Document:

Exhibit 4.01

 

CUSIP NO. 5252M0FCL9

ISIN NO. US5252M0CL96

 

	
  REGISTERED

  	
   

  	
  FACE
  AMOUNT: $5,000,000

  
	
  No. R-1

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

(FIXED RATE)

 

If the registered owner of this Note (as
indicated below) is The Depository Trust Company (the “Depository”) or a
nominee of the Depository, this Note is a Note in global form (a “Global
Security”) and the following legends are applicable except as specified on the
reverse hereof:

 

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 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, 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.

 

 

 

 

 

 

	
  ISSUE DATE: February 6, 2008

   

  STATED MATURITY DATE: February 6, 2023, subject
  to Issuer’s Call Option and/or Survivor’s Option

   

  INTEREST RATE: From and including the Issue Date to
  but excluding February 6, 2009: 8.75%. From and including
  February 6, 2009 to but excluding the Stated Maturity Date: 8.75% x
  Interest Accrual Factor

   

  SPREAD: N/A

   

  SPREAD MULTIPLIER: N/A

   

  MAXIMUM INTEREST RATE: N/A

   

  MINIMUM INTEREST RATE: 0.00%

   

  NTEREST PAYMENT DATES: Each February 6,
  May 6, August 6 and November 6, commencing on May 6,
  2008.

   

  REGULAR RECORD DATES: Fifteen calendar days
  immediately preceding the interest payment date.

   

  EXCHANGE RATE AGENT: N/A

   

  DEPOSITORY: The Depository Trust Company

   

  DUAL CURRENCY NOTE: 

  o  YES    x  NO

   

  OPTION ELECTION DATES: N/A

   

  OPTIONAL PAYMENT CURRENCY: N/A

   

  DESIGNATED EXCHANGE RATE: N/A

   

  OPTION VALUE CALCULATION AGENT: N/A

   

  OTHER PROVISIONS: N/A

   

   

  	
   

  	
  INTEREST PERIOD: Quarterly, from and including each
  Interest Payment Date (or the Issue Date, in the case of the first Interest
  Period), to but excluding the next succeeding Interest Payment Date (or the
  Stated Maturity Date, in the case of the final Interest Period).

   

  INTEREST ACCRUAL FACTOR: For any Interest Period,
  the number of calendar days (including non-Business Days) during that
  Interest Period in respect of which 6m USD LIBORREF is greater
  than or equal to the Lower LIBOR Barrier and less than or equal to the Upper
  LIBOR Barrier, divided by the total number of calendar days (including
  non-Business Days) in such Interest Period.

   

  LOWER LIBOR BARRIER: 0.00%

   

  UPPER LIBOR BARRIER: 6.50%

   

  6m USD LIBORREF: For any day within an
  Interest Period, the rate for deposits in U.S. Dollars for a period of 6
  months which appears on Reuters Page LIBOR01 as of 11:00 a.m.
  London time on such day (or if such day is not a London business day, on the
  immediately preceding London business day), subject to the Rate Cut Off.

   

  RATE CUT OFF: 6m USD LIBORREF for any
  days within an Interest Period from and including the fifth Business Day
  prior to an Interest Payment Date will equal 6m USD LIBORREF in
  effect on the fifth Business Day prior to that Interest Payment Date.

   

  OPTION TO RECEIVE PAYMENTS IN THE SPECIFIED
  CURRENCY:

  o  YES   x  NO

   

  SPECIFIED CURRENCY: N/A

   

  BUSINESS DAY: New York and London

   

  AMORTIZING NOTE:

  o 
  YES   x  NO

   

  SINKING FUND: N/A

   

  OID NOTE:

  o  YES    x  NO

   

  ISSUE PRICE: 
  N/A

   

  	
  AUTHORIZED DENOMINATIONS: $1,000/$1,000

   

  EXTENSION OF MATURITY NOTE:

  oYES   
  x NO

   

  EXTENSION PERIOD: N/A

   

  NUMBER OF EXTENSION PERIODS: N/A

   

  OPTION TO ELECT REPAYMENT:

  o  YES   x  NO

   

  OPTIONAL REPAYMENT DATES: N/A

   

  SURVIVOR’S OPTION:

  x  YES  o NO

   

  OPTIONAL REPAYMENT PRICES: N/A

   

  OPTIONAL INTEREST RATE RESET:

  o  YES   x  NO

   

  OPTIONAL RESET DATES: N/A

   

  OPTIONAL REDEMPTION:

  x  YES   
  o NO

   

  SPECIAL ELECTION PERIOD: N/A

   

  INITIAL REDEMPTION DATE: February 6, 2009.

   

  INITIAL REDEMPTION 

  PERCENTAGE:  N/A

   

  APPLICABILITY OF ANNUAL REDEMPTION

  PERCENTAGE REDUCTION:

  oYES  
   xNO

  If yes, state Annual Percentage

  Reduction:     %

   

  EXTENDIBLE NOTE:

  o YES   
  xNO

   

  INITIAL MATURITY DATE: N/A

   

  SPECIAL ELECTION INTERVAL: N/A

   

  RENEWABLE IN PART:

  o YES   
  x NO

   

  AUTHORIZED RENEWABLE AMOUNTS: N/A

   

  

 

 

