Document:

EX-10.45

 

Exhibit 10.45

NATIONAL CITY CORPORATION

RESTRICTED STOCK UNIT AWARD AGREEMENT

National City Corporation

     WHEREAS, National City Corporation (“Corporation”) currently has in effect the National City
Corporation Long-Term Cash and Equity Incentive Plan Effective April 6, 2004 (the “Plan”); and

     WHEREAS, Article 8 of the Plan provides for the award of restricted stock units (“RSU’s”) to
employees of the Corporation and Subsidiaries as selected from time to time by the Corporation’s
Compensation and Organization Committee or another committee appointed by the board of directors of
the Corporation (the “Committee”);

     WHEREAS, the individual identified as Grantee (“Grantee”) on the cover sheet that is attached
hereto and hereby made a part hereof (“Cover Sheet”) is a key employee of Corporation and/or a
Subsidiary (collectively and individually the “Employers”);

     WHEREAS, the execution of a RSU Award Agreement in the form hereof has been duly authorized by
the Committee;

     WHEREAS, the Corporation desires reasonable protection for its confidential business
information and from competitive activity by Grantee; and

     WHEREAS, the Grantee agrees to accept an award of RSU’s under the Plan subject to the terms of
this agreement;

     NOW, THEREFORE, pursuant to the Plan, the Corporation hereby grants to the Grantee subject to
the terms and conditions of this agreement on the date listed on the Cover Sheet as the “Grant
Date” the number of RSU’s as is stated in the Cover Sheet (the “Award”), subject to the terms and
conditions of the Plan and to the following terms, conditions, limitations and restrictions, and
the Corporation and the Grantee hereby agree as follows:

     1. The Award represents the right to receive shares of National City Corporation Common Stock
(“Common Stock”) subject to the terms and conditions set forth in this agreement. Each RSU
represents a hypothetical share of Common Stock. The RSU’s will be credited to the Grantee in an
unfunded account established on the Corporation’s books for the Grantee (the “Account”).

     2. Upon the vesting date and the lapse of any restrictions on the RSU’s set forth herein and
in the Plan, one share of Common Stock shall be issuable for each RSU on such date, subject to the
terms and provisions of this agreement and the Plan. Thereafter, the Corporation will
transfer such shares of Common Stock to the Grantee upon satisfaction of any required Tax
Withholding Obligations, as defined herein. The Grantee’s Account shall be credited with such
additional RSU’s to reflect any additional shares of equity securities which the Grantee would have
been entitled to receive had the Common Stock represented by RSU’s credited to Grantee’s Account
been issued and outstanding at the time of a share dividend, a merger or reorganization in which
the Corporation is the surviving corporation or any other change in capital structure, and such
additional RSU’s shall also be a part of and shall be referred to as RSU’s and shall be subject to
the vesting date restrictions set forth herein and in the Plan. Grantee shall receive a cash
payment equal to the amount of, and distributed at the same time as, any cash dividend or other
items of similar nature paid on, or issued with respect to, the Corporation’s Common Stock. No
investment credit of any kind with respect to the RSU’s shall be credited to the Grantee’s Account
in any way or be paid to the Grantee.

     3. The RSU’s may not be sold, exchanged, assigned, transferred, pledged or otherwise disposed
of by the Grantee except to the Corporation, except that the Grantee’s rights with respect to the
RSU’s may be transferred by will or pursuant to the laws of descent and distribution. Any attempted
transfer in violation of the provisions of this paragraph shall be void, the purported transferee
shall obtain no rights with respect to such RSU’s and the RSU’s subject to the attempted transfer
shall be forfeited.

