Exhibit 4.08


 




 


 





GUARANTEE AGREEMENT


 


LEHMAN BROTHERS HOLDINGS CAPITAL TRUST VIII


 


Dated as of May 17, 2007




 


 





 

















 


CROSS REFERENCE TABLE*


 


	
  Section of Trust

  	
   

  	
  Section of

  
	
  Indenture Act of

  	
   

  	
  Guarantee

  
	
  1939, as amended

  	
   

  	
  Agreement

  
	
  310(a)

  	
   

  	
  4.1(a)

  
	
  310(b)

  	
   

  	
  2.8; 4.1(c)

  
	
  310(c)

  	
   

  	
  Inapplicable

  
	
  311(a)

  	
   

  	
  2.2(b)

  
	
  311(b)

  	
   

  	
  2.2(b)

  
	
  311(c)

  	
   

  	
  Inapplicable

  
	
  312(a)

  	
   

  	
  2.2(a); 2.9

  
	
  312(b)

  	
   

  	
  2.2(b); 2.9

  
	
  312(c)

  	
   

  	
  2.9

  
	
  313(a)

  	
   

  	
  2.3

  
	
  313(b)

  	
   

  	
  2.3

  
	
  313(c)

  	
   

  	
  2.3

  
	
  313(d)

  	
   

  	
  2.3

  
	
  314(a)

  	
   

  	
  2.4

  
	
  314(b)

  	
   

  	
  Inapplicable

  
	
  314(c)

  	
   

  	
  2.5

  
	
  314(d)

  	
   

  	
  Inapplicable

  
	
  314(e)

  	
   

  	
  2.5

  
	
  314(f)

  	
   

  	
  Inapplicable

  
	
  315(a)

  	
   

  	
  3.1(d); 3.2(a)

  
	
  315(b)

  	
   

  	
  2.7(a)

  
	
  315(c)

  	
   

  	
  3.1(c)

  
	
  315(d)

  	
   

  	
  3.1(d)

  
	
  316(a)

  	
   

  	
  2.6; 5.4(a)

  
	
  316(b)

  	
   

  	
  5.3

  
	
  316(c)

  	
   

  	
  Inapplicable

  
	
  317(a)

  	
   

  	
  2.10

  
	
  317(b)

  	
   

  	
  Inapplicable

  
	
  318(a)

  	
   

  	
  2.1(b)

  



 






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


 


i

















 


Table of Contents


 


	
   

  	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  
	
  INTERPRETATION AND DEFINITIONS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  1.1.

  	
   

  	
  Interpretation
  and Definitions

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE II

  
	
  TRUST INDENTURE ACT

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  2.1.

  	
   

  	
  Trust
  Indenture Act; Application

  	
   

  	
  4

  
	
  SECTION
  2.2.

  	
   

  	
  Lists
  of Holders of Securities

  	
   

  	
  4

  
	
  SECTION
  2.3.

  	
   

  	
  Reports
  by the Trust Guarantee Trustee

  	
   

  	
  5

  
	
  SECTION
  2.4.

  	
   

  	
  Periodic
  Reports to Trust Guarantee Trustee

  	
   

  	
  5

  
	
  SECTION
  2.5.

  	
   

  	
  Evidence
  of Compliance with Conditions Precedent

  	
   

  	
  5

  
	
  SECTION
  2.6.

  	
   

  	
  Events
  of Default; Waiver

  	
   

  	
  5

  
	
  SECTION
  2.7.

  	
   

  	
  Event
  of Default; Notice

  	
   

  	
  5

  
	
  SECTION
  2.8.

  	
   

  	
  Conflicting
  Interests

  	
   

  	
  6

  
	
  SECTION
  2.9.

  	
   

  	
  Disclosure
  of Information

  	
   

  	
  6

  
	
  SECTION
  2.10.

  	
   

  	
  Trust
  Guarantee Trustee May File Proofs of Claim

  	
   

  	
  6

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE III

  
	
  POWERS, DUTIES AND RIGHTS OF

  
	
  TRUST GUARANTEE TRUSTEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  3.1.

  	
   

  	
  Powers
  and Duties of the Trust Guarantee Trustee

  	
   

  	
  6

  
	
  SECTION
  3.2.

  	
   

  	
  Certain
  Rights of Trust Guarantee Trustee

  	
   

  	
  8

  
	
  SECTION
  3.3.

