<PAGE>
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:
[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-11(c) or Section 240.14a-12
THE CENTRIS GROUP, 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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Notes:
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<PAGE>
PRELIMINARY
[LOGO OF THE CENTRIS GROUP, INC.(TM)]
March 30, 1998
Dear Stockholder,
You are cordially invited to attend the 1998 Annual Meeting of Stockholders
of The Centris Group, Inc. to be held on Wednesday, May 13, 1998, at the
offices of the Company, 650 Town Center Drive, 15th Floor, Costa Mesa,
California, at 9:00 a.m., Local Time.
Information concerning the matters to be voted on at the Annual Meeting is
set forth in the attached Notice of 1998 Annual Meeting of Stockholders and
Proxy Statement.
It is important that your shares be represented at the Annual Meeting
whether or not you are personally able to attend. All materials you need to
vote your shares by mail are enclosed in this package. Please review them
carefully. I URGE YOU TO VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY
CARD IN THE ENCLOSED ENVELOPE AS PROMPTLY AS POSSIBLE.
Sincerely,
David L. Cargile
Chairman of the Board, President
and Chief Executive Officer
<PAGE>
PRELIMINARY
[LOGO OF THE CENTRIS GROUP, INC.(TM)]
NOTICE OF 1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 13, 1998
-----------------------------
To the Stockholders of The Centris Group, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of The
Centris Group, Inc., a Delaware corporation (the "Company"), will be held on
Wednesday, May 13, 1998, at the offices of the Company, 650 Town Center Drive,
15th Floor, Costa Mesa, California, at 9:00 a.m., Local Time, for the
following purposes:
(1) To elect three of seven directors for the Company's Board of Directors,
to serve until their successors have been duly elected and qualified or
until their earlier death, resignation or removal;
(2) To ratify the selection by the Board of Directors of KPMG Peat Marwick
LLP as the Company's independent auditors for the year ending December
31, 1998;
(3) To consider and vote upon a stockholder proposal; and
(4) To act upon such other matters as may properly come before the Annual
Meeting of Stockholders.
The Board of Directors has fixed the close of business on March 20, 1998 as
the record date for the determination of stockholders entitled to notice of
and to vote at the Annual Meeting of Stockholders and any postponements or
adjournments thereof.
All stockholders are cordially invited to attend the Annual Meeting of
Stockholders. Even if a stockholder expects to attend, it will be appreciated
if the stockholder would promptly vote, sign, date and return the enclosed
proxy card in the envelope provided.
By Order of the Board of Directors,
Jose A. Velasco
Senior Vice President, Chief
Administrative Officer, Secretary
and General Counsel
March 30, 1998
Costa Mesa, California
PLEASE VOTE, SIGN, DATE AND RETURN THE ACCOMPANYING PROXY CARD WITHOUT DELAY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE. THE PROXY IS REVOCABLE AND WILL NOT
AFFECT A STOCKHOLDER'S RIGHT TO VOTE IN PERSON IN THE EVENT THE STOCKHOLDER
ATTENDS THE MEETING.
<PAGE>
PRELIMINARY
[LOGO OF THE CENTRIS GROUP, INC.(TM)]
-------------------------
PROXY STATEMENT
-------------------------
1998 ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON
MAY 13, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of The Centris Group, Inc., a Delaware
corporation (the "Company"), for use at the 1998 Annual Meeting of
Stockholders of the Company (the "Annual Meeting") to be held at the offices
of the Company, 650 Town Center Drive, 15th Floor, Costa Mesa, California, on
Wednesday, May 13, 1998, at 9:00 a.m., Local Time, and any postponements or
adjournments thereof. Accompanying this Proxy Statement is a proxy card
(sometimes referred to herein as a "proxy") which may be used to indicate a
stockholder's vote as to each of the matters described in this Proxy Statement
of which management is aware will require stockholder action at the Annual
Meeting.
The Company intends to mail this Proxy Statement and the accompanying proxy
card on March 30, 1998 to stockholders entitled to notice of and to vote at
the Annual Meeting.
GENERAL INFORMATION
RECORD DATE, SHARES OUTSTANDING AND QUORUM
The close of business on March 20, 1998 has been fixed as the record date
for the determination of stockholders entitled to notice of and to vote at the
Annual Meeting and any postponements or adjournments thereof. As of that
record date, the Company had outstanding 12,166,796 shares of its $0.01 par
value common stock, the only outstanding voting securities of the Company. The
number of outstanding shares reflects the 100% stock split effected in the
form of a stock dividend paid on February 27, 1998 to all stockholders of
record at the close of business on February 18, 1998 (the "100% stock split").
Pursuant to the Company's Bylaws, the holders of one-third ( 1/3rd) of all
shares of stock outstanding and entitled to vote who are present in person or
by proxy at a meeting of stockholders shall constitute a quorum. For each
share owned on the record date, a stockholder is entitled to one vote on all
matters to be considered at the Annual Meeting. The Company's Restated
Certificate of Incorporation does not provide for cumulative voting for the
election of directors.
VOTING PROCEDURES
All proxies which are properly completed, signed and returned to the Company
prior to the Annual Meeting, and which have not been revoked, will be voted in
the manner indicated on the proxy. WHERE NO INSTRUCTIONS HAVE BEEN GIVEN BY A
STOCKHOLDER ON THE PROXY CARD WITH RESPECT TO A PARTICULAR MATTER PRESENTED,
THE PROXY WILL BE VOTED FOR THE ELECTION OF ALL OF THE NOMINEES NAMED IN THE
PROXY, FOR PROPOSAL NO. 2, AND AGAINST PROPOSAL NO. 3. Abstentions are counted
for purposes of
1
<PAGE>
determining the presence of a quorum for the transaction of business at a
meeting and will be counted as abstentions for the tabulation of the votes
cast.
If shares of the Company's stock are held in "street name" through a broker
or other nominee, the broker or other nominee, under New York Stock Exchange
rules, will not be permitted to exercise voting discretion with respect to the
stockholder's proposal set forth in this Proxy Statement as PROPOSAL NO. 3.
Since "street name" shares may be voted only in accordance with specific
instructions received by the broker or nominee from the owners of such shares,
if such specific instructions are not given, the broker or nominee may not
vote on PROPOSAL NO. 3. This results in what is known as a "broker non-vote"
on such proposal. While broker non-votes will not be counted in determining
the number of shares necessary for approval of PROPOSAL NO. 3, broker non-
votes will be included in determining whether or not a quorum is present at
the meeting.
A stockholder may revoke his or her proxy at any time before it is voted by
filing with the Secretary of the Company at its principal executive offices
either a written notice of revocation or a duly executed proxy bearing a later
date, or by appearing in person at the Annual Meeting and voting his or her
shares in person. The submission of a proxy to the Company in connection with
the 1998 Annual Meeting, if properly executed, automatically revokes all prior
proxies which may have previously been submitted to the Company for this
Annual Meeting.
It is the Company's policy to handle proxies and ballots from stockholders
in a manner that protects stockholder privacy. All proxy cards and ballots
that identify votes of stockholders are held confidential and only the proxy
solicitor, the proxy tabulator and a few other persons necessary to inspect
and process the ballots and proxies have access to them.
2
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PROPOSAL NO. 1
ELECTION OF DIRECTORS
NOMINEES
The Company's Restated Certificate of Incorporation and Bylaws divide the
Board of Directors into three classes and permit the Board of Directors to
determine its size. The number of directors established by the Board of
Directors is currently seven, with two directors elected at two annual
meetings of stockholders, and three directors elected at a third annual
meeting. Each of the directors of the Company serves for a term ending on the
date of the third annual meeting of stockholders following his or her election
(and thereafter until a successor has been duly elected and qualified or until
the director's earlier death, resignation or removal). The dates of each
director's term of office are as set forth below.
The three directors who are to be elected at this 1998 Annual Meeting will
hold office until the 2001 Annual Meeting of Stockholders of the Company. Each
of the three nominees for election have advised the Company that they are able
and willing to serve as directors. If any nominee refuses or is unable to
serve, the Company's designated proxy holders will vote for another person
nominated by the Board of Directors.
DIRECTORS WILL BE ELECTED BY A PLURALITY OF THE VOTES CAST IN PERSON OR BY
PROXY AT THE ANNUAL MEETING. THE THREE CANDIDATES RECEIVING THE HIGHEST NUMBER
OF VOTES WILL BE ELECTED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE
COMPANY'S THREE NOMINEES. ALL PROXIES RECEIVED BY THE COMPANY WILL BE VOTED IN
FAVOR OF THE COMPANY'S NOMINEES, UNLESS AN INSTRUCTION TO THE CONTRARY IS
INDICATED ON A PROPERLY EXECUTED PROXY CARD.
