LEHMANBROTHERS HOLDINGS INC. Lehman Notes, Series B DISTRIBUTION AGREEMENT

Exhibit 1.02

LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

DISTRIBUTION AGREEMENT

May 18, 2005

To the Agents listed on
the signature page hereto

Ladies and Gentlemen:

Lehman Brothers Holdings Inc., a Delaware corporation (the “Company”), confirms its agreement with you (the “Agents”) with respect to the issue and sale by the Company of up to $5,000,000,000 aggregate principal amount of its Lehman Notes, Series B, (the “Lehman Notes” or the “Securities”).  The Securities are to be issued pursuant to an indenture, dated as of September 1, 1987, as amended and supplemented to date (as amended, the “Indenture”), between the Company and Citibank, N.A., as trustee (the “Trustee”).

Subject to the terms and conditions stated herein and subject to the reservation by the Company of the right to sell Securities directly on its own behalf at any time, to any person, and the right to enter into agreements substantially identical hereto with other agents, the Company hereby (i) appoints each of you as agent of the Company for the purpose of soliciting offers to purchase the Securities from the Company in accordance with the terms hereof and (ii) agrees that whenever the Company determines to sell Securities pursuant to this Agreement, such Securities shall be sold pursuant to a Terms Agreement (as defined herein) relating to such sale in accordance with the provisions of Section 3(a) hereof between the Company and Lehman Brothers Inc. (the “Lead Agent”), pursuant to which the Lead Agent shall purchase such Securities as principal for resale to the public or for resale to one or more of the other Agents or dealers, each of whom will purchase as principal for resale to the public or to other dealers, as further set forth in this Agreement.  This Agreement shall only apply to sales of the Securities and not to sales of any other securities or evidences of indebtedness of the Company and only on the specific terms set forth herein.

SECTION 1.  Representations and Warranties.  The Company represents and warrants to the Agents as of the date hereof, as of the Closing Date referred to in Section 2(c) hereof, and as of the times referred to in Section 8(a) hereof (the Closing Date and each such time being hereinafter sometimes referred to as a “Representation Date”), as follows:

(a)           The Company meets the requirements for the use of Form S-3 under the Securities Act of 1933, as amended (the “Securities Act”), and the rules and regulations promulgated thereunder (the “Rules and Regulations”), and has carefully prepared and filed with the Securities and Exchange Commission (the “Commission”) one or more registration statements on
Form S-3 (file number 333-121067), which have become effective, for the

registration of the Securities under the Securities Act.  The registration statement, as amended at the date of this Agreement, meets the requirements set forth in Rule 415(a)(1)(ix) under the Securities Act and complies in all other material respects with such rule.  The Company has filed with the Commission pursuant to Rule 424 under the Securities Act (“Rule 424”) a supplement to the form of prospectus included in the registration statement relating to the offering of the Securities and the plan of distribution thereof.  The term “Registration Statement” means the registration statement, as amended at the date of this Agreement and as from time to time amended and supplemented hereafter, including the exhibits thereto, financial statements, and all documents incorporated therein by reference pursuant to Form S-3 (the “Incorporated Documents”).  Such form of prospectus included in the registration statement, including the Incorporated Documents, is hereinafter referred to as the “Basic Prospectus”; and such supplemented form of prospectus, in the form in which it was filed with the Commission pursuant to Rule 424 (including the Basic Prospectus as so supplemented), is hereinafter called the “Prospectus”.  Any reference herein to the Registration Statement, the Basic Prospectus or the Prospectus shall be deemed to refer to and include the Incorporated Documents filed under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and any reference herein to the terms “amend”, “amendment” or “supplement” with respect to the Registration Statement, the Basic Prospectus or the Prospectus shall be deemed to refer to and include the filing of any Incorporated Documents under the Exchange Act after the date of this Agreement or the issue date of the Basic Prospectus or the Prospectus, as the case may be, and deemed to be incorporated therein by reference.

(b)           As of the applicable Representation Date and at all times during each period during which solicitations of offers to purchase Securities have not been suspended or during which, in the opinion of counsel to the Agents, a prospectus relating to the Securities is required to be delivered under the Securities Act (each a “Marketing Period”), the Registration Statement, the Prospectus and any such amendment or supplement will comply in all material respects with the applicable requirements of the Securities Act and the Rules and Regulations, and the Incorporated Documents will comply in all material respects with the requirements of the Exchange Act or the Securities Act, as applicable, and the rules and regulations adopted by the Commission thereunder and will have been timely filed as required thereby; the Indenture has been qualified under and complies in all material respects with the Trust Indenture Act of 1939, as amended (the “Trust Indenture Act”); on the date it became effective, the Registration Statement did not, and, on the date that any post-effective amendment to the Registration Statement becomes effective, the Registration Statement as amended by such post-effective amendment did not or will not, as the case may be, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; the Prospectus, as it may be amended or supplemented, does not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they are made, not misleading; the Incorporated Documents comply in all material respects with the applicable provisions of the Exchange Act and rules and regulations of the Commission thereunder, and, when read together with the Prospectus, or the Prospectus as it may be then amended or supplemented, will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they are made, not misleading; provided that the foregoing representations and warranties in this paragraph (b) shall not apply to statements or omissions

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made in reliance upon and in conformity with written information furnished to the Company by the Agents specifically for use in connection with the preparation of the Registration Statement or the Prospectus, as they may be amended or supplemented, or to any statements in or omissions from the statement of eligibility and qualification on Form T-1 of the Trustee under the Trust Indenture Act (“Form T-1”). The Commission has not issued an order preventing or suspending the use of the Basic Prospectus or the Prospectus.

(c)           The nationally recognized independent registered public accounting firm whose report appears in the Company’s most recent Annual Report on Form 10-K, which is incorporated by reference in the Prospectus, are independent public accountants as required by the Securities Act and the Rules and Regulations.  In the event that a report of a nationally recognized independent registered public accounting firm regarding historical financial information with respect to any entity acquired by the Company is required to be incorporated by reference in the Prospectus, such independent public accountants were independent public accountants, as required by the Securities Act and the Rules and Regulations, during the period of their engagement to examine the financial statements being reported on and at the date of their report.

(d)           The audited consolidated financial statements of the Company included in the Prospectus and the Registration Statement present, and will present, as of the applicable Representation Date and during each Marketing Period, fairly on a consolidated basis the financial position, the results of operations, changes in common stock and stockholder’s equity and cash flows of the Company and its subsidiaries as of the respective dates and for the respective periods indicated, all in conformity with generally accepted accounting principles applied on a consistent basis throughout the periods involved.  The unaudited consolidated financial statements of the Company, if any, included in the Prospectus and the Registration Statement and the related notes are, and will be, as of the applicable Representation Date and during each Marketing Period, true, complete and correct, subject to normally recurring changes resulting from year-end audit adjustments, and prepared in accordance with Regulation S-X of the Rules and Regulations.

(e)           Except as described in or contemplated by the Registration Statement and the Prospectus, there has not been any material adverse change in, or any adverse development which materially affects, the business, properties, financial condition or results of operations of the Company or the Company and its subsidiaries taken as a whole from the dates as of which information is given in the Registration Statement and the Prospectus.

(f)            The Securities conform to the description thereof contained in the Prospectus, are duly and validly authorized, and, when validly authenticated, issued and delivered in accordance with the Indenture and sold as provided in this Agreement, will be validly issued and outstanding obligations of the Company entitled to the benefits of the Indenture.

(g)           Neither the Company nor any of the Significant Subsidiaries (as defined below) is in violation of its organizational documents or in default under any agreement, indenture or instrument, the effect of which violation or default would be material to the Company and its subsidiaries taken as a whole.  The execution, delivery and performance of this Agreement and the consummation of the related transactions described in the Registration

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Statement will not conflict with, result in the creation or imposition of any material lien, charge or encumbrance upon any of the assets of the Company or any of its Significant Subsidiaries pursuant to the terms of, or constitute a default under, any material agreement, indenture or instrument, or result in a violation of the organizational documents of the Company or any of its Significant Subsidiaries or any order, law, rule or regulation of any court or governmental agency having jurisdiction over the Company, any of its Significant Subsidiaries or their property.  Except as set forth in the Prospectus or as required by the Securities Act, the Exchange Act, the Trust Indenture Act and applicable state securities laws, no consent, authorization or order of, or filing or registration with, any court or governmental agency is required for the execution, delivery and performance of this Agreement. “Significant Subsidiary” means any subsidiary of the Company with assets greater than or equal to 7.5% of the assets of the Company and its subsidiaries determined on a consolidated basis in accordance with GAAP (the “Consolidated Assets”).  For the purposes of this definition, the Consolidated Assets at any time shall be determined on the basis of the financial statements in the Company’s most recent Quarterly Report on Form 10-Q or Annual Report on Form 10-K, as the case may be, filed with the Commission.

