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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
[_]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER: 001-12099
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THE CENTRIS GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C>
DELAWARE 33-0097221
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>
650 TOWN CENTER DRIVE, SUITE 1600, COSTA MESA, CA 92626
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(714) 549-1600
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
<TABLE>
<CAPTION>
TITLE OF
SECURITIES EXCHANGES ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, PAR VALUE $.01 PER SHARE NEW YORK STOCK EXCHANGE
COMMON STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
</TABLE>
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Aggregate Market Value of Voting Stock held by non-affiliates of the
Registrant as of March 20, 1998: $130,483,488 (10,817,284 shares at the
closing price of $12 1/16 per share). For this purpose, all shares held by
officers and directors of the Registrant are considered to be held by
affiliates, but neither the Registrant nor such persons concede that they are
affiliates of the Registrant.
Number of Shares of Common Stock of the Registrant outstanding as of March
20, 1998: 12,166,796
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1997 Annual Report to Stockholders are
incorporated by reference into Part II of this Form 10-K. Portions of the
Registrant's definitive Proxy Statement to be filed within 120 days after
December 31, 1997, are incorporated by reference into Part III of this Form
10-K.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
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PART 1
ITEM 1. BUSINESS
GENERAL INFORMATION
The Registrant, The Centris Group, Inc., formerly US Facilities Corporation
(the "Company"), is a Delaware holding company formed in 1982 which, through
its subsidiaries, operates as a specialty insurance group. The Company's
USBenefits Insurance Services, Inc. ("US Benefits") subsidiary is the managing
general underwriter and marketing organization for medical lines coverages
issued by The Continental Insurance Company ("Continental"), one of the CNA
Insurance Companies. The Company's USF RE INSURANCE COMPANY ("USF RE")
subsidiary writes property/casualty reinsurance and insurance. The Company's
INTERRA Reinsurance Group, Inc. ("INTERRA") subsidiary manages and underwrites
catastrophic accident and health risks nationally and internationally.
In January, 1997 USBenefits acquired the operations of Global Excess
Holdings, Inc. a Michigan based managing general underwriter of medical stop-
loss insurance. In early September, 1997 the Company acquired INTERRA, an
Indiana based company which, as noted above, manages and underwrites
catastrophic accident and health risks nationally and internationally. In late
September, 1997 USF RE, acquired from The Hanover Insurance Company its
Allmerica Re property/casualty treaty operation.
On February 3, 1998 the Company announced that its Board of Directors had
authorized a two-for-one split of its common stock in the form of a 100% stock
dividend to stockholders of record as of February 18, 1998. Certificates
reflecting the stock split were issued February 27,1998. All references in
this Form 10-K to number of shares, per share amounts and market prices of the
Company's common stock have been adjusted retroactively for all periods
presented to reflect this change in capital structure.
FINANCIAL INFORMATION RELATING TO BUSINESS SEGMENTS
The Company's operations are classified into two business segments: (1)
medical lines and (2) property/casualty. For additional information see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and also "Note 10" of Notes to CONSOLIDATED FINANCIAL STATEMENTS,
which are incorporated herein by this reference from the Company's 1997 Annual
Report to Stockholders in response to Items 7 and 8 hereof, respectively.
MEDICAL LINES
GENERAL
Since 1980, USBenefits has had an agreement to underwrite and manage medical
lines coverages for Continental or its predecessor. Such agreement provides
that USBenefits is responsible for designing medical lines products, marketing
the products, underwriting risks, collecting premiums, administering coverage
agreements, investigating and settling claims and making claim payments within
specified limits. While USBenefits participates in the setting of rates and
underwriting standards, which are the ultimate responsibility of Continental,
it does not insure any risks in its role as underwriting manager; all
insurance risks are borne by Continental and its reinsurers, including USF RE.
See "BUSINESS--MEDICAL LINES--MEDICAL LINES REINSURANCE".
Under its current management agreement with Continental, USBenefits is paid
management fees for its services, which are a percentage of premiums
collected. The management agreement may be terminated by either
2
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party at any December 31 upon 90 days prior notice, and can also be terminated
upon the occurrence of certain events. The management agreement provides that
during its term and for a period ranging from 12 to 18 months following
termination, Continental will not solicit or take away USBenefits' customers,
and that upon termination USBenefits has the right to the expirations and
renewals of the medical lines business. The Company believes that these
provisions permit USBenefits to move the medical lines business to another
insurance company if its relationship with Continental were to terminate.
Alternatively, USBenefits could write medical lines coverages on a direct
basis through its affiliate, USF RE, which is currently licensed to issue such
coverage in 42 states and the District of Columbia.
USBenefits also markets various employee benefits insurance products on
behalf of several large national life insurance companies. Other than
Continental, no one insurance company, third party administrator ("TPA") or
insurance producer accounts for 10% or more of USBenefits' revenues.
INTERRA underwrites on behalf of an unaffiliated life insurance company and
underwrites accident and health reinsurance for its affiliate, USF RE, in
addition to providing catastrophic claims management services to the Company
and its subsidiaries. INTERRA also provides the Company with growth
opportunities in the international accident and health reinsurance marketplace
MARKETING
USBenefits markets and distributes its medical lines products through a
network of TPAs, insurance agents, brokers and consultants (collectively
"Producers"). Producers have non-exclusive arrangements with USBenefits that
enable them to submit requests for coverage quotations on behalf of their
clients. Continental may pay a fee or commission to Producers for placing the
coverage, the amount of which is based on a percentage of the premium written
and is negotiated on a case-by-case basis. Additionally, USBenefits may pay an
annual production bonus to Producers based on the amount of new business and
rate of retention of accounts during the calendar year. USBenefits markets its
products to a variety of employers, including both large and small employee
groups.
The Company believes there will be opportunities for growth from industry
consolidation. Several of USBenefits' competitors have been acquired, and this
activity is expected to continue. Many smaller managing general underwriters
have lost their issuing carriers due to unacceptably high loss ratios on their
books of business. There has also been consolidaiton in the third-party
administrator marketplace, one of USBenefits' primary sources of business. The
third party administrators which remain are larger, more financially secure,
and seek to do business with sound, well established companies such as
USBenefits. In the past few years USBenefits has embarked on a program of
aggressively marketing its products to brokers and consultants. These
producers control a sizable portion of USBenefits' target market, midsized
employer groups, and are the exclusive source of business for larger employer
groups. USBenefits has been able to increase its business with the brokerage
community while maintaining its committment to its traditional third-party
administrator distribution system.
PRODUCTS
Medical Stop-Loss. USBenefits offers two types of medical stop-loss
products: specific excess and aggregate excess. Employers can elect to
purchase specific excess coverage only, or a combination of specific and
aggregate coverage. USBenefits does not offer aggregate coverage separately.
Generally, self-insured employers purchase a combination of specific and
aggregate medical stop-loss coverage in order to minimize their exposure.
Medical stop-loss coverage is written on a basic form which can be customized
to meet the employer's individual needs and ability to retain risk. Medical
stop-loss coverage indemnifies only the employer for its obligations under its
self-insured plan of medical benefits; no plan participant or beneficiary is
covered by the medical stop-loss policy.
Provider Excess. USBenefits provider excess product limits the exposure
which providers of medical services incur when they enter into capitated fee
arrangements; it protects these providers from excessive losses that can arise
when expenses exceed a predetermined level.
3
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UNDERWRITING MANAGEMENT
Under its agreement with Continental, USBenefits, with the assistance of USF
RE, provides the services necessary to underwrite and service the medical
lines business, including, but not limited to: (i) selecting Producers; (ii)
accepting medical lines risks and issuing coverage agreements on behalf of
Continental within mutually agreed upon underwriting and pricing guidelines;
and (iii) processing claims for reimbursement under policies on behalf of
Continental.
MEDICAL LINES REINSURANCE
USF RE reinsures a portion of the medical lines business underwritten by
USBenefits. Under the reinsurance agreement with Continental, USF RE is
responsible for 50% of Continental's liability under such contracts issued
through USBenefits. In addition, USF RE is responsible for a proportionate
share of loss adjustment expenses and any liability incurred by Continental
for extra-contractual or punitive damages.
The amount of premium ceded by Continental to USF RE under the reinsurance
agreement is equal to a proportionate share of the original gross premiums
written by Continental, less a ceding commission paid by USF RE to Continental
which covers Continental's costs of acquiring and servicing such business.
PROPERTY/CASUALTY
GENERAL
Property/Casualty reinsurance and insurance underwriting is conducted by USF
RE and its wholly-owned subsidiary USF Insurance Company ("USFIC"). These
subsidiaries both carry an "A" (Excellent) rating from A.M. Best Company and
USF RE is assigned a claims paying ability rating of Aq (Good) by Standard &
Poor's. Insurance companies purchase reinsurance in order to control and
manage the risks they accept when they issue policies. USF RE assumes
facultative and treaty reinsurance from unaffiliated insurance companies,
primarily through reinsurance intermediaries. Facultative is reinsurance of
one risk at a time, while reinsurance treaties cover a portion of all policies
written by another insurer in a particular risk category. USF RE concentrates
its casualty writings in commercial auto liability, general liability and
products liability. It also provides a broad range of coverages for most types
of property exposures. USF RE is licensed to write various lines of insurance
in 47 states, the District of Columbia and Puerto Rico.
RETROCESSIONS
USF RE has entered into retrocession (reinsurance) agreements which mitigate
USF RE's exposure to losses and therefore allow it to increase the limits it
can offer on each property/casualty account. Other retrocession agreements
protect against catastrophic losses. Management believes its current
retrocessional arrangements are adequate to protect the Company from excessive
catastrophic losses.
USF RE evaluates the financial condition of potential retrocessionaires to
determine whether to cede retrocessional coverage to such companies. USF RE's
retrocession agreements are placed with unaffiliated companies which
management believes to be financially secure and experienced in this type of
business. Reinsurance recoverables are monitored continually, and any
retrocessionaire not qualified in USF RE's state of domicile, Massachusetts,
is requested to post security in the amount of its estimated liability to USF
RE.
SURPLUS LINES
USFIC, a Pennsylvania domiciled insurance company, is eligible to offer
surplus lines coverages in 33 states, the District of Columbia and the U.S.
Virgin Islands and is also licensed as an admitted insurer in New York and
Florida. USFIC writes surplus lines insurance on commercial property/casualty
risks which are marketed through independent excess and surplus lines brokers.
STATUTORY FINANCIAL INFORMATION
The information presented below conforms to the requirements of "Disclosures
Concerning Unpaid Claims and Claim Adjustment Expenses of Property/Casualty
Insurance Underwriters" contained in the Securities Exchange Act of 1934 Guide
4 and the Securities Act of 1933 Guide 6.
4
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COMBINED RATIO
The statutory combined ratio is the traditional indicator of the potential
underwriting profitability of an insurance company's business. It reflects the
percentage of losses and loss adjustment expenses incurred to earned premiums
(the "loss ratio") plus the percentage of production and servicing expenses to
net written premiums (the "underwriting expense ratio"). The table below sets
forth USF RE's consolidated loss ratio, underwriting expense ratio and
combined ratio determined in accordance with statutory accounting practices
("SAP") for the years indicated.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1997 1996 1995
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<S> <C> <C> <C>
Loss ratio.......................................... 78.4 71.0 67.6
Underwriting expense ratio.......................... 27.5 27.9 28.4
-------- ------- -------
Combined ratio...................................... 105.9 98.9 96.0
======== ======= =======
</TABLE>
LOSS AND LOSS ADJUSTMENT EXPENSE ("LAE") RESERVES
For information pertinent to loss and loss adjustment expense reserves see
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS" and also "Note 1(F)" and "Note 5" of "Notes to CONSOLIDATED
FINANCIAL STATEMENTS," which are incorporated herein by this reference from
the Company's 1997 Annual Report to Stockholders in response to Items 7 and 8
hereof, respectively.
The following table reconciles USF RE's consolidated reserve for losses and
LAE from SAP to amounts based on GAAP:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------
1997 1996 1995
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(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Statutory loss and LAE reserves................... $ 90,862 $72,385 $62,420
Reserves ceded to reinsurers...................... 25,939 22,265 16,426
Provision for uncollectible reinsurance........... -- 19 48
-------- ------- -------
GAAP loss and LAE reserves........................ $116,801 $94,669 $78,894
======== ======= =======
</TABLE>
Except for the foregoing, there is no difference in USF RE's reserves for
losses and LAE whether determined in accordance with GAAP or SAP.
The table below provides a reconciliation of beginning and ending
consolidated statutory liability balances as of December 31, 1997, 1996 and
1995.
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Reserves for losses and LAE at beginning of
period....................................... $ 72,385 $ 62,420 $ 56,304
Reserves of acquired company.................. 7,348
Incurred losses and LAE:
Provision for losses and LAE for claims
occurring in the current year.............. 116,968 83,485 74,935
Increase in estimated losses and LAE for
claims occurring in prior years............ 8,103 4,688 2,808
Payments:
Losses and LAE payments for claims occurring
during:
The current year.......................... (75,434) (43,287) (39,511)
Prior years............................... (38,508) (34,921) (32,116)
-------- -------- --------
Reserve for losses and LAE at end of
period................................... $ 90,862 $ 72,385 $ 62,420
======== ======== ========
</TABLE>
5
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The table on this page presents the development of USF RE's consolidated
statutory balance sheet liability for losses and LAE for 1987 through 1997.
The top line of the table shows the estimated liability for unpaid losses and
LAE recorded at December 31 for each of the indicated years. This liability
represents the estimated amount of losses and LAE for claims arising in all
years that are unpaid at the balance sheet date, including losses that had
been incurred but not yet reported.
The upper portion of the table shows the re-estimated amount of the
previously recorded liability based on experience as of the end of each
succeeding year. The estimate is increased or decreased as more information
becomes known about the frequency and severity of claims for individual years.
The lower portion of the table shows the cumulative amount paid with respect
to the previously recorded liability as of the end of each succeeding year,
and a reconciliation of the gross and net amounts for the latest five years.
<TABLE>
<CAPTION>
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997
------- ------- ------- ------- ------- ------- ------- ------- ------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Liability for
Losses/LAE--
End of Year.............. $ 8,623 $17,660 $28,697 $35,975 $36,481 $45,483 $51,358 $56,304 $62,420 $ 72,385 $ 90,862
Net Liability re-estimated
as of:
1 year later.............. 11,143 17,003 29,715 33,871 37,528 47,119 53,783 59,112 67,108 80,488
2 years later............. 11,622 17,752 29,619 32,720 36,381 47,482 52,625 56,601 67,017
3 years later............. 12,370 18,290 29,694 31,654 36,037 46,786 50,185 54,756
4 years later............. 12,717 18,294 28,581 30,222 34,529 42,785 47,973
5 years later............. 12,154 18,063 27,392 29,610 31,614 41,639
6 years later............. 12,288 17,994 26,815 27,111 30,787
7 years later............. 12,326 17,707 25,647 26,277
8 years later............. 12,314 17,496 24,769
9 years later............. 12,271 17,347
10 years later............ 12,196
Net Cumulative
redundancy/(deficiency).. (3,573) 313 3,928 9,698 5,694 3,844 3,385 1,548 (4,597) (8,103)
Cumulative %.............. (41)% 2% 14% 27% 16% 8% 7% 3% (8)% (11)%
Paid (cumulative) as of:
1 year later.............. 6,988 9,373 14,255 13,918 14,516 22,190 26,075 32,115 34,921 38,509
2 years later............. 8,424 11,676 18,265 17,497 17,832 26,374 33,952 38,884 45,611
3 years later............. 9,638 14,959 21,095 19,946 20,164 31,747 38,488 43,269
4 years later............. 11,472 15,693 21,833 21,276 24,004 34,347 40,256
5 years later............. 11,741 15,927 22,653 22,868 25,672 35,813
6 years later............. 11,920 16,606 23,480 23,281 26,762
7 years later............. 12,028 16,122 23,606 23,801
8 years later............. 12,042 16,170 23,701
9 years later............. 12,091 16,196
10 years later............ 12,115
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C>
Gross Liability--End of Year................................................... 58,542 69,597 78,846 94,650 116,801
Reinsurance Recoverable........................................................ 7,184 13,293 16,426 22,265 25,939
Net Liability--End of Year..................................................... 51,358 56,304 62,420 72,385 90,862
Gross Re-Estimated Liability-Latest............................................ 55,575 70,010 84,229 101,798
Re-Estimated Recoverable-Latest................................................ 7,602 15,254 17,212 21,310
Net Re-Estimated Liability-Latest.............................................. 47,973 54,756 67,017 80,488
Gross Cumulative Redundancy (Deficiency)....................................... 2,967 (413) (5,383) (7,148)
</TABLE>
6
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INVESTMENTS
For information, see "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS", Note 1 (c) and Note 3 of Notes to
CONSOLIDATED FINANCIAL STATEMENTS," incorporated herein by this reference from
the Company's 1997 Annual Report to Stockholders in response to Item 7 and
Item 8 herein.
COMPETITION
The insurance and reinsurance industries are highly competitive and consist
of a large number of companies, many of which have financial resources,
employees, facilities and experience substantially in excess of those of the
Company.
MEDICAL LINES
The medical lines business is highly competitive and involves a diversified
field of participants from small, start-up operations to large, well-
established organizations such as USBenefits. A precise measure of the size of
the medical stop-loss market is not possible because data on the market is not
routinely collected, compiled or systematically analyzed. However, the Company
believes that there are currently over 200 providers of medical stop-loss and
provider excess coverages. Based on its over-17 years of experience in the
medical stop-loss business, the Company believes that it is the largest
provider of medical stop-loss coverage in the United States and one of the
leading sources of provider excess coverage. However, other large and
established companies offer medical lines products and services similar to
those offered by the Company.
USBenefits currently relies on its long-standing relationships with
independent TPAs as a source of business, as well as growing relationships
with insurance agents, brokers and consultants. USBenefits must compete for
its business by offering competitively priced products, providing high
quality, timely services and paying commissions which are competitive.
USBenefits believes that its experience in the medical stop-loss business and
the claims data it has collected over the years give it a competitive
advantage over many of its competitors who must rely on general industry
information.
PROPERTY/CASUALTY REINSURANCE
Competition in the reinsurance business is based on many factors, including
a reinsurer's perceived overall financial strength, premiums charged, A.M.
Best Company rating, services offered, claims handling, experience in the
lines of business written and the number of jurisdictions in which a reinsurer
is authorized to do business. The reinsurance market has two basic segments:
reinsurers that primarily obtain their business directly from ceding insurance
companies, and those that primarily obtain business through reinsurance
intermediaries. USF RE obtains the majority of its property/casualty business
through reinsurance intermediaries. USF RE's competition in this field
includes numerous major international and domestic insurance and reinsurance
companies and underwriting syndicates.
Conditions remain highly competitive in most areas of the property/ casualty
reinsurance market. USF RE has been able to compete against many companies
with significantly larger policyholders' surplus and greater resources by
focusing its efforts on specialty areas where it can best utilize its
underwriting expertise and capital resources. The Company believes USF RE's
"A" (Excellent) rating from A.M. Best Company, its Aq (Good) claims paying
ability rating from Standard & Poor's and its excellent financial condition
have strengthened USF RE's position in its markets.
7
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REGULATION
GENERAL
Insurance and reinsurance companies are subject to primary regulation and
supervision by the insurance departments of their states of domicile, as well
as by agencies of other states where they are licensed or authorized to
transact business. Such regulation and supervision is designed to protect
policyholders, not stockholders. Although the extent of such regulation varies
from state to state, in general the insurance laws of states provide such
supervisory agencies with broad administrative powers. These powers include
the granting and revocation of licenses to transact business, the licensing of
agents, the approval of policy forms and rates, the determination of reserve
requirements, the monitoring of financial stability, the form and content of
required financial statements, and the type and character of investments. The
National Association of Insurance Commissioners ("NAIC") has proposed a
variety of model laws and regulations as part of its accreditation program
affecting insurance companies generally, including laws and regulations
relating to solvency standards for all insurance companies. Most of these
model laws and regulations have been adopted by the majority of states and
only two states, New York and Nevada, have not been accredited. Adoption of
these laws has not had a material negative impact on the Company's insurance
operations.
USF RE and USFIC are required to file detailed annual financial and other
reports with the appropriate insurance regulatory agency in each state in
which they are admitted or authorized to do business. Their business and
accounts are subject to examination by such agencies at any time, and the laws
of Massachusetts and Pennsylvania and other states require periodic
examination of USF RE and USFIC. USF RE was examined by the Division of
Insurance of the Commonwealth of Massachusetts during 1993 for the four-year
period ended December 31, 1992. USFIC was examined by the Insurance Department
of the Commonwealth of Pennsylvania during 1993 for the four-year period ended
December 31, 1992. The final reports of these examinations did not indicate
any concerns of a material nature or which were significant to USF RE's or
USFIC's surplus as regards policyholders. Both companies are scheduled to be
examined during 1998 for the five year periods ending December 31, 1997.
PROPERTY/CASUALTY
Historically the property/casualty reinsurance business had not been subject
to extensive regulation. However, reinsurance is now under closer scrutiny by
state agencies, as evidenced by the promulgation by the NAIC of several model
laws and regulations specifically relating to reinsurance. Management expects
this trend toward greater regulation of the insurance and reinsurance
industries to continue. At this time management cannot anticipate what impact,
if any, such regulation would have on the Company's operations.
USFIC is required by state laws governing surplus lines to be eligible to
write business as a surplus lines insurer in each state in which its products
are sold. Eligibility is based on a number of considerations, including size,
financial condition, experience in the insurer's state of domicile, expertise
of management and plan of operations. The writing of surplus lines is
constrained by laws that require that the business can be written in a state
only if coverage for the risk is not available from an insurer admitted in
such state. Furthermore, the business can only be written through a licensed
excess and surplus lines broker.
MEDICAL LINES
State regulation of self-insured medical plans is preempted by the Employee
Retirement Income Security Act of 1974 ("ERISA"). However, as medical stop-
loss has grown in importance, states have attempted to circumvent ERISA's
preemption by seeking to assert their regulatory authority over insurance
companies writing medical stop-loss coverages and related service providers,
such as USBenefits. The NAIC has adopted a model Managing General Agents Law,
the substance of which has been enacted in 49 states and the District of
Columbia. This model law requires the licensing of managing general agents
that perform certain functions on behalf of insurance companies, such as
underwriting together with claims settlement and payment. It also
8
<PAGE>
imposes certain requirements with respect to the content of agreements between
insurance companies and managing general agents. USBenefits is licensed or
registered as a managing general agent or third party administrator in various
states where such licensing is required. It is also licensed directly, or
through one or more of its employees, in 47 states and the District of
Columbia as an accident and health insurance agent and in 49 states and the
District of Columbia as a property/casualty insurance agent.
Additionally, the Company's INTERRA subsidiary is subject to regulation in
various states where it operates in any one of its capacities as a reinsurance
broker or intermediary, a third-party administrator or a claims management
company.
STATE INSURANCE HOLDING COMPANY LAWS
The Company, its stockholders, and its insurance company subsidiaries are
subject to the Insurance Holding Company Acts of the Commonwealth of
Massachusetts where USF RE is domiciled and the Commonwealth of Pennsylvania
where USFIC is domiciled. Until 1997 USF RE had been deemed to be
"commercially domiciled" in the State of California and thereby subject to the
California Holding Company Act. Generally these Insurance Holding Company Acts
prohibit any person from acquiring "control" of a domestic insurer, or of a
company controlling a domestic insurer without prior approval of the insurance
commissioner of such insurer's state of domicile. Control is presumed to exist
through ownership or the right to acquire 10% or more of the stock of the
insurer; but this presumption may be rebutted. These Insurance Holding Company
Acts require holding companies and their insurance subsidiaries to register
and file on a regular basis reports which include information concerning their
capital structure, ownership and financial condition. All transactions between
members of the holding company group are subject to fairness and
reasonableness standards, and notice of certain transactions must be given to
the Commissioners of Insurance of Massachusetts and Pennsylvania 30 days prior
to entering into such transactions, during which time the Commissioners of
these states may indicate their disapproval.
The amount of dividends which USF RE is permitted to pay the Company is
limited by the insurance laws of Massachusetts. USF RE must give notice to the
Massachusetts Insurance Commissioner of all dividends and other distributions
to stockholders within five business days after they are declared, and may not
pay such dividends until ten business days after receipt by the Commissioner
of the required notices. Following such dividends or distributions, USF RE's
surplus to policyholders must be reasonable in relation to its outstanding
liabilities and adequate for its financial needs. In addition, USF RE may not
pay any "extraordinary" dividend or distribution until 30 days after the
Massachusetts Insurance Commissioner has received notice of such dividend or
distribution, and until the Commissioner has either (i) not disapproved such
payment within such 30-day period, or (ii) approved such payment within such
30-day period. For 1998, the amount which may be paid in dividends by USF RE
without prior regulatory approval is $11,266,000. The amount of dividends
which USFIC may pay to USF RE is subject to similar restrictions under the
laws of Pennsylvania. Since being acquired by the Company, neither USF RE nor
USFIC has paid any dividends.
LEGISLATIVE AND REGULATORY DEVELOPMENTS
As noted in prior filings with the Securities and Exchange Commission by the
Company, various Federal and state healthcare legislative and regulatory
proposals which could impact the financing and delivery of healthcare have
been considered. Congress enacted certain of those proposals, some of which
cover self-insured medical benefit plans. Management cannot predict at this
time what impact, if any, these enactments would have on the Company's medical
lines business. However, based on management's review of the latest
information received, management believes that these enactments will not have
an adverse impact on the Company's business.
Some of the statements included within this Item 1 and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, as
well as in the consolidated financial statements and related notes
(incorporated herein by reference from the Company's 1997 Annual Report to
Stockholders in response to
9
<PAGE>
items 7 and 8 hereof, respectively) may be considered to be forward looking
statements (as that term is defined in the Private Securities Litigation
Reform Act of 1995), and which are subject to certain risks and uncertainties.
Among those factors which could cause the actual results to differ materially
from those suggested by such statements are: catastrophe losses in the
Company's insurance lines or a material aggregation of losses; changes in
federal or state law affecting an employer's ability to self-insure; the
availability of adequate retrocessional insurance coverage at appropriate
prices; a downturn in the general economy; the effects of competitive market
pressures within the medical lines or property/casualty marketplaces; the
effect of changes required by generally accepted accounting practices or
statutory accounting practices; and other risks which are described from time
to time in the Company's filings with the Securities and Exchange Commission.
The words "believes", "anticipates", "expects" and similar expressions are
intended to identify forward looking statements.
EMPLOYEES
As of March 20, 1998 the Company had 196 full-time employees. No employees
are represented by labor unions, and management considers its employee
relations to be excellent.
10
<PAGE>
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company are:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
David L. Cargile........ 52 Chairman, President and Chief Executive Officer
Howard S. Singer........ 52 Executive Vice President-Corporate Finance and
Investor Relations
John T. Grush........... 49 Senior Vice President
Charles M. Caporale..... 47 Senior Vice President, Chief Financial Officer and Treasurer
Jose A. Velasco......... 43 Senior Vice President, Chief Administrative Officer,
Secretary and General Counsel
Craig J. Kelbel......... 44 Senior Vice President
Edward D. Jones......... 52 Senior Vice President
Mark A. Carney.......... 39 Senior Vice President
</TABLE>
All executive officers other than Charles M. Caporale, Mark A. Carney and
Edward D. Jones have been employed by the Company for more than five years.
There are no family relationships among any of the executive officers of the
Company. There have been no events under bankruptcy or insolvency laws, no
criminal proceedings and no judgments or injunctions material to the
evaluation of the ability and integrity of any executive officer during the
past five years.
Mr. Caporale joined the Company in July, 1997 as Senior Vice President,
Chief Financial Officer and Treasurer. Before joining the Company, Mr.
Caporale began his career at Coopers & Lybrand and served in various
capacities in the insurance industry prior to joining the Minet group of
companies in 1985. He occupied several management positions in Minet
companies, including Executive Vice President and Chief Financial Officer of
Minet, Inc.
Mr. Carney joined the company in September, 1997 as a Senior Vice President
in connection with the acquisition of INTERRA and continues to serve as its
President and Chief Operating Officer. Prior to joining the Company, Mr.
Carney held various executive positions with health care companies. He founded
INTERRA in 1993, and until its acquisition served as its Chairman, President
and Chief Operating Officer.
Mr. Jones joined the Company in September, 1993 as a Vice President and was
promoted to Senior Vice President in March, 1998. He is responsible for
corporate strategic and business planning, government affairs, customer
service, and spearheads the Company's electronic data interchange (EDI)
efforts. Before joining the Company, Mr. Jones served as Executive Vice
President and as a member of the Board of Directors of Medical Review Systems,
a firm that he co-founded in 1990. He has also served as a consultant to and
held positions with various academic and governmental organizations.
ITEM 2. PROPERTIES
The principal executive offices of the Company and its subsidiaries are
located in 40,281 square feet of leased office space at 650 Town Center Drive,
Costa Mesa, California. The lease on this facility was renewed for the period
from October 1, 1995 through March 31, 2007, with a five-year option to
extend. Additional offices are maintained in leased premises in Chicago,
Illinois; Indianapolis, Indiana; Florham Park, New Jersey; Philadelphia,
Pennsylvania; Atlanta, Georgia; Tulsa, Oklahoma and Phoenix, Arizona.
ITEM 3. LEGAL PROCEEDINGS
From time to time the Company is a party to legal proceedings incidental to
its business, none of which individually or in the aggregate is considered by
the Company to be material to its financial condition or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter of the fiscal year
covered by this report to a vote of security holders, through the solicitation
of proxies or otherwise.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
On February 3, 1998, the Company announced that its Board of Directors had
authorized a two-for-one split of its common stock in the form of a 100% stock
dividend to stockholders of record as of February 18, 1998. Certificates
reflecting the stock split were issued February 27, 1998. Amounts presented
have been retroactively adjusted to reflect the stock split.
The Company paid quarterly cash dividends of $.03 per share in 1997 and
1996, respectively, and $.025 per share in 1995. In addition, material
appearing under the captions "Stockholder Information" and "Stock Price
Information" in the 1997 Annual Report to Stockholders of The Centris Group,
Inc. (the "Annual Report") is hereby incorporated by this reference.
ITEM 6. SELECTED FINANCIAL DATA
Material appearing under the caption "Selected Financial Data" in the
Company's Annual Report is hereby incorporated by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Material appearing under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" in the Company's Annual
Report is hereby incorporated by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Material appearing under the captions "Report on Consolidated Financial
Statements" and "Independent Auditors' Report" and contained in the Company's
consolidated financial statements and notes thereto in the Company's Annual
Report is hereby incorporated by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information regarding directors and executive officers of the Registrant
as required by Items 401 and 405 of Regulation S-K is set forth in Part I of
this Form 10-K under the caption "EXECUTIVE OFFICERS OF THE COMPANY" and under
the caption "ELECTION OF DIRECTORS" in the Company's definitive Proxy
Statement for the Company's 1998 Annual Meeting of Stockholders scheduled to
be held on May 13, 1998, and which will be filed with the Securities and
Exchange Commission not later than 120 days after December 31, 1997 (the
"Proxy Statement"), and is hereby incorporated by this reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 402 of Regulation S-K is set forth under
the caption "COMPENSATION OF EXECUTIVE OFFICERS," "COMPENSATION COMMITTEE OF
THE BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION," and "COMPENSATION
COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION" in the Company's Proxy
Statement, and is hereby incorporated by this reference.
12
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 403 of Regulation S-K is set forth under
the captions "SECURITY OWNERSHIP OF MANAGEMENT" and "SECURITY OWNERSHIP OF
CERTAIN OTHER STOCKHOLDERS" in the Company's Proxy Statement, and is hereby
incorporated by this reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information regarding certain relationships and related transactions as
required by Item 404 of Regulation S-K is set forth in the Company's Proxy
Statement under the captions "COMPENSATION OF EXECUTIVE OFFICERS" and "RELATED
TRANSACTIONS," and is hereby incorporated by this reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Form 10-K:
(i) The following is a list of financial statements, together with
reports thereon, filed as part of this Form 10-K, all of which have been
incorporated herein by reference to the material in the Company's Annual
Report as described under Item 8 of this Form 10-K:
Report on Consolidated Financial Statements
Consolidated Income Statements--Years ended December 31, 1997, 1996
and 1995
Consolidated Balance Sheets--December 31, 1997 and 1996
Consolidated Statements of Stockholders' Equity--at December 31,
1997, 1996, and 1995
Consolidated Statements of Cash Flows--Years ended December 31,
1997, 1996 and 1995
Notes to Consolidated Financial Statements
Independent Auditors' Report
(ii) The following is a list of financial statement schedules filed with
this Form 10-K:
Index to Schedules
Independent Auditor's Report
Schedule I--Summary of Investments
Schedule II--Condensed Financial Information of Registrant
Schedule III--Supplementary Insurance Information
Schedule IV--Reinsurance
All other schedules to the Consolidated Financial Statements required by
Article 7 of Regulation S-X are not required under the related instructions or
are inapplicable and therefore have been omitted.
(iii) The following is a list of exhibits required to be filed as part of
this Form 10-K by Item 601 of Regulation-K:
<TABLE>
<C> <S>
3.1, 4.1* The Company's Restated Certificate of Incorporation, as amended, as
presently in effect.
3.2, 4.2* Amended and Restated Bylaws of the Company, as presently in effect.
4.3 Stock Certificate of the Company. Filed as Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June
30, 1997 (the "June 1997 Form 10-Q"), and incorporated herein by
this reference.
4.4 Rights Agreement. Filed as Exhibit 2 to the Company's Current Report
on Form 8-K dated May 24, 1990, and incorporated herein by this
reference.
</TABLE>
13
<PAGE>
<TABLE>
<C> <S>
4.5 First Amendment to Rights Agreement. Filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated January 16, 1992, and
incorporated herein by this reference.
4.6 Second Amendment to Rights Agreement. Filed as Exhibit 10.1 to the
Company's Current Report on Form 8-K dated April 29, 1994,
incorporated herein by this reference.
4.7 Third Amendment to Rights Agreement. Filed as Exhibit 4 to the
Company's Current Report on Form 8-K dated September 28, 1995, and
incorporated herein by this reference.
4.8 Fourth Amendment to Rights Agreement. Filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated July 23, 1997, and
incorporated herein by this reference.
4.9 Fifth Amendment to Rights Agreement. Filed as Exhibit 1 to the
Company's Current Report on Form 8-K dated January 28, 1998, and
incorporated herein by this reference.
9 Not applicable.
10 Material Contracts.
10.1 Agreement of Employment between the Company and David L. Cargile
effective as of November 1, 1996, including relocation loan
arrangement and Amendment No. 1 thereto, filed as Exhibit 10.4(i)
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1995 (the "1995 Form 10-K"), and filed as Exhibit 10.2
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (the "1996 Form 10-K"), and which are
incorporated herein by this reference.
10.2 Agreement of Employment between the Company and Howard S. Singer
effective as of November 1, 1996. Filed as Exhibit 10.3 to the
Company's 1996 Form 10-K, and incorporated herein by this
reference.
10.3 Agreement of Employment between the Company and Craig J. Kelbel
effective as of November 1, 1996. Filed as Exhibit 10.4 to the
Company's 1996 Form 10-K, and incorporated herein by this
reference.
10.4 Agreement of Employment between the Company and Mark A. Carney
effective as of September 6, 1997. Filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended
September 30, 1997 (the "September 1997 Form 10-Q"), and
incorporated herein by this reference.
10.5(i) Severance Agreement dated May 24, 1994 between the Company and David
L. Cargile. Filed as Exhibit 10.3 to the Company's June 1994 Form
10-Q, and incorporated herein by this reference; and Amendment No.
1 thereto dated December 4, 1996, filed as Exhibit 10.5(vii) to the
Company's 1996 Form 10-K, and incorporated herein by this
reference.
10.5(ii)* Amendment No. 2 dated August 29, 1997 to Severance Agreement between
the Company and David L. Cargile.
10.5(iii) Severance Agreement dated May 24, 1994 between the Company and
Howard S. Singer. Filed as Exhibit 10.2 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June, 1994 (the "June
1994 Form 10 -Q"), and incorporated herein by this reference; and
Amendment No. 1 thereto dated December 4, 1996, filed as Exhibit
10.4(viii) to the Company's 1996 Form 10-K, and incorporated herein
by this reference.
10.5(iv)* Amendment No. 2 dated August 29, 1997 to Severance Agreement between
the Company and Howard S. Singer.
