Exhibit 4.03


 


CUSIP NO. 52517P5M9

ISIN NO. US52517P5M99


 


REGISTERED                                                                                                      PRINCIPAL
AMOUNT: $64,000


No. R-1


 


LEHMAN BROTHERS HOLDINGS INC.


 


MEDIUM-TERM NOTE, SERIES I


 


FX BASKET-LINKED NOTE
 DUE OCTOBER 4, 2010


 


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 October 4,
2010, 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 amount per $1,000 Note
equal the greater of (a) zero and (b) the product of $1,000 times the
Basket Return times the Participation Rate.


 


The “Participation Rate” is 280%.


 


The “Basket” is the Euro (EUR), British Pound Sterling (GBP) and
Canadian Dollar (CAD) (each a “Basket Currency” and, collectively, the “Basket
Currencies”).


 


The “Basket Return” is a
percentage equal to a quotient, the numerator of which is the difference of the
Basket Ending Level minus the Basket Starting Level and the denominator of
which is the Basket Starting Level.


 


The “Basket Starting Level”
was set to 100 on the Trade Date.


 


The “Basket Ending Level” is
the Basket closing level on the Valuation Date, which is equal to the product
of 100 times the sum of 1 plus the sum of the Weighted Currency Returns.


 


The “Weighted Currency Return” for each Basket
Currency is the product of the Basket Currency Weighting for such Basket
Currency times the Currency Return for such Basket Currency.


 


The “Basket Currency Weighting” for each Basket
Currency is as follows:


 


	
  Basket

  Currency

  	
   

  	
  Basket

  Currency

  Weighting

  	
   

  
	
  EUR

  	
   

  	
  33.34

  	
  %

  
	
  GBP

  	
   

  	
  33.33

  	
  %

  
	
  CAD

  	
   

  	
  33.33

  	
  %

  



 


The “Currency Return” is (i) for each of EUR and
GBP, a quotient, the numerator of which is the difference of the Initial Spot
Rate for such Basket Currency minus the Final Spot Rate for such Basket
Currency and the denominator of which is the Initial Spot Rate for such Basket
Currency and (ii) for CAD, a quotient, the numerator of which is the
difference of the Final Spot Rate for CAD minus the Initial Spot Rate for CAD
and the denominator of which is the Final Spot Rate for CAD.


 


2

















 


The “Final Spot Rate” is, for each Basket Currency,
the Reference Exchange Rate for that Basket Currency on the Valuation Date,
determined by the Calculation Agent in accordance with the Spot Rate Source
(subject to the occurrence of a Disruption Event).


 


The “Initial Spot Rate” is, for each Basket
Currency, the Reference Exchange Rate for that Basket Currency determined by
the Calculation Agent on the Trade Date as set forth below:


 


	
  Basket 

  Currency

  	
   

  	
  Initial Spot

  Rate

  	
   

  
	
  EUR

  	
   

  	
  1.4127

  	
   

  
	
  GBP

  	
   

  	
  2.0168

  	
   

  
	
  CAD

  	
   

  	
  1.0052

  	
   

  



 


The “Reference Exchange Rates” for EUR and GBP are
the spot exchange rates for each of EUR and GBP quoted against the U.S. dollar,
expressed as the number of USD per unit of the Basket Currency and for CAD is
the spot exchange rate for CAD quoted against the U.S. dollar, expressed as the
number of units of the Basket Currency per USD 1.


 


The “Valuation Date” is September 28, 2010; provided that, upon
the occurrence of a Disruption Event with respect to a Basket Currency, the
Valuation Date for the affected Basket Currency may be postponed (as described
in “Disruption Events” below).


 


The “Trade Date” is September 26, 2007.


 


The “Issue Date” is October 2, 2007.


 


If the Calculation Agent determines that a
Disruption Event relating to one or more of the Basket Currencies is in effect
on the scheduled Valuation Date, the Calculation Agent will determine the
Basket Return using:


 


•                                          for each Basket Currency
that did not suffer a Disruption Event on the scheduled Valuation Date, the
Final Spot Rate on the scheduled Valuation Date, and


 


•                                          for each Basket Currency
that did suffer a Disruption Event on the scheduled Valuation Date, the Final
Spot Rate on the immediately succeeding scheduled Valuation Business Day for
such Basket Currency on which no Disruption Event occurs or is continuing with
respect to such Basket Currency;


 


provided, however, that if a
Disruption Event has occurred or is continuing with respect to a Basket
Currency on each of the three scheduled Valuation Business Days following the
scheduled Valuation Date, then (a) such third scheduled Valuation Business
Day shall be deemed the Valuation Date for the affected Basket Currency; and (b) the
Calculation Agent will determine the Final Spot Rate for the affected Basket
Currency on such day in accordance with Fallback Rate Observation Methodology.


 


3

















 


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 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 conversion
of the Reference Currency into USD through customary legal channels; or (y) for
any Basket Currency other than EUR, the delivery of USD from accounts inside
the country for which a Basket Currency is the lawful currency (such
jurisdiction with respect to such Basket Currency, the “Basket Currency
Jurisdiction”) to accounts outside that Basket Currency Jurisdiction;


 


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


 


(C)                                the Final Spot Rate being unavailable for the Basket
Currency, or the occurrence of an event (i) for any Basket Currency other
than EUR, in the Basket Currency Jurisdiction for that Basket Currency that
materially disrupts the market for the Basket Currency or (ii) that generally
makes it impossible to obtain the Final Spot Rate for the Basket Currency, on
the Valuation Date.


 


A
“Valuation Business Day” means, with respect to each Basket Currency, 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 the city or
jurisdiction indicated in the table below:


 


	
  Basket 

  Currency

  	
   

  	
  Valuation Business Day

  
	
  EUR

  	
   

  	
  New York

  
	
  GBP

  	
   

  	
  New York

  
	
  CAD

  	
   

  	
  New York

  



 


The “Spot Rate Source” for the EUR 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 appears on Reuters Screen 1FED to the right of the
caption “EUR” at approximately 10:00 a.m., New York time, on the Valuation
Date or such other relevant date. The “Spot Rate Source” for the GBP is the
U.S. dollar/British Pound Sterling official fixing rate, expressed as the
amount of U.S. dollars per one Sterling, for settlement in two Business Days
reported by the Federal Reserve Bank of New York which appears on Reuters
Screen 1FED to the right of the caption “GBP” at approximately 10:00 a.m.,
New York time, on the Valuation Date or such other relevant date. The “Spot
Rate Source” for the CAD is the U.S. dollar/Canadian Dollar official fixing
rate, expressed as the amount of Canadian Dollars per one U.S. dollar, for
settlement in one Business Days reported by the


 


4

















 


Federal
Reserve Bank of New York which appears on Reuters Screen 1FED to the right of
the caption “CAD” at approximately 10:00 a.m., New York time, on the
Valuation Date or such other relevant date.


 


The
screen or time of observation indicated in relation to any Spot Rate Source
above shall be deemed to refer to such screen or time of observation as
modified or amended from time to time, or to any substitute screen thereto.


 


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).


 


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.


 


5

















 


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.


 


6

















 


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:  October 2, 2007

  	
   

  
	
   

  	
   

  
	
  [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

  



 


7

















 


[REVERSE OF NOTE]


 


LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
 FX BASKET-LINKED NOTE
 DUE OCTOBER 4, 2010


 


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,
FX Basket-Linked 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 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.