EVEREST RE GROUP, LTD.
----------------------------
NOTICE OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 23, 200122, 2002
TO THE SHAREHOLDERS OF EVEREST RE GROUP, LTD.:
The Annual General Meeting of Shareholders of Everest Re Group, Ltd. (the
"Company"), a Bermuda company, will be held at the Royal Pavilion Hotel,
Porters, St. James, Barbados on Wednesday, May 23, 200122, 2002 at 11:00 a.m., for the
following purposes:
1. To elect two Class IIIII Directors of the Company, each to serve for a
three-year period to expire at the 20042005 Annual General Meeting of
Shareholders or until such director's successor shall have been duly
elected or appointed or until such director's office is otherwise
vacated.
2. To appoint PricewaterhouseCoopers LLP as the Company's independent
auditors for the year ending December 31, 20012002 and authorize the Board
of Directors to set the fees for the independent auditors.
3. To consider and approve the Everest Re Group, Ltd. 2002 Stock Incentive
Plan as described in the accompanying Proxy Statement.
4. To authorize adjourning or postponing the meeting to solicit additional
votes, if necessary.
5. To consider and act upon any other business, if any, as may properly
come before the meeting and any and all adjournments thereof.
The Company's financial statements for the year ended December 31, 20002001
together with the report of the Company's auditor in respect of these financial
statements, as approved by the Company's Board of Directors, will be presented
at this Annual General Meeting.
Only shareholders of record, as shown by the transfer books (Register of
Members) of the Company, at the close of business on March 30, 200127, 2002 are entitled
to notice of, and to vote at, the Annual General Meeting.
You are cordially invited to attend the meeting in person. Whether or not
you expect to attend the meeting in person, you are urged to sign and date the
enclosed proxy and return it promptly in the postage prepaid envelope provided
for that purpose.
By Order of the Board of Directors
Janet J. Burak,Joseph A. Gervasi, Secretary
April 14, 200111, 2002
Hamilton, Bermuda
EVEREST RE GROUP, LTD.
PROXY STATEMENT
-------------------------
ANNUAL GENERAL MEETING OF SHAREHOLDERS
MAY 23, 200122, 2002
The enclosed Proxy Card is being solicited on behalf of the Board of
Directors (the "Board") for use at the 20012002 Annual General Meeting of
Shareholders of Everest Re Group, Ltd., a Bermuda company (the "Company"), to be
held on May 23, 2001,22, 2002, and at any adjournment thereof. It may be revoked at any
time before it is exercised by giving a laterlater-dated proxy, notifying the
Secretary of the Company in writing at the Company's registered office at
Clarendon House, 2 Church Street, Hamilton HM 11 Bermuda, or by voting in person
at the Annual General Meeting. All shares represented at the meeting by properly
executed proxies will be voted as specified and, unless otherwise specified,
will be votedvoted: (1) for the election of KennethWilliam F. Galtney, Jr. and Thomas J.
Duffy and Joseph V. TarantoGallagher as directors anddirectors; (2) for the appointment of PricewaterhouseCoopers LLP as
independent auditors.auditors and for authorizing the Board to set the fees for the
independent auditors; (3) for the approval of the Everest Re Group, Ltd. 2002
Stock Incentive Plan and (4) for authorizing the adjournment or postponement of
the meeting to solicit additional votes, if necessary.
Only shareholders of record at the close of business on March 30, 200127, 2002 will
be entitled to vote at the meeting. On that date, 46,096,37851,286,165 common shares, par
value $.01 per share ("Common Shares"), were outstanding and entitled to vote.
Except as may be provided in the Company's Bye-laws, where voting is by poll,
each Common Share is entitled to one vote.
The election of each nominee for director, and the approval of all other
matters to be voted upon at the Annual General Meeting, require the affirmative
vote of a majority of the votes cast at the Annual General Meeting, provided
there is a quorum (consisting of not less than two persons present in person or
by proxy holding in excess of 50% of the issued and outstanding Common Shares
entitled to attend and vote at the Annual General Meeting). The Company has
appointed inspectors of election to count votes cast in person or by proxy.
Common Shares owned by shareholders electing to abstain from voting will be
counted towards the presence of a quorum. However, such Common Shares, and
Common Shares owned by shareholders and not voted in person or by proxy at the
Annual General Meeting (including "broker non-votes"), will not be counted
towards the majority needed to elect a director or approve any other matter
before the shareholders and thus will have no effect on the outcome of those
votes.
This Proxy Statement, the attached Notice of Annual General Meeting, the
Annual Report of the Company for the year ended December 31, 20002001 (including
financial statements) and the enclosed Proxy Card are first being mailed to the
Company's shareholders on or about April 14, 2001.11, 2002.
On February 24, 2000, the Company became the holding company for Everest
Reinsurance Holdings, Inc. ("Everest Holdings") and its subsidiaries in
connection with a restructuring. As a result, all references in this document to
the Company prior to February 24, 2000 should be deemed to refer to Everest
Holdings and all references to the Common Shares prior to February 24, 2000
should be deemed to refer to the common stock of Everest Holdings.
All references in this document to "$" or "dollars" are references to the
currency of the United States of America.
The Company knows of no specific matter to be brought before the Annual
General Meeting that is not referred to in the attached Notice of Annual General
Meeting of Shareholders and this Proxy Statement. If any such matter comes
before the meeting, including any shareholder proposal properly made, the proxy
holders will vote proxies in accordance with their best judgment with respect to
such matters. To be properly made, a shareholder proposal must
comply with the Company's Bye-Laws and, in order for any matter to come before
the meeting, it must relate to matters referred to in the attached Notice of
Annual General Meeting.
PROPOSAL NO. 1--ELECTION OF DIRECTORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE DIRECTOR NOMINEES
DESCRIBED BELOW. PROXIES WILL BE SO VOTED UNLESS SHAREHOLDERS SPECIFY OTHERWISE
IN THEIR PROXIES.
The Company's Bye-Laws provide for the division of the Board into three
classes, with the directors in each class serving for a term of three years. At
the 20012002 Annual General Meeting, two nominees for Class IIIII director positions
are to be elected to serve until the 20042005 Annual General Meeting of Shareholders
or until their successors are elected and qualified or until such director's
office is otherwise vacated. All of the nominees for election as Class IIIII
directors at this meeting, and all directors whose term of office will continue
after the meeting, are currently directors of the Company. The Class IIII director
positions will be subject to election at the 20022003 Annual General Meeting of
Shareholders and the Class III directors will be subject to election at the 20032004
Annual General Meeting of Shareholders. It is not expected that any of the
nominees will become unavailable for election as a director, but if any nominee
should become unavailable prior to the meeting, proxies will be voted for such
persons as the Board shall recommend, unless the Board reduces the number of
directors accordingly. There are no arrangements or understandings between any
director and any other person pursuant to which such person was selected as a
director or nominee.
INFORMATION CONCERNING NOMINEES
The following information has been furnished by the respective nominees for
election of Class IIIII directors for a term expiring in 2004.
KENNETH J. DUFFY, 71, became a Class II director of the Company on March
12, 1996 and served as a director of Everest Reinsurance Company, a wholly owned
subsidiary of the Company ("Everest Re") from March 1996 to February 2000. Mr.
Duffy is a retired insurance executive. He served with the insurance holding
company, Commercial Union Corporation, and its parent company, CGU plc, from
1948 until his retirement in 1999. He was President and Chief Executive of
Commercial Union Corporation from January 1985 to January 1995, Chairman and
Chief Executive from January 1993 to January 1995, Chairman from January 1995 to
October 1998 and Senior Advisor to CGU plc from October 1998 to December 1999.
Until December 1999, he was also a director of Commercial Union Canada Holdings,
Ltd. and the President and a director of Curepool (Bermuda) Ltd. He is also a
vice president of the Insurance Institute of London and a fellow of the
Institute of Risk Management.
JOSEPH V. TARANTO, 52, a Class II director, became Chairman of the Board
and Chief Executive Officer of the Company and Everest Re on October 17, 1994
and served as President of both companies from December 1994 until Mr.
Gallagher's election as President on February 24, 1997. Mr. Taranto also serves
as a director and Chairman and Chief Executive Officer of Everest Holdings, as a
director and Chairman of Everest Reinsurance (Bermuda), Ltd. ("Bermuda Re") and
as a director of Everest Re. Mr. Taranto was a director and President of
Transatlantic Holdings, Inc. and a director and President of Transatlantic
Reinsurance Company and Putnam Reinsurance Company (both subsidiaries of
Transatlantic Holdings, Inc.) from 1986 to 1994.
INFORMATION CONCERNING CONTINUING DIRECTORS AND EXECUTIVE OFFICERS
The following information has been furnished by those directors whose terms
of office will continue after the 2001 Annual General Meeting and by the other
executive officers.
MARTIN ABRAHAMS, 68, 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.
JOHN R. DUNNE, 71, became a Class I director of the Company on June 10,
1996 and served as a director of Everest Re from June 1996 to February 2000. Mr.
Dunne, an attorney and member of the bar of both New York and the District of
Columbia, has since 1994 been counsel to the law firm of Whiteman, Osterman &
Hanna in
2
Albany, New York. Mr. Dunne is a director of CGU Corporation. 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 for the
United States Government, Department of Justice. From 1966 to 1989, Mr. Dunne
served as a New York State Senator while concurrently practicing law as a
partner in New York law firms.2005.
THOMAS J. GALLAGHER, 52,53, became a Class III director of the Company on
March 13, 1996. Mr. Gallagher also serves as a director of Everest Re,Reinsurance
Company, a wholly-owned subsidiary of the Company ("Everest Re"), having first
been elected to that position in 1987. Elected President and Chief Operating
Officer of both the Company and Everest Re on February 24, 1997, Mr. Gallagher
had been Executive Vice President of both companies since December 1995 and a
Senior Vice President of the Company since 1994 and of Everest Re since 1989.
Since joining Everest Re in 1975, he has served as an underwriter in the
facultative and treaty departments, as vice president in charge of the
facultative department and as vice president in charge of the treaty casualty
department. Mr. Gallagher 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,Re"), as a director and Chairman
of Everest Global Services, Inc. ("Everest Global"), as a director and Chairman
of Everest National Insurance Company ("Everest National"), as a director and
Chairman of Everest Insurance Company of Canada ("EVCAN"), as a director and
Chairman of Mt. McKinley Insurance Company ("Mt. McKinley"), as a director and
Chairman and Chief Executive Officer of Everest Indemnity Insurance Company
("Everest Indemnity"), as a director of WorkCare Southeast, Inc. ("WorkCare
Southeast") and WorkCare Southeast of Georgia, Inc. ("WorkCare Georgia"), and as director and Chairman of
CRA-CO
Holdings, Ltd. ("CRA-CO"), SoutheasternEverest Security Insurance Company ("Southeastern"Everest
Security") (f/k/a Southeastern Security Insurance Company) and Adjusters
Unlimited, Inc. ("AUI"), all of which are subsidiaries of the Company.
WILLIAM F. GALTNEY, JR.Jr., 48,49, became a Class III director of the Company on
March 12, 1996 and served as a director of Everest Re from March 1996 to
February 2000. Since 1983, Mr. Galtney hasis currently President of Gallagher Healthcare
Insurance Services, Inc. ("GHIS"), which is a wholly-owned subsidiary of Arthur
J. Gallagher & Co. Mr. Galtney had been the Chairman and Chief Executive Officer
since 1983 of Healthcare Insurance Services, Inc. ("HIS") (predecessor to GHIS),
a managing general and surplus lines agency previously indirectly owned by The
Galtney Group, Inc. ("GGI"),. GGI is a holding
company in which he has an ownership interest45% owned by Mr. Galtney and of
which he is also Chairman and Chief Executive Officer.
Mr. Galtney also servesINFORMATION 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.
2
MARTIN ABRAHAMS, 69, became a Class I director of the Company on March 12,
1996 and served as either the chairman or a director of various subsidiariesEverest 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 affiliateswas a partner in that firm from 1969 to 1995.
KENNETH J. DUFFY, 72, became a Class II director of GGI.the Company on March
12, 1996 and served as a director of Everest Re from March 1996 to February
2000. Mr. GaltneyDuffy is a retired insurance executive. He served with the insurance
holding company, Commercial Union Corporation, and its parent company, CGU plc,
from 1948 until his retirement in 1999. He was President and Chief Executive of
Commercial Union Corporation from January 1985 to January 1995, Chairman and
Chief Executive 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 MutualCommercial 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 Ltd.
STEPHEN L. LIMAURO, 49, is an executive officerManagement.
JOHN R. DUNNE, 72, became a Class I director of the Company on June 10,
1996 and served as a director of Everest Re from June 1996 to February 2000. Mr.
Dunne, an attorney and member of the bar of both New York and the District of
Columbia, has since 1994 been counsel to the law firm of Whiteman, Osterman &
Hanna in Albany, New York. Mr. Dunne was a director of CGU Corporation 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 for the United States Government, Department of
Justice. From 1966 to 1989, Mr. Dunne served as a New York State Senator while
concurrently practicing law as a partner in New York law firms.
JOSEPH V. TARANTO, 53, a Class II director, became ComptrollerChairman of the Board
and Chief Executive Officer of the Company and Everest Re on October 17, 1994
and served as President of both companies from December 1994 until Mr.
Gallagher's election as President on February 24, 1997. Mr. Taranto also serves
as a director and Chairman and Chief Executive Officer of Everest Holdings, as a
director and Chairman of Bermuda Re and as a director of Everest Re. Mr. Taranto
was a director and President of Transatlantic Holdings, Inc. and a director and
President of Transatlantic Reinsurance Company and Putnam Reinsurance Company
(both subsidiaries of Transatlantic Holdings, Inc.) from 1986 to 1994.