(h)           Each of the Company and the Significant Subsidiaries have been duly organized, are validly existing and in good standing under the laws of their respective jurisdictions of formation, are duly qualified to do business and in good standing as foreign corporations and are duly registered as a broker-dealer, broker, dealer or investment advisor, as the case may be, in each jurisdiction in which their respective ownership of property or the conduct of their respective businesses requires such qualification or registration and in which the failure to qualify or register would be reasonably likely, individually or in the aggregate, to have a material adverse effect on the business, condition or properties of the Company and its subsidiaries taken as a whole (a “Material Adverse Effect”).  Each of the Company and the Significant Subsidiaries holds all material licenses, permits, and certificates from governmental authorities necessary for the conduct of its business and owns, or possesses adequate rights to use, all material rights necessary for the conduct of such business and has not received any notice of material conflict with the asserted rights of others in respect thereof, except in each case where the failure to do so would not be reasonably likely, individually or in the aggregate, to have a Material Adverse Effect; and each of the Company and the Significant Subsidiaries has the power and authority necessary to own or hold its properties and to conduct the businesses in which it is engaged.  Except as may be disclosed in the Registration Statement and the Prospectus, all outstanding shares of capital stock of the Significant Subsidiaries have been duly authorized and are validly issued and outstanding, fully paid and non-assessable and, except for directors’ qualifying shares, are owned by the Company, directly or indirectly through subsidiaries, free and clear of any lien, pledge and encumbrance or any claim of any third party.

(i)            Except as described in the Registration Statement and the Prospectus, there is no material litigation or governmental proceeding pending or, to the knowledge of the Company, threatened against the Company or any of its subsidiaries which might reasonably be expected to have a Material Adverse Effect or which is required to be disclosed in the Registration Statement and the Prospectus.

(j)            The certificates delivered pursuant to paragraph (d) of Section 7 hereof and all other documents delivered by the Company or its representatives in connection with the issuance

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and sale of the Securities were on the dates on which they were delivered, or will be on the dates on which they are to be delivered, in all material respects true and complete.

(k)           Any certificate signed by any officer of the Company and delivered to the Lead Agent or to counsel for the Agents in connection with an offering of the Securities to one or more Agents through the Lead Agent shall be deemed a representation and warranty by the Company to such Agent or Agents as to the matters covered thereby on the date of such certificate and, unless subsequently amended or supplemented, at each Representation Date subsequent thereto.

SECTION 2.  Solicitations as Agent.  (a)  On the basis of the representations and warranties contained herein, but subject to the terms and conditions herein set forth, the Agents agree to use their reasonable best efforts to solicit offers to purchase the Securities upon the terms and conditions set forth herein and in the Prospectus.  The Agents agree to solicit offers to purchase only as permitted or contemplated by the Prospectus and herein.  The Company reserves the right, in its sole discretion, to suspend solicitation of offers to purchase the Securities commencing at any time for any period of time or permanently.  Upon receipt of at least one business day’s prior notice from the Company, orally or in writing, the Agents will forthwith suspend solicitation of offers to purchase Securities from the Company until such time as the Company has advised the Agents that such solicitation may be resumed.  The Agents are authorized to solicit offers to purchase the Securities only in denominations of $1,000 or any amount in excess thereof which is an integral multiple of $1,000, at a purchase price equal to 100% of the principal amount thereof, plus accrued interest, if any, or such other denominations or purchase price as shall be specified by the Company (the “Offering Price”). Unless otherwise instructed by the Company, the Lead Agent shall communicate to the Company, orally or in writing, each reasonable offer to purchase Securities received by the Agents.  The Company shall have the sole right to accept offers to purchase the Securities and may reject any such offer in whole or in part.  Each Agent shall have the right, in its discretion reasonably exercised without advising the Company, to reject any offer to purchase the Securities received by it in whole or in part, and any such rejection shall not be deemed a breach of its agreement contained herein.  Unless authorized by the Lead Agent in each instance, each Agent agrees not to submit an offer to purchase Securities for which an order from a purchaser has not been received.

(b)           Administrative procedures relating to the issue and delivery of, the solicitation of purchases of and payment for, the Securities shall be as set forth in Exhibit A hereto (the “Procedures”).  The provisions of the Procedures shall apply to all transactions contemplated hereunder.  The Agents and the Company agree to perform the respective duties and obligations specifically provided to be performed by each of them herein and in the Procedures.  The Procedures may only be amended by agreement of the Company and the Lead Agent, on behalf of the Agents.

(c)           The documents required to be delivered by Section 7 hereof shall be delivered at the offices of Lehman Brothers Inc., 745 Seventh Avenue, New York, New York 10019, no later than 10:00 A.M., New York City time, on the date of this Agreement or at such later time as may be mutually agreed by the Company and the Lead Agent, which in no event shall be later than the time at which the Agents commence solicitation of purchasers of Securities hereunder, such time and date be herein called the “Closing Date.”

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(d)           The Company may from time to time appoint one or more additional financial institutions experienced in the distribution of securities similar to the Securities (each such additional institution herein referred to as an “Additional Agent”) as agent(s) hereunder pursuant to a letter (an “Agent Accession Letter”) substantially in the form attached hereto as Exhibit B to this Agreement, whereupon each such Additional Agent shall, subject to the terms and conditions of this Agreement and the Agent Accession Letter, become a party to this Agreement as an agent, vested with all the authority, rights and powers and subject to all the duties and obligations of an Agent as if originally named as an Agent hereunder.  If the Company shall appoint any Additional Agent(s) pursuant to an Agent Accession Letter in accordance with this subsection (d), the Company shall provide each Agent with a copy of such executed Agent Accession Letter.

(e)           Each Agent acknowledges and agrees, with respect to communications in accordance with the Procedures via live.lehman.com, or such other website as may be from time to time maintained for use in connection with the Securities (the “Lehman Notes Website”), (i) that it is responsible for maintaining the confidentiality of the log-on and password it uses to access the Lehman Notes Website, (ii) that it is fully responsible for all activities that occur using its log-on and password, (iii) to notify the Company and the Lead Agent immediately of any unauthorized use of its log-on or password or any other breach of security and (iv) that it will not use the log-on or password of any other person at any time.

SECTION 3.  Purchases as Principal.  (a)  Each sale of Securities shall be made in accordance with the terms of this Agreement and a separate agreement to be entered into between the Company and the Lead Agent which will provide for the sale of such Securities to, and the purchase of and reoffering thereof by, the Lead Agent as principal (a “Terms Agreement”).  Each such Terms Agreement, which may be oral (in which case a written confirmation of terms shall be delivered by the Lead Agent to the Company), shall be substantially in the form attached hereto as Exhibit C or in such other form as the Company and the Lead Agent may agree.  The agreement of the Lead Agent to purchase Securities pursuant to any Terms Agreement, unless otherwise set forth therein, shall be deemed to be made on the basis of the representations, warranties and agreements of the Company herein contained and shall be subject to the terms and conditions herein set forth.  Each Terms Agreement shall describe the Securities to be purchased pursuant thereto by the Lead Agent as principal, and shall specify, among other things, the principal amount of Securities to be purchased, the interest rate and maturity date of such Securities, the interest payment dates, the Offering Price, the Agents’ Concession (as defined below) to be paid to the Lead Agent, the Dealers’ Concession (as defined below), the Reallowance (as defined below), if any, the net proceeds to the Company, the time of delivery of and payment for such Securities (the “Settlement Date”), whether the Securities are redeemable or repayable, including pursuant to a Survivor’s Option (as defined in the Prospectus), and on what terms and conditions, whether there are any additional conditions precedent to the obligations of the Lead Agent under such Terms Agreement and any other relevant terms.

(b)           Upon the closing of the sale of any Securities sold by the Company to the Lead Agent pursuant to a Terms Agreement as a result of a solicitation made by the Agents, the Company agrees to pay the Lead Agent a concession in accordance with the schedule set forth in Exhibit D hereto applicable to such Security or such other concession upon which the Company

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and the Lead Agent agree in the form of a discount on the principal amount of notes sold (the “Agents’ Concession”).  The Agents’ Concession shall be set forth in the applicable Terms Agreement and Pricing Supplement (as defined below).  The Lead Agent and the other Agents will share the Agents’ Concession in such proportions as they and the Company may agree.

