SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the
Securities Exchange Act of 1934
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to ss.240.14a-11(c) or ss.240.14a-12
EVEREST REINSURANCE HOLDINGS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(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): N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid: N/A
[ ] Fee paid previously with preliminary materials.
[ ] Checkbox 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: N/A
(2) Form, Schedule or Registration Statement No.: N/A
(3) Filing Party: N/A
(4) Date Filed: N/A
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
----------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
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 corporate headquarters at
Westgate Corporate Center, 477 Martinsville Road, Liberty Corner, New Jersey, on
Thursday, May 20, 1999 at 11:00 a.m., for the following purposes:
1. To elect two Class III Directors of the Company, each for a three-year
period to expire at the 2002 Annual Meeting of Stockholders.
2. To consider and act upon the proposal to adopt the Executive Performance
Annual Incentive Plan, as described in the accompanying Proxy Statement.
3. 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 23, 1999 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 J. Burak, Secretary
April 12, 1999
Liberty Corner, New Jersey
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
----------------------
PROXY STATEMENT
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
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 20, 1999, 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 and for the adoption of the Executive Performance Annual Incentive
Plan.
Only stockholders of record at the close of business on March 23, 1999 will
be entitled to vote at the meeting. On that date 49,656,940 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, 1998 (including financial
statements) and the enclosed Proxy Card are first being mailed to the Company's
stockholders on or about April 12, 1999.
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, two nominees for Class III director
positions are to be elected to serve until the 2002 Annual Meeting of
Stockholders and until their successors are elected and qualified. All of the
nominees for election as Class III directors at this meeting, and all directors
whose term of office will continue after the meeting, are currently directors of
the Company. The Class I director positions will be subject to election at the
2000 Annual Meeting of Stockholders and the Class II directors will be subject
to election at the 2001 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.
Thomas J. Gallagher and William F. Galtney, Jr., the two nominees for the Class
III director positions, have been serving under election by the shareholders on
May 23, 1996.
<PAGE>
INFORMATION CONCERNING NOMINEES
The following information has been furnished by the respective nominees for
election of Class III directors for a term expiring in 2002.
THOMAS J. GALLAGHER, 50, became a Class III director of the Company on
March 13, 1996. Mr. Gallagher also serves as a director of Everest Reinsurance
Company, a wholly owned subsidiary of the Company ("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 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. and WorkCare Southeast
of Georgia, Inc., all of which are members of the Everest Reinsurance Holdings
group.
WILLIAM F. GALTNEY, JR., 46, 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 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.
INFORMATION CONCERNING CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following information has been furnished by those directors whose terms
of office will continue after the 1999 Annual Meeting and by the remaining
executive officers.
MARTIN ABRAHAMS, 66, became a Class I director of the Company on March 12,
1996 and a director of 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.
KENNETH J. DUFFY, 69, 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
a Senior Advisor to CGU plc, having been associated with that organization for
more than 40 years. He served as President and Chief Executive of Commercial
Union Corporation, the CGU United States subsidiary, from January 1985, as
Chairman and Chief Executive from January 1993 and as Chairman from his
retirement in January 1995 until October 1998. He is 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.
JOHN R. DUNNE, 69, 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 is a
director of Commercial Union 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.
2
<PAGE>
JOSEPH V. TARANTO, 50, 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 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, 47, is an executive officer of the Company and became
Comptroller of the Company on September 25, 1997. 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 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"), whose parent is
the Company. He serves as a director and President of Everest Re Holdings, Ltd.
("ERHL"), a subsidiary of Everest Re, and is Comptroller of WorkCare Southeast,
Inc. and WorkCare Southeast of Georgia, Inc. and Chief Accountant of WorkCare,
Inc.
JANET J. BURAK (formerly Janet Burak Melchione), 48, 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 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, Inc. and WorkCare Southeast of Georgia, Inc. She serves as Associate
General Counsel of WorkCare, Inc.
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 1998. 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 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
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 1998.
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 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 Compa-
3
<PAGE>
ny's Annual Incentive Plan, the 1995 Stock Incentive Plan and the Chief
Executive Officer's Bonus Plan and, if it is approved by the stockholders as
presented in Proposal No. 2 of this Proxy Statement, 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 two
occasions in 1998.
COMMON STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of shares of common
stock as of March 23, 1999 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 (10)
----------------------- -------------------- ---------
<S> <C> <C>
Martin Abrahams ........................................... 5,403(1) *
Kenneth J. Duffy .......................................... 4,703(2) *
John R. Dunne ............................................. 4,523(3) *
Thomas J. Gallagher ....................................... 49,718(4) *
William F. Galtney, Jr. ................................... 195,922(5) *
Robert P. Jacobson ........................................ 100(6) *
Joseph V. Taranto ......................................... 445,142(7) *
Stephen L. Limauro ........................................ 7,800(8) *
Janet J. Burak ............................................ 13,100(9) *
All directors and Designated Executive Officers
as a group (9 persons) ................................. 726,411 1.46%
</TABLE>
- -------------
* Less than 1%
(1) Includes 2,216 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 2,216 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 2,036 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 4,800 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 39,300 shares, which may be purchased upon the exercise of stock
options which are exercisable under the Company's 1995 Stock Incentive
Plan.
(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 2,216 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.
(6) Mr. Jacobson ceased being a director and executive officer of the Company
on June 11, 1998, but is identified as a "Designated Executive Officer" for
1998 for purposes of this Proxy Statement.
(7) Includes 35,000 shares, which may be purchased upon the exercise of stock
options, which are exercisable under the Company's 1995 Stock Incentive
Plan.
