Document:

EX 10.5 Employment agreement, dated July 23, 2013, between UCP, Inc. and James W. Fletcher

EXHIBIT 10.5

EMPLOYMENT AGREEMENT 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) between UCP, Inc., a Delaware corporation (the “Company”), and James W. Fletcher (the “Executive”) is entered into as of July 23, 2013 (the “Effective Date”).  In consideration of the covenants contained herein, the parties agree as follows: 

		
	1.
	Employment.  The term of Executive's employment by the Company under this Agreement will begin on the Effective Date, and will continue until the third anniversary of the Effective Date, unless earlier terminated pursuant to Section 4 hereof; provided, however, that on the third anniversary of the Effective Date and each annual anniversary of such date thereafter, the Agreement shall automatically be extended for one additional year unless either the Company or  Executive shall have terminated this automatic extension provision by written notice to the other party at least 60 days prior to the automatic extension date.  The term of employment in effect from time to time hereunder is hereinafter called the “Employment Period.”  Subject to the terms of this Agreement, Executive's employment is at will, which means that either Executive or the Company may terminate this relationship with or without Cause or notice.

2.Position and Duties.

		
	(a)
	 Position.  During the Employment Period, Executive shall serve as the Chief Operating Officer of the Company and shall report to the Board of Directors of the Company (the “Board”) and have the normal duties, responsibilities and authority of an executive serving in such positions, subject to the direction of the Board.  Upon the termination of Executive's service for any reason, unless otherwise determined by the Board, Executive shall be deemed to have resigned from any positions held at the Company or any of its subsidiaries or affiliates voluntarily, without any further required action by Executive, as of the cessation of Executive's services, and Executive, at the Board's request, shall execute any documents deemed in the discretion of the Company to be reasonably necessary to reflect his resignation(s).

		
	(b)
	Obligations.  During the Employment Period,  Executive shall devote his full business time and efforts to the business and affairs of the Company and its subsidiaries.  Notwithstanding the foregoing, during his employment, Executive may devote reasonable time to the supervision of his personal investments and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and other types of activities, to the extent that such other activities are not competitive with the Company or otherwise conflict with the business of the Company or Executive's duties hereunder; provided, however, that before Executive agrees to serve on the board of directors of any for-profit company (whether publicly or privately held), Executive will obtain the approval of the Audit Committee of the Board (or such other committee to which the Board may subsequently delegate this responsibility).

3.Compensation and Benefits.

		
	(a)
	Base Salary.  As compensation for Executive's performance of Executive's duties hereunder, Company shall pay to Executive an initial Base Salary of $325,000 per year, payable in accordance with the normal payroll practices of the Company, less required deductions for state and federal withholding tax, social security and all other employment taxes and payroll deductions. The Base Salary shall be reviewed for increases by the Board in good faith, based 

EXHIBIT 10.5

upon Executive's performance, not less often than annually.  The term “Base Salary” shall refer to the Base Salary as so increased by the Board.

		
	(b)
	Annual Incentive Compensation.  During the Employment Period, Executive shall be eligible to receive an annual cash incentive bonus determined by the Compensation Committee of the Board (the “Committee”) in its sole discretion, as a percentage of Executive's Base Salary, with a target bonus of not less than 50% of Executive's Base Salary, and based upon Executive's and/or the Company's achievement of annual performance goals or objectives established by the Committee, in its sole discretion. Payment of any annual cash incentive bonus earned shall be made on or before March 15th of each calendar year immediately following the year in which such compensation is earned.

		
	(c)
	Other Benefits.

		
	(i)
	Savings and Retirement Plans.  Executive shall be entitled to participate in all qualified and non-qualified savings and retirement plans applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time.

		
	(ii)
	Welfare Benefit Plans.  Executive and/or his eligible dependents shall be eligible to participate in and shall receive all benefits under the Company's welfare benefit plans and programs applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time.  

		
	(iii)
	Fringe Benefits.  During the Employment Period, Executive shall be entitled to such fringe benefits as may be available generally to other senior executives of the Company.

		
	(iv)
	Vacation.  Executive shall be entitled to accrue paid vacation time consistent with the applicable policies of the Company as in effect from time to time, but in no event shall Executive be eligible to accrue less than five weeks of such vacation per year.    

		
	(v)
	Business Expenses.  Subject to Section 16 and compliance with applicable Company policies (including any requirements for acceptable documentation), Executive shall be reimbursed for all reasonable travel and other expenses incurred in the performance of Executive's duties on behalf of the Company.

		
	4.
	Termination of Employment.

		
	(a)
	The Employment Period shall end upon the first to occur of: (i) the expiration of the term of this Agreement pursuant to Section 1 hereof; (ii) termination of Executive's employment by the Company on account of Executive's inability to perform the essential functions of Executive's position, with or without reasonable accommodation, due to a physical or mental disability (as determined by the Board in good faith), for a period of more than six consecutive months (“Termination for Disability”); (iii) termination of Executive's employment by the Company for Cause (as defined in Exhibit A attached hereto) (“Termination for Cause”); (iv) termination of  Executive's employment by the Company other than a Termination for Disability or a Termination for Cause (“Termination Without Cause”); (v) Executive's death; (vi) termination of Executive's employment by Executive for Good Reason (as defined in 

EXHIBIT 10.5

Exhibit A attached hereto) (“Termination for Good Reason”); or (vii) termination of Executive's employment by Executive for any reason other than Good Reason.

		
	(b)
	If the Employment Period ends for any reason set forth in Section 4(a), except as otherwise provided in this Section 4, Executive shall cease to have any rights to salary, bonus (if any) or benefits hereunder, other than (i) payment of unpaid Base Salary through and including the date of termination or resignation (which in the case of a termination by the Company shall be paid on the final day of employment, and in the case of a resignation shall be paid out on the final day of employment or within seventy-two hours after the resignation, whichever occurs later), (ii) Executive's business expenses that are reimbursable pursuant to Section 3(d) but have not been reimbursed by the Company as of the date of termination, (iii) Executive's annual bonus for the fiscal year immediately preceding the fiscal year in which the date of termination occurs, if such bonus has been earned, but has not been paid as of the date of termination, (iv) any accrued vacation pay to the extent not theretofore paid, and (v) any other amounts or benefits required to be paid or provided by law or under any plan, program, policy or practice of the Company (“Accrued Compensation and Benefits”). 

		
	(c)
	If the Employment Period ends on account of Termination Without Cause or Termination for Good Reason, Executive shall receive a severance payment (the “Severance Payment”) in an amount equal to one times the sum of (A) Executive's Base Salary at the time of termination (or, in the event of a Termination for Good Reason, the Base Salary prior to the event constituting Good Reason if such Base Salary is higher than the Base Salary at the time of termination) plus (B) Executive's target annual bonus for the year in which Executive's employment terminates.  In addition, if the Employment Period ends on account of death, Termination Without Cause, Termination for Good Reason or Termination for Disability, the Company shall pay Executive after such termination of employment (or to Executive's family in the event of his death), on a monthly basis, an amount equal to the monthly amount of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) continuation coverage premium for such month, at the same level and cost to Executive (or Executive's family in the event of his death) as immediately preceding the date of termination, under the Company group medical plan in which Executive participated immediately preceding the date of termination, less the amount of Executive's portion of such monthly premium as in effect immediately preceding the date of termination, until the earlier of (A) 12 months after the date of termination; and (B) the date on which Executive and his family have obtained other substantially similar healthcare coverage or become entitled to Medicare coverage.  Subject to Section 16, the Severance Payment shall be paid in a lump sum payment on the sixtieth day following the termination date.  As a condition to Executive's receipt of the post-employment payments and benefits set forth in this Section 4(c), Executive must execute, return, not rescind and comply with a commercially reasonable written release agreement in a form prescribed by the Company (the “Release”).

