Exhibit 4.03


 




 





COLLATERAL AGREEMENT


 


among


 


LEHMAN BROTHERS HOLDINGS
INC.


 


and


 


THE BANK OF NEW YORK,


 


as Collateral Agent and
Securities Intermediary


 


and


 


U.S. BANK NATIONAL
ASSOCIATION,


 


as Stock Purchase Contract
Agent


 


Dated as of May 17, 2007




 





 

















 


TABLE OF
CONTENTS


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEFINITIONS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 1.1.

  	
   

  	
  Definitions

  	
   

  	
  2

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PLEDGE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 2.1.

  	
   

  	
  Pledge

  	
   

  	
  7

  
	
  Section 2.2.

  	
   

  	
  Control

  	
   

  	
  7

  
	
  Section 2.3.

  	
   

  	
  Termination

  	
   

  	
  7

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DISTRIBUTIONS ON PLEDGED COLLATERAL

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 3.1.

  	
   

  	
  Income and Distributions.

  	
   

  	
  8

  
	
  Section 3.2.

  	
   

  	
  Payments Following Termination Event

  	
   

  	
  8

  
	
  Section 3.3.

  	
   

  	
  Payments Prior to or on Stock Purchase Date

  	
   

  	
  8

  
	
  Section 3.4.

  	
   

  	
  Payments to Stock Purchase Contract Agent

  	
   

  	
  9

  
	
  Section 3.5.

  	
   

  	
  Assets Not Properly Released

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CONTROL

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 4.1.

  	
   

  	
  Establishment of Collateral Account

  	
   

  	
  10

  
	
  Section 4.2.

  	
   

  	
  Treatment as Financial Assets

  	
   

  	
  10

  
	
  Section 4.3.

  	
   

  	
  Sole Control by Collateral Agent

  	
   

  	
  10

  
	
  Section 4.4.

  	
   

  	
  Securities Intermediary’s Location

  	
   

  	
  10

  
	
  Section 4.5.

  	
   

  	
  No Other Claims

  	
   

  	
  11

  
	
  Section 4.6.

  	
   

  	
  Investment and Release

  	
   

  	
  11

  
	
  Section 4.7.

  	
   

  	
  Statements and Confirmations

  	
   

  	
  11

  
	
  Section 4.8.

  	
   

  	
  Tax Allocations

  	
   

  	
  11

  
	
  Section 4.9.

  	
   

  	
  No Other Agreements

  	
   

  	
  11

  
	
  Section 4.10.

  	
   

  	
  Powers Coupled with an Interest

  	
   

  	
  11

  
	
  Section 4.11.

  	
   

  	
  Waiver of Lien; Waiver of Set-off

  	
   

  	
  11

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INITIAL DEPOSIT; CREATION OF TREASURY MCAPS

  
	
  AND RECREATION OF NORMAL MCAPS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 5.1.

  	
   

  	
  Initial Deposit of Trust Preferred Securities

  	
   

  	
  13

  
	
  Section 5.2.

  	
   

  	
  Creation of Treasury MCAPS

  	
   

  	
  13

  
										



 


i

















 


	
  Section 5.3.

  	
   

  	
  Recreation of Normal MCAPS

  	
   

  	
  14

  
	
  Section 5.4.

  	
   

  	
  Termination Event

  	
   

  	
  14

  
	
  Section 5.5.

  	
   

  	
  Reinvestment of Proceeds of Pledged Treasury
  Securities

  	
   

  	
  15

  
	
  Section 5.6.

  	
   

  	
  Settlement with Qualifying Treasury Securities

  	
   

  	
  16

  
	
  Section 5.7.

  	
   

  	
  Application of Proceeds in Settlement of Stock
  Purchase Contracts

  	
   

  	
  17

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VI

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PLEDGED TRUST PREFERRED SECURITIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 6.1.

  	
   

  	
  Voting Rights

  	
   

  	
  19

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  RIGHTS AND REMEDIES

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 7.1.

  	
   

  	
  Rights and Remedies of the Collateral Agent

  	
   

  	
  20

  
	
  Section 7.2.

  	
   

  	
  Remarketing

  	
   

  	
  20

  
	
  Section 7.3.

  	
   

  	
  Successful Remarketing

  	
   

  	
  21

  
	
  Section 7.4.

  	
   

  	
  Substitutions

  	
   

  	
  21

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  REPRESENTATIONS AND WARRANTIES; COVENANTS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 8.1.

  	
   

  	
  Representations and Warranties

  	
   

  	
  22

  
	
  Section 8.2.

  	
   

  	
  Covenants

  	
   

  	
  22

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
  THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 9.1.

  	
   

  	
  Appointment, Powers and Immunities

  	
   

  	
  23

  
	
  Section 9.2.

  	
   

  	
  Instructions of the Company

  	
   

  	
  23

  
	
  Section 9.3.

  	
   

  	
  Reliance by Collateral Agent and Securities
  Intermediary

  	
   

  	
  24

  
	
  Section 9.4.

  	
   

  	
  Certain Rights

  	
   

  	
  24

  
	
  Section 9.5.

  	
   

  	
  Merger, Conversion, Consolidation or Succession to
  Business

  	
   

  	
  25

  
	
  Section 9.6.

  	
   

  	
  Rights in Other Capacities

  	
   

  	
  25

  
	
  Section 9.7.

  	
   

  	
  Non-reliance on Collateral Agent and Securities
  Intermediary

  	
   

  	
  25

  
	
  Section 9.8.

  	
   

  	
  Compensation and Indemnity

  	
   

  	
  25

  
	
  Section 9.9.

  	
   

  	
  Failure to Act

  	
   

  	
  26

  
	
  Section 9.10.

  	
   

  	
  Resignation of Collateral Agent and Securities
  Intermediary

  	
   

  	
  26

  
	
  Section 9.11.

  	
   

  	
  Right to Appoint Agent or Advisor

  	
   

  	
  27

  
	
  Section 9.12.

  	
   

  	
  Survival

  	
   

  	
  28

  
	
  Section 9.13.

  	
   

  	
  Exculpation

  	
   

  	
  28

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE X

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  AMENDMENT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 10.1.

  	
   

  	
  Amendment Without Consent of Holders

  	
   

  	
  29

  
	
  Section 10.2.

  	
   

  	
  Amendment with Consent of Holders

  	
   

  	
  29

  



 


ii

















 


	
  Section 10.3.

  	
   

  	
  Execution of Amendments

  	
   

  	
  30

  
	
  Section 10.4.

  	
   

  	
  Effect of Amendments

  	
   

  	
  30

  
	
  Section 10.5.

  	
   

  	
  Reference of Amendments

  	
   

  	
  30

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE XI

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Section 11.1.

  	
   

  	
  No Waiver

  	
   

  	
  31

  
	
  Section 11.2.

  	
   

  	
  Governing Law; Submission to Jurisdiction

  	
   

  	
  31

  
	
  Section 11.3.

  	
   

  	
  Notices

  	
   

  	
  31

  
	
  Section 11.4.

  	
   

  	
  Successors and Assigns

  	
   

  	
  31

  
	
  Section 11.5.

  	
   

  	
  Counterparts

  	
   

  	
  32

  
	
  Section 11.6.

  	
   

  	
  Severability

  	
   

  	
  32

  
	
  Section 11.7.

  	
   

  	
  Expenses, Etc.

  	
   

  	
  32

  
	
  Section 11.8.

  	
   

  	
  Security Interest Absolute

  	
   

  	
  32

  
	
  Section 11.9.

  	
   

  	
  Notice of Termination Event

  	
   

  	
  33

  
	
  Section 11.10.

  	
   

  	
  Incorporation by Reference

  	
   

  	
  33

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBITS:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT A –  Instruction
  from Stock Purchase Contract Agent to Collateral Agent (Creation of Treasury
  MCAPS)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT B –  Instruction
  from Collateral Agent to Securities Intermediary (Creation of Treasury MCAPS)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT C –  Instruction
  from Stock Purchase Contract Agent to Collateral Agent (Recreation of Normal
  MCAPS)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT D –
   Instruction from Collateral Agent to
  Securities Intermediary (Recreation of Normal MCAPS)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT E –
   Notice of Settlement with Treasury
  Securities from Collateral Agent to Stock Purchase Contract Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT F –
   Instruction to Collateral Agent
  Regarding Remarketing

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT G –
   Instruction to Collateral Agent
  Regarding Withdrawal From Remarketing

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  EXHIBIT
  H –  Notice of Occurrence of
  Termination Event

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULES:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE
  I -  Reference Dealers

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SCHEDULE II – Contact
  Persons for Confirmation

  	
   

  	
   

  
						



 


iii

















 


COLLATERAL AGREEMENT dated as of May 17, 2007 among
Lehman Brothers Holdings Inc., a Delaware corporation (the “Company”), The Bank
of New York, as collateral agent (in such capacity, the “Collateral Agent”), and as
securities intermediary (as defined in Section 8-102(a)(14) of the UCC) with
respect to the Collateral Account (in such capacity, the “Securities
Intermediary”), and U.S. Bank National Association, as stock purchase contract
agent and as attorney-in-fact of the Holders from time to time of the Mandatory
Capital Advantaged Preferred Securities (“MCAPS”SM) (in such
capacity, the “Stock Purchase Contract Agent”) under the Stock Purchase Contract
Agreement.


 


RECITALS


 


WHEREAS, the Company and the
Stock Purchase Contract Agent are parties to the Stock Purchase Contract
Agreement dated as of the date hereof (as modified and supplemented and in
effect from time to time, the “Stock Purchase Contract Agreement”), pursuant to
which 1,000,000 Normal MCAPS will be issued.


 


WHEREAS, each Normal MCAPS
consists of a unit comprised of (a) a stock purchase contract (a “Stock
Purchase Contract”) pursuant to which the Holder will purchase from the Company
on the Stock Purchase Date, for an amount equal to $1,000 (the “Stated Amount”),
one depositary share of the Company (a “Depositary Share”), representing 1/100th
of a share of the Company’s Non-Cumulative Perpetual Preferred Stock, Series H,
$100,000 liquidation preference per share, (the “Preferred Stock”), and (b) a
Trust Preferred Security.


 


WHEREAS, pursuant to the
terms of the Stock Purchase Contract Agreement and the Stock Purchase
Contracts, the Holders of the MCAPS have irrevocably authorized the Stock
Purchase Contract Agent, as attorney-in-fact of such Holders, among other
things, to execute and deliver this Agreement on behalf of such Holders and to
grant the pledge provided herein of the Collateral to secure the Obligations.


 


NOW, THEREFORE, the Company,
the Collateral Agent, the Securities Intermediary and the Stock Purchase
Contract Agent agree as follows:


 

















 


ARTICLE I


 


DEFINITIONS


 


Section 1.1.            Definitions.


 


For all purposes of this
Agreement, except as otherwise expressly provided or unless the context
otherwise requires:


 


(a)    the
terms defined in this Article have the meanings assigned to them in this
Article and include the plural as well as the singular, and nouns and pronouns
of the masculine gender include the feminine and neuter genders;


 


(b)    the
words “herein,” “hereof”
and “hereunder” and other words of similar
import refer to this Agreement as a whole and not to any particular Article,
Section, Exhibit or other subdivision;


 


(c)    the
following terms which are defined in the UCC shall have the meanings set forth
therein: “Certificated Security,” “Control,” “Financial Asset,”
“Entitlement Order,” “Securities Account” and “Security Entitlement”;


 


(d)   
capitalized terms used herein and not defined herein have the meanings
assigned to them in the Stock Purchase Contract Agreement; and


 


(e)    the
following terms have the meanings given to them in this Section 1.1(e):


 


“Agreement”
means this Collateral Agreement, as the same may be amended, modified or
supplemented from time to time.


 


“Collateral”
means the collective reference to:


 


(1)           the
Collateral Account and all investment property and other financial assets from
time to time credited to the Collateral Account and all Security Entitlements
with respect thereto, including, without limitation, (A) the Trust Preferred
Securities and Security Entitlements relating thereto that are a component of
the Normal MCAPS from time to time (but excluding the right to receive
distributions on the Trust Preferred Securities), (B) any Qualifying Treasury
Securities and Security Entitlements relating thereto delivered from time to
time upon creation of Treasury MCAPS in accordance with Section 5.2 hereof and
(C) payments made by Holders pursuant to Section 5.6 hereof;


 


(2)           all
Proceeds of any of the foregoing (whether such Proceeds arise before or after
the commencement of any proceeding under any applicable bankruptcy, insolvency
or other similar law, by or against the pledgor or with respect to the
pledgor); and


 


(3)           all
powers and rights now owned or hereafter acquired under or with respect to the
Collateral.


 


“Collateral
Account” means the Securities Account of The Bank of New York, as
Collateral Agent, maintained by the Securities Intermediary and designated “The
Bank of New York, as Collateral Agent of the Company, as pledgee of U.S. Bank
National Association, as the Stock Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders.”


 


2

















 


“Collateral
Agent” means the Person named as the “Collateral Agent” in the first
paragraph of this Agreement until a successor Collateral Agent shall have
become such pursuant to the applicable provisions of this Agreement, and
thereafter “Collateral Agent” shall mean such Person or any subsequent successor
who is appointed pursuant to this Agreement.


 


“Company”
means the Person named as the “Company” in the first paragraph of this
Agreement until a successor shall have become such pursuant to the applicable
provisions of the Stock Purchase Contract Agreement, and thereafter “Company”
shall mean such successor.


 


“Declaration
of Trust” means the Amended and Restated Declaration of Trust, dated
as of the date hereof, among the Company, as Sponsor, the Property Trustee, the
Delaware Trustee and the Regular Trustees (each as named therein), and the
several Holders (as defined therein).


