Default Under Specified Transaction - ISDA Provision

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Section 5(a)(v) 1992 ISDA

(v) Default under Specified Transaction. The party, any Credit Support Provider of such party or
any applicable Specified Entity of such party 

(1) defaults under a Specified Transaction and, after giving effect to any applicable notice requirement 
or grace period, there occurs a liquidation of, an acceleration of obligations under, or an early termination
of, that Specified Transaction,

(2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment
or delivery due on the last payment, delivery or exchange date of, or any payment on early termination
of, a Specified Transaction (or such default continues for at least three Local Business Days if there
is no applicable notice requirement or grace period) or

(3) disaffirms, disclaims, repudiates or rejects, in whole or in part, a Specified Transaction (or such
action is taken by any person or entity appointed or empowered to operate it or act on its behalf);

Section 5(v) 2002 ISDA

(v) Default Under Specified Transaction. The party, any Credit Support Provider of such party or any applicable
Specified Entity of such party:―

(l) defaults (other than by failing to make a delivery) under a Specified Transaction or any credit support arrangement
relating to a Specified Transaction and, after giving effect to any applicable notice requirement or grace period, such
default results in a liquidation of, an acceleration of obligations under, or an early termination of, that Specified
Transaction;

(2) defaults, after giving effect to any applicable notice requirement or grace period, in making any payment due on the
last payment or exchange date of, or any payment on early termination of, a Specified Transaction (or, if there is no
applicable notice requirement or grace period, such default continues for at least one Local Business Day);

(3) defaults in making any delivery due under (including any delivery due on the last delivery or exchange date of) a
Specified Transaction or any credit support arrangement relating to a Specified Transaction and, after giving effect to
any applicable notice requirement or grace period, such default results in a liquidation of, an acceleration of obligations
under, or an early termination of, all transactions outstanding under the documentation applicable to that Specified
Transaction; or

(4) disaffirms, disclaims, repudiates or rejects, in whole or in part, or challenges the validity of, a Specified
Transaction or any credit support arrangement relating to a Specified Transaction that is, in either case, confirmed or
evidenced by a document or other confirming evidence executed and delivered by that party, Credit Support Provider or
Specified Entity (or such action is taken by any person or entity appointed or empowered to operate it or act on its
behalf);

Commentary

This is like Cross Default, but for non "borrowing" style transactions - for example swap agreements agreements and repos, but only transactions between the two counterparties and their referenced Credit Support Providers and Specified Entities.

If a Counterparty (or its Credit Support Provider or Specified Entity) experiences an Event of Default under a swap agreement (or other transaction falling within the definition of Specified Transaction, which is typically wide - but check the agreement!) with you, this constitutes an Event of Default under the ISDA.

Default, Not Acceleration: note it is triggered by an event of default under the Specified Transaction, not a acceleration following an event of default. So even if you don't close out under the Specified Transaction, you may still close out under this ISDA (and vice versa) - in this way it imports all the Events of Default from all Specified Transactions into the present one.
What if I do "jump the gun"?: could a wrongfully submitted notice of default be treated as a repudiation/anticipatory breach by the "non-defaulting party" giving the other party at least the right to withhold payments on the basis that this would constitute a Potential Event of Default by the party submitting the notice? There's not much law on point, but the starting point is "no" - it would simply be an ineffective notice. However, a non-payment on the basis of an ineffective notice would be impermissible and may itself amount to a Failure to Pay. But as to the mere dispatch of the notice itself, there is relatively recent case law (albeit in the bond world) stating that an acceleration notice that is submitted wrongfully, i.e. when no actual event of default, is merely ineffective and does not give rise to a claim for breach of contract/ damages from "defaulting party". Clearly this has not been considered in context of ISDA per se (and may be nuances here that would lead to different result) but at it is a start.

Comparison with Cross Default

No requirement for a Threshold Amount to be hit before trigger: any default will trigger it.
Only relates to transactions between the two counterparties (or any Specified Entity) - a default by a counterparty under a derivatives transaction *with a third party* would not trigger this clause.

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