Document:

Exhibit 4.08

 

INTEREST
CALCULATION

AGENCY AGREEMENT

 

BETWEEN

 

LEHMAN
BROTHERS HOLDINGS INC.

 

AND

 

CITIBANK, N.A.

 

Dated as of May 18,
2005

 

LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation (the “Issuer”)
proposes to issue and sell its Medium-Term Notes, Series H (the “Notes”),
from time to time under, and pursuant to, the terms of an Indenture dated as of
September 1, 1987, as amended and supplemented (the “Indenture”),
between the Issuer and Citibank, N.A., as Trustee (in such capacity, the “Trustee”).

 

For the purpose of providing for an agent of the Issuer to calculate
the base rates applicable to those Notes on which interest is to accrue at a
variable or floating rate (“Floating Rate Notes”), determined by
reference to the CD Rate, the Commercial Paper Rate, the Treasury Rate, the
Federal Funds (Effective) Rate, the Federal Funds (Open) Rate, LIBOR, EURIBOR,
the Prime Rate or the Eleventh District Cost of Funds Rate (collectively, the “Base
Rates”), as specified and described in the form of the Floating Rate Notes,
a copy of which is attached hereto as Exhibit A, the Issuer and Citibank,
N.A., hereby agree as follows:

 

SECTION 1.                                Appointment
of Calculation Agent.  The Issuer
hereby appoints Citibank, N.A., as Calculation Agent (in such capacity, the “Calculation
Agent”) of the Issuer with respect to any Floating Rate Notes issued or to
be issued by the Issuer under and pursuant to the terms of the Indenture, and
the Calculation Agent hereby accepts its obligations as set forth in this
Agreement upon the terms and conditions set forth herein.

 

SECTION 2.                                Calculation
of Base Rates.  As soon as reasonably
practical on or after each Interest Determination Date set forth in each
Floating Rate Note, the Calculation Agent shall determine the applicable Base Rate
and shall notify the Issuer and the Trustee of such Base Rate.  The Calculation Agent will, upon the request
of the holder of any Floating Rate Note, provide the interest rate then in
effect and, if different, the interest rate which will become effective as a
result of a determination made on the most recent Interest Determination Date
with respect to such Floating Rate Note. 
All interest rate determinations made by the Calculation Agent with
respect to the Floating Rate Notes shall, in the absence of manifest error, be
conclusive for all purposes and binding upon the Issuer.  If at any time the Calculation Agent is not
also acting as Trustee under the Indenture, the Issuer will cause the Trustee
to give the Calculation Agent as least three business days notice of each
Interest Determination Date.

 

SECTION 3.                                New
Base Rates.  If the Issuer proposes
to issue Floating Rate Notes whose interest rate will be determined on a basis
of formula not referred to above (a “New Base Rate”), the Issuer shall
give a description of such New Base Rate to the Calculation Agent.  The

 

 

Calculation Agent shall
determine if it is able and willing to calculate the New Base Rate and, upon
its agreement in writing to do so, the term “Base Rates” shall be deemed to
include the New Base Rate.  If the
Calculation Agent notifies the Issuer that it is not able or willing to
calculate the New Base Rate, or that it is only willing to do so on the basis
of an increase of its fees not acceptable to the Issuer, the Calculation Agent
shall have no responsibility with respect to such New Base Rate and the Issuer
shall appoint a different calculation agent to determine the New Base Rate.

 

SECTION 4.                                Fees
and Expenses.  The Calculation Agent
shall be entitled to such compensation for its services under this Agreement as
may be agreed upon with the Issuer, and the Issuer shall pay such compensation
and shall reimburse the Calculation Agent for all reasonable expenses,
disbursements and advances incurred or made by the Calculation Agent in connection
with the services rendered by it under this Agreement, except any expenses,
disbursements or advances attributable to its gross negligence or bad faith.

 

SECTION 5.                                Rights
and Liabilities of Calculation Agent. 
The Calculation Agent shall incur no liability for, or in respect of,
any action taken, omitted to be taken or suffered by it in reliance upon any
Floating Rate Note, certificate, affidavit, instruction, notice, request,
direction, order, statement or other paper document or direction, order,
statement or other paper, document or communication received from the Issuer
and reasonably believed by it to be genuine. 
Any order, certificate, affidavit, instruction, notice, request,
direction, statement or other communication from the Issuer made or given by it
and sent, delivered or directed to the Calculation Agent under, pursuant to or
as permitted by any provision of this Agreement shall be sufficient for
purposes of this Agreement if such communication is in writing and signed by
any officer of the Issuer.  The
Calculation Agent may consult with counsel satisfactory to it, and the opinion
of such counsel shall constitute full and complete authorization and protection
of the Calculation Agent with respect on any action taken, omitted to be taken
or suffered by it hereunder in good faith and in accordance with and in
reliance upon the opinion of such counsel. 
In acting under this Agreement, the Calculation Agent (in its capacity
as such) does not assume any obligation (other than as set forth above in Section 2)
towards, or any relationship of agency or trust for or with, the holders of the
Notes.

