Document:

Exhibit 10.4

Packaging Holdings Inc

c/o Burns Philp
& Company Pty Limited

Level 23, 56 Pitt Street

Sydney NSW 2000

Australia

July 25, 2007

United Steelworkers

Five Gateway Center

Pittsburgh, PA 15222

RE:         Termination
of ESOP and Related Contractual Provisions, Including USW

Representation On Board of Directors of Blue Ridge Paper Products, Inc.

Ladies and Gentlemen:

This letter is to confirm
our understanding and agreement on the consequences which will result in the
event that Blue Ridge Paper Products, Inc. (“Blue Ridge”) is acquired (the “Acquisition”)
either directly or indirectly, including through a merger with Packaging
Holdings Inc., by Rank Group Limited.  We
have previously agreed, in paragraph 8 of the letter agreement dated June 13,
2007, that the Acquisition will result in the termination of the Employee Stock
Ownership Plan (“ESOP”) previously created pursuant to Article XXXI and
Appendix C of the current collective bargaining agreement between Blue Ridge
and the USW.  This letter is to confirm
that (a) the termination of the ESOP will result in the automatic termination
of the provisions of Articles XXXI thru XXXV of the Master Agreement, including
but not limited to cessation of the United Steelworker’s (“USW”) representation
on the board of directors of Blue Ridge pursuant to Article XXXI; and (b)
Articles XXXI thru XXXV will be deleted from the Master Agreement and of no
further force or effect as of the effective date of the Acquisition.

Please confirm our
understanding and agreement by your signature below on behalf of the USW.  This letter agreement shall be binding upon
and inure solely to the benefit of the parties and their permitted assigns and
nothing herein is intended to or shall confer upon any other person or entity,
any right, benefit or remedy of any nature whatsoever, under or by reason of
this letter agreement.

 

	
  

  	
   

  	
  Sincerely,

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ THOMAS J. DEGNAN

  
	
   

  	
   

  	
  Thomas J. Degnan

  
	
   

  	
   

  	
   

  
	
  Agree To and
  Confirmed on behalf of

  	
   

  	
   

  
	
  the United
  Steelworkers

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ STAN JOHNSON

  	
   

  	
   

  	
   

  
	
  Name:

  	
  Stan Johnson

  	
   

  	
   

  
	
  Title:

  	
  Authorized Representative of the United Steelworkers

  
	
   

  	
  Director, USW
  District 9Exhibit
10.5

NINTH AMENDMENT TO THE

RETIREMENT PLAN
FOR SALARIED EMPLOYEES

OF BLUE RIDGE PAPER PRODUCTS INC.

The
Retirement Plan for Salaried Employees of Blue Ridge Paper Products Inc. is
amended, by adding a new Section 4.2(d) thereto, effective May 7, 2007, as
follows:

(d)         Benefit Increase for
Transferred Employees.  In the case
of any current or former Participant, to the extent that:

(1)                                 the
amount of such person’s Accrued Benefit is (or, in the case of a former
Participant, was) otherwise determined by offsetting such person’s benefit
under the Plan by the amount of such person’s accrued benefit under the
Champion Plan,

(2)                                 the
amount of such person’s accrued benefit under the Champion Plan as of any date
subsequent to May 13, 1999 is smaller than the amount of such person’s accrued
benefit under the Champion Plan as of May 13, 1999, and

(3)                                 such
reduction in such accrued benefit under the Champion Plan is due to a charge
imposed under the Champion Plan on account of preretirement survivor annuity
coverage provided with respect to such person under the Champion Plan for all
or any portion of the period of time that such person is (or was) an Employee
of the Employer (for purposes of this subsection (d), the “Champion Plan
Preretirement Survivor Coverage Charge”),

the amount of such person’s Accrued Benefit shall be
increased by an amount equal to the excess of:

(1)                                 the
amount that would have been such person’s Accrued Benefit had such person’s
accrued benefit under the Champion Plan been reduced by such Champion Plan
Preretirement Survivor Coverage Charge, over

(2)                                 the
amount of such person’s Accrued Benefit, determined without regard to the
provisions of this subsection (d).

The provisions of this subsection (d) shall apply
notwithstanding any other provisions of the Plan to the contrary.

