EX-10.4



 EXHIBIT 10.4 
 FORM OF NONQUALIFIED STOCK OPTION AGREEMENT FOR USE WITH THE INCENTIVE PLAN 

SIGNATURE GROUP HOLDINGS, INC. 
 2006 PERFORMANCE INCENTIVE PLAN 
 NONQUALIFIED STOCK OPTION AGREEMENT

 THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Option Agreement”) dated
                     by and between Signature Group Holdings, Inc., a Nevada Corporation (the “Corporation”), and
                     (the “Grantee”) evidences the nonqualified stock option (the “Option”) granted by the
Corporation to the Grantee as to the number of shares of the Corporation’s Common Stock first set forth below. 

Number of Shares of Common Stock1:
                     Award
Date:                     
 Exercise Price per Share1:
                  $                     Expiration
Date1,
2:                     

Vesting
1, 2: [Specific terms of vesting will be set by the
Administrator at the date of grant.] 
 The Option is granted under the Signature Group Holdings, Inc. 2006 Performance
Incentive Plan (the “Plan”) and subject to the Terms and Conditions of Nonqualified Stock Option ( the “Terms”) attached to this Option Agreement (incorporated herein by this reference) and to the Plan. The Option
has been granted to the Grantee in addition to, and not in lieu of, any other form of compensation otherwise payable or to be paid to the Grantee. Capitalized terms are defined in the Plan if not defined herein. The parties agree to the terms of the
Option set forth herein. The Grantee acknowledges receipt of a copy of the Terms, the Plan and the Prospectus for the Plan. 
  

							
	“GRANTEE”	 		 	SIGNATURE GROUP HOLDINGS, INC.
		 		 	A Nevada corporation
				
	  
	 		 		 	
	Signature	 		 	By:	 	  

	  
	 		 	Print Name:	 	  

	Print Name	 		 	Title:	 	  


  

	1 	 Subject to adjustment under Section 7.1 of the Plan 



	2 	 Subject to early termination under Section 4 of the Terms and Section 7.4 of the Plan










 CONSENT OF SPOUSE 

In consideration of the Corporation’s execution of this Option Agreement, the undersigned spouse of the Grantee agrees to be bound by
all of the terms and provisions hereof and of the Plan. 
  

									
		 	  
	 		 	  
	 	
		 	Signature of Spouse	 		 	Date	 	








 TERMS AND CONDITIONS OF NONQUALIFIED STOCK OPTION 

1. Vesting; Limits on Exercise; Incentive Stock Option Status. 
 The Option shall vest and become exercisable in percentage installments of the aggregate number of shares subject to the Option as set forth on the cover page of this Option Agreement. The Option may be
exercised only to the extent the Option is vested and exercisable. 
  

	 	•	 	 Cumulative Exercisability. To the extent that the Option is vested and exercisable, the Grantee has the right to exercise the Option (to the
extent not previously exercised), and such right shall continue, until the expiration or earlier termination of the Option. 


  

	 	•	 	 No Fractional Shares. Fractional share interest shall be disregarded, but may be cumulated. 



 

	 	•	 	 Minimum Exercise. No fewer than 1,001 shares of Common Stock may be purchased at any one time, unless the number purchased is the total number
at the time exercisable under the Option. 


  

	 	•	 	 Nonqualified Stock Option. The Option is a nonqualified stock option and is not, and shall not be, an incentive stock option within the meaning
of Section 422 of the code. 


 2. Continuance of Employment/Service Required; No Employment/ Service Commitment.

 The vesting schedule requires continued employment or service through each applicable vesting date as a condition to the
vesting of the applicable installment of the Option and the rights and benefits under this Option Agreement. Employment or service for only a portion of the vesting period, even if a substantial portion, will not entitle the Grantee to any
proportionate vesting or avoid or mitigate a termination of rights and benefits upon or following a termination of employment or services as provided in section 4 below or under the Plan. 