  	
   

  	
  Not
  Responsible for Recitals or Issuance of Trust Guarantee

  	
   

  	
  9

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  
	
  GUARANTEE TRUSTEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  4.1.

  	
   

  	
  Guarantee
  Trustee; Eligibility

  	
   

  	
  10

  
	
  SECTION
  4.2.

  	
   

  	
  Appointment,
  Removal and Resignation of Trust Guarantee Trustee

  	
   

  	
  10

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE V

  
	
  GUARANTEE

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  5.1.

  	
   

  	
  Guarantee

  	
   

  	
  11

  
	
  SECTION
  5.2.

  	
   

  	
  Waiver
  of Notice and Demand

  	
   

  	
  11

  
	
  SECTION
  5.3.

  	
   

  	
  Obligations
  Not Affected

  	
   

  	
  12

  
	
  SECTION
  5.4.

  	
   

  	
  Rights
  of Holders

  	
   

  	
  13

  
	
  SECTION
  5.5.

  	
   

  	
  Guarantee
  of Payment

  	
   

  	
  13

  
	
  SECTION
  5.6.

  	
   

  	
  Subrogation

  	
   

  	
  13

  
	
  SECTION
  5.7.

  	
   

  	
  Independent
  Obligations

  	
   

  	
  14

  



 


ii

















 


	
  ARTICLE VI

  
	
  SUBORDINATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  6.1.

  	
   

  	
  Ranking

  	
   

  	
  14

  
	
  SECTION
  6.2.

  	
   

  	
  Subordination
  of Common Securities

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VII

  
	
  TERMINATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  7.1.

  	
   

  	
  Termination

  	
   

  	
  14

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  
	
  INDEMNIFICATION

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  8.1.

  	
   

  	
  Exculpation

  	
   

  	
  14

  
	
  SECTION
  8.2.

  	
   

  	
  Indemnification

  	
   

  	
  15

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IX

  
	
  MISCELLANEOUS

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SECTION
  9.1.

  	
   

  	
  Successors
  and Assigns

  	
   

  	
  15

  
	
  SECTION
  9.2.

  	
   

  	
  Amendments

  	
   

  	
  15

  
	
  SECTION
  9.3.

  	
   

  	
  Notices

  	
   

  	
  15

  
	
  SECTION
  9.4.

  	
   

  	
  Benefit

  	
   

  	
  16

  
	
  SECTION
  9.5.

  	
   

  	
  Governing
  Law

  	
   

  	
  16

  



 


iii

















 


GUARANTEE AGREEMENT


 


This
GUARANTEE AGREEMENT (the “Guarantee”), dated as of May 17, 2007, is
executed and delivered by Lehman Brothers Holdings Inc., a Delaware corporation
(the “Guarantor”), and U.S. Bank National Association, as trustee (the “Guarantee
Trustee”), for the benefit of the Holders (as defined herein) from time to
time of the Trust Securities (as defined herein) of Lehman Brothers Holdings
Capital Trust VIII, a Delaware statutory trust (the “Trust”).


 


WHEREAS,
pursuant to the Declaration of Trust (as defined herein), the Trust is issuing
preferred securities having a liquidation amount of $1,000 per security (the “Trust
Preferred Securities”) and common securities, having a liquidation amount
of $1,000 per security and designated the Trust Common Securities (the “Trust
Common Securities” and, together with the Trust Preferred Securities, the “Trust
Securities”);


 


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


 


NOW,
THEREFORE, in consideration of the purchase by each Holder of Trust Securities,
which purchase the Guarantor hereby agrees shall benefit the Guarantor, the
Guarantor executes and delivers this Guarantee for the benefit of the Holders.


 


ARTICLE I

INTERPRETATION AND DEFINITIONS


 


SECTION 1.1.                                          Interpretation
and Definitions


 


In
this Guarantee, unless the context otherwise requires:


 


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


 


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


 


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


 


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


 


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


 

















 


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


 


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


 


(h)           the
following terms have the following meanings:


 


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


 


“Business
Day” means any day other than a Saturday or Sunday or a day on which
banking institutions in the City of New York are authorized or required by law,
regulation or executive order to close.


 


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


 


“Debentures”
means the $500,001,000 initial aggregate principal amount of the Guarantor’s
Remarketable Junior Subordinated Debentures due 2043 issued pursuant to the
Indenture.


