Terreno Realty Corp (Form: 8-K, Received: 02/19/2014 06:32:28)

Terreno Realty Corporation

Date: February 19, 2014

/s/ Jaime J. Cannon

Jaime J. Cannon

Chief Financial Officer

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 18, 2014

Terreno Realty Corporation

(Exact name of registrant as specified in its charter)

Maryland

001-34603

27-1262675

(State or other jurisdiction

of incorporation)

(Commission

File Number)

(IRS Employer

Identification No.)

101 Montgomery Street, Suite 200

San Francisco, CA 94104

(Address of principal executive offices) (Zip Code)

(415) 655-4580

(Registrant’s telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

On February 18, 2014, Terreno Realty Corporation (the “Company”) entered into (i) Amended and Restated Severance Agreements with each of W. Blake Baird (Chairman and Chief Executive Officer) and Michael A. Coke (President) and (ii) a Severance Agreement with Jaime J. Cannon (Chief Financial Officer).

Amended and Restated Severance Agreements with Mr. Baird and Mr. Coke

The Amended and Restated Severance Agreements with Mr. Baird and Mr. Coke amend and restate the Severance Agreements, dated as of February 16, 2010, between the Company and each of Mr. Baird and Mr. Coke (the “2010 Severance Agreements”). The 2010 Severance Agreements were amended by the Amended and Restated Severance Agreements to provide that, in the event that the Company terminates the executive’s employment without cause or the executive resigns for good reason, the executive, in addition to the payment of any earned but unpaid annual base salary and any earned but unpaid incentive compensation, will be entitled to receive a cash severance payment equal to the sum of (i) the executive’s then current annual base salary and (ii) the amount of the target value for each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that has not ended as of the executive’s date of termination.

If such termination occurs within 12 months following a change in control of the Company, the cash severance payment that the executive will be entitled to receive is equal to two times the sum of (i) the executive’s then current annual base salary and (ii) the greater of the target value or the calculated value as of the date upon which a change in control (as defined in the Amended and Restated Severance Agreements) occurred for each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that had not ended as of the change in control, with the change in control date being deemed the last day of the performance measurement period. In the case of such a change in control, the calculated value of each such outstanding equity performance award under the Company’s long-term incentive plan shall be determined, if applicable, using a Closing Stock Price (as defined under the Company’s long-term incentive plan) that is equal to the fair market value, as determined by the Compensation Committee of the Board of Directors of the Company, of the total consideration paid or payable in the transaction resulting in the change in control for one share of common stock of the Company.

In addition, the Amended and Restated Severance Agreements amended the 2010 Severance Agreements to provide that if the executive’s employment is terminated on account of his death or disability, the cash severance payment he is entitled to receive is equal to the sum of the target value of each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that has not ended as of the executive’s date of termination.

The other terms of the 2010 Severance Agreements, including the full vesting of all time-based restricted stock awards in connection with the termination of each executive’s employment under the circumstances described above, remain unchanged.

Severance Agreement with Mr. Cannon

Under the Severance Agreement with Mr. Cannon, in the event that the Company terminates his employment without cause or if he resigns for good reason, the executive, in addition to the payment of any earned but unpaid annual base salary and any earned but unpaid incentive compensation, will be entitled to receive, subject to his execution of a general release of claims, a cash severance payment equal to the sum of (i) the executive’s then current annual base salary and (ii) the amount of the target value for each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that has not ended as of the executive’s date of termination.

If such termination occurs within 12 months following a change in control of the Company, the cash severance payment that the executive will be entitled to receive is equal to the sum of (i) the executive’s then current annual base salary and (ii) the greater of the target value or the calculated value as of the date upon which a change in control (as defined in the Severance Agreement) occurred for each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that had not ended as of the change in control, with the change in control date being deemed the last day of the performance measurement period. In the case of such a change in control, the calculated value of each such outstanding equity performance award under the Company’s long-term incentive plan shall be determined, if applicable, using a Closing Stock Price (as defined under the Company’s long-term incentive plan) that is equal to the fair market value, as determined by the Compensation Committee of the Board of Directors of the Company, of the total consideration paid or payable in the transaction resulting in the change in control for one share of common stock of the Company. In addition, in connection with the termination of the executive’s employment under the circumstances described above, all of the executive’s time-based restricted stock awards will fully vest, and he will be eligible to continue to participate, subject to his copayment of premium amounts at the active employees’ rate, in the Company’s group health, dental and vision programs for a period of 18 months following termination.

In addition, the Severance Agreement provides that if the executive’s employment is terminated on account of his death or disability, the cash severance payment he is entitled to receive is equal to the sum of the target value of each of his outstanding performance equity awards under the Company’s long-term incentive plan with a performance measurement period that has not ended as of the executive’s date of termination. In addition, all of the executive’s time-based restricted stock awards will fully vest.

Amended and Restated Long-Term Incentive Plan

On February 18, 2014, the Compensation Committee of the Board of Directors approved an Amended and Restated Long-Term Incentive Plan (the “Amended LTIP Plan”), which amends the Company’s Long-Term Incentive Plan that became effective on February 16, 2010. Under the Amended LTIP Plan, if the Company’s total shareholder return for any performance measurement period beginning on or after January 1, 2014 exceeds the compound, annualized percentage return of a performance measurement index under the Amended LTIP Plan for such period but the excess is less than 100 basis points, the size of the awards granted with respect to such performance measurement index will be determined by linear interpolation.

