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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement
[ ] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY
RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
Citizens, Inc.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
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2) Aggregate number of securities to which transaction applies:
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3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
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4) Proposed maximum aggregate value of transaction:
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5) Total fee paid:
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
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2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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The Securities and Exchange Commission should contact:
Reid A. Godbolt, Esq.
David A. Thayer, Esq.
Jones & Keller, P.C.
1625 Broadway, Suite 1600
Denver, Colorado 80202
303-573-1600 (telephone)
303-573-0769 (facsimile)
with respect to comments.
PERSONS WHO POTENTIALLY ARE TO RESPOND TO THE COLLECTION OF INFORMATION
CONTAINED IN THIS FORM ARE NOT REQUIRED TO RESPOND UNLESS THE FORM DISPLAYS A
CURRENTLY VALID OMB CONTROL NUMBER.
SEC 1913 (02-02)
CITIZENS, INC.
400 EAST ANDERSON LANE
AUSTIN, TEXAS 78752
(512) 837-7100
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
MARCH 4, 2004
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To the Shareholders of Citizens, Inc.:
DATE: March 4, 2004
TIME: 10:00 a.m. Central time
PLACE: 400 East Anderson Lane
Austin, Texas
WE ARE HOLDING THIS MEETING:
1. To consider and act upon a proposal to amend our Articles of
Incorporation to (i) increase the number of authorized shares
of our Class A common stock from 50,000,000 to 100,000,000
shares and (ii) increase the number of authorized shares of
our Class B common stock from 1,000,000 to 2,000,000 shares.
2. To consider and act upon a proposal to amend our Articles of
Incorporation to create an authorized class of 25,000,000
shares of preferred stock available for future issuance in
series with terms and preferences designated by our Board of
Directors.
3. To consider and act upon a proposal to amend Article V of our
Articles of Incorporation to increase the maximum number of
directors on our Board of Directors from nine members to up to
15 members.
4. To transact any other business properly brought before the
meeting or any adjournment thereof.
You are cordially invited to attend the meeting in person. To ensure
that you are represented at the meeting, please fill in, sign, and return the
enclosed proxy card as promptly as possible. Your early attention to the proxy
statement and proxy card will be greatly appreciated. IF YOUR SHARES ARE HELD IN
STREET OR NOMINEE NAME, PLEASE RESPOND TO THE RECORD HOLDER'S COMMUNICATION WITH
YOU AS SOON AS POSSIBLE SO THAT YOUR SHARES CAN BE REPRESENTED AT THE MEETING.
By Order of the Board of Directors
/s/ Marcia F. Emmons
Marcia F. Emmons, Secretary
January 26, 2004
CITIZENS, INC.
400 EAST ANDERSON LANE
AUSTIN, TEXAS 78752
PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
This Proxy Statement is furnished to you in connection with the
solicitation of proxies by our Board of Directors for use at our special meeting
of shareholders to be held at 10:00 a.m. Central time on March 4, 2004, at our
headquarters located at 400 East Anderson Lane, Austin, Texas. This Proxy
Statement and the enclosed proxy card were sent to shareholders on or about
January 26, 2004.
The following matters will be acted on at our meeting:
1. To consider and act upon a proposal to amend Article III of
our Articles of Incorporation to (i) increase the number of
authorized shares of our Class A common stock from 50,000,000
to 100,000,000 shares and (ii) increase the number of
authorized shares of our Class B common stock from 1,000,000
to 2,000,000 shares.
2. To consider and act upon a proposal to amend Article III of
our Articles of Incorporation to create an authorized class of
25,000,000 shares of preferred stock available for future
issuance in series with terms and preferences designated by
our Board of Directors.
3. To consider and act upon a proposal to amend Article V of our
Articles of Incorporation to increase the maximum number of
directors on our Board of Directors from nine members to up to
15 members.
4. To transact any other business properly brought before the
meeting or any adjournment thereof.
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GENERAL INFORMATION ABOUT VOTING
Who can vote?
Holders of our Class A and Class B common stock can vote their shares
if our records show that you owned the shares on January 22, 2004. A total of
34,935,419 shares of Class A common stock and 874,935 shares of Class B common
stock can vote at the meeting. Each share of common stock is entitled to one
vote. Each proxy card indicates the number of shares that you will be entitled
to vote at the meeting.
How do I vote by proxy?
Follow the instructions on the enclosed proxy card to vote on each
proposal to be considered at the meeting. Sign and date the proxy card and mail
it back to us in the enclosed envelope. The proxyholders named on the proxy card
will vote your shares as you instruct. If you sign and return the proxy card but
do not vote on a matter, the proxyholders will vote for you on that proposal.
Unless you instruct otherwise, the proxyholders will vote:
- for the proposal to amend Article III of our Articles of
Incorporation to (i) increase the number of authorized shares
of our Class A common stock from 50,000,000 to 100,000,000
shares and (ii) increase the number of authorized shares of
our Class B common stock from 1,000,000 to 2,000,000 shares;
- for the proposal to amend Article III of our Articles of
Incorporation to create an authorized class of 25,000,000
shares of preferred stock available for future issuance in
series with terms and preferences designated by our Board of
Directors;
- for the proposal to amend Article V of our Articles of
Incorporation to increase the maximum number of directors on
our Board of Directors from nine members to up to 15 members.
- in the discretion of the proxyholders with respect to any
other matters properly brought before the meeting.
What if other matters come up at the meeting?
The matters described in this proxy statement are the only matters we
know will be voted on at the meeting. If other matters are properly presented at
the meeting, the proxyholders will vote your shares in their discretion.
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Can I change my vote after I return my proxy card?
