Exhibit 10.2
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Date: March 1, 2002
To: Max Re Ltd. From: Canadian Imperial Bank
of Commerce
Attention: Keith S. Hynes Contact: Tyler Ratcliffe
Phone Number: (441) 296-8800 Phone Number: 212-885-4413
Facsimile Number: (441) 296-8811 Facsimile Number: 212-885-4378
Re: Reference # NY OT00
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TOTAL RETURN SWAP CONFIRMATION
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The purpose of this letter agreement (this "Confirmation") is to confirm the
terms and conditions of the Transaction entered into between Canadian Imperial
Bank of Commerce ("CIBC") and Max Re Ltd., ("Counterparty") on the Trade Date
specified below (the "Transaction"). This Confirmation constitutes a
"Confirmation" as referred to in the Master Agreement
The definitions and provisions contained in the 2000 ISDA Definitions (the "Swap
Definitions") and in the 1996 ISDA Equity Derivatives Definitions (the "Equity
Definitions," and together with the Swap Definitions, the "Definitions"), in
each case as published by the International Swaps and Derivatives Association,
Inc., are incorporated into this Confirmation. In the event of any inconsistency
between the Swap Definitions and the Equity Definitions, the Equity Definitions
will govern. In the event of any inconsistency between either set of Definitions
and this Confirmation, this Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA
Master Agreement dated as of March 1, 2002, as amended and supplemented
from time to time (the "Agreement"), between CIBC and Counterparty. All
provisions contained in the Agreement shall govern this Confirmation except
as expressly modified below. The parties hereto each acknowledges that the
interests acquired under this Transaction will not be registered under the
Securities Act of 1933 (the "Act") and are being sold in reliance upon the
exemption for private placements pursuant to Section 4(2) of the Act.
2. The terms of the particular Transaction to which this Confirmation relates
are as follows:
GENERAL TERMS:
Trade Date: March 1, 2002
Effective Date: March 1, 2002
Termination Date: February 29, 2004, subject to adjustment in
accordance with the Modified Following
Business Day Convention.
Shares: Common Stock of Max Re Diversified
Strategies, Ltd. (the "Fund").
Calculation Agent: CIBC
Settlement Currency: USD
EQUITY AMOUNTS PAYABLE BY CIBC:
Equity Amount Payer: CIBC
Number of Shares: On the Effective Date, 89,335, subject to
adjustment as provided below under
Adjustments and Mandatory Redemptions.
Quarterly Valuation Date: Quarterly, each May 31, August 31, November
30, February 28 and the Termination Date.
Unit NAV: The Fund's total net assets, including
without limitation investments, cash, accrued
interest receivable and any other category of
assets, less its liabilities including any
obligations (whether present or future,
contingent or otherwise, as principal or
surety or otherwise) as calculated on a per
share basis and reported by the Fund and by
Bank of Bermuda (the "Custodian") in
accordance with U.S. GAAP. Provided, that on
any Valuation Date, if the Fund has suspended
reporting Unit NAV, then the Calculation
Agent shall determine Unit NAV.
Maximum Notional Amount: USD 105,000,000
Equity Value: With respect to any Business Day other than a
final Quarterly Valuation Date, the product
of (a) Unit NAV and (b) the Number of Shares.
On a final Quarterly Valuation Date, the
Equity Value shall be the higher of (i) the
highest bid price received by the Calculation
Agent after soliciting bids from (A) at least
three nationally recognized broker / dealers
and, (B) at the Counterparty's option, the
Counterparty or (ii) the Redemption Amount
(as defined below). For this purpose, if
Shares submitted by CIBC for redemption are
not redeemed by the Fund, the Calculation
Agent shall determine the Unit NAV.
Capped Equity Value: The lesser of the Maximum Notional Amount and
the Equity Value.
Equity Notional Amount: Initially, USD 100,000,000, subject to
adjustment on each Quarterly Valuation Date
and Mandatory Redemption Date so that the
Equity Notional Amount equals the Capped
Equity Value on such Quarterly Valuation Date
and Mandatory Redemption Date subject to
adjustment as provided below under
Adjustments.
Appreciation Amount: With respect to the first Quarterly Valuation
Date, an amount equal to the Capped Equity
Value minus the Equity Notional Amount and
thereafter, except for a final Quarterly
Valuation Date, an amount equal to the Capped
Equity Value calculated on the relevant
Quarterly Valuation Date minus the Capped
Equity Value calculated on the immediately
preceding Quarterly Valuation Date, as
applicable. On a final
Quarterly Valuation Date, the Appreciation
Amount will be an amount equal to the Equity
Value calculated on such final Quarterly
Valuation Date minus the Capped Equity Value
calculated on the immediately preceding
Quarterly Valuation Date.
Equity Payment Dates: (i) The sixth Business Day following each
Quarterly Valuation Date, subject to
adjustment in accordance with the
Modified Following Business Day
Convention; and
(ii) In the case of a Mandatory Redemption
Date and the Termination Date, each
date on which CIBC receives a cash
payment from the Fund in exchange for
Shares purchased by CIBC under the
Stock Purchase Agreement (the
"Redemption Amount").
Equity Payments: On each Equity Payment Date CIBC will pay the
Counterparty an amount equal to algebraic sum
of (a) the amount of all dividends and
similar cash distributions paid by the Fund
on the Number of Shares during the period
from the Effective Date or the preceding
Equity Payment Date, as the case may be and
(b) the Appreciation Amount, if such sum is
positive. If such sum is negative then
Counterparty shall pay CIBC the absolute
value of such sum.
FLOATING AMOUNTS PAYABLE
BY COUNTERPARTY:
Floating Amount Payer: Counterparty
Notional Amount: The Equity Notional Amount
Payment Dates: Each Equity Payment Date.
Floating Rate Option: USD-LIBOR-BBA
Designated Maturity: 3 months, pro-rated where applicable
Spread: 0.90%
Floating Rate Day
Count Fraction: Actual/360
Reset Days: Each Payment Date.
Business Days: New York
ADJUSTMENTS On the Effective Date and each Valuation
- ----------- Date, the Unit NAV shall be as reported by
the Custodian on the last Business Day of the
most recent month for which it has provided a
Monthly Valuation Report as described in the
Agreement. If such month is not the month
immediately preceding the Effective Date or
any Quarterly Valuation Date, on the date the
Counterparty provides to CIBC the Monthly
Valuation Report (i) in the case of the
Monthly Valuation Report
for the month immediately preceding the
Effective Date, the Number of Shares shall be
adjusted so that the Number of Shares times
the Unit NAV as of the last Business Day of
the month immediately preceding the Effective
Date equals the initial Equity Notional
Amount and (ii) in the case of the Monthly
Valuation Report for the month corresponding
to the Quarterly Valuation Date, CIBC or
Counterparty, as appropriate, shall pay to
the other that amount, after taking into
account any payment made on the relevant
Equity Payment Date, necessary to make such
other party whole as a result of any
adjustment made to the Unit NAV reported on
the relevant Quarterly Valuation Date.
ADDITIONAL COUNTERPARTY (A) By 1:00 p.m. on the first Business Day
PAYMENTS: after receipt of written notice from CIBC,
Counterparty will pay to CIBC an amount equal
to all amounts which are required to be
refunded to the Fund by CIBC, as the result
of an adjustment after the Termination Date,
to Unit NAV. If CIBC receives an additional
payment after the Termination Date from the
Fund as a result of an adjustment after the
Termination Date, to Unit NAV, CIBC shall pay
such amount to Counterparty on the first
Business Day after receipt of such additional
payment. (B) By 1:00 p.m. on the first
Business Day after receipt of written notice
from CIBC, Counterparty will pay to CIBC an
amount equal to the amount that the Fund or
the Fund's bankruptcy liquidators, trustee or
any court having apparent jurisdiction over
the Fund requires CIBC to pay or repay to the
Fund, the Fund's bankruptcy estate or any
creditor of the Fund in respect of the
Shares.
