[BEAR STEARNS LOGO OMITTED]
BEAR, STEARNS & CO. INC.
383 Madison Avenue
New York, NY 10179
Tel (212) 272-2000
www.bearstearns.com
VARIABLE EQUITY FORWARD ISSUANCE TRANSACTION
Date:
December 15, 2005
To:
Scottish Re Group Limited
Crown House, Third Floor
4 Par-la-Ville Road
Hamilton, Bermuda HM 08
Attention:
Dean E. Miller
Facsimile:
(441) 295-7576
Telephone:
(441) 298-4395
From:
Bear Stearns Derivatives Documentation
Facsimile:
(212) 272-9857
Telephone:
(212) 272-2711
Ref. Number: NY42771
--------------------------------------------------------------------------------
Dear Sir or Madam:
The purpose of this communication (this "CONFIRMATION") is to
confirm the terms
and conditions of the transaction (the "TRANSACTION") entered into
between Bear,
Stearns International Limited ("PARTY A") and Scottish Re Group
Limited ("PARTY
B") on the Trade Date specified below. This Confirmation
constitutes a
"Confirmation" as referred to in the Agreement specified below.
This
Confirmation is sent on behalf of both Bear, Stearns & Co. Inc.
and Bear,
Stearns International Limited.
This Confirmation evidences a complete and binding agreement
between Party A and
Party B as to the terms of the Transaction to which this
Confirmation relates.
This Confirmation shall supplement, form a part of, and be subject
to an
agreement in the form of the 1992 ISDA Master Agreement
(Multicurrency-Cross
Border) (the "AGREEMENT") as if we had executed an agreement in
such form (but
without any Schedule) on the Trade Date of this Transaction. In the
event of any
inconsistency between the provisions of that Agreement, and this
Confirmation,
this Confirmation will prevail for the purpose of this Transaction.
The definitions and provisions contained in the 2002 ISDA Equity
Derivatives
Definitions (the "EQUITY DEFINITIONS") and the 2000 ISDA
Definitions (the "SWAP
DEFINITIONS", and together with the Equity Definitions, the
"DEFINITIONS"), in
each case as published by the International Swaps and Derivatives
Association,
Inc. ("ISDA"), are incorporated into this Confirmation. References
herein to
"Transaction" shall be deemed references to "Swap Transaction" for
purposes of
the Swap Definitions. In the event of any inconsistency between the
Equity
Definitions and the Swap Definitions, the Equity Definitions will
govern. In the
event of any inconsistency between either set of Definitions and
this
Confirmation, this Confirmation will govern.
Party A and Party B each represents that entering into the
Transaction is within
its capacity, is duly authorized and does not violate any laws of
its
jurisdiction of organization or residence or the terms of
Reference Number: NY42771
Scottish Re Group Limited
December 15, 2005
any agreement to which it is a party. Party A and Party B each
represents that
(a) it is not relying on the other party in connection with its
decision to
enter into this Transaction, and neither party is acting as an
advisor to or
fiduciary of the other party in connection with this Transaction
regardless of
whether the other party provides it with market information or its
views; (b) it
understands the risks of the Transaction and any legal, regulatory,
tax,
accounting and economic consequences resulting therefrom; and (c)
it has
determined based upon its own judgment and upon any advice received
from its own
professional advisors as it has deemed necessary to consult that
entering into
the Transaction is appropriate for such party in light of its
financial
capabilities and objectives. Party A and Party B each represents
that upon due
execution and delivery of this Confirmation, it will constitute a
legally valid
and binding obligation, enforceable against it in accordance with
its terms,
subject to applicable principles of bankruptcy and creditors'
rights generally
and to equitable principles of general application.
The terms of the Transaction to which this Confirmation relates are
as follows:
Agent:
Counterparty acknowledges that Bear, Stearns & Co. Inc.
("BS&C") has acted as agent for Counterparty solely for the
purposes of arranging this Transaction with its Affiliate,
Bear Stearns and has acted as agent for Bear Stearns (without
accepting any liability for Bear Stearns's performance or
non-performance of Bear Stearns's obligations under the
Transaction) in connection with the execution of this
Confirmation on Bear Stearns's behalf. This Confirmation is
being provided by BS&C in such capacity. Upon your written
request, BS&C will furnish you with the time at which this
Transaction was entered into. Bear Stearns is not a member of
the Securities Investor Protection Corporation.