		
	(d)
	If, during the two year period following a Change in Control (as defined in Exhibit A attached hereto), Executive's employment is terminated due to a Termination Without Cause or a Termination for Good Reason, Executive shall receive the benefits set forth in Section 4(c), except that (1) in lieu of the Severance Payment described in Section 4(c), Executive shall receive two times the sum of (A) Executive's Base Salary at the time of such termination or Change in Control, whichever Base Salary level is greater, plus (B) the average of Executive's annual bonuses for the three most recently completed years prior to Executive's termination of employment or Change in Control, whichever average is greater or, if Executive has not 

EXHIBIT 10.5

been employed for at least three full years, the average of Executive's annual bonuses for all completed years prior to Executive's termination of employment or Change in Control, whichever is greater (the “CIC Severance Payment”).  Subject to Section 16, the CIC Severance Payment shall be paid in a lump sum payment on the sixtieth day following the termination date.    As a condition to Executive's receipt of the post-employment payments and benefits set forth in this Section 4(d), Executive must execute, return, not rescind and comply with a Release.

		
	(e)
	Notwithstanding the foregoing, if the payment required to be paid under Section 4(d), when considered either alone or with other payments paid or imputed to Executive (the “Total Payments”) from the Company that would be deemed “excess parachute payments” under Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), is determined by the Company, with the assistance of a nationally recognized accounting firm acceptable to Executive, to be a “parachute payment” under Section 280G(b)(2) of the Code, then the Total Payments shall be automatically reduced to an amount equal to $1.00 less than three times (3x) the “base amount” (as defined in Section 280G(3) of the Code) (the “Reduced Amount”); provided, however, such reduction shall not apply if the sum of (A) the Total Payments  less (B) the amount of excise tax payable by the Executive under Section 4999 of the Code with respect to the Total Payments, is greater than the Reduced Amount.  Any such reduction shall occur in the following order:  (i)  by eliminating the acceleration of vesting of any stock options for which the exercise price exceeds the fair market value (and if there is more than one option award so outstanding, then the acceleration of the vesting of the most “under water” option shall be reduced first, and so-on); (ii)  by reducing the CIC Severance Payment and any other cash payments not subject to Section 409A of the Code;  (iii) by reducing any benefit continuation payments (and if there be more than one such payment, by reducing the payments in reverse order, with the payments made the earliest being reduced first); (iv), by reducing any cash payments that are subject to Section 409A of the Code (and if there be more than one such payment, by reducing the payments in reverse order, with the payments made the earliest being reduced first); (v) by reducing the payments of any restricted stock, restricted stock units, performance awards or similar equity-based awards that have been awarded to Executive by the Company that are subject to performance-based vesting (and if there be more than one such award held by Executive, by reducing the awards in the reverse order of the date of their award, with the most-recently awarded reduced first and the oldest award reduced last); (vi) by reducing the payments of any restricted stock, restricted stock units, performance awards or similar equity-based awards that have been awarded to Executive by the Company that are subject to time-based vesting (and if there be more than one such award held by Executive, by reducing the awards in the reverse order of the date of their award, with the most-recently awarded reduced first and the oldest award reduced last); and (vii) by reducing the acceleration of vesting of any stock options that are not described in (i), above. 

5.Confidential Information.  Executive acknowledges that the information, observations and data obtained by him while employed by the Company pursuant to this Agreement, as well as those obtained by him while employed by the Company or any of its subsidiaries prior to the date of this Agreement, concerning the business or affairs of the Company or any of its subsidiaries (“Confidential Information”) are the property of the Company or such subsidiary. Therefore, Executive agrees that during the Employment Period and for three years thereafter that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board unless and except to the extent that such Confidential Information becomes generally known to and available for use by the public other than as 

EXHIBIT 10.5

a result of Executive's acts or omissions to act. Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the business of the Company or any of its subsidiaries or affiliates which he may then possess or have under his control. 

6.Enforcement.  Because the services of Executive are unique and Executive has access to confidential information of the Company, the parties hereto agree that the Company would be damaged irreparably in the event the provisions of Section 5 hereof were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Therefore, the Company or its successors or assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security).

7.Indemnification and Insurance.  The Company shall indemnify Executive to the full extent provided for in its corporate Bylaws and to the maximum extent that the Company indemnifies any of its other directors and senior executive officers, and he will be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and senior executive officers against all costs, charges, liabilities and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its affiliates or his serving or having served any other enterprise, plan or trust as a director, officer, employee or fiduciary at the request of the Company or any of its affiliates (other than any dispute, claim or controversy arising under or relating to this Agreement (except for this Section 7)).  The Company will enter into an indemnification agreement with the Executive in the standard form that it has or will adopt for the benefit of its other directors and senior executive officers.  

8.Survival.  Sections 5, 6, 7 and 16 hereof shall survive and continue in full force and effect in accordance with their respective terms, notwithstanding any termination of the Employment Period. 

9.Notices.  Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or sent by certified mail, return receipt requested, postage prepaid, addressed (a) if to Executive, to his last known address shown on the payroll records of the Company, and if to the Company, to UCP, Inc., 6489 Camden Avenue, Suite 204, San Jose, CA 95120 attention:  Chairman of the Compensation Committee of the Board of Directors, with a copy to the General Counsel of the Company at the same address, or (b) to such other address as either party shall have furnished to the other in accordance with this Section 9. 

10.Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein. 

11.Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof. 

EXHIBIT 10.5

12.Successors and Assigns. This Agreement shall inure to the benefit of and be enforceable by Executive and his heirs, executors and personal representatives, and the Company and its successors and assigns. Any successor or assignee of the Company shall assume the liabilities of the Company hereunder. 

13.Governing Law.  This Agreement shall be governed by the internal laws (as opposed to the conflicts of law provisions) of the State of California. 

14.Amendment and Waiver.  The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

15.Withholding.  All payments and benefits under this Agreement are subject to withholding of all applicable taxes.

16.Code Section 409A.  This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent.  The payments to Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each payment to Executive under this Agreement shall be considered a separate payment.    In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement.  To the extent any amounts under this Agreement are payable by reference to Executive's “termination of employment” such term and similar terms shall be deemed to refer to Executive's “separation from service,” within the meaning of Section 409A of the Code.  Notwithstanding any other provision in this Agreement, to the extent any  payments hereunder constitutes nonqualified deferred compensation, within the meaning of Section 409A, and Executive is a specified employee (within the meaning of Section 409A of the Code) as of the date of Executive's separation from service, each such payment that is payable upon Executive's separation from service and would have been paid prior to the six-month anniversary of  Executive's separation from service, shall be delayed until the earlier to occur of (i) the first day of the seventh month following Executive's separation from service or (ii) the date of Executive's death.  Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by Employer under any applicable expense reimbursement policy, and shall be paid to Executive within 30 days following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense.  Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year.  The right to any reimbursement or in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.

EXHIBIT 10.5

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above. 
	
														
	 
	 
	 
	 
	 
	 
	 
	 
	 

	 
	 
	UCP, INC.
	 