4
<PAGE>
(8) Includes 7,400 shares, which may be purchased upon the exercise of stock
options, which are exercisable under the Company's 1995 Stock Incentive
Plan.
(9) Includes 2,000 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 10,500 shares which may be purchased upon the exercise of stock
options, which are exercisable under the Company's 1995 Stock Incentive
Plan.
(10) Based on 49,656,940 total shares of common stock outstanding and entitled
to vote as of March 23, 1999.
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, 1998 are set forth below. This table is based on information provided in
Schedule 13Gs filed with the Securities and Exchange Commission by each of the
parties listed in the table.
<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------ ------------------ ----------
<S> <C> <C>
Mellon Bank Corporation .............................. 3,829,318 (1) 7.64%
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Morgan Stanley, Dean Witter & Co. .................... 3,839,877 (2) 7.67
1585 Broadway
New York, New York 10036
Miller Anderson & Sherrerd, LLP ...................... 3,312,510 (3) 6.62
1 Tower Bridge, Suite 1100
West Conshocken, PA 19428
Oppenheimer Capital .................................. 3,446,458 (4) 6.8
Oppenheimer Tower, World Financial Center
New York, NY 10281
Boston Partners Asset Management, LP ................. 4,114,242 (5) 8.2
One Financial Center
Boston, MA 02159
</TABLE>
- -------------
(1) Mellon Bank Corporation reports in its Schedule 13G that it has sole voting
power with respect to 3,273,231 shares of common stock, shared voting power
with respect to 25,400 shares of common stock, sole dispositive power with
respect to 3,742,701 shares of common stock and shared dispositive power
with respect to 62,717 shares of common stock.
(2) Morgan Stanley, Dean Witter & Co. reports in its Schedule 13G that it has
shared voting power with respect to 3,438,067 shares of common stock and
has shared dispositive power with respect to 3,839,877 shares of common
stock.
(3) Miller Anderson & Sherrerd LLP reports in its Schedule 13G that it has
shared voting power with respect to 2,948,500 shares of common stock and
shared dispositive power with respect to 3,312,510 shares of common stock.
(4) Oppenheimer Capital reports in its Schedule 13G that it has shared voting
power with respect to 3,446,458 shares of common stock and shared
dispositive power with respect to 3,446,458 shares of common stock.
(5) Boston Partners Asset Management, LP reports in its Schedule 13G that it
has shared voting power with respect to 4,114,242 shares of common stock
and shared dispositive power with respect to 4,114,242 shares of common
stock.
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 1998 for services as a director and was also reimbursed for
out-of-pocket expenses associated with each meeting attended. The annual
compensation for 1998 of the Non-Employee Directors was fixed at $40,000 per
year. Compensation was paid quarterly in arrears by the issuance of shares of
common stock. By compensating the Non-Employee Directors with stock, it is
intended to align their interests with those of the stockholders. The value of
shares issued are 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 is equal to one-quarter of
$40,000 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 is rounded down to the nearest whole number. For 1998 each of the
Non-Employee Directors was issued a total of 986 shares as compensation for
their services as a director in accordance with this procedure. As of January 1,
1999, the value of these shares for each Non-Employee director was $38,392.37
based upon the $38.9375 closing price of the common stock on December 31, 1998.
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. 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 are 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 stock 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
shares of common stock at an exercise price of $22.5625. Upon his initial
appointment to the Board on June 10, 1996, Mr. Dunne was granted options to
purchase 2,036 shares of common stock at an exercise price of $24.5625.
6
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years, or as otherwise indicated, with respect to the Company's
Chief Executive Officer and the four other most highly compensated executive
officers who were serving as executive officers as of December 31, 1998 or who
had served as an executive officer during a portion of 1998 (the "Designated
Executive Officers"), for services rendered by them to the Company and to its
subsidiaries.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------- ------------------- -----------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING LTIP COMPENSATION
NAME AND PRINCIPAL POSITION(1) YEAR SALARY($) BONUS ($)(2) AWARD(S)($)(3) OPTIONS(#) PAYOUT ($)(4) ($)(5)
- ------------------------------ ---- --------- ------------ -------------- ----------- ------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto 1998 $945,426 $745,660 -- 150,000 -- $23,804
Chairman of the Board 1997 887,532 717,000 -- 75,000 -- 21,971
And Chief Executive 1996 851,775 689,600 -- 50,000 -- 16,918
Officer
Thomas J. Gallagher 1998 338,654 225,000 -- 27,500 -- 13,544
President and Chief 1997 304,231 200,000 -- 27,500 -- 12,627
Operating Officer 1996 261,250 150,000 -- 20,000 $85,239 9,013
Robert P. Jacobson 1998 117,589 -- -- -- -- 316,053
1997 300,577 120,000 -- 17,500 -- 9,656
1996 290,500 120,000 -- 14,000 -- 9,672
Janet J. Burak 1998 174,654 60,000 -- 8,000 -- 5,948
Senior Vice President 1997 161,654 60,000 $97,500 7,500 -- 5,538
General Counsel 1996 156,125 55,000 -- 7,500 59,870 5,644
& Secretary
Stephen L. Limauro 1998 170,339 65,000 -- 6,000 -- 5,800
Senior Vice President 1997 151,523 45,000 -- 5,000 -- 5,185
And Comptroller 1996 144,115 40,000 -- 4,000 -- 5,250
</TABLE>
- -----------------
(1) Mr. Jacobson ceased being a director and executive officer on June 11,
1998.
