Exhibit 4.2
	 

	 
		EXECUTION COPY
	 

	 
		“THE SECURITIES EVIDENCED BY THIS
		CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
		1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED
		UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING
		SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 UNDER THE
		SECURITIES ACT OF 1933, AS AMENDED, OR THE COMPANY AT ITS OPTION RECEIVES AN
		OPINION OF COUNSEL OF THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO
		THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
		EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT
		AND UNLESS, WHERE APPLICABLE, HAS RECEIVED THE PRIOR APPROVAL OF THE CAYMAN
		ISLANDS MONETARY AUTHORITY.
	 

	 
		IN ADDITION, THE SECURITIES EVIDENCED BY
		THIS CERTIFICATE ARE SUBJECT TO CERTAIN TRANSFER RESTRICTIONS IN THE
		COMPANY’S ARTICLES OF ASSOCIATION AND PURSUANT TO A SHAREHOLDERS’
		AGREEMENT DATED AS OF AUGUST 11, 2004 AMONG THE COMPANY AND CERTAIN OF THE
		COMPANY’S SHAREHOLDERS. A COPY OF SUCH ARTICLES OF ASSOCIATION AND
		SHAREHOLDERS’ AGREEMENT WILL BE FURNISHED WITHOUT CHARGE BY THE COMPANY TO
		THE HOLDER HEREOF UPON WRITTEN REQUEST.”
	 

	 
		OWNERSHIP OF OPTIONS BY UNITED STATES
		PERSONS (AS DEFINED IN SECTION 7701(A)(30) OF THE INTERNAL REVENUE CODE OF
		1986, AS AMENDED) MAY SUBJECT SUCH PERSONS TO SIGNIFICANT ADVERSE UNITED STATES
		FEDERAL INCOME TAX CONSEQUENCES, INCLUDING ADVERSE CONSEQUENCES ARISING UNDER
		THE UNITED STATES PASSIVE FOREIGN INVESTMENT COMPANY RULES. UNITED STATES
		PERSONS THAT OWN OPTIONS ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS
		REGARDING THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ASSOCIATED WITH
		OWNERSHIP OF THE OPTIONS.
	 

	 
		GREENLIGHT CAPITAL RE, LTD.
	 

	 
		SHARE PURCHASE OPTION
	 

	 
		 
	 

	 
			
				
				  Certificate No.: W-1
				

			 	
				
				  Date: August 11, 2004
				

			 

 

	 
		FOR VALUE RECEIVED, GREENLIGHT CAPITAL RE,
		LTD., a company organized under the laws of the Cayman Islands with limited
		liability (the “Company”),
		hereby grants to First International Capital Holdings, Ltd. (“FIC”)
		(the “Option Holder”) this option certificate (this
		“Option”) to purchase, in accordance with the terms set
		forth herein, FOUR HUNDRED THOUSAND (400,000) shares of the Company’s
		Class A Ordinary Shares, initially having a par value of US$0.10 per share (the
		“Class A Ordinary
		Shares”), at a price per share
		equal to US$10.00 as adjusted from time to time pursuant to Section 2 hereof
		(the “Exercise
		Price”) but at no time shall the
		Exercise Price be less than the then current par value of any share to be
		issued pursuant hereto.
	 

	 
		This Option is issued pursuant to that
		certain letter agreement, dated as of August 5, 2002 (the “Letter Agreement”), between Greenlight Capital, Inc., the sponsor
		of the Company (“Greenlight
		Capital”) and First International
		Securities, Ltd. (“FIS”).
		Greenlight Capital assigned all of its rights, title and interests under the
		first paragraph of the section of the letter entitled “FIS’ Incentive
		Compensation” to the Company as of the date hereof. FIS assigned all of
		its rights, title and interest
	 

	 
		 
	 

	 
		1
	 

	 
		 
	 


	 
 

	 
		under the Letter Agreement to FIC on June
		30, 2003. Each capitalized term used in this Option but not otherwise defined
		herein has the meaning given to such term in the Letter Agreement.
	 

