<PAGE>

                                                                    Exhibit 4.12

================================================================================


                               GUARANTEE AGREEMENT

                                     between

                       EVEREST REINSURANCE HOLDINGS, INC.,
                                  as Guarantor,

                                       and

                              JPMORGAN CHASE BANK,
                              as Guarantee Trustee

                             ______________________
                      EVEREST RE CAPITAL TRUST [II OR III]

                             ______________________

                           Dated as of ________, ____


================================================================================

<PAGE>

                      EVEREST RE CAPITAL TRUST [II OR III]

            Certain Sections of this Guarantee Agreement relating to
                         Sections 310 through 318 of the
                          Trust Indenture Act of 1939:

<TABLE>
<CAPTION>
Section of Trust Indenture Act                                     Section of Guarantee Agreement
------------------------------                                     ------------------------------
  <S>                                                              <C>
  310(a) ....................................................................    4.1(a)
     (b) ....................................................................    4.1(c), 2.8
     (c) ....................................................................    Inapplicable
  311(a) ....................................................................    2.2(b)
     (b) ....................................................................    2.2(b)
     (c) ....................................................................    Inapplicable
  312(a) ....................................................................    2.2(a)
     (b) ....................................................................    2.2(b)
     313 ....................................................................    2.3
  314(a) ....................................................................    2.4
     (b) ....................................................................    Inapplicable
     (c) ....................................................................    2.5
     (d) ....................................................................    Inapplicable
     (e) ....................................................................    2.5, 3.2
     (f) ....................................................................    2.1, 3.2
  315(a) ....................................................................    3.1(d)
     (b) ....................................................................    2.7
     (c) ....................................................................    3.1
     (d) ....................................................................    3.1(d)
  316(a) ....................................................................    2.6, 5.4
     (b) ....................................................................    5.3
     (c) ....................................................................    Inapplicable
  317(a) ....................................................................    Inapplicable
     (b) ....................................................................    Inapplicable
  318(a) ....................................................................    2.1(b)
     (b) ....................................................................    2.1
     (c) ....................................................................    2.1(a)
</TABLE>

Note: This reconciliation and tie sheet shall not, for any purpose, be deemed to
be a part of the Guarantee Agreement.

                                        i

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
                                                                                                       Page
<S>                                                                                                    <C>
ARTICLE I          INTERPRETATION AND DEFINITIONS ..................................................      1

     Section 1.1.       Interpretation .............................................................      1

     Section 1.2.       Definitions ................................................................      2

ARTICLE II         TRUST INDENTURE ACT .............................................................      5

     Section 2.1.       Trust Indenture Act; Application ...........................................      5

     Section 2.2.       List of Holders ............................................................      5

     Section 2.3.       Reports by the Guarantee Trustee ...........................................      6

     Section 2.4.       Periodic Reports to the Guarantee Trustee ..................................      6

     Section 2.5.       Evidence of Compliance with Conditions Precedent ...........................      6

     Section 2.6.       Events of Default; Waiver ..................................................      6

     Section 2.7.       Events of Default; Notice ..................................................      7

     Section 2.8.       Conflicting Interests ......................................................      7

ARTICLE III        POWERS, DUTIES AND RIGHTS OF THE GUARANTEE TRUSTEE ..............................      7

     Section 3.1.       Powers and Duties of the Guarantee Trustee .................................      7

     Section 3.2.       Certain Rights of Guarantee Trustee ........................................      8

     Section 3.3.       Compensation ...............................................................     10

     Section 3.4.       Indemnity ..................................................................     10

ARTICLE IV         GUARANTEE TRUSTEE ...............................................................     10

     Section 4.1.       Guarantee Trustee: Eligibility .............................................     11

     Section 4.2.       Appointment, Removal and Resignation of the Guarantee Trustee ..............     11

ARTICLE V          GUARANTEE .......................................................................     12

     Section 5.1.       Guarantee ..................................................................     12

     Section 5.2.       Waiver of Notice and Demand ................................................     12

     Section 5.3.       Obligations Not Affected ...................................................     12

     Section 5.4.       Rights of Holders ..........................................................     13

     Section 5.5.       Guarantee of Payment .......................................................     13

     Section 5.6.       Subrogation ................................................................     13

     Section 5.7.       Independent Obligations ....................................................     14

ARTICLE VI         COVENANTS AND SUBORDINATION .....................................................     14
</TABLE>

                                       ii

<PAGE>

                                TABLE OF CONTENTS
                                   (continued)

<TABLE>
<CAPTION>
                                                                                                       Page
     <S>                                                                                               <C>
     Section 6.1.       Subordination ..............................................................     14

     Section 6.2.       Pari Passu Guarantees ......................................................     14

ARTICLE VII        TERMINATION .....................................................................     14

     Section 7.1.       Termination ................................................................     14

ARTICLE VIII       MISCELLANEOUS ...................................................................     15

     Section 8.1.       Successors and Assigns .....................................................     15

     Section 8.2.       Amendments .................................................................     15

     Section 8.3.       Notices ....................................................................     15

     Section 8.4.       Benefit ....................................................................     16

     Section 8.5.       Governing Law ..............................................................     16

     Section 8.6.       Counterparts ...............................................................     17
</TABLE>

                                       iii

<PAGE>

         Guarantee Agreement, dated as of ____________, _______, executed and
delivered by Everest Reinsurance Holdings, Inc., a Delaware corporation (the
"Guarantor") having its principal office at 477 Martinsville Road, Liberty
Corner, New Jersey 07938, and JPMorgan Chase Bank, a banking corporation
organized under the laws of the State of New York, as trustee (the "Guarantee
Trustee"), for the benefit of the Holders (as defined herein) from time to time
of the Preferred Securities (as defined herein) of Everest Re Capital Trust [II
or III], a Delaware statutory trust (the "Issuer").

