Equity Derivatives Definitions - In a Nutshell

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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”).

Template:Nutshell Equity Derivatives 1.3 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.
Template:Nutshell Equity Derivatives 1.5 Section 1.6. “Share Transaction” means any of the Transaction types under these definitions referencing a single Share, but not counting any Share Basket Transactions.
Template:Nutshell Equity Derivatives 1.7 Template:Nutshell Equity Derivatives 1.8 Template:Nutshell Equity Derivatives 1.9 1.10. “Basket Forward Transaction” means an Index Basket Forward Transaction or Share Basket Forward Transaction.
Section 1.11. “Basket Swap Transaction” means an Index Basket Swap Transaction or Share Basket Swap Transaction.
Template:Nutshell Equity Derivatives 1.12 Section 1.13. “Index” means each specified index underlying 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.
Template:Nutshell Equity Derivatives 1.17 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.
Template:Nutshell Equity Derivatives 1.22 Section 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 as of the Valuation Time or, if no method is specified, the Index level at the Valuation Time; and
1.23(b) For a Share, the price per Share the Calculation Agent determines as of the Valuation Time on the Valuation Date or Averaging Date as specified in the Confirmation or, if not specified:
(i) Open outcry Exchanges: for any Share trading on an “open outcryExchange that has a tradable price as of the Valuation Time, the official trading price per Share as of the relevant Valuation Time 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 as of (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 clearance system for a Share (or any successor the Calculation Agent determines). If not specified, it will be the main domestic clearance system used to settle trades in the Share on the Settlement Date. If it ceases to settle trades in such Share, the parties must try to agree another manner of delivery.
Template:Nutshell Equity Derivatives 1.28 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.
Template:Nutshell Equity Derivatives 1.31 Section 1.32. “Currency Business Day” means a day on which commercial banks are open for business in the principal financial center for the relevant currency. For euro that means y day on which 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.
Template:Nutshell Equity Derivatives 1.35 Template:Nutshell Equity Derivatives 1.36 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.
Template:Nutshell Equity Derivatives 1.39 Template:Nutshell Equity Derivatives 1.40 Template:Nutshell Equity Derivatives 1.41 Template:Nutshell Equity Derivatives 1.42 Template:Nutshell Equity Derivatives 1.43 Template:Nutshell Equity Derivatives 1.44 Template:Nutshell Equity Derivatives 1.45 Template:Nutshell Equity Derivatives 1.46 Template:Nutshell Equity Derivatives 1.47 Template:Nutshell Equity Derivatives 1.48 Template:Nutshell Equity Derivatives 1.49 Template:Nutshell Equity Derivatives 1.50 Template:Nutshell Equity Derivatives 1.51
Article 2 General Terms Relating to Option Transactions
Template:Nutshell Equity Derivatives 2.1 Template:Nutshell Equity Derivatives 2.2 Template:Nutshell Equity Derivatives 2.3 Template:Nutshell Equity Derivatives 2.4
Article 3 Exercise of Options
Template:Nutshell Equity Derivatives 3.1 Template:Nutshell Equity Derivatives 3.2 Template:Nutshell Equity Derivatives 3.3 Template:Nutshell Equity Derivatives 3.4
Article 4 General Terms Relating to Forward Transactions
Template:Nutshell Equity Derivatives 4.1 Template:Nutshell Equity Derivatives 4.2
Article 5 General Terms Relating to Equity Swap Transactions
5.1. Equity Amount Payer. The “Equity Amount Payer” will be specified in the Confirmation.
Template:Nutshell Equity Derivatives 5.2 Template:Nutshell Equity Derivatives 5.3 Template:Nutshell Equity Derivatives 5.4 Section 5.5. “Final Exchange Amount” means any amount specified as such for a party in the Confirmation for an Equity Swap Transaction. It will be payable on the Final Exchange Date.
Template:Nutshell Equity Derivatives 5.6 Section 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)
Section 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
Section 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.
Section 6.2. Valuation Date. “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.

Section 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.
Template:Nutshell Equity Derivatives 6.5 Section 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.