 

SECTION 6.                                Right
of Calculation Agent to Own Floating Rate Notes.  The Calculation Agent’s officers, employees
and shareholders may become owners of, or acquire any interests in, Floating
Rate Notes, with the same rights as if the Calculation Agent were not the
Calculation Agent, and may engage in, or have an interest in, any financial or
other transaction with the Issuer as if the Calculation Agent were not the
Calculation Agent.

 

SECTION 7.                                Duties
of Calculation Agent.  The
Calculation Agent shall be obligated only to perform such duties as are
specifically set forth herein, and no other duties or obligations on the part
of the Calculation Agent, in its capacity as such, shall be implied by this
Agreement.

 

SECTION 8.                                Termination,
Resignation or Removal of Calculation Agent.  The Calculation Agent may at any time
terminate this Agreement by giving no less than 60 days’ written notice to the
Issuer unless the Issuer consents in writing to a shorter time.  Upon receipt of notice of termination by the
Calculation Agent, the Issuer agrees promptly to appoint a successor
Calculation Agent.  The Issuer may
terminate this Agreement at any time by giving

 

2

 

written notice to the
Calculation Agent and specifying the date when the termination shall become
effective; provided, however, that so long as any Floating Rate Notes are
outstanding, no termination by the Calculation Agent or by the Issuer shall
become effective prior to the date of the appointment by the Issuer, as
provided in Section 9 hereof, of a successor Calculation Agent and the
acceptance of such appointment by such successor Calculation Agent.  Upon termination by either party pursuant to
the provisions of this Section, the Calculation Agent shall be entitled to the
payment of any compensation owed to it by the Issuer hereunder and to the
reimbursement of all reasonable expenses, disbursements and advances incurred
or made by the Calculation Agent in connection with the services rendered by it
hereunder, as proved by Section 4 hereof, and the provisions of Section 10
shall remain in effect following such termination.

 

SECTION 9.                                Appointment
of Successor Calculation Agent.  Any
successor Calculation Agent appointed by the Issuer following termination of
this Agreement pursuant to the provisions of Section 8 hereof shall
execute and deliver to the Calculation Agent and to the Issuer an instrument
accepting such appointment, and thereupon such successor Calculation Agent
shall, without any further act or instrument, become vested with all the
rights, immunities, duties and obligations of the Calculation Agent, with like
effect as of originally named a Calculation Agent hereunder, and the
Calculation Agent shall thereupon be obligated to transfer and deliver, and
such successor Calculation Agent shall be entitled to receive and accept,
copies of any available records maintained by the Calculation Agent in connection
with the performance of it obligations hereunder.

 

SECTION 10.                          Indemnification.  The Issuer shall indemnify and hold harmless
the Calculation Agent, its officers and employees from and against all actions,
claims, damages, liabilities, losses and expense (including reasonable legal
fees and expenses) relating to or arising out of actions or omissions
hereunder, except actions, claims, damages, liabilities, losses and expenses
caused by the gross negligence or willful misconduct of the Calculation Agent,
its officers or employees.

 

SECTION 11.                          Merger,
Consolidation or Sale of Business by Calculation Agent.  Any corporation into which the Calculation
Agent may be merged, converted, or consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Calculation Agent may
be a party, or any corporation to which the Calculation Agent may sell or
otherwise transfer all or substantially all of its corporate trust business,
shall, to the extent permitted by applicable law, become the Calculation Agent
under this Agreement without the execution of any paper or any further act by
the parties hereto.

 

SECTION 12.                          Notices.  Any notice or other communication given
hereunder shall be delivered in person, sent by letter, telecopy or telex or
communicated by telephone (subject, in the case of communication by telephone,
to written confirmation dispatched within 24 hours) to the addresses given
below or such other address as the party to receive such notice may have
previously specified in writing:

 

To the Issuer:

 

3

 

	
  Lehman Brothers Holdings Inc.

  
	
  745 Seventh Avenue

  
	
  New York, New York 10019

  
	
   

  	
   

  
	
  Attention:

  	
  Treasurer

  
	
  Telecopy:

  	
  (212) 526-    

  
	
  Telephone:

  	
  (212) 526-7000

  
	
   

  	
   

  
	
  To the Calculation Agent:

  
	
   

  	
   

  
	
  Citibank, N.A.

  
	
  388 Greenwich Street -
  14th Floor

  
	
  New York, New York 10013

  
	
   

  	
   

  
	
  Attention:

  	
  Citibank Agency & Trust

  
	
  Telecopy:

  	
  (212) 816-5527

  
	
  Telephone:

  	
  (212) 816-5773

  
			

 

Any notice hereunder given by letter, telecopy or telex shall be deemed
to have been received when it would have been received in the ordinary course
of post or transmission, as the case may be.

