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EVEREST RE GROUP, LTD.
----------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 22, 2003
TO THE SHAREHOLDERS OF EVEREST RE GROUP, LTD.:
The Annual General Meeting of Shareholders of Everest Re Group, Ltd. (the
"Company"), a Bermuda company, will be held at the Royal Pavilion Hotel,
Porters, St. James, Barbados on Wednesday, May 22, 2003 at 11:00 a.m., for the
following purposes:
1. To elect three Class I directors of the Company, each to serve for a
three-year period to expire at the 2006 Annual General Meeting of
Shareholders or until such director's successor shall have been duly
elected or appointed or until such director's office is otherwise
vacated.
2. To appoint PricewaterhouseCoopers LLP as the Company's independent
auditors for the year ending December 31, 2003 and authorize the Board
of Directors of the Company acting by the Audit Committee of the Board
of Directors to set the fees for the independent auditors.
3. To consider and approve the Everest Re Group, Ltd. 2003 Non-Employee
Director Equity Compensation Plan as described in the accompanying
Proxy Statement.
4. To consider and act upon any other business, if any, as may properly
come before the meeting and any and all adjournments thereof.
The Company's financial statements for the year ended December 31, 2002
together with the report of the Company's auditor in respect of these financial
statements, as approved by the Company's Board of Directors, will be presented
at this Annual General Meeting.
Only shareholders of record, as shown by the transfer books (Register of
Members) of the Company, at the close of business on March 27, 2003 are entitled
to notice of, and to vote at, the Annual General Meeting.
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting in person, you are urged to sign and date the
enclosed proxy and return it promptly in the postage prepaid envelope provided
for that purpose.
By Order of the Board of Directors
Joseph A. Gervasi, Secretary
April 11, 2003
Hamilton, Bermuda
EVEREST RE GROUP, LTD.
PROXY STATEMENT
----------
ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 22, 2003
The enclosed Proxy Card is being solicited on behalf of the Board of
Directors (the "Board") for use at the 2003 Annual General Meeting of
Shareholders of Everest Re Group, Ltd., a Bermuda company (the "Company"), to be
held on May 22, 2003, and at any adjournment thereof. It may be revoked at any
time before it is exercised by giving a later-dated proxy, notifying the
Secretary of the Company in writing at the Company's registered office at
Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda, or by voting in
person at the Annual General Meeting. All shares represented at the meeting by
properly executed proxies will be voted as specified and, unless otherwise
specified, will be voted: (1) for the election of Martin Abrahams, John R. Dunne
and John A. Weber as directors; (2) for the appointment of
PricewaterhouseCoopers LLP as independent auditors and for authorizing the Board
of Directors of the Company acting by the Audit Committee of the Board to set
the fees for the independent auditors; and (3) for the approval of the Everest
Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan.
Only shareholders of record at the close of business on March 27, 2003 will
be entitled to vote at the meeting. On that date, 51,360,643 Common Shares, par
value $.01 per share ("Common Shares"), were outstanding and entitled to vote
including 452,000 Common Shares held by Everest Reinsurance Holdings, Inc., a
subsidiary of the Company ("Everest Holdings"). Except as may be provided in the
Company's Bye-Laws, where voting is by poll, each Common Share is entitled to
one vote.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the affirmative
vote of a majority of the votes cast at the Annual General Meeting, provided
there is a quorum (consisting of not less than two persons present in person or
by proxy holding in excess of 50% of the issued and outstanding Common Shares
entitled to attend and vote at the Annual General Meeting). The Company has
appointed inspectors of election to count votes cast in person or by proxy.
Common Shares owned by shareholders who are present in person or by proxy at the
Annual General Meeting but who elect to abstain from voting will be counted
towards the presence of a quorum. However, such Common Shares, and Common Shares
owned by shareholders and not voted in person or by proxy at the Annual General
Meeting (including "broker non-votes"), will not be counted towards the majority
needed to elect a director or approve any other matter before the shareholders
and thus will have no effect on the outcome of those votes.
This Proxy Statement, the attached Notice of Annual General Meeting, the
Annual Report of the Company for the year ended December 31, 2002 (including
financial statements) and the enclosed Proxy Card are first being mailed to the
Company's shareholders on or about April 11, 2003.
On February 24, 2000, the Company became the holding company for Everest
Holdings and its subsidiaries in connection with a restructuring. As a result,
all references in this document to the Company prior to February 24, 2000 refer
to Everest Holdings and all references to the Common Shares prior to February
24, 2000 refer to the common stock of Everest Holdings.
All references in this document to "$" or "dollars" are references to the
currency of the United States of America.
The Company knows of no specific matter to be brought before the Annual
General Meeting that is not referred to in the attached Notice of Annual General
Meeting of Shareholders and this Proxy Statement. If any such matter
comes before the meeting, including any shareholder proposal properly made, the
proxy holders will vote proxies in accordance with their best judgment with
respect to such matters. To be properly made, a shareholder proposal must comply
with the Company's Bye-Laws and, in order for any matter to come before the
meeting, it must relate to matters referred to in the attached Notice of Annual
General Meeting.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE DIRECTOR NOMINEES
DESCRIBED BELOW. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE
IN THEIR PROXIES.
The Company's Bye-Laws provide for the division of the Board into three
classes, with the directors in each class serving for a term of three years. At
the 2003 Annual General Meeting, three nominees for Class I director positions
are to be elected to serve until the 2006 Annual General Meeting of Shareholders
or until their successors are elected and qualified or until such director's
office is otherwise vacated. None of the nominees are current or former
employees of the Company. Mr. Abrahams and Mr. Dunne are currently Class I
directors of the Company. At its regularly scheduled meeting on February 25,
2003 and in accordance with the Company's Bye-Laws, as approved by the
shareholders at the 2000 Annual General Meeting, the Company's Board of
Directors increased the number of Class I director positions from two to three
and simultaneously increased the total number of director positions from six to
seven. These additions were recommended to the Board by its Nominating and
Governance Committee, which is composed entirely of independent directors. In
addition, the Nominating and Governance Committee recommended to the Board of
Directors the nominations of Mr. Abrahams, Mr. Dunne and Mr. Weber as Class I
directors for the shareholders' consideration at the 2003 Annual General
Meeting. The Class II director positions will be subject to election at the 2004
Annual General Meeting and the Class III directors will be subject to election
at the 2005 Annual General Meeting.
All nominees have accepted their nominations for the Class I director
positions. It is not expected that any of the nominees will become unavailable
for election as a director, but if any nominee should become unavailable prior
to the meeting, proxies will be voted for such persons as the Board shall
recommend, unless the Board reduces the number of directors accordingly. There
are no arrangements or understandings between any director and any other person
pursuant to which such person was selected as a director or nominee.
INFORMATION CONCERNING NOMINEES
The following information has been furnished by the respective nominees for
election of Class I directors for a term expiring in 2006.
MARTIN ABRAHAMS, 70, became a Class I director of the Company on March 12,
1996 and served as a director of Everest Reinsurance Company, a wholly owned
subsidiary of the Company ("Everest Re"), from March 1996 to February 2000. Mr.
Abrahams, currently retired, served with the accounting firm of Coopers &
Lybrand L.L.P. from 1957 and was a partner in that firm from 1969 to 1995.
JOHN R. DUNNE, 73, became a Class I director of the Company on June 10,
1996 and served as a director of Everest Re from June 1996 to February 2000. Mr.
Dunne, an attorney and member of the bar of both New York and the District of
Columbia, has since 1994 been counsel to the law firm of Whiteman, Osterman &
Hanna in Albany, New York. Mr. Dunne was a director of CGU Corporation, an
insurance holding company, from 1993 until 2001. Mr. Dunne was counsel to the
Washington, D.C. law firm of Bayh, Connaughton & Malone from 1993 to 1994. From
1990 to 1993, he served as an Assistant Attorney General at the United States
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.
JOHN A. WEBER, 58, is nominated to become a new Class I director. Since
December 2002, he has been the Managing Partner of Copley Square Capital
Management, LLC, a private partnership and SEC-registered investment advisor
which provides investment management and strategic advisory services to
institutions. From 1990 through 2002, Mr. Weber was affiliated with One Beacon
Insurance Group LLC (formerly known as CGU Corporation) and its predecessor
companies. During that affiliation, he became the Managing Director and Chief
Investment Officer of One
2
Beacon Insurance Companies and the President of One Beacon Asset Management,
Inc. (formerly known as CGU Asset Management, Inc.). From 1988 through 1990, Mr.
Weber was the Chief Investment Officer for Provident Life Accident Insurance
Company and from 1972 through 1988 was associated with Connecticut Mutual Life
Insurance Company ("Connecticut Mutual") and its affiliate, State House Capital
Management Company ("State House"), eventually serving as Senior Vice President
of Connecticut Mutual and President of State House.
INFORMATION CONCERNING CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following information has been furnished by those directors whose terms
of office will continue after the Annual General Meeting and by the other
executive officers.
KENNETH J. DUFFY, 73, became a Class II director of the Company on March
12, 1996 and served as a director of Everest Re from March 1996 to February
2000. Mr. Duffy is a retired insurance executive. He served with the insurance
holding company, Commercial Union Corporation, and its parent company, CGU plc,
from 1948 until his retirement in 1999. He was President and Chief Executive
Officer of Commercial Union Corporation from January 1985 to January 1995,
Chairman and Chief Executive Officer from January 1993 to January 1995, Chairman
from January 1995 to October 1998 and Senior Advisor to CGU plc from October
1998 to December 1999. Until December 1999, he was also a director of Commercial
Union Canada Holdings, Ltd. and the President and a director of Curepool
(Bermuda) Ltd. He is also a vice president of the Insurance Institute of London
and a fellow of the Institute of Risk Management.
JOSEPH V. TARANTO, 54, a Class II director, became Chairman of the Board
and Chief Executive Officer of the Company and Everest Re on October 17, 1994
and served as President of both companies from December 1994 until Mr.
Gallagher's election as President on February 24, 1997. Mr. Taranto also serves
as a director and Chairman and Chief Executive Officer of Everest Holdings, as a
director and Chairman of Everest Reinsurance (Bermuda), Ltd. ("Bermuda Re") and
as a director of Everest Re. Mr. Taranto was a director and President of
Transatlantic Holdings, Inc. and a director and President of Transatlantic
Reinsurance Company and Putnam Reinsurance Company (both subsidiaries of
Transatlantic Holdings, Inc.) from 1986 to 1994.
THOMAS J. GALLAGHER, 54, became a Class III director of the Company on
March 13, 1996. Mr. Gallagher also serves as a director of Everest Re, having
first been elected to that position in 1987. Elected President and Chief
Operating Officer of both the Company and Everest Re on February 24, 1997, Mr.
Gallagher had been Executive Vice President of both companies since December
1995 and a Senior Vice President of the Company since 1994 and of Everest Re
since 1989. Since joining Everest Re in 1975, he has served as an underwriter in
the facultative and treaty departments, as vice president in charge of the
facultative department and as vice president in charge of the treaty casualty
department. Mr. Gallagher also serves as Deputy Chairman of the Company, as a
director and President of Everest Holdings, as a director and Deputy Chairman of
Bermuda Re, as a director and Chairman of Everest Global Services, Inc.
("Everest Global"), as a director and Chairman of Everest National Insurance
Company ("Everest National"), as a director and Chairman of Everest Insurance
Company of Canada ("EVCAN"), as a director and Chairman of Mt. McKinley
Insurance Company ("Mt. McKinley"), as a director and Chairman and Chief
Executive Officer of Everest Indemnity Insurance Company ("Everest Indemnity"),
as a director of WorkCare Southeast, Inc. ("WorkCare Southeast") and WorkCare
Southeast of Georgia, Inc. ("WorkCare Georgia") and Everest Security Insurance
Company ("Everest Security") (f/k/a Southeastern Security Insurance Company) all
of which are subsidiaries of the Company.
WILLIAM F. GALTNEY, JR., 50, became a Class III director of the Company on
March 12, 1996 and served as a director of Everest Re from March 1996 to
February 2000. Mr. Galtney is currently President of Gallagher Healthcare
Insurance Services, Inc. ("GHIS"), which is a wholly-owned subsidiary of Arthur
J. Gallagher & Co. Mr. Galtney had been the Chairman and Chief Executive Officer
since 1983 of Healthcare Insurance Services, Inc. ("HIS") (predecessor to GHIS),
a managing general and surplus lines agency previously indirectly owned by The
Galtney Group, Inc. ("GGI"). GGI is a company 45% owned by Mr. Galtney and of
which he is also Chairman and Chief Executive Officer. Mr. Galtney was also a
director of Mutual Risk Management Ltd. until March 2002.
