Exhibit 4.03


 


CUSIP
NO. 5252M0GG6


ISIN NO. US5252M0GG65


 


	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $2,000,000

  



No. R-1


 


LEHMAN BROTHERS HOLDINGS INC.


 


MEDIUM-TERM NOTE, SERIES I


 


AUSSIE BULL NOTES
 DUE JUNE 27, 2012


 


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 June 27, 2012, or
if such day is not a Business Day, on the next following Business Day.


 


The “Valuation
Date” is June 20, 2012; provided that, upon the occurrence of a Disruption
Event with respect to a Basket Component, the Valuation Date for the affected
Basket Component may be postponed (as described below under “Disruption Events”).


 


The “Trade
Date” is June 26, 2008.


 


The “Issue
Date” is June 27, 2008.


 


The “Redemption
Amount” is the amount equal to the principal amount of each Note, plus the
Additional Amount, if any.


 


The “Additional
Amount” is an amount per Note equal to the principal amount of each note
multiplied by (a) the Basket Return, if the Basket Return is greater than
zero; or (b) 0.0%, if the Basket Return is less than or equal to zero.


 


The “Basket
Return” is the sum of the Weighted Index Return, the Weighted Currency Return,
the Weighted Copper Return and the Weighted Aluminum Return.


 


The “Reference
Index” is the S&P®/ASX 200 Index.


 


The “Index
Level” is the daily closing level of the Reference Index, as determined and
published by the Index Sponsor (subject to the occurrence of a Disruption
Event).


 


The “Initial
Index Level” is 5,307, which is the Index Level on the Trade Date.


 


The “Final
Index Level” is the Index Level on the Valuation Date (subject to the
occurrence of a Disruption Event).


 


The “Index
Sponsor” is Standard & Poor’s Australian Index Committee.


 


The “Weighted
Index Return” is the Index Weight times the Index Return.


 


The “Index
Weight” is 33.34%.


 


The “Index
Return” is a quotient, the numerator of which is the difference of the Final
Index Level minus the Initial Index Level and the denominator of which is the
Initial Index Level.


 


The “Reference
Currency” is the Australian Dollar (AUD).


 


2

















 


The “Reference Exchange Rate” is the spot
exchange rate for the Reference Currency quoted against the U.S. dollar (USD)
expressed as number of USD per unit of the Reference Currency.


 


The “Initial
Currency Rate” is 0.9573, which is the Reference Exchange Rate on the Trade
Date, observed in accordance with the Settlement Rate Option.


 


The “Settlement
Rate” is the Reference Exchange Rate on the Valuation Date, observed in
accordance with the Settlement Rate Option (subject to the occurrence of a
Disruption Event).


 


The “Weighted
Currency Return” is the product of the Currency Weight times the Currency
Return.


 


The “Currency
Weight” is 33.34%.


 


The “Currency
Return” is a quotient,
the numerator of which is the difference of the Settlement Rate minus the
Initial Currency Rate and the denominator of which is the Settlement Rate.


 


The “Settlement
Rate Option” is the
USD/AUD official fixing rate, expressed as the amount of USD per one AUD, as
published by the WM Company and appearing immediately under the caption “Bid/Ask”
on the Reuters page USDAUDFIXM=WM (as substitute for 1FEE) to the right of
“AUD” at approximately 4:00 p.m., London time.


 


The “Reference
Commodities” are Aluminum and Copper together, and each a “Reference Commodity”.


 


“Aluminum” is High Grade Primary Aluminum.


 


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


 


The “Initial Aluminum Price” is $3,024.50,
which is the Aluminum Price on the Trade Date.


 


The “Final Aluminum Price” is the Aluminum Price on the Valuation Date.


 


The “Weighted Aluminum Return” is the sum of Aluminum Weight times
Aluminum Return.


 


The “Aluminum Weight” is 16.66%.


 


The “Aluminum Return” is a quotient, the numerator of which is the
difference of the Final Aluminum Price minus the Initial Aluminum Price and the
denominator of which is the Initial Aluminum Price.


 


“Copper” is Copper – Grade A.


 


3

















 


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


 


The “Initial Copper Price” is $8,551.00,
which is the Copper Price on the Trade Date.


 


The “Final Copper Price” is the Copper Price on the Valuation Date.


 


The “Weighted Copper Return” is the sum of Copper Weight times Copper
Return.


 


The “Copper Weight” is 16.66%.


 


The “Copper Return” is a quotient, the numerator of which is the
difference of the Final Copper Price minus the Initial Copper Price and the
denominator of which is the Initial Copper Price.


 


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


 


	
  Reference Commodity

  	
   

  	
  Relevant Commodity Exchange

  
	
   

  	
   

  	
   

  
	
  Aluminum

  	
   

  	
  London Metal
  Exchange (“LME”)

  
	
   

  	
   

  	
   

  
	
  Copper

  	
   

  	
  LME

  



 


If a
Disruption Event relating to one or more of the Reference Index, the Reference
Currency or the Reference Commodities (with respect to a Commodity Disruption
Event identified in clauses (A), (B) or (C) below) is in effect on
the scheduled Valuation Date, the Calculation Agent will calculate the Basket
Return using:


 


·                                          If the Reference Index,
the Reference Currency or a Reference Commodity did not suffer a Disruption Event
on the scheduled Valuation Date, the Final Index Level, the Settlement Rate,
the Final Copper Price or the Final Aluminum Price, as applicable, on the
scheduled Valuation Date, and


 


·                                          If any or all of the
Reference Index, the Reference Currency or a Reference Commodity did
suffer a
Disruption Event on the scheduled Valuation Date, the Final Index Level, the
Settlement Rate, the Final Copper Price and/or the Final Aluminum Price, as the
case may be, on the immediately succeeding Scheduled Index Trading Day,
scheduled 


 


4

















 


Currency
Business Day or scheduled Commodity Trading Day, as applicable, on which no Disruption
Event occurs or is continuing with respect to the  affected Reference Index, Reference Currency
or Reference Commodity;


 


provided however that if a Disruption Event with respect to
one or more of the Reference Index, the Reference Currency or a Reference
Commodity has occurred or is continuing on each of the three Scheduled Index
Trading Days, scheduled Currency Business Days or scheduled Commodity Trading
Days, as applicable, following the scheduled Valuation Date, then (a) such
third Scheduled Index Trading Day, scheduled Currency Business Day or scheduled
Commodity Trading Day, as applicable, shall be deemed the Valuation Date for
the affected Reference Index, Reference Currency or Reference Commodity,
respectively; and (b) the Calculation Agent will determine, on such day, (i) in
the case of the Reference Index, its good faith estimate of the Final Index
Level, in accordance with the formula for and method of calculating the Index
Level last in effect prior to commencement of the Index Disruption Event, using
the closing price (or, if trading in the relevant securities has been
materially suspended or materially limited, its good faith estimate of the
closing price that would have prevailed but for such suspension or limitation
or non-trading day) on such third Scheduled Index Trading Day of each security
most recently included in the Reference Index, (ii) in the Case of the
Reference Currency, the Settlement Rate in accordance with the “Fallback Rate
Observation Methodology”, or (iii) in the case of a Reference Commodity,
the Final Copper Price or the Final Aluminum Price, as applicable, for the
affected Reference Commodity in its sole and absolute discretion, taking into
account the latest available quotation for the Final Copper Price or the Final
Aluminum Price, as the case may be, for the affected Reference Commodity and
any other information that in good faith it deems relevant.


 


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


 


For
purposes of the above, “scheduled Valuation Business Day” means a day that is
or, in the judgment of the Calculation Agent, should have been, a Valuation
Business Day for the affected Basket Currency.


 


A “Disruption
Event” means, for the Reference Index, an Index Disruption Event, for the
Reference Currency, a Currency Disruption Event and for the Reference
Commodities, a Commodity Disruption Event.


