EXHIBIT 10.1

                       
   ADOPTED BY BOARD OF DIRECTORS DECEMBER 10, 1998 (EFFECTIVE JANUARY 1, 1999)


                       EVEREST REINSURANCE HOLDINGS, INC.
                              ANNUAL INCENTIVE PLAN

         1.       PURPOSE
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         The purpose of the Everest Reinsurance Holdings,  Inc. Annual Incentive
Plan (the "Plan") is to provide incentive for employees who are in a position to
contribute  materially  to the success of the Company and its  Subsidiaries;  to
reward their accomplishments; to motivate future accomplishments;  and to aid in
attracting  and retaining  employees of the caliber  necessary for the continued
success of the Company and its Subsidiaries.

         2.       DEFINITIONS
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         The following terms as used herein shall have the meaning specified:

         (a) Amount  Available"  means the maximum  aggregate amount that may be
awarded for any year as determined in accordance with paragraph 3.

         (b) "Award" means an incentive bonus paid pursuant to the Plan.

         (c) "Board" means the Board of Directors of the Company.

         (d) "Cause" means (i) a felony  conviction of a  Participant;  (ii) the
commission  by a  Participant  of an act of fraud or  embezzlement  against  the
Company  and/or a  Subsidiary;  (iii)  willful  misconduct  or gross  negligence
materially   detrimental   to  the  Company   and/or  a  Subsidiary;   (iv)  the
Participant's  continued failure to implement  reasonable requests or directions
arising from  actions of the Board after thirty (30) days written  notice to the
Participant; (v) the Participant's wrongful dissemination or use of confidential
or proprietary  information;  (vi) the intentional  and habitual  neglect by the
Participant of his or her duties to the Company  and/or a Subsidiary;  (vii) any
other reasons  consistent with the Company's and/or a Subsidiary's  policies and
procedures regarding dismissals as they are adopted and implemented from time to
time.

         (e) "Committee" means the Compensation Committee of the Board.

         (f) "Company" means Everest Reinsurance Holdings, Inc. or any successor
corporation.

         (g) "Employee" means employees of the Company and its Subsidiaries.

         (h)  "Participant"    means    an    Employee     selected     by   the
Committee    to    participate     in     the    Plan.     If     an    Employee
is  governed   by   an  individual   employment  agreement,   such  an  Employee

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may  be  a   Participant  in   the   Plan  to  the  extent  the  terms  of  such
agreement do not supersede this Plan.

         (i)  "Performance  Goals"  means any  financial,  statistical  or other
measures  selected  by  the  Committee  to  measure  Company  and/or  Subsidiary
performance.

         (j) "Subsidiary"  means any corporation in which the Company,  directly
or indirectly,  controls 50% or more of the total  combined  voting power of all
classes of such corporation's stock.

         3.       AWARDS
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         (a) Persons  eligible  for Awards shall  consist of 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.

         (b) The  Committee  shall have  absolute  discretion  to determine  the
Employees who are eligible to receive  Awards under the Plan for any year and to
determine  the amount of such Awards  based on such  criteria and factors as the
Committee  in its  sole  discretion  may  determine.  Recommendations  as to the
Employees  who are to receive  Awards under the Plan for any year and the amount
of such Awards shall be made to the Committee by the Chief Executive  Officer of
the Company.  The fact that an Employee is eligible for an Award shall not mean,
however,  that such Employee will necessarily  receive or be entitled to receive
an Award. The fact that an Employee received an Award in any given year does not
mean that the  Employee  will  receive or be entitled to receive an Award in any
subsequent year.

         (c) As to any year,  no Awards  may be paid  except  out of the  Amount
Available for such year. The Amount Available will be determined annually by the
Committee  based upon  Performance  Goals  established  by the Committee  within
ninety (90) days of the beginning of each year for which the  Performance  Goals
are being  established.  The  Committee  shall have the authority at any time to
make adjustments to the Performance Goals which the Committee deems necessary or
desirable. Nothing contained herein shall require the Committee to establish any
Amount  Available  for any year in which the  Committee  in its sole  discretion
determines that no Awards will be made pursuant to this Plan.

         (d) As soon as  practicable  following  each year  while the Plan is in
effect,  the Committee shall determine the extent to which the Performance Goals
for the year were achieved,  the Amount Available and the Awards payable to each
Participant.  Awards will be paid to each  Participant  in cash  following  such
determination  by the Committee and no later than ninety (90) days following the
close  of the  year  with  respect  to  which  the  Awards  are  made,  unless a
Participant  has elected to defer all or a portion of such  payment  pursuant to
the  Company's or a  Subsidiary's  Deferred  Compensation  Plan, in which event,
payment of the amount  deferred will be made in accordance with the terms of the
Deferred Compensation Plan.
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         (e) No Award will be paid to any  Participant who is not an employee of
the  Company on the last day of the year,  except  that if during the last eight
(8) months of the year,  the  Participant  retires,  dies,  or is  involuntarily
terminated  other than for Cause, the Participant or his estate may be awarded a
prorated  Award as and to the extent  determined  by the  Committee  in its sole
discretion.  If a Participant  is on disability for more than four (4) months of
the year, the Participant will be entitled to a prorated Award. Participants who
resign  voluntarily  after the end of the year,  but before  Award  payments are
actually made, will be eligible for an Award as and to the extent  determined by
the Committee in its sole  discretion.  The provisions of this  subparagraph are
subject to the terms of any  written  agreement  between a  Participant  and the
Company.

