Exhibit
10.2








TRUST
FOR


PICO
HOLDINGS, INC. NON-EMPLOYEE DIRECTOR


DEFERRED
COMPENSATION











This
Agreement made this 25th day of
September 2001, by and between PICO Holdings, Inc. (“PICO”), and Huntington
National Bank, N.A. (“Trustee”);





WHEREAS,
PICO has entered into deferred compensation arrangements (“Deferral Agreements”)
with certain of its non-employee directors;





WHEREAS,
PICO incurred or expects to incur liability to pay deferred compensation under
the terms of the Deferral Agreements;





WHEREAS,
PICO wishes to establish a Trust (“Trust”) and to contribute to the Trust assets
that shall be held therein, subject to the claims of creditors in the event of
Insolvency (as herein defined) of PICO, until paid to non-employee directors and
their beneficiaries in such manner and at such times as specified in the
Deferral Agreements;





WHEREAS,
it is the intention of the parties that this Trust shall constitute an unfunded
arrangement and shall not affect the status of the Deferral Agreements as
unfunded agreements maintained for the purpose of providing deferred
compensation for a select group of management, directors, or highly compensated
employees for purposes of Title I of the Employee Retirement Income Security Act
of 1974;





WHEREAS,
it is the intention of PICO to hold assets in this Trust to provide a source of
funds to assist it in the meeting of the liabilities under the Deferral
Agreements;





NOW,
THEREFORE, the parties do hereby establish the Trust and agree that the Trust
shall be comprised, held and disposed of as follows:





Section
1.                      ESTABLISHMENT
OF TRUST.





(a)           PICO
hereby deposits with Trustee in Trust the cash sum of $100.00, which shall
become the principal of the Trust to be held, administered and disposed of by
Trustee as provided in this Trust Agreement.





(b)           The
Trust hereby established shall initially be revocable by PICO. The Trust shall
become irrevocable upon a Change of Control of PICO, as defined
herein.  For purposes of this Trust, Change of Control shall be deemed
to have occurred in the reasonable discretion of the Board of Directors in
consideration of the following guidelines: (i) any person (as the term is used
in Sections 13(d) and 14(d) of the Securities Exchange Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly of securities of PICO representing thirty percent (30%) or more of
PICO’s outstanding securities; or (ii) individuals who are members of PICO’s
Board of Directors on the date hereof (the “Incumbent Board”) cease for any
reason to constitute at least a majority thereof, provided that any person
becoming a director subsequent to the date hereof whose election was approved by
a vote of at least two-thirds of the directors comprising the Incumbent Board,
or whose nomination for election by the stockholders of PICO was approved by the
nominating committee serving under an Incumbent Board, shall be considered a
member of the Incumbent Board.





(c)           The
Trust is intended to be a grantor trust, of which PICO and any affiliate
participating in the Plan, are the grantors, within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of
1986, as amended, and shall be construed accordingly.





(d)           The
principal of the Trust, and any earnings thereon, shall be held separate and
apart from other funds of PICO and shall be used exclusively for the uses and
purposes of paying amounts due under the Deferral Agreements and general
creditors as herein set forth.  Non-employee directors entering into
Deferral Agreements and their beneficiaries shall have no preferred claim on, or
any beneficial ownership interest in, any assets of the Trust.  Any
rights created under the Deferral Agreements and this Trust Agreement shall be
mere unsecured contractual rights of employees and their beneficiaries against
PICO or any affiliate.  Any assets held by the Trust will be subject
to the claims of the general creditors of PICO and any affiliate (to the extent
of each entity’s proportionate interest in the Trust) under federal and state
law in the event of Insolvency, as set forth in Section 3(a)
herein.





(e)           Within
five (5) days after payment of board of directors and committee fees is due by
PICO, PICO shall be required to deposit into the Trust cash in an amount equal
to the amount deferred from all non-employee director’s Deferral
Agreements.  Such cash payments by PICO shall be immediately invested
by Trustee in Huntington U. S. Treasury Money Market Fund.  As soon as
practical, but in no event longer than fifteen (15) days, Trustee shall use the
funds (including interest) in each non-employee director’s account to purchase
the largest number of PICO shares possible for each non-employee director on the
open market.  PICO’s shares are traded on the Nasdaq National
Market.  The PICO shares purchased by Trustee on the open market, plus
any cash remaining in each non-employee director’s account in Huntington U. S.
Treasury Money Market Fund, shall be held by Trustee in each non-employee
director’s account.  Upon a Change of Control, PICO shall, as soon as
possible but in no event later than thirty (30) days following the Change of
Control, make an irrevocable contribution to the Trust of all PICO shares held
by Trustee in each non-employee director’s account, plus the amount of cash in
each non-employee director’s account to which he or she would be entitled
pursuant to the terms of the employee’s Deferral Agreement as of the date of the
Change of Control





Section
      2.
            PAYMENTS
      TO NON-EMPLOYEE DIRECTORS AND THEIR
  BENEFICIARIES.