(c)           Unless otherwise agreed to by the Lead Agent, each Agent shall purchase from the Lead Agent as principal for resale to the public, or to other dealers as set forth in Section 3(c) below, such aggregate principal amount of Securities with respect to which it has communicated offers to purchase to the Lead Agent (the “Commitment Amount”).  The agreement of each Agent to purchase Securities from the Lead Agent shall be deemed to be made on the basis of the representations, warranties and agreements of the Company herein contained and shall be subject to the terms and conditions herein set forth.  Each Agent agrees to deliver to the Lead Agent on the Settlement Date (or on such later date as may be specified by the Lead Agent) and at the place specified by the Lead Agent immediately available funds, payable to the order of the Lead Agent, for (i) an amount equal to the Offering Price, less the applicable Agents’ Concession in respect of such Agent’s Commitment Amount or (ii) such other amount as the Lead Agent shall advise such Agent.  The Lead Agent will make payment to the Company against delivery to the Lead Agent for each Agent’s account of the Securities to be purchased by each Agent, and the Lead Agent will deliver to each Agent the Securities paid for by such Agent.  If the Lead Agent has determined that transactions in the Securities are to be settled through the facilities of DTC or another clearinghouse facility, payment for and delivery of Securities purchased by each Agent shall be made through such facilities, if such Agent is a member, or, if such Agent is not a member, settlement shall be made through such Agent’s ordinary correspondent who is a member.

(d)           In connection with the resale of the Securities purchased, the Agents may engage the services of broker-dealers in connection with the resale of the Securities (each, a “Dealer”); and such Agent may sell Securities to a Dealer at a price not less than the Offering Price less the applicable concession to dealers set forth in the applicable Pricing Supplement (the “Dealers’ Concession”); provided, however, that:

i)              Each Agent agrees that any Dealer it may engage will agree that (i) such Dealer is either (a) a member in good standing of the National Association of Securities Dealers, Inc. (the “NASD”) or (b) a foreign dealer foreign dealer not eligible for membership in the NASD and (ii) (a) if such Dealer is a member of the NASD, such Dealer will comply with the requirements of NASD Conduct Rule 2740 and Interpretive Material-2740 of the Conduct Rules of the NASD, and such Dealer will not grant any concessions, discounts or other allowances which are not permitted by that section or (b) if such Dealer is a foreign dealer not eligible for membership in the NASD, such Dealer will not make any sales of the Securities in, or to nationals or residents of, the United States, its territories or its possessions, and that in making any sales of the Securities such Dealer will comply, as though it is a member of the NASD, with (A) the requirements of the NASD Conduct Rule 2730 and Interpretive Material-2730, NASD Conduct Rule 2750 and Interpretive Material-2750, and NASD Conduct Rule 2420 and Interpretive Material 2420-1 and (B) to the extent applicable to such Dealer, the requirements of the NASD Conduct Rule 2420 and Interpretive Material 2420-1;

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ii)             Each Agent agrees that any Dealer it may engage will agree to comply with the duties and obligations of the Agents set forth in Sections 5(a) and 5(b) as if applicable to such Dealer; and

iii)            Each Agent agrees that any Dealer it may engage will agree that (i) such Dealer will offer the Securities to the public at the Offering Price and (ii) such Dealer will not reallow a discount on sales to other dealers in an amount in excess of the reallowance set forth in the applicable Pricing Supplement, if any (the “Reallowance”).

SECTION 4.  Covenants of the Company.  The Company covenants and agrees with the Agents that it will furnish (to the extent it has not already done so) to each of the Agents and Simpson Thacher & Bartlett LLP, counsel to the Agents, a copy of the Registration Statement, including all exhibits, in the form it became effective and all of the amendments thereto and that:

(a)           The Company shall advise the Agents promptly of (i) the filing and the effectiveness of any amendment to the Registration Statement, (ii) the filing of (x) any supplement to the Prospectus relating to the Securities (other than an amendment or supplement providing solely for interest rates, redemption provisions, maturities or other terms of Securities or other information contemplated by the Prospectus or required by the Securities Act or the Rules and Regulations to be filed in a Pricing Supplement) or (y) any document relating to the Securities pursuant to the Exchange Act which will be incorporated by reference in the Prospectus, (iii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or any part thereof or the initiation or threat of any stop order proceeding and will use its best efforts to prevent the issuance of any stop order and to obtain as soon as possible its lifting, if issued or (vi) receipt by the Company of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threat of any proceeding for that purpose.

(b)           The Company will prepare, with respect to any Securities to be sold through or to the Agents pursuant to this Agreement, a pricing supplement with respect to such Securities in substantially the form attached hereto as Exhibit E (a “Pricing Supplement”) and will file such Pricing Supplement with the Commission pursuant to Rule 424(b) under the Securities Act not later than the time specified by such rule.

(c)           The Company will not file any registration statement with respect to the registration of additional Securities or any amendment to the Registration Statement or any amendment or supplement to the Prospectus (other than a prospectus supplement not relating to the Securities or an amendment or supplement providing solely for the interest rates, redemption provisions, maturities or other terms of Securities or other information contemplated by the Prospectus or required by the Securities Act or the Rules and Regulations to be filed in a Pricing Supplement or an amendment or supplement effected by the filing of a document with the Commission pursuant to the Exchange Act) in a form as to which counsel to the Agents shall reasonably object.

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(d)           If, during any Marketing Period, any event occurs as a result of which the Prospectus would include an untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it is necessary at any time to amend the Prospectus to comply with the Securities Act, the Company will notify the Agents promptly to suspend solicitation of purchases of the Securities and to cease sale of any Securities by the Lead Agent, and the Company will promptly prepare and file with the Commission an amendment or supplement which will correct such statement or omission or an amendment which will effect such compliance and will use its reasonable best efforts to cause any amendment of the Registration Statement containing an amended Prospectus to be made effective as soon as possible.

(e)           The Company will make generally available to its security holders an earnings statement which will satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Rules and Regulations covering each fiscal period beginning the first day of its fiscal year and ending the last day of each of its fiscal quarters.  Such earnings statement shall be made available within the period specified by the Commission (x) for Form 10-K in the case of the last fiscal quarter of the Company’s fiscal year, and (y) for Form 10-Q in the case of the first three fiscal quarters of the Company’s fiscal year.

(f)            The Company will file promptly all documents required to be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act.

(g)           The Company will furnish to the Agents without charge copies of the Prospectus and all amendments and supplements thereto, in each case as soon as available and in such quantities as are reasonably requested.

(h)           The Company will furnish such information, execute such instruments and take such actions as may be required to qualify the Securities for offering and sale under the laws of such jurisdictions as the Lead Agent may designate and will maintain such qualifications in effect so long as required for the sale of the Securities; provided, however, that the Company shall not be required to qualify to do business in any jurisdiction where it is not now so qualified or to take any action which would subject it to general or unlimited service of process in any jurisdiction where it is not now so subject.

SECTION 5.  Covenants of the Agents.  Each Agent covenants and agrees with the Lead Agent and each other Agent as follows:

(a)           The Lead Agent has notified each Agent that, other than registering the Securities under the Securities Act, no action has been or will be taken by the Company that would permit the offer or sale of the Securities or possession or distribution of the Prospectus or any other offering material relating to the Securities in any jurisdiction where action for that purpose is required. Accordingly, each Agent agrees that it will comply in all material respects with all applicable laws, rules and regulations of all jurisdictions and regulatory bodies governing the use and distribution of prospectuses.  Each Agent agrees that it will comply in all material respects with all applicable provisions of the Securities Act, provisions of the Rules and Regulations, provisions of the Exchange Act, provisions of the rules and regulations promulgated thereunder and regulations of self-regulatory bodies (including as to investor suitability)) and it

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will obtain any requisite consent, approval or permission (other than those obtained by the Company pursuant to Section 4(h)) for the purchase, offer or sale by such Agent of Securities under the laws and regulations in force in any such jurisdiction to which it is subject or in which it makes such purchase, offer or sale. None of the Company, the Lead Agent or any other Agent shall have any responsibility for determining what compliance is necessary by any one Agent or for obtaining any consents, approvals or permissions applicable to such one Agent. Each Agent further agrees that it will take no action that will impose any obligations additional to those expressly stated in this Agreement on the Company, the Lead Agent or any other Agents. Subject to the above, each Agent shall, if required by applicable law, furnish to each person to whom it offers, sells or delivers Securities a copy of the Prospectus, as then amended or supplemented, or, unless delivery of the Prospectus is required by applicable law, inform each such person that a copy thereof, as then amended or supplemented, will be made available upon request. Each Agent understands and agrees that it is not authorized to give any information or to make any representation not contained in the Prospectus or the documents incorporated by reference or specifically referred to therein in connection with the offer and sale of the Securities.

(b)           Each Agent agrees not to stabilize or engage in any syndicate covering transaction (as defined in Rule 100 of Regulation M under the Exchange Act) in connection with the offering of the Securities without the prior consent of the Lead Agent.