                              W i t n e s s e t h :

         Whereas, pursuant to an Amended and Restated Trust Agreement, dated as
of November 14, 2002 (the "Trust Agreement"), among the Guarantor, as Depositor,
JPMorgan Chase Bank, as Property Trustee, Chase Manhattan Bank USA, National
Association, as Delaware Trustee, and the Administrative Trustees named therein
and the Holders from time to time of undivided beneficial interests in the
assets of the Issuer, the Issuer is issuing up to $______ aggregate Liquidation
Amount (as defined in the Trust Agreement) of its _____% Preferred Securities
(Liquidation Amount $25 per preferred security) (the "Preferred Securities")
representing preferred undivided beneficial interests in the assets of the
Issuer and having the terms set forth in the Trust Agreement;

         Whereas, the Preferred Securities will be issued by the Issuer and the
proceeds thereof, together with the proceeds from the issuance of the Issuer's
Common Securities (as defined below), will be used to purchase the Debt
Securities (as defined in the Trust Agreement) of the Guarantor, which will be
deposited with JPMorgan Chase Bank, as Property Trustee under the Trust
Agreement, as trust assets; and

         Whereas, as incentive for the Holders to purchase Preferred Securities
the Guarantor desires irrevocably and unconditionally to agree, to the extent
set forth herein, to pay to the Holders of the Preferred Securities the
Guarantee Payments (as defined herein) and to make certain other payments on the
terms and conditions set forth herein.

         Now, therefore in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement to
provide as follows for the benefit of the Holders from time to time of the
Preferred Securities:

                                    ARTICLE I

                         Interpretation and Definitions

              Section 1.1.  Interpretation.

              In this Guarantee Agreement, unless the context otherwise
requires:

              (a)  capitalized terms used in this Guarantee Agreement but not
         defined in the preamble hereto have the respective meanings assigned to
         them in Section 1.2;

<PAGE>

              (b)  a term defined anywhere in this Guarantee Agreement has the
         same meaning throughout;

              (c)  all references to "the Guarantee Agreement" or "this
         Guarantee Agreement" are to this Guarantee Agreement as modified,
         supplemented or amended from time to time;

              (d)  all references in this Guarantee Agreement to Articles and
         Sections are to Articles and Sections of this Guarantee Agreement
         unless otherwise specified;

              (e)  a term defined in the Trust Indenture Act has the same
         meaning when used in this Guarantee Agreement unless otherwise defined
         in this Guarantee Agreement or unless the context otherwise requires;

              (f)  a reference to the singular includes the plural and
         vice -versa; and

              (g)  the masculine, feminine or neuter genders used herein shall
         include the masculine, feminine and neuter genders.

              Section 1.2.  Definitions.

              As used in this Guarantee Agreement, the terms set forth below
shall, unless the context otherwise requires, have the following meanings:

              "Affiliate" of any specified Person means any other Person
         directly or indirectly controlling or controlled by or under direct or
         indirect common control with such specified Person; provided, however,
         that the Issuer shall not be deemed to be an Affiliate of the
         Guarantor. For the purposes of this definition, "control" when used
         with respect to any specified Person means the power to direct the
         management and policies of such Person, directly or indirectly, whether
         through the ownership of voting securities, by contract or otherwise;
         and the terms "controlling" and "controlled" have meanings correlative
         to the foregoing.

              "Board of Directors" means either the board of directors of the
         Guarantor or any duly authorized committee of that board.

              "Common Securities" means the securities representing common
         undivided beneficial interests in the assets of the Issuer.

              "Debt" means with respect to any Person, whether recourse is to
         all or a portion of the assets of such Person and whether or not
         contingent and without duplication, (i) every obligation of such Person
         for money borrowed; (ii) every obligation of such Person evidenced by
         bonds, debentures, notes or other similar instruments, including
         obligations incurred in connection with the acquisition of property,
         assets or businesses; (iii) every reimbursement obligation of such
         Person with respect to letters of credit, bankers' acceptances or
         similar facilities issued for the account of such Person, (iv) every
         obligation of such Person issued or assumed as the deferred purchase
         price of property or services (but excluding trade accounts payable or
         accrued liabilities arising in the

                                        2

<PAGE>

         ordinary course of business); (v) every capital lease obligation of
         such Person; (vi) all Other Financial Obligations (as hereinafter
         defined) of such Person; (vii) every obligation of the type referred to
         in clauses (i) through (vi) of another Person and all dividends of
         another Person the payment of which, in either case, such Person has
         guaranteed or is responsible or liable, directly or indirectly, as
         obligor or otherwise, and (viii) all renewals, extensions, refundings,
         amendments or modifications of any obligation of the type referred to
         in clauses (i) through (vii).

              "Event of Default" means a default by the Guarantor on any of its
         payment or other obligations under this Guarantee Agreement; provided,
         however, that, except with respect to a default in payment of any
         Guarantee Payments, the Guarantor shall have received notice of default
         from the Guarantee Trustee and shall not have cured such default within
         30 days after receipt of such notice.