 


“Depositary
Share” has the meaning specified in the second paragraph of the
recitals of this Agreement.


 


“Failed Remarketing” means a Final Remarketing that is not Successful.


 


“Final Dealer”
has the meaning specified in Section 5.5(a).


 


“Holder” has the meaning specified in Section 1.1 of
the Stock Purchase Contract Agreement, as in effect on the date hereof.


 


“Market Disruption Event” means (i) a general moratorium on
commercial banking activities in New York declared by the relevant authorities
or (ii) any material disruption of the U.S. government securities market or
U.S. federal funds-transfer systems, written notification of which shall have
been given to the Collateral Agent by any of the Regular Trustees.


 


“Obligations”
means, with respect to each Holder, all obligations and liabilities of such
Holder under such Holder’s Stock Purchase Contract, the Stock Purchase Contract
Agreement and this Agreement or any other document made, delivered or given in
connection herewith or therewith, in each case whether on account of principal,
interest (including, without limitation, interest accruing before and after the
filing of any petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to such Holder, whether or not a
claim for post-filing or post-petition interest is allowed in such proceeding),
fees, indemnities, costs, expenses or otherwise (including, without limitation,
all fees and disbursements of counsel to the Company or the Collateral Agent or
the Securities Intermediary that are required to be paid by the Holder pursuant
to the terms of any of the foregoing agreements).


 


“Permitted
Investments” means any one of the following, in each case maturing
on the Business Day following the date of acquisition:


 


(1)           any
evidence of indebtedness with an original maturity of 365 days or less issued,
or directly and fully guaranteed or insured, by the United States of America or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States of America is pledged in support of the timely payment
thereof or such indebtedness constitutes a general obligation of it);


 


(2)           deposits,
certificates of deposit or acceptances with an original maturity of 365 days or
less of any institution which is a member of the Federal Reserve System having
combined capital and surplus and undivided profits of not less than $500
million at the time of deposit (and which may include the Collateral Agent);


 


3

















 


(3)           investments
with an original maturity of 365 days or less of any Person that are fully and
unconditionally guaranteed by a bank referred to in clause (2);


 


(4)           repurchase
agreements and reverse repurchase agreements relating to marketable direct
obligations issued or unconditionally guaranteed by the United States of
America or issued by any agency thereof and backed as to timely payment by the
full faith and credit of the United States of America;


 


(5)           investments
in commercial paper, other than commercial paper issued by the Company or its
Affiliates, of any corporation incorporated under the laws of the United States
of America or any State thereof, which commercial paper has a rating at the
time of purchase at least equal to “A-1” by Standard & Poor’s Ratings
Services (“S&P”) or at least equal to “P-1” by Moody’s Investors Service,
Inc. (“Moody’s”); and


 


(6) investments in money market funds (including,
but not limited to, money market funds managed by the Collateral Agent or an
affiliate of the Collateral Agent) registered under the Investment Company Act
of 1940, as amended, rated in the highest applicable rating category by S&P
or Moody’s.


 


“Pledge”
means the lien and security interest created by this Agreement.


 


“Pledged
Securities” means the Pledged Trust Preferred Securities and the
Pledged Treasury Securities, collectively.


 


“Pledged
Trust Preferred Securities” means Trust Preferred Securities and
Security Entitlements with respect thereto from time to time credited to the
Collateral Account and not then released from the Pledge.


 


“Pledged
Treasury Securities” means Qualifying Treasury Securities and
Security Entitlements with respect thereto from time to time credited to the
Collateral Account and not then released from the Pledge, together with all
Qualifying Treasury Securities purchased from time to time by the Collateral
Agent with the Proceeds of maturing Pledged Treasury Securities pursuant to
Section 5.5.


 


“Preferred
Stock” has the meaning specified in the second paragraph of the
recitals of this Agreement.


 


“Proceeds”
has the meaning ascribed thereto in Section 9-102(a)(64) of the UCC and
includes, without limitation, all interest, dividends, cash, instruments,
securities, financial assets and other property received, receivable or
otherwise distributed upon the sale (including, without limitation, the
Remarketing), exchange, collection or disposition of any financial assets from
time to time held in the Collateral Account.


 


“Qualifying
Treasury Securities” has the meaning specified in the Stock Purchase
Contract Agreement, as in effect on the date hereof.


 


“Quarterly
Date” means each February 28, May 31, August 31, and November 30,
commencing on the later of the first such date on which Qualifying Treasury
Securities are held in the Collateral Account and August 31, 2007 (or, if any
such day is not a Business Day, the next succeeding Business Day).


 


4

















 


 “Reference Dealer”
means each of the U.S. government securities dealers listed on Schedule I
hereto (including any successor thereto) and any other U.S. government
securities dealers designated by the Collateral Agent or agent thereof (it
being understood that the Collateral Agent may, but shall not be obligated, to
designate any one or more such other U.S. government securities dealers);
provided that if at any time fewer than three of the entities named on Schedule
I are active U.S. government securities dealers and approved counterparties of
The Bank of New York, any of the Regular Trustees may designate an additional
U.S. government securities dealer as a Reference Dealer.


 


“Regular
Trustee” has the meaning set forth in the Declaration of Trust, as
in effect on the date hereof.


 


“Reset Rate”
has the meaning set forth in the Indenture, as in effect on the date hereof.


 


“Roll Date”
means, with respect to any Quarterly Date, the latest date prior to such
Quarterly Date that is a maturity date of Qualifying Treasury Securities held
in the Collateral Account.


 


“Securities
Intermediary” means the Person named as the “Securities Intermediary”
in the first paragraph of this Agreement until a successor Securities
Intermediary shall have become such pursuant to the applicable provisions of
this Agreement, and thereafter “Securities Intermediary” shall mean such Person
or any subsequent successor who is appointed pursuant to this Agreement.


 


“Stated
Amount” has the meaning specified in the second paragraph of the
recitals of this Agreement.


 


“Stock
Purchase Contract” has the meaning specified in the second paragraph
of the recitals of this Agreement.


 


“Stock
Purchase Contract Agent” means the Person named as the “Stock
Purchase Contract Agent” in the first paragraph of this Agreement until a
successor Stock Purchase Contract Agent shall have become such pursuant to the
applicable provisions of this Agreement, and thereafter “Stock Purchase
Contract Agent” shall mean such Person or any subsequent successor who is
appointed pursuant to this Agreement.


 


“Stock
Purchase Contract Agreement” has the meaning specified in the first
paragraph of the recitals of this Agreement.


 


“Trade Date”
means, with respect to each Roll Date, the Business Day immediately preceding
such Roll Date.


 


“Trades”
means the Treasury/Reserve Automated Debt Entry System maintained by the
Federal Reserve Bank of New York pursuant to the Trades Regulations.


 


“Trades
Regulations” means the regulations of the United States Department
of the Treasury, published at 31 C.F.R. Part 357, as amended from time to time.
Unless otherwise defined herein, all terms defined in the Trades Regulations
are used herein as therein defined.


 


“Transfer”
means (i) in the case of certificated securities in registered form, delivery
as provided in Section 8-301(a) of the UCC, endorsed to the transferee or in
blank by an effective endorsement, (ii) in the case of Qualifying Treasury
Securities, registration of the transferee as the owner of such Qualifying
Treasury Securities on Trades and (iii) in the case of Security Entitlements,
including, without limitation, Security Entitlements with respect to Qualifying
Treasury Securities, a securities intermediary indicating by book entry that
such Security Entitlement has been credited to the transferee’s Securities
Account.


 


5

















 


“Trust”
means Lehman Holdings Capital Trust VII, a Delaware statutory trust.


 


“UCC”
means the Uniform Commercial Code as in effect in the State of New York from
time to time.


 


“Value”
means, with respect to any item of Collateral on any date, as to (1) Trust
Preferred Securities, the aggregate liquidation amount thereof, and (2)
Qualifying Treasury Securities, the aggregate principal amount thereof.


 


6

















 


ARTICLE II



PLEDGE


 


Section 2.1.            Pledge.


 


Each Holder, acting through
the Stock Purchase Contract Agent as such Holder’s attorney-in-fact, and the
Stock Purchase Contract Agent, acting solely as such attorney-in-fact, hereby
pledges and grants to the Collateral Agent, as agent of and for the benefit of
the Company, a continuing first priority security interest in and to, and a
lien upon and right of set-off against, all of such Person’s right, title and
interest in and to the Collateral to secure the prompt and complete payment and
performance when due (whether at stated maturity, by acceleration or otherwise)
of the Obligations. The Collateral Agent shall have all of the rights, remedies
and recourses with respect to the Collateral afforded a secured party by the
UCC, in addition to, and not in limitation of, the other rights, remedies and
recourses afforded to the Collateral Agent by this Agreement.


 


Section 2.2.            Control.


 


The Collateral Agent shall
have control of the Collateral Account pursuant to the provisions of Article IV
of this Agreement.


 


Section 2.3.            Termination.


 


As to each Holder, this
Agreement and the Pledge created hereby shall terminate upon the satisfaction
of such Holder’s Obligations. Upon such termination, the Collateral Agent
shall, except as otherwise provided herein, instruct the Securities
Intermediary to Transfer such Holder’s portion of the Collateral to the Stock
Purchase Contract Agent for distribution to such Holder, free and clear of the
Pledge created hereby.


 


7

















 


ARTICLE III



DISTRIBUTIONS ON PLEDGED COLLATERAL


 


Section 3.1.            Income and
Distributions.


 


The Collateral Agent shall
transfer all income and distributions received by the Collateral Agent on
account of the Pledged Trust Preferred Securities or Permitted Investments from
time to time held in the Collateral Account (ABA No. 021-000-018, A/C No. 212825,
Re: Lehman Brothers MCAPS Collateral Account Trust VII) to the Stock
Purchase Contract Agent for distribution to the applicable Holders as provided
in the Stock Purchase Contracts or Stock Purchase Contract Agreement.


 


Section 3.2.            Payments Following
Termination Event.


 


Following a Termination
Event, the Collateral Agent shall transfer all payments of liquidation amounts
or principal it receives, if any, in respect of (1) the Pledged Trust Preferred
Securities and (2) the Pledged Treasury Securities or Permitted Investments, to
the Stock Purchase Contract Agent for the benefit of the applicable Holders for
distribution to such Holders in accordance with their respective interests,
free and clear of the Pledge created hereby.


 


Section 3.3.            Payments Prior to
or on Stock Purchase Date.


 


(a)    Except
as provided in Sections 3.3(b), 3.3(c) and 5.5 below, if no Termination Event
shall have occurred, all payments of liquidation amounts or principal received
by the Securities Intermediary in respect of (1) the Remarketing of the Pledged
Trust Preferred Securities and (2) the Pledged Treasury Securities, shall be held
and invested in Permitted Investments selected by the Company until the Stock
Purchase Date, and transferred to the Company on the Stock Purchase Date as
provided in Section 5.7 hereof. Any balance remaining in the Collateral Account
shall be released from the Pledge and transferred to the Stock Purchase
Contract Agent for the benefit of the applicable Holders for distribution to
such Holders in accordance with their respective interests, free and clear of
the Pledge created thereby. The Company shall instruct the Collateral Agent in
writing as to the Permitted Investments in which any payments made under this
Section 3.3(a) shall be invested. The Collateral Agent shall have no liability
in respect of losses incurred as a result of the failure of the Company to
provide timely written investment direction. The Collateral Agent may
conclusively rely on any written direction and shall bear no liability for any
loss or other damage based on acting or omitting to act under this Section 3.3
pursuant to any direction of the Company and neither the Collateral Agent nor
the Securities Intermediary shall in any way be liable for the selection of
Permitted Investments or by reason of any insufficiency in the Collateral
Account resulting from any loss on any Permitted Investment included therein.


 


(b)    All
payments of liquidation amounts or principal received by the Securities
Intermediary in respect of (1) the Trust Preferred Securities and (2) the
Qualifying Treasury Securities or Security Entitlements thereto, that, in each
case, have been released from the Pledge pursuant hereto shall be transferred
to the Stock Purchase Contract Agent for the benefit of the applicable Holders
for distribution to such Holders in accordance with their respective interests.


 


(c)    In the
event that a Remarketing is not Successful, principal payments received by the
Securities Intermediary in respect of the Pledged Treasury Securities shall be
invested in Qualifying Treasury Securities maturing at least one business day
prior to the next Quarterly Date in a principal amount equal to the aggregate
stated amount of the related Treasury MCAPS, which Qualifying Treasury
Securities shall be considered Pledged Treasury Securities for the purpose of
this Agreement. The Collateral Agent shall remit any remaining funds, after
application of principal payments received in


 


8

















 


respect of Qualifying Treasury Securities to purchase new Qualifying
Treasury Securities, to the Stock Purchase Contract Agent who shall remit such
funds to the holders of the related Treasury MCAPS on a pro rata basis.


 


Section 3.4.            Payments to Stock
Purchase Contract Agent.


 


The Securities Intermediary
shall use commercially reasonable efforts to deliver payments to the Stock Purchase
Contract Agent hereunder to the account designated by the Stock Purchase
Contract Agent for such purpose not later than 12:00 p.m. (New York City time)
on the Business Day such payment is received by the Securities Intermediary;
provided, however, that if such payment is received by the Securities
Intermediary on a day that is not a Business Day or after 11:00 a.m. (New York
City time) on a Business Day, then the Securities Intermediary shall use
commercially reasonable efforts to deliver such payment to the Stock Purchase
Contract Agent no later than 10:30 a.m. (New York City time) on the next
succeeding Business Day. Notwithstanding the foregoing, if the Securities
Intermediary is required to deliver payments to the Stock Purchase Contract
Agent on a Business Day that is in the next calendar year, then the Securities
Intermediary shall use commercially reasonable efforts to deliver such payment
to the Stock Purchase Contract Agent no later than 10:30 am (New York City
time) on the immediately preceding Business Day.