Trade Date:
December 15, 2005
Effective Date:
December 21, 2005
Buyer:
Party A
Seller:
Party B
Shares:
Ordinary shares of Scottish Re Group Limited (the "ISSUER")
Ticker Symbol: ("SCT")
Number of Shares:
1,644,737 (such Number of Shares, absent adjustments made
pursuant to "Share Adjustments" and "Extraordinary Events"
hereunder, being the maximum number of Shares deliverable
under this Transaction); provided that if Party A determines
at any time that it (or its affiliates) will be unable to
complete the public sale of Shares pursuant to "Registration"
below in compliance with all applicable securities laws and
regulations in an amount equal to the Number of Shares for
any reason whatsoever (including, without limitation, the
unavailability of an effective Registration Statement (as
defined below) or legally sufficient Prospectus (as
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Scottish Re Group Limited
December 15, 2005
defined below) required for such sales), Party A shall have
the right to reduce the Number of Shares (and correspondingly
the Forward Price) to an amount elected by it in its sole
discretion that is no more than the number of Shares that
Party A has publicly sold prior to such time under the
Registration Statement, and the Calculation Agent shall make
adjustments to this Transaction to account for such lesser
Number of Shares so selected by Party A. If Party A makes an
adjustment pursuant to this provision, Party A shall pay to
Party B within 5 Currency Business Days an amount equal to a)
the product of (i) the Gross Spread multiplied by (ii) the
difference between (A) one minus (B) the quotient of (x) the
Number of Shares after making such an adjustment divided by
(y) the Number of Shares prior to making such an adjustment
plus (b) the product of (i) the Premium multiplied by (ii)
the difference between (A) one minus (B) the quotient of (x)
the Number of Shares after making such an adjustment divided
by (y) the Number of Shares prior to making such an
adjustment minus (c) the amount of any loss incurred by Party
A due to the inability to hedge or in unwinding or
re-establishing hedges to this Transaction as a result of the
adjustment in Number of Shares, including benefit of the
bargain.
Forward Price:
USD 37,500,000
Fees:
On the third Currency Business Day following the Trade Date,
Party B shall pay to Party A an amount equal to the sum of
(i) the Premium and (ii) the Gross Spread by wire transfer of
immediately available funds to an account specified by Party
A
Premium:
USD 1,578,947.52 (USD 0.96 per Share)
Gross Spread:
4.75% multiplied by the Number of Shares multiplied by USD
24.00
Prepayment:
Inapplicable
Variable Obligation:
Applicable
Forward Floor Price:
USD 22.80
Forward Cap Price:
USD 28.80
Exchange:
New York Stock Exchange
Related Exchange:
All Exchanges
EARLY PAYMENTS:
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Draw Down Notional Amount:
An amount specified by Party B to Party A upon five
Scheduled Trading Days' notice prior to the Draw Down
Payment Date; provided that the aggregate amount of all Draw
Down Notional Amounts (the "AGGREGATE DRAW DOWN NOTIONAL
AMOUNT") specified by Party B from time to time shall not
exceed 75% of the Forward Price.
Each Draw Down Notional Amount will be at least USD
10,000,000, unless the amount permitted to be drawn in
accordance with the preceding paragraph is less than USD
10,000,000, in which case such lesser amount may be drawn.
Draw Down Amount:
With respect to a Draw Down Notional Amount, the amount
calculated by the Calculation Agent as of the Draw Down
Payment Date equal to the quotient of (i) the Draw Down
Notional Amount divided by (ii) (1 + Discount Rate) Days/360
Where,
"DISCOUNT RATE" is the sum of (i) the zero coupon rate
derived by the Calculation Agent from the swaps curve shown
on Bloomberg Page USSW as of 11:00 a.m. London time. The rate
will be determined (using linear interpolation as needed) for
a tenor equal to Days. The rate will be expressed as a
simple, non-compounded interest rate on an Actual/360
day-count basis. If that Bloomberg page is no longer
published, is unavailable or reflects information which the
Calculation Agent believes erroneous, then the Calculation
Agent may select a different third party source of like
curves and (ii) 30 basis points.
