Exhibit 10.15
EMPLOYMENT AGREEMENT
     This EMPLOYMENT AGREEMENT (“Agreement”) is made as of May 7, 2007, by and
between PICO Holdings, Inc., a diversified holding company formed under the laws
of the state of California (“Company”), and John R. Hart (“Employee”). This
Agreement supersedes and replaces the Employment Agreement entered into as of
January 1, 2006 between PICO Holdings, Inc. and John R. Hart.
RECITALS
     1. The Company believes it is prudent and appropriate to build and operate
businesses where significant value can be created from the development of unique
assets, and to acquire businesses which the Company identifies as undervalued
and where the Company’s participation can aid in the recognition of the
businesses’ fair value, as well as create additional value.
     2. The Company believes that Employee possesses unique skills, knowledge,
and experience and has demonstrated such skills, knowledge and experience in
pursuing the Company’s goals.
     3. The Company believes that it is imperative that it be able to rely upon
Employee’s skills and services for a reasonable time in the future.
     4. Employee has been President and Chief Executive Officer and a Director
of the Company since November 20, 1996, a Director of its predecessor company
since December 10, 1993, and President and Chief Executive Officer of its
predecessor since July 15, 1995. During this time the annual compounded return
on the Company’s stock price over the 13.25 year period equates to 21.62% per
annum.
     5. Employee has been instrumental in reorganizing the Company’s Board of
Directors, management, and corporate structure.
     6. Employee entered into a four-year Employment Agreement with the Company
effective December 31, 1997. A further Employment Agreement was entered into for
the period of January 1, 2002 through December 31, 2005. A subsequent Employment
Agreement was entered into as of January 1, 2006 through December 31, 2010. The
Employment Agreement contained herein shall take effect on May 7, 2007 and
supersedes and replaces the January 1, 2006 Employment Agreement.
     7. Employee will assume all of Ronald Langley’s duties and responsibilities
as an employee of the Company as well as continuing to fulfill his duties as
President and CEO of the Company due to Ronald Langley’s resignation effective
December 31, 2007.

 

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AGREEMENT
     In consideration of the foregoing, and of their mutual promises contained
herein, the parties agree and intend to be legally bound as follows:
     1. Employment and Term.
     The Company hereby engages Employee, and Employee hereby accepts such
engagement, on the terms and conditions set forth herein, for a period
commencing on May 7, 2007 and ending December 31, 2012.
     2. Duties.
     Employee is engaged in the position of President and Chief Executive
Officer. Employee shall perform faithfully and diligently the duties customarily
performed by persons in the position for which Employee is engaged, and such
other similar and related duties as the Board of Directors of the Company shall
reasonably assign to Employee from time to time. The duties of Employee shall
encompass but not necessarily be limited to the following areas and activities:
          A. To analyze the activities and operations of the Company and its
subsidiaries and affiliates and make recommendations to achieve greater
operating efficiencies.
          B. To conduct activities on behalf of the Company and its subsidiaries
and affiliates including but not limited to investigating opportunities for
consolidation, making recommendations for internal financial restructuring, and
searching for potential merger and acquisition candidates.
          C. To analyze the investment portfolios of the Company and its
subsidiaries and affiliates and make recommendations to achieve higher yield and
a greater overall return.
          D. To fulfill the duties of the Company’s President and Chief
Executive Officer as defined by the Company’s By-Laws.
          E. To strictly comply with the Company’s Code of Ethics as adopted by
the Board of Directors of the Company on March 6, 2006.
          Employee will devote such time and efforts to completing his duties as
is reasonably necessary to maximize the success of the Company’s business.
     3. Compensation.
          A. Base Salary. As compensation for the proper and satisfactory
performance of all duties to be performed by Employee hereunder, Company shall
pay to Employee a base salary of $1,228,800.00 for the year 2007. On January 1,
2008 Employee’s 2007 base salary of $1,228,800.00 shall be increased by the same
percentage applicable to the Company’s other staff members, in an amount deemed
adequate to provide for cost of living, subject to Compensation Committee
approval, based on several major compensation studies; to the resulting number
$500,000.00 shall be added and this shall constitute Employee’s base salary for
the year 2008. On January 1, 2009 the base salary shall be increased by the same
percentage applicable to the Company’s other staff members, in an amount deemed
adequate to provide for cost of living, subject to Compensation Committee
approval, based on several major compensation studies. The same adjustment to
the resulting base salary shall be made on January 1, 2010, January 1, 2011 and
January 1, 2012.

