CERTIFICATE OF DESIGNATIONS
OF
CONVERTIBLE PREFERRED SHARES
OF
SCOTTISH RE GROUP LIMITED
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Pursuant to the Companies Law (2003 Revision) of the Cayman Islands
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SCOTTISH RE GROUP LIMITED, a Cayman Islands exempted company (the
"Company"), HEREBY CERTIFIES that pursuant to resolutions of the Finance and
Investment Committee of the Board of Directors of the Company adopted on
December 11, 2003 , the issue of 5,750,000 Convertible Preferred Shares, $0.01
par value per share, $25 liquidation preference per share (the "Convertible
Preferred Shares"), each Convertible Preferred Share convertible into 1.0607
ordinary shares of the Company, par value $0.01 per share (the "Ordinary
Shares"), was authorized and the designation, preferences and privileges, voting
rights, relative, participating, optional and other special rights, and
qualifications, limitations and restrictions of all 5,750,000 Convertible
Preferred Shares, in addition to those set forth in the Memorandum of
Association and the Articles of Association of the Company, were fixed as
follows:
1. Designation. The designation of this Series (hereinafter referred to as
this "Series") shall be "Convertible Preferred Shares," and the number of shares
constituting this Series shall be 5,750,000. The Convertible Preferred Shares
shall have an issue price of and a liquidation preference (the "liquidation
preference") of $25 per share. The number of authorized shares of this Series
may be reduced (but not below the number then issued and outstanding) by further
resolution duly adopted by the Board of Directors of the Company or by any duly
authorized committee of the Board of Directors (collectively, the "Board of
Directors"), but the number of authorized shares of this Series shall not be
increased. No such reduction shall affect the due authorization of any issued
and outstanding shares of this Series.
2. Dividends. (a) The holders of the Convertible Preferred Shares shall be
entitled to receive cash dividends when, as and if declared by the Board of
Directors, out of assets legally available for that purpose and to the extent
the Company is able to pay its debts as they fall due ("solvent") after giving
effect thereto, at the rates set forth below in this Section 2. Dividends on the
Convertible Preferred Shares shall be payable, when, as and if declared by the
Board of Directors, quarterly in arrears on February 15, May 15, August 15 and
November 15 of each year (each, a "Dividend Payment Date"), commencing on
February 15, 2004, or if such date is not a Business Day (as defined below), the
next succeeding Business Day, except that the dividend
otherwise payable on May 15, 2007 shall be payable on the Mandatory Redemption
Date (as defined below). Each such dividend shall be paid to the holders of
record of the shares of this Series as they appear on the share register of the
Company on the applicable record date (each, a "Record Date"), which shall be
the first day of the month in which the relevant Dividend Payment Date falls;
provided, however, that holders of Convertible Preferred Shares converted on a
date falling between the Record Date associated with a Dividend Payment Date and
such Dividend Payment Date shall receive the applicable dividend payment,
together with all other accumulated and unpaid dividends, on such date of
conversion. Dividends on the Convertible Preferred Shares shall accumulate and
be cumulative from the date of original issuance, whether or not there are
assets legally available for the payment of such dividends. If the Board of
Directors fails to declare a dividend, the dividend shall accumulate until
declared and paid. Accumulated and unpaid dividends on any Convertible Preferred
Shares that are converted into Ordinary Shares shall be declared and paid at the
time of conversion out of assets legally available for that purpose and to the
extent the Company is solvent after giving effect thereto. Accumulated dividends
shall not accrue interest.
"Business Day" shall mean any day other than a Saturday or Sunday or a day
on which banking institutions in New York City are authorized or required by law
or executive order to remain closed.
(b) For each quarterly dividend period (each, a "Dividend Period") from
December 17, 2003 through and including the Dividend Period ending on February
15, 2007 (the "Initial Rate Period"), dividends payable on the Convertible
Preferred Shares shall be payable at a rate per annum equal to 1.000% of the
liquidation preference thereof, equivalent to $0.2500 per Convertible Preferred
Share. For each Dividend Period after the Initial Rate Period, dividends payable
on the Convertible Preferred Shares shall be payable at a rate per annum of the
liquidation preference thereof equal to the Reset Rate (as defined below) or the
rate as provided in Section 4(g), as applicable. The amount of dividends per
Convertible Preferred Share for each Dividend Period shall be computed by
dividing the applicable rate for such Dividend Period by four and applying the
resulting rate to the liquidation preference per Convertible Preferred Share.
Each Dividend Period (other than the initial Dividend Period) shall commence on
a Dividend Payment Date and shall end on and include the day next preceding the
next Dividend Payment Date.
(c) Dividends payable on the Convertible Preferred Shares shall be computed
(1) for any full Dividend Period on the basis of a 360-day year consisting of
twelve 30-day months and (2) for any period shorter than a full Dividend Period,
on the basis of a 30-day month and, for any period less than one month, on the
basis of the actual number of days elapsed per 30-day month. In the event that
any date on which a dividend is payable on the Convertible Preferred Shares is
not a Business Day, then payment of the dividend payable on such date shall be
made on the next day that is a Business Day (and without any interest or other
payment in respect of any such delay).
(d) No full dividends shall be declared or paid or set apart for payment on
any other share capital ranking, as to dividends, on a parity with the
Convertible Preferred Shares for
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any period unless full cumulative dividends on the Convertible Preferred Shares
for all full Dividend Periods ending on or prior to the date of such dividends
on such other series of share capital have been or contemporaneously are
declared and paid or declared and a sum sufficient for the payment thereof set
apart for such payment. When dividends are not paid in full, as aforesaid, upon
the Convertible Preferred Shares and any other share capital ranking on a parity
as to dividends with the Convertible Preferred Shares, all dividends declared
upon the Convertible Preferred Shares and any other share capital ranking on a
parity as to dividends with the Convertible Preferred Shares shall be declared
and paid pro rata so that the amount of dividends declared per share on the
Convertible Preferred Shares and such other share capital shall in all cases
bear to each other the same ratio that accumulated and unpaid dividends per
share on the Convertible Preferred Shares and such other share capital bear to
each other. No interest, or sum of money in lieu of interest, shall be payable
in respect of any dividend payment or payments on the Convertible Preferred
Shares which may be in arrears.
(e) Unless full cumulative dividends on all outstanding Convertible
Preferred Shares have been or are contemporaneously paid or declared and sums
sufficient for the payment thereof have been set aside for their payment and no
Failure (as defined in Section 4(g)) has occurred and is continuing: (i) except
as provided in Section 2(d) above, no dividends, other than dividends paid in
Ordinary Shares or in any other shares ranking junior to the Convertible
Preferred Shares as to dividends and upon liquidation, dissolution or winding
up, shall be declared or paid or set aside for payment, (ii) no other
distributions shall be declared or made on the Ordinary Shares or on any other
shares of the Company ranking junior to the Convertible Preferred Shares as to
dividends or upon liquidation, dissolution or winding up and (iii) any Ordinary
Shares or any other shares of the Company ranking junior to or on a parity with
the Convertible Preferred Shares as to dividends or upon liquidation,
dissolution or winding up shall not be redeemed, purchased or otherwise acquired
for any consideration (or any moneys be paid to or made available for a sinking
fund for the redemption of any such shares) by the Company (except by conversion
into or exchange for shares of the Company ranking junior to the Convertible
Preferred Shares as to dividends and upon liquidation, dissolution or winding
up).
(f) Dividends on the Convertible Preferred Shares shall cease to accumulate
upon the conversion or mandatory redemption of the Convertible Preferred Shares.
(g) Holders of the Convertible Preferred Shares shall have the right to
elect two directors to the Board of Directors as provided in Section 8.
3. Redemption. (a) On May 21, 2007 (the "Mandatory Redemption Date"), the
Company shall redeem the Convertible Preferred Shares in whole at a redemption
price equal to the stated liquidation preference of $25 per Convertible
Preferred Share and accumulated and unpaid dividends to, but not including, the
Mandatory Redemption Date, out of legally available funds for such redemption
and payment, if any, and to the extent the Company is solvent after giving
effect thereto. In the event that fewer than all the outstanding Convertible
Preferred Shares are to be redeemed on a particular date (due to the Company not
having sufficient legally available funds for such redemption or to the extent
that Company would not be solvent after giving effect thereto), the Convertible
Preferred Shares to be redeemed on such date shall be
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determined by lot or pro rata as may be determined by the Board of Directors or
by any other method as may be determined by the Board of Directors in its sole
discretion to be equitable, provided that such method satisfies any applicable
requirements of any securities exchange on which the Convertible Preferred
Shares are listed. The Convertible Preferred Shares shall not be redeemable
prior to Mandatory Redemption Date, except in respect of conversions in
accordance with Section 5 hereof.
