Document:

ForexsterPurchaseAgreementExhibit10_2

Exhibit 10.2

EXECUTION VERSION

ASSET PURCHASE AGREEMENT
dated as of 
 
 
July 10, 2014 
 
 
among 
 
 
 
GAIN GTX BERMUDA, LTD.,
GAIN CAPITAL HOLDINGS, INC. 
 
 
 
and 
 
 
 
FOREXSTER LIMITED

TABLE OF CONTENTS
Page
ARTICLE 1 Definitions    1
		
	Section 1.01.
	Definitions    1

		
	Section 1.02.
	Other Definitional and Interpretative Provisions    4

ARTICLE 2 Purchase and Sale    5
		
	Section 2.01.
	Purchase and Sale    5

		
	Section 2.02.
	Excluded Assets    5

		
	Section 2.03.
	Excluded Liabilities    5

		
	Section 2.04.
	Purchase Price; Allocation of Purchase Price    6

		
	Section 2.05.
	Closing    6

		
	Section 2.06.
	Withholding    7

ARTICLE 3 Representations and Warranties of Seller    7
		
	Section 3.01.
	Corporate Existence and Power    7

		
	Section 3.02.
	Authorization    8

		
	Section 3.03.
	Governmental Authorization    8

		
	Section 3.04.
	Noncontravention    8

		
	Section 3.05.
	No Required Consents    8

		
	Section 3.06.
	Title to the Purchased Assets    8

		
	Section 3.07.
	Intellectual Property    8

		
	Section 3.08.
	Litigation    9

		
	Section 3.09.
	Tax Matters    10

		
	Section 3.10.
	Acquisition For Investment    10

		
	Section 3.11.
	Availability Of Information    10

		
	Section 3.12.
	Seller Status    10

		
	Section 3.13.
	Restricted Shares    10

		
	Section 3.14.
	Finders’ Fees    11

		
	Section 3.15.
	Disclaimer of Other Representations and Warranties    11

ARTICLE 4 Representations and Warranties of Buyer    11
		
	Section 4.01.
	Corporate Existence and Power    11

		
	Section 4.02.
	Corporate Authorization    11

		
	Section 4.03.
	Governmental Authorization    12

		
	Section 4.04.
	Noncontravention    12

		
	Section 4.05.
	Finders’ Fees    12

ARTICLE 5 Representations And Warranties Of Gain    12
		
	Section 5.01.
	Corporate Existence And Power    12

		
	Section 5.02.
	Corporate Authorization    12

		
	Section 5.03.
	Governmental Authorization    13

		
	Section 5.04.
	Noncontravention    13

		
	Section 5.05.
	Gain Stock    13

ARTICLE 6 Covenants    13
		
	Section 6.01.
	Confidentiality    13

		
	Section 6.02.
	Reasonable Best Efforts; Further Assurances    14

		
	Section 6.03.
	Certain Filings    15

		
	Section 6.04.
	Public Announcements    15

ARTICLE 7 Transfer Restrictions    15
		
	Section 7.01.
	General Restrictions on Transfers    15

		
	Section 7.02.
	Legends    15

		
	Section 7.03.
	Permitted Transferees    16

ARTICLE 8 Tax Matters    16
		
	Section 8.01.
	Allocation of Taxes    16

		
	Section 8.02.
	Other Tax Obligations    17

ARTICLE 9 Survival; Indemnification    17
		
	Section 9.01.
	Survival    17

		
	Section 9.02.
	Indemnification    17

		
	Section 9.03.
	Third Party Claim Procedures    18

		
	Section 9.04.
	Direct Claim Procedures    19

		
	Section 9.05.
	Insurance Proceeds    19

		
	Section 9.06.
	Sole Remedy    20

		
	Section 9.07.
	Special Damages    20

ARTICLE 10 Miscellaneous    20
		
	Section 10.01.
	Notices    20

		
	Section 10.02.
	Amendments and Waivers    21

		
	Section 10.03.
	Disclosure Schedule References    22

		
	Section 10.04.
	Expenses    22

		
	Section 10.05.
	Successors and Assigns    22

		
	Section 10.06.
	Governing Law    22

		
	Section 10.07.
	Jurisdiction    22

		
	Section 10.08.
	WAIVER OF JURY TRIAL    23

		
	Section 10.09.
	Counterparts; Effectiveness; Third Party Beneficiaries    23

		
	Section 10.10.
	Entire Agreement    23

		
	Section 10.11.
	Severability    23

		
	Section 10.12.
	Specific Performance    24

Exhibit A    Platform Description 
Exhibit B    Transferred Copyrights
Schedule 2.04(a)    Tax Matters
Schedule 3.07(a)    Setec Patents
Schedule 3.07(e)    Escrowed IP

Note: Certain schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The Company hereby undertakes to furnish supplementally copies of any of the omitted schedules or exhibits upon request by the SEC.

ASSET PURCHASE AGREEMENT
AGREEMENT (this “Agreement”) dated as of July 10, 2014 among GAIN GTX Bermuda, Ltd., a Bermuda exempt company (“Buyer”), GAIN Capital Holdings, Inc., a Delaware corporation (“Gain”), and Forexster Limited, a Bermuda exempt company (“Seller”),
W I T N E S S E T H :
WHEREAS, Buyer desires to purchase the Purchased Assets (as defined below) from Seller, and Seller desires to sell the Purchased Assets to Buyer, upon the terms and subject to the conditions hereinafter set forth;
WHEREAS, in connection with the transactions contemplated by this Agreement, (i) Buyer (on behalf of its Affiliates (as hereinafter defined)), Seller and Valaquenta Intellectual Properties Limited, a Bermuda exempt company (“VIPL”), will enter into a termination and release agreement pursuant to which any and all agreements currently in place between Affiliates of Buyer (including, without limitation, GAIN GTX, LLC, a Delaware limited liability company (“GTX”)), on the one hand, and Seller and/or VIPL, on the other hand, related to the Platform will be terminated (the “Termination Agreement”), (ii) Buyer and VIPL will enter into a consulting agreement with respect to services to be performed by VIPL following the Closing (the “Consulting Agreement”), (iii) Buyer and VIPL will enter into an asset purchase agreement pursuant to which Buyer will acquire certain assets from VIPL related to the Platform (as defined below) (the “VIPL Agreement”), (iv) Buyer and Setec Astronomy Limited will enter into a license agreement pursuant to which Buyer will receive a license under any and all Setec Patents (the “Setec Agreement”) and (v) Buyer and Arman Valaquenta will enter into a license agreement pursuant to which Buyer will receive a license under the Valaquenta Patent (the “Valaquenta Agreement”);
The parties hereto agree as follows:
ARTICLE 1 
DEFINITIONS
Section 1.01.    Definitions.  (a) The following terms, as used herein, have the following meanings:
“Acquired Stock” means any shares of Gain Stock issued to Seller pursuant to the terms of this Agreement.
“Affiliate” means, with respect to any Person, any other Person directly or indirectly controlling, controlled by, or under common control with such other Person.  For purposes of this definition, “control” when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have correlative meanings.
“Applicable Law” means, with respect to any Person, any transnational, domestic or foreign federal, state or local law (statutory, common or otherwise), constitution, treaty, convention, ordinance, code, rule, regulation, order, injunction, judgment, decree, ruling or other similar requirement enacted, adopted, promulgated or applied by a Governmental Authority that is binding upon or applicable to such Person, as amended unless expressly specified otherwise.
“Business Day” means a day, other than Saturday, Sunday or other day on which commercial banks in New York, New York are authorized or required by Applicable Law to close.
“Closing Date” means the date of the Closing.
“Code” means the Internal Revenue Code of 1986, as amended.
“Damages” means all damages, losses, liabilities and expenses (including reasonable expenses of investigation and reasonable attorneys’ fees and expenses in connection with any action, suit or proceeding whether involving a third-party claim or a claim solely between the parties hereto and any incidental or indirect losses, liabilities or expenses), excluding any lost profits, consequential damages, diminution in value, losses based on valuation metrics or other multipliers or similar damages (provided that the foregoing limitation shall not apply if such damages are payable to third parties), in connection with or arising out of the transactions contemplated by this Agreement, in tort or otherwise.
“Exchange Act” means the Securities Exchange Act of 1934, as amended.
“GAAP” means generally accepted accounting principles in the United States.
“Gain Stock” means shares of Gain’s common stock, par value $0.00001 per share.
“Governmental Authority” means any transnational, domestic or foreign federal, state or local governmental, regulatory or administrative authority, department, court, agency or official, including any political subdivision thereof.
“Intellectual Property Rights” means any and all intellectual property rights throughout the world, including inventions, whether or not patentable, patents and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations thereof), trademarks, service marks, trade dress, logos, domain names, trade names and corporate names (whether or not registered), copyrights (whether or not registered), computer software, (including source code, object code, firmware, operating systems and specifications), trade secrets and know-how.
“knowledge” of any Person that is not an individual means the knowledge of such Person’s officers after reasonable inquiry.
“Lien” means, with respect to any property or asset, any mortgage, deed of trust, lien, pledge, charge, security interest, encumbrance or other adverse claim of any kind in respect of such property or asset.  For the purposes of this Agreement, a Person shall be deemed to own subject to a Lien any property or asset which it has acquired or holds subject to the interest of a vendor or lessor under any conditional sale agreement, capital lease or other title retention agreement relating to such property or asset.
“Permitted Transferee” means any Affiliate of Seller or any other Person with respect to which Gain shall have provided its consent to Transfer the Acquired Stock to such Person.
“Person” means an individual, corporation, partnership, limited liability company, association, trust or other entity or organization, including a Governmental Authority.
“Platform” means the software platform owned by VIPL designed to enable the trading of currencies, commodities and other financial instruments as more fully described on Exhibit A.
“Pre-Closing Tax Period” means (i) any Tax Period ending on or before the Closing Date and (ii) with respect to a Tax Period that commences before but ends after the Closing Date, the portion of such period up to and including the Closing Date.
“Purchased Assets” means all of the copyrights owned by Seller relating to, and Seller’s trade secrets and know-how embodied in or otherwise directly related to, the Platform, including the copyrights vested in Seller in each of (i) the files relating to the Platform set forth on Exhibit B, (ii) the source code documentation relating to such files and (iii) user manuals relating to such files.  For the avoidance of doubt, the Purchased Assets include all rights to sue and collect damages for the past, present of future infringement or misappropriation of any of the Purchased Assets.
“SEC” means the United States Securities and Exchange Commission.
“Securities Act” means the Securities Act of 1933, as amended.
“Setec Patents” means any and all patents and patent applications owned or controlled by Setec Astronomy Limited, including all continuations, divisionals and provisional applications, world-wide as such are set forth on Schedule 3.07(a).
“Tax” means (i) any tax, governmental fee or other like assessment or charge of any kind whatsoever (including withholding on amounts paid to or by any Person), together with any interest, penalty, addition to tax or additional amount imposed by any Governmental Authority (a “Taxing Authority”) responsible for the imposition of any such tax, or (ii) liability for the payment of any amounts of the type described in (i) as a result of being a transferee or a party to any agreement or any express or implied obligation to indemnify any other Person.
“Transfer” means, with respect to any Acquired Stock, (i) when used as a verb, to sell, assign, dispose of, exchange, pledge, lend, encumber, hypothecate or otherwise transfer such Acquired Stock or any economic participation or interest therein (including through hedging or other derivative transactions), whether directly or indirectly, or agree, offer or commit to do any of the foregoing (including by contract, option or other agreement or arrangement) and (ii) when used as a noun, a direct or indirect sale, assignment, disposition, exchange, pledge, loan, encumbrance, hypothecation or other transfer of such Acquired Stock or any participation or interest therein (including through a hedging or other derivative transaction) or any agreement, offer or commitment to do any of the foregoing (including by contract, option or other agreement or arrangement).
“Valaquenta Patent” means any and all patents and patent applications owned or controlled by Arman Valaquenta as such are set forth on Schedule 3.07(a).
(b)    Each of the following terms is defined in the Section set forth opposite such term:
	
		
	Term
	Section

	Agreement
	Preamble

	Apportioned Obligations
	‎8.01(a)

	Allocation Statement
	‎2.04(b)

	Buyer
	Preamble

	Buyer Indemnified Party
	‎9.02(a)

	Cap
	‎9.02(a)(ii)

	Closing
	‎2.05

	Consulting Agreement
	Preamble

	e-mail
	‎10.01

	Excluded Assets
	‎2.02

	Excluded Liabilities
	‎2.03

	Indemnified Party
	‎9.03(a)

	Indemnifying Party
	‎9.03(a)

	Permits
	‎3.01

	Post-Closing Tax Period
	‎8.01(a)

	Purchase Price
	‎2.04

	Seller
	Preamble

	Seller Agreements
	‎3.02

	Setec Agreement
	Preamble

	Termination Agreement
	Preamble

	Third Party Claim
	‎9.03(a)

	Transfer Taxes
	‎8.01(b)

	Valuation Referee
	‎2.04

	Valaquenta Agreement
	Preamble

	VIPL
	Preamble

	VIPL Agreement
	Preamble

	Warranty Breach
	‎9.02(a)(i)

