-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, A1iu1u7l/QD7jzqQCjdXL+Mr0z7Hy4j/GOai+FGVAZhFVpJS6usVVjQnW1OUr1eO 3hwflnOO0vBxtobeM7nnVw== 0000950123-94-000933.txt : 19940517 0000950123-94-000933.hdr.sgml : 19940517 ACCESSION NUMBER: 0000950123-94-000933 CONFORMED SUBMISSION TYPE: S-3 PUBLIC DOCUMENT COUNT: 6 REFERENCES 429: 033-58548 FILED AS OF DATE: 19940516 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: 6211 IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-3 SEC ACT: 1933 Act SEC FILE NUMBER: 033-53651 FILM NUMBER: 94528866 BUSINESS ADDRESS: STREET 1: AMERICAN EXPRESS TWR STREET 2: 3 WORLD FINANCIAL CNTR CITY: NEW YORK STATE: NY ZIP: 10048 BUSINESS PHONE: 2122982000 MAIL ADDRESS: STREET 1: AMERICAN EXPRESS TOWER STREET 2: WORLD FINANCIAL CENTER ATTN GEN COUNSEL CITY: NEW YORK STATE: NY ZIP: 10283 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 S-3 1 LEHMAN BROTHERS HOLDINGS INC. 1 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1994 REGISTRATION NO. 33- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------------------ LEHMAN BROTHERS HOLDINGS INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-3216325 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
------------------------ 3 WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10285 (212) 526-7000 (ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES) ------------------------ DAVID MARCUS, ESQ. GENERAL COUNSEL LEHMAN BROTHERS HOLDINGS INC. 3 WORLD FINANCIAL CENTER NEW YORK, NEW YORK 10285 (212) 526-7000 (NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE) COPY TO: MAXINE L. GERSON, ESQ. LEHMAN BROTHERS HOLDINGS INC. 2 WORLD TRADE CENTER NEW YORK, NEW YORK 10048 JOHN E. RILEY, ESQ. SIMPSON THACHER & BARTLETT 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10017 ------------------------ APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: FROM TIME TO TIME AFTER THE EFFECTIVE DATE OF THIS REGISTRATION STATEMENT, AS DETERMINED BY MARKET CONDITIONS. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. / / If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. /X/ ------------------------ CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------------------------- - --------------------------------------------------------------------------------------------------------------------------------- PROPOSED PROPOSED TITLE OF EACH CLASS OF AMOUNT TO BE MAXIMUM OFFERING MAXIMUM AGGREGATE AMOUNT OF SECURITIES TO BE REGISTERED REGISTERED(A)(B) PRICE PER UNIT OFFERING PRICE(C) REGISTRATION FEE - --------------------------------------------------------------------------------------------------------------------------------- Debt Securities.................... U.S.$500,000,000(d)(e) 100% - ----------------------------------------------------------------------------------- Debt Warrants...................... (g) (g) - ----------------------------------------------------------------------------------- Currency Warrants.................. (h) (h) U.S.$500,000,000(f) U.S.$172,415 - ----------------------------------------------------------------------------------- Index Warrants..................... (i) (i) - ----------------------------------------------------------------------------------- Interest Rate Warrants............. (j) (j) - --------------------------------------------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------
(a) Includes the amount, if any, that may be acquired and sold by an affiliate of the Registrant in connection with certain market making activities of such affiliate. (b) Or, if any Debt Securities are issued (i) with an initial offering price denominated in a foreign currency or a foreign currency unit, such amount as shall result in aggregate gross proceeds equivalent to U.S.$500,000,000 to the Registrant at the time of initial offering, or (ii) at an original issue discount, such greater amount as shall result in aggregate gross proceeds of U.S.$500,000,000 to the Registrant. (c) Estimated solely for the purpose of calculating the registration fee. (d) Less an amount equal to the aggregate initial offering price of Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants issued under this Registration Statement. (e) This Registration Statement also relates to offers and sales of Debt Securities, Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants in connection with market-making transactions by and through Lehman Brothers Inc., a wholly-owned subsidiary of the Registrant. (f) In no event will the aggregate initial offering price (excluding accrued interest) of Debt Securities, Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants issued under this Registration Statement exceed $500,000,000, or the equivalent thereof in any foreign currency or foreign currency unit at the dates of issuance. Such amount represents the issue price of any Debt Securities, Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants and the exercise price of any Debt Securities issuable upon the exercise of a Debt Warrant. (g) The Debt Warrants may be sold separately or with Debt Securities, Currency Warrants, Index Warrants and Interest Rate Warrants as units. It is not practicable to determine the number of Debt Warrants and proposed maximum offering price per Debt Warrant at this time, as they will depend, among other things, on the denominations or stated values of the Debt Securities covered by the Debt Warrants, the duration of the Debt Warrants and prevailing interest rates at the time of the offering. (h) The Currency Warrants may be sold separately or with the Debt Securities, Debt Warrants, Index Warrants and Interest Rate Warrants as units. It is not practicable to determine the number of Currency Warrants and proposed maximum offering price per Currency Warrant at this time, as they will depend on the currency selected and the exchange rate in effect between the U.S. dollar and that currency at the time of the offering. (i) The Index Warrants may be sold separately or with the Debt Securities, Debt Warrants, Currency Warrants and Interest Rate Warrants as units. It is not practicable to determine the number of Index Warrants and proposed maximum offering price per Index Warrant at this time as they will depend, among other things, on the Index selected at the time of the offering. (j) The Interest Rate Warrants may be sold separately or with the Debt Securities, Debt Warrants, Currency Warrants and Index Warrants as units. It is not practicable to determine the number of Interest Rate Warrants and proposed maximum offering price per Interest Rate Warrant at this time as they will depend, among other things, on certain interest rates prevailing at the time of the offering. ------------------------ Pursuant to Rule 429 under the Securities Act of 1933, the Prospectus herein is a combined Prospectus and also relates to Registration Statement No. 33-58548 previously filed with the Commission on Form S-3 and declared effective May 26, 1993. The Registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- 2 INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE. SUBJECT TO COMPLETION, DATED MAY 16, 1994 LEHMAN BROTHERS HOLDINGS INC. DEBT SECURITIES, DEBT WARRANTS, CURRENCY WARRANTS, INDEX WARRANTS AND INTEREST RATE WARRANTS ------------------------ Lehman Brothers Holdings Inc. ("Holdings"), may offer from time to time (i) unsecured debt securities (the "Debt Securities") consisting of debentures, notes and/or other evidences of indebtedness, (ii) warrants to purchase Debt Securities ("Debt Warrants"), (iii) warrants entitling the holders thereof to receive from Holdings, upon exercise, the cash value of the right to purchase ("Currency Call Warrants") and to sell ("Currency Put Warrants" and, together with the Currency Call Warrants, the "Currency Warrants") a certain amount of one currency or currency unit for a certain amount of a different currency or currency unit, all as shall be designated by Holdings at the time of offering, (iv) warrants entitling the holders thereof to receive from Holdings, upon exercise, an amount in cash determined by reference to decreases ("Index Put Warrants") or increases ("Index Call Warrants") in the level of a specified index (an "Index") which may be based on one or more U.S. or foreign stocks, bonds or other securities, one or more U.S. or foreign interest rates, one or more currencies or currency units, or any combination of the foregoing, or determined by reference to the differential between any two Indices ("Index Spread Warrants" and, together with the Index Put Warrants and the Index Call Warrants, the "Index Warrants") and (v) warrants entitling the holders thereof to receive from Holdings, upon exercise, an amount in cash determined by reference to decreases ("Interest Rate Put Warrants") or increases ("Interest Rate Call Warrants" and, together with the Interest Rate Put Warrants, the "Interest Rate Warrants") in the yield or closing price of one or more specified debt instruments issued either by the United States government or by a foreign government (the "Debt Instrument"), in the interest rate or interest rate swap rate established from time to time by one or more specified financial institutions (the "Rate") or in any specified combination of Debt Instruments and/or Rates, for aggregate proceeds of up to U.S.$618,062,720, or the equivalent thereof in one or more foreign currencies or foreign currency units (such amount being the aggregate proceeds to Holdings from all Debt Securities, Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants (collectively, the "Securities") issued and the exercise price of any Debt Securities issuable upon the exercise of any Debt Warrants). The Securities may be offered either together or separately and in one or more series in amounts, at prices and on terms to be determined at the time of the offering. Unless otherwise specified in an applicable Prospectus Supplement, the Securities will be sold for, and the Debt Warrants, Currency Warrants, Index Warrants or Interest Rate Warrants (collectively, the "Warrants") will be exercisable in, United States dollars, and the principal of and interest, if any, on the Debt Securities and the cash payments, if any, in respect of the Currency Warrants, the Index Warrants and the Interest Rate Warrants will be payable in United States dollars. If this Prospectus is being delivered in connection with the offering and sale of Debt Securities, the specific designation, priority, aggregate principal amount, the currency or currency unit for which the Debt Securities may be purchased, the currency or currency unit in which the principal and interest, if any, is payable, the rate (or method of calculation) and time of payment of interest, if any, authorized denominations, maturity, any redemption terms, any listing on a securities exchange and the initial public offering price, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto and any other terms in connection with such offering and sale are set forth in an applicable Prospectus Supplement. If this Prospectus is being delivered in connection with the offering and sale of Warrants, the specific designation, aggregate number of warrants, the currency or currency unit for which the warrants may be purchased, the currency or currency unit in which the cash settlement value or the exercise price, if applicable, is payable, the method of calculation of the cash settlement value, if applicable, the date on which such warrants become exercisable and the expiration date, provisions, if any, for the automatic exercise and/or cancellation prior to the expiration date, the initial public offering price, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto and any other terms in connection with such offering and sale will be set forth in an applicable Prospectus Supplement. The Debt Securities and the Debt Warrants may be issued in registered form or bearer form with, in the case of Debt Securities, coupons attached. The Currency Warrants, Index Warrants and Interest Rate Warrants will be issued in registered form only. In addition, all or a portion of the Securities of a series may be issued in global form. Debt Securities in bearer form will be offered only outside the United States to non-United States persons and to offices located outside the United States of certain United States financial institutions. See "Description of Debt Securities -- Limitations on Issuance of Bearer Securities." Discussions of certain United States federal income taxation consequences to holders of Securities and certain of the risks associated with an investment in Securities will be set forth in the applicable Prospectus Supplement. ------------------------ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. ------------------------ The Securities will be sold either through underwriters, dealers or agents, or directly by Holdings. The applicable Prospectus Supplement sets forth the names of any underwriters or agents (which may include Lehman Brothers Inc., a subsidiary of Holdings ("Lehman Brothers")) involved in the sale of the Securities in respect of which this Prospectus is being delivered, the proposed amounts, if any, to be purchased by underwriters and the compensation, if any, of such underwriters or agents. This Prospectus together with the applicable Prospectus Supplement may also be used by Lehman Brothers, in connection with offers and sales of Securities related to market making transactions, by and through Lehman Brothers, at negotiated prices related to prevailing market prices at the time of sale or otherwise. Lehman Brothers may act as principal or agent in such transactions. ------------------------ , 1994 3 AVAILABLE INFORMATION Holdings is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act") and in accordance therewith files reports and other information with the Securities and Exchange Commission (the "SEC"). Such reports and information may be inspected and copied at the public reference facilities maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the following Regional Offices of the SEC: New York Regional Office, 7 World Trade Center, New York, New York 10048; and Chicago Regional Office, Suite 1400, Northwestern Atrium Center, 500 W. Madison Street, Chicago, Illinois 60661-2511; and copies of such material can be obtained from the Public Reference Section of the SEC, Washington, D.C. 20549, at prescribed rates. Holdings' 8 3/4% Notes Due 2002 are listed on the New York Stock Exchange, Inc. (the "Exchange") and Holdings' $55 Million Serial Zero Coupon Senior Notes Due May 16, 1998, FT-SE Eurotrack 200 Index Call Warrants Expiring June 4, 1996, Japanese Yen Bear Warrants Expiring September 15, 1995, 7 1/4% Oracle Yield Enhanced Equity Linked Debt SecuritiesSM Due 1996, 6 1/2% Amgen Yield Enhanced Equity Linked Debt Securities Due 1997, Japanese Yen Bear Warrants Expiring March 5, 1996 and Stock Upside Note SecuritiesSM Due 2000 are listed on the American Stock Exchange, Inc. and reports and other information concerning Holdings may also be inspected at the offices of the Exchange at 20 Broad Street, New York, New York 10005 and at the offices of the American Stock Exchange, Inc., 86 Trinity Place, New York, New York 10006. Holdings has filed with the SEC a registration statement on Form S-3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act of 1933, as amended (the "Securities Act"). This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which are omitted in accordance with the rules and regulations of the SEC. For further information, reference is hereby made to the Registration Statement. ------------------------ DOCUMENTS INCORPORATED BY REFERENCE The following documents previously filed by Holdings with the SEC pursuant to the Exchange Act are hereby incorporated by reference in this Prospectus: (1) Holdings' Annual Report on Form 10-K for the fiscal year ended December 31, 1993. (2) Holdings' Quarterly Report on Form 10-Q for the quarter ended March 31, 1994. (3) Holdings' Current Reports on Form 8-K dated February 24, 1994, April 14, 1994 and April 26, 1994. Each document filed by Holdings pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and prior to the termination of the offering of the Securities offered by an applicable Prospectus Supplement shall be deemed to be incorporated by reference into this Prospectus from the date of filing of such document. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of the Registration Statement and this Prospectus to the extent that a statement contained herein, in an applicable Prospectus Supplement or in any subsequently filed document which also is or is deemed to be incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of the Registration Statement or this Prospectus. Holdings will provide without charge to each person, including any beneficial owner of any Security, to whom a copy of this Prospectus is delivered, upon the written or oral request of any such person, a copy of any or all of the documents which are incorporated herein by reference, other than exhibits to such documents (unless such exhibits are specifically incorporated by reference into such documents). Requests should be directed to Mary J. Capko, the Controller's Office, Lehman Brothers Holdings Inc., 388 Greenwich Street, 10th Floor, New York, New York 10013 (telephone (212) 464-7622). 2 4 THE COMPANY Lehman Brothers Holdings Inc. (together with its consolidated subsidiaries hereinafter referred to as the "Company" unless the context otherwise requires) is one of the leading global investment banks serving institutional, corporate, government and high net worth individual clients and customers. The Company's worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by offices in 19 additional locations in the United States, 11 in Europe and the Middle East, four in Latin America and seven in the Asia Pacific region. The Company's business includes capital raising for clients through securities underwriting and direct placements; corporate finance and strategic advisory services; merchant banking; securities sales and trading; institutional asset management; research; and the trading of foreign exchange, derivative products and certain commodities. The Company acts as a market maker in all major equity and fixed income products in both the domestic and international markets. Lehman Brothers is a member of all principal securities and commodities exchanges in the United States, as well as the National Association of Securities Dealers, Inc. ("NASD"), and holds memberships or associate memberships on several principal international securities and commodities exchanges, including the London, Tokyo, Hong Kong, Frankfurt and Milan stock exchanges. Holdings was incorporated in Delaware on December 29, 1983. American Express Company owns all of Holdings' issued and outstanding Common Stock and Nippon Life Insurance Company owns all of Holdings' issued and outstanding Cumulative Convertible Voting Preferred Stock, Series A. Holdings' principal executive offices are located at 3 World Financial Center, New York, New York 10285 (telephone (212) 526-7000). USE OF PROCEEDS Except as otherwise may be set forth in an applicable Prospectus Supplement accompanying this Prospectus, Holdings intends to apply the net proceeds from the sale of the Securities for general corporate purposes. RATIO OF EARNINGS TO FIXED CHARGES The following table sets forth the ratio of earnings to fixed charges of the Company for each of the five years in the period ended December 31, 1993 and for three months ended March 31, 1994:
THREE MONTHS ENDED YEAR ENDED DECEMBER 31, MARCH 31, - ----------------------------------------- ------------------ 1989 1990 1991 1992 1993 1994 - ----- ----- ----- ----- ----- ------------------ 1.01 * 1.03 * 1.00 1.06
- --------------- * Earnings were inadequate to cover fixed charges and would have had to increase approximately $766 million and $247 million in order to cover the deficiencies for the periods ended December 31, 1990 and December 31, 1992, respectively. In computing the ratio of earnings to fixed charges, "earnings" consist of earnings from continuing operations before income taxes and fixed charges. "Fixed charges" consist principally of interest expense and one-third of office rentals and one-fifth of equipment rentals, which are deemed to be representative of the interest factor. 3 5 DESCRIPTION OF DEBT SECURITIES The Debt Securities will constitute either Senior Debt (as defined below) or Subordinated Debt (as defined below) of Holdings. The Debt Securities constituting Senior Debt will be issued under an indenture, dated as of September 1, 1987, between Holdings and Citibank, N.A., Trustee, as supplemented and amended by Supplemental Indentures dated as of November 25, 1987, as of November 27, 1990 and as of September 13, 1991 (the "Senior Indenture"), and the Debt Securities constituting Subordinated Debt will be issued under an indenture between Holdings and Chemical Bank, Trustee (the "Subordinated Indenture"). The Senior Indenture and the Subordinated Indenture are hereinafter collectively referred to as the "Indentures" and, individually, as an "Indenture". Each Indenture will incorporate by reference certain Standard Multiple-Series Indenture Provisions, filed with the SEC on July 30, 1987 and as amended and refiled with the SEC on November 16, 1987. This Prospectus contains descriptions of all material provisions of the Indentures. The summary of such provisions of the Indentures does not purport to be complete; copies of such Indentures are filed as exhibits to the Registration Statement of which this Prospectus is a part. All articles and sections of the applicable Indenture, and all capitalized terms set forth below, have the meanings specified in the applicable Indenture. GENERAL Neither Indenture limits the amount of debentures, notes or other evidences of indebtedness which may be issued thereunder. Each Indenture provides that Debt Securities may be issued from time to time in one or more series. Since Holdings, as a holding company, does not have any significant assets other than the equity securities of its subsidiaries, its cash flow and consequent ability to service its debt, including the Debt Securities, are dependent upon the earnings of its subsidiaries and the distribution of those earnings to Holdings, or upon loans or other payments of funds by those subsidiaries to Holdings. Holdings' subsidiaries, including Lehman Brothers, are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any interest or principal on the Debt Securities or to make any funds available therefor, whether by dividends, loans or other payments. Dividends, loans and other payments by Lehman Brothers are restricted by net capital and other rules of various regulatory bodies. See "Capital Requirements." The payment of dividends by Holdings' subsidiaries is contingent upon the earnings of those subsidiaries and is subject to various business considerations in addition to net capital requirements and contractual restrictions. Since the Debt Securities will be obligations of a holding company, the ability of holders of the Debt Securities to benefit from any distribution of assets of any subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to the prior claims of present and future creditors of such subsidiary. Reference is made to the applicable Prospectus Supplement for the following terms and other information with respect to the Debt Securities being offered thereby: (1) the title of such Debt Securities and whether such Debt Securities will be Senior Debt or Subordinated Debt; (2) any limit on the aggregate principal amount of such Debt Securities; (3) whether the Debt Securities are to be issuable as Registered Securities or Bearer Securities or both, and if Bearer Securities are issued, whether Bearer Securities may be exchanged for Registered Securities and the circumstances and places for such exchange, if permitted; (4) whether the Debt Securities are to be issued in whole or in part in the form of one or more temporary or permanent global Debt Securities ("Global Securities") in registered or bearer form and, if so, the identity of the depositary, if any, for such Global Security or Securities; (5) the date or dates (or manner of determining the same) on which such Debt Securities will mature; (6) the rate or rates (or manner of determining the same) at which such Debt Securities will bear interest, if any, and the date or dates from which such interest will accrue; (7) the dates (or manner of determining the same) on which such interest will be payable and the Regular Record Dates for such Interest Payment Dates for Debt Securities which are Registered Securities, and the extent to which, or the manner in which, any interest payable on a temporary or permanent global Debt Security on an Interest Payment Date will be paid if other than in the manner described under "Global Securities" below; (8) any mandatory or optional sinking fund or analogous provisions; (9) each office or agency where, subject to the terms of the applicable Indenture as described below under "Payment and Paying Agents", the principal of and premium, if any, and interest, if any, on the Debt Securities will be payable and each office or agency where, subject to the terms of the applicable Indenture as described below under 4 6 "Denominations, Registration and Transfer," the Debt Securities may be presented for registration of transfer or exchange; (10) the date, if any, after which, and the price or prices in the currency or currency unit in which, such Debt Securities are payable pursuant to any optional or mandatory redemption provision; (11) any provisions for payment of additional amounts for taxes and any provision for redemption, in the event the Company must comply with reporting requirements in respect of a Debt Security or must pay such additional amounts in respect of any Debt Security; (12) the terms and conditions, if any, upon which the Debt Securities of such series may be repayable prior to maturity at the option of the holder thereof (which option may be conditional) and the price or prices in the currency or currency unit in which such Debt Securities are payable; (13) the denominations in which any Debt Securities which are Registered Securities will be issuable if other than denominations of $1,000 and any integral multiple thereof, and the denomination or denominations in which any Debt Securities which are Bearer Securities will be issuable if other than the denomination of $5,000; (14) the currency, currencies or currency units for which such Debt Securities may be purchased and the currency, currencies or currency units in which the principal of and interest, if any, on such Debt Securities may be payable; (15) any index used to determine the amount of payments of principal of and premium, if any, and interest, if any, on such Debt Securities; and (16) other terms of the Debt Securities. (Section 301). If any of the Debt Securities are sold for foreign currencies or foreign currency units or if the principal of or interest, if any, on any series of Debt Securities is payable in foreign currencies or foreign currency units, the restrictions, elections, tax consequences, specific terms and other information with respect to such issue of Debt Securities and such currencies or currency units will be set forth in an applicable Prospectus Supplement relating thereto. One or more series of Debt Securities may be sold at a substantial discount below their stated principal amount, bearing no interest or interest at a rate which at the time of issuance is below market rates. Federal income tax consequences and special considerations applicable to any such series will be in an applicable Prospectus Supplement. SENIOR DEBT The Debt Securities constituting part of the senior debt of Holdings (the "Senior Debt") will rank equally with all other unsecured debt of Holdings except Subordinated Debt. SUBORDINATED DEBT The Debt Securities constituting part of the subordinated debt of Holdings (the "Subordinated Debt") will be subordinate and junior in the right of payment, to the extent and in the manner set forth in the Subordinated Indenture, to all present or future Senior Debt. "Senior Debt" is defined to mean (a) any indebtedness for money borrowed or evidenced by bonds, notes, debentures or similar instruments, (b) indebtedness under capitalized leases, (c) any indebtedness representing the deferred and unpaid purchase price of any property or business, and (d) all deferrals, renewals, extensions and refundings of any such indebtedness or obligation; except that the following does not constitute Senior Debt: (i) indebtedness evidenced by the Subordinated Debt, (ii) indebtedness which is expressly made equal in right of payment with the Subordinated Debt or subordinate and subject in right of payment to the Subordinated Debt, (iii) indebtedness for goods or materials purchased in the ordinary course of business or for services obtained in the ordinary course of business or indebtedness consisting of trade payables or (iv) indebtedness which is subordinated to any obligation of Holdings of the type specified in clauses (a) through (d) above. The effect of clause (iv) is that Holdings may not issue, assume or guaranty any indebtedness for money borrowed which is junior to the Senior Debt and senior to the Subordinated Debt. (Subordinated Indenture Section 1401). Upon the failure to pay the principal or premium, if any, on Senior Debt when due or upon the maturity of any Senior Debt by lapse of time, acceleration or otherwise, all principal thereof, interest thereon, if any, and other amounts due in connection therewith shall first be paid in full, before any payment is made on account of the principal, premium, if any, or interest, if any, on the Subordinated Debt or to acquire any of the Subordinated Debt or on account of the redemption, sinking fund or analogous provisions in the Subordinated 5 7 Indenture. (Subordinated Indenture Section 1402). Upon any distribution of assets of Holdings pursuant to any dissolution, winding up, liquidation or reorganization of Holdings, payment of the principal, premium, if any, and interest, if any, on the Subordinated Debt will be subordinated, to the extent and in the manner set forth in the Subordinated Indenture, to the prior payment in full of all Senior Debt. (Subordinated Indenture Section 1403). By reason of such subordination, in the event of insolvency, creditors of Holdings who are holders of Senior Debt may recover more ratably than the holders of Subordinated Debt. DENOMINATIONS, REGISTRATION AND TRANSFER Unless otherwise provided with respect to a series of Debt Securities, the Debt Securities will be issuable as Registered Securities without coupons and in denominations of $1,000 or any integral multiple thereof. Debt Securities of a series may be issuable in whole or in part in the form of one or more Global Securities, as described below under "Global Securities." One or more Global Securities will be issued in a denomination or aggregate denominations equal to the aggregate principal amount of Debt Securities of the series to be represented by such Global Security or Securities. If so provided with respect to a series of Debt Securities, Debt Securities of such series will be issuable solely as Bearer Securities with coupons attached or as both Registered Securities and Bearer Securities. (Section 201). In connection with the sale during the "restricted period" as defined in Section 1.163-5(c)(2)(i)(D)(7) of the United States Treasury Regulations (generally, the first 40 days after the closing date and, with respect to unsold allotments, until sold) no Bearer Security shall be mailed or otherwise delivered to any location in the United States (as defined under "Limitations on Issuance of Bearer Securities"). A Bearer Security in definitive form (including interests in a permanent Global Security) may be delivered only if the Person entitled to receive such Bearer Security furnishes written certification, in the form required by the applicable Indenture, to the effect that such Bearer Security is not owned by or on behalf of a United States person (as defined under "Limitations on Issuance of Bearer Securities"), or, if a beneficial interest in such Bearer Security is owned by or on behalf of a United States person, that such United States person (i) acquired and holds the Bearer Security through a foreign branch of a United States financial institution, (ii) is a foreign branch of a United States financial institution purchasing for its own account or resale (and in either case, (i) or (ii), such financial institution agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or (iii) is a financial institution purchasing for resale during the restricted period only to non-United States persons outside the United States (Sections 303, 304). See "Global Securities -- Bearer Debt Securities" and "Limitations on Issuance of Bearer Securities." Registered Securities of any series (other than a Global Security) will be exchangeable for other Registered Securities of the same series and of a like aggregate principal amount and tenor of different authorized denominations. In addition, if Debt Securities of any series are issuable as both Registered Securities and as Bearer Securities, at the option of the Holder upon request confirmed in writing, and subject to the terms of the applicable Indenture, Bearer Securities (with all unmatured coupons, except as provided below, and all matured coupons in default) of such series will be exchangeable into Registered Securities of the same series of any authorized denominations and of a like aggregate principal amount and tenor. Unless otherwise indicated in an applicable Prospectus Supplement, any Bearer Security surrendered in exchange for a Registered Security between a Regular Record Date or a Special Record Date and the relevant date for payment of interest shall be surrendered without the coupon relating to such date for payment of interest and interest will not be payable in respect of the Registered Security issued in exchange for such Bearer Security, but will be payable only to the Holder of such coupon when due in accordance with the terms of the applicable Indenture. (Section 305). Except as provided in an applicable Prospectus Supplement, Bearer Securities will not be issued in exchange for Registered Securities. Debt Securities may be presented for exchange as provided above, and Registered Securities (other than a Global Security) may be presented for registration of transfer (with the form of transfer endorsed thereon duly executed), at the office of the Security Registrar or at the office of any transfer agent designated by Holdings for such purpose with respect to any series of Debt Securities and referred to in an applicable Prospectus Supplement, without service charge and upon payment of any taxes and other governmental 6 8 charges as described in each Indenture. Such transfer or exchange will be effected upon the Security Registrar or such transfer agent, as the case may be, being satisfied with the documents of title and identity of the person making the request. Holdings has appointed each Trustee as Security Registrar under the applicable Indenture. (Section 305). If a Prospectus Supplement refers to any transfer agents (in addition to the Security Registrar) initially designated by Holdings with respect to any series of Debt Securities, Holdings may at any time rescind the designation of any such transfer agent or approve a change in the location through which any such transfer agent acts, except that, if Debt Securities of a series are issuable only as Registered Securities, Holdings will be required to maintain a transfer agent in each Place of Payment for such series and, if Debt Securities of a series are issuable as Bearer Securities, Holdings will be required to maintain (in addition to the Security Registrar) a transfer agent in a Place of Payment for such series located outside the United States. Holdings may at any time designate additional transfer agents with respect to any series of Debt Securities. (Section 1002). In the event of any redemption in part, Holdings shall not be required to (i) issue, register the transfer of or exchange Debt Securities of any series during a period beginning at the opening of business 15 days before any selection of Debt Securities of that series to be redeemed and ending at the close of business on (A) if Debt Securities of the series are issuable only as Registered Securities, the day of mailing of the relevant notice of redemption and (B) if Debt Securities of the series are issuable as Bearer Securities, the day of the first publication of the relevant notice of redemption or, if Debt Securities of the series are also issuable as Registered Securities and there is no publication, the mailing of the relevant notice of redemption; (ii) register the transfer of or exchange any Registered Security, or portion thereof, called for redemption, except the unredeemed portion of any Registered Security being redeemed in part; or (iii) exchange any Bearer Security called for redemption, except to exchange such Bearer Security for a Registered Security of that series and like tenor which is immediately surrendered for redemption. (Section 305). PAYMENT AND PAYING AGENTS Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of (and premium, if any) and any interest on Bearer Securities will be payable, subject to any applicable laws and regulations, at the offices of such Paying Agents outside the United States as Holdings may designate from time to time, at the option of the Holder, by check or by transfer to an account maintained by the payee with a bank located outside the United States. (Sections 307 and 1002). Unless otherwise indicated in an applicable Prospectus Supplement, payment of interest on Bearer Securities on any Interest Payment Date will be made only against surrender of the coupon relating to such Interest Payment Date. (Section 1001). No payment of interest on a Bearer Security will be made unless on the earlier of the date of the first such payment by Holdings or the delivery by Holdings of the Bearer Security in definitive form (including interests in a permanent Global Security) (the "Certification Date"), a written certificate in the form and to the effect described under "Denominations, Registration and Transfer" is provided to Holdings. No payment with respect to any Bearer Security will be made at any office or agency of Holdings in the United States or by check mailed to any address in the United States or by transfer to an account maintained with a bank located in the United States. Notwithstanding the foregoing, payment of principal of (and premium, if any) and interest on Bearer Securities denominated and payable in U.S. dollars will be made at the office of Holdings' Paying Agent in the Borough of Manhattan, The City of New York if, and only if, payment of the full amount thereof in U.S. dollars at all offices or agencies outside the United States is illegal or effectively precluded by exchange controls or other similar restrictions. (Section 1002). Unless otherwise indicated in an applicable Prospectus Supplement, payment of principal of (and premium, if any) and any interest on Registered Securities (other than a Global Security) will be made at the office of such Paying Agent or Paying Agents as Holdings may designate from time to time, except that at the option of Holdings payment of any interest may be made (i) by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register or (ii) by wire transfer to an account maintained by the Person entitled thereto as specified in the Security Register. (Sections 305, 307, 1002). Unless otherwise indicated in an applicable Prospectus Supplement, payment of any instalment of interest on 7 9 Registered Securities will be made to the Person in whose name such Registered Security is registered at the close of business on the Regular Record Date for such interest payment. (Section 307). Unless otherwise indicated in an applicable Prospectus Supplement, the principal office of each Trustee under the applicable Indenture in The City of New York will be designated as Holdings' sole Paying Agent for payments with respect to Debt Securities which are issuable solely as Registered Securities and as Holdings' Paying Agent in the Borough of Manhattan, The City of New York, for payments with respect to Debt Securities (subject to the limitations described above in the case of Bearer Securities) which may be issuable as Bearer Securities. Any Paying Agents outside the United States and any other Paying Agents in the United States initially designated by Holdings for the Debt Securities will be named in an applicable Prospectus Supplement. Holdings may at any time designate additional Paying Agents or rescind the designation of any Paying Agents or approve a change in the office through which any Paying Agent acts, except that, if Debt Securities of a series are issuable only as Registered Securities, Holdings will be required to maintain a Paying Agent in each Place of Payment for such series, and if Debt Securities of a series may be issuable as Bearer Securities, Holdings will be required to maintain (i) a Paying Agent in the Borough of Manhattan, The City of New York for payments with respect to any Registered Securities of the series (and for payments with respect to Bearer Securities of the series in the circumstances described above, but not otherwise), and (ii) a Paying Agent in a Place of Payment located outside the United States where Debt Securities of such series and any coupons appertaining thereto may be presented and surrendered for payment; provided that if the Debt Securities of such series are listed on The Luxembourg Stock Exchange (the "Stock Exchange") or any other stock exchange located outside the United States and such stock exchange shall so require, Holdings will maintain a Paying Agent in Luxembourg or any other required city located outside the United States, as the case may be, for the Debt Securities of such series. (Section 1002). All moneys paid by Holdings to a Paying Agent for the payment of principal of (and premium, if any) or interest on any Debt Security which remain unclaimed at the end of two years after such principal, premium or interest shall have become due and payable will be repaid to Holdings and the Holder of such Debt Security or any coupon will thereafter look only to Holdings for payment thereof. (Section 1003). LIMITATION ON LIENS So long as any Debt Securities remain outstanding, unless an applicable Prospectus Supplement relating thereto provides otherwise, Holdings will not, and will not permit any Designated Subsidiary (as defined below), directly or indirectly, to create, issue, assume, incur or guarantee any indebtedness for money borrowed which is secured by a mortgage, pledge, lien, security interest or other encumbrance of any nature on any of the present or future common stock of a Designated Subsidiary unless the Debt Securities and, if Holdings so elects, any other indebtedness of Holdings ranking at least pari passu with the Debt Securities, shall be secured equally and ratably with (or prior to) such other secured indebtedness for money borrowed so long as it is outstanding. (Section 1005). The term "Designated Subsidiary" means any present or future consolidated subsidiary of Holdings, the consolidated net worth of which constitutes at least 5% of the consolidated net worth of Holdings. As of March 31, 1994, Holdings' Designated Subsidiaries were Lehman Brothers, Lehman Special Securities Inc., Lehman Commercial Paper Inc., Lehman Government Securities Inc., Lehman Brothers Group Inc., Lehman Brothers Holdings PLC, Lehman Brothers UK Holdings Limited, Lehman Brothers International (Europe), Lehman Brothers Japan Inc., Lehman Funding Corp., Lehman Brothers Financial Products Inc., Lehman Brothers Verwaltungs und Beteiligungsgesellschaft mbH and LB I Group Inc. EVENTS OF DEFAULT Except as may otherwise be set forth in an applicable Prospectus Supplement relating to a series of Debt Securities, the following are Events of Default under the Indenture with respect to Debt Securities of such series: (a) failure to pay principal of or premium, if any, on any Debt Security of that series when due; (b) failure to pay interest, if any, on any Debt Security of that series and any related coupons when due, continued for 30 days; (c) failure to deposit any sinking fund payment or analogous obligation, when due, continued for 30 days, in respect of any Debt Security of that series; (d) failure to perform any other covenant 8 10 of Holdings in the Indenture (other than a covenant included in the applicable Indenture solely for the benefit of a series of Debt Securities other than that series), continued for 90 days after written notice as provided in the Indenture; (e) certain events in bankruptcy, insolvency or reorganization in respect of Holdings; and (f) any other Event of Default provided with respect to Debt Securities of that series. (Section 501). An Event of Default with respect to a particular series of Debt Securities does not necessarily constitute an Event of Default with respect to any other series of Debt Securities issued under the same or another Indenture. The Trustee may withhold notice to the Holders of any series of Debt Securities of any default with respect to such series (except in the payment of principal, premium or interest, if any) if it considers such withholding to be in the interests of such Holders. (Section 602). If an Event of Default with respect to Debt Securities of any series at the time outstanding occurs and is continuing, unless the principal of all of the Debt Securities of such series shall have already become due and payable, either the Trustee or the Holders of at least 25% in principal amount of the outstanding Debt Securities of that series may declare the principal amount (or, if the Debt Securities of that series are Original Issue Discount Securities, such portion of the principal amount as may be specified in the terms of the series) of all the Debt Securities of that series to be due and payable immediately. At any time after a declaration of acceleration with respect to Debt Securities of any series has been made, but before a judgment or decree based on acceleration has been obtained and entered, the Holders of a majority in principal amount of the outstanding Debt Securities of that series may, under certain circumstances, rescind and annul such acceleration. (Section 502). For information as to waiver of defaults, see "Meetings, Modification and Waiver." Each Indenture provides that the Trustee will be under no obligation, subject to the duty of the Trustee during default to act with the required standard of care, to exercise any of its rights or powers under such Indenture at the request or direction of any of the Holders, unless such Holders shall have offered to the Trustee reasonable indemnity. (Section 603). Subject to such provisions for indemnification of the Trustee, the Holders of a majority in principal amount of the outstanding Debt Securities of any series will have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred on the Trustee, with respect to the Debt Securities of that series. (Section 512). Holdings will be required to furnish to each Trustee annually a statement as to the performance by Holdings of certain of its obligations under the applicable Indenture and as to any default in such performance. (Section 1006). SATISFACTION AND DISCHARGE Except as may otherwise be set forth in an applicable Prospectus Supplement relating to a series of Debt Securities, each