Document:

Exhibit 4.02

 

	
  CUSIP NO.
  52517PE64

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL
  AMOUNT: $27,670,000

  
	
  No. R-1

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES H

 

PRINCIPAL PROTECTED USD-ASIAN BASKET
FX-LINKED NOTE
DUE AUGUST 7, 2007

 

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR A NOMINEE OF THE DEPOSITORY. 
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW YORK) TO THE
COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS MADE TO CEDE & CO., ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON
IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.

 

UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM (A “CERTIFICATED NOTE”), THIS GLOBAL SECURITY MAY NOT
BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.

 

 

LEHMAN BROTHERS HOLDINGS INC., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
the “Company,” which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received, hereby
promises to pay to CEDE & Co., or registered assigns, on the Maturity
Date, an amount equal to the Redemption Amount. 
The Notes do not bear interest. No payments on the Notes will be made
until the Maturity Date.

 

The “Maturity Date” is August 7, 2007, or if such
day is not a Business Day, on the next following Business Day.

 

The Redemption Amount, for each $1 principal amount of
the Notes represented hereby, is the amount equal to the sum of (a) $1 plus (b) the Additional Amount.

 

The “Additional Amount”, for each $1 principal amount
of the Notes represented hereby will be (subject to the occurrence of a
Disruption Event) the greater of (i) zero and (ii) 140% times the
Basket Value.

 

The “Reference Currencies” are the Australian Dollar
(AUD), Chinese Renminbi (CNY), Indonesian Rupiah (IDR), Japanese Yen (JPY),
Korean Won (KRW), Singapore Dollar (SGD), Thai Baht (THB), Taiwanese Dollar
(TWD) and the U.S. Dollar (USD).

 

The “Basket Value” equals the sum of:

 

(i) a quotient, the numerator of which
is 0.1655 and the denominator of which is the Settlement Rate for AUD plus

 

(ii) a quotient, the numerator of which
is 1.0078 and the denominator of which is the Settlement Rate for CNY plus

 

(iii) a quotient, the numerator of which
is 1163.7500 and the denominator of which is the Settlement Rate for IDR plus

 

(iv) a quotient, the numerator of which
is 14.7175 and the denominator of which is the Settlement Rate for JPY plus

 

(v) a quotient, the numerator of which
is 120.2500 and the denominator of which is the Settlement Rate for KRW plus

 

(vi) a quotient, the numerator of which
is 0.2033 and the denominator of which is the Settlement Rate for SGD plus

 

(vii) a quotient, the numerator of which
is 4.8985 and the denominator of which is the Settlement Rate for THB plus

 

(viii) a quotient, the numerator of
which is 3.9919 and the denominator of which is the Settlement Rate
for TWD plus

 

(ix) a quotient, the numerator of which
is -1.0000 and the denominator of which is the Settlement Rate for USD.

 

2

 

The “Settlement Rate” for each Reference Currency is
the Reference Exchange Rate on the Valuation Date, observed as per the
Settlement Rate Option (subject to the occurrence of a Price Source
Unavailability Event).

 

The “Reference Exchange Rates”
are the spot exchange rates for each of the Reference Currencies quoted against
the U.S. dollar expressed as number of currency units per USD 1.

 

The “Settlement
Rate Option” for each Reference Currency is as follows:

 

	
  Reference 

  Currency

  	
   

  	
  Settlement
  Rate Option

  
	
  AUD

  	
   

  	
  One divided by
  the spot rate in (A):

  

  (A) The U.S. Dollar/Australian Dollar official fixing rate, expressed as
  the amount of U.S. Dollars per one Australian Dollar, for settlement in two
  Business Days reported by the Federal Reserve Bank of New York which appears
  on Reuters Screen 1FEE to the right of the caption “AUD” at approximately
  12.00 p.m. New York time, on the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  CNY

  	
   

  	
  The Chinese
  Renminbi/U.S. Dollar official fixing rate, expressed as the amount of Chinese
  Renminbi per one U.S. Dollar, for settlement in two Business Days reported by
  The State Administration of Foreign Exchange of the People’s Republic of
  China, Beijing, which appears on the Reuters Screen SAEC Page opposite
  the symbol “USDCNY=“ at approximately 5:00 p.m., Beijing time, on the
  Valuation Date.

