EXHIBIT 1.10
CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of April 29, 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 $7,340,000
aggregate principal amount of The Dow Jones Industrial Average(SM) SUNS(R),
Stock Upside Note Securities Due April 29, 2010 (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 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 Maturity
Payment Amount, (b) the determination of whether adjustments to the Closing
Level should be made, (c) the determination of the Adjusted Final Index Level,
(d) the determination of the Successor Index 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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* "Dow Jones" and "Dow Jones Industrial Average" are servicemarks of Dow
Jones & Company, Inc. and have been licensed for use by Lehman Brothers
Holdings Inc. The Securities, based on the performance of the Dow Jones
Industrial Average, are not sponsored, endorsed, sold or promoted by Dow
Jones, and Dow Jones makes no representation regarding the advisability of
investing in the Securities.
"Stock Upside Note Securities" and "SUNS" are trademarks of Lehman Brothers
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 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.
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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:
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Name: Karen Corrigan
Title: Vice President
LEHMAN BROTHERS INC.,
as Calculation Agent
By:
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Name: Karen Corrigan
Title: Vice President
ANNEX A
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1. The Index.
The Index is the Dow Jones Industrial Average(SM), as calculated by Dow
Jones & Company, Inc. (the "Index").
The Index is a price-weighted index of 30 common stocks chosen by the
editors of The Wall Street Journal as representative of a broad cross-section of
U.S. industry. As of April 24, 2003, the component companies of the Dow Jones
Industrial Average were as follows: 3M Company, Alcoa Inc., Altria Group, Inc.,
American Express Company, AT&T Corp., The Boeing Company, Caterpillar Inc.,
Citigroup Inc., The Coca-Cola Company, E.I. du Pont de Nemours and Company,
Eastman Kodak Company, Exxon Mobil Corporation, General Electric Company,
General Motors Corporation, Hewlett-Packard Company, The Home Depot, Inc.,
Honeywell International Inc., Intel Corporation, International Business Machines
Corporation, International Paper Company, J.P. Morgan Chase & Co., Johnson &
Johnson, McDonald's Corporation, Merck & Co., Inc., Microsoft Corporation, The
Procter & Gamble Company, SBC Communications Inc., United Technologies
Corporation, Wal-Mart Stores, Inc. and The Walt Disney Company.
2. Determination of the Maturity Payment Amount.
The Calculation Agent shall determine (i) the Adjusted 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 Dow Jones & Company, Inc. ("Dow Jones") discontinues publication of
the Index and Dow Jones 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 Maturity Payment Amount 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 subsequent Closing 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 Dow Jones discontinues publication of the Index prior to, and such
discontinuance is continuing on, any date that a Closing Level 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 Closing Level to be used in computing the Adjusted Final Index
Level and the Maturity Payment Amount. Each such Closing Level 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, using the
Closing Level (or, if trading in the relevant securities has been materially
suspended or materially limited, its good faith estimate of
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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 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 Closing Level to be used in computing the Alternative Redemption Amount, 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 Final Index Level to be used in computing the Alternative
Redemption Amount 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 Closing Level and the Maturity Payment 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., if such split had not occurred).
5. Definitions.
Set forth below are the terms used in the Agreement and in this Annex A.
"Adjusted Final Index Level" shall mean the product of (a) .868 and (b) the
Final Index Level.
"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 Adjusted
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 Adjusted 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 4:00 p.m., New York City time.
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"Closing Level" shall mean, with respect to any day, the last reported
level of the Index, the Successor Index or any security which is a component of
either such index, as the case may be, at 4:00 p.m., New York City time, as
reported by Dow Jones & Company, Inc., the publisher of the Successor Index or
the primary exchange on which any such security then trades, as the case may be,
on such day; provided, that if any such day is not a Business Day, the last
reported level on the next following Business Day will be used; provided
further, that if a Market Disruption Event occurs on any such date, the
Calculation Agent will determine the Closing Level by reference to the last
reported level on the next following Business Day on which no Market Disruption
Event occurs.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Dow Jones" shall have the meaning set forth in Section 3(a) of this Annex
A.
"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 8440.04, the Closing Level on April 24,
2003.
"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% or
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 securities 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 such 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 such 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 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 related to the
Index, or any Successor Index, 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
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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 system" includes bulletin board services.
"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 April 29, 2010 (or if April 29, 2010 is
not a Business Day, on the next 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 that 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 April 26, 2010; provided, that if such day is
not a Business Day, the Valuation Date shall mean the next following Business
Day; provided further, that if a Market Disruption Event occurs on such date,
the Valuation Date will be the next following Business Day on which no Market
Disruption Event occurs.