EXHIBIT 1.10
CALCULATION AGENCY AGREEMENT
AGREEMENT, dated as of April 26, 2001, between Lehman Brothers
Holdings Inc. (the "Company") and Lehman Brothers Inc., as Calculation Agent.
WHEREAS, the Company has authorized the issuance of
$30,000,000 aggregate principal amount of NASDAQ-100 INDEX(R) SUNSSM, 109%
Minimum Redemption Stock Upside Note SecuritiesSM Due April 26, 2004 (the
"Securities")*;
WHEREAS, the Securities will be issued under an Indenture
Agreement dated as of September 1, 1987, between the Company and Citibank, N.A.,
as Trustee (the "Trustee"), as supplemented and amended by supplemental
indentures dated as of November 25, 1987, November 27, 1990, September 13, 1991,
October 4, 1993, October 1, 1995, and June 26, 1997, and incorporating Standard
Multiple Series Indenture Provisions dated July 30, 1987, as amended November
16, 1987 (collectively, the "Indenture"); and
WHEREAS, the Company requests the Calculation Agent to perform
certain services described herein in connection with the Securities;
NOW THEREFORE, the Company and the Calculation Agent agree as
follows:
* The Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq(R) are trade or
service marks of The Nasdaq Stock Market, Inc. (which witH its
affiliates are the "Nasdaq Corporations") and are licensed for use by
the Company. The Securities have not been passed on by the Nasdaq
Corporations as to their legality or suitability. The Securities are
not issued, endorsed, sold, or promoted by the Nasdaq Corporations. THE
NASDAQ CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE SECURITIES.
"SUNSSM" and "Stock Upside Note SecuritiesSM" are service marks of
Lehman Brothers Inc.
Appointment of Agent. The Company hereby appoints Lehman Brothers Inc. as
Calculation Agent and Lehman Brothers Inc. hereby accepts such appointment as
the Company's agent for the purpose of performing the services hereinafter
described upon the terms and subject to the conditions hereinafter mentioned.
Calculations and Information Provided. In response to a request made by the
Trustee for a determination of the Maturity Payment Amount due at Stated
Maturity of the Securities, the Calculation Agent shall determine such Maturity
Payment Amount and notify the Trustee of its determination. The Calculation
Agent shall also be responsible for (a) the determination of the Capped
Quarterly Returns for each Reset Period, (b) the determination of the Equity
Return, (c) the determination of the Alternative Redemption Amount, (d) the
Successor Index if publication of the Index is discontinued and (e) whether a
Market Disruption Event has occurred. The Calculation Agent shall notify the
Trustee of any such adjustment or any such Successor Index, or if a Market
Disruption Event has occurred. Annex A hereto sets forth the procedures the
Calculation Agent will use to determine the information described in this
Section 2.
Calculations. Any calculation or determination by the Calculation Agent
pursuant hereto shall (in the absence of manifest error) be final and binding.
Any calculation made by the Calculation Agent hereunder shall, at the Trustee's
request, be made available at the Corporate Trust Office.
Fees and Expenses. The Calculation Agent shall be entitled to reasonable
compensation for all services rendered by it as agreed to between the
Calculation Agent and the Company.
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Terms and Conditions. The Calculation Agent accepts its obligations herein
set out upon the terms and conditions hereof, including the following, to all of
which the Company agrees:
in acting under this Agreement, the Calculation
Agent is acting solely as an independent expert of the Company and does
not assume any obligation toward, or any relationship of agency or
trust for or with, any of the holders of the Securities;
unless otherwise specifically provided herein, any
order, certificate, notice, request, direction or other communication
from the Company or the Trustee made or given under any provision of
this Agreement shall be sufficient if signed by any person who the
Calculation Agent reasonably believes to be a duly authorized officer
or attorney-in-fact of the Company or the Trustee, as the case may be;
the Calculation Agent shall be obliged to perform
only such duties as are set out specifically herein and any duties
necessarily incidental thereto;
the Calculation Agent, whether acting for itself or
in any other capacity, may become the owner or pledgee of Securities
with the same rights as it would have had if it were not acting
hereunder as Calculation Agent; and
the Calculation Agent shall incur no liability
hereunder except for loss sustained by reason of its gross negligence
or wilful misconduct.
Resignation; Removal; Successor. (a) The Calculation Agent may
at any time resign by giving written notice to the Company of such intention on
its part, specifying the date on which its desired resignation shall become
effective, subject to the appointment of a successor Calculation Agent and
acceptance of such appointment by such successor Calculation Agent, as
hereinafter provided. The Calculation Agent hereunder may be removed at any time
by the filing with it of an instrument in writing signed by or on behalf of the
Company and specifying such removal and the date when it shall become effective.
Such resignation or removal shall take effect upon the appointment by the
Company, as hereinafter provided, of a successor Calculation Agent and the
acceptance of such appointment by such successor Calculation Agent. In the
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event a successor Calculation Agent has not been appointed and has not accepted
its duties within 90 days of the Calculation Agent's notice of resignation, the
Calculation Agent may apply to any court of competent jurisdiction for the
designation of a successor Calculation Agent.
In case at any time the Calculation Agent shall resign, or
shall be removed, or shall become incapable of acting, or shall be adjudged
bankrupt or insolvent, or make an assignment for the benefit of its creditors or
consent to the appointment of a receiver or custodian of all or any substantial
part of its property, or shall admit in writing its inability to pay or meet its
debts as they mature, or if a receiver or custodian of it or all or any
substantial part of its property shall be appointed, or if any public officer
shall have taken charge or control of the Calculation Agent or of its property
or affairs, for the purpose of rehabilitation, conservation or liquidation, a
successor Calculation Agent shall be appointed by the Company by an instrument
in writing, filed with the successor Calculation Agent. Upon the appointment as
aforesaid of a successor Calculation Agent and acceptance by the latter of such
appointment, the Calculation Agent so superseded shall cease to be Calculation
Agent hereunder.
Any successor Calculation Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor, to the Company and to the
Trustee an instrument accepting such appointment hereunder and agreeing to be
bound by the terms hereof, and thereupon such successor Calculation Agent,
without any further act, deed or conveyance, shall become vested with all the
authority, rights, powers, trusts, immunities, duties and obligations of such
predecessor with like effect as if originally named as Calculation Agent
hereunder, and such predecessor, upon payment of its charges and
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disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Calculation Agent shall be entitled to receive,
all moneys, securities and other property on deposit with or held by such
predecessor, as Calculation Agent hereunder.
Any corporation into which the Calculation Agent hereunder may
be merged or converted or any corporation with which the Calculation Agent may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Calculation Agent shall be a party, or any
corporation to which the Calculation Agent shall sell or otherwise transfer all
or substantially all of the assets and business of the Calculation Agent shall
be the successor Calculation Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto.
Certain Definitions. Terms not otherwise defined herein or in
Annex A hereto are used herein as defined in the Indenture or the Securities.
Indemnification. The Company will indemnify the Calculation
Agent against any losses or liability which it may incur or sustain in
connection with its appointment or the exercise of its powers and duties
hereunder except such as may result from the gross negligence or wilful
misconduct of the Calculation Agent or any of its agents or employees. The
Calculation Agent shall incur no liability and shall be indemnified and held
harmless by the Company for or in respect of any action taken or suffered to be
taken in good faith by the Calculation Agent in reliance upon written
instructions from the Company.
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Notices. Any notice required to be given hereunder shall be
delivered in person, sent (unless otherwise specified in this Agreement) by
letter, telex or facsimile transmission or communicated by telephone (confirmed
in a writing dispatched within two New York Business Days), (a) in the case of
the Company, to it at Three World Financial Center, New York, New York 10285
(facsimile: (212) 526-3774) (telephone: (212) 526-1936), Attention: Legal
Counsel, (b) in the case of the Calculation Agent, to it at Three World
Financial Center, 200 Vesey Street, New York, New York 10285-0600 (facsimile:
(212) 526-2755) (telephone: (212) 526-0900), Attention: Equity Derivatives
Trading and (c) in the case of the Trustee, to it at 111 Wall Street, 5th Floor,
New York, New York 10043 (facsimile: (212) 657-3836) (telephone: (212)
657-7805), Attention: Corporate Trust Department or, in any case, to any other
address or number of which the party receiving notice shall have notified the
party giving such notice in writing. Any notice hereunder given by telex,
facsimile or letter shall be deemed to be served when in the ordinary course of
transmission or post, as the case may be, it would be received.
Governing Law. This Agreement shall be governed by and
continued in accordance with the laws of the State of New York.
Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
Benefit of Agreement. This Agreement is solely for the benefit
of the parties hereto and their successors and assigns, and no other person
shall acquire or have any rights under or by virtue hereof.
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IN WITNESS WHEREOF, this Calculation Agency Agreement has been
entered into as of the day and year first above written.
LEHMAN BROTHERS HOLDINGS INC.
By:___________________________
Name:
Title:
LEHMAN BROTHERS INC.,
as Calculation Agent
By:__________________________
Name:
Title:
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ANNEX A
The Index.
The Index is the Nasdaq-100 Index(R), as calculated by Nasdaq
(the "Index").
Determination of the Maturity Payment Amount.
The Calculation Agent shall determine (i) the Capped Quarterly
Returns for each of the twelve Reset Periods, (ii) the Equity Return and (iii)
the amount payable at Stated Maturity for each $1,000 principal amount of
Securities (the "Maturity Payment Amount").
The Maturity Payment Amount shall equal the greater of (a)
$1,090 and (b) the Alternative Redemption Amount.
Discontinuance of the Index.
If Nasdaq discontinues publication of the Index and
Nasdaq or another entity publishes a successor or
substitute index (the "Successor Index") that the
Calculation Agent determines, in its sole discretion,
to be comparable to the discontinued Index, then the
Calculation Agent shall calculate the Capped
Quarterly Returns for each Reset Period pursuant to
Section 2 hereof by reference to the index level of
such Successor Index at the Close of Trading on the
NYSE, AMEX, Nasdaq or the relevant exchange or market
for the Successor Index on the date that any Capped
Quarterly Return is to be determined.
Upon any selection by the Calculation Agent of a Successor
Index, the Company shall promptly give notice to the
holders of the Securities.
If Nasdaq discontinues publication of the Index prior
to, and such discontinuance is continuing on, the
date that any Capped Quarterly Return is to be
determined and the Calculation Agent determines that
no Successor Index is available at such time, then,
on such date, the Calculation Agent shall determine
the Capped Quarterly Return to be used in computing
the Alternative Redemption Amount. The ending index
level to be used in computing the Capped Quarterly
Return shall be computed by the Calculation Agent in
accordance with the formula for and method of
calculating the Index last in effect prior to such
discontinuance,
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using the Closing Level (or, if trading in the
relevant securities has been materially suspended or
materially limited, its good faith estimate of the
Closing Level that would have prevailed but for such
suspension or limitation) at the close of the
principal trading session on such date of each
security most recently comprising the Index on the
primary organized U.S. exchange or trading system.
Alteration of Method of Calculation.
If at any time the method of calculating the Index or a
Successor Index, or the ending index level to be used in computing the Capped
Quarterly Return, is changed in a material respect, or if the Index or a
Successor Index is in any other way modified so that such Index does not, in the
opinion of the Calculation Agent, fairly represent the value of the Index or
such Successor Index had such changes or modifications not been made, then, from
and after such time, the Calculation Agent will, at the Close of Trading in New
York City on the date that the ending index level to be used in computing the
Capped Quarterly Return is to be determined, make such calculations and
adjustments as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a level of a stock index comparable to the Index
or such Successor Index, as the case may be, as if such changes or modifications
had not been made, and calculate the Capped Quarterly Returns, the Equity Return
and the Alternative Redemption Amount with reference to the Index or such
Successor Index, as adjusted. Accordingly, if the method of calculating the
Index or a Successor Index is modified so that the level of such index is a
fraction of what it would have been if it had not been modified (e.g., due to a
split in the index), then the Calculation Agent shall adjust such index in order
to arrive at a level of the Index or such Successor Index as if it had not been
modified (e.g., as if such split had not occurred).
Definitions.
Set forth below are the terms used in this Annex A to the
Calculation Agency Agreement.
"AMEX" shall mean the American Stock Exchange.
"Alternative Redemption Amount" shall mean, with respect to
each $1,000 principal amount of Securities, the sum of (i) $1,000 and (ii) the
Equity Return.
"Business Day", notwithstanding any provision in the
Indenture, shall mean any day that is not a Saturday, a Sunday or a day on which
the NYSE or Nasdaq is not open for trading or banking institutions or trust
companies in the City of New York are authorized or obligated by law or
executive order to close.
"Calculation Agency Agreement" shall mean the Calculation
Agency Agreement, dated as of April 26, 2001, between the Company and the
Calculation Agent, as amended from time to time.
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"Calculation Agent" shall mean the person that has entered
into an agreement with the Company providing for, among other things, the
determination of the Maturity Payment Amount, which term shall, unless the
context otherwise requires, include its successors and assigns. The initial
Calculation Agent shall be Lehman Brothers Inc.
"Capped Quarterly Return" for any Reset Period shall mean the
lesser of:
(x) ending index level - starting index level; and
-----------------------------------------
starting index level
(y) 9%,
where (i) the starting index level for the first Reset Period equals
1953.28 and the starting index level on any Reset Date equals the
ending index level for the Reset Period ending on that Reset Date and
(ii) the ending index level for any Reset Period is the Closing Level
on the Reset Date at the end of the that Reset Period or, in the case
of the last Reset Period, on the fifth Business Day prior to the Stated
Maturity
"Close of Trading" shall mean 4:00 p.m., New York City time.