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 the Principal Amount hereof (as defined below) and, if so specified above,
to pay interest thereon from the Issue Date specified above or from the most
recent Interest Payment Date specified above to which interest has been paid or
duly provided for at the Interest Rate specified above until the principal
hereof is paid or made available for payment and (to the extent that the
payment of such interest shall be legally enforceable) at such rate per annum
on any overdue principal and premium and on any overdue installment of
interest.  Unless otherwise specified
above, and except as provided in Section 8 on the reverse hereof if this
Note is a Dual Currency Note (as hereinafter defined), payments of principal,
premium, if any, and interest hereon will be made in U.S. dollars; if the
Specified Currency set forth above is a currency other than U.S. dollars (a “Foreign
Currency”), such payments will be made in U.S. dollars based on the equivalent
of that Foreign Currency converted into U.S. dollars in the manner set forth in
Section 2 on the reverse hereof.  If
the Specified Currency is a Foreign Currency and it is so provided above, the
Holder may elect to receive such payments in that Foreign Currency by delivery
of a written request to the Trustee (or to any duly appointed Paying Agent) at
the Corporate Trust Office (as defined below) not later than 10 calendar days
prior to the applicable payment date, and such election will remain in effect
for the Holder until revoked by written notice to the Trustee (or to any such
Paying Agent) at the Corporate Trust Office received not later than 10 calendar
days prior to the applicable payment date; provided,
however, no such election or
revocation may be made if, with respect to this Note, (i) an Event of
Default has occurred, (ii) the Company has exercised any discharge or
defeasance options or (iii) the Company has given a notice of
redemption.  In the event the Holder

 

2

 

 

makes any such election
pursuant to the preceding sentence, such election will not be effective on any
transferee of such Holder and such transferee shall be paid in U.S. dollars
unless such transferee makes an election pursuant to the preceding sentence; provided, however,
that such election, if in effect while funds are on deposit with the Trustee to
satisfy and discharge this Note, will be effective on any such transferee
unless otherwise specified above.  The “Principal
Amount” of this Note at any time means (i) if this Note is an OID Note,
the Amortized Face Amount at such time as described in Section 7 on the
reverse hereof, (ii) if this Note is an Amortizing Note, the Outstanding
Face Amount at such time as described in Section 4 on the reverse hereof, (iii) in
all other cases, the Face Amount hereof.

 

If this Note is subject to an Annual
Percentage Reduction as specified above, the Redemption Price shall initially
be the Initial Redemption Percentage of the Principal Amount of this Note on
the Initial Redemption Date and shall decline at each anniversary of the
Initial Redemption Date (each such date, a “Redemption Date”) by the Annual
Percentage Reduction of such Principal Amount until the Redemption Price is
100% of such Principal Amount.

 

In the event of any optional redemption by
the Company, any repayment at the option of the Holder, acceleration of the
maturity of this Note or other prepayment of this Note prior to the Maturity
Date specified, the term “Maturity” when used herein shall refer, where
applicable, to the date of redemption, repayment, acceleration or other
prepayment of this Note.

 

Except as provided in the following
paragraph, the Company will pay interest quarterly on February 6, May 6,
August 6 and November 6 of each year (unless other Interest Payment
Dates are specified above) (each an “Interest Payment Date”), commencing with
the first Interest Payment Date next succeeding the Issue Date, and at
Maturity; provided that any
payment of principal, premium, if any, or interest to be made on any Interest
Payment Date or on a date of Maturity that is not a Business Day shall be made
on the next succeeding Business Day with the same force and effect as if made
on such Interest Payment Date or such date of Maturity, as the case may be, and
no additional interest shall accrue as a result of such delayed payment.  The term “Business Day” means any day, that
is not a Saturday or Sunday, and that is not a day on which banking
institutions in New York City are generally authorized obligated or by law or
executive order to be closed; for notes denominated in pounds sterling only, is also
a London Business Day; for notes having a specified currency other than U.S.
dollars only, other than notes denominated in Euros, is also not a day on which
banking institutions in the principal financial center (as defined below) of
the country of the specified currency generally are authorized or obligated by
law or executive order to close; and for 
notes denominated in Euros, is also a Euro business day. A principal
financial center means the capital city of the country issuing the specified
currency. However, for U.S. dollars, Australian dollars, Canadian dollars and
Swiss francs, the principal financial center will be New York City, Sydney,
Toronto and Zurich, respectively. A ‘‘London Business Day’’ means any day that
is not a Saturday or Sunday and on which dealings in deposits in U.S. dollars
are transacted, or with respect to any future date are expected to be
transacted, in the London interbank market and a ‘‘Euro Business Day’’ means
any day that is not a Saturday or Sunday on which the Trans-European Automated
Real-Time Gross Settlement Express Transfer System is open.  Each payment of interest
hereon shall include interest accrued through the day before the Interest
Payment Date or date of Maturity, as the case may be.  Unless otherwise specified above, interest on
this Note will be computed on the basis of a 360-day year of twelve 30-day
months.  In no event shall the interest
rate of this Note be higher than the maximum rate permitted by applicable law,
as the same may be modified by United States law of general application.

 

Unless otherwise specified above, the
interest payable on any Interest Payment Date will, as provided in the
Indenture, be paid to the person in whose name this Note (or one or more
predecessor Notes) is registered at the close of business on the Regular Record
Date indicated above (whether or not a Business Day) next preceding such
Interest Payment Date; provided
that, notwithstanding any provision of the Indenture to the contrary, interest
payable on any date of Maturity shall be payable to the Person to whom
principal shall be payable; and provided,
further, that, unless otherwise
specified above, in the case of a Note initially issued between a Regular
Record Date and the Interest Payment Date relating to such Regular Record Date,
interest for the period beginning on the Issue Date and ending on such Interest
Payment Date shall be paid on the Interest Payment Date following the next
succeeding Regular Record Date to the registered Holder on such next succeeding
Regular Record Date.

 

Unless otherwise indicated above, and except
as provided below, if this Note is a Global Security, all payments of interest
on this Note and all principal payments hereon if this Note is an Amortizing Note
(other than 

 

3

 

 

interest and, in the case of
Amortizing Notes, principal payable at Maturity) will be made by check (unless
otherwise provided above, from an account at a bank located outside the United
States if such amount is payable in a Foreign Currency); provided that, if the Holder hereof is the
Holder of U.S.$10,000,000 or more in aggregate Principal Amount of Notes of
this series of like tenor and term (or a Holder of the equivalent thereof in a Foreign
Currency determined as provided in Section 2 on the reverse hereof), such
Holder shall be entitled to receive interest payments (and principal payments,
if this Note is an Amortizing Note) in immediately available funds, but only if
complete and appropriate instructions have been received in writing by the
Trustee (or any such Paying Agent) on or prior to the applicable Regular Record
Date.  Simultaneously with any election
by the Holder hereof to receive payments in respect hereof in a Foreign Currency,
such Holder may, if so entitled (as provided above), elect to receive such
payments in immediately available funds by providing complete and appropriate
instructions to the Trustee (or any such Paying Agent), and all such payments
will be made in immediately available funds to an account maintained by the
payee with a bank located outside the United States or as otherwise provided
above.