(b) Unless the Company is not legally permitted to redeem Convertible
Preferred Shares on the Mandatory Redemption Date, notice of such redemption
shall be given by first class mail, postage prepaid, mailed not less than 15 or
more than 30 days prior to the redemption date, to each holder of record of the
shares to be redeemed, at such holder's address as the same appears on the stock
register of the Company. Each such notice shall state: (i) the redemption date;
(ii) the number of Convertible Preferred Shares to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (iii) the place or places where
certificates for such shares are to be surrendered for payment of the redemption
price; (iv) that dividends on the shares to be redeemed shall cease to accrue on
the redemption date; and (v) that the shares may be converted on or prior to the
last Trading Day preceding the redemption date and the applicable Conversion
Rate.
(c) Notice having been mailed as aforesaid, from and after the redemption
date (unless the Company shall default in the payment of the redemption price)
dividends on the Convertible Preferred Shares so called for redemption shall
cease to accrue. In case fewer than all the shares represented by any such
certificate are redeemed, a new certificate shall be issued representing the
unredeemed shares without cost to the holder thereof.
(d) In the event all Convertible Preferred Shares are not redeemed on the
Mandatory Redemption Date, (i) the Company shall follow the procedures set forth
in this Section on subsequent redemption dates (substituting the actual dates of
any such redemption for the term "Mandatory Redemption Date") until all
Convertible Preferred Shares have been redeemed, and (ii) the Convertible
Preferred Shares after the Mandatory Redemption Date shall remain convertible in
accordance with Section 5(d) until redeemed.
4. Remarketing. (a) The dividend rate on the Convertible Preferred Shares
may be reset upward to the Reset Rate on the fourth day (the "Remarketing Date")
preceding the Purchase Contract Settlement Date (as defined below). The Reset
Rate shall become effective four Trading Days (as defined below) (the
"Remarketing Settlement Date") immediately following the remarketing (the
"Remarketing") pursuant to the Remarketing Agreement (as defined below). The
Company shall take all action necessary to conduct a Remarketing as provided in
the Remarketing Agreement and the Purchase Contract Agreement. The Company shall
provide notice to the holders of the Convertible Preferred Shares of the
schedule for the Remarketing not later than 15 nor more than 30 calendar days
prior to the Remarketing Date. As long as the Convertible Preferred Shares are
evidenced by one or more global security certificates deposited with the
Depositary (as defined below), the Company shall request, not
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later than 15 nor more than 30 calendar days prior to the Remarketing Date, that
the Depositary notify its participants holding Convertible Preferred Shares of
the Remarketing.
(b) Prior to 11:00 a.m., New York City time, on the Trading Day immediately
preceding the Remarketing Date, but no earlier than the Dividend Payment Date
immediately preceding such date, holders of Separate Convertible Preferred
Shares (as defined below) may elect to have their Separate Convertible Preferred
Shares remarketed under the Remarketing Agreement by delivering their Separate
Convertible Preferred Shares, along with a notice of such election, as specified
in the Purchase Contract Agreement. After such time, such election shall become
an irrevocable election to have such Separate Convertible Preferred Shares
remarketed in the Remarketing. Holders of Separate Convertible Preferred Shares
electing to have their Separate Convertible Preferred Shares remarketed will
also have the right to withdraw that election by written notice as specified in
the Purchase Contract Agreement on or prior to 11:00 a.m., New York City time,
on the Trading Day immediately preceding the Remarketing Date.
To the extent a Convertible Preferred Share constitutes a component of a
Hybrid Capital Unit, upon failure to otherwise elect to settle its obligations
on the Purchase Contract Settlement Date in cash, the holder of such Hybrid
Capital Unit shall be deemed to have elected to have Convertible Preferred
Shares that are part of such Hybrid Capital Units remarketed as provided in the
Purchase Contract Agreement.
(c) The right of each holder to have Convertible Preferred Shares purchased
in the Remarketing shall be as provided in the Remarketing Agreement and the
Purchase Contract Agreement. The Remarketing Agent is not obligated to purchase
any of the Convertible Preferred Shares that would otherwise remain unsold in
the Remarketing. Neither the Company nor the Remarketing Agent shall be
obligated in any case to provide funds to make payment for the Convertible
Preferred Shares included in the Remarketing.
(d) If there is a Successful Remarketing, as defined in the Purchase
Contract Agreement, then prior to 4:00 p.m., New York City time, on the
Remarketing Date, the Remarketing Agent shall determine the Reset Rate, which
shall be the rate per annum (rounded to the nearest one-thousandth (0.001) of
one percent) that the Remarketing Agent determines, in its sole judgment, to be
the lowest rate per annum that will enable it to remarket, at such price, all of
the Convertible Preferred Shares tendered or deemed tendered for Remarketing.
The Reset Rate shall in no event be less than the original dividend rate on the
Convertible Preferred Shares and shall not exceed the maximum rate permitted by
applicable law. In addition to the price obtained in the Remarketing, the
purchaser of Convertible Preferred Shares in the Remarketing shall pay an amount
equal to any accumulated and unpaid dividends on the Convertible Preferred
Shares. The Company and its affiliates shall not be able to participate in or
bid for the Convertible Preferred Shares during the Remarketing.
(e) If none of the holders of the Convertible Preferred Shares or the
holders of the Hybrid Capital Units elect to have Convertible Preferred Shares
remarketed in the Remarketing, the Reset Rate shall be the rate determined by
the Remarketing Agent, in its sole
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discretion, as the rate that would have been established had a Remarketing of
all the Convertible Preferred Shares been held on the Remarketing Date.
(f) If, by 4:30 p.m., New York City time, on the Remarketing Date, the
Remarketing Agent is unable to remarket all of the Convertible Preferred Shares
included in the Remarketing, a "Failed Remarketing" shall be deemed to have
occurred and the Remarketing Agent shall so advise by telephone the Depositary
and the Company. In the event of a Failed Remarketing the Company shall, no
later than third Trading Day preceding the Purchase Contract Settlement Date,
issue a press release to such effect on the Bloomberg and Reuters newswires and
shall concurrently cause such press release to be posted on its web site. In the
event of a Failed Remarketing, the Reset Rate shall be equal to the nearest
one-thousandth of one percent (1) 3-month LIBOR (as defined below), plus (2) the
applicable spread set forth on Schedule I to this Certificate of Designations
based on the ratings of the Convertible Preferred Shares at that time. The Reset
Rate shall in no event be less than the original dividend rate on the
Convertible Preferred Shares and shall not exceed the maximum rate permitted by
applicable law. Upon a Failed Remarketing, holders of the Hybrid Capital Units
shall have the option to settle the related purchase contract with separate cash
by delivering to the collateral agent for the Hybrid Capital Units $25 in cash
per purchase contract on or prior to the Trading Day immediately preceding the
Purchase Contract Settlement Date in accordance with the Purchase Contract
Agreement.
(g) If on the Remarketing Settlement Date there are any accrued and unpaid
dividends on the Convertible Preferred Shares or the Company fails to satisfy
the Conversion Obligation (defined below) in a timely manner, then the Reset
Rate shall be the greater of the rate determined in the Remarketing and the rate
that would be applicable in a Failed Remarketing. If on the Mandatory Redemption
Date, the Company fails to pay all accrued and unpaid dividends or redeem the
Convertible Preferred Shares in full or the Company fails to satisfy in full its
Conversion Obligation at the times provided in Section 5(c) or (d), as the case
may be, with respect to any shares of Convertible Preferred Shares which are
converted (a "Failure"), then the dividend rate of the Convertible Preferred
Shares thereafter shall be the greater of (i) the then existing dividend rate
and (ii) 3-month LIBOR plus the applicable spread set forth on Schedule I to
this Certificate of Designations based on the ratings of the Convertible
Preferred Shares at that time, for the period after such Failure until such
Failure no longer exists. The Company shall promptly give notice to the holders
of any applicable dividend rate.
