Template:Nutshell Equity Derivatives 12.7

12.7 Payment upon Certain Extraordinary Events
12.7(a) If “Cancellation and Payment” or “Partial Cancellation and Payment” applies, then one party will pay the other the amounts described below no later than three Currency Business Days after notice of the determination, which must be given promptly, is effective.
12.7(b) Option Transactions: The parties must promptly agree within five Exchange Business Days of the relevant event (the “Closing Date”) the amount Seller must pay Buyer. If they cannot:

12.7(b)(i) if “Agreed Model” applies, the Calculation Agent will determine the sum of the Unadjusted Value and the Adjustment Value, (noting that the Buyer will not have to pay the Seller anything on cancellation of an Option Transaction other than unpaid Premium).

(A) the Calculation Agent will determine the “Unadjusted Value” as the value of the relevant portion of the Option Transaction on the Closing Date based on:

(1) the average Implied Volatility of the relevant Shares over the 15 Exchange Business Days up to the Closing Date;

(2) expected dividends between the Closing Date and the Expiration Date based on, and payable on the same dates as:

(a) gross ordinary cash dividends due on the relevant Shares in the one-year period ending on the Closing Date or

(b) if the Calculation Agent determines the Issuer has changed its dividend policies before the Closing Date, the expected dividends per the changed policy

in each case excluding Extraordinary Dividends;

(3) the Calculation Agent’s valuation of the Shares and any consideration provided for the Shares to holders at the time of the Extraordinary Event;

(4) a combined interest rate and stock loan rate as specified in the related Confirmation from the Closing Date to the Expiration Date; and

(5) a term of the Option Transaction from the Closing Date to the Expiration Date.

(B) “Adjustment Value” means the difference between the amounts determined pursuant to (B)(1) and (B)(2) below:

(1) the Calculation Agent’s valuation of the relevant portion of the Option Transaction based on:

(a) the average Implied Volatility of the relevant Shares over the 15 Exchange Business Days up to the Announcement Date;

(b) expected dividends between the Announcement Date and the Expiration Date based on, and payable on the same dates as:

(x) gross ordinary cash dividends due on the relevant Shares in the one-year period ending on the Announcement Date or

(y) if the Calculation Agent determines the Issuer has changed its dividend policies before the Announcement Date, the expected dividends per the changed policy

in each case excluding Extraordinary Dividends;

(c) its valuation (as of the Announcement Date) of the Settlement Price (assuming Cash Settlement) of the relevant Shares as of the Valuation Time;

(d) a combined interest rate and stock loan rate as specified in the related Confirmation from the Announcement Date to the Expiration Date; and

(e) a term of the Option Transaction from the Announcement Date to the Expiration Date.

(2) a value for the relevant portion of the Option Transaction based on the factors listed in (1)(a)-(e) above, but with an average Implied Volatility over the 15 Exchange Business Days from the Announcement Date.

12.7(b)(ii) If “Calculation Agent Determination” applies, then the Calculation Agent will determine the amount.

12.7(c) Forward Transactions and Equity Swap Transactions: Any Forward Transaction or Equity Swap Transaction, will be cancelled and the Cancellation Amount determined as follows:

(i) where there is one Determining Party, it will calculate the Cancellation Amount and who has to pay it.

(ii) where there are two Determining Parties, each will calculate a Cancellation Amount and they will split the difference.