For the avoidance of
doubt, the provisions of this subsection (d) shall:

(1)                                 in
no event result in the payment of duplicate benefits under the Plan,

(2)                                 apply
with respect to any person otherwise described in the foregoing provisions of
this subsection (d), notwithstanding the fact that such person (i) has
commenced to receive such person’s benefits under the Plan, (ii) is, but for
the provisions of this subsection (d), not otherwise entitled to any future
benefits under the Plan or (iii) has died, and

(3)                                 in
no event be construed as the acceptance by the Employer, the Committee or any
current or former Participant (or such person’s Beneficiary) of the correctness
under the terms of the Champion Plan (or under the Code or ERISA) of the
Champion Plan Preretirement Survivor Coverage Charge otherwise imposed with
respect to any current or former Participant, and shall in no event bar any
claim, or other action, brought against the Champion Plan (or the plan
administrator of the Champion Plan) or the sponsor of the Champion Plan by the
Plan or by any current or former Participant (or Beneficiary) challenging the
amount of such charge under the Champion Plan.

In the event of any reduction in the amount of the
Champion Plan Preretirement Survivor Coverage Charge with respect to any given
current or former Participant (whether on account of any claim or other action,
or otherwise), the Committee shall, as determined by the Committee, cause a
reduction to be made in the amount of any future benefits otherwise payable
under the Plan to, or with respect to, such person and/or seek to recover, as
an overpayment, a portion of the benefit previously paid under the Plan to, or
with respect to, such person.

The provisions of this subsection (d) shall in all
events be administered in accordance with such rules of uniform application as
may be established by the Committee.Exhibit 4.01

	
  CUSIP NO. 52517P4E8

  	
   

  
	
  ISIN NO. US52517P4E82

  	
   

  
	
   

  	
   

  
	
  REGISTERED

  	
  PRINCIPAL
  AMOUNT: $5,455,000

  
	
  No. R-1

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

RETURN-ENHANCED NOTES LINKED TO A BASKET OF
TEN COMMODITIES

DUE AUGUST 9, 2010

THIS
NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER
REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITORY OR A NOMINEE OF THE
DEPOSITORY.  UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55
WATER STREET, NEW YORK, NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND
ANY PAYMENT IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

UNLESS
AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN CERTIFICATED FORM (A
“CERTIFICATED NOTE”), THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY.

 

LEHMAN BROTHERS HOLDINGS
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company,” which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to CEDE & Co., or registered assigns, on
the Maturity Date, an amount
equal to the Redemption Amount at Maturity.

The
“Maturity Date” is August 9, 2010, or if such day is not a Business Day, on the
next following Business Day.

The
“Valuation Date” is August 2, 2010, or if such day is not a Valuation Business
Day, the immediately preceding Valuation Business Day; provided that if a
Disruption Event is in effect on the scheduled Valuation Date, the Valuation
Date may be postponed.

The
“Redemption Amount at Maturity” for each $1,000 note will be a single U.S.
dollar payment on the Maturity Date equal to:

(A)     the sum of $1,000 plus the product of $1,000
times the Basket Return times the Upside Participation Rate, if the Final
Basket Level is greater than the Initial Basket Level; or

(B)       $1,000, if the Final Basket Level is equal to
or less than the Initial Basket Level.

The “Component Commodities”
and “Commodity Weightings” are as follows:

	
  Component Commodities

  	
   

  	
  Component

  Weighting

  	
   

  
	
  Brent crude oil (“Crude
  Oil”)

  	
   

  	
  10.0%

  	
   

  
	
  No. 2 fuel heating oil
  (“Heating Oil”)

  	
   

  	
  10.0%

  	
   

  
	
  Copper — Grade A (“Copper”)

  	
   

  	
  10.0%

  	
   

  
	
  Primary Nickel (“Nickel”)

  	
   

  	
  10.0%

  	
   

  
	
  Special High Grade Zinc
  (“Zinc”)

  	
   

  	
  10.0%

  	
   

  
	
  Gold (“Gold”)

  	
   

  	
  10.0%

  	
   

  
	
  No. 11 world sugar (“Sugar”)

  	
   

  	
  10.0%

  	
   

  
	
  Coffee Robusta (“Coffee”)

  	
   

  	
  10.0%

  	
   

  
	
  Class III milk (“Milk”)

  	
   

  	
  10.0%

  	
   

  
	
  Lean hogs (“Lean Hogs”)

  	
   

  	
  10.0%

  	
   

  

 

The “Upside Participation
Rate” is 125%.