STEPHEN L. LIMAURO, 50, is an Executive Vice President and the Chief
Financial Officer of the Company. He served as Comptroller of the Company from
September 1997 until November 6, 2001. He served as Comptroller of Everest Re
from September 25, 1997 and Chief
Financial Officer anduntil August 29, 2001. He served as Treasurer of the
Company from November 17, 1999 until November 6, 2001 and Treasurer of Everest
Re onfrom November 17, 1999.1999 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
Treasurer and Comptroller of Everest Holdings and a
director of Bermuda Re,
Everest Re, Everest National and Everest Indemnity, a director and
AFCchairman of Everest Re Advisors, Ltd. ("AFC"Everest Re Advisors"), which
are subsidiariesa Bermuda
subsidiary of the Company.Company, and a director of Everest Advisors (Ireland) Limited
("Everest Ireland"), an Irish subsidiary of Everest Re Advisors. He also serves
as a director and Treasurer of EVCAN. He serves as a director and President of
Everest Re Holdings, Ltd. ("ERHL"), a subsidiary of Everest Re, and of Everest
Global and is Chief Financial Officer of WorkCare Southeast and WorkCare
GeorgiaGeorgia. He is also a director of Bermuda Re and Chief
AccountantEverest International
Reinsurance, Ltd. ("Everest International"), (f/k/a AFC Re Ltd.), which are
subsidiaries of WorkCare, Inc. ("WorkCare").the Company. He also serves as a director, Senior Vice President
and Chief Financial Officer of CRA-CO Southeastern and AUI, allboth of which are subsidiaries of
the Company. He alsoMr. Limauro serves as a director Vice
President and Comptroller of Mt. McKinley and served as Comptroller of Mt.
McKinley Managers, L.L.C. until November 6, 2000. PriorEverest
Security and, prior to the restructuring, Mr. Limaurohe was a director and Chairman of the
Company.
JANETPETER J. BURAK, 50, is an executive officer of the Company and became Vice
President, General Counsel and Secretary of the Company upon its organization on
November 11, 1993. SheBENNETT, 51, became a Senior Vice President of the Company and Everest
Re on January 31, 1994. Ms. Burak has served as General Counsel of Everest Re
since 1985 and in 1986 was appointed Secretary. Ms. Burak is also Senior Vice
President, Secretary and General Counsel of Everest Holdings and Everest Global,
a director of Bermuda Re and a director and Assistant Secretary of
3
Everest National and Everest Indemnity. She is a director, Vice President and
Assistant Secretary of ERHL, Vice President and Secretary of Mt. McKinley,
Secretary of EVCAN and Assistant Secretary of Mt. McKinley Managers, L.L.C.,
WorkCare Southeast and WorkCare Georgia. She serves as Associate General Counsel
of WorkCare. She also serves as an Assistant Secretary of CRA-CO, Southeastern
and AUI, all of which are subsidiaries of the Company. Prior to the
restructuring, Ms. Burak was a director and Deputy Chairman of the Company.
PETER J. BENNETT, 50, is an executive officer of the Company and became
Senior Vice President on May
23, 2000. He serves as Managing Directordirector and Chief Executive Officer of Bermuda Re and is
a director and Vice President of AFC.Everest International Reinsurance, Ltd. Mr. Bennett
was President of the Citadel Group Representatives, Inc. from 1985 to 1987 and
from 1990 to 2000.
3
THE BOARD OF DIRECTORS AND ITS COMMITTEES
The Board conducts its business through its meetings and meetings of its
committees. SixFour meetings of the Board were held in 2000.2001. No director, either in
person or through an alternate director appointment as permitted under Bermuda
law, attended fewer than 75% of the aggregate of the total number of meetings of
the Board and the total number of meetings of all committees of the Board on
which the director served. The Board currently maintains Audit and Compensation
Committees. The Board does not maintain a nominating committee or other
committee performing similar functions.
AUDIT COMMITTEE
The Audit Committee was created by the Board on March 21, 1996. The
principal purpose of the Audit Committee is to assist the Board in fulfilling
its oversight responsibilities by reviewing (i) the financial reports and other
financial information provided by the Company to governmental bodies or the
public, (ii) the Company's systems of internal controls regarding finance,
accounting, legal compliance and ethics that management and the Board have
established and (iii) the Company's auditing, accounting and financial reporting
processes generally. The Audit Committee relies upon appropriate Company
financial and legal personnel and the Company's independent auditors to review
the Company's internal controls and financial statements, audit findings and
significant accounting and reporting issues. The Audit Committee adopted a
Charter on May 23, 2000 that is attached to this Proxy Statement as Exhibit A.2000. In May 2001, the Board re-examined and again approved
the adequacy of the Charter, a copy of which was furnished in the proxy
statement for the 2001 Annual General Meeting of Shareholders.
The current members of the Audit Committee are Mr. Abrahams, Mr. Duffy and
Mr. Dunne, none of whom are employees or officers of the Company and all of whom
meet the independence standards of the New York Stock Exchange. Mr. Abrahams
served as Chairman of the Audit Committee in 1997 and until February 26, 1998.
Mr. Dunne was designated Chairman of the Audit Committee effective February 26,
1998 and is currently serving in that position. The Audit Committee held three
meetings in 2000.2001.
COMPENSATION COMMITTEE
The Compensation Committee exercises authority with respect to all
compensation and benefits afforded all officers at the Senior Vice President
level and above, the Designated Executive Officers (as defined herein), and the
Company's Chief Financial Officer, Comptroller, and Treasurer and the Company's
General Counsel and Secretary. The
Compensation Committee also has oversight responsibilities for the
administration of the Company's Annual Incentive Plan, the 1995 Stock Incentive
Plan, the 2002 Stock Incentive Plan (if such plan is approved by the
shareholders at the Annual General Meeting) and the Executive Performance Annual
Incentive Plan.
The current members of the Compensation Committee are Mr. Abrahams and Mr.
Duffy, neither of whom are current or former employees or officers of the
Company. Mr. Duffy has been designated to serve as Chairman.Chairman of the Compensation
Committee. The Compensation Committee held twothree meetings and acted by unanimous written consent on one
occasion in 2000.2001.
4
COMMON SHARE OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Shares as
of March 30, 200127, 2002 by the directors of the Company, by the designated executive
officers listed in the Summary Compensation Table (the "Designated Executive
Officers") and by all directors and executive officers of the Company as a
group. Information in this table was furnished to the Company by the respective
directors and Designated Executive Officers. Unless otherwise indicated in a
footnote, each person listed in the table possesses sole voting power and sole
dispositive power with respect to the shares shown in the table to be owned by
that person.
AMOUNT AND NATURE OF PERCENT OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS (11)
----------------------- -------------------- ---------
Martin Abrahams ....................... 14,828(1)20,143(1) *
Kenneth J. Duffy ...................... 14,128(2)19,443(2) *
John R. Dunne ......................... 13,948(3)19,263(3) *
Thomas J. Gallagher ................... 114,727(4)142,327(4) *
William F. Galtney, Jr. ............... 165,228(5)160,543(5) *
Joseph V. Taranto ..................... 547,142(6) *618,142(6) 1.20
Stephen L. Limauro .................... 21,200(7)27,800(7) *
Janet J. Burak ........................ 26,300(8)30,400(8) *
Peter J. Bennett ...................... 4,000(9)8,000(9) *
All directors and executive officers
as a group (9 persons) ....... 821,501(10) 1.78%1,046,061(10) 2.03
- ---------------------
* Less than 1%
(1) Includes 9,05613,718 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(2) Includes 9,05613,718 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(3) Includes 8,87613,538 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(4) Includes 105,100132,700 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(5) Includes 151,600141,600 shares owned by Galtney Family Investors, Ltd., a limited
partnership in which Mr. Galtney maintains a beneficial ownership and for
which he serves as the General Partner. Also includes 9,05613,718 shares
purchasable upon the exercise of stock options exercisable within 60 days
of March 30, 2001.27, 2002.
(6) Includes 197,000328,000 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(7) Includes 3,000 shares of restricted stock issued to Mr. Limauro under the
Company's 1995 Stock Incentive Plan. Such stock may not be sold or
transferred until the vesting requirements have been satisfied. Also
includes 17,80024,400 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(8) Includes 1,000 shares of restricted stock issued to Ms. Burak underceased being an executive officer of the Company's 1995 Stock Incentive Plan. Such stock may not be sold or
transferred untilCompany on January 24,
2002, but is identified as a "Designated Executive Officer" for 2001 for
purposes of the vesting requirements have been satisfied. Also
includes 23,700Proxy Statement.
(9) Includes 8,000 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.
(9)27, 2002.
(10) Includes 4,000547,792 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.
(10) Includes 383,644 shares purchasable upon the exercise of stock options
exercisable within 60 days of March 30, 2001.27, 2002.
(11) Based on 46,096,37851,286,165 total Common Shares outstanding and entitled to vote as
of March 30, 2001.27, 2002.
5
PRINCIPAL HOLDERS OF COMMON SHARES
To the best of the Company's knowledge, the only beneficial owners of more
than 5% of the outstanding Common Shares as of December 31, 20002001 are set forth
below. This table is based on information provided in Schedule 13Gs filed with
the Securities and Exchange Commission by each of the parties listed in the
table.
NUMBER OF SHARES PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED CLASS
------------------------------------ ------------------ ---------
FMRJanus Capital Corp. ............................... 5,342,3052,632,140 (1) 11.652%
82 Devonshire5.7%
100 Fillmore Street
Boston, Massachusetts 02109Denver, Colorado 80206-4923
Morgan Stanley Dean Witter & Co. ........ 2,572,6212,608,985 (2) 5.61%5.64%
1585 Broadway
New York, New York 10036
- -------------------
(1) FMRJanus Capital Corp. reports in its Schedule 13G that it has sole voting power with
respect to 184,410 Common Shares, shared voting power with respect to 0
Common Shares, soleand
dispositive power with respect to 5,342,305 Common
Shares and shared dispositive power with respect to 02,632,140 Common Shares.
(2) Morgan Stanley Dean Witter & Co. reports in its Schedule 13G that it has
sole voting power with respect to 0 Common Shares, shared voting power with respect to 2,441,921 Common Shares, sole dispositive power with respect to
02,554,785 Common Shares and shared
dispositive power with respect to 2,572,6212,608,985 Common Shares.
DIRECTORS' COMPENSATION
Each member of the Board who is not otherwise affiliated with the Company
as an employee and/or officer ("Non-Employee(each, a "Non-Employee Director") was compensated
in 20002001 for services as a director and was also reimbursed for out-of-pocket
expenses associated with each meeting attended. The annual compensation for 20002001
of the Non-Employee Directors was $46,125.$45,000. Compensation was paid in four
installments by the issuance of Common Shares. Compensating the Non-Employee
Directors with Common Shares is intended to align their interests with those of
the Company's shareholders. The value of Common Shares issued is calculated
based on the average of the highest and lowest sale prices of the Common Shares
on the installment dates or, if no sale is reported for that day, the next
preceding day for which there is a reported sale. For 2000,In 2001, each of the
Non-Employee Directors was issued a total of 1,378651 shares as compensation for his
services as a director in accordance with this procedure. As of January 1, 2001,2002,
the value of these shares for each Non-Employee director was $98,699$46,026 based upon
the $71.625$70.70 closing price of a Common Share on December 29, 2000.31, 2001.
In addition, the Company has adopted the 1995 Stock Option Plan for
Non-Employee Directors (the "Directors' Plan"), which is designed to maintain
the Company's ability to attract and retain the services of experienced and
highly qualified outside directors and to create a proprietary interest in the
Company's continued success. Each of the Non-Employee Directors on the Board is
awarded options to purchase that number of Common Shares equal to $50,000
divided by the fair market value of such shares as of the date he is initially
appointed to the Board, with an exercise price equal to that fair market value.
As defined in the Directors' Plan, the fair market value is determined by
averaging the highest and lowest trading prices of the Common Shares on the date
of the option award.
Upon their initial appointment to the Board on March 12, 1996, Mr.
Abrahams, Mr. Duffy and Mr. Galtney were each granted options to purchase 2,216
Common Shares at an exercise price of $22.5625 per share. Upon his initial
appointment to the Board on June 10, 1996, Mr. Dunne was granted options to
purchase 2,036 Common Shares at an exercise price of $24.5625 per share.
Pursuant to a Stock Option Agreement for Non-Employee Directors dated February
23, 2000,September
21, 2001, each of the foregoing four directors was granted options to purchase
7,50010,000 Common Shares at an exercise price of $25.3438$48.01 per share.
6
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation paid or accrued for the last
three fiscal years with respect to the Company's Chief Executive Officer and the
four other most highly compensated executive officers who were serving as
executive officers as of December 31, 20002001 (the "Designated Executive
Officers"), for services rendered by them to the Company and to its
subsidiaries.
SUMMARY COMPENSATION TABLE
LONG-TERM COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ ----------------------------------------------------- -----------------------------
RESTRICTED SECURITIES ALL OTHER
OTHER ANNUAL STOCK UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY($) BONUS($)(1) COMPENSATION(2) AWARD(S)BONUS ($)(2) COMPENSATION (3) AWARD(S) ($)(4) OPTIONS(#) ($)(4)(5)
- ------------------------------------------------------- ---- --------- ----------- ------------- ---------------- --------------- -------------- ----------- ------------
Joseph V. Taranto 20002001 $1,000,000 $1,400,000 -- -- 100,000200,000 $31,050
Chairman of the Board 2000 1,000,000 1,400,000 -- -- 100,000 31,050
and Chief Executive 1999 964,387 1,150,000 -- -- 80,000 18,461
and Chief Executive 1998 945,426 745,660 -- -- 150,000 23,804
Officer
Thomas J. Gallagher 2001 415,385 365,000 -- -- 33,000 13,512
President and Chief 2000 371,923377,308 350,000 -- -- 33,000 12,369
President and ChiefOperating Officer 1999 341,538 300,000 -- -- 30,000 14,138
Operating Officer 1998 338,654 225,000 -- -- 27,500 13,544
Stephen L. Limauro 2001 241,539 200,000 -- -- 12,000 8,259
Executive Vice President 2000 194,300202,377 175,000 -- $141,750 10,000 6,917
Executive Vice PresidentChief Financial Officer 1999 172,992 100,000 -- -- 8,000 5,918
Chief Financial Officer 1998 170,339 65,000 -- -- 6,000 5,800
and Comptroller
Janet J. Burak (1) 2001 207,692 -- -- -- 10,000 7,102
(Senior Vice President 2000 181,869189,919 100,000 -- -- 9,000 6,495
Senior Vice PresidentGeneral Counsel 1999 173,923 80,000 -- -- 8,000 6,184
General Counsel 1998 174,654 60,000 -- __ 8,000 5,948
and SecretarySecretary)
Peter J. Bennett 2001 259,615 80,000 55,000 -- 5,000 14,481
Senior Vice President of 2000 152,885 100,000 41,001 -- 20,000 5,663
Senior Vice President of 1999 -- -- -- -- -- --
Everest Re Group, Ltd. 19981999 -- -- -- -- -- --
and Managing Director
and Chief Executive
Officer of Bermuda Re
- ------------------
(1) Ms. Burak ceased being an executive officer and ceased holding these
positions on January 24, 2002.