     4. The RSU’s described in paragraph 2 of this agreement shall vest on the earliest of (i)
[insert vesting schedule] (ii) upon a Change in Control (iii) [(iii) optional] upon the Grantee’s
retirement at or after the age of 55 with 10 or more years of employment service with the Employers
(iv) [(iv) optional] at the time the Grantee ceases to be an employee of the Employers by reason of
action initiated by the Employers other than a termination for Cause (as hereinafter defined) and
where the Grantee has executed a release, releasing the employers from any liability associated
with or arising out of Grantee’s employment or termination of employment (“Negotiated
Termination”), or (v) the Grantee’s death or Disability. The date of any such Change of Control
shall be determined by the Committee. [include following if include optional (iv) above] For
purposes of this RSU Award Agreement, “Cause” means that prior to any termination, the Grantee
shall have committed: (i) an intentional act of fraud, embezzlement or theft in connection with his
duties or in the course of his employment with Employers; (ii) an intentional wrongful damage to
property of Employers; or (iii) an intentional wrongful disclosure of secret processes or
confidential information of any of the Employers. For purposes of this RSU Award Agreement, no act
or failure to act on the part of the Grantee shall be deemed “intentional” if it was due primarily
to an error in judgement or negligence, but shall be deemed “intentional” only if done or omitted
to be done by the Grantee not in good faith and without reasonable belief that his action or
omission was in the best interest of the Employers.

     5. In addition to any event resulting in forfeiture provided for in this agreement or the
Plan, all of the RSU’s shall be forfeited upon the occurrence, prior to the time prescribed in
paragraph 4 of this agreement for the vesting of the RSU’s, of any of the following events:

     (i) the Grantee ceases to be an Employee for any reason other than death or a Disability;

     (ii) the Committee finds that the Grantee has been convicted of a felony or misdemeanor
involving fraud or dishonesty on the part of the Grantee towards the Employers; or

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NATIONAL CITY CORPORATION

RESTRICTED STOCK UNIT AWARD AGREEMENT

National City Corporation

     (iii) the Grantee breaches the terms of paragraphs 9, 10, 12 or 13, but forfeiture shall
not be the Corporation’s sole remedy for such breach.

In the event of any forfeiture of RSU’s, such RSU’s shall be canceled and deducted from the
Grantee’s Account.

     6. At such time as the RSU’s vest, or prior to any event in connection with the Award that the
Corporation determines may result in any federal, state, local or foreign tax withholding
obligations of the Employers for the benefit of the Grantee (the “Tax Withholding Obligation”), the
Employers’ obligation to issue and deliver to the Grantee Common Stock shall be conditioned upon
the Grantee and the Employers having reached a mutual agreement in accordance with the Plan as to
any Tax Withholding Obligations. To the extent shares of Common Stock that have become issuable
are used to satisfy any Tax Withholding Obligations through a sale of shares as described herein,
such obligations shall be calculated using the Employer’s minimum applicable statutory withholding
rates.

          (i) By sale of shares. Unless Grantee chooses to satisfy the Tax Withholding Obligation by
some other means in accordance with clause (ii) below, Grantee’s acceptance of the Award
constitutes Grantee’s instruction and authorization to the Corporation, and any brokerage firm
determined acceptable to the Corporation, to sell on Grantee’s behalf a whole number of shares of
Common Stock from those shares of Common Stock issuable to Grantee as the Corporation determines to
be appropriate to generate cash proceeds sufficient to satisfy the Tax Withholding Obligation. Such
shares of Common Stock will be sold on the day the Tax Withholding Obligation arises or as soon
thereafter as practicable. Grantee will be responsible for all broker’s fees and other costs of
sale, and Grantee agrees to indemnify and hold the Corporation harmless from any losses, costs,
damages or expenses relating to any such sale. Grantee acknowledges that the Corporation or its
designee is under no obligation to arrange for such sale at any particular price, and that the
proceeds of any such sale may not be sufficient to satisfy Grantee’s Tax Withholding Obligation.
Accordingly, Grantee agrees to pay to the Corporation as soon as practicable, including through
additional payroll withholding, any amount of the Tax Withholding Obligation that is not satisfied
by the sale of shares of Common Stock described above.

          (ii) By check, wire transfer or other means. At any time not less than five (5) business days
before any Tax Withholding Obligation arises, Grantee may elect to satisfy Grantee’s Tax
Withholding Obligation by delivering to the Corporation an amount that the Corporation determines
is sufficient to satisfy the Tax Withholding Obligation by (a) wire transfer to such account as the
Corporation may direct, (b) delivery of a certified check payable to the Corporation or (c) such
other means as the Corporation may establish or permit.