  
	
   

  	
   

  	
   

  
	
  IDR

  	
   

  	
  The Indonesian
  Rupiah/U.S. Dollar spot rate at 11:00 a.m., Singapore time, expressed as
  the amount of Indonesian Rupiah per one U.S. Dollar, for settlement in two
  Business Days, reported by the Association of Banks in Singapore which
  appears on the Telerate Page 50157 to the right of the caption “Spot”
  under the column “IDR” at approximately 11:30 a.m., Singapore time, on
  the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  JPY

  	
   

  	
  The Japanese
  Yen/U.S. Dollar official fixing rate, expressed as the amount of Japanese Yen
  per one U.S. Dollar, for settlement in two Business Days reported by the
  Federal Reserve Bank of New York which appears on Reuters Screen 1FED to the
  right of the caption “JPY” at approximately 10.00 a.m. New York time, on
  the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  KRW

  	
   

  	
  The Korean
  Won/U.S. Dollar market average rate, expressed as the amount of Korean Won
  per one U.S. Dollar, for settlement in two Business Days reported by the
  Korea Financial Telecommunications and Clearing Corporation which appears on
  the Reuters Screen KFTC18 Page to the right of the caption “USD Today”
  that is available at approximately 5:30 p.m., Seoul time, on the
  Valuation Date or as soon thereafter as practicable, but in no event later
  than 9:00 a.m., Seoul time, on the first Business Day following the
  Valuation Date.

  
	
   

  	
   

  	
   

  
	
  SGD

  	
   

  	
  The Singapore
  Dollar/U.S. Dollar spot rate at 11:00 a.m., Singapore time, expressed as
  the amount of Singapore Dollar per one U.S. Dollar, for settlement in two
  Business Days, reported by the Association of Banks in Singapore which
  appears on the Reuters Page ABSIRFIX01 to the right of the caption “Spot”
  under the column “SGD” at approximately 11:30 a.m., Singapore time, on
  the Valuation Date.

  
	
   

  	
   

  	
   

  
	
  THB

  	
   

  	
  The Thai
  Baht/U.S. Dollar spot rate at 11:00 a.m., Singapore time, expressed as
  the amount of Thai Baht per one U.S. Dollar, for settlement in two Business
  Days, reported by the Association of Banks in Singapore which appears on the
  Reuters Page ABSIRFIX01 to the right of the caption “Spot” under the
  column “THB” at approximately 11:30 a.m., Singapore time, on the Valuation
  Date.

  
	
   

  	
   

  	
   

  
	
  TWD

  	
   

  	
  The Taiwanese
  Dollar/U.S. Dollar spot rate, expressed as the amount of Taiwanese Dollars
  per one U.S. Dollar, for settlement in two Business Days, reported by the
  Taipei Forex Inc. which appears on the Reuters Screen TAIFX1 Page under
  the heading “Spot” as of 11:00 a.m. Taipei time, on that Valuation Date,
  or if no rate appears as of 11:00 a.m., Taipei time, the rate that first
  appears in any of the next succeeding 15 minute intervals after such time, up
  to and including 12:00 noon, Taipei time on the Valuation Date.

  

 

3

 

The screen or time of
observation indicated in relation to any Settlement Rate Option above shall be
deemed to refer to such screen or time of observation as modified or amended
from time to time, or to any substitute screen thereto.

 

The “Valuation Date” is August 1, 2007 or, if
such day is not a Valuation Business Day, the next following Valuation Business
day.

 

A “Valuation Business Day” means, with respect to each Reference
Currency, any day, other than a Saturday or Sunday, that is neither a legal
holiday nor a day on which commercial banks are authorized or required by law,
regulation or executive order to close (including for dealings in foreign
exchange in accordance with the practice of the foreign exchange market) in the
city or jurisdiction indicated in the Settlement Rate Option for that Reference
Currency.

 

A “Business Day”, notwithstanding any provision in
the Indenture, is any day that is not is not a Saturday or Sunday and that is
not a day on which banking institutions in New York City generally are
authorized or obligated by law or executive order to be closed.

