Exhibit 4.01


 


 


 


LEHMAN BROTHERS HOLDINGS INC.


and


CITIBANK, N.A., Warrant Agent


and


LEHMAN BROTHERS INC., Calculation Agent


 






 


WARRANT AGREEMENT


dated as of August 11, 2006


 






 


4,900,000 Warrants


Currency Basket Warrants


Expiring February 13, 2008


 















 


Table of Contents


	
  

  	
  Page

  
	
  ARTICLE I ISSUANCE OF
  WARRANTS AND FORM, EXECUTION, DELIVERY AND REGISTRATION OF WARRANTS    

  	
  1

  
	
   

  	
   

  
	
  SECTION
  1.01.   Issuance of Warrants

  	
  1

  
	
  SECTION
  1.02.   Form, Execution and Delivery of Warrant Certificates

  	
  1

  
	
  SECTION
  1.03.   Mutilated or Missing Warrant Certificates

  	
  3

  
	
   

  	
   

  
	
  ARTICLE II DURATION AND
  EXERCISE OF WARRANTS

  	
  4

  
	
   

  	
   

  
	
  SECTION
  2.01.   Duration of Warrants; Exercise Notice

  	
  4

  
	
  SECTION
  2.02.   Exercise and Delivery of Warrants

  	
  5

  
	
  SECTION
  2.03.   Price Source Unavailability Event.

  	
  8

  
	
  SECTION
  2.04.   Disruption Events

  	
  8

  
	
  SECTION
  2.05.   Delisting of Warrants

  	
  8

  
	
  SECTION
  2.06.   Automatic Exercise of Warrants

  	
  8

  
	
  SECTION
  2.07.   Denominations; Maximum Number of Exercisable Warrants;
  Minimum Number of Exercisable Warrants

  	
  9

  
	
  SECTION
  2.08.   Covenant of the Company

  	
  10

  
	
  SECTION
  2.09.   Return of Money Held Unclaimed for Two Years

  	
  10

  
	
  SECTION
  2.10.   Return of Global Warrant Certificate

  	
  10

  
	
   

  	
   

  
	
  ARTICLE III OTHER
  PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS

  	
  10

  
	
   

  	
   

  
	
  SECTION
  3.01.   Warrantholder May Enforce Rights

  	
  10

  
	
  SECTION
  3.02.   Merger, Consolidation, Sale, Transfer or Conveyance

  	
  10

  
	
   

  	
   

  
	
  ARTICLE IV WARRANTS
  ACQUIRED BY THE COMPANY; PAYMENT OF TAXES; TAXATION OF WARRANTS
 	
  11

  
	
   

  	
   

  
	
  SECTION
  4.01.   Warrants Acquired by the Company

  	
  11

  
	
  SECTION
  4.02.   Taxation of Warrants

  	
  11

  
	
   

  	
   

  
	
  ARTICLE V CONCERNING
  THE WARRANT AGENT

  	
  11

  
	
   

  	
   

  
	
  SECTION
  5.01.   Warrant Agent

  	
  11

  
	
  SECTION
  5.02.   Conditions of Warrant Agent’s Obligations

  	
  12

  
	
  SECTION
  5.03.   Resignation and Appointment of Successor

  	
  13

  
	
   

  	
   

  
	
  ARTICLE VI CONCERNING
  THE CALCULATION AGENT

  	
  14

  
	
   

  	
   

  
	
  SECTION
  6.01.   Calculation Agent

  	
  14

  
	
  SECTION
  6.02.   Calculations and Information Provided

  	
  15

  
	
  SECTION
  6.03.   Conditions of Calculation Agent’s Obligations

  	
  15

  
	
  SECTION 6.04.   Resignation and
  Appointment of Successor

  	
  16

  



 



 i
 






 



 


	
  SECTION 6.05.  
  Compensation; Indemnification

  	
  16

  
	
   

  	
   

  
	
  ARTICLE VII
  MISCELLANEOUS

  	
  16

  
	
   

  	
   

  
	
  SECTION
  7.01.   Definitions

  	
  16

  
	
  SECTION
  7.02.   Amendment

  	
  20

  
	
  SECTION
  7.03.   Notices and Demands to the Company, the Warrant Agent and
  the Calculation Agent

  	
  21

  
	
  SECTION
  7.04.   Addresses for Notices

  	
  21

  
	
  SECTION
  7.05.   Notices to Holders

  	
  21

  
	
  SECTION
  7.06.   Obtaining of Approvals

  	
  21

  
	
  SECTION
  7.07.   Persons Having Rights Under This Agreement

  	
  21

  
	
  SECTION
  7.08.   Inspection of Agreement

  	
  21

  
	
  SECTION
  7.09.   Headings

  	
  22

  
	
  SECTION
  7.10.   Counterparts

  	
  22

  
	
  SECTION
  7.11.   GOVERNING LAW

  	
  22

  
	
   

  	
   

  
	
  TESTIMONIUM

  	
   

  
	
  SIGNATURES

  	
   

  
	
  EXHIBIT A - Form of Global Warrant Certificate

  	
   

  
	
  EXHIBIT B - Exercise Notice

  	
   

  
	
  EXHIBIT C -
  Confirmation of Exercise/Notice of Rejection

  	
   

  



 


 



 ii















WARRANT AGREEMENT, dated as of August 11, 2006, among
LEHMAN BROTHERS HOLDINGS INC., a Delaware corporation (the “Company”),
CITIBANK, N.A., a national banking association (the “Warrant Agent”),
and LEHMAN BROTHERS INC., a Delaware corporation (the “Calculation Agent”).


WHEREAS the Company proposes to sell warrants
(collectively, the “Warrants” or, individually, a “Warrant”)
representing the right to receive from the Company an amount, if any, in U.S.
Dollars determined by reference to the Basket Value on the terms and conditions
set forth in this Agreement; and


WHEREAS the Company desires the Warrant Agent to act
on behalf of the Company, and the Warrant Agent is willing so to act, in
connection with the issuance, transfer and exercise of the Warrants, and the
Company desires to set forth herein, among other things, the provisions of the
Warrants and the terms and conditions on which they may be issued, transferred
and exercised.


NOW, THEREFORE, the parties hereto agree as follows:


ARTICLE I


ISSUANCE OF WARRANTS AND
FORM,

EXECUTION, DELIVERY AND REGISTRATION

OF WARRANTS


SECTION 1.01.  Issuance
of Warrants. (a)  The Warrants will constitute direct,
unconditional and unsecured obligations of the Company and will rank equally
with the Company’s other unsecured contractual obligations and with the Company’s
unsecured and unsubordinated debt.


(b)  The Warrants will be issued in book-entry form and
represented by one or more global certificates (each a “Global Warrant
Certificate”). Each Warrant shall represent the right, subject to the
provisions contained herein, to receive the Cash Settlement Amount of such
Warrant upon exercise. In no event shall a registered or beneficial holder of a
Warrant (each a “Warrantholder”) be entitled to receive any interest on
any Cash Settlement Amount. A Warrant will not require or entitle a
Warrantholder to receive any of the Reference Currencies comprising the Basket
from the Company. The Company shall not be under any obligation to, nor will
it, sell the Reference Currencies to, or purchase or take delivery of any such
Reference Currency from, Warrantholders in connection with the exercise of any
Warrants.


(c)  Warrantholders shall not be entitled to hold Warrants in
certificated form through Clearstream Banking, société
anonyme (“Clearstream”), or the Euroclear System operated by
Morgan Guaranty Trust’s Brussels Office (“Euroclear”).


SECTION 1.02.  Form,
Execution and Delivery of Warrant Certificates. (a)  Each Global
Warrant Certificate shall be evidenced by a certificate in registered form
substantially in the form set forth in Exhibit A hereto, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Agreement, and may represent any









 



number of whole Warrants.
Each Global Warrant Certificate may have imprinted or otherwise reproduced
thereon such letters, numbers or other marks of identification or designation
and such legends or endorsements as the officers of the Company executing the
same may approve (execution thereof to be conclusive evidence of such approval)
and which are not inconsistent with the provisions of this Agreement, or as may
be required to comply with any law or with any rule or regulation made pursuant
thereto, or with any rule or regulation of any stock exchange on which the
Warrants may be listed, or of the Depository, or to conform to usage.


(b)  The Warrant Agent is authorized, upon receipt of a
Global Warrant Certificate from the Company, duly executed on behalf of the
Company, and a written order from the Company, to countersign such Global
Warrant Certificate. The Global Warrant Certificate shall be manually
countersigned and dated the date of its countersignature by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. The Warrant
Agent shall deliver the Global Warrant Certificate to or upon the order of the
Company. One or more Global Warrant Certificates may be executed by the Company
and delivered to the Warrant Agent on or after the date of execution of this
Agreement; provided that only one Global Warrant Certificate shall be
outstanding at any one time.


The Company reserves the right to issue, from time to
time after the date of execution of this Agreement, additional Warrants, and in
connection therewith the Global Warrant Certificate may be exchanged for a new
Global Warrant Certificate to reflect the issuance by the Company of such
additional Warrants. To effect such an exchange the Company shall deliver to
the Warrant Agent a new Global Warrant Certificate duly executed on behalf of
the Company and a written instruction as provided in this Section 1.02. The
Warrant Agent shall authenticate the new Global Warrant Certificate as provided
in this Section and shall deliver the new Global Warrant Certificate to the Depository
in exchange for, and upon receipt of, the Global Warrant Certificate then held
by the Depository. The Warrant Agent shall cancel the Global Warrant
Certificate delivered to it by the Depository, destroy such Global Warrant
Certificate and provide a certificate of destruction to the Company.


(c) In case any officer of the Company who shall have
signed a Global Warrant Certificate, either manually or by facsimile signature,
shall cease to be such officer before such Global Warrant Certificate shall have
been countersigned and delivered by the Warrant Agent to the Company or
delivered by the Company, such Global Warrant Certificate nevertheless may be
countersigned and delivered as though the person who signed such Global Warrant
Certificate had not ceased to be such officer of the Company; and the Global
Warrant Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Global Warrant Certificate, shall
be a proper officer of the Company to sign such Global Warrant Certificate,
although at the date of the execution of this Warrant Agreement any such person
was not such officer.


(d) The Global Warrant Certificate will initially be
registered in the name of a nominee of The Depository Trust Company (the “Depository”,
which term, as used herein, includes any successor securities depository
selected by the Company). The Warrant holdings of the Depository participants
(the “Participants”) will be recorded on the books of the Depository.
The holdings of customers of the Participants and the identity of the
Warrantholders will be reflected on the books and records of such Participants
and will not be known to the Warrant



 2
 






 



Agent, the Company, the Calculation Agent or the
Depository. The Global Warrant Certificate will be held by the Depository or
its agent.