3
STEPHEN L. LIMAURO, 51, is an Executive Vice President and the Chief
Financial Officer of the Company. He served as Comptroller of the Company from
September 25, 1997 until November 6, 2001. He served as Comptroller of Everest
Re from September 25, 1997 until August 29, 2001. He served as Treasurer of the
Company from November 17, 1999 until November 6, 2001 and Treasurer of Everest
Re from November 17, 1999 until August 6, 2001. He became Executive Vice
President of the Company and Everest Re on September 21, 2000. 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,
Executive Vice President, and Chief Financial Officer of Everest Re and Everest
Holdings, a director of Bermuda Re, Everest National and Everest Indemnity, a
director and Chairman of Everest Re Advisors, Ltd. ("Everest Re Advisors"), a
Bermuda subsidiary of the Company, and a director of Everest Advisors (Ireland)
Limited ("Everest Ireland"), an Irish subsidiary of Everest Re Advisors. He also
serves as a director and Treasurer of EVCAN. He serves as a director and
Chairman of Everest Re Holdings, Ltd. ("ERHL"), a subsidiary of Everest Re, and
director and President of Everest Global and is Chief Financial Officer of
WorkCare Southeast and WorkCare Georgia. He is also a director of Bermuda Re and
Everest International Reinsurance, Ltd. ("Everest International") (f/k/a AFC Re
Ltd.), which are subsidiaries of the Company. Mr. Limauro serves as a director
of Mt. McKinley and Everest Security, which are subsidiaries of the Company. He
also serves as a trustee of Everest Re Capital Trust, which is a Delaware
statutory trust. Prior to the restructuring, he was a director and Chairman of
the Company.
PETER J. BENNETT, 51, became a Senior Vice President of the Company on May
23, 2000. He serves as director and Chief Executive Officer of Bermuda Re, a
director of ERHL and Everest Re Advisors and is director and Chairman of Everest
International. Mr. Bennett was President of Citadel Group Representatives, Inc.
and Managing Director of Citadel Group Representatives, Limited (both of which
were representatives of Citadel Reinsurance Company Limited) from 1985 to 1987
and from 1990 to 2000.
KEITH T. SHOEMAKER, 47, became Comptroller of the Company on November 6,
2001 and became the Principal Accounting Officer on July 30, 2002. He also
serves as Vice President and Comptroller of Everest Holdings, ERHL, Everest Re,
Everest Global and Mt. McKinley as well as Assistant Comptroller of Everest
National, Everest Indemnity, Everest Security, WorkCare Southeast, WorkCare
Georgia and Mt. McKinley Managers, L.L.C. ("Mt. McKinley Managers") and is
Assistant Controller of EVCAN. Mr. Shoemaker was Vice President and Controller
of Selective Insurance Company from 1999 to 2001 and served as Vice President of
the National Council on Compensation Insurance from 1992 to 1999.
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 2002. No director, either in
person or through an alternate director appointment as permitted under Bermuda
law, 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, Nominating and
Governance and Compensation Committees.
AUDIT COMMITTEE
The principal purpose of the Company's Audit Committee is to oversee the
integrity of the Company's financial statements and the Company's compliance
with legal and regulatory requirements, to oversee the independent auditor, to
evaluate the independent auditor's qualifications and independence and to
oversee the performance of the Company's internal audit function. The Audit
Committee meets separately and together with the Company's management, director
of internal audit and the independent auditors to review the Company's internal
controls and financial statements, audit findings and significant accounting and
reporting issues. The Board has adopted a Charter for the Audit Committee and
intends to revise that Charter as necessary to comply with all applicable laws.
4
The members of the Audit Committee are Mr. Abrahams, Mr. Duffy and Mr.
Dunne, none of whom are current or former employees or officers of the Company
and all of whom meet the independence standards of the New York Stock Exchange
("NYSE"). At least one of the members qualifies as an "audit committee financial
expert" as defined by the SEC under Section 407 of the Sarbanes-Oxley Act of
2002 (the "Sarbanes-Oxley Act"). Mr. Dunne serves as Chairman of the Audit
Committee. The Audit Committee held four meetings in 2002.
COMPENSATION COMMITTEE
The Compensation Committee exercises authority with respect to all
compensation and benefits afforded all officers at the Senior Vice President
level and above, the Designated Executive Officers (as defined herein), and the
Company's Chief Financial Officer, Comptroller, Treasurer and Secretary. The
Compensation Committee also has oversight responsibilities for all of the
Company's broad-based compensation and benefit programs, including
administration of the Company's Annual Incentive Plan, the 1995 Stock Incentive
Plan, the 2002 Stock Incentive Plan and the Executive Performance Annual
Incentive Plan. The Compensation Committee adopted a Charter on November 21,
2002.
The current members of the Compensation Committee are Mr. Abrahams, Mr.
Duffy and Mr. Dunne, none of whom are current or former employees or officers of
the Company. Mr. Duffy serves as Chairman of the Compensation Committee. The
Compensation Committee held four meetings in 2002.
NOMINATING AND GOVERNANCE COMMITTEE
The Nominating and Governance Committee was established by the Board on
November 21, 2002 with authority and responsibility to identify and recommend
qualified individuals to be nominated as directors of the Company and to develop
and recommend to the Board the Corporate Governance Guidelines applicable to the
Company. The Nominating and Governance Committee will consider a shareholder's
nominee for director who is proposed in accordance with the procedures set forth
in the Company's Bye-Laws. The Bye-Laws require that written notice of a
shareholder's intent to make such a nomination at the 2004 Annual General
Meeting of Shareholders must be received by the Secretary of the Company between
November 13, 2003 and December 13, 2003. The current members of the Nominating
and Governance Committee are Mr. Abrahams, Mr. Duffy and Mr. Dunne, none of whom
are current or former employees or officers of the Company. Mr. Abrahams
currently serves as Chairman of the Nominating and Governance Committee. The
Nominating and Governance Committee held no meetings in 2002.
5
COMMON SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Shares as
of March 27, 2003 by the directors of the Company and the nominee to the Board,
by the Designated Executive Officers listed in the Summary Compensation Table
and by all directors and executive officers of the Company as a group.
Information in this table was furnished to the Company by the respective
directors and Designated Executive Officers. Unless otherwise indicated in a
footnote, each person listed in the table possesses sole voting power and sole
dispositive power with respect to the shares shown in the table as owned by that
person.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (11)
----------------------- -------------------- ----------
Martin Abrahams ...................... 26,385(1) *
Kenneth J. Duffy ..................... 25,685(2) *
John R. Dunne ........................ 25,505(3) *
Thomas J. Gallagher .................. 172,527(4) *
William F. Galtney, Jr. .............. 166,785(5) *
Joseph V. Taranto .................... 739,142(6) 1.44
John A. Weber ........................ 0 *
Stephen L. Limauro ................... 35,805(7) *
Keith T. Shoemaker ................... 1,000(8) *
Peter J. Bennett ..................... 13,000(9) *
All directors and executive
officers as a group (10 persons) .... 1,205,834(10) 2.35
----------
* Less than 1%
(1) Includes 19,556 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003 and 6,829 shares held in the
Martin Abrahams Revocable Trust.
(2) Includes 19,556 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003.
(3) Includes 19,376 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003.
(4) Includes 162,900 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003.
(5) Includes 141,600 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 19,556 shares
issuable upon the exercise of stock options exercisable within 60 days of
March 27, 2003.
(6) Includes 449,000 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003. Excludes 452,000 Common
Shares held by Everest Holdings over which Mr. Taranto has voting and
dispositive power. Mr. Taranto disclaims beneficial ownership of the Common
Shares held by Everest Holdings.
(7) Includes 1,800 shares of restricted stock issued to Mr. Limauro under the
Company's 1995 Stock Incentive Plan, which may not be sold or transferred
until the vesting requirements have been satisfied. Also includes 32,600
shares issuable upon the exercise of stock options exercisable within 60
days of March 27, 2003.
(8) Includes 1,000 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003
(9) Includes 13,000 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003.
(10) Includes 736,544 shares issuable upon the exercise of stock options
exercisable within 60 days of March 27, 2003.
(11) Based on 51,360,643 total Common Shares outstanding and entitled to vote as
of March 27, 2003.
6
PRINCIPAL HOLDERS OF COMMON SHARES
To the best of the Company's knowledge, the only beneficial owner of more
than 5% of the outstanding Common Shares as of December 31, 2002 is set forth
below. This table is based on information provided in a Schedule 13G filed with
the SEC by the party listed in the table.
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
---------------------------------- ------------------ ---------
FMR Corp. 5,159,750 (1) 10.142%
82 Devonshire Street
Boston , Massachusetts 02109
----------
(1) FMR Corp. reports in its Schedule 13G that it has sole voting power with
respect to 230,950 Common Shares and sole dispositive power with respect to
5,159,750 Common Shares.
DIRECTORS' COMPENSATION
Each member of the Board who is not otherwise affiliated with the Company
as an employee and/or officer (each, a "Non-Employee Director") was compensated
in 2002 for services as a director and was also reimbursed for out-of-pocket
expenses associated with each meeting attended. The annual compensation for 2002
of the Non-Employee Directors consisted of cash and stock having an aggregate
value of $50,000. This compensation was paid in four installments: three
issuances of Common Shares that were not under any shareholder-approved plan and
one cash payment. The three stock issuances to each Non-Employee Director were
in respect of services provided during the fourth quarter of 2001 and the first
and second quarters of 2002. The cash payment of $12,500 to each Non-Employee
Director was in respect of services rendered for the third quarter of 2002.
Following the issuance by the NYSE of its Corporate Governance Rule Proposals
submitted to the SEC on August 16, 2002, the Company ceased making equity-based
compensation payments to the Non-Employee Directors and has made all subsequent
compensation payments to Non-Employee Directors in cash. In the event the 2003
Non-Employee Director Equity Compensation Plan (the "Plan") is approved by the
shareholders at the 2003 Annual General Meeting (see Proposal Number 3 below,
"Approval of Everest Re Group, Ltd. 2003 Non-Employee Director Equity
Compensation Plan"), the Non-Employee Directors may elect to receive their cash
compensation in the form of stock in the amount as determined under the Plan.
Compensating the Non-Employee Directors with Common Shares is intended to
align their interests with those of the Company's shareholders. The value of
Common Shares issued is calculated based on the average of the highest and
lowest sale prices of the Common Shares on each installment date or, if no sale
is reported for that day, the next preceding day for which there is a reported
sale. In 2002, each of the Non-Employee Directors was issued a total of 562
shares as compensation for his services as a director in accordance with this
procedure. As of January 1, 2003, the value of those shares for each
Non-Employee director was $31,079 based upon the NYSE closing price of a Common
Share on December 31, 2002 of $55.30.
The Company 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 in those directors a proprietary interest in the
Company's continued success. Each of the Non-Employee Directors on the Board is
awarded options to purchase that number of Common Shares equal to $50,000
divided by the fair market value of such shares as of the date he is initially
appointed to the Board, with an exercise price equal to that fair market value.
As defined in the Directors' Plan, the fair market value is determined by
averaging the highest and lowest trading prices of the Common Shares on the date
of the option award. This Directors' Plan, which was approved by the
shareholders on May 23, 1996, will remain in effect regardless of whether the
shareholders approve the 2003 Non-Employee Director Plan at the 2003 Annual
General Meeting.
Upon their initial appointment to the Board on March 12, 1996, Mr.
Abrahams, Mr. Duffy and Mr. Galtney were each granted options to purchase 2,216
Common Shares at an exercise price of $22.5625 per share. Upon his initial
appointment to the Board on June 10, 1996, Mr. Dunne was granted options to
purchase 2,036 Common Shares at an exercise price of $24.5625 per share. In the
event that he is elected a Class I Director at the 2003 Annual General Meeting
of Shareholders, in accordance with the Directors' Plan, Mr. Weber will be
granted the number of options whose total fair market value on the date of
election will equal $50,000.