	 

	 
	 
	 
	 
	By: 
	 
	/s/ Dustin L. Bogue
	 
	 

	 
	 
	 
	 
	

Name: 
	 
	Dustin L. Bogue
	 
	 

	 
	 
	 
	 
	Title:
	 
	President and Chief Executive Officer
	 
	 

	 
	 
	 
	 
	 
	 

	 
	 
	      EXECUTIVE:
	 
	/s/ James W. Fletcher
	 

	 
	 
	 
	 
	

James W. Fletcher
	 

	 
	 
	 
	 
	Chief Operating Officer
	 

    

EXHIBIT 10.5

EXHIBIT A
DEFINITIONS 

“Cause” shall mean the occurrence of any of the following conditions:

(i)    any act or omission that constitutes a material breach by Executive of any of his material obligations under this Agreement, after a written demand for substantial performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has materially breached such obligations and Executive's failure to cure such alleged breach not later than 30 days following his receipt of such notice;

(ii)    conviction or plea of guilty to a charge of commission of a felony; 

(iii)    the commission of dishonest, fraudulent or deceptive acts or practices in connection with Executive's employment that are materially injurious to the Company, monetarily or otherwise; or

(iv)    Executive's ongoing willful refusal to follow the proper and lawful directions of the Board after a written demand for substantial performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has refused to follow its instructions and Executive's failure to cure such refusal not later than 30 days following his receipt of such notice.

For purposes of this definition, no act, or failure to act, on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive's action or omission was in the best interests of the Company.  Any act, or failure to act, based upon (A) authority given pursuant to a resolution duly adopted by the Board or (B) the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding Executive, if Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel for Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the conditions set forth in clauses (i), (ii), (iii) or (iv) above have been satisfied, and specifying the particulars thereof in detail.

“Change in Control”  shall mean, except as otherwise provided below, the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company.  In determining whether an event shall be considered a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company, the following provisions shall apply:

(i)    A “change in the ownership” of the Company shall occur on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(v).  If a person or group is considered either to own more than 50% of the total fair market value or total voting power of the stock of the Company, or to have effective control of the Company within the meaning of clause (ii) of this definition, and such person or group acquires 

EXHIBIT 10.5

additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the ownership” of the Company.

(ii)    A “change in the effective control” of the Company shall occur on either of the following dates:

(A)  The date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).  If a person or group is considered to possess 30% or more of the total voting power of the stock of the Company, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the effective control” of the Company; or

(B)  The date on which a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).

(iii)    A “change in the ownership of a substantial portion of the assets” of the Company shall occur on the date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)
(vii).  A transfer of assets shall not be treated as a “change in the ownership of a substantial portion of the assets” when such transfer is made to an entity that is controlled by the shareholders of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vii)(B).

Notwithstanding the occurrence of any of the foregoing events, an initial public offering or any bona fide primary or secondary public offering following the occurrence of an initial public offering shall not constitute a Change in Control.  Additionally, the ownership of stock by Pico Holdings, Inc., or its affiliates, as of and following the initial public offering shall not constitute a Change of Control.

“Good Reason” shall mean any of the following actions, if taken without the express written consent of Executive:   (i) a material diminution in Executive's Base Salary; (ii) a material diminution in Executive's authority, duties or responsibilities; (iii) requiring Executive to move his place of employment more than 50 miles from his place of employment prior to such move; or (iv) a material breach by the Company of this Agreement.  Executive's employment with the Company may be terminated for Good Reason if (i) Executive provides written notice to Company of the occurrence of the Good Reason event (as described above) within 90 days after Executive has knowledge of the circumstances constituting Good Reason, which notice shall specifically identify the circumstances which Executive believes constitute Good Reason, (ii)  Company fails to correct the circumstances constituting “Good Reason” within 30 days after such notice; and (iii) Executive resigns within six months after the initial existence of such circumstances.EX 10.6  Transition Services Agreement, dated July 23, 2013, between PICO Holdings, Inc. and UCP, Inc

EXHIBIT 10.6
TRANSITION SERVICES AGREEMENT

THIS TRANSITION SERVICES AGREEMENT (including the exhibits hereto, the “Agreement”) is entered into as of the 23rd day of July, 2013 (the “Effective Date”), by and between PICO HOLDINGS, INC., a California corporation (“PICO”), and UCP, INC., a Delaware corporation (“UCP”).  PICO and UCP may be referred to in this Agreement separately as a “Party” or collectively as the “Parties.” 

W I T N E S S E T H:

WHEREAS, prior to the completion of the initial public offering of shares of its common stock (the “Offering”), UCP was a wholly owned subsidiary of PICO;

WHEREAS, upon completion of the Offering, PICO maintains a controlling ownership stake in UCP;

WHEREAS, upon completion of the Offering, notwithstanding PICO's controlling ownership stake in UCP, UCP desires to engage PICO as a third party service provider to provide certain accounting, human resources and information technology services as set forth herein, at UCP's direction and control and subject to the terms and conditions described in this Agreement; and

WHEREAS, in order to assist UCP in its operations, PICO desires to provide such accounting, human resources and information technology services to UCP, at UCP's direction and control and subject to the terms and conditions described in this Agreement.

NOW, THEREFORE, in consideration of the covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound hereby, agree as follows:

ARTICLE I
DEFINITIONS
    
For purposes of this Agreement, the following terms shall have the respective meanings set forth below:

“Additional Services” has the meaning set forth in Section 2.5.

“Affiliate” shall mean as to any Person, another Person that directly, or indirectly through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such Person.

“Audit Committee” has the meaning set forth in Section 4.2(a).

“Control” shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the person controlled, whether through ownership of voting securities, by contract or otherwise.

“Confidential Information” has the meaning set forth in Section 6.1.

“Effective Date” has the meaning set forth in the preamble hereto.

“Guest User” has the meaning set forth in Section 7.1.

“Host” has the meaning set forth in Section 7.1.

“Initial Term” has the meaning set forth in Section 4.1.

“Laws” means all federal, state, regional, provincial, local or foreign laws, including statutes, ordinances, codes, rules, regulations, published guidelines, directives, orders, writs, injunctions, judgments, decrees, arbitration awards, and the common law.

“Losses” means any and all costs, claims, actions, demands, damages, fees, penalties, injuries, expenses (including reasonable attorneys' fees, costs of investigation and court costs), interest and liability.

1

“Offering” has the meaning set forth in the first recital hereto.

“Optional Renewal Term” has the meaning set forth in Section 4.1.

“Party” or “Parties” has the meaning set forth in the preamble hereto.

“Person” means any legal entity including a corporation, unincorporated organization, association, limited liability company, partnership, trust, business trust, joint venture, or sole proprietorship, governmental organization or body, or any agency, department or instrumentality thereof, and includes a natural person.

“Personally Identifiable Information” means any and all tangible and intangible information provided or disclosed hereunder about present, former or potential customers, contractors or Representatives of UCP or its Affiliates, including name, address, telephone number, email address, account or policy information, and any list, description, or other grouping of such Persons, and any medical records or other medical information of such Persons and any other type of information deemed “nonpublic” and protected by privacy Laws and any other applicable Law.

“PICO” has the meaning set forth in the preamble hereto.

“Recovery Plans” has the meaning set forth in Section 2.6(c).

“Representatives” has the meaning set forth in Section 6.3.

“Sales Tax” has the meaning set forth in Section 3.3(a).

“Senior Managers” shall mean, Max Webb and John Perri, in the case of PICO, and Dustin Bogue, Allen Bennett and William La Herran, in the case of UCP.

“Service Coordinators” has the meaning set forth in Section 2.2.

“Service Fees” has the meaning set forth in Section 3.1.

“Services” has the meaning set forth in Section 2.1.

“Significant Service Shortfall” has the meaning set forth in Section 2.6(b).

“Systems” has the meaning set forth in Section 7.1.

“Term” has the meaning set forth in Section 4.1.