The Company may from time to time select a new entity
to act as Depository with respect to the Warrants and, if such selection is
made, the Company shall promptly give the Warrant Agent written notice to such
effect identifying the new Depository, and the Global Warrant Certificate shall
be delivered to the Warrant Agent and shall be transferred to the new
Depository as provided below as promptly as possible. Appropriate changes may
be made in the forms of the Global Warrant Certificate, the Exercise Notice and
the related notices to be delivered in connection with an exercise to reflect
the selection of the new Depository.


(e) Except as otherwise provided herein or in the
Global Warrant Certificate, the Warrant Agent shall from time to time register
the transfer of the Global Warrant Certificate in its records (which may be
maintained electronically), subject to such reasonable regulations as the
Company or the Warrant Agent may prescribe, only to the Depository, to another
nominee of the Depository, to a successor Depository or to a nominee of a
successor Depository, upon surrender of such Global Warrant Certificate, duly
endorsed, or accompanied by a written instrument or instruments of transfer in
form satisfactory to the Warrant Agent and the Company, duly executed by the
registered holder thereof or by the duly appointed legal representative
thereof, or by its duly authorized attorney, such signature to be guaranteed by
a bank or trust company with a correspondent office in New York City or by a
member of a national securities exchange. Upon any such registration of
transfer, a new Global Warrant Certificate shall be issued to the transferee
and the surrendered Global Warrant Certificate shall be canceled by the Warrant
Agent.


The Global Warrant Certificate may be transferred as
provided above at the option of the holder thereof, when surrendered to the
Warrant Agent’s Office, or at the office of any successor Warrant Agent (as
provided in Section 5.03 hereof), for another Global Warrant Certificate of
like tenor and representing an equal number of unexercised Warrants.


(f) Except as provided in Section 1.03 hereof, no
service charge shall be made for any registration of transfer or exchange of
Global Warrant Certificates, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Global Warrant
Certificates, other than exchanges pursuant to this Section 1.02 not involving
any transfer.


SECTION 1.03.  Mutilated
or Missing Warrant Certificates. (a)  If any Global Warrant
Certificate is mutilated, lost, stolen or destroyed, the Company may in its
discretion execute, and the Warrant Agent may countersign and deliver, in
exchange and substitution for and upon cancellation of the mutilated Global
Warrant Certificate, or in lieu of the Global Warrant Certificate lost, stolen
or destroyed, a new Global Warrant Certificate of like tenor and representing
an equal number of unexercised Warrants, bearing an identification number not
contemporaneously outstanding, but only (in case of loss, theft or destruction)
upon receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction of such Global Warrant Certificate, written
direction from the Company, and security or indemnity, if requested, also
satisfactory to them. Applicants for such substitute Global Warrant
Certificates



 3
 






 



shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.


(b)  In case all of the Warrants evidenced by any such
mutilated, lost, stolen or destroyed Global Warrant Certificate have been or
are about to be exercised, or deemed to be exercised, the Company in its
absolute discretion may, instead of issuing a new Global Warrant Certificate,
direct the Warrant Agent in writing to treat the same as if it had received an
Exercise Notice in proper form in respect thereof, as provided herein, or as
being subject to automatic exercise (pursuant to Section 2.06 hereof) , as the
case may be.


(c)  Each new Global Warrant Certificate issued pursuant to
this Section 1.03 in lieu of any lost, stolen or destroyed Global Warrant
Certificate shall be an original, additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Global Warrant
Certificate shall at any time be enforceable by anyone, and shall be entitled
to the same benefits under this Agreement equally and proportionately with any
and all other Global Warrant Certificates duly issued hereunder.


(d) Upon the issuance of any new Global Warrant
Certificate in accordance with this Section 1.03, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and any other expenses (including the fees
and expenses of the Warrant Agent and the reasonable fees of its counsel)
connected therewith.


(e) The provisions of this Section 1.03 are exclusive
and shall preclude (to the extent lawful) any other rights and remedies with
respect to the replacement or payment of mutilated, lost, stolen or destroyed
Global Warrant Certificates.


ARTICLE II


DURATION AND EXERCISE OF
WARRANTS


SECTION 2.01.  Duration
of Warrants; Exercise Notice. Subject to the limitations set forth herein
and in Sections 2.06, 2.07(b) and 2.02(c) hereof, each Warrant may be
irrevocably exercised in whole but not in part on any Business Day from August
11, 2006 until 3:00 p.m., New York City time, on the earlier of (i) the
Business Day immediately preceding February 13, 2008 (February 13, 2008 being
referred to herein as the “Expiration Date”) and (ii) the Business Day
immediately preceding the Delisting Date, if any. Except in the event of
automatic exercise, each Warrant shall be irrevocably exercised upon receipt by
the Warrant Agent of such Warrant delivered free on the records of the
Depository to the Warrant Agent’s Depository Participant Account (entitled
Citibank, N.A. Corporate Trust Warrant Agent Account, No. 2659, or such other
account at the Depository as the Warrant Agent shall designate in writing to
the Company) (the “Warrant Account”) pursuant to an Exercise Notice to
the Warrant Agent from a Participant; provided, however, that
Exercise Notices are subject to rejection by the Warrant Agent as provided
herein. An Exercise Notice shall be unconditional. Except as provided in
Section 2.02(b) hereof, the Warrant Agent shall be entitled, with no duty of
inquiry, to rely conclusively on any Exercise Notice received by it. “Exercise
Notice” means an irrevocable exercise notice to the Warrant Agent at its
address, which notice shall be



 4
 






 



substantially in the form
set forth in Exhibit B hereto or such other form as the Company and the
Warrant Agent may approve and may be given by facsimile transmission.


SECTION 2.02.  Exercise
and Delivery of Warrants. (a)  Except for Warrants (x) subject to
automatic exercise (as described in Section 2.06 hereof), (y) for which
exercise is delayed pursuant to Section 2.07(b) hereof or (z) held through the
facilities of Clearstream or Euroclear, the “Exercise Date” for a
Warrant will be (i) the Business Day on which the Warrant Agent receives the
Warrant and Exercise Notice duly completed and in proper form with respect to
such Warrant, if received at or prior to 3:00 p.m., New York City time, on such
day, or (ii) if the Warrant Agent receives such Warrant and Exercise Notice
after 3:00 p.m., New York City time, on a Business Day, then the Business Day
following such Business Day.


In the case of Warrants held through the facilities of
Clearstream or Euroclear, except for Warrants subject to automatic exercise,
the “Exercise Date” for a Warrant will be (i) the Business Day on which
the Warrant Agent receives the Exercise Notice duly completed and in proper
form with respect to such Warrant if such Exercise Notice is received at or
prior to 3:00 p.m., New York City time, on such day; provided that the
Warrant is received by the Warrant Agent by 3:00 p.m., New York City time, on
the Valuation Date, or (ii) if the Warrant Agent receives such Exercise Notice
after 3:00 p.m., New York City time, on a Business Day, then the Business Day
following such Business Day; provided that the Warrant is received by
3:00 p.m., New York City time, on the Valuation Date relating to exercises of
Warrants on the applicable Valuation Day. In the event that a Warrant is
received after 3:00 p.m., New York City time, on the applicable Valuation Date,
then the Exercise Date for such Warrant will be the day on which such Warrant
is received or, if such day is not a Business Day, the following Business Day.
In the case of Warrants held through the facilities of Euroclear, (a)
participants must also transmit, by facsimile, to the Warrant Agent a copy of
the Exercise Notice submitted to Euroclear by 3:00 p.m., New York City time, on
the desired Exercise Date and (b) Euroclear must confirm (a “Euroclear
Confirmation”) by telex to the Warrant Agent by 9:00 a.m., New York City
time, on the applicable Valuation Date that the Warrants will be received by
the Warrant Agent on such date; provided that if such telex
communication is received after 9:00 a.m., New York City time, on the
applicable Valuation Date, the Company will be entitled, in it sole discretion,
to direct the Warrant Agent to reject the related Exercise Notice or waive the
requirement for timely delivery of such telex communication.


(b)  The Warrant Agent shall, in
the case of Warrants other than those held through Clearstream or Euroclear,
following receipt of a properly delivered Warrant in accordance with Section
2.02(a) hereof, accompanied by an Exercise Notice, and, in the case of Warrants
held through Clearstream or Euroclear, following receipt of a properly
delivered Exercise Notice in accordance with Section 2.02(a) hereof:


(i)  promptly (1) for Warrants not held through Clearstream
or Euroclear, determine whether such Exercise Notice has been duly completed
and is in proper form and (2) for Warrants held through Clearstream or
Euroclear, determine whether such Exercise Notice has been duly completed and
is in proper form duly executed by Clearstream or the Euroclear participant
tendering such Warrant, as applicable; and, in either case, if the Warrant
Agent determines that the Exercise Notice has not been duly completed or is not
in proper form, the Warrant Agent promptly shall (X) reject such



 5
 






 



Exercise
Notice and shall send to the entity that executed such Exercise Notice a notice
of rejection substantially in the form set forth in Exhibit C hereto and
shall redeliver such Warrants (to the extent received in the case of Warrants
held through Clearstream or Euroclear) free through the facilities of the
Depository to the account from which they were transferred to the Warrant Agent
and (Y) shall not take the actions required by clauses (ii)-(viii) below with
respect to such Exercise Notice or the related Warrants; provided, however,
that the Warrant Agent shall deliver a copy of the Exercise Notice relating to
such Warrants to the Company as required by clause (viii) below and the Company
may waive, in its sole discretion, any defect in the form of such Exercise
Notice;


(ii)  with respect to each Warrant held through Euroclear for
which an Exercise Notice was received, promptly telephone Euroclear to
determine whether Euroclear anticipates that it will be able to provide a
Euroclear Confirmation as required by Section 2.02(a) hereof;


(iii)  notify the Company and the Calculation Agent (and such
other parties (not to exceed two) as the Company shall designate in writing) by
5:00 p.m., New York City time, on the Business Day that such Exercise Notice
has been received (or shall be deemed to have been received) of (A) the total
number of Warrants covered by such Exercise Notice and (B) the number of such
Warrants, if any, as to which Euroclear has not advised the Warrant Agent that
it anticipates being able to provide a Euroclear Confirmation as required by
Section 2.02(a) hereof;


