Exhibit 4.03


 


CUSIP
NO. 5252M0DF1


ISIN NO. US5252M0DF10


 


	
  REGISTERED

  	
  PRINCIPAL AMOUNT:
  $3,260,000

  



No. R-1


 


LEHMAN BROTHERS HOLDINGS INC.


 


MEDIUM-TERM NOTE, SERIES I


 


CHINA BULL NOTES


DUE FEBRUARY 28, 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 February 28,
2012, or if such day is not a Business Day, on the next following Business Day.


 


The “Valuation
Date” is February 21, 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 “Original
Trade Date” is February 25, 2008.


 


The “Issue
Date” is February 28, 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) 60.0%, if the Basket Return is greater than or equal to
60.0%; (b) the Basket Return, if the Basket Return is greater than zero,
but less than 60.0%; or (c) 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 Crude Oil Return.


 


The “Reference
Index” is the Hang Seng® 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 23,269.14, which is the Index Level on the Original 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 the Hang Seng Indexes Company Limited, a wholly owned
subsidiary of the Hang Seng® Bank.


 


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 Chinese Renminbi (CNY).


 


2

















 


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


 


The “Initial
Currency Rate” is 7.146, which is the Reference Exchange Rate on the Original
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 Initial Currency Rate minus the
Settlement Rate and the denominator of which is the Initial Currency Rate.


 


The “Settlement
Rate Option” is the
CNY/USD official Beijing fixing rate, expressed as the amount of CNY per one
USD, for settlement in two Beijing and New York business days reported by The
State Administration of Foreign Exchange of the People’s Republic of China,
Beijing, which appears on the Reuters Screen SAEC Page opposite the symbol
“USDCNY=” at approximately 5:00 p.m., Beijing time, on the relevant day.


 


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


 


“Copper” is Copper – Grade A.


 


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


 


The “Initial Copper Price” is $8,247, which
is the Copper Price on the Original 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.


 


“Crude Oil” is
Light sweet crude oil.


 


3

















 


The “Crude Oil Price” is the official settlement price of the first
nearby month futures contract (or, in the case of the last trading day of the
first nearby month contract, the second nearby month contract) for Crude Oil,
expressed as the U.S. dollar price per barrel, as made public by the Relevant
Commodity Exchange for Crude Oil (subject to the occurrence of a Disruption
Event).


 


The “Initial Crude Oil Price” is $99.23, which
is the Crude Oil Price on the
Original Trade Date.


 


The “Final Crude Oil Price” is the Crude Oil Price on the Valuation
Date.


 


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


 


The “Crude Oil Weight” is 16.66%.


 


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

  
	
   

  	
   

  	
   

  
	
  Copper

  	
   

  	
  London Metal
  Exchange (“LME”)

  
	
   

  	
   

  	
   

  
	
  Crude Oil

  	
   

  	
  The NYMEX Division,
  or its successor, of the

  New York Mercantile Exchange, Inc.

  (“NYMEX”)

  






 


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 Crude Oil 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 


 


4

















 


Valuation
Date, the Final Index Level, the Settlement Rate, the Final Copper Price and/or
the Final Crude Oil Price, as the case may be, on the immediately succeeding
Scheduled Index Trading Day, Scheduled 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, based on the
last available Index Level and any other information that in good faith it
deems relevant, (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 Crude
Oil 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 Crude Oil 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 Crude Oil 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 Crude Oil 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 material suspension of or limitation imposed on
trading relating to the securities that then comprise 20% or more of the level
of the Reference Index (or the successor index) by the Relevant Equity
Exchanges (as 


 


5

















 


defined below) on which those securities are traded, at any
time during the one hour period that ends at the close of trading on such day,
whether by reason of movements in price exceeding limits permitted by that
Relevant Equity Exchange or otherwise;


 


(B)                                A material suspension of or limitation imposed on
trading in futures or options contracts related to the Reference Index (or the
successor index) by the primary exchange or quotation system on which those
futures or options contracts are traded at any time during the one hour period
that ends at the close of trading on such day, whether by reason of movements
in price exceeding limits permitted by the exchanges or otherwise;


 


(C)                                Any event, other than an early closure, that
disrupts or impairs the ability of market participants in general to effect
transactions in, or obtain market values for the securities that then comprise
20% or more of the Reference Index (or the successor index) on the Relevant
Equity Exchanges on which those securities are traded, at any time during the
one hour period that ends at the close of trading on that day;


 


(D)                               Any event, other than an early closure, that disrupts
or impairs the ability of market participants in general to effect transactions
in, or obtain market values for, the futures or options contracts relating to
the Reference Index (or the successor index) on the primary exchange or
quotation system on which those futures or options contracts are traded at any
time during the one hour period that ends at the close of trading on such day;


 


(E)                                 The closure of the
Relevant Equity Exchanges on which the securities that then comprise 20% or
more of the Reference Index (or the successor index) are traded or on which
futures or options contracts relating to the Reference Index (or the successor
index) are traded prior to its scheduled closing time unless the earlier
closing time is announced by the Relevant Equity Exchanges at least one hour
prior to the earlier of (1) the actual closing time for the regular
trading session on the Relevant Equity Exchanges and (2) the submission
deadline for orders to be entered into the Relevant Equity Exchanges for
execution at the close of trading on such day.


 


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


 


(1)                                  the relevant percentage
contribution of a security to the level of the Reference Index (or the
successor index) will be based on a comparison of (x) the portion of the
level of the Reference Index (or the successor index) attributable to that
security and (y) the overall level of the Reference Index (or the
successor index), in each case immediately before the occurrence of the Index
Disruption Event;


 


(2)                                  “close of trading” means
in respect of any Relevant Equity Exchange, the scheduled weekday closing time
on a day on which the Relevant Equity Exchange is scheduled to be open for
trading for its respective regular


 


6

















 


trading
session, without regard to after hours or any other trading outside of the
regular trading session hours; and


 


(3)                                  limitations pursuant to
the rules of any Relevant Equity Exchange similar to NYSE Rule 80A
(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 80A
as determined by the Calculation Agent) on trading during significant market
fluctuations will constitute a suspension, absence or material limitation of
trading.


 


For
purposes of the above, “Relevant Equity Exchange” means the primary organized
exchange or market of trading for any security (or any combination thereof)
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 or (y) the conversion of the
Reference Currency into USD through customary legal channels;


 


(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;


 


(B)                                either (i) the failure of trading to commence, or permanent
discontinuance of trading, in the Reference Commodity, or futures contracts or
options 


 


7

















 


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 Original Trade Date of a material change in
the content, composition, or constitution of the Reference Commodity; or


 


(E)                                 the occurrence since the Original 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.


 


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


 


8

















 


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 Beijing.


 


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.


 


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).


 


9

















 


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:
  February 28, 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


CHINA BULL NOTES
 DUE FEBRUARY 28, 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,
China 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.