The “Basket Return” is a quotient, the numerator of which
is the difference of the Final Basket Level minus the Initial Basket Level and
the denominator of which is the Initial Basket Level, expressed as a percentage
rounded to three decimal places.

 2
 

 

The “Final Basket Level” is the product of 100 times the
sum of 1 plus the sum of the Weighted Component Commodity Returns.

The “Initial Basket Level” is set to 100 on the Trade Date.

The “Trade Date” is August 1, 2007.

The “Issue Date” is August 8, 2007.

The “Weighted Component Commodity Returns” are, for each
Component Commodity, the product of the Component Weighting times a quotient,
the numerator of which is the difference of the Final Commodity Price minus the
Initial Commodity Price and the denominator of which is the Initial Commodity
Price for such Component Commodity.

The “Initial Commodity Prices” for each Component Commodity
are as follows:

	
  Component

  Commodity

  	
   

  	
  Initial Commodity

  Price

  	
   

  
	
  Crude Oil

  	
   

  	
  US$75.35

  	
   

  
	
  Heating Oil

  	
   

  	
  US$2.0694

  	
   

  
	
  Copper

  	
   

  	
  US$7,950.00

  	
   

  
	
  Nickel

  	
   

  	
  US$30,760.00

  	
   

  
	
  Zinc

  	
   

  	
  US$3,525.00

  	
   

  
	
  Gold

  	
   

  	
  US$665.75

  	
   

  
	
  Sugar

  	
   

  	
  US$10.28

  	
   

  
	
  Coffee

  	
   

  	
  US$1,806.00

  	
   

  
	
  Milk

  	
   

  	
  US$21.40

  	
   

  
	
  Lean Hogs

  	
   

  	
  US$72.325

  	
   

  

 

The “Final Commodity Price” is, for each Component
Commodity, the Commodity Price on the Valuation Date.

The “Commodity Price” for each Component Commodity is as
follows:

	
  Component

  Commodity

  	
   

  	
  Commodity Price

  	
   

  
	
  Crude Oil

  Heating Oil

  	
   

  	
  For each of Crude Oil
  and Heating Oil, the official settlement price of the first nearby month
  futures contract (or, in the case of the last trading day of the first nearby
  month contract, the second nearby month

  	
   

  

 

 3
 

 

	
  

  	
   

  	
  contract) for that
  Component Commodity, expressed (a) in the case of Crude Oil, as the U.S.
  dollar price per barrel and (b) in the case of Heating Oil, as the U.S.
  dollar price per gallon, in each case as made public by the Relevant Exchange
  for that Component Commodity (subject to the occurrence of a Disruption
  Event).

  	
   

  
	
  Copper

  Nickel

  Zinc

  	
   

  	
  For each of Copper,
  Nickel and Zinc, the official settlement price of that Component Commodity
  for cash delivery, expressed as the U.S. dollar price per metric ton of the
  Component Commodity, as made public by the Relevant Exchange for that
  Component Commodity (subject to the occurrence of a Disruption Event).

  	
   

  
	
  Gold

  	
   

  	
  For Gold, the official
  afternoon fixing price, stated in U.S. dollars per troy ounce, as calculated
  and quoted by the Relevant Exchange (subject to the occurrence of a
  Disruption Event).

  	
   

  
	
  Sugar

  	
   

  	
  For Sugar, the official
  settlement price of the first nearby month futures contract (or, in the case
  of the last trading day of the first nearby month contract, the second nearby
  month contract) for Sugar, stated in US cents, per pound, as made public by
  the Relevant Exchange for that Component Commodity 

  	
   

  

 

 4
 

 

	
  

  	
   

  	
  (subject to the
  occurrence of a Disruption Event).