7
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years with respect to the Company's Chief Executive Officer and the
four other most highly compensated executive officers who were serving as
executive officers as of December 31, 2002 (the "Designated Executive
Officers"), for services rendered by them to the Company and to its
subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
----------------------- --------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS ($)(2) COMPENSATION(3) AWARD(S)($)(4) OPTIONS(#) ($)(5)
--------------------------- ---- --------- ------------ --------------- -------------- ---------- ------------
Joseph V. Taranto 2002 $1,000,000 $1,600,000 -- -- 100,000 $31,158
Chairman of the Board 2001 1,000,000 1,400,000 -- -- 200,000 31,050
and Chief Executive 2000 1,000,000 1,400,000 -- -- 100,000 31,050
Officer
Thomas J. Gallagher 2002 423,012 400,000 -- -- 16,500 13,848
President and Chief 2001 415,385 365,000 -- -- 33,000 13,512
Operating Officer 2000 377,308 350,000 -- -- 33,000 12,369
Stephen L. Limauro 2002 254,462 250,000 -- -- 25,000 8,686
Executive Vice President 2001 241,539 200,000 -- -- 12,000 8,259
and Chief 2000 202,377 175,000 -- $141,750 10,000 6,917
Financial Officer
Keith T. Shoemaker (1) 2002 166,154 50,000 -- -- 5,000 2,514
Comptroller and 2001 55,385 25,000 -- -- 5,000 221
Principal Accounting 2000 -- -- -- -- -- --
Officer
Peter J. Bennett 2002 268,577 100,000 78,120 -- -- 15,021
Senior Vice President of 2001 259,615 80,000 70,859 -- 5,000 14,481
Everest Re Group, Ltd. 2000 152,885 100,000 55,223 -- 20,000 5,663
and Managing Director
and Chief Executive
Officer of Bermuda Re
----------
(1) Mr. Shoemaker commenced employment with the Company on August 27, 2001. He
became Principal Accounting Officer on July 30, 2002.
(2) Represents compensation earned by the Designated Executive Officers
pursuant to the Company's Annual Incentive Plan. The amounts shown for Mr.
Taranto were awarded pursuant to the Executive Performance Annual Incentive
Plan.
(3) The amounts reported for 2002 and 2001 include $60,000 and $55,000,
respectively, as housing allowance under the terms of Mr. Bennett's
employment agreement and $18,120 and $15,859, respectively, in payment of
taxes. The amount reported for 2000 includes $40,000 paid to Mr. Bennett as
a housing allowance, $14,222 in payment of taxes and $1,001 in
reimbursement of expenses incurred by him to move household items to
Bermuda.
8
(4) The amount reported represents the value of the Common Shares underlying
the restricted stock at the date of grant, without taking into account any
diminution in value attributable to the restrictions on such stock. An
award of 3,000 shares of restricted stock was made to Mr. Limauro on
September 21, 2000. The closing price of a Common Share on the NYSE on that
date was $47.25. This restricted stock award vests at the rate of 20% per
year over a five-year period. As of December 31, 2002, Mr. Limauro held
1,800 restricted Common Shares valued at $99,540, based on $55.30 as the
closing price of a Common Share on the NYSE on December 31, 2002. Dividends
are paid quarterly on these restricted Common Shares at the same rate as
dividends are paid on Common Shares held by public shareholders.
(5) The amount reported for 2002 represents: (i) the following term life and
accidental death and dismemberment insurance premiums paid by the Company
on behalf of the Designated Executive Officers: (a) Mr. Taranto-$1,158, (b)
Mr. Gallagher-$1,158, (c) Mr. Limauro-$1,152, (d) Mr. Shoemaker-$769 and
(e) Mr. Bennett-$1,592; (ii) the following employer contributions to
qualified and non-qualified employee savings plans: (a) Mr.
Taranto-$30,000, (b) Mr. Gallagher-$12,690, (c) Mr. Limauro-$7,534, (d) Mr.
Shoemaker-$1,745; and (iii) the following employer contribution to a
qualified savings plan: Mr. Bennett-$13,429. STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted under the Company's 2002 Stock Incentive Plan during 2002 to the
Designated Executive Officers.
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE (3) ($)(4)
------- -------------- -------------- ----------- ---------- -------------
Joseph V. Taranto ............ 100,000 20.96% $55.595 09/26/12 $2,057,840
Thomas J. Gallagher .......... 16,500 3.46 55.595 09/26/12 339,544
Stephen L. Limauro ........... 25,000 5.24 55.595 09/26/12 514,460
Keith T. Shoemaker ........... 5,000 1.05 55.595 09/26/12 102,892
Peter J. Bennett ............. -- -- -- -- --
----------
(1) Represents non-qualified stock options granted to Mr. Taranto, Mr.
Gallagher, Mr. Limauro and Mr. Shoemaker on September 26, 2002, all of
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 Common Share on
the date of grant. No SARs were granted in 2002.
(2) Based upon 477,000 non-qualified stock options granted to all employees in
2002.
(3) Exercisable options expire unless exercised within three years following
termination of employment due to retirement, disability or death or within
three months following termination of employment due to resignation or
dismissal. Generally, if employment terminates because of death, retirement
upon attaining age 65 or because of disability, unexercisable options
become immediately exercisable until the earlier of: (a) three years after
death or such termination; or (b) ten years from the date of grant.
(4) The grant date present value of each option grant is estimated as of the
date of grant using the Black-Scholes option pricing model, modified to
include dividends, with the following assumptions: (a) Expected
Volatility--The annualized standard deviation of the continuously
compounded rate of return on the underlying stock, based on the closing
price observations for the twelve-month period ended December 31, 2002,
which was 29.326499%.
9
(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 3.34%.
(c) Dividend Yield--The yield calculated by dividing the estimated
annualized dividend rate of the Common Shares in the amount of $.28 per
share by the weighted average fair market value of the stock on the date of
grant, which resulted in an assumed dividend yield of 0.57%.
(d) Expected Life--The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was 7.29
years.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table sets forth certain information concerning the number
and value of unexercised stock options at the end of 2002 held by the Designated
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE AT FY-END(#) AT FY-END ($)(1)
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
Joseph V. Taranto 0 0 373,000 382,000 $7,076,060 $3,045,062
Thomas J. Gallagher 0 0 150,300 80,200 3,930,540 1,146,343
Stephen L. Limauro 0 0 29,000 45,000 686,649 339,554
Keith T. Shoemaker 0 0 1,000 9,000 6,760 27,040
Peter J. Bennett 0 0 9,000 16,000 170,920 273,280
----------
(1) Based on the year-end fair market value of Common Shares of $54.77, which
is calculated by averaging the high and low trading prices on December 31,
2002 on the NYSE. The value of the options is computed by subtracting the
exercise prices of the options from their fair market values and
multiplying the difference by the number of shares underlying the options
at the applicable exercise prices.
COMPENSATION COMMITTEE REPORT
I. Executive Compensation Policy
OVERVIEW. The Company's executive compensation program in 2002 was designed
to attract, retain and motivate highly talented individuals whose abilities are
critical to the success of the Company. Compensation policies that attract
personnel of this caliber are particularly important for a relatively new public
entity like the Company. The Company's compensation program is guided by the
following fundamental principles:
o Compensation of executive officers is based on the level of job
responsibility, the performance of the Company and the performance of
the individual.
o Total compensation levels are designed to be competitive with
compensation paid by organizations of similar stature.
o Compensation should align the interests of the executive officers with
those of the Company's shareholders by basing a significant part of
total compensation on the long-term performance of the Common Shares.
The Company's executive compensation program in 2002 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
10
Company's executive compensation program consists of two key elements: (i)
an annual component consisting of base salary and annual bonus and (ii) a
long-term component which may consist of 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 2002, annual compensation for executive officers of the Company
consisted of two components-base salary and a cash payment under either the
Company's Executive Performance Annual Incentive Plan (in the case of Mr.
Taranto) or the Company's Annual Incentive Plan (in the case of the other
executive officers). The base salary for Mr. Taranto was subject to the terms of
his current employment agreement (see "Employment and Change of Control
Agreements--Mr. Taranto" below). The base salaries for the other executive
officers were determined by the Compensation Committee based on each executive
officer's performance and, as previously discussed, the Company's performance
and the range of compensation of executive officers with similar
responsibilities in comparable companies.
Annual bonuses paid to executive officers under the Annual Incentive Plan
and the Executive Performance Annual Incentive Plan are a significant element of
the executive compensation program. Under the Annual Incentive Plan, the Company
may make cash payments each year to employees who hold positions of significant
responsibility and/or whose performance or potential contribution, in the
judgment of the Compensation Committee, will contribute materially to the
success of the Company and/or its subsidiaries. The Annual Incentive Plan is
designed to provide incentive to those employees, to reward their
accomplishments, to motivate future accomplishments, and to aid in attracting
and retaining employees of the caliber necessary for the continued success of
the Company. The Compensation Committee has discretion to determine the amounts
of individual awards under the Annual Incentive Plan based on such criteria and
factors as the Compensation Committee in its sole discretion may determine and
after considering recommendations made by the Chief Executive Officer of the
Company. The aggregate amount available for all awards each year is determined
annually by the Compensation Committee based upon performance goals established
by the Compensation Committee. The determination of individual awards is
subjective in nature and is influenced by the Compensation Committee's
perception of the importance of an individual's contributions to the overall
success of the Company. To evaluate corporate performance, the Compensation
Committee considered the following factors related to the Company's 2002
financial results: after-tax operating income, return on equity and earnings
growth.
The Compensation Committee has 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.
The Executive Performance Annual Incentive Plan was approved by the
Company's shareholders on May 20, 1999. Each year the Compensation Committee
selects executive officers of the Company and its subsidiaries who will be
eligible that year to participate in the Executive Performance Annual Incentive
Plan. Currently, only Mr. Taranto, the Company's Chairman and Chief Executive
Officer, is a participant (see "Chief Executive Officer Compensation" below).
Each year, the Compensation Committee establishes in writing objective
performance goals for each participant, which, if attained, will entitle such
participant to specific award amounts that will be paid to each participant.
Each participant's performance is measured by any of the following performance
criteria: net income before or after taxes, operating income before or after
taxes, premiums earned, earnings per share, return on shareholders' equity,
return on assets, appreciation in and/or maintenance of the price of the Common
Shares or any other publicly traded securities of the Company, comparisons with
various stock market indices, market share, statutory combined ratio, expense
ratio, reductions in costs and expense growth, or gross or net premium growth.
The Compensation Commit-
11
tee establishes an objective method by which award amounts are calculated under
the plan. The maximum award amount any one participant may be awarded in one
year is $2 million. The Compensation Committee, in its sole discretion, may
eliminate or reduce but not increase any award determination. The plan provides
that the total amount of awards granted to all participants in any one year may
not exceed 10% of the Company's average annual income before taxes for the
preceding five years.
B. LONG-TERM COMPENSATION
In 2002, the Company's long-term incentive program for executive officers
was implemented by means of the 2002 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 2002 Stock Incentive Plan are a significant element of the
Company's executive compensation program. Compensation derived from share
ownership provides a strong incentive to increase shareholder value, since the
value of this compensation is determined by changes in the price of the Common
Shares over the term of each award. Awards under the 2002 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 2002 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 and through December
31, 2002, the Compensation Committee has granted employees 2,880,700 options to
purchase Common Shares under the 1995 Stock Incentive Plan. In 2002, the
Compensation Committee granted 475,000 options to purchase Common Stock under
the 2002 Stock Incentive Plan, which was approved by the shareholders at the
2002 Annual General Meeting. Awards granted to the Company's Designated
Executive Officers during 2002 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
2002 grants were appropriate and in the best interests of the Company.
The Company does not have a long-term cash bonus plan in effect and
currently intends to rely on the 2002 Stock Incentive Plan as the sole means of
long-term compensation, believing compensation in the form of share ownership
increases long-term value for the shareholders while compensating individual
employees for superior performance.
III. Deductibility Cap On Executive Compensation
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), limits the ability of a publicly-held company to take a tax deduction
for annual compensation in excess of $1 million paid to its chief executive
officer or to any of its four other most highly paid executive officers.
However, compensation is exempt from this limit if it qualifies as
"performance-based compensation." To preserve this deduction, the Company has
designed its incentive plans to constitute "performance-based compensation" and
not be counted toward the $1 million limit. However, the 2002 Stock Incentive
Plan does allow for the Compensation Committee, in its sole discretion, to grant
awards under the plans which do not constitute "performance-based compensation."
In the event that certain awards are granted which are not intended to
constitute "performance-based compensation," the awards will not be subject to
the share limitations applicable to a single individual. Although the
Compensation Committee will consider deductibility under section 162(m) with
respect to the compensation arrangements for executive officers, deductibility
will not be the sole factor used in determining appropriate levels or methods of
compensation. Since Company objectives may not always be consistent with the
requirements for full deductibility, the Company and
12
the subsidiaries may enter into compensation arrangements under which payments
would not be deductible under section 162(m).
IV. Chief Executive Officer Compensation
In 2002, 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
non-qualified stock options as set forth in that section. The Compensation
Committee also approved a $1,600,000 cash payment to Mr. Taranto under the
Executive Performance Annual Incentive Plan for fiscal year 2002 (see "Summary
Compensation Table" and "Annual Compensation" above). This performance-based
award was calculated as a function of the Company's actual operating earnings
per share in 2002 in accordance with a formula previously established by the
Compensation Committee.
Kenneth J. Duffy John R. Dunne Martin Abrahams
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed with management, which has
primary responsibility for the financial statements, and with Pricewaterhouse
Coopers LLP, the Company's independent auditor, the audited financial statements
for the year ended December 31, 2002 (the "Audited Financial Statements"). In
addition, the Audit Committee has discussed with PricewaterhouseCoopers LLP, the
matters required to be discussed by Statement on Auditing Standards No. 61. The
Audit Committee also has discussed with management of the Company and with
PricewaterhouseCoopers LLP such other matters and received such assurances from
them as the Committee deemed appropriate.
The Audit Committee has received the written disclosures and the letter
from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1, and has discussed with that firm its independence. The Audit
Committee has considered whether the performance by PricewaterhouseCoopers LLP
of the non-audit services disclosed under "Financial Information Systems Design
and Implementation Fees" and "All Other Fees" is compatible with maintaining
their independence.
Based on the foregoing review and discussions and relying thereon, the
Audit Committee has recommended to the Company's Board of Directors the
inclusion of the Audited Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002.
The fees billed to the Company by PricewaterhouseCoopers LLP and its
worldwide affiliates in 2002 are as follows:
Audit Fees: The aggregate fees billed for professional services rendered by
the independent auditors for the audit of the Company's financial
statements as of and for the year ended December 31, 2002 and the review of
the financial statements included in the Company's Quarterly Reports on
Form 10-Q for the year were $1,120,818.
Financial Information Systems Design and Implementation Fees: The aggregate
fees billed for financial information systems design and implementation
rendered by the independent auditors during 2002 were $0.
All Other Fees: The aggregate fees billed by the independent auditors
during 2002 for non-audit and non-information systems related services were
$525,076, of which $291,944 was attributable to tax compliance and none of
which was attributable to tax preparation.
PricewaterhouseCoopers LLP used no leased employees on the Company's audit
engagement.
Martin Abrahams Kenneth J. Duffy John R. Dunne
13
PERFORMANCE GRAPH
The following Performance Graph compares cumulative total shareholder
returns on the Common Shares (assuming reinvestment of dividends) from October
3, 1995 (when the Company's shares were first listed on the NYSE) through
December 31, 2002, with the cumulative total return of the Standard & Poor's 500
Index and the Standard & Poor's Insurance (Property and Casualty) Index.
COMPARISON OF 87 MONTH CUMULATIVE TOTAL RETURN*
AMONG EVEREST RE GROUP, LTD., THE S&P 500 INDEX
AND THE S&P PROPERTY & CASUALTY INSURANCE INDEX
[LINE CHART OMITTED]
Cumulative Total Return*
--------------------------------------------------------------------
10/03/1995 12/95 12/96 12/97 12/98 12/99 12/00 12/01 12/02
EVEREST RE GROUP, LTD. 100 119 147 213 202 117 376 373 293
S&P 500 100 106 130 174 224 271 246 217 169
S&P INSURANCE (PROPERTY-CASUALTY) 100 106 129 188 176 131 204 188 167
* $100 INVESTED ON 10/3/95 IN STOCK OR ON 9/30/95
IN INDEX -- INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL YEAR ENDING DECEMBER 31.
14
RETIREMENT PLAN
All the executive officers of the Company, with the exception of Mr.
Bennett, 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. As an employee of
Bermuda Re, Mr. Bennett is not eligible to participate in the Retirement Plan
and Bermuda Re does not maintain a defined benefit retirement plan. The
Retirement Plan is a tax-qualified plan that determines benefits under a formula
that takes into account a participant's years of continuous service and final
average earnings with Everest Re and certain affiliates, including during the
period of affiliation with the Prudential Insurance Company of America
("Prudential"). The Supplemental Plan is a non-qualified plan that provides
benefits that would otherwise be provided under the Retirement Plan formula but
for the application of certain limitations on tax-qualified benefits under the
Code. The Retirement Plan and the Supplemental Plan are similar to the
tax-qualified and supplemental pension plans of Prudential in which the
executive officers and other employees of the Company and Everest Re
participated prior to the Company's initial public offering. The following table
shows the estimated annual pension benefits payable at normal retirement age to
a participant under the Retirement Plan and the Supplemental Plan who attains
the earnings and service classifications indicated under the plans.
FINAL AVERAGE EARNINGS YEARS OF CONTINUOUS SERVICE
---------------------- -------------------------------
5 10 15 20 25 30 35
-------- -------- -------- --------- ---------- ---------- ----------
$ 250,000 $ 23,571 $ 47,142 $ 70,713 $ 94,284 $ 117,855 $ 129,806 $ 141,756
300,000 28,571 57,142 85,713 114,284 142,855 157,306 171,756
350,000 33,571 67,142 100,713 134,284 167,855 184,806 201,756
400,000 38,571 77,142 115,713 154,284 192,855 212,306 231,756
450,000 43,571 87,142 130,713 174,284 217,855 239,806 261,756
500,000 48,571 97,142 145,713 194,284 242,855 267,306 291,756
750,000 73,571 147,142 220,713 294,284 367,855 404,806 441,756
1,000,000 98,571 197,142 295,713 394,284 492,855 542,306 591,756
1,250,000 123,571 247,142 370,713 494,284 617,855 679,806 741,756
1,500,000 148,571 297,142 445,713 594,284 742,855 817,306 891,756
1,750,000 173,571 347,142 520,713 694,284 867,855 954,806 1,041,756
2,000,000 198,571 397,142 595,713 794,284 992,855 1,092,306 1,191,756
2,250,000 223,571 447,142 670,713 894,284 1,117,855 1,229,806 1,341,756
2,500,000 248,571 497,142 745,713 994,284 1,242,855 1,367,306 1,491,756
2,750,000 273,571 547,142 820,713 1,094,284 1,367,855 1,504,806 1,641,756
3,000,000 298,571 597,142 895,713 1,194,284 1,492,855 1,642,306 1,791,756
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, which has
been terminated, the Executive Performance Annual Incentive Plan and, for
participants who held positions equivalent to or senior to that of department
vice president when that position existed, cash payments under the Company's
Annual Incentive Plan. With respect to cash payments made under the Annual
Incentive Plan through December 31, 1999, "earnings" did not include amounts in
excess of 50% of salary or $275,000, whichever was greater. Moreover, "earnings"
does not include any other compensation set forth in the Summary Compensation
Table. Final average earnings and earnings will be determined under the
Supplemental Plan in the same manner as under the Retirement Plan, except that a
participant's earnings are not subject to the limitations under the Code.
"Continuous service" under the Retirement Plan and Supplemental Plan will be the
number of years and months worked for Everest Re and certain affiliates,
including during the period of affiliation with Prudential.
15
The years of continuous service for Mr. Taranto, Mr. Gallagher, Mr. Limauro
and Mr. Shoemaker to be taken into account under the Retirement Plan and
Supplemental Plan (rounded to the nearest year), as of April 1, 2003, are 8, 28,
30 and 2, respectively. Final average earnings for Mr. Taranto, Mr. Gallagher,
Mr. Limauro and Mr. Shoemaker to be taken into account as of April 1, 2003 are
$2,178,931, $681,846, $333,883 and $164,405, respectively.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS--MR. TARANTO
On July 15, 1998, the Company entered into an employment agreement with Mr.
Taranto (the "Employment Agreement"). The Employment Agreement became effective
on January 1, 2000 and was amended on April 20, 2001 to extend his term of
employment from December 31, 2001 to March 31, 2004 unless sooner terminated in
accordance with its terms. The Employment Agreement provides for a base salary
of $1,000,000 per year and states that Mr. Taranto is eligible to participate in
the Executive Performance Annual Incentive Plan. Upon entering into the
Employment Agreement in July 1998, Mr. Taranto received non-qualified options
under the Company's 1995 Stock Incentive Plan to purchase 150,000 Common Shares
as a sign-on bonus. Upon execution of the April 20, 2001 amendment extending the
term of his employment, he was granted non-qualified options to purchase 200,000
Common Shares under the same plan.
In connection with the restructuring of the Company in February 2000, Mr.
Taranto's Employment Agreement was amended to state that he would be the
Chairman and Chief Executive Officer of the Company after the restructuring and
that he would provide services to the Company after the restructuring that were
comparable to those required under his Employment Agreement prior to the
restructuring. As a result, the Company and Everest Holdings are both parties to
the Employment Agreement and have co-extensive rights, powers, duties and
obligations. The February 2000 amendment made other conforming changes to the
Employment Agreement to reflect the restructuring. When the Company established
Everest Global as a new Delaware subsidiary to perform administrative and
back-office functions for the Company and its insurance subsidiaries, Mr.
Taranto became an employee of that company and Everest Global became a party to
the Employment Agreement.
If the Company terminates Mr. Taranto's employment for "due cause" or if he
voluntarily terminates his employment other than for "good reason" (as defined
in the Employment Agreement), Mr. Taranto will be entitled to his base salary
due him through the date of termination. If the Company terminates Mr. Taranto's
employment other than for due cause, or if he voluntarily terminates his
employment for good reason, the Company will be obligated to pay him, in
addition to all base salary accrued through the date of termination, (i) the
aggregate amount of base salary from the date of termination and through the end
of the term and (ii) the aggregate bonus amounts due under the appropriate bonus
plans or programs through the end of the term.
In connection with the execution of the Employment Agreement, the Company
and Mr. Taranto also entered into a Change of Control Agreement dated as of July
15, 1998. The Change of Control Agreement provides that if within one year after
the occurrence of a material change (as defined in the agreement) Mr. Taranto
terminates his employment for any reason, or if the Company terminates Mr.
Taranto's employment for any reason other than for due cause (as defined in the
agreement), then (a) all of Mr. Taranto's outstanding stock options granted
under the Company's stock plans shall immediately vest and become exercisable;
(b) Mr. Taranto shall receive a cash payment equal to the lesser of (i) 2.99
multiplied by Mr. Taranto's annual compensation for the most recent taxable year
ending prior to the date of the material change less the value of Mr. Taranto's
gross income in the most recent taxable year ending prior to the date of a
material change attributable to Mr. Taranto's exercise of stock options, stock
appreciation rights and other stock-based awards granted Mr. Taranto by the
Company and (ii) 2.99 multiplied by Mr. Taranto's "annualized includible
compensation for the base period" as that phrase is defined in Section 280G(d)
of the Code; (c) Mr. Taranto shall continue to be covered under the Company's
medical and dental insurance plans for a period of three years from the date of
termination; and (d) Mr. Taranto shall receive "Special Retirement Benefits" in
an amount that will equal the retirement benefits he would have received had he
continued in the employ of the Company for three years following his termination
under the Everest Reinsurance Retirement Plan and any supplemental, substitute
or successor retirement plans adopted by the Company. In the event that the
benefits Mr. Taranto receives under the Change of Control Agreement cause Mr.
Taranto to receive a "Parachute Payment" within the meaning of Section 280G of
the
16
Code, Mr. Taranto's benefits will be reduced to an amount that is one dollar
less than the amount that would cause a Parachute Payment. If an award made
under the Change of Control Agreement nevertheless results in an assessment
against Mr. Taranto of a "Parachute Tax" pursuant to Section 4999 of the Code,
Mr. Taranto shall be entitled to receive an additional amount of money that
would put him in the same net tax position had no Parachute Tax been incurred.
The Change of Control Agreement will terminate on the earliest of (i) one year
following a material change; (ii) termination by Mr. Taranto of his employment
with the Company under circumstances not following a material change; (iii) the
Company's termination of Mr. Taranto's employment for due cause; or (iv) March
31, 2004, or any date thereafter, with 60 days written notice.
In connection with the restructuring, Mr. Taranto entered into an amendment
to his Change of Control Agreement which provides that transactions with respect
to the Company after the restructuring will trigger benefits under the agreement
to the same extent as transactions with respect to Everest Holdings prior to the
restructuring. Changes were also made in the Change of Control Agreement to take
into account the establishment of Everest Global and Mr. Taranto's employment by
that company.
EMPLOYMENT AGREEMENT--MR. BENNETT
On April 24, 2002, Bermuda Re entered into an employment agreement with Mr.
Bennett under which he is to serve as the Managing Director and Chief Executive
Officer of Bermuda Re from May 1, 2002 until May 1, 2003. The agreement provides
for an annual salary of $270,400, plus $5,000 per month as a housing allowance.
Mr. Bennett is also eligible to participate in the Company's Annual Incentive
Plan, which is entirely discretionary in nature and which may be amended or
terminated by the Company at any time. He is also a participant in the Senior
Executive Change of Control Plan. (See "Other Change of Control Arrangements").
Pursuant to the employment agreement, Mr. Bennett was granted options under
the Company's 1995 Stock Incentive Plan to purchase 20,000 Common Shares. The
options will vest ratably over a five-year period. Also pursuant to the
employment agreement, Mr. Bennett is receiving medical insurance, dental
insurance and group life insurance and is participating in a qualified defined
contribution plan.
If Bermuda Re terminates Mr. Bennett's employment prior to May 1, 2003 for
reasons other than misconduct or a breach of Bermuda Re's policies, a separation
payment equivalent to one year's salary will be made and a reasonable allowance
will be provided to move his personal possessions back to the United Kingdom.
Bermuda Re may terminate Mr. Bennett's employment for cause as defined in the
employment agreement at any time during the term of the agreement without prior
notice.
OTHER CHANGE OF CONTROL ARRANGEMENTS
The Company established a Senior Executive Change of Control Plan (the
"Change of Control Plan"), effective September 28, 1998. The Change of Control
Plan is administered by the Compensation Committee, which selects participants
from among the senior executives of the Company and its subsidiaries. Among
others, the Compensation Committee has selected Mr. Gallagher, Mr. Limauro and
Mr. Bennett 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 Mr. Limauro and Mr. Bennett 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; and (e)
the participant shall receive "special retirement
17
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 Mr. Limauro and Mr. Bennett, the period is 2 years.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 2002, the Compensation Committee was comprised of Kenneth J. Duffy,
Martin Abrahams and John R. Dunne, all of whom are Non-Employee Directors of the
Company and none of whom is or has been an officer of the Company.
CERTAIN TRANSACTIONS WITH DIRECTORS
One of the Company's directors, William F. Galtney, Jr., is the President
of Gallagher Healthcare Insurance Services, Inc. ("GHIS"), a wholly-owned
subsidiary of Arthur J. Gallagher & Co. ("Gallagher"). In 2002, Everest Re paid
brokerage commissions to Gallagher of $1,181,870.
In 2002, GHIS entered into Program Administrator Agreements with Everest
National and Mt. McKinley Managers ("the Everest Companies") as underwriting
manager for Everest Indemnity. Under these agreements, policies are placed by
GHIS with the Everest Companies and reinsured by Transatlantic Reinsurance
Company, which then reinsures up to 100% of the assumed risk with Sunrise
Professional Indemnity, Ltd., a Cayman reinsurance company owned by WFG
Interests, LLC, which is owned by Mr. Galtney. Under these agreements, in 2002,
the Company recorded $85,483,571 in gross written premiums and paid related
commissions and fees of $6,795,528 to GHIS.
GHIS was the producing agent for workers' compensation, general liability
and automobile risks written by the Everest Companies for the Rural/Metro
Corporation. In 2002, the Company recorded $19,764,672 in gross written premiums
in connection with this program and paid related commissions to GHIS of
$932,545.
Gallagher Bassett Services, Inc. ("Gallagher Bassett"), a Gallagher
affiliate, provides claims services for the Rural Metro program mentioned above
and for Everest Indemnity's All Risks program. In 2002, the Company paid fees to
Gallagher Basset of $434,268.
In 2003, Everest Indemnity, through Mt. McKinley Managers, expects to write
a liability program for which J.P. Woods Co., Inc., a Gallagher affiliate, will
receive an estimated brokerage fee of $900,000.
Everest National had a business relationship with WorkCare Northwest, Inc.
("WorkCare Northwest"), a company in which Edward B. Galtney, William Galtney's
brother, holds a 50% interest. In 2002, Everest National paid commissions in the
amount of $828,720 to WorkCare Northwest for insurance agency services as a
program administrator. This program was cancelled as of July 1, 2001 and is
currently in run-off. It is expected that no material commissions will be paid
to WorkCare Northwest in 2003.
PROPOSAL NO. 2--APPOINTMENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 2003 AND THE AUTHORIZATION OF THE BOARD OF DIRECTORS ACTING
BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS TO SET THE FEES FOR THE
INDEPENDENT AUDITORS. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY
OTHERWISE IN THEIR PROXIES.
The Company's independent auditors have been appointed each year at the
Annual General Meeting of Shareholders pursuant to the Board's recommendation,
which in turn was based on the recommendation of the Audit Committee. For the
2003 Annual General Meeting, and in accordance with the Sarbanes-Oxley Act, the
Audit Committee, has evaluated the performance and independence of
PricewaterhouseCoopers, LLC and has recommended to the shareholders their
appointment as the Company's independent auditors for the year ending December
31, 2003. In making its recommendation, the Audit Committee reviews both the
audit scope and estimated fees for professional
18
services for the coming year. Representatives of PricewaterhouseCoopers LLP will
be present at the 2003 Annual General Meeting, will have the opportunity to make
a statement if they so desire and will be available to respond to appropriate
questions from shareholders.
PROPOSAL NO. 3--APPROVAL OF THE EVEREST RE GROUP, LTD.
2003 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
EVEREST RE GROUP, LTD. 2003 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN TO BE
EFFECTIVE UPON SHAREHOLDER APPROVAL. PROXIES GIVEN BY SHAREHOLDERS OF RECORD
WILL BE SO VOTED UNLESS THE SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
PROXIES GIVEN BY BENEFICIAL HOLDERS TO SHAREHOLDERS OF RECORD MAY NOT BE SO
VOTED UNLESS BENEFICIAL HOLDERS SPECIFY A VOTE FOR APPROVAL IN THEIR PROXIES.
This summary of the material terms of the Plan is qualified in its entirety
by the full text of the Plan, a copy of which is set forth as Appendix A to this
Proxy Statement.
DESCRIPTION OF PLAN
GENERAL
On February 25, 2003, the Board adopted the Plan, subject to approval by
the Company's shareholders. The Plan will become effective immediately upon
approval by the shareholders and, if approved, will continue in effect until
terminated by the Board. The Board has approved the Plan, and is recommending it
to the shareholders for their approval, because the Board believes it is
important for non-employee directors to have an equity interest in the Company.
The purpose of the Plan is to benefit the Company, its subsidiaries, and its
shareholders by enhancing the Company's ability to attract and retain
experienced and knowledgeable directors and to encourage such directors to
increase their proprietary interest in the Company through ownership of shares.
The total number of shares reserved for issuance under the Plan is 500,000.
Any shares allocated to an award under the Plan that expires, lapses, is
forfeited or terminated for any reason without issuance of the shares (whether
or not cash or other consideration is paid to the participant in respect of such
shares) will be available for new awards to be granted under the Plan. The
shares with respect to which awards may be made under the Plan may be shares
that are currently authorized but unissued, or to the extent permitted by
applicable law, currently held or subsequently acquired by the Company including
shares purchased in the open market or in private transactions.
The Plan provides for the grant of non-qualified stock options ("Options")
and retainer awards ("Retainer Awards") to non-employee directors. As of March
1, 2003, four directors of the Company were eligible to receive awards under the
Plan. Upon Mr. Weber's election as a director at the Annual General Meeting, he
also will become eligible to receive awards under the Plan.
PLAN ADMINISTRATION
The Plan will be administered by a committee of the Board (the
"Committee"), the members of which shall be designated by the Board. The
Committee shall initially be the full Board. If the Board designates a Committee
that is less than the full Board, the Committee shall not include directors
eligible to receive awards under the Plan. The Committee has the authority to
grant and amend any type or combination of types of awards permitted under the
Plan.
The Committee may delegate all or any portion of its responsibilities or
powers under the Plan to persons selected by it, provided, however, that the
Committee may not delegate discretionary authority with respect to substantial
decisions or functions regarding the Plan or awards.
STOCK OPTIONS
The Committee may grant Options to non-employee directors to purchase
shares. The purchase price of shares under each Option must be based on the fair
market value of a share on the date the Option is granted. Options grant-
19
ed under the Plan will be exercisable in accordance with the terms established
by the Committee. The full purchase price of each share purchased upon the
exercise of any Option must be paid at the time of exercise. No more than 10,000
shares may be issued for Options to any one eligible director in any calendar
year.
The Committee, in its discretion, may impose such conditions, restrictions
and contingencies on shares acquired pursuant to the exercise of an Option as
the Committee determines to be desirable. The number of shares subject to an
Option and any other restrictions that are deemed appropriate by the Committee
for a particular award to particular eligible directors, or in particular
circumstances, will be included in the individual award document reflecting the
grant of the award to the recipient and setting forth specific terms and
conditions of the Option (the "Award Agreement").
Except as otherwise provided by the Committee, if a director's date of
termination occurs for a reason other than death, disability or removal for
cause, the holder of the stock option may exercise the stock option at any time
within a period of one year after such termination to the extent the stock
option was exercisable on the date of such termination. If the director's date
of termination occurs by reason of death or disability, the director (or estate
as the case may be) may exercise the stock option at any time within a period of
three years after the date of such termination to the extent the stock option
was exercisable on the date of such termination. An Option shall expire
immediately upon a director's removal for cause. In no event, however, may any
stock option be exercised by any person after its expiration date.
RETAINER AWARDS
Each Plan year, the non-employee directors shall be entitled to elect to be
granted a stock-based "Retainer Award" for the year in lieu of receiving all or
a portion of their applicable retainer fees in cash. The Retainer Award shall be
in the form of shares having a fair market value equal to the retainer fee that
would otherwise be paid in cash. No more than 5,000 shares may be issued for
Retainer Awards to any one eligible director in any calendar year.
If a director becomes an eligible director during a Plan year on a date
other than the first day of the Plan year, the director shall be entitled to
elect to be granted a Retainer Award for the remainder of the year in lieu of
receiving all or a portion of the applicable retainer fees which would otherwise
be paid in cash.
Shares awarded as Retainer Awards shall be fully vested as of the date of
grant.
PAYMENT PROVISIONS
The Plan permits the payment of the Option exercise price in cash, or, at
the Committee's discretion, by the tender, by actual delivery or by attestation,
of the equivalent value of shares valued at their fair market value, or with a
combination of such shares and cash, subject to and in compliance with
applicable law. However, shares may only be used for such purpose, if they have
been held by the participant for at least six months (or such other period as
may be required by the Committee) and meet any other requirements established by
the Committee.
CHANGE IN CONTROL
In the event of a "Change in Control" of the Company, as discussed below,
any outstanding Options under the Plan shall fully vest on the date of such
Change in Control. In addition, the Committee may, in its sole discretion,
recommend that the Board take any of the following actions as a result, or in
anticipation, of any such event to assure fair and equitable treatment of
participants:
o offer to purchase any outstanding award made pursuant to the Plan from
the holder for its equivalent cash value, as determined by the
Committee, as of the date of the Change of Control; or
o make adjustments or modifications to outstanding Awards as the Committee
deems appropriate to maintain and protect the rights and interests of
participants following such Change of Control.
Any such action approved by the Board shall be conclusive and binding on
the Company and all participants.