Section 1.02.    Other Definitional and Interpretative Provisions.  The words “hereof”, “herein” and “hereunder” and words of like import used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement.  The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.  References to Articles, Sections, Exhibits and Schedules are to Articles, Sections, Exhibits and Schedules of this Agreement unless otherwise specified.  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any capitalized terms used in any Exhibit or Schedule but not otherwise defined therein, shall have the meaning as defined in this Agreement.  Any singular term in this Agreement shall be deemed to include the plural, and any plural term the singular.  Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”, whether or not they are in fact followed by those words or words of like import.  “Writing”, “written” and comparable terms refer to printing, typing and other means of reproducing words (including electronic media) in a visible form.  References to any statute shall be deemed to refer to such statute as amended from time to time and to any rules or regulations promulgated thereunder.  References to any agreement or contract are to that agreement or contract as amended, modified or supplemented from time to time in accordance with the terms hereof and thereof; provided that with respect to any agreement or contract listed on any schedules hereto, all such amendments, modifications or supplements must also be listed in the appropriate schedule.  References to any Person include the successors and permitted assigns of that Person.  References from or through any date mean, unless otherwise specified, from and including or through and including, respectively.  References to “law”, “laws” or to a particular statute or law shall be deemed also to include any and all Applicable Law.
ARTICLE 2     
PURCHASE AND SALE
Section 2.01.    Purchase and Sale.  Upon the terms and subject to the conditions of this Agreement, Seller does hereby irrevocably sell, convey, transfer, assign and deliver to Buyer all of the right, title and interest of Seller in, to and under the Purchased Assets at the Closing, free and clear of all Liens, and Buyer does hereby accept all the right, title and interest of Seller in, to and under all of the Purchased Assets, free and clear of all Liens.
Section 2.02.    Excluded Assets.  Buyer expressly understands and agrees that all of Seller’s assets other than the Purchased Assets shall be excluded from the transactions contemplated hereby (such excluded assets, the “Excluded Assets”).
Section 2.03.    Excluded Liabilities.  Notwithstanding any provision in this Agreement or any other writing to the contrary, Buyer is not assuming any liability or obligation of Seller (or any predecessor of Seller or any prior owner of all or part of its businesses and assets) of whatever nature, whether presently in existence or arising hereafter (“Excluded Liabilities”), all of which shall be retained by and remain obligations and liabilities of Seller.  For the avoidance of doubt, Excluded Liabilities include:
(a)    any liability or obligation of Seller, or any member of any consolidated, affiliated, combined or unitary group of which Seller is or has been a member, for Taxes, subject to Schedule 2.04(a); provided that Transfer Taxes and Apportioned Obligations shall be paid in the manner set forth in ‎Article 8;
(b)    any liability or obligation relating to employee benefits or compensation arrangements existing on or prior to the Closing Date, including any liability or obligation under any of Seller’s employee benefit agreements, plans or other arrangements;
(c)    any liability or obligation relating to an Excluded Asset; and
(d)    any liability or obligation relating to Intellectual Property Rights owned or used by Seller, including any third party claim of any rights in the Purchased Assets that relate to Seller’s ownership or use of the Purchased Assets on or prior to the Closing Date.
Section 2.04.    Purchase Price; Allocation of Purchase Price.  (a)  The purchase price for the Purchased Assets consists of (i) prepayments made by Buyer or its Affiliates pursuant to the terms of agreements currently in place between Affiliates of Buyer (including, without limitation, GTX), on the one hand, and Seller, on the other hand, related to the Platform, including, without limitation, that certain Exclusive Marketing Agreement, dated as of July 14, 2010, by and between Seller and Gain Capital Group LLC, plus (ii) 861,935 shares of Gain Stock, plus (iii) the amounts payable, if any, pursuant to Schedule 2.04(a) hereof  (collectively, the “Purchase Price”).  The Purchase Price shall be paid as provided in Section ‎2.05 and Schedule 2.04(a).
(a)    As promptly as practicable after the Closing, Buyer shall deliver to Seller a statement (the “Allocation Statement”), allocating the Purchase Price among the Purchased Assets in accordance with their fair market values.  If within 10 days after the delivery of the Allocation Statement Seller notifies Buyer in writing that Seller objects to the allocation set forth in the Allocation Statement, Buyer and Seller shall use commercially reasonable efforts to resolve such dispute within 20 days.  In the event that Buyer and Seller are unable to resolve such dispute within 20 days, Buyer and Seller shall jointly retain a nationally recognized expert (the “Valuation Referee”) to resolve the disputed items.  Upon resolution of the disputed items, the allocation reflected on the Allocation Statement shall be adjusted to reflect such resolution. The costs, fees and expenses of the Valuation Referee shall be borne equally by Buyer and Seller.
(b)    Seller and Buyer agree to i) be bound by the Allocation Statement for all Tax purposes and ii) act in accordance with the Allocation in the preparation, filing and audit of any Tax return.
(c)    If any additional payments are made pursuant to Schedule 2.04(a), the Allocation Statement shall be adjusted pro rata among the Purchased Assets.
Section 2.05.    Closing.  The closing (the “Closing”) of the purchase and sale of the Purchased Assets hereunder shall take place at the offices of Davis Polk & Wardwell LLP, 450 Lexington Avenue, New York, New York, on the date of this Agreement, or at such other time as Buyer, Gain and Seller may agree.  At the Closing:
(a)    Gain shall deliver evidence reasonably satisfactory to Seller that Gain shall have instructed its transfer agent to issue and deliver to Seller certificates for 861,935 shares of Gain Stock registered in the stock records of Gain in the name of Seller.
(b)    VIPL and Buyer shall enter into the VIPL Agreement.
(c)    Buyer, Seller and VIPL shall enter into the Termination Agreement.
(d)    Buyer and VIPL shall enter into the Consulting Agreement.
(e)    Buyer and Setec Astronomy Limited shall enter into the Setec Agreement.
(f)    Buyer and Arman Valaquenta shall enter into the Valaquenta Agreement.
All of the foregoing transactions shall be deemed to occur simultaneously and the Closing shall not be deemed to occur unless all of such transactions occur.
Section 2.06.    Withholding.  Buyer and its Affiliates shall be entitled to deduct and withhold from any amount otherwise payable to Seller pursuant to this Agreement such amounts as it is, in Buyer’s reasonable judgment, required to deduct and withhold with respect to the making of such payment under any provision of federal, state, local or foreign law.  If any amount is so withheld, such withheld amounts shall be treated for all purposes of this Agreement as having been paid to Seller.  If requested by Buyer, Seller shall provide Buyer, at the Closing or at the time or times otherwise reasonably requested by Buyer, with a fully executed original IRS Form 8233, W-9, W-8BEN or W-8ECI or a similar certification, as applicable.  Buyer and its Affiliates do not anticipate withholding any amounts under this Section 2.06 in respect of any payments due under Section 2.04 at the Closing.  Buyer and its Affiliates agree to reasonably cooperate with Seller to apply for or obtain a refund of any withholding tax imposed under this Section 2.06; provided, that Seller has provided Buyer with reasonably detailed documentation or other information sufficient to allow Buyer to reasonably conclude that Seller may be entitled to such a refund.
ARTICLE 3     
REPRESENTATIONS AND WARRANTIES OF SELLER
Subject to ‎Section 10.03, except as set forth in the Seller Disclosure Schedule, Seller represents and warrants to each of Buyer and Gain as of the Closing Date that:
Section 3.01.    Corporate Existence and Power.  Seller is an exempted company duly incorporated, validly existing and in good standing under the laws of Bermuda and has all corporate powers required to carry on its business as now conducted.  Seller is duly qualified to do business as a foreign corporation, is in good standing in each jurisdiction where such qualification is necessary and has all governmental licenses, franchises, permits, certificates, approvals or other similar authorizations (together, “Permits”) required to carry on its business as now conducted, except where the failure to effect or maintain such licensure or qualification would not, individually or in the aggregate, have a material adverse effect on Seller.
Section 3.02.    Authorization.  Seller has the legal capacity to enter into this Agreement and the Termination Agreement (the “Seller Agreements”).  Assuming the due authorization, execution and delivery by the other parties hereto, the Seller Agreements constitute the valid and binding agreements of Seller, enforceable against Seller in accordance with their terms, (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws affecting creditors’ rights generally and general principles of equity).
Section 3.03.    Governmental Authorization.  The execution, delivery and performance by Seller of the Seller Agreements and the consummation of the transactions contemplated by each of the Seller Agreements require no action by or in respect of, or filing with, any Governmental Authority.
Section 3.04.    Noncontravention.  The execution, delivery and performance by Seller of the Seller Agreements and the consummation of the transactions contemplated hereby and thereby do not and will not (i) violate the memorandum of association or bye-laws of Seller, (ii) assuming compliance with the matters referred to in ‎Section 3.03, violate any Applicable Law, (iii) constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or Gain or to a loss of any benefit relating to the Purchased Assets to which Seller is entitled under any provision of any agreement or other instrument binding upon Seller or by which any of the Purchased Assets is or may be bound or (iv) result in the creation or imposition of any Lien on any Purchased Asset.
Section 3.05.    No Required Consents.  The transactions contemplated by this Agreement do not require any consent or other action of any third party.
Section 3.06.    Title to the Purchased Assets.  Seller is the sole and exclusive owner of the Purchased Assets, and upon consummation of the transactions contemplated hereby, Buyer will have acquired sole and exclusive ownership of, and good title in, to and under, each of the Purchased Assets, free and clear of all Liens.  The Purchased Assets (as defined herein), Purchased Assets (as such term is defined in the VIPL Agreement), Setec Agreement and Valaquenta Agreement, include, in the aggregate, all of the Intellectual Property Rights and other assets or rights of any kind, whether tangible or intangible, comprising and required to operate the Platform as currently operated on the date hereof and as contemplated to operate by this Agreement.
Section 3.07.    Intellectual Property.  
(a)    Neither the Company nor any of its current officers or directors own or control (i) any trademarks used in connection with the Platform or (ii) except for the Setec Patents and Valaquenta Patent set forth on Schedule 3.07(a), any patents or patent applications related to the Platform.  With respect to any trade secrets and/or know-how related to the Platform, neither the Company nor any of its current officers or directors have applied for, or otherwise caused to be filed or obtained, shall apply for or otherwise cause to be filed or obtained, any patents or patent applications other than the Setec Patents and Valaquenta Patent.
(b)    There exist no restrictions on the disclosure, use, license or transfer of any of the Intellectual Property Rights included in the Purchased Assets (it being understood that, with respect to any trade secret and know-how included in the Purchased Assets, the value of such trade secret and know-how is contingent upon the ability to restrict disclosure so that it does not become generally known).  The consummation of the transactions contemplated by this Agreement will not alter, encumber, impair or extinguish any of the Intellectual Property Rights included in the Purchased Assets or impair the right of Buyer to develop, use, sell, license or otherwise dispose of, or to bring any action for the infringement, misappropriation or other violation of, any of the Intellectual Property Rights included in the Purchased Assets.
(c)    There is no claim, action, suit, investigation or proceeding pending against, or, to the knowledge of Seller, threatened against Seller, (i) based upon, or challenging or seeking to deny or restrict, the rights of Seller in any of the Purchased Assets, (ii) alleging that any of the Intellectual Property Rights included in the Purchased Assets are invalid or unenforceable, or (iii) alleging that the use of any of the Purchased Assets do or may conflict with, misappropriate, infringe or otherwise violate any Intellectual Property Right of any Person; provided however, and notwithstanding anything contained in this Agreement that may be construed to the contrary including this Section 3.07, Seller makes no representation or warranty that the Purchased Assets have previously, current do or may in the future may conflict with, misappropriate, infringe or otherwise violate the patent rights and/or patent applications of any Person.
(d)    To the knowledge of Seller, no Person has infringed, misappropriated or otherwise violated any of the Intellectual Property Rights included in the Purchased Assets.  Seller has taken reasonable steps in accordance with normal industry practice to maintain the confidentiality of all trade secrets included in the Purchased Assets and none of the trade secrets included in the Purchased Assets have been disclosed other than to employees, representatives and agents of Seller all of whom are bound by written confidentiality agreements.
(e)    Except as set forth on Schedule ‎3.07‎(e), neither Seller nor any other party acting on its behalf has disclosed or delivered to any third party, or permitted the disclosure or delivery to any escrow agent or other third party, any source code included in the Purchased Assets.  To the knowledge of Seller, the Platform does not include or incorporate any software that is subject to license rights customarily referred to as “open source” in a manner that could require any source code included in the Purchased Assets to be made available to the public.
Section 3.08.    Litigation.  There is no action, suit, investigation or proceeding pending against, or to the knowledge of Seller, threatened against or affecting, Seller before (or, in the case of threatened actions, suits, investigations or proceedings, would be before) any Governmental Authority or arbitrator which in any manner challenges or seeks to prevent, enjoin, alter or materially delay the transactions contemplated by this Agreement.
Section 3.09.    Tax Matters.  Except with respect to the matters contemplated in Schedule 2.04(a):
(a)    Seller has timely paid all Taxes due and payable, the non-payment of which would result in a Lien on any Purchased Asset or would result in Buyer or Gain becoming liable or responsible therefor.
(b)    Seller has established, in accordance with GAAP applied on a basis consistent with that of preceding periods, adequate reserves for the payment of all Taxes which arise from or with respect to the Purchased Assets, the non-payment of which would result in a Lien on any Purchased Asset or would result in Buyer or Gain becoming liable therefor.
Section 3.10.    Acquisition For Investment.  Seller is acquiring all shares of Acquired Stock for investment for its own account and not with a view to, or for sale in connection with, any distribution thereof.  Seller (either alone or together with its advisors) has sufficient knowledge and experience in financial and business matters so as to be capable of evaluating the merits and risks of its investment in the Acquired Stock and is capable of bearing the economic risks of such investment.  Seller has consulted with its own legal, regulatory, tax, business, investment, financial and accounting advisers in connection with its acquisition of Acquired Stock and has had a reasonable opportunity to ask such questions as it has deemed necessary concerning Gain, its financial condition and its results from operations and any such questions have been answered to its satisfaction.  Seller has made its own investment decision based on its own judgment, due diligence and advice from such advisers as it has deemed necessary and not upon any view expressed by any other Person.
Section 3.11.    Availability Of Information.  Seller understands and acknowledges that Buyer and Gain, on the date hereof, at the Closing Date and at the time the number of shares of Gain Stock issuable pursuant to Section 2.05(a)  is calculated, have or will have access to (and may be or will be in possession of ) information about Gain and the Gain Stock (which may include material, non-public information) that may be or is material and superior to the information available to Seller at such time, and that neither Buyer nor Gain is sharing or will share any such information with Seller.
Section 3.12.    Seller Status.  Seller is an “accredited investor” as that term is defined in Rule 501(a) of Regulation D as promulgated by the SEC under the Securities Act.  Seller is not a registered broker-dealer under Section 15 of the Exchange Act.
Section 3.13.    Restricted Shares.  Seller understands that the Acquired Stock has not been registered under the Securities Act, and that Seller is acquiring shares of Gain Stock in the ordinary course of its business, as principal for its own account and not with a view towards, or for resale in connection with, the public sale or distribution thereof.  Seller acknowledges that it may need to hold the Acquired Stock indefinitely unless such shares are subsequently registered under the Securities Act or an exemption from such registration is available.
Section 3.14.    Finders’ Fees.  There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Seller who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.
Section 3.15.    Disclaimer of Other Representations and Warranties.  EXCEPT AS EXPRESSLY SET FORTH IN THIS SECTION 3, SELLER MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AT LAW OR IN EQUITY, IN RESPECT OF ANY OF THE PURCHASED ASSETS WITH RESPECT TO MERCHANTABILITY, FITNESS FOR ANY PARTICULAR PURPOSE, IS ERROR FREE, OR WILL OPERATE WITHOUT INTERRUPTION AND ANY SUCH OTHER REPRESENTATIONS OR WARRANTIES ARE HEREBY EXPRESSLY DISCLAIMED.  BUYER HEREBY ACKNOWLEDGES AND AGREES THAT, EXCEPT TO THE EXTENT SPECIFICALLY SET FORTH IN THIS SECTION 3, BUYER IS PURCHASING THE PURCHASED ASSETS ON AN “AS-IS”, “WHERE-IS” AND “WITH ALL FAULTS” BASIS.
ARTICLE 4     
REPRESENTATIONS AND WARRANTIES OF BUYER
Subject to ‎Section 10.03, except as disclosed in the Buyer Disclosure Schedule, Buyer represents and warrants to Seller as of the Closing Date that:
Section 4.01.    Corporate Existence and Power.  Buyer is a limited liability company duly incorporated, validly existing and in good standing under the laws of Delaware and has all necessary power and authority required to carry on its business as now conducted.  Buyer is duly qualified to do business as a foreign corporation, is in good standing in each jurisdiction where such qualification is necessary and has all governmental licenses, franchises, permits, certificates, approvals or other similar authorizations required to carry on its business as now conducted, except where the failure to effect or maintain such licensure or qualification would not, individually or in the aggregate, have a material adverse effect on Buyer.
Section 4.02.    Corporate Authorization.  Buyer has the legal capacity to enter into this Agreement.  Assuming the due authorization, execution and delivery by the other parties hereto, this Agreement constitutes the valid and binding agreements of Buyer, enforceable against Buyer in accordance with its terms, (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws affecting creditors’ rights generally and general principles of equity).
Section 4.03.    Governmental Authorization.  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any Governmental Authority.
Section 4.04.    Noncontravention.  The execution, delivery and performance by Buyer of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the limited liability company agreement of Buyer, (ii) assuming compliance with the matters referred to in Section 4.03, violate any Applicable Law, (iii) require any consent or other action by any Person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Buyer or any of its subsidiaries or to a loss of any benefit to which Buyer or any of its subsidiaries is entitled under, any provision of any agreement or other instrument binding upon Buyer or any of its subsidiaries, except for such violations, conflicts, defaults, terminations or accelerations that would not, individually or in the aggregate have a material adverse effect on Buyer and its subsidiaries taken as a whole or (iv) result in the creation or imposition of any Lien on the assets of Buyer.
Section 4.05.    Finders’ Fees.  There is no investment banker, broker, finder or other intermediary which has been retained by or is authorized to act on behalf of Buyer who might be entitled to any fee or commission in connection with the transactions contemplated by this Agreement.
ARTICLE 5     
REPRESENTATIONS AND WARRANTIES OF GAIN
Subject to ‎Section 10.03, except as disclosed in the Gain Disclosure Schedule, Gain represents and warrants to Seller as of the Closing Date that:
Section 5.01.    Corporate Existence And Power.  Gain is a corporation duly incorporated, validly existing and in good standing under the laws of Delaware and has all necessary power and authority required to carry on its business as now conducted.  Gain is duly qualified to do business as a foreign corporation, is in good standing in each jurisdiction where such qualification is necessary and has all governmental licenses, franchises, permits, certificates, approvals or other similar authorizations required to carry on its business as now conducted, except where the failure to effect or maintain such licensure or qualification would not, individually or in the aggregate, have a material adverse effect on Gain.
Section 5.02.    Corporate Authorization.  Gain has the legal capacity to enter into this Agreement.  Assuming the due authorization, execution and delivery by the other parties hereto, this Agreement constitutes the valid and binding agreements of Gain, enforceable against Gain in accordance with its terms, (subject to applicable bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and other Applicable Laws affecting creditors’ rights generally and general principles of equity).
Section 5.03.    Governmental Authorization.  The execution, delivery and performance by Gain of this Agreement and the consummation of the transactions contemplated hereby require no material action by or in respect of, or material filing with, any Governmental Authority.
Section 5.04.    Noncontravention.  The execution, delivery and performance by Gain of this Agreement and the consummation of the transactions contemplated hereby do not and will not (i) violate the certificate of incorporation or bylaws of Gain, (ii) assuming compliance with the matters referred to in ‎Section 5.03, violate any Applicable Law, (iii) require any consent or other action by any Person under, constitute a default or an event that, with or without notice or lapse of time or both, would constitute a default under, or give rise to any right of termination, cancellation or acceleration of any right or obligation of Gain or any of its subsidiaries or to a loss of any benefit to which Gain or any of its subsidiaries is entitled under, any provision of any agreement or other instrument binding upon Gain or any of its subsidiaries, except for such violations, conflicts, defaults, terminations or accelerations that would not, individually or in the aggregate have a material adverse effect on Gain and its subsidiaries taken as a whole or (iv) result in the creation or imposition of any Lien on the assets of Gain.
Section 5.05.    Gain Stock.  The Gain Stock to be issued hereunder has been duly authorized by Gain and, when issued and delivered as provided herein, will be duly and validly issued, fully paid and non-assessable and not subject to preemptive rights created by statute, Gain’s certificate of incorporation or by-laws or any agreement to which Gain or its subsidiaries are a party or are bound.
ARTICLE 6     
COVENANTS
Seller agrees that:
Section 6.01.    Confidentiality.  
(g)    After the Closing, Seller and its Affiliates will hold, and will use commercially reasonable efforts to cause their respective officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence, unless compelled to disclose by Applicable Law, all confidential documents and information concerning the Purchased Assets, except to the extent that such information can be shown to have been (1) in the public domain through no fault of Seller or its Affiliates or (2) later lawfully acquired by Seller from sources other than those related to its prior ownership of the Purchased Assets.  Nothing in this Agreement shall be construed to restrict employees of Seller and Seller’s Affiliates from using intangible residual know-how or concepts (as distinguished from the tangible implementation of such know-how and concepts) retained in the unaided memory of such individual as a result of authorized access to such know-how or concepts prior to the Closing Date, provided that such individuals shall not directly reference, incorporate or otherwise use in any product or service any confidential documents and information concerning the Purchased Assets or otherwise take any action that in any manner may infringe upon the Intellectual Property Rights of Buyer.  The obligation of Seller and its Affiliates to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information.
(h)    On and after the Closing Date, Seller will afford promptly to Buyer and its agents reasonable access to its books and records, employees and auditors to the extent necessary or useful for Buyer in connection with any audit, investigation, dispute or litigation or any other reasonable business purpose, in each case relating to the Purchased Assets; provided that any such access by Buyer shall not unreasonably interfere with the conduct of the business of Seller.  Any and all information obtained during such access shall be maintained in confidence by Buyer its Affiliates and their respective agents.  The obligation of Buyer, its Affiliates and their respective agents to hold any such information in confidence shall be satisfied if they exercise the same care with respect to such information as they would take to preserve the confidentiality of their own similar information.
Buyer and Seller agree that:
Section 6.02.    Reasonable Best Efforts; Further Assurances.  (a) Subject to the terms and conditions of this Agreement, Buyer, Gain and Seller will use their reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, all things necessary or desirable under Applicable Laws to consummate the transactions contemplated by this Agreement, including (i) preparing and filing as promptly as practicable with any Governmental Authority or other third party all documentation to effect all necessary filings, notices, petitions, statements, registrations, submissions of information, applications and other documents and (ii) obtaining and maintaining all approvals, consents, registrations, permits, authorizations and other confirmations required to be obtained from any Governmental Authority or other third party that are necessary, proper or advisable to consummate the transactions contemplated by this Agreement.  Seller and Buyer agree to execute and deliver such other documents, certificates, agreements and other writings and to take such other actions as may be necessary or desirable in order to consummate or implement expeditiously the transactions contemplated by this Agreement and to vest in Buyer good title to the Purchased Assets.
(b)    Seller hereby constitutes and appoints, effective as of the Closing Date, Buyer and its successors and assigns as the true and lawful attorney of Seller with full power of substitution in the name of Buyer, or in the name of Seller but for the benefit of Buyer, (1) to collect for the account of Buyer any items of Purchased Assets and (2) to institute and prosecute all proceedings which Buyer may in its sole discretion deem proper in order to assert or enforce any right, title or interest in, to or under the Purchased Assets, and to defend or compromise any and all actions, suits or proceedings in respect of the Purchased Assets.  Buyer shall be entitled to retain for its own account any amounts collected pursuant to the foregoing powers, including any amounts payable as interest in respect thereof.
Section 6.03.    Certain Filings.  Seller and Buyer shall cooperate with one another (i) in determining whether any action by or in respect of, or filing with, any Governmental Authority is required, or any actions, consents, approvals or waivers are required to be obtained from parties to any material contracts, in connection with the consummation of the transactions contemplated by this Agreement and (ii) in taking such actions or making any such filings, furnishing information required in connection therewith and seeking timely to obtain any such actions, consents, approvals or waivers.
Section 6.04.    Public Announcements.  Each party agrees not to issue any press release or make any public statement with respect to this Agreement or the transactions contemplated hereby without the prior written consent of each other party hereto, except for any press releases and public statements the making of which may be required by Applicable Law or any listing agreement with any national securities exchange.
ARTICLE 7     
TRANSFER RESTRICTIONS
Section 7.01.    General Restrictions on Transfers.  
(c)    Seller agrees that it shall not Transfer any Acquired Stock (or solicit any offers in respect of any Transfer of any Acquired Stock) in contravention of the terms and conditions of this ‎Article 7.
(d)    In addition, Seller agrees that it shall not Transfer any Acquired Stock (or solicit any offers in respect of any Transfer of any Acquired Stock) (i) unless there is an effective registration statement under the Securities Act covering such Acquired Stock or the sale is made in accordance with Rule 144 under the Securities Act or (ii) if such Transfer (or solicitation of an offer of a Transfer) would violate any other applicable securities or “blue sky” laws.
(e)    Any attempt to Transfer any Acquired Stock in violation of this ‎Article 7 shall be null and void, and Gain shall not, and shall cause any transfer agent not to, give any effect in Gain’s stock records to such attempted Transfer.
Section 7.02.    Legends.  
(a)    In addition to any other legend that may be required, each certificate for Acquired Stock issued to Seller shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED, OR ANY NON-U.S. OR STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN COMPLIANCE THEREWITH.  THIS SECURITY IS ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE ASSET PURCHASE AGREEMENT DATED AS OF JULY 10, 2014 COPIES OF WHICH MAY BE OBTAINED UPON REQUEST FROM GAIN CAPITAL HOLDINGS, INC. OR ANY SUCCESSOR THERETO.
(b)    If any shares of Acquired Stock cease to be subject to any and all restrictions on Transfer set forth in this Agreement, Gain, upon the written request of Seller as holder thereof, shall issue to Seller a new certificate evidencing such Acquired Stock without all or part of the legend required by ‎Section 7.02‎(a) (unless part of such legend is required by applicable law) endorsed thereon.
Section 7.03.    Permitted Transferees.  Notwithstanding anything in this Agreement to the contrary, Seller may at any time Transfer any or all of its Acquired Stock to one or more of its Permitted Transferees so long as (i) such Permitted Transferee shall have agreed in writing to be bound by the terms of this Agreement and (ii) the Transfer shall not be in violation of ‎Section 7.01(a).
ARTICLE 8     
TAX MATTERS
Section 8.01.    Allocation of Taxes.  
(c)    All personal property Taxes and similar ad valorem obligations levied with respect to the Purchased Assets for a taxable period which includes (but does not end on) the Closing Date and that are payable after the Closing Date (collectively, the “Apportioned Obligations”) shall be apportioned between Seller and Buyer based on the number of days of such taxable period included in the Pre-Closing Tax Period and the number of days of such taxable period after the Closing Date (such portion of such taxable period, the “Post-Closing Tax Period”).  Seller shall be liable for the proportionate amount of such Taxes that is attributable to the Pre-Closing Tax Period, and Buyer shall be liable for the proportionate amount of such taxes that is attributable to the Post-Closing Tax Period.
(d)    All excise, sales, use, value added, registration stamp, recording, documentary, conveyancing, franchise, transfer and similar Taxes incurred in connection with the transactions contemplated by this Agreement (collectively, “Transfer Taxes”) shall be split equally by Buyer and Seller.  Seller represents and warrants to Buyer that, with respect to the transactions contemplated by this agreement, Seller is entitled to an exemption from Transfer Taxes for isolated, casual or occasional sales in each jurisdiction that would otherwise impose a Transfer Tax on the transactions.  Buyer and Seller shall cooperate in providing each other with any appropriate resale exemption certifications and other similar documentation.
(e)    Apportioned Obligations and Transfer Taxes shall be timely paid, and all applicable filings, reports and returns shall be filed, as provided by Applicable Law.  The paying party shall be entitled to reimbursement from the non-paying party in accordance with Section 8.01(a).  Upon payment of any such Apportioned Obligation, the paying party shall present a statement to the non-paying party setting forth the amount of reimbursement to which the paying party is entitled under ‎Section 8.01(a) together with such supporting evidence as is reasonably necessary to calculate the amount to be reimbursed.  The non-paying party shall make such reimbursement promptly but in no event later than 10 days after the presentation of such statement.  Any payment not made within such time shall bear interest at the per annum rate of 10% for each day until paid.
Section 8.02.    Other Tax Obligations.  Certain other tax obligations shall be handled in the manner set forth on Schedule 2.04(a).
ARTICLE 9     
SURVIVAL; INDEMNIFICATION
Section 9.01.    Survival.  The representations and warranties of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing until the 18-month anniversary of the Closing Date.  The covenants and agreements of the parties hereto contained in this Agreement or in any certificate or other writing delivered pursuant hereto or in connection herewith shall survive the Closing indefinitely or for the shorter period explicitly specified therein, except that for such covenants and agreements that survive for such shorter period, breaches thereof shall survive indefinitely or until the latest date permitted by law.  Notwithstanding the preceding sentences, any breach of covenant, agreement, representation or warranty in respect of which indemnity may be sought under this Agreement shall survive the time at which it would otherwise terminate pursuant to the preceding sentence, if notice of the inaccuracy thereof giving rise to such right of indemnity shall have been given to the party against whom such indemnity may be sought prior to such time.
Section 9.02.    Indemnification.  (a) Effective at and after the Closing, Seller hereby indemnifies Buyer, Gain, each of their respective Affiliates and each of their respective successors and assignees (each, a “Buyer Indemnified Party”) against, and agrees to hold each of them harmless from, any and all Damages incurred or suffered by a Buyer Indemnified Party arising out of:
(i)    any misrepresentation or breach of warranty (each such misrepresentation and breach of warranty a “Warranty Breach”) or breach of covenant or agreement made or to be performed by Seller pursuant to this Agreement; or
(ii)    any Excluded Liability;
regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of law or equity of, or violation of any law by, a Buyer Indemnified Party; provided that with respect to indemnification by Seller for Warranty Breaches pursuant to Section ‎9.02(a)(i), Seller’s maximum liability for all such Warranty Breaches shall not exceed $8,000,000 (the “Cap”); provided, further, for the avoidance of doubt, that the Cap shall not apply to any fraud claims brought by a Buyer Indemnified Party.
(b)    Effective at and after the Closing, Buyer hereby indemnifies Seller, its Affiliates and their respective successors and assignees against and agrees to hold each of them harmless from any and all Damages incurred or suffered by Seller, any of its Affiliates or any of their respective successors and assignees arising out of any Warranty Breach or breach of covenant or agreement made or to be performed by Buyer or Gain pursuant to this Agreement regardless of whether such Damages arise as a result of the negligence, strict liability or any other liability under any theory of law or equity of, or violation of any law by, Seller, any of its Affiliates or any of their respective successors and assignees; provided that with respect to indemnification by Buyer for Warranty Breaches pursuant to this ‎Section 9.02‎(b), Buyer’s maximum liability for all such Warranty Breaches shall not exceed the Cap; provided, further, for the avoidance of doubt, that the Cap shall not apply to (i) any third party claim brought against Seller arising from use of the Purchased Assets by Buyer or its Affiliates and their respective successors or assignees (e.g., a claim by Buyer’s customers), and (ii) any fraud claims brought by Seller.
Section 9.03.    Third Party Claim Procedures.  d) The party seeking indemnification under ‎Section 9.02 (the “Indemnified Party”) agrees to give prompt notice in writing to the party against whom indemnity is to be sought (the “Indemnifying Party”) of the assertion of any claim or the commencement of any suit, action or proceeding by any third party (“Third Party Claim”) in respect of which indemnity may be sought under such Section.  Such notice shall set forth in reasonable detail such Third Party Claim and the basis for indemnification (taking into account the information then available to the Indemnified Party).  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have actually prejudiced the Indemnifying Party.
(c)    The Indemnifying Party shall be entitled to participate in the defense of any Third Party Claim and, subject to the limitations set forth in this ‎Section 9.03, shall be entitled to control and appoint lead counsel for such defense, in each case at its own expense; provided that prior to assuming control of such defense, the Indemnifying Party must i) acknowledge that it would have an indemnity obligation for the Damages resulting from such Third Party Claim as provided under this ‎Article 9 and ii) furnish the Indemnified Party with evidence that the Indemnifying Party has adequate resources to defend the Third Party Claim and fulfill its indemnity obligations hereunder.
(d)    The Indemnifying Party shall not be entitled to assume or maintain control of the defense of any Third Party Claim and shall pay the fees and expenses of counsel retained by the Indemnified Party if iii) the Indemnifying Party does not deliver the acknowledgment referred to in Section 9.03(b) (i) within 30 days of receipt of written notice of the Third Party Claim pursuant to ‎Section 9.03(a), iv) the Third Party Claim relates to or arises in connection with any criminal proceeding, action, indictment, allegation or investigation, v) the Third Party Claim seeks an injunction or equitable relief against the Indemnified Party or any of its Affiliates or (iv) the Indemnified Party reasonably believes an adverse determination with respect to the Third Party Claim would be detrimental to the reputation or future business prospects of the Indemnified Party or any of its Affiliates.
(e)    If the Indemnifying Party shall assume the control of the defense of any Third Party Claim in accordance with the provisions of this ‎Section 9.03, the Indemnifying Party shall obtain the prior written consent of the Indemnified Party (which shall not be unreasonably withheld) before entering into any settlement of such Third Party Claim, if the settlement does not expressly unconditionally release the Indemnified Party and its affiliates from all liabilities and obligations with respect to such Third Party Claim or the settlement imposes injunctive or other equitable relief against the Indemnified Party or any of its affiliates.
(f)    In circumstances where the Indemnifying Party is controlling the defense of a Third Party Claim in accordance with paragraphs (b) and (c) above, the Indemnified Party shall be entitled to participate in the defense of any Third Party Claim and to employ separate counsel of its choice for such purpose, in which case the fees and expenses of such separate counsel shall be borne by the Indemnified Party; provided that in such event the Indemnifying Party shall pay the fees and expenses of such separate counsel incurred by the Indemnified Party prior to the date the Indemnifying Party assumes control of the defense of the Third Party Claim.
(g)    Each party shall cooperate, and cause their respective affiliates to cooperate, in the defense or prosecution of any Third Party Claim and shall furnish or cause to be furnished such records, information and testimony, and attend such conferences, discovery proceedings, hearings, trials or appeals, as may be reasonably requested in connection therewith.
Section 9.04.    Direct Claim Procedures.  In the event an Indemnified Party has a claim for indemnity under Section 9.02 against an Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party agrees to give prompt notice in writing of such claim to the Indemnifying Party.  Such notice shall set forth in reasonable detail such claim and the basis for indemnification (taking into account the information then available to the Indemnified Party).  The failure to so notify the Indemnifying Party shall not relieve the Indemnifying Party of its obligations hereunder, except to the extent such failure shall have actually prejudiced the Indemnifying Party.  If the Indemnifying Party has timely disputed its indemnity obligation for any Damages with respect to such claim, the parties shall proceed in good faith to negotiate a resolution of such dispute and, if not resolved through negotiations, such dispute shall be resolved by litigation in an appropriate court of jurisdiction determined pursuant to ‎Section 10.07.
Section 9.05.    Insurance Proceeds.  The amount of an Indemnifying Party’s liability under this Agreement shall be determined taking into account any applicable insurance proceeds actually received by the Indemnified Party.  The indemnification obligations of each party hereto under this Article 9 shall inure to the benefit of the Affiliates of the other party hereto on the same terms as are applicable to such other party.  All indemnification payments under this Article 9 shall be deemed adjustments to the Purchase Price.
Section 9.06.    Sole Remedy.  The indemnification provided in this Article 9 shall be the sole and exclusive remedy after the Closing Date for damages available to the parties to this Agreement for breach of any of the terms, conditions, representations or warranties contained herein or any right, claim or action arising from the transactions contemplated by this Agreement; provided, however, this exclusive remedy for damages does not preclude a party from bringing an action (i) for specific performance or other equitable remedy to require a party to perform its obligations under this Agreement or (ii) based on fraud or intentional misrepresentation.
Section 9.07.    Special Damages.  Notwithstanding anything contained in this Agreement to the contrary, no party shall be liable to any other party for indirect, special, punitive, exemplary or consequential loss or damage (including any loss of revenue or profit) arising out of this Agreement; provided, however, the foregoing shall not be construed to preclude recovery by the Indemnified Party in respect of Damages directly incurred from (i) claims of third parties or (ii) any claim based on fraud or intentional misrepresentation.  Each party agrees to use commercially reasonable efforts to mitigate its Damages.
ARTICLE 10     
MISCELLANEOUS
Section 10.01.    Notices.  All notices, requests and other communications to any party hereunder shall be in writing (including facsimile transmission and electronic mail (“e-mail”) transmission, so long as a receipt of such e-mail is requested and received) and shall be given,
if to Buyer, to:
Gain Capital Holdings Inc. 
135 US Highway 202/206 
Suite 11 
Bedminster, NJ 07921 
Attention:  Diego Rotsztain, General Counsel 
Facsimile No.:  (866) 861-1673 
drotsztain@gaincapital.com
with a copy to:
Davis Polk & Wardwell LLP 
450 Lexington Avenue 
New York, New York  10017 
Attention:  Leonard Kreynin 
Facsimile No.:  (212) 701-5800 
leonard.kreynin@davispolk.com
if to Gain, to:
Gain Capital Holdings Inc. 
135 US Highway 202/206 
Suite 11 
Bedminster, NJ 07921 
Attention:  Diego Rotsztain, General Counsel 
Facsimile No.:  (866) 861-1673 
drotsztain@gaincapital.com
with a copy to:
Davis Polk & Wardwell LLP 
450 Lexington Avenue 
New York, New York  10017 
Attention:  Leonard Kreynin 
Facsimile No.:  (212) 701-5800 
leonard.kreynin@davispolk.com
if to Seller, to:
Forexster Limited 
c/o Wakefiled Quin Limited 
Victoria Place 
31 Victoria Street 
Hamilton, HM10 
Bermuda
with a copy to:
Nixon Peabody LLP 
1300 Clinton Avenue 
Rochester, New York 14604 
Attention: Jeremy J. Wolk 
Facsimile No.: (866) 560-0661 
E-mail: jwolk@nixonpeabody.com
or such other address or facsimile number as such party may hereafter specify for the purpose by notice to the other parties hereto.  All such notices, requests and other communications shall be deemed received on the date of receipt by the recipient thereof if received prior to 5:00 p.m. in the place of receipt and such day is a Business Day in the place of receipt.  Otherwise, any such notice, request or communication shall be deemed not to have been received until the next succeeding Business Day in the place of receipt.
Section 10.02.    Amendments and Waivers.  (h) Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing, makes specific references to the provision to be amended or waived, and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective.
(i)    No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.  The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
Section 10.03.    Disclosure Schedule References.  The parties hereto agree that any reference in a particular Section of either the Seller Disclosure Schedule, Buyer Disclosure Schedule or the Gain Disclosure Schedule shall only be deemed to be an exception to (or, as applicable, a disclosure for purposes of) (a) the representations and warranties (or covenants, as applicable) of the relevant party that are contained in the corresponding Section of this Agreement and (b) any other representations and warranties of such party that is contained in this Agreement, but only if the relevance of that reference as an exception to (or a disclosure for purposes of) such representations and warranties would be readily apparent to a reasonable person who has read that reference and such representations and warranties, without any independent knowledge on the part of the reader regarding the matter(s) so disclosed.
Section 10.04.    Expenses.  Except as otherwise provided herein, all costs and expenses incurred in connection with this Agreement shall be paid by the party incurring such cost or expense.
Section 10.05.    Successors and Assigns.  The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns permitted pursuant to the next sentence hereof.  No party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the written consent of each other party hereto; provided, however, that each party hereto may transfer or assign its rights and obligations under this Agreement, in whole or from time to time in part, to (i) one or more of its Affiliates or (ii) to any Person who acquires all or substantially all of the capital stock or assets of a party and agrees in writing to be bound by the provisions of this Agreement so long as such party has a good faith belief that such transfer or assignment will not materially impair the rights hereunder any of the other parties hereto.  For clarity and avoidance of doubt, no party shall have a consent right over any change of control, sale or any other corporate transaction involving any other party.
Section 10.06.    Governing Law.  This Agreement shall be governed by and construed in accordance with the law of the State of New York, without regard to the conflicts of law rules of such state.
Section 10.07.    Jurisdiction.  The parties hereto agree that any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions contemplated hereby shall be brought in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, so long as one of such courts shall have subject matter jurisdiction over such suit, action or proceeding, and that any cause of action arising out of this Agreement shall be deemed to have arisen from a transaction of business in the State of New York, and each of the parties hereby irrevocably consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum.  Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court.  Without limiting the foregoing, each party agrees that service of process on such party as provided in ‎Section 10.01 shall be deemed effective service of process on such party.
Section 10.08.    WAIVER OF JURY TRIAL.  EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 10.09.    Counterparts; Effectiveness; Third Party Beneficiaries.  This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.  This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by all of the other parties hereto.  Until and unless each party has received a counterpart hereof signed by the other party hereto, this Agreement shall have no effect and no party shall have any right or obligation hereunder (whether by virtue of any other oral or written agreement or other communication).  No provision of this Agreement is intended to confer any rights, benefits, remedies, obligations or liabilities hereunder upon any Person other than the parties hereto and their respective successors and assigns.
Section 10.10.    Entire Agreement.  This Agreement, the Termination Agreement, the Consulting Agreement and the VIPL Agreement constitute the entire agreement among the parties with respect to the subject matter of this Agreement and supersede all prior agreements and understandings, both oral and written, among the parties with respect to the subject matter of this Agreement.
Section 10.11.    Severability.  If any term, provision, covenant or restriction of this Agreement is held by a court of competent jurisdiction or other authority to be invalid, void or unenforceable, the remainder of the terms, provisions, covenants and restrictions of this Agreement shall remain in full force and effect and shall in no way be affected, impaired or invalidated so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.  Upon such a determination, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.
Section 10.12.    Specific Performance.  The parties hereto agree that irreparable damage would occur if any provision of this Agreement were not performed in accordance with the terms hereof and that the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement or to enforce specifically the performance of the terms and provisions hereof in in the United States District Court for the Southern District of New York or any New York State court sitting in New York City, in addition to any other remedy to which they are entitled at law or in equity.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed by their respective authorized officers as of the day and year first above written.
	