Yes. At any time before the vote on a proposal, you can change your
vote either by giving our secretary, Marcia F. Emmons, at our address shown
above, a written notice revoking your proxy card or by signing, dating, and
returning to us a new proxy card. We will honor the proxy card with the latest
date.
Can I vote in person at the meeting rather than by completing the proxy card?
Although we encourage you to complete and return the proxy card to
ensure that your vote is counted, you can attend the meeting and vote your
shares in person, even if you have previously completed and returned a proxy
card.
What do I do if my shares are held in "street name"?
If your shares are held by your broker, a bank, or other nominee, you
will probably receive this proxy statement from them with instructions for
voting your shares. Please respond quickly so that they may represent you.
If your shares are held in the name of a broker, bank, or other
nominee, and you do not tell that person how to vote your shares (so-called
"broker non-votes"), that person can vote them as they see fit only on matters
that self regulatory organizations determine to be routine, and not on any other
proposal such as the proposals to amend our Articles of Incorporation. Broker
non-votes will be counted as present to determine if a quorum exists, but will
not be counted as present and entitled to vote on any non-routine proposal.
How are votes counted?
We will proceed with the shareholders meeting if at least one-third of the
outstanding shares of common stock entitled to vote either sign and return their
proxy cards or attend the meeting. If you sign and return your proxy card, your
shares will be counted to determine whether we have a quorum even if you abstain
or fail to vote on any of the proposals listed on the proxy card. With respect
to the three proposals to amend our Articles of Incorporation, each proposal
will require the approval of at least a majority of the shares of the Class A
and Class B common stock issued and outstanding, with each class voting
separately as a voting group.
Who pays for this proxy solicitation?
We will pay the cost of this solicitation. In addition to sending you
these materials, some of our officers or directors may contact you by telephone,
by mail, or in person. None of these individuals will receive any extra
compensation for doing this.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
We have two classes of common stock. Both classes of common stock are
equal in all respects, except that (i) Class B common shareholders elect a
simple majority of the Board of Directors of the Company and Class A common
shareholders elect the remaining directors; and (ii) Class A shareholders
receive, on a per-share basis, twice the cash dividends paid on a per-share
basis to Class B shareholders. Each outstanding share of common stock has one
vote in all matters to be considered at the meeting.
Management knows of no matters to be submitted at the Meeting with
respect to which the shareholders are entitled to vote, other than the proposals
described in this proxy statement. In the event other matters properly come
before the Meeting, the persons named in the proxy will vote according to their
best judgment.
The following table shows, as of December 31, 2003, certain information
with regard to the beneficial ownership of our Common Stock:
- by each of our executive officers and directors,
- by all of our executive officers and directors as a group, and
- by each person who is known by us to own beneficially more
than 5% of our outstanding common stock.
SHARES OWNED AND PERCENT OF
NAME AND ADDRESS NATURE OF OWNERSHIP(1) CLASS
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Harold E. Riley 4,765,483 Class A (2) 13.6%
400 E. Anderson Lane 874,935 Class B (2) 100.0%
Austin, TX 78752
Rick D. Riley 681,161 Class A (3) 1.9%
400 E. Anderson Lane
Austin, TX 78752
Ray A. Riley 417,124 Class A (4) 1.2%
400 E. Anderson Lane
Austin, TX 78752
Timothy T. Timmerman 7,937 Class A (5)
2490 FM 685
Hutto, TX 78634
Steven F. Shelton 2,654 Class A (5)
7359 Road X
Lamar, Colorado 81052
5
Mark A. Oliver 5,468 Class A (5)
400 E. Anderson Lane
Austin, TX 78752
Marcia F. Emmons 39 Class A (5)
400 E. Anderson Lane
Austin, TX 78752
David J. Mehle -- (5)
400 E. Anderson Lane
Austin, TX 78752
Dr. E. Dean Gage 1,086 Class A (5)
Texas A&M University
College of Veterinary Medicine
College Station, Texas 77843
Dr. Richard C. Scott -- (5)
Baylor University
University Development
Robinson Tower, 8th Floor
Waco, Texas 76798
All executive officers 5,880,952 Class A 16.8%
and directors as 100.0%
a group (ten persons) 874,935 Class B
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(1) Except as otherwise indicated, each person named in the table has sole
voting and investment power with respect to all shares beneficially
owned, subject to applicable community property law.
(2) Owns 4,405,547 Class A shares directly and spouse owns 359,936 Class A
shares. The Harold E. Riley Trust, of which Mr. Riley is the
controlling Trustee, owns all of the 874,935 issued and outstanding
shares of Class B common stock.
(3) Owns 411,532 Class A shares directly, 22,165 Class A shares as joint
tenant with spouse, and 227,940 and 19,524 Class A shares indirectly as
trustee for minor children and spouse, respectively.
(4) Owns 253,382 Class A shares directly, 20,805 Class A shares as joint
tenant with spouse, and 142,937 Class A shares indirectly as trustee
for minor children.
(5) Owns less than one percent (1%).
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We are not aware of any arrangement, including any pledge by any person, of our
common stock, the operation of which may at a subsequent date result in a change
of control of the company.
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BACKGROUND FOR PROPOSALS 1 THROUGH 3
We were incorporated in Colorado in November 1977. Over the years, our
shareholders have approved various amendments to our Articles of Incorporation,
some amendments which have amended earlier amendments. Because our Articles of
Incorporation and amendments thereto date back over a period of 25 years, it is
difficult to determine the content of our Articles of Incorporation as currently
in effect since the whole of the articles are in multiple filings over the
years. The Colorado Business Corporation Act ("CBCA"), which is the current law
that controls corporations formed in Colorado, allows Colorado corporations to
restate their Articles of Incorporation in order to bring the original articles
and all amendments thereto into one document. We are restating our Articles of
Incorporation for purposes of clarity.
