<PAGE> 1
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
Date of Report (Date of earliest event reported) November 20, 1996
PICO HOLDINGS, INC.
(Exact name of registrant as specified in charter)
California 0-18786 94-2723335
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
875 Prospect Street, Suite 301, La Jolla, California 92037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 456-2422
CITATION INSURANCE GROUP
One Almaden Boulevard, Suite 300
San Jose, California 95113
(Former name or former address, if changed since last report)
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ITEM 1. CHANGE IN CONTROL OF REGISTRANT.
On November 20, 1996, Citation Holdings, Inc., an Ohio corporation
("Sub") and a wholly-owned subsidiary of Citation Insurance Group ("Citation" or
the "Registrant"), merged with and into Physicians Insurance Company of Ohio, an
Ohio corporation ("PICO"), (the "Merger") pursuant to an Agreement and Plan of
Reorganization (the "Merger Agreement"), dated as of May 1, 1996, as amended, by
and among PICO, Citation and Sub. Pursuant to the Merger, each outstanding share
of the Class A Common Stock of PICO (the "PICO Stock") was converted into the
right to receive 5.0099 shares of Citation Common Stock. As a result, (i) the
former shareholders of PICO own approximately 80% of the outstanding Citation
Common Stock and control the Board of Directors of Citation and (ii) PICO has
become a wholly owned subsidiary of Citation. Pursuant to the Merger Agreement,
Citation also assumed all outstanding options to acquire PICO Common Stock.
Effective upon the Merger, Citation's name was changed to "PICO
Holdings, Inc." and the Nasdaq symbol for Citation stock was changed to "PICO."
As a result of the Merger the following individuals and entities own
five percent (5%) or more of the Registrant:
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENTAGE
AND NATURE OF OWNERSHIP OF
BENEFICIAL REGISTRANT
NAME OF BENEFICIAL OWNER OWNERSHIP(1)
- ----------------------------------------------------------------------------------------
<S> <C> <C>
Guinness Peat Group plc (2) 6,065,871 18.8%
Global Equity Corporation (3) 4,258,415 13.2%
John D. Weil (4) 2,135,708 6.6%
John R. Hart (5) 1,908,847 5.8%
Ronald Langley (5) 1,908,847 5.8%
</TABLE>
(1) Sole voting and investment power unless otherwise indicated.
(2) Guinness Peat Group plc ("GPG") has an option to purchase $1,175,000
more of newly issued shares of the Registrant's stock, pursuant to the
GPG Agreement (as defined below) as amended. The purchase price would
be the average of the closing bid prices for the Registrant's Stock on
Nasdaq for the 20 trading days immediately preceding the date when GPG
gives notice of purchase. This option will expire if GPG's ownership of
shares of the Registrant's Stock becomes less than 7.5%. The Registrant
has, pursuant to the GPG Agreement, a first right to purchase any of
the Registrant's Stock which GPG desires to sell, except for sales to
Ronald Langley and John R. Hart (see note 5 below).
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(3) Global Equity Corporation ("GEC") has an option to purchase $825,000
more of newly issued shares of the Registrant's Stock, pursuant to the
Subsequent Agreement (as defined below). The purchase price would be
the average of the closing bid prices for the Registrant's Stock on
Nasdaq for the 20 trading days immediately preceding the date when GEC
gives notice of purchase. This option will expire if GEC's ownership of
the Registrant's Stock becomes less than 7.5%. Also pursuant to the
Subsequent Agreement, until December 10, 1996, if the Registrant issues
additional equity securities of any class or type, GEC has the prior
right and option to participate in the issuance of such equity
securities in an amount not to exceed $5,000,000 in aggregate purchase
price. The Registrant has, pursuant to the Subsequent Agreement, a
first right to purchase any of the Registrant's Stock which GEC desires
to sell. Pursuant to California law, GEC is unable to vote any shares
of the Registrant's Stock.
(4) Mr. Weil owns 10,019 shares of the Registrant's Stock directly and has
indirect ownership of an additional 2,125,689 shares of the
Registrant's Stock.
(5) Mr. Langley and Mr. Hart each hold options to purchase up to 1,032,114
shares of the Registrant's Stock presently owned by GPG. In addition,
Mr. Langley and Mr. Hart each hold currently exercisable options to
purchase up to 876,732 shares of the Registrant's Stock.
GPG entered into an Agreement for Purchase and Sale of Stock, dated
November 23, 1993, with Quaker Holdings Limited and PICO (the "GPG Agreement")
as amended by the Agreement for Purchase and Sale of Shares dated May 9, 1996
between GPG, GEC and PICO (the "Subsequent Agreement"), pursuant to which GPG
acquired shares of PICO Stock. Pursuant to the GPG Agreement, GPG acquired
certain rights with respect to nomination of directors to the PICO Board of
Directors and to the purchase of additional shares from PICO. Pursuant to the
Subsequent Agreement, GPG sold to GEC shares of PICO Stock and transferred
certain rights held by it to GEC. PICO's obligations under the GPG Agreement and
the Subsequent Agreement have been assumed by the Registrant.
The GPG Agreement, as amended, provides that, subject to the fiduciary
duties and responsibilities which the Registrant and its Board of Directors owe
to all of its shareholders and other persons, the Registrant will use its best
efforts to cause the nomination and election of one person designated by GPG to
serve on the Registrant's Board of Directors. Currently, GPG has designated Dr.
Weiss as its nominee to the Registrant's Board of Directors. Under the GPG
Agreement, as amended, GPG shall continue to have the right to nominate one
director so long as it owns 11% or more of the Registrant.
Pursuant to the GPG Agreement and the Subsequent Agreement, each of GPG
and GEC have the right to require the Registrant to register their shares for
resale in the public market. GPG and GEC have agreed not to exercise their
registration rights for a period of
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six months after the Merger. Pursuant to the GPG Agreement and the Subsequent
Agreement, GPG and GEC have rights to acquire shares of the Registrant as
described in notes 2 and 3 above.
Pursuant to the Merger Agreement, the Registrant's Board consists of
nine persons, two of whom were designated by Citation prior to the Merger
(collectively, the "Citation Directors"), and seven of whom were designated by
PICO prior to the Merger (collectively, the "PICO Directors"). Three PICO
Directors, S. Walter Foulkrod, III, Esq., Richard D. Ruppert, M.D., and Gary H.
