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EVEREST RE GROUP, LTD.
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 25, 2005
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 Wessex House, 45 Reid Street, Hamilton HM 12, Bermuda on May 25, 2005 at 11:00 a.m., local time, for the following purposes:
1. To elect two Class III directors of the Company, each to serve for a three-year period to expire at the 2008 Annual General Meeting of Shareholders or until such directors successor shall have been duly elected or appointed or until such directors office is otherwise vacated.
2. To appoint PricewaterhouseCoopers LLP as the Companys independent auditors for the year ending December 31, 2005 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 an amendment to the 2003 Everest Re Group, Ltd. Non-Employee Director Equity Compensation Plan, as described in the accompanying Proxy Statement.
4. To consider and approve an amendment to the Everest Re Group, Ltd. Executive Performance Annual Incentive Plan, as described in the accompanying Proxy Statement.
5. To consider and act upon such other business, if any, as may properly come before the meeting and any and all adjournments thereof.
The Companys financial statements for the year ended December 31, 2004, together with the report of the Companys auditors in respect of those financial statements, as approved by the Companys 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 29, 2005 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 15, 2005
Hamilton, Bermuda
EVEREST RE GROUP, LTD.
P ROXY S TATEMENT
ANNUAL GENERAL MEETING OF SHAREHOLDERS
May 25, 2005
The enclosed Proxy Card is being solicited on behalf of the Board of Directors (the Board) for use at the 2005 Annual General Meeting of Shareholders of Everest Re Group, Ltd., a Bermuda company (the Company), to be held on May 25, 2005, 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 Companys 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 Thomas J. Gallagher and William F. Galtney, Jr. 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; (3) for the approval of an amendment to the Everest Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan; and (4) for the approval of an amendment to the Everest Re Group, Ltd. Executive Performance Annual Incentive Plan.
Only shareholders of record at the close of business on March 29, 2005 will be entitled to vote at the meeting. On that date, 56,796,439 Common Shares, par value $.01 per share (Common Shares), were outstanding and entitled to vote, including 452,000 Common Shares owned by Everest Reinsurance Holdings, Inc., a subsidiary of the Company (Everest Holdings). The Common Shares owned by Everest Holdings will not be voted at the Annual General Meeting. Except as may be provided in the Companys 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, 2004 (including financial statements) and the enclosed Proxy Card are first being mailed to the Companys shareholders on or about April 15, 2005.
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 Companys 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. 1ELECTION 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 Companys 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 2005 Annual General Meeting, two nominees for Class III director positions are to be elected to serve until the 2008 Annual General Meeting of Shareholders or until their successors are elected and qualified or until such directors office is otherwise vacated. At its regularly scheduled meeting on February 23, 2005, the Nominating and Governance Committee recommended to the Board of Directors the nominations of Mr. Gallagher and Mr. Galtney as Class III directors for the shareholders consideration at the 2005 Annual General Meeting. Mr. Gallagher and Mr. Galtney are currently Class III directors of the Company. Mr. Gallagher is currently an employee of Everest Global Services, Inc., a subsidiary of the Company (Everest Global). The Class I director positions will be subject to election at the 2006 Annual General Meeting and the Class II directors will be subject to election at the 2007 Annual General Meeting.
All nominees have accepted their nominations for the Class III 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 III directors for terms expiring in 2008.
Thomas J. Gallagher , 56, became a Class III director of the Company on March 13, 1996. Mr. Gallagher also serves as a director of Everest Reinsurance Company (Everest Re), having first been elected to that position in 1987. Elected President and Chief Operating Officer of both the Company and Everest Re on February 24, 1997, Mr. Gallagher had been Executive Vice President of both companies since December 1995 and a Senior Vice President of the Company from 1994 to 1995 and of Everest Re from 1989 to 1994. Since joining Everest Re in 1975, he has served as an underwriter in the facultative and treaty departments, as vice president in charge of the facultative department and as vice president in charge of the treaty casualty department. Mr. Gallagher also serves as Deputy Chairman of the Company, as a director and President of Everest Holdings, as a director and Deputy Chairman of Everest Reinsurance (Bermuda), Ltd. (Bermuda Re), as a director and Chairman of Everest Global, 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), and 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. , 52, became a Class III director of the Company on March 12, 1996 and served as a director of Everest Re from March 1996 to February 2000. Since April 1, 2005, he has been Chairman of Oxford Insurance Services Limited, a managing general and surplus lines agency. Prior thereto, he was President (until December
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31, 2004) and Chairman (until March 31, 2005) of Gallagher Healthcare Insurance Services, Inc. (GHIS), a wholly owned subsidiary of Arthur J. Gallagher & Co. From 1983, Mr. Galtney was the Chairman and Chief Executive Officer of Healthcare Insurance Services, Inc. (predecessor to Gallagher Healthcare Insurance Services, Inc.), a managing general and surplus lines agency previously indirectly owned by The Galtney Group, Inc. Mr. Galtney is also Managing Member, President and Director of Galtney Group, LLC and was a director of Mutual Risk Management Ltd. from 1988 to 2002.
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.
Martin Abrahams , 72, became a Class I director of the Company on March 12, 1996 and served as a director of 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.
Kenneth J. Duffy , 75, 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.
John R. Dunne , 75, 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 LLP in Albany, New York. Mr. Dunne has been a director of AVIVA Life Insurance Company of New York since 1995, serving on the Audit Committee. 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.
Joseph V. Taranto , 56, 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. Gallaghers election as President on February 24, 1997. Mr. Taranto also serves as Chairman and Chief Executive Officer of Everest Holdings and as Chairman of Bermuda 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.
John A. Weber , 60, became a Class I director on May 22, 2003. Since December 2002, he has been the Managing Partner of Copley Square Capital Management, LLC, a private partnership and SEC-registered investment adviser 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 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.
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Stephen L. Limauro , 53, 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 Holdings, a director of Everest 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 and chairman 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 director and Chairman of 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, Everest Re Capital Trust II and Everest Re Capital Trust III, which are Delaware statutory trusts. Prior to the restructuring, he was a director and Chairman of Everest Re Group, Ltd.
Mark S. de Saram , 49, is an executive officer of the Company and became Senior Vice President on October 13, 2004. He serves as Managing Director and Chief Executive Officer of Bermuda Re and as a director and Deputy Chairman of ERHL, Everest Re Advisors and Everest International. He serves as a director of Everest Ireland. Mr. de Saram joined Everest in 1995 as Vice President of Everest Re responsible for United Kingdom and European Operations. Prior to his joining Everest, Mr. de Saram accumulated 21 years of reinsurance industry experience working in various underwriting capacities in the United Kingdom and Canada.
Keith T. Shoemaker , 49, 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 Assistant Controller of EVCAN. He also serves as a trustee of Everest Re Capital Trust and Everest Re Capital Trust II, which are Delaware statutory trusts. 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 2004. 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. All of the directors personally attended last years Annual General Meeting of Shareholders. The directors are expected to attend the Annual General Meeting pursuant to the Companys Corporate Governance Guidelines.
The Board has affirmatively determined that the following directors, who constitute a majority of the Board and who serve as members of the Audit, Compensation and Nominating and Governance Committees, are independent: Mr. Abrahams, Mr. Duffy, Mr. Dunne and Mr. Weber. To determine independence, the Board applied the categorical standards contained in the Companys Corporate Governance Guidelines. A copy of those standards, which meet and in some respects exceed the corporate governance listing standards of the New York Stock Exchange (NYSE), is set forth as Appendix A to this Proxy Statement. The Board also considered whether these four directors had any other material relationships with the Company, its affiliates or the Companys external auditor and concluded that none of
4
them had a relationship that impaired his independence. The Board based its determination on personal discussions with the directors and a review of each directors responses to questions regarding employment, compensation history, affiliations and family and other relationships. Additionally, as well as making the disclosures required under Bye-law 21(b) of the Companys Bye-laws (which in turn requires compliance with the Companies Act 1981 of Bermuda, as amended), pursuant to the Corporate Governance Guidelines, directors must disclose to the other directors any potential conflicts of interest they may have with respect to any matter under discussion and, if disqualified by the Chairman of the meeting, refrain from voting on a matter in which they may have a material interest.
Prior to each scheduled meeting of the Board of Directors, the directors who are not officers of the Company meet in executive session outside the presence of management. The executive sessions are chaired by alternating directors who rotate on an alphabetical basis. In addition, the independent directors meet in executive session outside the presence of management on a regular basis.
The Board currently maintains Audit, Nominating and Governance and Compensation Committees, all of whose members are independent directors. The Charters for each of these committees, the Corporate Governance Guidelines and the Companys Ethics Guidelines and Index to Compliance Policies as well as the Code of Ethics for Chief Executive Officer and Senior Financial Officers are posted on the Companys website at http://www.everestre.com . These documents are also available in print to any shareholder who requests a copy from the Corporate Secretary. In the event the Company makes any amendment to or grants any waiver from the provisions of its Code of Ethics, the Company intends to disclose such amendment or waiver on its website within five business days.
The Board also maintains an Executive Committee, the purpose of which is to take any emergency actions until the Board can meet. The members of the Executive Committee are Mr. Taranto, Mr. Gallagher and Mr. Galtney. There was one meeting of the Executive Committee in 2004 and one action was taken by unanimous consent. All actions taken by the Executive Committee were ratified and approved by the Board of Directors at the next following meeting.
Audit Committee
The principal purpose of the Companys Audit Committee is to oversee the integrity of the Companys financial statements and the Companys compliance with legal and regulatory requirements, to oversee the independent auditors, to evaluate the independent auditors qualifications and independence and to oversee the performance of the Companys internal audit function. The Audit Committee meets separately and together with the Companys management, director of internal audit and the independent auditors to review the Companys internal controls and financial statements, audit findings and significant accounting and reporting issues. The Board has adopted a Charter for the Audit Committee which is revised as necessary to comply with all applicable laws, rules and regulations. The Charter is available on the Companys website at http://www.everestre.com .
The members of the Audit Committee are Mr. Abrahams, Mr. Duffy, Mr. Dunne, and Mr. Weber, all of whom meet the independence standards of the NYSE and the Securities and Exchange Commission (SEC). Mr. Abrahams qualifies also as an audit committee financial expert as defined by the SEC in Item 401(h) of Regulation S-K. No member of the Audit Committee may serve on the Audit Committee of more than two other public companies unless the Board has determined that such service will not affect the ability of the Committee member to serve on the Companys Audit Committee. Mr. Dunne serves as Chairman of the Audit Committee. The Audit Committee held three meetings in 2004.
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 Companys Chief Financial Officer, Comptroller, Treasurer and Secretary. The Compensation Committee also has oversight responsibilities for all of the Companys broad-based compensation and benefit programs, including administration of the Companys 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, which is available on the Companys website at http://www.everestre.com .
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The current members of the Compensation Committee are Mr. Abrahams, Mr. Duffy, Mr. Dunne and Mr. Weber, none of whom are current or former employees or officers of the Company and all of whom meet the independence standards of the NYSE. Mr. Duffy serves as Chairman of the Compensation Committee. The Compensation Committee held four meetings in 2004.
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 current members of the Nominating and Governance Committee are Mr. Abrahams, Mr. Duffy, Mr. Dunne and Mr. Weber, all of whom meet the independence standards of the NYSE. Mr. Abrahams currently serves as Chairman of the Nominating and Governance Committee.
The Nominating and Governance Committee will consider a shareholders nominee for director who is proposed in accordance with the procedures set forth in Bye-Law 12 of the Companys Bye-laws, which is available on the Companys website or by mail from the Corporate Secretarys office. This Bye-Law requires written notice of a shareholders intent to make such a nomination at the 2006 Annual General Meeting of Shareholders to be received by the Secretary of the Company at the address listed below under Shareholder Communications with Directors , between November 16, 2005 and December 16, 2005. Such notice shall set forth the name and address, as it appears on the Register of Members, of the shareholder who intends to make the nomination; a representation that the shareholder is a holder of record of shares of the Company entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to make such nomination; the class and number of shares of the Company which are held by the shareholder; the name and address of each individual to be nominated; a description of all arrangements or understandings between the shareholder and any such nominee and any other person or persons (naming such person or persons) pursuant to which such nomination is to be made by the shareholder; such other information regarding any such nominee required to be included in a proxy statement filed pursuant to Regulation 14A under the Securities Exchange Act of 1934; and the consent of any such nominee to serve as a director, if so elected.
Shareholder candidates nominated in accordance with the procedures of Bye-Law 12 will, like any other director-candidate, be considered based solely on their character, judgment, education, training, business experience and expertise. In addition to complying with independence standards of the NYSE, the SEC and the Company, candidates for director must possess the highest levels of personal and professional ethics, integrity and values and be willing to devote sufficient time to perform their board and committee duties. It is in the Companys best interests that the board be composed of individuals whose skills, experience, diversity and expertise complement those of the other board members. The objective is to have a board which, taken as a whole, is knowledgeable in the areas of insurance/reinsurance, accounting (using generally accepted accounting practices and/or statutory accounting practices for insurance companies), financial management and investment, and any other areas which the board and committee deem appropriate in light of the continuing operations of the Company and its subsidiaries. Financial services-related experience, other relevant prior service, a familiarity with national and international issues affecting the Companys operations and a diversity of background, experience, race and gender are also among the relevant criteria to be considered. Following interviews, meetings and such inquiries and investigations determined to be appropriate under the circumstances, the Committee makes its director recommendations to the Board.
The Nominating and Governance Committee held two meetings in 2004. The Committees Charter, which was adopted by the Board on February 25, 2004 and the Corporate Governance Guidelines which contain the director qualifications, are available on the Companys website at http://www.everestre.com .
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Shareholder Communications with Directors
Shareholders may communicate directly with the Board of Directors or individual directors. All communications should be directed to the Companys Secretary at the following address and in the following manner:
Everest Re Group, Ltd. Corporate Secretary
c/o
Everest Global Services, Inc.
Westgate Corporate Center
477
Martinsville Road
P.O. Box 830
Liberty
Corner, New Jersey 07938-0830
Any such communication should prominently indicate on the outside of the envelope that it is intended for the Board of Directors, for the Non-Management Directors or for any individual director. Each communication addressed to an individual director and received by the Companys Secretary from investors or security holders, which is related to the operation of the Company and is not solely commercial in nature, will promptly be forwarded to the specified party. Communications addressed to the Board of Directors or to the Non-Management Directors will be forwarded to the Chairman of the Nominating and Governance Committee.
Common Share Ownership By Directors And Executive Officers
The following table sets forth the beneficial ownership of Common Shares as of March 29, 2005 by the directors of the Company, 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.
Name of Beneficial Owner
Amount and Nature of
Beneficial Ownership
Class (12)
Martin
Abrahams
35,195
(1)
*
Kenneth J. Duffy
34,622
(2)
*
John R. Dunne
33,840
(3)
*
Thomas J. Gallagher
168,427
(4)
*
William F.
Galtney, Jr.
124,726
(5)
*
Joseph V. Taranto
702,772
(6)
1.24
John A. Weber
7,587
(7)
*
Stephen L. Limauro
49,275
(8)
*
Keith T. Shoemaker
6,100
(9)
*
Mark S. de Saram
44,260
(10)
*
All directors
and executive officers
as a group (10 persons)
1,206,804
(11)
2.12
* |
Less than 1%
|
||
(1) |
Includes 27,891 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005 and 7,142
shares held in the Martin Abrahams Revocable Trust.
|
||
(2) |
Includes 25,675 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005. Does
not include 9,250 7.85% trust preferred securities issued by Everest Re Capital
Trust, a subsidiary of the Company.
|
||
(3) |
Includes 27,711 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005.
|
||
(4) | Includes 144,400 shares issuable upon the exercise of stock options exercisable within 60 days of March 29, 2005. Also includes 13,200 shares of restricted stock issued to Mr. Gallagher under the Companys 2002 Stock Incentive Plan which may not be sold or transferred until the vesting requirements are satisfied. |
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(5) |
Includes 90,000 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 27,891 shares
issuable upon the exercise of stock options exercisable within 60 days of March
29, 2005.
|
||
(6) |
Includes 350,000 shares issuable
upon the exercise of stock options exercisable within 60 days of March 29, 2005
and includes 59,000 shares of restricted stock issued to Mr. Taranto under the Companys
2002 Stock Incentive Plan which may not be sold or transferred until the vesting
requirements have been satisfied. Excludes 452,000 Common Shares owned by Everest
Holdings over which Mr. Taranto has voting and dispositive power. Mr. Taranto disclaims
beneficial ownership of the Common Shares owned by Everest Holdings.
|
||
(7) |
Includes 2,381 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005. Does
not include 1,000 7.85% trust preferred securities issued by Everest Re Capital
Trust, a subsidiary of the Company.
|
||
(8) |
Includes 600 shares of restricted
stock issued to Mr. Limauro under the Companys 1995 Stock Incentive Plan and
3,600 restricted shares issued to him under the Companys 2002 Stock Incentive
Plan, which may not be sold or transferred until the vesting requirements have been
satisfied. Also includes 42,200 shares issuable upon the exercise of stock options
exercisable within 60 days of March 29, 2005. Does not include 1,000 6.20% trust
preferred securities issued by Everest Capital Trust II, a subsidiary of the Company.
|
||
(9) |
Includes 6,100 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005.
|
||
(10) |
Includes 41,500 shares issuable upon
the exercise of stock options exercisable within 60 days of March 29, 2005. Also
includes 2,400 shares of restricted stock issued to Mr. de Saram under the Companys
2002 Stock Incentive Plan which may not be sold or transferred until the vesting
requirements have been satisfied.
|
||
(11) |
Includes 695,751 shares issuable
upon the exercise of stock options exercisable within 60 days of March 29, 2005.
|
||
(12) | Based on 56,796,439 total Common Shares outstanding and entitled to vote as of March 29, 2005. |
Principal Holders of Common Shares
To the best of the Companys knowledge, the only beneficial owners of more than 5% of the outstanding Common Shares as of December 31, 2004 are set forth below. This table is based on information provided in Schedule 13G Information Statements filed with the SEC by the parties listed in the table.
Number of Shares |
|
|||
Name and Address of Beneficial Owner | Beneficially Owned |
|
||
|
||||
Barclays Global Investors, NA | 4,692,134(1) |
|
||
45 Fremont Street |
|
|||
San Francisco, California 94105 |
|
|||
|
||||
FMR Corp. | 4,453,880(2) |
|
||
82 Devonshire Street |
|
|||
Boston, Massachusetts 02109 |
|
|||
Putnam, LLC d/b/a Putnam Investments on behalf of itself | 3,484,861(3) |
|
||
and Marsh & McLennan Companies, Inc.; |
|
|||
|
||||
Putnam Investment Management, LLC; and |
|
|||
The Putnam Advisory Company, LLC |
|
|||
One Post Office Square |
|
|||
Boston, Massachusetts 02109 |
|
|||
|
||||
Lord, Abbett & Co. | 2,932,325(4) |
|
||
90 Hudson Street | ||||
Jersey City, New Jersey 07302 |
(1) | Barclays reports in its Schedule 13G that it has sole voting power with respect to 4,398,181 Common Shares and sole dispositive power with respect to 4,692,134 Common Shares. |
8
(2) |
FMR Corp. reports in its Schedule
13G that it has sole voting power with respect to 106,880 Common Shares and sole
dispositive power with respect to 4,453,880 Common Shares.
|
||
(3) |
Putnam, LLC on behalf of itself and
Putnam Investment Management and the Putnam Advisory Company reports in its Schedule
13G that it has shared voting power with respect to 525,834 Common Shares and shared
dispositive power with respect to 3,484,861 Common Shares.
|
||
(4) | Lord, Abbett & Co. reports in its Schedule 13G that it has sole voting power and sole dispositive power with respect to 2,932,325 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 or Non-Management Director) was compensated in 2004 for services as a director and was also reimbursed for out-of-pocket expenses associated with each meeting attended. The annual compensation for 2004 of each Non-Employee Director consisted of stock and/or cash having an aggregate value of $60,000. The compensation for 2004 was paid in four installments of cash or, at the directors election, by issuances of Common Shares under the 2003 Non-Employee Director Equity Compensation Plan (the 2003 Directors Plan), which was approved by shareholders on May 22, 2003. An amendment to the 2003 Directors Plan is being submitted to the shareholders for their approval at the 2005 Annual General Meeting. (See Proposal Number 3 below, Approval of Amendment to the Everest Re Group, Ltd. 2003 Non-Employee Director Equity Compensation Plan.) Following the issuance by the NYSE on August 16, 2002 of its proposed new Corporate Governance Listing Standards relating to shareholder approval of equity compensation plans, the Company ceased making equity-based compensation payments to the Non-Employee Directors and made all subsequent compensation payments to Non-Employee Directors in cash until the 2003 Directors Plan was approved by the shareholders at the 2003 Annual General Meeting. The Non-Employee Directors may each now elect to receive their compensation in cash or in the form of stock in the amount as determined under the Plan.
Giving Non-Employee Directors an opportunity to receive their compensation in the form of Common Shares is intended to align their interests with those of the Companys 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 2004, each of the Non-Employee Directors who elected to be so compensated was issued a total of 712 shares as compensation for his services as a director in accordance with this procedure. As of January 1, 2005, the value of those shares for each Non-Employee Director was $63,767 based upon the NYSE closing price of a Common Share on December 31, 2004 of $89.56.
On May 23, 1996, the shareholders approved the Companys adoption of the 1995 Stock Option Plan for Non-Employee Directors (the 1995 Directors Plan), which is designed to maintain the Companys ability to attract and retain the services of experienced and highly qualified Non-Employee Directors and to create in those directors a proprietary interest in the Companys continued success. At the time of his or her appointment to the Board, each Non-Employee Director 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 of appointment, with an exercise price equal to that fair market value. As defined in the 1995 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.
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. Upon his election as a director on May 22, 2003, in accordance with the 1995 Directors Plan, Mr. Weber was granted options to purchase 706 Common Shares at an exercise price of $70.82. No options were issued to Non-Employee Directors in 2004.
9
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 Companys
Chief Executive Officer, the four other most highly compensated executive officers
who were serving as executive officers as of December 31, 2004 (the Designated
Executive Officers) and Mr. Bennett, who ceased to serve as an executive officer
on October 13, 2004, for services rendered by them to the Company and to its subsidiaries.
Summary Compensation Table
10
Stock Option Grants
The following table sets forth certain
information concerning stock options granted under the Companys 2002 Stock
Incentive Plan during 2004 to the Designated Executive Officers.
Options/SAR Grants in Last Fiscal Year
11
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 2004 held by the Designated Executive Officers.
Aggregated Option/SAR Exercises in Last
Fiscal Year
12
Compensation Committee Report
I. Executive Compensation Policy
Overview
. The Companys executive
compensation program in 2004 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 complex, multinational public entity like the Company. The Companys
compensation program is guided by the following fundamental principles:
The Companys executive compensation program
in 2004 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 Companys program relative to the attainment
of its objectives. The Companys 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 Companys long-term compensation goals, the Companys 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 2004, annual compensation for executive
officers of the Company consisted of two components-base salary and a cash payment
under either the Companys Executive Performance Annual Incentive Plan (in
the case of Mr. Taranto) or the Companys 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 AgreementsMr. Taranto below). The base salaries for the other
executive officers were determined by the Compensation Committee based on each executive
officers performance and, as previously discussed, the Companys 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
13
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 Committees perception of the
importance of an individuals contributions to the overall success of the Company.
To evaluate corporate performance, the Compensation Committee considered the following
factors related to the Companys 2004 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 Companys performance and their individual contributions.
The Executive Performance Annual Incentive
Plan was approved by the Companys shareholders on May 20, 1999. An amendment
to the Executive Performance Annual Incentive Plan is being submitted to the shareholders
for their approval at the 2005 Annual General Meeting. (See Proposal Number 4 below,
Approval of Amendment to the Everest Re Group, Ltd. Executive Performance
Annual Incentive Plan.) 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 Companys 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 participants performance is measured by any
of the following performance criteria: net income before or after taxes, operating
income before or after taxes, premiums earned, earnings per share, return on shareholders
equity, return on assets, appreciation in and/or maintenance of the price of the
Common Shares or any other publicly traded securities of the Company, comparisons
with various stock market indices, market share, statutory combined ratio, expense
ratio, reductions in costs and expense growth, or gross or net premium growth.
The Compensation Committee establishes
an objective method by which award amounts are calculated under this plan. The maximum
award amount any one participant may be awarded in one year is $2 million but will
be increased to $2.5 million if the shareholders approve Proposal Number 4 below.
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 Companys
average annual income before taxes for the preceding five years.
B. Long-Term Compensation
In 2004, the Companys long-term compensation
program for executive officers was implemented by means of the 2002 Stock Incentive
Plan. Awards under this plan are intended to reinforce managements 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 Companys 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 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 recipients demonstrated past and expected future performance
as well as a recipients 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, 2004, the Compensation Committee has granted
employees 2,880,700 options to purchase Common Shares under the 1995 Stock Incentive
Plan and 1,148,250 options under the 2002 Stock Incentive Plan. In 2004, the Compensation
Committee granted 435,500
14
options to purchase Common Stock under the 2002 Stock Incentive Plan,
which was approved by the shareholders at the 2002 Annual General Meeting. Restricted
stock and stock option awards granted to the Companys Designated Executive
Officers during 2004 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 the 2002 Stock Incentive
Plan and determined that the 2004 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 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 the subsidiaries may enter into compensation arrangements under which payments
would not be deductible under section 162(m).
IV. Chief Executive Officer Compensation
In 2004, Mr. Tarantos compensation
was based on the terms of his Employment Agreement with the Company and Everest
Re (see Employment and Change of Control AgreementsMr. Taranto
below) and consisted of base salary and restricted stock as set forth in that section.
The Compensation Committee also approved a $2,000,000 cash payment to Mr. Taranto
under the Executive Performance Annual Incentive Plan for fiscal year 2004 (see
Summary Compensation Table and Annual Compensation above).
This performance-based award was calculated as a function of the Companys
actual operating earnings per share in 2004 in accordance with a formula previously
established by the Compensation Committee.
Kenneth J. Duffy John R. Dunne Martin
Abrahams John A. Weber
15
Audit Committee Report
The Audit Committee has reviewed and discussed
with management, which has primary responsibility for the financial statements,
and with PricewaterhouseCoopers LLP, the Companys independent auditors, the
audited financial statements for the year ended December 31, 2004 (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 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 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. Based on the foregoing review and discussions and relying thereon,
the Audit Committee has recommended to the Companys Board of Directors the
inclusion of the Audited Financial Statements in the Companys Annual Report
on Form 10-K for the year ended December 31, 2004.
The Audit Committee devoted substantial
time in 2004 to discussing with the Companys independent auditors and internal
auditors the status and operating effectiveness of the Companys internal control
over financial reporting. The Audit Committees oversight involved several
meetings both with management and with the auditors outside the presence of management
to monitor the preparation of managements report on the effectiveness of the
Companys internal controls and the independent auditors opinion on managements
assessment. The meetings reviewed in detail the standards that were established,
the content of managements assessment, and the auditors testing and
evaluation of the design and operating effectiveness of the internal controls. As
reported in the Companys Annual Report on Form 10-K filed March 15, 2005,
the independent auditors concluded that, as of December 31, 2004, managements
assessment of the effectiveness of internal control was fairly stated in all material
respects and that the Company maintained, in all material respects, effective internal
control over financial reporting based upon the criteria established in Internal
ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (COSO).
Under its Charter and the Audit and
Non-Audit Services Pre-Approval Policy (the Policy), the Audit
Committee is required to pre-approve the audit and non-audit services performed
by the independent auditors. The Policy requires that any service that has not received
a general pre-approval or that exceeds pre-approved cost levels or budgeted amounts
requires specific approval by the Audit Committee. For both specific and general
pre-approval, the Audit Committee considers whether such services are consistent
with the SECs rules on auditor independence. The Audit Committee also considers
whether the independent auditors are best positioned to provide the most effective
and efficient service and whether the service might enhance the Companys ability
to manage or control risk or improve audit quality. The Audit Committee is also
mindful of the relationship between fees for audit and non-audit services in deciding
whether to pre-approve any such services and may determine, for each fiscal year,
the appropriate ratio between the total amount of fees for audit, audit-related
and tax fees and a total amount of fees for certain permissible non-audit services
classified as All Other Fees below. All such factors are considered
as a
The fees billed to the Company by PricewaterhouseCoopers
LLP and its worldwide affiliates in 2004 and 2003 are as follows:
16
(1) Audit fees include the annual and quarterly financial statement
audit, internal control audit (as required by the Sarbanes Oxley Act of 2002), subsidiary
audits, and procedures required to be performed by the independent auditors to be
able to form an opinion on the Companys consolidated financial statements.
Audit services also include the attestation engagement for the independent auditors
report on managements report on internal controls for financial reporting.
Audit fees also include statutory audits or financial audits of subsidiaries or
affiliates of the Company and services associated with SEC registration statements,
periodic reports and other documents filed with the SEC or other documents issued
in connection with securities offerings.
(2) Audit-related fees include assurance
and related services that are reasonably related to the performance of the audit
or review of the Companys financial statements, accounting consultations related
to accounting, financial reporting or disclosure matters not classified as audit
services; assistance with understanding and implementing new accounting and
financial reporting guidance from rulemaking authorities; financial audits of employee
benefit plans; agreed-upon or expanded audit procedures related to accounting and/or
billing records required to respond to or comply with financial, accounting or regulatory
reporting matters and assistance with internal control reporting requirements.
(3) Tax fees include tax compliance, tax
planning and tax advice and may be granted general pre-approval by the Audit Committee.
(4) All other fees are for accounting and
form research subscriptions.
Martin Abrahams Kenneth J. Duffy John
R. Dunne John A. Weber
17
Performance Graph
The following Performance Graph compares
cumulative total shareholder returns on the Common Shares (assuming reinvestment
of dividends) from December 31, 1999 through December 31, 2004, with the cumulative
total return of the Standard & Poors 500 Index and the Standard &
Poors Insurance (Property and Casualty) Index.
18
Retirement Plan
All the executive officers of the Company,
with the exception of Mr. de Saram, 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. de Saram 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 participants years of continuous service
and final average earnings with Everest Re and certain affiliates, including during
the period of affiliation with the 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 Companys 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.
Benefits shown in the table above are computed
as a single-life annuity and reflect a reduction to recognize in part Everest Res
cost of social security benefits. A participants 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 include
the participants base salary, cash bonus payments under the Chief Executive
Officers 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 Companys 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 participants earnings are not subject to the limitations under the
Code. Continuous service under the Retirement Plan and Supplemental
Plan will be the number of years and months worked for Everest Re and certain affiliates,
including during the period of affiliation with Prudential.
The years of continuous service for Mr.
Taranto, Mr. Gallagher, 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, 2005 are
19
10, 30, 32 and 4, respectively. Final average earnings for Mr. Taranto,
Mr. Gallagher, Mr. Limauro and Mr. Shoemaker to be taken into account as of April
1, 2005 are $2,612,493, $855,165, $497,708 and $175,621, respectively.
Employment And Change Of Control AgreementsMr.
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 and was further amended on April 18, 2003, extending his term of employment
to March 31, 2006 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 Companys 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. Tarantos 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. Tarantos
employment for due cause (as defined in the Employment Agreement) 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. Tarantos 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. Tarantos employment for any reason other than for due
cause (as defined in the agreement), then (a) all of Mr. Tarantos outstanding
stock options granted under the Companys 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. Tarantos annual compensation for the
most recent taxable year ending prior to the date of the material change less the
value of Mr. Tarantos gross income in the most recent taxable year ending
prior to the date of a material change attributable to Mr. Tarantos 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. Tarantos 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 Companys
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
Code, Mr. Tarantos 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
20
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 Companys termination of Mr. Tarantos employment for
due cause; or (iv) March 31, 2006, 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. Tarantos employment by that company.
Employment AgreementMr. de Saram
On October 14, 2004, Bermuda Re entered
into an employment agreement with Mr. de Saram, which was amended on December 8,
2004, under which he is to serve as the Managing Director and Chief Executive Officer
of Bermuda Re from November 1, 2004 until November 1, 2006. As amended, the agreement
provides for an annual salary of $300,000, plus $12,500 per month as a housing allowance.
Fifty percent of Mr. de Sarams salary is paid in U.S dollars and fifty percent
is paid in Great Britain pounds sterling. Mr. de Saram is also eligible to participate
in the Companys Annual Incentive Plan, which is entirely discretionary in
nature and which may be amended or terminated by the Company at any time. Any payments
made under the Annual Incentive Plan shall be in U.S. dollars. He is also a participant
in the Senior Executive Change of Control Plan. (See Other Change of Control
Arrangements). Pursuant to his employment agreement, Mr. de Saram also participates
in the medical insurance, dental insurance and group life insurance plans currently
available to other Bermuda Re employees. In lieu of participating in the Bermuda
Savings Plan, he receives a monthly payment equal to 10% of his monthly salary,
which is paid in Great Britain pounds sterling.
If Bermuda Re terminates Mr. de Sarams
employment prior to November 1, 2006 for reasons other than misconduct or a breach
of Bermuda Res policies, a separation payment equivalent to one years
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. de Sarams
employment for cause as defined in the employment agreement at any time during the
term of the agreement without prior notice. If Bermuda Re does not renew Mr. de
Sarams employment agreement at the expiration of its term and does not offer
him employment at the level at which he was employed prior to entering into that
agreement, then Bermuda Re will pay Mr. de Saram a sum equal to six months
base salary, plus the reasonable cost of six months of medical insurance.
Termination of Employment AgreementMr. Bennett
The employment of Mr. Bennett, who was
Mr. de Sarams predecessor as Managing Director and Chief Executive Officer
of Bermuda Re, terminated on October 13, 2004. In connection with that termination,
Bermuda Re agreed to pay Mr. Bennett, through April 2005, his monthly salary of
$11,153.85, his monthly housing allowance of $8,000 and the reasonable cost of medical
insurance, and to provide a reasonable allowance to move his personal possessions
back to the United Kingdom.
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. de Saram 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 participants employment for any
reason other than for due cause (as defined in the plan), then (a) all
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of the participants outstanding stock options granted under
the Companys stock plans shall immediately vest and become exercisable for
three months following termination of employment; (b) all restrictions on the participants
restricted stock awarded under the Companys stock plans shall immediately
terminate and lapse; (c) the participant shall receive a cash payment equal to the
participants 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. de Saram the number is 2); (d) the
participant shall continue to be covered under the Companys medical and dental
insurance plans for a period of two years from the date of termination; and (e)
the participant shall receive special retirement benefits in an amount
that will equal the retirement benefits he or she would have received under the
Everest Reinsurance Retirement Plan and any supplemental, substitute or successor
plans adopted by the Company had he or she continued in the employ of the Company
for a period following termination determined by the Compensation Committee. For
Mr. Gallagher, the period is 3 years and for Mr. Limauro and Mr. de Saram, the period
is 2 years.
Compensation Committee Interlocks and Insider Participation
During 2004, the Compensation Committee
was comprised of Martin Abrahams, Kenneth J. Duffy, John R. Dunne and John A. Weber,
all of whom are Non-Employee Directors of the Company and none of whom is or has
been an officer of the Company. No compensation committee interlocks existed during
2004.
Certain Transactions With Directors
One of the Companys Non-Employee
Directors, William F. Galtney, Jr., was the President of Gallagher Healthcare Insurance
Services, Inc. (GHIS), a wholly-owned subsidiary of Arthur J. Gallagher
& Co. (Gallagher) until December 31, 2004. Thereafter, Mr. Galtney
continued as Chairman of GHIS until March 31, 2005. Effective April 1, 2005, Mr.
Galtney became Chairman of Oxford Insurance Services Limited (Oxford),
a company 99% owned directly by Mr. Galtney. In addition, Mr. Galtney owns shares
in Gallagher representing less than a 1% interest. In 2004, Everest Re paid brokerage
commissions to Gallagher of $2,556,173. Currently, brokerage payable to Gallagher
is $531,233.
In 2002, GHIS entered into Program Administrator
Agreements with Everest National and with Mt. McKinley Managers as underwriting
manager for Everest Indemnity (the Everest Companies). Under these agreements,
policies placed by GHIS with the Everest Companies are generally reinsured under
an 82% quota share treaty 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 2004, the Everest Companies recorded $67,920,869 in gross
written premiums and related commissions and fees of $6,274,820 to GHIS, of which
$5,081,710 was paid in 2004. Effective April 1, 2005, the GHIS agreements were terminated
and the Everest Companies began negotiating new agreements with Mr. Galtney. GHIS
has also entered into a service agreement with Oxford pursuant to which Oxford provides
certain underwriting services related to GHIS under its agreements with the Everest
Companies. It is anticipated that the estimated gross written premiums and related
commissions and fees for 2005 for both the GHIS and Oxford agreements with the Everest
Companies are approximately $53.3 million and $4.3 million, respectively. GHIS,
through its Western Litigation Specialists division, provides claims services for
medical malpractice policies issued under both the GHIS and Oxford agreements.
GHIS was the producing agent for workers
compensation, general liability and automobile risks written by the Everest Companies
for Rural/Metro Corporation (Rural Metro). The workers compensation
component of the program did not renew in May 2004. In 2004, the Company recorded
$8,641,315 in written premiums in connection with this program and paid related
commissions to GHIS of $796,018, of which $575,611 was paid in 2004. Estimated premium
and commissions for the 2005 renewals of such policies, if written, are $9.7 million
and $.8 million, respectively. If such policies are written in 2005, it is anticipated
that the policies would be written through Oxford as producing agent.
GHIS also was the producing agent for workers
compensation, general liability/professional liability and automobile risks written
by the Everest Companies for San Diego Medical Services Enterprise, LLC (SDMS).
SDMS is a joint venture between Rural/Metro and the City of San Diego. In 2004,
the written premium for SDMS was
22
$1,346,069 with related commissions paid to GHIS of $134,607. Estimated
premium and commissions for the 2005 renewals of such policies, if written, are
$1.3 million and $134,607, respectively. If such policies are written in 2005, it
is anticipated that the policies would be written through Oxford as producing agent.
Gallagher Bassett Services, Inc. (Gallagher
Bassett), a Gallagher affiliate, provides claims services for the Rural Metro
program mentioned above, for Everest Indemnitys All Risks, Ltd. Program and
for Everest Nationals Risk Services, LLC program. Mr. Galtney does not have
any affiliation with All Risks, Ltd or with Risk Services, LLC. In 2004, the Company
paid fees to Gallagher Bassett of $862,786 net of audit refunds for prior years
services of $164,893. Estimated fees for 2005 are $2,559,272.
In 2004, Everest Indemnity, through Mt.
McKinley Managers, wrote a surplus lines medical malpractice book of business in
Arizona known as APIC through SKANCO, a surplus lines producer affiliate of Gallagher.
Under these agreements in 2004, written premium was $2,171,827 with related commissions
of $54,295. Estimated premium and commissions for 2005 are $2.0 million and $50,000,
respectively.
Beginning in late 2003 and terminating
in late 2004, Everest Indemnity, through Mt. McKinley Managers, wrote a California
construction liability program on a surplus lines basis through Cromwell Management
Corporation. J.P. Woods Co., Inc., a Gallagher affiliate, receives a brokerage fee
equal to 1.0% of the gross written premium for the first $1 million of limits on
policies written. For 2005, the estimated premium for the first $1 million in limits
is $25,336,091, and the resulting estimated brokerage due to J.P. Woods Co., Inc.
is $828,431.
Everest National had a business relationship
with WorkCare Northwest, Inc. (WorkCare Northwest), a company of which
Edward B. Galtney, William Galtneys brother, is a majority owner. In 2004,
Everest National paid commissions in the amount of $0 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 commissions
will be paid to WorkCare Northwest in the future.
PROPOSAL NO. 2APPOINTMENT OF INDEPENDENT
AUDITORS
The Board of Directors recommends
that you vote FOR the appointment of PricewaterhouseCoopers LLP as the Companys
independent auditors for the year ending December 31, 2005 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 Companys independent auditors
have been appointed each year at the Annual General Meeting of Shareholders pursuant
to the Boards recommendation, which in turn is based on the recommendation
of the Audit Committee. For the 2005 Annual General Meeting, and in accordance with
the Sarbanes-Oxley Act of 2002 (Sarbanes Oxley), the Audit Committee
has evaluated the performance and independence of PricewaterhouseCoopers LLP and
has recommended to the shareholders their appointment as the Companys independent
auditors for the year ending December 31, 2005. In making its recommendation, the
Audit Committee reviews both the audit scope and estimated fees for professional
services for the coming year. Representatives of PricewaterhouseCoopers LLP will
be present at the 2005 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. 3APPROVAL OF AMENDMENT
TO THE EVEREST RE GROUP, LTD.
The Board of Directors recommends
that you vote FOR the approval of the amendment to 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 owners to shareholders
of record may not be so voted unless beneficial owners specify a vote for approval
in their proxies.
23
Proposed Amendment
On February 23, 2005, the Board approved,
subject to approval by shareholders at the Annual General Meeting, an amendment
to the 2003 Directors Plan that expands the type and variety of awards available
under the plan to be comparable to those available for award to employees of the
Company under the Everest Re Group, Ltd. 2002 Stock Incentive Plan. As originally
adopted, the 2003 Directors Plan provides for retainer awards through which
a Non-Employee Director may elect to receive his annual compensation in the form
of Company shares rather than in cash and for discretionary option awards through
which a Non-Employee Director may purchase, for a certain period of time, Company
shares at a specified exercise price. Under the proposed amendment, the 2003 Directors
Plan would additionally provide for the award of stock appreciation rights (SARs),
restricted stock awards and stock awards to Non-Employee Directors, as described
more fully below in the Description of Plan.
Reasons for Amendment
The Board recommends that shareholders
approve the adoption of the amendment to the 2003 Directors Plan because the
addition of a greater variety of awards, comparable to those that are available
for award to employees under the Companys 2002 Stock Incentive Plan, will
further enhance the Companys ability to attract and retain knowledgeable directors
and encourage such directors to increase their proprietary interest in the Company,
consistent with the purpose of the plan. Furthermore, the amendment to the 2003
Directors Plan is in the best interests of the Company because it will enhance
the Companys ability to remain at a competitive advantage with other industry
leaders by conforming the plans operation to the trend in equity awards to
grant fewer options and more SARs, restricted stock awards, and stock awards.
In addition, the amendment to the 2003
Directors Plan will help the Company to continue to attract and provide incentives
to directors without adversely affecting or potentially diluting shareholders
interests in the Company. The amendment does not change the maximum number of shares
available for award under the plan overall nor does the amendment change the maximum
limit on awards that may be made to any individual participant in a year. The maximum
number of shares available for award under the 2003 Directors Plan will remain
at 500,000, which is the same number of shares that were authorized when the plan
was initially adopted in May, 2003. Similarly, the amendment preserves the same
annual limit on the number of total awards that may be granted to any one director
in a year: the annual 5,000 share aggregate limit per director which now applies
to retainer awards will now apply to retainer awards, restricted stock awards and
stock awards as a group. The annual 10,000 share aggregate limit per director for
option awards will now apply to option awards and SARs as a group.
Background
The 2003 Directors Plan was originally
adopted by the Board of Directors on February 25, 2003, and shareholders approved
the adoption of the plan at the Companys Annual General Meeting on May 22,
2003. The 2003 Directors Plan was further amended by the Board of Directors
on November 20, 2003 to provide that the expiration date for exercising vested options
is three years following the participants termination as a director, except
where termination is for cause, in which case the options expire immediately. The
purpose of the 2003 Directors Plan is to benefit the Company, its subsidiaries,
and its shareholders by enhancing the Companys 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.
Description of 2003 Directors Plan
Even though the proposed amendment to the
2003 Directors Plan relates only to the type and variety of awards available
under the plan, the following paragraphs provide a summary of all of the material
terms of the plan, including those aspects which are not proposed to be changed.
This summary is qualified in its entirety by the full text of the 2003 Directors
Plan, as amended, a copy of which is set forth as Appendix B to this Proxy Statement.
24
General
The 2003 Directors Plan provides
for the grant of non-qualified stock options (Options), retainer awards
(Retainer Awards), SARs, restricted stock awards and stock awards to
Non-Employee Directors. As of March 1, 2005, five directors of the Company were
eligible to receive awards under the 2003 Directors Plan. On March 29, 2005,
the closing sale price of the Common Shares as reported on the New York Stock Exchange
was $86.34 per share.
The total number of shares reserved for
issuance under the 2003 Directors Plan is 500,000. Any shares allocated to
an award under the 2003 Directors 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 following additional
limits apply to awards under the plan: (1) no more than 10,000 shares in the aggregate
may be issued for Options or SARs to any one eligible director in any calendar year;
and (2) no more than 5,000 shares in the aggregate may be issued for Retainer Awards
or stock awards, including restricted stock awards, to any one eligible director
in any calendar year.
The shares with respect to which awards
may be made under the 2003 Directors Plan may be shares that are currently
authorized but unissued, or to the extent permitted by applicable law, currently
held or subsequently acquired by subsidiaries of the Company, including shares purchased
in the open market or in private transactions. All Common Shares issued in settlement
of an award shall be issued as fully paid.
The Committee may grant any combination
of Options, SARs, restricted stock or stock awards. The number of shares subject
to the award and any other restrictions that are deemed appropriate by the Committee
for a particular type of award, to particular individuals, or in particular circumstances,
will be included in an individual award document reflecting the grant of the award
to the recipient and setting forth specific terms and conditions of the award (the
Award Agreement). A stock award, other than an award of restricted stock,
need not be evidenced by an Award Agreement.
Plan Administration
The 2003 Directors Plan is administered
by a committee of the Board (the Committee), the members of which are
designated by the Board. The Committee currently is 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 2003 Directors 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.
Retainer Awards
Each plan year, each Non-Employee Director
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 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. 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.
Stock Options
The Committee may grant Options to Non-Employee
Directors to purchase Common Shares of the Company. 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 granted under the 2003 Directors 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
25
the time of exercise. 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.
Except as otherwise provided by the Committee,
if a directors date of termination occurs for a reason other than removal
for cause, the holder of the Option may exercise the Option at any time within a
period of three years after such termination to the extent the Option was exercisable
on the date of such termination. If the directors date of termination occurs
by reason of death or disability, the director (or estate as the case may be) may
exercise the Option at any time within a period of three years after such termination
to the extent the Option was exercisable on the date of such termination. An Option
shall expire immediately upon a directors removal for cause. In no event,
however, may any Option be exercised by any person after its expiration date.
Stock Appreciation Rights
The Committee may grant an SAR in connection
with all or any portion of an Option or independent of any Option grant. An SAR
entitles the participant to receive the amount by which the fair market value of
a specified number of Shares on the exercise date exceeds an exercise price established
by the Committee. The excess amount will be payable in shares, in cash, or in a
combination thereof, as determined by the Committee. If Common Shares are issued
on surrender of an SAR, such Common Shares shall be issued fully paid, in consideration
of the eligible directors services. The Committee, in its discretion, may
impose such conditions, restrictions and contingencies on the shares acquired pursuant
to the exercise of an SAR as the Committee determines to be desirable.
Other Stock Awards
The Committee may grant stock awards (a
grant of shares as payment of a bonus, as payment of any other compensation obligation,
upon the occurrence of a special event or as otherwise determined by the Committee)
and restricted stock (grants of shares, with such shares or rights being made subject
to a risk of forfeiture or other restrictions that lapse upon the achievement of
one or more goals relating to completion of service by the participant, as determined
by the Committee). Recipients of restricted stock may have voting rights and may
receive dividends on the granted shares prior to the time the restrictions lapse.
Payment Provisions
The 2003 Directors Plan permits the
payment of the Option exercise price, or award price, by the following methods:
(1) in cash; or (2) at the Committees discretion, by the eligible directors
surrender to the Company for repurchase of Common Shares valued at their fair market
value, with the proceeds of such repurchase applied by the Company to pay the exercise
or award price (or part thereof), as applicable; or (3) with a combination of such
shares and cash. Shares may only be used for such purpose, however, if they have
been owned for at least six months (or such other period as may be required by the
Committee) by the eligible director who is the holder of such Option or award and
they meet any other requirements established by the Committee. Other lawful consideration
may also be applied to the purchase or exercise price of an award under the plan,
to the extent authorized by the Committee.
Change in Control
The 2003 Directors Plan permits the
acceleration of vesting with respect to any outstanding Options under the plan in
the event of a Change in Control of the Company, as defined below. The
form of Award Agreement that is currently in effect with respect to Options provides
that the Options shall fully vest on the date of a Change in Control. 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:
26
Any such action approved by the Board shall be
conclusive and binding on the Company and all participants.
For purposes of the 2003 Directors
Plan, a Change in Control shall mean the occurrence of any of the following:
Amendment and Termination
The Board may at any time amend, suspend
or discontinue the 2003 Directors Plan, in whole or in part, provided, 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 holders consent.
Adjustments
The 2003 Directors Plan contains
provisions relating to adjustments of the terms of outstanding awards to reflect
changes in the Companys 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 2003 Directors Plan will only be transferable to the extent
designated by the participant by will or by laws of descent and distribution.
Registration
Common Shares issuable pursuant to the
2003 Directors Plan are covered by a registration statement on Form S-8 filed
with the Securities and Exchange Commission on May 22, 2003.
27
Interest of Certain Persons in Matters to be Acted Upon
Each of the Non-Employee Directors of the
Company has a direct interest in the approval of the amendment of the 2003 Directors
Plan, which will make additional types of equity awards available to such 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 2003 Directors
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. In addition, this summary is
necessarily general and does not describe all possible federal income tax effects
to particular recipients of awards under the plan or to the Company in all circumstances.
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.
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.
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.
Special rules will apply if the participant
uses previously-owned shares to pay some or all of the Option exercise price. 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.
Stock Appreciation Rights
The grant of an SAR will not result in
taxable income to the participant. Upon exercise of an SAR, the amount of cash or
the fair market value of shares received will be taxable to the participant as ordinary
income. Gains and losses realized by the participant upon disposition of any 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.
Restricted Stock and Other Stock Awards
A participant who has been granted a restricted
stock award will not realize taxable income at the time of grant, assuming that
the restrictions constitute a substantial risk of forfeiture for U.S.
income tax purposes. Upon the vesting of shares subject to an award, the holder
will realize ordinary income 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 vesting. Dividends paid
to the holder during the restriction period, if so provided, will also be compensation
income to the participant.
28
A participant may elect pursuant to section 83(b) of the Code to
have income recognized at the date of grant of a restricted stock award and to have
the applicable capital gain holding period commence as of that date.
A participant who receives a stock award
which is not subject to a substantial risk of forfeiture will be taxed
based on the value of the stock on the date of the award.
Withholding of Taxes
The Company may withhold amounts from participants
to satisfy withholding tax requirements. Except as otherwise provided by the Committee,
participants may have shares withheld from awards or may tender previously owned
shares to the Company to satisfy tax withholding requirements. The shares withheld
from awards may only be used to satisfy the Companys minimum statutory withholding
obligation.
Deferred Compensation Rules
Under U.S. tax rules that generally became
effective January 1, 2005, certain types of awards under the 2003 Directors
Plan might constitute deferred compensation. The grant of deferred compensation
awards could result in tax penalties for participants unless certain requirements
are satisfied. The Company currently intends to structure awards under the plan
so that they do not result in the application of such tax penalties to participants.
Tax Deduction
Everest Re Group, Ltd. is not subject to
U.S. income taxes.
Change in Control
Any acceleration of the vesting of an Option
award under the 2003 Directors 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.
PROPOSAL No. 4APPROVAL OF AMENDMENT
TO THE EVEREST RE GROUP, LTD.
The Board of Directors recommends
that you vote FOR the approval of the amendment to the Everest Re Group, Ltd. Executive
Performance Annual Incentive Plan the (Executive 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
owners to shareholders of record may not be so voted unless beneficial owners specify
a vote for approval in their proxies.
Proposed Amendment
On February 23, 2005, the Board approved,
subject to approval by shareholders at the Annual General Meeting, an amendment
to the Executive Plan that increases the maximum award that may be paid to any one
participant in a year from $2 million to $2.5 million.
Background and Reasons for Amendment
The Board recommends that shareholders
approve the adoption of the amendment in order to enhance the Executive Plans
ability to continue to serve the purpose for which it was originally adopted. The
purpose of the Executive Plan is to provide an incentive for executives who are
in a position to contribute materially to the success of the Company and its subsidiaries,
reward their accomplishments, motivate future accomplishments, and aid in attracting
and retaining executives of the caliber necessary for the continued success of the
Company and its subsidiaries. The maximum award available under the Executive Plan
has not been increased since the plan was originally adopted by shareholders in
1999. In order to enable the Company to be competitive with other industry leaders,
the Board believes that it is necessary to increase the maximum award available
to reward and to motivate executives superior performance.
29
The purpose of the Executive Plan is also to define and limit amounts
which may be awarded to eligible executives of the Company so that the awards will
qualify as performance-based compensation under Section 162(m) of the Code. By qualifying
as performance-based compensation under Section 162(m), the cash bonuses could be
deductible to the Company (or its subsidiary, if applicable) if it were subject
to U.S. taxation.
Description of the Plan
Even though the proposed amendment to the
Executive Plan relates only to the maximum award that may be paid to any one participant
in a year, the following paragraphs provide a summary of all of the material terms
of the plan, including those aspects which are not proposed to be changed. This
summary is qualified in its entirety by the full text of the Executive Plan, as
amended, a copy of which is set forth as Appendix C to this Proxy Statement.
Administration
The Executive Plan provides that it shall
be administered by a committee appointed by the Board to administer the plan, consisting
of no fewer than two members of the Board. Each member of the committee must qualify
as an outside director within the meaning of Code Section 162(m). The
committee has all discretion and authority necessary or appropriate to administer
the plan and to interpret the provisions of the plan consistent with qualification
of the plan as performance-based compensation under Code Section 162(m). The Board
has designated the Compensation Committee of the Board to perform the functions
of this committee.
Eligibility
Within ninety (90) days after the beginning
of each year, the Compensation Committee, in its sole discretion, selects corporate
officers of the Company and its subsidiaries who will be eligible that year to participate
in the Executive Plan (the Participants).
Awards and Performance Measures
The Compensation Committee establishes
in writing objective performance goals for each Participant, which, if attained,
shall entitle such Participant to specific award amounts that will be paid to each
Participant. The Participants performance shall be measured by any of the
following performance criteria: net income before or after taxes, operating income
before or after taxes, premiums earned, earnings per share, return on stockholders
equity, return on assets, appreciation in and/or maintenance of the price of the
common stock or any other publicly traded securities of the Company, comparisons
with various stock market indices, market share, statutory combined ratio, expense
ratio, reductions in costs and expense growth, or gross or net premium growth.
The Compensation Committee establishes
an objective method by which award amounts will be calculated under the Executive
Plan. The maximum award amount any one Participant may be awarded in one year is
currently $2 million, but would be increased to $2.5 million under the proposed
amendment. 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 will not exceed 10%
of the Companys average annual income before taxes for the preceding five
years.
Other Terms and Conditions
The Executive Plan provides that no award
shall be assignable or transferable other than by will or by laws of descent and
distribution. The plan further provides that the Board may at any time and without
notice to any corporate officer of the Company or a subsidiary suspend, discontinue,
revise, amend or terminate the plan, provided that any such revision or amendment
which requires shareholder approval in order to maintain the qualification of awards
as performance-based compensation pursuant to Code Section 162(m) shall not be made
without such approval. Because payments under the plan are determined by comparing
actual performance to the annual performance goals established by the Compensation
Committee, it is not possible to conclusively state the amount of benefits which
will be paid under the plan. Consistent with the Compensation Committees practice
since the plan was approved by Shareholders in 1999, the Compensation Committee
has determined that only the Chairman of the Board and Chief
30
Executive Officer, Joseph V. Taranto, will be a Participant in the
Executive Plan for 2005 and eligible for a performance-based award payable in 2006.
A performance goal has been established for Mr. Taranto based upon the Companys
earnings per share. Maximum awards payable have been set as a function of the actual
2005 earnings per share. In all cases, the maximum award payable to Mr. Taranto
in 2006 will be substantially less than 1% of the Companys 2005 after-tax
operating income. Further, if the amendment is approved by shareholders, the award
will not exceed $2.5 million and the Compensation Committee has sole discretion
under the plan to reduce or eliminate the award as it deems appropriate.
Securities Authorized for Issuance under Equity Compensation
Plans
The following table summarizes, as of December
31, 2004, information about compensation plans under which securities of the Company
are authorized for issuance:
Equity Compensation Plans
31
MISCELLANEOUSGENERAL MATTERS
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange
Act of 1934, as amended, requires the Companys executive officers and directors,
and persons who own more than ten percent of a registered class of the Companys
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 Companys review
of the copies of the forms it has received and representations that no other reports
were required, the Company believes that all of its executive officers, directors
and greater than ten percent beneficial owners have filed with the SEC on a timely
basis all required forms with respect to transactions during fiscal year 2004.
Shareholder Proposals for the 2006 Annual General Meeting
of Shareholders
To be considered for inclusion in the Companys
Proxy Statement relating to the 2006 Annual General Meeting of Shareholders, a shareholder
proposal must be received by the Secretary of the Company in proper form at the
Companys registered office at Clarendon House, 2 Church Street, Hamilton HM
11, Bermuda, no later than December 16, 2005.
The proxy solicited by the Board relating
to the 2006 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 March 1, 2006.
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 Communication, Inc. will provide solicitation services to the Company
for a fee of approximately $5,500 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.
All transfers of certificates for Common
Shares should also be mailed to the above address.
32
APPENDIX A
CORPORATE GOVERNANCE GUIDELINE ON
DIRECTOR INDEPENDENCE
A majority of the Board shall be composed
of independent directors, as that term is defined from time to time
by the listing standards of the NYSE. As required by such listing standards, in
assessing independence, the Board shall make a determination whether a director
has any material relationship with the Company (directly or as a partner, shareholder
or officer of an organization that has a relationship with the Company). In making
this determination, absent other considerations, the Board will deem a director
to be independent if either the director or a member of his immediate family:
A-1
APPENDIX B
EVEREST RE GROUP, LTD.
(As Amended through Second Amendment)
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 Companys
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
Discretionary Awards.
Section 2. Definitions
The following terms, used herein, shall
have the meaning specified:
(a)
Award
means the Retainer Award or a Discretionary Award granted to any Eligible Director
under the terms of 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 Participants duties
at or relating to the Company or its affiliates), (iii) the Participants 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 Participants 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)
Discretionary
Award
shall be as defined in Section 6.
(l)
Director
means a member of the Board.
(m)
Effective
Date
means the Effective Date as defined in Section 12(e).
(n)
Eligible
Director
means each Director who is not an Employee of the Company.
B-1
(o)
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 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.
(p)
Exchange
Act
means the Securities Exchange Act of 1934, and any successor statute,
as it may be amended from time to time.
(q)
Exercise
Price
means a purchase or exercise price established by the Committee
at the time an Option or SAR is granted.
(r)
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.
(s)
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.
(t)
Participant
means any Eligible Director who has been granted an Award pursuant to this Plan.
(u)
Plan Year
shall mean each calendar year, with the first Plan Year beginning on the Effective
Date and ending on December 31, 2003.
(v)
Restricted
Stock
shall be as defined in Section 6(c)(2).
(w)
Retainer
Award
shall be as defined in Section 5(a).
(x)
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.
(y)
SAR
shall be as defined in Section 6(b).
(z)
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.
(aa)
Stock Award
shall
be as defined in Section 6(c)(1).
(bb)
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 corporations common
equity.
Section 3. Eligibility
Persons eligible for Awards under the Plan
shall consist solely of Eligible Directors.
B-2
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.
(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.
The Committee may grant any of the types
of Awards enumerated in paragraphs (a) through (c) of this Section 6 (Discretionary
Awards) either singly, in tandem or in combination with other types of Awards,
as the Committee may in its sole discretion determine:
(a)
Options.
(b)
Stock Appreciation Rights.
A stock appreciation right (SAR) is a right to receive, upon surrender
of the right, an amount payable in cash or in Common Shares, which may be Restricted
Stock. The amount payable with respect to each SAR shall be equal in value to the
excess, if any, of the Fair Market Value of a specified number of Common Shares
on the exercise date (or on such other date or dates set forth in the Award Agreement)
over the Exercise
B-3
Price relative to such shares, as may be established by the Committee.
If Common Shares are issued on surrender of an SAR, such Common Shares shall be
issued fully paid, in consideration of the Eligible Directors services to
the Company.
(c)
Restricted Stock
and Stock Awards.
(d)
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:
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.
(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 Discretionary Awards which are Options or SARs and 5,000 shares pursuant to Retainer
Awards and Discretionary Awards which are Stock Awards (including Restricted Stock).
B-4
(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. Where one or more types of
Awards (both of which are payable in Common Shares) are granted in tandem with each
other, the number of Common Shares shall be deemed to be the greater of the number
of shares that would be counted if one or the other Award alone was outstanding.
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 Discretionary Award (other than Stock
Awards which are not Restricted Stock) under the Plan shall be evidenced by an Award
Agreement setting forth the number of Common Shares or SARs 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:
B-5
(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 in 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 in control,
which adjustment or modification may include acceleration of time periods for purposes
of vesting in, or realizing gain from, any outstanding Award made pursuant to the
Plan.
Any such action approved by the Board shall
be conclusive and binding on the Company and all Participants.
B-6
(c) For purposes of this Section, a Change
in Control shall mean the occurrence of any of the following:
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.
B-7
(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.
(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 persons 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 Companys 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.
(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
B-8
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 holders consent. Adjustments pursuant to Section 9 shall
not be subject to the foregoing limitations of this Section 13.
B-9
Appendix C
Everest Re Group, Ltd.
(as amended through First Amendment)
1.
PURPOSE
The purpose of the Everest Re Group, Ltd.
Executive Performance Annual Incentive Plan (the Plan) is to provide
incentive for executives who are in a position to contribute materially to the success
of the Company and its Subsidiaries; to reward their accomplishments; to motivate
future accomplishments; and to aid in attracting and retaining executives of the
caliber necessary for the continued success of the Company and its Subsidiaries.
2.
DEFINITIONS
The following terms as used herein shall
have the meaning specified:
A performance criteria may be applied by the Committee
as a measure of the performance of any, all, or any combination of the Company or
a Subsidiary.
C-1
3.
TERM
The Plan shall be effective as of January
1, 1999, subject to approval by a vote of the shareholders at the 1999 Annual Meeting
of Shareholders, and such shareholder approval shall be a condition to the right
of any Participant to receive any benefits hereunder. As long as the Plan remains
in effect, it shall be resubmitted to shareholders as necessary to enable the Plan
to continue to qualify as performance-based compensation under Section 162(m) of
the Code.
4.
AWARDS
C-2
5.
ADMINISTRATION
6.
MISCELLANEOUS
C-3
C-4
EVEREST RE GROUP, LTD.
Annual General Meeting of Shareholders
PROXY
EVEREST RE GROUP, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
EVEREST RE GROUP, LTD.
C/O EQUISERVE TRUST COMPANY N.A.
EVEREST RE GROUP, LTD.
Annual General Meeting of Shareholders
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 4.
Long-Term Compensation
Annual Compensation
Awards
Restricted
Securities
All Other
Other Annual
Stock
Underlying
Compensation
Name and Principal Position
Year
Salary($)
Bonus ($)(3)
Compensation (4)
Award(s) ($)(5)
Options(#)
($)(6)
Joseph
V. Taranto
2004
$1,000,000
$2,000,000
$2,617,650
$31,158
Chairman of
the Board
2003
1,000,000
1,800,000
2,231,100
30,466
and
Chief Executive
2002
1,000,000
1,600,000
100,000
31,158
Officer
Thomas
J. Gallagher
2004
469,231
550,000
628,236
15,235
President
and Chief
2003
446,538
500,000
446,220
14,539
Operating
Officer
2002
423,012
400,000
16,500
13,848
Stephen L. Limauro
2004
294,231
400,000
25,000
9,985
Executive
Vice President
2003
270,915
350,000
334,665
9,285
and Chief
2002
254,462
250,000
25,000
8,686
Financial
Officer
Keith T. Shoemaker
2004
186,923
55,000
5,500
6,474
Comptroller
and
2003
177,231
65,000
5,500
6,138
Principal
Accounting
2002
166,154
50,000
5,000
2,514
Officer
Mark S. de Saram (1)
2004
305,148
225,000
23,850
12,000
34,282
Senior
Vice President of
2003
264,334
183,154
223,110
28,908
Everest Re
Group, Ltd.
2002
223,628
121,540
10,000
23,955
and
Managing Director
and Chief
Executive
Officer
of Bermuda Re
Peter J. Bennett (2)
2004
287,369
126,400
13,050
Former
Senior Vice
2003
276,708
150,000
99,931
74,370
__
15,978
President
of Everest
2002
268,577
100,000
78,120
15,021
Re
Group, Ltd.and
Managing Director
and
Chief Executive
Officer of
Bermuda Re
(1)
Mr. de Saram was elected to serve
as Senior Vice President of the Company and Managing Director and Chief Executive
Officer of Bermuda Re on October 13, 2004.
(2)
Mr. Bennett ceased being an executive
officer and ceased holding these positions on October 13, 2004.
(3)
Represents compensation earned by
the Designated Executive Officers pursuant to the Companys Annual Incentive
Plan. The amounts shown for Mr. Taranto were awarded pursuant to the Executive Performance
Annual Incentive Plan.
(4)
The amounts reported for 2004, 2003
and 2002 for Mr. Bennett include $96,000, $84,000 and $60,000, respectively, as
housing allowance under the terms of his employment agreement and $23,708, $15,931
and $18,120, respectively, in payment of taxes. The 2004 amount for Mr. Bennett
also includes $6,692 in lieu of unused accrued vacation. For Mr. de Saram, the amounts
include $1,709 in relocation expenses, $9,033 as housing allowance, $7,296 in family
travel costs and $5,812 in taxes paid under the terms of his employment agreement.
(5)
The amounts reported represent the
value of the Common Shares underlying the restricted stock at the respective dates
of grant, September 18, 2003 ($74.37 per share) and September 21, 2004 ($74.79 per
share), without taking into account any diminution in value attributable to the
restrictions on such stock. The restricted stock vests at the rate of 20% per year
over a 5-year period. Based on the closing price of a Common Share on the NYSE on
December 31, 2004 of $89.56, the aggregate number of shares and value of restricted
shares held on that date were as follows: 59,000 shares valued at $5,284,040 for
Mr. Taranto; 13,200 shares valued at $1,182,192 for Mr. Gallagher; 4,200 shares
valued at $376,152 for Mr. Limauro and 2,400 shares valued at $214,944 for Mr. de
Saram. Mr. Bennetts unvested shares of restricted stock were forfeited. Dividends
are paid quarterly on these restricted Common Shares at the same rate as dividends
are paid on Common Shares held by public shareholders.
(6)
The amount reported for 2004 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-$1,158, (d) Mr. Shoemaker-$866, Mr. Bennett-$1,470
and (e) Mr. de Saram-$2,932; (ii) the following employer contributions to qualified
and non-qualified employee savings plans: (a) Mr. Taranto-$30,000, (b) Mr. Gallagher-$14,077,
(c) Mr. Limauro-$8,827, and (d) Mr. Shoemaker-$5,608; and (iii) the following employer
contribution to a qualified savings plan: Mr. Bennett-$11,580. Mr. de Saram received
a contribution of $31,350 to, or in lieu of, a contribution to his personal pension
plan.
Individual
Grants
Number of
% of Total
Securities
Options/SARs
Underlying
Granted to
Exercise or
Grant Date
Options/SARs
Employees in
Base Price
Expiration
Present Value
Granted (#)(1)
Fiscal Year(2)
($/Sh)
Date (3)
($)(4)
Joseph
V. Taranto
Thomas J. Gallagher
Stephen L. Limauro
25,000
5.74
74.33
09/21/14
636,393
Keith T. Shoemaker
5,500
1.26
74.33
09/21/14
140,006
Mark S. de Saram
12,000
2.76
74.33
09/21/14
305,468
Peter J. Bennett
(1)
Represents non-qualified stock options
granted to Mr. Limauro, Mr. de Saram and Mr. Shoemaker on September 21, 2004, which
become exercisable in 20% increments annually 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 2004.
(2)
Based upon 435,500 non-qualified
stock options granted to all employees in 2004.
(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 VolatilityThe 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, 2004, which was 28.7854%.
(b)
Risk Free Rate of ReturnThe 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 in the Federal Reserve Statistical Release was 3.66%.
(c)
Dividend YieldThe yield calculated by dividing the estimated annualized dividend rate of the Common Shares in the amount of $.40 per share by the weighted average fair market value of the stock on the date of grant, which resulted in an assumed dividend yield of .8639%.
(d)
Expected LifeThe average length of time before assumed exercise reflecting vesting provisions and maximum exercise period, which was 6.85 years.
and FY-End Option/SAR Values
Number of Securities
Underlying Unexercised
Value of Unexercised
Shares
Options/SARS
In-the-Money Options/SARS
Acquired on
Value
at FY-End(#)
at FY-End ($)(1)
Name
Exercise(#)
Realized($)
Exercisable
Unexercisable
Exercisable
Unexercisable
Joseph
V. Taranto
210,000
$12,088,921
385,000
160,000
$15,833,678
$5,247,824
Thomas J. Gallagher
63,000
4,282,630
137,800
29,700
7,381,531
1,319,529
Stephen L.
Limauro
4,000
249,345
40,200
46,800
1,946,970
1,235,413
Keith T. Shoemaker
0
0
6,100
14,900
212,377
344,431
Mark S. de
Saram
0
0
40,500
22,000
2,174,411
583,556
Peter J. Bennett
19,000
870,245
0
0
0
0
(1)
Based on the year-end fair market
value of Common Shares of $89.93, which is calculated by averaging the high and
low trading prices on December 31, 2004 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 of executive officers
is based on the level of job responsibility, the performance of the Company and
the performance of the individual.
Total compensation levels are designed
to be competitive with compensation paid by organizations of similar stature.
Compensation should align the interests
of the executive officers with those of the Companys shareholders by basing
a significant part of total compensation on the long-term performance of the Common
Shares.
whole, and no one factor is determinative. The Audit Committee has considered
whether the performance by PricewaterhouseCoopers LLP of the services disclosed
below is compatible with maintaining their independence. The Audit Committee approved
all of the audit-related fees, tax fees and all other fees for 2004 and 2003.
(1)
Audit fees
$3,734,650
$1,585,766
(2) Audit-related fees
69,300
68,000
(3) Tax fees
28,176
612,825
(4) All other fees
8,702
Cumulative Total Return
12/99
12/00
12/01
12/02
12/03
12/04
EVEREST RE GROUP,
LTD.
100.00
S&P 500
100.00
S&P PROPERTY & CASUALTY
INSURANCE
100.00
*
$100 INVESTED ON 12/31/99 IN STOCK OR INDEX INCLUDING REINVESTMENT OF DIVIDENDS.
FISCAL
YEAR ENDING DECEMBER 31.
$
150,000
$ 13,417
$ 26,835
$ 40,252
$ 53,670
$ 67,087
$ 73,978
$ 80,870
200,000
18,417
36,835
55,252
73,670
92,087
101,478
110,870
250,000
23,417
46,835
70,252
93,670
117,087
128,978
140,870
300,000
28,417
56,835
85,252
113,670
142,087
156,478
170,870
350,000
33,417
66,835
100,252
133,670
167,087
183,978
200,870
400,000
38,417
76,835
115,252
153,670
192,087
211,478
230,870
450,000
43,417
86,835
130,252
173,670
217,087
238,978
260,870
500,000
48,417
96,835
145,252
193,670
242,087
266,478
290,870
750,000
73,417
146,835
220,252
293,670
367,087
403,978
440,870
1,000,000
98,417
196,835
295,252
393,670
492,087
541,478
590,870
1,500,000
148,417
296,835
445,252
593,670
742,087
816,478
890,870
2,000,000
198,417
396,835
595,252
793,670
992,087
1,091,478
1,190,870
2,500,000
248,417
496,835
745,252
993,670
1,242,087
1,366,478
1,490,870
3,000,000
298,417
596,835
895,252
1,193,670
1,492,087
1,641,478
1,790,870
3,500,000
348,417
696,835
1,045,252
1,393,670
1,742,087
1,916,478
2,090,870
2003 NON-EMPLOYEE DIRECTOR EQUITY COMPENSATION
PLAN
accelerate time periods for purposes
of vesting in, or realizing gain from, any outstanding award made pursuant to this
plan;
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 in Control; or
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 in Control.
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
Companys then outstanding voting securities.
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.
The Company transfers substantially
all of its assets to another corporation or entity that is not its wholly owned
subsidiary.
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 Companys then outstanding
securities, and the effect of such ownership is to take over and control the affairs
of the Company.
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.
EXECUTIVE PERFORMANCE ANNUAL INCENTIVE PLAN
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
2,318,534
$53.8223
3,256,289(1)
approved by security holders
Equity compensation plans not
96,000(2)
$36.2184
-0-
approved by security holders
Total
2,414,534
$53.1224
3,256,289
(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) and the 2003 Non-Employee
Director Equity Compensation Plan.
(2)
As of December 31, 2004, 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.
Shareholder
Services
P.O. Box 43069
Providence, Rhode
Island 02940
(800) 519-3111
(781) 575-2726
By Order of the Board of Directors
Joseph A. Gervasi
April 15, 2005
Secretary
Has not been employed by the Company,
any of its affiliates or the Companys external auditor at any time during
the past three years;
Has not received more than $100,000
per year from the Company, other than director and committee fees and pension or
other forms of deferred compensation for prior service (provided such compensation
is not contingent in any way on continued service);
Is not, and in the past three years
has not been, part of an interlocking directorate in which an executive officer
of the Company serves on the compensation committee of another company that concurrently
employs such director or directors immediate family member;
Does not, and in the past three years
has not, provided legal, consulting, investment banking, commercial banking, accounting
or other professional services to the Company or any of its subsidiaries or affiliates,
and is not a director, executive officer, general partner or significant equity
holder of an entity that has provided legal, consulting, investment banking, accounting
or other professional services in amounts which exceed the greater of $1,000,000
or 2% of such other companys consolidated gross revenues; for purposes of
this and the succeeding paragraph, direct or indirect beneficial ownership of an
interest representing 10% of the equity or the voting interests of an entity will
generally be considered a significant equity holding;
Is not, and in the past three years
has not been, a director, executive officer, general partner or significant equity
holder of a company that makes payments to, or receives payments from, the Company
or any of its affiliates, for property or services in an amount which, exceeds the
greater of $1 million or 2% of such other companys consolidated gross revenues;
and
Is not, and in the past three years
has not been, an employee, officer or director of a foundation, university or other
non-profit organization that has received grants or endowments from the Company
or any of its subsidiaries or affiliates in annual amounts which exceed the greater
of $1,000,000 or 2% of the organizations annual gross revenues.
2003 NON-EMPLOYEE
DIRECTOR EQUITY COMPENSATION PLAN
(1)
An Option 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, an Option 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 Directors 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 Participants death, disability (as may be
determined by the Committee) or in the event of a Change in Control.
(3)
Unless otherwise provided by the
Committee, an Option shall expire on the earliest of: (i) the ten-year anniversary
of the Award Date, (ii) the three-year anniversary of the Directors Date of
Termination if termination occurs due to the Directors death or disability,
(iii) the Date of Termination, if such termination of service occurs due to removal
for Cause, or (iv) the three-year anniversary of the Directors Date of Termination
if the termination of service occurs for reasons other than as listed in clauses
(ii) or (iii). No Option shall be exercisable following a Directors Date of
Termination except to the extent that the Option is exercisable prior to, or becomes
exercisable as of, such Date of Termination.
(1)
A Stock Award shall be
any compensation grant to a Participant that provides for payment to a Participant
in Common Shares.
(2)
An Award of Restricted Stock
is a Stock Award where the Common Shares granted to a Director are subject to a
substantial risk of forfeiture, other restrictions on transfer, or such other restrictions
on incidents of ownership as the Committee may determine, which restrictions will
lapse upon achievement of one or more goals relating to the completion of services
by the Director or achievement of other objectives as may be determined by the Committee.
A certificate for shares of Restricted Stock, which certificate shall be registered
in the name of the Director, shall bear an appropriate restrictive legend and shall
be subject to appropriate stop-transfer orders; provided, however, that the certificates
representing shares of Restricted Stock shall be held in custody by the Company
until the restrictions relating thereto otherwise lapse, and; provided, further,
that the Director shall deliver to the Company a stock power endorsed in blank relating
to the shares of Restricted Stock as soon as practicable following the date of grant.
(3)
Stock Awards, including Awards of
Restricted Stock, may be issued at the time of grant, upon the exercise of an SAR,
Option or other right, as payment of a bonus, as payment of any other compensation
obligations, upon the occurrence of a future event, at a specified time in the future
or as otherwise determined by the Committee. The period during which Restricted
Stock is subject to restrictions may commence prior to the actual transfer of Restricted
Stock to a Participant if so specified in the Award Agreement.
(1)
Subject to the following provisions
of this subsection 6(d), 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 Eligible Directors surrender to the
Company for repurchase of Common Shares owned for at least six months by the Eligible
Director who is the holder of the Option (the value of such Common Shares shall
be the Fair Market Value on the date of exercise and the proceeds of such repurchase
shall be applied by the Company to pay the Exercise Price (or part thereof, as applicable)),
through a combination of Common Shares and cash, or through such other means as
the Committee determines are consistent with the Plans purpose and subject
to and in compliance with applicable law. No fractional Common Shares will be issued
or accepted.
(3)
All Common Shares issued pursuant
to this Section 6 shall be issued as fully paid.
(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 Participants 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.
(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.
(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
Companys 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 Companys 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.
(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
determination 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.
(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.
Executive
Performance Annual Incentive Plan
(a)
Award means a performance
incentive bonus paid pursuant to the Plan.
(b)
Board means the Board
of Directors of the Company.
(c)
Code means the Internal
Revenue Code of 1986 as amended. Reference to a specific section of the Code shall
include such section, any valid regulation promulgated thereunder, and any comparable
provision of any future legislation or regulation amending, supplementing or superseding
such section or regulation.
(d)
Committee means the Committee
appointed by the Board to administer the Plan. The Committee shall consist of no
fewer than two members of the Board. The members of the Committee shall be appointed
by, and serve at the pleasure of, the Board. Each member of the Committee shall
qualify as an outside director under Code Section 162 (m).
(e)
Company means Everest
Re Group, Ltd. or any successor corporation.
(f)
Participant means a corporate
officer of the Company or a Subsidiary selected by the Committee in its sole discretion
to participate in the Plan.
(g)
Performance Criteria
means the following measures of performance:
net income, before or after taxes
operating income, before or after
taxes
premiums earned
earnings per share
return on stockholders equity
return on assets
appreciation in and/or maintenance
of the price of the common stock or any other publicly traded securities of the
Company
comparisons with various stock market
indices
market share
statutory combined ratio
expense ratio
reductions in costs and expense growth
gross or net premium growth
(h)
Performance Goal means
the goal or goals established for a Participant by the Committee in accordance with
paragraph 4 (a).
(i)
Subsidiary means any corporation
in which the Company, directly or indirectly, controls 50% or more of the total
combined voting power of all classes of such corporations stock.
(j)
Target Awards means the
amount of the target award established for each Participant by the Committee in
accordance with paragraph 4 (a).
(a)
Within ninety (90) days after the
beginning of each year, the Committee, in its sole discretion, shall select Participants
for the year and establish in writing (i) objective Performance Goal or Goals for
each Participant for that year based on one or more of the Performance Criteria
(ii) the specific award amounts that will be paid to each Participant if the Performance
Goal or Goals are achieved (the Target Award) and (iii) an objective
method by which such amounts will be calculated, which calculation will be based
upon a comparison of actual performance to the Performance Goal or Goals. The calculation
of the amount of an Award shall be objectively determinable. The maximum Award that
may be paid to any Participant under the Plan for any year will be $2.5 million.
The selection of a Participant for any given year does not mean that the Participant
will be selected or will be entitled to be selected as a Participant in any subsequent
year.
(b)
The Committee, in its sole discretion,
may eliminate or reduce, but not increase, any Award calculated under the methodology
established in accordance with paragraph 4 (a).
(c)
As soon as practicable following
each year while the Plan is in effect, the Committee shall determine and certify
in writing the extent to which the Performance Goal or Goals applicable to each
Participant for the year were achieved and the amount of the Award, if any, to be
made. Awards will be paid to the Participants in cash following such certification
by the Committee and no later than ninety (90) days following the close of the year
with respect to which the Awards are made, unless a Participant has elected to defer
all or a portion of such payment pursuant to the Companys or a Subsidiarys
Deferred Compensation Plan, in which event, payment of the amount deferred will
be made in accordance with the terms of the Deferred Compensation Plan.
(d)
No Award will be paid to any Participant
who is not an employee of the Company on the last day of the year, except that if
during the last eight (8) months of the year, the Participant retires, dies, or
is involuntarily terminated, the Participant may be entitled to a prorated Award
as and to the extent determined by the Committee in its sole discretion. If a Participant
is on disability for more than four (4) months of the year, the Participant will
be entitled to a prorated Award. Participants, who resign voluntarily after the
end of the year, but before Award payments are payments are actually made, will
be eligible for an Award as and to the extent determined by the Committee in its
sole discretion. The provisions of this subparagraph are subject to the terms of
any written agreement between a Participant and the Company.
(e)
In no event shall the total amount
of Awards granted to the Participants in any one year exceed ten percent (10%) of
the Companys average annual income before taxes for the preceding five years.
(a)
The Plan shall be administered by
the Committee. The Committee shall have all discretion and authority necessary or
appropriate to administer the Plan and to interpret the provisions of the Plan,
consistent with qualification of the Plan as performance-based compensation under
Code Section 162(m). Any determination, decision or action of the Committee in connection
with the construction, interpretation, administration or application of the Plan
shall be final, conclusive and binding upon all persons.
(b)
No member of the Committee or the
Board shall be liable for any action taken or determination made in good faith with
respect to the Plan or any Award thereunder, and the Company shall defend and indemnify
Committee and Board members for any actions taken or decisions made in good faith
under the Plan.
(a)
NON-ASSIGNABILITY. No Award shall
be assignable or transferable (including pursuant to a pledge or security interest)
other than by will or by laws of descent and distribution.
(b)
WITHHOLDING TAXES. Whenever payments
under the Plan are to be made, the Company and/or the Subsidiary shall withhold
therefrom an amount sufficient to satisfy any applicable governmental withholding
tax requirements related thereto.
(c)
AMENDMENT OR TERMINATION OF THE PLAN.
The Board may at any time and without notice to any corporate officer of the Company
or a Subsidiary suspend, discontinue, revise, amend or terminate the Plan; provided,
that any such revision, or amendment which requires approval of the Companys
shareholders in order to maintain the qualification of Awards as performance-based
compensation pursuant to Code Section 162(m) shall not be made without such approval.
(d)
NON-UNIFORM DETERMINATIONS. The Committees
determinations under the Plan need not be uniform and may be made by it selectively
among persons who receive, or are eligible to receive, Awards under the Plan, whether
or not such persons are similarly situated. Without limiting the generality of the
foregoing, the Committee shall be entitled, among other things, to make non-uniform
and selective determinations and to establish non-uniform and selective Performance
Goals.
(e)
OTHER PAYMENTS OR AWARDS. Nothing
contained in the Plan shall be deemed in any way to limit or restrict the Company,
its Subsidiaries, or the Committee from making any award or payment to any person
under any other plan, arrangement or understanding, whether now existing or hereafter
in effect.
(f)
PAYMENTS TO OTHER PERSONS. If payments
are legally required to be made to any person other than the person to whom any
amount is available under the Plan, payments shall be made accordingly. Any such
payment shall be a complete discharge of the liability of the Company, its Subsidiaries,
and the Committee.
(g)
UNFUNDED PLAN. A Participant shall
have no interest in any fund or specified asset of the Company or a Subsidiary.
Nothing contained in the Plan, and no action taken pursuant to its provisions, shall
create or be construed to create a trust of any kind, or a fiduciary relationship
between the Company or its Subsidiaries and any Participant, beneficiary, legal
representative or any other person. To the extent that any person acquires a right
to receive payments from the Company and its Subsidiaries under the Plan, such right
shall be no greater than the right of an unsecured general creditor of the Company
and its Subsidiaries. All payments to be made hereunder shall be paid from the general
funds of the Company and its Subsidiaries and no special or separate fund shall
be established and no segregation of assets shall be made to assure payment of such
amounts. The Plan is not intended to be an employee benefit plan subject to the
Employee Retirement Income Security Act of 1974, as amended.
(h)
LIMITS OF LIABILITY. Neither the
Company, its Subsidiaries, nor any member of the Board or of the Committee, nor
any other person participating in any determination of any question under the Plan,
or in the interpretation, administration or application of the Plan, shall have
any liability to any party for any good faith action taken or not taken under the
Plan.
(i)
NO RIGHT TO EMPLOYMENT. Nothing contained
in this Plan shall confer upon any Participant any right to continue in the employ
or other service of the Company or a Subsidiary, or constitute any contract or limit
in any way the right of the Company or a Subsidiary to change such persons
compensation or other benefits or to terminate the employment or other service of
such person with or without cause.
(j)
INVALIDITY. If any term or provision
contained herein shall to any extent be invalid or unenforceable, such term or provision
shall be reformed so that it is valid and such invalidity or unenforceability shall
not affect any other provision or part hereof.
(k)
APPLICABLE LAW. The Plan shall be
governed by the laws of the State of Delaware as determined without regard to the
conflict of law principles thereof.
(l)
CODE SECTION 162 (M). It is the intent
of the Company that all Awards under the Plan qualify as performance-based compensation
for purposes of Code Section 162 (m) so that the Companys tax deduction for
such Awards is not disallowed in whole or in part under Code Section 162 (m). The
Plan is to be applied and interpreted accordingly.
(m)
SUCCESSORS. The obligations of the
Company and its Subsidiaries under this Plan shall be binding upon any organization
that shall succeed to all or substantially all of the Companys or a Subsidiarys
assets.
May 25, 2005, 11:00 a.m.
Wessex House, 45 Reid Street
Hamilton HM 12, Bermuda
FOLD AND DETACH HERE
SEE REVERSE
SIDE
P.O. BOX 8687
EDISON, NJ 08818-8687
May 25,
2005,
11:00 a.m.
Wessex House, 45 Reid Street
Hamilton HM 12, Bermuda
FOLD AND DETACH HERE
6287
Please mark your
votes as in this
example.
EVEREST RE GROUP, LTD.
1.
Election of
FOR
WITHHELD
To elect Thomas J. Gallagher and
Directors
FOR all nominees
|_|
|_|
AUTHORITY
William F. Galtney, Jr. as Directors
listed (except as
WITHHOLD
of the Company for a three-year
marked to the
to vote for
term ending in 2008.
contrary)
nominees listed
|_|
For all nominees except as written above
Signature:
__________________________________
Date:
_________________
Signature:
________________________________
Date:
_______________