8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

July 31, 2015

Date of Report (Date of earliest event reported)

PICO HOLDINGS, INC.

(Exact Name of Registrant as Specified in Its Charter)

California (State or other Jurisdiction of Incorporation or Organization) 33-36383 (Commission File Number) 94-2723335 (IRS Employer Identification No.)

7979 Ivanhoe Avenue, Suite 300

La Jolla, California 92037

(Address of principal executive offices) (Zip code)

Registrant's Telephone Number, Including Area Code: (888) 389-3222

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

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

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

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

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

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

Item 1.01 Entry into a Material Definitive Agreement.

The disclosures set forth below under Item 2.01 are hereby incorporated by reference in this Item 1.01.

Item 1.02 Termination of a Material Definitive Agreement.

The disclosures set forth below under Item 2.01 are hereby incorporated by reference in this Item 1.02.

Item 2.01 Completion of Acquisition or Disposition of Assets.

On July 13, 2015, PICO Northstar Hallock, LLC (the “Company”), an 87.7% owned subsidiary of PICO Holdings, Inc. (“PICO”), entered into an Asset Purchase Agreement (the “Purchase Agreement”) with CHS Hallock, LLC (“CHS Hallock”), a wholly owned subsidiary of CHS Inc. (“CHS”), pursuant to which CHS agreed to purchase substantially all of the assets used in the Company’s agribusiness segment. On July 31, 2015, the Company closed the sale pursuant to the terms of the Purchase Agreement. The Purchase Agreement was previously disclosed by PICO in a Current Report on Form 8-K filed with the Securities and Exchange Commission on July 17, 2015 (the “Prior 8-K”). The foregoing description of the terms of the Purchase Agreement is qualified in its entirety by reference to the Purchase Agreement, a copy of which was attached as Exhibit 2.1 to the Prior 8-K and is incorporated herein by reference.

The selling price was determined primarily as an amount equal to $127 million less an estimated $22 million working capital balance adjustment. The final sale price is subject to change upon final calculation of the working capital balance to be determined within 90 days from the date the sale closed. If the final working capital balance is less than the estimated working capital balance, the Company will pay CHS for the shortfall, however the Company will receive additional proceeds if the final working capital balance is greater than the estimated working capital balance. After repayment of $80.9 million of outstanding debt and $5.9 million in selling and other related costs of the sale, the Company received net proceeds of $18.4 million on the date of close.

From these net proceeds, the Company was required to deposit $10.2 million in two separate escrow accounts to secure certain obligations under the Purchase Agreement. The first escrow account required $6 million to secure general indemnification obligations and for refund of any difference in the final working capital balance. Any balance remaining after payment of indemnification claims will be released 18 months from the closing date of the sale. The second escrow account required $4.2 million related to proposed amendments to two environmental permits for plant operations that are in process, but were not received prior to the closing date of the sale. The first matter relates to waste water issues at the plant and required a deposit of $1.8 million and the second matter relates to plant air quality issues that required a $2.4 million deposit. In the event that one or both permit amendments are not approved by the relevant regulatory authorities, the deposit in the operations escrow for any such non-approved amendment will be paid to CHS in satisfaction of the matter. Conversely, if one or both of the amendments are approved, the entire deposit will be released to the Company.

On July 31, 2015, PICO issued a press release announcing the closing of the sale. A copy of the press release is attached to this report as Exhibit 99.2.

As part of the closing of the sale, PICO entered into a Guarantee with CHS Hallock whereby PICO guaranteed up to $8 million for any indemnification claims in excess of $6 million of the purchase price that was deposited in escrow to secure the Company’s general indemnification obligations under the Purchase Agreement (the “Guaranty”). The foregoing description of the terms of the Guaranty is qualified in its entirety by reference to the Guaranty, a copy of which is attached to this report as Exhibit 99.3 and is incorporated herein by reference.

As part of the closing of the sale, PICO also entered into a Restrictive Covenant Agreement with CHS Hallock which restricts the Company's and PICO's activities in the processing of canola seeds and refining of canola oils for three years (the “Restrictive Agreement”). The foregoing description of the terms of the Restrictive Agreement qualified in its entirety by reference to the Guaranty, a copy of which is attached to this report as Exhibit 99.4 and is incorporated herein by reference.

As part of the closing of the sale, the Company repaid $80.9 million of outstanding debt, which was borrowed under a Credit Agreement, dated as of June 13, 2011, as amended, among the Company, PICO Northstar, LLC, the lenders from time to time party thereto and ING Capital LLC (the “Credit Agreement”), that included a senior secured, multi-draw term loan used to fund the purchase and construction of the agribusiness operational assets and a senior secured working capital loan used to fund the Company's working capital needs. After giving effect to the repayment, the Company was released from all liabilities and obligations under the Credit Agreement and the Credit Agreement was terminated.

Forward-Looking Statements

Statements contained in this Current Report on Form 8-K regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties associated with the final sales price and the Company's proceeds from the sale of the Purchased Assets. Risks are described more fully in PICO's filings with the Securities and Exchange Commission, including without limitation PICO’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements contained in this Current Report on Form 8-K speak only as of the date on which they were made. PICO undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

Item 9.01 Financial Statements and Exhibits.

(b)    Pro Forma Financial Information.

The required unaudited pro forma condensed consolidated financial information is included as Exhibit 99.1 hereto and incorporated herein by reference.

(d)    Exhibits

Exhibit Number	Description
99.1	Pro Forma Consolidated Financial Information (Unaudited).
99.2	Press Release dated July 31, 2015.
99.3	Guaranty, dated July 31, 2015, between PICO Holdings, Inc. and CHS Hallock, LLC.
99.4	Restrictive Covenant Agreement, dated July 31, 2015, between CHS Hallock, LLC and PICO Holdings, Inc.

SIGNATURE

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

Date: August 6, 2015

PICO HOLDINGS, INC.

By:	/s/ Maxim C.W. Webb
Name:	Maxim C. W. Webb
Title:	Executive Vice President and Chief Financial Officer

EXHIBIT INDEX

Exhibit Number	Description
99.1	Pro Forma Consolidated Financial Information (Unaudited).
99.2	Press Release dated July 31, 2015.
99.3	Guaranty, dated July 31, 2015, between PICO Holdings, Inc. and CHS Hallock, LLC.
99.4	Restrictive Covenant Agreement, dated July 31, 2015, between CHS Hallock, LLC and PICO Holdings, Inc.

EX-99.1

PICO Holdings, Inc. and Subsidiaries

Introduction to Pro Forma Consolidated Financial Information

(Unaudited)

PICO Holdings, Inc. (the "Company") conducted its agribusiness operations through PICO Northstar Hallock, LLC ("Northstar"), which was an 87.7% owned subsidiary. On July 31, 2015, the Company closed on the sale of substantially all of the certain assets and liabilities of Northstar.

The accompanying unaudited pro forma consolidated statement of operations and comprehensive loss for three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012 give effect to the disposition of certain assets and liabilities of Northstar as if the sale had been consummated at the beginning of each period presented. The accompanying unaudited pro forma condensed consolidated balance sheet as of March 31, 2015 gives effect to the disposition of certain assets and liabilities of Northstar as if it had been consummated as of March 31, 2015.

The historical financial information on which the pro forma financial statements are based is included in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2015 and the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015. The pro forma consolidated financial statements and the notes thereto should be read in conjunction with these historical consolidated financial statements.

The unaudited pro forma consolidated financial statements are presented for illustrative purposes only and are subject to a number of assumptions which may not be indicative of the results of operations that would have occurred had the disposition been completed at the dates indicated or what the results will be for any future periods. The unaudited pro forma consolidated statements of operations and comprehensive loss do not include transaction costs or the loss that the Company expects to recognize on the sale of certain assets and liabilities.