 

Unless otherwise indicated above, and except
as provided below if this Note is a Global Security, payments of principal,
premium, if any, and interest payable at Maturity will be made in immediately
available funds (unless otherwise indicated above, payable to an account at a
bank located outside the United States if payable in a Foreign Currency) upon
surrender of this Note at the corporate trust office or agency of the Trustee
(or any duly appointed Paying Agent) maintained for that purpose in the Borough
of Manhattan, New York City (the “Corporate Trust Office”), provided that this Note is presented to
the Trustee (or any such Paying Agent) in time for the Trustee (or any such
Paying Agent) to make such payments in such funds in accordance with its normal
procedures.

 

Unless otherwise specified above, if this
Note is a Global Security, payments of interest hereon and principal hereon if
this Note is an Amortizing Note (in each case, other than at Maturity), will be
made in same-day funds in accordance with existing arrangements between the
Trustee (or any duly appointed Paying Agent) and the Depository.  Unless otherwise specified above, if this
Note is a Global Security, any principal, premium and/or interest payable
hereon at Maturity will be paid by wire transfer in immediately available funds
to an account specified by the Depository (which account, unless otherwise
provided above, will be at a bank located outside the United States if payable
in a Foreign Currency).

 

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.$”
or “$” 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.

 

4

 

IN WITNESS WHEREOF, Lehman Brothers Holdings
Inc. has caused this instrument to be signed by its Chairman of the Board, its
President, 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 6, 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

  
	
   

  

 

 

5

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I

(Fixed Rate)

 

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 (Fixed Rate) of the Company (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 repayment 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. Currency Exchanges and Payments.  If the Holder elects to receive all or a
portion of payments of principal of, premium, if any, and interest on this
Note, if denominated in a Foreign Currency, in U.S. dollars, the Exchange Rate
Agent specified on the face hereof or a successor thereto (the “Exchange Rate
Agent”) will convert such payments into U.S. dollars. In the event of such an
election, payment to the Holder will be based upon the exchange rate as
determined by the Exchange Rate Agent based on the highest bid quotation in New
York City received by such Exchange Rate Agent at approximately 11:00 a.m.,
New York City time, on the second Business Day preceding the applicable payment
date from three recognized foreign exchange dealers (one of which may be the
Exchange Rate Agent unless such Exchange Rate Agent is an affiliate of the
Company) for the purchase by the quoting dealer of the Foreign Currency for
U.S. dollars for settlement on such payment date in the amount of the Foreign
Currency payable in the absence of such an election to such Holder and at which
the applicable dealer commits to execute a contract. If such bid quotations are
not available, such payment will be made in the Foreign Currency. All currency
exchange costs will be borne by the holder of this Note by deductions from such
payments.

 

Unless otherwise specified
on the face hereof, if payment hereon is required to be made in a Foreign
Currency and such currency is unavailable to the Company for making payments
thereof due to the imposition of exchange controls or other circumstances
beyond the Company’s control, or is no longer used by the government of the
country which issued such currency or for the settlement of transactions by
public institutions of or within the international banking community, then the
Company will be entitled to make payments with respect hereto in U.S. dollars
until such Foreign Currency is again available or so used.  The amount so payable on any date in such
Foreign Currency shall be converted into U.S. dollars at a rate determined by
the Exchange Rate Agent on the basis of the noon buying rate in New York City
for cable transfers in the Foreign Currency as certified for customs purposes
by the Federal Reserve Bank of New York (the “Market Exchange Rate”) for such
Foreign Currency on the second Business Day prior to such payment date, or on
such other basis as may be specified on the face hereof.  In the event such Market Exchange Rate is not
then available, the Company will be entitled to make payments in U.S. dollars (i) if
such Foreign Currency is not a composite currency, on the basis of the most
recently available Market Exchange Rate for such Foreign Currency or (ii) if
such Foreign Currency is a composite currency in an amount determined by the
Exchange Rate Agent to be the sum of the results obtained by multiplying the
number of units of each component currency of such composite currency, as of
the most recent date on which such composite currency was used, by the Market
Exchange Rate for such component currency on the second Business Day prior to
such payment date (or if such Market Exchange Rate is not then available, by
the most recently available Market Exchange Rate for such component currency,
or as otherwise specified on the face hereof). 
Any payment in respect hereof made under such circumstances in U.S.
dollars will not constitute an Event of Default under the Indenture.

 

If the official unit of any
component currency of a composite currency is altered by way of combination or
subdivision, the number of units of that currency as a component shall be
divided or multiplied in the same proportion. 
If two or more component currencies are consolidated into a single
currency, the amounts of those currencies as components shall be replaced by an
amount in such single currency equal to the sum of the amounts of 

 

 

6

 

the consolidated component
currencies expressed in such single currency. 
If any component currency is divided into two or more currencies, the
amount of that original component currency as a component shall be replaced by
amounts of such two or more currencies having an aggregate value on the date of
division equal to the amount of the former component currency immediately
before such division.

 

In the event of an official redenomination of
the Specified Currency or the Optional Payment Currency (including, without
limitation, an official redenomination of any such currency that is a composite
currency), the obligations of the Company to make payments in or with reference
to such currency shall, in all cases, be deemed immediately following such
redenomination to be obligations to make payments in or with reference to that
amount of redenominated currency representing the amount of such currency
immediately before such redenomination. 
In no event shall any adjustment be made to any amount payable hereunder
as a result of any redenomination of any component currency of any composite
currency (unless such composite currency is itself officially redenominated).