(a)           PICO
shall deliver to Trustee a schedule (the “Payment Schedule”) that indicates the
amounts payable in respect of each non-employee director, and that contains such
other instructions as to enable the Trustee to make any distributions to each
non-employee director as required under his or her Deferral
Agreement.  Except as otherwise provided herein, Trustee shall make
payments in accordance with such Payment Schedule. No set-off from any amounts
payable to a non-employee director hereunder shall be permitted without the
non-employee director’s written consent.  No changes shall be made by
PICO to the Payment Schedule without the written consent of the affected
non-employee director (except for a change permitted under Deferral Agreement or
a change to an immediate lump sum payment of all remaining benefits upon
termination of all Deferral Agreements).  The Trustee shall make
provision for the reporting and withholding of any federal, state or local taxes
that may be required to be withheld with respect to the payment of compensation
from the Trust and shall pay amounts withheld to the appropriate taxing
authorities or determine that such amounts have been reported, withheld and paid
by PICO.





(b)           The
entitlement of an non-employee director or his or her beneficiaries to deferred
amounts under the Deferral Agreement shall be certified by the Compensation
Committee of the Board of Directors of PICO or such party as it shall designate
and any claim for such benefits shall be considered and reviewed under the
procedures set out in the Deferral Agreement.





(c)           PICO
(or any affiliate) may make payment of deferred compensation directly to
non-employee directors or their beneficiaries as they become due under the terms
of the Deferral Agreements.





PICO
shall notify Trustee of its decision to make payment of benefits directly prior
to the time amounts are payable to non-employee directors or their
beneficiaries.  In addition, if the principal of the Trust, and any
earnings thereon, are not sufficient to make payments of benefits in accordance
with the terms of any Deferral Agreement, PICO shall make the balance of each
such payment in accordance with the terms of the Deferral
Agreement.  Trustee shall notify PICO where principal and earnings are
not sufficient.





Section
      3.
            TRUSTEE
      RESPONSIBILITY REGARDING PAYMENTS TO TRUST BENEFICIARY WHEN PICO IS
      INSOLVENT.





(a)           Trustee
shall cease payment of benefits to all non-employee directors and their
beneficiaries if PICO is Insolvent.  “Insolvent” for purposes of this
Trust Agreement shall mean if (i) an entity is unable to pay its debts as they
become due, or (ii) an entity is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code.





(b)           At
all times during the continuance of this Trust, as provided in Section l (d)
hereof, the principal and income of the Trust shall be subject to claims of
general creditors of PICO and any participating affiliate under federal and
state law as set forth below.





(1)           The
Board of Directors and the Chief Executive Officer of PICO and any participating
affiliate shall have the duty to inform Trustee in writing of such entity’s
Insolvency.  If a person claiming to be a creditor of PICO or a
participating affiliate alleges in writing to Trustee that such entity has
become Insolvent, Trustee shall determine whether such entity is Insolvent and,
pending such determination, Trustee shall discontinue payment of benefits to
non-employee directors and beneficiaries.





(2)           Unless
Trustee has actual knowledge of the Insolvency of PICO, or has received notice
from PICO or from a person claiming to be a creditor alleging that PICO is
Insolvent, Trustee shall have no duty to inquire whether the entity is
Insolvent.  Trustee may in all events rely on such evidence concerning
PICO’s solvency as may be furnished to Trustee and that provides Trustee with a
reasonable basis for malting a determination concerning PICO’s
solvency.





(3)           If
at any time Trustee has determined that PICO is Insolvent, Trustee shall
discontinue payments to non-employee directors or their beneficiaries and shall
hold the assets of the Trust for the benefit of PICO’s general
creditors.  Nothing in this Trust Agreement shall in any way diminish
any rights of non-employee directors or their beneficiaries to pursue their
rights as general creditors of PICO with respect to benefits due under the
Deferral Agreement or otherwise.





(4)           Trustee
shall resume the payment of benefits to non-employee directors or their
beneficiaries in accordance with Section 2 of this Trust Agreement only after
Trustee has determined that PICO is not Insolvent (or is no longer
Insolvent).





(c)           Provided
that there are sufficient assets, if Trustee discontinues the payment of
benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes
such payments, the first payment following such discontinuance shall include the
aggregate amount of all payments due to non-employee directors or their
beneficiaries under the terms of the Deferral Agreements for the period of such
discontinuance, less the aggregate amount of any payments made to non-employee
directors or their beneficiaries by PICO in lieu of the payments provided for
hereunder during any such period of discontinuance.


Section
4.                      PAYMENTS
TO PICO.





Except as
provided in Section 3 hereof, after the Trust has become irrevocable, PICO shall
have no right or power to direct Trustee to return to PICO or to divert to
others any of the Trust assets before all payment of benefits have been made to
non-employee directors and their beneficiaries pursuant to the terms of the
Deferral Agreement.  Notwithstanding the preceding sentence, the
Trustee may reimburse PICO (or any affiliate) for benefits paid directly by PICO
(or any affiliate) to non-employee directors and beneficiaries.





Section
5.                      INVESTMENT
AUTHORITY.





All
payments by PICO to Trustee shall be used by Trustee to purchase PICO shares in
the open market as specified in Section 1.(e) above.  All rights
associated with assets of the Trust shall be exercised by Trustee or the person
designated by Trustee, and shall in no event be exercisable by or rest with
non-employee directors.  Trustees shall invest the cash of the Trust
in Huntington U. S. Treasury Money Market Fund.





Section
6.                      DISPOSITION
INCOME.





During
the term of this Trust, all of the income received by the Trust shall be
accumulated in the Trust.





Section
7.                      ACCOUNTING
BY TRUSTEE.





Trustee
shall keep accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made, including such
specific records as shall be agreed upon in writing between PICO and
Trustee.  Within thirty (30) days following the close of each calendar
year and within thirty (30) days following the close of each calendar quarter
and within thirty (30) days after the removal or resignation of the Trustee,
Trustee shall deliver to PICO a written account of its administration of the
Trust during such year or quarter or during the period from the close of the
last preceding year to the date of such removal or resignation, setting forth
all investments, income, receipts, disbursements and other transactions effected
by it, including a description of all securities and investments purchased and
sold with the cost or net proceeds of such purchases or sales, and showing all
cash, securities and other property held in the Trust at the end of such year or
as of the date of such removal or resignation, as the case may
be.  Such written account shall show the number of PICO shares, and
the amount of cash held in Huntington U. S. Treasury Money Market Fund,
separately for each non-employee director on a quarterly basis.





Section
8.                      RESPONSIBILITY
OF TRUSTEE.





(a)           Trustee
shall act with the care, skill, prudence and diligence under the circumstances
then prevailing that a prudent person acting in like capacity and familiar with
such matters would use in the conduct of an enterprise of a like character and
with like aims; provided, however, that Trustee shall incur no liability to any
person for any action taken pursuant to a direction, request or approval given
by PICO which is contemplated by, and in conformity with, the terms of this
Trust and is given in writing by PICO.  In the event of a dispute
between PICO and Trustee, Trustee may apply to a court of competent jurisdiction
to resolve the dispute.





(b)           If
Trustee undertakes or defends any litigation or threatened litigation arising in
connection with this Trust, PICO agrees to indemnify Trustee against Trustee's
costs, expenses and liabilities (including, without limitation, attorneys’ fees
and expenses) relating thereto and to be primarily liable for such
payments.  If PICO does not pay such costs, expenses and liabilities
in a reasonably timely manner, Trustee may obtain payment from the
Trust.  Notwithstanding the preceding sentences, in no event shall
PICO indemnify Trustee (nor shall any payments be made from the trust on behalf
of Trustee) if the Trustee is determined to have acted negligently or with
willful misconduct in carrying out its duties with respect to the
Trust.





(c)           Trustee
may consult with legal counsel (who may also be counsel for PICO generally) with
respect to any of its duties or obligations hereunder.





(d)           Trustee
may hire agents, accountants, actuaries, investment advisors, financial
consultants or other professionals to assist it in performing any of its duties
or obligations hereunder.  Unless approved in advance by PICO, Trustee
shall pay the fees and expenses relating to hiring of such agents, accountants
and other professionals.  Reasonable and customary expenses may be
incurred by Trustee without approval.





(e)           Trustee
shall have, without exclusion, all powers conferred on Trustees by applicable
law, unless expressly provided otherwise herein; provided, however, that if an
insurance policy is held as an asset of the Trust, Trustee shall have no power
to name a beneficiary of an insurance policy other than the Trust, to assign
such policy (as distinct from conversion of such policy to a different form)
other than to a successor Trustee, or to loan to any person the proceeds of any
borrowing against such policy.