“Third Party” or “Third Parties” means any Person or Persons other than UCP or PICO, or any of their respective Affiliates.

“UCP” has the meaning set forth in the preamble hereto.

“UCP Indemnified Person” has the meaning set forth in Section 5.3.

“Unauthorized Access” has the meaning set forth in Section 6.1.

ARTICLE II
SERVICES

2.1    Services.  Subject to the terms and conditions of this Agreement, PICO agrees to provide or cause to be provided to UCP, for the benefit of UCP, its Controlled Affiliates and designated recipients, the services set forth on  Exhibit A, Exhibit B and Exhibit C hereto (collectively, the “Services”).  PICO shall provide the Services at UCP's reasonable direction, which direction may include granting PICO certain permissions and authority; provided, however, that notwithstanding the foregoing, and without limiting the generality of Section 2.10, PICO has no authority to bind UCP to any Third Party agreement or to make any filing on behalf of UCP with any governmental authority or under applicable Law.

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2.2    Service Coordinators.  Each Party will nominate a representative to act as its primary contact with respect to the provision of the Services (together, the “Service Coordinators”). Unless otherwise agreed, all notices and communications relating to this Agreement shall be directed to the Service Coordinators, other than those day to day communications and billings relating to the actual provision of the Services, which shall be directed to the appropriate personnel of each Party, as directed by the Service Coordinators.

2.3    Direction of PICO Employees.  PICO shall be solely responsible for all salary, employment, engagement, payroll, bonuses, fees and other benefits of and liabilities relating to, and compliance with immigration and visa laws and requirements in respect of, its personnel assigned to perform the Services.  In performing their respective duties hereunder, all personnel of PICO engaged in providing the Services shall be under the direction, control and supervision of PICO; and PICO shall have the sole right to exercise all authority with respect to the employment (including termination of employment), assignment and compensation of such PICO personnel.  The employees of PICO engaged in providing Services to UCP shall not, by virtue thereof, become employees of UCP.  PICO shall provide prompt written notice to UCP upon the departure of any Service Coordinator, or any key employee who is providing a Service.

2.4    Cooperation.  UCP shall use its reasonable efforts to (a) cooperate with PICO with respect to the provision of the Services and (b) enable PICO to provide the Services in accordance with this Agreement.  

2.5    Additional Services.  The Parties each have exerted their commercially reasonable efforts to identify and describe the Services.  However, the Parties acknowledge and agree that there may be services useful or necessary to UCP's accounting, human resources or information technology operations which are not identified on Exhibit A, Exhibit B or Exhibit C (collectively, the “Additional Services”).  At any time and from time to time during the Term, UCP may provide written notice to PICO requesting Additional Service(s) and setting forth in reasonable detail a description of the requested Additional Service(s), the proposed start date or dates and the proposed termination date or dates.  Upon receiving UCP's written request, PICO shall, to the extent it is able to do so without unreasonable adverse consequences to its own operations, provide or cause to be provided such Additional Service subject to the Parties agreement on any adjustment to the Service Fees to the extent of any increased cost of providing the Services.  The provision of such Additional Services shall in all respects be subject to the terms of this Agreement, shall be considered added to Exhibit A, Exhibit B or Exhibit C, as applicable, shall constitute an amendment to this Agreement and shall thereafter be considered a Service.  Unless otherwise agreed by the Parties, the term for such Additional Services shall be the Term of this Agreement.

2.6    Standard of Services.

(a)General Standard.  PICO shall use commercially reasonable efforts to perform or cause to be performed the Services at a level that is not materially less favorable than past practices of PICO in providing or causing to be provided such service to itself, its Affiliates and/or UCP as such practices existed during the twelve (12) months immediately preceding the Offering. UCP understands and agrees that PICO is not in the business of providing transition services to Third Parties, and PICO shall not be held accountable to a higher standard of care than that set forth herein.  UCP shall receive the benefit of any and all warranties, guarantees, representations, service level standards and indemnities given to PICO by Third Party service providers in respect of the Services.

(b)Shortfall in Services.  If UCP provides PICO with written notice of the occurrence of any Significant Service Shortfall (as defined below) in the Services, as reasonably determined by UCP in good faith, PICO shall use commercially reasonable efforts to rectify such Significant Service Shortfall as soon as reasonably possible.  For purposes of this Section 2.6(b), a “Significant Service Shortfall” shall be deemed to have occurred if the timing or quality of performance of one or more Services provided by PICO hereunder falls below the standard required by Section 2.6(a) hereof.

(c)Recovery Plans.  For as long as Services are provided hereunder, PICO shall, and shall cause its relevant Affiliates to, maintain backup, business continuation and disaster recovery plans, procedures and policies (collectively, “Recovery Plans”) consistent with past practices as they existed during the twelve (12) months immediately preceding the Offering.  PICO shall provide UCP: 

(i)Annually, a report describing the details of the then-current Recovery Plans and analyzing PICO's ability to perform the Services in the event such Recovery Plans are invoked;

(ii)At least once per year, the opportunity to review copies of PICO's then-current Recovery Plans; and

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(iii)Without limiting PICO's obligations under Section 6.2, immediately upon notice of any incident that gives cause to invoke any Recovery Plan or which may reasonably affect the Services, Confidential Information or Personally Identifiable Information, a report of the type of incident, potential cause (if known), work being undertaken to recover, estimated time to recover and primary and alternative contact details.

2.7    Subcontracting.  PICO may subcontract for the performance of any Service to: (a) any person if the Service to be subcontracted is primarily a routine task or function generally considered ancillary to the Services; (b) an Affiliate of PICO; (c) an existing subcontractor that was providing such Service to PICO or UCP immediately before the Effective Date; or (d) any other person with prior written notice to, and approval (not to be unreasonably withheld or delayed) from, UCP; provided that no such subcontracting shall relieve PICO from any of its obligations or liabilities hereunder, and PICO shall remain responsible for all obligations or liabilities of such subcontractor with respect to the providing of such Service or Services, as if provided by PICO.

2.8    Compliance with Laws; Consents.  PICO represents that it shall, and shall cause its Affiliates to, comply at all times during the term of this Agreement with all applicable Laws, including HIPAA, HITECH, Sarbanes Oxley (SOX) Section 404 and other Laws relating in any way to the privacy or data security related to Personally Identifiable Information.  PICO shall obtain and maintain all material permits, approvals and licenses necessary or appropriate to perform its duties and obligations (including all Services) under this Agreement and shall at all times comply (or in the case of any providers of Services who are contractors or independent Third Parties, use commercially reasonable efforts to cause them to comply) with the terms and conditions of such permits, approvals and licenses. 

2.9    Conflict with Laws. Notwithstanding anything in this Agreement to the contrary, PICO shall not be obligated to provide any Service if the provision of such Service would violate any applicable Law or rules of professional ethics or breach any contract or other agreement, due to the failure to obtain such consent, license or approval or otherwise, notwithstanding PICO's reasonable efforts to obtain such consent, license or approval.  If PICO is prevented from providing, or causing to be provided, any Service by reason of the foregoing, PICO shall use commercially reasonable efforts to (a) notify UCP of such prevention as soon as practicable, and (b) provide alternative equivalent services at no additional cost to UCP; provided, however, that under no circumstances shall the performance of such Service require PICO or any of its directors (or persons in similar positions), officers, employees or agents to violate any applicable Law or breach any contract or other agreement.

2.10    Relationship of Parties; No Agency. The relationship of the Parties hereunder are those of independent contractors and nothing contained in this Agreement nor the Parties' performance hereunder creates a fiduciary relationship, partnership, joint venture or relationship of trust or agency between the Parties.  Each Party acknowledges that it has entered into this Agreement for independent business reasons.  Neither Party shall have any power or authority to negotiate or conclude any agreement, or to make any representation or to give any understanding on behalf of the other Party in any way whatsoever.