     7. Upon the vesting of the RSU’s in accordance with paragraph 4 of this agreement, the
Corporation shall issue, subject to paragraph 6 hereof, certificates of unrestricted Common Stock
in the name of the Grantee at the time and in the manner provided in the Plan. [optional
additional language] Within the time period prescribed under the Regulations promulgated under
Section 409A of the Internal Revenue Code (“409A”) the Grantee may elect to defer the receipt of
Common Stock until the Grantee’s “separation from service,” as defined by 409A, at which time the
Corporation shall issue the Common Stock to the Grantee. In the event, however, that the Grantee
is a “specified employee” within the meaning of 409A, such issuance shall be delayed for a period
of six months following separation from service.

     8. It is the intention of the parties that this agreement shall not be subject to the Employee
Retirement Income Security Act of 1974, as amended (“ERISA”). Notwithstanding any other provision
of this agreement to the contrary, if a final nonappealable determination has been made by a court
of competent jurisdiction or an opinion of counsel has been rendered to the effect that this
agreement is not exempt from Parts 2, 3 and 4 of Title I of ERISA, all of the RSU’s shall be
forfeited; provided, however, that upon such an occurrence the Committee may, in its discretion,
with respect to all or a portion of the RSU’s, accelerate the vesting of the RSU’s.

     9. Grantee acknowledges and agrees that in the performance of his or her duties of employment
with the Employers he or she may be in contact with customers, potential customers and/or
information about customers or potential customers of the Employers either in person, through the
mails, by telephone or by other electronic means. Grantee also acknowledges and agrees that trade
secrets and Confidential Information of the Employers, as defined in paragraph 9(c) of this
agreement, gained by Grantee during his or her employment with the Employers, have been developed
by the Employers through substantial expenditures of time, effort and financial resources and
constitute valuable and unique property of the Employers. Grantee further understands,
acknowledges and agrees that the foregoing makes it necessary for the protection of the Employers’
businesses that Grantee not divert business or customers from the Employers and that the Grantee
maintain the confidentiality and integrity of the Confidential Information as hereinafter defined:

     (a) Grantee agrees that he or she will not, during his or her employment by the Employers
and for a period of one (1) year after such employment ends, no matter how terminated (the
“Business Protection Period”):

     (i) directly or indirectly solicit, divert, entice or take away any customers,
business, patronage or orders of the Employers with whom the Grantee has had contact,
involvement or responsibility during his or her employment with the Employers, or attempt
to do so, for the sale of any product or service that competes with a product or service
offered by the Employers;

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NATIONAL CITY CORPORATION

RESTRICTED STOCK UNIT AWARD AGREEMENT

National City Corporation

     (ii) directly or indirectly solicit, divert, entice or take away any potential
customer identified, selected or targeted by the Employers with whom the Grantee has had
contact, involvement or responsibility during his or her employment with the Employers, or
attempt to do so, for the sale of any product or service that competes with a product or
service offered by the Employers; or

     (iii) accept or provide assistance in the accepting of (including, but not limited to,
providing any service, information, assistance or other facilitation or other involvement)
business, patronage or orders from customers or any potential customers of the Employers
with whom Grantee has had contact, involvement or responsibility on behalf of any third
party or otherwise for Grantee’s benefit.

Nothing contained in this paragraph 9(a) shall preclude Grantee from accepting employment with a
company, firm or business that competes with the Employers so long as the Grantee’s activities
do not violate the provisions of subparagraphs 9(a)(i), 9(a)(ii) or 9(a)(iii) above or any of
the provisions of paragraphs 9(b) and 9(c) below.

     (b) Grantee agrees that he or she will not directly or indirectly at any time during or
after the term of this agreement solicit, induce, confer or discuss with any employee of the
Employers or attempt to solicit, induce, confer or discuss with any employee of the Employers
the prospect of leaving the employ of the Employers, termination of his or her employment with
the Employers or the subject of employment by some other person or organization. Grantee
further agrees that he or she will not directly or indirectly at any time during or after the
term of this agreement hire or attempt to hire any employee of the Employers.