(h) By approximately 4:30 p.m., New York City time, on the Trading Day
following the Remarketing Date, provided that there has not been a Failed
Remarketing, the Remarketing Agent shall advise, by telephone: (i) the
Depositary and the Company of the Reset Rate determined in the Remarketing and
the number of Convertible Preferred Shares sold in the Remarketing, (ii) each
purchaser (or the Depositary Participant (as defined below) thereof) of the
Reset Rate and the number of Convertible Preferred Shares such purchaser is to
purchase and (iii) each purchaser to give instructions to its Depositary
Participant to pay the purchase price on the Purchase Contract Settlement Date
in same day funds against delivery of the Convertible Preferred Shares purchased
through the facilities of the Depositary.
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(i) In accordance with the Depositary's normal procedures, on the Purchase
Contract Settlement Date, the transactions described above with respect to each
Convertible Preferred Share tendered for purchase and sold in the Remarketing
shall be executed through the Depositary, and the accounts of the respective
Depositary Participants shall be debited and credited and such Convertible
Preferred Shares delivered by book-entry as necessary to effect purchases and
sales of such Convertible Preferred Shares. The Depositary shall make payment in
accordance with its normal procedures.
(j) If any holder of Convertible Preferred Shares selling Convertible
Preferred Shares in the Remarketing fails to deliver such Convertible Preferred
Shares, the direct or indirect Depositary Participant of such selling holder and
of any other person that was to have purchased Convertible Preferred Shares in
the Remarketing may deliver to such other person a number of Convertible
Preferred Shares that is less than the number of Convertible Preferred Shares
that otherwise was to be purchased by such person. In such event, the number of
Convertible Preferred Shares to be so delivered shall be determined by such
direct or indirect Depositary Participant, and delivery of such lesser number of
Convertible Preferred Shares shall constitute good delivery.
(k) Under the Remarketing Agreement, the Company shall be liable for, and
shall pay, any and all costs and expenses incurred in connection with the
Remarketing.
(l) The tender and settlement procedures set forth in this Section 4,
including provisions for payment by purchasers of the Convertible Preferred
Shares in the Remarketing, shall be subject to modification to the extent
required by the Depositary or, if the book-entry system is no longer available
for the Convertible Preferred Shares at the time of the Remarketing, to
facilitate the tendering and remarketing of the Convertible Preferred Shares in
certificated form. In addition, the Remarketing Agent may modify the settlement
procedures set forth herein in order to facilitate the settlement process.
(m) The Company agrees to use commercially reasonable efforts to ensure
that, if required by applicable law, a registration statement with regard to the
full amount of the Convertible Preferred Shares to be remarketed in the
Remarketing shall be effective with the U.S. Securities and Exchange Commission
in a form that will enable the Remarketing Agent to rely on it in connection
with such Remarketing.
(n) Definitions:
"3-month LIBOR" shall mean, with respect to the second London Banking Day
prior to the Remarketing Settlement Date or the first day of a Dividend Period
thereafter (a "LIBOR Reset Date"), as the case may be:
(i) the rate for 3-month deposits in United States dollars commencing
on the LIBOR Reset Date that appears on the Moneyline Telerate Page 3750 as
of 11:00 a.m., London time, on the determination date, unless fewer than
two such offered rates so appear; or
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(ii) if fewer than two offered rates appear, or no rate appears, as
the case may be, on the particular date on the Moneyline Telerate Page
3750, the rate calculated by the Calculation Agent of at least two offered
quotations obtained by the Remarketing Agent after requesting the principal
London offices of each of four major reference banks in the London
interbank market to provide the Calculation Agent with its offered
quotation for deposits in United States dollars for the period of three
months, commencing on the LIBOR Reset Date, to prime banks in the London
interbank markets at approximately 11:00 a.m., London time, on that date
and in a principal amount that is representative for a single transaction
in United States dollars in that market at that time; or
(iii) if fewer than two offered quotations referred to in clause (b)
are provided as requested, the rate calculated by the Calculation Agent as
the arithmetic mean of the rates quoted at approximately 11:00 a.m., New
York time, on the particular date by three major banks (which will not
include affiliates of the Company) in The City of New York selected by the
Remarketing Agent for loans in United States dollars to leading European
banks for a period of three months and in a principal amount that is
representative for a single transaction in United States dollars in that
market at that time; or
(iv) if the banks so selected by the Calculation Agent are not quoting
as mentioned in clause (iii), the original dividend rate on the Convertible
Preferred Shares.
"Calculation Agent" shall mean the calculation agent selected by the
Company, including any successor calculation agents selected by the Company.
"Depositary" shall mean, with respect to Convertible Preferred Shares
issuable in whole or in part in the form of one or more Global Securities, a
clearing agency registered under Section 17A of the Exchange Act that is
designated to act as depositary for such shares, and initially shall be The
Depository Trust Company.
"Depositary Participant" shall mean a member of, or participant in, the
Depositary.
"Exchange Act" shall mean the Securities Exchange Act of 1934 and any
statute successor thereto, in each case as amended from time to time, and the
rules and regulations promulgated thereunder.
"Global Security" shall mean a global Convertible Preferred Stock
certificate registered in the name of a Depositary or its nominee.
"Hybrid Capital Unit" shall mean a unit offered by the Company with a
stated amount of $25 consisting of a Purchase Contract (as defined in the
Purchase Contract Agreement) issued by the Company and a Convertible Preferred
Share.
"London Banking Day" shall mean a day on which commercial banks are open
for business, including dealings in United States dollars, in London.
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"Moneyline Telerate Page 3750" means the display on Moneyline Telerate (or
any successor service) on such page (or any other page as may replace such page
on such service) for the purpose of displaying the London interbank rates of
major banks for United States dollars.
"Purchase Contract Agent" shall mean the purchase contract agent under the
Purchase Contract Agreement, including successor purchase contract agents.
"Purchase Contract Agreement" shall mean the Purchase Contract Agreement
dated as of December 17, 2003, between the Company and JPMorgan Chase Bank, as
Purchase Contract Agent and Collateral Agent, as amended from time to time.
"Purchase Contract Settlement Date" shall mean February 15, 2007.
"Remarketing Agent" shall mean the remarketing agent selected by the
Company, including any successor remarketing agents selected by the Company.
"Remarketing Agreement" shall mean the Remarketing Agreement dated as of
December 17, 2003, between the Company and the Remarketing Agent, as amended
from time to time.
"Remarketing Date" shall mean the fourth Trading Day preceding the Purchase
Contract Settlement Date.
"Reset Rate" shall mean shall mean the distribution rate per annum that
results from the Remarketing pursuant this Section 4.
"Separate Convertible Preferred Share" shall mean the Convertible Preferred
Shares that are no longer a component of Hybrid Capital Units.
"Trading Day" shall mean a day on which the Ordinary Shares (i) are not
suspended from trading on any national or regional securities exchange or
association or over-the-counter market at the close of business; and (ii) have
traded at least once on the national or regional securities exchange or
association or over-the-counter market that is the primary market for the
trading of the Ordinary Shares; or (iii) are scheduled to so trade in the case
where such term is used with respect to future days.
5. Conversion. (a) Conversion Right. Subject to the terms set forth in this
Certificate of Designations, the Convertible Preferred Shares shall be
convertible into cash and fully paid and nonassessable Ordinary Shares as
described below on the Mandatory Redemption Date or upon a consolidation or
merger of the Company with or into another person or any merger of another
person into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancellation of outstanding Ordinary
Shares), in each case in which 30% or more of the total consideration (as
determined in good faith by the Board of Directors) paid to the Company's
shareholders consists of cash, cash equivalents, debt or preferred securities or
common stock or the equivalent which is not traded or to be traded
9
immediately following the merger on a U.S. securities exchange or the Nasdaq
National Market (a "Specified Merger"). The initial conversion rate (the
"Conversion Rate") for each Convertible Preferred Share, $25 liquidation
preference per share, shall be 1.0607 and shall be subject to adjustment as
described below. The Conversion Rate reflects an initial conversion price of
$23.57 per Ordinary Share. The Conversion Rate, and thus the conversion price,
is subject to adjustment as described below. A holder may, upon delivery of a
conversion notice, substantially in the form on the back of the certificate for
the Convertible Preferred Shares, convert one or more whole Convertible
Preferred Shares. Upon conversion, the Company will deliver, and the holder of
Convertible Preferred Shares will be entitled to receive, cash and Ordinary
Shares as described in Sections 5(c) and (d), as applicable.
The Company shall give effect to any conversion of the Convertible
Preferred Shares contemplated by this Certificate of Designations by such of the
methods (or a combination thereof) described in Section 5(k) as the Board of
Directors may in its discretion determine.