2.11    UCP Capabilities.  UCP acknowledges that PICO is willing to provide the Services as a short term accommodation to assist UCP in transitioning its operations to those typically seen in independent publicly traded companies. UCP will use commercially reasonable efforts to develop its internal capabilities so that it is able to act on its own behalf in the areas covered by the Services.

ARTICLE III
SERVICE FEES

3.1    Service Fees. UCP shall pay PICO the fees set forth on each of Exhibit A, Exhibit B and Exhibit C (collectively, the “Service Fees”), each of which Service Fees corresponds to the module of Services described on the applicable Exhibit.  On a quarterly basis, the Parties will discuss in good faith whether the Service Fees need to be revised in light of the costs, including customary overhead allocation, actually incurred in providing the Services and any changes anticipated as a result of changes in the scope of services or applicable requirements which the Services are intended to address; provided, however, that in no event shall the Parties have a binding obligation to agree to or accept any such revisions to the Services Fees.  To the extent that UCP notifies PICO in accordance with Section 4.2 that it requires only a portion of a specific Service to be provided, the Parties will negotiate to determine an appropriate reduction of the Service Fees.  The Service Fees include all out-of-pocket charges and costs of performing the Services hereunder, including, license fees, royalties or provider services fees, and any and all compensation for personnel providing the Services hereunder, including compensation, benefits and bonuses.

3.2    Payment. PICO shall invoice UCP on a quarterly basis in arrears for the Services provided hereunder, which invoice shall be adjusted, on a pro rata basis, for any Service that is suspended, reduced, discontinued or otherwise terminated under Section 4.2.  Payment in full of the undisputed invoiced amounts shall be made by electronic funds transfer or other method satisfactory to the Parties, within thirty (30) days after the date of receipt of the quarterly invoice. 

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3.3    Taxes.  

(a)The fees payable by UCP to PICO shall, in each case, be taken to be exclusive of any value added taxes, sales taxes, or similar taxes (“Sales Tax”) properly chargeable in respect of the transactions hereunder, and an amount equal to such taxes so chargeable shall, subject to receipt of a valid Sales Tax receipt or invoice in accordance with Section 3.3(c) below, be paid by UCP to PICO in addition to the fees otherwise payable under this Agreement.

(b)In the event that applicable Law requires that any amount in respect of taxes be withheld from any payment by UCP to PICO under this Agreement, UCP shall withhold the required amounts and pay such withheld amounts over to the applicable governmental authority in accordance with the requirements of applicable Law, and any amount so withheld and paid over shall be treated as having been paid to PICO, and UCP shall not be required to pay any additional amount as a result of or in respect of such withholding.  UCP shall provide PICO with documentation evidencing payment to the applicable governmental authority of any amounts so withheld.

(c)In each case where an amount in respect of Sales Tax is payable by UCP in respect of a Service provided by PICO, PICO shall furnish in a timely manner a valid Sales Tax receipt or invoice to UCP in the form and manner required by law to allow UCP to recover such Sales Tax to the extent allowable by Law.

ARTICLE IV
TERM AND TERMINATION
4.1    Term. Unless earlier terminated as set forth herein, this Agreement shall commence as of the Effective Date and remain in force for the following term (the “Term” of this Agreement): (a) one (1) year following the Effective Date (the “Initial Term”); (b) after expiration of the Initial Term, up to two (2)  optional, successive ninety (90) day periods (each an “Optional Renewal Term”), each exercisable by UCP in its sole discretion at any time prior to the expiration of the Initial Term or the first Optional Renewal Term, as applicable and upon sixty (60) days prior written notice to PICO; and (c) after the expiration of the Initial Term and any applicable Optional Renewal Terms, this Agreement shall remain in force on a month-to-month basis until canceled by either Party, for any reason or no reason, upon (i) thirty (30) days prior written notice, if UCP is the cancelling Party or (ii) sixty (60) days prior written notice, if PICO is the cancelling Party.  Prior to any termination or expiration of this Agreement the Audit Committee shall approve such termination as contemplated by Section 4.2(a).

4.2    Discontinuation or Reduction of Services; Termination. 

(a)UCP may, without limiting any of UCP's rights or remedies hereunder (including under Section 4.5), upon not less than thirty (30) days prior written notice, elect to discontinue or partially reduce any Service(s); provided that the Audit Committee of UCP (the “Audit Committee”) shall have approved such discontinuation or reduction in Services provided by PICO and reasonably concluded that, following such discontinuation or partial reduction in Services, UCP would be able to satisfy the information and inspection rights of PICO contained in Article IV of the Investor Rights Agreement of even date herewith among UCP, PICO and the other parties thereto; further provided that PICO may waive the requirement for Audit Committee approval if PICO determines that such discontinuation or partial reduction in Services would not be reasonably expected to materially adversely affect the ability of (or information required for) PICO to carry out its reporting and other legal requirements.  In the event of any discontinuation or partial reduction with respect to one or more, but less than all, of the Services, this Agreement shall continue in full force and effect with respect to any other Services. The Parties shall amend Exhibit A, Exhibit B and Exhibit C and the Service Fees set forth therein, as applicable, to reflect the discontinuation or partial reduction of any Service(s).

(b)UCP may, without limiting any of UCP's rights or remedies hereunder (including under Section 4.5), upon not less than thirty (30) days prior written notice, elect to discontinue all of the Services by terminating this Agreement for any reason or no reason; provided, however, that any such termination shall be approved by the Audit Committee as contemplated by Section 4.2(a).

4.3    Suspension of Services for Non-Payment. If UCP fails to pay any fees and/or charges not disputed in good faith within sixty (60) days of the date such fees and/or charges are due, PICO may, upon further written notice to UCP, suspend its provision of Services; provided, however, that PICO shall resume promptly (and in any event within twenty four (24) hours) the provision of Services upon UCP's cure of such failure to pay such undisputed fees and/or charges.

4.4    Records Post-Termination. PICO will maintain records related to the Services, and the provision thereof, that are necessary or advisable for the performance of its obligations under this Agreement. After termination of this Agreement, PICO will maintain all files related to the Services, and the provision thereof, for one year, all of which shall be treated as Confidential Information under this Agreement. During the period in which PICO maintains the files, UCP may request to examine and copy 

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the files or direct PICO to provide such files or copies thereof to UCP.  Nothing herein shall require PICO to transfer or dispose of any files or records prior to the time when PICO would be permitted to do so in compliance with applicable regulatory requirements and its document retention policy.  After one year following termination of this Agreement, PICO may dispose of files and records that it no longer needs for its own regulatory compliance purposes consistent with the manner it uses to dispose of its own confidential information.  

4.5    Effect of Termination.  Termination or expiration of this Agreement, or suspension or discontinuance of the Services provided under this Agreement, shall not affect any obligations or liability of either Party that accrued prior to the effective date of termination, including any damages or other liability that may arise under or as a result of a Significant Service Shortfall.

4.6    Survival.   Article I, Section 2.10, Section 4.4, Section 4.5, this Section 4.6, Article V, Article VI, Article IX, Section 10.1, Section 10.2 and Sections 10.4-10.14 shall survive the termination of this Agreement.