10.5(v) Severance Agreement dated May 24, 1994 between the Company and John
T. Grush. Filed as Exhibit 10.4 to the Company's June 1994 Form 10-
Q, and incorporated herein by this reference; and Amendment No. 1
dated December 4, 1996, filed as Exhibit 10.4(ix) to the Company's
1996 Form 10-K, and incorporated herein by this reference.
</TABLE>
14
<PAGE>
<TABLE>
<C> <S>
10.5(vi)* Amendment No. 2 dated August 29, 1997 to Severance Agreement
between the Company and John T. Grush.
10.5(vii) Severance Agreement dated May 24, 1994 between the Company and
Craig J. Kelbel. Filed as Exhibit 10.14(v) to the Company's 1995
Form 10-K, and incorporated herein by this reference; and
Amendment No. 1 dated December 4, 1996, filed as Exhibit 10.5(x)
to the Company's 1996 Form 10-K, and incorporated herein by this
reference.
10.5(viia)* Amendment No. 2 dated August 29, 1997 to Severance Agreement
between the Company and Craig T. Kelbel.
10.5(viii) Severance Agreement dated May 24, 1994 between the Company and
Jose A. Velasco. Filed as Exhibit 10.6 to the Company's June 1994
Form 10-Q, and incorporated herein by this reference; and
Amendment No. 1 dated December 4, 1996, filed as Exhibit
10.5(xii) to the Company's 1996 Form 10-K, and incorporated
herein by this reference.
10.5(ix)* Amendment No. 2 dated August 29, 1997 to Severance Agreement
between the Company and Jose A. Velasco.
10.5(x) Severance Agreement dated July 23, 1997 between the Company and
Charles M. Caporale. Filed as Exhibit 10.3 to the Company's
September 1997 Form 10-Q, and incorporated herein by this
reference.
10.5(xi) Severance Agreement dated September 6, 1997 between the Company
and Mark A. Carney. Filed as Exhibit 10.2 to the Company's
September 1997 Form 10-Q, and incorporated herein by this
reference.
10.5(xii)* Severance Agreement dated December 4, 1996 between the Company and
Edward D. Jones, III; and Amendment No. 1 dated August 29, 1997.
10.6 Lease Agreement dated May 28, 1985 between Center Tower Associates
and US Benefits, Inc. Filed as Exhibit 10.13 to the Company's
Form S-1 Registration Statement declared effective by the
Securities and Exchange Commission ("Commission") on October 31,
1986, and incorporated herein by this reference; and First
Amendment dated November 24, 1986 between Center Tower Associates
and the Company as assignee of US Benefits, Inc., filed as
Exhibit 10.26 to the Company's Form S-2 Registration Statement
declared effective by the Commission on December 4, 1991 (the "S-
2 Registration Statement"), and incorporated herein by this
reference; and Second Amendment dated July 8, 1992, filed as
Exhibit 10.17 to the Company's Annual Report on Form 10-K for the
year ended December 31, 1992, and incorporated herein by this
reference; and Third Amendment dated May 4,1993, filed as Exhibit
10.18 to the Company's Annual Report on Form 10-K for the year
ended December 31, 1993 ( the "1993 Form 10-K"), and incorporated
herein by this reference; and Fourth and Fifth Amendments dated
August 29, 1994 and October 1, 1995, respectively, filed as
Exhibit 10.18(i) to the Company's 1995 Form 10-K, and
incorporated herein by this reference.
10.7(i) Management Agreement No. 1 dated October 3, 1994 (with Addenda)
between The Continental Insurance Company and USBenefits
Insurance Services, Inc. Filed as Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarter ended September,
1994, and incorporated herein by this reference; and Additional
Addenda to Management Agreement No.1, filed as Exhibit 10.19(i)
to the Company's 1995 Form 10-K and incorporated herein by this
reference.
10.7(ii)* Addendum Eight and Addendum Nine, both dated April 24th, 1997, to
Management Agreement No. 1 between The Continental Insurance
Company and USBenefits Insurance Services, Inc.
</TABLE>
15
<PAGE>
<TABLE>
<C> <S>
10.8 Quota Share Retrocession Agreement dated July 11, 1986 between The
Continental Insurance Company, as successor to Harbor Insurance
Company by assumption, and USF RE INSURANCE COMPANY, as amended. Filed
as Exhibit 10.47 to the Company's S-2 Registration Statement, and
incorporated herein by this reference; and Amendment dated January 16,
1991, filed as Exhibit 10.21 to the Company's 1993 Form 10-K, and
incorporated herein by this reference; and Amendment dated October 3,
1994, filed as Exhibit 10.21(i) to the Company's Annual Report on Form
10-K for the year ended December 31, 1994, and incorporated herein by
this reference.
10.9 Credit Agreement dated as of December 20, 1994 between the Company and
Fleet National Bank of Connecticut (formerly known as Shawmut Bank
Connecticut, N.A.), including Revolving Note and Pledge Agreement.
Filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1995, and incorporated herein by this
reference; and First and Second Amendments to the Credit Agreement,
filed as Exhibit 10.1 to the Company's Quarterly Reports on Form 10-Q
for the quarters ended March 31, 1996 and September 30, 1996,
respectively, and incorporated herein by this reference.
10.10* The Company's Amended 1988 Employee Stock Plan.
10.11* The Company's Amended and Restated 1991 Employee Stock Option Plan.
10.12 Form of Stock Option Agreement under The Company's. Amended and
Restated 1991 Employee Stock Option Plan. Filed as Exhibit 10.1 to the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30,
1996 (the "June 1996 Form 10-Q"), and incorporated herein by this
reference.
10.14* The Company's 1991 Directors Stock Option Plan Amended and Restated.
10.15 Form of Stock Option Agreement under The Company's 1991 Directors Stock
Option Plan Amended and Restated. Filed as Exhibit 10.2 to the
Company's June 1996 Form 10-Q, and incorporated herein by this
reference
10.22 The Company's Amended Incentive Compensation Program. Filed as Exhibit
10.26 to the Company's 1995 Form 10-K, and incorporated herein by this
reference.
10.23* The Company's 1997 Long-Term Incentive-Performance Unit Plan, including
form of Plan Agreement.
10.24 The Company's Non-Qualified Deferred Compensation Plan, including form
of Plan Agreement. Filed as Exhibit 10.23 to the Company's 1996 Form
10-K, and incorporated herein by this reference.
11* The Centris Group, Inc. and Subsidiaries Computation of Earnings Per
Share.
12 Not applicable.
13* The Centris Group, Inc. 1997 Annual Report to Stockholders (filed with
the Commission only to the extent it is specifically incorporated by
reference in this Form 10-K).
18 Not applicable.
19 Not applicable.
21* Subsidiaries of The Centris Group, Inc..
22 Not applicable.
23* Independent Auditors' Consent dated March 26, 1998.
24 Not applicable.
27* Financial Data Schedules.
</TABLE>
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the fourth quarter of the year ended
December 31, 1997.
- --------
* Describes a document filed with the Annual Report on Form 10-K for the year
ended December 31, 1997.
16
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Date: March 25, 1998 THE CENTRIS GROUP, INC.
/s/ David L. Cargile
By: _________________________________
David L. Cargile
Chairman of the Board,
Chief Executive Officer and
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed by the following persons on behalf of the Company and
in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ David L. Cargile Chairman of the Board, Chief March 25, 1998
____________________________________ Executive Officer and
David L. Cargile President (Principal
Executive Officer)
/s/ John F. Kooken Director March 25, 1998
____________________________________
John F. Kooken
/s/ L. Steven Medgyesy Director March 25, 1998
____________________________________
L. Steven Medgyesy
/s/ Bernard H. Ross Director March 25, 1998
____________________________________
Bernard H. Ross
/s/ Charles L. Schultz Director March 25, 1998
____________________________________
Charles L. Schultz
/s/ Howard S. Singer Director and Executive Vice March 25, 1998
____________________________________ President--Corporate
Howard S. Singer Finance and Investor
Relations
Director MARCH , 1998
____________________________________
Kenneth C. Tyler
/s/ Charles M. Caporale Senior Vice President, Chief March 25, 1998
____________________________________ Financial Officer and
Charles M. Caporale Treasurer (Principal
Financial and Accounting
Officer)
</TABLE>
17
<PAGE>
INDEX TO SCHEDULES
INDEPENDENT AUDITORS' REPORT ON SCHEDULES
<TABLE>
<S> <C>
Summary of Investments............................................. Schedule I
Condensed Financial Information of Registrant...................... Schedule II
Supplementary Insurance Information................................ Schedule III
Reinsurance........................................................ Schedule IV
</TABLE>
18
<PAGE>
INDEPENDENT AUDITORS' REPORT
Under date of February 3, 1998, we reported on the consolidated balance
sheets of The Centris Group, Inc., formerly US Facilities Corporation, and
Subsidiaries as of December 31, 1997 and 1996, and related consolidated income
statements, statements of stockholders' equity and cash flows for each of the
years in the three-year period ended December 31, 1997 as contained in the
1997 Annual Report to Stockholders. These consolidated financial statements
and our report thereon are incorporated by reference in the annual report on
Form 10-K for the year 1997. In connection with our audits of the
aforementioned consolidated financial statements, we also audited the related
consolidated financial statement schedules as listed in the accompanying
index. These consolidated financial statement schedules are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these consolidated financial statement schedules based on our audits.
In our opinion, such schedules, when considered in relation to the basic
consolidated financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
/s/ KPMG Peat Marwick LLP
Los Angeles, California
February 3, 1998
19
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
SCHEDULE I--SUMMARY OF INVESTMENTS
DECEMBER 31, 1997
<TABLE>
<CAPTION>
AMOUNT AT
WHICH SHOWN
ON BALANCE
COST(/1/) VALUE(/1/) SHEET(/1/)
--------- ---------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Fixed maturities:
Bonds:
United States Government agencies and
authorities............................ $ 36,430 $ 37,205 $ 37,205
States, municipalities and political
subdivisions........................... 98,007 103,591 103,591
Foreign governments..................... 510 529 529
All other corporate bonds............... 42,315 44,793 44,793
-------- -------- --------
Total fixed maturities................ 177,262 186,118 186,118
======== ======== ========
Equity securities:
Preferred stocks:
Industrial and miscellaneous............ 250 256 256
Common stocks:
Industrial and miscellaneous............ 14,753 15,308 15,308
-------- -------- --------
Total................................. 15,003 15,564 15,564
======== ======== ========
Other invested assets..................... 509 509 509
Short-term investments.................... 21,633 21,633 21,633
-------- -------- --------
Total investments..................... $214,407 $223,824 $223,824
======== ======== ========
</TABLE>
- --------
(1) Cost represents the amortized cost of investments to the Company. Value
represents current market value. Amount at which investments are shown on
the balance sheet represents current market value as required by SFAS No.
115.
20
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--CONDENSED INCOME STATEMENTS
THE CENTRIS GROUP
(PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1997 1996 1995
------- ------- -------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Revenues:
Dividends from subsidiaries........................ $ 4,000 $ 4,000 $ 6,000
Other.............................................. 62 58 49
------- ------- -------
Total revenues................................... 4,062 4,058 6,049
Operating expenses:
Other general and administrative................... 990 896 1,723
Interest........................................... 2,373 2,610 2,259
------- ------- -------
Total operating expenses......................... 3,363 3,506 3,982
------- ------- -------
Income (loss) before income taxes.................... 699 552 2,067
Income tax benefits.................................. (1,420) (1,652) (2,324)
------- ------- -------
Income before equity in earnings of subsidiaries..... 2,119 2,204 4,391
Equity in earnings of subsidiaries................... 13,093 12,816 9,463
------- ------- -------
Net income........................................... $15,212 $15,020 $13,854
======= ======= =======
</TABLE>
21
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
SCHEDULE II--CONDENSED BALANCE SHEETS
THE CENTRIS GROUP
(PARENT COMPANY ONLY)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
------------------------
1997 1996
----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
------
Cash.................................................. $ 1,548 $ 641
Investment in and due from affiliates................. 146,164 134,838
Other assets.......................................... 4,021 3,889
----------- -----------
Total assets...................................... $ 151,733 $ 139,368
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Note payable.......................................... $ 32,500 $ 35,000
Accounts payable and accrued expenses................. 1,643 2,004
----------- -----------
Total liabilities................................. 34,143 37,004
=========== ===========
Stockholders' equity:
Common stock........................................ 124 122
Paid-in capital..................................... 46,188 45,442
Net unrealized investment gain...................... 6,121 5,860
Retained earnings................................... 66,654 52,883
----------- -----------
119,087 104,307
Less treasury stock, at cost........................ (1,497) (1,943)
----------- -----------
Total stockholders' equity........................ 117,590 102,364
----------- -----------
Total liabilities and stockholders' equity........ $ 151,733 $ 139,368
=========== ===========
</TABLE>
22
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
THE CENTRIS GROUP, INC.
(PARENT COMPANY ONLY)
SCHEDULE II--CONDENSED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1997 1996 1995
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income...................................... $ 15,212 $ 15,020 $ 13,854
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Increase (decrease) in accounts payable and
accrued expenses............................. (361) (224) (359)
Increase in other assets...................... (132) (1,464) (690)
Equity in income of and change in due from
affiliates................................... (10,286) (14,140) (15,310)
-------- -------- --------
Net cash provided by (used in) operating
activities................................. 4,433 (808) (2,505)
-------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from note payable...................... -- -- 10,000
Payment on note payable......................... (2,500) -- --
Proceeds from issuance of common stock.......... 1,194 2,044 2,405
Dividends Paid.................................. (1,441) (1,410) (1,125)
-------- -------- --------
Net cash (used in) provided by financing
activities................................. (2,747) 634 11,280
CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in investment in affiliates............ (779) -- (10,500)
-------- -------- --------
Net increase (decrease) in cash................. 907 (174) (1,725)
Cash at beginning of year....................... 641 815 2,540
-------- -------- --------
Cash at end of year............................. $ 1,548 $ 641 $ 815
======== ======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................ $ 2,303 $ 2,498 $ 2,187
Income taxes.................................... $ 4,366 $ 4,771 $ 5,217
</TABLE>
23
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
SCHEDULE III-SUPPLEMENTARY INSURANCE INFORMATION
<TABLE>
<CAPTION>
AMORTIZATION
BENEFITS, OF
DEFERRED FUTURE POLICY CLAIMS, DEFERRED
POLICY BENEFITS, LOSSES, NET LOSSES AND POLICY OTHER NET
ACQUISITION CLAIMS AND UNEARNED PREMIUM INVESTMENT SETTLEMENT ACQUISITION OPERATING PREMIUMS
SEGMENT COSTS LOSS EXPENSES PREMIUMS REVENUE INCOME EXPENSES COSTS EXPENSES WRITTEN
------- ----------- ----------------- -------- ------- ---------- ---------- ------------ --------- --------
(DOLLARS IN THOUSANDS)
1997
----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical lines...... $ -- 23,585 -- 103,479 3,605 82,760 34,732 13,328 103,479
Property/casualty.. 4,495 93,216 30,249 56,054 7,424 42,311 11,464 4,535 62,071
------ ------- ------ ------- ------ ------- ------ ------ -------
Total............. $4,495 116,801 30,249 159,533 11,029 125,071 46,196 17,863 165,550
====== ======= ====== ======= ====== ======= ====== ====== =======
<CAPTION>
1996
----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical lines...... $ -- 17,400 -- 84,179 3,312 58,095 28,526 10,111 84,179
Property/casualty.. 3,644 77,269 22,936 39,945 6,777 30,078 8,653 3,988 43,799
------ ------- ------ ------- ------ ------- ------ ------ -------
Total............. $3,644 94,669 22,936 124,124 10,089 88,173 37,179 14,099 127,978
====== ======= ====== ======= ====== ======= ====== ====== =======
<CAPTION>
1995
----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Medical lines...... $ -- 17,947 -- 81,546 3,269 54,563 27,069 12,025 81,546
Property/casualty.. 2,830 60,947 17,705 33,425 5,872 23,180 8,895 3,304 35,350
------ ------- ------ ------- ------ ------- ------ ------ -------
Total............. $2,830 78,894 17,705 114,971 9,141 77,743 35,964 15,329 116,896
====== ======= ====== ======= ====== ======= ====== ====== =======
</TABLE>
24
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
SCHEDULE IV--REINSURANCE
<TABLE>
<CAPTION>
INSURANCE PREMIUMS EARNED 1997 1996 1995
------------------------- -------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Gross amount (direct)............................. $ 11,986 $ 10,279 $ 12,218
Ceded to other companies.......................... 23,097 20,869 14,398
Assumed from other companies...................... 170,644 134,714 117,151
Net amount........................................ 159,533 124,124 114,971
Percentage of amount assumed to net............... 107.0% 108.5% 101.9%
</TABLE>
25
<PAGE>
Restated Certificate Of Incorporation
Of
The Centris Group, Inc.
(Formerly U.S. Facilities Corporation
and originally incorporated as U S HOLDINGS INC.
on June 18, 1982)
____________________________________
FIRST: The name of the Corporation is The Centris Group, Inc.
(hereinafter sometimes referred to as the "Corporation").
SECOND: The address of the registered office of the Corporation in
the State of Delaware is Corporation Trust Center, 1209 Orange Street, in the
City of Wilmington, County of New Castle. The name of the registered agent at
that address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which a corporation may be organized under the General
Corporation Law of Delaware.
FOURTH:
A. The total number of shares of all classes of stock which the Corporation
shall have authority to issue is forty-five million (45,000,000), consisting of:
(1) Five million (5,000,000) shares of Preferred Stock, par value one
cent ($.01) per share (the "Preferred Stock"); and
(2) Forty million (40,000,000) shares of Common Stock, par value one cent
($.01) per share (the "Common Stock").
<PAGE>
B. The board of directors is authorized, subject to any limitations
prescribed by law, to provide for the issuance of the shares of Preferred Stock
in series, and by filing a certificate pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to be
included in each such series, and to fix the designation, powers, preferences
and rights of the shares of each such series and any qualifications, limitations
or restrictions thereof. The number of authorized shares of Preferred Stock may
be increased or decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holdings of a majority of the Common
Stock, without a vote of the holders of the Preferred Stock, or of any series
thereof, unless a vote of any such holders is required pursuant to the
certificate or certificates establishing the series of Preferred Stock.
FIFTH: The following provisions are inserted for the management of
the business and the conduct of the affairs of the Corporation, and for further
definition, limitation and regulation of the powers of the Corporation and of
its directors and stockholders:
A. The business and affairs of the Corporation shall be managed by or under
the direction of the board of directors. In addition to the powers and
authority expressly conferred upon them by statute or by this Restated
Certificate of Incorporation or the by-laws of the Corporations, the directors
are hereby empowered to exercise all such powers and do all such acts and things
as may be exercised or done by the Corporation.
B. The directors of the Corporation need not be elected by written ballot
unless the by-laws so provide.
C. Special meetings of stockholders of the Corporation may be called only by
the board of directors pursuant to a resolution adopted by a majority of the
directors then in office. Special meetings of stockholders may not be called by
the stockholders.
-2-
<PAGE>
SIXTH:
A. The number of directors shall be fixed from time to time exclusively by
the board of directors pursuant to a resolution adopted by a majority of the
directors then in office. The directors shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 1987 annual meeting of stockholders, the term of
office of the second class to expire at the 1988 annual meeting of stockholders
and the term of office of the third class to expire at the 1989 annual meeting
of stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
B. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the board of directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a majority vote of the directors
then in office, though less than a quorum, and directors so chosen shall hold
office for a term expiring at the annual meeting of stockholders at which the
term of office of the class to which they have been elected expires. No
decrease in the number of directors constituting the board of directors shall
shorten the term of any incumbent director.
C. Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire board of directors, may be
removed from office at any time, with or without cause, by the affirmative vote
of the holders of at least 66-2/3 percent of the voting power of all of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
-3-
<PAGE>
SEVENTH: The board of directors is expressly empowered to adopt,
amend or repeal by-laws of the Corporation. The stockholders shall also have
power to adopt, amend or repeal the by-laws of the Corporation. In addition to
any vote of the holders of any class or series of stock of this Corporation
required by law or by this Restated Certificate of Incorporation of the
Corporation, the affirmative vote of the holders of at least 66-2/3 percent of
the voting power of all of the then-outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to adopt, amend or repeal any
provisions of the by-laws of the Corporation.
EIGHTH: The stockholder vote required to approve Business
Combinations (as hereinafter defined) shall be as set forth in this Article
EIGHTH.
A. (1) Except as otherwise expressly provided in section B. of this Article
EIGHTH:
(i) Any merger or consolidation of the Corporation or any Subsidiary
(as hereinafter defined) with (a) any Interested Stockholder (as hereinafter
defined) or (b) any other corporation (whether or not itself an Interested
Stockholder) which is, or after such merger or consolidation would be, an
Affiliate (as hereinafter defined) of an Interested Stockholder; or
(ii) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition (in one transaction or a series of transactions) to or with any
Interested Stockholder or any Affiliate of any Interested Stockholder of any
assets of the Corporation or any Subsidiary having an aggregate Fair Market
Value (as hereinafter defined) of $10,000,000 or more; or
(iii) The issuance or transfer by the Corporation of any Subsidiary
(in one transaction or a series of transactions) of any securities of the
Corporation or any Subsidiary to any
-4-
<PAGE>
Interested Stockholder or any Affiliate of any Interested Stockholder in
exchange for cash, securities or other property (or a combination thereof)
having an aggregate Fair Market Value of $10,000,000 or more; or
(iv) The adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of any Interested
Stockholder or any Affiliate of any Interested Stockholder; or
(v) Any reclassification of securities (including any reverse stock
split) or recapitalization of the Corporation, or any merger or
consolidation of the Corporation with any of its Subsidiaries, or any other
transaction (whether or not with or into or otherwise involving any
Interested Stockholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares of any class of
equity or convertible securities of the Corporation or any Subsidiary which
is directly or indirectly owned by any Interested Stockholder or any
Affiliate of any Interested Stockholder
shall require the affirmative vote of the holders of at least 66-2/3 percent of
the voting power of all of the then-outstanding shares of the capital stock of
the Corporation entitled to vote generally in the election of directors
(hereinafter in this Article EIGHTH referred to as the "Voting Stock"), voting
together as a single class (it being understood that, for purposes of this
Article EIGHTH, each share of the Voting Stock shall have the number of votes
granted to it pursuant to Article FOURTH of this Restated Certificate of
Incorporation or any designation of the rights, powers and preferences of any
class or series of Preferred Stock made pursuant to said Article FOURTH [a
"Preferred Stock Designation"]). Such affirmative vote shall be required
notwithstanding any other provisions of this Restated Certificate of
Incorporation or any provision of law or of any agreement with any national
securities exchange which might otherwise permit a lesser vote or no
-5-
<PAGE>
vote, but such affirmative vote shall be required in addition to any affirmative
vote of the holders of any particular class or series of the Voting Stock
required by law, this Restated Certificate of Incorporation or any Preferred
Stock Designation.
(2) The term "Business Combination" as used in this Article EIGHTH shall
mean any transaction which is referred to in any one or more of subparagraphs
(i) through (v) of paragraph (1) of this section A.
B. The provisions of section A. of this Article EIGHTH shall not be
applicable to any particular Business Combination, and such Business Combination
shall require only such affirmative vote as is required by law, any other
provision of this Restated Certificate of Incorporation of the Corporation, any
Preferred Stock Designation or any agreement with any national securities
exchange, if, in the case of a Business Combination that does not involve any
cash or other consideration being received by the stockholders of the
Corporation, solely in their respective capacities as stockholders of the
Corporation, the condition specified in the following paragraph (1) is met, or,
in the case of any other Business Combination, the conditions specified in
either of the following paragraphs (1) or (2) are met:
(1) The Business Combination shall have been approved by two-thirds of
the Continuing Directors (as hereinafter defined), it being understood that this
condition shall not be capable of satisfaction unless there is at least one
Continuing Director.
(2) All of the following conditions shall have been met:
(i) The consideration to be received by holders of shares of a
particular class of outstanding Voting Stock shall be in cash or in the same
form as the Interested Stockholder has paid for shares of such class of
Voting Stock within the two-year period ending on and including the date on
which the Interested Stockholder became an Interested Stockholder (the
"Determination Date"). If, within such two-year period, the Interested
Stockholder has
-6-
<PAGE>
paid for shares of any class of Voting Stock with varying forms of
consideration, the form of consideration to be received per share by holders
of shares of such class of Voting Stock shall be either cash or the form
used to acquire the largest number of shares of such class of Voting Stock
acquired by the Interested Stockholder within such two-year period.
(ii) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the date (the "Consummation Date") of the consummation of the
Business Combination, of the consideration other than cash to be received
per share by holders of Common Stock in such Business Combination shall be
at least equal to the higher of the following (it being intended that the
requirements of this paragraph (2)(ii) shall be required to be met with
respect to all shares of Common Stock outstanding whether or not the
Interested Stockholder has previously acquired any shares of Common Stock):
(a) (If applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of Common Stock acquired by it
within the two-year period immediately prior to the date of the first public
announcement of the proposal of the Business Combination (the "Announcement
Date") or in the transaction in which it became an Interested Stockholder,
whichever is higher, plus interest compounded annually from the
Determination Date through the Consummation Date at the prime rate of
interest of such bank headquartered in the City of Los Angeles, California,
as may be selected by the Continuing Directors from time to time in effect,
less the aggregate amount of any cash dividends paid, and the Fair Market
Value of any dividends paid in other than cash, on each share of Common
Stock from the Determination Date through the Consummation Date in an amount
up to, but not exceeding, the amount of interest so payable per share of
Common Stock; or
-7-
<PAGE>
(b) The Fair Market Value per share of Common Stock on the
Announcement Date.
(iii) The aggregate amount of (x) the cash and (y) the Fair Market
Value, as of the Consummation Date, of the consideration other than cash to
be received per share by holders of shares of any class, other than Common
Stock, of outstanding Voting Stock shall be at least equal to the highest of
the following (it being intended that the requirements of this paragraph
(2)(iii) shall be required to be met with respect to every such class of
outstanding Voting Stock, whether or not the Interested Stockholder has
previously acquired any shares of a particular class of Voting Stock):
(a) (If applicable) the highest per share price (including any
brokerage commissions, transfer taxes and soliciting dealers' fees) paid by
the Interested Stockholder for any shares of such class of Voting Stock
acquired by it within the two-year period immediately prior to the
Announcement Date or in the transaction in which it became an Interested
Stockholder, whichever is higher, plus interest compounded annually from the
Determination Date through the Consummation Date at the prime rate of
interest of such major bank headquartered in the City of Los Angeles as may
be selected by the Continuing Directors from time to time in effect, less
the aggregate amount of any cash dividends paid, and the Fair Market Value
of any dividends paid in other than cash, on each share of such class of
Voting Stock from the Determination Date through the Consummation Date in an
amount up to, but not exceeding, the amount of interest so payable per share
of such class of Voting Stock; or
(b) The Fair Market Value per share of such class of Voting Stock on
the Announcement Date; or
-8-
<PAGE>
(c) The highest preferential amount per share to which the holders
of shares of such class of Voting Stock are entitled in the event of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation.
(iv) After such Interested Stockholder has become an Interested
Stockholder and prior to the consummation of such Business Combination: (a)
except as approved by a majority of the Continuing Directors, there shall
have been no failure to declare and pay at the regular date therefor any
full quarterly dividends (whether or not cumulative) on any outstanding
Preferred Stock; (b) there shall have been (I) no reduction in the annual
rate of dividends paid on the Common Stock (except as necessary to reflect
any subdivision of the Common Stock), except as approved by a majority of
the Continuing Directors, and (II) an increase in such annual rate of
dividends as necessary to reflect any reclassification (including any
reverse stock split), recapitalization, reorganization or any similar
transaction which has the effect of reducing the number of outstanding
shares of the Common Stock, unless the failure so to increase such annual
rate is approved by a majority of the Continuing Directors; and (c) such
Interested Stockholder shall have not become the beneficial owner of any
additional shares of Voting Stock except as part of the transaction which
results in such Interested Stockholder becoming an Interested Stockholder.
(v) After such Interested Stockholder has become an Interested
Stockholder, such Interested Stockholder shall not have received the
benefit, directly or indirectly (except proportionately, solely in such
Interested Stockholder's capacity as a stockholder of the Corporation), of
any loans, advances, guarantees, pledges or other financial assistance or
any tax credits or other tax advantages provided by the Corporation, whether
in anticipation of or in connection with such Business Combination or
otherwise.
-9-
<PAGE>
(vi) A proxy or information statement describing the proposed Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934 and the rules and regulations thereunder (or any subsequent
provisions replacing such Act, rules or regulations) shall be mailed to all
stockholders of the Corporation at least 30 days prior to the consummation
of such Business Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such Act or subsequent
provisions).
-10-
<PAGE>
C. For the purposes of this Article EIGHTH:
(1) A "person" shall mean any individual, firm, corporation or other
entity.
(2) "Interested Stockholder" shall mean any person (other than the
Corporation or any Subsidiary) or which:
(i) Is the beneficial owner, directly or indirectly, of more than 10
percent of the voting power of the outstanding Voting Stock; or
(ii) Is an Affiliate of the Corporation and at any time within the
two-year period immediately prior to the date in question was the beneficial
owner, directly or indirectly, of 10 percent or more of the voting power of
the then-outstanding Voting Stock; or
(iii) Is an assignee of or has otherwise succeeded to any shares of
Voting Stock which were at any time within the two-year period immediately
prior to the date in question beneficially owned by any Interested
Stockholder, if such assignment or succession shall have occurred in the
course of a transaction or series of transactions not involving a public
offering within the meaning of the Securities Act of 1933.
(3) A person shall be a "beneficial owner" of any Voting Stock:
(i) Which such person or any of its Affiliates or Associates (as
hereinafter defined) beneficially owns, directly or indirectly; or
(ii) Which such person or any of its Affiliates or Associates has (a)
the right to acquire (whether such right is exercisable immediately or only
after the passage of time), pursuant to any agreement, arrangement or
understanding or upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
(iii) Which are beneficially owned, directly or indirectly, by any
other person with which such person or any of its Affiliates or Associates
has any agreement, arrangement or
-11-
<PAGE>
understanding for the purpose of acquiring, holding, voting or disposing
of any shares of Voting Stock.
(4) For the purposes of determining whether a person is an Interested
Stockholder pursuant to paragraph (2) of this section C., the number of shares
of Voting Stock deemed to be outstanding shall include shares deemed owned
through application of paragraph (3) of this section C., but shall not include
any other shares of Voting Stock which may be issuable pursuant to any
agreement, arrangement or understanding, or upon exercise of conversion rights,
warrants or options, or otherwise.
(5) "Affiliate" or "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as in effect on January 1, 1986.
(6) "Subsidiary" means any corporation of which a majority of any class
of equity security is owned, directly or indirectly, by the Corporation;
provided, however, that for the purposes of the definition of Interested
Stockholder set forth in paragraph (2) of this section C., the term "Subsidiary"
shall mean only a corporation of which a majority of each class of equity
security is owned, directly or indirectly, by the Corporation.
(7) "Continuing Director" means any member of the board of directors of
the Corporation (the "Board") who is unaffiliated with the Interested
Stockholder and was a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any successor of a Continuing
Director who is unaffiliated with the Interested Stockholder and is recommended
to succeed a Continuing Director by a majority of Continuing Directors then on
the Board.
(8) "Fair Market Value" means: (i) in the case of stock, the highest
closing sale price during the 30-day period immediately preceding the date in
question of a share of such stock on
-12-
<PAGE>
the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock
is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such
stock is not listed on such Exchange, on the principal United States securities
exchange registered under the Securities Exchange Act of 1934 on which such
stock is listed, or, if such stock is not listed on any such exchange, the
highest closing bid quotation with respect to a share of such stock during the
30-day period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system then in use,
or, if no such quotations are available, the fair market value on the date in
question of a share of such stock as determined by the Board in good faith; and
(ii) in the case of property other than cash or stock, the fair market value of
such property on the date in question as determined by the Board in good faith.
(9) In the event of any Business Combination in which the Corporation
survives, the phrase "consideration other than cash to be received" as used in
paragraphs (2)(ii) and (2)(iii) of section B. of this Article EIGHTH shall
include the shares of Common Stock and/or the shares of any other class of
outstanding Voting Stock retained by the holders of such shares.
D. A majority of the directors then in office shall have the power and duty
to determine, on the basis of information known to them after reasonable
inquiry, all facts necessary to determine compliance with this Article EIGHTH,
including, without limitation: (i) whether a person is an Interested
Stockholder, (2) the number of shares of Voting Stock beneficially owned by any
person, (3) whether a person is an Affiliate or Associate of another, (4)
whether the applicable conditions set forth in paragraph (2) of section B. have
been met with respect to any Business Combination, and (5) whether the assets
which are the subject of any Business Combination referred to in paragraph
(1)(ii) of section A. have, or the consideration to be received for the issuance
or transfer of securities by the Corporation or any Subsidiary in any Business
Combination referred to in paragraph (1)(iii) of section A. has, an aggregate
Fair Market Value of $10,000,000 or more.
-13-
<PAGE>
E. Nothing contained in this Article EIGHTH shall be construed to relieve
any Interested Stockholder from any fiduciary obligation imposed by law.
NINTH:
A. Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she, or a person of whom he or she is the legal representative, is or
was a director or officer of this Corporation or is or was serving at the
request of this Corporation as a director, officer, employee or agent of another
corporation or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged activity in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a director,
officer, employee or agent, shall be indemnified and held harmless by this
Corporation to the fullest extent authorized by the General Corporation Law of
Delaware, as the same exists or may hereafter be amended (but, in the case of
any such amendment, only to the extent that such amendment permits this
Corporation to provide broader indemnification rights than said Law permitted
this Corporation to provide prior to such amendment) against all expenses,
liability and loss (including attorneys' fees, judgments, fines, ERISA excise
taxes or penalties and amounts paid or to be paid in settlement) reasonably
incurred or suffered by such person in connection with any such proceeding and
such indemnification shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of his or
her heirs, executors and administrators; provided, however, that this
Corporation shall indemnify any such person seeking indemnity in connection with
a proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the board of directors of this Corporation.
Such right shall be a
-14-
<PAGE>
contract right and shall include the right to be paid by this Corporation
expenses incurred in defending any such proceeding in advance of its final
disposition; provided however, that if the Delaware General Corporation Law
requires the payment of such expenses incurred by a director or officer in his
or her capacity as a director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or officer,
including, without limitation, service to an employee benefit plan) in advance
of the final disposition of such proceeding, it shall be made only upon delivery
to this Corporation of an undertaking, by or on behalf of such director or
officer, to repay all amounts so advanced if it should be determined ultimately
that such director or officer is not entitled to be indemnified under this
Article or otherwise.
B. If a claim under section A. is not paid in full by this Corporation
within ninety (90) days after a written claim has been received by this
Corporation, the claimant may at any time thereafter institute a proceeding
against this Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such proceeding. It shall be a defense to any such
proceeding (other than a proceeding brought to enforce a claim for expenses
incurred in defending any proceeding in advance of its final disposition where
the required undertaking, if any, has been tendered to this Corporation) that
-15-
<PAGE>
the claimant has not met the standards of conduct which make it permissible
under the General Corporation Law of Delaware for this Corporation to indemnify
the claimant for the amount claimed, but the burden of proving such defense
shall be on this Corporation. Neither the failure of this Corporation (including
its board of directors, independent legal counsel, or its stockholders) to have
made a determination prior to the commencement of such proceeding that
indemnification of the claimant is proper in the circumstances because he or she
has met the applicable standard of conduct set forth in the General Corporation
Law of Delaware, nor an actual determination by this Corporation (including its
board of directors, independent legal counsel, or its stockholders) that the
claimant has not met such applicable standard of conduct, shall be a defense to
the proceeding or create a presumption that claimant has not met the applicable
standard of conduct.
C. The rights conferred on any person by sections A. and B. shall not be
exclusive of any other right which such person may have or hereafter acquire
under any statute, provision of this Restated Certificate of Incorporation, by-
law of this Corporation, agreement, vote of stockholders or disinterested
directors or otherwise.
D. This Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer, employee or agent of this Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not this Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
TENTH: A director of this Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under section 174 of the Delaware General
Corporation Law, or (iv) for any transaction from which the director derived an
improper personal benefit.