In addition, the Amended LTIP Plan provides that in the event that there is not a sufficient number of shares available under the Company’s stockholder-approved equity incentive plan to settle awards under the Amended LTIP Plan, the awards will be settled in cash to the extent of such unavailability of shares.

The Amended LTIP Plan does not provide for any other material amendments to the Long-Term Incentive Plan.

The discussion above regarding the Amended and Restated Severance Agreements, the Severance Agreement and the Amended LTIP Plan is qualified in its entirety by reference to the full text of such Amended and Restated Severance Agreements, Severance Agreement and Amended LTIP Plan, copies of which are filed as Exhibits 10.1 through 10.4 to this Current Report on Form 8-K and are incorporated herein by reference.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.


Exhibit Number		Title

10.1*		Amended and Severance Agreement between Terreno Realty Corporation and W. Blake Baird, dated as of February 18, 2014

10.2*		Amended and Restated Severance Agreement between Terreno Realty Corporation and Michael A. Coke, dated as of February 18, 2014

10.3*		Severance Agreement between Terreno Realty Corporation and Jaime J. Cannon, dated as of February 18, 2014

10.4*		Terreno Realty Corporation Amended and Restated Long-Term Incentive Plan

*	Filed herewith

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

Exhibit 10.1

AMENDED AND RESTATED SEVERANCE AGREEMENT

This Amended and Restated Severance Agreement (“Agreement”) is made as of February 18, 2014, between Terreno Realty Corporation, a Maryland corporation (the “Company”), and W. Blake Baird (the “Executive”).

WHEREAS, the parties hereto are parties to that certain Severance Agreement, dated as of February 16, 2010, which the parties hereto desire to amend and restate in its entirety as set forth herein; and

WHEREAS, the Company desires to continue to employ the Executive and to provide the Executive with certain severance protection and the Executive desires to continue to be employed by the Company on the terms contained herein.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1. Term . The term of this Agreement shall extend from the date first written above (the “Commencement Date”) until the third anniversary of the Commencement Date. The Agreement shall be automatically extended for an additional one-year period beginning on the third anniversary of the Commencement Date and each anniversary thereof unless, not less than 90 days prior to each such date, either party shall have given notice to the other that it does not wish to extend this Agreement.

2. Termination . During the term of this Agreement, the Executive’s employment with the Company may be terminated without any breach of this Agreement under the following circumstances:

(a) Death . The Executive’s employment hereunder shall terminate upon his death.

(b) Disability . The Company may terminate the Executive’s employment if he is disabled and unable to perform the essential functions of the Executive’s then existing position or positions under this Agreement with or without reasonable accommodation for a period of 180 days (which need not be consecutive) in any 12-month period. If any question shall arise as to whether during any period the Executive is disabled so as to be unable to perform the essential functions of the Executive’s then existing position or positions with or without reasonable accommodation, the Executive may, and at the request of the Company shall, submit to the Company a certification in reasonable detail by a physician selected by the Company to whom the Executive or the Executive’s guardian has no reasonable objection as to whether the Executive is so disabled or how long such disability is expected to continue, and such certification shall for the purposes of this Agreement be conclusive of the issue. The Executive shall cooperate with any reasonable request of the physician in connection with such certification. If such question shall

arise and the Executive shall fail to submit such certification, the Company’s determination of such issue shall be binding on the Executive. Nothing in this Section 2(b) shall be construed to waive the Executive’s rights, if any, under existing law including, without limitation, the Family and Medical Leave Act of 1993, 29 U.S.C. §2601 et seq . and the Americans with Disabilities Act, 42 U.S.C. §12101 et seq.

(c) Termination by Company for Cause . The Company may terminate the Executive’s employment hereunder for Cause by a vote of the Board at a meeting of the Board called and held for such purpose. For purposes of this Agreement, “Cause” shall mean: (i) conduct by the Executive constituting a material act of misconduct in connection with the performance of his duties, including, without limitation, misappropriation of funds or property of the Company or any of its subsidiaries or affiliates other than the occasional, customary and de minimis use of Company property for personal purposes; (ii) the commission by the Executive of any felony or a misdemeanor involving moral turpitude, deceit, dishonesty or fraud, or any conduct by the Executive that would reasonably be expected to result in material injury or reputational harm to the Company or any of its subsidiaries and affiliates if he were retained in his position; (iii) continued non-performance by the Executive of his duties hereunder (other than by reason of the Executive’s physical or mental illness, incapacity or disability) which has continued for more than 30 days following written notice of such non-performance from the Board; (iv) a breach by the Executive of any of the provisions contained in Section 5 of this Agreement; (v) a material violation by the Executive of the Company’s written employment policies, or (vi) failure to cooperate with a bona fide internal investigation or an investigation by regulatory or law enforcement authorities, after being instructed by the Company to cooperate, or the willful destruction or failure to preserve documents or other materials known to be relevant to such investigation or the inducement of others to fail to cooperate or to produce documents or other materials in connection with such investigation.

(d) Termination Without Cause . The Company may terminate the Executive’s employment hereunder at any time without Cause. Any termination by the Company of the Executive’s employment under this Agreement which does not constitute a termination for Cause under Section 2(c) and does not result from the death or disability of the Executive under Section 2(a) or (b) shall be deemed a termination without Cause. A notice by the Company of non-renewal of this Agreement shall not be construed as a termination without Cause.