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          B. Incentive Award. In addition, Employee shall be eligible to receive
an annual incentive award based on the growth of the Company’s book value per
share during the fiscal year, above a threshold. The threshold above which
incentives are earned is 80% of the S&P 500 annualized total return for the five
previous years, (but no less than 0). If the increase in book value per share
exceeds this threshold, the incentive award shall be equal to 7.5% of such
excess multiplied by the number of shares oustanding at the beginning of the
fiscal year. The incentive award shall be paid in cash, less applicable tax
withholdings.
          C. Stock Appreciation Rights. The Compensation Committee will grant to
Employee no later than December 31, 2008, 419,178 freestanding stock-settled
stock appreciation rights with the exercise price being the closing market price
on the Nasdaq Global Market on the date of grant, under the PICO Holdings, Inc.
2005 Long-Term Incentive Plan. These stock appreciation rights vest one-third on
the date of grant and one-third on each anniversary thereafter.
          D. Employee Benefits. Employee shall be entitled to the standard
employee benefit package made available to employees of the Company, subject to
the terms, conditions and restrictions stated in that package and the applicable
benefit plan documents. Notwithstanding the preceding sentence, the termination
payments available under this Agreement shall be in lieu of any standard
severance benefits payable to Employee under the severance program available
generally to employees of Company. Company shall have the right at any time to
prospectively amend, modify or eliminate employee benefits, which changes shall
become effective immediately.
          E. Payments by Affiliates. All compensation, fees or other
remuneration payable to Employee by any affiliate of the Company shall be waived
or if paid, remitted to the Company.
     4. Termination.
          If Employee’s services under this Agreement are terminated by the
Company for any reason other than cause or the death or disability of Employee,
prior to January 1, 2009, Employee shall be paid a lump sum equal to
$3,686,400.00 (less applicable tax withholdings). If Employee’s services are
terminated by the Company for any reason other than cause or the death or
disability of Employee on or after January 1, 2009 and prior to December 31,
2012, Employee shall be paid a lump sum equal to $3,686,400.00 (less applicable
tax withholdings) minus the amount previously paid to Employee under
Section 3.A. of this Agreement from January 1, 2009 to the date of termination.
In addition to the amount set forth above, Employee shall receive the pro rata
portion of the annual incentive award that would have been payable to Employee
under Section 3.B. of this Agreement for the year in which termination of
employment occurs. The portion payable to Employee shall be equal to the
incentive award payable for the full year of termination times a fraction, the
numerator of which is the increase in book value per share at the date of
termination and the denominator of which is the increase in book value per share
at December 31 for the year of termination. The incentive award shall be paid in
cash, less applicable tax withholdings, within 2-1/2 months after the end of the
year of termination.
     5. Death or Disability of Employee.
          In the event Employee terminates employment as a result of death or
permanent and total disability (as determined by the Board of Directors of the
Company in its sole discretion) prior to January 1, 2009, a lump sum shall be
paid to Employee or to the person designated by Employee to receive death
benefits hereunder, in an amount equal to $3,686,400.00 (less applicable
withholding taxes). In the event Employee terminates employment as a result of
death or permanent and total disability on or after January 1, 2009 and prior to
December 31, 2012, Employee or the person designated by Employee to receive
death benefits hereunder shall be paid a lump sum in an amount equal to
$3,686,400.00 (less applicable

