UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities Exchange Act of
1934
Filed by
the
Registrant ý
Filed by
a Party other than the
Registrant o
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Preliminary
Proxy Statement
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Confidential,
for Use of the Commission Only (as permitted by Rule
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Definitive
Proxy Statement
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Definitive
Additional Materials
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Soliciting
Material Pursuant to Section 240.14a-12
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GREENLIGHT
CAPITAL RE, LTD.
(Name of
Registrant As Specified in its Charter)
N/A
(Name of
Person(s) Filing Proxy Statement, if other than the Registrant)
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of Filing Fee (Check the appropriate box):
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computed on table below per Exchange Act Rules 14a-6(i)(1) and
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Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | |||||
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GREENLIGHT
CAPITAL RE, LTD.
65
Market Street, Suite 1207
Jasmine
Court, Camana Bay
P.O.
Box 31110
Grand
Cayman, KY1-1205
Cayman
Islands
NOTICE
OF ANNUAL GENERAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 28,
2010
Notice is
hereby given that the Annual General Meeting of Shareholders, or the Meeting, of
Greenlight Capital Re, Ltd., or the Company, will be held at the Company’s
offices at 65 Market Street, Suite 1207, Jasmine Court, Grand Cayman, Cayman
Islands on April 28, 2010, at 9:00 a.m. (local time), for the following
purposes:
1. To
consider and vote upon a proposal to elect seven directors of the Company to
serve on the Board of Directors until the Annual General Meeting of Shareholders
in 2011;
2. To
consider and vote upon a proposal to elect seven directors of Greenlight
Reinsurance, Ltd., a wholly-owned subsidiary of the Company, or Greenlight Re,
to serve on the Board of Directors of Greenlight Re until the Annual General
Meeting of Shareholders in 2011, which pursuant to the Company’s Third Amended
and Restated Memorandum and Articles of Association, is required to be
considered by the shareholders of the Company;
3. To
consider and vote upon an amendment to increase the number of Class A ordinary
shares available for issuance under the Company’s 2004 stock incentive plan, or
the plan, from 2.0 million Class A ordinary shares to 3.5 million Class A
ordinary shares and to extend the termination date of the plan from August 11,
2014 to April 27, 2020;
4. To
consider and vote upon a proposal to ratify the appointment of BDO Seidman, LLP
as the independent auditors of the Company for the fiscal year ending December
31, 2010; and
5. To
consider and vote upon a proposal to ratify the appointment of BDO Cayman
Islands as the independent auditors of Greenlight Re for the fiscal year ending
December 31, 2010, which pursuant to the Company’s Third Amended and Restated
Memorandum and Articles of Association, is required to be considered by the
shareholders of the Company.
Information
concerning the matters to be acted upon at the Meeting is set forth in the
accompanying Proxy Statement.
Only
shareholders of record, as shown by the transfer books of the Company, at the
close of business on March 8, 2010, will be entitled to notice of, and to vote
at, the Meeting or any adjournments thereof.
In
accordance with rules adopted by the Securities and Exchange Commission, we are
pleased to furnish these proxy materials to shareholders over the Internet
rather than in paper form. We believe these rules allow us to provide our
shareholders with expedited and convenient access to the information they need,
while helping to conserve natural resources and lower the costs of printing and
delivering proxy materials.
Whether
or not you plan to attend the Meeting, we hope you will vote as soon as
possible. Voting your proxy will ensure your representation at the Meeting. We
urge you to carefully review the proxy materials and to vote FOR Proposals 1
through 5.
By Order
of the Board of Directors,
Leonard Goldberg
Chief
Executive Officer
March 5,
2010
Grand
Cayman, Cayman Islands
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Exhibits
10.1
Amended and Restated Greenlight Capital Re, Ltd. 2004 Stock Incentive
Plan
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GREENLIGHT CAPITAL RE,
LTD.
65 Market
Street, Suite 1207, Jasmine Court, Camana Bay
P.O. Box
31110
Grand
Cayman, KY1-1205
Cayman
Islands
PROXY
STATEMENT
ANNUAL
GENERAL MEETING OF SHAREHOLDERS
TO
BE HELD ON APRIL 28, 2010
This
Proxy Statement is furnished in connection with the solicitation by the Board of
Directors of Greenlight Capital Re, Ltd., or the Company, of proxies for use at
the Annual General Meeting of Shareholders of the Company, or the Meeting, to be
held at 65 Market Street, Suite 1207, Jasmine Court, Camana Bay, Grand
Cayman, Cayman Islands on April 28, 2010 at 9:00 a.m. (local time), and at
any and all adjournments or postponements thereof, for the purposes set forth in
the accompanying Notice of Annual General Meeting of Shareholders. The Company’s
Annual Report on Form 10-K for the fiscal year ended December 31, 2009,
including financial statements, is included with this Proxy Statement for
informational purposes and not as a means of soliciting your proxy. Additional copies of the Annual
Report on Form 10-K may be obtained, without charge, by writing to us at the
address above.
This
Proxy Statement and the accompanying proxy card and Notice of Annual General
Meeting of Shareholders are first being provided to shareholders on or about
March 5, 2010.
Unless
otherwise indicated or unless the context otherwise requires, all references in
this Proxy Statement to “the Company”, "GLRE", “we”, “us”, “our” and similar
expressions are references to Greenlight Capital Re, Ltd. All references to
Greenlight Re are references to Greenlight Reinsurance, Ltd., the wholly-owned
subsidiary of Greenlight Capital Re, Ltd.
As a
shareholder of GLRE, you have a right to vote on certain business matters
affecting GLRE. The proposals that will be presented at the Meeting
and upon which you are being asked to vote are discussed below under the
“Proposals” section. Each Class A ordinary share of GLRE you owned as
of the record date entitles you to one vote on each proposal presented at the
Meeting, subject to certain provisions of our Third Amended and Restated
Memorandum and Articles of Association, or our Articles, as described below
under “Voting Securities and Vote Required”.
You may
vote by mail, by telephone, over the internet, or in person at the
Meeting.
Voting by Mail. If you
have requested a paper copy of the proxy documents you may vote by signing the
proxy card and returning it in the prepaid and addressed envelope enclosed with
the proxy materials. If you vote by mail we encourage you to sign and
return the proxy card even if you plan to attend the Meeting so that your shares
will be voted if you are unable to attend the Meeting.
Voting by Telephone. To
vote by telephone, please follow either the instructions included on your proxy
card or the voting instructions you received by mail or that are being provided
via the Internet. If you vote by telephone, you do not need to
complete and mail a proxy card. Telephone voting is available through 11:59 p.m.
(local time), the day prior to the Meeting day.
Voting over the Internet. To
vote over the Internet, please follow either the instructions included on your
proxy card or the voting instructions you receive by mail or the
instructions that are being provided via the Internet. If you
vote over the Internet, you do not need to complete and mail a proxy card.
Internet voting is available through 11:59 p.m. (local time), the day
prior to the Meeting day.
Voting in Person at the
Meeting. If you attend the Meeting and plan to vote in person, we
will provide you with a ballot at the Meeting. If your shares are
registered directly in your name, you are considered the shareholder of record
and you have the right to vote in person at the Meeting. If your
shares are held in the name of your broker or other nominee, you are considered
the beneficial owner of shares held in street name. As a beneficial
owner, if you wish to vote at the Meeting, you will need to bring to the Meeting
a legal proxy from your broker or other nominee authorizing you to vote those
shares.
Under
rules adopted by the SEC, we are furnishing proxy materials to our shareholders
primarily via the Internet, instead of mailing printed copies of those materials
to each shareholder. On or about March 16, 2010, we will mail to our
shareholders (other than those who previously requested electronic or paper
delivery) a Notice of Internet Availability containing instructions on how to
access our proxy materials, including our proxy statement and our annual report.
The Notice of Internet Availability also instructs you on how to access your
proxy card to vote over the Internet, by mail or telephone.
This new
process is designed to expedite shareholders’ receipt of proxy materials, help
conserve natural resources and lower the cost of the Meeting. However, if you
would prefer to receive printed proxy materials, please follow the instructions
included in the Notice of Internet Availability. If you have previously elected
to receive our proxy materials electronically, you will continue to receive
these materials via e-mail unless you elect otherwise.
Any
registered shareholder receiving a Notice of Internet Availability who
would like to request a separate paper copy of these materials, should:
(1) go to www.proxyvoting.com/glre and
follow the instructions provided; (2) send an e-mail message to shrrelations@bnymellon.com
with “Request for Proxy Materials” in the subject line and provide your name,
address and the control number that appears in the box on the Notice of Internet
Availability; or (3) call our Investor Relations department, at 1(888)
313-0164 (Toll Free) or 1(201) 680-6688 (Outside of the U.S. or
Canada).
As of
March 8, 2010, the record date for the determination of persons entitled to
receive notice of, and to vote at, the Meeting, the following ordinary shares
are estimated to be issued and outstanding:
• 30,063,893
Class A ordinary shares, par value $0.10 per share
• 6,254,949
Class B ordinary shares, par value $0.10 per share
The above
ordinary shares are our only classes of equity shares outstanding and entitled
to vote at the Meeting.
Class
A Ordinary Shares
Each
Class A ordinary share is entitled to one vote per share. However, except upon
unanimous consent of the Board of Directors, no holder shall be permitted to
acquire an amount of shares which would cause any person to own (directly,
indirectly or constructively under applicable United States tax attribution and
constructive ownership rules) 9.9% or more of the total voting power of the
total issued and outstanding ordinary shares. Due to the voting limitations on
our Class B ordinary shares described below, each Class A ordinary share will be
effectively entitled to more than one vote per share subject to the 9.9%
restriction described in this paragraph.
Class
B Ordinary Shares
Each
Class B ordinary share is entitled to ten votes per share. However, the total
voting power of all Class B ordinary shares, as a class, shall not exceed 9.5%
of the total voting power of the total issued and outstanding ordinary shares.
The voting power of any Class A ordinary shares held by any holder of Class B
ordinary shares (whether directly, or indirectly or constructively under
applicable United States tax attribution and constructive ownership rules) shall
be included for purposes of measuring the total voting power of the Class B
ordinary shares.
Because
the applicability of the voting power reduction provisions to any particular
shareholder depends on facts and circumstances that may be known only to the
shareholder or related persons, we request that any holder of ordinary shares
with reason to believe that it is a shareholder whose ordinary shares constitute
9.9% or more of the voting power of the Company, or a 9.9% Shareholder, contact
us promptly so that we may determine whether the voting power of such holder’s
ordinary shares should be reduced. By submitting a proxy, a holder of ordinary
shares will be deemed to have confirmed that, to its knowledge, it is not, and
is not acting on behalf of, a 9.9% Shareholder. The directors of the Company are
empowered to require any shareholder to provide information as to that
shareholder’s beneficial ownership of ordinary shares, the names of persons
having beneficial ownership of the shareholder’s ordinary shares, relationships
with other shareholders or any other facts the directors may consider relevant
to the determination of the number of ordinary shares attributable to any
person. The directors may disregard the votes attached to ordinary shares of any
holder who fails to respond to such a request or who, in their judgment, submits
incomplete or inaccurate information. The directors retain certain discretion to
make such final adjustments that they consider fair and reasonable in all the
circumstances as to the aggregate number of votes attaching to the ordinary
shares of any shareholder to ensure that no person shall be a 9.9% Shareholder
at any time.
The
attendance of two or more persons representing, in person or by proxy, more than
50% of the issued and outstanding ordinary shares as of March 8, 2010, the
record date of the Meeting, is necessary to constitute a quorum at the Meeting.
Assuming that a quorum is present, the affirmative vote of the holders of a
simple majority of the ordinary shares voted will be required to approve each of
the proposals 1, 2, 3, 4 and 5.
With
regard to any proposal, votes may be cast in favor of or against such proposal
or a shareholder may abstain from voting on such proposal. Abstentions will be
excluded entirely from the vote and will have no effect except that abstentions
and “broker non-votes” will be counted toward determining the presence of a
quorum for the transaction of business. Generally, broker non-votes occur when
ordinary shares held for a beneficial owner are not voted on a particular
proposal because the broker has not received voting instructions from the
beneficial owner, and the broker does not have discretionary authority to vote
on a particular proposal.
The Board
of Directors recommends that the shareholders take the following actions at the
Meeting:
1. Proposal One: to vote FOR the
election of the seven director nominees named herein to serve on the Company’s
Board of Directors until the Annual General Meeting of Shareholders in
2011.
2. Proposal Two: to vote FOR the
election of the seven director nominees named herein to serve on the Board of
Directors of Greenlight Re until the Annual General Meeting of Shareholders in
2011, which pursuant to the Company’s Third Amended and Restated Memorandum and
Articles of Association, is required to be considered by the shareholders of the
Company.
3. Proposal Three: to vote FOR an
amendment to increase the number of Class A ordinary shares available for
issuance under the Company’s stock incentive plan from 2.0 million Class A
ordinary shares to 3.5 million Class A ordinary shares and to extend the
termination date of the plan from August 11, 2014 to April 27,
2020.
4. Proposal Four: to vote FOR the
ratification of BDO Seidman, LLP, an independent registered public accounting
firm, as the Company’s independent auditor for fiscal year ending December
31, 2010.
5. Proposal Five: to vote FOR the
ratification of BDO Cayman Islands an independent registered public accounting
firm, as Greenlight Re’s independent auditor for fiscal year ending December
31, 2010, which pursuant to the Company’s Third Amended and Restated
Memorandum and Articles of Association, is required to be considered by the
shareholders of the Company.
A
representative of BDO will attend the Meeting and will be available to respond
to questions and may make a statement if he or she so desires.
Proxies
must be received by us by 11:59 p.m. (local time) on April 27, 2010. A
shareholder may revoke his or her proxy at any time up to one hour prior to
the commencement of the Meeting.
To do this, you must:
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enter
a new vote by telephone, over the Internet or by signing and returning
another proxy card at a later date;
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file
a written revocation with the Secretary of the Company at our address set
forth above;
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file
a duly executed proxy bearing a later date;
or
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appear
in person at the Meeting and vote in
person.
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Such persons designated as proxies are officers of the Company.
All
ordinary shares represented by properly executed proxies that are returned and
not revoked will be voted in accordance with the instructions, if any, given
thereon. If no instructions are provided in an executed proxy, it will be voted
FOR each of the proposals described herein and set forth on the accompanying
form of proxy, and in accordance with the proxy holder’s best judgment as to any
other business as may properly come before the Meeting. If a shareholder
appoints a person other than the persons named in the enclosed form of proxy to
represent him or her, such person should vote the shares in respect of which he
or she is appointed proxy holder in accordance with the directions of the
shareholder appointing him or her.
ELECTION
OF DIRECTORS OF THE COMPANY
Our
Articles provide that the Board of Directors shall be appointed annually for a
term of appointment that shall end at the conclusion of the Annual General
Meeting of Shareholders following the one at which they were appointed.
Currently, we have seven directors serving on our Board of Directors. The Board
of Directors has nominated Alan Brooks, David Einhorn,
Leonard Goldberg, Ian Isaacs, Frank Lackner, Bryan Murphy
and Joseph Platt to serve as the directors of the Company, to be voted on
by all holders of record of ordinary shares as of the record date. The Board of
Directors has no reason to believe any nominee will not continue to be a
candidate or will not be able to serve as a director of the Company if elected.
In the event that any nominee is unable to serve as a director, the proxy
holders named in the accompanying proxy have advised that they will vote for the
election of such substitute or additional nominee(s) as the Board of Directors
may propose. The Board of Directors unanimously recommends that you vote FOR the
election of each of the nominees.
Each of
the director nominees is currently serving as a director of the Company and is
standing for re-election. Unless otherwise directed, the persons
named in the proxy intend to vote all proxies FOR the election of the following
director nominees.
Director Nominees
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Name
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Age
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Position
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Director
Since
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Alan
Brooks(1)(3)
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63
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Director
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2004
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David
Einhorn(3)
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41
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Chairman
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2004
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Leonard
Goldberg(3)
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47
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Director,
Chief Executive Officer
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2005
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Ian
Isaacs(2)(4)
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54
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Director
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2008
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Frank
Lackner(1)(3)(4)
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41
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Director
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2004
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Bryan
Murphy(1)(2)(3)
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64
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Director
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2008
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Joseph
Platt(2)(4)
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62
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Director
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2004
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(1) Member of Audit Committee
(2) Member
of Compensation Committee
(3) Member
of Underwriting Committee
(4) Member
of Nominating and Governance Committee
There is no
family relationship among any of the nominees, directors and/or any of the
Company’s executive officers.
The
nominees have consented to serve as directors of the Company and Greenlight Re,
if elected.
Set forth
below is biographical information concerning each nominee for election as a
director of the Company, including a discussion of such nominee’s particular
experience, qualifications, attributes or skills that lead our Board of
Directors to conclude that the nominee should serve as a director of our
Company.
Alan Brooks has been a
director of our Board since July 2004. From February 2001 until his retirement
in July 2003, Mr. Brooks was engaged as a consultant by KPMG in the Cayman
Islands. Prior to that, from 1984 to 1999, Mr. Brooks served as the non-life
insurance practice partner at KPMG in the Cayman Islands. During those years,
Mr. Brooks specialized in providing audit and liquidation services to
the offshore insurance industry. Mr. Brooks was engaged as the audit partner for
over 150 licensed insurance companies in the Cayman Islands, ranging from
companies writing property and casualty, life and credit insurance as well as
special purpose vehicles formed to insure catastrophe risks. Mr. Brooks has
significant experience in the preparation of financial statements in accordance
with United States, United Kingdom, Canadian and International GAAP.
