A Share Swap Agreement is utilized when parties wish to create synthetic exposure to shares without directly owning the underlying securities. This sophisticated derivative instrument, structured under Swiss law, enables parties to exchange periodic payments based on the performance of specified shares against another set of payments, typically based on a floating rate. The agreement is particularly relevant in Switzerland's financial center, where it must comply with the Federal Act on Financial Market Infrastructures (FMIA), the Financial Services Act (FinSA), and other applicable Swiss regulations. It includes detailed provisions for calculation methodologies, payment mechanisms, risk management, and regulatory compliance, making it suitable for financial institutions, investment firms, and sophisticated corporate entities operating under Swiss jurisdiction.
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1. Parties: Identification of the swap counterparties, including registration details and addresses
2. Background: Context of the transaction and commercial purpose of the share swap
3. Definitions and Interpretation: Key terms used in the agreement, including financial definitions and calculation methodologies
4. Swap Structure: Core economic terms including reference shares, notional amount, and swap payments
5. Term and Dates: Duration of the swap, effective date, termination date, payment dates, and calculation periods
6. Payment Obligations: Mechanics of payments, including equity amounts, floating amounts, and dividend equivalents
7. Calculation Agent: Appointment, role, and responsibilities of the calculation agent
8. Representations and Warranties: Standard and transaction-specific representations, including regulatory compliance
9. Events of Default: Circumstances constituting default and consequences
10. Termination Events: Early termination triggers and procedures, including regulatory changes
11. Tax Provisions: Tax representations, indemnities, and gross-up obligations
12. Market Disruption: Handling of market disruption events affecting the underlying shares
13. Transfer Restrictions: Limitations on transfer of rights and obligations
14. Governing Law and Jurisdiction: Swiss law as governing law and jurisdiction provisions
15. Notices: Communication procedures between parties
16. Miscellaneous: Standard boilerplate provisions including amendments, waivers, and severability
1. Credit Support Arrangements: Required if parties agree to collateral posting requirements
2. Break Clauses: Optional provisions allowing early termination on specified dates
3. Physical Settlement: Include if physical settlement of shares is permitted as an alternative
4. Multiple Exchange Provisions: Required if underlying shares are listed on multiple exchanges
5. Regulatory Reporting: Detailed reporting obligations if parties are subject to specific regulatory regimes
6. Special Entity Provisions: Required if one party is a special entity under Swiss regulations
7. Additional Tax Provisions: Required for cross-border transactions or specific tax structures
1. Economic Terms: Detailed specification of economic terms including notional amount, reference price, and payment calculations
2. Reference Shares: Details of the underlying shares including issuer, ISIN, exchange, and relevant adjustments
3. Calculation Procedures: Detailed methodologies for calculations, including disruption fallbacks
4. Form of Confirmation: Template for trade confirmations under the agreement
5. Account Details: Payment and settlement account information for both parties
6. Credit Support Terms: If applicable, detailed collateral requirements and calculations
7. Regulatory Compliance: Specific procedures and forms for regulatory reporting
8. Approved Brokers: List of approved brokers for hedge transactions if relevant
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