Template:Nutshell Equity Derivatives 6.7 Section 6.8. If “Futures Price Valuation” applies to an Index in an Index Transaction, then on a Valuation Date:

6.8(a) Valuation Date. For Futures Price Valuation only, “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.


Article 7 General Terms Relating to Settlement
Section 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.
Template:Nutshell Equity Derivatives 7.2 Template:Nutshell Equity Derivatives 7.3
Article 8 Cash Settlement
Template:Nutshell Equity Derivatives 8.1 Template:Nutshell Equity Derivatives 8.2 Template:Nutshell Equity Derivatives 8.3 Template:Nutshell Equity Derivatives 8.4 Section 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 PriceForward Floor Price: Number of Shares or Baskets x Settlement Price - Forward Floor Price;
(B) where Forward Cap PriceSettlement 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.

Template:Nutshell Equity Derivatives 8.6 Section 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.
Section 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
Template:Nutshell Equity Derivatives 9.1 Template:Nutshell Equity Derivatives 9.2 Template:Nutshell Equity Derivatives 9.3 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.

Template:Nutshell Equity Derivatives 9.5 Template:Nutshell Equity Derivatives 9.6 Template:Nutshell Equity Derivatives 9.7 Template:Nutshell Equity Derivatives 9.8 Template:Nutshell Equity Derivatives 9.9 Template:Nutshell Equity Derivatives 9.10 Template:Nutshell Equity Derivatives 9.11 Template:Nutshell Equity Derivatives 9.12
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.
Section 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).

Section 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.
Section 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
Template:Nutshell Equity Derivatives 11.1 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 are’t any exchange-traded options options on the Shares, the Calculation Agent will adjust the Transaction as it thinks fit, by analogy to the Options Exchange’s rules that would have applied had the options 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.

Template:Nutshell Equity Derivatives 11.2(d)

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.

Template:Nutshell Equity Derivatives 11.3 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.

Template:Nutshell Equity Derivatives 12.1(b) Template:Nutshell Equity Derivatives 12.1(c)

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.

Template:Nutshell Equity Derivatives 12.1(e) Template:Nutshell Equity Derivatives 12.1(f) Template:Nutshell Equity Derivatives 12.1(g) Template:Nutshell Equity Derivatives 12.1(h) Template:Nutshell Equity Derivatives 12.1(i) Template:Nutshell Equity Derivatives 12.1(j) Template:Nutshell Equity Derivatives 12.1(k)

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.

Template:Nutshell Equity Derivatives 12.1(m) Template:Nutshell Equity Derivatives 12.1(n) 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).

Template:Nutshell Equity Derivatives 12.2(b) Template:Nutshell Equity Derivatives 12.2(c)

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);

Template:Nutshell Equity Derivatives 12.2(e) Template:Nutshell Equity Derivatives 12.2(f)

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).

Template:Nutshell Equity Derivatives 12.2(h) Template:Nutshell Equity Derivatives 12.2(i) Template:Nutshell Equity Derivatives 12.2(j) Template:Nutshell Equity Derivatives 12.2(k) Template:Nutshell Equity Derivatives 12.2(l) Template:Nutshell Equity Derivatives 12.2(m) Template:Nutshell Equity Derivatives 12.2(n)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: Template:Nutshell Equity Derivatives 12.3(a) Template:Nutshell Equity Derivatives 12.3(b) Template:Nutshell Equity Derivatives 12.3(c)

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).

Template:Nutshell Equity Derivatives 12.3(e) Template:Nutshell Equity Derivatives 12.3(f) Template:Nutshell Equity Derivatives 12.4 Section 12.5. Composition of Combined Consideration. For any “Share-for-CombinedMerger 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 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) “Negotiated Close-out” means that, if the parties fail to terminate the Transaction on mutually acceptable terms, 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, then 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) 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) Each of the following terms shall have the meaning set forth below:
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.
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
Template:Nutshell Equity Derivatives 13.1 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.

Template:Nutshell Equity Derivatives 13.3 Template:Nutshell Equity Derivatives 13.4