Mr. Brooks is a shareholder and director of Genesis Trust and Corporate
Services Ltd., a Cayman Islands based trust and management
company. Mr. Brooks also serves as a director of other Cayman based
insurance companies. Mr. Brooks has been a Fellow of the Institute of
Chartered Accountants of England & Wales since 1979. Prior to
qualifying as a Chartered Accountant, Mr. Brooks received a Diploma of
Education from the North Buckinghamshire College of Education in 1968. Our
Nominating and Governance Committee and Board believe that Mr. Brooks should
serve as a director given his Cayman Islands residency and extensive audit,
accounting and financial experience and expertise.
David Einhorn has been a
director of our Board since July 2004 and Chairman of our Board since August 6,
2004. Mr. Einhorn co-founded and has served as the President of
Greenlight Capital, Inc., since January 1996. Mr. Einhorn serves as
senior managing member of DME Advisors, LP, or DME Advisors, our investment
advisor. Greenlight Capital, Inc. and DME Advisors are affiliates of Greenlight
Capital Re, Ltd. Since April 2006, Mr. Einhorn has served as a director of
BioFuel Energy Corp. (Nasdaq: BIOF). From March 2006 to March 2007 Mr. Einhorn
served on the board of directors of New Century Financial Corp., formerly listed
on the New York Stock Exchange under the symbol “NEW”. Mr. Einhorn
graduated summa cum laude with distinction from Cornell University in 1991
where he earned a B.A. from the College of Arts and Sciences. Our Nominating and
Governance Committee and Board believe that Mr. Einhorn should serve as a
director and as Chairman of our Board given his investment expertise and
business experience and his significant share ownership in the
Company.
Leonard Goldberg has served
as our Chief Executive Officer and a director of our Board since August 2005.
Mr. Goldberg has more than 20 years of insurance and reinsurance
experience. He worked with the Alea Group, a reinsurance company, from August
2000 to August 2004, including serving as chief executive officer of Alea North
America Insurance Company and Alea North America Specialty Insurance Company
from March 2002 to August 2004, where he was responsible for the insurance and
reinsurance strategy for the North America region. Prior to working with the
Alea Group, Mr. Goldberg served as chief actuary and senior vice president
– Financial Products of Custom Risk Solutions, a managing general agency
company, from April 1999 to August 2000. From May 1995 to December 1998,
Mr. Goldberg provided various actuarial services to Zurich Group, a
reinsurance company, including acting as chief actuary of Zurich Re London.
Mr. Goldberg received his B.A. in Mathematics from Rutgers University
in 1984 and MBA, Finance Concentration, from Rutgers Executive MBA program in
1993 and is a Fellow of the Casualty Actuarial Society and a member of the
American Academy of Actuaries. Our Nominating and Governance Committee and
Board believe that Mr. Goldberg should serve as a director given his role as
Chief Executive Officer of the Company and his significant insurance and
reinsurance experience and expertise.
Ian Isaacs has been a
director of our Board since May 2008. Mr. Isaacs is currently a senior partner
at Merlin Securities, a San Francisco-based broker dealer. Mr. Isaacs
previously served as a director of our Board from its founding in July 2004
until February 2007. Mr. Isaacs stepped down from the Board in
February of 2007, due to his then-current employer’s policy prohibiting its
employees from serving on boards of publicly-traded
companies. Mr. Isaacs rejoined the Board in May 2008, when he joined
Merlin Securities, where his duties include providing portfolio analytics and
market intelligence to institutional investors. Previously, from July 2000 to
March 2008, Mr. Isaacs served as a Senior Vice President, Investments, with
UBS Financial Services, a subsidiary of UBS AG, a Zurich-based investment bank.
At UBS Financial Services, Mr. Isaacs conducted market research for
institutional investors, including Greenlight Capital, Inc. Prior to its
acquisition by UBS AG in July of 2000, Mr. Isaacs was employed by
PaineWebber from May 1990, becoming Senior Vice-President of Investments in
1995. Prior to Paine Webber, Mr. Isaacs was a partner with Hambrecht and
Quist, an investment bank based in San Francisco, from 1985 to
1990. Mr. Isaacs received his Bachelor of Arts from
Carleton College in 1977. Our Nominating and Governance Committee and
Board believe that Mr. Isaacs should serve as a director given his significant
experience in the securities business, evaluating business models and executive
strategy, as well as his financial investment experience and
expertise.
Frank Lackner has been a
director since July 2004. Since 2007, Mr. Lackner has acted as a consultant with
Lackner Capital Advisors LLC., a New York based company he founded that provides
investment banking and financial advisory services to the financial services
industry. Mr. Lackner served as managing director of Fox-Pitt Kelton
Cochran Caronia Waller, a global specialist investment bank, from May 2007 to
September 2007. Prior to this, Mr. Lackner served as a managing director of
Torsiello Securities Inc., an investment banking and financial advisory services
company to the global insurance and financial services industry, and its
predecessor firm from October 2001 until October 2006. From January 1998 to
October 2001, Mr. Lackner was a founder and chief executive officer of
RiskContinuum, Inc., an online reinsurance trading exchange. During such time,
Mr. Lackner also provided consulting services to First International
Capital LLC and to other clients in the insurance industry. From September 1993
to December 1997, Mr. Lackner was a vice president of Insurance Partner
Advisors, L.P., a private equity investment partnership formed by the Centre
Reinsurance Companies, Chase Manhattan Bank and the Robert Bass Group, which
made equity investments in insurance, reinsurance and healthcare companies
worldwide. From 1992 to 1993, Mr. Lackner was a finite risk reinsurance
underwriter at the Centre Reinsurance Companies, where he worked on both
corporate development projects and structuring and pricing finite risk insurance
and reinsurance products. From 1990 to 1992, Mr. Lackner was an investment
banker at Donaldson, Lufkin & Jenrette Securities Corp., where he advised
both property/casualty and life insurance companies on strategic acquisitions,
divestitures and capital markets-related activities, including initial public
offerings, debt offerings and restructurings. Mr. Lackner formerly served as a
director of American Safety Insurance Holdings Ltd. (NYSE: ASI), a specialty
insurance company that provides customized insurance products and solutions for
small and medium-sized businesses. Mr. Lackner received his BBA in Banking
and Finance from Hofstra University in 1989. Our Nominating Governance
Committee and Board believe that Mr. Lackner should serve as a director given
his insurance and reinsurance, global investments and financial advisory
experience and expertise.
Bryan Murphy has been a
director of our Board since May 2008. From 1996 until his retirement in December
2007, Mr. Murphy served as a founding director and chief executive officer
of Island Heritage Holdings Ltd., a Cayman Islands-based property, liability and
automobile insurer. Prior to Island Heritage, Mr. Murphy acted as a
consultant to Trident Partnership from 1994 to 1996 and was employed by
International Risk Management Group from 1978 to 1994. Mr. Murphy has over
30 years experience in the insurance business and has held senior positions in
several countries, including the Cayman Islands, Ireland, Ethiopia and Saudi
Arabia. Until December 2007, Mr. Murphy served on the board of directors of AZ
Reinsurance Limited, a wholly owned subsidiary of Astra-Zeneca PLC and a captive
insurer of the group’s property and liability insurance business. In addition,
until December 2008, Mr. Murphy served on the board of directors
of ICHEM Reinsurance Limited, a wholly owned subsidiary of ICI PLC
and a captive insurer for the group’s property and liability insurance business.
Mr. Murphy holds a degree in economics and mathematics from
University College, Dublin, Ireland. Our Nominating and
Governance Committee and Board believe that Mr. Murphy should serve as a
director given his given his Cayman Islands residency and extensive senior
management experience in international insurance and reinsurance
companies.
Joseph Platt has been a
director of our Board since July 2004. Currently, Mr. Platt is the general
partner at Thorn Partners, LP a family–office limited
partnership. Mr. Platt’s career at Johnson and Higgins
(J&H), a global insurance broker and employee benefits consultant, spanned
27 years until the sale of J&H to Marsh & McLennan Companies in March
1997. At the sale of J&H, Mr. Platt was an owner, director and
executive vice president responsible for North America and marketing and sales
worldwide. Mr. Platt was head of the operating committee and a member of the
executive committee. Since 1997, Mr. Platt has been an active private
investor. Mr. Platt is on the board of directors of Jones Brown, a private
Canadian insurance broker, and serves as an independent director of the
BlackRock Open End & Liquidity Funds. He is also a Director of the West Penn
Allegheny Health System (WPAHS). He is a member of the New York State Bar
Association. Mr. Platt received his B.A. from Manhattan College in
1968 and his J.D. from Fordham University Law School in 1971.
Mr. Platt also attended Harvard Business School’s Advanced
Management Program in 1983. Our Nominating and Governance Committee and Board
believe that Mr. Platt should serve as a director given his insurance and
compensations and benefits experience and expertise.
Alternate
Director
Daniel Roitman. Section 14 of the
Articles provide that any director (other than an alternate director) may, by
writing, appoint any other director, or any other person willing to act, to be
an alternate director and, by writing, may remove from office an alternate
director so appointed by him. We anticipate that, if re-elected,
Mr. Einhorn will continue to appoint Daniel Roitman as his alternate
director. Mr. Roitman is not a director nominee. Mr. Roitman has
served as chief operating officer and partner of Greenlight Capital, Inc. since
January 2003. From 1996 through 2002, Mr. Roitman served as a vice
president at Goldman Sachs. Before joining Goldman Sachs,
Mr. Roitman was employed as a member of the New York technology practice at
Andersen Consulting, now Accenture. Mr. Roitman earned a B.S. with
distinction in electrical engineering from Cornell University in 1991 and a
Master of Engineering in 1992. Mr. Roitman graduated with distinction from
the New York University Stern School of Business in 2002, earning an MBA in
Finance. Mr. Einhorn has appointed Mr. Roitman as his alternate given Mr.
Roitman’s financial investment and business experience and
expertise.
THE BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE ELECTION OF
EACH OF THE NOMINEES ABOVE.
ELECTION
OF DIRECTORS OF GREENLIGHT RE
Pursuant
to the Articles, with respect to any matter required to be submitted to a vote
of the shareholders of Greenlight Re, the Company is required to submit a
proposal relating to such matters to its own shareholders and vote all the
shares of Greenlight Re owned by the Company in accordance with and proportional
to such vote of the Company’s shareholders. Accordingly, the shareholders of the
Company are being asked to consider this proposal.
Currently,
we have seven directors serving on Greenlight Re’s Board of Directors, which is
a full Board of Directors. Greenlight Re’s Board of Directors has nominated
Alan Brooks, David Einhorn, Leonard Goldberg, Ian Isaacs,
Frank Lackner, Bryan Murphy and Joseph Platt to serve as the
directors of Greenlight Re, to be voted on by all holders of record of ordinary
shares as of the Record Date. The Board of Directors has no reason to believe
any nominee will not continue to be a candidate or will not be able to serve as
a director of Greenlight Re if elected. In the event that any nominee is unable
to serve as a director, the proxy holders named in the accompanying proxy have
advised that they will vote for the election of such substitute or additional
nominee(s) as the Board of Directors may propose. The Board of Directors
unanimously recommends that you vote FOR the election of each of the
nominees.
Each of
the director nominees is currently serving as a director of Greenlight Re.
Unless otherwise directed, the persons named in the proxy intend to vote all
proxies FOR the election of the following director nominees.
Director Nominees
|
Name
|
Age
|
Position
|
Director
Since
|
|||
|
Alan
Brooks
|
63
|
Director
|
2004
|
|||
|
David
Einhorn
|
41
|
Chairman
|
2004
|
|||
|
Leonard
Goldberg
|
47
|
Director,
Chief Executive Officer
|
2005
|
|||
|
Ian
Isaacs
|
54
|
Director
|
2008
|
|||
|
Frank
Lackner
|
41
|
Director
|
2004
|
|||
|
Bryan
Murphy
|
64
|
Director
|
2008
|
|||
|
Joseph
Platt
|
62
|
Director
|
2004
|
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR”
AUTHORIZATION OF THE ELECTION OF GREENLIGHT RE’S NOMINEES ABOVE.
APPROVAL
OF AMENDMENT AND RESTATEMENT OF THE STOCK INCENTIVE PLAN
Proposed
Amendment to Increase Shares Authorized and Extend Termination Date
On August 12,
2004, we adopted the Greenlight Capital Re, Ltd. 2004 stock incentive plan, or
the stock incentive plan, which was amended and restated on August 15, 2005,
February 14, 2007 and May 4, 2007. Subject to adjustment in
accordance with the terms of the stock incentive plan, 2,000,000 Class A
ordinary shares are currently available for the grant of awards under the stock
incentive plan.
Our Board of
Directors has adopted, subject to shareholder approval, an amended and restated
stock incentive plan, or the amended plan, which increases the number of Class A
ordinary shares authorized for issuance under stock incentive plan by 1.5
million Class A ordinary shares to 3.5 million Class A ordinary shares. In
addition, the amendment will extend the termination date of the stock incentive
plan from August 11, 2014 to April 27, 2020.
Our Board of
Directors believes that equity based awards are an important incentive for
attracting, retaining and motivating employees and officers through the
opportunity of equity participation in the Company. The amended plan
is intended to enable us to continue to have an adequate number of Class A
ordinary shares available for the grant of stock and stock option awards to
attract new employees, and to retain current employees.
As of
February 1, 2010, 1,339,000 stock options and 527,103 restricted shares have
been granted under the stock incentive plan, leaving 133,897 Class A ordinary
shares available for future grants under the stock incentive
plan. These prior grants have been made to our officers, employees
and certain directors. In the near term, we anticipate granting additional stock
options and restricted shares in connection with the hiring or appointment of
individuals, as well as to employees and certain directors.
The full text
of the amended plan is set forth as Exhibit 1 to this Proxy Statement. A general
description of the principal terms of the stock incentive plan, as amended by
the amended plan, is set forth below. The summary, however, does not purport to
be a complete description of all the provisions of the stock incentive plan. Any
of our shareholders who wishes to obtain a copy of the stock incentive plan may
do so upon the written request to Investor Relations at our principal executive
offices located at 65 Market Street, Suite 1207, Jasmine Court, Camana Bay, P.O.
Box 31110, Grand Cayman, KY1-1205, Cayman Islands.
Summary of
the Plan
General
The general
purpose of the stock incentive plan is to enable us and our affiliates to retain
the services of eligible employees, directors and consultants through the grant
of stock options, stock bonuses and restricted shares (collectively referred to
as the awards).
Subject to
adjustment in accordance with the terms of the stock incentive plan, 2,000,000
Class A ordinary shares (3.5 million Class A ordinary shares if the amended plan
is approved) are available for the grant of awards under the stock incentive
plan. As of February 1, 2010, 1,339,000 options and 527,103 restricted shares
have been granted under the stock incentive plan.
Administration
Our
Compensation Committee administers the stock incentive plan and has broad
discretion, subject to the terms of the stock incentive plan, to determine which
eligible participants will be granted awards, prescribe the terms and conditions
of awards, establish rules and regulations for the interpretation and
administration of the stock incentive plan and adopt any modifications,
procedures or sub-plans that may be necessary or desirable to comply with the
laws of foreign countries in which we or our affiliates operate to assure the
viability of awards granted under the stock incentive plan.
Eligibility
Persons
eligible to participate in the stock incentive plan include our employees,
directors, and consultants and those of our affiliates. While the
specific individuals to whom awards will be made in the future cannot be
determined at this time, all 15 of our current employees and 5 of our current
directors are presently eligible to participate in the stock incentive
plan.
Options
Stock options
are subject to such terms and conditions as our Compensation Committee deems
appropriate. Our Compensation Committee determines the per share exercise price
of stock options which will not be less than 100% of the fair market value of
the Class A ordinary shares on the date of grant. Options generally expire ten
years from the date of grant and vest and become exercisable as determined by
our Compensation Committee on the date of grant.
A participant
may pay the exercise price of stock options in cash, by cashiers’ check or at
the discretion of our Compensation Committee, in certain other Class A ordinary
shares held by the participant, by having us withhold a number of Class A
ordinary shares upon exercise equal to the aggregate exercise price, in any
other form of legal consideration or by a combination of the foregoing
methods.
Unless
otherwise specified by our Compensation Committee, upon the termination of a
participant’s service other than due to the participant’s death or disability,
all unvested stock options held by the participant will terminate and the
participant may exercise his or her vested stock options during the period
ending on the earlier of three months following the termination and the
expiration of the term of the stock option. If a participant’s service is
terminated by us for cause, all of the participant’s stock options, vested and
unvested, will terminate.
Unless
otherwise specified by our Compensation Committee, upon the termination of a
participant’s service due to the participant’s death or disability, all unvested
stock options held by the participant will terminate and the participant or his
or her beneficiary may exercise any vested stock options during the period
ending on the earlier of twelve months following the termination and the
expiration of the term of the stock option.
Unless
otherwise provided in an individual option agreement and subject to the stock
incentive plan’s adjustment provision, a change of control will not affect any
stock options granted under the stock incentive plan.
