Exhibit 4.09


 


Execution Copy


 




 





LLC GUARANTEE AGREEMENT


 


LEHMAN BROTHERS HOLDINGS E-CAPITAL LLC I


 


Dated as of August 19, 2005




 





 





















 


CROSS REFERENCE TABLE*


 


	
  Section of Trust

  Indenture Act of

  1939, as amended

  	
   

  	
  Section of

  Guarantee

  Agreement

  
	
   

  	
   

  	
   

  
	
  310(a)

  	
   

  	
  4.1(a)

  
	
  310(b)

  	
   

  	
  2.8; 4.1(c)

  
	
  310(c)

  	
   

  	
  Inapplicable

  
	
  311(a)

  	
   

  	
  2.2(b)

  
	
  311(b)

  	
   

  	
  2.2(b)

  
	
  311(c)

  	
   

  	
  Inapplicable

  
	
  312(a)

  	
   

  	
  2.2(a); 2.9

  
	
  312(b)

  	
   

  	
  2.2(b); 2.9

  
	
  312(c)

  	
   

  	
  2.9

  
	
  313(a)

  	
   

  	
  2.3

  
	
  313(b)

  	
   

  	
  2.3

  
	
  313(c)

  	
   

  	
  2.3

  
	
  313(d)

  	
   

  	
  2.3

  
	
  314(a)

  	
   

  	
  2.4

  
	
  314(b)

  	
   

  	
  Inapplicable

  
	
  314(c)

  	
   

  	
  2.5

  
	
  314(d)

  	
   

  	
  Inapplicable

  
	
  314(e)

  	
   

  	
  2.5

  
	
  314(f)

  	
   

  	
  Inapplicable

  
	
  315(a)

  	
   

  	
  3.1(d);
  3.2(a)

  
	
  315(b)

  	
   

  	
  2.7(a)

  
	
  315(c)

  	
   

  	
  3.1(c)

  
	
  315(d)

  	
   

  	
  3.1(d)

  
	
  316(a)

  	
   

  	
  2.6; 5.4(a)

  
	
  316(b)

  	
   

  	
  5.3

  
	
  316(c)

  	
   

  	
  Inapplicable

  
	
  317(a)

  	
   

  	
  2.10

  
	
  317(b)

  	
   

  	
  Inapplicable

  
	
  318(a)

  	
   

  	
  2.1(b)

  



 










*                                         This
Cross-Reference Table does not constitute part of the Agreement and shall not
have any bearing upon the interpretation of any of its terms or provisions.


 


i





















 


Table of Contents


 


	
  ARTICLE I

  DEFINITIONS AND INTERPRETATION

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 1.1.

  	
   

  	
  Definitions and
  Interpretation

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  TRUST INDENTURE ACT

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 2.1.

  	
   

  	
  Trust Indenture Act;
  Application

  	
   

  
	
  SECTION 2.2.

  	
   

  	
  Lists of Holders of
  Securities

  	
   

  
	
  SECTION 2.3.

  	
   

  	
  Reports by the LLC Guarantee
  Trustee

  	
   

  
	
  SECTION 2.4.

  	
   

  	
  Periodic Reports to LLC
  Guarantee Trustee

  	
   

  
	
  SECTION 2.5.

  	
   

  	
  Evidence of Compliance with
  Conditions Precedent

  	
   

  
	
  SECTION 2.6.

  	
   

  	
  Events of Default; Waiver

  	
   

  
	
  SECTION 2.7.

  	
   

  	
  Event of Default; Notice

  	
   

  
	
  SECTION 2.8.

  	
   

  	
  Conflicting Interests

  	
   

  
	
  SECTION 2.9.

  	
   

  	
  Disclosure of Information

  	
   

  
	
  SECTION 2.10.

  	
   

  	
  LLC Guarantee Trustee
  May File Proofs of Claim

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  POWERS, DUTIES AND RIGHTS OF

  LLC GUARANTEE TRUSTEE

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 3.1.

  	
   

  	
  Powers and Duties of the LLC
  Guarantee Trustee

  	
   

  
	
  SECTION 3.2.

  	
   

  	
  Certain Rights
  of LLC Guarantee Trustee

  	
   

  
	
  SECTION 3.3.

  	
   

  	
  Not Responsible
  for Recitals or Issuance of LLC Guarantee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  LLC GUARANTEE TRUSTEE

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 4.1.

  	
   

  	
  LLC Guarantee
  Trustee; Eligibility

  	
   

  
	
  SECTION 4.2.

  	
   

  	
  Appointment, Removal
  and Resignation of LLC Guarantee Trustee

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  GUARANTEE

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 5.1.

  	
   

  	
  Guarantee

  	
   

  
	
  SECTION 5.2.

  	
   

  	
  Waiver of
  Notice and Demand

  	
   

  
	
  SECTION 5.3.

  	
   

  	
  Obligations Not
  Affected

  	
   

  
	
  SECTION 5.4.

  	
   

  	
  Rights of Holders

  	
   

  
	
  SECTION 5.5.

  	
   

  	
  Guarantee of
  Payment

  	
   

  
	
  SECTION 5.6.

  	
   

  	
  Subrogation

  	
   

  
	
  SECTION 5.7.

  	
   

  	
  Independent
  Obligations

  	
   

  



 


ii





















 


	
  ARTICLE VI

  SUBORDINATION

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 6.1.

  	
   

  	
  Ranking

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  TERMINATION

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 7.1.

  	
   

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  INDEMNIFICATION

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 8.1.

  	
   

  	
  Exculpation

  	
   

  
	
  SECTION 8.2.

  	
   

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  MISCELLANEOUS

  
	
   

  	
   

  	
   

  	
   

  
	
  SECTION 9.1.

