Exhibit 4.04


 


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


 


 


ARTICLE I


 


DEFINITIONS


 


	
   

  	
   

  	
   

  	
  Page

  
	
  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 500,000 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 I,
$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 VIII, 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. 212937,
Re: Lehman Brothers MCAPS Collateral Account Trust VIII) 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.

  	
  U.S. Bank National Association

  
	
  745 Seventh Avenue

  	
  One Federal Street, 3rd Floor

  
	
  New York, New York 10019

  	
  Boston, MA 02110

  
	
  Facsimile: (646) 834-2658

  	
  Attn: Corporate Trust Services

  
	
  Attention: Lee Goldblatt

  	
  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.


 


	
   

  	
  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 VIII


 


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.”


 


F-1

















 


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.


 


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)

  
	
   

  	
   

  



 


F-1

















 


	
   

  	
   

  	
   

  
	
  (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 VIII


 


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