 


Section 3.5.            Assets Not Properly
Released.


 


If the Stock Purchase
Contract Agent or any Holder shall receive any principal payments on account of
financial assets credited to the Collateral Account and not released therefrom
in accordance with this Agreement, the Stock Purchase Contract Agent or such
Holder shall hold the same as trustee of an express trust for the benefit of
the Company and, upon receipt of an Officers’ Certificate of the Company so
directing, promptly deliver the same to the Securities Intermediary for credit
to the Collateral Account or to the Company for application to the Obligations
of the Holders, and the Stock Purchase Contract Agent and Holders shall acquire
no right, title or interest in any such payments of principal amounts so
received. The Stock Purchase Contract Agent shall have no liability under this
Section 3.5 unless and until it has been notified in writing that such payment
was delivered to it erroneously and shall have no liability for any action
taken, suffered or omitted to be taken prior to its receipt of such notice.


 


9

















 


ARTICLE IV



CONTROL


 


Section 4.1.            Establishment of
Collateral Account.


 


The Securities Intermediary
hereby confirms that:


 


(a)    Securities
Intermediary has established the Collateral Account;


 


(b)    the
Collateral Account is a Securities Account;


 


(c)    subject
to the terms of this Agreement, the Securities Intermediary shall identify in
its records the Collateral Agent as the entitlement holder entitled to exercise
the rights that comprise any financial asset credited to the Collateral
Account;


 


(d)    all
property delivered to the Securities Intermediary pursuant to this Agreement or
the Stock Purchase Contract Agreement, including any Permitted Investments,
will be credited promptly to the Collateral Account; and


 


(e)    all
securities or other property underlying any financial assets credited to the
Collateral Account shall be (i) registered in the name of the Stock Purchase
Contract Agent and endorsed to the Securities Intermediary or in blank, (ii)
registered in the name of the Securities Intermediary or (iii) credited to
another Securities Account maintained in the name of the Securities
Intermediary. In no case will any financial asset credited to the Collateral
Account be registered in the name of the Stock Purchase Contract Agent or any
Holder or specially endorsed to the Stock Purchase Contract Agent or any Holder
unless such financial asset has been further endorsed to the Securities
Intermediary or in blank.


 


Section 4.2.            Treatment as
Financial Assets.


 


Each item of property
(whether investment property, financial asset, security, instrument or cash)
credited to the Collateral Account shall be treated as a financial asset.


 


Section 4.3.            Sole Control by
Collateral Agent.


 


Except as provided in
Section 6.1, at all times prior to the termination of the Pledge, the
Collateral Agent shall have sole control of the Collateral Account, and the
Securities Intermediary shall take instructions and directions with respect to
the Collateral Account solely from the Collateral Agent. If at any time the
Securities Intermediary shall receive an entitlement order issued by the
Collateral Agent and relating to the Collateral Account, the Securities
Intermediary shall comply with such entitlement order without further consent
by the Stock Purchase Contract Agent or any Holder or any other Person. Except
as otherwise permitted under this Agreement, until termination of the Pledge,
the Securities Intermediary will not comply with any entitlement orders issued
by the Stock Purchase Contract Agent or any Holder.


 


Section 4.4.            Securities
Intermediary’s Location.


 


The Collateral Account, and
the rights and obligations of the Securities Intermediary, the Collateral
Agent, the Stock Purchase Contract Agent and the Holders with respect thereto,
shall be governed by the laws of the State of New York. Regardless of any
provision in any other agreement, for purposes of the UCC, New York shall be
deemed to be the Securities Intermediary’s jurisdiction.


 


10

















 


Section 4.5.            No Other Claims.


 


Except for the claims and
interest of the Collateral Agent and of the Stock Purchase Contract Agent and
the Holders in the Collateral Account, as at the date of this Agreement, the
Securities Intermediary (without having conducted any investigation) does not
know of any claim to, or interest in, the Collateral Account or in any
financial asset credited thereto. If any Person asserts any lien, encumbrance
or adverse claim (including any writ, garnishment, judgment, warrant of
attachment, execution or similar process) against the Collateral Account or in
any financial asset carried therein, the Securities Intermediary will promptly
notify the Collateral Agent and the Stock Purchase Contract Agent.


 


Section 4.6.            Investment and
Release.


 


All proceeds of financial
assets from time to time deposited in the Collateral Account shall be invested
and reinvested as provided in this Agreement. At no time prior to termination
of the Pledge with respect to any particular property shall such property be
released from the Collateral Account except in accordance with this Agreement
or upon written instructions of the Collateral Agent.


 


Section 4.7.            Statements and
Confirmations.


 


The Securities Intermediary
will promptly send copies of all statements, confirmations and other
correspondence concerning the Collateral Account and any financial assets
credited thereto simultaneously to each of the Stock Purchase Contract Agent
and the Collateral Agent at their addresses for notices under this Agreement.


 


Section 4.8.            Tax Allocations.


 


The Stock Purchase Contract
Agent shall report all items of income, gain, expense and loss recognized in
the Collateral Account, to the extent such reporting is required by law, to the
Internal Revenue Service authorities in the manner required by law. Neither the
Securities Intermediary nor the Collateral Agent shall have any tax reporting
duties hereunder.


 


Section 4.9.            No Other Agreements.


 


The Securities Intermediary
has not entered into, and prior to the termination of the Pledge will not enter
into, any agreement with any other Person relating to the Collateral Account or
any financial assets credited thereto, including, without limitation, any
agreement to comply with entitlement orders of any Person other than the
Collateral Agent.


 


Section 4.10.          Powers Coupled with
an Interest.


 


The rights and powers
granted in this Article IV to the Collateral Agent have been granted in order
to perfect its security interests in the Collateral Account, are powers coupled
with an interest and will be affected neither by the bankruptcy of the Stock
Purchase Contract Agent or any Holder nor by the lapse of time. The obligations
of the Securities Intermediary under this Article IV shall continue in effect
until the termination of the Pledge with respect to any and all Collateral.


 


Section 4.11.          Waiver of Lien;
Waiver of Set-off.


 


The Securities Intermediary
waives any security interest, lien or right to make deductions or set- offs
that it may now have or hereafter acquire in or with respect to the Collateral
Account, any financial asset credited thereto or any Security Entitlement in
respect thereof. Neither the financial assets credited 


 


11

















 


to the Collateral Account
nor the Security Entitlements in respect thereof will be subject to deduction,
set-off, banker’s lien or any other right in favor of any person other than the
Company.


 


12

















 


ARTICLE V



INITIAL DEPOSIT; CREATION OF TREASURY MCAPS

AND RECREATION OF NORMAL MCAPS


 


Section 5.1.            Initial Deposit of
Trust Preferred Securities.


 


(a)    Prior
to or concurrently with the execution and delivery of this Agreement, the Stock
Purchase Contract Agent, on behalf of the initial Holders of the Normal MCAPS,
shall Transfer to the Securities Intermediary, for credit to the Collateral
Account, the Trust Preferred Securities or Security Entitlements relating thereto,
and, in the case of Security Entitlements, the Securities Intermediary shall
indicate by book-entry that a Securities Entitlement to such Trust Preferred
Securities has been credited to the Collateral Account.


 


(b)    The
Collateral Agent may, at any time or from time to time, in its sole discretion,
cause any or all securities or other property underlying any financial assets
credited to the Collateral Account to be registered in the name of the
Securities Intermediary, the Collateral Agent or their respective nominees;
provided, however, that unless any Trust Enforcement Event (defined in the
Declaration of Trust) shall have occurred and be continuing, the Collateral
Agent agrees not to cause any Trust Preferred Securities to be so
re-registered.


 


Section 5.2.            Creation of
Treasury MCAPS.


 


(a)    A
Holder of Normal MCAPS shall have the right, at any time from and after the
date of this Agreement and prior to the Successful Remarketing of the Trust
Preferred Securities (except (1) on a day in February, May, August or November
that is on or after the 15th day of the month through the last day
of the month (or the next Business Day if the last day is not a Business Day)
or (2) during the period from 3:00 p.m. (New York City time) on the second
Business Day immediately preceding the beginning of any Remarketing Period
until the opening of business on the Business Day immediately following the end
of that Remarketing Period), on or prior to 5:00 p.m. (New York City time) to
create Treasury MCAPS by substitution of Qualifying Treasury Securities or
Security Entitlements with respect thereto for the Pledged Trust Preferred
Securities comprising a part of all or a portion of such Holder’s Normal MCAPS
by:


 


(i)    transferring to the Collateral Agent, for
credit to the Collateral Account, Qualifying Treasury Securities or Security
Entitlements with respect thereto having a Value equal to the aggregate
liquidation amount of the Pledged Trust Preferred Securities to be released,
accompanied by a notice, substantially in the form of Exhibit C to the Stock
Purchase Contract Agreement, whereupon the Stock Purchase Contract Agent shall
deliver to the Collateral Agent a notice, substantially in the form of Exhibit
A hereto, (A) stating that such Holder has notified the Stock Purchase Contract
Agent that such Holder has Transferred Qualifying Treasury Securities or
Security Entitlements with respect thereto to the Collateral Agent for credit
to the Collateral Account, (B) stating the Value of the Qualifying Treasury
Securities or Security Entitlements with respect thereto Transferred by such
Holder and (C) requesting that the Collateral Agent release from the Pledge the
Pledged Trust Preferred Securities that are a component of such Normal MCAPS
and deliver the Treasury MCAPS and Trust Preferred Securities; and


 


(ii)    delivering the related Normal MCAPS to the
Stock Purchase Contract Agent.


 


Upon receipt of such notice
and confirmation that Qualifying Treasury Securities or Security Entitlements
with respect thereto have been credited to the Collateral Account as described
in such notice,


 


13

















 


the Collateral Agent shall
instruct the Securities Intermediary by a notice, substantially in the form of
Exhibit B hereto, to release such Pledged Trust Preferred Securities from the
Pledge by Transfer to the Stock Purchase Contract Agent for distribution to
such Holder, free and clear of the Pledge created hereby.


 


(b)    Upon
credit to the Collateral Account of Qualifying Treasury Securities or Security
Entitlements with respect thereto delivered by a Holder of Normal MCAPS and
receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release such Pledged Trust Preferred Securities from the
Pledge and shall promptly Transfer the same to the Stock Purchase Contract
Agent for distribution to such Holder, free and clear of the Pledge created
hereby.


 


Section 5.3.            Recreation of
Normal MCAPS.


 


(a)    A
Holder of Treasury MCAPS shall have the right, at any time from and after the
date of this Agreement and prior to the Successful Remarketing of the Trust
Preferred Securities (except (1) on a day in February, May, August or November
that is on or after the 15th day of the month through the last day
of the month (or the next Business Day if the last day is not a Business Day)
or (2) during the period from 3:00 p.m. (New York City time) on the second
Business Day immediately preceding the beginning of a Remarketing Period until
the opening of business on the Business Day immediately the end of such
Remarketing Period), on or prior to 5:00 p.m. (New York City time), to recreate
Normal MCAPS by substitution of Trust Preferred Securities or Security
Entitlements with respect thereto for Pledged Treasury Securities by:


 


(i)    transferring to the Securities
Intermediary, for credit to the Collateral Account, Trust Preferred Securities
or Security Entitlements with respect thereto having an aggregate liquidation
amount equal to the Value of the Pledged Treasury Securities to be released,
accompanied by a notice, substantially in the form of Exhibit C to the Stock
Purchase Contract Agreement, whereupon the Stock Purchase Contract Agent shall
deliver to the Collateral Agent a notice, substantially in the form of Exhibit
C hereto, stating that such Holder has Transferred the Trust Preferred
Securities or Security Entitlements with respect thereto to the Collateral
Account for credit to the Collateral Account and requesting that the Collateral
Agent release from the Pledge the Pledged Treasury Securities related to such
Treasury MCAPS; and


 


(ii)    delivering the related Treasury MCAPS to
the Stock Purchase Contract Agent.


 


Upon receipt of such notice
and confirmation that Trust Preferred Securities or Security Entitlements with respect
thereto have been credited to the Collateral Account as described in such
notice, the Collateral Agent shall instruct the Securities Intermediary by a
notice substantially in the form of Exhibit D hereto to release such Pledged
Treasury Securities from the Pledge by Transfer to the Stock Purchase Contract
Agent for distribution to such Holder, free and clear of the Pledge created
hereby.


 


(b)    Upon
credit to the Collateral Account of Trust Preferred Securities or Security
Entitlements with respect thereto delivered by a Holder of Treasury MCAPS and
receipt of the related instruction from the Collateral Agent, the Securities
Intermediary shall release such Pledged Treasury Securities from the Pledge and
shall promptly Transfer the same to the Stock Purchase Contract Agent for
distribution to such Holder, free and clear of the Pledge created hereby.


 


Section 5.4.            Termination Event.


 


(a)    Upon
receipt by the Collateral Agent of written notice from the Company or the Stock
Purchase Contract Agent in the Form set forth in Exhibit H that a Termination
Event has occurred, the


 


14

















 


Collateral Agent shall release all Collateral from the Pledge and shall
promptly instruct the Securities Intermediary to Transfer:


 


(i)    any Pledged Trust Preferred Securities or
Security Entitlements with respect thereto; 
and


 


(ii)    any Pledged Treasury Securities


 


to the Stock
Purchase Contract Agent for the benefit of the Holders for distribution to such
Holders, in accordance with their respective interests, free and clear of the
Pledge created hereby.