 

All determinations referred to above made by
the Exchange Rate Agent shall be at its sole discretion (except to the extent
expressly provided herein that any determination is subject to approval by the
Company) and, in the absence of manifest error, shall be conclusive for all
purposes and binding on the Holder hereof, and the Exchange Rate Agent shall
have no liability therefor.

 

All currency exchange costs will be borne by
the Holder hereof by deduction from the payments made hereon.

 

Section 3. Redemption.  If so specified on the face hereof, the
Company may at its option redeem this Note in whole or from time to time in
part on or after the date designated as the Initial Redemption Date on the face
hereof at either a price based on a constant percentage of the Principal Amount
of this Note as specified on the face hereof or at prices declining from the
premium specified on the face hereof, if any, to 100% of the Principal Amount
hereof, together, in each case, with accrued interest to the Redemption Date.
The Company may exercise such option by causing the Trustee to mail by
first-class mail to the Holder hereof a notice of such redemption at least 30
but not more than 60 days prior to the Redemption Date.  In the event of redemption of this Note in
part only, a new Note or Notes of this series for the unredeemed portion hereof
shall be issued in the name of the Holder hereof upon the cancellation hereof
in accordance with the terms of the Indenture. Unless otherwise specified on
the face hereof, if less than all of the Notes with like tenor and terms to
this Note are to be redeemed, the Notes to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.

 

Section 4. Sinking Funds and Amortizing Notes.  Unless otherwise specified on the face hereof
or unless this Note is an Amortizing Note, this Note will not be subject to any
sinking fund.  If it is specified on the
face hereof that this Note is an Amortizing Note, the Company will make
payments combining principal and interest on the dates and in the amounts set
forth in the table appearing in Schedule I, attached to this Note.  If this Note is an Amortizing Note, payments
made hereon will be applied first to interest due and payable on each such
payment date and then to the reduction of the Outstanding Face Amount.  The term “Outstanding Face Amount” means, at
any time, the amount of unpaid principal hereof at such time.

 

Section 5. Optional Repayment.  If so specified on the face hereof, this Note
will be repayable prior to the Maturity Date at the option of the Holder on the
Optional Repayment Dates specified on the face hereof at the Optional Repayment
Prices specified on the face hereof, together with accrued interest to the
applicable Optional Repayment Date. 
Unless otherwise specified on the face hereof, in order for this Note to
be so repaid, the Company must receive, at least 30 but not more than 45 days
prior to an Optional Repayment Date, either (i) this Note with the form
below entitled “Option to Elect Repayment” duly completed or (ii) a
telegram, telex, facsimile transmission or letter from a member of a national
securities exchange or the National Association of Securities Dealers, Inc.
or a commercial bank or trust company in the United States setting forth the
name of the Holder hereof, the Face Amount hereof, the Face Amount to be
repaid, the certificate number hereof or a description of the tenor and terms
of this Note, a statement that the option to elect repayment is being exercised
thereby and a guarantee that this Note with the form below entitled “Option to
Elect Repayment” duly completed will be received by the Paying Agent not later
than five Business Days after the date of such telegram, telex, facsimile
transmission or letter and this Note and form duly completed are received by
the Paying Agent by such fifth Business Day. 
Exercise of this repayment option shall be irrevocable, except as
otherwise provided under Section 6 or Section 9.  The repayment option may be exercised by the
Holder of this Note with respect to less than the Face Amount then outstanding 

 

 

7

 

provided
that the Face Amount of the Note remaining outstanding after repayment is an
authorized denomination.  Upon such
partial repayment this Note shall be cancelled and a new Note or Notes for the
remaining Face Amount hereof shall be issued in the name of the Holder of this
Note.

 

Section 6. Optional Interest Reset.  If so specified on the face hereof, the
Interest Rate on this Note may be reset at the option of the Company, in the
manner set forth below (unless otherwise specified on the face hereof), on the
Optional Reset Date or Optional Reset Dates specified on the face hereof.  The Company may exercise such option by
notifying the Trustee in writing of such exercise at least 45 but not more than
60 days prior to an Optional Reset Date. 
Not later than five Business Days after receipt thereof, the Trustee
will mail by first-class mail to the Holder of this Note a notice (the “Reset
Notice”) setting forth (i) the election of the Company to reset the
interest rate, (ii) such new interest rate and (iii) the provisions,
if any, for redemption during the period from such Optional Reset Date to the
next Optional Reset Date or, if there is no such next Optional Reset Date, to
the Maturity Date of this Note (each such period a “Subsequent Interest Period”),
including the date or dates on which or the period or periods during which and
the price or prices at which such redemption may occur during such Subsequent
Interest Period.  The Reset Notice shall
be substantially in the form of Exhibit A to this Note.  Upon the transmittal by the Trustee of a
Reset Notice to the Holder of this Note, such new interest rate shall take
effect automatically, and, except as modified by the Reset Notice and as
described in the next paragraph, this Note will have the same terms as prior to
the transmittal of such Reset Notice.

 

Notwithstanding the foregoing, not later than
20 days prior to an Optional Reset Date, the Company may, at its option, revoke
the interest rate provided for in the Reset Notice and establish an interest
rate that is higher than the interest rate provided for in the Reset Notice for
the Subsequent Interest Period commencing on such Optional Reset Date by
causing the Trustee to mail by first-class mail notice of such higher interest
rate to the Holder of this Note.  Such
notice shall be irrevocable and shall be mailed by the Trustee within five
Business Days after receipt thereof.  All
Notes with respect to which the interest rate is reset on an Optional Reset
Date will bear such higher interest rate for the Subsequent Interest Period.

