citizens financial 8k 11-17-06
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 or 15(D) of the Securities Exchange Act of 1934
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Date
of Report (Date of earliest event report) November
21, 2006
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CITIZENS
FINANCIAL CORPORATION
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(Exact
name of registrant as specified in its
charter)
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KENTUCKY
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0-20148
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61-1187135
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(State
of incorporation)
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(Commission
File Number)
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(IRS
Registrant
Identification
No.)
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12910
SHELBYVILLE ROAD
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LOUISVILLE,
KENTUCKY 40243
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(Address
of principal executive offices)
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Registrant’s
telephone number, including area code: (502)
244-2420
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Not
Applicable
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Former
name or former address, if changed since last
report
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Check
the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligations of the registrant under any of the following
provisions (see General Instruction A.2. below):
[
]
Written communications pursuant to Rule 425 under the securities Act (17 CFR
230.425)
[
]
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[
]
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act
(17CFR
240.14d-2(b))
[
]
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act
(17
CFR
240.13e-4(c))
Item
1.01. Entry into a Material Definitive Agreement.
On
November 21, 2006, the Registrant entered into an Executive Employment Agreement
with John D. Cornett whereby Mr. Cornett shall serve as Executive Vice President
and Chief Operating Officer of the Registrant and as President and Chief
Operating Officer of Citizens Security Life Insurance Company, United Liberty
Life Insurance Company, Citizens Insurance Company and Citizens Security Benefit
Services, Inc., each a direct or indirect subsidiary of the Registrant,
effective January 1, 2007. The agreement will not become effective, however,
unless Mr. Cornett’s obligations under his existing employment agreement with
American Capitol Insurance Company and any related agreements (excluding
continuing confidentiality obligations) are fully and finally terminated prior
to January 1, 2007. The agreement terminates on December 31, 2008, with
automatic extension for additional successive periods of one (1) year each
unless either the Registrant or Mr. Cornett gives at least sixty (60) days
prior
written notice of termination.
Under
the
agreement, Mr. Cornett will be paid an annual salary of $195,000 and will
receive a one-time guaranteed bonus in the amount of $60,000 (payable on the
first regular payday falling next after January 1, 2008) less the amount
reimbursed by the Registrant in respect of Mr. Cornett’s expenses in relocating
from Houston, Texas to Louisville, Kentucky. Mr. Cornett will also be eligible
to participate in bonus plans established by the Registrant for which its senior
executives are generally eligible to participate.
If,
prior
to the expiration of the then-current term, Mr. Cornett resigns for Good Reason
or is terminated For Convenience of Registrant, he will receive, at his option
but subject to his continued compliance with the non-competition,
non-solicitation and non-interference covenants in the agreement, a severance
benefit in the amount of one (1) year salary. Mr. Cornett is also entitled
to a
severance benefit in the amount of three (3) months salary in the event the
agreement is terminated by Registrant’s election not to extend the agreement
beyond the original or any extended term.
For
purposes of Mr. Cornett’s agreement, “Good Reason” means (a) a breach by the
Registrant of the agreement which is not cured by the Registrant within ten
(10)
days after notice of breach by Mr. Cornett; (b) a material reduction in Mr.
Cornett’s duties or title; (c) a relocation of Registrant’s offices in and from
which Mr. Cornett is expected to work beyond 50 miles from where such offices
are currently located; or (d) a Change in Control of Registrant. “For
Convenience of Registrant” means a termination of Mr. Cornett’s employment by
the Registrant for any reason other than disability or For Cause. “For Cause”
means (a) Mr. Cornett’s material breach of the agreement, which breach continues
for a period of ten (10) days after notice of breach by the Registrant; (b)
Mr.
Cornett’s failure to adhere to any written policy of the Registrant if Mr.