(e) Termination by the Executive . The Executive may terminate his employment hereunder at any time for any reason, including but not limited to Good Reason. For purposes of this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events: (i) a material diminution in the Executive’s responsibilities, authority or duties; (ii) a material diminution in the Executive’s Base Salary except for across-the-board salary reductions based on the Company’s financial performance similarly affecting all or substantially all senior management employees of the Company; (iii) a material change in the geographic location at which the Executive provides services to the Company; or (iv) the material breach of this Agreement by the Company. “Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies the Company in writing of the first occurrence of the Good Reason condition within 60 days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Company’s

efforts, for a period not less than 30 days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates his employment within 60 days after the end of the Cure Period. If the Company cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.

(f) Notice of Termination . Except for termination as specified in Section 2(a), any termination of the Executive’s employment by the Company or any such termination by the Executive shall be communicated by written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon.

(g) Date of Termination . “Date of Termination” shall mean: (i) if the Executive’s employment is terminated by his death, the date of his death; (ii) if the Executive’s employment is terminated on account of disability under Section 2(b) or by the Company for Cause under Section 2(c), the date on which Notice of Termination is given; (iii) if the Executive’s employment is terminated by the Company under Section 2(d), 30 days after the date on which a Notice of Termination is given; (iv) if the Executive’s employment is terminated by the Executive under Section 2(e) without Good Reason, 30 days after the date on which a Notice of Termination is given, and (v) if the Executive’s employment is terminated by the Executive under Section 2(e) with Good Reason, the date on which a Notice of Termination is given after the end of the Cure Period. Notwithstanding the foregoing, in the event that the Executive gives a Notice of Termination to the Company, the Company may unilaterally accelerate the Date of Termination and such acceleration shall not result in a termination by the Company for purposes of this Agreement.

3. Compensation Upon Termination .

(a) Termination Generally . If the Executive’s employment with the Company is terminated for any reason, the Company shall pay or provide to the Executive (or to his authorized representative or estate) any earned but unpaid base salary, incentive compensation earned but not yet paid, unpaid expense reimbursements, accrued but unused vacation and any vested benefits the Executive may have under any employee benefit plan of the Company (the “Accrued Benefit”) on or before the time required by law but in no event more than 30 days after the Executive’s Date of Termination.

(b) Termination of Employment by Reason of Death or Disability . If the Executive’s employment is terminated by the Company under Section 2(a) by reason of death or disability under Section 2(b), then the Company shall through the Date of Termination, pay the Executive his Accrued Benefit. In addition,

under the Company’s long-term incentive compensation program with a performance measurement period that has not ended as of the Date of Termination. Such amount shall be paid on the first payroll date that occurs at least 30 days after the Date of Termination;

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable.

(c) Termination by the Company Without Cause or by the Executive with Good Reason . If the Executive’s employment is terminated by the Company without Cause as provided in Section 2(d), or the Executive terminates his employment for Good Reason as provided in Section 2(e), then the Company shall, through the Date of Termination, pay the Executive his Accrued Benefit. In addition:

(i) subject to the Executive signing the Release within the 21-day period following the Date of Termination and the expiration of the seven-day revocation period for the Release, the Company shall pay the Executive an amount equal to one times the sum of (A) the Executive’s Base Salary and (B) the amount of the target value for each of his outstanding performance equity awards under the Company’s long-term incentive compensation program with a performance measurement period that has not ended as of the Date of Termination (the “Severance Amount”). If such termination occurs within 12 months after a Change in Control, the Severance Amount shall be two (2) times the sum of (A) the Executive’s Base Salary and (B) the greater of the target value or the calculated value as of the date upon which a Change in Control occurred (the “Change in Control Date”) for each of his outstanding performance equity awards as of the Change in Control Date under the Company’s long-term incentive program with a performance measurement period that had not ended as of the Change in Control Date, with the Change in Control Date being deemed the last day of the performance measurement period. In the case of such a Change in Control, the calculated value of each such outstanding equity performance award under the Company’s long-term incentive program shall be determined, if applicable, using a Closing Stock Price (as defined under the Company’s long-term incentive program) that is equal to the fair market value, as determined by the Compensation Committee of the Board of Directors of the Company, of the total consideration paid or payable in the transaction resulting in the Change of Control for one share of common stock of the Company. The Severance Amount shall be paid out in a lump sum on the first payroll date that occurs at least 30 days after the Date of Termination; and

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable; and

(iii) subject to the Executive’s copayment of premium amounts at the active employees’ rate, the Executive may continue to participate in the Company’s group health, dental and vision program for 18 months; provided, however, that the continuation of health benefits under this Section shall reduce and count against the Executive’s rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).

(d) Additional Limitation .

(i) Anything in this Agreement to the contrary notwithstanding, in the event that the amount of any compensation, payment or distribution by the Company to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations thereunder (the “Severance Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, the following provisions shall apply:

(A) If the Severance Payments, reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes payable by the Executive on the amount of the Severance Payments which are in excess of the Threshold Amount, are greater than or equal to the Threshold Amount, the Executive shall be entitled to the full benefits payable under this Agreement.

(B) If the Threshold Amount is less than (x) the Severance Payments, but greater than (y) the Severance Payments reduced by the sum of (1) the Excise Tax and (2) the total of the Federal, state, and local income and employment taxes on the amount of the Severance Payments which are in excess of the Threshold Amount, then the Severance Payments shall be reduced (but not below zero) to the extent necessary so that the sum of all Severance Payments shall not exceed the Threshold Amount. In such event, the Severance Payments shall be reduced in the following order: (1) cash payments not subject to Section 409A of the Code; (2) cash payments subject to Section 409A of the Code; (3) equity-based payments and acceleration; and (4) non-cash forms of benefits. To the extent any payment is to be made over time (e.g., in installments, etc.), then the payments shall be reduced in reverse chronological order.