 

If the Company elects to reset the interest
rate of this Note, the Holder of this Note will have the option to elect
repayment by the Company of this Note, or any portion hereof, on any Optional
Reset Date at a price calculated with reference to the Face Amount hereof to be
repaid, plus any interest accrued to, such Optional Reset Date.  In order to obtain repayment on an Optional
Reset Date, the Holder must follow the procedures set forth above in Section 5
for optional repayment except that the period for delivery or notification to
the Trustee shall be at least 25 but not more than 35 days prior to such
Optional Reset Date and except that, if the Holder has tendered this Note for
repayment pursuant to the Reset Notice, the Holder may, by written notice to
the Trustee, revoke such tender for repayment until the close of business on
the tenth day prior to such Optional Reset Date; provided, however,
that if such day is not a Business Day, then such notice may be given on the
next succeeding Business Day.

 

Section 7. Survivor’s Option.  If so specified on the face hereof, the
Representative (defined below) of a deceased beneficial owner of this Note
shall have the option to elect to require repayment, in whole or from time to
time in part, of such Note following the death of the beneficial owner (a “Survivor’s
Option”). The Survivor’s Option may not be exercised unless the Note was
acquired by the beneficial owner at least six months prior to the trustee’s
receipt of written request for repayment as provided below.

 

If the Survivor’s Option is
applicable to a Note, upon the valid exercise of the Survivor’s Option, the
Company shall repay the Note (or portion thereof), properly tendered for
repayment by or on behalf of the person (the “Representative”) that has
authority to act on behalf of the deceased beneficial owner of a Note under the
laws of the appropriate jurisdiction (including, without limitation, the
personal representative or executor of the deceased beneficial owner or the
surviving joint owner of the deceased beneficial owner) at a price equal to
100% of the principal amount of the deceased beneficial owner’s beneficial
interest in such Note plus accrued interest to the date of such repayment,
subject to the following limitations:

 

1.               The
Company may, in its sole discretion, limit the aggregate principal amount of
Medium-Term Notes, Series I, without regard to series or tranches, as to
which exercises of the Survivor’s Option shall be accepted from all deceased
beneficial owners in any calendar year (the “Annual Put Limitation”) to an
amount equal to the greater of $1,000,000 or 1.0% of the aggregate principal 

 

 

8

 

amount of such notes, without regard to series or
tranches, as of the end of the most recent calendar year, and (ii) limit
the aggregate principal amount of such notes issued prior to the date hereof,
without regard to series or tranches, as to which exercises of the Survivor’s
Option will be accepted in any calendar year from the authorized representative
for any individual deceased beneficial owner to $125,000 (the “Individual Put
Limitation”).

 

2.               The
Company shall not make principal repayments pursuant to exercise of the
Survivor’s Option in amounts that are less than the minimum authorized
denomination, and, in the event that any partial exercise of the Survivor’s
Option or the limitations described in the preceding sentence would result in
the partial repayment of any Note, the principal amount of such Note remaining
Outstanding after repayment must be at least the minimum authorized
denomination.

 

3.               A
valid exercise of the Survivor’s Option with respect to any Note (or portion
thereof) may not be withdrawn.

 

Each Note (or portion
thereof) that is tendered pursuant to a valid exercise of the Survivor’s Option
shall be accepted in the order of all such exercises that are received by the
Trustee, except for any Note (or portion thereof) the acceptance of which would
contravene (i) the Annual Put Limitation, if applied, or (ii) the
Individual Put Limitation, if applied, with respect to the relevant individual
deceased beneficial owner. If, as of the end of any calendar year, the
aggregate principal amount of Notes (or portions thereof) that have been
tendered pursuant to the valid exercise of the Survivor’s Option during such
year has exceeded either the Annual Put Limitation, if applied, or the
Individual Put Limitation, if applied, for such year, any exercise(s) of
the Survivor’s Option with respect to Notes (or portions thereof) not accepted
during such calendar year because such acceptance would have contravened either
such limitation, if applied, shall be deemed to be tendered in the following
calendar year in the order all such Notes (or portions thereof) were originally
tendered. Any Note (or portion thereof) accepted for repayment pursuant to
exercise of the Survivor’s Option shall be repaid on the first Interest Payment
Date that occurs 20 or more calendar days after the date of such acceptance. In
the event that a Note (or any portion thereof) tendered for repayment pursuant
to a valid exercise of the Survivor’s Option is not accepted, the Trustee shall
deliver a notice by first-class mail to the registered holder thereof, at its
last known address as indicated in the Security Register, that states the
reason such Note (or portion thereof) has not been accepted for payment.

 

In order for a Survivor’s
Option to be validly exercised with respect to any Note (or portion thereof),
the Trustee must receive from the Representative (i) a written request for
repayment signed by the Representative, and such signature must be guaranteed
by a firm that is a participant in the Security Transfer Agents Medallion
Program, the New York Stock Exchange Medallion Signature Program or the Stock
Exchange Medallion Program, (ii) appropriate evidence satisfactory to the
Trustee that (A) the deceased was the beneficial owner of such Note at the
time of death and the interest in such Note was acquired by the deceased
beneficial owner at least six months prior to the Trustee’s receipt of the
request for repayment, (B) the death of such beneficial owner has
occurred, and the date of such death, and (C) the Representative has
authority to act on behalf of the deceased beneficial owner, (iii) if the
interest in such Note is held by a nominee or trustee of, custodian for, or
another person in a similar capacity to, the deceased beneficial owner,
evidence satisfactory to the Trustee from such nominee, trustee, custodian or
similar person attesting to the deceased’s beneficial ownership in such Note, (iv) tax
waivers and such other instruments or documents that the Trustee reasonably
requires in order to establish the validity of the beneficial ownership of the
Notes and the claimant’s entitlement to payment, and (v) any additional
information the Trustee requires to evidence satisfaction of any conditions to
the exercise of such Survivor’s Option or to document beneficial ownership or
authority to make the election and to cause the repayment of such Note. Subject
to the Issuer’s right hereunder to impose an Annual Put Limitation and an
Individual Put Limitation, all questions as to the eligibility or validity of
any exercise of the Survivor’s Option shall be determined by the Trustee, in
its sole discretion, which determination shall be final and binding on all
parties.

 

The death of a person holding a beneficial
ownership interest in a Note: (a) with any person in a joint tenancy with
right of survivorship; or (b) with his or her spouse in tenancy by the
entirety, tenancy in common, as community property or in any other joint
ownership arrangement, shall be deemed the death of a beneficial owner of that
note, and the entire principal amount of the Note held in this manner shall be
subject to repayment by the Issuer upon valid exercise of the Survivor’s
Option; provided, however, that the death of a person holding a
beneficial ownership interest in a Note as tenant in common with a person other
than his or her spouse shall be deemed the 

 

 

9

 

death of a beneficial owner
only with respect to the such deceased person’s interests in the Note, and only
the deceased beneficial owner’s percentage interest in the principal amount of
the Note shall be subject to repayment. 
If the ownership interest in a Note is held by a nominee for a
beneficial owner or by a custodian under the Uniform Gifts to Minors Act or
Uniform Transfer to Minors Act, or by a trustee of a trust that is wholly
revocable by the beneficial owner, or by a guardian or committee for a beneficial
owner, the death of the beneficial owner of that Note shall constitute the
death of the beneficial owner for purposes of the Survivor’s Option, if the
beneficial ownership interest can be established to the satisfaction of the
Trustee.  In these cases, the death of
the nominee, custodian, trustee, guardian or committee shall not be deemed the
death of the beneficial owner of such Note for purposes of the Survivor’s
Option.

 

Section 8. OID Notes.  If this Note is an OID Note, the amount
payable in the event of redemption by the Company, repayment at the option of
the Holder or acceleration of Maturity shall be the Amortized Face Amount of
this Note as of the date of such redemption, repayment or declaration of
acceleration rather than the Face Amount hereof.  The “Amortized Face Amount” of this Note
shall be the amount equal to (a) the Issue Price (as set forth on the face
hereof) plus (b) the original issue discount amortized from the Issue Date
to the date as of which the Amortized Face Amount is calculated, which
amortization shall be calculated using the “interest method” (computed in
accordance with generally accepted accounting principles in effect on such
date) but in no event shall the Amortized Face Amount of this Note exceed the
Face Amount.

 

Section 9. Dual Currency Notes.  If it is specified on the face hereof that
this Note is a Dual Currency Note, the Company has a one time option,
exercisable on any one of the Option Election Dates specified on the face
hereof in whole, but not in part, with respect to all Dual Currency Notes
issued on the same day and having the same terms as this Note (this “Tranche”),
of thereafter making all payments of principal, premium, if any, and interest
(which payments would otherwise be made in the Specified Currency of such
Notes) in the Optional Payment Currency specified on the face hereof.  If the Company makes such an election, the
amount of Optional Payment Currency payable in respect hereof shall be
determined by the Exchange Rate Agent by converting the amount of Specified
Currency that would otherwise be payable into the Optional Payment Currency at
the Designated Exchange Rate specified on the face hereof.

 

The Company may exercise such option by
notifying the Trustee of such exercise on or prior to the Option Election
Date.  The Trustee will mail by
first-class mail to each holder of a Note of this Tranche a notice of such
election within five Business Days of the Option Election Date which shall
state (i) the first date, whether an Interest Payment Date and/or the
Maturity Date, on which scheduled payments in the Optional Payment Currency
will be made and (ii) the Designated Exchange Rate.  Any such notice by the Company, once given,
may not be withdrawn.

 

If this Note is a Dual Currency Note, unless
otherwise specified on the face hereof and notwithstanding any prior election
made by the Company, the amount payable hereon in the event of any optional
redemption by the Company, any repayment at the option of the Holder, any
acceleration of the Maturity of this Note or other prepayment of this Note
prior to the Maturity Date shall be an amount equal to the Principal Amount
hereof otherwise due and payable plus accrued interest to but excluding the
date of redemption, repayment, acceleration or other prepayment minus the Total
Option Value multiplied by a fraction, the numerator of which is the Principal
Amount hereof and the denominator of which is the aggregate Principal Amount of
all Dual Currency Notes of this Tranche. 
In no event will such payment be less than zero. Notwithstanding any
prior election made by the Company, such payment shall be made in the Specified
Currency unless otherwise provided on the face hereof.

 

The term “Total Option Value” means, with
respect to any Dual Currency Note on any date, an amount (calculated as of such
date by the Option Value Calculation Agent) equal to the sum of the Option
Values (calculated as of such date by the Option Value Calculation Agent) for
all Interest Payment Dates occurring after the date of calculation up to and
including the Maturity Date.  The term “Option
Value” means, with respect to an Interest Payment Date or the Maturity Date,
the amount calculated by the Option Value Calculation Agent to be the
arithmetic average of the prices quoted on the date of calculation by three
reference banks (which banks shall be selected by the Option Value Calculation
Agent and shall be reasonably acceptable to the Company) for the right on the
Option Election Date immediately preceding such Interest Payment Date or
Maturity Date to purchase for value on such Interest Payment Date or Maturity
Date from such reference banks (A) the aggregate amount of the Specified
Currency due on such Interest Payment Date or Maturity Date with respect to all
of the Dual Currency 

 

 

10

 

Notes of this Tranche in
exchange for (B) the amount of the Optional Payment Currency that would be
received if the amount in clause (A) were converted into the Optional
Payment Currency at the Designated Exchange Rate.

 

All determinations referred to above made by
the Exchange Rate Agent or the Option Value Calculation Agent shall be at their
sole discretion (except to the extent expressly provided herein that any
determination is subject to approval by the Company) and, in the absence of
manifest error, shall be conclusive for all purposes and binding on the Holder
hereof, and neither the Exchange Rate Agent nor the Option Value Calculation
Agent shall have any liability therefor.