(f)           Notwithstanding
any powers granted to Trustee pursuant to this Trust Agreement or to applicable
law, Trustee shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom, within the meaning
of section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.





Section
9.                      COMPENSATION
AND EXPENSES OF TRUSTEE.





PICO
shall pay all administrative and Trustee’s fees and approved expenses relating
to the operation of the Trust.  If not so paid, the fees and expenses
shall be paid from the Trust.  These fees will be $20.00 per security
transaction for each account, plus a $15.00 annual maintenance fee for each
account.  These fees will be billed to PICO quarterly.





Section
10.                                RESIGNATION
AND REMOVAL OF TRUSTEE.





(a)           Trustee
may resign at any time by written notice to PICO, which shall be effective
thirty (30) days after receipt of such notice unless PICO and Trustee agree
otherwise.





(b)           Trustee
may be removed by PICO on thirty (30) days notice or upon shorter notice
accepted by Trustee.





(c)           Upon
resignation or removal of Trustee and appointment of a successor Trustee, all
assets shall subsequently be transferred to the successor
Trustee.  The transfer shall be completed within thirty (30) days
after receipt of notice of resignation, removal or transfer, and upon receipt by
the Trustee of all proper documentation unless PICO extends the time
limit.





(d)           If
Trustee resigns or is removed, a successor shall be appointed, in accordance
with Section 11 hereof, by the effective date of resignation or removal under
paragraph(s) (a) or (b) of this Section.  If no such appointment has
been made, Trustee may apply to a court of competent jurisdiction for
appointment of a successor or for instructions.  All expenses of
Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.





Section
11.                                APPOINTMENT
OF SUCCESSOR.





(a)           If
Trustee resigns or is removed in accordance with Section 10(a) or (b) hereof,
PICO may appoint any third party, such as a bank trust department or other party
that may be granted trustee powers under state law, as a successor to replace
Trustee upon resignation or removal.  Notwithstanding the preceding
sentence, if the Trustee resigns or is removed within one (1) year of a Change
in Control of PICO, the Trustee shall select the Successor
Trustee.  The appointment shall be effective when accepted in writing
by the new Trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets.  The former
Trustee shall execute any instrument necessary or reasonably requested by PICO
or the successor Trustee to evidence the transfer.





(b)          The
successor Trustee need not examine the records and acts of any prior
Trustee.  The successor Trustee shall not be responsible for and PICO
shall indemnify and defend the successor Trustee from any claim or liability
resulting from any action or inaction of any prior Trustee or from any other
past event, or any condition existing at the time it becomes successor
Trustee.  Notwithstanding the preceding sentence, this indemnification
shall not include liability resulting from actions or inactions of the successor
Trustee after it becomes aware (or should have become aware) of any past event
or other condition that requires corrective action on the part of the successor
Trustee.





Section
12.        AMENDMENT OR
TERMINATION.





(a)           This
Trust Agreement may be amended by a written instrument executed by Trustee and
PICO.  Notwithstanding the foregoing, no such amendment shall conflict
with the terms of the Deferral Agreement or shall make the Trust revocable after
it has become irrevocable in accordance with Section l(b) hereof.  In
addition, no such amendment shall alter the terms of the Trust relating to the
special requirements imposed hereunder on or after a Change of Control of PICO
without the written approval of non-employee directors who have entered into
Deferral Agreements.





(b)         The
Trust shall not terminate until the date on which non-employee directors and
their beneficiaries are no longer entitled to benefits pursuant to the terms of
their Deferral Agreements.  Upon termination of the Trust, any assets
remaining in the trust after distribution of all benefits to non-employee
directors’ beneficiaries shall be returned to PICO.





Section
13.        MISCELLANEOUS.





(a)           Any
provision of this Trust Agreement prohibited by law shall be ineffective to the
extent of any such prohibition, without invalidating the remaining provisions
hereof





(b)           Benefits
payable to non-employee directors and their beneficiaries under this Trust
Agreement may not be anticipated, assigned (either at law or in equity),
alienated, pledged, encumbered or subjected to attachment, garnishment, levy,
execution or other legal or equitable process.





(c)           This
Trust Agreement shall be governed by and construed in accordance with the laws
of California.











Section
14.        EFFECTIVE DATE.





The effective date of this Trust
Agreement shall be September 25, 2001.