 

Upon the occurrence of a Disruption Event with
respect to any Reference Currency on any day during the term of the notes, the
Calculation Agent shall determine the Additional Amount payable on the Maturity
Date in good faith and in a commercially reasonable manner.

 

A “Disruption Event” means any of the following
events (other than a Price Source Unavailability Event), as determined in good
faith by the Calculation Agent:

 

(A)                              the occurrence and/or
existence of an event on any day that has the effect of preventing or making
impossible the delivery of USD from accounts inside the country for which a Reference
Currency is the lawful currency (such jurisdiction with respect to such
Reference Currency, the “Reference Currency Jurisdiction”) to accounts outside
that Reference Currency Jurisdiction;

 

(B)                                the occurrence of any
event causing the Reference Exchange Rate for any Reference Currency to be
split into dual or multiple currency exchange rates; or

 

(C)                                the occurrence and/or
existence of any event (other than those set forth in (A) or (B) above
or those constituting a Price Source Unavailability Event) with respect to any
Reference Currency that prevents or makes impossible (x) the Calculation Agent’s
ability to calculate the Additional Amount, (y) the fulfilment of our
obligations under the notes, or (z) our ability or the ability of any of our
affiliates through which we hedge our position under the notes to hedge such
position or to unwind all or a material portion of such hedge.

 

Upon the occurrence of a Price Source Unavailability
Event with respect to a Reference Currency, the Settlement Rate for the
affected Reference Currency will be determined in accordance with the Fallback
Rate Observation Methodology.

 

A “Price Source Unavailability Event” means,
as determined in good faith by the Calculation Agent, the Settlement Rate being
unavailable for a Reference Currency, or the occurrence of an event (other than
an event constituting a Disruption Event) that generally makes it impossible to
obtain the Settlement Rate for a Reference Currency, on the relevant Valuation
Date.

 

4

 

The “Fallback Rate
Observation Methodology” means that the Settlement Rate for a Reference
Currency will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received by the Calculation Agent at approximately
10:00 a.m., New York City time, on the Valuation Business Day next
succeeding the Valuation Date for the purchase or sale for deposits in the
Reference Currency by the New York offices of three leading banks engaged in
the interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”).  If fewer than
three Reference Banks provide spot quotations then the Settlement Rate for such
Reference Currency will be determined by the Calculation Agent in good faith
and in a commercially reasonable manner.

 

Except as provided below, the Redemption Amount may,
at the option of the Company, be made by check mailed to the person entitled
thereto at such person’s address as it appears on the registry books of the
Company.

 

Payment of the Redemption Amount will be made in
immediately available funds upon surrender of this Note at the corporate trust
office or agency of the Trustee (or any duly appointed Paying Agent) maintained
for that purpose in the Borough of Manhattan, New York City (the “Corporate
Trust Office”), provided that this Note is presented to the Trustee (or any
such Paying Agent) in time for the Trustee (or any such Paying Agent) to make
such payments in such funds in accordance with its normal procedures.

 

The Company will pay any administrative costs imposed
by banks in making payments in immediately available funds, but any tax,
assessment or governmental charge imposed upon payments hereunder, including,
without limitation, any withholding tax, will be borne by the Holder hereof.

 

References herein to “USD”, “U.S. dollars” or “U.S.$”
or “$” are to the coin or currency of the United States as at the time of
payment is legal tender for the payment of public and private debts.

 

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF
THIS NOTE SET FORTH ON THE REVERSE HEREOF. 
SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
IF SET FORTH AT THIS PLACE.

 

This Note shall not be valid or become obligatory for
any purpose until the certificate of authentication hereon shall have been
signed by the Trustee under the Indenture.

 

5

 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this instrument to be signed by its Chairman of the Board, its President,
its Vice Chairman, its Chief Financial Officer, one of its Vice Presidents or
its Treasurer, by manual or facsimile signature under its corporate seal,
attested by its Secretary or one of its Assistant Secretaries by manual or
facsimile signature.

 

	
  Dated: February 7,
  2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

This is one of the
Securities of the series designated herein referred to in the within-mentioned
Indenture.

 

	
  CITIBANK, N.A.

