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 [ X ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for use by 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 REINSURANCE HOLDINGS, INC.
................................................................................
(Name of Registrant as Specified in its Charter)
COMMAND FINANCIAL PRESS CORPORATION
................................................................................
(Name of Person(s) Filing Proxy Statement if other than 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:
...............................................................
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 (Set forth the amount on
which the filing fee is calculated and state how it was
determined):
...............................................................
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 REINSURANCE HOLDINGS, INC.
----------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 22, 1997
TO THE STOCKHOLDERS OF EVEREST REINSURANCE HOLDINGS, INC.:
The Annual Meeting of Stockholders of Everest Reinsurance Holdings, Inc., a
Delaware corporation, will be held at the Company's new corporate headquarters
at Westgate Corporate Center, 477 Martinsville Road, Liberty Corner, New Jersey,
on Thursday, May 22, 1997 at 11:00 a.m., for the following purposes:
1. To elect three Class I Directors of the Company, each for a three-year
period to expire at the 2000 Annual Meeting of Stockholders.
2. To transact such other business as may properly come before the
meeting and any and all adjournments thereof.
Stockholders of record at the close of business on March 25, 1997 will be
entitled to vote at the meeting. A list of such stockholders will be available
at the time and place of the meeting and, during the 10 days prior to the
meeting, at the office of the Secretary of the Company at Westgate Corporate
Center, 477 Martinsville Road, Liberty Corner, New Jersey.
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 Burak Melchione, Secretary
April 11, 1997
Newark, New Jersey
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
PROXY STATEMENT
----------
ANNUAL MEETING OF STOCKHOLDERS
MAY 22, 1997
The enclosed Proxy is being solicited on behalf of the Board of Directors
(the "Board") for use at the Annual Meeting of Stockholders of Everest
Reinsurance Holdings, Inc., a Delaware corporation (the "Company"), to be held
on May 22, 1997, 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 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
directors.
Only stockholders of record at the close of business on March 25, 1997 will
be entitled to vote at the meeting. On that date 50,490,673 shares of common
stock, par value $.01 per share, were outstanding and entitled to vote. Each
share of common stock is entitled to one vote.
This Proxy Statement, the attached Notice of Annual Meeting, the Annual
Report of the Company for the year ended December 31, 1996 (including financial
statements) and the enclosed Proxy Card are first being mailed to the Company's
stockholders on or about April 11, 1997.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE FOR THE
NOMINEES FOR THE BOARD OF DIRECTORS DESCRIBED BELOW. PROXIES WILL BE SO VOTED
UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. NOMINEES FOR DIRECTOR
WILL BE ELECTED BY A PLURALITY OF THE VOTES CAST. ABSTENTIONS AND BROKER
NON-VOTES WILL HAVE NO EFFECT ON THE OUTCOME OF THE VOTE.
The Company's Certificate of Incorporation provides for the division of the
Board into three classes, with the directors in each class serving for a term of
three years. At the Annual Meeting, three nominees for Class I director
positions are to be elected to serve until the 2000 Annual Meeting of
Stockholders 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
1998 Annual Meeting of Stockholders and the Class III directors will be subject
to election at the 1999 Annual Meeting of Stockholders. 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 Company's Board of Directors 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. Messrs.
Martin Abrahams, Robert P. Jacobson, Kenneth J. Duffy, Joseph V. Taranto, John
R. Dunne and Robert A. Mulderig have been serving under interim election by the
Board.
<PAGE>
INFORMATION CONCERNING NOMINEES
The following information has been furnished by the respective nominees for
election of Class I directors for a term expiring in 2000.
MARTIN ABRAHAMS, 64, became a Class I director of the Company on March 12,
1996 and a director of Everest Reinsurance Company, a wholly-owned subsidiary of
the Company ("Everest Re"), on March 13, 1996. 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, 67, became a Class I director of the Company and a director
of Everest Re on June 10, 1996. 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 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.
ROBERT P. JACOBSON, 48, became a Class I director of the Company and a
director of Everest Re on March 13, 1996. Since January 31, 1994, Mr. Jacobson
has served as Senior Vice President, Chief Financial Officer and Comptroller to
both companies. He is responsible for the actuarial and comptrollers
departments. Previously, Mr. Jacobson was with the accounting firm of Coopers &
Lybrand L.L.P. where he had been a partner since 1982 responsible for property
and casualty insurance and reinsurance clients. He is also the Comptroller and a
director of Everest National Insurance Company ("Everest National"), a wholly
owned subsidiary of Everest Re.
INFORMATION CONCERNING CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following information has been furnished by those directors whose terms
of office will continue after the 1997 Annual Meeting and by the remaining
executive officers.
KENNETH J. DUFFY, 67, became a Class II director of the Company on March
12, 1996 and a director of Everest Re on March 13, 1996. Mr. Duffy is currently
the Chairman of the Board of Commercial Union Corporation. Having been
associated with that company for more than forty years, Mr. Duffy became its
Chairman and Chief Executive Officer in 1993. He retired as Chief Executive
Officer in January 1995 while retaining his responsibilities as Chairman. As of
January 1995, he became a consultant to Commercial Union plc with respect to
United States, Canadian and Bermudian matters. Mr. Duffy is a director of
Commercial Union Corporation, 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, a fellow of the Institute
of Risk Management and a member of the advisory committee of the Conning Venture
Capital Funds.
