mm04-0210_def14a.htm
LEUCADIA
NATIONAL CORPORATION
315
Park Avenue South
New
York, New York 10010
NOTICE
OF ANNUAL MEETING OF SHAREHOLDERS
To
Be Held May 10, 2010
April 7,
2010
To our
common shareholders:
You are
cordially invited to attend the annual meeting of shareholders of Leucadia
National Corporation to be held on May 10, 2010, at 10:00 a.m., at
PricewaterhouseCoopers LLP, PwC Auditorium, 300 Madison Avenue, New York, New
York:
1. To elect
eight directors.
2. To ratify
the selection of PricewaterhouseCoopers LLP as independent auditors to audit the
consolidated financial statements of our company and our subsidiaries for the
year ended December 31, 2010.
3. To
transact any other business as may properly come before the meeting or any
adjournments of the meeting.
Only
holders of record of our common shares at the close of business on March 22,
2010 will be entitled to notice of and to vote at the meeting. Please
vote your shares, either (i) by signing, dating and mailing the enclosed
proxy card in the accompanying postage prepaid envelope, (ii) by telephone
using the toll-free telephone number printed on the proxy card, or (iii) by
voting on the Internet, using the instructions printed on the proxy
card. This will assure that your shares are represented at the
meeting.
Important
Notice Regarding the Availability of Proxy Materials for the Annual Meeting of
Shareholders to be Held on May 10, 2010:
This
proxy statement and the accompanying annual report are available at: https://materials.proxyvote.com/527288.
By Order
of the Board of Directors.
LAURA E.
ULBRANDT
Assistant
Vice President and Secretary
LEUCADIA
NATIONAL CORPORATION
315
Park Avenue South
New
York, New York 10010
PROXY
STATEMENT
Annual
Meeting of Shareholders
April 7,
2010
This
proxy statement is being furnished to the shareholders of Leucadia National
Corporation, a New York corporation, in connection with the solicitation of
proxies by the Board of Directors for use at the annual meeting of shareholders
of the Company to be held on May 10, 2010 and at any adjournments
thereof.
At the
meeting, shareholders will be asked:
1. To elect
eight directors.
2. To ratify
the selection of PricewaterhouseCoopers LLP as independent auditors to audit the
consolidated financial statements of our company and our subsidiaries for the
year ended December 31, 2010.
3. To
transact any other business as may properly come before the meeting or any
adjournments of the meeting.
The Board
of Directors has fixed the close of business on March 22, 2010 as the record
date for the determination of the holders of our common shares, par value $1.00
per share, entitled to notice of and to vote at the meeting. Each
eligible shareholder will be entitled to one vote for each common share held on
all matters to come before the meeting and may vote in person or by proxy by
completing the enclosed proxy card and returning it in the enclosed postage
prepaid envelope or, as indicated on the proxy card, by voting on the Internet
or by voting by telephone. At the close of business on March 22,
2010, there were 243,300,154 common shares entitled to vote.
This
proxy statement and the accompanying form of proxy are first being sent to
holders of the common shares on or about April 7, 2010.
THE
MEETING
Date,
Time and Place
The
annual meeting will be held on May 10, 2010, at 10:00 a.m., at
PricewaterhouseCoopers LLP, PwC Auditorium, 300 Madison Avenue, New York, New
York.
Matters
to be Considered
At the
meeting, shareholders will be asked to consider and vote to elect eight
directors and to ratify the selection of independent auditors. See
“ELECTION OF DIRECTORS” and “RATIFICATION OF SELECTION OF INDEPENDENT
AUDITORS.” The Board of Directors does not know of any matters to be
brought before the meeting other than as set forth in the notice of
meeting. If any other matters properly come before the meeting, the
persons named in the enclosed form of proxy or their substitutes will vote in
accordance with their best judgment on such matters.
Record
Date; Shares Outstanding and Entitled to Vote
Shareholders
as of the record date, i.e., the close of business
on March 22, 2010, are entitled to notice of and to vote at the
meeting. As of the record date, there were 243,300,154 common shares
outstanding and entitled to vote, with each share entitled to one
vote.
Broker
Non-Votes
A “broker
non-vote” occurs when a brokerage firm or other nominee holding shares for a
beneficial owner does not vote on a particular proposal because the nominee does
not have authority to vote on that particular proposal without receiving voting
instructions from the beneficial owner. Under New York Stock Exchange
Rules, brokers may not vote on “non-routine” proposals unless they have received
voting instructions from the beneficial owner, and to the extent that they have
not received voting instructions, brokers report such number of shares as
“non-votes”. The proposal to elect Directors is considered a
“non-routine” item, which means that brokerage firms may not vote in their
discretion regarding the election of Directors on behalf of beneficial owners
who have not furnished voting instructions. The proposal to approve
the appointment of independent auditors, however, is considered a “routine”
item, which means that brokerage firms may vote in their discretion regarding
the appointment of independent auditors on behalf of beneficial owners who have
not furnished voting instructions. Because at least one routine item
is to be voted upon at the meeting, broker non-votes will be counted for
purposes of determining the presence or absence of a quorum for the transaction
of business at the Annual Meeting of Shareholders.
Required
Votes for Each Proposal
Election of
Directors. Under New York law, the affirmative vote of the
holders of a plurality of the common shares voted at the meeting is required to
elect each director. Consequently, only shares that are voted in
favor of a particular nominee will be counted toward the nominee’s achievement
of a plurality. Shares present at the meeting that are not voted for
a particular nominee, broker non-votes or shares present by proxy where the
shareholder withholds authority to vote for the nominee will not be counted
toward the nominee’s achievement of a plurality.
Selection of
Auditors. Ratification of the selection of
PricewaterhouseCoopers LLP as independent auditors requires the affirmative vote
of the holders of a majority of the common shares voted at the
meeting. Abstentions and broker non-votes are not counted in
determining the votes cast in connection with the ratification of auditors, but
do have the effect of reducing the number of affirmative votes required to
achieve a majority for this matter by reducing the total number of shares from
which the majority is calculated.
Ian M.
Cumming, Chairman of the Board of Directors of our company, beneficially owns
24,283,393, or approximately 9.9%, of the common shares outstanding at the
record date. Joseph S. Steinberg, a Director and President of our
Company, beneficially owns 27,567,551, or approximately 11.2%, of the common
shares outstanding at the record date. The Cumming Foundation, a
private charitable foundation established by Mr. Cumming, beneficially owns
283,210 or approximately .1% of the common shares outstanding at the record
date. Cumming Philanthropic Organization, a Wyoming nonprofit
corporation established by Mr. Cumming, owns 101,666 (less than .1%) of the
common shares outstanding at the record date. Mr. Cumming disclaims
beneficial ownership of the common shares held by his charitable foundation and
the nonprofit corporation. Messrs. Cumming and Steinberg have advised
us that they intend to cause all common shares that they beneficially own to be
voted in favor of each nominee named herein and ratification of the selection of
independent auditors. Mr. Cumming has advised us that each of his
charitable foundation and the nonprofit corporation intends to cause all of its
common shares to be voted in favor of each nominee named herein and ratification
of the selection of independent auditors. In addition to Messrs.
Cumming and Steinberg, all of our other directors and officers beneficially own
approximately .4% of the common shares outstanding at the record date, excluding
common shares acquirable upon the exercise of options.
Voting
and Revocation of Proxies
Shareholders
are requested to vote by proxy in one of three ways:
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Use
the toll-free telephone number shown on your proxy
card;
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Visit
the Internet website at www.proxyvote.com
and follow the on-screen instructions;
or
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Mail,
date, sign and promptly return your proxy card in the enclosed postage
prepaid envelope.
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Common
shares represented by properly executed proxies, received by us or voted by
telephone or via the Internet, which are not revoked will be voted at the
meeting in accordance with the instructions contained
therein. Subject to the broker non-vote rules discussed under
“Required Votes,” if instructions are not given, proxies will be voted for
election of each nominee for director named and for
ratification of the selection of independent auditors.
Voting
instructions, including instructions for both telephonic and Internet voting,
are provided on the proxy card. The Internet and telephone voting
procedures are designed to authenticate shareholder identities, to allow
shareholders to give voting instructions and to confirm that shareholders’
instructions have been recorded properly. A control number, located
on the proxy card, will identify shareholders and allow them to vote their
shares and confirm that their voting instructions have been properly
recorded. Shareholders voting via the Internet should understand that
there may be costs associated with electronic access, such as usage charges from
Internet access providers and telephone companies, that must be borne by the
shareholder. If you do vote by Internet or telephone, it will not be
necessary to return your proxy card.
If your
shares are held in the name of a bank or broker, follow the voting instructions
on the form you receive from your record holder. The availability of
Internet and telephone voting will depend on their voting
procedures.
If a
shareholder neither returns a signed proxy card, votes by the Internet or by
telephone, nor attends the meeting and votes in person, his or her shares will
not be voted.
Any proxy
signed and returned by a shareholder or voted by telephone or via the Internet
may be revoked at any time before it is exercised by giving written notice of
revocation to the Secretary of the Company, at the Company’s address set forth
herein, by executing and delivering a later-dated proxy, either in writing, by
telephone or via the Internet, or by voting in person at the
meeting. Attendance at the
meeting
will not alone constitute revocation of a proxy. If your shares are
held in a brokerage, bank, or other institutional account, you must obtain a
proxy from that entity showing that you were the record holder as of the close
of business on March 22, 2010, in order to vote your shares at the
meeting.
Electronic
Delivery of Proxy Materials and Annual Report
This
proxy statement and the accompanying annual report are available at: https://materials.proxyvote.com/527288.
“Householding”
of Annual Report and Proxy Materials
We have
adopted a procedure approved by the Securities and Exchange Commission (the
“SEC”) called “householding.” Under this procedure, shareholders of
record who have the same address and last name will receive only one copy of our
Annual Report and proxy statement unless one or more of these shareholders
notifies us that they wish to continue receiving individual
copies. This procedure will reduce our printing costs and postage
fees.
Shareholders
who participate in householding will continue to receive separate proxy
cards. Also, householding will not in any way affect dividend check
mailings.
If you
are eligible for householding, but you and other shareholders of record with
whom you share an address currently receive multiple copies of the Annual Report
and/or the proxy statement, or if you hold in more than one account, and in
either case you wish to receive only a single copy of each of these documents
for your household, please contact our transfer agent, American Stock Transfer
and Trust Company, LLC (in writing: 59 Maiden Lane, New York, New York 10038; by
telephone: in the U.S., Puerto Rico and Canada, 1-800-937-5449; outside the
U.S., Puerto Rico and Canada, 1-718-921-8200).
If we are
householding materials to your address and you wish to receive a separate copy
of the 2009 Annual Report or this proxy statement, or if you do not wish to
participate in householding and prefer to receive separate copies of these
documents in the future, please contact American Stock Transfer and Trust
Company as indicated above.
Beneficial
shareholders can request information about householding from their banks,
brokers or other holders of record.
Proxy
Solicitation
We will
bear the costs of solicitation of proxies for the meeting. In
addition to solicitation by mail, directors, officers and our regular employees
may solicit proxies from shareholders by telephone, telegram, personal interview
or otherwise. These directors, officers and employees will not
receive additional compensation, but may be reimbursed for out-of-pocket
expenses in connection with this solicitation. In addition to
solicitation by our directors, officers and employees, we have engaged Innisfree
M&A Incorporated, a proxy solicitation agent, in connection with the
solicitation of proxies for the meeting. We will bear the costs of
the fees for the solicitation agent, which are not expected to exceed
$12,000. Brokers, nominees, fiduciaries and other custodians have
been requested to forward soliciting material to the beneficial owners of common
shares held of record by them, and these custodians will be reimbursed for their
reasonable expenses.
Independent
Auditors
We have
been advised that representatives of PricewaterhouseCoopers LLP, our independent
auditors for 2009, will attend the meeting, will have an opportunity to make a
statement if they desire to do so and will be available to respond to
appropriate questions.
ELECTION
OF DIRECTORS
At the
meeting, eight directors are to be elected to serve until the next meeting or
until their successors are elected and qualified. Each of the
following nominees is currently serving as a director. The persons
named in the enclosed form of proxy have advised that, unless contrary
instructions are received, they intend to vote for
the eight nominees named by the Board of Directors and listed on the following
table. The Board of Directors does not expect that any of the
nominees will be unavailable for election as a director. However, if
by reason of an unexpected occurrence one or more of the nominees is not
available for election, the persons named in the form of proxy have advised that
they will vote for the substitute nominees as the Board of Directors may
propose. The following information is as of March 22,
2010.
Each of
the biographies of the nominees for election as directors below contains
information regarding the person’s service as a director, business experience,
director positions held currently or at any time during the past five years, and
the experience, qualifications, attributes and skills that caused the Nominating
and Corporate Governance Committee and the Board of Directors to determine that
the person should be nominated for re-election as a director of the Company at
the Company’s 2010 Annual Meeting of Shareholders.
Name
and present position,
if
any, with the Company
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Age,
period served as director, other business experience
during
the last five years and family relationships, if
any
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Ian
M. Cumming,
Chairman
of the Board
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Mr.