PICO Holdings, Inc. and Subsidiaries Pro Forma Condensed Consolidated Balance Sheets - Unaudited (In thousands, except par value)
	March 31, 2015
	As Reported			Pro Forma Adjustments				Pro Forma As Adjusted
Assets
Cash and cash equivalents	$	47,971		$	18,151		(A)	$	66,122
Investments ($24,155 measured at fair value at March 31, 2015)	50,973							50,973
Real estate and tangible water assets, net	397,718			(3,539		)	(B)	394,179
Property, plant and equipment, net	118,802			(114,454		)	(B)	4,348
Intangible assets	128,139							128,139
Other assets	38,916			(19,998		)	(B)	18,918
Total assets	$	782,519		$	(119,840	)		$	662,679
Liabilities and shareholders’ equity
Debt	$	223,328		$	(81,195	)	(C)	$	142,133
Accounts payable and accrued expenses	25,094			(3,924		)	(B)	21,170
Deferred compensation	24,954							24,954
Other liabilities	16,355			(2,500		)	(B)	13,855
Total liabilities	289,731			(87,619		)		202,112
Commitments and contingencies
Common stock, $0.001 par value; authorized 100,000 shares, 23,083 issued and 23,005 outstanding at March 31, 2015	23							23
Additional paid-in capital	492,495							492,495
Accumulated deficit	(86,333		)	(31,537		)	(D)	(117,870		)
Accumulated other comprehensive income	4,675							4,675
Treasury stock, at cost (common shares: 78 at March 31, 2015)	(1,413		)					(1,413		)
Total PICO Holdings, Inc. shareholders’ equity	409,447			(31,537		)		377,910
Noncontrolling interest in subsidiaries	83,341			(684		)	(E)	82,657
Total equity	492,788			(32,221		)		460,567
Total liabilities and equity	$	782,519		$	(119,840	)		$	662,679

PICO Holdings, Inc. and Subsidiaries Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Loss - Unaudited (In thousands, except per share data)
	Three Months Ended March 31, 2015
	As Reported			Pro Forma Adjustments				Pro Forma As Adjusted
Revenues and other income:
Sale of real estate and water assets	$	43,610						$	43,610
Sale of canola oil and meal	39,432			(39,432		)	(E)	—
Other income	1,608			106			(E)	1,714
Total revenues and other income	84,650			(39,326		)		45,324
Cost of sales:
Cost of real estate and water assets sold	36,333							36,333
Cost of canola oil and meal sold	42,893			(42,893		)	(E)	—
Total cost of sales	79,226			(42,893		)		36,333
Expenses:
Operating and other costs	20,049			(3,532		)	(E)	16,517
Impairment loss on intangible and long-lived assets	2,964							2,964
Interest	1,439			(1,439		)	(E)	—
Depreciation and amortization	537			(46		)	(E)	491
Total costs and expenses	104,215			(47,910		)		56,305
Loss before income taxes and equity in loss of unconsolidated affiliates	(19,565		)	8,584				(10,981		)
Benefit for federal, foreign, and state income taxes	(239		)					(239		)
Equity in loss of unconsolidated affiliate	(483		)					(483		)
Net loss	(19,809		)	8,584				(11,225		)
Net loss attributable to noncontrolling interests	2,984			(1,062		)	(E)	1,922
Net loss attributable to PICO Holdings, Inc.	$	(16,825	)	$	7,522			$	(9,303	)
Other comprehensive loss:
Net loss	$	(19,809	)	$	8,584			$	(11,225	)
Other comprehensive income (loss), net of tax:
Unrealized loss on securities, net of deferred income tax and reclassification adjustments	(51		)					(51		)
Foreign currency translation	9							9
Total other comprehensive loss, net of tax	(42		)	—				(42		)
Comprehensive loss	(19,851		)	8,584				(11,267		)
Comprehensive loss attributable to noncontrolling interests	2,984			(1,062		)	(E)	1,922
Comprehensive loss attributable to PICO Holdings, Inc.	$	(16,867	)	$	7,522			$	(9,345	)
Net loss per common share – basic and diluted:
Net loss per common share	$	(0.73	)	$	0.33			$	(0.40	)
Weighted average shares outstanding	23,005			23,005				23,005

PICO Holdings, Inc. and Subsidiaries Pro Forma Consolidated Statements of Operations and Comprehensive Loss - Unaudited (In thousands, except per share data)
	December 31, 2014
	As Reported			Pro Forma Adjustments				Pro Forma As Adjusted
Revenues and other income:
Sale of real estate and water assets	$	192,368						$	192,368
Sale of canola oil and meal	163,855			(163,855		)	(E)	—
Other income (loss), net	(1,327		)	1,447			(E)	120
Total revenues and other income	354,896			(162,408		)		192,488
Cost of sales:
Cost of real estate and water assets sold	158,200							158,200
Cost of canola oil and meal sold	156,668			(156,668		)	(E)	—
Total cost of sales	314,868			(156,668		)		158,200
Expenses:
Operating and other costs	78,990			(13,861		)	(E)	65,129
Impairment loss on intangible and long-lived assets	13,084							13,084
Interest	5,764			(5,536		)	(E)	228
Depreciation and amortization	3,233			(179		)	(E)	3,054
Total costs and expenses	415,939			(176,244		)		239,695
Loss before income taxes and equity in loss of unconsolidated affiliates	(61,043		)	13,836				(47,207		)
Benefit for federal, foreign, and state income taxes	(3,514		)					(3,514		)
Equity in loss of unconsolidated affiliate	(2,076		)					(2,076		)
Net loss	(59,605		)	13,836				(45,769		)
Net loss attributable to noncontrolling interests	7,180			(1,718		)	(E)	5,462
Net loss attributable to PICO Holdings, Inc.	$	(52,425	)	$	12,118			$	(40,307	)
Other comprehensive loss:
Net loss	$	(59,605	)	$	13,836			$	(45,769	)
Other comprehensive income (loss), net of tax:
Unrealized loss on securities, net of deferred income tax and reclassification adjustments	(2,093		)					(2,093		)
Foreign currency translation	6,578							6,578
Total other comprehensive loss, net of tax	4,485			—				4,485
Comprehensive loss	(55,120		)	13,836				(41,284		)
Comprehensive loss attributable to noncontrolling interests	7,180			(1,718		)	(E)	5,462
Comprehensive loss attributable to PICO Holdings, Inc.	$	(47,940	)	$	12,118			$	(35,822	)
Net loss per common share – basic and diluted:
Net loss per common share	$	(2.30	)	$	0.53			$	(1.77	)
Weighted average shares outstanding	22,802			22,802				22,802

