Exhibit
4.03


 


CUSIP NO. 52517P6Y2


ISIN NO. US52517P6Y29


 


	
  REGISTERED

  	
  PRINCIPAL
  AMOUNT: $5,500,000

  



No.
R-1


 


LEHMAN BROTHERS HOLDINGS INC.


 


MEDIUM-TERM NOTE, SERIES I


 


FX BASKET-LINKED NOTE
 DUE OCTOBER 13, 2009


 


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


 


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


 

















 


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


 


The “Maturity Date” is
October 13, 2009, or if such day is not a Business Day, on the next following
Business Day.


 


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


 


The “Additional Amount” is a single U.S.
dollar amount equal to the principal amount of the Notes multiplied by the
product of the Leverage times greatest of the Basket Returns of (a) Basket 1,
(b) Basket 2 and (c) Basket 3; provided that
the minimum Additional Amount payable on the notes shall be zero.


 


The “Leverage” is 150%.


 


Basket 1 consists of the Brazilian Real
(BRL), Argentine Peso (ARS) and Mexican Peso (MXN), each with a weighting of
33.34%, 33.33% and 33.33%, respectively. Basket 2 consists of Turkish Lira
(TRY), Hungarian Forint (HUF), Israeli Shekel (ILS) and Russian Ruble (RUB),
each with a weighting of 25%. Basket 3 consists of Indonesian Rupiah (IDR),
Singapore Dollar (SGD), Malaysian Ringgit (MYR) and Indian Rupee (INR), each
with a weighting of 25%. Each such currency is a “Reference Currency.”


 


The
“Basket Return” for each Basketn equals the sum of the Weighted
Currency Returns for the Reference Currencies in that Basketn.


 


The “Weighted Currency Return” for each Reference
Currency in each Basketn is the product of the Weighting for such
Reference Currency times a quotient, the numerator of which is the difference
of the Initial Reference Currency Rate for such Reference Currency minus the
Settlement Rate for such Reference Currency and the denominator of which is the
Settlement Rate for such Reference Currency.


 


The “Initial Reference Currency Rate” and “Weighting”
for each Reference Currency in each Basketn are as follows:


	
  Basketn

  	
   

  	
  Reference

  Currency

  	
   

  	
  Initial

  Reference

  Currency

  Rate

  	
   

  	
  Weighting

  	
   

  
	
  Basket 1 

  	
   

  	
  BRL

  	
   

  	
  1.8092

  	
   

  	
  33.34

  	
  %

  
	
   

  	
  ARS

  	
   

  	
  3.15400

  	
   

  	
  33.33

  	
  %

  
	
   

  	
  MXN

  	
   

  	
  10.8685

  	
   

  	
  33.33

  	
  %

  
	
  Basket 2 

  	
   

  	
  TRY

  	
   

  	
  1.1869

  	
   

  	
  25

  	
  %

  
	
   

  	
  HUF

  	
   

  	
  177.419

  	
   

  	
  25

  	
  %

  
	
   

  	
  ILS

  	
   

  	
  4.0095

  	
   

  	
  25

  	
  %

  
	
   

  	
  RUB

  	
   

  	
  24.9882

  	
   

  	
  25

  	
  %

  



 


2

















 


	
  Basket 3

  	
   

  	
  IDR

  	
   

  	
  9107

  	
   

  	
  25

  	
  %

  
	
   

  	
  SGD

  	
   

  	
  1.4786

  	
   

  	
  25

  	
  %

  
	
   

  	
  MYR

  	
   

  	
  3.4059

  	
   

  	
  25

  	
  %

  
	
   

  	
  INR

  	
   

  	
  39.49

  	
   

  	
  25

  	
  %

  



 


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


 


The “Reference Exchange Rates”
are the spot exchange rates for each of the Reference Currencies quoted against
the U.S. dollar expressed as number of currency units per USD 1.


 


The “Valuation Date” is October 5, 2009; provided that, upon the occurrence of a Disruption Event
with respect to a Reference Currency, the Valuation Date for the affected
Reference Currency may be postponed (as described in “Disruption Events”
below).