Weiss are serving as Class I Directors and will stand for reelection at the 1997
annual shareholders' meeting. The Citation Directors, Marshall J. Burak and Paul
M. Bancroft, and one PICO Director, Robert R. Broadbent, are serving as Class II
Directors and will stand for reelection at the 1998 annual shareholders'
meeting. Three PICO Directors, John R. Hart, Ronald Langley and John D. Weil,
are serving as Class III Directors and will stand for reelection at the 1999
annual shareholders' meeting. All other directors of the Registrant in office
prior to the Merger resigned immediately prior to the Merger.
No five percent (5%) or greater shareholder of the Registrant prior to
the Merger continues to hold 5% or more of the Registrant after the Merger.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
Pursuant to the Merger as described in Item 1 above, the Registrant acquired
PICO, which is now a wholly owned subsidiary of the Registrant, on November 20,
1996. The Registrant issued an aggregate of approximately 26,106,072 shares of
its common stock to PICO shareholders in exchange for their PICO Stock
reflecting an exchange ratio of 5.0099 shares of Citation Common Stock issued
for each share of PICO stock.
Each share of PICO Stock outstanding immediately prior to the Merger (except
shares of PICO Stock as to which dissenters' rights have been perfected) was
converted into the right to receive a number of shares of Citation Common Stock
equal to the Exchange Ratio. The Exchange Ratio was equal to the PICO Share
Value divided by $5.03, and the PICO Share Value was the average of the closing
prices of one share of PICO Stock on the Nasdaq National Market for the 20
consecutive trading days ending with the trading day immediately prior to the
date the last significant condition to the Merger was met, except that, because
the average share value as described above was less than $25.20 per share, the
PICO Share Value was equal to $25.20.
Pursuant to the Merger, Citation also assumed PICO's obligations with respect to
outstanding options to purchase 508,000 shares of PICO stock. Each PICO Option
is exercisable for that number of shares of Citation Common Stock equal to the
number of shares of PICO Stock subject to such PICO Option immediately prior to
the Merger multiplied by the Exchange Ratio and rounded down to the nearest
whole number. The exercise price per share of Citation Stock for each PICO
Option is determined by dividing the exercise price per share
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of PICO Stock for such PICO Option in effect immediately prior to the Merger by
the Exchange Ratio, and rounding down to the nearest whole cent.
The Merger was structured as a tax free reorganization.
PICO is incorporated under the laws of the state of Ohio. PICO, together with
its subsidiaries operates primarily as a diversified investment and insurance
company. The Registrant shall continue to use the physical property of PICO and
its subsidiaries, in the operation of such business.
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANT.
(a) (i) As a result of the Merger, Deloitte & Touche, L.L.P.
("Deloitte"), independent auditors of the Registrant, were
dismissed by the Registrant as its principal accountant
effective as of November 26, 1996. Deloitte's reports on the
Registrant's Financial Statements for 1995 and 1994 contained
no adverse opinions or disclaimers of opinion and were not
qualified or modified as to uncertainty or audit scope;
however, Deloitte's reports for 1995 and 1994 were modified
related to the Company's change in its method of accounting
for income taxes effective January 1, 1993 to conform with
Statement of Financial Accounting Standards (SFAS) No. 109,
its change in its method of accounting for investments in debt
and equity securities effective December 31, 1993 to conform
with SFAS 115 and its change in its method of accounting for
reinsurance effective January 1, 1993 to conform with SFAS No.
113. The decision to change accountants was approved by the
Board of Directors of the Registrant.
(ii) Since January 1, 1994, the Registrant had not had any
disagreement with Deloitte on any matter of accounting
principles or practices, financial statement disclosure or
auditing scope of procedure.
(iii) None of the events described in Item 304(a)(1)(v) of
Regulation S-K have occurred since January 1, 1994 and require
disclosure. The Registrant has requested that Deloitte furnish
it with a letter addressed to the SEC stating whether or not
it agrees with the above statements. A copy of such letter
dated December 4, 1996 is filed as Exhibit 16.1 to this Form
8-K.
(b) The Registrant has engaged Coopers & Lybrand, L.L.P. ("Coopers") as the
independent accountant for the Registrant effective November 26, 1996.
Coopers was the independent accountant for PICO prior to the Merger.
Since January 1, 1994 the Registrant has not consulted Coopers
regarding any mater described in Item 304(a)(2)(i) or (ii) of
Regulation S-K.
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ITEM 5. OTHER EVENTS.
In addition to the events described in Items 1, 2 and 4 above, pursuant to the
Merger, the Registrant:
(i) changed its name to PICO Holdings, Inc.
(ii) changed its transfer agent to The Huntington National Bank,
Huntington Center, HC-1112, Columbus, Ohio 43287
(iii) changed the Agent under its Rights Agreement dated July 21,
1991, as amended, from Registrar and Transfer Agent to The
Huntington National Bank.
(iv) amended its By-Laws
(v) amended its Articles of Incorporation
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial statements of PICO.
The financial statements of PICO, one of its subsidiaries and
an affiliate and the related Notes and Reports of Independent
or Chartered Accountants listed below (collectively, the "PICO
Financial Statements") are incorporated herein by reference to
pages F-1 through F-72 of the Registrant's Registration
Statement on Form S-4 (File No. 333-06671) .
PICO
Report of Independent Accountants
Consolidated Balance Sheets as of December 31, 1995
and 1994
Consolidated Statements of Operations for the Years
Ended December 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Shareholders'
Equity for the Years Ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows for the Years
Ended December 31, 1995, 1994 and 1993
Notes to the Consolidated Financial Statements
Consolidated Balance Sheets as of June 30, 1996
(unaudited) and December 31, 1995
Consolidated Statements of Operations for the six
months ended June 30, 1996 and 1995 (unaudited)
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 (unaudited)
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Notes to the Consolidated Financial Statements
6
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GLOBAL EQUITY CORPORATION (formerly the Ondaatje
Corporation)
Report of Chartered Accountants
Consolidated Statements of Financial Position for the
Years Ended March 31, 1995 and 1994
Consolidated Statements of Operations for the Years
Ended March 31, 1995, 1994 and 1993
Consolidated Statements of Deficit for the Years
Ended March 31, 1995, 1994 and 1993
Consolidated Statements of Changes in Financial
Position for the Years Ended March 31, 1995, 1994 and
1993
Notes to the Consolidated Financial Statements
Consolidated Balance Sheets as of September 30, 1995
and 1994
Consolidated Statements of Operations for the six
months ended September 30, 1995 and 1994 (unaudited)
Consolidated Statements of Changes in Financial
Position for the six months ended September 30, 1995
and 1994 (unaudited)
Notes to the Consolidated Financial Statements
(unaudited)
SEQUOIA INSURANCE COMPANY
Report of Independent Accountants
Balance Sheets as of December 31, 1994 and 1993
Statements of Operations for the Years Ended December
31, 1994, 1993 and 1992
Statements of Changes in Shareholder's Equity for
the Years Ended December 31, 1994, 1993 and 1992
Statements of Cash Flows for the Years Ended December
31, 1994, 1993 and 1992
Notes to Financial Statements
Balance Sheets as of June 30, 1995 (unaudited) and
December 31, 1994
Statements of Operations for the six months ended
June 30, 1995 and 1994 (unaudited)
Statements of Changes in Shareholder's Equity for the
six months ended June 30, 1994 and 1995 (unaudited)
Statements of Cash Flows for the six months ended
June 30, 1995 and 1994 (unaudited)
Notes to interim Financial Statements
The Registrant intends to file financial statements of PICO
for the nine (9) month period ended and as of September 30,
1996 on or before December 31, 1996 on an amendment to this
Form 8-K.
