Equity Derivatives Definitions - In a Nutshell

Article 1 Certain General Definitions
1.1. “Transaction” means an Option Transaction, Forward Transaction, Equity Swap Transaction or other transaction which incorporates these Definitions.
1.2. “Option Transaction” means an OTC equity option transaction:

(a) on a single index (an “Index Option Transaction”)

(b) on a single share (a “Share Option Transaction”)

(c) on a basket of indices (an “Index Basket Option Transaction”) or

(d) on a basket of shares (a “Share Basket Option Transaction”).

1.3. A “Forward Transaction” means an OTC equity forward transaction:

(a) on a single index (an “Index Forward Transaction”);

(b) on a single security (a “Share Forward Transaction”);

(c) on a basket of indices (an “Index Basket Forward Transaction); or

(d) on a basket of securities (a “Share Basket Forward Transaction”).

1.4. “Equity Swap Transaction” means an Index Swap Transaction, a Share Swap Transaction, an Index Basket Swap Transaction or a Share Basket Swap Transaction.
1.5. An “Index Transaction” means an Index Option Transaction, Index Forward Transaction or Index Swap Transaction.
1.6. “Share Transaction” means any Transaction referencing a single Share, other than a Share Basket Transaction.
1.7. “Index Basket Transaction” means an Index Basket Option Transaction, Index Basket Forward Transaction or Index Basket Swap Transaction.
1.8. “Share Basket Transaction” means a Share Basket Option Transaction, Share Basket Forward Transaction or Share Basket Swap Transaction.
1.9. “Basket Option Transaction” means an Index Basket Option Transaction or Share Basket Option Transaction.
1.10. “Basket Forward Transaction” means an Index Basket Forward Transaction or Share Basket Forward Transaction.
1.11. “Basket Swap Transaction” means an Index Basket Swap Transaction or Share Basket Swap Transaction.
1.12. “Confirmation” means, for a Transaction, the confirmations exchanged between the parties which, taken together, evidence the terms of a Transaction.
1.13. “Index” will be specified in an Index Transaction or Index Basket Transaction.
1.14. “Shares” means the securities specified as such in a Share Transaction or Share Basket Transaction.
1.15. “Basket” means a basket of Indexes or Shares in the relative proportions (or numbers of Shares per Issuer) specified in the Confirmation.
1.16. “Issuer” means, like, the issuer. Of the Shares, like.
1.17. “Trade Date” must be specified in the Confirmation.
1.18. “Buyer” means the party so specified.
1.19. “Seller” means the party so specified.
1.20. “Number of Shares” means:

(a) For a Share Option Transaction: Number of Options * Option Entitlement;

(b) For a Share Forward Transaction or a Share Swap Transaction: The number of Shares specified in the Confirmation; and

(c) For each Issuer in a Share Basket Transaction: the number of Shares of that Issuer specified in the Confirmation.

1.21. “Number of Baskets”: The number of Baskets specified in the Confirmation for an Index Basket Transaction or Share Basket Transaction.
1.22. “Multiplier” must be specified in the Confirmation.
1.23. “Relevant Price” means:

1.23(a) For any Index on any Valuation Date or Averaging Date, the Index level the Calculation Agent determines per the Confirmation at the Valuation Time or, if a method is not specified, the Index level at the Valuation Time; and

1.23(b) For a Share, the price per Share the Calculation Agent determines at the Valuation Time on the Valuation Date or Averaging Date per the Confirmation or, if a method is not specified:

(i) Open outcry Exchanges: for any Share trading on an “open outcry” Exchange with a tradable price at the Valuation Time, the official trading price per Share at that time as reported by the Exchange; and

(ii) Dealer quotation Exchanges: for any Share trading on a dealer quotation Exchange, the mid-point of the highest bid and lowest ask prices quoted at (or immediately before) the Valuation Time on the Valuation Date or Averaging Date ignoring quotations that “lock” or “cross” the Exchange.

1.24. “Equity Notional Amount” will be as specified or, if not specified, will be the “Notional Amount”), adjusted for Equity Notional Resets, Re-investment of Dividends and any Adjustments and Modifications.
1.25. “Exchange” means each specified exchange for an Index or Share (and any Alternative Exchange).
1.26. “Related Exchange” means each specified exchange for an Index or Share and any Alternative Exchange. Where “All Exchanges” is specified, “Related Exchange” means each exchange the Calculation Agent considers to have a material effect on the overall market for trading futures or options on the Index or Share.
1.27. “Clearance System” means the specified clearing system for a Share (or any successor the Calculation Agent determines) or, if none, the main domestic clearance system for that Share on the Settlement Date. If it ceases clearing the Share, the parties must try to settle some other way.
1.28. “Index Sponsor” means the corporation or other entity that

(a) is responsible for the rules, procedures and calculation methods of the Index and

(b) regularly announces the Index level during each Scheduled Trading Day.

1.29. “Exchange Business Day” means any Scheduled Trading Day on which each Exchange and Related Exchange is open for trading during their respective regular trading sessions, even if it closes before its Scheduled Closing Time.
1.30. “Scheduled Closing Time” means the scheduled weekday closing time of an Exchange or Related Exchange on a Scheduled Trading Day, ignoring after-hours trading.
1.31. “Scheduled Trading Day” means a day when each Exchange and Related Exchange is scheduled to be open for their regular trading sessions.
1.32. “Currency Business Day” means a day on which commercial banks are open for business in the principal financial center for the currency or, for euro, when the TARGET system is operating.
1.33 Settlement Currency: The currency specified as such in the relevant Confirmation.
1.34. “Euro” means the lawful currency of the European Union.
1.35. “EC Treaty” means the Treaty of Rome establishing the European Community as amended from time to time.
1.36. “Clearance System Business Day” means any day on which a Clearance System is scheduled to be open for business.
1.37. “Settlement Cycle” means the usual period of Clearance System Business Days or Exchange Business Days) following a trade on which settlement usually occurs according to the Exchange’s rules. If there are multiple Exchanges, it will be the longest such period.
1.38. “Cash-settled” means that Cash Settlement applies to the Transaction.
1.39. “Physically-settled” means a Transaction to which Physical Settlement applies.
1.40. The “Calculation Agent” will be specified in the Confirmation. It must exercise its judgment in in good faith and in a commercially reasonable manner but, when doing so, is neither fiduciary nor advisor to either party.
1.41. “ISDA Master Agreement” means an ISDA Master Agreement, and “Event of Default”, “Affiliate” and “Early Termination Date” are as defined in the ISDA Master Agreement.
1.42. “Knock-in Price” must be specified in the Confirmation.
1.43. “Knock-out Price” must be specified in the Confirmation.
1.44. Knock-in Event.

(a) If “Knock-in Event” applies, a party’s right to exercise an Option under an Option Transaction will be conditional upon the Knock-in Event existing when it is exercised on any Knock-in Determination Day. The parties’ rights and obligations will be altered upon the such exercise as is specified in the Confirmation.

(b) “Knock-in Event” must be specified in the Confirmation. If it is not, but the Confirmation specifies a Knock-in Price for a Knock-in Reference Security that is also the specified Underlier for that Transaction, the Knock-in Event will occur:

(i) If the Knock-in Price on the Trade Date was higher than the initial level set for the Transaction: when the Knock-in Reference Security’s level at the Knock-in Valuation Time on a Knock-in Determination Day at least equals the Knock-in Price; and

(ii) If the Knock-in Price on the Trade Date was lower than the initial level set for the Transaction: when the Knock-in Reference Security‘s level at the Knock-in Valuation Time on a Knock-in Determination Day at most equals the Knock-in Price.

If the parties cannot agree whether a Knock-in Event has occurred, the Calculation Agent will decide.

1.45. Knock-out Event.

(a) If “Knock-out Event” applies, a party’s right to exercise an Option under a Transaction will be conditional upon the Knock-out Event not having occurred on any Knock-out Determination Day as of the time of such exercise, and the parties’ respective rights and obligations will be altered from the occurrence of the Knock-out Event as specified in the Confirmation.

(b) “Knock-out Event” must be specified in the Confirmation. If it is not, but the Confirmation specifies a Knock-out Price for a Knock-out Reference Security that is also the specified Index, Share or Basket for that Transaction, the Knock-out Event will occur:

(i) If the Knock-out Price on the Trade Date was higher than the initial level set for the Transaction: when the level of the Knock-out Reference Security at the Knock-out Valuation Time on any Knock-out Determination Day is at least equal to the Knock-out Price; and

(ii) If the Knock-out Price on the Trade Date was lower than the initial level set for the Transaction: when the level of the Knock-out Reference Security at the Knock-out Valuation Time on any Knock-out Determination Day is equal to or lower than the Knock-out Price.