THOMAS J. GALLAGHER, 48, 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 currently serves as a director of Everest Reinsurance
Ltd, Everest National and Everest Insurance Company of Canada ("EVCAN"), all of
which are wholly owned subsidiaries of Everest Re. He is also Vice Chairman of
EVCAN.
WILLIAM F. GALTNEY, JR., 44, became a Class III director of the Company on
March 12, 1996 and a director of Everest Re on March 13, 1996. 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 80% 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 GGI
subsidiaries and affiliates. Mr. Galtney is also a director of Mutual Risk
Management Ltd.
2
<PAGE>
ROBERT A. MULDERIG, 44, became a Class II director of the Company and
Everest Re on August 1, 1996. Mr. Mulderig is the Chairman of the Board and
Chief Executive Officer of Mutual Risk Management Ltd., a Bermuda holding
company. Mr. Mulderig has been involved with Mutual Risk Management Ltd. since
its founding in 1977 and has been its Chief Executive Officer since 1982. Mr.
Mulderig is a director of Mutual Indemnity Ltd., and Chairman of Legion
Insurance Company. Mr. Mulderig is also a member of the Board of Directors of
many captive insurance and reinsurance companies in Bermuda and Barbados.
JOSEPH V. TARANTO, 48, 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 is the
Chairman of the Board and President of Everest National and Chairman of Everest
Re Ltd. Mr. Taranto is a director of EVCAN and serves as its Chairman of the
Board. He is also a director of International Technology Underwriters, Inc. 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.
JANET BURAK MELCHIONE, 46, 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. Melchione has served as General
Counsel of Everest Re since 1985 and in 1986 was appointed Secretary. Ms.
Melchione is Secretary and General Counsel of Everest National, Secretary of
EVCAN and Assistant Secretary of Everest Reinsurance Ltd.
SHELDON ROSENBERG, 47, is an executive officer of the Company and became
Vice President and Chief Actuary of Everest Re on May 11, 1995. He is a director
of Everest National. Mr. Rosenberg previously had been employed at Continental
Corporation since 1986, most recently as Senior Vice President. Since February
1994, he had served as Chief Actuary of Continental Insurance Company, the
primary insurance subsidiary of Continental Corporation. Mr. Rosenberg is a
fellow of the Casualty Actuarial Society and has previously served on its Board
of Directors. He is a member of the American Academy of Actuaries.
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board conducts its business through its meetings and meetings of its
committees. Four meetings of the Board were held in 1996. 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.
John C. Morrison became a non-employee Class I director of the Company on
March 11, 1996 and a director of Everest Re on March 13, 1996. At the meeting of
the Board of Directors on March 21, 1996, Mr. Morrison was appointed a member of
the Audit Committee and the Compensation Committee. Mr. Morrison's death on
April 4, 1996 created vacancies on the Board and on both of these committees.
The Board of Directors subsequently filled these vacancies in 1996.
AUDIT COMMITTEE
The Audit Committee was created by the Board of Directors on March 21,
1996. The principal purpose of the Audit Committee is to oversee the Company's
financial reporting process, its system of internal controls, the audit process
and the Company's ethics guidelines and to report to the full Board of Directors
on the Committee's findings and recommendations. The Audit Committee relies upon
appropriate Company financial and legal personnel and the Company's independent
public accountants to review these internal controls, the Company's 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
has been designated to serve as Chairman. The Audit Committee held three
meetings in 1996.
3
<PAGE>
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 and the Company's
Comptroller, Secretary and Treasurer. 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 Chief Executive Officer's Bonus
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 three
occasions in 1996.
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of shares of common
stock as of March 21, 1997 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 the Designated 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(9)
------------------------ -------------------- ----------
<S> <C> <C>
Martin Abrahams.................................... 2,308(1) *
Kenneth J. Duffy................................... 1,608(2) *
John R. Dunne...................................... 1,518(3) *
Thomas J. Gallagher................................ 20,600(4) *
William F. Galtney, Jr............................. 137,708(5) *
Robert P. Jacobson................................. 24,440(6) *
Robert A. Mulderig................................. 10,000 *
Joseph V. Taranto.................................. 440,138 *
Janet B. Melchione................................. 2,100(7) *
Sheldon Rosenberg.................................. 13,000(8) *
All directors and Designated Executive Officers
as a group (10 persons)........................ 653,420 1.29
</TABLE>
- ------------------
* Less than 1%
(1) Includes 1,108 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Option Plan
for Non-Employee Directors.
(2) Includes 1,108 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Option Plan
for Non-Employee Directors.
(3) Includes 1,018 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Option Plan
for Non-Employee Directors.
(4) Includes 9,600 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 8,600 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Incentive
Plan.
(5) Includes 126,600 shares owned by Western Indemnity Insurance Company, a
wholly-owned subsidiary of Galtney Holdings, Inc. Galtney Holdings, Inc. is
wholly-owned by GGI in which Mr. Galtney maintains an 80% ownership
position. Also includes 1,108 shares which may be purchased upon the
exercise of stock options which are exercisable under the Company's 1995
Stock Option Plan for Non-Employee Directors.