Under the CBCA, a restatement of articles of incorporation does not
require shareholder approval since the action simply combines existing articles
into one document. However, the CBCA also allow Colorado corporations to amend
their articles of incorporation while restating the articles. The CBCA requires
shareholder approval for any amendments to our Articles of Incorporation. Our
Board of Directors is recommending to our shareholders three separate amendments
which are described in the three proposals which follow. We have attached a copy
of our Articles of Incorporation, restated and as proposed to be amended, as
Appendix A to this proxy statement.
PROPOSAL NO. 1 TO AMEND OUR ARTICLES OF INCORPORATION
TO INCREASE THE NUMBER OF AUTHORIZED
SHARES OF COMMON STOCK
General
To provide for our future capital needs, our Board of Directors on
January 9, 2004, unanimously adopted a resolution, subject to shareholder
approval, to amend Article III of our Articles of Incorporation to provide
additional authorized shares of common stock (a copy of Article III, as it is
proposed to be amended, is attached to this proxy statement as Appendix A). The
proposal provides for an increase in the authorized number of shares of our
Class A common stock from 50,000,000 to 100,000,000 shares, and for an increase
in the authorized number of shares of our Class B common stock from 1,000,000 to
2,000,000 shares.
Both classes of common stock are equal in all respects, except that (i)
Class B common shareholders elect a simple majority of the Board of Directors of
the Company and Class A common shareholders elect the remaining directors; and
(ii) Class A shareholders receive, on a per-share basis, twice the cash
dividends paid on a per-share basis to Class B shareholders. Each outstanding
share of common stock has one vote in all matters to be considered at the
Meeting. In the election of directors, the nominees receiving the highest
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number of votes cast in their favor will be elected to our board, subject to the
right of the Class B shareholders to elect a simple majority of the directors.
Of our presently authorized 50,000,000 shares of Class A common stock,
as of December 31, 2003, 37,674,293 shares were issued including 2,738,874
shares in treasury. No shares are reserved for future issuance. Therefore, we
have approximately 12,325,707 authorized, unissued, and unreserved shares of
Class A Common stock.
Of our presently authorized 1,000,000 shares of Class B common stock,
874,935 shares are outstanding and no shares are reserved for future issuance.
Therefore, we have 125,065 authorized, unissued, and unreserved shares of Class
B Common stock. All of the outstanding Class B shares are owned by the Harold E.
Riley Trust, of which our Chairman, Harold E. Riley, is trustee.
Increase of the Class A and B Common Stock Authorization
Our Board of Directors believes that it is in our company's best
interest to increase the number of authorized shares of Class A and B common
stock in order to have additional authorized but unissued shares available for
issuance to meet business needs as they arise. The Board of Directors believes
that the availability of such additional shares will provide our company with
the flexibility to issue common stock for possible future financing
transactions, stock dividends or distributions, acquisitions, and other proper
corporate purposes that may be identified by the Board of Directors. In the past
five years we have acquired five insurance companies. The sole consideration
paid in each of these acquisitions was the issuance of shares of our Class A
common stock to the shareholders of these companies. We have no plans,
arrangements, agreements, or understandings at the present time regarding any
acquisition using our common stock. However, our Board of Directors may consider
future acquisition opportunities and believes it to be in our best interests to
have sufficient shares of Class A and Class B common stock available for our
future financing needs. The Board of Directors does not intend to issue any
Class A and Class B common stock except on terms that the Board of Directors
deems to be in the best interests of our company and its shareholders.
The authorized shares of Class A and Class B common stock in excess of
those issued will be available for issuance at such times and for such corporate
purposes as our Board of Directors may deem advisable, without further action by
our shareholders, except as may be required by applicable law or by the rules of
the New York Stock Exchange. Upon issuance, such shares will have the same
rights as the outstanding shares of Class A and Class B common stock. Holders of
Class A and Class B common stock have no preemptive rights.
The issuance of additional shares of Class A and Class B common stock,
other than through a stock split in the form of a stock dividend, may have a
dilutive effect on earnings per share and on the percentage voting power of
existing shareholders. Any future issuance of Class
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A and Class B common stock will be subject to the rights of holders of
outstanding shares of any preferred stock that our company may issue in the
future if the preferred stock proposal discussed in this proxy statement is
approved. See the discussion of Proposal No. 2 below.
Potential Effects of the Proposed Amendment
In deciding whether to issue additional shares of common stock, our
Board of Directors will consider the effect of the issuance on our operating
results and our then-existing shareholders. Since the simple majority of our
Board of Directors is elected by the holders of our Class B common stock, the
issuance of shares of Class A common stock in the future will likely not
significantly affect the control of our company. However, the acquisition of
shares of our Class A common stock by an entity in order to acquire a strong
influence on the Board of Directors and our policies might be discouraged
through the public or private issuance of additional shares of Class A common
stock, since such issuance would dilute the stock ownership of the acquiring
entity. The Board of Directors is committed to increasing the underlying value
of the shares owned by all holders in the event shares are issued. Our Board of
Directors did not propose this amendment for the purpose of discouraging
mergers, tender offers, proxy contests, or other changes in control of our
company and we are not aware of any specific effort by any party to accumulate
our Class A common stock.
Our outstanding Class B common stock elects a majority of our Board of
Directors. All of the outstanding shares of our Class B common stock are owned
indirectly by Harold E. Riley, Chairman of the Board, through the Harold E.