7
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(b) Pro forma financial information.
Pro forma financial information for the year ended December
31, 1995, the six months ended June 30, 1996 and as of June
30, 1996, are incorporated herein by reference to pages 54-59
of the Registrant's Registration Statement on Form S-4 (File
No. 333-06671).
The Registrant intends to file the pro forma financial
information for the nine month period ended and as of
September 30, 1996, on or before December 31, 1996.
(c) Exhibits.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.2 Agreement and Plan of Reorganization dated as of May 1, 1996
among the Registrant, Citation Holdings, Inc. and PICO and
amendment thereto dated August 14, 1996, incorporated herein by
reference to exhibit filed with Amendment No. 2 to Registration
Statement on Form S-4 (File No. 333-06671).
2.3 Second Amendment to Agreement and Plan of Reorganization dated
November 12, 1996.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
4.1 Rights Agreement dated July 22, 1991 between Citation and
Security Pacific National Bank ("Rights Agreement"),
incorporated herein by reference to exhibit filed with
Form 8-A on July 22, 1991.
4.2 First Amendment to Rights Agreement dated April 30, 1996.
4.3 Second Amendment to Rights Agreement dated November 20, 1996.
16.1 Letter regarding change in Certifying Accountant from
Deloitte & Touche, LLP, independent auditors.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick Thorne, Chartered Accountants.
99.1 PICO Financial Statements, incorporated herein by reference to pages
F-1 through F-72 of Registrant's Registration Statement on Form S-4
(File No. 333-06671).
99.2* Unaudited financial statements of PICO for the nine month period
ended as of September 30, 1996 and 1995.
99.3* Unaudited pro forma combined financial statements for the nine
month period ended and as of September 30, 1996.
</TABLE>
8
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* To be filed by amendment
9
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SIGNATURES
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.
PICO HOLDINGS, INC.
Date: December 4, 1996 By: /s/ Gary W. Burchfield
----------------------
Gary W. Burchfield, Chief Financial
Officer and Treasurer
10
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
2.2 Agreement and Plan of Reorganization dated as of May 1, 1996
among the Registrant, Citation Holdings, Inc. and PICO and
amendment thereto dated August 14, 1996, incorporated herein by
reference to exhibit filed with Amendment No. 2 to Registration
Statement on Form S-4 (File No. 333-06671).
2.3 Second Amendment to Agreement and Plan of Reorganization dated
November 12, 1996.
3.1 Amended and Restated Articles of Incorporation of the Registrant.
4.1 Rights Agreement dated July 22, 1991 between Citation and
Security Pacific National Bank ("Rights Agreement")
incorporated herein by reference to exhibit filed with
Form 8-A on July 22, 1991.
4.2 First Amendment to Rights Agreement dated April 30, 1996.
4.3 Second Amendment to Rights Agreement dated November 20, 1996.
16.1 Letter regarding change in Certifying Accountant from
Deloitte & Touche, LLP, independent auditors.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2 Consent of KPMG Peat Marwick Thorne, Chartered Accountants.
99.1 PICO Financial Statements, incorporated herein by reference to pages
F-1 through F-72 of Registrant's Registration Statement on Form S-4
(File No. 333-06671).
99.2* Unaudited financial statements of PICO for the nine month period
ended as of September 30, 1996 and 1995.
99.3* Unaudited pro forma combined financial statements for the nine
month period ended and as of September 30, 1996.
</TABLE>
* To be filed by amendment
11
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Exhibit 2.3
SECOND AMENDMENT TO
AGREEMENT AND PLAN OF REORGANIZATION
This Second Amendment to Agreement and Plan of Reorganization (this
"Second Amendment") is made and entered into as of November 12, 1996, by and
among Citation Insurance Group, a California corporation ("Citation"), Citation
Holdings, Inc., an Ohio corporation ("Newco"), and Physicians Insurance Company
of Ohio, an Ohio corporation ("PICO"), for the purpose of amending that certain
Agreement and Plan of Reorganization (the "Reorganization Agreement"), dated as
of May 1, 1996, among Citation, Newco and PICO.
RECITALS
WHEREAS, Citation, Newco and PICO previously have entered into that
certain Amendment to Agreement and Plan or Reorganization, dated August 14,
1996;
WHEREAS, Citation has advised PICO that its consolidated
stockholders' equity has decreased; and
WHEREAS, the parties wish to further amend the Reorganization Agreement
to account for this decrease.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants and agreements contained herein, and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1. Clause (B) of Section 5.3(h) is amended to read in full as
follows:"As of November 15, 1996, there has been no increase in long-term debt
of Citation or any Citation Subsidiary, as compared with long-term debt at
December 31, 1995, or any increase in the outstanding capital stock of Citation
or any Citation Subsidiary (other than issuances of additional stock pursuant to
vested Citation Options) as compared with capital stock at December 31, 1995, or
any decrease in Citation's consolidated stockholders' equity below $34 million."
<PAGE> 2
1. Capitalized terms used but not defined herein shall have the meaning
given thereto in the Reorganization Agreement, as amended.
2. Except as expressly modified hereby, the Reorganization Agreement,
as so amended, shall continue in full force and effect.
3. The interpretation, performance and enforcement of this Second
Amendment and the legal relations among the parties shall be governed by and
construed in accordance with the internal laws of the State of California
applicable to contracts made and to be wholly performed in such state.
