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SCHEDULE 14A INFORMATION
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:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
[ X ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
CITIZENS FINANCIAL CORPORATION
(Name of Registrant as Specified In Its Charter)
Not Applicable
(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)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] 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:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
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CITIZENS FINANCIAL CORPORATION
The Marketplace, Suite 300
12910 Shelbyville Road
Louisville, Kentucky 40243
NOTICE OF 2002 ANNUAL MEETING OF SHAREHOLDERS
Dear Shareholder:
You are cordially invited to attend this year's Annual Meeting of
Shareholders of Citizens Financial Corporation.
DATE: Thursday, May 23, 2002
TIME: 4:00 p.m., EDT (Louisville time)
PLACE: The Marketplace, Suite 300
12910 Shelbyville Road
Louisville, Kentucky 40243
AGENDA: The agenda for meeting includes:
The election of seven directors for a term of one year; and
The transaction of such other business as may properly come
before the meeting.
RECORD DATE: The record date for determining shareholders entitled to
vote at the meeting is the close of business on April 16,
2002.
Even if you plan to attend the meeting, please complete, sign, date and
return the enclosed proxy. You may attend even though you have returned the
proxy. If you decide to revoke your proxy for any reason, you may do so at any
time before the voting as described in the accompanying Proxy Statement.
By Order of the Board of Directors,
DARRELL R. WELLS
PRESIDENT AND CHIEF
EXECUTIVE OFFICER
Louisville, Kentucky
April 23, 2002
PLEASE VOTE PROMPTLY
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CITIZENS FINANCIAL CORPORATION
The Marketplace, Suite 300
12910 Shelbyville Road
Louisville, Kentucky 40243
PROXY STATEMENT
This statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Citizens Financial Corporation. The proxies
we receive will be voted at the Annual Meeting of Shareholders of Citizens
Financial on Thursday, May 23, 2002, beginning at 4:00 p.m., EDT. The Annual
Meeting will be held at our offices in Suite 300, The Marketplace, 12910
Shelbyville Road, Louisville, Kentucky.
Your vote is important. Please complete, date and sign the enclosed
proxy and return it in the enclosed postage-paid return envelope so your shares
are represented at the Annual Meeting.
This proxy statement provides information about Citizens Financial, the
proposals on the agenda for the Annual Meeting and this proxy solicitation. The
terms "we," "our," "Citizens Financial" and the "Company" used in this statement
refer to Citizens Financial Corporation. This statement and the enclosed proxy
are first being sent to shareholders on or about April 23, 2002.
VOTING
VOTING RIGHTS. You are entitled to notice of the Annual Meeting and to
vote your Class A Stock if our records showed that you owned your shares as of
the close of business on April 16, 2002. At that time, there were 1,716,815
shares of Class A Stock outstanding and entitled to vote. You have one vote for
each share of Class A Stock you own on all proposals other than the election of
directors. In the election of directors, you have "cumulative" voting rights
under Kentucky law. This means that you have as many votes as equals the number
of shares you own multiplied by the number of directors to be elected, and you
may give all your votes to a single nominee or distribute your votes among
nominees in any manner you desire.
USING A PROXY CARD TO VOTE. If you hold your shares in your own name,
you may indicate on the enclosed proxy how you want your shares voted and sign,
date and mail the proxy card in the enclosed postage-paid envelope. The persons
named on the proxy will vote your shares in accordance with those instructions.
If you give us a proxy card without giving specific voting instructions, your
shares will be voted for the director nominees named in this statement. We are
not aware of any other matters to be presented at the meeting except for those
described in this statement. If any other matters not described in this
statement are properly presented at the meeting, the persons named on the proxy
will have the authority to vote your shares in their discretion and will vote
them in accordance with the recommendations of the Board of Directors. If the
meeting is adjourned to a later time, they may vote your shares at the new time
as well, unless you revoke your proxy. The persons named on the proxy may vote
cumulatively in the election of directors.
If your Class A Stock is held in "street name," the broker, bank or
other nominee holding your shares will send you directions you must follow in
order to give instructions on how to vote your shares.