(2) Represents compensation earned by the Designated Executive Officers for the
years ended December 31, 2000,2001, December 31, 19992000 and December 31, 19981999
pursuant to the Company's Annual Incentive Plan. In addition, the amounts
shown for Mr. Taranto for 1998 includes $279,760 pursuant to the Chief
Executive Officer's Bonus Plan that was in effect at that time but which
was not adopted by the Board at the restructuring in 2000. The amounts shown for Mr.
Taranto for 1999 and 2000 include $1,150,000 and $1,400,000
respectivelywere awarded pursuant to the Executive Performance Annual Incentive
Plan.
(2)(3) The amount reported for 2000 includes $40,000 paid to Mr. Bennett in 2000 as a
housing allowance and $1,001 as reimbursement of expenses incurred by him
to move household items to Bermuda, both of which were provided under the
terms of his employment agreement with Bermuda Re. (3)The amount reported for
2001 was attributable entirely to the housing allowance under the terms of
his employment agreement.
7
(4) The amount reported represents the value of the Common Shares underlying
the restricted stock at the date of grant, without taking into account any
diminution in value attributable to the restrictions on such stock. An
award of restricted stock to Mr. Limauro was made on September 21, 2000;
the closing price of a Common 7
Share on the New York Stock Exchange on that
date was $47.25. This restricted stock award vests at the rate of 20% per
year over a five-year period. As of December 31, 2000,2001, Mr. Limauro held
3,000 restricted Common Shares valued at $214,875,$213,150, based on $71.625$71.05 as the
average of the high and low trading prices of a Common Share on the New
York Stock Exchange on December 29, 2000.31, 2001. Dividends are paid quarterly on
these restricted Common Shares at the same rate as dividends paid on Common
Shares held by public shareholders.
(4) For 2000,(5) The amount reported for 2001 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--$1,050,
(b) Mr. Gallagher--$1,050, (c) Mr. Limauro--$846,1,013, (d) Ms. Burak--$797872 and
(e) Mr. Bennett--$375;1,500; and (ii) the following employer contributions to
qualified and non-qualified employee savings plans: (a) Mr.
Taranto--$30,000, (b) Mr. Gallagher--$11,319,12,462, (c) Mr. Limauro--$6,071,7,246, (d)
Ms. Burak--$5,698;6,230; and (iii) the following employer contribution to a
qualified savings plan: Mr. Bennett--$5,288.12,981.
STOCK OPTION GRANTS
The following table sets forth certain information concerning stock options
granted under the Company's 1995 Stock Incentive Plan during 20002001 to the
Designated Executive Officers.
OPTION /SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
----------------------------------------------------------------------------------------------------------------------------------------------------------------
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) FISCAL YEAR(2) ($/SH) DATE (3) ($)(4)
------------ --------------- -------------- ----------- ------------ --------------
Joseph V. Taranto .......... 100,000 22.60% $25.3438 02/23/10 $1,313,260200,000 34.91% $66.23 04/20/11 $6,734,080
Thomas J. Gallagher ........ 33,000 7.46 25.3438 02/23/10 433,3765.76 48.01 09/21/11 762,392
Stephen L. Limauro ......... 10,000 2.26 25.3438 02/23/10 131,32612,000 2.09 48.01 09/21/11 277,234
Janet J. Burak ............. 9,000 2.03 25.3438 02/23/10 118,19310,000 1.74 48.01 09/21/11 231,028
Peter J. Bennett ........... 20,000 4.52 34.25 05/23/10 354,9525,000 .87 48.01 09/21/11 115,514
- -------------------
(1) Represents non-qualified stock options granted to Mr. Taranto, Mr.
Gallagher, Mr.
Limauro, and Ms. Burak and Mr. Bennett on February 23, 2000September 21, 2001 and to Mr. BennettTaranto
on May 23, 2000,April 20, 2001, all of which become exercisable in 20% installments each
year commencing with the first anniversary of the grant dates, as long as
employment with the Company or its subsidiaries continues. These stock
options were granted with an exercise price equal to 100% of the fair
market value of a Common Share on the date of grant. With respect to the
grant of options to Mr. Taranto, 155,000 options do not constitute
performance-based compensation under Section 162(m) of the U.S. Internal
Revenue Code of 1986, as amended. See Section III of the Compensation
Committee Report, below. No SARs were granted in 2000.2001.
(2) Based upon 442,300572,800 non-qualified stock options granted to all employees in
2000.2001.
(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:
8
(a) Expected Volatility--The annualized standard deviation of the
continuously compounded rate of return on the underlying stock, based
on the closing price observations for the twelve-month period ended
December 31, 2000,2001, which was 45.84%38.2586%.
(b) Risk Free Rate of Return--The rate available, on the date of grant, on
zero-coupon U.S. government issues with a remaining term comparable to
the expected life of the options as reported over the Bloomberg wire
service, which was 5.2%5.217%.
8
(c) Dividend Yield--The yield calculated by dividing the estimated
annualized dividend rate of the Common Shares in the amount of $.24$.28
per share by the weighted average fair market value of the stock on
the date of grant, which resulted in an assumed dividend yield of
0.9%0.52%.
(d) Expected Life--The average length of time before assumed exercise
reflecting vesting provisions and maximum exercise period, which was
7.57.3 years.
STOCK OPTION EXERCISES AND OPTION VALUES
The following table table sets forth certain information concerning the number
and value of unexercised stock options at the end of 20002001 held by the Designated
Executive Officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
SHARES OPTIONS/SARS IN-THE-MONEY OPTIONS/SARS
ACQUIRED ON VALUE AT FY-END(#) AT FY-END($FY-END ($)(2)(1)
NAME EXERCISE(#) REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------- ------------ --------------------------- ----------- ----------- ------------- ----------- -------------
Joseph V. Taranto 0 0 161,000 294,000 $6,109,967 $11,850,806252,000 403,000 $9,462,721 $17,007,041
Thomas J. Gallagher 0 0 92,500 88,500 4,315,452 3,656,981120,100 93,900 5,320,693 3,240,109
Stephen L. Limauro 4,000 161,250 14,200 22,800 622,556 960,0370 0 20,800 28,200 875,114 948,808
Janet J. Burak 5,000 197,188 20,300 24,700 889,321 1,021,3800 0 28,300 26,700 1,189,327 909,025
Peter J. Bennett 0 0 0 20,000 0 755,0004,000 21,000 92,160 704,000
- ---------------------
(1) For Ms. Burak, based upon an exercise price of $16.75 per share and a
fair-market value of $56.1875 per share on the date of exercise, November
6, 2000. For Mr. Limauro, based upon an exercise price of $16.75 per share
and a fair-market value of $57.0625 per share on the date of exercise,
November 1, 2000.
(2) Based on the year-end fair market value of Common Shares of $71.625,$71.05, which
is calculated by averaging the high and low trading prices on December 29,
200031,
2001 on the New York Stock Exchange. The value of the options is computed
by subtracting the exercise prices of the options from their fair market
values and multiplying the difference by the number of shares underlying
the options at the applicable exercise prices.
COMPENSATION COMMITTEE REPORT
I. Executive Compensation Policy
OVERVIEW. The Company's executive compensation program in 20002001 was designed
to attract, retain and motivate highly talented individuals whose abilities are
critical to the success of the Company. Compensation policies that attract
personnel of this caliber are particularly important for a relatively new public
entity like the Company. The Company's compensation program is guided by the
following fundamental principles:
o Compensation of executive officers is based on the level of job
responsibility, the performance of the Company and the performance of
the individual.
o Total compensation levels are designed to be competitive with
compensation paid by organizations of similar stature.
o Compensation should align the interests of the executive officers with
those of the Company's shareholders by basing a significant part of
total compensation on the long-term performance of the Common Shares.
The Company's executive compensation program in 20002001 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.
9
In establishing executive compensation, the various components of compensation
are considered collective-
9
lycollectively in order to properly assess the appropriateness of
the Company's program relative to the attainment of its objectives. The
Company's executive compensation program consists of two key elements: (i) an
annual component, I.E., base salary and annual bonus and (ii) a long-term
component, I.E., stock options, stock appreciation rights, restricted stock and
stock awards.
The Compensation Committee reviewed a variety of factors of historical and
projected Company performance in determining executive compensation. In the
course of this review, the Compensation Committee considered the Company's
long-term compensation goals, the Company's financial performance and the
compensation practices of other reinsurers through a review of publicly
available information. In reviewing these factors, the Compensation Committee
was able to assess the overall performance of the Company and its prospects for
the future to establish an acceptable range for executive compensation.
II. Components Of Executive Compensation
A. ANNUAL COMPENSATION
In 2000,2001, annual compensation for executive officers of the Company
consisted of two components-base salary and a cash payment under either the
Company's Executive Performance Annual Incentive Plan (in the case of Mr.
Taranto) or the Company's Annual Incentive Plan (in the case of the other
executive officers). The base salary for Mr. Taranto was subject to the terms of
his current employment agreement (see "Employment and Change of Control
Agreements--Mr. Taranto" below). The base salaries for the other executive
officers were determined by the Compensation Committee based on each executive
officer's performance and, as previously discussed, the Company's performance
and the range of compensation of executive officers with similar
responsibilities in comparable companies.
Annual bonuses paid to executive officers under the Annual Incentive Plan
and the Executive Performance Annual Incentive Plan are a significant element of
the executive compensation program. Under the Annual Incentive Plan, the Company
may make cash payments each year to employees who hold positions of significant
responsibility and/or whose performance or potential contribution, in the
judgment of the 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
Committee in its sole discretion may determine and after considering
recommendations made by the Chief Executive Officer of the Company. The
aggregate amount available for all awards each year is determined annually by
the Compensation Committee based upon performance goals established by the
Committee. The determination of individual awards is subjective in nature and is
influenced by the Compensation Committee's perception of the importance of an
individual's contributions to the overall success of the Company. To evaluate
corporate performance, the Compensation Committee considered the following
factors related to the Company's 20002001 financial results: after-tax operating
income, return on equity and earnings growth.
The Compensation Committee has arrived at total compensation for each of
the Designated Executive Officers that it believes is appropriate to the
Company's performance and their individual contributions.
The Executive Performance Annual Incentive Plan was approved by the
Company's shareholders on May 20, 1999. Each year the Compensation Committee
selects executive officers of the Company and its subsidiaries who will be
eligible that year to participate in the Executive Performance Annual Incentive
Plan. Currently, only Mr. Taranto, the Company's Chairman and Chief Executive
Officer, is a participant (see "Chief Executive Officer Compensation" below).
Each year, the Compensation Committee establishes in writing objective
performance goals for each participant, which, if attained, will entitle such
participant to specific award amounts that will be paid to each participant.
Each participant's performance is measured by any of the following performance
criteria: net income before or after taxes, operating income before or after
taxes, premiums earned, earnings per share, return on share-
10
holders'shareholders' equity,
return on assets, appreciation in and/or maintenance of the price of the Common
Shares or any other publicly traded
10
securities of the Company, comparisons with various stock market indices, market
share, statutory combined ratio, expense ratio, reductions in costs and expense
growth, or gross or net premium growth. The Compensation Committee establishes
an objective method by which award amounts are calculated under the plan. The
maximum award amount any one participant may be awarded in one year is $2
million. The Compensation Committee, in its sole discretion, may eliminate or
reduce but not increase any award determination. The plan provides that the
total amount of awards granted to all participants in any one year may not
exceed 10% of the Company's average annual income before taxes for the preceding
five years.
B. LONG-TERM COMPENSATION
In 2000,2001, the long-term incentive used for executive officers was provided
under the 1995 Stock Incentive Plan. Awards under this plan are intended to
reinforce management's long-term perspective on corporate performance and
provide an incentive for key executives to remain with the Company for the
long-term.
Awards under the 1995 Stock Incentive Plan are a significant element of the
Company's executive compensation program. Compensation derived from share
ownership provides a strong incentive to increase shareholder value, since the
value of this compensation is determined by changes in the price of the Common
Shares over the term of each award. Awards under the 1995 Stock Incentive Plan
may take the form of stock options, stock appreciation rights, restricted stock
or stock awards. Stock options, the principal form of long-term incentive
compensation under the 1995 Stock Incentive Plan, encourage retention because
they carry a five-year vesting period and, if not exercised, are generally
forfeited if the employee leaves the Company before retirement. In addition,
stock options, granted at the fair market value on the date of grant and with
terms not to exceed 10 years, are designed to keep management and professional
employees oriented to growth over the long-term and not simply to short-term
profits. Awards are granted subjectively at the discretion of the Compensation
Committee based on a variety of factors, including a recipient's demonstrated
past and expected future performances, as well as a recipient's level of
responsibility with the Company and his or her ability to affect shareholder
value.
Since the institution of the 1995 Stock Incentive Plan and through December
31, 2001, the Compensation Committee has granted employees 2,305,9002,878,700 options to
purchase Common Shares. Awards granted to the Company's Designated Executive
Officers during 20002001 are summarized under the captions "Options/SARs Grants in
Last Fiscal Year" and "Summary Compensation Table" above. When granting these
awards, the Compensation Committee took into account prior grants to these
individuals under the 1995 Stock Incentive Plan and determined that the 20002001
grants were appropriate and in the best interests of the Company. The
Compensation Committee has determined the need for a new stock incentive plan as
described in Proposal 3.