			
	GAIN GTX BERMUDA, LTD.

	By:
	/s/ Alex Bobinski

	 
	Name:
	Alex Bobinski

	 
	Title:
	Director

	
			
	GAIN CAPITAL HOLDINGS, INC.

	By:
	/s/ Diego Rotsztain

	 
	Name:
	Diego Rotsztain

	 
	Title:
	EVP

	
			
	FOREXSTER LIMITED

	By:
	/s/ Horst Finkbeiner

	 
	Name:
	Horst Finkbeiner

	 
	Title:
	DirectorEX 10.2 Equity Incentive Plan and Form of Awards

PICO HOLDINGS, INC.

2014 EQUITY INCENTIVE PLAN

	
				
	Table of Contents

	 
	 
	Page

	1.
	Establishment, Purpose and Term of Plan
	4

	 
	1.1
	Establishment
	4

	 
	1.2
	Purpose
	4

	 
	1.3
	Term of Plan
	4

	2.
	Definitions and Construction
	4

	 
	2.1
	Definitions
	4

	 
	2.2
	Construction
	10

	3.
	Administration
	10

	 
	3.1
	Administration by the Committee
	10

	 
	3.2
	Authority of Officers
	10

	 
	3.3
	Administration with Respect to Insiders
	10

	 
	3.4
	Committee Complying with Section 162(m)
	10

	 
	3.5
	Powers of the Committee
	10

	 
	3.6
	Option or SAR Repricing
	11

	 
	3.7
	Indemnification
	11

	4.
	Shares Subject to Plan
	12

	 
	4.1
	Maximum Number of Shares Issuable
	12

	 
	4.2
	Adjustment for Unissued or Forfeited Predecessor Plan Shares
	12

	 
	4.3
	Share Counting
	12

	 
	4.4
	Adjustments for Changes in Capital Structure
	12

	 
	4.5
	Assumption or Substitution of Awards
	13

	5.
	Eligibility, Participation and Award Limitations
	13

	 
	5.1
	Persons Eligible for Awards
	13

	 
	5.2
	Participation in the Plan
	13

	 
	5.3
	Incentive Stock Option Limitations
	13

	 
	5.4
	Section 162(m) Award Limits
	14

	 
	5.5
	Nonemployee Director Award Limit
	14

	6.
	Stock Options
	14

	 
	6.1
	Exercise Price
	14

	 
	6.2
	Exercisability and Term of Options
	14

	 
	6.3
	Payment of Exercise Price
	14

	 
	6.4
	Effect of Termination of Service
	15

	 
	6.5
	Transferability of Options
	16

	7.
	Stock Appreciation Rights
	16

	 
	7.1
	Types of SARs Authorized
	16

1

	
				
	 
	7.2
	Exercise Price
	16

	 
	7.3
	Exercisability and Term of SARs
	16

	 
	7.4
	Exercise of SARs
	17

	 
	7.5
	Deemed Exercise of SARs
	17

	 
	7.6
	Effect of Termination of Service
	17

	 
	7.7
	Transferability of SARs
	17

	8.
	Restricted Stock Awards
	17

	 
	8.1
	Types of Restricted Stock Awards Authorized
	18

	 
	8.2
	Purchase Price
	18

	 
	8.3
	Payment of Purchase Price
	18

	 
	8.4
	Payment of Purchase Price
	18

	 
	8.5
	Vesting and Restrictions on Transfer
	18

	 
	8.6
	Voting Rights; Dividends and Distributions
	18

	 
	8.7
	Effect of Termination of Service
	19

	 
	8.8
	Nontransferability of Restricted Stock Award Rights
	19

	9.
	Restricted Stock Units
	19

	 
	9.1
	Grant of Restricted Stock Unit Awards
	19

	 
	9.2
	Purchase Price
	19

	 
	9.3
	Vesting
	19

	 
	9.4
	Voting Rights, Dividend Equivalent Rights and Distributions
	19

	 
	9.5
	Effect of Termination of Service
	20

	 
	9.6
	Settlement of Restricted Stock Unit Awards
	20

	 
	9.7
	Nontransferability of Restricted Stock Unit Awards
	20

	10.
	Performance Awards
	20

	 
	10.1
	Types of Performance Awards Authorized
	20

	 
	10.2
	Initial Value of Performance Shares and Performance Units
	21

	 
	10.3
	Establishment of Performance Period, Performance Goals and Performance Award Formula
	21

	 
	10.4
	Measurement of Performance Goals
	21

	 
	10.5
	Settlement of Performance Awards
	22

	 
	10.6
	Voting Rights; Dividend Equivalent Rights and Distributions
	23

	 
	10.7
	Effect of Termination of Service
	24

	 
	10.8
	Nontransferability of Performance Awards
	24

	11.
	Cash-Based Awards and Other Stock-Based Awards
	24

	 
	11.1
	Grant of Cash-Based Awards
	24

	 
	11.2
	Grant of Other Stock-Based Awards
	24

	 
	11.3
	Value of Cash-Based and Other Stock-Based Awards
	24

	 
	11.4
	Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards
	25

	 
	11.5
	Voting Rights; Dividend Equivalent Rights and Distributions
	25

	 
	11.6
	Effect of Termination of Service
	25

	 
	11.7
	Nontransferability of Cash-Based Awards and Other Stock-Based Awards
	25

2

	
				
	12.
	Standard Forms of Award Agreement
	26

	 
	12.1
	Award Agreements
	26

	 
	12.2
	Authority to Vary Terms
	26

	13.
	Change in Control
	26

	 
	13.1
	Effect of Change in Control on Awards
	26

	 
	13.2
	Effect of Change in Control on Nonemployee Director Awards
	27

	 
	13.3
	Federal Excise Tax Under Section 4999 of the Code
	27

	14.
	Compliance with Securities Law
	27

	15.
	Compliance with Section 409A
	27

	 
	15.1
	Awards Subject to Section 409A
	27

	 
	15.2
	Deferral and/or Distribution Elections
	28

	 
	15.3
	Subsequent Elections
	28

	 
	15.4
	Payment of Section 409A Deferred Compensation
	28

	16.
	Tax Withholding
	30

	 
	16.1
	Tax Withholding in General
	30

	 
	16.2
	Withholding in or Directed Sale of Shares
	30

	17.
	Amendment, Suspension or Termination of Plan
	30

	18.
	Miscellaneous Provisions
	31

	 
	18.1
	Repurchase Rights
	31

	 
	18.2
	Forfeiture Events
	31

	 
	18.3
	Provision of Information
	31

	 
	18.4
	Rights as Employee, Consultant or Director
	31

	 
	18.5
	Rights as a Shareholder
	31

	 
	18.6
	Delivery of Title to Shares
	32

	 
	18.7
	Fractional Shares 
	32

	 
	18.8
	Retirement and Welfare Plans
	32

	 
	18.9
	Beneficiary Designation
	32

	 
	18.10
	Severability
	32

	 
	18.11
	No Constraint on Corporate Action
	32

	 
	18.12
	Unfunded Obligation
	32

	 
	18.13
	Choice of Law
	32

3

PICO Holdings, Inc.
2014 Equity Incentive Plan

1.Establishment, Purpose and Term of Plan.
1.1Establishment.  The PICO Holdings, Inc. 2014 Equity Incentive Plan (the “Plan”) is hereby established effective as of May 14, 2014, the date of its approval by the shareholders of the Company (the “Effective Date”).

1.2Purpose.  The purpose of the Plan is to advance the interests of the Participating Company Group and its shareholders by providing an incentive to attract, retain and reward persons performing services for the Participating Company Group and by motivating such persons to contribute to the growth and profitability of the Participating Company Group.  The Plan seeks to achieve this purpose by providing for Awards in the form of Options, Stock Appreciation Rights, Restricted Stock Awards, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based Awards and Other Stock-Based Awards.

1.3Term of Plan.  The Plan shall continue in effect until its termination by the Committee; provided, however, that all Awards shall be granted, if at all, within ten (10) years from the Effective Date.

2.Definitions and Construction.

2.1Definitions.  Whenever used herein, the following terms shall have their respective meanings set forth below:
(a)“Affiliate” means (i) a parent entity, other than a Parent Corporation, that directly, or indirectly through one or more intermediary entities, controls the Company or (ii) a subsidiary entity, other than a Subsidiary Corporation, that is controlled by the Company directly or indirectly through one or more intermediary entities.  For this purpose, the terms “parent,” “subsidiary,” “control” and “controlled by” shall have the meanings assigned such terms for the purposes of registration of securities on Form S-8 under the Securities Act.
(b)“Award” means any Option, Stock Appreciation Right, Restricted Stock Purchase Right, Restricted Stock Bonus, Restricted Stock Unit, Performance Share, Performance Unit, Cash-Based Award or Other Stock-Based Award granted under the Plan.
(c)“Award Agreement” means a written or electronic agreement between the Company and a Participant setting forth the terms, conditions and restrictions applicable to an Award.
(d)“Board” means the Board of Directors of the Company.
(e)“Cash-Based Award” means an Award denominated in cash and granted pursuant to Section 11.
(f)“Cashless Exercise” means a Cashless Exercise as defined in Section 6.3(b)(i).
(g)“Cause” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between a Participant and a Participating Company applicable to an Award, any of the following: (i) the Participant’s theft, dishonesty, willful misconduct, breach of fiduciary duty for personal profit, or falsification of any Participating Company documents or records; (ii) the Participant’s material failure to abide by a Participating Company’s code of conduct or other policies (including, without limitation, policies relating to confidentiality and reasonable workplace conduct); (iii) the Participant’s unauthorized use, misappropriation, destruction or diversion of any tangible or intangible asset or corporate opportunity of a Participating Company (including, without limitation, the Participant’s improper use or disclosure of a Participating Company’s confidential or proprietary information); (iv) any intentional act by the Participant which has a material detrimental effect on a Participating Company’s reputation or business; (v) the Participant’s repeated failure to perform any reasonable assigned duties after written notice from a Participating Company of, and a reasonable opportunity to cure, such failure; (vi) any material breach by the Participant of any employment, 

4

service, non-disclosure, non-competition, non-solicitation or other similar agreement between the Participant and a Participating Company, which breach is not cured pursuant to the terms of such agreement; or (vii) the Participant’s conviction (including any plea of guilty or nolo contendere) of any criminal act involving fraud, dishonesty, misappropriation or moral turpitude, or which impairs the Participant’s ability to perform his or her duties with a Participating Company.
(h)“Change in Control” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the occurrence of any one or a combination of the following:
(i)any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as such term is defined in Rule 13d‐3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than fifty percent (50%) of the total Fair Market Value or total combined voting power of the Company’s then‐outstanding securities entitled to vote generally in the election of Directors; provided, however, that a Change in Control shall not be deemed to have occurred if such degree of beneficial ownership results from any of the following: (A) an acquisition by any person who on the Effective Date is the beneficial owner of more than fifty percent (50%) of such voting power, (B) any acquisition directly from the Company, including, without limitation, pursuant to or in connection with a public offering of securities, (C) any acquisition by the Company, (D) any acquisition by a trustee or other fiduciary under an employee benefit plan of a Participating Company or (E) any acquisition by an entity owned directly or indirectly by the shareholders of the Company in substantially the same proportions as their ownership of the voting securities of the Company; or
(ii)an Ownership Change Event or series of related Ownership Change Events (collectively, a “Transaction”) in which the shareholders of the Company immediately before the Transaction do not retain immediately after the Transaction direct or indirect beneficial ownership of more than fifty percent (50%) of the total combined voting power of the outstanding securities entitled to vote generally in the election of Directors or, in the case of an Ownership Change Event described in Section 2.1(ee)(iii), the entity to which the assets of the Company were transferred (the “Transferee”), as the case may be; or
(iii)a date specified by the Committee following approval by the shareholders of a plan of complete liquidation or dissolution of the Company;
provided, however, that a Change in Control shall be deemed not to include a transaction described in subsections (i) or (ii) of this Section 2.1(h) in which a majority of the members of the board of directors of the continuing, surviving or successor entity, or parent thereof, immediately after such transaction is comprised of Incumbent Directors.
For purposes of the preceding sentence, indirect beneficial ownership shall include, without limitation, an interest resulting from ownership of the voting securities of one or more corporations or other business entities which own the Company or the Transferee, as the case may be, either directly or through one or more subsidiary corporations or other business entities.  The Committee shall determine whether multiple events described in subsections (i), (ii) and (iii) of this Section 2.1(h) are related and to be treated in the aggregate as a single Change in Control, and its determination shall be final, binding and conclusive.
(i)“Code” means the Internal Revenue Code of 1986, as amended, and any applicable regulations and administrative guidelines promulgated thereunder.
(j)“Committee” means the Compensation Committee and such other committee or subcommittee of the Board, if any, duly appointed to administer the Plan and having such powers in each instance as shall be specified by the Board.  If, at any time, there is no committee of the Board then authorized or properly constituted to administer the Plan, the Board shall exercise all of the powers of the Committee granted herein, and, in any event, the Board may in its discretion exercise any or all of such powers.
(k)“Company” means PICO Holdings, Inc., a California corporation, and any successor corporation thereto.

5

(l)“Consultant” means a person engaged to provide consulting or advisory services (other than as an Employee or a Director) to a Participating Company, provided that the identity of such person, the nature of such services or the entity to which such services are provided would not preclude the Company from offering or selling securities to such person pursuant to the Plan in reliance on registration on Form S‐8 under the Securities Act.
(m)“Covered Employee” means, at any time the Plan is subject to Section 162(m), any Employee who is or may reasonably be expected to become a “covered employee” as defined in Section 162(m), or any successor statute, and who, with respect to a Performance Award, is designated, either as an individual Employee or a member of a class of Employees, by the Committee no later than the earlier of (i) the date that is ninety (90) days after the beginning of the Performance Period, or (ii) the date on which twenty-five percent (25%) of the Performance Period has elapsed, as a “Covered Employee” under this Plan for such applicable Performance Period.
(n)“Director” means a member of the Board.
(o)“Disability” means, unless such term or an equivalent term is otherwise defined by the applicable Award Agreement or other written agreement between the Participant and a Participating Company applicable to an Award, the permanent and total disability of the Participant, within the meaning of Section 22(e)(3) of the Code.
(p)“Dividend Equivalent Right” means the right of a Participant, granted at the discretion of the Committee or as otherwise provided by the Plan, to receive a credit for the account of such Participant in an amount equal to the cash dividends paid on one share of Stock for each share of Stock represented by an Award held by such Participant.
(q)“Employee” means any person treated as an employee (including an Officer or a Director who is also treated as an employee) in the records of a Participating Company and, with respect to any Incentive Stock Option granted to such person, who is an employee for purposes of Section 422 of the Code; provided, however, that neither service as a Director nor payment of a Director’s fee shall be sufficient to constitute employment for purposes of the Plan.  The Company shall determine in good faith and in the exercise of its discretion whether an individual has become or has ceased to be an Employee and the effective date of such individual’s employment or termination of employment, as the case may be.  For purposes of an individual’s rights, if any, under the terms of the Plan as of the time of the Company’s determination of whether or not the individual is an Employee, all such determinations by the Company shall be final, binding and conclusive as to such rights, if any, notwithstanding that the Company or any court of law or governmental agency subsequently makes a contrary determination as to such individual’s status as an Employee.
(r)“Exchange Act” means the Securities Exchange Act of 1934, as amended.
(s)“Fair Market Value” means, as of any date, the value of a share of Stock or other property as determined by the Committee, in its discretion, or by the Company, in its discretion, if such determination is expressly allocated to the Company herein, subject to the following:
(i)Except as otherwise determined by the Committee, if, on such date, the Stock is listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be the closing price of a share of Stock as quoted on the national or regional securities exchange or quotation system constituting the primary market for the Stock, as reported in The Wall Street Journal or such other source as the Company deems reliable.  If the relevant date does not fall on a day on which the Stock has traded on such securities exchange or quotation system, the date on which the Fair Market Value shall be established shall be the last day on which the Stock was so traded or quoted prior to the relevant date, or such other appropriate day as shall be determined by the Committee, in its discretion.

6

(ii)Notwithstanding the foregoing, the Committee may, in its discretion, determine the Fair Market Value of a share of Stock on the basis of the opening, closing, or average of the high and low sale prices of a share of Stock on such date or the preceding trading day, the actual sale price of a share of Stock received by a Participant, any other reasonable basis using actual transactions in the Stock as reported on a national or regional securities exchange or quotation system, or on any other basis consistent with the requirements of Section 409A.  The Committee may vary its method of determination of the Fair Market Value as provided in this Section for different purposes under the Plan to the extent consistent with the requirements of Section 409A.
(iii)If, on such date, the Stock is not listed or quoted on a national or regional securities exchange or quotation system, the Fair Market Value of a share of Stock shall be as determined by the Committee in good faith without regard to any restriction other than a restriction which, by its terms, will never lapse, and in a manner consistent with the requirements of Section 409A.
(t)“Full Value Award” means any Award settled in Stock, other than (i) an Option, (ii) a Stock Appreciation Right, or (iii) a Restricted Stock Purchase Right or an Other Stock-Based Award under which the Company will receive monetary consideration equal to the Fair Market Value (determined on the effective date of grant) of the shares subject to such Award.
(u)“Incentive Stock Option” means an Option intended to be (as set forth in the Award Agreement) and which qualifies as an incentive stock option within the meaning of Section 422(b) of the Code.
(v)“Incumbent Director” means a director who either (i) is a member of the Board as of the Effective Date or (ii) is elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but excluding a director who was elected or nominated in connection with an actual or threatened proxy contest relating to the election of directors of the Company).
(w)“Insider” means an Officer, a Director or other person whose transactions in Stock are subject to Section 16 of the Exchange Act.
(x)“Net Exercise” means a Net Exercise as defined in Section 6.3(b)(iii).
(y)“Nonemployee Director” means a Director who is not an Employee.
(z)“Nonemployee Director Award” means any Award granted to a Nonemployee Director.
(aa)“Nonstatutory Stock Option” means an Option not intended to be (as set forth in the Award Agreement) or which does not qualify as an incentive stock option within the meaning of Section 422(b) of the Code.
(bb)“Officer” means any person designated by the Board as an officer of the Company.
(cc)“Option” means an Incentive Stock Option or a Nonstatutory Stock Option granted pursuant to the Plan.
(dd)“Other Stock-Based Award” means an Award denominated in shares of Stock and granted pursuant to Section 11.
(ee)“Ownership Change Event” means the occurrence of any of the following with respect to the Company:  (i) the direct or indirect sale or exchange in a single or series of related transactions by the shareholders of the Company of securities of the Company representing more than fifty percent (50%) of the total combined voting power of the Company’s then outstanding securities entitled to vote generally in the election of Directors; (ii) a merger or consolidation in which the Company is a party; or (iii) the sale, exchange, or transfer of 

7

all or substantially all of the assets of the Company (other than a sale, exchange or transfer to one or more subsidiaries of the Company).
(ff)“Parent Corporation” means any present or future “parent corporation” of the Company, as defined in Section 424(e) of the Code.
(gg)“Participant” means any eligible person who has been granted one or more Awards.
(hh)“Participating Company” means the Company or any Parent Corporation, Subsidiary Corporation or Affiliate.
(ii)“Participating Company Group” means, at any point in time, the Company and all other entities collectively which are then Participating Companies.
(jj)“Performance Award” means an Award of Performance Shares or Performance Units.
(kk)“Performance Award Formula” means, for any Performance Award, a formula or table established by the Committee pursuant to Section 10.3 which provides the basis for computing the value of a Performance Award at one or more levels of attainment of the applicable Performance Goal(s) measured as of the end of the applicable Performance Period.
(ll)“Performance-Based Compensation” means compensation under an Award that satisfies the requirements of Section 162(m) for certain performance-based compensation paid to Covered Employees.
(mm)“Performance Goal” means a performance goal established by the Committee pursuant to Section 10.3.
(nn)“Performance Period” means a period established by the Committee pursuant to Section 10.3 at the end of which one or more Performance Goals are to be measured.
(oo)“Performance Share” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Share, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(pp)“Performance Unit” means a right granted to a Participant pursuant to Section 10 to receive a payment equal to the value of a Performance Unit, as determined by the Committee, based upon attainment of applicable Performance Goal(s).
(qq)“Predecessor Plan” means the Company’s 2005 Long-Term Incentive Plan.
(rr)“Restricted Stock Award” means an Award of a Restricted Stock Bonus or a Restricted Stock Purchase Right.
(ss)“Restricted Stock Bonus” means Stock granted to a Participant pursuant to Section 8.
(tt)“Restricted Stock Purchase Right” means a right to purchase Stock granted to a Participant pursuant to Section 8.
(uu)“Restricted Stock Unit” means a right granted to a Participant pursuant to Section 9 to receive on a future date or occurrence of a future event a share of Stock or cash in lieu thereof, as determined by the Committee.
(vv)“Rule 16b‐3” means Rule 16b‐3 under the Exchange Act, as amended from time to time, or any successor rule or regulation.