(2) Represents compensation earned by the Designated Executive Officers for the
years ended December 31, 1998, December 31, 1997, and December 31, 1996
pursuant to the Company's Annual Incentive Plan. In addition, the amounts
shown for Mr. Taranto for 1998, 1997 and 1996 include $279,760, $269,000
and $258,700, respectively, pursuant to the Chief Executive Officer's Bonus
Plan.
(3) 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. Awards
of restricted stock were made to Messrs. Gallagher and Jacobson on October
6, 1995; the closing price of the common stock on that date was $19.875 per
share. The award of restricted stock to Ms. Burak was made on September 26,
1997; the closing price of the common stock on that date was $39.00 per
share.
Sixty percent of the restricted shares awarded to Mr. Gallagher in 1995 are
unrestricted three years after the date of the award and twenty percent of
the restricted shares awarded to Ms. Burak in 1997 are unrestricted one
year after the date of the award in accordance with the terms of the 1995
Stock Incentive Plan. As of December 31, 1998, the aggregate number of
restricted stock units remaining outstanding under the 1995 and 1997 awards
and the fair market value of those units based on $37.75 as the average of
the high and low trading
7
<PAGE>
prices on the New York Stock Exchange on that date are as follows: Mr.
Gallagher held 4,800 restricted shares valued at $181,200 and Ms. Burak
held 2,000 restricted shares valued at $75,500. 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.
(4) All amounts represent payments under The Prudential Insurance Company of
America's Long-Term Compensation Plan reflecting performance over the
four-year performance cycles ending on December 31, 1998, 1997 and 1996
respectively. The payments reported for Mr. Gallagher and Ms. Burak for
1996 were made to them in April 1997 and were reported in the 1997 Proxy
Statement as 1996 compensation. These were the final payments made under
this Plan. The Company does not have any long-term cash bonus plan
currently in effect.
(5) For 1998, 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) Mr. Jacobson--$525, (d) Ms.
Burak--$709 and (e) Mr. Limauro--$690; (ii) the following employer
contributions to qualified and non-qualified employee savings plans: (a)
Mr. Taranto--$22,754 (b) Mr. Gallagher--$12,494 (c) Mr. Jacobson-- $3,528
(d) Ms. Burak--$5,240 and (e) Mr. Limauro--$5,110; and (iii) for Mr.
Jacobson--$312,000 as payment in connection with his ceasing to be an
officer and director of the Company.
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted under the Company's 1995 Stock Incentive Plan during 1998 to the
Designated Executive Officers.
OPTION /SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE (3) ($)(4)
---- -------------- -------------- ----------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Joseph V. Taranto ................ 150,000 34.90% $ 37.875 07/15/08 $2,679,720
Thomas J. Gallagher .............. 27,500 6.40 37.4063 09/25/08 463,397
Robert P. Jacobson ............... -- -- -- -- 0
Janet J. Burak ................... 8,000 1.86 37.4063 09/25/08 134,806
Stephen L. Limauro ............... 6,000 1.40 37.4063 09/25/08 101,105
</TABLE>
- -----------------
(1) Represents non-qualified stock options granted to Mr. Taranto on July 15,
1998 and to Mr. Gallagher, Ms. Burak and Mr. Limauro on September 25, 1998
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 share of
common stock on the date of grant. No SARs were granted in 1998.
(2) Based upon 429,750 non-qualified stock options granted to all employees in
1998.
(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.
(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:
8
<PAGE>
(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, 1998, which was 34.79%.
(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 5.62% for the July 15, 1998 options and 4.71% for the
September 25, 1998 options.
(c) Dividend Yield -- The yield calculated by dividing the estimated
annualized dividend rate of the Company's common stock in the amount of
$.20 per share by the weighted average fair market value of the stock on
the date of grant, which resulted in an assumed dividend yield of 0.5%.
(d) Expected Life -- The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was 7.5
years.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table sets forth certain information concerning the number
and value of unexercised stock options at the end of 1998 held by the Designated
Executive Officers. The only Designated Executive Officer who exercised stock
options during 1998 was Mr.
Jacobson.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS AT IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE AT FY-END(#) AT FY-END($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----- ---------- ----------- ----------- ------------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Joseph V. Taranto 0 0 35,000 240,000 $276,250 $414,375
Thomas J. Gallagher 0 0 39,300 78,700 652,300 536,402
Robert P. Jacobson 23,280 $504,403 -- -- 0 0
Janet J. Burak 0 0 10,500 22,500 167,437 148,906
Stephen L. Limauro 0 0 7,400 15,600 122,900 102,418
</TABLE>
- ----------
(1) Based on the year-end fair market value of common stock of $37.75 which is
calculated by averaging the high and low trading prices on December 31, 1998 on
the New York Stock Exchange. The value of the options is computed by subtracting
the exercise prices of the options from their fair market values and multiplying
the difference by the number of shares underlying the options at the applicable
exercise prices.
COMPENSATION COMMITTEE REPORT
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. The current members of the
Compensation Committee are Mr. Abrahams and Mr. Duffy.
9
<PAGE>
I. Executive Compensation Policy
OVERVIEW. The Company's executive compensation program in 1998 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 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 1998 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 1998, 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. For Mr. Taranto it also included a third component--a
cash payment under the Chief Executive Officer's Bonus Plan. 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 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 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.