Any repeal or modification of the foregoing paragraph by the
stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
ELEVENTH: The Corporation reserves the right to amend or repeal any
provision contained in this restated Certificate of Incorporation in the manner
prescribed by the laws of the State of
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<PAGE>
Delaware and all rights conferred upon stockholders are granted subject to this
reservation; provided, however, that, notwithstanding any other provision of
this Restated Certificate of Incorporation or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any vote of the
holders of any class or series of the stock of this Corporation required by law,
by this Restated Certificate of Incorporation or any certificate of designation
filed with the Delaware Secretary of State pursuant to Article FOURTH hereof,
the affirmative vote of the holders of at least 66-2/3 percent of the voting
power of all of the then-outstanding shares of the capital stock of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class, shall be required to amend or repeal this Article
ELEVENTH, Article SIXTH, Article SEVENTH, Article EIGHTH or Article NINTH.
In Witness Whereof, this Restated Certificate of Incorporation, having been
duly adopted by the board of directors of The Centris Group, Inc. in accordance
with section 245 of the General Corporation Law of Delaware, restates and
integrates and does not further amend the provisions of the Corporation's
Certificate of Incorporation as heretofore amended or supplemented, and there is
no discrepancy between those provisions and the provisions of this Restated
Certificate of Incorporation, and has been executed by David L. Cargile, its
President, and attested by Jose A. Velasco, its Secretary, this 25th day of
March, 1998.
THE CENTRIS GROUP, INC.
By /s/ DAVID L. CARGILE
-----------------------
DAVID L. CARGILE, President
Attest:
/s/JOSE A. VELASCO
- ----------------------------
JOSE A. VELASCO, Secretary
-17-
<PAGE>
THE CENTRIS GROUP, INC.
-----------------------
BY-LAWS
ARTICLE I - STOCKHOLDERS
Section 1. Annual Meeting.
An annual meeting of the stockholders, for the election of directors
to succeed those whose terms expire and for the transaction of such other
business as may properly come before the meeting, shall be held at such place,
on such date, and at such time as the Board of Directors shall each year fix,
which date shall be within thirteen months subsequent to the later of the date
of incorporation or the last annual meeting of stockholders.
Section 2. Special Meetings.
Special meetings of the stockholders of the Corporation may be called
by the Board of Directors pursuant to a resolution adopted by a majority of the
directors then in office. Special meetings of stockholders may not be called by
the stockholders. (Amended March 4, 1992)
Section 3. Notice of Meetings.
Written notice of the place, date, and time of all meetings of the
stockholders shall be given, not less than ten nor more than sixty days before
the date on which the meeting is to be held, to each stockholders entitled to
vote at such meeting, except as otherwise provided herein or required by law
(meaning, here and hereinafter, as required from time to time by the Delaware
General Corporation Law or the Certificate of Incorporation of the Corporation).
When a meeting is adjourned to another place, date or time, written
notice need not be given of the adjourned meeting if the place, date and time
thereof are announced at the meeting at which the adjournment is taken;
provided, however, that if the date of any
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<PAGE>
adjourned meeting is more than thirty days after the date for which the meeting
was originally noticed, or if a new record date is fixed for the adjourned
meeting, written notice of the place, date, and time of the adjourned meeting
shall be given in conformity herewith. At any adjourned meeting, any business
may be transacted which might have been transacted at the original meeting.
Section 4. Quorum.
At any meeting of the stockholders, the holders of one third (1/3) of
all the shares of the stock entitled to vote at the meeting, present in person
or by proxy, shall constitute a quorum for all purposes, unless or except to the
extent that the presence of a larger number may be required by law.
If a quorum shall fail to attend any meeting, the chairman of the
meeting or the holders of one-third (1/3) of the shares of stock entitled to
vote who are present, in person or by proxy, may adjourn the meeting to another
place, date, or time.
If a notice of any adjourned special meeting of stockholders is sent
to all stockholders entitled to vote thereat, stating that it will be held with
those present constituting a quorum, then except as otherwise required by law,
those present at such adjourned meeting shall constitute a quorum, and all
matters shall be determined by a majority of the votes cast at such meeting.
(amended May 16, 1994)
Section 5. Organization.
Such person as the Board of Directors may have designated or, in the
absence of such a person, the chief executive officer of the Corporation or, in
his or her absence, such person as may be chosen by the holders of a majority of
the shares entitled to vote who are present, in person or by proxy, shall call
to order any meeting of the stockholders and act as chairman of the meeting. In
the absence of the Secretary of the Corporation, the secretary of the meeting
shall be such person as the chairman appoints.
2.
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Section 6. Conduct of Business.
The Chairman of the Board of Directors shall preside at each meeting
of stockholders. In the absence of the Chairman, the meeting shall be chaired
by an officer of the Corporation in accordance with the following order: Vice
Chairman of the Board, Chairman of the Executive Committee of the Board,
President, Executive Vice President, Senior Vice President and Vice President.
In the absence of all such officers, the meeting shall be chaired by a person
chosen to so act by the vote of a majority of the shares of stock present in
person or represented by proxy and entitled to vote thereat. The Secretary of
the Corporation, or in his or her absence an Assistant Secretary, or in the
absence of the Secretary and all Assistant Secretaries, a person whom the
Chairman of the meeting shall appoint, shall act as Secretary of the meeting and
keep a record of the proceedings thereof.
The Board of Directors of the Corporation shall be entitled to make
such rules or regulations for the conduct of meetings of stockholders as it
shall deem necessary, appropriate or convenient. Subject to such rules and
regulations, if any, as adopted by the Board of Directors, the Chairman of the
meeting shall have the right and authority to prescribe such rules, regulations
and procedures and to do all such acts as, in the judgment of such Chairman, are
necessary, appropriate or convenient for the proper conduct of the meeting.
These rules, regulations and procedures may include, without limitation, (i)
establishing an agenda or order of business for the meeting, (ii) rules and
procedures for maintaining order at the meeting and the safety of those present,
(iii) limitations on participation in such meeting to stockholders of record of
the Corporation and their duly authorized and constituted proxies, and such
other persons as the Chairman shall permit, (iv) restrictions on entry to the
meeting after the time fixed for commencement thereof, (v) limitations on the
time allotted to questions or comment by participants, and (vi) regulation of
the opening and closing of the polls for balloting on matters which are to be
voted on by ballot. Further, to the extent determined by the Board of Directors
or the Chairman of the meeting, meetings of stockholders of the Corporation
shall not be required to be held in accordance with rules of parliamentary
procedure. (amended January 31, 1996)
3.
<PAGE>
Section 7. Notice of Stockholder Business.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be (a) specified in the
notice of meeting (or any supplement thereto) given by or at the direction of
the Board of Directors, (b) otherwise properly brought before the meeting by or
at the direction of the Board of Directors, or (c) otherwise properly brought
before the meeting by a stockholder. For business to be properly brought before
an annual meeting by a stockholder, the stockholder must have given timely
notice thereof in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation, not less than 90 days prior to
the meeting; provided, however, that in the event that less than 100 days'
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the annual meeting was mailed or such public disclosure
was made. A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before the annual meeting (a) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (b) the name and
address, as they appear on the Corporation's books, of the stockholder proposing
such business, (c) the class and number of shares of the Corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such business. Notwithstanding anything in the By-Laws to the
contrary, no business shall be conducted at an annual meeting except in
accordance with the procedures set forth in this Section 7. The Chairman of an
annual meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting and in accordance with
the provisions of this Section 7, and if he or she should so determine, he or
she shall so declare to the meeting and any such business not properly brought
before the meeting shall not be transacted.
4.
<PAGE>
Section 8. Proxies and Voting.
At any meeting of the stockholders, every stockholder entitled to vote
may vote in person or by proxy authorized by an instrument in writing filed in
accordance with the procedure established for the meeting.
Each stockholder shall have one vote for every share of stock entitled
to vote which is registered in his or her name on the record date for the
meeting, except as otherwise provided herein or required by law.
All voting, including on the election of directors but excepting where
otherwise required by law, may be by a voice vote; provided, however, that upon
demand therefore by a stockholder entitled to vote or his or her proxy, a stock
vote shall be taken. Every stock vote shall be taken by ballots, each of which
shall state the name of the stockholder or proxy voting and such other
information as may be required under the procedure established for the meeting.
Every vote taken by ballots shall be counted by an inspector or inspectors
appointed by the chairman of the meeting.
At any meeting of stockholders, all elections for directors shall be
--------------------------------------------------------------------
determined by a plurality of the votes of the shares present in person or by
- ----------------------------------------------------------------------------
proxy entitled to vote; and other matters shall be determined by a majority of
- ------------------------------------------------------------------------------
the vote of the shares present in person or by proxy entitled to vote, except as
- --------------------------------------------------------------------------------
may be otherwise required by law or by the Corporation's Restated Certificate of
- --------------------------------------------------------------------------------
Incorporation. (Amended March 25, 1998)
- ----------------------------------------
Section 9. Stock List.
A complete list of stockholders entitled to vote at any meeting of
stockholders, arranged in alphabetical order for each class of stock and showing
the address of each such stockholder and the number of shares registered in his
or her name, shall be open to the examination of any such stockholder, for any
purpose germane to the meeting, during ordinary business hours for a period of
at least ten (10) days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held.
The stock list shall also be kept at the place of the meeting during
the whole time thereof and shall be open to the examination of any such
stockholder who is present. This
5.
<PAGE>
list shall presumptively determine the identity of the stockholders entitled to
vote at the meeting and the number of shares held by each of them.
Section 10. Consent of Stockholders in Lieu of Meeting
Any action required to be taken at any annual or special meeting of
stockholders of the corporation, or any action which may be taken at any annual
or special meeting of the stockholders, may be taken without a meeting, without
prior notice and without a vote, if a consent in writing, setting forth the
action so taken, shall be signed by the holders of outstanding stock having not
less than the minimum number of votes that would be necessary to authorize or
take such action at a meeting at which all shares entitled to vote thereon were
present and voted.
ARTICLE II - BOARD OF DIRECTORS
Section 1. Number and Term of Office.
The number of directors shall be fixed from time to time exclusively
by the Board of Directors pursuant to a resolution adopted by a majority of the
directors then in office. The directors shall be divided into three classes, as
nearly equal in number as reasonably possible, with the term of office of the
first class to expire at the 1987 annual meeting of stockholders, the term of
office of the second class to expire at the 1988 annual meeting of stockholders
and the term of office of the third class to expire at the 1989 annual meeting
of stockholders. At each annual meeting of stockholders following such initial
classification and election, directors elected to succeed those directors whose
terms expire shall be elected for a term of office to expire at the third
succeeding annual meeting of stockholders after their election.
Section 2. Vacancies and Newly Created Directorships.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, newly created directorships resulting from any increase in the
authorized number of directors or any vacancies in the Board of Directors
resulting from death, resignation, retirement, disqualification, removal from
office or other cause may be filled only by a
6.
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majority vote of the directors then in office, though less than a quorum, and
directors so chosen shall hold office for a term expiring at the annual meeting
of stockholders at which the term of office of the class to which they have been
elected expires. No decrease in the number of directors constituting the Board
of Directors shall shorten the term of any incumbent director.
Section 3. Removal.
Subject to the rights of the holders of any series of Preferred Stock
then outstanding, any directors, or the entire Board of Directors, may be
removed from office at any time, with or without cause, by the affirmative vote
of the holders of at least 66 2/3 percent of the voting power of all of the
then-outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors, voting together as a single class.
(Amended June 5, 1986)
Section 4. Regular Meetings.
Regular meetings of the Board of Directors shall be held at such place
or places, on such date or dates, and at such time or times as shall have been
established by the Board of Directors and publicized among all directors. A
notice of each regular meeting shall not be required.
Section 5. Special Meetings.
Special meetings of the Board of Directors may be called by one-third
of the directors then in office (rounded up to the nearest whole number) or by
the chief executive officer and shall be held at such place, on such date, and
at such time as they or he or she shall fix. Notice of the place, date, and
time of each such special meeting shall be given each director by whom it is not
waived by mailing written notice not less than five days before the meeting or
by transmitting the text of the notice by telecopier (facsimile transmission) or
telegraph not less than twenty-four hours before the meeting. The method of
notice need not be the same for each director. Unless otherwise indicated in
the notice thereof, any and all business may be transacted at a special meeting.
(Amended September 2, 1987)
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Section 6. Quorum.
At any meeting of the Board of Directors, a majority of the total
number of the whole Board shall constitute a quorum for all purposes. If a
quorum shall fail to attend any meeting, a majority of those present may adjourn
the meeting to another place, date, or time, without further notice or waiver
thereof.
Section 7. Participation in Meetings By Conference Telephone.
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other and such participation shall
constitute presence in person at such meeting.
Section 8. Conduct of Business.
At any meeting of the Board of Directors, business shall be transacted
in such order and manner as the Board may from time to time determine, and all
matters shall be determined by the vote of a majority of the directors present,
except as otherwise provided herein or required by law. Action may be taken by
the Board of Directors without a meeting if all members thereof consent thereto
in writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors.
Section 9. Powers.
The Board of Directors may, except as otherwise required by law,
exercise all such powers and do all such acts and things as may be exercised or
done by the Corporation, including, without limiting the generality of the
foregoing, the unqualified power:
(1) To declare dividends from time to time in accordance with law;
(2) To purchase or otherwise acquire any property, rights or
privileges on such terms as it shall determine;
(3) To authorize the creation, making and issuance, in such form as
it may determine, of written obligations of every kind, negotiable or non-
negotiable, secured or unsecured, and to do all things necessary in connection
therewith;
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(4) To remove any officer of the Corporation with or without cause,
and from time to time to devolve the powers and duties of any officer upon any
other person for the time being;
(5) To confer upon any officer of the Corporation the power to
appoint, remove and suspend subordinate officers, employees and agents;
(6) To adopt from time to time such stock, option, stock purchase,
bonus or other compensation plans for directors, officers, employees and agents
of the Corporation and its subsidiaries as it may determine;
(7) To adopt from time to time such insurance, retirement, and other
benefit plans for directors, officers, employees and agents of the Corporation
and its subsidiaries as it may determine; and,
(8) To adopt from time to time regulations, not inconsistent with
these by-laws, for the management of the Corporation's business and affairs.
Section 10. Compensation of Directors.
Directors, as such, may receive, pursuant to resolution of the Board
of Directors, fixed fees and other compensation for their services as directors,
including, without limitation, their services as members of committees of the
Board of Directors.
Section 11. Nomination of Director Candidates.
Subject to the rights of holders of any class or series of stock
having a preference over the Common Stock as to dividends or upon liquidation,
nominations for the election of Directors may be made by the Board of Directors
or a proxy committee appointed by the Board of Directors or by any stockholder
entitled to vote in the election of Directors generally. However, any
stockholder entitled to vote in the election of Directors generally may nominate
one or more persons for election as Directors at a meeting only if timely notice
of such stockholder's intent to make such nomination or nominations has been
given in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 90 days prior to
the meeting; provided, however, that in the event that less than 100 days'
notice or
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prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the 10th day following the day on which such
notice of the date of the meeting was mailed or such public disclosure was made.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be nominated;
(b) a representation that the stockholder is a holder of record of stock of the
Corporation entitled to vote for the election of Directors on the date of such
notice and intends to appear in person or by proxy at the meeting to nominate
the person or persons specified in the notice; (c) a description of all
arrangements or understandings between the stockholder and each nominee and any
other person or persons (naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder; (d) such other
information regarding each nominee proposed by such stockholder as would be
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission, had the nominee been nominated, or
intended to be nominated, by the Board of Directors; and (e) the consent of each
nominee to serve as a director of the Corporation if so elected.
In the event that a person is validly designated as a nominee in
accordance with this Section 11 and shall thereafter become unable or unwilling
to stand for election to the Board of Directors, the Board of Directors or the
stockholder who proposed such nominee, as the case may be, may designate a
substitute nominee upon delivery, not fewer than five days prior to the date of
the meeting for the election of such nominee of a written notice to the
secretary setting forth such information regarding such substitute nominee as
would have been required to be delivered to the Secretary pursuant to this
Section 11 had such substitute nominee been initially proposed as a nominee.
Such notice shall include a signed consent to serve as a Director of the
Corporation, if elected, of each such substitute nominee.
If the Chairman of the meeting for the election of Directors
determines that a nomination of any candidate for election as a Director at such
meeting was not made in accordance with the applicable provisions of this
Section 11, such nomination shall be void; provided, however, that nothing in
this Section 11 shall be deemed to limit any voting rights upon the occurrence
of dividend arrearages provided to holders of Preferred Stock pursuant to the
Preferred Stock designation for any series of Preferred Stock.
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ARTICLE III - COMMITTEES
Section 1. Committees of the Board of Directors.
The Board of Directors, by a vote of a majority of the whole Board,
may from time to time designate committees of the Board, with such lawfully
delegable powers and duties as it thereby confers, to serve at the pleasure of
the Board and shall, for those committees and any others provided for herein,
elect a director or directors to serve as the member or members, designating, if
it desires, other directors as alternate members who may replace any absent or
disqualified member at any meeting of the committee. Any committee so
designated may exercise the power and authority of the Board of Directors to
declare a dividend, to authorize the issuance of stock or to adopt a certificate
of ownership and merger pursuant to Section 253 of the Delaware General
Corporation Law if the resolution which designates the committee or a
supplemental resolution of the Board of Directors shall so provide. In the
absence or disqualification of any member of any committee and any alternate
member in his place, the member or members of the committee present at the
meeting and not disqualified from voting, whether or not he or she or they
constitute a quorum, may by unanimous vote appoint another member of the Board
of Directors to act at the meeting in the place of the absent or disqualified
member.
Section 2. Conduct of Business.
Each committee may determine the procedural rules for meeting and
conducting its business and shall act in accordance therewith, except as
otherwise provided herein or required by law. Adequate provision shall be made
for notice to members of all meetings; one-third of the members shall constitute
a quorum unless the committee shall consist of one or two members, in which
event one member shall constitute a quorum; and all matters shall be determined
by a majority vote of the members present. Action may be taken by any committee
without a meeting if all members thereof consent thereto in writing, and the
writing or writings are filed with the minutes of the proceedings of such
committee.
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ARTICLE IV - OFFICERS
Section 1. Generally.
The officers of the Corporation shall consist of a President, one or
more Vice Presidents, a Secretary, a Treasurer and such other officers as may
from time to time be appointed by the Board of Directors. Officers shall be
elected by the Board of Directors, which shall consider that subject at its
first meeting after every annual meeting of stockholders. Each officer shall
hold office until his or her successor is elected and qualified or until his or
her earlier resignation or removal. The President shall be a member of the
Board of Directors. Any number of offices may be held by the same person.
Section 2. President.
The President shall be the chief executive officer of the Corporation.
Subject to the provisions of these by-laws and to the direction of the Board of
Directors, he or she shall have the responsibility for the general management
and control of the business and affairs of the Corporation and shall perform all
duties and have all powers which are commonly incident to the office of chief
executive or which are delegated to him or her by the Board of Directors. He or
she shall have power to sign all stock certificates, contracts and other
instruments of the Corporation which are authorized and shall have general
supervision and direction of all of the other officers, employees and agents of
the Corporation.
Section 3. Vice President.
Each Vice President shall have such powers and duties as may be
delegated to him or her by the Board of Directors. One Vice President shall be
designated by the Board to perform the duties and exercise the powers of the
President in the event of the President's absence or disability.
Section 4. Treasurer.
The Treasurer shall have the responsibility for maintaining the
financial records of the Corporation and shall have custody of all monies and
securities of the Corporation. He or she shall make such disbursements of the
funds of the Corporation as are authorized and
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shall render from time to time an account of all such transactions and of the
financial condition of the Corporation. The Treasurer shall also perform such
other duties as the Board of Directors may from time to time prescribe.
Section 5. Secretary.
The Secretary shall issue all authorized notices for, and shall keep
minutes of, all meetings of the stockholders and the Board of Directors. He or
she shall have charge of the corporate books and shall perform such other duties
as the Board of Directors may from time to time prescribe.
Section 6. Delegation of Authority.
The Board of Directors may from time to time delegate the powers or
duties of any officer to any other officers or agents, notwithstanding any
provision hereof.
Section 7. Removal.
Any officer of the Corporation may be removed at any time, with or
without cause, by the Board of Directors.
Section 8. Action with Respect to Securities of Other Corporations.
Unless otherwise directed by the Board of Directors, the President or
any officer of the Corporation authorized by the President shall have power to
vote and otherwise act on behalf of the Corporation, in person or by proxy, at
any meeting of stockholders of or with respect to any action of stockholders of
any other corporation in which this Corporation may hold securities and
otherwise to exercise any and all rights and powers which this Corporation may
possess by reason of its ownership of securities in such other corporation.
ARTICLE V - STOCK
Section 1. Certificates of Stock.
Each stockholder shall be entitled to a certificate signed by, or in
the name of the Corporation by, the President or a Vice President, and by the
Secretary or an Assistant
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Secretary, or the Treasurer or an Assistant Treasurer, certifying the number of
shares owned by him or her. Any of or all the signatures on the certificate may
be facsimile.
Section 2. Transfers of Stock.
Transfers of stock shall be made only upon the transfer books of the
Corporation kept at an office of the Corporation or by transfer agents
designated to transfer shares of the stock of the Corporation. Except where a
certificate is issued in accordance with Section 4 of Article V of these by-
laws, an outstanding certificate for the number of shares involved shall be
surrendered for cancellation before a new certificate is issued therefore.
Section 3. Record Date.
The Board of Directors may fix a record date, which shall not be more
than sixty nor less than ten days before the date of any meeting of
stockholders, nor more than sixty days prior to the time for the other action
hereinafter described, as of which there shall be determined the stockholders
who are entitled: to notice of or to vote at any meeting of stockholders or any
adjournment thereof; to express consent to corporate action in writing without a
meeting; to receive payment of any dividend or other distribution or allotment
of any rights; or to exercise any rights with respect to any change, conversion
or exchange of stock or with respect to any other lawful action.
Section 4. Lost, Stolen or Destroyed Certificates
In the event of the loss, theft or destruction of any certificate of
stock, another may be issued in its place pursuant to such regulations as the
Board of Directors may establish concerning proof of such loss, theft or
destruction and concerning the giving of a satisfactory bond or bonds of
indemnity.
Section 5. Regulations.
The issue, transfer, conversion and registration of certificates of
stock shall be governed by such other regulations as the Board of Directors may
establish.
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ARTICLE VI - NOTICES
Section 1. Notices.
Except as otherwise specifically provided herein or required by law,
all notices required to be given to any stockholder, director, officer, employee
or agent shall be in writing and may in every instance be effectively given by
hand delivery to the recipient thereof, by depositing such notice in the mails,
postage paid, or by sending such notice by pre-paid telegram or mailgram. Any
such notice shall be addressed to such stockholder, director, officer, employee
or agent at his or her last known address as the same appears on the books of
the Corporation. The time when such notice is received by such stockholder,
director, officer, employee or agent, or by any person accepting such notice on
behalf of such person, if hand delivered, or dispatched, if delivered through
the mails or by telegram or mailgram, shall be the time of the giving of the
notice.
Section 2. Waivers.
A written waiver of any notice, signed by a stockholder, director,
officer, employee or agent, whether before or after the time of the event for
which notice is to be given, shall be deemed equivalent to the notice required
to be given to such stockholder, director, officer, employee or agent. Neither
the business nor the purpose of any meeting need be specified in such a waiver.
ARTICLE VII - MISCELLANEOUS
Section 1. Facsimile Signatures.
In addition to the provisions for use of facsimile signatures
elsewhere specifically authorized in these by-laws, facsimile signatures of any
officer or officers of the Corporation may be used whenever and as authorized by
the Board of Directors or a committee thereof.
Section 2. Corporate Seal.
The Board of Directors may provide a suitable seal, containing the
name of the Corporation, which seal shall be in the charge of the Secretary. If
and when so directed by the
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Board of Directors or a committee thereof, duplicates of the seal may be kept
and used by the Treasurer or by an Assistant Secretary or Assistant Treasurer.
Section 3. Reliance upon Books, Reports and Records.
Each director, each member of any committee designated by the Board of
Directors, and each officer of the Corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of account or
other records of the Corporation, including reports made to the Corporation by
any of its officers, by an independent certified public accountant, or by an
appraiser selected with reasonable care.
Section 4. Fiscal Year.
The fiscal year of the Corporation shall be as fixed by the Board of
Directors.
Section 5. Time Periods.
In applying any provision of these by-laws which require that an act
be done or not done a specified number of days prior to an event or that an act
be done during a period of a specified number of days prior to an event,
calendar days shall be used, the day of the doing of the act shall be excluded,
and the day of the event shall be included.
ARTICLE VIII - INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 1. Right to Indemnification.
Each person who was or is made a party or is threatened to be made a
party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative ("proceeding"), by reason of the fact
that he or she or a person of whom he or she is the legal representative, is or
was a director or officer of the Corporation or is or was serving at the request
of the Corporation as a director or officer, employee or agent of another
corporation, or of a partnership, joint venture, trust or other enterprise,
including service with respect to employee benefit plans, whether the basis of
such proceeding is alleged activity in an official capacity as a director,
officer, employee or agent or in any other capacity while serving
16.
<PAGE>
as a director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the Delaware
General Corporation Law, as the same exists or may hereafter be amended, (but,
in the case of any such amendment, only to the extent that such amendment
permits the Corporation to provide broader indemnification rights than said Law
permitted the Corporation to provide prior to such amendment) against all
expenses, liability and loss (including attorneys' fees, judgments, fines, ERISA
excise taxes or penalties and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such person in connection with any such
proceeding and such indemnification shall continue as to a person who has ceased
to be a director, officer, employee or agent and shall inure to the benefit of
his or her heirs, executors and administrators; provided, however, that the
Corporation shall indemnify any such person seeking indemnity in connection with
a proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of the Corporation.
Such right shall be a contract right and shall include the right to be paid by
the Corporation expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Delaware General
Corporation Law requires, the payment of such expenses incurred by a director or
officer of the Corporation in his or her capacity as a director or officer (and
not in any other capacity in which service was or is rendered by such person
while a director or officer, including, without limitation, service to an
employee benefit plan) in advance of the final disposition of such proceeding,
shall be made only upon delivery to the Corporation of an undertaking, by or on
behalf of such director or officer, to repay all amounts so advanced if it
should be determined ultimately that such director or officer is not entitled to
be indemnified under this Section or otherwise.
Section 2. Right of Claimant to Bring Suit.
If a claim under Section 1 is not paid in full by the Corporation
within ninety (90) days after a written claim has been received by the
Corporation, the claimant may at any time thereafter institute a proceeding
against the Corporation to recover the unpaid amount of the claim and, if
successful in whole or in part, the claimant shall be entitled to be paid also
the expense of prosecuting such proceeding. It shall be a defense to any such
proceeding (other than a proceeding brought to enforce a claim for expenses
incurred in defending any
17.
<PAGE>
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to this Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Delaware General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a determination
prior to the commencement of such proceeding that indemnification of the
claimant is proper in the circumstances because he or she has met the applicable
standard of conduct set forth in the Delaware General Corporation Law, nor an
actual determination by the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) that the claimant has not met
such applicable standard of conduct, shall be a defense to the proceeding or
create a presumption that claimant has not met the applicable standard of
conduct.
Section 3. Non-Exclusivity of Rights.
The rights conferred on any person by Sections 1 and 2 shall not be
exclusive of any other right which such persons may have or hereafter acquire
under any statute, provision of the Certificate of Incorporation, by-law,
agreement, vote of stockholders or disinterested directors or otherwise.
Section 4. Insurance.
The Corporation may maintain insurance, at its expense, to protect
itself and any such director, officer, employee or agent of the Corporation or
another corporation, partnership, joint venture, trust or other enterprise
against any such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such expense, liability or
loss under the Delaware General Corporation Law.
ARTICLE IX - AMENDMENTS
The Board of Directors is expressly empowered to adopt, amend or
repeal By-laws of the Corporation. The stockholders shall also have power to
adopt, amend or repeal the By-laws of the Corporation. In addition to any vote
of the holders of any class or series of
18.
<PAGE>
stock of this Corporation required by law, by the certificate of incorporation
of the Corporation or by these By-laws, the affirmative vote of the holders of
at least 66 2/3 percent of the voting power of all of the then-outstanding
shares of the capital stock of the Corporation entitled to vote generally in the
election of directors, voting together as a single class, shall be required to
adopt, amend or repeal any provisions of the By-laws of the Corporation.
19.
<PAGE>
Amendment No. 2
To Severance Agreement
Between
The Centris Group, Inc.
(Formerly US Facilities Corporation)
And
David L. Cargile
________________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
David L. Cargile (the "Executive") entered into a Severance Agreement dated May
24, 1994, and to an Amendment No. 1 thereto dated December 4, 1996 (collectively
referred to herein as the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such
<PAGE>
Persons that may be deemed to be acting in concert with respect to the
Company or the acquisition, ownership or voting of Company securities)
becomes, directly or indirectly, the "Beneficial Owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC thereunder, each
as in effect on the Effective Date of this Agreement), without the prior
approval of the Board of Direcors of the Company, of outstanding securities
of the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that the concept of
any Person becoming the owner of 15% or more of the combined voting shares
shall not include: (A) the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any Person holding voting shares for or pursuant to the terms of
any such employee benefit plan; or (B) any Person if such Person would not
otherwise be a 15% stockholder but for a reduction in the number of
outstanding voting shares resulting from a stock repurchase program or other
similar plan instituted by the Company or from a self-tender offer of the
Company, which stock repurchase plan or Company self-tender offer commenced
on or after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 15% or more of the combined voting shares
shall include such Beneficial Owner after the first date upon which (x) such
Person, since the date of commencement of such stock repurchase plan or
Company self-tender offer, shall have acquired Beneficial Ownership of, in
the aggregate, additional voting shares of the Company representing 1% or
more of the voting shares then outstanding, and (y) such Person, together
with all affiliates and associates of such Person, shall Beneficially Own 15%
or more of the voting shares of the Company then outstanding. In calculating
the percentage of outstanding voting shares that are Beneficially Owned by a
Person for purposes of this subsection, voting shares that are Beneficially
Owned by such Person shall be deemed outstanding, and voting shares that are
not Beneficially Owned by such Person and that are subject to issuance upon
the exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of May 24, 1994, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
May 24, 1994 and as amended by Amendment No. 1 on December 4, 1996 shall
otherwise in all respects remain as originally written to the extent that such
terms do not conflict with or are inconsistent with this Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 2 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/ Jose A. Velasco
--------------------------------
Jose A. Velasco
Senior Vice President, Chief Administrative
Officer, Secretary and General Counsel
Executive:
---------
By /s/ David L. Cargile
--------------------------------
David L. Cargile
-3-
<PAGE>
Amendment No. 2
To Severance Agreement
Between
The Centris Group, Inc.
(formerly US Facilities Corporation)
And
Howard S. Singer
________________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
Howard S. Singer (the "Executive") entered into a Severance Agreement dated May
24, 1994, and to an Amendment No. 1 thereto dated December 4, 1996 (collectively
referred to herein as the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such
<PAGE>
Persons that may be deemed to be acting in concert with respect to the
Company or the acquisition, ownership or voting of Company securities)
becomes, directly or indirectly, the "Beneficial Owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC thereunder, each
as in effect on the Effective Date of this Agreement), without the prior
approval of the Board of Direcors of the Company, of outstanding securities
of the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that the concept of
any Person becoming the owner of 15% or more of the combined voting shares
shall not include: (A) the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any Person holding voting shares for or pursuant to the terms of
any such employee benefit plan; or (B) any Person if such Person would not
otherwise be a 15% stockholder but for a reduction in the number of
outstanding voting shares resulting from a stock repurchase program or other
similar plan instituted by the Company or from a self-tender offer of the
Company, which stock repurchase plan or Company self-tender offer commenced
on or after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 15% or more of the combined voting shares
shall include such Beneficial Owner after the first date upon which (x) such
Person, since the date of commencement of such stock repurchase plan or
Company self-tender offer, shall have acquired Beneficial Ownership of, in
the aggregate, additional voting shares of the Company representing 1% or
more of the voting shares then outstanding, and (y) such Person, together
with all affiliates and associates of such Person, shall Beneficially Own 15%
or more of the voting shares of the Company then outstanding. In calculating
the percentage of outstanding voting shares that are Beneficially Owned by a
Person for purposes of this subsection, voting shares that are Beneficially
Owned by such Person shall be deemed outstanding, and voting shares that are
not Beneficially Owned by such Person and that are subject to issuance upon
the exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of May 24, 1994, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
May 24, 1994 and as amended by Amendment No. 1 on December 4, 1996 shall
otherwise in all respects remain as originally written to the extent that such
terms do not conflict with or are inconsistent with this Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 2 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/David L. Cargile
--------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/Howard S. Singer
--------------------------
Howard S. Singer
-3-
<PAGE>
Amendment No. 2
To Severance Agreement
Between
The Centris Group, Inc.
(formerly US Facilities Corporation)
And
John T. Grush
______________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
John T. Grush (the "Executive") entered into a Severance Agreement dated May 24,
1994, and to an Amendment No. 1 thereto dated December 4, 1996 (collectively
referred to herein as the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such
<PAGE>
Persons that may be deemed to be acting in concert with respect to the
Company or the acquisition, ownership or voting of Company securities)
becomes, directly or indirectly, the "Beneficial Owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC thereunder, each
as in effect on the Effective Date of this Agreement), without the prior
approval of the Board of Direcors of the Company, of outstanding securities
of the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that the concept of
any Person becoming the owner of 15% or more of the combined voting shares
shall not include: (A) the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any Person holding voting shares for or pursuant to the terms of
any such employee benefit plan; or (B) any Person if such Person would not
otherwise be a 15% stockholder but for a reduction in the number of
outstanding voting shares resulting from a stock repurchase program or other
similar plan instituted by the Company or from a self-tender offer of the
Company, which stock repurchase plan or Company self-tender offer commenced
on or after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 15% or more of the combined voting shares
shall include such Beneficial Owner after the first date upon which (x) such
Person, since the date of commencement of such stock repurchase plan or
Company self-tender offer, shall have acquired Beneficial Ownership of, in
the aggregate, additional voting shares of the Company representing 1% or
more of the voting shares then outstanding, and (y) such Person, together
with all affiliates and associates of such Person, shall Beneficially Own 15%
or more of the voting shares of the Company then outstanding. In calculating
the percentage of outstanding voting shares that are Beneficially Owned by a
Person for purposes of this subsection, voting shares that are Beneficially
Owned by such Person shall be deemed outstanding, and voting shares that are
not Beneficially Owned by such Person and that are subject to issuance upon
the exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of May 24, 1994, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
May 24, 1994 and as amended by Amendment No. 1 on December 4, 1996 shall
otherwise in all respects remain as originally written to the extent that such
terms do not conflict with or are inconsistent with this Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 2 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/ David L. Cargile
---------------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/ John T. Grush
---------------------------------
John T. Grush
-3-
<PAGE>
Amendment No. 2
To Severance Agreement
Between
The Centris Group, Inc.
(Formerly US Facilities Corporation)
And
Craig J. Kelbel
_________________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
Craig J. Kelbel (the "Executive") entered into a Severance Agreement dated May
24, 1994, and to an Amendment No. 1 thereto dated December 4, 1996 (collectively
referred to herein as the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such
<PAGE>
Persons that may be deemed to be acting in concert with respect to the
Company or the acquisition, ownership or voting of Company securities)
becomes, directly or indirectly, the "Beneficial Owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC thereunder, each
as in effect on the Effective Date of this Agreement), without the prior
approval of the Board of Directors of the Company, of outstanding securities
of the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that the concept of
any Person becoming the owner of 15% or more of the combined voting shares
shall not include: (A) the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any Person holding voting shares for or pursuant to the terms of
any such employee benefit plan; or (B) any Person if such Person would not
otherwise be a 15% stockholder but for a reduction in the number of
outstanding voting shares resulting from a stock repurchase program or other
similar plan instituted by the Company or from a self-tender offer of the
Company, which stock repurchase plan or Company self-tender offer commenced
on or after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 15% or more of the combined voting shares
shall include such Beneficial Owner after the first date upon which (x) such
Person, since the date of commencement of such stock repurchase plan or
Company self-tender offer, shall have acquired Beneficial Ownership of, in
the aggregate, additional voting shares of the Company representing 1% or
more of the voting shares then outstanding, and (y) such Person, together
with all affiliates and associates of such Person, shall Beneficially Own 15%
or more of the voting shares of the Company then outstanding. In calculating
the percentage of outstanding voting shares that are Beneficially Owned by a
Person for purposes of this subsection, voting shares that are Beneficially
Owned by such Person shall be deemed outstanding, and voting shares that are
not Beneficially Owned by such Person and that are subject to issuance upon
the exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of May 24, 1994, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
May 24, 1994 and as amended by Amendment No. 1 on December 4, 1996 shall
otherwise in all respects remain as originally written to the extent that such
terms do not conflict with or are inconsistent with this Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 2 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/ David L. Cargile
-----------------------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/ Craig J. Kelbel
-----------------------------------------
Craig J. Kelbel
-3-
<PAGE>
Amendment No. 2
To Severance Agreement
Between
The Centris Group, Inc.