 


(b)    If such
Termination Event shall result from the Company’s becoming a debtor under the
Bankruptcy Code, and if the Collateral Agent shall for any reason fail promptly
to effectuate the release and Transfer of all Pledged Trust Preferred
Securities, Pledged Treasury Securities and Proceeds of any of the foregoing,
as the case may be, as provided by this Section 5.4, the Stock Purchase
Contract Agent shall:


 


(i)    use its best efforts to obtain an opinion
of a nationally recognized law firm to the effect that, notwithstanding the
Company’s being the debtor in such a bankruptcy case, the Collateral Agent will
not be prohibited from releasing or Transferring the Collateral as provided in
this Section 5.4 and shall deliver or cause to be delivered such opinion to the
Collateral Agent within ten days after the occurrence of such Termination
Event, and if (A) the Stock Purchase Contract Agent shall be unable to obtain
such opinion within ten days after the occurrence of such Termination Event or
(B) the Collateral Agent shall continue, after delivery of such opinion, to
refuse to effectuate the release and Transfer of all Pledged Trust Preferred
Securities, Pledged Treasury Securities and Proceeds of any of the foregoing,
as the case may be, as provided in this Section 5.4, then the Stock Purchase
Contract Agent shall within fifteen days after the occurrence of such
Termination Event commence an action or proceeding in the court having
jurisdiction of the Company’s case under the Bankruptcy Code seeking an order
requiring the Collateral Agent to effectuate the release and transfer of all
Pledged Trust Preferred Securities, Pledged Treasury Securities and Proceeds of
any of the foregoing, or as the case may be, as provided by this Section 5.4;
or


 


(ii)    commence an action or proceeding like that
described in Section 5.4(b)(i) hereof within ten days after the occurrence of
such Termination Event.


 


Section 5.5.            Reinvestment of
Proceeds of Pledged Treasury Securities.


 


(a)    At or
about 11:00 A.M., New York City time, on each Trade Date, the Collateral Agent
shall select at least three Reference Dealers (including at least three
Reference Dealers named on Schedule I hereto or named by any of the Regular
Trustees as replacements therefor who are approved counterparties of The Bank of New York) and request each of them to provide
a commitment (which may be oral if promptly confirmed in writing by facsimile
or e-mail), satisfactory in form to the Collateral Agent, to the effect that if
selected as the Final Dealer, such Reference Dealer shall sell to the
Collateral Agent, for delivery against payment on the immediately succeeding
Roll Date, an aggregate principal amount of the U.S. treasury security that is
the Qualifying Treasury Security on such Roll Date equal to the aggregate
principal amount of Qualifying Treasury Securities held in the Collateral
Account on such Trade Date. If the Collateral Agent shall have received at
least two firm offers, it shall select the lowest offer and the Reference
Dealer providing the lowest offer shall be the “Final Dealer”; provided that if
two or more Reference Dealers have provided identical lowest offers, the
Collateral Agent shall select any of these Reference Dealers as the Final
Dealer in its absolute discretion. The Final Dealer shall be obligated


 


15

















 


to sell to the Collateral Agent, for Cash on the Roll Date, the
aggregate principal amount of the U.S. treasury security specified in such
offer. If the Collateral Agent determines that (i) a Market Disruption Event
has occurred or (ii) fewer than two Reference Dealers have provided firm offers
in a timely manner meeting the foregoing requirements, the steps contemplated
above shall be taken on each succeeding Business Day on which the Collateral
Agent determines that no Market Disruption Event has occurred until at least
two Reference Dealers have provided such offers, except that the Collateral
Agent shall request offers from the Reference Dealers for same day settlement.
The Collateral Agent shall use reasonable care in administering the foregoing
procedures and shall have no liability in connection therewith to the Issuer
Trust, the Property Trustee, the Company or any other Person in the absence of
gross negligence or willful misconduct. All determinations regarding whether a
Market Disruption Event has occurred shall be made by the Collateral Agent in
its sole discretion.


 


(b)    On each
Roll Date (or, if no Final Dealer shall have been selected on the Trade Date,
on the date that the Final Dealer is selected), the Collateral Agent shall
instruct the Securities Intermediary to apply the Proceeds of the U.S. treasury
securities held in the Collateral Account to the Purchase Price of the
Qualifying Treasury Securities, which shall be deposited in the Collateral
Account, and to apply the excess of such Proceeds over the Purchase Price of
the Qualifying Treasury Securities to purchase Permitted Investments for
deposit in the Collateral Account.


 


(c)    On each
Quarterly Date, if the Qualifying Treasury Securities shall have been purchased
and deposited in the Collateral Account, the Collateral Agent shall liquidate
the Permitted Investments in the Collateral Account and promptly remit the
Proceeds to the Stock Purchase Contract Agent for payment to each Holder of
Treasury MCAPS on a pro rata basis.


 


Section 5.6.            Settlement with
Qualifying Treasury Securities.


 


(a)    Upon
receipt by the Collateral Agent of (1) a notice from the Stock Purchase
Contract Agent promptly following the receipt by the Stock Purchase Contract
Agent of a notice from a Holder of Normal MCAPS that such Holder has elected,
in accordance with the procedures specified in Section 6.2 of the Stock
Purchase Contract Agreement, to effect a Settlement with Qualifying Treasury
Securities and (2) delivery by such Holder of Qualifying Treasury Securities
having a principal amount equal to the Purchase Price under the related Stock
Purchase Contracts by deposit in the Collateral Account on or prior to 5:00
p.m. (New York City time) on the first Business Day prior to the beginning of
the Remarketing Period, then any securities or their proceeds received shall be
paid or delivered, as the case may be, to the Company on the Stock Purchase
Date in settlement of the Stock Purchase Contracts in accordance with the terms
of this Agreement and the Stock Purchase Contract Agreement.


 


(b)    If a
Holder of Normal MCAPS (i) fails to notify the Stock Purchase Contract Agent of
its intention to make a Settlement with Qualifying Treasury Securities as
provided in Section 6.2 of the Stock Purchase Contract Agreement or (ii) does
notify the Stock Purchase Contract Agent of its intention to made a Settlement
with Qualifying Treasury Securities but fails to make such delivery as required
by Section 6.2 of the Stock Purchase Contract Agreement, such Holder shall be
deemed to have consented to the disposition of such Holder’s Pledged Trust
Preferred Securities in accordance with Section 6.2 of the Stock Purchase
Contract Agreement.


 


(c)    As soon
as practicable after 5:00 p.m. (New York City time) on the first Business Day
immediately preceding the beginning of the Remarketing Period, the Collateral
Agent shall deliver to the Stock Purchase Contract Agent a notice,
substantially in the form of Exhibit E hereto, stating the number of Pledged
Trust Preferred Securities to be remarketed in the applicable Remarketing
pursuant to Section 6.2(a) of the Stock Purchase Contract Agreement.


 


16

















 


(d)    If any
Remarketing other than a Final Remarketing is not Successful, the Collateral
Agent shall promptly return the Qualifying Treasury Securities or their
proceeds, as the case may be, that it has received with respect to the
Settlement with Qualifying Treasury Securities to the Stock Purchase Contract
Agent for distribution to the Holders who elected to effect a Settlement with
Qualifying Treasury Securities.


 


(e)    In the
event of a Successful Remarketing, the Collateral Agent shall (i) instruct the
Securities Intermediary to release from the Pledge such Holder’s related
Pledged Trust Preferred Securities as to which such Holder has effected a
Settlement with Qualifying Treasury Securities pursuant to Section 5.6(a) and
(ii) instruct the Securities Intermediary to Transfer all such Pledged Trust
Preferred Securities to the Stock Purchase Contract Agent for distribution to
such Holder free and clear of the Pledge created hereby.


 


Section 5.7.            Application of
Proceeds in Settlement of Stock Purchase Contracts.


 


(a)    If a
Holder of Normal MCAPS has not elected to make an effective Settlement with
Qualifying Treasury Securities by notifying the Stock Purchase Contract Agent
in the manner provided for in Section 6.2 
of the Stock Purchase Contract Agreement or does notify the Stock
Purchase Contract Agent as provided in Section 6.2  of the Stock Purchase Contract Agreement of
its intention to deliver Qualifying Treasury Securities having a principal
amount equal to the Purchase Price under the related Stock Purchase Contracts
but fails to make such delivery as required by Section 6.2  of the Stock Purchase Contract Agreement,
such Holder shall be deemed to have elected to pay for the Depositary Shares to
be issued under such Stock Purchase Contracts from the Proceeds of the
Remarketing of the related Pledged Trust Preferred Securities.


 


In the event of a Successful
Remarketing, the Collateral Agent shall, upon written instruction of the
Company, instruct the Securities Intermediary to Transfer the related Pledged
Trust Preferred Securities to the Remarketing Agent, upon confirmation of
deposit by the Remarketing Agent of the Proceeds of such Successful Remarketing
(less, to the extent permitted by the Remarketing Agreement, the Remarketing
Fee) in the Collateral Account. On the Stock Purchase Date, the Collateral
Agent shall, in consultation with the Stock Purchase Contract Agent, instruct
the Securities Intermediary to remit a portion of the Proceeds from such
Successful Remarketing equal to the aggregate liquidation amount of such
Pledged Trust Preferred Securities to satisfy in full such Holder’s obligations
to pay the Purchase Price to purchase the Depositary Shares under the related
Stock Purchase Contracts and to remit the balance of the Proceeds from the
Successful Remarketing, if any, to the Stock Purchase Contract Agent for
distribution to such Holder.


 


In the event of a Failed
Remarketing, the Collateral Agent, for the benefit of the Company, will, at the
written instruction of the Company, deliver or dispose of the Pledged Trust
Preferred Securities in accordance with the Company’s written instructions to
satisfy in full, from any such disposition or retention, such Holders’
obligations to pay the Purchase Price for the Depositary Shares to be issued
under the Stock Purchase Contracts underlying such Normal MCAPS. Thereafter,
the Collateral Agent shall promptly remit the Proceeds in excess of the
aggregate Purchase Price for the Depositary Shares to be issued under such
Stock Purchase Contracts to the Stock Purchase Contract Agent for payment to
the Holders of the Normal MCAPS to which such Trust Preferred Securities
relate.


 


(b)    A
Holder of a Treasury MCAPS shall be deemed to have elected to pay for the
Depositary Shares to be issued under such Stock Purchase Contracts from the
Proceeds of the related Pledged Treasury Securities. Without receiving any
instruction from any Holder, the Collateral Agent shall instruct the Securities
Intermediary to remit the Proceeds of the related Pledged Treasury Securities
to the Company in settlement of such Stock Purchase Contracts on the Stock
Purchase Date. In the event the


 


17

















 


sum of the Proceeds from the related Pledged Treasury Securities
exceeds the aggregate Purchase Price of the Stock Purchase Contracts being
settled thereby, the Collateral Agent shall instruct the Securities
Intermediary to transfer such excess, when received, to the Stock Purchase Contract
Agent for distribution to Holders of the Treasury MCAPS to which such
Qualifying Treasury Securities relate.


 


(c)    On or
prior to 5:00 p.m. (New York City time) on the second Business Day immediately
preceding any beginning of a Remarketing Period, but no earlier than the
Payment Date immediately preceding such date, Holders of Separate Trust
Preferred Securities may elect to have their Separate Trust Preferred
Securities remarketed under the Remarketing Agreement, by delivering their
Separate Trust Preferred Securities along with a notice of such election,
substantially in the form of Exhibit F hereto, to the Collateral Agent. Any
such notice and delivery may not be conditioned upon the level at which the
Reset Rate is established in the Remarketing or any other condition. The
Collateral Agent shall hold Separate Trust Preferred Securities in an account
separate from the Collateral Account in which the Pledged Securities shall be
held. Holders of Separate Trust Preferred Securities electing to have their
Separate Trust Preferred Securities remarketed will also have the right to
withdraw that election by written notice to the Collateral Agent, substantially
in the form of Exhibit G hereto, on or prior to 5:00 p.m. (New York City time)
on the second Business Day immediately preceding the beginning of any
Remarketing Period, upon which notice the Collateral Agent shall return such
Separate Trust Preferred Securities to such Holder. After such time, such
election shall become an irrevocable election to have such Separate Trust
Preferred Securities remarketed in such Remarketing.


 


Promptly after 11:00 a.m.
(New York City time) on the Business Day immediately preceding the beginning of
any Remarketing Period, the Collateral Agent shall notify the Remarketing Agent
of the aggregate liquidation amount of the Separate Trust Preferred Securities
to be remarketed and deliver to the Remarketing Agent for remarketing all
Separate Trust Preferred Securities delivered to the Collateral Agent pursuant
to this Section 5.7(c) and not validly withdrawn prior to such date. In the
event of a Successful Remarketing, after deducting the Remarketing Fee, the
Remarketing Agent will remit to the Collateral Agent the remaining portion of
the proceeds of such Remarketing for payment to the Holders of the remarketed
Separate Trust Preferred Securities, in accordance with their respective
interests. In the event of a Failed Remarketing, the Remarketing Agent will
promptly return such Separate Trust Preferred Securities to the Collateral
Agent for distribution to the appropriate Holders.


 


18

















 


ARTICLE VI



PLEDGED TRUST PREFERRED SECURITIES


 


Section 6.1.            Voting Rights.


 


The Stock Purchase Contract
Agent and Holder may exercise, or refrain from exercising, any and all voting
and other consensual rights pertaining to the Pledged Trust Preferred
Securities or any part thereof for any purpose not inconsistent with the terms
of this Agreement and in accordance with the terms of the Stock Purchase Contract
Agreement.