8

(ww)“SAR” or “Stock Appreciation Right” means a right granted to a Participant pursuant to Section 7 to receive payment, for each share of Stock subject to such Award, of an amount equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the Award over the exercise price thereof.
(xx)“Section 162(m)” means Section 162(m) of the Code.
(yy)“Section 409A” means Section 409A of the Code.
(zz)“Section 409A Deferred Compensation” means compensation provided pursuant to an Award that constitutes nonqualified deferred compensation within the meaning of Section 409A.
(aaa)“Securities Act” means the Securities Act of 1933, as amended.
(bbb)“Service” means a Participant’s employment or service with the Participating Company Group, whether as an Employee, a Director or a Consultant.  Unless otherwise provided by the Committee, a Participant’s Service shall not be deemed to have terminated merely because of a change in the capacity in which the Participant renders Service or a change in the Participating Company for which the Participant renders Service, provided that there is no interruption or termination of the Participant’s Service.  Furthermore, a Participant’s Service shall not be deemed to have been interrupted or terminated if the Participant takes any military leave, sick leave, or other bona fide leave of absence approved by the Company.  However, unless otherwise provided by the Committee, if any such leave taken by a Participant exceeds ninety (90) days, then on the ninety-first (91st) day following the commencement of such leave the Participant’s Service shall be deemed to have terminated, unless the Participant’s right to return to Service is guaranteed by statute or contract.  Notwithstanding the foregoing, unless otherwise designated by the Company or required by law, an unpaid leave of absence shall not be treated as Service for purposes of determining vesting under the Participant’s Award Agreement.  A Participant’s Service shall be deemed to have terminated either upon an actual termination of Service or upon the business entity for which the Participant performs Service ceasing to be a Participating Company.  Subject to the foregoing, the Company, in its discretion, shall determine whether the Participant’s Service has terminated and the effective date of and reason for such termination.
(ccc)“Stock” means the common stock of the Company, as adjusted from time to time in accordance with Section 4.4.
(ddd)“Stock Tender Exercise” means a Stock Tender Exercise as defined in Section 6.3(b)(ii).
(eee)“Subsidiary Corporation” means any present or future “subsidiary corporation” of the Company, as defined in Section 424(f) of the Code.
(fff)

“Ten Percent Owner” means a Participant who, at the time an Option is granted to the Participant, owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company (other than an Affiliate) within the meaning of Section 422(b)(6) of the Code.
(ggg)“Trading Compliance Policy” means the written policy of the Company pertaining to the purchase, sale, transfer or other disposition of the Company’s equity securities by Directors, Officers, Employees or other service providers who may possess material, nonpublic information regarding the Company or its securities.
(hhh)“Vesting Conditions” mean those conditions established in accordance with the Plan prior to the satisfaction of which an Award or shares subject to an Award remain subject to forfeiture or a repurchase option in favor of the Company exercisable for the Participant’s monetary purchase price, if any, for such shares upon the Participant’s termination of Service or failure of a performance condition to be satisfied.

9

2.2Construction.  Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan.  Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular.  Use of the term “or” is not intended to be exclusive, unless the context clearly requires otherwise.

3.Administration.

3.1Administration by the Committee.  The Plan shall be administered by the Committee.  All questions of interpretation of the Plan, of any Award Agreement or of any other form of agreement or other document employed by the Company in the administration of the Plan or of any Award shall be determined by the Committee, and such determinations shall be final, binding and conclusive upon all persons having an interest in the Plan or such Award, unless fraudulent or made in bad faith.  Any and all actions, decisions and determinations taken or made by the Committee in the exercise of its discretion pursuant to the Plan or Award Agreement or other agreement thereunder (other than determining questions of interpretation pursuant to the preceding sentence) shall be final, binding and conclusive upon all persons having an interest therein.  All expenses incurred in connection with the administration of the Plan shall be paid by the Company.

3.2Authority of Officers.  Any Officer shall have the authority to act on behalf of the Company with respect to any matter, right, obligation, determination or election that is the responsibility of or that is allocated to the Company herein, provided that the Officer has apparent authority with respect to such matter, right, obligation, determination or election.  To the extent permitted by applicable law, the Committee may, in its discretion, delegate to a committee comprised of one or more Officers the authority to grant one or more Awards, without further approval of the Committee, to any Employee, other than a person who, at the time of such grant, is an Insider or a Covered Employee, and to exercise such other powers under the Plan as the Committee may determine; provided, however, that (a) such Officers may not grant Awards for more than 10,000 shares to any single Employee in any fiscal year of the Company, (b) each such Award shall be subject to the terms and conditions of the appropriate standard form of Award Agreement approved by the Board or the Committee and shall conform to the provisions of the Plan, and (c) each such Award shall conform to such other limits and guidelines as may be established from time to time by the Committee.

3.3Administration with Respect to Insiders.  With respect to participation by Insiders in the Plan, at any time that any class of equity security of the Company is registered pursuant to Section 12 of the Exchange Act, the Plan shall be administered in compliance with the requirements, if any, of Rule 16b‐3.

3.4Committee Complying with Section 162(m).  If the Company is a “publicly held corporation” within the meaning of Section 162(m), the Board may establish a Committee of “outside directors” within the meaning of Section 162(m) to approve the grant of any Award intended to result in the payment of Performance-Based Compensation.

3.5Powers of the Committee.  In addition to any other powers set forth in the Plan and subject to the provisions of the Plan, the Committee shall have the full and final power and authority, in its discretion:
(a)to determine the persons to whom, and the time or times at which, Awards shall be granted and the number of shares of Stock, units or monetary value to be subject to each Award;
(b)to determine the type of Award granted;
(c)to determine whether an Award granted to a Covered Employee shall be intended to result in Performance-Based Compensation;
(d)to determine the Fair Market Value of shares of Stock or other property;
(e)to determine the terms, conditions and restrictions applicable to each Award (which need not be identical) and any shares acquired pursuant thereto, including, without limitation, (i) the exercise or purchase price of shares pursuant to any Award, (ii) the method of payment for shares purchased pursuant to any Award, (iii) the method for satisfaction of any tax withholding obligation arising in connection with any Award, including by the withholding or delivery of shares of Stock, (iv) the timing, terms and conditions of the exercisability or vesting of any Award or any shares acquired pursuant thereto, (v) the Performance Measures, Performance Period, Performance Award Formula and Performance Goals applicable to any Award and the extent to which such Performance Goals have been attained, (vi) the time of expiration of any Award, (vii) the effect of any 

10

Participant’s termination of Service on any of the foregoing, and (viii) all other terms, conditions and restrictions applicable to any Award or shares acquired pursuant thereto not inconsistent with the terms of the Plan;
(f)to determine whether an Award will be settled in shares of Stock, cash, other property or in any combination thereof;
(g)to approve one or more forms of Award Agreement;
(h)to amend, modify, extend, cancel or renew any Award or to waive any restrictions or conditions applicable to any Award or any shares acquired pursuant thereto;
(i)to accelerate, continue, extend or defer the exercisability or vesting of any Award or any shares acquired pursuant thereto, including with respect to the period following a Participant’s termination of Service;
(j)to prescribe, amend or rescind rules, guidelines and policies relating to the Plan, or to adopt sub-plans or supplements to, or alternative versions of, the Plan, including, without limitation, as the Committee deems necessary or desirable to comply with the laws of, or to accommodate the tax policy, accounting principles or custom of, foreign jurisdictions whose residents may be granted Awards; and
(k)to correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Award Agreement and to make all other determinations and take such other actions with respect to the Plan or any Award as the Committee may deem advisable to the extent not inconsistent with the provisions of the Plan or applicable law.
3.6Option or SAR Repricing.  Without the affirmative vote of holders of a majority of the shares of Stock cast in person or by proxy at a meeting of the shareholders of the Company at which a quorum representing a majority of all outstanding shares of Stock is present or represented by proxy, the Committee shall not approve a program providing for either (a) the cancellation of outstanding Options or SARs having exercise prices per share greater than the then Fair Market Value of a share of Stock (“Underwater Awards”) and the grant in substitution therefore of new Options or SARs having a lower exercise price, Full Value Awards or payments in cash, or (b) the amendment of outstanding Underwater Awards to reduce the exercise price thereof.  This Section shall not be construed to apply to (i) “issuing or assuming a stock option in a transaction to which Section 424(a) applies,” within the meaning of Section 424 of the Code, (ii) adjustments pursuant to the assumption of or substitution for an Option or SAR in a manner that would comply with Section 409A, or (iii) an adjustment pursuant to Section 4.4.

3.7Indemnification.  In addition to such other rights of indemnification as they may have as members of the Board or the Committee or as officers or employees of the Participating Company Group, to the extent permitted by applicable law, members of the Board or the Committee and any officers or employees of the Participating Company Group to whom authority to act for the Board, the Committee or the Company is delegated shall be indemnified by the Company against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any right granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by independent legal counsel selected by the Company) or paid by them in satisfaction of a judgment in any such action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct in duties; provided, however, that within sixty (60) days after the institution of such action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at its own expense to handle and defend the same.

11

4.Shares Subject to Plan.

4.1Maximum Number of Shares Issuable.  Subject to adjustment as provided in Sections 4.2, 4.3 and 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan shall be equal to one million (1,000,000) shares and shall consist of authorized but unissued or reacquired shares of Stock or any combination thereof.

4.2Adjustment for Unissued or Forfeited Predecessor Plan Shares.  The maximum aggregate number of shares of Stock that may be issued under the Plan as set forth in Section 4.1 shall be cumulatively increased from time to time by:
(a)the aggregate number of shares of Stock that remain available for the future grant of awards under the Predecessor Plan immediately prior to its termination as of the Effective Date;
(b)the number of shares of Stock subject to that portion of any option or other award outstanding pursuant to the Predecessor Plan as of the Effective Date which, on or after the Effective Date, expires or is terminated or canceled for any reason without having been exercised or settled in full; and
(c)the number of shares of Stock acquired pursuant to the Predecessor Plan subject to forfeiture or repurchase by the Company for an amount not greater than the Participant’s purchase price which, on or after the Effective Date, is so forfeited or repurchased;
provided, however, that the aggregate number of shares of Stock authorized for issuance under the Predecessor Plan that may become authorized for issuance under the Plan pursuant to this Section 4.2 shall not exceed two million three hundred thousand (2,300,000) shares.
4.3Share Counting.
(a)Each share of Stock subject to an Award other than a Full Value Award shall be counted against the limit set forth in Section 4.1 as one (1) share.  Each one (1) share of Stock subject to a Full Value Award granted pursuant to the Plan or forfeited or repurchased pursuant to Section 4.3(b) shall be counted for purposes of the limit set forth in Section 4.1 as 2.25 shares.
(b)If an outstanding Award for any reason expires or is terminated or canceled without having been exercised or settled in full, or if shares of Stock acquired pursuant to an Award subject to forfeiture or repurchase are forfeited or repurchased by the Company for an amount not greater than the Participant’s purchase price, the shares of Stock allocable to the terminated portion of such Award or such forfeited or repurchased shares of Stock shall again be available for issuance under the Plan.  Shares of Stock shall not be deemed to have been issued pursuant to the Plan with respect to any portion of an Award that is settled in cash.  Upon payment in shares of Stock pursuant to the exercise of an SAR, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the SAR is exercised.  If the exercise price of an Option is paid by tender to the Company, or attestation to the ownership, of shares of Stock owned by the Participant, or by means of a Net-Exercise, the number of shares available for issuance under the Plan shall be reduced by the gross number of shares for which the Option is exercised.  Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the exercise or settlement of Options or SARs pursuant to Section 16.2 shall not again be available for issuance under the Plan.  Shares withheld or reacquired by the Company in satisfaction of tax withholding obligations pursuant to the vesting or settlement of Full Value Awards pursuant to Section 16.2 shall again become available for issuance under the Plan.

4.4Adjustments for Changes in Capital Structure.  Subject to any required action by the shareholders of the Company and the requirements of Sections 409A and 424 of the Code to the extent applicable, in the event of any change in the Stock effected without receipt of consideration by the Company, whether through merger, consolidation, reorganization, reincorporation, recapitalization, reclassification, stock dividend, stock split, reverse stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, or similar change in the capital structure of the Company, or in the event of payment of a dividend or distribution to the shareholders of the Company in a form other than Stock (excepting regular, periodic cash dividends) that has a material effect on the Fair Market Value of shares of Stock, appropriate and proportionate adjustments shall be made in the number and kind of shares subject to the Plan and to any outstanding Awards, the Award limits set forth in Section 5.3 and Section 5.4, and in the exercise or purchase price per share under any outstanding Award in order to prevent dilution 

12

or enlargement of Participants’ rights under the Plan.  For purposes of the foregoing, conversion of any convertible securities of the Company shall not be treated as “effected without receipt of consideration by the Company.”  If a majority of the shares which are of the same class as the shares that are subject to outstanding Awards are exchanged for, converted into, or otherwise become (whether or not pursuant to an Ownership Change Event) shares of another corporation (the “New Shares”), the Committee may unilaterally amend the outstanding Awards to provide that such Awards are for New Shares.  In the event of any such amendment, the number of shares subject to, and the exercise or purchase price per share of, the outstanding Awards shall be adjusted in a fair and equitable manner as determined by the Committee, in its discretion.  Any fractional share resulting from an adjustment pursuant to this Section shall be rounded down to the nearest whole number and the exercise or purchase price per share shall be rounded up to the nearest whole cent.  In no event may the exercise or purchase price, if any, under any Award be decreased to an amount less than the par value, if any, of the stock subject to such Award.  The Committee in its discretion, may also make such adjustments in the terms of any Award to reflect, or related to, such changes in the capital structure of the Company or distributions as it deems appropriate, including modification of Performance Goals, Performance Award Formulas and Performance Periods.  The adjustments determined by the Committee pursuant to this Section shall be final, binding and conclusive.

4.5Assumption or Substitution of Awards.  The Committee may, without affecting the number of shares of Stock reserved or available hereunder, authorize the issuance or assumption of benefits under this Plan in connection with any merger, consolidation, acquisition of property or stock, or reorganization upon such terms and conditions as it may deem appropriate, subject to compliance with Section 409A and any other applicable provisions of the Code.

5.Eligibility, Participation and Award Limitations.

5.1Persons Eligible for Awards.  Awards may be granted only to Employees, Consultants and Directors.

5.2     Participation in the Plan.  Awards are granted solely at the discretion of the Committee.  Eligible persons may be granted more than one Award.  However, eligibility in accordance with this Section shall not entitle any person to be granted an Award, or, having been granted an Award, to be granted an additional Award.

5.3    Incentive Stock Option Limitations.
(a)Maximum Number of Shares Issuable Pursuant to Incentive Stock Options.  Subject to adjustment as provided in Section 4.4, the maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to the exercise of Incentive Stock Options shall not exceed four million (4,000,000) shares.  The maximum aggregate number of shares of Stock that may be issued under the Plan pursuant to all Awards other than Incentive Stock Options shall be the number of shares determined in accordance with Section 4.1, subject to adjustment as provided in Sections 4.2, 4.3, and 4.4.
(b)Persons Eligible.  An Incentive Stock Option may be granted only to a person who, on the effective date of grant, is an Employee of the Company, a Parent Corporation or a Subsidiary Corporation (each being an “ISO-Qualifying Corporation”).  Any person who is not an Employee of an ISO-Qualifying Corporation on the effective date of the grant of an Option to such person may be granted only a Nonstatutory Stock Option.
(c)Fair Market Value Limitation.  To the extent that options designated as Incentive Stock Options (granted under all stock plans of the Participating Company Group, including the Plan) become exercisable by a Participant for the first time during any calendar year for stock having a Fair Market Value greater than One Hundred Thousand Dollars ($100,000), the portion of such options which exceeds such amount shall be treated as Nonstatutory Stock Options.  For purposes of this Section, options designated as Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of stock shall be determined as of the time the option with respect to such stock is granted.  If the Code is amended to provide for a limitation different from that set forth in this Section, such different limitation shall be deemed incorporated herein effective as of the date and with respect to such Options as required or permitted by such amendment to the Code.  If 

13

an Option is treated as an Incentive Stock Option in part and as a Nonstatutory Stock Option in part by reason of the limitation set forth in this Section, the Participant may designate which portion of such Option the Participant is exercising.  In the absence of such designation, the Participant shall be deemed to have exercised the Incentive Stock Option portion of the Option first.  Upon exercise of the Option, shares issued pursuant to each such portion shall be separately identified.
5.4    Section 162(m) Award Limits.  Subject to adjustment as provided in Section 4.4, no Covered Employee shall be granted within any fiscal year of the Company one or more Awards intended to qualify for treatment as Performance-Based Compensation which in the aggregate are for more than 1,000,000 shares or, if applicable, which could result in such Covered Employee receiving more than $15,000,000 for each full fiscal year of the Company contained in the Performance Period for such Award.

5.5    Nonemployee Director Award Limit.  No Nonemployee Director shall be granted within any fiscal year of the Company one or more Nonemployee Director Awards pursuant to the Plan which in the aggregate are for more than a number of shares of Stock determined by dividing $250,000 by the Fair Market Value of a share of Stock determined on the last trading day immediately preceding the date on which the applicable Nonemployee Director Award is granted.

6.Stock Options.
Options shall be evidenced by Award Agreements specifying the number of shares of Stock covered thereby, in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
6.1Exercise Price.  The exercise price for each Option shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the Option and (b) no Incentive Stock Option granted to a Ten Percent Owner shall have an exercise price per share less than one hundred ten percent (110%) of the Fair Market Value of a share of Stock on the effective date of grant of the Option.  Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a Nonstatutory Stock Option) may be granted with an exercise price less than the minimum exercise price set forth above if such Option is granted pursuant to an assumption or substitution for another option in a manner that would qualify under the provisions of Section 409A or Section 424(a) of the Code.

6.2Exercisability and Term of Options.  Options shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such Option; provided, however, that (a) no Option shall be exercisable after the expiration of ten (10) years after the effective date of grant of such Option, (b) no Incentive Stock Option granted to a Ten Percent Owner shall be exercisable after the expiration of five (5) years after the effective date of grant of such Option and (c) no Option granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such Option (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act).  Subject to the foregoing, unless otherwise specified by the Committee in the grant of an Option, each Option shall terminate ten (10) years after the effective date of grant of the Option, unless earlier terminated in accordance with its provisions.

6.3Payment of Exercise Price.
(a)Forms of Consideration Authorized.  Except as otherwise provided below, payment of the exercise price for the number of shares of Stock being purchased pursuant to any Option shall be made (i) in cash, by check or in cash equivalent; (ii) if permitted by the Committee and subject to the limitations contained in Section 6.3(b), by means of (1) a Cashless Exercise, (2) a Stock Tender Exercise or (3) a Net Exercise; (iii) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (iv) by any combination thereof.  The Committee may at any time or from time to time grant 

14

Options which do not permit all of the foregoing forms of consideration to be used in payment of the exercise price or which otherwise restrict one or more forms of consideration.
(b)Limitations on Forms of Consideration.
(i)Cashless Exercise.  A “Cashless Exercise” means the delivery of a properly executed notice of exercise together with irrevocable instructions to a broker providing for the assignment to the Company of the proceeds of a sale or loan with respect to some or all of the shares being acquired upon the exercise of the Option (including, without limitation, through an exercise complying with the provisions of Regulation T as promulgated from time to time by the Board of Governors of the Federal Reserve System).  The Company reserves, at any and all times, the right, in the Company’s sole and absolute discretion, to establish, decline to approve or terminate any program or procedures for the exercise of Options by means of a Cashless Exercise, including with respect to one or more Participants specified by the Company notwithstanding that such program or procedures may be available to other Participants.
(ii)Stock Tender Exercise.  A “Stock Tender Exercise” means the delivery of a properly executed exercise notice accompanied by a Participant’s tender to the Company, or attestation to the ownership, in a form acceptable to the Company of whole shares of Stock owned by the Participant having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised.  A Stock Tender Exercise shall not be permitted if it would constitute a violation of the provisions of any law, regulation or agreement restricting the redemption of the Company’s stock.  If required by the Company, an Option may not be exercised by tender to the Company, or attestation to the ownership, of shares of Stock unless such shares either have been owned by the Participant for a period of time required by the Company (and not used for another option exercise by attestation during such period) or were not acquired, directly or indirectly, from the Company.
(iii)Net Exercise.  A “Net Exercise” means the delivery of a properly executed exercise notice followed by a procedure pursuant to which (1) the Company will reduce the number of shares otherwise issuable to a Participant upon the exercise of an Option by the largest whole number of shares having a Fair Market Value that does not exceed the aggregate exercise price for the shares with respect to which the Option is exercised, and (2) the Participant shall pay to the Company in cash the remaining balance of such aggregate exercise price not satisfied by such reduction in the number of whole shares to be issued.
6.4Effect of Termination of Service.
(a)Option Exercisability.  Subject to earlier termination of the Option as otherwise provided by this Plan and unless otherwise provided by the Committee, an Option shall terminate immediately upon the Participant’s termination of Service to the extent that it is then unvested and shall be exercisable after the Participant’s termination of Service to the extent it is then vested only during the applicable time period determined in accordance with this Section and thereafter shall terminate.
(i)Disability.  If the Participant’s Service terminates because of the Disability of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant (or the Participant’s guardian or legal representative) at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the date of expiration of the Option’s term as set forth in the Award Agreement evidencing such Option (the “Option Expiration Date”).
(ii)Death.  If the Participant’s Service terminates because of the death of the Participant, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant’s legal representative or other person who acquired the right to exercise the Option by reason of the Participant’s death at any time prior to the expiration of twelve (12) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.  The Participant’s Service shall be deemed to have terminated on account of death if the Participant dies within three (3) months (or such longer or shorter period provided by the Award Agreement) after the Participant’s termination of Service.

15

(iii)Termination for Cause.  Notwithstanding any other provision of the Plan to the contrary, if the Participant’s Service is terminated for Cause or if, following the Participant’s termination of Service and during any period in which the Option otherwise would remain exercisable, the Participant engages in any act that would constitute Cause, the Option shall terminate in its entirety and cease to be exercisable immediately upon such termination of Service or act.
(iv)Other Termination of Service.  If the Participant’s Service terminates for any reason, except Disability, death or Cause, the Option, to the extent unexercised and exercisable for vested shares on the date on which the Participant’s Service terminated, may be exercised by the Participant at any time prior to the expiration of three (3) months (or such longer or shorter period provided by the Award Agreement) after the date on which the Participant’s Service terminated, but in any event no later than the Option Expiration Date.
(b)Extension if Exercise Prevented by Law.  Notwithstanding the foregoing, other than termination of Service for Cause, if the exercise of an Option within the applicable time periods set forth in Section 6.4(a) is prevented by the provisions of Section 14 below, the Option shall remain exercisable until the later of (i) thirty (30) days after the date such exercise first would no longer be prevented by such provisions or (ii) the end of the applicable time period under Section 6.4(a), but in any event no later than the Option Expiration Date.
6.5Transferability of Options.  During the lifetime of the Participant, an Option shall be exercisable only by the Participant or the Participant’s guardian or legal representative.  An Option shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Option, an Option shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S‐8 under the Securities Act or, in the case of an Incentive Stock Option, only as permitted by applicable regulations under Section 421 of the Code in a manner that does not disqualify such Option as an Incentive Stock Option.

7.Stock Appreciation Rights.
Stock Appreciation Rights shall be evidenced by Award Agreements specifying the number of shares of Stock subject to the Award, in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
7.1Types of SARs Authorized.  SARs may be granted in tandem with all or any portion of a related Option (a “Tandem SAR”) or may be granted independently of any Option (a “Freestanding SAR”).  A Tandem SAR may only be granted concurrently with the grant of the related Option.

7.2Exercise Price.  The exercise price for each SAR shall be established in the discretion of the Committee; provided, however, that (a) the exercise price per share subject to a Tandem SAR shall be the exercise price per share under the related Option and (b) the exercise price per share subject to a Freestanding SAR shall be not less than the Fair Market Value of a share of Stock on the effective date of grant of the SAR.  Notwithstanding the foregoing, an SAR may be granted with an exercise price lower than the minimum exercise price set forth above if such SAR is granted pursuant to an assumption or substitution for another stock appreciation right in a manner that would qualify under the provisions of Section 409A of the Code.