  	
   

  	
  Successors and
  Assigns

  	
   

  
	
  SECTION 9.2.

  	
   

  	
  Amendments

  	
   

  
	
  SECTION 9.3.

  	
   

  	
  Notices

  	
   

  
	
  SECTION 9.4.

  	
   

  	
  Benefit

  	
   

  
	
  SECTION 9.5.

  	
   

  	
  Governing Law

  	
   

  



 


iii





















 


LLC GUARANTEE AGREEMENT


 


This LLC
GUARANTEE AGREEMENT, dated as of August 19, 2005 (the “LLC Guarantee”),
is executed and delivered by Lehman Brothers Holdings Inc., a Delaware
corporation (the “Guarantor”), and JPMorgan Chase Bank, N.A., as trustee
(the “LLC Guarantee Trustee”), for the benefit of the holders from time
to time of the LLC Preferred Securities (as defined below).


 


WHEREAS,
pursuant to a Limited Liability Company Agreement (the “LLC Agreement”),
dated as of the date hereof, of Lehman Brothers Holdings E-Capital LLC I, a
Delaware limited liability company (the “LLC”), the LLC may issue a
series of preferred interests in the LLC (the “Original LLC Preferred
Securities”) that initially are not registered under the Securities Act of
1933, as amended;


 


WHEREAS,
pursuant to the LLC Agreement, the proceeds received by the LLC from the
issuance and sale of the Original LLC Preferred Securities will be invested by
the LLC in the Company Debenture and other Affiliate Debt Instruments and
Eligible Debt Securities (each as defined in the LLC Agreement);


 


WHEREAS, the
Original LLC Preferred Securities may be exchanged pursuant to the exchange
offer contemplated by the Registration Rights Agreement for new securities (the
“New LLC Preferred Securities” and together with the Original LLC
Preferred Securities, the “LLC Preferred Securities”);


 


WHEREAS, the
Guarantor, as incentive for the Holders (as defined herein) to purchase LLC
Preferred Securities, desires hereby irrevocably and unconditionally to agree,
to the extent set forth herein, to pay to the Holders the Guarantee Payments
(as defined herein) and to make certain other payments on the terms and
conditions set forth herein.


 


NOW,
THEREFORE, in consideration of the purchase by each Holder of LLC Preferred
Securities, which purchase the Guarantor hereby agrees shall directly or
indirectly provide at least some material benefit to the Guarantor, the
Guarantor executes and delivers this LLC Guarantee for the benefit of the Holders.


 


ARTICLE I

DEFINITIONS AND INTERPRETATION


 


SECTION 1.1.        Definitions and Interpretation


 


In
this LLC Guarantee, unless the context otherwise requires:


 


(a)           capitalized terms used in this LLC
Guarantee but not defined in the preamble above have the respective meanings
assigned to them in this Section 1.1;


 


(b)           capitalized terms used in this LLC
Guarantee but not otherwise defined herein shall have the meanings assigned to
them in the LLC Agreement or the Declaration of Trust, as the case may be;


 





















 


(c)           a term defined anywhere in this LLC
Guarantee has the same meaning throughout;


 


(d)           all references to “the LLC Guarantee”
or “this LLC Guarantee” are to this LLC Guarantee as modified, supplemented or
amended from time to time;


 


(e)           all references in this LLC Guarantee
to Articles and Sections are to Articles and Sections of this LLC Guarantee,
unless otherwise specified;


 


(f)            unless otherwise defined in this LLC
Guarantee, a term defined in the Trust Indenture Act has the same meaning when
used in this LLC Guarantee;


 


(g)           a reference to the singular includes
the plural and vice versa and a reference to any masculine form of a term shall
include the feminine form of such term, as applicable; and


 


(h)           the following terms have the
following meanings:


 


“Affiliate”
means, with respect to any specified Person, any other Person that directly or
indirectly controls or is controlled by, or is under common control with such
specified Person.  For the purposes of
this definition, “control” when used with respect to any specified Person means
the power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise; and the terms “controlling” and “controlled” have meanings correlative
to the foregoing.


 


“Covered
Person” means any Holder or beneficial owner of LLC Preferred Securities.


 


“Declaration
of Trust” means the Declaration of Trust by and among Lehman Brothers
Holdings Inc., as Sponsor, JPMorgan Chase Bank, N.A., as Property Trustee,
Chase Bank USA, National Association, as the Delaware Trustee, and the Regular
Trustees named therein, dated as of August 19, 2005, as it may be amended,
modified or supplemented from time to time.


 


“Event of
Default” means a default by the Guarantor on any of its payment or other
obligations under this LLC Guarantee.


 


“Guarantee
Payments” means the following payments or distributions, without
duplication, with respect to the LLC Preferred Securities, to the extent not
paid by or on behalf of the LLC: (i) any accumulated and unpaid
distributions on such LLC Preferred Securities to the extent the LLC has
sufficient funds available therefor at the time, (ii) the Redemption Price
with respect to any LLC Preferred Securities called for redemption by the LLC
to the extent the LLC has sufficient funds available therefor at the time and (iii) upon
a voluntary or involuntary dissolution, winding-up or termination of the LLC,
the lesser of (a) the Capital Account of the LLC Preferred Securities and (b) the
amount of assets of the LLC after satisfaction of all liabilities remaining
available for distribution to Holders in dissolution of the LLC (in either
case, the “Liquidation Distribution”).


 


2





















 


“Holder”
means any holder of any LLC Preferred Security, as registered on the books and
records of the LLC; provided, however, that in determining
whether the holders of the requisite percentage of LLC Preferred Securities
have given any request, notice, consent or waiver hereunder, “Holder” shall not
include the Guarantor or any Affiliate of the Guarantor or any other obligor on
the LLC Preferred Securities.


