Exhibit
4.03


CUSIP NO. 52517PP70

ISIN NO. US52517PP709


	
  REGISTERED

  	
  PRINCIPAL AMOUNT:
  $3,000,000

  
	
  No. R-1

  	
   

  



 


LEHMAN BROTHERS HOLDINGS INC.


MEDIUM-TERM NOTE, SERIES I


DOUBLE CONDITIONAL RANGE NOTE
DUE JUNE 27, 2007


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, 2007, 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 Additional Amount, if any.


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


(A) 7.5%, if, at all times during the Observation Period, both (a) the
Continuously Observed EUR Rate has traded strictly within the EUR Reference
Range and (b) the Continuously Observed MXN Rate has traded strictly within the
MXN Reference Range; or


(B) 0%, if, at any time during the Observation Period, either (a) the
Continuously Observed EUR Rate trades outside the EUR Reference Range (or on
either the EUR Range Lower Boundary or the EUR Range Upper Boundary) or (b) the
Continuously Observed MXN Rate trades outside the MXN Reference Range (or on
either the MXN Range Lower Boundary or the MXN Range Upper Boundary).


The “Start Date” is December 20, 2006.


The “End Date” is June 20, 2007.


The “Observation Period” is the period from and including 10:00 am EST
on the Start Date to but excluding 10:00 am EST on the End Date.


The “Reference Currencies” are the Euro (EUR) and the Mexican Peso
(MXN).


The “EUR Reference Exchange Rate” is the spot exchange rate for the
Euro quoted against the U.S. Dollar expressed as the number of U.S. Dollars per
one Euro.


The “Continuously Observed EUR Rate” is, at any time on any day during
the Observation Period, the most recent traded EUR Reference Exchange Rate
observed on the continuous trading EBS (Electronic Broking Service) Spot
Dealing System (subject to the occurrence of a Disruption Event or a Continuous
Observation Unavailability Event).


The “EUR Reference Range” is
the range from (but excluding) the EUR Range Lower Boundary to (but excluding)
the EUR Range Upper Boundary.


The “EUR Range Lower
Boundary” is 1.2450, equal to the EUR Initial Fixing minus 0.0750.



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The “EUR Range Upper
Boundary” is 1.3950, equal to the Range Initial Fixing plus 0.0750.


The “EUR Initial Fixing” is
1.3200, which is the EUR Reference Exchange Rate observed by on the Start Date
in accordance with the Settlement Rate Option.


The “MXN Reference Exchange
Rate” is the spot exchange rate for the Mexican Peso quoted against the U.S.
Dollar expressed as the number of Mexican Pesos per one U.S. Dollar.


The “Continuously Observed
MXN Rate” is, at any time on any day during the Observation Period, the most
recent traded MXN Reference Exchange Rate observed on the continuous trading
Reuters DealingLink Spot Dealing System (subject to the occurrence of a
Disruption Event or a Continuous Observation Unavailability Event).


The “MXN Reference Range” is
the range from (but excluding) the MXN Range Lower Boundary to (but excluding)
the MXN Range Upper Boundary.


The “MXN Range Lower
Boundary” is 10.2502, equal to the MXN Initial Fixing minus 0.5500.


The “MXN Range Upper
Boundary” is 11.3002, equal to the MXN Initial Fixing plus 0.5000.


The “MXN Initial Fixing” is
10.8002, which is the MXN Reference Exchange Rate observed by on the Start Date
in accordance with the Settlement Rate Option.


If a Disruption Event occurs with respect to a Reference
Currency on any day during the Observation Period to but excluding the earlier
of (a) 10:00 a.m. EST on the End Date and (b) the time on any day at which
either the Continuously Observed EUR Rate first trades outside the EUR
Reference Range (or on either the EUR Range Lower Boundary or EUR Range Upper
Boundary) or the Continuously Observed MXN Rate first trades outside the MXN
Reference Range (or on either the MXN Range Lower Boundary or MXN Range Upper
Boundary), and for so long as such Disruption Event is continuing, the
Continuously Observed EUR Rate or Continuously Observed MXN Rate, as
applicable, for the affected Reference Currency for each such day will be a
single EUR Reference Exchange Rate or MXN Reference Exchange Rate, as
applicable, determined by the Calculation Agent in accordance with the Fallback
Rate Observation Methodology.


A “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 the conversion of either of the Reference
Currencies into U.S. Dollars through customary legal channels; or


(B)           the
occurrence of any event causing either the EUR Reference Exchange Rate or the
MXN Reference Exchange Rate to be split into dual or multiple currency exchange
rates.



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If a Continuous Observation Unavailability Event occurs
with respect to a Reference Currency on any day during the Observation Period
to but excluding the earlier of (a) 10:00 a.m. EST on the End Date and (b) the
time on any day at which the Continuously Observed EUR Rate first trades
outside the EUR Reference Range (or on either the EUR Range Lower Boundary or
EUR Range Upper Boundary) or the Continuously Observed MXN Rate first trades
outside the MXN Reference Range (or on either the MXN Range Lower Boundary or
MXN Range Upper Boundary), and for so long as such Continuous Observation
Unavailability Event is continuing, the Continuously Observed EUR Rate or the
Continuously Observed MXN Rate, as applicable, for the affected Reference
Currency for each such day will be a single daily EUR Reference Exchange Rate
or MXN Reference Exchange Rate, as applicable, determined by the Calculation
Agent in accordance with the Settlement Rate Option on that day (subject to the
occurrence of a Settlement Rate Option Unavailability Event).


A “Continuous Observation Unavailability Event”
means, as determined in good faith by the Calculation Agent, (a) with
respect to EUR, the Continuously Observed EUR Rate being unavailable, or the
occurrence of an event (other than an event constituting a Disruption Event)
that generally makes it impossible to obtain the Continuously Observed EUR
Rate, on the EBS Spot Dealing System; and (b) with respect to MXN, the
Continuously Observed MXN Rate being unavailable, or the occurrence of an event
(other than an event constituting a Disruption Event) that generally makes it
impossible to obtain the Continuously Observed MXN Rate, on the Reuters
DealingLink Spot Dealing System.


If a Settlement
Rate Option Unavailability Event is in effect on any day during the Observation
Period on which the EUR Reference Exchange Rate or MXN Reference Exchange Rate
is to be observed in accordance with the Settlement Rate Option pursuant to a
Continuous Observation Unavailability Event, as described above, the
Calculation Agent will determine the EUR Reference Exchange Rate or MXN
Reference Exchange Rate, as applicable, in accordance with the Fallback Rate
Observation Methodology.


A “Settlement
Rate Option Unavailability Event” means, as determined in good faith by the
Calculation Agent, the EUR Reference Exchange Rate or the MXN Reference
Exchange Rate, as applicable, being unavailable, or the occurrence of an event
(other than an event constituting a Disruption Event) that generally makes it
impossible to obtain the EUR Reference Exchange Rate or the MXN Reference
Exchange Rate, as applicable, in accordance with the Settlement Rate Option on
such day.


A “Valuation Business Day,” with respect to the Euro, means
any day, other than a Saturday or Sunday, that is neither a legal holiday nor a
day on which commercial banks are authorized or required by law, regulation or
executive order to close (including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in New York.  A Valuation Business Day, with respect to the
Mexican Peso, means a business day (including for dealings in foreign exchange
in accordance with the market practice of the foreign exchange market) in
Mexico City, Mexico.


The “Settlement
Rate Option” for the EUR Reference Exchange Rate is the U.S. Dollar/Euro
official fixing rate, expressed as the amount of U.S. Dollars per one Euro, for
settlement in two business days reported by the Federal Reserve Bank of New
York which 



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appears on Reuters Screen 1FED to the right of the
caption “EUR” at approximately 10:00 a.m. New York time, on the Start Date or such other
relevant date.


The “Settlement Rate Option” for the MXN Reference Exchange
Rate is the Mexican Peso/U.S. Dollar official fixing rate, expressed as the
amount of Mexican Pesos per one U.S. Dollar, for settlement in two business
days reported by Banco de Mexico which appears on Reuters Screen MEX01 Page
under the heading “USDMXNFIX=“ at the close of business in Mexico City on the Start Date or such other
relevant date.


The “Fallback Rate Observation Methodology” means that the Reference Exchange Rate, Settlement
Rate or other rate, as specified in the applicable pricing supplement, in
respect of a reference 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, Settlement Rate or other rate for such Reference
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 Reference
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, Settlement 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 Reference 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, Settlement Rate or
other rate, as applicable, for such Reference 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 Additional 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 Additional
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 



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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.



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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:  December 27, 2006


	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title:   Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name: Jin Lee

  
	
   

  	
   

  	
  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

  



 



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[REVERSE
OF NOTE]


LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
DOUBLE CONDITIONAL RANGE NOTE
DUE JUNE 27, 2007


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, Double
Conditional Range 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 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 and will equal, for each note, the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.  If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the beneficial owner of a note will be capped at the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.


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.