7.3Exercisability and Term of SARs.
(a)Tandem SARs.  Tandem SARs shall be exercisable only at the time and to the extent, and only to the extent, that the related Option is exercisable, subject to such provisions as the Committee may specify where the Tandem SAR is granted with respect to less than the full number of shares of Stock subject to the related Option.  The Committee may, in its discretion, provide in any Award Agreement evidencing a Tandem SAR that such SAR may not be exercised without the advance approval of the Company and, if such approval is not given, then the Option shall nevertheless remain exercisable in accordance with its terms.  A Tandem SAR shall terminate and cease to be exercisable no later than the date on which the related Option expires or is terminated or canceled.  Upon the exercise of a Tandem SAR with respect to some or all of the shares subject to such SAR, the 

16

related Option shall be canceled automatically as to the number of shares with respect to which the Tandem SAR was exercised.  Upon the exercise of an Option related to a Tandem SAR as to some or all of the shares subject to such Option, the related Tandem SAR shall be canceled automatically as to the number of shares with respect to which the related Option was exercised.
(b)Freestanding SARs.  Freestanding SARs shall be exercisable at such time or times, or upon such event or events, and subject to such terms, conditions, performance criteria and restrictions as shall be determined by the Committee and set forth in the Award Agreement evidencing such SAR; provided, however, that (i) no Freestanding SAR shall be exercisable after the expiration of ten (10) years after the effective date of grant of such SAR and (ii) no Freestanding SAR granted to an Employee who is a non-exempt employee for purposes of the Fair Labor Standards Act of 1938, as amended, shall be first exercisable until at least six (6) months following the date of grant of such SAR (except in the event of such Employee’s death, disability or retirement, upon a Change in Control, or as otherwise permitted by the Worker Economic Opportunity Act).  Subject to the foregoing, unless otherwise specified by the Committee in the grant of a Freestanding SAR, each Freestanding SAR shall terminate ten (10) years after the effective date of grant of the SAR, unless earlier terminated in accordance with its provisions.
7.4Exercise of SARs.  Upon the exercise (or deemed exercise pursuant to Section 7.5) of an SAR, the Participant (or the Participant’s legal representative or other person who acquired the right to exercise the SAR by reason of the Participant’s death) shall be entitled to receive payment of an amount for each share with respect to which the SAR is exercised equal to the excess, if any, of the Fair Market Value of a share of Stock on the date of exercise of the SAR over the exercise price.  Payment of such amount shall be made (a) in the case of a Tandem SAR, solely in shares of Stock in a lump sum upon the date of exercise of the SAR and (b) in the case of a Freestanding SAR, in cash, shares of Stock, or any combination thereof as determined by the Committee, in a lump sum upon the date of exercise of the SAR.  When payment is to be made in shares of Stock, the number of shares to be issued shall be determined on the basis of the Fair Market Value of a share of Stock on the date of exercise of the SAR.  For purposes of Section 7, an SAR shall be deemed exercised on the date on which the Company receives notice of exercise from the Participant or as otherwise provided in Section 7.5.

7.5Deemed Exercise of SARs.  If, on the date on which an SAR would otherwise terminate or expire, the SAR by its terms remains exercisable immediately prior to such termination or expiration and, if so exercised, would result in a payment to the holder of such SAR, then any portion of such SAR which has not previously been exercised shall automatically be deemed to be exercised as of such date with respect to such portion.

7.6Effect of Termination of Service.  Subject to earlier termination of the SAR as otherwise provided herein and unless otherwise provided by the Committee, an SAR shall be exercisable after a Participant’s termination of Service only to the extent and during the applicable time period determined in accordance with Section 6.4 (treating the SAR as if it were an Option) and thereafter shall terminate.

7.7Transferability of SARs.  During the lifetime of the Participant, an SAR shall be exercisable only by the Participant or the Participant’s guardian or legal representative.  An SAR shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  Notwithstanding the foregoing, to the extent permitted by the Committee, in its discretion, and set forth in the Award Agreement evidencing such Award, a Tandem SAR related to a Nonstatutory Stock Option or a Freestanding SAR shall be assignable or transferable subject to the applicable limitations, if any, described in the General Instructions to Form S‐8 under the Securities Act.

8.Restricted Stock Awards.
Restricted Stock Awards shall be evidenced by Award Agreements specifying whether the Award is a Restricted Stock Bonus or a Restricted Stock Purchase Right and the number of shares of Stock subject to the Award, in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:

17

8.1Types of Restricted Stock Awards Authorized.  Restricted Stock Awards may be granted in the form of either a Restricted Stock Bonus or a Restricted Stock Purchase Right.  Restricted Stock Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4.  If either the grant of or satisfaction of Vesting Conditions applicable to a Restricted Stock Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).

8.2Purchase Price.  The purchase price for shares of Stock issuable under each Restricted Stock Purchase Right shall be established by the Committee in its discretion.  No monetary payment (other than applicable tax withholding) shall be required as a condition of receiving shares of Stock pursuant to a Restricted Stock Bonus, the consideration for which shall be services actually rendered to a Participating Company or for its benefit.  Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock subject to a Restricted Stock Award.

8.3Purchase Period.  A Restricted Stock Purchase Right shall be exercisable within a period established by the Committee, which shall in no event exceed thirty (30) days from the effective date of the grant of the Restricted Stock Purchase Right.

8.4Payment of Purchase Price.  Except as otherwise provided below, payment of the purchase price for the number of shares of Stock being purchased pursuant to any Restricted Stock Purchase Right shall be made (a) in cash, by check or in cash equivalent, (b) by such other consideration as may be approved by the Committee from time to time to the extent permitted by applicable law, or (c) by any combination thereof.

8.5Vesting and Restrictions on Transfer.  Shares issued pursuant to any Restricted Stock Award may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.  During any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, such shares may not be sold, exchanged, transferred, pledged, assigned or otherwise disposed of other than pursuant to an Ownership Change Event or as provided in Section 8.8.  The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to such Restricted Stock Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then satisfaction of the Vesting Conditions automatically shall be determined on the next trading day on which the sale of such shares would not violate the Trading Compliance Policy.  Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

8.6Voting Rights; Dividends and Distributions.  Except as provided in this Section, Section 8.5 and any Award Agreement, during any period in which shares acquired pursuant to a Restricted Stock Award remain subject to Vesting Conditions, the Participant shall have all of the rights of a shareholder of the Company holding shares of Stock, including the right to vote such shares and to receive all dividends and other distributions paid with respect to such shares; provided, however, that if so determined by the Committee and provided by the Award Agreement, such dividends and distributions shall be subject to the same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid, and otherwise shall be paid no later than the end of the calendar year in which such dividends or distributions are paid to shareholders (or, if later, the 15th day of the third month following the date such dividends or distributions are paid to shareholders).  In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant is entitled by reason of the Participant’s Restricted Stock Award shall be immediately subject to the 

18

same Vesting Conditions as the shares subject to the Restricted Stock Award with respect to which such dividends or distributions were paid or adjustments were made.

8.7Effect of Termination of Service.  Unless otherwise provided by the Committee in the Award Agreement evidencing a Restricted Stock Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then (a) the Company shall have the option to repurchase for the purchase price paid by the Participant any shares acquired by the Participant pursuant to a Restricted Stock Purchase Right which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service and (b) the Participant shall forfeit to the Company any shares acquired by the Participant pursuant to a Restricted Stock Bonus which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.  The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.

8.8Nontransferability of Restricted Stock Award Rights.  Rights to acquire shares of Stock pursuant to a Restricted Stock Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or the laws of descent and distribution.  All rights with respect to a Restricted Stock Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.

9.Restricted Stock Units.
Restricted Stock Unit Awards shall be evidenced by Award Agreements specifying the number of Restricted Stock Units subject to the Award, in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
9.1Grant of Restricted Stock Unit Awards.  Restricted Stock Unit Awards may be granted upon such conditions as the Committee shall determine, including, without limitation, upon the attainment of one or more Performance Goals described in Section 10.4.  If either the grant of a Restricted Stock Unit Award or the Vesting Conditions with respect to such Award is to be contingent upon the attainment of one or more Performance Goals, the Committee shall follow procedures substantially equivalent to those set forth in Sections 10.3 through 10.5(a).
9.2Purchase Price.  No monetary payment (other than applicable tax withholding, if any) shall be required as a condition of receiving a Restricted Stock Unit Award, the consideration for which shall be services actually rendered to a Participating Company or for its benefit.  Notwithstanding the foregoing, if required by applicable state corporate law, the Participant shall furnish consideration in the form of cash or past services rendered to a Participating Company or for its benefit having a value not less than the par value of the shares of Stock issued upon settlement of the Restricted Stock Unit Award.
9.3Vesting.  Restricted Stock Unit Awards may (but need not) be made subject to Vesting Conditions based upon the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be established by the Committee and set forth in the Award Agreement evidencing such Award.  The Committee, in its discretion, may provide in any Award Agreement evidencing a Restricted Stock Unit Award that, if the satisfaction of Vesting Conditions with respect to any shares subject to the Award would otherwise occur on a day on which the sale of such shares would violate the provisions of the Trading Compliance Policy, then the satisfaction of the Vesting Conditions automatically shall be determined on the first to occur of (a) the next trading day on which the sale of such shares would not violate the Trading Compliance Policy or (b) the last day of the calendar year in which the original vesting date occurred.
9.4Voting Rights, Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Restricted Stock Units until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  However, the Committee, in its discretion, may provide in the Award Agreement evidencing 

19

any Restricted Stock Unit Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated.  Dividend Equivalent Rights, if any, shall be paid by crediting the Participant with a cash amount or with additional whole Restricted Stock Units as of the date of payment of such cash dividends on Stock, as determined by the Committee.  The number of additional Restricted Stock Units (rounded to the nearest whole number), if any, to be credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Restricted Stock Units previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date.  If so determined by the Committee and provided by the Award Agreement, such cash amount or additional Restricted Stock Units shall be subject to the same terms and conditions and shall be settled in the same manner and at the same time as the Restricted Stock Units originally subject to the Restricted Stock Unit Award.  In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant’s Restricted Stock Unit Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions as are applicable to the Award
9.5Effect of Termination of Service.  Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Restricted Stock Unit Award, if a Participant’s Service terminates for any reason, whether voluntary or involuntary (including the Participant’s death or disability), then the Participant shall forfeit to the Company any Restricted Stock Units pursuant to the Award which remain subject to Vesting Conditions as of the date of the Participant’s termination of Service.
9.6Settlement of Restricted Stock Unit Awards.  The Company shall issue to a Participant on the date on which Restricted Stock Units subject to the Participant’s Restricted Stock Unit Award vest or on such other date determined by the Committee in compliance with Section 409A, if applicable, and set forth in the Award Agreement one (1) share of Stock (and/or any other new, substituted or additional securities or other property pursuant to an adjustment described in Section 9.4) for each Restricted Stock Unit then becoming vested or otherwise to be settled on such date, subject to the withholding of applicable taxes, if any.  If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section, and such deferred issuance date(s) and amount(s) elected by the Participant shall be set forth in the Award Agreement.  Notwithstanding the foregoing, the Committee, in its discretion, may provide for settlement of any Restricted Stock Unit Award by payment to the Participant in cash of an amount equal to the Fair Market Value on the payment date of the shares of Stock or other property otherwise issuable to the Participant pursuant to this Section.
9.7Nontransferability of Restricted Stock Unit Awards.  The right to receive shares pursuant to a Restricted Stock Unit Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to a Restricted Stock Unit Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
10.Performance Awards.
Performance Awards shall be evidenced by Award Agreements in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
10.1Types of Performance Awards Authorized.  Performance Awards may be granted in the form of either Performance Shares or Performance Units.  Each Award Agreement evidencing a Performance Award shall specify the number of Performance Shares or Performance Units subject thereto, the Performance Award Formula, the Performance Goal(s) and Performance Period applicable to the Award, and the other terms, conditions and restrictions of the Award.

20

10.2Initial Value of Performance Shares and Performance Units.  Unless otherwise provided by the Committee in granting a Performance Award, each Performance Share shall have an initial monetary value equal to the Fair Market Value of one (1) share of Stock, subject to adjustment as provided in Section 4.4, on the effective date of grant of the Performance Share, and each Performance Unit shall have an initial monetary value established by the Committee at the time of grant.  The final value payable to the Participant in settlement of a Performance Award determined on the basis of the applicable Performance Award Formula will depend on the extent to which Performance Goals established by the Committee are attained within the applicable Performance Period established by the Committee.

10.3Establishment of Performance Period, Performance Goals and Performance Award Formula.  In granting each Performance Award, the Committee shall establish in writing the applicable Performance Period, Performance Award Formula and one or more Performance Goals which, when measured at the end of the Performance Period, shall determine on the basis of the Performance Award Formula the final value of the Performance Award to be paid to the Participant.  Unless otherwise permitted in compliance with the requirements under Section 162(m) with respect to each Performance Award intended to result in the payment of Performance-Based Compensation, the Committee shall establish the Performance Goal(s) and Performance Award Formula applicable to each Performance Award no later than the earlier of (a) the date ninety (90) days after the commencement of the applicable Performance Period or (b) the date on which 25% of the Performance Period has elapsed, and, in any event, at a time when the outcome of the Performance Goals remains substantially uncertain.  Once established, the Performance Goals and Performance Award Formula applicable to a Performance Award intended to result in the payment of Performance-Based Compensation to a Covered Employee shall not be changed during the Performance Period.  The Company shall notify each Participant granted a Performance Award of the terms of such Award, including the Performance Period, Performance Goal(s) and Performance Award Formula.

10.4Measurement of Performance Goals.  Performance Goals shall be established by the Committee on the basis of targets to be attained (“Performance Targets”) with respect to one or more measures of business or financial performance (each, a “Performance Measure”), subject to the following:
(a)Performance Measures.  Performance Measures shall be calculated in accordance with the Company’s financial statements, or, if such measures are not reported in the Company’s financial statements, they shall be calculated in accordance with generally accepted accounting principles, a method used generally in the Company’s industry, or in accordance with a methodology established by the Committee prior to the grant of the Performance Award.  As specified by the Committee, Performance Measures may be calculated with respect to the Company and each Subsidiary Corporation consolidated therewith for financial reporting purposes, one or more Subsidiary Corporations or such division or other business unit of any of them selected by the Committee.  Unless otherwise determined by the Committee prior to the grant of the Performance Award, the Performance Measures applicable to the Performance Award shall be calculated prior to the accrual of expense for any Performance Award for the same Performance Period and excluding the effect (whether positive or negative) on the Performance Measures of any change in accounting standards or any extraordinary, unusual or nonrecurring item, as determined by the Committee, occurring after the establishment of the Performance Goals applicable to the Performance Award.  Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of Performance Measures in order to prevent the dilution or enlargement of the Participant’s rights with respect to a Performance Award.  Performance Measures may be based upon one or more of the following, as determined by the Committee:
(i)revenue;
(ii)sales;
(iii)expenses;
(iv)operating income;
(v)gross margin;
(vi)operating margin;

21

(vii)earnings before any one or more of: stock-based compensation expense, interest, taxes, depreciation and amortization;
(viii)pre-tax profit;
(ix)net operating income;
(x)net income;
(xi)economic value added;
(xii)free cash flow;
(xiii)operating cash flow;
(xiv)balance of cash, cash equivalents and marketable securities;
(xv)stock price;
(xvi)earnings per share;
(xvii)return on shareholder equity;
(xviii)return on capital;
(xix)return on assets;
(xx)return on investment;
(xxi)total shareholder return;
(xxii)employee satisfaction;
(xxiii)employee retention;
(xxiv)market share;
(xxv)customer satisfaction;
(xxvi)product development;
(xxvii)research and development expenses;
(xxviii)completion of an identified special project; and
(xxix)completion of a joint venture or other corporate transaction.
(b)Performance Targets.  Performance Targets may include a minimum, maximum, target level and intermediate levels of performance, with the final value of a Performance Award determined under the applicable Performance Award Formula by the Performance Target level attained during the applicable Performance Period.  A Performance Target may be stated as an absolute value, an increase or decrease in a value, or as a value determined relative to an index, budget or other standard selected by the Committee.
10.5Settlement of Performance Awards.
(a)Determination of Final Value.  As soon as practicable following the completion of the Performance Period applicable to a Performance Award, the Committee shall certify in writing the extent to which the applicable Performance Goals have been attained and the resulting final value of the Award earned by the Participant and to be paid upon its settlement in accordance with the applicable Performance Award Formula.
(b)Discretionary Adjustment of Award Formula.  In its discretion, the Committee may, either at the time it grants a Performance Award or at any time thereafter, provide for the positive or negative adjustment of the Performance Award Formula applicable to a Performance Award granted to any Participant who is not a Covered Employee to reflect such Participant’s individual performance in his or her position with the Company or such other factors as the Committee may determine.  If permitted under a Covered Employee’s Award Agreement, the Committee shall have the discretion, on the basis of such criteria as may be established by the Committee, to reduce some or all of the value of the Performance Award that would otherwise be paid to the 

22

Covered Employee upon its settlement notwithstanding the attainment of any Performance Goal and the resulting value of the Performance Award determined in accordance with the Performance Award Formula.  No such reduction may result in an increase in the amount payable upon settlement of another Participant’s Performance Award that is intended to result in Performance-Based Compensation.
(c)Effect of Leaves of Absence.  Unless otherwise required by law or a Participant’s Award Agreement, payment of the final value, if any, of a Performance Award held by a Participant who has taken in excess of thirty (30) days in unpaid leaves of absence during a Performance Period shall be prorated on the basis of the number of days of the Participant’s Service during the Performance Period during which the Participant was not on an unpaid leave of absence.
(d)Notice to Participants.  As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), the Company shall notify each Participant of the determination of the Committee.
(e)Payment in Settlement of Performance Awards.  As soon as practicable following the Committee’s determination and certification in accordance with Sections 10.5(a) and (b), but in any event within the Short-Term Deferral Period described in Section 15.1 (except as otherwise provided below or consistent with the requirements of Section 409A), payment shall be made to each eligible Participant (or such Participant’s legal representative or other person who acquired the right to receive such payment by reason of the Participant’s death) of the final value of the Participant’s Performance Award.  Payment of such amount shall be made in cash, shares of Stock, or a combination thereof as determined by the Committee.  Unless otherwise provided in the Award Agreement evidencing a Performance Award, payment shall be made in a lump sum.  If permitted by the Committee, the Participant may elect, consistent with the requirements of Section 409A, to defer receipt of all or any portion of the payment to be made to the Participant pursuant to this Section, and such deferred payment date(s) elected by the Participant shall be set forth in the Award Agreement.  If any payment is to be made on a deferred basis, the Committee may, but shall not be obligated to, provide for the payment during the deferral period of Dividend Equivalent Rights or interest.
(f)Provisions Applicable to Payment in Shares.  If payment is to be made in shares of Stock, the number of such shares shall be determined by dividing the final value of the Performance Award by the Fair Market Value of a share of Stock determined by the method specified in the Award Agreement.  Shares of Stock issued in payment of any Performance Award may be fully vested and freely transferable shares or may be shares of Stock subject to Vesting Conditions as provided in Section 8.5.  Any shares subject to Vesting Conditions shall be evidenced by an appropriate Award Agreement and shall be subject to the provisions of Sections 8.5 through 8.8 above.
10.6Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Performance Share Awards until the date of the issuance of such shares, if any (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Performance Share Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date the Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date on which the Performance Shares are settled or the date on which they are forfeited.  Such Dividend Equivalent Rights, if any, shall be credited to the Participant either in cash or in the form of additional whole Performance Shares as of the date of payment of such cash dividends on Stock, as determined by the Committee.  The number of additional Performance Shares (rounded to the nearest whole number), if any, to be so credited shall be determined by dividing (a) the amount of cash dividends paid on the dividend payment date with respect to the number of shares of Stock represented by the Performance Shares previously credited to the Participant by (b) the Fair Market Value per share of Stock on such date.  Dividend Equivalent Rights, if any, shall be accumulated and paid to the extent that the related Performance Shares become nonforfeitable.  Settlement of Dividend Equivalent Rights may be made in cash, shares of Stock, or a combination thereof as determined by the Committee, and may be paid on the same basis as settlement of the related Performance Share as provided in Section 10.5.  Dividend Equivalent Rights shall not be paid with respect to Performance Units.  In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in 

23

Section 4.4, appropriate adjustments shall be made in the Participant’s Performance Share Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of the Performance Share Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Performance Goals as are applicable to the Award.

10.7Effect of Termination of Service.  Unless otherwise provided by the Committee and set forth in the Award Agreement evidencing a Performance Award, the effect of a Participant’s termination of Service on the Performance Award shall be as follows:
(a)Death or Disability.  If the Participant’s Service terminates because of the death or Disability of the Participant before the completion of the Performance Period applicable to the Performance Award, the final value of the Participant’s Performance Award shall be determined by the extent to which the applicable Performance Goals have been attained with respect to the entire Performance Period and shall be prorated based on the number of months of the Participant’s Service during the Performance Period.  Payment shall be made following the end of the Performance Period in any manner permitted by Section 10.5.
(b)Other Termination of Service.  If the Participant’s Service terminates for any reason except death or Disability before the completion of the Performance Period applicable to the Performance Award, such Award shall be forfeited in its entirety; provided, however, that in the event of an involuntary termination of the Participant’s Service, the Committee, in its discretion, may waive the automatic forfeiture of all or any portion of any such Award and determine the final value of the Performance Award in the manner provided by Section 10.7(a).  Payment of any amount pursuant to this Section shall be made following the end of the Performance Period in any manner permitted by Section 10.5.
10.8Nontransferability of Performance Awards.  Prior to settlement in accordance with the provisions of the Plan, no Performance Award shall be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  All rights with respect to a Performance Award granted to a Participant hereunder shall be exercisable during his or her lifetime only by such Participant or the Participant’s guardian or legal representative.
11.Cash-Based Awards and Other Stock-Based Awards.
Cash-Based Awards and Other Stock-Based Awards shall be evidenced by Award Agreements in such form as the Committee shall establish.  Such Award Agreements may incorporate all or any of the terms of the Plan by reference and shall comply with and be subject to the following terms and conditions:
11.1Grant of Cash-Based Awards.  Subject to the provisions of the Plan, the Committee, at any time and from time to time, may grant Cash-Based Awards to Participants in such amounts and upon such terms and conditions, including the achievement of performance criteria, as the Committee may determine.

11.2Grant of Other Stock-Based Awards.  The Committee may grant other types of equity-based or equity-related Awards not otherwise described by the terms of this Plan (including the grant or offer for sale of unrestricted securities, stock-equivalent units, stock appreciation units, securities or debentures convertible into common stock or other forms determined by the Committee) in such amounts and subject to such terms and conditions as the Committee shall determine.  Other Stock-Based Awards may be made available as a form of payment in the settlement of other Awards or as payment in lieu of compensation to which a Participant is otherwise entitled.  Other Stock-Based Awards may involve the transfer of actual shares of Stock to Participants, or payment in cash or otherwise of amounts based on the value of Stock and may include, without limitation, Awards designed to comply with or take advantage of the applicable local laws of jurisdictions other than the United States.

11.3Value of Cash-Based and Other Stock-Based Awards.  Each Cash-Based Award shall specify a monetary payment amount or payment range as determined by the Committee.  Each Other Stock-Based Award shall be expressed in terms of shares of Stock or units based on such shares of Stock, as determined by the Committee.  The Committee may require the satisfaction of such Service requirements, conditions, restrictions or performance criteria, including, without limitation, Performance Goals as described in Section 10.4, as shall be 

24

established by the Committee and set forth in the Award Agreement evidencing such Award.  If the Committee exercises its discretion to establish performance criteria, the final value of Cash-Based Awards or Other Stock-Based Awards that will be paid to the Participant will depend on the extent to which the performance criteria are met.  The establishment of performance criteria with respect to the grant or vesting of any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall follow procedures substantially equivalent to those applicable to Performance Awards set forth in Section 10.

11.4Payment or Settlement of Cash-Based Awards and Other Stock-Based Awards.  Payment or settlement, if any, with respect to a Cash-Based Award or an Other Stock-Based Award shall be made in accordance with the terms of the Award, in cash, shares of Stock or other securities or any combination thereof as the Committee determines.  The determination and certification of the final value with respect to any Cash-Based Award or Other Stock-Based Award intended to result in Performance-Based Compensation shall comply with the requirements applicable to Performance Awards set forth in Section 10.  To the extent applicable, payment or settlement with respect to each Cash-Based Award and Other Stock-Based Award shall be made in compliance with the requirements of Section 409A.

11.5Voting Rights; Dividend Equivalent Rights and Distributions.  Participants shall have no voting rights with respect to shares of Stock represented by Other Stock-Based Awards until the date of the issuance of such shares of Stock (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company), if any, in settlement of such Award.  However, the Committee, in its discretion, may provide in the Award Agreement evidencing any Other Stock-Based Award that the Participant shall be entitled to Dividend Equivalent Rights with respect to the payment of cash dividends on Stock during the period beginning on the date such Award is granted and ending, with respect to each share subject to the Award, on the earlier of the date the Award is settled or the date on which it is terminated.  Such Dividend Equivalent Rights, if any, shall be paid in accordance with the provisions set forth in Section 9.4.  Dividend Equivalent Rights shall not be granted with respect to Cash-Based Awards.  In the event of a dividend or distribution paid in shares of Stock or other property or any other adjustment made upon a change in the capital structure of the Company as described in Section 4.4, appropriate adjustments shall be made in the Participant’s Other Stock-Based Award so that it represents the right to receive upon settlement any and all new, substituted or additional securities or other property (other than regular, periodic cash dividends) to which the Participant would be entitled by reason of the shares of Stock issuable upon settlement of such Award, and all such new, substituted or additional securities or other property shall be immediately subject to the same Vesting Conditions and performance criteria, if any, as are applicable to the Award.

11.6Effect of Termination of Service.  Each Award Agreement evidencing a Cash-Based Award or Other Stock-Based Award shall set forth the extent to which the Participant shall have the right to retain such Award following termination of the Participant’s Service.  Such provisions shall be determined in the discretion of the Committee, need not be uniform among all Cash-Based Awards or Other Stock-Based Awards, and may reflect distinctions based on the reasons for termination, subject to the requirements of Section 409A, if applicable.

11.7Nontransferability of Cash-Based Awards and Other Stock-Based Awards.  Prior to the payment or settlement of a Cash-Based Award or Other Stock-Based Award, the Award shall not be subject in any manner to anticipation, alienation, sale, exchange, transfer, assignment, pledge, encumbrance, or garnishment by creditors of the Participant or the Participant’s beneficiary, except transfer by will or by the laws of descent and distribution.  The Committee may impose such additional restrictions on any shares of Stock issued in settlement of Cash-Based Awards and Other Stock-Based Awards as it may deem advisable, including, without limitation, minimum holding period requirements, restrictions under applicable federal securities laws, under the requirements of any stock exchange or market upon which such shares of Stock are then listed and/or traded, or under any state securities laws or foreign law applicable to such shares of Stock.

25

12.Standard Forms of Award Agreement.

12.1Award Agreements.  Each Award shall comply with and be subject to the terms and conditions set forth in the appropriate form of Award Agreement approved by the Committee and as amended from time to time.  No Award or purported Award shall be a valid and binding obligation of the Company unless evidenced by a fully executed Award Agreement, which execution may be evidenced by electronic means.

12.2Authority to Vary Terms.  The Committee shall have the authority from time to time to vary the terms of any standard form of Award Agreement either in connection with the grant or amendment of an individual Award or in connection with the authorization of a new standard form or forms; provided, however, that the terms and conditions of any such new, revised or amended standard form or forms of Award Agreement are not inconsistent with the terms of the Plan.

13.Change in Control.

13.1Effect of Change in Control on Awards.  Subject to the requirements and limitations of Section 409A, if applicable, the Committee may provide for any one or more of the following:
(a)Accelerated Vesting.  In its discretion, the Committee may provide in the grant of any Award or at any other time may take such action as it deems appropriate to provide for acceleration of the exercisability, vesting and/or settlement in connection with a Change in Control of each or any outstanding Award or portion thereof and shares acquired pursuant thereto upon such conditions, including termination of the Participant’s Service prior to, upon, or following the Change in Control, and to such extent as the Committee determines.
(b)Assumption, Continuation or Substitution.  In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without the consent of any Participant, assume or continue the Company’s rights and obligations under each or any Award or portion thereof outstanding immediately prior to the Change in Control or substitute for each or any such outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable.  For purposes of this Section, if so determined by the Committee in its discretion, an Award denominated in shares of Stock shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and the applicable Award Agreement, for each share of Stock subject to the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock subject to the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control.  Any Award or portion thereof which is neither assumed or continued by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control shall terminate and cease to be outstanding effective as of the time of consummation of the Change in Control.
(c)Cash-Out of Outstanding Stock-Based Awards.  The Committee may, in its discretion and without the consent of any Participant, determine that, upon the occurrence of a Change in Control, each or any Award denominated in shares of Stock or portion thereof outstanding immediately prior to the Change in Control and not previously exercised or settled shall be canceled in exchange for a payment with respect to each vested share (and each unvested share, if so determined by the Committee) of Stock subject to such canceled Award in (i) cash, (ii) stock of the Company or of a corporation or other business entity a party to the Change in Control, or (iii) other property which, in any such case, shall be in an amount having a Fair Market Value equal to the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control, reduced (but not below zero) by the exercise or purchase price per share, if any, under such Award.  In the event such determination is made by the Committee, an Award having an exercise or purchase price per share equal to or greater than the Fair Market Value of the consideration to be paid per share of Stock in the Change in Control may be canceled without payment 

26

of consideration to the holder thereof.  Payment pursuant to this Section (reduced by applicable withholding taxes, if any) shall be made to Participants in respect of the vested portions of their canceled Awards as soon as practicable following the date of the Change in Control and in respect of the unvested portions of their canceled Awards in accordance with the vesting schedules applicable to such Awards.
13.2Effect of Change in Control on Nonemployee Director Awards.  Subject to the requirements and limitations of Section 409A, if applicable, including as provided by Section 15.4(f), in the event of a Change in Control, each outstanding Nonemployee Director Award shall become immediately exercisable and vested in full and, except to the extent assumed, continued or substituted for pursuant to Section 13.1(b), shall be settled effective immediately prior to the time of consummation of the Change in Control.

13.3Federal Excise Tax Under Section 4999 of the Code.
(a)Excess Parachute Payment.  If any acceleration of vesting pursuant to an Award and any other payment or benefit received or to be received by a Participant would subject the Participant to any excise tax pursuant to Section 4999 of the Code due to the characterization of such acceleration of vesting, payment or benefit as an “excess parachute payment” under Section 280G of the Code, then, provided such election would not subject the Participant to taxation under Section 409A, the Participant may elect to reduce the amount of any acceleration of vesting called for under the Award in order to avoid such characterization.
(b)Determination by Independent Accountants.  To aid the Participant in making any election called for under Section 13.3(a), no later than the date of the occurrence of any event that might reasonably be anticipated to result in an “excess parachute payment” to the Participant as described in Section 13.3(a), the Company shall request a determination in writing by the professional firm engaged by the Company for general tax purposes, or, if the tax firm so engaged by the Company is serving as accountant or auditor for the Acquiror, the Company will appoint a nationally recognized tax firm to make the determinations required by this Section (the “Tax Firm”).  As soon as practicable thereafter, the Tax Firm shall determine and report to the Company and the Participant the amount of such acceleration of vesting, payments and benefits which would produce the greatest after-tax benefit to the Participant.  For the purposes of such determination, the Tax Firm may rely on reasonable, good faith interpretations concerning the application of Sections 280G and 4999 of the Code.  The Company and the Participant shall furnish to the Tax Firm such information and documents as the Tax Firm may reasonably request in order to make its required determination.  The Company shall bear all fees and expenses the Tax Firm charge in connection with its services contemplated by this Section.
14.Compliance with Securities Law.
The grant of Awards and the issuance of shares of Stock pursuant to any Award shall be subject to compliance with all applicable requirements of federal, state and foreign law with respect to such securities and the requirements of any stock exchange or market system upon which the Stock may then be listed.  In addition, no Award may be exercised or shares issued pursuant to an Award unless (a) a registration statement under the Securities Act shall at the time of such exercise or issuance be in effect with respect to the shares issuable pursuant to the Award, or (b) in the opinion of legal counsel to the Company, the shares issuable pursuant to the Award may be issued in accordance with the terms of an applicable exemption from the registration requirements of the Securities Act.  The inability of the Company to obtain from any regulatory body having jurisdiction the authority, if any, deemed by the Company’s legal counsel to be necessary to the lawful issuance and sale of any shares under the Plan shall relieve the Company of any liability in respect of the failure to issue or sell such shares as to which such requisite authority shall not have been obtained.  As a condition to issuance of any Stock, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate, to evidence compliance with any applicable law or regulation and to make any representation or warranty with respect thereto as may be requested by the Company.
15.Compliance with Section 409A.

15.1Awards Subject to Section 409A.  The Company intends that Awards granted pursuant to the Plan shall either be exempt from or comply with Section 409A, and the Plan shall be so construed.  The 

27

provisions of this Section 15 shall apply to any Award or portion thereof that constitutes or provides for payment of Section 409A Deferred Compensation.  Such Awards may include, without limitation:
(a)A Nonstatutory Stock Option or SAR that includes any feature for the deferral of compensation other than the deferral of recognition of income until the later of (i) the exercise or disposition of the Award or (ii) the time the stock acquired pursuant to the exercise of the Award first becomes substantially vested.
(b)Any Restricted Stock Unit Award, Performance Award, Cash-Based Award or Other Stock-Based Award that either (i) provides by its terms for settlement of all or any portion of the Award at a time or upon an event that will or may occur later than the end of the Short-Term Deferral Period (as defined below) or (ii) permits the Participant granted the Award to elect one or more dates or events upon which the Award will be settled after the end of the Short-Term Deferral Period.
Subject to the provisions of Section 409A, the term “Short-Term Deferral Period” means the 21⁄2 month period ending on the later of (i) the 15th day of the third month following the end of the Participant’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture or (ii) the 15th day of the third month following the end of the Company’s taxable year in which the right to payment under the applicable portion of the Award is no longer subject to a substantial risk of forfeiture.  For this purpose, the term “substantial risk of forfeiture” shall have the meaning provided by Section 409A.
15.2Deferral and/or Distribution Elections.  Except as otherwise permitted or required by Section 409A, the following rules shall apply to any compensation deferral and/or payment elections (each, an “Election”) that may be permitted or required by the Committee pursuant to an Award providing Section 409A Deferred Compensation:
(a)Elections must be in writing and specify the amount of the payment in settlement of an Award being deferred, as well as the time and form of payment as permitted by this Plan.
(b)Elections shall be made by the end of the Participant’s taxable year prior to the year in which services commence for which an Award may be granted to the Participant.
(c)Elections shall continue in effect until a written revocation or change in Election is received by the Company, except that a written revocation or change in Election must be received by the Company prior to the last day for making the Election determined in accordance with paragraph (b) above or as permitted by Section 15.3.
15.3Subsequent Elections.  Except as otherwise permitted or required by Section 409A, any Award providing Section 409A Deferred Compensation which permits a subsequent Election to delay the payment or change the form of payment in settlement of such Award shall comply with the following requirements:
(a)No subsequent Election may take effect until at least twelve (12) months after the date on which the subsequent Election is made.
(b)Each subsequent Election related to a payment in settlement of an Award not described in Section 15.4(a)(ii), 15.4(a)(iii) or 15.4(a)(vi) must result in a delay of the payment for a period of not less than five (5) years from the date on which such payment would otherwise have been made.
(c)No subsequent Election related to a payment pursuant to Section 15.4(a)(iv) shall be made less than twelve (12) months before the date on which such payment would otherwise have been made.
(d)Subsequent Elections shall continue in effect until a written revocation or change in the subsequent Election is received by the Company, except that a written revocation or change in a subsequent Election must be received by the Company prior to the last day for making the subsequent Election determined in accordance the preceding paragraphs of this Section 15.3.
15.4Payment of Section 409A Deferred Compensation.
(a)Permissible Payments.  Except as otherwise permitted or required by Section 409A, an Award providing Section 409A Deferred Compensation must provide for payment in settlement of the Award only upon one or more of the following:

28

(i)The Participant’s “separation from service” (as defined by Section 409A); 
(ii)The Participant’s becoming “disabled” (as defined by Section 409A); 
(iii)The Participant’s death; 
(iv)A time or fixed schedule that is either (i) specified by the Committee upon the grant of an Award and set forth in the Award Agreement evidencing such Award or (ii) specified by the Participant in an Election complying with the requirements of Section 15.2 or 15.3, as applicable; 
(v)A change in the ownership or effective control or the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 409A; or
(vi)The occurrence of an “unforeseeable emergency” (as defined by Section 409A).
(b)Installment Payments.  It is the intent of this Plan that any right of a Participant to receive installment payments (within the meaning of Section 409A) shall, for all purposes of Section 409A, be treated as a right to a series of separate payments.
(c)Required Delay in Payment to Specified Employee Pursuant to Separation from Service.  Notwithstanding any provision of the Plan or an Award Agreement to the contrary, except as otherwise permitted by Section 409A, no payment pursuant to Section 15.4(a)(i) in settlement of an Award providing for Section 409A Deferred Compensation may be made to a Participant who is a “specified employee” (as defined by Section 409A) as of the date of the Participant’s separation from service before the date (the “Delayed Payment Date”) that is six (6) months after the date of such Participant’s separation from service, or, if earlier, the date of the Participant’s death.  All such amounts that would, but for this paragraph, become payable prior to the Delayed Payment Date shall be accumulated and paid on the Delayed Payment Date.
(d)Payment Upon Disability.  All distributions of Section 409A Deferred Compensation payable pursuant to Section 15.4(a)(ii) by reason of a Participant becoming disabled shall be paid in a lump sum or in periodic installments as established by the Participant’s Election.  If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon becoming disabled, all such distributions shall be paid in a lump sum upon the determination that the Participant has become disabled.
(e)Payment Upon Death.  If a Participant dies before complete distribution of amounts payable upon settlement of an Award subject to Section 409A, such undistributed amounts shall be distributed to his or her beneficiary under the distribution method for death established by the Participant’s Election upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.  If the Participant has made no Election with respect to distributions of Section 409A Deferred Compensation upon death, all such distributions shall be paid in a lump sum upon receipt by the Committee of satisfactory notice and confirmation of the Participant’s death.
(f)Payment Upon Change in Control.  Notwithstanding any provision of the Plan or an Award Agreement to the contrary, to the extent that any amount constituting Section 409A Deferred Compensation would become payable under this Plan by reason of a Change in Control, such amount shall become payable only if the event constituting a Change in Control would also constitute a change in ownership or effective control of the Company or a change in the ownership of a substantial portion of the assets of the Company within the meaning of Section 409A.  Any Award which constitutes Section 409A Deferred Compensation and which would vest and otherwise become payable upon a Change in Control as a result of the failure of the Acquiror to assume, continue or substitute for such Award in accordance with Section 13.1(b) shall vest to the extent provided by such Award but shall be converted automatically at the effective time of such Change in Control into a right to receive, in cash on the date or dates such award would have been settled in accordance with its then existing settlement schedule (or as required by Section 15.4(c)), an amount or amounts equal in the aggregate to the intrinsic value of the Award at the time of the Change in Control.
(g)Payment Upon Unforeseeable Emergency.  The Committee shall have the authority to provide in the Award Agreement evidencing any Award providing for Section 409A Deferred 

29

Compensation for payment pursuant to Section 15.4(a)(vi) in settlement of all or a portion of such Award in the event that a Participant establishes, to the satisfaction of the Committee, the occurrence of an unforeseeable emergency.  In such event, the amount(s) distributed with respect to such unforeseeable emergency cannot exceed the amounts reasonably necessary to satisfy the emergency need plus amounts necessary to pay taxes reasonably anticipated as a result of such distribution(s), after taking into account the extent to which such emergency need is or may be relieved through reimbursement or compensation by insurance or otherwise, by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Award.  All distributions with respect to an unforeseeable emergency shall be made in a lump sum upon the Committee’s determination that an unforeseeable emergency has occurred.  The Committee’s decision with respect to whether an unforeseeable emergency has occurred and the manner in which, if at all, the payment in settlement of an Award shall be altered or modified, shall be final, conclusive, and not subject to approval or appeal.
(h)Prohibition of Acceleration of Payments.  Notwithstanding any provision of the Plan or an Award Agreement to the contrary, this Plan does not permit the acceleration of the time or schedule of any payment under an Award providing Section 409A Deferred Compensation, except as permitted by Section 409A.
(i)No Representation Regarding Section 409A Compliance.  Notwithstanding any other provision of the Plan, the Company makes no representation that Awards shall be exempt from or comply with Section 409A.  No Participating Company shall be liable for any tax, penalty or interest imposed on a Participant by Section 409A.
16.Tax Withholding.

16.1Tax Withholding in General.  The Company shall have the right to deduct from any and all payments made under the Plan, or to require the Participant, through payroll withholding, cash payment or otherwise, to make adequate provision for, the federal, state, local and foreign taxes (including social insurance), if any, required by law to be withheld by any Participating Company with respect to an Award or the shares acquired pursuant thereto.  The Company shall have no obligation to deliver shares of Stock, to release shares of Stock from an escrow established pursuant to an Award Agreement, or to make any payment in cash under the Plan until the Participating Company Group’s tax withholding obligations have been satisfied by the Participant.

16.2Withholding in or Directed Sale of Shares.  The Company shall have the right, but not the obligation, to deduct from the shares of Stock issuable to a Participant upon the exercise or settlement of an Award, or to accept from the Participant the tender of, a number of whole shares of Stock having a Fair Market Value, as determined by the Company, equal to all or any part of the tax withholding obligations of any Participating Company.  The Fair Market Value of any shares of Stock withheld or tendered to satisfy any such tax withholding obligations shall not exceed the amount determined by the applicable minimum statutory withholding rates.  The Company may require a Participant to direct a broker, upon the vesting, exercise or settlement of an Award, to sell a portion of the shares subject to the Award determined by the Company in its discretion to be sufficient to cover the tax withholding obligations of any Participating Company and to remit an amount equal to such tax withholding obligations to such Participating Company in cash.

17.Amendment, Suspension or Termination of Plan.
The Committee may amend, suspend or terminate the Plan at any time.  However, without the approval of the Company’s shareholders, there shall be (a) no increase in the maximum aggregate number of shares of Stock that may be issued under the Plan (except by operation of the provisions of Sections 4.2, 4.3, and 4.4), (b) no change in the class of persons eligible to receive Incentive Stock Options, and (c) no other amendment of the Plan that would require approval of the Company’s shareholders under any applicable law, regulation or rule, including the rules of any stock exchange or quotation system upon which the Stock may then be listed or quoted.  No amendment, suspension or termination of the Plan shall affect any then outstanding Award unless expressly provided by the Committee.  Except as provided by the next sentence, no amendment, suspension or termination of the Plan may have a materially adverse effect on any then outstanding Award without the consent of the Participant.  Notwithstanding any other provision of the Plan or any Award Agreement to the contrary, the Committee may, in its sole and absolute discretion and without the consent of any Participant, amend the Plan or any Award Agreement, to 

30

take effect retroactively or otherwise, as it deems necessary or advisable for the purpose of conforming the Plan or such Award Agreement to any present or future law, regulation or rule applicable to the Plan, including, but not limited to, Section 409A.
18.Miscellaneous Provisions.

18.1Repurchase Rights.  Shares issued under the Plan may be subject to one or more repurchase options, or other conditions and restrictions as determined by the Committee in its discretion at the time the Award is granted.  The Company shall have the right to assign at any time any repurchase right it may have, whether or not such right is then exercisable, to one or more persons as may be selected by the Company.  Upon request by the Company, each Participant shall execute any agreement evidencing such transfer restrictions prior to the receipt of shares of Stock hereunder and shall promptly present to the Company any and all certificates representing shares of Stock acquired hereunder for the placement on such certificates of appropriate legends evidencing any such transfer restrictions.

18.2Forfeiture Events.
(a)The Committee may specify in an Award Agreement that the Participant’s rights, payments, and benefits with respect to an Award shall be subject to reduction, cancellation, forfeiture, or recoupment upon the occurrence of specified events, in addition to any otherwise applicable vesting or performance conditions of an Award.  Such events may include, but shall not be limited to, termination of Service for Cause or any act by a Participant, whether before or after termination of Service, that would constitute Cause for termination of Service, or any accounting restatement due to material noncompliance of the Company with any financial reporting requirements of securities laws as a result of which, and to the extent that, such reduction, cancellation, forfeiture, or recoupment is required by applicable securities laws.
(b)If the Company is required to prepare an accounting restatement due to the material noncompliance of the Company, as a result of misconduct, with any financial reporting requirement under the securities laws, any Participant who knowingly or through gross negligence engaged in the misconduct, or who knowingly or through gross negligence failed to prevent the misconduct, and any Participant who is one of the individuals subject to automatic forfeiture under Section 304 of the Sarbanes-Oxley Act of 2002, shall reimburse the Company for (i) the amount of any payment in settlement of an Award received by such Participant during the twelve- (12-) month period following the first public issuance or filing with the United States Securities and Exchange Commission (whichever first occurred) of the financial document embodying such financial reporting requirement, and (ii) any profits realized by such Participant from the sale of securities of the Company during such twelve- (12-) month period.
18.3Provision of Information.  Each Participant shall be given access to information concerning the Company equivalent to that information generally made available to the Company’s common shareholders.

18.4Rights as Employee, Consultant or Director.  No person, even though eligible pursuant to Section 5, shall have a right to be selected as a Participant, or, having been so selected, to be selected again as a Participant.  Nothing in the Plan or any Award granted under the Plan shall confer on any Participant a right to remain an Employee, Consultant or Director or interfere with or limit in any way any right of a Participating Company to terminate the Participant’s Service at any time.  To the extent that an Employee of a Participating Company other than the Company receives an Award under the Plan, that Award shall in no event be understood or interpreted to mean that the Company is the Employee’s employer or that the Employee has an employment relationship with the Company.

18.5Rights as a Shareholder.  A Participant shall have no rights as a shareholder with respect to any shares covered by an Award until the date of the issuance of such shares (as evidenced by the appropriate entry on the books of the Company or of a duly authorized transfer agent of the Company).  No adjustment shall be made for dividends, distributions or other rights for which the record date is prior to the date such shares are issued, except as provided in Section 4.4 or another provision of the Plan.

31

18.6Delivery of Title to Shares.  Subject to any governing rules or regulations, the Company shall issue or cause to be issued the shares of Stock acquired pursuant to an Award and shall deliver such shares to or for the benefit of the Participant by means of one or more of the following: (a) by delivering to the Participant evidence of book entry shares of Stock credited to the account of the Participant, (b) by depositing such shares of Stock for the benefit of the Participant with any broker with which the Participant has an account relationship, or (c) by delivering such shares of Stock to the Participant in certificate form.

18.7Fractional Shares.  The Company shall not be required to issue fractional shares upon the exercise or settlement of any Award.

18.8Retirement and Welfare Plans.  Neither Awards made under this Plan nor shares of Stock or cash paid pursuant to such Awards may be included as “compensation” for purposes of computing the benefits payable to any Participant under any Participating Company’s retirement plans (both qualified and non-qualified) or welfare benefit plans unless such other plan expressly provides that such compensation shall be taken into account in computing a Participant’s benefit.

18.9Beneficiary Designation.  Subject to local laws and procedures, each Participant may file with the Company a written designation of a beneficiary who is to receive any benefit under the Plan to which the Participant is entitled in the event of such Participant’s death before he or she receives any or all of such benefit.  Each designation will revoke all prior designations by the same Participant, shall be in a form prescribed by the Company, and will be effective only when filed by the Participant in writing with the Company during the Participant’s lifetime.  If a married Participant designates a beneficiary other than the Participant’s spouse, the effectiveness of such designation may be subject to the consent of the Participant’s spouse.  If a Participant dies without an effective designation of a beneficiary who is living at the time of the Participant’s death, the Company will pay any remaining unpaid benefits to the Participant’s legal representative.

18.10Severability.  If any one or more of the provisions (or any part thereof) of this Plan shall be held invalid, illegal or unenforceable in any respect, such provision shall be modified so as to make it valid, legal and enforceable, and the validity, legality and enforceability of the remaining provisions (or any part thereof) of the Plan shall not in any way be affected or impaired thereby.

18.11No Constraint on Corporate Action.  Nothing in this Plan shall be construed to: (a) limit, impair, or otherwise affect the Company’s or another Participating Company’s right or power to make adjustments, reclassifications, reorganizations, or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets; or (b) limit the right or power of the Company or another Participating Company to take any action which such entity deems to be necessary or appropriate.

18.12Unfunded Obligation.  Participants shall have the status of general unsecured creditors of the Company.  Any amounts payable to Participants pursuant to the Plan shall be considered unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974.  No Participating Company shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations.  The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder.  Any investments or the creation or maintenance of any trust or any Participant account shall not create or constitute a trust or fiduciary relationship between the Committee or any Participating Company and a Participant, or otherwise create any vested or beneficial interest in any Participant or the Participant’s creditors in any assets of any Participating Company.  The Participants shall have no claim against any Participating Company for any changes in the value of any assets which may be invested or reinvested by the Company with respect to the Plan.

18.13Choice of Law.  Except to the extent governed by applicable federal law, the validity, interpretation, construction and performance of the Plan and each Award Agreement shall be governed by the laws of the State of California, without regard to its conflict of law rules.

32

IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies that the foregoing sets forth the PICO Holdings, Inc. 2014 Equity Incentive Plan as duly adopted by the Board on February 27, 2014.
	