              "Guarantee Payments" means the following payments or
         distributions, without duplication, with respect to the Preferred
         Securities, to the extent not paid or made by or on behalf of the
         Issuer: (i) any accumulated and unpaid Distributions (as defined in the
         Trust Agreement) required to be paid on the Preferred Securities, to
         the extent the Issuer shall have funds on hand available therefor at
         such time, (ii) the redemption price, including all accumulated and
         unpaid Distributions to the date of redemption (the "Redemption
         Price"), with respect to any Preferred Securities called for redemption
         by the Issuer, to the extent the Issuer shall have funds on hand
         available therefor at such time, and (iii) upon a voluntary or
         involuntary termination, winding up or liquidation of the Issuer,
         unless Debt Securities are distributed to the Holders, the lesser of
         (a) the aggregate of the Liquidation Amount of $25 per Preferred
         Security plus accumulated and unpaid Distributions on the Preferred
         Securities to the date of payment, to the extent that the Issuer shall
         have funds available therefor at such time and (b) the amount of assets
         of the Issuer remaining available for distribution to Holders in
         liquidation of the Issuer after satisfaction of liabilities to
         creditors of the Issuer in accordance with applicable law and the
         Expense Agreement (as defined in the Trust Agreement) (in either case,
         the "Liquidation Distribution").

              "Guarantee Trustee" means JPMorgan Chase Bank, until a Successor
         Guarantee Trustee has been appointed and has accepted such appointment
         pursuant to the terms of this Guarantee Agreement, and thereafter means
         each such Successor Guarantee Trustee.

              "Holder" means any holder, as registered on the books and records
         of the Issuer, of any Preferred Securities; provided, however, that in
         determining whether the holders of the requisite percentage of
         Preferred Securities have given any request, notice, consent or waiver
         hereunder, "Holder" shall not include the Guarantor, the Guarantee
         Trustee, or any Affiliate of the Guarantor or the Guarantee Trustee.

               "Indenture" means the Junior Subordinated Indenture, dated as of
          November 14, 2002, as heretofore amended and supplemented and as
          amended and supplemented by the [_____] Supplemental Indenture, among
          the Guarantor, the Indenture Trustee, as trustee, and for the limited
          purposes therein specified, Everest Re Group, Ltd., dated as of
          _________, _____, and as further

                                        3

<PAGE>

         supplemented and amended, between the Guarantor and JPMorgan Chase
         Bank, as trustee.

              "List of Holders" has the meaning specified in Section 2.2(a).

              "Majority in Liquidation Amount of the Preferred Securities"
         means, except as provided by the Trust Indenture Act, a vote by the
         Holder(s), voting separately as a class, of more than 50% of the
         aggregate Liquidation Amount of all then outstanding Preferred
         Securities issued by the Issuer.

              "Officers' Certificate" means, with respect to any Person, a
         certificate signed by the Chairman or a Vice Chairman of the Board of
         Directors of such Person or the President or a Vice President of such
         Person, and by the Treasurer, an Assistant Treasurer, the Secretary or
         an Assistant Secretary of such Person, and delivered to the Guarantee
         Trustee. Any Officers' Certificate delivered with respect to compliance
         with a condition or covenant provided for in this Guarantee Agreement
         (other than the compliance certificate required by Section 2.4)
         include:

                   (a) a statement that each officer signing the Officers'
              Certificate has read the covenant or condition and the definitions
              relating thereto;

                   (b) a brief statement of the nature and scope of the
              examination or investigation undertaken by each officer in
              rendering the Officers' Certificate;

                   (c) a statement that each officer has made such examination
              or investigation as, in such officer's opinion, is necessary to
              enable such officer to express an informed opinion as to whether
              or not such covenant or condition has been complied with; and

                   (d) a statement as to whether, in the opinion of each
              officer, such condition or covenant has been complied with.

              "Other Financial Obligations" means, with respect to a Person, all
         obligations to make payment pursuant to the terms of (i) securities
         contracts and foreign currency exchange contracts, (ii) derivative
         instruments, such as swap agreements (including interest rate and
         foreign exchange rate swap agreements), cap agreements, floor
         agreements, collar agreements, interest rate agreements, foreign
         exchange rate agreements, options, commodity futures contracts,
         commodity option contracts, and (iii) in the case of both (i) and (ii)
         above, similar financial instruments.

              "Person" means a legal person, including any individual,
         corporation, estate, partnership, joint venture, association, joint
         stock company, limited liability company, trust, unincorporated
         association, or government or any agency or political subdivision
         thereof, or any other entity of whatever nature.

              "Responsible Officer" means, with respect to the Guarantee
         Trustee, any Senior Vice President, any Vice President, any Assistant
         Vice President, the Secretary, any Assistant Secretary, the Treasurer,
         any Assistant Treasurer, any Senior Trust Officer, any

                                        4

<PAGE>

         Trust Officer or Assistant Trust Officer or any other officer of the
         Corporate Trust Department of the Guarantee Trustee and also means,
         with respect to a particular corporate trust matter, any other officer
         to whom such matter is referred because of that officer's knowledge of
         and familiarity with the particular subject.

              "Senior Debt" means the principal of and any premium and interest
         (including interest accruing on or after the filing of any petition in
         bankruptcy or for reorganization relating to the Guarantor whether or
         not such claim for post-petition interest is allowed in such
         proceeding) on all Debt, whether incurred on or prior to the date of
         this Guarantee Agreement or thereafter incurred, unless, in the
         instrument creating or evidencing the same or pursuant to which the
         same is outstanding, it is provided that such obligations are not
         superior in right of payment to the Debt Securities or this Guarantee
         Agreement or to other Debt which is pari passu with, or subordinated
         to, the Debt Securities; provided, however, that Senior Debt shall not
         be deemed to include (i) any Debt of the Guarantor which when incurred
         and without respect to any election under Section 1111(b) of the United
         States Bankruptcy Code of 1978, as amended, was without recourse to the
         Guarantor, (ii) any Debt of the Guarantor to any of its subsidiaries,
         (iii) Debt to any employee of the Guarantor, and (iv) any other debt
         securities issued pursuant to the Indenture.

              "Successor Guarantee Trustee" means a successor Guarantee Trustee
         possessing the qualifications to act as Guarantee Trustee under Section
         4.1.