4
<PAGE>
(6) Includes 11,280 shares of restricted stock issued to Mr. Jacobson 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 10,240 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Incentive
Plan.
(7) Includes 2,000 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Incentive
Plan.
(8) Includes 6,400 shares of restricted stock issued to Mr. Rosenberg 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 5,000 shares which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Incentive
Plan.
(9) Based on 50,490,673 total shares outstanding as of March 21, 1997.
PRINCIPAL HOLDERS OF COMMON STOCK
To the best of the Company's knowledge, the only beneficial owners of more
than 5% of the outstanding shares of common stock of the Company as of December
31, 1996 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 Bank Corporation.................. 4,682,000(1) 9.27%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Jurika & Voyles, L.P..................... 3,007,750(2) 5.96
1999 Harrison Street, Suite 700
Oakland, California 94612
Loomis, Sayles & Company, L.P............ 4,153,075(3) 8.2
One Financial Center
Boston, Massachusetts 02111
American Express Financial Corporation... 2,747,340(4) 5.4
IDS Tower 10
Minneapolis, Minnesota 55440
- --------------------
(1) Mellon Bank Corporation reports in its Schedule 13G that it has sole voting
power with respect to 4,075,000 shares of common stock, shared voting power
with respect to 8,000 shares of common stock, sole dispositive power with
respect to 1,990,000 shares of common stock and shared dispositive power
with respect to 2,692,000 shares of common stock.
(2) Jurika & Voyles, L.P. reports in its Schedule 13G that it has shared voting
power with respect to 2,716,560 shares of common stock and has shared
dispositive power with respect to 3,007,750 shares of common stock.
(3) Loomis, Sayles & Company, L.P. reports in its Schedule 13G that it has sole
voting power with respect to 1,684,100 shares of common stock, shared
voting power with respect to 1,650 shares of common stock and shared
dispositive power with respect to 4,153,075 shares of common stock.
(4) American Express Financial Corporation reports in its Schedule 13G that it
has shared voting power with respect to 1,763,340 shares of common stock
and shared dispositive power with respect to 2,747,340 shares of common
stock. American Express Financial Corporation is a subsidiary of American
Express Company.
5
<PAGE>
DIRECTORS' COMPENSATION
Each member of the Board of Directors who is not otherwise affiliated with
the Company as an employee and/or officer ("Non-Employee Director") was
compensated in 1996 for services as a director by an annual retainer of $15,000,
fees of $1,000 for each Board meeting attended and an additional fee of $1,000
for each committee meeting attended. The directors were also reimbursed for
their out-of-pocket expenses associated with each meeting attended. Commencing
in 1997, the annual compensation of the Non-Employee Directors has been fixed at
$35,000 per year to be paid quarterly in arrears by the issuance of shares of
common stock. By compensating the Non-Employee Directors with stock, it is
intended to more closely align their interests with those of the stockholders.
The value of shares issued shall be calculated based upon the average of the
highest and lowest sale prices of the Company's common stock on the last day of
the calendar quarter. If no sale is reported for such date, the average prices
on the next preceding day for which there is a reported sale will be used (the
"Market Price"). The number of shares to be paid each quarter shall be equal to
one-quarter of $35,000 divided by the applicable Market Price of the common
stock for each quarter. If the number of shares so calculated includes a
fractional share, such number shall be rounded down to the nearest whole number.
All directors will continue to be reimbursed for their out of pocket expenses
associated with each meeting attended.
In addition to the payments described herein, 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. The Directors' Plan was
amended by the stockholders at the Company's 1996 Annual Meeting of Stockholders
(the "Amended Directors' Plan"). Each of the Non-Employee Directors on the
Company's Board is awarded options to purchase that number of shares of common
stock equal to $50,000 divided by the fair market value of such stock as of the
date they were initially appointed to the Board, with an exercise price equal to
that fair market value. As defined in the Amended Directors' Plan, the fair
market value is determined by averaging the high and low trading prices of the
stock on the date of the option award.
In 1996, options to purchase a total of 12,870 shares of common stock were
granted under the Directors' Plan and the Amended Directors' Plan. Mr. Morrison
was granted options on March 11, 1996 to purchase 2,156 shares of common stock
at an exercise price of $23.1875. Mr. Abrahams, Mr. Duffy, and Mr. Galtney were
each granted options on March 12, 1996 to purchase 2,216 shares of common stock
at an exercise price of $22.5625. On June 10, 1996 Mr. Dunne was granted options
to purchase 2,036 shares of common stock at an exercise price of $24.5625. On
August 1, 1996 Mr. Mulderig was granted options to purchase 2,030 shares of
common stock at an exercise price of $24.625.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years, or as otherwise indicated, with respect to the Company's
Chief Executive Officer and the four other most highly compensated executive
officers who were serving as executive officers as of December 31, 1996 (the
"Designated Executive Officers"), for services rendered by them to the Company
and to its subsidiaries.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
---------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
--------------------------- ------------------------------ -------------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($)(1) AWARD(S) ($)(2) OPTIONS (#) PAYOUT ($)(3) ($)(4)
- --------------------------- ---- ---------- ------------ --------------- ------------ ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto 1996 $851,775 $689,600 -- 50,000 -- $ 16,918
Chairman of the Board 1995 815,350 300,000 -- -- -- 13,343,318
and Chief Executive 1994 158,654 50,000 -- -- -- 800,116
Officer
Thomas J. Gallagher 1996 261,250 150,000 -- 20,000 $85,239 9,013
President 1995 215,539 120,000 $238,500 43,000 69,741 7,060
1994 206,500 115,000 -- -- 70,300 6,890
Robert P. Jacobson 1996 290,500 120,000 -- 14,000 -- 9,672
Senior Vice President, 1995 276,298 100,000 280,238 51,200 -- 163,967
Chief Financial Officer 1994 225,962 70,000 -- -- -- 157,390
& Comptroller
Janet Burak Melchione 1996 156,125 55,000 -- 7,500 59,870 5,644
Senior Vice President, 1995 143,250 53,000 -- 10,000 48,985 5,358
General Counsel & 1994 137,019 62,840 -- -- 45,760 4,808
Secretary
Sheldon Rosenberg 1996 192,500 55,000 -- 11,000 -- 6,734
Vice President & Chief 1995 115,269 65,000 159,000 25,000 -- 502
Actuary of Everest Re 1994 -- -- -- -- -- --
</TABLE>
- ------------------
(1) For 1996 and 1995, represents compensation earned by all Designated
Executive Officers for the years ended December 31, 1996 and December 31,
1995, respectively, pursuant to the Company's Annual Incentive Plan. In
addition, for Mr. Taranto for 1996, includes $258,700 pursuant to the Chief
Executive Officer's Bonus Plan. For 1994, represents compensation earned
for the year ended December 31, 1994 pursuant to the Company's Annual
Incentive Plan and the following special bonuses paid on account of
continued service to the Company during the process of preparing for the
Company's initial public offering: (a) Mr. Gallagher--$50,000; (b) Ms.
Melchione--$25,000.
(2) The amounts reported represent the value of the common stock underlying the
restricted stock at the date of grant, without taking into account any
diminution in value attributable to the restrictions on such stock. The
awards of restricted stock were made on October 6, 1995; the closing price
of the common stock on that date was $19.875 per share.
7
<PAGE>
Twenty percent of the restricted shares awarded in 1995 became unrestricted
one year after the date of the award in accordance with the terms of the
1995 Stock Incentive Plan. As of December 31, 1996, the aggregate number of
restricted stock units remaining under the 1995 awards and the fair market
value of $28.3125 ascribed to such units based on the average of the high
and low trading prices on the New York Stock Exchange on that date are as
follows: Mr. Gallagher held 9,600 restricted shares valued at $271,800; Mr.
Jacobson held 11,280 restricted shares valued at $319,365; and Mr.
Rosenberg held 6,400 restricted shares valued at $181,200. Dividends are
paid quarterly on these restricted shares at the same rate as dividends
paid on common stock held by public stockholders. A restricted stock award
vests at the rate of 20% per year for a five year period. No restricted
stock awards were granted in 1996.
(3) All amounts represent payments under The Prudential's Long-Term
Compensation Plan reflecting performance over the four-year performance
cycles ending on December 31, 1998, 1997 and 1996 respectively. See
"Long-Term Incentive Plan--Awards in Last Fiscal Year."
(4) For 1996, represents: (i) the following term life insurance premiums paid
by the Company on behalf of the Designated Executive Officers: (a) Mr.
Taranto--$965, (b) Mr. Gallagher--$965, (c) Mr. Jacobson--$965, (d) Ms.
Melchione--$965 and (e) Mr. Rosenberg--$965; and (ii) the following
employer contributions to qualified and non-qualified employee savings
plans: (a) Mr. Taranto--$15,953, (b) Mr. Gallagher--$8,048 (c) Mr.
Jacobson--$8,707, (d) Ms. Melchione--$4,679 and (e) Mr. Rosenberg--$5,769.
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted under the Company's 1995 Stock Incentive Plan during 1996 to the
Designated Executive Officers.
<TABLE>
<CAPTION>
OPTION /SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANT
--------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE(3) ($)(4)
---- -------------- -------------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Joseph V. Taranto................... 50,000 18.29% $23.9375 9/26/06 $574,580
Thomas J. Gallagher................. 20,000 7.32 $23.9375 9/26/06 229,832
Robert P. Jacobson.................. 14,000 5.12 $23.9375 9/26/06 160,882
Janet Burak Melchione............... 7,500 2.74 $23.9375 9/26/06 86,187
Sheldon Rosenberg................... 11,000 4.02 $23.9375 9/26/06 126,408
</TABLE>
- ----------------------
(1) Represents non-qualified stock options granted on September 26, 1996 which
become exercisable in 20% installments each year commencing with the first
anniversary of the grant date, 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 share of common
stock on the date of grant. No SARs were granted in 1996.
(2) Based upon 273,400 non-qualified stock options granted to all employees in
1996.
(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. As a general rule, 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, 1996, which was 34.33%.
(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 6.63%.
(c) Dividend Yield -- The yield calculated by dividing the estimated
annualized dividend rate of the Company's common stock in the amount of
$0.16 per share by the weighted average fair market value of the stock on
the date of grant, which resulted in an assumed dividend yield of 0.7%.