"Closing Level" shall mean the last reported level of the
Index or the Successor Index, as the case may be, at 4:00 p.m., New York City
time, as reported by Nasdaq or the publisher of the Successor Index, as the case
may be.
"Equity Return" shall mean the product of (i) $1,000 and (ii)
the sum of the Capped Quarterly Returns for twelve Reset Periods.
"Index" shall mean the Nasdaq-100 Index(R), as calculated by
Nasdaq.
"Market Disruption Event", on any day, shall mean any of the
following events as determined by the Calculation Agent:
(i) A suspension, absence or material limitation of trading in
20% of more of the underlying stocks which then comprise the Index or
any Successor Index, as the case may be, has occurred on that day, in
each case, for more than two hours of trading or during the one-half
hour period preceding the Close of Trading on the primary organized
U.S. exchange or trading system on which such stocks are traded or, in
the case of a common stock not listed or quoted in the United States,
on the primary exchange, trading system or market for that security.
Limitations on trading during significant market fluctuations imposed
pursuant to the rules of any primary organized U.S. exchange or trading
system similar to NYSE Rule 80B (or any applicable rule or regulation
enacted or promulgated by the NYSE, any other exchange, trading system,
or market, any other self regulatory organization or the Securities and
Exchange Commission of similar scope as determined by the Calculation
Agent), may be considered
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material. Notwithstanding the first sentence of this paragraph, a
Market Disruption Event for a security traded on a bulletin board
means a suspension, absence or material limitation of trading of that
security for more than two hours or during the one hour period
preceding 4:00 p.m., New York City time.
(ii) A suspension, absence or material limitation has occurred
on that day, in each case, for more than two hours of trading or during
the one-half hour period preceding the Close of Trading in options
contracts related to the Index or any Successor Index, as the case may
be, whether by reason of movements in price exceeding levels permitted
by an exchange, trading system or market on which such options
contracts are traded or otherwise.
(iii) Information is unavailable on that date, through a
recognized system of public dissemination of transaction information,
for more than two hours of trading or during the one-half hour period
preceding the Close of Trading, of accurate price, volume or related
information in respect of 20% or more of the underlying stocks which
then comprise the Index or any Successor Index, as the case may be, or
in respect of options contracts related to the Index or any Successor
Index, as the case may be, in each case traded on any major U.S.
exchange or trading system or in the case of securities of a non-U.S.
issuer, traded on the primary non-U.S. exchange, trading system or
market.
For purposes of determining whether a Market Disruption Event has
occurred:
(i) a limitation on the hours or number of days of trading
shall not constitute a Market Disruption Event if it results from an
announced change in the regular business hours of the relevant
exchange, trading system or market;
(ii) any suspension in trading in an options contract on the
Index or any Successor Index, as the case may be, by a major securities
exchange, trading system or market by reason of (a) a price change
violating limits set by such securities market, (b) an imbalance of
orders relating to those contracts, or (c) a disparity in bid and ask
quotes relating to those contracts, shall constitute a Market
Disruption Event notwithstanding that the suspension or material
limitation is less than two hours;
(iii) a suspension or material limitation on an exchange,
trading system or in a market shall include a suspension or material
limitation of trading by one class of investors provided that the
suspension continues for more than two hours of trading or during the
last one-half hour period preceding the Close of Trading on the
relevant exchange, trading system or market but shall not include any
time when the relevant exchange, trading system or market is closed for
trading as part of that exchange's, trading system's or market's
regularly scheduled business hours; and
(iv) "Trading systems" include bulletin board services.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
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"NYSE" shall mean the New York Stock Exchange.
"Payment Determination Date" shall mean the fifth Business Day
prior to the Stated Maturity.
"Reset Dates" shall mean January 19, April 19, July 19 and
October 19 of each year, beginning July 19, 2001, or if any such day is not a
Business Day, the next Business Day.
"Reset Periods" shall mean the periods (i) from and including
April 19, 2001 to and including the first Reset Date, (ii) from and including
one Reset Date to and including the next succeeding Reset Date and (iii) from
and including the last Reset Date to and including the fifth Business Day prior
to the Stated Maturity.
"Stated Maturity" shall mean April 26, 2004, or (i) if April
26, 2004 is not a Business Day, the next Business Day, or (ii) if a Market
Disruption Event occurs on April 26, 2004, the first Business Day after April
26, 2004 on which a Market Disruption Event does not occur.
"Successor Index" shall mean such substitute index as the
Calculation Agent may select pursuant to the Calculation Agency Agreement upon
discontinuance of the Index.
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