EXHIBIT 1.10
------------
CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of November 13, 2001 (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 $6,000,000
aggregate principal amount of YEELDS(TM) Plus, 8% Yield Enhanced Equity Linked
Debt Securities Plus Due November 13, 2003 (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. The Calculation Agent shall
determine (a) the Maturity Payment Amount on the Calculation Date, (b) the
Redemption Payment Amount on the Redemption Date, (c) the Closing Level of the
Basket, (d) the Starting Multipliers and Ending Multipliers for each of the
Underlying Equity Securities in the Basket, (e) any required adjustments to the
Multipliers of the Underlying Equity Securities in the Basket and (f) 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.
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.
- ---------------
* "YEELDS" is a trademark of Lehman Brothers Inc.
3
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.
3
(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 Three World Financial Center, New York, New York 10285
(facsimile: (212) 526-7603) (telephone: (212) 526-0511), Attention: Treasurer,
with copies to (i) 101 Hudson Street, Jersey City, New Jersey 07302 (facsimile:
(201)
4
524-5451) (telephone: (201) 524-4174), Attention: Treasurer, (ii) One World
Financial Center, New York, New York 10281 (facsimile: (646) 836-0627)
(telephone: (646) 836-2150), Attention: Corporate Secretary and (iii) 101 Hudson
Street, Jersey City, New Jersey 07302 (facsimile: (201) 524-4940) (telephone:
(201) 524-5640), Attention: Corporate Secretary, (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, with a copy to 101 Hudson
Street, Jersey City, New Jersey 07302 (facsimile: (201) 524-5451) (telephone:
(201) 524-2000), 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 continued 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.
5
IN WITNESS WHEREOF, this Agreement has been entered into as of the day
and year first above written.
LEHMAN BROTHERS HOLDINGS INC.
By:
---------------------------
Name: Barrett S. DiPaolo
Title: Vice President
LEHMAN BROTHERS INC.,
as Calculation Agent
By:
---------------------------
Name: Barrett S. DiPaolo
Title: Vice President
ANNEX A
1. The Basket.
-----------
The Basket shall be composed of the Underlying Equity Securities (the
"Basket").
2. Determination of the Maturity Payment Amount.
---------------------------------------------
The Calculation Agent shall determine the amount payable on the Stated
Maturity Date for each $1,000 principal amount of Securities (the "Maturity
Payment Amount") and the amount payable upon a Redemption of each $1,000
principal amount of Securities (the "Redemption Payment Amount"). The Maturity
Payment Amount shall equal (i) the Closing Level of the Basket and (ii) any
accrued but unpaid interest through the Stated Maturity Date. In the event that
the Calculation Agent makes a Closing Price Adjustment due to the occurrence of
a Market Disruption Event, the payment by the Company of the Maturity Payment
Amount will be postponed until the date three Business Days after the date of
determination of any such Closing Price Adjustment. The Redemption Payment
Amount shall equal (i) the Redemption Price and (ii) any accrued but unpaid
interest through the Redemption Date.
3. Multipliers for the Common Stocks in the Basket.
------------------------------------------------
The multiplier for each Underlying Equity Security in the Basket shall
be the number of shares or other units (including ADRs) (or fraction of a share
or other unit expressed as a decimal) of such Underlying Equity Security
included in the Basket (the "Multiplier"). The Multiplier shall be adjusted from
time to time during the term of the Securities to give effect to the
extraordinary corporate transactions described below in Section 4. The price
used to determine the Starting Multiplier for each Underlying Equity Security
shall be determined based on the Closing Price for each Underlying Equity
Security on November 7, 2001. The Starting Multiplier for each Underlying Equity
Security in the Basket will remain constant unless adjusted. No adjustment to a
Multiplier will be required unless the adjustment would require a change of at
least 0.1% in the Multiplier then in effect. Each Multiplier, and any
adjustments to a Multiplier, will be rounded at the Calculation Agent's
discretion.
4. Adjustments to the Common Stocks in the Basket.
-----------------------------------------------
Adjustments to the Underlying Equity Securities included in the Basket
will be made (i) by adjusting the Multiplier then in effect for an Underlying
Equity Security in the Basket, (ii) by adding new Underlying Equity Securities,
other securities or cash to the Basket and/or (iii) by removing Underlying
Equity Securities in the Basket, each as described below. For purposes of these
adjustments, except as noted below, ADRs are treated like Underlying Equity
Securities if a comparable adjustment to the foreign shares underlying the ADRs
is made pursuant to the terms of the depositary arrangement for the ADRs or if
holders of ADRs are entitled to receive property in respect of the underlying
foreign shares.
o If an Underlying Equity Security is subject to a stock split or reverse
stock split, then once the split has become effective, the Multiplier then
in effect relating to that Underlying Equity Security will be adjusted.