              "Trust Indenture Act" means the Trust Indenture Act of 1939, as
         amended.

         Capitalized or otherwise defined terms used but not otherwise defined
herein shall have the meanings assigned to such terms in the Trust Agreement as
in effect on the date hereof.

                                   ARTICLE II

                               Trust Indenture Act

              Section 2.1. Trust Indenture Act; Application.

              (a)  This Guarantee Agreement is subject to the provisions of the
Trust Indenture Act that are required to be part of this Guarantee Agreement and
shall, to the extent applicable, be governed by such provisions. If any
provision of this Guarantee Agreement modifies or excludes any provision of the
Trust Indenture Act that may be so modified or excluded, the latter provision
shall be deemed to apply to this Guarantee Agreement as so modified or to be
excluded, as the case may be.

              (b)  If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by Sections 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.

              Section 2.2. List of Holders.

                                        5

<PAGE>

              (a)  The Guarantor shall furnish or cause to be furnished to the
Guarantee Trustee (a) semiannually, on or before June 30 and December 31 of each
year, a list, in such form as the Guarantee Trustee may reasonably require, of
the names and addresses of the Holders (the "List of Holders") as of a date not
more than 15 days prior to the delivery thereof, and (b) at such other times as
the Guarantee Trustee may request in writing, within 30 days after the receipt
by the Guarantor of any such request, a List of Holders as of a date not more
than 15 days prior to the time such list is furnished, in each case to the
extent such information is in the possession or control of the Guarantor and is
not identical to a previously supplied list of Holders or has not otherwise been
received by the Guarantee Trustee in its capacity as such. The Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.

              (b)  The Guarantee Trustee shall comply with its obligations under
Section 311(a), Section 311(b) and Section 312(b) of the Trust Indenture Act.

              Section 2.3. Reports by the Guarantee Trustee.

              Not later than November 15 of each year, commencing November 15,
______ , the Guarantee Trustee shall provide to the Holders such reports dated
as of the preceding September 15 as are required by Section 313(a) of the Trust
Indenture Act, if any, in the form and in the manner provided by Section 313 of
the Trust Indenture Act. The Guarantee Trustee shall also comply with the other
requirements of Section 313 of the Trust Indenture Act.

              Section 2.4. Periodic Reports to the Guarantee Trustee.

              The Guarantor shall provide to the Guarantee Trustee, the
Securities and Exchange Commission and the Holders such documents, reports and
information, if any, as required by Section 314 of the Trust Indenture Act and
the compliance certificate required by Section 314 of the Trust Indenture Act,
in the form, in the manner and at the times required by Section 314 of the Trust
Indenture Act, such compliance certificate to be provided within 120 days of the
end of each fiscal year of the Guarantor.

              Section 2.5. Evidence of Compliance with Conditions Precedent.

              The Guarantor shall provide to the Guarantee Trustee such evidence
of compliance with such conditions precedent, if any, provided for in this
Guarantee Agreement that relate to any of the matters set forth in Section
314(c) of the Trust Indenture Act. Any certificate or opinion required to be
given by an officer pursuant to Section 314(c)(1) may be given in the form of an
Officers' Certificate.

              Section 2.6. Events of Default; Waiver.

              The Holders of a Majority in Liquidation Amount of the Preferred
Securities may, by vote, on behalf of the Holders, waive any past Event of
Default and its consequences. Upon such waiver, any such Event of Default shall
cease to exist, and any Event of Default arising therefrom shall be deemed to
have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent therefrom.

                                        6

<PAGE>

              Section 2.7. Events of Default; Notice.

              (a)  The Guarantee Trustee shall, within 90 days after the
occurrence of an Event of Default, transmit by mail, first class postage
prepaid, to the Holders, notices of all Events of Default known to the Guarantee
Trustee, unless such defaults have been cured before the giving of such notice,
provided, however, that, except in the case of a default in the payment of a
Guarantee Payment, the Guarantee Trustee shall be protected in withholding such
notice if and so long as the Board of Directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Guarantee
Trustee in good faith determines that the withholding of such notice is in the
interests of the Holders.

              (b)  The Guarantee Trustee shall not be deemed to have knowledge
of any Event of Default unless the Guarantee Trustee shall have received written
notice, or a Responsible Officer charged with the administration of this
Guarantee Agreement shall have obtained written notice, of such Event of Default
from the Guarantor or a Holder.

              Section 2.8. Conflicting Interests.

              The Trust Agreement, the Amended and Restated Trust Agreement,
dated as of November 14, 2002, among the Guarantor, as Depositor, JPMorgan Chase
Bank, as Property Trustee, Chase Manhattan Bank USA, National Association, as
Delaware Trustee, and the Administrative Trustees named therein in respect of
Everest Re Capital Trust, the Amended and Restated Trust Agreement, dated as of
____________, 200__, among the Guarantor, as Depositor, JPMorgan Chase Bank, as
Property Trustee, Chase Manhattan Bank USA, National Association, as Delaware
Trustee, and the Administrative Trustees named therein in respect of Everest Re
Capital Trust [II or III], the Guarantee Agreement, dated as of November 14,
2002, between the guarantor and JPMorgan Chase Bank, as guarantee trustee, in
respect of Everest Re Capital Trust, the Guarantee Agreement, dated as of
____________, 200__, between the Depositor and JPMorgan Chase Bank, as guarantee
trustee, in respect of Everest Re Capital Trust II [and the Guarantee
Agreement, dated as of ____________, 200__, between the depositor and JPMorgan
Chase Bank, as guarantee trustee, in respect of Everest Re Capital Trust III]
shall be deemed to be specifically described in this Guarantee Agreement for the
purposes of clause (i) of the first proviso contained in Section 310(b) of the
Trust Indenture Act.