If the parties cannot agree whether a Knock-out Event has occurred, the Calculation Agent will decide.

1.46. “Knock-in Reference Security” means, where a Knock-in Event applies, the index, share or basket specified as such in the Confirmation or, if not specified, the specified Underlier.
1.47. “Knock-out Reference Security” means, where a Knock-out Event applies, the index, share or basket specified as such in the Confirmation or, if not specified, the specified Underlier.
1.48. “Knock-in Determination Day” means each specified Scheduled Trading Day, unless it is a Disrupted Day due to an event occurring before the Knock-in Valuation Time, in which case it will be the following undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Knock-in Determination Day. In this case the Calculation Agent must determine the level of the Knock-in Reference Security as if it were an Underlier on a disrupted Valuation Date using the method set out in Section 6.6.

Unless otherwise specified the Knock-in Determination Days will be each Scheduled Trading Day from and including the Trade Date to and including the final Valuation Date, the Expiration Date or, if none, the date one Settlement Cycle prior to the final Settlement Date for the Transaction (adjusted as necessary under Sections 3.1(f) and 6.6).
1.49. “Knock-out Determination Day” means each specified Scheduled Trading Day, unless it is a Disrupted Day due to an event occurring before the Knock-out Valuation Time, in which case it will be the following undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Knock-out Determination Day. In this case the Calculation Agent must determine the level of the Knock-out Reference Security as if it were an Underlier on a disrupted Valuation Date using the method set out in Section 6.6.

Unless otherwise specified the Knock-out Determination Days will be each Scheduled Trading Day from and including the Trade Date to and including the final Valuation Date, the Expiration Date or, if none, the date one Settlement Cycle prior to the final Settlement Date for the Transaction (adjusted as necessary under Sections 3.1(f) and 6.6).
1.50. “Knock-in Valuation Time” means the specified time on any Knock-in Determination Day or, if there is none, the Valuation Time specified in the related Confirmation, or if none, the Scheduled Closing Time on the relevant exchange for the Knock-in Reference Security on any Knock-in Determination Day

If an exchange closes early and before the specified Knock-in Valuation Time, the Knock-in Valuation Time will be that actual closing time.
1.51. “Knock-out Valuation Time” means the specified time on any Knock-out Determination Day or, if there is none, the Valuation Time specified in the related Confirmation, or if none, the Scheduled Closing Time on the relevant exchange for the Knock-out Reference Security on any Knock-out Determination Day

If an exchange closes early and before the specified Knock-out Valuation Time, the Knock-out Valuation Time will be that actual closing time.
Article 2 General Terms Relating to Option Transactions
2.1. Certain Definitions and Provisions Relating to Option Transactions. The following terms apply to Option Transactions:

2.1(a) “Commencement Date” means, for an American Option Transaction, the date so specified in the Confirmation (or the next following Scheduled Trading Day, if it is not a Scheduled Trading Day) or if no such date is specified, the Trade Date.

2.1(b) “Number of Options” must be specified in the Confirmation.

2.1(c) “Option Entitlement” means the number of Shares, or Baskets, per Option specified in the Confirmation or, if none is specified, one Share or Basket per Option.

2.1(d) “Option” means each unit into which an Option Transaction is divided for purposes of exercise, valuation or settlement.

2.1(e) “Strike Price” means:

(i) for an Index Option Transaction, the level of the Index specified in the Confirmation;

(ii) for a Share Option Transaction, the price per Share specified in the Confirmation;

(iii) for an Index Basket Option Transaction, the amount per Basket specified in the Confirmation; and

(iv) for a Share Basket Option Transaction, the amount per Basket specified in the Confirmation.

2.2. Option Style.

2.2(a) “American Option” means an Option Transaction which is not a Bermuda Option and which may be exercised on any Scheduled Trading Day during a multi-day Exercise Period.

2.2(b) “Bermuda Option” means an Option Transaction which may be exercised only on the Potential Exercise Dates during the Exercise Period and on the Expiration Date.

2.2(c) “European Option” means an Option Transaction which may be exercised only on the Expiration Date.

2.3. Option Type.

2.3(a) “Call” means an Option Transaction entitling Buyer:

(i) Where “Cash Settlement” applies: To receive from Seller the Option Cash Settlement Amount (where the Settlement Price exceeds the Strike Price); and

(ii) Where “Physical Settlement” applies: To buy Shares (or Baskets) from Seller at the Settlement Price per Share or Basket.

2.3(b) “Put” means an Option Transaction entitling Buyer:

(i) Where “Cash Settlement” applies: To receive from Seller the Option Cash Settlement Amount (where the Strike Price exceeds the Settlement Price); and

(ii) Where “Physical Settlement” applies: To sell Shares (or Baskets) to Seller at the Settlement Price per Share or Basket.

2.4. Terms Relating to Premium.

2.4(a) Payment of Premium: Buyer must pay Seller the Option Transaction Premium on the Premium Payment Date.

2.4(b) “Premium” for an Option Transaction will be specified in the Confirmation. Where the Confirmation specifies a Premium per Option, the Premium will be the product of the per-Option Premium and the Number of Options.

2.4(c) “Premium Payment Date” will be the date specified as such in the Option Transaction Confirmation or, if it is not a Currency Business Day for the currency of the Premium, the next following Currency Business Day. If it is not specified, the Premium Payment Date will fall one Settlement Cycle following the Trade Date, or if that is not a Currency Business Day, the next following Currency Business Day.

Article 3 Exercise of Options
3.1. General Terms Relating to Exercise.

3.1(a) “Exercise Period” means:

(i) For American Options: all Scheduled Trading Days from, and including, the Commencement Date to, and including, the Expiration Date between 9:00 a.m. and the Latest Exercise Time,

(ii) For Bermuda Options: each Potential Exercise Date and the Expiration Date, between 9:00 a.m. and the Latest Exercise Time, and

(iii) For European Options: the Expiration Date between 9:00 a.m. and the Expiration Time.

All such times will be local time in the location specified in the Confirmation for receipt by Seller or Seller’s Agent or, if not specified, local time in the jurisdiction of the Exchange.

3.1(b) “Exercise Date” means the Scheduled Trading Day during the Exercise Period on which such Option is exercised.

3.1(c) “Potential Exercise Date” means each specified as such in a Bermuda Option Confirmation (or, if it is not a Scheduled Trading Day, the next following Scheduled Trading Day), unless it is a Disrupted Day due to an event occurring before the Latest Exercise Time in which case it will be the following undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Potential Exercise Date. In any case, if an Option Transaction is exercised on a Scheduled Trading Day that would have been an Potential Exercise Date had it not been a Disrupted Day, that day will be treated as the Potential Exercise Date when determining whether an Exercise Date has occurred during the Exercise Period.

3.1(d) “Latest Exercise Time” will be specified in the Option Transaction Confirmation (and if it is not, will be the Expiration Time). On the Expiration Date it will be the Expiration Time.

3.1(e) The “Expiration Time” for an Option Transaction will be the time specified or, if not specified, the Valuation Time.

3.1(f) “Expiration Date” will be specified in an Option Transaction Confirmation (or, if it is not a Scheduled Trading Day, the following Scheduled Trading Day), unless that day has become a Disrupted Day before the Latest Exercise Time. In this case it will be the next undisrupted Scheduled Trading Day, though if eight Scheduled Trading Days in a row are Disrupted Days, the eighth one, even though a Disrupted Day, will be the Expiration Date. In any case, if an Option Transaction is exercised on a Scheduled Trading Day that would have been an Expiration Date had it not been a Disrupted Day, that day will be treated as the Expiration Date when determining whether an Exercise Date has occurred during the Exercise Period.

3.2. Procedure for Exercise.

(a) Notice: Unless Automatic Exercise applies, Buyer must give irrevocable notice during the Exercise Period to Seller to exercise an Option.

(b) Late notices: For American Options, a notice given after the Latest Exercise Time on a Scheduled Trading Day will be effective on the following Scheduled Trading Day in the Exercise Period (if there is one).

(c) Multiple Exercise: Where Multiple Exercise applies, Buyer must specify how many Options it is exercising on each Exercise Date.

(d) Written confirmation of oral notices: Buyer will execute and deliver to Seller a written confirmation confirming any oral exercise within one Scheduled Trading Day however, failure by to provide such confirmation will not affect the validity of an oral notice.