(d) Expected Life -- The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was 7.5
years.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table sets forth certain information concerning the number
and value of unexercised stock options at the end of 1996 held by the Designated
Executive Officers. The Designated Executive Officers did not exercise any stock
options during 1996.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/SARS
SHARES OPTIONS/SARS AT FY-END (#) AT FY-END ($)(1)
ACQUIRED ON VALUE ---------------------------- --------------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto............... 0 0 0 50,000 0 $ 218,750
Thomas J. Gallagher............. 0 0 8,600 54,400 $ 99,437 485,250
Robert P. Jacobson.............. 0 0 10,240 54,960 118,400 534,850
Janet Burak Melchione........... 0 0 2,000 15,500 23,125 125,312
Sheldon Rosenberg............... 0 0 5,000 31,000 57,812 279,375
</TABLE>
- -------------------
(1) Based on year-end fair market value of common stock which is calculated by
averaging the high and low trading prices on December 31, 1996 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.
LONG-TERM INCENTIVE PLAN--AWARDS IN LAST FISCAL YEAR
Prior to the initial public offering of the Company in October 1995 (the
"Offering") by its ultimate parent, The Prudential Insurance Company of America
("The Prudential"), the Company's operating subsidiary, Everest Re, had
participated in The Prudential's Long-Term Compensation Plan ("LTCP"). Awards
were made pursuant to the LTCP, based on the performance of The Prudential over
a four-year performance cycle. During the last year of each four-year cycle, a
target value was assigned to each participant, based on the personal
compensation limits of each participant. At the end of that four-year cycle, the
target value was adjusted, and payment was made to the employee based on an
evaluation of The Prudential's performance over those four years.
9
<PAGE>
As of December 31, 1993, The Prudential changed the basis of its long-term
compensation awards to a Performance Share Appreciation Plan and began to run
off the LTCP. Everest Re chose to remain with the LTCP. Upon consummation of the
Offering, employees of Everest Re no longer participated in the LTCP as to
future performance, but payouts with respect to the four-year LTCP cycles that
would have otherwise ended on each of December 31, 1995, 1996, 1997 and 1998
were to be made to each participant on the following basis: target values for
each four-year cycle were frozen at 1995 levels and payouts will be equal to a
percentage of the target amount multiplied by the portion of the four-year LTCP
cycle completed as of the date of the consummation of the Offering and a
performance factor. A total of 45% of such amount was paid on April 1, 1996 and
55% of such amount was paid on April 11,1997. Payments made under the LTCP to
the Designated Executive Officers for 1996 are set forth in the Summary
Compensation Table above.
COMPENSATION COMMITTEE REPORT
This report was prepared by the Compensation Committee of the Company's
Board of Directors (the "Compensation Committee"). The Compensation Committee
advises management and exercises authority with respect to compensation and
benefits afforded officers at or above the Senior Vice President level, the
Company's Comptroller, Treasurer and Secretary and the Designated Executive
Officers, including the CEO. The Committee oversees all of the Company's
broad-based compensation and benefit programs. At the beginning of 1996, the
members of the Compensation Committee were E. Michael Caulfield, William P. Link
and Lawrence J. Sundram, all of whom were officers of the Prudential and who
served as non-employee directors of the Company following the Offering in
October 1995 until their resignations from the Board on March 12, 1996. Kenneth
J. Duffy and John C. Morrison were appointed to the Compensation Committee on
March 21, 1996 and on June 10, 1996, Mr. Abrahams was appointed to fill the
vacancy created by Mr. Morrison's death. The current members of the Compensation
Committee are Mr. Abrahams and Mr. Duffy.
I. Executive Compensation Policy
Overview. The Company's executive compensation program in 1996 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 aligns the interests of the executive officers with those
of the Company's stockholders by basing a significant part of total
compensation on the long-term performance of the Company's common
stock.
The Company's executive compensation program in 1996 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
10
<PAGE>
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 1996, annual compensation for executive officers of the Company
consisted of two components-base salary and a cash payment under the Company's
Annual Incentive Plan. The base salary for Mr. Taranto was subject to the terms
of his employment agreement (See "Employment Agreement" below). The base
salaries for the other Designated 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
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 a cash
payment 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 executive officers 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.
Under the Annual Incentive Plan, each executive officer is assigned an
award ("Par Award") based on the executive officer's responsibilities, position,
performance, potential contribution and other relevant criteria. The Par Award
is a percentage of the executive officer's salary. Yearly goals ("Performance
Goals") are set to measure the performance of the Company, business units,
subsidiaries, departments and/or individuals and, to the extent Performance
Goals are met, cash bonus payments are made to executive officers ranging from 0
to 200 percent of the executive officer's Par Award. 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.
The Compensation Committee is responsible for determinations regarding
Performance Goals and Par Awards for officers at the senior vice president level
and above, except to the extent a Par Award may be based on the terms of an
individual employment agreement. (See "Employment Agreement" below). All other
determinations for employees below the senior vice president level are made by
the appropriate officers and employees of Everest Re, subject to the approval of
the Compensation Committee. Payments made in 1997 for the 1996 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 1996 financial results: after-tax
operating income, return on equity and earnings growth. The Committee then
reviewed the publicly available information on the compensation of executive
officers of competitors to arrive at total compensation for each of the
Designated Executive Officers that it believes is appropriate to the Company's
performance and their individual contributions.
B. LONG-TERM COMPENSATION
In 1996, two forms of long-term incentives were used for executive
officers--awards under the 1995 Stock Incentive Plan and awards under the LTCP.
These incentives are 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.
11
<PAGE>
1995 Stock Incentive Plan. Awards under the 1995 Stock Incentive Plan are a
significant element of the Company's executive compensation program.
Compensation derived from stock ownership provides a strong incentive to
increase shareholder value, since the value of this compensation is determined
by changes in the price of the Company's common stock over the term of each
award. Awards under the 1995 Stock Incentive Plan take the form of stock
options, stock appreciation rights, restricted stock and 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 733,100 options to purchase shares of the Company's common
stock. Awards granted to the Company's Designated Executive Officers during 1996
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 1996 grants were appropriate and in
the best interests of the Company.
Long-Term Compensation Plan. Prior to the Offering, Everest Re participated
in The Prudential's LTCP whereby awards were made to employees pursuant to the
LTCP based on the performance of The Prudential over a four-year performance
cycle. Upon the consummation of the Offering, employees of Everest Re no longer
participated in the LTCP but participants continue to remain eligible for
payouts from the Company with respect to the four-year performance cycles ending
on each of December 31, 1995, 1996, 1997, 1998. (See "Long-Term Incentive
Plan--Awards in Last Fiscal Year" for a more detailed discussion of the LTCP.)
The payouts to the Company's Designated Executive Officers for 1996 approved by
the Compensation Committee are summarized under the caption "Summary
Compensation Table" above.
The Company does not have a new 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 stock
ownership increases long-term value for the stockholders while compensating
individual employees for superior performance.
III. Deductibility Cap on Executive Compensation
Section 162(m) of the Internal Revenue Code ("Section 162(m)") disallows,
subject to limited exceptions, a corporate tax deduction for certain
compensation paid in excess of $1 million annually to each of the chief
executive officer and the four other most highly paid executive officers of
publicly-held companies. The Treasury Regulations under Section 162(m) provide,
for a limited period of time following a Company's initial public offering, an
exception to the $1 million cap for any plan which is in existence during a
period when a corporation was not publicly-held if the terms of such plan are
disclosed in the offering materials issued in connection with the initial public
offering of such corporation. The Company believes that its incentive
compensation plans and employment agreements which were disclosed in the
Company's prospectus in connection with the Offering, qualify for this exception
to the rules governing the $1 million cap so that the plans and agreements will
not be subject to limitation under such rules. The Company believes that, for
1996, the Company will not be denied a deduction with respect to any amount of
compensation paid to any executive officer.
12
<PAGE>
IV. Chief Executive Officer Compensation
In 1996, the compensation of Mr. Taranto was based on the terms of his
Employment Agreement with the Company and Everest Re (see "Employment Agreement"
below) and consisted of base salary and awards under the 1995 Stock Incentive
Plan. The Compensation Committee also approved a $430,900 cash payment under the
Annual Incentive Plan for fiscal 1996 based upon the Compensation Committee's
subjective determination of Mr. Taranto's significant contribution to the
Company's performance. (See "Summary Compensation Table" above) and, in
addition, awarded him a cash payment of $258,700 under the Chief Executive
Officer's Bonus Plan ("CEO Bonus Plan"). The CEO Bonus Plan was established by
the Compensation Committee on February 24, 1997 in order to retain and motivate
the Chief Executive Officer, whose contributions are critical to the success of
the Company.
Factors considered by the Committee when determining whether an award under
this Plan is appropriate include the effect on the Company and the stockholders
of changes in share price, changes in ratings by rating agencies, acquisitions,
Company restructurings and other significant corporate events. In making this
award under the CEO Bonus Plan for 1996, the Committee noted that during 1996,
the Company's share price had risen by almost 23% and that Everest Re's Standard
& Poor's rating had been upgraded.
In accordance with Mr. Taranto's Employment Agreement and the 1995 Stock
Incentive Plan, Mr. Taranto received 50,000 options for the purchase of common
stock under the 1995 Stock Incentive Plan. (See "Summary Compensation Table" and
"Options/SARs Grants in Last Fiscal Year" above). When considering the size of
this grant, the Compensation Committee took into account prior awards made to
Mr. Taranto under the Employment Agreement and the 1995 Stock Incentive Plan and
determined the 1996 award to be appropriate and in the best interests of the
Company. Through ownership of the options, the CEO's interests will be aligned
with the interests of the stockholders because the value of this award will be
dependent upon the value of the Company's common stock.
Kenneth J. Duffy Martin Abrahams
13
<PAGE>
PERFORMANCE GRAPH
The following Performance Graph compares cumulative total shareholder
returns on the Company's common stock (assuming reinvestment of dividends) from
October 3, 1995 (when the Company's stock was first listed on the New York Stock
Exchange) through December 31, 1996, with the cumulative total return of the
Standard & Poor's 500 Index and a peer group consisting of Chartwell Re
Corporation, General Re Corporation, NacRe Corp., Risk Capital Holdings, Inc.,
Transatlantic Holdings, Inc., Trenwick Group, Inc. and Zurich Reinsurance Centre
Holdings (the "Peer Group"). The peer group compiled for the Performance Graph
in last year's Proxy Statement included American Re Corporation and National Re
Corporation, both of which ceased public trading during 1996. Chartwell Re
Corporation, which became a publicly traded company in December 1995, has been
added to the Peer Group for the 1997 Proxy Statement's Performance Graph.
COMPARISON OF 15 MONTH CUMULATIVE TOTAL RETURN*
AMONG EVEREST REINSURANCE HOLDINGS, INC., THE S & P INDEX
AND A PEER GROUP
The following table represents graph:
Everest Reinsurance
Holdings, Inc. Peer Group S&P 500
-------------- ---------- -------
10/3/95 100 100 100
12/95 119 104 106
12/96 147 107 131
* $100 INVESTED ON 10/03/95 IN STOCK OR INDEX -
INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
14
<PAGE>
RETIREMENT PLAN
The executive officers of the Company participate in the Everest
Reinsurance Company Retirement Plan (the "Retirement Plan") and will participate
in the future 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. The Supplemental Plan, which is in the process of being
established, will be 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 Internal Revenue
Code. The Retirement Plan is, and the Supplemental Plan will be, similar to the
tax-qualified and supplemental pension plans of The Prudential in which the
executive officers and other employees of the Company and Everest Re
participated prior to the 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>
YEARS OF CONTINUOUS SERVICE
-------------------------------------------------------------------------------------------------
FINAL AVERAGE EARNINGS 5 10 15 20 25 35
- ---------------------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$ 150,000................. $ 14,048 $ 28,095 $ 42,143 $ 56,190 $ 70,238 $ 84,506
200,000................. 19,048 38,095 57,143 76,190 95,238 114,506
250,000................. 24,048 48,095 72,143 96,190 120,238 144,506
300,000................. 29,048 58,095 87,143 116,190 145,238 174,506
350,000................. 34,048 68,095 102,143 136,190 170,238 204,506
400,000................. 39,048 78,095 117,143 156,190 195,238 234,506
450,000................. 44,048 88,095 132,143 176,190 220,238 264,506
500,000................. 49,048 98,095 147,143 196,190 245,238 294,506
750,000................. 74,048 148,095 222,143 296,190 370,238 444,506
1,000,000................. 99,048 198,095 297,143 396,190 495,238 594,506
1,250,000................. 124,048 248,095 372,143 496,190 620,238 744,506
</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 and, for
participants who hold positions equivalent to or senior to that of department
vice president, cash payments under the Company's Annual Incentive Plan up to a
maximum of 50% of salary or $275,000, whichever is greater. However, "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 Internal
Revenue 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 The Prudential.
The years of continuous service for Mr. Taranto, Mr. Jacobson, Mr.
Gallagher, Ms. Melchione and Mr. Rosenberg to be taken into account under the
Retirement Plan and Supplemental Plan (rounded to the nearest year), as of April
1, 1997, are 2, 3, 22, 17, and 2, respectively. Final average earnings for Mr.
Taranto, Mr. Gallagher, Mr. Jacobson, Ms. Melchione and Mr. Rosenberg to be
taken into account as of April 1, 1997 are $866,971, $313,935, $366,759,
$200,196 and $254,143, respectively. Final average earnings for Mr. Taranto do
not include the "Additional Compensation" amounts payable under the terms of his
Employment Agreement with the Company (see "Employment Agreement" below).
15
<PAGE>
EMPLOYMENT AGREEMENT
The Company entered into an Employment Agreement with Mr. Taranto, dated as
of October 11, 1994 (the "Hiring Date"). The Employment Agreement expires on
December 31, 1999, unless sooner terminated in accordance with its terms. The
Employment Agreement provides for an annual base salary (the "Base Salary") of
$500,000, plus additional cash compensation (the "Additional Compensation") of
$25,000 per month (which is 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 shall be
subject to annual increases of no less than four percent nor greater than eight
percent. Effective March 31, 1997, Mr. Taranto's Base Salary was increased to
$560,200 and his Additional Compensation was increased to $28,030 per month. Mr.
Taranto is eligible to participate in the Annual Incentive Plan with a maximum
bonus equal to 80% of his Base Salary. In addition, Mr. Taranto is eligible for
an award under the Chief Executive Officer's Bonus Plan upon consideration by
the Compensation Committee of certain factors related to Company performance.
(See "Compensation Committee Report--Chief Executive Officer Compensation").
If the Company terminates Mr. Taranto's employment for "due cause" or Mr.
Taranto voluntarily terminates his employment other than for "good reason" (as
defined in the 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, 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.
For purposes of the Employment Agreement, "due cause" means repeated gross
negligence in the performance of, or failure to perform, Mr. Taranto's
obligations under the Employment Agreement, serious willful misconduct,
continued abuse of alcohol or drugs after counseling, conviction of any felony
or crime of moral turpitude or a material breach in trust committed in willful
or reckless disregard of the interests of the Company or for personal gain. As
defined in the Employment Agreement "good reason" shall mean the assignment to
Mr. Taranto of duties materially inconsistent with his position as Chief
Executive Officer of the Company, a material adverse change in the nature or
status of Mr. Taranto's position or responsibilities, a reduction by the Company
of Mr. Taranto's Base Salary or Additional Compensation or a material breach of
the Employment Agreement by the Company.
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"), Western Indemnity Insurance
Company ("Western Indemnity"), Western Litigation Specialists, Inc. ("WLS") and
Workcare, Inc., ("Workcare"). These are companies in which Mr. Galtney, a member
of the Company's Board of Directors, maintains an ultimate ownership and
controlling position. In 1996, as a result of these transactions, Everest Re has
paid to these companies (or incurred during 1996) a total of $354,875 for
various reinsurance intermediary brokerage commissions and ceding commissions
and for claims services associated with the run off of certain Everest Re
medical malpractice liabilities. It is anticipated that in 1997, the claims
services associated with this run off will result in approximately $120,000 in
fees paid by Everest Re to WLS and that Everest Re will pay to Western Indemnity
$39,000 in brokerage under a facultative certificate that runs from June 1996 to
June 1997. In 1996, Everest Re received a total of $1,040,000 in premiums from
Western Indemnity under three facultative reinsurance certificates. Under one of
the certificates it is expected that $650,000 of premium will be paid to Everest
Re in 1997. In addition, in 1996, Everest Re received $673,593 from Western
Indemnity for paid losses under a reinsurance agreement and pursuant to which
there are $151,778 of incurred losses that will be payable in 1997. In 1996,
Everest National paid or incurred commissions to Workcare of $934,221 for
services provided by Workcare as a program administrator under Everest
National's Texas Workers Compensation Program. In 1997, the Everest National
Workers Compensation Program for which Workcare has been engaged as program
administrator is being expanded to additional states and it is expected that the
substantially increased premium that is generated by the expansion will result
in commission payments to Workcare of approximately $3 million.
16
<PAGE>
MISCELLANEOUS--GENERAL MATTERS
OTHER MATTERS
It is not anticipated that there will be presented to the meeting any
business other than as set forth in the accompanying Notice of Annual Meeting of
Stockholders. However, if other matters properly come before the meeting, it is
the intention of the persons named in the enclosed form of proxy to vote any
proxies in accordance with their best judgment.
STOCKHOLDER PROPOSALS FOR THE 1998 ANNUAL MEETING
To be considered for inclusion in the Company's Proxy Statement relating to
the 1998 Annual Meeting of Stockholders, a stockholder proposal must be received
by the Company Secretary in proper form at the Company's principal executive
office no later than December 12, 1997.
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 $3,500 plus out-of-pocket expenses. The firm will
solicit proxies by personal interview, telephone, telegraph and mail. The
Company will, on request, reimburse stockholders 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 First Chicago Trust Company of New York to serve
as transfer agent, registrar and dividend paying agent for the Company's common
stock. Correspondence relating to any stock accounts or dividends should be
addressed to:
First Chicago Trust Company of New York
P.O. Box 2500
Jersey City, NJ 07303-2500
(201) 324-0498
All transfers of certificates of the Company's common stock should also be
mailed to the above address.
INDEPENDENT PUBLIC ACCOUNTANTS
The accounting firm of Deloitte & Touche LLP were the Company's auditors
until August 6, 1996 at which time, with the approval of the Audit Committee,
they were dismissed by the Company and replaced by the accounting firm of
Coopers & Lybrand L.L.P. As described in a Form 8-K filed with the Securities
and Exchange Commission on August 8, 1996, the reports on the Company's
financial statements for the fiscal years ended December 31, 1995 and December
31, 1994 did not contain any adverse opinion or disclaimer of opinion, nor were
they qualified or modified as to uncertainty, audit scope or accounting
principles. The dismissal of Deloitte & Touche LLP did not result from any
disagreement on any matter of accounting principles or practices, financial
statement disclosure or auditing scope or procedure which disagreements, if not
resolved to the satisfaction of Deloitte & Touche LLP, would have caused them to
make reference to the subject matter of the disagreement in their reports. Also,
there were no reportable events of the nature described in Regulation S-K, Item
304 (a)(1)(v) during the Company's two most recent fiscal years through August
6, 1996.
Representatives of Coopers & Lybrand L.L.P. will be present at the 1997
Annual Meeting, will have the opportunity to make a statement if they so desire,
and will be available to respond to appropriate questions of stockholders.
April 11, 1997 By Order of the Board of Directors
Janet Burak Melchione
SECRETARY
17
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.V. Taranto, R.P. Jacobson, and J.B. Melchione,
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 shares
of Common Stock of EVEREST REINSURANCE HOLDINGS, INC. held in the name of the
undersigned at the close of business on March 25, 1997, at the Annual Meeting of
Stockholders to be held on May 22, 1997, at 11:00 a.m. (local time), and at any
adjournment thereof, with all the powers the undersigned would have if
personally present, as follows:
(Continued on other side)
<PAGE>
Please mark your |
/ x / votes as in this | 6287
example. |
---------
The Board of Directors recommends a vote FOR the following items:
FOR all nominees WITHHOLD
listed (except as AUTHORITY to vote
marked to the for all nominees
contrary) listed
/ / / /
1. Election of M. Abrahams, J.R. Dunne, R.P. Jacobson
Directors
INSTRUCTION: To withhold authority to vote for any individual nominee,
write that nominee's name on the space provided below.
- ----------------------------------------------------------------------
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 ITEM 1.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
SIGNATURES ________________________________________________ DATE ______________
Sign exactly as name appears hereon. When signing in a representative capacity,
please give full title.