Riley Trust. Additionally, Mr. Riley is the largest Class A shareholder.
Therefore, as a practical matter, Mr. Riley has effective control over
significant corporate transactions. Additionally, cumulative voting of shares is
not permitted by our Articles of Incorporation. These factors make it more
difficult and time consuming for a third party to acquire control of Citizens or
to change the board of directors of Citizens. Authorization of an additional one
million shares to the number of Class B common stock we can issue could have the
effect of diluting Mr. Riley's ability to effectively control the company if
such shares were issued to a third party. We do not have any current plans,
arrangements, agreements, or understandings at the present time regarding the
issuance of any shares of Class B common stock.
No rights of appraisal or similar rights of dissenters exist with
respect to this proposal.
Approval by Shareholders of the Proposed Amendment
Approval of the proposed amendment to our articles of incorporation
will require the affirmative vote of at least a majority of the issued and
outstanding shares of our Class A and Class B common stock, with each class
voting separately as a voting group. Upon approval by our shareholders, the
proposed amendment will become effective upon filing of articles of amendment
with the Colorado Secretary of State, which will occur as soon as practicable
following the meeting. In the event that the proposed amendment is not approved
by our
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shareholders at the meeting, the current articles of incorporation relating to
our common stock will remain in effect.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE PROPOSAL TO AMEND THE
ARTICLES OF INCORPORATION TO INCREASE THE NUMBER OF OUR AUTHORIZED SHARES OF OUR
CLASS A AND CLASS B COMMON STOCK.
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PROPOSAL NO. 2
TO CREATE AND AUTHORIZE A CLASS OF 25,000,000 SHARES
OF PREFERRED STOCK AVAILABLE FOR FUTURE ISSUANCE
IN SERIES BY OUR BOARD OF DIRECTORS
General
To provide for our future capital needs, our Board of Directors on
January 9, 2004, unanimously adopted a resolution, subject to shareholder
approval, to amend Article III of our Articles of Incorporation to create and
authorize 25,000,000 shares of preferred stock. Our Articles of Incorporation
currently do not provide for the issuance of preferred stock.
Under the Colorado Business Corporation Act, if the proposed preferred
stock is approved by the shareholders, our Board of Directors will have the
authority to issue one or more series of preferred stock with such voting rights
(subject to the existing rights of our common stock with respect to the election
of directors), designations, preferences, and conversion or other special
rights, and such qualifications, limitations or restrictions, as our Board may
designate for each series issued from time to time. As such, the preferred stock
would be available for issuance without further action by our shareholders,
except as may be required by applicable law or pursuant to the requirements of
the New York Stock Exchange (or other exchange or quotations system upon which
our securities are then trading.)
Discussion of Proposed Preferred Stock
Our Board of Directors believe that the creation of preferred stock is
advisable and in the best interests of us and our shareholders for several
reasons. The authorization of the preferred stock would permit our board of
directors to issue such stock without shareholder approval and, thereby, provide
us with maximum flexibility in structuring acquisitions, joint ventures,
strategic alliances, capital-raising transactions and for other corporate
purposes.
The preferred stock would enable us to respond promptly to and take
advantage of market conditions and other favorable opportunities without
incurring the delay and expense associated with calling a special shareholders'
meeting to approve a contemplated stock issuance.
We do not view the authorization of the preferred stock as part of any
"anti-takeover" strategy. Any future series of preferred stock created by our
Board of Directors would be subject to the existing rights of our Class B common
shareholders to elect a simple majority of our Board of Directors and to the
Class A common shareholders to elect the remaining Board of Directors. However,
the issuance of shares of preferred stock under particular circumstances could
dilute or impair the voting power of our common stock with respect to other
matters.
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We may issue preferred stock without first offering it to holders of
our common stock, as the holders of our common stock have no preemptive rights.
The actual effect of the issuance of any shares of preferred stock upon the
rights of holders of our common stock cannot be stated until the Board
determines the specific rights of the holders of such series of preferred stock.
However, the effects might include, among other things, restricting dividends on
our common stock, diluting the voting power of our common stock (except with
respect to the elections of directors), reducing the market price of our common
stock, or impairing the liquidation rights of our common stock, without further
action by our shareholders.
We may consider issuing preferred stock in the future for purposes of
acquiring other businesses and raising additional capital or for other reasons.
Potential Issuance of Preferred Stock
On January 9, 2004, we entered into a term sheet with a New York based
institutional investor ("Investor"). The term sheet outlines a proposed issuance
of up to $25 million in senior convertible preferred stock by us to the
Investor. The letter agreement, while not a definitive agreement between the
parties, does require both the Investor and us to negotiate in good faith
towards a definitive agreement. The proposed preferred stock would be sold to
the Investor for cash. Net proceeds from the sale would be used for acquisitions
and general working capital. The term sheet is subject to:
- completion of due diligence by the Investor;
- mutual agreement on definitive terms, agreements and
documentation;
- no material adverse change affecting us prior to closing; and
- approval by our shareholders of this proposal to amend our
articles of incorporation to issue preferred stock.
While the exact rights and terms of the proposed preferred stock are
not final, the term sheet contemplates that the series of preferred stock would
have the following terms:
- Security and Issuance Amount -- $25 million of 4% Senior
Convertible Preferred Stock, of which $20 million would be
purchased on closing and an option to purchase an additional
$5 million for 12 months.
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- Dividend - 4% per annum, accrued to the principal face amount
of the preferred stock, compounded quarterly and payable in
cash or shares of our Class A common stock.
- Voting - None, other than class voting rights as will be
required under the Colorado Business Corporation Act.