     (c) Grantee will keep in strict confidence, and will not, directly or indirectly, at any
time during or after the term of this agreement, disclose, furnish, disseminate, make available
or use (except in the course of performing his or her duties of employment with the Employers)
any trade secrets or confidential business or technical information of the Employers or their
customers (the “Confidential Information”), without limitation as to when or how Grantee may
have acquired such information. The Confidential Information shall include the whole or any
portion or phase of any scientific or technical information, design, process, procedure,
formula, pattern, compilation, program, device, method, technique or improvement, or any
business information or plans, financial information, or listing of names, addresses or
telephone numbers, including without limitation, information relating to the Employers’
customers or prospective customers, the Employers’ customer lists, contract information
including terms, pricing and services provided, information received as a result of customer
contacts, the Employers’ products and processing capabilities, methods of operation, business
plans, financials or strategy, and agreements to which the Employers may be a party. The
Confidential Information shall not include information that is or becomes publicly available
other than as a result of disclosure by the Grantee. Grantee specifically acknowledges that the
Confidential Information, whether reduced to writing or maintained in the mind or memory of
Grantee and whether compiled by the Employers and/or Grantee, derives independent economic value
from not being readily known to or ascertainable by proper means by others who can obtain
economic value from its disclosure or use, that reasonable efforts have been put forth by the
Employers to maintain the secrecy of such information, that such information is the sole
property of the Employers and that any retention and use of such information during or after the
Grantee’s employment with the Employers (except in the course of performing his or her duties of
employment with the Employers) shall constitute a misappropriation of the Employers’ trade
secrets. Grantee further agrees that, at the time of termination of his or her employment he or
she will return to the Employers, in good condition, all property of the Employers, including,
without limitation, the Confidential Information. In the event that said items are not so
returned, the Employers shall have the right to charge Grantee for all reasonable damages,
costs, attorney’s fees and other expenses incurred in searching for, taking, removing and/or
recovering such property. If the Grantee is requested or required (either verbally or in
writing) to disclose any Confidential Information, he or she shall promptly notify the Employers
of this request and he or she shall promptly provide the Employers with a copy of the written
request or a description of any verbal request so that the Employers may seek a protective order
or other appropriate remedy. If a protective order or other appropriate remedy is not obtained
in a reasonable period of time, the Grantee may furnish only that portion of the Confidential
Information that he or she is legally required to disclose.

     10. During the Business Protection Period (and for any extended period as provided in
paragraph 11 below) Grantee agrees to communicate the contents of this agreement to any person,
firm, association, or corporation that Grantee intends to be employed by, associated with or
represent.

     11. If it shall be judicially determined that Grantee has violated any of his or her
obligations under paragraph 9 of this agreement, then the period applicable to the obligation which
he or she shall have been determined to have violated shall automatically be extended by a period
of time equal in length to the period during which said violation(s) occurred.

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NATIONAL CITY CORPORATION

RESTRICTED STOCK UNIT AWARD AGREEMENT

National City Corporation

     12. Grantee acknowledges and agrees that the remedy at law available to Employers for
breach of any of his or her obligations under this agreement would be inadequate, and Grantee
agrees and consents that, in addition to any other rights or remedies that Employers may have at
law or in equity, temporary and permanent injunctive relief may be granted in any proceeding that
may be brought to enforce any provision contained in paragraphs 9 through 11 of this agreement,
without the necessity of proof of actual damage.

     13. Grantee acknowledges that Grantee’s obligations under this agreement are reasonable in
the context of the nature of the Employers’ businesses and the competitive injuries likely to be
sustained by the Employers if Grantee violated such obligations. Grantee further acknowledges that
this agreement is made in consideration of, and is adequately supported by, the RSU Award, which
Grantee acknowledges constitutes new and good, valuable and sufficient consideration.

     14. The failure of the Employers to enforce any provision of this agreement shall not be
construed to be a waiver of such provision or of the right of the Employers thereafter to enforce
each and every provision.