HOW TO REVOKE YOUR PROXY. If you return the proxy before the Annual
Meeting, you may revoke it at any time before it is voted. You may revoke the
proxy by (1) delivering written notice of revocation to the Secretary of
Citizens Financial or (2) delivering a later-dated proxy or (3) voting in person
at the meeting.
If your Class A Stock is held in "street name," the broker, bank or
other nominee holding your shares will send you directions you must follow in
order to revoke or change your prior instructions on how to vote your shares.
VOTES REQUIRED. To transact business at the Annual Meeting, a majority
of the outstanding Class A Stock entitled to vote must be represented at the
meeting in person or by proxy. If you have returned a
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properly executed proxy or attend the meeting in person, your Class A Stock will
be counted for the purpose of determining whether a majority is represented,
even if you wish to abstain from voting on some or all matters introduced at the
meeting. A "broker non-vote" can occur if shares are held by a broker, bank or
other nominee who does not have authority to vote on a particular matter. Like
abstentions, broker non-votes will be counted for determining if a majority is
represented at the meeting. We do not count abstentions or broker non-votes as
votes for or against a proposal. As a result, they will not affect the outcome
of the vote in the election of directors. In the election of directors, the
seven nominees receiving the greatest number of votes will be elected.
YOUR VOTE IS IMPORTANT.
YOU MAY SAVE US THE EXPENSE OF A SECOND MAILING BY PROMPTLY RETURNING THE
ENCLOSED PROXY. PLEASE COMPLETE, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN
ORDER THAT THE REQUIRED NUMBER OF SHARES MAY BE REPRESENTED AT THE MEETING. THE
ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF IT IS MAILED WITHIN THE UNITED STATES.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table reflects the beneficial ownership of our Class A
Stock as of April 16, 2002 [i] by Darrell R. Wells, a director and officer who
is the only person we know to own beneficially more than five percent (5%) of
our Class A Stock, [ii] by each of our other directors individually, [iii] by
each of the other named officers reflected in the Summary Compensation Table
individually and [iv] by all of our directors and executive officers as a group.
We believe that each person named or included below has the sole voting and
investment power with respect to the amount of Class A Stock listed, unless
otherwise indicated.
OWNERSHIP OF CLASS A STOCK
PERCENT OF
SHAREHOLDER SHARES CLASS
Darrell R. Wells(1) 956,694(2) 55.72%
Suite 310, 4350 Brownsboro Road
Louisville, Kentucky 40207
John H. Harralson, Jr. 12,468 *
Lane A. Hersman 3,700 *
Frank T. Kiley 24,303 1.42%
Earle V. Powell 16,465 *
Thomas G. Ward 24,169 1.41%
Margaret A. Wells(1) 956,694(2) 55.72%
Brent L. Nemec 0 *
Stephen L. Marco 100 *
Robert N. Greenwood 2,979 *
14 Directors and Executive
Officers as a Group 1,041,585 60.67%
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* Less than 1%.
(1) Margaret A. Wells, a director, is the wife of Darrell R. Wells. Under the
federal securities laws, a person is presumed to be the beneficial owner of
securities held by members of the person's immediate family sharing the same
household. Accordingly, the shares reported as beneficially owned by Mr. Wells
and Ms. Wells are the same shares.
(2) Mr. Wells shares voting and investment power with respect to 67,315 shares
of the Class A Stock.
PROPOSAL 1
ELECTION OF DIRECTORS
At the Annual Meeting, a full Board of Directors will be elected to
serve until the next Annual Meeting of Shareholders and until their respective
successors are elected and qualify. The terms of all present directors will
expire at the conclusion of the election of directors at the Annual Meeting.
Under the Company's Bylaws, the Board of Directors consists of seven (7)
persons.
The Board of Directors has nominated the following persons for election
as directors. All of them were elected at the 2001 Annual Meeting of
Shareholders and in previous years as shown in the following table.