Restricted
Shares
Restricted
shares are subject to such terms and conditions, including vesting, as our
Compensation Committee deems appropriate as set forth in individual award
agreements. Participants may be entitled to vote the restricted shares while
held in our custody. Our Compensation Committee determines the purchase price,
if any, of restricted Class A ordinary shares.
In the event
of a termination of a participant’s service, we may repurchase any or all
unvested Class A ordinary shares held by the participant for par
value.
Stock Bonus
Awards
Stock bonus
awards are subject to such terms and conditions as our Compensation Committee
deems appropriate. To the extent permitted so that the Class A ordinary shares
awarded will be treated as fully paid, a stock bonus may be awarded in
consideration for past services rendered.
In the event
of a termination of a participant’s service, we may repurchase any or all
unvested Class A ordinary shares held by the participant for par
value.
Adjustments
Our
Compensation Committee will make appropriate adjustments so as to prevent
dilution or enlargement of the benefits or potential benefits with respect to
events such as dividends or other distributions, recapitalization,
reclassification, stock split, reverse stock split, reorganization, merger,
consolidation, spin-off or sale, transfer or disposition of all or substantially
all of our assets or stock. For example, our Compensation Committee shall adjust
the number of Class A ordinary shares subject to outstanding awards and the
exercise price of outstanding options.
Amendment/Termination
Our Board of
Directors may amend the stock incentive plan at any time. Except as provided in
the stock incentive plan, no amendment will be effective unless approved by our
shareholders to the extent shareholder approval is necessary to satisfy any
applicable law or any national securities exchange listing requirement, and no
amendment will be made that would adversely affect rights under an award
previously granted under the stock incentive plan without the consent of the
affected participants.
Our
Compensation Committee may suspend or terminate the stock incentive plan at any
time. Unless sooner terminated, the stock incentive plan will terminate on
August 11, 2014. If the amended plan is approved, the stock incentive plan will
expire on April 27, 2020 unless it is terminated earlier by our Board of
Directors.
U.S.
Federal Tax Consequences Applicable to U.S. Taxpayers
IRS Circular 230
Notice Requirement. This
communication is not given in the form of a covered opinion, within the meaning
of Circular 230 issued by the United States Secretary of the
Treasury. Thus, we are required to inform you that you cannot rely
upon any tax advice contained in this communication for the purpose of avoiding
United States federal tax penalties. In addition, any tax advice
contained in this communication may not be used to promote, market or recommend
a transaction to another party.
The tax
consequences of stock options and other awards granted under the stock incentive
plan are complex and depend, in large part, on the surrounding facts and
circumstances. This section provides a brief summary of certain
significant U.S. federal income tax consequences of the stock incentive plan
under existing U.S. law. This summary is not a complete statement of
applicable law and is based upon the Code, the regulations promulgated therein,
as well as administrative and judicial interpretations of the Code as in effect
on the date of this description. If U.S. federal tax laws, or the
interpretations of such laws, change in the future, the information provided in
this section may no longer be accurate. This section does not discuss state,
local, or non-U.S. tax consequences. This section also does not
discuss the effect of gift, estate, or inheritance taxes. Therefore,
it is important that you consult with your tax advisor before taking any action
with respect to any award you received under the plan.
We are not a
U.S. taxpayer and, accordingly, awards under the stock incentive plan are not
expected to have direct U.S. federal income tax consequences to us.
Stock
Options
Participants
are not taxed on stock options when they are granted. However, participants will
generally be taxed when upon exercise of a stock option to purchase Class A
ordinary shares. Upon exercise of a stock option, a participant will
generally recognize ordinary income in an amount equal to the excess of the fair
market value of the Class A ordinary shares underlying the stock option on the
date the participant exercises the stock option over the exercise price of the
stock option.
Restricted
Shares
A participant
generally will not recognize any income for federal income tax purposes when the
participant is awarded restricted Class A ordinary shares, because these shares
are considered to be property that is not transferable and subject to a
substantial risk of forfeiture under the Internal Revenue Code of 1986, as
amended, or the Code. When a restricted share becomes transferable or is no
longer subject to a substantial risk of forfeiture (i.e., when that share
becomes vested and the restricted period lapses), the participant will generally
be required to recognize as income an amount equal to the excess of the fair
market value of the share on the date the restrictions lapse over the amount, if
any, that the participant paid to acquire the share when it was granted.
However, pursuant to Section 83(b) of the Code, the participant can file an
election with the Internal Revenue Service to immediately recognize income upon
the grant of the restricted shares based on the fair market value of the
restricted shares on the date the award is granted (less the amount, if any,
that the participant paid to acquire the restricted shares). This election must
be filed within the first 30 days after the date a restricted stock award is
granted to the participant. If the participant makes this election, any
dividends paid with respect to the restricted shares will not be taxed as
compensation, but rather as dividend income, and the participant will not
recognize additional income when the restrictions applicable to the restricted
shares lapse, but will be taxed at capital gain rates when the participant sells
the restricted shares after they vest based on the fair market value of the
shares on the date the participant sells them over their fair market value on
the date of grant.
Stock
Bonus Awards
A participant
will be taxed on stock bonuses in the year in which the Class A ordinary shares
subject to the award are distributed to the participant. The participant will be
taxed on the aggregate fair market value of all Class A ordinary shares
distributed to him or her.
In general,
if a participant sells the Class A ordinary shares acquired upon exercise of
stock options or vesting of restricted shares or stock bonuses, the participant
generally will have a capital gain (or loss), depending on the difference
between the sale price of the Class A ordinary shares and the fair market value
of the Class A ordinary shares on the date the participant acquired the Class A
ordinary shares upon the exercise of the stock option or vesting of restricted
shares or stock bonuses. The capital gain (or loss) is considered “long term” or
“short term,” depending on how long the participant has held the Class A
ordinary shares prior to the sale.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” APPROVAL
OF THE AMENDMENT TO THE STOCK INCENTIVE PLAN.
APPOINTMENT
OF THE COMPANY’S AUDITOR
Upon
recommendation of the Audit Committee, the Board of Directors proposes that the
shareholders ratify the appointment of BDO Seidman, LLP to serve as the
independent auditors of the Company for the 2010 fiscal year until the Company’s
Annual General Meeting of Shareholders in 2011. BDO Seidman, LLP served as the
independent auditors of the Company for the 2009 fiscal year. A representative
of BDO will attend the Meeting and will be available to respond to questions and
may make a statement if he or she so desires.
THE
BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE
APPROVAL OF THE COMPANY'S AUDITOR PROPOSAL.
APPOINTMENT
OF GREENLIGHT RE’S AUDITOR
Upon
recommendation of the Audit Committee, the Board of Directors proposes that the
shareholders ratify the appointment of BDO Cayman Islands to serve as the
independent auditors of Greenlight Re for the 2010 fiscal year until Greenlight
Re’s Annual General Meeting of Shareholders in 2011. BDO Cayman Islands served
as the independent auditors of Greenlight Re for the 2009 fiscal year. A
representative of BDO will attend the Meeting and will be available to respond
to questions and may make a statement if he or she so
desires.
THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE “FOR” THE APPROVAL OF GREENLIGHT RE’S AUDITOR
PROPOSAL.
Board
Leadership Structure and Risk Oversight
Since the
Company’s formation in 2004, the Company has bifurcated the positions of
Chairman of the Board and Chief Executive Officer. David Einhorn,
who, through an affiliate, sponsored the Company and is the senior manager of
DME Advisors, LP, our investment advisor, has served as Chairman of the Board
since August 2004. Leonard Goldberg, who joined the Company in August
2005, has served as Chief Executive Officer since such time.
We believe it
is the Chairman of the Board’s responsibility to run the Board and the Chief
Executive Officer’s responsibility to run the Company. As directors
continue to have more oversight responsibilities than ever before, we believe it
is beneficial to have a Chairman of the Board whose job is to lead the
Board. Likewise, by having two different individuals serve as
Chairman of the Board and Chief Executive Officer, our Chief Executive Officer
is able to focus the vast amount of his time and energy in running the Company
and furthering its operational business strategy. Additionally, we
believe our dual leadership structure with a Chairman of the Board with
significant investment experience and expertise, and a Chief Executive Officer,
with significant reinsurance experience and expertise, complements our
underwriting and investment strategies and helps us to further our business
objectives.
We have five
independent directors and two non-independent directors: the Chairman of the
Board and our Chief Executive Officer. We currently have an Audit
Committee, a Compensation Committee, a Nominating and Corporate Governance
Committee and an Underwriting Committee. Our Audit, Compensation and
Nominating and Corporate Governance Committees are comprised solely of
independent directors and are each served by a different
chairperson. We believe that the number of independent, experienced
directors on our Board provides necessary and appropriate oversight for our
Company.
Management is
primarily responsible for assessing and managing the Company’s exposure to
risk. While risk assessment is management’s duty, the Audit Committee
is responsible for discussing guidelines and policies with management that
govern the process by which risk assessment and control is
handled. The Audit Committee also reviews steps that management has
taken to monitor the Company’s risk exposure. The Audit Committee
receives reports from management on a regular basis regarding the Company’s
assessment and management of risks. In addition, the Audit Committee
reports regularly to the full Board, which also considers the Company’s risk
profile. Management focuses on the risks facing the Company while the
Audit Committee focuses on the Company’s general risk management strategy and
also ensures that risks undertaken by the Company are consistent with the
Company’s standards. We believe this division of responsibilities is
the most effective approach for addressing the risks facing our Company and that
our Board leadership structures supports this approach.
Pursuant to
our corporate governance guidelines, the Board and its committees, on an annual
basis, perform a self-evaluation, self-assessment and peer
review. The Nominating and Corporate Governance Committee monitors
this process. As part of its self-evaluation, self-assessment and
peer review, the Board evaluates the overall composition of the Board, in order
to, among other things, ensure that the Board and its committees are providing
the Company with the best leadership structure given the Company’s
needs.
Board
Committees and Meetings
Our Board
of Directors has four committees: an Audit Committee, a Compensation Committee,
a Nominating and Governance Committee and an Underwriting
Committee. Each committee has a written charter. The table below
provides current membership and fiscal year 2009 meeting information for each of
the Board committees.
|
Name
|
Audit
Committee
|
Compensation
Committee
|
Nominating and Governance Committee
|
Underwriting
Committee
|
||||
|
Alan
Brooks
|
X*
|
X
|
||||||
|
David
Einhorn
|
X
|
|||||||
|
Leonard
Goldberg
|
X
|
|||||||
|
Ian
Isaacs
|
X*
|
X
|
||||||
|
Frank
Lackner
|
X
|
X
|
X*
|
|||||
|
Bryan
Murphy
|
X
|
X
|
X
|
|||||
|
Joseph
Platt
|
X
|
X*
|
|
|||||
|
Total
Meetings
|
6
|
5
|
4
|
5
|
||||
*
Committee Chairperson
Each of
our directors attended in person, or by telephone from outside of the United
States, at least 80% of the four meetings of the Board of Directors and any
committee on which he served in 2009. It is our policy that directors are
expected to attend the Meeting in the absence of a scheduling conflict or other
valid reason. All of our directors attended our 2009 annual general meeting of
shareholders.
Members
of the Audit Committee, Compensation Committee and Nominating and Governance
Committee must meet all applicable independence tests of the Nasdaq stock market
rules and the applicable rules and regulations promulgated by the Securities and
Exchange Commission, or the SEC. The Company’s Nominating and Governance
Committee and the Board of Directors have reviewed the responses of director
nominees to a questionnaire asking about their relationships (and those of
immediate family members) with the Company and other potential conflicts of
interest, and have considered the relationships listed below regarding Messrs.
Platt and Isaacs in determining their respective independence. Except as noted,
the Board of Directors concluded that all of the director nominees listed below
are independent in accordance with the director independence standards of the
Nasdaq stock market rules and the SEC and that none has a material relationship
with the Company that would impair his independence from management or otherwise
compromise his ability to act as an independent director. Accordingly, the
majority of the Board of Directors is currently and, if all the director
nominees are elected, will be comprised of independent directors.
Certain of
our directors invest in funds managed by Greenlight Capital, Inc. or its
affiliates. We refer to these funds as the Greenlight Funds. Each of the
Greenlight Funds is an affiliate of DME Advisors, LP, which acts as our
investment advisor and receives significant fees from us. Joseph Platt, Frank
Lackner and Ian Isaacs are all limited partners in the Greenlight Funds DME
Advisors, LP is an affiliate of David Einhorn, the Chairman of the Board, and
Mr. Einhorn has been deemed to not be independent due to his relationship with
DME Advisors, LP. In determining whether each of Messrs. Platt, Lackner and
Isaacs is independent, the Board considered his respective limited partner
interest in the Greenlight Funds. Under the Nasdaq rules, the Board considered
the investments of Messrs. Platt, Lackner and Isaacs in the Greenlight Funds,
but ultimately determined that such investments would not interfere with their
respective ability to exercise independent judgment in carrying out the
responsibilities as a director of the Company.
Ian Isaacs is
a senior partner of Merlin Securities, a prime brokerage services and technology
provider for hedge funds. The Greenlight Funds and DME Advisors, LP,
the Company’s investment advisor, compensate Merlin Securities for market
intelligence and analytic services provided by Mr. Isaacs to the Greenlight
Funds and DME Advisors, LP. In fiscal year 2009, the Greenlight Funds and DME
Advisors, LP paid commissions to Merlin Securities, of which Mr. Isaacs
indirectly received approximately $65,000. Under the Nasdaq rules, a director
will not be deemed independent if he accepted any compensation from a company in
excess of $120,000 during any 12 consecutive month period within the three years
preceding the determination of independence. The Board determined
that the compensation earned by Mr. Isaacs was related to his services to the
Greenlight Funds and DME Advisors, LP, and does not deem Mr. Isaacs to be
non-independent under this Nasdaq rule. Further, in analyzing whether Mr.
Isaacs’ role as a partner of an organization which received payments from the
Company renders him non-independent, the Board has determined that the payments
do not exceed the 5% consolidated gross revenues of Merlin Securities threshold
nor does it exceed the $200,000 threshold under the Nasdaq rules. Finally, the
Board considered Mr. Isaacs’ employment with Merlin Securities and his
compensation relating to services to the Greenlight Funds and DME Advisors, LP
and determined that such relationships would not interfere with his ability to
exercise independent judgment in carrying out the responsibilities of
director.
|
Director
|
Independent
|
Material
Transactions and Relationships
|
||
|
Alan
Brooks
|
Yes
|
None
|
||
|
David
Einhorn
|
No
|
President
of Greenlight Capital, Inc. and senior managing member of DME Advisors,
LP
|
||
|
Leonard
Goldberg
|
No
|
Chief
Executive Officer of the Company
|
||
|
Ian
Isaacs
|
Yes
|
None
|
||
|
Frank
Lackner
|
Yes
|
None
|
||
|
Bryan
Murphy
|
Yes
|
None
|
||
|
Joseph
Platt
|
Yes
|
None
|
Below is a
description of each committee of our Board of Directors.
Audit
Committee
The Audit
Committee is currently composed entirely of non-management directors each of
whom the Board of Directors has determined is independent in accordance with the
Nasdaq stock market rules and applicable rules and regulations promulgated under
the Securities Exchange Act of 1934, as amended, or the Exchange Act. The Audit
Committee has general responsibility for the oversight and surveillance of our
accounting, reporting and financial control practices. The Audit Committee is
governed by a written charter approved by our Board of Directors, which outlines
its primary duties and responsibilities and which can be found on our website at
www.greenlightre.ky.
Mr. Brooks has been designated as an “audit committee financial expert” as
defined in Section 407 of the Sarbanes-Oxley Act of 2002.
Compensation
Committee
The
Compensation Committee is appointed by the Board of Directors. All of the
members of our Compensation Committee are independent as defined under the
Nasdaq stock market rules and applicable SEC rules and regulations. The purpose
of our Compensation Committee is to discharge the responsibilities of our Board
of Directors relating to compensation of our executive officers. The
Compensation Committee is governed by a written charter approved by our Board of
Directors, which outlines its primary duties and responsibilities and which can
be found on our website at www.greenlightre.ky.
Our Compensation Committee, among other things, assists our Board of Directors
in ensuring that a proper system of compensation is in place to provide
performance-oriented incentives to management and makes recommendations to the
Board of Directors with respect to incentive-compensation plans and equity-based
plans.
Nominating
and Governance Committee
The
Nominating and Governance Committee makes recommendations to the Board of
Directors as to nominations and compensation for the Board of Directors and
committee members, as well as structural, governance and procedural matters. The
Nominating and Governance Committee also reviews the performance of the Board of
Directors and the Company’s succession planning. All of the members of our
Nominating and Governance Committee are independent as defined under the Nasdaq
stock market rules and applicable SEC rules and regulations. The Nominating and
Governance Committee is governed by a written charter approved by our Board of
Directors, which outlines its primary duties and responsibilities and which can
be found on our website at www.greenlightre.ky.
The
Nominating and Governance Committee is responsible for reviewing with the Board
of Directors, on an annual basis, the requisite skills and characteristics of
new directors as well as the composition of the Board of Directors as a whole.
When the Board of Directors determines to seek a new member, whether to fill a
vacancy or otherwise, the Nominating and Governance Committee generally does not
use third-party search firms. The Nominating and Governance Committee considers
recommendations from other directors, management and others, including
shareholders. In general, the Nominating and Governance Committee looks for
directors possessing superior business judgment and integrity who have
distinguished themselves in their chosen fields of endeavor and who have
knowledge or experience in the areas of insurance, reinsurance, financial
services or other aspects of the Company’s business, operations or activities.