For purposes of the Plan, a Change of Control shall mean the occurrence of
any of the following:
20
o A tender offer or exchange offer the effect of which is to take over and
control the affairs of the Company, and such offer is consummated for
the ownership of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's then
outstanding voting securities.
o The Company is merged or consolidated with another corporation and, as a
result, less than seventy-five percent (75%) of the outstanding voting
securities of the resulting corporation shall then be owned in the
aggregate by the former shareholders of the Company other than
affiliates.
o The Company transfers substantially all of its assets to another
corporation or entity that is not its wholly owned subsidiary.
o Any person is or becomes the beneficial owner, directly or indirectly,
of securities of the Company representing twenty-five percent (25%) or
more of the combined voting power of the Company's then outstanding
securities, and the effect of such ownership is to take over and control
the affairs of the Company.
o As the result of a tender offer, merger, consolidation, sale of assets,
or contested election, or any combination of such transactions, the
persons who were members of the Board immediately before the transaction
cease to constitute at least a majority thereof.
AMENDMENT AND TERMINATION
The Board may at any time amend, suspend or discontinue the Plan, in whole
or in part, provided that no such amendment shall increase any of the share
limitations nor shall it permit the Committee to grant an Option with an
exercise price below fair market value on the date of grant. The Committee may
at any time alter or amend any or all Award Agreements under the Plan to the
extent permitted by law, but no such alteration or amendment shall impair the
rights of any holder of an award without the holder's consent.
ADJUSTMENTS
The Plan contains provisions relating to adjustments of the terms of
outstanding awards to reflect changes in the Company's capitalization or shares
or the occurrence of specified events. The number of shares that may be acquired
under the Plan, the maximum number of shares that may be delivered pursuant to
awards, and such other terms as are necessarily affected by such specified
events are subject to adjustment in the event of a stock dividend, stock split,
recapitalization, merger, consolidation (whether or not the Company is the
surviving corporation), reorganization, combination or exchange of shares or
similar events.
TRANSFERABILITY
Except as otherwise provided by the Committee, awards under the Plan will
only be transferable to the extent designated by the participant by will or by
laws of descent and distribution.
REGISTRATION
Following approval by the shareholders, the Company intends to register the
shares issued under the Plan with the SEC.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED UPON
Each of the non-employee directors of the Company and the nominee to the
Board has a direct interest in the approval of the Plan, which will make
additional Common Shares available to non-employee directors.
UNITED STATES INCOME TAX CONSEQUENCES OF THE PLAN
The following paragraphs provide a summary of the material U.S. federal
income tax consequences of the Plan based upon current laws and regulations.
These laws and regulations are subject to change. This summary does not address
state, local or foreign tax consequences to which a participant in the Plan may
be subject. The Company suggests that participants consult with their individual
tax advisors to determine the applicability of the tax rules to the awards
granted to them under the Plan.
21
NON-QUALIFIED STOCK OPTIONS
The grant of a non-qualified stock option will not result in taxable income
to the participant. Except as described below, the participant will realize
ordinary income at the time of exercise in an amount equal to the excess of the
fair market value of the shares acquired over the exercise price for those
shares. Gains or losses realized by the participant upon disposition of such
shares will be treated as capital gains and losses, with the basis in such
shares equal to the fair market value of the shares at the time of exercise.
The exercise of a non-qualified stock option through the delivery of
previously acquired stock will generally be treated as a non-taxable, like-kind
exchange as to the number of shares surrendered and the identical number of
shares received under the option. That number of shares received will take the
same basis and, for capital gains purposes, the same holding period as the
shares that are surrendered. The value of the shares received upon such an
exchange that are in excess of the number of shares surrendered will be
includible as ordinary income to the participant at the time of exercise. The
excess shares will have a new holding period for capital gain purposes and a
basis equal to the value of such shares determined at the time of exercise.
RETAINER AWARDS
A participant who has elected to receive a Retainer Award in lieu of
receiving retainer fees in cash will realize ordinary income at the time of
grant in an amount equal to the then fair market value of those shares. Gains or
losses realized by the participant upon disposition of such shares will be
treated as capital gains and losses, with the basis in such shares equal to the
fair market value of the shares at the time of grant.
TAX DEDUCTION
The Company is not subject to U.S. income taxes. However, if an award is
granted to a participant employed by a subsidiary that is a U.S. taxpayer, the
subsidiary will be entitled to a deduction equal to the amount of income
includible in the participant's income.
CHANGE IN CONTROL
Any acceleration of the vesting of an Option award under the Plan in the
event of a Change in Control of the Company may cause part or all of the
consideration involved to be treated as an "excess parachute payment" under the
Code, which may subject the participant to a 20% excise tax and preclude
deduction by a subsidiary.
PLAN BENEFITS
The following table sets forth grants of options made under the Plan, which
shall be effective upon the approval of the Plan by the shareholders:
NEW EVEREST RE GROUP, LTD. 2003 NON-EMPLOYEE DIRECTOR
EQUITY COMPENSATION PLAN BENEFITS
NUMBER OF SHARES AWARDED AND
POSITION DOLLAR VALUE ($) UNDERLYING OPTIONS GRANTED
-------- ---------------- ----------------------------
All current executive officers, 0 0
as a group
All current directors who are not 0 0
executive officers, as a group
Each nominee for director who 0 0
is not a current director
All employees who are not current 0 0
executive officers, as a group
22
INFORMATION REGARDING PLANS AND OTHER ARRANGEMENTS
NOT SUBJECT TO SECURITY HOLDER ACTION
The following table summarizes, as of December 31, 2002, information about
compensation plans under which securities of the Company are authorized for
issuance:
EQUITY COMPENSATION PLANS
NUMBER OF SECURITIES
REMAINING AVAILABLE
NUMBER OF SECURITIES FOR FUTURE ISSUANCE
TO BE ISSUED UPON WEIGHTED-AVERAGE UNDER EQUITY
EXERCISE OF EXERCISE PRICE OF COMPENSATION PLANS
OUTSTANDING OPTIONS, OUTSTANDING OPTIONS, (EXCLUDING SECURITIES
WARRANTS AND RIGHTS WARRANTS AND RIGHTS REFLECTED IN COLUMN (A))
PLAN CATEGORY (A) (B) (C)
------------- ------------------- ------------------- ------------------------
Equity compensation plans 2,407,524 $41.23 3,566,645(1)
approved by security holders
Equity compensation plans not 96,000(2) $36.22 -0-
approved by security holders
Total 2,503,524 $41.09 3,566,645
----------
(1) Includes shares available under the Everest Re Group, Ltd. 2002 Stock
Incentive Plan, which permits the granting of stock options, stock
appreciation rights, restricted stock and stock awards. Also includes
shares available under the Everest Re Group, Ltd. 1995 Stock Option Plan
for Non-Employee Directors (formerly known as the Everest Reinsurance
Holdings, Inc. 1995 Stock Option Plan for Non-Employee Directors).
(2) As of December 31, 2002, the Company had in place the following individual
compensation arrangements with non-employee directors that were not
approved by Company shareholders:
On April 1, 1999, each of the non-employee directors was granted a stock
option award covering 6,500 Common Shares at an exercise price of $30.625
per share, which was the fair market value of the shares on the date of
grant. The options vest ratably over three years.
On February 23, 2000, each of the non-employee directors was granted a
stock option award covering 7,500 Common Shares at an exercise price of
$25.3438 per share, which was the fair market value of the shares on the
date of grant. The options vest ratably over three years.
On September 21, 2001, each of the non-employee directors was granted a
stock option award covering 10,000 Common Shares at an exercise price of
$48.01 per share, which was the fair market value of the shares on the date
of grant. The options vest ratably over three years.
MISCELLANEOUS--GENERAL MATTERS
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive 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 SEC
and the NYSE. Executive officers, directors and greater than ten percent
shareholders are required by SEC regulation to furnish the Company with copies
of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of the forms it has
received and written representations that no other reports were required, the
Company believes that, with the exception of Mr. Shoemaker, all of its
Designated Executive Officers, directors and greater than ten percent beneficial
owners have filed with the SEC on a timely
23
basis all required forms with respect to transactions during fiscal year 2002.
Keith Shoemaker was late in his initial Form 3 filing and in filing a Form 4 to
report the September 26, 2002 option grant.
SHAREHOLDER PROPOSALS FOR THE 2004 ANNUAL GENERAL MEETING OF SHAREHOLDERS
To be considered for inclusion in the Company's Proxy Statement relating to
the 2004 Annual General Meeting of Shareholders, a shareholder proposal must be
received by the Secretary of the Company in proper form at the Company's
registered office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda
no later than December 13, 2003.
The proxy solicited by the Board relating to the 2004 Annual General
Meeting of Shareholders shall confer discretionary authority to vote on a
shareholder proposal if the Secretary of the Company receives notice of that
proposal after February 26, 2004.
Shareholders who intend to nominate persons for election as directors at
general meetings must comply with the advance notice procedures set forth in the
Bye-Laws of the Company in order for such nominations to be properly brought
before that general meeting. These advance notice procedures require that
written notice of a shareholder's intent to make such a nomination at the 2004
Annual General Meeting of Shareholders must be received by the Secretary of the
Company between November 13, 2003 and December 13, 2003.
PROXY SOLICITATIONS
The expense of this 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 without additional compensation. In addition, Georgeson Shareholder
Communications, Inc. will provide solicitation services to the Company for a fee
of approximately $5,000 plus out-of-pocket expenses. The firm will solicit
proxies by personal interview, telephone, telegraph and mail. The Company will,
on request, reimburse shareholders of record who are brokers, dealers, banks or
voting trustees, or their nominees, for their reasonable expenses in sending
proxy materials and annual reports to the beneficial owners of the shares they
hold of record.
TRANSFER AGENT AND REGISTRAR
The Company has appointed EquiServe Trust Company, N.A. to serve as
transfer agent, registrar and dividend paying agent for the Common Shares.
Correspondence relating to any share accounts or dividends should be addressed
to:
EquiServe Trust Company, N.A.
Shareholder Services
P.O. Box 43010
Providence, Rhode Island 02940-3010
(800) 446-2617
All transfers of certificates for Common Shares should also be mailed to
the above address.
By Order of the Board of Directors
Joseph A. Gervasi
April 11, 2003 SECRETARY
24
APPENDIX A
EVEREST RE GROUP, LTD.
2003 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE
The Everest Re Group, Ltd. 2003 Non-Employee Directors Equity Compensation
Plan (the "Plan") has been established by Everest Re Group, Ltd., a Bermuda
company (the "Company"), to promote the interests of the Company and its
shareholders by enhancing the Company's ability to attract and retain the
services of experienced and knowledgeable directors and by encouraging such
directors to acquire an increased proprietary interest in the Company through
the ownership of Common Shares. The Common Shares can be acquired through grants
of stock in lieu of cash-based retainer fees and through grants of Option
Awards.
SECTION 2. DEFINITIONS
The following terms, used herein, shall have the meaning specified:
(a) "AWARD" means the Retainer Award or an Option Award granted to any
Eligible Director under the Plan.
(b) "AWARD DATE" means the date on which an Award under the Plan is
granted.
(c) "AWARD AGREEMENT" means an agreement described in Section 8 hereof
entered into between the Company and a Participant, setting forth the terms and
conditions applicable to the Award granted to the Participant.
(d) "BOARD" means the Board of Directors of the Company as it may be
comprised from time to time.
(e) Unless otherwise defined in an Award Agreement, "CAUSE" shall mean any
one of the following: (i) the willful engaging by the Participant in continuing
or repeated conduct which is demonstrably and materially injurious to the
Company or its affiliates, (ii) commission by the Participant of an act that
involves theft, fraud or dishonesty (whether or not involving the Company, its
affiliates or Participant's duties at or relating to the Company or its
affiliates), (iii) the Participant's continuing or repeated material failure to
abide by or comply with the internal policies or procedures of the Company or
its affiliates (as may be applicable to Directors) or any non-compete or
confidentiality agreement with the Company or its affiliates, or (iv) conviction
of any crime that constitutes a felony (whether or not involving the Company,
its affiliates or the Participant's duties at or relating to the Company or its
affiliates).
(f) "CHANGE IN CONTROL" shall be as defined in Section 10.
(g) "CODE" means the Internal Revenue Code of 1986, and any successor
statute, and the regulations promulgated thereunder, as it or they may be
amended from time to time.
(h) "COMMITTEE" means the Committee as defined in Section 12.
(i) "COMMON SHARES" means common shares of the Company, par value $.01 per
share, or any security of the Company issued in substitution, exchange or lieu
thereof.
(j) "DATE OF TERMINATION" means the last day on which a Participant serves
as a Director.
(k) "DIRECTOR" means a member of the Board.
(l) "EFFECTIVE DATE" means the Effective Date as defined in Section 12(e).
(m) "ELIGIBLE DIRECTOR" means each Director who is not an Employee of the
Company.
(n) "EMPLOYEE" means officers and employees of the Company or a Subsidiary,
and excludes directors who are not also officers or employees of the Company or
a Subsidiary. "Employee" includes consultants and advisors
25
that provide bona fide services (other than services as a director) to the
Company or a Subsidiary, provided that such services are not in connection with
the offer or sale of securities of the Company or a Subsidiary in a
capital-raising transaction.
(o) "EXCHANGE ACT" means the Securities Exchange Act of 1934, and any
successor statute, as it may be amended from time to time.
(p) "EXERCISE PRICE" means a purchase or exercise price established by the
Committee at the time an Option is granted.
(q) "FAIR MARKET VALUE" means, unless otherwise provided in the Award
Agreement, the average of the highest and lowest sale price of Common Shares as
reported on the Composite Transaction Tape of the New York Stock Exchange (or on
such other exchange, if any, on which the Common Shares are traded) on the
relevant date, or if no sale of Common Shares are reported for such date, the
next preceding day for which there is a reported sale. If Common Shares are not
traded on any such exchange, Fair Market Value shall be as determined in the
Award Agreement, or as may be determined in good faith by the Committee. In no
event, shall the Fair Market Value be less than the prevailing par value of a
Common Share to be issued under the Plan.
(r) "OPTION" means a non-qualified stock option Award granted under the
Plan that entitles the Participant, for a certain period of time, to purchase
Common Shares at an Exercise Price established by the Committee.
(s) "PARTICIPANT" means any Eligible Director who has been granted an Award
pursuant to this Plan.
(t) "PLAN YEAR" shall mean each calendar year, with the first Plan Year
beginning on the Effective Date and ending on December 31, 2003.
(u) "RETAINER FEE" means the annual compensation fee for services to be
rendered as a Director to be paid to each Eligible Director as determined
annually by the Board in its sole discretion. Such fees are to be paid in cash,
or in stock at the election of each Eligible Director as provided in Section 5
of this Plan, on a quarterly basis (or other period as may be determined by the
Board). Cash payments will become payable as of the last business day of the
applicable Plan Year quarter. For Retainer Fees to be paid in the form of stock,
the payment date shall be the first business day of the next following Plan Year
quarter.
(v) "SECTION 16" means Section 16 of the Exchange Act, and any successor
statutory provision, and the rules promulgated thereunder, as it or they may be
amended from time to time.
(w) "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 common equity.
SECTION 3. ELIGIBILITY
Persons eligible for Awards under the Plan shall consist solely of Eligible
Directors.
SECTION 4. AWARDS
The Eligible Directors shall be eligible to receive any of the types of
Awards enumerated in Sections 5 or 6, either singly, in tandem or in combination
with other types of Awards, as provided herein or as the Committee may in its
sole discretion determine. Retainer Awards shall only be granted if the Eligible
Director elects to waive cash payment of all or a portion of the applicable
Retainer Fees.
SECTION 5. RETAINER AWARDS
(a) For each Plan Year, each Director who is an Eligible Director on the
first day of that Plan Year shall be entitled to elect to be granted a
stock-based "Retainer Award" for the year in lieu of receiving all or a portion
of the Retainer Fee in cash. The Retainer Award shall be in the form of Common
Shares having a Fair Market Value (as determined on the last day of the
applicable Plan Year quarter) equal to the Retainer Fee that would otherwise be
paid in cash.
26
(b) If a Director becomes an Eligible Director during a Plan Year, on a
date other than the first day of the Plan Year, he shall be entitled to elect to
be granted a Retainer Award for the remainder of the year in lieu of receiving
all or a portion of the applicable Retainer Fee. The Retainer Award shall be in
the form of Common Shares having a Fair Market Value (as determined on the last
day of the applicable Plan Year quarter) equal to the Retainer Fee, subject to a
pro-rata reduction to reflect the portion of the Plan Year prior to the date on
which he becomes an Eligible Director.
(c) Common Shares awarded under this subsection 5(a) shall be fully vested
as of the date of grant.
SECTION 6. DISCRETIONARY OPTION AWARDS.
(a) DISCRETIONARY OPTION AWARDS. The Committee may at any time, and from
time to time, in its sole discretion, grant an Eligible Director an Option Award
(a "Discretionary Option Award"), which shall be subject to the terms and
conditions set forth in subsections (b) and (c) below.
(b) TERMS OF OPTION AWARDS.
(1) An Option Award shall entitle the Director to purchase Common Shares at
an Exercise Price equal to the greater of: (i) 100% of the Fair Market
Value of Common Shares as of the Award Date; or (ii) the par value of a
Common Share.
(2) Unless otherwise provided by the Committee, the Option Award granted to
an Eligible Director shall become exercisable with respect to one-third
of the shares covered by the Option on the first anniversary of the
date of grant and with respect to an additional one-third of the shares
covered by the Option on each subsequent anniversary; provided,
however, that such portion of the Option shall become exercisable only
if such Director's Date of Termination does not occur prior to the
foregoing vesting dates. Notwithstanding any provision of the Plan to
the contrary, the foregoing vesting schedule shall be subject to
acceleration in the event of the Participant's death, disability (as
may be determined by the Committee) or in the event of a Change in
Control.
(3) An Option Award shall expire on the earlier of: (i) the ten-year
anniversary of the Award Date (ii) the three-year anniversary of the
Director's Date of Termination if termination occurs due to the
Director's death or disability, (iii) the Date of Termination, if such
termination of service occurs due to removal for Cause, or (iv) the
one-year anniversary of the Director's Date of Termination if the
termination of service occurs for reasons other than as listed in
subsections (ii), or (iii). No Option shall be exercisable following a
Director's Date of Termination except to the extent that the Option is
exercisable prior to, or becomes exercisable as of, such Date of
Termination.
(c) PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price of
an Option granted under this Section 6 shall be subject to the following:
(1) Subject to the following provisions of this subsection 6(c), the full
Exercise Price for Common Shares purchased on the exercise of an Option
shall be paid at the time of such exercise.
(2) The Exercise Price of Common Shares subject to the Option may be paid
in cash. At the discretion of the Committee, the purchase price may
also be paid by the tender, by actual delivery or by attestation, of
Common Shares owned for at least six months by the holder of the Option
(the value of such Common Shares shall be the Fair Market Value on the
date of exercise), through a combination of Common Shares and cash, or
through such other means as the Committee determines are consistent
with the Plan's purpose and subject to and in compliance with
applicable law. No fractional Common Shares will be issued or accepted.
SECTION 7. COMMON SHARES AND OTHER SHARE-BASED AWARDS AVAILABLE UNDER PLAN
(a) The Common Shares which may be issued pursuant to an Award under the
Plan may be shares currently authorized but unissued or currently held or
subsequently acquired by the Company or its subsidiaries, including shares
purchased in the open market or in private transactions.
27
(b) Subject to the adjustment provisions of Section 9 hereof, the maximum
aggregate number of shares that may be delivered to Participants and their
beneficiaries under the Plan shall be equal to 500,000 Common Shares and the
maximum number of shares that may be granted to any one Eligible Director in a
single calendar year shall be 10,000 shares pursuant to Option Awards and 5,000
shares pursuant to Retainer Awards.
(c) To the extent that any Common Shares covered by an Award are not
delivered to a Participant or beneficiary because the Award is forfeited or
canceled, or the Common Shares are not delivered because the Award is settled in
cash or used to satisfy the applicable tax withholding obligation, such shares
shall not be deemed to have been delivered for purposes of determining the
maximum number of Common Shares available for delivery under the Plan and they
shall again be available under the Plan.
(d) If the Exercise Price of any Option granted under the Plan is satisfied
by tendering Common Shares to the Company (by either actual delivery or by
attestation), only the number of Common Shares issued net of the Common Shares
tendered shall be deemed delivered for purposes of determining the maximum
number of Common Shares available for delivery under the Plan.
(e) For the purposes of computing the total number of Common Shares granted
under the Plan, each Option shall be deemed to be the equivalent of the maximum
number of Common Shares that may be issued upon exercise of the particular
Option. Additional rules for determining the number of Common Shares granted
under the Plan may be adopted by the Committee, as it deems necessary and
appropriate.
(f) No fractional Common Shares shall be distributed under the Plan and,
instead, the Fair Market Value of such fractional share shall be distributed in
cash, with the Fair Market Value determined as of the date the fractional share
would otherwise have been distributable. For purposes of the foregoing sentence,
if more than one Award or type of Award under the Plan is to be distributed in
Common Shares on a single date, such Common Shares shall be aggregated prior to
determining the number of whole and fractional shares to be distributed.
SECTION 8. AWARD AGREEMENTS
Each Option Award under the Plan shall be evidenced by an Award Agreement
setting forth the number of Common Shares subject to the Award and such other
terms and conditions applicable to the Award, as determined by the Committee,
not inconsistent with the terms of the Plan and applicable law. The Committee
may, but need not require that the Participant sign a copy of such document.
Such document is referred to as the Award Agreement regardless of whether any
Participant signature is required. In the event that the Committee requires that
the Participant execute and return the Award Agreement, no person shall have any
rights under the Award unless and until the Participant to whom such Award shall
have been granted shall have properly executed and delivered to the Company the
Award Agreement; provided, however, the execution and delivery of such an Award
Agreement shall not be a precondition to the granting of such Award. By
executing the Award Agreement, or submitting an option exercise form (whether or
not the Award Agreement required execution) a Participant shall be deemed to
have accepted and consented to any action taken under the Plan by the Committee,
the Board or their delegates.
(a) Award Agreements shall include the following terms:
(1) NON-ASSIGNABILITY. Unless otherwise specifically provided for by the
Committee, a provision that no Option, while vested or unvested, or any other
Award, while unvested, be assignable or transferable except by will or by the
laws of descent and distribution and that, during the lifetime of a Participant,
the Award shall be exercised, if exercisable, only by such Participant or by his
or her guardian or legal representative.
(2) TERMINATION OF SERVICES. A provision describing the treatment of an
Award in the event of the death, disability or other termination of a
Participant's service with the Company, including but not limited to terms
relating to the vesting, time for exercise, forfeiture or cancellation of an
Award in such circumstances. Participants who terminate service prior to the
satisfaction of applicable conditions and restrictions associated with their
Award(s) may be entitled to such Award(s) as and to the extent determined by the
Committee.
28
(3) RIGHTS AS A SHAREHOLDER. A provision that a Participant shall have no
rights as a shareholder with respect to any Common Shares covered by an Award
until the date the Participant becomes the holder of record. Except as provided
in Section 9 hereof, no adjustment shall be made for dividends or other rights,
unless the Award Agreement specifically requires such adjustment.
(4) MINIMUM EXERCISE. No Option may be exercised for less than the lesser
of 50 Common Shares or the full number of shares of Common Shares for which the
Option is then exercisable.
(b) OTHER TERMS. Award Agreements may include such other terms as the
Committee may determine are necessary and appropriate to effect an Award to the
Participant, including, but not limited to, the term of the Award, vesting
provisions, any requirements for continued service with the Company, any other
restrictions or conditions (including performance requirements) on the Award and
the method by which restrictions or conditions lapse, the effect on the Award of
a change in control of the Company, the price, amount or value of Awards, and
the terms, if any, pursuant to which a Participant may elect to defer the
receipt of cash or Common Shares under an Award.
SECTION 9. ADJUSTMENT PROVISIONS
(a) In the event of any change in the outstanding shares of Common Shares
by reason of a stock dividend or split, recapitalization, merger or
consolidation (whether or not the Company is a surviving corporation),
reorganization, combination or exchange of Common Shares or other similar
corporate changes or an extraordinary dividend paid in cash or property, the
number of Common Shares (or other securities) then remaining subject to this
Plan, and the maximum number of shares that may be issued annually to anyone
pursuant to this Plan, including those that are then covered by outstanding
Awards, shall (i) in the event of an increase in the number of outstanding
shares, be proportionately increased and the price for each share then covered
by an outstanding Award shall be proportionately reduced, and (ii) in the event
of a reduction in the number of outstanding shares, be proportionately reduced
and the price for each share then covered by an outstanding Award shall be
proportionately increased.
(b) In the event the adjustments described in clauses (i) and (ii) of
subsection (a) of this Section 9 are inadequate to ensure equitable treatment of
any Award holder, then, to the extent permissible under applicable law, the
Committee shall make any further adjustments as it deems necessary to ensure
equitable treatment of any holder of an Award as the result of any transaction
affecting the securities subject to the Plan or as is required or authorized
under the terms of any applicable Award Agreement.
(c) The existence of the Plan and the Awards granted hereunder shall not
affect or restrict in any way the right or power of the Board or the
shareholders of the Company to make or authorize any adjustment,
recapitalization, reorganization or other capital structure of its business, any
merger or consolidation of the Company, any issue of bonds, debentures,
preferred or prior preference stock ahead of or affecting the Common Shares or
the rights thereof, the dissolution or liquidation of the Company or any sale or
transfer of all or any part of its assets or business, or any other corporate
act or proceeding.
SECTION 10. CHANGE OF CONTROL
In the event of a "Change in Control" of the Company (defined below), in
addition to any action required or authorized by the terms of an Award
Agreement, the Committee may, in its sole discretion, recommend that the Board
take any of the following actions as a result, or in anticipation, of any such
event to assure fair and equitable treatment of Participants:
(a) offer to purchase any outstanding Award made pursuant to this Plan from
the holder for its equivalent cash value, as determined by the Committee, as of
the date of the change of control; or
(b) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and interests of
Participants following such change of control.
Any such action approved by the Board shall be conclusive and binding on
the Company and all Participants.
29
(c) For purposes of this Section, a "Change of Control" shall mean the
occurrence of any of the following:
(1) A tender offer or exchange offer whereby the effect of such offer is to
take over and control the affairs of the Company, and such offer is
consummated for the ownership of securities of the Company representing
twenty-five percent (25%) or more of the combined voting power of the
Company's then outstanding voting securities.
(2) The Company is merged or consolidated with another corporation and, as
a result of such merger or consolidation, less than seventy-five
percent (75%) of the outstanding voting securities of the surviving or
resulting corporation shall then be owned in the aggregate by the
former shareholders of the Company, other than affiliates within the
meaning of the Exchange Act or any party to such merger or
consolidation.
(3) The Company transfers substantially all of its assets to another
corporation or entity that is not a wholly owned subsidiary of the
Company.
(4) Any person (as such term is used in Sections 3(a)(9) and 13(d)(3) of
the Exchange Act) is or becomes the beneficial owner, directly or
indirectly, of securities of the Company representing twenty-five
percent (25%) or more of the combined voting power of the Company's
then outstanding securities, and the effect of such ownership is to
take over and control the affairs of the Company.
(5) As the result of a tender offer, merger, consolidation, sale of assets,
or contested election, or any combination of such transactions, the
persons who were members of the Board of the Company immediately before
the transaction, cease to constitute at least a majority thereof.
SECTION 11. GENERAL RESTRICTIONS
Delivery of Common Shares or other amounts under the Plan shall be subject
to the following:
(a) Notwithstanding any other provision of the Plan, the Company shall have
no liability to deliver any Common Shares under the Plan or make any other
distribution of benefits under the Plan unless such delivery or distribution
would comply with all applicable laws (including, without limitation, the
requirements of the Securities Act of 1933), and the applicable requirements of
any securities exchange or similar entity.
(b) To the extent that the Plan provides for issuance of stock certificates
to reflect the issuance of Common Shares, the issuance may be effected on a
non-certificated basis, to the extent not prohibited by applicable law or the
applicable rules of any stock exchange.
SECTION 12. OPERATION AND ADMINISTRATION
(a) ADMINISTRATION.
(1) The Plan and all Awards granted pursuant thereto shall be administered
by a committee of the Board (the "Committee"), which shall initially be
the full Board. The full Board shall remain as the Committee until such
time, and times, as the Board, in its sole discretion, designates a
lesser number of Board members to serve as the Committee. If the Board
designates a Committee of less than the full Board, such Committee
shall not include Eligible Directors. If the Committee is made up of
less than the full Board, or for any other reason determined by the
full Board, the full Board may take any action under the Plan that
would otherwise be the responsibility of the Committee.
(2) The Committee shall have the authority and discretion to interpret and
administer the Plan, to establish, amend and rescind any rules and
regulations relating to the Plan and to determine the terms and
provisions of any Award Agreement made pursuant to the Plan. All
questions of interpretation with respect to the Plan, the number of
Common Shares or other security, or rights granted and the terms of any
Award Agreements, including the timing, pricing, and amounts of Awards,
shall be determined by the Committee, and its deter-
30
mination shall be final and conclusive upon all parties in interest. In
the event of any conflict between an Award Agreement and this Plan, the
terms of this Plan shall govern.
(3) Except to the extent prohibited by applicable law or the applicable
rules of a stock exchange, the Committee may delegate to the officers
or employees of the Company and its Subsidiaries the authority to
execute and deliver such instruments and documents, to do all such acts
and things, and to take all such other steps deemed necessary,
advisable or convenient for the effective administration of the Plan in
accordance with its terms and purpose, except that the Committee may
not delegate any discretionary authority with respect to substantive
decisions or functions regarding the Plan or Awards thereunder,
including, but not limited to, decisions regarding the timing,
eligibility, pricing, amount or other material terms of such Awards.
Any such delegation may be revoked by the Committee at any time.
(4) To the extent that the Committee determines that the restrictions
imposed by the Plan preclude the achievement of the material purposes
of the Awards in jurisdictions outside the United States, the Committee
will have the authority and discretion to modify those restrictions as
the Committee determines to be necessary or appropriate to conform to
applicable requirements or practices of jurisdictions outside of the
United States.
(b) UNFUNDED PLAN. The Plan shall be unfunded. Neither the Company, a
Subsidiary, nor the Board shall be required to segregate any assets that may at
any time be represented by Awards made pursuant to the Plan. Neither the
Company, a Subsidiary, the Committee, nor the Board shall be deemed to be a
trustee of any amounts to be paid under the Plan.
(c) LIMITS OF LIABILITY.
(1) Any liability of the Company or a Subsidiary to any Participant with
respect to an Award shall be based solely upon contractual obligations
created by the Plan and the Award Agreement.
(2) Neither the Company nor a Subsidiary, 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 action taken or not taken in good faith under the
Plan except as may be expressly provided by statute.
(d) RIGHTS OF PARTICIPANTS. Nothing contained in this Plan or in any Award
Agreement (or in any other documents related to this Plan or to any Award or
Award Agreement) shall confer upon any Participant any right to continue in the
service of the Company or a Subsidiary or constitute any contract or limit in
any way the right of the Company or a Subsidiary to change such person's
compensation or other benefits or to terminate the service of such person with
or without cause.
(e) DURATION. The Board adopted the Plan subject to the approval of the
shareholders of the Company at the Company's 2003 Annual General Meeting of its
shareholders on May 22, 2003. The date of such shareholder approval shall be the
"Effective Date" of the Plan. The Plan shall remain in effect until all Awards
under the Plan have been exercised or terminated under the terms of the Plan and
applicable Award Agreements, provided, however, that Awards under the Plan may
only be granted within ten years from the Effective Date of the Plan.
(f) FORM AND TIME OF ELECTIONS. Any election required or permitted under
the Plan shall be in writing, and shall be deemed to be filed when timely
delivered to the Secretary of the Company. Any election to receive a Retainer
Award in lieu of cash shall be irrevocable after it is filed with respect to the
Plan Year for which it is filed, and such election shall remain in effect and be
irrevocable with respect to any future Plan Year unless a new election with
respect to such Plan Year is filed in accordance with rules established by the
Committee, in which case such new election shall be irrevocable with respect to
such Plan Year.
31
(g) ACTION BY COMPANY. Any action required or permitted to be taken by the
Company shall be by resolution of the Board, or by action of one or more members
of the Board (including a committee of the Board) who are duly authorized to act
for the Board or (except to the extent prohibited by the provisions of Rule
16b-3, applicable local law, the applicable rules of any stock exchange, or any
other applicable rules) by a duly authorized officer of the Company.
(h) GENDER AND NUMBER. Where the context admits, words in any gender shall
include any other gender, words in the singular shall include the plural and the
plural shall include the singular.
SECTION 13. AMENDMENT AND TERMINATION
The Board may at any time amend, suspend or discontinue the Plan, in whole
or in part; provided, however, that no amendment by the Board shall increase any
limitations set forth in Section 7 nor shall it permit any Options to be awarded
at Exercise Prices below Fair Market Value without approval of the shareholders.
The Committee may at any time alter or amend any or all Award Agreements under
the Plan to the extent permitted by law, but no such alteration or amendment
shall impair the rights of any holder of an Award without the holder's consent.
Adjustments pursuant to Section 9 shall not be subject to the foregoing
limitations of this Section 13.
32
EVEREST RE GROUP, LTD.
ANNUAL GENERAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 22, 2003, 11:00 A.M.
ROYAL PAVILION HOTEL
PORTERS, ST. JAMES, BARBADOS
\/ FOLD AND DETACH HERE \/
--------------------------------------------------------------------------------
PROXY
EVEREST RE GROUP, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
P
R The undersigned hereby appoints J.V. Taranto, S.L. Limauro, and J.A.
O Gervasi, and each of them, as proxies of the undersigned, each with full
X power to act without the others and with full power of substitution, to
Y vote all the Common Shares of EVEREST RE GROUP, LTD. held in the name of
the undersigned at the close of business on March 27, 2003, at the Annual
General Meeting of Shareholders to be held on May 22, 2003, at the Royal
Pavilion Hotel, Porters, St. James, Barbados at 11:00 a.m. (local time),
and at any adjournment or postponement thereof, with all the powers the
undersigned would have if personally present, on the matters set forth
hereon in accordance with any directions given by the undersigned and, in
their discretion, on all other matters that may properly come before the
Annual General Meeting, all in accordance with the accompanying Notice and
Proxy Statement, receipt of which is acknowledged.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES (SEE REVERSE SIDE), BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE
IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES
CANNOT VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
-----------
SEE REVERSE
SIDE
-----------
EVEREST RE GROUP, LTD.
C/O EQUISERVE TRUST COMPANY N.A.
P.O. BOX 8523
EDISON, NJ 08818-8523
VOTER CONTROL NUMBER
----------------------------------------
----------------------------------------
YOUR VOTE IS IMPORTANT. PLEASE VOTE IMMEDIATELY.
(FOR INTERNAL USE ONLY)
\/ FOLD AND DETACH HERE \/
--------------------------------------------------------------------------------
PLEASE MARK YOUR | 6287
[X] VOTES AS IN THIS |
EXAMPLE. +---
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2 AND 3.
--------------------------------------------------------------------------------
EVEREST RE GROUP, LTD.
--------------------------------------------------------------------------------
FOR WITHHELD
1. Election of FOR ALL NOMINEES [_] [_] WITHHOLD
Directors LISTED (EXCEPT AS AUTHORITY
MARKED TO THE TO VOTE FOR
CONTRARY) NOMINEES LISTED
To elect Martin Abrahams, John R. Dunne and
John A. Weber as Directors of the Company
for a three-year term ending in 2006.
[_] FOR all nominees except as written above.
2. To appoint PricewaterhouseCoopers, LLP as the FOR AGAINST ABSTAIN
Company's independent auditors for the year [_] [_] [_]
ending December 31, 2003 and authorize the
Board of Directors acting by the Audit
Committee of the Board to set the fees for
the independent auditors.
3. To approve the adoption of the Everest Re [_] [_] [_]
Group, Ltd. 2003 Non-Employee Director Equity
Compensation Plan.
In their discretion, upon such other matters as may properly come before the
meeting, and any and all adjournments thereof, 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 SHAREHOLDER, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2 AND 3.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
Signature:_________________________________________________ Date:______________
Signature:_________________________________________________ Date:______________
Sign exactly as name appears hereon. When signing in a representative capacity,
please give full title.