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DIRECTOR PRINCIPAL OCCUPATION(S)
NAME, AGE, AND PRESENT OF THE OR EMPLOYMENT(S) DURING
POSITIONS WITH THE COMPANY COMPANY PAST FIVE OR MORE YEARS
AND THE INSURANCE SUBSIDIARIES(1) SINCE AND CERTAIN DIRECTORSHIPS(2)
------------------------------ ----- -------------------------
John H. Harralson, Jr. 1990 Publisher, Southern Publishing d/b/a
74 THE VOICE TRIBUNE (suburban newspaper),
Director of the Company Louisville, Kentucky
and the Insurance Subsidiaries
Lane A. Hersman 1995 Present principal positions with the Company
50 and Citizens Security since 1995; formerly
Executive Vice President and Chief senior financial management positions
Operating Officer and Director of the with the Company since 1991 and Citizens
Company; President and Chief Security since 1988
Executive Officer and Director of the
Insurance Subsidiaries
Frank T. Kiley 1990 Principal, Security Management Company
55 (investments and investment management),
Director of the Company Louisville, Kentucky
Earle V. Powell 1990 Retired; Trustee, Kentucky Teachers
85 Retirement Board, Frankfort, Kentucky
Director of the Company
and the Insurance Subsidiaries
Thomas G. Ward 1990 President, Third Kentucky Cellular
64 Corporation (telecommunications),
Director of the Company Lexington, Kentucky
and the Insurance Subsidiaries
Darrell R. Wells 1990 General Partner, Security Management
59 Company (investments and investment
President and Chief Executive Officer, management), Louisville, Kentucky.
Director and Chairman of the Board of Director, Churchill Downs Incorporated
the Company and Jundt Growth Fund
Margaret A. Wells 1993 Homemaker and civic volunteer,
55 Louisville, Kentucky
Director of the Company
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(1) The Company's Insurance Subsidiaries are Citizens Security Life Insurance
Company ("Citizens Security"), the Company's corporate predecessor; United
Liberty Life Insurance Company ("United Liberty"); and Citizens Insurance
Company ("Citizens Insurance"), which is presently inactive. The Company's other
subsidiary is not significant to its overall business.
(2) Directorships in publicly-held companies other than the Company, in
registered investment companies and, in the discretion of the nominees, other
organizations.
The persons named on the enclosed proxy intend to vote for the seven
(7) nominees, unless you indicate on the proxy that your votes should be
withheld from any or all such nominees, subject to the matters described in
"Discretionary Authority in Election of Directors," below. If there are more
nominees at the meeting than there are directorships, the nominees receiving the
highest number of votes will be elected to the available directorships.
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DISCRETIONARY AUTHORITY IN ELECTION OF DIRECTORS
All of the nominees have agreed to serve if elected. If, however, any
nominee is unable to serve, the persons named on the proxy, or their
substitutes, reserve the right to vote for a substitute nominee selected by our
Board of Directors. In addition, if any shareholder or shareholders vote their
shares for the election of a director or directors other than the nominees named
above, the persons named on the proxy, or their substitutes, reserve the right
to vote cumulatively for less than all of the nominees named above or any
substitute nominees, as they may choose.
If for any reason more than seven (7) people are to be elected to our
Board of Directors, the persons named on the proxy, or their substitutes, are
not permitted to vote for more than seven (7) nominees. If for any reason less
than seven (7) persons are to be elected directors, the persons named on the
proxy reserve the right to vote such shares for a reduced number of nominees
from among those named above, or any substitute nominees.
BOARD MEETINGS AND COMMITTEES
Our Board of Directors held five (5) meetings during 2001. Each of the
directors attended at least 75% of the total number of meetings of the Board and
the committees on which she or he served.
Our Board of Directors has delegated certain functions to standing
committees of the Board, including the Executive and Audit Committees. We have
not established standing nominating or compensation committees or committees
performing similar functions.
THE EXECUTIVE COMMITTEE: Held one (1) meeting in 2001.
CURRENT MEMBERS: Messrs. Wells, Hersman, and Kiley.
FUNCTIONS: This committee is authorized to perform all of
the functions of the Board except as limited by
the Company's Articles of Incorporation and
Bylaws and by certain provisions contained
in the resolution of the Board that created the
Executive Committee.