                                   ARTICLE III

               Powers, Duties and Rights of the Guarantee Trustee

              Section 3.1. Powers and Duties of the Guarantee Trustee.

              (a)  This Guarantee Agreement shall be held by the Guarantee
Trustee for the benefit of the Holders, and the Guarantee Trustee shall not
transfer this Guarantee Agreement to any Person except a Holder exercising its
rights pursuant to Section 5.4(iv) or to a Successor Guarantee Trustee on
acceptance by such Successor Guarantee Trustee of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee shall automatically vest in any Successor Guarantee Trustee, upon
acceptance by such Successor Guarantee Trustee of its appointment hereunder, and
such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered pursuant to the
appointment of such Successor Guarantee Trustee.

              (b)  If an Event of Default has occurred and is continuing, the
Guarantee Trustee shall enforce this Guarantee Agreement for the benefit of the
Holders.

              (c)  The Guarantee Trustee, before the occurrence of any Event of
Default and after the curing of all Events of Default that may have occurred,
shall undertake to perform only such duties as are specifically set forth in
this Guarantee Agreement, and no implied covenants shall be read into this
Guarantee Agreement against the Guarantee Trustee. In case an Event of Default
has occurred (that has not been cured or waived pursuant to Section 2.6), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement,

                                        7

<PAGE>

and use the same degree of care and skill in its exercise thereof, as a prudent
person would exercise or use under the circumstances in the conduct of his or
her own affairs.

              (d)  No provision of this Guarantee Agreement shall be construed
to relieve the Guarantee Trustee from liability for its own negligent action,
its own negligent failure to act or its own willful misconduct, except that:

                      (i)    prior to the occurrence of any Event of Default and
              after the curing or waiving of all such Events of Default that may
              have occurred:

                                 (A)  the duties and obligations of the
                      Guarantee Trustee shall be determined solely by the
                      express provisions of this Guarantee Agreement, and the
                      Guarantee Trustee shall not be liable except for the
                      performance of such duties and obligations as are
                      specifically set forth in this Guarantee Agreement; and

                                 (B)  in the absence of bad faith on the part of
                      the Guarantee Trustee, the Guarantee Trustee may
                      conclusively rely, as to the truth of the statements and
                      the correctness of the opinions expressed therein, upon
                      any certificates or opinions furnished to the Guarantee
                      Trustee and conforming to the requirements of this
                      Guarantee Agreement; but in the case of any such
                      certificates or opinions that by any provision hereof or
                      of the Trust Indenture Act are specifically required to be
                      furnished to the Guarantee Trustee, the Guarantee Trustee
                      shall be under a duty to examine the same to determine
                      whether or not they conform to the requirements of this
                      Guarantee Agreement;

                      (ii)   the Guarantee Trustee shall not be liable for any
              error of judgment made in good faith by a Responsible Officer of
              the Guarantee Trustee, unless it shall be proved that the
              Guarantee Trustee was negligent in ascertaining the pertinent
              facts upon which such judgment was made;

                      (iii)  the Guarantee Trustee shall not be liable with
              respect to any action taken or omitted to be taken by it in good
              faith in accordance with the direction of the Holders of not less
              than a Majority in Liquidation Amount of the Preferred Securities
              relating to the time, method and place of conducting any
              proceeding for any remedy available to the Guarantee Trustee, or
              exercising any trust or power conferred upon the Guarantee Trustee
              under this Guarantee Agreement; and

                      (iv)   no provision of this Guarantee Agreement shall
              require the Guarantee Trustee to expend or risk its own funds or
              otherwise incur personal financial liability in the performance of
              any of its duties or in the exercise of any of its rights or
              powers, if the Guarantee Trustee shall have reasonable grounds for
              believing that the repayment of such funds or liability is not
              reasonably assured to it under the terms of this Guarantee
              Agreement or adequate indemnity against such risk or liability is
              not reasonably assured to it.

              Section 3.2. Certain Rights of Guarantee Trustee.

                                        8

<PAGE>

              (a)  Subject to the provisions of Section 3.1:

                      (i)   The Guarantee Trustee may conclusively rely and
              shall be fully protected in acting or refraining from acting upon
              any resolution, certificate, statement, instrument, opinion,
              report, notice, request, direction, consent, order, bond,
              debenture, note, other evidence of indebtedness or other paper or
              document reasonably believed by it to be genuine and to have been
              signed, sent or presented by the proper party or parties.

                      (ii)  Any direction or act of the Guarantor contemplated
              by this Guarantee Agreement shall be sufficiently evidenced by an
              Officers' Certificate unless otherwise prescribed herein.

                      (iii) Whenever, in the administration of this Guarantee
              Agreement, the Guarantee Trustee shall deem it desirable that a
              matter be proved or established before taking, suffering or
              omitting to take any action hereunder, the Guarantee Trustee
              (unless other evidence is herein specifically prescribed) may, in
              the absence of bad faith on its part, request and rely upon an
              Officers' Certificate which, upon receipt of such request from the
              Guarantee Trustee, shall be promptly delivered by the Guarantor.

                      (iv)  The Guarantee Trustee may consult with legal
              counsel, and the written advice or opinion of such legal counsel
              with respect to legal matters shall be full and complete
              authorization and protection in respect of any action taken,
              suffered or omitted to be taken by it hereunder in good faith and
              in accordance with such advice or opinion. Such legal counsel may
              be legal counsel to the Guarantor or any of its Affiliates and may
              be one of its employees. The Guarantee Trustee shall have the
              right at any time to seek instructions concerning the
              administration of this Guarantee Agreement from any court of
              competent jurisdiction.

