8-K

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON, DC 20549

                                    FORM 8-K

                                 CURRENT REPORT
                       PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                Date of Report (date of earliest event reported):
                                  May 31, 2006

                          LEHMAN BROTHERS HOLDINGS INC.
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
                 (State or other jurisdiction of incorporation)

         1-9466                                           13-3216325
(Commission File Number)                       (IRS Employer Identification No.)

   745 SEVENTH AVENUE
   NEW YORK, NEW YORK                                       10019
  (Address of principal                                   (Zip Code)
   executive offices)

               Registrant's telephone number, including area code:
                                 (212) 526-7000

                                 Not Applicable
          (Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions:

[_]  Written communications pursuant to Rule 425 under the Securities Act (17
     CFR 230.425)

[_]  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
     240.14a-12)

[_]  Pre-commencement communications pursuant to Rule 14d-2(b) under the
     Exchange Act (17 CFR 240.14d-2(b))

[_]  Pre-commencement communications pursuant to Rule 13e-4(c) under the
     Exchange Act (17 CFR 240.13e-4(c))



Item 9.01 Financial Statements and Exhibits

          (c) Exhibits

          The following Exhibits are incorporated by reference into Registration
Statement on Form S-3 No. 333-121067 as exhibits thereto and are filed as part
of this Report.

4.01   Global Security representing the Registrant's Limited Principal
       Protection RAPIDS(SM) (Return Accelerated PortfolIo Debt Securities) Due
       May 31, 2008, Linked to the S&P 500(R) Index (SPX) (filed herewith)

4.02   Calculation Agency Agreement between the Registrant and Lehman Brothers
       Inc., as calculation agent, relating to the Registrant's Limited
       Principal Protection RAPIDS(SM) (Return Accelerated PortfolIo Debt
       Securities) Due May 31, 2008, Linked to the S&P 500(R) Index (SPX) (filed
       herewith)


                                       2



                                    SIGNATURE

          Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.

                                             LEHMAN BROTHERS HOLDINGS INC.
                                                         (Registrant)


                                             By: /s/ James J. Killerlane III
                                                 -------------------------------
                                                 James J. Killerlane III
                                                 Vice President

Date: May 31, 2006


                                       3



                                  EXHIBIT INDEX

Exhibit No.   Exhibit
- -----------   -------
4.01          Global Security representing the Registrant's Limited Principal
              Protection RAPIDS(SM) (Return Accelerated PortfolIo Debt
              Securities) Due May 31, 2008, Linked to the S&P 500(R) Index (SPX)

4.02          Calculation Agency Agreement between the Registrant and Lehman
              Brothers Inc., as calculation agent, relating to the Registrant's
              Limited Principal Protection RAPIDS(SM) (Return Accelerated
              PortfolIo Debt Securities) Due May 31, 2008, Linked to the S&P
              500(R) Index (SPX)


                                       4

EX-4.01

                          LEHMAN BROTHERS HOLDINGS INC.

                     Limited Principal Protection RAPIDS(SM)
         (Return Accelerated PortfolIo Debt Securities) Due May 31, 2008
                         Linked to the S&P 500(R) Index

Number R-1                                                         $2,210,000.00
ISIN US52520WAB72                                                CUSIP 52520WAB7

See Reverse for Certain Definitions

THIS SECURITY (THIS "SECURITY") IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO SUCH DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.

          LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and
existing under the laws of the State of Delaware (hereinafter called the
"Company"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, on the Stated Maturity Date, in such coin or
currency of the United States of America at the time of payment shall be legal
tender for the payment of public and private debts, for each $1,000 principal
amount of the Securities represented hereby, an amount equal to the Maturity
Payment Amount. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

          Any amount payable on the Stated Maturity Date hereon will be paid
only upon presentation and surrender of this Security.



                                                                               2


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

          "RAPIDS" is a service mark of the Company. "Standard & Poor's," "S&P,"
"S&P 500," "Standard & Poor's 500" and "500" are the service marks of
McGraw-Hill, Inc. and have been licensed for use by the Company. The Securities,
linked to the performance of the S&P 500 Index, are not sponsored, endorsed,
sold or promoted by Standard & Poor's and Standard & Poor's makes no
representation regarding the advisability of investing in the Securities.

          This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture referred to on the reverse hereof.



                                                                               3


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

Dated: May 31, 2006                     LEHMAN BROTHERS HOLDINGS INC.