3.3. Multiple Exercise.

3.3(a) If “Multiple Exercise” applies to an American Option or a Bermuda Option, Buyer may exercise any part of the unexercised Options on any Scheduled Trading Day during the Exercise Period but may not exercise fewer than the Minimum Number of Options or more than the Maximum Number of Options on any one Scheduled Trading Day, and where an “Integral Multiple” is specified, only in that Integral Multiple.

An attempted exercise on any Scheduled Trading Day of:

(i) more than the Maximum Number of Options will be treated as an exercise of the Maximum Number of Options only (and the excess will remain unexercised);

(ii) fewer than the Minimum Number of Options will be ineffective; and

(iii) an amount of Options that is not in the Integral Multiple will be rounded down to the next lowest Integral Multiple (and the excess will remain unexercised).

3.3(b) Clean-up exercise: In any case, Buyer may exercise any number of Options that does not exceed the Maximum Number of Options provided that is all the remaining unexercised Options on any Exercise Date and, on the Expiration Date, all unexercised Options.

3.3(c) “Minimum Number of Options” will be specified in the Option Transaction Confirmation where Multiple Exercise applies.

3.3(d) “Maximum Number of Options” will be specified in the Option Transaction Confirmation where Multiple Exercise applies.

3.4. Automatic Exercise. If “Automatic Exercise” applies to an Option Transaction then (unless, by the Expiration Time on the Expiration Date Buyer notifies Seller that Automatic Exercise should not occur) each unexercised Option will be automatically exercised:

3.4(a) Cash Settlement: at the Expiration Time on the Expiration Date; and

3.4(b) Physical Settlement: if the Calculation Agent determines the Option to be In-the-Money at such time, as at the Expiration Time on the Expiration Date.

3.4(c) “In-the-Money” means:

(i) For a Call: That the Reference Price at least equals the price at which a Related Exchange would automatically exercise a Physically-settled option on that Share with that Strike Price or, if there are no listed options on that Share or there is no Related Exchange, the Reference Price exceeds the Strike Price; and

(ii) For a Put: That the Reference Price is no greater than the price at which a Related Exchange would automatically exercise a Physically-settled option on that Share with that Strike Price or, if there are no listed options on that Share, or there is no Related Exchange, the Reference Price is less than the Strike Price); and

3.4(d) “Reference Price” means the price per Share or per Basket determined as of the Expiration Time on the Expiration Date and, if no means of determining such price or amount are provided, that will be:

(i) For a Share Option Transaction: The Relevant Price of the Share

(ii) For a Share Basket Option Transaction:the sum of the values for each Share in the Basket determined as its Relevant Price multiplied by its Number of Shares (in either case, using the Valuation Time and Valuation Date as the Expiration Time and Expiration Date)

4 General Terms Relating to Forward Transactions
4.1. Definitions for Forward Transactions. For Forward Transactions, the following definitions apply:

4.1(a) Forward Price: For any kind of Forward Transaction, the Forward Price will be specified in the Confirmation.

4.1(b) “Forward Floor Price” means the level of the Underlier, specified as such in the Confirmation.

4.1(c) “Forward Cap Price” means the level of the Underlier specified as such in the related Confirmation.

4.2. Terms Relating to Prepayment.

4.2(a) Payment of the Prepayment Amount. For a Forward Transaction to which “Prepayment” applies, Buyer must pay Seller the Prepayment Amount on the Prepayment Date.

4.2(b) “Prepayment Amount” will be defined in the Confirmation.

4.2(c) “Prepayment Date” will be the date specified in the Confirmation, or, if it is not a Currency Business Day, the following Currency Business Day or, if not specified, the date one Settlement Cycle following the Trade Date, or if it is not an Exchange Business Day that is a Currency Business Day, the next following Exchange Business Day that is.

Article 5 General Terms Relating to Equity Swap Transactions
5.1. Equity Amount Payer. The “Equity Amount Payer” will be specified in the Confirmation.
5.2. “Equity Amount Receiver” means the party specified as such in the Equity Swap Transaction Confirmation or, if none, the party who is not the Equity Amount Payer.
5.3. “Initial Exchange Amount” means the amount that is specified as such in the related Equity Swap Transaction Confirmation for a party and that it must pay on the Initial Exchange Date.
5.4. “Initial Exchange Date” will be specified in the related Confirmation, or, if it is not an Exchange Business Day and a Currency Business Day, the following day that is.
5.5. “Final Exchange Amount” means any amount specified as such for a party in an Equity Swap Transaction Confirmation. It will be payable on the Final Exchange Date.
5.6. “Final Exchange Date” will be specified in the Confirmation, or, if it is not an Exchange Business Day and a Currency Business Day, will be the next day that is.
5.7. “Rate of Return” on any Cash Settlement Payment Date means the rate the Calculation Agent determines for the Valuation Date using the formula: ((Final Price - Initial Price)/Initial Price) * Multiplier (if any)
5.8. “Initial Price” means, for the first Valuation Date, the price specified in the Confirmation, and for each subsequent Valuation Date, the Final Price for the immediately preceding Valuation Date.
5.9. “Final Price” means, for each Valuation Date:

5.9(a) Index Swap Transactions: the Index level at the Valuation Time on the Valuation Date;

5.9(b) Share Swap Transactions: the price per Share at the Valuation Time on the Valuation Date or, if no means for determining the Final Price are provided in the Confirmation:

(i) For “open outcry” Exchanges that have a price as of the Valuation Time, the Exchange’s official price per Share at the Valuation Time on the Valuation Date; and

(ii) For Exchanges that are dealer quotation systems, the mid-point of the highest bid and lowest ask prices quoted at the Valuation Time on the Valuation Date (ignoring quotations that “lock” or “cross” the system);

5.9(c) Index Basket Swap Transactions: The weighted sum of the Relevant Prices for the Indices in the Basket; and

5.9(d) Share Basket Swap Transactions: The sum of the values for the Shares of each Issuer as the product of

(i) the Relevant Price of the Share and

(ii) the relevant Number of Shares in the Basket.

5.10 Equity Notional Reset: if “Equity Notional Reset” applies the Equity Notional Amount following any Cash Settlement Payment Date will be adjusted to equal the existing Equity Notional Amount +/- the Equity Amount determined on that Cash Settlement Payment Date. Article 6 Valuation
6.1. “Valuation Time” means the time on the relevant Valuation Date or Averaging Date specified in the related Confirmation or, if not specified, the Scheduled Closing Time on the Exchange on for the Index or Share on that date. If the Exchange closes before its Scheduled Closing Time and the Valuation Time is after the time it actually closes, then the Valuation Time will be that actual closing time.
6.2. “Valuation Date” means (for Option Transactions) each Exercise Date and (for Forward Transactions and Equity Swap Transactions) each date so specified in the Confirmation (and, where that is not a Scheduled Trading Day, the following Scheduled Trading Day), subject to the disruption provisions in Section 6.6.
6.3. General Terms Relating to Market Disruption Events
6.3(a) “Market Disruption Event” means

(i) a material Trading Disruption or Exchange Disruption to a Share or Index during the hour before the Valuation Time (etc), or

(ii) an Early Closure.

To work out whether there is a Market Disruption Event on an Index due to a Market Disruption Event on one of its component securities, the Calculation Agent will determine the percentage that security contributes to the Index by comparing

(x) how much of the Index level is attributable to that security with

(y) the Index level just before the Market Disruption Event happened.

6.3(b) “Trading Disruption” means any suspension or limitation on trading imposed by an Exchange or Related Exchange for any reason

(i) relating to the Share on the Exchange (or on Exchanges for securities comprising at least 20 percent of the Index level, for any Index Transactions and Index Basket Transactions), or

(ii) in futures or options contracts on the Share or Index on any Related Exchange.

6.3(c) Exchange Disruption means any event (other than an Early Closure) that the Calculation Agent determines impedes market participants trading or valuing:

(i) Shares on an Exchange (or, for Index Transactions and Index Basket Transactions, on Exchanges whose securites comprise at least 20 percent of the Index level), or

(ii) futures or options contracts on the Share or the Index on any Related Exchange.