 


Upon receipt of any notices
and other communications in respect of any Pledged Trust Preferred Securities,
including notice of any meeting at which holders of the Trust Preferred
Securities are entitled to vote or solicitation of consents, waivers or proxies
of holders of the Trust Preferred Securities, the Collateral Agent shall use
reasonable efforts to send promptly to the Stock Purchase Contract Agent such
notice or communication, and as soon as reasonably practicable after receipt of
a written request therefore from the Stock Purchase Contract Agent, execute and
deliver to the Stock Purchase Contract Agent such proxies and other instruments
in respect of such Pledged Trust Preferred Securities (in form and substance
satisfactory to the Collateral Agent) as are prepared by the Company and
delivered to the Collateral Agent with respect to the Pledged Trust Preferred
Securities.


 


19

















 


ARTICLE VII



RIGHTS AND REMEDIES


 


Section 7.1.            Rights and Remedies
of the Collateral Agent.


 


(a)    In
addition to the rights and remedies specified in Section 5.7 hereof or
otherwise available at law or in equity, after an event of default (as
specified in Section 7.1(b) below) hereunder, the Collateral Agent shall have
all of the rights and remedies with respect to the Collateral of a secured
party under the UCC (whether or not the UCC is in effect in the jurisdiction
where the rights and remedies are asserted) and the Trades Regulations and such
additional rights and remedies to which a secured party is entitled under the
laws in effect in any jurisdiction where any rights and remedies hereunder may
be asserted. Without limiting the generality of the foregoing, such remedies
may include, to the extent permitted by applicable law, (1) retention of the
Pledged Trust Preferred Securities or the Pledged Treasury Securities in full
satisfaction of the Holders’ obligations under the Stock Purchase Contracts and
the Stock Purchase Contract Agreement or (2) sale of the Pledged Trust
Preferred Securities or the Pledged Treasury Securities in one or more public
or private sales.


 


(b)    Without
limiting any rights or powers otherwise granted by this Agreement to the
Collateral Agent, in the event the Company is unable to make payments from
amounts transferred or transferable to the Company on account of the principal
payments of any Pledged Treasury Securities as provided in Article III hereof,
in satisfaction of the Obligations of the Holder of the Treasury MCAPS of which
such applicable Pledged Treasury Securities are a part under the related Stock
Purchase Contracts, the inability to make such payments shall constitute an
event of default hereunder and the Collateral Agent shall have and may
exercise, with reference to such Pledged Treasury Securities any and all of the
rights and remedies available to a secured party under the UCC and the Trades
Regulations after default by a debtor, and as otherwise granted herein or under
any other law.


 


(c)    Without
limiting any rights or powers otherwise granted by this Agreement to the
Collateral Agent, the Collateral Agent is hereby irrevocably authorized to
receive and collect all payments of (i) the liquidation amount of the Pledged
Trust Preferred Securities and (ii) the principal amount of the Pledged
Treasury Securities, subject, in each case, to the provisions of Article III
hereof, and as otherwise granted herein.


 


(d)    The
Stock Purchase Contract Agent and each Holder of MCAPS agrees that, from time
to time, upon the written request of the Collateral Agent or the Stock Purchase
Contract Agent, such Holder shall execute and deliver such further documents
and do such other acts and things as the Company may reasonably request in
order to maintain the Pledge, and the perfection and priority thereof, and to
confirm the rights of the Collateral Agent hereunder. The Stock Purchase
Contract Agent shall have no liability to any Holder for executing any
documents or taking any such acts requested by the Collateral Agent hereunder,
except for liability for its own negligent acts, its own negligent failure to
act or its own willful misconduct.


 


Section 7.2.            Remarketing.


 


The Collateral Agent shall,
promptly after 11:00 a.m., New York City time, on the Business Day immediately
preceding the beginning of any Remarketing Period, notify the Remarketing Agent
of the aggregate liquidation amount of the Pledged Trust Preferred Securities
that are to be remarketed and without any instruction from any Holder of Normal
MCAPS, present the related Pledged Trust Preferred Securities to the
Remarketing Agent for Remarketing. In the event of a Failed Remarketing, the
Trust


 


20

















 


Preferred Securities
presented to the Remarketing Agent pursuant to this Section 7.2 for Remarketing
shall be redeposited into the Collateral Account.


 


Section 7.3.            Successful
Remarketing.


 


In the event of a Successful
Remarketing, the Collateral Agent shall, at the direction of the Company,
instruct the Securities Intermediary to (i) Transfer the Pledged Trust
Preferred Securities to the Remarketing Agent upon confirmation of deposit by
the Remarketing Agent of the Proceeds of such Successful Remarketing (after
deducting any Remarketing Fee in accordance with the Remarketing Agreement) in
the Collateral Account, (ii) apply an amount equal to the aggregate Purchase
Price for the Depositary Shares to be issued under the related Stock Purchase
Contracts in full satisfaction of such Holders’ obligations to pay the Purchase
Price under the related Stock Purchase Contracts, and (iii) promptly remit the
remaining portion of such Proceeds to the Stock Purchase Contract Agent for
payment to the Holders of Normal MCAPS, in accordance with their respective
interests and the Stock Purchase Contract Agreement. With respect to Separate
Trust Preferred Securities, any Proceeds of such Remarketing (after deducting
any Remarketing Fee in accordance with the Remarketing Agreement) attributable
to the Separate Trust Preferred Securities will be remitted to the Collateral
Agent for payment to the holders of Separate Trust Preferred Securities. In the
event of a Failed Remarketing, the Pledged Trust Preferred Securities shall
remain credited to the Collateral Account and Section 5.7 shall apply.


 


Section 7.4.            Substitutions.


 


Whenever a Holder has the
right to substitute Qualifying Treasury Securities, Trust Preferred Securities
or Security Entitlements for any of them, as the case may be, for financial
assets held in the Collateral Account, such substitution shall not constitute a
novation of the security interest created hereby.


 


21
















 


ARTICLE VIII




REPRESENTATIONS AND WARRANTIES; COVENANTS


 


Section 8.1.            Representations and Warranties.


 


Each Holder from time to
time, acting through the Stock Purchase Contract Agent as attorney-in-fact (it
being understood that the Stock Purchase Contract Agent shall not be liable for
any representation or warranty made by or on behalf of a Holder), hereby
represents and warrants to the Collateral Agent (with respect to such Holder’s
interest in the Collateral), which representations and warranties shall be
deemed repeated on each day a Holder Transfers Collateral, that:


 


(a)    such
Holder has the power to grant a security interest in and lien on the
Collateral;


 


(b)    such
Holder is the sole beneficial owner of the Collateral and, in the case of
Collateral delivered in physical form, is the sole holder of such Collateral
and is the sole beneficial owner of, or has the right to Transfer, the
Collateral it Transfers to the Collateral Agent for credit to the Collateral
Account, free and clear of any security interest, lien, encumbrance, call,
liability to pay money or other restriction other than the security interest
and lien granted under Article II hereof;


 


(c)    upon
the Transfer of the Collateral to the Collateral Agent for credit to the
Collateral Account, the Collateral Agent, for the benefit of the Company, will
have a valid and perfected first priority security interest therein (assuming
that any central clearing operation or any securities intermediary or other
entity not within the control of the Holder involved in the Transfer of the
Collateral, including the Collateral Agent and the Securities Intermediary,
gives the notices and takes the action required of it hereunder and under
applicable law for perfection of that interest and assuming the establishment
and exercise of control pursuant to Article IV hereof); and


 


(d)    the
execution and performance by the Holder of its obligations under this Agreement
will not result in the creation of any security interest, lien or other
encumbrance on the Collateral other than the security interest and lien granted
under Article II hereof or violate any provision of any existing law or
regulation applicable to it or of any mortgage, charge, pledge, indenture,
contract or undertaking to which it is a party or which is binding on it or any
of its assets.


 


Section 8.2.            Covenants.


 


The Holders from time to
time, acting through the Stock Purchase Contract Agent as their
attorney-in-fact (it being understood that the Stock Purchase Contract Agent
shall not be liable for any covenant made by or on behalf of a Holder), hereby
covenant to the Collateral Agent that for so long as the Collateral remains
subject to the Pledge:


 


(a)    neither
the Stock Purchase Contract Agent nor such Holders will create or purport to
create or allow to subsist any mortgage, charge, lien, pledge or any other
security interest whatsoever over the Collateral or any part of it other than
pursuant to this Agreement; and


 


(b)    neither
the Stock Purchase Contract Agent nor such Holders will sell or otherwise
dispose (or attempt to dispose) of the Collateral or any part of it except for
the beneficial interest therein, subject to the Pledge hereunder, transferred
in connection with the Transfer of the MCAPS.


 


22

















 


ARTICLE IX


THE COLLATERAL AGENT AND THE SECURITIES INTERMEDIARY


 


It is hereby agreed as
follows:


 


Section 9.1.            Appointment, Powers
and Immunities.


 


The Collateral Agent or the
Securities Intermediary shall act as agent for the Company hereunder with such
powers as are specifically vested in the Collateral Agent or the Securities
Intermediary, as the case may be, by the terms of this Agreement. The
Collateral Agent and Securities Intermediary shall:


 


(a)    have no
duties or responsibilities except those expressly set forth in this Agreement
and no implied covenants or obligations shall be inferred from this Agreement
against the Collateral Agent and the Securities Intermediary, nor shall the
Collateral Agent and the Securities Intermediary be bound by the provisions of
any agreement by any party hereto beyond the specific terms hereof;


 


(b)    not be
responsible for any recitals contained in this Agreement, or in any certificate
or other document referred to or provided for in, or received by it under, this
Agreement, the MCAPS or the Stock Purchase Contract Agreement, or for the
value, validity, effectiveness, genuineness, enforceability or sufficiency of
this Agreement (other than as against the Collateral Agent or the Securities
Intermediary, as the case may be), the MCAPS, any Collateral or the Stock
Purchase Contract Agreement or any other document referred to or provided for
herein or therein or for any failure by the Company or any other Person (except
the Collateral Agent or the Securities Intermediary, as the case may be) to
perform any of its obligations hereunder or hereunder or for the validity,
perfection, enforceability, priority or, except as expressly required hereby,
maintenance of any security interest created hereunder;


 


(c)    not be
required to initiate or conduct any litigation or collection proceedings
hereunder (except pursuant to directions furnished under Section 9.2 hereof,
subject to Section 9.8 hereof);


 


(d)    not be
responsible for any action taken or omitted to be taken by it hereunder or
under any other document or instrument referred to or provided for herein or in
connection herewith or therewith, except for its own gross negligence or
willful misconduct; and


 


(e)    not be
required to advise any party as to selling or retaining, or taking or
refraining from taking any action with respect to, any securities or other
property deposited hereunder.


 


Subject to the foregoing,
during the term of this Agreement, the Collateral Agent and the Securities
Intermediary shall take all reasonable action in connection with the
safekeeping and preservation of the Collateral hereunder as determined by
industry standards.


 


No provision of this
Agreement shall require the Collateral Agent or the Securities Intermediary to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder. In no event shall the Collateral
Agent or the Securities Intermediary be liable for any amount in excess of the
Value of the Collateral.


 


Section 9.2.            Instructions of the
Company.


 


The Company shall have the
right, by one or more written instruments executed and delivered to the
Collateral Agent, to direct the time, method and place of conducting any
proceeding for the realization of any right or remedy in connection with a
Failed Remarketing, or of exercising any power conferred on the Collateral
Agent, or to direct the taking or refraining from taking of any action
authorized by this


 


23

















 


Agreement; provided,
however, that (i) such direction shall not conflict with the provisions of any
law or of this Agreement or involve the Collateral Agent in personal liability
and (ii) the Collateral Agent shall be indemnified to its satisfaction as
provided herein. Nothing contained in this Section 9.2 shall impair the right
of the Collateral Agent in its discretion to take any action or omit to take
any action which it deems proper and which is not inconsistent with such
direction. None of the Collateral Agent or the Securities Intermediary has any
obligation or responsibility to file UCC financing statements.


 


Section 9.3.            Reliance by
Collateral Agent and Securities Intermediary.


 


Each of the Collateral Agent
and the Securities Intermediary shall be entitled, in the absence of bad faith,
to rely conclusively upon any certification, order, judgment, opinion, notice
or other written communication (including, without limitation, any thereof by
e-mail or similar electronic means, telecopy, telex or facsimile) believed by
it to be genuine and correct and to have been signed or sent by or on behalf of
the proper Person or Persons (without being required to determine the
correctness of any fact stated therein) and consult with and conclusively rely
upon advice, opinions and statements of legal counsel and other experts
selected by the Collateral Agent or the Securities Intermediary, as the case
may be. As to any matters not expressly provided for by this Agreement, the
Collateral Agent and the Securities Intermediary shall in all cases be fully
protected in acting, or in refraining from acting, hereunder in accordance with
instructions given by the Company in accordance with this Agreement. In the
event any instructions are given (other than in writing at the time of the
execution of the Agreement), whether in writing, by telecopier or otherwise,
the Collateral Agent and the Securities Intermediary are authorized to seek
confirmation of such instructions by telephone call-back to the person or
persons designated on Schedule II hereto, and the Collateral Agent and the
Securities Intermediary may rely upon the confirmations of anyone purporting to
be the person or persons so designated. The persons and telephone numbers for
call-backs may be changed only in writing actually received and acknowledged by
the Collateral Agent and the Securities Intermediary.


 


It is understood that the
Collateral Agent and the Securities Intermediary in any funds transfer may rely
solely upon any account numbers or similar identifying number provided by the
Company to identify (i) the beneficiary, (ii) the beneficiary’s bank, or (iii)
an intermediary bank. The Collateral Agent and the Securities Intermediary may
apply any of the deposited funds for any payment order it executes using any
such identifying number, even where its use may result in a person other than
the beneficiary being paid, or the transfer of funds to a bank other than the
beneficiary’s bank, or an intermediary bank, designated by the Company.


