CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of November 6, 2003 (the
"Agreement"), between Lehman Brothers Holdings Inc. (the "Company") and Lehman
Brothers Inc., as Calculation Agent.
WHEREAS, the Company has authorized the issuance of up to $7,611,000
aggregate principal amount of S&P 500(R) Index Callable SUNS(R), Stock Upside
Note Securities Due November 6, 2009 (the "Securities")*;
WHEREAS, the Securities will be issued under an Indenture, 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:
1. 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.
2. Calculations and Information Provided. In response to a request made
by the Trustee for a determination of the Maturity Payment Amount due on the
Stated Maturity Date 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
Maturity Payment Amount, (b) the determination of whether adjustments to the
Closing Level should be made, (c) the determination of the Final Index Level,
(d) the determination of the Successor Index or Final Index Level if
publication of the Index is discontinued and (e) the determination of whether
a Market Disruption Event has occurred. The Calculation Agent shall notify the
Trustee of all such determinations and any such adjustment 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.
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* "S&P," "S&P 500," "Standard & Poor's," "Standard & Poor's 500" and "500"
are the trademarks of McGraw-Hill Inc. and have been licensed to Lehman
Brothers Holdings Inc. The Securities, based on the performance of the
S&P 500 Index, are not sponsored, endorsed, sold or promoted by Standard
& Poor's and Standard and Poor's makes no representation regarding the
advisability of investing in the Securities.
"Stock Upside Note Securities" and "SUNS" are trademarks of Lehman
Brothers Inc., a wholly-owned subsidiary of Lehman Brothers Holdings Inc.
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3. 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.
4. 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.
5. 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:
(a) 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;
(b) 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;
(c) the Calculation Agent shall be obliged to perform only such
duties as are set out specifically herein and any duties necessarily
incidental thereto;
(d) 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
(e) the Calculation Agent shall incur no liability hereunder except
for loss sustained by reason of its gross negligence or wilful
misconduct.
6. 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
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.
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(b) 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.
(c) 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 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.
(d) 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.
7. Certain Definitions. Terms not otherwise defined herein or in Annex A
hereto are used herein as defined in the Indenture or the Securities.
8. 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.
9. 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 Business Days), (a) in the case of the Company,
to it at 745 Seventh Avenue, New York, New York 10019 (facsimile: (646)
758-3204) (telephone: (212) 526-7000), Attention: Treasurer, with a copy to
399 Park Avenue, New York, New York 10022 (facsimile: (212) 526-0357)
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(telephone: (212) 526-7000), Attention: Corporate Secretary, (b) in the case
of the Calculation Agent, to it at 745 Seventh Avenue, New York, New York
10019 (facsimile: (646) 758-4942) (telephone: (212) 526-7000), 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.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
11. 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.
12. 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:
ANNEX A
1. The Index.
The Index is the S&P 500 Index (the "Index"), as calculated, published
and disseminated by Standard & Poor's, a division of McGraw-Hill, Inc.
("S&P").
The Index is a capitalization-weighted index of 500 stocks designed to
measure performance of the broad domestic economy through changes in the
aggregate market value of 500 stocks representing all major industries.
Standard & Poor's chooses companies for inclusion in the Index with the aim of
achieving a distribution by broad industry groupings that approximates the
distribution of these groupings in the common stock population of The New York
Stock Exchange (the "NYSE"), which Standard & Poor's uses as an assumed model
for the composition of the total market. As of November 3, 2003, the 500
companies included in the Index were divided into ten industry groups:
Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care,
Industrials, Information Technology, Materials, Telecommunications Services
and Utilities.
2. Determination of the Maturity Payment Amount.
The Calculation Agent shall determine (i) the Final Index Level and (ii)
the amount payable on the Stated Maturity Date for each $1,000 principal
amount of Securities (the "Maturity Payment Amount").
The Maturity Payment Amount, for each $1,000 principal amount of Securities,
shall be equal to the greater of (a) $1,000 and (b) the Alternative Redemption
Amount
3. Discontinuance of the Index.
(a) If S&P discontinues publication of the Index and S&P 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 Final Index Level will be determined by
reference to the level of such Successor Index at the Close of Trading on the
NYSE or the relevant exchange or market for the Successor Index on the date
the Final Index Level is to be determined.
(b) Upon any selection by the Calculation Agent of a Successor Index, the
Company shall promptly give notice to the holders of the Securities.
(c) If S&P discontinues publication of the Index prior to, and such
discontinuance is continuing on, the date the Final Index Level is to be
determined and the Calculation Agent determines that no Successor Index is
available at such time, or if S&P fails to calculate and announce a Closing
Level for the Index on the date the Final Index Level is to be determined,
then, on such date, the Calculation Agent will determine the Final Index Level
to be used in computing the Alternative Redemption Amount. The Final Index
Level will 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, 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
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principal trading session on such date of each security most recently
comprising the Index on the primary exchange or trading system on which such
securities trade.
4. Alteration of Method of Calculation.
If at any time the method of calculating the Index or a Successor Index,
or the Final Index Level thereof, 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 level
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 of the primary exchange or quotation system on which each
security comprising the Index or such Successor Index is traded on the date
the Final Index Level 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. The Calculation Agent will calculate the
Final Index Level and the Alternative Redemption Amount with reference to the
Index or such Successor Index, as adjusted.
