Hart Employment Agreement 2005


    EXHIBIT
      10.8

    EMPLOYMENT
      AGREEMENT

    


    This
      EMPLOYMENT AGREEMENT (“Agreement”) is made as of January 1, 2006, by and between
      PICO Holdings, Inc., a diversified investment company formed under the laws
      of
      the state of California (“Company”), and John R. Hart (“Employee”).

    


    RECITALS

     

    1. The
      Company believes it is prudent and appropriate to attempt to increase
      shareholder value through strategic investments, acquisitions, business
      combinations, realization of market value of existing assets and acquisitions
      of
      assets or companies below market value and in certain circumstances, below
      book
      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.

     

    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. The Employment Agreement
      contained herein shall take effect on January 1, 2006.

    


    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 five-year period commencing
      on
      January 1, 2006.


    
      
        
        

      

      
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    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 October 17, 2003.

    


    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.
      During
      the term of this Agreement, 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 $1,075,000.00 per year, payable in accordance
      with the normal payroll practices of the Company, less required deductions
      for
      state and federal income tax withholding, social security and other required
      payroll taxes. The base salary shall be revised annually with the first
      adjustment occurring on January 1, 2006, in the same percentage applicable
      to
      the Company’s other staff members, in an amount deemed adequate to provide for
      cost of living, subject to Committee approval, based on several major
      compensation indices.

    


    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 (adjusted for any book value
      impact by 7⁄8 of all stock appreciation rights--related expenses net of tax)
      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 5% of such excess
      multiplied by the number of shares outstanding at the beginning of the fiscal
      year. The incentive award shall be paid in cash, less applicable tax
      withholdings. 

    


    C. 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.

    


    D. 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.


    
      
        
        

      

      
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              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, 2008, Employee shall be paid a lump sum equal to $3,225,000.00 (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, 2008 and prior to December 31, 2010, Employee shall
      be
      paid a lump sum equal to $3,225,000.00 (less applicable tax withholdings) minus
      the amount previously paid to Employee under Section 3.A. of this Agreement
      from
      January 1, 2008 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, 2008, 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 $3,225,000.00 (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, 2008 and prior to December 31, 2010, Employee
      or the person designated by Employee to receive death benefits hereunder shall
      be paid a lump sum in an amount equal to $3,225,000.00 (less applicable
      withholding taxes) minus the amount previously paid to Employee under Section
      3.A. of this Agreement from January 1, 2008 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 $500,000.00 if Employee terminates employment during
      calendar year 2006. 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.


    
      
        
        

      

      
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              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.

    


    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.


    
      
        
        

      

      
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    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.

    


    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