	 
		This Option is subject to the following
		provisions:
	 

	 
		Section 1. Option Terms.
	 

	 
		(a) This Option is for
		the purchase of FOUR HUNDRED THOUSAND (400,000) Class A Ordinary Shares at the
		Exercise Price, as such price may be adjusted from time to time under the terms
		hereof.
	 

	 
		(b) This Option shall
		expire at 5:00 p.m. Cayman Islands time, on the tenth anniversary of the date
		that this Option is exercisable (the “Expiration
		Date”).
	 

	 
		Section 2. Anti-dilution Provisions. In order to prevent dilution of the purchase rights
		granted under Section 1 hereof, the Exercise Price shall be subject to
		adjustment from time to time pursuant to this Section 2. 
	 

	 
		(a) Effect on Exercise Price of Certain
		Events. For purposes of determining the
		adjusted Exercise Price, the following shall be applicable:
	 

	 
		(i) Subdivision or Combination of Ordinary
		Shares. If the Company, at any time
		while this Option is outstanding (a) shall pay a stock or bonus share
		dividend on its Class A Ordinary Shares or Class B Ordinary Shares, par value
		$0.10 per share (the “Class B
		Ordinary Shares” and, collectively
		with the Class A Ordinary Shares, the “Ordinary Shares”), (b) subdivide the class of Ordinary Shares into
		a larger number of shares or (c) combine the Ordinary Shares into a smaller
		number of shares then (i) the Exercise Price thereafter shall be determined by
		multiplying the Exercise Price by a fraction the numerator of which shall be
		the number of Ordinary Shares (excluding treasury shares, if any) issued and
		outstanding before such event and the denominator of which shall be the number
		of Ordinary Shares issued and outstanding after such event and (ii) the number
		of Ordinary Shares issuable upon exercise of the Option shall be
		multiplied by a fraction, the numerator of which shall be the number of
		Ordinary Shares (excluding treasury shares, if any) issued and outstanding
		after such event and the denominator of which shall be the number of Ordinary
		Shares (excluding treasury shares, if any) issued and outstanding before such
		event. Any adjustment made pursuant to this Section 2(a)(1) shall become
		effective immediately after the record date for the determination of
		shareholders entitled to receive such dividend or distribution and shall become
		effective immediately after the effective date in the case of a subdivision or
		combination.
	 

	 
		(ii) Amalgamation, Reorganization, Reclassification,
		Consolidation, Merger or Sale. Any
		amalgamation, recapitalization, reorganization, reclassification,
		consolidation, scheme, arrangement, merger of the Company or sale of all or
		substantially all of the Company’s assets or other transaction, in each
		case which is effected in such a manner that the holders of Ordinary Shares are
		entitled to receive (either directly or upon subsequent liquidation) shares,
		securities or assets with respect to or in exchange for Ordinary Shares is
		referred to herein as an “Organic
		Change.” Prior to the consummation
		of any Organic Change, the Company shall make appropriate provisions to insure
		that the Option Holder shall thereafter have the right to acquire and receive,
		in lieu of or in addition to (as the case may be) Class A Ordinary Shares
		immediately theretofore acquirable and receivable upon the exercise of this
		Option, such shares, securities or assets as such Option Holder would have
		received in connection with such Organic Change if such Option Holder had
		exercised this Option immediately prior to such Organic Change. In each such
		Organic Change, the Company shall also make appropriate provisions to insure
		that the provisions of this Section 2 shall thereafter be applicable to this
		Option (including, in the
	 

	 
		 
	 

	 
		2
	 

	 
		 
	 


	 
 

	 
		case of any such amalgamation,
		consolidation, merger or sale in which the successor entity or purchasing
		entity is other than the Company) and that there is an immediate adjustment of
		the Exercise Price to the value for the Class A Ordinary Shares reflected by
		the terms of such amalgamation, consolidation, merger or sale, and a
		corresponding immediate adjustment in the number of Class A Ordinary Shares
		acquirable and receivable upon exercise of this Option, if the value so
		reflected is less than the Exercise Price in effect immediately prior to such
		amalgamation, consolidation, merger or sale. Prior to the consummation of any
		such consolidation, merger or sale, the Company shall use its reasonable
		efforts to cause the successor entity (if other than the Company resulting from
		amalgamation, consolidation, merger or sale) or the entity purchasing such
		assets to assume, by written instrument, the obligation to deliver to each such
		Option Holder such shares, securities or assets as, in accordance with the
		foregoing provisions, the Option Holder may be entitled to acquire; provided,
		however that any such assumption shall not relieve the Company of its
		obligations hereunder.
	 