The Company shall at all times have a duly appointed Conversion Agent for
purposes of converting the Convertible Preferred Shares.
(b) Conversion Procedures. No fractional Ordinary Shares shall be issued by
the Company upon conversion of the Convertible Preferred Shares. In lieu of a
fractional Ordinary Share, the holder shall receive an amount of cash equal to
the fractional part of the share multiplied by the average Closing Price (as
defined below) of the Ordinary Shares for the 20 consecutive Trading Day period
ending on and including the fourth Trading Day immediately preceding the date of
a Specified Merger or the 20 consecutive Trading Day period beginning on the
Trading Day immediately following the Mandatory Redemption Date, as the case may
be. If, however, a holder surrenders for conversion at one time more than one
Convertible Preferred Share, then the number of Ordinary Shares that may be
issued pursuant to the related purchase contracts shall be computed based upon
the aggregate number of Convertible Preferred Shares surrendered for conversion.
Upon conversion, the Company shall make a cash payment for accumulated and
unpaid dividends on the Convertible Preferred Shares out of assets legally
available for that purpose and to the extent that the Company is solvent after
giving effect thereto. The Company shall not make any payment or other
adjustment for dividends on any Ordinary Shares issued upon conversion of the
Convertible Preferred Shares, except pursuant to Section 5(e).
A holder shall not be required to pay any taxes or duties incurred by the
Company relating to the issuance or delivery of Ordinary Shares of the Company
if that holder exercises its conversion rights, but such holder shall be
required to pay any tax or duty which may be payable relating to any transfer
involved in the issuance or delivery of the Ordinary Shares in a name other than
the holder's own. Certificates representing Ordinary Shares shall be issued or
delivered only after all applicable taxes and duties, if any, payable by such
holder have been paid.
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To convert interests in a Convertible Preferred Share held in book-entry
form, a holder must deliver to the Depositary the appropriate instruction form
for conversion pursuant to the Depositary's conversion program.
To convert a definitive Convertible Preferred Share held in global form, a
holder must: (i) complete and manually sign the conversion notice on the back of
the share certificate (or a facsimile thereof); (ii) deliver the completed
conversion notice and the share to be converted to the specified office of the
Conversion Agent; (iii) if required by the Conversion Agent, furnish appropriate
endorsements and transfer documents; and (iv) pay all taxes or duties, if any,
as described in this Section 5(b).
In the case of a conversion upon a Specified Merger, notice of conversion
must be given during the time period referred to under Section 5(c). In the case
of conversion on the Mandatory Redemption Date, notice of conversion must be
given prior to the close of business on the Trading Day preceding the Mandatory
Redemption Date (or if any Convertible Preferred Shares remain outstanding after
the Mandatory Redemption Date, such notice may be given at any time prior to
redemption of such Convertible Preferred Shares).
The conversion date shall be the date on which all of the foregoing
requirements have been satisfied. The Convertible Preferred Shares shall be
deemed to have been converted immediately prior to 5:00 p.m., New York City
time, on the conversion date. In the case of conversion on the Mandatory
Redemption Date, delivery of the cash and the Ordinary Shares shall occur on the
fourth Trading Day after the end of the averaging period referred to in this
Section 5(b). In the case of a conversion upon a Specified Merger, settlement
shall occur as soon as practicable on or after the conversion date.
(c) Conversion Upon Specified Merger. If a holder of Convertible Preferred
Shares converts upon a Specified Merger prior to the Mandatory Redemption Date,
the Company shall deliver to such holder, for each Convertible Preferred Share
(the "Specified Merger Conversion Obligation"): (i) a cash amount ("cash
amount") (excluding any cash in lieu of fractional shares) equal to the
liquidation preference of the Convertible Preferred Share and (ii) the product
of (A) the kind and amount of securities, cash or other property that such
holder would have been entitled to receive, on a per share basis, if such holder
had converted immediately before the Specified Merger (including any Ordinary
Shares retained by the holder of Ordinary Shares in the merger) multiplied by
(B) a number of Ordinary Shares, if any, equal to the difference between (I) a
number equal to the Conversion Rate minus (II) a number of Ordinary Shares equal
to the quotient of (x) the cash amount divided by (y) the average Closing Price
of the Ordinary Shares for the 20 consecutive Trading Day period ending on the
fourth Trading Day immediately preceding the date of completion of the Specified
Merger.
Upon conversion, the Company shall pay accumulated and unpaid dividends in
cash to, but not including, the conversion date out of assets legally available
for that purpose and to the extent that the Company is solvent after giving
effect thereto. The Company shall deliver the cash amount and the Ordinary
Shares due upon conversion as soon as practicable following conversion upon a
Specified Merger.
11
The Company shall provide each of the holders with a notice of the
completion of a Specified Merger within five Business Days thereof. The notice
shall specify a date, which shall be 10 Trading Days after the date of the
notice but no later than the Mandatory Redemption Date for the Convertible
Preferred Shares (or if any Convertible Preferred Shares remain outstanding
after the Mandatory Redemption Date, such date upon which all outstanding
Convertible Preferred Shares shall be redeemed), by which each holder's
Specified Merger early conversion right must be exercised. Such notice shall be
published in a daily newspaper in the English language of general circulation in
New York City, and shall be posted on the Company's website and released on the
Bloomberg and Reuters newswires.
If a holder of Convertible Preferred Shares does not elect to exercise its
Specified Merger early conversion right, the Convertible Preferred Shares shall
remain outstanding and the Convertible Preferred Shares shall, subject to
Section 5(h) below, be convertible as described in Section 5(d).
In determining the kind and amount of securities, cash or other property
receivable upon a Specified Merger by a holder of Convertible Preferred Shares
if such holder had converted immediately before the Specified Merger, it will be
assumed that such holder is not a person with which the Company consolidated or
into which the Company merged or which merged into the Company or to which such
sale or transfer was made, as the case may be (any such person, a "Constituent
Person"), or an affiliate of a Constituent Person to the extent such Specified
Merger provides for different treatment of Ordinary Shares held by affiliates of
the Company and non-affiliates and such holder failed to exercise its rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such Specified Merger (provided that if the kind or
amount of securities, cash and other property receivable upon such Specified
Merger is not the same for each Ordinary Share held immediately prior to such
Specified Merger by other than a Constituent Person or an affiliate thereof and
in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section, the kind and
amount of securities, cash and other property receivable upon such
Reorganization Event by each non-electing share shall be deemed to be the kind
and amount so receivable per share by a plurality of the non-electing shares).
To the extent that applicable law requires the Company to have in effect,
at the time of such Specified Merger, an effective registration statement
covering the securities to be issued and delivered in respect of the Specified
Merger Conversion Obligation, the Company covenants and agrees to use
commercially reasonable efforts to have such registration statement in effect
and to provide a prospectus in connection therewith in a form that may be used
in connection with the settlement of such Specified Merger Conversion
Obligation.
(d) Conversion Upon Mandatory Redemption. If a holder of Convertible
Preferred Shares converts on the Mandatory Redemption Date, the Company shall
deliver to such holder, for each Convertible Preferred Share (the "Mandatory
Redemption Conversion Obligation"; together with the Specified Merger Conversion
Obligation, the "Conversion Obligation"): (i) a cash amount ("cash amount")
(excluding any cash in lieu of fractional shares) equal to the liquidation
preference of the Convertible Preferred Share and (ii) a number of Ordinary
Shares, if any, equal to the difference between (A) a number equal to the
Conversion
12
Rate minus (B) a number of Ordinary Shares equal to the quotient of (I) the cash
amount divided by (II) the average Closing Price of the Ordinary Shares for the
20 consecutive Trading Day period beginning on the Trading Day immediately
following the Mandatory Redemption Date (provided if any Convertible Preferred
Shares remain outstanding after the Mandatory Redemption Date, and are
thereafter converted, such period shall begin on the Trading Day following the
day the conversion notice is given with respect to such Convertible Preferred
Shares).
On the Mandatory Redemption Date, the Company shall pay accumulated and
unpaid dividends to, but not including, the Mandatory Redemption Date out of
assets legally available for that purpose and to the extent that the Company is
solvent after giving effect thereto. The Company shall deliver the cash amount
and the Ordinary Shares due upon conversion pursuant to this Section 5(d) on the
third Trading Day following the end of the 20 trading day period described in
the preceding paragraph (or if such day is not a trading day, the next following
Trading Day).
