LEHMAN BROTHERS HOLDINGS INC, S-3, 1994-05-16

LEHMAN BROTHERS HOLDINGS INC
S-3, 1994-05-16
SECURITY BROKERS, DEALERS & FLOTATION COMPANIES

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 16, 1994
REGISTRATION NO. 33-
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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)

<TABLE>
<S> <C>
DELAWARE 13-3216325
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
</TABLE>

------------------------

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

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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

<TABLE>
<CAPTION>
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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
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Debt Securities.................... U.S.$500,000,000(d)(e) 100%
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Debt Warrants...................... (g) (g)
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Currency Warrants.................. (h) (h) U.S.$500,000,000(f) U.S.$172,415
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Index Warrants..................... (i) (i)
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Interest Rate Warrants............. (j) (j)
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</TABLE>

(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.
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<PAGE> 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
<PAGE> 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
<PAGE> 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:

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED DECEMBER 31, MARCH 31,
- ----------------------------------------- ------------------
1989 1990 1991 1992 1993 1994
- ----- ----- ----- ----- ----- ------------------
<S> <C> <C> <C> <C> <C>
1.01 * 1.03 * 1.00 1.06
</TABLE>

- ---------------
* 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
<PAGE> 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
<PAGE> 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
<PAGE> 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

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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

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<PAGE> 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

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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

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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

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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).

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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."

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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.

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<PAGE> 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).

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<PAGE> 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".

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<PAGE> 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.

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<PAGE> 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

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<PAGE> 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

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<PAGE> 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.

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<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>

===============================================================================

LEHMAN BROTHERS
HOLDINGS INC.

DEBT SECURITIES,
DEBT WARRANTS, CURRENCY
WARRANTS, INDEX WARRANTS
AND INTEREST RATE WARRANTS
------------------------

PROSPECTUS
, 1994

------------------------

===============================================================================
<PAGE> 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).

<TABLE>
<S> <C>
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
--------
--------
</TABLE>

- ---------------
* 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------------- --------------------------- -------------------
<C> <S> <C>
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
</TABLE>

II-4
<PAGE> 32

<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
- ----------------------------------------- --------------------------- -------------------
<C> <S> <C>
/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
</TABLE>

II-5
<PAGE> 33

EXHIBIT INDEX

<TABLE>
<CAPTION>
FILED HEREWITH (--),
PREVIOUSLY FILED (*) PAGE NUMBER
EXHIBIT OR INCORPORATED BY REFERENCE IN SEQUENTIAL
NUMBER DESCRIPTION TO NUMBERING SYSTEM
- ------ ----------- ---------------------------- ----------------
<S> <C><C> <C>
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
</TABLE>

E-1
<PAGE> 34

<TABLE>
<CAPTION>
FILED HEREWITH (--),
PREVIOUSLY FILED (*) PAGE NUMBER
EXHIBIT OR INCORPORATED BY REFERENCE IN SEQUENTIAL
NUMBER DESCRIPTION TO NUMBERING SYSTEM
- ------ --------------------------------- ------------------------------ ----------------
<S> <C> <C> <C> <C>
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
</TABLE>

E-2

<PAGE> 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

-------------------------------------------------

<PAGE> 2
TABLE OF CONTENTS(1)

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
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
</TABLE>

- --------------------
(1) The Table of Contents is not a part of the Currency Warrant
Agreement

- i -

<PAGE> 3

<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
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
</TABLE>

- ii -

<PAGE> 4

<TABLE>
<Caption
Page
----
<S> <C> <C>
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

</TABLE>

- iii -

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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.

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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.,

<PAGE> 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.

<PAGE> 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

<PAGE> 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.

<PAGE> 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.

<PAGE> 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

<PAGE> 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

<PAGE> 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.

<PAGE> 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

<PAGE> 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,

<PAGE> 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.

<PAGE> 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:

<PAGE> 31

Annex 1

Defined Terms

<TABLE>
<CAPTION>
Page
<S> <C>
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
</TABLE>

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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.

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.

<PAGE> 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: ( )

<PAGE> 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

<PAGE> 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

<PAGE> 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).

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

<PAGE> 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

<PAGE> 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.

<PAGE> 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

<PAGE> 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.

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.

<PAGE> 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

<PAGE> 48
2

[NAME OF DEPOSITORY
PARTICIPANT]
(Participant Number]

by
----------------------
Authorized Signature

Address:

Telephone: ( )

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

<PAGE> 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

-------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS1/

<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>

- --------------------

1/ The Table of Contents is not a part of the Index Warrant
Agreement

- i -
<PAGE> 3

<TABLE>
<CAPTION>
Page
<S> <C> <C>
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
</TABLE>

- ii -
<PAGE> 4
Page

<TABLE>
<S> <C> <C>
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
</TABLE>

- iii -
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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.

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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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;
<PAGE> 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)
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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;
<PAGE> 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
<PAGE> 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
<PAGE> 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)
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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,
<PAGE> 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
<PAGE> 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.
<PAGE> 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
<PAGE> 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
<PAGE> 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.
<PAGE> 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:
<PAGE> 39
Annex 1

<TABLE>
<CAPTION>
Defined Terms
-------------

Page
----
<S> <C>
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
</TABLE>

- i -
<PAGE> 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,
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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.
<PAGE> 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

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
<PAGE> 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
<PAGE> 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.
<PAGE> 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.
<PAGE> 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
<PAGE> 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: ( )
<PAGE> 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").

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
<PAGE> 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 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.

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
<PAGE> 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
<PAGE> 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

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.

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.
<PAGE> 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.

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.
<PAGE> 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:
<PAGE> 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: ( )
<PAGE> 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
<PAGE> 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 .

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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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

<PAGE> 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
<PAGE> 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
<PAGE> 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

<PAGE> 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

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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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) ____

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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)

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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)

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Debt Securities
(Title of the indenture securities)
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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.

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<S> <C>
Name Address
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Comptroller of the Currency Washington, D.C.
Federal Reserve Bank of New York New York, NY
Federal Deposit Insurance Corporation Washington, D.C.
</TABLE>

(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.

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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
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Vice President