	 
		(b) Notices.
		Immediately upon any adjustment of the Exercise Price, the Company shall give,
		or cause to be given, written notice thereof to the Option Holder, setting
		forth in reasonable detail and certifying the calculation of such adjustment.
		The Company shall give, or cause to be given, written notice to the Option
		Holder at least five (5) business days prior to the date on which the Company
		closes its books or takes a record (i) with respect to any dividend or
		distribution upon Ordinary Shares, (ii) with respect to any pro rata
		subscription offer to holders of Ordinary Shares or (iii) for determining
		rights to vote with respect to any Organic Change, dissolution or liquidation.
		The Company shall also give, or cause to be given, written notice to the Option
		Holder at least five (5) business days prior to the date on which any Organic
		Change shall take place
	 

	 
		Section 3. Exercise of Option. 
	 

	 
		(a) Exercise Procedure: The Option Holder may exercise any portion of this
		Option at any time and from time to time, commencing after the date hereof
		until 5:00 p.m. Cayman Islands time, on the Expiration Date by surrendering at
		the registered office of the Company this Option and a completed Exercise
		Agreement (substantially in the form of Exhibit A
		attached hereto) and by paying the Exercise Price in one of the following
		manners:
	 

	 
		(i) Cash Exercise.
		The Option Holder shall deliver immediately available funds or a cashiers check
		payable to the Company; or
	 

	 
		(ii) Cashless Exercise. After the date of issuance of this Option, if all of
		the Class A Ordinary Shares underlying this Option (the “Option Shares”) are registered pursuant to an effective
		registration statement and the provisions of the Companies Law (2003 Revision)
		as from time to time amended or replaced (the “Companies Law”) may be satisfied by the Company, the Option
		Holder shall have the right to surrender this Option to the Company together
		with a notice of cashless exercise, in which event the Company shall issue to
		the Option Holder the number of Option Shares determined as follows:
	 

	 
		X = Y (A-B)/A
	 

	 
		Where:
	 

	 
		X = the number of Option Shares to be issued
		to the Option Holder
	 

	 
		Y = the number of Option Shares with respect
		to which this Option is being exercised
	 

	 
		 
	 

	 
		3
	 

	 
		 
	 


	 
 

	 
		A = the average of the per share Market
		Price of the Ordinary Shares for the five (5) trading days immediately prior to
		(but not including) the date of exercise (but not less than the then par value
		of the Ordinary Shares)
	 

	 
		B = the Exercise Price
	 

	 
		For purposes of Rule 144 promulgated under
		the United States Securities Act of 1933, as amended, it is intended,
		understood and acknowledged that the Option Shares issued in a cashless
		exercise transaction shall be deemed to have been acquired and paid the full
		purchase price therefor by the Option Holder, and the holding period for the
		Option Shares shall be deemed to have been commenced on the issue date to the
		extent permitted by Rule 144. The consideration to the Company for the issue of
		the Option Shares shall be the surrender of the Option and the rights of the
		Option Holder hereunder.
	 

	 
		For purposes hereof, “Market
		Price” means on any particular date (i) the closing bid price per Class A
		Ordinary Share on such date on the national securities exchange or automated
		quotation system on which the Class A Ordinary Shares are then listed or if
		there is no such price on such date, then the closing bid price on such
		exchange or quotation system on the date nearest preceding such date, or (ii)
		if the Class A Ordinary Shares are not listed then on a national securities
		exchange or automated quotation system, the closing bid price for each Ordinary
		Share in the over-the-counter market, as reported by the National Quotation
		Bureau Incorporated (or similar organization or agency succeeding to its
		functions of reporting prices) at the close of business on such date.
	 