 

SECTION 13.                          Benefit
of Agreement.  Except as provided
herein, 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.

 

SECTION 14.                          Governing
Law.  This Agreement shall be
governed by and construed in accordance with the laws of the State of New York.

 

SECTION 15.                          Amendments.  This Agreement may only be amended by a
writing signed by the parties hereto.

 

SECTION 16.                          Counterparts.  This Agreement may be executed in any number
of counterparts, each of which shall be an original, but such counterparts
shall together constitute by one and the same instrument.

 

4

 

IN WITNESS
WHEREOF, of this Agreement has been entered into the day and year first above
written.

 

	
   

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK, N.A.

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
   

  	
   

  
					

 

5Exhibit 4.09

 

CALCULATION
AGENCY AGREEMENT

 

CALCULATION
AGENCY AGREEMENT, dated as of May 18, 2005 (this “Agreement”),
between Lehman Brothers Holdings Inc. (the “Company”) and Lehman
Brothers Inc., as Calculation Agent.

 

WHEREAS,
the Company proposes to issue and sell its Notes, Performance Linked to the Value of a Common Stock, a Stock Index,
a Basket of Common Stocks or a Basket of Stock Indices (the “Notes”)
from time to time;

 

WHEREAS,
the terms of each series of the Notes will be described in a pricing supplement
(in connection with the performance by the Calculation Agent of its services
hereunder with respect to a particular series of the Notes, the prospectus
supplement relating to such particular series of the Notes is referred to
herein as the “relevant Pricing Supplement”) and a prospectus
supplement, dated May 18, 2005, to the prospectus dated May 18, 2005,
as supplemented by a prospectus supplement 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 each series of the Notes (in connection
with the performance by the Calculation Agent of its services hereunder with
respect to a particular series of the Notes, such particular series of the
Notes is referred to herein as the “relevant 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 the Maturity
Payment Amount, the Redemption Payment Amount or the Optional Repurchase Amount
with respect to any series of the Notes, the Calculation Agent shall determine
the applicable Payment Amount in accordance with the terms of the relevant
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 each series of
the Notes, to the extent applicable:

 

(a)                                  the
Settlement Value and any adjustments thereto;

 

 

(b)                                 in
the case of Notes whose performance is linked to a common stock or a basket of
common stocks:

 

(i)                                     the
Closing Price of each Settlement Value Security on any date that the Settlement
Value is to be determined,

 

(ii)                                  the
Multiplier for each Settlement Value Security, and

 

(iii)                               whether
and what adjustments to the Multipliers should be made;

 

(c)                                  in
the case of Notes whose performance is linked to an index or a basket of
indices:

 

(i)                                     the
Closing Level of each Relevant Index on any date that the Settlement Value is
to be determined,

 

(ii)                                  whether
and what adjustments to any Relevant Index should be made,

 

(iii)                               any
successor or substitute index if publication of a Relevant Index is
discontinued, and

 

(iv)                              the
Closing Level of the Relevant Index if the publisher of a Relevant Index
discontinues publication of such index and the Calculation Agent determines
that no successor index is available at such time, or if the publisher of such
Relevant Index fails to calculate and publish a Closing Level for the Relevant
Index on any date when it would ordinarily do so in accordance with customary
practice;

 

(d)                                 whether
a Market Disruption Event has occurred;

 

(e)                                  if
Stock Settlement is applicable, the number and kind of Settlement Value
Securities to be delivered, the value of any fractional shares thereof and
whether cash or other property shall be delivered in lieu of, or in addition
to, any Settlement Value Securities;

 

(f)                                    the
Amortized Principal Amount;

 

(g)                                 the
amount payable upon repayment of the Notes on any Optional Reset Date;

 

(h)                                 whether
a particular day is a Scheduled Trading Day;

 

(i)                                     the
applicable Valuation Date; and

 

2

 

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

 

The
Calculation Agent shall notify the Trustee of all such calculations,
determinations and adjustment or if a Market Disruption Event with respect to a
series of Notes has occurred.  Annex A
hereto sets forth the procedures the Calculation Agent will use to determine
the information described in this Section 2 with respect to a series of
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.

 

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

 

3

 

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.  Capitalized terms not
otherwise defined herein or in Annex A hereto are used herein as defined in the
relevant Notes or, if not defined in the relevant 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

 

4

 

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.

 

5

 

IN
WITNESS WHEREOF, this Agreement has been entered into as of the day and year
first above written.

 

 

	
   

  	
  LEHMAN
  BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LEHMAN
  BROTHERS INC.,

  
	
   

  	
  as Calculation Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

6

 

ANNEX A

 

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

 

2.                                       Determination
of the Payment Amount, Alternative Redemption Amount and Settlement Value.