Indenture provides that Holdings shall be discharged from its obligations under the Debt Securities of such series (with certain exceptions) at any time prior to the Stated Maturity or redemption thereof when (a) Holdings has irrevocably deposited with the applicable Trustee, in trust, (i) sufficient funds in the currency or currency unit in which the Debt Securities of such series are payable to pay the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series, or (ii) such amount of direct obligations of, or obligations the principal of and interest, if any, on which are fully guaranteed by, the government which issued the currency in which the Debt Securities of such series are payable, and which are not subject to prepayment, redemption or call, as will, together with the predetermined and certain income to accrue thereon without consideration of any reinvestment thereof, be sufficient to pay when due the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series, or (iii) such combination of such funds and securities as described in (i) and (ii), respectively, as will, together with the predetermined and certain income to accrue on any such securities as described in (ii), be sufficient to pay when due the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series and (b) Holdings has paid all other sums payable with respect to the Debt Securities of such series and (c) certain other conditions are met. Upon such discharge, the Holders of the Debt Securities of such series shall no longer be entitled to the benefits of the Indenture, except for certain rights, including registration of transfer 9 11 and exchange of the Debt Securities of such series and replacement of lost, stolen or mutilated Debt Securities, and shall look only to such deposited funds or obligations for payment. (Sections 401 and 403). DEFEASANCE OF CERTAIN OBLIGATIONS If the terms of the Debt Securities of any series so provide, Holdings may omit to comply with the restrictive covenants in Section 801 ("Company May Consolidate, Etc., Only on Certain Terms"), Section 1005 ("Limitations on Liens on Common Stock of Designated Subsidiaries") and any other specified covenant and any such omission with respect to such Sections shall not be an Event of Default with respect to the Debt Securities of such series, if (a) Holdings has irrevocably deposited with the applicable Trustee, in trust, (i) sufficient funds in the currency or currency unit in which the Debt Securities of such series are payable to pay the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series, or (ii) such amount of direct obligations of, or obligations the principal of and interest, if any, on which are fully guaranteed by, the government which issued the currency in which the Debt Securities of such series are payable and which are not subject to prepayment, redemption or call, as will, together with the predetermined and certain income to accrue thereon without consideration of any reinvestment thereof, be sufficient to pay when due the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series or, (iii) such combination of such funds and securities as described in (i) and (ii), respectively, as will, together with the predetermined and certain income to accrue on any such securities as described in (ii), be sufficient to pay when due the principal of (and premium, if any), and interest, if any, to Stated Maturity (or redemption) on, the Debt Securities of such series and (b) certain other conditions are met. The obligations of Holdings under the Indenture with respect to the Debt Securities of such series, other than with respect to the covenants referred to above shall remain in full force and effect. (Section 1009). MEETINGS, MODIFICATION AND WAIVER Modifications and amendments of either Indenture may be made by Holdings and the applicable Trustee with the consent of the Holders of not less than 66 2/3% in principal amount of the Outstanding Debt Securities of each series issued under such Indenture affected by such modification or amendment; provided, however, that no such modification or amendment may, without the consent of the Holder of each Outstanding Debt Security affected thereby, (a) change the Stated Maturity of the principal of, or any instalment of principal of or interest, if any, on, any Debt Security, (b) reduce the principal amount of, or the premium, if any, or interest, if any, on, any Debt Security, (c) change any obligation of Holdings to pay additional amounts, (d) reduce the amount of principal of an Original Issue Discount Security payable upon acceleration of the Maturity thereof, (e) adversely affect the right of repayment or repurchase, if any, at the option of the Holder, (f) reduce the amount, or postpone the date fixed for, any payment under any sinking fund or analogous provision, (g) change the currency or currency unit of payment of principal of or premium, if any, or interest, if any, on any Debt Security, (h) change or eliminate the right, if any, to elect payment in a coin or currency or currency unit other than that in which Debt Securities which are Registered Securities are denominated or stated to be payable, (i) impair the right to institute suit for the enforcement of any payment on or with respect to any Debt Security, (j) reduce the percentage in principal amount of Outstanding Debt Securities of any series, the consent of the Holders of which is required for modification or amendment of the applicable Indenture or for waiver of compliance with certain provisions of the applicable Indenture or for waiver of certain defaults, (k) reduce the requirements contained in either Indenture for quorum or voting, or (l) change any obligation of Holdings to maintain an office or agency in the places and for the purposes required in the applicable Indenture. (Section 902). The Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series may on behalf of the Holders of all Debt Securities of that series waive, insofar as that series is concerned, compliance by Holdings with certain restrictive provisions of the applicable Indenture. (Section 1007). The Holders of not less than a majority in principal amount of the Outstanding Debt Securities of any series may on behalf of the Holders of all Debt Securities of that series and any coupons appertaining thereto waive any past default under the applicable Indenture with respect to that series, except a default in the 10 12 payment of the principal of or premium, if any, or interest, if any, on any Debt Security of that series or in the payment of any sinking fund instalment or analogous obligation or in respect of a provision which under the applicable Indenture cannot be modified or amended without the consent of the Holder of each Outstanding Debt Security of that series affected. (Section 513). Each Indenture contains provisions for convening meetings of the Holders of Debt Securities of a series if Debt Securities of that series are issuable as Bearer Securities. A meeting may be called at any time by the applicable Trustee, and also, upon request, by Holdings or Holders of at least 10% in principal amount of the Outstanding Debt Securities of such series, in any such case upon notice given in accordance with "Notices" below. (Section 1302). Except as limited by the proviso in the second preceding paragraph, any resolution presented at a meeting or adjourned meeting at which a quorum is present may be adopted by the affirmative vote of the Holders of a majority in principal amount of the Outstanding Debt Securities of that series; provided, however, that, except as limited by the proviso in the second preceding paragraph, any resolution with respect to any consent or waiver which may be given by the Holders of not less than 66 2/3% in principal amount of the Outstanding Debt Securities of a series may be adopted at a meeting or an adjourned meeting at which a quorum is present only by the affirmative vote of 66 2/3% in principal amount of the Outstanding Debt Securities of that series; and provided, further, that, except as limited by the proviso in the second preceding paragraph, any resolution with respect to any request, demand, authorization, direction, notice, consent, waiver or other action which may be made, given or taken by the Holders of a specified percentage, which is less than a majority, in principal amount of Outstanding Debt Securities of a series may be adopted at a meeting or adjourned meeting duly reconvened at which a quorum is present by the affirmative vote of the Holders of such specified percentage in principal amount of the Outstanding Debt Securities of that series. Any resolution passed or decision taken at any meeting of Holders of Debt Securities of any series duly held in accordance with the applicable Indenture will be binding on all Holders of Debt Securities of that series and the related coupons. The quorum at any meeting called to adopt a resolution, and at any reconvened meeting, will be persons holding or representing a majority in principal amount of the Outstanding Debt Securities of a series; provided, however, that if any action is to be taken at such meeting with respect to a consent or waiver which may be given by the Holders of not less than 66 2/3% in principal amount of the Outstanding Debt Securities of a series, the persons holding or representing 66 2/3% in principal amount of the Outstanding Debt Securities of such series will constitute a quorum (Section 1304). CONSOLIDATION, MERGER AND SALE OF ASSETS Holdings may, without the consent of any Holders of Outstanding Debt Securities, consolidate or merge with or into, or transfer or lease its assets substantially as an entirety to, any Person, and any other Person may consolidate or merge with or into, or transfer or lease its assets substantially as an entirety to, Holdings, provided that (i) the Person (if other than Holdings) formed by such consolidation or into which Holdings is merged or which acquires or leases the assets of Holdings substantially as an entirety is organized under the laws of any United States jurisdiction and assumes Holdings' obligations on the Debt Securities and under the Indenture, (ii) after giving effect to the transaction, no Event of Default, and no event which, after notice or lapse of time or both, would become an Event of Default, shall have happened and be continuing, and (iii) certain other conditions are met. (Section 801). NOTICES Except as may otherwise be set forth in an applicable Prospectus Supplement relating to a series of Debt Securities, notices to Holders of Bearer Securities will be given by publication in a daily newspaper in the English language of general circulation in The City of New York and in London, and so long as such Bearer Securities are listed on the Stock Exchange and the Stock Exchange shall so require, in a daily newspaper of general circulation in Luxembourg or, if not practical, elsewhere in Western Europe. Such publication is expected to be made in The Wall Street Journal, the Financial Times and the Luxemburger Wort. Notices to Holders of Registered Securities will be given by mail to the addresses of such Holders as they appear in the Security Register. (Sections 101 and 106). 11 13 TITLE Title to any temporary global Debt Security or permanent global Debt Security in bearer form or any Bearer Securities and any coupons appertaining thereto will pass by delivery. Holdings, each Trustee and any agent of Holdings or the applicable Trustee may treat the bearer of any Bearer Security and the bearer of any coupon and the registered owner of any Registered Security as the absolute owner thereof (whether or not such Debt Security or coupon shall be overdue and notwithstanding any notice to the contrary) for the purpose of making payment and for all other purposes. (Section 308). REPLACEMENT OF DEBT SECURITIES AND COUPONS Any mutilated Debt Security or a Debt Security with a mutilated coupon appertaining thereto will be replaced by Holdings at the expense of the Holder upon surrender of such Debt Security to the applicable Trustee. Debt Securities or coupons that become destroyed, stolen or lost will be replaced by Holdings at the expense of the Holder upon delivery to the applicable Trustee of the Debt Security and coupons or evidence of the destruction, loss or theft thereof satisfactory to Holdings and the applicable Trustee; in the case of any coupon which becomes destroyed, stolen or lost, such coupon will be replaced by issuance of a new Debt Security in exchange for the Debt Security to which such coupon appertains. In the case of a destroyed, lost or stolen Debt Security or coupon an indemnity satisfactory to the applicable Trustee and Holdings may be required at the expense of the Holder of such Debt Security or coupon before a replacement Debt Security will be issued. (Section 306). CONCERNING THE TRUSTEES Business and other relationships (including other trusteeships) between, on the one hand, Holdings and its affiliates and, on the other hand, the Trustee under the Indenture pursuant to which any of the Debt Securities to which an applicable Prospectus Supplement accompanying this Prospectus relates are described in such Prospectus Supplement. LIMITATIONS ON ISSUANCE OF BEARER SECURITIES In compliance with United States federal tax laws and regulations, Bearer Securities may not be offered or sold during the restricted period (as defined under "Denominations, Registration and Transfer"), or delivered in definitive form in connection with a sale during the restricted period, in the United States or to United States persons other than to (a) the United States office of (i) an international organization (as defined in Section 7701 (a)(18) of the Code), (ii) a foreign central bank (as defined in Section 895 of the Code), or (iii) any underwriter, agent, or dealer offering or selling Bearer Securities during the restricted period (a "Distributor") pursuant to a written contract with the issuer or with another Distributor, that purchases Bearer Securities for resale or for its own account and agrees to comply with the requirements of Section 165 (j)(3)(A), (B), or (C) of the Code, or (b) the foreign branch of a United States financial institution purchasing for its own account or for resale, which institution agrees to comply with the requirements of Section 165 (j)(3)(A), (B), or (C) of the Code. In addition, a sale of a Bearer Security may be made during the restricted period to a United States person who acquired and holds the Bearer Security on the Certification Date through a foreign branch of a United States financial institution that agrees to comply with the requirements of Section 165(j)(3)(A), (B) or (C) of the Code. Any Distributor (including an affiliate of a Distributor) offering or selling Bearer Securities during the restricted period must agree not to offer or sell Bearer Securities in the United States or to United States persons (except as discussed above) and must employ procedures reasonably designed to ensure that its employees or agents directly engaged in selling Bearer Securities are aware of these restrictions. Bearer Securities and their interest coupons will bear a legend substantially to the following effect: "Any United States person who holds this obligation will be subject to limitations under the United States income tax laws, including the limitations provided in Section 165(j) and 1287(a) of the Internal Revenue Code." 12 14 Purchasers of Bearer Securities may be affected by certain limitations under United States tax laws. See the applicable Prospectus Supplement for a summary of material U.S. federal income tax consequences to United States persons investing in Bearer Securities. As used herein, "United States person" means a citizen or resident of the United States, a corporation, partnership or other entity created or organized in or under the laws of the United States and an estate or trust the income of which is subject to United States federal income taxation regardless of its source, and "United States" means the United States of America (including the States and the District of Columbia) and its possessions including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the Northern Mariana Islands. The term "Non-United States Holder" means any Holder which is not an United States person. DESCRIPTION OF WARRANTS The Debt Warrants, Currency Warrants, Index Warrants and Interest Rate Warrants are to be issued under separate warrant agreements (each a "Warrant Agreement" and respectively a "Debt Warrant Agreement", a "Currency Warrant Agreement", an "Index Warrant Agreement" and an "Interest Rate Warrant Agreement") to be entered into between Holdings and one or more banks or trust companies, as warrant agent (each a "Warrant Agent" and respectively a "Debt Warrant Agent", a "Currency Warrant Agent", an "Index Warrant Agent" and an "Interest Rate Warrant Agent"), all as shall be set forth in the Prospectus Supplement relating to the Warrants being offered thereby. A form of each type of Warrant Agreement, including a form of warrant certificate representing each type of Warrant (each a "Warrant Certificate" and respectively a "Debt Warrant Certificate", a "Currency Warrant Certificate", an "Index Warrant Certificate" and an "Interest Rate Warrant Certificate"), reflecting the alternative provisions that may be included in the Warrant Agreements to be entered into with respect to particular offerings of Warrants, are incorporated by reference as exhibits to the Registration Statement of which this Prospectus is a part. The descriptions contained herein of the Warrant Agreements and the Warrant Certificates and summaries of certain provisions of the Warrant Agreements and the Warrant Certificates do not purport to be complete and are subject to, and are qualified in their entirety by reference to, all the provisions of the applicable Warrant Agreements and the Warrant Certificates, including the definitions therein of certain terms not otherwise defined in this Prospectus. Wherever particular sections of, or terms defined in, the Warrant Agreements are referred to, such sections or defined terms are incorporated herein by reference. The particular terms of each issue of Warrants, as well as any modifications or additions to the general terms of the applicable Warrant Agreement or Warrant Certificate, will be described in the Prospectus Supplement relating to such Warrants. Accordingly, for a description of the terms of a particular issue of Warrants, reference must be made to the Prospectus Supplement relating thereto and to the descriptions set forth below. DEBT WARRANTS Holdings may issue, together with Debt Securities, Currency Warrants, Index Warrants or Interest Rate Warrants, or separately, Debt Warrants for the purchase of Debt Securities. If any of the Debt Warrants are sold for foreign currencies or foreign currency units or if any series of Debt Warrants is exercisable in foreign currencies or foreign currency units, the restrictions, elections, tax consequences, specific terms and other information with respect to such issue of Debt Warrants and such currencies or currency units will be set forth in an applicable Prospectus Supplement relating thereto. If so specified in the applicable Prospectus Supplement, the Debt Warrants may, in certain circumstances, be cancelled by Holdings prior to their expiration date and the holders thereof will be entitled to receive only the applicable Cancellation Amount. The Cancellation Amount may be either a fixed amount or an amount that varies during the term of the Debt Warrants in accordance with a schedule or formula. 13 15 General The Prospectus Supplement will describe the terms of any Debt Warrants offered thereby, the Debt Warrant Agreement relating to such Debt Warrants and the Debt Warrant Certificates representing such Debt Warrants, including the following: (1) the title of such Debt Warrants; (2) the aggregate amount of such Debt Warrants; (3) the initial offering price of such Debt Warrants; (4) the exercise price; (5) the currency or currency unit in which the initial offering price and/or the exercise price of such Debt Warrants is payable; (6) whether the Debt Warrants are to be issuable in registered or bearer form or both, and if in bearer form, whether such Debt Warrants may be exchanged for Debt Warrants in registered form and the circumstances and places for such exchange, if permitted; (7) if applicable, the title and terms of related Debt Securities with which such Debt Warrants are issued, the number of such Debt Warrants issued with each such Debt Security and the date, if any, on and after which such Debt Warrants and such Debt Securities will be separately transferable; (8) the title, aggregate principal amount and terms of the Debt Securities purchasable upon exercise of all of such Debt Warrants; (9) the principal amount of Debt Securities purchasable upon exercise of each Debt Warrant and the price at which such principal amount of Debt Securities may be purchased upon such exercise; (10) the date on which the right to exercise such Debt Warrants shall commence and the date (the "Debt Warrant Expiration Date") on which such right shall expire; (11) any minimum number of Debt Warrants which must be exercised at any one time, other than upon automatic exercise; (12) the maximum number, if any, of such Debt Warrants that may, subject to election by Holdings, be exercised by all owners (or by any person or entity) on any day; (13) any provisions for the automatic exercise of such Debt Warrants; (14) whether and under what circumstances such Debt Warrants may be cancelled by Holdings prior to expiration; (15) any other procedures and conditions relating to the exercise of such Debt Warrants; (16) the identity of the Debt Warrant Agent; (17) any national securities exchange on which such Debt Warrants will be listed; (18) provisions, if any, for issuing such Debt Warrants in certificated form; (19) if applicable, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto; and (20) any other terms of the Debt Warrants. Debt Warrant Certificates will be exchangeable for new Debt Warrant Certificates of different denominations and, if in registered form, may be presented for registration of transfer and Debt Warrants may be exercised at the corporate trust office of the Debt Warrant Agent or any other office indicated in the Prospectus Supplement relating thereto (Section 3.1). Prior to the exercise of Debt Warrants, holders of Debt Warrants will not be entitled to payments of principal of (or premium, if any) or interest, if any, on the Debt Securities purchasable upon such exercise, or to enforce any of the covenants in the applicable Indenture (Section 4.1). Exercise of Debt Warrants Unless otherwise provided in the Prospectus Supplement, each Debt Warrant will entitle the holder thereof to purchase for cash such principal amount of Debt Securities at such exercise price as shall in each case be set forth in, or be determinable as set forth in, the Prospectus Supplement relating to the Debt Warrants offered thereby (Sections 2.1). Debt Warrants may be exercised at any time up to the close of business on the Debt Warrant Expiration Date specified in the Prospectus Supplement relating to the Debt Warrants offered thereby. After the close of business on the Debt Warrant Expiration Date (or such later date to which such Debt Warrant Expiration Date may be extended by Holdings), unexercised Debt Warrants will become void (Section 2.2). Debt Warrants may be exercised as set forth in the Prospectus Supplement relating to the Debt Warrants offered thereby. Upon receipt of payment and the Debt Warrant Certificate properly completed and duly executed at the corporate trust office of the Debt Warrant Agent or any other office indicated in the Prospectus Supplement, Holdings will, as soon as practicable, forward to the person entitled thereto the Debt Securities purchasable upon such exercise. If fewer than all of the Debt Warrants represented by such Debt Warrant Certificate are exercised, a new Debt Warrant Certificate will be issued for the remaining amount of Debt Warrants (Section 2.3). 14 16 Other Information Other important information concerning Debt Warrants is set forth below under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger, Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding Company". CURRENCY WARRANTS Holdings may issue, together with Debt Securities, Debt Warrants, Index Warrants or Interest Rate Warrants, or separately, Currency Warrants (a) in the form of Currency Put Warrants, entitling the owners thereof to receive from Holdings the Currency Warrant Cash Settlement Value (as shall be defined in the Prospectus Supplement) of the right to sell a specified amount of one currency (whether U.S. dollars or a foreign currency or foreign currency unit) (a "Base Currency") for a specified amount of a different currency (whether U.S. dollars or a foreign currency or foreign currency unit) (a "Reference Currency"), (b) in the form of Currency Call Warrants, entitling the owners thereof to receive from Holdings the Currency Warrant Cash Settlement Value of the right to purchase a specified amount of a Base Currency for a specified amount of a Reference Currency, or (c) in such other form as shall be specified in the related Prospectus Supplement. The Prospectus Supplement for an issue of Currency Warrants will set forth the formula pursuant to which the Currency Warrant Cash Settlement Value will be determined, including any multipliers, if applicable. The Prospectus Supplement will describe the terms of any Currency Warrants offered thereby, the Currency Warrant Agreement relating to such Currency Warrants and the Currency Warrant Certificates representing such Currency Warrants, including the following: (1) the title of such Currency Warrants; (2) the aggregate amount of such Currency Warrants; (3) the initial offering price of such Currency Warrants; (4) the exercise price, if any; (5) the currency or currency unit in which the initial offering price, the exercise price, if any, and the Currency Warrant Cash Settlement Value of such Currency Warrants is payable; (6) the Base Currency and the Reference Currency for such Currency Warrants; (7) whether such Currency Warrants shall be Currency Put Warrants, Currency Call Warrants or otherwise; (8) the formula for determining the Currency Warrant Cash Settlement Value, if applicable, of each Currency Warrant; (9) whether and under what circumstances a minimum and/or maximum expiration value is applicable upon the expiration or exercise of such Currency Warrants; (10) the effect or effects, if any, of the occurrence of a Market Disruption Event or Force Majeure Event; (11) the date on which the right to exercise such Currency Warrants shall commence and the date (the "Currency Warrant Expiration Date") on which such right shall expire; (12) any minimum number of Currency Warrants which must be exercised at any one time, other than upon automatic exercise; (13) the maximum number, if any, of such Currency Warrants that may, subject to election by Holdings, be exercised by all owners (or by any person or entity) on any day; (14) any provisions for the automatic exercise of such Currency Warrants other than at expiration; (15) whether and under what circumstances such Currency Warrants may be cancelled by Holdings prior to their expiration date; (16) any other procedures and conditions relating to the exercise of such Currency Warrants; (17) the identity of the Currency Warrant Agent; (18) any national securities exchange on which such Currency Warrants will be listed; (19) provisions, if any, for issuing such Currency Warrants in certificated form; (20) if such Currency Warrants are not issued in book-entry form, the place or places at which payments in respect of such Currency Warrants are to be made by Holdings; (21) if applicable, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto; and (22) any other terms of the Currency Warrants. Other important information concerning Currency Warrants is set forth below under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger, Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and Interest Rate Warrants -- Exercise of Warrants", "-- Market Disruption and Force Majeure Events" and "-- Settlement Currency", "-- Listing". 15 17 INDEX WARRANTS Holdings may issue, together with Debt Securities, Debt Warrants, Currency Warrants or Interest Rate Warrants, or separately, Index Warrants (a) in the form of Index Put Warrants, entitling the owners thereof to receive from Holdings the Index Cash Settlement Value (as shall be defined in the Prospectus Supplement) in cash, which amount will be determined by reference to the amount, if any, by which the Fixed Amount (as shall be defined in the Prospectus Supplement) at the time of exercise exceeds the Index Value (as shall be defined in the Prospectus Supplement), (b) in the form of Index Call Warrants, entitling the owners thereof to receive from Holdings the Index Cash Settlement Value in cash, which amount will be determined by reference to the amount, if any, by which the Index Value at the time of exercise exceeds the Fixed Amount, (c) in the form of Index Spread Warrants, entitling the owners thereof to receive from Holdings the Index Cash Settlement Value in cash, which amount will be determined by reference to the amount, if any, by which the Reference Index Value (as shall be defined in the Prospectus Supplement) at the time of exercise exceeds the Base Index Value (as shall be defined in the Prospectus Supplement) or (d) in such other form as shall be specified in the related Prospectus Supplement. The Prospectus Supplement for an issue of Index Warrants will set forth the formula pursuant to which the Index Cash Settlement Value will be determined, including any multipliers, if applicable. The Prospectus Supplement will describe the terms of Index Warrants offered thereby, the Index Warrant Agreement relating to such Index Warrants and the Index Warrant Certificate representing such Index Warrants, including the following: (1) the title of such Index Warrants; (2) the aggregate amount of such Index Warrants; (3) the initial offering price of such Index Warrants; (4) the exercise price, if any; (5) the currency or currency unit in which the initial offering price, the exercise price, if any, and the Index Cash Settlement Value of such Index Warrants is payable; (6) the Index or Indices for such Index Warrants, which may be based on one or more U.S. or foreign stocks, bonds, or other securities, one or more U.S. or foreign interest rates, one or more currencies or currency units, or any combination of the foregoing, and may be a preexisting U.S. or foreign index compiled and published by a third party or an index based on one or more securities, interest rates or currencies selected by Holdings solely in connection with the issuance of such Index Warrants, and certain information regarding such Index or Indices and the underlying securities, interest rates or currencies (including, to the extent possible, the policies of the publisher of the Index with respect to additions, deletions and substitutions of such securities, interest rates or currencies); (7) whether such Index Warrants shall be Index Put Warrants, Index Call Warrants, Index Spread Warrants or otherwise; (8) the method of providing for a substitute Index or Indices or otherwise determining the amount payable in connection with the exercise of such Index Warrants if any Index changes or ceases to be made available by its publisher; (9) the formula for determining the Index Cash Settlement Value, if applicable, of each Index Warrant; (10) whether and under what circumstances a minimum and/or maximum expiration value is applicable upon the expiration or exercise of such Index Warrants; (11) the effect or effects, if any, of the occurrence of a Market Disruption Event or Force Majeure Event; (12) the date on which the right to exercise such Index Warrants shall commence and the date (the "Index Warrant Expiration Date") on which such right shall expire; (13) any minimum number of Index Warrants which must be exercised at any one time, other than upon automatic exercise; (14) the maximum number, if any, of such Index Warrants that may, subject to election by Holdings, be exercised by all owners (or by any person or entity) on any day; (15) any provisions for the automatic exercise of such Index Warrants other than at expiration; (16) whether and under what circumstances such Index Warrants may be cancelled by Holdings prior to their expiration date; (17) any provisions permitting a Holder to condition any notice of exercise on the absence of certain specified changes in the Index Value, the Base Index Value or the Reference Index Value after the date of exercise; (18) any other procedures and conditions relating to the exercise of such Index Warrants; (19) the identity of the Index Warrant Agent; (20) any national securities exchange on which such Index Warrants will be listed; (21) provisions, if any, for issuing such Index Warrants in certificated form; (22) if such Index Warrants are not issued in book-entry form, the place or places at which payments in respect of such Index Warrants are to be made by Holdings; (23) if applicable, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto; and (24) any other terms of such Index Warrants. 16 18 Other important information concerning Index Warrants is set forth below under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger, Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and Interest Rate Warrants -- Exercise of Warrants", "-- Market Disruption and Force Majeure Events", "-- Settlement Currency", "-- Listing". INTEREST RATE WARRANTS Holdings may issue, together with Debt Securities, Debt Warrants, Currency Warrants or Index Warrants or, separately, Interest Rate Warrants (a) in the form of Interest Rate Put Warrants, entitling the owners thereof to receive from Holdings the Interest Rate Cash Settlement Value (as shall be defined in the Prospectus Supplement) in cash, which amount will be determined by reference to the amount, if any, by which the Spot Amount (as shall be defined in the Prospectus Supplement) is less than the Strike Amount (as shall be defined in the Prospectus Supplement) on the applicable valuation date following exercise, (b) in the form of Interest Rate Call Warrants, entitling the owners thereof to receive from Holdings the Interest Rate Cash Settlement Value in cash, which amount will be determined by reference to the amount, if any, by which the Spot Amount on the applicable valuation date following exercise exceeds the Strike Amount or (c) in such other form as shall be specified in the related Prospectus Supplement. The Prospectus Supplement for an issue of Interest Rate Warrants will set forth the formula pursuant to which the Interest Rate Cash Settlement Value will be determined, including any multipliers, if applicable. The Strike Amount may either be a fixed yield, price or rate of a Debt Instrument, a Rate or any combination of Debt Instruments and/or Rates or a yield, price or rate that varies during the term of the Interest Rate Warrants in accordance with a schedule or formula. The Debt Instrument will be one or more instruments specified in the applicable Prospectus Supplement issued either by the United States government or by a foreign government. The Rate will be one or more interest rates or interest rate swap rates established from time to time by one or more financial institutions specified in the applicable Prospectus Supplement. The Prospectus Supplement will describe the terms of Interest Rate Warrants offered thereby, the Interest Rate Warrant Agreement relating to such Interest Rate Warrants and the Interest Rate Warrant Certificate representing such Interest Rate Warrants, including the following: (1) the title of such Interest Rate Warrants, (2) the aggregate amount of such Interest Rate Warrants; (3) the initial offering price of such Interest Rate Warrants; (4) the exercise price, if any; (5) the currency or currency unit in which the initial offering price, the exercise price, if any, and the Interest Rate Cash Settlement Value of such Interest Rate Warrants is payable; (6) the Debt Instrument (which may be one or more debt instruments issued either by the United States government or by a foreign government), the Rate (which may be one or more interest rates or interest rate swap rates established from time to time by one or more specified financial institutions) or the other yield, price or rate utilized for such Interest Rate Warrants, and certain information regarding such Debt Instrument or Rate; (7) whether such Interest Rate Warrants shall be Interest Rate Put Warrants, Interest Rate Call Warrants or otherwise; (8) the Strike Amount, the method of determining the Spot Amount and the method of expressing movements in the yield or closing price of the Debt Instrument or in the level of the Rate as a cash amount in the currency in which the Interest Rate Cash Settlement Value of such Warrants is payable; (9) the formula for determining the Interest Rate Cash Settlement Value, if applicable, of each Interest Rate Warrant; (10) whether and under what circumstances a minimum and/or maximum expiration value is applicable upon the expiration or exercise of such Interest Rate Warrants; (11) the effect or effects, if any, of the occurrence of a Market Disruption Event or Force Majeure Event; (12) the date on which the right to exercise such Interest Rate Warrants shall commence and the date (the "Interest Rate Warrant Expiration Date") on which such right shall expire; (13) any minimum number of Interest Rate Warrants which must be exercised at any one time, other than upon automatic exercise; (14) the maximum number, if any, of such Interest Rate Warrants that may, subject to election by Holdings, be exercised by all owners (or by any person or entity) on any day; (15) any provisions for the automatic exercise of such Interest Rate Warrants other than at expiration; (16) whether and under what circumstances such Interest Rate Warrants may be cancelled by Holdings prior to their expiration date; (17) any provisions permitting a Holder to condition any notice of exercise on the absence of certain specified changes in the Spot Amount after the date 17 19 of exercise; (18) any other procedures and conditions relating to the exercise of such Interest Rate Warrants; (19) the identity of the Interest Rate Warrant Agent; (20) any national securities exchange on which such Interest Rate Warrants will be listed; (21) provisions, if any, for issuing such Interest Rate Warrants in certificated form; (22) if such Interest Rate Warrants are not issued in book-entry form, the place or places at which payments in respect of such Interest Rate Warrants are to be made by Holdings; (23) if applicable, a discussion of certain United States federal income tax, accounting or other special considerations applicable thereto; and (24) any other terms of such Interest Rate Warrants. Other important information concerning Interest Rate Warrants is set forth below under "Certain Items Applicable to All Warrants -- Modifications", "-- Merger, Consolidation, Sale or Other Dispositions", "-- Enforceability of Rights by Beneficial Owner; Governing Law" and "-- Unsecured Obligations of a Holding Company" and "Certain Items Applicable to Currency Warrants, Index Warrants and Interest Rate Warrants -- Exercise of Warrants", "-- Market Disruption and Force Majeure Events", "-- Settlement Currency", "-- Listing". CERTAIN ITEMS APPLICABLE TO ALL WARRANTS Modifications Each Warrant Agreement and the terms of each issue of Warrants may be amended by Holdings and the applicable Warrant Agent, without the consent of the beneficial owners or the registered holders, for the purpose of curing any ambiguity, or of curing, correcting or supplementing any defective or inconsistent provision contained therein, or in any other manner which Holdings may deem necessary or desirable and which will not adversely affect the interests of the beneficial owners of the then outstanding unexercised Warrants in any material respect (Section 6.1). Holdings and each Warrant Agent also may modify or amend the applicable Warrant Agreement and the terms of the related Warrants, with the consent of the beneficial owners of not less than a majority in number of the then outstanding unexercised Warrants affected, provided that no such modification or amendment that reduces the amount receivable upon exercise, cancellation or expiration, shortens the period of time during which the Warrants may be exercised or otherwise materially and adversely affects the exercise rights of the beneficial owners of the Warrants or reduces the percentage number of outstanding Warrants the consent of whose beneficial owners is required for modification or amendment of the applicable Warrant Agreement or the terms of the Warrants may be made without the consent of the beneficial owners affected thereby (Section 6.1). Merger, Consolidation, Sale or Other Dispositions If at any time there is a merger or consolidation involving Holdings or a sale, transfer, conveyance or other disposition of all or substantially all of the assets of Holdings, then in any such event the successor or assuming corporation shall succeed to and be substituted for Holdings, with the same effect as if it had been named in the applicable Warrant Agreement and in the applicable Warrants as Holdings. Holdings shall thereupon be relieved of any further obligation under such Warrant Agreement or under such Warrants, and, in the event of any such merger, consolidation, sale, transfer, conveyance or other disposition, Holdings as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated (Section 6.2 of the Debt Warrant Agreement and Section 3.2 of each other Warrant Agreement). Enforceability of Rights by Beneficial Owner; Governing Law Each Warrant Agent will act solely as an agent of Holdings in connection with the issuance and exercise of the applicable Warrants and will not assume any obligation or relationship of agency or trust for or with any owner of a beneficial interest in any Warrant or with the registered holder thereof (Section 5.2). A Warrant Agent shall have no duty or responsibility in case of any default by Holdings in the performance of its obligations under the applicable Warrant Agreement or Warrant Certificate including, without limitation, any duty or responsibility to initiate any proceedings at law or otherwise or to make any demand upon Holdings (Section 5.2). Beneficial owners may, without the consent of the applicable Warrant Agent, enforce by 18 20 appropriate legal action, on their own behalf, their right to exercise their Warrants, to receive Debt Securities, in the case of Debt Warrants, and to receive payment, if any, for their Warrants, in the case of Currency Warrants, Index Warrants or Interest Rate Warrants (Section 4.2 of the Debt Warrant Agreement and Section 3.1 of each other Warrant Agreement). Except as may otherwise be provided in the Prospectus Supplement relating thereto, each issue of Warrants and the applicable Warrant Agreement will be governed by and construed in accordance with the law of the State of New York (Section 6.5). Unsecured Obligations of a Holding Company The Warrants are unsecured obligations of Holdings and, therefore, changes in the perceived creditworthiness of Holdings may be expected to affect trading prices in Warrants. Since Holdings, as a holding company, does not have any significant assets other than the equity securities of its subsidiaries, its cash flow and consequent ability to satisfy its financial obligations, including Warrants, are dependent upon the earnings of its subsidiaries and the distribution of those earnings to Holdings, or upon loans or other payments of funds by those subsidiaries to Holdings. Holdings' subsidiaries, including Lehman Brothers, are separate and distinct legal entities and will have no obligation, contingent or otherwise, to pay any amount in respect of Warrants or to make any funds available therefor, whether by dividends, loans or other payments. Dividends, loans and other payments by Lehman Brothers are restricted by net capital and other rules of various regulatory bodies. See "Capital Requirements." The payment of dividends by Holdings' subsidiaries is contingent upon the earnings of those subsidiaries and is subject to various business considerations in addition to net capital requirements and contractual restrictions. Additionally, since Warrants will be obligations of a holding company, the ability of holders of Warrants to benefit from any distribution of assets of any subsidiary upon the liquidation or reorganization of such subsidiary is subordinate to the prior claims of present and future creditors of such subsidiary. CERTAIN ITEMS APPLICABLE TO CURRENCY WARRANTS, INDEX WARRANTS AND INTEREST RATE WARRANTS Exercise of Warrants Except as may otherwise be provided in the applicable Prospectus Supplement relating thereto, (a) each Currency Warrant, Index Warrant and Interest Rate will entitle the owner, upon payment of the exercise price, if any, to the applicable Cash Settlement Value of such Warrant, on the applicable Exercise Date, in each case as such terms will further be defined in the applicable Prospectus Supplement relating thereto (Section 2.2) and (b) if not exercised prior to 1:30 p.m., New York City time, on the Business Day preceding the applicable Warrant Expiration Date, the Warrants will be deemed automatically exercised on such Warrant Expiration Date (Section 2.3). As described below, Currency Warrants, Index Warrants and Interest Rate Warrants may also be deemed to be automatically exercised if they are delisted. Procedures for exercise of the Currency Warrants, Index Warrants and Interest Rate Warrants will be set out in the applicable Prospectus Supplement. Market Disruption and Force Majeure Events If so specified in the applicable Prospectus Supplement, following the occurrence of a Market Disruption Event or Force Majeure Event (as each term shall be defined therein), the Cash Settlement Value of a Currency Warrant, an Index Warrant or an Interest Rate Warrant may be determined on a different basis than under normal exercise of a Warrant or the determination of the applicable Cash Settlement Value. In addition, if so specified in the applicable Prospectus Supplement, Currency Warrants, Index Warrants and Interest Rate Warrants may, in certain circumstances, be cancelled by Holdings prior to their expiration date and the holders thereof will be entitled to receive only the applicable Cancellation Amount. The Cancellation Amount may be either a fixed amount or an amount that varies during the term of the Warrants in accordance with a schedule or formula. 