 


The “Issue Date” is October 12, 2007.


 


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


 


•                                          for each Reference
Currency that did not suffer a Disruption Event on the scheduled Valuation
Date, the Settlement Rate on the scheduled Valuation Date, and


 


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


 


provided, however, that if a
Disruption Event has occurred or is continuing with respect to a Reference
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 Reference Currency; and (b)
the Calculation Agent will determine the Settlement Rate for the affected
Reference Currency on such day in accordance with Fallback Rate Observation
Methodology.


 


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
Reference Currency.


 


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


 


3

















 


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


 


A “Valuation Business Day” means, with respect to each
Reference 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:


 


	
  Reference

  Currency

  	
   

  	
  Screen

  Reference

  	
   

  	
  Valuation

  Business Day

  
	
  BRL

  	
   

  	
  BRFR

  	
   

  	
  Brazilia, Rio de Janiero or
  São Paulo; and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ARS

  	
   

  	
  ARS=

  	
   

  	
  Buenos Aires and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MXN

  	
   

  	
  MEX01

  	
   

  	
  Mexico City and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TRY

  	
   

  	
  The EUR/TRY rate on ECB37 divided by the EUR/USD rate on
  ECB37

  	
   

  	
  TARGET and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  HUF

  	
   

  	
  The EUR/HUF rate on ECB37 divided by the EUR/USD rate on
  ECB37

  	
   

  	
  TARGET and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ILS

  	
   

  	
  FXIL

  	
   

  	
  Tel Aviv and New York

  



 


4

















 


	
  RUB

  	
   

  	
  EMTA

  	
   

  	
  Moscow and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  IDR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SGD

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  MYR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore and New York

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai and New York

  



 


The “Settlement Rate
Option” for the BRL is the Brazilian Real/U.S. dollar offered rate for U.S.
dollars, expressed as the amount of Brazilian Reals per one U.S. dollar, for
settlement in two Business Days reported by the Banco Central do Brasil on
SISBACEN Data System under transaction code PTAX-800 (“Consulta de Cambio” or
Exchange Rate Inquiry), Option 5 ( “Cotacoes para Contabilidade” or Rates for
Accounting Purposes), which appears on Reuters Screen BRFR Page under the
caption “Dolar PTAX” at approximately 6:30 pm Sao Paolo time on the Valuation
Date or such other relevant date. The Settlement Rate Option for ARS is the
Argentine Peso/U.S. dollar official fixing rate, expressed as the amount of
Argentine Pesos per one U.S. dollar for settlement on the same day (or, if that
day is not a business day in Buenos Aires and New York, for settlement on the
first succeeding day that is a business day in both Buenos Aires and New York)
which appears on the Reuters Screen ARS= page at the close of business in
Buenos Aires on the Valuation 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 Valuation Date or such other relevant date.


 


The
Settlement Rate Option for the TRY is the TRY/EUR Fixing Rate divided by the
USD/EUR Fixing Rate. The Settlement Rate Option for the TRY is the EUR/TRY
Fixing Rate divided by the EUR/USD Fixing Rate. The “EUR/TRY Fixing Rate” is
the Euro/Turkish Lira fixing rate, expressed as the amount of Euro per one
Turkish Lira which appears on Reuters Screen ECB37 to the right of the caption “TRY”
at approximately 2:15 p.m., Central European time, on the Valuation Date or
such other relevant date. The “EUR/USD Fixing Rate” is the Euro/U.S. dollar
fixing rate, expressed as the amount of Euro per one U.S. dollar which appears
on Reuters Screen ECB37 to the right of the caption “USD” at approximately 2:15
p.m., Central European time, on the Valuation Date or such other relevant date.
The Settlement Rate Option for the HUF is the EUR/HUF Fixing Rate divided by
the EUR/USD Fixing Rate. The “EUR/HUF Fixing Rate” is the Euro/Hungarian Forint
fixing rate, expressed as the amount of Euro per one Hungarian Forint which
appears on Reuters Screen ECB37 to the right of the caption “HUF” at
approximately 2:15 p.m., Central European time, on the Valuation Date or such
other relevant date. The Settlement Rate Option for the ILS is the Israeli
Shekel/U.S. dollar Specified Rate, expressed as the amount of Israeli Shekels
per one U.S. dollar, for settlement in two Business Days which appears on the
Reuters Screen FXIL under the heading “USD/ILS” to the right of the caption “1700”
at approximately 5.00 p.m., Tel Aviv time, on Valuation Date or such other
relevant date. The Settlement Rate Option for the RUB is the Russian Ruble/U.S.
dollar Specified Rate, expressed as the amount of Russian Rubles per one U.S.
dollar, for 