In selecting director candidates, the Nominating and Corporate Governance
Committee also considers diversity, including skills, geography and the
interplay of the candidate's experience with the experience of the other board
members.
The
Nominating and Governance Committee will consider, for director nominees,
persons recommended by shareholders, who may submit recommendations to the
Nominating and Governance Committee in care of the Company’s Secretary,
Greenlight Capital Re, Ltd., 65 Market Street, Suite 1207, Jasmine Court, Camana
Bay, P.O. Box 31110, Grand Cayman, KY1-1205, Cayman Islands. To be considered by
the Nominating and Governance Committee, such recommendations must be
accompanied by a description of the qualifications of the proposed candidate and
a written statement from the proposed candidate that he or she is willing to be
nominated and desires to serve if elected. Nominees for director who are
recommended by shareholders to the Nominating and Governance Committee will be
evaluated in the same manner as any other nominee for director. Nominations by
shareholders may also be made at an Annual General Meeting of Shareholders in
the manner set forth under “Shareholder Proposals for the Annual General Meeting
of Shareholders in 2011”.
Underwriting
Committee
The
Underwriting Committee, among other things, advises our Board of Directors and
management concerning the establishment and review of our underwriting policies
and guidelines, oversees our underwriting process and procedures, monitors our
underwriting performance and oversees our underwriting risk management exposure.
The Underwriting Committee is governed by a written charter approved by our
Board of Directors, which outlines its primary duties and responsibilities and
which can be found on our website at www.greenlightre.ky.
|
Name
|
Age
|
Position
|
Position
Since
|
|||
|
Leonard
Goldberg*
|
47
|
Director,
Chief Executive Officer
|
2005
|
|||
|
Barton
Hedges
|
44
|
President
and Chief Underwriting Officer
|
2006
|
|||
|
Tim
Courtis
|
48
|
Chief
Financial Officer
|
2006
|
|
*
|
See
biography above under
“Director Nominees.”
|
Barton Hedges has served as
President and Chief Underwriting Officer of Greenlight Re since January 2006.
Mr. Hedges has more than 20 years experience in the property and casualty
insurance and reinsurance industry and is a Fellow of the Casualty Actuarial
Society and a member of the American Academy of Actuaries. Prior to joining
Greenlight Re, Mr. Hedges served as president and chief operating officer of
Platinum Underwriters Bermuda, Ltd., a property, casualty and finite risk
reinsurer from July 2002 until December 2005, where he was responsible for the
initial start-up of the company and managed the company’s day-to-day
operations. Mr. Hedges’ previous experience includes serving as
executive vice president and chief operating officer of Bermuda-based
Scandinavian Re, actuarial consultant at Tillinghast – Towers Perrin, Senior
Manager at Deloitte & Touche LLP and actuarial manager at United States
Fidelity and Guaranty Company, where he began his career in 1987.
Mr. Hedges has a B.A. in Mathematics from
Towson State University.
Tim Courtis has served
as Chief Financial Officer since May 2006. Mr. Courtis has over 20 years
experience in the property and casualty reinsurance, captive and insurance
industry. Mr. Courtis was president and chief financial officer of European
International Reinsurance Company Ltd., a subsidiary of Swiss Re, from August
1994 until April 2006, where he was responsible for the management and financial
analysis of Swiss Re’s Barbados-based entities. Prior to joining Swiss Re in
1994, Mr. Courtis worked for Continental Insurance in Barbados and
International Risk Management Company in Bermuda where he performed duties as
senior account manager to various captive insurance companies. Mr. Courtis
is a Canadian Chartered Accountant and has a MBA from York University,
Toronto and a Bachelor of Business from Wilfrid Laurier University,
Waterloo.
We
currently have five independent directors who receive compensation from us for
their services. Under the Articles, our directors may receive compensation for
their services as may be determined by our Board of Directors. Neither
Mr. Einhorn nor Mr. Goldberg is eligible for compensation as a member
of our Board of Directors. Our Compensation Committee determined that the annual
retainer we pay to our directors, excluding Mr. Einhorn and Mr. Goldberg, is
$50,000, effective May 1, 2009, payable at the election of the directors either
quarterly (for quarters commencing May 1) in arrears, in cash or once in
restricted shares, which restricted shares will vest at the earlier of the date
of the one year anniversary of the grant date and the next Annual General
Meeting of Shareholders. Effective May 1, 2010 the annual retainer will increase
to $70,000. Each independent director will also be annually awarded 4,000
restricted shares, which will vest at the earlier of the date of the one year
anniversary of the grant date and the next Annual General Meeting of
Shareholders. Our Compensation Committee also determined
that the Chairman of the Audit Committee (Mr. Brooks) will receive an
additional $20,000 in cash annually, payable quarterly (for quarters commencing
May 1) in arrears.
Director Compensation Table
The
following table summarizes the total compensation paid or awarded to our
independent directors in 2009.
|
Name
|
Fees
Earned
or
Paid
in
Cash
($)
|
Stock
Awards
($)(1)
|
Option
Awards
($)(2)
|
Total
($)
|
||||
|
Alan
Brooks
|
20,000
|
113,006
|
—
|
133,006
|
||||
|
Ian
Isaacs
|
—
|
113,006
|
—
|
113,006
|
||||
|
Frank
Lackner
|
—
|
113,006
|
—
|
113,006
|
||||
|
Bryan
Murphy
|
—
|
113,006
|
—
|
113,006
|
||||
|
Joseph
Platt
|
—
|
113,006
|
—
|
113,006
|
||||
|
(1)
|
The
aggregate number of stock awards held on December 31, 2009 by each of
Messrs. Brooks, Isaacs, Lackner, Murphy and Platt was 21,488, 15,189,
16,175, 11,856 and 21,488 respectively. All stock awards were granted
under our stock incentive plan. We account for our stock incentive plan in
accordance with U.S. GAAP. The value reported above in the “Stock Awards”
column is the aggregate grant date fair value for each director’s
stock award granted in 2009.
|
|
(2)
|
The
aggregate number of option awards held on December 31, 2009 by each of
Messrs. Brooks, Lackner and Platt was 2,000. All option awards were
granted under our stock incentive plan. We account for the stock incentive
plan in accordance with U.S. GAAP. There were no options granted to
directors during 2009.
|
Shareholder
Communication
The
Nominating and Governance Committee has adopted a policy for handling
shareholder communications to directors. The policy and contact information can
be found on our website at www.greenlightre.ky.
Shareholders may send written communications to the Board of Directors or any
one or more of the individual directors by mail, c/o Secretary, Greenlight
Capital Re, Ltd., 65 Market Street, Suite 1207, Jasmine Court, Camana Bay, P.O.
Box 31110, Grand Cayman, KY1-1205, Cayman Islands or by fax at (345) 745-4576.
There is no screening process, other than to confirm that the sender is a
shareholder and to filter inappropriate materials and unsolicited materials of a
marketing or publication nature. All shareholder communications that are
received by the Secretary of the Company for the attention of a director or
directors are forwarded to the director or directors.
Compensation
Policy
In
general, we seek to pay salaries and living expenses that are commensurate with
the salaries and living expenses paid to executives at other reinsurance
companies. However, as we are the first global reinsurer operating in the
Cayman Islands, no direct comparisons may be made.
Our
performance-driven compensation policy consists of the following three
components:
• base
salary;
• bonuses;
and
• equity-based
compensation.
We use
short-term compensation comprised of base salary and annual cash bonuses and
long-term compensation comprised of deferred bonuses, stock options and
restricted stock in an effort to align our employees’ and executive officers’
interests with those of our shareholders and increase long-term growth in book
value per share. We compensate our current executive officers,
Messrs. Goldberg, Hedges and Courtis, or the named executive officers, or
NEOs, according to the terms of their employment agreements.
Messrs. Goldberg and Courtis are NEOs based on their positions with us and
Mr. Hedges is a NEO based on his level of compensation.
Our
Compensation Committee reviews all recommendations made with respect to
discretionary compensation and approves all discretionary compensation decisions
for all of our employees, including our NEOs. Each year, our Chief Executive
Officer provides information and recommendations to the Compensation Committee
with respect to individual performance to assist the Compensation Committee with
its analysis and evaluation of each employee’s compensation, including the NEOs,
but not for himself. The Compensation Committee determines and approves the
amount of any discretionary bonus awarded to the Chief Executive Officer. While
the Compensation Committee considers this information, it is not bound by the
Chief Executive Officer’s recommendations. While the Compensation Committee is
generally familiar with the compensation of similarly situated individuals and
does consider this information when making compensation decisions, given the
nature of our business and compensation, the Compensation Committee has not felt
it necessary to utilize the services of a compensation consultant or to do any
formal benchmarking.
Base
Salary
We use
base salary to recognize the experience, skills, knowledge, roles and
responsibilities of our employees and executive officers. When establishing the
base salaries of our NEOs, our Compensation Committee considered a number of
factors, including:
• the
individual’s years of underwriting and actuarial experience;
• the
functional role of the individual’s position;
• the
level of the individual’s responsibility;
• our
ability to replace the individual; and
• the
limited number of well-qualified candidates available in or willing to relocate
to the Cayman Islands.
Base
salaries, which may include a living allowance, are expected to be reviewed by
the Compensation Committee for possible increases at least once every three
years and the timing of such review depends on the nature of the individual’s
responsibilities and whether the Compensation Committee believes that changed
circumstances warrant such review.
Effective
January 1, 2009, Mr. Hedges’ employment contract was amended to increase his
base salary from $450,000 per annum to $500,000 per annum. The
increase, as determined by our Compensation Committee, was reflective of Mr.
Hedges’ successful formation of an experienced underwriting team and his
successful development and ongoing management of a larger, more complex,
underwriting platform.
Bonuses
We use
bonuses to reward individual and company performance. We expect our bonuses to
be highly variable from year to year primarily due to our expectation of annual
variability in our underwriting result. Our Compensation Committee
determines each NEO’s target bonus, expressed as a percentage of his base
salary. For 2009, Mr. Goldberg’s target bonus is 125% of base salary
and Mr. Hedges’ target bonus is 100% of base salary. Effective
January 1, 2009, Mr. Courtis’ target bonus was increased from 50% of base salary
to 60% of base salary. The increase in Mr. Courtis’ target bonus, as
determined by our Compensation Committee, was reflective of Mr. Courtis’
increased responsibility due to the growth of our Company and his expanded
responsibility over all of our Company’s financial and risk management
matters.
Our
Compensation Committee approved a bonus program, which became effective as of
the 2007 year and in which all of our employees, including our NEOs,
participate. Under the bonus program, each employee’s target bonus consists of
two components: a quantitative component based on return on deployed equity
relating to our reinsurance operations and a discretionary component based on a
qualitative assessment of each employee’s performance. Each employee is assigned
a percentage of the portion of his or her bonus that will be determined based
upon the quantitative component of his or her bonus. An employee’s quantitative
bonus percentage may be adjusted annually by the Compensation Committee based
primarily on the roles and responsibilities of the employee and the level of
their direct involvement in underwriting operations. The remaining
portion of the target bonus is discretionary and determined based on a
qualitative assessment of the employee’s performance in relation to certain
annual performance goals and objectives.
Quantitative
Bonus
Each
year, our employees, including our NEOs, are entitled to receive a portion of a
bonus pool based on quantitative performance. This pool is calculated
based on the return on deployed equity, or RODE, for each underwriting year. The
quantitative portion of an employee’s actual annual bonus is not calculated and
paid until two years from the end of the fiscal year in which the business was
underwritten. The employee’s receipt of the quantitative portion of
his or her bonus is therefore deferred for two years so that we can better
determine the actual performance of the reinsurance contracts for such
underwriting year. We therefore do not risk paying large bonuses for contracts
that do not perform well over time. For example, the 2009 underwriting year
quantitative bonuses, if any, will be paid in 2012. For years prior to 2009, an
employee had to be employed by us or one of our subsidiaries on the last day of
the applicable underwriting year in order to receive the quantitative portion of
his or her bonus with respect to such year, but did not need to be employed on
the date quantitative bonuses are paid. For 2009 and future years, an employee
must be employed by us or one of our subsidiaries on January 1st
following the end of the applicable fiscal year, in order to receive the
quantitative component of his or her bonus with respect to such year, but need
not be employed by us at the date of payment of the deferred amounts.
Notwithstanding the foregoing, with respect to the quantitative portion of the
employee’s annual bonus for 2009 and future years, the payment schedule may be
adjusted to comply with Section 457A of the Internal Revenue Code of 1986,
as amended, or the Code. Our Compensation Committee has the discretion to reduce
or increase the total aggregate quantitative bonus pool for any particular
underwriting year based on particular reinsurance industry events or other
extraordinary factors.
Each
employee, including our NEOs, is assigned a quantitative bonus participation
percentage, or a “QBP percentage,” which indicates the portion of his bonus that
will be determined based on RODE. Deployed equity is the aggregate allocated
equity calculated by our proprietary models based upon the risk profile of each
reinsurance contract written.
If our
Compensation Committee expects an individual to have a direct or significant
impact on our return on deployed equity, it will assign that individual a higher
QBP percentage. Similarly, if our Compensation Committee expects that
an individual will not have a direct or significant impact on our return on
deployed equity it will assign that individual a lower QBP
percentage. Our Compensation Committee believes that the performance
of each of Mr. Goldberg and Mr. Hedges, our Chief Executive Officer and Chief
Underwriting Officer, respectively, will have a direct and/or significant impact
on our return on deployed equity relating to our reinsurance
operations. Therefore, they have been assigned higher QBP
percentages, whereas Mr. Courtis, our Chief Financial Officer, has been assigned
a lower QBP percentage, as the Compensation Committee believes that his
individual performance should be weighted more heavily when making bonus
determinations. For 2009, Mr. Goldberg’s target bonus was $500,000,
80% of which was the target QBP percentage. Mr. Hedges’ target bonus
was $500,000, 80% of which was the target QBP percentage. Mr.
Courtis’ target bonus was $180,000, 40% of which was the target QBP percentage.
Each NEO’s QBP percentage may be adjusted annually by the Compensation
Committee.
The sum
of the target quantitative bonuses for all employees, including NEOs, equals the
total target quantitative bonus pool. Each NEO’s share of the
quantitative bonus pool is his or her target quantitative bonus divided by the
total target quantitative bonus pool. The amount of
quantitative bonus ultimately paid to each NEO is based upon the NEO’s share of
the quantitative bonus pool multiplied by the ultimate quantitative bonus
declared.
RODE is
the percentage return based on net underwriting income, net of all general and
administrative expenses, all discounted at a risk free rate selected for such
underwriting year, in relation to the sum of the deployed capital allocated to
each of the contracts underwritten. The amount of quantitative bonus awarded, if
any, is determined based on the excess of the actual RODE compared to a risk
free return.
A target
RODE is established for the entire underwriting portfolio each year by the
Compensation Committee and is an amount equal to the sum of (i) the “risk free
rate,” as determined annually by the Underwriting Committee and (ii) a fixed
percentage in excess of the risk free rate for each contract underwritten based
upon the inherent risk in each contract. Currently we use one fixed
percentage for all frequency business and another percentage for all severity
business. A higher fixed percentage is assigned for severity business to reflect
the inherently riskier nature of that business.
Expressed as
a formula, for each underwriting year, target RODE is calculated as
follows:
|
|
Target
RODE =
|
{Risk
Free Rate + the sum of (a fixed percentage times the amount of deployed
equity for each contract)} / total deployed
equity
|
At the end of
the three-year measurement period, the actual RODE is compared to the target
RODE for the applicable underwriting year and the quantitative bonus pool is
funded in accordance with the following formulas:
|
Actual
RODE
|
Amount
Credited to Quantitative Bonus Pool
|
|
Equal
to or less than Risk Free Rate
|
Zero
|
|
Between
Risk Free Rate and Target RODE
|
The
sum of all employees’ target quantitative bonuses multiplied by a
fraction, the numerator of which equals the actual RODE minus the risk
free rate and the denominator of which equals the target RODE minus the
risk free rate.
|
|
Greater
than Target Return
|
The
sum of all employees’ target quantitative bonuses plus 10% multiplied by
the excess of achieved RODE over target RODE multiplied by deployed
equity.
|
|
Greater
than Target Return + 5%
|
In
addition to the bonus calculated above, an additional bonus pool will be
created equal to 10% multiplied by the excess of achieved RODE over target
RODE + 5% multiplied by deployed
equity.
|
There is no
maximum amount that may be paid under the quantitative component of our bonus
plan. Likewise, there is no fixed minimum amount and therefore the quantitative
component of the bonus plan could be zero for any particular underwriting
year.
Additionally,
the Compensation Committee has the discretion to make adjustments to the
calculation of the quantitative bonus pool due to significant over-performance
or deficiencies. For example, the quantitative bonus pool could be
reduced if it related to over-weighting and short term good
fortune on natural catastrophe business. Alternatively, the quantitative bonus
pool could be increased if in a generally poor underwriting year for the
reinsurance industry, we demonstrated a prudent use of deployed capital and
achieved a profitable above industry average return on capital.
The
calculation of the quantitative bonus pool is deferred for two years following
the end of the applicable underwriting year because we believe that short-term
results are not an accurate indicator of any contract’s performance. Thus,
subject to the requirements of Section 457A of the Code, calculations are
scheduled to be made with respect to the 2009 underwriting year on January 1,
2012 and payments made in calendar year 2012. As such, the employee’s receipt of
the quantitative portion of his or her bonus is deferred until we can better
determine the actual performance of the reinsurance contracts bound by us during
such year. We believe that this is unique in the reinsurance business
and helps us better align the interests of management and shareholders by paying
bonuses once the business develops instead of based solely on initial accounting
of results. The calculated bonus pool will accrue our investment return from
December 31 of the underwriting year until December 31 two years
later.
In
February 2010 the Compensation Committee approved the quantitative bonus pool
with respect to the 2007 underwriting year based on performance through December
31, 2009. Although the Compensation Committee has discretion to make adjustments
to the calculation of the quantitative bonus pool it did not elect to exercise
this discretion with respect to quantitative bonuses related to the 2007
underwriting year.
As a
result of the RODE calculation for the 2007 underwriting year, the Compensation
Committee approved quantitative bonus amounts for each of our NEOs which will be
payable on or before March 15, 2010. The resulting quantitative bonus amounts
are $1,078,668 to Mr. Goldberg, $970,802 to Mr. Hedges and $161,800 to Mr.
Courtis. These quantitative bonus amounts reflect the Company’s successful 2007
underwriting results in which the Company reported a RODE in excess of the
target return plus five percent. The amounts awarded to each
of Mr. Goldberg, Mr. Hedges and Mr. Courtis were determined based on
each NEO’s share of the target quantitative bonus pool multiplied by the
ultimate quantitative bonus declared.
Discretionary
Bonus
The
discretionary portion of an employee’s annual bonus is determined by taking into
account the employee’s achievement of individual performance goals established
by the employee and management and reviewed and approved by our Chief Executive
Officer or the Compensation Committee (in the case of the Chief Executive
Officer). The CEO makes a recommendation to the Compensation Committee with
regard to the amount of any discretionary bonus to be awarded to all employees,
including the NEOs, but not for himself. The Compensation Committee determines
and approves the amount of any discretionary bonus awarded to the CEO. An
employee must be employed by us or one of our subsidiaries on the last day of
the year in order to receive the discretionary component of his or her bonus for
the year.
With
respect to the 2009 discretionary bonuses for our NEOs, the Compensation
Committee considered the individual performance of each of our NEOs taking into
account their respective achievements in relation to certain goals and
objectives and such other criteria as our Compensation Committee deemed
appropriate. The following is a non-exclusive list of factors considered by our
Compensation Committee in making 2009 qualitative bonus determinations, none of
which were assigned any particular weight:
Goals and
objectives for Leonard Goldberg:
|
·
|
Monitoring
and managing overall enterprise risk and
profitability;
|
|
·
|
Developing
strategic relationships and partnerships with insurance companies and
other risk taking entities;
|
|
·
|
Effectively
managing rating agency and regulatory relationships;
and
|
|
·
|
Providing
consistent and appropriate communications to the Board of Directors and
investors.
|
Goals and
objectives for Barton Hedges:
|
·
|
Expanding
new lines of business;
|
|
·
|
Developing
and retaining relationships with brokers, agents and managing general
agents;
|
|
·
|
Developing
and managing relationships with outside experts, including financial
advisors, attorneys and accountants;
and
|
|
·
|
Recruiting
and developing staff.
|
Goals and
objectives for Tim Courtis:
|
·
|
Coordinating
regulatory issues and relationships, including rating
agencies;
|
|
·
|
Managing
and expanding our letters of credit
facilities;
|
|
·
|
Ensuring
that Board of Directors and committee meetings run efficiently and
effectively;
|
|
·
|
Managing
the ongoing public reporting process, including any SEC or Nasdaq
issues;
|
|
·
|
Recruiting
and developing staff; and
|
|
·
|
Producing
underwriting analyses and reports which assist in tracking the progress of
our business.
|
As a
result of these analyses, in February 2010 the Compensation Committee approved
discretionary bonus amounts with respect to 2009 performance for each of our
NEOs, resulting in a $100,000 qualitative bonus payment to Mr. Goldberg, a
$100,000 qualitative bonus payment to Mr. Hedges and a $129,600 qualitative
bonus payment to Mr. Courtis.
The
qualitative bonus awards granted to both Mr. Goldberg and Mr. Hedges were equal
to their target qualitative bonus amount. Mr. Goldberg’s bonus
was a reflection of the Compensation Committee’s approval of his successful
management of the Company’s overall risk profile and the further development of
certain strategic relationships. Mr. Hedges’ bonus was a reflection of his
continued successful growth and diversification of a frequency oriented
underwriting portfolio and the successful integration of a larger underwriting
team. Mr. Courtis’ qualitative bonus award was 120% of his target
qualitative bonus which reflects the Compensation Committee’s evaluation that
Mr. Courtis successfully managed all finance functions of the Company which have
become more complex as the Company’s underwriting platform has
grown.
The
discretionary bonus amounts will be paid on or around March 15,
2010.
Stock
Incentive Plan Awards
In 2004,
we adopted a stock incentive plan, which was amended and restated effective as
of August 15, 2005, February 14, 2007 and May 4, 2007. We have historically
granted stock options to our employees, including our NEOs, at employment
inception that vest ratably over three years. Pursuant to the terms of his
employment agreement, Mr. Goldberg also receives annual option grants and
on August 14, 2009, our Board of Directors granted Mr. Goldberg
options to acquire 80,000 Class A ordinary shares at an exercise price of $28.44
per share, being 1.7 times the Company’s fully diluted book value per share as
of June 30, 2009. In accordance with Mr. Goldberg’s employment
agreement the exercise price of the options is calculated as the greater of: a)
the fair market value of a GLRE share on the grant date and b) 1.7 times our
fully diluted book value per share as of June 30, 2009.
Our
Compensation Committee has decided that over the long term, restricted stock
will be the preferred form of equity compensation as it better aligns management
with long-term shareholder value creation. Our Compensation Committee determines
the value of restricted stock grants that each NEO may receive, taking into
account prior performance, our desire to retain the executive and the
executive’s role within our company. Those executives who are most critical to
our future growth generally receive larger awards. The restricted stock will be
subject to three-year cliff vesting. Unvested restricted shares will be
forfeited if a NEO terminates employment for any reason (other than death or
disability). Currently, we expect long-term compensation, or the deferred
portion of our bonus program and stock incentive plan awards, to represent the
majority of each NEO’s compensation.
In order
to prevent the backdating of equity awards and to ensure that the timing of
awards or the release of material information will not be accelerated or delayed
to allow an award recipient to benefit from a more favorable stock price, on
February 27, 2008, our Board of Directors and Compensation Committee adopted a
policy with respect to our equity grant practices that delineates specific
procedures that must be followed when granting equity awards. We believe this
policy helps the integrity of our equity award grant practices.
Our
current practice is to grant equity awards in March of each fiscal year. In
2009, our Compensation Committee approved and we granted awards of
$701,250, $601,245 and $626,250 of Class A ordinary restricted shares to each of
Messrs. Goldberg, Hedges and Courtis respectively under the stock incentive
plan. The number of shares were calculated based on the closing price
of the shares on March 12, 2009. The restricted shares were granted
on March 13, 2009 and are subject to three-year cliff vesting. These stock
awards reflect our Compensation Committee’s assessment of each individual’s
successful performance during 2008 with respect to further developing our
underwriting platform, developing strategic partnerships and judiciously
deploying underwriting capital in a softening reinsurance marketplace, as well
as our desire to retain these executives and align their interests with those of
our shareholders.
In 2010,
our Compensation Committee approved and we will grant awards of $476,000 of
Class A ordinary restricted shares to each of Messrs. Goldberg, Hedges and
Courtis, under our stock incentive plan. The number of shares will be
calculated based on the closing price of the shares on March 12, 2010. The
restricted shares will be granted on or around March 15, 2010 and are
subject to three-year cliff vesting. These stock awards reflect our Compensation
Committee’s assessment of each individual’s successful performance during 2009
with respect to further developing our underwriting platform, developing
strategic partnerships and judiciously deploying underwriting capital in a
softening reinsurance marketplace, as well as our desire to retain these
executives and align their interests with those of our
shareholders.
Benefits
and Perquisites
We offer
certain limited perquisites to our executives, including housing allowances and
contributions to our defined benefit contribution pension plan. We intend to
continue to maintain our current benefits and perquisites for our executive
officers. However, our Compensation Committee may revise, amend or add to these
benefit programs at its discretion.
Tax
Implications
The
Compensation Committee considers the income tax consequences of individual
compensation elements when analyzing the overall compensation paid to our NEOs.
Because we are not a U.S. taxpayer, our compensation program has not been
designed to comply with Section 162(m) of the Code.
Ordinary
Share Ownership Guidelines
We
believe that broad-based share ownership by our employees, including our NEOs,
is the most effective method to deliver superior shareholder returns by
increasing the alignment between the interests of our employees and our
shareholders. We do not, however, have a formal requirement for share ownership
by any group of employees including our NEOs.
Change
in Control and Severance
Upon
termination of employment or a change in control, the NEOs may receive
accelerated vesting of awards granted under our stock incentive plan and
severance payments under their employment agreements.
Under our
stock incentive plan, our Compensation Committee generally has the discretion to
vest unvested awards upon a change in control as described below under “The
Stock Incentive Plan.” This discretion allows the Compensation Committee to
determine at the time of the change in control whether, and the extent to which,
additional vesting is warranted. In addition, Mr. Goldberg’s option
agreements and each NEO’s restricted stock award agreements provide for
accelerated vesting upon termination of employment under certain circumstances,
and also upon a change in control. For more details on these termination
provisions, see “Potential Payments upon Termination or Change in
Control.”
Upon
termination of employment without cause or for good reason, our NEOs are
eligible for severance payments which, depending upon the circumstances
surrounding termination, may include:
• a
cash payment equal to one year’s annual salary and bonus;
• a
pro-rated target bonus for the year of termination; and
• one
year of continued health benefits.
The
amount of our severance obligations to our NEOs is designed to be competitive
with the amounts payable to executives in similar positions at other global
reinsurance companies with which we compete for talent. Severance payments are
made monthly and are contingent upon the NEO’s continued compliance with the
restrictive covenants in his employment agreement. Mr. Goldberg’s agreement
contains a special provision whereby he may terminate his employment and receive
severance benefits in the event of a change in control (as defined under the
description of his employment agreement). We agreed to this provision in
consideration of the risk Mr. Goldberg took by joining us in our formation
stages and our recognition of his willingness to take the risk and his
confidence in both our overall strategy and the strength of our Board of
Directors.
Compensation
Committee Report
In
February 2010, our Compensation Committee reviewed and discussed the
compensation discussion and analysis required by Regulation S-K, Item 402(b)
promulgated under the Exchange Act, with management. Based on the review and
discussions referred to in the preceding sentence, our Compensation Committee
recommended to our Board of Directors that this compensation discussion and
analysis disclosure be included in this Proxy Statement.
The
foregoing report is provided by the following directors, who constitute the
Compensation Committee:
The
Compensation Committee
Ian Isaacs
(Chairman)
Bryan
Murphy
Joseph Platt
The
foregoing Compensation Committee Report shall not be incorporated by reference
in any previous or future documents filed by the Company with the SEC under the
Securities Act of 1933, as amended, or the Exchange Act, except to the extent
that the Company specifically incorporates the Report by reference in any filed
document.
The
following Summary Compensation Table summarizes the total compensation paid or
awarded to our NEOs in 2009, 2008 and 2007.
|
Name
and
Principal
Position
|
Year
|
Salary
($)
|
Bonus
($)
|
Stock
Awards
($)(2)
|
Option
Awards
($)(3)
|
Non-Equity
Incentive
Plan
Compensation
($)(4)
|
All
Other
Compensation
($)(5)
|
Total
($)
|
||||||||
|
Leonard
Goldberg, CEO
|
2009
|
400,000
|
100,000
|
(1) |
701,250
|
500,000
|
1,078,668
|
79,317
|
(6) |
2,859,235
|
||||||
|
2008
|
462,500
|
250,000
|
473,765
|
695,200
|
—
|
109,317
|
(7) |
1,990,782
|
||||||||
|
2007
|
500,000
|
100,000
|
589,780
|
509,000
|
—
|
127,317
|
(8) |
1,826,097
|
||||||||
|
Tim
Courtis, CFO
|
2009
|
300,000
|
129,600
|
(1) |
626,250
|
—
|
161,800
|
79,317
|
(6) |
1,296,967
|
||||||
|
2008
|
300,000
|
225,000
|
473,765
|
—
|
—
|
79,317
|
(6) |
1,078,082
|
||||||||
|
2007
|
291,667
|
90,000
|
303,896
|
—
|
—
|
79,317
|
(6) |
764,880
|
||||||||
|
Barton
Hedges, CUO
|
2009
|
500,000
|
100,000
|
(1) |
601,245
|
—
|
970,802
|
79,317
|
(6) |
2,251,364
|
||||||
|
2008
|
450,000
|
225,000
|
473,765
|
—
|
—
|
79,317
|
(6) |
1,228,082
|
||||||||
|
2007
|
450,000
|
90,000
|
533,990
|
—
|
—
|
79,317
|
(6) |
1,153,307
|
| (1) | Represents the discretionary portion of the NEO’s bonus to be paid on March 15, 2010. |
|
(2)
|
All
stock awards were granted under our stock incentive plan. We account for
the stock incentive plan in accordance with U.S. GAAP. The value reported
above in the "Stock Awards" column is the aggregate grant date fair value
for each NEO’s restricted stock award, granted in 2009, 2008 and
2007.
|
|
(3)
|
All
option awards were granted under our stock incentive plan at fair value on
the date of grant. The value reported above in the "Option Awards" column
is the aggregate grant date fair value for each NEO’s option
award.
|
|
(4)
|
As
discussed in the “Compensation Discussion & Analysis” section of this
proxy statement, the quantitative component of each NEO’s bonus is
calculated and paid two years following the end of the fiscal year in
which the business is underwritten and is based on performance over this
extended period. Accordingly, quantitative bonuses are not earned in the
year in which the business is underwritten but rather they are earned at
the end of the applicable performance period. In the case of the 2007
quantitative bonus, in February 2010 the compensation committee approved
the amounts reported above based on performance through December 31, 2009
and calculations performed as of January 1, 2010. These amounts are
expected to be paid on March 15, 2010 and are reported as non-equity
incentive plan compensation for the 2009 year.
As
of December 31, 2009, we estimate that the bonus amounts relating to the
2008 and 2009 underwriting years, payable in 2011 and 2012 respectively,
would equal approximately $2,419,000 for Mr. Goldberg (2009: $1,167,000;
2008: $1,252,000), $2,294,000 for Mr. Hedges (2009: $1,167,000; 2008:
$1,127,000) and $398,000 for Mr. Courtis (2009: $210,000; 2008:
$188,000). We note, however, that these amounts will be adjusted
based on changes in underwriting results and. the ultimate amount paid
could be materially different than the estimates provided. Additionally,
because our compensation committee has discretion to pay more or less than
the amount resulting from the performance based funding calculation, the
ultimate amount of the quantitative portion of the bonus for each NEO may
differ from the estimate provided herein. We expect that final
decisions with respect to the 2008 and 2009 quantitative bonus amounts
will be made in February 2011 and February 2012,
respectively.
|
|
(5)
|
The
amounts shown in this column include a housing allowance and the amounts
we contributed to our defined contribution pension plan on behalf of each
NEO.
|
|
(6)
|
Includes
a $72,000 housing allowance and amounts contributed to our defined
contribution pension plan on behalf of each of Mr. Goldberg, Mr.
Hedges and Mr. Courtis.
|
|
(7)
|
Includes
a $102,000 housing allowance and amounts contributed to our defined
contribution pension plan on behalf of
Mr. Goldberg.
|
|
(8)
|
Includes
a $120,000 housing allowance and amounts contributed to our defined
contribution pension plan on behalf of
Mr. Goldberg.
|
Grants
of Plan Based Awards for Fiscal Year 2009
Our
Compensation Committee, or our Board of Directors acting as our Compensation
Committee, granted stock option and restricted stock awards under our stock
incentive plan and established target quantitative bonuses (which will be paid
in 2012) for our NEOs in 2009. Set forth in the following table is information
regarding stock option and restricted stock awards granted in 2009 as well as
2009 estimated quantitative bonus amounts.