- Term/Maturity - Principal face amount of the preferred stock
plus accrued, but unpaid, dividends would be due 60 months
after the closing.
- Payment Terms - We may pay the principal amount and any
dividends due in cash or, at our election, in shares of our
Class A common stock. If payment were to be made in Class A
shares, the number of shares issued would be calculated by
taking the dollar amount due and dividing it by the lesser of
(a) the conversion price or (b) 95% of the 15-day volume
weighted average price of our Class A common shares for the
15-day period prior to the payment date. The terms sheet
defines the conversion price to be 110% of the weighted
average price of our Class A common shares for the 30 business
days prior to the closing of the transaction (the "Conversion
Price").
- Forced Conversion - We would have the option to require
conversion of the preferred stock into our Class A common
stock if our Class A common stock trades higher than 135% of
the Conversion Price for a period of 25 consecutive trading
days after the closing.
- Forced Redemption - If the average of the closing prices of
our Class A common stock is less than 80% of the Conversion
Price during any 50 day trading period after issuance of the
preferred stock, the following the first anniversary of the
closing, the Investor may force us every six months to redeem
up to 25% of any outstanding preferred stock at its face
amount plus any accrued dividends. We have the election of
paying any forced redemption in cash or in Class A common
shares with the number of shares to be issued calculated in
the same manner described under "Payment Terms" above. The
Investor's right to force redemption is terminated if the
closing price of our Class A common stock exceeds 130% of the
Conversion Price for any 25 business day period after closing.
- Warrants - The Investor would also receive a seven year
warrant to purchase shares of our Class A common stock for
100% of the Conversion Price. The number of Class A common
shares issuable under the warrant would be equal to 27.5% of
the number of preferred shares issued to the Investor. The
warrants would contain customary anti-dilution provisions with
respect to stock splits, stock dividends and other similar
events. The preferred stock will not contain anti-dilution
provisions, although the Investor will have the right to
force redemption if we issue any equity securities or
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equity-linked securities at a price per share below the
Conversion Price.
- Registration Rights - We will be obligated to register for
resale with the Securities and Exchange Commission any of the
shares of Class A common stock issued in connection with the
transaction described above.
- Borrowing Limitation - We will not be allowed to incur any new
debt or obligations that is in any manner senior to or equal
in right of payment or liquidation to the preferred stock;
however, we retained the right to utilize a bank line of
credit of up to $30 million.
THE FOREGOING TERMS ARE NOT NECESSARILY BINDING ON US OR THE INVESTOR.
AS WE PREPARE AND NEGOTIATE DEFINITIVE AGREEMENTS WITH THE INVESTOR, THE TERMS
OF THE PREFERRED STOCK MAY BE REVISED. SINCE APPROVAL OF THIS PROPOSAL WILL
ALLOW OUR BOARD OF DIRECTORS TO ISSUE THE PREFERRED STOCK IN SERIES WITH TERMS
AND RIGHTS AS IT DEEMS FIT WITHOUT SHAREHOLDER APPROVAL, OUR BOARD OF DIRECTORS
WOULD BE ABLE TO ISSUE A SERIES OF PREFERRED STOCK WITH TERMS OR RIGHTS THAT
VARY SIGNIFICANTLY FROM THE TERMS DESCRIBED ABOVE, WHETHER IT BE IN A
TRANSACTION WITH THE INVESTOR OR OTHERWISE. FURTHERMORE, AS THE TERM SHEET ONLY
OBLIGATES US AND THE INVESTOR TO NEGOTIATE IN GOOD FAITH TOWARDS DEFINITIVE
DOCUMENTS, NEITHER PARTY IS BOUND TO COMPLETE THE TRANSACTION AS DESCRIBED
ABOVE.
Approval by Shareholders of the Proposed Amendment
Approval of the proposed amendment to our articles of incorporation
will require the affirmative vote of at least a majority of the issued and
outstanding shares of our Class A and Class B common stock, with each class
voting separately as a voting group. Upon approval by our shareholders, the
proposed amendment will become effective upon filing of articles of amendment
with the Colorado Secretary of State, which will occur as soon as practicable
following the meeting. In the event that the proposed amendment is not approved
by our shareholders at the meeting, we will not be able to issue preferred stock
and we will not be able to complete our proposed financing with the Investor.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO CREATE AN AUTHORIZED CLASS OF
25,000,000 SHARES OF PREFERRED STOCK AVAILABLE FOR FUTURE ISSUANCE IN SERIES
WITH TERMS AND PREFERENCES DESIGNATED BY OUR BOARD OF DIRECTORS.
15
PROPOSAL NO. 3
TO INCREASE THE MAXIMUM NUMBER OF DIRECTORS ON OUR BOARD OF
DIRECTORS FROM NINE MEMBERS TO UP TO 15 MEMBERS
Considering the growth and size of our company, our Board of Directors
on January 9, 2004, unanimously adopted a resolution, subject to shareholder
approval, to amend Article V of our Articles of Incorporation to increase the
maximum number of directors on our Board of Directors from nine members to up to
15 members (a copy of Article V, as it is proposed to be amended, is attached to
this proxy statement as Appendix A).
Our Articles of Incorporation provide that our Board of Directors shall
consist of at least five members and not more than nine members. Our company has
grown significantly since it was incorporated 1977. We have grown to become a
life insurance holding company with approximately 120 employees and
approximately $400 million in assets at December 31, 2003 (unaudited). Our Class
A common stock is traded on the New York Stock Exchange ("NYSE").
As a life insurance holding company and stature as a company traded on
the NYSE, along with intentions to continue our growth pattern, our Board of
Directors believes it requires the flexibility to increase the size of the Board
to meet the challenges of a complex and highly competitive insurance industry.
In order to effectively manage and guide the business plan of the company, we
may require Board members with diverse backgrounds, such as in sales, national
and international business contacts and experience, insurance regulation and
medicine (considering our significant life insurance business).
Additionally, recent NYSE regulations and federal and state securities
laws require Boards of Directors of public companies to include members on the
Board who are sophisticated in accounting matters. Current NYSE regulations
require that we maintain an Audit Committee of the Board of Directors comprised
of at least three independent directors, all of whom must be financially
sophisticated and one of whom must be an accounting expert.
Thus, we believe it is important to be authorized to maintain a board
size to meet the regulatory and business challenges of the insurance industry.
Failure to obtain shareholder approval of this amendment could lead to our Board
being unprepared to effectively complete and meet the significant regulatory
requirements of a publicly traded insurance company.
Approval by Shareholders of the Proposed Amendment
Approval of the proposed amendment to our articles of incorporation
will require the affirmative vote of at least a majority of the issued and
outstanding shares of our Class A and Class B common stock, with each class
voting separately as a voting group. Upon approval by our shareholders, the
proposed amendment will become effective upon filing of articles of
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amendment with the Colorado Secretary of State, which will occur as soon as
practicable following the meeting. In the event that the proposed amendment is
not approved by our shareholders at the meeting, our Board of Directors will be
limited to no more than nine members.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF THE
PROPOSAL TO AMEND OUR ARTICLES OF INCORPORATION TO INCREASE THE MAXIMUM NUMBER
OF DIRECTORS ON OUR BOARD OF DIRECTORS FROM NINE MEMBERS TO UP TO 15 MEMBERS.
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DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS
The deadline for receipt of shareholder proposals for our 2004 meeting
was on December 26, 2003. Any shareholder who wishes to present a proposal to be
considered at our 2005 annual meeting of shareholders and who wishes to have
such proposal receive consideration for inclusion in our proxy statement for
such meeting must deliver such proposal in writing to us at 400 East Anderson
Lane, Austin, Texas 78752, not later than 120 calendar days before the date that
our proxy statement is released to our shareholders in connection with our 2004
annual meeting of shareholders. Any such shareholder proposal must comply with
the requirements of Rule 14a-8 promulgated under the Securities Exchange Act of
1934.
The persons who will be named as proxies for the 2004 annual meeting of
shareholders will generally have discretionary authority to vote on any matter
presented by a shareholder for action at that meeting. In the event that we
receive notice of any shareholder proposal no later than forty-five (45) days
before the date on which we first mail our 2004 proxy statement, then so long as
we include in our proxy statement for the 2004 annual meeting of shareholders
advice on the nature of the matter and how the named proxies intend to vote the
shares for which they have received discretionary authority, such proxies may
exercise discretionary authority with respect to such matter, except to the
extent limited by the rules of the Securities and Exchange Commission governing
shareholder proposals.
INCORPORATION BY REFERENCE OF ANNUAL REPORT ON FORM 10-K
AND QUARTERLY REPORT OF FORM 10-Q
This Proxy Statement incorporates by reference our Form 10-K for the
fiscal year ended December 31, 2002, which was previously delivered to our
shareholders and which contains important information about us and our financial
condition that is not included in this Proxy Statement. This Proxy Statement
also incorporates by reference our quarterly report on Form 10-Q for the periods
ended March 31, June 30 and September 30, 2003. We will provide upon written
request, without charge to each shareholder, a copy of our Form 10-K and Forms
10-Q, as filed with the Securities and Exchange Commission. Any such requests
should be directed to our corporate secretary at our executive offices set forth
in this proxy statement or may be acquired from our web site at
www.citizensinc.com by clicking on the "Investor Information" button and then
clicking on the "SEC Filings" button. You may also obtain copies of the Form
10-K and Forms 10-Q by accessing the SEC's homepage (www.sec.gov).
18
OTHER MATTERS
At the date of mailing of this proxy statement, we are not aware of any
business to be presented at the meeting other than the proposals discussed
above. If other proposals are properly brought before the meeting, any proxies
returned to us will be voted as the proxyholders see fit.
By Order of the
Board of Directors
By /s/ Marcia F. Emmons
-----------------------------
Marcia F. Emmons, Secretary
Austin, Texas
January 26, 2004
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APPENDIX A
RESTATED AND AMENDED ARTICLES OF INCORPORATION
OF
CITIZENS, INC.
RESTATED AND AMENDED ARTICLES OF INCORPORATION
OF
CITIZENS, INC.
Citizens, Inc., a Colorado corporation (hereinafter referred to as the
"Corporation") pursuant to the provisions of the Colorado Business Corporation
Act, hereby certifies to the Secretary of State of Colorado that:
FIRST: The Corporation desires to restate and amend its Articles of
Incorporation as currently in effect as hereinafter provided.
SECOND: The provisions set forth in these Restated and Amended
Articles of Incorporation supersede the original Articles of Incorporation and
all amendments thereto. These Restated and Amended Articles of Incorporation
correctly set forth the provisions of the Articles of Incorporation, as amended,
of the Corporation.
THIRD: The Articles of Incorporation of the Corporation are hereby
amended and restated by striking in their entirety all previous articles, and by
substituting in lieu thereof the following:
ARTICLE I
Name
The name of the corporation is Citizens, Inc.