 


“Indemnified
Person” means the LLC Guarantee Trustee, any Affiliate of the LLC Guarantee
Trustee, or any officers, directors, shareholders, members, partners,
employees, representatives, nominees, custodians or agents of the LLC Guarantee
Trustee.


 


“LLC
Guarantee Trustee” means JPMorgan Chase Bank, N.A., until a successor LLC
Guarantee Trustee has been appointed and has accepted such appointment pursuant
to the terms of this LLC Guarantee and thereafter means each such Successor LLC
Guarantee Trustee.


 


“Majority
in Liquidation Amount of the LLC Preferred Securities” means, except as
provided in the terms of the LLC Preferred Securities, Holder(s) of outstanding
LLC Preferred Securities, voting together as a single class, who are the record
owners of more than 50% of the aggregate liquidation amount of all outstanding
LLC Preferred Securities.  In determining
whether the Holders of the requisite amount of LLC Preferred Securities have
voted, LLC Preferred Securities that are owned by the Guarantor or any
Affiliate of the Guarantor or any other obligor on the LLC Preferred Securities
shall be disregarded for the purpose of any such determination.


 


 “Officers’ Certificate” means, with
respect to any Person, a certificate signed on behalf of such Person by two
Authorized Officers of such Person.  Any
Officers’ Certificate delivered with respect to compliance with a condition or
covenant provided for in this LLC Guarantee shall include:


 


(a)           a
statement that each officer signing the Officers’ Certificate has read the
covenant or condition and the definitions relating thereto;


 


(b)           a
brief statement of the nature and scope of the examination or investigation
undertaken by each officer on behalf of such Person in rendering the Officers’
Certificate;


 


(c)           a
statement that each such officer has made such examination or investigation as,
in such officer’s opinion, is necessary to enable such officer on behalf of
such Person to express an informed opinion as to whether or not such covenant
or condition has been complied with; and


 


(d)           a
statement as to whether, in the opinion of each such officer on behalf of such
Person, such condition or covenant has been complied with.


 


“Person”
means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, unincorporated association, or government or any agency or
political subdivision thereof, or any other entity of whatever nature.


 


3





















 


“Registration
Rights Agreement” means the Registration Rights Agreement dated as of August 19,
2005 by and among the Guarantor, the Trust and the LLC and Lehman Brothers
Inc., Zions Investment Securities, Inc. and SunTrust Capital Markets, Inc.,
as Initial Purchasers.


 


“Responsible
Officer” means, with respect to the LLC Guarantee Trustee, any officer with
direct responsibility for the administration of this LLC Guarantee and also
means, with respect to a particular corporate trust matter, any other officer
to whom such matter is referred because of that officer’s knowledge of and
familiarity with the particular subject.


 


“Successor
LLC Guarantee Trustee” means a successor LLC Guarantee Trustee possessing
the qualifications to act as LLC Guarantee Trustee under Section 4.1.


 


“Trust”
means Lehman Brothers Holdings E-Capital Trust I, a Delaware statutory trust,
formed under the Declaration of Trust.


 


“Trust
Indenture Act” means the Trust Indenture Act of 1939, as amended from time
to time, or any successor legislation.


 


ARTICLE II

TRUST INDENTURE ACT


 


SECTION 2.1.                                          Trust
Indenture Act; Application


 


(a)           This LLC Guarantee is subject to the
provisions of the Trust Indenture Act that are required to be part of this LLC
Guarantee and shall, to the extent applicable, be governed by such provisions.


 


(b)           If and to the extent that any
provision of this LLC Guarantee limits, qualifies or conflicts with the duties
imposed by Sections 310 to 317, inclusive, of the Trust Indenture Act, such
imposed duties shall control.


 


SECTION 2.2.                                          Lists of
Holders of Securities


 


(a)           The Guarantor shall provide the LLC
Guarantee Trustee within 30 days of receipt by the Guarantor of a written
request from the LLC Guarantee Trustee for the names and addresses of the
Holders of the LLC Preferred Securities (“List of Holders”) as of a date
no more than 15 days before such List of Holders is given to the LLC Guarantee
Trustee; provided that the Guarantor shall not be obligated to provide such
List of Holders at any time the List of Holders does not differ from the most
recent List of Holders given to the LLC Guarantee Trustee by the Guarantor.  The LLC Guarantee Trustee shall preserve, in
as current a form as is reasonably practicable, all information contained in
Lists of Holders given to it, provided that the LLC Guarantee Trustee
may destroy any List of Holders previously given to it on receipt of a new List
of Holders.


 


(b)           The LLC Guarantee Trustee shall
comply with its obligations under Sections 311(a), 311(b) and 312(b) of
the Trust Indenture Act.


 


4





















 


SECTION 2.3.                                          Reports by
the LLC Guarantee Trustee


 


Within 60 days
after May 15 of each year, the LLC Guarantee Trustee shall provide to the
Holders of the LLC Preferred Securities such reports as are required by Section 313
of the Trust Indenture Act, if any, in the form and in the manner provided by Section 313
of the Trust Indenture Act.  The LLC
Guarantee Trustee shall also comply with the requirements of Section 313(d) of
the Trust Indenture Act.


 


SECTION 2.4.                                          Periodic
Reports to LLC Guarantee Trustee


 


The Guarantor
shall provide to the LLC Guarantee Trustee such documents, reports and
information as required by Section 314(a) of the Trust Indenture Act
(if any) and the compliance certificate required by Section 314(a) of
the Trust Indenture Act in the form, in the manner and at the times required by
Section 314(a) of the Trust Indenture Act.