 

The
Calculation Agent shall determine the applicable Payment Amount in accordance
with the terms of the relevant Notes and this Agreement.  In connection therewith, the Calculation
Agent shall also calculate the related Alternative Redemption Amount and
Settlement Value, all in accordance with the terms of the relevant Notes and
this Agreement.

 

3.                                       Stock
Settlement.

 

If the
relevant Notes may be settled on the Stated Maturity Date or on the Optional
Repurchase Date and if Stock Settlement is applicable, the Calculation Agent
will determine the number and kind of Settlement Value Securities to be
delivered, and whether cash or other property shall be delivered in lieu of, or
in addition to, any Settlement Value Securities, all in accordance with Section 4
hereof and the terms of the relevant Notes.

 

4.                                       Adjustments
to the Multipliers and the Settlement Value Securities.

 

Adjustments to
a Multiplier and the Settlement Value Securities shall be made by the
Calculation Agent in the circumstances described below.  For purposes of the following adjustments,
except as noted below, ADSs shall be treated like common stock if a comparable
adjustment to the foreign shares underlying the ADSs is made pursuant to the
terms of the depositary arrangement for the ADSs or if holders of ADSs are
entitled to receive property in respect of the underlying foreign share.

 

(a)                                  If a Settlement Value Security
is subject to a stock split or reverse stock split, then once the split has
become effective, the Multiplier relating to such Settlement Value Security
shall be adjusted.  The Multiplier shall
be adjusted to equal the product of the number of shares outstanding of the
Settlement Value Security after the split with respect to each share of such
Settlement Value Security immediately prior to effectiveness of the split and
the prior Multiplier.

 

(b)                                 If a Settlement Value Security
is subject to an extraordinary stock dividend or extraordinary stock
distribution that is given equally to all holders of shares, then once the
Settlement Value Security is trading ex-dividend, the Multiplier for such
Settlement Value Security shall be increased by the product of the number of
shares of such Settlement Value Security issued with respect to one share of
such Settlement Value Security and the prior Multiplier.

 

(c)                                  If the issuer of a Settlement
Value Security, or if a Settlement Value Security is an ADS, the foreign issuer
of the underlying foreign share, is being liquidated or dissolved or is subject
to a proceeding under any applicable bankruptcy, insolvency or other similar
law, such Settlement Value Security shall continue to be included in the
calculation of the Settlement Value so long as the Relevant Exchange is
reporting a market price for the Settlement Value Security.  If a market price, including a price on a
bulletin board service, is no longer available

 

A-1

 

for a Settlement Value Security, then the
value of the Settlement Value Security shall equal zero for so long as no
market price is available, and no attempt shall be made to find a replacement
stock or increase the Settlement Value to compensate for the deletion of such
Settlement Value Security.

 

(d)                                 If the issuer of a Settlement
Value Security, or if a Settlement Value Security is an ADS, the foreign issuer
of the underlying foreign share, has been subject to a merger or consolidation
and is not the surviving entity and holders of the Settlement Value Security
are entitled to receive cash, securities, other property or a combination
thereof in exchange for the Settlement Value Security, then the following shall
be included in the calculation of the Settlement Value as “Settlement Property”:

 

(i)                                     To
the extent cash is received, the Settlement Property shall include, subject to
any subsequent adjustments made by the Calculation Agent pursuant to this Section 4,
an amount of cash equal to the product of (1) the cash consideration per
share of Settlement Value Security and (2) the Multiplier for the
Settlement Value Security, each determined as of the time the holders of the
Settlement Value Security are entitled to receive the cash consideration (the “M&A
Cash Component”), plus accrued interest. 
Interest shall accrue beginning the first London Business Day after the
day that holders of the Settlement Value Security receive the cash consideration
until the Stated Maturity Date (the “M&A Cash Component Interest Accrual
Period”).  Interest shall accrue on
the M&A Cash Component at a rate equal to LIBOR with a term corresponding
to the M&A Cash Component Interest Accrual Period.

 

(ii)                                  To
the extent that equity securities that are traded or listed on an exchange,
quotation system or market are received, once the exchange for the new
securities has become effective, the former Settlement Value Security shall be
removed from the calculation of the Settlement Value and the Settlement
Property will include a number of shares of the new security equal to the
Multiplier for the new security as a new Settlement Value Security.  The Multiplier for the new Settlement Value
Security shall equal the product of the last value of the Multiplier of the
original Settlement Value Security and the number of securities of the new
Settlement Value Security exchanged with respect to one share of the original
Settlement Value Security.