ARTICLE II
Purpose
The objects and purposes for which this company is formed and
incorporated are:
To purchase, hold, pledge, transfer, sell, or otherwise dispose of or
deal in, the shares of the capital stock, bonds, debentures, notes or other
securities or evidences of indebtedness of any corporation; to receive, collect
and dispose of dividends, interests or other income on any such securities held
by it; and do any and all acts and things tending to increase the value of said
corporation; to issue bonds and secure the same by pledge or deed of trust of or
upon any part of such securities or other property held or owned by the company
and to sell or pledge such bonds for proper corporate purposes and in the
promotion of its corporate business; to purchase, receive, hold and dispose of
any securities of any person or corporation, whether such securities shall be
bonds, mortgages, debentures, notes, shares of capital stock or otherwise, and
in respect to any such securities, to exercise any and all rights and privileges
of ownership thereof; to borrow and lend money and negotiate loans; to know,
accept, endorse, buy and sell promissory notes, bonds, stocks, debentures,
coupons and other securities; to issue, subscribe for, take, acquire, hold,
sell, exchange and deal in shares, stocks, bonds, obligations, and securities of
any
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government, authority, or company; to form, promote, subsidize and assist
companies, syndicates or partnerships of all kinds, and to finance and refinance
the same.
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Colorado.
ARTICLE III
SHARES
The total number of shares of all classes which the Corporation has
authority to issue is 127,000,000 of which 102,000,000 shares shall be Common
Stock, and 25,000,000 shares shall be Preferred Stock.
The designations and the preferences, conversion and other rights,
voting powers, restrictions, limitations as to distributions, qualifications,
and terms and conditions of redemption of the shares of each class of stock are
as follows:
COMMON STOCK
Subject to all of the rights of the Preferred Stock as expressly
provided herein, by law or by the Board of Directors pursuant to this Article,
common stock divided into two (2) classes:
A. 100,000,000 shares of Class A Common Stock of no par value per
share; and
B. 2,000,000 shares of Class B Common Stock of no par value per
share.
Cumulative voting shall be denied as to each class of common stock and
no shareholder of either class shall have any pre-emptive right to acquire any
share of stock to be issued by the Corporation.
The Common Stock of the Corporation shall possess all such rights and
privileges as are afforded to capital stock by applicable law in the absence of
any express grant of rights or privileges in these Articles of Incorporation.
The Class A Common Stock and the Class B Common Stock shall be equal in all
respects, except that:
1. The cash dividends paid upon each share of Class A Common
Stock shall be twice the cash dividends paid on each share of
Class B Common Stock.
2. The holders of the Class B Common Stock shall have the
exclusive right to elect a simple majority of the members of the Board of
Directors of the Corporation; and the holders of Class A Common Stock shall have
the exclusive right to elect the remaining Directors.
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PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more series. The description of shares of each
series of Preferred Stock, including any preferences, conversion and other
rights, voting powers, restrictions, limitations as to distributions,
qualifications, and terms and conditions of redemption shall be as set forth in
resolutions adopted by the Board of Directors and in Articles of Amendment to
State Terms of Series Shares filed as required by law from time to time prior to
the issuance of any shares of such series.
The Board of Directors is expressly authorized, prior to issuance, by
adopting resolutions providing for the issuance of, or providing for a change in
the number of, shares of any particular series of Preferred Stock and, if and to
the extent from time to time required by law, by filing Articles of Amendment to
State Terms of Series Shares to set or change the number of shares to be
included in each series of Preferred Stock and to set or change in any one or
more respects the designations, preferences, conversion or other rights, voting
powers, restrictions, limitations as to distributions, qualifications, or terms
and conditions of redemption relating to the shares of each such series.
Notwithstanding the foregoing, the Board of Directors shall not be authorized to
change the right of the Common Stock of the Corporation to vote one vote per
share on all matters submitted for stockholder action. The authority of the
Board of Directors with respect to each series of Preferred Stock shall include,
but not be limited to, setting or changing the following:
(a) the distinctive serial designation of such series and
the number of shares constituting such series (provided that the
aggregate number of shares constituting all series of Preferred Stock
shall not exceed 25,000,000);
(b) the annual distribution rate on shares of such
series, whether distributions shall be cumulative and, if so, from
which date or dates;
(c) whether the shares of such series shall be redeemable
and, if so, the terms and conditions of such redemption, including the
date or dates upon and after which such shares shall be redeemable, and
the amount per share payable in case of redemption, which amount may
vary under different conditions and at different redemption dates;
(d) the obligation, if any, of the Corporation to redeem
or repurchase shares of such series pursuant to a sinking fund;
(e) whether shares of such series shall be convertible
into, or exchangeable for, shares of stock of any other class or
classes and, if so, the terms and conditions of such conversion or
exchange, including the price or prices or the rate or rates of
conversion or exchange and the terms of adjustment, if any;
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(f) whether the shares of such series shall have voting
rights, in addition to the voting rights provided by law, and, if so,
the terms of such voting rights;
(g) the rights of the shares of such series in the event
of voluntary or involuntary liquidation, dissolution or winding up of
the Corporation; and
(h) any other relative rights, powers, preferences,
qualifications, limitations or restrictions thereof relating to such
series which may be authorized or permitted under the Colorado Business
Corporation Act.
The shares of Preferred Stock of any one series shall be identical with
each other in all respects except as to the dates from and after which dividends
thereon shall cumulate, if cumulative.
ARTICLE IV
Duration
The term of existence of the corporation shall be perpetual.
ARTICLE V
Directors
The business and affairs of the corporation shall be under the control
and management of a Board of Directors consisting of not less than five (5)
members and not more than fifteen (15) members, the number to be fixed by the
by-laws of the company.
ARTICLE VI
No Pre-emptive Rights
Shareholders shall not have a pre-emptive right to subscribe for
additional shares of the corporation issued from time to time by the
corporation.