(iv)  with respect to Warrants held through Euroclear,
determine whether the Warrant Agent has received by 9:00 a.m., New York City
time, on the Valuation Date relating to such Warrants, Euroclear Confirmations
with respect to such Warrants as required by Section 2.02(a) hereof, and if the
Warrant Agent has not received any such Euroclear Confirmation by such time,
notify the Company and the Calculation Agent (and such other parties (not to
exceed two) as the Company shall designate in writing) by 10:00 a.m., New York
City time, on such Valuation Date of the number of such Warrants in respect of
which the Warrant Agent has not received such Euroclear Confirmations and
(except to the extent the Company has notified the Warrant Agent that it has
waived the requirement of timely delivery of such Euroclear Confirmation) send
to the Euroclear participant that executed such Exercise Notice for which no
related Euroclear Confirmation was received (at the address specified in such
notice) a notice of rejection substantially in the form set forth in Exhibit
C hereto;


(v)  by 5:00 p.m., New York City time, on the Exercise Date
for such Warrants, notify the Company and the Calculation Agent of the total
number of exercised Warrants so determined (if such number is less than an
aggregate of 100 Warrants, the Warrant Agent shall not take the actions
required by clauses (vi) and (vii) below with respect to such Exercise Notice
or the related Warrants);


(vi)  obtain from the Calculation Agent the calculation of
the Cash Settlement Amount of the exercised Warrants (excluding any Warrants
held through Clearstream or Euroclear as to which timely delivery of the
related Warrant has not been



 6
 






 



made) as of
their Valuation Date in the manner set forth in Section 2.02(c) hereof by no
later than 5:00 p.m., New York City time, on the applicable Valuation Date;


(vii)  notify the Company (and such other parties (not to
exceed two) as the Company shall designate in writing) by 5:00 p.m., New York
City time, on the applicable Valuation Date of the aggregate Cash Settlement
Amount payable in respect of the exercised Warrants, and send notices of
confirmation substantially in the form included in Exhibit C to the
appropriate Participant specifying therein the reference number assigned by the
Warrant Agent to each accepted Exercise Notice; and


(viii)  promptly deliver a copy of each Exercise Notice to
the Company and advise the Company of such other matters relating to the
exercised Warrants as the Company shall reasonably request. Any notice to be
given to the Company by the Warrant Agent pursuant to this Section 2.02 shall
be by telephone (promptly confirmed in writing) or telecopy.


Except in the case of Warrants subject to automatic
exercise (as described in Section 2.06 hereof), if on any applicable Valuation
Date the Cash Settlement Amount for any Warrants then exercised would be zero,
then the attempted exercise of such Warrants shall be void and of no effect and
such Warrants shall be transferred by the Warrant Agent back to the Participant
(including Clearstream and Euroclear) that submitted them free to the Warrant
Agent on the records of the Depository (to the extent received in the case of
Warrants held through Clearstream or Euroclear) and, in any such case, the
Warrants in question shall remain outstanding and exercisable thereafter.


(c)  The Company shall make available to the Warrant Agent,
not later than 3:00 p.m., New York City time, on the third Business Day
following the Valuation Date (the “Settlement Payment Date”), funds in
an amount sufficient to pay the aggregate Cash Settlement Amount of the
exercised Warrants. If the Company has made such funds available as provided in
the preceding sentence, the Warrant Agent will be responsible for making funds
available to the Depository in accordance with procedures agreed upon between
the Depository and the Warrant Agent, against receipt of the Global Warrant
Certificate, after 3:00 p.m., New York City time, but prior to the close of
business, on the Settlement Payment Date, such funds to be in an amount equal to
the aggregate Cash Settlement Amount of the Warrants that were delivered to the
Warrant Agent (together with the related Exercise Notice) as provided in
Sections 2.01 and 2.02(a) and (b) hereof. The Depository will be responsible
for disbursing such funds to each appropriate Participant, and such Participant
will be responsible for disbursing such funds to the Warrantholders it
represents and to each brokerage firm for which it acts as agent. Each such
brokerage firm will be responsible for disbursing funds to the Warrantholders
it represents.


(d)  The Warrant Agent shall cause its records, which may be
kept electronically, to be marked to reflect the reduction in the number of
Warrants represented by the Global Warrant Certificate by the number of
Warrants that were delivered to the Warrant Agent and for which payment has
been made as provided in Section 2.02(c) hereof promptly after such delivery
and payment. Absent manifest error, the Warrant Agent’s records shall be
conclusive evidence of such matters.



 7














 


SECTION 2.03.  Price Source Unavailability Event. Upon
the occurrence of a Price Source Unavailability Event with respect to a
Reference Currency, the Valuation Date for the affected Reference Currency will
be postponed until the Valuation Business Day for that Reference Currency next
succeeding the scheduled Valuation Date on which no Price Source Unavailability
Event is occurring. If on each of the two scheduled Valuation Business Days
following the scheduled Valuation Date the Price Source Unavailability is still
in effect or if such days are not otherwise Valuation Business Days, the
Calculation Agent will determine the Settlement Rate for the affected Reference
Currency on the third scheduled Valuation Business Day after the scheduled
Valuation Date in accordance with the Fallback Rate Observation Methodology.


SECTION 2.04.  Disruption Events. Upon
the occurrence of a Disruption Event with respect to any Reference Currency on
any day during the term of the Warrants, the Calculation Agent will determine the
Settlement Rate for the affected Reference Currency as of the day on which such
Disruption Event occurred in accordance with the Fallback Rate Observation
Methodology. The Calculation Agent will use the Settlement Rate for the
affected Reference Currency so determined to calculate the Basket Value for any
Warrant exercised after the Disruption Event has occurred, whether or not the
Disruption Event is still continuing.


SECTION 2.05.  Delisting
of Warrants. In the event the Warrants are delisted from, or permanently
suspended from trading on (within the meaning of the Securities Exchange Act of
1934, as amended), the AMEX and not accepted at the same time for listing on
another United States national securities exchange, Warrants not previously
exercised will be deemed automatically exercised on the Delisting Date, and the
Cash Settlement Amount shall be calculated and settled as provided in Section
2.02 hereof. The Company will notify the Warrant Agent in writing, who will
notify the Warrantholders as soon as practicable of such delisting or trading
suspension. However, if the Company first receives notice of the delisting or
suspension on the same day on which the Warrants are delisted or suspended,
such day will be deemed the Delisting Date.


SECTION 2.06.  Automatic Exercise of Warrants (a) All
Warrants for which the Warrant Agent has not received an Exercise Notice duly
completed and in proper form at or prior to 3:00 p.m., New York City time, on
the earlier of (i) the Business Day immediately preceding the Expiration Date
or (ii) the Business Day immediately preceding the Delisting Date, if any, or
for which the Warrant Agent has received an Exercise Notice duly completed and
in proper form but with respect to which timely delivery of the relevant Warrants
has not been made, will be deemed automatically exercised on such date without
any requirement of an Exercise Notice to the Warrant Agent. The Exercise Date
for such Warrants shall be the Expiration Date or the Delisting Date, as the
case may be, or if such date is not a Business Day, the following Business Day.
The Valuation Date for such Warrants shall be the Scheduled Valuation Business
Day immediately following the date of automatic exercise, subject to
postponement in the event of a Disruption Event, as described in Section 2.04
hereof.


(b)  The Warrant Agent shall by 5:00 p.m., New York City
time, on the Expiration Date or the Delisting Date, as the case may be, notify
the Company and the Calculation Agent (and such other parties (not to exceed
two) as the Company shall designate in writing) of the number of Warrants to be
automatically exercised on such day. The Warrant



 8
 






 



Agent shall
(i) by 5:00 p.m., New York City time, on the applicable Valuation Date, obtain
from the Calculation Agent the calculation of the Cash Settlement Amount (as
determined by the Calculation Agent in the manner provided in Section 2.02(c)
hereof) of the Warrants to be automatically exercised, (ii) by 5:00 p.m., New
York City time, on the applicable Valuation Date, notify the Company (and such
other parties (not to exceed two) as the Company shall designate in writing) of
the aggregate Cash Settlement Amount payable in respect of such automatically
exercised Warrants and (iii) advise the Company of such other matters relating
to the automatically exercised Warrants as the Company shall reasonably
request.


(c)  The Company shall make available to the Warrant Agent,
not later than 3:00 p.m., New York City time, on the third Business Day after
the applicable Valuation Date for automatically exercised Warrants (the “Automatic
Settlement Payment Date”), funds in an amount sufficient to pay the
aggregate Cash Settlement Amount of such Warrants. If the Company has made such
funds available as provided in the preceding sentence, the Warrant Agent will
be responsible for making funds available to the Depository in accordance with
procedures agreed upon between the Depository and the Warrant Agent, against
receipt of the Global Warrant Certificate, after 3:00 p.m., New York City time,
but prior to the close of business, on the Automatic Settlement Payment Date,
such funds to be in an amount equal to the aggregate Cash Settlement Amount of
the Warrants subject to such automatic exercise. The Depository will be
responsible for disbursing such funds to each appropriate Participant, and such
Participant will be responsible for disbursing such funds to the Warrantholders
it represents and to each brokerage firm for which it acts as agent. Each such
brokerage firm will be responsible for disbursing funds to the Warrantholders
it represents.


SECTION 2.07.  Denominations; Maximum Number of
Exercisable Warrants; Minimum Number of Exercisable Warrants (a) The
Warrants will be issued in denominations of 100 Warrants and whole multiples of
100.


(b)  All exercises of Warrants (except in the case of
automatic exercise of Warrants as described in Section 2.06 hereof) shall be
subject, at the Calculation Agent’s option, to the limitation that not more
than 500,000 Warrants in total may be exercised on any Exercise Date. If any
Business Day would otherwise, under the terms of this Agreement, be the
Exercise Date in respect of more than 500,000 Warrants, then at the Calculation
Agent’s option (by giving notice thereof to the Warrant Agent not later than
5:00 p.m., New York City time, on the Business Day immediately following such
Exercise Date), 500,000 of such Warrants (selected by the Warrant Agent on a
pro rata basis or by lot) shall be deemed exercised on such Exercise Date, and
the remainder of such Warrants (the “Remaining Warrants”) shall be
deemed exercised on the following Business Day (subject to successive
applications of this Section 2.07). Remaining Warrants shall be deemed
exercised in the order of their respective initial Exercise Dates, and
Remaining Warrants shall be deemed exercised before any other Warrants
initially exercised after such Remaining Warrants. The date on which any
Warrant is deemed exercised under this Section 2.07(b) shall for all purposes
of this Agreement be the “Exercise Date” in respect of such Warrant.