 

(iii)                               To
the extent that equity securities that are not traded or listed on an exchange,
quotation system or market or non-equity securities or other property (other
than cash) is received, the Calculation Agent shall determine the fair market
value of the securities or other property received per share of Settlement
Value Security (which may be based on the Average Execution Price for such
securities or other property).  The
Settlement Property shall include, subject to any subsequent adjustments made by
the Calculation Agent pursuant to this Section 4, an amount of cash equal
to the product of (1) such fair market value per share of Settlement Value
Security and (2) the Multiplier for the Settlement Value Security (the “M&A
Sale Component”), each determined as of the time holders of the Settlement
Value Security are entitled to receive the securities or other property, plus
accrued interest.  Interest shall accrue
beginning the first London Business Day after the day that an affiliate of the
Company sells the securities or other property used to hedge the Company’s
obligations under the Notes until the Stated Maturity Date (the “M&A
Sale Component Interest Accrual Period”). 
Interest shall

 

A-2

 

accrue at a
rate equal to LIBOR with a term corresponding to the M&A Sale Component
Interest Accrual Period.

 

(e)                                  If all of the shares of a
Settlement Value Security of an issuer are converted into or exchanged for the
same or a different number of shares of any class or classes of equity
securities other than such Settlement Value Security, whether by capital
reorganization, recapitalization or reclassification or otherwise, then, once
the conversion has become effective, the former Settlement Value Security shall
be removed from the calculation of the Settlement Value and the Settlement
Property will include as a new Settlement Value Security a number of shares of
the new equity securities equal to the Multiplier for the new Settlement Value
Security. The initial Multiplier for each new Settlement Value Security shall
equal the product of the last value of the Multiplier of the original
Settlement Value Security and the number of shares of the new Settlement Value
Security issued with respect to one share of the original Settlement Value
Security.

 

(f)                                    If the issuer of a Settlement
Value Security, or if a Settlement Value Security is an ADS, the issuer of the
underlying foreign share, issues to all of its shareholders common stock or
another equity security that is traded or listed on an exchange, quotation system
or market of an issuer other than itself, then the Settlement Property shall
include as a new Settlement Value Security a number of shares of the new common
stock or other equity security equal to the Multiplier for the new Settlement
Value Security. The initial Multiplier for the new Settlement Value Security
shall equal the product of the last value of the Multiplier with respect to the
original Settlement Value Security and the number of shares of the new
Settlement Value Security with respect to one share of the original Settlement
Value Security.

 

(g)                                 If an ADS is no longer listed or
admitted to trading on a United States securities exchange registered under the
Securities Exchange Act of 1934 or is no longer a security quoted on The Nasdaq
Stock Market, then the ADS shall be removed from the calculation of the
Settlement Value, the foreign share underlying the ADS shall be deemed to be a
new common stock and the Settlement Property shall include as a new Settlement
Value Security a number of shares of new common stock equal to the Multiplier
for the new Settlement Value Security. 
The initial Multiplier for that new Settlement Value Security shall
equal the product of the last value of the Multiplier with respect to the
original ADS and the number of underlying foreign shares represented by a
single such ADS.

 

(h)                                 If a Settlement Value Security
is subject to an extraordinary dividend or an extraordinary distribution
(including upon liquidation or dissolution) of cash, equity securities that are
not traded or listed on an exchange, quotation system or market, non-equity
securities or other property of any kind which is received equally by all
holders of such Settlement Value Security, then following will be included in
the calculation of the Settlement Value as Settlement Property:

 

(i)                                     To
the extent cash is entitled to be received, the Settlement Property shall
include, subject to any subsequent adjustments made by the Calculation Agent
pursuant to this Section 4, on each day after the time that the Settlement
Value Security trades ex-dividend until the date the cash consideration is
entitled to be received, the present value of the cash to be received per share
of Settlement Value Security multiplied by the Multiplier for the Settlement
Value Security on such day, discounted at a rate equal to LIBOR, with a term
beginning that day and ending on the date that the

 

A-3

 

cash is
entitled to be received (the “PV Extraordinary Cash Component”); provided,
however, that when the cash consideration is received, the preceding
adjustment will be eliminated and the Settlement Property shall include,
subject to any subsequent adjustments made by the Calculation Agent pursuant to
this Section 4, an amount of cash equal to the product of (1) the
cash consideration per share of Settlement Value Security and (2) the
Multiplier for the Settlement Value Security, each determined as of the time
the holders of the Settlement Value Security are entitled to receive the cash
consideration (the “Extraordinary Cash Component”), plus accrued
interest. Interest shall accrue on the Extraordinary Cash Component beginning
the first London Business Day after the day that holders of the Settlement
Value Security are entitled to receive the Extraordinary Cash Component until
the Stated Maturity Date (the “Extraordinary Cash Component Interest Accrual
Period”). Interest shall accrue at a rate equal to LIBOR with a term
corresponding to the Extraordinary Cash Component Interest Accrual Period.