 


Section 9.4.            Certain Rights.


 


(a)    Whenever in the administration of the
provisions of this Agreement the Collateral Agent or the Securities
Intermediary shall deem it necessary or desirable that a matter be proved or
established prior to taking or suffering any action to be taken hereunder, such
matter (unless other evidence in respect thereof be herein specifically
prescribed) may, in the absence of gross negligence or bad faith on the part of
the Collateral Agent or the Securities Intermediary, be deemed to be
conclusively proved and established by a certificate signed by one of the
Company’s officers, and delivered to the Collateral Agent or the Securities
Intermediary and such certificate, in the absence of gross negligence or bad
faith on the part of the Collateral Agent or the Securities Intermediary, shall
be full warrant to the Collateral Agent or the Securities Intermediary for any
action taken, suffered or omitted by it under the provisions of this Agreement
upon the faith thereof.


 


(b)    The
Collateral Agent or the Securities Intermediary shall not be bound to make any
investigation into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, consent, entitlement
order, approval or other paper or document.


 


24

















 


Section 9.5.            Merger, Conversion,
Consolidation or Succession to Business.


 


Any corporation into which
the Collateral Agent or the Securities Intermediary may be merged or converted
or with which it may be consolidated, or any corporation resulting from any
merger, conversion or consolidation to which the Collateral Agent or the
Securities Intermediary shall be a party, or any corporation succeeding to all
or substantially all of the corporate trust business of the Collateral Agent or
the Securities Intermediary shall be the successor of the Collateral Agent or
the Securities Intermediary hereunder without the execution or filing of any
paper with any party hereto or any further act on the part of any of the
parties hereto except where an instrument of transfer or assignment is required
by law to effect such succession, anything herein to the contrary
notwithstanding.


 


Section 9.6.            Rights in Other
Capacities.


 


The Collateral Agent and the
Securities Intermediary and their affiliates may (without having to account
therefore to the Company) accept deposits from, lend money to, make their
investments in and generally engage in any kind of banking, trust or other
business with the Stock Purchase Contract Agent, any other Person interested
herein and any Holder of MCAPS (and any of their respective subsidiaries or
affiliates) as if it were not acting as the Collateral Agent or the Securities
Intermediary, as the case may be, and the Collateral Agent, the Securities
Intermediary and their affiliates may accept fees and other consideration from
the Stock Purchase Contract Agent and any Holder of MCAPS without having to
account for the same to the Company; provided that each of the Securities
Intermediary and the Collateral Agent covenants and agrees with the Company
that it shall not accept, receive or permit there to be created in favor of
itself and shall take no affirmative action to permit there to be created in
favor of any other Person, any security interest, lien or other encumbrance of
any kind in or upon the Collateral other than the lien created by the Pledge.


 


Section 9.7.            Non-reliance on
Collateral Agent and Securities Intermediary.


 


None of the Securities
Intermediary or the Collateral Agent shall be required to keep itself informed
as to the performance or observance by the Stock Purchase Contract Agent or any
Holder of MCAPS of this Agreement, the Stock Purchase Contract Agreement, the
MCAPS or any other document referred to or provided for herein or therein or to
inspect the properties or books of the Stock Purchase Contract Agent or any
Holder of MCAPS. None of the Collateral Agent or the Securities Intermediary
shall have any duty or responsibility to provide the Company with any credit or
other information concerning the affairs, financial condition or business of
the Stock Purchase Contract Agent or any Holder of MCAPS (or any of their
respective affiliates) that may come into the possession of the Collateral
Agent or the Securities Intermediary or any of their respective affiliates.


 


Section 9.8.            Compensation and
Indemnity.


 


The Company agrees to:


 


(a)    pay the
Collateral Agent and the Securities Intermediary from time to time such
compensation as shall be agreed in writing between the Company and the
Collateral Agent or the Securities Intermediary, as the case may be, for all
services rendered by them hereunder;


 


(b)   
indemnify and hold harmless the Collateral Agent the Securities
Intermediary and each of their respective directors, officers, agents and
employees (collectively, the “Indemnitees”), from and against any and all
claims, liabilities, losses, damages, fines, penalties and expenses (including
reasonable fees and expenses of counsel) and taxes (other than those based
upon, determined by or measured by the income of the Collateral Agent and
Securities Intermediary) (collectively, “Losses” and individually, a


 


25

















 


“Loss”) that may be imposed on, incurred by, or asserted against, the
Indemnitees or any of them for following any instructions or other directions
upon which either the Collateral Agent or the Securities Intermediary is
entitled to rely pursuant to the terms of this Agreement, provided that the
Collateral Agent or the Securities Intermediary has not acted with gross negligence
or engaged in willful misconduct or bad faith with respect to the specific Loss
against which indemnifications sought; and


 


(c)    in
addition to and not in limitation of paragraph (b) immediately above, indemnify
and hold the Indemnitees and each of them harmless from and against any and all
Losses that may be imposed on, incurred by or asserted against, the Indemnitees
or any of them in connection with or arising out of the Collateral Agent’s or
the Securities Intermediary’s acceptance or performance of its powers and
duties under this Agreement, provided that the Collateral Agent or the
Securities Intermediary has not acted with gross negligence or engaged in
willful misconduct or bad faith with respect to the specific Loss against which
indemnification is sought.


 


The provisions of this
Section and Section 11.7 shall survive the resignation or removal of the
Collateral Agent or Securities Intermediary and the termination of this
Agreement.


 


Section 9.9.            Failure to Act.


 


In the event of any
ambiguity in the provisions of this Agreement or any dispute between or
conflicting claims by or among the parties hereto or any other Person with
respect to any funds or property deposited hereunder, then at its sole option,
each of the Collateral Agent and the Securities Intermediary shall be entitled,
after prompt notice to the Company and the Stock Purchase Contract Agent, to
refuse to comply with any and all claims, demands or instructions with respect
to such property or funds so long as such dispute or conflict shall continue,
and the Collateral Agent and the Securities Intermediary shall not be or become
liable in any way to any of the parties hereto for its failure or refusal to
comply with such conflicting claims, demands or instructions. The Collateral
Agent and the Securities Intermediary shall be entitled to refuse to act until
either:


 


(a)    such
conflicting or adverse claims or demands shall have been finally determined by
a court of competent jurisdiction or settled by agreement between the
conflicting parties as evidenced in a writing satisfactory to the Collateral
Agent or the Securities Intermediary; or


 


(b)    the
Collateral Agent or the Securities Intermediary shall have received security or
an indemnity satisfactory to it sufficient to save it harmless from and against
any and all loss, liability or reasonable out-of-pocket expense which it may
incur by reason of its acting.


 


The Collateral Agent and the
Securities Intermediary may in addition elect to commence an interpleaded
action or seek other judicial relief or orders as the Collateral Agent or the
Securities Intermediary may deem necessary. Notwithstanding anything contained
herein to the contrary, none of the Collateral Agent or the Securities
Intermediary shall be required to take any action that is in its opinion
contrary to law or to the terms of this Agreement, or which would in its
opinion subject it or any of its officers, employees or directors to liability.


 


Section 9.10.          Resignation of
Collateral Agent and Securities Intermediary.


 


Subject to the appointment
and acceptance of a successor Collateral Agent or Securities Intermediary as
provided below:


 


26

















 


(i)    the Collateral Agent and the Securities
Intermediary may resign at any time by giving notice thereof to the Company and
the Stock Purchase Contract Agent as attorney-in-fact for the Holders of MCAPS;


 


(ii)    the Collateral Agent and the Securities
Intermediary may be removed at any time by the Company; and


 


(iii)    if the Collateral Agent or the Securities
Intermediary fails to perform any of its material obligations hereunder in any
material respect for a period of not less than 20 days after receiving written
notice of such failure by the Stock Purchase Contract Agent and such failure
shall be continuing, the Collateral Agent and the Securities Intermediary may
be removed by the Stock Purchase Contract Agent, acting at the direction of the
Holders of MCAPS.


 


provided that any Person at
any time acting as Collateral Agent or Securities Intermediary may not resign
or be removed in any one of those capacities without the consent of each party
to this Collateral Agreement unless it resigns or is removed in all such
capacities in which it is then acting.


 


The Stock
Purchase Contract Agent shall promptly notify the Company of any removal of the
Collateral Agent or the Securities Intermediary pursuant to clause (iii) of
this Section 9.10. Upon any such resignation or removal, the Company shall have
the right to appoint a successor Collateral Agent or Securities Intermediary,
as the case maybe, which shall not be an Affiliate of the Stock Purchase
Contract Agent. If no successor Collateral Agent or Securities Intermediary
shall have been so appointed and shall have accepted such appointment within 30
days after the retiring Collateral Agent’s or Securities Intermediary’s giving
of notice of resignation or the Company’s or the Stock Purchase Contract Agent’s
giving notice of such removal, then the retiring or removed Collateral Agent or
Securities Intermediary may petition any court of competent jurisdiction, at
the expense of the Company, for the appointment of a successor Collateral Agent
or Securities Intermediary. The Collateral Agent and the Securities Intermediary
shall each be a bank or a national banking association which has an office (or
an agency office) in New York City with a combined capital and surplus of at
least $50,000,000. Upon the acceptance of any appointment as Collateral Agent
or Securities Intermediary hereunder by a successor Collateral Agent or
Securities Intermediary, as the case may be, such successor Collateral Agent or
Securities Intermediary, as the case may be, shall thereupon succeed to and
become vested with all the rights, powers, privileges and duties of the
retiring Collateral Agent or Securities Intermediary, as the case may be, and
the retiring Collateral Agent or Securities Intermediary, as the case may be,
shall take all appropriate action, subject to payment of any amounts then due and
payable to it hereunder, to transfer any money and property held by it
hereunder (including the Collateral) to such successor. The retiring Collateral
Agent or Securities Intermediary shall, upon such succession, be discharged
from its duties and obligations as Collateral Agent or Securities Intermediary
hereunder. After any retiring Collateral Agent’s or Securities Intermediary’s
resignation hereunder as Collateral Agent or Securities Intermediary, the
provisions of this Article IX shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was acting
as the Collateral Agent or Securities Intermediary. Any resignation or removal
of the Collateral Agent or Securities Intermediary hereunder, at a time when
such Person is acting as the Collateral Agent or Securities Intermediary, shall
be deemed for all purposes of this Agreement as the simultaneous resignation or
removal of the Collateral Agent or Securities Intermediary, as the case may be.


 


Section 9.11.          Right to Appoint
Agent or Advisor.


 


The Collateral Agent shall
have the right to appoint agents or advisors in connection with any of its
duties hereunder, and the Collateral Agent shall not be liable for any action
taken or omitted by, or in reliance upon the advice of, such agents or advisors
selected in good faith. The appointment of agents


 


27

















 


pursuant to this Section
9.11 shall be subject to prior written consent of the Company, which consent
shall not be unreasonably withheld.


 


Section 9.12.          Survival.


 


The provisions of this
Article IX shall survive termination of this Agreement and the resignation or
removal of the Collateral Agent or the Securities Intermediary.


 


Section 9.13.          Exculpation.


 


Anything contained in this
Agreement to the contrary notwithstanding, in no event shall the Collateral
Agent or the Securities Intermediary or their officers, directors, employees or
agents be liable under this Agreement to any third party for indirect, special,
punitive, or consequential loss or damage of any kind whatsoever, including,
but not limited to, lost profits, whether or not the likelihood of such loss or
damage was known to the Collateral Agent or the Securities Intermediary, or any
of them incurred without any act or deed that is found to be attributable to
gross negligence or willful misconduct on the part of the Collateral Agent or
the Securities Intermediary.


 


28

















 


ARTICLE X



AMENDMENT


 


Section 10.1.          Amendment Without
Consent of Holders.


 


Without the consent of any
Holders, the Company, when duly authorized, the Collateral Agent, the
Securities Intermediary and the Stock Purchase Contract Agent, at any time and
from time to time, may amend this Agreement, in form satisfactory to the
Company, the Collateral Agent, the Securities Intermediary and the Stock
Purchase Contract Agent, to:


 


(a)   
evidence the succession of another Person to the Company and the
assumption by any such successor of the covenants of the Company;


 


(b)   
evidence and provide for the acceptance of appointment hereunder by a
successor Collateral Agent, Securities Intermediary or Stock Purchase Contract
Agent;


 


(c)    add to
the covenants of the Company for the benefit of the Holders, or surrender any
right or power herein conferred upon the Company, provided that such covenants
or such surrender do not adversely affect the validity, perfection or priority
of the Pledge created hereunder;


 


(d)    cure
any ambiguity (or formal defect), correct or supplement any provisions herein
which may be inconsistent with another such provisions herein;


 


(e)    conform the
terms of this Agreement to the terms set forth in the Prospectus dated May 8,
2007 of the Company and the Trust relating to the MCAPS; or


 


(f)    make
any other provisions with respect to such matters or questions arising under
this Agreement, provided that such action shall not adversely affect the
interests of the Holders in any material respect.


 


Section 10.2.          Amendment with
Consent of Holders.