6.4. “Disrupted Day” means any Scheduled Trading Day on which an Exchange or Related Exchange does not open for trading during its regular trading session or suffers a Market Disruption Event. The Calculation Agent must notify the parties as soon as practicable if any Averaging Date, a Valuation Date, Potential Exercise Date, Knock-in Determination Day, Knock-out Determination Day or Expiration Date is a Disrupted Day.
6.5. “Scheduled Valuation Date” means any date that, had it not been a Disrupted Day, would have been a Valuation Date (i.e., ignoring any postponement on account of a disruption).
6.6. Consequences of Disrupted Days. If any Valuation Date is a Disrupted Day, then:

(a) Index Transaction or Share Transactions: It will be the next undisrupted Scheduled Trading Day unless eight Scheduled Trading Days in a row are Disrupted Days, in which case:

(i) that eighth Scheduled Trading Day will be the Valuation Date, even though it is a Disrupted Day, and

(ii) the Calculation Agent must determine:

(A) for an Index Transaction, the Index level at the Valuation Time on that day using the calculation method used for the Index before the disruption began, using the Exchange-traded price as of the Valuation Time on that eighth Scheduled Trading Day for each security in the Index (or, if that security is still disrupted, its good faith estimate of its value as of the Valuation Time on that day; and

(B) for a Share Transaction, its good faith estimate of the value for the Share as of the Valuation Time on that eighth Scheduled Trading Day;

(b) Index Basket Transactions: the Valuation Date for each undisrupted Index will be the Scheduled Valuation Date, and the Valuation Date for each disrupted Index will be the next undisrupted Scheduled Trading Day for that Index, unless eight Scheduled Trading Days in a row are Disrupted Days, in which case:

(i) that eighth Scheduled Trading Day will be the Valuation Date, even though it is a Disrupted Day, and

(ii) the Calculation Agent must determine the Index level as of the Valuation Time on that eighth Scheduled Trading Day using the calculation method used for the Index before the disruption began, using the Exchange-traded price as of the Valuation Time on that eighth Scheduled Trading Day for each security in the Index (or, if that security is still disrupted, its good faith estimate of its value as of the Valuation Time on that day; and

(c) Share Basket Transactions: the Valuation Date for each undisrupted Share will be the Scheduled Valuation Date, and the Valuation Date for each disrupted Share will be the next undisrupted Scheduled Trading Day, unless eight Scheduled Trading Days in a row are Disrupted Days, in which case:

(i) that eighth Scheduled Trading Day will be the Valuation Date, even though it is a Disrupted Day, and

(ii) the Calculation Agent must determine its good faith estimate of the value for that Share as of the Valuation Time on that eighth Scheduled Trading Day.

6.7. Averaging. If Averaging Dates are specified, then the following provisions will apply for any Valuation Date:

6.7(a) “Averaging Date” means, for each Valuation Date, each date so specified (or, if it is not a Scheduled Trading Day, the following Scheduled Trading Day).

6.7(b) Settlement Price and Final Price. The Settlement Price or Final Price for a Valuation Date will be:

(i) Index Transactions and Cash-settled Share Transactions: The average of the Relevant Prices of the Index or the Shares on each Averaging Date;

(ii) Index Basket Transactions: The average for the Basket the Calculation Agent determines using the method set out in the Confirmation at the Valuation Time on each Averaging Date or, if not so set out, the average for the Baskets it determines on the Averaging Date as the sum of Relevant Prices for each Index in the Basket; and

(iii) Cash-settled Share Basket Transactions: The average of the Baskets the Calculation Agent determines using the method set out in the Confirmation at the Valuation Time on each Averaging Date or, if not so set out, the average of the Baskets it determines on the Averaging Date as the sum of each Share determined as Relevant Price x Number of Shares.

6.7(c) Averaging Date Disruption. If any Averaging Date is a Disrupted Day, then, if the specified consequence for "Averaging Date Disruption” is:

6.7(c)(i) “Omission”, then the Averaging Date will not be relevant when determining the Settlement Price or Final Price. If as a result there would be no Averaging Date on that Valuation Date, Section 6.6 will apply when determining the relevant level on the final Averaging Date for that Valuation Date as if it were a disrupted Valuation Date;

6.7(c)(ii) “Postponement”, then Section 6.6 will apply when determining the relevant level on that Averaging Date as if it were a disrupted Valuation Date whether or not the deferred Averaging Date would fall on a date that already is an Averaging Date; or

6.7(c)(iii) “Modified Postponement”, then:

(A) Index Transactions and Share Transactions: The Averaging Date will be the next Valid Date, though if one has not occurred by the Valuation Time on the eighth Scheduled Trading Day following the originally disrupted Averaging Date or Disrupted Day:

(1) that eighth Scheduled Trading Day will be the Averaging Date (even if it is already an Averaging Date), and

(2) the Calculation Agent will determine the relevant level for that Averaging Date per Section 6.6;

(B) Index Basket Transactions or Share Basket Transactions: the Averaging Date for each unaffected Index or Share will be as specified in the Confirmation as an Averaging Date for tat Valuation Date and the Averaging Date for a disrupted Index or Share will be the next Valid Date for the Index or Share. However if the next Valid Date for the Index or Share has not occurred by the Valuation Time on that eighth following Scheduled Trading Day then:

(1) that eighth Scheduled Trading Day will be the Averaging Date (even if it is already an Averaging Date) and

(2) the Calculation Agent will determine the relevant level under Section 6.6; and

(C) “Valid Date” means an undisrupted Scheduled Trading Day on which another Averaging Date for the same Valuation Date does not occur.

6.7(d) Adjustments of the Exchange-traded Contract. If any Exchange-traded Contract terms are changed by the Exchange, the Calculation Agent must adjust any variable relevant to Transaction settlement as necessary to preserve the economic equivalent of all payments by the parties under the Transaction that would have been required following that change.

6.7(e) Adjustments to Indices. If an Index Modification or Index Cancellation occurs by, or an Index Disruption occurs on an Averaging Date under any Index Transaction or Index Basket Transaction, then the Index Adjustment Events under Section 11.1(b) will apply.

6.8. If “Futures Price Valuation” applies to an Index in an Index Transaction, then on a Valuation Date:

6.8(a) “Valuation Date” means the day on which the Official Settlement Price is published whether or not it is a Disrupted Day (except where Section 6.8(e) applies).

6.8(b) Additional definitions:

6.8(b)(i) “Exchange-traded Contract” for an Index is as specified in the Confirmation by reference to

(A) that Index and

(B) its delivery month; and

(C) the Exchange on which it is traded.

6.8(b)(ii) “Official Settlement Price” means the official settlement price of the Exchange-traded Contracts as published by the Exchange or its clearing house.

6.8(c) Settlement Price and Final Price. the Settlement Price or the Final Price on any Valuation Date:

6.8(c)(i) for an Index Transaction, will be the Official Settlement Price; and

6.8(c)(ii) for an Index Basket Transaction, the Settlement Price or the Final Price will be as provided elsewhere in these Definitions, provided that the Relevant Price for each Index where Futures Price Valuation applies will be the Official Settlement Price.

6.8(d) Adjustments of the Exchange-traded Contract. Without duplicating Section 11.1 (which takes priority), if the Exchange-traded Contract is changed by the Exchange, the Calculation Agent will, if necessary, adjust the Strike Price, Number of Options, Initial Price, Forward Price, Forward Floor Price, Forward Cap Price, Knock-in Price, Knock-out Price or any other relevant variable to preserve the economic equivalent of any payments by the parties under the Transaction required after the date of the change.

6.8(e) Non-Commencement or Discontinuance of the Exchange-traded Contract. If there is no Official Settlement Price because trading in the Exchange-traded Contract is permanently discontinued by a Valuation Date, the Official Settlement Price for that Valuation Date the relevant Index level at the close of the Exchange’s regular trading session on the Valuation Date.

The Expiration Date or Valuation Date will be the date on which Official Settlement Price would be published (had the Exchange-traded Contract been trading) unless it is a Disrupted Day, in which case Sections 3.1(f) or 6.6, will apply.

6.8(f) Corrections of the Official Settlement Price. If the Exchange corrects the Official Settlement Price for any Valuation Date within one Settlement Cycle after its original publication, either party may notify the other and the Calculation Agent will adjust the terms of the Transaction to account for such correction if needed and determine any amount payable as a result.

7. General Terms Relating to Settlement
7.1. If “Settlement Method Election” applies then the “Electing Party” (if one is specified, or the Buyer or the Equity Amount Receiver if not) must give irrevocable notice of its election of Cash Settlement or Physical Settlement for the Transaction by the Settlement Method Election Date.