     15. Grantee shall not have any right in, to or with respect to any of the shares of Common
Stock (including any voting rights or rights with respect to dividends paid on the Common Stock)
issuable under the Award until the Award is settled by the issuance of such shares of Common Stock
to Grantee.

     16. All provisions, terms, conditions, paragraphs, agreements and covenants (“Provisions”)
contained in this agreement are severable and, in the event any one of them shall be held to be
invalid, this agreement shall be interpreted as if such Provision was not contained herein, and
such determination shall not otherwise affect the validity of any other Provision.

     17. As used in this agreement, Disability means “Disability” as defined in and entitling the
Grantee to initial benefits under the National City Long-term Disability Plan. All other
capitalized terms used but not defined in this agreement shall have the meanings ascribed to such
terms as set forth in the Plan.

     18. By entering into this agreement and accepting the Award, Grantee acknowledges that: (a)
the Plan is discretionary and may be modified, suspended or terminated by the Corporation at any
time as provided in the Plan; (b) the grant of the Award is a one-time benefit and does not create
any contractual or other right to receive future grants of awards or benefits in lieu of awards;
(c) all determinations with respect to any such future grants, including, but not limited to, the
times when awards will be granted, the number of RSU’s subject to each award, the award price, if
any, and the time or times when each award will be settled will be at the sole discretion of the
Corporation; (d) Grantee’s participation in the Plan is voluntary; (e) the value of the Award is an
extraordinary item which is outside the scope of Grantee’s employment contract, if any; (f) the
Award is not part of normal or expected compensation for any purpose, including, without
limitation, for calculating any benefits, severance, resignation, termination, bonuses, pension or
retirement benefits or similar payments; (g) the future value of the Common Stock subject to the
Award is unknown and cannot be predicted with certainty, (h) neither the Plan, the Award nor the
issuance of the shares of Common Stock confers upon Grantee any right to continue in the employ of
(or any other relationship with) the Employers, nor do they limit in any respect the right of the
Employers to terminate Grantee’s employment or other relationship with the Employers at any time,
and furthermore, the grant of the Award will not be interpreted to form an employment contract
between Grantee and the Employers.

     19. The Account established for the Grantee under this agreement is an unfunded bookkeeping
account and is payable only in Common Stock of the Corporation. The Corporation is not required to
physically segregate any cash or securities or establish any separate funds to pay any benefits
under the agreement or the Plan. Nothing in this agreement or the Plan shall be deemed to create a
trust or fund of any kind or any fiduciary relationship.

     20. It is the Grantee’s responsibility to execute this agreement (the “Executed Agreement”)
and deliver the Executed Agreement to the Corporate Human Resources Department at the address
listed on the Cover Sheet. If the Executed Agreement is not received by the Corporate Human
Resources Department within 90 days after the Grant Date, this RSU Award shall terminate and this
agreement shall be null and void.

     21. The Grantee agrees that any action, claim, counterclaim, cross claim, proceeding or suit,
whether at law or in equity, whether sounding in tort, contract or otherwise, at any time arising
under or in connection with this agreement, the administration, enforcement or negotiation of this
agreement, or the performance of any obligations in respect of this agreement (each such action,
claim, counterclaim, cross claim, proceeding or suit, an “Action”), shall be brought exclusively in
a federal court or state court located in the city of Cleveland, Ohio. Each of the parties hereby
unconditionally submit to the jurisdiction of any such court with respect to each such Action and
hereby waive any objection each of the parties may now or hereafter have to the venue of any such
Action brought in any such court.

     22. This agreement shall be construed in accordance with, and governed by, the substantive
laws of the State of Ohio.

     23. For purposes of this agreement, the continuous employ of the Grantee with the Employers
shall not be deemed interrupted, and the Grantee shall not be deemed to have ceased to be an
employee of the Employers by reason of the transfer of his or her employment among the Employers.
Also a leave of absence approved by an Executive Officer for illness, military or governmental
service or other cause shall be considered as employment.

     24. Paragraphs 9 through 14, 16, 21 and 22 shall survive the termination of this agreement.

Page 4EX-10.15

 

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.

 

 

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.

2

 

          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

3

 

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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