  
	
    as
  Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

6

 

[REVERSE
OF NOTE]

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES H

PRINCIPAL PROTECTED USD-ASIAN BASKET FX-LINKED NOTE
DUE AUGUST 7, 2007

 

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series H,
Principal Protected USD-Asian Basket FX-Linked Note (herein called the “Notes”).  The
Notes are one of an indefinite number of series of debt securities of the
Company (collectively, the “Securities”) issued or issuable under and pursuant
to an indenture dated as of September 1, 1987, as amended and supplemented
(the “Indenture”), duly executed and delivered by the Company and Citibank,
N.A., as Trustee (herein called the “Trustee”), to which Indenture and all
indentures supplemental thereto reference is hereby made for a description of
the rights, limitations of rights, obligations, duties and immunities
thereunder of the Trustee, the Company and the holders of the Securities.  The separate series of Securities may be
issued in various aggregate principal amounts, may mature at different times,
may bear interest (if any) at different rates, may be subject to different
redemption provisions or repurchase rights (if any), may be subject to
different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided.

 

Section 2. 
Principal Amount for Indenture Purposes.  For the purpose of determining whether
Holders of the requisite amount of Notes of this series outstanding under the
Indenture have made a demand, given a notice or waiver or taken any other
action, the principal amount of this Note will be deemed to be the principal
amount of this Note then outstanding.

 

Section 3. 
Modification and Waivers. 
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than 66-2/3% in aggregate
principal amount of each series of the Securities at the time Outstanding to be
affected, evidenced as in the Indenture provided, to execute supplemental
indentures adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or
modifying in any manner the rights of the holders of the Securities of all such
series; provided, however, that no such supplemental indenture shall, among
other things, (i) change the fixed maturity of any Security, or reduce the
Redemption Amount or the principal amount thereof, or reduce the rate or extend
the time of payment of interest thereon or reduce any premium or other amount
payable on redemption, or make the Redemption Amount or the principal amount
thereof, premium or other amount payable, if any, or interest thereon payable
in any coin or currency other than that hereinabove provided, without the
consent of the Holder of each Security so affected, or (ii) change the
place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected.  It is also provided in the Indenture that,
prior to any declaration accelerating the maturity of any series of Securities,
the holders of a majority in aggregate principal amount of the Securities of
such series Outstanding may on behalf of the holders of all the Securities of
such series waive any past 

 

 

default or Event of
Default under the Indenture with respect to such series and its consequences,
except a default in the payment of interest, if any, on the Redemption Amount
or the principal amount, or premium, if any, on any of the Securities of such
series, or in the payment of any sinking fund installment or analogous
obligation with respect to Securities of such series.  Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes of this series which may be
issued in exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes of this series.

 

Section 4. 
Obligations Unconditional. 
No reference herein to the Indenture and no provisions of this Note or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the Redemption Amount or the principal
amount on this Note at the place, at the respective times, at the rate, and in
the coin or currency herein prescribed.

 

Section 5. 
Defeasance.  The Indenture
contains provisions for the discharge of the Indenture and defeasance at any
time of the indebtedness on this Note upon compliance by the Company with
certain conditions set forth therein, which provisions apply to this Note.

 

Section 6. 
Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the Company, in denominations of $10,000 or whole multiples
of $5,000, either at the office or agency to be designated and maintained by
the Company for such purpose in the Borough of Manhattan, New York City,
pursuant to the provisions of the Indenture or at any of such other offices or
agencies as may be designated and maintained by the Company for such purpose
pursuant to the provisions of the Indenture, and in the manner and subject to
the limitations provided in the Indenture, but without the payment of any
service charge, except for any tax or other governmental charges imposed in
connection therewith.  Notes of this
series are exchangeable for a like aggregate principal amount of Notes of this
series of a different authorized denomination, except that Global Securities
will not be exchangeable for Certificated Notes of this series.

 

Section 7. 
Registration of Transfer. 
As provided in the Indenture and subject to certain limitations as
therein set forth, the transfer of this Note is registrable in the Security
Register, upon surrender of this Note for registration of transfer, at the
Corporate Trust Office or agency in a Place of Payment for this Note, duly
endorsed by, or accompanied by a written instrument of transfer in form
satisfactory to the Company and the Security Registrar requiring such written instrument
of transfer duly executed by, the Holder hereof or his attorney duly authorized
in writing, and thereupon one or more new Notes of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.