  	
   

  
	
  Coffee

  	
   

  	
  For Coffee, the
  official settlement price of the relevant contract, determined to be the
  contract with the next succeeding first notice date, which is the first
  business day of a delivery month, stated in U.S. dollars, per metric tonne,
  as made public by the Relevant Exchange for that Component Commodity (subject
  to the occurrence of a Disruption Event).

  	
   

  
	
  Milk

  Lean Hogs

  	
   

  	
  For each of Milk and
  Lean Hogs, the official settlement price of the current relevant contract,
  determined to be the contract with the next succeeding last trade date, which
  is the tenth business day of a contract month, stated (a) in the case of
  Milk, as the US dollar price per hundredweight (100 pounds), and (b) in the
  case of Lean Hogs, as the US cents price per pound, in each case as made
  public by the Relevant Exchange for that Component Commodity (subject to the
  occurrence of a Disruption Event).

  	
   

  

 

The “Relevant Exchange” is, for each Component Commodity,
the exchange set forth opposite such Component Commodity below, or its
successor, or if the exchange set forth below is no longer the principal
exchange or trading market for a Component Commodity or options or futures
contracts for such Component Commodity, such other exchange or principal
trading market for the relevant Component Commodity as determined in good faith
by the Calculation Agent which serves as the source of prices for that
Component Commodity, and any principal exchanges where options or futures
contracts on that Component Commodity are traded:

 5
 

 

	
  Component

  Commodity

  	
   

  	
  Relevant Exchange

  
	
  Crude Oil

  	
   

  	
  The Intercontinental Exchange (“ICE”)

  
	
  Heating Oil

  	
   

  	
  The NYMEX Division, or its successor, of the New
  York Mercantile Exchange, Inc. (“NYMEX”)

  
	
  Copper

  	
   

  	
  London Metal Exchange (“LME”)

  
	
  Nickel

  	
   

  	
  LME

  
	
  Zinc

  	
   

  	
  LME

  
	
  Gold

  	
   

  	
  The market in London on which members of the LBMA
  quote prices for the buying and selling of Gold.

  
	
  Sugar

  	
   

  	
  The New York Board of Trade (“NYBOT”)

  
	
  Coffe

  	
   

  	
  Euronext.liffe (“LIFFE”)

  
	
  Milk

  	
   

  	
  The Chicago Mercantile Exchange (“CME”)

  
	
  Lean Hogs

  	
   

  	
  CME

  

 

A “Valuation Business Day” is a day, as determined in good
faith by the Calculation Agent, on which the Relevant Exchange for each
Component Commodity is scheduled to be (or, but for the occurrence of a Disruption
Event, would have been) open for trading during its regular trading session
(notwithstanding the Relevant Exchange or organized exchange or market, as
applicable, closing prior to its scheduled closing time).

If a Disruption Event identified in clauses (A), (B) or (C)
below relating to one or more Component Commodities is in effect on the
scheduled Valuation Date, the Calculation Agent will calculate the Final Basket
Level using:

·                                         for each such Component
Commodity that did not suffer a Disruption Event on the scheduled Valuation
Date, the Final Commodity Price for that Component Commodity on the scheduled
Valuation Date, and

·                                         for each such Component
Commodity that did suffer a Disruption Event on the scheduled Valuation Date,
the Final Commodity Price on the immediately succeeding trading day for such
Component Commodity on which no Disruption Event occurs or is continuing with
respect to such Component Commodity;

provided however that if a
Disruption Event has occurred or is continuing with respect to a Component
Commodity on each of the three scheduled trading days following the scheduled
Valuation Date, then (a) that third scheduled trading day shall be deemed the
Valuation Date for the affected Component Commodity; and (b) the Calculation
Agent will determine the Final Commodity Price for the affected Component
Commodity on such day in its sole and absolute

 6
 

 

discretion
taking into account the latest available quotation for the Commodity Price for
the affected Component Commodity and any other information that in good faith
it deems relevant.

If a Disruption Event identified in clauses (D) or (E)
below relating to one or more Component Commodities (other than Gold) is in
effect on the Valuation Date, the Calculation Agent will determine the Final
Commodity Price for the affected Component Commodity on the scheduled Valuation
Date in its sole and absolute discretion taking into account the latest
available quotation for the Commodity Price for the affected Component
Commodity and any other information that in good faith it deems relevant.