(ii) For the purposes of this Section 3(d), “Threshold Amount” shall mean three times the Executive’s “base amount” within the meaning of Section 280G(b)(3) of the Code and the regulations promulgated thereunder less one dollar ($1.00); and “Excise Tax” shall mean the excise tax imposed by Section 4999 of the Code, and any interest or penalties incurred by the Executive with respect to such excise tax.

(iii) The determination as to which of the alternative provisions of this Section 3(d) shall apply to the Executive shall be made by a nationally recognized accounting firm selected by the Company (the “Accounting Firm”), which shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the Date of Termination, if applicable, or at such earlier time as is reasonably requested by the Company or the Executive. For purposes of determining which of the alternative provisions of this Section 3(d) shall apply, the Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation applicable to individuals for the calendar year in which the determination is to be made, and state and local income taxes at the highest marginal rates of individual taxation in the state and locality of the Executive’s residence on the Date of Termination, net of the maximum

reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.

(e) Definitions. For purposes of this Agreement, the following terms shall have the following meanings:

“Change in Control” shall mean any of the following:

(i) any “person,” as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Act”) (other than the Company, any of its subsidiaries, or any trustee, fiduciary or other person or entity holding securities under any employee benefit plan or trust of the Company or any of its subsidiaries), together with all “affiliates” and “associates” (as such terms are defined in Rule 12b-2 under the Act) of such person, shall become the “beneficial owner” (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, of securities of the Company representing 40 percent or more of the combined voting power of the Company’s then outstanding securities having the right to vote in an election of the Board (“Voting Securities”) (in such case other than as a result of an acquisition of securities directly from the Company); or

(ii) the date 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; or

(iii) the consummation of (A) any consolidation or merger of the Company where the stockholders of the Company, immediately prior to the consolidation or merger, would not, immediately after the consolidation or merger, beneficially own (as such term is defined in Rule 13d-3 under the Act), directly or indirectly, shares representing in the aggregate more than 50 percent of the voting shares of the Company issuing cash or securities in the consolidation or merger (or of its ultimate parent corporation, if any), or (B) any sale or other transfer (in one transaction or a series of transactions contemplated or arranged by any party as a single plan) of all or substantially all of the assets of the Company.

Notwithstanding the foregoing, a “Change in Control” shall not be deemed to have occurred for purposes of the foregoing clause (i) solely as the result of an acquisition of securities by the Company which, by reducing the number of shares of Voting Securities outstanding, increases the proportionate number of Voting Securities beneficially owned by any person to 40 percent or more of the combined voting power of all of the then outstanding Voting Securities; provided, however, that if any person referred to in this sentence shall thereafter become the beneficial owner of any additional shares of Voting Securities (other than pursuant to a stock split, stock dividend, or similar transaction or as a result of an acquisition of securities directly from the Company) and immediately thereafter beneficially owns 40 percent or more of the combined voting power of all of the then outstanding Voting Securities, then a “Change in Control” shall be deemed to have occurred for purposes of the foregoing clause (i).

4. Section 409A .

(a) Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s separation from service within the meaning of Section 409A of the Code, the Company determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

(b) To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s “separation from service.” The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions set forth in Treasury Regulation Section 1.409A-1(h).

(c) The parties intend that this Agreement will be administered in accordance with Section 409A of the Code. To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code. The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

(d) The Company makes no representation or warranty and shall have no liability to the Executive or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

5. Confidential Information, Nonsolicitation and Cooperation .

developed by the Executive in the course of the Executive’s employment by the Company, as well as other information to which the Executive may have access in connection with the Executive’s employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Executive’s duties under Section 5(b).

(b) Confidentiality. The Executive understands and agrees that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Company with respect to all Confidential Information. At all times, both during the Executive’s employment with the Company and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Company, except as may be necessary in the ordinary course of performing the Executive’s duties to the Company.

(c) Documents, Records, etc . All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to the Executive by the Company or are produced by the Executive in connection with the Executive’s employment will be and remain the sole property of the Company. The Executive will return to the Company all such materials and property as and when requested by the Company. In any event, the Executive will return all such materials and property immediately upon termination of the Executive’s employment for any reason. The Executive will not retain with the Executive any such material or property or any copies thereof after such termination.

(d) Nonsolicitation . During the Executive’s employment with the Company and for 12 months thereafter, regardless of the reason for the termination, the Executive (i) will refrain from directly or indirectly employing, attempting to employ, recruiting or otherwise soliciting, inducing or influencing any person to leave employment with the Company (other than terminations of employment of subordinate employees undertaken in the course of the Executive’s employment with the Company); and (ii) will refrain from soliciting or encouraging any customer or supplier to terminate or otherwise modify adversely its business relationship with the Company. The Executive understands that the restrictions set forth in this Section 5(d) are intended to protect the Company’s interest in its Confidential Information and established employee, customer and supplier relationships and goodwill, and agrees that such restrictions are reasonable and appropriate for this purpose.

(e) Third-Party Agreements and Rights . The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information or the Executive’s engagement in any business. The Executive represents to the Company that the Executive’s execution of this Agreement, the Executive’s employment with the Company and the performance of the Executive’s proposed duties for the Company will not violate any obligations the Executive may have to any such previous employer or other party. In the Executive’s work for the Company, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Company any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.