		
	 
	 

	 
	 

	 
	/s/ James F. Mosier

	 
	      James F. Mosier, Secretary

33

PICO Holdings, Inc.
Stock Option Grant Notice
2014 Equity Incentive Plan

PICO Holdings, Inc. (the “Company”), pursuant to its 2014 Equity Incentive Plan (the “Plan”), hereby grants to Optionholder an option to purchase the number of shares of the Company’s Stock as specified and on the terms set forth below (the “Option”).  This Option is subject to all of the terms and conditions as set forth in this Stock Option Grant Notice (the “Grant Notice”), in the Option Agreement (the “Agreement” and, together with this Grant Notice, the “Award Agreement”), the Plan and the Notice of Exercise, all of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not explicitly defined herein but defined in the Plan or the Award Agreement will have the same definitions as in the Plan or the Award Agreement, as applicable. If there is any conflict between the terms in this Grant Notice, the Agreement or the Plan, the terms of the Plan will control.
	
			
	Optionholder:
	[Name]
	 

	Date of Grant:
	[Date]
	 

	Vesting Commencement Date:
	[Date]
	 

	Number of Shares Subject to Option:
	[____] 
	 

	Exercise Price (Per Share):
	$[___]
	 

	Total Exercise Price:
	$[___]
	 

	Expiration Date:
	[Date]
	 

Type of Grant:                     Incentive Stock Option1                 Nonstatutory Stock Option
		
	Vesting Conditions:
	[_________________] subject to the potential vesting acceleration described in Section 1 of the Agreement.

Exercise Conditions:    [_________________]
Payment:         By one or a combination of the following items (described in the Agreement):
		
	   X   
	By cash, check, bank draft or money order payable to the Company

		
	   X   
	Pursuant to a Cashless Exercise (as defined in the Agreement) if the shares are publicly traded

		
	   X   
	By a Stock Tender Exercise (as defined in the Agreement) if the shares are publicly traded

		
	   X   
	If and only to the extent this option is a Nonstatutory Stock Option, and subject to the Company’s consent at the time of exercise, by a Net Exercise (as defined in the Agreement) arrangement

Additional Terms/Acknowledgements:  By their signatures below, the Company and the Optionholder agree that the Option is governed by this Grant Notice and by the provisions of the Agreement and the Plan, both of which are attached to and made a part of this document.  The Optionholder acknowledges receipt of copies of the Agreement, the Plan, and the stock plan prospectus for this Plan and represents that the Participant has read and is familiar with their provisions.  As of the Date of Grant set forth above, this Grant Notice, the Agreement and the Plan set forth the entire understanding between Optionholder and the Company and any Participating Company regarding the Option and supersedes all prior oral and written agreements, promises and/or representations on that subject, with the exception of (i) stock options or other stock awards previously granted and delivered to Optionholder, (ii) any compensation recovery policy maintained by the Company or any applicable Participating Company or otherwise required by applicable law and (iii) any written employment or severance or change in control (or similar) arrangement between the Optionholder and the Company or any Participating Company that would provide for vesting acceleration of this Option upon the terms and conditions set forth therein.

                                                                         

1 If this is an Incentive Stock Option, it (plus other outstanding Incentive Stock Options) cannot be first exercisable for more than $100,000 in value (measured by exercise price) in any calendar year.  Any excess over $100,000 is a Nonstatutory Stock Option.

The Optionholder hereby accepts the Option subject to all of the terms and conditions of this Notice, the Agreement and the Plan.  The Optionholder consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or any other Participating Company or another third party designated by the Company or any other Participating Company.

	
		
	PICO Holdings Inc.

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     
	Optionholder:

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     

Attachments:  Option Agreement, 2014 Equity Incentive Plan and Notice of Exercise

Attachment
Agreement

Attachment II
2014 Equity Incentive Plan

Attachment III
Notice of Exercise

PICO Holdings, Inc.
2014 Equity Incentive Plan Name
Option Agreement
(Incentive Stock Option or Nonstatutory Stock Option)
Pursuant to your Stock Option Grant Notice (“Grant Notice”) and this Option Agreement (the “Agreement”, and together with the Grant Notice, the “Award Agreement”) and in consideration of your services, PICO Holdings, Inc. (the “Company”) has granted you an option (the “Option”) under its 2014 Equity Incentive Plan (the “Plan”) to purchase the number of shares of the Company’s Stock indicated in your Grant Notice at the exercise price indicated in your Grant Notice.  Your Option is granted to you effective as of the date of grant set forth in the Grant Notice (the “Date of Grant”).  Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.   
The details of your Option, in addition to those set forth in the Grant Notice and the Plan, are as follows:
1.Vesting.

(a)General Vesting.  Subject to the provisions contained herein, your Option will vest, if at all, in accordance with the Vesting Conditions provided in the Grant Notice and the potential vesting acceleration provisions of this Section 1.  Vesting will cease upon the termination of your Service.

(b)Effect of a Change in Control.  In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without your consent or the consent of any Participant, assume or continue the Company’s rights and obligations under your Option or portion thereof outstanding immediately prior to the Change in Control or substitute for your outstanding Option or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable so long as you are not adversely affected due to any such substitution. For purposes of this Section, your Option shall be deemed assumed if, following the Change in Control, your Option confers the right to receive, subject to the terms and conditions of the Plan and this Award Agreement, for each share of Stock subject to your Option immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of your Option, for each share of Stock subject to your Option, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control.  If your Option or any portion of your Option is neither assumed, continued or substituted for by the Acquiror in connection with the Change in Control nor exercised or settled as of the time of consummation of the Change in Control, and provided that you are providing continued Services through the date immediately prior to the Change in Control, your Option or portion thereof, as applicable, shall become vested in full immediately prior to, and contingent upon, the effective time of the Change in Control.

(c)Acceleration of Vesting Upon a Termination Without Cause.  If your Service terminates at any time as a result of (1) your termination by the Company or Participating Company, as applicable, without Cause (excluding your death or Disability) or (2) your Resignation for Good Reason (as defined below), then effective as of the date of such termination of Service, the vesting of your Option shall accelerate in full.

(i)“Resignation for Good Reason” means the voluntary resignation from employment with the Company within a period of 180 days after the initial occurrence, without your express written consent, of any of the following conditions (each, a “Good Reason”) which remains in effect for thirty (30) days after your delivery of written notice of the occurrence of such condition(s) to the Board within sixty (60) days following your knowledge of the initial occurrence of such condition(s): (i) a material diminution in your authority, duties or responsibilities; (ii) a material reduction in your base salary; (iii) a material reduction in the health and welfare insurance, retirement or other benefits available to you as of the Grant Date (except for reductions in such benefits applicable to senior executive employees of the Company generally) and provided that such material reduction shall only be deemed “Good Reason” if it constitutes a material reduction in your base compensation; (iv) the relocation of you to a facility or a location more than fifty (50) miles from La Jolla, California; or (v) the failure of the Company or Acquiror to honor any material term of the employment, severance or other similar agreement under which you provide Services.

2.Number of Shares and Exercise Price.  The number of shares of Stock subject to your Option and your exercise price per share in your Grant Notice will be adjusted for any changes in Stock effected without receipt of consideration by the Company, as provided in Section 4.4 of the Plan.

3.Exercise Restriction for Non-Exempt Employees.  If you are an Employee eligible for overtime compensation under the Fair Labor Standards Act of 1938, as amended (that is, a “Non-Exempt Employee”), and except as otherwise provided in the Plan, you may not exercise your Option until you have completed at least six (6) months of Service measured from the Date of Grant, even if you have already been an employee for more than six (6) months. Consistent with the provisions of the Worker Economic Opportunity Act, you may exercise your Option as to any vested portion prior to such six (6) month anniversary in the case of (i) your death or disability, (ii) a Change in Control or (iii) your termination of Continuous Service on your “retirement” (as defined in the Company’s benefit plans) or otherwise as permitted by the Worker Economic Opportunity Act.  

4.Exercise Conditions.  As set forth in your Grant Notice and subject to the provisions of your Option, you may elect at any time that is during the term of your Option, to exercise all or part of your Option if the applicable vesting and exercisability conditions have been satisfied.

5.Method of Payment.  You must pay the full amount of the exercise price for the shares you wish to exercise.  You may pay the exercise price in cash or by check, bank draft or money order payable to the Company or in any other manner permitted by your Grant Notice, which may include one or more of the following

(a)Provided that at the time of exercise the Stock is publicly traded, pursuant to a Cashless Exercise program described in Section 6.3 of the Plan.  This manner of payment is also known as a “broker-assisted exercise”, “same day sale”, or “sell to cover”.

(b)Provided that at the time of exercise the Stock is publicly traded, by a Stock Tender Exercise as described in Section 6.3 of the Plan.

(c)If this Option is a Nonstatutory Stock Option, subject to the consent of the Company at the time of exercise, by a Net Exercise arrangement as described in Section 6.3 of the Plan.

6.Whole Shares.  You may exercise your Option only for whole shares of Stock.

7.Securities Law Compliance.  In no event may you exercise your Option unless the shares of Stock issuable upon exercise are then registered under the Securities Act or, if not registered, the Company has determined that your exercise and the issuance of the shares would be exempt from the registration requirements of the Securities Act.  The exercise of your Option also must comply with all other applicable laws and regulations governing your Option, and you may not exercise your Option if the Company determines that such exercise would not be in material compliance with such laws and regulations (including any restrictions on exercise required for compliance with Treas. Reg. 1.401(k)-1(d)(3), if applicable).

8.Term.  You may not exercise your Option before the Date of Grant or after the expiration of your Option’s term.  Notwithstanding the provisions of Section 6.4 of the Plan, the term of your Option expires upon the earliest of the following:

(a)twelve (12) months after the termination of your Service as a result of (1) your termination by the Company or Participating Company, as applicable, without Cause (excluding your death or Disability) or (2) your Resignation for Good Reason;

(b)twelve (12) months after the termination of your Service due to your Disability (except as otherwise provided in Section 8(c) below);

(c)eighteen (18) months after your death if you die either during your Service or within three (3) months after your Service terminates for any reason;

(d)three (3) months after the termination of your Service for any reason other than as provided in Section 8(a) through 8(c); provided, however, that if during any part of such three (3) month period your Option is not exercisable solely because of the condition set forth in the section above relating to “Securities Law Compliance,” your Option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of thirty (30) days after the date such exercise first would no longer be prevented because of the condition set forth in the section above relating to “Securities Law Compliance”; provided further, if during any part of such three (3) month period, the sale of any Stock received upon exercise of your Option would violate the Company’s insider trading policy, then your Option will not expire until the earlier of the Expiration Date or until it has been exercisable for an aggregate period of thirty (30) days after the date such exercise first would no longer be in violation of the Company’s insider trading policy.  Notwithstanding the foregoing, if (i) you are a Non-Exempt Employee, (ii) your Service terminates within six (6) months after the Date of Grant, and (iii) you have vested in a portion of your Option at the time of your termination of Service, your Option will not expire until the earlier of (x) the later of (A) the date that is seven (7) months after the Date of Grant, and (B) the date that is three (3) months after the termination of your Service, and (y) the Expiration Date;

(e)the Expiration Date indicated in your Grant Notice; or

(f)the day before the tenth (10th) anniversary of the Date of Grant.

If your Option is an Incentive Stock Option, note that to obtain the federal income tax advantages associated with an Incentive Stock Option, the Code requires that at all times beginning on the Date of Grant 

and ending on the day three (3) months before the date of your Option’s exercise, you must be an employee of the Company or an Affiliate, except in the event of your death or Disability.  The Company has provided for extended exercisability of your Option under certain circumstances for your benefit but cannot guarantee that your Option will necessarily be treated as an Incentive Stock Option if you continue to provide services to the Company or an Affiliate as a Consultant or Director after your employment terminates or if you otherwise exercise your Option more than three (3) months after the date your employment with the Company or an Affiliate terminates.
9.Exercise.

(a)You may exercise the vested and exercisable portion of your Option during its term by (i) delivering a Notice of Exercise (in a form designated by the Company) or completing such other documents and/or procedures designated by the Company for exercise and (ii) paying the exercise price and any applicable withholding taxes to the Company’s Secretary, stock plan administrator, or such other person as the Company may designate, together with such additional documents as the Company may then require.

(b)By exercising your Option you agree that, as a condition to any exercise of your Option, the Company may require you to enter into an arrangement providing for the payment by you to the Company of any tax withholding obligation of the Company arising by reason of (i) the exercise of your Option, (ii) the lapse of any substantial risk of forfeiture to which the shares of Stock are subject at the time of exercise, or (iii) the disposition of shares of Stock acquired upon such exercise.

(c)If your Option is an Incentive Stock Option, by exercising your Option you agree that you will notify the Company in writing within fifteen (15) days after the date of any disposition of any of the shares of the Stock issued upon exercise of your Option that occurs within two (2) years after the Date of Grant or within one (1) year after such shares of Stock are transferred upon exercise of your Option.

10.Transferability.  Except as otherwise provided in this Section 10, your Option is not transferable, except by will or by the laws of descent and distribution, and is exercisable during your life only by you.  

(a)Certain Trusts.  Upon receiving written permission from the Committee or its duly authorized designee, you may transfer your Option to a trust if you are considered to be the sole beneficial owner (determined under Section 671 of the Code and applicable state law) while the option is held in the trust.  You and the trustee must enter into transfer and other agreements required by the Company.  

(b)Domestic Relations Orders.  To the extent your Option is a Nonstatutory Stock Option, upon receiving written permission from the Committee or its duly authorized designee, and provided that you and the designated transferee enter into transfer and other agreements required by the Company, you may transfer your Option pursuant to the terms of a domestic relations order, official marital settlement agreement or other divorce or separation instrument as permitted by Treasury Regulation 1.421-1(b)(2) that contains the information required by the Company to effectuate the transfer.  You are encouraged to discuss the proposed terms of any division of this Option with the Company prior to finalizing the domestic relations order or marital settlement agreement to help ensure the required information is contained within the domestic relations order or marital settlement agreement.  If this Option is an Incentive Stock Option, this Option may be deemed to be a Nonstatutory Stock Option as a result of such transfer.

(c)Beneficiary Designation.  Upon receiving written permission from the Committee or its duly authorized designee, you may, by delivering written notice to the Company, in a form approved 

by the Company and any broker designated by the Company to handle option exercises, designate a third party who, on your death, will thereafter be entitled to exercise this Option and receive the Stock or other consideration resulting from such exercise.  In the absence of such a designation, your executor or administrator of your estate will be entitled to exercise this Option and receive, on behalf of your estate, the Stock or other consideration resulting from such exercise.

11.Option not a Service Contract.  Your Option is not an employment or service contract, and nothing in your Option will be deemed to create in any way whatsoever any obligation on your part to continue in the employ of any Participating Company, or of any Participating Company to continue your employment.  In addition, nothing in your Option will obligate any Participating Company, their respective stockholders, boards of directors, officers or employees to continue any relationship that you might have as a Director or Consultant for any Participating Company.

12.Withholding Obligations.

(a)At the time you exercise your Option, in whole or in part, and at any time thereafter as requested by the Company or any applicable Participating Company, you hereby authorize withholding from payroll and any other amounts payable to you, and otherwise agree to make adequate provision for (including by means of a “same day sale” pursuant to a program developed under Regulation T as promulgated by the Federal Reserve Board to the extent permitted by the Company), any sums required to satisfy the federal, state, local and foreign tax withholding obligations of any applicable Participating Company which arise in connection with the exercise of your Option.  

(b)If this Option is a Nonstatutory Stock Option, then upon your request and subject to approval by the Company, and compliance with any applicable legal conditions or restrictions, the Company may withhold from fully vested shares of Stock otherwise issuable to you upon the exercise of your Option a number of whole shares of Stock having a Fair Market Value, determined by the Company as of the date of exercise, not in excess of the minimum amount of tax required to be withheld by law (or such lower amount as may be necessary to avoid classification of your Option as a liability for financial accounting purposes).  If the date of determination of any tax withholding obligation is deferred to a date later than the date of exercise of your Option, share withholding pursuant to the preceding sentence shall not be permitted unless you make a proper and timely election under Section 83(b) of the Code, covering the aggregate number of shares of Stock acquired upon such exercise with respect to which such determination is otherwise deferred, to accelerate the determination of such tax withholding obligation to the date of exercise of your Option.  Notwithstanding the filing of such election, shares of Stock shall be withheld solely from fully vested shares of Stock determined as of the date of exercise of your Option that are otherwise issuable to you upon such exercise.  Any adverse consequences to you arising in connection with such share withholding procedure shall be your sole responsibility.

(c)You may not exercise your Option unless the tax withholding obligations of the Company and/or any Participating Company are satisfied.  Accordingly, you may not be able to exercise your Option when desired even though your Option is vested and exercisable, and the Company will have no obligation to issue a certificate for such shares of Stock or release such shares of Stock from any escrow provided for herein, if applicable, unless such obligations are satisfied.

13.Tax Consequences. You hereby agree that neither Company nor any Participating Company has any duty to design or administer the Plan or its other compensation programs in a manner that minimizes your tax liabilities. You will not make any claim against any Participating Company, or any of its officers, directors, employees or affiliates related to tax liabilities arising from your Option or your other compensation. 

In particular, you acknowledge that this Option is exempt from Section 409A of the Code only if the exercise price per share specified in the Grant Notice is at least equal to the “fair market value” per share of the Stock on the Date of Grant and there is no other impermissible deferral of compensation associated with your Option.

14.Notices.  Any notices provided for in this Award Agreement or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.  By accepting this Option, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

15.Governing Plan Document.  Your Option is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Option, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to the Plan.  In addition, your Option will be subject to recoupment in accordance with any clawback policy that the Company has adopted or any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any plan of or agreement with the Company or any Participating Company.  Except as expressly provided in this Award Agreement, in the event of any conflict between the provisions of your Option and those of the Plan, the provisions of the Plan will control.

16.    Other Documents.  You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Trading Compliance Policy in effect from time to time.  

17.    Effect on Other Employee Benefit Plans.  The value of your Option will not be included as compensation, earnings, salaries, or other similar terms used when calculating employee benefits under any employee benefit plan sponsored by the Company or any Participating Company, except as such plan otherwise expressly provides. The Company and each Participating Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Participating Company’s employee benefit plans.

18.    Voting Rights.  You will not have voting or any other rights as a stockholder of the Company with respect to the shares to be issued pursuant to this Option until such shares are issued to you.  Upon such issuance, you will obtain full voting and other rights as a stockholder of the Company.  Nothing contained in this Option, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and any Participating Company or any other person.

19.    Severability.  If all or any part of this Award Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Award Agreement or the Plan not declared to be unlawful or invalid.  Any Section of this 

Award Agreement (or part of such a Section) so declared to be unlawful or invalid shall, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

20.    Miscellaneous.

(a)    The rights and obligations of the Company under your Option will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns. 

(b)    You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Option.

(c)    You acknowledge and agree that you have reviewed your Option in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Option, and fully understand all provisions of your Option.

(d)    This Award Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(e)    All obligations of the Company under the Plan and this Award Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

*        *        *

This Agreement will be deemed to be accepted by you upon your acceptance of the Grant Notice to which it is attached.

Notice of Exercise
PICO Holdings, Inc.
Attention: Stock Plan Administrator
Date of Exercise: _______________
This constitutes notice to PICO Holdings, Inc. (the “Company”) under my Option that I elect to purchase the below number of shares of Stock of the Company (the “Shares”) for the price set forth below.
	
			
	Type of Option (check one):
	Incentive         
	Nonstatutory         

	Option Date of Grant:
	_______________
	_______________

	Number of Shares as to which Option is exercised:
	_______________
	_______________

	Certificates to be issued in name of:
	_______________
	_______________

	Total exercise price:
	$______________
	$______________

	Cash payment delivered herewith:
	$______________
	$______________

	[Value of ________ Shares delivered herewith as Stock Tender Exercise1:
	$______________
	$______________]

	[Value of ________ Shares pursuant to net exercise2:
	$______________
	$______________]

	[Cashless Exercise3:
	$______________
	$______________]

                                                                   
1 Shares must meet the public trading requirements and other terms set forth in the Option.  Shares must be valued in accordance with the terms of the Option being exercised, and must be owned free and clear of any liens, claims, encumbrances or security interests.  Certificates must be endorsed or accompanied by an executed assignment separate from certificate.
2 The option must be a Nonstatutory Stock Option, and PICO Holdings, Inc. must have established net exercise procedures at the time of exercise, in order to utilize this payment method.
3 Shares must meet the public trading requirements and other terms set forth in the Option.

By this exercise, I agree (i) to provide such additional documents as you may require pursuant to the terms of the 2014 Equity Incentive Plan, (ii) to provide for the payment by me to you (in the manner designated by you) of your withholding obligation, if any, relating to the exercise of this Option, and (iii) if this exercise relates to an incentive stock option, to notify you in writing within fifteen (15) days after the date of any disposition of any of the Shares issued upon exercise of this Option that occurs within two (2) years after the date of grant of this Option or within one (1) year after such Shares are issued upon exercise of this Option.
Very truly yours,
                                                                                                       

PICO Holdings, Inc.
Restricted Stock Unit Award 
Grant Notice
2014 Equity Incentive Plan

PICO Holdings, Inc. (the “Company”) hereby awards to Participant the number of Restricted Stock Units specified and on the terms set forth below (the “Award”).  The Award is subject to all of the terms and conditions as set forth  in this Restricted Stock Unit Award Grant Notice (the “Grant Notice”), in the Restricted Stock Unit Award Agreement (the “Agreement” and, together with the Grant Notice, the “Award Agreement”) and in the Company’s 2014 Equity Incentive Plan (the “Plan”), all of which are attached hereto and incorporated herein in their entirety.  Capitalized terms not explicitly defined herein but defined in the Plan or the Award Agreement shall have the meanings set forth in the Plan or the Award Agreement, as applicable.  In the event of any conflict between the terms of this Grant Notice, the Agreement or the Plan, the terms of the Plan shall control.
	
			
	Participant:
	[Name]
	 

	Date of Grant:
	[Date]
	 

	Vesting Commencement Date:
	[Date]
	 

	Number of Restricted Stock Units:
	[_______]
	 

	Settlement Date:
	For each Restricted Stock Unit received, and subject to any adjustment pursuant to Section 3(a) of the Agreement, one share of Stock of the Company will be issued for each Restricted Stock Unit that vests at the time set forth in Section 6 of the Agreement.

	Vesting Conditions:
	[_________________] subject to the potential vesting acceleration described in Section 2 of the Agreement.

Additional Terms/Acknowledgements:  By their signatures below, the Company and the Participant agree that the Award is governed by this Grant Notice and by the provisions of the Agreement and the Plan, both of which are attached to and made a part of this document.  The Participant acknowledges receipt of copies of the Agreement, the Plan, and the stock plan prospectus for this Plan and represents that the Participant has read and is familiar with their provisions.  As of the Date of Grant set forth above, this Grant Notice, the Agreement and the Plan set forth the entire understanding between Participant and any other Participating Company regarding the Award and supersedes all prior oral and written agreements, promises and/or representations on that subject, with the exception of (i) restricted stock units or other stock awards previously granted and delivered to Participant, (ii) any compensation recovery policy maintained by the Company or Participating Company or otherwise required by applicable law and (iii) any written employment or severance or change in control (or similar) arrangement between the Participant and the Company or any Participating Company that would provide for vesting acceleration of this Award upon the terms and conditions set forth therein.

The Participant hereby accepts the Award subject to all of the terms and conditions of this Notice, the Agreement and the Plan.  Participant consents to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or any other Participating Company or another third party designated by the Company or any other Participating Company.

	
		
	PICO Holdings Inc.

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     
	Participant:

By:                                                                                        
                                  Signature
Title:                                                                                     
Date:                                                                                     

		
	Attachments: 
	Restricted Stock Unit Award Agreement, 2014 Equity Incentive Plan and Prospectus

PICO Holdings, Inc.
2014 Equity Incentive Plan
Restricted Stock Unit Award Agreement
Pursuant to the Restricted Stock Unit Award Grant Notice (the “Grant Notice”) and this Restricted Stock Unit Award Agreement (the “Agreement”, and together with the Grant Notice, the “Award Agreement”) and in consideration of your services, PICO Holdings, Inc. (the “Company”) has awarded you a Restricted Stock Unit Award (the “Award”) under its 2014 Equity Incentive Plan (the “Plan”) for the number of Restricted Stock Units indicated in the Grant Notice (the “Stock Units”).  Capitalized terms not explicitly defined in this Agreement or in the Grant Notice but defined in the Plan will have the same definitions as in the Plan.    
The details of your Award, in addition to those set forth in the Grant Notice and the Plan are as follows:
1.Grant of the Award.  This Award represents your right to be issued on a future date one share of Stock for each Stock Unit indicated in the Grant Notice that vests.  As of the Date of Grant specified in the Grant Notice, the Company will credit to a bookkeeping account maintained by the Company for your benefit (the “Account”) the number of Stock Units subject to this Award.  This Award was granted in consideration of your services to the Participating Company Group.  Except as otherwise provided herein, you will not be required to make any payment to Participating Company Group (other than services to a Participating Company) with respect to your receipt of the Award, the vesting of the Stock Units or the delivery of the Stock to be issued in respect of the Award. 

2.Vesting.  

(a)General Vesting.  Subject to the provisions contained herein, your Award will vest, if at all, in accordance with the Vesting Conditions provided in the Grant Notice and the potential vesting acceleration provisions of this Section 2.  Vesting will cease upon the termination of your Service for any reason.  Upon such termination of your Service, any Stock Units credited to the Account that were not vested on the date of such termination will be forfeited at no cost to the Company and you will have no further right, title or interest in such Stock Units or the shares of Stock to be issued in respect of such portion of the Award. 

(b) Effect of a Change in Control.

(i)In the event of a Change in Control, the surviving, continuing, successor, or purchasing corporation or other business entity or parent thereof, as the case may be (the “Acquiror”), may, without your consent or the consent of any Participant, assume or continue the Company’s rights and obligations under your Award or portion thereof outstanding immediately prior to the Change in Control or substitute for your outstanding Award or portion thereof a substantially equivalent award with respect to the Acquiror’s stock, as applicable so long as you are not adversely affected due to any such substitution. For purposes of this Section, your Award shall be deemed assumed if, following the Change in Control, the Award confers the right to receive, subject to the terms and conditions of the Plan and this Award Agreement, for each share of Stock issuable under the Award immediately prior to the Change in Control, the consideration (whether stock, cash, other securities or property or a combination thereof) to which a holder of a share of Stock on the effective date of the Change in Control was entitled (and if holders were offered a choice of consideration, the type of consideration chosen by the holders of a majority of the outstanding shares of Stock); provided, however, that if such consideration is not solely common stock of the Acquiror, the 

Committee may, with the consent of the Acquiror, provide for the consideration to be received upon the exercise or settlement of the Award, for each share of Stock issuable in respect of the Award, to consist solely of common stock of the Acquiror equal in Fair Market Value to the per share consideration received by holders of Stock pursuant to the Change in Control.  If your Award or any portion of your Award is neither assumed, continued or substituted for by the Acquiror in connection with the Change in Control nor settled as of the time of consummation of the Change in Control, and provided that you are providing continued Services through the date immediately prior to the Change in Control, your Award or portion thereof, as applicable, shall become vested in full immediately prior to, and contingent upon, the effective time of the Change in Control and shall be settled in accordance with Section 6.

(ii)To the extent the Award is subject to the requirements of Section 409A of the Code, the provisions of this subsection 2(b)(ii) shall apply and shall supersede anything to the contrary set forth herein and in the Plan to the extent required for the Award to comply with the requirements of Section 409A of the Code.  In a Change in Control the Award must be assumed, continued or substituted by the Acquiror and any shares of Stock may not be earlier issued unless the Change in Control is also a “change in the ownership or effective control of the corporation”, or a “change in the ownership of a substantial portion of the assets of the corporation” with respect to the Company in each case within the meaning of Treasury Regulation Section 1.409A-3(i)(5) and an exemption is available and elected under Treasury Regulation 1.409A-3(j)(ix)(B) or such earlier issuance of the shares of Stock is otherwise permitted by Section 409A of the Code.  The Company retains the right to provide for earlier issuance of shares of Stock in settlement of any vested portion of the Award to the extent permitted by Section 409A of the Code.

(c)Acceleration of Vesting Upon a Termination Without Cause.  If your Service terminates at any time as a result of (1) your termination by the Company or Participating Company, as applicable, without Cause (excluding your death or Disability) or (2) your Resignation for Good Reason (as defined below), then effective as of the date of such termination of Service, the vesting of your Award shall accelerate in full.

(i)“Resignation for Good Reason” means the voluntary resignation from employment with the Company within a period of 180 days after the initial occurrence, without your express written consent, of any of the following conditions (each, a “Good Reason”) which remains in effect for thirty (30) days after your delivery of written notice of the occurrence of such condition(s) to the Board within sixty (60) days following your knowledge of the initial occurrence of such condition(s): (i) a material diminution in your authority, duties or responsibilities; (ii) a material reduction in your base salary; (iii) a material reduction in the health and welfare insurance, retirement or other benefits available to you as of the Grant Date (except for reductions in such benefits applicable to senior executive employees of the Company generally) and provided that such material reduction shall only be deemed “Good Reason” if it constitutes a material reduction in your base compensation; (iv) the relocation of you to a facility or a location more than fifty (50) miles from La Jolla, California; or (v) the failure of the Company or Acquiror to honor any material term of the employment, severance or other similar agreement under which you provide Services.

3.Number of Stock Units & Shares of Stock. 

(a)The Stock Units subject to your Award will be adjusted for any changes in Stock effected without receipt of consideration by the Company, as provided in Section 4.4 of the Plan.

(b)Any additional Restricted Stock Units and any shares, cash or other property that become subject to the Award pursuant to this Section 3, if any, will be subject, in a manner determined by 

the Committee, to the same forfeiture restrictions, restrictions on transferability, and time and manner of delivery as applicable to the other Stock Units and shares covered by your Award.

(c)No fractional shares or rights for fractional shares of Stock will be created pursuant to this Section 3.  Any fraction of a share will be rounded down to the nearest whole share.  The Committee may, in its discretion, determine an equivalent benefit for any fractional shares or fractional shares that may be created by the adjustments referred to in this Section 3.

4.Securities Law Compliance.  You will not be issued any Stock in respect of your Award unless either (i) the shares are registered under the Securities Act or (ii) the Company has determined that such issuance would be exempt from the registration requirements of the Securities Act. Your Award also must comply with all other applicable laws and regulations governing the Award, and you will not receive such shares if the Company determines that such receipt would not be in material compliance with such laws and regulations.

5.Transfer Restrictions.  Your Stock Units are not transferable other than by will and by the laws of descent and distribution.  Prior to the time that shares of Stock have been delivered to you in respect of your Award, you may not transfer, pledge, sell or otherwise dispose of any portion of the Stock Units or the shares in respect of your Stock Units. In addition to any other limitation on transfer created by applicable securities laws, you agree not to assign, hypothecate, donate, encumber or otherwise dispose of any interest in any of the shares of Stock in respect of your Award until the shares are issued to you in accordance with Section 6 of this Agreement.  After the shares have been issued to you, you are free to assign, hypothecate, donate, encumber or otherwise dispose of any interest in such shares provided that any such actions are in compliance with the provisions herein and applicable securities laws.  Notwithstanding the foregoing, upon receiving written permission from the Committee or its duly authorized designee, you may, by delivering written notice to the Company, in a form provided by or otherwise satisfactory to the Company and any broker designated by the Company to effect transactions under the Plan, designate a third party who, in the event of your death, will thereafter be entitled to receive any distribution of Stock or other consideration to which you were entitled at the time of your death pursuant to this Award Agreement.  In the absence of such a designation, your legal representative will be entitled to receive, on behalf of your estate, such Stock or other consideration.  

6.Date of Issuance.  

(a)To the extent that your Award is exempt from the application of Section 409A of the Code, the issuance of shares of Stock in respect of the Stock Units is intended to comply with Treasury Regulation Section 1.409A-1(b)(4) and will be construed and administered in such a manner.

(b)Subject to the satisfaction of the withholding obligations set forth in Section 11 of this Agreement, in the event one or more Stock Units vests, the Company will issue to you, on the vesting date, one share of Stock for each Stock Unit that vests and such issuance date is referred to as the “Original Issuance Date.” If the Original Issuance Date falls on a date that is not a business day, delivery will instead occur on the next following business day.  If you are permitted to elect to defer delivery of the shares of Stock to be issued in respect of your Award beyond the vesting date, your Original Issuance Date will instead be determined in accordance with such deferral election.

(c)However, if (i) the Original Issuance Date does not occur (1) during an “open window period” applicable to you, as determined by the Company in accordance with the Trading Compliance Policy or other similar applicable policy then in effect for you, or (2) on a date when you are otherwise permitted 

to sell shares of Stock on an established stock exchange or stock market (including but not limited to under a previously established written trading plan that meets the requirements of Rule 10b5-1 under the Exchange Act and was entered into in compliance with the Company’s policies (a “10b5-1 Plan”)), and (ii) the Company elects (1) not to satisfy the Withholding Taxes described in Section 11 by withholding shares of Stock from the shares otherwise due, on the Original Issuance Date, to you under this Award, (2) not to permit you to enter into a “same day sale” commitment with a broker-dealer pursuant to Section 11 of this Agreement (including but not limited to a commitment under a 10b5-1 Plan) and (3) not to permit you to pay the Withholding Taxes in cash or from other compensation, then the shares that would otherwise be issued to you on the Original Issuance Date will not be delivered on such Original Issuance Date and will instead be delivered on the first business day when you are not prohibited from selling shares of the Company’s Stock in the open public market, but in no event later than December 31 of the calendar year in which the Original Issuance Date occurs (that is, the last day of your taxable year in which the Original Issuance Date occurs), or, if and only if permitted in a manner that complies with Treasury Regulation Section 1.409A-1(b)(4), no later than the date that is the 15th day of the third calendar month of the year following the year in which the shares of Stock under this Award are no longer subject to a “substantial risk of forfeiture” within the meaning of Treasury Regulation Section 1.409A-1(d).  The form of delivery of the Shares in respect of your Award (e.g., a stock certificate or electronic entry evidencing such shares) will be determined by the Company.  

7.Dividends.   You will receive no Dividend Equivalent Rights or other benefit or adjustment to your Award with respect to any cash dividend, stock dividend or other distribution that does not result from a adjustment for changes in capital structure described in Section 4.4 of the Plan; provided, however, that this sentence will not apply with respect to any shares of Stock that are delivered to you in connection with your Award after such shares have been delivered to you.

8.Restrictive Legends.  The Stock issued with respect to your Stock Units will be endorsed with appropriate legends, if any, as determined by the Company.

9.Award not a Service Contract.  Your Award is not an employment or service contract, and nothing in your Award will be deemed to create in any way whatsoever any obligation on your part to continue in the employ or service of any Participating Company or on the part of any Participating Company to continue your employment or service.  In addition, nothing in your Award will obligate any Participating Company, their respective shareholders, boards of directors, officers or employees to continue any relationship that you might have as an Employee, Director or Consultant for any Participating Company.

10.280G Best After Tax.  If any payment or benefit you would receive from the Company or any other Participating Company or otherwise in connection with a Change in Control or other similar transaction (a “280G Payment”) would (i) constitute a “parachute payment” within the meaning of Section 280G of the Code, and (ii) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then any such 280G Payment (a “Payment”) shall be equal to the Reduced Amount.  The “Reduced Amount” shall be either (x) the largest portion of the Payment that would result in no portion of the Payment (after reduction) being subject to the Excise Tax or (y) the largest portion, up to and including the total, of the Payment, whichever amount (i.e., the amount determined by clause (x) or by clause (y)), after taking into account all applicable federal, state and local employment taxes, income taxes, and the Excise Tax (all computed at the highest applicable marginal rate), results in your receipt, on an after-tax basis, of the greater economic benefit notwithstanding that all or some portion of the Payment may be subject to the Excise Tax.  If a reduction in a Payment is required pursuant to the preceding sentence and the Reduced Amount is determined pursuant to clause (x) of the preceding sentence, the reduction shall occur in the manner (the “Reduction Method”) that results in the greatest economic benefit for you.  If more than one 

method of reduction will result in the same economic benefit, the items so reduced will be reduced pro rata (the “Pro Rata Reduction Method”).  

Notwithstanding the foregoing, if the Reduction Method or the Pro Rata Reduction Method would result in any portion of the Payment being subject to taxes pursuant to Section 409A of the Code that would not otherwise be subject to taxes pursuant to Section 409A of the Code, then the Reduction Method and/or the Pro Rata Reduction Method, as the case may be, shall be modified so as to avoid the imposition of taxes pursuant to Section 409A of the Code as follows:  (A) as a first priority, the modification shall preserve to the greatest extent possible, the greatest  economic benefit for you as determined on an after-tax basis; (B) as a second priority, Payments that are contingent on future events (e.g., being terminated without cause), shall be reduced (or eliminated) before Payments that are not contingent on future events; and (C) as a third priority, Payments that are “deferred compensation” within the meaning of Section 409A of the Code shall be reduced (or eliminated) before Payments that are not deferred compensation within the meaning of Section 409A of the Code. 

Unless you and the Company agree on an alternative accounting firm, the accounting firm engaged by the Company for general tax compliance purposes as of the day prior to the effective date of the change of control transaction triggering the Payment shall perform the foregoing calculations.  If the accounting firm so engaged by the Company is serving as accountant or auditor for the individual, entity or group effecting the change of control transaction, the Company shall appoint a nationally recognized accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such accounting firm required to be made hereunder.  The Company shall use commercially reasonable efforts to cause the accounting firm engaged to make the determinations hereunder to provide its calculations, together with detailed supporting documentation, to you and the Company within fifteen (15) calendar days after the date on which your right to a 280G Payment becomes reasonably likely to occur (if requested at that time by you or the Company) or such other time as requested by you or the Company.  

If you receive a Payment for which the Reduced Amount was determined pursuant to clause (x) of the first paragraph of this Section 10 and the Internal Revenue Service determines thereafter that some portion of the Payment is subject to the Excise Tax, you shall promptly return to the Company a sufficient amount of the Payment (after reduction pursuant to clause (x) of the first paragraph of this Section so that no portion of the remaining Payment is subject to the Excise Tax.  For the avoidance of doubt, if the Reduced Amount was determined pursuant to clause (y) in the first paragraph of this Section 10, you shall have no obligation to return any portion of the Payment pursuant to the preceding sentence.

11.Withholding Obligations.

(a)On each vesting date, and on or before the time you receive a distribution of the shares in respect of your Stock Units, and at any other time as reasonably requested by the Company or any applicable Participating Company in accordance with applicable tax laws, you hereby authorize any required withholdings from the shares of Stock issuable to you and/or otherwise agree to make adequate provision, including in cash, for any sums required to satisfy the federal, state, local and foreign tax withholding obligations of any applicable Participating Company that arise in connection with your Award (the “Withholding Taxes”).  Specifically, any applicable Participating Company may, in its sole discretion, satisfy all or any portion of the Withholding Taxes relating to your Award by any of the following means or by a combination of such means: (i) withholding from any compensation otherwise payable to you by the Participating Company; (ii) causing you to tender a cash payment; (iii) permitting or requiring you to enter into a “same day sale” commitment with a broker-dealer that is a member of the Financial Industry Regulatory 

Authority (a “FINRA Dealer”) whereby you irrevocably elect to sell a portion of the shares to be delivered in connection with your Stock Units to satisfy the Withholding Taxes and whereby the FINRA Dealer irrevocably commits to forward the proceeds necessary to satisfy the Withholding Taxes directly to the applicable Participating Company; or (iv) withholding shares of Stock from the shares of Stock issued or otherwise issuable to you in connection with your Stock Units with a Fair Market Value (measured as of the date shares of Stock are issued to you) equal to the amount of such Withholding Taxes; provided, however, that the number of such shares of Stock so withheld will not exceed the amount necessary to satisfy the applicable Participating Company’s required tax withholding obligations using the minimum statutory withholding rates for federal, state, local and, if applicable, foreign tax purposes, including payroll taxes, that are applicable to supplemental taxable income; and provided further, that to the extent necessary to qualify for an exemption from application of Section 16(b) of the Exchange Act, such share withholding procedure shall be subject to the express prior approval of the Committee.  

(b)Unless all applicable Withholding Taxes are satisfied, the Company will have no obligation to deliver to you any Stock or other consideration pursuant to this Award.

(c)In the event a Participating Company’s obligation to withhold arises prior to the delivery to you of Stock or it is determined after the delivery of Stock to you that the amount of the Participating Company’s withholding obligation was greater than the amount withheld by the Participating Company, you agree to indemnify and hold the all Participating Companies harmless from any failure by such Participating Company to withhold the proper amount.

12.Unsecured Obligation.  Your Award is unfunded, and as a holder of vested Stock Units, you will be considered an unsecured creditor of the Company with respect to the Company’s obligation, if any, to issue shares or other property pursuant to this Award Agreement.  You will not have voting or any other rights as a shareholder of the Company with respect to the shares to be issued pursuant to this Award Agreement until such shares are issued to you.   Upon such issuance, you will obtain full voting and other rights as a shareholder of the Company.  Nothing contained in this Award Agreement, and no action taken pursuant to its provisions, will create or be construed to create a trust of any kind or a fiduciary relationship between you and the Company, any other Participating Company or any other person.

13.Other Documents.  You hereby acknowledge receipt of and the right to receive a document providing the information required by Rule 428(b)(1) promulgated under the Securities Act, which includes the Plan prospectus.  In addition, you acknowledge receipt of the Trading Compliance Policy in effect from time to time.  

14.Notices.  Any notices provided for in this Award Agreement or the Plan will be given in writing (including electronically) and will be deemed effectively given upon receipt or, in the case of notices delivered by mail by the Company to you, five days after deposit in the United States mail, postage prepaid, addressed to you at the last address you provided to the Company.  Notwithstanding the foregoing, the Company may, in its sole discretion, decide to deliver any documents related to participation in the Plan and this Award by electronic means or to request your consent to participate in the Plan by electronic means.  By accepting this Award, you consent to receive such documents by electronic delivery and to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

15.Governing Plan Document.  Your Award is subject to all the provisions of the Plan, the provisions of which are hereby made a part of your Award, and is further subject to all interpretations, amendments, rules and regulations which may from time to time be promulgated and adopted pursuant to 

the Plan.  In addition, your Award will be subject to recoupment in accordance with any clawback policy that the Company has adopted or any clawback policy that the Company is required to adopt pursuant to the listing standards of any national securities exchange or association on which the Company’s securities are listed or as is otherwise required by the Dodd-Frank Wall Street Reform and Consumer Protection Act or other applicable law. No recovery of compensation under such a clawback policy will be an event giving rise to a right to resign for “good reason” or “constructive termination” (or similar term) under any plan of or agreement with the Company or any Participating Company.  Except as expressly provided in this Award Agreement, in the event of any conflict between the provisions of your Award and those of the Plan, the provisions of the Plan will control.

16.Severability.  If all or any part of this Award Agreement or the Plan is declared by any court or governmental authority to be unlawful or invalid, such unlawfulness or invalidity will not invalidate any portion of this Award Agreement or the Plan not declared to be unlawful or invalid. Any Section of this Award Agreement (or part of such a Section) so declared to be unlawful or invalid will, if possible, be construed in a manner which will give effect to the terms of such Section or part of a Section to the fullest extent possible while remaining lawful and valid.

17.Effect on Other Employee Benefit Plans.  The value of the Award subject to this Award Agreement will not be included as compensation, earnings, salaries, or other similar terms used when calculating employee benefits under any employee benefit plan sponsored by the Company or any Participating Company, except as such plan otherwise expressly provides. The Company and each Participating Company expressly reserves its rights to amend, modify, or terminate any of the Company’s or any Participating Company’s employee benefit plans.

18.Amendment.  Any amendment to this Award Agreement must be in writing, signed by a duly authorized representative of the Company. Notwithstanding the foregoing, this Agreement may be amended solely by the Committee by a writing which specifically states that it is amending this Award Agreement, so long as a copy of such amendment is delivered to you, and provided that no such amendment adversely affecting your rights hereunder may be made without your written consent.  Without limiting the foregoing, the Company reserves the right to amend this Award Agreement in any way it may deem necessary or advisable to carry out the purpose of the grant as a result of any change in applicable laws or regulations or any future law, regulation, interpretation,  ruling, or judicial decision. 

19.Compliance with Section 409A of the Code.  To the maximum extent possible, this Award is intended to be exempt from the application of Section 409A of the Code, including but not limited to by reason of complying with the “short-term deferral” rule set forth in Treasury Regulation Section 1.409A-1(b)(4) and any ambiguities herein shall be interpreted accordingly.  However, if this Award fails to satisfy the requirements of the short-term deferral rule and is otherwise not exempt from, and therefore deemed to be deferred compensation subject to, Section 409A of the Code, this Award shall comply with Section 409A of the Code to the extent necessary to avoid adverse personal tax consequences and any ambiguities herein shall be interpreted accordingly.  To the extent this Award is subject to Section 409A of the Code and if you are a “Specified Employee” (within the meaning set forth Section 409A(a)(2)(B)(i) of the Code) as of the date of your separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h)), then the issuance of any shares that would otherwise be made upon the date of the separation from service or within the first six months thereafter will not be made on the originally scheduled dates and will instead be issued in a lump sum on the earlier of: (i) the fifth business day following your death, or (ii) the date that is six months and one day after the date of the separation from service, with the balance of the shares issued thereafter in accordance with the original vesting and issuance schedule set forth above, but if and only if such delay in the issuance of the shares is necessary to avoid the imposition of taxation on you in respect of 

the shares under Section 409A of the Code.  Each installment of shares that vests is a “separate payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2).  

20.No Obligation to Minimize Taxes.  Neither the Company nor any other Participating Company has any duty or obligation to minimize the tax consequences to you of this Award and neither the Company nor any Participating Company will be liable to you for any adverse tax consequences to you arising in connection with this Award.  You are hereby advised to consult with your own personal tax, financial and/or legal advisors regarding the tax consequences of this Award and by signing the Grant Notice, you have agreed that you have done so or knowingly and voluntarily declined to do so.  

21.Miscellaneous.

(a)The rights and obligations of the Company under your Award will be transferable to any one or more persons or entities, and all covenants and agreements hereunder will inure to the benefit of, and be enforceable by the Company’s successors and assigns. 

(b)You agree upon request to execute any further documents or instruments necessary or desirable in the sole determination of the Company to carry out the purposes or intent of your Award.

(c)You acknowledge and agree that you have reviewed your Award in its entirety, have had an opportunity to obtain the advice of counsel prior to executing and accepting your Award, and fully understand all provisions of your Award.

(d)This Award Agreement will be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.

(e)All obligations of the Company under the Plan and this Award Agreement will be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.

*    *    *
This Restricted Stock Unit Award Agreement will be deemed to be accepted by you upon your acceptance of the Restricted Stock Unit Award Grant Notice to which it is attached

PICO Holdings, Inc. 
Restricted Stock Unit Award Deferral Election Form
(For Awards Granted in 2015)

	
	
	Please complete this Election Form and return a signed copy to [Name], [Title] of PICO Holdings, Inc. (the “Company” or “PICO”) no later than 5:00 p.m. Pacific Time on December 31, 2014 (the “Election Deadline”).

The Board of Directors (the “Board”) of PICO Holdings, Inc. (the “Company” or “PICO”) has decided to permit you to make an irrevocable election to defer receipt of all (but not less than all) of the shares that may vest under any Restricted Stock Unit Award granted to you in 2015 (the “RSU Award”).  The RSU Award will be subject to the terms of the Company’s 2014 Equity Incentive Plan (the “2014 Plan”) and its forms of Restricted Stock Unit Grant Notice and Restricted Stock Unit Agreement (together, the “Award Agreement”).  
	
	
	 

I, _________________________, hereby make the following election with respect to my RSU Award:     
No Deferral.  I hereby elect to be issued all of the shares that vest under my RSU Award as and when they become vested, in accordance with the terms of the applicable Award Agreement and the 2014 Plan.  
Deferral.  I hereby elect to be issued all of the shares that vest under my RSU Award on the earliest to occur of the following dates/events: 
		
	•
	On ______________ (Date, Month) of the following calendar year: _______(Year) 

		
	◦
	(Date selected must be no earlier than January 1, [______]1  and no later than [___, _________]2).

		
	•
	The 5th business day after my “separation from service” (as defined under Treasury Regulation Section 1.409A-1(h)) for any reason, including by reason of death, disability, resignation or retirement. However, if I am a “specified employee” (as defined under Treasury Regulation Section 1.409A-1(i)) as of the date of my separation from service, then the vested shares will be issued on the earlier of (i) the 5th business day after the date of my death and (ii) the date that is 6 months and one day after my separation from service. 

 
		
	•
	A Change in Control (as defined in the 2014 Plan) that also constitutes a “change in the ownership or effective control of the corporation”, or a “change in the ownership of a substantial portion of the assets of the corporation” with respect to the Company in each case within the meaning of Treasury Regulation Section 1.409A-3(i)(5).

                                                      

1 Minimum deferral date should be first calendar year following the last year in which the RSU is fully vested.
2 Maximum deferral date should be set at not more than 5 years following the grant date (or anticipated grant date).

This deferral election is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the regulations and other guidance promulgated thereunder.  Notwithstanding any deferral election made herein, as described in Section 6 of the Award Agreement, the distribution of vested shares may be delayed as provided therein, but only if and to the extent such further delay is permissible without penalty under Section 409A of the Code and the regulations and other guidance promulgated thereunder.  In addition, the Company reserves the right to terminate this deferral election at any time to the extent permitted by Section 409A of the Code and the regulations and other guidance promulgated thereunder, in which case, any vested shares of common stock granted pursuant to the RSU Award may be issued immediately.    
This Election Form shall be construed and administered according to the laws of the State of California, without regard to its conflicts of laws principles.
By completing and executing this Election Form, I authorize the Company to defer or not defer, as indicated, the issuance of the vested shares subject to the RSU Award.  I acknowledge that the Company has not made any representations to me concerning the future performance of the Company’s common stock.  Further, I have not relied upon advice from the Company in making my election. By executing this Election Form, I acknowledge my understanding of and agreement with all the terms and provisions set forth herein.
I understand that the Election Deadline is December 31, 2014, and that after such deadline this election shall be irrevocable (i.e., after such deadline, I cannot withdraw or change this election). This election is effective only if received by [____________] on or before 5:00 p.m., Pacific Time, on December 31, 2014.
	
			
	 
	 
	 

	Signature of Participant    
	 
	Date

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00237-of-00352.parquet"}]]