A “Disruption Event” for a Component Commodity, any of the
following events with respect to that Component Commodity, in each case as
determined in good faith by the Calculation Agent constitutes:

(A)                             the suspension of or
material limitation on trading in the Component Commodity or futures contracts
or options related to the Component Commodity, on the Relevant Exchange for
that Component Commodity;

(B)                               either (i) the failure of
trading to commence, or permanent discontinuance of trading, in the Component
Commodity, or futures contracts or options related to the Component Commodity,
on the Relevant Exchange for that Component Commodity, or (ii) the
disappearance of, or of trading in, the Component Commodity;

(C)                               the failure of the
Relevant Exchange for the Component Commodity to publish the official daily
settlement price of the Component Commodity for that day (or the information
necessary for determining the settlement price); and

solely
with respect to Component Commodities other than Gold,

(D)                              the occurrence since the
Trade Date of a material change in the content, composition, or constitution of
the Component Commodity; or

(E)                                the occurrence since the
Trade Date of a material change in the formula for or the method of calculating
the settlement price of the Component Commodity.

For the
purpose of determining whether a Disruption Event for a Component Commodity has
occurred:

(1)                                 a limitation on the hours
in a trading day and/or number of days of trading will not constitute a
Disruption Event if it results from an announced change in the regular business
hours of the Relevant Exchange for the Component Commodity;

(2)                                 a suspension in trading in
a Component Commodity on the Relevant Exchange for that Component Commodity (without
taking into account any extended or after-hours trading session), by reason of
a price change

 7
 

 

reflecting
the maximum permitted price change from the previous trading day’s settlement
price will constitute a Disruption Event; and

(3)                                 a suspension of or
material limitation on trading on a Relevant Exchange for a Component Commodity
will not include any time when the Relevant Exchange for that Component
Commodity is closed for trading under ordinary circumstances.

For purposes of calculating the Final Basket Level in the
event of a Disruption Event relating to one or more Component Commodities in
accordance with the above, “trading day” means a day, as determined in good
faith by the Calculation Agent, on which trading is generally conducted on the
Relevant Exchange applicable to the affected Component Commodity.

The “Calculation Agent” means
Lehman Brothers Commodity Services Inc, the determinations and calculations of
which will be binding absent manifest error.

Except as provided below, any
Redemption Amount at Maturity may, at the option of the Company, be made by
check mailed to the person entitled thereto at such person’s address as it
appears on the registry books of the Company.

Payment of any Redemption
Amount at Maturity will be made in immediately available funds in accordance
with the normal procedures of the Trustee (or any duly appointed Paying Agent).

The Company will pay any
administrative costs imposed by banks in making payments in immediately
available funds, but any tax, assessment or governmental charge imposed upon
payments hereunder, including, without limitation, any withholding tax, will be
borne by the Holder hereof.

References herein to “U.S.
dollars” or “U.S.$” or “$” or “USD” are to the coin or currency of the United
States as at the time of payment is legal tender for the payment of public and
private debts.

REFERENCE
IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF.  SUCH FURTHER PROVISIONS SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

This Note shall not be valid or
become obligatory for any purpose until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture.

 8
 

 

IN WITNESS WHEREOF, Lehman
Brothers Holdings Inc. has caused this instrument to be signed by its Chairman
of the Board, its President, its Vice Chairman, its Chief Financial Officer,
one of its Vice Presidents or its Treasurer, by manual or facsimile signature
under its corporate seal, attested by its Secretary or one of its Assistant
Secretaries by manual or facsimile signature.

Dated:  August 8, 2007

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cindy Buckholz

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  
					

 

 

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

This is one of the Securities of the series designated
herein referred to in the within-mentioned Indenture.

	
  CITIBANK, N.A.