 

(ii)                                  To
the extent that equity securities that are not traded or listed on an exchange,
quotation system or market or non-equity securities or other property (other
than cash) is received, the Calculation Agent shall determine the fair market
value of the securities or other property received per share of Settlement
Value Security (which may be based on the Average Execution Price for such
securities or other property) and the Settlement Property shall include,
subject to any subsequent adjustments made by the Calculation Agent pursuant to
this Section 4, an amount of cash equal to the product of (1) such
fair market value per share of Settlement Value Security, and (2) the
Multiplier for the Settlement Value Security (the “Extraordinary Sale
Component”), each determined as of the time the holders of the Settlement
Value Security are entitled to receive the securities or other property, plus
accrued interest.  Interest shall accrue
beginning the first London Business Day after the day that an affiliate of the
Company sells the securities or other property used to hedge the Company’s
obligations under the Notes until the Stated Maturity Date (the “Extraordinary
Sale Component Interest Accrual Period”). 
Interest shall accrue at a rate equal to LIBOR with a term corresponding
to the Extraordinary Sale Component Interest Accrual Period.

 

(i)                                     If other corporate events occur
with respect to such issuer of a Settlement Value Security, adjustments shall
be made which, in the sole judgment of the Calculation Agent, are appropriate
to reflect the economic substance of such events.

 

(j)                                     In the case of Notes whose
performance is linked to the value of an index stock or a basket of common
stocks, the Multiplier for each Settlement Value Security will, unless
otherwise provided in the relevant Notes, also be adjusted to reflect changes
in the per share amount of dividends paid on the Settlement Value Security
during the term of the Notes. If any such Settlement Value Security is an ADS,
the term “dividend” used in this paragraph (j) shall mean, unless otherwise
provided in the relevant Notes, net dividend (that is, the dividend net of any
applicable withholding or similar taxes).

 

(i)                                     If,
during the period from, but excluding, the date of the relevant Pricing
Supplement to the applicable Valuation Date, holders of record of the
Settlement Value Security are entitled to receive a per share cash dividend
(other than an extraordinary cash dividend, as determined by the Calculation
Agent) from the issuer of such Settlement Value Security (a “New Dividend”),
or if the Settlement Value Security is an ADS, the foreign issuer of the
underlying foreign share, and the amount of the New

 

A-4

 

Dividend is
less than the Base Dividend, including if the issuer of the Settlement Value
Security fails to declare or make a quarterly dividend payment on such
Settlement Value Security (as determined by the Calculation Agent), the
Multiplier shall be reduced, effective at the close of business on the Business
Day immediately preceding the ex-dividend date for the New Dividend (such
Business Day, the “Effective Adjustment Date”), so that the new
Multiplier equals the product of the then current Multiplier and:

 

	
  1

  	
  –

  	
  Base Dividend – New Dividend

  
	
   

  	
   

  	
  Closing Price

  

 

The Base
Dividend shall be subject to adjustment by the Calculation Agent in the
event of certain events affecting the stock, such as stock splits, reverse
stock splits or reclassifications, as determined by the Calculation Agent.  As used above, (a) the “new dividend” shall be the dividend
per share of stock, which may be zero, giving rise to the adjustment; and (b) the
“closing price” shall be the closing price of the stock on
the relevant exchange on the Effective Adjustment Date for the stock dividend
giving rise to the adjustment.  If the
Calculation Agent determines that the issuer of the Settlement Value Security
has failed to declare or make a quarterly dividend payment, the Effective
Adjustment Date for adjusting the Multiplier shall be the first Business Day
immediately following the Multiplier Adjustment Dates for Changes in Dividends
specified in the relevant Notes and the Valuation Date.

 

(ii)                                  If,
during the period from, but excluding, the date of the relevant Pricing
Supplement to the applicable Valuation Date, holders of record of the
Settlement Value Security are entitled to receive a New Dividend from the
issuer of the Settlement Value Security, or if the Settlement Value Security is
an ADS, the foreign issuer of the underlying foreign share, and the amount of
the New Dividend is more than the Base Dividend per share, the Multiplier shall
be increased, effective at the close of business on the Effective Adjustment
Date, so that the new Multiplier equals the product of the then current
Multiplier and:

 

	
  1

  	
  +

  	
  New Dividend – Base Dividend

  
	
   

  	
   

  	
  Closing Price

  

 

To the extent
that there is any other equity security (that is, any equity security other
than the index stock or the common stocks in the basket) is included as a
Settlement Value Security and the issuer of such equity security changes the
rate of the regular cash dividend that it pays on such equity security during
the time that such equity security is a Settlement Value Security, the
Calculation Agent may, in its sole discretion, make comparable adjustments to
the Multiplier for such equity security to the extent it believes such
adjustments are appropriate.

 

Other than as
set forth above, the payment of an ordinary cash dividend by an issuer of a
Settlement Value Security, or if a Settlement Value Security is an ADS, by a
foreign issuer of the underlying foreign share, from current income or retained
earnings shall not result in an adjustment to the Multiplier.