(f) Litigation and Regulatory Cooperation . During and after the Executive’s employment, the Executive shall cooperate fully with the Company in the defense or prosecution of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company. The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 5(f).

(g) Injunction . The Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of the promises set forth in this Section 5, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, subject to Section 6 of this Agreement, the Executive agrees that if the Executive breaches, or proposes to breach, any portion of this Agreement, the Company shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damage to the Company.

6. Arbitration of Disputes . Any controversy or claim arising out of or relating to this Agreement or the breach thereof or otherwise arising out of the Executive’s employment or the termination of that employment (including, without limitation, any claims of unlawful employment discrimination whether based on age or otherwise) shall, to the fullest extent permitted by law, be settled by arbitration in any forum and form agreed upon by the parties or, in the absence of such an agreement, under the auspices of the American Arbitration Association (“AAA”) in San Francisco, California in accordance with the Employment Dispute Resolution Rules of the AAA, including, but not limited to, the rules and procedures applicable to the selection of arbitrators. In the event that any person or entity other than the Executive or the Company may be a party with regard to any such controversy or claim, such controversy or claim shall be submitted to arbitration subject to such other person or entity’s agreement. Judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. This Section 6 shall be specifically enforceable. Notwithstanding the foregoing, this Section 6 shall not preclude either party from pursuing a court action for the sole purpose of obtaining a temporary restraining order or a preliminary injunction in circumstances in which such relief is appropriate; provided that any other relief shall be pursued through an arbitration proceeding pursuant to this Section 6.

California. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

8. Integration . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter.

9. Withholding . All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.

10. Successor to the Executive . This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation).

11. Enforceability . If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

12. Survival . The provisions of this Agreement shall survive the termination of this Agreement and/or the termination of the Executive’s employment to the extent necessary to effectuate the terms contained herein.

13. Waiver . No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

14. Notices . Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by registered or certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Board.

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.

16. Governing Law . This is a California contract and shall be construed under and be governed in all respects by the laws of the State of California, without giving effect to the conflict of laws principles of such State. With respect to any disputes concerning federal law, such disputes shall be determined in accordance with the law as it would be interpreted and applied by the United States Court of Appeals for the Ninth Circuit.

17. Counterparts . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

18. Successor to Company . The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement to the same extent that the Company would be required to perform it if no succession had taken place. Failure of the Company to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.

19. Gender Neutral . Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.

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IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.

TERRENO REALTY CORPORATION

By: Michael A. Coke

Its: President

EXECUTIVE

/s/ W. Blake Baird

Name: W. Blake Baird

Exhibit 10.2

AMENDED AND RESTATED SEVERANCE AGREEMENT

This Amended and Restated Severance Agreement (“Agreement”) is made as of February 18, 2014, between Terreno Realty Corporation, a Maryland corporation (the “Company”), and Michael A. Coke (the “Executive”).

2. Termination . During the term of this Agreement, the Executive’s employment with the Company may be terminated without any breach of this Agreement under the following circumstances:

(a) Death . The Executive’s employment hereunder shall terminate upon his death.

3. Compensation Upon Termination .

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable.

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable; and

(d) Additional Limitation .

reduction in federal income taxes which could be obtained from deduction of such state and local taxes. Any determination by the Accounting Firm shall be binding upon the Company and the Executive.

(e) Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

“Change in Control” shall mean any of the following:

4. Section 409A .

5. Confidential Information, Nonsolicitation and Cooperation .

(b) Confidentiality . The Executive understands and agrees that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Company with respect to all Confidential Information. At all times, both during the Executive’s employment with the Company and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Company, except as may be necessary in the ordinary course of performing the Executive’s duties to the Company.

9. Withholding . All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.

19. Gender Neutral . Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.

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IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.


TERRENO REALTY CORPORATION

By:		W. Blake Baird
Its:		Chairman and Chief Executive Officer

EXECUTIVE

/s/ Michael A. Coke
Name: Michael A. Coke

Exhibit 10.3

SEVERANCE AGREEMENT

This Severance Agreement (“Agreement”) is made as of February 18, 2014, between Terreno Realty Corporation, a Maryland corporation (the “Company”), and Jaime J. Cannon (the “Executive”).

2. Termination . During the term of this Agreement, the Executive’s employment with the Company may be terminated without any breach of this Agreement under the following circumstances:

(a) Death . The Executive’s employment hereunder shall terminate upon his death.

3. Compensation Upon Termination .

(i) subject to the Executive (in case of disability only) signing a general release of claims in favor of the Company and related persons and entities in a form and manner satisfactory to the Company (the “Release”) within the 21-day period following the Date of Termination and the expiration of the seven-day revocation period for the Release, the Company shall pay the Executive, or his estate, as the case may be, a lump sum amount equal to the target value of each of his outstanding performance equity awards under the Company’s long-term incentive compensation program with a performance measurement period that has not ended as of the Date of Termination. Such amount shall be paid on the first payroll date that occurs at least 30 days after the Date of Termination;

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable.

