Exhibit
4.03


	
  CUSIP NO. 52517PU74

  	
   

  	
   

  
	
  ISIN NO. US52517PU741

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $250,000

  
	
  No. R-1

  	
   

  	
   

  



 


LEHMAN BROTHERS HOLDINGS INC.


MEDIUM-TERM NOTE, SERIES I


BASE METALS BASKET PARTICIPATION NOTE
 DUE MARCH 1, 2009


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


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













 


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


The “Maturity Date” is March 1, 2009, or if such day is not a Business
Day, on the next following Business Day.


The “Redemption Amount” is the amount equal to the sum of the principal
amount of the Notes plus the Supplemental Redemption Amount, if any.


The “Supplemental Redemption Amount” is a single U.S. Dollar payment
calculated by the Calculation Agent equal to the principal amount of the Notes
multiplied by:


(A) the Basket
Return multiplied by the Participation Rate, if the Basket Return is greater
than 0.000%; or


(B) 0%, if the
Basket Return is less than or equal to 0.000%.


The “Basket Return” is the sum of the
Weighted Component Commodity Returns, expressed as a percentage (rounded to
three decimal places).


The “Participation Rate” is 75.0%.


The “Component Commodities” are Copper,
Nickel and Zinc.


 “Copper”
is Copper — Grade A.


“Nickel” is Primary Nickel.


“Zinc” is Special High Grade Zinc.


The “Weighted Component Commodity Return” is,
for each Component Commodity, the Component Commodity Weighting for such
Component Commodity multiplied by a quotient, the numerator of which is the
difference between the Final Commodity Price for such Component Commodity and
the Commodity Strike for such Component Commodity and the denominator of which
is the Commodity Strike for such Component Commodity.


The “Commodity Strike” is, for each Component
Commodity, the Commodity Price on the date hereof, as set forth below:




	
  Component Commodity

  	
   

  	
  Commodity Strike

  	
   

  
	
  Copper

  	
   

  	
   

  	
  $

  	
  5,875

  	
   

  
	
  Nickel

  	
   

  	
   

  	
  $

  	
  4,270

  	
   

  
	
  Zinc

  	
   

  	
   

  	
  $

  	
  3,470

  	
   

  






 


The “Trade Date” is February 22, 2007.



 2
 









 


The “Valuation Date” is February 23, 2009.


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


The “Commodity Price” is, for each Component
Commodity, the official settlement price of that Component Commodity for cash
delivery, expressed as the U.S. Dollar price per metric ton of the Component
Commodity, as made public by the Relevant Exchange (subject to the occurrence
of a Disruption Event).


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


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


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


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


provided however that if a Disruption Event has occurred or
is continuing with respect to a Component Commodity on each of the three
scheduled Exchange Business Days following the scheduled Valuation Date, then
(a) that third Exchange Business Day shall be deemed the Valuation Date for the
affected Component Commodity; and (b) the Calculation Agent will determine the
Final Commodity Price for the affected Component Commodity on such day in its
sole and absolute discretion taking into account the latest available quotation
for the Commodity Price for the affected Component Commodity and any other
information that in good faith it deems relevant.


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


A “Disruption Event” for a
Component Commodity means any of the following events, as determined in good
faith by the Calculation Agent:



 3
 









 


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


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


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


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


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


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


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


 (2)                               a suspension in trading on the Relevant Exchange
(without taking into account any extended or after-hours trading session), in a
Component Commodity by reason of a price change reflecting the maximum
permitted price change from the previous trading day’s settlement price will
constitute a Disruption Event; and


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


An “Exchange
Business Day” is a day, as determined by the Calculation Agent, on which the
Relevant Exchange is scheduled to be (or, but for the occurrence of a
Disruption Event, would have been) open for trading during its regular trading
session (notwithstanding the Relevant Exchange closing prior to its scheduled
closing time).


A “Business Day”,
notwithstanding any provision in the Indenture, is any day that is not is not a
Saturday or Sunday and that is not a day on which banking institutions in New
York City generally are authorized or obligated by law or executive order to be
closed.


The “Calculation Agent” means
Lehman Brothers Commodity Services Inc.



 4
 









 


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


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


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


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


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


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



 5
 









 


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


Dated:  March 1, 2007


	
  

  	
  [SEAL]

  	
   

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:Andrew Yeung

  
	
   

  	
   

  	
   

  	
  Title:Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:  Aaron
  Guth

  
	
   

  	
   

  	
   

  	
  Title:   Assistant
  Secretary

  



 


TRUSTEE’S
CERTIFICATE OF AUTHENTICATION


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


	
   

  	
  CITIBANK, N.A.

  	
   

  
	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  
				



 


 



 6















 


[REVERSE
OF NOTE]


LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
 BASE METALS BASKET PARTICIPATION NOTE
 DUE MARCH 1, 2009


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


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


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













 


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


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


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


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


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


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













 


such
notice or becomes aware of such ineligibility, the Company will issue, and the
Trustee will authenticate and deliver, Notes of this series in definitive form
in an aggregate principal amount equal to the principal amount of this Note.


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


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


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


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


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


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