Nothing contained in this Option Agreement or the Plan constitutes a continued employment or service commitment by the Corporation of any
of its Subsidiaries, affects the Grantee’s status, if her or she is an employee, as an employee at will who is subject to termination without cause, confers upon the Grantee any tight to remain employed by or in service to the Corporation of
any Subsidiary, interferes in any way with the right of the Corporation or any Subsidiary at any time to terminate such employment or service, or affects the right of the Corporation or any Subsidiary to increase or decrease the Grantee’s other
compensation. 
 3. Method of Exercise of Option. 
 The Option shall be exercisable by the delivery to the Secretary of the Corporation (or such person as the Administrator may require pursuant to such administrative exercise procedures as the
Administrator may implement from time to time) of: 
  

	 	•	 	 A written notice stating the number of share of Common Stock to be purchased pursuant to the Option or by the completion of such other administrative
exercise procedures as the Administrator may require from time to time, 


  

	 	•	 	 Payment in full for the Exercise Price of the shares to be purchased in cash, check or by electronic funds transfer to the Corporation, or (subject to
compliance with all applicable laws, rules, regulations and listing requirements and further subject to such rules as the Administrator may adopt as to any non-cash payment) in shares of Common Stock already owned by the Grantee, valued at their
fair market value on the exercise date, provided, however, that any shares initially acquired upon exercise of a stock option or otherwise from the Corporation must have been owned by the Grantee for at least six (6) months before the
date of such exercise; 


  

	 	•	 	 Any written statements or agreements required pursuant to Section 8.1 of the Plan; and 



 

	 	•	 	 Satisfaction of the tax withholding provisions of Section 8.5 of the Plan. 



 







 The administrator also may, but is not required to, authorize a non-cash payment alternative
by notice and third party payment in such manner as may be authorized by the Administrator. 
 4. Early Termination of Option.

 4.1 Possible Termination of Option upon Change in Control. The Option is subject to
termination in connection with a Change in Control Event or certain similar reorganization events as provided in section 7.4 of the Plan. 
 4.2 Termination of Option upon a Termination of Grantee’s Employment or Services. Subject to earlier termination on the Expiration Date of the Option or pursuant to Section 4.1 above,
if the Grantee ceases to be employed by or ceases to provide services to the Corporation or a Subsidiary, the following rules shall apply ( the last day that the Grantee is employed by or provides services to the Corporation or a Subsidiary is
referred to as the Grantee’s “Severance Date”) 
  

	 	•	 	 Other than as expressly provided below in this Section 4.2, (a) the Grantee will have until the date that is 90 days after his or her Severance Date to
exercise the Option (or portion thereof) to the extent that it was vested on the Severance Date, (b) the Option, to the extent not vested on the Severance Date, shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for
the 90-day period following the Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 90-day period; 



 

	 	•	 	 If the termination of the Grantee’s employment or services is the result of the Grantee’s death of Disability (as defined below), (a) the
Grantee (or his beneficiary or personal representative, as the case may be) will have until the date that is 12 months after the Grantee’s Severance Date to exercise the Option, (b) the Option, to the extent not vested on the Severance Date,
Shall terminate on the Severance Date, and (c) the Option, to the extent exercisable for the 12-month period following the Severance Date and not exercised during such period, shall terminate at the close of business on the last day of the 12-month
period; 


  

	 	•	 	 If the Grantee’s employment or services are terminated by the Corporation or a Subsidiary for Cause (as defined below), the Option (whether vested
or not) shall terminate on the Severance Date. 


 For Purposes of the Option, “Disability”
means a “permanent and total disability” (within the meaning of Section 22(e)(3) of the Code or as otherwise determined by the Administrator). 
 For purposes of the Option, “Cause” means that the Grantee: 
  

	 	(4)	has been negligent in the discharge of his or her duties to the Corporation or any of its Subsidiaries, has refused to perform stated or assigned duties or is
incompetent in or (other than by reason of a disability or analogous condition) incapable of performing those duties; 

  

	 	(5)	has been dishonest or committed or engaged in an act of theft, embezzlement or fraud, a breach of confidentiality, an unauthorized disclosure or use of inside
information, customer lists, trade secrets or other confidential information; has breached a fiduciary duty, or willfully and materially violated an other duty, law, rule, regulation or policy of the corporation, any of its Subsidiaries or any
affiliate of the Corporation or any of its Subsidiaries; or has been convicted of a felony or misdemeanor (other than minor traffic violations or similar offenses); 