The Company does not have a long-term cash bonus plan in effect. TheSubject to
the approval of the shareholders of Proposal 3, the Company currently intends to rely on
the 19952002 Stock Incentive Plan as the sole means of long-term compensation,
believing compensation in the form of share ownership increases long-term value
for the shareholders while compensating individual employees for superior
performance.
III. Deductibility Cap On Executive Compensation
Section 162(m) of the U.S. Internal Revenue Code of 1986, as amended (the
"Code"), limits the ability of a publicly-held company to take a tax deduction
for annual compensation in excess of $1 million paid to its chief executive
officer or to any of its four other most highly paid executive officers.
However, compensation is exempt from this limit if it qualifies as
"performance-based compensation." To preserve this deduction, the Company has
designed its incentive plans to constitute "performance-based compensation" and
not be counted toward the $1 million limit. However, the 1995 Stock Incentive
Plan and the proposed 2002 Stock Incentive Plan 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
11
the subsidiaries may enter into compensation arrangements under which payments
would not be deductible under section 162(m).
11
IV. Chief Executive Officer Compensation
In 2000,2001, Mr. Taranto's compensation was based on the terms of the Secondhis
Employment Agreement with the Company and Everest Re (see "Employment and Change
of Control Agreements--Mr. Taranto" below) and consisted of base salary and
non-qualified stock options as set forth in that section. The Compensation
Committee also approved a $1,400,000 cash payment to Mr. Taranto under the
Executive Performance Annual Incentive Plan for fiscal year 20002001 (see "Summary
Compensation Table" and "Annual Compensation" above). This performance-based
award was calculated as a function of the Company's actual operating earnings
per share in 20002001 in accordance with a formula previously established by the
Compensation Committee.
Kenneth J. Duffy Martin Abrahams
AUDIT COMMITTEE REPORT
The Audit Committee ("Committee") has reviewed and discussed with management, which has
primary responsibility for the financial statements, and with the Company's
independent auditors, the audited financial statements for the year ended
December 31, 20002001 (the "Audited Financial Statements"). In addition, the Audit
Committee has discussed with PricewaterhouseCoopers LLP, the Company's
independent auditing firm, the matters required to be discussed by Statement on
Auditing Standards No. 61. The Audit Committee also has discussed with
management of the Company and with PricewaterhouseCoopers LLP such other matters
and received such assurances from them as were deemed appropriate.
The Audit Committee also has received the written disclosures and the
letter from PricewaterhouseCoopers LLP required by Independence Standards Board
Standard No. 1, and has discussed with that firm its independence. The Audit
Committee has considered whether the performance by PricewaterhouseCoopers LLP
of the non-audit services disclosed under "Financial Information Systems Design
and Implementation Fees" and "All Other Fees" is compatible with maintaining
their independence.
Based on the foregoing review and discussions and relying thereon, the
Audit Committee has recommended to the Company's Board of Directors the
inclusion of the Audited Financial Statements in the Company's Annual Report for
the year ended December 31, 20002001 on Form 10-K.
The fees billed to the Company by PricewaterhouseCoopers LLP and its
worldwide affiliates in 20002001 are as follows:
Audit Fees: The aggregate fees billed for professional services rendered by
the independent auditors for the audit of the Company's financial
statements as of and for the year ended December 31, 20002001 and the review of
the financial statements included in the Company's Quarterly Reports on
Form 10-Q for the year were $788,903.$870,146.
Financial Information Systems Design and Implementation Fees: The aggregate
fees billed for financial information systems design and implementation
rendered by the independent auditors during 2000 were $129,233.2001 amounted to $1,102,249.
The entire amount was attributable to the conversion of the existing ledger
system to PeopleSoft, a project that was completed in 2001.
All Other Fees: The aggregate fees billed by the independent auditors
during 20002001 for non-audit and non-information systems related services were
$413,127.$807,718, of which $544,000 was attributable to worldwide tax services.
PricewaterhouseCoopers LLP used no leased employees on the Company's audit
engagement.
Martin Abrahams Kenneth J. Duffy John R. Dunne
12
PERFORMANCE GRAPH
The following Performance Graph compares cumulative total shareholder
returns on the Common Shares (assuming reinvestment of dividends) from October
3, 1995 (when the Company's shares were first listed on the New York Stock
Exchange) through December 31, 2000,2001, with the cumulative total return of the
Standard & Poor's 500 Index and the Standard & Poor's Insurance (Property and
Casualty) Index.
[EDGAR REPRESENTATION OF LINE GRAPH IN PRINTED DOCUMENT]
COMPARISON OF 6375 MONTH CUMULATIVE TOTAL RETURN*
AMONG EVEREST RE GROUP, LTD., THE S&P 500 INDEX AND
THE S&P INSURANCE (PROPERTY-CASUALTY) INDEX
(LINE CHART OMITTED)(PROPERTY-CASUALTY INDEX)
EVEREST RE GROUP, LTD. S&P 500 S&P INSURANCE (PROPERTY-CASUALTY)
1010/03/1995 100 100 100
12/95 119 106 106
12/96 147 130 129
12/97 213 174 188
12/98 202 224 175
12/99 117 271 130
12/00 377 246 203
12/01 373 217 187
Cumulative Total Return*
-----------------------------------------------------------------------------------------------------------------------------------
10/03/1995 12/95 12/96 12/97 12/98 12/99 12/00 12/01
EVEREST RE GROUP, LTD. 100 119 147 213 202 117 377 373
S&P 500 100 106 130 174 224 271 246 217
S&P INSURANCE (PROPERTY-CASUALTY) 100 106 129 188 175 130 203 187
* $100 INVESTED ON 10/3/95 IN STOCK OR ON 9/30/95 IN INDEX -- INCLUDING
REINVESTMENT OF DIVIDENDS. FISCAL YEAR ENDING DECEMBER 31.
13
RETIREMENT PLAN
All the executive officers of the Company, with the exception of Mr.
Bennett, participate in the Everest Reinsurance Company Retirement Plan (the
"Retirement Plan") and in the Supplemental Retirement Plan (the "Supplemental
Plan"), both of which are defined benefit pension plans. As an employee of
Bermuda Re, Mr. Bennett is not eligible to participate in the Retirement Plan
and Bermuda Re does not maintain a defined benefit retirement plan. The
Retirement Plan is a tax-qualified plan that determines benefits under a formula
that takes into account a participant's years of continuous service and final
average earnings with Everest Re and certain affiliates, including during the
period of affiliation with the Prudential Insurance Company of America
("Prudential"). The Supplemental Plan is a non-qualified plan that provides
benefits that would otherwise be provided under the Retirement Plan formula but
for the application of certain limitations on tax-qualified benefits under the
Code. The Retirement Plan and the Supplemental Plan are similar to the
tax-qualified and supplemental pension plans of Prudential in which the
executive officers and other employees of the Company and Everest Re
participated prior to the Company's initial public offering. The following table
shows the estimated annual pension benefits payable at normal retirement age to
a participant under the Retirement Plan and the Supplemental Plan who attains
the earnings and service classifications indicated under the plans.
FINAL AVERAGE EARNINGS YEARS OF CONTINUOUS SERVICE
- ---------------------- -------------------------------
5 10 15 20 25 30 35
-------- -------- -------- --------- --------- --------- --------- --------- ------------------- ---------- ----------
$ 250,000 ...... $ 23,97123,718 $ 47,58147,436 $ 71,37271,154 $ 95,16294,872 $ 118,953118,590 $ 130,988130,597 $ 143,023142,604
300,000 ...... 28,791 57,581 86,372 115,162 143,953 158,488 173,02328,718 57,436 86,154 114,872 143,590 158,097 172,604
350,000 ...... 33,791 67,581 101,372 135,162 168,953 185,988 203,02333,718 67,436 101,154 134,872 168,590 185,597 202,604
400,000 ...... 38,791 77,581 116,372 155,162 193,953 213,488 233,02338,718 77,436 116,154 154,872 193,590 213,097 232,604
450,000 ...... 43,791 87,581 131,372 175,162 218,953 240,988 263,02343,718 87,436 131,154 174,872 218,590 240,597 262,604
500,000 ...... 48,971 97,581 146,372 195,162 243,953 268,488 293,02348,718 97,436 146,154 194,872 243,590 268,097 292,604
750,000 ...... 73,791 147,581 221,372 295,162 368,953 405,988 443,02373,718 147,436 221,154 294,872 368,590 405,597 442,604
1,000,000 ...... 98,791 197,581 296,372 395,162 493,953 543,488 593,02398,718 197,436 296,154 394,872 493,590 543,097 592,604
1,250,000 ...... 123,791 247,581 371,372 495,162 618,953 680,988 743,023123,718 247,436 371,154 494,872 618,590 680,597 742,604
1,500,000 ...... 148,791 297,581 446,372 595,162 743,953 818,488 893,023148,718 297,436 446,154 594,872 743,590 818,097 892,604
1,750,000 ...... 173,791 347,581 521,372 695,162 868,953 955,988 1,043,023173,718 347,436 521,154 694,872 868,590 955,597 1,042,604
2,000,000 ...... 198,791 397,581 596,372 795,162 993,953 1,093,488 1,193,023198,718 397,436 596,154 794,872 993,590 1,093,097 1,192,604
2,250,000 ...... 223,791 447,581 671,372 895,162 1,118,953 1,230,988 1,343,023223,718 447,436 671,154 894,872 1,118,590 1,230,597 1,342,604
2,500,000 ...... 248,791 497,581 746,372 995,162 1,243,953 1,368,488 1,493,023248,718 497,436 746,154 994,872 1,243,590 1,368,097 1,492,604
2,750,000 ...... 273,791 547,581 821,372 1,095,162 1,368,953 1,505,988 1,643,023273,718 547,436 821,154 1,094,872 1,368,590 1,505,597 1,642,604
3,000,000 ...... 298,791 597,581 896,372 1,195,162 1,493,953 1,643,488 1,793,023298,718 597,436 896,154 1,194,872 1,493,590 1,643,097 1,792,604
Benefits shown in the table above are computed as a single-life annuity and
reflect a reduction to recognize in part Everest Re's cost of social security
benefits. A participant's "final average earnings" under the Retirement Plan
will be his or her average annual "earnings" under the plan during the 72
consecutive months of continuous service in which the participant received the
greatest amount of earnings out of the final 120 months of continuous service.
For this purpose, "earnings" generally includes the participant's base salary,
cash bonus payments under the Chief Executive Officer's Bonus Plan, the
Executive Performance Annual Incentive Plan and, for participants who held
positions equivalent to or senior to that of department vice president when that
position existed, cash payments under the Company's Annual Incentive Plan. With
respect to cash payments made under the Annual Incentive Plan through December
31, 2000,1999, "earnings" did not include amounts in excess of 50% of salary or
$275,000, whichever was greater. Moreover, "earnings" does not include any other
compensation set forth in the Summary Compensation Table. Final average earnings
and earnings will be determined under the Supplemental Plan in the same manner
as under the Retirement Plan, except that a participant's earnings are not
subject to the limitations under the Code. "Continuous service" under the
Retirement Plan and Supplemental Plan will be the number of years and months
worked for Everest Re and certain affiliates, including during the period of
affiliation with Prudential.
14
The years of continuous service for Mr. Taranto, Mr. Gallagher, Mr. Limauro
and Ms. Burak to be taken into account under the Retirement Plan and
Supplemental Plan (rounded to the nearest year), as of April 1, 2001,2002, are 6, 26,
28,7, 27,
29 and 21,22 respectively. Final average earnings for Mr. Taranto, Mr. Gallagher,
Mr. Limauro and Ms. Burak to be taken into account as of April 1, 20012002 are
$1,651,737, $542,003, $224,725$1,964,551, $616,670, $288,769 and $238,991,$236,609 respectively. Final average
earnings for Mr. Taranto include the "Additional Compensation" amounts payable
under the terms of his initial Employment Agreement with the Company (see
"Employment Agreements" below).
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS--MR. TARANTO
The Company entered into an Employment Agreement with Mr. Taranto, dated as
of October 11, 1994 (the "Hiring Date"), which expired on December 31, 1999. The
Employment Agreement provided for an annual base salary (the "Base Salary") of
$500,000, plus additional cash compensation (the "Additional Compensation") of
$25,000 per month (which was not included in Mr. Taranto's salary for purposes
of computing Mr. Taranto's bonus under the Annual Incentive Plan established by
the Company). Each of the Base Salary and the Additional Compensation was
subject to annual increases of no less than four percent nor greater than eight
percent. Effective March 26, 1999, Mr. Taranto's Base Salary was increased to
$608,817 and his Additional Compensation was increased to $30,463 per month.
Prior to January 1, 1999, Mr. Taranto was eligible to participate in the Annual
Incentive Plan with a maximum bonus equal to 80% of his Base Salary and after
January 1, 1999 he was eligible for an award under the Executive Performance
Annual Incentive Plan (see "Compensation Committee Report--Chief Executive
Officer Compensation").
On July 15, 1998, the Company entered into anotheran employment agreement with Mr.
Taranto (the "Second"Employment Agreement"). The Employment Agreement"), whichAgreement became effective
as
ofon January 1, 2000 and will expirewas amended on April 20, 2001 to extend his term of
employment from December 31, 2001 to March 31, 2004 unless sooner terminated in
accordance with its terms. The terms of the Second Employment Agreement are
substantially similar to the terms of the Employment Agreement with the
following exceptions: (a) the Second Employment Agreement is for a period of two
years and provides for a base salary
of $1,000,000 per year and (b)states that Mr. Taranto will beis eligible to participate in
the Executive Performance Annual Incentive Plan. Upon entering into the
Second Employment Agreement in July 1998, Mr. Taranto received a
non-qualified optionoptions
under the Company's 1995 Stock Incentive Plan to purchase 150,000 Common Shares
as a sign-on bonus. Upon execution of the April 20, 2001 amendment extending the
term of his employment, he was granted non-qualified options to purchase 200,000
Common Shares under that plan.
In connection with the restructuring of the Company in February 2000, Mr.
Taranto entered
into an amendmentTaranto's Employment Agreement was amended to his Second Employment Agreement. The amendment providedstate that Mr. Tarantohe 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
agreementEmployment Agreement prior to the
restructuring. In connection with the restructuring,As a result, the Company and Everest Holdings are both parties to
the employment agreementEmployment Agreement and have co-extensive rights, powers, duties and
obligations. OtherThe February 2000 amendment made other conforming changes were also made to the
employment agreementEmployment Agreement to reflect the restructuring. In accordance with the amendment, whenWhen the Company established
Everest Global as a new Delaware subsidiary Everest Global Services, Inc. ("Everest Global"), to perform administrative and
back-office functions for the Company and its insurance subsidiaries, Mr.
Taranto transferred his employmentbecame an employee of that company and Everest Global became a party to
Everest Global.the Employment Agreement.
If the Company terminates Mr. Taranto's employment for "due cause" (as
defined in the Second Employment Agreement) or Mr. Tarantoif he
voluntarily terminates his employment other than for "good reason" (as defined
in the
Employment Agreement and the Second Employment Agreement), Mr. Taranto will be entitled to his base salary
due him through the date of termination. If the Company terminates Mr. Taranto's
employment other than for due cause, or if Mr.
Tarantohe voluntarily terminates his
employment for good reason, the Company will be obligated to pay Mr. Taranto,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 December 31, 2001,the end
of term and (ii) through December 31, 2001, the aggregate bonus amounts due under the appropriate bonus
plans or programs.programs through the end of the term.
In connection with the execution of the Second Employment Agreement, the Company
and Mr. Taranto also entered into a Change of Control Agreement dated as of July
15, 1998. The Change of Control Agreement provides that if within one year after
the occurrence of a material change (as defined in the agreement), Mr. Taranto
terminates his employment for any reason, or if the Company terminates Mr.
Taranto's employment for any reason other than for due cause (as defined in the
agreement), then (a) all of Mr. Taranto's outstanding stock options granted
under
15
the Company's stock plans shall immediately vest and become exercisable;
(b) Mr. Taranto shall receive a cash payment equal to the lesser of (i) 2.99
multiplied by Mr. Taranto's annual compensation for the most recent taxable year
ending prior to the date of the material change less the value of Mr. Taranto's
gross income in the most recent taxable year ending prior to the date of a
material change attributable to Mr. Taranto's exercise of stock options, stock
appreciation rights and other stock-based awards granted Mr. Taranto by the
Company and (ii) 2.99 multiplied by Mr. Taranto's "annualized includible
compensation for the base period" as that phrase is defined in Section 280G(d)
of the Code; (c)Mr. Taranto shall continue to be covered under the Company's
medical and dental insurance plans for a period of three years from the date of
termination; (d) Mr. Taranto shall receive "Special Retirement Benefits" in an
amount that will equal the retirement benefits he would have received had he
continued in the employ of the Company for three years following his termination
under the Everest Reinsurance Retirement Plan and any supplemental, substitute
or successor retirement plans adopted by the Company. In the event that the
benefits Mr. Taranto receives under the Change of Control Agreement cause Mr.
Taranto to receive a "Parachute Payment" within the meaning of Section 280G of
the Code, Mr. Taranto's benefits will be reduced to an amount that is one dollar
less than the amount that would cause a ParachutePara-
15
chute Payment. If an award made under the Change of Control Agreement
nevertheless results in an assessment against Mr. Taranto of a "Parachute Tax"
pursuant to Section 4999 of the Code, Mr. Taranto shall be entitled to receive
an additional amount of money that would put him in the same net tax position
had no Parachute Tax been incurred. The Change of Control Agreement will
terminate on the earliest of (i) one year following a material change; (ii)
termination by Mr. Taranto of his employment with the Company under
circumstances not following a material change; (iii) the Company's termination
of Mr. Taranto's employment for due cause; or (iv) DecemberMarch 31, 2001,2004, or any date
thereafter, with 60 days written notice.
In connection with the restructuring, Mr. Taranto entered into an amendment
to his Change of Control Agreement which provides that transactions with respect
to the Company after the restructuring will trigger benefits under the agreement
to the same extent as transactions with respect to Everest Holdings prior to the
restructuring. Changes were also made in the Change of Control Agreement to take
into account the establishment of Everest Global and Mr. Taranto's employment by
that company.
EMPLOYMENT AND CHANGE OF CONTROL AGREEMENTS -- MR.AGREEMENT--MR. BENNETT
On March 23, 2000, Bermuda Re entered into an employment agreement
("Agreement") with Mr.
Bennett under which he is to serve as the Managing Director and Chief Executive
Officer of Bermuda Re from May 1, 2000 until May 1, 2002. The Agreementagreement provides
for an annual salary of $250,000, plus $5,000 per month as a housing allowance.
Mr. Bennett is also eligible to participate in the Company's Annual Incentive
Plan, which is entirely discretionary in nature and which may be amended or
terminated by the Company at any time. He is also a participant in the Senior
Executive Change of Control Plan. (see(See "Other Change of Control Arrangements".).
Pursuant to the Agreement,employment agreement, Mr. Bennett was granted options under
the Company's 1995 Stock Incentive Plan to purchase 20,000 Common Shares of the
Company. The options will vest twenty percent per year over a five-year period.
Also pursuant to the Agreement,employment agreement, Mr. Bennett is receiving medical
insurance, dental insurance and group life insurance and is participating in a
qualified defined contribution plan.
If Bermuda Re terminates Mr. Bennett's employment prior to the end of the
AgreementMay 1, 2002 for
reasons other than misconduct or a breach of Bermuda Re's policies, a separation
payment equivalent to one year's salary will be made and a reasonable allowance
will be provided to move his personal possessions back to the United Kingdom.
Bermuda Re may terminate Mr. Bennett's employment for cause as defined in the
Agreementemployment agreement at any time during the term of the Agreementagreement without prior
notice. In that event, his employment with Bermuda Re shall be terminated,
and except as may be required above, Bermuda Re shall have no further
obligations to him..
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 Ms.
Burak and
Mr. Bennett to participate in the plan.
16
The Change of Control Plan provides that if within two years after the
occurrence of a material change (as defined in the plan) a participant
terminates his or her employment for good reason (as defined in the plan) or the
Company terminates the participant's employment for any reason other than for
due cause (as defined in the plan), then (a) all of the participant's
outstanding stock options granted under the Company's stock plans shall
immediately vest and become exercisable for three months following termination
of employment; (b) all restrictions on the participant's restricted stock
awarded under the Company's stock plans shall immediately terminate and lapse;
(c) the participant shall receive a cash payment equal to the participant's
average salary and annual incentive bonus for the three most recent taxable
years (or such shorter period as may be applicable), multiplied by a number
between 2 and 2.99 determined by the Compensation Committee (for Mr. Gallagher
the number is 2.99 and for Mr. Limauro Ms. Burak and Mr. Bennett the number is 2); (d) the
participant shall continue to be covered under the Company's medical and dental
insurance plans for a period of two years from the date of termination; and (e)
the participant shall receive "special retirement 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
16
continued in the employ of the Company for a period following termination
determined by the Compensation Committee. For Mr. Gallagher, the period is the
greater of 3 and the number of years necessary to credit service to his 55th
birthday, and for Mr. Limauro Ms.
Burak and Mr. Bennett, the period is 2 years.
CERTAIN TRANSACTIONS WITH DIRECTORS
Two of the Company's operating subsidiaries, Everest Re and Everest National have entered into a number of business transactions with Healthcare
Risk Management Services, Inc. ("Healthcare Risk Management"). Healthcare Risk
Management is a company in which Mr. Galtney, a member of the Board, maintained
a substantial ownership position during 2000. In 2000, as a result of these
transactions, Everest Re paid to Healthcare Risk Management, a licensed
reinsurance intermediary that routinely presents risks to Everest Re, brokerage
fees of $89,700 in respect of 1999 business and $34,500 in respect of 2000
business. Brokerage payable to Healthcare Risk Management as of January 1, 2001
was $34,500. Everest National also hashad a business relationship with WorkCare Northwest, Inc.
("WorkCare Northwest"), a company in which Mr. Galtney's
brother, Edward B. Galtney holds a 90% ownership50%
interest. Mr. Galtney is the brother of William F. Galtney, Jr. one of the
Company's directors. In 2000,2001, Everest National incurred and paid commissions in the amount of
$1,629,086$3,307,170 and loss control expenses in the amount of $367,463 to WorkCare
Northwest for insurance agency services as a program administrator under Everest
National's Idaho Workers Compensation Program. In 2000, Everest Re alsoThis program was cancelled as of
July 1, 2001 and is currently in run-off. It is expected that commissions and
loss control expenses will continue to be paid Western Litigation Specialists, Inc., a subsidiary of The Galtney Group, Inc.
(in which William Galtney holds an ownershipto WorkCare Northwest as premium
is collected in the future. It is estimated that commissions to be paid in 2002
will be approximately $304,499 and controlling interest) fees of
$100,000loss control expenses to administer and manage claims for St. Louis University Self Insured
Trust Program.be paid in 2002 will
be approximately $33,833.
PROPOSAL NO. 2--APPOINTMENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE YEAR
ENDING DECEMBER 31, 20012002 AND THE AUTHORIZATION OF THE BOARD OF DIRECTORS TO SET
THE FEES FOR THE INDEPENDENT AUDITORS. PROXIES WILL BE SO VOTED UNLESS
SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES.
The Company's independent auditors are appointed each year at the Annual
General Meeting of Shareholders pursuant to the Board's recommendation, which in
turn is based on the recommendation of the Audit Committee. In making its
recommendation, the Audit Committee reviews both the audit scope and estimated
fees for professional services for the coming year. Representatives of
PricewaterhouseCoopers LLP will be present at the 20012002 Annual General Meeting,
will have the opportunity to make a statement if they desire to do so, and will be
available to respond to appropriate questions of shareholders.
PROPOSAL NO. 3--APPROVAL OF THE EVEREST RE GROUP, LTD.
2002 STOCK INCENTIVE PLAN
THE BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE FOR THE APPROVAL OF THE
EVEREST RE GROUP, LTD. 2002 STOCK INCENTIVE PLAN TO BE EFFECTIVE UPON
SHAREHOLDER APPROVAL. PROXIES GIVEN BY SHAREHOLDERS OF RECORD WILL BE SO VOTED
UNLESS THE SHAREHOLDERS SPECIFY OTHERWISE IN THEIR PROXIES. PROXIES GIVEN BY
BENEFICIAL HOLDERS TO SHAREHOLDERS OF RECORD MAY NOT BE SO VOTED UNLESS
BENEFICIAL HOLDERS SPECIFY A VOTE FOR APPROVAL IN THEIR PROXIES.
On February 26, 2002, the Board of Directors adopted the Everest Re Group,
Ltd. 2002 Stock Incentive Plan (the "Plan"), subject to approval by the
Company's shareholders. The Plan will become effective immediately upon approval
by the shareholders. The Board of Directors adopted the Plan to replace the
Everest Re Group, Ltd. 1995 Stock Incentive Plan (the "1995 Plan") because the
share reserve for the 1995 Plan has been substantially depleted during the past
61/2 years. Upon approval of the proposed Plan by the shareholders, no further
awards will be granted under the 1995 Plan. The Board of Directors recommends
approval of the Plan by the shareholders because the Board believes it is
important for employees and others providing services to the Company and its
subsidiaries to have an equity interest in the Company. Following approval by
the shareholders, the Company intends to register the shares issued under the
Plan with the Securities Exchange Commission (the "SEC"). On March 27, 2002, the
closing sale price of the Common Shares as reported on the New York Stock
Exchange was $68.65 per share.
This summary of the material terms of the Plan is qualified in its entirety
by the full text of the Plan, a copy of which is set forth as Appendix A to this
Proxy Statement.
PLAN ADMINISTRATION
The Plan will be administered by a committee of the Board of Directors (the
"Committee"), which is required under the terms of the Plan to consist of two or
more non-employee directors. The Board of Directors has designated
17
the Compensation Committee as the Committee to administer the 2002 Plan. The
Committee has the authority to grant and amend, any type or combination of types
of awards, whether payable in stock, cash or a combination of the two.
The Committee may delegate all or any portion of its responsibilities or
powers under the Plan to persons selected by it. The Committee may also delegate
to officers of the Company discretionary authority with respect to substantial
decisions or functions regarding the Plan or awards, including decisions
regarding the timing, eligibility, pricing, amount or other terms of an award,
provided such awards are not made to insiders, who are defined as persons
subject to Section 16 of the Exchange Act.
GENERAL
The Plan provides for the grant of non-qualified and incentive stock
options, stock appreciation rights ("SARs"), restricted stock and stock awards.
The purpose of the 2002 Plan is to benefit the Company, its subsidiaries and its
shareholders by encouraging high levels of performance by individuals who are
key to the success of the Company and its subsidiaries and to enable the Company
to attract, motivate and retain talented and experienced individuals essential
to its success.
Awards may be granted under the Plan to any person, including any director
of the Company, who is an employee of the Company, or a consultant or advisor
who (other than non-employee directors) provides bona fide services for the
Company. No determination has been made as to which individuals will receive
grants under the Plan and, therefore, the benefits to be allocated to any one
individual or to any group of eligible individuals are not presently known.
As of April 1, 2002, approximately 470 employees of the Company would be
eligible to receive awards under the Plan, subject to the power of the Committee
to determine the eligible employees and other persons to whom awards would be
granted. The total number of shares that may be granted under the Plan is
4,000,000. Any shares allocated to an award under the Plan that expires, lapses
or 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. No awards may be granted under the Plan after the ten-year anniversary of
the effective date of the Plan.