THE AUDIT COMMITTEE: Held four (4) meetings during 2001.
CURRENT MEMBERS: Messrs. Harralson, Powell and Ward.
FUNCTIONS: This committee operates under a written charter
adopted by the Board of Directors. Its primary
responsibility is to oversee the Company's
financial reporting process on behalf of the
Board of Directors and report the results of
its activities to the Board of Directors. Its
members are independent as defined under the
listing standards of the National Association of
Securities Dealers.
The following is the report of the Audit Committee for the current
year.
The Audit Committee of the Board of Directors is currently
composed of the three (3) independent directors named below. The
Committee recommends to the Board of Directors the selection of the
Company's independent accountants.
Management is responsible for the Company's internal controls
and the financial reporting process. The independent accountants are
responsible for performing an independent audit of the Company's
consolidated financial statements in accordance with generally accepted
auditing standards and to issue a report thereon. The Committee's
responsibility is to monitor and oversee these processes.
In this context, the Committee has met and held discussions with
management and the independent accountants. Management represented to
the Committee that the Company's consolidated financial statements were
prepared in accordance with generally accepted accounting principles,
and the Committee has reviewed and discussed the consolidated financial
statements with management and the independent accountants. The
Committee discussed with the independent accountants the matters
required to be discussed by Statement on Auditing Standards No. 61
(Communication with Audit Committees).
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The Company's independent accountants also provided to the
Committee the written disclosures required by Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees),
and the Committee discussed with the independent accountants their
independence.
Based upon the Committee's discussion with management and the
independent accountants and the Committee's review of the
representation of management and the report of the independent
accountants to the Committee, the Committee recommended that the Board
of Directors include the audited consolidated financial statements in
the Company's Annual Report on Form 10-K for the year ended December
31, 2001 filed with the Securities and Exchange Commission.
Earle V. Powell
John H. Harralson, Jr.
Thomas G. Ward
DIRECTOR COMPENSATION
Each member of the Board of Directors who is not a full-time employee
of the Company or its subsidiaries or who is not otherwise compensated as such
receives a fee of $1,900 ($2,000 effective second quarter of 2002) per quarter
if she or he attends all meetings of the Board of Directors. Five hundred
dollars is deducted from each quarterly payment for each meeting missed by the
director for that quarter.
EXECUTIVE OFFICERS OF THE COMPANY
Our executive officers, as listed below, are elected annually and serve
at the pleasure of our Board of Directors.
DIRECTOR PRESENT POSITIONS WITH THE COMPANY PRINCIPAL OCCUPATION(S) OR EMPLOYMENT(S)
NAME/AGE AND THE INSURANCE SUBSIDIARIES (1) DURING PAST FIVE OR MORE YEARS
-------- ----------------------------------- ------------------------------
Darrell R. Wells President and Chief Executive Officer General Partner, Security
59 (since 1995), Director and Chairman of Management Company (investments
the Board of the Company and investments management),
Louisville, Kentucky
Lane A. Hersman Executive Vice President and Chief Present principal positions with the
50 Operating Officer and Director of the Company and with Citizens Security
Company; President and Chief Executive since 1995 and with United Liberty
Officer and Director of the Insurance since 1998; formerly senior financial
Subsidiaries management positions with the Company
since 1991 and with Citizens Security
since 1988
Robert N. Greenwood Vice President, Operations, of the Present position with the Company
67 Company; Senior Vice President, since 1992, with Citizens Security
Operations, of Citizens Security and since 1989 and with United Liberty
United Liberty since 1998
James L. Head Vice President, Administration, of the Present positions with the Company