 

Section 10. Extension of Maturity Notes.  If it is specified on the face hereof that
this Note is an Extension of Maturity Note, the Company has the option to
extend the Maturity Date hereof for the number of Extension Periods set forth
on the face hereof, each of which Extension Periods shall be a period of from
one to five whole years.  Unless
otherwise specified on the face hereof, the following procedures shall apply if
this Note is an Extension of Maturity Note.

 

The Company may exercise its option by
notifying the Trustee of such exercise at least 45 but not more than 60 days
prior to the Maturity Date hereof in effect prior to the exercise of such
option (the “Original Stated Maturity”). 
Not later than five Business Days after receipt thereof, the Trustee
will mail to the Holder a notice (the “Extension Notice”), first class, postage
prepaid, setting forth (i) the election of the Company to extend the
Maturity Date, (ii) the new Maturity Date, (iii) the Interest Rate
applicable to the Extension Period and (iv) the provisions, if any, for
redemption during the Extension Period, including the date on which or the
period or periods during which and the price at which such redemption may occur
during the Extension Period.  Upon the
mailing by the Trustee of an Extension Notice to the Holder, the Maturity Date
hereof shall be extended automatically, and, except as modified by the
Extension Notice and as described in the next paragraph, this Note will have
the same terms as prior to the mailing of such Extension Notice.

 

Notwithstanding the foregoing, not later than
20 days prior to the Original Stated Maturity hereof, the Company may, at its
option, revoke the interest rate provided for in the Extension Notice and
establish a higher interest rate for the Extension Period by causing the Trustee
to mail notice of such higher interest rate, first class, postage prepaid, to
the Holder.  Such notice shall be
irrevocable and shall be mailed by the Trustee within three Business Days after
receipt thereof.  This Note will bear
such higher interest rate for the Extension Period, whether or not tendered for
repayment.

 

If the Company extends the Maturity Date of
this Note, the Holder will have the option to elect repayment by the Company of
this Note, or any portion hereof, on the Original Stated Maturity at a price
calculated with reference to the Face Amount hereof to be repaid plus any
accrued interest to such date.  In order
for this Note to be so repaid on the Original Stated Maturity, the Holder must
follow the procedures set forth in Section 5 hereof for optional
repayment, except that the period for delivery of this Note or notification to
the Trustee shall be at least 25 but not more than 35 days prior to the
Original Stated Maturity and except that the Holder may, by written notice to
the Trustee, revoke any such tender for repayment until the close of business
on the tenth day prior to the Original Stated Maturity; provided, however,
that if such day is not a Business Day, then such notice may be given on the
next succeeding Business Day.

 

Section 11. Extendible Notes.  If it is specified on the face hereof that
this Note is an Extendible Note, this Note will mature on the Initial Maturity
Date specified on the face hereof unless the Maturity of all or any portion of
this Note is extended in accordance with the procedures described below.

 

On the Interest Payment Date occurring in the
sixth month (unless a different Special Election Interval is specified on the
face hereof) prior to the Initial Maturity Date hereof (the “Initial Maturity
Extension Date”) and on the Interest Payment Date occurring in each sixth month
(or the last month of each Special Election Interval) after such Initial
Maturity Extension Date (each, together with the Initial Maturity Extension
Date, a “Maturity Extension Date”), the Maturity of this Note will be extended
to the Interest Payment Date occurring in the twelfth month (or, if a Special
Election Interval is specified on the face hereof, the last month in a period
equal to twice the Special Election Interval) after such Maturity Extension
Date, unless the Holder elects to terminate the automatic extension of the
Maturity hereof or any portion hereof as described below.

 

 

11

 

If the Holder elects to terminate the
automatic extension of the Maturity of any portion of the principal amount of
this Note during the specified period prior to any Maturity Extension Date,
such portion will become due and payable on the Interest Payment Date occurring
in the sixth month (or the last month in the Special Election Interval) after
such Maturity Extension Date (the “Extended Maturity Date”).

 

The Holder may elect to terminate the
automatic extension of the Maturity of this Note, or if so specified above, any
portion hereof, by delivering a notice to such effect to the Trustee (or any
duly appointed Paying Agent) at the Corporate Trust Office not less than 15 nor
more than 30 days prior to such Maturity Extension Date (unless another period
is specified on the face hereof as the “Special Election Period”).  Such election will be irrevocable and will be
binding upon each subsequent Holder of this Note.  An election to terminate the automatic
extension of the Maturity of this Note may be exercised with respect to less
than the entire Face Amount hereof only if so specified on the face hereof and
only in such Face Amount, or any integral multiple in excess thereof, as is
specified on the face hereof. Notwithstanding the foregoing, the Maturity of
this Note will not be extended beyond the Maturity Date specified on the face
hereof.

 

Unless otherwise specified above, any such
election to terminate will be effective only if this Note, with the “Option to
Elect Termination of Automatic Extension” included herein duly executed, is
presented to the Trustee (or any duly appointed Paying Agent) simultaneously
with notice of such election (or, in the event notice of such election,
together with a guarantee of delivery within five Business Days, is transmitted
on behalf of the Holder from a member of a national securities exchange, the
National Association of Securities Dealers, Inc. or a commercial bank or
trust company in the United States, within five Business Days of the date of
such notice). As soon as practicable following receipt of this Note the Trustee
(or any duly appointed Paying Agent) shall issue in exchange herefor in the
name of the Holder (i) a Note, in a face amount equal to the face amount
of this Note for which the election to terminate the automatic extension of
Maturity was exercised, with terms identical to those specified herein (except
for the Issue Date and the Initial Interest Rate and except that such Note
shall have a fixed, non-extendable Maturity on the Extended Maturity Date) and (ii) if
such election is made with respect to less than the full Face Amount hereof, a
replacement Renewable Note, in a face amount equal to the Face Amount of this
Note for which no election was made, with terms identical to this Note.