Cumming, 69, has served as a director and our Chairman of the Board since
June 1978. Mr. Cumming is also a director of Skywest, Inc., a
Utah-based regional air carrier, and HomeFed Corporation (“HomeFed”), a
publicly held real estate development company, in which we have an
approximate 31.4% equity interest; Mr. Cumming has an approximate 7.7%
equity interest in HomeFed and a private charitable foundation, as to
which Mr. Cumming disclaims beneficial ownership, has an approximate 2.2%
equity interest in HomeFed. Mr. Cumming is a director of
Fortescue Metals Group Ltd (“Fortescue”), an Australian public company
that is engaged in the mining of iron ore, in which we have an approximate
8% equity interest. Mr. Cumming is also a director of AmeriCredit Corp.,
an auto finance company, in which we have an approximate 25% interest and
a director of Jefferies Group, Inc. (“Jefferies”), a publicly held full
service global investment bank and institutional securities firm serving
companies and other investors, in which we have an approximate 28%
interest. Since 2001, Mr. Cumming had been Chairman of the
Board of The FINOVA Group Inc. (“FINOVA”), formerly a publicly traded
middle market lender that was dissolved in November 2009.
Mr.
Cumming has managerial and investing experience in a broad range of
businesses through his more than 30 years as Chairman and Chief Executive
Officer of the Company. He also has experience serving on the
boards of directors and committees of both public and private
companies.
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Paul
M. Dougan
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Mr.
Dougan, 72, has served as a director since May 1985. Mr. Dougan is a
private investor. Until July 2004, he was a director and
President and Chief Executive Officer of Equity Oil Company, a company
engaged in oil and gas exploration and production.
Mr.
Dougan has managerial experience in the independent energy sector,
particularly in connection with exploration of natural resources and
development of energy related businesses and in real estate
development. He also has experience serving on the boards of
directors of both public and private companies. He has served
on committees of the Company's Board of
Directors.
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Name
and present position,
if
any, with the Company
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Age,
period served as director, other business experience
during
the last five years and family relationships, if
any
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Alan
J. Hirschfield
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Mr.
Hirschfield, 74, has served as a director since April 2004. Mr.
Hirschfield is a private investor and consultant. From 1992 to 2000, he
was Co-Chief Executive Officer of Data Broadcasting Corporation, which
merged with Financial Times/Pearsons, Inc. Prior to that time,
Mr. Hirschfield held executive positions in the entertainment
industry. He is a director and Chairman of the Audit Committee
of Carmike Cinemas, Inc., a publicly-held motion picture exhibitor in the
United States and is a director and Chairman of the Compensation Committee
of Cantel Medical Corp., a healthcare company. He was formerly
a director of Interactive Data Corporation and Peregrine Systems
Inc.
Mr.
Hirschfield has managerial experience in the media and entertainment
sector, as well as in investment banking and real estate. He
also has experience serving on the boards of directors of both public and
private companies. He has served on committees of both public
and private companies, including audit committees (serving as chair), as
well as serving on the Company’s Audit Committee.
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James
E. Jordan
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Mr.
Jordan, 66, has served as a director since February 1981. Mr.
Jordan is a private investor. He was the Managing Director of
Arnhold and S. Bleichroeder Advisers, LLC, a privately owned global
investment management company from July 2002 to June 2005. Mr.
Jordan is a director of the First Eagle family of mutual funds and JZ
Capital Partners Plc., a Guernsey registered investment trust
company.
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Mr.
Jordan has managerial experience in the financial sector, particularly in
the area of asset management both in the U.S. and foreign
markets. He also has experience serving on the boards of
directors of both public and private companies. He has served
on committees of the Company's Board of Directors, including serving as
Chair of the Company’s Nominating and Corporate Governance Committee and
formerly serving as Chair of the Company’s Audit
Committee.
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Jeffrey
C. Keil
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Mr.
Keil, 66, has served as a director since April 2004. Mr. Keil is a private
investor who had been President and a director of Republic New York
Corporation and Vice Chairman of Republic National Bank of New York from
1984 to 1996. Mr. Keil is currently the non-executive chairman of a
privately held insurance company and the non-executive chairman of a
privately held registered investment advisor. Mr. Keil was
formerly a director of Presidential Life Insurance Company and Anthracite
Capital, Inc., a specialty real estate finance company.
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Mr.
Keil has managerial experience in the domestic and international banking
sector, as well as in real estate and investing. He also has
experience serving on the boards of directors of both public and private
companies. He has served on committees of both public and
private companies, including audit committees, as well as serving as Chair
of the Company’s Audit Committee.
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Name
and present position,
if
any, with the Company
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Age,
period served as director, other business experience
during
the last five years and family relationships, if
any
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Jesse
Clyde Nichols, III
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Mr.
Nichols, 70, has served as a director since June 1978. Mr. Nichols is a
private investor. He was President, from May 1974 through 2000, of Nichols
Industries, Inc., a diversified holding company.
Mr.
Nichols has managerial experience in the manufacturing
sector. He also has experience serving on the boards of
directors of both public and private companies. He has served
on committees of the Company’s Board of Directors, as well as serving as
Chair of the Company’s Compensation Committee.
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Michael
Sorkin
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Mr.
Sorkin, 67, has served as an Executive Vice Chairman of N M Rothschild
(Corporate Finance) Limited, the U.K. arm of the family controlled
Rothschild banking group, since 2001. In addition, since 2002 he has
served as a non executive director of St. James’s Place PLC, a company
engaged in wealth management services. Mr. Sorkin was formerly
a director of JZ Equity Partners Plc.
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Mr.
Sorkin has management and strategic experience in the international
investment banking and financial services sector. He also has
experience advising companies on international transactions, and has
served on the boards of directors of both public and private
companies.
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Joseph
S. Steinberg, President
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Mr.
Steinberg, 66, has served as a director since December 1978 and as our
President since January 1979. Mr. Steinberg is Chairman of the
Board of HomeFed; Mr. Steinberg has an approximate 8.6% equity interest in
HomeFed, trusts for the benefit of Mr. Steinberg’s children have an
approximate .8% equity interest in HomeFed and a private charitable trust,
as to which Mr. Steinberg disclaims beneficial ownership, has an
approximate .5% equity interest in HomeFed. Mr. Steinberg is also a
director of Jefferies and an alternate director of
Fortescue. Since 2001, Mr. Steinberg had been a director of
FINOVA.
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Mr.
Steinberg has managerial and investing experience in a broad range of
businesses through his more than 30 years as President and a director of
the Company. He also has experience serving on the boards of
directors and committees of both public and private
companies.
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The Board
of Directors recommends a vote FOR the above-named
nominees.
INFORMATION
CONCERNING
THE
BOARD OF DIRECTORS AND BOARD COMMITTEES
Director
Independence
Pursuant
to our Corporate Governance Guidelines, a copy of which is available on our
website, www.leucadia.com, the
Board of Directors is required to affirmatively determine that a majority of the
directors is independent under the listing standards of the New York Stock
Exchange (“NYSE”), the exchange on which the Company’s common shares are
traded. In accordance with the Guidelines, the Board of Directors
undertakes an annual review of director independence. During this
review, the Board considers all transactions and relationships between each
director or any member of his immediate family and the Company, and its
subsidiaries and affiliates. The Board also examines transactions and
relationships between directors or their affiliates and Ian M. Cumming, our
Chairman of the Board, and Joseph S. Steinberg, our President, and their
respective affiliates. The purpose of this review is to determine
whether any such relationships or transactions is considered a “material
relationship” that would be inconsistent with a determination that a director is
independent. The Board has not adopted any “categorical standards”
for assessing independence, preferring instead to consider and disclose existing
relationships with the non-management directors and the Company, Mr. Cumming or
Mr. Steinberg.
As a
result of this review, on March 1, 2010, the Board affirmatively determined
that, other than Mr. Cumming and Mr. Steinberg, all of the current directors are
independent of the Company and its management. The Board also
determined that Lawrence D. Glaubinger, a director of the Company during 2009
who did not stand for re-election at the 2009 shareholders’ meeting, was
independent of the Company and its management. In determining that
all of the directors other than Mr. Cumming and Mr. Steinberg are independent,
the Board reviewed the NYSE corporate governance rules and also determined that
the following relationships are not material relationships and therefore do not
affect the independence determination: Mr. Cumming and Mr.
Hirschfield are passive investors, each with a 15% passive interest, in a
regional internet service provider; Mr. Cumming is a 6.6% passive stockholder in
a restaurant that is 50% owned by Mr. Hirschfield; Mr. Dougan’s son-in-law is
the Associate Director of the State of Utah School and Institutional Trust Lands
Administration, a state agency that continues to oversee relations with the
Company with respect to certain parcels of land and as to which Mr. Dougan’s
son-in-law has no financial interest; Mr. Keil is a trustee of several trusts
(certain of which hold our common shares) for the benefit of Mr. Steinberg’s
children and other family members (for which Mr. Keil receives no remuneration);
Mr. Keil’s daughter is the principal of a non-profit charter school to which Mr.
Steinberg, through a charitable trust, donated $50,000 in 2006 and $10,000 in
2007 and to which Mr. Cumming, through a charitable foundation, donated $25,000
in 2006; in August 2007, Mr. Keil acquired an interest in a Swiss investment
management company with approximately $1 billion under management that prior to
2009 managed certain funds for Mr. Steinberg and his charitable trust (Mr.
Steinberg was a client of the Swiss firm before Mr. Keil acquired his interest
in the firm) and for which Mr. Steinberg and the charitable trust paid the Swiss
firm approximately $59,000, $42,000 and $0 in fees for 2007, 2008 and 2009,
respectively; Mr. Keil’s son-in-law was an at will employee of the Company from
April 2007 to February 2010 (as discussed under “Certain Relationships and
Related Person Transactions”); and N M Rothschild (Corporate Finance) Limited,
the investment bank of which Mr. Sorkin is an Executive Vice Chairman, has
performed investment banking services for the Company in the past, but has not
provided any such services in the past three years.
In
addition, as stated in the Corporate Governance Guidelines, the Board has
determined that friendship among directors shall not in and of itself be a basis
for determining that a director is not independent for purposes of serving on
the Board.
Board
Structure and Risk Oversight
Mr. Cumming serves as our Chairman of
the Board and our Chief Executive Officer pursuant to the terms of his
employment agreement with the Company and the Bylaws of the
Company. Mr. Cumming has served as the Chairman of the Board and
Chief Executive Officer of the Company for more than 30 years. The
Board believes that the Company has benefited from this structure and, based
upon Mr.
Cumming’s
more than 30 years of leadership, Mr. Cumming’s continuation in the combined
role of the Chairman and Chief Executive Officer is in the best interests of the
shareholders.
All directors of the Company
other than Mr. Cumming and Mr. Steinberg, our President, are independent under
the NYSE independence standards discussed above, and all committees of the Board
(other than the Executive Committee which did not meet last year) are composed
entirely of independent directors. The Board regularly meets in executive
session without management present, and these meetings are chaired by the
Board’s presiding director, Alan J. Hirschfield, in accordance with the
Company’s Corporate Governance Guidelines.
The Board of Directors is responsible
for the general oversight of risks that affect the Company, and has delegated
the day-to-day authority for risk management to Messrs. Cumming and Steinberg,
our Chairman and our President, respectively. The Board
receives regular reports on the operations of the Company from Messrs. Cumming
and Steinberg and other members of management as appropriate and discusses risks
related thereto. In exercising its oversight responsibilities, the
Board considers potential investments that require an expenditure above $100
million, a financial threshold approved by the Board, with general delegation to
Messrs. Cumming and Steinberg of approval for matters below that
threshold. The Board also fulfills its oversight role through the
operations of its various committees, including its Audit
Committee. All committees of the Board provide periodic reports to
the Board on their activities. The Audit Committee has responsibility
for risk oversight in connection with its review of the Company’s financial
reports filed with the SEC. The Audit Committee receives reports from
the Company’s Chief Financial Officer and its independent auditors in connection
with the review of the Company’s quarterly and annual financial statements
regarding significant financial transactions, accounting and reporting matters,
critical accounting estimates and management’s exercise of judgment in
accounting matters. When reporting on such matters, the Company’s
independent auditors also provide their assessment of management’s report and
conclusions. The Audit Committee also receives reports from the
Company’s Chief Compliance Officer in accordance with the Company’s whistle
blower policy. The Audit Committee also oversees the Company’s Related Party
Transaction Policy.
The Board believes that its
compensation policies do not reward employees for imprudent risk
taking. The Company surveyed the compensation plans of its operating
companies for all employees, as well as reviewed the discretionary incentive
compensation practice for corporate employees. As a result of its
review, the Company concluded that none of its compensation plans or practices
fosters imprudent risk-taking.
Certain
Relationships and Related Person Transactions
Policies
and Procedures with Respect to Transactions with Related Persons
The Board
has adopted a policy for the review, approval and ratification of transactions
that involve “related persons" and potential conflicts of interest (the “Related
Person Transaction Policy”).