PICO Holdings, Inc. and Subsidiaries Pro Forma Consolidated Statements of Operations and Comprehensive Loss - Unaudited (In thousands, except per share data)
	December 31, 2013
	As Reported			Pro Forma Adjustments				Pro Forma As Adjusted
Revenues and other income:
Sale of real estate and water assets	$	116,776						$	116,776
Sale of canola oil and meal	184,139			(184,139		)	(E)	—
Sale of software	13,649							13,649
Other income	30,265			(509		)	(E)	29,756
Total revenues and other income	344,829			(184,648		)		160,181
Cost of sales:
Cost of real estate and water assets sold	87,457							87,457
Cost of canola oil and meal sold	190,700			(190,700		)	(E)	—
Cost of software sold	3,033							3,033
Total cost of sales	281,190			(190,700		)		90,490
Expenses:
Operating and other costs	78,015			(10,967		)	(E)	67,048
Impairment loss on intangible and long-lived assets	1,410							1,410
Interest	6,881			(5,746		)	(E)	1,135
Depreciation and amortization	2,765			(146		)	(E)	2,619
Total costs and expenses	370,261			(207,559		)		162,702
Loss before income taxes and equity in loss of unconsolidated affiliates	(25,432		)	22,911				(2,521		)
Provision for federal, foreign, and state income taxes	3,197							3,197
Equity in loss of unconsolidated affiliate	(565		)					(565		)
Net loss	(29,194		)	22,911				(6,283		)
Net loss attributable to noncontrolling interests	6,896			(2,905		)	(E)	3,991
Net loss attributable to PICO Holdings, Inc.	$	(22,298	)	$	20,006			$	(2,292	)
Other comprehensive loss:
Net loss	$	(29,194	)	$	22,911			$	(6,283	)
Other comprehensive income (loss), net of tax:
Unrealized gain on securities, net of deferred income tax and reclassification adjustments	2,411							2,411
Foreign currency translation	(165		)					(165		)
Total other comprehensive loss, net of tax	2,246			—				2,246
Comprehensive loss	(26,948		)	22,911				(4,037		)
Comprehensive loss attributable to noncontrolling interests	6,896			(2,905		)	(E)	3,991
Comprehensive (income) loss attributable to PICO Holdings, Inc.	$	(20,052	)	$	20,006			$	(46	)
Net loss per common share – basic and diluted:
Net loss per common share	$	(0.98	)	$	0.88			$	(0.10	)
Weighted average shares outstanding	22,742			22,742				22,742

PICO Holdings, Inc. and Subsidiaries Pro Forma Consolidated Statements of Operations and Comprehensive Loss - Unaudited (In thousands, except per share data)
	December 31, 2012
	As Reported			Pro Forma Adjustments				Pro Forma As Adjusted
Revenues and other income:
Sale of real estate and water assets	$	59,020						$	59,020
Sale of canola oil and meal	85,255			(85,255		)	(E)	—
Other income	5,806			(50		)	(E)	5,756
Total revenues and other income	150,081			(85,305		)		64,776
Cost of sales:
Cost of real estate and water assets sold	42,142							42,142
Cost of canola oil and meal sold	84,831			(84,831		)	(E)	—
Total cost of sales	126,973			(84,831		)		42,142
Expenses:
Operating and other costs	46,566			(9,705		)	(E)	36,861
Interest	4,153			(2,654		)	(E)	1,499
Depreciation and amortization	1,967			(284		)	(E)	1,683
Total costs and expenses	179,659			(97,474		)		82,185
Loss from continuing operations before income taxes	(29,578		)	12,169				(17,409		)
Benefit for federal, foreign, and state income taxes	(1,069		)					(1,069		)
Loss from continuing operations	(28,509		)	12,169				(16,340		)
Loss from discontinued operations, net of income taxes	(3,143		)					(3,143		)
Net loss	(31,652		)	12,169				(19,483		)
Net loss attributable to noncontrolling interests	2,579			(1,664		)	(E)	915
Net loss attributable to PICO Holdings, Inc.	$	(29,073	)	$	10,505			$	(18,568	)
Other comprehensive loss:
Net loss	$	(31,652	)	$	12,169			$	(19,483	)
Other comprehensive income (loss), net of tax:
Unrealized loss on securities, net of deferred income tax and reclassification adjustments	(226		)					(226		)
Foreign currency translation	(829		)					(829		)
Total other comprehensive loss, net of tax	(1,055		)	—				(1,055		)
Comprehensive loss	(32,707		)	12,169				(20,538		)
Comprehensive loss attributable to noncontrolling interests	2,579			(1,664		)	(E)	915
Comprehensive loss attributable to PICO Holdings, Inc.	$	(30,128	)	$	10,505			$	(19,623	)
Net loss per common share – basic and diluted:
Loss from continuing operations	$	(1.14	)	$	0.46			$	(0.68	)
Loss from discontinued operations	(0.14		)	—				(0.14		)
Net loss per common share	$	(1.28	)	$	0.46			$	(0.82	)
Weighted average shares outstanding	22,802			22,802				22,802

PICO Holdings, Inc. and Subsidiaries

Notes to the Pro Forma Consolidated Financial Statements

(Unaudited)

1. Basis of Presentation

The preparation of the unaudited pro forma condensed consolidated financial information is based on financial statements prepared in accordance with accounting principles generally accepted in the United States of America. The pro forma adjustments reflected in the accompanying unaudited pro forma consolidated financial information reflects estimates and assumptions that the Company’s management believes to be reasonable. Actual results may differ from those estimates. Pro forma adjustments related to the unaudited pro forma financial information presented below assume the sale of substantially all of the certain assets and liabilities of Northstar was consummated on the date of the most recent period presented for the consolidated balance and at the beginning of the fiscal year presented for the consolidated statement of operations and comprehensive loss. The financial statements include adjustments which give effect to events that are (i) directly attributable to the sale, (ii) expected to have a continuing impact on the Company, and (iii) factually supportable. In addition, the consolidated balance sheet includes adjustments that are nonrecurring, such as transaction costs and the loss on the transaction.

The unaudited pro forma condensed consolidated financial information is provided for illustrative purposes only and does not purport to represent what the actual results of operations would have been had the transactions occurred on the respective dates assumed, nor is it necessarily indicative of the Company’s future operating results. This unaudited pro forma consolidated financial information and the accompanying unaudited notes should be read in conjunction with the Company’s condensed consolidated financial statements and notes thereto included in the Company’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 11, 2015 and the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 16, 2015.

2. Unaudited Pro Forma Condensed Consolidated Balance Sheet

The unaudited pro forma condensed consolidated balance sheet at March 31, 2015 reflects the following pro forma adjustments:

(A) Reflects the pro forma impact of the receipt of net cash proceeds from the sale equal to $127 million primarily less the following: (i) a $22 million working capital balance adjustment, (ii) $5.9 million in selling and transaction costs, and (ii) repayment of $81.2 million in debt associated with Northstar's assets.

(B) Adjustment to reflect the assets and liabilities sold.

(C) Adjustment reflects the repayment of $81.2 million in debt in conjunction with the sale of Northstar's assets.

(D) Represents the estimated after tax-loss from the sale as if the transaction closed on the balance sheet date.

3. Unaudited Pro Forma Condensed Consolidated Statements of Operations and Comprehensive Loss

The unaudited pro forma condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2015 and the years ended December 31, 2014, 2013 and 2012 reflect the following pro forma adjustments:

(E) Amount eliminates the revenues, other income or loss, cost of goods sold, operating expenses and noncontrolling interest of Northstar.

EX-99.2

NEWS RELEASE

FORIMMEDIATE RELEASE

PICO HOLDINGS, INC. ANNOUNCES THE CLOSING OF THE SALE OF SUBSTANTIALLY

ALL OF THE ASSETS OF MAJORITY OWNED PICO NORTHSTAR HALLOCK

(LA JOLLA, CALIFORNIA) - July 31, 2015 - PICO Holdings, Inc. (GLOBENEWSWIRE)

PICO Holdings, Inc. (NASDAQ: PICO) announced today the closing of its previously announced sale of substantially all of the assets of its majority owned canola processing subsidiary, PICO Northstar Hallock, LLC (“PICO Northstar”), to CHS Inc., a farmer-owned cooperative and a global energy, grains and foods company.

ABOUT PICO HOLDINGS

PICO Holdings, Inc. is a diversified holding company. We seek to acquire, build, and operate businesses where significant value can be created from the development of unique assets, and to acquire businesses which we identify as undervalued and where our management participation in operations can aid in the recognition of the business's fair value, as well as create additional value. Our objective is to maximize long-term shareholder value.