To the extent that applicable law requires the Company to have in effect,
at the time of such redemption, an effective registration statement covering the
securities to be issued and delivered in respect of the Mandatory Redemption
Conversion Obligation, the Company covenants and agrees to use commercially
reasonable efforts to have such registration statement in effect and to provide
a prospectus in connection therewith in a form that may be used in connection
with the settlement of such Mandatory Redemption Conversion Obligation.
(e) Conversion Rate Adjustments.
(1) In case the Company shall pay or make a dividend or other distribution
on Ordinary Shares in Ordinary Shares, the Conversion Rate in effect at the
close of business on the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution shall be increased by
dividing such Conversion Rate by a fraction of which:
(i) the numerator shall be the number of Ordinary Shares outstanding
at the close of business on the date fixed for such determination; and
(ii) the denominator shall be the sum of such number of Ordinary
Shares and the total number of Ordinary Shares constituting such dividend
or other distribution,
such increase to become effective immediately at the opening of business on the
day following the date fixed for such determination.
(2) In case the Company shall issue rights, warrants or options, other than
pursuant to any dividend reinvestment plans or share purchase plans, to all
holders of its Ordinary Shares entitling them, for a period expiring within 60
days after the record date for the determination of shareholders entitled to
receive such rights, warrants or options, to subscribe for or purchase Ordinary
Shares at a price per share less than the Current Market Price per Ordinary
Share on the date of announcement of such issuance, the Conversion Rate in
effect at the close of business on
13
the date of such announcement shall be increased by dividing such Conversion
Rate by a fraction of which:
(i) the numerator shall be the number of Ordinary Shares outstanding
at the close of business on the date of such announcement plus the number
of Ordinary Shares which the aggregate of the offering price of the total
number of Ordinary Shares so offered for subscription or purchase would
purchase at such Current Market Price; and
(ii) the denominator shall be the number of Ordinary Shares
outstanding at the close of business on the date of such announcement plus
the number of Ordinary Shares so offered for subscription or purchase,
such increase to become effective immediately after the opening of business on
the Business Day following the date of such announcement. The Company agrees
that it shall notify the Conversion Agent if any issuance of such rights,
warrants or options is cancelled or not completed following the announcement
thereof and the Conversion Rate shall thereupon be readjusted to the Conversion
Rate in effect immediately prior to the date of such announcement.
(3) In case outstanding Ordinary Shares shall be subdivided or split into a
greater number of Ordinary Shares, the Conversion Rate in effect at the close of
business on the day preceding the day upon which such subdivision or split
becomes effective shall be proportionately increased, and, conversely, in case
outstanding Ordinary Shares shall each be combined into a smaller number of
Ordinary Shares, the Conversion Rate in effect at the close of business on the
day preceding the day upon which such combination becomes effective shall be
proportionately reduced, such increase or reduction, as the case may be, to
become effective immediately at the opening of business on the day following the
day upon which such subdivision, split or combination becomes effective.
(4) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Ordinary Shares evidences of its indebtedness or assets
(including Ordinary Shares, other securities, cash and property but excluding
(w) any rights, warrants or options referred to in paragraph (2) of this Section
5(e), (x) any dividend or distribution paid exclusively in cash, (y) any
dividend or distribution referred to in paragraph (1) or (5) of this Section
5(e) and (z) any dividends and distributions of stock, securities or other
property or assets (including cash) in connection with the reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or
conveyance to which Section 5(h) applies), the Conversion Rate in effect at the
close of business on the date fixed for the determination of shareholders
entitled to receive such distribution shall be adjusted by dividing such rate by
a fraction of which:
(i) the numerator shall be the Current Market Price per Ordinary Share
on the date fixed for such determination less the then fair market value
(as reasonably determined by the Board of Directors of the Company, whose
determination shall be conclusive and the basis for which shall be
described in a resolution of the Board of Directors of the Company) of the
portion of the assets or evidences of indebtedness so distributed
applicable to one Ordinary Share; and
14
(ii) the denominator shall be such Current Market Price per Ordinary
Share,
such adjustment to become effective at the opening of business on the day
following the date fixed for the determination of shareholders entitled to
receive such distribution. In any case in which this paragraph (4) is
applicable, paragraph (2) of this Section 5(e)(a) shall not be applicable. In
the event that such dividend or distribution is not so paid or made, the
Conversion Rate shall again be adjusted to be the Conversion Rate which would
then be in effect if such dividend or distribution had not been declared.
(5) In case the Company shall, by dividend or otherwise, make a
distribution to all or substantially all holders of its Ordinary Shares of share
capital of one of its subsidiaries (the Conversion Rate will be adjusted, if at
all, based on the Current Market Value of the subsidiary stock so distributed
relative to the Current Market Value of the Company's Ordinary Shares over a
measurement period following such distribution), in which certain components of
the Conversion Rate will be divided by a fraction:
(i) the numerator of which is the Current Market Price of the
Company's Ordinary Shares immediately following the distribution less the
fair market value (as reasonably determined by the Board of Directors,
whose determination shall be conclusive and the basis for which shall be
described in a board resolution) of the portion of these assets or
evidences of indebtedness; and
(ii) the denominator of which is the Current Market Price of the
Company's Ordinary Shares immediately following the distribution;
(6) In case the Company or any of its subsidiaries shall, by dividend or
otherwise, make distributions consisting exclusively of cash to all holders of
its Ordinary Shares, excluding any cash dividend or distribution on the Ordinary
Shares to the extent that the aggregate cash dividend or distribution per
Ordinary Share in any quarter does not exceed $0.05 (the "Dividend Threshold
Amount") (the Dividend Threshold Amount is subject to adjustment on the same
basis as the Conversion Rate, provided that no adjustment shall be made to the
Dividend Threshold Amount for any adjustment made pursuant to this Section
5(e)(6)) then, in such case, the Conversion Rate in effect at the close of
business on the date fixed for the determination of shareholders entitled to
receive such distribution dividend or distribution shall be adjusted by dividing
such rate by a fraction of which:
(i) the numerator shall be the Current Market Price of the Company's
Ordinary Shares on such date less the amount of cash so distributed
applicable to one Ordinary Share in excess of the Dividend Threshold
Amount; and
(ii) the denominator shall be the Current Market Price on such date,
such adjustment to be effective at the opening of business on the day following
the date fixed for the determination of shareholders entitled to receive such
dividend or distribution. In the event
15
that such dividend or distribution is not so paid or made, the Conversion Rate
shall again be adjusted to be the Conversion Rate that would then be in effect
if such dividend or distribution had not been declared.
(7) In case a tender or exchange offer made by the Company or any
subsidiary of the Company for all or any portion of the Ordinary Shares shall
expire and such tender or exchange offer (as amended upon the expiration
thereof) shall require the payment to shareholders of consideration per Ordinary
Share having a fair market value (as determined by the Board of Directors of the
Company, whose determination shall be conclusive and described in a resolution
of the Board of Directors of the Company) that as of the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended) exceeds the Closing Price of an Ordinary
Share on the Trading Day next succeeding the Expiration Time, the Conversion
Rate shall be increased so that the same shall equal the rate determined by
dividing the Conversion Rate in effect immediately prior to the Expiration Time
by a fraction:
(i) the numerator of which shall be equal to the product of (x) the
Current Market Price of an Ordinary Share as of the Expiration Time and (y)
the number of Ordinary Shares outstanding (less any shares accepted in
terms of the tender or exchange offer, such shares being referred to as the
"Purchased Shares") at the Expiration Time less the fair market value
(determined aforesaid) of the aggregate consideration payable to
shareholders for all Purchased Shares, and
(ii) the denominator of which shall be the product of (x) the number
of Ordinary Shares outstanding at the Expiration Time less any Purchased
Shares and (y) the Closing Price of an Ordinary Share at the Expiration
Time,
such adjustment to become effective immediately prior to the opening of business
on the day following the Expiration Time. If the Company is obligated to
purchase shares pursuant to any such tender or exchange offer, but the Company
is permanently prevented by applicable law from effecting any such purchases or
all such purchases are rescinded, the Conversion Rate shall again be adjusted to
be the Conversion Rate that would then be in effect if such tender or exchange
offer had not been made.