The
Related Person Transaction Policy applies to the following individuals (each a
“Related Person”): each director and executive officer of the
Company; any nominee for election as a director of the Company; any security
holder who is known to own of record or beneficially more than five percent of
any class of the Company’s voting securities; any immediate family member of any
of the foregoing persons; and any corporation, firm, association or their entity
in which one or more directors of the Company are directors or officers (other
than where serving as such at the request of the Company), or have a substantial
financial interest (other than through the Company). Any equity
interest in any corporation, firm, association or other entity received by any
director or executive officer of the Company as a result of his serving as a
director or executive officer of another entity at the request of the Company
shall not be deemed to be a substantial financial interest in such other entity
for purposes of the Related Person Transaction Policy.
Under the
Related Person Transaction Policy, a Related Person Transaction is defined as a
transaction or arrangement involving a Related Person in which the Company is a
participant or that would require disclosure in the Company’s filings with the
SEC as a transaction with a Related Person.
Under the
Related Person Transaction Policy, Related Persons must disclose to the Audit
Committee any potential Related Person Transactions and must disclose all
material facts with respect to such interest. All Related Person
Transactions will be reviewed by the Audit Committee and, in its discretion,
approved or ratified. In determining whether to approve or ratify a
Related Person Transaction the Audit Committee will consider the relevant facts
and circumstances of the Related Person Transaction which may include factors
such as the relationship of the Related Person with the Company, the materiality
or significance of the transaction to the Company and the Related Person, the
business purpose and reasonableness of the transaction, whether the transaction
is comparable to a transaction that could be available to the Company on an
arms-length basis, and the impact of the transaction on the Company’s business
and operation. Related Person Transactions having a value of $120,000
or more are disclosed below in accordance with the rules of the
SEC.
Related
Person Transactions
The
Company is party to a Services Agreement with each of Messrs. Cumming and
Steinberg, each dated as of January 1, 2004, pursuant to which the Company has
agreed to provide certain services for Messrs. Cumming and Steinberg and/or
their affiliated entities, if such services are requested. Such
services include accounting and cash management services and tax services and,
with respect to Mr. Steinberg, transportation services. Mr. Steinberg
paid the Company $308,000 for services rendered by the Company in 2009 under his
agreement and has advanced the Company $311,000 for services to be rendered by
the Company in 2010. Mr. Cumming did not receive any services under
his Services Agreement in 2009 and does not expect to receive any services in
the future; accordingly, he has not advanced the Company any funds for future
services.
Mr.
Steinberg's brother, Morton M. Steinberg, is a partner in the law firm DLA Piper
LLP (US), a member of DLA Piper, a global legal services organization whose
members have offices in twenty-nine countries. During 2009, the
Company paid approximately $2,340,000 in aggregate fees to such firm for legal
services rendered to the Company. This amount represents less than
..3% of all fees received by DLA Piper LLP (US) in 2009. Mr. Morton
Steinberg has a less than 1% partnership interest in DLA Piper LLP
(US).
From
April 1, 2007 to February 2010, the Company engaged Patrick Q. Riordan, the
son-in-law of Jeffrey C. Keil, a director of the Company and Chairman of the
Company's Audit Committee, as an at-will employee of a
subsidiary. Pursuant to such arrangement, Mr. Riordan received an
annual salary of $300,000 and was entitled to an annual cash bonus of at least
$50,000. In 2007, 2008 and 2009 the Company paid Mr. Riordan
$220,385, $361,723 and $370,723, respectively. Mr. Riordan was
engaged to identify new investment opportunities for the Company, and if any
such opportunities were consummated, he was entitled to a profits interest to be
determined by the Company in each such instance, subject to the Company's having
received a preferred rate of return on such investment. In February
2010, Mr. Riordan left the Company’s employment to pursue other
opportunities. Mr. Riordan was paid $161,296 in 2010.
The Audit
Committee or the Board have approved or ratified each of the foregoing Related
Person Transactions.
Meetings
and Committees
During
2009, the Board of Directors held seven meetings and took action on numerous
other occasions.
The Board
of Directors has a standing Audit Committee, Executive Committee, Compensation
Committee and Nominating and Corporate Governance Committee.
The
functions of the Audit Committee are to assist the Board of Directors in
fulfilling its responsibility to oversee the conduct and integrity of our
financial reporting and financial statements filed with the SEC, the scope and
performance of our internal audit function, our systems of internal accounting
and financial disclosure controls, compliance with legal and regulatory
requirements, our Code of Business Practice and Code of Practice, and
preparation of the audit committee report. In discharging its duties,
the Audit Committee, among other things, has the sole authority to appoint
(subject to shareholder ratification, which is not binding on the Audit
Committee), compensate (including fee pre-approvals), evaluate and replace the
independent auditors, oversee their scope of work, independence and their
engagement for any other services, and meets independently with those persons
performing the Company’s internal auditing function, as well as the Company’s
independent auditors and senior management.
During
2009, the Audit Committee met with management and/or the independent auditors
six times and met once during 2010. At such meetings, the Audit
Committee met with the independent auditors without management
present. The Board of Directors has adopted a charter for the Audit
Committee, which is available on our website. See “Annual Report and
Company Information” below. The Audit Committee consists of Messrs.
Keil (Chairman), Dougan, Hirschfield, Jordan and Nichols. The Board
has determined that each of Messrs. Keil and Hirschfield is qualified as an
audit committee financial expert within the meaning of regulations of the SEC,
thereby satisfying the financial expertise requirement of the listing standards
of the NYSE, and that each member of the Audit Committee is financially
literate.
The
function of the Executive Committee is to exercise the authority of the Board of
Directors in the management of our business at such times as the full Board of
Directors is unavailable in accordance with New York law. The
Executive Committee consists of Messrs. Cumming (Chairman), Keil, Jordan and
Steinberg. The Executive Committee did not meet in 2009.
The
functions of the Compensation Committee are to determine and approve the
compensation of the Chairman of the Board and President including under the 2003
Senior Executive Annual Incentive Bonus Plan (as amended), make recommendations
to the Board of Directors with respect to compensation of our other executive
officers in consultation with Messrs. Cumming and Steinberg, including with
respect to our employee benefit and incentive plans, and to administer our stock
option plan. The Board of Directors has adopted a charter for the
Compensation Committee, which is available on our website. See
“Annual Report and Company Information” below. The Compensation
Committee met three times in 2009 and met three times during
2010. The Compensation Committee consists of Messrs. Nichols
(Chairman), Dougan and Jordan.
The
function of the Nominating and Corporate Governance Committee is to assist the
Board by identifying qualified candidates to serve as directors and recommend to
the Board candidates for election to the Board, to develop and recommend to the
Board corporate governance guidelines, and to oversee the evaluations of the
Board and management. In selecting nominees to the Board of
Directors, the Nominating and Corporate Governance Committee assesses the
independence of the candidates and their ability to comply with the Company
Corporate Governance Guidelines.
The Board
of Directors has adopted a charter for the Nominating and Corporate Governance
Committee, which is also available on our website. See “Annual Report
and Company Information” below. The Nominating and Corporate
Governance Committee met once and took action on one other occasion during 2009
and met once and took action on one other occasion during 2010. The
Nominating and Corporate Governance Committee consists of Messrs. Jordan
(Chairman), Dougan and Nichols.
The
information contained in this proxy statement with respect to the Audit
Committee charter, the Compensation Committee charter, the Nominating and
Corporate Governance Committee charter and the independence of the
non-management members of the Board of Directors shall not be deemed to be
“soliciting material” or to be “filed” with the Securities and Exchange
Commission, nor shall the information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that we specifically incorporate it by reference in a
filing.
A
shareholder entitled to vote in the election of directors may nominate one or
more persons for election as directors at a meeting if written notice of that
shareholder’s intent to make the nomination has been given to us, with respect
to an election to be held at an annual meeting of shareholders, not less than
120 days before the first anniversary of our proxy statement in connection with
the last annual meeting, and, with respect to an election to be held at a
special meeting of shareholders, not later than the tenth day following the date
on which notice of the meeting is first given to shareholders. The
notice shall include the name and address of the shareholder and his or her
nominees, a representation that the shareholder is entitled to vote at the
meeting and intends to nominate the person, a description of all arrangements or
understandings between the shareholder and each nominee, other information as
would be required to be included in a proxy statement soliciting proxies for the
election of the shareholder’s nominees, and the consent of each nominee to serve
as a director of the Company if so elected. We may require any
proposed nominee to furnish other information as we may reasonably require to
determine the eligibility of the proposed nominee to serve as a director of the
Company. We did not receive any nominations from shareholders for
election as directors at the meeting. See “Proposals by Shareholders”
for the deadline for nominating persons for election as directors for the 2011
annual meeting.
Attendance
All
directors attended at least 75% of the meetings of the Board of Directors and
committees of the Board of Directors on which they served. Under our
Corporate Governance Guidelines, each director is expected to dedicate
sufficient time to the performance of his duties as a director, including by
attending meetings of the shareholders, the Board and committees of which he is
a member. All directors attended the annual meeting of shareholders
in May 2009. A copy of our Corporate Governance Guidelines is
available on our website.
Meetings
of Non-Management Directors
The Board
of Directors has determined that the non-management members of the Board of
Directors will meet regularly in executive session outside the presence of any
member of management, in conjunction with regularly scheduled meetings of the
Board. No formal Board action may be taken at any executive
session. The non-management directors annually select a presiding
director to chair executive sessions who will serve for a one year
term. Mr. Alan Hirschfield was the presiding director for 2009 and
has been selected to serve as the presiding director for 2010.
Communicating
with the Board
Shareholders
and other parties interested in communicating directly with the non-management
directors as a group may do so by writing to the non-management members of the
Board of Directors, c/o Corporate Secretary, Leucadia National Corporation, 315
Park Avenue South, New York, New York 10010. The Corporate Secretary
will review all correspondence and regularly forward to the non-management
members of the Board a summary of all such correspondence that, in the opinion
of the Corporate Secretary, deals with the functions of the Board or committees
thereof or that the Corporate Secretary otherwise determines requires
attention. Non-management directors may at any time review a log of
all correspondence received by the Company that is addressed to non-management
members of the Board and request copies of all such
correspondence. Concerns relating to accounting, internal controls or
auditing matters will immediately be brought to the attention of the Chairman of
the Audit Committee.
Code
of Practice
We have a
Code of Business Practice, which is applicable to all directors, officers and
employees of the Company, and includes a Code of Practice applicable to our
principal executive officers and senior financial officers. Both the
Code of Business Practice and the Code of Practice are available on our
website. We intend to post amendments to or waivers from our Code of
Practice applicable to our principal executive officers and senior financial
officers on our website.
INFORMATION
ON STOCK OWNERSHIP
Present
Beneficial Ownership of Common Shares
Set forth
below is certain information as of March 22, 2010, with respect to the
beneficial ownership of common shares by (1) each person who, to our knowledge,
is the beneficial owner of more than 5% of our outstanding common shares, which
is our only class of voting securities, determined in accordance with Rule 13d-3
of the Securities Exchange Act of 1934, as amended, (2) each director and
nominee for director, (3) each of the executive officers named in the Summary
Compensation Table under “Executive Compensation,” (4) the charitable foundation
established by Mr. Cumming and (5) all of our executive officers and directors
as a group. Unless otherwise stated, the business address of each
person listed is c/o Leucadia National Corporation, 315 Park Avenue South, New
York, New York 10010.
|
Name
and Address
of Beneficial Owner
|
|
Number
of Shares
and
Nature of
Beneficial Ownership
|
|
Percent
of Class
|
|
| |
|
|
|
|
|
|
|
|
|
Morgan
Stanley
(a)(b)
|
|
14,338,232
|
|
|
|
5.9
|
% |
|
|
Group
consisting of
Fairholme
Capital Management, L.L.C, Fairholme Funds, Inc. and
Bruce
R. Berkowitz (c)(d)
|
|
20,052,869
|
|
|
|
8.2
|
%
|
|
|
Ian
M. Cumming
|
|
24,283,393
|
|
(e)(f)
|
|
9.9
|
% |
|
|
Paul
M. Dougan
|
|
28,450
|
|
(g)
|
|
*
|
|
|
|
Alan
J. Hirschfield
|
|
47,000
|
|
(h)
|
|
*
|
|
|
|
James
E. Jordan
|
|
132,750
|
|
(h)
|
|
*
|
|
|
|
Jeffrey
C. Keil
|
|
22,000
|
|
(h)
|
|
*
|
|
|
|
Thomas
E. Mara
|
|
127,518
|
|
(i)
|
|
*
|
|
|
|
Jesse
Clyde Nichols, III
|
|
208,948
|
|
(j)
|
|
*
|
|
|
|
Joseph
A. Orlando
|
|
97,068
|
|
(k)
|
|
*
|
|
|
|
Michael
Sorkin
|
|
36,500
|
|
(l)
|
|
*
|
|
|
|
Joseph
S. Steinberg
|
|
27,567,551
|
|
(f)(m)
|
|
11.2
|
% |
|
|
Justin
R. Wheeler
|
|
92,500
|
|
(n)
|
|
*
|
|
|
|
Cumming
Foundation
|
|
283,210
|
|
(o)
|
|
.1
|
% |
|
|
Cumming
Philanthropic Organization
|
|
101,666
|
|
(p)
|
|
*
|
|
|
|
All
directors and executive officers
as
a group (14 persons)
|
|
52,895,236
|
|
(q)
|
|
21.3
|
% |
|
___________________
* Less
than .1%.
|
(a)
|
The
business address of Morgan Stanley is 1585 Broadway, New York, New York
10036.
|
|
(b)
|
Based
upon a Schedule 13G filed February 12, 2010, by Morgan Stanley, the
securities reported in Morgan Stanley’s Schedule 13G may be beneficially
owned, or deemed to be beneficially owned, by certain operating units of
Morgan Stanley and its subsidiaries and
affiliates.
|
|
(c)
|
The
business address of these beneficial owners is c/o Fairholme Capital
Management, L.L.C., 4400 Biscayne Boulevard, 9th Floor, Miami, Florida
33137.
|
|
(d)
|
Based
upon a Schedule 13G filed February 16, 2010, by Fairholme Capital
Management, L.L.C, Fairholme Funds, Inc. and Bruce R. Berkowitz (together,
“Fairholme”), the securities reported in Fairholme’s Schedule 13G are
owned by various investment vehicles managed by Fairholme Capital
Management, L.L.C. (“FCM”). FCM, Fairholme Funds,
Inc. and Mr. Berkowitz disclaim beneficial ownership of the common shares
reported by them in Fairholme’s Schedule
13G.
|
|
(e)
|
Includes
216,000 (less than .1%) common shares beneficially owned by Mr. Cumming’s
wife, as to which Mr. Cumming may be deemed to be the beneficial owner and
2,000,000 (.8%) common shares which Mr. Cumming currently has the right to
acquire upon exercise of warrants. Also includes 7,000,000
shares as collateral for a line of
credit.
|
|
(f)
|
Messrs.
Cumming and Steinberg have an oral agreement pursuant to which they will
consult with each other as to the election of a mutually acceptable Board
of Directors of the Company.
|
|
(g)
|
Includes
9,000 common shares that may be acquired upon the exercise of currently
exercisable stock options and 300 (less than .1%) common shares owned by
Mr. Dougan’s wife as to which Mr. Dougan disclaims beneficial
ownership.
|
|
(h)
|
Includes
9,000 common shares that may be acquired upon the exercise of currently
exercisable stock options.
|
|
(i)
|
Includes
108,000 common shares that may be acquired upon the exercise of currently
exercisable stock options.
|
|
(j)
|
Includes
7,000 common shares that may be acquired upon the exercise of currently
exercisable stock options and 127,798 (less than .1%) common shares held
by a revocable trust for Mr. Nichols’ benefit in a managed account, 23,164
(less than .1%) common shares beneficially owned by Mr. Nichols’ wife
(directly and indirectly through a majority owned company) and 15,018
shares held by a trust for the benefit of Mr. Nichol’s minor children as
to which Mr. Nichols may be deemed to be the beneficial
owner.
|
|
(k)
|
Includes
96,000 common shares that may be acquired upon the exercise of currently
exercisable stock options.
|
|
(l)
|
Includes
12,000 (less than .1%) common shares owned by Mr. Sorkin’s wife as to
which Mr. Sorkin disclaims beneficial ownership and 500 common shares that
may be acquired upon the exercise of currently exercisable stock
options.
|
|
(m)
|
Includes
139,200 (less than .1%) common shares beneficially owned by Mr.
Steinberg’s wife and daughter, 20,636,424 (8.5%) common shares held by
corporations that are wholly owned by Mr. Steinberg, or by corporations
that are wholly owned by a family trust as to which Mr. Steinberg has sole
voting and dispositive control, 2,339,712 (1.0%) common shares held in a
trust for the benefit of Mr. Steinberg’s children as to which Mr.
Steinberg may be deemed to be the beneficial owner, and 2,000,000 (.8%)
common shares which Mr. Steinberg currently has the right to acquire upon
exercise of warrants.
|
|
(n)
|
Includes
84,742 common shares that may be acquired upon the exercise of currently
exercisable stock options.
|
|
(o)
|
Mr.
Cumming is a trustee and President of the foundation and disclaims
beneficial ownership of the common shares held by the
foundation.
|
|
(p)
|
Mr.
Cumming is a director and President of Cumming Philanthropic Organization
and disclaims beneficial ownership of the common shares held by the
organization.
|
|
(q)
|
Includes
12,300 common shares owned of record by the spouses of certain directors
of the Company, as to which each such director disclaims beneficial
ownership; 4,000,000 common shares that may be acquired by Messrs. Cumming
and Steinberg pursuant to the exercise of currently exercisable warrants;
43,500 common shares that may be acquired by directors pursuant to the
exercise of currently exercisable stock options; and 495,512 common shares
that may be acquired by certain officers pursuant to the exercise of
currently exercisable stock
options.
|
As of
March 22, 2010, Cede & Co. held of record 193,209,412 shares (approximately
79.4% of the total number of common shares outstanding). Cede &
Co. held such shares as a nominee for broker-dealer members of The Depository
Trust Company, which conducts clearing and settlement operations for securities
transactions involving its members.
As
described in our Form 10-K for the year ended December 31, 2009, our common
shares are subject to transfer restrictions that are designed to reduce the
possibility that certain changes in ownership could result in limitations on the
use of our significant tax attributes. Our certificate of
incorporation contains provisions that generally restrict the ability of a
person or entity from acquiring ownership (including through attribution under
the tax law) of 5% or more of our common shares and the ability of persons or
entities now owning 5% or more of our common shares from acquiring additional
common shares. Shareholders (and prospective shareholders) are
advised that, under the tax law rules incorporated in these provisions, the
acquisition of even a single common share may be proscribed under our
certificate of incorporation, given (among other things) the tax law ownership
attribution rules as well as the tax law rules applicable to acquisitions made
in coordination with or in concert with others. The restriction will
remain until the earliest of (a) December 31, 2024, (b) the repeal of Section
382 of the Internal Revenue Code of 1986 as amended (the “Code”) (or any
comparable successor provision) and (c) the beginning of our taxable year to
which these tax attributes may no longer be carried forward. The restriction may
be waived by our Board of Directors. Shareholders are advised to carefully
monitor their ownership of our common shares and consult their own legal
advisors and/or us to determine whether their ownership of our common shares
approaches the proscribed level. Based upon discussions with each of
Morgan Stanley and Fairholme, we believe that the beneficial ownership
(determined in accordance with Rule 13d-3 under the Securities Exchange Act of
1934) of common shares by each of Morgan Stanley and Fairholme as reflected in
the table above is not in violation of the transfer restrictions contained in
our certificate of incorporation.
Equity
Compensation Plan Information
The
following table summarizes information regarding the Company’s equity
compensation plans as of December 31, 2009. All outstanding awards
relate to the Company’s common shares.
|
|
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
|
6,196,240
|
|
$27.765
|
|
1,888,650
|
|
| |
|
|
|
|
|
|
|
Equity
compensation
Plans
not approved
by
security holders
|
_ |
|
_ |
|
_ |
|
| |
|
|
|
|
|
|
|
Total
|
6,196,240
|
|
$27.765
|
|
1,888,650
|
|
|
|
|
|
|
|
|
|
EXECUTIVE
COMPENSATION
Compensation
Discussion & Analysis
Introduction
Our
principal executive officers, Ian M. Cumming and Joseph S. Steinberg, in
consultation with the Compensation Committee, establish our compensation
philosophy and executive compensation program. The Compensation
Committee determines and approves the compensation of Messrs. Cumming and
Steinberg, including bonus compensation under the 2003 Senior Executive Annual
Incentive Bonus Plan, and makes recommendations to the Board of Directors, in
consultation with Messrs. Cumming and Steinberg, with respect to the
compensation of the other executive officers of the Company including those
named in the Summary Compensation Table ( the “Senior Executive Officers” and
together with Mr. Cumming and Mr. Steinberg, the “Named Executive
Officers”).
Compensation
Objectives and Philosophy
Our
compensation philosophy is based upon rewarding our executive officers for
current and past contributions, performance and dedication and providing
incentives for superior long-term performance. We continue to believe
that there should be a strong link between pay and performance for both the
Company and the individual. Accordingly, a large percentage of annual
compensation consists of discretionary bonus compensation. This
ensures that compensation paid to an executive reflects the individual’s
specific contributions during the year, the level and degree of complexity
involved in his/her contributions to the Company and the Company’s overall
performance.
In
determining the compensation of our named executive officers, the Compensation
Committee, together with Messrs. Cumming and Steinberg considered the Company’s
financial performance as well as the continued uncertain economic conditions
experienced in 2009. Our compensation philosophy has not changed;
however, economic uncertainty continued to significantly affect our executive
compensation in 2009. Bonuses received by our Senior Executive
Officers for 2009 were higher than those paid for 2008, but lower than those
paid for 2007, unless reflecting an expansion of an executive’s responsibilities
or enhanced performance. As discussed below, Messrs. Cumming and
Steinberg did not receive bonus compensation under the Bonus Plan for 2008, and
no determination has yet been made as to their bonus compensation for 2009; this
will be considered by the Compensation Committee at their meeting following the
Annual Shareholders Meeting.
Role
of Principal Executive Officers in Compensation Decisions
In
determining executive compensation, the Compensation Committee works with
Messrs. Cumming and Steinberg. In January of each year, Messrs.
Cumming and Steinberg meet with the Compensation Committee to report their
recommendations for the prior year’s bonus and current year’s salary levels for
the Senior Executive Officers.
Setting
Executive Compensation
In
determining compensation for our Senior Executive Officers, neither the
Compensation Committee nor Messrs. Cumming and Steinberg rely on any specific
formula, benchmarking or pre-determined targets. In making their
recommendations to the Compensation Committee, Messrs. Cumming and Steinberg
focus primarily on their subjective determination of the performance of the
individual executive officer, as well as on the performance of the Company and
general economic conditions.
In
considering executive compensation, Messrs. Cumming and Steinberg take into
account the dedication, institutional knowledge and significant contributions
(which may involve restructuring newly acquired enterprises or managing and
maximizing the value of existing or potential businesses and investments, the
success of which may not be evident for several years) that our executive
officers bring to
the
Company, as well as the status of the Company’s investments. Messrs.
Cumming and Steinberg report their compensation proposals to the Compensation
Committee for its consideration and recommendation to the full Board of
Directors for its approval.
Elements
of Compensation
In an
effort to reflect our compensation philosophy and keep our compensation program
as straightforward as possible, in 2009 our compensation package for Named
Executive Officers consisted of four basic elements:
(1) base
salary;
(2) annual
bonus compensation (which for Messrs. Cumming and Steinberg has historically
been governed by our shareholder approved 2003 Senior Executive Annual Incentive
Bonus Plan discussed below);
(3) long-term
incentives in the form of stock options granted pursuant to our shareholder
approved Amended and Restated 1999 Stock Option Plan (the “Option Plan”), for
executive officers other than Messrs. Cumming and Steinberg, and warrants
granted pursuant to our shareholder approved 2006 Senior Executive Warrant Plan
(for Messrs. Cumming and Steinberg); and
(4) retirement
benefits pursuant to our Savings and Retirement Plan and Deferred Compensation
Retirement Plan.
Other
elements of compensation include medical and life insurance benefits available
to employees generally. Additionally, certain perquisites may be
available to executive officers that are not available to other employees
generally. See “Other Benefits; Executive Perquisites”.
Each
element of compensation has a different purpose. Salary and bonus
payments are designed mainly to reward current and past
performance. Stock options and warrants are primarily designed to
provide strong incentive for superior long-term future performance and are
directly linked to shareholders’ interests because the value of the awards will
increase or decrease based upon the future price of the Company’s common
shares. Retirement benefits are designed to provide employees with
income after they retire, and the Company’s annual contribution is determined
based upon a combination of an employee’s age and years of service.
Other
than Messrs. Cumming and Steinberg, none of our executive officers is a party to
an employment agreement with the Company.
Base
Salary
Base
salary is consistent with the executive’s office and level of responsibility,
with annual salary increases that generally amount to a small percentage of the
executive’s prior base salary, primarily reflecting cost of living
increases. However, annual salary increases may be significant to
reflect an executive’s increase in office and/or responsibility. Base
salary of executive officers other than Messrs. Cumming and Steinberg is
determined by the Board of Directors after considering the recommendation of the
Compensation Committee in consultation with Messrs. Cumming and
Steinberg. Base salary of Messrs. Cumming and Steinberg is based upon
their employment agreements discussed in greater detail below.
Short-Term
Incentives – Annual Bonus Compensation
Bonus
compensation of executive officers, other than Messrs. Cumming and Steinberg, is
determined by the Board on the basis of recommendations made by the Compensation
Committee upon
consultation
with Messrs. Cumming and Steinberg based on their subjective assessment of
an executive’s performance and the Company’s performance.
Bonus
Compensation for Messrs. Cumming and Steinberg is determined by the Compensation
Committee principally pursuant to the terms of the 2003 Senior Executive Annual
Incentive Bonus Plan, as amended (the “Bonus Plan”), although the Compensation
Committee may award bonuses to Messrs. Cumming and Steinberg in addition to the
amounts provided under the Bonus Plan.
Additionally,
in 2009 all employees of Leucadia National Corporation (but not all
subsidiaries) received an annual discretionary year-end bonus equal to 3% of
base salary.
Long-Term
Incentives – Stock Options
By means
of our Option Plan, we seek to retain the services of persons now holding key
positions and to secure the services of persons capable of filling the
positions. From time to time, stock options may be awarded which,
under the terms of the Option Plan, permit the executive officer or other
employee to purchase common shares of the Company, after vesting, at not less
than the fair market value of the common shares on the date of grant of the
stock option. Since employees only realize a gain if the price of the
common shares increases during the period of the option, shareholder and
executive interests are aligned. Options granted to executive
officers generally become exercisable at the rate of 20% per year, commencing
approximately one year after the date of grant. As with base salary
and bonuses, the amount of stock options awarded to an executive officer is not
based on any specific formula, but rather on a subjective assessment of the
executive’s level and performance, as well as the date and extent of prior
option grants. Options are granted to executive officers by the
Compensation Committee upon the recommendation of Messrs. Cumming and
Steinberg. Options are not granted according to a set schedule;
however, since 2000 the Compensation Committee has granted options every other
year. Options are priced at the closing price on the date of grant
and are not granted to precede the announcement of favorable information. In
2009 we did not grant stock options to our Senior Executive
Officers. However, on March 1, 2010, we granted an option to purchase
100,000 common shares of the Company to Justin R. Wheeler. See
“Compensation of Senior Executive Officers (executive officers other than Ian M.
Cumming and Joseph S. Steinberg)” below.
Long-Term
Incentives – Warrants
Although
Messrs. Cumming and Steinberg are eligible to participate in our Option Plan,
they have never received stock options; instead Messrs. Cumming and Steinberg
have received shareholder approved warrants, most recently in 2006, when
shareholders approved our 2006 Senior Executive Warrant Plan pursuant to which
Messrs. Cumming and Steinberg were each granted Warrants to purchase 2,000,000
common shares at an exercise price of $28.515 (105% of the closing price per
common share on the grant date). These Warrants vested at a rate of
20% per year, commencing on May 16, 2006 and thereafter on March 6 of each of
2007, 2008, 2009 and 2010. All of these Warrants are currently
vested.
Retirement
Benefits Pursuant to Our Savings and Retirement Plan and Deferred Compensation
Retirement Plan, and with Respect to Eligible Employees, the Frozen Defined
Benefit Pension Plan
Savings
and Retirement Plan
We and
certain of our affiliated companies currently maintain a Savings and Retirement
Plan for certain of our employees and employees of these affiliated companies.
Participants in the Savings and Retirement Plan may make before-tax and/or
after-tax contributions to the plan and we will match a portion of an eligible
participant's before-tax contributions. The Savings and Retirement Plan also
provides a contribution for eligible participants determined on the basis of age
and service with potential contributions ranging from 2% of eligible
compensation up to 16% of eligible compensation (the “Profit Sharing
Benefit”). Eligible compensation for the Profit Sharing Benefit for
2009 was limited to $245,000. Beginning in 2009, eligible employees
earning more than $130,000 in the previous fiscal year were no longer eligible
to participate in the Profit Sharing Benefit portion of the Savings and
Retirement Plan
(although
they still are eligible to make salary reduction contributions and to receive
matching contributions under the Savings and Retirement Plan). As a
result, on January 1, 2009, we established the Leucadia National Corporation
Deferred Compensation Retirement Plan, which allows such employees the
opportunity to receive an employer contribution based on age and years of
service.
Deferred
Compensation Retirement Plan
Effective
January 1, 2009, we established the Leucadia National Corporation Deferred
Compensation Retirement Plan (“Deferred Compensation Plan”), which allows
participating senior executives with compensation in excess of $130,000 the
opportunity to receive an employer contribution ranging from 2% of eligible
compensation up to 16% of eligible compensation. Contributions are
determined on the basis of age and years of service. The Deferred
Compensation Plan does not provide for employee contributions. The
Deferred Compensation Plan is designed as a non-qualified deferred compensation
plan and is intended to meet the requirements of Section 409A of the
Code. Senior executives who are eligible to participate in the
Deferred Compensation Plan are not eligible to receive the Profit Sharing
Benefit under the Savings and Retirement Plan. Separate accounts are
maintained for each participant and participants may direct the investment of
their account. Accounts under the Deferred Compensation Plan are
subject to the same rules for contribution and investment timing, investment
transaction accounting, and investment changes applied to the accounts of all
employees participating in the Savings and Retirement
Plan. Distributions are made upon retirement, separation from
service, death, disability or Change in Control (as defined in the Deferred
Compensation Plan). In-Service distributions are available in the
case of unforeseeable emergency. Lump sum payments to specified
employees (as such term is defined in Code Section 409A(a)(2)(B)(i)) will not be
made until six months and one day following a separation from
service. All Named Executive Officers are fully vested in their
benefit under the Deferred Compensation Plan.
Frozen
Defined Benefit Pension Plan
We and
certain of our affiliated companies maintain a frozen retirement plan, the
Leucadia National Corporation Retirement Plan, as amended and restated effective
January 1, 1997 (the “Frozen Defined Benefit Pension Plan”), for certain of our
employees and employees of these affiliated companies. No benefit accruals under
the Frozen Defined Benefit Pension Plan have been allowed and no new
participants have been allowed after December 31, 1998. All participants are
100% vested in their frozen accrued benefit. Participants were not
required to make any contributions under the retirement plan.
Pension
benefits may be collected upon attainment of normal retirement age (age 65) or
upon satisfying the criteria for early retirement (age 55 with at least 10 years
of service). All early retirement benefit payments are actuarially
reduced to reflect the longer expected payout period. Messrs. Cumming
and Steinberg are currently eligible to receive a normal retirement
benefit. Mr. Mara is currently eligible to receive an early
retirement benefit.
The
Frozen Defined Benefit Pension Plan provides for a survivor’s benefit payable to
the spouse of a plan participant upon the death prior to retirement of the plan
participant. Had the death of any of our Named Executive Officers
occurred on December 31, 2009, their spouses would be entitled to the following
amounts under the Frozen Defined Benefit Pension Plan (subject to certain
elections which may be made as described below): Mr. Cumming’s spouse
would receive $225,000, Mr. Steinberg’s spouse would receive $177,000, Mr.
Mara’s spouse would receive $156,000, Mr. Orlando’s spouse would receive
$107,000 and Mr. Wheeler’s spouse would not receive any payment.
The
Frozen Defined Benefit Pension Plan contains provisions for optional forms of
payment and provides that the normal form of benefit in the case of a married
participant is a benefit actuarially equivalent to an annuity for the life of
the participant payable in the form of a 50% joint and survivor annuity for the
participant and his spouse. With the spouse’s consent, a married
participant may alternatively elect to receive benefits in the form of a single
life annuity, a 75% joint and survivor annuity, a 100% joint and survivor
annuity, a 5-year certain and life annuity, a 10-year certain and life annuity
or a lump sum.
Both our
Savings and Retirement Plan and Frozen Defined Benefit Pension Plan are intended
to qualify under the provisions of Section 401 of the Code.
Other
Benefits; Executive Perquisites
Medical
and life insurance benefits are available to employees generally.
Under our
employment agreements with Messrs. Cumming and Steinberg, we have agreed to
carry at our expense term life insurance policies on their lives in the amount
of $1,000,000 each, payable to the beneficiaries as each of Messrs. Cumming and
Steinberg shall designate. Additionally, Messrs. Cumming and
Steinberg each may use the Company’s aircraft for non-business purposes, subject
to the limitations set forth in their employment agreements. See
“Employment Agreements” below. The incremental costs of any such
aircraft usage are reported as other compensation in the Summary Compensation
Table included elsewhere in this proxy statement.
Certain
of our executive officers receive the use of Company owned cars and certain
related benefits. The incremental costs of any personal use by the
Named Executive Officers are reported as other compensation in the Summary
Compensation Table included elsewhere in this proxy statement. The
Company also pays for the parking expenses of one of our executive
officers.
Stock
Ownership Requirements
We do not
have a formal stock ownership requirement; however, our Named Executive Officers
beneficially own approximately 21.2% of our outstanding common shares, as
reflected in the Present Beneficial Ownership of Common Shares table included in
this proxy statement.
Compensation
of Senior Executive Officers (executive officers other than Ian M. Cumming and
Joseph S. Steinberg)
In 2009,
our Senior Executive Officers received cost of living increases to their base
salary (determined in January 2009) and discretionary bonuses for 2008 (also
determined in January 2009). Additionally, on January 26, 2010, the
Company’s Board of Directors, upon the recommendation of the Compensation
Committee in consultation with Messrs. Cumming and Steinberg, approved annual
salary increases (effective January 1, 2010) and discretionary 2009 cash bonuses
for each of the Company’s Senior Executive Officers.
Discretionary
cash bonus compensation of our Senior Executive Officers is determined based
upon the subjective assessment of an executive’s and the Company’s performance,
given the varied nature of the Company’s businesses. Bonuses are
subjective and are not based upon any formula or the application of any
mathematical criteria. In making their recommendations to the Compensation
Committee, Messrs. Cumming and Steinberg consider the Company’s actual and
estimated results of operations for the year in question, as well as operating
results and bonus compensation for prior years. They also consider
annual performance reviews completed by each executive officer for the year,
which provide Messrs. Cumming and Steinberg with each executive’s subjective
assessment of his or her achievements for the year.
In
evaluating each executive’s performance, Messrs. Cumming and Steinberg take into
account the individual contributions to the current and future operations of the
Company made by the named executive officers and place significant emphasis on
whether the executive’s performance has increased the long-term value of the
Company, rather than on short-term gains. Messrs. Cumming and
Steinberg also recognize that the current efforts of its executive officers may
not result in operating profits for many years in the future.
Bonuses
can vary widely from year to year, reflecting the Company’s profitability and
the activities of the Company for that year. For example, in years in
which the Company is making significant acquisitions or dispositions, Messrs.
Cumming and Steinberg are likely to subjectively consider the
executive’s
contribution to that effort (assuming his or her job responsibilities include
acquisition and/or disposition activities or oversight) and in years in which
the Company is actively engaged in restructuring operating companies, Messrs.
Cumming and Steinberg are likely to consider the executive’s contribution to
these efforts (assuming his or her job responsibilities include
operations-related activities or oversight). Messrs. Cumming and
Steinberg also subjectively consider the executive’s contribution to analyses
that results in avoiding investments that do not meet the Company’s investment
criteria and are not consummated.
For 2009,
Messrs. Cumming and Steinberg considered Mr. Mara’s senior leadership role in
the Company and his efforts with its several energy related projects and his
leadership and contributions to due diligence and negotiation efforts in
consummated acquisitions and in acquisition opportunities that were not
consummated. Messrs. Cumming and Steinberg also considered Mr. Mara’s
senior role in overseeing the Company’s investments in Inmet Mining Corporation
and Cobre Las Cruces.
For Mr.
Orlando, for 2009, Messrs. Cumming and Steinberg considered his senior
leadership role in the Company, his management skills in coordinating the
accounting operations of the Company’s multiple and varied operations,
contributions to due diligence and negotiation efforts in consummated
acquisitions and oversight of the Company’s public reporting and income tax
filings.
For Mr.
Wheeler, for 2009, Messrs. Cumming and Steinberg considered his accomplishments
in overseeing the Company’s varied operating companies and investments and
contributions to due diligence and negotiation efforts in consummated
acquisitions and in acquisition opportunities that were not
consummated. Messrs. Cumming and Steinberg also recognized Mr.
Wheeler’s efforts to maximize the value of the Company’s investments in its
operating companies, control their costs and find opportunities for the
operating companies to increase revenue.
After
considering all of the foregoing, Messrs. Cumming and Steinberg made their
recommendations to the Compensation Committee for its review and
approval. Thereafter, the Compensation Committee made its
recommendation to the Board of Directors.
On March
1, 2010, the Compensation Committee, upon the recommendation of Messrs. Cumming
and Steinberg, approved the grant to Justin R. Wheeler, Vice President and a
Named Executive Officer of the Company, of options to purchase 100,000 common
shares of the Company at an exercise price of $24.37 per share, the closing
price of a common share of the Company on the NYSE on March 1,
2010. The Compensation Committee also approved and recommended that
the Board of Directors approve a retention agreement for Mr. Wheeler on the same
date. The Board authorized the retention agreement on March 1,
2010. Messrs. Cumming and Steinberg recommended these arrangements in
view of Mr. Wheeler’s demonstrated executive skills over the past few years in
his oversight of the Company’s operations and investments, and their collective
concern that Mr. Wheeler might pursue other opportunities. The
retention agreement provides for a payment of $2,500,000 to Mr. Wheeler if, at
any time during the five year period through March 1, 2015, neither Mr. Cumming
nor Mr. Steinberg is the Chief Executive Officer of the Company. The agreement
contains a two year non-compete and non-solicitation
clauses. Following discussions with Mr. Wheeler, the amount of the
payment and option award were recommended by Messrs. Cumming and Steinberg as
being an appropriate incentive to retain Mr. Wheeler; in determining the option
award, consideration was given to the number of options and the exercise price
of such options previously granted to Mr. Wheeler.
Compensation
of Messrs. Cumming and Steinberg
The
Compensation Committee determines and approves, in conjunction with the Board of
Directors, the annual compensation of Mr. Cumming, our Chairman of the Board,
and Mr. Steinberg, our President. The base compensation of Messrs.
Cumming and Steinberg is set pursuant to employment agreements between the
Company and each of Messrs. Cumming and Steinberg expiring June 30,
2015. See “Employment Agreements and Elements of Post Termination
Compensation and Benefits.” The base salaries of Messrs. Cumming and
Steinberg provided for in the current employment agreements initially
were
determined by the Compensation Committee in 1994 and increase annually in July
of each year only to reflect annual cost of living increases.
Messrs.
Cumming and Steinberg are also eligible to receive bonus compensation under the
Bonus Plan. The Bonus Plan directly links the annual incentive bonus
of Messrs. Cumming and Steinberg with our earnings, while providing the
Compensation Committee with the flexibility to reduce amounts to be paid under
the Bonus Plan. The Bonus Plan, as amended in May 2006 pursuant to
shareholder approval, provides for annual incentive bonuses to be paid to each
of Messrs. Cumming and Steinberg in an amount equal to 1.35% of our audited
consolidated pre-tax earnings for each of the fiscal years through
2014. The amount of the annual incentive bonus awarded to Messrs.
Cumming and Steinberg in any given year is subject to reduction by the
Compensation Committee, in its sole discretion. Payments under the
Bonus Plan are made in cash following written certification by the Compensation
Committee as to the amount of the annual incentive bonus for any given
year. Amounts awarded to Messrs. Cumming and Steinberg, if any, under
the Bonus Plan are determined and approved by the Compensation Committee each
year following the annual meeting of shareholders.
The Bonus
Plan is designed so that the cash bonuses awarded under the plan will qualify as
“performance-based compensation” under Section 162(m) of the
Code. See “Accounting and Tax Matters.”
Employment
Agreements and Elements of Post-Termination Compensation and
Benefits
Employment
Agreements
We have
employment agreements with Messrs. Cumming and Steinberg that provide for Mr.
Cumming’s employment as our Chairman of the Board and Chief Executive Officer
and for Mr. Steinberg’s employment as our President through June 30, 2015 at
annual salaries of $749,027 (as of July 1, 2009), subject to annual
cost-of-living adjustments effective July 1 of each year, plus any additional
compensation as may be voted by the Board of Directors. Although
their employment agreements entitle Messrs. Cumming and Steinberg to participate
in all of our incentive plans and those of our subsidiaries and affiliated
companies, they do not participate in any of those plans. We have
also agreed to carry at our expense term life insurance policies on their lives
in the amount of $1,000,000 each, payable to the beneficiaries as each of
Messrs. Cumming and Steinberg shall designate. Additionally, their
employment agreements entitle Messrs. Cumming and Steinberg, for as long as the
Company has corporate-owned aircraft for business use, and subject to the
availability of such aircraft, to the personal use of such aircraft, provided
that the incremental cost to the Company does not exceed $1,500,000 per year for
each of Messrs. Cumming and Steinberg. Their employment agreements
also provide that the Company will provide Messrs. Cumming and Steinberg with
the use of suitable cars.
Under the
employment agreements, if there is an Initiating Event (as defined below) and
(A) either the employment of Messrs. Cumming or Steinberg is terminated by us
(other than for Cause (as defined below) or pursuant to the end of the term of
the employment agreement or due to the death or disability of Messrs. Cumming or
Steinberg) or (B) Messrs. Cumming or Steinberg terminates his employment within
one year of certain occurrences, such as the appointment or election of another
person to his office, the aggregate compensation and other benefits to be
received by Mr. Cumming or Mr. Steinberg for any twelve full calendar months
falling below 115% of the amount received by him during the comparable preceding
twelve-month period, or a change in the location of his principal place of
employment, Messrs. Cumming or Steinberg will receive a Severance Allowance
equal to the remainder of the aggregate annual salary, as adjusted for increases
in the cost of living, commencing on the date of termination and terminating at
the close of business on June 30, 2015 (the “Severance Period”). In
addition, we or our successors will continue to (1) pay an amount equal to what
Messrs. Cumming or Steinberg would have received under any pension plan of the
Company had they continued to be an active, full-time employee of the Company
during the Severance Period and (2) to carry the $1,000,000 term life insurance
policies payable to the beneficiaries of Messrs. Cumming and Steinberg through
the Severance Period.
An
“Initiating Event” includes the consolidation or merger of the Company with or
into another corporation or other reorganization of the Company, any of which
results in a change in control of the Company; the sale of all or substantially
all of the assets of the Company; or the acquisition, directly or indirectly, by
any person, of beneficial ownership of more than fifty percent of the
outstanding voting securities of the Corporation. “Cause” is defined
as the commission of any act of gross negligence in the performance of duties or
obligations to the Company or any of its subsidiary or affiliated companies, or
the commission of any material act of disloyalty, dishonesty or breach of trust
against the Company or any of its subsidiary or affiliated
companies.
Additionally,
in the event of (1) the death of Messrs. Cumming or Steinberg (as the case may
be); or (2) in the event of the termination of the agreement by the Company
because of physical or mental disability of either Messrs. Cumming or Steinberg
(as the case may be), Messrs. Cumming or Steinberg or either of their personal
representatives shall be entitled to receive the following compensation prorated
through the end of the month in which death or such termination
occurs: (a) base salary; (b) any additional compensation authorized
by the Board of Directors; and (c) any annual cost of living adjustments to base
compensation required by the employment agreements. Thereafter, the
company has no other obligations under the employment agreements, other than to
pay any accrued and/or vested employee benefits, such as retirement, disability,
profit sharing, stock options, cash or stock bonus or other plan or
arrangement.
During
the term of the agreements, any renewals or extensions of the agreements, and
for a period of six months following termination of employment with the Company,
Messrs. Cumming and Steinberg shall not, without the prior written approval of
the Board of Directors of the Company solicit any customers or clients of the
Company or solicit any employees of the Company.
Shareholders
Agreement
Under the
Shareholders Agreement among the Company, Ian M. Cumming and Joseph S.
Steinberg, as amended as of May 16, 2006 (the “Shareholders Agreement”), the
Company has agreed to repurchase up to 55% of the interest of each of Messrs.
Cumming and Steinberg in the common shares of the Company upon the death of each
of Mr. Cumming and Mr. Steinberg. The Company will use all available
proceeds from the life insurance policies held by the Company on the life of
each of Messrs. Cumming and Steinberg, up to a maximum of $125,000,000, to
fulfill this purchase obligation. We currently maintain insurance on
the life of each of Messrs. Cumming and Steinberg in the aggregate face amount
of $125,000,000 for Mr. Cumming and $117,000,000 for Mr. Steinberg for this
purpose, the premiums for which aggregated approximately $2,500,000 in
2009.
The
Shareholders Agreement provides that Messrs. Cumming’s and Steinberg’s interests
in the Company will be valued at the higher of the average closing price of the
common shares on the NYSE for the 40 trading days preceding the date of death or
the net book value of the common shares at the end of the fiscal quarter
preceding the date of death. The Shareholders Agreement extends
through June 30, 2018.
Retirement
Benefits Agreement
Pursuant
to a retirement benefits agreement between Mr. Cumming and the predecessor to
Leucadia Financial Corporation (“Leucadia Financial”), a wholly owned subsidiary
of Leucadia National Corporation, upon Mr. Cumming’s retirement, he will be
entitled to receive $10,000 per year for a period of ten years immediately
following the date of his retirement or until his death, whichever occurs
first. If Mr. Cumming should die during the ten year period, Leucadia
Financial will pay $10,000 per year to Mr. Cumming’s designees or to his estate,
until the expiration of the ten-year period. This agreement was
initially entered into in 1977, before Leucadia Financial became a subsidiary of
the Company.
Accounting
and Tax Matters
The cost
of all share-based payments to employees, including grants of employee stock
options and warrants is recognized in the financial statements based on their
fair values. The cost is recognized as an expense over the vesting
period of the award.
Under the
provisions of Section 162(m) of the Code, we would not be able to deduct
compensation to our executive officers whose compensation is required to be
disclosed in our proxy statement for any year in excess of $1,000,000 per year
unless the compensation was within the definition of “performance-based
compensation” or meets certain other criteria. To qualify as
“performance-based compensation,” in addition to certain other requirements,
compensation generally must be based on achieving certain pre-established
objective performance criteria or standards that precludes the exercise of
discretion to increase the amount of compensation payable upon the attainment of
the performance goal. We believe that ordinarily it is in our best
interest to retain maximum flexibility in our compensation programs to enable us
to appropriately reward, retain and attract the executive talent necessary to
our success. To the extent these goals can be met with compensation
that is designed to be deductible under Section 162(m) of the Code, such as the
Option Plan and the Senior Executive Annual Incentive Bonus Plan (as discussed
elsewhere in this analysis), the compensation plans will be
used. However, the Compensation Committee and the Board of Directors
recognize that, in appropriate circumstances, compensation that is not
deductible under Section 162(m) of the Code may be paid in the Compensation
Committee’s discretion, weighing factors such as the benefit to the Company in
giving bonuses deserved by executives outweighing the loss of any potential tax
deduction. Additionally, given the Company’s available net operating
loss carryforwards, we believe that any loss of deductions as a result of such
compensation may not be material.
In order
to maintain tax deductibility of payments made pursuant to the 2003 Senior
Executive Annual Incentive Bonus Plan, we must obtain shareholder approval of
the material terms of the performance goals every five years, as required under
the tax rules. As approval was received in 2006, we will again seek
shareholder approval as required under the tax rules in 2011.
Compensation
Committee Report
We have
reviewed and discussed with the Company’s management the above Compensation
Discussion and Analysis (“CD&A”). Based upon the reviews and
discussions, we have recommended to the Board of Directors that the CD&A be
included in these Proxy Materials.
Compensation
Committee
Jesse
Clyde Nichols, III (Chairman)
Paul M.
Dougan
James E.
Jordan
Summary
Compensation Table
Name
and Principal Position
|
|
|
|
|
|
|
|
|
|
All
Other
Compensation
(3)
|
|
|
|
|
Ian
M. Cumming, Chairman of the Board
|
|
2009
2008
2007
|
|
$741,288
$723,152
$702,169
|
|
$22,471
$22,030
$21,389
|
(1)
(1)
(1)
|
|
|
$ -
$ -
$ -
|
|
$248,091
$403,878
$486,477
|
(4)(5) |
|
|
$1,011,850
$1,149,060
$1,210,035
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
S. Steinberg,
President
|
|
2009
2008
2007
|
|
$741,288
$723,152
$702,169
|
|
$22,471
$22,030
$21,389
|
(1)
(1)
(1) |
|
|
$ -
$ -
$ -
|
|
$420,579
$395,299
$528,238
|
(5)(6) |
|
|
$1,184,338
$1,140,481
$1,251,796
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
E. Mara,
Executive
Vice President
|
|
2009
2008
2007
|
|
$353,000
$343,000
$330,000
|
|
$610,590
$510,290
$809,900
|
|
|
|
$ -
$872,731
$
-
|
|
$142,690
$144,854
$132,060
|
(7) |
|
|
$1,106,280
$1,870,875
$1,271,960
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Orlando,
Vice
President and Chief Financial Officer
|
|
2009
2008
2007
|
|
$321,000
$312,000
$300,000
|
|
$809,630
$684,360
$909,000
|
|
|
|
|
|
$46,400
$51,713
$52,486
|
(8) |
|
|
$1,177,030
$1,920,804
$1,261,486
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Justin
R. Wheeler, Vice President
|
|
2009
2008
2007
|
|
$250,000
$214,000
$206,000
|
|
$847,500
$646,420
$806,180
|
|
|
|
|
|
$94,769
$93,869
$41,679
|
(9) |
|
|
$1,192,269
$1,827,020
$1,053,859
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) This
amount represents the annual year-end bonus, based on a percentage of salary,
paid to all employees of Leucadia National Corporation (but not all
subsidiaries). Messrs. Cumming and Steinberg did not receive bonus
compensation under the Bonus Plan for 2007 or 2008. The Compensation
Committee intends to consider the payment of a 2009 performance bonus to each of
Messrs. Cumming and Steinberg at their meeting to be held following the 2010
Annual Meeting of Shareholders. See “Compensation Discussion and Analysis –
Compensation of Messrs. Cumming and Steinberg.”
(2) This
column represents the grant date fair value of stock options granted to each of
Messrs. Mara, Orlando and Wheeler in 2008, all in accordance with generally
accepted accounting principles (“GAAP”). For information on the
valuation assumptions with respect to the grants made in 2008, refer to Note 14
to our consolidated financial statements contained in our Form 10-K for the
fiscal year ended December 31, 2009.
(3) Certain
items included in this column (including personal use of corporate aircraft and
company cars, parking expenses, directors fees, and life insurance premiums) are
currently taxable to the Named
Executive
Officer. The amount of taxable income for the individual is
determined pursuant to Internal Revenue Service rules which may differ from the
amounts reflected in this column.
(4) Consists
of non-cash compensation of $29,886, valued at the incremental cost to the
Company, for Mr. Cumming’s personal use of corporate aircraft, directors fees
from affiliates of the Company of $167,500 and contributions made by the Company
to the Deferred Compensation Plan on behalf of Mr. Cumming of
$36,750. This column also includes the annual premium on a $1,000,000
term life insurance policy paid by the Company and contributions made by the
Company to the Savings and Retirement Plan on behalf of Mr. Cumming, none of
which exceeded the greater of $25,000 or 10% of the total amount of these
benefits for Mr. Cumming.
(5) The
calculation of the incremental cost to the Company for personal use of company
aircraft consists of the incremental costs incurred as a result of personal
flight activity, including fuel expense, repairs and maintenance, flight crew
meals and lodging. Incremental costs do not include depreciation,
hanger rent, insurance, flight crew salaries and benefits and any other expense
that would have been incurred regardless of whether there was any personal use
of Company aircraft.
(6) Consists
of non-cash compensation, valued at the incremental cost to the Company, for Mr.
Steinberg’s personal use of corporate aircraft of $212,727, net of a $250,000
voluntary reimbursement to the Company made by Mr. Steinberg toward corporate
aircraft usage, directors fees from affiliates of the Company of $166,500 and
contributions made by the Company to the Deferred Compensation Plan on behalf of
Mr. Steinberg of $34,300. This column also includes the annual
premium on a $1,000,000 term life insurance policy paid by the Company and
contributions made by the Company to the Savings and Retirement Plan on behalf
of Mr. Steinberg, none of which exceeded the greater of $25,000 or 10% of the
total amount of these benefits for Mr. Steinberg.
(7) Consists
of directors fees from affiliates of the Company of $81,197 ($25,697 of which
was received in Canadian dollars and converted into U.S. dollars using the
closing exchange rates on the date each payment was received) and contributions
made by the Company to the Deferred Compensation Plan on behalf of Mr. Mara of
$36,750. This column also includes Mr. Mara’s personal use of a
Company car and related expenses including parking, and contributions made by
the Company to the Savings and Retirement Plan on behalf of Mr. Mara, none of
which exceeded the greater of $25,000 or 10% of the total amount of these
benefits for Mr. Mara.
(8) This
column includes directors fees from affiliates of the Company and contributions
made by the Company to the Savings and Retirement Plan and the Deferred
Compensation Plan on behalf of Mr. Orlando, none of which exceeded the greater
of $25,000 or 10% of the total amount of these benefits for Mr.
Orlando.
(9) Consists
of directors fees from affiliates of the Company of $62,000. This
column also includes Mr. Wheeler’s personal use of a Company car and related
expenses and contributions made by the Company to the Savings and Retirement
Plan and the Deferred Compensation Plan on behalf of Mr. Wheeler, none of which
exceeded the greater of $25,000 or 10% of the total amount of these benefits for
Mr. Wheeler.
Outstanding
Equity Awards at Fiscal Year-End
This
table provides information on the holdings of option awards or warrants by the
Named Executive Officers at December 31, 2009. This table includes
exercisable and unexercisable options or warrants. The options vest
and become exercisable in five equal annual installments, commencing
approximately one year from the grant date. For Mr. Cumming and Mr.
Steinberg, warrants commenced vesting on May 16, 2006, the date of shareholder
approval, and vest in five equal annual installments thereafter on March 6th of
each subsequent year. For additional information about the option and
warrant awards, see the description of our Option Plan and Warrant Plan in the
CD&A.
| |
|
Option
Awards |
|
|
|
|
|
|
Number
of Securities Underlying Unexercised Options
|
|
|
|
|
|
|
|
|
|
|
Exercisable
|
Unexercisable
|
|
|
|
|
|
|
Ian
M. Cumming,
Chairman
of the Board
|
|
3/6/06(1)
|
|
1,600,000
|
|
400,000
|
|
|
$28.515
|
|
3/5/11
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
S. Steinberg,
President
|
|
3/6/06(1)
|
|
1,600,000
|
|
400,000
|
|
|
$28.515
|
|
3/5/11
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Thomas
E. Mara,
Executive
Vice President
|
|
12/9/04(2)
12/11/06(3)
10/22/08(4)
|
|
24,000
20,000
20,000
|
|
24,000
60,000
80,000
|
|
|
$21.753
$27.340
$27.880
|
|
1/2/11
12/31/12
10/22/14
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Joseph
A. Orlando,
Vice
President and Chief Financial Officer
|
|
12/9/04(2)
12/11/06(3)
10/22/08(4)
|
|
18,000
20,000
20,000
|
|
18,000
60,000
80,000
|
|
|
$21.753
$27.340
$27.880
|
|
1/2/11
12/31/12
10/22/14
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
Justin
R. Wheeler,
Vice
President
|
|
12/9/04(2)
12/11/06(3)
10/22/08(4)
|
|
12,242
30,000
20,000
|
|
7,500
45,000
80,000
|
|
|
$21.753
$27.340
$27.880
|
|
1/2/11
12/31/12
10/22/14
|
|
______________________
(1) Vesting
of these warrants began on May 16, 2006, the date of shareholder approval, and
thereafter on March 6th of each of 2007, 2008, 2009 and 2010.
(2) Vesting
of these options began on January 2, 2006.
(3) Vesting
of these options began on January 1, 2008.
(4) Vesting
of these options began on October 22, 2009.
Pension
Benefits Under the Company’s Frozen Defined Benefit Pension Plan
The
following table shows the benefits that the Named Executive Officers are
entitled to receive under our Frozen Defined Benefit Pension Plan. As
described in the CD&A, the Leucadia National Corporation Retirement Plan, as
amended and restated effective January 1, 1997, was frozen effective December
31, 1998. We and certain of our affiliated companies maintain this
frozen retirement plan for certain of our employees and employees of those
affiliated companies. No benefit accruals under or new participants in the
retirement plan have been allowed after December 31, 1998. All
participants are 100% vested in their frozen accrued
benefit. Participants were not required to make any contributions
under the retirement plan.
|
|
|
Number
of Years of Credited Service
|
|
Annual
Accumulated Retirement Benefit (1)
|
|
Present
Value of Accumulated Retirement Benefit (2)
|
|
Payments
During Last Fiscal Year
|
|
Ian
M. Cumming
|
|
10
|
|
$25,394
|
|
$426,000
|
|
–
|
|
Joseph
S. Steinberg
|
|
10
|
|
$25,394
|
|
$337,000
|
|
–
|
|
Thomas
E. Mara
|
|
10
|
|
$25,394
|
|
$297,000
|
|
–
|
|
Joseph
A. Orlando
|
|
12
|
|
$27,451
|
|
$198,000
|
|
–
|
|
Justin
R. Wheeler
|
|
0
|
|
–
|
|
–
|
|
–
|
(1) These
amounts are determined under the retirement plan formula, which considers cash
compensation and total years of service for the named individual. The
amounts are expressed as life annuities payable beginning at age
65. Since the plan was frozen in 1998, subsequent changes in cash
compensation and additional years of service have no effect on the annual
accumulated retirement benefit reflected above, which will not
change.
(2) The
present value of accumulated retirement benefits was calculated using a 4.35%
interest rate; 2009 PPA separate static annuitant and nonannuitant mortality
tables; the participant’s age as of his nearest birthday to December 31, 2009;
and annuity payments assumed to commence at normal retirement age (65) or
current age, if older.
For
information concerning a retirement benefits agreement for Mr. Cumming, see
“Employment Agreements and Elements of Post-Termination Compensation and
Benefits” in the CD&A.
Benefits
Under The Company’s Non-Qualified Deferred Compensation Retirement
Plan
The
following table shows the benefits that the Named Executive Officers are
entitled to receive under our Non-Qualified Deferred Compensation Retirement
Plan. As described in the CD&A, the Non-Qualified Deferred
Compensation Retirement Plan was established January 1, 2009. The
table reflects the contributions made by the Company and earnings during
2009. The plan does not provide for employee
contributions. All Named Executive Officers are fully vested in their
benefits. Earnings are based on the directed investment options of
the Named Executive Officers.
|
|
|
Registrant
Contributions
in Last
Fiscal
Year(1)
|
|
Aggregate
Earnings in Last Fiscal Year(2)
|
|
Aggregate
Withdrawals/
Distributions
|
|
Aggregate
Balance at Last Fiscal Year End
|
|
Ian
M. Cumming,
Chairman
of the Board
|
|
$36,750
|
|
$12,564
|
|
$ -
|
|
$49,314
|
| |
|
|
|
|
|
|
|
|
|
Joseph
S. Steinberg,
President
|
|
$34,300
|
|
$10,648
|
|
$ -
|
|
$44,948
|
| |
|
|
|
|
|
|
|
|
|
Thomas
E. Mara,
Executive
Vice President
|
|
$36,750
|
|
$
4,325
|
|
$ -
|
|
$41,075
|
| |
|
|
|
|
|
|
|
|
|
Joseph
A. Orlando,
Vice
President and Chief Financial Officer
|
|
$22,050
|
|
$
8,811
|
|
$ -
|
|
$30,861
|
| |
|
|
|
|
|
|
|
|
|
Justin
R. Wheeler,
Vice
President
|
|
$
7,350
|
|
$
1,274
|
|
$ -
|
|
$
8,624
|
_________________
(1) All
amounts are included in the Summary Compensation Table in All Other
Compensation.
(2)
Earnings are based upon the investment direction of the Named Executive
Officer.
Directors
who are also our employees do not receive remuneration for services as a member
of the Board of Directors or any committee of the Board of
Directors.
The
annual retainer paid to the Company’s non-employee directors is $75,000 and
meeting fees are $750 ($850 if a committee chairman). Additionally,
members of the Audit Committee receive $10,000 annually and the Chairman of the
Audit Committee receives an annual fee of $14,000.
Under the
terms of the Option Plan, each non-employee director will automatically be
granted options to purchase 2,000 common shares on the date on which the annual
meeting of our shareholders will be held each year. The purchase price of the
common shares covered by the options will be the fair market value of the common
shares on the date of grant. These options become exercisable at the rate of 25%
per year commencing one year after the date of grant. As a result of this
provision, options to purchase 2,000 common shares at an exercise price of
$24.44 per common share were awarded to each of Messrs. Dougan, Hirschfield,
Jordan, Keil, Nichols and Sorkin on May 11, 2009.
The
Company reimburses directors for reasonable travel expenses incurred in
attending board and committee meetings.
This
table sets forth compensation paid to the non-employee directors during 2009
(including Lawrence D. Glaubinger who did not stand for reelection at the 2009
Annual Meeting).
| |
|
|
Fees
Earned or
Paid
in Cash (1)
|
|
|
|
|
|
| |
Paul
M. Dougan
|
|
$ 94,750
|
|
$17,606
|
|
$
112,356
|
|
| |
Lawrence
Glaubinger
|
|
$ 28,750
|
|
$
-
|
|
$ 28,750
|
|
| |
Alan
J. Hirschfield
|
|
$ 94,000
|
|
$17,606
|
|
$
111,606
|
|
| |
James
E. Jordan
|
|
$ 94,850
|
|
$17,606
|
|
$
112,456
|
|
| |
Jeffrey
C. Keil
|
|
$102,500
|
|
$17,606
|
|
$
120,106
|
|
| |
Jesse
Clyde Nichols, III
|
|
$ 96,550
|
|
$17,606
|
|
$
114,156
|
|
| |
Michael
Sorkin
|
|
$ 53,000
|
|
$17,606
|
|
$ 70,606
|
|
_________________________
(1) This
column reports the amount of cash compensation earned in 2009 for Board and
committee service.
(2) This
column represents the grant date fair value of stock options granted to each
director in 2009 determined in accordance with GAAP. For
information on the valuation assumptions with respect to the grants made in
2009, refer to Note 14 to our consolidated financial statements contained in our
Form 10-K for the fiscal year ended December 31, 2009.
(3) This
table does not include disclosure of any perquisites and other personal benefits
for any non-employee director because such amounts did not exceed $10,000 in the
aggregate per director.
Potential
Payments upon Termination of Employment
The
following information describes and quantifies (where possible) certain
compensation that would become payable under then existing agreements and plans
if the Named Executive Officer’s employment had terminated on December 31, 2009,
other than for Cause.
We have
employment agreements with Messrs. Cumming and Steinberg which require payments
under certain circumstances. As described in the CD&A, under the
employment agreements, if there is an Initiating Event and (A) either the
employment of Messrs. Cumming or Steinberg is terminated by us other than for
Cause (or pursuant to the end of the term of the employment agreement or due to
the death or disability of Messrs. Steinberg or Cumming) or (B) Messrs. Cumming
or Steinberg terminates his employment within one year of certain occurrences
each of Messrs. Cumming and Steinberg would be entitled to a severance allowance
of $4,400,000, which is equal to the remainder of their aggregate salary, as
adjusted for annual increases in the cost of living, commencing on December 31,
2009 and terminating at the close of business on June 30, 2015 (the “Severance
Period”). In determining this amount, we have assumed a consistent
annual cost of living increase of 2% (the actual annual cost of living increase
effective July 2009). The Company would also be obligated to make
annual contributions to our Savings and Retirement Plan and Deferred
Compensation Retirement Plan based on the severance allowance during the
Severance Period (aggregating $246,000 for Mr. Cumming and $244,000 for Mr.
Steinberg). Additionally, the Company would be obligated to continue
to carry at our expense term life insurance policies on the lives of Messrs.
Cumming and Steinberg in the amount of $1,000,000 each until June 30, 2015,
payable to the beneficiaries as each of Messrs. Cumming and Steinberg shall
designate. If Mr. Cumming or Mr. Steinberg were to die during the
Severance Period, the payments due under the employment agreements would
terminate at the end of the month in which death occurs.
If the
termination had resulted from the death or disability of Mr. Cumming or Mr.
Steinberg, no additional salary payments would be required under the employment
agreements. Thereafter, the Company
would
have no other obligation under the employment agreements, other than to pay any
accrued and/or vested employee benefits under the retirement plans and the
warrants.
Under the
Shareholders Agreement between the Company and Messrs. Cumming and Steinberg,
which is described in the CD&A, should the death of Messrs. Cumming and
Steinberg have occurred on December 31, 2009, the Company would have been
obligated to repurchase common shares from either of their estates in an amount
equal to the life insurance proceeds received by the Company upon their death,
not to exceed $125,000,000 for each estate. The Company currently is
the beneficiary on life insurance policies in the aggregate face amount of
$125,000,000 for Mr. Cumming and $117,000,000 for Mr. Steinberg.
Under the
2006 Senior Executive Warrant Plan, should the death of Messrs. Cumming and
Steinberg have occurred on December 31, 2009, the 400,000 common shares for each
of Messrs. Cumming and Steinberg that are not vested under the Warrant Plan
would immediately become vested; since the exercise price of the warrants
exceeded their market price at that date, the warrants would have had no
aggregate intrinsic value. The Warrant Plan does not provide for any
other circumstances for acceleration of vesting upon termination of
employment.
For
amounts payable under the Frozen Defined Benefit Pension Plan upon retirement or
death of a Named Executive Officer, see the pension benefits table above, as
well as the description of this plan in the CD&A. For a
description of the Savings and Retirement Plan, see the
CD&A. Under these plans, termination of employment does not
accelerate amounts payable.
For
amounts payable under the Deferred Compensation Retirement Plan upon the
retirement, termination, change in control, death, or disability of a Named
Executive Officer, see the table on page 28 above as well as the description of
this plan in the CD&A. For the description of the Deferred
Compensation Retirement Plan, see the CD&A. Payments will
accelerate upon a Change in Control (as defined in the plan).
For
amounts payable to Mr. Cumming under a retirement benefits agreement, see the
CD&A. Under this agreement, upon Mr. Cumming’s retirement,
payments will commence.
None of
the Senior Executive Officers is a party to an employment
agreement. However, under the terms of the Option Plan, the time
within which to exercise vested options will be extended in accordance with the
Option Plan, but not beyond the expiration date of the Option, for a period of
either three months or one year, depending on the triggering event; these
triggering events do not result in any acceleration of any unvested
Options. For the number of Options exercisable by each Senior
Executive Officer as of December 31, 2009 see the Outstanding Equity Awards at
Fiscal Year-End table.
Upon the
occurrence of an Extraordinary Event of the Company (as defined in the Option
Plan, including a change in control of the Company) all then outstanding stock
options that have not vested or become exercisable will immediately become
exercisable. Had an Extraordinary Event occurred on December 31,
2009, our Senior Executive Officers would not have received any value for their
outstanding stock options (determined by multiplying (A) the spread between the
$23.79 per common share closing price on December 31, 2009 and the per common
share exercise price for each option (which was negative) by (B) the number of
common shares covered by previously unvested options).
Indemnification
Pursuant
to contracts of insurance dated October 1, 2009, with Illinois National
Insurance Company, 175 Water Street, New York, New York 10038, U.S. Specialty
Insurance Company, 111 Town Square Place, Suite 1201 Jersey City, New Jersey
07310, Westchester Fire Insurance Company, 1325 Avenue of the Americas, 19th
Floor, New York, New York 10019, Continental Casualty Insurance Company, 40 Wall
Street, New York, New York 10005, Hartford Accident & Indemnity Company, 2
Park Ave, 5th Floor, New York, New York 10016, Allied World Assurance Company
(U.S.), Inc., 199 Water
Street,
24th Floor, New York, New York 10038 and XL Specialty Insurance Company, 100
Constitution Plaza, 17th Floor, Hartford, Connecticut 06103, we maintain a
combined $80,000,000 indemnification insurance policy covering all of our
directors and officers. The annual premium for the insurance is
approximately $2,100,000.
Section
16(a) Beneficial Ownership Reporting Compliance
Section
16(a) of the Securities Exchange Act of 1934 requires our executive officers and
directors, and persons who beneficially own more than 10% of a registered class
of our equity securities, to file reports of ownership and changes in ownership
with the SEC. Based solely upon a review of the copies of the forms
furnished to us and written representations from our executive officers,
directors and greater than 10% beneficial shareholders, we believe that during
the year ended December 31, 2009, all persons subject to the reporting
requirements of Section 16(a) filed the required reports on a timely
basis.
AUDIT
COMMITTEE REPORT
The
following is the report of our Audit Committee with respect to our audited
financial statements for the fiscal year ended December 31, 2009.
Review
with Management
The Audit
Committee reviewed and discussed our audited financial statements with
management.
Review
and Discussions with Independent Auditors
The Audit
Committee discussed the Company’s audited financial statements with management,
which has primary responsibility for the financial
statements. PricewaterhouseCoopers LLP, our independent auditors, is
responsible for expressing an opinion on the conformity of the Company’s audited
financial statements with accounting principles generally accepted in the United
States of America. The Audit Committee has discussed with
PricewaterhouseCoopers LLP the matters that are required to be discussed by the
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 3200T. The Audit Committee also received the written
disclosures and the letter from PricewaterhouseCoopers LLP required by the
applicable requirements of the Public Company Accounting Oversight Board
regarding PricewaterhouseCooper LLP’s communications with the Audit Committee
concerning independence; and has discussed with PricewaterhouseCoopers LLP their
independence. The Audit Committee also concluded that
PricewaterhouseCoopers LLP’s provision of audit and non-audit services to the
Company and its subsidiaries, as described in this Proxy Statement, is
compatible with PricewaterhouseCoopers LLP’s independence.
Conclusion
Based
upon the review and discussions referred to above, the Audit Committee
recommended to the Board of Directors that our audited consolidated financial
statements be included in our Annual Report on Form 10-K for the year ended
December 31, 2009 for filing with the SEC and selected PricewaterhouseCoopers
LLP as the independent auditor for 2010.
Submitted
by the Audit Committee of the Board of Directors
Jeffrey
C. Keil, Chairman
Paul M.
Dougan
Alan J.
Hirschfield
James E.
Jordan
Jesse
Clyde Nichols, III
The
information contained in the foregoing report shall not be deemed to be
“soliciting material” or to be “filed” with the Securities and Exchange
Commission, nor shall the information be incorporated by reference into any
future filing under the Securities Act of 1933 or the Securities Exchange Act of
1934, except to the extent that the Company specifically incorporates it by
reference in a filing.
INDEPENDENT
ACCOUNTING FIRM FEES
The Audit
Committee has adopted policies and procedures for pre-approving all audit and
non-audit work performed by our independent auditor, PricewaterhouseCoopers
LLP. Specifically, the committee has pre-approved certain specific
categories of work and an initially authorized annual amount for each
category. For additional services or services in an amount above the
initially authorized annual amount, additional authorization from the Audit
Committee is required. The Audit Committee has delegated to the
Committee chair the ability to pre-approve both general pre-approvals (where no
specific, case-by-case approval is necessary) and specific
pre-approvals. Any pre-approval decisions made by the Committee chair
under this delegated authority will be reported to the full Audit
Committee. All requests for services to be provided by
PricewaterhouseCoopers LLP that do not require specific approval by the Audit
Committee must be submitted to the Chief Financial Officer of the Company, who
determines that such services are in fact within the scope of those services
that have been pre-approved by the Audit Committee. The Chief
Financial Officer reports to the Audit Committee periodically.
The
following table sets forth the aggregate fees incurred by us for the following
periods relating to our independent accounting firm, PricewaterhouseCoopers
LLP:
| |
|
Fiscal
Year Ended
December
31,
|
|
| |
|
2009
|
|
2008
|
|
| |
Audit
Fees
|
$2,269,900
|
|
$2,835,300
|
|
| |
Audit
Related
Fees
|
153,100
|
|
223,100
|
|
| |
Tax
Fees
|
492,700
|
|
840,300
|
|
| |
All
Other
Fees
|
2,600
|
|
1,500
|
|
| |
|
$2,918,300
|
|
$3,900,200
|
|
In the
table above, in accordance with the SEC’s definitions and rules, Audit Fees are
fees paid to PricewaterhouseCoopers LLP for professional services for the audit
of the Company’s consolidated financial statements included in our Form 10-K and
review of financial statements included in our Form 10-Qs, and for services that
are normally provided by the accountants in connection with regulatory filings
or engagements. Audit Related Fees are fees for assurance and related
services that are reasonably related to the performance of the audit or review
of our financial statements and in 2009 consist of compliance with regulatory
matters and consulting with respect to technical accounting and disclosure
rules. Tax Fees are fees for tax compliance, tax advice and tax
planning. All Other Fees are fees for services not included in the
first three categories. All such services were approved by the Audit
Committee.
RATIFICATION
OF SELECTION OF INDEPENDENT AUDITORS
The
ratification of the selection of PricewaterhouseCoopers LLP as independent
auditors is being submitted to shareholders because we believe that this action
follows sound corporate practice and is in the best interests of the
shareholders. If the shareholders do not ratify the selection by the
affirmative vote of the holders of a majority of the common shares voted at the
meeting, the Audit Committee of the Board of Directors will reconsider the
selection of independent auditors, but such a vote will not be binding on the
Audit Committee. If the shareholders ratify the selection, the Audit
Committee, in its discretion, may still direct the appointment of new
independent auditors at any time during the year if they believe that this
change would be in our and our shareholders’ best interests.
The Board
of Directors recommends that the shareholders ratify the selection of
PricewaterhouseCoopers LLP, an independent registered public accounting firm, as
the independent auditors to audit our accounts and those of our subsidiaries for
2010. The Audit Committee approved the selection of
PricewaterhouseCoopers LLP as our independent auditors for
2010. PricewaterhouseCoopers LLP are currently our independent
auditors.
The Board
of Directors recommends a vote FOR this
proposal.
ANNUAL
REPORT AND COMPANY INFORMATION
A copy of
our 2009 Annual Report to Shareholders is being furnished to shareholders
concurrently herewith.
Shareholders
may request a written copy of our Audit Committee Charter, Compensation
Committee Charter, Nominating and Corporate Governance Committee Charter, our
Corporate Governance Guidelines and our Code of Business Practice, which
includes our Code of Practice, by writing to our Corporate Secretary, Laura E.
Ulbrandt, at 315 Park Avenue South, New York, New York 10010. Each of
these documents is also available on our website, www.leucadia.com.
PROPOSALS
BY SHAREHOLDERS
Proposals
that shareholders wish to include in our proxy statement and form of proxy for
presentation at our 2011 annual meeting of shareholders must be received by us
at 315 Park Avenue South, New York, New York 10010, Attention of Laura E.
Ulbrandt, Assistant Vice President and Secretary, no later than December 7,
2010.
Any
shareholder proposal must be in accordance with the rules and regulations of the
SEC. With respect to proposals submitted by a shareholder other than
for inclusion in our 2011 proxy statement and related form of proxy, timely
notice of any shareholder proposal must be received by us in accordance with our
by-laws and our rules and regulations no later than December 7,
2010. Any proxies solicited by the Board of Directors for the 2011
annual meeting may confer discretionary authority to vote on any proposals
notice of which is not timely received.
It
is important that your proxy be returned promptly, whether by mail, by the
Internet or by telephone. You may revoke the proxy at any time before
it is exercised. If you attend the meeting in person, you may
withdraw any proxy (including an Internet or telephonic proxy) and vote your own
shares. If your shares are held in a brokerage, bank, or other
institutional account, you must obtain a proxy from that entity showing that you
were the record holder as of the close of business on March 22, 2010, in order
to vote your shares at the meeting.
By Order
of the Board of Directors
Laura E.
Ulbrandt
Assistant
Vice President and Secretary