(i) subject to the Executive signing the Release within the 21-day period following the Date of Termination and the expiration of the seven-day revocation period for the Release, the Company shall pay the Executive an amount equal to one times the sum of (A) the Executive’s Base Salary and (B) the amount of the target value for each of his outstanding performance equity awards under the Company’s long-term incentive compensation program with a performance measurement period that has not ended as of the Date of Termination (the “Severance Amount”). If such termination occurs within 12 months after a Change in Control, the Severance Amount shall be the sum of (A) the Executive’s Base Salary and (B) the greater of the target value or the calculated value as of the date upon which a Change in Control occurred (the “Change in Control Date”) for each of his outstanding performance equity awards as of the Change in Control Date under the Company’s long-term incentive program with a performance measurement period that had not ended as of the Change in Control Date, with the Change in Control Date being deemed the last day of the performance measurement period. In the case of such a Change in Control, the calculated value of each such outstanding equity performance award under the Company’s long-term incentive program shall be determined, if applicable, using a Closing Stock Price (as defined under the Company’s long-term incentive program) that is equal to the fair market value, as determined by the Compensation Committee of the Board of Directors of the Company, of the total consideration paid or payable in the transaction resulting in the Change of Control for one share of common stock of the Company. The Severance Amount shall be paid out in a lump sum on the first payroll date that occurs at least 30 days after the Date of Termination; and

(ii) upon the Date of Termination, all time-based restricted stock awards held by the Executive shall vest and become nonforfeitable; and

(d) Additional Limitation .

pursuant to the terms of this Agreement or otherwise, calculated in a manner consistent with Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”) and the applicable regulations thereunder (the “Severance Payments”), would be subject to the excise tax imposed by Section 4999 of the Code, the following provisions shall apply:

(e) Definitions . For purposes of this Agreement, the following terms shall have the following meanings:

“Change in Control” shall mean any of the following:

4. Section 409A .

Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s separation from service would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s separation from service, or (B) the Executive’s death. If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.

5. Confidential Information, Nonsolicitation and Cooperation .

(a) Confidential Information . As used in this Agreement, “Confidential Information” means information belonging to the Company which is of value to the Company in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; and business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Company. Confidential Information includes information developed by the Executive in the course of the Executive’s employment by the Company, as well as other information to which the Executive may have access in connection with the Executive’s employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include information in the public domain, unless due to breach of the Executive’s duties under Section 5(b).

(b) Confidentiality . The Executive understands and agrees that the Executive’s employment creates a relationship of confidence and trust between the Executive and the Company with respect to all Confidential Information. At all times, both during the Executive’s employment with the Company and after its termination, the Executive will keep in confidence and trust all such Confidential Information, and will not use or disclose any such Confidential Information without the written consent of the Company, except as may be necessary in the ordinary course of performing the Executive’s duties to the Company.

(f) Litigation and Regulatory Cooperation . During and after the Executive’s employment, the Executive shall cooperate fully with the Company in the defense or prosecution

of any claims or actions now in existence or which may be brought in the future against or on behalf of the Company which relate to events or occurrences that transpired while the Executive was employed by the Company. The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Company at mutually convenient times. During and after the Executive’s employment, the Executive also shall cooperate fully with the Company in connection with any investigation or review of any federal, state or local regulatory authority as any such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Company. The Company shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of obligations pursuant to this Section 5(f).

7. Consent to Jurisdiction . To the extent that any court action is permitted consistent with or to enforce Section 6 of this Agreement, the parties hereby consent to the jurisdiction of the Superior Court of the State of California and the United States District Court for the District of California. Accordingly, with respect to any such court action, the Executive (a) submits to the personal jurisdiction of such courts; (b) consents to service of process; and (c) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process.

9. Withholding . All payments made by the Company to the Executive under this Agreement shall be net of any tax or other amounts required to be withheld by the Company under applicable law.

15. Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.

19. Gender Neutral . Wherever used herein, a pronoun in the masculine gender shall be considered as including the feminine gender unless the context clearly indicates otherwise.

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IN WITNESS WHEREOF, the parties have executed this Agreement effective on the date and year first above written.


TERRENO REALTY CORPORATION

By:		/s/ W. Blake Baird
Its:		Chairman and Chief Executive Officer

EXECUTIVE

/S/ Jaime J. Cannon
Name: Jaime J. Cannon

Exhibit 10.4

TERRENO REALTY CORPORATION

AMENDED AND RESTATED LONG-TERM INCENTIVE PLAN

1. Purpose

This Amended and Restated Long-Term Incentive Plan (the “ Plan ”) is intended to provide an incentive for superior work and to motivate executives and employees of Terreno Realty Corporation (the “ Company ”) toward even higher achievement and business results, to tie their goals and interests to those of the Company and its stockholders and to enable the Company to attract and retain highly qualified executives and employees. The Plan is for the benefit of Participants (as defined below).

2. Definitions

For purposes of this Plan:

(a) “ Award ” means a grant to a Participant hereunder.

(b) “ Award Notice ” means a notice or agreement provided to a Participant that sets forth the terms, conditions and limitations of the Participant’s participation in this Plan, including, without limitation, the Participant’s Target Award.

(d) “ Closing Index Value ” means, with respect to each Performance Measurement Index, the Performance Measurement Index Value as of the last day of any Performance Measurement Period.

(e) “ Closing Stock Price ” means the Stock Price as of the last day of any Performance Measurement Period.

(f) “ Code ” means Internal Revenue Code of 1986, as amended.

(g) “ Committee ” means the Compensation Committee of the Board.

(h) “ Effective Date ” means January 1, 2014.

(i) “ FTSE NAREIT Equity Industrial Index ” means the FTSE NAREIT Equity Industrial Index, or, in the event such index is discontinued or its methodology significantly changed, a comparable index selected by the Committee in good faith.