(c)           Each Agent understands and agrees that nothing contained in this Agreement shall constitute a partnership with the Lead Agent or with the other Agents and the obligations of such Agent and each of the other Agents are several and not joint.  Each Agent elects to be excluded from the application of Subchapter K, Chapter 1, Subtitle A, of the United States Internal Revenue Code of 1986, as amended.  Each Agent authorizes the Lead Agent, on behalf of such Agent, to execute such evidence of such election as may be required by the United States Internal Revenue Service.

SECTION 6.  Payment of Expenses.  The Company will pay (i) the costs incident to the authorization, issuance, sale and delivery of the Securities and any taxes payable in that connection, (ii) the costs incident to the preparation, printing and filing under the Securities Act of the Registration Statement and any amendments and exhibits thereto, (iii) the costs incident to the preparation, printing and filing of any document and any amendments and exhibits thereto required to be filed by the Company under the Exchange Act, (iv) the costs of distributing the Registration Statement, as originally filed, and each amendment and post-effective amendment thereof (including exhibits), any preliminary prospectus in any of the foregoing documents, (v) the fees and disbursements of the Trustee and its counsel, (vi) the cost of any filings with the National Association of Securities Dealers, Inc., (vii) the fees and disbursements of counsel to the Company and the Company’s accountants, (viii) the fees paid to rating agencies in connection with the rating of the Securities, (ix) the fees and expenses of qualifying the Securities under the securities laws of the several jurisdictions as provided in Section 4(h) hereof and of preparing and printing a Blue Sky Survey and a memorandum concerning the legality of the Securities as an investment (including fees and expenses of a single counsel to the Agents in connection therewith), (x) the fees and disbursements of a single counsel to the Agents, (xi) the costs relating to the development and maintenance of the Lehman Notes Website and (xii) all other costs and expenses incident to the performance of the Company’s obligations under this Agreement.

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SECTION 7.  Conditions of Obligations.  The obligations of each Agent, under this Agreement shall be subject to the accuracy in all material respects, on each Representation Date, of the representations and warranties of the Company contained herein, to the accuracy of any material statements of officers of the Company made in any certificates, opinions, affidavits, written statements or letters furnished to the Agents or counsel to the Agents pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder, and to each of the following additional conditions precedent:

(a)           No order suspending the effectiveness of the Registration Statement or suspending the qualification of the Indenture shall be in effect and no proceedings for such purpose shall be pending before or threatened by the Commission, and any requests for additional information on the part of the Commission (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the reasonable satisfaction of the Lead Agent.

(b)           At the Closing Date, the Company shall have furnished to the Agents the opinion of the Chief Legal Officer, General Counsel or an Associate General Counsel of the Company, addressed to the Agents and dated the Closing Date, to the effect that:

i)              The Company has been duly incorporated and is validly existing and in good standing as a corporation under the law of the jurisdiction of its incorporation and has full corporate power to conduct the businesses in which it is engaged as described in the Prospectus.  Each of the Significant Subsidiaries that is incorporated under the laws of the United States or any State or territory thereof (a “Domestic Significant Subsidiary”) is a duly incorporated and validly existing corporation in good standing under the law of its jurisdiction of incorporation, and has full corporate power and authority to own and operate its properties and conduct its business as described in the Prospectus.  Each of the Company and the Domestic Significant Subsidiaries is duly qualified to do business as a foreign corporation, is in good standing in its jurisdiction of incorporation and is duly registered as a broker-dealer, broker, dealer or investment advisor, as the case may be, in each jurisdiction in which the nature of the business conducted by it or in which the ownership or holding by lease of the properties owned or held by it requires such qualification or registration and where the failure to so qualify or register would have a Material Adverse Effect.

ii)             All the outstanding shares of capital stock of the Domestic Significant Subsidiaries have been duly authorized and are validly issued and outstanding and are fully paid and non-assessable and, except for directors’ qualifying shares, are owned by the Company or a subsidiary of the Company free and clear of any claims, liens, encumbrances and security interests.

iii)            The Securities and the Indenture conform in all material respects to the descriptions thereof contained in the Prospectus.

iv)           The Indenture has been duly authorized, executed and delivered by the Company, has been duly qualified under the Trust Indenture Act, and

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constitutes a valid and legally binding instrument enforceable against the Company in accordance with its terms; and the Securities have been duly authorized, executed and issued by the Company, and, when executed and authenticated as specified in the Indenture and delivered against payment therefor in accordance with this Agreement, will constitute valid and legally binding obligations of the Company entitled to the benefits of the Indenture; provided, however, that the foregoing is subject to the effects of bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors’ rights generally, from time to time in effect, to general equitable principles (whether considered in a proceeding at law or in equity) and by an implied covenant of good faith and fair dealing.

v)            No consent, approval, authorization, order, registration or qualification of any court or governmental agency or body is required for the consummation of the transactions contemplated in this Agreement, except for (1) such consents, approvals, authorizations, registrations or qualifications orders as have been obtained under the Securities Act and such as may be required under the Exchange Act, under state securities and Blue Sky laws of any jurisdiction, and (2) the qualification of the Indenture under the Trust Indenture Act, which has been obtained.

vi)           Such counsel does not know of any contracts or other documents which are required to be filed as exhibits to the Registration Statement by the Securities Act or by the Rules and Regulations which have not been filed as exhibits to the Registration Statement or incorporated therein by reference as permitted by the Rules and Regulations.

vii)          Such counsel does not know of any litigation or any governmental proceeding pending or threatened against the Company or any of its subsidiaries which would affect the subject matter of this Agreement or is required to be disclosed in the Prospectus which is not disclosed and correctly summarized (by incorporation by reference or otherwise) therein.

viii)         To such counsel’s knowledge, neither the Company nor any of the Domestic Significant Subsidiaries is in violation of its corporate charter or by-laws, nor in default under any material agreement, indenture or instrument known to such counsel, the effect of which violation or default would be material to the Company and its subsidiaries taken as a whole.

ix)            This Agreement has been duly authorized, executed and delivered by the Company; the execution, delivery and performance of this Agreement by the Company will not conflict with, or result in the creation or imposition of the material lien, charge or encumbrance upon any of the assets of the Company or the Domestic Significant Subsidiaries pursuant to the terms of, or constitute a default under, any indenture, mortgage, deed of trust, loan agreement or instrument known to such counsel and to which the Company or the Domestic Significant Subsidiaries is a party or bound, or result in a violation of the

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corporate charter or by-laws of the Company or the Domestic Significant Subsidiaries or any statute, rule, regulation or any order known to such counsel of any court or governmental agency having jurisdiction over the Company, the Domestic Significant Subsidiaries or any of their respective properties, the effect of which conflict, default or violation would be material to the Company and its subsidiaries taken as a whole;

x)             The Registration Statement has become effective under the Securities Act, and, to the best knowledge of such counsel, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or threatened by the Commission.

xi)            The Registration Statement and the Prospectus (except that no opinion need be expressed as to the financial statements and notes thereto or the schedules or other financial or statistical data or the Form T-1 included or incorporated by reference therein), comply as to form in all material respects with the requirements of the Securities Act and the Rules and Regulations.

Such counsel shall also have furnished a statement that although such counsel is not passing upon and does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement and the Prospectus (except as to those matters stated in paragraph (iii) of this subsection (b)), such counsel has no reason to believe that (A) the Registration Statement, as of its effective date, contained any untrue statement of a material fact or omitted to state any material fact required to be stated therein or necessary in order to make the statements therein not misleading or (B) the Prospectus contains any untrue statement of a material fact or omits to state any material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading (except that no statement need be made as to the financial statements and notes thereto or the schedules or other financial or statistical data or the Form T-1 included or incorporated by reference therein).

In rendering such opinion and statement, such counsel may rely upon opinions of local counsel satisfactory to the Lead Agent for matters not governed by New York law and may rely as to matters of fact, to the extent he or she deems proper, upon certificates or affidavits of officers of the Company, the Trustee and public officials. Such counsel may rely on a certificate of the Trustee with respect to the execution of the Securities by the Company and the authentication thereof by the Trustee.

(c)           At the Closing Date, the Agents shall have received from counsel to the Agents such opinion or opinions, dated the Closing Date, with respect to the issuance and sale of the Securities, the Registration Statement, the Prospectus and other related matters as the Agents may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purpose of enabling them to pass upon such matters.