                                        By: /s/ James J. Killerlane III
                                            ------------------------------------
                                            James J. Killerlane III
                                            Vice President


                                        Attest: /s/ Jin Lee
                                                --------------------------------
                                                Jin Lee
                                                Assistant Secretary

                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

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

Dated: May 31, 2006

CITIBANK, N.A.
as Trustee


By: /s/ John J. Byrnes
    -------------------------------
    Name: John J. Byrnes
    Title: Authorized Signatory



                                                                               4


                               Reverse of Security

          This Security is one of a duly authorized series of Securities of the
Company designated as Limited Principal Protection RAPIDS(SM) (Return
Accelerated PortfolIo Debt Securities) Due May 31, 2008 Linked to the S&P 500(R)
Index (herein called the "Securities"). The Company may, without the consent of
the holders of the Securities, create and issue additional notes ranking equally
with the Securities and otherwise similar in all respects so that such further
notes shall be consolidated and form a single series with the Securities;
provided that no additional notes can be issued if an Event of Default has
occurred with respect to the Securities. This series of Securities is one of an
indefinite number of series of debt securities of the Company, issued and to be
issued under an indenture, dated as of September 1, 1987, as amended (herein
called the "Indenture"), duly executed and delivered by the Company and Citibank
N.A., as trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities.

          The Maturity Payment Amount, at the request of the Trustee, shall be
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.

          All percentages resulting from any calculation with respect to the
Securities will be rounded at the Calculation Agent's discretion.

          The Trustee shall fully rely on the determination by the Calculation
Agent of the Maturity Payment Amount and shall have no duty to make any such
determination.

          This Security is not subject to any sinking fund.

          If an Event of Default with respect to the Securities shall occur and
be continuing, the amounts payable on all of the Securities may be declared due
and payable in the manner and with the effect provided in the Indenture. The
amount payable to the Holder hereof upon any acceleration permitted under the
Indenture will be equal to the Maturity Payment Amount calculated as though the
date of acceleration was the Stated Maturity Date and the date three Business
Days prior thereto was the Valuation Date.

          The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of each series of Securities at the time Outstanding to be
affected (each series voting as a class), evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to, or
changing in any manner or eliminating any of the provisions of the Indenture or
of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, if any, or reduce any premium
payable on redemption, or make the principal thereof, or premium, if any, or
interest thereon, if any, payable in any coin or currency other than that
hereinabove provided, without the consent of



                                                                               5


the holder of each Security so affected, or (ii) change the place of payment on
any Security, or impair the right to institute suit for payment on any Security,
or reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Security so affected. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of any series of
Securities, the holders of a majority in aggregate principal amount of the
Securities of such series Outstanding may on behalf of the holders of all the
Securities of such series waive any past default or Event of Default under the
Indenture with respect to such series and its consequences, except a default in
the payment of interest, if any, or the principal of, or premium, if any, on any
of the Securities of such series, or in the payment of any sinking fund
installment or analogous obligation with respect to Securities of such series.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future holders and owners of this
Security and any Securities which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Security or such other Securities.

          No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal amount with respect to this
Security.

          The Securities are issuable in denominations of $1,000 and any whole
multiples of $1,000.

          The Company, the Trustee, and any agent of the Company or of the
Trustee may deem and treat the registered holder (the "Holder") hereof as the
absolute owner of this Security (whether or not this Security shall be overdue
and notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment hereof, or on account hereof, and for all other
purposes and neither the Company nor the Trustee nor any agent of the Company or
of the Trustee shall be affected by any notice to the contrary. All such
payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, effectually satisfy and discharge liability for
moneys payable on this Security.

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

          As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
Corporate Trust Office or agency in a Place of Payment for this Security, duly
endorsed by, or accompanied by a written instrument of transfer in form



                                                                               6


satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Securities of this series or of like tenor and of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

          The Company intends to treat, and by purchasing this Security, the
Holder agrees to treat, for all tax purposes, this Security as a cash-settled
financial contract giving rise to capital gain or loss, rather than as a debt
instrument.

          THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

          Set forth below are definitions of the terms used in this Security.

          "AMEX" shall mean the American Stock Exchange LLC.

          "Business Day", notwithstanding any provision in the Indenture, shall
mean any day that is not a Saturday, a Sunday or a day on which the NYSE, Nasdaq
or AMEX is not open for trading or banking institutions or trust companies in
the City of New York are authorized or obligated by law or executive order to
close.

          "Calculation Agency Agreement" shall mean the Calculation Agency
Agreement, dated as of May 31, 2006, between the Company and the Calculation
Agent, as amended from time to time, or any successor calculation agency
agreement.

          "Calculation Agent" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the determination
of the Maturity Payment Amount, which term shall, unless the context otherwise
requires, include its successors and assigns. The initial Calculation Agent
shall be Lehman Brothers Inc.

          "Close of Trading" shall mean, in respect of any Relevant Exchange,
the scheduled weekday closing time on a day on which the Relevant Exchange is
scheduled to be open for trading for its respective regular trading session,
without regard to after hours or any other trading outside of the regular
trading session hours.

          "Closing Index Level" shall mean, with respect to any day, in the case
of the Index or the Successor Index, the closing level of the Index or the
Successor Index, as the case may be, as reported by S&P or the publisher of the
Successor Index, as the case may be, on such day or as determined by the
Calculation Agent pursuant to the Calculation Agency Agreement.

          "Company" shall have the meaning set forth on the face of this
Security.

          "Exchange Business Day" shall mean any day on which the Index or any
Successor Index is published by its publisher or is otherwise determined by the
Calculation Agent pursuant to the Calculation Agency Agreement.



                                                                               7


          "Final Index Level" shall equal the Closing Index Level on the
Valuation Date.

          "Final Index Return" shall equal the following:

                     Final Index Level - Initial Index Level
                     ---------------------------------------
                               Initial Index Level

          "Holder" shall have the meaning set forth on the reverse of this
Security.

          "Indenture" shall have the meaning set forth on the reverse of this
Security.

          "Index" shall mean the S&P 500(R) Index, as calculated, published and
disseminated by S&P.

          "Initial Index Level" shall equal 1280.16, the Closing Index Level on
May 26, 2006.

          "Market Disruption Event", with respect to the Index or any Successor
Index shall mean any of the following events has occurred on any day as
determined by the Calculation Agent in its sole discretion:

          (1) A material suspension of or limitation imposed on trading relating
          to the securities that then comprise 20% or more of the Index or any
          Successor Index, by the Relevant Exchanges on which those securities
          are traded, at any time during the one-hour period that ends at the
          Close of Trading on such day, whether by reason of movements in price
          exceeding limits permitted by that Relevant Exchange or otherwise.
          Limitations on trading during significant market fluctuations imposed
          pursuant to NYSE Rule 80B or any applicable rule or regulation enacted
          or promulgated by the NYSE, any other exchange, quotation system or
          market, any other self regulatory organization or the Securities and
          Exchange Commission of similar scope or as a replacement for Rule 80B
          may be considered material.

          (2) A material suspension of, or limitation imposed on, trading in
          futures or options contracts relating to the Index or any Successor
          Index by the primary exchange on which those futures or options
          contracts are traded, at any time during the one-hour period that ends
          at the Close of Trading on such day, whether by reason of movements in
          price exceeding limits permitted by the exchanges or otherwise.

          (3) Any event, other than an early closure, that disrupts or impairs
          the ability of market participants in general to effect transactions
          in, or obtain market values for, the securities that then comprise 20%
          or more of the Index or any Successor Index on the Relevant Exchanges
          on which those securities are traded, at any time during the one-hour
          period that ends at the Close of Trading on that day.

          (4) Any event, other than an early closure, that disrupts or impairs
          the ability of market participants in general to effect transactions
          in, or obtain market values for, the futures or options contracts
          relating to the Index or any Successor Index on the primary



                                                                               8


          exchange or quotation system on which those futures or options
          contracts are traded at any time during the one-hour period that ends
          at the Close of Trading on that day.

          (5) The closure of the Relevant Exchanges on which securities that
          then comprise 20% or more of the Index or any Successor Index are
          traded or on which futures or options contracts relating to the Index
          or any Successor Index are traded prior to its scheduled closing time
          unless the earlier closing time is announced by the Relevant Exchanges
          at least one hour prior to the earlier of (i) the actual closing time
          for the regular trading session on the Relevant Exchanges and (ii) the
          submission deadline for orders to be entered into the Relevant
          Exchanges for execution at the Close of Trading on that day.

For purposes of determining whether a Market Disruption Event has occurred, the
relevant percentage contribution of a security to the level of the Index or any
Successor Index will be based on a comparison of (x) the portion of the level of
the Index or Successor Index attributable to that security and (y) the overall
level of the Index or Successor Index, in each case immediately before the
occurrence of the Market Disruption Event.

          "Maturity Payment Amount" for each $1,000 principal amount of
Securities, shall equal:

          o    If the Final Index Return is greater than or equal to zero, the
               lesser of:

               (a)  $1,185; and

               (b)  $1,000 + ($2,000 x the Final Index Return).

          o    If the Final Index Return is less than zero and the Final Index
               Level is equal to or greater than the Threshold Level, $1,000.

          o    If the Final Index Return is less than zero and the Final Index
               Level is less than the Threshold Level,

               $1,000 x Final Index Level
                        -----------------
                         Threshold Level

          If requested by the Trustee, the Maturity Payment Amount shall be
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.

          "Nasdaq" shall mean The Nasdaq Stock Market, Inc.

          "NYSE" shall mean The New York Stock Exchange, Inc.

          "Place of Payment" shall mean the place or places where the principal
of (and premium, if any) and interest, if any, on the Securities are payable.

          "Relevant Exchange" shall mean, for any security (or any combination
thereof then underlying the Index or any Successor Index), the primary exchange,
quotation system (which includes bulletin board services) or other market of
trading for such security.



                                                                               9


          "Securities" shall have the meaning set forth on the reverse of this
Security.

          "Security" shall have the meaning set forth on the face of this
Security.

          "S&P" shall mean Standard & Poor's, a division of McGraw-Hill, Inc.

          "Stated Maturity Date" shall mean May 31, 2008 (or if May 31, 2008 is
not a Business Day, on the next Business Day); provided, that if the Valuation
Date is postponed, the Stated Maturity Date shall be the third Business Day
following the date that the Final Index Level on the postponed Valuation Date is
determined.

          "Successor Index" shall mean such successor or substitute index as the
Calculation Agent may select pursuant to the Calculation Agency Agreement upon
discontinuance of the Index.

          "Threshold Level" shall mean 1152.144, as it may be adjusted from time
to time by the Calculation Agent to the extent it believes appropriate, in a
manner consistent with the adjustments to the method of calculation of the Index
or a Successor Index described in the Calculation Agency Agreement.

          "Trustee" shall have the meaning set forth on the reverse of this
Security.

          "Valuation Date" shall mean May 28, 2008; provided, that if a Market
Disruption Event occurs on such day or if such day is not an Exchange Business
Day, then the Valuation Date shall be the next following Exchange Business Day
on which no Market Disruption Event occurs; provided, however, if a Market
Disruption Event occurs on each of the eight Exchange Business Days following
the originally scheduled Valuation Date, then (a) that eighth Exchange Business
Day shall be deemed the Valuation Date and (b) the Calculation Agent shall
determine the Final Index Level based upon its good faith estimate of the level
of the Index on that eighth Exchange Business Day.

          All terms used but not defined in this Security are used herein as
defined in the Calculation Agency Agreement or the Indenture.



                                   ----------

          The following abbreviations, when used in the inscription on the face
of the within Security, shall be construed as though they were written out in
full according to applicable laws or regulations:

TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN  - as joint tenants with right of
          Survivorship and not as tenants in common

UNIF GIFT MIN ACT - ______ Custodian _______
                    (Cust)           (Minor)
under Uniform Gifts to Minors
Act _______________________________________
                    (State)

     Additional abbreviations may also be used though not in the above list.

                                   ----------

          FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

- --------------------

- --------------------

________________________________________________________________________________
(Name and Address of Assignee, including zip code, must be printed or
typewritten.)

________________________________________________________________________________
the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing

________________________________________________________________________________
to transfer the said Security on the books of the Company, with full power of
substitution in the premises.

     Dated:

                                       -----------------------------------------

          NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Security in every particular, without
alteration or enlargement or any change whatever.

Signature(s) Guaranteed:


- ---------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.

EX-4.02

                          CALCULATION AGENCY AGREEMENT

          CALCULATION AGENCY AGREEMENT, dated as of May 31, 2006 (the
"Agreement"), between Lehman Brothers Holdings Inc. (the "Company") and Lehman
Brothers Inc., as Calculation Agent.

          WHEREAS, the Company has authorized the issuance of up to $2,541,500
aggregate principal amount of Limited Principal Protection RAPIDS(SM) (Return
Accelerated PortfolIo Debt Securities) Due May 31, 2008 Linked to the S&P 500(R)
Index (SPX) (the "Securities")*;

          WHEREAS, the Securities will be issued under an Indenture, dated as of
September 1, 1987, between the Company and Citibank, N.A., as Trustee (the
"Trustee"), as supplemented and amended by supplemental indentures dated as of
November 25, 1987, November 27, 1990, September 13, 1991, October 4, 1993,
October 1, 1995, and June 26, 1997, and incorporating Standard Multiple Series
Indenture Provisions dated July 30, 1987, as amended November 16, 1987
(collectively, the "Indenture"); and

          WHEREAS, the Company requests the Calculation Agent to perform certain
services described herein in connection with the Securities;

          NOW THEREFORE, the Company and the Calculation Agent agree as follows:

          1. Appointment of Agent. The Company hereby appoints Lehman Brothers
Inc., as Calculation Agent, and Lehman Brothers Inc. hereby accepts such
appointment as the Company's agent for the purpose of performing the services
hereinafter described upon the terms and subject to the conditions hereinafter
mentioned.

          2. Calculations and Information Provided. In response to a request
made by the Trustee for a determination of the Maturity Payment Amount due on
the Stated Maturity Date of the Securities, the Calculation Agent shall
determine such Maturity Payment Amount and notify the Trustee of its
determination. The Calculation Agent shall also determine (a) the Successor
Index if publication of the Index is discontinued, (b) the Closing Index Level
if no Successor Index is available or if S&P or the publisher of any Successor
Index, as the case may be, fails to calculate and publish a Closing Index Level
on any date, (c) adjustments to the Index, Successor Index or Closing Index
Level thereof if the method of calculating any of these items changes in a
material respect or if the Index or Successor Index is in any other way modified
so

- ----------
*    "RAPIDS" is a service mark of the Company. "Standard & Poor's," "S&P," "S&P
     500," "Standard & Poor's 500" and "500" are the service marks of
     McGraw-Hill, Inc. and have been licensed for use by the Company. The
     Securities, linked to the performance of the S&P 500 Index, are not
     sponsored, endorsed, sold or promoted by Standard & Poor's and Standard &
     Poor's makes no representation regarding the advisability of investing in
     the Securities.



                                                                               2


that it does not, in the opinion of the Calculation Agent, fairly represent the
level of the Index, or Successor Index, as the case may be, had such changes or
modifications not been made, (d) adjustments to the Threshold Level, if required
in order to reflect adjustments made in the Index or Successor Index and (e)
whether a Market Disruption Event has occurred. The Calculation Agent shall
notify the Trustee of all such adjustments or any such Successor Index, or if a
Market Disruption Event has occurred. Annex A hereto sets forth the procedures
the Calculation Agent will use to determine the information described in this
Section 2.

          3. Calculations. Any calculation or determination by the Calculation
Agent pursuant hereto shall (in the absence of manifest error) be final and
binding. Any calculation made by the Calculation Agent hereunder shall, at the
Trustee's request, be made available at the Corporate Trust Office.

          4. Fees and Expenses. The Calculation Agent shall be entitled to
reasonable compensation for all services rendered by it as agreed to between the
Calculation Agent and the Company.

          5. Terms and Conditions. The Calculation Agent accepts its obligations
herein set out upon the terms and conditions hereof, including the following, to
all of which the Company agrees:

          (a) in acting under this Agreement, the Calculation Agent is acting
     solely as an independent expert of the Company and does not assume any
     obligation toward, or any relationship of agency or trust for or with, any
     of the holders of the Securities;

          (b) unless otherwise specifically provided herein, any order,
     certificate, notice, request, direction or other communication from the
     Company or the Trustee made or given under any provision of this Agreement
     shall be sufficient if signed by any person whom the Calculation Agent
     reasonably believes to be a duly authorized officer or attorney-in-fact of
     the Company or the Trustee, as the case may be;

          (c) the Calculation Agent shall be obliged to perform only such duties
     as are set out specifically herein and any duties necessarily incidental
     thereto;

          (d) the Calculation Agent, whether acting for itself or in any other
     capacity, may become the owner or pledgee of Securities with the same
     rights as it would have had if it were not acting hereunder as Calculation
     Agent; and

          (e) the Calculation Agent shall incur no liability hereunder except
     for loss sustained by reason of its gross negligence or willful 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



                                                                               3


by the filing with it of an instrument in writing signed by or on behalf of the
Company and specifying such removal and the date when it shall become effective.
Such resignation or removal shall take effect upon the appointment by the
Company, as hereinafter provided, of a successor Calculation Agent and the
acceptance of such appointment by such successor Calculation Agent. In the event
a successor Calculation Agent has not been appointed and has not accepted its
duties within 90 days of the Calculation Agent's notice of resignation, the
Calculation Agent may apply to any court of competent jurisdiction for the
designation of a successor Calculation Agent.

          (b) In case at any time the Calculation Agent shall resign, or shall
be removed, or shall become incapable of acting, or shall be adjudged bankrupt
or insolvent, or make an assignment for the benefit of its creditors or consent
to the appointment of a receiver or custodian of all or any substantial part of
its property, or shall admit in writing its inability to pay or meet its debts
as they mature, or if a receiver or custodian of it or all or any substantial
part of its property shall be appointed, or if any public officer shall have
taken charge or control of the Calculation Agent or of its property or affairs,
for the purpose of rehabilitation, conservation or liquidation, a successor
Calculation Agent shall be appointed by the Company by an instrument in writing,
filed with the successor Calculation Agent. Upon the appointment as aforesaid of
a successor Calculation Agent and acceptance by the latter of such appointment,
the Calculation Agent so superseded shall cease to be Calculation Agent
hereunder.

          (c) Any successor Calculation Agent appointed hereunder shall execute,
acknowledge and deliver to its predecessor, to the Company and to the Trustee an
instrument accepting such appointment hereunder and agreeing to be bound by the
terms hereof, and thereupon such successor Calculation Agent, without any
further act, deed or conveyance, shall become vested with all the authority,
rights, powers, trusts, immunities, duties and obligations of such predecessor
with like effect as if originally named as Calculation Agent hereunder, and such
predecessor, upon payment of its charges and disbursements then unpaid, shall
thereupon become obligated to transfer, deliver and pay over, and such successor
Calculation Agent shall be entitled to receive, all moneys, securities and other
property on deposit with or held by such predecessor, as Calculation Agent
hereunder.

          (d) Any corporation into which the Calculation Agent hereunder may be
merged or converted or any corporation with which the Calculation Agent may be
consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Calculation Agent shall be a party, or any
corporation to which the Calculation Agent shall sell or otherwise transfer all
or substantially all of the assets and business of the Calculation Agent shall
be the successor Calculation Agent under this Agreement without the execution or
filing of any paper or any further act on the part of any of the parties hereto.

          7. Certain Definitions. Terms not otherwise defined herein or in Annex
A hereto are used herein as defined in the Indenture or the Securities.

          8. Indemnification. The Company will indemnify the Calculation Agent
against any losses or liability which it may incur or sustain in connection with
its appointment or the exercise of its powers and duties hereunder except such
as may result from the gross



                                                                               4


negligence or willful 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 1301
Avenue of the Americas, New York, New York 10019 (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 388 Greenwich
Street, 14th Floor, New York, New York 10013 (facsimile: (212) 816-5527)
(telephone: (212) 816-5773), Attention: Agency and Trust, or in any case, to any
other address or number of which the party receiving notice shall have notified
the party giving such notice in writing. Any notice hereunder given by telex,
facsimile or letter shall be deemed to be served when in the ordinary course of
transmission or post, as the case may be, it would be received.

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

          11. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.

          12. Benefit of Agreement. This Agreement is solely for the benefit of
the parties hereto and their successors and assigns, and no other person shall
acquire or have any rights under or by virtue hereof.



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

                                             LEHMAN BROTHERS HOLDINGS INC.


                                             By: /s/ James J. Killerlane III
                                                 -------------------------------
                                                 James J. Killerlane III
                                                 Vice President


                                             LEHMAN BROTHERS INC.,
                                             as Calculation Agent


                                             By: /s/ James J. Killerlane III
                                                 -------------------------------
                                                 James J. Killerlane III
                                                 Vice President

                         [Calculation Agency Agreement]



                                     ANNEX A

     1.   The Index.

          The Index is the S&P 500(R) Index (the "Index"), as calculated,
published and disseminated by Standard & Poor's, a division of McGraw-Hill, Inc.
("S&P").

     2.   Determination of the Maturity Payment Amount.

          The Calculation Agent shall, at the request of the Trustee, determine
the amount payable on the Stated Maturity Date for each $1,000 principal amount
of Securities (the "Maturity Payment Amount").

          The Maturity Payment Amount shall be the following:

          o    If the Final Index Return is greater than or equal to zero, the
               lesser of:

               (a)  $1,185; and

               (b)  $1,000 + ($2,000 x the Final Index Return).

          o    If the Final Index Return is less than zero and the Final Index
               Level is equal to or greater than the Threshold Level, $1,000.

          o    If the Final Index Return is less than zero and the Final Index
               Level is less than the Threshold Level,

               $1,000 x Final Index Level
                        -----------------
                         Threshold Level

     3.   Discontinuance of the Index.

     (a) If S&P discontinues publication of the Index and S&P or another entity
publishes a successor or substitute index (the "Successor Index") that the
Calculation Agent determines, in its sole discretion exercised in good faith, to
be comparable to the discontinued Index, then the Calculation Agent shall
determine each subsequent Closing Index Level to be used in computing the
Maturity Payment Amount by reference to the Closing Index Level of such
Successor Index on the applicable date.

     (b) Upon any selection by the Calculation Agent of a Successor Index, the
Company shall promptly give notice to the holders of the Securities.

     (c) If S&P discontinues publication of the Index and the Calculation Agent
determines that no Successor Index is available at such time, or if S&P (or the
publisher of any Successor Index) fails to calculate and publish a Closing Index
Level for the Index (or a Successor Index) on any date when it would ordinarily
do so in accordance with its customary practice, the Calculation Agent will
determine the Closing Index Level to be used for purposes of computing the
Maturity Payment Amount. In such circumstances, the Closing Index Level will be
computed by the Calculation Agent in accordance with the formula for and method
of calculating the Index (or any Successor Index) last in effect prior to such
discontinuance or failure to publish, using



                                                                               2


the Closing Price (or, if trading in any of the relevant securities has been
materially suspended or materially limited, its good faith estimate of the
Closing Price that would have prevailed but for such suspension or limitation)
at the close of the principal trading session on such date of each security most
recently comprising the Index (or any Successor Index) on the Relevant Exchange
on which such security trades.

     4.   Alteration of Method of Calculation.

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

          Accordingly, if the method of calculating the Index or a Successor
Index is modified so that the level of such index is a fraction of what it would
have been if it had not been modified, then the Calculation Agent shall adjust
such index in order to arrive at a level of the Index or such Successor Index as
if it had not been modified.

     5.   Definitions.

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

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

          "AMEX" shall mean the American Stock Exchange LLC.

          "Business Day", notwithstanding any provision in the Indenture, shall
mean any day that is not a Saturday, a Sunday or a day on which the NYSE, Nasdaq
or AMEX is not open for trading or banking institutions or trust companies in
the City of New York are authorized or obligated by law or executive order to
close.

          "Calculation Agent" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the determination
of the Maturity Payment Amount, which term shall, unless the context otherwise
requires, include its successors and assigns. The initial Calculation Agent
shall be Lehman Brothers Inc.

          "Close of Trading" shall mean, in respect of any Relevant Exchange,
the scheduled weekday closing time on a day on which the Relevant Exchange is
scheduled to be



                                                                               3


open for trading for its respective regular trading session, without regard to
after hours or any other trading outside of the regular trading session hours.

          "Closing Index Level" shall mean, with respect to any day, in the case
of the Index or the Successor Index, the closing level of the Index or the
Successor Index, as the case may be, as reported by S&P or the publisher of the
Successor Index, as the case may be, on such day or as determined by the
Calculation Agent pursuant to this Agreement.

          "Closing Price" shall mean, with respect to a security on any day, the
last reported sales price for that security on the Relevant Exchange at the
scheduled weekday closing time of the regular trading session of the Relevant
Exchange; provided, however, if such security is not listed or traded on a
bulletin board, then the "Closing Price" of the security shall be determined
using the average execution price per share that an affiliate of the Company
pays or receives upon the purchase or sale of the security used to hedge the
Company's obligations under the Securities.

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

          "Exchange Business Day" shall mean any day on which the Index or any
Successor Index is published by its publisher or is otherwise determined by the
Calculation Agent pursuant to this Agreement.

          "Final Index Level" shall equal the Closing Index Level on the
Valuation Date.

          "Final Index Return" shall equal the following:

                     Final Index Level - Initial Index Level
                     ---------------------------------------
                               Initial Index Level

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

          "Index" shall have the meaning set forth in Section 1 of this Annex A.

          "Initial Index Level" shall equal 1280.16, the Closing Index Level on
May 26, 2006.