 


SECTION 2.5.                                          Evidence
of Compliance with Conditions Precedent


 


The Guarantor
shall provide to the LLC Guarantee Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this LLC Guarantee that relate to
any of the matters set forth in Section 314(c) of the Trust Indenture
Act.  Any certificate or opinion required
to be given by an officer pursuant to Section 314(c)(1) may be given
in the form of an Officers’ Certificate.


 


SECTION 2.6.                                          Events of
Default; Waiver


 


The Holders of
a Majority in Liquidation Amount of the LLC Preferred Securities may, by vote
or written consent, on behalf of the Holders of all of the LLC Preferred
Securities, waive any past Event of Default and its consequences.  Upon such waiver, any such Event of Default
shall cease to exist, and any Event of Default arising therefrom shall be
deemed to have been cured, for every purpose of this LLC Guarantee, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.


 


SECTION 2.7.                                          Event of
Default; Notice


 


(a)           The LLC Guarantee Trustee shall,
within 90 days after the occurrence of an Event of Default, transmit by mail,
first class postage prepaid, to the Holders of the LLC Preferred Securities,
notices of all Events of Default actually known to a Responsible Officer of the
LLC Guarantee Trustee, unless such defaults have been cured before the giving
of such notice; provided that the LLC Guarantee Trustee shall be
protected in withholding such notice if and so long as a Responsible Officer of
the LLC Guarantee Trustee in good faith determines that the withholding of such
notice is in the interests of the Holders of the LLC Preferred Securities.


 


(b)           The LLC Guarantee Trustee shall not
be deemed to have knowledge of any Event of Default unless the LLC Guarantee
Trustee shall have received written notice, or of which a Responsible Officer
of the LLC Guarantee Trustee charged with the administration of the LLC Agreement
shall have obtained actual knowledge.


 


5





















 


SECTION 2.8.                                          Conflicting
Interests


 


The LLC
Agreement shall be deemed to be specifically described in this LLC Guarantee
for the purposes of clause (i) of the first proviso contained in Section 310(b)(1) of
the Trust Indenture Act. Nothing herein shall prevent the LLC Guarantee Trustee
from filing with the Commission the application referred to in the penultimate
paragraph of Section 310(b) of the Trust Indenture Act.  In determining whether the LLC Guarantee
Trustee has a conflicting interest as defined in Section 310(b) of
the Trust Indenture Act with respect to the LLC Preferred Securities or the LLC
Guarantee in respect of such LLC Preferred Securities, there shall be excluded (i) all
series of securities of any Investment Affiliate issued or issuable under an
Indenture, (ii) this LLC Guarantee and the Trust Guarantee and (iii) (A) the
LLC Agreement and (B) the Declaration of Trust.


 


SECTION 2.9.                                          Disclosure
of Information


 


The disclosure of information as to the names and addresses of the
Holders of the Securities in accordance with Section 312 of the Trust
Indenture Act, regardless of the source from which such information was
derived, shall not be deemed to be a violation of any existing law, or any law
hereafter enacted which does not specifically refer to Section 312 of the
Trust Indenture Act, nor shall the LLC Guarantee Trustee be held accountable by
reason of mailing any material pursuant to a request made under Section 312(b) of the
Trust Indenture Act.


 


SECTION 2.10.                                    LLC Guarantee
Trustee May File Proofs of Claim


 


Upon the
occurrence of an Event of Default, the LLC Guarantee Trustee is hereby
authorized to (a) recover judgment, in its own name and as trustee of an
express trust, against the Guarantor for the whole amount of any Guarantee
Payments remaining unpaid and (b) file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have its
claims and those of the Holders of the LLC Preferred Securities allowed in any
judicial proceedings relative to the Guarantor, its creditors or its property.


 


ARTICLE III

POWERS, DUTIES AND RIGHTS OF

LLC GUARANTEE TRUSTEE


 


SECTION 3.1.                                          Powers and
Duties of the LLC Guarantee Trustee


 


(a)           This LLC Guarantee shall be held by
the LLC Guarantee Trustee for the benefit of the Holders of the LLC Preferred
Securities, and the LLC Guarantee Trustee shall not transfer this LLC Guarantee
to any Person except a Holder of LLC Preferred Securities exercising his or her
rights pursuant to Section 5.4(b) or to a Successor LLC Guarantee
Trustee on acceptance by such Successor LLC Guarantee Trustee of its
appointment to act as Successor LLC Guarantee Trustee.  The right, title and interest of the LLC Guarantee
Trustee in and to this LLC Guarantee shall automatically vest in any Successor
LLC Guarantee Trustee, and such vesting and succession of title shall be
effective whether or not conveyance documents have been executed and delivered
pursuant to the appointment of such Successor LLC Guarantee Trustee.


 


(b)           If an Event of Default actually known
to a Responsible Officer of the LLC Guarantee Trustee has occurred and is
continuing, the LLC Guarantee Trustee shall enforce this LLC Guarantee for the
benefit of the Holders of the LLC Preferred Securities.


 


6





















 


(c)           The LLC Guarantee Trustee, before the
occurrence of any Event of Default and after the curing or waiver of all Events
of Default that may have occurred, shall undertake to perform only such duties
as are specifically set forth in this LLC Guarantee, and no implied covenants
shall be read into this LLC Guarantee against the LLC Guarantee Trustee.  In case an Event of Default has occurred
(that has not been cured or waived pursuant to Section 2.6) and is
actually known to a Responsible Officer of the LLC Guarantee Trustee, the LLC
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this LLC Guarantee, and use the same degree of care and skill in its exercise
thereof, as a prudent Person would exercise or use under the circumstances in
the conduct of his or her own affairs.