 


With the consent of the
Holders of not less than a majority of the Stock Purchase Contracts at the time
outstanding, including without limitation the consent of the Holders obtained
in connection with a tender or an exchange offer, by Act of such Holders
delivered to the Company, the Stock Purchase Contract Agent, the Securities
Intermediary and the Collateral Agent, as the case may be, the Company, when
duly authorized by a Board Resolution, the Stock Purchase Contract Agent, the
Securities Intermediary and the Collateral Agent may amend this Agreement for
the purpose of modifying in any manner the provisions of this Agreement or the
rights of the Holders in respect of the MCAPS; provided, however, that no such
supplemental agreement shall, without the unanimous consent of the Holders of
each Outstanding MCAPS adversely affected thereby in any material respect:


 


(a)    change
the amount or type of Collateral underlying a MCAPS (except for the rights of
holders of Normal MCAPS to substitute the Qualifying Treasury Securities for
the Pledged Trust Preferred Securities or the rights of Holders of Treasury
MCAPS to substitute Trust Preferred Securities, as applicable, for the Pledged
Treasury Securities), impair the right of the Holder of any MCAPS to receive
distributions on the underlying Collateral or otherwise adversely affect the
Holder’s rights in or to such Collateral; or


 


29

















 


(b)   
otherwise effect any action that would require the consent of the Holder
of each Outstanding MCAPS affected thereby pursuant to the Stock Purchase
Contract Agreement if such action were effected by a modification or amendment
of the provisions of the Stock Purchase Contract Agreement; or


 


(c)    reduce
the percentage of Stock Purchase Contracts the consent of whose Holders is
required for the modification or amendment of the provisions of this Agreement;


 


(d)   
provided that if any amendment or proposal referred to above would
adversely affect only the Normal MCAPS or only the Treasury MCAPS, then only
the affected class of Holders as of the record date for the Holders entitled to
vote thereon will be entitled to vote on such amendment or proposal, and such
amendment or proposal shall not be effective except with the consent of Holders
of not less than a majority of such class; provided further that the unanimous
consent of the Holders of each outstanding Stock Purchase Contract of such
class affected thereby shall be required to approve any amendment or proposal
specified in clauses (a) through (c) above.


 


It shall not be necessary
for any Act of Holders under this Section to approve the particular form of any
proposed amendment, but it shall be sufficient if such Act shall approve the
substance thereof.


 


Section 10.3.          Execution of
Amendments.


 


In executing any amendment
permitted by this Article, the Collateral Agent, the Securities Intermediary
and the Stock Purchase Contract Agent shall be entitled to receive and (subject
to Section 7.1 of the Stock Purchase Contract Agreement with respect to
the Stock Purchase Contract Agent) shall be fully authorized and protected in
relying upon, an Opinion of Counsel and an officers’ certificate stating that
the execution of such amendment is authorized or permitted by this Agreement
and that all conditions precedent, if any, to the execution and delivery of
such amendment have been satisfied. The Collateral Agent, Securities
Intermediary and Stock Purchase Contract Agent may, but shall not be obligated
to, enter into any such amendment which affects their own respective rights,
duties or immunities under this Agreement or otherwise.


 


Section 10.4.          Effect of Amendments.


 


Upon the execution of any
amendment under this Article, this Agreement shall be modified in accordance
therewith, and such amendment shall form a part of this Agreement for all
purposes; and every Holder of Certificates theretofore or thereafter
authenticated, executed on behalf of the Holders and delivered under the Stock
Purchase Contract Agreement shall be bound thereby.


 


Section 10.5.          Reference of
Amendments.


 


Certificates authenticated,
executed on behalf of the Holders and delivered after the execution of any
amendment pursuant to this Section may, and shall if required by the Collateral
Agent or the Stock Purchase Contract Agent, bear a notation in form approved by
the Stock Purchase Contract Agent and the Collateral Agent as to any matter
provided for in such amendment. If the Company shall so determine, new
Certificates so modified as to conform, in the opinion of the Collateral Agent,
the Stock Purchase Contract Agent and the Company, to any such amendment may be
prepared and executed by the Company and authenticated, executed on behalf of
the Holders and delivered by the Stock Purchase Contract Agent in accordance
with the Stock Purchase Contract Agreement in exchange for Certificates
representing Outstanding MCAPS.


 


30

















 


ARTICLE XI



MISCELLANEOUS


 


Section 11.1.          No Waiver.


 


No failure on the part of
the Company, the Collateral Agent, the Securities Intermediary or any of their
respective agents to exercise, and no course of dealing with respect to, and no
delay in exercising, any right, power or remedy hereunder shall operates a
waiver thereof; nor shall any single or partial exercise by the Company, the
Collateral Agent, the Securities Intermediary or any of their respective agents
of any right, power or remedy hereunder preclude any other or further exercise
thereof or the exercise of any other right, power or remedy. The remedies
herein are cumulative and are not exclusive of any remedies provided by law.


 


Section 11.2.          Governing Law;
Submission to Jurisdiction.


 


This agreement shall be
governed by, and construed in accordance with, the laws of the State of New
York. The Company, the Collateral Agent, the Securities Intermediary and the
Holders from time to time of the Trust Preferred Securities, acting through the
Stock Purchase Contract Agent as their attorney-in-fact, hereby submit to the
nonexclusive jurisdiction of the United States District Court for the Southern
District of New York and of any New York state court sitting in New York City
for the purposes of all legal proceedings arising out of or relating to this
Agreement or the transactions contemplated hereby. The Company, the Collateral
Agent, the Securities Intermediary and the Holders from time to time of the
Trust Preferred Securities, acting through the Stock Purchase Contract Agent as
their attorney-in-fact, irrevocably waive, to the fullest extent permitted by
applicable law, any objection that they may now or hereafter have to the laying
of the venue of any such proceeding brought in such a court and any claim that
any such proceeding brought in such a court has been brought in an inconvenient
forum.


 


Section 11.3.          Notices.


 


All notices, requests,
consents and other communications provided for herein (including, without
limitation, any modifications of, or waivers or consents under, this Agreement)
shall be give nor made in writing (including, without limitation, by telecopy)
delivered to the intended recipient at the “Address For Notices” specified
below its name on the signature pages hereof or, as to any party, at such other
address as shall be designated by such party in a notice to the other parties.
Except as otherwise provided in this Agreement, all such communications shall
be deemed to have been duly given when transmitted by telecopy or personally
delivered or, in the case of a mailed notice, upon receipt, in each case given
or addressed as aforesaid.


 


Section 11.4.          Successors and
Assigns.


 


This Agreement shall be
binding upon and inure to the benefit of the respective successors and assigns
of the Company, the Collateral Agent, the Securities Intermediary and the Stock
Purchase Contract Agent, and the Holders from time to time of the MCAPS, by
their acceptance of the same, shall be deemed to have agreed to be bound by the
provisions hereof and to have ratified the agreements of, and the grant of the
Pledge hereunder by, the Stock Purchase Contract Agent.


 


31

















 


Section 11.5.          Counterparts.


 


This Agreement may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same instrument, and any of the parties hereto may
execute this Agreement by signing any such counterpart.


 


Section 11.6.          Severability.


 


If any provision hereof is
invalid and unenforceable in any jurisdiction, then, to the fullest extent
permitted by law, (i) the other provisions hereof shall remain in full force
and effect in such jurisdiction and shall be liberally construed in order to
carry out the intentions of the parties hereto as nearly as may be possible and
(ii) the invalidity or unenforceability of any provision hereof in any
jurisdiction shall not affect the validity or enforceability of such provision
in any other jurisdiction.


 


Section 11.7.          Expenses, Etc.


 


The Company agrees to
reimburse the Collateral Agent and the Securities Intermediary for:


 


(a)    all
reasonable costs and expenses of the Collateral Agent and the Securities
Intermediary (including, without limitation, the reasonable fees and expenses
of counsel to the Collateral Agent and the Securities Intermediary), in
connection with (i) the negotiation, preparation, execution and delivery or
performance of this Agreement and (ii) any modification, supplement or waiver
of any of the terms of this Agreement;


 


(b)    all
reasonable costs and expenses of the Collateral Agent and the Securities
Intermediary (including, without limitation, reasonable fees and expenses of
counsel) in connection with (i) any enforcement or proceedings resulting or
incurred in connection with causing any Holder of MCAPS to satisfy its
obligations under the Stock Purchase Contracts forming a part of the MCAPS and
(ii) the enforcement of this Section 11.7;


 


(c)    all
transfer, stamp, documentary or other similar taxes, assessments or charges
levied by any governmental or revenue authority in respect of this Agreement or
any other document referred to herein and all costs, expenses, taxes,
assessments and other charges incurred in connection with any filing,
registration, recording or perfection of any security interest contemplated
hereby;


 


(d)    all
reasonable fees and expenses of any agent or advisor appointed by the
Collateral Agent and consented to by the Company under Section 9.11 of this
Agreement; and


 


(e)    any
other out-of-pocket costs and expenses reasonably incurred by the Collateral
Agent and the Securities Intermediary in connection with the performance of
their duties hereunder.


 


Section 11.8.          Security Interest
Absolute.


 


All rights of the Collateral
Agent and security interests hereunder, and all obligations of the Holders from
time to time hereunder, shall be absolute and unconditional irrespective of:


 


(a)    any
lack of validity or enforceability of any provision of the Stock Purchase
Contracts or the MCAPS or any other agreement or instrument relating thereto;


 


(b)    any
change in the time, manner or place of payment of, or any other term of, or any
increase in the amount of, all or any of the obligations of Holders of the
MCAPS under the related Stock Purchase


 


32

















 


Contracts, or any other amendment or waiver of any term of, or any
consent to any departure from any requirement of, the Stock Purchase Contract
Agreement or any Stock Purchase Contract or any other agreement or instrument
relating thereto; or


 


(c)    any
other circumstance which might otherwise constitute a defense available to, or
discharge of, a borrower, a guarantor or a pledgor.


 


Section 11.9.          Notice of Termination
Event.


 


Upon the occurrence of a
Termination Event, the Company shall deliver written notice to the Stock
Purchase Contract Agent, the Collateral Agent and the Securities Intermediary.
Upon the written request of the Collateral Agent or the Securities
Intermediary, the Company shall inform such party whether or not a Termination
Event has occurred.


 


Section 11.10.        Incorporation by
Reference 


 


In connection with its
execution and performance hereunder the Stock Purchase Contract Agent is
entitled to all rights, privileges, protections, immunities, benefits and
indemnities provided to it under the Stock Purchase Contract Agreement.


 


[SIGNATURES ON THE FOLLOWING
PAGE]


 


33

















 


IN WITNESS WHEREOF, the parties hereto have caused
this Agreement to be duly executed as of the day and year first above written.


 


	
  LEHMAN
  BROTHERS HOLDINGS INC.

  	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION, as Stock

  Purchase Contract Agent and as attorney-in-fact

  of the Holders from time to
  time of the MCAPS

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  BARRETT S. DIPAOLO

  	
   

  	
  By:

  	
  /s/
  EARL DENNISON

  
	
  Name:

  	
   

  	
  Name:

  
	
  Title:

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Address
  for Notices:

  	
   

  	
  Address
  for Notices:

  
	
   

  	
   

  	
   

  
	
  Lehman
  Brothers Holdings Inc.

  745 Seventh Avenue
 New York, New York 10019
 Facsimile: (646) 834-2658
 Attention: Lee Goldblatt

  	
   

  	
  U.S.
  Bank National Association

  One Federal Street, 3rd
  Floor
 Boston, MA 02110
 Attn: Corporate Trust Services
 Fax: 617-603-6667

  
	
   

  	
   

  	
   

  
	
  THE
  BANK OF NEW YORK, as Collateral

  Agent and Securities Intermediary

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/
  MARIA TOKARZ

  	
   

  	
   

  
	
  Name:

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address
  for Notices:

  	
   

  	
   

  
	
  Attn:
  MBS Group

  101 Barclay Street, Floor 4
  West
 New York, NY 10286
 Fax: 212-815-3910

  	
   

  	
   

  



 


34

















 


EXHIBIT A


 


INSTRUCTION 

FROM STOCK PURCHASE CONTRACT AGENT

TO COLLATERAL AGENT 

(Creation of Treasury MCAPS)


 


The Bank of New York


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:        Normal MCAPS of Lehman Brothers Holdings
Inc. (the “COMPANY”)


 


The
Securities Account of The Bank of New York, as Collateral Agent, maintained by
the Securities Intermediary and designated “The Bank of New York, as Collateral
Agent of Lehman Brothers Holdings Inc., as pledgee of U.S. Bank National
Association, as the Stock Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders” (the “COLLATERAL ACCOUNT”)


 


Please refer to the
Collateral Agreement, dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”),
among the Company, you, as Collateral Agent and as Securities Intermediary and
the undersigned, as Stock Purchase Contract Agent and as attorney-in-fact for
the holders of Normal MCAPS from time to time. Capitalized terms used herein
but not defined shall have the meaning set forth in the Collateral Agreement.


 


We hereby notify you in
accordance with Section 5.2 of the Collateral Agreement that the holder of
securities named below (the “HOLDER”) has elected to substitute $                
Value of Qualifying Treasury Securities or Security Entitlements with respect
thereto in exchange for an equal Value of Pledged Trust Preferred Securities
relating to Normal MCAPS and has delivered to the undersigned a notice stating
that the Holder has Transferred such Qualifying Treasury Securities or Security
Entitlements with respect thereto to the Securities Intermediary, for credit to
the Collateral Account.


 


We hereby request that you
instruct the Securities Intermediary, upon confirmation that such Qualifying
Treasury Securities or Security Entitlements thereto have been credited to the
Collateral Account, to release to the undersigned an equal Value of Pledged
Trust Preferred Securities in accordance with Section 5.2 of the Collateral
Agreement.