(c)  No fewer than 100 Warrants may be exercised by a
Warrantholder at any one time, except in the case of automatic exercise of
Warrants.



 9
 






 



SECTION 2.08.  Covenant of the Company. The Company
covenants, for the benefit of the Warrantholders, that it will not seek the
delisting of the Warrants from, or suspension of their trading on, the AMEX
unless the Company has, at the same time, arranged for listing of the Warrants
on another United States national securities exchange.


SECTION 2.09.  Return
of Money Held Unclaimed for Two Years. Except as otherwise provided herein,
any money deposited with or paid to the Warrant Agent for the payment of the
Cash Settlement Amount of any Warrants and not applied but remaining unclaimed
for two years after the date upon which such Cash Settlement Amount shall have
become due and payable shall be repaid by the Warrant Agent to the Company and
the holders of such Warrants shall thereafter look only to the Company for any
payment which such holders may be entitled to collect and all liability of the
Warrant Agent with respect to such money shall thereupon cease; provided,
however, that the Warrant Agent, before making any such repayment, may
at the expense of the Company notify the Participants concerned, that said
money has not been so applied and remains unclaimed and that after a date named
in the notification any unclaimed balance of said money then remaining will be
returned to the Company.


SECTION 2.10.  Return
of Global Warrant Certificate. At such time as all of the Warrants
evidenced by a Global Warrant Certificate have been exercised (including
pursuant to an automatic exercise) and all payments to the Participants made as
provided herein, the Warrant Agent shall, upon written direction from the
Company, destroy the canceled Global Warrant Certificate (unless instructed by
the Company in writing to deliver the Global Warrant Certificate to the
Company) and shall provide a certificate of destruction to the Company.


ARTICLE III


OTHER PROVISIONS RELATING TO

RIGHTS OF WARRANTHOLDERS


SECTION 3.01.  Warrantholder
May Enforce Rights. Notwithstanding any of the provisions of this
Agreement, any Warrantholder, without the consent of the Warrant Agent, may, in
and for its own behalf, enforce, and may institute and maintain, any suit,
action or proceeding against the Company suitable to enforce, or otherwise in
respect of, its right to exercise, and to receive payment for, its Warrants as
provided in this Agreement.


SECTION 3.02.  Merger,
Consolidation, Sale, Transfer or Conveyance. If at any time there shall be
a merger or consolidation involving the Company or a sale, transfer, conveyance
(other than by way of lease) or other disposition of substantially all of the
assets of the Company, then the successor or assuming corporation shall succeed
to and be substituted for the Company under this Agreement and the Warrants,
with the same effect as if it had been named herein and in any Global Warrant
Certificate as the Company. The Company shall thereupon be relieved of any
further obligation hereunder or under the Warrants and may at any time
thereafter be dissolved, wound up or liquidated. In any case of any such
consolidation or merger involving the Company or sale, transfer, conveyance or
other disposition of substantially all of the assets of the Company, any
changes in phraseology and form (but not in substance) that may be appropriate
may be made in the Global Warrant Certificates delivered thereafter.



 10
 






 



The Warrant Agent may
rely on a written opinion of counsel as conclusive evidence that any such
consolidation or merger involving the Company or sale, transfer, conveyance
(other than by way of lease) or other disposition of substantially all of the
assets of the Company complies with the provisions of this Section 3.02.


ARTICLE IV


WARRANTS ACQUIRED BY THE COMPANY;

PAYMENT OF TAXES; TAXATION OF WARRANTS


SECTION 4.01.  Warrants
Acquired by the Company. In the event the Company shall purchase or
otherwise acquire Warrants, such Warrants may, at the option of the Company, be
surrendered free through a Participant to the Depository for credit to the
account of the Warrant Agent maintained at the Depository, and if so credited,
the Warrant Agent shall promptly note the cancellation of such Warrants by
notation on the records of the Warrant Agent. Such Warrants may also, at the
option of the Company, be resold by the Company directly or to or through any
of its affiliates in lieu of being surrendered to the Depository.


Any canceled Global Warrant Certificate held by the
Warrant Agent under this Agreement shall be destroyed by the Warrant Agent
unless otherwise directed in writing by the Company, and the Warrant Agent
shall deliver a certificate of destruction to the Company evidencing the same.


SECTION 4.02.  Taxation
of Warrants. The Company intends to treat and, by purchasing a Warrant, the
Warrantholder agrees to treat, for all tax purposes, a Warrant as a nonequity
option within the meaning of section 1256(g)(3) of the Internal Revenue Code of
1986, as amended.


ARTICLE V


CONCERNING THE WARRANT AGENT


SECTION 5.01.  Warrant
Agent. (a) The Company hereby appoints Citibank, N.A. (“Citibank”)
as Warrant Agent of the Company in respect of the Warrants upon the terms and
subject to the conditions set forth herein; and Citibank hereby accepts such
appointment.


The Warrant Agent shall have the powers and authority
granted to and conferred upon it in this Agreement and such further powers and
authority to act on behalf of the Company as the Company may hereafter grant to
or confer upon it. All of the terms and provisions with respect to such powers
and authority contained in any Global Warrant Certificate are subject to and
governed by the terms and provisions hereof.


(b) Citibank covenants and agrees to maintain an
office, staffed by qualified personnel, with adequate facilities for the
discharge of its responsibilities under this Agreement, including, without
limitation, the payment of the Cash Settlement Amount, as calculated by the
Calculation Agent, and the timely settlement of the Warrants upon exercise
thereof.



 11
 






 



SECTION 5.02.  Conditions of Warrant
Agent’s Obligations. The Warrant Agent accepts its obligations herein set
forth upon the terms and conditions hereof, including the following, to all of
which the Company agrees and to all of which the rights hereunder of the
Warrantholders shall be subject:


(a)  The Company agrees promptly to pay the Warrant Agent the
compensation to be agreed upon with the Company for all services rendered by
the Warrant Agent and to reimburse the Warrant Agent for its reasonable
out-of-pocket expenses (including reasonable attorneys’ fees and expenses)
incurred by the Warrant Agent without negligence, bad faith or breach of this
Agreement on its part in connection with the services rendered by it hereunder.
The Company also agrees to indemnify the Warrant Agent and its officers,
directors, agents and employees for, and to hold it and them harmless against,
any loss, liability or expense (including reasonable attorneys’ fees and
expenses) incurred without negligence, bad faith or breach of this Agreement on
the part of the Warrant Agent, arising out of or in connection with its acting
as such Warrant Agent hereunder, as well as the reasonable costs and expenses
of defending against any claim of liability in the premises. This section shall
survive the termination of this Agreement and the earlier removal or
resignation of the Warrant Agent.


(b)  In acting under this Agreement, the Warrant Agent is
acting solely as agent of the Company and does not assume any obligation or
relationship of agency or trust for or with any of the owners or holders of the
Warrants.


(c)  The Warrant Agent may consult with counsel satisfactory
to it, and the opinion of such counsel shall be full and complete authorization
and protection in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion of such counsel.


(d)  The Warrant Agent shall be fully protected and shall
incur no liability for or in respect of any action taken or thing suffered by
it in reliance upon any written notice, direction, consent, certificate,
affidavit, statement or other paper or document believed by it to be genuine
and to have been presented or signed by the proper parties, and the Warrant Agent
may, if it shall deem it necessary or desirable, request such papers or
documents prior to taking any action hereunder.


(e)  The Warrant Agent, and its officers, directors, agents
and employees, may become the owner of, or acquire any interest in, any Warrants
or other obligations of the Company, with the same rights that it or they would
have if it were not the Warrant Agent hereunder and, to the extent permitted by
applicable law, it or they may engage or be interested in any financial or
other transaction with the Company and may act on, or as depository, trustee or
agent for, any committee or body of holders of Warrants or other obligations of
the Company as freely as if it were not the Warrant Agent hereunder.


(f)  The Warrant Agent shall not be under any liability for
interest on any monies at any time received by it pursuant to any of the
provisions of this Agreement nor shall it be obligated to segregate such monies
from other monies held by it, except as required by law. The Warrant Agent
shall not be responsible for advancing funds on behalf of the Company.



 12
 






 



(g)  The Warrant Agent shall not be under any responsibility
with respect to the validity or sufficiency of this Agreement or the execution
and delivery hereof (except the due execution and delivery hereof by the
Warrant Agent) or with respect to the validity or execution of the Global
Warrant Certificates (except its countersignature thereof).


(h)  The recitals contained herein and in the Global Warrant
Certificates (except as to the Warrant Agent’s countersignature thereon) shall
be taken as the statements of the Company, and the Warrant Agent assumes no
responsibility for the correctness of the same.


(i)  The Warrant Agent shall be obligated to perform such
duties as are herein specifically set forth, and no implied duties or
obligations shall be read into this Agreement against the Warrant Agent. The
Warrant Agent shall not be under any obligation to take any action hereunder
likely to involve it in any expense or liability, the payment of which is not,
in its reasonable opinion, assured to it. The Warrant Agent shall not be
accountable or under any duty or responsibility for the application by the
Company of any proceeds. The Warrant Agent shall have no duty or responsibility
in case of any default by the Company in the performance of its covenants or
agreements contained in any Global Warrant Certificate or in the case of the
receipt of any written demand from a holder of a Warrant with respect to such
default, including, without limiting the generality of the foregoing, any duty
or responsibility to initiate or attempt to initiate any proceedings at law or
otherwise or, except as provided in Section 7.03 hereof, to make any demand
upon the Company.


(j)  The Warrant Agent 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.


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


SECTION 5.03.  Resignation
and Appointment of Successor.(a)  The Company agrees, for the
benefit of the Warrantholders, that there shall at all times be a Warrant Agent
hereunder until all the Warrants are no longer outstanding or until monies for
the payment of all outstanding Warrants, if any, shall have been paid to the
Warrant Agent and shall have been returned to the Company as provided in
Section 2.9 hereof, whichever occurs earlier.


(b)  The Warrant Agent may at any time resign as such agent
by giving written notice to the Company of such intention on its part,
specifying the date on which its desired resignation shall become effective,
subject to the appointment of a successor Warrant Agent and acceptance of such appointment
by such successor Warrant Agent as hereinafter provided. The Warrant Agent
hereunder may be removed at any time by the filing with it of an instrument in
writing signed by or on behalf of the Company and specifying such removal and
the date when it shall become effective. Such resignation or removal shall take
effect upon the appointment by the Company, as hereinafter provided, of a
successor Warrant Agent (which shall be a banking institution organized under
the laws of the United States of America or one of the states thereof and
having an office in the Borough of Manhattan, New York City) and the acceptance
of such



 13
 






 



appointment by
such successor Warrant Agent. In the event a successor Warrant Agent has not
been appointed and accepted its duties within 90 days of the Warrant Agent’s
notice of resignation or its removal, the Warrant Agent may apply to any court
of competent jurisdiction for the designation of a successor Warrant Agent. The
obligation of the Company under Section 5.02(a) hereof shall continue to the
extent set forth therein notwithstanding the resignation or removal of the
Warrant Agent.