(8) The reclassification of Ordinary Shares into securities including
securities other than Ordinary Shares (other than any reclassification upon a
Reorganization Event (as defined below) to which Section 5(h) applies) shall be
deemed to involve:
(i) a distribution of such securities other than Ordinary Shares to
all holders of Ordinary Shares (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of shareholders entitled to receive such distribution" and
the "date fixed for such determination" within the meaning of paragraph (4)
of this Section 5(e)); and
(ii) a subdivision, split or combination, as the case may be, of the
number of
16
shares of Ordinary Shares outstanding immediately prior to such
reclassification into the number of shares of Ordinary Shares outstanding
immediately thereafter (and the effective date of such reclassification
shall be deemed to be "the day upon which such subdivision or split becomes
effective" or "the day upon which such combination becomes effective", as
the case may be, and "the day upon which such subdivision, split or
combination becomes effective" within the meaning of paragraph (3) of this
Section 5(e)).
(9) The "Current Market Price" per Ordinary Share on any date of
determination means the average of the daily Closing Prices for the five
consecutive Trading Days selected by the Company commencing not more than thirty
(30) Trading Days before and ending not later than the earlier of such date of
determination and the day before the "ex date" with respect to the issuance or
distribution requiring such computation. For purposes of this paragraph, the
term "ex date," when used with respect to any issuance or distribution, shall
mean the first date on which Ordinary Shares trade regularly on such exchange or
in such market without the right to receive such issuance or distribution.
(10) The "Closing Price" of the Ordinary Shares, on any date of
determination means:
(i) the closing sale price or, if no closing sale price is reported,
the last reported regular-way sale price of the Ordinary Shares on the New
York Stock Exchange, Inc. (the "NYSE") on that date or, if the Ordinary
Shares are not listed for trading on the NYSE on that date, as reported in
the composite transactions for the principal United States securities
exchange on which the Ordinary Shares are so listed; or
(ii) if the Ordinary Shares are not so reported, the last quoted bid
price for the Ordinary Shares in the over-the-counter market as reported by
the National Quotation Bureau or a similar organization, or, if that bid
price is not available, the average of the mid-point of the last bid and
ask prices of the Ordinary Shares on that date from at least three
nationally recognized independent investment banking firms retained for
this purpose by the Company.
(11) For purposes of paragraph (4) of this Section 5(e) and paragraphs (1),
(2) and (3) of this Section 5(e), any dividend or distribution to which
paragraph (4) is applicable that also includes (x) Ordinary Shares, (y) rights
or warrants to subscribe for or purchase Ordinary Shares to which paragraph (2)
applies or (z) a subdivision or combination of Ordinary Shares to which
paragraph (3) applies (or any combination thereof), shall be deemed instead to
be:
(i) a dividend or distribution of the evidences of indebtedness,
assets, shares of capital stock, rights or warrants, other than such
Ordinary Shares, such rights or warrants or such subdivision or combination
to which paragraphs (1), (2) and (3) apply, respectively (and any
Conversion Rate adjustment required by paragraph (4) with respect to such
dividend or distribution shall then be made), immediately followed by
(ii) a dividend or distribution of such Ordinary Shares, such rights
or warrants or such subdivision or combination (and any further Conversion
Rate adjustment required
17
by paragraphs (1), (2) and (3) with respect to such dividend or
distribution shall then be made), except:
(A) the record date of such dividend or distribution shall be
substituted as (A) "the date fixed for the determination of shareholders
entitled to receive such dividend or other distribution" within the meaning
of paragraph (1), (ii) "the date fixed for the determination of
shareholders entitled to receive such rights, warrants or options" within
the meaning of paragraph (2) and (iii) "the day upon which such subdivision
or split becomes effective," "the day upon which such combination becomes
effective" and "the day upon which such subdivision, split or combination
becomes effective" within the meaning of paragraph (3); and
(B) any Ordinary Shares included in such dividend or distribution
shall not be deemed "outstanding at the opening of business on the day
following the date fixed for such determination" within the meaning of
paragraph (1) and any reduction or increase in the number of Ordinary
Shares resulting from such subdivision or combination shall be disregarded
in connection with such dividend or distribution.
(12) All adjustments to the Conversion Rate shall be calculated to the
nearest 1/10,000th of an Ordinary Share (or if there is not a nearest 1/10,000th
of an Ordinary Share, to the next lower 1/10,000th of an Ordinary Share).
(13) The Company may, but shall not be required to, make such increases in
the Conversion Rate, in addition to those required by this Section 5(e), as the
Board of Directors of the Company considers to be advisable in order to avoid or
diminish any income tax to any holders of Ordinary Shares resulting from any
dividend or distribution of Ordinary Shares or issuance of rights or warrants to
purchase or subscribe for Ordinary Shares or from any event treated as such for
income tax purposes or for any other reason.
(f) Notice of Adjustments and Certain Other Events. Whenever the Conversion
Rate is adjusted as herein provided, the Company shall within 10 Business Days
following the occurrence of an event that requires an adjustment to the
Conversion Rate pursuant to Section 5(e) (or if the Company is not aware of such
occurrence, as soon as practicable after becoming so aware):
(i) compute the adjusted Conversion Rate in accordance with Section
5(e) and prepare and transmit to the Conversion Agent an officers'
certificate setting forth the Conversion Rate, the method of calculation
thereof in reasonable detail, and the facts requiring such adjustment and
upon which such adjustment is based; and
(ii) provide a written notice to the holders of the Convertible
Preferred Shares of the occurrence of such event and a statement in
reasonable detail setting forth the method by which the adjustment to the
Conversion Rate was determined and setting forth the adjusted Conversion
Rate.
18
(g) Rights Plans. To the extent that the Company has a rights plan in
effect, upon conversion of the Convertible Preferred Shares, holders of the
Convertible Preferred Shares shall receive, in addition to the Ordinary Shares
required to be delivered upon conversion, the rights under the rights plan,
unless, prior to conversion of the Convertible Preferred Shares the rights have
separated from the Ordinary Shares, in which case the Conversion Rate shall be
adjusted at the time of separation as if the Company made a distribution to all
holders of the Ordinary Shares as described in clause (4) of Section 5(e),
subject to readjustment in the event of the expiration, termination or
redemption of the rights.
(h) Change of Ordinary Shares into Other Securities, Cash or Property. In
the event of:
(i) any consolidation or merger of the Company with or into another
person (other than a merger or consolidation in which the Company is the
continuing corporation and in which the Ordinary Shares outstanding
immediately prior to the merger or consolidation are not exchanged for
cash, securities or other property of the Company or another corporation);
(ii) any sale, transfer, lease or conveyance to another person of the
property of the Company as an entirety or substantially as an entirety;
(iii) any statutory share exchange of the Company with another person
(other than in connection with a merger or acquisition); or
(iv) any liquidation, dissolution or termination of the Company other
than as a result of or after the occurrence of a Termination Event (as
defined in the Purchase Contract Agreement) (any event described in clauses
(i), (ii), (iii) and (iv), a "Reorganization Event"),
each Convertible Preferred Share shall become, without the consent of the
holders of the Convertible Preferred Shares, convertible into the right to
receive only the kind of securities, cash and other property receivable upon
consummation of such Reorganization Event by a holder of the number of Ordinary
Shares that would have been received by the holder of Convertible Preferred
Shares had such holder converted the Convertible Preferred Shares into Ordinary
Shares immediately prior to the closing date of such Reorganization Event;
provided that upon conversion of the Convertible Preferred Shares the
liquidation preference shall always be paid in cash as provided in Sections 5(c)
and (d), as applicable. For purposes of settling the Conversion Obligation on
the Mandatory Redemption Date, the "Closing Price" of any such securities, cash
and other property that would have been received upon consummation of the
Reorganization Event (the "Exchange Property") under clause (II) of Section
5(d), (A) with respect to any publicly traded securities consisting of common
stock (or its equivalent) traded on a U.S. securities exchange or the Nasdaq
National Market that compose all or part of the Exchange Property, shall be
based on the Closing Price of such securities over the applicable period, (B) in
the case of any cash that composes all or part of the Exchange Property, shall
be based on the amount of such cash and (C) in the case of any other property
that composes all or
19
part of the Exchange Property, shall be based on the value of such property on
the date of the Reorganization Event, as determined by a nationally recognized
independent investment banking firm retained by the Company for this purpose.
For purposes of clause (A) of this paragraph, the term "Closing Price" (and the
term "Trading Day" as used therein) shall be deemed to refer to such price and
days as are applicable to any securities referred to in clause (A) above. In any
such Reorganization Event, the Company shall (and shall cause the issuer of any
Exchange Property to) take such actions as are necessary to make adequate
provision for the delivery of any Exchange Property upon conversion of the
Convertible Preferred Shares after the Reorganization Event. In determining the
kind and amount of the Exchange Property pursuant to the foregoing, it will be
assumed that such holder of Ordinary Shares is not a Constituent Person, or an
affiliate of a Constituent Person to the extent such Reorganization Event
provides for different treatment of Ordinary Shares held by affiliates of the
Company and non-affiliates and such holder failed to exercise its rights of
election, if any, as to the kind or amount of securities, cash and other
property receivable upon such Reorganization Event (provided that if the kind or
amount of securities, cash and other property receivable upon such
Reorganization Event is not the same for each non-electing share, then for the
purpose of this Section, the kind and amount of securities, cash and other
property receivable upon such Reorganization Event by each non-electing share
shall be deemed to be the kind and amount so receivable per share by a plurality
of the non-electing shares). The above provisions shall similarly apply to
successive Reorganization Events.
(i) Tax-Related Increases in the Conversion Rate. The Company may, but
shall not be required to, make such increases in the Conversion Rate, in
addition to those required by this Section 5, as the Board of Directors
considers to be advisable in order to avoid or diminish any income tax to
holders of share capital of the Company resulting from any dividend or
distribution of share capital, or rights to acquire share capital, or from any
event treated in that way for income tax purposes or for any other reason.
(j) Calculations. The Company or its agents will be responsible for making
all calculations called for under the Convertible Preferred Shares (including,
but are not limited to, determination of the market price of the Ordinary Shares
and the amount of any adjustments pursuant to Section 5(e)). The Company or its
agents will make all these calculations in good faith and, absent manifest
error, such calculations will be final and binding on holders of the Convertible
Preferred Shares. The Conversion Agent is entitled to conclusively rely upon the
accuracy of such calculations without independent verification as provided in a
certificate delivered pursuant to Section 5(f).
(k) Conversion Mechanics. The Company shall, in accordance with Cayman
Islands law and the Company's Articles of Association and out of assets legally
available for such purpose and to the extent the Company is solvent after giving
effect thereto, give legal effect to any conversion of the Convertible Preferred
Shares contemplated in this Certificate of Designations by such of the following
methods (or a combination thereof) as the Board of Directors or any duly
authorized committee thereof (the "Committee") may in its discretion determine
(in all cases in such a manner that preserves and protects the rights of the
holders of the Convertible Preferred Shares), including, without limitation, the
right to receive cash
20
and Ordinary Shares as provided in Sections 5(c) and (d), as applicable:
(i) by redeeming mandatorily the converting Convertible Preferred
Shares and in consideration therefor making a cash payment and/or issuing
fully-paid Ordinary Shares in the relevant number calculated by reference
to the relevant formula specified in Section 5(c) or (d), as applicable, to
the holder whose Convertible Preferred Shares are being converted
(including without limitation (x) by way of the automatic application of
any cash amount which would otherwise be payable on the redemption of the
Convertible Preferred Share toward the payment up to the relevant amount of
Ordinary Shares or (y) subject to shareholder resolution, by declaring a
capitalization issue of fully paid up Ordinary Shares in the relevant
amounts in accordance with the Company's Articles of Association); and/or
(ii) provided that the total nominal par value of the Convertible
Preferred Shares being converted is equal to the total nominal par value of
the Ordinary Shares into which they convert, by re-designating Convertible
Preferred Shares as Ordinary Shares and upon such redesignation, each such
Convertible Preferred Share to be converted shall be re-designated as an
Ordinary Share of that class into which it is converted with the rights,
privileges, terms and obligations of such class and the converted Ordinary
Share shall thenceforth form part of the class of Ordinary Shares into
which it was converted for all purposes hereof; and/or
(iii) by issuing redeemable non-voting deferred shares on such terms
and in such amounts as the Committee may consider appropriate to give
effect to the conversion; and/or
(iv) by declaring a dividend in order to give effect to any part of
the conversion; and/or
(v) by any such other method or methods on such terms as the Committee
may consider appropriate and as may be permitted by law.
(l) Special Conversion Right. The provisions of this Section 5(l) shall
only be applicable if, and at the time that, the Company is entitled to exercise
its rights of foreclosure against the Convertible Preferred Shares under the
Pledge Agreement, and in no event shall this Section 5(l) be applicable to any
Separate Convertible Preferred Shares. Upon a Failed Remarketing, if a holder of
Convertible Preferred Shares (which are not Separate Convertible Preferred
Shares) fails to settle in cash, pursuant to Section 5.02(d) of the Purchase
Contract Agreement, its obligations under the Purchase Contract (as defined in
the Purchase Contract Agreement) with respect to which such Convertible
Preferred Shares have been pledged therefore resulting in an event of default
under the Purchase Contract Agreement, the Company may, in connection with
exercising its rights under the Pledge Agreement with respect to such
Convertible Preferred Shares, elect to convert in accordance with Section 5(k)
above such Convertible Preferred Shares on the Purchase Contract Settlement Date
into a right to receive cash in an amount equal to the liquidation preference of
such Convertible Preferred Shares plus accrued and unpaid dividends, if any,
with respect to such Convertible Preferred Shares plus the
21
Intrinsic Value (as defined in the Purchase Contract Agreement), if any, of such
Convertible Preferred Shares. In such event, the Company shall be entitled to
offset the portion of such conversion amount equal to the liquidation preference
of such Convertible Preferred Shares against the amount payable by the holder
under such Purchase Contract and shall pay the remainder of such amounts to such
holder.
"Pledge Agreement" shall mean the Pledge Agreement, dated as December 17,
2003, among the Company and JPMorgan Chase Bank, as Collateral Agent, Custodial
Agent, Securities Intermediary and Purchase Contract Agent, as amended from time
to time.
6. Liquidation Rights. (a) Upon the voluntary or involuntary dissolution,
liquidation or winding up of the Company, the holders of the Convertible
Preferred Shares shall be entitled to receive and to be paid out of the assets
of the Company available for distribution to its shareholders, before any
payment or distribution shall be made on the Ordinary Shares or on any other
class of shares ranking junior to the Convertible Preferred Shares upon
liquidation, dissolution or winding up, the liquidation preference of $25 per
share, plus accumulated and unpaid cumulative dividends (whether or not earned
or declared) to the date of the liquidating distribution and any outstanding
Conversion Obligation with respect to the Convertible Preferred Shares which
have been converted prior to the date of liquidation.
(b) After the payment to the holders of the Convertible Preferred Shares of
the full preferential amounts to which such holders are entitled as provided for
in this Section 6, the holders of the Convertible Preferred Shares as such shall
have no right or claim to any of the remaining assets of the Company.
(c) If, upon any voluntary or involuntary dissolution, liquidation, or
winding up of the Company, the amounts payable with respect to the Convertible
Preferred Shares and any other share capital of the Company ranking as to any
asset distribution on a parity with the Convertible Preferred Shares are not
paid in full, the holders of the Convertible Preferred Shares and of such other
share capital shall share ratably in any such distribution of assets of the
Company in proportion to the full respective preferential distributions to which
they are entitled.
(d) Neither the sale, lease, exchange, transfer or conveyance of all or
part of the property or business of the Company for cash, securities or other
property, nor the merger or consolidation of the Company into or with any other
corporation or the merger or consolidation of any other corporation into or with
the Company, shall be deemed to be a dissolution, liquidation or winding up,
voluntary or involuntary, for the purposes of this Section 6.
7. Ranking. The Convertible Preferred Shares shall rank senior to all
Ordinary Shares outstanding or that may be issued in the future with respect to
the payment of dividends and upon the liquidation, dissolution or winding up of
the Company. The Convertible Preferred Shares shall rank, with respect to the
payment of dividends and upon the liquidation, dissolution or winding up of the
Company, on a parity with each other Series of Preferred Shares issued by the
Company, the terms of which do not expressly provide that such Series ranks
junior to the Convertible Preferred Shares with respect to the payment of
dividends and upon the liquidation,
22
dissolution or winding up of the Company. The Company may not issue any series
or class of preferred shares that ranks senior to the Convertible Preferred
Shares without complying with the provisions of Section 9(b).
8. Voting And Certain Other Rights. Except as set forth herein or required
by applicable law, holders of Convertible Preferred Shares shall have no voting
rights in respect of the Ordinary Shares and their consent shall not be required
for taking any corporate action. Holders of the Convertible Preferred Shares,
voting as a class or acting by written consent of holders of a majority of the
liquidation preference of outstanding Convertible Preferred Shares, shall be
entitled to elect two directors to the Board of Directors if, and as long as,
all accumulated dividends on the Convertible Preferred Shares have not been paid
on the Remarketing Date, the Convertible Preferred Shares are not redeemed on
the Mandatory Redemption Date at a price of $25 per share plus accumulated and
unpaid dividends up to, but not including, the Mandatory Redemption Date or the
Company does not satisfy in full its Conversion Obligation at the time provided
in Section 5(c) or (d), as the case may be, with respect to any shares of
Convertible Preferred Shares which are converted. For this purpose, the Board of
Directors shall reserve two vacant places on the Board of the Company to
accommodate such elections and pass such board resolutions as are necessary to
give effect to such elections. If the holders of the Convertible Preferred
Shares become entitled to elect directors to the Board of Directors, the Company
shall promptly give notice to all holders and take all action necessary,
including calling a meeting or circulating a consent to permit the nomination
and election of such directors. The Articles of the Company's Articles of
Association relating to "Closing Register of Members or Fixing Record Date,"
"General Meeting," "Notice of General Meetings" and "Proceedings at General
Meetings" shall be applicable to the holders of Convertible Preferred Shares as
a class, provided that any written consents approved by a majority of the
holders of Convertible Preferred Shares shall be effective and shall bind all
holders of Convertible Preferred Shares. Directors elected by the holders of the
Convertible Preferred Shares may only be removed by a vote of the Convertible
Preferred Shares, or a written consent in the manner provided above, except
after such time as the holders no longer have the right to elect such directors.
In addition, holders of the Convertible Preferred Shares shall be entitled to
vote on matters as described in Section 9.
9. Modification. (a) Without the Consent of Holders. To the extent
permitted by applicable law, the Board of Directors of the Company may modify
the terms of this Certificate of Designation without the consent of any holder
of the Convertible Preferred Shares to:
(i) evidence the succession of any person to the obligations of the
Company;
(ii) add to the covenants for the benefit of holders of the Convertible
Preferred Shares or to surrender any of the rights or powers of the
Company under the Convertible Preferred Shares;
(iii) cure any ambiguity or correct or supplement any provisions that may
be inconsistent, provided that such action shall not adversely affect
the interest of holders of the Convertible Preferred Shares in any
material respect; or
23
(iv) make any other provision with respect to such matters or questions
arising under this Certificate of Designation which the Company may
deem desirable and which shall not adversely affect the interests of
holders of the Convertible Preferred Shares.
(b) With the Consent of Holders. Except as provided below in this Section
9(b), this Certificate of Designation may be amended, modified or supplemented,
and noncompliance in any particular instance with any provision of this
Certificate of Designation or the Convertible Preferred Shares may be waived, in
each case with the written consent or affirmative vote of the holders of at
least a majority of the aggregate liquidation preference of the Convertible
Preferred Shares at the time outstanding, including any modification occurring
in connection with any merger or consolidation of the Company or otherwise.
Without the written consent or the affirmative vote of each holder of
Convertible Preferred Shares affected thereby (in addition to the written
consent or the affirmative vote of the holders of at least a majority of the
aggregate liquidation preference of the Convertible Preferred Shares at the time
outstanding), an amendment or waiver under this Section 9(b) may not:
(i) change any payment date of the Convertible Preferred Shares;
(ii) change any conversion date of the Convertible Preferred Shares;
(iii) reduce the rate of dividends payable on the Convertible Preferred
Shares;
(iv) change the place or currency of payment of the Convertible Preferred
Shares;
(v) impair the right to institute suit for the enforcement of the
Convertible Preferred Shares;
(vi) adversely affect the right to convert the Convertible Preferred Shares
or reduce the amounts payable on conversion; or
(vii) change the percentage of liquidation preference whose holders must
approve any amendment.
(c) Applicability. All of the provisions of this Section 9 shall apply to
the Convertible Preferred Shares. Sections 12(a) of the Articles of Association
of the Company shall not apply to the Convertible Preferred Shares.
10. Consolidation, Merger, Sale or Conveyance.
(a) Covenant Not to Consolidate, Merge, Convey, Transfer or Lease Property
Except under Certain Conditions. The Company covenants that it will not
consolidate with, convert into, or merge with and into, any other entity or
sell, assign, transfer, lease or convey all or substantially all of its
properties and assets to any person or entity, unless:
24
(i) either the Company shall be the continuing corporation, or the
successor (if other than the Company) shall be a corporation organized
under the laws of the United States of America or a State thereof or
the District of Columbia, the Cayman Islands or Bermuda and the
Convertible Preferred Shares are converted into or exchanged for, in
accordance with applicable law, shares of the successor corporation
with substantially the same rights, powers, preferences and
privileges; and
(ii) the Company or such successor corporation, as the case may be, shall
not, immediately after such consolidation, conversion, merger, sale,
assignment, transfer, lease or conveyance, be in default of payment or
other obligations under the Convertible Preferred Shares.
(b) Rights and Duties of Successor Person. In case of any such merger,
consolidation, share exchange, sale, assignment, transfer, lease or conveyance
and upon any conversion of securities into a successor corporation in accordance
with (a) above, such successor corporation shall succeed to and be substituted
for the Company with the same effect as if it had been named herein as the
Company. Such successor Person thereupon may cause to be signed, and may issue
either in its own name or in the name of the Company, any or all of the
certificates evidencing Convertible Preferred Shares issuable hereunder which
theretofore shall not have been signed by the Company. All the certificates
issued shall in all respects have the same legal rank and benefit under this
Certificate of Designations as the certificates theretofore or thereafter issued
in accordance with the terms of this Certificate of Designations as though all
of such certificates had been issued at the date of original issuance of the
Convertible Preferred Shares.
In case of any such merger, consolidation, share exchange, sale,
assignment, transfer, lease or conveyance such change in phraseology and form
(but not in substance) may be made in the certificates evidencing securities for
which the Convertible Preferred Shares have been exchanged thereafter to be
issued as may be appropriate.
(c) Officers' Certificate and Opinion of Counsel Given to Conversion Agent.
The Company shall deliver to the Conversion Agent an officers' certificate and
an opinion of counsel (conforming to the terms of the Purchase Contract
Agreement) as conclusive evidence that any such merger, consolidation, share
exchange, sale, assignment, transfer, lease or conveyance, and any such
assumption, complies with the provisions of this Section 10 and that all
conditions precedent to the consummation of any such merger, consolidation,
share exchange, sale, assignment, transfer, lease or conveyance have been met.
11. Reservation of Ordinary Shares. The Company shall at all times that any
Convertible Preferred Shares are outstanding reserve and keep available, free
from preemptive rights, out of its authorized but unissued Ordinary Shares the
full number of Ordinary Shares issuable upon conversion of the Convertible
Preferred Shares.
25
12. Currency of Payments. Any cash payments with respect to the Convertible
Preferred Shares shall be paid in U.S. dollars in immediately available funds.
[Signature appears on subsequent page].
26
IN WITNESS WHEREOF, I have affixed my signature hereto this 17th day of
December, 2003.
SCOTTISH RE GROUP LIMITED
By: /s/ Marjorie Hurlston
-------------------------
Corporate Secretary
27
SCHEDULE I
- ------------------------------------------------ -------------------------------
Ratings of Convertible Preferred Shares* Spread
- ------------------------------------------------ -------------------------------
A-/A3 or better 1.50%
- ------------------------------------------------ -------------------------------
BBB+/Baa1 2.00%
- ------------------------------------------------ -------------------------------
BBB/Baa2 2.50%
- ------------------------------------------------ -------------------------------
BBB-/Baa3 3.00%
- ------------------------------------------------ -------------------------------
BB+/Ba1 3.50%
- ------------------------------------------------ -------------------------------
BB/Ba2 4.00%
- ------------------------------------------------ -------------------------------
BB-/Ba3 4.50%
- ------------------------------------------------ -------------------------------
B+/B1 5.00%
- ------------------------------------------------ -------------------------------
B/B2 5.50%
- ------------------------------------------------ -------------------------------
B-/B3 or below or no rating 6.00%
- ------------------------------------------------ -------------------------------
* The above ratings are by Standard & Poor's Ratings Service, a division of
The McGraw-Hill Companies, and Moody's Investors Service, Inc.,
respectively. In the event of a split rating, meaning the two ratings
agencies have differing ratings of the Convertible Preferred Shares, the
lower rating shall determine the spread of the Reset Rate or other dividend
rate.