19 21 Settlement Currency Currency Warrants, Index Warrants and Interest Rate Warrants will be settled only in U.S. dollars (unless settlement in a foreign currency is specified in the applicable Prospectus Supplement and is permissible under applicable) law and accordingly will not require or entitle an owner to sell, deliver, purchase or take delivery of the currency, security or other instrument underlying such Warrants. If any of the Currency Warrants, Index Warrants or Interest Rate Warrants are sold for, or if the exercise price, if any, is payable in, foreign currencies or foreign currency units or if the amount payable by Holdings in respect of any series of Currency Warrants, Index Warrants or Interest Rate Warrants is payable in foreign currencies or foreign currency units, the restrictions, elections, tax consequences, specific terms and other information with respect to such issue of Warrants and such currencies or currency units will be set forth in an applicable Prospectus Supplement relating thereto. Listing Unless otherwise provided in the Prospectus Supplement, each issue of Currency Warrants, Index Warrants and Interest Rate Warrants will be listed on a national securities exchange, as specified in the applicable Prospectus Supplement, subject only to official notice of issuance, as a pre-condition to the sale of any such Warrants. It may be necessary in certain circumstances for such national securities exchange to obtain the approval of the SEC in connection with any such listing. In the event that the such Warrants are delisted from, or permanently suspended from trading on, such exchange, and, at or prior to such delisting or suspension, such Warrants shall not have been listed on another national securities exchange, any such Warrants not previously exercised will be deemed automatically exercised on the date such delisting or permanent trading suspension becomes effective (Section 2.3). The applicable Cash Settlement Value to be paid in such event will be as set forth in the applicable Prospectus Supplement. Holdings will notify holders of such Warrants as soon as practicable of such delisting or permanent trading suspension. The applicable Warrant Agreement will contain a covenant of Holdings not to seek delisting of such Warrants from, or permanent suspension of their trading on, such exchange (Section 2.4 of the Currency Warrant Agreement and the Interest Rate Warrant Agreement and Section 2.5 of the Index Warrant Agreement). GLOBAL SECURITIES The Securities of a series may be issued in whole or in part in the form of one or more Global Securities that will be deposited with or on behalf of a depository (a "Depository") identified in the Prospectus Supplement relating to such series. Global Securities representing Debt Securities or Debt Warrants may be issued in either registered or bearer form. Global Securities representing Currency Warrants, Index Warrants or Interest Rate Warrants will be issued in registered form only. Global Securities may be issued in either temporary or permanent form. The specific terms of the depository arrangement with respect to any Securities of a series will be described in the Prospectus Supplement relating to such series. The Company anticipates that the following provisions will apply to all depository arrangements. Unless otherwise specified in an applicable Prospectus Supplement, Securities which are to be represented by a Global Security in registered form to be deposited with or on behalf of a Depository will be registered in the name of such Depository or its nominee. Upon the issuance of a Global Security in registered form, the Depository for such Global Security will credit the respective principal amounts, in the case of Debt Securities, and the respective number of warrants, in the case of Warrants represented by such Global Security to the accounts of institutions that have accounts with such Depository or its nominee ("participants"). The accounts to be credited shall be designated by the underwriters or agents of such Securities or by Holdings, if such Securities are offered and sold directly by Holdings. Ownership of beneficial interests in such Global Securities will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests by participants in such Global Securities will be shown on, and the transfer of that ownership interest will be effected only through, records maintained by the Depository or its nominee for such Global Security. Ownership of beneficial interests in Global Securities by persons that hold through participants will be shown on, and the transfer of that ownership interest within such participant will be effected only through, records maintained by such participant. The laws of some jurisdictions require that 20 22 certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and such laws may impair the ability to transfer beneficial interests in a Global Security. So long as the Depository for a Global Security in registered form, or its nominee, is the registered owner of such Global Security, such Depository or such nominee, as the case may be, will be considered the sole owner or holder of the Securities represented by such Global Security for all purposes under the applicable Indenture, in the case of Debt Securities, or under the applicable warrant agreement, in the case of Warrants, governing such Securities. Except as set forth below, owners of beneficial interests in such Global Security will not be entitled to have Securities of the series represented by such Global Security registered in their names, will not receive or be entitled to receive physical delivery of Securities of such series in definitive form and will not be considered the owners or holders thereof under the applicable Indenture, in the case of Debt Securities, or under the applicable warrant agreement, in the case of Warrants. Payments in respect of Securities registered in the name of or held by a Depository or its nominee will be made to the Depository or its nominee, as the case may be, as the registered owner or the holder of the Global Security. None of Holdings, the applicable Trustee or Warrant agent, any Paying Agent or any Security Registrar for such Securities will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests in a Global Security or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests. Holdings expects that the Depository for a permanent Global Security in registered form, upon receipt of any payment in respect of a permanent Global Security, will credit immediately participants' accounts with payments in amounts proportionate to their respective beneficial interests in such Global Security as shown on the records of such Depository. Holdings also expects that payments by participants to owners of beneficial interests in such Global Security held through such participants will be governed by standing instructions and customary practices, as is now the case with securities held for the accounts of customers in bearer form or registered in "street name," and will be the responsibility of such participants. A Global Security in registered form may not be transferred except as a whole by the Depository for such Global Security to a nominee of such Depository or by a nominee of such Depository to such Depository or another nominee of such Depository or by such Depository or any such nominee to a successor of such Depository or a nominee of such successor. If a Depository for a permanent Global Security in registered form is at any time unwilling or unable to continue as Depository and a successor Depository is not appointed by Holdings within 90 days, Holdings will issue Securities in definitive registered form in exchange for the Global Security representing such Securities. In addition, Holdings may at any time and in its sole discretion determine not to have any Securities in registered form represented by one or more Global Securities and, in such event, will issue Securities in definitive form in exchange for all of the Global Securities representing such Securities. Further, if Holdings so specifies with respect to the Securities of a series, an owner of a beneficial interest in a Global Security representing Securities of such series may, on terms acceptable to Holdings and the Depository for such Global Security, receive Securities of such series in definitive form. In any such instance, an owner of a beneficial interest in a Global Security will be entitled to physical delivery in definitive form of Securities of the series represented by such Global Security equal in principal amount, in the case of Debt Securities, or number, in the case of Warrants, to such beneficial interest and to have such Securities registered in its name (if the Securities of such series are issuable as registered securities). Unless otherwise specified by Holdings, Securities of such series so issued in definitive form will be issued either as registered or bearer securities (if the Securities of such series are issuable in such form) and in authorized denominations, in the case of Debt Securities, or in authorized numbers, in the case of Warrants, as specified in the applicable Prospectus Supplement. See, however, "Description of Debt Securities -- Limitations on Issuance of Bearer Securities" above for a description of certain restrictions on the issuance of a Bearer Security in definitive form in exchange for an interest in a Global Security. BEARER DEBT SECURITIES If so specified in an applicable Prospectus Supplement, pending the availability of a permanent Global Security, all or any portion of the Debt Securities of a series which may be issuable as bearer securities will 21 23 initially be represented by one or more temporary Global Securities, without interest coupons, to be deposited with a common depositary in London for Morgan Guaranty Trust Company of New York, Brussels Office, as operator of the Euro-clear System ("Euro-clear") and Centrale de Livraison de Valeurs Mobilieres, S.A. ("CEDEL") for credit to the designated accounts. The interests of the beneficial owner or owners in such a temporary Global Security in bearer form will be exchangeable for definitive Debt Securities (including interests in a permanent Global Security in bearer form), representing Debt Securities having the same interest rate and Stated Maturity, but only upon written certification in the form and to the effect described under "Description of Debt Securities-Denominations, Registration and Transfer" unless such certification has been provided on an earlier interest payment date. The beneficial owner of a Debt Security represented by a temporary Global Security in bearer form or a permanent Global Security in bearer form may, on or after the applicable exchange date and upon 30 days' notice to the applicable Trustee given through Euro-clear or CEDEL, exchange its interest for definitive bearer Debt Securities or, if specified in an applicable Prospectus Supplement, definitive registered Debt Securities of any authorized denomination. No bearer Debt Security delivered in exchange for a portion of a temporary Global Security or a permanent Global Security shall be mailed or otherwise delivered to any location in the United States in connection with such exchange. Unless otherwise specified in an applicable Prospectus Supplement, interest in respect of any portion of such a temporary Global Security in bearer form payable in respect of an Interest Payment Date occurring prior to the issuance of a permanent Global Security in bearer form will be paid to each of Euro-clear and CEDEL with respect to the portion of the temporary Global Security in bearer form held for its account. Each of Euro-clear and CEDEL will undertake in such circumstances to credit such interest received by it in respect of a temporary Global Security in bearer form to the respective accounts for which it holds such temporary Global Security in bearer form as of the relevant Interest Payment Date, but only upon receipt in each case of written certification, in the form and to the effect described under "Description of Debt Securities-Denomination, Registration and Transfer." UNITED STATES TAXATION A summary of the material U.S. federal income tax consequences to U.S. persons investing in Securities will be set forth in the applicable Prospectus Supplement. The summary of U.S. federal income tax consequences contained in the Prospectus Supplement will be presented for informational purposes only, however, and will not be intended as legal or tax advice to prospective purchasers. Prospective purchasers of Securities are urged to consult their own tax advisors prior to any acquisition of Securities. CAPITAL REQUIREMENTS As registered broker-dealers, Lehman Brothers and certain of Holdings' other subsidiaries (the "Regulated Subsidiaries") are subject to the SEC's net capital rule (Rule 15c3-1, the "Net Capital Rule"), promulgated under the Exchange Act. The Exchange monitors the application of the Net Capital Rule by Lehman Brothers. The Exchange or the NASD, as the case may be, monitors the application of the Net Capital Rule by the Regulated Subsidiaries. Lehman Brothers and such Regulated Subsidiaries compute net capital under the alternative method of the Net Capital Rule which requires the maintenance of minimum net capital, as defined. A broker-dealer may be required to reduce its business if its net capital is less than 4% of aggregate debit balances and may also be prohibited from expanding its business or paying cash dividends if resulting net capital would be less than 5% of aggregate debit balances. In addition, the Net Capital Rule does not allow withdrawal of subordinated capital if net capital would be less than 5% of such debit balances. The Net Capital Rule also limits the ability of broker-dealers to transfer large amounts of capital to parent companies and other affiliates. Under the Net Capital Rule equity capital can not be withdrawn from a broker-dealer without the prior approval of the SEC when net capital after the withdrawal would be less than 25% of its securities positions haircuts (which are deductions from capital of certain specified percentages of the market value of securities to reflect the possibility of a market decline prior to disposition). In addition, the Net Capital Rule requires broker-dealers to notify the SEC and the appropriate self-regulatory organization two business days before a withdrawal of excess net capital if the withdrawal would exceed the greater of 22 24 $500,000 or 30% of the broker-dealer's excess net capital, and two business days after a withdrawal that exceeds the greater of $500,000 or 20% of excess net capital. Finally, the Net Capital Rule authorizes the SEC to order a freeze on the transfer of capital if a broker-dealer plans a withdrawal of more than 30% of its excess net capital and the SEC believes that such a withdrawal would be detrimental to the financial integrity of the firm or would jeopardize the broker-dealer's ability to pay its customers. Compliance with the Net Capital Rule could limit those operations of Lehman Brothers and the Regulated Subsidiaries that require the intensive use of capital, such as underwriting and trading activities and the financing of customer account balances, and also could restrict Holdings' ability to withdraw capital from Lehman Brothers and the Regulated Subsidiaries which in turn could limit Holdings' ability to pay dividends, repay debt and redeem or purchase shares of its outstanding capital stock. The Company is subject to other domestic and international regulatory requirements with which it is required to comply. PLAN OF DISTRIBUTION Holdings may sell Securities in any one or more of the following ways: (i) through, or through underwriting syndicates managed by, Lehman Brothers alone or with one or more other underwriters; (ii) through one or more dealers or agents (which may include Lehman Brothers); or (iii) directly to one or more purchasers. The specific managing underwriter or underwriters or agent or agents with respect to the offer and sale of Securities are set forth on the cover of a Prospectus Supplement relating to such Securities and the members of the underwriting syndicate, if any, are named in such Prospectus Supplement. Only the underwriters or agents so named in a Prospectus Supplement are underwriters or agents, respectively, in connection with such Securities. The applicable Prospectus Supplement also describes the discounts and commissions to be allowed or paid to the underwriters or agents, all other items constituting underwriting or agency compensation, the discounts and commissions to be allowed or paid to dealers, if any, and the exchanges, if any, on which such Securities will be listed. Securities acquired by any underwriter will be acquired for its own account and may be resold from time to time in one or more transactions, including negotiated transactions, at a fixed public offering price or at varying prices determined at the time of sale. The obligations of the underwriters to purchase such Securities will be subject to certain conditions precedent, and the underwriters will be obligated to purchase all such Securities if any of such Securities are purchased. Any initial public offering price and any discounts or concessions allowed or reallowed or paid to dealers may be changed from time to time. To the extent, if any, that Securities to be purchased by Lehman Brothers, as underwriter, are not resold by it or are not resold at the public offering price set forth in an applicable Prospectus Supplement, the funds derived from such offering by the Company on a consolidated basis may be reduced. If so indicated in an applicable Prospectus Supplement, Holdings will authorize the underwriters named therein to solicit offers by certain institutional investors to purchase Securities providing for payment and delivery on a future date specified in an applicable Prospectus Supplement. There may be limitations on the minimum amount which may be purchased by any such institutional investor or on the portion of the aggregate proceeds to Holdings of the particular Securities which may be sold pursuant to such arrangements. Institutional investors to which such offers may be made, when authorized, include commercial and savings banks, insurance companies, pension funds, educational charitable institutions and such other institutions as may be approved by Holdings. The obligations of any such purchasers pursuant to such delayed delivery and payment arrangements will not be subject to any conditions except (i) the purchase by an institution of the particular Securities shall not at the time of delivery be prohibited under the laws of any jurisdiction in the United States to which such institution is subject, and (ii) Holdings shall have sold to such underwriters all of such Securities less the amount of such securities covered by such arrangements. Underwriters named therein will not have any responsibility in respect of the validity of such arrangements or the performance of Holdings or such institutional investors thereunder. 23 25 Each distributor of Bearer Securities will agree that it will not offer or sell during the restricted period, directly or indirectly, Bearer Securities in the United States or to United States persons (other than as discussed under "Description of Debt Securities -- Limitations on Issuance of Bearer Securities") and in connection with the sale of Bearer Securities during the restricted period, will not deliver definitive Bearer Securities within the United States. See "Description of Debt Securities -- Limitations on Issuance of Bearer Securities." Each underwriter or agent will represent and agree that (i) it has not offered or sold and will not offer or sell in the United Kingdom, by means of any document, any Securities other than to persons whose ordinary business it is to buy or sell shares or debentures, whether as principal or agent (except in circumstances which do not constitute an offer to the public within the meaning of the Companies Act 1985); (ii) it has complied and will comply with all applicable provisions of the Financial Services Act 1986 with respect to anything done by it in relation to the Securities in, from or otherwise involving the United Kingdom; and (iii) it has only issued or passed on and will only issue or pass on to any person in the United Kingdom any document received by it in connection with the issue of the Securities if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988. The underwriters and agents named in an applicable Prospectus Supplement may be entitled under agreements entered into with Holdings to indemnification by Holdings against certain civil liabilities, including liabilities under the Securities Act, or to contribution with respect to payments which the underwriters and agents may be required to make in respect thereof. The underwriters and agents may engage in transactions with, or perform services for, Holdings in the ordinary course of business. Holdings has been advised by Lehman Brothers that Lehman Brothers may from time to time purchase and sell Securities in the secondary market. Each offering of Securities and any market-making activities by Lehman Brothers with respect to Securities will be conducted in compliance with the requirements of Schedule E of the By-Laws of the NASD regarding an NASD member firm's participation in distributing its affiliate's securities. Lehman Brothers may act as principal or agent in such transactions. This Prospectus may be used by Lehman Brothers in connection with such transactions. Such sales, if any, will be made at varying prices related to prevailing market prices at the time of sale. Lehman Brothers is not obligated to make a market in any Securities and may discontinue any market-making activities at any time without notice. No assurance can be given that there will be a secondary market for the Securities. ERISA MATTERS Each of Holdings and Lehman Brothers may be considered a "party in interest" within the meaning of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and a "disqualified person" under corresponding provisions of the Code, with respect to certain employee benefit plans. Certain transactions between an employee benefit plan and a party in interest or disqualified person may result in "prohibited transactions" within the meaning of ERISA and the Code. ANY EMPLOYEE BENEFIT PLAN PROPOSING TO INVEST IN THE SECURITIES SHOULD CONSULT WITH ITS LEGAL COUNSEL. LEGAL OPINIONS Unless otherwise indicated in an applicable Prospectus Supplement relating to offered Securities, the validity of the Securities offered hereby will be passed upon for Holdings by David Marcus, Esq., General Counsel of Holdings and for the underwriters or agents by Simpson Thacher & Bartlett (a partnership which includes professional corporations), 425 Lexington Avenue, New York, New York 10017. Simpson Thacher & Bartlett acts as counsel in various matters for Holdings, Lehman Brothers and certain of their subsidiaries. 24 26 INDEPENDENT ACCOUNTANTS The consolidated financial statements and schedules of the Company for the years ended December 31, 1993, December 31, 1992 and December 31, 1991, appearing in the Company's Annual Report on Form 10-K for the year ended December 31, 1993 have been audited by Ernst & Young, independent auditors, as set forth in their report thereon included therein and incorporated herein by reference. Such consolidated financial statements and schedules are, and audited financial statements included in subsequently filed documents will be, incorporated herein by reference in reliance upon the reports of Ernst & Young pertaining to such financial statements (to the extent covered by consents filed with the Securities and Exchange Commission) given upon the authority of such firm as experts in accounting and auditing. 25 27 =============================================================================== NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY HOLDINGS OR ANY AGENT OR UNDERWRITER. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF HOLDINGS SINCE THE DATE HEREOF. ------------------------ TABLE OF CONTENTS
PAGE ---- Available Information................. 2 Documents Incorporated by Reference... 2 The Company........................... 3 Use of Proceeds....................... 3 Ratio of Earnings to Fixed Charges.... 3 Description of Debt Securities........ 4 Description of Warrants............... 13 Global Securities..................... 20 United States Taxation................ 22 Capital Requirements.................. 22 Plan of Distribution.................. 23 ERISA Matters......................... 24 Legal Opinions........................ 24 Independent Accountants............... 25
=============================================================================== =============================================================================== LEHMAN BROTHERS HOLDINGS INC. DEBT SECURITIES, DEBT WARRANTS, CURRENCY WARRANTS, INDEX WARRANTS AND INTEREST RATE WARRANTS ------------------------ PROSPECTUS , 1994 ------------------------ =============================================================================== 28 PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION The following are estimated expenses to be incurred by the Registrant in connection with the offering described in this Registration Statement (other than underwriting discounts and commissions). SEC registration fee.............................................. $172,415 NASD fee.......................................................... 30,500 Legal fees and expenses........................................... 30,000 Accounting fees and expenses...................................... 50,000 Fees and expenses of Trustees..................................... 25,000 Blue Sky qualification fees and expenses.......................... 25,000 Printing and engraving fees....................................... 35,000 Miscellaneous..................................................... 12,085 -------- Total................................................... $380,000 -------- --------
- --------------- * Estimated and subject to future contingencies. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS The Restated Certificate of Incorporation of the Registrant requires the Registrant to indemnify its directors and officers to the fullest extent permitted by Delaware General Corporation Law. In addition, the directors of the Registrant are insured under officers' and directors' liability insurance policies purchased by American Express Company. The directors, officers and employees of the Registrant are also insured against fiduciary liabilities under the Employee Retirement Income Security Act of 1974. Any underwriting agreement or agency agreement with respect to an offering of securities registered hereunder will provide for the indemnification of the Registrant and its officers and directors by the underwriters or agents, as the case may be, against certain liabilities including liabilities under the Securities Act of 1933. ITEM 16. EXHIBITS The Exhibit Index beginning on page E-1 is hereby incorporated by reference. ITEM 17. UNDERTAKINGS (a) The undersigned Registrant hereby undertakes: (1) To file, during any period in which offers or sales are being made, a post-effective amendment to this Registration Statement: (i) To include any prospectus required by section 10(a)(3) of the Securities Act of 1933; (ii) To reflect in the prospectus any facts or events arising after the effective date of the Registration Statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the Registration Statement; (iii) To include any material information with respect to the plan of distribution not previously disclosed in the Registration Statement or any material change to such information in the Registration Statement; II-1 29 provided, however, that the undertakings set forth in paragraphs (i) and (ii) above do not apply if the information required to be included in a post-effective amendment by those paragraphs is contained in periodic reports filed by the registrant pursuant to section 13 or section 15(d) of the Securities Exchange Act of 1934 that are incorporated by reference in the Registration Statement. (2) That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. (3) To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) That, for purposes of determining any liability under the Securities Act of 1933, each filing of the Registrant's annual report pursuant to section 13(a) or section 15(d) of the Securities Act of 1934 that is incorporated by reference in the Registration Statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the Restated Certificate of Incorporation and other provisions summarized in Item 15 above, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted against the Registrant by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933 and will be governed by the final adjudication of such issue. II-2 30 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-3 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of New York, State of New York, on the 16th day of May, 1994. LEHMAN BROTHERS HOLDINGS INC. By /s/ MICHAEL R. MILVERSTED ------------------------------------ Michael R. Milversted Treasurer II-3 31 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Thomas A. Russo, Robert Matza and Michael R. Milversted and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign any and all amendments (including post-effective amendments) and supplements to this Registration Statement and any registration statement previously filed by the Registrant or a predecessor in interest, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed below by the following persons in the capacities and on the dates indicated.
SIGNATURES TITLE DATE - ----------------------------------------- --------------------------- ------------------- Chief Executive Officer and May , 1994 - ----------------------------------------- Chairman of the Board of Richard S. Fuld, Jr. Directors (principal executive officer) /s/ T. CHRISTOPHER PETTIT Chief Operating Officer, May 16, 1994 - ----------------------------------------- President and Director T. Christopher Pettit /s/ ROBERT MATZA Chief Financial Officer, May 16, 1994 - ----------------------------------------- (principal financial Robert Matza officer) /s/ STEPHEN J. BIER (principal accounting May 16, 1994 - ----------------------------------------- officer) Stephen J. Bier /s/ ROGER S. BERLIND Director May 16, 1994 - ----------------------------------------- Roger S. Berlind /s/ DAVID M. CULVER Director May 16, 1994 - ----------------------------------------- David M. Culver /s/ KATSUMI FUNAKI Director May 16, 1994 - ----------------------------------------- Katsumi Funaki /s/ RICHARD M. FURLAUD Director May 16, 1994 - ----------------------------------------- Richard M. Furlaud Director May , 1994 - ----------------------------------------- Harvey Golub
II-4 32
SIGNATURES TITLE DATE - ----------------------------------------- --------------------------- ------------------- /s/ MASATAKA SHIMASAKI Director May 16, 1994 - ----------------------------------------- Masataka Shimasaki /s/ SHERMAN R. LEWIS, JR. Director May 16, 1994 - ----------------------------------------- Sherman R. Lewis, Jr. /s/ DINA MERRILL Director May 16, 1994 - ----------------------------------------- Dina Merrill Director May , 1994 - ----------------------------------------- Roger S. Penske /s/ MALCOLM WILSON Director May 16, 1994 - ----------------------------------------- Malcolm Wilson
II-5 33 EXHIBIT INDEX
FILED HEREWITH (--), PREVIOUSLY FILED (*) PAGE NUMBER EXHIBIT OR INCORPORATED BY REFERENCE IN SEQUENTIAL NUMBER DESCRIPTION TO NUMBERING SYSTEM - ------ ----------- ---------------------------- ---------------- 1(a) -- Form of Agency Agreement Exhibit 1(a) to Registration Statement No. 33-65674 filed July 7, 1993 1(b) -- Form of Underwriting Agreement Exhibit 1(b) to Registration (including Delayed Delivery Statement No. 33-58548 filed Contract) February 19, 1993 4(a) -- Holdings Standard Multiple Series Exhibit 4(a) to Post-Effective Indenture Provisions dated July Amendment No. 1 to Registra- 30, 1987 and as amended November tion Statement No. 33-16141 16, 1987 filed November 16, 1987 4(b) -- Indenture dated as of September Exhibit 4(b) to Post-Effective 1, 1987 between Holdings and Amendment No. 1 to Registra- Citibank, N.A., as Trustee, with tion Statement No. 33-16141 respect to the Senior Debt filed November 16, 1987 Securities 4(c) -- Supplemental Indenture, dated as Exhibit 4(m) to Registration of November 25, 1987, between Statement No. 33-25797 filed Holdings and Citibank, N.A., as November 25, 1988 Trustee, with respect to the Senior Debt Securities 4(d) -- Second Supplemental Indenture, Exhibit 4(e) to Registration dated as of November 27, 1990 Statement No. 33-49062 filed between Holdings and Citibank, July 1, 1992 N.A., as Trustee, with respect to the Senior Debt Securities 4(e) -- Third Supplemental Indenture Exhibit 4(f) to Registration dated as of September 13, 1991, Statement No. 33-46146 filed between Holdings and Citibank, March 10, 1992 N.A., as Trustee, with respect to the Senior Debt Securities 4(f) -- Fourth Supplemental Indenture Exhibit 2(f) to Form 8-A filed dated as of October 4, 1993, October 7, 1993 between Holdings and Citibank, N.A., as Trustee, with respect to the Senior Debt Securities 4(g) -- Revised Form of Indenture between Exhibit 4(c) to Post-Effective Holdings and Chemical Bank, as Amendment No. 1 to Registra- Trustee, with respect to the tion Statement No. 33-16141 Subordinated Debt Securities filed November 16, 1987 4(h) -- Form of Fixed Rate Note Exhibit 4(d) to Registration Statement No. 33-40990 filed May 31, 1991 4(i) -- Form of Variable Rate Note Exhibit 4(e) to Registration Statement No. 33-40990 filed May 31, 1991 4(j) -- Form of Bearer Security for Exhibit 4(h) to Post-Effective Fixed-Rate Note and Form of Amendment No. 1 to Registra- Related Coupon tion Statement No. 33-16141 filed November 16, 1987 4(k) -- Form of Bearer Security for Exhibit 4(i) to Post-Effective Variable Rate Note and Form of Amendment No. 1 to Registra- Related Coupon tion Statement No. 33-16141 filed November 16, 1987 4(l) -- Form of Bearer Security for Exhibit 4(j) to Post-Effective Medium-Term Note (Fixed Rate) and Amendment No. 1 to Registra- Form of Related Coupon tion Statement No. 33-16141 filed November 16, 1987
E-1 34
FILED HEREWITH (--), PREVIOUSLY FILED (*) PAGE NUMBER EXHIBIT OR INCORPORATED BY REFERENCE IN SEQUENTIAL NUMBER DESCRIPTION TO NUMBERING SYSTEM - ------ --------------------------------- ------------------------------ ---------------- 4(m) -- Form of Bearer Security for Exhibit 4(k) to Post-Effective Medium-Term Note (Floating Rate) Amendment No. 1 to Registra- and Form of Related Coupon tion Statement No. 33-16141 filed November 16, 1987 4(n) -- Form of Serial Zero Coupon Senior Exhibit 4.1 to Holdings' Note Current Report on Form 8-K dated April 27, 1988 4(o) -- Form of Medium-Term Note, Series Exhibit 4(v) to Registration D (Fixed Rate) Statement No. 33-49062 filed July 1, 1992 4(p) -- Form of Medium-Term Note, Series Exhibit 4(w) to Registration D (Floating Rate) Statement No. 33-49062 filed July 1, 1992 4(q) -- Form of Debt Warrant Agreement Exhibit 4(q) to Pre-Effective (including Form of Debt Warrant Amendment No. 1 to Registra- Certificate) tion Statement No. 33-58548 filed May 17, 1993 4(r) -- Form of Currency Warrant -- Agreement (including Form of Currency Warrant Certificate) 4(s) -- Form of Index Warrant Agreement -- (including Form of Index Warrant Certificate) 4(t) -- Form of Interest Rate Warrant Exhibit 4(t) to Pre-Effective Agreement (including Form of Amendment No. 1 to Registra- Interest Rate Warrant tion Statement No. 33-58548 Certificate) filed May 17, 1993 5 -- Opinion and consent of David -- Marcus, Esq. 12 -- Computation in support of ratio Exhibit 12 to Holdings' Annual of earnings to fixed charges Report on Form 10-K for the year ended December 31, 1993 and Holdings' Quarterly Report on Form 10-Q for the three months ended March 31, 1994 23(a) -- Consent of David Marcus, Esq. -- (included in Exhibit 5) 23(b) -- Consent of Ernst & Young, -- Independent Auditors 24 -- Power of Attorney Included on Page II-4 of this Registration Statement 25(a) -- Form T-1 Statement of Eligibility -- and Qualification under Trust Indenture Act of 1939 of Citibank, N.A. (bound separately) 25(b) -- Form T-1 Statement of Eligibility Exhibit 26(b) to Registration and Qualification under the Trust Statement No. 33-40990 filed Indenture Act of 1939 of Chemical May 31, 1991 Bank
E-2 EX-4.R 2 CURRENCY WARRANT AGREEMENT 1 ------------------------------------------------- LEHMAN BROTHERS HOLDINGS INC. and CITIBANK, N.A. as Currency Warrant Agent and LEHMAN BROTHERS INC. as Calculation Agent ------------------------------ CURRENCY WARRANT AGREEMENT dated as of Currency Warrants Expiring ------------------------------------------------- 2 TABLE OF CONTENTS(1)
Page ---- ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF CURRENCY WARRANTS . . . . . . . . . 1 SECTION 1.1 Issuance of Currency Warrants; Conversion of Currency Warrants to Book-Entry . . . . . . . . . . . . . . . . 1 SECTION 1.2 Form, Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 1.3 Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 1.4 Registration of Transfers and Exchanges . . . . . . . . . . . . . 4 SECTION 1.5 Mutilated or Missing Warrant Certificates . . . . . . . . . . . . 5 SECTION 1.6 Registered Holders . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.7 Global Warrant Certificate . . . . . . . . . . . . . . . . . . . 6 ARTICLE II DURATION AND EXERCISE OF CURRENCY WARRANTS . . . . . . . . . . 9 SECTION 2.1 Duration of Currency Warrants; Minimum and Maximum Exercise Amounts; Notice of Exercise . . . . . . . . . 9 SECTION 2.2 Exercise and Delivery of Currency Warrants . . . . . . . . . . . 10 SECTION 2.3 Automatic Exercise of Warrants . . . . . . . . . . . . . . . . . 13 SECTION 2.4 Limitation of Number of Exercisable Warrants . . . . . . . . . . 16 SECTION 2.5 Covenant of the Company . . . . . . . . . . . . . . . . . . . . . 16 SECTION 2.6 Return of the Global Warrant Certificate . . . . . . . . . . . . 16 SECTION 2.7 Return of Moneys Held Unclaimed for Two Years . . . . . . . . . . 16 SECTION 2.8 Designation of Agent for Receipt of Notice . . . . . . . . . . . 16
- -------------------- (1) The Table of Contents is not a part of the Currency Warrant Agreement - i - 3
Page ---- ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS . . . . . . . . . . . . . 17 SECTION 3.1 Holders of Currency Warrants May Enforce Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 SECTION 3.2 Consolidation, Merger or Other Disposition . . . . . . . . . . . 17 ARTICLE IV CANCELLATION OF CURRENCY WARRANTS . . . . . . . . . . . 18 SECTION 4.1 Cancellation of Currency Warrants . . . . . . . . . . . . . . . . 18 SECTION 4.2 Treatment of Warrantholders . . . . . . . . . . . . . . . . . . . 18 SECTION 4.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE V CONCERNING THE CURRENCY WARRANT AGENT . . . . . . . . . . 19 SECTION 5.1 Currency Warrant Agent . . . . . . . . . . . . . . . . . . . . . 19 SECTION 5.2 Conditions of Currency Warrant Agent's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 5.3 Compliance With Applicable Laws . . . . . . . . . . . . . . . . . 21 SECTION 5.4 Resignation and Appointment of Successor . . . . . . . . . . . . 21 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . 23 SECTION 6.1 Modification, Supplementation or Amendment . . . . . . . . . . . 23 SECTION 6.2 Notices and Demands to the Company and Currency Warrant Agent . . . . . . . . . . . . . . . . . . . . 24 SECTION 6.3 Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 6.4 Notices to Warrantholders . . . . . . . . . . . . . . . . . . . . 24 SECTION 6.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 6.6 Obtaining of Governmental Approvals . . . . . . . . . . . . . . . 24 SECTION 6.7 Persons Having Rights Under the Currency Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . 25
- ii - 4
SECTION 6.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 6.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 6.10 Inspection of Agreement . . . . . . . . . . . . . . . . . . . . . 25 Annex 1 - Defined Terms EXHIBIT A - Form of Warrant Certificate EXHIBIT A-1 - Form of Exercise Notice from Warrantholder EXHIBIT B - Form of Global Warrant Certificate EXHIBIT B-1 - Form of Exercise Notice from Depository Participant EXHIBIT C-1 - Form of Confirmation of Exercise for Warrant Certificate EXHIBIT C-2 - Form of Confirmation of Exercise for Global Warrant Certificate EXHIBIT D-1 - Form of Notice of Rejection for Warrant Certificate EXHIBIT D-2 - Form of Notice of Rejection for Global Warrant Certificate
- iii - 5 CURRENCY WARRANT AGREEMENT THIS AGREEMENT, dated as of , among LEHMAN BROTHERS HOLDINGS INC., a corporation duly incorporated and existing under the laws of the State of Delaware (the "Company"), Citibank, N.A., a banking association duly incorporated and existing under the laws of the State of New York, as Currency Warrant Agent (the "Currency Warrant Agent"), and Lehman Brothers Inc., a corporation duly incorporated and existing under the laws of the State of Delaware (the "Calculation Agent"). An Index of defined terms is attached hereto as Annex 1. W I T N E S S E T H T H A T : WHEREAS, the Company proposes to sell currency warrants (the "Currency Warrants" or, individually, a "Currency Warrant") representing the right to receive from the Company an amount in U.S. dollars to be determined by reference to decreases in the value of the relative to the U.S. Dollar; and WHEREAS, the Company wishes the Currency Warrant Agent to act on behalf of the Company in connection with the issuance, transfer and exercise of the Currency Warrants, and wishes to set forth herein, among other things, the provisions of the Currency Warrants and the terms and conditions under which they may be issued, transferred, exercised and cancelled; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF CURRENCY WARRANTS SECTION 1.1 Issuance of Currency Warrants; Conversion of Currency Warrants to Book-Entry. (a) The Currency Warrants will be originally issued as certificates in definitive form (each a "Warrant Certificate"). Each Currency Warrant shall represent the right, subject to the provisions contained herein, to receive the Cash Settlement Value (as defined in Section 2.2(d)), or, under certain circumstances, the Alternative Settlement Amount (as defined in Section 2.3) of such Currency Warrant. Such Cash Settlement Value or Alternative Settlement Amount will be payable only in U.S. Dollars. In no event shall any beneficial owner of book- entry Currency Warrants or the registered owner of certificated Currency Warrants (each a "Warrantholder") be entitled to receive any interest on the Cash Settlement Value or Alternative Settlement Amount. A Currency Warrant will not require or entitle the holder thereof to sell, deliver, purchase or take delivery of any currency, security or 6 2 other instrument to or from the Company, nor will the Company be under any obligation to, nor will it, purchase or take delivery, or sell or deliver, any currency, security or other instrument to or from the Warrantholders. (b) The Currency Warrants will constitute direct, unconditional and unsecured contractual obligations of the Company and will rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. (c) Forty-five calendar days after the closing of the offering, each registered holder of a Warrant Certificate will have the option (the "Conversion Option") to convert the form in which such holder holds his Currency Warrants from definitive form to book-entry form within a forty-five calendar day period (the "Conversion Option Period"). To utilize the Conversion Option such Warrantholder must deliver or arrange to deliver his Warrant Certificates to a Participant (as defined in Section 1.7(c)) entitled to execute, clear and settle transactions through the Depository (as defined in Section 1.7(c)) and through which such Warrantholder's beneficial interest after electing the Conversion Option will be maintained, who will then deposit the Currency Warrants with the Depository or its nominee. Ownership of the Currency Warrants surrendered under the Conversion Option will be represented by a single certificate (the "Global Warrant Certificate"). After the last day of the Conversion Option Period, the Depository will not be required to accept delivery of Currency Warrants represented by Warrant Certificates ("Certificated Warrants") for exchange for Currency Warrants in book-entry form ("Book-Entry Warrants") but may permit Warrant Certificates to be so exchanged on a case-by-case basis. It is anticipated that after the Conversion Option Period, Warrant Certificates delivered to the Depository in proper form for deposit will be accepted by the Depository for exchange for Book-Entry Warrants, generally within three to four New York Business Days after delivery to the Depository. However, there can be no assurance that such Warrant Certificates will be accepted for exchange. Further, there can be no assurance, with respect to Warrant Certificates accepted for exchange, that exchange will occur within that time period. Certificated Warrants surrendered at any time for exchange for Book-Entry Warrants may not be exercised or delivered for settlement of transfer until such exchange has been effected. If the Depository is at any time unwilling or unable to continue as securities depository for the Currency Warrants and a successor depository is not appointed by the Company within 90 days, the Company will reissue Warrant Certificates in exchange for the Global Warrant Certificate. In addition, the Company may at any time and in its sole discretion determine not to have the Currency Warrants available in book-entry form and, in such event, will issue Warrant Certificates in exchange for the Global Warrant Certificate. In any such instance, and in accordance with the provisions of this Agreement, each Warrantholder will be entitled to have a number 7 3 of Currency Warrants equivalent to such Warrantholder's beneficial interest in the Global Warrant Certificate registered in the name of the Warrantholder and will be entitled to physical delivery of such Currency Warrants in definitive form by a Participant. The provisions of Section 1.7 shall apply only if and when the Conversion Option is utilized and a Global Warrant Certificate is issued hereunder. SECTION 1.2 Form, Execution and Delivery of Warrant Certificates. (a) Certificated Warrants, whenever issued, shall be represented by Warrant Certificates 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 Currency Warrants. The Warrant Certificates 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 Currency Warrants may be listed, or of any securities depository, or to conform to usage. Warrant Certificates shall be signed on behalf of the Company by its chairman, its president or one of its vice presidents and under its corporate seal reproduced thereon and attested by its secretary or an assistant secretary. The signature of any of such officers may be either manual or facsimile. Typographical and other minor errors or defects in any such signature shall not affect the validity or enforceability of any Warrant Certificate that has been duly countersigned and delivered by the Currency Warrant Agent. (b) In case any officer of the Company who shall have signed a Warrant Certificate, either manually or by facsimile signature, shall cease to be such officer before such Warrant Certificate shall have been countersigned and delivered by the Currency Warrant Agent to the Company or delivered by the Company, such Warrant Certificate nevertheless may be countersigned and delivered as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and the Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such an officer. SECTION 1.3 Warrant Certificates. Each Warrant Certificate, when signed on behalf of the Company in accordance with Section 1.2, shall be delivered to the Currency Warrant Agent, which shall manually countersign and deliver the same to 8 4 or upon the order of the Company. Each Warrant Certificate shall be dated the date of its countersignature. A Warrant Certificate shall not be valid for any purpose, and no Currency Warrant evidenced thereby shall be exercisable, unless and until such Warrant Certificate has been countersigned by the manual signature of the Currency Warrant Agent. Such countersignature by the Currency Warrant Agent on any Warrant Certificate signed by the Company in accordance with Section 1.2 shall be conclusive evidence that the Warrant Certificate so countersigned has been duly issued hereunder. SECTION 1.4 Registration of Transfers and Exchanges. (a) Except as otherwise provided herein or in the Warrant Certificate, the Currency Warrant Agent shall from time to time register ownership and transfers of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose (the "Currency Warrant Register") at the Currency Warrant Agent's Office (as defined herein), subject to such reasonable regulations as the Company or the Currency Warrant Agent may prescribe, upon surrender thereof, duly endorsed, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Currency Warrant Agent and the Company duly executed by the registered holder(s) 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 located, or with a correspondent office, in New York City or by a broker or dealer which is a member of a national securities exchange, or in any other manner acceptable to the Currency Warrant Agent. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Currency Warrant Agent. (b) At the option of a Warrantholder, Warrant Certificates may be exchanged for other Warrant Certificates, representing a like number of unexercised Currency Warrants, upon surrender to the Currency Warrant Agent of the Warrant Certificates to be exchanged at its offices maintained for such purposes (the location of which shall be provided to the Company), (the "Currency Warrant Agent's Office"), Attention: Corporate Trust Department, or at the office of any successor Currency Warrant Agent (as provided for in Section 5.4). Upon surrender of any Currency Warrant Certificate for exchange, the Currency Warrant Agent shall cancel such Warrant Certificate, and the Company shall execute, and the Currency Warrant Agent shall countersign and deliver, in accordance with Section 1.2 and 1.3, one or more new Warrant Certificates of like tenor and representing a like number of unexercised Currency Warrants. (c) Warrant Certificates issued upon transfer or exchange pursuant to Section 1.4(a) or (b) shall be valid obligations of the Company, evidencing the same obligations of the Company as the Warrant Certificates surrendered for transfer or exchange, and entitled to the same benefits under this 9 5 Agreement as were such Warrant Certificates prior to such surrender. (d) Except as provided in Section 1.5, no service charge shall be made for any registration of transfer or exchange of 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 Warrant Certificates, other than exchanges pursuant to this Section 1.4 not involving any transfer. (e) In the event that upon any exercise of Currency Warrants evidenced by a Warrant Certificate the number of Currency Warrants exercised shall be less than the total number of Currency Warrants evidenced by such Warrant Certificate, there shall be issued to the holder thereof or such holder's assignee a new Warrant Certificate evidencing the number of Currency Warrants not exercised. SECTION 1.5 Mutilated or Missing Warrant Certificates. (a) If any Warrant Certificate is mutilated, lost, stolen or destroyed, the Company may in its discretion execute, and the Currency Warrant Agent may countersign and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Currency 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 Currency Warrant Agent of such loss, theft or destruction of such Warrant Certificate and security or indemnity, if requested, also satisfactory to them. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Currency Warrant Agent may prescribe. (b) In case such mutilated, lost, stolen or destroyed Currency Warrant Certificate has been or is about to be exercised, or deemed to be exercised, the Company in its absolute discretion may, instead of issuing a new Warrant Certificate, direct the Currency Warrant Agent to treat the same as if it had received irrevocable notice of exercise in proper form in respect thereof, as provided herein, or as being subject to automatic exercise, as the case may be. (c) Each new Warrant Certificate issued pursuant to this Section 1.5 in lieu of any lost, stolen or destroyed Warrant Certificate shall be an original, additional contractual obligation of the Company, whether or not, in the case of any lost, stolen or destroyed Currency Warrant Certificate, such Warrant Certificate shall at any time be enforceable by anyone, and shall be entitled to the same benefits under this Agreement as the Warrant Certificate that was lost, stolen or destroyed. 10 6 (d) Upon the issuance of any new Warrant Certificate in accordance with this Section 1.5, 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 Currency Warrant Agent) connected therewith. (e) The provisions of this Section 1.5 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 Warrant Certificates. (f) All Warrant Certificates surrendered for exercise, registration of transfer or exchange shall, if surrendered to any person other than the Currency Warrant Agent, be delivered to the Currency Warrant Agent and shall be promptly cancelled by it. The Company may at any time deliver to the Currency Warrant Agent for cancellation any Warrant Certificates previously countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Warrant Certificates so delivered shall be promptly cancelled by the Currency Warrant Agent. No Warrant Certificates shall be countersigned in lieu of or in exchange for any Warrant Certificate cancelled as provided in this Section 1.5, except as expressly permitted by this Agreement. All cancelled Warrant Certificates held by the Currency Warrant Agent shall be destroyed unless otherwise directed by the Company. SECTION 1.6 Registered Holders. Prior to due presentment for registration of transfer, the Company, the Currency Warrant Agent, and any agent of the Company or the Currency Warrant Agent, may deem and treat the person in whose name a Warrant Certificate shall be registered in the Currency Warrant Register (a "Registered Holder") as the absolute owner of the Currency Warrants evidenced thereby (notwithstanding any notation of ownership or other writing thereon) for any purpose whatsoever, and as the person entitled to exercise the rights represented by the Currency Warrants evidenced thereby, and neither the Company nor the Currency Warrant Agent, nor any agent of the Company or the Currency Warrant Agent, shall be affected by any notice to the contrary. This Section 1.6 shall be without prejudice to the rights of Warrantholders as described elsewhere herein. SECTION 1.7 Global Warrant Certificate. (a) Any Global Warrant Certificate issued in accordance with this Section 1.7 shall be substantially in the form set forth in Exhibit B 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 Currency Warrants. The 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 11 7 (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 Currency Warrants may be listed or of any Depository referred to herein, or to conform to usage. The Global Currency Warrant Certificate shall be signed on behalf of the Company upon the same conditions, in substantially the same manner and with the same effect as the Warrant Certificates. (b) The Currency Warrant Agent is authorized, from time to time during the Conversion Option Period, upon receipt of a Global Warrant Certificate from the Company, duly executed on behalf of 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 Currency Warrant Agent and shall not be valid for any purpose unless so countersigned. The Currency Warrant Agent shall deliver the Global Currency Warrant Certificate to or upon the order of the Company against receipt of an appropriate amount of Certificated Warrants (such Certificated Warrants shall be destroyed or otherwise disposed of in accordance with instructions provided by the Company). One or more Global Warrant Certificates may be executed by the Company and delivered to the Currency 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 Currency 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 Currency Warrants. To effect such an exchange the Company shall deliver to the Currency Warrant Agent a new Global Warrant Certificate duly executed on behalf of the Company as provided in Section 1.3. The Currency 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 Currency 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) 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 Currency Warrant holdings of the Participants will be recorded on the books of the Depository. The holdings of customers of the Participants and the identity of the 12 8 Warrantholders will be reflected on the books and records of such Participants and will not be known to the Currency Warrant Agent, the Company or the Depository. The Global Warrant Certificate will be held by the Depository or its agent. "Participants" include securities brokers and dealers, banks and trust companies, clearing organizations and certain other organizations which are participants in the Depository system and, for purposes of this Agreement, shall also mean participants in the book-entry system of any successor Depository. Access to the Depository's system is also available to others such as banks, securities dealers and trust companies ("Indirect Participants") that clear or maintain a custodial relationship with a Participant, either directly or indirectly. The Global Warrant holdings of Warrantholders who are customers of Indirect Participants will be reflected on the books and records of Participants in the name of the respective Indirect Participants. The Global Warrant Certificate will be held by the Depository or its agent. Neither the Company nor the Warrant Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Warrant Certificate or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company may from time to time select a new entity to act as Depository with respect to the Currency Warrants and, if such selection is made, the Company shall promptly give the Currency Warrant Agent notice to such effect identifying the new Depository, and the Global Warrant Certificate shall be delivered to the Currency 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 notice of exercise and the related notices to be delivered in connection with an exercise to reflect the selection of the new Depository. (d) Except as otherwise provided herein or in the Global Warrant Certificate, the Currency 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 Currency 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 to the Warrant Agent's Office, or at the office of any successor Warrant Agent (as provided in Section 5.4), duly endorsed, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Currency 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 officer the New York City or by a 13 9 member of a United States national securities exchange, or in any other manner acceptable to the Currency Warrant Agent. Upon any such registration of transfer, a new Global Warrant Certificate of like tenor and representing a like number of unexercised Currency Warrants shall be issued to the transferee and the surrendered Global Warrant Certificate shall be cancelled by the Currency Warrant Agent. ARTICLE II DURATION AND EXERCISE OF CURRENCY WARRANTS SECTION 2.1 Duration of Currency Warrants; Minimum and Maximum Exercise Amounts; Notice of Exercise. (a) Subject to the limitations described in this Article II, each Currency Warrant may be irrevocably exercised in whole but not in part on any New York Business Day from the date of issuance until 3:00 P.M., New York City time, on the New York Business Day immediately preceding the earlier of (i) (the "Expiration Date") or (ii) the Delisting Date. There is no exercise price payable by any Warrantholder in connection with the exercise of a Currency Warrant. Each Currency Warrant may be exercised by (a) transfer of the related Currency Warrants on the records of the Depository free to the Currency Warrant Agent Participant Account (Account No. 2659), or such other account of the Currency Warrant Agent at the Depository as the Currency Warrant Agent shall specify (the "Currency Warrant Account"), in the case of Book-Entry Warrants, or surrender of the Warrant Certificate or Certificates to the Currency Warrant Agent at the Currency Warrant Agent's Office, in the case of Certificated Warrants and (b) delivery of written notice (an "Exercise Notice") to the Currency Warrant Agent executed by the Participant acting on behalf of the beneficial owner of such Currency Warrant, in the case of Book-Entry Warrants, or from the Registered Holder of such Currency Warrants, in the case of Certificated Warrants; provided, however, that Exercise Notices are subject to rejection by the Currency Warrant Agent as provided herein. (b) The Exercise Notice, which shall be irrevocable, shall be in substantially the form set forth in Exhibit A-1 hereto in the case of Certificated Warrants, and in Exhibit B-1 hereto in the case of Book-Entry Warrants, and shall be in writing, duly completed and executed, and delivered to the Currency Warrant Agent (which shall include facsimile transmissions, followed promptly by an executed original, but the date and time of receipt of such transmission shall be the effective date and time of such notice) at its address as set forth in such Exercise Notice or at such other address as the Currency Warrant Agent may specify from time to time. (c) As used herein, "New York Business Day" means any day other than a Saturday or Sunday or a day on which either the New York Stock Exchange or the American Stock Exchange (the 14 10 "AMEX") is not open for securities trading or commercial banks in New York City are authorized or required by law or executive order to remain closed. Except as provided in Section 2.2(b), the Currency Warrant Agent and the Company shall be entitled to rely conclusively on any Exercise Notice received by them with no duty of inquiry by either of them. SECTION 2.2 Exercise and Delivery of Currency Warrants. (a) Except in the case of automatic exercise as provided in Section 2.3, the exercise date (the "Exercise Date") for a Currency Warrant shall be (i) if the Currency Warrant Agent receives delivery of such Currency Warrant and an Exercise Notice in proper form at or prior to 3:00 P.M., New York City time, on a New York Business Day, then such New York Business Day and (ii) otherwise the New York Business Day next succeeding the day on which the Currency Warrant Agent receives such Currency Warrant and such Exercise Notice. The "Valuation Date" for a Currency Warrant will be the first New York Business Day following the Exercise Date. Notwithstanding the foregoing, an otherwise valid exercise for a Currency Warrant shall be deemed to be withdrawn, and such Currency Warrant shall be deemed to be automatically exercised in the manner and on the date specified in Section 2.3, if the Currency Warrant Agent received delivery of such Currency Warrant and an Exercise Notice in proper form at any time after 3:00 P.M., New York City time, on the New York Business Day preceeding the Delisting Date. (b) Following receipt of the Currency Warrants and the Exercise Notice related to such Currency Warrants, the Currency Warrant Agent shall: (i) promptly (1) in the case of Certificated Warrants, determine whether the Exercise Notice has been duly completed and is in proper form duly executed by the Registered Holder thereof or by the duly appointed legal representative thereof or by a duly authorized attorney and (2) in the case of Book-Entry Warrants, determine whether such Exercise Notice has been duly completed and is in proper form and if the Currency Warrant Agent determines that the Exercise Notice has not been duly completed or is not in proper form or, in the case of Certificate Warrants, has not been so executed, the Currency Warrant Agent promptly (X) shall reject such Exercise Notice and shall send to the entity that delivered such Exercise Notice a notice of rejection substantially in the form set forth in Exhibit D-1 or Exhibit D-2 hereto, as applicable, and, in the case of Certificated Warrants, shall return to the Registered Holder that submitted such Exercise Notice, by first class mail, the Warrant Certificates evidencing such Currency Warrants or, in the case of Book-Entry Warrants, shall redeliver such Currency Warrants free through the facilities of the Depository to the account from which they were transferred to the Currency Warrant Agent and in either case (Y) shall not take the actions required by clauses 15 11 (ii)-(vi) below with respect to such Exercise Notice or the related Currency Warrants; provided, however, that the Currency Warrant Agent shall deliver a copy of the Exercise Notice relating to such Currency Warrants to the Company, if the Company so requests, as required by Section 2.2(b)(vi) below and the Company may waive any defect in the form of such Exercise Notice; (ii) notify the Company by 5:00 p.m., New York City time, on the Exercise Date for such Currency Warrants of the total number of Currency Warrants covered by such Exercise Notice; (iii) obtain the Spot Rate (as defined in Section 2.2(d)) from the Calculation Agent no later than 5:00 p.m., New York City time, on the applicable Valuation Date; (iv) obtain the Cash Settlement Value of the Exercised Warrants as of their Valuation Date from the Calculation Agent, which shall be calculated in the manner set forth in Section 2.2(d) by no later than 5:00 p.m., New York City time, on the applicable Valuation Date; (v) notify the Company by 5:00 p.m., New York City time, on the Valuation Date of the aggregate Cash Settlement Value payable in respect of the exercise of such Exercised Warrants, and send notices of confirmation substantially in the form included in Exhibit C-1 or Exhibit C-2 hereto, as the case may be, to the appropriate Registered Holder or Participant specifying therein the reference number assigned by the Currency Warrant Agent to each accepted Exercise Notice; and (vi) promptly deliver a copy of each Exercise Notice to the Company upon request of 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 2.2 or Section 2.3 shall be by telephone (promptly confirmed in writing) or telecopy. Any exercise of the Currency Warrants shall be irrevocable. (c) Except in the case of Currency Warrants subject to automatic exercise, provided that the Company has made adequate funds available to the Currency Warrant Agent in a timely manner, which shall in no event be later than 3:00 p.m., New York City time, on the fifth New York Business Day following a Valuation Date (the "Settlement Date"), the Currency Warrant Agent will be responsible for making payment available either (i) for Certificated Warrants, to each appropriate Registered Holder in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a 16 12 U.S. Dollar account maintained by such Registered Holder in the United States (at such Registered Holder's election as specified in the applicable Exercise Notice), after 3:00 p.m., New York City time, but prior to the close of business, on such Settlement Date or (ii) for Book-Entry Warrants, to each appropriate Participant in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a U.S. Dollar account maintained by such Participant in the United States (at the Participant's election as specified in the Exercise Notice), after 3:00 p.m., New York City time, but prior to the close of business, on such Settlement Date. (d) The "Cash Settlement Value" of an exercised Warrant will be calculated by the Calculation Agent no later than 5:00 p.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars equal to the greater of (i) zero and (ii) the amount (rounded down to the nearest cent) computed by subtracting from U.S. $100 an amount equal to the product of U.S. $100 times a fraction, the numerator of which is per U.S. Dollar (the "Strike Rate") and the denominator of which is the spot exchange rate of the for the U.S. Dollar (expressed as a number of per U.S. Dollar and determined by the Calculation Agent) at , New York City time, on the applicable Valuation Date (the "Spot Rate"). If the Strike Rate for such Valuation Date is equal to or exceeds the Spot Rate, the Cash Settlement Value will be zero. The Calculation Agent will determine the Spot Rate as follows: with respect to exercises other than automatic exercises, the Calculation Agent will obtain a quote for the applicable bid spot rate for the U.S. Dollar from one Reference Bank (as defined below) and select the higher (i.e., the rate expressed as the greater number of per U.S. Dollar) of the applicable bid spot rate for the U.S. Dollar quoted by the Calculation Agent and the quote obtained from the Reference Bank; and with respect to automatic exercises, the Calculation Agent will obtain quotes for the applicable bid spot rate for the U.S. Dollar from two Reference Banks and select the highest of the applicable bid spot rate U. S. Dollar quoted by the Calculation Agent and the quotes obtained from the Reference Banks. Each "Reference Bank" will be a bank that is a leading market maker in the foreign exchange market for the currencies. The Spot Rate will be rounded by the Calculation Agent to the second decimal place, rounding up if the third decimal place, without regard to rounding, is five or higher and otherwise truncating after the second decimal place. References in this Agreement to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. (e) In the event a Global Warrant Certificate is issued, the Warrant Agent shall cause its records, which may be 17 13 kept electronically, to be marked to reflect the reduction in the number of Currency Warrants represented by the Global Warrant Certificate by the number of Currency Warrants that were delivered to the Currency Warrant Account and for which payment has been made as provided in Section 2.2(c) promptly after such delivery and payment. Absent manifest error, the Currency Warrant Agent's records shall be conclusive evidence of such matters. (f) The Company has appointed Lehman Brothers Inc., and Lehman Brothers Inc. accepts such appointment, to be the Company's Calculation Agent to make certain calculations, as provided herein. Unless otherwise provided by this Agreement, the Calculation Agent's calculations under this Agreement shall, absent manifest error, be final and binding on the Company, the Currency Warrant Agent, the Warrantholders, the Record Holders and any Participant. Any such calculations will be made available to a Warrantholder for inspection at the Currency Warrant Agent's Office. 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 Currency Warrants are no longer outstanding or until moneys for the payment of all outstanding Currency Warrants, if any, shall have been paid to the Currency Warrant Agent, whichever occurs earlier. 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 Currency Warrant Agent, as provided in Section 5.4, except that a successor Calculation Agent need not be a banking institution with offices south of Chambers Street in the Borough of Manhattan, The City of New York, and may only be appointed if such successor has been nominated by the Company. (g) The Calculation Agent will not be responsible for good faith errors or omissions in calculating or disseminating information regarding the Spot Rate, or the Cash Settlement Value or Alternative Settlement Amount, as applicable. SECTION 2.3 Automatic Exercise of Warrants. All Warrants for which the Warrant Agent has not received an Exercise Notice in proper form by 3:00 p.m., New York City time, on the fifth New York Business Day preceding the earlier of (i) the Expiration Date or (ii) Delisting Date or for which the Warrant Agent has received an Exercise Notice in proper form but with respect to which timely delivery of the relevant Currency Warrants has not been made, will be deemed automatically exercised on the Expiration Date or the Delisting Date, as the case may be, without any requirement of delivery of an Exercise Notice or Currency Warrants to the Currency Warrant Agent. Accordingly, the Exercise Date for such Currency Warrants shall be the Expiration Date or the Delisting Date, as the case may be, or, if such date is not a New York Business Day, the next 18 14 succeeding New York Business Day and the Valuation Date for such Currency Warrants shall be the first New York Business Day following the Exercise Date for such Currency Warrants. "Delisting Date" shall mean the effective date on which the Currency Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder) on, the AMEX (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Act of 1934. The Currency 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 of the number of Currency Warrants to be automatically exercised on such day. The Warrant Agent shall (i) obtain from the Calculation Agent on the applicable Valuation Date the Cash Settlement Value or the Alternative Settlement Amount on such Valuation Date of the Currency Warrants to be automatically exercised, (ii) by 3:00 p.m., New York City time, on the New York Business Day next succeeding such Valuation Date, notify the Company of the Cash Settlement Value or the Alternative Settlement Amount payable in respect of such exercised Currency Warrants and (iii) advise the Company of such other matters relating to the exercised Currency Warrants as the Company shall reasonably request. With respect to all Currency Warrants, other than Book-Entry Warrants, subject to automatic exercise, the Company shall make available to the Currency Warrant Agent, not later than 3:00 p.m., New York City time, on the fifth New York Business Day following the Valuation Date for automatically exercised Currency Warrants (in any such case, the "Automatic Settlement Date"), funds in an amount equal to, and for the payment of, the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of such Currency Warrants. Subject to such funds having been made available as provided in the preceding sentence, the Currency Warrant Agent will be responsible for making its payment available to the appropriate Registered Holder in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a U.S. Dollar account maintained by such Registered Holder in the United States (at such Registered Holder's election), after 3:00 p.m., New York City time, but prior to the close of business, on the Automatic Settlement Date, against receipt by the Currency Warrant Agent at the Currency Warrant Agent's Office from such Registered Holder of its Warrant Certificates. In the case of Book-Entry Warrants subject to automatic exercise, the Company shall make available to the Warrant Agent, not later than 3:00 p.m., New York City time, on the Automatic 19 15 Settlement Date, funds in an amount equal to, and for the payment of, the aggregate Cash Settlement Value of such Currency Warrants. Subject to such funds having been made available as provided in the preceding sentence, the Currency Warrant Agent will be responsible for making funds available to the Depository, 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 Date. All Currency Warrants shall be deemed to be cancelled on and as of the Automatic Settlement Date and each Warrantholder's rights under the Currency Warrants and hereunder shall thereupon cease, except for the right to receive the Cash Settlement Value or the Alternative Settlement Amount, as applicable. Each Currency Warrant will entitle the Warrantholder thereof to receive the Alternative Settlement Amount in lieu of the Cash Settlement Value thereof in the event that such Currency Warrants are automatically exercised on the Delisting Date. The "Alternative Settlement Amount" of a Currency Warrant will be calculated by the Calculation Agent as of 10:00 a.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Currency Warrants determined as described above; A = the total number of days from but excluding the Valuation Date for such Currency Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Currency Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Currency Warrant; and Z = the lesser of T or I. The Company will advise the Currency Warrant Agent as soon as practicable of the date of any expected delisting or permanent suspension of trading of the Currency Warrants and will immediately inform the Currency Warrant Agent after the Company has received notice that such delisting or suspension has occurred, but in no event will notice of such delisting or suspension be given to the Warrant Agent later than 9:30 a.m., 20 16 New York City time, on the New York Business Day following the date that such delisting or suspension occurs. SECTION 2.4 Limitation of Number of Exercisable Warrants. Not fewer than 500 Currency Warrants may be exercised by a Warrantholder at any one time except in the case of automatic exercise. SECTION 2.5 Covenant of the Company. The Company covenants, for the benefit of the Warrantholders, that (i) it will cause the Currency Warrants to be listed on the AMEX at issuance and (ii) until the Expiration Date, it will not seek the delisting of the Currency Warrants from, or permanent suspension of their trading on the AMEX unless prior to such delisting or suspension the Currency Warrants shall have been listed, and shall be accepted for trading pursuant to the rules of another Self-Regulatory Organization. SECTION 2.6 Return of the Global Warrant Certificate. At such time as all of the Currency Warrants have been exercised, deemed automatically exercised or otherwise cancelled, the Currency Warrant Agent shall return the cancelled Global Warrant Certificate to the Company. SECTION 2.7 Return of Moneys Held Unclaimed for Two Years. Any moneys deposited with or paid to the Currency Warrant Agent for the payment of the Cash Settlement Value or the Alternative Settlement Amount of any Currency Warrants and not applied but remaining unclaimed for two years after the date upon which such Cash Settlement Value or the Alternative Settlement Amount shall have become due and payable, shall be repaid by the Currency Warrant Agent to the Company, and the holder of such Currency Warrants shall thereafter look only to the Company for any payment which such Warrantholder may be entitled to collect and all liability of the Currency Warrant Agent with respect to such moneys shall thereupon cease; provided, however, that the Currency Warrant Agent, before making any such repayment, may at the expense of the Company notify, in the case of Book-Entry Warrants, the Participants concerned, or, in the case of Certificated Warrants, the Warrantholders concerned, that said moneys have not been so applied and remain unclaimed and that after a date named therein any unclaimed balance of said moneys then remaining will be returned to the Company. SECTION 2.8 Designation of Agent for Receipt of Notice. The Company may from time to time designate in writing to the Currency Warrant Agent a designee for receipt of all notices to be given by the Currency Warrant Agent pursuant to this Article II and all such notices thereafter shall be given in the manner herein provided by the Currency Warrant Agent to such designee. 21 17 ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS SECTION 3.1 Holders of Currency Warrants May Enforce Rights. Notwithstanding any of the provisions of this Agreement, any Warrantholder, without the consent of the Currency Warrant Agent, may, in and for his own behalf, enforce and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, his right to exercise and to receive payment for his Currency Warrants provided in this Agreement and the Warrant Certificates or Global Warrant Certificate, as the case may be. SECTION 3.2 Consolidation, Merger or Other Disposition. If at any time the Company shall consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to another person, then in any such event the successor or assuming corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named as the Company herein and in the Currency Warrants; the Company shall thereupon be relieved of any further obligation hereunder or under the Currency Warrants, and, in the event of any such consolidation, merger, conveyance, transfer or lease, the Company as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated. Such successor or assuming corporation shall expressly assume, by an amendment to this Agreement, executed and delivered to the Currency Warrant Agent, in form satisfactory to such Currency Warrant Agent, the due and punctual payment of any and all amounts payable by the Company pursuant to this Agreement and the performance of every covenant of this Agreement on the part of the Company to be performed or observed. Such successor or assuming corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, a new Warrant Certificate or Global Warrant Certificate representing the Currency Warrants not theretofore exercised, in exchange and substitution for the Warrant Certificate or Global Warrant Certificate theretofore issued. Such Warrant Certificate or Global Warrant Certificate shall in all respects have the same legal rank and benefit under this Agreement as the Warrant Certificate or Global Warrant Certificate theretofore issued in accordance with the terms of this Agreement as though such new Warrant Certificate or Global Warrant Certificate had been issued at the date of the execution hereof. In any case of any such consolidation, merger, conveyance, transfer or lease of substantially all of the assets of the Company, such changes in phraseology and form (but not in substance) may be made in the new Warrant Certificates or Global Warrant Certificate as may be appropriate. The Currency Warrant Agent may receive a written opinion of legal counsel as conclusive evidence that any such consolidation, merger, conveyance, transfer or lease of 22 18 substantially all of the assets of the Company complies with the provisions of this Section 3.2. ARTICLE IV CANCELLATION OF CURRENCY WARRANTS SECTION 4.1 Cancellation of Currency Warrants. In the event the Company shall purchase or otherwise acquire Currency Warrants, such Currency Warrants may, at the option of the Company, (i) in the case of Book-Entry Warrants, be surrendered free through a Depository Participant for credit to the account of the Currency Warrant Agent maintained at the Depository, and if so credited, the Currency Warrant Agent shall promptly note the cancellation of such Currency Warrants by notation on the records of the Currency Warrant Agent or (ii) in the case of Certificated Warrants, delivered to the Currency Warrant Agent, and if so delivered the Currency Warrant Agent shall promptly note the cancellation of such Currency Warrants on the records of the Currency Warrant Agent. Such Currency Warrants may also, at the option of the Company, be resold by the Company directly to or through any of its affiliates in lieu of being surrendered to the Depository. No Warrant Certificate or Global Warrant Certificate shall be countersigned in lieu of or in exchange for any Currency Warrant which is cancelled as provided herein, except as otherwise expressly permitted by this Agreement. SECTION 4.2 Treatment of Warrantholders. The Company, the Currency Warrant Agent and any agent of the Company or the Currency Warrant Agent may deem and treat the person in whose name a Global Warrant Certificate shall be registered in the records of the Currency Warrant Agent as the holder of all right, title and interest in such Global Warrant Certificate (notwithstanding any notation of ownership or other writing thereon) for any purpose and as the person entitled to exercise the rights represented by the Currency Warrants evidenced thereby, and neither the Company nor the Currency Warrant Agent, nor any agent of the Company or the Currency Warrant Agent shall be affected by any notice to the contrary, except that the Currency Warrant Agent and the Company shall be entitled to rely on and act pursuant to instructions of Participants as contemplated by Article II of this Agreement. This Section 4.2 shall be without prejudice to the rights of Warrantholders as described elsewhere herein. SECTION 4.3 Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Currency Warrants; provided, however, that the Company shall not be required to pay any tax or other governmental charge which may be payable in respect of any transfer involving any beneficial or record interest in or ownership interest of any Currency Warrants. 23 19 ARTICLE V CONCERNING THE CURRENCY WARRANT AGENT SECTION 5.1 Currency Warrant Agent. The Company hereby appoints Citibank, N.A. as Currency Warrant Agent of the Company in respect of the Currency Warrants, the Warrant Certificates and the Global Warrant Certificate upon the terms and subject to the conditions set forth herein, in the Warrant Certificate and in the Global Warrant Certificate; and Citibank, N.A. hereby accepts such appointment. The Currency Warrant Agent shall have the powers and authority granted to and conferred upon it in the Warrant Certificate and the Global Warrant Certificate and hereby and such further powers and authority acceptable to it 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 the Warrant Certificate and the Global Warrant Certificate are subject to and governed by the terms and provisions hereof. SECTION 5.2 Conditions of Currency Warrant Agent's Obligations. The Currency Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof and of the Warrant Certificates and the Global Warrant Certificate, including the following, to all of which the Company agrees and to all of which the rights hereunder of the Warrantholders from time to time of the Currency Warrants shall be subject: (a) The Company agrees promptly to pay the Currency Warrant Agent the compensation to be agreed upon with the Company for all services rendered by the Currency Warrant Agent and to reimburse the Currency Warrant Agent for its reasonable out-of-pocket expenses (including reasonable attorneys' fees and expenses) incurred by the Currency 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 Currency Warrant Agent for, and to hold it 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 Currency Warrant Agent, arising out of or in connection with its acting as such Currency Warrant Agent hereunder or with respect to the Currency Warrants, as well as the reasonable costs and expenses of defending against any claim of liability in the premises. (b) In acting under this Agreement and in connection with the Currency Warrants, the Currency 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 Warrantholders or the registered holder of the Global Warrant Certificate. 24 20 (c) The Currency 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 Currency Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or omitted or thing suffered by it in reliance upon any Warrant Certificate, Global Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) The Currency Warrant Agent, and its officers, directors and employees, may become the Warrantholder of, or acquire any interest in, any Currency Warrants or other obligations of the Company, with the same rights that it or they would have if it were not the Currency 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 Currency Warrants or other obligations of the Company as freely as if it were not the Currency Warrant Agent hereunder. (f) The Currency Warrant Agent shall not be under any liability for interest on any moneys at any time received by it pursuant to any of the provisions of this Agreement, the Warrant Certificates or the Global Warrant Certificate. (g) The Currency 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 Currency Warrant Agent) or with respect to the validity or execution of any Warrant Certificate or the Global Warrant Certificate (except its countersignature thereof). (h) The recitals contained herein and in the Warrant Certificate and the Global Warrant Certificate (except as to the Currency Warrant Agent's countersignature thereon) shall be taken as the statements of the Company and the Currency Warrant Agent assumes no responsibility for the correctness of the same. (i) The Currency Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificate and the Global Warrant Certificate specifically set forth and no implied duties or obligations shall be read into this Agreement, the Warrant Certificate or the Global 25 21 Warrant Certificate against the Currency Warrant Agent. The Currency 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 Currency Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of the Warrant Certificate or the Global Warrant Certificate countersigned by the Currency Warrant Agent and delivered by it to the Company pursuant to this Agreement or for the application by the Company of any proceeds. The Currency 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 herein, in the Warrant Certificate or in the Global Warrant Certificate or in the case of the receipt of any written demand from a holder of a Currency Warrant with respect to such default, except as provided in Section 6.2 hereof, 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 to make any demand upon the Company. (j) Unless specifically provided herein or in the Warrant Certificate, the Global Warrant Certificate, any order, certificate, notice, request, direction or other communication from the Company made or given by the Company under any provision of this Agreement shall be sufficient if signed by its Treasurer or any Vice President. SECTION 5.3 Compliance With Applicable Laws. The Currency Warrant Agent agrees to comply with all applicable federal and state laws in respect of the services rendered by it under this Agreement, including (but not limited to) the provisions of United States federal income tax laws regarding information reporting and backup withholding. The Currency Warrant Agent expressly assumes all liability for its failure to comply with such laws, including (but not limited to) any liability for its failure to comply with any applicable provisions of United States federal income tax laws regarding information reporting and backup withholding applicable to it. SECTION 5.4 Resignation and Appointment of Successor. (a) The Company agrees, for the benefit of the Warrantholders from time to time of the Currency Warrants, that there shall at all times be a Currency Warrant Agent hereunder until all the Currency Warrants are no longer exercisable. (b) The Currency 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 Currency Warrant Agent and acceptance of such appointment by such successor Currency Warrant Agent, as 26 22 hereinafter provided. The Currency 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 Currency 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 or an agent's office south of Chambers Street in the Borough of Manhattan, New York City) and the acceptance of such appointment by such successor Currency Warrant Agent. In the event a successor Currency Warrant Agent has not been appointed and has not accepted its duties within 90 days of the Currency Warrant Agent's notice of resignation, the Currency Warrant Agent may apply to any court of competent jurisdiction for the designation of a successor Currency Warrant Agent. The obligation of the Company under Section 5.2(a) shall continue to the extent set forth therein notwithstanding the resignation or removal of the Currency Warrant Agent. (c) In case at any time the Currency Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged 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 all or any substantial part of its property shall be appointed, or if any public officer shall have taken charge or control of the Currency Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Currency Warrant Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in writing, filed with the successor Currency Warrant Agent. Upon the appointment as aforesaid of a successor Currency Warrant Agent and acceptance by the latter of such appointment, the Currency Warrant Agent so superseded shall cease to be Currency Warrant Agent hereunder. (d) Any successor Currency 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 Currency Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Currency Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Currency Warrant Agent shall be entitled to receive, all moneys, securities and other property on deposit with or held by such predecessor, as Currency Warrant Agent hereunder. 27 23 (e) Any corporation into which the Currency Warrant Agent hereunder may be merged or converted or any corporation with which the Currency Warrant Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Currency Warrant Agent shall be a party, or any corporation to which the Currency Warrant Agent shall sell or otherwise transfer all or substantially all of the assets and business of the Currency Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Currency 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 MISCELLANEOUS SECTION 6.1 Modification, Supplementation or Amendment. (a) This Agreement, the Warrant Certificates and the Global Warrant Certificate may be modified, supplemented or amended by the Company and the Currency Warrant 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, maintaining the listing of any Currency Warrants on any U.S. national securities exchange or registration of such Currency Warrants under the Exchange Act, permitting the issuance of Currency Warrants in definitive form in accordance with paragraph (a) of Section 1.1, reflecting the issuance by the Company of additional Currency Warrants of the same issue or reflecting the appointment of a successor Depository in accordance with paragraph (c) of Section 1.1 or in any other manner which the Company may deem necessary or desirable and which will not materially adversely affect the interests of the holders of Currency Warrants. Notwithstanding anything in this Section 6.1 to the contrary, this Agreement may not be amended to provide for the countersigning by the Currency Warrant Agent of Warrant Certificates or Global Warrant Certificate evidencing in the aggregate in excess of Currency Warrants unless and until the Currency Warrant Agent has received notice from the AMEX or any successor U.S. national securities exchange or self-regulatory organization that the additional Currency Warrants in excess of have been approved for listing on such exchange or self-regulatory organization. (b) The Company and the Currency Warrant Agent may modify or amend this Agreement, the Warrant Certificates, and the Global Warrant Certificate with the consent of the Warrantholders of not fewer than a majority in number of the then outstanding unexercised Currency Warrants affected by such modification or amendment, for any purpose; provided, however, that no such modification or amendment that increases the Strike Rate, otherwise changes the determination of the Cash Settlement Value, or the Alternative Settlement Amount of the Currency Warrants (or 28 24 any aspects of such determination ) so as to reduce the amount receivable upon exercise, shortens the period of time during which the Currency Warrants may be exercised, increases the minimum number of Currency Warrants that may be exercised by or on behalf of any one Warrantholder at any one time, or otherwise materially and adversely affects the exercise rights of the Warrantholders or reduces the number of outstanding Currency Warrants the consent of the Warrantholders of which is required for modification or amendment of this Agreement, the Warrant Certificates, or the Global Warrant Certificate may be made without the consent of each Warrantholder affected thereby. SECTION 6.2 Notices and Demands to the Company and Currency Warrant Agent. If the Currency Warrant Agent shall receive any notice or demand addressed to the Company by any Warrantholder pursuant to the provisions of the Warrant Certificates or the Global Warrant Certificate, the Currency Warrant Agent shall promptly forward such notice or demand to the Company. SECTION 6.3 Addresses for Notices. Any communications from the Company to the Currency Warrant Agent with respect to this Agreement shall be addressed to Citibank, N.A., 120 Wall Street, 13th Floor, New York, New York 10043 (facsimile: (212) 480-1614) (telephone: (212) 412-6209, Attention: Corporate Trust Department; any communications from the Currency Warrant Agent to the Company with respect to this Agreement shall be addressed to Lehman Brothers Holdings Inc., 388 Greenwich Street, New York, New York 10013 (facsimile: (212) 464-6414) (telephone: (212) 298-2000), Attention: Treasurer (or such other address as shall be specified in writing to the other parties hereto by the Currency Warrant Agent or the Company, respectively). SECTION 6.4 Notices to Warrantholders. The Company may cause to have notice given to the holders of Currency Warrants by providing the Currency Warrant Agent with a form of notice to be distributed by (i) in the case of Certificated Warrants, the Currency Warrant Agent to the Registered Holders or (ii) in the case of Book-Entry Warrants, the Depository to Participants in accordance with the custom and practices of the Depository. SECTION 6.5 Governing Law. The validity, interpretation and performance of this Agreement and each Currency Warrant issued hereunder and of the respective terms and provisions thereof shall be governed by the laws of the State of New York. SECTION 6.6 Obtaining of Governmental Approvals. The Company will from time to time use its best efforts to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and the AMEX and filings under the United States federal and state laws, which may be or become requisite in connection with the issuance, sale, trading, 29 25 transfer or delivery of the Currency Warrants, the Warrant Certificates, the Global Warrant Certificate and the exercise of the Currency Warrants. SECTION 6.7 Persons Having Rights Under the Currency Warrant 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 Currency Warrant Agent, the registered holder of the Global Warrant Certificate 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 in this Agreement contained shall be for the sole and exclusive benefit of the Company and the Currency Warrant Agent and their successors and of the registered holder of the Global Warrant Certificate and the Warrantholders. SECTION 6.8 Headings. The descriptive headings of the several Articles and Sections and the Table of Contents of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 6.9 Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument. SECTION 6.10 Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the principal corporate trust office of the Currency Warrant Agent, for inspection by the registered holder of the Warrant Certificate, Participants, Indirect Participants and Warrantholders. 30 26 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: ------------------------------- Name: Title: CITIBANK, N.A. By: ------------------------------- Name: Title: LEHMAN BROTHERS INC. By: ------------------------------- Name: Title: 31 Annex 1 Defined Terms