4. This Second Amendment may be executed in counterparts with the same
effect as if all parties hereto had signed the same document. All counterparts
so executed shall be deemed to be an original, shall be construed together and
shall constitute one agreement.
IN WITNESS WHEREOF, Citation, Newco and PICO have executed this
Agreement as of the date first written above.
CITATION INSURANCE GROUP
By: /s/ Paul M. Bancroft
-------------------------------
Name: Paul M. Bancroft
Title: Vice Chairman, Board of Directors
CITATION HOLDINGS, INC.
By: /s/ Robert M. Erickson
-------------------------------
Name: Robert M. Erickson
Title: President
PHYSICIANS INSURANCE COMPANY OF OHIO
By: /s/ John R. Hart
-------------------------------
Name: John R. Hart
<PAGE> 3
Title: President & CEO
<PAGE> 1
Exhibit 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
CITATION INSURANCE GROUP
ROBERT ERICKSON AND DOUGLAS GOULD certify
that:
1. They are the duly elected and acting President and
Secretary, respectively, of Citation Insurance Group.
2. The Articles of Incorporation of this corporation are
hereby amended and restated to read as follows:
"ARTICLE I
The name of this corporation is PICO Holdings, Inc.
ARTICLE II
The purpose of the corporation is to engage in any lawful act
or activity for which a corporation may be organized under the
General Corporation Law of California other than the banking
business, the trust company business or the practice of a
profession permitted to be incorporated by the California
Corporations Code.
ARTICLE III
This corporation is authorized to issue two (2) classes of
shares, designated respectively "Common Stock" and "Preferred
Stock."
A. The number of shares of
Common Stock is One Hundred Million
(100,000,000). The par value of each share is
one tenth of one cent ($0.001).
<PAGE> 2
B. The number of shares of Preferred Stock is Two
Million (2,000,000). The par value of each share of Preferred
Stock is one cent ($.01). The Preferred Stock herein
authorized may be issued from time to time in one or more
series, the number of shares, the designation and the rights,
preferences, privileges and restrictions, within any limits
and restrictions herein stated, shall be fixed and determined,
for any wholly unissued series of stock authorized herein, by
the Board of Directors. The Board of Directors, within the
limits and restrictions stated herein and in any resolution or
resolutions of the Board originally fixing the number of
shares constituting any series, may increase or decrease (but
not below the number of shares of such series then
outstanding) the number of shares of any such series
subsequent to the issue of shares of that series. In case the
number of shares of any series shall be so decreased, the
shares constituted the decrease shall resume the status they
had prior to the adoption of the resolution originally fixing
the number of shares of that series.
C. One Million (1,000,000) shares of
Preferred Stock are designated as Series A
Junior Participating Cumulative Preferred
Stock.
(1) Dividends and
Distributions.
(a) The holders of shares of Series
A Preferred Stock, in preference to the holders of Common
Stock of the Corporation and of any other junior stock of the
Corporation that may be outstanding, shall be entitled to
receive, when, as and if declared by the Board of Directors
out of funds legally available for the purpose, quarterly
dividends payable in cash on the tenth day of January, April,
July and October in each year (each such date being referred
to herein as a "Quarterly Dividend Payment Date"), commencing
on the first Quarterly Dividend
<PAGE> 3
Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (i) $.25
per share ($1.00 per annum), or (ii) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate
per share amount of all cash dividends, and 100 times the
aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend
payable in shares of Common Stock, or a subdivision of the
outstanding shares of Common Stock (by reclassification or
otherwise), declared on the Common Stock since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to
the first Quarterly Dividend Payment Date, since the first
issuance of any share or fraction of a share of Series A
Preferred Stock. In the event that the Corporation shall at
any time declare or pay any dividend on common Stock payable
in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding stares of
Common Stock (by reclassification or otherwise) into a greater
or lesser number of shares of Common Stock, then and in each
such event, the amount to which the holder of each share of
Series A Preferred Stock was entitled immediately prior to
such event under clause (ii) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a
dividend or distribution on the Series A Preferred Stock as
provided in paragraph C(1)(a) of this Article III
contemporaneously with any declaration of a dividend or
distribution on the Common Stock (other than a dividend
payable in
<PAGE> 4
shares of Common Stock); provided, however, that in the event
no dividend or distribution shall have been declared on the
Common Stock during the period between any Quarterly Dividend
Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $.25 per share ($1.00 per annum)
on the Series A Preferred Stock shall nevertheless be payable
on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue
and be cumulative on outstanding shares of Series A Preferred
Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series A Preferred Stock,
unless the date of issue of such shares is prior to the record
date for the first Quarterly Dividend Payment Date, in which
cash dividends on such shares shall begin to accrue from the
date of issue of such shares, or unless the date of issue is a
Quarterly Dividend Payment Date or is a date after the record
date for the determination of holders of shares of Series A
Preferred Stock entitled to receive a quarterly dividend and
before such Quarterly dividend Payment Date, in either of
which cases such dividends shall begin to accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued
but unpaid dividends shall cumulate but shall not bear
interest. Dividends paid on the shares of Series A Preferred
Stock in an amount less than the total amount of such
dividends at the time accrued and payable on such shares shall
be allocated pro rata on a share-by-share basis among all such
shares at the time outstanding. The Board of Directors may fix
a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be not more than 60 days prior to the date fixed for the
payment thereof.
<PAGE> 5
(2) Voting Rights. The holders of shares of
Series A Preferred Stock shall have the following voting
rights:
(a) Each share of Series A Preferred
Stock shall entitle the holder thereof to 100 votes (and each
one one-hundredth of a share of Series A Preferred Stock shall
entitled the holder thereof to one vote) on all matters
submitted to a vote of the stockholders of the Corporation. In
the event that the Corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common
Stock or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification
or otherwise than by payment of a dividend in shares of Common
Stock) into a greater or lesser number of shares of Common
Stock, then and in each such event, the number of votes per
share to T which holders of shares of Series A Preferred Stock
were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator
of which is the number of shares of common Stock that were
outstanding immediately prior to such event.
(b) Except as otherwise provided in
the Amended and Restated Articles of Incorporation of the
Corporation or herein or by law, the holders of shares of
Series A Preferred Stock and the holders of shares of Common
Stock shall vote together as one class on all matters
submitted to a vote of the stockholders of the Corporation.