Certain information for each person nominated for election as a director,
and for all continuing directors of the Company, is set forth below.
COMPANY NOMINEES FOR ELECTION AS DIRECTORS
WHOSE TERMS WILL EXPIRE AT THE 2001 ANNUAL MEETING OF STOCKHOLDERS
DAVID L. CARGILE, age 52, joined the Company as a Senior Vice President in
December 1991, and was appointed as its President, Chief Operating Officer and
a director in August 1994, and as its Chief Executive Officer in March 1995.
He was elected as Chairman of the Board in April 1995. Prior to joining the
Company Mr. Cargile was employed for seventeen years by Reinsurance Facilities
Corporation, a reinsurance intermediary, and had served since 1984 as that
company's President and Chief Executive Officer. He has also served on the
boards of directors of a number of companies engaged in the reinsurance
business.
CHARLES L. SCHULTZ, age 70, was elected a director of the Company in May
1995. From 1985 until his retirement in 1993, Mr.Schultz held the position of
Senior Vice President, Finance and Chief Financial Officer of Farmers Group,
Inc., the management and holding company for the Farmers Insurance Group.
Since November 1995 Mr.Schultz has served as a director of Amwest Insurance
Group, a Southern California-based insurance holding company.
HOWARD S. SINGER, age 52, has served as a director of the Company since its
founding. From 1983 through 1991 he served in the capacity of financial
consultant to the Company. Since December 1991 Mr. Singer has been employed by
the Company as its Executive Vice President--Corporate Finance and Investor
Relations.
DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS WILL EXPIRE AT THE 1999 ANNUAL MEETING OF STOCKHOLDERS
BERNARD H. ROSS, age 71, has served as a director of the Company since 1986.
He currently serves as Executive Vice President of Request, Inc., a developer
of medical software, and prior to that was Chairman and Chief Executive
Officer of Fitness Horizons, Inc., a developer of fitness centers for
children. In addition to being a partner and consultant, until 1989 he was
National Director of Healthcare Services of Touche, Ross &
3
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Company, a national public accounting firm. He has also served on various
professional and governmental advisory boards related to healthcare.
KENNETH C. TYLER, age 79, served as a director of the Company from 1986 to
September 1989, at which time he resigned from the Company's Board of
Directors due to health reasons. The vacancy created by his resignation was
not filled, and following his recovery Mr.Tyler was re-elected to the Board of
Directors in December 1989. Prior thereto Mr.Tyler had served for almost 40
years in a variety of managerial and executive capacities with the Farmers
Group, Inc., and held the position of Vice Chairman of the Board and General
Counsel of that company from 1983 until his retirement in 1985.
DIRECTORS CONTINUING IN OFFICE
WHOSE TERMS WILL EXPIRE AT THE 2000 ANNUAL MEETING OF STOCKHOLDERS
JOHN F. KOOKEN, age 66, has served as a director of the Company since 1986.
In 1987 he was appointed Vice Chairman and Chief Financial Officer of Security
Pacific Corporation, the parent of Security Pacific National Bank, Los
Angeles, California, and retired in July 1992. Since June 1992 Mr. Kooken has
served as a director of Golden State Bancorp, and since February 1994 he has
served as a director of Pacific Gulf Properties, Inc., a real estate
investment trust.
L. STEVEN MEDGYESY, M.D., age 64, has served as a director of the Company
since 1983. Until March 1996 he served as Medical Director of the Company's
USBenefits Insurance Services, Inc. subsidiary. From 1963 until his retirement
in 1993 as the Director of Laboratories at Lincoln West Medical Center,
Chicago, Dr. Medgyesy practiced in the field of pathology.
1998 COMMITTEES OF THE BOARD: FUNCTION; MEMBERSHIP; ATTENDANCE
The Board of Directors of the Company has five standing Committees:
The EXECUTIVE COMMITTEE has all of the power and authority in the management
of the business and affairs of the Company to take action on behalf of the
Board of Directors as may be necessary between regular meetings of the Board,
when a special meeting or a telephonic meeting of the full Board is not
possible or practicable.
The functions of the AUDIT COMMITTEE include: (i) meeting with the Company's
independent auditors to review the scope and results of the independent
auditors' activities and reviewing the results of their audit when it is
completed; (ii) reviewing the adequacy of internal financial and accounting
controls and the results of the independent auditors' examinations thereof;
(iii) recommending to the Board of Directors the appointment of the Company's
independent auditors; and (iv) reporting its findings on any of the above to
the Board of Directors, as appropriate. All members of the Audit Committee are
non-employee directors.
The functions of the INVESTMENT COMMITTEE include: (i) establishing goals
for the Company's investment program as well as policies to achieve such
goals; (ii) analyzing current investments and their return and suggesting any
changes deemed necessary; and (iii) selecting independent investment advisors,
determining the scope of their duties and responsibilities, approving their
fees and monitoring and evaluating their performance.
The functions of the COMPENSATION COMMITTEE include: (i) establishing
criteria and adopt compensation policies applicable to the Company's Chief
Executive Officer and executive officers at the level of Senior Vice President
and above; (ii) recommending to the Board of Directors salary, bonus and other
forms of direct and indirect compensation to be paid to the Chief Executive
Officer; (iii) evaluating and making recommendations to the Board of Directors
regarding compensation policies and programs applicable to all Company
employees; and (iv) administering the Company's annual cash bonus plan and its
stock option and other long-term incentive plans. All members of the
Compensation Committee are non-employee directors.
4
<PAGE>
The primary functions of the NOMINATING COMMITTEE include reviewing and
investigating the qualifications of candidates proposed by management or by
others (including candidates proposed by stockholders or members of the Board)
for election by stockholders or election by the Board itself to fill a vacancy
on the Company's Board of Directors. Recommendations by stockholders must be
supported by a description of such persons' background and experience,
together with the written consents of such persons to serve on the Board if
elected, and should be addressed to the Nominating Committee, in care of the
Secretary, The Centris Group, Inc., 650 Town Center Drive, Suite 1600, Costa
Mesa, California. This information must be received by February 10, 1999, for
such persons to be considered for nomination by the Board for election at the
1999 Annual Meeting of Stockholders.
There were seven meetings of the Board during 1997. The Executive Committee
acted twice during the year by written consent. Other Committees met during
1997 as follows: Audit--five times; Investment--two times; Compensation--three
times; and Nominating--two times. All current directors attended or
participated by telephone in at least 75% of the meetings of the Board and the
Committees of which they were members during 1997. Committee members are
appointed each year at the Board of Directors meeting immediately following
the annual meeting of stockholders. The table below identifies the present
members of each Committee who were appointed in May 1997.
<TABLE>
<CAPTION>
COMMITTEE MEMBERS
--------- -------
<S> <C>
Executive Committee..... Messrs. Cargile (Chairman), Kooken and Singer
Audit Committee......... Messrs. Schultz (Chairman), Kooken, Ross and Tyler
Compensation Committee.. Messrs. Ross (Chairman), Medgyesy, Schultz and Tyler
Investment Committee.... Messrs. Kooken (Chairman), Cargile, Medgyesy, Schultz and Singer
Nominating Committee.... Messrs. Singer (Chairman), Cargile, Medgyesy, Ross and Tyler
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are also full-time employees of the Company receive no
additional compensation for their services as directors. Non-employee
directors are paid an annual retainer of $12,500 and a fee of $3,000 for each
meeting of the Board attended ($1,000 for telephonic meetings). Such directors
are also paid a fee of $1,000 for each Committee meeting ($1,500 for Committee
Chairmen). In addition, directors are reimbursed for reasonable out-of-pocket
expenses incurred by them in connection with their attendance at Board and
Committee meetings.
Non-employee directors are also entitled to receive stock option awards
under the Company's 1991 Directors Stock Option Plan, as amended. The amount
of the options awarded and to be awarded under this Plan has been adjusted to
reflect the February 1998 100% stock split. Under this Plan as currently in
effect, on the third business day following each annual meeting, each non-
employee director automatically is granted an award of options covering
between 6,000 to 9,000 shares of common stock, with the number of options
actually granted determined in accordance with a formula related to the
Company's return on equity for the prior year. Based on the Company's return
on equity for 1997, each of the non-employee directors will receive an option
grant for 6,000 shares following the 1998 Annual Meeting.