Page Alternative Settlement Amount . . . . . . . . . . . . . . 15 AMEX . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Automatic Settlement Date . . . . . . . . . . . . . . . . 14 Book-Entry Warrants . . . . . . . . . . . . . . . . . . . 2 Calculation Agent . . . . . . . . . . . . . . . . . . . . 1 Cash Settlement Value . . . . . . . . . . . . . . . . . . 12 Certificated Warrants . . . . . . . . . . . . . . . . . . 2 Company . . . . . . . . . . . . . . . . . . . . . . . . . 1 Conversion Option . . . . . . . . . . . . . . . . . . . . 2 Conversion Option Period . . . . . . . . . . . . . . . . 2 Currency Warrant . . . . . . . . . . . . . . . . . . . . 1 Currency Warrant Account . . . . . . . . . . . . . . . . 9 Currency Warrant Agent . . . . . . . . . . . . . . . . . 1 Currency Warrant Agent's Office . . . . . . . . . . . . . 4 Currency Warrant Register . . . . . . . . . . . . . . . . 4 Currency Warrants . . . . . . . . . . . . . . . . . . . . 1 Delisting Date . . . . . . . . . . . . . . . . . . . . . 14 Depository . . . . . . . . . . . . . . . . . . . . . . . 7 Exercise Date . . . . . . . . . . . . . . . . . . . . . . 10 Exercise Notice . . . . . . . . . . . . . . . . . . . . . 9 Exercised Warrants . . . . . . . . . . . . . . Exhibit A-1 Expiration Date . . . . . . . . . . . . . . . . . . . . . 9 Global Warrant Certificate . . . . . . . . . . . . . . . 2 Indirect Participants . . . . . . . . . . . . . . . . . . 8 New York Business Day . . . . . . . . . . . . . . . . . . 9 Participants . . . . . . . . . . . . . . . . . . . . . . 8 Registered Holder . . . . . . . . . . . . . . . . . . . . 6 Self-Regulatory Organization . . . . . . . . . . . . . . 14 Settlement Date . . . . . . . . . . . . . . . . . . . . . 11 Spot Rate . . . . . . . . . . . . . . . . . . . . . . . . 12 Strike Rate . . . . . . . . . . . . . . . . . . . . . . . 12 Valuation Date . . . . . . . . . . . . . . . . . . . . . 10 Warrant Certificate . . . . . . . . . . . . . . . . . . . 1 Warrantholder . . . . . . . . . . . . . . . . . . . . . . 1
32 EXHIBIT A [FORM OF WARRANT CERTIFICATE] [FACE] No. CUSIP No. LEHMAN BROTHERS HOLDING INC. Currency Warrants Expiring This Warrant Certificate certifies that , or registered assigns, is the registered holder of Currency Warrants Expiring (the "Currency Warrants"). Upon receipt by the Currency Warrant Agent of this Warrant Certificate and the exercise notice on the reverse hereof (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at the offices of the Currency Warrant Agent in the Borough of Manhattan, New York City, each Currency Warrant entitles the registered holder hereof (the "Warrantholder") to receive, subject to the conditions set forth herein and in the Currency Warrant Agreement, from Lehman Brothers Holdings Inc. (the "Company") the cash settlement value in U.S. Dollars (the "Cash Settlement Value") calculated by the Calculation Agent no later than 5:00 p.m., New York City time, on the Valuation Date and equal to the greater of (i) zero and (ii) the amount (rounded down to the nearest cent) computed by subtracting from U.S. $100 an amount equal to the product of U.S. $100 times a fraction, the numerator of which is per U.S. Dollar (the "Strike Rate") and the denominator of which is the spot exchange rate of the for the U.S. Dollars (expressed as a number of per U.S. Dollar and determined by the Calculation Agent) at 10:00 a.m., New York City time, on the applicable Valuation Date (the "Spot Rate"). If the Strike Rate is equal to or exceeds the Spot Rate for such Valuation Date, the Cash Settlement Value will be zero. Subject to the terms of the Currency Warrant Agreement, each Currency Warrant may be irrevocably exercised, in whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earlier of (i) (the "Expiration Date") or (ii) the Delisting Date, and on the Expiration Date or the Delisting Date, as the case may be, the Currency Warrants shall expire and all Currency Warrants evidenced hereby shall be automatically exercised and otherwise shall be void. Except in the case of automatic exercise of the Currency Warrants, as set forth herein and in the Currency 33 2 Warrant Agreement, not fewer than 500 Currency Warrants may be exercised by or on behalf of any one Warrantholder at any one time. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless manually countersigned by the Currency Warrant Agent. IN WITNESS WHEREOF, Lehman Brothers Holdings, Inc. has caused this instrument to be duly executed. Dated: LEHMAN BROTHERS HOLDINGS INC. By -------------------------- Title: President [SEAL] Attest: By --------------------------- Title: Assistant Secretary Countersigned for authentication only as of the date above written: Citibank, N.A., as Currency Warrant Agent By --------------------------- Authorized Officer 34 3 [REVERSE] Currency Warrants Expiring The Currency Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Currency Warrants issued by the Company pursuant to a Currency Warrant Agreement, dated as of (the "Currency Warrant Agreement"), among the Company, Citibank, N.A. (the "Currency Warrant Agent") and Lehman Brothers Inc. (the "Calculation Agent") and are subject to the terms and provisions contained in the Currency Warrant Agreement, to all of which terms and provisions the Warrantholder consents by acceptance of this Warrant Certificate and which Currency Warrant Agreement is hereby incorporated by reference in and made a part of this Warrant Certificate. A copy of the Currency Warrant Agreement is on file at the Warrant Agent's Office (as defined herein). The Currency Warrants constitute direct, unconditional and unsecured contractual obligations of the Company and rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. Subject to the provisions hereof and of the Currency Warrant Agreement, each Currency Warrant may be irrevocably exercised, as a whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day (as defined herein) from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earlier of (i) the Expiration Date or (ii) the Delisting Date (as defined herein). The holder of Currency Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate with the exercise notice set forth below (or an exercise notice in substantially identical form), duly completed and executed, to the Currency Warrant Agent's offices in the Borough of Manhattan, New York City (the "Warrant Agent's Office"), which are, on the date hereof, located at 111 Wall Street, 5th Floor, New York, New York 10043, Attention: Corporate Trust Department. Except in the case of automatic exercise of the Currency Warrants, as set forth herein and in the Currency Warrant Agreement, not fewer than 500 Currency Warrants may be exercised by or on behalf of any one Warrantholder at any one time. The "Cash Settlement Value" of an exercised Currency Warrant will be calculated by the Calculation Agent no later than 5:00 p.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars equal to the greater of (i) zero and (ii) the amount (rounded down to the nearest cent) computed by subtracting from U.S. $100 an amount equal to the product of U.S. $100 times a fraction, the numerator of which is per U.S. Dollar (the "Strike Rate") and the denominator of which is the spot 35 4 exchange rate of the for the U.S. Dollar (expressed as a number of per U.S. Dollar and determined by the Calculation Agent) at 10:00 a.m., New York City time, on the applicable Valuation Date (the "Spot Rate"). If the Strike Rate for such Valuation Date is equal to or exceeds the Spot Rate, the Cash Settlement Value will be zero. The Company has appointed Lehman Brothers Inc. to be its Calculation Agent to make certain calculations, as described in the Currency Warrant Agreement and herein. The Calculation Agent shall act as an independent expert and not as an agent of the Company. Unless otherwise provided by the Currency Warrant Agreement, the calculations of the Calculation Agent and the determinations of the Currency Warrant Agent under the Currency Warrant Agreement and Warrant Certificate shall, absent manifest error, be final and binding on the Company and the Warrantholder. Subject to the Currency Warrant Agreement and this Warrant Certificate, and except in the case of automatic exercise on the Expiration Date or the Delisting Date, the valuation date (the "Valuation Date") for a Currency Warrant shall be the New York Business Day next succeeding the New York Business Day (the "Exercise Date") on which the Currency Warrant Agent has received the Warrant Certificate representing such Currency Warrant, with the exercise notice below (or an exercise notice in substantially identical form delivered herewith), duly completed and executed by the Warrantholder, at or prior to 3:00 p.m., New York City time; and if the Currency Warrant Agent shall receive any such Warrant Certificate after 3:00 p.m., New York City time, on such date, then such Warrant Certificate shall be deemed to have been received at or prior to 3:00 p.m., New York City time, on the next succeeding New York Business Day (which shall be the Exercise Date for such Warrants), and in such event the Valuation Date shall be the next New York Business Day following such Exercise Date. If the exercise notice is not rejected as provided in the Currency Warrant Agreement, then the Currency Warrant Agent will determine the Cash Settlement Value of the exercised Currency Warrants in accordance with the terms of the Currency Warrant Agreement. Any exercise of the Currency Warrants will be irrevocable. Except in the case of Currency Warrants subject to automatic exercise, payment shall be made available to the Warrantholder after 3:00 p.m., New York City time, on the fifth New York Business Day following the Valuation Date for such Currency Warrants in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by such Warrantholder in the United States (at the Warrantholder's election as specified in the exercise notice), in an amount equal 36 5 to the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of the exercised Currency Warrants. All Warrant certificates for which the Currency Warrant Agent has not received a notice of exercise in proper form by 3:00 p.m., New York City time, on the New York Business Day preceding the earlier of (i) the Expiration Date or (ii) the Delisting Date, as the case may be, or for which the Currency Warrant Agent has received an exercise notice in proper form but with respect to which timely delivery of the relevant Warrant Certificate has not been made will be deemed automatically exercised on the Expiration Date or the Delisting Date, as the case may be, without any requirement of delivery of an exercise notice to the Currency Warrant Agent. Accordingly, the Exercise Date for such Currency Warrants shall be the Expiration Date or Delisting Date, as the case may be, or, if such date is not a New York Business Day, the next succeeding New York Business Day and the Valuation Date for such Currency Warrants shall be the first New York Business Day following the Exercise Date for such Currency Warrants. "Delisting Date" shall mean the effective date on which the Currency Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder) on, the American Stock Exchange (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Payment with respect to automatically exercised Currency Warrants shall be made available to the Warrantholder in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by the Warrantholder in the United States (at the Warrantholder's election), after 3:00 p.m., New York City time, on the fifth New York Business Day following the Valuation Date, against receipt by the Currency Warrant Agent at the Warrant Agent's Office from the Warrantholder of its Warrant Certificates. Such payment shall be in the amount of the aggregate Cash Settlement Value or the Alternative Settlement Amount, as applicable, in respect of the Currency Warrants evidenced by the Warrant Certificates that were exercised on the Expiration Date or the Delisting Date, as the case may be. In the case of delisting of the Warrants as described in the Currency Warrant Agreement, the Warrantholder shall be entitled to receive, in lieu of the Cash Settlement Value, the Alternative Settlement Amount. The Alternative Settlement Amount of a Currency Warrant will be calculated by the Calculation Agent as of 10:00 a.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest 37 6 cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Currency Warrants determined as described above; A = the total number of days from but excluding the Valuation Date for such Currency Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Currency Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Currency Warrant; and Z = the lesser of T or I. Prior to due presentment for registration of transfer, the Company, the Currency Warrant Agent, and any agent of the Company or the Currency Warrant Agent, may deem and treat the Warrantholder as the absolute owner of the Currency 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 Currency Warrants evidenced hereby, and neither the Company nor the Currency Warrant Agent, nor any agent of the Company or the Currency Warrant Agent, shall be affected by any notice to the contrary. The Currency Warrant Agent shall, in accordance with the Currency Warrant Agreement, from time to time register the transfer of this Warrant Certificate upon the records 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 Currency Warrant Agent, duly executed by the Warrantholder or by its duly appointed legal representative or duly authorized attorney, such signature to be guaranteed by a bank or trust company located, or with a correspondent office, in New York City or by a broker or dealer which is a member of a national securities exchange, or in any other manner acceptable to the Currency Warrant Agent. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s). As provided in the Currency Warrant Agreement and subject to certain limitations, this Warrant Certificate may be exchanged for other Warrant Certificates, representing a like 38 7 number of Currency Warrants, upon surrender to the Currency Warrant Agent of this Warrant Certificate at the Warrant Agent's Office. No service charge shall be made for any registration of transfer or exchange of this Warrant Certificate, 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 this Warrant Certificate, other than exchanges pursuant to the Currency Warrant Agreement not involving any transfer. Capitalized terms included herein but not defined herein have the meanings assigned thereto in the Currency Warrant Agreement. References herein to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. As used herein, a "New York Business Day" means any day other than (i) a Saturday, Sunday or a day on which either the American Stock Exchange or the New York Stock Exchange is not open for securities trading or commercial banks in New York City are required or authorized by law or executive order to remain closed. The Currency Warrant Agreement and the terms of the Currency Warrants are subject to amendment, as provided in the Currency Warrant Agreement. THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 39 Exhibit A-1 EXERCISE NOTICE Citibank, N.A. Corporate Trust Department, 5th Floor 111 Wall Street New York, New York 10043 1. The undersigned Warrantholder hereby irrevocably exercises Currency Warrants (the "Exercised Warrants") and delivers to you herewith a Warrant Certificate or Certificates, registered in the Warrantholder's name, representing a number of Currency Warrants at least equal to the number of Exercised Warrants. The Warrantholder is exercising no fewer than 500 Currency Warrants. 2. The Warrantholder hereby directs the Currency Warrant Agent (a) to pay the Cash Settlement Value or the Alternative Settlement Amount, as applicable, with respect to the Exercised Warrants: / / By cashier's check or an official bank check; or / / By wire transfer to the following U.S. Dollar bank account in the United States: (Minimum payments of $100,000 only) Bank: ---------------------------- ABA Routing No.: ----------------- Account No: -------- Reference:------------- and; (b) if the number of Exercised Warrants is less than the number of Currency Warrants represented by the enclosed Warrant Certificate or Warrant Certificates, to deliver a Warrant Certificate representing the unexercised Currency Warrants to Dated: , 19 ---------------------------- Warrantholder by ----------------------- Authorized Signature Address: Telephone: ( ) 40 EXHIBIT B [FORM OF GLOBAL WARRANT CERTIFICATE] [FACE] No. CUSIP No. LEHMAN BROTHERS HOLDING INC. Currency Warrants Expiring This certifies that CEDE & CO., or registered assigns, is the registered holder of Currency Warrants Expiring (the "Currency Warrants"). Upon receipt by the Currency Warrant Agent of this Global Warrant Certificate and the exercise notice on the reverse hereof (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at the offices of the Currency Warrant Agent in the Borough of Manhattan, New York City, each Currency Warrant entitles the beneficial owner thereof (each a "Warrantholder") to receive, subject to the conditions set forth herein and in the Currency Warrant Agreement, from Lehman Brothers Holdings Inc. (the "Company") the cash settlement value in U.S. Dollars (the "Cash Settlement Value") calculated by the Calculation Agent no later than 5:00 p.m., New York City time, on the Valuation Date equal to the greater of (i) zero and (ii) the amount (rounded down to the nearest cent) computed by subtracting from U.S.$100 an amount equal to the product of U.S.$100 times a fraction, the numerator of which is per U.S. Dollar (the "Strike Rate") and the denominator of which is the spot exchange rate of the for the U.S. Dollar (expressed as a number of per U.S. Dollar and determined by the Calculation Agent) at 10:00 a.m., New York City time, on the applicable valuation date (the "Spot Rate"). If the Strike Rate is equal to or exceeds the Spot Rate for such valuation date, the Cash Settlement Value will be zero. Subject to the terms of the Currency Warrant Agreement, each Currency Warrant may be irrevocably exercised, in whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earlier of (i) (the "Expiration Date") and (ii) the Delisting Date, at which time the Currency Warrants shall expire and all Currency Warrants evidenced hereby shall be automatically exercised and otherwise shall be void. A Warrantholder of Currency Warrants evidenced by this Global Warrant Certificate may exercise them only by 41 2 transfer of such Currency Warrants on the records of the Depository Trust Company free to the Currency Warrant Account (as defined in the Currency Warrant Agreement) and pursuant to an irrevocable Exercise Notice delivered to the Currency Warrant Agent from a Participant (as defined in the Currency Warrant Agreement) acting on behalf of such Warrantholder. Except in the case of automatic exercise of the Currency Warrants, as set forth herein and in the Currency Warrant Agreement, not fewer than 500 Currency Warrants may be exercised by or on behalf of any one Warrantholder at any one time. This Global Warrant Certificate shall not be valid unless manually countersigned by the Currency Warrant Agent. IN WITNESS WHEREOF, Lehman Brothers Holdings, Inc. has caused this instrument to be duly executed. Dated: LEHMAN BROTHERS HOLDINGS INC. By -------------------------- Title: [SEAL] Attest: By ------------------------ Title: Countersigned for authentication only as of the date above written: Citibank, N.A., as Currency Warrant Agent By ------------------------ Authorized Officer 42 3 [REVERSE] Currency Warrants Expiring The Currency Warrants evidenced by this Global Warrant Certificate are part of a duly authorized issue of Currency Warrants issued by the Company pursuant to a Currency Warrant Agreement, dated as of (the "Currency Warrant Agreement"), among the Company, Citibank, N.A. (the "Currency Warrant Agent") and Lehman Brothers Inc. (the "Calculation Agent") and is subject to the terms and provisions contained in the Currency Warrant Agreement, to all of which terms and provisions the Warrantholders, the entities through which such Warrantholders hold their beneficial interests in the Currency Warrants and the registered holder of this Global Warrant Certificate consent by acceptance of this Global Warrant Certificate and which Currency Warrant Agreement is hereby incorporated by reference in and made a part of this Global Warrant Certificate. A copy of the Currency Warrant Agreement is on file at the Warrant Agent's Office (as defined herein). The Currency Warrants constitute direct, unconditional and unsecured contractual obligations of the Company and rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. Subject to the provisions hereof and of the Currency Warrant Agreement, each Currency Warrant may be irrevocably exercised, as a whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day (as defined herein) from its date of issuance until 3:00 p.m., New York City time, on the fifth New York Business Day immediately preceding the earlier of (i) the Expiration Date or (ii) the Delisting Date (as defined herein). A Warrantholder of Currency Warrants evidenced by this Global Warrant Certificate may exercise them only by transfer of such Currency Warrants on the records of the Depository Trust Company free to the Currency Warrant Account and by delivering an exercise notice in substantially identical form to the exercise notice attached hereto, duly completed and executed by the Participant through which such Warrantholder holds its Currency Warrants, to the Warrant Agent's offices in the Borough of Manhattan, New York City (the "Warrant Agent's Office"), which are, on the date hereof, located at 111 Wall Street, 5th Floor, New York, New York 10043, Attention: Corporate Trust Department. Except in the case of automatic exercise of the Currency Warrants, as set forth herein and in the Currency Warrant Agreement, not fewer than 500 Currency Warrants may be exercised by or on behalf of any one Warrantholder at any one time. The "Cash Settlement Value" of an exercised Currency Warrant will be calculated by the Calculation Agent no later than 43 4 5:00 p.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars equal to the greater of (i) zero and (ii) the amount (rounded down to the nearest cent) computed by subtracting from U.S. $100 an amount equal to the product of U.S. $100 times a fraction, the numerator of which in per U.S. Dollar (the "Strike Rate") and the denominator of which is the spot exchange rate of the for the U.S. Dollars (expressed or a number of per U.S. Dollar and determined by the Calculation Agent) at 10:00 a.m., New York City time, on the applicable Valuation Date (the "Spot Rate"). If the Strike Rate for such Valuation Date is equal to or exceeds the Spot Rate, the Cash Settlement Value will be zero. The Company has appointed Lehman Brothers Inc. to be its Calculation Agent to make certain calculations, as described in the Currency Warrant Agreement and herein. The Calculation Agent shall act as an independent expert and not as an agent of the Company. Unless otherwise provided by the Currency Warrant Agreement, the calculations of the Calculation Agent and the determinations of the Currency Warrant Agent under the Currency Warrant Agreement and this Global Warrant Certificate shall, absent manifest error, be final and binding on the Company and the Warrantholders. Subject to the Currency Warrant Agreement and this Global Warrant Certificate, and except in the case of automatic exercise on the Expiration Date or the Delisting Date, the valuation date (the "Valuation Date") for a Currency Warrant shall be the New York Business Day next succeeding the New York Business Day (the "Exercise Date") on which the Currency Warrant Agent has received the Currency Warrant, with the exercise notice below (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at or prior to 3:00 p.m., New York City time; and if the Currency Warrant Agent shall receive any such Currency Warrant after 3:00 p.m., New York City time, on such date, then such Global Warrant Certificate shall be deemed to have been received at or prior to 3:00 p.m., New York City time, on the next succeeding New York Business Day (which shall be the Exercise Date for such Currency Warrants), and in such event the Valuation Date shall be the next New York Business Day following such Exercise Date. If the exercise notice is not rejected as provided in the Currency Warrant Agreement, then the Calculation Agent will determine the Cash Settlement Value of the exercised Currency Warrants in accordance with the terms of the Currency Warrant Agreement. Any exercise of the Currency Warrants will be irrevocable. Except in the case of Currency Warrants subject to automatic exercise, payment shall be made available to the appropriate Participant after 3:00 p.m. on the fifth New York 44 5 Business Day following the Valuation Date for such Currency Warrants in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by such Participant in the United States (at the Participant's election as specified in the exercise notice), in an amount equal to the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of the exercised Currency Warrants. All Currency Warrants for which the Currency Warrant Agent has not received a notice of exercise in proper form by 3:00 p.m., New York City time, on the New York Business Day preceding the earlier of (i) the Expiration Date or (ii) the Delisting Date, as the case may be, or for which the Currency Warrant Agent has received an exercise notice in proper form but with respect to which timely delivery of the relevant Currency Warrant has not been made will be deemed automatically exercised on the Expiration Date or the Delisting Date, as the case may be, without any requirement of delivery of an exercise notice to the Currency Warrant Agent. Accordingly, the Exercise Date for such Currency Warrants shall be the Expiration Date or Delisting Date, as the case may be, or, if such Date is not a New York Business Day, the next succeeding New York Business Day and the Valuation Date for such Currency Warrants shall be the first New York Business Day following the Exercise Date for such Currency Warrants. "Delisting Date" shall mean the effective date on which the Currency Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder) on, the American Stock Exchange (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Payment with respect to automatically exercised Currency Warrants shall be made available to the Depository in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by the Participant in the United States (at the Participant's election) after 3:00 p.m. on the fifth New York Business Day following the Valuation Date, against receipt by the Currency Warrant Agent at the Warrant Agent's Office of the Global Warrant Certificate, for automatically exercised Currency Warrants, that were exercised on the Expiration Date or the Delisting Date, as the case may be. Such payment shall be in the amount of the aggregate Cash Settlement Value or the Alternative Settlement Amount, as applicable, in respect of the Currency Warrants evidenced by the Global Warrant Certificate that were exercised on the Expiration Date or the Delisting Date, as the case may be. 45 6 In the case of delisting of the Currency Warrants as described in the Currency Warrant Agreement, Warrantholders shall be entitled to receive, in lieu of the Cash Settlement Value, the Alternative Settlement Amount. The Alternative Settlement Amount of a Currency Warrant will be calculated by the Calculation Agent as of 10:00 a.m., New York City time, on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Currency Warrants determined as described above; A = the total number of days from but excluding the Valuation Date for such Currency Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Currency Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Currency Warrant; and Z = the lesser of T or I. Prior to due presentment for registration of transfer, the Company, the Currency Warrant Agent, and any agent of the Company or the Currency Warrant Agent, may deem and treat the registered owner hereof as the absolute owner of the Currency 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 Currency Warrants evidenced hereby, and neither the Company nor the Currency Warrant Agent, nor any agent of the Company or the Currency Warrant Agent, shall be affected by any notice to the contrary. The Currency Warrant Agent shall, in accordance with the Currency Warrant Agreement, from time to time register the transfer of this Global Warrant Certificate upon the records 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 Currency Warrant Agent, duly executed by the registered holder hereof or by its duly appointed legal representative or duly authorized attorney, such signature to be guaranteed by a bank or trust company located, or with a correspondent office, in New York City or by a broker or dealer which 46 7 is a member of a national securities exchange, or in any other manner acceptable to the Currency Warrant Agent. Upon any such registration of transfer, a new Global Warrant Certificate shall be issued to the transferee(s). No service charge shall be made for any registration of transfer or exchange of this Global Warrant Certificate, 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 this Global Warrant Certificate, other than exchanges pursuant to the Currency Warrant Agreement not involving any transfer. Capitalized terms included herein but not defined herein have the meanings assigned thereto in the Currency Warrant Agreement. References herein to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. As used herein, a "New York Business Day" means any day other than (i) a Saturday, Sunday or a day on which either the American Stock Exchange or the New York Stock Exchange is not open for securities trading or commercial banks in New York City are required or authorized by law or executive order to remain closed. The Currency Warrant Agreement and the terms of the Currency Warrants are subject to amendment, as provided in the Currency Warrant Agreement. THIS GLOBAL WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 47 EXHIBIT B-1 EXERCISE NOTICE (For Currency Warrants Represented by the Global Warrant Certificate) Citibank, N.A. c/c Citicorp Data Distribution Inc. 404 Sette Drive Paramus, New Jersey 07652 (Facsimile: (201) 262-7521) (Telephone: (201) 262-5444) 1. Reference is made to the Currency Warrant Agreement dated as of (the "Currency Warrant Agreement"), among Lehman Brothers Holdings Inc. (the "Company"), Citibank, N.A., as warrant agent (the "Currency Warrant Agent"), and Lehman Brothers Inc., as calculation agent (the "Calculation Agent"). On behalf of certain beneficial owners, each of whom is exercising no fewer than 500 Currency Warrants that are covered by this Exercise Notice and whose Currency Warrants have been, or will be, transferred to the Currency Warrant Agent's DTC Participant Account, entitled Citibank, N.A. Corporate Trust Warrant Agent Account, No. ------------- (the "Currency Warrant Account"), ------------ Currency Warrants (the "Exercised Warrants") are hereby irrevocably exercised. 2. The Participant hereby directs the Currency Warrant Agent to pay the Cash Settlement Value or the Alternative Settlement Amount, as applicable, with respect to the Exercised Warrants: / / By cashier's check or an official bank check; or / / By wire transfer to the following U.S. Dollar bank account in the United States: (Minimum payments of $100,000 only) Bank: ---------------------------- ABA Routing No.: ----------------- Account No: -------- Reference:------------- Dated: 19 48 2 [NAME OF DEPOSITORY PARTICIPANT] (Participant Number] by ---------------------- Authorized Signature Address: Telephone: ( ) 49 EXHIBIT C-1 CONFIRMATION OF EXERCISE [For Currency Warrants Represented by Warrant Certificates] [Name of Warrantholder] [Address] We hereby confirm receipt of your Exercise Notice with respect to Currency Warrants (the "Exercised Warrants") and the related Warrant Certificates, which we have found to be duly completed and in proper form. The Valuation Date of the Exercised Warrants was , 19 . We hereby confirm that the aggregate [Cash Settlement Value] [Alternative Settlement Amount] of the Exercised Warrants is $ ($ per Warrant), which will be made available to you [in the form of a cashiers check or an official bank check] [by wire transfer to the bank account designated in your irrevocable Exercise Notice, in New York Clearing House funds,] for payment after 3:00 p.m. on the fifth New York Business Day following the Valuation Date for such Currency Warrants. Capitalized terms included herein but not defined have the meanings assigned thereto in the Currency Warrant Agreement, dated as of March __, 1994, among Lehman Brothers Holdings, Inc., Citibank, N.A., as Currency Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by -------------------------- Authorized Signature 50 EXHIBIT C-2 CONFIRMATION OF EXERCISE [For Currency Warrants Represented by the Global Warrant Certificate] [Name of Depository Participant] [Address] We hereby confirm receipt of your Exercise Notice with respect to Currency Warrants (the "Exercised Warrants") which were transferred by you (or on your behalf) to our DTC Participant Account No. -------------. Such Exercise Notice we have found to be duly completed and in proper form. The Valuation Date of the Exercised Warrants was , 19 . We hereby confirm that the aggregate Cash Settlement Value of the Exercised Warrants is $ ($ per Currency Warrant), which will be made available to you [in the form of a cashiers check or an official bank check] [by wire transfer to the bank account designated in your irrevocable of Exercise Notice, in New York Clearing House funds,] for payment after 3:00 p.m. on the fifth New York Business Day following the Valuation Date for such Currency Warrants. Capitalized terms included herein but not defined have the meanings assigned thereto in the Currency Warrant Agreement dated as of , among Lehman Brothers Holdings Inc., Citibank, N.A., as Currency Warrant Agent as Currency Warrant Agent, and Lehman Brothers Inc. as Calculation Agent. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature 51 D-1 NOTICE OF REJECTION [For Warrants Represented by Warrant Certificates] [Name of Warrantholder] [Address] You are hereby notified that [the Exercise Notice delivered by you was determined by us not to have been [duly completed] [in proper form]] [the Currency Warrants to which the Exercise Notice delivered by you relates were not received at the Warrant Agent's Office], as set forth in the Currency Warrant Agreement, dated as of , among Lehman Brothers Holdings Inc., Citibank, N.A., as Currency Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Accordingly, we have rejected your Exercise Notice. Capitalized terms used but not defined herein have the meanings assigned thereto in the Currency Warrant Agreement. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature 52 D-2 NOTICE OF REJECTION [For Currency Warrants Represented by the Global Warrant Certificate] [Name of Depository Participant] [Address] You are hereby notified that [the Exercise Notice delivered by you was determined by us not to have been [duly completed] [in proper form]] [the Currency Warrants to which the Exercise Notice delivered by you relates were not transferred to our DTC Participant Account No. ---------], as set forth in the Currency Warrant Agreement, dated as of March __, 1994, among Lehman Brother Holdings, Inc., Citibank, N.A., as Currency Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Accordingly, we have rejected your Exercise Notice. Capitalized terms used but not defined herein have the meanings assigned thereto in the Currency Warrant Agreement. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature EX-4.S 3 INDEX WARRANT AGREEMENT 1 ------------------------------------------------- LEHMAN BROTHERS HOLDINGS INC. and CITIBANK, N.A. as Index Warrant Agent and LEHMAN BROTHERS INC. as Calculation Agent ------------------------------ INDEX WARRANT AGREEMENT dated as of Index Warrants Expiring ------------------------------------------------- 2 TABLE OF CONTENTS1/
Page ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF INDEX WARRANTS . . . . . . . . . . . . . . . 1 SECTION 1.1 Issuance of Index Warrants; Conversion of Index Warrants to Book-Entry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 SECTION 1.2 Form, Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 SECTION 1.3 Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.4 Registration of Transfers and Exchanges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 SECTION 1.5 Mutilated or Missing Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 SECTION 1.6 Registered Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 SECTION 1.7 Global Warrant Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 ARTICLE II DURATION AND EXERCISE OF INDEX WARRANTS . . . . . . . . . . . . . . . . 9 SECTION 2.1 Duration of Index Warrants; Minimum and Maximum Exercise Amounts; Notice of Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 SECTION 2.2 Exercise and Delivery of Index Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 SECTION 2.3 Automatic Exercise of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 SECTION 2.4 Limitation of Number of Exercisable Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 2.5 Discontinuance or Modification of the Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 SECTION 2.6 Covenant of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.7 Return of the Global Warrant Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.8 Return of Moneys Held Unclaimed for Two Years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 SECTION 2.9 Designation of Agent for Receipt of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 SECTION 2.10 Extraordinary Events and Market Disruption Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
- -------------------- 1/ The Table of Contents is not a part of the Index Warrant Agreement - i - 3
Page ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.1 Holders of Index Warrants May Enforce Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 SECTION 3.2 Consolidation, Merger or Other Disposition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 ARTICLE IV CANCELLATION OF INDEX WARRANTS . . . . . . . . . . . . . . . . . . 25 SECTION 4.1 Cancellation of Index Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 SECTION 4.2 Treatment of Warrantholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 4.3 Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE V CONCERNING THE INDEX WARRANT AGENT . . . . . . . . . . . . . . . . . 26 SECTION 5.1 Index Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 SECTION 5.2 Conditions of Index Warrant Agent's Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 SECTION 5.3 Compliance With Applicable Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 SECTION 5.4 Resignation and Appointment of Successor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 ARTICLE VI MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 6.1 Modification, Supplementation or Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 6.2 Notices and Demands to the Company and Index Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 SECTION 6.3 Addresses for Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.4 Notices to Warrantholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.5 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.6 Obtaining of Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.7 Persons Having Rights Under the Index Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 SECTION 6.8 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 6.9 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 SECTION 6.10 Inspection of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
- ii - 4 Page EXHIBIT A - Form of Warrant Certificate EXHIBIT A-1 - Form of Exercise Notice from Warrantholder EXHIBIT B - Form of Global Warrant Certificate EXHIBIT B-1 - Form of Exercise Notice from Depository Participant EXHIBIT C-1 - Form of Confirmation of Exercise for Warrant Certificate EXHIBIT C-2 - Form of Confirmation of Exercise for Global Warrant Certificate EXHIBIT D-1 - Form of Notice of Rejection for Warrant Certificate EXHIBIT D-2 - Form of Notice of Rejection for Global Warrant Certificate EXHIBIT E - Form of Notice of Rejection Relating to Limit Option