(c) In addition, the holders of
shares of Series A Preferred Stock shall have the following
special voting rights:
<PAGE> 6
(i) In the event that at
any time dividends on a Series A Preferred Stock, whenever
accrued and whether or not consecutive, shall not have been
paid or declared and a sum sufficient for the payment thereof
set aside, in an amount equivalent to six quarterly dividends
on all shares of Series A Preferred Stock at the time
outstanding, then and in each such event, the holders of
shares of Series A Preferred Stock and each other series of
preferred stock now or hereafter issued that shall be accorded
such class voting right by the Board of Directors and that
shall have the right to elect two directors as the result of a
prior or subsequent default in payment of dividends on such
series (each such other series being hereinafter called "Other
Series of Preferred Stock"), voting separately as a class
without regard to series, shall be entitled to elect two
directors at the next annual meeting or a special meeting
called for such purpose. The remainder of the board shall be
elected by the holders of all shares (including the Series A
Preferred Stock and each Other Series of Preferred Stock) of
the Corporation entitled to vote for the election of
directors; provided, however, that the Series A Preferred
Stock and each Other Series of Preferred Stock voting as a
class, shall not have the right to elect more than one-third
of the directors. Such special voting right of the holders of
shares of Series A Preferred Stock may be exercised until all
dividends in a default on the Series A Preferred Stock shall
have been paid in full or declared and funds sufficient
therefor set aside, and when so paid or provided for, such
special voting right of the holders of shares of Series A
Preferred Stock shall cease, but subject always to the same
provisions for the vesting of such special voting rights in
the event of any such future dividend default or defaults.
(ii) At any time
after such special voting rights shall have so
<PAGE> 7
vested in the holders of shares of Series A Preferred Stock,
the Secretary of the Corporation may, and upon the written
request of the holders of record of 10% or more in number of
the shares of Series A Preferred Stock and each Other Series
of Preferred Stock then outstanding addressed to the Secretary
at the principal executive office of the Corporation shall,
call a special meeting of the holders of all shares of the
Corporation entitled to vote, for the election of directors to
be elected as herein provided, to be held within 60 days after
such call and at the place and upon the notice provided by law
and in the Bylaws for the holding of meetings of stockholders;
provided, however, that the Secretary shall not be required to
call such special meeting in the case of any such request
received less than 90 days before the date fixed for any
annual meeting of stockholders, and if in such case such
special meeting is not called or held, the holders of shares
of Preferred Stock so entitled to vote shall be entitled to
exercise the special voting rights provided in this paragraph
at such annual meeting. No such special meeting and no
adjournment thereof shall be held on a date later than 60 days
before the annual meeting of stockholders. If, at any meeting
so called or at any annual meeting held which the holders of
shares of Series A Preferred Stock have the special voting
rights provided for in this paragraph, the holders of not less
than 40% of the aggregate voting power of Series A Preferred
Stock and each Other Series of Preferred Stock then
outstanding are present in person or by proxy, such percentage
shall be sufficient to constitute a quorum for the election of
the two directors as herein provided.
(iii) Upon the
election at such meeting by the holders of shares of Series A
Preferred Stock and each Other Series of Preferred Stock,
voting as a class, of the directors they are entitled so to
elect, the
<PAGE> 8
persons so elected, together with such persons as may be
directors or as may have been elected as directors by the
holders of all shares (including Series A Preferred Stock and
each other Series of Preferred Stock) otherwise entitled to
vote for directors, shall constitute the duly elected
directors of the Corporation. The directors so elected by
holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock, voting as a class, shall serve
until the next annual meeting or until their respective
successors shall be elected and qualified, or if any such
director is a member of a class of directors under provisions
dividing the directors into classes, each such director shall
serve until the annual meeting at which the term of office of
such director's class shall expire or until such director's
successor shall be elected and shall qualify, and at each
subsequent meeting of stockholders at which the directorship
of any director elected by the vote of holders of shares of
Series A Preferred Stock and each Other Series of Preferred
Stock under the special voting rights set forth in this
paragraph is up for election, said special class voting rights
shall apply in the reelection of such director or in the
election of such director's successor; provided, however, that
whenever the holders of shares of Series A Preferred Stock and
each Other Series of Preferred Stock shall be divested of the
special rights to elect two directors as above provided, the
terms of office of all persons elected as directors by the
holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock, voting as a class, shall forthwith
terminate, and two directors shall be elected by the holders
of all shares (including the Series A Preferred Stock and each
other series of Preferred Stock) to fill their positions.
(iv) If, at any time
after a special meeting of stockholders or an annual meeting
of stockholders at which the
<PAGE> 9
holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock, voting as a class, have elected
directors as provided above, and while the holders of shares
of Series A Preferred Stock and each Other Series of Preferred
Stock shall be entitled so to elect two directors, the number
of directors who have been elected by the holders of shares of
Series A Preferred Stock and each Other Series of Preferred
Stock (or who by reason of one or more resignations, deaths or
removals have succeeded any directors so elected) shall by
reason of resignation, death or removal by less than two but
at least one, the vacancy in the directors so elected by the
holders of shares of the Series A Preferred Stock and each
Other Series of Preferred Stock may be filled by the remaining
director elected by such holders. In the event that such
election shall not occur within 30 days after such vacancy
arises, or in the event that there shall not be incumbent one
director so elected by such holders, the Secretary of the
Corporation may, and upon the written request of the holders
of record of 10% or more in number of the shares of Series A
Preferred Stock and each Other Series of Preferred Stock then
outstanding addressed to the Secretary at the principal office
of the Corporation shall, call a special meeting of the
holders of shares of Series A Preferred Stock and each Other
Series of Preferred Stock so entitled to vote, for an election
to fill such vacancy or vacancies, to be held within 60 days
after such call and at the place and upon the notice provided
by law and in the Bylaws for the holding of meetings of
stockholders; provided, however, that the Secretary shall not
be required to call such special meeting in the case of any
such request received less than 90 days before the date fixed
for any annual meeting of stockholders, and if in such case
such special meeting is not called, the holders of shares of
Preferred Stock so entitled to vote shall be
<PAGE> 10
entitled to fill such vacancy or vacancies at such annual
meeting. If any such special meeting required to be called as
above provided shall not be called by the Secretary within 30
days after receipt of any such request, then the holders of
record of 10% or more in number of the shares of Series A
Preferred Stock and each Other Series of Preferred Stock then
outstanding may designate in writing one of their number to
call such meeting, and the person so designated may, at the
expense of the Corporation, call such meeting to be held at
the place and upon the notice above provided, and for that
purpose shall have access to the stock books of the
Corporation; no such special meeting and no adjournment
thereof shall be held on a date later than 60 days before the
annual meeting of stockholders.
(d) Nothing herein
shall prevent the directors or stockholders from taking any
action to increase the number of authorized shares of Series A
Preferred Stock, or increasing the number of authorized shares
of Preferred Stock of the same class as the Series A Preferred
Stock or the number of authorized shares of Common Stock, or
changing the par value of the Common Stock or Preferred Stock,
or issuing options, warrants or rights to any class of stock
of the Corporation as authorized by the Amended and Restated
Articles of Incorporation of the Corporation, as it may
hereafter be amended.
(e) Except as set forth
herein, holders of shares of Series A Preferred Stock shall
have no special voting rights and their consent shall not be
required (except to the extent they are entitled to vote as
set forth in the Amended and Restated Articles of
Incorporation of the Corporation or herein or by law) for
taking any corporate action.
<PAGE> 11
(3) Restrictions.
(a) Whenever any
dividends or other distributions payable on the Series A
Preferred Stock as provided in Section C(1) hereof are in
arrears, thereafter and until all accrued and unpaid dividends
and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in
full, the Corporation shall not, directly or indirectly:
(i) declare or pay
dividends on, or made any other distributions with respect to,
any shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding up) to the Series A
Preferred Stock;
(ii) declare or pay
dividends on, or make any other distributions with respect to,
any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with
the Series A Preferred Stock, except dividends paid ratably on
shares of the Series A Preferred Stock and all such parity
stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase
or otherwise acquire for consideration shares of any stock
ranking junior (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock,
provided that the Corporation may at any time redeem, purchase
or otherwise acquire shares of any such junior stock in
exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series A Preferred Stock; or
<PAGE> 12
(iv) purchase or
otherwise acquire for consideration any shares of Series A
Preferred Stock, or any shares of stock ranking on a parity
with the Series A Preferred Stock, except in accordance with a
purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective series
and classes, shall determine in good faith will result in fair
and equitable treatment among the respective series or
classes.
(b) The Corporation
shall not permit any subsidiary of the Corporation to purchase
or otherwise acquire for consideration, directly or
indirectly, any shares of stock of the Corporation unless the
Corporation could, under paragraph (a) of this Section 3,
purchase or otherwise acquire such shares at such time and in
such manner.
(4) Reacquired Shares. Any shares of Series
A Preferred Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and
cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but
unissued shares of preferred stock, without designation as to
series, and may be reissued as part of any series of preferred
stock created by resolution or resolutions of the Board of
Directors (including Series A Preferred Stock), subject to the
conditions and restrictions on issuance set forth herein.
<PAGE> 13
(5) Liquidation, Dissolution or Winding
Up. Upon any liquidation, dissolution or winding up of the
Corporation, no distribution shall be made to:
(a) the holders of shares of
stock ranking junior (either as to dividends or upon
liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares
of Series A Preferred Stock shall have received the greater of
(i) $1.00 per share ($.01 per one one-hundredth of a share),
plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not declared, to the date of
such payment, or (ii) an aggregate amount per share, subject
to the provision for adjustment hereinafter set forth, equal
to 100 times the aggregate amount to be distributed per share
to holders of shares of Common Stock; or
(b) the holders of shares of
stock ranking on a parity (either as to dividends or upon
liquidation, dissolution or winding up) with the Series A
Preferred Stock, except distributions made ratably on the
Series A Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all
such shares are entitled upon such liquidation, dissolution or
winding up.
In the event that the corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of
Common Stock, then and in each such event, the aggregate
amount to which the holder of each share of Series A Preferred
Stock was entitled immediately prior to such event under
clause 5(a) of the preceding sentence shall be adjusted
<PAGE> 14
by multiplying such amount by a fraction, the numerator of
which is the number of shares of Common Stock outstanding
immediately after such event, and the denominator of which is
the number of shares of Common Stock that were outstanding
immediately prior to such event.
(6) Consolidation, Merger, etc. In the event
that the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares
of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, or otherwise
changed, then and in each such event, the shares of Series A
Preferred Stock shall at the same time be similarly exchanged
or changed in an amount per share (subject to the provision
for adjustment hereinafter set forth) equal to 100 times the
aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or
for which each share of Common Stock is changed or exchanged.
In the event that the Corporation shall at any time declare or
pay any dividend on Common Stock payable in shares of Common
Stock, or effect a subdivision or combination or consolidation
of the outstanding shares of Common Stock (by reclassification
or otherwise) into a greater or lesser number of shares of
Common Stock, then and in each such event, the amount set
forth in the preceding sentence with respect to the exchange
or change of shares of Series A Preferred Stock shall be
adjusted by multiplying such amount by a fraction, the
numerator of which is the number of shares of Common Stock
outstanding immediately after such event, and the denominator
of which is the number of shares of Common Stock that were
outstanding immediately prior to such event.
(7) No Redemption. The shares of Series A
Preferred Stock shall not be
<PAGE> 15
redeemable. Notwithstanding the foregoing, the Corporation may
acquire shares of Series A Preferred Stock in any other manner
permitted by law, the Amended and Restated Articles of
Incorporation of the Corporation or herein.
(8) Rank. Unless otherwise provided in the
amended and Restated Articles of Incorporation of the
Corporation or a Certificate of Determination relating to a
subsequent series of preferred stock of the Corporation, the
Series A Preferred Stock shall rank junior to all other series
of the Corporation's preferred stock as to the payment of
dividends and the distribution of assets on liquidation,
dissolution or winding up, and senior to the Common Stock of
the Corporation.
(9) Amendment. The Amended and Restated
Articles of Incorporation of the Corporation shall not be
amended in any manner that would materially and adversely
alter or change the powers, preferences or special rights of
the Series A Preferred Stock without the affirmative vote of
the holders of at least two-thirds of the outstanding shares
of Series A Preferred Stock, voting together as a single
series.
(10) Fractional Shares. Series A Preferred
Stock may be issued in fractions of a share (in one
one-hundredths (1/100) of a share and integral multiples
thereof) that shall entitle the holder thereof, in proportion
to such holder's fractional shares, to exercise voting rights,
receive dividends, participate in distributions and have the
benefit of all other rights of holders of shares of Series A
Preferred Stock.
ARTICLE IV
<PAGE> 16
The corporation reserves the right to amend, alter, or repeal
any provision contained in these Articles of Incorporation, in
the manner now or hereafter prescribed by law, and all rights
and powers conferred by these Articles of Incorporation on
shareholders, directors and officers are granted subject to
this reservation.