 

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository.  If a
successor Depository for the Notes of this series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company will issue, and the Trustee will
authenticate and deliver, Notes of this series in definitive form in an
aggregate principal amount equal to the principal amount of this Note.

 

 

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

 

Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Company nor the Trustee nor any agent
of the Company or of the Trustee shall be affected by any notice to the
contrary.

 

Section 8. 
Events of Default.  If an
Event of Default with respect to Notes of this series shall occur and be
continuing, the amount declared due and payable upon any acceleration of the
Notes will be determined by the Calculation Agent and will equal the Redemption
Amount calculated as though the maturity of the Notes were the date of early
repayment in the manner and with the effect provided in the Indenture.  The amount payable to the Holder hereof upon
any acceleration permitted under the Indenture will be equal to the Redemption
Amount calculated as though the date to which the maturity has been accelerated
were the Maturity Date as determined by the Calculation Agent.

 

Section 9. 
No Recourse Against Certain Persons.  No recourse for the payment of the Redemption
Amount or for any claim based hereon or otherwise in respect hereof, and no
recourse under or upon any obligation, covenant or agreement of the Company in
the Indenture or any Indenture supplemental thereto or in any Note, or because
of the creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, officer or director, as such, past, present or
future, of the Company or of any successor corporation, either directly or
through the Company or any successor corporation, whether by virtue of any
constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

Section 10. 
Tax Treatment.  The Company
agrees, and by acceptance of beneficial ownership interest in the Notes of this
series, each Holder of such Notes will be deemed to have agreed, for United
States federal income tax purposes, (i) to treat the Notes of this series
as indebtedness that is subject to Treas. Reg. Sec. 1.1275-4 (the “Contingent
Payment Regulations”) and (ii) to be bound by the Company’s determination
of the “comparable yield” and “projected payment schedule,” within the meaning
of the Contingent Payment Regulations, with respect to the Notes of this
series.

 

Section 11.  Defined Terms.  All terms used but not defined in this Note
are used herein as defined in the Indenture.

 

Section 12. 
GOVERNING LAW.  THIS NOTE
SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
NEW YORK.Exhibit 4.03

 

CALCULATION
AGENCY AGREEMENT

 

CALCULATION AGENCY AGREEMENT, dated as of February 7,
2006 (this “Agreement”), between Lehman Brothers Holdings Inc. (the “Company”)
and Lehman Brothers Inc., as Calculation Agent (the “Calculation Agent”).

 

WHEREAS, the Company proposes to issue and sell its FX
Range Resetting Notes (the “Notes”)
from time to time;

 

WHEREAS, the terms of the Notes are described in a
pricing supplement, dated January 31, 2006 (in connection with the
performance by the Calculation Agent of its services hereunder with respect to
the Notes, the pricing supplement relating to the Notes is referred to herein
as the “relevant Pricing Supplement”), to the prospectus supplement
dated May 18, 2005 and the prospectus dated May 18, 2005;

 

WHEREAS, the Notes 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 Notes;

 

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 any Interest
Amount with respect to any series of the Notes, the Calculation Agent shall
determine the Interest Amount (as set forth below) on the applicable Interest
Payment Date (as defined below) in accordance with the terms of the Notes and
this Agreement and notify the Trustee of its determination.  In addition, the Calculation Agent shall also
be responsible for determining each of the following items for the Notes, to
the extent applicable:

 

(a)                                  whether
a Disruption Event (as defined below) has occurred;

 

(b)                                 whether
a Price Source Unavailability Event (as defined below) has occurred; and

 

 

(c)                                  any
other calculation, determination or adjustment specified as being made by the
Calculation Agent in this Agreement, the relevant Pricing Supplement or the
Notes.