(formerly US Facilities Corporation)
And
Jose A. Velasco
______________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
Jose A. Velasco (the "Executive") entered into a Severance Agreement dated May
24, 1994, and to an Amendment No. 1 thereto dated December 4, 1996 (collectively
referred to herein as the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such
<PAGE>
Persons that may be deemed to be acting in concert with respect to the
Company or the acquisition, ownership or voting of Company securities)
becomes, directly or indirectly, the "Beneficial Owner" (as defined in Rule
13d-3 under the Exchange Act and the regulations of the SEC thereunder, each
as in effect on the Effective Date of this Agreement), without the prior
approval of the Board of Direcors of the Company, of outstanding securities
of the Company representing 15% or more of the combined voting power of the
Company's then outstanding securities; provided, however, that the concept of
any Person becoming the owner of 15% or more of the combined voting shares
shall not include: (A) the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any Person holding voting shares for or pursuant to the terms of
any such employee benefit plan; or (B) any Person if such Person would not
otherwise be a 15% stockholder but for a reduction in the number of
outstanding voting shares resulting from a stock repurchase program or other
similar plan instituted by the Company or from a self-tender offer of the
Company, which stock repurchase plan or Company self-tender offer commenced
on or after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 15% or more of the combined voting shares
shall include such Beneficial Owner after the first date upon which (x) such
Person, since the date of commencement of such stock repurchase plan or
Company self-tender offer, shall have acquired Beneficial Ownership of, in
the aggregate, additional voting shares of the Company representing 1% or
more of the voting shares then outstanding, and (y) such Person, together
with all affiliates and associates of such Person, shall Beneficially Own 15%
or more of the voting shares of the Company then outstanding. In calculating
the percentage of outstanding voting shares that are Beneficially Owned by a
Person for purposes of this subsection, voting shares that are Beneficially
Owned by such Person shall be deemed outstanding, and voting shares that are
not Beneficially Owned by such Person and that are subject to issuance upon
the exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of May 24, 1994, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
May 24, 1994 and as amended by Amendment No. 1 on December 4, 1996 shall
otherwise in all respects remain as originally written to the extent that such
terms do not conflict with or are inconsistent with this Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 2 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/ David L. Cargile
------------------------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/ Jose A. Velasco
------------------------------------------
Jose A. Velasco
-3-
<PAGE>
Severance Agreement
______________________________
This Agreement is made and entered into as of this 4th day of December, 1996,
by and between US Facilities Corporation, a Delaware corporation (the
"Company"), and Edward D. Jones, III ("Executive").
RECITALS
Whereas, the Executive is currently employed by the Company and is considered
a key employee of the Company; and
Whereas, the Company desires to retain the services of the Executive; and
Whereas, the Company and the Executive desire to set forth the amounts
payable and benefits to be provided by the Company to the Executive in the event
of a termination of the Executive's employment with the Company under the
circumstances set forth herein after the happening of a Change in Control (as
defined herein);
Now, Therefore, in consideration of the foregoing and the mutual agreements
contained herein, and intending to be legally bound hereby, the parties agree as
follows:
AGREEMENT
1. Continued Employment. In reliance upon the promises of the Company
--------------------
hereinafter contained, the Executive agrees that, for a period of not less than
six (6) months commencing on the date set forth above, and subject to reasonable
absences for illness, holiday and vacation or personal leave of absence in
accordance with the Company's policies and practices in effect on the
<PAGE>
date hereof, the Executive will continue his employment with the Company and
shall devote his best efforts to such duties as may be assigned to him by the
Company from time to time.
2. Other Severance Arrangements. Except to the extent specifically set forth
----------------------------
herein, in the event of the termination of the Executive's employment with the
Company, the Executive shall be entitled to receive any Company benefits payable
under any employee benefit plan, program, policy or arrangement as such may then
be in effect, including all such termination arrangements with Executive that
may be described in any employment agreement.
3. Effective Date. This Agreement shall be effective as of the date first
--------------
above written ("Effective Date") and shall continue and remain in full force and
effect until the termination of Executive's employment with the Company, unless
this Agreement is earlier terminated by the parties in writing. The completion
of six (6) months of employment with the Company by the Executive as set forth
in Section 1 shall not be a condition precedent to the effectiveness of this
Agreement or to the payments of amounts or provision of benefits hereunder in
the event the Executive's employment with the Company is terminated under the
circumstances described in Section 4(b).
4. Termination of Employment.
-------------------------
(a) Events Requiring No Payments Under Section 5: In the event the
Executive's employment with the Company is terminated under any of the following
circumstances, no payments shall be or become due and owing, and the Company
shall have no other obligations under Section 5 of this Agreement:
(i) By either party for any reason prior to the happening of a Change
in Control (as hereinafter defined);
(ii) By either party for any reason at any time more than two (2) years
after a Change in Control;
-2-
<PAGE>
(iii) By the Company at any time, whether prior to, contemporaneous
with or subsequent to a Change in Control, for reason of "Cause" (as
hereinafter defined) or due to the request or demand of any regulatory
authority; or
(iv) By the Executive at any time, whether prior to, contemporaneous
with or subject to a Change in Control, upon his retirement or resignation
for reasons other than "Good Reason" (as hereinafter defined).
Notwithstanding the foregoing, nothing contained in this Section 4(a) shall
prevent the Executive or his spouse, heirs, estate or personal representative
from receiving any amounts payable under any other plan, program, policy or
arrangement that is not a severance plan, program, policy or arrangement.
(b) Events Requiring Payments Under Section 5: In the event the
Executive's employment with the Company is terminated under any of the following
circumstances set forth in (i) and (ii) below, the Company shall make the
payments and provide the benefits as set forth in Section 5:
(i) By the Company, contemporaneously with or within two (2) years
after the happening of a Change in Control, for any reason other than (1) for
Cause or (2) due to the request or demand of any regulatory authority; or
(ii) By the Executive, contemporaneously with or within two (2) years
after a Change in Control, for Good Reason.
(c) For purposes of this Agreement, the term "Cause" shall mean (i) the
commission by Executive of any material act of fraud or dishonesty; (ii) a final
conviction of Executive of a felony in either a state or federal court
proceeding; (iii) intentional and willful failure by Executive to faithfully
carry out his duties and responsibilities as an employee of the Company, after
reasonable notice in writing to and discussion thereafter with Executive; and
(iv) Executive engaging in
-3-
<PAGE>
activities which place Executive in a direct or indirect conflict with the
Company or its interests. The decision as to the existence of "Cause," as
described in (i), (iii) and (iv) above, shall be determined by a majority of the
Company's nonemployee Directors; provided, however, if there is a change in the
composition of the Board such that those persons who served as nonemployee
Directors on the Effective Date of this Agreement represent less than fifty
percent (50%) of the total number of nonemployee Directors, then "Cause" shall
be determined by use of the Settlement of Disputes provisions set forth in
Section 8 of this Agreement.
(d) For purposes of this Agreement, the term "Good Reason" shall mean the
following five (5) events; provided, however, that Executive may waive in
writing his objection to the occurrence of any such event, in which case such
event will no longer constitute "Good Reason":
(i) Any material breach by the Company of its obligations contained in
this Agreement;
(ii) The assignment to the Executive of any duties inconsistent with
the status of his position with the Company as such duties and position
existed on the day immediately preceding the happening of a Change in
Control, or an alteration in the nature or status of the Executive's duties
and responsibilities that renders the Executive's position to be of less
dignity, responsibility or scope from that which existed on the day
immediately preceding the happening of a Change in Control; provided,
however, it shall not be an event of Good Reason if the Executive is assigned
additional duties for the Company or any affiliate or subsidiary of the
Company which are not inconsistent with the duties described in Section 1
hereof so long as the aggregate of all duties assigned to the Executive in
connection with his service with the Company, its affiliates or subsidiaries
do not require the Executive to devote, on a consistent and sustained basis,
substantially more time than other senior level executives of the Company are
required to devote to their duties;
-4-
<PAGE>
(iii) A reduction by the Company in the Executive's annual base salary
as was in effect on the day immediately preceding the happening of a Change
in Control or as the same may be increased from time to time;
(iv) The failure of the Company to continue in effect of the benefits
enjoyed by the Executive under the Company's 1988 Employee Stock Plan or its
1991 Employee Stock Option Plan or under the Company's Incentive Compensation
Program, or any other compensation plan, program or arrangement, or any of
the Company's pension, retirement, profit sharing, savings, life insurance,
medical, health-and-accident, disability or other employee benefit plans,
programs or arrangements as they existed on the day immediately preceding the
happening of a Change in Control, or the failure of the Company to continue
the Executive's participation therein; or the failure by the Company to
provide the Executive with the number of paid vacation days to which he is
entitled on the basis of years of service and position with the Company in
accordance with the Company's normal vacation policy, or the failure of the
Company to continue or if the Company adversely changes or reduces other
specific contractual benefits or perquisites provided to Executive as they
existed on the day immediately preceding the happening of a Change in
Control, including, but not limited to, providing an automobile or an
automobile allowance, club memberships, and dues for professional associates
for Executive;
(v) The assignment of the Executive to an office which is located
more than 50 miles from the office at which the Executive was primarily
performing his duties on the day immediately preceding the happening of a
Change in Control.
(e) For purposes of this Agreement, a "Change in Control" shall mean the
occurrence, after the Effective Date hereof, of any of the following events if
such events are not approved by the Board of Directors of the Company prior to
their occurrence;
(i) At any time during the term of this Agreement, any "person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange
-5-
<PAGE>
Act") and the regulations of the Securities and Exchange Commission (the
"SEC") thereunder, each as in effect on the Effective Date of this Agreement
(including any such persons that may be deemed to be acting in concert with
respect to the Company or the acquisition, ownership or voting of Company
securities) becomes, directly or indirectly, the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act and the regulations of the SEC
thereunder, each as in effect on the Effective Date of this Agreement) of
outstanding securities of the Company representing 10% or more of the
combined voting power of the Company's then outstanding securities. For
purposes of this subsection (i) of Section 4(e) of the Agreement, a person
becomes, directly or indirectly, the beneficial owner of outstanding
securities of the Company representing 10% or more of the combined voting
power of the Company's outstanding securities when such person, together with
all affiliates and associates of such person, acquires beneficial ownership
of, in the aggregate, a number of voting shares of the Company equal to 1% or
more of the voting shares then outstanding, and thereupon or thereafter
beneficially owns (as defined in the aforenoted Rule 13d-3 under the Exchange
Act) 10% or more of the voting shares of the Company then outstanding;
provided, however, that the concept of any person becoming the owner of 10%
or more of the combined voting shares shall not include: (A) the Company,
any wholly owned subsidiary of the Company, any employee benefit plan of the
Company or of a subsidiary of the Company, or any person holding voting
shares for or pursuant to the terms of any such employee benefit plan; or (B)
any person if such person would not otherwise be a 10% stockholder but for a
reduction in the number of outstanding voting shares resulting from a stock
repurchase program or other similar plan instituted by the Company or from a
self-tender offer of the Company, which plan or tender offer commenced on or
after the Effective Date of this Agreement; provided, however, that the
concept of becoming the owner of 10% or more of the combined voting shares
shall include such beneficial owner after the first date upon which (x) such
person, since the date of commencement of such plan or tender offer, shall
have acquired beneficial ownership of, in the aggregate, a number of voting
shares of the Company equal to 1% or more of the voting shares then
outstanding, and (y) such person, together with all affiliates and associates
of such person, shall beneficially own 10% or more of the voting shares of
the Company then outstanding. In calculating the percentage of the person for
purposes of this
-6-
<PAGE>
subsection, voting shares that are beneficially owned by such person shall be
deemed outstanding, and voting shares that are not beneficially owned by such
person and that are subject to issuance upon the exercise or conversion of
outstanding conversion rights, exchange rights, rights (other than rights),
warrants or options shall not be deemed outstanding. Any determination made
by the directors as to whether any person is or is not a 10% stockholder for
purposes of this subsection shall be conclusive and binding upon the Company
and upon all stockholders;
(ii) At any time during the term of this Agreement the composition of
the Board of Directors of the Company is changed such that persons who were
directors of the Company as of the Effective Date, or persons nominated or
elected as directors by a majority of such persons who were directors as of
the Effective Date, do not continue to comprise a majority of the members of
such Board of Directors of the Company;
(iii) At any time during the term of this Agreement the stockholders
of the Company approve a merger or consolidation of the Company with, or a
reorganization transaction involving the Company and, any other entity, other
than a merger, consolidation or reorganization which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or by being
converted into voting securities of the surviving entity) at least 50% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation;
or
(iv) At any time during the term of this Agreement the stockholders of
the Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of more than 50% of its
consolidated assets.
5. Obligations of the Company Upon Termination of Employment. Upon
---------------------------------------------------------
termination of Executive's employment with the Company under the circumstances
set forth in Section 4(b), the
-7-
<PAGE>
Executive shall be entitled to receive, notwithstanding such termination, the
following payments and to be provided the following benefits:
(a) Salary and Bonus: Subject to the limitations set forth in Section 7
hereof, the Company shall pay to the Executive that amount which is equal to his
regular base salary, at the rate then in effect, for a period of one (1) year,
plus a bonus in an amount which shall be equal to the largest cash bonus
actually received by Executive during his term of employment with the Company;
provided, however, that if Executive shall have entered into an Employment
Agreement with the Company which is in effect at the time of Executive's
termination, then and in that event the Company and Executive agree that upon
Executive's termination Executive shall be entitled to receive either (i) the
salary and bonus termination payments under this Section 5(a), or (ii) the
salary and bonus terminations payments provided for in such Employment
Agreement, whichever salary and bonus termination payment is the greater; but
under no conditions shall Executive be entitled to receive upon termination both
the salary and bonus termination payments under this Severance Agreement and the
salary and bonus termination payments under any such Employment Agreement.
(b) Method of Payment: The payments due to Executive under Section 5(a)
of this Agreement shall be made as follows:
(i) The Company shall pay to the Executive his regular base salary in
installments consistent with the Company's payroll practices then in effect,
or in a single lump sum payment, whichever method is selected by Executive,
in his sole discretion;
(ii) The Company shall pay to Executive the bonus payments in a single
lump sum; and
(iii) Any lump sum payments due to Executive shall be paid to
Executive on the Effective Date of his termination of employment.
-8-
<PAGE>
(c) Other Benefits: The Company shall continue in force for Executive for
a period of two (2) years after Executive's termination the life insurance,
medical, health-and-accident and disability benefit plans or programs then in
effect on the date of Executive's termination from the Company; provided,
however, that such Other Benefits as are set forth in this Section 5(c) shall
not be required to be available to Executive if subsequent employment by
Executive with another employer offers to Executive similar plans or programs in
which the benefits equal or exceed the benefits which Executive could receive
under the Company's plans or programs as provided herein.
6. No Duty to Mitigate. The Executive shall not be required to mitigate the
-------------------
amount of any payment required hereunder by seeking other employment or
otherwise, nor shall the amount paid hereunder be reduced or offset by any
compensation earned or received by the Executive as a result of employment with
another employer, self-employment or any amount received from any other plan,
program, policy or arrangement of the Company.
7. Nonapplicability of Excise Tax. The parties intend that this Agreement
------------------------------
shall govern the rights an obligations of the parties with respect to severance
payments payable upon a termination of Executive's employment with the Company,
and that the excise tax as provided in Section 280G of the Internal Revenue Code
shall not be applicable to payments under this Agreement. Accordingly, the
parties agree that the aggregate amount which shall be paid to Executive under
this Agreement shall be $1.00 less than that amount which would make such
payment to Executive an "excess parachute payment" under the provisions of
Sections 280G of the Internal Revenue Code, and to which an excise tax would be
applicable.
8. Settlement of Disputes.
----------------------
(a) It is specifically agreed that any controversy or dispute between the
parties to this Agreement involving the construction, interpretation,
application, performance or breach of the terms, covenants or conditions of this
Agreement or in any way arising under this Agreement shall, on demand of one of
the parties by written notice hereto served on the other in the manner
prescribed in Section 9(a) hereof, be determined pursuant to the general
reference procedures
-9-
<PAGE>
prescribed by California Code of Civil Procedure Sections 638(1), et seq., as
they may be amended from time to time, by a retired or former judge of the
Superior Court for the County of Orange, State of California. The parties intend
this general reference agreement to be specifically enforceable in accordance
with said Section 638(1).
(b) The reference may be commenced by any party hereto by the filing in
the Superior Court of the State of California for the County of Orange of a
petition or a motion for a general reference proceeding.
(c) The petition or motion may designate as a sole referee a retired judge
working with JAMS who is acceptable to that party. If the parties to the
reference proceeding are unable to mutually agree upon a referee, the Presiding
Judge or any judge of the Orange County Superior Court to whom the matter is
assigned shall appoint a retired or former Orange County Superior Court Judge
from those listed with JAMS as available to act as a referee.
(d) The petition and any opposition or response thereto shall recite in a
clear and meaningful manner the factual basis of the controversy between the
parties and identify the issues to be submitted to the referee for decision.
(e) The parties acknowledge that this agreement is specifically
enforceable and that the decision by the referee is tantamount to a judgment by
a trial court (CCP (S) 644) and is subject to review in accordance with CCP (S)
645, and that any judgment rendered in the trial court is appealable in the same
manner as any other trial court judgment.
(f) The parties may agree on limited discovery. However, in the absence
of an agreement, each party may: (i) take up to three depositions not totaling
more than six hours cumulatively; (ii) propound one set of interrogatories, not
to exceed 20 single questions; (iii) serve not more than 10 requests for
admissions; and (iv) propound not to exceed 15 requests to produce documents,
all as may be "reasonable," as measured by the circumstances and amount in
dispute
-10-
<PAGE>
between the parties. Any disagreements between the parties regarding discovery
matters shall be resolved by the referee.
(g) The hearing shall be held within 60 days after the referee is
selected. The referee shall issue a written memorandum of decision setting
forth his findings of fact and conclusions of law.
9. Miscellaneous.
-------------
(a) Notices: All notices and other communications required or permitted
to be given under this Agreement shall be in writing and shall be deemed to have
been duly given if delivered personally or sent by certified mail, return
receipt requested, first-class postage prepaid, to the parties to this Agreement
at the following addresses:
If to the Company: US Facilities Corporation
650 Town Center Drive, Suite 1600
Costa Mesa, California 92626
Attention: Chief Executive Officer
If to Executive: Edward D. Jones, III
3324 Wildcat Point
Johns Island, South Carolina 29455
or to such other address as either party to this Agreement shall have last
designated by notice to the other party. All such notices and communications
shall be deemed to have been received on the earlier of the date of receipt or
the third business day after the date of mailing thereof.
(b) Binding Effect; Benefits: This Agreement shall be binding upon and
inure to the benefit of the parties to this Agreement and their respective
successors and assigns. Nothing in this Agreement, express or implied, is
intended or shall be construed to give any person, other than the parties to
this Agreement or their respective successors or assigns, any legal or equitable
right, remedy or claim under or in respect of any agreement or any provision
contained herein.
-11-
<PAGE>
(c) Waiver: Either party hereto may by written notice to the other (i)
extend the time for the performance of any of the obligations or other actions
of the other under this Agreement; (ii) waive compliance with any of the
conditions or covenants of the other contained in this Agreement; and (iii)
waive or modify performance of any of the obligations of the other under this
Agreement. Except as provided in the preceding sentence, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a waiver by the party
taking such action of compliance with any representations, warranties, covenants
or agreements contained herein. The waiver by any party hereto of a breach of
any provision of this Agreement shall not operate or be construed as a waiver of
any preceding or succeeding breach and no failure by either party to exercise
any right or privilege hereunder shall be deemed a waiver of such party's rights
or privileges hereunder or shall be deemed a waiver of such party's rights to
exercise the same any subsequent time or times hereunder.
(d) Amendment: This Agreement may be terminated, amended, modified or
supplemented only by a written instrument executed by the Executive and the
Company.
(e) Nonassignability: Neither this Agreement nor any right, remedy,
obligation or liability arising hereunder or by reason hereof shall be
assignable by either the Company or the Executive without the prior written
consent of the other party.
(f) Governing Law: This Agreement shall be governed by and construed in
accordance with the laws of the State of California, regardless of the law that
might be applied under principles of conflict of laws.
(g) Section and Other Headings: The section and other headings contained
in this Agreement are for reference purposes only and shall not affect the
meaning or interpretation of this Agreement.
-12-
<PAGE>
(h) Withholding of Taxes: The Company may withhold from amounts required
to be paid to the Executive hereunder any applicable federal, state, local and
other taxes with respect thereto; provided, however, that the Company shall
promptly pay over the amounts so withheld to the appropriate taxing bodies and
provide to the Executive appropriate statements on forms proscribed for such
purposes on the amounts so withheld.
(i) Severability: If, for any reason, any provision of this Agreement is
held invalid, such invalidity shall not affect any other provision of this
Agreement not held so invalid, and each such other provision shall, to the full
extent consistent with law, continue in full force and effect. If any provision
of this Agreement shall be held invalid in part, such invalidity shall in no way
affect the rest of such provision not held so invalid, and the rest of such
provision, together with all other provisions of this Agreement, shall to the
full extent consistent with law continue in full force and effect. If this
Agreement is held invalid or cannot be enforced, then to the full extent
permitted by law, any prior agreement between the Company (or any predecessor
thereof) and the Executive shall be deemed reinstated as if this Agreement had
not been executed.
(j) Counterparts: This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to be one and the same instrument.
-13-
<PAGE>
In Witness Whereof, the Company has caused this Agreement to be executed and
its seal affixed hereunto by its officers thereunto duly authorized, and the
Executive has signed this Agreement, all as of the date first above written.
Company: US Facilities Corporation
-------
By /s/ David L. Cargile
-----------------------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/ Edward D. Jones, III
------------------------------------------
Edward D. Jones, III
-14-
<PAGE>
Amendment No. 1
To Severance Agreement
Between
The Centris Group, Inc.
(formerly US Facilities Corporation)
And
Edward D. Jones, III
__________________________________
Whereas, The Centris Group, Inc., a Delaware corporation (the "Company"), and
Edward D. Jones, III (the "Executive") entered into a Severance Agreement dated
December 4, 1996 (the "Agreement"), which relates to the termination of
Executive's employment with the Company under certain circumstances; and
Whereas, the Company and the Executive desire to amend Section 4(e)(i) to
clarify the definition of events which constitute a "Change in Control" for
purposes of this Agreement;
Now, Therefore, in consideration of the Company's agreement to continue the
employment of Executive for a period of a minimum of six (6) months from the
date of this Amendment and the payment to Executive of $1.00 and other good and
valuable consideration, receipt of which is hereby acknowledged, the Company and
the Executive hereby agree to enter into this Amendment to the Agreement as
follows:
1. Section 4(e)(i) of the Agreement as originally written shall be stricken
and eliminated from the Agreement, and shall be completely replaced by a new
Section 4(e)(i), which shall read in full as follows:
(i) At any time during the term of this Agreement, any "Person" (as
such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934 (the "Exchange Act") and the regulations of the Securities and
Exchange Commission (the "SEC") thereunder, each as in effect on the
Effective Date of this Agreement (including any such Persons that may be
deemed to be acting in concert with respect to the Company or the
acquisition, ownership or voting of Company securities) becomes, directly or
indirectly, the
<PAGE>
"Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act and
the regulations of the SEC thereunder, each as in effect on the Effective
Date of this Agreement), without the prior approval of the Board of Directors
of the Company, of outstanding securities of the Company representing 15% or
more of the combined voting power of the Company's then outstanding
securities; provided, however, that the concept of any Person becoming the
owner of 15% or more of the combined voting shares shall not include: (A)
the Company, any wholly owned subsidiary of the Company, any employee benefit
plan of the Company or of a subsidiary of the Company, or any Person holding
voting shares for or pursuant to the terms of any such employee benefit plan;
or (B) any Person if such Person would not otherwise be a 15% stockholder but
for a reduction in the number of outstanding voting shares resulting from a
stock repurchase program or other similar plan instituted by the Company or
from a self-tender offer of the Company, which stock repurchase plan or
Company self-tender offer commenced on or after the Effective Date of this
Agreement; provided, however, that the concept of becoming the owner of 15%
or more of the combined voting shares shall include such Beneficial Owner
after the first date upon which (x) such Person, since the date of
commencement of such stock repurchase plan or Company self-tender offer,
shall have acquired Beneficial Ownership of, in the aggregate, additional
voting shares of the Company representing 1% or more of the voting shares
then outstanding, and (y) such Person, together with all affiliates and
associates of such Person, shall Beneficially Own 15% or more of the voting
shares of the Company then outstanding. In calculating the percentage of
outstanding voting shares that are Beneficially Owned by a Person for
purposes of this subsection, voting shares that are Beneficially Owned by
such Person shall be deemed outstanding, and voting shares that are not
Beneficially Owned by such Person and that are subject to issuance upon the
exercise or conversion of outstanding conversion rights, exchange rights,
warrants or options shall not be deemed outstanding. The Board of Directors
shall have the absolute and unfettered authority to make the final
determination as to whether any Person is or is not to be considered a 15%
Stockholder for purposes of this Agreement, which determination shall be
conclusive for all purposes and shall be binding upon the Company and upon
the Executive.
2. This Amendment shall be retroactive and shall be considered and deemed to
have been in effect as of December 4, 1996, the Effective Date of the Agreement,
which is the date when it was entered into by the parties hereto.
3. Apart from this Amendment, the terms of the Agreement as entered into on
December 4, 1996 shall otherwise in all respects remain as originally written to
the extent that such terms do not conflict with or are inconsistent with this
Amendment.
-2-
<PAGE>
In Witness Whereof, this Amendment No. 1 has been executed by a duly
authorized officer of the Company and by the Executive as of the 29th day of
August, 1997.
Company: The Centris Group, Inc.
-------
By /s/David L. Cargile
-------------------------------------
David L. Cargile
President and Chief Executive Officer
Executive:
---------
By /s/Edward D. Jones, III
-------------------------------------
Edward D. Jones, III
-3-
<PAGE>
ADDENDUM EIGHT
to
MANAGEMENT AGREEMENT NO. 1
between
USBENEFITS INSURANCE SERVICES, INC.
and
THE CONTINENTAL INSURANCE COMPANY, (one of the CNA Insurance Companies)
Management Agreement No. 1 is hereby amended as set forth below, effective
as of March 30, 1996.
Paragraph 6.2 of Section 6 - MANAGEMENT OF CLAIMS AND LOSSES is amended to
read in its entirety as follows:
Claim payments shall be made on the Company's checks issued by the
Underwriting Manager in the Company's name which checks shall be drawn on the
Company's accounts. Scheduled employees of the Underwriting Manager covered by
the fidelity bond required by Section 11.4 hereof are authorized to issue claims
checks up to $100,000, as provided in the Claims Guidelines.
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
officers have caused this Addendum Eight to be executed in duplicate this 24th
day of April, 1997.
The Continental Insurance Company USBenefits Insurance Services, Inc.
By: /s/ PAUL V. POLACHEK By: /s/ CRAIG J. KELBEL
--------------------------- ----------------------------------
Craig J. Kelbel, President and
Chief Operating Officer
Witnessed: Witnessed:
/s/ KURT SCHERER /s/ B. RETTEW
- ------------------------- --------------------------------------
<PAGE>
ADDENDUM NINE
to
MANAGEMENT AGREEMENT NO. 1
between
USBENEFITS INSURANCE SERVICES, INC.
and
THE CONTINENTAL INSURANCE COMPANY,
(one of the CNA Insurance Companies)
Management Agreement No. 1 is hereby amended as set forth below, effective
as of April 18, 1997.
Paragraph 6.2 of Section 6 - MANAGEMENT OF CLAIMS AND LOSSES is amended to
read in its entirety as follows:
Claim payments shall be made on the Company's checks issued by the
Underwriting Manager in the Company's name which checks shall be drawn on the
Company's accounts. Scheduled employees of the Underwriting Manager covered by
the fidelity bond required by Section 11.4 hereof are authorized to issue claims
checks up to $250,000, as provided in the Claims Guidelines.
IN WITNESS WHEREOF, the parties hereto by their respective duly authorized
officers have caused this Addendum Nine to be executed in duplicate this 24th
day of April, 1997.
The Continental Insurance Company USBenefits Insurance Services, Inc.
By: /s/ Paul V. Polachek By: /s/ Craig J. Kelbel
----------------------------- ----------------------------------
Paul V. Polachek Craig J. Kelbel, President and
Chief Operating Officer
Witnessed: Witnessed:
/s/ Janet L. Schaeffer /s/ Timothy J. Barden
- --------------------------------- --------------------------------------
<PAGE>
THE CENTRIS GROUP, INC.
----------------------
AMENDED 1988 EMPLOYEE STOCK PLAN
I. PURPOSE
The purpose of The Centris Group, Inc. 1988 Employee Stock Plan, as Amended
-----------------------
in January 1997, (the "Plan") is to further the interest of The Centris Group,
------------------
Inc. (the "Company") by inducing individuals to become, or remain employees of
- ----
the Company or its Subsidiaries through stock options, stock appreciation rights
and restricted stock which may be granted under the Plan. Options granted under
the Plan may either be options intended to qualify as "incentive stock options"
within the meaning of Section 422A of the Internal Revenue Code, or nonqualified
stock options.
II. DEFINITIONS
The following terms shall have the following meanings for purposes of this
Plan:
a. "Award" shall mean a grant of Stock Options, Stock Appreciation Rights,
Restricted Stock or any combination thereof.
b. "Board" shall mean the Board of Directors of The Centris Group, Inc.
-----------------------
c. "Code" shall mean the Internal Revenue Code of 1986, as amended.
d. "Committee" shall mean the committee appointed by the Board pursuant to
Section III(A) below to administer the Plan or, if no committee has been
appointed, the Board.
e. "Common Stock" shall mean the common stock of the Company, as described
in the Company's Articles of Incorporation.
f. "Company" shall mean The Centris Group, Inc., a Delaware corporation.
-----------------------
g. "Disability" shall mean that because of injury or sickness a person
cannot perform each of the material duties of his or her regular occupation.
h. "Non-Employee Director" means any director of the Company who qualifies
as a "non-employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission pursuant to the Securities Exchange Act of
1934, as amended.
i. "Employee" shall mean any officer, or employee of the Company or its
Subsidiaries. For purposes of grants of Incentive Stock Options under this
Plan, the term Employee shall be limited to active employees of the Company or
its Subsidiaries.
<PAGE>
j. "Fair Market Value Per Share" shall be the mean between the highest and
lowest quoted selling prices of the Common Stock on the date of the grant of the
Award, or if not available, the mean between the bona fide bid and asked prices
of the Common Stock on the date of the grant of the Award.
k. "Incentive Stock Option" ("ISO") shall mean an Option granted under the
Plan which is designated as an incentive stock option, and which qualifies as
such within the meaning of Section 422A of the Code.
l. "Nonqualified Option" ("NQSO") shall mean an Option granted under the
Plan which is designated as a nonqualified stock option, and which shall not be
qualified as an incentive stock option within the meaning of Section 422A of the
Code.
m. "Option" shall mean an Incentive Option, as defined in Section II(k)
above, or a Non-qualified Option as defined in Section II(l) above.
n. "Optionee" shall mean any Employee who has been awarded an Option to
purchase shares of Common Stock or who has been awarded SARs under the Plan.
o. "Plan" shall mean The Centris Group, Inc. 1988 Employee Stock Plan, as
----------------------
amended.
p. "Restricted Stock" shall mean shares of Common Stock awarded to an
Employee under Section X of the Plan.
q. "Stock Appreciation Right" ("SAR") shall mean the right to receive the
appreciation in value of the Common stock between the date of the grant of the
SAR and the date the SAR is exercised. A granted SAR may be attached to an
Option or separate from an Option.
2
<PAGE>
III. ADMINISTRATION
A. The Plan shall be administered by the Board or, in the discretion of
the Board, by a committee of the Board that is composed solely of two or more
Non-Employee Directors (the "Committee"). Subject to the provisions of the
Plan, the Committee or the Board shall have the authority to construe and
interpret the Plan and to make all determinations necessary or advisable for the
administration of the Plan. All determinations of the Committee or the Board
shall be binding on all Plan participants.
B. The Company will indemnify and hold harmless the members of the Board
and the Committee from and against any and all liabilities, costs and expenses
incurred by such persons as a result of any act, or omission in connection with
the performance of such persons' duties, responsibilities and obligations under
the Plan, other than such liabilities, costs and expenses as may result from the
bad faith, willful misconduct or criminal acts of such persons.
IV. SHARES SUBJECT TO PLAN
The stock subject to the Plan shall consist of 600,000 shares (as adjusted
---------------------------
for the February, 1998 100% stock split) of the Company's Common Stock. If any
- ----------------------------------------
Option granted hereunder shall expire or terminate for any reason without having
been exercised in full, the unpurchased shares subject thereto shall again be
available for the purposes of this Plan. If any Restricted Stock is forfeited
to the Company, such shares shall again be available for the purposes of this
Plan. Any shares of stock that are surrendered to the Company in a stock-for-
stock exercise of an Option shall be available for issuance under the Plan.
V. ELIGIBILITY AND PARTICIPATION
A. The Committee shall determine the Employees to whom Options, SARs,
Restricted Stock or any combination thereof, shall be granted, the time or times
at which such Awards shall be granted, and the number of shares to be subject to
each Award. An Employee may be granted ISOs, NQSOs, SARs, Restricted Stock or
any combination of the four; provided, however, that the grant of ISOs and NQSOs
to an Employee shall be made in separate Option grants, and each ISO and each
NQSO shall be specifically designated as such.
B. No Employee shall be granted ISOs such that the aggregate fair market
value (determined at the time the Option is granted) of the shares granted under
all stock option plans of the Company exceeds $100,000 for options becoming
exercisable in any calendar year.
VI. PURCHASE PRICE
The purchase price of each share covered by each Option shall be
established by the Committee at the date of grant, but such price shall not be
less than 100 percent of the Fair Market Value Per Share of the Common Stock;
provided, however, that if at the time an ISO is granted the Optionee, owns or
would be considered to own by reason of Section 425(d) of the Code, more than 10
percent of the total combined voting power of all classes of stock of the
Company, the purchase price of the shares covered by such ISO shall not be less
than 110
3
<PAGE>
percent of the Fair Market Value Per Share of the common stock on the date the
ISO is granted.
VII. DURATION OF OPTIONS
The expiration date of any Option shall be determined by the Committee. In
the event the Committee does not specify the expiration date of the Option, the
expiration date shall be ten years after the date of grant for ISOs and ten
years and one day from the date of grant for NQSOs, subject to earlier
termination as provided herein.
VIII. OPTIONS
A. Options awarded under the Plan shall be evidenced by an Option
agreement which shall be in such form as the Committee may determine. Without
limiting the foregoing, the Committee may include in any Option agreement a
provision conditioning or accelerating the grant of an Option, or the receipt of
benefits pursuant to such Option, upon the exercise or settlement of a previous
Option.
B. An Optionee may purchase fewer than the total number of shares granted
in an Option, provided that a partial exercise of an Option may not be for less
than 100 shares, unless fewer than 100 shares remain unexercised in an Award, in
which case the entire remaining Option must be exercised at one time. As a
condition to the exercise, in whole or in part, of any Option, the Committee may
require the Optionee to pay, in addition to the purchase price of the shares
covered by the Option, an amount equal to any federal, state, or local taxes
that are required to be paid in connection with the exercise of such Option.
C. To the extent the right to purchase shares has vested, Options may be
exercised from time to time by giving written notice to the Company stating the
number of shares with respect to which the Option is being exercised. Such
notice shall comply with all applicable rules established by the Committee.
D. Full payment for the shares with respect to which such Option, or
portion thereof is exercised shall be made in combination of cash, check, or
shares of the Company's Common Stock (valued at their fair market value on the
date of delivery) owned by the Optionee, duly endorsed for transfer to the
Company, equal to the aggregate option price and applicable taxes of the shares
with respect to which such Option or portion thereof is being exercised;
provided, however, that the Committee may, in the exercise of its discretion,
(i) allow exercise of an Option in a broker-assisted or similar transaction in
which the exercise price is not received by the Company until promptly after
exercise, (ii) allow the Company to loan the exercise price to the person
entitled to exercise the Award, if the exercise will be followed by a prompt
sale of some or all of the underlying shares and a portion of the sale proceeds
is dedicated to full payment of the exercise price and applicable taxes, and/or
(iii) allow the Company to assist any Optionee (including any officer of the
Company) in the payment of the exercise price payable upon exercise of such
Option, by lending the amount of such exercise price to the Optionee on such
terms and at such rates of interest and upon such
4
<PAGE>
security (or unsecured) as shall have been authorized by or under authority of
the Committee or the Board.
IX. STOCK APPRECIATION RIGHTS
The Committee, in its discretion, may grant, either by attachment to an
Option at the time of grant, or by amendment, or on a separate basis, a Stock
Appreciation Right which shall be subject to such terms and conditions, not
inconsistent with the Plan as the Committee may impose, including the following:
a. SARs awarded under the Plan shall be evidenced by a Stock Appreciation
Rights agreement which shall be in such form as the Committee may determine.
b. An SAR may be exercised only to the extent that the Option to which it
is attached is at the time exercisable; or, if issued separately, pursuant to
the terms of the Stock Appreciation Rights agreement.
c. An SAR shall entitle the holder to surrender to the Company either the
Option (or a portion thereof) to which the SAR is attached, or the SAR, if
issued separately from an Option, and receive in exchange therefore, as the
Committee in its discretion may determine, either cash, shares of the Company's
Common Stock, or a combination of both having a fair market value on the date of
exercise in the aggregate equal to the appreciation in value of the shares in
respect to which the right is exercised. Such appreciation shall be measured by
either the difference between the aggregate Option price of such shares and
their fair market value at the date of exercise (with respect to SARs attached
to an Option), or the difference between the fair market value of such shares at
the time of grant and at the time of exercise (with respect to SARs issued
separately from Options).
d. If the Stock Appreciation Right is attached to an Option, the exercise
of the Stock Appreciation Right shall cancel the Option to which the Stock
Appreciation Right is attached.
X. RESTRICTED STOCK
A. The Committee may award shares of Restricted Stock which are subject to
the terms of this Section X and such other conditions as the Committee may
prescribe in a Restricted Stock Award. Each certificate for Restricted Stock
shall be registered in the name of the Employee and deposited with the Company
by the Employee, together with a stock power endorsed in blank.
B. Restricted Stock awarded under the Plan shall be evidenced by a
Restricted Stock agreement which shall be in such form as the Committee may
determine.
C. At the time of the Award, there shall be established for the Employee a
"Restriction Period" of such length as shall be determined by the Committee.
Restricted Stock may not be sold, assigned, transferred, pledged or otherwise
encumbered, except as herein
5
<PAGE>
provided, during the Restriction Period. Except for such restrictions, the
Employee shall have all the rights of a stockholder of the Company, with respect
to such Restricted Stock.
D. At the expiration of the Restriction Period, the Company shall
redeliver to the Employee (or the Employee's legal representative or
beneficiary) the shares and stock power deposited with the Company pursuant to
Section X.A.
XI. NONTRANSFERABILITY OF AWARDS
An Employee may not transfer, assign, pledge, or hypothecate any Option,
SAR or Restricted Stock granted under this Plan, except pursuant to an exercise
of an Option through the use of a Regulation T Margin Account solely for the
purpose of exercising the underlying Option. Otherwise, Awards may only be
transferred pursuant to the Employee's will, or the laws of descent and
distribution.
XII. CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan or any Award granted under the Plan shall
confer upon any Employee any rights with respect to continuation of employment
by the Company, nor shall this Plan or any individual agreement issued pursuant
hereto be deemed a contract of employment.
XIII. TERMINATION OF EMPLOYMENT - ISOS/SARS
A. If an Optionee ceases to be an Employee for any reason other than
death, Disability, or retirement at or after age 55, any ISO or SAR previously
granted shall terminate upon the termination of employment.
B. If an Optionee ceases to be an Employee due to retirement at or after
age 55, any ISO or SAR shall terminate 90 days following the date oftermination,
unless by its terms it shall expire before such date, or otherwise terminate as
provided herein, in which case it shall only be exercisable to the extent that
it would have been exercisable had the Employee not terminated employment.
C. If an Optionee terminates employment due to death or Disability, any
ISO or SAR granted under this Plan shall terminate one year after the date of
termination of employment, unless by its terms it shall expire before such date,
or otherwise terminate as provided herein, in which case it shall only be
exercisable to the extent that it would have been exercisable had the employee
not terminated employment. In the case of death, any outstanding ISO or SAR may
be exercised by the person or persons to whom the Optionee's rights under the
ISO or SAR shall pass by will or by the laws of descent and distribution.
6
<PAGE>
XIV. TERMINATION OF EMPLOYMENT - NQSOS
A. If an Optionee ceases to be an Employee for any reason other than
death, Disability, or retirement at or after age 55, any NQSOs previously
granted shall terminate upon the termination of employment.
B. If an Optionee ceases to be an Employee due to retirement at or after
age 55 any NQSOs granted to the employee under this Plan shall terminate upon
their normal expiration date as if the Optionee had remained an employee of the
Company.
C. If an Optionee terminates employment due to death or Disability, any
NQSO granted under this Plan shall terminate one year after the date of
termination of employment, unless by its terms it shall expire before such date,
or otherwise terminate as provided herein, in which case it shall only be
exercisable to the extent that it would have been exercisable had the employee
not terminated employment. In the case of death, any outstanding NQSO may be
exercised by the person or persons to whom the Optionee's rights under the
option shall pass by will or by the laws of descent and distribution.
XV. TERMINATION OF EMPLOYMENT - RESTRICTED STOCK
A. If a recipient of Restricted Stock ceases to be an Employee for any
reason other than death, Disability or retirement at or after age 55, any shares
of Restricted Stock to which the restrictions of Section X have not lapsed shall
be forfeited.
B. If a recipient of Restricted Stock ceases to be an Employee for reasons
of death, Disability or retirement at or after age 55, the Employee, the legal
representative or named beneficiary of the Employee if the Employee is legally
incapacitated or deceased, shall be entitled to receive, free of restrictions of
Section X, such portion of an Award as the Committee shall determine, but in no
event less than the number of shares in an Award multiplied by a fraction, the
numerator of which shall be the number of months elapsed from the date of the
Award, and the denominator of which shall be the number of months in the
Restriction Period.
XVI. DILUTION AND OTHER ADJUSTMENTS
A. In the event any change in the outstanding Common Stock of the Company
occurs by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event, if the Committee shall determine in its sole discretion, that
such change equitably requires an adjustment in the number, or option price per
share of the Options, or the number of shares, SARs or Restricted Stock awarded,
such shares, SARs or the price of such Options may be appropriately adjusted by
the Committee.
B. Notwithstanding Subsection (A) of this Section, upon the dissolution or
liquidation of the Company, or upon any change in control, any options or SARs
granted and outstanding under the Plan shall become immediately exercisable in
full and shall remain
7
<PAGE>
exercisable until the effective date of such transaction and the Restriction
Period on any Restricted Stock shall lapse. Any Option or SAR not exercised by
the effective date of such transaction shall terminate on such date.
XVII. AMENDMENT AND TERMINATION OF PLAN
A. The Board may from time to time, and with respect to any shares at the
time not subject to an Option or SAR or issued as Restricted Stock, suspend or
terminate the Plan or amend or revise the terms of the Plan, provided that any
material amendment to the Plan shall be approved by the stockholders of the
Company.
B. No amendment, suspension, or termination of the Plan shall, without
the consent of the Employees who have received Awards, alter or impair any
rights or obligations under any Award previously granted under the Plan.
C. The terms and conditions of any Award granted to an Employee may be
modified only by a written agreement executed by the Employee and the Company;
provided, however, that if any amendment or modification of an ISO would
constitute a "modification, extension, or renewal" within the meaning of Section
425(h) of the Code, such amendment shall state that "the parties hereto
recognize and agree that this amendment constitutes a modification, renewal, or
extension of the option granted within the meaning of Section 425(h) of the
Code."
XVIII. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board and approval
by the stockholders of the Company; provided, however, that prior to approval of
the Plan by the stockholders, but after adoption by the Board, Options may be
granted under the plan subject to approval of adoption of the Plan by the
stockholders. The Plan shall be null and void ab initio if not approved by the
Company's stockholders within 12 months after the date of adoption of the Plan
by the Board.
XIX. TERM OF THE PLAN
No Option, SAR or Restricted Stock shall be granted pursuant to the Plan
after ten years from date of adoption of the Plan by the Board.
XX. GOVERNING LAW
The Plan shall be governed by and construed and enforceable in accordance
with the laws of Delaware.
8
<PAGE>
XXI. NOTICE
Any notice or filing required or permitted to be given to the Company
shall be sufficient if in writing and hand delivered or when sent by U.S. mail,
postage prepaid to the principal office of the Company directed to the attention
of the Secretary of the Company. Any notice to the Employee must be in writing
and is effective when delivered or when mailed by U.S. mail, postage prepaid to
the Employee or his personal representatives at his last address on record with
the Company.
XXII. GENDER, SINGULAR AND PLURAL
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, or neuter as the identity of the person or persons may
require. As the context may require, the singular may be read as the plural and
the plural as the singular.
XXIII. CAPTIONS
The captions to the sections and paragraphs of the Plan are for
convenience only and shall not control or affect the meaning or construction of
any of its provisions.
XXIV. ADOPTION OF THE PLAN
The date of adoption of this Amended 1988 Employee Stock Plan shall be
the date upon which the stockholders approve this Amended Plan.
9
<PAGE>
EXHIBIT 10.11
THE CENTRIS GROUP, INC.
-----------------------
AMENDED AND RESTATED 1991 EMPLOYEE STOCK OPTION PLAN
(INCLUDING ALL AMENDMENTS THROUGH FEBRUARY 1998)
----------------
I. PURPOSE
The purpose of The Centris Group, Inc. 1991 Employee Stock Option Plan is to
----------------------
further the interests of The Centris Group, Inc. by inducing individuals to
----------------------
become or remain employees of the Company or its subsidiaries through stock
options, stock appreciation rights and restricted stock which may be granted
under the Plan. Options granted under the Plan may either be options intended to
qualify as "incentive stock options" within the meaning of Section 422 of the
Code, or nonqualified stock options.
II. DEFINITIONS
The following terms shall have the following meanings for purposes of this Plan:
a. "Award" shall mean a grant of Options, Stock Appreciation Rights,
Restricted Stock or any combination thereof.
b. "Board" shall mean the Board of Directors of The Centris Group, Inc.
----------------------
c. "Change in Control" means the following and shall be deemed to occur if
any of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and 14(d) of
the Exchange Act, is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the Company
representing 25% or more of the combined voting power of the Company's then
outstanding voting securities;
(ii) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, is approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act) shall, for the purposes of this Plan, be considered as
though such person were a member of the Incumbent Board;
(iii) The stockholders of the Company approve a merger or consolidation
with any other corporation, other than
<PAGE>
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of another entity) more than 50% of the combined voting power of the
voting securities of the Company or such other entity outstanding immediately
after such merger or consolidation, or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquired 50% or more of the combined voting power of the Company's then
outstanding voting securities; or
(iv) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all of the Company's assets.
Notwithstanding the preceding provisions of this Section II.c., a Change in
Control shall not be deemed to have occurred (1) if the "person" described in
the preceding provisions of this Section II.c. is an underwriting or
underwriting syndicate that has acquired the ownership of 50% or more of the
combined voting power of the Company's then outstanding voting securities solely
in connection with a public offering of the Company's securities; (2) if the
"person" described in the preceding provisions of this Section II.c. is an
employee stock ownership plan or other employee benefit plan maintained by the
Company (or any of its affiliated companies) that is qualified under the
provisions of the Employee Retirement Income Security Act of 1974, as amended;
or (3) if the person described in clause (i) of the preceding provisions of this
section II.c. would not otherwise be a beneficial owner of 25% or more of the
combined voting power of the Company's then outstanding voting securities but
for a reduction in the number of outstanding voting securities resulting from a
stock repurchase program or other similar plan of the Company or from a self
tender offer of the Company, which plan or tender offer commenced on or after
the date hereof; provided, however, that the term "person" shall include such
person from and after the first date upon which (A) such person, since the date
of the commencement of such plan or tender offer, shall have acquired beneficial
ownership of, in the aggregate, a number of voting securities of the Company
equal to 1% or more of the voting securities of the Company then outstanding,
and (B) such person, together with all affiliates and associates of such person,
shall beneficially own 25% or more the voting securities of the Company then
outstanding.
d. "Code" shall mean the Internal Revenue Code of 1986, as amended.
e. "Committee" shall mean the committee appointed by the Board to
administer the Plan or, if no committee has been appointed, the Board, exclusive
of persons who do not meet the requirements for being Non-Employee Directors or
persons who are not "outside directors" (within the meaning of the regulations
under Section 162(m) of the Code) if the Award granted by the Committee is
intended to constitute Performance-Based Compensation.
f. "Common Stock" shall mean the common stock of the Company, as
described in the Company's Restated Certificate of Incorporation.
<PAGE>
g. "Company" shall mean The Centris Group, Inc., a Delaware corporation,
----------------------
or any successor thereto.
h. "Disability" shall mean that because of injury or sickness a person
cannot perform each of the material duties of his or her regular occupation.
i. "Employee" shall mean any officer or employee of the Company or its
subsidiaries. For purposes of grants of ISOs under this Plan, the term Employee
shall be limited to active employees of the Company or its subsidiaries.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
k. "Fair Market Value" with respect to the Common Stock shall be the
closing price of the Common Stock as reported by The New York Stock Exchange on
---------------------------
the date of valuation or, if not available, the mean between the bonafide bid
---------------------------------
and asked prices of the Common Stock on such date.
- --------------------------------------------------
l. "Incentive Stock Option" ("ISO") shall mean an Option granted under the
Plan which is designated as an incentive stock option, and which qualifies as
such within the meaning of Section 422 of the Code
m. "Non-Employee Director" means any director of the Company who qualifies
as a "non-employee director" within the meaning of Rule 16b-3 promulgated by the
Securities and Exchange Commission pursuant to the Exchange Act.
n. "Nonqualified Stock Option" ("NQSO") shall mean an Option granted under
the Plan which is designated as a nonqualified stock option, and which shall not
be qualified as an incentive stock option within the meaning of Section 422 of
the Code.
o. "Option" shall mean an ISO as defined as in Section II.l. above, or an
NQSO as defined in Section II.m. above.
p. "Optionee" shall mean any Employee who has been awarded an Option to
purchase shares of Common Stock or who has been awarded SARs under the Plan.
q. "Performance-Based Compensation" means performance-based compensation
as described in Section 162(m) of the Code and the regulations thereunder. If
the amount of compensation an Employee will receive under any Award is not based
solely on an increase in the value of Common Stock after the date of grant or
award, the Committee, in order to qualify an Award as performance-based
compensation under Section 162(m) of the Code and the regulations thereunder,
can condition the grant, award, vesting, or exercisability of such an award on
the attainment of a preestablished, objective performance goal. For this
purpose, a preestablished, objective performance goal may include one or more of
the following performance criteria: (i) cash flow, (ii) earnings per share
(including earnings before interest, taxes, and amortization), (iii) return on
equity, (iv) total stockholder return, (v) return on capital, (vi) return on
assets or net assets, (vii) income or net income, (viii) operating income
<PAGE>
or net operating income, (ix) operating margin, (x) return on operating revenue,
and (xi) any other similar performance criteria contemplated by the regulations
under Section 162(m) of the Code.
r. "Plan" shall mean The Centris Group, Inc. 1991 Employee Stock Option
----------------------
Plan, as amended.
s. "Restricted Stock" shall mean shares of Common Stock awarded to an
Employee under Section X of the Plan.
t. "Stock Appreciation Right" ("SAR") shall mean the right to receive the
appreciation in value of the Common Stock between the date of the grant of the
SAR and the date the SAR is exercised. A granted SAR may be attached to an
Option or separate from an Option.
III ADMINISTRATION
A. The Plan will be administered by the Committee, which will be composed
solely of two or more Non-Employee Directors (the "Committee"). In addition, if
Awards are to be made to persons subject to Section 162(m) of the Code and such
awards are intended to constitute Performance-Based Compensation, then each of
the Committee's members shall also be an "outside director," as such term is
defined in the regulations under Section 162(m) of the Code. Notwithstanding
anything contained herein, no person shall be disqualified from being a member
of the Committee merely because such person is entitled to receive grants or
awards pursuant to The Centris Group, Inc. 1991 Directors Stock Option Plan, as
----------------------
amended.
B. Subject to the provisions of the Plan, the Committee or the Board shall
have the authority to construe and interpret the Plan and to make all
determinations necessary or advisable for the administration of the Plan. All
determinations of the Committee or the Board shall be binding on Plan
participants.
C. The Company will indemnify and hold harmless the members of the Board
and the Committee from and against any and all liabilities, costs and expenses
incurred by such person as a result of any act or omission in connection with
the performance of such persons' duties, responsibilities and obligations under
the Plan, other than such liabilities, costs and expenses as may result from the
bad faith, willful misconduct or criminal acts of such persons.
IV. SHARES SUBJECT TO PLAN
A. The stock subject to the Plan shall consist of the 1,600,000 shares (as
--------------------
adjusted for the February, 1998 100% stock split) shares previously authorized
- -------------------------------------------------
to be issued under the Plan plus (i) an additional 400,000 shares (as adjusted)
----------------------------
of the Company's Common Stock, with (ii) an annual number of incremental shares
to be added to the Plan on the first trading day of each successive calendar
year commencing after December 31, 1996, which incremental amount shall be
calculated at 5% of the total outstanding shares (as adjusted) of the Company as
--------------
of the last day of the prior calendar year, less any shares authorized but
unissued under the
<PAGE>
Plan. The total allocation of shares available for issuance under the 1991
Employee Plan, when added to the total amount of shares authorized but unissued
under all of the Company's option plans, shall not at any time exceed 15% of the
total outstanding shares of the Company's Common Stock on a fully diluted basis.
B. If any Option granted hereunder shall expire, terminate or otherwise be
cancelled for any reason without having been exercised in full, the unpurchased
shares subject thereto shall again be available for issuance under this Plan. If
any Restricted Stock is forfeited to the Company, such shares shall again be
available for purposes of this Plan. Any shares of stock that are surrendered to
the Company in a stock-for-stock exercise of an Option shall be available for
issuance under the 1991 Employee Plan.
C. Notwithstanding any other provision of this Plan, no Employee shall be
granted Awards with respect to more than 240,000 shares (as adjusted) of Common
-----------------------------
Stock in any one calendar year; provided, however, that this limitation shall
not apply if it is not required in order for the compensation attributable to
Awards hereunder to qualify as Performance-Based Compensation. The limitation
set forth in this Section IV.C shall be subject to adjustment as provided in
Section XVI, but only to the extent such adjustment would not affect the status
of compensation attributable to Awards hereunder as Performance-Based
Compensation.
D. Notwithstanding any other provision of this Plan, the maximum number of
shares issuable upon exercise of Awards granted in the form of ISOs after March
27, 1996 shall be the lesser of the number of shares available for grant under
this Plan pursuant to Section IV.A or 1,000,000 shares (as adjusted).
-----------------------------
V. ELIGIBILITY AND PARTICIPATION
A. The Committee shall determine the Employees to whom Options, SARs,
Restricted Stock or any combination thereof, shall be granted, the time or times
at which such Awards shall be granted, the number of shares to be subject to
each Award, and whether to grant such an Award as Performance-Based
Compensation. An Employee may be granted ISOs, NQSOs, SARs, Restricted Stock or
any combination of the four; provided, however, that the grant of ISOs and NQSOs
to an Employee shall be made in separate Option grants, and each ISO and each
NQSO shall be specifically designated as such.
B. No Employee shall be granted ISOs such that the aggregate Fair Market
Value (determined at the time the Option is granted) of the shares granted under
all stock option plans of the Company exceeds $100,000 for options becoming
exercisable in any calendar year.
VI. PURCHASE PRICE
The purchase price of each share covered by each Option shall be established by
the Committee at the date of grant, but such price shall not be less than 100
percent of the Fair Market Value per share of the Common Stock on the date of
grant; provided, however, that if at the time an ISO is granted, the Optionee
owns more than 10 percent of the total combined voting power of all classes of
stock of the Company, the purchase price of the shares covered by such ISO shall
<PAGE>
not be less than 110 percent of the Fair Market Value per share of the Common
Stock on the date the ISO is granted.
VII. DURATION OF OPTIONS
The expiration date of any Option shall be determined by the Committee. In the
event the Committee does not specify the expiration date of the Option, the
expiration date shall be ten years after the date of grant (five years for
owners of more than 10% of the total combined voting power) for ISOs and ten
years and one day from the date of grant for NQSOs, subject to earlier
termination as provided herein.
VIII. OPTIONS
A. Options awarded under the Plan shall be evidenced by an Option
agreement which shall be in such form as the Committee may determine. Without
limiting the foregoing, the Committee may include in any Option agreement a
provision conditioning or accelerating the grant of an Option, or the receipt of
benefits pursuant to such Option, upon the exercise or settlement of a previous
Option.
B. An Optionee may purchase fewer than the total number of shares granted
in an Option, provided that a partial exercise of an Option may not be for less
than 100 shares, unless fewer than 100 shares remain unexercised in an Award, in
which case the entire remaining Option must be exercised at one time. As a
condition to the exercise, in whole or in part, of any Option, the Committee may
require the Optionee to pay, in addition to the purchase price of the shares
covered by the Option, an amount equal to any federal, state or local taxes that
are required to be paid in connection with the exercise of such Option.
C. To the extent the right to purchase shares has vested, Options may be
exercised from time to time by giving written notice to the Company stating the
number of shares with respect to which the Option is being exercised. Such
notice shall comply with all applicable rules established by the Committee.
D. Full payment for the shares with respect to which such Option, or
portion thereof, is exercised shall be made in a combination of cash, check or
shares of the Company's Common Stock (valued at their Fair Market Value on the
date of delivery) owned by the Optionee, duly endorsed for transfer to the
Company, equal to the aggregate option price and applicable taxes of the shares
with respect to which such Option or portion thereof is being exercised;
provided, however, that the Committee may, in the exercise of its discretion,
(i) allow exercise of an Option in a broker-assisted or similar transaction in
which the exercise price is not received by the Company until promptly after
exercise, (ii) allow the Company to loan the exercise price to the person
entitled to exercise the Award, if the exercise will be followed by a prompt
sale of some or all of the underlying shares and a portion of the sale proceeds
is dedicated to full payment of the exercise price and applicable taxes, and/or
(iii) allow the Company to assist any Optionee (including any officer of the
Company) in the payment of the exercise price payable upon exercise of such
Option, by lending the amount of such exercise price to the Optionee on such
terms and at such rates of interest and upon such
<PAGE>
security (or unsecured) as shall have been authorized by or under authority of
the Committee or the Board.
IX. STOCK APPRECIATION RIGHTS
The Committee in its discretion may grant, either by attachment to an Option at
the time of grant, or by amendment, or on a separate basis, a Stock Appreciation
Right which shall be subject to such terms and conditions, not inconsistent with
the Plan, as the Committee may impose, including the following:
a. SARs awarded under the Plan shall be evidenced by a Stock Appreciation
Rights agreement which shall be in such form as the Committee may determine.
b. A SAR may be exercised only to the extent that the Option to which it
is attached is at the time exercisable; or if issued separately, pursuant to the
terms of the Stock Appreciation Rights agreement. The grant price of a
separately issued SAR shall not be less than 100 percent of the Fair Market
Value per share of Common Stock on the date of grant of the SAR.
c. A SAR shall entitle the holder to surrender to the Company either the
Option (or a portion thereof) to which the SAR is attached, or the SAR, if
issued separately from an Option, and receive in exchange therefore, as the
Committee in its discretion may determine, either cash, shares of the Company's
Common Stock or a combination of both having a Fair Market Value on the date of
exercise in the aggregate equal to the appreciation in value of the shares in
respect to which the right is exercised. Such appreciation shall be measured by
either the difference between the aggregate option price of such shares and
their Fair Market Value at the date of exercise (with respect to SARs attached
to an Option), or the difference between the grant price of the SAR and the Fair
Market Value of the Common Stock at the time of exercise (with respect to SARs
issued separately from an Option).
d. If the SAR is attached to an Option, the exercise of the SAR shall
cancel the Option to which the SAR is attached.
X. RESTRICTED STOCK
A. The Committee may award shares of Restricted Stock which are subject to
the terms of this Section X and such other conditions as the Committee may
prescribe in a Restricted Stock Award. Each certificate for Restricted Stock
shall be registered in the name of the Employee and deposited with the Company
by the Employee, together with a stock power endorsed in blank.
B. Restricted Stock awarded under the Plan shall be evidenced by a
Restricted Stock agreement which shall be in such form as the Committee may
determine.
C. At the time of the Award, there shall be established for the Employee a
"Restriction Period" of such length as shall be determined by the Committee.
Restricted Stock
<PAGE>
may not be sold, assigned, transferred, pledged or otherwise encumbered, except
as herein provided, during the Restriction Period. Except for such restrictions,
the Employee shall have all the rights of a stockholder of the Company, with
respect to such Restricted Stock.
D. At the expiration of the Restriction Period, the Company shall
redeliver to the Employee (or the Employee's legal representative or
beneficiary) the shares and stock power deposited with the Company pursuant to
Section X.A.
E. In no event shall the number of shares issued as Restricted Stock under
this Plan exceed 100,000 shares (as adjusted).
-----------------------------
XI. NONTRANSFERABILITY OF AWARDS
No Award granted under this Plan shall be assignable or transferable except (i)
by will or by the laws of descent and distribution, or (ii) subject to the final
sentence of this Section XI, upon dissolution of marriage pursuant to a
qualified domestic relations order or, in the discretion of the Committee and
under circumstances that would not adversely affect the interests of the
Company, pursuant to a nominal transfer that does not result in a change in
beneficial ownership. During the lifetime of an Award recipient, an Award
granted to such person shall be exercisable only by the recipient (or the
recipient's permitted transferee) or such person's guardian or legal
representative. Notwithstanding the foregoing, (i) no Award owned by a recipient
subject to Section 16 of the Exchange Act may be assigned or transferred in any
manner inconsistent with Rule 16b-3, and (ii) ISOs (or other Awards subject to
transfer restrictions under the Code) may not be assigned or transferred in
violation of Section 422(b)(5) of the Code (or any comparable or successor
provision) or the regulations thereunder, and nothing herein is intended to
allow such assignment or transfer.
XII. CONTINUATION OF EMPLOYMENT
Nothing contained in the Plan or any Award granted under the Plan shall confer
upon any Employee any rights with respect to continuation of employment by the
Company, nor shall this Plan or any individual agreement issued pursuant hereto
be deemed a contract of employment.
XIII. TERMINATION OF EMPLOYMENT--ISOS/SARS
A. If an Optionee ceases to be an Employee for any reason other than
death, Disability or retirement at or after age 55, any ISO or SAR previously
granted shall terminate upon the termination of employment.
B. If an Optionee ceases to be an Employee due to retirement at or after
age 55, any ISO or SAR shall terminate 90 days following the date of retirement,
unless by its terms it shall expire before such date, or otherwise terminate as
provided herein, in which case it shall only be exercisable to the extent that
it would have been exercisable had the Employee not terminated employment.
<PAGE>
C. If an Optionee terminates employment due to death or Disability, any
ISO or SAR granted under this Plan shall terminate one year after the date of
termination of employment, unless by its terms it shall expire before such date,
or otherwise terminate as provided herein, in which case it shall be exercisable
only to the extent that it would have been exercisable had the employee not
terminated employment. In the case of death, any outstanding ISO or SAR may be
exercised by the person or persons to whom the Optionee's rights under the ISO
or SAR shall pass by will or by the laws of descent and distribution.
XIV. TERMINATION OF EMPLOYMENT--NQSOS
A. If an Optionee ceases to be an Employee for any reason other than
death, Disability or retirement at or after age 55, any NQSOs previously granted
shall terminate upon the termination of employment.
B. If an Optionee ceases to be an Employee due to retirement at or after
age 55, any NQSOs granted to the employee under this Plan shall terminate upon
their normal expiration date as if the Optionee had remained an employee of the
Company.
C. If an Optionee terminates employment due to death or Disability, any
NQSO granted under this Plan shall terminate one year after the date of
termination of employment, unless by its terms it shall expire before such date,
or otherwise terminate as provided herein, in which case it shall be exercisable
only to the extent that it would have been exercisable had the Employee not
terminated employment. In the case of death, any outstanding NQSO may be
exercised by the person or persons to whom the Optionee's rights under the
Option shall pass by will or by the laws of descent and distribution.
XV. TERMINATION OF EMPLOYMENT--RESTRICTED STOCK
A. If a recipient of Restricted Stock ceases to be an Employee for any
reason other than death, Disability or retirement at or after age 55, any shares
of Restricted Stock with respect to which the restrictions of Section X have not
lapsed shall be forfeited.
B. If a recipient of Restricted Stock ceases to be an Employee for reasons
of death, Disability or retirement at or after age 55, the Employee, the legal
representative or named beneficiary of the Employee if the Employee is legally
incapacitated or deceased, shall be entitled to receive, free of the
restrictions of Section X, such portion of an Award as the Committee shall
determine, but in no event less than the number of shares in an Award multiplied
by a fraction, the numerator of which shall be the number of months elapsed from
the date of the Award, and the denominator which shall be the number of months
in the Restriction Period.
XVI. DILUTION AND OTHER ADJUSTMENTS
A. In the event any change in the outstanding Common Stock of the Company
occurs by reason of any stock split, stock dividend, recapitalization, merger,
consolidation, reorganization, combination or exchange of shares or other
similar event, if the Committee
<PAGE>
shall determine, in its sole discretion, that such change equitably requires an
adjustment in the number, or option price per share of the Options, or the
number of shares, SARs or Restricted Stock awarded, such shares, SARs or the
price of such Options may be appropriately adjusted by the Committee.
B. Notwithstanding Section XVI.A., upon the dissolution or liquidation of
the Company, or upon any Change in Control, any Options or SARs granted and
outstanding under the Plan shall become immediately exercisable in full and
shall remain exercisable until the effective date of such transaction, and the
Restriction Period on any Restricted Stock shall lapse. Any Option or SAR not
exercised by the effective date of such transaction shall terminate on such
date.
XVII. AMENDMENT AND TERMINATION OF PLAN
A. The Board may from time to time, and with respect to any shares at the
time not subject to an Option or SAR or issued as Restricted Stock, suspend or
terminate the Plan or amend or revise the terms of the Plan, provided that any
material amendment to the Plan shall be approved by the stockholders of the
Company.
B. No amendment, suspension or termination of the Plan shall, without the
consent of the Employees who have received Awards, alter or impair any rights or
obligations under any Award previously granted under the Plan.
C. The terms and conditions of any Award granted to an Employee may be
modified only by a written agreement executed by the Employee and the Company;
provided, however, that if any amendment or modification of an ISO would
constitute a "modification, extension or renewal" within the meaning of Section
424 of the Code, such amendment shall state that "the parties hereto recognize
and agree that this amendment constitutes a modification, renewal or extension
of the option granted within the meaning of Section 424 of the Code."
XVIII. EFFECTIVE DATE
This Plan shall become effective upon adoption by the Board and approval by the
stockholders of the Company; provided, however, that prior to approval of the
Plan by the stockholders, but after adoption by the Board, Options may be
granted under the Plan subject to approval of adoption of the Plan by the
stockholders. The Plan shall be null and void ab initio if not approved by the
Company's stockholders within 12 months after the date of adoption of the Plan
by the Board.
XIX. TERM OF PLAN
No Option, SAR or Restricted Stock shall be granted pursuant to the Plan after
ten years from date hereof.
<PAGE>
XX. GOVERNING LAW
The Plan shall be governed by and construed and enforceable in accordance with
the laws of the State of Delaware.
XXI. NOTICE
Any notice or filing required or permitted to be given to the Company shall be
sufficient if in writing and hand delivered or sent by U.S. mail, postage
prepaid, to the principal office of the Company directed to the attention of the
Secretary of the Company. Any notice to the Employee must be in writing and is
effective when delivered or mailed by U.S. mail, postage prepaid, to the
Employee or his personal representatives at his or her last address on record
with the Company.
XXII. GENDER, SINGULAR AND PLURAL
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine or neuter as the identity of the person or persons may
require. As the context may require, the singular may be read as the plural and
the plural as the singular.
XXIII. CAPTIONS
The captions to the sections and paragraphs of the Plan are for convenience only
and shall not control or affect the meaning or construction of any of its
provisions.
XXIV. ADOPTION OF THE PLAN
The date of adoption of this Amended and Restated 1991 Employee Stock Option
Plan was May 14, 1997.
-----------------
<PAGE>
EXHIBIT 10.14
THE CENTRIS GROUP, INC.THE CENTRIS GROUP, INC.
---------------------------------------------
1991 Directors Stock Option Plan
Amended and Restated
As of July 26, 1995 and March 27, 1996
I. General Provisions
1.1 Purposes of the Plan. The Centris Group, Inc. has adopted this 1991
----------------------
Directors Stock Option Plan, to enable the Company to attract and retain the
services of experienced and knowledgeable Nonemployee Directors and to align
further their interests with those of the stockholders of the Company by
providing for or increasing the proprietary interests of the Nonemployee
Directors in the Company.
1.2 Plan History. The Centris Group, Inc. 1991 Directors Stock Option
----------------------
Plan was originally adopted by the Board of Directors of the Company on March 6,
1991 and approved by the Company's stockholders on May 23, 1991. It was amended
and restated by the Board of Directors of the Company on December 18, 1991 and
was submitted to and approved by the Company's stockholders at the 1992 Annual
Meeting of Stockholders held on May 27, 1992. The Plan was further amended and
restated by the Board of Directors of the Company on July 26, 1995 and on March
27, 1996, and will, as so amended, be submitted to the Company's stockholders
for approval at the Company's 1996 Annual Meeting of Stockholders. Further non-
------------
material amendments were adopted by the Board without stockholder action in
- ---------------------------------------------------------------------------
January, 1998.
- -------------
1.3 Definitions. The following terms, when used in this Plan, shall
have the meanings set forth in this Section 1.3:
(a) "Award" means an award of any Stock Option under the Plan.
(b) "Board" or "Board of Directors" means the Board of Directors of
the Company.
(c) "Change in Control" means the following and shall be deemed to
occur if any of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing
25% or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) Individuals who, as of the date hereof, constitute the Board
of Directors (the "Incumbent Board") cease for any reason to constitute at least
a majority of the Board, provided that any person becoming a director subsequent
to the date hereof whose election, or nomination for election by the Company's
stockholders, is approved by a vote of at least a majority of the directors then
comprising the Incumbent Board (other than an election or nomination of an
individual whose initial assumption of office is in connection with an actual or
threatened election contest relating to the election of the directors of the
Company, as
<PAGE>
such terms are used in Rule 14a-11 of Regulation 14A promulgated under the
Exchange Act) shall, for the purposes of this Plan, be considered as though such
person were a member of the Incumbent Board;
(iii) The stockholders of the Company approve a merger or
consolidation with any other corporation, other than
(A) A merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of another entity) more than 50% of the combined voting power of the
voting securities of the Company or such other entity outstanding immediately
after such merger or consolidation, or
(B) A merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquired 50% or more of the combined voting power of the Company's then
outstanding voting securities; or
(iv) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all of the Company's assets.
Notwithstanding the preceding provisions of this Section 1.3(c), a Change in
Control shall not be deemed to have occurred (1) if the "person" described in
the preceding provisions of this Section 1.3(c) is an underwriting or
underwriting syndicate that has acquired the ownership of 50% or more of the
combined voting power of the Company's then outstanding voting securities solely
in connection with a public offering of the Company's securities; (2) if the
"person" described in the preceding provisions of this Section 1.3(c) is an
employee stock ownership plan or other employee benefit plan maintained by the
Company (or any of its affiliated companies) that is qualified under the
provisions of the Employee Retirement Security Act of 1974, as amended; or (3)
if the person described in clause (i) of the preceding provisions of this
subsection (c) would not otherwise be a beneficial owner of 25% or more of the
combined voting power of the Company's then outstanding voting securities but
for a reduction in the number of outstanding voting securities resulting from a
stock repurchase program or other similar plan of the Company or from a self
tender offer of the Company, which plan or tender offer commenced on or after
the date hereof; provided, however, that the term "person" shall include such
person from and after the first date upon which (A) such person, since the date
of the commencement of such plan or tender offer, shall have acquired beneficial
ownership of, in the aggregate, a number of voting securities of the Company
equal to 1% or more of the voting securities of the Company then outstanding,
and (B) such person, together with all affiliates and associates of such person,
shall beneficially own 25% or more the voting securities of the Company then
outstanding.
(d) "Common Stock" means the common stock of the Company, par value
$0.01 per share.
2.
<PAGE>
(e) "Company" means The Centris Group, Inc., a Delaware corporation,
----------------------
or any successor thereto.
(f) "Fair Market Value" of shares of stock shall be calculated on the
basis of the closing price of stock of that class on the day in question (or, if
such day is not a trading day in the U.S. securities markets, on the nearest
preceding trading day), as reported with respect to the principal market (or the
composite of the markets, if more than one) in which such shares are then
traded; or, if no such closing prices are reported, on the basis of the mean
between the high bid and low asked prices that day on the principal market or
national quotation system on which such shares are then quoted; or, if not so
quoted, as furnished by a professional securities dealer making a market in such
shares selected by the Board or a committee of the Board; or if no such dealer
is available, then the Fair Market Value shall be determined in good faith by
the Board.
(g) "Nonemployee Director" means any member of the Board of Directors
who is not an employee of the Company or of any parent corporation (as defined
in Section 424 of the Internal Revenue Code of 1986, as amended) with respect to
the Company.
(h) "Participant" means any Nonemployee Director who receives an
Award pursuant to the terms of the Plan.
(i) "Plan" means The Centris Group, Inc. 1991 Directors Stock Option
Plan, as set forth herein, as amended from time to time.
(j) "Stock Option" means a right to purchase Common Stock which is
the subject of an Award under this Plan.
1.4 Common Shares Subject to Plan.
(a) Subject to the provisions of Section 1.4(c) and 4.1, the maximum
number of shares of Common Stock which may be issued pursuant to Awards under
this Plan shall not exceed 300,000 shares (as adjusted for the February, 1998
--------------------------------------------------
100% stock split).
- -----------------
(b) The shares of Common Stock to be delivered under the Plan shall
be made available, at the discretion of the Board of Directors, either from
authorized but unissued shares of Common Stock, or from previously issued shares
of Common Stock reacquired by the Company, including shares purchased in the
open market.
(c) Shares of Common Stock, subject to the unexercised portion of any
Stock Option granted under this Plan that expires, terminates or is canceled,
will again become available for grant of further Awards under this Plan.
3.
<PAGE>
II. Awards of Stock Options
2.1 Award Grants.
(a) Each Nonemployee Director who is serving as a member of the Board
of Directors as of July 26, 1995 shall automatically be granted, effective as of
July 26, 1995, an Award consisting of Stock Options covering 6,000 shares (as
----------------
adjusted) of Common Stock.
- --------
(b) Each Nonemployee Director who is serving as a member of the Board
of Directors on the third business day following the 1996 Annual Meeting of
Stockholders shall automatically be granted an Award consisting of Stock Options
covering 6,000 shares (as adjusted) of Common Stock, effective as of the date of
-------------------------
such grant.
(c) Each Nonemployee Director who is serving as a member of the Board
of Directors on the third business day following the Annual Meeting of
Stockholders of every calendar year commencing with the 1997 Annual Meeting of
Stockholders shall automatically be granted an Award, effective as of the date
of such grant, consisting of Stock Options covering between 6,000 and 9,000
---------------
shares (as adjusted) of Common Stock, the exact number of Stock Options to be
- -------------------
determined based on the following formula: (i) if the Company's Return On
Equity is 15% or less, the grant shall be for options representing 6,000 shares
------------
(as adjusted); (ii) if the Return On Equity is more than 15% but less than 18%,
- ------------
the grant shall be for options representing 8,000 shares (as adjusted); and
-------------------------
(iii) if the Return On Equity is greater than 18%, the grant shall be for
options representing 9,000 shares (as adjusted).
-------------------------
(d) Each Nonemployee Director who is newly appointed or elected as
such after the third business day following the Annual Meeting of Stockholders
of any calendar year, but prior to the Annual Meeting of Stockholders of the
next calendar year, shall, upon the date of such appointment or election,
automatically be granted an Award consisting of Stock Options covering that
number of shares of Common Stock (exclusive of fractional shares) equal to the
product of 3,000 multiplied by a fraction the numerator of which is the number
of days until the next Annual Meeting of Stockholders and the denominator of
which is 365.
2.2 Return on Equity. For purposes of this Article II, "Return On
Equity" for any fiscal year shall mean net income for such fiscal year as
determined by generally accepted accounting principles, divided by stockholders'
equity as of December 31 of the prior fiscal year as reported in the Company's
audited consolidated financial statements.
2.3 Award Procedures. All Nonemployee Directors shall receive Awards
under this Plan, which Awards shall be granted automatically as provided in this
Article II. A Nonemployee Director to whom an Award has been made shall be
notified of the Award, and the Company shall promptly cause to be prepared and
executed a written agreement evidencing the Stock Options which are the subject
of such Award.
2.4 Securities Law Requirements. Shares of Common Stock shall not be
offered or issued under this Plan unless the offer, issuance and delivery of
such shares shall comply with all applicable provisions of law, domestic or
foreign, including, without limitation, the
4.
<PAGE>
Securities Act of 1933, as amended, the California Corporate Securities Law of
1968, as amended, and the requirements of any stock exchange upon which the
Common Stock may then be listed. As a condition precedent to the issuance of
shares of Common Stock pursuant to an Award, the Company may require the
Participant to take any reasonable action to comply with such requirements.
III. Stock Options
3.1 Purchase Price. The purchase price of Common Stock issuable upon
exercise of each Stock Option shall be the Fair Market Value, as of the date of
grant of the Stock Option, of the Common Stock subject to such Stock Option.
3.2 Stock Option Term. Unless earlier exercised or terminated pursuant
to the provisions of Sections 3.3 or 3.4 of this Article III, each Stock Option
shall expire and no longer be exercisable on a date which is ten years after the
date of grant.
3.3 Exercise of Stock Options.
(a) Options covering 25% of the shares of Common Stock subject to a
grant of Stock Options shall become exercisable upon the expiration of one full
year of service as a Nonemployee Director of the Company following the date of
grant of such Stock Options and may thereafter be exercisable until the Stock
Options are exercised or expire as provided in this Article III. Options
covering the remaining 50% of the shares of Common Stock subject to such Stock
Option grant shall become exercisable upon the expiration of two full years of
service as a Nonemployee Director of the Company following the date of grant of
such Options and may thereafter be exercisable until the Stock Options are
exercised or expire as provided in this Article III.
(b) At the time of the exercise of a Stock Option, the purchase price
shall be paid in full in cash, or in shares of Common Stock valued at their Fair
Market Value as of the exercise date. No fractional shares will be issued
pursuant to the exercise of a Stock Option, nor will any cash payment be made in
lieu of fractional shares. Holders of Stock Options may purchase fewer than the
total number of shares of Common Stock granted in a Stock Option, provided that
a partial exercise of a Stock Option may not be for less than 100 shares, unless
fewer than 100 shares remain unexercised in an Award in which case the entire
remaining Stock Option must be exercised at one time.
3.4 Termination of Director Status. In the event that the holder of
Stock Options ceases to be a director of the Company as a result of death,
--------------------
disability or retirement ("Termination"), and provided that such holder has been
- --------------------------------------------------------------------------------
a director of the Company for at least one year at the time of Termination, all
- -------------------------------------------------------------------------------
Stock Options granted to a Director, whether or not exercisable on the effective
- --------------------------------------------------------------------------------
date of such Termination, shall not expire at that time, but shall thereafter
- -----------------------------------------------------------------------------
continue to be exercisable by the Option holder (or, in the event of the death
- ------------------------------------------------------------------------------
of the Option holder, by the transferee holder pursuant to a will or in
- -----------------------------------------------------------------------
accordance with the laws of descent and distribution) until expiration of the
- -----------------------------------------------------------------------------
applicable option term. In the event the option holder dies within one year of
- ------------------------------------------------------------------------------
initial election or appointment to the Board, the options will
- --------------------------------------------------------------
5.
<PAGE>
continue to be exercisable by will or according to the laws of descent and
- --------------------------------------------------------------------------
distribution for a period of three years following the date of death. If for any
- --------------------------------------------------------------------------------
reason other than death an optionee ceases to be a Director within one year of
- ------------------------------------------------------------------------------
the Director's initial election or appointment to the Board, any options granted
- --------------------------------------------------------------------------------
under the Director Plan and held by such Director shall be canceled as of the
- -----------------------------------------------------------------------------
date of such termination.
- ------------------------
3.5 Rights With Respect to Common Stock. No Participant and no
beneficiary or other person claiming under or through such Participant will have
any right, title or interest in or to any shares of Common Stock subject to any
Stock Option unless and until such Stock Option is duly exercised pursuant to
the terms of this Plan.
IV. Adjustment Provisions
4.1 Changes in Outstanding Securities. Subject to Section 4.2 below, (i)
if the outstanding shares of Common Stock of the Company are increased,
decreased or exchanged for a different number or kind of shares or other
securities of the Company, or if additional shares or different shares or other
securities of the Company are distributed in respect of such shares of Common
Stock (or any stock or securities received with respect to such Common Stock),
through reorganization, recapitalization, reclassification, stock dividend,
stock split, reverse stock split, spin-off or other distribution with respect to
such shares of Common Stock (or any stock or securities received with respect to
such Common Stock), or (ii) of the value of the outstanding shares of Common
Stock of the Company is reduced by reason of an extraordinary cash dividend, an
appropriate or proportionate adjustment may be made in (x) the maximum number
and kind of shares provided in Section 1.4 of Article I, and (y) the number and
kind of shares or other securities subject to then outstanding Stock Options,
and (z) the purchase or exercise price for each share of Common Stock subject to
an outstanding Stock Option.
4.2 Change of Control. In addition to the adjustments permitted by
Section 4.1 above, upon the occurrence of a Change in Control any outstanding
Stock Options not theretofore exercisable shall immediately become exercisable
in their entirety, notwithstanding any of the other provisions of the Plan.
4.3 Termination of Independent Corporate Status. Upon the dissolution or
liquidation of the Company or upon a reorganization, merger or consolidation of
the Company with one or more corporations, as a result of which the Company goes
out of existence or becomes a subsidiary of another corporation, or upon a sale
of substantially all of the property of the Company to another corporation (in
each of such cases a "Corporate Termination Event"), this Plan shall terminate.
Any Stock Option theretofore granted under the Plan and not exercised on or
prior to the Corporate Termination Event shall expire and terminate, unless
provision be made in writing in connection with such Corporate Termination Event
for the assumption of the Stock Option or the substitution for such Stock Option
of a new option covering the stock of a successor corporation, or a parent or
subsidiary thereof or of the Company, with appropriate adjustments as to number
and kind of shares and prices, in which event such Stock Option shall continue
in the manner and under the terms so provided.
6.
<PAGE>
4.4 Other Adjustments. Adjustments under this Article IV will be made by
the Board, whose determination as to what adjustments will be made and the
extent thereof will be final, binding and conclusive. No fractional interests
will be issued under the Plan resulting from any such adjustments.
V. Miscellaneous Provisions
5.1 Amendment, Suspension, Termination or Interpretation of the Plan.
(a) The Board may at any time amend, suspend or terminate the Plan;
provided, however, that no such action shall:
(i) increase the maximum number of shares specified in Section
1.4(a) of Article I, unless approved by the stockholders of the Company;
(ii) alter, terminate or impair in any manner which is materially
adverse to a Participant any Award previously granted;
(iii) change the nondiscretionary manner in which Awards are made
under Article II; or
(iv) change, more than once in any six-month period, provisions
of the Plan dealing with the amount of any Award, the purchase price of the
Common Stock which is the subject of any Award, the timing of the grant of any
Awards, or the exercisability features of Awards.
(b) Questions of interpretation of any of the provisions of the Plan
shall be resolved by competent legal counsel for the Company selected by the
Chief Executive Officer of the Company.
5.2 Effective Date and Duration of Plan. This Plan has been approved by
the Board and shall become effective as of March 27, 1996, subject to its
approval by the holders of a majority of the outstanding shares of Common Stock
present in person or by proxy and entitled to vote at the first meeting of the
stockholders of the Company occurring after March 27, 1996. This Plan shall
terminate at such time as the Board, in its discretion, shall determine. No
Award may be granted under the Plan after the date of such termination, but such
termination shall not affect any Award theretofore granted and any shares of
Common Stock subject thereto.
5.3 Director Status. Nothing in this Plan or in any instrument executed
pursuant hereto shall confer upon any Nonemployee Director any right to continue
as a member of the Board of Directors of the Company or any subsidiary thereof.
5.4 No Entitlement to Shares. No Nonemployee Director (individually
or as a member of a group) and no beneficiary or other person claiming under or
through such Nonemployee Director shall have any right, title or interest in or
to any shares of Common
7.
<PAGE>
Stock allocated or reserved for the purpose of the Plan or subject to any Award
except as to such shares of Common Stock, if any, as shall have been issued to
such Nonemployee Director. A Nonemployee Director's rights to any shares of
Common Stock issued to the name of such Nonemployee Director pursuant to an
Award under this Plan shall be subject to such limitations and restrictions as
are set forth in or imposed pursuant to this Plan.
5.5 Withholding of Taxes. The Company may make such provisions as it
deems appropriate for the withholding by the Company pursuant to federal or
state income tax laws of such amounts as the Company determines it is required
to withhold in connection with any Award. The Company may require a Participant
to satisfy any relevant tax requirements before authorizing any issuance of
Common Stock to such Participant or payment of any other benefit hereunder to
such Participant. Any such settlement shall be made in the form of cash, a
certified or bank cashier's check or such other form of consideration as is
satisfactory to the Board.
5.6 Transferability. No Award granted under this Plan shall be
assignable or transferable except (i) by will or by the laws of descent and
distribution, or (ii) subject to the final sentence of this Section 5.6, upon
dissolution of marriage pursuant to a qualified domestic relations order or, in
the discretion of the Committee and under circumstances that would not adversely
affect the interest of the Company, pursuant to a nominal transfer that does not
result in a change in beneficial ownership. During the lifetime of a
Participant, an Award granted to such person shall be exercisable only by the
Participant (or the Participant's permitted transferee) or such person's
guardian or legal representative. Notwithstanding the foregoing, no Award may be
assigned or transferred in any manner inconsistent with Rule 16b-3.
5.7 Other Plans. Nothing in this Plan is intended to be a substitute
for, or shall preclude or limit the establishment or continuation of, any other
plan, practice or arrangement for the payment of compensation or benefits to
directors generally, which the Company now has or may hereafter lawfully put
into effect, including, without limitation, any retirement, pension, insurance,
stock purchase, incentive compensation or bonus plan.
5.8 Singular, Plural; Gender. Whenever used herein, nouns in the
singular shall include the plural, and the masculine pronoun shall include the
feminine gender, as the context may require.
5.9 Applicable Law. This Plan shall be governed by, interpreted under
and construed and enforced in accordance with the internal laws of the State of
Delaware.
5.10 Successors. The Plan and any agreement with respect to an Award
shall be binding upon the successors and assigns of the Company and upon each
Participant and such Participant's heirs, executors, administrators, personal
representatives, permitted assignees and successors in interest.
8.
<PAGE>
THE CENTRIS GROUP, INC.
-----------------------
1997 LONG-TERM INCENTIVE - PERFORMANCE UNIT PLAN
I. INTRODUCTION
1.1 This document describes the terms and conditions of The Centris Group,
------------------
Inc. 1997 Long-Term Incentive - Performance Unit Plan pursuant to which
- ---
Performance Units may be granted to eligible officers of the Company and its
subsidiaries. The following statements summarize the principal provisions of
the Plan, against which the Board or the Compensation Committee of the Board, in
their sole discretion shall interpret and administer the Plan.
1.2 The Long-Term Incentive - Performance Unit Plan was approved by the
Compensation Committee of the Board of Directors of the Company on September 17,
1996 and by the Board of Directors of the Company on December 4, 1996 and
January 29, 1997, subject to approval by the holders of a majority of the
outstanding shares of Common Stock present in person or by proxy and entitled to
vote at the Company's Annual Meeting of Stockholders to be held in May 1997.
The Plan is not subject to any provision of the Employee Retirement Income
Security Act of 1974, as amended, and is not required to be qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended. The Plan was
amended as of May 14, 1997 to reflect the Company's new name adopted as of that
date.
II. DESCRIPTION
2.1 The Plan provides for the Grant of Performance Units to eligible
officers of the Company and its subsidiaries, contingent on the Company
achieving specific predetermined operating targets. The number of Performance
Units awarded will be determined based on actual performance over the
Performance Period relative to target.
III. PURPOSE
3.1 The purpose of the Plan is to reward key executives for the Company's
long-term operating performance. The underlying purpose and objective is to
further the interests of the Company by providing incentives for individuals to
become or remain employees of the Company or its subsidiaries through the
granting of long-term incentives such as Performance Units granted under the
Plan.
IV. DEFINITIONS
4.1 The following terms shall have the following meanings for purposes of
the Plan:
a) "Agreement" shall mean a document executed by the Company for an
individual participant describing the specific terms and conditions of a Grant
issued under the Plan.
b) "Board" shall mean the Board of Directors of The Centris Group, Inc.
----------------------
<PAGE>
c) "Base Compensation" shall mean the Participant's base salary at the time
the Performance Unit Grant is made.
d) "Change in Control" means the following and shall be deemed to occur if
any of the following events occur:
(i) Any "person," as such term is used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), is or
becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange
Act), directly or indirectly, of securities of the Company representing 25% or
more of the combined voting power of the Company's then outstanding voting
securities;
(ii) Individuals who, as of the date of the Plan, constituted the
Board of Directors ("Incumbent Board") cease for any reason to constitute at
least a majority of the Board, provided that any person becoming a director
subsequent to such date whose election, or nomination for election by the
Company's stockholders, is approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of the office is in
connection with an actual or threatened election contest relating to the
election of the directors of the Company, as such terms are used in Rule 14a-11
of Regulation 14A promulgated under the Exchange Act) shall, for the purposes of
the Plan, be considered as though such person were a member of the Incumbent
Board;
(iii) The stockholders of the Company approve a merger or
consolidation with any other corporation, other than
(A) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of another entity) more than 50% of the combined voting power of the
voting securities of the Company or such other entity outstanding immediately
after such merger or consolidation, or
(B) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no person
acquired 50% or more of the combined voting power of the Company's then
outstanding voting securities; or
(iv) The stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or other disposition by
the Company of all or substantially all of the Company's assets.
Notwithstanding the preceding provisions of this Section 4.1(d), a Change
in Control shall not be deemed to have occurred (1) if the "person" described in
clause (i) of the preceding provisions of this Section 4.1(d) above (1) is an
underwriter or underwriting syndicate that has acquired the ownership of 50% or
more of the combined voting power of the Company's then outstanding voting
securities solely in connection with a public offering of the
<PAGE>
Company's securities; (2) is the Company, any wholly owned subsidiary of the
Company, any employee benefit plan of the Company or of a subsidiary of the
Company, or any person holding voting shares for or pursuant to the terms of any
such employee benefit plan; or (3) would not otherwise be a beneficial owner of
25% or more of the combined voting power of the Company's then outstanding
voting securities but for a reduction in the number of outstanding voting
securities resulting from a stock repurchase program or other similar plan of
the Company or from a self tender offer of the Company, which plan or tender
offer commenced on or after the date hereof; provided, however, that the term
"person" shall include such person from and after the first date upon which (A)
such person, since the date of the commencement of such plan or tender offer,
shall have acquired beneficial ownership of, in the aggregate, a number of
voting securities of the Company equal to 1% or more of the voting securities of
the Company then outstanding, and (B) such person, together with all affiliates
and associates of such person, shall beneficially own 25% or more the voting
securities of the Company then outstanding.
In calculating the percentage of the person for purposes of this
subsection, voting shares that are beneficially owned by such person shall be
deemed outstanding, and voting shares that are not beneficially owned by such
person and that are subject to issuance upon the exercise or conversion of
outstanding conversion rights, exchange rights, rights (other than rights),
warrants or options shall not be deemed outstanding. Any determination made by
the Committee as to whether any person is or is not a 25% stockholder for
purposes of this subsection shall be conclusive and binding upon the Company and
upon all stockholders.
e) "Code" shall mean the Internal Revenue Code of 1986, as amended.
f) "Committee" shall mean the Compensation Committee of the Board of
Directors, appointed by the Board, constituted of persons who meet the
requirements for being "non-employee directors" of the Company Plan pursuant to
Rule 16b-3 under the Exchange Act and persons who are considered "outside
directors" within the meaning of the regulations under Section 162(m) of the
Code if the Award granted by the Committee is intended to constitute
Performance-Based Compensation.
g) "Company" shall mean The Centris Group, Inc., a Delaware corporation
----------------------
(formerly known as "US Facilities Corporation"), including any subsidiaries and
affiliates or any successors thereto.
h) "Date of Grant" shall mean the date the Committee determines to Grant
Performance Units to a Participant as reflected in an Agreement.
i) "Disability" shall mean that because of injury or sickness a person
cannot perform each of the material duties of his or her regular occupation.
j) "Employee" shall mean an employee of the Company. For purposes of
Grants of Performance Units under this Plan, the term Employee shall be limited
to officers of the Company.
<PAGE>
k) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
l) "Grant" shall mean a Grant of Performance Units made to eligible
Participants at the beginning of the Performance Period.
m) "Outside or Non-employee Director" shall mean a member of the Board
that is not currently an employee of the Company.
n) "Participant" shall mean an officer of the Company selected by the
Committee to participate in the Plan.
o) "Payout" shall mean a payment of the Award to the Participants,
calculated at the end of each Performance Period.
p) "Performance Units" shall mean the number of Units granted to eligible
Participants at the beginning of each Performance Period, calculated as the
Participant's Target Award divided by the Unit Value.
q) "Performance-Based Compensation" shall mean performance-based
compensation as described in Section 162(m) of the Code and the regulations
thereunder.
r) "Plan" shall mean this The Centris Group, Inc. 1997 Long-Term
----------------------
Incentive - Performance Unit Plan.
s) "Retirement" shall mean severance from employment with the Company at
or after the attainment of age sixty-five (65).
t) "Return on Equity" or "ROE" for any year, determined at the end of
such fiscal year, shall mean net income of the Company for such fiscal year as
determined by generally accepted accounting principles (GAAP) divided by
stockholders' equity recorded at the beginning of such fiscal year. ROE for
purposes of this Plan as specified below shall mean the average Return on Equity
for the three year Performance Period as defined below. The Committee shall
determine ROE in good faith and its determination shall be conclusive and
binding on the Plan and Plan Participants.
u) "Subsidiary" shall mean any corporation (other than the Company) in an
unbroken chain of corporations beginning with the Company if, at the time of
granting of Performance Units, each of the corporations other than the last
corporation in the unbroken chain owns stock possessing fifty percent (50%) or
more of the total combined voting power of all classes of stock in one of the
corporations in such chain.
v) "Target Award", expressed as a percent of Base Compensation,
determines the number of Performance Units granted to the Participants at the
beginning of the Performance Period.
<PAGE>
w) "Unit Value" shall be $10.00, or other value determined by the
Committee.
V. ADMINISTRATION
5.1 The Plan shall be administered by the Committee. The Committee shall
be appointed by the Board and shall consist of not less than two Outside
Directors of the Company, none of whom are eligible to participate in the Plan.
The Board may, from time to time, remove members from, or add members to, the
Committee. Vacancies on the Committee, however caused, shall be filled by the
Board. The Board shall appoint one (1) of the members of the Committee as
Chair. The Committee shall hold meetings at such times and places as it may
determine. Acts of a majority of the Committee at which a quorum is present, or
which are approved in writing by all the members of the Committee, shall be the
valid acts of the Committee.
5.2 The Committee has the general authority to interpret the provisions of
the Plan and adopt such rules as it deems necessary and desirable for the
administration of the Plan. Among its functions are the selection of
participants and determination of the kind, number, amounts, terms and
conditions of Grants, Awards and Payouts made under the Plan to such persons.
The determinations of the Committee are binding on Plan Participants. No member
of the Committee shall be held liable for any action or determination made in
good faith with respect to the Plan or any Performance Units granted thereunder.
VI. ELIGIBILITY
6.1 For purposes of the Plan, to begin as of the Effective Date, the
Committee has determined that Plan Participants shall include the Company's
president and chief executive officer; senior vice president and president of
USF RE Insurance Company; senior vice president and president of USBenefits
Insurance Services, Inc.; executive vice president of corporate finance and
investor relations; senior vice president and chief financial officer; senior
vice president, secretary and general counsel; and executive vice president of
USF RE Insurance Company.
6.2 Subsequent to the Plan's Effective Date, the Committee shall, in its
discretion, and at any time during the life of the Plan, determine who shall be
deemed to be a Participant in the Plan.
6.3 In order to receive Awards under the Plan, a Participant must be
employed by the Company and have maintained employment with the Company for at
least two (2) years preceding Payouts. If a Participant terminates his/her
employment or is terminated by the Company for any reason, all Performance Units
previously granted and Awarded, but not paid out, will be forfeited, and no
Payouts associated with such Grants will be made to the Participant.
6.4 Participants entering the Plan at any time during the course of the
Company's fiscal year will be eligible for grants of Performance Units in the
year in which he/she is first deemed a Participant of the Plan by the Committee.
The Participant will not be eligible for
<PAGE>
Awards or Payouts associated with Performance Periods begun in any year
preceding the year in which the Participant becomes a Participant in the Plan.
VII. TERMS
7.1 Grants
The Committee shall determine the number of Performance Units to be
granted to each Participant. Participants are granted Performance Units at the
beginning of the Performance Period with Payouts contingent on the Company
meeting predetermined ROE targets. The number of Performance Units granted to
each Participant is calculated as the Participant's Target Award, as defined in
Section 7.4, determined by the Committee, multiplied by the participant's Base
Compensation. The resulting dollar amount is then divided by $10.00 (or other
unit value determined by the Committee) which results in the number of
Performance Units to be granted.
7.2 Performance Period
The Performance Period refers to the period of time for which the
Company's operating performance will be measured against predetermined targets.
For purposes of the Plan, the Performance Period is three (3) years in length,
with the first Performance Period to begin on January 1, 1997, the Plan's
Effective Date, and to end on December 31, 1999. Subsequent three- year
Performance Periods will begin annually on the first anniversary of the
Effective Date and on each anniversary date thereafter.
7.3 Performance Measure
The Performance Measure refers to the measure used to determine Awards
following each Performance Period. For purposes of the Plan, the Committee has
selected ROE as the Performance Measure to be used in the Plan. The Committee
will calculate ROE at the close of each Performance Period.
7.4 Target Awards
For purposes of the Plan, Participants are each assigned a Target Award
by the Committee, expressed as a percent of Base Compensation, based upon such
factors as the Committee may deem appropriate, in its sole discretion,
including, but not limited to, the Participants' position in the Company, their
roles and responsibilities, and the overall impact of their contributions on the
Company's performance.
7.5 Performance Threshold
For purposes of the Plan, the Committee has determined that the Company
should meet a minimum level of operating performance, or Performance Threshold,
for any Payouts to be made from the Plan. It is the determination of the
Committee that the Company
<PAGE>
achieve at least a thirteen (13) percent average ROE over the Performance Period
in order for Payouts to be made during the first Performance Period, or any
portion of it. The Committee shall establish the Performance Threshold for each
subsequent Performance Period. Notwithstanding the above, if the Performance
Threshold is not attained with respect to any Performance Period, the Committee
shall have the right in its sole discretion and subject only to any required
approvals by the Board of Directors, and in conformity with the non-
discretionary requirements of Section 162(m) of the Code, to make Awards in such
amounts and to such persons as the Committee determines should receive the
Awards. If the Performance Threshold is not attained over the Performance
Period, any Performance Units granted for such Performance Period may still be
awarded as determined under the sole discretion of the Committee subject to
Board approval.
7.6 Performance Levels and Awards
a) The Committee has determined that four (4) Performance Levels
initially be used to determine Plan Payouts. The performance levels will be
defined as follows:
i) Below Target Performance will refer to the Company achieving a
ROE over the Performance Period of at least thirteen (13) percent but less than
fifteen (15) percent. If Below Target Performance is achieved then Participants
in the Plan will receive a Payout equal to at least fifty (50) percent of their
individual Performance Unit Grant.
ii) Target Performance will refer to the Company achieving a ROE
over the Performance Period of at least fifteen (15) percent but less than
seventeen (17) percent. If Target Performance is attained then Participants in
the Plan will receive a Payout equal to at least one-hundred (100) percent of
their individual Performance Unit Grant.
iii) Above Target Performance will refer to the Company achieving
ROE over the Performance Period of at least seventeen (17) percent but less than
eighteen (18) percent. If Above Target Performance is attained then Participants
will receive a Payout equal to at least one-hundred and twenty-five (125)
percent of their individual Performance Unit Grant.
iv) Well-Above Target Performance will refer to the Company
achieving ROE over the Performance Period of at least eighteen (18) percent. If
Well-Above Target Performance is attained then Participants will receive a
Payout equal to one-hundred and fifty (150) percent of their individual
Performance Unit Grant.
b) The Committee reserves the right to change or modify the
Performance Levels at any time and without notice to Plan Participants, provided
that any changes or modifications will not apply to any Performance Units
granted prior to the effective date of such changes or modifications.
<PAGE>
7.7 Payouts
a) Providing the Company meets the Performance Threshold, Payouts
earned by the Participants will be automatically deferred into the Company's
Non-Qualified Deferred Compensation Plan, approved by the Committee on December
4, 1996.
b) Payouts will be calculated by multiplying the value of the
Performance Units awarded to the Participants by the Performance Level achieved,
as defined in Section 7.5 and 7.6.
c) Payouts earned will be determined as soon as practicable following
the year in which the Performance Period ends. The Committee will certify, in
writing, the accuracy of Awards prior to Payouts being made.
d) The CEO shall have the authority, subject only to approval by the
Committee and the Board, and in conformity with the non-discretionary
requirements of Section 162(m) of the Code, to adjust a Participant's Payout to
take into account strategic and financial events, conditions or results,
including, but not limited to, recognizing a Participant's business unit's
results which had a significant impact on the Company's overall Company
financial results for any Performance Period.
VIII. MISCELLANEOUS PROVISIONS
8.1 Amendments and Termination
a) The Committee may from time to time suspend or terminate the Plan
or amend or revise the terms of the Plan, provided that any material amendment
to the Plan shall be approved by the Board or the Company's stockholders, as may
be required in each case.
b) No amendment, suspension or termination of the Plan shall, without
the consent of the Participants who have received a Payout, alter or impair any
rights or obligations under any Payout previously granted under the Plan.
8.2 Nontransferability of Awards
The Participant may not transfer, assign, pledge or hypothecate any
Performance Units granted under this Plan. Performance Awards may only be
transferred pursuant to the Participant's will, or the laws of descent and
distribution, or to a revocable trust created by the Participant for the benefit
of the Participant or the Participant's family of which the Participant is the
sole trustee.
8.3 Continuation of Employment
Nothing contained in the Plan or any Performance Unit granted under
the Plan shall confer upon any Participant any rights with respect to
continuation of employment by the
<PAGE>
Company, nor shall this Plan or any individual agreement issued pursuant hereto
be deemed a contract of employment, or in any manner alter the "at will"
employment relationship that exists between the Company and its employees.
8.4 Termination of Employment
a) If a Participant terminates employment for any reason other than
death, Disability or Retirement, any Performance Units previously granted and
not paid out shall be forfeited.
b) If a Participant terminates employment for reasons of death,
Disability, or retirement, the Participant, the beneficiary, the legal
representative or the named beneficiary of the Participant (if the Participant
is legally incapacitated or deceased) shall be entitled to receive, a portion or
all of the Payout, providing the Company has achieved Threshold Performance, as
the Committee shall determine in good faith, but in no event less than the
target award multiplied by a fraction, the numerator or which shall be the
number of months elapsed from the Date of Grant, and the denominator which shall
be the number of months in a Performance Period.
8.5 Adjustments
a) In the event an extraordinary event occurs, such as a
recapitalization, merger, consolidation, or other similar event, if the
Committee shall determine, in its sole discretion, that such change equitably
requires an adjustment in the calculation of ROE, performance levels, or award
payouts, such calculation or ROE, performance levels, or award payouts, in
conformity with the non-discretionary requirements of Section 162(m) of the
Code, may be appropriately adjusted by the Committee.
b) Notwithstanding Section 8.5(a) above, upon the dissolution or
liquidation of the Company, or upon any Change in Control, either
(i) Payouts with respect to Performance Units granted and
outstanding shall be made to Participants in the Plan, in consideration of the
Company's actual ROE performance over the Performance Period, to date, relative
to Target Performance, providing that the Company has achieved its predetermined
Performance Threshold, or
(ii) Payouts with respect to Awards determined by the Committee,
but not yet paid, shall be made to Participants in the Plan.
8.6 Effective Date
This Plan shall become effective on January 1, 1997 subject to approval
by the Company's stockholders, and shall continue in effect for subsequent years
unless it is terminated or amended by the Committee.
<PAGE>
8.7 Code Section 162(m)
(a) It is the intent of the Company that all Payouts under the Plan
qualify as performance-based compensation for purposes of Code Section
162(m)(4)(C) so that the Company's tax deduction for such Payouts is not
disallowed in whole or in part under Code Section 162(m). The Plan is to be
applied and interpreted accordingly.
(b) The Committee may from time to time suspend, revise, amend or
terminate the Plan; provided, however, that any such amendment or revision which
requires approval of the Company's stockholders in order to maintain the
qualifications of Payouts as performance-based compensation pursuant to Code
Section 162(m)(4)(C) shall not be made without such approval.
8.8 Governing Law
The Plan shall be governed by and construed and enforceable in
accordance with the laws of the state of California.
8.9 Notice
Any notice or filing required or permitted to be given to the Company
shall be sufficient if in writing and hand delivered or sent by U.S. mail,
postage prepaid, or Federal Express or any other recognized courier service to
the principal office of the Company directed to the attention of the Company's
Vice President of Human Resources. Any notice to the Participant must be in
writing and is effective when hand delivered or sent by U.S. mail, postage
prepaid, or Federal Express or any other recognized courier service to the
Participant or his personal representatives at his her last address on record
with the Company.
8.10 Gender, Singular and Plural
All pronouns and any variations thereof shall be deemed to refer to
the masculine, feminine or neuter as the identity of the person or persons may
require. As the context may require, the singular may be read as the plural and
the plural as the singular.
8.11 Captions
The captions to the sections and paragraphs of the Plan are for
convenience only and shall not control or effect the meaning or construction of
any of its provisions.
8.12 Withholding of Taxes
In the event the Company determines that it is required to withhold
state or federal or Social Security taxes, the Company shall have the authority
to withhold from the Participants such required state and federal income taxes
as it deems appropriate.
<PAGE>
8.13 Legality of Issuance
The Company shall not be under any obligation to make payment with
respect to any Performance Units unless and until the Company has determined
that all applicable provisions of state and federal income tax laws have been
satisfied.
8.14 Adoption of the Plan
The date of adoption of this The Centris Group, Inc. 1997 Long-Term
-----------------------
Incentive - Performance Unit Plan shall be the date upon which the Board of
Directors approved the Plan, subject to ratification by the Stockholders of the
Company at the 1997 Annual Meeting of Stockholders to be held in May, 1997.
<PAGE>
THE CENTRIS GROUP, INC.
1997 LONG-TERM INCENTIVE - PERFORMANCE UNIT PLAN
AGREEMENT
This Agreement is made and entered into this ____ day of _____________, ____, by
and between The Centris Group, Inc., a Delaware Corporation (the "Company"), and
_____________________________ (the "Participant"), pursuant to The Centris
Group, Inc. 1997 Long-Term Incentive - Performance Unit Plan (the "Plan").
Section 1. Grant of Performance Units. The Compensation Committee of the
Company's Board of Directors (the "Committee") hereby grants to the Participant
____________ Performance Units. The effective date of grant is January 1, ____.
Each Performance Unit shall have a grant value of $____ and is granted pursuant
to the Plan. The Participant acknowledges having received and read the text of
the Plan, the terms and conditions of which are incorporated into this Agreement
by reference thereto. In the event of a conflict between this Agreement and the
Plan, the terms and conditions of the Plan shall prevail.
Section 2. Performance Period. The Performance Period for this grant shall be
the three (3) year period from January 1, ____ through December 31, 20__.
Section 3. Payouts. Payouts (as defined in the Plan) shall be determined at
the end of the Performance Period on the basis of the Company's actual ROE (as
defined in the Plan) over the performance period relative to predetermined ROE
targets as set forth in the Plan. Payouts under the Plan shall be automatically
deferred into the Company's Non-Qualified Deferred Compensation Plan.
Section 4. Determinations. All determinations, decisions, and interpretations
made under this Agreement by the Committee or the Board are made at their sole
discretion and shall be binding upon the Plan and the Participants.
Section 5. Termination of Employment. Amounts due to participants upon
termination of employment shall be determined in accordance with the provisions
of the Plan. Once Payouts are deferred to the Non-Qualified Deferred
Compensation Plan, they may be withdrawn only in accordance with the terms of
such plan.
Section 6. No Employment Rights. Nothing contained in this Agreement shall
confer upon any Participant any rights with respect to continuation of
employment by the Company, nor shall this Agreement be deemed a contract of
employment, or to alter in any manner the "at will" employment relationship that
exists between the Company and its employees.
<PAGE>
IN WITNESS WHEREOF, the Company and the Participant have executed this Agreement
as of the day and year first written above.
The Centris Group, Inc.
By:
--------------------------
Participant
- -----------------------------
<PAGE>
EXHIBIT 11
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
Computation of Earnings Per Share
The computation of per share income is based upon the weighted average number of
common and common equivalent shares outstanding during each year ended December
31, adjusted to reflect the February 27, 1998 two-for-one stock split. Such
information, presented in conformance with the provisions of Statement of
Financial Accounting Standards No. 128, "Earnings per Share", is as follows:
<TABLE>
<CAPTION>
(000 omitted, except for
per share data)
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
Net income...................................................... $15,212 $15,020 $13,854
Weighted average shares outstanding during
the period (Basic Shares).................................... 11,980 11,732 11,204
Common stock equivalent shares.................................. 174 218 252
--------- -------- --------
Common and common stock equivalent shares
outstanding for purposes of calculating
diluted income per share..................................... 12,154 11,950 11,456
========= ======== ========
Basic income per share.......................................... $ 1.27 $ 1.28 $ 1.24
Diluted income per share........................................ $ 1.25 $ 1.26 $ 1.21
</TABLE>
<PAGE>
EXHIBIT 13
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1997 1996 1995 1994 1993
(In thousands of dollars, except per share data)
INCOME STATEMENT DATA:
Premiums earned $159,533 $124,124 $114,971 $ 93,269 $ 83,206
Commissions and fees 33,635 26,722 25,994 23,583 21,736
Investment income including
realized investment gains 21,304 12,273 10,212 5,959 7,037
-------- -------- -------- -------- --------
Total revenues $214,472 $163,119 $151,177 $122,811 $111,979
======== ======== ======== ======== ========
Income before
income taxes $ 21,995 $ 20,162 $ 18,159 $ 7,382 $ 8,407
Net income $ 15,212 $ 15,020 $ 13,854 $ 6,238 $ 6,767
Diluted income per share* $ 1.25 $ 1.26 $ 1.21 $ .52 $ .57
Cash dividends per share $ .12 $ .12 $ .10 -- --
BALANCE SHEET DATA:
Total assets $343,248 $288,743 $249,872 $199,737 $154,723
-------- -------- -------- -------- --------
Notes payable $ 32,500 $ 35,000 $ 35,000 $ 25,000 --
-------- -------- -------- -------- --------
Stockholders' equity $117,590 $102,364 $ 88,061 $ 63,079 $ 63,333
-------- -------- -------- -------- --------
CASH FLOW DATA:
From operating activities $ 22,276 $ 27,794 $ 13,220 $ 16,469 $ 12,958
From investing activities (19,539) (25,461) (20,837) (36,406) (9,793)
From financing activities (2,747) 634 11,280 21,588 (1,337)
</TABLE>
*Share data adjusted to reflect the February 27, 1998 two-for-one stock split
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
BUSINESS OPERATIONS
The Centris Group, Inc. (the "Company") conducts business primarily in two
segments:
Medical lines includes medical stop-loss and provider excess coverages
underwritten by USBenefits Insurance Services, Inc. ("USBenefits") on behalf of
The Continental Insurance Company ("Continental"), one of the CNA Insurance
Companies, reinsurance of 50% of this business by USF RE INSURANCE COMPANY ("USF
RE") and catastrophic accident and health risks underwritten and managed
nationally and internationally by INTERRA Reinsurance Group, Inc. ("INTERRA").
USBenefits is the underwriting manager and marketing organization for medical
lines coverages issued on behalf of Continental and for group life insurance
coverage issued by an affiliate of Continental. Medical stop-loss coverage is a
form of excess insurance that protects employers that self-fund their employee
healthcare plans by capping their exposure from the risk of loss. Provider
excess coverage limits the financial risks healthcare providers face from
medical plans that prepay the providers fixed sums per plan participant
(capitated fees) or provide specified rates for services. USBenefits also
markets other employee benefits related products. Medical lines products are
marketed through a network of unaffiliated third party administrators, insurance
agents, brokers and consultants.
Substantially all commissions and fees and approximately 65%, 67% and 71% of
premiums earned for 1997, 1996 and 1995, respectively, arise from USBenefits'
and USF RE's relationship with Continental and its affiliate.
Property/Casualty reinsurance and insurance underwriting is conducted by USF RE
and its wholly-owned subsidiary USF Insurance Company ("USFIC"). These
subsidiaries both carry an "A" (Excellent) rating from A.M. Best Company and USF
RE is assigned a claims paying ability rating of Aq (Good) by Standard & Poor's.
Insurance companies purchase reinsurance in order to control and manage the
risks they accept when they issue policies. USF RE assumes facultative and
treaty reinsurance from unaffiliated insurance companies, primarily through
reinsurance intermediaries. Facultative is reinsurance of one risk at a time,
while reinsurance treaties cover a portion of all policies written by another
insurer in a particular risk category. USF RE concentrates its casualty writings
in commercial auto liability, general liability and products liability lines.
It also provides a broad range of coverages for most types of property
exposures. USFIC writes surplus lines insurance on commercial property/casualty
risks which are marketed through independent excess and surplus lines brokers.
ACQUISITIONS
In January, 1997 USBenefits acquired the operations of Global Excess Holdings,
Inc. ("Global") a Michigan based managing general underwriter of medical stop-
loss insurance that produced approximately $30,000,000 of medical stop-loss
premiums in 1996. The results of this operation have been incorporated into the
medical lines segment.
In early September, 1997 the Company acquired INTERRA, an Indianapolis based
company which manages and underwrites catastrophic accident and health risks
nationally and internationally. INTERRA brings fee income and underwriting
opportunities for the Company's risk assumption businesses in one of the fastest
growing sectors of the industry -- international accident and health insurance
and reinsurance. INTERRA underwrites on behalf of an unaffiliated life insurance
company and has expanded its operations to include underwriting accident and
health reinsurance for its affiliate, USF RE, and providing catastrophic claims
management services to the Company and its subsidiaries. INTERRA's results have
also been incorporated into the medical lines segment.
In late September, 1997 USF RE acquired from The Hanover Insurance Company its
Allmerica Re property/casualty treaty operation. This acquisition is expected to
give USF RE a more visible presence in the eastern United States while adding
approximately $24,000,000 of premium in 1998 as the existing business is renewed
by USF RE. The addition of an east coast treaty branch office enhances the
growth and development plans for the property/casualty treaty reinsurance
business and brings to the Company underwriting expertise in marine and
international reinsurance. The results of this operation have been incorporated
into the property/casualty segment.
Each of these transactions was accounted for as a purchase. The transactions
were not material to the financial statements of the Company. The results of
operations of each entity since the acquisition dates are included in the
accompanying consolidated financial statements.
<PAGE>
The Company continues to actively pursue accretive acquisition opportunities in
complementary business lines.
STOCK SPLIT
On February 3, 1998 the Company announced that its board of directors had
authorized a two-for-one split of its common stock in the form of a stock
dividend to stockholders of record as of February 18, 1998. Certificates
reflecting the stock split were issued on February 27, 1998. All share amounts
in the accompanying consolidated financial statements have been adjusted to
reflect the stock split.
RESULTS OF OPERATIONS
CONSOLIDATED RESULTS
The table below presents certain consolidated financial information regarding
the Company's operations.
<TABLE>
<CAPTION>
Year ended December 31, 1997 Change 1996 Change 1995
- ----------------------- ---- ------ ---- ------ ----
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Premiums earned $159,533 29% $124,124 8% $114,971
Commissions and fees 33,635 26% 26,722 3% 25,994
Net investment income 11,091 9% 10,147 10% 9,190
Realized investment gain 10,213 380% 2,126 108% 1,022
-------- --- -------- --- --------
Total revenues $214,472 31% $163,119 8% $151,177
======== === ======== === ========
Expenses:
Insurance expenses 171,267 37% 125,352 10% 113,707
General and administrative 18,837 26% 14,995 (12%) 17,052
Interest expense 2,373 (9%) 2,610 16% 2,259
-------- --- -------- --- --------
Total expenses 192,477 35% 142,957 7% 133,018
======== === ======== === ========
Income before income taxes 21,995 9% 20,162 11% 18,159
Income tax expense 6,783 32% 5,142 19% 4,305
-------- --- -------- --- --------
Net income $ 15,212 1% $ 15,020 8% $ 13,854
======== === ======== === ========
</TABLE>
Changes in revenues between the periods presented reflect the Company's
diversification in two distinct business segments. Increases in premiums earned
and commissions and fees in 1997 as compared to 1996 were primarily attributable
to growth in the property/casualty segment, additional medical-stop loss
business resulting from the January, 1997 Global acquisition and increased
production of provider excess coverage. Revenue changes between 1996 and 1995
primarily reflect managed growth in property/casualty lines.
Returns on invested assets are an integral element of results from operations.
Underwriting cash flows, which consist of premiums collected over losses and
expenses paid, and investment cash flows, which consist of income from existing
investments and proceeds from sales and maturities of investments, provide the
funds used to build the investment portfolio. The portfolio is managed based
upon Company guidelines which incorporate a variety of factors including the
relationship of invested assets to liabilities, total return, business needs,
regulatory requirements and tax considerations. Increases in net investment
income result from higher levels of invested assets in 1997 and 1996 due to
higher production levels in each business segment. Increases in realized gains
between years are generally a result of continuous evaluation of the investment
portfolio to enhance and maintain yields and total return consistent with the
Company's investment guidelines. To lessen its exposure to stock market
volatility, the Company realized $10,213,000 during 1997 in pre-tax gains
primarily from its equity portfolio.
<PAGE>
Insurance expenses are comprised of losses and loss adjustment expenses incurred
and policy acquisition expenses. Insurance and reinsurance companies establish
reserves for losses incurred, but not yet paid, in order to match such losses
with the related premiums earned. The process of establishing loss reserves is
subject to uncertainties that are a normal, recurring aspect of the insurance
business which requires the use of informed judgments and estimates. Loss and
loss adjustment expense reserve development is reviewed on a regular basis,
incorporating analysis of current trends, market changes in the Company's
business segments and historical experience to analyze the Company's actuarial
assumptions. As additional experience and other data becomes available, the
Company's actuarial estimates may be revised. Such revisions may impact
earnings. Policy acquisition expenses vary on the basis of market conditions and
mix of business.
The Company's focus on productivity and expense control continued to favorably
impact operations and resulted in maintaining general and administrative (G&A)
expenses at 9% of revenues in 1997 even with the effect of three strategic
acquisitions, compared to 9% of revenues in 1996 and 11% of revenues in 1995.
Net income for 1997 as compared to 1996 reflects the increases in revenues and
continuing control of G&A expenses, offset by third quarter reserve adjustments
in the medical lines segment. The increase in net income in 1996 as compared to
1995 resulted from increases in revenues and a decrease in consolidated G&A
expenses, as the company continued to increase productivity and control expenses
in relation to revenues, offset in part by higher claims cost in the medical
lines segment. Pre-tax income for 1995 was reduced by $695,000 in connection
with the March 1995 resignation of the Company's former Chief Executive Officer.
Income taxes as a percentage of pre-tax income fluctuate depending on the
proportion of tax exempt investment income to total pre-tax income and the
proportion of total income subject to state income taxes. The increase in the
effective income tax rate in 1997 primarily results from the tax effect of
acquired companies and utilization of tax benefits and changes in valuation
allowances which were available in prior periods.
BUSINESS SEGMENTS
The following tables present pre-tax operating information by business segment
and holding company operations (including realized gains) for the years ended
December 31, 1997, 1996 and 1995.
MEDICAL LINES
<TABLE>
<CAPTION>
Year ended December 31, 1997 Change 1996 Change 1995
- -------------------------- -------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Gross premiums written $103,673 23% $ 84,179 3% $ 81,546
Net premiums written 103,479 23% 84,179 3% 81,546
Revenues:
Premiums earned 103,479 23% 84,179 3% 81,546
Commissions and fees 33,335 25% 26,722 3% 25,994
Net investment income 3,605 9% 3,312 1% 3,269
-------- --- -------- --- --------
Total revenues 140,419 23% 114,213 3% 110,809
Expenses:
Losses and loss
adjustment 82,760 42% 58,095 6% 54,563
Policy acquisition 35,003 23% 28,526 5% 27,069
General and
administrative 13,328 32% 10,111 (16%) 12,025
-------- --- -------- --- --------
Total expenses 131,091 36% 96,732 3% 93,657
Income before income
taxes $ 9,328 (47%) $ 17,481 2% $ 17,152
</TABLE>
<PAGE>
Increases in revenues for 1997 are primarily due to additional medical stop-loss
business from the acquisition of Global in January 1997 combined with growth in
the provider excess line. Medical lines production increased by 3% in 1996 over
1995 due to strong retention of in-force accounts and controlled growth of the
provider excess line.
The change in medical lines pre-tax income between the 1997 and 1996 periods
primarily reflects third quarter additions of $8,000,000 to medical lines
reserves. The Company continually reviews its reserves as new information
becomes known and claim trends become more fully developed. The Company's third
quarter reserve review indicated increases in the severity and frequency of
specific and aggregate claims in the second half of 1996 and the first half of
1997. In addition, continuing competitive industry conditions resulted in less
improvement in premium rate levels than expected.
During the third quarter, the Company implemented a variety of pricing and
underwriting actions to support the underwriting profitability of this line of
business. Since healthcare costs vary depending on the size and nature of the
employer group and the geographic region, the Company has reviewed the
distribution of its business and implemented appropriate rating actions. The
Company's marketing efforts have become focused on larger groups where there is
more predictability and better opportunities to write profitable business. The
Company has taken specific rating actions in those regions of the country where
managed care is not firmly established. It also reduced the amount of business
written through producers whose book of business is less profitable.
Implementation of these strategies is restoring underwriting profitability to
the medical lines business, which is evident in improved fourth quarter results
for the segment, a trend which is expected to be sustained going forward.
Equally important, the more stringent standards established for the producer
network have resulted in higher quality of business without sacrificing growth
in the overall level of premium production. Pre-tax income in 1996 as compared
to 1995 reflects increases in the frequency and severity of claims which were
not fully offset by corresponding increases in premium rates, as well as the
effect of higher formula reserves incurred in 1996 in connection with greater
volume in the provider excess line.
Policy acquisition expenses vary due to the level of production activity, mix of
business and market conditions. Increases in general and administrative expenses
in 1997 primarily result from expenses related to the acquired Global
operations.
The segment information presented in the preceding table includes losses before
income tax of $1,156,000 for the year ended December 31, 1995 from the Company's
medical bill review operation which was closed effective May 31, 1995.
<TABLE>
<CAPTION>
PROPERTY/CASUALTY
Year ended December 31, 1997 Change 1996 Change 1995
- -------------------------- ------- ------- ------- -------- -------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Gross premiums written $86,270 31% $65,850 29% $50,915
Net premiums written 62,071 42% 43,799 24% 35,350
Revenues:
Premiums earned 56,054 40% 39,945 19% 33,425
Commissions and fees 300 -- --
Net investment income 7,424 10% 6,777 15% 5,872
------- -- ------- -- -------
Total revenues 63,778 37% 46,722 19% 39,297
Expenses:
Losses and loss
adjustment 42,311 41% 30,078 30% 23,180
Policy acquisition 11,193 29% 8,653 (3%) 8,895
General and
administrative 4,535 14% 3,988 21% 3,304
------- -- ------- -- -------
Total expenses 58,039 36% 42,719 21% 35,379
------- -- ------- -- -------
Income (loss) before
income taxes $ 5,739 43% $ 4,003 2% $ 3,918
======= == ======= == =======
</TABLE>
<PAGE>
USF RE entered the property/casualty reinsurance market in 1987, and continues
to focus on disciplined growth. Since December 31, 1986, statutory
policyholders' surplus has increased from $30,555,000 to $112,657,000 at
December 31, 1997. In December 1996 A.M. Best Company upgraded its rating of USF
RE and USFIC to "A" (Excellent). In 1996 USF RE was also assigned a claims
paying ability rating of Aq (Good) by Standard & Poor's. Although market
conditions remain highly competitive, the combination of increased surplus
levels, strict underwriting standards, an "A" (Excellent) rating from A.M. Best
Company and additional underwriting expertise in marine and international
business through the east coast treaty branch provide a strong position for USF
RE to continue with disciplined growth.
Revenue growth in property/casualty lines in 1997 as compared to 1996 was the
result of continued expansion of treaty reinsurance operations and increased
marketing efforts. Facultative property and casualty lines also grew, but at a
slower rate due to an increasingly competitive marketplace. The addition of an
east coast USF RE treaty branch office through the Allmerica Re acquisition
gives USF RE more presence in the eastern United States and is expected to add
approximately $24,000,000 of premium in 1998.
Changes in the relationship between gross and net premiums written were due to
changes in the Company's ceded reinsurance programs. Some retrocession
(reinsurance) agreements mitigate an insurance company's exposure to losses and,
therefore, allow increases in the limits which can be offered on each account.
Other retrocession agreements protect against catastrophic losses. Management
believes its retrocessional coverage is adequate to protect the Company from
excessive catastrophic losses. During 1997 and 1996, the Company did not incur
any significant catastrophic losses due to natural disasters.
The Company evaluates the financial condition of potential retrocessionaires to
determine whether to cede coverage to such companies. Retrocession agreements
are placed with unaffiliated companies which management believes are financially
secure and experienced in this type of business. Reinsurance recoverables are
monitored continually and any retrocessionaire not qualified in USF RE's or
USFIC's state of domicile is required to post security in the amount of its
estimated liability.
Fluctuations in losses and loss adjustment expenses and policy acquisition
expenses generally result from growth in premiums and changes in the mix of
business. Amounts reported in 1996 as compared to 1995 reflect the Company's
continued growth in casualty lines which are generally reserved at a higher
formula loss ratio than property lines and the 1995 withdrawal from the plate
glass business which generally carried a lower loss ratio and higher acquisition
expenses. The plate glass business accounted for 4% of premiums earned in 1995.
Shifts in policy acquisition expenses between periods presented result from
changes in the mix of business and modification of retrocessional arrangements.
Differences in pre-tax income between the periods primarily reflect increases in
treaty and facultative writings and favorable 1997 property underwriting
experience.
<TABLE>
<CAPTION>
HOLDING COMPANY
Year ended December 31, 1997 Change 1996 Change 1995
- ----------------------------- ------- -------- -------- -------- --------
(dollars in thousands)
<S> <C> <C> <C> <C> <C>
Revenues:
Investment income $ 62 7% $ 58 18% $ 49
Realized gains 10,213 380% 2,126 108% 1,022
------- --- ------- --- -------
Total revenues 10,275 370% 2,184 104% 1,071
======= === ======= === =======
Expenses:
General and administrative 974 9% 896 (13%) 1,028
Other -- -- -- -- 695
Interest 2,373 (9%) 2,610 15% 2,259
------- --- ------- --- -------
Total expenses 3,347 (5%) 3,506 (12%) 3,982
------- --- ------- --- -------
Income (loss) before
income taxes $ 6,928 -- $(1,322) (55%) $(2,911)
======= === ======= === =======
</TABLE>
<PAGE>
To lessen its exposure to stock market volatility, the Company realized
$10,213,000 in pre-tax gains primarily from its equity portfolio and principally
during the third quarter of 1997. Interest expenses declined in 1997 as the
Company commenced principal payments on its outstanding bank loan.
ACCOUNTING POLICIES
See Footnote 1 to the Company's Consolidated Financial Statements appearing
elsewhere in this Annual Report for information regarding significant accounting
policies.
INFLATION
The healthcare marketplace has long been subject to the effects of increases in
costs of services. Inflation in the costs of healthcare tends to generate
increases in premiums for medical lines coverage, resulting in greater revenues.
Inflation can also negatively impact insurance and reinsurance operations by
causing higher claims settlements than may have originally been estimated, while
not necessarily allowing an immediate increase in premiums to a level necessary
to maintain profit margins. Historically the Company has made no explicit
provisions for inflation, but trends are considered when setting underwriting
terms and claim reserves. Such reserves are subjected to a continual internal
and external review processes to assess their adequacy and are adjusted as
deemed appropriate. Overall economic trends also affect interest rates, which in
turn affect investment income and the market value of the Company's investment
portfolio.
LIQUIDITY AND CAPITAL RESOURCES
The Company utilizes cash from operations and maturing investments to meet its
insurance obligations to policyholders and claimants, as well as to meet
operating costs. Primary sources of cash from operations include premium
collections, commissions and fees and investment income. The principal uses of
cash from operations are for premium payments to insurance companies, payments
of claims under USF RE's and USFIC's reinsurance and insurance contracts and
operating expenses such as salaries, commissions, taxes and general overhead.
The Company secured a $25,000,000 bank loan in December 1994 which was increased
to $35,000,000 in November 1995. Of this amount, the Company contributed
$30,500,000 to the surplus of its insurance group to support additional growth.
At December 31,1997, $32,500,000 was outstanding under the bank loan. The Credit
Agreement with the Company's lender contains certain covenants, restrictions and
dividend payment limitations with which the Company was in compliance at
December 31, 1997. See Footnote 6 to the Company's Consolidated Financial
Statements appearing elsewhere in this Annual Report.
The Company anticipates that it will continue to generate sufficient cash flow
from operations to cover its short-term (1-18 months) and long-term (18 months
to 3 years) liquidity needs. While the Company currently has no immediate plans
for significant capital outlays, from time to time it contemplates acquisition
opportunities that complement its business operations.
During 1997, the investment portfolio grew by 15% and currently reflects an
allocation of approximately 94% in fixed income investments, both taxable and
tax preferenced, with an "AA" average fixed income portfolio rating, and 6% in
equities. All such securities are carried at quoted market values at the latest
balance sheet date. The portfolio does not contain any real estate investments,
derivatives, high yield bonds, private placements or mortgage loans.
USF RE is restricted in the annual amount of dividends which it may pay to the
Company without receiving prior approval from the Massachusetts Commissioner of
Insurance. During 1998, the amount which may be paid without such prior approval
is $11,266,000. Since its acquisition by the Company in 1983, USF RE has not
paid any dividends.
Application of the National Association of Insurance Commissioners risk-based
capital ("RBC") requirements for property and casualty insurance entities to USF
RE's and USFIC's statutory financial information indicates that presently these
companies substantially exceed the capital level required under the RBC
requirements.
<PAGE>
YEAR 2000
As the year 2000 approaches, the Company recognizes the need to ensure that its
operations will not be adversely affected by year 2000 computer software issues.
The Company has a formal plan in place to evaluate and implement solutions to
year 2000 computer software issues. The evaluation phase of this plan, which
was completed in December, 1997, included an analysis of the Company's software
systems, identification of software enhancements required to address year 2000
issues and identification of vendors and business partners that may impact
Company operations. The Company's significant operational and financial
software systems are provided by third party vendors who the Company has
confirmed, have also been focused on addressing year 2000 issues. Presently,
the Company has commenced upgrading its software products and expects to
complete this phase of its plan, including testing year 2000 changes, during
1998. The cost of the year 2000 remediation plan is not considered material to
the Company's financial position. The Company will continue to make investments
in its software systems to ensure year 2000 compliance for all its business
processing systems.
FORWARD LOOKING STATEMENTS
Some of the statements included within Management's Discussion and Analysis of
Financial Condition and Results of Operations and the consolidated financial
statements and related Notes may be considered to be forward looking statements
(as that term is defined in the Private Securities Litigation Reform Act of
1995), and which are subject to certain risks and uncertainties. Among those
factors which could cause the actual results to differ materially from those
suggested by such statements are: catastrophe losses in the Company's insurance
lines or a material aggregation of losses, changes in federal or state law
affecting an employer's ability to self-insure, availability of adequate
retrocessional insurance coverage at appropriate prices, a downturn in the
general economy, the effects of competitive market pressures within the medical
lines or property/casualty marketplaces, the effect of changes required by
generally accepted accounting practices or statutory accounting practices, and
other risks which are described from time to time in the Company's filings with
the Securities and Exchange Commission. The words "believes", "anticipates",
"expects" and similar expressions are intended to identify forward looking
statements.
<PAGE>
FINANCIAL STATEMENTS
REPORT ON CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements were prepared by the Company,
which is responsible for their integrity and objectivity. The statements have
been prepared in conformity with generally accepted accounting principles,
appropriate in the circumstances, and necessarily include some amounts that are
based upon the Company's best estimates and judgment. Financial information
presented elsewhere in this Annual Report is consistent with these accompanying
consolidated financial statements.
The accounting systems and controls of the Company are designed to provide
assurance that transactions are executed in accordance with management's
authorization, that the financial records are reliable for preparing financial
statements and maintaining accountability for assets, and that assets are
safeguarded against losses from unauthorized use or disposition.
The Company's consolidated financial statements have been audited by KPMG Peat
Marwick LLP, independent certified public accountants, whose audits thereon were
made in accordance with generally accepted auditing standards. The audit
included a review of internal accounting controls to the extent necessary to
design audit procedures to gather sufficient evidence to support their opinion
on the fairness of presentation of the consolidated financial statements. The
auditors have full access to each member of management in conducting their
audits, and their report is contained elsewhere in this Annual Report.
The Audit Committee of the Board of Directors, comprised solely of non-employee,
independent directors meets regularly with management and the independent
accountants to review the work and procedures of each. The independent
accountants have free access to the Audit Committee, without management being
present, to discuss the results of their work and their opinions on the adequacy
of the Company's accounting controls and the quality of the Company's financial
reporting. The Board of Directors, upon the recommendation of the Audit
Committee, appoints the independent public accountants, subject to annual
stockholder approval.
/s/ David L. Cargile /s/ Charles M. Caporale
Chairman of the Board, President Senior Vice President, treasurer
and Chief Executive Officer and chief financial officer
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENTS
Year ended December 31, 1997 1996 1995
- --------------------------------------------------- -------- -------- --------
(In thousands of dollars, except per share data)
<S> <C> <C> <C>
Revenues:
Premiums earned $159,533 $124,124 $114,971
Commissions and fees 33,635 26,722 25,994
Net investment income 11,091 10,147 9,190
Realized investment gains 10,213 2,126 1,022
-------- -------- --------
Total revenues 214,472 163,119 151,177
Operating expenses:
Losses and loss adjustment
expenses incurred 125,071 88,173 77,743
Policy acquisition expenses 46,196 37,179 35,964
General and administrative
expenses 18,837 14,995 16,357
Other expense -- -- 695
Interest expense 2,373 2,610 2,259
-------- -------- --------
Total operating expenses 192,477 142,957 133,018
-------- -------- --------
Income before income taxes 21,995 20,162 18,159
Income tax expense 6,783 5,142 4,305
-------- -------- --------
Net income $ 15,212 $ 15,020 $ 13,854
Basic income per share $1.27 $1.28 $1.24
Diluted income per share $1.25 $1.26 $1.21
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
<CAPTION>
Consolidated balance sheets
December 31, 1997 1996
- --------------------------------------------------------------- ---------- ----------
(In thousands of dollars)
<S> <C> <C>
ASSETS
Investments:
Bonds, available for sale, at market (amortized
cost $177,262 in 1997 and $150,674 in 1996) $186,118 $155,480
Equity securities at market
(cost $15,003 in 1997 and $16,296 in 1996) 15,564 20,370
Short-term and other investments, at cost
which approximates market 22,142 18,502
-------- --------
Total investments 223,824 194,352
Cash and invested cash 11,122 11,132
Restricted cash and short-term investments 27,947 23,771
Accrued investment income 3,196 2,653
Receivables:
Reinsurance losses and reserves 26,932 23,975
Premiums 26,012 16,841
Prepaid reinsurance premiums 7,799 6,495
Deferred policy acquisition costs 4,495 3,644
Other assets 11,921 5,880
-------- --------
Total assets $343,248 $288,743
======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
LIABILITIES:
Insurance liabilities:
Amounts due insurance companies $ 36,470 $ 27,148
Losses and loss adjustment expenses 116,801 94,669
Unearned premiums 30,249 22,936
Note payable 32,500 35,000
Accounts payable and accrued expenses 9,638 6,626
-------- --------
Total liabilities 225,658 186,379
======== ========
STOCKHOLDERS' EQUITY:
Common stock, $.01 par value;
40,000,000 shares authorized;
12,465,000 shares issued in 1997 and 12,306,000
issued in 1996, including 298,000 and 386,000
shares held in treasury in 1997 and 1996, respectively. 124 122
Paid in capital 46,188 45,442
Net unrealized investment gain 6,121 5,860
Retained earnings 66,654 52,883
-------- --------
119,087 104,307
Less treasury stock, at cost (1,497) (1,943)
-------- --------
Total stockholders' equity 117,590 102,364
-------- --------
Commitments and contingencies
Total liabilities and stockholders' equity $343,248 $288,743
======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Net
Unrealized
Investment Total
Common Paid in Gain Retained Treasury Stockholders'
Stock Capital (Loss) Earnings Stock Equity
- --------------------------------- ------- ------- -------- -------- -------- -------------
(in thousands of dollars)
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1995 $118 $44,202 $(2,637) $26,544 $(5,148) $ 63,079
Net income -- -- -- 13,854 -- 13,854
Exercise of stock options
(561,400 shares) 4 226 -- -- 2,175 2,405
Dividends paid (.10 per share) -- -- -- (1,125) -- (1,125)
Unrealized investment
gain, net -- -- 9,848 -- -- 9,848
---- ------- ------- ------- ------- --------
Balance at December 31, 1995 122 44,428 7,211 39,273 (2,973) 88,061
Net income -- -- -- 15,020 -- 15,020
Exercise of stock options
(371,000 shares) -- 1,014 -- -- 1,030 2,044
Dividends paid (.12 per share) -- -- -- (1,410) -- (1,410)
Unrealized investment
loss, net -- -- (1,351) -- -- (1,351)
---- ------- ------- ------- ------- --------
Balance at December 31, 1996 122 45,442 5,860 52,883 (1,943) 102,364
Net income -- -- -- 15,212 -- 15,212
Exercise of stock options
(247,100 shares) 2 746 -- -- 446 1,194
Dividends paid (.12 per share) -- -- -- (1,441) -- (1,441)
Unrealized investment
gain, net -- -- 261 -- -- 261
---- ------- ------- ------- ------- --------
Balance at December 31, 1997 $124 $46,188 $ 6,121 $66,654 $(1,497) $117,590
==== ======= ======= ======= ======= ========
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, 1997 1996 1995
- ------------------------------------------------------- --------- --------- ----------
(in thousands of dollars)
<S> <C> <C> <C>
Cash Flows From Operating Activities:
Net income $ 15,212 $ 15,020 $ 13,854
Adjustments to reconcile net income
to net cash provided by operating activities:
Amortization of deferred policy
acquisition costs 46,196 37,179 34,281
Deferred policy acquisition costs (47,047) (37,993) (34,064)
Realized investment gains (10,213) (2,126) (1,022)
Increase in premiums receivable (9,171) (2,776) (4,631)
Increase in reinsurance receivables (2,957) (5,378) (4,296)
Increase in losses and loss
adjustment expenses 22,132 15,775 9,247
Increase in unearned premiums 7,313 5,231 3,092
Other, net 4,624 2,095 (990)
Depreciation and amortization 363 502 445
Net transfers to restricted cash and
short-term investments (4,176) 265 (2,696)
-------- -------- ---------
Net cash provided by operating activities 22,276 27,794 13,220
-------- -------- ---------
Cash Flows From Investing Activities:
Purchases of bonds (56,778) (46,453) (102,339)
Purchases of equity securities (14,549) (6,544) (12,790)
Proceeds from sales and maturities
of investment securities 57,101 31,455 86,587
Net sales (purchases) of short-term investments (4,031) (1,681) 7,886
Purchases of property and equipment (1,282) (2,238) (181)
-------- -------- ---------
Net cash used in investing activities (19,539) (25,461) (20,837)
-------- -------- ---------
Cash Flows From Financing Activities:
Proceeds from note payable -- -- 10,000
Payments on note payable (2,500) -- --
Dividends paid (1,441) (1,410) (1,125)
Proceeds from issuance of common stock 1,194 2,044 2,405
-------- -------- ---------
Net cash (used in) provided by
financing activities (2,747) 634 11,280
-------- -------- ---------
Net (decrease) increase in cash and invested cash (10) 2,967 3,663
Cash and invested cash at beginning of year 11,132 8,165 4,502
-------- -------- ---------
Cash and invested cash at end of year $ 11,122 $ 11,132 $ 8,165
======== ======== =========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the year for:
Interest $ 2,303 $ 2,498 $ 2,187
Income taxes $ 4,366 $ 4,771 $ 5,217
</TABLE>
See accompanying notes to consolidated financial statements
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
note 1 - summary of significant accounting policies
(A) Organization and Principles of Consolidation
The consolidated financial statements include the accounts of The Centris Group,
Inc., a Delaware corporation (the "Company"), and its wholly owned subsidiaries.
The Company's USBenefits Insurance Services, Inc. ("USBenefits") subsidiary is
the managing general underwriter and marketing organization for medical lines
coverages issued by The Continental Insurance Company ("Continental"), one of
the CNA Insurance Companies. The Company's USF RE insurance company ("USF RE")
and USF Insurance Company ("USFIC") subsidiaries write property/casualty
reinsurance and insurance. The Company's INTERRA Reinsurance Group, Inc.
(INTERRA) subsidiary manages and underwrites catastrophic accident and health
risks nationally and internationally. All significant intercompany balances and
transactions have been eliminated in consolidation.
(B) Recognition of Revenue
Management fees and brokerage commissions are primarily recognized as of the
effective date of the underlying insurance coverage. Insurance and reinsurance
premiums are generally recognized as revenues over the terms of the related
policies on a pro-rata basis, and are reported net of ceded earned premiums.
Substantially all commissions and fees and approximately 65%, 67% and 71% of
premiums earned for 1997, 1996 and 1995 respectively, arise from USBenefits' and
USFRE's relationship with Continental and an affiliate. Such contracts may be
terminated as of any year-end.
(C) Investments
Securities are purchased to support the investment strategies of the Company,
which are based on many factors including, but not limited to, total rate of
return, maturity, credit risk, tax considerations, regulatory requirements and
market economics. The Company has the ability to hold all bonds to maturity.
However, securities in the portfolio may be sold from time to time based upon
the Company's investment strategies and market opportunities. Bonds and equity
securities are held as "available for sale" and carried at market value as of
the balance sheet date. Market values are principally obtained from a national
quotation service. Declines in the market value of any security below cost that
are deemed other than temporary, will be charged to earnings. Unrealized gains
and losses net of income taxes are reported as a separate component of
stockholders' equity. Market values of bonds are primarily a function of current
interest rates, and vary from period to period. Realized gains or losses on
sales of investments are computed on a specific identification basis.