MANDATORY REDEMPTIONS: In the event of a mandatory redemption by the
Fund of all or part of the Shares on any
Business Day (the "Mandatory Redemption
Date"), then the Equity Notional Amount and
the Number of Shares shall be adjusted
accordingly on the relevant Equity Payment
Date. Such Equity Payment Date is considered
to be a Termination Date that is applicable
to only the Redemption Amount.
3. ACCOUNT DETAILS:
Payments to CIBC:
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Account for Payments: Chase Manhattan Bank, New York
For the Account of: Canadian Imperial Bank of Commerce
Account No.: 544-708-234
ABA No.: 021-000-021
Attention: Financial Products
Payments to Counterparty:
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Account for Payments: Federal Reserve Bank of Boston
For the Account of: Max Re Ltd. (Gen-Re-NEAM)
Account No.: MRLF 0020502
ABA No.: 011-001-234
BOS SAFE DEP
DDA No.: 162299
4. OFFICES:
(a) The Office of CIBC for the Transaction is Toronto.
(b) The Office of Counterparty for the Transaction is Hamilton, Bermuda.
5. BROKER/ARRANGER: None.
6. This Confirmation may be executed in one or more counterparts, either in
original or facsimile form, each of which shall constitute an original and
all of which together shall constitute one and the same agreement. When
executed by the parties through facsimile transmission, this Confirmation
shall constitute the original agreement between the parties and the parties
hereby adopt the signatures printed by the receiving facsimile machine as the
original signatures of the parties.
7. COVENANTS: The Calculation Agent hereby covenants that
all determinations made by the Calculation
Agent under this Confirmation will be made in
good faith and in a commercially reasonable
manner at all times.
8. OTHER PROVISIONS:
Optional Early Termination: The Counterparty shall have the right, under
Section 2.3 (b) (ii) of the Liquidity
Agreement, to terminate the Transaction in
whole, but not in part, on any Business Day,
such Business Day shall be deemed the
Termination Date.
After February 28, 2003, upon 30 days written
notice to CIBC, the Counterparty shall have
the right to terminate the Transaction in
whole, but not in part, on any Business Day,
such Business Day shall be deemed the
Termination Date.
Governing Law: The laws of the State of New York (without
reference to the choice of law doctrine).
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Entering into a derivative transaction involves certain risks. An identification
of the principal risks is provided in the CIBC World Markets Risk Disclosure
Statement, which has been delivered to you. If you have not received a copy,
please let us know and one will be provided to you. You should always consider
those risks in determining whether to enter into derivative transactions.
Except as if expressly agreed to by you or us in writing, neither of us has
acted as advisor to the other with respect to the desirability or
appropriateness of entering into the Transaction confirmed hereby or with
respect to the other party's risk management needs generally. This pertains not
only to the financial and market risk management risks and consequences of the
confirmed or any proposed Transaction, but also to any legal, regulatory, tax,
accounting and credit issues generated by such transactions, which each party
must evaluate for itself and in reliance on its own professional advisors.
The Transaction confirmed hereby might be one which includes one or more
elements not found in more basic swap structures with which you should be
familiar, such as single currency interest rate swaps. These elements, if
present, could include leverage, one or more embedded options or one or more
embedded forwards or some other structural elements which could significantly
affect the Transaction's price behavior As with any other financial market
transaction, you should monitor the Transaction's value frequently throughout
its term to protect yourself as well as possible against unanticipated or
undesired changes in its value and to insure its continued utility relative to
your financial management needs and your appetite for the market, legal,
regulatory, credit, tax and accounting risks that can attend the Transaction.
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Please confirm that the foregoing correctly sets forth the terms of our
agreement by executing the copy of this Confirmation enclosed for that purpose
and returning it to us or by sending to us a letter or telex substantially
similar to this letter, which letter or telex sets forth the material terms of
the Transaction to which this Confirmation relates and indicates your agreement
to those terms.
Yours Sincerely,
CANADIAN IMPERIAL BANK OF COMMERCE
By:
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Name: Gina S. Ghent
Title: Executive Director
Confirmed as of the date first above written:
MAX RE LTD.
By:
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Name:
Title: