Document:

Exhibit 4.10

 

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 Yield Enhanced
Equity Linked Debt Securities (or YEELDS®), Performance Linked to
the Value of a Common Stock (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)                                 the
Closing Price of each Settlement Value Security on any date that the Settlement
Value is to be determined,

 

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

 

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

 

(e)                                  whether
a Market Disruption Event has occurred;

 

(f)                                    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;

 

(g)                                 the
Amortized Principal Amount;

 

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

 

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

 

(j)                                     the
applicable Valuation Date; and

 

(k)                                  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;

 

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(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.

 

(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

 

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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 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.

 

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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.

 

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 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.

 

A-4

 

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.                                       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 based upon its
estimate of the value of the Settlement Value Security, as of the Close of
Trading on that eighth Scheduled Trading Day.

 

6.                                       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.

 

“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 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.

 

A-5

 

“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.

 

“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.

 

A-6

 

“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 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-7Exhibit 4.11

 

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 Risk Adjusting Equity Range SecuritiesSM
(or RANGERSSM) (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)                                 whether
the Settlement Value falls below the Threshold Value on any Scheduled Trading
Day;

 

 

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

 

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

 

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

 

(f)                                    whether
a Market Disruption Event has occurred;

 

(g)                                 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;

 

(h)                                 the
Amortized Principal Amount; 

 

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

 

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

 

(k)                                  the
applicable Valuation Date; and

 

(l)                                     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;

 

2

 

(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.

 

(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

 

3

 

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 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.

 

4

 

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.

 

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 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.

 

A-4

 

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.                                       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 based upon its estimate of the value of
the Settlement Value Security, as of the Close of Trading on that eighth
Scheduled Trading Day.

 

6.                                       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.

 

“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
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.

 

A-5

 

“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.

 

“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.

 

A-6

 

“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
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.

 

“Threshold
Value” 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-7

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