SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities`
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[X] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[_] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12
EVEREST RE GROUP, LTD.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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<PAGE>
[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
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EVEREST RE GROUP, LTD.
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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
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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 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 ____________ 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.
2
<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.
3
<PAGE>
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 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
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 90% 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 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, 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 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.
4
<PAGE>
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.
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.
5
<PAGE>
Amount and Nature of Percent of
Name of Beneficial Owner Beneficial Ownership Class (10)
----------------------- -------------------- ---------
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) ____%
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* 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 __________ total Common Shares outstanding and entitled to
vote as of March 27, 2000.
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.
Number of Shares Percent of
Name and Address of Beneficial Owner Beneficially Owned Class
------------------------------------ ------------------ -------
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
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(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.
6
<PAGE>
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 $30.625 per
share.
Compensation of Executive Officers
Summary Compensation Table
The following table sets forth compensation paid or accrued for the
last three fiscal years with respect to the Company's Chief Executive
Officer and the three other most highly compensated executive officers who
were serving as executive officers as of December 31, 1999 (the "Designated
Executive Officers"), for services rendered by them to the Company and to
its subsidiaries.
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation Long Term Compensation
Awards
Restricted Securities All Other
Stock Underlying Compensation
Name and Principal Position Year Salary($) 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>
7
<PAGE>
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(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--$5,190.
Stock Option Grants
The following table sets forth certain information concerning stock
options granted under the Company's 1995 Stock Incentive Plan during 1999
to the Designated Executive Officers.
<TABLE>
<CAPTION>
Option /SAR Grants in Last Fiscal Year
Individual Grants
Number of % of Total
Securities Options/SARs
Underlying Granted to Exercise or Grant Date
Options/SARs Employees in Base Price Expiration Present Value
Name Granted (#)(1) Fiscal Year(2) ($/Sh) Date (3) ($)(4)
<S> <C> <C> <C> <C> <C>
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.
8
<PAGE>
(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 $.24
per share by the weighted average fair market value of the stock on
the date of grant, which resulted in an assumed dividend yield of 0.8%.
(d) Expected Life -- The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was
7.5 years.
Stock Option Exercises And Option Values
The following table sets forth certain information concerning the
number and value of unexercised stock options at the end of 1999 held by
the Designated Executive Officers. No Designated Executive Officer
exercised stock options during 1999.
<TABLE>
<CAPTION>
Aggregated Option/SAR Exercises in Last Fiscal Year
and FY-End Option/SAR Values
Number of Securities
Underlying Unexercised Value of Unexercised
Shares Options/SARs at In-the-Money Options/SARs
Acquired on Value at FY-End(#) at FY-End($)(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.
9
<PAGE>
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.
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.
10
<PAGE>
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.
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.
11
<PAGE>
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
12
<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.
<TABLE>
<CAPTION>
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
Cumulative Total Return*
-------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
10/3/95 12/95 12/96 12/97 12/98 12/99
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
* $100 INVESTED ON 10/3/95 IN SHARES OR INDEX
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEARS ENDING DECEMBER 31.
</TABLE>
13
<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.
14
<PAGE>
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 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
15
<PAGE>
(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
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
16
<PAGE>
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 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 an ultimate ownership and
controlling 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,
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.
17
<PAGE>
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.
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.
18
<PAGE>
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
19
<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
below 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
<PAGE>
6287
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
This proxy, when properly executed, will be voted in the manner directed
herein by the shareholder. IF NO DIRECTION IS MADE, THIS PROXY WILL BE
VOTED FOR PROPOSALS 1, 2 AND 3.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
1. To elect Martin Abrahams and John R. Dunne as Directors of the
Company for a three-year term ending in 2003.
FOR all nominees
listed (except as WITHHOLD
marked to the AUTHORITY to vote
contrary) for all nominees listed
[ ] [ ]
INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, WRITE THAT NOMINEE'S NAME ON THE SPACE PROVIDED
BELOW.
----------------------------------------------------------------------
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 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.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
SIGNATURE(S) DATE
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Sign exactly as name appears hereon.
When signing in a representative capacity, please give
full title.
