EXHIBIT 10.3
SEVERANCE AGREEMENT
THIS AGREEMENT is made and entered into as of this 23rd day of July,
1997, by and between THE CENTRIS GROUP, INC., a Delaware corporation (the
"Company"), and XXXXXXX X. XXXXXXXX ("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
1
accordance with the Company's policies and practices in effect on the 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
(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
3
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 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
(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.
5
(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 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 15% 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 15% 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) 15% or more of the voting
shares of the Company then outstanding; 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 plan or tender offer
6
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 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
15% or more of the voting shares 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.
The Board of Directors shall have the absolute authority to make a 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.
(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
7
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 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
two (2) years, 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 hereby
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:
8
(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.
(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 now provided in Section 280G of the Internal
Revenue Code shall not be applicable to payments under this Agreement.
9
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 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.
10
(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 ss. 644) and is subject to review in accordance
with CCP ss. 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 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: The Centris Group, Inc.
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, Xxxxxxxxxx 00000
Attention: Chief Executive Officer
If to Executive: Xxxxxxx X. Xxxxxxxx
000 Xxxxxx Xxxx
Xxxxxx, Xxx Xxxxxx 00000
11
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.
(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.
12
(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.
(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 on the subject matter of this Agreement
between the Company (or any predecessor thereof) and the Executive shall be
deemed reinstated as if this Agreement had not been executed.
13
(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.
IN WITNESS WHEREOF, the Company has caused this Agreement to be
executed by a duly authorized officer, and the Executive has signed this
Agreement, all as of the date first above written.
Company: THE CENTRIS GROUP, INC.
-------
By /S/ XXXXX X. XXXXXXX
--------------------
XXXXX X. XXXXXXX
President and Chief Executive Officer
Executive:
---------
/S/ XXXXXXX X. XXXXXXXX
-----------------------
XXXXXXX X. XXXXXXXX
14