ARTICLE V
LIMITATION ON LIABILITY; DISCLAIMER; INDEMNIFICATION
5.1    Limitation of Liability.  The maximum liability of any Party hereto to the other Party and such other Party's Affiliates hereunder shall not exceed the Service Fees payable for the initial twelve (12) months of the Term of this Agreement, calculated as if all Services provided hereunder were provided for such twelve (12) months, except that the foregoing liability cap shall not apply to: (a) claims based on a Party's willful misconduct, gross negligence or fraud; (b) claims based on a breach of Article VI hereunder; or (c) claims for indemnity under Section 5.3 hereunder.  Notwithstanding anything else in this Agreement, the Parties waive any claim to any special, indirect, punitive or consequential damages against each other, except to the extent awarded to a Third Party claim that is subject to indemnification under Section 5.3.

5.2    DISCLAIMER.  EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT, PICO MAKES NO EXPRESS WARRANTIES, AND NO WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE. 

5.3    Indemnification.  PICO shall indemnify, defend and hold harmless UCP, its Affiliates and their respective Representatives (each, a “UCP Indemnified Person”), from, against and in respect of, and reimburse any UCP Indemnified Person for, any Third Party Losses imposed, sustained, incurred or suffered by or asserted against any of the UCP Indemnified Persons, relating to, resulting from or arising out of: (a) any fraud, gross negligence or willful misconduct by or on behalf of PICO or any of its Affiliates in providing any of the Services that PICO is obligated to provide hereunder; (b) any claim that any Service, or the provision thereof, infringes or violates any Third Party's intellectual property rights; or (c) any material breach of this Agreement, including any breach of Section 2.8 or Section 6.1.

5.4    Indemnification Procedure.  A UCP Indemnified Person shall give PICO prompt notice of any claim, action or suit against it asserting Losses, and PICO shall have the right to defend such action or suit.  PICO shall have control over the claim or proceeding, including the right to settle; provided, however, that PICO shall not, absent the prior written consent of the UCP Indemnified Person, consent to the entry of any judgment or enter into any settlement that (a) provides for any relief other than the payment of monetary damages for which PICO shall be solely liable and (b) in which the claimant or plaintiff does not release UCP Indemnified Person from all liability in respect thereof.

ARTICLE VI
CONFIDENTIALITY

6.1    Confidential Information.  Each Party covenants that it will (a) accord the Confidential Information (as defined below) of the other Party the same degree of confidential treatment that it accords its similar proprietary and confidential information, (b) not use such Confidential Information for any purpose other than those stated in this Agreement, and (c) not disclose such Confidential Information to any Person unless disclosure to such Person is made in the ordinary course of such Party's conduct of its business and is subject to protections, at least as stringent as those herein, and comparable to those such Party would apply in connection with a comparable disclosure of its own Confidential Information.  Notwithstanding any other provision of this Agreement, a Party may disclose Confidential Information of the other Party, without liability for such disclosure, to the extent the disclosing Party demonstrates that such disclosure is (x) required to be made pursuant to applicable law, government authority, duly authorized subpoena, or court order, (y) required to be made to a court or other tribunal in connection with the enforcement of such Party's rights under this Agreement or to contest claims between the Parties, or (z) approved by the prior written consent of the other Party.  Each Party will promptly notify the other Party if it receives a subpoena or otherwise becomes aware of events that may legally require it to disclose Confidential Information of the other Party, and will cooperate with the other Party (at the 

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other Party's expense) to obtain an order quashing or otherwise modifying the scope of such subpoena or legal requirement, in an effort to prevent the disclosure of such Confidential Information.  For purposes of this Agreement, “Confidential Information” means all confidential or proprietary information and documentation of either Party made available to the other Party under this Agreement that is either identified in writing as confidential or which the receiving Party should reasonably have recognized at the time of disclosure as being of a confidential nature; provided, however, that information required to be disclosed in a report or filing under applicable securities Laws shall not be considered Confidential Information.  For the avoidance of doubt, any and all data, including Personally Identifiable Information, that is provided to or accessed by PICO in the course of providing the Services, shall be considered UCP's Confidential Information, even if such data is generated by PICO in the course of providing the Services.

6.2    Unauthorized Acts.  Each Party shall (a) notify the other Party promptly of any unauthorized possession, use, access to, or knowledge of any Confidential Information by any Person which shall become known to it, any attempt by any Person to gain possession of Confidential Information without authorization or any attempt to use or acquire knowledge of any Confidential Information without authorization (collectively, “Unauthorized Access”), (b) promptly furnish to the other Party full details of the Unauthorized Access and use reasonable efforts to assist the other Party in investigating or preventing the reoccurrence of any Unauthorized Access, (c) cooperate with the other Party in any litigation and investigation against Third Parties deemed necessary by such Party to protect its proprietary rights, and (d) use commercially reasonable efforts to prevent a recurrence of any such Unauthorized Access.

6.3    Insider Trading Policy. Each Party shall instruct its respective Affiliates, officers, directors, controlling Persons, partners, employees, lenders, agents, advisors and representatives (collectively, “Representatives”) that it is a violation of applicable Law for any Representative to purchase or sell securities of the other Party based on non-public information obtained in connection with the performance of this Agreement. 

ARTICLE VII
SYSTEM ACCESS 
7.1    System Access.  If either Party is at any time given access (each in such capacity, a “Guest User”) to the other's computer system(s) or software (collectively, “Systems”) in connection with the performance of this Agreement, such Guest User shall comply with the other Party's (each in such capacity, a “Host”) Systems security policies, procedures and requirements which the Host makes available to the Guest User in writing upon request.

ARTICLE VIII
MUTUAL REPRESENTATIONS AND WARRANTIES
8.1    Mutual Representations and Warranties.  Each Party represents and warrants to the other that as of the Effective Date:

(a)it has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction in which it is incorporated;

(b)it has full power and authority to execute, deliver and perform its obligations under this Agreement; 

(c)this Agreement has been duly and validly authorized, executed and delivered on behalf of such Party and is a valid and binding agreement of such Party, enforceable against such Party in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency (including, without limitation, all laws relating to fraudulent transfers), reorganization, moratorium or similar laws affecting such enforcement, and except as enforcement is subject to general principles of equity (regardless of whether enforcement is considered in a proceeding in equity or at law); and

(d)its execution and delivery of this Agreement by such Party and the performance of its obligations hereunder do not violate, or constitute a breach of or default under, its organizational documents or any agreement or instrument by which it is bound, and it has no knowledge that its performance of such obligations will violate, or constitute a breach of or default under, any order, rule, law or regulation applicable to such Party of any court, governmental body, administrative agency or self-regulatory authority having jurisdiction over such Party.

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ARTICLE IX
DISPUTE RESOLUTION

9.1    Prior to the initiation of legal proceedings, the Parties shall first attempt to resolve any dispute arising out of or in connection with this Agreement or the transactions contemplated hereby informally, as follows:

(a)The Parties shall first attempt, through the Service Coordinators, to resolve all disputes and shall attempt to initiate such efforts within two (2) business days after receipt of notice of any such dispute.  If the Parties are unable to resolve a dispute in an amount of time that either Party deems reasonable under the circumstances, such Party may refer the dispute for resolution to the Senior Managers pursuant to the provisions of Section 9.1(b).

(b)Within five (5) business days of a notice under Section 9.1(a) referring a dispute for resolution by Senior Managers, each Party shall brief its Senior Managers as to the background of the dispute, along with any appropriate supporting documentation.  The designated Senior Managers will confer as often as they deem reasonably necessary in order to gather and exchange information, discuss the dispute and negotiate in good faith, in an effort to resolve the dispute without the need for any formal proceedings.

