Derivatives / Employee Compensation Plans

• Many LTIPs measure the performance of the management based on the total shareholder return over a given measurement period
• There are many things that need to be considered when performing these calculations, including
  • Absolute share price performance
  • Impact of dividends (e.g., Are the deemed to be reinvested? If so, at what price?)
  • Currency effects, especially when comparing against global peers
• Modelling these plans can be a significant exercise, with many opportunities for errors, both initially and on an ongoing basis
• We are experts in modelling these types of transactions

• Like convertible/exchangeable bonds, equity derivatives and many employee compensation plans typically include a broad range of events which can require a change to the conversion price or exchange property, including
• Dividends/distributions
• Equity or equity-linked capital raising
• Stock splits and consolidations
• When it comes to employee compensation plans, we can also assist companies in giving comfort to their board and employees that the adjustments are being performed fairly, and in communications with employees to explain what is being done

ConvEx as Calculation Agent

• When ConvEx is named as Calculation Agent up-front, clients benefit from our experience in ensuring their documentation avoids known problems, and we are also responsible for performing the calculations when needed
• Being named up-front allows us to provide this service proactively and at a much lower cost than appointing an Independent Expert after problems have already arisen

ConvEx as Calculations Adviser

• If you have issued an instrument without naming a calculation agent in the documentation, ConvEx can be appointed after the fact as Calculations Adviser, to provide a similar level of service as we do to our Calculation Agency clients, providing the service proactively

ConvEx as Independent Expert

• In the event of a dispute or uncertainty as to a calculation, ConvEx can provide advice or independent expert support
• Our extensive capital markets experience and knowledge of securities documentation allows us to consider the formulaic provisions, but also to put them into a market context to assist in clarifying the original intent to arrive at a fair solution
• Where needed we can provide written opinions for the issuer’s reliance