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withholding taxes) minus the amount previously paid to Employee under
Section 3.A. of this Agreement from January 1, 2009 to the date of termination
of employment. In addition to the amount set forth above, Employee shall receive
the pro rata portion of the annual incentive award that would have been payable
to Employee under Section 3.B. of this Agreement for the year in which
termination of employment occurs. The portion payable to Employee shall be equal
to the incentive award payable for the full year of termination times a
fraction, the numerator of which is the increase in book value per share at the
date of termination and the denominator of which is the increase in book value
per share at December 31 of the year of termination. The incentive award shall
be paid in cash, less applicable tax withholdings, within 2-1/2 months after the
end of the year of termination. If no person has been designated by Employee to
receive death benefits hereunder, payment shall be made to Employee’s surviving
spouse (if any) or to Employee’s estate if Employee is not married at the time
of death.
     6. Termination by Employee
          In the event Employee terminates employment for any reason prior to
December 31, 2010, Company shall make a lump sum payment to Employee in the
amount (less applicable tax withholdings) of $400,000.00 if Employee terminates
employment during calendar year 2007. Such lump sum amount shall decrease by
$100,000.00 each calendar year thereafter.
     7. Non-Solicitation of Employees
          Employee agrees that for a period of one (1) year following
termination of employment, Employee will not solicit any officer or key employee
of the Company or its subsidiaries or affiliates for employment.
     8. Golden Parachute Limitation.
          To the extent that any payment to Employee under this Agreement taken
together with any other payments made to Employee constitutes an “excess
parachute payment” within the meaning of Internal Revenue Code Section 280G,
payments to employee will be reduced to the extent necessary to eliminate any
excess parachute payment. Employee may direct which payments to reduce to meet
the requirements.
     9. Confidentiality.
          Both during the term of his engagement by the Company and thereafter,
Employee shall not, without the prior written consent of the Company, or as
required by the order of any court or administrative agency with jurisdiction,
divulge to any third party, or use for his own benefit or for any purpose other
than the exclusive benefit of the Company, any confidential information
concerning its business and affairs obtained by him during the term of his
engagement; it being the intent hereof that Employee shall not so divulge or use
any such information which is unpublished or not readily available to the
general public. Nothing contained in this Section 9 shall restrict Employee’s
ability to make such disclosures during the course of his employment as may be
necessary or appropriate to the effective and efficient discharge of his duties
to the Company under this Agreement.

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     10. Other Agreements.
          Employee represents and warrants to the Company that there is no
agreement between him and any other person, firm or corporation concerning the
performance of services under this Agreement or which in any way might prevent
Employee from performing his obligations under this Agreement. Nothing shall be
interpreted as precluding Employee from seeking or performing other employment
or consulting work.
     11. Assignment.
          This Agreement may not be assigned by either party without the prior
written consent of the other.
     12. Waiver of Breach.
          Failure to insist upon strict compliance with any of the terms,
promises or conditions of this Agreement shall not be deemed a waiver of such
terms, promise or condition, nor shall any waiver or relinquishment of any right
or power hereunder at any one or more times be deemed a waiver or relinquishment
of such right or power, unless specifically stated.
     13. Severability.
          The invalidity or unenforceability of any provisions hereof shall in
no way affect the validity or enforceability of any other provision.
     14. Modification.
          This Agreement cannot be amended, changed, modified, or discharged
except by an agreement in writing signed by both the Company and Employee. In
the event the Company determines that modifications may be necessary to
facilitate compliance with the requirements of Internal Revenue Code
Section 409A, the Company and Employee shall cooperate to adopt such
modifications.
     15. Governing Law.
          This Agreement and the performance of this Agreement shall be governed
by the laws of the state of California.
     16. Captions.
          The captions at the beginning of the several sections of this
Agreement are not part of the context hereof but are only guides or labels to
assist in locating and reading such sections. They should be given no effect in
construing this Agreement.
     17. Binding Effect.
          Except as otherwise herein expressly provided, this Agreement shall
inure to the benefit of and be binding upon the Company, its successors and
assigns, and Employee, his heirs, executors, administrators and legal
representatives, provided that the rights and obligations of Employee or the
Company hereunder may not be delegated or assigned except as provided in
Section 12 hereof.

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     18. Entire Agreement.
          This Agreement contains the entire agreement of the parties with
respect to the subject matter hereof, and no representations, inducements,
promises or agreements, oral or written, between the parties, not embodied
herein shall have any force or effect.
     IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective on the date first written above.

            PICO HOLDINGS, INC.
      /s/ James F. Mosier       Name              General Counsel and Secretary
    Title:          

            EMPLOYEE:
      /s/ John R. Hart       John R. Hart         

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