Those directors who are also employees of the Company may be entitled to
additional compensation in their capacity as employees to the extent that they
participate in the Company's short-term and long-term incentive compensation
plans, as described elsewhere in this Proxy Statement.
5
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 20, 1998, the number of shares of
the Company's common stock deemed to be beneficially owned (including shares
which can be acquired within 60 days) by: (i) each director of the Company;
(ii) the Company's Chief Executive Officer; (iii) the Company's four other
most highly compensated officers; and (iv) all directors and all executive
officers of the Company as a group, and the percentage of such holdings to the
total number of shares in the class, as calculated in accordance with the
rules and regulations of the Securities and Exchange Commission (the "SEC").
The Chief Executive Officer plus the four other most highly compensated
officers are sometimes referred to collectively in this Proxy Statement as the
"Named Executives." Except as otherwise noted, the indicated owners have sole
voting and investment power with respect to the shares specified.
The number of shares set forth in the table below and the footnotes to the
table have been adjusted to reflect the February 1998 100% stock split.
<TABLE>
<CAPTION>
NUMBER RIGHT TO ACQUIRE
OF SHARES BENEFICIAL OWNERSHIP PERCENT OF CLASS
NAME AND ADDRESS BENEFICIALLY OWNED WITHIN 60 DAYS(/1/) BENEFICIALLY OWNED
- ---------------- ------------------ -------------------- ------------------
<S> <C> <C> <C>
David L. Cargile 44,000 402,500 3.49%
650 Town Center Drive
Costa Mesa, CA 92626
John T. Grush 42,243(/2/) 48,000 *
650 Town Center Drive
Costa Mesa, CA 92626
Craig J. Kelbel 5(/2/) 26,000 *
650 Town Center Drive
Costa Mesa, CA 92626
John F. Kooken 25,400(/3/) 14,000 *
1170 Lorain Road
San Marino, CA 91108
L. Steven Medgyesy, M.D. 619,568(/4/) 14,000 4.95%
6200 North Hiawatha
Chicago, IL 60646
Bernard H. Ross 4,000 14,000 *
1853 Mission Hills Lane
Northbrook, IL 60062
Charles L. Schultz -0- 9,000 *
325 South Rimpau
Boulevard
Los Angeles, CA 90020
Howard S. Singer 546,110(/5/) 45,000 4.62%
6200 North Hiawatha
Chicago, IL 60646
Kenneth C. Tyler 23,000 9,000 *
17244 Exeter Place
Northridge, CA 91325
Jose A. Velasco 38,930(/2/) 45,000 *
650 Town Center Drive
Costa Mesa, CA 92626
All Directors and
Executive Officers of
the Company 1,349,512 637,500 15.52%
(13 persons) as a group
</TABLE>
6
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- --------
* Indicates ownership of less than 1% of the Company's outstanding stock.
(1) This column reflects the number of shares that could be purchased within
60 days of March 20, 1998 by the exercise of vested options under the
Company's stock option plans.
(2) Includes shares held in the employee's 401(k) account. While the employee
votes the shares in his account at any stockholders meeting, on exiting
the account only the cash value of the shares is distributed and
certificates are not issued.
(3) Includes 1,000 shares held by Mr. Kooken's wife through her separate
individual retirement accounts.
(4) Includes 275,932 shares owned directly by Dr. Medgyesy; 172,622 shares
held by Dr. Medgyesy in his capacity as trustee of the Singer Family
Trust, which trust is for the benefit of Howard S. Singer and members of
his family; 16,120 shares held by Dr. Medgyesy's wife; and 154,894 shares
held in various trusts for the benefit of Dr. Medgyesy and members of his
family. Dr. Medgyesy disclaims beneficial ownership in 343,636 of said
shares.
(5) Includes 337,060 shares held directly by Mr. Singer; 172,622 shares held
by Dr. Medgyesy in his capacity as trustee of the Singer Family Trust,
which trust is for the benefit of Mr. Singer and members of his family;
16,828 shares held by Mr. Singer's wife as trustee for the benefit of
their descendants; 14,000 shares held by a partnership of which Mr. Singer
is the general partner; and 5,600 shares held by Mr. Singer's individual
retirement account. Mr. Singer disclaims beneficial ownership in 203,450
of said shares.
SECURITY OWNERSHIP OF CERTAIN OTHER STOCKHOLDERS
The following table sets forth information regarding the beneficial
ownership of each person, other than those affiliated with the management of
the Company, known to the Company to be the beneficial owner of more than 5%
of its outstanding common stock. The Company believes that the Company's stock
in the name of the firms listed below is held by investment advisors or
affiliates on behalf of their respective clients, and that none of such
clients is the beneficial owner of more than 5% of the Company's stock. The
number of shares set forth in the table and the footnotes to the table reflect
the February 1998 100% stock split.
<TABLE>
<CAPTION>
AMOUNT OF SHARES PERCENT
NAME AND ADDRESS BENEFICIALLY OWNED OF CLASS
---------------- ------------------ ---------
<S> <C> <C>
Philo Smith 796,600(/1/) 6.55%
Philo Smith Capital Corporation
(and affiliated limited partnerships,
funds and companies)
2950 Summer Street
Stamford, Connecticut 06905
Dimensional Fund Advisors Inc. 750,800(/2/) 6.17%
1299 Ocean Avenue, 11th Floor
Santa Monica, California 90401
Dorchester Partners, L.P. 718,200(/3/) 5.90%
Dorchester Advisors, Inc.
Michael J. Halpern
1999 Avenue of the Stars, Suite 1950
Los Angeles, California 90067
Kahn Brothers & Co., Inc. 846,220(/4/) 6.95%
555 Madison Avenue, 22nd Floor
New York, New York 10022
</TABLE>
7
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- --------
(1) As disclosed in a Schedule 13D dated October 24, 1997, filed with the SEC
and furnished to the Company. By virtue of the dispositive and voting
powers described in the Schedule 13D, Philo Smith and Philo Smith & Co.,
Inc. beneficially own 138,400 of the shares held by PSCO Partners Limited
Partners; Philo Smith Capital Corporation beneficially owns 49,000 of the
shares held by PSCO Partners Limited Partnership Two; and Philo Smith and
Philo Smith Capital Corporation beneficially own 609,200 of the shares
held by PSCO Fund Limited.
(2) As disclosed in a Schedule 13G dated February 9, 1998, filed with the SEC
and furnished to the Company. Dimensional Fund Advisors, Inc.
("Dimensional"), a registered investment advisor, is deemed to have
beneficial ownership of 750,800 shares of the Company's stock, all of
which shares are held in portfolios of DFA Investment Dimensions Group
Inc., a registered open-end investment company, or in series of the DFA
Investment Trust Company, a Delaware business trust, or the DFA Group
Trust and DFA Participation Group Trust, investment vehicles for qualified
employee benefit plans, all of which Dimensional Fund Advisors Inc. serves
as investment manager. Dimensional disclaims beneficial ownership of all
such shares.
(3) As disclosed in Amendment No. 3 to a Schedule 13D filed with the SEC on
February 20, 1998, and furnished to the Company. The Schedule 13D states
that Dorchester Partners, L.P. ("Partners"), a private investment
partnership, and Dorchester Advisors, Inc. ("Advisors") have shared voting
power and dispositive power with respect to 718,200 shares, and that
Michael J. Halpern ("Halpern"), through Halpern's position as the sole
stockholder, officer and director of Advisors which is the general partner
of Partners, controls the investment and voting decisions with respect to
such 718,200 shares.
(4) As disclosed in a Schedule 13G dated February 6, 1998, filed with the SEC
and furnished to the Company. The Schedule 13G indicates that Kahn
Brothers & Co., Inc. is the beneficial owner of 846,220 shares and has
shared voting and dispositive powers with respect to such 846,200 shares.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors and executive officers, and persons who own more than 10% of a
registered class of the Company's equity securities, to file with the
Securities and Exchange Commission reports of ownership and changes in
ownership of common stock and other equity securities of the Company and to
furnish the Company with copies of all such Section 16(a) reports that they
file.
Based solely on review of the copies of such reports furnished to the
Company and written representations that no other reports were required, the
Company believes that during the 1997 fiscal year all filing requirements
applicable to its officers and directors were complied with.
8
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THE CENTRIS GROUP, INC.
COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS
REPORT ON EXECUTIVE COMPENSATION
GENERAL
The Compensation Program of The Centris Group, Inc. for the 1997 fiscal year
consisted of three components: annual cash salaries, discretionary cash
bonuses under its Incentive Compensation Program and discretionary long-term
awards (Stock Option Plan and Long-Term Incentive Plan).
Base salaries of all employees, except for the Chief Executive Officer, are
generally set in accordance with the Company's Salary Administration Program
which provides a framework for determining an employee's salary level. This
determination is based upon a variety of factors that include job function,
expertise, experience and the competitive placement of each position relative
to other companies. Management of the Company establishes the base salaries
for those employees below the level of the senior officers, whose salaries are
established by the Compensation Committee on the recommendation of the
Company's Chief Executive Officer. The Company's Salary Administration Program
was prepared with input from an independent compensation consultant and is
periodically updated with information on salary levels for companies of a
generally similar size from various sources, including salary surveys and
analyses presented by the independent compensation consultant.
The bonus amount which an eligible participant can receive under the
Incentive Compensation Program depends on the component of the Incentive
Compensation Program in which each person participates, the extent to which
the Company meets a predetermined net income target for the respective year,
and the participant's job performance for that year as determined by each
person's supervisor. Payments of bonuses below the level of senior officers
are made at the discretion of the Chief Executive Officer, and the
Compensation Committee approves only the aggregate amount of such payments.
The Compensation Committee specifically approves the bonus payments and
awards under the Company's employee Stock Option Plan and Long-Term Incentive
Plan for each senior officer based upon recommendations from the Chief
Executive Officer. The salary, bonus payments, Stock Options and Long-Term
Incentive Plan awards for the Chief Executive Officer are determined by the
Compensation Committee and recommended to the full Board, which may adopt,
modify or reject such recommendations. Directors who are also employees do not
participate in the discussions or vote on matters affecting any aspect of
their own compensation.
COMPENSATION POLICIES FOR EXECUTIVES
The goals of the Company's Compensation Program have been to further the
Company's business objectives, and at the same time to attract and retain high
quality executives and equitably reward individuals who contribute to its
success. This approach seeks to link executive compensation with achievement
of profitability goals and the strategic goal of enhancing stockholder value
by tying the value of a portion of the senior executives' compensation to the
Company's long-term performance.
BASE SALARIES. The Company provides executive officers with salaries which
are generally in the higher quartile of the range of competitive salaries paid
to executives of companies in similar sectors of the insurance industry. The
Company periodically updates information on executive salary levels for
companies of a generally similar size from various sources, including salary
surveys and analyses presented by the independent compensation consultant.
Executive officers are evaluated on March 1 of each year, and any adjustments
to their salaries are effective as of that date.
ANNUAL BONUSES. Generally, awards under the Incentive Compensation Program
are contingent on achievement of a Company net income target, which is
established in advance each year by the Compensation Committee. Bonuses are
awarded following the end of each year, after the Company's year-end results
have been
9
<PAGE>
determined. Under the Incentive Compensation Program, the Compensation
Committee has full discretionary authority with respect to bonus awards. If
the Company's net income target is reached, the bonus award my be less than
the target amount for any executive; if the Company's net income target is not
met, the Compensation Committee may grant bonuses to qualified executives.
Since the Company met and slightly exceeded its net income target for 1997,
bonuses were paid to the Company's senior executives (excluding the Company's
Chief Executive Officer) ranging from 10% to 30% of their annual salary. The
Committee's decisions were based upon recommendations from the Chief Executive
Officer as a result of his evaluation of each executive's overall performance
and the results of the operations under the executive's direction as compared
to the Company's business plan for 1997.
LONG-TERM INCENTIVE PLANS. In 1996 the Board adopted a Long-Term Incentive-
Performance Unit Plan ("LTI Plan") and a Non-Qualified Deferred Compensation
Plan. The LTI Plan was approved by the Company's stockholders at the 1997
Annual Meeting and both of these Plans were implemented for fiscal year 1997.
The LTI Plan provides for cash payment awards which qualify as performance
based compensation under Section 162(m) of the Internal Revenue Code. A target
number of performance units are granted to key employees at the beginning of a
performance period, while the actual number of performance units awarded is
determined after the performance period. The performance period is three years
in length, with the first performance period beginning January 1, 1997 and
ending on December 31, 1999. Each performance unit granted in 1997 had a value
of $10. Awards are based upon the Company meeting pre-determined annual return
on equity (ROE) targets, and for purposes of the plan, ROE is calculated as
the average return on equity over the three-year period. The Company must meet
a minimum level of ROE over the three year period before awards, which require
Committee approval, will be made. Payouts of awards under the Plan are
automatically deferred into the Non-Qualified Deferred Compensation Plan and
vest over a two year period.
The Chief Executive Officer has the authority, subject to approval by the
Committee and the Board and in conformity with the non-discretionary
requirements of Section 162(m) of the Internal Revenue Code, to adjust a
participant's payout to take into account strategic and financial events or
conditions, including, but not limited to, recognizing a participant's
business unit's results which had a significant impact on the Company's
overall financial results for the performance period.
In addition, for 1997 the Compensation Committee adopted stock option grant
guidelines which are also aimed at more closely tying executive compensation
and incentives to long-term performance. Under these guidelines, senior
executives may be awarded options at a predetermined target level which is
generally based upon their position in the Company. As with cash bonuses, the
actual number awarded is determined by the Compensation Committee after
receiving recommendations from the Chief Executive Officer based on his
evaluation of the Company's and the executive's performance during the prior
year. In recognition that the Company met and slightly exceeded its business
plan objectives, in 1997 stock options were granted at 75% of target.
COMPENSATION OF CHIEF EXECUTIVE OFFICER
David L. Cargile, the Company's Chairman, President and Chief Executive
Officer, serves under an employment agreement entered into in November 1996.
The agreement provides for an annual base salary that can be increased and
supplemented at the discretion of the Board of Directors. Effective in March
1997, Mr. Cargile's annual salary was increased to $441,000. In January 1998
the Board granted to Mr. Cargile a bonus of $300,000 for his performance
during 1997. Mr. Cargile was also granted options in March 1997 to purchase
45,000 shares (as adjusted for the February 1998 100% stock split) of the
Company's common stock and was awarded 14,700 LTI Plan units for the 1997
year.
The Board's compensation decisions for Mr. Cargile reflect his continuing
contributions in revitalizing the Company since he assumed responsibility for
the Company's operations in the third quarter of 1994. Under his leadership,
the Company's performance has significantly improved. The initiatives and
programs instituted by Mr. Cargile have resulted in dramatic improvement in
every category of the Company's financial results. During this period revenues
grew by 75%; net income increased by 144%; total assets increased by 72%;
return on
10
<PAGE>
equity increased by 51%; stockholders' equity increased by 86%; book value
increased 66% and earnings per share increased 140%. The Committee also noted
that the total return for the Company's stockholders has increased 131%
between year-end 1994 and year-end 1997, exceeding the performance of such
well-known barometers as the S&P 500 Stock Index, the Dow Jones Industrial
Average, and the NASDAQ Composite Index. The Company's stock, which began
paying a regular cash dividend in the first quarter of 1995, has risen in
price from $10.00 per share at year-end 1994 to $22.31 at year-end 1997. By
February 18, 1998, the record date for the 100% stock split, the stock had
gained a further 13%, to close at $25.25.
The Committee reviewed all the forgoing factors in determining the
compensation of the Company's Chief Executive Officer. The factors were not
assigned specific weight by members of the Committee but rather were weighed
subjectively by each member. In light of the forgoing, the Compensation
Committee concluded that the total compensation paid to the Company's Chief
Executive Officer was appropriate for his level of responsibility and
reasonable in light of his contributions to the continued growth and
performance of the Company. The Committee has also concluded that the
leadership and direction provided by the Chief Executive Officer have had a
direct impact on maximizing stockholder value.
DEDUCTIBILITY OF EXECUTIVE COMPENSATION
The 1993 Omnibus Budget Reconciliation Act ("OBRA") provides that the income
tax deductions of publicly traded companies in tax years beginning on or after
January 1, 1994 may be limited to the extent total compensation (including
base salary, annual bonus, stock option exercises and nonqualified benefits)
for certain executive officers exceeds $1,000,000 in any one year. Under OBRA,
the deduction limit does not apply to payments which meet certain requirements
to qualify as "performance-based" compensation.