          "Market Disruption Event", with respect to the Index or any Successor
Index shall mean any of the following events has occurred on any day as
determined by the Calculation Agent in its sole discretion:

     (1) A material suspension of or limitation imposed on trading relating to
     the securities that then comprise 20% or more of the Index or any Successor
     Index, by the Relevant Exchanges on which those securities are traded, at
     any time during the one-hour period that ends at the Close of Trading on
     such day, whether by reason of movements in price exceeding limits
     permitted by that Relevant Exchange or otherwise. Limitations on trading
     during significant market fluctuations imposed pursuant to NYSE Rule 80B or
     any applicable rule or regulation enacted or promulgated by the NYSE, any
     other exchange, quotation system or market, any other self regulatory
     organization or the



                                                                               4


     Securities and Exchange Commission of similar scope or as a replacement for
     Rule 80B may be considered material.

     (2) A material suspension of, or limitation imposed on, trading in futures
     or options contracts relating to the Index or any Successor Index by the
     primary exchange on which those futures or options contracts are traded, at
     any time during the one-hour period that ends at the Close of Trading on
     such day, whether by reason of movements in price exceeding limits
     permitted by the exchanges or otherwise.

     (3) Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for, the securities that then comprise 20% or more of
     the Index or any Successor Index on the Relevant Exchanges on which those
     securities are traded, at any time during the one-hour period that ends at
     the Close of Trading on that day.

     (4) Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for, the futures or options contracts relating to the
     Index or any Successor Index on the primary exchange or quotation system on
     which those futures or options contracts are traded at any time during the
     one-hour period that ends at the Close of Trading on that day.

     (5) The closure of the Relevant Exchanges on which securities that then
     comprise 20% or more of the Index or any Successor Index are traded or on
     which futures or options contracts relating to the Index or any Successor
     Index are traded prior to its scheduled closing time unless the earlier
     closing time is announced by the Relevant Exchanges at least one hour prior
     to the earlier of (i) the actual closing time for the regular trading
     session on the Relevant Exchanges and (ii) the submission deadline for
     orders to be entered into the Relevant Exchanges for execution at the Close
     of Trading on that day.

For purposes of determining whether a Market Disruption Event has occurred, the
relevant percentage contribution of a security to the level of the Index or any
Successor Index will be based on a comparison of (x) the portion of the level of
the Index or Successor Index attributable to that security and (y) the overall
level of the Index or Successor Index, in each case immediately before the
occurrence of the Market Disruption Event.

          "Maturity Payment Amount" shall have the meaning set forth in Section
2 of this Annex A.

          "Nasdaq" shall mean The Nasdaq Stock Market, Inc.

          "NYSE" shall mean The New York Stock Exchange, Inc.

          "Relevant Exchange" shall mean, for any security (or any combination
thereof then underlying the Index or any Successor Index), the primary exchange,
quotation system (which includes bulletin board services) or other market of
trading for such security.

          "Securities" shall have the meaning set forth in the preamble to this
Agreement.



                                                                               5


          "S&P" shall have the meaning set forth in Section 1 of this Annex A.

          "Stated Maturity Date" shall mean May 31, 2008 (or if May 31, 2008 is
not a Business Day, on the next Business Day); provided, that if the Valuation
Date is postponed, the Stated Maturity Date shall be the third Business Day
following the date that the Final Index Level on the postponed Valuation Date is
determined.

          "Successor Index" shall have the meaning set forth in Section 3(a) of
this Annex A.

          "Threshold Level" shall mean 1152.144, as it may be adjusted from time
to time by the Calculation Agent to the extent it believes appropriate, in a
manner consistent with the adjustments to the method of calculation of the Index
or a Successor Index described in Sections 3 and 4 of this Annex A and under the
circumstances described in Sections 3 and 4 of this Annex A.

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

          "Valuation Date" shall mean May 28, 2008; provided, that if a Market
Disruption Event occurs on such day or if such day is not an Exchange Business
Day, then the Valuation Date shall be the next following Exchange Business Day
on which no Market Disruption Event occurs; provided, however, if a Market
Disruption Event occurs on each of the eight Exchange Business Days following
the originally scheduled Valuation Date, then (a) that eighth Exchange Business
Day shall be deemed the Valuation Date and (b) the Calculation Agent shall
determine the Final Index Level based upon its good faith estimate of the level
of the Index on that eighth Exchange Business Day.