Exhibit 1.5
[LEHMAN BROTHERS LOGO OMITTED]
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 Miller
Facsimile:
441-295-7576
Telephone:
441-298-4395
From:
Lehman Brothers, Inc., acting as Agent,
Lehman Brothers OTC Derivatives Inc., acting as Principal
Attention:
Andrew Yare - Transaction Management Group
Facsimile:
646-885-9546 (United States of America)
Telephone:
212-526-9986
Ref. Numbers:
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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
Lehman Brothers OTC Derivatives Inc. ("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 Lehman Brothers, Inc. and
Lehman Brothers
OTC Derivatives Inc.. LEHMAN BROTHERS OTC DERIVATIVES INC. IS NOT A
MEMBER OF
THE SECURITIES INVESTOR PROTECTION CORPORATION.
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 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:
Lehman Brothers Inc. ("LBI") is acting as agent on
behalf of Party A and Party B for this
Transaction. LBI has no obligations, by guarantee,
endorsement or otherwise, with respect to the
performance of this Transaction by either party.
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
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
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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:
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.
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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
Days
(ii) (1 + Discount Rate) ----
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.
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
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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 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
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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 (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
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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:
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.
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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.
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
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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
For greater certainty, the definition of
Adjustment:
"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
Exchange under Section 1.25(b) of the
Definitions.
ADDITIONAL DISRUPTION EVENTS:
Change in Law:
Applicable
Insolvency,
Insolvency Filing Notwithstanding anything to the contrary in the
and Other Bankruptcy Events:
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
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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 connection with
any Shares borrowed in connection with a
Transaction, net of any costs or fees
(including, for greater certainty, any lender's
borrow fees).
Minimum Stock Loan Ra