(d)           The Company shall have furnished to the Agents a certificate of its Chief Executive Officer, President, Chief Operating Officer, Chief Administrative Officer, any

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Executive Vice President, Senior Vice President or Vice President, and its Chief Financial Officer, its Treasurer, its Financial Controller or its Global Head of Asset Liability Management (or other officer performing substantially the same function), dated the day of the Closing Date, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus and this Agreement, and that, to the best of their knowledge after due inquiry:

i)              The representations and warranties of the Company in this Agreement are true and correct in all material respects on and as of the Closing Date with the same effect as if made on the Closing Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied at or prior to the Closing Date.

ii)             No stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or threatened.

iii)            (i) the Registration Statement does not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) the Prospectus does not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, and (iii) since the effective date of the Registration Statement there has not occurred any event required to be set forth in an amended or supplemented Prospectus which has not been so set forth.

(e)           At the Closing Date, a nationally recognized registered independent public accounting firm shall have furnished to the Agents a letter, dated the day of the Closing Date, confirming that they are independent auditors with respect to the Company within the meaning of the Securities Act and in form and substance satisfactory to the Agents, stating in effect that:

i)              In their opinion, the consolidated financial statements of the Company and its subsidiaries, and the supporting schedules, included in the Registration Statement and the Prospectus and audited by them comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Exchange Act and the related published rules and regulations thereunder.

ii)             On the basis of a reading of the unaudited consolidated financial statements of the Company and its subsidiaries, if any, included in the Registration Statement and the Prospectus and of the latest unaudited consolidated financial statements made available by the Company and Lehman Brothers Inc., carrying out certain specified procedures (but not an audit in accordance with generally accepted auditing standards), a reading of the minutes of the meetings of the directors of the Company and Lehman Brothers Inc., and inquiries of certain officials of the Company and its subsidiaries, who have responsibility for

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financial and accounting matters of the Company and its subsidiaries, as to transactions and events subsequent to the date of the most recent audited consolidated financial statements included in the Registration Statement and the Prospectus, nothing came to their attention that caused them to believe that:

(A)          any material modifications should be made to the unaudited consolidated financial statements of the Company and its subsidiaries, if any, included in the Registration Statement and the Prospectus, for them to be in conformity with generally accepted accounting principles; and such financial statements do not comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the published instructions, rules and regulations thereunder.

(B)           the unaudited capsule information of the Company and its subsidiaries, if any, included in the Registration Statement and the Prospectus does not agree with the amounts set forth in the unaudited consolidated financial statements of the Company from which it was derived or was not determined on a basis substantially consistent with that of the corresponding financial information in the latest audited financial statements of the Company included in the Registration Statement and the Prospectus.

(C)           (I) as of the latest date as of which the Company and its subsidiaries have monthly financial statements, as compared to amounts shown in the most recent consolidated financial statements of the Company and its subsidiaries included in the Registration Statement and the Prospectus, there was any change in the capital stock (other than issuances of common stock upon the exercise of options or employee awards and the repurchase of common stock in the ordinary course of business to provide for common stock to be issued pursuant to the exercise of options or employee awards), or increase in long-term indebtedness or decrease in net assets or stockholders’ equity of the Company and its subsidiaries and (II) from the latest date as of which the Company and its subsidiaries have monthly financial statements to the date of the most recent consolidated financial statements of the Company and its subsidiaries included in the Registration Statement and the Prospectus, there was any consolidated loss from operations before taxes or consolidated net loss of the Company and its subsidiaries;

(D)          as of a specified date no more than three business days prior to the date of the letter as compared to the date of the most recent consolidated financial statements of the Company and its subsidiaries included in the Registration Statement and the Prospectus, (I) there was any change in capital stock (other than issuances of common stock upon the exercise of options or employee awards and the repurchase of common stock in the ordinary course of business to provide for common stock to be issued pursuant to the exercise of options or employee awards) or increase

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in long-term indebtedness or decrease in net assets or stockholders’ equity of the Company and its subsidiaries;

except in all instances for changes, increases or decreases set forth in such letter, in which case the letter shall be accompanied by an explanation by the Company as to the significance thereof, unless said explanation is not deemed necessary by the Representatives.

iii)            If pro forma financial statements are included in the Registration Statement or the Prospectus, (x) they have read such pro forma financial statements, (y) they have made inquiries of certain officials of the Company who have responsibility for financial and accounting matters of the Company as to the basis for their determination of the pro forma adjustments and whether such pro forma financial statements comply as to form in all material respects with the applicable accounting requirements of Rule 11-02 of Regulation S-X and (z) they have proved the arithmetic accuracy of the application of the pro forma adjustments to the historical amounts; and as a result thereof, nothing came to their attention that caused them to believe that such pro forma financial statements do not so comply with Rule 11-02 of Regulation S-X and that such pro forma adjustments have not been properly applied to the historical amounts in the compilation of those statements.

iv)           They have performed certain other specified procedures as a result of which they determined that certain information of an accounting, financial or statistical nature (which is expressed in dollars, or percentages derived from dollar amounts, and has been obtained from the general accounting records of the Company) set forth in the Registration Statement, as amended, and the Prospectus, as amended or supplemented, and in Exhibit 12 to the Registration Statement, including specified information, if any, included or incorporated from the Company’s Annual Report on Form 10-K incorporated therein or specified information, if any, included or incorporated from any of the Company’s Quarterly Reports on Form 10-Q or its Current Reports on Form 8-K incorporated therein, agrees with the accounting records of the Company and its subsidiaries or computations made therefrom, excluding any questions of legal interpretation.

(f)            Prior to the Closing Date, the Company shall have furnished to the Agents such further information, certificates and documents as the Agents or counsel to the Agents may reasonably request.

If any of the conditions specified in this Section 7 shall not have been fulfilled when and as required by this Agreement, or if any of the certificates or opinions furnished to the Agents or to counsel to the Agents pursuant to this Section 7 shall not be in all material respects reasonably satisfactory in form and substance to the Agents and to counsel to the Agents, this Agreement and all obligations of the Agents hereunder may be cancelled by the Agents.  Notice of such cancellation shall be given to the Company in writing, or by telegraph confirmed in writing.

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SECTION 8.  Additional Covenants of the Company.  The Company covenants and agrees that:

(a)           Each acceptance by it of an offer for the purchase of Securities shall be deemed to be an affirmation that the representations and warranties of the Company contained in this Agreement are true and correct in all material respects at the time of such acceptance and an undertaking that such representations and warranties will be true and correct in all material respects at the time of delivery to the Lead Agent of the Securities relating to such acceptance as though made at and as of each such time (and it is understood that such representations and warranties shall relate to the Registration Statement and the Prospectus as amended or supplemented to each such time).

(b)           During each Marketing Period, each time that the Registration Statement or the Prospectus shall be amended or supplemented or because the Company shall file with the Commission any document incorporated by reference into the Prospectus (other than by filing with the Commission: (i) information furnished to the Commission in a Current Report on Form 8-K pursuant to Item 7.01 of Form 8-K (or any successor item thereto), (ii) an exhibit to the Registration Statement or Prospectus that does not relate to the Securities, (iii) a prospectus supplement not relating to the Securities or an amendment or supplement providing solely for a change in the interest rates, redemption provisions, amortization schedule or maturities of the Securities or a change in the principal amount of Securities remaining to be sold or other information contemplated by the Prospectus to be filed in a Pricing Supplement, (iv)or any other change that the Lead Agent reasonably deems immaterial), the Company shall (i) within two (2) business days after such amendment, supplement or filing or (ii) if such amendment, supplement or filing was not filed during a Marketing Period, within two (2) business days after the first day of the next succeeding Marketing Period, furnish the Agents with a certificate of the Chairman of the Board, any Vice Chairman, the Chief Executive Officer, any Executive Vice President or any Vice President and the Treasurer, Chief Financial Officer, Senior Vice President and Director of Global Asset and Liability Management of the Company in form satisfactory to the Lead Agent to the effect that the statements contained in the certificate referred to in Section 7(d) hereof which was last furnished to the Agents are true and correct at the time of such amendment or supplement or filing, as the case may be, as though made at and as of such time (except that such statements shall be deemed to relate to the Registration Statement and the Prospectus as amended and supplemented to such time) or, in lieu of such certificate, a certificate of the same tenor as the certificate referred to in said Section 7(d), modified as necessary to relate to the Registration Statement and the Prospectus as amended and supplemented to the time of delivery of such certificate.  If requested by the Lead Agent on behalf of the Agents, in its sole discretion, pursuant to Section 3(a) of this Agreement in connection with the purchase of Securities from the Company by the Lead Agent as principal, the Company shall deliver to the Agents on the Settlement Date a certificate of the type described in the previous sentence.