(j) “ Initial Index Value ” means, with respect to each Performance Measurement Index, the Performance Measurement Index Value as of the first day of any Performance Measurement Period.

(k) “ Initial Stock Price ” means the Stock Price as of the first day of any Performance Measurement Period.

(l) “ MSCI US REIT Index ” means the MSCI US REIT Index (RMS), or, in the event such index is discontinued or its methodology significantly changed, a comparable index selected by the Committee in good faith.

(m) “ Participant ” means an executive or employee of the Company selected by the Committee to participate in the Plan.

(n) “ Performance Measurement Indexes ” means the MSCI US REIT Index and the FTSE NAREIT Equity Industrial Index.

(o) “ Performance Measurement Index Value ” for each Performance Measurement Index means, with respect to any date, the average value of such Performance Measurement Index for the ten consecutive trading days immediately preceding such date.

(p) “ Performance Measurement Period ” means, a three calendar year period commencing on January 1, 2014 and each January 1 thereafter while this Plan is effective, and concluding on December 31 of the second calendar year thereafter.

(q) “ Stock ” means the Company’s common stock, par value $0.01 per share.

(r) “ Stock Price ” means, as of a particular date, the average closing price of one share of Stock for the ten consecutive trading days ending on, and including, such date (or, if such date is not a trading day, the most recent trading day immediately preceding such date).

(s) “ Target Award ” means a Participant’s target award for each Performance Measurement Period, as set forth in the Participant’s Award Notice.

(t) “ Total Shareholder Return ” means, with respect to a Performance Measurement Period, the compound, annualized percentage return per share achieved by the Stock assuming contemporaneous reinvestment in the Stock of all dividends and other distributions (excluding dividends and distributions paid in the form of additional shares of Stock) at the closing price of one share of Stock on the date such dividend or other distribution was paid, based on the Initial Stock Price and the Closing Stock Price for such Performance Measurement Period.

3. Administration

(a) The Plan shall be administered by the Committee. The Committee shall have the discretionary authority to make all determinations (including, without limitation, the interpretation and construction of the Plan and the determination of relevant facts) regarding the entitlement to any Award hereunder and the amount of any Award to be paid under the Plan (including the number of shares of Stock issuable to any Participant), provided such determinations are made in good faith and are consistent with the purpose and intent of the Plan. In particular, but without limitation and subject to the foregoing, the Committee shall have the authority:

(i) to select Participants under the Plan;

(ii) to determine the Target Award and any formula or criteria for the determination of the Target Award for each Participant;

(iii) to determine the terms and conditions, not inconsistent with the terms of this Plan, which shall govern Award Notices and all other written instruments evidencing an Award hereunder, including the waiver or modification of any such conditions;

(iv) to adopt, alter and repeal such administrative rules, guidelines and practices governing the Plan as it shall from time to time deem advisable; and

(v) to interpret the terms and provisions of the Plan and any Award granted under the Plan (and any Award Notices or other agreements relating thereto) and to otherwise supervise the administration of the Plan.

(b) Notwithstanding anything herein to the contrary, the Committee may, in its discretion, make appropriate adjustments to any Award, any Target Award, any Initial Stock Price, any Closing Stock Price, the target performance levels for any Performance Measurement Period or the Total Shareholder Return for any period in connection with or as a result of any of the following events which occur or have occurred after the Effective Date: reorganization, recapitalization, reclassification, stock dividend, stock split, reverse stock split or other similar change in the Company’s capital stock, if the outstanding shares of Stock are increased or decreased or are exchanged for a different number or kind of shares or other securities of the Company, or additional shares or new or different shares or other securities of the Company or other non-cash assets are distributed with respect to such shares of Stock or other securities.

(c) Subject to the terms hereof, all decisions made by the Committee pursuant to the Plan shall be final, conclusive and binding on all persons, including the Company and the Participants. No member of the Board or the Committee, nor any officer or employee of the Company acting on behalf of the Board or the Committee shall be personally liable for any action, determination or interpretation taken or made in good faith with respect to the Plan, and all members of the Board or Committee and each and any officer or employee of the Company acting on their behalf shall, to the extent permitted by law, be fully indemnified and protected by the Company in respect of any such action, determination or interpretation.

4. Determination and Payment of Awards

(a) Each Participant’s Award Notice shall specify such Participant’s Target Award. The Target Award may be expressed as a dollar amount or as a percentage of a Participant’s base salary or other compensation, a number of shares of Stock or pursuant to any other method, amount or formula selected by the Committee for such Participant, and may apply for all or a specified number of Performance Measurement Periods, each as determined in the sole discretion of the Committee.

(b) The amount of a Participant’s Award hereunder shall be determined based on Total Shareholder Return for each Performance Measurement Period relative to the compound, annualized percentage return of each Performance Measurement Index for such period. The compound, annualized percentage return of each Performance Measurement Index shall be established by comparing the Initial Index Value to the Closing Index Value. Unless otherwise

specified in an Award Notice, (i) 50 percent of the Award shall be calculated with reference to Total Shareholder Return relative to the compound, annualized percentage return of the MSCI US REIT Index, and (ii) the remaining 50 percent of the Award shall be calculated with reference to Total Shareholder Return relative to the compound, annualized percentage return of the FTSE NAREIT Equity Industrial Index.