OTHER INFORMATION

The PICO Holdings, Inc. logo is available at:

http://www.globenewswire.com/newsroom/prs/?pkgid=5044

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Statements regarding matters that are not historical facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Because such statements are subject to risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Among the factors that could cause actual results to differ materially from those indicated in the forward-looking statements are risks and uncertainties associated with the closing of the sale of the Purchase Assets. Risks are described more fully in the Company’s filings with the Securities and Exchange Commission, including without limitation the Company’s most recent Annual Report on Form 10-K, Quarterly Report on Form 10-Q and other documents subsequently filed with or furnished to the Securities and Exchange Commission. All forward-looking statements speak only as of the date on which they were made. The Company undertakes no obligation to update such statements to reflect events that occur or circumstances that exist after the date on which they were made.

This news release was distributed by GlobeNewswire, www.globenewswire.com.

CONTACT:    PICO Holdings, Inc.

Ted Mitchell

858-964-0253

# # # # #

EX-99.3

GUARANTY

This GUARANTY dated as of the 31st day of July, 2015 (this “Guaranty”) ismade by PICO HOLDINGS, INC., a California corporation (“Guarantor”), infavor of CHS Hallock, LLC, a Minnesota limited liability company (“Beneficiary”).

Recitals

WHEREAS, Beneficiary and PICO Northstar Hallock, LLC, a Delaware limited liability company (“Seller”), have entered into that certain Asset Purchase Agreement dated as of the 13th day of July, 2015 (as amended, modified or supplemented from time to time, the “APA”), pursuant to which Seller has agreed to sell and assign and Beneficiary has agreed to purchase and assume substantially all of the Assets of Seller, including the Hallock Plant, and certain specifically enumerated Liabilities of Seller (all as defined and set forth in the APA), relating to Seller’s business of processing canola seeds and refining canola oils at the Hallock Plant. Terms used, but not defined, herein shall have the meanings set forth for such terms in the APA.

WHEREAS, Guarantor is the indirect parent and indirect majority member of Seller, and desires to guarantee for the benefit of Beneficiary the payment of certain amounts due by Seller, in each case as specified in, and when due under, Article VIII of the APA for the duration of the term of this Guaranty.

WHEREAS, pursuant to the terms of an Escrow Agreement executed on the Closing Date by Beneficiary, Seller and U.S. Bank National Association (the “Escrow Agent”), Beneficiary has deposited a portion of the Purchase Price, in the amount of $6,000,000 (the “Indemnification Escrow Amount”), with the Escrow Agent, to (a) provide a source of funds for the Adjustment Amount and Final Derivative Adjustment if payable by Seller to Buyer pursuant to Section 3.5.2(d) or Section 3.5.2(e) of the APA, respectively, and (b) reimburse Beneficiary for Losses relating to general indemnification matters, including breaches of or inaccuracies in representations and warranties (including those relating to environmental matters), and to those other indemnification matters identified in Section 8.2 of the APA, in each case, that have been either mutually agreed to by the parties or finally determined pursuant to Article VIII of the APA, but specifically excluding Losses that are covered exclusively by the Operations Escrow Amount (such Losses, the “General Indemnified Losses”).

WHEREAS, Seller’s maximum liability to the Buyer Indemnified Parties for Losses under Section 8.2(a) of the APA (other than with respect to Seller Fundamental Representations and the representations and warranties in Section 4.18 of the APA) is limited to the Indemnity Cap.

WHEREAS, in order to induce Beneficiary to enter into the APA, Beneficiary has requested that Guarantor guarantee the payment of General Indemnified Losses, if any, to the extent that the Indemnification Escrow Amount then held in the Escrow Account is fully extinguished or insufficient to pay any remaining sums due and owing by Seller to any Buyer Indemnified Party (but subject to the Guaranty Cap specified below), and Guarantor has agreed to do so by executing and delivering this Guaranty.

NOW THEREFORE, Guarantor hereby agrees as follows:

Section 1.Guarantee.

(a)During the period from the date hereof until the applicable termination time specified in Section 5, Guarantor hereby irrevocably and unconditionally guarantees to Beneficiary the satisfaction of the payment obligations of Seller under Article VIII of the APA relating to the General Indemnified Losses, as and when due, but only to the extent that the Indemnification Escrow Amount then held in the Escrow Account is fully extinguished or insufficient to pay any remaining sums due and owing by Seller to any Buyer Indemnified Party, and otherwise subject to the limitations and conditions set forth in this Guaranty (such obligations referred to herein as the “Guaranteed Obligations”). Guarantor’s liability with respect to the Guaranteed Obligations will not exceed $8,000,000, plus any amounts payable by Guarantor pursuant to Section 6(k) hereof, in the aggregate (collectively, the “Guaranty Cap”).

Guarantor hereby agrees that, except as specifically provided herein (including the limitations and conditions set forth in this Section 1(a)), and to the fullest extent permitted by applicable law, its performance of the Guaranteed Obligations shall not be conditional on (1) the validity or enforceability of the APA or the Guaranteed Obligations, (2) the taking of any action by Beneficiary to enforce the same or (3) any other circumstances; provided, however, that Guarantor and Beneficiary explicitly acknowledge and agree, for the avoidance of doubt, that nothing in this Guaranty is intended to, or will, override or supersede the requirements of Article VIII of the APA.

Notwithstanding anything to the contrary contained herein, it is a condition of Guarantor’s obligations hereunder that no claim for General Indemnified Losses may be made under this Guaranty until such claim first has been made to the Escrow Agent against the balance of the Indemnification Escrow Amount then held in the Escrow Account under the Escrow Agreement and such claim has either been (i) rejected in full in writing by the Escrow Agent because the balance of the Indemnification Escrow Amount then held in the Escrow Account has been fully extinguished, or (ii) rejected in part in writing by the Escrow Agent because the balance of the Indemnification Escrow Amount then held in the Escrow Account was insufficient to fully cover the General Indemnified Losses for which such claim was made and, after paying the balance of the Indemnification Escrow Amount then held in the Escrow Account to the applicable Buyer Indemnified Party for such General Indemnified Losses, a sum will remain due and owing by Seller to such Buyer Indemnified Party (in each case, with a copy of such written rejection submitted by Beneficiary to Guarantor along with any such claim for General Indemnified Losses).

(b)This Guaranty shall continue to be effective or be automatically reinstated, as the case may be, if and to the extent that at any time any performance of all or any portion of the Guaranteed Obligations or any amount owed to Beneficiary by Guarantor hereunder is rescinded or must otherwise be returned by Beneficiary upon the insolvency, bankruptcy or reorganization of Guarantor or Seller.

(c)This is a continuing and irrevocable guaranty of the Guaranteed Obligations, including as affected by any amendment or modification of the APA.

(d)Subject to the conditions of Section 1(a), a separate action may be brought by Beneficiary and prosecuted against Guarantor, whether or not any action is brought or prosecuted against Seller or whether Seller is joined to any such action.

(e)Without notice of demand and without affecting Guarantor’s liability hereunder, from time to time:

(i)Guarantor authorizes Beneficiary and Seller to renew, compromise, extend, accelerate or otherwise change the terms of the APA; and

(ii)Guarantor authorizes Beneficiary to take and hold security for the payment of the Guaranteed Obligations, and exchange, enforce, waive or release any such security or any part thereof, and apply any such security and direct the order or manner of sale thereof as Beneficiary in its commercially reasonable discretion may determine.

