CALCULATION AGENCY AGREEMENT





                  CALCULATION  AGENCY  AGREEMENT,  dated as of August 14, 2001

(the  "Agreement"),  between  Lehman Brothers Holdings Inc. (the "Company") and

 Lehman Brothers Inc., as Calculation Agent.





                  WHEREAS, the Company has authorized the issuance of

$10,000,000 aggregate principal amount of Portfolio RANGERSSM, Portfolio Risk

AdjustiNG Equity Range SecuritiesSM Notes Due August 14, 2003 (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.  The  Calculation  Agent shall

determine  (a) the Maturity  Payment  Amount on the  Calculation  Date,  (b) the

Starting Price of each of the Underlying  Equity  Securities in the Basket,  (c)

the Ending Price of each of the Underlying Equity Securities in the Basket,  (d)



the Adjusted Value for each of the Underlying  Equity  Securities in the Basket,

(e) the sum of the Adjusted Values for all of the Underlying  Equity  Securities

in the Basket,  (f) the Starting  Multipliers and Ending Multipliers for each of

the Underlying Equity Securities in the Basket, (g) any required  adjustments to

the  Multipliers  of the  Underlying  Equity  Securities  in the  Basket and (h)

whether a Market  Disruption  Event has occurred.  The  Calculation  Agent shall

notify the Trustee of all such  determinations  and any such  adjustment 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.

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Any calculation made by the Calculation  Agent hereunder shall, at the Trustee's

request, be made available at the Corporate Trust Office.



     4. Fees and Expenses. The Calculation Agent shall be entitled to reasonable

compensation  for  all  services  rendered  by  it  as  agreed  to  between  the

Calculation Agent and the Company.



     5. Terms and  Conditions.  The  Calculation  Agent accepts its  obligations

herein set out upon the terms and conditions hereof, including the following, to

all of which the Company agrees:



                  (a) in acting under this Agreement, the Calculation Agent is

         acting solely as an independent expert of the Company and does not

         assume any obligation toward, or any relationship of agency or trust

         for or with, any of the holders of the Securities;



                  (b) unless otherwise specifically provided herein, any order,

         certificate, notice, request, direction or other communication from the

         Company or the Trustee made or given under any provision of this

         Agreement shall be sufficient if signed by any person who the

         Calculation Agent reasonably believes to be a duly authorized officer

         or attorney-in-fact of the Company or the Trustee, as the case may be;



                  (c) the  Calculation  Agent shall be  obliged to perform only

         such  duties as are set out specifically herein and any duties

         necessarily incidental thereto;



                  (d) the Calculation Agent, whether acting for itself or in any

         other capacity, may become the owner or pledgee of Securities with the

         same rights as it would have had if it were not acting hereunder as

         Calculation Agent; and



                  (e) the Calculation Agent shall incur no liability hereunder

         except for loss sustained by reason of its gross negligence or wilful

         misconduct.



     6. Resignation;  Removal;  Successor.  (a) The Calculation Agent may at any

time resign by giving  written  notice to the Company of such  intention  on its

part,  specifying  the  date on  which  its  desired  resignation  shall  become

effective,  subject to the  appointment  of a  successor  Calculation  Agent and

acceptance  of  such  appointment  by  such  successor   Calculation  Agent,  as

hereinafter provided. The Calculation Agent hereunder may be removed at any time

by the filing with it of an instrument in writing  signed by or on behalf of the

Company and specifying such removal and the date when it shall become effective.

Such  resignation  or removal  shall take  effect  upon the  appointment  by the

Company,  as  hereinafter  provided,  of a successor  Calculation  Agent and the

acceptance of such appointment by such successor Calculation Agent. In the event

a successor  Calculation  Agent has not been  appointed and has not accepted its

duties within 90 days of the  Calculation  Agent's  notice of  resignation,  the

Calculation  Agent  may  apply to any court of  competent  jurisdiction  for the

designation of a successor Calculation Agent.

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                  (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

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