 

3.                                       Calculations.  Any calculation or determination by the
Calculation Agent pursuant hereto shall be made at the sole discretion of the
Calculation Agent and 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. The procedures the Calculation Agent will use to
determine the information described herein with respect to the Notes is set
forth as follows:

 

(a)          On the applicable Interest Payment Date, the Calculation Agent
shall calculate the Interest Amount for the Notes. The Interest Amount is a
single U.S. Dollar payment calculated by the Calculation Agent on each
corresponding Interest Payment Date equal to the principal amount of the Notes
multiplied by (subject to the occurrence of a Disruption Event):

 

(A) 2.5%, if the Reference Exchange Rate
has traded strictly within the applicable Reference Range (or on either of the
applicable Range Boundaries) on every day from and including the applicable
Start Date at 10:00 p.m. EST, to but excluding the applicable End Date at
10:00 p.m. EST, of the applicable Reference Range period, as observed on
the continuous trading EBS (Electronic Broking Service) Spot Dealing System; or

 

(B) 0%, if the Reference Exchange Rate
trades outside the applicable Reference Range on any day from and including the
applicable Start Date at 10:00 p.m. EST, to but excluding the applicable
End Date at 10:00 p.m. EST, as observed on the continuous trading EBS Spot
Dealing System.

 

(i)                                     The
“Interest Payment Dates” are May 5, 2006, August 7, 2006, November 7,
2006 and February 7, 2007.

 

(ii)                                  Each
“Reference Range”, which corresponds to a particular Reference Range period, is
as follows: 

 

	
  Range 

  Period

  	
   

  	
  Start
  Date

  	
   

  	
  End
  Date

  	
   

  	
  Range
  Midpoint

  (RMi)

  	
   

  	
  Range
  Lower 

  Boundary

  	
   

  	
  Range
  Upper 

  Boundary

  
	
  1

  	
   

  	
  January 31, 2006

  	
   

  	
  April 28, 2006

  	
   

  	
  1.2124

  	
   

  	
  1.1624

  	
   

  	
  1.2624

  
	
  2

  	
   

  	
  April 28, 2006

  	
   

  	
  July 31, 2006

  	
   

  	
  RM2

  	
   

  	
  RM2-0.05

  	
   

  	
  RM2+0.05

  
	
  3

  	
   

  	
  July 31, 2006

  	
   

  	
  October 31, 2006

  	
   

  	
  RM3

  	
   

  	
  RM3-0.05

  	
   

  	
  RM3+0.05

  
	
  4

  	
   

  	
  October 31, 2006

  	
   

  	
  January 31, 2007

  	
   

  	
  RM4

  	
   

  	
  RM4-0.05

  	
   

  	
  RM4+0.05

  

 

If any Start Date or End Date is not a
Valuation Business Day, such Start Date or End Date shall be the next
succeeding Valuation Business Day.

 

2

 

(iii)                               The
“Range Midpoint” is the Reference Exchange Rate observed on the Valuation Date
observed in accordance with the Settlement Rate Option (subject to the
occurrence of a Price Source Unavailability Event).

 

(iv)                              The “Valuation
Date” for each Reference Range period, is the Start Date for such period.

 

(v)                                 A
“Valuation Business Day” means any day, other than a Saturday or Sunday, that
is neither a legal holiday nor a day on which commercial banks are authorized
or required by law, regulation or executive order to close (including for
dealings in foreign exchange in accordance with the practice of the foreign
exchange market) in the city indicated in the Settlement Rate Option.

 

(vi)                              The “Reference
Exchange Rate” is the spot exchange rate for the Reference Currency quoted
against the U.S. Dollar expressed as the number of U.S. Dollars per unit of the
Reference Currency.

 

(vii)                           The “Reference
Currency” is the Euro (EUR).

 

(viii)                        The “Settlement
Rate Option” is the U.S. Dollar/Euro official fixing rate, expressed as the
amount of U.S. Dollars per one Euro, for settlement in two Business Days
reported by the Federal Reserve Bank of New York which appears on Reuters
Screen 1FED to the right of the caption “EUR” at approximately 10.00 a.m.,
New York time, on the relevant Valuation Date.

 

(b)         Upon the occurrence of a
Disruption Event with respect to the Reference Currency on any day during the
term of the Notes, the Calculation Agent shall determine the Interest Amount
payable on each Interest Payment Date following the date on which the
Disruption Event occurred in good faith and in a commercially reasonable manner.