GRANTS
OF PLAN BASED AWARDS IN FISCAL YEAR 2009
|
Grant
Date
|
Approval
Date
|
Estimated
Future Payouts
Under
Non-Equity Incentive
Plan
Awards(1)
|
Estimated
Future Payouts
Under
Equity Incentive Plan
Awards
|
All
other
Stock
Awards:
Number
of
Shares
of
Stock
or
Units
(#)(2)
|
All
other
Option
Awards:
Number
of
Securities
Underlying
Options
(#)
|
Exercise
or
Base
Price
of
Option
Awards
($/Sh)
|
Grant
Date
Fair
Value
of
Stock
and
Option
Awards
($)
|
|||||||||
|
Leonard
Goldberg
|
3/13/09
|
2/17/09
|
— |
—
|
46,750
|
—
|
—
|
701,250
|
||||||||
|
Leonard
Goldberg
|
8/14/09
|
8/05/08
|
—
|
—
|
—
|
80,000
|
28.44
|
(3) |
500,000
|
|||||||
|
Leonard
Goldberg
|
—
|
—
|
1,167,000
|
—
|
—
|
—
|
—
|
—
|
||||||||
|
Tim
Courtis
|
3/13/09
|
2/17/09
|
— |
—
|
41,750
|
—
|
—
|
626,250
|
||||||||
|
Tim
Courtis
|
—
|
—
|
210,000
|
—
|
—
|
—
|
—
|
—
|
||||||||
|
Barton
Hedges
|
3/13/09
|
2/17/09
|
— |
—
|
40,083
|
—
|
—
|
601,245
|
||||||||
|
Barton
Hedges
|
—
|
—
|
1,167,000
|
—
|
—
|
—
|
—
|
—
|
|
(1)
|
The
amounts in this column reflect the NEO’s estimated quantitative bonus with
respect to the 2009 underwriting
year.
|
|
(2)
|
The
amount in this column represents a grant of restricted shares made
pursuant to our stock incentive plan. Each restricted share award is
subject to three-year cliff
vesting.
|
|
(3)
|
The
exercise price of the Option Award is 1.7 times the fully diluted book
value as of the immediately preceding quarter end before the grant
date.
|
Outstanding
Equity Awards at Fiscal Year End 2009
|
Option
Awards
|
Stock
Awards
|
|||||||||||||||||
|
Name
|
Number
of
Securities
Underlying
Unexercised
Options
Exercisable
(#)
|
Number
of
Securities
Underlying
Unexercised
Options
Unexercisable
(#)
|
Equity
Incentive
Plan
Awards:
Number
of
Securities
Underlying
Unexercised
Unearned
Options
(#)
|
Option
Exercise
Price
($)
|
Option
Expiration
Date
|
Number
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
(#)(1)
|
Market
Value
of
Shares
or
Units
of
Stock
That
Have
Not
Vested
($)(2)
|
Equity
Incentive
Plan
Awards:
Number
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
(#)
|
Equity
Incentive
Plan
Awards:
Market
or
Payout
Value
of
Unearned
Shares,
Units
or
Other
Rights
That
Have
Not
Vested
($)
|
|||||||||
|
Leonard
Goldberg
|
500,000
|
(3) |
—
|
—
|
11.10
|
8/15/15
|
108,685
|
(10) |
2,563,879
|
—
|
—
|
|||||||
|
110,000
|
(4) |
—
|
—
|
13.48
|
10/05/16
|
—
|
—
|
—
|
—
|
|||||||||
|
33,334
|
(5) |
16,666
|
(5) |
—
|
19.60
|
8/15/17
|
—
|
—
|
—
|
—
|
||||||||
|
40,000
|
(6) |
40,000
|
(6) |
—
|
29.39
|
8/11/18
|
—
|
—
|
—
|
—
|
||||||||
|
20,000
|
(7) |
60,000
|
(7) |
—
|
28.44
|
8/14/19
|
—
|
—
|
—
|
—
|
||||||||
|
Tim
Courtis
|
75,000
|
(8) |
—
|
12.72
|
5/01/16
|
85,750
|
(11) |
2,022,843
|
—
|
—
|
||||||||
|
Barton
Hedges
|
250,000
|
(9) |
—
|
—
|
11.63
|
1/02/16
|
98,518
|
(12) |
2,324,040
|
—
|
—
|
|||||||
|
(1)
|
This
column reflects grants of restricted shares made pursuant to our stock
incentive plan. All restricted shares are subject to three-year cliff
vesting.
|
(2) Assumes
a stock price of $23.59, the closing price on December 31, 2009.
|
(3)
|
Mr.
Goldberg was granted an option to purchase 500,000 Class A ordinary shares
on August 15, 2005 in accordance with the terms of his employment. The
option became exercisable with respect to 166,666 shares on August 15,
2006 and became exercisable with respect to another 166,667 shares each on
August 15, 2007 and 2008.
|
|
(4)
|
Mr.
Goldberg was granted an option to purchase 110,000 Class A ordinary shares
on October 5, 2006, 100,000 of which were granted in accordance with the
terms of his employment agreement and another 10,000 of which were granted
at the discretion of the Compensation Committee. The option became
exercisable with respect to 36,667 shares each on October 5, 2007 and
2008, and became exercisable with respect to 36,666 shares on October 5,
2009.
|
|
(5)
|
Mr.
Goldberg was granted an option to purchase 50,000 Class A ordinary shares
on August 15, 2007 in accordance with the terms of his employment
agreement. The option became exercisable with respect to 16,667 shares
each on August 15, 2008 and 2009, and will become exercisable with respect
to the remaining 16,666 on August 15,
2010.
|
|
(6)
|
Mr.
Goldberg was granted an option to purchase 80,000 Class A ordinary shares
on August 11, 2008 in accordance with the terms of his employment
agreement. The option became exercisable with respect to
20,000 shares immediately upon grant and became exercisable with
respect to another 20,000 shares on August 11, 2009 and will become
exercisable with respect to another 20,000 shares on each of August 11,
2010 and August 11, 2011.
|
|
(7)
|
Mr.
Goldberg was granted an option to purchase 80,000 Class A ordinary shares
on August 14, 2009 in accordance with the terms of his employment
agreement. The option became exercisable with respect to
20,000 shares immediately upon grant, and will become
exercisable with respect to an additional 20,000 shares on each of August
14, 2010, August 14, 2011 and August 14,
2012.
|
|
(8)
|
Mr.
Courtis was granted an option to purchase 75,000 Class A ordinary shares
on May 1, 2006 in accordance with the terms of his employment agreement.
The option became exercisable with respect to 25,000 shares each on May 1,
2007, May 1, 2008 and May 1, 2009.
|
|
(9)
|
Mr.
Hedges was granted an option to purchase 250,000 Class A ordinary shares
on January 2, 2006 in accordance with the terms of his employment
agreement. The option became exercisable with respect to 83,334 shares on
January 2, 2007 and became exercisable with respect to 83,333 shares on
each January 2, 2008 and January 2,
2009.
|
|
(10)
|
Mr.
Goldberg was awarded 37,000 Class A ordinary shares on March 15, 2007,
24,935 Class A ordinary shares on March 24, 2008, and 46,750 Class A
ordinary shares on March 13, 2009. These shares are restricted and will
vest on the third anniversary of each award date
respectively.
|
|
(11)
|
Mr.
Courtis was awarded 19,065 Class A ordinary shares on March 15, 2007,
24,935 Class A ordinary shares on March 24, 2008, and 41,750 Class A
ordinary shares on March 13, 2009. These shares are restricted and will
vest on the third anniversary of each award date
respectively.
|
|
(12)
|
Mr.
Hedges was awarded 33,500 Class A ordinary shares on March 15, 2007,
24,935 Class A ordinary shares on March 24, 2008, and 40,083 Class A
ordinary shares on March 13, 2009. These shares are restricted and will
vest on the third anniversary of each award date
respectively.
|
Option Exercises and Stock Vested
No stock
options were exercised by NEOs and no stock awards vested during
2009.
Equity
Compensation Plan Information
The
following table provides information as of December 31, 2009 with respect to the
Company’s Class A ordinary shares that may be issued upon the exercise of
options, warrants and restricted stock granted to employees, consultants or
members of the board of directors under all of our existing compensation plans,
including the 2004 stock incentive plan, each as amended.
|
Plan
category
|
Number of securities
to
be issued
upon exercise of
outstanding options,
warrants
and rights
|
Weighted-average
exercise
price of
outstanding options,
warrants
and rights
|
Number
of securities
remaining
available for
future issuance under
equity compensation
plans
(excluding securities
reflected in column
(a))
|
|||||||||
|
(a)
|
(b)
|
(c)
|
||||||||||
|
Equity
compensation plans approved by security holders
|
1,581,340
|
(1)
|
$
|
13.44
|
133,897
|
(2)
|
||||||
|
Equity
compensation plans not approved by security holders
|
—
|
—
|
—
|
|||||||||
|
Total
|
1,581,340
|
(1)
|
$
|
13.44
|
133,897
|
(2)
|
||||||
|
(1)
|
Includes
1,281,340 Class A ordinary shares issuable upon the exercise of options
that were outstanding under the Stock Incentive Plan as of
December 31, 2009. Also includes 400,000 Class A ordinary shares
issuable upon the exercise of share purchase options granted in 2004 to a
consultant, First International Capital Holdings, Ltd., or FIC, less
100,000 Class A ordinary share purchase options repurchased from
FIC.
|
|
(2)
|
Represents
the difference between the number of securities issuable under the stock
incentive plan (2,000,000) and the number of securities issued under
the stock incentive plan as of December 31, 2009 (1,866,103). The
number of securities to be issued under the stock incentive plan consists
of options to acquire 1,281,340 Class A ordinary shares as well as 584,763
issued shares.
|
Pension
Benefits
None of
our NEOs participate in a qualified or non-qualified defined benefit pension
plan sponsored by us. In accordance with the National Pensions Law (2000
Revision) of the Cayman Islands, all Cayman Islands-based employers are required
to make a contribution to a pension plan for each person they employ. As of June
1, 2006, we adopted a defined contribution pension plan. The amounts contributed
to this plan on behalf of the NEOs are set forth in the following
table.
Non-qualified
Deferred Compensation in Fiscal Year 2009
|
Name
|
Executive
Contributions
in
Last
Fiscal Year
($)
|
Registrant
Contributions
in
Last
Fiscal Year
($)(1)
|
Aggregate
Earnings
in
Last
Fiscal Year
($)(2)
|
Aggregate
Withdrawals/
Distributions
($)
|
Aggregate
Balance
at
Last
Fiscal
Year-End
($)
|
|||||
|
Leonard
Goldberg
|
—
|
7,317
|
4,452
|
—
|
25,912
|
|||||
|
Tim
Courtis
|
—
|
7,317
|
4,803
|
—
|
26,408
|
|||||
|
Barton
Hedges
|
—
|
7,317
|
4,492
|
—
|
25,483
|
|
(1)
|
The
amounts provided in this column represent the amount of the contributions
we made on behalf of each NEO to our defined contribution pension plan
during 2009. These amounts are also reported as compensation in the
Summary Compensation Table under the “All Other Compensation”
column.
|
|
(2)
|
Earnings
are measured based on the NEO’s individual investment selections. The
aggregate earnings and aggregate balance data for each NEO under the
defined contribution pension plan is reported net of any pension plan
expenses.
|
Employment
Agreements
The
following paragraphs summarize the material terms of the employment agreements
of our NEOs. The severance provisions of these agreements are summarized in the
section titled “Potential Payments Upon Termination or Change in Control”
below.
Chief
Executive Officer
Leonard Goldberg. We
have entered into an employment agreement with Leonard Goldberg under which
he serves as our Chief Executive Officer for a term beginning on August 15, 2008
(amended December 30, 2008) and ending on August 14, 2011. Under the terms of
his employment agreement, Mr. Goldberg is entitled to receive an annual
salary of not less than $400,000, subject to increase as determined by our Board
of Directors, and an annual performance-based bonus with a target equal to 125%
of base salary. Mr. Goldberg receives a Cayman Islands housing allowance of
$6,000 per month and is entitled to participate in our employee benefit plans
and insurance programs. Mr. Goldberg is also reimbursed for certain tax
preparation expenses. Under the terms of his employment agreement, on August 11,
2008 and August 14, 2009, Mr. Goldberg was granted an option to acquire
80,000 Class A ordinary shares, respectively. On each third Nasdaq trading day
following our release of earnings results for the quarterly period ended June
30, on which Mr. Goldberg is employed by us, he will be granted an
additional option to acquire 80,000 Class A ordinary shares. All shares subject
to an option must have an exercise price equal to the greater of the fair market
value per share on the date of grant and 1.7 times our fully diluted book value
per share at June 30 preceding the grant date.
Mr.
Goldberg is subject to a six-month post-termination non-competition restriction
and a one-year post-termination non-solicitation restriction in addition to
perpetual confidentiality and non-disparagement requirements. The
non-competition restriction does not apply if Mr. Goldberg’s employment
terminates at the end of its term under circumstances that do not entitle him to
receive severance payments.
Executive
Officers
Barton Hedges. We have
entered into an employment agreement effective January 10, 2006 (amended
December 30, 2008) with Barton Hedges under which he serves as our
President and Chief Underwriting Officer of Greenlight Re. The employment
agreement does not have a fixed term. Under the terms of his employment
agreement, Mr. Hedges is entitled to receive an annual salary of not less than
$450,000, subject to increase as determined by our Board of Directors, and an
annual performance-based bonus with a target equal to 100% of base salary.
Mr. Hedges receives a Cayman Islands housing allowance of $6,000 per month
and is entitled to participate in our employee benefit plans and insurance
programs. Mr. Hedges is also reimbursed for certain tax preparation
expenses. Under the terms of his employment agreement, on January 2, 2006, Mr.
Hedges received an option to acquire 250,000 Class A ordinary shares with an
exercise price equal to the fair market value per share on the date of
grant. On February 18, 2009 we amended the employment agreement with
Mr. Hedges such that, with effect from January 1, 2009, Mr. Hedges is
entitled to receive an annual salary of $500,000.
Tim Courtis. We have
entered into an employment agreement effective May 1, 2006 (amended
December 30, 2008) with Tim Courtis under which he serves as our Chief
Financial Officer. The employment agreement does not have a fixed term. Mr.
Courtis receives an annual base salary of not less than $300,000, subject to
increase as determined by our Board of Directors, and an annual
performance-based bonus with a target equal to 50% of base salary.
Mr. Courtis receives a Cayman Islands housing allowance of $6,000 per month
and is entitled to participate in our employee benefit plans and insurance
programs. Under the terms of his employment agreement, on May 1, 2006, Mr.
Courtis received an option to acquire 75,000 Class A ordinary shares with an
exercise price equal to the fair market value per share on the date of
grant. On February 18, 2009 we amended the employment agreement with
Mr. Courtis such that, with effect from January 1, 2009, Mr. Courtis’
target bonus is 60% of base salary.
Mr. Hedges
and Mr. Courtis are also subject to a six-month post-termination
non-competition restriction and a one-year post-termination non-solicitation
restriction in addition to perpetual confidentiality and non-disparagement
requirements.
The
employment agreements of our NEOs were amended in 2008 in order to comply with
Section 409A and Section 457A of the Code.
The
Stock Incentive Plan
General
On August
11, 2004, we adopted the Greenlight Capital Re, Ltd. 2004 stock incentive plan,
or the stock incentive plan, which was amended and restated on August 15, 2005,
February 14, 2007 and May 4, 2007. The general purpose of the stock incentive
plan is to enable us and our affiliates to retain the services of eligible
employees, directors and consultants through the grant of stock options, stock
bonuses and rights to acquire restricted shares (collectively referred to as the
awards).
Subject to
adjustment in accordance with the terms of the stock incentive plan, 2,000,000
Class A ordinary shares are available for the grant of awards under the stock
incentive plan. The maximum number of Class A ordinary shares with respect to
which options may be granted to any participant during any calendar year is
500,000 Class A ordinary shares. As of December 31, 2009, 1,339,000 options and
527,103 restricted shares have been granted under the stock incentive plan. Our
Board of Directors has adopted, subject to shareholder approval, an amended and
restated stock incentive plan, or the amended plan, which increases the number
of Class A ordinary shares authorized for issuance under the stock incentive
plan by 1.5 million Class A ordinary shares to 3.5 million Class A ordinary
shares. In addition, the amendment will extend the termination date of the stock
incentive plan from August 11, 2014 to April 27, 2020.
Administration
Our
Compensation Committee administers the stock incentive plan and has broad
discretion, subject to the terms of the stock incentive plan, to determine which
eligible participants will be granted awards, prescribe the terms and conditions
of awards, establish rules and regulations for the interpretation and
administration of the stock incentive plan and adopt any modifications,
procedures or sub-plans that may be necessary or desirable to comply with the
laws of foreign countries in which we or our affiliates operate to assure the
viability of awards granted under the stock incentive plan.
Options
Options
are subject to such terms and conditions as our Compensation Committee deems
appropriate. Our Compensation Committee determines the per share exercise price
of options which will not be less than 100% of the fair market value of the
Class A ordinary shares on the date of grant. Options generally expire ten years
from the date of grant and vest and become exercisable as determined by our
Compensation Committee on the date of grant.
Unless
otherwise provided in an individual option agreement and subject to the stock
incentive plan’s adjustment provision, a change of control will not affect any
options granted under the stock incentive plan.
Restricted
Shares
Restricted
shares are subject to such terms and conditions as our Compensation Committee
deems appropriate as set forth in individual award agreements. Participants may
be entitled to vote the restricted shares while held in our custody. Our
Compensation Committee determines the purchase price, if any, of restricted
Class A ordinary shares.
Stock
Bonus Awards
Stock
bonus awards are subject to such terms and conditions as our Compensation
Committee deems appropriate. To the extent permitted so that the Class A
ordinary shares awarded will be treated as fully paid, a stock bonus may be
awarded in consideration for past services rendered.
Adjustments
Our
Compensation Committee will determine the appropriate adjustments to be made in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available with respect to an award upon the occurrence of
certain events affecting our capitalization such as a dividend or other
distribution, recapitalization, reclassification, stock split, reverse stock
split, reorganization, merger, consolidation, spin-off or sale, transfer or
disposition of all or substantially all of our assets or stock. For example, our
Compensation Committee shall adjust the number of Class A ordinary shares
subject to outstanding awards and the exercise price of outstanding
options.