The Compensation Committee intends to consider various alternatives to
preserve the deductibility of compensation payments to the extent it is
reasonably practicable and consistent with its other objectives. In this
connection, the Company has obtained stockholder approval of the Company's
1997 Long-Term Incentive-Performance Unit Plan, and intends to operate the
Plan within the requirements of Section 162(m) of the Internal Revenue Code to
preserve the corporate deductibility of executive compensation. The Company
may, however, pay compensation which is not deductible in limited
circumstances when sound management of the Company so requires. The Committee
believes that if any loss of deductibility occurs it would not be materially
adverse to the Company. For fiscal year 1997, no executive officer's taxable
compensation exceeded the $1,000,000 limit on deductibility.
COMPENSATION COMMITTEE
Bernard H. Ross, Chairman
L. Steven Medgyesy, M.D. Charles L. Schultz
Kenneth C. Tyler
THE ABOVE REPORT OF THE COMPENSATION COMMITTEE WILL NOT BE DEEMED TO BE
INCORPORATED BY REFERENCE INTO ANY FILING BY THE COMPANY UNDER THE SECURITIES
ACT OF 1933 OR THE SECURITIES EXCHANGE ACT OF 1934, EXCEPT TO THE EXTENT THAT
THE COMPANY SPECIFICALLY INCORPORATES THE SAME BY REFERENCE.
COMPENSATION COMMITTEE INTERLOCKS
AND INSIDER PARTICIPATION
The members of the Compensation Committee during 1997 were Bernard H. Ross
(Chair), Dr. L. Steven Medgyesy, Charles L. Schultz and Kenneth C. Tyler. All
of the directors who served on the Compensation Committee during 1997 were
non-employee directors.
11
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE*
The following table provides information concerning all compensation paid or
credited by the Company to the Named Executives for services rendered to the
Company and its subsidiaries in all capacities during the fiscal years ended
December 31, 1997, 1996 and 1995.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E) (G) (I)
------------------------------------------------------------------------
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------------------------------------------------------------
NUMBER OF
SECURITIES
UNDERLYING
FISCAL OTHER ANNUAL OPTIONS ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS(/1/) COMPENSATION GRANTED COMPENSATION(/2/)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
David L. Cargile** 1997 $437,601 $300,000 (/3/) 45,000 $260,165(/4/)
President, and Chief 1996 411,825 280,000 (/3/) -0- 187,400(/4/)
Executive Officer 1995 350,100 350,000 (/3/) 350,000 110,016(/4/)
- -----------------------------------------------------------------------------------------------------------
Howard S. Singer** 1997 $233,054 $ 47,500 (/3/) 24,000 $ 17,376
Executive Vice President-- 1996 225,914 56,818 (/3/) -0- 9,000
Corporate Finance 1995 216,876 75,871 (/3/) 7,000 9,000
and Investor Relations
- -----------------------------------------------------------------------------------------------------------
John T. Grush 1997 $291,646 $ 65,000 (/3/) 24,000 $ 20,885
Senior Vice President and 1996 291,646 58,309 (/3/) -0- 20,213
President of USF RE INSURANCE 1995 291,693 58,118 (/3/) 6,000 20,213
COMPANY
- -----------------------------------------------------------------------------------------------------------
Craig J. Kelbel** 1997 $239,349 $ 25,000 (/3/) 24,000 $ 18,251
Senior Vice President and 1996 229,793 69,459 (/3/) -0- 12,562
President of USBenefits 1995 181,516 70,000 (/3/) 14,000 12,534
Insurance Services, Inc.
- -----------------------------------------------------------------------------------------------------------
Jose A. Velasco 1997 $202,312 $ 61,000 (/3/) 24,000 $ 15,490
Senior Vice President, Chief 1996 175,380 53,165 (/3/) -0- 15,816
Administrative Officer, 1995 166,658 58,295 (/3/) 7,000 15,370
Secretary and General Counsel
- -----------------------------------------------------------------------------------------------------------
</TABLE>
* The number of securities underlying options granted (column "g") has been
adjusted to reflect the February 1998 100% stock split. The Company has
excluded from the SUMMARY COMPENSATION TABLE the columns relating to awards
of Restricted Stock (column "f") and Long-Term Incentive Plan Payouts
(column "h") because no such awards or compensation were earned by or paid
to the Named Executives in the fiscal years covered by the table.
** The compensation paid to Messrs. Cargile, Singer and Kelbel during 1997 was
pursuant to employment agreements described under "EMPLOYMENT AGREEMENTS
WITH NAMED EXECUTIVES" elsewhere in this Proxy Statement.
12
<PAGE>
(1) Cash bonuses awards under the Company's Incentive Compensation Program
(the "Incentive Program") are paid in during the first quarter of the
subsequent year for services performed in the year indicated in the table.
The gross amounts paid to all participants under the Incentive Program
applicable to fiscal years 1997, 1996 and 1995 were $1,085,500, $1,240,000
and $1,534,000, respectively.
(2) Each of the Named Executives was credited with $9,000 for 1995, $9,000 for
1996, and $9,500 in 1997 as the Company's matching contribution to such
executive's participation in the Company's 401(k) Employees Savings Plan.
The balance of the amount shown in each year for these executives was the
Company's matching payment to the executive's voluntary contribution to
the Company's Non-Qualified Deferred Compensation Plan, plus interest paid
by the Company on the funds in the executive's account under the Non-
Qualified Deferred Compensation Plan, except for Mr. Cargile who also
received the additional compensation described in footnote (4) below.
(3) The Company also provides its executive officers health and group term-
life insurance and other benefits generally available to all salaried
employees, and certain additional noncash benefits, including club
memberships and the use and maintenance of automobiles, which benefits in
no individual case have an aggregate incremental cost to the Company which
exceeds the lesser of $50,000 or 10% of that individual's total salary and
bonus as reported in the "SUMMARY COMPENSATION TABLE." See also
"EMPLOYMENT AGREEMENT WITH NAMED EXECUTIVES" elsewhere in this Proxy
Statement for compensation payments to Mr. Cargile, Mr. Singer and Mr.
Kelbel (or their named beneficiaries) in the event of their disability or
death during the term of their employment agreements.
(4) As a result of the loan forgiveness arrangement and the additional income
taxes incurred as a part of Mr. Cargile's relocation in 1995 from Atlanta,
Georgia, to Southern California, as required by the Company (see
"EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVES" elsewhere in this Proxy
Statement), Mr. Cargile received additional compensation of $213,357
attributable to 1997, $178,400 attributable to 1996 and $87,489
attributable to 1995.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table provides information on grants to the Named Executives
of stock options under the Company's 1991 Employee Stock Option Plan awarded
during the fiscal year ended December 31, 1997. The number of options granted
have been adjusted to reflect the February 1998 100% stock split. This table
also illustrates the comparable potential appreciation in value over a 5-year
period of stock held by the Company's stockholders as a group, and by a unit
of 1,000 shares, from the value of the Company's common stock of $11.15 per
share, which was the closing price of the stock on the New York Stock Exchange
on December 31, 1997, adjusted to reflect the February 1998 100% stock split.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
(ADJUSTED TO REFLECT 100% STOCK SPLIT) (5-YEAR PERIOD)(/2/)
(A) (B) (C) (D) (E) (F) (G)
% OF TOTAL
NUMBER OF OPTIONS GRANTED
SECURITIES TO ALL
UNDERLYING EMPLOYEES IN EXERCISE
OPTIONS LAST FISCAL OR BASE EXPIRATION
NAME GRANTED(/1/) YEAR(/1/) PRICE(/1/) DATE 5% 10%
<S> <C> <C> <C> <C> <C> <C>
David L. Cargile 45,000 16.0% $10.19 03/26/02 $ 124,650 $ 227,650
- -----------------------------------------------------------------------------------------------
Howard S. Singer 24,000 8.5% $10.19 03/26/02 $ 66,480 $ 148,080
- -----------------------------------------------------------------------------------------------
John T. Grush 24,000 8.5% $10.19 03/26/02 $ 66,480 $ 148,080
- -----------------------------------------------------------------------------------------------
Craig J. Kelbel 24,000 8.5% $10.19 03/26/02 $ 66,480 $ 148,080
- -----------------------------------------------------------------------------------------------
Jose A. Velasco 24,000 8.5% $10.19 03/26/02 $ 66,480 $ 148,080
<CAPTION>
POTENTIAL GAIN FOR
STOCKHOLDERS AT RATE OF
5% 10%
- -----------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
All Stockholders N/A N/A N/A N/A $37,474,360 $107,191,270
- -----------------------------------------------------------------------------------------------
Per 1,000 Shares N/A N/A N/A N/A $ 3,080 $ 8,810
</TABLE>
(1) All options were granted to the Named Executives on March 26, 1997. One-
half of the options become exercisable on the first and second anniversary
dates, respectively, of such grant, and all options expire five years
therefrom. The exercise price of the options, $10.19, was the closing
price of the Company's common stock on March 26, 1997 on the New York
Stock Exchange, adjusted to reflect the February 1998 100% stock split.
(2) The information set forth in columns (f) and (g) is at an assumed annual
rate of appreciation over the 5-year period, commencing at the option
grant date. The appreciation figures set forth are net of the option
exercise price, but before taxes associated with the option exercise.
THESE FIGURES SHOULD NOT BE VIEWED IN ANY WAY AS A FORECAST OF ACTUAL
RESULTS OF THE FUTURE PERFORMANCE OF THE COMPANY'S STOCK, WHICH WILL BE
DETERMINED BY UNKNOWN FUTURE EVENTS AND FACTORS, INCLUDING MARKET
CONDITIONS AS WELL AS THE OPTION HOLDERS' CONTINUED EMPLOYMENT THROUGHOUT
THE OPTION VESTING PERIOD.
14
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table provides information with respect to (i) options to
purchase the Company's common stock granted to the Named Executives in prior
years under the Company's 1988 Employee Stock Plan and its 1991 Employee Stock
Option Plan, (ii) the number of shares acquired by the Named Executives upon
exercise of options during the 1997 fiscal year and (iii) the number of
unexercised options held by each of them at December 31, 1997 under such
Plans. The number of shares in this table and the December 31, 1997 price as
stated in footnote (1) have been adjusted to reflect the February 1998 100%
stock split.
<TABLE>
<CAPTION>
(A) (B) (C) (D) (E)
NUMBER OF SECURITIES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS(/1/)
SHARES OPTIONS HELD AT 12/31/97 HELD AT 12/31/97
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
<S> <C> <C> <C> <C> <C> <C>
David L. Cargile 28,000 $161,840 380,000 45,000 $1,489,000 $43,200
- --------------------------------------------------------------------------------------------
Howard S. Singer 30,000 $175,375 33,000 24,000 $ 115,950 $23,040
- --------------------------------------------------------------------------------------------
John T. Grush 40,000 $233,750 36,000 24,000 $ 131,400 $23,040
- --------------------------------------------------------------------------------------------
Craig J. Kelbel -0- -0- 14,000 24,000 $ 16,100 $23,040
- --------------------------------------------------------------------------------------------
Jose A. Velasco 20,000 $106,250 33,000 24,000 $ 115,950 $23,040
</TABLE>
(1) Based on the closing price of the common stock of $11.15 at December 31,
1997 on the New York Stock Exchange, (adjusted for the February 1998 100%
stock split) minus the exercise price of the option.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
As approved by stockholders at the 1997 Annual Meeting, the Company's Long-
Term Incentive--Performance Unit Plan ("LTI-PUP" or "Plan") provides for cash
payment awards intended to qualify as performance-based compensation to
satisfy the requirements of Section 162(m) of the Internal Revenue Code. Under
the LTI-PUP performance units are granted at the beginning of a three-year
performance period. The actual number of performance units awarded to a
participant is determined at the close of the three-year period, based upon
the Company meeting a certain pre-determined average return on equity over the
performance period. The Board of Directors has discretion to make certain
awards under the Plan if the return on equity target is not met.
All payments earned by participants under the LTI-PUP will automatically be
deferred into the Company's Non-Qualified Deferred Compensation Plan, which
provides for a vesting of the payouts over a two-year period.
15
<PAGE>
The following table sets forth the award potential, assuming the Company
achieves target performance levels, and the number of performance units
granted in 1997 to the Named Executives for the performance period 1997-1999,
during which each performance unit had a value of $10.
<TABLE>
<CAPTION>
ESTIMATED FUTURE PAYOUTS
UNDER NON-STOCK PRICE-BASED
PLANS
---------------------------
(A) (B) (C) (D) (E) (F)
PERFORMANCE OR
OTHER PERIOD
NUMBER UNTIL
OF MATURATION
NAME UNITS OR PAYOUT THRESHOLD TARGET MAXIMUM
<S> <C> <C> <C> <C> <C>
David L. Cargile 14,700 3 years $73,500 $147,000 $220,500
- ---------------------------------------------------------------------
Howard S. Singer 5,682 3 years $28,410 $ 56,820 $ 85,230
- ---------------------------------------------------------------------
John T. Grush 5,831 3 years $29,155 $ 58,310 $ 87,465
- ---------------------------------------------------------------------
Craig J. Kelbel 5,788 3 years $28,940 $ 57,880 $ 86,820
- ---------------------------------------------------------------------
Jose A. Velasco 4,430 3 years $22,150 $ 44,300 $ 66,450
</TABLE>
16
<PAGE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN AMONG
THE CENTRIS GROUP, INC., CUSTOM PEER GROUP, THE S & P
INSURANCE-PROPERTY-CASUALTY INDEX AND THE NASDAQ
INSURANCE STOCKS INDEX
[PERFORMANCE GRAPH APPEARS HERE]
The Centris Custom Peer S&P Nasdaq
Group Group Insurance Insurance
12/31/92 100 100 100 100
12/31/93 116 110 98 110
12/31/94 100 106 103 100
12/31/95 216 138 139 142
12/31/96 201 168 169 163
12/31/97 231 224 246 239
The graph above shows a five year comparison of cumulative total stockholder
returns for (i) The Centris Group Common Stock, (ii) the Company's new custom
peer group, (iii) the S&P Insurance-Property-Casualty Index, and (iv) the
Company's old NASDAQ Insurance Stock Index which was used in prior years. The
Company's stock began trading on the New York Stock Exchange ("NYSE") in
September, 1996, and since 1997 represents the first full year on the NYSE the
Company revised its indices for comparative purposes. The new custom peer
group index is comprised of the following companies: Acceptance Insurance
Companies, Inc.; Amwest Insurance Group, Inc.; Baldwin & Lyons, Inc.; Chandler
Insurance Company, Ltd.; Chartwell Re Corporation; Executive Risk Inc.; Farm
Family Holdings Inc.; HCC Insurance Holdings, Inc.; Intercargo Corporation;
National Insurance Group; Orion Capital Corporation; PXRE Corporation; RLI
17
<PAGE>
Corporation; Sphere Drake Holdings Ltd.; Terra Nova Holdings Ltd.; and
Trenwick Group Inc. The returns of the companies in the peer indices are
weighted based on their stock market capitalization as of the beginning of the
period. Cumulative stockholder return (on an assumed investment of $100 as of
December 31, 1992), as determined at the end of each year, reflects the change
in stock price, assuming the reinvestment of dividends.
NOTWITHSTANDING ANYTHING TO THE CONTRARY SET FORTH IN ANY OF THE COMPANY'S
PREVIOUS FILINGS WITH THE SEC UNDER THE SECURITIES ACT OF 1933 OR THE
SECURITIES EXCHANGE ACT OF 1934 THAT MIGHT INCORPORATE FUTURE FILINGS,
INCLUDING THIS PROXY STATEMENT IN WHOLE OR IN PART, THE PERFORMANCE GRAPH SET
FORTH ABOVE IN THIS PROXY STATEMENT SHALL NOT BE INCORPORATED BY REFERENCE
INTO ANY SUCH FILINGS.
EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVES
David L. Cargile: Mr. Cargile serves as the Company's President and Chief
Executive Officer pursuant to a four-year employment agreement entered into in
November 1996, which provides for a base annual salary of $420,000 (increased
to $441,000 as of March 1997), a discretionary cash bonus, and certain other
benefits. The Company can terminate Mr. Cargile's employment at any time
without cause by paying him 150% of the salary due to him under the remaining
term of his employment agreement. In the event of his death or disability
Mr. Cargile (or his beneficiary) will be paid the greater of the amount of his
then current compensation remaining due for the term of the employment
agreement or one (1) year's salary.
In connection with his employment and the Company's requirement that he move
from Atlanta, Georgia to Southern California, in July 1995 the Company granted
to Mr. Cargile a $649,000 loan for the purchase of a residence, secured by a
trust deed on that residence, bearing interest at 6.05% per annum. Of that
principal amount, $414,765 is being forgiven by the Company over 60 months.
Additionally, the full amount of the loan will be forgiven if Mr. Cargile's
employment terminates for any reason other than cause. As of February 28,
1998, $447,920 of the principal amount of the above-noted loan was
outstanding. In addition, the Company agreed to pay to Mr. Cargile such
additional amount as is required to compensate him for the additional state
and federal taxes due which will arise as a result of the credit he will
receive against the loan balance, and for the increase in state taxes Mr.
Cargile will experience as a California resident as contrasted with the state
taxes he would have otherwise paid as a resident of Georgia. (See footnote (4)
to "SUMMARY COMPENSATION TABLE" elsewhere in this Proxy Statement.)
Howard S. Singer: Pursuant to a four-year employment agreement entered into
in December 1996, Mr. Singer serves as the Executive Vice President of the
Company at a base annual salary of $227,270 (increased to $234,088 as of March
1997), a bonus as may be granted by the Board, and certain other benefits,
including a one-time "piggyback" registration right, at no cost to him, with
respect to Company stock owned by Mr. Singer. The Company can terminate Mr.
Singer's employment at any time without cause by paying him 150% of the salary
due to him under the remaining term of his employment agreement. In the event
of his death or disability Mr. Singer (or his beneficiary) will be paid the
greater of the amount of his then current compensation remaining due for the
term of the employment agreement or one (1) year's salary.
Craig J. Kelbel: Mr. Kelbel entered into a three-year employment agreement
with the Company in November 1996 to serve in the positions of President and
Chief Operating Officer of USBenefits and as a Senior Vice President of the
Company at a base annual salary of $231,530 (increased to $240,791 as of March
1997), and certain other benefits. The Company can terminate Mr. Kelbel's
employment at any time without cause by paying him 100% of the salary due to
him under the remaining term of his employment agreement. In the event of his
death or disability Mr. Kelbel (or his beneficiary) will be paid the amount of
his then current compensation for a period of one (1) year.
Change in Control Agreements: The Company has entered into severance
agreements with the Named Executives. Except for Mr. Cargile, these executives
would be entitled to receive a payment of two years annual salary plus an
amount equal to the largest annual cash bonuses received, during their
employment as well as a continuation for two years of life and medical
insurance benefits, in the event their employment is terminated by
18
<PAGE>
the Company (other than for cause) or is terminated by the executive "for good
reason" within two years after a change in control of the Company. Mr. Cargile
would receive three years annual salary plus one-and-one-half times his
largest annual cash bonus, as well as the other benefits noted above. All of
these agreements further state that if any executive has an employment
agreement which also provides for payments upon termination, the executive
will receive payments either under the severance agreement or the employment
agreement, whichever payment is greater, but may not receive payments under
both agreements. As defined in the agreements, a change in control includes,
under specific circumstances, a merger of the Company with another company
which results in a 50% change of the combined voting power of the Company's
securities or the sale of more than 50% of the Company's assets or, under
certain circumstances, the beneficial ownership by any person of more than 15%
of the Company's equity securities.
RELATED TRANSACTIONS
As described above under "EMPLOYMENT AGREEMENTS WITH NAMED EXECUTIVES," the
Company has made a loan to Mr. Cargile in the amount of $649,000 in connection
with the purchase of his principal residence in Southern California, a portion
of which loan is being forgiven over a 60-month period.
PROPOSAL NO. 2
RATIFICATION OF SELECTION OF AUDITORS
The Board of Directors has selected KPMG Peat Marwick LLP, independent
certified public accountants, to continue as the Company's auditors for the
fiscal year ending December 31, 1998, unless in the opinion of the Board KPMG
Peat Marwick LLP is not in a position to continue providing its services to
the Company or the continuation of the audit relationship is inappropriate. In
such situations the Board of Directors retains the ability to designate a
successor auditing firm, subject to ratification by the stockholders at the
next regularly scheduled annual meeting of stockholders.
KPMG Peat Marwick LLP, or a predecessor, has audited the Company's financial
statements since 1982. Representatives of KPMG Peat Marwick LLP will be
present at the Annual Meeting to respond to appropriate questions from
stockholders.
VOTE REQUIRED
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES PRESENT IN PERSON OR BY
PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING IS REQUIRED TO RATIFY THE
SELECTION OF KPMG PEAT MARWICK LLP AS THE COMPANY'S AUDITORS FOR THE FISCAL
YEAR ENDING DECEMBER 31, 1998.
BOARD RECOMMENDATION
THE BOARD RECOMMENDS A VOTE FOR SUCH RATIFICATION. ALL PROXIES RECEIVED BY
THE COMPANY WILL BE VOTED TO RATIFY THE KPMG PEAT MARWICK LLP SELECTION,
UNLESS A CONTRARY VOTE IS INDICATED ON THE PROXY CARD.
PROPOSAL NO. 3
STOCKHOLDER PROPOSAL
A holder of the Company's common stock has submitted the following statement
to stockholders for their approval at the 1998 Annual Meeting. The name,
address and the number of shares held by the stockholder who submitted the
proposal will be furnished by the Company, either orally or in writing as
requested, promptly upon the receipt by the Secretary of the Company of any
oral or written request for such information.
STOCKHOLDER PROPOSAL
We recommend that the Board of Directors of the Company take the steps
necessary to promptly consider the Company's strategic options to maximize
shareholders' value, including a sale of the Company, and to report promptly
the results thereof to the shareholders.
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STOCKHOLDER'S STATEMENT IN SUPPORT OF THE PROPOSAL
We believe that the proposal is appropriate because the current stock price
does not reflect the intrinsic value of the Company. The current modest
premium to book value does not allocate fair value to the Company's strong
market position in the medical stop-loss reinsurance business. The need to
evaluate the Company's strategic options, including a potential sale of the
Company, is essential in realizing the Company's inherent value for several
reasons:
1) The Company is worth considerably more to a third party because a
buyer of the Company would realize substantial operating efficiencies in
combining with the Company.
2) A third party would have access to a lower cost of capital than the
Company currently has on a stand-alone basis.
3) Following the acquisition of the Company, a third party's lower cost
of capital would permit it to consolidate the medical stop reinsurance
business on a more cost efficient basis.
4) The Company is too small to attract extensive analyst coverage.
5) The current management of the Company has been undisciplined in
allocating the Company's capital and has not been successful in earning an
attractive operating return on the Company's capital base.
6) The Company's relatively small existing capital base limits its
participation in the market for reinsurance from the major insureds.
VOTE
THE AFFIRMATIVE VOTE OF A MAJORITY OF THE SHARES PRESENT IN PERSON OR BY
PROXY AND ENTITLED TO VOTE AT THE ANNUAL MEETING IS REQUIRED TO APPROVE THIS
STOCKHOLDER PROPOSAL.
POSITION OF THE COMPANY IN OPPOSITION TO THE PROPOSAL
THE COMPANY RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL. YOUR PROXY WILL
BE VOTED AGAINST THE PROPOSAL UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY
CARDS.
The Board of Directors and management of the Company are strongly committed
to maximizing value for stockholders, and they continually review strategic
alternatives and opportunities in order to pursue whichever course of action
will best achieve that objective. As a result, adoption of the stockholder
proposal is not necessary. The Company is always seeking to enhance
stockholder value through internal growth, by actively pursuing the
acquisition of businesses which are complementary to the Company's business
and searching for other strategic arrangements and alliances. In the course of
these activities, the Company engages and relies upon the advice of nationally
prominent investment banking firms.
In furtherance of its goal, during 1997 the Company completed three
acquisitions designed to increase its profitability and to enhance stockholder
value. In January 1997, the Company acquired Global Excess Re, a Michigan-
based managing general underwriter of medical stop-loss insurance, and in the
third quarter of last year acquired INTERRA Reinsurance Group, Inc., an
Indiana-based manager and underwriter of catastrophic accident and health
risks nationally and internationally. In addition, during the third quarter
Allmerica Re, the property and casualty treaty operation of The Hanover
Insurance Company, was acquired. In an action specifically designed to
directly benefit stockholders, in February 1998 the Company made a 100% stock
split in the form of a stock dividend to broaden its stockholder base by
making the stock more affordable to a greater number of stockholders and to
increase stockholder liquidity.
In the Company's opinion, the statements made by the stockholder in support
of his proposal are erroneous. The strength of the Company's reinsurance
operations refute the contention that the Company's ability to participate in
the market for reinsurance from major insurers is limited. The Company's
reinsurance subsidiary
20
<PAGE>
is on the approved list and continues to receive business from the major
domestic purchasers of reinsurance, such as the American International Group,
the St. Paul Companies, the CNA Insurance Companies, and The Travelers. It
should also be noted that the conclusion by the stockholder making the
proposal that combining the Company with a "third party" would realize
operating efficiencies or that a "third party" would have a lower cost of
capital is mere speculation without any actual foundation.