10
<PAGE>
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 and Change of Control
Agreements--Mr. Taranto" 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 1999 for the 1998 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 1998 financial results: after-tax operating income, return on
equity and earnings growth. The Committee then arrived 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 1998, 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 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 may take the form of stock options, stock appreciation rights,
restricted stock or stock awards. Stock options, the principal form of long-term
incentive compensation under the 1995 Stock Incentive Plan, encourage retention
because they carry a five-year vesting period and, if not exercised, are
generally forfeited if the employee leaves the Company before retirement. In
addition, stock options, granted at the fair market value on the date of grant
and with terms not to exceed 10 years, are designed to keep management and
professional employees oriented to growth over the long-term and not simply to
short-term profits. Awards are granted subjectively at the discretion of the
Compensation Committee based on a variety of factors, including a recipient's
demonstrated past and expected future performances, as well as a recipient's
level of responsibility with the Company and his or her ability to affect
shareholder value.
Since the institution of the 1995 Stock Incentive Plan, the Committee has
granted employees 1,502,100 options to purchase shares of the Company's common
stock. Awards granted to the Company's Designated Executive Officers during 1998
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 1998 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 stock
ownership increases long-term value for the stockholders while compensating
individual employees for superior performance.
11
<PAGE>
III. Deductibility Cap On Executive Compensation
Section 162(m) of the Internal Revenue Code ("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 Code 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 it's initial public offering in 1995
(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 1998, the Company will not be
denied a deduction with respect to any amount of compensation paid to any
executive officer.
IV. Chief Executive Officer Compensation
In 1998, 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 $465,900 cash payment under the
Annual Incentive Plan for fiscal year 1998 based upon the Compensation
Committee's subjective determination of Mr. Taranto's significant contribution
to the Company's performance. (See "Summary Compensation Table" above). In
addition, it awarded him a cash payment of $279,760 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. In the event the stockholders approve the Executive Performance
Annual Incentive Plan which is being presented to them in Proposal No. 2 of this
Proxy Statement, the Board will eliminate the CEO Bonus Plan as an element of
Mr. Taranto's compensation.
Factors considered by the Committee when determining whether an award under
the CEO Bonus 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 1998, the Committee noted that
during 1998, Everest Re's Standard & Poor's rating had been upgraded.
In consideration for his entering into a new employment agreement
commencing January 1, 2000 and terminating December 31, 2001 (the "Second
Employment Agreement"), Mr. Taranto was awarded in 1998 150,000 options for the
purchase of common stock under the 1995 Stock Incentive Plan as a "Sign-On
Bonus." (See "Summary Compensation Table" and "Options/SARs Grants in Last
Fiscal Year" above and "Employment and Change of Control Agreements - Mr.
Taranto" below). 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 1998
grant 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. Mr. Taranto was not awarded any other
options in 1998.
Kenneth J. Duffy Martin Abrahams
12
<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, 1998, with the cumulative total return of the
Standard & Poor's 500 Index, the Standard & Poor's Insurance (Property and
Casualty) Index and a peer group consisting of Chartwell Re Corporation, NAC Re
Corp., Risk Capital Holdings, Inc., Transatlantic Holdings, Inc. and Trenwick
Group, Inc. (the "Peer Group"). The Peer Group compiled for the Performance
Graph in last year's Proxy Statement included General Re Corporation which
ceased public trading during 1998. Because the number of publicly traded
reinsurers that were members of the selected Peer Group has decreased each year
since 1996, the Company has decided to stop using a Peer Group commencing with
the Proxy Statement for the 2000 Annual Meeting of Stockholders and will use
only the Standard & Poor's 500 Index and the Standard & Poor's Insurance
(Property and Casualty) Index for future Performance Graphs.
COMPARISON OF 39 MONTH CUMULATIVE TOTAL RETURN*
AMONG EVEREST REINSURANCE HOLDINGS, INC., THE S&P 500 INDEX,
THE S&P INSURANCE (PROPERTY-CASUALTY) INDEX AND A PEER GROUP
[GRAPHIC OMITTED]
<TABLE>
<CAPTION>
Cumulative Total Return*
------------------------------------
10/3/95 12/95 12/96 12/97 12/98
<S> <C> <C> <C> <C> <C>
EVEREST REINSURANCE HOLDINGS, INC. 100 119 147 213 202
PEER GROUP 100 109 110 146 146
S&P 500 100 106 130 174 224
S&P INSURANCE (PROPERTY-CASUALTY) 100 106 129 188 175
* $100 INVESTED ON 10/3/95 IN STOCK 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 Internal Revenue 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 Offering following which
the Company separated from Prudential and became publicly traded. 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>
$ 150,000 .............. $ 13,926 $ 27,851 $ 41,777 $ 55,702 $69,628 $ 83,801
200,000 .............. 18,926 37,851 56,777 75,702 94,628 113,801
250,000 .............. 23,926 47,851 71,777 95,702 119,628 143,801
300,000 .............. 28,926 57,851 86,777 115,702 144,628 173,801
350,000 .............. 33,926 67,851 101,777 135,702 169,628 203,801
400,000 .............. 38,926 77,851 116,777 155,702 194,628 233,801
450,000 .............. 43,926 87,851 131,777 175,702 219,628 263,801
500,000 .............. 48,926 97,851 146,777 195,702 244,628 293,801
750,000 .............. 73,926 147,851 221,777 295,702 369,628 443,801
1,000,000 .............. 98,926 197,851 296,777 395,702 494,628 593,801
1,250,000 .............. 123,926 247,851 371,777 495,702 619,628 743,801
1,500,000 .............. 148,926 297,851 446,777 595,702 744,628 893,801
1,750,000 .............. 173,926 347,851 521,777 695,702 869,628 1,403,801
</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 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 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 Prudential.
14
<PAGE>
The years of continuous service for Mr. Taranto, Mr. Jacobson, 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, 1999, are 4, 4, 24, 19, and 26, respectively. Final average earnings for Mr.