 


5

















 


settlement in one Business
Day, calculated by the Chicago Mercantile Exchange (“CME”) and as published on
CME’s website, which appears on the Reuters Screen EMTA Page, at approximately
1:30 p.m., Moscow time, on the Valuation Date or such other relevant date.


 


The
Settlement Rate Option for the IDR is the Indonesian Rupiah/U.S. dollar spot
rate at 11:00 a.m., Singapore time, expressed as the amount of Indonesian
Rupiah per one U.S. dollar, for settlement in two Business Days reported by the
Association of Banks in Singapore which appears on the Reuters Page ABSIRFIX01
to the right of the caption “Spot” under the column “IDR” at approximately
11:30 a.m., Singapore time, on the on the Valuation Date or such other relevant
date. The Settlement Rate Option for the SGD is the Singapore Dollar/U.S.
dollar spot rate at 11:00 a.m., Singapore time, expressed as the amount of
Singapore Dollar per one U.S. dollar, for settlement in two Business Days,
reported by the Association of Banks in Singapore which appears on the Reuters
Page ABSIRFIX01 to the right of the caption “Spot” under the column “SGD” at
approximately 11:30 a.m., Singapore time, on the Valuation Date or such other
relevant date. The Settlement Rate Option for the MYR is the Malaysian
Ringgit/U.S. dollar spot rate, expressed as the amount of Malaysian Ringgit per
one U.S. dollar, for settlement in two Business Days reported by the
Association of Banks in Singapore, which appears on the Reuters Page ABSIRFIX01
to the right of the caption “Spot” under the column “MYR” at approximately
11:30 a.m. Singapore time on the Valuation Date or such other relevant date. The
Settlement Rate Option for the INR is the Indian Rupee/U.S. dollar reference
rate, expressed as the amount of Indian Rupee per one U.S. dollar, for
settlement in two Business Days reported by the Reserve Bank of India which
appears on the Reuters Screen RBIB Page at approximately 2:30 p.m., Mumbai
time, or as soon thereafter as practicable on the on the Valuation Date
or such other relevant date.


 


The
term “Business Day” solely as used in any Settlement Rate Option described
above shall mean 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
Principal Financial Center for both (a) the Reference Currency and (b) the
currency against which the Reference Currency is quoted (the “base currency”)
in accordance with the Reference Exchange Rate specified in the applicable
pricing supplement, in each case as specified for the applicable Reference
Currency or base currency in the table above; provided that where the Turkish
Lira or Hungarian Forint is the Reference Currency or the base currency “business
day” for the Turkish Lira or Hungarian Forint as the Reference Currency or the
base currency shall mean any day on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer (TARGET) System is open.


 


The screen or time of observation indicated in relation to
any Settlement Rate Option 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, 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 


 


6

















 


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 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.


 


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.


 


7

















 


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 12, 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

  



 


8

















 


[REVERSE OF NOTE]


 


LEHMAN BROTHERS HOLDINGS INC.


MEDIUM-TERM NOTES, SERIES I


FX BASKET-LINKED NOTE
 DUE OCTOBER 13, 2009


 


Section
1. General. This Note is one of a
duly authorized series of Notes of the Company designated as the Medium-Term
Notes, Series I, 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.