"DAYS" means the number of days from and including the Draw
Down Payment Date to but excluding the Scheduled Maturity
Date.
Draw Down Payment Date:
The date specified by Party B as the payment date for the
related Draw Down Amount; provided that no Draw Down Payment
Date shall occur (i) prior to Party B receiving notice from
Party A that Party A has completed the public sale of the
Number of Shares pursuant to "Registration" below in
compliance with all applicable securities laws and
regulations and (ii) after the first Valuation Date.
Early Payment:
On each Draw Down Payment Date, Party A shall pay to Party B
the Draw Down Amount by wire transfer of immediately
available funds to an account specified by Party B.
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VALUATION:
Settlement Calculations:
For purposes of determining the Forward Cash Settlement
Amount and the Number of Shares to be Delivered, the
Transaction shall be split into 30 components of equal size
(each, a "COMPONENT"), with the Number of Shares allocated
equally among them. Each Component will have its own
Valuation Date, with the Number of Shares to be Delivered for
such Component being determined as if it were a separate
Transaction; provided that the Settlement Date in respect of
all Components shall be the Settlement Date determined as set
forth in Section 9.4 of the Equity Definitions for the
Valuation Date of the final Component hereunder; provided
further that if Party B elects Cash Settlement or Net Share
Settlement pursuant to "Settlement Method Election" below,
Party A may increase the number of Components and the
corresponding number of Valuation Dates if in its sole good
faith discretion Party A deems such increase prudent in light
of the federal securities laws; provided further that, the
Calculation Agent may increase the number of Components and
the corresponding number of Valuation Dates (and, if such
increase occurs following the first Valuation Date, make the
appropriate corresponding adjustment to the Number of Shares
to be Delivered), such number of Components and Valuation
Dates not to exceed 60, if in the sole good faith discretion
of the Calculation Agent market conditions necessitate such
an increase.
Valuation Time:
The close of trading on the Exchange, without regard to
extended trading hours.
Valuation Date:
For each Component, as set forth in Annex A hereto, with all
Valuation Dates for all Components to be the 30 consecutive
Scheduled Trading Days beginning on, and including, the
twenty-ninth Scheduled Trading Day immediately preceding the
Scheduled Maturity Date, subject to any adjustment pursuant
to "Settlement Calculations"; provided that if any such date
is a Disrupted Day, the Valuation Date for the relevant
Component shall be the first succeeding Scheduled Trading Day
that is not a Disrupted Day and which is not, or is not
deemed to be, a Valuation Date in respect of any other
Component under this Transaction; provided further that if
the Valuation Date for the relevant Component has not
occurred
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pursuant to the preceding proviso as of the eighth Scheduled
Trading Day following the scheduled Valuation Date for the
final Component, that eighth Scheduled Trading Day shall be
the Valuation Date (irrespective of whether such day is a
Valuation Date in respect of any other Component under this
Transaction) and the Settlement Price shall be the price
determined by the Calculation Agent.
Market Disruption Event:
For purposes of this Transaction (including the provisions
relating to Forward Price), Section 6.3(a)(ii) of the 2002
Definitions is replaced by the following:
"(ii) an Exchange Disruption, which in either case the
Calculation Agent determines is material, occurs at any time
during regular trading hours on the Exchange on the relevant
Scheduled Trading Day, or"
Scheduled Maturity Date:
September 29, 2006
SETTLEMENT TERMS:
Settlement Currency:
USD
Settlement Price:
The volume-weighted average price calculated based on the
prices of the Shares traded on the Exchange on the relevant
Valuation Date.
Settlement Method Election:
Applicable; provided that Party B shall also be entitled to
elect Net Share Settlement (as defined below); provided
further that if Party B elects Cash Settlement or Net Share
Settlement with respect to this Transaction, Party B shall,
on the Settlement Method Election Date, deemed to have made
the representation contained in the last sentence of
paragraph (i) of "Additional Representations, Warranties and
Agreements of Party B" below to Party A. For the avoidance of
doubt, the parties hereto agree that the election that Party
B makes pursuant to this paragraph shall apply to all
Components.