68 Company; Senior Vice President, since 1992, with Citizens Security
Administration, of Citizens Security and since 1990, and with United Liberty
United Liberty since 1998
Stephen L. Marco Vice President and Chief Actuary of the Present positions with the Company
51 Company; Senior Vice President and since 1993, with Citizens Security
Chief Actuary of Citizens Security and since 1992, and with United Liberty
United Liberty since 1998
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PRESENT POSITIONS WITH THE COMPANY PRINCIPAL OCCUPATION(S) OR EMPLOYMENT(S)
NAME/AGE AND THE INSURANCE SUBSIDIARIES (1) DURING PAST FIVE OR MORE YEARS
-------- ----------------------------------- ------------------------------
Paul M. Marquess Vice President, Agency, of the Present positions with the Company
64 Company; Senior Vice President, and Citizens Security since 1996 and
Agency, of Citizens Security and United with United Liberty since 1998
Liberty
Brent L. Nemec Vice President, Accounting and Chief Present positions with the Company
47 Financial Officer, and Treasurer of the and Citizens Security since 1996 and
Company; Senior Vice President, with United Liberty since 1998
Accounting and Chief Financial Officer
and Treasurer of the Insurance Subsidiaries
Tonya G. Crawford Vice President, Pre-Need, of the Present positions with the Company
39 Company and Senior Vice President, since 1999 and with Citizens
Pre-Need, of Citizens Security and Security and United Liberty since
United Liberty 1998; formerly Director of
Operations of United Liberty
(acquired in 1998)
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(1) The Company's Insurance Subsidiaries are Citizens Security Life Insurance
Company ("Citizens Security"), the Company's corporate predecessor; United
Liberty Life Insurance Company ("United Liberty"); and Citizens Insurance
Company ("Citizens Insurance"), which is presently inactive. The Company's other
subsidiary is not significant to its business.
EXECUTIVE COMPENSATION
The following table provides a profile of our executive compensation
and shows, among other things, salaries and bonuses paid during the last three
years to the persons named, who include our President and Chief Executive
Officer and each of the four other most highly compensated executive officers of
the Company.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
OTHER
NAME AND PRINCIPAL POSITIONS ANNUAL ALL OTHER
WITH THE COMPANY YEAR SALARY BONUS COMPENSATION COMPENSATION(4)
Darrell R. Wells, President and Chief 2001 $ 0 $ 0 $2,568(2) $ 0
Executive Officer and Chairman of the 2000 $ 0 $ 0 6,979(2) $ 0
Board(1) 1999 $ 0 $ 0 $0 $ 0
Lane A. Hersman, Executive Vice 2001 $135,846 $ 0 $7,096(3) $4,702
President and Chief Operating Officer 2000 $124,330 $ 0 $6,833(3) $4,465
and Director 1999 $118,412 $1,000 $6,833(3) $3,673
Brent L. Nemec, Vice President, 2001 $118,077 $ 0 $0 $3,871
Accounting and Chief Financial 2000 $108,429 $ 0 $0 $3,297
Officer and Treasurer 1999 $103,289 $1,000 $0 $3,131
Stephen L. Marco 2001 $115,481 $ 0 $0 $4,101
Vice President and Chief Actuary 2000 $106,289 $ 0 $0 $3,821
1999 $101,816 $1,000 $0 $3,450
Robert N. Greenwood 2001 $113,154 $ 0 $0 $3,378
Vice President, Operations 2000 $104,923 $ 0 $0 $3,240
1999 $100,924 $1,000 $0 $3,124
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(1) Mr. Wells has not received any salary or bonus for serving as an officer in
a part-time capacity.
(2) Other Annual Compensation consists of personal use of an airplane partly
owned by the Company.
(3) Other Annual Compensation consists of reimbursement of auto expenses.
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(4) The amounts shown in this column represent Company contributions to the
Company's 401(k) plan and term life insurance premiums, as follows:
YEAR MR. WELLS MR. HERSMAN MR. NEMEC MR. MARCO MR. GREENWOOD
---- --------- ----------- --------- --------- -------------
401(K)
......................................................................................................................
2001 $0 $3,145 $2,519 $2,779 $2,723
2000 $0 $2,948 $1,967 $2,519 $2,486
1999 $0 $2,235 $1,870 $1,924 $1,907
LIFE INSURANCE PREMIUMS
......................................................................................................................