	 
		(b) Certificates for the Class A Ordinary
		Shares acquired through exercise of this Option shall be delivered by the
		Company to the Option Holder within five (5) business days after (i) notice of
		request for such certificates by the Option Holder, (ii) receipt by the Company
		of the items required by Section 3(a) for the respective method or methods of
		exercise, and (iii) where applicable, compliance with any required approval
		under the Companies Law (and the Company shall use reasonable efforts to assist
		in obtaining any required approval of the Cayman Islands Monetary Authority as
		promptly as practicable). Upon a partial exercise of this Option, unless this
		Option has expired or all of the purchase rights represented hereby have been
		exercised, the Company shall prepare a new Option, substantially identical
		hereto, representing the rights formerly represented by this Option which have
		not expired or been exercised and shall, within such five-day period, deliver
		such new Option to such Option Holder.
	 

	 
		(c) The Class A Ordinary Shares issuable
		upon exercise of this Option shall be deemed to have been issued to the Option
		Holder on the date by which the Company receives the completed Exercise
		Agreement and payment of the Exercise Price, if any, and the register of
		members of the Company has recorded such issue of shares and, where applicable,
		has received any required approval under the Companies Law and the Option
		Holder shall be deemed for all purposes to have become the record holder of
		such Class A Ordinary Shares on such date.
	 

	 
		(d) The issuance of certificates for the
		Class A Ordinary Shares issuable upon exercise of this Option shall be made
		without charge to the Option Holder for any issuance tax in respect thereof or
		other cost incurred by the Company in connection with such exercise and the
		related issuance of the Class A Ordinary Shares.
	 

	 
		(e) The Company shall at all times reserve
		and keep available authorized but unissued Class A Ordinary Shares, solely for
		the purpose of issuance upon exercise of this Option, such number of Class A
		Ordinary Shares as are issuable upon exercise of this Option. All Class A
		Ordinary
	 

	 
		 
	 

	 
		4
	 

	 
		 
	 


	 
 

	 
		Shares shall, when issued, be duly and
		validly issued, fully paid and nonassessable (meaning that no further sums are
		required to be paid by the holders thereof in connection with the issue
		thereof) and free from all taxes, liens and charges. The Company shall take
		such actions as may be necessary to assure that the Class A Ordinary Shares may
		be so issued without violation of any applicable law or governmental regulation
		or any requirements of any domestic securities exchange upon which their shares
		may be listed (except for official notice of issuance which shall be
		-immediately delivered by the Company upon each such issuance).
	 

	 
		Section 4. Option Not Transferable.
	 

	 
		(a) Except as permitted by Section 4(b),
		this Option is not transferable by the Option Holder.
	 

	 
		(b) The restrictions set forth in 4(a) above
		shall not apply to any transfer by the holder of this Option to any Person
		approved by the Board of Directors of the Company in its sole and reasonable
		discretion; provided that prior to such transfer, each proposed transferee (i)
		delivers a written notice to the Company, which notice shall disclose in
		reasonable detail the identity of such transferee, (ii) delivers an opinion of
		counsel which (to the Company’s reasonable satisfaction) is knowledgeable
		in securities and tax matters and that such transfer would not likely cause
		adverse tax, regulatory or legal consequences to the Company, any of its
		subsidiaries or any of its shareholders and (iii) executes that certain
		Shareholders’ Agreement dated as of August 11, 2004 by and among the
		Company and each of the other signatories to the Shareholders’ Agreement.
		“Person” means an individual, a partnership, a company, a
		corporation, a limited liability company, an association, a joint stock
		company, a trust, a joint venture, an unincorporated organization or a
		governmental or quasi-governmental entity or any department, agency or
		political subdivision thereof.
	 

	 
		Section 5. Option Exchangeable for Different
		Denominations. This Option is
		exchangeable, upon the surrender hereof by the Option Holder at the registered
		office of the Company, for new options in different denominations,
		substantially identical hereto, representing in the aggregate the rights
		formerly represented by this Option, and each of such new options shall
		represent such portion of such rights as is designated by the Option Holder at
		the time of such surrender. The date the Company initially issues this Option
		shall be the date of issuance of such new options regardless of the number of
		times new certificates representing the unexpired and unexercised rights
		formerly represented by this Option shall be issued.
	 

	 
		Section 6. Replacement; Taxes. Upon receipt of evidence reasonably satisfactory to
		the Company (an affidavit of the Option Holder shall be satisfactory) of the
		ownership and the loss, theft, destruction or mutilation of any certificate
		evidencing this Option, and in the case of any such loss, theft or destruction,
		upon receipt of indemnity reasonably satisfactory to the Company (provided that
		if such Option Holder is a financial institution or other institutional
		investor its own agreement shall be satisfactory), or, in the case of any such
		mutilation upon surrender of such certificate, the Company shall (at its
		expense) execute and deliver in lieu of such certificate a new certificate,
		substantially identical hereto, representing the rights represented by such
		lost, stolen, destroyed or mutilated certificate and dated the date of such
		lost, stolen, destroyed or mutilated certificate. The Company shall pay all
		taxes (other than securities transfer taxes) and all other expenses and charges
		payable in connection with the preparation, execution, and delivery of options
		pursuant to Sections 4, 5 and 6.
	 

	 
		Section 7. Successors and Assigns. This instrument is intended to bind and inure to the
		benefit of and be enforceable by the Option Holder and its respective heirs,
		executors, administrators and successors.
	 

	 
		 
	 

	 
		5
	 

	 
		 
	 


	 
 

	 
		Section 8. Amendment and Waiver. Except as otherwise provided herein, the provisions of
		this Option may be amended only if the Company has obtained the written consent
		of the Option Holder, which consent shall not be unreasonably withheld.
	 

	 
		Section 9. Descriptive Headings. The descriptive headings of this Option are inserted
		for convenience only and do not constitute a part of this Option.
	 

	 
		Section 10. Governing Law.
		This Option shall be governed by and construed and enforced in accordance with
		the laws of the Cayman Islands. Each party, for the benefit of the other,
		hereby irrevocably submits to the nonexclusive jurisdiction of the courts of
		the Cayman Islands for the adjudication of any dispute hereunder or in
		connection herewith or with any transaction contemplated hereby or discussed
		herein, and hereby irrevocably waives, and agrees not to assert in any suit,
		action or proceeding, any claim that it is not personally subject to the
		jurisdiction of any such court, that such suit, action or proceeding is
		improper. Each party hereby irrevocably waives personal service of process and
		consents to process being served in any such suit, action or proceeding by
		mailing a copy thereof to such party at the address for such notices to it
		under this Option and agrees that such service shall constitute good and
		sufficient service of process and notice thereof. Nothing contained herein
		shall be deemed to limit in any way any right to serve process in any manner
		permitted by law.
	 

	 
		Section 11. Complete Agreement; Severability. Except as otherwise expressly set forth herein, this
		Option and any other agreement or instrument executed by the parties and
		contemplated by the Letter Agreement embody the complete agreement and
		understanding among the parties hereto with respect to the subject matter
		hereof and supersede and preempt any prior understandings, agreements or
		representations by or among the parties, written or oral, which may have
		related to the subject matter hereof in any way. In case any provision of this
		Option shall be invalid, illegal or unenforceable, such invalidity, illegality,
		or unenforceability shall not in any way affect or impair any other provision
		of this Option.
	 

	 
		Section 12. Notices. All
		notices and other communications provided for herein shall be in writing and
		shall be deemed to have been duly given if delivered personally or sent by
		registered or certified mail, return receipt requested, postage prepaid:

	 

	 
		 
	 

	 
			
				
				  If to the Company:
				

			 	
				
				   
				

			 	
				
				  Greenlight Capital Re,
				  Ltd.
 HSBC Financial Services (Cayman)
				  Limited
 2nd Floor, Strathvale House, 90
				  North Church Street
 P.O. Box
				  1109GT
 Grand Cayman, Cayman
				  Islands
 Attn: Tom Clark
				

			 
	
				
				  In each case with a copy to:
				

			 	
				
				   
				

			 	
				
				  Akin Gump Strauss Hauer & Feld
				  LLP
 590 Madison Avenue

				  New York, New York 10022

				  Attention: Kerry E. Berchem, Esq.
				

			 
	
				
				  If to the Purchaser:
				

			 	
				
				   
				

			 	
				
				  First International Capital
				  Holdings, Ltd.
 c/o Caribbean Corporate
				  Services Ltd.
 Omar Hodge
				  Building
 Road Town

				  Tortola, British Virgin Islands

				  Attention: Joseph Taussig
				

			 

 

	 
		 
	 

	 
		6
	 

	 
		 
	 


	 
 

	 
		All such notices and communications shall be
		deemed to have been duly given when delivered by hand, if personally delivered;
		five business days after the date of deposit in the Cayman Islands or United
		States of America mail, if mailed by first-class certified air mail; when
		receipt is acknowledged by the recipient facsimile machine, if sent by
		facsimile; and one business day after being delivered via a next-day air
		courier.
	 

	 
		 
	 

	 
		7
	 

	 
		 
	 


	 
 

	 
		IN WITNESS
		WHEREOF, the Company has caused this Option to be executed on a deed the date
		first written above.
	 

	 
		 
	 

	 
			
				
				   
				

			 	
				
				   
				

			 	
				
				  GREENLIGHT CAPITAL RE, LTD.
				

			 
	
				
				   
				

			 	
				
				

			 	
				
				   
				

			 	
				
				  By: 
				

			 	
				
				  
 /s/ David Einhorn
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Name: David Einhorn
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				  Title: Director
				

			 

 

	 
		 
	 

	 
			
				
				  Accepted and Agreed to:

				  As of August 27, 2004
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  FIRST INTERNATIONAL CAPITAL
				  HOLDINGS, LTD.
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				  By: 
				

			 	
				
				  
 /s/ Joseph F. Taussig
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				

			 
	
				
				   
				

			 	
				
				  Name: Joseph F. Taussig
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 
	
				
				   
				

			 	
				
				  Title: President
				

			 	
				
				   
				

			 	
				
				   
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		8
	 

	 
		 
	 


	 
 

	 
		EXHIBIT A
	 

	 
		EXERCISE AGREEMENT
	 

	 
			
				
				  To:
				

			 	
				
				  GREENLIGHT CAPITAL RE,
				  LTD.
				

			 

 

	 
		1.  The undersigned hereby: (1) irrevocably elects to
		subscribe for and offers to purchase Class A Ordinary Shares of Greenlight
		Capital Re, Ltd., pursuant to Option No. W-1 heretofore issued to
		______________ on __________, 2004; (2) encloses a payment of $ _________ for
		these shares at a price of $ ______ per share (as adjusted pursuant to the
		provisions of the Option); and (3) requests that a certificate for the shares
		be issued in the name of the undersigned and delivered to the undersigned at
		the address specified below.
	 

	 
		2.  The undersigned hereby: (1) irrevocably elects to
		exchange Option(s) to purchase _______ Class A Ordinary Shares of Greenlight
		Capital Re, Ltd., pursuant to Option No. W-1 heretofore issued to ____________
		on ________, 2004; (2) encloses Option(s) as a payment of $___________ for
		these shares at a price of $____ per share (as adjusted pursuant to the
		provisions of the Option); and (3) requests that a certificate for the shares
		be issued in the name of the undersigned and delivered to the undersigned at
		the address specified below.
	 

	 
		 
	 

	 
			
				
				  
 Dated:
				

			 	
				
				   
				

			 	
				
				  Signature 
				

			 	
				
				

			 
	
				
				   
				

			 	
				
				   
				

			 	
				
				  Address
				

			 	
				
				   
				

			 

 

	 
		 
	 

	 
		9