Electing Party:
Party B
Settlement Method Election Date:
The 75th Scheduled Trading Day prior to the Scheduled
Maturity Date
Default Settlement Method:
Physical Settlement
PHYSICAL SETTLEMENT TERMS:
Physical Settlement:
Applicable; provided that, notwithstanding Section 9.2(a)(ii)
of the Equity Definitions, on the Settlement Date, Party A
will pay to Party B an amount equal to the difference between
(i) the Forward Price minus
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December 15, 2005
(ii) the Aggregate Draw Down Notional Amount, and Party B
will deliver to Party A the Number of Shares to be Delivered
and will pay to Party A the Fractional Share Amount, if any,
in respect of all Valuation Dates for all Components
hereunder.
Number of Shares to be Delivered:
Notwithstanding Section 9.5 of the Equity Definitions, the
Number of Shares to be Delivered in respect of each Component
shall be:
(i) if the Settlement Price is less than or equal to the
Forward Floor Price, the Number of Shares for such Component;
(ii) if the Settlement Price is greater than the Forward
Floor Price but less than or equal to the Forward Cap Price,
a number of Shares equal to the Forward Price divided by the
Settlement Price divided by the number of Components; and
(iii) if the Settlement Price is greater than the Forward Cap
Price, a number of Shares equal to the product of (A) 1 minus
the quotient of (1) the difference between (x) Forward Cap
Price minus (y) the Forward Floor Price divided by (2) the
Settlement Price, multiplied by (B) the Number of Shares for
such Component.
Failure to Deliver:
Inapplicable.
CASH SETTLEMENT TERMS:
Cash Settlement:
Applicable, provided that Party B properly elects cash
settlement in accordance with the conditions set forth in the
"Settlement Method Election" provision above.
(i) If the Cash Settlement Amount is a positive number, Party
B shall pay to Party A the Cash Settlement Amount on the Cash
Settlement Payment Date.
(ii) If the Cash Settlement Amount is a negative number,
Party A shall pay to Party B the absolute value of the Cash
Settlement Amount on the Cash Settlement Payment Date.
Cash Settlement Amount:
An amount, as calculated by the Calculation Agent, equal to
the sum of (i) the Forward Cash Settlement Amount plus (ii)
the Aggregate Draw Down Notional Amount.
Cash Settlement Payment Date
Three (3) Currency Business Days following the final
Valuation Date.
NET SHARE SETTLEMENT TERMS:
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Net Share Settlement:
Applicable; provided that Party B properly elects net share
settlement in accordance with the conditions set forth in the
"Settlement Method Election" provision above.
(i) If the Cash Settlement Amount is a positive number, Party
B shall deliver to Party A a number of Shares equal to the
quotient of (A) the Cash Settlement Amount divided by (B) the
Settlement Price on the Valuation Date.
(ii) If the Cash Settlement Amount is negative, Party A shall
deliver to Party B a number of Shares equal to the quotient
of (A) the absolute value of the Cash Settlement Amount
divided by (B) the Settlement Price on the Valuation Date.
No fractional Shares shall be delivered in connection with
Net Share Settlement, and the value of any fractional Share
otherwise deliverable shall be paid in cash on the relevant
Net Share Settlement Date (such value to be determined by
multiplying such fractional Share by the Settlement Price on
the relevant Valuation Date).
If the Transaction is to be Net Share Settled, the provisions
of Sections 9.8, 9.9, 9.10, 9.11 and 9.12 of the Equity
Definitions will be applicable, except that all references in
such provisions to "Physically Settled" shall be read as
references to "Net Share Settled". "Net Share Settled" in
relation to a Transaction means that Net Share Settled is
applicable to the Transaction.
SHARE ADJUSTMENTS:
Method of Adjustment:
Calculation Agent Adjustment; provided, however, that
adjustments may be made to account for changes in volatility,
expected dividends, stock loan rate and liquidity relative to
the relevant Share but only in respect of Potential
Adjustment Events of the types described in Sections
11.2(e)(ii)(B) and 11.2(e)(ii)(C) or Section 11.2(e)(vi) of
the 2002 Definitions, any Announcement Event, and events of
the types described in Sections and 11.2(e)(vii) to the
extent analogous to the foregoing.
"Announcement Event" shall mean the occurrence of the
Announcement Date of a Merger Event or Tender Event and will
constitute a Potential Adjustment Event, if the Merger Date
or Closing Date does not occur on or prior to the final
Valuation Date.
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EXTRAORDINARY EVENTS:
CONSEQUENCES OF MERGER EVENTS:
Share-for-Share:
Modified Calculation Agent Adjustment
Share-for-Other:
Cancellation and Payment
(Calculation Agent Determination)
Share-for-Combined:
Modified Calculation Agent Adjustment
TENDER OFFER:
Applicable
CONSEQUENCES OF TENDER OFFERS:
Share-for-Share:
Modified Calculation Agent Adjustment
Share-for-Other:
Modified Calculation Agent Adjustment
Share-for-Combined:
Modified Calculation Agent Adjustment
New Shares:
The definition of "New Shares" in Section 12.1 of the Equity
Definitions shall be amended by deleting subsection (i) in
its entirety and replacing it with the following: "(i) the
shares are re-listed, re-traded or re-quoted on any exchange
or quotation system which qualifies as an Exchange under
Section 1.25(b) of the Definitions and".
Tender Offers:
The definition of "Tender Offer" in Section 12.1 of the
Equity Definitions will be amended by replacing the phrase
"outstanding voting shares of the Issuer" in the fourth line
thereof with "outstanding Shares of the Issuer".
Modified Calculation Agent Adjustment:
For greater certainty, the definition of "Modified
Calculation Adjustment" in Sections 12.2 and 12.3 of the
Equity Definitions shall be amended by adding the following
italicized language after the stipulated parenthetical
provision: "(including adjustments to account for changes in
volatility, expected dividends, stock loan rate or liquidity
relevant to the Shares or to the Transaction) from the
Announcement Date to the Merger Date (Section 12.2) or Tender
Offer Date (Section 12.3),"
Composition of Combined Consideration:
Not Applicable
Nationalization or Delisting:
Applicable
Delisting:
Notwithstanding Section 12.6(a)(iii) of the 2002 Definitions,
it will constitute a Delisting if the shares are re-listed,
re-traded or re-quoted on any exchange or quotation system
which does not qualify as an
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Exchange under Section 1.25(b) of the Definitions.
ADDITIONAL DISRUPTION EVENTS:
Change in Law:
Applicable
Insolvency, Insolvency Filing and
Other Bankruptcy Events:
Notwithstanding anything to the contrary in the Equity
Definitions, upon an Insolvency, Insolvency Filing or any
event set forth under Section 5(a)(vii) of the Agreement,
this Confirmation and all obligations and rights of Party A
and Party B hereunder, including the rights and obligations
of Party A to pay the Forward Price and Party B to deliver
Shares, shall immediately and automatically terminate,
without the necessity of any notice, payment or action by any
party.
The definition of "Insolvency Filing" in Section 12.9 of the
Equity Definitions shall be amended by deleting the clause
"provided that such proceedings instituted or petitions
presented by creditors and not consented to by the Issuer
shall not be deemed an Insolvency Filing" at the end of such
definition and replacing it with the following: "; or it has
instituted against it a proceeding seeking a judgment of
insolvency or bankruptcy or any other relief under any
bankruptcy or insolvency law or other similar law affecting
creditors' rights, or a petition is presented for its
winding-up or liquidation by a creditor and such proceeding
is not dismissed, discharged, stayed or restrained in each
case within fifteen (15) days of the institution or
presentation thereof."
Hedging Disruption:
Applicable
Increased Cost of Hedging:
Applicable
Loss of Stock Borrow:
Applicable
Section 12.9(a)(vii) and Section 12.9(b)(iv) of the Equity
Definitions are amended by deleting all references to "a rate
equal to or less than the Maximum Stock Loan Rate" and
replacing them with "a Stock Collateral Rate that is equal to
or greater than the Minimum Stock Loan Rate." For greater
certainty, the Stock Collateral Rate will be deemed to be
greater than the Minimum Stock Loan Rate if the spread below
the applicable floating rate decreases.
"STOCK COLLATERAL RATE" means the rate of return on
collateral posted in conne