If the Electing Party does not elect a settlement method, it will be the specified “Default Settlement Method” if one is specified, or Cash Settlement (for Index Transactions and Equity Swap Transactions) and Physical Settlement (for Share Forward Transactions and Share Basket Forward Transactions) if not.
7.2. “Settlement Method Election Date” will be the date specified in the Confirmation, or, if it is not a Scheduled Trading Day, the next Scheduled Trading Day.
7.3. “Settlement Price” means, for any Valuation Date:

7.3(a) Cash-settled Share Option Transactions or Share Forward Transactions: the price per Share the Calculation Agent determines as provided under the Confirmation as of the Valuation Time on the Valuation Date or, if not so provided that the Settlement Price will be:

(i) for any Share on an “open outcry” Exchange that has a tradable price at the Valuation Time the price per Share at that Valuation Time, as reported by the Exchange; and

(ii) for any Share on a dealer Exchange or quotation system, the mid-point of the highest bid and lowest ask prices quoted at or immediately before the Valuation Time on the Valuation Date without regard to quotations that “lock” or “cross” the exchange or system;

7.3(b) Cash-settled Share Basket Option Transactions and Share Basket Forward Transactions: The Calculation Agent will determine the Settlement Price for the Basket according to the formula specified in the Confirmation or, if not specified, by adding the values for each Share in the Basket: Relevant Price x Number of Shares

7.3(c) Physically-settled Share Option Transactions and Share Basket Option Transactions: the Strike Price;

7.3(d) Index Option Transactions and Index Forward Transactions: The Calculation Agent will determine the level of the Index per the method in the Confirmation as of the Valuation Time on the Valuation Date or, if there is no such method, as the level of the Index at the Valuation Time on the Valuation Date; and

7.3(e) Index Basket Option Transactions and Index Basket Forward Transactions: the Calculation Agent will determine an amount for the Basket per the method in the Confirmation at the Valuation Times on the Valuation Date or, if no method is provided, as an amount for the Basket equal to the weighted sum of the Relevant Prices for the Indices in the Basket.

Article 8 Cash Settlement
8.1. Cash Settlement of Option Transactions. For each Exercise Date under a Cash-settled Option Transaction Seller will pay to Buyer any Option Cash Settlement Amount on the Cash Settlement Payment Date for all Options exercised on that Exercise Date.
8.2. “Option Cash Settlement Amount” means, for each Valuation Date:

(a) Index Option Transaction and Index Basket Option Transactions: For any Exercise Date, the number of exercised Options x Strike Price Differential x one unit of the Settlement Currency x any Multiplier; and

(b) Share Option Transaction and Share Basket Option Transactions: for any Exercise Date, the number of exercised Options x Option Entitlement x Strike Price Differential.

8.3. “Strike Price Differential” means, for each Valuation Date, the greater of zero and

(a) for a Call, Settlement Price - Strike Price; or

(b) for a Put, Strike Price - Settlement Price.

8.4. Cash Settlement of Forward Transactions. For each Cash Settlement Payment Date under a Cash-settled Forward Transaction:

(a) if “Prepayment” does not apply:

(i) where the Forward Cash Settlement Amount is positive, Seller will pay it to Buyer on the Cash Settlement Payment Date; and

(ii) if Forward Cash Settlement Amount is negative, then Buyer will pay its absolute value to Seller on the Cash Settlement Payment Date; and

(b) if “Prepayment” applies, Seller will pay Buyer Forward Cash Settlement Amount + any Excess Dividend Amount on the Cash Settlement Payment Date.

8.5. Forward Cash Settlement Amount. “Forward Cash Settlement Amount” means, for each Valuation Date:

(a) Index Forward Transaction or Index Basket Forward Transactions:

(i) where “Prepayment” does not apply: Settlement Price - Forward Price x 1 unit of Settlement Currency x Multiplier;

(ii) where “Prepayment” applies: Settlement Price x 1 unit of Settlement Currency x Multiplier;

(b) Share Forward Transaction or Share Basket Forward Transactions:

(i) where neither “Prepayment” or “Variable Obligation” applies: Number of Shares (or Baskets) x Settlement Price - Forward Price;

(ii) where “Prepayment” applies but “Variable Obligation” does not: Number of Shares or Baskets x Settlement Price;

(iii) where “Prepayment” does not apply but “Variable Obligation” does:

(A) where Settlement Price ≤ Forward Floor Price: Number of Shares or Baskets x Settlement Price - Forward Floor Price;

(B) where Forward Cap Price ≥ Settlement Price > Forward Floor Price: Number of Shares or Baskets x zero; and

(C) where Settlement Price > Forward Cap Price: Number of Shares or Baskets x Settlement Price - Forward Cap Price; and

(iv) where both “Prepayment” and “Variable Obligation” apply: Number of Shares or Baskets (without rounding) x Settlement Price.

8.6. Cash Settlement of Equity Swap Transactions. Where Cash Settlement applies for each Cash Settlement Payment Date under an Equity Swap Transaction, if the Type of Return is:

8.6(a) “Price Return”:

(i) if the Equity Amount is positive then the Equity Amount Payer will pay it (with any other amounts it owes) to the Equity Amount Receiver on the relevant Cash Settlement Payment Date; and

(ii) if the Equity Amount is negative then the Equity Amount Receiver will pay its absolute value (with any other amounts it owes) to the Equity Amount Payer on the relevant Cash Settlement Payment Date;

8.6(b) “Total Return” and “Re-investment of Dividends” does not apply, then Price Return will apply, only on each Dividend Payment Date, the Equity Amount Payer will pay any due Dividend Amount to the Equity Amount Receiver on the Dividend Payment Date; and

8.6(c) “Total Return” and “Re-investment of Dividends” applies, then Price Return will apply, only when determining each the Equity Amount on each later Cash Settlement Payment Date the Calculation Agent must adjust the Equity Notional Amount as described in Section 10.4.

8.7. The “Equity Amount” for any Cash Settlement Payment Date means Equity Notional Amount X Rate of Return as determined by the Calculation Agent at the Valuation Time on the Valuation Date.
8.8. “Cash Settlement Payment Date” means the date specified in Confirmation or, if none is specified, the date that is one Settlement Cycle following the Valuation Date, (or, in either case, the following Currency Business Day if the date in question isn’t one).

If, due to a Disrupted Day, there is more than one Valuation Date for the components of any Basket, the Cash Settlement Payment Date will be determined by reference to the last one.
Article 9 Physical Settlement
9.1. Physical Settlement of Option Transactions. For each Exercise Date under a Physically-settled Option Transaction, on the Settlement Date:

(a) Calls:

Buyer will pay Seller Settlement Price x Number of Shares to be Delivered or Settlement Price x Number of Baskets to be Delivered (without regard to rounding) and

Seller will deliver the Number of Shares to be Delivered or Number of Baskets to be Delivered and will pay any Fractional Share Amount to Buyer;

(b) Puts:

Buyer will deliver the Number of Shares to be Delivered or the Number of Baskets to be Delivered, and pay any Fractional Share Amount to Seller and

Seller will pay to Buyer Settlement Price x Number of Shares to be Delivered or Settlement Price x Number of Baskets to be Delivered (without regard to rounding); and

(c) such payments and deliveries will be made on the Settlement Date through the Clearance System to the accounts specified in the Confirmation.

9.2. Physical Settlement of Forward Transactions. For a Settlement Date under a Forward Transaction for which “Physical Settlement” applies, on the relevant Settlement Date:

(a) For a Share Forward Transaction:

(i) Neither “Prepayment” or “Variable Obligation” applies:

Buyer will pay to Seller an amount equal to Forward Price x Number of Shares, and

Seller will deliver the Number of Shares to be Delivered and pay any Fractional Share Amount to Buyer;

(ii) “Prepayment” does not apply and “Variable Obligation” applies:

Buyer will pay to Seller Forward Floor Price x Number of Shares

Seller will deliver the Number of Shares to be Delivered and pay any Fractional Share Amount to Buyer; and

(iii) if “Prepayment” applies, Seller will deliver to Buyer the Number of Shares to be Delivered and will pay the Excess Dividend Amount, if any, and any Fractional Share Amount; and

(b) For a Share Basket Forward Transaction:

(i) Neither “Prepayment” or “Variable Obligation” applies:

Buyer will pay to Seller an amount equal to Forward Price x Number of Baskets, and

Seller will deliver to Buyer Number of Shares of each Issuer in the Basket x Number of Baskets to be Delivered (rounded per Section 9.6) and will pay any Fractional Share Amount to Buyer;

(ii) “Prepayment” does not apply and “Variable Obligation” applies:

Buyer will pay to Seller Forward Floor Price x Number of Baskets' and'

Seller will deliver to Buyer Number of Shares of each Issuer in the Basket x Number of Baskets to be Delivered (rounded per Section 9.6) and will pay any Fractional Share Amount to Buyer; and

(iii) if “Prepayment” applies for each Issuer comprising the Basket, Seller will deliver to Buyer Number of Shares x Number of Baskets to be Delivered (rounded per Section 9.6) and will pay any Excess Dividend Amount or Fractional Share Amount to Buyer.