                      (v)   The Guarantee Trustee shall be under no obligation
              to exercise any of the rights or powers vested in it by this
              Guarantee Agreement at the request or direction of any Holder,
              unless such Holder shall have provided to the Guarantee Trustee
              such adequate security and indemnity as would satisfy a reasonable
              person in the position of the Guarantee Trustee, against the
              costs, expenses (including attorneys' fees and expenses) and
              liabilities that might be incurred by it in complying with such
              request or direction, including such reasonable advances as may be
              requested by the Guarantee Trustee; provided that, nothing
              contained in this Section 3.2(a)(v) shall be taken to relieve the
              Guarantee Trustee, upon the occurrence of an Event of Default, of
              its obligation to exercise the rights and powers vested in it by
              this Guarantee Agreement.

                      (vi)  The Guarantee Trustee shall not be bound to make any
              investigation into the facts or matters stated in any resolution,
              certificate, statement, instrument, opinion, report, notice,
              request, direction, consent, order, bond, debenture, note, other
              evidence of indebtedness or other paper or document, but the
              Guarantee

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               Trustee, in its discretion, may make such further inquiry or
               investigation into such facts or matters as it may see fit.

                    (vii) The Guarantee Trustee may execute any of the trusts or
               powers hereunder or perform any duties hereunder either directly
               or by or through its agents or attorneys, and the Guarantee
               Trustee shall not be responsible for any misconduct or negligence
               on the part of any such agent or attorney appointed with due care
               by it hereunder.

                    (viii) Whenever in the administration of this Guarantee
               Agreement the Guarantee Trustee shall deem it desirable to
               receive instructions with respect to enforcing any remedy or
               right or taking any other action hereunder, the Guarantee Trustee
               (A) may request instructions from the Holders of a Majority in
               Liquidation Amount of the Preferred Securities, (B) may refrain
               from enforcing such remedy or right or taking such other action
               until such instructions are received, and (C) shall be protected
               in acting in accordance with such instructions.

               (b) No provision of this Guarantee Agreement shall be deemed to
impose any duty or obligation on the Guarantee Trustee to perform any act or
acts or exercise any right, power, duty or obligation conferred or imposed on it
in any jurisdiction in which it shall be illegal, or in which the Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation. No permissive power or authority available to the Guarantee Trustee
shall be construed to be a duty to act in accordance with such power and
authority.

               Section 3.3. Compensation.

               The Guarantor agrees to pay to the Guarantee Trustee from time to
time reasonable compensation for all services rendered by it hereunder (which
compensation shall not be limited by any provision of law in regard to the
compensation of a trustee of an express trust) and to reimburse the Guarantee
Trustee upon request for all reasonable expenses, disbursements and advances
(including the reasonable fees and expenses of its attorneys and agents)
incurred or made by the Guarantee Trustee in accordance with any provision of
this Guarantee Agreement.

               Section 3.4. Indemnity.

               The Guarantor agrees to indemnify the Guarantee Trustee for, and
to hold it harmless against, any loss, liability or expense incurred without
negligence or bad faith on the part of the Guarantee Trustee arising out of or
in connection with the acceptance or administration of this Guarantee Agreement,
including the costs and expenses of defending itself against any claim or
liability in connection with the exercise or performance of any of its powers or
duties hereunder. The Guarantee Trustee will not claim or exact any lien or
charge on any Guarantee Payments as a result of any amount due to it under this
Guarantee Agreement.

                                   ARTICLE IV

                                Guarantee Trustee

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               Section 4.1. Guarantee Trustee: Eligibility.

               (a) There shall at all times be a Guarantee Trustee which shall:

                    (i) not be an Affiliate of the Guarantor; and

                    (ii) be a Person that is eligible pursuant to the Trust
               Indenture Act to act as such and has a combined capital and
               surplus of at least $50,000,000, and shall be a corporation
               meeting the requirements of Section 310(a) of the Trust Indenture
               Act. If such corporation publishes reports of condition at least
               annually, pursuant to law or to the requirements of the
               supervising or examining authority, then, for the purposes of
               this Section 4.1 and to the extent permitted by the Trust
               Indenture Act, the combined capital and surplus of such
               corporation shall be deemed to be its combined capital and
               surplus as set forth in its most recent report of condition so
               published.

               (b) If at any time the Guarantee Trustee shall cease to be
          eligible to so act under Section 4.1(a), the Guarantee Trustee shall
          immediately resign in the manner and with the effect set out in
          Section 4.2(c).

               (c) If the Guarantee Trustee has or shall acquire any
          "conflicting interest" within the meaning of Section 310(b) of the
          Trust Indenture Act, the Guarantee Trustee and Guarantor shall in all
          respects comply with the provisions of Section 310(b) of the Trust
          Indenture Act, subject to the penultimate paragraph thereof.

               Section 4.2. Appointment, Removal and Resignation of the
Guarantee Trustee.

               (a) Subject to Section 4.2(b), the Guarantee Trustee may be
appointed or removed without cause at any time by the Guarantor.

               (b) The Guarantee Trustee shall not be removed until a Successor
Guarantee Trustee has been appointed and has accepted such appointment by
written instrument executed by such Successor Guarantee Trustee and delivered to
the Guarantor.

               (c) The Guarantee Trustee appointed hereunder shall hold office
until a Successor Guarantee Trustee shall have been appointed or until its
removal or resignation. The Guarantee Trustee may resign from office (without
need for prior or subsequent accounting) by an instrument in writing executed by
the Guarantee Trustee and delivered to the Guarantor, which resignation shall
not take effect until a Successor Guarantee Trustee has been appointed and has
accepted such appointment by instrument in writing executed by such Successor
Guarantee Trustee and delivered to the Guarantor and the resigning Guarantee
Trustee.