The Multiplier will be adjusted to equal the product of the number of
shares outstanding after the split with respect to each share immediately
prior to effectiveness of the split and the prior Multiplier.
2
o If an Underlying Equity Security is subject to an extraordinary stock
dividend or extraordinary stock distribution in common stock that is given
equally to all holders of shares, then once the Underlying Equity Security
is trading ex-dividend, the Multiplier will be increased by the product of
the number of shares issued with respect to one share and the prior
Multiplier.
o If the issuer of an Underlying Equity Security, or, if an Underlying
Equity Security is an ADR, the foreign issuer of the underlying foreign
share, is being liquidated or dissolved or is subject to a proceeding
under any applicable bankruptcy, insolvency or other similar law, the
Underlying Equity Security will continue to be included in the Basket so
long as the primary exchange, trading system or market is reporting a
market price for the Underlying Equity Security. If a market price,
including a price on a bulletin board service, is no longer available for
an Underlying Equity Security included in the Basket, then the value of
that Underlying Equity Security will equal zero for so long as no market
price is available, and no attempt will be made to find a replacement
stock or increase the Basket to compensate for the deletion of that
Underlying Equity Security.
o If the issuer of an Underlying Equity Security, or, if an Underlying
Equity Security is an ADR, the foreign issuer of the underlying foreign
share, has been subject to a merger or consolidation and is not the
surviving entity and holders of the issuer's common stock are entitled to
receive cash, securities, other property or a combination of those in
exchange for their common stock, then the following will be included in
the Basket:
o To the extent cash is received, the Basket will include the amount of
the cash consideration at the time holders are entitled to receive
the cash consideration, plus accrued interest. Interest will accrue
beginning on the first London Business Day after the day on which
holders receive the cash consideration until the Stated Maturity
Date. Interest will accrue at a rate equal to LIBOR with a term
corresponding to the interest accrual period stated in the preceding
sentence.
o To the extent that equity securities that are traded or listed on an
exchange, trading system or market are received, once the exchange
for the new securities has become effective, the former Underlying
Equity Security will be removed from the Basket and the new
securities will be added to the Basket. The Multiplier for the new
securities will equal the product of the last value of the Multiplier
of the original Underlying Equity Security and the number of
securities of the new security exchanged with respect to one share of
the original Underlying Equity Security.
o To the extent that equity securities that are not traded or listed on
an exchange, trading system or market or non-equity securities or
other property (other than cash) is received, the calculation agent
will determine the fair market value of the securities or other
property received and the Basket will include an amount of cash equal
to the product of the Multiplier and the fair market value. The
Basket will also include accrued interest on that amount. Interest
will accrue beginning on the first London Business Day after the day
that an affiliate of the Company sells the securities or other
property used to hedge the Company's obligations under the notes
until the Stated Maturity Date. Interest will accrue at a rate equal
3
to LIBOR with a term corresponding to the interest accrual period
stated in the preceding sentence.
o If all of the shares of the class of common stock of which an Underlying
Equity Security is a part are converted into or exchanged for the same or
a different number of shares of any class or classes of common stock other
than that class of common stock of which the Underlying Equity Security is
a part, whether by capital reorganization, recapitalization or
reclassification, then, once the conversion has become effective, the
former Underlying Equity Security will be removed from the Basket and the
new common stock will be added to the Basket as an Underlying Equity
Security. The Multiplier for each new Underlying Equity Security added to
the Basket will equal the product of the last value of the Multiplier of
the original Underlying Equity Security and the number of shares of the
new Underlying Equity Security issued with respect to one share of the
original Underlying Equity Security.
o If the issuer of an Underlying Equity Security in the Basket, or if an
Underlying Equity Security is an ADR, the issuer of the underlying foreign
share, issues to all of its shareholders common stock or another equity
security that is traded or listed on an exchange, trading system or market
of an issuer other than itself, then the new common stock or other equity
security will be added to the Basket as an Underlying Equity Security. The
Multiplier for the new Underlying Equity Security will equal the product
of the last value of the Multiplier with respect to the original
Underlying Equity Security and the number of shares of the new Underlying
Equity Security issued with respect to one share of the original
Underlying Equity Security.
o If an ADR is no longer listed or admitted to trading on a United States
securities exchange registered under the Securities Exchange Act of 1934
or is no longer a security quoted on the Nasdaq, then the foreign share
underlying the ADR will be deemed to be a new common stock included in the
Basket. The initial Multiplier for that new Underlying Equity Security
will equal the last value of the Multiplier for the ADR multiplied by the
number of underlying foreign shares represented by a single ADR.
o If an Underlying Equity Security is subject to an extraordinary dividend
or an extraordinary distribution (including upon liquidation or
dissolution) of cash, equity securities that are not traded or listed on
an exchange, trading system or market, non-equity securities or other
property of any kind which is received equally by all holders of the class
of common stock of which the Underlying Equity Security is a part, then
the Basket will include the following:
o To the extent cash is entitled to be received, the Basket will
include on each day after the time that the Underlying Equity
Security trades ex-dividend until the date the cash consideration is
entitled to be received, the present value of the cash to be
received, discounted at a rate equal to LIBOR, with a term beginning
that day and ending on the date that the cash is entitled to be
received. When the cash consideration is received, the Basket will
include the amount of the cash consideration, plus accrued interest.
Interest will accrue beginning the first London Business Day after
the day that holders receive the cash consideration until the Stated
Maturity Date. Interest will accrue at a rate equal to LIBOR with
4
a term corresponding to the interest accrual period stated in the
preceding sentence.
o To the extent that equity securities that are not traded or listed on
an exchange, trading system or market or non-equity securities or
other property (other than cash) are received, the Calculation Agent
will determine the fair market value of the securities or other
property received and the Basket will include an amount of cash equal
to the product of the Multiplier and the fair market value. The
Basket will also include accrued interest on that amount. Interest
will accrue beginning on the first London Business Day after the day
that an affiliate of the Company sells the securities or other
property used to hedge the Company's obligations under the notes
until the Stated Maturity Date. Interest will accrue at a rate equal
to LIBOR with a term corresponding to the interest accrual period
stated in the preceding sentence.
o If similar corporate events occur with respect to the issuer of an equity
security other than an Underlying Equity Security that is included in the
Basket, adjustments similar to the above will be made for that equity
security. In addition, if any other corporate events occur with respect to
the issuer of an Underlying Equity Security included in the Basket,
adjustments will be made to reflect the economic substance of those
events.
The payment of an ordinary cash dividend from current income or retained
earnings will not result in an adjustment to the Multiplier.
5. Definitions.
Set forth below are the terms used in the Agreement and in this Annex
A.
"ADR" shall mean American depositary receipt.
"AMEX" shall mean the American Stock Exchange.
"Average Execution Price" shall mean, for a security or other property,
the average execution price that an affiliate of the Company receives or pays
for such security or property, as the case may be, to hedge the Company's
obligations under the Securities.
"Basket" shall have the meaning set forth in Section 1 of this Annex A.
"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, Nasdaq
or 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 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.
5
"Calculation Date" shall mean three Business Days prior to the Stated
Maturity Date; provided that if a Market Disruption Event occurs on such date,
the Calculation Date shall be the previous Business Day on which there was not a
Market Disruption Event.
"Close of Trading" shall mean 4:00 p.m., New York City time.
"Closing Level of the Basket" shall mean the sum of the following
amounts calculated with respect to each Underlying Equity Security on the
Calculation Date: (i) the Closing Price of such Underlying Equity Security, plus
any cash or other equity securities attributable to one share or unit of such
Underlying Equity Security as described in Section 4 of this Annex A, multiplied
by (ii) the Ending Multiplier for such Underlying Equity Security.
"Closing Price" shall mean, for each Underlying Equity Security, as
determined by the Calculation Agent based on information reasonably available to
it, subject to any Closing Price Adjustment:
(i) If the Underlying Equity Security is listed on a United States
national securities exchange or trading system or is a Nasdaq security,
the last reported sale price at the Close of Trading, regular way, on such
day, on the primary securities exchange registered under the Securities
Exchange Act of 1934 on which such Underlying Equity Security is listed or
admitted to trading or on Nasdaq, as the case may be.
(ii) If the Underlying Equity Security is listed on a non-United States
securities exchange, trading system (other than a bulletin board) or
market, the last reported sale price at the Close of Trading, regular way,
on such day, on the primary exchange, trading system or market on which
such Underlying Equity Security is listed or admitted to trading, as the
case may be. The Closing Price shall then be converted into U.S. dollars
using the Official W.M. Reuters Spot Closing Rate.
(iii) If the Underlying Equity Security is not listed on a national
securities exchange or trading system or is not a Nasdaq security, and is
listed or traded on a bulletin board, the Average Execution Price of the
Underlying Equity Security. If such Underlying Equity Security is listed
or traded on a non-United States bulletin board, the Closing Price will
then be converted into U.S. dollars using the Official W.M. Reuters Spot
Closing Rate.