All payments and deliveries will be made through the Clearance Systems to the specified accounts of the Buyer or the Seller.
9.3. Physical Settlement of Equity Swap Transactions. Where “Physical Settlement” applies to an Equity Swap Transaction, on each Settlement Date:

• the Equity Amount Payer will deliver the Number of Shares or Baskets to be Delivered and will pay any Fractional Share Amount to the Equity Amount Receiver;and
• the Equity Amount Receiver will pay the Equity Notional Amount to the Equity Amount Payer.
  

9.4. “Settlement Date” means:

(a) for Option Transactions, the first Clearance System Business Day one Settlement Cycle after the Exercise Date; and

(b) for Forward Transactions and Equity Swap Transactions, the specified date (or, failing that, one Settlement Cycle after the Valuation Date (adjusted for Clearance System Business Days).

HOWEVER the Settlement Date will be delayed until any Settlement Disruption Event has lifted. If it doesn’t lift for 8 straight Clearance System Business Days then, if the Shares can be delivered some other way, the Settlement Date will be a settlement cycle after that eighth Clearance System Business Day. Otherwise, it will just be postponed until delivery can be effected.

If only some Shares in a Basket are disrupted, the unaffected portion must be settled on schedule.

9.5. “Number of Shares to be Delivered” is calculated as follows:

(a) Share Option Transactions: For an Exercise Date, number of exercised Options x Option Entitlement;

(b) Share Forward Transactions where “Variable Obligation” does not apply: the Number of Shares;

(c) Share Forward Transactions where “Variable Obligation” applies:

(i) if Settlement Price ≤ Forward Floor Price: Number of Shares.

(ii) if Forward Floor Price < Settlement Price ≤ Forward Cap Price: (Foward Floor Price/Equity Derivatives) x Number of Shares; and

(iii) if Settlement Price > Forward Cap Price: ((Forward Floor Price + Settlement Price - Forward Cap Price)/Settlement Price) x Number of Shares

(d) Share Swap Transactions: Number of Shares.

If the Number of Shares to be Delivered comprises any fraction of a Share, it will be rounded down to an integral number of Shares and a Fractional Share Amount will be payable in lieu of the fraction.

9.6. “Number of Baskets to be Delivered” means:

(a) Share Basket Option Transactions: on an Exercise Date, number of exercised Options x Option Entitlement.

(b) Share Basket Forward Transaction where “Variable Obligation” does not apply: Number of Baskets.

(c) Share Basket Forward Transaction where “Variable Obligation” applies:

(i) where Settlement Price ≤ Forward Floor Price: Number of Baskets.

(ii) where Forward Floor Price < Settlement Price ≤ Forward Cap Price: (Forward Floor Price/Settlement Price) x Number of Baskets.

(iii) where Settlement Price > Forward Cap Price: ((Forward Floor Price + Settlement Price - Forward Cap Price)/Settlement Price) x Number of Baskets

(d) Share Basket Swap Transactions: the Number of Baskets.

If the aggregate number of Shares of any Issuer in a Basket is not an integral number of Shares then the aggregate number of Shares of that Issuer to be delivered will be rounded down and a Fractional Share Amount paid in lieu of the fraction.

9.7. “Fractional Share Amount” means a Settlement Currency amount representing any fractional Share in a Number of Shares to be Delivered or the Number of Baskets to be Delivered multiplied by:

(a) Share Option Transactions and Share Basket Option Transactions: the Settlement Price for that Share on the Exercise Date (assuming Cash Settlement with an Exercise Date of the Valuation Date);

(b) Share Forward Transactions and Share Basket Forward Transactions: the Settlement Price for that Share on the Valuation Date for that Settlement Date (or, if none, the date one Settlement Cycle before the Settlement Date); and

(c) Share Swap Transactions and Share Basket Swap Transactions: the Final Price for the Share on the Valuation Date for that Settlement Date (or, if none, the date one Settlement Cycle before the Settlement Date).

9.8. “Settlement Disruption Event” means, an event beyond the control of the parties which means the Clearance System cannot transfer a Share.
9.9. Expenses. All Share transfer expenses and taxes will be payable by the party that would pay them in a normal sale of the Sharess in question through the relevant Clearance System.
9.10. Delivery Versus Payment. Delivery versus payment will apply wherever delivery and payment are due on the same day and the Clearance System permits it.
9.11. Representation and Agreement. A party delivering Shares under a Transaction represents, on the date of conveyance, that it has conveyed good title to the necessary Shares, free from:

(i) Encumbrance: any encumbrance (other customary liens) or other restrictions, without the receiver having to provide any documents or comply with any volume or manner of sale restrictions,

(ii) Transfer restrictions: any restrictions or required consents to transfer of the Shares by any person,

(iii) Transferee limitations: any limitations on who may be transferred such Shares,

(iv) Certification requirements: Any approval, consent, opinion or notice from any person before transfer, and

(v) Registration: any registration, qualification or prospectus delivery requirement for such Shares under applicable laws.

(vi) Book-entry form: Where a Clearance System is involved, the Shares are properly in book-entry form.

9.12. Indemnification for Failure to Deliver. If, absent a designatged Early Termination Date, a party fails to perform any delivery obligation, it will indemnify the other party on demand for any costs or expenses the other party incurs as a result. The deliveree’s signed certificate giving reasonable detail of those costs or expenses will be conclusive evidence that they have been incurred. However, no party will be liable for Consequential loss in any circumstances.
Article 10 Dividends
10.1. “Dividend Amount” means a Share’s Record Amount, Ex Amount or Paid Amount, as specified in the Confirmation and adjusted to cater for concentrations or dilutions under Section 11.2.

10.1(a) “Record Amount” means 100% of the gross cash dividend per Share declared by the Issuer to Shareholders on any record date during the Dividend Period.

10.1(b) “Ex Amount” means 100% of the gross cash dividend per Share declared by the Issuer to Shareholders of record, where the Shares commence trading “ex-dividend” during the Dividend Period.

10.1(c) “Paid Amount” means 100% of the gross cash dividend per Share paid during the Dividend Period to holders of record of a Share.

Any “gross cash dividend” represents the sum before any tax withholding and excluding any tax imputations, credits, refunds or deductions granted or levied on the dividend, and excluding any Extraordinary Dividends and Excess Dividend Amounts.
10.2. “Dividend Payment Date” means, for each Dividend Period, the date specified as such in the Confirmation (or the following Currency Business Day if it isn’t one). If no Dividend Payment Date is specified it will be the Cash Settlement Payment Date or Settlement Date relating to the end of the relevant Dividend Period.
10.3. “Dividend Period” means the Second Period, unless specified as the First Period.

10.3(a) The “First Period” starts on the Clearance System Business Day one Settlement Cycle after the Trade Date and then runs from one Cash Settlement Payment Date or Settlement Date to the next.

10.3(b) The “Second Period” starts on the Trade Date and then runs from one Valuation Date to the next, ending on the final Valuation Date (unless it is a Physically-settled Forward Transaction to which Variable Obligation doesn’t apply, in which case it ends a Settlement Cycle before the Settlement Date).

10.4. If “Re-investment of Dividends” applies, after each Dividend Payment Date the Calculation Agent must add the Dividend Amount to the Equity Notional Amount and that will be the new Equity Notional Amount for the following Cash Settlement Payment Date.
10.5. Dividend Payment Obligations Relating to Physically-settled Option Transactions. All dividends on Shares to be delivered under a Physically-settled Option Transaction will be payable to the party that would receive them under normal market practice for a sale of the Shares settling through a Clearance System on the Exercise Date.
10.6. “Extraordinary Dividend” means the specified amount per Share or, if not specified, the amount determined by the Calculation Agent.
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.
Article 12 Extraordinary Events
12.1. General Provisions Relating to Extraordinary Events.

12.1(a) “Extraordinary Event” means a Merger Event, Tender Offer, Index Adjustment Event, Nationalization, Insolvency, Delisting or Additional Disruption Event.

