Template:Nutshell Equity Derivatives 12.9

Section 12.9. Additional Disruption Events.

12.9(a) Additional Disruption Event definitions: The following terms are defined as follows:

12.9(a)(i) “Additional Disruption Event” means any of the events in paragraphs 12.9(a)(ii) to 12.9(a)(viii):

12.9(a)(ii) “Change in Law” means either party determines that, due to a change in law or regulation:

(X) it becomes illegal to buy, sell or hold underlying Shares or;

(Y) it becomes materially more expensive to perform the Transaction.

12.9(a)(iii) “Failure to Deliver” means a party’s failure to deliver Shares when due under a Transaction because of market illiquidity;

12.9(a)(iv) “Insolvency Filing” means that the Issuer commences or agrees to insolvency proceedings or a winding-up petition (or has one instituted against it by a regulator or insolvency administrator). Non-consensual insolvency action taken by creditors is not an Insolvency Filing;

12.9(a)(v) “Hedging Disruption” means that the Hedging Party cannot reasonably acquire, hold, replace or unwind any transactions hedging its equity price risk, or realise, recover or pay the proceeds of any hedging transactions.

12.9(a)(vi) “Increased Cost of Hedging” means that the Hedging Party would incur a materially increased cost under the Transaction to:

(A) hedge its equity price risk; or

(B) realise the proceeds of its hedge.

This excludes costs arising solely from the deterioration of its own creditworthiness.

12.9(a)(vii) “Loss of Stock Borrow” means that, having used commercially reasonable efforts, the Hedging Party cannot borrow the Shares it needs to hedge the Transaction at a rate equal to or lower than the Maximum Stock Loan Rate;

12.9(a)(viii) “Increased Cost of Stock Borrow”: the rate the Hedging Party incurs to borrow Shares for the Transaction exceeds the Initial Stock Loan Rate;

12.9(a)(ix) “Hedging Party”: The party specified as such in the Confirmation or, if none, either party;

12.9(a)(x) “Hedging Shares” means the number of Shares the Hedging Party needs to hedge the equity price risk under a Transaction;

12.9(a)(xi) “Lending Party” means a counterparty that the Hedging Party reasonably and in good faith selects;

12.9(a)(xii) “Non-Hedging Party” is not the Hedging Party;

12.9(a)(xiii) “Maximum Stock Loan Rate” for any “Loss of Stock Borrow” will be specified in the Confirmation;

12.9(a)(xiv) “Initial Stock Loan Rate” for any Increased Cost of Stock Borrow will be specified in the Confirmation; and

12.9(a)(xv) “Price Adjustment” means an adjustment to a price, spread or other variable in a Transaction.

In a super nutshell:

Event	Section	What happens?	At what price?
Change in Law or Insolvency Filing	12.9(b)(i)	Either party gives 2 Scheduled Trading Days’ notice to terminate	Cancellation Amount
Hedging Disruption	12.9(b)(iii)	The Hedging Party may terminate on 2 Scheduled Trading Days’ notice	Cancellation Amount
Increased Cost of Hedging	12.9(b)(iv)	Hedging Party notifies a Price Adjustment. Non-Hedging Party may (i) agree to amend Transaction; (ii) pay the Price Adjustment outright; or (iii) terminate. If NHP has done none within 2 Scheduled Trading Days the Hedging Party can terminate.	Cancellation Amount
Loss of Stock Borrow	12.9(b)(iv)	The Hedging Party notifies the LOSB, the Non-Hedging Party has two Scheduled Trading Days to come up with a stock loan at a rate no higher than the Maximum Stock Loan Rate, failing which the Hedging Party may terminate	Cancellation Amount
Increased Cost of Stock Borrow	12.9(b)(iv)	The Hedging Party notifies the ICOSB and a proposed Price Adjustment. Non-Hedging Party has two Scheduled Trading Days to (i) agree to amend Transaction; (ii) pay the Price Adjustment outright; or (iii) terminate on the second Scheduled Trading Day.	Cancellation Amount

In a normal nutshell:

12.9(b) For the purpose of determining the consequence of an Additional Disruption Event:

12.9(b)(i) If Change in Law or Insolvency Filing applies and one happens, either party may terminate the Transaction two Scheduled Trading Days’ notice (or less, if required under Change in Law), and the Determining Party will determine the Cancellation Amount.