(iv) If a Market Disruption Event has occurred for an Underlying Equity
Security on a day on which the Closing Price for such Underlying Equity
Security is to be calculated, the Closing Price for such Underlying Equity
Security shall initially be determined using the Closing Price for such
Underlying Equity Security on the next preceding Trading Day on which a
Market Disruption Event did not occur. Once the Market Disruption Event
has ceased, the Closing Price of such Underlying Equity Security shall
then be adjusted to equal the Average Execution Price of the Underlying
Equity Security.
"Closing Price Adjustment" shall mean an adjustment made by the
Calculation Agent to an Underlying Equity Security's initial Closing Price due
to the occurrence of a Market Disruption Event three Business Days prior to the
Stated Maturity Date. A Closing Price Adjustment shall adjust such initial
Closing Price, once such Market Disruption Event ceases to
6
exist, to equal the Average Execution Price received upon the sale of that
Underlying Equity Security.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Discount Factor" shall mean ( 1 )x where x is the number of
(-----}
(1.275)
years from the Issue Date, computed on the basis of a 360-day year of twelve
30-day months.
"Ending Multiplier" shall mean, for each Underlying Equity Security,
the Starting Multiplier for such Underlying Equity Security adjusted for the
occurrence from time to time, prior to the Close of Trading on the Calculation
Date, of any of the extraordinary corporate transactions described in Section 4
of this Annex A.
"Indenture" shall have the meaning set forth in the preamble to this
Agreement.
"Issue Date" shall mean November 13, 2001.
"Issue Price" shall mean $1,000.
"LIBOR" shall mean London Interbank Offered Rate.
"London Business Day" shall mean shall mean any day in the United
Kingdom that is not a Saturday, a Sunday or a day on which the London Stock
Exchange is not open for trading or banking institutions or trust companies in
the City of London are authorized or obligated by law or parliamentary order to
close.
"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 an
Underlying Equity Security 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 that security is traded or, in the case of an
Underlying Equity Security 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 or as a replacement for Rule 80B, may
be considered 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 the Close of Trading.
(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 an Underlying Equity Security, whether by reason of movements
in price exceeding levels permitted by an
7
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 an Underlying Equity Security or in respect of options
contracts related to an Underlying Equity Security, 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 an Underlying
Equity Security 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.
"Maturity Payment Amount" shall have the meaning set forth in Section 2
of this Annex A.
"Multiplier" shall have the meaning set forth in Section 3 of this
Annex A.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"NYSE" shall mean the New York Stock Exchange.
"Official W.M. Reuters Spot Closing Rate" shall mean the closing spot
rate published on Reuters page "WMRA" relevant for an Underlying Equity
Security.
"Prospectus Supplement" shall mean the prospectus supplement, dated
November 7, 2001, issued by the Company relating to $6,000,000 aggregate
principal amount of the Securities.
"Redemption" shall mean the option of the Company to redeem, at any
time on or
8
after December 13, 2002 until the Stated Maturity Date, in whole but not in
part, the Securities.
"Redemption Date" shall mean, notwithstanding anything to the contrary
in the Indenture, the date set forth in the Redemption Notice, which date shall
not be less than 10 nor more than 30 calendar days after the date of the
Redemption Notice.
"Redemption Notice" shall mean the notice the Company gives to the
holders of Securities in order to redeem the Securities.
"Redemption Payment Amount" shall have the meaning set forth in Section
2 of this Annex A.
"Redemption Price" shall equal, on any Redemption Date, the amount of
cash, per $1,000 principal amount of Securities, that when discounted from the
Redemption Date to the Issue Date by the applicable Discount Factor and added to
the present value of all interest payments made or to be made through the
Redemption Date, discounted to the Issue Date by the applicable Discount Factor,
will equal the Issue Price.
"Starting Multiplier" shall mean, for each Underlying Equity Security,
the following:
Underlying Equity Security Starting Multiplier (number of shares)
-------------------------- --------------------------------------
Applied Materials, Inc. 5.083884
Cisco Systems, Inc. 10.565240
Oracle Corporation 12.836970
Sun Microsystems, Inc. 15.885624
Veritas Software Corporation 5.613247
"Starting Value" shall mean $200 for each Underlying Equity Security.
"Stated Maturity Date" shall mean November 13, 2003.
"Trading Day" shall mean a day on which trading generally is conducted
on the NYSE, AMEX and Nasdaq and in the over-the-counter market for equity
securities, as determined by the Calculation Agent.
"Trustee" shall have the meaning set forth in the preamble to this
Agreement.
"Underlying Equity Securities" shall mean the securities included in
the Basket from time to time and shall initially be the following five common
stocks: Applied Materials, Inc., Cisco Systems, Inc., Oracle Corporation, Sun
Microsystems, Inc. and Veritas Software Corporation. The Underlying Equity
Securities shall be adjusted only by the Calculation Agent pursuant to this
Agreement.