(c)           During each Marketing Period, each time that the Registration Statement or the Prospectus shall be amended or supplemented or because the Company shall file with the Commission any document incorporated by reference into the Prospectus (other than by filing with the Commission (i) information furnished to the Commission in a Current Report on Form 8-K pursuant to Item 7.01 of Form 8-K (or any successor item thereto), (ii) an exhibit to the Registration Statement or Prospectus that does not relate to the Securities, (iii) an amendment or

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supplement to or document incorporated by reference in the Registration Statement or Prospectus setting forth only financial statements or other financial information (including any press release announcing earnings), (iv) a prospectus supplement not relating to the Securities or an amendment or supplement providing solely for a change in interest rates, redemption provisions, amortization schedule or maturities of the Securities or a change in the principal amount of Securities remaining to be sold or other information contemplated by the Prospectus to be filed in a Pricing Supplement or (v) similar changes, or any other change that the Lead Agent reasonably deems immaterial), the Company shall furnish the Agents (i) within two (2) business days after such amendment, supplement or filing or (ii) if such amendment, supplement or filing was not filed during a Marketing Period, within two (2) business days after the first day of the next succeeding Marketing Period, with the written opinion of an Associate General Counsel to the Company, addressed to the Agents and dated the date of delivery of such opinion, in form satisfactory to the Lead Agent, of the same tenor as the opinion referred to in Section 7(b) hereof, but modified, as necessary, to relate to the Registration Statement and the Prospectus as amended or supplemented to the time of delivery of such opinion; provided, however, that in lieu of such opinion, such counsel may furnish the Agents with a letter to the effect that the Agents may rely on a prior opinion delivered under Section 7(b) or this Section 8(c) to the same extent as if it were dated the date of such letter authorizing reliance (except that statements in such prior opinion shall be deemed to relate to the Registration Statement and the Prospectus as amended or supplemented to the time of delivery of such letter authorizing reliance).  If requested by the Lead Agent on behalf of the Agents, in its sole discretion, pursuant to Section 3(a) of this Agreement in connection with the purchase of Securities from the Company by the Lead Agent as principal, the Company shall deliver to the Agents on the Settlement Date an opinion of counsel of the type described in the previous sentence.

(d)           During each Marketing Period, each time that the Registration Statement or the Prospectus shall be amended or supplemented to include additional financial information or the Company files with the Commission any document incorporated by reference into the Prospectus which contains additional financial information (other than information that the Lead Agent reasonably deems immaterial), the Company shall cause the Company’s auditors to furnish the Agents (i) within two (2) business days after such amendment, supplement or filing or (ii) if such amendment, supplement or filing was not filed during a Marketing Period, within two (2) business days after the first day of the next succeeding Marketing Period, a letter, addressed to the Agents and dated the date of delivery of such letter, in form and substance satisfactory to the Lead Agent, of the same tenor as the letter referred to in Section 7(e) hereof but modified to relate to the Registration Statement and Prospectus, as amended and supplemented to the date of such letter, with such changes as may be necessary to reflect changes in the financial statements and other information derived from the accounting records of the Company; provided, however, that if the Registration Statement or the Prospectus is amended or supplemented solely to include financial information as of and for a fiscal quarter, the Company’s auditor may limit the scope of such letter to the unaudited financial statements included in such amendment or supplement unless there is contained therein any other accounting, financial or statistical information that, in the Lead Agent’s reasonable judgment, should be covered by such letter, in which event such letter shall also cover such other information. If requested by the Lead Agent on behalf of the Agents, in its sole discretion, pursuant to Section 3(a) of this Agreement in connection with the purchase of Securities from the

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Company by the Lead Agent as principal, the Company shall deliver to the Agents on the Settlement Date a letter of the type described in the previous sentence.

SECTION 9.  Indemnification and Contribution.  (a)  The Company shall indemnify and hold harmless each Agent, its officers and employees and each person, if any, who controls such Agent within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action or pending action in respect thereof (including, but not limited to, any loss, claim, damage, liability or action relating to purchases and sales of Securities), to which such Agent, officer, employee or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability, action or pending action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, as originally filed or in any amendment thereof, or in any Prospectus or in any amendment or supplement thereto, (ii) the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse such Agent and each such officer, employee or controlling person promptly upon demand for any legal or other expenses reasonably incurred by such Agent, officer, employee or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability, action or pending action as such expenses are incurred; provided, however, that (i) the Company shall not be liable in any such case to the extent that any such loss, claim, damage, liability, action or pending action arises out of, or is based upon, any untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity with written information concerning such Agent furnished to the Company by or on behalf of such Agent specifically for use in connection with the preparation thereof, and (ii) such indemnity with respect to any Prospectus shall not inure to the benefit of such Agent (or any person controlling such Agent) from whom the person asserting any such loss, claim, damage or liability purchased the Securities which are the subject thereof if such person did not receive a copy of the Prospectus at or prior to the confirmation of the sale of such Securities to such person in any case where such delivery is required by the Securities Act and the untrue statement or omission of a material fact contained in the Prospectus was corrected in the Prospectus, unless such failure to deliver the Prospectus was a result of noncompliance by the Company with Section 4(g) hereof.  The foregoing indemnity agreement is in addition to any liability that the Company may otherwise have to each Agent or to any officer, employee or controlling person of such Agent.

(b)           Each Agent severally agrees to indemnify and hold harmless the Company, its officers, employees, each of its directors, and each person, if any, who controls the Company within the meaning of the Securities Act, from and against any loss, claim, damage or liability, joint or several, or any action or pending action in respect thereof, to which the Company or any such director, officer or controlling person may become subject, under the Securities Act or otherwise, insofar as such loss, claim, damage, liability, action or pending action arises out of, or is based upon, (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus or in any amendment or supplement thereto, or (ii) the omission or alleged omission to state therein any material fact required to be stated therein or necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or alleged untrue statement or omission or alleged omission was made in reliance upon and in conformity with written information concerning any Agent furnished to

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the Company by or on behalf of such indemnifying Agent through the Lead Agent specifically for inclusion therein, and shall reimburse the Company and any such director, officer or controlling person for any legal or other expenses reasonably incurred by the Company or any such director, officer or controlling person in connection with investigating or defending or preparing to defend against any such loss, claim, damage, liability, action or pending action as such expenses are incurred.  The foregoing indemnity agreement is in addition to any liability that such Agent may otherwise have to the Company or any such director, officer, employee or controlling person.

(c)           Promptly after receipt by an indemnified party under this Section 9 of notice of any claim or the commencement of any action, the indemnified party shall, if a claim in respect thereof is to be made against the indemnifying party under this Section 9, notify the indemnifying party in writing of the claim or the commencement of that action; provided, however, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have under this Section 9 except to the extent it has been materially prejudiced by such failure and, provided further, that the failure to notify the indemnifying party shall not relieve it from any liability which it may have to an indemnified party otherwise than under this Section 9.  If any such claim or action shall be brought against an indemnified party, and it shall notify the indemnifying party thereof, the indemnifying party shall be entitled to participate therein and, to the extent that it wishes, jointly with any other similarly notified indemnifying party, to assume the defense thereof with counsel satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and either (i) the indemnifying party or parties and the indemnified party or parties mutually agree or (ii) representation of both the indemnifying party or parties and the indemnified party or parties by the same counsel is inappropriate under applicable standards of professional conduct due to actual or potential differing interests between them, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties.  After notice from the indemnifying party to the indemnified party of its election to assume the defense of such claim or action, the indemnifying party shall not be liable to the indemnified party under this Section 9 for any legal or other expenses subsequently incurred by the indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by the Agents in the case of subparagraph (a) representing the indemnified parties under subparagraph (a), as the case may be, who are parties to such action), (ii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action or (iii) the indemnifying party has authorized the employment of counsel for the indemnified party at the expense of the indemnifying party.  No indemnifying party shall (i) without the prior written consent of the indemnified parties (which consent shall not be unreasonably withheld), settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding,

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or (ii) be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with the consent of the indemnifying party or if there be a final judgment of the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment.

(d)           If the indemnification provided for in this Section 9 shall for any reason be unavailable to or insufficient to hold harmless an indemnified party under Section 9(a) or 9(b) in respect of any loss, claim, damage or liability, or any action or pending action in respect thereof, referred to therein, then each indemnifying party shall, in lieu of indemnifying such indemnified party, contribute to the amount paid or payable by such indemnified party as a result of such loss, claim, damage or liability, action or pending action in respect thereof, (i) in such proportion as shall be appropriate to reflect the relative benefits received by the Company on the one hand and one or more Agents on the other from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company on the one hand and one or more Agents on the other with respect to the statements or omissions that resulted in such loss, claim, damage or liability, action or pending action in respect thereof, as well as any other relevant equitable considerations.  The relative benefits received by the Company on the one hand and one or more Agents on the other with respect to such offering shall be deemed to be in the same proportion as the total net proceeds from the offering of the Securities purchased under this Agreement (before deducting expenses) received by the Company, on the one hand, and the portion represented by the percentage that the underwriting discounts and commissions received by the Agent with respect to the Securities purchased under this Agreement, on the other hand, bear to the total gross proceeds from the offering of the Securities under this Agreement, in each case as set forth in the table on the cover page of the Prospectus.  The relative fault shall be determined by reference to whether the untrue or alleged untrue statement of a material fact or omission or alleged omission to state a material fact relates to information supplied by the Company or one or more Agents, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such statement or omission.  The Company and the Agents agree that it would not be just and equitable if contributions pursuant to this Section were to be determined by pro rata allocation or by any other method of allocation that does not take into account the equitable considerations referred to herein.  The amount paid or payable by an indemnified party as a result of the loss, claim, damage or liability, or action in respect thereof, referred to above in this Section shall be deemed to include, for purposes of this Section 9(d), any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim.  Notwithstanding the provisions of this Section 9(d), no Agent shall be required to contribute any amount in excess of the amount by which the total price at which the Securities purchased by it exceeds the amount of any damages which the Agent has otherwise paid or become liable to pay by reason of any untrue or alleged untrue statement or omission or alleged omission.  No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation.