(f)Except as set forth in the third paragraph of Section 1(a), Guarantor waives the right to (i) require Beneficiary to proceed against or exhaust any security granted to Beneficiary by Seller or by any other person, or to pursue any other remedy in Beneficiary’s power whatsoever, and (ii) have the property of Seller first applied to discharge of the Guaranteed Obligations. Beneficiary may, at its election, exercise any right or remedy it may have against Seller or any security held by Beneficiary, including, without limitation, the right to foreclose upon any such security by judicial or nonjudicial sale, without affecting or impairing in any way the liability of Guarantor hereunder, except to the extent the Guaranteed Obligations have been fulfilled. Guarantor waives any defense arising out of the absence, impairment or loss of any right of reimbursement, contribution or subrogation or any other right or remedy of Guarantor against Seller, or any such security, whether resulting from such election by Beneficiary or otherwise. In addition, Guarantor hereby waives, to the fullest extent permitted by law and until all of the Guaranteed Obligations has been fully performed, all rights and benefits which might otherwise be available to Guarantor with respect to the APA and this Guaranty under applicable Minnesota law of suretyship and guarantor^’s defenses generally.

(g)Provided that all of the Guaranteed Obligations have beenpaid and performed in full or this Guaranty has otherwise expired pursuant to Section 5 hereof, Guarantor shall be subrogated to all rights of Beneficiary in respect of any amounts paid by Guarantor pursuant to the provisions of this Guaranty. Except with respect to the delivery of the written rejection by the Escrow Agent provided for in the third paragraph of Section 1(a), Guarantor waives all presentments, demands for performance, notices of nonperformance, protests, notices of protest, notices of dishonor, notices of default or delinquency, notice of acceleration, notice of nonpayment, and notices of acceptance of this Guaranty. In addition, Guarantor waives any defense based upon (a) any amendment, modification or extension of the obligations hereby guaranteed and (b) any assertion or claim that the automatic stay provided by 11 U.S.C. §362 (arising upon the voluntary or involuntary bankruptcy proceeding of Seller or any permitted assignee), or any other stay provided under any other debtor relief law (whether statutory, common law, case law or otherwise) of any jurisdiction whatsoever, now or hereafter in effect, which may be or become applicable, shall operate or be interpreted to stay, enjoin, condition, reduce or impair the ability of Beneficiary to enforce any rights, whether now existing or hereafter acquired, which Beneficiary may have against Guarantor related to the Guaranteed Obligations. Guarantor assumes the responsibility of being and keeping informed of the financial condition of Seller and all of other circumstances bearing upon the risk of non-performance of the Guaranteed Obligations which diligent inquiry would reveal, and agrees that Beneficiary shall have no duty to advise Guarantor of information known to Beneficiary regarding such condition or any such circumstances.

(h)Except as otherwise provided in Section 1(a) and in Section 3, the liability of Guarantor under this Guaranty shall be absolute, unconditional and irrevocable (other than as a result of the performance of and/or compliance with the terms of such Guaranteed Obligations by Guarantor and/or Seller, or the written waiver, settlement and/or discharge of the Guaranteed Obligations by Beneficiary or the termination of this Guaranty in accordance with its terms) irrespective of the following:

(i)the lack of power or authority of Guarantor to execute and deliver this Guaranty or Seller to execute and deliver the APA;

(ii)the existence or continuance of Beneficiary, Seller or anyaffiliate thereof as a legal entity;

(iii)the consolidation or merger of Seller or any affiliate with or into any other corporation or other person, or the sale, lease or other disposition by Seller or any affiliate of all or substantially all of its assets to any other business entity, whether or not effected in compliance with the provisions of the APA;

(iv)the bankruptcy or insolvency of Seller or any affiliate, the admission in writing by Seller or any affiliate or its inability to pay its debts as they mature, or its making of a general assignment for the benefit of, or entering into a composition or arrangement with creditors; and

(v)any act, failure to act, delay or omission whatsoever on the part of Seller, other than the performance of and/or compliance with the terms of the Guaranteed Obligations, or any failure to give Guarantor notice of default in the making of any payment due and payable under this Guaranty or the APA.

(i)It is not and shall not be necessary for Beneficiary to inquire into the powers of Seller, or the managers, officers, directors, partners, trustees or agents acting or purporting to act on Seller’s behalf, and any Guaranteed Obligations made or created in reliance upon the professed exercise of such powers shall be guaranteed hereunder.

Section 2.Undertakings.

Guarantor hereby unconditionally undertakes to and on behalf of Beneficiary, until the earlier to occur of (a) the performance in full of the Guaranteed Obligations and (b) the termination of this Guaranty in accordance with its terms, that Guarantor will not cause, and will cause its subsidiaries not to cause, Seller (i) to file a voluntary petition in bankruptcy, or a voluntary petition or an answer seeking reorganization or liquidation in a proceeding under any bankruptcy laws or an answer admitting the material allegations of petition filed against Seller in any such proceeding, or (ii) to seek relief, by voluntary petition, answer or consent, under the provisions of any other bankruptcy or other extension or adjustment with creditors, or (iii) to adopt a resolution of liquidation; except in the case of clauses (i) or (ii), above, to the extent that Guarantor receives a written opinion from a nationally recognized law firm advising Guarantor that Guarantor and/or any one or more of its subsidiaries is required in the exercise of its fiduciary or other legal obligations to make such filing or seek such relief, as the case may be.

Section 3.Certain Limitations.

Notwithstanding anything in Sections 1 or 2 hereof to the contrary:

(a)Guarantor shall not be required by this Guaranty to perform any Guaranteed Obligations or undertaking if the performance thereof is illegal or impossible in the place where performance is required; and

(b)Guarantor shall not be required to perform any Guaranteed Obligations while the performance of such Guaranteed Obligations is being disputed in good faith by Seller in accordance with the dispute resolution provisions in the APA.

Section 4.Representations and Warranties of Guarantor.

Guarantor represents and warrants as follows, which representations and warranties shall survive the execution of this Guaranty:

(a)Organization and Authority; Binding Obligations. Guarantor is a corporation duly organized and validly existing under the laws of the State of California. It is not subject to any current orders for winding up, or appointment of a receiver or liquidator or to any notice of any proposed deregistration. Guarantor has all necessary power and authority to execute and deliver this Guaranty, to perform its obligations hereunder and to consummate the transactions contemplated hereby. This Guaranty has been duly authorized, executed and delivered by Guarantor and constitutes the valid and binding obligation of Guarantor, enforceable against Guarantor in accordance with its terms, subject, as to enforceability of remedies, to limitations imposed by bankruptcy, insolvency, reorganization, moratorium or other similar laws relating to or affecting the enforcement of creditors’ rights generally and to general principles of equity.

(b)Non-Contravention; Consents. The execution and delivery by Guarantor of this Guaranty and the consummation of the transactions contemplated hereby do not conflict with or result in a breach of, or require any consent under, the organizational documents of Guarantor, or any applicable law or regulation, or any order, writ, injunction or decree of any court or governmental authority or agency, or any agreement or instrument to which Guarantor is a party or by which it is bound or to which it is subject, or constitute a default under any such agreement or instrument, or result in the creation of imposition of any lien, charge, claim or encumbrance upon any of the revenues or assets of Guarantor pursuant to the terms of any such agreement or instrument. No consent, action, approval or authorization of, or registration, declaration or filing with, any governmental authority or other third party is required to be obtained by Guarantor to authorize the execution, delivery or performance by Guarantor of this Guaranty or for the validity or enforceability hereof.

(c)No Actions, Suits or Proceedings. There are no pending or, to Guarantor’s knowledge, threatened actions, suits or proceedings against Guarantor or affecting it or its properties before or by any court or administrative agency which, if adversely determined, would adversely affect its ability to perform the Guaranteed Obligations.

Section 5.Termination.

Subject to Section 1(b) hereof, this Guaranty shall expire at 5:00 p.m., Central Time, on the date that is the earlier of (a) the 18-month anniversary of the Closing Date and (b) 30 calendar days after the termination of the APA, after which time, subject to the following parenthetical, no claim may be made against Guarantor hereunder (but without prejudice to any outstanding claim validly made against Guarantor hereunder at or prior to such time or any outstanding claim validly made against Seller in accordance with the APA at or prior to such time, which is subsequently made against Guarantor, whether before, at or within a commercially reasonable time after (making allowance for the time required to finally resolve such claim against Seller) such time, due to Seller having failed to fully satisfy such claim because the balance of the Indemnification Escrow Amount then held in the Escrow Account was insufficient to fully cover the General Indemnified Losses for which such claim was made); provided, however, that with respect to claims for General Indemnified Losses based on a breach of or inaccuracy in Section 4.15 of the APA only, the applicable expiry time of this Guaranty shall be 5:00 p.m., Central Time, on the fifth anniversary of the Closing Date (but without prejudice to any outstanding claim for such breach of or inaccuracy in Section 4.15 of the APA validly made against Guarantor hereunder at or prior to such time or any outstanding claim for such breach of or inaccuracy in Section 4.15 of the APA validly made against Seller in accordance with the APA at or prior to such time, which is subsequently made against Guarantor, whether before, at or within a commercially reasonable time after (making allowance for the time required to finally resolve such claim against Seller) such time, due to Seller having failed to fully satisfy such claim because the balance of the Indemnification Escrow Amount then held in the Escrow Account was insufficient to fully cover the General Indemnified Losses for which such claim was made).

Section 6.Miscellaneous.

(a)Notices. All notices to Guarantor under this Guaranty shall, until Guarantor furnishes written notice to the contrary, be mailed or delivered to Guarantor at 7979 Ivanhoe Avenue, Suite 300, La Jolla, CA, 92037, and directed to the attention of the Chief Executive Officer. All notices shall be effective when received by the addressee thereof. All notices to Beneficiary shall be mailed or delivered as provided in the APA.

(b)Governing Law; Jurisdiction.

(i)This Guaranty shall be governed by, and construed and enforced in accordance with, the laws of the State of Minnesota, without giving effect to the conflict of law rules thereof that would result in the application of any law other than the laws of the State of Minnesota.

(ii)The parties hereby submit to the exclusive jurisdiction of the Federal courts of the United States of America or the courts of the State of Minnesota, in each case, located in the County of Hennepin for the purposes of all legal proceedings arising out of or relating to this Guaranty or the transactions contemplated hereby. Each of the parties irrevocably waives, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum.

(c)Interpretation. The headings of the sections and other subdivisions of this Guaranty are inserted for convenience only and shall not be deemed to constitute a part hereof.

(d)Successors and Assigns. This Guaranty shall be binding upon and inure to the benefit of the respective successors and permitted assigns of Guarantor and Beneficiary.

(e)No Waiver; Amendments. No failure on the part of either party hereto to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise by either party hereto of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The terms of this Guaranty may be waived, altered or amended only by an instrument in writing duly executed by Guarantor and Beneficiary.

(f)No Third Party Beneficiary. Neither this Guaranty nor any remedy arising hereunder is intended for the benefit of, or is enforceable by, anyperson other than Beneficiary, Guarantor, any Buyer Indemnified Party and their respective successors and permitted assigns.

(g)No Set-off. Subject to the terms of Sections 3.5.2(e), 6.12, 8.9, and 8.10 of the APA, by acceptance of this Guaranty, Beneficiary shall be deemed to have waived any right to set off against, combine, consolidate, or otherwise appropriate and apply (i) any assets of Guarantor at any time held by Beneficiary or (ii) any indebtedness or other liabilities at any time owing by Beneficiary to Guarantor, as the case may be, on account of the Guaranteed Obligations.

(h)Counterparts. This Guaranty may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. A signed copy of this Guaranty delivered by facsimile, e-mail or other means of electronic transmission is to be deemed to have the same legal effect as delivery of an original signed copy of this Guaranty.

(i)Severability. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (1) the other provisions hereof shall remain in full force and effect in such jurisdiction and (2) the invalidity or unenforceability of any such provision in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.

(j)Waiver of Jury Trial.EACH OF GUARANTOR AND BENEFICIARY HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTY OR THE TRANSACTIONS CONTEMPLATED HEREBY.

(k)Expenses and Fees. Guarantor agrees to be responsible for and to pay all reasonable costs and expenses, including, without limitation, reasonable attorneys’ fees and foreclosure fees, incurred by Beneficiary in connection with the collection of all sums guaranteed hereunder and the defense or enforcement of Beneficiary’s rights hereunder, whether or not suit is filed, and whether such collection be from Seller or from Guarantor, provided that no such costs and expenses shall be payable by Guarantor unless Beneficiary prevails in such collection, defense or enforcement. In the event that litigation is commenced, then the prevailing party in such litigation, whether Beneficiary or Guarantor, shall be entitled to an award of reasonable attorneys’ feesand expenses, as determined by the court.

(l)Entire Agreement. The terms and conditions set forth herein, together with the documents referenced herein, constitute the complete statement of the agreement between Guarantor and Beneficiary relating to the subject matter hereof. No prior parol evidence may be introduced or considered at any judicial or arbitration proceeding for any purpose to interpret or clarify any term or provision of this Guaranty.

IN WITNESS WHEREOF, Guarantor has caused this Guaranty to be duly executed as or the day and year first above written.

PICO HOLDINGS, INC., as Guarantor

By: /s/ John R. Hart

Name: John R. Hart

Title: President and CEO

Accepted and Agreed:

CHS Hallock, LLC, as Beneficiary

By: /s/ Thomas J. Malecha    

Name: Thomas J. Malecha    

Title: President

EX-99.4

RESTRICTIVE COVENANT AGREEMENT

This Restrictive Covenant Agreement (this “Agreement”) is entered into as of July 31, 2015 (the “Effective Date”), by and between CHS Hallock, LLC, a Minnesota limited liability company (“CHS”), and PICO Holdings, Inc., a California corporation (the “Restricted Party” and, together with CHS, the “Parties”).

RECITALS

A.CHS and PICO Northstar Hallock, LLC, a Delaware limited liability company (the “Company”) entered into that certain Asset Purchase Agreement, dated as of July 13, 2015 (the “Purchase Agreement”), pursuant to which the Company agreed to sell and assign to Buyer, and Buyer agreed to purchase and assume from the Company, substantially all of the assets of the Company and certain specifically enumerated liabilities of the Company (the “Transaction”) related to the plant processing canola seeds and refining canola oils located at 2100 US Highway 75, Kennedy, Minnesota 56733 (the “Hallock Plant”), for the consideration and on the terms set forth in the Purchase Agreement.

B.The execution and delivery of this Agreement by the Restricted Party is an inducement to and a condition precedent to CHS’s willingness to enter into the Purchase Agreement and consummate the Transaction.

C.TheRestricted Party, as an affiliate of the Company, will derive significant economic benefit as a result of the consummation of the Transaction.

AGREEMENT

The Parties, intending to be legally bound, hereby agree as follows:

1.Noncompetition, Nonsolicitation and Confidentiality. The Restricted Party acknowledges the highly competitive nature of the businesses of CHS and its affiliates (collectively, the “CHS Group”) and accordingly agrees as follows:

(a)From the Effective Date and during the three (3) year period immediately following the Effective Date (the “Restricted Period”), the Restricted Party shall not, whether on the Restricted Party’s own behalf or on behalf of or in conjunction with any person or entity (including, PICO Northstar Oklahoma, LLC, a Delaware limited liability company (“PICO Oklahoma”)), directly or indirectly, solicit or assist in soliciting, in competition with the CHS Group with respect to the Competitive Business (as defined in Section 1(b)(i)), the business of any customer or prospective customer of the Hallock Plant:

(i)with whom the Restricted Party or its subsidiaries or affiliates had contact or dealings during the one (1) year period immediately preceding the Effective Date; or

(ii)with whom employees of the Restricted Party or its subsidiaries or affiliates had personal contact or dealings during the one (1) year period immediately preceding the Effective Date.