 

	 	(6)	has materially breached any of the provisions of any agreement with the Corporation , any of its Subsidiaries or an affiliate of the Corporation or an of its
Subsidiaries; or 

  

	 	(4)	has engaged in unfair competition with, or otherwise acted intentionally in a manner injurious to the reputation, business or assets of, the Corporation, any of its
Subsidiaries or any affiliate of the Corporation of any of its Subsidiaries; has improperly induced a vendor or customer to break or terminate any contract with the Corporation, any of its Subsidiaries or any affiliate of the Corporation or any of
its Subsidiaries; or had induced a principal for whom the Corporation, any of it’s Subsidiaries of any affiliate of the Corporation or any of its Subsidiaries acts as agent to terminate such agency relationship. 








 In all events the Option is subject to earlier termination on the Expiration Date of the
Option or as contemplated by Section 4.1. The Administrator shall be the sole judge of whether the Grantee continues to render employment or services for purposes of this Option Agreement. 
 5. Non-Transferability. 
 The Option and any other rights of the
Grantee under this Option Agreement or the Plan are nontransferable and exercisable only by the Grantee, except as set forth in Section 5.5 of the Plan. 
 6. Notices. 
 Any notice to be given under the terms of this Option
Agreement shall be in writing and addressed to the Corporation at its principal office to the attention of the Secretary, and to the Grantee at the address last reflected on the Corporation’s payroll records, or such other address as either
party may hereafter designate in writing to the other. Any such notice shall be delivered in person or shall be enclosed in a properly sealed envelope addressed as aforesaid, registered or certified, and deposited (postage and registry or
certification fee prepaid) in a post office or branch post office regularly maintained by the United States Government. Any such notice shall be given only when received, but if the Grantee is no longer employed by or providing services to the
corporation or a Subsidiary, shall be deemed to have been duly given five business days after the date mailed in accordance with the foregoing provisions of this Section 6. 
 7. Plan. 
 The Option and all rights of the Grantee under this Option
Agreement are subject to terms and agreements of the Plan, incorporated herein by this reference. The Grantee agrees to be bound by the terms of this Plan and Option Agreement (including these Terms). The Grantee acknowledges reading and
understanding The Plan, the Prospectus of the Plan and this Option Agreement. In the even of a conflict or inconsistency between the terms and Conditions of this Option Agreement and of the Plan, the terms and conditions of the Plan shall govern.
Unless otherwise expressly provided in other sections of this Option Agreement, provisions of the Plan that confer discretionary authority on the Board or the Administrator do not and shall not be deemed to create any rights in the Grantee unless
such rights are expressly set forth herein or are otherwise in the sole discretion of the Board or the Administrator so conferred by appropriate action of the Board or the Administrator so conferred by appropriate action of the Board or the
Administrator under the Plan after the date hereof. 
 8. Entire Agreement. 

This Option Agreement (including these Terms) and the Plan together constitute the entire agreement and supersede all prior understandings
and agreements, written or oral, of the parties hereto with respect to the subject matter hereof. The Plan and this Option Agreement may be amended pursuant to Section 8.6 of the Plan. Such amendment must be in writing and signed by the Corporation.
The Corporation may, however, unilaterally waive any provision hereof In writing to the extent such waiver does not adversely affect the interests of the Grantee hereunder, but no such waiver shall operate as or be construed to be a subsequent
waiver of the same provision or a waiver of any other provision hereof. 
 9. Governing Law. 

This Option Agreement Shall be governed by and construed and enforced in accordance with the laws of the State of Nevada without regard to
conflict of law principles thereunder. 
 10. Effect of this Agreement. 

Subject to the Corporation’s right to terminate the Option pursuant to Section 7.4 of the Plan, this Option Agreement shall be
assumed by, be binding upon and inure to the benefit of any successor or successors to the Corporation. 







 11. Counterparts. 
 This Option Agreement may be executed simultaneously in any number of counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument.

 12. Section Headings. 
 The section headings of this Option Agreement are for convenience of reference only and shall not be deemed to alter or affect any provision thereof.