(D) Short-Term and Other Investments, Cash and Invested Cash
Short-term and other investments and cash and invested cash consist of bank
deposits and money market mutual funds.
Premiums collected but not yet remitted to insurance companies are restricted by
law as to use. Such amounts are reported as restricted cash and short-term
investments, which at December 31, 1997 and 1996 consisted primarily of money
market mutual funds and U.S. Government obligations.
(E) Policy Acquisition Costs
The insurers' costs of acquiring new business are deferred to the extent
estimated to be recoverable from future income, including investment income, and
amortized to operations ratably over the terms of the related policies.
Acquisition costs include commissions, premium taxes and certain underwriting
expenses related to production of insurance and reinsurance business.
(F) Losses and Loss Adjustment Expenses
The liability for losses is determined on the basis of claim adjusters' and
ceding insurers' reports and other estimates, including those for incurred but
not reported losses. The liability for loss adjustment expenses is established
by estimating future expenses to be incurred in the settlement of claims
provided for in the liability for losses. Both estimates are dependent upon
future events, the outcomes of which can be affected by economic, legal,
political and social factors. The Company does not discount estimated future
expenses to their present values.
Management believes that the estimated liability for losses and loss adjustment
expenses at December 31, 1997 is adequate to cover the ultimate liability.
however, such estimates may be more or less than the amount ultimately paid when
the claims are settled.
<PAGE>
(G) Reinsurance
Reinsurance receivables (including amounts related to claims incurred, both
reported and not reported) and prepaid reinsurance premiums are reported as
assets. In the normal course of business, the Company seeks to reduce the loss
that may arise from events which may cause unfavorable underwriting results by
reinsuring certain levels of risk with other insurance enterprises. Amounts
recoverable from reinsurers are estimated in a manner consistent with the claim
liability associated with the reinsured policy. However, such estimates may be
more or less than the amount ultimately collected when claims are settled.
(H) Depreciation and Amortization
Depreciation and amortization are provided on the straight-line basis over the
estimated useful lives of the related assets. Leasehold improvements are
amortized over the lesser of the lease terms or useful lives of the
improvements. Intangibles are amortized over their estimated useful lives.
(I) Income Taxes
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial reporting basis
and the tax basis of the Company's assets and liabilities, as well as expected
benefits of utilizing net operating loss carry forwards. The impact on deferred
taxes of changes in tax rates and laws, if any, are applied to the years during
which temporary differences are expected to be settled, and reflected in the
consolidated financial statements in the period of enactment.
(J) Income per Share and Capital structure
Effective December 31, 1997 the Company adopted SFAS No. 128, "Earnings per
Share" and SFAS No. 129, "Capital Structure". All quarterly and year-to-date per
share information has been restated to conform to the provisions of SFAS No. 128
which did not have a material effect on previous disclosure of per share
amounts.
(K) Stock-Based Compensation
Effective December 31, 1996 the Company adopted the disclosure-only provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation". Management has
elected to continue use of the accounting methods prescribed by Accounting
Principles Board Opinion No. 25 and to expand its disclosure of stock-based
compensation as permitted by SFAS No. 123. Accordingly, no related compensation
cost has been recognized.
(L) Comprehensive Income and Business Segments
The Company will adopt SFAS No.130, "Comprehensive Income" and SFAS NO. 131,
"Disclosures about Segments of an Enterprise and Related Information" for the
year ending December 31, 1998. These SFAS require that additional information be
included in a complete set of financial statements, but will have no effect on
the Company's net income, stockholders' equity or cash flows.
(M) Fair Value of Financial Instruments
The Company discloses the fair value of financial instruments and the methods
and assumptions used to establish fair value, as required by SFAS No. 107,
"Disclosures about the Fair Value of Financial Instruments".
(N) Management's Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make certain estimates and
assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
note 2 - acquisitions and stock split
Effective January 1, 1997 the Companys' USBenefits subsidiary acquired the
medical stop-loss operations of Global Excess Holdings, Inc. Effective August 1,
1997 the Company acquired INTERRA which manages and underwrites catastrophic
accident and health risks nationally and internationally. On September 30, 1997
the Company's USF RE subsidiary acquired from The Hanover Insurance Company its
Allmerica Re property/casualty treaty operation. Each of these transactions was
accounted for as a purchase. The purchase transactions were not material to the
financial statements of the Company. The results of operations of each entity
since the effective acquisition dates are included in the consolidated financial
statements.
<PAGE>
On February 3, 1998 the Company announced that its Board of Directors had
authorized a two-for-one split of its common stock in the form of a 100% stock
dividend to stockholders of record as of February 18, 1998. Certificates
reflecting the stock split were issued February 27, 1998. All references in the
consolidated financial statements and related notes thereto to number of shares,
per share amounts and market prices of the Company's common stock have been
adjusted retroactively for all periods presented to reflect this change in
capital structure.
note 3 - investments
Bonds valued at approximately $11,599,000 were on deposit with various
governmental authorities at December 31, 1997.
The amortized cost and estimated market values of bonds (in thousands of
dollars) at December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
Gross Gross Gross
Amortized Unrealized Unrealized Market
December 31, 1997 Cost Gains Losses Value
- -------------------------------------- --------- ---------- ----------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 36,430 $ 775 $ -- $ 37,205
Foreign bonds 510 19 -- 529
Obligations of states and political
subdivisions 98,007 5,584 -- 103,591
Corporate bonds 42,315 2,529 (51) 44,793
-------- ------ ----- --------
Total $177,262 $8,907 $ (51) $186,118
======== ====== ===== ========
<CAPTION>
Gross Gross Gross
Amortized Unrealized Unrealized Market
December 31, 1996 Cost Gains Losses Value
- -------------------------------------- -------- ---------- ---------- --------
<S> <C> <C> <C> <C>
U.S. Treasury securities and
obligations of U.S. Government
corporations and agencies $ 13,265 $ 236 $ (80) $ 13,421
Foreign bonds 529 25 -- 554
Obligations of states and political
subdivisions 89,996 3,508 (239) 93,265
Corporate bonds 46,884 1,737 (381) 48,240
-------- ------ ----- --------
Total $150,674 $5,506 $(700) $155,480
======== ====== ===== ========
</TABLE>
The amortized cost and estimated market value of bonds at December 31, 1997, by
contractual maturity, are shown below (in thousands of dollars). Expected
maturities will differ from contractual maturities because certain borrowers
have the right to call or prepay obligations with or without call or prepayment
penalties.
<TABLE>
<CAPTION>
Maturity Dates Amortized Cost Market Value
- ------------------ -------------- ------------
<S> <C> <C>
1998 $ 509 $ 518
1999-2002 49,162 51,110
2003-2007 89,967 92,934
2008-Thereafter 37,624 41,556
-------- --------
Total $177,262 $186,118
======== ========
</TABLE>
<PAGE>
Information regarding bond sales (in thousands of dollars) follows:
<TABLE>
<CAPTION>
Year ended Proceeds Gross Gross
December 31, From Sales Gains Losses
- ------------ ---------- ------ ------
<S> <C> <C> <C>
1997 $31,224 $ 624 $ 47
1996 24,656 809 80
1995 77,373 1,677 522
</TABLE>
Information regarding equity dispositions (in thousands of dollars) follows:
<TABLE>
<CAPTION>
Year ended Proceeds Gross Gross
December 31, From Sales Gains Losses
- ------------ ---------- ------ ------
<S> <C> <C> <C>
1997 $25,878 $9,824 $142
1996 6,799 1,757 120
1995 9,214 211 344
</TABLE>
Information regarding gross unrealized gains and losses on equity securities (in
thousands of dollars) follows:
<TABLE>
<CAPTION>
Gross Gross
Unrealized Unrealized
Year Ended December 31, Gains Losses
- ----------------------- ---------- ----------
<S> <C> <C>
1997 $1,268 $707
1996 4,766 692
1995 2,243 487
</TABLE>
Net investment income (in thousands of dollars) consists of the following:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ----------------------- ------- ------- -------
<S> <C> <C> <C>
Interest on bonds $ 9,685 $ 8,618 $ 8,134
Short-term investment interest 2,568 2,349 1,569
Dividends on equity securities 278 346 496
------- ------- -------
12,531 11,313 10,199
Less: Investment expenses 1,440 1,166 1,009
------- ------- -------
Net investment income $11,091 $10,147 $ 9,190
======= ======= =======
</TABLE>
note 4 - reinsurance
The property and casualty insurance companies cede a portion of their business
to other insurance companies, under multiple reinsurance contracts. Generally,
the property/casualty companies limit retention on individual reinsurance
contracts to $500,000 per occurance. The property/casualty companies also
purchase catastrophe reinsurance coverages. Reinsurance contracts do not
relieve the Company from its obligations to policyholders. A contingent
liability exists for the amount of all reinsurance recoverable in the event that
any of the reinsuring companies are unable to pay. consequently, allowances are
established for amounts deemed uncollectible. The Company evaluates the
financial condition of its reinsurers and monitors concentrations of credit
risks arising from similar geographic regions, activities, or economic
characteristics of the reinsurers to minimize its exposure to significant losses
from a reinsurer's insolvency. At December 31, 1997 reinsurance recoverables and
prepaid premiums of $45,109,000 were unsecured. The Company holds letters of
credit totaling $10,769,000 under certain reinsurance agreements that can be
drawn on for amounts that remain unpaid for more than 120 days.
<PAGE>
The effect of reinsurance on premiums written and earned and the effect of
ceding arrangements (in thousands of dollars) follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
-------------------- -------------------- --------------------
Premiums Premiums Premiums Premiums Premiums Premiums
Written Earned Written Earned Written Earned
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Direct $ 13,791 $ 11,986 $ 10,122 $ 10,279 $ 11,260 $ 12,218
Reinsurance
assumed 176,152 170,644 140,102 134,714 121,201 117,151
Reinsurance
ceded (24,393) (23,097) (22,246) (20,869) (15,565) (14,398)
-------- -------- -------- -------- -------- --------
Net $165,550 $159,533 $127,978 $124,124 $116,896 $114,971
======== ======== ======== ======== ======== ========
Losses and loss adjustment expenses ceded $ 11,002 $ 12,844 $ 8,327
======== ======== ========
Liabilities for losses and loss
adjustment expenses ceded $ 25,939 $ 22,265 $ 16,426
======== ======== ========
Commissions ceded $ 6,038 $ 4,144 $ 2,441
======== ======== ========
</TABLE>
note 5 - reserve for losses and loss adjustment expenses
The table below summarizes the activity for losses and loss adjustment expenses
(LAE), net of reinsurance recoverable, for each of the years ended December 31,
1997, 1996 and 1995, respectively (in thousands of dollars). Reserves are
established for losses that have occurred as of each balance sheet date, whether
or not reported to the Company. Insurance and reinsurance companies establish
reserves for losses incurred, but not yet paid, in order to match such losses
with the related premiums earned. The process of establishing loss reserves is
subject to uncertainties that are a normal, recurring aspect of the insurance
business which requires the use of informed judgments and estimates. Estimating
loss reserves is a process where many factors can ultimately affect the final
settlement of a claim and, therefore, the ultimate reserve that is needed. In
addition, time can be a critical part of reserving determinations, since the
longer the span between the incidence of a loss and the payment or settlement of
the claim, the more variable the ultimate settlement amounts may be. In the
Company's medical lines segment, increases in the severity and frequency of
specific and aggregate claims in the second half of 1996 and the first half of
1997 resulted in third quarter 1997 additions of $8,000,000 to medical lines
reserves. Loss and loss adjustment expense reserve development is reviewed on a
regular basis, incorporating analysis of current trends, market changes in the
Company's business segments and historical experience to analyze the Company's
actuarial assumptions. As additional experience and other data become available,
the Company's actuarial estimates may be revised and impact earnings.
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ---------------------------------------------- --------- --------- ---------
<S> <C> <C> <C>
Balance at beginning of period $ 94,669 $ 78,894 $ 69 647
Less reinsurance recoverables 22,284 16,474 13,343
-------- -------- --------
Reserve for losses and LAE at beginning
of period, net 72,385 62,420 56,304
Reserves of acquired company 7,348
Incurred losses and LAE:
Provision for losses and LAE for claims
occurring in the current year 116,968 83,485 74,935
Increase in estimated losses and LAE for
claims occurring in prior years 8,103 4,688 2,808
Loss and LAE payments for claims
occurring during:
The current year (75,434) (43,287) (39,511)
Prior years (38,508) (34,921) (32,116)
-------- -------- --------
Reserve for losses and LAE at end
of period, net 90,862 72,385 62,420
Plus reinsurance recoverables 25,939 22,284 16,474
-------- -------- --------
Balance at end of period $116,801 $ 94,669 $ 78,894
======== ======== ========
</TABLE>
note 6 - note payable
The Company maintains a $35,000,000 reducing, revolving, variable interest rate
bank Credit Agreement. Amounts bear interest at LIBOR plus a margin, currently
1%. At December 31, 1997, $32,500,000 was outstanding. Under its terms, the
outstanding balance is reduced quarterly, with aggregate annual reductions (in
thousands of dollars) as follows:
<TABLE>
<CAPTION>
Year Commitment Reductions
- -------- ---------------------
<S> <C>
1998 $ 5,300
1999 6,800
2000 6,800
2001 6,800
2002 6,800
-------
Total $32,500
</TABLE>
Interest on amounts outstanding at December 31, 1997 is paid at an effective
rate of 6.91% through March 23, 1998.
The Credit Agreement contains restrictive covenants which include restrictions
on other debt, mergers, acquisitions and investment portfolio quality.
Additionally, the Credit Agreement requires the Company to maintain certain
levels of financial ratios, statutory surplus and pretax statutory net income,
minimum consolidated tangible net worth, risk based capital ratio and A.M. Best
Company rating. The Credit Agreement is secured by a pledge of all the capital
stock of USF RE. At December 31, 1997 the Company was in compliance with all
covenants of the Credit Agreement.
<PAGE>
note 7 - income taxes
Income tax expense (benefit) (in thousands of dollars) consists of:
<TABLE>
<CAPTION>
Year Ended December 31, 1997: Federal State Total
- -------------------------------- -------- ------- --------
<S> <C> <C> <C>
Current $ 7,350 $ 978 $ 8,328
Deferred (1,757) 212 (1,545)
------- ------ -------
Total $ 5,593 $1,190 $ 6,783
======= ====== =======
Year Ended December 31, 1996: Federal State Total
- -------------------------------- ------- ------ -------
Current $ 5,849 $ 452 $ 6,301
Deferred (1,154) (5) (1,159)
------- ------ -------
Total $ 4,695 $ 447 $ 5,142
======= ====== =======
Year Ended December 31, 1995: Federal State Total
- -------------------------------- ------- ------ -------
Current $ 3,818 $ 312 $ 4,130
Deferred 121 54 175
------- ------ -------
Total $ 3,939 $ 366 $ 4,305
======= ====== =======
</TABLE>
Actual tax expense differs from "expected" tax expense computed by applying the
federal statutory rate to income before taxes (in thousands of dollars) as
follows:
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- -------------------------------------- -------- -------- --------
<S> <C> <C> <C>
"Expected" federal tax expense $ 7,698 $ 7,057 $ 6,174
Tax exempt interest - net (1,463) (1,393) (1,621)
Change in valuation allowance 0 (576) (115)
State taxes, net of federal benefit 616 290 241
Other (68) (236) (374)
------- ------- -------
Actual income tax expense $ 6,783 $ 5,142 $ 4,305
======= ======= =======
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of deferred tax assets and deferred tax liabilities at December 1997 and 1996
are presented below (in thousands of dollars):
<TABLE>
<CAPTION>
December 31, 1997 1996
<S> <C> <C>
Deferred tax assets:
Loss and loss adjustment expense reserves $ 4,862 $ 3,708
Unearned premiums 1,572 1,151
Net operating loss carry forwards 444 444
Other 464 292
Total deferred tax assets 7,342 5,595
Less valuation allowance (444) (444)
------- -------
Net deferred tax assets 6,898 5,151
Deferred tax liabilities:
Intangibles (536) (569)
Depreciation (237) (104)
Policy acquisition costs (1,573) (1,276)
Net unrealized gain (3,297) (3,020)
Acquired receivables (228) --
Other (65) (33)
------- -------
Total deferred tax liabilities (5,936) (5,002)
------- -------
Total deferred income taxes $ 962 $ 149
======= =======
</TABLE>
<PAGE>
Based on the Company's current and historical earnings, management believes it
is more likely than not that the existing net deductible temporary differences
will reverse during periods in which the Company generates net taxable income.
However, there can be no assurance that the Company will generate any earnings
or any specific level of continuing earnings in future years. Valuation
allowances established for uncertainties associated with the utilization of
future tax benefits are revised when changes in circumstances indicate that it
is more likely than not the reversal of such temporary differences will be
realized. Certain tax planning strategies could be implemented to supplement
income from operations to fully realize recorded tax benefits.
Net operating loss carry forwards of $1,268,000 are available to offset future
federal taxable income of a subsidiary through 2005.
note 8 - stockholders' equity
The Company is authorized to issue 40,000,000 shares of common stock and
10,000,000 shares of preferred stock.
The Company has a Stockholder Rights Agreement which provides that in the event
any person becomes the beneficial owner of 10% or more of the outstanding common
stock of the Company, each right (other than rights held by the 10% stockholder)
will be exercisable at a predetermined price after the close of business on the
tenth business day following such event. Each right entitles the holder thereof
to purchase for the then exercise price the number of shares of common stock
which have a market value equal to two times the exercise price. The Plan
further provides that if, on or after the occurrence of the previously mentioned
event, the Company is merged with or into any other corporation, or 50% or more
of the Company's assets or earning power are sold, each right (other than rights
held by the 10% stockholder) will be exercisable to purchase for the exercise
price shares of common stock of the surviving corporation or purchaser which
have a market value equal to two times the exercise price. The rights expire on
May 24, 2000, and can be redeemed by the Board of Directors at $.0005 per right
at any time before the first date on which they first become exercisable.
At December 31, 1997 and 1996, USF RE's statutory surplus was $112,657,000 and
$109,880,000, respectively. Consolidated statutory net income for USF RE was
$5,937,000, $8,022,000, and $10,343,000 for the years ended December 31, 1997,
1996 and 1995, respectively. Statutory amounts are determined on the basis of
regulations promulgated by the National Association of Insurance Commissioners,
which is a comprehensive basis of accounting other than Generally Accepted
Accounting Principles. The more significant of these statutory accounting
practices are: (1) premiums are taken into income over the terms of the
policies, whereas the related acquisition and commission costs are expensed when
incurred; (2) certain assets designated as "non-admitted assets" are charged to
surplus; (3) bonds are carried at amortized cost irrespective of the Company's
investment portfolio activity; (4) adjustments reflecting the equity in earnings
of subsidiaries are carried to the surplus account as unrealized capital gains
or losses rather than income; (5) deferred federal income tax effects for tax
return timing differences are not provided; (6) gains and losses from
retrospective reinsurance contracts are recognized immediately through the
income statement; and (7) a provision is made for unearned premiums and losses
recoverable, in excess of funds held, on business reinsured with companies not
qualified by license, through a charge to surplus.
Application of the National Association of Insurance Commissioners risk-based
capital (RBC) requirements for property and casualty insurance entities to USF
RE's and USFIC's statutory financial information indicates that presently
these companies substantially exceed the capital level required under the RBC
requirements.
USF RE is limited in the amount of dividends it can pay to the Company without
approval of the Insurance Commissioner of Massachusetts. Such limitation is the
greater of net income or 10% of policyholders' surplus of the preceding year.
During 1998 USF RE may pay dividends of $11,266,000 to the Company without such
prior approval. USF RE has not paid any dividends since being acquired by the
Company in 1983.
note 9 - employee compensation and benefits
The Centris Group, Inc. Employees Savings Plan is a qualified voluntary
contributory 401(k) savings plan covering substantially all employees. Under the
Company's plan eligible employees may contribute up to 15% of their compensation
on a pre-tax basis up to the IRS allowable limit. The Company makes matching
contributions to the plan on a pro-rata basis for all participants up to a
maximum of 6% of each individual's compensation. For 1997, 1996 and 1995 such
matching contributions were $475,000, $388,000 and $395,000, respectively.
<PAGE>
The Centris Group, Inc. non-qualified deferred compensation plans, adopted
January 1, 1997, provide 401(k) excess salary deferrals, annual bonus deferrals
and long-term incentive-performance unit plan deferrals for key employees. Under
the plans, eligible employees may elect to defer a percentage of compensation
which, when aggregated with amounts deferred under the qualified plan may not
exceed 15% of pre-tax compensation. The Company makes matching contributions
which, when aggregated with the Company's qualified plan, shall not exceed 6% of
the participants' compensation. For 1997, such matching contributions were
$73,000.
The Centris Group, Inc. long-term incentive-performance unit plan, adopted
January 1, 1997, provides for cash payment awards which qualify as performance
based compensation under Section 162M 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. Performance units granted in 1997 had a
unit value of $10. The performance period is three years in length, with the
first performance period beginning January 1, 1997 and ending on December 31,
1999. Awards are based upon the Company meeting pre-determined 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 Board
Compensation Committee approval, will be made. Payouts of awards granted under
the plan are automatically deferred to the non-qualified deferred compensation
plan. The value of awards is accrued when they can be reasonably estimated based
upon the provisions of the plan and actual results.
The Company has four fixed stock option plans under which options to purchase
shares of the Company's common stock have been or may be granted. As of December
31, 1997 options to purchase up to 600,000 and 2,000,000 shares, respectively,
have been authorized under the 1988 and 1991 Employee Stock Option Plans.
Options to purchase up to 70,000 and 300,000 shares, respectively, have been
authorized under the 1988 and 1991 Director Stock Option Plans. Such plans allow
the Company to grant incentive stock options, nonqualified stock options, stock
appreciation rights and restricted shares to key employees and directors at
prices not lower than the market value at date of grant. Generally options
granted vest 50% after one year and 50% after two years from the date of grant
and have a maximum term of five years. Options are exercisable through periods
ending May 28, 2001.
The Company has adopted the disclosure-only provisions of SFAS No.123,
"Accounting for Stock-based Compensation," but applies Accounting Principles
Board Opinion No. 25 and related interpretations in accounting for its fixed
stock option plans. Accordingly, no related compensation cost has been
recognized. If the Company had elected to recognize compensation cost for its
Employee and Director plans based on the fair value at the grant dates for
awards under those plans, net income and earnings per share adjusted to reflect
the February 27, 1998 two-for-one stock split would have been reported as the
proforma amounts noted below (in thousands of dollars, except per share
information) consistent with the method prescribed by SFAS No.123:
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- ------------------------------- ------- ------- --------
<S> <C> <C> <C> <C>
Net Income As reported $15,212 $15,020 $13,854
Pro forma $14,958 $14,762 $13,611
Diluted income
per share As reported $ 1.25 $ 1.26 $ 1.21
Pro forma $ 1.23 $ 1.24 $ 1.19
</TABLE>
The fair value of each option grant subsequent to December 15, 1994 used to
compute proforma net income and earnings per share disclosures is the estimated
present value at grant date using the Black-Scholes option-pricing model with
the following weighted average assumptions for 1997: dividend yield of 1.4%,
expected volatility of 20%, a risk free interest rate of 6% and an expected
holding period of 4 years.
Weighted average assumptions used for 1996 and 1995 were: dividend yield of
1.4%, expected volatility of 15%, a risk free interest rate of 5%; and an
expected holding period of 4 years.
<PAGE>
The status of all options granted, adjusted to reflect the February 27, 1998 two
for-one stock split, is as follows:
<TABLE>
<CAPTION>
December 31, 1997 1996 1995
- ------------------- ------------------- ------------------ ---------------------
Shares Weighted Shares Weighted Shares Weighted
-Average -Average -Average
Exercise Exercise Exercise
Price Price Price
-------- ------- --------- -------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding-beginning of year 911,300 $ 7.02 1,205,200 $6.78 1,297,800 $4.90
Granted 321,000 10.08 30,000 8.50 510,800 8.00
Exercised (247,100) 5.18 (311,000) 5.87 (561,400) 3.71
Canceled (10,000) 8.04 (12,900) 8.85 (42,000) 6.88
--------- ------ ---------- ----- ---------- -----
Outstanding-end of year 975,200 $ 8.48 911,300 $7.02 1,205,200 $6.78
========= ====== ========== ===== ========== =====
Options exercisable at year end 639,200 $ 7.68 630,800 $6.57 621,400 $5.82
========= ====== ========== ===== ========== =====
Weighted-average fair value of
options granted during the year $ 2.32 $1.44 $1.54
====== ===== =====
</TABLE>
The following table summarizes information about fixed stock options outstanding
at December 31,1997 adjusted to reflect the February 27, 1998 two-for-one stock
split :
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
- -------------------------------------------------- ---------------------------------------
Weighted-
Average Weighted- Weighted-
Number Remaining Average Number Average
Range of Outstanding at Contractual Exercise Exerciseable at Exercise
Exercise price 12/31/97 Life Price 12/31/97 Price
- ------------------ -------------- ----------- --------- --------------- ---------
<S> <C> <C> <C> <C> <C>
$ 4.50 to $7 335,400 2 Years $6.69 335,400 $6.69
$ 8 to $10.16 639,800 4 Years 9.42 303,800 8.77
------- -------
Total 975,200 639,200
======= =======
</TABLE>
<PAGE>
note 10 - segment information
Certain information about the Company's operations by industry segment is
summarized as follows (in thousands of dollars):
<TABLE>
<CAPTION>
Year Ended December 31, 1997 1996 1995
- ------------------------------ -------- --------- ----------
<S> <C> <C> <C>
Revenues:
Medical lines $140,419 $114,213 $110,809
Property/casualty 63,778 46,722 39,297
Holding company 10,275 2,184 1,071
-------- -------- --------
Total $214,472 $163,119 $151,177
======== ======== ========
Income before income taxes:
Medical lines $ 9,328 $ 17,481 $ 17,152
Property/casualty 5,739 4,003 3,918
Holding company 6,928 (1,322) (2,911)
-------- -------- --------
Total $ 21,995 $ 20,162 $ 18,159
======== ======== ========
Identifiable assets:
Medical lines $110,749 $ 87,228 $ 75,529
Property/casualty 226,930 196,987 170,645
Holding company 5,569 4,528 3,698
-------- -------- --------
Total $343,248 $288,743 $249,872
======== ======== ========
</TABLE>
note 11 - commitments and contingencies
The Company leases certain facilities and equipment under long-term operating
leases which expire at various dates through 2007. Total rent expense, including
month-to-month rentals, was $1,635,000 in 1997, $1,273,000 in 1996 and
$1,951,000 in 1995.
Future minimum noncancelable lease commitments (in thousands of dollars) are as
follows:
<TABLE>
<CAPTION>
Year ending December 31,
- -------------- ------------
<S> <C>
1998 $ 1,749
1999 1,468
2000 1,354
2001 1,265
2002 1,265
Thereafter 5,232
-------
$12,333
=======
</TABLE>
note 12 - income per share
Reconciliation of income and outstanding shares and related per share amounts
adjusted to reflect the February 27, 1998 two-for-one stock split, is presented
below (in thousands of dollars, except per share data):
<TABLE>
<CAPTION>
Year ended December 31, 1997 1996 1995
- ------------------------------------------ ------- ------- -------
<S> <C> <C> <C>
Income (Numerator):
Income available to Common Stockholders
for Basic and Diluted income per share $15,212 $15,020 $13,854
======= ======= =======
Weighted Average Shares (Denominator):
Basic Shares 11,980 11,732 11,204
Effect of dilutive securities
Stock Options 174 218 252
------- ------- -------
Diluted Shares 12,154 11,950 11,456
======= ======= =======
Per Share Amounts:
Basic Income per Share $ 1.27 $ 1.28 $ 1.24
Diluted Income per Share $ 1.25 $ 1.26 $ 1.21
</TABLE>
<PAGE>
THE CENTRIS GROUP, INC. AND SUBSIDIARIES
INDEPENDENT AUDITORS' REPORT
To: the board of directors and stockholders of
the centris group, inc.
We have audited the accompanying consolidated balance sheets of The Centris
Group, Inc., formerly US Facilities Corporation, and subsidiaries as of December
31, 1997 and 1996 and the related consolidated income statements, statements of
stockholders' equity and cash flows for each of the years in the three-year
period ended December 31, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Centris Group,
Inc. and subsidiaries at December 31, 1997 and 1996, and the results of their
operations and their cash flows for each of the years in the three-year period
ended December 31, 1997, in conformity with generally accepted accounting
principles.
/s/ KPMG PEAT MARWICK LLP
February 3, 1998
Los Angeles, California
<PAGE>
Quarterly results of operations (unaudited)
The following is quarterly summary financial information for 1997, 1996 and 1995
(in thousands of dollars, except per share data). As noted earlier in this
Annual Report, all share amounts have been adjusted to reflect the February 27,
1998 two-for-one stock split.
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
Quarter Quarter Quarter Quarter
------- ------- ------- -------
<S> <C> <C> <C> <C>
1997
Revenues $50,193 $49,033 $58,939 $56,307
Income before income taxes 5,220 5,363 5,845 5,567
Net income 3,660 3,748 4,026 3,778
Basic earnings per share $ .31 $ .32 $ .33 $ .32
Diluted earnings per share $ .30 $ .31 $ .33 $ .31
1996
Revenues $38,918 $38,529 $40,525 $45,147
Income before income taxes 4,977 4,781 5,091 5,313
Net income 3,808 3,585 3,709 3,918
Basic earnings per share $ .33 $ .30 $ .32 $ .33
Diluted earnings per share $ .32 $ .30 $ .31 $ .33
1995
Revenues $35,459 $39,932 $36,330 $39,456
Income before income taxes 3,732 5,023 4,606 4,798
Net income 2,922 3,849 3,477 3,606
Basic earnings per share $ .26 $ .34 $ .31 $ .31
Diluted earnings per share $ .26 $ .34 $ .30 $ .31
</TABLE>
stock price information
The following are the quarterly high and low prices from January 1, 1996 through
February 28, 1998.* The Company believes that as of February 28, 1998 there were
approximately 2,000 holders of its common stock.
<TABLE>
<CAPTION>
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
High Low High Low High Low High Low
----------- ------- ----------- ------ ----------- ------- ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1998 through
February 28 $12 13/16 10 7/8
1997 $10 3/16 9 7/16 $10 5/8 9 $11 7/8 9 3/4 $11 15/16 10
1996 $10 11/16 8 1/4 $10 1/16 8 3/16 $ 9 3/4 7 15/16 $91 5/16 8 9/16
</TABLE>
<PAGE>
board of directors
David L. Cargile[1,3,5]
Chairman, President and Chief Executive Officer,
The Centris Group, Inc.
John F. Kooken[1,2,3]
Retired; Director, Golden State Bancorp;
Director, Pacific Gulf Properties, Inc.; Former Vice
Chairman and Chief Financial Officer, Security
Pacific Corporation
L. Steven Medgyesy, M.D.[3,4,5]
Retired; Former Director of Laboratories, Lincoln
West Medical Center
Bernard H. Ross[2,4,5]
Executive Vice President, Request, Inc.; Former
Partner and National Director of Healthcare
Services, Touche Ross & Company
Charles L. Schultz[2,3,4]
Retired; Director, Amwest Insurance Group;
Former Senior Vice President, Finance and
Chief Financial Officer, Farmers Group, Inc.
Howard S. Singer[1,3,5]
Executive Vice President,
Corporate Finance and
Investor Relations,
The Centris Group, Inc.
Kenneth C. Tyler [2,4,5]
Retired; Attorney at Law; Former Vice Chairman
and General Counsel, Farmers Group, Inc.
Director Emeritus:
John A. Allison
Retired; Former Vice Chairman, Transamerica Insurance Group
1997 Committee Assignments
(1) Member of Executive Committee
(2) Member of Audit Committee
(3) Member of Investment
Committee
(4) Member of Compensation
Committee
(5) Member of Nominating
Committee
<PAGE>
Officers
David L. Cargile
Chairman of the Board, President and Chief Executive Officer
Howard S. Singer
Executive Vice President, Corporate Finance and Investor Relations
Charles M. Caporale
Senior Vice President, Treasurer and Chief Financial Officer
Mark A. Carney
Senior Vice President
John T. Grush
Senior Vice President
Edward D. Jones, III
Senior Vice President
Craig J. Kelbel
Senior Vice President
Jose A. Velasco
Senior Vice President, Chief Administrative Officer, Secretary and General
Counsel
Patricia S. Boisseranc
Vice President
Barbara Fox Stoner
Vice President
Frank P. Van Buskirk
Vice President
Stockholder Information
annual meeting
The 1998 Annual Meeting of Stockholders of The Centris Group, Inc. will be held
May 13, 1998 at 9:00 a.m. local time, at the offices of the Company, 650 Town
Center Drive, Suite 1600, Costa Mesa, California 92626.
additional information
Stockholder inquiries and requests for additional copies of this Annual Report
and the Company's 1997 Report on Form 10-K filed with the Securities and
Exchange Commission should be directed to: Howard S. Singer, Executive Vice
President, The Centris Group, Inc., 5215 Old Orchard Road, Suite 300, Skokie,
Illinois 60077, (800) 550-3285.
<PAGE>
book value
$9.67 per share at December 31, 1997, after adjustment to reflect the February
27, 1998 two-for-one stock split.
registrar and transfer agent
American Stock Transfer & Trust Company, 40 Wall Street, New York, New York
10005.
independent auditors
KPMG Peat Marwick LLP, 725 South Figueroa Street, Los Angeles, California 90017.
stock trading information
The Company's common stock trades on The New York Stock Exchange under the
symbol CGE.
The company's web page can be found at: www.thecentrisgroup.com.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF
THE CENTRIS GROUP, INC.
AS OF DECEMBER 31, 1997
THE CENTRIS GROUP, INC.
(a Delaware corporation)
100% 100%
USBenefits Insurance Services, Inc. USF RE INSURANCE COMPANY
(a California corporation) (a Massachusetts corporation)
100%
100% US HOLDINGS, INC.
INTERRA REINSURANCE GROUP, INC. (a Delaware corporation)
(an Indiana corporation)
100%
USF INSURANCE COMPANY
(a Pennsylvania corporation)
100%
INTERNATIONAL EXCESS RE, LIMITED
(a British Virgin Islands
corporation)
<PAGE>
EXHIBIT 23
The Board of Directors
The Centris Group, Inc.
We consent to incorporation by reference in Registration Statements (No. 33-
41086 and No. 33-46841), both on Form S-8, of The Centris Group, Inc., formerly
US Facilities Corporation of our report dated February 3, 1998, relating to the
consolidated balance sheets of The Centris Group, Inc. and subsidiaries as of
December 31, 1997 and 1996, and the related consolidated income statements,
statements of stockholders' equity and cash flows for each of the years in the
three-year period ended December 31, 1997, and all related schedules, which
report appears in the December 31, 1997 annual report on Form 10-K of The
Centris Group, Inc. and subsidiaries.
/s/ KPMG PEAT MARWICK LLP
Los Angeles, California
March 26, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 7
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<DEBT-HELD-FOR-SALE> 0
<DEBT-CARRYING-VALUE> 0
<DEBT-MARKET-VALUE> 0
<EQUITIES> 0
<MORTGAGE> 0
<REAL-ESTATE> 0
<TOTAL-INVEST> 223,824
<CASH> 39,069
<RECOVER-REINSURE> 26,012
<DEFERRED-ACQUISITION> 4,495
<TOTAL-ASSETS> 343,248
<POLICY-LOSSES> 116,801
<UNEARNED-PREMIUMS> 30,249
<POLICY-OTHER> 0
<POLICY-HOLDER-FUNDS> 0
<NOTES-PAYABLE> 32,500
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 343,248
159,533
<INVESTMENT-INCOME> 11,091
<INVESTMENT-GAINS> 10,213
<OTHER-INCOME> 33,635
<BENEFITS> 125,071
<UNDERWRITING-AMORTIZATION> 46,196
<UNDERWRITING-OTHER> 21,210
<INCOME-PRETAX> 21,995
<INCOME-TAX> 6,783
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,212
<EPS-PRIMARY> 1.27
<EPS-DILUTED> 1.25
<RESERVE-OPEN> 79,733
<PROVISION-CURRENT> 116,968
<PROVISION-PRIOR> 8,103
<PAYMENTS-CURRENT> 75,434
<PAYMENTS-PRIOR> 38,508
<RESERVE-CLOSE> 90,862
<CUMULATIVE-DEFICIENCY> 8,103
</TABLE>