ARTICLE VII
Bylaws
The Board of Directors shall have power to enact, alter, amend and
repeal the by-laws of the corporation not inconsistent with the laws of the
State of Colorado and these Articles of Incorporation as it may deem best for
the management of the corporation.
ARTICLE VIII
Elimination of Personal Liability of a Director
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No director shall be liable to the Corporation or any shareholder for
monetary damages for breach of fiduciary duty as a director, except for any
matter in respect of which such director (a) shall be liable under C.R.S.
Section 7-5-114 or any amendment thereto or successor provision thereto; (b)
shall have breached the director's duty of loyalty to the Corporation or its.
shareholders; (c) shall not have acted in good faith or, in failing to act shall
not have acted in good faith; (d) shall have acted or failed to act in a manner
involving intentional misconduct or a knowing violation of law; or (e) shall
have derived an improper personal benefit. Neither the amendment nor repeal of
this Article, nor the adoption of any provision in the Articles of Incorporation
inconsistent with this Article, shall eliminate or reduce the effect of this
Article in respect to any matter occurring prior to such amendment, repeal or
adoption of an inconsistent provision. This Article shall apply to the full
extent now permitted by Colorado law or as may be permitted in the future by
changes or enactments in Colorado law, including without limitation C.R.S.
Section 7-2-102 and/or C.R.S. Section 7-3-101.
ARTICLE IX
Voting Requirements
When, with respect to any action to be taken by shareholders of the
Corporation, the Colorado Corporation Code requires the affirmative vote of the
holders of two-thirds of the outstanding shares entitled to vote thereon, or of
any class or series, such action may be taken by the affirmative vote of the
holders of a majority of the outstanding shares entitled to vote on such action,
unless any class of shares is entitled to vote thereon as a class, in which
event the proposed action may be taken upon receiving the affirmative vote of
the holders of a majority of the shares of each class of shares entitled to vote
thereon as a class and of the total shares entitled to vote thereon.
ARTICLE X
Incorporators
The name and address of each incorporator is:
NAME ADDRESS
------------------ -------------------------
Dr. Bruce Holman 3401 East Kentucky Avenue
Denver, Colorado 80209
Stanford E. Ernest 3280 Dartmouth Avenue
Boulder, Colorado 80302
Max P. Osborn 2445 Vance
Lakewood, Colorado 80215
Howard M. Jeffries 7720 South Race
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Littleton, Colorado 80122
George A. Powell 6601 South Marion Court
Littleton, Colorado 80121
Thomas J. Murphy 3361 South Ulster Court
Denver, Colorado 80321
James F. Martin 1216 Pierce, No. A-13
Lakewood, Colorado 80215
FOURTH: By resolution of the Board of Directors of the Corporation at
a duly called meeting on January 9, 2004, the Board of Directors approved these
Restated and Amended Articles of Incorporation and advised to the stockholders
of the Corporation the same, and by vote of the stockholders of the Corporation
at a duly called meeting on March 4, 2004, the stockholders duly approved these
Restated and Amended Articles of Incorporation in compliance with the CBCA.
FIFTH: The number of votes cast for the amendments contained in these
Restated and Amended Articles of Incorporation by each voting group entitled to
vote separately on the amendments was sufficient for approval by that voting
group.
The (a) name or names, and (b) mailing address or addresses, of any one or more
of the individuals who cause this document to be delivered for filing and to
which the Secretary of State may deliver notice if filing of this document is
refused, are: David A. Thayer, Esq., Jones & Keller, P.C., 1625 Broadway, Suite
1600, Denver, CO 80202, (303) 573-1600.
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PROXY PROXY
CITIZENS, INC.
400 East Anderson Lane
Austin, Texas 78752
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of Citizens, Inc. acknowledges receipt of
the notice of the special meeting of shareholders, to be held Thursday, March 4,
2004, at 10:00 a.m. Central time, at the Company's headquarters at 400 East
Anderson Lane, Austin, Texas and hereby appoints Rick D. Riley and Mark A.
Oliver, or either of them, each with the power of substitution, as attorneys and
proxies to vote all the shares of the undersigned at the special meeting and at
all adjournments thereof, hereby ratifying and confirming all that the attorneys
and proxies may do or cause to be done by virtue hereof. The above-named
attorneys and proxies are instructed to vote all of the undersigned's shares as
follows:
1. Proposal to amend Article III of the Articles of Incorporation
to (i) increase the number of authorized shares of our Class A
common stock from 50,000,000 to 100,000,000 shares and (ii)
increase the number of authorized shares of our Class B common
stock from 1,000,000 to 2,000,000 shares.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
2. Proposal to amend Article III of the Articles of Incorporation
to create an authorized class of 25,000,000 shares of
preferred stock available for future issuance in series with
terms and preferences designated by the Board of Directors.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. Proposal to amend Article V of the Articles of Incorporation
to increase the maximum number of directors on our Board of
Directors from nine members to up to 15 members.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. Transaction of such other business as may properly come before
the meeting or any adjournment thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS ONE, TWO AND THREE AND AS THE PROXIES DEEM ADVISABLE ON SUCH
OTHER MATTERS AS MAY COME BEFORE THE MEETING.
DATED:___________________ 2004 ____________________________________________
SIGNATURE
____________________________________________
SIGNATURE IF HELD JOINTLY
Please sign your name exactly as it appears
below. When shares are held by joint
tenants, both should sign. When signing as
attorney, executor, administrator, trustee
or guardian, please give full title as such.
If a corporation, please sign in full
corporate name by President or other
authorized officer. If a partnership, please
sign in partnership name by authorized
person.
PLEASE MARK, SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY.