SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrant |_|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement
|_| Confidential, for use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
EVEREST RE GROUP, LTD.
(Name of Registrant as Specified In Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(I)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
EVEREST RE GROUP, LTD.
----------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 2000
TO THE SHAREHOLDERS OF EVEREST RE GROUP, LTD.:
The Annual General Meeting of Shareholders of Everest Re Group, Ltd., a
Bermuda company, will be held at the Royal Pavilion Hotel, Porters, St. James,
Barbados on Tuesday, May 23, 2000 at 11:00 a.m., for the following purposes:
1. To elect two Class I Directors of the Company, each to serve for a
three-year period to expire at the 2003 Annual General Meeting of
Shareholders or until such director's successor shall have been duly
elected or appointed or until such director's office is otherwise vacated.
2. To authorize the Board of Directors to elect or appoint additional
directors up to such maximum number as may be established from time to time
in accordance with the Company's Bye-laws.
3. To appoint PricewaterhouseCoopers as the Company's independent auditors for
the year ending December 31, 2000 and authorize the Board of Directors to
set the fees for the independent auditors.
4. To transact such other business, if any, as may lawfully be brought before
the meeting and any and all adjournments thereof.
Only shareholders of record, as shown by the transfer books (Register of
Members) of the Company, at the close of business on March 27, 2000 are entitled
to notice of, and to vote at, the Annual General Meeting.
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting in person, you are urged to sign and date the
enclosed proxy and return it promptly in the postage prepaid envelope provided
for that purpose.
By Order of the Board of Directors
Janet J. Burak, Secretary
April 14, 2000
Hamilton, Bermuda
<PAGE>
EVEREST RE GROUP, LTD.
PROXY STATEMENT
----------
ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 23, 2000
The enclosed proxy is being solicited on behalf of the Board of Directors
(the "Board") for use at the 2000 Annual General Meeting of Shareholders of
Everest Re Group, Ltd., a Bermuda company (the "Company"), to be held on May 23,
2000, and at any adjournment thereof. It may be revoked at any time before it is
exercised by giving a later proxy, notifying the Secretary of the Company in
writing, or voting in person at the Annual General Meeting. All shares
represented at the meeting by properly executed proxies will be voted as
specified and, unless otherwise specified, will be voted for the election of
Martin Abrahams and John R. Dunne as directors, for authorizing the Board to
elect or appoint additional directors and for the appointment of
PricewaterhouseCoopers as independent auditors.
Only shareholders of record at the close of business on March 27, 2000 will
be entitled to vote at the meeting. On that date 45,819,697 common shares, par
value $.01 per share ("Common Shares"), were outstanding and entitled to vote.
Each Common Share is entitled to one vote.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the affirmative
vote of a majority of the votes cast at the Annual General Meeting, provided
there is a quorum (consisting of not less than two persons present in person or
by proxy holding in excess of 50% of the issued and outstanding Common Shares
entitled to attend and vote at the Annual General Meeting). The Company has
appointed inspectors of election to count votes cast in person or by proxy.
Common Shares owned by shareholders electing to abstain from voting will be
counted towards the presence of a quorum. However, such Common Shares, and
Common Shares owned by shareholders and not voted in person or by proxy at the
Annual General Meeting (including "broker non-votes"), will not be counted
towards the majority needed to elect a director or approve any other matter
before the shareholders and thus will have no effect on the outcome of those
votes.
This Proxy Statement, the attached Notice of Annual General Meeting, the
Annual Report of the Company for the year ended December 31, 1999 (including
financial statements) and the enclosed Proxy Card are first being mailed to the
Company's shareholders on or about April 14, 2000.
Because February 24, 2000 was the effective date of a restructuring
pursuant to which the Company became the holding company for Everest Reinsurance
Holdings, Inc. ("Everest Holdings") and its subsidiaries, all references in this
document to the Company prior to February 24, 2000 should be deemed to refer to
Everest Holdings and all references to the Common Shares prior to February 24,
2000 should be deemed to refer to the common stock of Everest Holdings.
All references in this document to "$" or "dollars" are references to the
currency of the United States of America.
The Company knows of no specific matter to be brought before the Annual
General Meeting that is not referred to in the attached Notice of Annual General
Meeting of Shareholders and this Proxy Statement. If any such matter comes
before the meeting, including any shareholder proposal properly made, the proxy
holders will vote proxies in accordance with their best judgment with respect to
such matters. To be properly made, a shareholder proposal must comply with the
Company's Bye-Laws and in order for any matter to come before the meeting, it
must relate to matters referred to in the attached Notice of Annual General
Meeting.
<PAGE>
PROPOSAL NO. 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE DIRECTOR NOMINEES
DESCRIBED BELOW. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE
IN THEIR PROXIES.
The Company's Bye-Laws provide for the division of the Board into three
classes, with the directors in each class serving for a term of three years. At
the 2000 Annual General Meeting, two nominees for Class I director positions are
to be elected to serve until the 2003 Annual General Meeting of Shareholders and
until their successors are elected and qualified. All of the nominees for
election as Class I directors at this meeting, and all directors whose term of
office will continue after the meeting, are currently directors of the Company.
The Class II director positions will be subject to election at the 2001 Annual
General Meeting of Shareholders and the Class III directors will be subject to
election at the 2002 Annual General Meeting of Shareholders. It is not expected
that any of the nominees will become unavailable for election as a director, but
if any nominee should become unavailable prior to the meeting, proxies will be
voted for such persons as the Board shall recommend, unless the Board reduces
the number of directors accordingly. There are no arrangements or understandings
between any director and any other person pursuant to which such person was
selected as a director or nominee.
INFORMATION CONCERNING NOMINEES
The following information has been furnished by the respective nominees for
election of Class I directors for a term expiring in 2003.
MARTIN ABRAHAMS, 67, became a Class I director of the Company on March 12,
1996 and served as a director of Everest Reinsurance Company, a wholly owned
subsidiary of the Company ("Everest Re"), from March 1996 to February 2000. Mr.
Abrahams, currently retired, served with the accounting firm of Coopers &
Lybrand L.L.P. from 1957 and was a partner in that firm from 1969 to 1995.
JOHN R. DUNNE, 70, became a Class I director of the Company on June 10,
1996 and served as a director of Everest Re from June 1996 to February 2000. Mr.
Dunne, an attorney and member of the bar of both New York and the District of
Columbia, has since 1994 been counsel to the law firm of Whiteman, Osterman &
Hanna in Albany, New York. Mr. Dunne is a director of CGU Corporation. Mr. Dunne
was counsel to the Washington DC law firm of Bayh, Connaughton & Malone from
1993 to 1994. From 1990 to 1993, he served as an Assistant Attorney General for
the United States Government, Department of Justice. From 1966 to 1989, Mr.
Dunne served as a New York State Senator while concurrently practicing law as a
partner in New York law firms.
INFORMATION CONCERNING CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following information has been furnished by those directors whose terms
of office will continue after the 2000 Annual General Meeting and by the other
executive officers.
KENNETH J. DUFFY, 70, became a Class II director of the Company on March
12, 1996 and served as a director of Everest Re from March 1996 to February
2000. Mr. Duffy is a retired insurance executive. He served with the insurance
holding company, Commercial Union Corporation, and its parent company, CGU plc,
from 1948 until his retirement in 1999. He was President and Chief Executive of
Commercial Union Corporation from January 1985 to January 1995, Chairman and
Chief Executive from January 1993 to January 1995, Chairman from January 1995 to
October 1998 and Senior Advisor to CGU plc from October 1998 to December 1999.
Until December 1999, he was also a director of Commercial Union Canada Holdings,
Ltd. and the President and a director of Curepool (Bermuda) Ltd. He is also a
vice president of the Insurance Institute of London and a fellow of the
Institute of Risk Management.
THOMAS J. GALLAGHER, 51, became a Class III director of the Company on
March 13, 1996. Mr. Gallagher also serves as a director of Everest Re, having
first been elected to that position in 1987. Elected President and Chief
Operating Officer of both the Company and Everest Re on February 24, 1997, Mr.
Gallagher had been Executive
2
<PAGE>
Vice President of both companies since December 1995 and a Senior Vice President
of the Company since 1994 and of Everest Re since 1989. Since joining Everest Re
in 1975, he has served as an underwriter in the facultative and treaty
departments, as vice president in charge of the facultative department and as
vice president in charge of the treaty casualty department. Mr. Gallagher also
serves as Deputy Chairman of the Company, as a director and President of Everest
Holdings, as a director and Deputy Chairman of Everest Reinsurance (Bermuda),
Ltd. ("Bermuda Re"), as a director and Chairman of Everest Global Services, Inc.
("Everest Global"), as a director and Chairman of Everest National Insurance
Company ("Everest National"), as a director and Chairman of Everest Insurance
Company of Canada ("EVCAN"), as a director and Chairman and Chief Executive
Officer of Everest Indemnity Insurance Company ("Everest Indemnity") and as a
director of WorkCare Southeast, Inc. ("WorkCare Southeast"), WorkCare Southeast
of Georgia, Inc. ("WorkCare Georgia"), CRA-CO Holdings, Ltd., Southeastern
Security Insurance Company and Adjusters Unlimited, Inc., all of which are
subsidiaries of the Company.
WILLIAM F. GALTNEY, JR., 47, became a Class III director of the Company on
March 12, 1996 and served as a director of Everest Re from March 1996 to
February 2000. Since 1983, Mr. Galtney has been the Chairman and Chief Executive
Officer of Healthcare Insurance Services, Inc., a managing general and surplus
lines agency indirectly owned by The Galtney Group, Inc. ("GGI"), a holding
company 45% owned by Mr. Galtney and of which he is also Chairman and Chief
Executive Officer. Mr. Galtney also serves as either the chairman or a director
of various subsidiaries and affiliates of GGI. Mr. Galtney is also a director of
Mutual Risk Management Ltd.
JOSEPH V. TARANTO, 51, a Class II director, became Chairman of the Board
and Chief Executive Officer of the Company and Everest Re on October 17, 1994
and served as President of both companies from December 1994 until Mr.
Gallagher's election as President on February 24, 1997. Mr. Taranto also serves
as a director and Chairman and Chief Executive Officer of Everest Holdings, as a
director and Chairman of Bermuda Re and as a director of Everest Re. Mr. Taranto
was a director and President of Transatlantic Holdings, Inc. and a director and
President of Transatlantic Reinsurance Company and Putnam Reinsurance Company
(both subsidiaries of Transatlantic Holdings, Inc.) from 1986 to 1994.
STEPHEN L. LIMAURO, 48, is an executive officer of the Company and became
Comptroller of the Company and Everest Re on September 25, 1997 and Chief
Financial Officer and Treasurer of the Company and Everest Re on November 17,
1999. He became a Senior Vice President of the Company and Everest Re on
February 23, 1999. He served as Assistant Comptroller of Everest Re from June
20, 1988 until September 25, 1997. From May 1995 until September 1997, he was
Vice President, Treasurer and Assistant Comptroller of the Company. Mr. Limauro
is also a director, Senior Vice President, Chief Financial Officer, Treasurer
and Comptroller of Everest Holdings, a director of Bermuda Re and Everest Re and
a director and Comptroller of Everest National and Everest Indemnity. He also
serves as a director, Assistant Treasurer and Assistant Controller to EVCAN and
he is Comptroller of Mt. McKinley Managers, L.L.C. ("Mt. McKinley"), a
subsidiary of Everest Holdings. He serves as a director and President of Everest
Re Holdings, Ltd. ("ERHL"), a subsidiary of Everest Re, and of Everest Global
and is Comptroller of WorkCare Southeast and WorkCare Georgia and Chief
Accountant of WorkCare, Inc. ("WorkCare"). He also serves as a director, Senior
Vice President, Chief Financial Officer and Comptroller of CRA-CO Holdings,
Ltd., Southeastern Security Insurance Company and Adjusters Unlimited, Inc., all
of which are subsidiaries of the Company. Prior to the restructuring, Mr.
Limauro was a director and Chairman of the Company.
JANET J. BURAK (formerly Janet Burak Melchione), 49, is an executive
officer of the Company and became Vice President, General Counsel and Secretary
of the Company upon its organization on November 11, 1993. She became a Senior
Vice President of the Company and Everest Re on January 31, 1994. Ms. Burak has
served as General Counsel of Everest Re since 1985 and in 1986 was appointed
Secretary. Ms. Burak is also Vice President and Secretary of Everest Holdings,
Vice President, Secretary and General Counsel of Everest Global, a director of
Bermuda Re and a director and Assistant Secretary of Everest National and
Everest Indemnity. She is a director, Vice President and Assistant Secretary of
ERHL, Secretary of EVCAN and Assistant Secretary of Mt. McKinley, WorkCare
Southeast and WorkCare Georgia. She serves as Associate General Counsel of
WorkCare. She also serves
3
<PAGE>
as an Assistant Secretary of CRA-CO Holdings, Ltd., Southeastern Security
Insurance Company and Adjusters Unlimited, Inc., all of which are subsidiaries
of the Company. Prior to the restructuring, Ms. Burak was a director and Deputy
Chairman of the Company.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board conducts its business through its meetings and meetings of its
committees. Six meetings of the Board were held in 1999. No director attended
fewer than 75% of the aggregate of the total number of meetings of the Board and
the total number of meetings of all committees of the Board on which the
director served. The Board currently maintains Audit and Compensation
Committees. The Board does not maintain a nominating committee or other
committee performing similar functions.
AUDIT COMMITTEE
The Audit Committee was created by the Board on March 21, 1996. The
principal purpose of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities by reviewing (i) the financial reports and other
financial information provided by the Company to governmental bodies or the
public, (ii) the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established and (iii) the Company's auditing, accounting and financial reporting
processes generally. The Audit Committee relies upon appropriate Company
financial and legal personnel and the Company's independent auditors to review
the Company's internal controls and financial statements, audit findings and
significant accounting and reporting issues.
The current members of the Audit Committee are Mr. Abrahams, Mr. Duffy and
Mr. Dunne, none of whom are employees or officers of the Company. Mr. Abrahams
served as Chairman in 1997 and until February 26, 1998. Mr. Dunne was designated
Chairman effective February 26, 1998 and is currently serving in that position.
The Audit Committee held three meetings in 1999.
COMPENSATION COMMITTEE
The Compensation Committee exercises authority with respect to all
compensation and benefits afforded all officers at the Senior Vice President
level and above, the Designated Executive Officers (as defined herein), and the
Company's Chief Financial Officer, Comptroller and Treasurer and the Company's
General Counsel and Secretary. The Compensation Committee also has oversight
responsibilities for all of the Company's broad-based compensation and benefit
programs, including administration of the Company's Annual Incentive Plan, the
1995 Stock Incentive Plan and the Executive Performance Annual Incentive Plan.
The current members of the Compensation Committee are Mr. Abrahams and Mr.
Duffy, neither of whom are current or former employees or officers of the
Company. Mr. Duffy has been designated to serve as Chairman. The Compensation
Committee held three meetings and acted by unanimous written consent on one
occasion in 1999.
4
<PAGE>
COMMON SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Shares as
of March 27, 2000 by the directors of the Company, by the designated executive
officers listed in the Summary Compensation Table (the "Designated Executive
Officers") and by all directors and executive officers of the Company as a
group. Information in this table was furnished to the Company by the respective
directors and Designated Executive Officers. Unless otherwise indicated in a
footnote, each person listed in the table possesses sole voting power and sole
dispositive power with respect to the shares shown in the table to be owned by
that person.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (10)
- ----------------------- -------------------- ----------
<S> <C> <C>
Martin Abrahams ................................... 9,070(1) *
Kenneth J. Duffy .................................. 8,370(2) *
John R. Dunne ..................................... 8,190(3) *
Thomas J. Gallagher ............................... 79,318(4) *
William F. Galtney, Jr ............................ 209,659(5) *
Joseph V. Taranto ................................. 516,142(6) *
Stephen L. Limauro ................................ 14,000(7) *
Janet J. Burak .................................... 21,300(8) *
All directors and executive officers
as a group (8 persons) ............................ 866,049(9) 1.89%
</TABLE>
- ----------
* Less than 1%
(1) Includes 4,387 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(2) Includes 4,387 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(3) Includes 4,307 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(4) Includes 4,400 shares of restricted stock issued to Mr. Gallagher under the
Company's 1995 Stock Incentive Plan. Such stock may not be sold or
transferred until the vesting requirements have been satisfied. Also
includes 68,900 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(5) Includes 191,600 shares owned by Galtney Family Investors, Ltd., a limited
partnership in which Mr. Galtney maintains a beneficial ownership and for
which he serves as the General Partner. Also includes 4,387 shares
purchasable upon the exercise of stock options exercisable within 60 days
of March 27, 2000.
(6) Includes 106,000 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(7) Includes 13,600 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(8) Includes 1,500 shares of restricted stock issued to Ms. Burak under the
Company's 1995 Stock Incentive Plan. Such stock may not be sold or
transferred until the vesting requirements have been satisfied. Also
includes 18,700 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(9) Includes 224,668 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 27, 2000.
(10) Based on 45,819,697 total Common Shares outstanding and entitled to vote as
of March 27, 2000.
5
<PAGE>
PRINCIPAL HOLDERS OF COMMON SHARES
To the best of the Company's knowledge, the only beneficial owners of more
than 5% of the outstanding Common Shares as of December 31, 1999 are set forth
below. This table is based on information provided in Schedule 13Gs filed with
the Securities and Exchange Commission by each of the parties listed in the
table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
- ------------------------------------ ----------------- ----------
<S> <C> <C>
Mellon Financial Corporation ................ 3,853,309(1) 8.20%
One Mellon Center
Pittsburgh, Pennsylvania 15258
Cramer Rosenthal McGlynn LLC ................ 2,616,202(2) 5.57%
707 Westchester Avenue
White Plains, New York 10604
</TABLE>
- ----------
(1) Mellon Financial Corporation reports in its Schedule 13G that it has sole
voting power with respect to 2,591,349 Common Shares, shared voting power
with respect to 537,600 Common Shares, sole dispositive power with respect
to 3,155,549 Common Shares and shared dispositive power with respect to
675,000 Common Shares.
(2) Cramer Rosenthal McGlynn reports in its Schedule 13G that it has shared
voting power and shared investment power with respect to these Common
Shares.
DIRECTORS' COMPENSATION
Each member of the Board who is not otherwise affiliated with the Company
as an employee and/or officer ("Non-Employee Director") was compensated in 1999
for services as a director and was also reimbursed for out-of-pocket expenses
associated with each meeting attended. The annual compensation for 1999 of the
Non-Employee Directors was fixed at $40,000 per year. Compensation was paid
quarterly in arrears by the issuance of Common Shares. Compensating the
Non-Employee Directors with Common Shares is intended to align their interests
with those of the Company's shareholders. The value of Common Shares issued is
calculated based on the average of the highest and lowest sale prices of the
Common Shares on the last day of the calendar quarter or, if no sale is reported
for that day, the next preceding day for which there is a reported sale. For
1999, each of the Non-Employee Directors was issued a total of 1,315 shares as
compensation for his services as a director in accordance with this procedure.
As of January 1, 2000, the value of these shares for each Non-Employee director
was $29,340.94 based upon the $22.3125 closing price of a Common Share on
December 31, 1999.
In addition, the Company has adopted the 1995 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan"), which is designed to maintain
the Company's ability to attract and retain the services of experienced and
highly qualified outside directors and to create a proprietary interest in the
Company's continued success. Each of the Non-Employee Directors on the Company's
Board is awarded options to purchase that number of Common Shares equal to
$50,000 divided by the fair market value of such shares as of the date he is
initially appointed to the Board, with an exercise price equal to that fair
market value. As defined in the Directors' Plan, the fair market value is
determined by averaging the high and low trading prices of the Common Shares on
the date of the option award.
Upon their initial appointment to the Board on March 12, 1996, Mr.
Abrahams, Mr. Duffy, and Mr. Galtney were each granted options to purchase 2,216
Common Shares at an exercise price of $22.5625 per share. Upon his initial
appointment to the Board on June 10, 1996, Mr. Dunne was granted options to
purchase 2,036 Common Shares at an exercise price of $24.5625 per share.
Pursuant to a Stock Option Agreement for Non-Employee Directors dated April 1,
1999, each of the foregoing four directors was granted options to purchase 6,500
Common Shares at an exercise price of $30.625 per share.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years with respect to the Company's Chief Executive Officer and the
three other most highly compensated executive officers who were serving as
executive officers as of December 31, 1999 (the "Designated Executive
Officers"), for services rendered by them to the Company and to its
subsidiaries.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------- ----------------------------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($)(1) AWARD(S) ($)(2) OPTIONS(#) ($)(3)
- ---------------------------- ----- --------- ------------ --------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto 1999 $964,387 $1,150,000 -- 80,000 $18,461
Chairman of the Board 1998 945,426 745,660 -- 150,000 23,804
and Chief Executive 1997 887,532 717,000 -- 75,000 21,971
Officer
Thomas J. Gallagher 1999 341,538 300,000 -- 30,000 14,138
President and Chief 1998 338,654 225,000 -- 27,500 13,544
Operating Officer 1997 304,231 200,000 -- 27,500 12,627
Janet J. Burak 1999 173,923 80,000 -- 8,000 6,184
Senior Vice President 1998 174,654 60,000 -- 8,000 5,948
General Counsel 1997 161,654 60,000 $97,500 7,500 5,538
and Secretary
Stephen L. Limauro 1999 172,992 100,000 -- 8,000 5,918
Senior Vice President 1998 170,339 65,000 -- 6,000 5,800
Chief Financial Officer 1997 151,523 45,000 -- 5,000 5,185
and Comptroller
</TABLE>
- --------------
(1) Represents compensation earned by the Designated Executive Officers for the
years ended December 31, 1999, December 31, 1998 and December 31, 1997
pursuant to the Company's Annual Incentive Plan. In addition, the amounts
shown for Mr. Taranto for 1998 and 1997 include $279,760 and $269,000,
respectively, pursuant to the Chief Executive Officer's Bonus Plan. The
amount shown for Mr. Taranto for 1999 includes $1,150,000 pursuant to the
Executive Performance Annual Incentive Plan.
(2) The amount reported represents the value of the Common Shares underlying
the restricted stock at the date of grant, without taking into account any
diminution in value attributable to the restrictions on such stock. An
award of restricted stock to Ms. Burak was made on September 26, 1997; the
closing price of a Common Share on the New York Stock Exchange on that date
was $39.00. This restricted stock award vests at the rate of 20% per year
over a five-year period. As of December 31, 1999, Ms. Burak held 1,500
restricted Common Shares valued at $33,360, based on $22.44 as the average
of the high and low trading prices of a Common Share on the New York Stock
Exchange on that date. Dividends are paid quarterly on these restricted
Common Shares at the same rate as dividends paid on Common Shares held by
public shareholders.
(3) For 1999, represents: (i) the following term life insurance premiums paid
by the Company on behalf of the Designated Executive Officers: (a) Mr.
Taranto--$1,050, (b) Mr. Gallagher--$1,050, (c) Ms. Burak--$733 and (d) Mr.
Limauro--$728; and (ii) the following employer contributions to qualified
and non-qualified employee savings plans: (a) Mr. Taranto--$17,411, (b) Mr.
Gallagher--$13,088, (c) Ms. Burak--$5,451 and (d) Mr. Limauro--$5,190.
7
<PAGE>
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted under the Company's 1995 Stock Incentive Plan during 1999 to the
Designated Executive Officers.
OPTION /SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE (3) ($)(4)
------ -------------- -------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto................ 80,000 21.94% $ 30.625 04/01/09 $1,092,552
Thomas J. Gallagher.............. 30,000 8.23 30.625 04/01/09 409,707
Janet J. Burak................... 8,000 2.19 30.625 04/01/09 109,255
Stephen L. Limauro............... 8,000 2.19 30.625 04/01/09 109,255
</TABLE>
- ----------
(1) Represents non-qualified stock options granted to Mr. Taranto, Mr.
Gallagher, Ms. Burak and Mr. Limauro on April 1, 1999, which become
exercisable in 20% installments each year commencing with the first
anniversary of the grant dates, as long as employment with the Company or
its subsidiaries continues. These stock options were granted with an
exercise price equal to 100% of the fair market value of a Common Share on
the date of grant. No SARs were granted in 1999.
(2) Based upon 364,500 non-qualified stock options granted to all employees in
1999.
(3) Exercisable options expire unless exercised within three years following
termination of employment due to retirement, disability or death or within
three months following termination of employment due to resignation or
dismissal. Generally, if employment terminates because of death, retirement
upon attaining age 65 or because of disability, unexercisable options
become immediately exercisable until the earlier of: (a) three years after
death or such termination; or (b) ten years from the date of grant.
(4) The grant date present value of each option grant is estimated as of the
date of grant using the Black-Scholes option pricing model, modified to
include dividends, with the following assumptions:
(a) Expected Volatility -- The annualized standard deviation of the
continuously compounded rate of return on the underlying stock, based
on the closing price observations for the twelve-month period ended
December 31, 1999, which was 33.86%.
(b) Risk Free Rate of Return -- The rate available, on the date of grant,
on zero-coupon U.S. government issues with a remaining term comparable
to the expected life of the options as reported over the Bloomberg
wire service, which was 5.54%.
(c) Dividend Yield -- The yield calculated by dividing the estimated
annualized dividend rate of the Common Shares in the amount of $.24
per share by the weighted average fair market value of the stock on
the date of grant, which resulted in an assumed dividend yield of
0.8%.
(d) Expected Life -- The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was
7.5 years.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table sets forth certain information concerning the number
and value of unexercised stock options at the end of 1999 held by the Designated
Executive Officers. No Designated Executive Officer exercised stock options
during 1999.
8
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE AT FY-END(#) AT FY-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto 0 0 90,000 265,000 $0 $0
Thomas J. Gallagher 0 0 62,900 85,100 195,650 48,913
Janet J. Burak 0 0 17,100 23,900 45,500 11,375
Stephen L. Limauro 0 0 12,000 19,000 36,400 9,100
</TABLE>
- ----------
(1) Based on the year-end fair market value of Common Shares of $22.4375, which
is calculated by averaging the high and low trading prices on December 31, 1999
on the New York Stock Exchange. The value of the options is computed by
subtracting the exercise prices of the options from their fair market values and
multiplying the difference by the number of shares underlying the options at the
applicable exercise prices.
COMPENSATION COMMITTEE REPORT
I. Executive Compensation Policy
OVERVIEW. The Company's executive compensation program in 1999 was designed
to attract, retain and motivate highly talented individuals whose abilities are
critical to the success of the Company. Compensation policies that attract
personnel of this caliber are particularly important for a relatively new public
entity like the Company. The Company's compensation program is guided by the
following fundamental principles:
o Compensation of executive officers is based on the level of job
responsibility, the performance of the Company and the performance of
the individual.
o Total compensation levels are designed to be competitive with
compensation paid by organizations of similar stature.
o Compensation should align the interests of the executive officers with
those of the Company's shareholders by basing a significant part of
total compensation on the long-term performance of the Common Shares.
The Company's executive compensation program in 1999 achieved the
objectives described above and was a significant factor in attaining a high
level of corporate performance and increased shareholder value throughout the
year. In establishing executive compensation, the various components of
compensation are considered collectively in order to properly assess the
appropriateness of the Company's program relative to the attainment of its
objectives. The Company's executive compensation program consists of two key
elements: (i) an annual component, I.E., base salary and annual bonus and (ii) a
long-term component, I.E., stock options, stock appreciation rights, restricted
stock and stock awards.
The Compensation Committee reviewed a variety of factors of historical and
projected Company performance in determining executive compensation. In the
course of this review, the Compensation Committee considered the Company's
long-term compensation goals, the Company's financial performance and the
compensation practices of other reinsurers through a review of publicly
available information. In reviewing these factors, the Compensation Committee
was able to assess the overall performance of the Company and its prospects for
the future to establish an acceptable range for executive compensation.
9
<PAGE>
II. Components Of Executive Compensation
A. ANNUAL COMPENSATION
In 1999, annual compensation for executive officers of the Company
consisted of two components--base salary and a cash payment under the Company's
Executive Performance Annual Incentive Plan (in the case of Mr. Taranto) or the
Company's Annual Incentive Plan (in the case of the other executive officers).
The base salary for Mr. Taranto was subject to the terms of his employment
agreement (See "Employment and Change of Control Agreements--Mr. Taranto"
below). The base salaries for the other executive officers were determined by
the Compensation Committee based on each executive officer's performance and, as
previously discussed, the Company's performance and the range of compensation of
executive officers with similar responsibilities in comparable companies.
Annual bonuses paid to executive officers under the Annual Incentive Plan
and the Executive Performance Annual Incentive Plan are a significant element of
the executive compensation program. Since January 1, 1994, eligible employees of
the Company have participated in the Annual Incentive Plan. Under the Annual
Incentive Plan, the Company may make cash payments to participants each year,
based on the performance of the Company, the performance of participant's
subsidiary or department and/or the participant's individual performance in the
preceding year. The Annual Incentive Plan is designed to reward participants for
the achievement and success of general corporate goals and to recognize and
reward their individual performances in achieving such goals, as well as to
compensate them on the basis of the Company's financial results. The
determination of individual performance goals and the extent to which such
performance goals are met is subjective in nature and is influenced by the
Compensation Committee's perception of the importance of the various corporate
and individual goals to the overall success of the Company. Payments made in
2000 for the 1999 bonus year were based on corporate performance above par, and
on the significance of the individual executive officer's contribution toward
attaining that result. To evaluate corporate performance, the Compensation
Committee considered the following factors related to the Company's 1999
financial results: after-tax operating income, return on equity and earnings
growth. The Compensation Committee then arrived at total compensation for each
of the executive officers that it believes is appropriate to the Company's
performance and their individual contributions.
The Executive Performance Annual Incentive Plan was approved by the
Company's shareholders on May 20, 1999. Each year the Compensation Committee
selects executive officers of the Company and its subsidiaries who will be
eligible that year to participate in the Executive Performance Annual Incentive
Plan. Currently, only Mr. Taranto, the Company's Chairman and Chief Executive
Officer, is a participant. (See "Chief Executive Officer Compensation" below).
Each year, the Compensation Committee establishes in writing objective
performance goals for each participant, which, if attained, will entitle such
participant to specific award amounts that will be paid to each participant.
Each participant's performance is measured by any of the following performance
criteria: net income before or after taxes, operating income before or after
taxes, premiums earned, earnings per share, return on shareholders' equity,
return on assets, appreciation in and/or maintenance of the price of the Common
Shares or any other publicly traded securities of the Company, comparisons with
various stock market indices, market share, statutory combined ratio, expense
ratio, reductions in costs and expense growth, or gross or net premium growth.
The Compensation Committee establishes an objective method by which award
amounts are calculated under the plan. The maximum award amount any one
participant may be awarded in one year is $2 million. The Compensation
Committee, in its sole discretion, may eliminate or reduce but not increase, any
award determination. The plan provides that the total amount of awards granted
to all participants in any one year may not exceed 10% of the Company's average
annual income before taxes for the preceding five years.
B. LONG-TERM COMPENSATION
In 1999, the long-term incentive used for executive officers was provided
under the 1995 Stock Incentive Plan. Awards under this plan are intended to
reinforce management's long-term perspective on corporate performance and
provide an incentive for key executives to remain with the Company for the
long-term.
10
<PAGE>
Awards under the 1995 Stock Incentive Plan are a significant element of the
Company's executive compensation program. Compensation derived from share
ownership provides a strong incentive to increase shareholder value, since the
value of this compensation is determined by changes in the price of the Common
Shares over the term of each award. Awards under the 1995 Stock Incentive Plan
may take the form of stock options, stock appreciation rights, restricted stock
or stock awards. Stock options, the principal form of long-term incentive
compensation under the 1995 Stock Incentive Plan, encourage retention because
they carry a five-year vesting period and, if not exercised, are generally
forfeited if the employee leaves the Company before retirement. In addition,
stock options, granted at the fair market value on the date of grant and with
terms not to exceed 10 years, are designed to keep management and professional
employees oriented to growth over the long-term and not simply to short-term
profits. Awards are granted subjectively at the discretion of the Compensation
Committee based on a variety of factors, including a recipient's demonstrated
past and expected future performances, as well as a recipient's level of
responsibility with the Company and his or her ability to affect shareholder
value.
Since the institution of the 1995 Stock Incentive Plan, the Committee has
granted employees 1,866,600 options to purchase Common Shares. Awards granted to
the Company's Designated Executive Officers during 1999 are summarized under the
captions "Options/SARs Grants in Last Fiscal Year" and "Summary Compensation
Table" above. When granting these awards, the Compensation Committee took into
account prior grants to these individuals under the 1995 Stock Incentive Plan
and determined that the 1999 grants were appropriate and in the best interests
of the Company.
The Company does not have a long-term cash bonus plan in effect. The
Company currently intends to rely on the 1995 Stock Incentive Plan as the sole
means of long-term compensation believing compensation in the form of share
ownership increases long-term value for the shareholders while compensating
individual employees for superior performance.
III. Deductibility Cap on Executive Compensation
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), limits the ability of a publicly-held company to take a tax deduction
for annual compensation in excess of $1 million paid to its chief executive
officer or to any of its four other most highly paid executive officers.
However, compensation is exempt from this limit if it qualifies as
"performance-based compensation." To preserve this deduction, the Company has
designed its incentive plans to constitute "performance-based compensation" and
not be counted toward the $1 million limit. Although the Compensation Committee
will consider deductibility under section 162(m) with respect to the
compensation arrangements for executive officers, deductibility will not be the
sole factor used in determining appropriate levels or methods of compensation.
Since Company objectives may not always be consistent with the requirements for
full deductibility, the Company and the subsidiaries may enter into compensation
arrangements under which payments would not be deductible under section 162(m).
IV. Chief Executive Officer Compensation
In 1999, Mr. Taranto's compensation was based on the terms of his
Employment Agreement with the Company and Everest Re (See "Employment and Change
of Control Agreements -- Mr. Taranto" below) and consisted of base salary and
"Additional Cash Compensation" and non-qualified stock options as set forth in
this section. The Compensation Committee also approved a $1,150,000 cash payment
to Mr. Taranto under the Executive Performance Annual Incentive Plan for fiscal
year 1999. (See "Summary Compensation Table" and "Annual Compensation" above).
This performance-based award was calculated as a function of the Company's
actual earnings per share in 1999 in accordance with a formula previously
established by the Compensation Committee.
Kenneth J. Duffy Martin Abrahams
11
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares cumulative total shareholder
returns on the Common Shares (assuming reinvestment of dividends) from October
3, 1995 (when the Company's shares were first listed on the New York Stock
Exchange) through December 31, 1999, with the cumulative total return of the
Standard & Poor's 500 Index and the Standard & Poor's Insurance (Property and
Casualty) Index.
COMPARISON OF 51 MONTH CUMULATIVE TOTAL RETURN*
AMONG EVEREST RE GROUP, LTD., THE S&P 500 INDEX
AND THE S&P INSURANCE (PROPERTY-CASUALTY) INDEX
[THE FOLLOWING IS A LINE CHART IN ITS PRINTED PIECE.]
<TABLE>
<CAPTION>
Cumulative Total Return*
--------------------------------------------------
10/3/95 12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C> <C>
EVEREST RE GROUP, LTD. 100 119 147 213 202 117
S&P 500 100 106 130 174 224 271
S&P INSURANCE (PROPERTY-CASUALTY) 100 106 129 188 175 130
</TABLE>
* $100 INVESTED ON 10/3/95 IN SHARES OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS. FISCAL YEARS ENDING DECEMBER 31.