               (d) If no Successor Guarantee Trustee shall have been appointed
and accepted appointment as provided in this Section 4.2 within 60 days after
delivery to the Guarantor of an instrument of resignation, the resigning
Guarantee Trustee may petition, at the expense of the Guarantor, any court of
competent jurisdiction for appointment of a Successor Guarantee

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<PAGE>

Trustee. Such court may thereupon, after prescribing such notice, if any, as it
may deem proper, appoint a Successor Guarantee Trustee.

                                   ARTICLE V

                                   Guarantee

               Section 5.1. Guarantee.

               The Guarantor irrevocably and unconditionally agrees to pay in
full to the Holders the Guarantee Payments (without duplication of amounts
theretofore paid by or on behalf of the Issuer), as and when due, regardless of
any defense, right of set-off or counterclaim which the Issuer may have or
assert. The Guarantor's obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Guarantor to the Holders or by
causing the Issuer to pay such amounts to the Holders. The Guarantor shall give
prompt written notice to the Guarantee Trustee in the event it makes any direct
payment hereunder.

               Section 5.2. Waiver of Notice and Demand.

               The Guarantor hereby waives notice of acceptance of the Guarantee
Agreement and of any liability to which it applies or may apply, presentment,
demand for payment, any right to require a proceeding first against the
Guarantee Trustee, Issuer or any other Person before proceeding against the
Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.

               Section 5.3. Obligations Not Affected.

               The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:

               (a) the release or waiver, by operation of law or otherwise, of
          the performance or observance by the Issuer of any express or implied
          agreement, covenant, term or condition relating to the Preferred
          Securities to be performed or observed by the Issuer;

               (b) the extension of time for the payment by the Issuer of all or
          any portion of the Distributions (other than an extension of time for
          payment of Distributions that results from the extension of any
          interest payment period on the Debt Securities as provided in the
          Indenture), Redemption Price, Liquidation Distribution or any other
          sums payable under the terms of the Preferred Securities or the
          extension of time for the performance of any other obligation under,
          arising out of, or in connection with, the Preferred Securities;

               (c) any failure, omission, delay or lack of diligence on the part
          of the Holders to enforce, assert or exercise any right, privilege,
          power or remedy conferred on the Holders pursuant to the terms of the
          Preferred Securities, or any action on the part of the Issuer granting
          indulgence or extension of any kind;

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<PAGE>

               (d) the voluntary or involuntary liquidation, dissolution, sale
          of any collateral, receivership, insolvency, bankruptcy, assignment
          for the benefit of creditors, reorganization, arrangement, composition
          or readjustment of debt of, or other similar proceedings affecting,
          the Issuer or any of the assets of the Issuer;

               (e) any invalidity of, or defect or deficiency in, the Preferred
          Securities;

               (f) the settlement or compromise of any obligation guaranteed
          hereby or hereby incurred; or

               (g) any other circumstance whatsoever that might otherwise
          constitute a legal or equitable discharge or defense of a guarantor,
          it being the intent of this Section 5.3 that the obligations of the
          Guarantor hereunder shall be absolute and unconditional under any and
          all circumstances.

There shall be no obligation of the Holders to give notice to, or obtain the
consent of, the Guarantor with respect to the happening of any of the foregoing.

               Section 5.4. Rights of Holders.

               The Guarantor expressly acknowledges that: (i) this Guarantee
Agreement will be deposited with the Guarantee Trustee to be held for the
benefit of the Holders; (ii) the Guarantee Trustee has the right to enforce this
Guarantee Agreement on behalf of the Holders; (iii) the Holders of a Majority in
Liquidation Amount of the Preferred Securities have the right to direct the
time, method and place of conducting any proceeding for any remedy available to
the Guarantee Trustee in respect of this Guarantee Agreement or exercising any
trust or power conferred upon the Guarantee Trustee under this Guarantee
Agreement; provided, however, that, subject to Section 3.1, the Guarantee
Trustee shall have the right to decline to follow any such direction if the
Guarantee Trustee being advised by counsel determines that the action so
directed may not lawfully be taken, or if the Guarantee Trustee in good faith
shall, by a Responsible Officer or Officers of the Guarantee Trustee, determine
that the proceedings so directed would be illegal or involve it in personal
liability or be unduly prejudicial to the rights of the Holders not party to
such direction; and provided further that nothing in this Guarantee Agreement
shall impair the right of the Guarantee Trustee to take any action deemed proper
by the Guarantee Trustee and which is not inconsistent with such direction; and
(iv) any Holder may institute a legal proceeding directly against the Guarantor
to enforce its rights under this Guarantee Agreement, without first instituting
a legal proceeding against the Guarantee Trustee, the Issuer or any other
Person.

               Section 5.5. Guarantee of Payment.

               This Guarantee Agreement creates a guarantee of payment and not
of collection. This Guarantee Agreement will not be discharged except by payment
of the Guarantee Payments in full (without duplication of amounts theretofore
paid by the Issuer) or upon distribution of Debt Securities to Holders as
provided in the Trust Agreement.

               Section 5.6. Subrogation.

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<PAGE>

               The Guarantor shall be subrogated to all (if any) rights of the
Holders against the Issuer in respect of any amounts paid to the Holders by the
Guarantor under this Guarantee Agreement and shall have the right to waive
payment by the Issuer pursuant to Section 5.1; provided, however, that the
Guarantor shall not (except to the extent required by mandatory provisions of
law) be entitled to enforce or exercise any rights which it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this Guarantee Agreement, if, at the time of any
such payment, any amounts are due and unpaid under this Guarantee Agreement. If
any amount shall be paid to the Guarantor in violation of the preceding
sentence, the Guarantor agrees to hold such amount in trust for the Holders and
to pay over such amount to the Holders.

