EXHIBIT 1.4
[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:
NY42772
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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: NY42772
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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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:
December 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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December 15, 2005
Exchange under Section 1.25(b) of the
Definitions.
ADDITIONAL DISRUPTION EVENTS:
Change in Law:
Applicable
Insolvency,
Insolvency
Filing and Other
Notwithstanding anything to the
Bankruptcy Events:
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 o