The following additional limitations will apply to awards under the Plan:
(1) no more than 250,000 shares may be issued for restricted stock and stock
awards; (2) no more than 350,000 shares may be issued for options and SARs
granted to any one individual in any calendar year; and (3) no more than
1,000,000 shares may be issued for options intended to be Incentive Stock
Options. The Committee may make awards which are not intended to comply with
Section 162(m) of the Code, which awards will not be subject to the individual
limitations in the preceding sentence.
The shares with respect to which awards may be made under the Plan may be
shares that are currently authorized but unissued, or to the extent permitted by
applicable law, currently held or subsequently acquired by the Company,
including shares purchased in the open market or in private transactions.
The Committee may grant any combination of stock options (both incentive
and non-qualified), SARs, restricted stock or stock awards. The number of shares
subject to an 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 the 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").
The Plan contains provisions relating to adjustments of the terms of
outstanding awards to reflect changes in the Company's capitalization or shares
or the occurrence of specified events. The number of shares that may be acquired
under the Plan, the maximum number of shares that may be delivered pursuant to
awards, and such other terms as are necessarily affected by such specified
events are subject to adjustment in the event of a stock dividend, stock split,
recapitalization, merger, consolidation (whether or not Everest Re Group, Ltd.
is the surviving corporation), reorganization, combination or exchange of Shares
or similar events.
18
Except as otherwise provided by the Committee, awards under the Plan will
only be transferable to the extent designated by the participant by will or by
laws of descent and distribution.
STOCK OPTIONS
The Committee may grant options to purchase shares which may be either
incentive stock options or non-qualified stock options. 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 Plan will be
exercisable in accordance with the terms established by the Committee. The full
purchase price of each share purchased upon the exercise of any option must be
paid at the time of exercise. 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 an employee recipient of
a stock option award under the Plan terminates employment with the Company for a
reason other than death, disability, or retirement, the holder of the stock
option may exercise the stock option at any time within a period of three months
after such termination to the extent the stock option was exercisable on the
date of such termination. If the employee terminates employment by reason of
death, disability or retirement, the employee may exercise the stock option at
any time within a period of three years after such termination to the extent the
stock option was exercisable on the date of such termination. In no event,
however, may any stock 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 as well as 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. 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
(a grant 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 Plan permits the payment of the option exercise price or award price in
cash or, at the Committee's discretion, with shares valued at their fair market
value, or with a combination of such shares and cash. Shares may only be used
for payment, however, if they have been held by the participant for at least six
months (or such other period as may be required by the Committee) and meet any
other requirements established by the Committee. Other lawful consideration,
which may include a promissory note as may be approved by the Committee, may
also be applied to the purchase or exercise price of an award under the Plan, to
the extent authorized by the Committee and as may be permitted under relevant
state or Bermuda law.
Shares held by a participant may also be used to discharge tax withholding
obligations related to the exercise of options or the receipt of other awards to
the extent authorized by the Committee.
CHANGE IN CONTROL
In the event of a "Change in Control" of the Company (as defined in the
Plan), 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
19
Board of Directors take any of the following actions as a result, or in
anticipation, of any such event to assure fair and equitable treatment of
participants:
o accelerate time periods for purposes of vesting in, or realizing gain
from, any outstanding award made pursuant to the Plan;
o offer to purchase any outstanding award made pursuant to the Plan from
the holder for its equivalent cash value, as determined by the
Committee, as of the date of the Change of Control; or
o make adjustments or modifications to outstanding awards as the
Committee deems appropriate to maintain and protect the rights and
interests of participants following such Change of Control.
Any such action approved by the Board of Directors shall be conclusive and
binding on the Company and all participants.
AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or discontinue the
Plan, in whole or in part. The Committee may at any time alter or amend any or
all Award Agreements under the Plan to the extent permitted by law, but no such
alteration or amendment shall impair the rights of any holder of an award
without the holder's consent.
UNITED STATES INCOME TAX CONSEQUENCES OF THE PLAN
The following paragraphs provide a general summary of the U.S. federal
income tax consequences of the Plan based upon current law, which is subject to
change. State, local or foreign tax consequences are beyond the scope of this
summary. 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.
NON-QUALIFIED STOCK OPTIONS
The grant of a non-qualified 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 will take the same basis
and, for capital gains purposes, the same holding period as the shares that are
given up. The value of the shares received upon such an exchange that are in
excess of the number given up 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.
INCENTIVE STOCK OPTIONS
The grant of an incentive stock option will not result in taxable income to
the participant. The exercise of an incentive stock option will not result in
taxable income to the participant provided that the participant was, without a
break in service, an employee of the Company during the period beginning on the
date of the grant of the option and ending on the date three months prior to the
date of exercise (one year prior to the date of exercise if the participant is
disabled, as that term is defined in the Code).
The excess of the fair market value of the shares at the time of the
exercise of an incentive stock option over the exercise price is an adjustment
that is included in the calculation of the participant's alternative minimum
taxable income for the tax year in which the incentive stock option is
exercised. For purposes of determining the participant's alternative
20
minimum tax liability for the year of disposition of the shares acquired
pursuant to the incentive stock option exercise, the participant will have a
basis in those shares equal to the fair market value of the shares at the time
of exercise.
If the participant does not sell or otherwise dispose of the stock within
two years from the date of the grant of the incentive stock option or within one
year after the transfer of such stock to the participant, then, upon disposition
of such shares, any amount realized in excess of the exercise price will be
taxed to the participant as capital gain. A capital loss will be recognized to
the extent that the amount realized is less than the exercise price.
If the foregoing holding period requirements are not met, the participant
will generally realize ordinary income at the time of the disposition of the
shares in an amount equal to the lesser of (i) the excess of the fair market
value of the shares on the date of exercise over the exercise price, or (ii) the
excess, if any, of the amount realized upon disposition of the shares over the
exercise price. If the amount realized exceeds the value of the shares on the
date of exercise, any additional amount will be capital gain. If the amount
realized is less than the exercise price, the participant will recognize no
income and a capital loss will be recognized equal to the excess of the exercise
price over the amount realized upon the disposition of the shares.
The exercise of an incentive stock option through the exchange of
previously acquired stock will generally be treated in the same manner as such
an exchange would be treated in connection with the exercise of a non-qualified
stock option; that is, as a non-taxable, like-kind exchange as to the number of
shares given up and the identical number of shares received under the option.
That number of shares will take the same basis and, for capital gain purposes,
the same holding period as the shares that are given up. However, such holding
period will not be credited for purposes of the one-year holding period required
for the new shares to receive incentive stock option treatment. Shares received
in excess of the number of shares given up will have a new holding period and
will have a basis of zero or, if any cash was paid as part of the exercise
price, the excess shares received will have a basis equal to the amount of the
cash. If a disqualifying disposition (a disposition before the end of the
applicable holding period) occurs with respect to any of the shares received
from the exchange, it will be treated as a disqualifying disposition of the
shares with the lowest basis.
If the exercise price of an incentive stock option is paid with shares
acquired through a prior exercise of an incentive stock option, gain will be
realized on the shares given up (and will be taxed as ordinary income) if those
shares have not been held for the minimum incentive stock option holding period
(two years from the date of grant and one year from the date of transfer), but
the exchange will not affect the tax treatment, as described in the immediately
preceding paragraph, of the shares received.
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. 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.
21
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 Company's minimum statutory withholding
obligation.
TAX DEDUCTION
Everest Re Group, Ltd. is not subject to U.S. income taxes. However, if an
award is granted to a participant employed by a subsidiary that is a U.S.
taxpayer, the subsidiary will be entitled to a deduction equal to the amount of
income includible in the participant's income.
A U.S. income tax deduction will generally be unavailable for annual
compensation in excess of $1 million paid to any of the five most highly
compensated officers of a public corporation. However, amounts that constitute
"performance-based compensation" are not counted toward the $1 million limit. If
a U.S. subsidiary has an employee who is among the five most highly compensated
officers, that subsidiary's deduction will be subject to this limit. To preserve
the deduction for its U.S. subsidiary, the Company has designed the Plan to
enable awards thereunder to constitute "performance-based compensation" and not
be counted toward the $1 million limit. The Plan provides that the Committee, in
its sole discretion, may grant awards which are not intended to constitute
"performance-based compensation."
CHANGE IN CONTROL
Any acceleration of the vesting or payment of awards under the Plan in the
event of a Change in Control in 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.
TAX ADVICE
The preceding discussion is based on U.S. tax laws and regulations
presently in effect, which are subject to change, and the discussion does not
purport to be a complete description of the U.S. income tax aspects of the Plan.
A participant may also be subject to state and local taxes in connection with
the grant of awards under the Plan. 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 in their personal circumstances.
MISCELLANEOUS--GENERAL MATTERS
SECTION 16(a)16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's executive officers and directors, and persons who own more than
ten percent of a registered class of the Company's equity securities, to file
reports of ownership and changes in ownership on Forms 3, 4 and 5 with the Securities and
Exchange Commis-
17
sion (the "SEC")SEC
and the New York Stock Exchange. Officers,Executive officers, directors and greater than
ten percent shareholders are required by SEC regulation to furnish the Company
with copies of all Forms 3, 4 and 5 they file.
Based solely on the Company's review of the copies of suchthe forms it has
received and written representations that no other reports were required, the
Company believes that all of its officers, directors and greater than ten
percent beneficial owners have filed with the SEC on a timely basis all required
forms with respect to transactions during fiscal year 2000.2001.
SHAREHOLDER PROPOSALS FOR THE 20022003 ANNUAL GENERAL MEETING OF SHAREHOLDERS
To be considered for inclusion in the Company's Proxy Statement relating to
the 20022003 Annual General Meeting of Shareholders, a shareholder proposal must be
received by the Secretary of the Company in proper form at the Company's
registered office at Clarendon House, 2 Church Street, Hamilton HM 11, Bermuda
no later than December 15, 2001.12, 2002.
22
The proxy solicited by the Board of Directors relating to the 20022003 Annual
General Meeting of Shareholders shall confer discretionary authority to vote on
a shareholder proposal if the Secretary of the Company receives notice of that
proposal after February 28, 2002.25, 2003.
Shareholders who intend to nominate persons for election as directors at
general meetings must comply with the advance notice procedures set forth in the
Bye-Laws of the Company in order for such nominations to be properly brought
before that general meeting. These advance notice procedures require that
written notice of a shareholder's intent to make such a nomination at the 20022003
Annual General Meeting of Shareholders must be received by the Secretary of the
Company between November 15, 200112, 2002 and December 15, 2001.12, 2002.
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 and its subsidiaries without additional compensation. In addition,
Corporate
Investor Communications, Inc.Georgeson Shareholder will provide solicitation services to the Company for a
fee of approximately $4,500$5,000 plus out-of-pocket expenses. The firm will solicit
proxies by personal interview, telephone, telegraph and mail. The Company will,
on request, reimburse shareholders of record who are brokers, dealers, banks or
voting trustees, or their nominees, for their reasonable expenses in sending
proxy materials and annual reports to the beneficial owners of the shares they
hold of record.
TRANSFER AGENT AND REGISTRAR
The Company has appointed EquiServe Trust Company, N.A. to serve as
transfer agent, registrar and dividend paying agent for the Common Shares.
Correspondence relating to any share accounts or dividends should be addressed
to:
EquiServe Trust Company, N.A.
P.O. Box 2500
Jersey City, NJ 07303-2500
(201) 324-0498(800) 446-2617
All transfers of certificates for Common Shares should also be mailed to
the above address.
By Order of the Board of Directors
Janet J. BurakJoseph A. Gervasi
April 14, 200111, 2002 SECRETARY
1823
EXHIBITAPPENDIX A
EVEREST RE GROUP, LTD.
AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
CHARTER
I.2002 STOCK INCENTIVE PLAN
SECTION 1. ESTABLISHMENT AND PURPOSE
The primary functionpurpose of the Audit CommitteeEverest Re Group, Ltd. 2002 Stock Incentive Plan (the
"Plan") is to assistbenefit the Corporation, its Subsidiaries, and its shareholders by
encouraging high levels of performance by individuals who are key to the success
of the Corporation and its Subsidiaries and to enable the Corporation and its
Subsidiaries to attract, motivate and retain talented and experienced
individuals essential to their success. This is to be accomplished by providing
such eligible individuals an opportunity to obtain or increase their proprietary
interest in the Corporation's performance and by providing such individuals with
additional incentives to remain with the Corporation and its Subsidiaries.
SECTION 2. DEFINITIONS
The following terms, used herein, shall have the meaning specified:
(a) "AWARD" means any award or benefit granted under the terms of the
Plan.
(b) "AWARD AGREEMENT" means an agreement described in Section 6 hereof
entered into between the Corporation and a Participant, setting forth the terms
and conditions applicable to the Award granted to the Participant.
(c) "BOARD OF DIRECTORS" means the Board of Directors of the
Corporation as it may be comprised from time to time.
(d) "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.
(e) "COMMITTEE" means the Committee as defined in fulfilling its oversight responsibilities by reviewing:Section 8.
(f) "CORPORATION" means Everest Re Group, Ltd., and any successor
corporation.
(g) "EFFECTIVE DATE" means the financial reportsEffective Date as defined in Section
15.
(h) "EMPLOYEE" means officers and other financial informationkey employees of the
Corporation or a Subsidiary, but excludes directors of the Corporation who are
not also employees of the Corporation or a Subsidiary. "Employee" includes
consultants and advisors that provide bona fide services to the Corporation or a
Subsidiary, provided that such services are not in connection with the offer or
sale of securities of the Corporation or a Subsidiary in a capital-raising
transaction.
(i) "EXCHANGE ACT" means the Securities Exchange Act of 1934, and any
successor statute, as it may be amended from time to time.
(j) "EXERCISE PRICE" means a purchase or exercise price established by
the CompanyCommittee at the time an Option or an SAR is granted.
(k) "FAIR MARKET VALUE" means, unless otherwise provided in the Award
Agreement, the average of the highest and lowest sale price of the Stock as
reported on the Composite Transaction Tape of the New York Stock Exchange (or on
such other exchange, if any, on which the Stock is traded) on the relevant date,
or if no sale of the Stock is reported for such date, the next preceding day for
which there is a reported sale. If the Stock is 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 share to governmental bodiesbe issued under the
Plan.
24
(l) "INCENTIVE STOCK OPTION" means an option that is intended to
satisfy the requirements applicable to an "incentive stock option" described in
Section 422(b) of the Code.
(m) "INSIDER" means any person who is subject to "Section 16."
(n) "OPTION" means an Award granted under the Plan that entitles the
Participant, for a certain period of time, to purchase shares of Stock at an
Exercise Price established by the Committee.
(o) "PARTICIPANT" means any Employee who has been granted an Award
pursuant to this Plan.
(p) "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.
(q) "STOCK" means shares of common stock (class of common shares) of
the Corporation, par value $.01 per share, or any security of the Corporation
issued in substitution, exchange or lieu thereof.
(r) "SUBSIDIARY" means any corporation in which the Corporation,
directly or indirectly, controls 50% or more of the total combined voting power
of all classes of such corporation's stock.
(s) "TEN-PERCENT SHAREHOLDER" means any person who owns, directly or
indirectly, on the relevant date securities representing more than ten percent
(10%) of the total combined voting power of all classes of stock of the
Corporation or of its parent. For purposes of applying the foregoing ten percent
(10%) limitation, the rules of Code Section 424(d) shall apply.
SECTION 3. ELIGIBILITY
Persons eligible for Awards shall consist of Employees who hold positions
of significant responsibilities with the Corporation and/or a Subsidiary or
whose performance or potential contribution, in the judgment of the Committee,
will benefit the future success of the Corporation and/or a Subsidiary.
SECTION 4. AWARDS
The Committee may grant any of the types of Awards enumerated in paragraphs
(a) through (d) of this Section 4, either singly, in tandem or in combination
with other types of Awards, as the Committee may in its sole discretion
determine:
(a) NON-QUALIFIED STOCK OPTIONS. The grant of an Option entitles the
Participant to purchase a specific number of shares of Stock at an Exercise
Price established by the Committee. Any Option granted under this Section 4 may
either be an incentive stock option or a non-qualified stock option. A
Non-qualified Stock Option is an Option that is not intended to be an "incentive
stock option" as described in section 422(b) of the Code. All Non-qualified
Stock Options granted under the Plan shall expire not later than ten (10) years
after grant, and shall have an Exercise Price equal to 100% of the Fair Market
Value of the Stock on the date the option is granted.
(b) INCENTIVE STOCK OPTIONS. An Incentive Stock Option is an Option
that is intended to satisfy the requirements applicable to an "incentive stock
option" as described in section 422(b) of the Code. All Incentive Stock Options
granted under the Plan shall be subject to the following:
(i) The aggregate fair market value (determined at the time of the
grant of the Award) of the shares of Stock subject to Incentive Stock
Options, which are exercisable by one person for the first time during
a particular calendar year, shall not exceed $100,000.
(ii) No Incentive Stock Option may be granted under this Plan on
or after the tenth anniversary of the date this Plan is adopted, or the
public;date this Plan is approved by shareholders, whichever is earlier.
(iii) No Incentive Stock Option may be exercisable more than:
25
A. in the Company's systemscase of internal controls
regarding finance, accounting, legal compliancean Employee who is not a Ten-Percent
Shareholder on the date that the option is granted, ten (10) years
after the date the option is granted, and
ethicsB. in the case of an Employee who is a Ten-Percent
Shareholder on the date the option is granted, five (5) years
after the date the option is granted.
(vi) The exercise price of any Incentive Stock Option shall be no
less than:
A. in the case of an Employee who is not a Ten-Percent
Shareholder on the date that management and
the Board have established; andoption is granted, the Company's auditing, accounting and financial
reporting processes generally. The Audit Committee's primary duties and
responsibilities are to:
o Serve as an independent and objective party to monitor the Company's
financial reporting process and internal control system.
o Review and appraise the audit effortsFair
Market Value of the Company's independent
accountantsStock subject to the option on such date; and
internal audit department.
o ProvideB. in the case of an open avenueEmployee who is a Ten-Percent
Shareholder on the date that the option is granted, 110% of communication among the
independent
accountants, senior management,Fair Market Value of the internal audit department, andStock subject to the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by
carrying out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committeeoption on such date
(v) No Incentive Stock Option shall be comprisedgranted to an individual
who is an Employee by virtue of at least three (3)being a consultant or advisor.
(c) 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
shares of Stock, which may be Restricted Stock.
(i) 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 shares of Stock on the exercise date (or on such other date
or dates set forth in the Award Agreement) over the Exercise Price
relative to such shares, as may be established by the Committee.
(ii) In the case of an SAR granted with respect to an Incentive
Stock Option to an Employee who is a Ten-Percent Shareholder on the
date of such Award, the Exercise Price shall not be less than 110% of
the Fair Market Value of a share of Stock on the date the Award is
made.
(d) RESTRICTED STOCK AND STOCK AWARDS.
(i) Restricted Stock is Stock that is issued to a Participant and
nois subject to a substantial risk of forfeiture or other restrictions on
transfer and/or such other restrictions on incidents of ownership as
the Committee may determine, where such restrictions will lapse upon
achievement of one or more than five (5) directorsgoals relating to the completion of services
by the Participant or achievement of other objectives as may be
determined by the Board, eachCommittee. A certificate for the shares of whom are independentRestricted
Stock, which certificate shall be registered in the name of the
management of the Company,Participant, shall bear an appropriate restrictive legend and free from any relationship that, in the
opinion of the Board, would interfere with the exercise of his or her
independent judgment as a member of the Committee. All members of the Committee
shall have a working familiarity with basic finance and accounting practices,
and at least one member of the Committee shall have accounting or related
financial management expertise.
III. MEETINGS
The Committee shall hold regularly scheduled meetings at least three (3)
times a year in conjunction with the regularly scheduled Board meetings. The
Committee should meet at least annually with the chief financial officer, the
director of the internal audit department and the independent accountants in
separate executive sessionsbe
subject to discuss any mattersappropriate stop-transfer orders; provided, that the
Committee or these
individuals believe shouldcertificates representing shares of Restricted Stock shall be discussed privately. In addition,held in
custody by the Committee
should hold such other special meetings as circumstances dictate.
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and dutiesCorporation until the Audit Committee shall:
FINANCIAL REPORTING
1. Monitor significant accounting and reporting issues, including
professional and regulatory pronouncements, and understand their impact onrestrictions relating thereto
otherwise lapse, and; provided further, that the Company's financial statements.
2. Review and discussParticipant shall
deliver to the Company's annual audited financial statements
with management.
19
3. Review with financial management andCorporation a stock power (instrument of transfer)
endorsed in blank relating to the independent accountants
matters described in SAS No. 61, as they relate to interim financial
information,Restricted Stock as soon as
practicable following the closedate of each fiscal quarter.
4. Discussgrant.
(ii) Stock Awards shall be any compensation grant to a Participant
that provides for payment to a Participant in shares of Stock.
(iii) Restricted Stock and Stock Awards 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.
(e) PAYMENT OF OPTION EXERCISE PRICE. The payment of the Exercise Price
of an Option granted under this Section 4 shall be subject to the following:
(i) Subject to the following provisions of this subsection 4(e),
the full Exercise Price for shares of stock purchased on the exercise
of an Option shall be paid at the time of such exercise.
26
(ii) The Exercise Price of the Stock subject to the Option may be
paid in cash. At the discretion of the Committee, the purchase price
may also be paid by the tender, by actual delivery of shares or by
attestation, of Stock owned for at least six months by the holder of
the option (the value of such Stock shall be its Fair Market Value on
the date of exercise), through a combination of Stock and cash, or
through such other means as the Committee determines are consistent
with the independent accountants their judgments aboutPlan's purpose and relevant state or Bermuda law. No
fractional shares of Stock will be issued or accepted.
(iii) Without limiting the acceptability and qualityforegoing, to the extent permitted by
law (including relevant state or Bermuda law), (A) the Committee may
agree to accept as full or partial payment of the Company's accounting principlesExercise Price of
Stock issued upon exercise of options, a promissory note of the
Participant evidencing the Participant's obligation to make future cash
payments to the Corporation, which promissory notes shall be payable as
applieddetermined by the Committee (but in no event later than five (5) years
after the date thereof), shall be secured by a pledge of the shares of
Stock purchased, and shall bear interest at a rate established by the
Committee and (B) the Committee may also permit Participants, either on
a selective or aggregate basis, to simultaneously exercise Options and
sell the shares of Stock thereby acquired, pursuant to a brokerage or
similar arrangement approved in advance by the Committee, and use the
proceeds from such sale as payment of the Exercise Price of such Stock.
SECTION 5. SHARES OF STOCK AND OTHER STOCK-BASED AWARDS AVAILABLE UNDER PLAN
(a) The Stock 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 Corporation, including shares purchased in the open
market or in private transactions.
(b) Subject to the adjustment provisions of Section 9 hereof, the
maximum number of shares that may be delivered to Participants and their
beneficiaries under the Plan shall be equal to 4,000,000 shares of Stock.
(c) Subject to the adjustment provisions of Section 9 hereof, the
following additional maximums are imposed on the Plan
(i) The maximum number of shares of Stock that may be issued
pursuant to Options intended to be Incentive Stock Options shall be
1,000,000 shares.
(ii) The aggregate maximum number of shares of Stock that may be
covered by Awards granted to any one individual pursuant to Section 4
relating to Options and SARs, shall be 350,000 shares during any one
calendar-year period. Notwithstanding the preceding sentence, or any
other provision of the Plan, the Committee, in its financial reporting;sole discretion, may
make Awards under the discussion should include such issues as:
o SelectionPlan which are not intended to satisfy the
"performance-based" compensation exception of new or changesSection 162(m) of the
Code and regulations thereunder, which Awards shall not be subject to
the Company's accounting or auditing
principles and practices
o Estimates, judgments and uncertainties
o Unusual transactions
o Accounting policiesindividual limits set forth in the preceding sentence.
(iii) The maximum number of shares of Stock that may be issued in
conjunction with Awards granted pursuant to Section 4 relating to
significant financial items, includingRestricted Stock and Stock Awards shall be 250,000 shares plus any
shares that are reacquired by the timingCompany pursuant to paragraph 5(d)
that were previously subject to a Restricted Stock Award or Stock
Award.
(d) To the extent that any shares of transactions andStock covered by an Award are not
delivered to a Participant or beneficiary because the periodAward is forfeited or
canceled, or the shares of Stock are not delivered because the Award is settled
in which they are recorded.
5. Following completioncash or used to satisfy the applicable tax withholding obligation, such
shares shall be deemed to have been delivered for purposes of determining the
maximum number of shares of Stock available for delivery under the Plan.
(e) If the Exercise Price of any Option granted under the Plan is
satisfied by tendering shares of Stock to the Corporation (by either actual
delivery or by attestation), only the number of shares of Stock issued net of
the annual audit, review separatelyshares of Stock tender shall be deemed delivered for purposes of determining
the maximum number of shares of Stock available for delivery under the Plan.
27
(f) For the purposes of computing the total number of shares of Stock
granted under the Plan, the following rules shall apply to Awards payable in
Stock:
(i) each Option shall be deemed to be the equivalent of the
maximum number of shares of Stock that may be issued upon exercise of
the particular Option;
(ii) where one or more types of Awards (both of which are payable
in Stock) are granted in tandem with each other, the number of management,shares
of Stock shall be deemed to be the independent accountants and the internal auditing department
any significant difficulties encountered during the coursegreater of the audit,
including any restrictions onnumber of shares that
would be counted if one or the scopeother Award alone was outstanding.
Additional rules for determining the number of work shares of Stock granted under the
Plan may be adopted by the Committee, as it deems necessary and appropriate.
SECTION 6. AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an Award Agreement setting
forth the number of shares of Stock and/or accessSARs subject to required
information.
6. Review any significant disagreement among managementthe Award and such
other terms and conditions applicable to the independent accountants in connectionAward, as determined by the
Committee, not inconsistent with the preparationterms of the financial
statements.
7. AdvisePlan. The Committee may, but
need not require that the BoardParticipant sign a copy of such document. Such
document is referred to as the Award Agreement regardless of whether based on review and discussions with
management andany
Participant signature is required. In the independent accountants,event that the Committee would recommendrequires that
the audited financial statements be included inParticipant execute and return the Annual Report on Form 10-K
forAward Agreement, no person shall have any
rights under the last fiscal year for filing withAward unless and until the Securities and Exchange Commission.
8. Review with the independent accountants, the internal auditing
department and management the extentParticipant to which changes or improvements in
financial or accounting practices, as discussed with the Audit Committee,whom such Award shall
have been implemented.
INDEPENDENT ACCOUNTANTS
9. Recommendgranted shall have 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 of Directors or their delegates.
(a) Award Agreements shall include the selectionfollowing terms:
(i) NON-ASSIGNABILITY. Unless otherwise specifically provided for
by the Committee, a provision that no Award shall 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.
(ii) TERMINATION OF EMPLOYMENT. A provision describing the
treatment of an Award in the event of the independent
accountants,retirement, disability, death
or other termination of a Participant's employment with the Corporation
or a Subsidiary, 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 employment 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. A provision that for purposes of the Plan
(A) a transfer of an Employee from the Corporation to a Subsidiary or
affiliate of the Corporation, whether or not incorporated, or vice
versa, or from one Subsidiary or affiliate of the Corporation to
another, and (B) a leave of absence, duly authorized in writing by the
Corporation, shall not be deemed a termination of employment, except as
otherwise required by applicable law, as determined by the Committee,
in order to preserve the status of an option as an Incentive Stock
Option.
(iii) RIGHTS AS A SHAREHOLDER. A provision that a Participant
shall have no rights as a shareholder with respect to any Stock 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.
(iv) WITHHOLDING. A provision requiring the withholding of
applicable taxes required by law from all amounts paid to the holder of
an Award in satisfaction of such Award. In the case of an Award paid in
cash, the withholding obligation shall be satisfied by withholding the
applicable amount and paying the net amount in cash to the Participant.