ARTICLE V
A. The liability of the directors of
the corporation for monetary damages shall
be eliminated to the fullest extent permissible
under California law.
B. The corporation is authorized to provide
indemnification of agents (as defined in Section 317 of the
Corporations Code) through by-law provisions, agreements with
agents, vote of shareholders, or otherwise, in excess of the
indemnification otherwise permitted by Section 317 of the
California Corporations Code, subject only to the limits set
forth in Section 204 of the Corporations Code with respect to
actions for breach of duty to the corporation and its
shareholders.
ARTICLE VI
A. The authorized number of Directors of the
Corporation shall not be less than five (5) nor more than nine
(9) and the exact number of directors initially authorized
shall be nine (9). The exact number of Directors may be fixed
within the limits specified in this Article VI.A by a
resolution adopted by the Board of Directors, or by a vote of
the holders of a majority of the voting power of the
outstanding shares of capital stock entitled to vote. The
minimum or maximum number of directors provided in this
Article VI.A may be changed only by amendment
<PAGE> 17
to these Articles of Incorporation duly adopted by the
affirmative vote of the holders of a majority of the voting
power of outstanding shares of capital stock entitled to vote
and by a resolution duly adopted by the Board of Directors.
Subject to the rights of any outstanding series of Preferred
Stock, all directors shall be elected by the holders of all
outstanding shares of capital stock, voting together as a
single class.
B. So long as the Corporation remains a "Listed
Corporation" within the meaning of Section 301.5 of the
California Corporations Code and so long as the authorized
number of directors of the Corporation is nine or more, the
composition of the Board of Directors of the Corporation shall
be determined as set forth in this subsection. The Directors
shall be divided into three classes, as nearly equal in number
as reasonably possible, with the term of office of the first
class to expire at the annual meeting of shareholders in 1997,
the term of office of the second class to expire at the annual
meeting of shareholders in 1988 and the term of office of the
third class to expire at the annual meeting of shareholders in
1999. At each annual meeting of shareholders hereafter,
directors shall be elected for a term of office to expire at
the third succeeding annual meeting of shareholders after
their election. All directors shall hold office until the
expiration of the term for which elected, and until their
respective successors are elected, except in the case of the
death, resignation, or removal of any director."
3. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the Board of Directors.
4. The foregoing amendment and restatement of the Articles of
Incorporation has been duly approved by the required vote of the
<PAGE> 18
shareholders in accordance with Section 902 of the California Corporations Code.
The total number of outstanding shares Common Stock of the corporation entitled
to vote on this amendment is 6,094,203. The number of shares voting in favor of
the amendment equalled or exceeded the vote required. The percentage vote
required was more than 50%. There are no shares of Preferred Stock outstanding.
<PAGE> 19
We further declare under penalty of perjury under the laws of
the State of California that the matters set forth in this Certificate are true
and correct of our own knowledge.
Dated: November ___, 1996
- -----------------------------
ROBERT ERICKSON
President
- -----------------------------
DOUGLAS GOULD
Secretary
<PAGE> 1
Exhibit 4.2
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST AMENDMENT TO RIGHTS AGREEMENT dated as of July 12, 1991 (the
"Rights Agreement") between Citation Insurance Group ("the Company") and
Registrar and Transfer Company, as successor rights agent (the "Rights Agent")
is dated as of April 30, 1996.
WHEREAS, the Company and the Rights Agent (as successor to Security
Pacific National Bank) are parties to the Rights Agreement; and
WHEREAS, the Company and the Rights Agent desire to confirm the
appointment of the Rights Agent as the successor Rights Agent under the Rights
Agreement effective as of December 1, 1992; and
WHEREAS, the Company and the Rights Agent desire to amend certain
provisions of the Rights Agreement regarding successor Rights Agents; and
WHEREAS, the Company and Physicians Insurance Company of Ohio ("PICO")
have entered into that certain Agreement and Plan of Reorganization dated as of
April 30, 1996 (the "Reorganization Agreement") pursuant to which Citation
Holdings, Inc., a wholly-owned subsidiary of the Company, will merge with and
into PICO and as a result thereof the shareholders of PICO shall become
shareholders of the Company; and
WHEREAS, it is in the best interests of the shareholders of the
Company that the Rights Agreement be amended as set forth herein;
and
WHEREAS, Section 27 of the Rights Agreement provides that a majority,
but not less than three, of the Independent Directors (as defined in the Rights
Agreement) may direct the Company and the Rights Agent to supplement or amend
any provision of the Rights Agreement in any manner; and
WHEREAS, a majority of such Independent Directors, by resolution duly
adopted, has directed the Company and the Rights Agent to amend the Rights
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Rights Agreement as follows:
<PAGE> 2
The Company and the Rights Agent hereby confirm and ratify the
appointment, as of December 1, 1992, of Registrar and Transfer Company, a New
Jersey corporation, as the successor Rights Agent with the same powers, rights,
duties and responsibilities as if it had been originally named as Rights Agent.
<PAGE> 3
1. The Company and the Rights Agent hereby confirm and ratify the
amendment, as of December 1, 1992, of Section 21 of the Rights Agreement which
has been amended to delete the fifth sentence of Section 21 and in its place
substituting a new fifth sentence to read as follows:
"Any successor Rights Agent, whether appointed by the Company
or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the States
of New Jersey, New York or California (or of any other state
of the United States so long as such corporation is authorized
to do business in the States of New Jersey, New York or
California), in good standing, registered as a Transfer Agent
in accordance with the applicable provisions of the Securities
Exchange Act of 1934, as amended, and qualified to act as a
Transfer Agent under the rules of the New York Stock Exchange
and the National Association of Securities Dealers, Inc."
2. Effective as of the date hereof, the proviso to the first sentence
of the definition of "10% Stockholder" in Section 1(y) of the Rights Agreement
is hereby amended by adding a new subsection (iii) immediately following the
words "then outstanding" at the end of such proviso and before the beginning of
the next sentence. Said new subsection (iii) shall read in its entirety as
follows:
"; or (iii) any shareholder (a "Shareholder"), together with
all Affiliates and Associates of such Shareholder, of
Physicians Insurance Company of Ohio, an Ohio corporation
("PICO") who acquires Beneficial Ownership of Voting Shares of
the Company as a result of the consummation of the merger of
PICO with and into a wholly-owned subsidiary of the Company
(the
<PAGE> 4
"Merger") as contemplated by that certain Agreement and Plan
of Reorganization dated as of April 30, 1996 between the
Company and PICO, but only if such Shareholder would not
otherwise be a 10% Stockholder but for the acquisition of
Voting Shares in the Merger; provided, however, that the term
"10% Stockholder" shall include such Shareholder from and
after the first date upon which (A) such Shareholder, since
the effective date of the Merger, shall have acquired
Beneficial Ownership of, in the aggregate, a number of Voting
Shares of the Company equal to 1% or more of the Voting Shares
of the Company then outstanding and (B) such Shareholder,
together with all Affiliates and Associates of such
Shareholder, shall beneficially own 10% or more of the Voting
Shares of the Company then outstanding."