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 (for example, due to a split in the index), then the
Calculation Agent will adjust such index in order to arrive at a level of the
Index or such Successor Index as if it had not been modified (for example, as
if such split had not occurred).
5. Definitions.
Set forth below are definitions of the terms used in the Agreement and in
this Annex A.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"Alternative Redemption Amount" shall mean, with respect to each $1,000
principal amount of Securities, the product of (a) $1,000 and (b) the Final
Index Level, divided by the Initial Index Level.
"AMEX" shall mean the American Stock Exchange LLC.
"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, the
Nasdaq or the AMEX 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 Agent" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the
determination of the Final Index Level and 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.
"Close of Trading" shall mean, in respect of any primary exchange or
quotation system, the scheduled weekday closing time on a day on which the
primary exchange or quotation system is scheduled to be open for trading for
its respective regular trading session, without regard to after hours or any
other trading outside of the regular trading session hours.
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"Closing Level" shall mean, with respect to any day, the official closing
level of the Index or any Successor Index on such day, as reported by S&P or
the publisher of the Successor Index.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Exchange Business Day" shall mean any day on which the NYSE, or the
relevant exchange for any Successor Index, is scheduled to be open for its
regular trading session.
"Final Index Level" shall mean the Closing Level on the Valuation Date.
"Indenture" shall have the meaning set forth in the preamble to this
Agreement.
"Index" shall have the meaning set forth in Section 1 of this Annex A.
"Initial Index Level" shall mean 1059.02, the Closing Level on November
3, 2003.
"Market Disruption Event" on any day, shall mean, with respect to the
Index or any Successor Index, the occurrence of any of the following events,
as determined by the Calculation Agent in its sole discretion:
(i) A material suspension of or limitation imposed on trading
relating to the securities that then comprise 20% or more of the Index or
any Successor Index by the primary exchange or quotation system on which
those securities are traded, at any time during the one-hour period that
ends at the Close of Trading on such day, whether by reason of movements
in price exceeding limits permitted by that primary exchange or quotation
system or otherwise.
(ii) A material suspension of or limitation imposed on trading in
futures or options contracts relating to the Index or any Successor Index
by the primary exchange or quotation system on which those futures or
options contracts are traded, at any time during the one-hour period that
ends at the Close of Trading on such day, whether by reason of movements
in price exceeding limits permitted by that primary exchange or quotation
system or otherwise.
(iii) Any event, other than an early closure, that disrupts or
impairs the ability of market participants in general to effect
transactions in, or obtain market values for, the securities that then
comprise 20% or more of the Index or any Successor Index on the primary
exchange or quotation system on which those securities are traded at any
time during the one-hour period that ends at the Close of Trading on such
day.
(iv) Any event, other than an early closure, that disrupts or
impairs the ability of market participants in general to effect
transactions in, or obtain market values for, futures or options
contracts relating to the Index or any Successor Index on the primary
exchange or quotation system on which those futures or options contracts
are traded at any time during the one-hour period that ends at the Close
of Trading on such day.
(v) The closure of the primary exchange or quotation system on which
securities that then comprise 20% or more of the Index or any Successor
Index are traded or on which futures or options contracts relating to the
Index or any Successor Index are
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traded prior to its scheduled closing time unless the earlier closing
time is announced by the primary exchange or quotation system at least
one hour prior to the earlier of (1) the actual closing time for the
regular trading session on the primary exchange or quotation system and
(2) the submission deadline for orders to be entered into the primary
exchange or quotation system for execution at the Close of Trading on
such day.
(vi) The Company, or any of its affiliates, is unable, after using
commercially reasonable efforts to unwind or dispose of, or realize,
recover or remit the proceeds of, any transactions or assets it deems
necessary to hedge the equity price risk of entering into and performing
its obligations with respect to the Securities.
For purposes of determining whether a Market Disruption Event has
occurred the relevant percentage contribution of a security to the level
of the Index or any Successor Index will be based on a comparison of (x)
the portion of the level of the index attributable to that security and
(y) the overall level of the index, in each case immediately before the
occurrence of the Market Disruption Event.
"Maturity Payment Amount" shall have the meaning set forth in Section 2
of this Annex A.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"NYSE" shall mean The New York Stock Exchange, Inc.
"Securities" shall have the meaning set forth in the preamble to this
Agreement.
"Stated Maturity Date" shall mean November 6, 2009 (or if November 6,
2009 is not a Business Day, on the next succeeding Business Day); provided,
that if a Market Disruption Event occurs on the Valuation Date, the Stated
Maturity Date shall be the third Business Day following the date the Final
Index Level is determined.
"Successor Index" shall have the meaning set forth in Section 3(a) of
this Annex A.
"Trustee" shall have the meaning set forth in the preamble to this
Agreement.
"Valuation Date" shall mean November 3, 2009; provided, that if such day
is not an Exchange Business Day, the Valuation Date shall mean the next
succeeding Exchange Business Day; provided further, that if a Market
Disruption Event occurs on such date, the Valuation Date will be the next
succeeding Exchange Business Day on which no Market Disruption Event occurs.