- iii - 5 INDEX WARRANT AGREEMENT THIS AGREEMENT, dated as of , among LEHMAN BROTHERS HOLDINGS INC., a corporation duly incorporated and existing under the laws of the State of Delaware (the "Company"), Citibank, N.A., a banking association duly incorporated and existing under the laws of the State of New York, as Index Warrant Agent (the "Index Warrant Agent") and Lehman Brothers Inc., a corporation duly incorporated and existing under the laws of the State of Delaware (the "Calculation Agent"). An Index of defined terms is attached hereto as Annex 1. W I T N E S S E T H T H A T : WHEREAS, the Company proposes to sell index warrants (the "Index Warrants" or, individually, an "Index Warrant") representing the right to receive from the Company an amount in U.S. dollars to be determined by reference to increases in the Index (the "Index"); and WHEREAS, the Company wishes the Index Warrant Agent to act on behalf of the Company in connection with the issuance, transfer and exercise of the Index Warrants, and wishes to set forth herein, among other things, the provisions of the Index Warrants and the terms and conditions under which they may be issued, transferred, exercised and cancelled; NOW, THEREFORE, in consideration of the premises and of the mutual agreements herein contained, the parties hereto agree as follows: ARTICLE I ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION OF INDEX WARRANTS SECTION 1.1 Issuance of Index Warrants; Conversion of Index Warrants to Book-Entry. (a) The Index Warrants will be originally issued as certificates in definitive form (each a "Warrant Certificate"). Each Index Warrant shall represent the right, subject to the provisions contained herein, to receive the Cash Settlement Value (as defined in Section 2.2(d)), or, under certain circumstances, the Alternative Settlement Amount (as defined in Section 2.3) of such Index Warrant. Such Cash Settlement Value or Alternative Settlement Amount will be payable only in U.S. dollars. In no event shall any beneficial owner of book-entry Index Warrants or the registered owner of certificated Index Warrants (each a "Warrantholder") be entitled to receive any interest on the Cash Settlement Value or Alternative Settlement Amount, and the Index Warrants will not entitle the Warrantholders to any of the rights of the holder of any stock 6 2 underlying the Index or any Successor Index (the "Underlying Stock") or any other securities. An Index Warrant will not require or entitle the holder thereof to sell, deliver, purchase or take delivery of any currency, security or other instrument underlying such Index Warrant to or from the Company, nor will the Company be under any obligation to, nor will it, purchase or take delivery, or sell or deliver, any currency, security or other instrument underlying such Warrant to or from the Warrantholders. (b) The Index Warrants will constitute direct, unconditional and unsecured contractual obligations of the Company and will rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. (c) Forty-five calendar days after the closing of the offering, each registered holder of a Warrant Certificate will have the option (the "Conversion Option") to convert the form in which such holder holds his Index Warrants from definitive form to book-entry form within a forty-five calendar day period (the "Conversion Option Period"). To utilize the Conversion Option such Warrantholder must deliver or arrange to deliver his Warrant Certificates to a Participant (as defined in Section 1.7(c)) entitled to execute, clear and settle transactions through the Depository (as defined in Section 1.7(c)) and through which such Warrantholder's beneficial interest after electing the Conversion Option will be maintained, who will then deposit the Index Warrants with the Depository or its nominee. Ownership of the Index Warrants surrendered under the Conversion Option will be represented by a single certificate (the "Global Warrant Certificate"). After the last day of the Conversion Option Period, the Depository will not be required to accept delivery of Index Warrants represented by Warrant Certificates ("Certificated Warrants") for exchange for Index Warrants in book-entry form ("Book-Entry Warrants") but may permit Warrant Certificates to be so exchanged on a case-by-case basis. It is anticipated that after the Conversion Option Period, Warrant Certificates delivered to the Depository in proper form for deposit will be accepted by the Depository for exchange for Book-Entry Warrants, generally within three to four New York Business Days after delivery to the Depository. However, there can be no assurance that such Warrant Certificates will be accepted for exchange. Further, there can be no assurance, with respect to Warrant Certificates accepted for exchange, that exchange will occur within that time period. Certificated Warrants surrendered at any time for exchange for Book-Entry Warrants may not be exercised or delivered for settlement of transfer until such exchange has been effected. If the Depository is at any time unwilling or unable to continue as securities depository for the Index Warrants and a successor depository is not appointed by the Company within 90 days, the Company will reissue Warrant Certificates in exchange for the Global Warrant Certificate. In addition, the Company may at any time and in its sole discretion 7 3 determine not to have the Index Warrants available in book-entry form and, in such event, will issue Warrant Certificates in exchange for the Global Warrant Certificate. In any such instance, and in accordance with the provisions of this Agreement, each Warrantholder will be entitled to have a number of Index Warrants equivalent to such Warrantholder's beneficial interest in the Global Warrant Certificate registered in the name of the Warrantholder and will be entitled to physical delivery of such Index Warrants in definitive form by a Participant. The provisions of Section 1.7 shall apply only if and when the Conversion Option is utilized and a Global Warrant Certificate is issued hereunder. SECTION 1.2 Form, Execution and Delivery of Warrant Certificates. (a) Certificated Warrants, whenever issued, shall be represented by Warrant Certificates 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 Index Warrants. The Warrant Certificates 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 Index Warrants may be listed, or of any securities depository, or to conform to usage. Warrant Certificates shall be signed on behalf of the Company by its chairman, its president or one of its vice presidents and under its corporate seal reproduced thereon and attested by its secretary or an assistant secretary. The signature of any of such officers may be either manual or facsimile. Typographical and other minor errors or defects in any such signature shall not affect the validity or enforceability of any Warrant Certificate that has been duly countersigned and delivered by the Index Warrant Agent. (b) In case any officer of the Company who shall have signed a Warrant Certificate, either manually or by facsimile signature, shall cease to be such officer before such Warrant Certificate shall have been countersigned and delivered by the Index Warrant Agent to the Company or delivered by the Company, such Warrant Certificate nevertheless may be countersigned and delivered as though the person who signed such Warrant Certificate had not ceased to be such officer of the Company; and the Warrant Certificate may be signed on behalf of the Company by any person who, at the actual date of the execution of such Warrant Certificate, shall be a proper officer of the Company to sign such Warrant Certificate, although at the date of the execution of this Agreement any such person was not such an officer. 8 4 SECTION 1.3 Warrant Certificates. Each Warrant Certificate, when signed on behalf of the Company in accordance with Section 1.2, shall be delivered to the Index Warrant Agent, which shall manually countersign and deliver the same to or upon the order of the Company. Each Warrant Certificate shall be dated the date of its countersignature. A Warrant Certificate shall not be valid for any purpose, and no Index Warrant evidenced thereby shall be exercisable, unless and until such Warrant Certificate has been countersigned by the manual signature of the Index Warrant Agent. Such countersignature by the Index Warrant Agent on any Warrant Certificate signed by the Company in accordance with Section 1.2 shall be conclusive evidence that the Warrant Certificate so countersigned has been duly issued hereunder. SECTION 1.4 Registration of Transfers and Exchanges. (a) Except as otherwise provided herein or in the Warrant Certificate, the Index Warrant Agent shall from time to time register ownership and transfers of any outstanding Warrant Certificates upon the records to be maintained by it for that purpose (the "Index Warrant Register") at the Index Warrant Agent's Office (as defined herein), subject to such reasonable regulations as the Company or the Index Warrant Agent may prescribe, upon surrender thereof, duly endorsed, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Index Warrant Agent and the Company duly executed by the registered holder(s) 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 located, or with a correspondent office, in New York City or by a broker or dealer which is a member of a national securities exchange, or in any other manner acceptable to the Index Warrant Agent. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s) and the surrendered Warrant Certificate shall be cancelled by the Index Warrant Agent. (b) At the option of a Warrantholder, Warrant Certificates may be exchanged for other Warrant Certificates, representing a like number of unexercised Index Warrants, upon surrender to the Index Warrant Agent of the Warrant Certificates to be exchanged at its offices maintained for such purposes (the location of which shall be provided to the Company), (the "Index Warrant Agent's Office"), Attention: Corporate Trust Department, or at the office of any successor Index Warrant Agent (as provided for in Section 5.4). Upon surrender of any Index Warrant Certificate for exchange, the Index Warrant Agent shall cancel such Warrant Certificate, and the Company shall execute, and the Index Warrant Agent shall countersign and deliver, in accordance with Section 1.2 and 1.3, one or more new Warrant Certificates of like tenor and representing a like number of unexercised Index Warrants. 9 5 (c) Warrant Certificates issued upon transfer or exchange pursuant to Section 1.4(a) or (b) shall be valid obligations of the Company, evidencing the same obligations of the Company as the Warrant Certificates surrendered for transfer or exchange, and entitled to the same benefits under this Agreement as were such Warrant Certificates prior to such surrender. (d) Except as provided in Section 1.5, no service charge shall be made for any registration of transfer or exchange of 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 Index Warrant Certificates, other than exchanges pursuant to this Section 1.4 not involving any transfer. (e) In the event that upon any exercise of Index Warrants evidenced by a Warrant Certificate the number of Index Warrants exercised shall be less than the total number of Index Warrants evidenced by such Warrant Certificate, there shall be issued to the holder thereof or such holder's assignee a new Warrant Certificate evidencing the number of Index Warrants not exercised. SECTION 1.5 Mutilated or Missing Warrant Certificates. (a) If any Warrant Certificate is mutilated, lost, stolen or destroyed, the Company may in its discretion execute, and the Index Warrant Agent may countersign and deliver, in exchange and substitution for and upon cancellation of the mutilated Warrant Certificate, or in lieu of the Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor and representing an equivalent number of Index 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 Index Warrant Agent of such loss, theft or destruction of such Warrant Certificate and security or indemnity, if requested, also satisfactory to them. Applicants for such substitute Warrant Certificates shall also comply with such other reasonable regulations and pay such other reasonable charges as the Company or the Index Warrant Agent may prescribe. (b) In case such mutilated, lost, stolen or destroyed Index Warrant Certificate has been or is about to be exercised, or deemed to be exercised, the Company in its absolute discretion may, instead of issuing a new Warrant Certificate, direct the Index Warrant Agent to treat the same as if it had received irrevocable notice of exercise in proper form in respect thereof, as provided herein, or as being subject to automatic exercise, as the case may be. (c) Each new Warrant Certificate issued pursuant to this Section 1.5 in lieu of any lost, stolen or destroyed Warrant Certificate shall be an original, additional contractual 10 6 obligation of the Company, whether or not, in the case of any lost, stolen or destroyed Index Warrant Certificate, such Warrant Certificate shall at any time be enforceable by anyone, and shall be entitled to the same benefits under this Agreement as the Warrant Certificate that was lost, stolen or destroyed. (d) Upon the issuance of any new Warrant Certificate in accordance with this Section 1.5, 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 Index Warrant Agent) connected therewith. (e) The provisions of this Section 1.5 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 Warrant Certificates. (f) All Warrant Certificates surrendered for exercise, registration of transfer or exchange shall, if surrendered to any person other than the Index Warrant Agent, be delivered to the Index Warrant Agent and shall be promptly cancelled by it. The Company may at any time deliver to the Index Warrant Agent for cancellation any Warrant Certificates previously countersigned and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Warrant Certificates so delivered shall be promptly cancelled by the Index Warrant Agent. No Warrant Certificates shall be countersigned in lieu of or in exchange for any Warrant Certificate cancelled as provided in this Section 1.5, except as expressly permitted by this Agreement. All cancelled Warrant Certificates held by the Index Warrant Agent shall be destroyed unless otherwise directed by the Company. SECTION 1.6 Registered Holders. Prior to due presentment for registration of transfer, the Company, the Index Warrant Agent, and any agent of the Company or the Index Warrant Agent, may deem and treat the person in whose name a Warrant Certificate shall be registered in the Index Warrant Register (a "Registered Holder") as the absolute owner of the Index Warrants evidenced thereby (notwithstanding any notation of ownership or other writing thereon) for any purpose whatsoever, and as the person entitled to exercise the rights represented by the Index Warrants evidenced thereby, and neither the Company nor the Index Warrant Agent, nor any agent of the Company or the Index Warrant Agent, shall be affected by any notice to the contrary. This Section 1.6 shall be without prejudice to the rights of Warrantholders as described elsewhere herein. SECTION 1.7 Global Warrant Certificate. (a) Any Global Warrant Certificate issued in accordance with this Section 1.7 shall be substantially in the form set forth in Exhibit B hereto, with such appropriate insertions, omissions, substitutions and other variations as are required or permitted 11 7 by this Agreement, and may represent any number of whole Index Warrants. The 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 Index Warrants may be listed or of any Depository referred to herein, or to conform to usage. The Global Index Warrant Certificate shall be signed on behalf of the Company upon the same conditions, in substantially the same manner and with the same effect as the Warrant Certificates. (b) The Index Warrant Agent is authorized, from time to time during the Conversion Option Period, upon receipt of a Global Warrant Certificate from the Company, duly executed on behalf of 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 Index Warrant Agent and shall not be valid for any purpose unless so countersigned. The Index Warrant Agent shall deliver the Global Index Warrant Certificate to or upon the order of the Company against receipt of an appropriate amount of Certificated Warrants (such Certificated Warrants shall be destroyed or otherwise disposed of in accordance with instructions provided by the Company). One or more Global Warrant Certificates may be executed by the Company and delivered to the Index 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 Index 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 Index Warrants. To effect such an exchange the Company shall deliver to the Index Warrant Agent a new Global Warrant Certificate duly executed on behalf of the Company as provided in Section 1.3. The Index 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 Index 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) 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 12 8 any successor securities depository selected by the Company). The Index Warrant holdings of 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 Index Warrant Agent, the Company or the Depository. The Global Warrant Certificate will be held by the Depository or its agent. "Participants" include securities brokers and dealers, banks and trust companies, clearing organizations and certain other organizations which are participants in the Depository system and, for purposes of this Agreement, shall also mean participants in the book-entry system of any successor Depository. Access to the Depository's system is also available to others such as banks, securities dealers and trust companies ("Indirect Participants") that clear or maintain a custodial relationship with a Participant, either directly or indirectly. The Global Warrant holdings of Warrantholders who are customers of Indirect Participants will be reflected on the books and records of Participants in the name of the respective Indirect Participants. The Global Warrant Certificate will be held by the Depository or its agent. Neither the Company nor the Warrant Agent will have any responsibility or liability for any aspect of the records relating to or payments made on account of beneficial ownership interests of a Global Warrant Certificate or for maintaining, supervising or reviewing any records relating to such beneficial ownership interest. The Company may from time to time select a new entity to act as Depository with respect to the Index Warrants and, if such selection is made, the Company shall promptly give the Index Warrant Agent notice to such effect identifying the new Depository, and the Global Warrant Certificate shall be delivered to the Index 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 notice of exercise and the related notices to be delivered in connection with an exercise to reflect the selection of the new Depository. (d) Except as otherwise provided herein or in the Global Warrant Certificate, the Index 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 Index 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 to the Warrant Agent's Office, or at the office of any successor Warrant Agent (as provided in Section 5.4), duly endorsed, or accompanied by a written instrument or instruments of transfer in form satisfactory to the Index Warrant Agent and the Company, duly 13 9 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 officer the New York City or by a member of a United States national securities exchange, or in any other manner acceptable to the Index Warrant Agent. Upon any such registration of transfer, a new Global Warrant Certificate of like tenor and representing a like number of unexercised Index Warrants shall be issued to the transferee and the surrendered Global Warrant Certificate shall be cancelled by the Index Warrant Agent. ARTICLE II DURATION AND EXERCISE OF INDEX WARRANTS SECTION 2.1 Duration of Index Warrants; Minimum and Maximum Exercise Amounts; Notice of Exercise. (a) Subject to the limitations described in this Article II, each Index Warrant may be irrevocably exercised in whole but not in part on any New York Business Day from the date of issuance until 3:00 P.M., New York City time on the New York Business Day immediately preceding the earliest of (i) (the "Expiration Date"), (ii) the Delisting Date or (iii) the ancellation Date. There is no exercise price payable by any Warrantholder in connection with the exercise of an Index Warrant. Each Index Warrant may be exercised by (a) transfer of the related Index Warrants on the records of the Depository free to the Index Warrant Agent Participant Account (Account No. ), or such other account of the Index Warrant Agent at the Depository as the Index Warrant Agent shall specify (the "Index Warrant Account"), in the case of Book-Entry Warrants, or surrender of the Warrant Certificate or Certificates to the Index Warrant Agent at the Index Warrant Agent's Office, in the case of Certificated Warrants and (b) delivery of written notice (an "Exercise Notice") to the Index Warrant Agent executed by the Participant acting on behalf of the beneficial owner of such Index Warrant, in the case of Book-Entry Warrants, or from the Registered Holder of such Index Warrants, in the case of Certificated Warrants; provided, however, that Exercise Notices are subject to rejection by the Index Warrant Agent as provided herein. (b) The Exercise Notice, which shall be irrevocable, shall be in substantially the form set forth in Exhibit A-1 hereto in the case of Certificated Warrants, and in Exhibit B-1 hereto in the case of Book-Entry Warrants, and shall be in writing, duly completed and executed, and delivered to the Index Warrant Agent (which shall include facsimile transmissions, followed promptly by an executed original, but the date and time of receipt of such transmission shall be the effective date and time of such notice) at its address as set forth in such Exercise Notice or at such other address as the Index Warrant Agent may specify from time to time. An irrevocable Exercise Notice may be conditioned by the Warrantholder pursuant to the Limit Option as 14 10 set forth in Section 2.2(f), but shall otherwise be unconditional. (c) As used herein, "New York Business Day" means any day other than a Saturday or Sunday or a day on which either the New York Stock Exchange or the American Stock Exchange (the "AMEX") is not open for securities trading or commercial banks in New York City are authorized or required by law or executive order to remain closed; "London Business Day" means any day other than (i) a Saturday or Sunday or a day on which banking institutions generally in London are authorized or required by law or executive order to remain closed or (ii) a day on which the London Stock Exchange or the London International Financial Futures and Options Exchange ("LIFFE") is not open for business. Except as provided in Section 2.2(b), the Index Warrant Agent and the Company shall be entitled to rely conclusively on any Exercise Notice received by them with no duty of inquiry by either of them. SECTION 2.2 Exercise and Delivery of Index Warrants. (a) Except in the case of automatic exercise as provided in Section 2.3, and subject to the Limit Option provided in Section 2.2(f), the exercise date (the "Exercise Date") for an Index Warrant shall be (i) if the Index Warrant Agent receives delivery of such Index Warrant and an Exercise Notice in proper form at or prior to 3:00 P.M., New York City time on a New York Business Day, then such New York Business Day and (ii) otherwise the New York Business Day next succeeding the day on which the Index Warrant Agent receives such Index Warrant and such Exercise Notice. The "Valuation Date" for an Index Warrant will be the first London Business Day following the Exercise Date, subject to postponement upon the occurrence of an Extraordinary Event or a Market Disruption Event pursuant to Section 2.10. (b) Following receipt of the Index Warrants and the Exercise Notice related to such Index Warrants, the Index Warrant Agent shall: (i) promptly (1) in the case of Certificated Warrants, determine whether the Exercise Notice has been duly completed and is in proper form duly executed by the Registered Holder thereof or by the duly appointed legal representative thereof or by a duly authorized attorney and (2) in the case of Book-Entry Warrants, determine whether such Exercise Notice has been duly completed and is in proper form and if the Index Warrant Agent determines that the Exercise Notice has not been duly completed or is not in proper form or, in the case of Certificate Warrants, has not been so executed, the Index Warrant Agent promptly (X) shall reject such Exercise Notice and shall send to the entity that delivered such Exercise Notice a notice of rejection substantially in the form set forth in Exhibit D-1 or Exhibit D-2 hereto, as applicable, and, in the case of Certificated Warrants, shall return to the Registered Holder 15 11 that submitted such Exercise Notice, by first class mail, the Warrant Certificates evidencing such Index Warrants or, in the case of Book-Entry Warrants, shall redeliver such Index Warrants free through the facilities of the Depository to the account from which they were transferred to the Index Warrant Agent and in either case (Y) shall not take the actions required by clauses (ii)-(viii) below with respect to such Exercise Notice or the related Index Warrants; provided, however, that the Index Warrant Agent shall deliver a copy of the Exercise Notice relating to such Index Warrants to the Company, if the Company so requests, as required by Section 2.2(b)(viii) below and the Company may waive any defect in the form of such Exercise Notice; (ii) notify the Company by 5:00 p.m., New York City time, on the Exercise Date for such Index Warrants of (A) the total number of Index Warrants covered by such Exercise Notice, (B) the number of such Index Warrants subject to the Limit Option ("Contingently Tendered Warrants") and (C) the number of such Index Warrants not subject to the Limit Option; (iii) obtain the Spot Index from the Calculation Agent no later than 5:00 p.m., New York City time, on the applicable Valuation Date (or, if such Valuation Date is not a New York Business Day, on the next succeeding New York Business Day); (iv) if any of the Index Warrants covered by such Exercise Notice constitute Contingently Tendered Warrants, the Index Warrant Agent shall, by 5:00 p.m., New York City time, on the applicable Valuation Date (or, if such Valuation Date is not a New York Business Day, on the next succeeding New York Business Day) (A) obtain from the Calculation Agent the Limit Option Reference Index (as defined in Section 2.2(f)(ii); (B) determine in accordance with Section 2.2(f) whether such Contingently Tendered Warrants will be subject to exercise after giving effect to the Limit Option and, if such Warrants will not be subject to exercise, send to the Registered Holder, in the case of Certificated Warrants, or to the Participant that submitted such Exercise Notice, in the case of Book-Entry Warrants, a notice of rejection substantially in the form set forth in Exhibit E hereto with respect to such Index Warrants and return to the Registered Holder that submitted such Exercise Notice, by first class mail, the Warrant Certificates evidencing such Index Warrants, or, in the case of Book-Entry Warrants, redeliver the Warrants free through the facilities of the Depository to the account from which they were transferred to the Index Warrant Agent; and (C) notify the Company as to whether such Contingently Exercised Warrants will be subject to exercise; 16 12 (v) by 5:00 p.m., New York City time, on the second New York Business Day after the applicable Exercise Date (A) determine the sum of (1) the number of such Index Warrants not subject to the Limit Option (i.e., the number of Index Warrants determined pursuant to clause (ii)(C) above) plus (2) the number of such Index Warrants that are Contingently Exercised Index Warrants that will be subject to exercise notwithstanding the Limit Option (i.e., the number of Index Warrants so identified pursuant to clause (iv)(B) above) (all of such Warrants, the "Exercised Warrants") and (B) notify the Company of the total number of Exercised Warrants so determined (if such number is zero, the Warrant Agent shall not take the actions required by clauses (vi), (vii) and (viii) with respect to such Exercise Notice or the related Index Warrants); (vi) obtain the Cash Settlement Value of the Exercised Warrants as of their Valuation Date from the Calculation Agent, which shall be calculated in the manner set forth in Section 2.2(d) by no later than 5:00 p.m., New York City time, on the applicable Valuation Date (or, if such Valuation Date is not a New York Business Day, on the next succeeding New York Business Day); (vii) notify the Company by 5:00 p.m., New York City time, on the Valuation Date (or, if such Valuation Date is not a New York Business Day, on the next succeeding New York Business Day) of the aggregate Cash Settlement Value payable in respect of the exercise of such Exercised Warrants, and send notices of confirmation substantially in the form included in Exhibit C-1 or Exhibit C-2 hereto, as the case may be, to the appropriate Registered Holder or Participant specifying therein the reference number assigned by the Index Warrant Agent to each accepted Exercise Notice; and (viii) promptly deliver a copy of each Exercise Notice to the Company upon request of 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 2.2 or Section 2.3 shall be by telephone (promptly confirmed in writing) or telecopy. Any exercise of the Index Warrants shall be irrevocable, except for the limited circumstances in which an exercise may be treated as contingent pursuant to Section 2.2(f). (c) Except in the case of Index Warrants subject to automatic exercise, provided that the Company has made adequate funds available to the Index Warrant Agent in a timely manner, which shall in no event be later than 3:00 p.m., New York City time, on the fifth New York Business Day following a Valuation Date (or, if the Valuation Date is not a New York Business Day, on the sixth New York Business Day following the Valuation Date) 17 13 (the "Settlement Date"), the Index Warrant Agent will be responsible for making payment available either (i) for Certificated Warrants, to each appropriate Registered Holder in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a U.S. Dollar account maintained by such Registered Holder in the United States (at such Registered Holder's election as specified in the applicable Exercise Notice), after 3:00 p.m., New York City time, but prior to the close of business, on such Settlement Date or (ii) for Book-Entry Warrants, to each appropriate Participant in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a U.S. Dollar account maintained by such Participant in the United States (at the Participant's election as specified in the Exercise Notice), after 3:00 p.m., New York City time, but prior to the close of business, on such Settlement Date. (d) The "Cash Settlement Value" of an exercised Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars equal to the product (rounded down to the nearest cent) of (A) times (B) the amount, if any, by which the Spot Index for the applicable Valuation Date of such Warrant exceeds the Strike Index times (C) the fixed U.S. Dollar/ exchange rate of U.S. = . If the Strike Index for such valuation date is equal to or exceeds the Spot Index, the Cash Settlement Value will be zero. The "Official Index Period" is the period during which prices in all country sectors of the Stock Exchange Automated Quotation system and the Stock Exchange Automated Quotations International system are firm (normally between 9:45 A.M. and 3:30 P.M., London time). The "Strike Index" is . Subject to the provisions of Section 2.5, the "Spot Index" for any date means the closing value, expressed in , on such date of the Index compiled and published by the London Stock Exchange. References in this Agreement to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. (e) In the event a Global Warrant Certificate is issued, the Warrant Agent shall cause its records, which may be kept electronically, to be marked to reflect the reduction in the number of Index Warrants represented by the Global Warrant Certificate by the number of Index Warrants that were delivered to the Index Warrant Account and for which payment has been made as provided in Section 2.2(c) promptly after such delivery and payment. Absent manifest error, the Index Warrant Agent's records shall be conclusive evidence of such matters. 18 14 (f) Except in the case of an automatic exercise (as described in Section 2.3 below) or cancellation or with respect to payments of any Alternative Settlement Amount, the related Exercise Notice may specify that such exercise be subject to the condition that the Spot Index used to determine the Cash Settlement Value of such Index Warrants not be 50 or more points lower than the most recent closing value of the Index prior to the exercise. The option of a Warrantholder to condition an exercise of Index Warrants as provided in this Section 2.2(f) is herein referred to as the "Limit Option". If a Warrantholder elects the Limit Option in connection with any exercise of Index Warrants, the following provisions shall apply: (i) To be valid, such election must be specified in the related Exercise Notice. Each of the Index Warrant Agent and the Company shall be entitled to rely conclusively on such Exercise Notice, as received by the Index Warrant Agent, in determining whether such election has been validly made. In connection with any exercise of 500 or more Index Warrants, a Warrantholder may elect to subject only a portion of such Index Warrants to the Limit Option; provided that the number of such Index Warrants subject to the Limit Option and the number of such Index Warrants not subject to the Limit Option shall in each case not be less than 500. Registered Holders and Participants shall be required to certify that the number of Index Warrants exercised on behalf of any Warrantholder pursuant to the related Exercise Notice that are subject to the Limit Option is an amount that is not less than 500. (ii) The Limit Option Reference Index, shall be obtained by the Index Warrant Agent from the Calculation Agent, and the Calculation Agent's determination of the Limit Option Reference Index shall be conclusive and binding for all purposes relating to such exercise. The "Limit Option Reference Index" with respect to a Contingently Tendered Warrant will be the closing value of the Index on the Exercise Date of such Index Warrant; provided that if such Exercise Date is not a London Business Day, the applicable closing value shall be the closing value of the Index on the immediately preceding London Business Day. (iii) In the event that the Spot Index on the Valuation Date for such Index Warrants is 50 or more points lower than the Limit Option Reference Index for such Warrants, such Index Warrants (A) shall not be subject to exercise and shall be treated for all purposes of this Agreement and the Warrant Certificates and Global Warrant Certificate as if the related Exercise Notice had never been received by the Warrant Agent, and (B) shall not constitute "Exercised Warrants" for purposes of Section 2.2(b). If such Spot Index is not 50 or more points lower than such Limit Option Reference Index, such Index Warrants shall be subject to exercise as provided in this Section 2.2 and shall be deemed 19 15 to be "Exercised Warrants" for such purposes. The Index Warrant Agent's determination shall be conclusive and binding for all purposes relating to such Index Warrants. (iv) Once elected by a Warrantholder in connection with an exercise of Index Warrants, the Limit Option will continue to apply, on the basis of the Limit Option Reference Index as initially determined for such Index Warrants, even if the Valuation Date for such Index Warrants is postponed, except when such Valuation Date is postponed until the Cancellation Date, as described pursuant to Section 2.10. Pursuant to the Limit Option, such Warrants will either (i) be exercised on a delayed basis if the applicable Spot Index is not less than the Limit Option Reference Index by 50 or more points, or (ii) be excluded from being exercised if, on any applicable postponed Valuation Date, the applicable Spot Index is less than the Limit Option Reference Index by 50 or more points. (g) The Company has appointed Lehman Brothers Inc., and Lehman Brothers Inc. accepts such appointment, to be the Company's Calculation Agent to make certain calculations, as provided herein. The Calculation Agent shall act as an independent expert and not as an agent of the Company, and, unless otherwise provided by this Agreement, its calculations under this Agreement shall, absent manifest error, be final and binding on the Company, the Index Warrant Agent, the Warrantholders, the Record Holders and any Participant. Any such calculations will be made available to a Warrantholder for inspection at the Index Warrant Agent's Office. 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 Index Warrants are no longer outstanding or until moneys for the payment of all outstanding Index Warrants, if any, shall have been paid to the Index Warrant Agent, whichever occurs earlier. 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 Index Warrant Agent, as provided in Section 5.4, except that a successor Calculation Agent need not be a banking institution with offices south of Chambers Street in the Borough of Manhattan, The City of New York, and may only be appointed if such successor has been nominated by the Company. SECTION 2.3 Automatic Exercise of Warrants. All Warrants for which the Warrant Agent has not received an Exercise Notice in proper form by 3:00 p.m., New York City time, on the New York Business Day preceding the earliest of (i) the Expiration Date, (ii) Delisting Date or (iii) cancellation as a result of an Extraordinary Event pursuant to Section 2.10 (the "Cancellation Date") or for which the Warrant Agent has received an Exercise Notice in proper form but with respect to which 20 16 timely delivery of the relevant Index Warrants has not been made, together with any Index Warrants the Valuation Date for which has at such time been postponed pursuant to Section 2.10 will be deemed automatically exercised on the Expiration Date, Delisting Date or the Cancellation Date, as the case may be, without any requirement of delivery of an Exercise Notice or Index Warrants to the Index Warrant Agent. Accordingly, the Exercise Date for such Index Warrants shall be the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be, or, if such date is not a New York Business Day, the next succeeding New York Business Day and the Valuation Date for such Index Warrants shall be the first London Business Day following the Exercise Date for such Index Warrants. "Delisting Date" shall mean the effective date on which the Index Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Securities and Exchange Commission thereunder) on, the AMEX (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization; provided, however, that if the Company first receives notice of the delisting or suspension of the Index Warrants on the same day on which such Index Warrants are delisted or suspended, such day will be deemed the Delisting Date for purposes of this Agreement. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. The Index Warrant Agent shall by 5:00 p.m., New York City time, on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be, notify the Company of the number of Index Warrants to be automatically exercised on such day. The Warrant Agent shall (i) obtain from the Calculation Agent on the applicable Valuation Date the Cash Settlement Value or the Alternative Settlement Amount on such Valuation Date of the Index Warrants to be automatically exercised, (ii) by 3:00 p.m., New York City time, on the New York Business Day next succeeding such Valuation Date, notify the Company of the Cash Settlement Value or the Alternative Settlement Amount payable in respect of such exercised Index Warrants and (iii) advise the Company of such other matters relating to the exercised Index Warrants as the Company shall reasonably request. With respect to all Index Warrants, other than Book-Entry Warrants, subject to automatic exercise, the Company shall make available to the Index Warrant Agent, not later than 3:00 p.m., New York City time, on the fifth New York Business Day following the Valuation Date (or, if the Valuation Date is not a New York Business Day, on the sixth New York Business Day following the Valuation Date) for automatically exercised Index Warrants (in any such case, the "Automatic Settlement Date"), funds in an amount equal to, and for the payment of, the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of such Index Warrants. Subject to such funds 21 17 having been made available as provided in the preceding sentence, the Index Warrant Agent will be responsible for making its payment available to the appropriate Registered Holder in the form of a cashier's check or an official bank check, or (in the case of payments of $100,000 or more) by wire transfer to a U.S. Dollar account maintained by such Registered Holder in the United States (at such Registered Holder's election), after 3:00 p.m., New York City time, but prior to the close of business, on the Automatic Settlement Date, against receipt by the Index Warrant Agent at the Index Warrant Agent's Office from such Registered Holder of its Warrant Certificates. In the case of Book-Entry Warrants subject to automatic exercise, the Company shall make available to the Warrant Agent, not later than 3:00 p.m., New York City time, on the Automatic Settlement Date, funds in an amount equal to, and for the payment of, the aggregate Cash Settlement Value of such Index Warrants. Subject to such funds having been made available as provided in the preceding sentence, the Index Warrant Agent will be responsible for making funds available to the Depository, 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 Date. All Index Warrants shall be deemed to be cancelled on and as of the Automatic Settlement Date and each Warrantholder's rights under the Index Warrants and hereunder shall thereupon cease, except for the right to receive the Cash Settlement Value or the Alternative Settlement Amount, as applicable. Each Index Warrant will entitle the Warrantholder thereof to receive the Alternative Settlement Amount in lieu of the Cash Settlement Value thereof under the circumstances indicated in Section 2.10 or in the event that such Index Warrants are automatically exercised on the Delisting Date. The "Alternative Settlement Amount" of an Index Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Index Warrants determined as described above; provided that, with respect to a cancellation of the Index Warrants on a Cancellation Date, the Spot Index shall be an amount determined by the Calculation Agent which, subject to approval by the Company (such approval not to be unreasonably withheld), in the reasonable opinion of the Calculation Agent fairly reflects the value of the Underlying Stocks on the Cancellation Date; 22 18 A = the total number of days from but excluding the Valuation Date for such Index Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Index Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Index Warrant; and Z = the lesser of T or I. For purposes of determining "I" in the above formula, in the event that the Calculation Agent and the Company are required, but have not, after good faith consultation with each other and within thirty days following the first day upon which such Alternative Settlement Amount may be calculated in accordance with the above formula, agreed upon a Spot Index which fairly reflects the value of the Underlying Stocks on the Cancellation Date, then the Calculation Agent shall promptly nominate a third party, subject to approval by the Company (such approval not to be unreasonably withheld), to determine such figure and calculate the Alternative Settlement Amount in accordance with the above formula. Such party shall act as an independent expert and not as an agent of the Company or the Calculation Agent, and its calculation and determination of the Alternative Settlement Amount shall, absent manifest error, be final and binding on the Company, the Index Warrant Agent, the Calculation Agent and the Warrantholders. Any such calculations shall be made available to a Warrantholder for inspection at the Index Warrant Agent's Office. Neither the Company nor such third party shall have any responsibility for good faith errors or omissions in calculating the Alternative Settlement Amount. The Company will advise the Index Warrant Agent as soon as practicable of the date of any expected delisting or permanent suspension of trading of the Index Warrants and will immediately inform the Index Warrant Agent after the Company has received notice that such delisting or suspension has occurred, but in no event will notice of such delisting or suspension be given to the Warrant Agent later than 9:30 a.m., New York City time, on the New York Business Day following the date that such delisting or suspension occurs. SECTION 2.4 Limitation of Number of Exercisable Warrants. Not fewer than 500 warrants may be exercised by a Warrantholder at any one time except in the case of automatic exercise or cancellation. All exercises of Index Warrants (other than on the Expiration Date, Delisting Date or the Cancellation Date) shall be subject, at the Company's option, to the limitation that not more than 1,000,000 Index Warrants in total may be exercised on any Exercise Date and not more than 250,000 Warrants may be exercised by or on behalf of any person or 23 19 entity, either individually or in concert with any other person or entity, on any Exercise Date. If any New York Business Day would otherwise, under the terms hereof, be the Exercise Date in respect of more than 1,000,000 Index Warrants, then upon the Company's exercising such option (by giving notice thereof to the Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such Exercise Date), 1,000,000 of such Index Warrants shall be deemed exercised on such Exercise Date (selected by the Index Warrant Agent on a pro rata basis, but if, as a result of such pro rata selection, any Registered Holders would be deemed to have exercised less than 500 Index Warrants, then the Index Warrant Agent shall first select additional Index Warrants of such holder so that no such holder shall be deemed to have exercised less than 500 Index Warrants), and the remainder of such Index Warrants (the "Remaining Warrants") shall be deemed exercised on the New York Business Day following the otherwise applicable Exercise Date (subject to successive applications of this Section 2.4); provided that any Remaining Warrant in respect of which an Exercise Notice was delivered on a given Exercise Date shall be deemed exercised before any other Index Warrants in respect of which an Exercise Notice was delivered on a later Exercise Date. If any individual Warrantholder attempts to exercise more than 250,000 Index Warrants on any Exercise Date, then at the Company's election (as notified to the Index Warrant Agent by giving notice thereof to the Index Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such Exercise Date) 250,000 of such Index Warrants shall be deemed exercised on such Exercise Date and the remainder shall be deemed exercised on the New York Business Day following the otherwise applicable Exercise Date (subject to successive applications of this Section 2.4). The date on which any Index Warrant is deemed exercised under the preceding sentences shall for all purposes of this Agreement be the "Exercise Date" in respect of such Index Warrants. SECTION 2.5 Discontinuance or Modification of the Index. (a) If at any time the London Stock Exchange discontinues or suspends calculation or publication of the Index and a successor index (a "Successor Index"), as determined by the Calculation Agent, is calculated and published by any Third Party, then, from and after such time, the Calculation Agent shall, at the close of business in London, England on each date a Cash Settlement Value or Alternative Settlement Amount is to be calculated, make such calculations with reference to the closing value of the Successor Index so calculated and published by the Third Party. In selecting a Successor Index, the Calculation Agent shall consider, among other things, whether the index is continuously maintained and disseminated, whether the stocks included represent a cross-section of European industries, the sufficiency of liquidity and market capitalization of such stocks, the availability of accurate price information for such stocks, whether the index is widely accepted in the market and is used as the basis for options or futures contracts and the 24 20 competence and reliability of the Third Party that publishes such Successor Index. The "Third Party" shall mean a third party (which may be the London Stock Exchange) proposed by the Calculation Agent with due regard for such party's competence and reliability and approved by the Company, which approval shall not be unreasonably withheld. (b) If at any time the method of calculating the Index or a Successor Index, or the value thereof, is changed in a material respect, or if the Index or a Successor Index is in any other way modified, so that the Index or such Successor Index does not, in the opinion of the Calculation Agent, fairly represent the value of the Index or such Successor Index had such changes or modifications not been made, then, from and after such time, the Calculation Agent shall, at the close of business in London, England on each date a Cash Settlement Value or Alternative Settlement Amount is to be calculated, make such adjustments as, in the good faith judgment of the Calculation Agent, with the approval of the Company (which approval shall not be unreasonably withheld), may be necessary in order to arrive at a calculation of a value of a stock average comparable to the Index or such Successor Index, as the case may be, as if such change or modifications had not been made, and calculate the Cash Settlement Value or Alternative Settlement Amount, as applicable, with reference to the Index or such Successor Index, as adjusted. Accordingly, if the method of calculating the Index or a Successor Index is modified so that the value of the Index or such Successor index is a fraction of what it would have been if it had not been modified (e.g., due to a split in the Index or such Successor Index), then the Calculation Agent shall adjust such stock average in order to arrive at a value of the Index or such Successor Index, as applicable, as if it had not been modified (e.g., as if such split had not occurred). (c) If at any time, the London Stock Exchange or a Third Party discontinues or