EXHIBIT 1.10
CALCULATION AGENCY AGREEMENT
CALCULATION AGENCY AGREEMENT, dated as of June 7, 2004 (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 $22,296,200
aggregate principal amount of Nasdaq-100 Index(R) Rebound RANGERS(SM), Rebound
Risk AdjustiNG Equity Range Securities(SM) Notes Due June 7, 2008 (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 or the Redemption Amount due upon redemption of the
Securities, the Calculation Agent shall determine such Maturity Payment Amount
or Redemption Amount and notify the Trustee of its determination. The
Calculation Agent shall also be responsible for (a) the determination of the
Successor Index if publication of the Index is discontinued, (b) adjustments to
the Closing Level and (c) the determination of whether a Market Disruption Event
has occurred. The Calculation Agent shall notify the Trustee of any such
adjustment or any such Successor Index, or if a Market Disruption Event has
occurred. Annex A hereto sets forth the procedures the Calculation Agent will
use to determine the information described in this Section 2.
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* The Nasdaq-100(R), Nasdaq-100 Index(R), and Nasdaq(R) are trade or
servicemarks of The Nasdaq Stock Market, Inc. (which with its
affiliates are the "Nasdaq Corporations") and are licensed for use by
the Company. The Securities have not been passed on by the Nasdaq
Corporations as to their legality or suitability. The Securities are
not issued, endorsed, sold, or promoted by the Nasdaq Corporations. THE
NASDAQ CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH
RESPECT TO THE SECURITIES.
RANGERS is a servicemark and Risk AdjustiNG Equity Range Securities is
a servicemark 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
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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
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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 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 Nasdaq-100 Index(R), as calculated by Nasdaq (the
"Index").
2. Determination of the Maturity Payment Amount.
The Calculation Agent shall determine the amount payable at Stated
Maturity for each $1,000 principal amount of Securities (the "Maturity Payment
Amount").
The Maturity Payment Amount shall be the following:
If the Ending Index Level of the Index on the Final Valuation Date is
greater than or equal to 105% of 1,464.22, $1,310.
If the Ending Index Level of the Index on the Final Valuation Date is
less than 105% of 1,464.22, the lesser of:
(a) $1,000; and
Ending Index Level
(b) $1,000 x (------------------ + 0.20)
1,464.22
3. Determination of the Redemption Amount
If the Ending Index Level of the Index on any Annual Observation Date
is greater than or equal to 105% of 1,464.22, the Calculation Agent shall
determine the amount payable upon redemption for each $1,000 principal amount of
Securities (the "Redemption Amount").
The Redemption Amount shall be the following:
If the Ending Index Level of the Index on any Annual Observation Date
is greater than or equal to 105% of 1,464.22:
$1,000 + ($77.50 x Years Outstanding)
4. Discontinuance of the Index.
(a) If Nasdaq discontinues publication of the Index and Nasdaq or
another entity publishes a successor or substitute index (the "Successor Index")
that the Calculation Agent determines, in its sole discretion exercised in good
faith, to be comparable to the discontinued Index, then the Calculation Agent
shall calculate the Maturity Payment Amount pursuant to Section 2 hereof or the
Redemption Amount pursuant to Section 3 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 Final Valuation Date
or any Annual Observation Date, as the case may be.
(b) Upon any selection by the Calculation Agent of a Successor Index,
the Company shall promptly give notice to the holders of the Securities.
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(c) If Nasdaq discontinues publication of the Index prior to, and such
discontinuance is continuing on, any Annual Observation Date or the Final
Valuation Date and the Calculation Agent determines that no Successor Index is
available at such time, then, on such date, the Calculation Agent shall
determine the index to be used in computing the Redemption Amount or the
Maturity Payment Amount, as the case may be. The Redemption Amount and the
Maturity Payment Amount 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 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.
5. Alteration of Method of Calculation.
If at any time the method of calculating the Index or a Successor
Index, or the Closing 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 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 any Annual Observation Date or the Final Valuation
Date, 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 Redemption
Amount or the Maturity Payment Amount, as the case may be, 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 (for
example, 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 (for example, if such split had not occurred).
6. Definitions.
Set forth below are the terms used in the Agreement and in this Annex
A.
"Agreement" shall have the meaning set forth in the preamble to this
Agreement.
"AMEX" shall mean the American Stock Exchange LLC.
"Annual Observation Date" shall mean each of June 2, 2005, June 2, 2006
and June 4, 2007; provided, that if a Market Disruption Event occurs on any such
day, then such Annual Observation Date shall be the next following Business Day
on which no Market Disruption Event occurs.
"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.
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"Calculation Agent" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the determination
of the Maturity Payment Amount and the Redemption 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 sessions.
"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 the Close of Trading, as reported by
Nasdaq, the publisher of the Successor Index or the primary exchange on which
any such security then trades, as the case may be.
"Company" shall have the meaning set forth in the preamble to this
Agreement.
"Ending Index Level" shall equal the Closing Level on the Final
Valuation Date or any Annual Observation Date, as the case may be.
"Final Valuation Date" shall mean June 4, 2008; provided, that if a
Market Disruption Event occurs on such day, then the Final Valuation Date shall
be the next following Business Day on which no Market Disruption Event occurs.
"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.
"Market Disruption Event", with respect to the Index shall mean any of
the following events has occurred on any day as determined by the Calculation
Agent:
(1) 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 Relevant Exchange, 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. Limitations on trading during significant
market fluctuations imposed pursuant to NYSE Rule 80B or any applicable
rule or regulation enacted or promulgated by the NYSE, any other exchange,
quotation 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.
(2) 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.
(3) 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
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securities that then comprise 20% or more of the Index or any Successor
Index, on the primary U.S. exchange or quotation system on which those
securities are traded, or in the case of a security not listed or quoted in
the United States, on the primary exchange, quotation system or market for
such security, at any time during the one hour period that ends at the
Close of Trading on such day.
(4) 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 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.
(5) 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 (i) the actual
closing time for the regular trading session on the primary exchange or
quotation system and (ii) 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.
(6) 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.
"Redemption Amount" shall have the meaning set forth in Section 2 of
this Annex A.
"Relevant Exchange" shall mean, for each security included in the
Index, the primary securities exchange, quotation system, including any bulletin
board service, on which such security is traded.
"Stated Maturity" shall mean June 7, 2008 (or if June 7, 2008 is not a
Business Day, on the next Business Day); provided, that if a Market Disruption
Event occurs on the Final Valuation Date, the Stated Maturity shall be the third
Business Day following the date that the Ending Index Level on the postponed
Final Valuation Date is determined.
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"Successor Index" shall have the meaning set forth in Section 4(a) of
this Annex A.
"Trustee" shall have the meaning set forth in the preamble to this
Agreement.
"Years Outstanding" shall mean the number of full years elapsed since
the date on which the Securities were first offered for sale.