In the case of Awards paid in shares of Stock, a Participant may satis-
28
fy the withholding obligation by paying the amount of any taxes in cash
or, with the approval of the Committee, shares of Stock may be deducted
from the payment to satisfy the obligation in full or in part. The
amount of the withholding and the number of shares of Stock to be
deducted shall be determined by the Committee with reference to the
Fair Market Value of the Stock when the withholding is required to be
made; PROVIDED, HOWEVER, the amount of Stock so deducted shall not
exceed the minimum required withholding obligation.
(v) TREATMENT OF OPTION. Each Award of an option shall state
whether or not it is intended to constitute an Incentive Stock Option.
(vi) MINIMUM EXERCISE. No option may be exercised for less than
the lesser of 50 shares of Stock or the full number of shares of Stock
for which firmthe option is ultimately accountablethen exercisable.
(b) Award Agreements may include the following terms:
(i) REPLACEMENT, SUBSTITUTION AND RELOADING. Any provisions (A)
permitting the surrender of outstanding Awards or securities held by
the Participant in order to exercise or realize rights under other
Awards, or in exchange for the grant of new Awards under similar or
different terms (including the grant of reload options) or (B)
requiring holders of Awards to surrender outstanding Awards as a
condition precedent to the grant of new Awards under the Plan.
(ii) OTHER TERMS. 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 employment with the
Corporation or a Subsidiary, 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 Corporation or an employing Subsidiary, 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 Stock
under an Award.
SECTION 7. AMENDMENT AND TERMINATION
The Board of Directors may at any time amend, suspend or discontinue the
Plan, in whole or in part. The Committee may at any time alter or amend any or
all Award Agreements under the Plan to the extent permitted by law, but no such
alteration or amendment shall impair the rights of any holder of an Award
without the holder's consent. Adjustments pursuant to Section 9 shall not be
subject to the foregoing limitations of this Section 7.
SECTION 8. ADMINISTRATION
(a) The Plan and all Awards granted pursuant thereto shall be
administered by a committee of the Board of Directors (the "Committee"), which
Committee shall consist of not less than two (2) members of such Board of
Directors who are not employees of the Corporation or any Subsidiary. The
members of the Committee shall be designated by the Board of Directors. If the
Committee does not exist, or for any other reason determined by the Board, the
Board may take any action under the Plan that would otherwise be the
responsibility of the Committee.
(b) 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 shares of Stock or other security, SARs,
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
Board.
10. Receive onevent of any conflict between an annual basisAward Agreement and this Plan, the terms of
this Plan shall govern.
(c) Except to the extent prohibited by applicable law or the applicable
rules of a formal written statement fromstock exchange, the independent accountants delineatingCommittee may delegate to the officers or
employees of the Corporation and its Subsidiaries the authority to execute and
deliver such instruments and documents, to do all relationshipssuch acts and things, and to
take all such other steps deemed
29
necessary, advisable or convenient for the effective administration of the Plan
in accordance with its terms and purpose, except that the CompanyCommittee may not
delegate any discretionary authority with respect to substantive decisions or
functions regarding the Plan or Awards thereunder as these relate to Insiders,
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.
(d) 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 discuss withdiscretion to modify those restrictions as the independent accountantsCommittee
determines to be necessary or appropriate to conform to applicable requirements
or practices of jurisdictions outside of the United States.
SECTION 9. ADJUSTMENT PROVISIONS
(a) In the event of any disclosed relationshipschange in the outstanding shares of Stock by
reason of a stock dividend or servicessplit, recapitalization, merger or consolidation
(whether or not the Corporation is a surviving corporation), reorganization,
combination or exchange of shares or other similar corporate changes or an
extraordinary dividend paid in cash or property, the number of shares of Stock
(or other securities) then remaining subject to this Plan, and the maximum
number of shares that may impact their objectivitybe issued 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
independencethe price for each share then covered by an outstanding Award shall be
proportionately reduced, and if so determined(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
paragraph 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 of Directors
or the shareholders of the Corporation to make or authorize any adjustment,
recapitalization, reorganization or other capital structure of its business, any
merger or consolidation of the Corporation, any issue of bonds, debentures,
preferred or prior preference stock or shares ahead of or affecting the Stock or
the rights thereof, the dissolution or liquidation of the Corporation or any
sale or transfer of all or any part of its assets or business, or any other
corporate act or proceeding.
SECTION 10. CHANGE OF CONTROL
(a) In the event of a "Change in Control" of the Corporation (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 of Directors take appropriate action to satisfy itselfany of the accountants independence.
11. Reviewfollowing actions as a result, or in
anticipation, of any such event to assure fair and equitable treatment of
Participants:
(i) accelerate time periods for purposes of vesting in, or
realizing gain from, any outstanding Award made pursuant to this Plan;
(ii) offer to purchase any outstanding Award made pursuant to this
Plan from the performanceholder for its equivalent cash value, as determined by
the Committee, as of the independent accountants and approve any
proposed dischargedate of the independent accountants when circumstances warrant.
12. Periodically consult withchange of control; or
(iii) make adjustments or modifications to outstanding Awards as
the independent accountants outCommittee deems appropriate to maintain and protect the rights and
interests of Participants following such change of control.
Any such action approved by the Board of Directors shall be conclusive and
binding on the Corporation and all Participants.
30
(b) For purposes of this Section, a Change of Control shall mean the
occurrence of any of the presencefollowing:
(i) A tender offer or exchange offer whereby the effect of management about internal controlssuch
offer is to take over and control the affairs of the Corporation, and
such offer is consummated for the ownership of securities of the
Corporation representing twenty-five percent (25%) or more of the
combined voting power of the Corporation's then outstanding voting
securities.
(ii) The Corporation is merged, amalgamated 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 Corporation,
other than affiliates within the meaning of the Exchange Act or any
party to such merger, amalgamation or consolidation.
(iii) The Corporation transfers substantially all of its assets to
another corporation or entity that is not a wholly-owned subsidiary of
the Corporation.
(iv) 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 Corporation representing
twenty-five percent (25%) or more of the combined voting power of the
Corporation's then outstanding securities, and the qualityeffect of such
ownership is to take over and acceptabilitycontrol the affairs of the organization's financial statements.
INTERNAL AUDIT
13. ReviewCorporation.
(v) As the reports to management prepared byresult of a tender offer, merger, amalgamation,
consolidation, sale of assets, or contested election, or any
combination of such transactions, the internal audit
department as well as management's responses to such reports and meet
periodically with the director of internal audit to review implications for the
Company's system of internal controls.
14. In consultation with the independent accountants and the internal
auditors, review the integritypersons who were members of the
organization's financial reporting
processes, both internal and external.
15. Review activities, organizational structure, and qualificationsBoard of Directors of the internal audit department.
20
MONITORING / COMPLIANCE
16. Review and reassessCorporation immediately before the
adequacytransaction, cease to constitute at least a majority thereof.
SECTION 11. GENERAL RESTRICTIONS
Delivery of this Charter on an annual basis
and recommend any proposed changesshares of Stock or other amounts under the Plan shall be
subject to the Board for approval.
17. Preparefollowing:
(a) Notwithstanding any other provision of the report required byPlan, the rulesCorporation
shall have no liability to deliver any shares of Stock 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 Exchange Commissionthe 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 shares of Stock, 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.
(c) Notwithstanding any other provision of the Plan, any Option granted
to a person who is a "non-exempt" Employee under the Fair Labor Standards Act of
1938, as amended, shall have an Exercise Price of not less than 85% of the Fair
Market Value of the Stock on the date of grant, and shall not be exercisable for
at least six months after the date of grant (except that such Option shall
become exercisable, as may be determined by the Board, upon the Participant's
death, disability or retirement, or upon a Change of Control or other
circumstances permitted by applicable regulations).
SECTION 12. UNFUNDED PLAN
The Plan shall be unfunded. Neither the Corporation, a Subsidiary, nor the
Board of Directors shall be required to segregate any assets that may at any
time be represented by Awards made pursuant to the Plan. Neither the
Corporation, a Subsidiary, the Committee, nor the Board of Directors shall be
deemed to be includeda trustee of any amounts to be paid under the Plan.
31
SECTION 13. LIMITS OF LIABILITY
(a) Any liability of the Corporation 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.
(b) Neither the Corporation nor a Subsidiary, nor any member of the
Board of Directors or of the Committee, nor any other person participating in
any determination of any question under the Plan, or in the Company's proxy statement.
18. Conductinterpretation,
administration or authorize investigations intoapplication of the Plan, shall have any matters withinliability to any party
for any action taken or not taken in good faith under the Committee's scopePlan except as may be
expressly provided by statute.
SECTION 14. RIGHTS OF EMPLOYEES
(a) Status as an eligible Employee shall not be construed as a
commitment that any Award will be made under this Plan to such eligible Employee
or to eligible Employees generally.
(b) 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 Employee or Participant any right to continue in the employ or
other service of responsibilities.the Corporation or a Subsidiary or constitute any contract or
limit in any way the right of the Corporation or a Subsidiary to change such
person's compensation or other benefits or to terminate the employment or other
service of such person with or without cause.
SECTION 15. DURATION
The CommitteeBoard of Directors adopted the Plan subject to the approval of the
shareholders of the Corporation at the Corporation's 2002 annual meeting of its
shareholders on May 22, 2002. The date of such shareholder approval shall be empowered to
retain independent counsel, accountants or others to assist it in the
conduct of
any investigation.
19. Review management's monitoring of compliance with the Company's Ethic
Guidelines, and ensure that management has the proper review system in place to
ensure that the Company's financial statements, reports and other financial
information disseminated to governmental organizations and the public satisfy
legal requirements.
20. Review, with the Company's counsel, legal compliance matters
including corporate securities trading policies.
21. Review, with the Company's counsel, any legal matter that could have
a significant impact on the Company's financial statements.
22. Perform any other activities consistent with this Charter, the
Company's Bye-laws and governing law, as the Committee or the Board deems
necessary or appropriate.
23. Report to the Board following the meetings"Effective Date" of the Committee.
24. Maintain minutesPlan. The Plan shall remain in effect until all Awards
under the Plan have been exercised or other records of meetings and activitiesterminated under the terms of the Committee.
25. MonitorPlan and
applicable Award Agreements, provided that Awards under the policies and procedures in effect forPlan may only be
granted within ten years from the reviewEffective Date of officer's expenses and perquisites.
26. Review and discuss with management the findings of any examination
conducted by regulatory agencies.
21Plan.
32
P R O X Y
PROXY
EVEREST RE GROUP, LTD.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints J.V. Taranto, S.L. Limauro, and J.J. Burak,J.A.
Gervasi, and each of them, as proxies of the undersigned, each with full power
to act without the others and with full power of substitution, to vote all the
Common Shares of EVEREST RE GROUP, LTD. held in the name of the undersigned at
the close of business on March 30, 2001,27, 2002, at the Annual General Meeting of
Shareholders to be held on May 23, 2001,22, 2002, at the Royal Pavilion Hotel, Porters,
St. James, Barbados at 11:00 a.m. (local time), and at any adjournment or
postponement thereof, with all the powers the undersigned would have if
personally present, on the matters set forth hereon in accordance with any
directions given by the undersigned and, in their discretion, on all other
matters that may properly come before the Annual General Meeting, all in
accordance with the accompanying Notice and Proxy Statement, receipt of which is
acknowledged.
You are encouraged to specify your choices by marking the appropriate boxesYOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE BOXES
(SEE REVERSE SIDE), but you need not mark any box if you wish to vote in
accordance with the Board of Directors' recommendations.BUT YOU NEED NOT MARK ANY BOX IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT VOTE
YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
SEE REVERSE
SIDE
Fold and Detach Here- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
[X]
PLEASE MARK YOUR
[X] VOTES AS IN THIS 6287
EXAMPLE.
6287
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR PROPOSALS 1, 2, 3 AND 2.4.
FOR ALL NOMINEES LISTED WITHHOLD
(EXCEPT AS MARKED TO AUTHORITY TO VOTE
THE CONTRARY) FOR NOMINEES LISTED
1. Election of Directors
[_] [_]To elect Thomas J. Gallagher and William F. Galtney, Jr. as Directors of the
Company for a three-year term ending in 2005.
INSTRUCTION: toTo withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.
- -------------------------------------------------------------------------------
To elect Kenneth J. Duffy and Joseph V. Taranto
as Directors of the Company for a three-year term
ending in 2004.--------------------------------------------------------------------------------
FOR AGAINST ABSTAIN
2. To appoint PricewaterhouseCoopers [_] [_] [_] as the Company's
independent auditors for the year ending December 31, 2001[ ] [ ] [ ]
2002 and authorize the Board of Directors to set the
fees for the independent auditors.
3. To approve the adoption of the Everest Re Group, Ltd. [ ] [ ] [ ]
2002 Stock Incentive Plan.
4. To authorize adjourning or postponing the meeting to [ ] [ ] [ ]
solicit additional votes, if necessary.
In their discretion, upon such other matters as may properly come before the
meeting, and any and all adjournments thereof, all in accordance with the
accompanying Notice and Proxy Statement, receipt of which is acknowledged.
IF THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES REPRESENTED THEREBY
WILL BE VOTED. IF A CHOICE IS SPECIFIED BY THE SHAREHOLDER, THE SHARES WILL BE
VOTED ACCORDINGLY. IF NOT OTHERWISE SPECIFIED, THE SHARES REPRESENTED BY THIS
PROXY WILL BE VOTED FOR ITEMS 1, 2, 3 AND 2.4.
SIGNATURE(S) DATE
---------------------------------------------- -----------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
SIGNATURE(S) DATE
- --------------------------------------------------------------------------------
Sign exactly as name appears hereon. When signing in a representative capacity,
please give full title.
Fold and Detach Here- --------------------------------------------------------------------------------
^ FOLD AND DETACH HERE ^
EVEREST RE GROUP, LTD.
ANNUAL MEETING OF SHAREHOLDERS
WEDNESDAY, MAY 23, 2001,22, 2002, 11:00 A.M.
ROYAL PAVILION HOTEL
PORTERS, ST. JAMES, BARBADOS