(c)  In case at any time the Warrant Agent shall give notice
of its intent to resign, or shall be removed, or shall become incapable of
acting, or shall be adjudged a bankrupt or insolvent, or make an assignment for
the benefit of its creditors, or consent to the appointment of a receiver or
custodian of all or any substantial part of its property, or shall admit in
writing its inability to pay or meet its debts as they mature, or if a receiver
or custodian of it or of all or any substantial part of its property shall be
appointed, or if any public officer shall have taken charge or control of the
Warrant Agent or of its property or affairs for the purpose of rehabilitation,
conservation or liquidation, a successor Warrant Agent, qualified as aforesaid,
shall be promptly appointed by the Company by an instrument in writing, filed
with the successor Warrant Agent. Upon the appointment as aforesaid of a successor
Warrant Agent and acceptance by the latter of such appointment, the Warrant
Agent so superseded shall cease to be Warrant Agent hereunder.


(d)  Any successor Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the authority, rights, powers, trust, immunities, duties and obligations
of such predecessor with like effect as if originally named as Warrant Agent
hereunder, and such predecessor, upon payment of its charges and disbursements
then due and unpaid, shall thereupon become obligated to transfer, deliver and
pay over, and such successor Warrant Agent shall be entitled to receive, all
monies, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.


(e)  Any corporation into which the Warrant Agent hereunder
may be merged or converted or any corporation with which the Warrant Agent may
be consolidated, or any corporation resulting from any merger, conversion or
consolidation to which the Warrant Agent shall be a party, or any corporation
to which the Warrant Agent shall sell or otherwise transfer all or
substantially all the corporate trust assets and business of the Warrant Agent,
provided that it shall be qualified as aforesaid, shall be the successor
Warrant Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto.


ARTICLE VI


CONCERNING THE CALCULATION AGENT


SECTION 6.01.  Calculation Agent. The Company hereby
appoints Lehman Brothers Inc. to be the Company’s Calculation Agent for the
purpose of performing the services described herein upon the terms and subject
to the conditions set forth herein; and Lehman Brothers Inc. hereby accepts
such appointment.


 



 14














 


SECTION 6.02.  Calculations and
Information Provided.  (a)  The Calculation Agent will determine the Cash
Settlement Amount in respect of an exercise of Warrants and will be responsible
for determining each of the following items:


(i)  the
Basket Value and the Cash Settlement Amount;


(ii)  whether
a Disruption Event  has occurred and, in
the event a Disruption Event has occurred, taking the actions specified in
Section 2.04 hereto;


(iii)  whether
a Price Source Unavailability Event has occurred and, in the event a Price
Source Unavailability Event has occurred, taking the actions specified in
Section 2.03 hereto;


(iv)  whether
a particular day is a Valuation Date;


(v)  whether
a particular day is a Valuation Business Day;


(vi)  whether
to limit the number of Warrants exercisable on any date, other than automatic
exercises, to an aggregate of 500,000 as described in Section 2.07 hereof;


(vii)  any
other calculation, determination or adjustment specified as being made by the
Calculation Agent in this Agreement or the relevant Warrants.


The Calculation Agent
shall timely notify the Warrant Agent of all such calculations, determinations
and adjustment or if a Disruption Event or Price Source Unavailability Event
with respect to the Warrants has occurred.


(b)  Any calculation or determination by the Calculation
Agent under this Agreement shall be made at the sole discretion of the
Calculation Agent and shall (in the absence of manifest error) be final and
binding on the Company, the Warrant Agent, the Warrantholders and any
Participant. Any such calculations will be made available to a Warrantholder
for inspection at the Warrant Agent’s Office.


SECTION 6.03.  Conditions of Calculation
Agent’s Obligations. The Calculation Agent accepts its obligations herein
set forth upon the terms and conditions hereof, including the following, to all
of which the Company agrees and to all of which the rights hereunder of the
Warrantholders shall be subject:


(a)  The Calculation Agent shall act as an independent expert
and not as an agent of the Company and does not assume any obligation toward,
or any relationship of agency or trust for or with, any Warrantholders.


(b)  Unless otherwise specifically provided herein, any
order, certificate, notice, request, direction or other communication from the
Company or the Warrant Agent made or given under any provision of this
Agreement shall be sufficient if signed by any person who the Calculation Agent
reasonably believes to be a duly authorized officer or attorney-in-fact of the
Company or the Warrant Agent, as the case may be.



 15
 






 



(c)  The Calculation Agent shall be obliged to perform only
such duties as are set out specifically herein and any duties necessarily
incidental thereto.


(d)  The Calculation Agent, whether acting for itself or in
any other capacity, may become the owner or pledgee of Warrants with the same
rights as it would have had if it were not acting hereunder as Calculation
Agent.


(e)  The Calculation Agent shall incur no liability hereunder
except for loss sustained by reason of its gross negligence or willful
misconduct.


SECTION 6.04.  Resignation and Appointment of Successor  .  (a) 
The Company agrees, for the benefit of the Warrantholders from time to
time, that there shall at all times be a Calculation Agent hereunder until all
the Warrants are no longer outstanding or until monies for the payment of all
outstanding Warrants, if any, shall have been paid to the Warrant Agent and
shall have been returned to the Company as provided in Section 2.9 hereof,
whichever occurs earlier.


(b)  Resignation, removal and appointment of the Calculation
Agent shall be in accordance with the procedures set forth for the resignation,
removal and appointment of the Warrant Agent, as provided in Section 5.03
hereof, except that a successor Calculation Agent need not be a banking
institution with offices in the Borough of Manhattan, New York City, and may
only be appointed if such successor has been nominated by the Company.


SECTION 6.05.  Compensation;
Indemnification  The Company agrees
promptly to pay the Calculation Agent the compensation to be agreed upon with
the Company for all services rendered by the Calculation Agent hereunder. The
Company also agrees to indemnify the Calculation Agent for, and to hold it
harmless against, any loss, liability, cost or expense (including reasonable
attorneys’ fees and expenses) incurred by the Calculation Agent by reason of
its being made a party to a suit or claim arising out of this Agreement; provided,
however, that such indemnity shall in no event apply to the extent that
any such loss, liability, cost or expense is a result of the gross negligence
or willful misconduct of the Calculation Agent or any of its agents or
employees. The Calculation Agent shall incur no liability and shall be
indemnified and held harmless by the Company for or in respect of any action
taken or suffered to be taken in good faith by the Calculation Agent in
reliance upon written instructions from the Company. The indemnity obligation
of the Company shall continue notwithstanding the termination of this Agreement
or the resignation or removal of the Calculation Agent.


ARTICLE VII



MISCELLANEOUS


SECTION 7.01.  Definitions.  Set forth below are certain defined terms
used in this agreement.


“AMEX”
shall mean the American Stock Exchange LLC.



 16
 






 



“Automatic
Settlement Payment Date” shall have the meaning set forth in Section
2.06(c) hereof.


“Basket”
shall mean a basket of currencies comprised of the Chinese Yuan, Taiwanese
Dollar, Japanese Yen, Singapore Dollar and U.S. Dollar.


“Basket Value”
shall mean the sum of the Reference Currency Quotients.


“Business Day”
shall mean any day that is not a Saturday, Sunday or a day on which The New
York Stock Exchange, Inc., The Nasdaq Stock Market, Inc. or the AMEX is not
open for trading or banking institutions or trust companies in New York City
are authorized or obligated by law or executive order to close.


“Calculation
Agent” shall have the meaning set forth in the preamble hereto.


“Cash
Settlement Amount” shall mean, per Warrant exercised, the greater of (i)
zero and (ii) the product of the Notional Amount times the Basket Value


“Citibank”
shall have the meaning set forth in Section 5.01(a) hereof.


“Clearstream”
shall have the meaning set forth in Section 1.01(c) hereof.


“Company”
shall have the meaning set forth in the preamble hereto.


“Delisting Date”
shall mean, if the Warrants are delisted, the effective date of their delisting
from, or permanent suspension from trading on, the AMEX or another United
States national securities exchange and failure to list the Warrants on another
United States national securities exchange.


“Depository”
shall have the meaning set forth in Section 1.02(d) hereof.


A “Disruption Event” with respect to any
Reference Currency means any of the following events (other than a Price Source
Unavailability Event), as determined in good faith by the Calculation Agent:


(a)  the occurrence and/or existence of an event on any day
that has the effect of preventing or making impossible (x) the conversion of
such Reference Currency into U.S. Dollars through customary legal channels; or
(y) the delivery of U.S. Dollars from accounts inside the country for which
such Reference Currency is the lawful currency (such jurisdiction with respect
to such Reference Currency, the “Reference Currency Jurisdiction”) to
accounts outside that Reference Currency Jurisdiction;


(b)  the occurrence of any event causing the Reference
Exchange Rate for such Reference Currency to be split into dual or multiple
currency exchange rates; or


(c)  the occurrence and/or existence of any event (other than
those set forth in (a) or (b) above) in a Reference Currency Jurisdiction that
materially disrupts the market for such Reference Currency.



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“Euroclear” shall have the meaning set forth in Section 1.01(c)
hereof.


“Euroclear
Confirmation” shall have the meaning set forth in Section 2.02(a) hereof.


“Exercise Date”
shall have the meaning set forth in Section 2.02(a) hereof.


“Exercise
Notice” shall have the meaning set forth in Section 2.01 hereof.


“Expiration
Date” shall have the meaning set forth in Section 2.01 hereof.


“Fallback Rate
Observation Methodology” means that the Settlement Rate for a Reference
Currency will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received by the Calculation Agent at approximately
5:00 p.m., Tokyo time, on the relevant date for the purchase or sale for
deposits in the Reference Currency by the offices in either Hong Kong,
Singapore or Tokyo of three leading banks engaged in the interbank market (selected
in the sole discretion of the Calculation Agent) (the “Reference Banks”). If
fewer than three Reference Banks provide spot quotations then the Settlement
Rate for such Reference Currency will be determined by the Calculation Agent in
good faith and in a commercially reasonable manner.