SECTION 10.  Representations and Warranties to Survive Delivery.  All representations and warranties of the Company contained in this Agreement, or contained in

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certificates of officers of the Company submitted pursuant hereto, shall remain operative and in full force and effect, regardless of the termination or cancellation of this Agreement or any investigation made by or on behalf of the Agents or any person controlling the Agents or by or on behalf of the Company, and shall survive each delivery of and payment for any of the Securities.

SECTION 11.  Termination.  (a)  The Company may elect to suspend or terminate the offering of Securities under this Agreement at any time.  The Company also (as to any one or more of the Agents) or any Agent (as to itself) may terminate the appointment and arrangements described in this Agreement. Upon receipt of instructions from the Company, the Lead Agent shall suspend or terminate the participation of any Selected Dealer under the Master Selected Dealer Agreement attached hereto as Exhibit D. Such actions may be taken, in the case of the Company, by giving prompt written notice of suspension to all of the Agents and by giving not less than one day’s written notice of termination to all of the Agents, or, in the case of an Agent, by giving not less than one day’s written notice of termination to the Company and the Lead Agent.  For the purpose of the foregoing sentence, “business day” shall mean any day which is not a Saturday or Sunday and which in New York City is not a day on which banking institutions are generally authorized or obligated by law to close.  The provisions of Sections 4(d), 4(g), 6, 9, 10, 13 and 14 hereof shall survive any termination of this Agreement.

(b)           Any Terms Agreement executed pursuant to Section 3(a) of this Agreement shall be subject to termination in the absolute discretion of the Lead Agent and upon the request of an Agent, after consultation with the Lead Agent and the Company, with respect to any Securities being purchased by such Agent, by notice given to the Company at or prior to delivery of and payment for all the Securities, if, prior to such time:  (i) any order suspending the effectiveness of the Registration Statement or suspending the qualification of the Indenture shall be in effect or any proceedings for such purpose shall be pending before or threatened by the Commission, (ii) there shall have occurred a downgrading in the rating accorded the Company’s debt securities by any “nationally recognized statistical rating organization”, as that term is defined by the Commission for purposes of Rule 436(g)(2) of the Rules and Regulations, (iii) any new restriction materially affecting the distribution of the Securities shall have become effective, (iv) trading in securities generally on the New York Stock Exchange or the American Stock Exchange or in the over-the-counter market, or trading in any securities of the Company on any exchange or in the over-the-counter market, shall have been suspended or the settlement of such trading generally shall have been materially disrupted or minimum prices shall have been established on any such exchange or such market by the Commission, by such exchange or by any other regulatory body or governmental authority having jurisdiction, (v) a banking moratorium shall have been declared by Federal or state authorities, (vi) the United States shall have become engaged in hostilities, there shall have been an escalation in hostilities involving the United States or there shall have been a declaration of a national emergency or war by the United States or (vii) there shall have occurred such a material adverse change in general economic, political or financial conditions, including without limitation as a result of terrorist activities after the date of such Terms Agreement hereof, or the effect of international conditions on the financial markets in the United States shall be such as to make it, in the judgment of the Lead Agent, impracticable or inadvisable to proceed with the public offering or delivery of the Securities.  The provisions of Sections 4(d), 4(g), 6, 9, 10, 13 and 14 hereof shall survive any termination of the Terms Agreement and this Agreement.

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(c)           For the avoidance of doubt, in the event of termination of this Agreement or any Terms Agreement with respect to any Agent, such Agent shall not receive any compensation except in connection with a purchase by it of Securities actually consummated, provided that the foregoing shall in no way limit the provisions of Section 9, and that reimbursement by the Company to an Agent of out-of-pocket accountable expenses actually incurred by such Agent and to which such Agent is otherwise entitled as provided herein shall not be prohibited.

SECTION 12.  Notices.  Except as otherwise provided herein, all notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication.  Notices to the Agents shall be directed to them as follows: c/o Lehman Brothers, Inc., 745 Seventh Avenue, New York, New York 10019, Attention: Taxable Fixed Income Syndicate/Lehman Notes, notices to the Company shall be directed to it as follows: Lehman Brothers Holdings Inc., 745 Seventh Avenue, New York, New York 10019, Attention:  Treasurer.

SECTION 13.  Binding Effect; Benefits.  This Agreement shall be binding upon the Agents, the Company, and their respective successors.  This Agreement and the terms and provisions hereof are for the sole benefit of only those persons, except that (a) the representations, warranties, indemnities and agreements of the Company contained in this Agreement shall also be deemed to be for the benefit of the person or persons, if any, who control the each Agent within the meaning of Section 15 of the Securities Act, and (b) the indemnity agreement of each Agent contained in Section 9 hereof shall be deemed to be for the benefit of directors of the Company, officers of the Company who have signed the Registration Statement and any person controlling the Company.  Nothing in this Agreement is intended or shall be construed to give any person, other than the person referred to in this Section, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision contained herein.

SECTION 14.  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of New York.  This Agreement may be executed in counterparts and the executed counterparts shall together constitute a single instrument.

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If the foregoing correctly sets forth our agreement, please indicate your acceptance hereof in the space provided for that purpose below.

EXHIBIT A

Lehman Brothers Holdings Inc.

Lehman Notes, Series B

ADMINISTRATIVE PROCEDURES

Lehman Notes, Series B (the “Notes”), are being offered on a continuous basis by Lehman Brothers Holdings Inc. (the “Company”).  Lehman Brothers Inc. (the “Lead Agent”), A.G. Edward & Sons, Inc., Banc of America Securities LLC, Charles Schwab & Co., Inc., Citigroup Global Markets Inc., Edward D. Jones & Co., L.P., Fidelity Capital Markets, a division of National Financial Services LLC, Morgan Stanley & Co. Incorporated, Muriel Siebert & Co. Inc., Raymond James & Associates, Inc., UBS PaineWebber Inc. and Wachovia Securities, LLC, each as agents (collectively, the “Agents”), have agreed to use their reasonable best efforts to solicit offers to purchase the Notes pursuant to a Distribution Agreement dated May 18, 2005 (the “Distribution Agreement”) between the Company and the Agents to which these administrative procedures are attached as an exhibit.  The Notes are being sold by the Company to the Lead Agent pursuant to the Distribution Agreement and one or more terms agreements substantially in the form attached to the Distribution Agreement as Exhibit C (each a “Terms Agreement”).  The Notes are being resold by the Lead Agent to the other Agents and by each of the Agents (including the Lead Agent) (i) directly to their customers or (ii) to selected broker-dealers for distribution to their customers in accordance with the Section 3(d) of the Distribution Agreement.  Terms defined in the Distribution Agreement shall have the same meaning when used in this exhibit.

Administrative responsibilities, document control and record-keeping functions to be performed by the Company will be performed by its Treasury Department.  Administrative procedures for the offering are explained below.  The Company will advise the Agents and the Trustee in writing of those persons handling administrative responsibilities with whom the Agents and the Trustee are to communicate regarding offers to purchase Notes and the details of their delivery.

Each Note will be issued in book-entry form only (each, a “Book-Entry Note”) and will be represented by one master global security in fully registered form (the “Master Global Note”) without coupons delivered to the Trustee, as agent for The Depository Trust Company (“DTC”), and recorded in the book-entry system maintained by DTC.  The Master Global Note shall be in a form approved by the Company, the Agents, DTC and the Trustee.  Prior to the issuance of any Notes, the Issuer shall execute, attest and deliver to the Trustee, and the Trustee, upon the Issuer’s order, shall authenticate, the Master Global Note and hold it as custodian for DTC.  An owner of a beneficial interest in a Book-Entry Note will not be entitled to receive a certificate representing such Note except in certain limited circumstances described in the Indenture.  In connection with the qualification of the Book-Entry Notes for eligibility in the book-entry system maintained by DTC, the Trustee will perform the custodial, document control and administrative functions described below, in accordance with its respective

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obligations under a Letter of Representation from the Company and the Trustee to DTC dated as of the date of the Distribution Agreement and a Medium-Term Note Certificate Agreement between the Trustee and DTC dated October 31, 1988 (the “Certificate Agreement”), and its obligations as a participant in DTC, including DTC’s Same-Day Funds Settlement System (“SDFS”).  The procedures set forth below may be modified in compliance with DTC’s then-applicable procedures and upon agreement by the Company, the Trustee and the Lead Agent.