 


(d)           No provision of this LLC Guarantee
shall be construed to relieve the LLC Guarantee Trustee from liability for its
own negligent action, its own negligent failure to act, or its own willful
misconduct, except that:


 


(i)            prior to the occurrence of any Event of Default and after
the curing or waiving of all such Events of Default that may have occurred:


 


(A)          the duties and obligations of the LLC Guarantee Trustee
shall be determined solely by the express provisions of this LLC Guarantee, and
the LLC Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this LLC
Guarantee, and no implied covenants or obligations shall be read into this LLC
Guarantee against the LLC Guarantee Trustee; and


 


(B)           in the absence of bad faith on the part of the LLC
Guarantee Trustee, the LLC Guarantee Trustee may conclusively rely, as to the
truth of the statements and the correctness of the opinions expressed therein,
upon any certificates or opinions furnished to the LLC Guarantee Trustee and
conforming to the requirements of this LLC Guarantee; but in the case of any
such certificates or opinions that by any provision hereof are specifically
required to be furnished to the LLC Guarantee Trustee, the LLC Guarantee
Trustee shall be under a duty to examine the same to determine whether or not
they conform to the requirements of this LLC Guarantee;


 


(ii)           the LLC Guarantee Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer of the LLC
Guarantee Trustee, unless it shall be proved that the LLC Guarantee Trustee was
negligent in ascertaining the pertinent facts upon which such judgment was
made;


 


(iii)          the LLC Guarantee Trustee shall not be liable with respect
to any action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders of a Majority in Liquidation Amount of the
LLC Preferred Securities relating to the time, method and place of conducting
any proceeding for any remedy available to the LLC Guarantee Trustee, or
exercising any trust or power conferred upon the LLC Guarantee Trustee under
this LLC Guarantee; and


 


7


















 


(iv)                              no
provision of this LLC Guarantee shall require the LLC Guarantee Trustee to
expend or risk its own funds or otherwise incur personal financial liability in
the performance of any of its duties or in the exercise of any of its rights or
powers, if the LLC Guarantee Trustee shall have reasonable grounds for
believing that (A) the repayment of such funds or liability is not
reasonably assured to it under the terms of this LLC Guarantee or (B) an
indemnity, reasonably satisfactory to the LLC Guarantee Trustee, against such
risk or liability is not reasonably assured to it.


 


SECTION 3.2.                                          Certain
Rights of LLC Guarantee Trustee


 


(a)                                  Subject
to the provisions of Section 3.1 hereof:


 


(i)                                     The
LLC Guarantee Trustee may conclusively rely, and shall be fully protected in
acting or refraining from acting upon, any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order, bond,
debenture, note, other evidence of indebtedness or other paper or document
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties.


 


(ii)                                  Any
direction or act of the Guarantor contemplated by this LLC Guarantee shall be
sufficiently evidenced by an Officers’ Certificate.


 


(iii)                               Whenever,
in the administration of this LLC Guarantee, the LLC Guarantee Trustee shall
deem it desirable that a matter be proved or established before taking,
suffering or omitting any action hereunder, the LLC Guarantee Trustee (unless
other evidence is herein specifically prescribed) may, in the absence of bad
faith on its part, request and conclusively rely upon an Officers’ Certificate
which, upon receipt of such request, shall be promptly delivered by the
Guarantor.


 


(iv)                              The
LLC Guarantee Trustee shall have no duty to see to any recording, filing or
registration of any instrument (or any rerecording, refiling or registration
thereof).


 


(v)                                 The
LLC Guarantee Trustee may consult with counsel of its selection, and the advice
or opinion of such counsel with respect to legal matters shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with such advice or
opinion.  Such counsel may be counsel to
the Guarantor or any of its Affiliates and may include any of its
employees.  The LLC Guarantee Trustee
shall have the right at any time to seek instructions concerning the
administration of this LLC Guarantee from any court of competent jurisdiction.


 


(vi)                              The
LLC Guarantee Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this LLC Guarantee at the request or direction
of any Holder, unless such Holder shall have provided to the LLC Guarantee
Trustee such security and indemnity, reasonably satisfactory to the LLC
Guarantee Trustee, against the costs, expenses (including attorneys’ fees and
expenses and the expenses of the LLC Guarantee Trustee’s agents, nominees or
custodians) and liabilities that might be incurred by it in complying with such
request or direction, including such reasonable advances as


 


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may be requested by the LLC Guarantee
Trustee; provided that nothing contained in this Section 3.2(a)(vi) shall
be taken to relieve the LLC Guarantee Trustee, upon the occurrence of an Event
of Default, of its obligation to exercise the rights and powers vested in it by
this LLC Guarantee.


 


(vii)                           The LLC
Guarantee Trustee shall not be bound to make any investigation into the facts
or matters stated in any resolution, certificate, statement, instrument,
opinion, report, notice, request, direction, consent, order, bond, debenture,
note, other evidence of indebtedness or other paper or document, but the LLC
Guarantee Trustee, in its discretion, may make such further inquiry or
investigation into such facts or matters as it may see fit.


 


(viii)                        The LLC
Guarantee Trustee may execute any of the trusts or powers hereunder or perform
any duties hereunder either directly or by or through agents, nominees,
custodians or attorneys, and the LLC Guarantee Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney appointed
with due care by it hereunder.


 


(ix)                                Any
action taken by the LLC Guarantee Trustee or its agents hereunder shall bind
the Holders, and the signature of the LLC Guarantee Trustee or its agents alone
shall be sufficient and effective to perform any such action.  No third party shall be required to inquire
as to the authority of the LLC Guarantee Trustee to so act or as to its
compliance with any of the terms and provisions of this LLC Guarantee, both of
which shall be conclusively evidenced by the LLC Guarantee Trustee or its agent
taking such action.


 


(x)                                   Whenever
in the administration of this LLC Guarantee the LLC Guarantee Trustee shall
deem it desirable to receive instructions with respect to enforcing any remedy
or right or taking any other action hereunder, the LLC Guarantee Trustee (i) may
request instructions from the Holders of a Majority in Liquidation Amount of
the LLC Preferred Securities, (ii) may refrain from enforcing such remedy
or right or taking such other until such instructions are received, and (iii) shall
be protected in conclusively relying on or acting in accordance with such instructions.


 


(b)                                 No
provision of this LLC Guarantee shall be deemed to impose any duty or
obligation on the LLC Guarantee Trustee to perform any act or acts or exercise
any right, power, duty or obligation conferred or imposed on it in any
jurisdiction in which it shall be illegal, or in which the LLC Guarantee
Trustee shall be unqualified or incompetent in accordance with applicable law,
to perform any such act or acts or to exercise any such right, power, duty or
obligation.  No permissive power or
authority available to the LLC Guarantee Trustee shall be construed to be a
duty.


 


SECTION 3.3.                                          Not
Responsible for Recitals or Issuance of LLC Guarantee


 


The recitals
contained in this LLC Guarantee shall be taken as the statements of the
Guarantor, and the LLC Guarantee Trustee does not assume any responsibility for
their


 


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correctness. 
The LLC Guarantee Trustee makes no representations as to the validity or
sufficiency of this LLC Guarantee.


 


ARTICLE IV

LLC GUARANTEE TRUSTEE


 


SECTION 4.1.                                          LLC
Guarantee Trustee; Eligibility


 


(a)                                  There
shall be at all times a LLC Guarantee Trustee which shall:


 


(i)                                     not
be an Affiliate of the Guarantor; and


 


(ii)                                  be
a corporation organized and doing business under the laws of the United States
of America or any state or territory thereof or of the District of Columbia, or
a corporation or Person permitted by the Securities and Exchange Commission to
act as an institutional trustee under the Trust Indenture Act, authorized under
such laws to exercise corporate trust powers, having a combined capital and
surplus of at least US$50,000,000, and subject to supervision or examination by
federal, state, territorial or District of Columbia authority.  If such corporation publishes reports of condition
at least annually, pursuant to law or to the requirements of the supervising or
examining authority referred to above, then, for the purposes of this Section 4.1(a)(ii),
the combined capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published.


 


(b)                                 If
at any time the LLC Guarantee Trustee shall cease to be eligible to so act
under Section 4.1(a), the LLC Guarantee Trustee shall immediately resign
in the manner and with the effect set out in Section 4.2(c).


 


(c)                                  If
the LLC Guarantee Trustee has or shall acquire any “conflicting interest”
within the meaning of Section 310(b) of the Trust Indenture Act, the
LLC Guarantee Trustee and Guarantor shall in all respects comply with the
provisions of Section 310(b) of the Trust Indenture Act.


 


SECTION 4.2.                                          Appointment,
Removal and Resignation of LLC Guarantee Trustee


 


(a)                                  Subject
to Section 4.2(b), unless an Event of Default shall have occurred and be
continuing, the LLC Guarantee Trustee may be appointed or removed with or
without cause at any time by the Guarantor.


 


(b)                                 The
LLC Guarantee Trustee shall not be removed in accordance with Section 4.2(a) until
a Successor LLC Guarantee Trustee has been appointed and has accepted such
appointment by written instrument executed by such Successor LLC Guarantee
Trustee and delivered to the Guarantor.


 


(c)                                  The
LLC Guarantee Trustee appointed to office shall hold office until a Successor
LLC Guarantee Trustee shall have been appointed or until its removal or
resignation.  The LLC Guarantee Trustee
may resign from office (without need for prior or subsequent accounting) by an
instrument in writing executed by the LLC Guarantee Trustee and delivered to


 


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the Guarantor, which resignation shall not take effect until a
Successor LLC Guarantee Trustee has been appointed and has accepted such
appointment by instrument in writing executed by such Successor LLC Guarantee
Trustee and delivered to the Guarantor and the resigning LLC Guarantee Trustee.


 


(d)                                 If
no Successor LLC Guarantee Trustee shall have been appointed and accepted
appointment as provided in this Section 4.2 within 60 days after delivery
to the Guarantor of an instrument of removal or resignation, the removed or
resigning LLC Guarantee Trustee may petition any court of competent
jurisdiction for appointment of a Successor LLC Guarantee Trustee.  Such court may thereupon, after prescribing
such notice, if any, as it may deem proper, appoint a Successor LLC Guarantee
Trustee.


 


(e)                                  No
LLC Guarantee Trustee shall be liable for the acts or omissions to act of any
Successor LLC Guarantee Trustee.


 


(f)                                    Upon
termination of this LLC Guarantee or removal or resignation of the LLC Guarantee
Trustee pursuant to this Section 4.2, the Guarantor shall pay to the LLC
Guarantee Trustee all amounts owing for fees and reimbursement of expenses that
have accrued to the date of such termination, removal or resignation.


 


ARTICLE V

GUARANTEE


 


SECTION 5.1.                                          Guarantee


 


The Guarantor
irrevocably and unconditionally agrees to pay in full to the Holders the
Guarantee Payments (without duplication of amounts theretofore paid by the
LLC), if, as and when due, regardless of any defense, right of set-off or
counterclaim that the LLC may have or assert. 
The Guarantor’s obligation to make a Guarantee Payment may be satisfied
by direct payment of the required amounts by the Guarantor to the Holders or by
causing the LLC to pay such amounts to the Holders.


 


SECTION 5.2.                                          Waiver of
Notice and Demand


 


The Guarantor
hereby waives notice of acceptance of this LLC Guarantee and of any liability
to which it applies or may apply, presentment, demand for payment, any right to
require a proceeding first against the LLC or any other Person before
proceeding against the Guarantor, protest, notice of nonpayment, notice of
dishonor, notice of redemption and all other notices and demands.


 


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SECTION 5.3.                                          Obligations
Not Affected


 


The
obligations, covenants, agreements and duties of the Guarantor under this LLC
Guarantee shall be absolute and unconditional and shall remain in full force
and effect until the entire liquidation amount of all outstanding LLC Preferred
Securities shall have been paid and such obligation shall in no way be affected
or impaired by reason of the happening from time to time of any event,
including without limitation, the following, whether or not with notice to, or
the consent of, the Guarantor:


 


(a)                                  the release or
waiver, by operation of law or otherwise, of the performance or observance by
the LLC of any express or implied agreement, covenant, term or condition
relating to the LLC Preferred Securities to be performed or observed by the
LLC;


 


(b)                                 the extension of time
for the payment by the LLC of all or any portion of the Non-Compounded
Distributions, Redemption Price, Preferred Accrual Amount, Liquidation
Distributions or any other sums payable under the terms of the LLC Preferred
Securities or the extension of time for the performance of any other obligation
under, arising out of, or in connection with, the LLC Preferred Securities
(other than an extension of time for payment of Non-Compounded Distributions,
Redemption Price, Preferred Accrual Amount, Liquidation Distribution or other
sum payable that results from the extension of any (i) time for the
payment of any distribution on the LLC Preferred Securities or any redemption
or liquidation of the LLC Preferred Securities permitted by the LLC Agreement
or (ii) any interest payment period on any Affiliate Debt Instruments or
any change to the maturity date of any Affiliate Debt Instruments permitted by
any applicable Indenture);


 


(c)                                  any failure,
omission, delay or lack of diligence on the part of the Special Representative
or the Holders to enforce, assert or exercise any right, privilege, power or
remedy conferred on the Special Representative or the Holders pursuant to the
terms of the LLC Preferred Securities, or any action on the part of the LLC granting
indulgence or extension of any kind;


 


(d)                                 the voluntary or
involuntary liquidation, dissolution, sale of any collateral, receivership,
insolvency, bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition or readjustment of debt of, or other
similar proceedings affecting the LLC or any of the assets of the LLC;


 


(e)                                  any invalidity of, or
defect or deficiency in, the LLC Preferred Securities;


 


(f)                                    the settlement or
compromise of any obligation guaranteed hereby or hereby incurred; or


 


(g)                                 any other circumstance
whatsoever that might otherwise constitute a legal or equitable discharge or
defense of a guarantor, it being the intent of this Section 5.3 that the
obligations of the Guarantor hereunder shall be absolute and unconditional
under any and all circumstances.


 


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There shall be
no obligation of the LLC Guarantee Trustee or the Holders to give notice to, or
obtain consent of, the Guarantor or any other Person with respect to the
happening of any of the foregoing.


 


No setoff,
counterclaim, reduction or diminution of any obligation, or any defense of any
kind or nature that the Guarantor has or may have against any Holder shall be
available hereunder to the Guarantor against such Holder to reduce the payments
to it under this Guarantee.


 


SECTION 5.4.                                          Rights
of Holders


 


(a)                                  The
Holders of a Majority in Liquidation Amount of the LLC Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the LLC Guarantee Trustee in respect of this LLC Guarantee
or to direct the exercise of any trust or power conferred upon the LLC
Guarantee Trustee under this LLC Guarantee.


 


(b)                                 If
the LLC Guarantee Trustee fails to enforce this LLC Guarantee, then any Holder
of LLC Preferred Securities may, subject to the subordination provisions of Section 6.1,
institute a legal proceeding directly against the Guarantor to enforce the LLC
Guarantee Trustee’s rights under this LLC Guarantee, without first instituting
a legal proceeding against the LLC, the LLC Guarantee Trustee or any other
Person or entity.  In addition, if the
Guarantor has failed to make a Guarantee Payment, a Holder of LLC Preferred Securities
may, subject to the subordination provisions of Section 6.1, directly
institute a proceeding against the Guarantor for enforcement of the LLC
Guarantee for such payment to such Holder. 
The Guarantor hereby waives any right or remedy to require that any
action on this LLC Guarantee be brought first against the LLC or any other
Person or entity before proceeding directly against the Guarantor.


 


SECTION 5.5.                                          Guarantee
of Payment


 


This LLC
Guarantee creates a guarantee of payment and not of collection.


 


SECTION 5.6.                                          Subrogation


 


The Guarantor
shall be subrogated to all (if any) rights of the Holders of LLC Preferred
Securities against the LLC in respect of any amounts paid to such Holders by
the Guarantor under this LLC Guarantee; provided, however, that
the Guarantor shall not (except to the extent required by mandatory provisions
of law) be entitled to enforce or exercise any right that it may acquire by way
of subrogation or any indemnity, reimbursement or other agreement, in all cases
as a result of payment under this LLC Guarantee, if, at the time of any such
payment, any amounts are due and unpaid under this LLC Guarantee.  If any amount shall be paid to the Guarantor
in violation of the preceding sentence, the Guarantor agrees to hold such
amount in trust for the Holders and to pay over such amount to the LLC
Guarantee Trustee for the benefit of the Holders.


 


SECTION 5.7.                                          Independent
Obligations


 


The Guarantor
acknowledges that its obligations hereunder are independent of the obligations
of the LLC with respect to the LLC Preferred Securities and that the Guarantor
shall


 


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be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this LLC
Guarantee notwithstanding the occurrence of any event referred to in
subsections 5.3(a) through 5.3(g), inclusive, hereof.


 


ARTICLE VI

SUBORDINATION


 


SECTION 6.1.                                          Ranking


 


This LLC
Guarantee will constitute an unsecured obligation of the Guarantor and will
rank (i) subordinate and junior in right of payment to all other
liabilities of the Guarantor, (ii) on a parity with the most senior
preferred securities or preference stock now or hereafter issued by the
Guarantor and with any guarantee now or hereafter entered into by the Guarantor
in respect of such senior preferred securities or preference stock of any
Affiliate of the Guarantor and (iii) senior to the Guarantor’s common
stock.


 


ARTICLE VII

TERMINATION


 


SECTION 7.1.                                          Termination


 


This LLC
Guarantee shall terminate upon (i) full payment of the Redemption Price of
all LLC Preferred Securities or (ii) full payment of the amounts payable
in accordance with the LLC Agreement upon liquidation of the LLC.  Notwithstanding the foregoing, this LLC
Guarantee will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of LLC Preferred Securities must restore payment
of any sums paid under any LLC Preferred Securities or this LLC Guarantee,
except to the extent any Holder must restore amounts wrongfully distributed by
the LLC, as required by the Delaware Limited Liability Company Act.


 


ARTICLE VIII

INDEMNIFICATION


 


SECTION 8.1.                                          Exculpation


 


(a)                                  No
Indemnified Person shall be liable, responsible or accountable in damages or
otherwise to the Guarantor or any Covered Person for any loss, damage or claim
incurred by reason of any act or omission performed or omitted by such
Indemnified Person in good faith in accordance with this LLC Guarantee and in a
manner that such Indemnified Person reasonably believed to be within the scope
of the authority conferred on such Indemnified Person by this LLC Guarantee or
by law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person’s negligence or
willful misconduct with respect to such acts or omissions.


 


(b)                                 An
Indemnified Person shall be fully protected in relying in good faith upon the
records of the Guarantor and upon such information, opinions, reports or
statements presented to the Guarantor by any Person as to matters the Indemnified
Person reasonably believes are within such other Person’s professional or
expert competence and who has been


 


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selected with reasonable care by or on behalf of the Guarantor,
including information, opinions, reports or statements as to the value and
amount of the assets, liabilities, profits, losses, or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of LLC Preferred Securities might properly be paid.


 


SECTION 8.2.                                          Indemnification


 


The Guarantor
agrees to indemnify each Indemnified Person for, and to hold each Indemnified
Person harmless against any loss, liability or expense incurred without
negligence or bad faith on its part, arising out of or in connection with the
acceptance or administration of the trust or trusts hereunder, including the
costs and expenses (including reasonable legal fees and expenses) of defending
itself against, or investigating, any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.  The obligation to indemnify as set forth in
this Section 8.2 shall survive the termination of this LLC Guarantee.


 


ARTICLE IX

MISCELLANEOUS


 


SECTION 9.1.                                          Successors
and Assigns


 


All guarantees
and agreements contained in this LLC Guarantee shall bind the successors,
assigns, receivers, trustees and representatives of the Guarantor and shall
inure to the benefit of the Holders of the LLC Preferred Securities then
outstanding.


 


SECTION 9.2.                                          Amendments


 


Except with
respect to any changes that do not materially adversely affect the rights of
the Holders (in which case no consent of the Holders will be required), this
LLC Guarantee may not be amended without the prior approval of the Holders of a
Majority in Liquidation Amount of the LLC Preferred Securities (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined).  The provisions of Article XVII
of the LLC Agreement with respect to meetings of Holders of the securities of
the LLC apply to the giving of such approval.


 


SECTION 9.3.                                          Notices


 


All notices
provided for in this LLC Guarantee shall be in writing, duly signed by the
party giving such notice, and shall be delivered, telecopied or mailed by first
class mail, as follows:


 


(a)                                  If
given to the LLC Guarantee Trustee, at the LLC Guarantee Trustee’s mailing
address set forth below (or such other address as the LLC Guarantee Trustee may
give notice of to the Guarantor and the Holders of the LLC Preferred
Securities):


 


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JPMorgan Chase Bank, N.A.


4 New York Plaza


15th Floor


New York, New York 10004


Attention: 
Worldwide Securities Services


Facsimile: (212) 623-6274


 


(b)                                 If
given to the Guarantor, at the Guarantor’s mailing address set forth below (or
such other address as the Guarantor may give notice of to the Holders of the
LLC Preferred Securities):


 


Lehman Brothers Holdings Inc.


1301 Avenue of the Americas

New York, New York 10019

Attention: Corporate Counsel


Facsimile: 
(212) 526-0339


 


(c)                                  If
given to any Holder of LLC Preferred Securities, at the address set forth on
the books and records of the LLC.


 


All such
notices shall be deemed to have been given when received in person, telecopied
with receipt confirmed, or mailed by first class mail, postage prepaid except
that if a notice or other document is refused delivery or cannot be delivered
because of a changed address of which no notice was given, such notice or other
document shall be deemed to have been delivered on the date of such refusal or
inability to deliver.


 


SECTION 9.4.                                          Benefit


 


This LLC
Guarantee is solely for the benefit of the Holders of the LLC Preferred
Securities and, subject to Section 3.1(a), is not separately transferable
from the LLC Preferred Securities.


 


SECTION 9.5.                                          Governing
Law


 


THIS LLC
GUARANTEE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.


 


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THIS LLC
GUARANTEE is executed as of the day and year first above written.


 


	
   

  	
  LEHMAN BROTHERS HOLDINGS INC.,

  as Guarantor

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Barrett
  S. DiPaolo

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Barrett S. DiPaolo

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A.,

  as LLC Guarantee Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Tai Bill
  Lee

  	
   

  
	
   

  	
   

  	
  Name: Tai Bill Lee

  
	
   

  	
   

  	
  Title:   Vice President

  
						



 


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