suspends calculation or publication of the Index or a Successor Index, as the case may be, and a comparable successor thereto, as determined by the Calculation Agent, is not calculated and published, then, from and after such time, the Calculation Agent shall, at the close of business in London, England on each date a Cash Settlement Value or Alternative Settlement Amount is to be calculated, make such calculations as, in the good faith judgment of the Calculation Agent, with the approval of the Company (which approval shall not be unreasonably withheld), may be necessary in order to arrive at a calculation of a value of a stock average comparable to the Index or such Successor Index, as the case may be, as last calculated and published, and calculate the Cash Settlement Value or Alternative Settlement Amount, as applicable, with reference to such comparable stock average. (d) In the event that the Company and the Calculation Agent fail to agree as to any specific adjustments or calculations to be made (as described in paragraphs (b) and (c) 25 21 of this Section 2.5) prior to the opening of business in New York City on the second New York Business Day prior to the date on which any payment is required to be made with respect to the Index Warrants, as to which payment such calculations or adjustments would be relevant, then such calculations or adjustment shall be determined by an independent party selected by the Company with due regard for such party's competence, reliability and creditworthiness, with the approval of the Calculation Agent, which approval shall not be unreasonably withheld. (e) If calculation or publication of the Index or a Successor Index is changed, modified, discontinued or suspended, as provided in this Section 2.5, then the Calculation Agent shall promptly notify the Index Warrant Agent, and the Index Warrant Agent shall in turn promptly notify the Warrantholders, of such change, modification, discontinuance or suspension and of any modification or adjustment to be made with respect to calculation of the Cash Settlement Value or Alternative Settlement Amount, as applicable. (f) Neither the Calculation Agent nor any such independent party selected by the Company will be responsible for good faith errors or omissions in calculating or disseminating information regarding the Index, any Successor Index, adjustments or calculations by the Calculation Agent or such independent party in order to arrive at a calculation of a stock average comparable to the Index or any Successor Index, or the Cash Settlement Value or Alternative Settlement Amount, as applicable. SECTION 2.6 Covenant of the Company. The Company covenants, for the benefit of the Warrantholders, that (i) it will cause the Index Warrants to be listed on the AMEX and (ii) until the Expiration Date, it will not seek the delisting of the Index Warrants from, or permanent suspension of their trading on the AMEX unless prior to such delisting or suspension the Index Warrants shall have been listed, and shall be accepted for trading pursuant to the rules of another Self-Regulatory Organization. SECTION 2.7 Return of the Global Warrant Certificate. At such time as all of the Index Warrants have been exercised, deemed automatically exercised or otherwise cancelled, the Index Warrant Agent shall return the cancelled Global Warrant Certificate to the Company. SECTION 2.8 Return of Moneys Held Unclaimed for Two Years. Any moneys deposited with or paid to the Index Warrant Agent for the payment of the Cash Settlement Value or the Alternative Settlement Amount of any Index Warrants and not applied but remaining unclaimed for two years after the date upon which such Cash Settlement Value or the Alternative Settlement Amount shall have become due and payable, shall be repaid by the Index Warrant Agent to the Company, and the holder of such Index 26 22 Warrants shall thereafter look only to the Company for any payment which such Warrantholder may be entitled to collect and all liability of the Index Warrant Agent with respect to such moneys shall thereupon cease; provided, however, that the Index Warrant Agent, before making any such repayment, may at the expense of the Company notify, in the case of Book-Entry Warrants, the Participants concerned, or, in the case of Certificated Warrants, the Warrantholders concerned, that said moneys have not been so applied and remain unclaimed and that after a date named therein any unclaimed balance of said moneys then remaining will be returned to the Company. SECTION 2.9 Designation of Agent for Receipt of Notice. The Company may from time to time designate in writing to the Index Warrant Agent a designee for receipt of all notices to be given by the Index Warrant Agent pursuant to this Article II and all such notices thereafter shall be given in the manner herein provided by the Index Warrant Agent to such designee. SECTION 2.10 Extraordinary Events and Market Disruption Events. (a) If the Company determines that, on a Valuation Date with respect to any Index Warrant, an Extraordinary Event has occurred and is continuing, then the Cash Settlement Value in respect of an exercise shall be calculated on the basis that the Valuation Date shall be the next London Business Day on which there is no Extraordinary Event or Market Disruption Event; provided, that, if the Valuation Date has not occurred on or prior to the Expiration Date, the Delisting Date or the fifteenth London Business Day following the Exercise Date with respect to such Index Warrant, the Warrantholder will receive the Alternative Settlement Amount in lieu of the Cash Settlement Value which shall be calculated as if the Index Warrant had been cancelled on the Expiration Date, the Delisting Date or such fifteenth London Business Day, as the case may be. The Company shall promptly give notice to Warrantholders, by publication in a United States newspaper with a national circulation (currently expected to be The Wall Street Journal), if an Extraordinary Event shall have occurred. "Extraordinary Event" means any of the following events: (i) a material limitation, suspension or absence of trading on one or more related exchanges which affects 50 per cent of more of the Underlying Stocks which then comprise the Index or a Successor Index or a general limitation on prices for such stocks on such exchange or exchanges; (ii) the enactment, publication, decree or other promulgation of any statute, regulation, rule or order of any court or other governmental authority which would make it unlawful or impracticable for the Company to perform any 27 23 of its obligations under this Agreement or the Index Warrants; or (iii) any outbreak or escalation of hostilities or other national or international calamity or crisis (including, without limitation, natural calamities which in the opinion of the Company may materially and adversely affect the economy of any European country or the trading of securities generally on the London Stock Exchange) which, in the opinion of the Company, has or will have a material adverse effect on the ability of the Company to perform its obligations under the Index Warrants or to modify the hedge of its position with respect to the Index or may materially and adversely affect the economies of the various European countries represented in the Index or the trading of securities generally on the related exchanges. For the purposes of determining whether an Extraordinary Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute an Extraordinary Event if it results from an announced change in the regular business hours of the London Stock Exchange, and (2) an "absence of trading" on the London Stock Exchange will not include any time when the London Stock Exchange itself is closed for trading under ordinary circumstances. If the Company determines that an Extraordinary Event has occurred and is continuing, and if the Extraordinary Event is expected by the Company to continue, the Company may immediately cancel the Index Warrants by notifying the Index Warrant Agent of such cancellation (the date such notice is given being the "Cancellation Date"), and each Warrantholder's rights under the Index Warrants and this Agreement shall thereupon cease; provided, that each Index Warrant shall be exercised (even if such Index Warrant would not otherwise be exercisable on such date because of the Limit Option) on the basis that the Exercise Date for such Index Warrant shall be the Cancellation Date and the holder of each such Index Warrant will receive, in lieu of the Cash Settlement Value of such Index Warrant, the Alternative Settlement Amount thereof. (b) If the Company determines that, on a Valuation Date with respect to any Index Warrant, a Market Disruption Event has occurred and is continuing, then the Cash Settlement Value in respect of an exercise shall be calculated on the basis that the Valuation Date shall be the next London Business Day on which there is no Market Disruption Event or Extraordinary Event; provided, that, if the Valuation Date has not occurred on or prior to the Expiration Date, the Delisting Date or the fifteenth London Business Day following the Exercise Date with respect to such Index Warrant, the Warrantholder will receive the Alternative Settlement Amount in lieu of the Cash Settlement Value which shall be calculated as if the Index Warrants had been cancelled on the Expiration Date, the Delisting Date or such 28 24 fifteenth London Business Day, as the case may be. The Company shall promptly give notice to Warrantholders, by publication in a United States newspaper with a national circulation (currently expected to be The Wall Street Journal), if a Market Disruption Event shall have occurred. "Market Disruption Event" means either of the following events: (i) a suspension or material limitation of trading on one or more related exchanges which affects 25 per cent or more of the securities from time to time underlying the Index or a Successor Index or a general limitation on prices for such securities on such related exchange or exchanges; or (ii) the suspension or material limitation on any major securities market of trading in futures or options contracts related to the Index or a Successor Index. For the purposes of determining whether a Market Disruption Event has occurred: (1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the relevant exchange, (2) a decision to permanently discontinue trading in the relevant contract will not constitute a Market Disruption Event, (3) a suspension in trading in a futures or options contract on the Index by a major securities market by reason of (x) a price change violating limits set by such securities market, (y) an imbalance of orders relating to such contracts or (z) a disparity in bid and ask quotes relating to such contracts will constitute a suspension or material limitation of trading in futures or options contracts related to the Index and (4) an "absence of trading" on a major securities market on which futures or options contracts related to the Index or a Successor Index are traded will not include any time when such securities market itself is closed for trading under ordinary circumstances. ARTICLE III OTHER PROVISIONS RELATING TO RIGHTS OF WARRANTHOLDERS SECTION 3.1 Holders of Index Warrants May Enforce Rights. Notwithstanding any of the provisions of this Agreement, any Warrantholder, without the consent of the Index Warrant Agent, may, in and for his own behalf, enforce and may institute and maintain any suit, action or proceeding against the Company suitable to enforce, or otherwise in respect of, his right to exercise and to receive payment for his Index Warrants provided in this Agreement and the Warrant Certificates or Global Warrant Certificate, as the case may be. 29 25 SECTION 3.2 Consolidation, Merger or Other Disposition. If at any time the Company shall consolidate with or merge into any other corporation or convey, transfer or lease its properties and assets substantially as an entirety to another person, then in any such event the successor or assuming corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named as the Company herein and in the Index Warrants; the Company shall thereupon be relieved of any further obligation hereunder or under the Index Warrants, and, in the event of any such consolidation, merger, conveyance, transfer or lease, the Company as the predecessor corporation may thereupon or at any time thereafter be dissolved, wound up or liquidated. Such successor or assuming corporation shall expressly assume, by an amendment to this Agreement, executed and delivered to the Index Warrant Agent, in form satisfactory to such Index Warrant Agent, the due and punctual payment of any and all amounts payable by the Company pursuant to this Agreement and the performance of every covenant of this Agreement on the part of the Company to be performed or observed. Such successor or assuming corporation thereupon may cause to be signed, and may issue either in its own name or in the name of the Company, a new Warrant Certificate or Global Warrant Certificate representing the Index Warrants not theretofore exercised, in exchange and substitution for the Warrant Certificate or Global Warrant Certificate theretofore issued. Such Warrant Certificate or Global Warrant Certificate shall in all respects have the same legal rank and benefit under this Agreement as the Warrant Certificate or Global Warrant Certificate theretofore issued in accordance with the terms of this Agreement as though such new Warrant Certificate or Global Warrant Certificate had been issued at the date of the execution hereof. In any case of any such consolidation, merger, conveyance, transfer or lease of substantially all of the assets of the Company, such changes in phraseology and form (but not in substance) may be made in the new Warrant Certificates or Global Warrant Certificate as may be appropriate. The Index Warrant Agent may receive a written opinion of legal counsel as conclusive evidence that any such consolidation, merger, conveyance, transfer or lease of substantially all of the assets of the Company complies with the provisions of this Section 3.2. ARTICLE IV CANCELLATION OF INDEX WARRANTS SECTION 4.1 Cancellation of Index Warrants. In the event the Company shall purchase or otherwise acquire Index Warrants, such Index Warrants may, at the option of the Company, (i) in the case of Book-Entry Warrants, be surrendered free through a Depository Participant for credit to the account of the Index Warrant Agent maintained at the Depository, and if so credited, the Index Warrant Agent shall promptly note the 30 26 cancellation of such Index Warrants by notation on the records of the Index Warrant Agent or (ii) in the case of Certificated Warrants, delivered to the Index Warrant Agent, and if so delivered the Index Warrant Agent shall promptly note the cancellation of such Index Warrants on the records of the Index Warrant Agent. Such Index Warrants may also, at the option of the Company, be resold by the Company directly to or through any of its affiliates in lieu of being surrendered to the Depository. No Warrant Certificate or Global Warrant Certificate shall be countersigned in lieu of or in exchange for any Index Warrant which is cancelled as provided herein, except as otherwise expressly permitted by this Agreement. SECTION 4.2 Treatment of Warrantholders. The Company, the Index Warrant Agent and any agent of the Company or the Index Warrant Agent may deem and treat the person in whose name a Global Warrant Certificate shall be registered in the records of the Index Warrant Agent as the holder of all right, title and interest in such Global Warrant Certificate (notwithstanding any notation of ownership or other writing thereon) for any purpose and as the person entitled to exercise the rights represented by the Index Warrants evidenced thereby, and neither the Company nor the Index Warrant Agent, nor any agent of the Company or the Index Warrant Agent shall be affected by any notice to the contrary, except that the Index Warrant Agent and the Company shall be entitled to rely on and act pursuant to instructions of Participants as contemplated by Article II of this Agreement. This Section 4.2 shall be without prejudice to the rights of Warrantholders as described elsewhere herein. SECTION 4.3 Payment of Taxes. The Company will pay all documentary stamp taxes attributable to the initial issuance of Index Warrants; provided, however, that the Company shall not be required to pay any tax or other governmental charge which may be payable in respect of any transfer involving any beneficial or record interest in or ownership interest of any Index Warrants. ARTICLE V CONCERNING THE INDEX WARRANT AGENT SECTION 5.1 Index Warrant Agent. The Company hereby appoints Citibank, N.A. as Index Warrant Agent of the Company in respect of the Index Warrants, the Warrant Certificates and the Global Warrant Certificate upon the terms and subject to the conditions set forth herein, in the Warrant Certificate and in the Global Warrant Certificate; and Citibank, N.A. hereby accepts such appointment. The Index Warrant Agent shall have the powers and authority granted to and conferred upon it in the Warrant Certificate and the Global Warrant Certificate and hereby and such further powers and authority acceptable to it 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 the Warrant Certificate 31 27 and the Global Warrant Certificate are subject to and governed by the terms and provisions hereof. SECTION 5.2 Conditions of Index Warrant Agent's Obligations. The Index Warrant Agent accepts its obligations herein set forth upon the terms and conditions hereof and of the Warrant Certificates and the Global Warrant Certificate, including the following, to all of which the Company agrees and to all of which the rights hereunder of the Warrantholders from time to time of the Index Warrants shall be subject: (a) The Company agrees promptly to pay the Index Warrant Agent the compensation to be agreed upon with the Company for all services rendered by the Index Warrant Agent and to reimburse the Index Warrant Agent for its reasonable out-of- pocket expenses (including reasonable attorneys' fees and expenses) incurred by the Index 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 Index Warrant Agent for, and to hold it 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 Index Warrant Agent, arising out of or in connection with its acting as such Index Warrant Agent hereunder or with respect to the Index Warrants, as well as the reasonable costs and expenses of defending against any claim of liability in the premises. (b) In acting under this Agreement and in connection with the Index Warrants, the Index 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 Warrantholders or the registered holder of the Global Warrant Certificate. (c) The Index 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 Index Warrant Agent shall be protected and shall incur no liability for or in respect of any action taken or omitted or thing suffered by it in reliance upon any Warrant Certificate, Global Warrant Certificate, notice, direction, consent, certificate, affidavit, statement or other paper or document reasonably believed by it to be genuine and to have been presented or signed by the proper parties. (e) The Index Warrant Agent, and its officers, directors and employees, may become the Warrantholder of, or 32 28 acquire any interest in, any Index Warrants or other obligations of the Company, with the same rights that it or they would have if it were not the Index 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 Index Warrants or other obligations of the Company as freely as if it were not the Index Warrant Agent hereunder. (f) The Index Warrant Agent shall not be under any liability for interest on any moneys at any time received by it pursuant to any of the provisions of this Agreement, the Warrant Certificates or the Global Warrant Certificate. (g) The Index 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 Index Warrant Agent) or with respect to the validity or execution of any Warrant Certificate or the Global Warrant Certificate (except its countersignature thereof). (h) The recitals contained herein and in the Warrant Certificate and the Global Warrant Certificate (except as to the Index Warrant Agent's countersignature thereon) shall be taken as the statements of the Company and the Index Warrant Agent assumes no responsibility for the correctness of the same. (i) The Index Warrant Agent shall be obligated to perform only such duties as are herein and in the Warrant Certificate and the Global Warrant Certificate specifically set forth and no implied duties or obligations shall be read into this Agreement, the Warrant Certificate or the Global Warrant Certificate against the Index Warrant Agent. The Index 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 Index Warrant Agent shall not be accountable or under any duty or responsibility for the use by the Company of the Warrant Certificate or the Global Warrant Certificate countersigned by the Index Warrant Agent and delivered by it to the Company pursuant to this Agreement or for the application by the Company of any proceeds. The Index 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 herein, in the Warrant Certificate or in the Global Warrant Certificate or in the case of the receipt of any written demand from a holder of an Index Warrant with respect to such default, except as provided in Section 6.2 hereof, including, without limiting the generality of the foregoing, 33 29 any duty or responsibility to initiate or attempt to initiate any proceedings at law or otherwise or to make any demand upon the Company. (j) Unless specifically provided herein or in the Warrant Certificate, the Global Warrant Certificate, any order, certificate, notice, request, direction or other communication from the Company made or given by the Company under any provision of this Agreement shall be sufficient if signed by its Treasurer or any Vice President. SECTION 5.3 Compliance With Applicable Laws. The Index Warrant Agent agrees to comply with all applicable federal and state laws in respect of the services rendered by it under this Agreement, including (but not limited to) the provisions of United States federal income tax laws regarding information reporting and backup withholding. The Index Warrant Agent expressly assumes all liability for its failure to comply with such laws, including (but not limited to) any liability for its failure to comply with any applicable provisions of United States federal income tax laws regarding information reporting and backup withholding applicable to it. SECTION 5.4 Resignation and Appointment of Successor. (a) The Company agrees, for the benefit of the Warrantholders from time to time of the Index Warrants, that there shall at all times be an Index Warrant Agent hereunder until all the Index Warrants are no longer exercisable. (b) The Index 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 Index Warrant Agent and acceptance of such appointment by such successor Index Warrant Agent, as hereinafter provided. The Index 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 Index 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 or an agent's office south of Chambers Street in the Borough of Manhattan, New York City) and the acceptance of such appointment by such successor Index Warrant Agent. In the event a successor Index Warrant Agent has not been appointed and has not accepted its duties within 90 days of the Index Warrant Agent's notice of resignation, the Index Warrant Agent may apply to any court of competent jurisdiction for the designation of a successor Index Warrant Agent. The obligation of the Company under Section 5.2(a) shall continue to the extent set forth 34 30 therein notwithstanding the resignation or removal of the Index Warrant Agent. (c) In case at any time the Index Warrant Agent shall resign, or shall be removed, or shall become incapable of acting, or shall be adjudged 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 all or any substantial part of its property shall be appointed, or if any public officer shall have taken charge or control of the Index Warrant Agent or of its property or affairs, for the purpose of rehabilitation, conservation or liquidation, a successor Index Warrant Agent, qualified as aforesaid, shall be appointed by the Company by an instrument in writing, filed with the successor Index Warrant Agent. Upon the appointment as aforesaid of a successor Index Warrant Agent and acceptance by the latter of such appointment, the Index Warrant Agent so superseded shall cease to be Index Warrant Agent hereunder. (d) Any successor Index 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 Index Warrant Agent, without any further act, deed or conveyance, shall become vested with all the authority, rights, powers, trusts, immunities, duties and obligations of such predecessor with like effect as if originally named as Index Warrant Agent hereunder, and such predecessor, upon payment of its charges and disbursements then unpaid, shall thereupon become obligated to transfer, deliver and pay over, and such successor Index Warrant Agent shall be entitled to receive, all moneys, securities and other property on deposit with or held by such predecessor, as Index Warrant Agent hereunder. (e) Any corporation into which the Index Warrant Agent hereunder may be merged or converted or any corporation with which the Index Warrant Agent may be consolidated, or any corporation resulting from any merger, conversion or consolidation to which the Index Warrant Agent shall be a party, or any corporation to which the Index Warrant Agent shall sell or otherwise transfer all or substantially all of the assets and business of the Index Warrant Agent, provided that it shall be qualified as aforesaid, shall be the successor Index 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. 35 ARTICLE VI MISCELLANEOUS SECTION 6.1 Modification, Supplementation or Amendment. (a) This Agreement, the Warrant Certificates and the Global Warrant Certificate may be modified, supplemented or amended by the Company and the Index Warrant 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, maintaining the listing of any Index Warrants on any U.S. national securities exchange or registration of such Index Warrants under the Exchange Act, permitting the issuance of Index Warrants in definitive form in accordance with paragraph (a) of Section 1.1, reflecting the issuance by the Company of additional Index Warrants of the same issue or reflecting the appointment of a successor Depository in accordance with paragraph (c) of Section 1.1 or in any other manner which the Company may deem necessary or desirable and which will not materially adversely affect the interests of the holders of Index Warrants. Notwithstanding anything in this Section 6.1 to the contrary, this Agreement may not be amended to provide for the countersigning by the Index Warrant Agent of Warrant Certificates or Global Warrant Certificate evidencing in the aggregate in excess of Index Warrants unless and until the Index Warrant Agent has received notice from the AMEX or any successor U.S. national securities exchange or self-regulatory organization that the additional Index Warrants in excess of have been approved for listing on such exchange or self-regulatory organization. (b) The Company and the Index Warrant Agent may modify or amend this Agreement, the Warrant Certificates, and the Global Warrant Certificate with the consent of the Warrantholders of not fewer than a majority in number of the then outstanding unexercised Index Warrants affected by such modification or amendment, for any purpose; provided, however, that no such modification or amendment that increases the Strike Index, otherwise changes the determination of the Cash Settlement Value, or the Alternative Settlement Amount of the Index Warrants (or any aspects of such determination ) so as to reduce the amount receivable upon exercise, shortens the period of time during which the Index Warrants may be exercised, increases the minimum or decreases the maximum number of Index Warrants that may be exercised by or on behalf of any one Warrantholder at any one time, or otherwise materially and adversely affects the exercise rights of the Warrantholders or reduces the number of outstanding Index Warrants the consent of the Warrantholders of which is required for modification or amendment of this Agreement, the Warrant Certificates, or the Global Warrant Certificate may be made without the consent of each Warrantholder affected thereby. SECTION 6.2 Notices and Demands to the Company and Index Warrant Agent. If the Index Warrant Agent shall receive 36 32 any notice or demand addressed to the Company by any Warrantholder pursuant to the provisions of the Warrant Certificates or the Global Warrant Certificate, the Index Warrant Agent shall promptly forward such notice or demand to the Company. SECTION 6.3 Addresses for Notices. Any communications from the Company to the Index Warrant Agent with respect to this Agreement shall be addressed to Citibank, N.A., 120 Wall Street, 13th Floor, New York, New York 10043 (facsimile: (212) 480-1614) (telephone: (212) 412-6209, Attention: Corporate Trust Department; any communications from the Index Warrant Agent to the Company with respect to this Agreement shall be addressed to Lehman Brothers Holdings Inc., 388 Greenwich Street, New York, New York 10013 (facsimile: (212) 464-6414) (telephone: (212) 298-2000), Attention: Treasurer (or such other address as shall be specified in writing to the other parties hereto by the Index Warrant Agent or the Company, respectively). SECTION 6.4 Notices to Warrantholders. The Company may cause to have notice given to the holders of Index Warrants by providing the Index Warrant Agent with a form of notice to be distributed by (i) in the case of Certificated Warrants, the Index Warrant Agent to the Registered Holders or (ii) in the case of Book-Entry Warrants, the Depository to Participants in accordance with the custom and practices of the Depository. SECTION 6.5 Governing Law. The validity, interpretation and performance of this Agreement and each Index Warrant issued hereunder and of the respective terms and provisions thereof shall be governed by the laws of the State of New York. SECTION 6.6 Obtaining of Governmental Approvals. The Company will from time to time use its best efforts to obtain and keep effective any and all permits, consents and approvals of governmental agencies and authorities and the AMEX and filings under the United States federal and state laws, which may be or become requisite in connection with the issuance, sale, trading, transfer or delivery of the Index Warrants, the Warrant Certificates, the Global Warrant Certificate and the exercise of the Index Warrants. SECTION 6.7 Persons Having Rights Under the Index Warrant 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 Index Warrant Agent, the registered holder of the Global Warrant Certificate 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 in this Agreement contained shall be for the sole and 37 33 exclusive benefit of the Company and the Index Warrant Agent and their successors and of the registered holder of the Global Warrant Certificate and the Warrantholders. SECTION 6.8 Headings. The descriptive headings of the several Articles and Sections and the Table of Contents of this Agreement are for convenience only and shall not control or affect the meaning or construction of any of the provisions hereof. SECTION 6.9 Counterparts. This Agreement may be executed by the parties hereto in any number of counterparts, each of which when so executed and delivered shall be deemed to be an original; but all such counterparts shall together constitute but one and the same instrument. SECTION 6.10 Inspection of Agreement. A copy of this Agreement shall be available at all reasonable times at the principal corporate trust office of the Index Warrant Agent, for inspection by the registered holder of the Warrant Certificate, Participants, Indirect Participants and Warrantholders. 38 34 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: -------------------------- Name: Title: CITIBANK, N.A. By: -------------------------- Name: Title: LEHMAN BROTHERS INC. By: ----------------------------- Name: Title: 39 Annex 1
Defined Terms ------------- Page ---- Alternative Settlement Amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 AMEX . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Automatic Settlement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Book-Entry Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Calculation Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Cancellation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Cash Settlement Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Certificated Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Contingently Tendered Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 Conversion Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Conversion Option Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Delisting Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Depository . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Exercise Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Exercise Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Exercised Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Expiration Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Extraordinary Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 FT-SE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Global Warrant Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Index Warrant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Index Warrant Account . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Index Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Index Warrant Agent's Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Index Warrant Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Index Warrant Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Index Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Indirect Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 LIFFE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Limit Option . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Limit Option Reference Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 London Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Market Disruption Event . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 New York Business Day . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Official Index Period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Participants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Registered Holder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Remaining Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Self-Regulating Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 Settlement Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Spot Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Strike Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Third Party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Underlying Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Valuation Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Warrant Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Warrantholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
- i - 40 EXHIBIT A [FORM OF WARRANT CERTIFICATE] [FACE] No. CUSIP No. LEHMAN BROTHERS HOLDING INC. Index Warrants Expiring This Warrant Certificate certifies that , or registered assigns, is the registered holder of Index Warrants Expiring (the "Index Warrants"). Upon receipt by the Index Warrant Agent of this Warrant Certificate and the exercise notice on the reverse hereof (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at the offices of the Index Warrant Agent in the Borough of Manhattan, New York City, each Index Warrant entitles the registered holder hereof (the "Warrantholder") to receive, subject to the conditions set forth herein and in the Index Warrant Agreement, from Lehman Brothers Holdings Inc. (the "Company") the cash settlement value in U.S. Dollars (the "Cash Settlement Value") calculated at the close of the Official Index Period on the Valuation Date equal to the product (rounded down to the nearest cent) of (A) times (B) the amount, if any, by which the Spot Index for the applicable valuation date exceeds (the "Strike Index") times (C) the fixed U.S. Dollar/ exchange rate of U.S. = . If the Strike Index is equal to or exceeds the Spot Index for such valuation date, the Cash Settlement Value will be zero. The "Official Index Period" is the period during which prices in all country sectors of the Stock Exchange Automated Quotation system and the Stock Exchange Automated Quotations International system are firm (normally between 9:45 A.M. and 3:30 P.M., London time). The "Spot Index" for any date means the closing value, expressed in , on such date of the Index compiled and published by The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited (the "London Stock Exchange"). Subject to the terms of the Index Warrant Agreement, each Index Warrant may be irrevocably exercised, in whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earliest of (i) (the "Expiration Date"), (ii) the Delisting Date and (iii) the Cancellation Date, 41 2 at which time the Index Warrants shall expire and all Index Warrants evidenced hereby shall be automatically exercised and otherwise shall be void. Except in the case of automatic exercise or cancellation of the Index Warrants, as set forth herein and in the Index Warrant Agreement, not fewer than 500 Index Warrants may be exercised by or on behalf of any one Warrantholder at any one time. All exercises of Index Warrants (other than on the Expiration Date, the Delisting Date or the Cancellation Date) shall be subject, at the Company's option, to the limitation that not more than 1,000,000 Index Warrants in total may be exercised on any Exercise Date and not more than 250,000 Index Warrants may be exercised by or on behalf of any person or entity, either individually or in concert with any other person or entity, on any Exercise Date. Reference is hereby made to the further provisions of this Warrant Certificate set forth on the reverse hereof and such further provisions shall for all purposes have the same effect as though fully set forth at this place. This Warrant Certificate shall not be valid unless countersigned by the Index Warrant Agent. IN WITNESS WHEREOF, Lehman Brothers Holdings, Inc. has caused this instrument to be duly executed. Dated: LEHMAN BROTHERS HOLDINGS INC. By ------------------------ Title: President [SEAL] Attest: By ---------------------- Title: Assitant Secretary Countersigned for authentication only as of the date above written: Citibank, N.A., as Index Warrant Agent By Authorized Officer 42 [REVERSE] Index Warrants Expiring The Index Warrants evidenced by this Warrant Certificate are part of a duly authorized issue of Index Warrants issued by the Company pursuant to an Index Warrant Agreement, dated as of (the "Index Warrant Agreement"), among the Company, Citibank, N.A. (the "Index Warrant Agent") and Lehman Brothers Inc. (the "Calculation Agent") and is subject to the terms and provisions contained in the Index Warrant Agreement, to all of which terms and provisions the Warrantholder consents by acceptance of this Warrant Certificate and which Index Warrant Agreement is hereby incorporated by reference in and made a part of this Warrant Certificate. A copy of the Index Warrant Agreement is on file at the Warrant Agent's Office (as defined herein). The Index Warrants constitute direct, unconditional and unsecured contractual obligations of the Company and rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. Subject to the provisions hereof and of the Index Warrant Agreement, each Index Warrant may be irrevocably exercised, as a whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day (as defined herein) from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earliest of (i) the Expiration Date, (ii) the Delisting Date (as defined herein) and (iii) the Cancellation date (as defined herein). The holder of Index Warrants evidenced by this Warrant Certificate may exercise them by surrendering this Warrant Certificate with the exercise notice set forth below (or an exercise notice in substantially identical form), duly completed and executed, to the Index Warrant Agent's offices in the Borough of Manhattan, New York City (the "Warrant Agent's Office"), which are, on the date hereof, located at 111 Wall Street, 5th Floor, New York, New York 10043, Attention: Corporate Trust Department. Except in the case of automatic exercise of the Index Warrants, as set forth herein and in the Index Warrant Agreement, not fewer than 500 Index Warrants may be exercised by or on behalf of any one Warrantholder at any one time. The "Cash Settlement Value" of an exercised Index Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars equal to the product (rounded down to the nearest cent) of (A) times (B) the amount, if any, by which the Spot Index for the Valuation Date of such Index Warrant exceeds the Strike Index times (C) the fixed U.S. Dollar/ exchange rate of = . If the Strike Index for such valuation date is equal to or exceeds the Spot Index, the Cash Settlement Value will be zero. 43 2 The Company has appointed Lehman Brothers Inc. to be its Calculation Agent to make certain calculations, as described in the Index Warrant Agreement and herein. The Calculation Agent shall act as an independent expert and not as an agent of the Company. Unless otherwise provided by the Index Warrant Agreement, the calculations of the Calculation Agent and the determinations of the Index Warrant Agent under the Index Warrant Agreement and Warrant Certificate shall, absent manifest error, be final and binding on the Company and the Warrantholder. Subject to the Index Warrant Agreement and this Warrant Certificate, and except in the case of automatic exercise on the Expiration Date, the Delisting Date, or Cancellation Date or in the case of a postponement due to there being exercised a number of Index Warrants in excess of the maximum permitted number on a given day, the valuation date (the "Valuation Date") for an Index Warrant shall be the London Business Day next succeeding the New York Business Day (the "Exercise Date") on which the Index Warrant Agent has received the Warrant Certificate representing such Index Warrant, with the exercise notice below (or an exercise notice in substantially identical form delivered herewith), duly completed and executed by the Warrantholder, at or prior to 3:00 p.m., New York City time; and if the Index Warrant Agent shall receive any such Warrant Certificate after 3:00 p.m., New York City time, on such date, then such Warrant Certificate shall be deemed to have been received at or prior to 3:00 p.m., New York City time, on the next succeeding New York Business Day (which shall be the Exercise Date for such Warrants), and in such event the Valuation Date shall be the next London Business Day following such Exercise Date. If the exercise notice is not rejected as provided in the Index Warrant Agreement, then the Index Warrant Agent will determine the Cash Settlement Value of the exercised Index Warrants in accordance with the terms of the Index Warrant Agreement. Any exercise of the Index Warrants will be irrevocable, except for the limited circumstances in which an exercise may be treated as contingent pursuant to the Limit Option, as provided in the Index Warrant Agreement. Except in the case of Index Warrants subject to automatic exercise, payment shall be made available to the Warrantholder on the fifth New York Business Day following the Valuation Date for such Index Warrants in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by such Warrantholder in the United States (at the Warrantholder's election as specified in the exercise notice), in an amount equal to the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of the exercised Index Warrants. 44 3 All Warrant certificates for which the Index Warrant Agent has not received a notice of exercise in proper form by 3:00 p.m., New York City time, on the New York Business Day preceding the earliest of (i) the Expiration Date; (ii) the Delisting Date or (iii) the date of cancellation as a result of an Extraordinary Event or Market Disruption Event (the "Cancellation Date"), as the case may be, or for which the Index Warrant Agent has received an exercise notice in proper form but with respect to which timely delivery of the relevant Warrant Certificate has not been made will be deemed automatically exercised on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be, without any requirement of delivery of an exercise notice to the Index Warrant Agent. Accordingly, the Exercise Date for such Index Warrants shall be the Expiration Date, Delisting Date or the Cancellation Date, as the case may be, or, if such date is not a New York Business Day, the next succeeding New York Business Day and the Valuation Date for such Index Warrants shall be the first London Business Day following the Exercise Date for such Index Warrants. "Delisting Date" shall mean the effective date on which the Index Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder) on, the American Stock Exchange (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization, provided, however, that if the Company first receives notice of the delisting or permanent suspension of the warrants on the same day on which such Index Warrants are delisted or suspended, such day will be deemed the Delisting Date for purposes of the Index Warrant Agreement and this Warrant Certificate. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Payment with respect to automatically exercised Index Warrants shall be made available to the Warrantholder in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by the Warrantholder in the United States (at the Warrantholder's election), on the fifth New York Business Day following the Valuation Date (or, if the Valuation Date is not a New York Business Day, on the sixth New York Business Day following the Valuation Date), against receipt by the Index Warrant Agent at the Warrant Agent's Office from the Warrantholder of its Warrant Certificates. Such payment shall be in the amount of the aggregate Cash Settlement Value or the Alternative Settlement Amount, as applicable, in respect of the Index Warrants evidenced by the Warrant Certificates that were exercised on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be. 45 4 In the case of delisting or cancellation of the Warrants as described in the Index Warrant Agreement, the Warrantholder shall be entitled to receive, in lieu of the Cash Settlement Value, the Alternative Settlement Amount. The Alternative Settlement Amount of an Index Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Index Warrants determined as described above; provided that, with respect to a cancellation of the Index Warrants on a Cancellation Date, the Spot Index shall be an amount determined by the Calculation Agent which, subject to approval by the Company (such approval not to be unreasonably withheld), in the reasonable opinion of the Calculation Agent fairly reflects the value of the Underlying Stocks on the Cancellation Date; A = the total number of days from but excluding the Valuation Date for such Index Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Index Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Index Warrant; and Z = the lesser of T or I. For purposes of determining "I" in the above formula, in the event that the Calculation Agent and the Company are required, but have not, after good faith consultation with each other and within thirty days following the first day upon which such Alternative Settlement Amount may be calculated in accordance with the above formula, agreed upon a Spot Index which fairly reflects the value of the Underlying Stocks on the Cancellation Date, then the Calculation Agent shall promptly nominate a third party, subject to approval by the Company (such approval not to be unreasonably withheld), to determine such figure and calculate the Alternative Settlement Amount in accordance with the above formula. Such party shall act as an independent expert and not as an agent of the Company or the Calculation Agent, and its calculation and determination of the Alternative Settlement Amount shall, absent manifest error, be final and binding on the Company, the Index Warrant Agent, the Calculation Agent and the Warrantholder. Any such calculations will be made available to the Warrantholder for inspection at the 46 5 Warrant Agent's Office. Neither the Company nor such third party shall have any responsibility for good faith errors or omissions in calculating the Alternative Settlement Amount. All exercises of Index Warrants (other than on the Expiration Date, Delisting Date or the Cancellation Date) shall be subject, at the Company's option, to the limitation that not more than 1,000,000 Index Warrants in total may be exercised on any Exercise Date and not more than 250,000 Index Warrants may be exercised by or on behalf of any person or entity, either individually or in concert with any other person or entity, on any Exercise Date. If any New York Business Day would otherwise, under the terms hereof, be the Exercise Date in respect of more than 1,000,000 Index Warrants, then upon the Company's exercising such option (by giving notice thereof to the Index Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such Exercise Date), 1,000,000 of such Index Warrants shall be deemed exercised on such Exercise Date (selected by the Index Warrant Agent on a pro rata basis, but if, as a result of such pro rata selection, any Warrantholder would be deemed to have exercised less than 500 Index Warrants, then the Index Warrant Agent shall first select additional Index Warrants of such Warrantholder so that no holder shall be deemed to have exercised less than 500 Index Warrants), and the remainder of such Index Warrants (the "Remaining Warrants") shall be deemed exercised on the following New York Business Day (subject to successive applications of this paragraph); provided that any Remaining Warrant in respect of which a notice of exercise was delivered on a given Exercise Date shall be deemed exercised before any other Index Warrants in respect of which a notice of exercise was delivered on a later Exercise Date. If any individual Warrantholder attempts to exercise more than 250,000 Index Warrants on any New York Business Day, then at the Company's election (as notified to the Index Warrant Agent by giving notice thereof to the Index Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such New York Business Day) 250,000 of such Index Warrants shall be deemed exercised on such New York Business Day and the remainder shall be deemed exercised on the following New York Business Day (subject to successive applications of this paragraph). The date on which any Index Warrant is deemed exercised under the preceding sentences shall for all purposes of this Warrant Certificate be deemed to be the "Exercise Date" in respect of such Index Warrants. Prior to due presentment for registration of transfer, the Company, the Index Warrant Agent, and any agent of the Company or the Index Warrant Agent, may deem and treat the Warrantholder as the absolute owner of the Index 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 Index Warrants evidenced hereby, and neither the Company nor the Index 47 6 Warrant Agent, nor any agent of the Company or the Index Warrant Agent, shall be affected by any notice to the contrary. The Index Warrant Agent shall, in accordance with the Index Warrant Agreement, from time to time register the transfer of this Warrant Certificate upon the records 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 Index Warrant Agent, duly executed by the Warrantholder or by its duly appointed legal representative or duly authorized attorney, such signature to be guaranteed by a bank or trust company located, or with a correspondent office, in New York City or by a broker or dealer which is a member of a national securities exchange, or in any other manner acceptable to the Index Warrant Agent. Upon any such registration of transfer, a new Warrant Certificate shall be issued to the transferee(s). As provided in the Index Warrant Agreement and subject to certain limitations, this Warrant Certificate may be exchanged for other Warrant Certificates, representing a like number of Index Warrants, upon surrender to the Index Warrant Agent of this Warrant Certificate at the Warrant Agent's Office. No service charge shall be made for any registration of transfer or exchange of this Warrant Certificate, 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 this Warrant Certificate, other than exchanges pursuant to the Index Warrant Agreement not involving any transfer. The Warrantholder may subject its exercise of Index Warrants to the Limit Option, as provided in the Index Warrant Agreement. Capitalized terms included herein but not defined herein have the meanings assigned thereto in the Index Warrant Agreement. References herein to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. As used herein, a "New York Business Day" means any day other than (i) a Saturday, Sunday or a day on which either the American Stock Exchange or the New York Stock Exchange is not open for securities trading or commercial banks in New York City are required or authorized by law or executive order to remain closed. A "London Business Day" means any day other than (i) a Saturday or a Sunday or a day on which banking institutions are authorized or required by law or executive order to remain closed or (ii) a duly on which the London Stock Exchange or the London International Financial Futures Exchange are not open for business. 48 7 The Index Warrant Agreement and the terms of the Index Warrants are subject to amendment, as provided in the Index Warrant Agreement. THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 49 Exhibit A-1 EXERCISE NOTICE Citibank, N.A. Corporate Trust Department, 5th Floor 111 Wall Street New York, New York 10043 1. This Notice [ ] DOES [ ] DOES NOT relate to "Contingently Tendered Warrants" subject to a Limit Option, as provided for in the Index Warrant Agreement. If this Exercise Notice relates to 500 or more Index Warrants and any of such Index Warrants are Contingently Tendered Warrants, of such Index Warrants are Contingently Tendered Warrants and are not. If the Spot Index used to determine the Cash Settlement Value of Contingently Tendered Warrants does not exceed the Limit Option Reference Index by 50 points or more, an Exercise Notice with respect to such Contingently Tendered Warrants shall be void and of no effect (and shall be disregarded for all purposes of the Index Warrant Agreement). 2. Subject to paragraph 1, the undersigned Warrantholder hereby irrevocably exercises Index Warrants (the "Exercised Warrants") and delivers to you herewith a Warrant Certificate or Certificates, registered in the Warrantholder's name, representing a number of Index Warrants at least equal to the number of Exercised Warrants. The Warrantholder is exercising no fewer than 500 Index Warrants. 3. The Warrantholder hereby directs the Index Warrant Agent (a) to pay the Cash Settlement Value or the Alternative Settlement Amount, as applicable, with respect to the Exercised Warrants: / / By cashier's check or an official bank check; or / / By wire transfer to the following U.S. Dollar bank account in the United States: (Minimum payments of $100,000 only) Bank: ---------------------------- ABA Routing No.: ----------------- Account No: Reference: -------- ------------- and; (b) if the number of Exercised Warrants is less than the number of Index Warrants represented by the enclosed Warrant 50 2 Certificate or Warrant Certificates, to deliver a Warrant Certificate representing the unexercised Index Warrants to Dated: , 19 ---------------------------- Warrantholder by ----------------------- Authorized Signature Address: Telephone: ( ) 51 EXHIBIT B [FORM OF GLOBAL WARRANT CERTIFICATE] [FACE] No. CUSIP No. LEHMAN BROTHERS HOLDING INC. Index Warrants Expiring This certifies that CEDE & CO., or registered assigns, is the registered holder of Index Warrants Expiring (the "Index Warrants"). Upon receipt by the Index Warrant Agent of this Global Warrant Certificate and the exercise notice on the reverse hereof (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at the offices of the Index Warrant Agent in the Borough of Manhattan, New York City, each Index Warrant entitles the beneficial owner thereof (each a "Warrantholder") to receive, subject to the conditions set forth herein and in the Index Warrant Agreement, from Lehman Brothers Holdings Inc. (the "Company") the cash settlement value in U.S. Dollars (the "Cash Settlement Value") calculated at the close of the Official Index Period on the Valuation Date equal to the product (rounded down to the nearest cent) of (A) times (B) the amount, if any, by which the Spot Index for the applicable valuation date exceeds (the "Strike Index") times (C) the fixed U.S. Dollar/ exchange rate of U.S. = . If the Strike Index is equal to or exceeds the Spot Index for such valuation date, the Cash Settlement Value will be zero. The "Official Index Period" is the period during which prices in all country sectors of the Stock Exchange Automated Quotation system and the Stock Exchange Automated Quotations International system are firm (normally between 9:45 A.M. and 3:30 P.M., London time). The "Spot Index" for any date means the closing value, expressed in , on such date of the Index compiled and published by The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited (the "London Stock Exchange"). Subject to the terms of the Index Warrant Agreement, each Index Warrant may be irrevocably exercised, in whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earliest of (i) (the "Expiration 52 2 Date"), (ii) the Delisting Date and (iii) the Cancellation Date, at which time the Index Warrants shall expire and all Index Warrants evidenced hereby shall be automatically exercised and otherwise shall be void. A Warrantholder of Index Warrants evidenced by this Global Warrant Certificate may exercise them only by transfer of such Index Warrants on the records of the Depository Trust Company free to the Index Warrant Account (as defined in the Index Warrant Agreement) and pursuant to an irrevocable Exercise Notice delivered to the Index Warrant Agent from a Participant (as defined in the Index Warrant Agreement) acting on behalf of such Warrantholder. Except in the case of automatic exercise or cancellation of the Index Warrants, as set forth herein and in the Index Warrant Agreement, not fewer than 500 Index Warrants may be exercised by or on behalf of any one Warrantholder at any one time. All exercises of Index Warrants (other than on the Expiration Date, the Delisting Date or the Cancellation Date) shall be subject, at the Company's option, to the limitation that not more than 1,000,000 Index Warrants in total may be exercised on any Exercise Date and not more than 250,000 Index Warrants may be exercised by or on behalf of any person or entity, either individually or in concert with any other person or entity, on any Exercise Date. This Global Warrant Certificate shall not be valid unless countersigned by the Index Warrant Agent. IN WITNESS WHEREOF, Lehman Brothers Holdings, Inc. has caused this instrument to be duly executed. Dated: LEHMAN BROTHERS HOLDINGS INC. By -------------------------- Title: [SEAL] Attest: By ------------------------ Title: Countersigned for authentication only as of the date above written: Citibank, N.A., as Index Warrant Agent By ------------------------ Authorized Officer 53 [REVERSE] Index Warrants Expiring The Index Warrants evidenced by this Global Warrant Certificate are part of a duly authorized issue of Index Warrants issued by the Company pursuant to an Index Warrant Agreement, dated as of (the "Index Warrant Agreement"), among the Company, Citibank, N.A. (the "Index Warrant Agent") and Shearson Lehman Brothers Inc. (the "Calculation Agent") and is subject to the terms and provisions contained in the Index Warrant Agreement, to all of which terms and provisions the Warrantholders, the entities through which such Warrantholders hold their beneficial interests in the Index Warrants and the registered holder of this Global Warrant Certificate consent by acceptance of this Global Warrant Certificate and which Index Warrant Agreement is hereby incorporated by reference in and made a part of this Global Warrant Certificate. A copy of the Index Warrant Agreement is on file at the Warrant Agent's Office (as defined herein). The Index Warrants constitute direct, unconditional and unsecured contractual obligations of the Company and rank on a parity with the Company's other unsecured contractual obligations and with the Company's unsecured and unsubordinated debt. Subject to the provisions hereof and of the Index Warrant Agreement, each Index Warrant may be irrevocably exercised, as a whole but not in part, at or prior to 3:00 p.m., New York City time, on any New York Business Day (as defined herein) from its date of issuance until 3:00 p.m., New York City time, on the New York Business Day immediately preceding the earliest of (i) the Expiration Date, (ii) the Delisting Date (as defined herein) and (iii) the Cancellation date (as defined herein). A Warrantholder of Index Warrants evidenced by this Global Warrant Certificate may exercise them only by transfer of such Index Warrants on the records of the Depository Trust Company free to the Index Warrant Account and by delivering an exercise notice in substantially identical form to the exercise notice attached hereto, duly completed and executed by the Participant through which such Warrantholder holds its Index Warrants, to the Warrant Agent's offices in the Borough of Manhattan, New York City (the "Warrant Agent's Office"), which are, on the date hereof, located at 111 Wall Street, 5th Floor, New York, New York 10043, Attention: Corporate Trust Department. Except in the case of automatic exercise of the Index Warrants, as set forth herein and in the Index Warrant Agreement, not fewer than 500 Index Warrants may be exercised by or on behalf of any one Warrantholder at any one time. The "Cash Settlement Value" of an exercised Index Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars equal to the product (rounded down to 54 2 the nearest cent) of (A) times (B) the amount, if any, by which the Spot Index for the Valuation Date of such Index Warrant exceeds the Strike Index times (C) the fixed U.S. Dollar/ exchange rate of = . If the Strike Index for such valuation date is equal to or exceeds the Spot Index, the Cash Settlement Value will be zero. The Company has appointed Lehman Brothers Inc. to be its Calculation Agent to make certain calculations, as described in the Index Warrant Agreement and herein. The Calculation Agent shall act as an independent expert and not as an agent of the Company. Unless otherwise provided by the Index Warrant Agreement, the calculations of the Calculation Agent and the determinations of the Index Warrant Agent under the Index Warrant Agreement and this Global Warrant Certificate shall, absent manifest error, be final and binding on the Company and the Warrantholders. Subject to the Index Warrant Agreement and this Global Warrant Certificate, and except in the case of automatic exercise on the Expiration Date, the Delisting Date, or Cancellation Date or in the case of a postponement due to there being exercised a number of Index Warrants in excess of the maximum permitted number on a given day, the valuation date (the "Valuation Date") for an Index Warrant shall be the London Business Day next succeeding the New York Business Day (the "Exercise Date") on which the Index Warrant Agent has received the Index Warrant, with the exercise notice below (or an exercise notice in substantially identical form delivered herewith), duly completed and executed, at or prior to 3:00 p.m., New York City time; and if the Index Warrant Agent shall receive any such Index Warrant after 3:00 p.m., New York City time, on such date, then such Global Warrant Certificate shall be deemed to have been received at or prior to 3:00 p.m., New York City time, on the next succeeding New York Business Day (which shall be the Exercise Date for such Index Warrants), and in such event the Valuation Date shall be the next London Business Day following such Exercise Date. If the exercise notice is not rejected as provided in the Index Warrant Agreement, then the Index Warrant Agent will determine the Cash Settlement Value of the exercised Index Warrants in accordance with the terms of the Index Warrant Agreement. Any exercise of the Index Warrants will be irrevocable, except for the limited circumstances in which an exercise may be treated as contingent pursuant to the Limit Option, as provided in the Index Warrant Agreement. Except in the case of Index Warrants subject to automatic exercise, payment shall be made available to the appropriate Participant on the fifth New York Business Day following the Valuation Date for such Index Warrants in the form 55 3 of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by such Participant in the United States (at the Participant's election as specified in the exercise notice), in an amount equal to the aggregate Cash Settlement Value or Alternative Settlement Amount, as applicable, of the exercised Index Warrants. All Index Warrants for which the Index Warrant Agent has not received a notice of exercise in proper form by 3:00 p.m., New York City time, on the New York Business Day preceding the earliest of (i) the Expiration Date; (ii) the Delisting Date or (iii) the date of cancellation as a result of an Extraordinary Event or Market Disruption Event (the "Cancellation Date"), as the case may be, or for which the Index Warrant Agent has received an exercise notice in proper form but with respect to which timely delivery of the relevant Index Warrant has not been made will be deemed automatically exercised on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be, without any requirement of delivery of an exercise notice to the Index Warrant Agent. Accordingly, the Exercise Date for such Index Warrants shall be the Expiration Date, Delisting Date or the Cancellation Date, as the case may be, or, if such Date is not a New York Business Day, the next succeeding New York Business Day and the Valuation Date for such Index Warrants shall be the first London Business Day following the Exercise Date for such Index Warrants. "Delisting Date" shall mean the effective date on which the Index Warrants are delisted from, or permanently suspended from trading (within the meaning of the Securities Exchange Act of 1934 and the rules and regulations of the Securities and Exchange Commission thereunder) on, the American Stock Exchange (or any successor Self-Regulatory Organization) and not accepted at the same time for listing on another Self-Regulatory Organization, provided, however, that if the Company first receives notice of the delisting or permanent suspension of the warrants on the same day on which such Index Warrants are delisted or suspended, such day will be deemed the Delisting Date for purposes of the Index Warrant Agreement and this Global Warrant Certificate. "Self-Regulatory Organization" means a self-regulatory organization on which warrants are traded and the rules of which are filed with the Securities and Exchange Commission under the Securities Exchange Act of 1934. Payment with respect to automatically exercised Index Warrants shall be made available to the Depository in the form of a cashier's check or an official bank check, or (in the case of payments of at least $100,000) by wire transfer to a U.S. Dollar bank account maintained by the Participant in the United States (at the Participant's election) on the fifth New York Business Day following the Valuation Date (or, if the Valuation Date is not a New York Business Day, on the sixth New York Business Day following the Valuation Date) against receipt by the Index Warrant Agent at the Warrant Agent's Office of the Global Warrant Certificate, for automatically exercised Index Warrants, that 56 4 were exercised on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be. Such payment shall be in the amount of the aggregate Cash Settlement Value or the Alternative Settlement Amount, as applicable, in respect of the Index Warrants evidenced by the Global Warrant Certificate that were exercised on the Expiration Date, the Delisting Date or the Cancellation Date, as the case may be. In the case of delisting or cancellation of the Index Warrants as described in the Index Warrant Agreement, Warrantholders shall be entitled to receive, in lieu of the Cash Settlement Value, the Alternative Settlement Amount. The Alternative Settlement Amount of an Index Warrant will be calculated by the Calculation Agent at the close of the Official Index Period on the Valuation Date and will equal an amount in U.S. Dollars (rounded down to the nearest cent) which is equal to the amount "X" calculated using the formula set forth below: X = I + ((A/B) x (T-Z)) where I = the Cash Settlement Value of the Index Warrants determined as described above; provided that, with respect to a cancellation of the Index Warrants on a Cancellation Date, the Spot Index shall be an amount determined by the Calculation Agent which, subject to approval by the Company (such approval not to be unreasonably withheld), in the reasonable opinion of the Calculation Agent fairly reflects the value of the Underlying Stocks on the Cancellation Date; A = the total number of days from but excluding the Valuation Date for such Index Warrants to and including the Expiration Date; B = the total number of days from but excluding the date the Index Warrants were initially sold to and including the Expiration Date; T = , the initial offering price per Index Warrant; and Z = the lesser of T or I. For purposes of determining "I" in the above formula, in the event that the Calculation Agent and the Company are required, but have not, after good faith consultation with each other and within thirty days following the first day upon which such Alternative Settlement Amount may be calculated in accordance with the above formula, agreed upon a Spot Index which fairly reflects the value of the Underlying Stocks on the Cancellation Date, then the Calculation Agent shall promptly nominate a third party, subject to approval by the Company (such approval not to be unreasonably withheld), to determine such 57 5 figure and calculate the Alternative Settlement Amount in accordance with the above formula. Such party shall act as an independent expert and not as an agent of the Company or the Calculation Agent, and its calculation and determination of the Alternative Settlement Amount shall, absent manifest error, be final and binding on the Company, the Index Warrant Agent, the Calculation Agent and the Warrantholders. Any such calculations will be made available to a Warrantholder for inspection at the Warrant Agent's Office. Neither the Company nor such third party shall have any responsibility for good faith errors or omissions in calculating the Alternative Settlement Amount. All exercises of Index Warrants (other than on the Expiration Date, Delisting Date or the Cancellation Date) shall be subject, at the Company's option, to the limitation that not more than 1,000,000 Index Warrants in total may be exercised on any Exercise Date and not more than 250,000 Index Warrants may be exercised by or on behalf of any person or entity, either individually or in concert with any other person or entity, on any Exercise Date. If any New York Business Day would otherwise, under the terms hereof, be the Exercise Date in respect of more than 1,000,000 Index Warrants, then upon the Company's exercising such option (by giving notice thereof to the Index Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such Exercise Date), 1,000,000 of such Index Warrants shall be deemed exercised on such Exercise Date (selected by the Index Warrant Agent on a pro rata basis, but if, as a result of such pro rata selection, any Warrantholder would be deemed to have exercised less than 500 Index Warrants, then the Index Warrant Agent shall first select additional Index Warrants of such Warrantholder so that no Warrantholder shall be deemed to have exercised less than 500 Index Warrants), and the remainder of such Index Warrants (the "Remaining Warrants") shall be deemed exercised on the following New York Business Day (subject to successive applications of this paragraph); provided that any Remaining Warrant in respect of which a notice of exercise was delivered on a given Exercise Date shall be deemed exercised before any other Index Warrants in respect of which a notice of exercise was delivered on a later Exercise Date. If any individual Warrantholder attempts to exercise more than 250,000 Index Warrants on any New York Business Day, then at the Company's election (as notified to the Index Warrant Agent by giving notice thereof to the Index Warrant Agent not later than 3:00 p.m., New York City time, on the second New York Business Day following such New York Business Day) 250,000 of such Index Warrants shall be deemed exercised on such New York Business Day and the remainder shall be deemed exercised on the following New York Business Day (subject to successive applications of this paragraph). The date on which any Index Warrant is deemed exercised under the preceding sentences shall for all purposes of this Global Warrant Certificate be deemed to be the "Exercise Date" in respect of such Index Warrants. 58 6 Prior to due presentment for registration of transfer, the Company, the Index Warrant Agent, and any agent of the Company or the Index Warrant Agent, may deem and treat the registered owner hereof as the absolute owner of the Index 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 Index Warrants evidenced hereby, and neither the Company nor the Index Warrant Agent, nor any agent of the Company or the Index Warrant Agent, shall be affected by any notice to the contrary. The Index Warrant Agent shall, in accordance with the Index Warrant Agreement, from time to time register the transfer of this Global Warrant Certificate upon the records 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 Index Warrant Agent, duly executed by the registered holder hereof or by its duly appointed legal representative or duly authorized attorney, such signature to be guaranteed by a bank or trust company located, or with a correspondent office, in New York City or by a broker or dealer which is a member of a national securities exchange, or in any other manner acceptable to the Index Warrant Agent. Upon any such registration of transfer, a new Global Warrant Certificate shall be issued to the transferee(s). No service charge shall be made for any registration of transfer or exchange of this Global Warrant Certificate, 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 this Global Warrant Certificate, other than exchanges pursuant to the Index Warrant Agreement not involving any transfer. Warrantholders may subject their exercises of Index Warrants to the Limit Option, as provided in the Index Warrant Agreement. Capitalized terms included herein but not defined herein have the meanings assigned thereto in the Index Warrant Agreement. References herein to "U.S. Dollars" or "$" are to the lawful currency of the United States of America. As used herein, a "New York Business Day" means any day other than (i) a Saturday, Sunday or a day on which either the American Stock Exchange or the New York Stock Exchange is not open for securities trading or commercial banks in New York City are required or authorized by law or executive order to remain closed. A "London Business Day" means any day other than (i) a Saturday or a Sunday or a day on which banking institutions are authorized or required by law or executive order to remain closed or (ii) a duly on which the London Stock Exchange or the London 59 7 International Financial Futures Exchange are not open for business. The Index Warrant Agreement and the terms of the Index Warrants are subject to amendment, as provided in the Index Warrant Agreement. THIS GLOBAL WARRANT CERTIFICATE SHALL BE GOVERNED BY, AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK. 60 EXHIBIT B-1 EXERCISE NOTICE (For Index Warrants Represented by the Global Warrant Certificate) Citibank, N.A. c/c Citicorp Data Distribution Inc. 404 Sette Drive Paramus, New Jersey 07652 (Facsimile: (201) 262-7521) (Telephone: (201) 262-5444) 1. Reference is made to the Index Warrant Agreement dated as of (the "Index Warrant Agreement"), among Lehman Brothers Holdings Inc. (the "Company"), Citibank, N.A., as warrant agent (the "Index Warrant Agent"), and Lehman Brothers Inc., as calculation agent (the "Calculation Agent"). Subject to paragraph 2, on behalf of certain beneficial owners, each of whom is exercising no fewer than 500 Index Warrants that are covered by this Exercise Notice and whose Index Warrants have been, or will be, transferred to the Index Warrant Agent's DTC Participant Account, entitled Citibank, N.A. Corporate Trust Warrant Agent Account, No. _____________ (the "Index Warrant Account"), ____________ Index Warrants (the "Excercised Warrants") are hereby irrevocably exercised. 2. This Notice [ ] DOES [ ] DOES NOT relate to "Contingently Tendered Warrants" subject to a Limit Option, as provided for in the Index Warrant Agreement. If this Exercise Notice relates to 500 or more Index Warrants and any of such Index Warrants are Contingently Tendered Warrants, at least Index Warrants of each Warrantholder are Contingently Tendered Warrants and at least Index Warrants of each Warrantholder are not. If the Spot Index used to determine the Cash Settlement Value of Contingently Tendered Warrants does not exceed the Limit Option Reference Index by 50 points or more, an Exercise Notice with respect to such Contingently Tendered Warrants shall be void and of no effect (and shall be disregarded for all purposes of the Index Warrant Agreement). 3. The Participant hereby directs the Index Warrant Agent to pay the Cash Settlement Value or the Alternative Settlement Amount, as applicable, with respect to the Exercised Warrants: / / By cashier's check or an official bank check; or / / By wire transfer to the following U.S. Dollar bank account in the United States: 61 2 (Minimum payments of $100,000 only) Bank: ---------------------------- ABA Routing No.: ----------------- Account No: Reference: -------- ------------- Dated: 19 [NAME OF DEPOSITORY PARTICIPANT] (Participant Number] by ---------------------- Authorized Signature Address: Telephone: ( ) 62 EXHIBIT C-1 CONFIRMATION OF EXERCISE [For Warrants Represented by Warrant Certificates] [Name of Warrantholder] [Address] We hereby confirm receipt of your Exercise Notice with respect to Index Warrants (the "Exercised Warrants") and the related Warrant Certificates, which we have found to be duly completed and in proper form. The Valuation Date of the Exercised Warrants was , 19 . [As set forth in your Exercise Notice, none of the Index Warrants covered thereby is subject to the Limit Option. Accordingly, for purposes hereof, all such Index Warrants shall constitute Exercised Warrants, which number we hereby confirm to be .] [Your Exercise Notice stated that the Index Warrants covered thereby are subject to the Limit Option. The applicable Limit Option Reference Index for such Index Warrants is and the Spot Index for the date that would otherwise be the Valuation Date for such Index Warrants is . Such Spot Index [does not exceed] [exceeds] such Limit Option Reference Index by 50 or more points. Accordingly, for purposes hereof, [all] [none of] such Index Warrants shall constitute Exercised Warrants. We hereby confirm the number of Exercised Warrants to be .] We hereby confirm that the aggregate [Cash Settlement Value] [Alternative Settlement Amount] of the Exercised Warrants is $ ($ per Warrant), which will be made available to you [in the form of a cashiers check or an official bank check] [by wire transfer to the bank account designated in your irrevocable Exercise Notice, in New York Clearing House funds,] for payment on the [fifth] [sixth] New York Business Day following the Valuation Date for such Index Warrants. Capitalized terms included herein but not defined have the meanings assigned thereto in the Index Warrant Agreement, dated as of , among Lehman Brothers Holdings, Inc., Citibank, N.A., as Index Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by -------------------------- Authorized Signature 63 EXHIBIT C-2 CONFIRMATION OF EXERCISE [For Index Warrants Represented by the Global Warrant Certificate] [Name of Depository Participant] [Address] We hereby confirm receipt of your Exercise Notice with respect to Index Warrants (the "Exercised Warrants") which were transferred by you (or on your behalf) to our DTC Participant Account No. _____________. Such Exercise Notice we have found to be duly completed and in proper form. The Valuation Date of the Exercised Warrants was , 19 . [As set forth in your Exercise Notice, none of the Index Warrants covered thereby is subject to the Limit Option. Accordingly, for purposes hereof, all such Index Warrants shall constitute Exercised Warrants, which number we hereby confirm to be .] [Your Exercise Notice stated that the Index Warrants covered thereby are subject to the Limit Option. The applicable Limit Option Reference Index for such Index Warrants is and the Spot Index for the date that would otherwise be the Valuation Date for such Index Warrants is . Such Spot Index [does not exceed] [exceeds] such Limit Option Reference Index by 50 or more points. Accordingly, for purposes hereof, [all] [none of] such Index Warrants shall constitute Exercised Warrants. We hereby confirm the number of Exercised Warrants to be .] We hereby confirm that the aggregate Cash Settlement Value of the Exercised Warrants is $ ($ per Index Warrant), which will be made available to you [in the form of a cashiers check or an official bank check] [by wire transfer to the bank account designated in your irrevocable of Exercise Notice, in New York Clearing House funds,] for payment on the [fifth] [sixth] New York Business Day following the Valuation Date for such Index Warrants. Capitalized terms included herein but not defined have the meanings assigned thereto in the Index Warrant Agreement 64 2 dated as of , among Lehman Brothers Holdings Inc., Citibank, N.A., as Index Warrant Agent as Index Warrant Agent, and Lehman Brothers Inc. as Calculation Agent. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature 65 D-1 NOTICE OF REJECTION [For Warrants Represented by Warrant Certificates] [Name of Warrantholder] [Address] You are hereby notified that [the Exercise Notice delivered by you was determined by us not to have been [duly completed] [in proper form]] [the Index Warrants to which the Exercise Notice delivered by you relates were not received at the Warrant Agent's Office], as set forth in the Index Warrant Agreement, dated as of , among Lehman Brothers Holdings Inc., Citibank, N.A., as Index Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Accordingly, we have rejected your Exercise Notice. Capitalized terms used but not defined herein have the meanings assigned thereto in the Index Warrant Agreement. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature 66 D-2 NOTICE OF REJECTION [For Index Warrants Represented by the Global Warrant Certificate] [Name of Depository Participant] [Address] You are hereby notified that [the Exercise Notice delivered by you was determined by us not to have been [duly completed] [in proper form]] [the Index Warrants to which the Exercise Notice delivered by you relates were not transferred to our DTC Participant Account No. _________], as set forth in the Index Warrant Agreement, dated as of , among Lehman Brother Holdings, Inc., Citibank, N.A., as Index Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Accordingly, we have rejected your Exercise Notice. Capitalized terms used but not defined herein have the meanings assigned thereto in the Index Warrant Agreement. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature 67 EXHIBIT E NOTICE OF REJECTION RELATING TO LIMIT OPTION [Name of Warrantholder or Depository Participant] [Address] We refer to your Exercise Notice dated , 19 , with respect to Index Warrants that were subject to the Limit Option. The applicable Limit Option Reference Index for such Index Warrants is and the Spot Index for the date that would otherwise be the Valuation Date for such Index Warrants is . Such Spot Index exceeds the Limit Option Reference Index on the Exercise Date by 50 Index points or more. Accordingly, we have rejected such Exercise Notice pursuant to the Limit Option. Capitalized terms included herein but not defined have the meanings assigned thereto in the Warrant Agreement dated as of , among Lehman Brothers Holdings Inc., Citibank, N.A., as Index Warrant Agent and Lehman Brothers Inc., as Calculation Agent. Dated: , 19 CITIBANK, N.A., as Warrant Agent, by ---------------------- Authorized Signature EX-5 4 OPINION OF DAVID MARCUS, ESQ. 1 LEHMAN BROTHERS HOLDINGS INC. THREE WORLD FINANCIAL CENTER NEW YORK, NY 10285 May 16, 1994 Securities and Exchange Commission 450 Fifth Street, NW Washington, DC 20549 Gentlemen: I am General Counsel of Lehman Brothers Holdings Inc., a Delaware corporation ("Holdings"). A Registration Statement on Form S-3 (the "Registration Statement"), under the Securities Act of 1933, as amended (the "Act"), was filed by the Company with the Securities and Exchange Commission on the date hereof. The Registration Statement relates to the registration of debt securities (the "Debt Securities") and warrants consisting of (i) senior debt (the "Senior Debt") and subordinated debt (the "Subordinated Debt"), (ii) warrants to purchase Debt Securities ("Debt Warrants"), (iii) warrants entitling the holders thereof to receive from Holdings, upon exercise, the cash value of the right to purchase or to sell a certain amount of one currency or currency unit for a certain amount of a different currency or currency unit ("Currency Warrants"), all as shall be designated by Holdings at the time of offering, (iv) warrants entitling the holders thereof to receive from Holdings, upon exercise, an amount in cash determined by reference to decreases or increases in the level of a specified index (an "Index") which may be based on one or more U.S. or foreign stocks, bonds or other securities, one or more U.S. or foreign interest rates, one or more currencies or currency units, or any combination of the foregoing, or determined by reference to the differential between any two Indices ("Index Warrants") and (v) warrants entitling the holders thereof to receive from Holdings, upon exercise, an amount in cash determined by reference to decreases or increases in the yield or closing price of one or more specified debt instruments issued either by the United States government or by a foreign government (the "Debt Instruments"), in the interest rate or interest rate swap established from time to time by one or more specified financial institutions (the "Rates") or in any specified combination of Debt Instruments and/or Rates ("Interest Rate Warrants" and, together with the Debt Warrants, Currency Warrants and Index Warrants, the "Warrants"), for aggregate proceeds of up to U.S.$500 million or the equivalent thereof in one or more foreign currencies or foreign currency units (such amount being the aggregate proceeds to Holdings from all Debt Securities issued and the exercise price of any Debt Securities issuable upon the exercise of any Debt Warrants) which the Company may offer from time to time in one or more series. In that connection, I or members of my staff have examined and relied upon originals or 2 LETTER TO SECURITIES AND EXCHANGE COMMISSION MAY 16, 1994 PAGE 2 copies, certified or otherwise identified to our satisfaction, of such documents, corporate records, certificates and instruments relating to Holdings as I have deemed relevant and necessary to the formation of the opinion hereinafter set forth. In such examination, I have assumed the genuineness and authenticity of all documents examined by us or members of my staff and all signatures thereon, the legal capacity of all persons executing such documents, the conformity to originals of all copies of documents submitted to us and the truth and correctness of any representations and warranties contained therein. Based upon the foregoing, I am of the opinion that: (i) the Senior Debt is duly authorized, the indenture pursuant to which the Senior Debt will be issued (the "Senior Indenture"), between Holdings and Citibank, N.A., as Trustee (the "Senior Debt Trustee"), has been duly executed and delivered, and, the Senior Debt, when duly executed by Holdings, authenticated by the Senior Debt Trustee in accordance with the terms of the Senior Indenture and issued and delivered against payment therefor, will be legally issued and will constitute a valid and binding obligation of Holdings entitled to the benefits of the Senior Indenture; (ii) the Subordinated Debt is duly authorized and, when the Indenture pursuant to which the Subordinated Debt will be issued (the "Subordinated Indenture") between Holdings and Chemical Bank, as Trustee (the "Subordinated Debt Trustee") has been duly executed and delivered, the Subordinated Debt, when duly executed by Holdings, authenticated by the Subordinated Debt Trustee in accordance with the terms of the Subordinated Indenture and issued and delivered against payment therefor, will be legally issued and will constitute a valid and binding obligations of Holdings entitled to the benefits of the Subordinated Indenture; and (iii) the Warrants are duly authorized and, when a Warrant Agreement pursuant to which any of the Warrants will be issued (any such agreement a "Warrant Agreement") between Holdings and Citibank, N.A., as Warrant Agent (the "Warrant Agent") has been duly executed and delivered, the Warrants, when duly executed by Holdings, authenticated by the Warrant Agent in accordance with the terms of the applicable Warrant Agreement and issued and delivered against payment therefor, will be legally issued and will constitute valid and binding obligations of Holdings entitled to the benefits of the applicable Warrant Agreement. In rendering this opinion, I express no opinion as to the laws of any jurisdiction other than the State of New York, the General Corporation Law of the State of Delaware and the United States of America. I hereby consent to the filing of this opinion as an exhibit to the Registration Statement and to the reference to me under the caption "Legal Opinions" in the Registration Statement, without admitting that I am an "expert" under the Act, or the rules and regulations of the 3 LETTER TO SECURITIES AND EXCHANGE COMMISSION MAY 16, 1994 PAGE 3 Securities and Exchange Commission issued thereunder, with respect to any part of the Registration Statement, including this exhibit. Very truly yours, David Marcus General Counsel EX-23.B 5 CONSENT OF ERNST & YOUNG 1 EXHIBIT 23(b) CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Independent Accountants" in the Registration Statement on Form S-3 and post effective amendments to the Registration Statement of Lehman Brothers Holdings Inc. (formerly Shearson Lehman Brothers Holdings Inc., the "Company") for the registration of debt securities, debt warrants, currency warrants, index warrants and interest rate warrants and to the incorporation by reference therein of our report dated February 3, 1994, except for Note 2, as to which the date is April 4, 1994 with respect to the consolidated financial statements and schedules of Lehman Brothers Holdings Inc. and Subsidiaries included in its Current Report (Form 8-K) dated April 14, 1994, which supersedes in its entirety the consolidated financial statements and schedules included in the Company's Annual Report (Form 10-K) for the year ended December 31, 1993, both filed with the Securities and Exchange Commission. ERNST & YOUNG New York, New York May 16, 1994 EX-25.A 6 FORM T-1 (CITIBANK) 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ----------------------------- FORM T-1 STATEMENT OF ELIGIBILITY UNDER THE TRUST INDENTURE ACT OF 1939 OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE Check if an application to determine eligibility of a Trustee pursuant to Section 305 (b)(2) ____ ----------------------------- CITIBANK, N.A. (Exact name of trustee as specified in its charter) 13-5266470 (I.R.S. employer Identification no.) 399 Park Avenue, New York, New York 10043 (Address of principal executive office) (Zip Code) ----------------------------- LEHMAN BROTHERS HOLDINGS INC. (Exact name of obligor as specified in its charter) Delaware 13-3216325 (State or other jurisdiction of (I.R.S. employer incorporation or organization) Identification no.) American Express Tower World Financial Center New York, NY 10285 (Address of principal executive offices) (Zip Code) ----------------------------- Debt Securities (Title of the indenture securities) 2 Item 1. GENERAL INFORMATION. Furnish the following information as to the trustee: (a) Name and address of each examining or supervising authority to which it is subject. Name Address ---- ------- Comptroller of the Currency Washington, D.C. Federal Reserve Bank of New York New York, NY Federal Deposit Insurance Corporation Washington, D.C.
(b) Whether it is authorized to exercise corporate trust powers. Yes. Item 2. AFFILIATIONS WITH OBLIGOR. If the obligor is an affiliate of the trustee, describe each such affiliation. None. Item 16. LIST OF EXHIBITS. Exhibit 1 - Copy of Articles of Association of the Trustee, as now in effect. (Exhibit 1 to T-1 to Registration Statement No. 2-79983) Exhibit 2 - Copy of certificate of authority of the Trustee to commence business. (Exhibit 2 to T-1 to Registration Statement No. 2-29577). Exhibit 3 - Copy of authorization of the Trustee to exercise corporate trust powers. (Exhibit 3 to T-1 to Registration Statement No. 2-55519) Exhibit 4 - Copy of existing By-Laws of the Trustee. (Exhibit 4 to T-1 to Registration Statement No. 33-34988) Exhibit 5 - Not applicable. Exhibit 6 - The consent of the Trustee required by Section 321(b) of the Trust Indenture Act of 1939. (Exhibit 6 to T-1 to Registration Statement No. 33-19227.) Exhibit 7 - Copy of the latest Report of Condition of Citibank, N.A. (as of December 31, 1993 - attached) Exhibit 8 - Not applicable. Exhibit 9 - Not applicable. 2 3 -------------------- SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939, the Trustee, Citibank, N.A., a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in The City of New York and State of New York, on the 11th day of April, 1994. CITIBANK, N.A. By: /s/P. DeFelice -------------- Vice President 3 -----END PRIVACY-ENHANCED MESSAGE-----