Template:Nutshell Equity Derivatives 11

Article 11 Adjustments and Modifications Affecting Indices, Shares and Transactions
11.1. Adjustments to Indices.
11.1(a) Successor Indices. The Calculation Agent may deem an Index calculated by a successor sponsor to the Index Sponsor, or a “Successor Index” that replaces the Index and uses a substantially similar formula and calculation method, to be the Index.
11.1(b) Index Adjustment Events: If before any Valuation Date the Index Sponsor announces a material change to the calculation method of, or materially modifies the Index in any way not contemplated in its formula or method (an “Index Modification”), permanently cancels the Index where no Successor Index exists (an “Index Cancellation”) or fails to announce a relevant Index (an “Index Disruption” (each of these events an “Index Adjustment Event”), then:

(A) if “Calculation Agent Adjustment” applies, then the Calculation Agent must determine whether the Index Adjustment Event materially affects the Index Transaction and, if it does, must calculate the any necessary price, using the Index level as at that Valuation Date it determines using the Index calculation method last in effect before the Index Adjustment Event, using the securities that comprised that Index at that time;

(B) if “Negotiated Close-out” applies then the parties may terminate the Transaction on mutually acceptable terms and if they do not it will continue on the terms and conditions and using formulas and calculation methods in effect as of the time of any necessary calculations; or

(C) if “Cancellation and Payment” applies then following an Index Adjustment Event the Transaction cancelled and valued using the Index calculation method in effect immediately before the Index Adjustment Event in question, as follows:

(1) for an Index Disruption, the Transaction will be cancelled on the Valuation Date,

(2) for an Index Cancellation, the Transaction will be cancelled on the Exchange Business Day before the Index Cancellation is effective (or the date the Index Sponsor announces it, if later) and

(3) following announcement of an Index Modification, either party may elect, on two Scheduled Trading Days’ notice (or less, so that termination occurs by the Index Modification date), to cancel the Transaction by the Scheduled Trading Day before the Index Modification becomes effective and

(X) for Option Transactions, Seller will pay to Buyer the Section 12.7(b)(ii) amount and

(Y) for Swap and Forward Transactions, one party will pay the other the Section 12.7(c) amount.

11.2. Adjustments to Share Transactions and Share Basket Transactions.

11.2(a) “Method of Adjustment” means a method for working out how to adjust a Share Transaction or Share Basket Transaction following an event that the Calculation Agent determines diluted or concentrated the theoretical value of the Shares.

11.2(b): Options Exchange Adjustment: If the Method of Adjustment is “Options Exchange Adjustment” then following adjustment to exchange-traded options the Calculation Agent will adjust any relevant variable under that Transaction that it thinks necessary to reflect the Options Exchange adjustment, effective as of the same date.

If there aren’t any exchange-traded options options on the Shares, the Calculation Agent will adjust the Transaction as it thinks fit to account for the diluting or concentrative effect of any event that, would have led to an adjustment under the Options Exchange’s rules had options in the Shares in question been traded on it.

11.2(c) If “Calculation Agent Adjustment” is the Method of Adjustment for a Share Transaction or Share Basket Transaction (or if none is specified) then following the Issuer’s declaration of an Potential Adjustment Event, the Calculation Agent will determine whether the Potential Adjustment Event will concentrate or dilute the value of the Shares. If it will, the Calculation Agent may:

(i) adjust any relevant variable under that Transaction it considers necessary to account for that dilution or concentration (without adjusting just for changes in volatility, expected dividends, stock loan rate or liquidity) and

(ii) determine the effective dates of any adjustments.

The Calculation Agent may refer to adjustments an Options Exchange makes to corresponding options when doing so.

11.2(d) “Options Exchange” will be specified in the Confirmation and includes any successor or substitute exchange or quotation system on which options contracts on the Shares have relocated (on which the Calculation Agent is satisfied there is comparable liquidity). If one is not specified, it will be the Related Exchange the Calculation Agent determines is the primary market for listed options contracts relating to the relevant Share.

11.2(e) “Potential Adjustment Event” means any of:

(i) a subdivision or reclassification of Shares (not counting a Merger Event) or a free bonus distribution of any such Shares to existing holders;

(ii) a distribution to existing holders of the relevant Shares of:

(A) such Shares; or

(B) securities granting the right to dividends or the proceeds of liquidation of the Issuer proportionately to holders of those Shares; or

(C) securities of an entity owned by the Issuer as a result of a spin-off; or

(D) any other securities, rights or assets for consideration of less than their prevailing market price as determined by the Calculation Agent;

(iii) an Extraordinary Dividend;

(iv) an Issuer call over partially-paid Shares;

(v) a repurchase by the Issuer or any of its subsidiaries of relevant Shares;

(vi) any shareholder’s rights being distributed or separated from the Issuer’s shares under a shareholder rights arrangement that provides for distribution of preferred stock, warrants, debt or rights below their prevailing market value, as determined by the Calculation Agent, provided that any adjustment effected following such an event must be readjusted if those rights are redeemed; or

(vii) any other event that may dilute or concentrate the relevant Shares.

11.3. Adjustments to Certain Share Transactions and Share Basket Transactions in European Currencies. If any Shares were quoted in a pre-Euro currency after the Trade Date quoted exclusively in euro on the relevant Exchange or principal market, the Calculation Agent will adjust any variable relevant to the Transaction to preserve the economic terms of the Transaction. The Calculation Agent will make necessary conversions as of the Valuation Time at an appropriate mid-market spot rate as at the Valuation Time. No adjustments under this Section will affect the denomination of any payment due under the Transaction.
11.4. Correction of Share Prices and Index Levels. If any Exchange price or Index level is corrected by the Exchange or Index Sponsor within a Settlement Cycle of publication, either party may notify the other and the Calculation Agent will determine any resulting payment or adjustment to the Transaction.