12.1(b) A “Merger Event” relating to any Shares means:

(i) a mandatory requirement to transfer all of those Shares to another entity;

(ii) the Issuer merges with another entity (except where the Issuer is the continuing entity and the Shares are not changed)

(iii) any entity offers to acquire 100% of the outstanding Shares and that offer results in an irrevocable commitment to transfer all the Shares to the offeror, or

(iv) the Issuer or its subsidiaries merges with another entity where the Issuer is the continuing entity and the Shares are not changed, but the outstanding Shares (not controlled by the other entity) immediately before the merger represented less than 50% of the outstanding Shares left after the merger (a “Reverse Merger”),

in each case if the Merger Date is on or before,

(A) for Physically-settled Option Transactions the later of the Expiration Date and the final Settlement Date,

(B) for Physically-settled Forward Transaction or Equity Swap Transactions, the relevant Settlement Date or,

(C) in any other case, the final Valuation Date.

12.1(c) “Merger Date” means the closing date of a Merger Event or, if one can’t be determined the date determined by the Calculation Agent.

12.1(d) “Tender Offer” means the Calculation Agent determines there has been a takeover offer or other event that results in an entity obtaining or having the right to obtain more than 10% and less than 100% of the outstanding voting shares of the Issuer.

12.1(e) “Tender Offer Date” means, for a Tender Offer, the date the Calculation Agent determines on which the applicable percentage threshold of voting shares are actually purchased.

12.1(f) “Share-for-Share” means

(i) for a Merger Event or Tender Offer, that the consideration for the relevant Shares consists (or, at the option of the holder of such Shares, will consist) solely of New Shares, and

(ii) a Reverse Merger.

12.1(g) “Share-for-Other” means a Merger Event or Tender Offer where the consideration is solely Other Consideration.

12.1(h) “Share-for-Combined” means a Merger Event or Tender Offer where the consideration is Combined Consideration.

12.1(i) “New Shares” means ordinary shares of any entity, that following the Merger Date or Tender Offer Date will be:

(i) publicly quoted, on a venue located in the same country as the Exchange (or, for European Union Exchanges, in the European Union) and

(ii) not subject to any exchange controls or trading limitations.

12.1(j) “Other Consideration” means consideration other than New Shares.

12.1(k) “Combined Consideration” means a combination of New Shares and Other Consideration.

12.1(l) “Announcement Date” means, in respect of an Extraordinary Event,

(i) for a Merger Event, the date when a firm intention to merge is first publicly announced,

(ii) for a Tender Offer, the date when a firm intention to purchase the requisite number of voting shares that leads to the Tender Offer is first publicly announced,

(iii) for an Index Disruption or Index Cancellation, the date when the Index Sponsor publicly announces any adjustment or cancellation causing an Index Disruption or Index Cancellation and in the case of an Index Modification, the Exchange Business Day before the Index Modificationis effective,

(iv) for a Nationalization, when the proposed Nationalization is first publicly announced,

(v) for an Insolvency, when institution of insolvency proceedings, presentation of an insolvency petition or similar action that leads to the Insolvency is publicly announced; and

(vi) for a Delisting, when the Exchange first publicly announces that the Shares will cease to be listed as contrampled in Section 12.6(a)(iii).

If any Extraordinary Event (other than an Index Disruption) is announced after the actual closing time for the ordinary regular trading session on Exchange, the Announcement Date will be the next Scheduled Trading Day.

12.1(m) “Implied Volatility” means for any Exchange Business Day, the mid-market implied volatility of the Shares the Calculation Agent determines by reference to the most comparable listed option on the relevant Shares considering such factors as it considers appropriate. If there is no such listed option or the Calculation Agent considers it is not sufficiently liquid, it will determine Implied Volatility at it sees fit.

12.1(n) “Affected Shares” means Shares affected by a Merger Event or Tender Offer.

12.2. Consequences of Merger Events.
For any Merger Event if, under “Consequences of Merger Events” for “Share-for-Share”, “Share-for-Other” or “Share-for-Combined”, the specified consequence is:

12.2(a) “Alternative Obligation”, then except for Reverse Mergers, following the Merger Date:

(i) the relevant New Shares or Other Consideration (as modified by any relevant terms and including any proceeds of any redemption) will be deemed to be the “Shares”

(ii) if relevant, the new issuer will be deemed to be the “Issuer”;

(iii) those New Shares or Other Consideration to which an existing shareholder would be entitled upon completion of the Merger Event will be deemed the relevant “Number of Shares”; and

(iv) the Calculation Agent will make other adjustments to the terms, as necessary (but will not adjust to account solely for changes in volatility, expected dividends, stock loan rate or liquidity).

12.2(b) “Cancellation and Payment”, the Transaction will be cancelled as of the Merger Date and:

(i) Option Transactions: Seller will pay Buyer the Section 12.7(b) amount, and

(ii) Forward Transactions and Equity Swap Transactions: one party will pay the other a 12.7(c) amount;

12.2(c) “Options Exchange Adjustment”, then the Calculation Agent will adjust the Transaction per Options Exchange Adjustment in Section 11.2(b) (but ignoring the words “diluting or concentrative”);

12.2(d) “Calculation Agent Adjustment”, the Calculation Agent must either:

(i) adjust the Transaction to account for the economic effect of the Merger Event (excluding changes in volatility, expected dividends, stock loan rate or liquidity of the Shares or the Transaction), or

(ii) if it considers that that could not produce a commercially reasonable result, notify the parties that the Transaction will be terminated, in which case Cancellation and Payment will apply and any necessary payments will be calculated under Section 12.7 (and for Option Transactions, the Calculation Agent must determine the payment as if “Calculation Agent Determination” applied);

12.2(e) If “Modified Calculation Agent Adjustment” is specified then, after the Merger Date, the Calculation Agent will either

(i) adjust the Transaction to account for the economic effect of the Merger Date in its determination, or

(ii) if that would not produce a commercially reasonable result, terminate the Transaction, at “Cancellation and Payment” (or, for an Option Transaction, “Calculation Agent Determination”) under Section 12.7.

12.3(e) “Partial Cancellation and Payment”, then the portion of a Share Basket Transaction represented by Affected Shares will be cancelled as of the Merger Date, the amount calculated under Section 12.7 for such Affected Shares will be paid by one party to the other, the Share Basket Transaction will continue with the Basket comprising the remaining Shares, and the Calculation Agent will adjust any terms if necessary to preserve as nearly as practicable the economic terms of the Transaction for the remaining Shares; or

12.2(g) “Component Adjustment”, then, where a Merger Event is “Share-for-Combined”, the option chosen for “Share-for-Share” will apply to the New Shares component and the option chosen for “Share-for-Other” will apply to the Other Consideration component (as the Calculation Agent determines).

12.3. Consequences of Tender Offers. If “Tender Offer” applies, then if, under “Consequences of Tender Offers” for “Share-for-Share”, “Share-for-Other” or “Share-for-Combined”, the specified consequence is:

12.3(a) “Cancellation and Payment”, then the Transaction in question will be cancelled as of the Tender Offer Date and:

(i) Under an Option Transaction, Seller will pay Buyer the amount calculated under Section 12.7(b), and

(ii) Under a Forward Transaction or a Equity Swap Transaction one party will pay to the other the amount calculated under Section 12.7(c);

12.3(b)“Options Exchange Adjustment”, then following each adjustment to the settlement terms of any relevant Options Exchange-traded options, the Calculation Agent will make adjustments per Section 11.2(b) (ignoring the words “diluting or concentrative” in the second sentence);

12.3(c) “Calculation Agent Adjustment”, then, following the Tender Offer Date the Issuer and the Shares will not change, but the Calculation Agent shall either:

(i) adjust the Transaction to account for the economic effect of the Tender Offer on the Transaction (but not solely for changes in volatility, expected dividends, stock loan rate or liquidity on the Shares), which it may do by reference to corresponding adjustments made by an options exchange to options on the Shares and determine the effective date of that adjustment, or

(ii) if it determines that no adjustment under (i) would produce a commercially reasonable result, notify the parties that the Transaction will terminate and “Cancellation and Payment” will apply and will be calculated under Section 12.7 (for Option Transactions as if “Calculation Agent Determination” applied;

12.3(d) If “Modified Calculation Agent Adjustment (Tender Offers)” is specified then, after the Tender Offer Date, Calculation Agent will either (i) adjust the Transaction to account for the economic effect of the Tender Offer in its determination, or (ii) if that would not produce a commercially reasonable result, terminate the Transaction, in which case “Cancellation and Payment” will under Section 12.7 (and for an Option Transaction, “Calculation Agent Determination” will apply).