               Section 5.7. Independent Obligations.

               The Guarantor acknowledges that its obligations hereunder are
independent of the obligations of the Issuer with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 5.3.

                                   ARTICLE VI

                           Covenants and Subordination

               Section 6.1. Subordination.

               The obligations of the Guarantor under this Guarantee Agreement
will constitute unsecured obligations of the Guarantor and will rank subordinate
and junior in right of payment to all Senior Debt of the Guarantor to the extent
and in the manner set forth in the Indenture. The obligations of the Guarantor
under this Guarantee Agreement do not constitute Senior Debt.

               Section 6.2. Pari Passu Guarantees.

               The obligations of the Guarantor under this Guarantee Agreement
shall rank pari passu with the obligations of the Guarantor under any similar
Guarantee Agreements issued by the Guarantor on behalf of the holders of
preferred securities issued by any Issuer Trust (as defined in the Indenture).

                                  ARTICLE VII

                                  Termination

               Section 7.1. Termination.

               This Guarantee Agreement shall terminate and be of no further
force and effect upon (i) full payment of the Redemption Price of all Preferred
Securities, (ii) the distribution of Debt Securities to the Holders in exchange
for all of the Preferred Securities or (iii) full payment of the amounts payable
in accordance with the Trust Agreement upon liquidation of the Issuer.
Notwithstanding the foregoing, this Guarantee Agreement will continue to be
effective or will be

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<PAGE>

reinstated, as the case may be, if at any time any Holder must restore payment
of any sums paid with respect to Preferred Securities or this Guarantee
Agreement. The obligations of the Guarantor under Sections 3.3 and 3.4 shall
survive any such termination.

                                  ARTICLE VIII

                                  Miscellaneous

               Section 8.1. Successors and Assigns.

               All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article VIII of the Indenture and pursuant to which the successor or assignee
agrees in writing to perform the Guarantor's obligations hereunder, the
Guarantor shall not assign its obligations hereunder.

               Section 8.2. Amendments.

               Except with respect to any changes which do not adversely affect
the rights of the Holders in any material respect (in which case no consent of
the Holders will be required), this Guarantee Agreement may only be amended with
the prior approval of the Holders of not less than a Majority in Liquidation
Amount of the Preferred Securities. The provisions of Article VI of the Trust
Agreement concerning meetings or consents of the Holders shall apply to the
giving of such approval.

               Section 8.3. Notices.

               Any notice, request or other communication required or permitted
to be given hereunder shall be in writing, duly signed by the party giving such
notice, and delivered, telecopied or mailed by first class mail as follows:

               (a) if given to the Guarantor, to the address set forth below or
          such other address, facsimile number or to the attention of such other
          Person as the Guarantor may give notice to the Guarantee Trustee and
          the Holders:

                           Everest Reinsurance Holdings, Inc.
                           477 Martinsville Road
                           P.O. Box 830
                           Liberty Corner, New Jersey 07938

                           Facsimile No.: (908) 604-3450
                           Attention: General Counsel

               (b) if given to the Issuer, at the Issuer's (and the Guarantee
          Trustee's) address or facsimile number set forth below or such other
          address or facsimile number as the Issuer or the Guarantee Trustee may
          give notice to the Guarantee Trustee (if given by the Issuer) and the
          Holders:

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<PAGE>

                           Everest Re Capital Trust [II or III]
                           c/o Everest Reinsurance Holdings, Inc.
                           477 Martinsville Road
                           P.O. Box 830
                           Liberty Corner, New Jersey 07938

                           Facsimile No.: (908) 604 -3450
                           Attention: General Counsel

                       with a copy to:

                           JPMorgan Chase Bank
                           4 New York Plaza, 15/th/ Floor
                           New York, New York 10004
                           Facsimile No.: (212) 623-6167
                           Attention: Institutional Trust Services

               (c) if given to the Guarantee Trustee, at the Guarantee Trustee's
          address or facsimile number set forth below or such other address or
          facsimile number as the Guarantee Trustee may give notice to the
          Guarantor and the Holders:

                           JPMorgan Chase Bank
                           4 New York Plaza, 15/th/ Floor
                           New York, New York 10004
                           Facsimile No.: (212) 623-6167
                           Attention: Institutional Trust Services

               (d) if given to any Holder, at the address set forth on the books
          and records of the Issuer.

               All notices hereunder shall be deemed to have been given when
received in person, telecopied with receipt confirmed, or mailed by first class
mail, postage prepaid, except that if a notice or other document is refused
delivery or cannot be delivered because of a changed address of which no notice
was given, such notice or other document shall be deemed to have been delivered
on the date of such refusal or inability to deliver.

               Section 8.4. Benefit.

               This Guarantee Agreement is solely for the benefit of the Holders
and is not separately transferable from the Preferred Securities.

               Section 8.5. Governing Law.

               THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD
TO THE CONFLICT OF LAWS PROVISIONS THEREOF.

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<PAGE>

               Section 8.6. Counterparts.

               This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.

                      [THE NEXT PAGE IS THE SIGNATURE PAGE]

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<PAGE>

               In Witness Whereof, the undersigned have executed this Guarantee
          Agreement as of the date first above written.

                                   Everest Reinsurance Holdings, Inc.

                                   By: _________________________________________
                                       Name: Stephen L. Limauro
                                       Title: Executive Vice President and Chief
                                              Financial Officer

                                   JPMorgan Chase Bank
                                       as Guarantee Trustee

                                   By: _________________________________________
                                       Name:
                                       Title: