General Provisions Relating to Extraordinary Events - Equity Derivatives Provision

From The Jolly Contrarian
Jump to navigation Jump to search

2002 ISDA Equity Derivatives Definitions
A Jolly Contrarian owner’s manual

Resources and navigation

Resources About the Equity Derivatives Definitions | (full wikitext) | (nutshell wikitext)
Hot topics Synthetic Prime Brokerage Anatomy | The Triple Cocktail | Cancellation and Payment | Calculation Agent
TOC | 1 General Definitions | 2 Option Transactions | 3 Exercise of Options | 4 Forward Transactions | 5 Equity Swap Transactions | 6 Valuation | 7 Settlement | 8 Cash Settlement | 9 Physical Settlement | 10 Dividends | 11 Adjustments and Modifications | 12 Extraordinary Events · 12.8 Cancellation Amount · 12.9 Additional Disruption Events · 12.9 List of ADEs · 12.9(b) Consequences of ADEs | 13 Miscellaneous

Index: Click to expand:

Section 12.1 in a Nutshell
Use at your own risk, campers!

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.

view template

Full text of Section 12.1

Section 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 any applicable Additional Disruption Event, as the case may be.
12.1(b)Merger Event” means, in respect of any relevant Shares, any
(i) reclassification or change of such Shares that results in a transfer of or an irrevocable commitment to transfer all of such Shares outstanding to another entity or person,
(ii) consolidation, amalgamation, merger or binding share exchange of the Issuer with or into another entity or person (other than a consolidation, amalgamation, merger or binding share exchange in which such Issuer is the continuing entity and which does not result in a reclassification or change of all of such Shares outstanding),
(iii) takeover offer, tender offer, exchange offer, solicitation, proposal or other event by any entity or person to purchase or otherwise obtain 100% of the outstanding Shares of the Issuer that results in a transfer of or an irrevocable commitment to transfer all such Shares (other than such Shares owned or controlled by such other entity or person), or
(iv) consolidation, amalgamation, merger or binding share exchange of the Issuer or its subsidiaries with or into another entity in which the Issuer is the continuing entity and which does not result in a reclassification or change of all such Shares outstanding but results in the outstanding Shares (other than Shares owned or controlled by such other entity) immediately prior to such event collectively representing less than 50% of the outstanding Shares immediately following such event (a “Reverse Merger”),
in each case if the Merger Date is on or before,
(A) in the case of a Physically-settled Option Transaction the later to occur of the Expiration Date or the final Settlement Date,
(B) in the case of a Physically-settled Forward Transaction or a Physically-settled Equity Swap Transaction, 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, where a closing date cannot be determined under the local law applicable to such Merger Event, such other date as determined by the Calculation Agent.
12.1(d)Tender Offer” means a takeover offer, tender offer, exchange offer, solicitation, proposal or other event by any entity or person that results in such entity or person purchasing, or otherwise obtaining or having the right to obtain, by conversion or other means, greater than 10% and less than 100% of the outstanding voting shares of the Issuer, as determined by the Calculation Agent, based upon the making of filings with governmental or self-regulatory agencies or such other information as the Calculation Agent deems relevant.
12.1(e)Tender Offer Date” means, in respect of a Tender Offer, the date on which voting shares in the amount of the applicable percentage threshold are actually purchased or otherwise obtained (as determined by the Calculation Agent).
12.1(f)Share-for-Share” means (i) in respect of 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, in respect of a Merger Event or Tender Offer, that the consideration for the relevant Shares consists solely of Other Consideration.
12.1(h)Share-for-Combined” means, in respect of a Merger Event or Tender Offer, that the consideration for the relevant Shares consists of Combined Consideration.
12.1(i)New Shares” means ordinary or common shares, whether of the entity or person (other than the Issuer) involved in the Merger Event or the making of the Tender Offer or a third party, that are, or that as of the Merger Date or Tender Offer Date are promptly scheduled to be,
(i) publicly quoted, traded or listed on an exchange or quotation system located in the same country as the Exchange (or, where the Exchange is within the European Union, in any member state of the European Union) and
(ii) not subject to any currency exchange controls, trading restrictions or other trading limitations.
12.1(j)Other Consideration” means any cash or securities (other than New Shares) or assets (whether of the entity or person (other than the Issuer) involved in the Merger Event or the making of the Tender Offer or a third party).
12.1(k)Combined Consideration” means New Shares in combination with Other Consideration.
12.1(l)Announcement Date” means, in respect of an Extraordinary Event,
(i) in the case of a Merger Event, the date of the first public announcement of a firm intention to engage in a transaction (whether or not subsequently amended) that leads to the Merger Event,
(ii) in the case of a Tender Offer, the date of the first public announcement of a firm intention to purchase or otherwise obtain the requisite number of voting shares (whether or not subsequently amended) that leads to the Tender Offer,
(iii) in the case of an Index Disruption or Index Cancellation, the date of the first public announcement by the Index Sponsor of any adjustment or cancellation as described in Section 11.1(b) that leads to the Index Disruption or Index Cancellation and in the case of an Index Modification, the Exchange Business Day immediately prior to the effective date of the Index Modification,
(iv) in the case of a Nationalization, the date of the first public announcement to nationalize (whether or not subsequently amended) that leads to the Nationalization,
(v) in the case of an Insolvency, the date of the first public announcement of the institution of a proceeding or presentation of a petition or passing of a resolution (or other analogous procedure in any jurisdiction) that leads to the Insolvency and
(vi) in the case of a Delisting, the date of the first public announcement by the Exchange that the Shares will cease to be listed, traded or publicly quoted in the manner described in Section 12.6(a)(iii).
In respect of any Extraordinary Event other than an Index Disruption, if the announcement of such Extraordinary Event is made after the actual closing time for the regular trading session on the relevant Exchange, without regard to any after hours or any other trading outside of such regular trading session hours, the Announcement Date shall be deemed to be the next following Scheduled Trading Day.
12.1(m)Implied Volatility” means for any Exchange Business Day, the mid-market implied volatility of the relevant Shares, as determined by the Calculation Agent by interpolating or extrapolating from the most comparable listed put or call option (which shall be of the same Option Type as the Option Transaction being cancelled) on the relevant Shares as determined by the Calculation Agent taking into account the nearest strike price, maturity and “in-the-money” or “out-of-the-money” amount, as the case may be, and such other factors that the Calculation Agent deems appropriate. To the extent that such a listed option does not exist or the Calculation Agent determines that the market for such listed option is not sufficiently liquid for the purpose of the relevant calculation, the Implied Volatility will be determined by the Calculation Agent by whatsoever means it deems appropriate.
12.1(n)Affected Shares” means Shares affected by a Merger Event or a Tender Offer, as the case may be.

view template


Get in touch
Comments? Questions? Suggestions? Requests? Insults? We’d love to hear from you.
Sign up for our newsletter

Content and comparisons

Section 12.1. General Provisions Relating to Extraordinary Events

12.1(a). “Extraordinary Event
12.1(b). “Merger Event
12.1(c). “Merger Date
12.1(d). “Tender Offer
12.1(e). “Tender Offer Date
12.1(f). “Share-for-Share
12.1(g). “Share-for-Other
12.1(h). “Share-for-Combined
12.1(i). “New Shares
12.1(j). “Other Consideration
12.1(k). “Combined Consideration
12.1(l). “Announcement Date
12.1(m). “Implied Volatility
12.1(n). “Affected Shares

Template

Summary

All hail the Determining Party

Note that where an Extraordinary Event occurs, the Determining Party, rather than the Calculation Agent, may be the person called on to calculate a Cancellation Amount. (This is relevant especially where the Calculation Agent is not the Hedging Party, as the Hedging Party will have definite ideas about how to value cancellation vis a vis its own hedge).

Share-for-Share

Is it just is or did ISDA’s crack drafting squad™ hit the wall on the definition of “Share-for-Share”? What do you mean, “and (ii) Reverse Merger”? It looks like something is missing, but we think the rather exasperated tone is basically, “a reverse merger is necessarily Share-for-Share so do we really need to “wrap it round with deemery”, as Büchstein would say? Well, we are jolly well not going to, so see how you like that.”

Definitions

12.1(a). “Extraordinary Event

Break these “Extraordinary Events” into four categories:

12.1(b). “Merger Event

12.1(c). “Merger Date

12.1(d). “Tender Offer

12.1(e). “Tender Offer Date

12.1(f). “Share-for-Share

12.1(g). “Share-for-Other

12.1(h). “Share-for-Combined

12.1(i). “New Shares

12.1(j). “Other Consideration

12.1(k). “Combined Consideration

12.1(l). “Announcement Date

12.1(m). “Implied Volatility

=== 12.1(n). “Affected Shares” ===
Template

See also

Template:M sa Equity Derivatives 12.1
Template

References

  1. especially since there is already an “Insolvency” event covering most of this).