12.3(e) “Partial Cancellation and Payment”, then the portion of a Share Basket Transaction represented by Affected Shares will be cancelled as of the Tender Offer Date, the amount calculated under Section 12.7 for such Affected Shares will be paid by one party to the other, the Share Basket Transaction will continue with the Basket comprising the remaining Shares, and the Calculation Agent will adjust any terms if necessary to preserve as nearly as practicable the economic terms of the Transaction for the remaining Shares; or

12.3(f) “Component Adjustment”, then for a Share-for-Combined Tender Offer:

(i) “Share-for-Share” will apply to the part of the consideration comprising New Shares and

(ii)“Share-for-Other” will apply to the part of the consideration comprising Other Consideration.

12.4. Settlement Following a Merger Event or Tender Offer.
Where, following a Merger Event or Tender Offer and adjustment of:

(a) A Cash-settled Transaction: the Calculation Agent will value the Other Consideration as necessry on each Valuation Date or Averaging Date.

(b) A Physically-settled Transaction:Where:

(i) New Shares are required to be delivered, the deliveror will deliver them per the settlement terms in the Confirmation (though, if it would not have received its New Share entitlement by the Settlement Date, the relevant Settlement Date will be postponed to the first Clearance System Business Day on which it would be able to deliver New Shares to the other party.

(ii) Other Consideration is required to be delivered, the deliveror will deliver it to the other party as the other party directs, as soon as reasonably practicable after the later of:

(1) the Settlement Date; and

(2) the first day on which Shareholder, having received the Other Consideration, would be able to deliver it to the other party.

12.5. Composition of Combined Consideration. For any “Share-for-Combined” Merger Event or Tender Offer:

(a) If “Composition of Combined Consideration” applies:

(i) where a holder of the Option Entitlement or Number of Shares could determine the Combined Consideration and could receive New Shares as part of it, the Combined Consideration will be New Shares to the maximum permitted value; and

(ii) if such a holder could make any election other than New Shares, the Combined Consideration will be determined as follows:

(A) the deliveree/payee may determine the composition by giving to the deliveror/payor at least two Scheduled Trading Days’ notice before the deadline for the relevant election; and

(B) otherwise, the deliveror/payor will determine the Composition of Combined Consideration.

(b) If “Composition of Combined Consideration” does not apply:

(i) to where a holder of the Option Entitlement or Number of Shares could determine the Combined Consideration and could receive New Shares as part of it, the Combined Consideration will be New Shares to the maximum permitted value; and

(ii) if such a holder could make any election other than New Shares, the Calculation Agent will determine Combined Consideration.

12.6 Nationalization, Insolvency and Delisting
12.6(a) The following definitions apply:

(i) “Nationalization” means all an Issuer’s Shares or substantially all of its assets have to be transferred to a government;

(ii) “Insolvency” means that an Issuer becomes insolvent and:

(A) all its Shares have to be transferred to an insolvency administrator or

(B) Shareholders of that Issuer are prohibited from transferring them; and

(iii) “Delisting” means that the Exchange announces that the Shares will cease to be listed on the Exchange (except because of a Merger Event or Tender Offer) and are not immediately re-listed on another exchange in the same country (or, where the Exchange is in the European Union, in the European Union).

12.6(b) If either party becomes aware of a Nationalization, Insolvency or Delisting, it will promptly tell the other party.
12.6(c) When determining the consequence of any Nationalization, Insolvency or Delisting:

(i)if “Negotiated Close-out” applies, then unless the parties agree to terminate the Transaction it will continue, but either party may choose to cash settle a Physically-settled Transaction, and if a Scheduled Valuation Date is a Disrupted Day, the Calculation Agent will ignore Section 6.6 (Disrupted Days) and use its good faith estimate to determine the Settlement Price or Final Price as of the Valuation Time on that Valuation Date;

(ii) “Cancellation and Payment” means that the Transaction will be cancelled as of the Announcement Date and

(A) For Option Transactions, Seller will pay Buyer an amount calculated per Section 12.7(b);

(B) For Forward Transactions or Equity Swap Transactions, one party will pay the other an amount calculated per Section 12.7(c); and

(iii) “Partial Cancellation and Payment” means that the portion of a Share Basket Transaction representing Affected Shares will be cancelled as of the Announcement Date, the amount for the Affected Shares will be calculated and paid per Section 12.7 and the remainder of the Share Basket Transaction will continue with the non-Affected Shares, the Calculation Agent adjusting any terms as necessary to preserve as far as possible the economic terms for the remaining Share Basket.

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.

12.8. Cancellation Amount.

12.8(a): “Cancellation Amount” means the gains or losses the Determining Party would incur under prevailing circumstances in replacing (i) the material terms of the Transaction, including payments and deliveries that would, but for the Extraordinary Event, have been required after termination and (ii) the parties’ option rights under the Transaction.

12.8(b): Any Cancellation Amount will be determined by the Determining Party in good faith using commercially reasonable procedures as of the date the Transaction was terminated (or such other dates as would be commercially reasonable).

12.8(c): In determining a Cancellation Amount, the Determining Party may consider:

(i) Dealer quotations: dealer quotations for replacement transactions

(ii) Market data: market data; and

(iii) Internal valuations: similar material from internal sources and Affiliates where they are regularly used by the Determining Party in its business for similar valuations.

12.8(d): The Determining Party will consider quotations under Section 12.8(c)(i) or relevant market data under Section 12.8(c)(ii) unless it reasonably believes in good faith that they are not readily available or would produce a result that would not satisfy standards described in this definition. The Determining Party may include costs of funding. Third parties supplying quotations or market data pursuant may include dealers, end-users, information vendors, brokers and other sources.

12.8(e): Without duplication and when it is commercially reasonable to do so, when calculating a Cancellation Amount the Determining Party may consider any loss or cost (or gain) incurred in terminating, liquidating or re-establishing any hedge.

12.8(f): The Determining Party will be specified in the confirmation.

12.8(g): “Commercially reasonable procedures” may include:

(i) Determining Party’s pricing and valuation models for similar transactions with third parties; and

(ii) different valuation methods depending on the type, complexity or size of the Transaction.

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.

Article 13 Miscellaneous
13.1. Non-Reliance. If “Non-Reliance” applies then each party represents to the other that:

(a) it is entering into such Transaction as principal;

(b) the other party is not its fiduciary;

(c) it is not relying upon any representations not made in writing under the ISDA Master Agreement or any Confirmations;

(d) it has sought such independent advice as it considers necessary, and it has made its own decisions based upon that advice and its own judgment and not upon anything said or done by the other party; and

(e) it fully understands the Transaction and is willing and able to assume the attendant risks.

13.2. Agreements and Acknowledgments Regarding Hedging Activities.

13.2(a) If “Agreements and Acknowledgments Regarding Hedging Activities” applies each party agrees that:

(i) neither party is relying on

(A) the manner or method in which the other party hedges

(B) any communication about the other party's hedging, or

(C) any statement made by such party about its hedging

and that

(ii)

(A) each party may, but doesn't have to, hedge;

(B) any hedges are the hedging party’s proprietary positions;

(C) neither party holds its Hedge Positions for the other party, and the other party has no interest in its Hedge Positions; and

(D) each party may hedge or not in its sole discretion.

13.2(b) “Hedge Positions” means any positions in securities, derivatives or FX, any stock loans or any other arrangements a party makes to hedge Transactions, whether individually or across a portfolio.

13.3. Index Disclaimer. If “Index Disclaimer” applies:

(a) Index Sponsor not involved: Each party agrees that the Index Sponsor does not endorse the Transaction, make any representations about the Index, the Transaction or their respective performance and will not be liable to anyone for any error in the Index nor obliged advise anyone of any such error.

(b) Parties not liable for Index Sponsor: Neither party is affiliated with the Index Sponsor will be liable for any act or omission of the Index Sponsor relating to the Index, or represents, warrants, undertakes or accepts any responsibility for any aspect of the Index.

13.4. Additional Acknowledgments. If “Additional Acknowledgments” applies each party acknowledges that:

13.4(a) neither the other party nor its Affiliates provides professional advice on the Transaction;

13.4(b) it has been able evaluate the merits and risks of the Transaction to its satisfaction. It is not relying on any communication from the other party as professional advice, a recommendation or any kind of assurance about performance;

13.4(c) the other party may have commercial relationships with the issuer of any Underliers and may trade the Underliers or derivatives on them at any time and that such trading may affect the price of the Underliers and consequently the Transaction.