 


A-1

















 


Date:


 


	
   

  	
  U.S. BANK NATIONAL ASSOCIATION, as Stock

  
	
   

  	
  Purchase Contract Agent and as attorney-in-fact of
  the

  
	
   

  	
  Holders from time to time of the MCAPS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Please print name and
address of Holder electing to substitute Qualifying Treasury Securities or
Security Entitlements with respect thereto for the Pledged Trust Preferred
Securities: 


 


	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other Taxpayer

  Identification Number, if any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


A-2

















 


EXHIBIT B


 


INSTRUCTION

FROM COLLATERAL AGENT 

TO SECURITIES INTERMEDIARY 

(Creation of Treasury MCAPS)


 


The Bank of New York


as Securities Intermediary


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
             Normal
MCAPS of Lehman Brothers Holdings Inc. (the “COMPANY”)


 


The
Securities Account of The Bank of New York, as Collateral Agent, maintained by
the Securities Intermediary and designated “The Bank of New York, as Collateral
Agent of Lehman Brothers Holdings Inc., as pledgee of U.S. Bank National
Association, as the Stock Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders” (the “COLLATERAL ACCOUNT”)


 


Please refer to the
Collateral Agreement, dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”),
among the Company, you, as Collateral Agent and as Securities Intermediary and
U.S. Bank National Association, as Stock Purchase Contract Agent and as
attorney-in-fact for the holders of Normal MCAPS from time to time. Capitalized
terms used herein but not defined shall have the meanings set forth in the
Collateral Agreement.


 


When you have confirmed that
$               
Value of Qualifying Treasury Securities or Security Entitlements thereto has
been credited to the Collateral Account by or for the benefit of                 ,
as Holder of Normal MCAPS (the “HOLDER”), you are hereby instructed to release
from the Collateral Account an equal Value of Pledged Trust Preferred
Securities or Security Entitlements with respect thereto relating to Normal
MCAPS of the Holder by Transfer to the Stock Purchase Contract Agent.


 


Dated:


	
   

  	
   

  	
  The Bank of New York, as Collateral Agent

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
  Please print name and
  address of Holder:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other Taxpayer

  
	
   

  	
   

  	
  Identification Number, if any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


B-1

















 


EXHIBIT C


 


INSTRUCTION 

FROM STOCK PURCHASE CONTRACT AGENT 

TO COLLATERAL AGENT 

(Recreation of Normal MCAPS)


 


The Bank of New York


The Collateral Agent


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
            
Treasury MCAPS of Lehman Brothers Holdings Inc. (the “COMPANY”)


 


The
Securities Account of The Bank of New York, as Collateral Agent, maintained by
the Securities Intermediary and designated “The Bank of New York, as Collateral
Agent of Lehman Brothers Holdings Inc., as pledgee of U.S. Bank National
Association, as the Stock Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders” (the “COLLATERAL ACCOUNT”)


 


Please refer to the
Collateral Agreement dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”),
among the Company, you, as Collateral Agent and as Securities Intermediary and
the undersigned, as Stock Purchase Contract Agent and as attorney-in-fact for
the holders of Treasury MCAPS from time to time. Capitalized terms used herein
but not defined shall have the meaning set forth in the Collateral Agreement.


 


We hereby notify you in
accordance with Section 5.3 of the Collateral Agreement that the holder of
securities named below (the “HOLDER”) has elected to substitute $              
Value of Trust Preferred Securities or Security Entitlements with respect
thereto in exchange for $                 an
equal Value of Pledged Treasury Securities with respect to               
Treasury MCAPS and has delivered to the undersigned a notice stating that the
holder has Transferred such Trust Preferred Securities or Security Entitlements
with respect thereto to the Securities Intermediary, for credit to the
Collateral Account.


 


We hereby request that you
instruct the Securities Intermediary, upon confirmation that such Trust
Preferred Securities or Security Entitlements with respect thereto have been
credited to the Collateral Account, to release to the undersigned $              
an equal Value of Qualifying Treasury Securities in accordance with Section 5.3
of the Collateral Agreement.


 


C-1

















 


Dated:


 


	
   

  	
  U.S. Bank National Association, as

  
	
   

  	
  Stock Purchase Contract Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Please
print name and address of Holder electing to substitute Trust Preferred
Securities or Security Entitlements with respect thereto for Pledged Treasury
Securities:


 


	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other
  Taxpayer

  
	
   

  	
   

  	
  Identification Number, if
  any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


C-2

















 


EXHIBIT D


 


INSTRUCTION


FROM COLLATERAL AGENT


TO SECURITIES INTERMEDIARY


(Recreation of Normal MCAPS)


 


The Bank of New York


as Securities Intermediary


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
{      } Treasury MCAPS of Lehman Brothers
Holdings Inc. (the “COMPANY”)


 


The
Securities Account of The Bank of New York, as Collateral Agent, maintained by
the Securities Intermediary and designated “The Bank of New York, as Collateral
Agent of Lehman Brothers Holdings Inc., as pledgee of U.S. Bank National
Association, as the Stock Purchase Contract Agent on behalf of and as
attorney-in-fact for the Holders” (the “COLLATERAL ACCOUNT”)


 


Please refer to the
Collateral Agreement dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”),
among the Company, you, as Securities Intermediary and Collateral Agent and
U.S. Bank National Association, as Stock Purchase Contract Agent and as
attorney-in-fact for the holders of Treasury MCAPS from time to time.
Capitalized terms used herein but not defined shall have the meanings set forth
in the Collateral Agreement.


 


When you have confirmed that
$                
Value of Trust Preferred Securities or Security Entitlements with respect
thereto has been credited to the Collateral Account by or for the benefit of                      ,
as Holder of Treasury MCAPS (the “HOLDER”), you are hereby instructed to
release from the Collateral Account an equal Value of Qualifying Treasury
Securities or Security Entitlements with respect thereto relating to Treasury
MCAPS of the Holder by Transfer to the Stock Purchase Contract Agent.


 


D-1

















 


Dated:


 


	
   

  	
  The Bank of New York, as

  
	
   

  	
  Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


Please
print name and address of Holder:


 


	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other Taxpayer

  
	
   

  	
   

  	
  Identification Number, if any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


D-2

















 


EXHIBIT E


 


NOTICE OF SETTLEMENT WITH
TREASURY SECURITIES FROM COLLATERAL 

AGENT TO STOCK PURCHASE CONTRACT AGENT


 


U.S. Bank National
Association


The Stock Purchase Contract
Agent


One Federal Street, 3rd Floor


Boston, MA 02110

Attention:  Corporate Trust Services

Facsimile:  617-603-6667


 


Re:
             Normal
MCAPS of Lehman Brothers Holdings Inc. (the “COMPANY”) 


Treasury MCAPS of the Company


 


Please refer to the
Collateral Agreement dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”), by
and among you, the Company, and the undersigned, as Collateral Agent and
Securities Intermediary. Unless otherwise defined herein, terms defined in the
Collateral Agreement are used herein as defined therein.


 


In accordance with Section
5.6(c) of the Collateral Agreement, we hereby notify you that as of 5:00 p.m.
(New York City time) on the ninth Business Day immediately preceding
{    } (the “REMARKETING SETTLEMENT DATE”), we have
received (i) a principal amount of $           
of Qualifying Treasury Securities equal to the Purchase Price due to the
Company on the Stock Purchase Date with respect to             Normal
MCAPS, and (ii) based on the principal amount of the Qualifying Treasury
Securities received set forth in clause (i) above, an aggregate liquidation
amount of $           
of Pledged Trust Preferred Securities are to be tendered for purchase in the
Remarketing.


 


Dated:


 


	
   

  	
  The Bank of New York, as

  
	
   

  	
  Collateral Agent

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


E-1

















 


EXHIBIT F


 


INSTRUCTION TO COLLATERAL
AGENT REGARDING 

REMARKETING


 


The Bank of New York


The Collateral Agent and Securities Intermediary


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
Trust Preferred Securities of Lehman Brothers Holdings Capital Trust VII


 


The undersigned hereby
notifies you in accordance with Section 5.7(c) of the Collateral Agreement,
dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”), among Lehman Brothers
Holdings Inc. (the “Company”), you, as Collateral Agent and Securities
Intermediary and U.S. Bank National Association, as the Stock Purchase Contract
Agent and as attorney-in-fact for the holders of Normal MCAPS from time to
time, that the undersigned elects to deliver $                
aggregate liquidation amount of Separate Trust Preferred Securities for
delivery to the Remarketing Agent on or prior to 5:00 p.m. (New York City time)
on the ninth Business Day immediately preceding the Remarketing Settlement Date
for remarketing pursuant to Section 5.7(c) of the Collateral Agreement. The
undersigned will, upon request of the Remarketing Agent, execute and deliver
any additional documents deemed by the Remarketing Agent or by the Company to
be necessary or desirable to complete the sale, assignment and transfer of the
Separate Trust Preferred Securities tendered hereby. Capitalized terms used
herein but not defined shall have the meaning set forth in the Collateral
Agreement.


 


The undersigned hereby
instructs you, upon receipt of the Proceeds of such remarketing from the
Remarketing Agent, to deliver such Proceeds to the undersigned in accordance
with the instructions indicated herein under “A. Payment Instructions.” The
undersigned hereby instructs you, in the event of a Failed Remarketing, upon
receipt of the Separate Trust Preferred Securities tendered herewith from the
Remarketing Agent, to deliver such Separate Trust Preferred Securities to the
person(s) and the address(es) indicated herein under “B. Delivery Instructions.”


 


With this notice, the
undersigned hereby (i) represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Separate Trust
Preferred Securities tendered hereby and that the undersigned is the record
owner of any Trust Preferred Securities tendered herewith in physical form or a
participant in The Depository Trust Company (“DTC”) and the beneficial owner of
any Trust Preferred Securities tendered herewith by book-entry transfer to your
account at DTC, (ii) agrees to be bound by the terms and conditions of Section
5.7(c) of the Collateral Agreement and (iii) acknowledges and agrees that after
5:00 p.m. (New York City time) on the ninth Business Day immediately preceding
the Remarketing Settlement Date, such election shall become an irrevocable
election to have such Separate Trust Preferred Securities remarketed in the
Remarketing. In the case of a Failed Remarketing, such Separate Trust Preferred
Securities shall be returned to the undersigned.


 


F-1

















 


Dated:


 


 


 


	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other Taxpayer

  
	
   

  	
   

  	
  Identification Number, if any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


A.            PAYMENT INSTRUCTIONS


 


Proceeds of the remarketing
should be paid by check in the name of the person(s) set forth below and mailed
to the address set forth below.


 


Name
(s)


(Please
Print)


Address


(Please
Print)


(Zip
Code)


(Taxpayer
Identification or Social Security Number)


 


B.            DELIVERY INSTRUCTIONS


 


In the event of a Failed
Remarketing, Trust Preferred Securities that are in physical form should be
delivered to the person(s) set forth below and mailed to the address set forth
below. 


 


	
  Name
  (s)

  	
   

  	
   

  
	
  (Please Print)

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  	
   

  
	
  (Please Print)

  	
  (Zip Code)

  
	
   

  	
   

  
	
   

  	
   

  
	
  (Tax
  Identification or Social Security Number)

  	
   

  



 


F-2

















 


In
the event of a Failed Remarketing, Trust Preferred Securities that are in
book-entry form should be credited to the account at The Depository Trust
Company set forth below.


 


	
   

  	
   

  
	
  DTC Account Number

  
	
   

  
	
  Name
  of Account Party:

  	
   

  	
   

  
				



 


F-3

















 


EXHIBIT G


 


INSTRUCTION TO COLLATERAL
AGENT REGARDING 

WITHDRAWAL FROM REMARKETING


 


The Bank of New York


The Collateral Agent


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
Trust Preferred Securities of Lehman Brothers Holdings Capital Trust VII


 


The undersigned hereby
notifies you in accordance with Section 5.7(c) of the Collateral Agreement,
dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”), among Lehman Brothers
Holdings Inc. and you, as Collateral Agent and Securities Intermediary, and
U.S. Bank National Association, as Stock Purchase Contract Agent and as
attorney-in-fact for the holders of Normal MCAPS from time to time, that the
undersigned elects to withdraw the $                   aggregate
liquidation amount of Separate Trust Preferred Securities delivered to the
Collateral Agent on                   
 for remarketing pursuant to Section 5.7(c) of the Collateral Agreement.
The undersigned hereby instructs you to return such Trust Preferred Securities
to the undersigned in accordance with the undersigned’s instructions. With this
notice, the Undersigned hereby agrees to be bound by the terms and conditions
of Section 5.7(c) of the Collateral Agreement. Capitalized terms used herein
but not defined shall have the meaning set forth in the Collateral Agreement.


 


Dated:


 


	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


	
   

  	
   

  	
  Signature
  Guarantee:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Name

  	
   

  	
  Social Security or other Taxpayer

  
	
   

  	
   

  	
  Identification Number, if any

  
	
   

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  



 


G-1

















 


EXHIBIT H


 


NOTICE OF
OCCURRENCE OF TERMINATION EVENT


 


The Bank of New York


The Collateral Agent and Securities
Intermediary


Attn.: MBS Group


101 Barclay Street, Floor 4 West


New York, NY 10286


 


Re:
             Lehman
Brothers Holdings Inc. (the “COMPANY”)


 


Please refer
to the Collateral Agreement dated as of May 17, 2007 (the “COLLATERAL AGREEMENT”),
by and among you, the Company, and the undersigned, as Collateral Agent and
Securities Intermediary. Unless otherwise defined herein, terms defined in the
Collateral Agreement are used herein as defined therein.


 


In accordance
with Section 5.4(c) of the Collateral Agreement, we hereby notify you that a
Termination Event has occurred.


 


Dated:


 


	
   

  	
  {Lehman Brothers Holdings Inc.}{U.S. Bank

  National Association}

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


H-1

















 


Schedule I


 


Reference Dealers


 

















 


Schedule II


 


Contact Persons for
Confirmation


 


	
  Name

  	
   

  	
  Phone
  Number