(c) The actual value of a Participant’s Award hereunder shall be determined at the conclusion of a Performance Measurement Period, as follows:

(i) If Total Shareholder Return for the Performance Measurement Period is less than the compound, annualized percentage return of a Performance Measurement Index for such period, Participants shall not receive an Award with respect to the 50 percent of the Target Award calculated with reference to such Performance Measurement Index.

(ii) If Total Shareholder Return for the Performance Measurement Period equals or exceeds the compound, annualized percentage return of a Performance Measurement Index for such period, Participants shall receive an Award equal to 50 percent of the Target Award.

(iii) If Total Shareholder Return for the Performance Measurement Period exceeds the compound, annualized percentage return of a Performance Measurement Index by 100 basis points or more, Participants shall receive an Award equal to 150 percent of the Target Award. If Total Shareholder Return for the Performance Measurement Period exceeds the compound, annualized percentage return of both Performance Measurement Indexes by 100 basis points or more, Participants shall receive an Award equal to 300 percent of the Target Award.

(iv) If Total Shareholder Return for the Performance Measurement Period exceeds the compound, annualized percentage return of a Performance Measurement Index for such period but the excess is less than 100 basis points, the size of Awards granted to Participants with respect to such Performance Measurement Index shall be determined by linear interpolation. By way of illustration only, if the excess performance is 50 basis points, Participants shall receive an Award equal to 100% of the Target Award.

(v) Notwithstanding the foregoing, if Total Shareholder Return for the Performance Measurement Period is negative the value of each Participant’s Award, as determined pursuant to Section 4(c)(ii), (iii) and (iv), above, shall be reduced by 50 percent.

(d) The dollar value of Participant’s Awards shall be determined by the Committee as soon as practicable following the conclusion of the relevant Performance Measurement Period. Following determination of such amounts, the Company shall issue to each Participant a number of shares of Stock with an aggregate Stock Price on the date of issuance equal to the dollar value of each Participant’s Award. In the event the Company does not have sufficient shares available under its shareholder-approved stock plan, the Company shall settle a Participant’s Award in

cash to the extent of such unavailability of shares. The shares of Stock or cash shall be issued or paid between January 1 and March 15 of the calendar year that follows the conclusion of the relevant Performance Measurement Period.

5. Termination of Employment

Unless otherwise provided in any Award Notice, if at any time prior to the end of a Performance Measurement Period a Participant’s employment or other service relationship with the Company terminates for any reason, such Participant shall forfeit the right to receive any payment or Award not paid to the Participant as of the date of termination of employment or other service relationship.

6. Miscellaneous

(a) Amendment and Termination . The Company reserves the right to amend or terminate the Plan at any time in its discretion without the consent of any Participants, but no such amendment shall adversely affect the rights of the Participants with regard to outstanding Awards. In the event the Plan is terminated, the Company shall determine the Awards payable to Participants based on the Total Shareholder Return relative to the Performance Measurement Indexes for each Performance Measurement Period ending on the date of Plan termination. The Awards for each Performance Measurement Period shall be further prorated to reflect the shortened Performance Measurement Period.

(b) No Contract for Continuing Services . This Plan shall not be construed as creating any contract for continued services between the Company or any of its subsidiaries and any Participant and nothing herein contained shall give any Participant the right to be retained as an employee or consultant of the Company or any of its subsidiaries.

(d) Unfunded Plan . The Plan shall be unfunded and shall not create (or be construed to create) a trust or separate fund. Likewise, the Plan shall not establish any fiduciary relationship between the Company or any of subsidiaries or affiliates and any Participant. To the extent that any Participant holds any rights by virtue of an award under the Plan, such right shall be no greater than the right of an unsecured general creditor of the Company or any of its subsidiaries.

(e) Governing Law . The Plan and each Award Letter awarded under the Plan shall be construed in accordance with and governed the laws of the State of California, without regard to principles of conflict of laws of such state.

(f) Tax Withholding . Any issuance of shares of Stock, or payment of cash pursuant to Section 4(d) of the Plan, to a Participant shall be subject to tax withholding. Each Participant shall, no later than the date as of which the value of an Award or of any Stock or other amounts received thereunder first becomes includable in the gross income of the Particpant for Federal income tax purposes, pay to the Company, or make arrangements satisfactory to the Administrator regarding payment of, any Federal, state, or local taxes of any kind required by

law to be withheld by the Company with respect to such income. In the case of the issuance of shares of Stock in settlement of an Award, the minimum tax withholding obligation may, at the election of the Participant, be satisfied in whole or in part through a net issuance of shares, and the Company shall withhold from shares of Stock to be issued to the Participant a number of shares of Stock with an aggregate fair market value that would satisfy the minimum withholding amount due. In the case of any payment of cash by the Company in settlement of an Award pursuant to Section 4(d) of the Plan, the minimum withholding amount shall be satisfied, to the extent permitted by law and subject to the election of the Participant to elect a net issuance of shares as set forth in this Section 4(f), by the Company’s deduction from such cash payment of any minimum withholding taxes.

(g) Construction . Wherever appropriate, the use of the masculine gender shall be extended to include the feminine and/or neuter or vice versa; and the singular form of words shall be extended to include the plural; and the plural shall be restricted to mean the singular.

(h) Headings . The Section headings and Section numbers are included solely for ease of reference. If there is any conflict between such headings or numbers and the text of this Plan, the text shall control.

(i) Effect on Other Plans . Nothing in this Plan shall be construed to limit the rights of Participants under the Company’s or its subsidiaries’ benefit plans, programs or policies.

(j) Effective Date . The Plan shall be effective as of the Effective Date.