Cornett has been given a reasonable opportunity to comply with such policy
or
cure his failure to comply (which reasonable opportunity must be granted during
the ten (10) day period preceding termination of the agreement); (c) the failure
for more than ten (10) days of the Registrant and Mr. Cornett to agree on
acceptable specific limitations on the time Mr. Cornett may devote to
prosecution of a certain provisional patent application filed with the United
States Patent and Trademark Office and to the commercialization of the business
process it describes; (d) the appropriation (or attempted appropriation) of
a
material business opportunity of the
Registrant
or its subsidiaries, including attempting to secure or securing any personal
profit in connection with any transaction entered into on behalf of the
Registrant or its subsidiaries; (e) the misappropriation (or attempted
misappropriation) of any of the funds or property of the Registrant or its
subsidiaries; or (f) the conviction of, the indictment for (or its procedural
equivalent), or the entering of a guilty plea or plea of no contest with respect
to, a felony, the equivalent thereof, or any other crime with respect to which
imprisonment is a possible punishment. “Change
in Control” means (a) any person becomes the beneficial owner, directly or
indirectly, of securities of the Registrant representing more than 50% of the
total voting power represented by the Registrant’s then outstanding voting
securities, excluding Darrell R. Wells, his wife Margaret Ann Wells, and all
current or future heirs, successors and affiliates to and of such persons and
all trusts or other entities established or maintained for their benefit
(collectively, the “Wells Family Interests”), (B) any employee benefit plan or
related trust sponsored or maintained by the Registrant, and (C) any corporation
or other entity owned, directly or indirectly, by all or substantially all
of
the shareholders of the Registrant immediately prior to the transaction in
substantially the same proportions as their ownership of stock of the
Registrant; provided, that, at the time of the acquisition of such beneficial
ownership interest, such person’s beneficial ownership interest in the
Registrant exceeds that of the Wells Family Interests; (b)
the
consummation of the sale or disposition by the Registrant of all or
substantially all of its assets, other than a sale or disposition that would
result in the voting securities of the Registrant outstanding immediately prior
thereto continuing to represent more than 50% of the total voting power
represented by the voting securities of the acquiring corporation or entity
or
its parent outstanding immediately after such sale or disposition;
or
(c) the
consummation of a merger or consolidation of the Registrant with any other
corporation or entity, other than a merger or consolidation that would result
in
the voting securities of the Registrant outstanding immediately prior thereto
continuing to represent more than 50% of the total voting power represented
by
the voting securities of the Registrant or such surviving corporation or entity
or its parent outstanding immediately after such merger or
consolidation.
Under
the
agreement, if Mr. Cornett’s employment is terminated other than by the
Registrant For Cause or by Mr. Cornett by resignation other than for Good
Reason, Mr. Cornett will have the option, exercisable for a period of 30 days
following termination, to require the Registrant to use its best efforts to
arrange for offers to him to purchase for cash all or any portion of his shares
of the Registrant’s Class A Stock as designated by him. Such sales would made
through one or more privately negotiated transactions with third party
purchasers at a price or prices not less than the average of the reported
transaction prices per share for the Class A Stock in the preceding 20 trading
days on the principal trading market for the Class A Stock (or, if there is
no
organized trading market for the Class A Stock, at the value per share of the
Class A Stock as determined by the most recent annual appraisal obtained by
the
Registrant). If the Registrant is able to arrange such offers, Mr. Cornett
must
sell the number of shares he designated at the cash price or prices offered.
However, if the Registrant is unable to arrange for an offer or offers within
90
days of receipt of Mr. Cornett’s request, Mr. Cornett may then require that the
Registrant exchange the number of shares designated by him into shares of a
to-be-created Class B Convertible Preferred Stock (the “Class B Stock”),
described below, valued at $100 per share for purposes of such
exchange.
In
addition, if there is a Change in Control of the Registrant either during Mr.
Cornett’s employment period or after Mr. Cornett’s employment is terminated
other than by the Registrant
For
Cause
or by Mr. Cornett by resignation other than for Good Reason (but not later
than
December 31, 2016), Mr. Cornett will have the option, exercisable for a period
of 30 days following such Change in Control, to require the Registrant to use
its best efforts to arrange for offers to him to purchase for cash all, but
not
less than all, of his shares of the Registrant’s Class A Stock. Such sales would
made through one or more privately negotiated transactions with third party
purchasers at a price or prices not less than the after-tax economic equivalent
of the consideration per share received by the persons transferring control
of
the Registrant. If the Registrant is able to arrange such offers, Mr. Cornett
must sell all of his shares at the cash price or prices offered. However, if
the
Registrant is unable to arrange for an offer or offers within 90 days of receipt
of Mr. Cornett’s request, Mr. Cornett may then require that the Registrant
exchange all of the shares held by him into shares of Class B Stock valued
at
$100 per share for purposes of such exchange.
In
no
event would the Registrant be required to either arrange for offers to purchase
or to exchange more than 100,000 shares of Class A Stock held by Mr.
Cornett.
The
Class
B Stock, if and when created, would accrue a 5% cumulative quarterly dividend,
payable prior and in preference to any declaration or payment of dividends
on
the Class A Stock. The Class B Stock would also have a liquidation preference
over the Class A Stock equal to the original issuance price per share of the
Class B Stock (as adjusted for any stock dividends, combinations or splits)
plus
all accrued or declared but unpaid dividends on the Class B Stock. The Class
B
Stock would be redeemable at any time by the Registrant at a price equal to
the
original issuance price per share (as adjusted for any stock dividends,
combinations or splits) plus all declared but unpaid dividends; provided, that
Mr. Cornett may elect to convert his shares into Class A Stock and thereby
terminate the Registrant’s redemption option. The Class B Stock would be
convertible at Mr. Cornett’s option at any time into the number of shares of
Class A Stock from which the Class B Stock was originally converted. The Class
B
Stock would vote together with the Class A Stock on all matters presented to
the
holders of Class A Stock for a vote, with Mr. Cornett entitled to cast one
vote
for each share of Class A Stock into which the Class B Stock could then be
converted. If shares of Class B Stock are issued upon exchange of Class A Stock
by Mr. Cornett, the Registrant may not amend its articles of incorporation
or
bylaws to change any preferences, limitations or relative rights of the Class
B
Stock without Mr. Cornett’s consent.
The
agreement includes confidentiality, non-competition, non-solicitation and
non-interference covenants by Mr. Cornett.
A
copy of
Mr. Cornett’s employment agreement (excluding attachments) is attached hereto as
Exhibit 10.35, and is incorporated by reference herein. The preceding summary
of
the agreement is qualified in its entirety by reference to Exhibit
10.35.
Item
5.02. Departure of Directors or Principal Officers; Election of Directors;
Appointment of Principal Officers.
(c) On
November 21, 2006, the Registrant agreed to appoint John D. Cornett as Executive
Vice President and Chief Operating Officer of the Registrant and as President
and Chief Operating Officer of Citizens Security Life Insurance Company, United
Liberty Life Insurance Company, Citizens Insurance Company and Citizens Security
Benefit Services, Inc., each a direct or indirect subsidiary of the Registrant,
effective January 1, 2007.
Mr.
Cornett, age 48, is currently employed as Executive Vice President, Treasurer
and Assistant Secretary of Acap Corporation and also serves as a director
and officer of its subsidiaries American Capitol Insurance Company and
Texas Imperial Life Insurance Company. Mr. Cornett’s employment with (and, as
applicable, service as a director of) each of Acap Corporation, American Capitol
Insurance Company and Texas Imperial Life Insurance Company must be terminated
prior to and as a condition of Mr. Cornett’s employment with the Registrant and
its subsidiaries.
Mr.
Cornett received a Bachelor of Business Administration in Accounting from the
University of Houston.
See
the
disclosures under Item 1.01 above for the material terms of Mr. Cornett’s
employment agreement.
Item
9.01. Financial Statements and Exhibits.
(c)
Exhibits.
10.35 Executive
Employment Agreement dated as of November 21, 2006.
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant
has
duly caused this report to be signed on its behalf by the undersigned hereunto
duly authorized.
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Citizens
Financial Corporation
Registrant
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| Date: November
21, 2006 |
By: |
/s/ Len
E.
Schweitzer |
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Len
E. Schweitzer
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Vice
President and
Chief Financial
Officer
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INDEX
TO EXHIBITS
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Exhibit
Number
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Description
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10.35
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Executive
Employment Agreement dated as of November 21, 2006.
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