 

If any of the
cash received referred to in clauses (i) or (iii) of paragraph (d) above
or clauses (i) or (ii) of paragraph (h) above is denominated in
a foreign currency, such cash shall be converted into U.S. dollars using the
Official W.M. Reuters Spot Closing Rate at 11:00 a.m., New York City
time.  If there are several quotes for
the Official W.M. Reuters Spot Closing Rate

 

A-5

 

at that time, the first quoted
rate starting at 11:00 a.m. shall be the rate used. If there is no such
Official W.M. Reuters Spot Closing Rate for a country’s currency at 11:00 a.m.,
New York City time, the foreign currency-denominated cash shall be converted
into U.S. dollars using the last available U.S. dollar cross-rate quote before
11:00 a.m., New York City time.

 

No adjustments
of any Multiplier shall be required unless the adjustment would result in a
change of at least .1% (.001) in the Multiplier then in effect. Adjustments
which result in a change of less than 1% (.001) shall be carried forward and
included in the next adjustment, if any. 
The Multiplier resulting from any of the adjustments specified above
shall be rounded at the Calculation Agent’s sole discretion.

 

5.                                       Discontinuance
of a Relevant Index

 

In the case of
Notes whose performance is linked to an index or a basket of indices, if the publisher
of a Relevant Index discontinues publication of such index and such publisher
or another entity publishes a successor or substitute index that the
Calculation Agent determines to be comparable to the discontinued Relevant
Index, then that successor or substitute index shall be deemed to be the
Relevant Index and the Calculation Agent shall determine the Closing Level to
be used for purposes of computing the amount payable by reference to the
Closing Level of such successor or substitute index on the date that any
Closing Level of the Relevant Index is to be determined.

 

If the
publisher of a Relevant Index discontinues publication of such index and the
Calculation Agent determines that no successor or substitute index is available
at such time, or if the publisher of such Relevant Index fails to calculate and
publish a Closing Level for the Relevant Index on any date when it would
ordinarily do so in accordance with customary practice, then, on such date, the
Calculation Agent shall determine the Closing Level of the Relevant Index to be
used. In such circumstances, the Closing Level of the Relevant Index shall be
computed by the Calculation Agent in accordance with the formula for and method
of calculating the Relevant Index last in effect prior to such discontinuance
or failure to publish, using the Closing Price (or, if trading in the relevant
securities has been materially suspended or materially limited, its estimate of
the Closing Price that would have prevailed but for such suspension or limitation)
on such date of each security most recently comprising the Relevant Index on
the Relevant Exchange on which such security trades.

 

6.                                       Alteration
of Method of Calculating a Relevant Index

 

If at any time
the Calculation Agent determines that the method of calculating a Relevant
Index, or the Closing Level thereof on any particular day, is changed in a
material respect, or if the Relevant Index is in any other way modified so that
such Relevant Index does not, in the opinion of the Calculation Agent, fairly
represent the value of the Relevant 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 the Relevant Exchanges on which the securities comprising
the Relevant Index traded on the date that any Closing Level is to be
determined, make such calculations and adjustments as may be necessary in order
to arrive at a level of a stock index comparable to the Relevant Index as if
such changes or modifications had not been made, and calculate the applicable
Payment Amount with reference to the Relevant Index, as adjusted. Accordingly,
if the method of calculating the Relevant 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

 

A-6

 

split in the index), then the
Calculation Agent shall adjust such index in order to arrive at a level of the
Relevant Index as if it had not been modified (for example, if such split had
not occurred).

 

7.                                       Market
Disruption Event; Valuation Date

 

The Calculation Agent shall determine whether or not one or more Market
Disruption Events have occurred on a scheduled Valuation Date and whether or
not such date is a Scheduled Trading Day. 
If the Calculation Agent determines that one or more Market Disruption
Events have occurred on the day that would otherwise be the applicable
Valuation Date, or that such date is not a Scheduled Trading Day, the Valuation
Date shall be postponed to the next Scheduled Trading Day on which no Market
Disruption Event occurs; provided, if a Market Disruption Event occurs
on each of the eight Scheduled Trading Days following the originally scheduled
Valuation Date, then that eighth Scheduled Trading Day shall be deemed the
Valuation Date and the Calculation Agent shall determine the Closing Price of
each affected Settlement Value Security or the Closing Level of the Relevant
Index, as the case may be, based upon its estimate of the value of the
Settlement Value Security or Relevant Index, as of the Close of Trading on that
eighth Scheduled Trading Day.

 

8.                                       Definitions.

 

Set forth
below are the terms used in the Agreement and in this Annex A.

 

“ADS” shall have the meaning specified in the relevant Notes.

 

“Agreement” shall have the meaning set forth in the preamble to
this Agreement.

 

“Alternative Redemption Amount” shall have the meaning specified
in the relevant Notes.

