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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MAY 12, 1998
CITIZENS FINANCIAL CORPORATION
(Exact name of registrant as specified in its charter)
KENTUCKY 0-20148 61-1187135
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of incorporation)
The Marketplace, Suite 300
12910 SHELBYVILLE ROAD, LOUISVILLE, KENTUCKY 40243
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (502) 244-2420
(Former name or former address, if changed since last report)
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INFORMATION TO BE INCLUDED IN THE REPORT
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 12, 1998, Citizens Financial Corporation (the "Company") and its
wholly-owned subsidiary Citizens Security Life Insurance Company ("CSLIC")
acquired 100% of the common stock of United Liberty Life Insurance Company
("United") from Chaswil United Corp., an Ohio insurance holding company
("Chaswil").
BACKGROUND
United is a life and accident insurer licensed to do business in 23
states. At December 31, 1997, it had statutory admitted assets of
approximately $40 million and statutory capital and surplus of approximately
$3.7 million. Prior to the acquisition, United was chartered in Ohio and had
its administrative offices in Cincinnati, Ohio. In connection with the
acquisition, United will be redomesticated as a Kentucky-chartered life and
accident insurer and its headquarters have been relocated to Louisville,
Kentucky, in the Company's administrative offices.
The Company and Chaswil entered into a Acquisition Agreement (EXHIBIT 2.1
hereto) with respect to the United common stock on December 12, 1997, amended
as of February 10, 1998 (Exhibit 2.2 hereto) and as of March 2, 1998 (EXHIBIT
2.3 hereto) (as so amended, the "Acquisition Agreement"). The Company
thereafter sought and obtained required approvals for the acquisition and
related transactions from insurance regulatory authorities of the states of
Kentucky and Ohio. Chaswil also sought and obtained other required approvals
from insurance regulatory authorities of the state of Ohio. The Company and
Chaswil also filed notification of the acquisition with the Department of
Justice and the Federal Trade Commission pursuant to the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and were granted early termination of the
waiting period applicable to such notifications.
PURCHASE PRICE
At the closing, the Company and CSLIC paid Chaswil $6,045,555 for the
United common stock, with $3,950,760 paid in cash and $2,094,795 paid by
Chaswil's retention of certain United mortgage loans, certain real estate
related assets and the capital stock of an unrelated entity. The Company paid
an additional $250,000 into escrow with a commercial bank pending certain
balance sheet adjustments based on United's capital and surplus (with certain
adjustments) as of April 30, 1998 in relation to its capital and surplus (also
with certain adjustments) as of December 31, 1997. Depending upon the results
of the balance sheet adjustments, the Company and CSLIC may be required to
release part or all of the escrowed amount or even pay an additional amount to
Chaswil or may be entitled to recover part or all of the escrowed amount or
even an additional amount from Chaswil.
FINANCING FOR THE ACQUISITION
The acquisition was financed with approximately $3,100,000 in working
capital of CSLIC and with $3,400,000 of the $6,710,000 of total proceeds under
a Term Loan Agreement dated as of May 8, 1998 between the Company and a
commercial bank (the "Term Loan Agreement"). The borrowings are evidenced by
a $6,710,000 Note that matures on October 1, 2006 (the "Note"). The balance
of the Note ($3,310,000) was used to pay the principal of and all accrued
interest on two outstanding promissory notes of the Company to the
commercial bank, which notes were thereafter terminated.
The Note is to be repaid in 33 consecutive quarterly installments of
principal. The initial installment, due July 1, 1998, is in the amount of
$100,000. Thereafter, installments range from $100,000 to $250,000. Interest
is payable on the Notes quarterly, beginning July 1, 1998, at a rate per annum
equal to the commercial bank's prime rate. The Note may be prepaid at any time
by the Company.
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The Term Loan Agreement limits the ability of the Company to (i) incur
additional indebtedness, (ii) create or permit liens, (iii) effect certain
asset sales or engage in certain mergers or similar transactions, (iv) make
dividend payments on its capital stock, and (v) invest in real estate ownership
and mortgages, bonds rated below BB+, and common stocks. In addition, the Term
Loan Agreement requires the Company to maintain certain financial ratios and a
minimum capital and surplus (calculated according to statutory accounting
principles).
To secure the Note, the Company has pledged all of the issued and
outstanding common stock of CSLIC. The commercial bank also required that
Darrell R. Wells ("Mr. Wells"), Chairman and President of the Company,
personally guaranty up to $1,610,000 of the Note. The Company and Mr. Wells
previously entered into a Guarantor's Compensation Agreement (the "Guarantor's
Compensation Agreement"), dated September 22, 1995, with Mr. Wells whereby the
Company pays an annual guaranty fee based on an applicable percentage of the
outstanding amount guaranteed by Mr. Wells. The Guarantor's Compensation
Agreement is described under "Certain Transactions Involving Directors and
Executive Officers" in the Board of Director's Proxy Statement for the Annual
Meeting of Shareholders held on May 21, 1998, which description is hereby
incorporated by this reference.
ITEM 7.FINANCIAL STATEMENTS AND EXHIBITS
At the time this Form 8-K is being filed, it is impracticable for the
Company to provide the required financial statements and pro forma financial
statements. The required financial statements will be filed under cover of an
amendment to this Form 8-K no later than sixty (60) days after the date this
Form 8-K is initially filed with the Securities and Exchange Commission.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Citizens Financial Corporation
By:/S/ Lane A. Hersman
Lane A. Hersman,
Executive Vice President
Date: May 27, 1998
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EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION PAGE
2.3 Acquisition Agreement dated December 12, 6
1997 by and between Chaswil United
Corp. and Citizens Financial
Corporation (Exhibit B and Schedules omitted)
2.4 First Amendment to Acquisition Agreement 74
dated February 10, 1998 by and between
Chaswil United Corp. and Citizens
Financial Corporation
2.5 Second Amendment to Acquisition Agreement 76
dated March 2, 1998 by and between
Chaswil United Corp. and Citizens
Financial Corporation (Exhibits
omitted)