“Global Warrant
Certificate” shall have the meaning set forth in Section 1.01(b) hereof.


“Initial
Reference Currency Amount”, for each Reference Currency and the U.S.
Dollar, shall be:




	
  Currency

  	
   

  	
  Initial Reference Currency Amount

  
	
  CNY

  	
   

  	
  1.9935

  
	
  TWD

  	
   

  	
  8.2075

  
	
  JPY

  	
   

  	
  28.7600

  
	
  SGD

  	
   

  	
  0.393475

  
	
  USD

  	
   

  	
  -1.0000

  






 


“Notional
Amount” shall equal $95.00.


“Participants”
shall have the meaning set forth in Section 1.02(d) hereof.


“Price Source
Unavailability Event” means, as determined in good faith by the Calculation
Agent, the Settlement Rate being unavailable for a Reference Currency, or the
occurrence of an event (other than an event constituting a Disruption Event)
that generally makes it impossible to obtain the Settlement Rate for a
Reference Currency, on the relevant Valuation Date.


 “Reference Currencies” shall mean the
Chinese Yuan, the Taiwanese Dollar, the Japanese Yen and the Singapore Dollar
(each, a “Reference Currency”).



 18
 






 



“Reference
Currency Quotient” shall mean, for each Reference Currency, and the U.S.
Dollar, a quotient, the numerator of which is the Initial Reference Currency
Amount for such currency and the denominator of which is the Settlement Rate
for such currency.


“Reference
Exchange Rate” shall mean, for each Reference Currency, the spot exchange
rates for each of such Reference Currencies quoted against the U.S. Dollar
expressed as number of currency units per USD 1.


“Remaining
Warrants” shall have the meaning set forth in Section 2.07(b) hereof.


“Settlement
Rate” shall mean, for each Reference Currency (subject to the occurrence of
a Disruption Event) is the Reference Exchange Rate on the Valuation Date,
observed as per the Settlement Rate Option (subject to the occurrence of a
Price Source Unavailability Event). The Settlement Rate for the U.S. Dollar
shall equal 1.


“Settlement
Rate Option” shall mean for each Reference Currency, as follows:


Chinese Yuan: The
Chinese Renminbi/U.S. Dollar official fixing rate, expressed as the amount of
Chinese Renminbi per one U.S. Dollar, for settlement in two business days
reported by The State Administration of Foreign Exchange of the People’s
Republic of China, Beijing, which appears on the Reuters Screen SAEC Page
opposite the symbol “USDCNY=“ at approximately 5:00 p.m., Beijing time, on the
relevant Valuation Date.


Taiwanese Dollar:
The Taiwanese Dollar/U.S. Dollar spot rate, expressed as the amount of
Taiwanese Dollars per one U.S. Dollar, for settlement in two business days,
reported by the Taipei Forex Inc. which appears on the Reuters Screen TAIFX1
Page under the heading “Spot” at approximately 11:00 a.m. Taipei time, on the
relevant Valuation Date, or if no rate appears as of 11:00 a.m., Taipei time,
the rate that first appears in any of the next succeeding 15 minute intervals
after such time, up to and including 12:00 noon, Taipei time, on the relevant
Valuation Date.


Japanese Yen: The
Japanese Yen/U.S. Dollar official fixing rate, expressed as the amount of
Japanese Yen per one U.S. Dollar, for settlement in two business days reported
by the Federal Reserve Bank of New York which appears on Reuters Screen 1FED to
the right of the caption “JPY” at approximately 10:00 a.m. New York time, on
the relevant Valuation Date.


Singapore Dollar:
The Singapore Dollar/U.S. Dollar spot rate at 11:00 a.m., Singapore time,
expressed as the amount of Singapore Dollar per one U.S. Dollar, for settlement
in two business days, reported by the Association of Banks in Singapore which
appears on the Reuters Page ABSIRFIX01 to the right of the caption “Spot” under
the column “SGD” at approximately 11:30 a.m., Singapore time, on the relevant
Valuation Date.


“Settlement
Payment Date” shall have the meaning set forth in Section 2.02(c) hereof.


“Valuation
Business Day” shall mean, with respect to each Reference Currency, any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which commercial banks are authorized or required by law, regulation or
executive order to close



 19
 






 



(including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in the city or
jurisdiction indicated in the Settlement Rate Option for that Reference
Currency.


“Valuation Date” shall mean, for each Reference
Currency, the Valuation Business Day immediately following the relevant
Exercise Date or, in the event of automatic exercise, following the Expiration
Date or Delisting Date; provided that if a Price Source Unavailability Event
occurs with respect to a Reference Currency, the Valuation Date for the
affected Reference Currency may be postponed as described herein. The Valuation
Date may also be postponed if the number of Warrants sought to be exercised on
a single Exercise Date exceeds the maximum daily limit on exercise, as
described as described in Section 2.02 hereof.


“Warrant”
shall have the meaning set forth in the recitals hereto. The term “Warrants”
has a corresponding meaning.


“Warrant
Account” shall have the meaning set forth in Section 2.01 hereof.


“Warrant Agent”
shall have the meaning set forth in the preamble hereto.


“Warrant Agent’s
Office” shall mean 111 Wall Street, 15th Floor, New York, New York 10043,
or such other address as shall be specified in writing by the Warrant Agent.


“Warrantholder”
shall have the meaning set forth in Section 1.01(b) hereof.


SECTION 7.02.  Amendment.
(a)  This Agreement and the terms of the Warrants may be amended by
the Company, the Warrant Agent and the Calculation Agent, without the consent
of the Warrantholders, for the purpose of curing any ambiguity, or of curing,
correcting or supplementing any defective or inconsistent provision contained
herein or therein, to maintain the Warrants’ listing on the AMEX or any other
national securities exchange or securities association on which they are then
listed, to reflect the issuance by the Company of additional warrants or in any
other manner which the Company may deem necessary or desirable and which, as
determined by the Company in its sole discretion, will not materially adversely
affect the interests of the holders of the Warrants.


(b)  The Company, the Warrant Agent and the Calculation Agent
may modify or amend this Agreement, with the consent of Warrantholders holding
not less than a majority in number of the then outstanding Warrants affected by
such modification or amendment, for any purpose; provided, however,
that no such modification or amendment that changes the determination of the
Cash Settlement Amount of a Warrant (or any aspects of such determination) so
as to reduce the amount receivable upon exercise of a Warrant, shortens the
period of time during which the Warrants may be exercised, or otherwise
materially and adversely affects the exercise rights of the Warrantholders or
reduces the percentage of the number of outstanding Warrants, the consent of
whose holders is required for modification or amendment of this Agreement, may
be made without the consent of each Warrantholder affected thereby. The Warrant
Agent may, but shall not be obligated to, enter into any amendment of this
Agreement that affects its rights, duties, immunities or indemnities hereunder.



 20
 






 



SECTION 7.03.  Notices and Demands to the Company, the
Warrant Agent and the Calculation Agent. If the Warrant Agent or the
Calculation Agent shall receive any notice or demand addressed to the Company
by any Warrantholder pursuant to the provisions of this Agreement, the Warrant
Agent or the Calculation Agent, as the case may be, shall promptly forward such
notice or demand to the Company.


SECTION 7.04.  Addresses for Notices.
(a) Any communications to the Warrant Agent with respect to this Agreement
shall be addressed to Citibank, N.A., 388 Greenwich St. 14th Floor, New York,
New York 10013, Attention: John W. Reasor, Vice President (telephone: (212)
816-5825; facsimile: (212) 816-5530), (b) any communications to the Company
with respect to this Agreement shall be addressed to Lehman Brothers Holdings
Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Treasurer
(telephone: (212) 526-7000; facsimile: (646) 758-3204), with a copy to 1301
Avenue of the Americas, 5th Floor, New York,
New York 10022, Attention: Corporate Secretary (telephone: (212) 526-0858;
email: corporatesecretary@lehman.com), and (c) any communications to the
Calculation Agent with respect to this Agreement shall be addressed to Lehman
Brothers Inc., 745 Seventh Avenue, New York, New York 10019, Attention:
Treasurer (telephone: (212) 526-7000; facsimile: (646) 758-4942) (or such other
address as shall be specified in writing by the Warrant Agent, the Company or
the Calculation Agent, respectively).


SECTION 7.05.  Notices to Holders.
The Company may cause to have notice given to the Warrantholders by providing
the Warrant Agent with a form of notice to be distributed by the Depository to
Participants in accordance with the custom and practices of the Depository.


SECTION 7.06.  Obtaining of Approvals.
The Company will from time to time take all action which may be necessary to
obtain and keep effective (a) any and all permits, consents and approvals of
governmental agencies and authorities and the AMEX or any successor United
States national securities exchange and (b) any and all filings or notices
under United States Federal and state securities laws, which may be or become
required in connection with the issuance, sale, trading, transfer or delivery
of the Global Warrant Certificates or the exercise of the Warrants.


SECTION 7.07.  Persons Having Rights
Under This Agreement. Nothing in this Agreement expressed or implied and
nothing that may be inferred from any of the provisions hereof is intended, or
shall be construed, to confer upon, or give to, any person or corporation other
than the Company, the Warrant Agent, the Calculation Agent, the registered
holder of the Global Warrant Certificates and the Warrantholders any right,
remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof; and all covenants,
conditions, stipulations, promises and agreements contained in this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent,
the Calculation Agent, and their respective successors, the registered holder
of the Global Warrant Certificates and of the Warrantholders.


SECTION 7.08.  Inspection of Agreement.
A copy of this Agreement shall be available during the Warrant Agent’s normal
business hours at the Warrant Agent’s Office, which is located at 111 Wall
Street, 15th Floor, New York, New York 10043, for inspection by



 21
 






 



the Warrantholders, Participants or any person certified
by any Participant to be an indirect participant of the Depository or any
person certified by any Participant to be a Warrantholder, in each case, on
behalf of whom such Participant holds Warrants.


SECTION 7.09.  Headings.The
descriptive headings of the several Articles and Sections of this Agreement are
inserted for convenience only and shall not control or affect the meaning or
construction of any of the provisions hereof.


SECTION 7.10.  Counterparts. This
Agreement may be executed by the parties hereto in any number of counterparts,
each of which counterpart, when so executed and delivered, shall be deemed to
be an original, but all such counterparts taken together shall constitute but
one and the same instrument. Delivery of an executed counterpart of a signature
page of this Agreement by facsimile transmission shall be effective as delivery
of a manually executed counterpart of this Agreement.


SECTION 7.11.  GOVERNING LAW. THIS
AGREEMENT AND EACH WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.