 


“Declaration
of Trust” means the Amended and Restated Declaration of Trust by and among
Lehman Brothers Holdings Inc., as Sponsor, U.S. Bank National Association, as
Property Trustee and Delaware Trustee, and the Regular Trustees named therein,
dated as of May 17, 2007, as it may be amended, modified or supplemented from
time to time.


 


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


 


“Global
Security” means a fully registered, global Trust Preferred Security.


 


“Guarantee
Payments” means the following payments or distributions, without
duplication, with respect to the Trust Securities, to the extent not paid by or
on behalf of the Trust: (i) any accumulated and unpaid distributions on such
Trust Securities to the extent the Trust has sufficient funds available
therefor at the time, (ii) the Redemption Price with respect to any Trust
Securities called for redemption by the Trust to the extent the Trust has
sufficient funds available therefor at the time and (iii) upon a voluntary or
involuntary dissolution, winding up or termination of the Trust (other than in
connection with the redemption of all of the Trust Preferred Securities), the
lesser of (a) the aggregate of the liquidation amount and all accumulated and
unpaid Distributions (as defined in the Declaration of Trust) on the Trust
Securities to the date of payment, to the extent the Trust has sufficient funds
available therefor at the time and (b) the amount of assets of the Trust, after
satisfaction of all liabilities, remaining 


 


2

















 


available
for distribution to Holders upon dissolution of the Trust (the “Liquidation
Distribution”).


 


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


 


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


 


“Underwriters”
means Lehman Brothers Inc. and the other underwriters listed in Schedule II to
the Underwriting Agreement, dated May 8, 2007 among the Guarantor, the Trust
and the underwriters named therein.


 


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


 


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


 


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


 


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


 


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


 


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


 


“Person”
means a legal person, including any individual, corporation, estate,
partnership, joint venture, association, joint stock company, limited liability
company, trust, 


 


3

















 


unincorporated
association, or government or any agency or political subdivision thereof, or
any other entity of whatever nature.


 


“Property
Trustee” means the Trustee meeting the eligibility requirements set forth
in Section 6.3 of the Declaration of Trust until a Successor Property Trustee
has been appointed and has accepted such appointment pursuant to the terms of
the Declaration of Trust and thereafter means each such Successor Property
Trustee. The Property Trustee shall initially be U.S. Bank National Association.


 


“Underwriting
Agreement” means the Underwriting Agreement dated as of May 17, 2007 by and
among the Guarantor, the Trust and the Underwriters.


 


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


 


“Subordinated
Indenture” means the Indenture governing the Debentures.


 


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


 


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


 


ARTICLE II

TRUST INDENTURE ACT


 


SECTION 2.1.                                          Trust
Indenture Act; Application


 


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


 


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


 


SECTION 2.2.                                          Lists
of Holders of Securities


 


(a)           The Guarantor shall provide the
Guarantee Trustee (i) except while the Trust Preferred Securities are
represented by one or more Global Securities at least one Business Day prior to
the date for payment of distributions, a list, in such form as the Guarantee
Trustee may reasonably require, of the names and addresses of the Holders of
the Trust Preferred Securities (“List of Holders”) as of the record date
relating to the payment of such distributions and (ii) at any other time,
within 30 days of receipt by the Guarantor of a written request from the
Guarantee Trustee for a List of Holders as of a date no more than 15 days
before such List of Holders is given to the Guarantee Trustee; provided
that the Guarantor shall not be obligated to 


 


4

















 


provide such List of Holders at
any time the List of Holders does not differ from the most recent List of
Holders given to the Guarantee Trustee by the Guarantor. The Guarantee Trustee
shall preserve, in as current a form as is reasonably practicable, all
information contained in Lists of Holders given to it, provided that the
Guarantee Trustee may destroy any List of Holders previously given to it on
receipt of a new List of Holders.


 


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


 


SECTION 2.3.                                          Reports
by the Guarantee Trustee


 


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


 


SECTION 2.4.                                          Periodic
Reports to Guarantee Trustee


 


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


 


SECTION 2.5.                                          Evidence
of Compliance with Conditions Precedent


 


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


 


SECTION 2.6.                                          Events
of Default; Waiver


 


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


 


SECTION 2.7.                                          Event
of Default; Notice


 


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


 


5

















 


as a Responsible Officer of the
Guarantee Trustee in good faith determines that the withholding of such notice
is in the interests of the Holders of the Trust Preferred Securities.


 


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


 


SECTION 2.8.                                          Conflicting
Interests


 


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


 


SECTION 2.9.        Disclosure of Information


 


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


 


SECTION 2.10.                                    Guarantee
Trustee May File Proofs of Claim


 


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


 


ARTICLE III

POWERS, DUTIES AND RIGHTS OF

GUARANTEE TRUSTEE


 


SECTION 3.1.                                          Powers
and Duties of the Guarantee Trustee


 


(a)           This Guarantee shall be held by the
Guarantee Trustee for the benefit of the Holders of the Trust Securities, and
the Guarantee Trustee shall not transfer this Guarantee to any Person except a
Holder of Trust Securities exercising his or her rights pursuant to Section
5.4(b) or to a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee


 


6

















 


of its appointment to act as
Successor Guarantee Trustee. The right, title and interest of the Guarantee
Trustee in and to this Guarantee shall automatically vest in any Successor
Guarantee Trustee, and such vesting and succession of title shall be effective
whether or not conveyance documents have been executed and delivered pursuant
to the appointment of such Successor Guarantee Trustee.


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


7

















 


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


 


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


 


SECTION 3.2.                                          Certain
Rights of Guarantee Trustee


 


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


 


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


 


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


 


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


 


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


 


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


 


(vi)          The Guarantee
Trustee shall be under no obligation to exercise any of the rights or powers
vested in it by this Guarantee at the request or direction of any Holder, 


 


8

















 


unless such
Holder shall have provided to the Guarantee Trustee such security and
indemnity, reasonably satisfactory to the Guarantee Trustee, against the costs,
expenses (including attorneys’ fees and expenses and the expenses of the
Guarantee Trustee’s agents, nominees or custodians) and liabilities that might
be incurred by it in complying with such request or direction, including such
reasonable advances as may be requested by the Guarantee Trustee; provided
that nothing contained in this Section 3.2(a)(vi) shall be taken to relieve the
Guarantee Trustee, upon the occurrence of an Event of Default, of its
obligation to exercise the rights and powers vested in it by this Guarantee.


 


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


 


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


 


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


 


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


 


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


 


SECTION 3.3.                                          Not
Responsible for Recitals or Issuance of Guarantee


 


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


 


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


 


ARTICLE IV

GUARANTEE TRUSTEE


 


SECTION 4.1.                                          Guarantee
Trustee; Eligibility


 


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


 


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


 


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


 


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


 


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


 


SECTION 4.2.                                          Appointment,
Removal and Resignation of Guarantee Trustee


 


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


 


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


 


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


 


10

















 


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


 


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


 


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


 


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


 


ARTICLE V

GUARANTEE


 


SECTION 5.1.                                          Guarantee


 


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


 


SECTION 5.2.                                          Waiver
of Notice and Demand


 


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


 


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SECTION 5.3.                                          Obligations
Not Affected


 


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


 


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


 


(b)           the extension of
time for the payment by the Trust of all or any portion of the distributions,
Redemption Price, Liquidation Distributions or any other sums payable under the
terms of the Trust Securities or the extension of time for the performance of
any other obligation under, arising out of, or in connection with, the Trust
Securities (other than an extension of time for payment of distributions,
Redemption Price, Liquidation Distributions or other sum payable that results
from the extension of any interest payment period on the Debentures or any
change to the maturity date of the Debentures, in each case, permitted by the
Indenture;


 


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


 


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


 


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


 


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


 


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


 


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


 


12

















 


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


 


SECTION 5.4.                                          Rights
of Holders


 


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


 


(b)           If the Guarantee Trustee fails to
enforce this Guarantee, then any Holder of Trust Preferred Securities may,
subject to the subordination provisions of Section 6.2, institute a legal
proceeding directly against the Guarantor to enforce the Guarantee Trustee’s
rights under this Guarantee, without first instituting a legal proceeding
against the Trust, the Guarantee Trustee or any other Person or entity. In
addition, if the Guarantor has failed to make a Guarantee Payment, a Holder of
Trust Securities may, subject to the subordination provisions of Section 6.2,
directly institute a proceeding against the Guarantor for enforcement of the
Guarantee for such payment to such Holder. The Guarantor hereby waives any
right or remedy to require that any action on this Guarantee be brought first
against the Trust or any other Person or entity before proceeding directly
against the Guarantor.


 


SECTION 5.5.                                          Guarantee
of Payment


 


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


 


SECTION 5.6.                                          Subrogation


 


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


 


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SECTION 5.7.                                          Independent
Obligations


 


The
Guarantor acknowledges that its obligations hereunder are independent of the
obligations of the Trust with respect to the Trust Securities and that the
Guarantor shall be liable as principal and as debtor hereunder to make
Guarantee Payments pursuant to the terms of this Guarantee notwithstanding the
occurrence of any event referred to in subsections 5.3(a) through 5.3(g),
inclusive, hereof.


 


ARTICLE VI

SUBORDINATION


 


SECTION 6.1.                                          Ranking


 


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


 


SECTION 6.2.                                          Subordination
of Common Securities


 


If
a Trust Enforcement Event has occurred and is continuing under the Declaration
of Trust, the rights of the holders of the Trust Common Securities to receive
Guarantee Payments hereunder shall be subordinated to the rights of the Holders
of the Trust Preferred Securities to receive Guarantee Payments under this
Guarantee.


 


ARTICLE VII

TERMINATION


 


SECTION 7.1.                                          Termination


 


This
Guarantee shall terminate upon (i) full payment of the Redemption Price of all
Trust Securities or (ii) full payment of the amounts payable in accordance with
the Declaration of Trust upon liquidation of the Trust. Notwithstanding the
foregoing, this Guarantee will continue to be effective or will be reinstated,
as the case may be, if at any time any Holder of Trust Securities must restore
payment of any sums paid under the Trust Securities or under this Guarantee.


 


ARTICLE VIII

INDEMNIFICATION


 


SECTION 8.1.                                          Exculpation


 


(a)           No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Guarantor or
any Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Indemnified Person in good faith in
accordance with this Guarantee and in a manner that such Indemnified Person 


 


14

















 


reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Guarantee or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person’s
negligence or willful misconduct with respect to such acts or omissions.


 


(b)           An Indemnified Person shall be fully
protected in relying in good faith upon the records of the Guarantor and upon
such information, opinions, reports or statements presented to the Guarantor by
any Person as to matters the Indemnified Person reasonably believes are within
such other Person’s professional or expert competence and who has been selected
with reasonable care by or on behalf of the Guarantor, including information,
opinions, reports or statements as to the value and amount of the assets,
liabilities, profits, losses, or any other facts pertinent to the existence and
amount of assets from which Distributions to Holders of Trust Securities might
properly be paid.


 


SECTION 8.2.                                          Indemnification


 


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


 


ARTICLE IX

MISCELLANEOUS


 


SECTION 9.1.                                          Successors
and Assigns


 


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


 


SECTION 9.2.                                          Amendments


 


Except
with respect to any changes that do not materially adversely affect the rights
of the Holders (in which case no consent of the Holders will be required), this
Guarantee may not be amended without the prior approval of the Holders of a
Majority in Liquidation Amount of the Trust Preferred Securities voting
together as a single class (excluding any Trust Securities held by the Sponsor
or any of its Affiliates). The provisions of Article 11.2 of the Declaration of
Trust with respect to meetings of Holders of Trust Securities apply to the
giving of such approval.


 


SECTION 9.3.                                          Notices


 


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


 


15

















 


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


 


U.S.
Bank National Association


300
Delaware Avenue


9th
Floor, EX-AE-WDAW


Wilmington,
Delaware 19801


Attention:  Corporate Trust Services


Facsimile:  302-576-3717


 


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


 


Lehman
Brothers Holdings Inc.


1301
Avenue of the Americas

New York, New York 10019

Attention: Corporate Counsel


Facsimile:  (212) 526-0339


 


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


 


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


 


SECTION 9.4.                                          Benefit


 


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


 


SECTION 9.5.                                          Governing
Law


 


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


 


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


 


	
   

  	
  LEHMAN
  BROTHERS HOLDINGS INC.,

  
	
   

  	
  as
  Guarantor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  BARRETT S. DIPAOLO

  
	
   

  	
   

  	
  Name:
  

  	
  Barrett
  S. DiPaolo

  
	
   

  	
   

  	
  Title:

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION,

  
	
   

  	
  as
  Guarantee Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  EARL DENNISON

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  



 


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