(b)During the Restricted Period, the Restricted Party shall not, whether on the Restricted Party’s own behalf or on behalf of or in conjunction with any person or entity (including PICO Oklahoma), directly or indirectly:

(i)engage in the business of processing canola seeds and refining canola oils (the “Competitive Business”) anywhere within a two hundred fifty (250) mile radius of the Hallock Plant (the “Restricted Area”); or

(ii)acquire a financial interest in any Competitive Business, directly or indirectly, anywhere within the Restricted Area, provided that such limitation shall not limit the Restricted Party from purchasing, directly or indirectly, any publicly traded securities of an entity involved in any Competitive Business, provided such Restricted Party’s interest in such entity does not exceed five percent (5%) of the outstanding securities of such entity.

(c)During the Restricted Period, the Restricted Party shall not, whether on the Restricted Party’s own behalf or on behalf of or in conjunction with any person or entity (including PICO Oklahoma), directly or indirectly, solicit or encourage any employee or independent contractor of the CHS Group located at or related to the Hallock Plant to leave the employment or service of the CHS Group, or otherwise in any way interfere with the relationship between such employee or independent contractor and the CHS Group; provided, however, that the Restricted Party shall not be prohibited from hiring an employee or independent contractor of CHS located at the Hallock Plant should that person respond to a general solicitation not directed at such employee or independent contractor.

(d)The Restricted Party acknowledges that the information and data (including trade secrets) concerning the business or affairs of the Hallock Plant (the “Confidential Information”) are the property of the CHS Group. During the five (5) year period immediately following the Effective Date, the Restricted Party shall not disclose to any unauthorized person or entity or use for the Restricted Party’s own account any of the Confidential Information, unless and only to the extent that the Confidential Information (i) becomes generally known to and available for use by the public, other than as a result of the Restricted Party’s acts or omissions to act, or (ii) is required to be disclosed pursuant to any applicable laws (in which case the Restricted Party shall promptly notify the CHS Group of such requirement and reasonably assist the CHS Group, at the CHS Group’s cost, in obtaining a protective order necessary to maintain the confidentiality of the Confidential Information). The Restricted Party shall take reasonable and appropriate steps to safeguard the Confidential Information and to protect the Confidential Information against disclosure, misuse, espionage, loss and theft. Notwithstanding the foregoing, CHS, on behalf of the CHS Group, acknowledges and agrees that Confidential Information does not apply to the financial information and results of operations of the Company prior to the Closing (as defined in the Purchase Agreement) (the “Company Financial Information”), and such Company Financial Information remains the property of the Company. Further, the Restricted Party and its affiliates shall not be precluded from disclosing any such Company Financial Information as the Restricted Party reasonably deems necessary or appropriate for purposes of meeting its obligations under applicable laws, including in any reports filed with the U.S. Securities and Exchange Commission or to be disclosed to its shareholders.

(e)Notwithstanding the foregoing, nothing herein shall prevent the Restricted Party or any of its affiliates from selling PICO Oklahoma or any or all of the assets of PICO Oklahoma to any non-affiliated party, even if such non-affiliated party intends to engage in a Competitive Business.

2.Enforcement.

(a)It is expressly understood and agreed that although the Parties consider the restrictions contained in Section 1 to be reasonable and not any greater than reasonably necessary to protect the CHS Group, if a final judicial determination is made by a court of competent jurisdiction that the duration, scope or geographical area or any other restriction contained in this Agreement is an unenforceable restriction against the Restricted Party, the provisions of this Agreement are not to be rendered void, but are to be deemed amended to apply as to such maximum duration, scope and geographical area and to such maximum extent as such court judicially determines or indicates to be enforceable, and the Parties shall revise the restrictions contained in this Agreement to cover the maximum duration, scope and geographical area permitted by applicable law. Alternatively, if any court of competent jurisdiction finds that any restriction contained in this Agreement is unenforceable, and such restriction cannot be amended so as to make it enforceable, such finding is not to affect the enforceability of any of the other restrictions contained in this Agreement.

(b)The Restricted Party acknowledges that the CHS Group’s remedies at law for a breach or threatened breach of any of the provisions of Section 1 would be inadequate and the CHS Group would suffer irreparable damages as a result of such breach or threatened breach. In recognition of this fact, the Restricted Party agrees that, in the event of such a breach or threatened breach, in addition to any remedies at law, the CHS Group, without the necessity of posting any bond or other form of security or proving damages, is to be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction or any other equitable remedy that is then available.

(c)In the event of a breach by the Restricted Party of this Agreement, the Restricted Period is to be extended by the duration of such breach.

3.Additional Acknowledgments. The Restricted Party acknowledges that the provisions of this Agreement are in consideration of: (a) the Transaction, including the Company’s right to receive the purchase price and other consideration contemplated by the Purchase Agreement, and (b) additional good and valuable consideration as set forth in this Agreement. The Restricted Party acknowledges that the purchase price and other consideration contemplated by the Purchase Agreement that the Company is to receive is sufficient to support the Restricted Party’s obligations under this Agreement. In addition, the Restricted Party acknowledges (i) that the business of the CHS Group is or could be conducted throughout the Restricted Area and beyond, and (ii) notwithstanding the state of organization or principal office of the members of the CHS Group, or any of their officers or employees, it is expected that the CHS Group will have business activities and valuable business relationships related to the Competitive Business throughout the Restricted Area. The Restricted Party acknowledges that the potential harm to the CHS Group of the non-enforcement of any provision of this Agreement outweighs any potential harm to the Restricted Party of its enforcement by injunction or otherwise. The Restricted Party acknowledges that the Restricted Party has had this Agreement carefully read on its behalf and consulted with legal counsel of the Restricted Party’s choosing regarding its contents, has given careful consideration to the restraints imposed upon the Restricted Party by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of Confidential Information now existing or to be developed in the future. The Restricted Party acknowledges that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, duration, scope and geographical area.

4.Successors and Assigns; No Third Party Beneficiaries. Subject to the terms of this Section 4, this Agreement is to apply to, and be binding in all respects upon, and inure to the benefit of the successors and permitted assigns of the Parties. Neither of the Parties is permitted to assign any of such Party’s rights or delegate any of such Party’s obligations under this Agreement without the prior written consent of the other Party (such consent not to be unreasonably withheld, conditioned or delayed). Notwithstanding the foregoing sentence, no such assignment or delegation by either Party is to relieve such Party from any of such Party’s obligations under this Agreement. Nothing in this Agreement is to be construed to give any person or entity other than the Parties and the CHS Group any legal or equitable right under or with respect to this Agreement or any provision of this Agreement, except such rights as will inure to a successor or permitted assignee pursuant to this Section 4. The members of the CHS Group (other than CHS) are intended third-party beneficiaries of this Agreement and such members are entitled to exercise (in whole or in part) any rights granted to such members under this Agreement.

5.Notices. All notices, consents, waivers and other communications under this Agreement must be in writing and are to be deemed to have been duly given when (a) delivered by hand (with written confirmation of receipt), (b) sent by facsimile with confirmation of transmission by the transmitting equipment during regular business hours, or if not during regular business hours, the next business day, (c) sent by electronic mail during regular business hours, or if not during regular business hours, the next business day, (d) received by the addressee, if sent by certified mail, return receipt requested, or (e) received by the addressee, if sent by a nationally recognized overnight delivery service, return receipt requested, in each case to the appropriate addresses or facsimile numbers set forth below (or to such other addresses or facsimile numbers as a Party designates by notice to the other Party in accordance with this Section 5):

CHS:

CHS Hallock, LLC

c/o CHS Inc.