 

“Amortized Principal Amount” shall have the meaning specified in
the relevant Notes.

 

“Average Execution Price” shall have
the meaning specified in the relevant Notes.

 

“Base Dividend” with respect to a
Settlement Value Security shall initially mean the amount specified as such in
the relevant Notes.  The Base Dividend
shall be appropriately adjusted by the Calculation Agent to reflect stock
splits and other similar events affecting the Settlement Value Security.

 

“Business Day” shall have the meaning specified in the relevant
Notes.

 

“Calculation Agent” shall mean the
person that has entered into this Agreement with the Company and shall, unless
the context otherwise requires, include its successors and assigns.  The initial Calculation Agent is Lehman
Brothers Inc.

 

“Close of Trading” shall have the
meaning specified in the relevant Notes.

 

“Closing Level” shall have the meaning specified in the relevant
Notes.

 

A-7

 

“Closing Price” shall have the meaning specified in the relevant
Notes.

 

“common stock” shall have the meaning specified in the relevant
Notes.

 

“Company” shall have the meaning set forth in the preamble to
this Agreement.

 

“Effective Adjustment Date” shall have the meaning set forth in Section 4(j)(i) of
this Annex A.

 

“Extraordinary Cash Component” “ shall have the meaning set
forth in Section 4(h)(i) of this Annex A.

 

“Extraordinary Cash Component Interest Accrual Period” “ shall
have the meaning set forth in Section 4(h)(i) of this Annex A.

 

“Extraordinary Sale Component” “ shall have the meaning set
forth in Section 4(h)(ii) of this Annex A.

 

“Extraordinary Sale Component Interest Accrual Period” “ shall
have the meaning set forth in Section 4(h)(ii) of this Annex A.

 

“Indenture” shall have the meaning set forth in the preamble to
this Agreement.

 

“LIBOR” shall mean London Interbank Offered Rate.

 

“London Business Day” shall mean any day in the United Kingdom
that is a Saturday, a Sunday or a day on which the London Stock Exchange is not
open for trading or banking institutions or trust companies in the City of
London are authorized or obligated by law or parliamentary order to close.

 

“M&A Cash Component” shall have the meaning set forth in Section 4(d)(i) of
this Annex A.

 

“M&A Cash Component Interest Accrual Period” shall have the
meaning set forth in Section 4(d)(i) of this Annex A.

 

“M&A Sale Component” shall have the meaning set forth in Section 4(d)(iii) of
this Annex A.

 

“M&A Sale Component Interest Accrual Period” shall have the
meaning set forth in Section 4(d)(iii) of this Annex A.

 

“Market Disruption Event”  shall
have the meaning specified in the relevant Notes.

 

“Maturity Payment Amount” shall have the meaning specified in
the relevant Notes.

 

“Multiplier” shall have the meaning specified in the relevant
Notes.

 

“Multiplier Adjustment Dates for Changes in Dividends” shall
have the meaning set forth in Section 4(j)(i) of this Annex A.

 

A-8

 

“New Dividend” shall have the meaning set forth in Section 4(j)(i) of
this Annex A.

 

“Official W.M. Reuters Spot Closing Rates”
shall have the meaning specified in the relevant Notes.

 

“Optional Repurchase Date” shall have
the meaning specified in the relevant Notes.

 

“Optional Repurchase Amount” shall
have the meaning specified in the relevant Notes.

 

“Optional Reset Dates” shall have the
meaning specified in the relevant Notes.

 

“Payment Amount” shall have the
meaning specified in the relevant Notes.

 

 “PV Extraordinary Cash
Component” shall have the meaning set forth in Section 4(h)(i) of
this Annex A.

 

“Redemption Payment Amount” shall have
the meaning specified in the relevant Notes.

 

“Relevant Exchange” shall have the
meaning specified in the relevant Notes.

 

“Relevant Index” shall have the
meaning set forth in the relevant Notes.

 

“relevant Notes” shall have the
meaning set forth in the preamble to this Agreement.

 

“relevant Pricing Supplement” shall
mean the pricing supplement issued by the Company with respect to the relevant
Notes.

 

“Notes” shall have the meaning set forth in the preamble to this
Agreement.

 

“Scheduled Trading Day” shall have the
meaning specified in the relevant Notes.

 

“Settlement Property” shall mean the
property described in Section 4 of this Annex A.

 

“Settlement Value” shall have the
meaning specified in the relevant Notes.

 

“Settlement Value Security” shall have
the meaning specified in the relevant Notes.

 

“Stated Maturity Date” shall have the
meaning specified in the relevant Notes.

 

“Stock Settlement” shall have the
meaning specified in the relevant Notes.

 

“Trustee” shall have the meaning set forth in the preamble to
this Agreement.

 

“Valuation Date” shall have the meaning specified in the
relevant Notes.

 

A-9

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