2001 $0 $1,557 $1,352 $1,322 $655
2000 $0 $1,517 $1,330 $1,302 $754
1999 $0 $1,438 $1,261 $1,526 $1,217
EMPLOYMENT AGREEMENTS
Messrs. Hersman and Marco have agreements with the Company and Citizens
Security that, until September 30, 2002, would provide for a severance payment
of one year's current salary unless such officer dies, voluntarily resigns or is
terminated for cause as defined in the agreements.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
Each year, the Board of Directors, other than Mr. Hersman, sets the
compensation and benefits of executive officers of the Company at one of its
meetings held after completion of the Company's financial statements for the
preceding year. The Board has not adopted a formal compensation policy and does
not regularly employ compensation consultants. In 2001, the only material
component of executive officer compensation was salary, in addition to benefits
generally available to all employees. The decision process begins with a salary
proposal by Mr. Hersman for each executive officer, other than himself. In
general, the Board intends that salary levels will be near the median for
executives with comparable responsibilities at comparable companies in the
insurance industry, although reliable industry data is difficult to obtain, and
that they will be competitive with other opportunities available to Company
executives. Salaries are indirectly related to corporate performance in that
improved Company performance improves the climate for annual salary increases,
but no portion of executive salaries is contingent upon meeting specific
criteria. The Company has not adopted a bonus plan or other incentive
compensation plan, other than the 1999 Stock Option Plan. No options have as yet
been granted under the Plan.
Mr. Wells, the Company's president and chief executive officer, has not
received any salary or bonus or benefits generally provided to employees of the
Company. Mr. Wells is the Company's largest beneficial shareholder and has
responsibilities for various other businesses not otherwise connected with the
Company.
John H. Harralson, Jr.
Frank T. Kiley
Earle V. Powell
Thomas G. Ward
Darrell R. Wells
Margaret A. Wells
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires our
directors, executive officers and 10% shareholders to file reports of holdings
and transactions in our shares with the SEC. Based on our records and other
information, we believe that our directors, executive officers and 10%
shareholders met these requirements in 2001.
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PERFORMANCE GRAPH
This graph compares our total shareholder return with like data for the
Russell 2000 Index and the Total Return Industry Index for NASDAQ Insurance
Stocks prepared by Center for Research in Securities Prices. The graph assumes
$100 invested at the per share closing price of the Class A Stock on the NASDAQ
SmallCap Market on December 31, 1996 in Citizens Financial and each of the
indices. All data assume reinvestment of dividends. The Company has not
historically paid dividends.
[GRAPH OMITTED]
1996 1997 1998 1999 2000 2001
-----------------------------------------------------------------------------------------
Citizens Financial $100.00 $114.29 $157.14 $209.52 $223.81 $157.14
Russell $100.00 $122.36 $119.25 $144.60 $140.23 $143.71
Nasdaq Insurance $100.00 $146.73 $130.73 $101.41 $127.35 $136.51
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER
PARTICIPATION
The members of the Board of Directors who participate in decisions
regarding the compensation of our executives are John H. Harralson, Jr., Frank
T. Kiley, Earle V. Powell, Thomas G. Ward, Darrell R. Wells, Margaret A. Wells
and, except as to his own compensation, Lane A. Hersman. Mr. Wells and Mr.
Hersman are current executive officers of the Company and Mr. Powell was
president of Citizens Security until his retirement in 1989.
Mr. Wells has responsibilities for other businesses including those
that employ Mr. Kiley, and either determines or participates in the
determination of the compensation received by him from his employers.
Mr. Wells and Mr. Kiley are affiliated with other entities that are
involved in continuing transactions with the Company. These transactions are
described in the next section.
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CERTAIN TRANSACTIONS INVOLVING DIRECTORS AND
EXECUTIVE OFFICERS
Darrell R. Wells, the Company's President and Chairman of the Board,
provides us with securities portfolio management services under four separate
contracts, one with us and one with each of our three insurance subsidiaries. He
does so through SMC Advisors, Inc., an investment advisory entity of which he is
the principal officer, a director, and the sole shareholder. Frank T. Kiley, a
Director of the Company, is also an officer and director of SMC Advisors. Each
contract with SMC Advisors provides for us to pay a fixed annual fee plus
incentive compensation equal to five percent (5%) of any net gain from net
realized and net unrealized capital gains and losses in the bond and stock
portfolios of the particular company involved for the year. The aggregate fees
we incurred under the four contracts as a group last year were as follows: fixed
fees of $45,000 (0.04% of average cash and invested assets for the year); and
incentive fees of $48,168 (0.04%) of average cash and invested assets for the
year). Any excess of net realized and unrealized capital losses over net
realized and unrealized capital gains at the end of a year is not carried
forward to the next year. Each contract provides for automatic renewal for
successive one-year periods unless we or SMC Advisors notifies the other, at
least 30 days prior to the end of the current contract period, that we or it
intends to terminate the contract. The contracts have been renewed for 2002. The
contracts are also subject to termination in certain events of default or
insolvency. Portfolio investments are limited to investments that comply with
the Kentucky Insurance Code and regulations and the overall investment policies
of the Company and our insurance subsidiaries.
Insurance laws require the Company's insurance subsidiaries to deposit
portions of their assets in bank custodial accounts for the protection of
policyholders. The principal custodian for such statutory deposits and other
assets is Commonwealth Bank and Trust Company, which is controlled by Mr. Wells.
The fees we pay the bank are based on the amount of assets held. In 2001, we
paid $94,199 in fees to the bank. Mr. Kiley is also a director of the bank.
Our subsidiary Corporate Realty Service, Inc. manages our home office
building, as well as two office buildings owned by partnerships controlled by
Mr. Wells. These partnerships pay management fees to Corporate Realty Service
based upon a percentage of rental income and leasing commissions according to a
prescribed schedule, and also reimburse certain salary expenses of Corporate
Realty Service. During 2001, the partnerships paid Corporate Realty Service
$174,746, consisting of $75,394 in management fees, $43,874 in leasing
commissions and $55,478 in salary reimbursement. Mr. Kiley also owns interests
in the partnerships. Corporate Realty Service provides occasional consulting
services to Commonwealth Bank and Trust Company on an hourly fee basis. Such
fees totaled $12,100 in 2001.
OTHER MATTERS
We are not aware of any other matters requiring a vote of shareholders
at the Annual Meeting (except for procedural matters), and we do not expect any
such other matters to arise. If, however, any such other matters are presented,
the persons named on the enclosed proxy, or any substitutes, will vote on these
matters according to their judgment of the best interests of the Company.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young, LLP has served as our independent accountant and the
auditor of our annual financial statements since the Company was organized in
1990. The Board of Directors ordinarily selects our independent accountant and
auditor in the last half of the year. It has not yet made a selection for the
current year.
The Company paid or accrued fees payable to Ernst & Young, LLP for the
year ending December 31, 2001 as follows:
AUDIT FEES. Fees for professional services for the audit of the
Company's annual consolidated financial statements and the review of
the consolidated financial statements included in the Company's
quarterly reports were $77,200.
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FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. There
were no fees for services of this kind during the year.
ALL OTHER FEES. Fees for all other services were $77,770, including
$64,200 for audits of the separate annual financial statements of
the Insurance Subsidiaries submitted to insurance regulatory
authorities and $13,750 for review of income tax returns and other
services.
The Audit Committee has determined that the provision by Ernst & Young,
LLP of the services covered by All Other Fees is compatible with maintaining its
independence.
We expect that a representative of Ernst & Young, LLP will be present
at the Annual Meeting, will have the opportunity to make a statement if the
representative desires to do so, and will be available to respond to appropriate
questions.
FINANCIAL STATEMENTS
Our most recent annual financial statements are contained in the 2001
Annual Report to Shareholders, which may be enclosed with this proxy statement.
You may obtain additional copies of the Annual Report by writing to the
President, The Marketplace, Suite 300, 12910 Shelbyville Road, Louisville,
Kentucky 40243. Although enclosed, you should not consider the Annual Report and
such financial statements as part of this statement because we do not consider
the information contained in the Annual Report or financial statements material
for purposes of exercising your judgment regarding the matters considered at the
Annual Meeting.
PROPOSALS BY SHAREHOLDERS
Shareholders are entitled to present proposals for action at a
forthcoming meeting if they comply with the requirements of the proxy rules. If
you would like for us to consider including a proposal in the Board of
Directors' proxy statement and form of proxy for presentation at the 2003 Annual
Meeting of Shareholders, you must deliver it to our offices not later than
December 24, 2002. If you intend to submit a proposal at the 2003 Annual Meeting
of Shareholders but do not intend to include it in the Board of Directors' proxy
statement and form of proxy for that meeting, you must provide appropriate
notice to us not later than March 8, 2003. You should send your proposals or
notices described above to the Secretary of the Company at The Marketplace,
Suite 300, 12910 Shelbyville Road, Louisville, Kentucky 40243.
GENERAL INFORMATION
Our Board of Directors is conducting this solicitation of proxies
primarily by mail. The Company will bear the costs of the solicitation, which
may include reimbursement to brokerage firms and others for expenses involved in
forwarding this solicitation material for the Annual Meeting to you and other
shareholders on our behalf. Certain officers, directors, and regular employees
of the Company may also solicit proxies on behalf of the Board of Directors by
means of telephone calls, personal interviews, and mail at no additional expense
to the Company, except any actual out-of-pocket communications charges.
Whether or not you plan to attend the Annual Meeting, please complete,
sign, date and promptly return the enclosed proxy in the enclosed envelope. No
postage is required for mailing in the United States.
By Order of the Board of Directors,
DARRELL R. WELLS
PRESIDENT AND CHIEF EXECUTIVE OFFICER
11
14
APPENDIX TO PROXY STATEMENT
FORM OF PROXY CARD
(Front)
PROXY
CITIZENS FINANCIAL CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR SHAREHOLDERS MEETING ON MAY 23, 2002
The undersigned hereby appoints James L. Head and Len E. Schweitzer and
each or either of them, as true and lawful agents and proxies, with full power
of substitution in each, to represent the undersigned in all matters coming
before the 2002 Annual Meeting of Shareholders of Citizens Financial Corporation
to be held at the office of the Company, The Marketplace, Suite 300, 12910
Shelbyville Road, Louisville, Kentucky on Thursday, May 23, 2002 at 4:00 p.m.
Eastern Daylight Time, and any adjournments thereof, and to vote all shares
owned of record by the undersigned as follows:
1. ELECTION OF DIRECTORS
Nominees: John H. Harralson, Jr., Lane A. Hersman, Frank T. Kiley,
Earle V. Powell, Thomas G. Ward, Darrell R. Wells and Margaret A. Wells.
[ ] VOTE FOR all nominees listed above, except vote withheld from
the following nominees (if any):
------------------------------------------------------------------
OR
[ ] VOTE WITHHELD from all nominees listed above.
2. OTHER MATTERS
In their discretion, to vote with respect to any other matters that
may come before the Meeting or any adjournments thereof, including matters
incident to its conduct.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED IN THE MANNER
SPECIFIED ABOVE BY THE SHAREHOLDER. TO THE EXTENT CONTRARY SPECIFICATIONS ARE
NOT GIVEN, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED IN ITEM 1, WITH THE
DISCRETIONARY AUTHORITY SET FORTH IN THE ACCOMPANYING PROXY STATEMENT.
PLEASE DATE AND SIGN ON THE REVERSE SIDE
15
(Back)
Dated:_________________________, 2002
PLEASE SIGN EXACTLY AS
NAME APPEARS BELOW
____________________________Signature
____________________________Signature
(JOINT OWNERS SHOULD EACH SIGN.
ATTORNEYS-IN-FACT, EXECUTORS,
ADMINISTRATORS, CUSTODIANS,
PARTNERS, OR CORPORATION
OFFICERS SHOULD GIVE FULL TITLE).
PLEASE DATE, SIGN, AND RETURN THIS PROXY
IN THE ENCLOSED ENVELOPE PROMPTLY.
NO POSTAGE IS NECESSARY IF MAILED
IN THE UNITED STATES.