12.9(b)(ii) If “Failure to Deliver” applies, then a Failure to Deliver will not be an Event of Default but the “Delivering Party” must:

(A) notify the “Receiving Party” that the Failure to Deliver has occurred within one Clearance System Business Day of the Exercise Date (for Option Transactions) and at least one Settlement Cycle prior to the Settlement Date (for Forward Transactions and Equity Swap Transactions; and

(B) deliver to the Receiving Party on the Settlement Date the Shares that it can deliver on such date;

and the Receiving Party’s corresponding payment or delivery obligation to the Delivering Party will be proportionately reduced.

Thereafter:

(I) For European Options and Forward Transactions: The Receiving Party may terminate the remaining Transaction effective immediately by notice to the Delivering Party and must (as Determining Party) determine the related Cancellation Amount;

(II) For American Options and Bermuda Options: The Receiving Party may terminate that part of the Transaction comprising the exercised but not settled Options effective immediately by notice to the Delivering Party and must (as Determining Party) determine the related Cancellation Amount;

(III) For Equity Swap Transactions: The Receiving Party may terminate that part of the Transaction consisting of the unsettled deliveries effective immediately by notice to the Delivering Party and must (as Determining Party) determine the Cancellation Amount;

(IV) For unexercised American Options and Bermuda Options to which Multiple Exercise applies, and for Equity Swap Transactions where a Settlement Date has not occurred: The Receiving Party may elect within one Settlement Cycle of the affected Settlement Date to terminate the remainder of the Transaction upon two Scheduled Trading Days’ notice, and must (as Determining Party) determine the Cancellation Amount.

12.9(b)(iii) If “Hedging Disruption” applies and it happens, the Hedging Party may terminate the Transaction on 2 Scheduled Trading Days’ notice, and the Determining Party will determine the Cancellation Amount payable under the Transaction.

12.9(b)(iv) If “Loss of Stock Borrow” applies, then if the Hedging Party notifies the Non-Hedging Party of a Loss of Stock Borrow, the Non-Hedging Party may, within 2 Scheduled Trading Days of notice, lend the Hedging Party the necessary Shares at a rate no greater than the Maximum Stock Loan Rate. If it does not, the Hedging Party may terminate the Transaction on notice and the Determining Party will determine the Cancellation Amount.

12.9(b)(v) If “Increased Cost of Stock Borrow” applies, the Hedging Party may tell the Non-Hedging Party that an Increased Cost of Stock Borrow has happened and that it will make a Price Adjustment to the Transaction.

Within 2 Scheduled Trading Days of that notice the Non-Hedging Party must:

(A) amend the Transaction to make the Price Adjustment,

(B) pay the Hedging Party the Price Adjustment or

(C) terminate the Transaction as of that second Scheduled Trading Day.

Within this period, the Non-Hedging Party may lend the Hedging Party, the necessary Hedging Shares at no more than the Initial Stock Loan Rate.

Absent such an election the Hedging Party may terminate the Transaction. On any termination of the Transaction, the Determining Party will determine the Cancellation Amount.

12.9(b)(vi) If “Increased Cost of Hedging” applies and it occurs, the Hedging Party will so notify the Non-Hedging Party and that it will make a Price Adjustment. Within 2 Scheduled Trading Days the Non-Hedging Party must elect to the Hedging Party either to:

(A) amend the Transaction to cater for the Price Adjustment,

(B) pay the Hedging Party the Price Adjustment or

(C) terminate the Transaction as of that second Scheduled Trading Day. Absent such an election the Hedging Party may terminate the Transaction. On any termination of the Transaction, the Determining Party will determine the Cancellation Amount.

12.9(b)(vii) If both “Hedging Disruption” and “Loss of Stock Borrow” apply and an event happens that could be either, it will be treated as a Loss of Stock Borrow and not a Hedging Disruption.

12.9(b)(viii) Any Shares the Non-Hedging Party or Lending Party provides relating to a Loss of Stock Borrow or Increased Cost of Stock Borrow must be in freely tradable book-entry form and documented under suitable stock lending documentation acceptable to the Hedging Party.

12.9(b)(ix) Any Cancellation Amount must be paid in the Transaction settlement currency no later than three Currency Business Days after the Determining Party’s notice of its determination is effective.