CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of September 10, 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
$12,429,200 aggregate principal amount of Nikkei 225 Index SUNS(R), Stock Upside
Note Securities Due June 10, 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 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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* "Nikkei," "Nikkei Stock Average" and "Nikkei 225" are the service marks of
Nihon Keizai Shimbun, Inc. ("NKS"). The Securities, based on the performance
of the Nikkei Stock Average, are not sponsored, endorsed, or promoted by
NKS.
"Stock Upside Note Securities" and "SUNS" are trademarks of Lehman Brothers
Inc., a wholly-owned subsidiary of Lehman Brothers Holdings Inc.
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.
(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)
(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.
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: Oliver Budde
Title: Vice President
LEHMAN BROTHERS INC.,
as Calculation Agent
By:__________________________
Name: Oliver Budde
Title: Vice President
ANNEX A
1. The Index.
The Index is the Nikkei Stock Average, as calculated, published and
disseminated by Nihon Keizai Shimbun, Inc. (the "Index").
The Index measures the composite price performance of selected
Japanese stocks. The Index is currently based on 225 underlying stocks trading
on the Tokyo Stock Exchange (the "TSE") and represents a broad cross-section of
Japanese industry. All 225 of the stocks underlying the Index are stocks listed
in the First Section of the TSE. Stocks listed in the First Section are among
the most actively traded stocks on the TSE. As of September 5, 2003, the 225
companies included in the Index were divided into six sector categories:
Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and
Transportation 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 Nihon Keizai Shimbun, Inc. ("NKS") discontinues publication of
the Index and NKS 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 TSE 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 NKS 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 NKS 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 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 any 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.
"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.
"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
NKS 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 TSE, 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 10,650.77, the Closing Level on
September 5, 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 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.
"NKS" shall have the meaning set forth in Section 3(a) of this Annex A.
"Securities" shall have the meaning set forth in the preamble to this
Agreement.
"Stated Maturity Date" shall mean June 10, 2010 (or if June 10, 2010 is
not an Exchange Business Day, on the next succeeding Exchange Business Day);
provided, that if a Market Disruption Event occurs on the Valuation Date, the
Stated Maturity Date shall be the third Exchange 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.
"TSE" shall have the meaning set forth in Section 1 of this Annex A.
"Valuation Date" shall mean June 7, 2010; 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.