  	
   

  
	
  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  	
   

  
				

 

 9

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

RETURN-ENHANCED NOTES LINKED TO A BASKET OF
TEN COMMODITIES  
 DUE 
AUGUST 9, 2010

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series I, Return-Enhanced Notes Linked to a Basket of
Ten Commodities (herein called the “Notes”).  The Notes are one of an
indefinite number of series of debt securities of the Company (collectively,
the “Securities”) issued or issuable under and pursuant to an indenture dated
as of September 1, 1987, as amended and supplemented (the “Indenture”), duly
executed and delivered by the Company and Citibank, N.A., as Trustee (herein
called the “Trustee”), to which Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations
of rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Securities. 
The separate series of Securities may be issued in various aggregate
principal amounts, may mature at different times, may bear interest (if any) at
different rates, may be subject to different redemption provisions or
repurchase rights (if any), may be subject to different sinking, purchase or
analogous funds (if any), may be subject to different covenants and Events of
Default and may otherwise vary as in the Indenture provided.

Section 2.  Principal
Amount for Indenture Purposes.  For
the purpose of determining whether Holders of the requisite amount of Notes of
this series outstanding under the Indenture have made a demand, given a notice
or waiver or taken any other action, the principal amount of this Note will be
deemed to be the principal amount of this Note then outstanding.

Section 3.  Modification
and Waivers.  The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
Holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the Redemption Amount at Maturity or the principal
amount thereof, or reduce the rate or extend the time of payment of interest
thereon or reduce any premium or other amount payable on redemption, or make
the Redemption Amount at Maturity or the principal amount thereof, premium or
other amount payable, if any, or interest thereon payable in any coin or
currency other than that herein above provided, without the consent of the
Holder of each Security so affected, or (ii) change the place of payment on any
Security, or impair the right to institute suit for payment on any Security, or
reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Security so affected. 
It is also provided in the Indenture that, prior to any declaration
accelerating the maturity of any series of Securities, the holders of a
majority in aggregate principal amount of 

 

the
Securities of such series Outstanding may on behalf of the holders of all the
Securities of such series waive any past default or Event of Default under the
Indenture with respect to such series and its consequences, except a default in
the payment of interest, if any, on the Redemption Amount at Maturity or the
principal amount, or premium, if any, on any of the Securities of such series,
or in the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. 
Any such consent or waiver by the Holder of this Note shall be conclusive
and binding upon such Holder and upon all future holders and owners of this
Note and any Notes of this series which may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes of this series.

Section 4.  Obligations
Unconditional.  No reference herein
to the Indenture and no provisions of this Note or of the Indenture shall alter
or impair the obligation of the Company, which is absolute and unconditional,
to pay any Redemption Amount at Maturity on this Note at the place, at the
respective times, at the rate, and in the coin or currency herein prescribed.

Section 5.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

Section 6.  Authorized
Form and Denominations.  The Notes of
this series are issuable in registered form, without coupons.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the Company, in
denominations of $1,000 or whole multiples of $1,000, either at the office or
agency to be designated and maintained by the Company for such purpose in the Borough
of Manhattan, New York City, pursuant to the provisions of the Indenture or at
any of such other offices or agencies as may be designated and maintained by
the Company for such purpose pursuant to the provisions of the Indenture, and
in the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith.  Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series of a different
authorized denomination, except that Global Securities will not be exchangeable
for Certificated Notes of this series.

Section 7.  Registration
of Transfer.  As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository.  If a
successor Depository for the Notes of this series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company will issue, and the Trustee will 

 

authenticate
and deliver, Notes of this series in definitive form in an aggregate principal
amount equal to the principal amount of this Note.

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Company nor the Trustee nor any agent
of the Company or of the Trustee shall be affected by any notice to the
contrary.

Section 8.  Events
of Default.  If an Event of Default
with respect to Notes of this series shall occur and be continuing, the amount
that may be declared due and payable upon any acceleration of the notes will be
determined by the Calculation Agent for the period from and including the Issue
Date to but excluding the date of early repayment and will equal, for each
note, the Redemption Amount at Maturity, calculated as the date of early
repayment were the Maturity Date. If a bankruptcy proceeding is commenced in
respect of Lehman Brothers Holdings, the claim of the beneficial owner of a
note for the period from and including the Issue Date to but excluding the date
of early repayment will be capped at the Redemption Amount at Maturity,
calculated as though the date of the commencement of the proceeding were the
Maturity Date.

Section 9.  No
Recourse Against Certain Persons.  No
recourse for the payment of the Redemption Amount at Maturity or for any claim
based hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or any
Indenture supplemental thereto or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.

Section 10.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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