Unless otherwise agreed between the Company and the Lead Agent, the Notes will be issued in accordance with the administrative procedures set forth herein.  To the extent the procedures set forth below conflict with or omit certain of the provisions of the Notes, the Indenture, the Distribution Agreement or the Prospectus, including the applicable Pricing Supplement, the relevant provisions of the Notes, the Indenture, the Distribution Agreement and the Prospectus shall control.

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EXHIBIT B

LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

FORM OF AGENT ACCESSION LETTER

[Name of Agent
Address of Agent]

Ladies and Gentlemen:

Lehman Brothers Holdings Inc., a Delaware corporation (the “Company”), has previously entered into a Distribution Agreement dated May 18, 2005 (the “Distribution Agreement”), among the Company and the other agents signatories thereto (the “Existing Agents”), with respect to the issue and sale by the Company of its Lehman Notes, Series B (the “Securities”) pursuant to an Indenture dated as of September 1, 1987, as amended between the Company and Citibank, N.A., as Trustee.  The Distribution Agreement permits the Company to appoint one or more additional persons to act as agent with respect to the Securities, on terms substantially the same as those contained in the Distribution Agreement.  A copy of the Distribution Agreement, including the Procedures with respect to the issuance of the Securities attached thereto as Exhibit A, is attached hereto.

In accordance with Section 2(d) of the Distribution Agreement we hereby confirm that, with effect from the date hereof, you shall become a party to, and an Agent under, the Distribution Agreement, vested with all the authority, rights and powers, and subject to all duties and obligations of an Agent as if originally named as such under the Distribution Agreement. 

Except as otherwise expressly provided herein, all terms used herein which are defined in the Distribution Agreement shall have the same meanings as in the Distribution Agreement.  Your obligation to act as Agent hereunder shall be subject to you having received copies of the most recent documents (including any prior documents referred to therein) previously delivered to the Existing Agents pursuant to Sections 7 and 8 of the Distribution Agreement.  By your signature below, you confirm that such documents are to your satisfaction.  For purposes of Section 12 of the Distribution Agreement, you confirm that your notice details are as set forth immediately beneath your signature.

Each of the parties to this letter agrees to perform its respective duties and obligations specifically provided to be performed by each of the parties to in accordance with the terms and provisions of the Distribution Agreement and the Procedures, as amended or supplemented hereby.

Notwithstanding anything in the Distribution Agreement to the contrary, the obligations of each of the Existing Agents and the Additional Agent(s) under Section 9 of the Distribution

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Agreement are several and not joint, and in no case shall any Existing Agent or Additional Agent (except as may be provided in any agreement among them) be responsible under Section 9(d) to contribute any amount by which the total price at which the Securities purchased by it exceeds the amount of any damages which such Existing Agent or Additional Agent has otherwise paid or become liable to pay with respect to the Securities purchased by such Existing Agent or Additional Agent hereunder.

This Agreement shall be governed by the laws of the State of New York.  This Agreement may be executed in one or more counterparts and the executed counterparts taken together shall constitute one and the same agreement.

If the foregoing correctly sets forth the agreement among the parties hereto, please indicate your acceptance hereof in the space provided for that purpose below.

CONFIRMED AND ACCEPTED, as of the
date first above written

[Insert name of Additional Agent and information pursuant
to Section 12 of the Distribution Agreement]

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Notice information pursuant to Section 12 of the
Distribution Agreement:

Name:

Address:

Contact Person:

Telephone:

Facsimile:

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EXHIBIT C

LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

FORM OF TERMS AGREEMENT

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Lehman Brothers Holdings Inc.
745 Seventh Avenue
New York, New York 10019

Attention:  Treasurer

Lehman Brothers Holdings Inc., a Delaware corporation (the “Company”), has previously entered into a Distribution Agreement dated May 18, 2005 (the “Distribution Agreement”), among the Company, Lehman Brothers Inc. (the “Lead Agent”) and the other agents party thereto, with respect to the issue and sale by the Company of its Lehman Notes, Series B (the “Securities”), pursuant to an Indenture dated as of September 1, 1987, as amended between the Company and Citibank, N.A., as Trustee.  The Distribution Agreement provides that sales of Securities shall be made pursuant to the Distribution Agreement and a separate agreement between the Company and the Lead Agent as principal.

The Lead Agent agrees to purchase, at the purchase price set forth below, $                       principal amount of Securities. The Securities have the terms indicated in the attached Pricing Supplement.

The Lead Agent’s obligation to purchase Securities hereunder is subject to the accuracy, as of the Settlement Date, of the Company’s representations and warranties contained in the Distribution Agreement and to the Company’s performance and observance of all applicable covenants and agreements contained therein, and the satisfaction of all conditions precedent contained therein, including, without limitation, those pursuant to Sections 7 and 8 thereof.

Except as otherwise expressly provided herein, all terms used herein which are defined in the Distribution Agreement shall have the same meanings as in the Distribution Agreement.

The undersigned agrees to perform its duties and obligations specifically provided to be performed by the Lead Agent in accordance with the terms and provisions of the Distribution Agreement and the Procedures, as amended or supplemented hereby.

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This Agreement shall be subject to the termination provisions of Section 11 of the Distribution Agreement.

This Agreement shall be governed by and construed in accordance with the laws of New York.  This Agreement may be executed in one or more counterparts and the executed counterparts taken together shall constitute one and the same agreement.

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If the foregoing correctly sets forth the agreement among the parties hereto, please indicate your acceptance hereof in the space provided for that purpose below.

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EXHIBIT D

LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

SCHEDULE OF CONCESSIONS

Unless otherwise set forth in the applicable Pricing Supplement, the Company agrees to pay the Lead Agent the Agents’ Concession equal to the following percentage of the principal amount of the Securities sold through the Agents:

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EXHIBIT E

LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

FORM OF PRICING SUPPLEMENT

Filed Pursuant to Rule 424(b)(2)
Registration No. 333-121067

Pricing Supplement No.         dated                       
(to Prospectus Supplement dated May 18, 2005
and Prospectus dated May 18, 2005)

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LEHMAN BROTHERS HOLDINGS INC.

Lehman Notes, Series B

This Pricing Supplement supplements the terms and conditions in, and incorporates by reference, the Prospectus, dated May 18, 2005, as supplemented by the Prospectus Supplement, dated May 18, 2005, (as so supplemented, together with all documents incorporated by reference therein, the “Prospectus”), and should be read in conjunction with the Prospectus. Unless otherwise defined in this Pricing Supplement, terms used herein have the same meanings as are given to them in the Prospectus.

Trade Date:

Issue Date:

Other Terms:

[IF THIS IS AN UPSIZE: The Notes will be issued in an aggregate principal amount of $[                 ] and will form a single tranche with the $[               ] aggregate principal amount of Retail Notes, Series B, that Lehman Brothers Holdings will also issue on [              ], 20[         ], as described in Pricing Supplement No. [        ] dated [            ], 20[         ].  The Notes will have the same CUSIP number as the other notes of this tranche and will settle on the same date as, and trade interchangeably with, the other notes of this tranche.  The issuance of the Notes will increase the aggregate principal amount of the outstanding notes of this tranche to $[                ].]

[IF UPSIZING IS INTENDED: In addition, on the Issue Date specified above, Lehman Brothers Holdings may (but is not required to) issue additional Notes similar in all respects (including with respect to the Price to Public and the Concessions specified above).]

Lehman Brothers Holdings may also issue additional Notes following the Issue Date at a new Price to Public and subject to new Concessions. All such additional Notes would form a single tranche with, have the same CUSIP number as and trade interchangeably with the Notes immediately upon settlement.

[IF SETTLEMENT PERIOD IS GREATER THAN T+3: It is expected that delivery of the Notes will be made against payment therefor more than three business days following the date of this pricing supplement.  Trades in the secondary market generally are required to settle in three business days unless the parties to any such trade expressly agree otherwise. Accordingly, purchasers who wish to trade the securities on any day prior to the third business day before the settlement date will be required to specify an alternative settlement cycle at the time of any such trade to prevent failed settlement.]