         4.       ADMINISTRATION
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         (a) The Plan shall be  administered  by the  Committee.  The  Committee
shall have all discretion  and authority  necessary or appropriate to administer
the Plan  and to  interpret  the  provisions  of the  Plan.  Any  determination,
decision  or  action  of the  Committee  in  connection  with the  construction,
interpretation,  administration  or  application  of the Plan  shall  be  final,
conclusive and binding upon all persons.

         (b) With the  exception of actions and  determinations  relating to the
Chief  Executive  Officer and the four most  highly  compensated  officers,  the
Committee  may delegate to the  officers or  employees  of the Company  and/or a
Subsidiary the authority to execute and deliver such  instruments and documents,
to do all  such  acts  and  things,  and to take all  such  other  steps  deemed
necessary,  advisable or convenient for the effective administration of the Plan
in accordance with its terms and purpose; provided,  however, all Awards will be
subject to the final approval of the Committee.

         (c) Neither the Company, its Subsidiaries,  nor any member of the Board
or of the Committee,  nor any other person participating in any determination of
any  question  under  the  Plan,  or in the  interpretation,  administration  or
application  of the Plan,  shall  have any  liability  to any party for any good
faith action taken or not taken under the Plan.

         5.       MISCELLANEOUS
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         (a)  NONASSIGNABILITY.  No Award shall be  assignable  or  transferable
(including  pursuant to a pledge or security  interest) other than by will or by
laws of descent and distribution.

         (b) WITHHOLDING TAXES. Whenever payments under the Plan are to be made,
the Company and/or the Subsidiary shall withhold  therefrom an amount sufficient
to satisfy any applicable  governmental  withholding  tax  requirements  related
thereto.

         (c) AMENDMENT OR TERMINATION OF THE PLAN. The Committee may at any time
and  without  notice to any  Employee  suspend,  discontinue,  revise,  amend or
terminate the Plan.
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         (d) NON-UNIFORM  DETERMINATIONS.  The Committee's  determinations under
the Plan need not be uniform and may be made by it selectively among persons who
receive, or are eligible to receive,  Awards under the Plan, whether or not such
persons  are  similarly  situated.   Without  limiting  the  generality  of  the
foregoing,  the  Committee  shall  be  entitled,  among  other  things,  to make
non-uniform  and  selective  determinations  and to  establish  non-uniform  and
selective Performance Goals.

         (e) OTHER  PAYMENTS OR AWARDS.  Nothing  contained in the Plan shall be
deemed in any way to limit or restrict the  Company,  its  Subsidiaries,  or the
Committee  from making any award or payment to any person  under any other plan,
arrangement or understanding, whether now existing or hereafter in effect.

         (f) PAYMENTS TO OTHER PERSONS.  If payments are legally  required to be
made to any person other than the person to whom any amount is  available  under
the  Plan,  payments  shall be made  accordingly.  Any such  payment  shall be a
complete  discharge of the liability of the Company,  its Subsidiaries,  and the
Committee.

         (g) UNFUNDED PLAN. A Participant  shall have no interest in any fund or
specified asset of the Company or a Subsidiary.  Nothing  contained in the Plan,
and no action taken pursuant to its provisions,  shall create or be construed to
create a trust of any kind, or a fiduciary  relationship  between the Company or
its Subsidiaries and any Participant,  beneficiary,  legal representative or any
other person. To the extent that any person acquires a right to receive payments
from the Company  and its  Subsidiaries  under the Plan,  such right shall be no
greater than the right of an unsecured  general  creditor of the Company and its
Subsidiaries.  All payments to be made hereunder  shall be paid from the general
funds of the Company and its  Subsidiaries and no special or separate fund shall
be  established  and no segregation of assets shall be made to assure payment of
such amounts. The Plan is not intended to be an employee benefit plan subject to
the Employee Retirement Income Security Act of 1974, as amended.

         (h) NO RIGHT TO EMPLOYMENT. Nothing contained in this Plan shall confer
upon any Participant any right to continue in the employ or other service of the
Company or a  Subsidiary,  or  constitute  any  contract or limit in any way the
right of the Company or a Subsidiary  to change such  person's  compensation  or
other  benefits or to terminate  the  employment or other service of such person
with or without cause.

         (i) INVALIDITY.  If any term or provision contained herein shall to any
extent be invalid or unenforceable,  such term or provision shall be reformed so
that it is valid, and such invalidity or  unenforceability  shall not affect any
other provision or part hereof.

         (k) APPLICABLE LAW. The Plan shall be governed by the laws of the State
of  Delaware  as  determined  without  regard  to the conflict of law principles
thereof.

         (l)  SUCCESSORS.  The  obligations of the Company and its  Subsidiaries
under this Plan shall be binding upon any organization that shall succeed to all
or substantially all of the Company's or a Subsidiary's assets.

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