Taranto, Mr. Gallagher, Mr. Jacobson, Ms. Burak and Mr. Limauro to be taken into
account as of April 1, 1999 are $1,267,463, $395,025, $364,810, $206,930 and
$152,950, 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"). 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 26, 1999, Mr. Taranto's Base Salary was increased to
$608,817 and his Additional Compensation was increased to $30,463 per month. Mr.
Taranto is eligible to participate in the Annual Incentive Plan with a maximum
bonus equal to 80% of his Base Salary and also 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").
On July 15, 1998 the Company entered into another employment agreement with
Mr. Taranto (the "Second Employment Agreement"), which is first effective as of
January 1, 2000 and expires 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, subject to approval of such plan by the stockholders of the Company. Mr.
Taranto will have the right to renegotiate the agreement if that plan is not
approved. 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 shares of common stock of the Company as a sign-on bonus.
In connection with the execution of the Second Employment Agreement, the
Company and Mr. Taranto also entered into a Change of Control Agreement dated as
of July 15, 1998. The Change of Control Agreement provides that if within one
year after the occurrence of a material change (as defined in the agreement),
Mr. Taranto terminates his employment for any reason or if the Company
terminates Mr. Taranto's employment for any reason other than for due cause (as
defined in the agreement) then (a) all of Mr. Taranto's outstanding stock
options granted under the Company's stock plans shall immediately vest and
become exercisable; (b) Mr. Taranto shall receive a cash payment equal to the
lesser of (i) 2.99 multiplied by Mr. Taranto's annual compensation for the most
recent taxable year ending prior to the date of the material change less the
value of Mr. Taranto's gross income in the most recent taxable year ending prior
to the date of a material change attributable to Mr. Taranto's exercise of stock
options, stock appreciation rights and other stock-based awards granted Mr.
Taranto by the Company and (ii) 2.99 multiplied by Mr. Taranto's "annualized
includible compensation for the base period" as that phrase is defined in
Section 280G(d) of the Internal Revenue Code of 1986, as amended (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.
15
<PAGE>
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 shall 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.
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 three Designated Executive
Officers, Mr.Gallagher, Ms. Burak and Mr. Limauro, to participate in the plan.
The Change of Control Plan provides that if within two years after the
occurrence of a material change (as defined in the plan) a participant
terminates his or her employment for good reason (as defined in the plan) or the
Company terminates the participant's employment for any reason other than for
due cause (as defined in the plan), then (a) all of the participant's
outstanding stock options granted under the Company's stock plans shall
immediately vest and become exercisable for three months following termination
of employment; (b) all restrictions on the participant's restricted stock
awarded under the Company's stock plans shall immediately terminate and lapse;
(c) the participant shall receive a cash payment equal to the participant's
average salary and annual incentive bonus for the three most recent taxable
years (or such shorter period as may be applicable), multiplied by a number
between 2 and 2.99 determined by the Compensation Committee (for Mr. Gallagher
the number is 2.99 and for Ms. Burak and Mr. Limauro the number is 2); (d) the
participant shall continue to be covered under the Company's medical and dental
insurance plans for a period of two years from the date of termination; (e) the
participant shall receive "special retirement benefits" in an amount that will
equal the retirement benefits he or she would have received 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.
16
<PAGE>
The Company also entered into a Change of Control Agreement with Mr.
Taranto on July 15, 1998 the terms of which have been set forth above (See
"Employment and Change of Control Agreements - Mr. Taranto") and which provides
benefits similar to the Change of Control Plan.
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"), WorkCare, Inc., now known as
Healthcare Specialty Brokers, Inc. ("WorkCare"), WorkCare Southeast, Inc., now
known as Healthcare Specialty Brokers of Alabama, Inc. ("WorkCare Southeast")
and WorkCare Northwest, Inc. ("WorkCare Northwest"). These are companies in
which Mr. Galtney, a member of the Company's Board of Directors, maintained an
ultimate ownership and controlling position during 1998. In 1998, as a result of
these transactions, Everest Re paid to HealthCare, a licensed reinsurance
intermediary that routinely presents risks to Everest Re, brokerage fees of
$45,953 in respect of 1997 business and $713,083 in respect of 1998 business.
Brokerage payable to HealthCare as of January 1, 1999 is $116,500. Through June
30, 1998 Everest National paid commissions to WorkCare of $498,645 for insurance
agency services provided by WorkCare as a program administrator under Everest
National's Texas, Illinois and Indiana Workers Compensation Program. Through
June 30, 1998, Everest Re incurred commissions to WorkCare Southeast of
$1,356,030 for insurance agency services provided by WorkCare Southeast as a
program administrator under Everest Re's Alabama Workers Compensation Program.
Of that amount, Everest Re paid WorkCare Southeast $1,204,394 in 1998 with
$151,636 remaining due and owing as of January 1, 1999.
As a result of the asset acquisitions discussed below, WorkCare and
WorkCare Southeast were only entitled to commissions on policies that incepted
on or before June 30, 1998. Through December 31, 1998, Everest National incurred
commissions to WorkCare Northwest in the amount of $315,549 for insurance agency
services provided by WorkCare Northwest as a program administrator under Everest
National's Idaho Workers Compensation Program. Payments were made to WorkCare
Northwest in 1998 totaling $17,162 with $298,387 due as of January 1, 1999.
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 of WorkCare and Mt. McKinley
acquired the assets of WorkCare Southeast. The aggregate initial purchase price
paid to GGI was $2,900,000. 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. Such collections and disbursements, net
of related costs and expenses, are to be treated as purchase price adjustments.
The amount paid to the GGI companies in 1998 was approximately $235,000 and the
amount due to the GGI companies as of December 31, 1998 as a result of the
service agreement transactions was approximately $28,000. These purchase price
adjustments are subject to final reconciliation of expenses, receipts and
disbursements.
17
<PAGE>
PROPOSAL NO. 2--APPROVAL OF THE EVEREST REINSURANCE HOLDINGS, INC.
EXECUTIVE PERFORMANCE ANNUAL INCENTIVE PLAN
THE BOARD OF DIRECTORS OF THE COMPANY HAS APPROVED AND RECOMMENDS THAT YOU
VOTE FOR THE APPROVAL OF THE PROPOSED EVEREST REINSURANCE HOLDINGS, INC.
EXECUTIVE PERFORMANCE ANNUAL INCENTIVE PLAN (THE "PLAN") AS DESCRIBED HEREIN.
PROXIES WILL BE SO VOTED UNLESS STOCKHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
PROPOSAL NO. 2 WILL BE ADOPTED IF APPROVED BY A MAJORITY OF SHARES PRESENT IN
PERSON OR BY PROXY AT THE MEETING AND ENTITLED TO VOTE. SHARES WILL BE COUNTED
AS CAST AGAINST THE PROPOSAL IF THE SHARES ARE VOTED EITHER AGAINST THE PROPOSAL
OR TO ABSTAIN FROM VOTING. BROKER NON-VOTES WILL NOT CHANGE THE NUMBER OF VOTES
CAST FOR OR AGAINST THE PROPOSAL AND WILL NOT BE TREATED AS SHARES ENTITLED TO
VOTE.
BACKGROUND AND REASONS FOR ADOPTION
On December 10, 1998, the Board adopted the Plan, subject to approval by
the stockholders, to provide for the granting to selected corporate officers of
the Company or its subsidiaries of annual cash bonus awards in amounts to be
determined by a committee appointed by the Board to administer the Plan.
The Board believes that the Plan will provide incentive for executives who
are in a position to contribute materially to the success of the Company and its
subsidiaries, reward their accomplishments, motivate future accomplishments, and
aid in attracting and retaining executives of the caliber necessary for the
continued success of the Company and its subsidiaries. Accordingly, the Board
has adopted the Plan and recommends its approval by stockholders. In the event
the stockholders approve the Plan, the Board will eliminate the Chief Executive
Officer's Bonus Plan which was established by the Board on February 24, 1997.
In order to permit the deductibility of cash bonuses awarded after May 1999
to certain executives of the Company under Section 162(m) of the Internal
Revenue Code of 1986 ("Code Section 162(m)"), the Board of Directors is
recommending the adoption of the Plan which would define and limit amounts which
may be awarded to eligible executives of the Company and which would qualify as
performance-based compensation under Code Section 162(m).
SUMMARY OF THE PLAN
The Plan is set forth in full in Exhibit A and the description of the Plan
which appears below is qualified in its entirety by reference to that Exhibit.
ADMINISTRATION
The Plan will be administered by a committee appointed by the Board to
administer the Plan (the "Committee") and shall consist of no fewer than two
members of the Board. Each member of the Committee shall qualify as an "outside
director" within the meaning of Code Section 162(m). The Committee shall have
all discretion and authority necessary or appropriate to administer the Plan and
to interpret the provisions of the Plan consistent with qualification of the
Plan as performance-based compensation under Code Section 162(m).
ELIGIBILITY
Within ninety (90) days after the beginning of each year, the Committee, in
its sole discretion, shall select corporate officers of the Company and its
subsidiaries who will be eligible that year to participate in the Plan (the
"Participants").
18
<PAGE>
AWARDS AND PERFORMANCE MEASURES
The Committee shall establish in writing objective performance goals for
each Participant, which, if attained, shall entitle such Participant to specific
award amounts that will be paid to each Participant. The Participants'
performance shall be 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 stockholders' equity, return on assets,
appreciation in and/or maintenance of the price of the common stock 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 Committee shall establish an objective method by which award amounts
will be calculated under the Plan. The maximum award amount any one Participant
may be awarded in one year is $2 million. The 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 will not exceed 10% of the Company's average annual
income before taxes for the preceding five years.
OTHER TERMS AND CONDITIONS
The Plan provides that no award shall be assignable or transferable other
than by will or by laws of descent and distribution. The Plan further provides
that the Board may at any time and without notice to any corporate officer of
the Company or a subsidiary suspend, discontinue, revise, amend or terminate the
Plan, provided that any such revision, or amendment which requires stockholder
approval in order to maintain the qualification of awards as performance-based
compensation pursuant to Code Section 162(m) shall not be made without such
approval.
Because payments under the Plan are determined by comparing actual
performance to the annual performance goals established by the Committee, it is
not possible to conclusively state the amount of benefits which will be paid
under the Plan. Subject to the approval of this Plan by the stockholders, which
will be effective January 1, 1999, the Committee has determined that only the
Chairman of the Board and Chief Executive Officer, Joseph V. Taranto, will be a
Participant in the Plan for 1999 and eligible for a performance-based award
payable in 2000. A performance goal has been established for Mr. Taranto based
upon the Company's earnings per share. Maximum awards payable have been set as a
function of the actual 1999 earnings per share. In all cases, the maximum award
payable to Mr. Taranto in 2000 will be less than 1% of the Company's 1999
after-tax operating income. Further, the award will not exceed $2 million and
the Committee has sole discretion under the Plan to reduce or eliminate the
award as it deems appropriate.
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.
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.
19
<PAGE>
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 1998.
STOCKHOLDER PROPOSALS FOR THE 2000 ANNUAL MEETING
To be considered for inclusion in the Company's Proxy Statement relating to
the 2000 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 10, 1999.
The proxy solicited by the Board of Directors relating to the 2000 Annual
Meeting of Stockholders shall confer discretionary authority to vote on a
stockholder proposal if the Company Secretary receives notice of that proposal
after February 23, 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 $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
c/o Equiserve
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 PricewaterhouseCoopers LLP was the Company's
auditors for 1998. Representatives of PricewaterhouseCoopers LLP will be present
at the 1999 Annual 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 stockholders.
By Order of the Board of Directors
Janet J. Burak
April 12, 1999 SECRETARY
20
<PAGE>
EXHIBIT A
EVEREST REINSURANCE HOLDINGS, INC.
EXECUTIVE PERFORMANCE ANNUAL INCENTIVE PLAN
1. PURPOSE
The purpose of the Everest Reinsurance Holdings, Inc. Executive Performance
Annual Incentive Plan (the "Plan") is to provide incentive for executives who
are in a position to contribute materially to the success of the Company and its
Subsidiaries; to reward their accomplishments; to motivate future
accomplishments; and to aid in attracting and retaining executives of the
caliber necessary for the continued success of the Company and its Subsidiaries.
2. DEFINITIONS
The following terms as used herein shall have the meaning specified:
(a) "Award" means a performance incentive bonus paid pursuant to the Plan.
(b) "Board" means the Board of Directors of the Company.
(c) "Code" means the Internal Revenue Code of 1986 as amended. Reference to
a specific section of the Code shall include such section, any valid regulation
promulgated thereunder, and any comparable provision of any future legislation
or regulation amending, supplementing or superseding such section or regulation.
(d) "Committee" means the Committee appointed by the Board to administer
the Plan. The Committee shall consist of no fewer than two members of the Board.
The members of the Committee shall be appointed by, and serve at the pleasure
of, the Board. Each member of the Committee shall qualify as an "outside
director" under Code Section 162 (m).
(e) "Company" means Everest Reinsurance Holdings, Inc. or any successor
corporation.
(f) "Participant" means a corporate officer of the Company or a Subsidiary
selected by the Committee in its sole discretion to participate in the Plan.
(g) "Performance Criteria" means the following measures of performance:
o net income, before or after taxes
o operating income, before or after taxes
o premiums earned
o earnings per share
o return on stockholders' equity
o return on assets
o appreciation in and/or maintenance of the price of the common
stock or any other publicly traded securities of the Company
o comparisons with various stock market indices
o market share
o statutory combined ratio
o expense ratio
o reductions in costs and expense growth
o gross or net premium growth
A performance criteria may be applied by the Committee as a measure of the
performance of any, all, or any combination of the Company or a Subsidiary.
21
<PAGE>
(h) "Performance Goal" means the goal or goals established for a
Participant by the Committee in accordance with paragraph 4 (a).
(i) "Subsidiary" means any corporation in which the Company, directly or
indirectly, controls 50% or more of the total combined voting power of all
classes of such corporation's stock.
(j) "Target Awards" means the amount of the target award established for
each Participant by the Committee in accordance with paragraph 4 (a).
3. TERM
The Plan shall be effective as of January 1, 1999, subject to approval by a
vote of the stockholders at the 1999 Annual Meeting of Stockholders, and such
approval shall be a condition to the right of any Participant to receive any
benefits hereunder. As long as the Plan remains in effect, it shall be
resubmitted to stockholders as necessary to enable the Plan to continue to
qualify as performance-based compensation under Section 162(m) of the Code.
4. AWARDS
(a) Within ninety (90) days after the beginning of each year, the
Committee, in its sole discretion, shall select Participants for the year and
establish in writing (i) objective Performance Goal or Goals for each
Participant for that year based on one or more of the Performance Criteria (ii)
the specific award amounts that will be paid to each Participant if the
Performance Goal or Goals are achieved (the "Target Award") and (iii) an
objective method by which such amounts will be calculated, which calculation
will be based upon a comparison of actual performance to the Performance Goal or
Goals. The calculation of the amount of an Award shall be objectively
determinable. The maximum Award that may be paid to any Participant under the
Plan for any year will be $2 million. The selection of a Participant for any
given year does not mean that the Participant will be selected or will be
entitled to be selected as a Participant in any subsequent year.
(b) The Committee, in its sole discretion, may eliminate or reduce, but not
increase, any Award calculated under the methodology established in accordance
with paragraph 4 (a).
(c) As soon as practicable following each year while the Plan is in effect,
the Committee shall determine and certify in writing the extent to which the
Performance Goal or Goals applicable to each Participant for the year were
achieved and the amount of the Award, if any, to be made. Awards will be paid to
the Participants in cash following such certification by the Committee and no
later than ninety (90) days following the close of the year with respect to
which the Awards are made, unless a Participant has elected to defer all or a
portion of such payment pursuant to the Company's or a Subsidiary's Deferred
Compensation Plan, in which event, payment of the amount deferred will be made
in accordance with the terms of the Deferred Compensation Plan.
(d) No Award will be paid to any Participant who is not an employee of the
Company on the last day of the year, except that if during the last eight (8)
months of the year, the Participant retires, dies, or is involuntarily
terminated, the Participant may be entitled to a prorated Award as and to the
extent determined by the Committee in its sole discretion. If a Participant is
on disability for more than four (4) months of the year, the Participant will be
entitled to a prorated Award. Participants, who resign voluntarily after the end
of the year, but before Award payments are actually made, will be eligible for
an Award as and to the extent determined by the Committee in its sole
discretion. The provisions of this subparagraph are subject to the terms of any
written agreement between a Participant and the Company.
(e) In no event shall the total amount of Awards granted to the
Participants in any one year exceed ten percent (10%) of the Company's average
annual income before taxes for the preceding five years.
5. ADMINISTRATION
(a) The Plan shall be administered by the Committee. The Committee shall
have all discretion and authority necessary or appropriate to administer the
Plan and to interpret the provisions of the Plan, consistent with qualifi-
22
<PAGE>
cation of the Plan as performance-based compensation under Code Section 162 (m).
Any determination, decision or action of the Committee in connection with the
construction, interpretation, administration or application of the Plan shall be
final, conclusive and binding upon all persons.
(b) No member of the Committee or the Board shall be liable for any action
taken or determination made in good faith with respect to the Plan or any Award
thereunder, and the Company shall defend and indemnify Committee and Board
members for any actions taken or decisions made in good faith under the Plan.
6. MISCELLANEOUS
(a) NON-ASSIGNABILITY. No Award shall be assignable or transferable
(including pursuant to a pledge or security interest) other than by will or by
laws of descent and distribution.
(b) WITHHOLDING TAXES. Whenever payments under the Plan are to be made, the
Company and/or the Subsidiary shall withhold therefrom an amount sufficient to
satisfy any applicable governmental withholding tax requirements related
thereto.
(c) AMENDMENT OR TERMINATION OF THE PLAN. The Board may at any time and
without notice to any corporate officer of the Company or a Subsidiary suspend,
discontinue, revise, amend or terminate the Plan; provided, that any such
revision, or amendment which requires approval of the Company's stockholders in
order to maintain the qualification of Awards as performance-based compensation
pursuant to Code Section 162 (m) shall not be made without such approval.
(d) NON-UNIFORM DETERMINATIONS. The Committee's determinations under the
Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive, Awards under the Plan, whether or not such
persons are similarly situated. Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make
non-uniform and selective determinations and to establish non-uniform and
selective Performance Goals.
(e) OTHER PAYMENTS OR AWARDS. Nothing contained in the Plan shall be deemed
in any way to limit or restrict the Company, its Subsidiaries, or the Committee
from making any award or payment to any person under any other plan, arrangement
or understanding, whether now existing or hereafter in effect.
(f) PAYMENTS TO OTHER PERSONS. If payments are legally required to be made
to any person other than the person to whom any amount is available under the
Plan, payments shall be made accordingly. Any such payment shall be a complete
discharge of the liability of the Company, its Subsidiaries, and the Committee.
(g) UNFUNDED PLAN. A Participant shall have no interest in any fund or
specified asset of the Company or a Subsidiary. Nothing contained in the Plan,
and no action taken pursuant to its provisions, shall create or be construed to
create a trust of any kind, or a fiduciary relationship between the Company or
its Subsidiaries and any Participant, beneficiary, legal representative or any
other person. To the extent that any person acquires a right to receive payments
from the Company and its Subsidiaries under the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company and its
Subsidiaries. All payments to be made hereunder shall be paid from the general
funds of the Company and its Subsidiaries and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of
such amounts. The Plan is not intended to be an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended.
(h) LIMITS OF LIABILITY. Neither the Company, its Subsidiaries, nor any
member of the Board or of the Committee, nor any other person participating in
any determination of any question under the Plan, or in the interpretation,
administration or application of the Plan, shall have any liability to any party
for any good faith action taken or not taken under the Plan.
(i) NO RIGHT TO EMPLOYMENT. Nothing contained in this Plan shall confer
upon any Participant any right to continue in the employ or other service of the
Company or a Subsidiary, or constitute any contract or limit in any
23
<PAGE>
way the right of the Company or a Subsidiary to change such person's
compensation or other benefits or to terminate the employment or other service
of such person with or without cause.
(j) INVALIDITY. If any term or provision contained herein shall to any
extent be invalid or unenforceable, such term or provision shall be reformed so
that it is valid and such invalidity or unenforceability shall not affect any
other provision or part hereof.
(k) APPLICABLE LAW. The Plan shall be governed by the laws of the State of
Delaware as determined without regard to the conflict of law principles thereof.
(l) CODE SECTION 162 (M). It is the intent of the Company that all Awards
under the Plan qualify as performance-based compensation for purposes of Code
Section 162 (m) so that the Company's tax deduction for such Awards is not
disallowed in whole or in part under Code Section 162 (m). The Plan is to be
applied and interpreted accordingly.
(m) SUCCESSORS. The obligations of the Company and its Subsidiaries under
this Plan shall be binding upon any organization that shall succeed to all or
substantially all of the Company's or a Subsidiary's assets.
<PAGE>
EVEREST REINSURANCE HOLDINGS, INC.
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 shares of Common
Stock of EVEREST REINSURANCE HOLDINGS, INC. held in the name of the undersigned
at the close of business on March 23, 1999, at the Annual Meeting of
Stockholders to be held on May 20, 1999, 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>
6287
[X] PLEASE MARK YOUR VOTES AS IN THIS EXAMPLE.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE FOLLOWING ITEMS:
1. Election of Directors T.J. GALLAGHER, W.F.GALTNEY, JR.
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. Approval of the proposal to adopt the Executive Performance Annual
Incentive Plan
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
In their discretion, upon such other matters as may properly come before the
meeting, all in accordance with the accompanying Notice and Proxy Statement,
receipt of which is acknowledged.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED THEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE STOCKHOLDER, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR ITEM 1 AND ITEM 2.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
Sign exactly as name appears hereon.
When signing in a representative capacity,
please give full title.