3. Except as set forth herein, the Rights Agreement shall
remain in full force and effect.
4. This Amendment shall be deemed to be a contract made under the laws
of the State of California and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and performed entirely within such state.
5. This Amendment may be executed in any number of counterparts and
each such counterpart shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be duly executed as of the day and year first above
written.
<PAGE> 5
Attest:
CITATION INSURANCE GROUP
By: /s/ Douglas S. Gould By: /s/ Donald Henderson
--------------------------- ------------------------
Name: Douglas S. Gould Name: Donald Henderson
------------------------- ----------------------
Title: Vice President and Secretary Title: President and CEO
-------------------------------- ---------------------
REGISTRAR AND TRANSFER
COMPANY
By: /s/ William P. Tatler
-------------------------
Name: William P. Tatler
-----------------------
Title: Vice President
----------------------
<PAGE> 1
Exhibit 4.3
SECOND AMENDMENT TO RIGHTS AGREEMENT
THIS SECOND AMENDMENT TO RIGHTS AGREEMENT is made and entered into as
of November 20, 1996 (the "Rights Agreement") by and among Citation Insurance
Group ("the Company"), Registrar and Transfer Company, the Company's current
Rights Agent ("Registrar"), and The Huntington National Bank, as successor
Rights Agent ("Huntington"), for the purpose of amending that certain Rights
Agreement, dated July 12, 1991.
WHEREAS, the Company and Registrar (as successor to Security Pacific
National Bank) are the current parties to the Rights Agreement; and
WHEREAS, the Company and Physicians Insurance Company of Ohio ("PICO")
have entered into that certain Agreement and Plan of Reorganization dated as of
May 1, 1996 (the "Reorganization Agreement"), pursuant to which Citation
Holdings, Inc., a wholly-owned subsidiary of the Company, will merge with and
into PICO (the "Merger") and as a result thereof the shareholders of PICO shall
become shareholders of the Company; and
WHEREAS, the Company and Huntington desire to confirm the appointment
of Huntington as the successor Rights Agent under the Rights Agreement effective
immediately prior to the Merger; and
WHEREAS, it is in the best interests of the shareholders of the
Company that the Rights Agreement be amended as set forth herein;
and
WHEREAS, Section 27 of the Rights Agreement provides that a majority,
but not less than three, of the Independent Directors (as defined in the Rights
Agreement) may direct the Company and the Rights Agent to
<PAGE> 2
supplement or amend any provision of the Rights Agreement in any manner; and
WHEREAS, a majority of such Independent Directors, by resolution duly
adopted, has directed the Company and the Rights Agent to amend the Rights
Agreement as set forth herein;
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree to amend the Rights Agreement as follows:
Effective immediately prior to the Merger, (a) The Huntington
National Bank shall be the successor Rights Agent under the Rights Agreement,
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent, and (b) Registrar shall be terminated as the
Rights Agent under the Rights Agreement.
1. Except as set forth herein, the Rights Agreement shall remain in
full force and effect.
2. This Amendment shall be deemed to be a contract made under the laws
of the State of California and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and performed entirely within such state.
3. This Amendment may be executed in any number of counterparts and
each such counterpart shall for all purposes be deemed to be an original, and
all such counterparts shall together constitute one and the same instrument.
<PAGE> 3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
Attest: REGISTRAR AND TRANSFER
COMPANY
By: /s/ William P. Tatler
-----------------------------
By: /s/ Douglas S. Gould
--------------------------
Name: William P. Tatler
-----------------------------
Name: Douglas S. Gould
------------------------
Title: Vice President
-----------------------------
Title: Vice President and Secretary
-----------------------------
CITATION INSURANCE GROUP THE HUNTINGTON NATIONAL
BANK
By:/s/ Mark A. Dunn
--------------------------------
By:/s/ Robert M. Erickson
---------------------------
Name: Mark A. Dunn
-----------------------------
Name: Robert M. Erickson Title: Trust Officer
------------------------ ----------------------------
Title: Chief Executive Officer
and Chief Financial Officer
---------------------------
<PAGE> 1
Exhibit 16.1
December 4, 1996
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, D.C. 20549
Dear Sirs/Madams:
We have read and agree with the comments in Item 4, except for the matters set
forth in the first and third sentences of paragraph 4(a)(i) and paragraph 4(b),
as to which we have no basis to agree or disagree, of the Current Report on Form
8-K of PICO Holdings, Inc. dated November 20, 1996.
Yours truly,
/s/ Deloitte & Touche LLP
- ---------------------------
Deloitte & Touche LLP
San Jose, California
December 4, 1996
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form 8-K of our reports
dated April 15, 1996, on our audit of the consolidated financial statements of
Physicians Insurance Company of Ohio and its subsidiaries as of December 31,
1995 and 1994, and for the three years in the period ended December 31, 1995 and
1994, and for the three years in the period ended December 31, 1995, and our
report dated November 3, 1995, on our audit of Sequoia Insurance Company as of
December 31, 1994 and 1993 and for the three years in the period ended December
31, 1994 appearing in the registration statement on Form S-4 (SEC File No.
333-06671) of Citation Insurance Group filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933.
/s/ Coopers & Lybrand L.L.P.
------------------------------
Coopers & Lybrand L.L.P.
Columbus, Ohio
December 4, 1996
<PAGE> 1
Exhibit 23.2
The Board of Directors
Global Equity Corporation
We consent to the incorporation by reference in Form 8-K dated November 20, 1996
of PICO Holdings, Inc. of our report dated May 16, 1995 on the consolidated
statements of financial position of the Ondaatje Corporation as at March 31,
1995 and 1994 and the consolidated statements of operations, deficit and changes
in financial position for each of the years in the three year period ended March
31, 1995, which report appears in the Form S-4 (File No. 333-06671) dated
October 2, 1996 of Citation Insurance Group.
/s/ KPMG
Toronto, Canada
December 4, 1996