 22
 






 



IN WITNESS WHEREOF, this Agreement has been duly
executed by the parties hereto as of the day and year first above written.


	
  

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/Rashid Alvi

  
	
   

  	
   

  	
  Name: Rashid Alvi

  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  CITIBANK, N.A., as Warrant Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John W. Reasor

  
	
  \

  	
   

  	
  Name: John W. Reasor

  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  LEHMAN BROTHERS INC., as Calculation Agent

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Martin Goldberg

  
	
   

  	
   

  	
  Name: Martin Goldberg

  
	
   

  	
   

  	
  Title: Senior Vice President

  



 



 23














 


EXHIBIT A


[FORM OF GLOBAL WARRANT CERTIFICATE]


	
  No. 1

  	
  CUSIP No. 52520W721

  
	
   

  	
  ISIN No. US52520W213

  



 


LEHMAN BROTHERS HOLDINGS
INC.

_________Warrants

Currency Basket Warrants

Expiring February 13, 2008


 


This certifies that CEDE & Co., or registered
assigns, is the registered holder of _________ Currency Basket Warrants
Expiring February 13, 2008 (the “Warrants”). Each Warrant entitles the
beneficial owner thereof (each a “Warrantholder”) to receive, subject to
the conditions set forth herein and in the Warrant Agreement (as defined
below), from Lehman Brothers Holdings Inc. (the “Company”) an amount in
U.S. Dollars (rounded down to the nearest one-hundredth of a cent) (the “Cash
Settlement Amount”) that is the greater of (A) zero and (B) the product of
the product of the Notional Amount times the Basket Value. In no event shall a
Warrantholder be entitled to any interest on any Cash Settlement Amount.
Capitalized terms included herein but not defined herein have the meanings
assigned thereto in the Warrant Agreement.


“Basket Value” shall mean the sum of the
Reference Currency Quotients.


“Initial
Reference Currency Amount”, for each Reference Currency and the U.S.
Dollar, shall be:




	
  Currency

  	
   

  	
  Initial Reference Currency

  Amount

  	
   

  
	
  CNY

  	
   

  	
  1.9935

  	
   

  
	
  TWD

  	
   

  	
  8.2075

  	
   

  
	
  JPY

  	
   

  	
  28.7600

  	
   

  
	
  SGD

  	
   

  	
  0.393475

  	
   

  
	
  USD

  	
   

  	
  -1.0000

  	
   

  






 


 “Notional
Amount” shall equal $95.00.


“Reference Currency Quotient” shall mean, for
each Reference Currency, and the U.S. Dollar, a quotient, the numerator of which
is the Initial Reference Currency Amount for such currency and the denominator
of which is the Settlement Rate for such currency.


“Reference Currencies” shall mean the Chinese
Yuan, the Taiwanese Dollar, the Japanese Yen and the Singapore Dollar (each, a “Reference
Currency”).


“Reference
Exchange Rate” shall mean, for each Reference Currency, the spot exchange
rates for each of such Reference Currencies quoted against the U.S. Dollar
expressed as number of currency units per USD 1.



 A-1
  
 






 



“Settlement Rate” shall mean, for each
Reference Currency (subject to the occurrence of a Disruption Event) is the
Reference Exchange Rate on the Valuation Date, observed as per the Settlement
Rate Option (subject to the occurrence of a Price Source Unavailability Event).
The Settlement Rate for the U.S. Dollar shall equal 1.


“Settlement
Rate Option” shall mean for each Reference Currency, as follows:


Chinese Yuan: The
Chinese Renminbi/U.S. Dollar official fixing rate, expressed as the amount of
Chinese Renminbi per one U.S. Dollar, for settlement in two business days
reported by The State Administration of Foreign Exchange of the People’s
Republic of China, Beijing, which appears on the Reuters Screen SAEC Page
opposite the symbol “USDCNY=“ at approximately 5:00 p.m., Beijing time, on the
relevant Valuation Date.


Taiwanese Dollar:
The Taiwanese Dollar/U.S. Dollar spot rate, expressed as the amount of
Taiwanese Dollars per one U.S. Dollar, for settlement in two business days,
reported by the Taipei Forex Inc. which appears on the Reuters Screen TAIFX1
Page under the heading “Spot” at approximately 11:00 a.m. Taipei time, on the
relevant Valuation Date, or if no rate appears as of 11:00 a.m., Taipei time,
the rate that first appears in any of the next succeeding 15 minute intervals
after such time, up to and including 12:00 noon, Taipei time, on the relevant
Valuation Date.


Japanese Yen: The
Japanese Yen/U.S. Dollar official fixing rate, expressed as the amount of
Japanese Yen per one U.S. Dollar, for settlement in two business days reported
by the Federal Reserve Bank of New York which appears on Reuters Screen 1FED to
the right of the caption “JPY” at approximately 10:00 a.m. New York time, on
the relevant Valuation Date.


Singapore Dollar:
The Singapore Dollar/U.S. Dollar spot rate at 11:00 a.m., Singapore time,
expressed as the amount of Singapore Dollar per one U.S. Dollar, for settlement
in two business days, reported by the Association of Banks in Singapore which
appears on the Reuters Page ABSIRFIX01 to the right of the caption “Spot” under
the column “SGD” at approximately 11:30 a.m., Singapore time, on the relevant
Valuation Date.


“Valuation Business Day” shall mean,
with respect to each Reference Currency, any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close
(including for dealings in foreign exchange in accordance with the practice of
the foreign exchange market) in the city or jurisdiction indicated in the
Settlement Rate Option for that Reference Currency.


“Valuation Date” shall mean, for each Reference
Currency, the Valuation Business Day immediately following the relevant
Exercise Date or, in the event of automatic exercise, following the Expiration
Date or Delisting Date; provided that if a Price Source Unavailability Event
occurs with respect to a Reference Currency, the Valuation Date for the
affected Reference Currency may be postponed as described in the Warrant
Agreement. The Valuation Date may also be postponed if the number of warrants
sought to be exercised on a single Exercise Date exceeds the maximum daily
limit on exercise, as described as described in the Warrant Agreement.



 A-2
  
 






 



Subject to the terms of the Warrant Agreement, each
Warrant may be irrevocably exercised in whole but not in part on any Business
Day from August 11, 2006 until 3:00 p.m., New York City time, on the earlier of
(i) the Business Day immediately preceding February 13, 2008 (February 13, 2008
being referred to herein as the “Expiration Date”) and (ii) the Business
Day immediately preceding the Delisting Date, if any. Except in the event of
automatic exercise (as described in the Warrant Agreement), each Warrant shall
be irrevocably exercised upon receipt by the Warrant Agent of such Warrant
delivered free on the records of the Depository to the Warrant Agent’s
Depository Participant Account (entitled Citibank, N.A. Corporate Trust Warrant
Agent Account, No. 2659, or such other account at the Depository as the Warrant
Agent shall designate in writing to the Company) (the “Warrant Account”)
pursuant to an Exercise Notice to the Warrant Agent from a Participant, in the
case of Warrants held through the facilities of the Depository, a Clearstream
participant, in the case of Warrants held through Clearstream, or a Euroclear
participant, in the case of Warrants held through Euroclear, acting, directly
or indirectly, on behalf of the Warrantholder; provided, however,
that Exercise Notices are subject to rejection by the Warrant Agent as provided
in the Warrant Agreement. An Exercise Notice shall be unconditional.


This Global Warrant Certificate shall not be valid
unless countersigned by the Warrant Agent.


The Warrants evidenced by this Global Warrant
Certificate are part of a duly authorized issue of Warrants issued by the
Company pursuant to a Warrant Agreement, dated as of August 11, 2006 (the “Warrant
Agreement”), among the Company, Citibank, N.A. (the “Warrant Agent”)
and Lehman Brothers Inc. (the “Calculation Agent”), and is subject to
the terms and provisions contained in the Warrant Agreement, to all of which
terms and provisions the Warrantholders, the entities through which such
Warrantholders hold their beneficial interests in the Warrants and the
registered holder of this Global Warrant Certificate consent by acceptance of
this Global Warrant Certificate by the Depository and which Warrant Agreement
is hereby incorporated by reference in and made a part of this Global Warrant
Certificate. A copy of the Warrant Agreement is on file at the Warrant Agent’s
Office, which is located at 111 Wall Street, 15th Floor, New York, New York
10043.


The Warrants constitute direct, unconditional and
unsecured obligations of the Company and rank equally with the Company’s other
unsecured contractual obligations and with the Company’s unsecured and
unsubordinated debt.


Subject to the terms of the Warrant Agreement and this
Global Warrant Certificate, and except for Warrants (x) subject to automatic
exercise, (y) for which exercise is delayed pursuant to the Warrant Agreement
or (z) which are held through the facilities of Clearstream or Euroclear, the “Exercise
Date” for a Warrant will be (i) the Business Day on which the Warrant Agent
receives the Warrant and Exercise Notice in proper form with respect to such
Warrant, if received at or prior to 3:00 p.m., New York City time, on such day,
or (ii) if the Warrant Agent receives such Warrant and Exercise Notice after
3:00 p.m., New York City time, on a Business Day, then the Business Day following
such Business Day.


In the case of Warrants held through the facilities of
Clearstream or Euroclear, except for Warrants subject to automatic exercise,
the “Exercise Date” for a Warrant will be (i)



 A-3
  
 






 



the Business Day on which the Warrant Agent receives
the Exercise Notice in proper form with respect to such Warrant if such
Exercise Notice is received at or prior to 3:00 p.m., New York City time, on
such day; provided that the Warrant is received by the Warrant Agent by
3:00 p.m., New York City time, on the Valuation Date, or (ii) if the Warrant
Agent receives such Exercise Notice after 3:00 p.m., New York City time, on a
Business Day, then the Business Day following such Business Day; provided
that the Warrant is received by 3:00 p.m., New York City time, on the Valuation
Date relating to exercises of Warrants on the applicable Valuation Day. In the
event that a Warrant is received after 3:00 p.m., New York City time, on the
applicable Valuation Date, then the Exercise Date for such Warrant will be the
day on which such Warrant is received or, if such day is not a Business Day,
the following Business Day. In the case of Warrants held through the facilities
of Euroclear, (a) participants must also transmit, by facsimile, to the Warrant
Agent a copy of the Exercise Notice submitted to Euroclear by 3:00 p.m., New
York City time, on the desired Exercise Date and (b) Euroclear must confirm by
telex to the Warrant Agent by 9:00 a.m., New York City time, on the applicable
Valuation Date that the Warrants will be received by the Warrant Agent on such
date; provided that if such telex communication is received after 9:00
a.m., New York City time, on the applicable Valuation Date, the Company will be
entitled to direct the Warrant Agent to reject the related Exercise Notice or
waive the requirement for timely delivery of such telex communication.