5500 Cenex Drive, MS 625

Inver Grove Heights, MN 55077

Attention: Eric T. Larson

Facsimile: 651-355-4554

Electronic Mail: eric.larson@chsinc.com

with a copy to (which does not constitute notice to CHS):

Maynard, Cooper & Gale, P.C.

1901 Sixth Avenue North

2400 Regions Harbert Plaza

Birmingham, AL 35203

Attention: Bradley H. Wood

Facsimile: 205-254-1999

Electronic Mail: bwood@maynardcooper.com

Restricted Party:

PICO Holdings, Inc.

7979 Ivanhoe Avenue, Suite 300

La Jolla, CA 92037

Attention: John Hart, Chief Executive Officer

Facsimile: 858-456-6480

Electronic Mail: jhart@picoholdings.com

with a copy to (which does not constitute notice to the Restricted Party):

Stoel Rives LLP

33 South Sixth Street, Suite 4200

Minneapolis, MN 55402

Attention: David T. Quinby

Facsimile: 612-373-8881

Electronic Mail: david.quinby@stoel.com

6.Entire Agreement; Modification. This Agreement and the Purchase Agreement and the other documents and agreements contemplated thereby constitute the entire agreement between the Parties and supersede all prior agreements and understandings, whether written or oral, between the Parties with respect to the subject matter hereof and thereof. The Parties are not permitted to amend this Agreement, except by a written agreement signed by the Parties. No course of dealing between or among any person or entity having any interest in this Agreement is to be deemed effective to modify, amend or discharge any part of this Agreement or any rights or obligations of any person or entity under or by reason of this Agreement.

7.Waiver; Remedies. Neither the failure nor any delay by either Party in exercising any right under this Agreement is to operate as a waiver of such right, and no single or partial exercise of any such right is to preclude any other or further exercise of such right or the exercise of any other right. No waiver of any of the provisions of this Agreement is to be deemed or is to constitute a waiver of any other provisions of this Agreement, whether or not similar, nor is any waiver to constitute a continuing waiver. The rights and remedies of the Parties are cumulative and not alternative.

8.Governing Law; Submission to Jurisdiction. This Agreement, as well as all matters in dispute between the Parties, whether arising from or relating to this Agreement or arising from or relating to alleged extra-contractual facts prior to, during or subsequent to this Agreement, including fraud, misrepresentation, negligence or any other alleged tort or violation of this Agreement, regardless of the legal theory upon which such matter is asserted, are to be governed by, construed under and enforced in accordance with the laws of the State of Minnesota without regard to any conflicts of laws principles that would require the application of any other laws. Any legal proceeding arising out of or based upon this Agreement may be instituted in the Federal courts of the United States of America or the courts of the State of Minnesota in each case located in the County of Hennepin, and each Party irrevocably submits to the exclusive jurisdiction of such courts in any such legal proceeding. Service of process, summons, notice or other document by mail to such Party’s address set forth herein shall be effective service of process for any legal proceeding brought in any such court. The Parties irrevocably and unconditionally waive any objection to the laying of venue of any legal proceeding in such courts and irrevocably waive and agree not to plead or claim in any such court that any such legal proceeding brought in any such court has been brought in an inconvenient forum.

9.WAIVER OF JURY TRIAL. THE PARTIES HEREBY WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR IN ANY WAY PERTAINING TO THIS AGREEMENT, WHETHER NOW OR HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. EACH PARTY IS PERMITTED TO FILE A COPY OF THIS SECTION 9 WITH ANY COURT AS WRITTEN EVIDENCE OF THE KNOWING, VOLUNTARY AND BARGAINED AGREEMENT BETWEEN THE PARTIES TO IRREVOCABLY WAIVE TRIAL BY JURY, AND THAT ANY LEGAL PROCEEDING WHATSOEVER BETWEEN THE PARTIES RELATING TO THIS AGREEMENT IS INSTEAD TO BE TRIED IN A COURT OF COMPETENT JURISDICTION BY A JUDGE SITTING WITHOUT A JURY.

10.Further Assurances. Each of the Parties shall execute and cause to be delivered to the other Party such instruments and other documents, and shall take such other actions, as the other Party reasonably requests for the purpose of carrying out or evidencing any of the transactions contemplated by this Agreement.

11.Representations of the Restricted Party. The Restricted Party represents and warrants to CHS that (a) the Restricted Party’s execution, delivery and performance of this Agreement does not and will not conflict with, or result in the breach of or violation of, any other agreement or order to which the Restricted Party is a party or by which the Restricted Party is bound, and (b) upon the execution and delivery of this Agreement by CHS, this Agreement will be the Restricted Party’s valid and binding obligation, enforceable in accordance with its terms.

12.Counterparts; Execution of Agreement. The Parties are permitted to execute this Agreement in one or more counterparts, each of such counterparts is to be deemed to be an original copy of this Agreement and all of which, when taken together, are to be deemed to constitute one and the same agreement. The exchange of copies of this Agreement and of signature pages by facsimile, electronic mail or other electronic transmission is to constitute effective execution and delivery of this Agreement as to the Parties. Signatures of the Parties transmitted by facsimile, electronic mail or other electronic transmission are to be deemed to be the Parties’ original signatures for any purpose whatsoever.

13.Rules of Construction.

(a)Except as otherwise explicitly specified in this Agreement to the contrary, (i) references to a Section means a Section of this Agreement, unless another agreement is specified; (ii) the word “including” is to be construed as “including, without limitation;” (iii) the words “or,” “either” and “any” are not to be construed as exclusive; (iv) the words “herein,” “hereof,” “hereby,” “hereto” and “hereunder” refer to this Agreement as a whole; (v) words in the singular or plural form include the plural and singular form, respectively; (vi) pronouns are to be deemed to refer to the masculine, feminine or neuter, as the identity of the person or entity or persons or entities requires; (vii) the words “asset” and “property” are to be construed to have the same meaning and effect and to refer to all tangible and intangible assets and properties, including cash, securities, accounts, contract rights and real and personal property; (viii) references to a particular person or entity include such person’s or entity’s successors and permitted assigns; (ix) references to a particular statute, rule or regulation include all rules and regulations thereunder and any predecessor or successor statutes, rules or regulations, in each case as amended or otherwise modified from time to time; (x) references to a particular agreement, document, instrument or certificate mean such agreement, document, instrument or certificate as amended, supplemented or otherwise modified from time to time if permitted by the provisions thereof; (xi) references to “Dollars” or “$” are references to United States Dollars; (xii) an accounting term not otherwise defined in this Agreement has the meaning ascribed to such term in accordance with United States generally accepted accounting principles; and (xiii) references to “written” or “in writing” include electronic form. The headings of Sections are provided for convenience only and are not to affect the construction or interpretation of this Agreement.

(b)The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement is to be construed as if drafted jointly by the Parties and no presumption or burden of proof is to arise favoring or disfavoring either Party by virtue of the authorship of any of the provisions of this Agreement.

(c)Any reference in this Agreement to a “day” or a number of “days” (without explicit reference to “business days”) is to be construed as a reference to a calendar day or number of calendar days. If any time period for giving notice or taking action under this Agreement expires on a day that is not a business day, the time period is to be automatically extended to the business day immediately following such day. When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period is to be excluded.

[Signature Page Follows]

Each of the Parties, intending to be legally bound, has caused this Agreement to be duly executed on such Party’s behalf by an authorized representative of such Party, as of the Effective Date.

CHS:

CHS Hallock, LLC

By: /s/ Thomas J. Malecha    

Name: Thomas J. Malecha    

Title: President

RESTRICTED PARTY:

PICO Holdings, Inc.

By: /s/ John R. Hart

Name: John R. Hart

Title: President and CEO