That your Company's current management has not been "undisciplined" is shown
by its financial results. During the three-year period from year-end 1994, the
year in which there was a change in management, to year-end 1997, the
financial growth has been significant.
. Revenues increased from $122,811,000 to $214,472,000, a growth of 75%;
. Net income increased from $6,238,000 to $15,212,000, a growth of 144%;
. Total assets increased from $199,737,000 to $343,248,000, a growth of
72%;
. Return on equity increased from 9.85% to 14.86%, a growth of 51%;
. Stockholders' equity increased from $63,079,000 to $117,590,000, a
growth of 86%;
. Book value increased 66% and earnings per share increased 140%.
And in the ultimate measure of stockholder value, total return, Centris
stock increased 131% between year-end 1994 and year-end 1997, exceeding the
performance of such well-known barometers as the S&P 500 Stock Index, the Dow
Jones Industrial Average, and the NASDAQ Composite Index. The Company's stock,
which began paying a regular cash dividend in the first quarter of 1995, has
risen in price from $10.00 per share at year-end 1994 to $22.31 at year-end
1997. By February 18, 1998, the record date for the 100% stock split, the
stock had gained a further 13% to close at $25.25.
Accordingly, the Company believes the stockholder proposal is erroneous and
speculative, and ignores the actions taken by the Board and management to
maximize stockholder value and the successful financial results they have
achieved.
As a final note, the Board and management firmly believe that adoption of
the stockholder proposal would not increase stockholder value, but instead
could seriously prejudice stockholder financial interests. Although the
stockholder proposal merely recommends that certain action by the Board and
does not obligate the Board to take any action, in the Company's judgment an
announcement that the proposal has been adopted could severely damage the
Company's long-term relationships with its principal customers, impair its
ability to maintain its professional staff, and could have an adverse impact
on the Company's ability to attract new business. This would compromise the
Company's ability to operate effectively in both the short and long term,
resulting in a possible decline in revenues and a corresponding decline in
stockholder values.
THE COMPANY RECOMMENDS THAT YOU VOTE AGAINST THIS PROPOSAL. YOUR PROXY WILL
BE VOTED AGAINST THE PROPOSAL UNLESS YOU SPECIFY OTHERWISE ON YOUR PROXY CARD.
OTHER MATTERS
The Board of Directors is not aware of any business to be presented at the
Annual Meeting except the matters set forth in the Notice and described in
this Proxy Statement. Unless otherwise directed on the proxy card, all shares
represented by the proxy holders appointed by the Company will be voted IN
FAVOR OF the nominees for election as directors and IN FAVOR OF PROPOSAL NO.
2, but will be voted AGAINST PROPOSAL NO. 3. The proxy holders will use their
best judgment in voting on any other matters that properly come before the
Annual Meeting.
21
<PAGE>
STOCKHOLDER PROPOSALS
Stockholders desiring to exercise their rights under the Proxy Rules of the
SEC to submit proposals for consideration by other stockholders at the 1999
Annual Meeting are advised that their proposals must be received by the
Company no later than November 27, 1998, in order to be eligible for inclusion
in the Company's Proxy Statement and proxy card relating to the 1999 Annual
Meeting of Stockholders. Under current plans, the Company's 1999 Annual
Meeting of Stockholders is scheduled to be held on May 12, 1999.
EXPENSES
The Company will bear the entire cost of preparing, assembling, printing and
mailing this Proxy Statement and the enclosed proxy card, and of soliciting
proxies. The Company will request banks and brokers to solicit their customers
who beneficially own shares listed on the Company's records in the names of
such nominees, and will reimburse those banks and brokers for their reasonable
out-of-pocket expenses in connection with such solicitation.
For this 1998 Annual Meeting the Company has retained the services of D.F.
King & Co., Inc. ("King"), a proxy solicitation firm. While King's primary
activities will involve contacting all intermediaries believed to be holding
stock of the Company on behalf of others, and will assist in the delivery of
proxy materials to such persons and in collecting executed proxies, King may
also contact and assist persons who hold stock directly. The original
solicitation of proxies by mail may be supplemented by telephone solicitation
by employees of King. In addition to the use of the mails and King, proxies
may be solicited by the directors, officers and employees of the Company
without additional compensation, by personal interview, by telephone or by
telegram. The Company has also engaged Corporate Election Services, Inc. to
assist in the tabulation of votes. It is anticipated that the total expense
for the services of D.F. King and Corporate Election Services will not exceed
$7,500, plus mailing and other out-of-pocket costs.
ANNUAL REPORT TO STOCKHOLDERS
The Company's 1997 Annual Report to Stockholders, which includes financial
information for fiscal periods ending December 31, 1997, 1996 and 1995, is
being mailed to the stockholders along with this Proxy Statement. The 1997
Annual Report to Stockholders is not to be considered part of the proxy
soliciting material.
By Order of the Board of Directors,
Jose A. Velasco
Senior Vice President, Chief
Administrative Officer,
Secretary and General Counsel
March 30, 1998
Costa Mesa, California
A COPY OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K TO THE SECURITIES AND
EXCHANGE COMMISSION FOR FISCAL YEAR ENDED DECEMBER 31, 1997 CAN BE OBTAINED
WITHOUT CHARGE FROM HOWARD S. SINGER, EXECUTIVE VICE PRESIDENT, THE CENTRIS
GROUP, INC., 5215 OLD ORCHARD ROAD, SUITE 300, SKOKIE, ILLINOIS 60077.
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-----------
PRELIMINARY
-----------
REVOCABLE PROXY REVOCABLE PROXY
THE CENTRIS GROUP, INC.
650 Town Center Drive, Suite 1600
Costa Mesa, California 92626
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints JOSE A. VELASCO, BARBARA FOX STONER AND
RODNEY W. LOEB, and each of them, with full power of substitution, as the
attorneys and proxies of the undersigned to attend the Annual Meeting of
Stockholders of The Centris Group, Inc., to be held on May 13, 1998, at 9:00
a.m., Local Time, at the offices of the Company, 650 Town Center Drive, 15th
Floor, Costa Mesa, California, and any postponements or adjournments thereof,
and to vote as directed on the reverse side of this card all shares which the
undersigned would be entitled to vote if the undersigned were personally present
at the Annual Meeting.
Receipt of the Notice and Proxy Statement for the 1998 Annual Meeting of
Stockholders as well as the Company's 1997 Annual Report to Stockholders is
acknowledged.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED BY THE APPOINTED PROXY HOLDERS
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2 AND AGAINST PROPOSAL 3.
THE SUBMISSION OF THIS PROXY TO THE COMPANY IN CONNECTION WITH THE 1998 ANNUAL
MEETING OF STOCKHOLDERS, IF PROPERLY EXECUTED, REVOKES ALL PRIOR PROXIES WHICH
MAY HAVE PREVIOUSLY BEEN SUBMITTED TO THE COMPANY FOR THE 1998 ANNUAL MEETING.
(Continued and to be signed on reverse side)
<PAGE>
Please mark your
A [X] votes as in this
example.
(Please vote, sign, date and return the Proxy Card promptly using
the enclosed envelope.)
Vote FOR all nominees Vote is withheld from
listed at right, except vote all nominees listed
is withheld from the nominees at right for election
listed below (if any): as directors
1. Election of [_] [_] NOMINEES: David L. Cargile
three directors. Charles L. Schultz
Howard S. Singer
(To withhold authority to vote for any one or more
nominee, write the nominees' name(s) on the lines
below.)
_____________________________________
_____________________________________
2. Ratification of KPMG Peat Marwick LLP as the independent auditors of the
Company for the year ended December 31, 1998.
FOR AGAINST ABSTAIN
[_] [_] [_]
3. Approval of stockholder proposal.
FOR AGAINST ABSTAIN
[_] [_] [_]
4. The proxy holders are authorized to vote in their discretion upon such other
business as may properly come before the Annual Meeting or any postponements
or adjournments thereof.
Please check
this box if you
plan to attend
the Annual [_]
Meeting on
May 13, 1998
SIGNATURE ___________________________________ DATE ________________________
_____________________________________________ DATE ________________________
SIGNATURE IF HELD JOINTLY
NOTE: Please sign exactly as your name appears hereon. 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.