 

(i)                                     A
“Disruption Event” means any of the following events (other than a Price Source
Unavailability Event), as determined in good faith by the Calculation Agent:

 

(A)                              the occurrence and/or existence of an event
on any day that has the effect of preventing or making impossible the
conversion of the Reference Currency into USD through customary legal channels;

 

(B)                                the
occurrence of any event causing the Reference Exchange Rate to be split into
dual or multiple currency exchange rates; or

 

(C)                                the occurrence and/or existence of any event
(other than those set forth in (A) or (B) above or those constituting
a Price Source Unavailability Event) with respect to the
Reference Currency that prevents or makes impossible (x) the Calculation Agent’s
ability to calculate the Interest Amount, (y) the 

 

3

 

Company’s fulfillment of its obligations under the
Notes, or (z) the ability of the Company or any of its affiliates through which
it hedges its position under the Notes to hedge such position or to unwind all or a material portion of such
hedge.

 

(c)          Upon the occurrence of a Price
Source Unavailability Event on any day in any Reference Range period or on the
Valuation Date, as applicable, and in respect of any Price Source
Unavailability Event other than with respect to the determination of any Range
Midpoint, for so long as such Price Source Unavailability Event is continuing,
the Reference Exchange Rate will be determined in accordance with the Fallback
Rate Observation Methodology.

 

(i)                                     A “Price Source Unavailability Event” means,
as determined in good faith by the Calculation Agent, the Reference
Exchange Rate
being unavailable, or the occurrence of an event (other than an event
constituting a Disruption Event) that generally makes it impossible to obtain
the Reference Exchange Rate, (a) for purposes of
determining any related Range Midpoint, on the relevant Valuation Date, in
accordance with the Settlement Rate Option, or (b) on any day
in any Reference Range period other than for purposes of determining any Range
Midpoint, on the EBS (Electronic Broking Service) Spot Dealing System.

 

(ii)                                  The “Fallback
Rate Observation Methodology” means that, in respect of a Price Source Unavailability Event
occurring on any day in any Reference Range period (other
than for purposes of determining any Range Midpoint on the relevant Valuation
Date), the Reference Exchange Rate will be determined on a daily basis in
accordance with the Settlement Rate Option on that day.  If the Reference Exchange Rate is not
available in accordance with the Settlement Rate Option on such day, or on the
Valuation Date for the purposes of determining any Range Midpoint, the
Reference Exchange Rate will be calculated on the basis of the arithmetic mean
of the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the Valuation Business
Day next succeeding that day for the purchase or sale for deposits in the
Reference Currency by the Reference Banks. 
If fewer than three Reference Banks provide spot quotations, then the
Reference Exchange Rate will be calculated on the basis of the arithmetic mean
of the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the relevant date from two
Reference Banks (selected in the sole discretion of the Calculation Agent), for
the purchase or sale for deposits in the Reference Currency.  If these spot quotations are available from
only one Reference Bank, then the Calculation Agent, in its sole discretion,
will determine which quotation is available and reasonable to be used.  If no spot quotation is available, then the
Reference Exchange Rate will be determined by the Calculation Agent in good
faith and in a commercially reasonable manner.

 

a.               The “Reference Banks” means the New York offices of
three leading banks engaged in the interbank market selected in the sole
discretion of the Calculation Agent.

 

4

 

(d)         The Calculation Agent shall notify the Trustee of all such
calculations, determinations and adjustments or if a Disruption Event or a Price
Source Unavailability Event
with respect to a series of Notes has occurred.

 

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 and not as an agent 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 Notes;

 

(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 Notes 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.

 

5

 

(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.  Capitalized terms not
otherwise defined herein are used herein as defined in the Notes or, if not
defined in the Notes, as defined in the Indenture.

 

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)

 

6

 

(telephone: (212) 526-7000), Attention: Corporate Secretary, (b) in
the case of the Calculation Agent, to it at Lehman Brothers Inc., 745 Seventh
Avenue, New York, NY 10019 (facsimile: (646) 758-3204) (telephone: (212) 526-7000),
Attention: Treasurer 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.

 

7

 

IN WITNESS WHEREOF, this 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:

  

 

8

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