Upon the occurrence of a Price Source Unavailability
Event with respect to a Reference Currency, the Valuation Date for the affected
Reference Currency will be postponed until the Valuation Business Day for that
Reference Currency next succeeding the scheduled Valuation Date on which no
Price Source Unavailability Event is occurring. If on each of the two scheduled
Valuation Business Days following the scheduled Valuation Date the Price Source
Unavailability is still in effect or if such days are not otherwise Valuation
Business Days, the Calculation Agent will determine the Settlement Rate for the
affected Reference Currency on the third scheduled Valuation Business Day after
the scheduled Valuation Date in accordance with the Fallback Rate Observation
Methodology. “Price Source Unavailability Event” means, as determined in
good faith by the Calculation Agent, the Settlement Rate being unavailable for
a Reference Currency, or the occurrence of an event (other than an event
constituting a Disruption Event) that generally makes it impossible to obtain
the Settlement Rate for a Reference Currency, on the relevant Valuation Date.


Upon the occurrence of a Disruption Event with respect
to any Reference Currency on any day during the term of the Warrants, the
Calculation Agent will determine the Settlement Rate for the affected Reference
Currency as of the day on which such Disruption Event occurred in accordance
with the Fallback Rate Observation Methodology. The Calculation Agent will use
the Settlement Rate for the affected Reference Currency so determined to
calculate the Basket Value for any warrant exercised after the Disruption Event
has occurred, whether or not the Disruption Event is still continuing. A “Disruption
Event” with respect to any Reference Currency means any of the following
events (other than a Price Source Unavailability Event), as determined in good
faith by the Calculation Agent:


(a)  the occurrence and/or existence of an event on any day
that has the effect of preventing or making impossible (x) the conversion of
such Reference Currency into U.S. Dollars through customary legal channels; or
(y) the delivery of U.S. Dollars from accounts inside the country for which such
Reference Currency is the lawful currency (such jurisdiction



 A-4
  
 






 



with respect
to such Reference Currency, the “Reference Currency Jurisdiction”) to
accounts outside that Reference Currency Jurisdiction;


(b)  the occurrence of any event causing the Reference
Exchange Rate for such Reference Currency to be split into dual or multiple
currency exchange rates; or


(c)  the occurrence and/or existence of any event (other than
those set forth in (a) or (b) above) in a Reference Currency Jurisdiction that
materially disrupts the market for such Reference Currency.


The valuation of and payment for any exercised Warrant
may be postponed as a result of the exercise of a number of Warrants exceeding
the maximum permissible amount as described herein, in which case the Warrantholder
will receive the Cash Settlement Amount determined as of a later date.


Subject to the terms of the Warrant Agreement, in the
event the Warrants are delisted from, or permanently suspended from trading on
(within the meaning of the Securities Exchange Act of 1934, as amended), the
AMEX and not accepted at the same time for listing on another United States
national securities exchange, Warrants not previously exercised will be deemed
automatically exercised on the Delisting Date, in which case the Warrantholder
will receive the Cash Settlement Amount.


All Warrants for which the Warrant Agent has not
received an Exercise Notice in proper form at or prior to 3:00 p.m., New York
City time, on the earlier of (i) the Business Day immediately preceding the
Expiration Date or (ii) the Business Day immediately preceding the Delisting
Date, if any, or for which the Warrant Agent has received an Exercise Notice in
proper form but with respect to which timely delivery of the relevant Warrants
has not been made, will be deemed automatically exercised on such date without
any requirement of an Exercise Notice to the Warrant Agent.


The Warrants will be issued in denominations of 100
Warrants and whole multiples of 100.


Subject to the terms of the Warrant Agreement, all
exercises of Warrants (except in the case of automatic exercise of Warrants)
shall be subject, at the Calculation Agent’s option, to the limitation that not
more than 500,000 Warrants in total may be exercised on any Exercise Date. No
fewer than 100 Warrants may be exercised by a Warrantholder at any one time,
except in the case of automatic exercise of Warrants.


The Company intends to treat and, by purchasing a
Warrant, the Warrantholder agrees to treat, for all tax purposes, a Warrant as
a nonequity option within the meaning of section 1256(g)(3) of the Internal
Revenue Code of 1986, as amended.


Prior to due presentment for registration of transfer,
the Company, the Warrant Agent, and any agent of the Company or the Warrant
Agent, may deem and treat the registered owner hereof as the absolute owner of
the Warrants evidenced hereby (notwithstanding any notation of ownership or
other writing hereon) for any purpose whatsoever, and as the person entitled to
exercise the rights represented by the Warrants evidenced hereby, and neither
the



 A-5
  
 






 



Company nor the Warrant Agent, nor any agent of the
Company or the Warrant Agent, shall be affected by any notice to the contrary.


The Warrant Agent shall, in accordance with the
Warrant Agreement, from time to time register the transfer of this Global
Warrant Certificate in its records (which may be maintained electronically) to
be maintained by it for that purpose at the Warrant Agent’s Office upon
surrender hereof, duly endorsed, or accompanied by a written instrument or
instruments of transfer in form satisfactory to the Warrant Agent, duly
executed by the registered holder hereof or by the duly appointed legal
representative or duly authorized attorney thereof, such signature to be
guaranteed by a bank or trust company with a correspondent office in New York
City or by a member of a national securities exchange. Upon any such
registration of transfer, a new Global Warrant Certificate shall be issued to
the transferee.


The Warrant Agreement and the terms of the Warrants
are subject to amendment, as provided in the Warrant Agreement.


THIS GLOBAL WARRANT CERTIFICATE SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.



 A-6
  
 






 



IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this instrument to be duly executed.


	
  Dated:

  	
   

  	
   

  	
   

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
   

  	
   

  	
  Title:

  
	
  [Corporate Seal]

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Countersigned for authentication

  	
   

  	
   

  	
   

  
	
  purposes only as of the

  	
   

  	
   

  	
   

  
	
  date above written:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  CITIBANK, N.A.

  	
   

  	
   

  	
   

  
	
  as Warrant Agent,

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  	
   

  	
   

  



 



 A-7
  














 


EXHIBIT B


FORM OF EXERCISE NOTICE


For Warrants Represented
by the Global Warrant Certificate

CUSIP No.: 52520W721

ISIN No.: US52520W7213

Citibank, N.A.

111 Wall Street, 15th Floor Zone 8

New York, New York 10043

Attn: Peggy Everett

Telephone No.: (212) 657-5316

Facsimile No.: (212) 657-2762


1. We refer to the
Warrant Agreement dated as of August 11, 2006 (the ‘‘Warrant Agreement’’),
among Lehman Brothers Holdings Inc. (the ‘‘Company’’), Citibank, N.A., as
Warrant Agent (the ‘‘Warrant Agent’’), and Lehman Brothers Inc., as Calculation
Agent (the ‘‘Calculation Agent’’). On behalf of certain beneficial owners, each
of whose Warrants have been, or will be, transferred to the Warrant Agent in
accordance with the provisions of the Representations Letter relating to the
Warrants, we hereby irrevocably exercise Warrants (the ‘‘Tendered Warrants’’).
We hereby acknowledge that the Tendered Warrants and this Exercise Notice must
be received by you by 3:00 p.m., New York City time, on a New York business day
in order for the Valuation Date for the Tendered Warrants to be the Valuation
Business Day following such New York business day and that, if the Tendered
Warrants and this Exercise Notice are received by you after 3:00 p.m., New York
City time, on a New York business day, the Valuation Date of the Tendered
Warrants shall be the following Valuation Business Day, in each case subject to
certain provisions of the Warrant Agreement.


2. If you determine that
this Exercise Notice has not been duly completed or is not in proper form, this
Exercise Notice will be void and of no effect and will be deemed not to have
been delivered. If the Cash Settlement Amount for any Tendered Warrants is
determined by the Calculation Agent to be zero, this Exercise Notice will be
void and of no effect and such Tendered Warrants will be transferred back to
the participant.


	
  Dated:

  	
   

  
	
   

  	
   

  
	
  NAME OF DEPOSITARY PARTICIPANT

  	
   

  
	
   

  	
   

  
	
  Participant Number

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Authorized Signature

  	
   

  
	
  Address:

  	
   

  
	
  Telephone: (  )

  	
   

  



 



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EXHIBIT C


CONFIRMATION OF EXERCISE


[Name of Depository Participant]

[Name of Euroclear Participant]

[Name of Clearstream Participant]

[Address]


We hereby confirm receipt of your Exercise Notice with
respect to _______________ Warrants (the “Tendered Warrants”) which were
transferred by you to our Depository Participant Account No. ______________. We
have found such Notice to be duly completed and in proper form, and we have
verified, in the manner provided in the Warrant Agreement, dated as of August
11, 2006 (the “Warrant Agreement”), among Lehman Brothers Holdings Inc.,
Citibank, N.A. and Lehman Brothers Inc., that you are a Depository Participant.
The Valuation Date of the Tendered Warrants was on ____________ in New York
City.


We hereby confirm that the aggregate Cash Settlement
Amount of the Tendered Warrants is $_____________ ($_____ per Warrant), which
will be made available to [you] as designated in your Exercise Notice.


Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement.


Dated:


	
   

  	
  CITIBANK, N.A., as Warrant Agent,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signature

  




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NOTICE OF REJECTION


[Name of Depository Participant]

[Name of Euroclear Participant]

[Name of Clearstream Participant]

[Address]


Dated:


You are hereby notified that the Exercise Notice
delivered by you was determined by us not to have been [duly completed] [in
proper form] [such Warrants were not transferred to our Depository Participant
Account No. ___________ on a timely basis as provided in the Warrant Agreement]
[we did not receive from Euroclear a Euroclear Confirmation that proper
delivery of the Warrants to which the Exercise Notice delivered by you relates
would be made on a timely basis], as set forth in the Warrant Agreement, dated
as of August 11, 2006 (the “Warrant Agreement”), among Lehman Brothers
Holdings Inc., Citibank, N.A. and Lehman Brothers Inc. Accordingly, we have
rejected your Exercise Notice as being unsatisfactory as to form.


Capitalized terms included herein but not defined have
the meanings assigned thereto in the Warrant Agreement.


 


	
   

  	
  CITIBANK, N.A., as Warrant Agent,

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Authorized Signature

  



 


 



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