12
<PAGE>
RETIREMENT PLAN
The executive officers of the Company participate in the Everest
Reinsurance Company Retirement Plan (the "Retirement Plan") and in the
Supplemental Retirement Plan (the "Supplemental Plan"), both of which are
defined benefit pension plans. The Retirement Plan is a tax-qualified plan that
determines benefits under a formula that takes into account a participant's
years of continuous service and final average earnings with Everest Re and
certain affiliates, including during the period of affiliation with the
Prudential Insurance Company of America ("Prudential"). The Supplemental Plan is
a non-qualified plan that provides benefits that would otherwise be provided
under the Retirement Plan formula but for the application of certain limitations
on tax-qualified benefits under the Code. The Retirement Plan and the
Supplemental Plan are similar to the tax-qualified and supplemental pension
plans of Prudential in which the executive officers and other employees of the
Company and Everest Re participated prior to the Company's initial public
offering. The following table shows the estimated annual pension benefits
payable at normal retirement age to a participant under the Retirement Plan and
the Supplemental Plan who attains the earnings and service classifications
indicated under the plans.
<TABLE>
<CAPTION>
FINAL AVERAGE EARNINGS YEARS OF CONTINUOUS SERVICE
------------------------ --------------------------------------------------------------------------
5 10 15 20 25 35
-------- -------- -------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
$ 200,000............... $ 18,859 $ 37,719 $ 56,578 $ 75,437 $ 94,296 $ 113,419
250,000............... 23,859 47,719 71,578 95,437 119,296 143,419
300,000............... 28,859 57,719 86,578 115,437 144,296 173,419
350,000............... 33,859 67,719 101,578 135,437 169,296 203,419
400,000............... 38,859 77,719 116,578 155,437 194,296 233,419
450,000............... 43,859 87,719 131,578 175,437 219,296 263,419
500,000............... 48,859 97,719 146,578 195,437 244,296 293,419
750,000............... 73,859 147,719 221,578 295,437 369,296 443,419
1,000,000............... 98,859 197,719 296,578 395,437 494,296 593,419
1,250,000............... 123,859 247,719 371,578 495,437 619,296 743,419
1,500,000............... 148,859 297,719 446,578 595,437 744,296 893,419
1,750,000............... 173,859 347,719 521,578 695,437 869,296 1,043,419
2,000,000............... 198,859 397,719 596,578 795,437 994,296 1,193,419
2,250,000............... 223,859 447,719 671,578 895,437 1,119,296 1,343,419
2,500,000............... 248,859 497,719 746,578 995,437 1,244,296 1,493,419
</TABLE>
Benefits shown in the table above are computed as a single-life annuity and
reflect a reduction to recognize in part Everest Re's cost of social security
benefits. A participant's "final average earnings" under the Retirement Plan
will be his or her average annual "earnings" under the plan during the 72
consecutive months of continuous service in which the participant received the
greatest amount of earnings out of the final 120 months of continuous service.
For this purpose, "earnings" generally includes the participant's base salary,
cash bonus payments under the Chief Executive Officer's Bonus Plan, the
Executive Performance Annual Incentive Plan and, for participants who held
positions equivalent to or senior to that of department vice president when that
position existed, cash payments under the Company's Annual Incentive Plan. With
respect to cash payments made under the Annual Incentive Plan through December
31, 1999, "earnings" did not include amounts in excess of 50% of salary or
$275,000, whichever was greater. Moreover, "earnings" does not include any other
compensation set forth in the Summary Compensation Table. Final average earnings
and earnings will be determined under the Supplemental Plan in the same manner
as under the Retirement Plan, except that a participant's earnings are not
subject to the limitations under the Code. "Continuous service" under the
Retirement Plan and Supplemental Plan will be the number of years and months
worked for Everest Re and certain affiliates, including during the period of
affiliation with Prudential.
The years of continuous service for Mr. Taranto, Mr. Gallagher, Ms. Burak
and Mr. Limauro to be taken into account under the Retirement Plan and
Supplemental Plan (rounded to the nearest year), as of April 1, 2000, are 5, 25,
20, and 27, respectively. Final average earnings for Mr. Taranto, Mr. Gallagher,
Ms. Burak and Mr. Limauro to
13
<PAGE>
be taken into account as of April 1, 2000 are $1,374,021, $469,866, $226,468 and
$178,863, respectively. Final average earnings for Mr. Taranto include the
"Additional Compensation" amounts payable under the terms of his Employment
Agreement with the Company (see "Employment Agreements" below).
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS -- MR. TARANTO
The Company entered into an Employment Agreement with Mr. Taranto, dated as
of October 11, 1994 (the "Hiring Date"), which expired on December 31, 1999. The
Employment Agreement provided for an annual base salary (the "Base Salary") of
$500,000, plus additional cash compensation (the "Additional Compensation") of
$25,000 per month (which was not included in Mr. Taranto's salary for purposes
of computing Mr. Taranto's bonus under the Annual Incentive Plan established by
the Company). Each of the Base Salary and the Additional Compensation was
subject to annual increases of no less than four percent nor greater than eight
percent. Effective March 26, 1999, Mr. Taranto's Base Salary was increased to
$608,817 and his Additional Compensation was increased to $30,463 per month.
Prior to January 1, 1999, Mr. Taranto was eligible to participate in the Annual
Incentive Plan with a maximum bonus equal to 80% of his Base Salary and after
January 1, 1999 he was eligible for an award under the Executive Performance
Annual Incentive Plan. (See "Compensation Committee Report--Chief Executive
Officer Compensation").
On July 15, 1998, the Company entered into another employment agreement
with Mr. Taranto (the "Second Employment Agreement"), which became effective as
of January 1, 2000 and will expire on December 31, 2001 unless sooner terminated
in accordance with its terms. The terms of the Second Employment Agreement are
substantially similar to the terms of the Employment Agreement with the
following exceptions: (a) the Second Employment Agreement is for a period of two
years and provides for a base salary of $1,000,000 per year, and (b) Mr. Taranto
will be eligible to participate in the Executive Performance Annual Incentive
Plan. Upon entering into the Second Employment Agreement, Mr. Taranto received a
non-qualified option under the Company's 1995 Stock Incentive Plan to purchase
150,000 Common Shares as a sign-on bonus.
In connection with the restructuring of the Company, Mr. Taranto entered
into an amendment to his Second Employment Agreement. The amendment provides
that Mr. Taranto will be the Chairman and Chief Executive Officer of the Company
after the restructuring and will provide services to the Company after the
restructuring that are comparable to those required under his employment
agreement prior to the restructuring. In connection with the restructuring, the
Company and Everest Holdings are both parties to the employment agreement and
have co-extensive rights, powers, duties and obligations. Other conforming
changes were also made to the employment agreement to reflect the restructuring.
The amendment also provides that if the Company establishes a new Delaware
subsidiary, Everest Global Services, Inc. ("Everest Services"), to perform
administrative and back-office functions for the Company and its insurance
subsidiaries, and if the Board so requests, Mr. Taranto will transfer to
employment with Everest Services.
In connection with the execution of the Second Employment Agreement, the
Company and Mr. Taranto also entered into a Change of Control Agreement dated as
of July 15, 1998. The Change of Control Agreement provides that if within one
year after the occurrence of a material change (as defined in the agreement),
Mr. Taranto terminates his employment for any reason or if the Company
terminates Mr. Taranto's employment for any reason other than for due cause (as
defined in the agreement) then (a) all of Mr. Taranto's outstanding stock
options granted under the Company's stock plans shall immediately vest and
become exercisable; (b) Mr. Taranto shall receive a cash payment equal to the
lesser of (i) 2.99 multiplied by Mr. Taranto's annual compensation for the most
recent taxable year ending prior to the date of the material change less the
value of Mr. Taranto's gross income in the most recent taxable year ending prior
to the date of a material change attributable to Mr. Taranto's exercise of stock
options, stock appreciation rights and other stock-based awards granted Mr.
Taranto by the Company and (ii) 2.99 multiplied by Mr. Taranto's "annualized
includible compensation for the base period" as that phrase is defined in
Section 280G(d) of the Code; (c) Mr. Taranto shall continue to be covered under
the Company's medical and dental insurance plans for a period of three years
from the date of termination; (d) Mr. Taranto shall receive "Special Retirement
14
<PAGE>
Benefits" in an amount that will equal the retirement benefits he would have
received had he continued in the employ of the Company for three years following
his termination under the Everest Reinsurance Retirement Plan and any
supplemental, substitute or successor retirement plans adopted by the Company.
In the event that the benefits Mr. Taranto receives under the Change of Control
Agreement cause Mr. Taranto to receive a "Parachute Payment" within the meaning
of Section 280G of the Code, Mr. Taranto's benefits will be reduced to an amount
that is one dollar less than the amount that would cause a Parachute Payment. If
an award made under the Change of Control Agreement nevertheless results in an
assessment against Mr. Taranto of a "Parachute Tax" pursuant to Section 4999 of
the Code, Mr. Taranto shall be entitled to receive an additional amount of money
that would put him in the same net tax position had no Parachute Tax been
incurred. The Change of Control Agreement will terminate on the earliest of (i)
one year following a material change; (ii) termination by Mr. Taranto of his
employment with the Company under circumstances not following a material change;
(iii) the Company's termination of Mr. Taranto's employment for due cause; or
(iv) December 31, 2001, or any date thereafter, with 60 days written notice.
In connection with the restructuring, Mr. Taranto entered into an amendment
to his Change in Control Agreement that provides that transactions with respect
to Everest Group after the restructuring will trigger benefits under the
agreement to the same extent as transactions with respect to Everest Holdings
prior to the restructuring. Changes were also made in the Change in Control
Agreement to take into account the possible establishment of Everest Services
and Mr. Taranto's employment by that Company.
If the Company terminates Mr. Taranto's employment for "due cause" (as
defined in the Employment Agreement and the Second Employment Agreement) or Mr.
Taranto voluntarily terminates his employment other than for "good reason" (as
defined in the Employment Agreement and the Second Employment Agreement), Mr.
Taranto will be entitled to his Base Salary and any Additional Compensation due
him through the date of termination. If the Company terminates Mr. Taranto's
employment other than for due cause, or if Mr. Taranto voluntarily terminates
his employment for good reason, the Company will be obligated to pay Mr.
Taranto, in addition to all Base Salary and Additional Compensation accrued
through the date of termination (i) the aggregate amount of Base Salary and
Additional Compensation, at the rate then in effect, from the date of
termination through December 31, 1999 under the Employment Agreement and through
December 31, 2001 under the Second Employment Agreement, and (ii) aggregate
bonus amounts for the period from the date of termination to December 31, 1999,
calculated as 40% of Base Salary at the date of termination under the Employment
Agreement and through December 31, 2001, the aggregate bonus amounts due under
the appropriate bonus plans or programs under the Second Employment Agreement.
OTHER CHANGE OF CONTROL ARRANGEMENTS
The Company established a Senior Executive Change of Control Plan (the
"Change of Control Plan"), effective September 28, 1998. The Change of Control
Plan is administered by the Compensation Committee, which selects participants
from among the senior executives of the Company and its subsidiaries. Among
others, the Compensation Committee has selected Mr. Gallagher, Ms. Burak and Mr.
Limauro to participate in the plan.
The Change of Control Plan provides that if within two years after the
occurrence of a material change (as defined in the plan) a participant
terminates his or her employment for good reason (as defined in the plan) or the
Company terminates the participant's employment for any reason other than for
due cause (as defined in the plan), then (a) all of the participant's
outstanding stock options granted under the Company's stock plans shall
immediately vest and become exercisable for three months following termination
of employment; (b) all restrictions on the participant's restricted stock
awarded under the Company's stock plans shall immediately terminate and lapse;
(c) the participant shall receive a cash payment equal to the participant's
average salary and annual incentive bonus for the three most recent taxable
years (or such shorter period as may be applicable), multiplied by a number
between 2 and 2.99 determined by the Compensation Committee (for Mr. Gallagher
the number is 2.99 and for Ms. Burak and Mr. Limauro the number is 2); (d) the
participant shall continue to be covered under the Company's medical and dental
insurance plans for a period of two years from the date of termination; (e) the
participant shall receive "special retirement benefits" in an amount that will
equal the retirement benefits he or she would have received
15
<PAGE>
under the Everest Reinsurance Retirement Plan and any supplemental, substitute
or successor plans adopted by the Company, had he or she continued in the employ
of the Company for a period following termination determined by the Compensation
Committee. For Mr. Gallagher, the period is the greater of 3 and the number of
years necessary to credit service to his 55th birthday, and for Ms. Burak and
Mr. Limauro, the period is 2 years.
CERTAIN TRANSACTIONS WITH DIRECTORS
Two of the Company's operating subsidiaries, Everest Re and Everest
National, have entered into a number of business transactions with HealthCare
Risk Management Services, Inc. ("HealthCare Risk Management"). HealthCare Risk
Management is a company in which Mr. Galtney, a member of the Company's Board of
Directors, maintained a substantial ownership position during 1999. In 1999, as
a result of these transactions, Everest Re paid to HealthCare Risk Management, a
licensed reinsurance intermediary that routinely presents risks to Everest Re,
brokerage fees of $121,500 in respect of 1998 business and $107,376 in respect
of 1999 business. Brokerage payable to HealthCare Risk Management as of January
1, 2000 was $89,700. Everest National also has a business relationship with
WorkCare Northwest, Inc. ("WorkCare Northwest"), a company in which Mr.
Galtney's brother, Edward B. Galtney, holds a 90% ownership interest. In 1999,
Everest National incurred and paid commissions in the amount of $663,591 to
WorkCare Northwest for insurance agency services as a program administrator
under Everest National's Idaho Workers Compensation Program.
In 1998, Everest National and Mt. McKinley acquired the assets of two
Galtney Group, Inc. ("GGI") insurance agencies. In these transactions, Everest
National acquired substantially all of the assets, including the name, of
WorkCare, Inc. and Mt. McKinley acquired substantially all of the assets,
including the name, of WorkCare Southeast, Inc., agencies which had provided
insurance agency services to Everest Re and Everest National. The aggregate
initial purchase price paid to GGI was $2,900,000. Following the transactions,
the GGI agencies formerly known as WorkCare, Inc. and WorkCare Southeast, Inc.
changed their names to Healthcare Specialty Brokers, Inc. ("Healthcare
Specialty") and Healthcare Specialty Brokers of Alabama, Inc. ("Healthcare
Specialty Alabama"), respectively. Pursuant to service agreements incorporated
into the Asset Purchase Agreements, the Company's affiliates agreed to
administer the collection and disbursement of the pre-July 1, 1998 business
receivables and payables on behalf of the GGI agencies and to treat such
collections and disbursements, net of related costs and expenses, as purchase
price adjustments. In 1999, Everest National and Mt. McKinley made an overall
settlement of commissions and certain operating expenses owed to GGI, resulting
in payments of $25,000 to Healthcare Specialty and $249,000 to Healthcare
Specialty Alabama. As a result of the asset acquisitions discussed above,
Healthcare Specialty and Healthcare Specialty Alabama were only entitled to
commissions on policies that incepted on or before June 30, 1998.
PROPOSAL NO. 2--AUTHORIZATION TO ELECT OR APPOINT
ADDITIONAL DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR AUTHORIZING THE BOARD
TO ELECT OR APPOINT ADDITIONAL DIRECTORS OF THE COMPANY UP TO SUCH MAXIMUM
NUMBER AS MAY BE ESTABLISHED FROM TIME TO TIME IN ACCORDANCE WITH THE COMPANY'S
BYE-LAWS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE IN
THEIR PROXIES.
As a Bermuda company, the Company is governed by the provisions of the
Companies Act 1981 of Bermuda (the "Companies Act") and the Memorandum of
Association and Bye-laws of the Company. The Companies Act provides that only
the shareholders of a company can authorize the board of directors to elect or
appoint additional directors to fill newly created board positions if the size
of the board is increased in accordance with the Company's Bye-laws. Without
shareholder authorization, the board of directors has the authority to fill
vacancies in existing board positions and to increase the board size up to the
maximum number permitted by the Company's Bye-laws, but it does not have
authority to fill newly created board positions if the board size is increased.
By contrast, the Delaware General Corporation Law, which governed the Company
prior to its February 24, 2000 restructuring,
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authorizes a corporation's board of directors both to fill vacancies in existing
board positions and to elect additional directors to fill newly created board
positions if the size of the board is increased, unless the corporation's
certificate of incorporation or by-laws otherwise provide. Therefore, in order
to provide the Board with the same authority to elect additional directors to
fill newly created Board positions under Bermuda law that the Board possessed
under Delaware law prior to the restructuring, the shareholders of the Company
are urged to approve Proposal No. 2. This will give the Board the ability to
expand its size with the timely addition of qualified directors.
PROPOSAL NO. 3--APPOINTMENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR ENDING
DECEMBER 31, 2000 AND THE AUTHORIZATION OF THE BOARD OF DIRECTORS TO SET THE
FEES FOR THE INDEPENDENT AUDITORS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS
SPECIFY OTHERWISE IN THEIR PROXIES.
The Company's independent auditors are appointed each year at the Annual
General Meeting of shareholders pursuant to the Board's recommendation, which in
turn is based on the recommendation of the Audit Committee. In making its
recommendation, the Audit Committee reviews both the audit scope and estimated
fees for professional services for the coming year. Representatives of
PricewaterhouseCoopers will be present at the 2000 Annual General Meeting, will
have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions of shareholders.
MISCELLANEOUS--GENERAL MATTERS
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than ten percent
of a registered class of the Company's equity securities, to file reports of
ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commission (the "SEC") and the New York Stock Exchange. Officers,
directors and greater than ten percent shareholders are required by SEC
regulation to furnish the Company with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of such forms it has
received, the Company believes that all of its officers, directors and greater
than ten percent beneficial owners have filed with the SEC on a timely basis all
required forms with respect to transactions during fiscal year 1999.
SHAREHOLDER PROPOSALS FOR THE 2001 ANNUAL GENERAL MEETING OF SHAREHOLDERS
To be considered for inclusion in the Company's Proxy Statement relating to
the 2001 Annual General Meeting of Shareholders, a shareholder proposal must be
received by the Company Secretary in proper form at the Company's registered
office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda no later
than December 15, 2000.
The proxy solicited by the Board of Directors relating to the 2001 Annual
General Meeting of Shareholders shall confer discretionary authority to vote on
a shareholder proposal if the Company Secretary receives notice of that proposal
after February 28, 2001.
Shareholders who intend to nominate persons for election as directors at
general meetings must comply with the advance notice procedures set forth in the
Bye-Laws of the Company in order for such nominations to be properly brought
before that general meeting. These advance notice procedures require that
written notice of a shareholder's intent to make such a nomination at the 2001
Annual General Meeting of Shareholders must be received by the Secretary of the
Company between November 15, 2000 and December 15, 2000.
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PROXY SOLICITATIONS
The expense of proxy solicitation will be borne by the Company. In addition
to solicitation by mail, proxies may be solicited in person or by telephone,
telegraph or facsimile by directors or officers who are employees of the Company
and its subsidiaries without additional compensation. In addition, Corporate
Investor Communications, Inc. will provide solicitation services to the Company
for a fee of approximately $4,000 plus out-of-pocket expenses. The firm will
solicit proxies by personal interview, telephone, telegraph and mail. The
Company will, on request, reimburse shareholders of record who are brokers,
dealers, banks or voting trustees, or their nominees, for their reasonable
expenses in sending proxy materials and annual reports to the beneficial owners
of the shares they hold of record.
TRANSFER AGENT AND REGISTRAR
The Company has appointed EquiServe Trust Company, N.A. to serve as
transfer agent, registrar and dividend paying agent for the Common Shares.
Correspondence relating to any share accounts or dividends should be addressed
to:
EquiServe Trust Company, N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(201) 324-0498
All transfers of certificates for Common Shares should also be mailed to
the above address.
By Order of the Board of Directors
Janet J. Burak
April 14, 2000 SECRETARY
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6287
|X| PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
FOR all nominees WITHHOLD
listed (except as AUTHORITY to
marked to the vote for all
contrary) nominees listed
| | | |
To elect Martin Abrahams and John R. Dunne as Directors of the Company for a
three-year term ending in 2003.
1. Election of Directors
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, WRITE
THAT NOMINEE'S NAME ON THE SPACE PROVIDED BELOW.
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SIGNATURE(S) DATE
----------------------------------------------- --------------
Sign exactly as name appears hereon. When signing in a representative capacity,
please give full title.
2. To authorize the Board of Directors to elect or appoint additional
Directors up to such maximum number as may be established from time to time
in accordance with the Company's Bye-laws.
FOR AGAINST ABSTAIN
| | | | | |
3. To appoint PricewatherouseCoopers as the Company's independent auditors for
the year ending December 31, 2000 and authorize the Board of Directors to
set the fees for the independent auditors.
FOR AGAINST ABSTAIN
| | | | | |
In their discretion, upon such other matters as may properly come before the
meeting, all in accordance with the accompanying Notice and Proxy Statement,
receipt of which is acknowledged.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED THEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE STOCKHOLDER, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
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^ FOLD AND DETACH HERE ^
EVEREST RE GROUP, LTD.
ANNUAL MEETING OF SHAREHOLDERS
TUESDAY, MAY 23, 2000, 11:00 A.M.
ROYAL PAVILION HOTEL
PORTERS, ST. JAMES, BARBADOS
<PAGE>
PROXY
EVEREST RE GROUP, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.V. Taranto, S.L. Limauro, and J.J. Burak,
and each of them, as proxies of the undersigned, each with full power to act
without the others and with full power of substitution, to vote all the Common
Shares of EVEREST RE GROUP, LTD. held in the name of the undersigned at the
close of business on March 27, 2000, at the Annual General Meeting of
Shareholders to be held on May 23, 2000, at the Royal Pavilion Hotel, Porters,
St. James, Barbados at 11:00 a.m. (local time), and at any adjournment or
postponement thereof, with all the powers the undersigned would have if
personally present, on the matters set forth hereon in accordance with any
directions given by the undersigned and, in their discretion, on all other
matters that may properly come before the Annual General Meeting, all in
accordance with the accompanying Notice and Proxy Statement, receipt of which is
acknowledged.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
(SEE REVERSE SIDE)
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^ FOLD AND DETACH HERE ^