Amendment/Termination
Our Board
of Directors may amend the stock incentive plan at any time. Except as provided
in the stock incentive plan, no amendment will be effective unless approved by
our shareholders to the extent shareholder approval is necessary to satisfy any
applicable law or any national securities exchange listing requirement, and no
amendment will be made that would adversely affect rights under an award
previously granted under the stock incentive plan without the consent of the
affected participants. Our Compensation Committee may suspend or terminate the
stock incentive plan at any time.
Unless
sooner terminated, the stock incentive plan will terminate on August 10, 2014
(April 27, 2020 if the amended plan is approved).
Employment
Agreements
Leonard Goldberg
In the
event that we terminate Mr. Goldberg’s employment without cause (as defined
below), Mr. Goldberg terminates for good reason (as defined below) or his
employment terminates at the end of the term of his employment agreement without
an offer from us of continued employment on substantially similar terms, we will
pay Mr. Goldberg a lump sum payment as soon as practicable following termination
but in no event later than 90 days following the date of termination equal to
accrued but unpaid base salary, bonus, and vacation pay; and a pro-rated portion
of the target bonus that would have been paid for the year in which his
employment terminated assuming targets had been achieved. In addition, we will
pay him as severance in twelve monthly installments the sum of his annual base
salary and target bonus provided that he does not breach the restrictive
covenants in his employment agreement. The commencement of these
payments will be delayed for six months if our Board of Directors determines
that such payments constitute non-qualified deferred compensation and Mr.
Goldberg is a “specified employee” within the meaning of Section 409A of
the Code with the first payment after the delay period being equal to the amount
that would have been paid had no delay been imposed.
If Mr.
Goldberg’s employment terminates as a result of his death or permanent
retirement from the reinsurance industry, Mr. Goldberg and/or his beneficiaries,
legal representatives or estate will become entitled to accrued but unpaid base
salary, bonus and vacation pay; and a pro-rated portion of the target bonus that
would have been paid for the year in which his employment terminated assuming
targets had been achieved, as soon as practicable following termination but in
no event later than 90 days following the date of termination. In addition, if
Mr. Goldberg’s employment terminates as a result of his death, his spouse
and dependents will become entitled to receive health benefits for one
year. We may terminate Mr. Goldberg’s employment agreement upon 30 days’
prior written notice if he becomes disabled. If Mr. Goldberg’s employment
terminates because of disability (as defined below), in addition to the accrued
but unpaid compensation discussed above and pro-rated bonus, Mr. Goldberg will
become entitled to receive base salary and continued health benefits for the
lesser of one year or until Mr. Goldberg is eligible to receive long-term
disability benefits under any long-term disability plan that we may establish.
Continued base salary payments will be paid in accordance with our regular
payroll schedule. The commencement of these payments will be delayed for six
months if our Board of Directors determines that such payments constitute
non-qualified deferred compensation and Mr. Goldberg is a “specified employee”
within the meaning of Section 409A of the Code with the first payment after
the delay period being equal to the amount that would have been paid had no
delay been imposed. If we are not able to provide Mr. Goldberg, his spouse,
or dependents with continued participation in our health plan, we will pay
Mr. Goldberg for the cost of such benefits which does not exceed the amount
which we would have paid if they had been entitled to participate. The cost of
such benefits will be paid in accordance with the procedures we
establish.
We may
require that Mr. Goldberg execute a release of claims against us as a
condition for compensation or benefits payable upon any termination of
employment.
Tim Courtis
and Barton Hedges
In the
event that we terminate either Mr. Courtis’ or Mr. Hedges’ employment
without cause (as defined below), or either NEO terminates his employment for
good reason (as defined below), we will pay him accrued but unpaid base salary,
bonus and vacation pay; and a pro-rated portion of the target bonus that would
have been paid for the year in which he was terminated assuming targets had been
achieved, as soon as practicable following termination but in no event later
than 90 days following the date of termination. In addition, we will pay him
severance in twelve monthly installments equal to the sum of his annual base
salary and target bonus assuming targets had been achieved, provided that he
does not breach the restrictive covenants in his employment agreement. Because
he would need to relocate upon his termination from the Company,
Mr. Courtis is also entitled to receive an additional $25,000 lump sum
payment at the same time he receives his first monthly severance payment. The
commencement of the payments will be delayed for six months if our Board of
Directors determines that such payments constitute nonqualified deferred
compensation and Mr. Courtis or Mr. Hedges is a “specified employee” within the
meaning of Section 409A of the Code and the first payment will be equal to the
aggregate amount the NEO would have received during the delay period had no
delay been imposed.
If either
Mr. Courtis’ or Mr. Hedges’ employment terminates as a result of his death, his
beneficiary, legal representatives or estate will become entitled to accrued but
unpaid base salary, bonus and vacation pay; and a pro-rated portion of the
target bonus that would have been paid for the year in which his employment
terminated assuming targets had been achieved, as soon as practicable following
termination but in no event later than 90 days following the date of
termination. In addition, his spouse and dependents will become entitled to
receive health benefits for one year. We may terminate either Mr. Courtis’
or Mr. Hedges’ employment agreement upon 30 days’ prior written notice if
he becomes disabled. If either Mr. Courtis’ or Mr. Hedges’ employment terminates
because of disability, he will become entitled to accrued but unpaid base
salary, bonus and vacation pay; a pro-rated portion of the target bonus that
would have been paid for the year in which his employment was terminated
assuming targets had been achieved, as soon as practicable following termination
but in no event later than 90 days following the date of termination; and base
salary and continued health benefits for the lesser of one year or until he is
eligible to receive long-term disability benefits under any long-term disability
plan that we may establish. Continued base salary payments will be paid in
accordance with our regular payroll schedule. The commencement of these payments
will be delayed for six months if our Board of Directors determines that such
payments constitute non-qualified deferred compensation and Mr. Hedges or
Mr. Courtis is a “specified employee” within the meaning of Section 409A of
the Code with the first payment after the delay period being equal to the amount
that would have been paid had no delay been imposed. If we are not able to
provide either Mr. Courtis or Mr. Hedges, their spouses or dependents
with continued participation in our health plan, we will pay for the cost of
such benefits which does not exceed the amount which we would have paid if they
have been entitled to participate. The cost of such benefits will be paid in
accordance with the procedures we establish.
We may
require that Mr. Courtis or Mr. Hedges execute a release of claims
against us as a condition for compensation or benefits payable upon any
termination of employment.
For
purposes of the employment agreements, “cause” generally means:
|
•
|
the
NEO’s drug or alcohol use which impairs his ability to perform his
duties;
|
|
•
|
conviction
by a court, or plea of “no contest” or guilty to a criminal
offense;
|
|
•
|
engaging
in fraud, embezzlement or any other illegal conduct with respect to us
and/or any of our affiliates;
|
|
•
|
willful
violation of the restrictive covenants set forth in his employment
agreement;
|
|
•
|
willful
failure or refusal to perform the duties under his employment agreement;
or
|
|
•
|
breach
of any material provision of his employment agreement or any of our or any
of our affiliates’ policies related to conduct which is not cured, if
curable, within ten days after written notice is
given.
|
For
purposes of the employment agreements, “good reason” generally means any of the
following events which is not cured, if curable, within 30 days after the NEO
has given notice thereof:
|
•
|
any
material and adverse change to the NEO’s duties or authority which is
inconsistent with his title and
position;
|
|
•
|
a
reduction of the NEO’s base salary;
or
|
|
•
|
a
failure by us to comply with any other material provisions of the
employment agreement.
|
In
addition to the above provisions, the definition of “good reason” in Mr.
Goldberg’s employment agreement also includes a diminution of his title or
position or a change in control (change in control has the same definition as in
the stock incentive plan discussed above).
For
purposes of the employment agreements, “disability” generally means if, as a
result of incapacity due to physical or mental illness, the NEO is substantially
unable to perform his duties for an entire period of at least 90 consecutive
days or 180 non-consecutive days within any 365-day period.
Stock
Incentive Plan and Awards Granted Thereunder
Under the
terms of the stock incentive plan, unless an option award provides otherwise,
upon termination other than for cause, death or disability (as defined below),
all unvested options terminate and the participant may exercise his or her
vested options within the period ending upon the earlier of three months
following termination or ten years from the grant date of the option (i.e., the
option’s expiration date). Unless an option award provides otherwise, upon
termination for cause (as defined below), all vested and unvested options will
terminate. Unless an option award provides otherwise, upon termination for death
or disability, all unvested options will terminate, and the vested portion of
the option may be exercised for the period ending upon the earlier of twelve
months following termination or the option’s expiration date.
Under the
terms of the option grants which Mr. Goldberg received in 2007, 2008 and 2009,
any unvested portion of each option award vests upon our termination of his
employment without cause (as defined in his employment agreement, see
description above), or Mr. Goldberg’s termination of employment for good reason
(as defined in his employment agreement, see description above), or when his
employment period expires if we do not offer Mr. Goldberg continued employment
on substantially similar terms, and the option will remain exercisable until the
expiration date. Upon Mr. Goldberg’s termination due to his death or
disability (as defined in his employment agreement, see description above), any
unvested portion of the option will terminate and any vested portion of the
option will remain exercisable until the expiration date. If we terminate Mr.
Goldberg’s employment due to his permanent retirement from the reinsurance
industry, any unvested portion of the option will terminate, and the vested
portion will remain exercisable until expiration, unless Mr. Goldberg
becomes employed by an entity which competes with any aspect of our or our
affiliates’ business, in which case, the option will immediately terminate. If
we terminate Mr. Goldberg’s employment for cause, all vested and unvested
portions of the option will terminate. If Mr. Goldberg’s employment
terminates under any other circumstances, the unvested portion of the option
will terminate and the vested portion will remain exercisable for 90 days, but
no later than the expiration date.
Under the
terms of the option grants awarded to Mr. Courtis and Mr. Hedges, upon
termination of employment, the awards remain exercisable in accordance with the
terms of the stock incentive plan, except that upon termination, other than for
cause, death or disability each as defined below, all vested options remain
exercisable for the period ending upon the earlier of 90 days or the expiration
date.
Under the
terms of the restricted share awards granted to each of Messrs. Goldberg, Hedges
and Courtis in 2009, the awards will automatically vest upon the executive’s
termination of employment due to death or disability or upon the occurrence of a
change in control. If the executive’s employment terminates for any other
reason, the unvested shares of restricted stock will be automatically
repurchased by the Company for par value and cancelled.
Upon a
change in control , our Compensation Committee has the discretion to vest
unvested options. In the tables below, it is assumed that the Compensation
Committee exercised its discretion to vest unvested options.
For
purposes of the stock incentive plan, “cause” generally means: if the
participant is a party to an employment agreement or other agreement with us or
an affiliate and such agreement provides for a definition of cause, the
definition contained in the agreement, or, if no such agreement or definition
exists, cause means a participant’s:
• material breach of his employment agreement or other
agreement;
|
•
|
continued
failure to satisfactorily perform assigned job responsibilities or to
follow the reasonable instructions of his superiors, including, without
limitation, our Board of Directors;
|
|
•
|
commission
of a crime constituting a criminal offense or felony (or its equivalent)
or other crime involving moral turpitude;
or
|
|
•
|
material
violation of any material law or regulation or any policy or code of
conduct adopted by us or engaging in any other form of misconduct which,
if it were made public, could reasonably be expected to adversely affect
our or an affiliate’s business reputation or
affairs.
|
For
purposes of the stock incentive plan, “disability” generally means, if the
participant is a party to an employment agreement or other agreement with us or
an affiliate and the agreement provides for a definition of disability, the
definition contained in the agreement, or, if no such agreement or definition
exists, disability will mean the failure of the participant to perform his
duties due to physical or mental incapacity as determined by our Compensation
Committee.
For
purposes of our stock incentive plan, "change in control"
generally means the occurrence of one of the following events: (i) any person or
group becomes the beneficial owner, directly or indirectly, of 51% or more
of our common stock (measured by voting power rather than number of shares); or
(ii) we consolidate or merge with or into any other person or group or sell,
assign, convey, transfer, lease or otherwise dispose of all or substantially all
of our assets and the assets of our direct and indirect subsidiaries to any
other person or group, in either one transaction or a series of related
transactions that occur within six months, other than a consolidation or merger
or disposition of assets.
Assuming
Mr. Goldberg’s employment terminated under each of the circumstances
described above on December 31, 2009, such payments and benefits have an
estimated value of:
|
Event
|
Pro-Rated
Bonus
$
|
Total
Cash
Severance
$
|
Value
of
Medical
Continuation
$
|
Value
of
Accelerated
Equity(3)
$
|
Total
$
|
|||||
|
Termination
without Cause, for Good Reason, or upon expiration of Employment Agreement
without similar offer of employment
|
500,000
|
900,000
|
(1) |
N/A
|
66,497
|
1,466,497
|
||||
|
Death
|
500,000
|
N/A
|
13,481
|
2,563,879
|
3,077,360
|
|||||
|
Permanent
Resignation from the Reinsurance Industry
|
500,000
|
N/A
|
N/A
|
N/A
|
500,000
|
|||||
|
Disability
|
500,000
|
400,000
|
(2) |
13,481
|
2,563,879
|
3,477,360
|
||||
|
Change
in Control
|
N/A
|
N/A
|
N/A
|
2,563,879
|
2,563,879
|
|
(1)
|
Calculated
as the sum of base salary ($400,000) and target bonus
($500,000).
|
|
(2)
|
Calculated
as one times base salary.
|
|
(3)
|
Calculated
as the sum of (i) the spread value (being the difference between the
strike price and the share value on December 31, 2009) of the options
and (ii) the fair market value of unvested shares of restricted stock
subject to accelerated vesting if a termination or change in control
occurred on December 31, 2009 and using a share price of $23.59, the
December 31, 2009 closing share
price.
|
Assuming
Mr. Hedges’ employment terminated under each of the circumstances described
above on December 31, 2009, such payments and benefits have an estimated value
of:
|
Event
|
Pro-Rated
Bonus
$
|
Total
Cash
Severance
$
|
Value
of
Medical
Continuation
$
|
Value
of
Accelerated
Equity(3)
$
|
Total
$
|
|||||
|
Termination
without Cause or for Good Reason
|
500,000
|
1,000,000
|
(1) |
N/A
|
N/A
|
1,500,000
|
||||
|
Death
|
500,000
|
N/A
|
10,139
|
2,324,040
|
2,834,179
|
|||||
|
Disability
|
500,000
|
500,000
|
(2) |
10,139
|
2,324,040
|
3,334,179
|
||||
|
Change
in Control
|
N/A
|
N/A
|
N/A
|
2,324,040
|
2,324,040
|
(1) Calculated
as the sum of base salary ($500,000) and target bonus ($500,000).
(2) Calculated
as one times base salary.
|
(3)
|
Calculated
as the sum of (i) the spread value of the options and (ii) the fair market
value of the unvested shares of restricted stock subject to accelerated
vesting if a change in control occurred on December 31, 2009 and using a
share price of $23.59, the December 31, 2009 closing share
price.
|
Assuming
Mr. Courtis’ employment terminated under each of the circumstances
described above on December 31, 2009, such payments and benefits have an
estimated value of:
|
Event
|
Pro-Rated
Bonus
$
|
Total
Cash
Severance
$
|
Value
of
Medical
Continuation
$
|
Value
of
Accelerated
Equity(3)
$
|
Total
$
|
|||||
|
Termination
without Cause or for Good Reason
|
180,000
|
505,000
|
(1) |
N/A
|
N/A
|
685,000
|
||||
|
Death
|
180,000
|
N/A
|
13,481
|
2,022,843
|
2,216,324
|
|||||
|
Disability
|
180,000
|
300,000
|
(1) |
13,481
|
2,022,843
|
2,516,324
|
||||
|
Change
in Control
|
N/A
|
N/A
|
N/A
|
2,022,843
|
2,022,843
|
|
(1)
|
Calculated
as the sum of base salary ($300,000) and target bonus ($180,000) plus an
additional $25,000 for relocation
expenses.
|
(2) Calculated
as one times base salary.
|
(3)
|
Calculated
as the sum of (i) the spread value of the options and (ii) the fair market
value of the unvested shares of restricted stock subject to accelerated
vesting if a change in control occurred on December 31, 2009 and using a
share price of $23.59, the December 31, 2009 closing share
price.
|
Compensation
Committee Interlocks and Insider Participation
The
Compensation Committee currently consists of Messrs. Isaacs, Murphy and Platt,
each of whom the Board of Directors concluded was independent in accordance with
the director independence standards of the Nasdaq stock market
rules.
Management
has the primary responsibility for establishing and maintaining adequate
internal controls over financial reporting, preparing the financial statements
and the public reporting process. The Audit Committee’s primary purpose is to
assist the Board of Directors in fulfilling its responsibilities to oversee the
participation of management in the financial reporting process and the role and
responsibilities of the independent auditors.
In
performing its oversight role in connection with the audit of the Company’s
consolidated financial statements for the year ended December 31, 2009, the
Audit Committee has:
1. reviewed
and discussed the audited consolidated financial statements with
management;
2. discussed
with the independent auditors the matters required to be discussed by Statement
on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1
AU Section 380, as adopted by the Public Company Accounting Oversight Board in
Rule 3200);
3. received
the written disclosures and the letter from the independent auditors required by
applicable requirements of the Public Company Accounting Oversight Board
regarding the independent auditors’ communications with the Audit Committee
concerning independence and has discussed with the independent auditors the
independent auditor’s independence.