(c)Legal proceedings may not be initiated until at least ten (10) business days after the receipt by a Party of a notice under Section 9.1(a) referring a dispute to Senior Managers.  If there is a dispute between the Parties, each Party shall continue to perform all of its obligations under this Agreement (including the obligations in dispute) until such dispute is resolved by the Parties in accordance with this Article IX or by a court of competent jurisdiction.  Without limiting the generality of the preceding sentence, if there is a dispute between the Parties regarding the Service Fee(s) in respect of a particular Service or whether PICO is obligated to engage in a particular task as a Service hereunder, PICO shall provide such Service or engage in such disputed task at UCP's direction as if such Service or disputed task was a Service hereunder, until such dispute is resolved by the Parties in accordance with this Article IX or by a court of competent jurisdiction.

ARTICLE X
MISCELLANEOUS

10.1    Construction Rules. The article and section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Words used in this Agreement in the singular, where the context so permits, shall be deemed to include the plural and vice versa. Words used in the masculine or the feminine, where the context so permits, shall be deemed to mean the other and vice versa. Any reference to a section number in this Agreement shall mean the section number in this Agreement unless otherwise expressly stated.   The terms “this Agreement,” “herein,” “hereof,” “hereunder” and similar expressions refer to this Agreement and not to any particular section or other portion of this Agreement.  Lists of examples following “including”, “e.g.”, “such as”, or “for example” are interpreted to include “without limitation”, unless qualified by words such as “only” or “solely.”  Unless stated or context requires otherwise all internal references are to this Agreement or its Exhibits; “days” means calendar days; “may” means that the applicable Party has a right, but not a concomitant duty; “current” or “currently” means “as of the Effective Date”, but “then-current” means the present time when the applicable right is exercised or performance rendered or measured; “notify” means to give notice as provided in Section 10.2; each Party's choices under this Agreement are in its sole discretion; “or” is not meant to be exclusive; and any reference to any agreement defined herein shall include such agreement as amended, modified or supplemented in accordance with its terms.

10.2    Notices. All notices, requests, consents and other communications hereunder to any Party shall be deemed to be sufficient if contained in a written instrument delivered in Person or sent by facsimile (provided a copy is thereafter promptly delivered as provided in this Section) or nationally recognized overnight courier, addressed to such Party at the address or facsimile number set forth below or such other address or facsimile number as may hereafter be designated in writing by such Party to the other Parties:

To: UCP     UCP, Inc.
6489 Camden Avenue, Suite 204 
San Jose, CA 95120
Attention: W. Allen Bennett, General Counsel
Fax: 559-439-4477
Email: allen@unioncommunityllc.com
To: PICO:        PICO Holdings, Inc.
7979 Ivanhoe Avenue, Suite 300

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La Jolla, CA 92037
Attention: Chief Financial Officer
Fax: 858-456-6480 
Email: mwebb@picoholdings.com

10.3    Assignment. This Agreement is a personal services agreement and neither this Agreement nor any of the rights or obligations hereunder shall be assigned by PICO (whether by operation of law, by contract, merger, change in Control, sale of subject assets, assumption or otherwise), without, in each instance, the prior written consent of UCP, provided that, the foregoing shall in no way restrict the performance of a Service by an Affiliate of PICO or a Third Party as otherwise allowed under this Agreement in accordance with Section 2.7.

10.4    Benefit of Agreement.  This Agreement shall be binding upon the Parties hereto and shall inure to the benefit of such Parties and their permitted assignees.

10.5    Amendment. This Agreement may not be modified or amended in any respect except in a writing signed by both Parties.  No waiver shall be deemed to have been granted or created by any course of conduct or acquiescence, and no waiver shall be enforceable against either Party hereto unless in writing and signed by the party against which such waiver is claimed.  No amendment, addition to, alteration, modification or waiver of any part of this Agreement shall be of any effect, whether by course of dealing or otherwise, unless explicitly set forth in writing referencing this Agreement and the provision(s) to be amended, altered, modified or waived and executed by the Parties.

10.6    Waiver; Remedies. The waiver by a Party of any breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach. The failure of a Party to require strict performance of any provision of this Agreement shall not affect such Party's right to full performance thereof at any time thereafter. No right, remedy or election given by any term of this Agreement or made by a Party shall be deemed exclusive, but shall be cumulative with all other rights, remedies and elections available at law or in equity. The Parties acknowledge that the rights created hereby are unique and recognize and affirm that in the event of a breach of this Agreement irreparable harm would be caused, money damages may be inadequate and an aggrieved Party may have no adequate remedy at law. Accordingly, the Parties agree that the other Party shall have the right, in addition to any other rights and remedies existing in its favor at law or in equity, to enforce such Party's rights and the obligations of the other Party not only by an action or actions for damages but also by an action or actions for specific performance, injunctive and/or other equitable relief (without posting of a bond or other security).

10.7    Severability. The provisions of this Agreement shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Agreement, or the application thereof to any Person or entity or any circumstance, is found to be invalid or unenforceable in any jurisdiction, (a) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision and (b) the remainder of this Agreement and the application of such provision to other Persons or circumstances shall not be affected by such invalidity or unenforceability, nor shall such invalidity or unenforceability affect the validity or enforceability of such provision, or the application thereof, in any other jurisdiction.

10.8    Multiple Counterparts. This Agreement may be executed in one or more counterparts, by facsimile or electronic signature, each of which shall be deemed an original and all of which shall, taken together, be considered one and the same agreement, it being understood that both Parties need not sign the same counterpart.

10.9    Further Actions. Each Party shall execute, deliver, acknowledge and file such other documents and take such further actions as may be reasonably requested from time to time by the other Party hereto to give effect to and carry out the transactions contemplated in this Agreement, and to provide the Services.

10.10    Regulations.  PICO shall, and shall cause all of its personnel and Third Parties authorized to provide Services, when on the property of UCP, conform to the rules and regulations of UCP concerning safety, health and security which are made known to such Persons in advance in writing.  In connection with receiving the Services, UCP shall, and shall cause all of its applicable personnel, when on the property of PICO, conform to the rules and regulations of PICO concerning safety, health and security which are made known to such Persons in advance in writing.

10.11    Entire Agreement. This Agreement and the exhibits constitute the entire agreement of the Parties with respect to the subject matter hereof and supersedes and cancels all prior agreements and understandings, either oral or written, between the Parties with respect to the subject matter hereof.

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10.12    No Drafting Presumption. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted by the Parties, and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement.    

10.13    Governing Law; Venue; Jurisdiction. All issues and questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by, and construed in accordance with, the laws of the State of Delaware, without giving effect to any choice of law or conflict of law rules or provisions (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware. The Parties further agree that any dispute arising out of this Agreement shall be decided by either the state or federal court in Santa Clara County, California. The Parties shall each submit to the jurisdiction of those courts and agree that service of process by certified mail, return receipt requested, shall be sufficient to confer said courts with in personam jurisdiction. 

10.14    WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY ISSUE TRIABLE BY A JURY FULLY TO THE EXTENT THAT ANY SUCH RIGHT NOW OR HEREAFTER EXISTS WITH REGARD TO THIS AGREEMENT, OR ANY CLAIM, COUNTERCLAIM OR OTHER ACTION ARISING IN CONNECTION THEREWITH. THIS WAIVER OF RIGHT TO TRIAL BY JURY IS GIVEN KNOWINGLY AND VOLUNTARILY BY THE PARTIES AND IS INTENDED TO ENCOMPASS INDIVIDUALLY EACH INSTANCE AND EACH ISSUE AS TO WHICH THE RIGHT TO A TRIAL BY JURY MAY OTHERWISE ACCRUE. THE PARTIES ARE EACH HEREBY AUTHORIZED TO FILE A COPY OF THIS SECTION IN ANY PROCEEDING AS CONCLUSIVE EVIDENCE OF THIS WAIVER BY THE OTHER PARTY.

[REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

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IN WITNESS WHEREOF, the Parties have executed and delivered this Agreement effective as of the day and year first written above.

PICO Holdings, Inc.,
a California corporation

By:_/s/ Max C. W. Webb

Name: Maxim C. W. Webb
Title:   Chief Financial Officer 

UCP, Inc.,
a Delaware corporation
By:_/s/ Dustin S. Bogue_
         
Name: Dustin L. Bogue
Title:   President and Chief Financial Officer 

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EXHIBIT A- 1

Accounting Services
Description of Accounting Services:
PICO will provide, or cause to be provided, the following accounting services (“Accounting Services”):

Provide accounts payable and expense processing, and settlement support.

Provide accounts receivable and cash receipts processing, and settlement support.

Provide investment accounting and investment data entry.

Provide tax compliance support.

Maintain UCP's general ledger, including monthly and quarter-end journal entries and account reconciliations, which ledger shall be provided to UCP for approval.

Consolidate UCP's financial statements and supporting schedules each quarter, with the input and current assistance from UCP staff, which financial statements and supporting schedules shall be provided to UCP for approval.

Conduct and support UCP's financial statement audit as requested by UCP accountants or UCP's auditor.

Provide monthly and quarterly closing schedule and technical accounting support to UCP accountants.

Provide SEC financial reporting compliance consult and support.

Provide budgeting and financial analysis support.

Provide services to support ERP and accounting processing transition.

Provide stock administration.

Provide training of UCP staff in regard to current procedures, policies and schedules. 

Provide certain access and authority to use the Oracle operating system, including project module, Expense, AP, budgeting and other modules and functionalities necessary to maintain accounting records and financial statements. 

Provide development support for internal controls, internal audits and accounting policies and procedures.

All accounting or related entries or related schedules supporting such entries that are processed by PICO must comply with GAAP and be in accordance with current PICO policies and procedures as defined in internal control processes for Sarbanes-Oxley compliance and shall comply with UCP's financial reporting requirements.

Service Fee for Accounting Services:

PICO will provide, included as part of the fees determined herein, the necessary human resources and related overhead support to provide the activities listed above. The Service Fee for Accounting Services during the Term shall be an amount equal to: $150,000 per quarter, pro rated as required hereunder.

PICO shall bill Third Party charges such as couriers at actual cost and provide documentation for such expenses.

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EXHIBIT B - 1

Human Resources Services

Description of Human Resources Services:

PICO will provide, or cause to be provided, the following human resources services (“HR Services”):

Provide pre-hire processing to include background checks and pre-hire paperwork.

Provide new hire processing and new employee orientation. 

Provide employee termination processing.

Manage personnel records and provide human resources reports.

Manage employee relations.

Provide compensation processing.

Maintenance of time off files for Associates

Provide worker's comp claim processing?

Provide performance appraisal/goal management and tracking.

Provide training as necessary to employees. 

Interact with auditors and provide documentation necessary for review of payroll, 401(k) and other human resource functions

Provide leave processing.

Provide the following payroll and benefit administration services:
		
	◦
	Issue and mail payroll checks and direct deposit confirmations for employees.

		
	◦
	Work with Paychex to ensure the preparation and filing of payroll tax reports, including W-2 Forms.

		
	◦
	Maintain payroll system and database and provide system security, training and upgrades as necessary in the normal course of business.

		
	◦
	Provide direct deposit facility.

		
	◦
	Process stop payments and direct deposit reversals.

		
	◦
	Process all garnishments as submitted by UCP.

		
	◦
	Provide administration services for benefit plans.  Specifically, allow each UCP employee and his or her dependents, where applicable and in accordance with the terms of the plans identified below, to be eligible to participate in the following employee benefit plans:  

		
	▪
	Health & Welfare Plans:

		
	•
	Medical Plan (currently high deductible health plan with HSA under Anthem Blue Cross)

		
	•
	Dental PPO Plan (currently under Metlife)

		
	•
	Vision Plan (currently under Vision Service Providers)

		
	•
	Life, AD&D, STD, LTD and Dependent Life (currently under UNUM)

		
	•
	Flexible Spending Plan (currently with eflex)

		
	•
	HSA Account Maintenance 

		
	▪
	Supplemental & Executive Benefit Plans:  

		
	•
	Additional Life Insurance for Officers (currently under Reliance)

		
	▪
	Retirement Savings Plans:  

		
	•
	PICO HOLDINGS, INC. EMPLOYEES 401(k) RETIREMENT PLAN AND TRUST

Service Fee for HR Services:

PICO will provide, included as part of the fees determined herein, the necessary human resources and related overhead 

13

support to provide the activities listed above. The Service Fee for HR Services during the Term shall be an amount equal to: $25,000 per quarter, pro rated as required hereunder.

PICO shall bill Third Party charges such as couriers at actual cost and provide documentation for such expenses.

14

EXHIBIT C - 1

Information Technology Services

Description of Information Technology Services:

PICO will provide, or cause to be provided, the following information technology services (“IT Services”):

Support approved corporate mobile devices with the ability to send and receive corporate e-mail, including any corporate mobile devices used by UCP personnel as of the Effective Date or devices of substantially similar kind during the period contemplated herein.

Maintain and assist in the acquisition of end user computing equipment and software, office equipment (copiers, scanners, facsimile machines, etc.) for UCP which adhere to the Service standard set forth in Section 2.6(a) of this Agreement.

As requested by UCP, negotiate overall purchasing agreements with information technology vendors with whom PICO does business and consult with UCP prior to making any decisions regarding standards or vendor changes for UCP.  PICO shall have no authority to legally bind UCP.

Manage a service desk which provides a single point of contact for any request for IT Services or issues with services in accordance with PICO's practices as of the date of this Agreement.  Ensure that a single phone number can be called to get assistance.  In addition, the user can submit less urgent requests via email or website.

Provide vendor management services for any Third Party service providers in accordance with PICO's practices, including license management in respect of IT Services.

Support electronic mail, client email package (Microsoft Outlook), enterprise email infrastructure (Microsoft Exchange), anti-virus and spam filtering Services, and Internet email Gateway Services.

Create, maintain and provide access to shared resources for the enterprise in accordance with PICO's practices as of the date of this Agreement.  Specifically, these shared resources shall include secure access to space on servers, printers, electronic mail, intranet and internet portals, Internet connections, networks, database management, storage area networks, failover systems and disaster recovery, firewall, and network administrators, among others.

Detect, troubleshoot and repair the Intranet, LAN, WAN, and Internet when degraded performance or outright failure occurs, including providing for appropriate notification of outages and their expected duration, provision of workarounds, and coordination of efforts of Third Party providers in the resolution in accordance with the Service standard set forth in Section 2.6(a) of this Agreement.

Monitor and manage network and other resources to ensure that the services are available and meeting the needs of UCP and the user community.

Administrative services shall be made available to assist in the appropriate use and setup of the services in accordance with the Service standard set forth in Section 2.6(a) of this Agreement.

Provide telecom services in accordance with the Service standard set forth in Section 2.6(a) of this Agreement.

Service Fee for IT Services:

PICO will provide, included as part of the fees determined herein, the necessary human resources and related overhead support to provide the activities listed above. The Service Fee for IT Services during the Term shall be an amount equal to: $24,000 per quarter, pro rated as required hereunder.

PICO shall bill Third Party charges such as couriers at actual cost and provide documentation for such expenses.

15

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