 


An “Index
Disruption Event” means any of the following events, as determined in good
faith by the Calculation Agent:


 


(A)                              a suspension, absence or material limitation of
trading of stocks then constituting 20% or more of the level of the Reference
Index (or the 


 


5

















 


relevant successor index) on the Relevant Equity Exchanges
(as defined below) for such securities at any time during the one hour period
preceding the close of the principal trading session on such Relevant Equity
Exchange;


 


(B)                                a breakdown or failure in the price and trade
reporting systems of the primary market of any relevant exchange as a result of
which the reported trading prices for stocks then constituting 20% or more of
the level of the Basket Index (or the relevant successor index) at any time
during the one hour period preceding the close of the principal trading session
on such relevant exchange are materially inaccurate;


 


(C)                                a suspension, absence or material limitation of
trading on any major securities exchange for trading in futures or options
contracts or exchange traded funds related to a Basket Index (or the relevant successor
index) at any time during the one hour period preceding the close of the
principal trading session on such exchange; or


 


(D)                               a decision to permanently discontinue trading in the
relevant futures or options contracts or exchange traded funds.


 


For the purpose of
determining whether an Index Disruption Event exists at any time, if trading in
a security included in the Reference Index is materially suspended or
materially limited at that time, then the relevant percentage contribution of
that security to the level of the Reference Index shall be based on a
comparison of (i) the portion of the level of the Reference Index
attributable to that security relative to, (ii) the overall level of the
Basket Index, in each case immediately before that suspension or limitation.


 


For the purpose of
determining whether an Index Disruption Event exists at any time:


 


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


 


(2)                                  limitations pursuant to
the rules of any Relevant Equity Exchange similar to NYSE Rule 80B
(or any applicable rule or regulation enacted or promulgated by any other
self-regulatory organization or any government agency of scope similar to NYSE Rule 80B
as determined by the calculation agent in its sole discretion) on trading
during significant market fluctuations will constitute a suspension, absence or
material           limitation of trading;


 


(3)                                  a suspension of trading in
futures or options contracts on the Reference Index by the primary securities
market trading in such contracts by reason of:


 


(i)    a
price change exceeding limits set by such exchange or market,


 


(ii)   an
imbalance of orders relating to such contracts, or


 


6

















 


(iii)   a
disparity in bid and ask quotes relating to such contracts,


 


will, in
each such case, constitute a suspension, absence or material limitation of
trading in futures or options contracts related to the Reference Index; and


 


(4)                                  a suspension, absence or
material limitation of trading on any Relevant Equity Exchange or on the
primary market on which futures or options contracts related to the Reference
Index are traded will not include any time when such market is itself closed
for trading under ordinary circumstances.


 


For
purposes of the above, “Relevant Equity Exchange” for any security (or
combination thereof then underlying the Reference Index or any successor index)
means the primary organized exchange, quotation system (which includes bulletin
board services) or other market of trading for such security then included in
the Reference Index or any successor index.


 


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


 


(A)                              the occurrence and/or existence of an event on any
day that has the effect of preventing or making impossible (x) the
delivery of USD from accounts inside the country for which the Reference Currency
is the lawful currency (such jurisdiction with respect to such Reference
Currency, the “Reference Currency Jurisdiction”) to accounts outside
that Reference Currency Jurisdiction;


 


(B)                                the occurrence of any event causing the Reference
Exchange Rate for the Reference Currency to be split into dual or multiple
currency exchange rates; or


 


(C)                                the Settlement Rate being unavailable for the
Reference Currency, or the occurrence of an event (i) in the Reference
Currency Jurisdiction for that Reference Currency that materially disrupts the
market for the Reference Currency or (ii) that generally makes it
impossible to obtain the Settlement Rate for the Reference Currency, on the
Valuation Date.


 


For
purposes of the above, “scheduled Currency Business Day” means a day that is
or, in the judgment of the Calculation Agent, should have been, a Currency
Business Day.


 


A “Commodity
Disruption Event” with respect to a Reference Commodity means any of the
following events, as determined in good faith by the Calculation Agent:


 


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


 


7

















 


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


 


(C)                                the failure of the Relevant Commodity Exchange for the Reference
Commodity to publish the official daily settlement price of the Reference
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 Reference 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 Reference Commodity.


 


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


 


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


 


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


 


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


 


For
purposes of the above, “scheduled Commodity Trading Day” means a day, as
determined in good faith by the Calculation Agent, on which trading is
generally conducted on the Relevant Commodity Exchange applicable to the
affected Reference Commodity.


 


A “Valuation
Business Day” means any day that is each of (a) a Scheduled Index Trading
Day for the Reference Index. (b) a Currency Business Day for the Reference
Currency, and (c) a Commodity Business Day
for the Reference Commodities.


 


8

















 


A “Scheduled
Index Trading Day” means any day on which the
Reference Index (or any successor index) is published by the Index Sponsor (or
the publisher of such successor index) or otherwise determined by the
Calculation Agent.


 


A “Currency
Business Day” means any day that is not a Saturday, a Sunday or a day on which
banking institutions generally are authorized or obligated by law or executive
order to be closed (including for dealings in foreign exchange in accordance
with the market practice of the foreign exchange market) in London.


 


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


 


The “Fallback
Rate Observation Methodology” means
that the Reference Exchange Rate, Final Spot Rate or other rate, as specified
in the applicable pricing supplement, in respect of a basket currency will
equal the noon buying rate in New York for cable transfers in foreign
currencies as announced by the Federal Reserve Bank of New York for customs
purposes (the “Noon Buying Rate”) on the relevant Valuation Date or such other
date specified in the applicable pricing supplement. If the Noon Buying Rate is
not announced on that date, the Reference Exchange Rate, Final Spot Rate or
other rate for such Basket Currency will be calculated on the basis of the
arithmetic mean of the applicable spot quotations received by the Calculation
Agent at approximately 10:00 a.m., New York City time, on the Valuation
Business Day next succeeding the Valuation Date or such other date specified in
the applicable pricing supplement, for the purchase or sale for deposits in the
basket currency by the New York offices of three leading banks engaged in the
interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”). If fewer than three Reference Banks provide spot
quotations, then the Reference Exchange Rate, Final Spot Rate or other rate, as
applicable, will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received by the Calculation Agent at approximately
10:00 a.m., New York City time, on the relevant date from two Reference
Banks (selected in the sole discretion of the Calculation Agent), for the
purchase or sale for deposits in the Basket Currency. If these spot quotations
are available from only one Reference Bank, then the Calculation Agent, in its
sole discretion, will determine whether that quotation is reasonable to be
used. If no spot quotation is available, then the Reference Exchange Rate,
Final Spot Rate or other rate, as applicable, for such Basket Currency will be
determined by the Calculation Agent in good faith and in a commercially
reasonable manner.


 


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
Inc.


 


Except as provided below, the Redemption Amount 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.


 


9

















 


Payment of the 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.


 


10

















 


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: June 27,
  2008

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
   

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Andrew Yeung

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  	
  Name: 

  	
  Cindy Buckholz

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  



 


TRUSTEE’S
CERTIFICATE OF AUTHENTICATION


 


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


 


CITIBANK, N.A.


  as Trustee


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  



 


11

















 


[REVERSE
OF NOTE]


 


LEHMAN BROTHERS
HOLDINGS INC.


MEDIUM-TERM NOTES,
SERIES I


AUSSIE BULL NOTES
 DUE JUNE 27, 2012


 


 


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,
Aussie Bull Notes (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 Additional 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 Additional 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 Additional 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
Additional 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 Issue Date to but excluding the date of early
repayment and will equal, for each note, the Redemption Amount, calculated as
the date of early repayment were the Maturity Date. If a bankruptcy proceeding is
commenced in respect of Lehman Brothers Holdings, the claim of the beneficial
owner of a note for the period from and including the Issue Date to but
excluding the date of early repayment will be capped at the Redemption Amount,
calculated as though the date of the commencement of the proceeding were the
Maturity Date.


 


Section 9. 
No Recourse Against Certain Persons.  No recourse for the payment of the Additional
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.