Based on
the review and discussions referred to above, and in reliance on the
information, opinions, reports or statements presented to the Audit Committee by
management and the independent auditors, the Audit Committee recommended to the
Board of Directors that the December 31, 2009 audited consolidated financial
statements be included in the Annual Report on Form 10-K.
|
The
Audit Committee
|
|
|
Alan
Brooks (Chairman)
Frank
Lackner
Bryan
Murphy
|
Independent
Public Accountant Fees and Services
Audit
Fees
The
aggregate amount of fees billed by BDO for professional services rendered for
(1) the audit of our financial statements during the fiscal years ended
December 31, 2009 and 2008; (2) the review of the financial statements
included in our Quarterly Reports on Form 10-Q in 2009 and 2008; (3) the
2009 and 2008 audits of the Company’s internal control over financial
reporting with the objective of obtaining reasonable assurance about whether
effective internal control over financial reporting was maintained in all
material respects; and (4) services that are normally provided by the
auditor in connection with statutory and regulatory filings or engagements were
approximately $328,000 and $280,000, respectively.
Audit-Related
Fees
The
Company did not incur any fees billed by BDO for audit related services during
the fiscal years ended December 31, 2009 and 2008.
Tax
Fees
The
Company did not incur any fees billed by BDO for tax services during the fiscal
years ended December 31, 2009 and 2008.
All
Other Fees
The
Company did not incur any other fees billed by BDO during the fiscal years ended
December 31, 2009 and 2008.
Audit
Committee’s Pre-Approval Policies and Procedures
Our Audit
Committee charter includes our policy regarding the approval of audit and
non-audit services performed by our independent auditors. The Audit Committee is
responsible for retaining and evaluating the independent auditors’
qualifications, performance and independence. The Audit Committee pre-approves
all auditing services, internal control-related services and permitted non-audit
services (including the fees and terms thereof) to be performed for us by our
independent auditors, subject to such exceptions for non-audit services as
permitted by applicable laws and regulations. The Audit Committee may delegate
this authority to a subcommittee consisting of one or more Audit Committee
members, including the authority to grant pre-approvals of audit and permitted
non-audit services, provided that decisions of such subcommittee to grant
pre-approvals are presented to the full Audit Committee at its next meeting. The
Audit Committee approved all professional services provided to us by BDO during
2009.
The
following table shows information known to us with respect to the beneficial
ownership of both classes of our ordinary shares as of February 20, 2010
for:
• each
person or group who beneficially owns more than 5% of each class of our ordinary
shares;
• each
of our NEOs, Messrs. Goldberg, Hedges and Courtis;
• each
of our directors; and
• all
of our directors and NEOs as a group.
Beneficial
ownership of shares is determined under the rules of the SEC and generally
includes any shares over which a person exercises sole or shared voting or
investment power. Except as indicated by footnote, and subject to applicable
community property laws, each person identified in the table possesses sole
voting and investment power with respect to all ordinary shares held by them.
Class A ordinary shares subject to options and warrants currently exercisable or
exercisable within 60 days of February 20, 2010, and not subject to repurchase
as of that date, are deemed to be outstanding for calculating the percentage of
outstanding shares of the person holding these options, but are not deemed to be
outstanding for calculating the percentage of any other person.
Applicable
percentage ownership in the following table is based on 30,063,893 Class A
ordinary shares outstanding as of February 20, 2010 and 6,254,949 Class B
ordinary shares outstanding as of February 20, 2010. Unless otherwise indicated,
the address of each of the named individuals is c/o Greenlight Capital Re, Ltd.,
65 Market Street, Suite 1207, Jasmine Court, Camana Bay, P.O. Box 31110, Grand
Cayman, KY1-1205, Cayman Islands.
|
Name
and address of beneficial owner
|
Beneficial
ownership of
principal
shareholders
|
||||||||
|
Number
of Class A Ordinary Shares
|
%
|
Number
of Class B Ordinary Shares
|
%
|
||||||
|
David
Einhorn(1)
|
—
|
—
|
6,254,949
|
100
|
|||||
|
Morgan
Stanley(2)
|
3,326,737
|
11.07
|
—
|
—
|
|||||
|
Leonard
Goldberg(3)
|
898,019
|
2.99
|
—
|
—
|
|||||
|
Barton
Hedges(4)
|
383,318
|
1.28
|
—
|
—
|
|||||
|
Tim
Courtis(5)
|
213,750
|
*
|
—
|
—
|
|||||
|
Alan
Brooks(6)
|
79,488
|
*
|
—
|
—
|
|||||
|
Ian
Isaacs(7)
|
65,189
|
*
|
—
|
—
|
|||||
|
Frank
Lackner(8)
|
81,175
|
*
|
—
|
—
|
|||||
|
Bryan
Murphy(9)
|
27,175
|
*
|
—
|
—
|
|||||
|
Joseph
Platt(10)
|
98,488
|
*
|
—
|
—
|
|||||
|
All
directors and NEOs as a group
(9
persons)
|
1,846,602
|
6.14
|
%
|
6,254,949
|
100
|
%
|
|||
|
*
|
Represents
less than 1% of the outstanding ordinary
shares.
|
|
(1)
|
Mr.
Einhorn, together with his affiliates, is limited to voting the number of
Class B ordinary shares equal to 9.5% of the total voting power of the
total issued and outstanding ordinary shares. Mr. Einhorn owns 4,864,461
Class B ordinary shares directly. Mr. Einhorn also retains beneficial
ownership of 1,390,488 Class B ordinary shares held by the
David M. Einhorn 2007 Family Trust. Mr. Einhorn has appointed
Mr. Roitman as his alternate director. Mr. Roitman has
beneficial ownership of 220,000 Class A ordinary shares. If
Mr. Roitman’s Class A ordinary shares were included in the total
shares held by the directors and NEOs, such number would be 2,066,602
shares, or 6.87%.
|
|
(2)
|
Morgan
Stanley’s beneficial ownership is based on a Schedule 13G/A filed on
February 12, 2010. The business address for Morgan Stanley is 1585
Broadway, New York, New
York 10036.
|
|
(3)
|
Includes
703,334 Class A ordinary shares subject to options and 108,685 restricted
shares subject to forfeiture held by Mr. Goldberg. Additionally, Mr.
Goldberg owns 63,130 Class A ordinary shares directly and also retains
beneficial ownership of 22,870 Class A ordinary shares held by the Leonard
R. Goldberg 2007 Family Trust.
|
|
(4)
|
Includes
250,000 Class A ordinary shares subject to options and 98,518 restricted
shares subject to forfeiture held by Mr.
Hedges.
|
|
(5)
|
Includes
75,000 Class A ordinary shares subject to options and 85,750 restricted
shares subject to forfeiture held by Mr.
Courtis.
|
|
(6)
|
Includes
2,000 Class A ordinary shares subject to options and 7,175 restricted
shares subject to forfeiture.
|
|
(7)
|
Includes
7,175 restricted Class A ordinary shares subject to
forfeiture.
|
|
(8)
|
Includes
22,000 Class A ordinary shares subject to options held by Mr. Lackner,
including 20,000 options transferred to him from First International, and
7,175 restricted shares subject to
forfeiture.
|
(9)
Includes 7,175 restricted shares subject to forfeiture.
|
(10)
|
Includes
2,000 Class A ordinary shares subject to options held by Mr. Platt, 7,175
restricted shares subject to forfeiture and 75,000 Class A ordinary shares
held by a partnership of which Mr. Platt is the general
partner.
|
Section
16(a) of the Exchange Act requires that our directors, executive officers and
the persons who beneficially own more than 10% of our ordinary shares file
reports of ownership and changes of ownership on Forms 3, 4 and 5 with the SEC.
Executive officers, directors and greater than 10% shareholders are required by
regulations promulgated by the SEC to furnish us with copies of all Forms 3, 4
and 5 they file. Based solely on the reports received by us and on the written
representations of the reporting persons, we believe that no director, executive
officer or greater than 10% shareholder failed to file on a timely basis the
reports required by Section 16(a) of the Exchange Act during, or with respect
to, fiscal 2009.
Related-Party
Transaction Policy and Audit Committee Charter
We have
established a written related-party transaction policy which provides procedures
for the review of transactions in excess of $120,000 in any year between us and
any covered person having a direct or indirect material interest, subject to
certain exceptions. Covered persons include any director, executive officer,
director nominee, 5% shareholder or any immediate family members of the
foregoing. Any such related-party transactions shall require advance approval by
a majority of our independent directors or a majority of the members of a
committee constituted solely of our independent directors. In addition, our
Audit Committee charter provides that the Audit Committee will review and
approve all related-party transactions.
Investment
Advisory Agreement
On
January 1, 2008, we entered into an agreement, or the advisory agreement,
wherein the Company and DME Advisors, a related party and an affiliate
of David Einhorn, Chairman of our Board of Directors and the
beneficial owner of all of the issued and outstanding Class B ordinary shares,
agreed to create a joint venture for the purposes of managing certain jointly
held assets. The term of the advisory agreement is January 1, 2008 through
December 31, 2010 with automatic three-year renewals unless either Greenlight Re
or DME Advisors terminates the agreement by giving 90 days notice prior to the
end of the three-year term. Concurrent with the execution of the advisory
agreement, we terminated the investment agreement with DME
Advisors.
Pursuant
to the advisory agreement, DME Advisors has the contractual right to manage
substantially all of our investable assets, subject to the investment
guidelines adopted by our Board of Directors for so long as the agreement is in
effect. DME Advisors receives two forms of compensation:
• a
1.5% annual fee, regardless of the performance of our investment account,
payable monthly based on the net asset value of our investment account,
excluding assets, if any, held in trusts used to collateralize our
reinsurance obligations, or Regulation 114 Trusts; and
• performance
compensation based on the appreciation in the value of our investment account
equal to 20% of net profits calculated per annum, subject to a loss carryforward
provision.
The loss
carryforward provision allows DME Advisors to earn reduced incentive
compensation of 10% on profits in any year subsequent to the year in which our
investment account incurs a loss, until all the losses are recouped and an
additional amount equal to 150% of the loss is earned. DME Advisors is not
entitled to earn performance compensation in a year in which our investment
portfolio incurs a loss. However, DME Advisors is entitled to earn reduced
incentive compensation on subsequent years to the extent it generates profits
for our investment portfolio in such years. For the year ended December 31,
2009, DME Advisors received $10.8 million as an annual fee and $21.9 million as
performance compensation.
DME
Advisors is required to follow our investment guidelines and act in a manner
that it considers fair and equitable in allocating investment opportunities to
us, but we do not otherwise impose any specific obligations or requirements
concerning the allocation of time, effort or investment opportunities to us or
any restrictions on the nature or timing of investments for our account and for
DME Advisors’ own account or other accounts that DME Advisors or its affiliates
may manage. In addition, DME Advisors can outsource to sub-advisors without our
consent or approval. In the event that DME Advisors and any of its affiliates
attempt to simultaneously invest in the same opportunity, the opportunity will
be allocated pro rata as reasonably determined by DME Advisors and its
affiliates. Affiliates of DME Advisors presently serve as general partner or
investment advisor of Greenlight Capital, L.P., Greenlight Capital Qualified,
L.P., Greenlight Capital Offshore, Ltd., Greenlight Capital Offshore Qualified,
Ltd., Greenlight Masters, L.P., Greenlight Masters Qualified, L.P., Greenlight
Masters Offshore, Ltd., Greenlight Masters Offshore I, Ltd., and Greenlight
Masters Partners, Greenlight Masters Offshore Partners and Greenlight Capital
Offshore Partners which we collectively refer to as the Greenlight Funds. Each
of the Greenlight Funds utilizes an investment strategy that may compete with or
diverge from our investment strategy.
We have
agreed to use commercially reasonable efforts to cause all of our current and
future subsidiaries to enter into substantially similar advisory
agreements, provided that any such agreement shall be terminable on the same
date that the advisory agreement is terminable.
We have
agreed to release DME Advisors and its affiliates from, and to indemnify and
hold them harmless against, any liability arising out of the advisory agreement,
subject to certain exceptions. Furthermore, DME Advisors and its affiliates have
agreed to indemnify us against any liability incurred in connection with certain
actions.
We may
terminate the advisory agreement prior to the expiration of its term only “for
cause,” which the advisory agreement defines as:
• a
material violation of applicable law relating to DME Advisors’ advisory
business;
• DME
Advisors gross negligence, willful misconduct or reckless disregard of its
obligations under the advisory agreement;
• a
material breach by DME Advisors of our investment guidelines that is not cured
within a 15-day period; or
• a
material breach by DME Advisors of its obligations to return and deliver assets
as we may request.
Mr. Einhorn co-founded and has
served as the President and Portfolio Manager of Greenlight Capital, Inc. since
January 1996. Mr. Einhorn serves as senior managing member of DME Advisors, our
investment advisor. Greenlight Capital, Inc. and DME Advisors are affiliates of
Greenlight Capital Re, Ltd.
Service
Agreement
In
February 2007, we entered into a service agreement with DME Advisors, which was
amended in August 2007 and October 2007, pursuant to which DME Advisors provides
investor relations services to us for compensation of $5,000 per month (plus
expenses). The service agreement has an initial term of one year and will
continue for sequential one-year periods until terminated by us or DME Advisors.
Either party may terminate the service agreement for any reason with 30 days
prior written notice to the other party.
For the
year ended December 31, 2009, we incurred expenses of $60,000 to DME Advisors
for investor relations services.
Shareholders’
Agreement
Pursuant
to our Shareholders’ Agreement, Greenlight Capital Investors, LLC, or GCI, had
the right to unlimited demand registration rights once we are eligible to use
Form S-3 (or similar short form registration statements). GCI assigned its
demand registration rights under the Shareholders’ Agreement, with our consent,
to David Einhorn on January 3, 2007. Mr. Einhorn has registration rights for all
of his Class B ordinary shares, including those acquired in a private placement
in May 2007, as contemplated under the Shareholders’ Agreement.
Neither
the Board of Directors nor management intends to bring before the Meeting any
business other than the matters referred to in the Notice of Annual General
Meeting of Shareholders and this Proxy Statement. If any other business should
come properly before the Meeting, or any adjournment thereof, the proxy holders
will vote on such matters at their discretion.
Other
Action at the Meeting
As of the
date of this Proxy Statement, the Company has no knowledge of any business,
other than described herein and customary procedural matters, which will be
presented for consideration at the Meeting. In the event any other business is
properly presented at the Meeting, the persons named in the accompanying proxy
may, but will not be obligated to, vote such proxy in accordance with their
judgment on such business.
Shareholder
Proposals for the Annual General Meeting of Shareholders in 2011
Pursuant
to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, shareholder
proposals must be received in writing by the Secretary of the Company no later
than 120 days prior to the date of the Company’s proxy statement released to
shareholders in connection with the Company’s previous year’s annual meeting of
shareholders and must comply with the requirements of Cayman Islands corporate
law and the Articles in order to be considered for inclusion in the Company’s
Proxy Statement and form of proxy relating to the Annual General Meeting of
Shareholders in 2011. The Company believes that shareholder proposals received
by November 5, 2010 would be considered timely for inclusion in the 2011 Proxy
Statement. Such proposals should be directed to the attention of the Secretary,
Greenlight Capital Re, Ltd.
Shareholders
who intend to nominate persons for election as directors at the Annual General
Meeting of Shareholders in 2011 must comply with the advance notice procedures
and other provisions set forth in the Articles in order for such nominations to
be properly brought before the Annual General Meeting of Shareholders in
2011.
Any
shareholder proposal from the Annual General Meeting of Shareholders in 2011,
other than with respect to a nominee for election as a director, which is
submitted outside the processes of Rule 14a-8 shall be considered untimely
unless received by the Secretary in writing no later than January 19, 2011. If a
shareholder proposal is introduced at the Annual General Meeting of Shareholders
in 2011 without any discussion of the proposal in the 2011 Proxy Statement and
the shareholder does not notify the Company by January 19, 2011, in accordance
with Cayman Islands corporate law, of the intent to raise such proposal at the
Annual General Meeting of Shareholders in 2011, then proxies received by the
Company for the Annual General Meeting of Shareholders in 2011 will be voted by
the persons named as such proxies in their discretion with respect to such
proposal.
Costs
of Solicitation
The entire
cost of this proxy solicitation will be borne by the Company, including expenses
in connection with preparing, assembly, printing and mailing proxy solicitation
materials. In addition to solicitation by mail, officers, directors and
employees of the Company may solicit proxies by telephone, facsimile, electronic
communication, in person or via the internet, although no compensation will be
paid for such solicitation. We have retained BNY Mellon Shareowner Services, or
BNY, to aid in the solicitation of proxies. For these and related consulting
services, we will pay BNY a fee of $5,000 and reimburse it for certain
out-of-pocket disbursements and expenses. In addition, we will pay
BNY additional fees in the event we mutually agree to have BNY initiate a direct
voice campaign to individual shareholders.
|
By
Order of the Board of Directors
|
|||
|
|
|||
|
Leonard
Goldberg
Chief
Executive Officer
|
|||
|
Dated:
March 5, 2010
Grand
Cayman, Cayman Islands
|
|||
28