 

Section 12. Principal Amount For Indenture Purposes.  For the purpose of determining whether
Holders of the requisite amount of Notes outstanding under the Indenture have
made a demand, given a notice or waiver or taken any other action, the
outstanding principal amount of this Note will be deemed to be the Principal
Amount, provided, however, if this Note is an OID Note, the
outstanding principal amount of this Note will be deemed to be the amount of
the principal thereof that would be due and payable as of the date of such
determination upon a declaration of acceleration of the maturity thereof.

 

Section 13. 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) extend the fixed
maturity of any Security, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon or reduce any premium
payable on redemption, or make the principal thereof, or premium, if any, or
interest thereon payable in any coin or currency other than that hereinabove
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 or the principal of, 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 

 

 

12

 

owners
of this Note and any Notes 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.

 

Section 14. 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
principal of, premium, if any, and interest, if any, on this Note at the place,
at the respective times, at the rate, and in the coin or currency herein
prescribed.

 

Section 15. 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 16. Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Unless
otherwise set forth on the face hereof, Notes denominated in U.S. dollars will
be issued in Face Amount denominations of U.S.$100,000 and any integral
multiple of U.S.$1,000 in excess thereof. 
Notes denominated in a Foreign Currency will be issued in the
denomination or denominations set forth on the face hereof.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the holders thereof,
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 Face Amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes.

 

Section 17. 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
Face Amount, will be issued to the designated transferee or transferees.

 

If this Note is a Global Security and 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 Securities of such 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 in definitive form in an aggregate Face Amount equal to the Face
Amount hereof.

 

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 18. Events of Default.  If an Event of Default with respect to Notes
of this series shall occur and be continuing, the principal of the Notes of
this series may be declared due and payable in the manner and with the effect
provided in the Indenture.  In the event
that this Note is an OID Note or a Dual Currency Note, the amount of principal
of this Note that becomes due and payable upon such acceleration shall be equal
to the amount calculated as set forth in Section 7 or Section 8,
respectively, hereof.  Upon payment (i) of
the aggregate applicable amounts of principal of the Notes of this series so
declared due and payable and (ii) of interest on any overdue principal and
overdue interest (in each case to the extent that the payment of such interest
shall be legally 

 

 

 

13

 

enforceable),
all of the Company’s obligations in respect of the payment of the principal of
and interest, if any, on the Notes of this series shall terminate.

 

Section 19. No Recourse Against Certain Persons.  No recourse for the payment of the principal
of, premium, if any, or interest on this Note, 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 20. Defined Terms.  All terms used but not defined in this Note
are used herein as defined in the Indenture.

 

Section 21. GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

 

 

14

 

OPTION TO ELECT REPAYMENT

 

The undersigned owner of this Note hereby
irrevocably elects to have the Company repay the Face Amount of this Note or
portion hereof below designated at (i) the Optional Repayment Percentage
multiplied by the Principal Amount of this Note to be repaid in respect of such
Face Amount plus accrued interest to the Optional Repayment Date, if this Note
is to be repaid pursuant to the Optional Repayment provision described in Section 5
hereof, or (ii) 100% of the Principal Amount of this Note to be repaid in
respect of such Face Amount plus accrued interest to the Optional Reset Date,
if this Note is to be repaid pursuant to the Optional Interest Reset provision
described in Section 6 hereof or the Extension of Maturity Notes provision
described in Section 9 hereof. Any such election is irrevocable except as
provided in Section 6 or Section 9 hereof.

 

	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
  Signature 

  
	
   

  	
   

  	
  Sign exactly as name
  appears on the front of this Note [SIGNATURE GUARANTEED - required only if
  Notes are to be issued and delivered to other than the registered Holder]

  
	
   

  	
   

  	
   

  
	
  Face Amount to be repaid,
  if amount to be repaid is less than the Face Amount of this Note (Face Amount
  remaining must be an authorized denomination) 

  	
   

  	
  Fill in for registration
  of Notes if to be issued otherwise than to the registered Holder:

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Please print name and address

  including zip code)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SOCIAL SECURITY OR OTHER
  TAXPAYER ID 

  NUMBER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
									

 

 

15

 

 

OPTION TO ELECT TERMINATION OF AUTOMATIC
EXTENSION

 

The undersigned owner of this Note hereby
irrevocably elects to terminate the automatic extension of this Note or of the
portion of the Face Amount of this Note below designated. Any such election is
irrevocable and will be binding on any subsequent Holder hereof.

 

 

	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
   

  	
   

  	
   

  	
  Signature 

  
	
   

  	
   

  	
  Sign exactly as name
  appears on the front of this Note [SIGNATURE GUARANTEED - required only if
  Notes are to be issued and delivered to other than the registered Holder]

  
	
   

  	
   

  	
   

  
	
  Face Amount to be repaid,
  if amount to be repaid is less than the Face Amount of this Note (Face Amount
  remaining must be an authorized denomination) 

  	
   

  	
  Fill in for registration
  of Notes if to be issued otherwise than to the registered Holder:

  
	
   

  	
   

  	
  Name:

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Please print name and address

  including zip code)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SOCIAL SECURITY OR OTHER
  TAXPAYER ID 

  NUMBER

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
									

 

 

16

 

 

ABBREVIATIONS

 

The following abbreviations, when used in the
inscription on the face of this instrument, shall be construed as though they
were written out in full according to applicable laws or regulations:

 

	
  TEN COM

  	
   

  	
  -

  	
  as tenants in common

  
	
  TEN ENT

  	
   

  	
  -

  	
  as tenant by the
  entireties

  
	
  JT TEN

  	
   

  	
  -

  	
  as joint tenants with
  right of survivorship and not as tenants in common

  
	
  UNIF GIFT

  	
   

  	
   

  	
   

  
	
  MIN ACT

  	
   

  	
  -

  	
   

  	
  Custodian

  	
   

  
	
   

  	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
   

  	
   

  	
   

  	
  Under Uniform Gifts to
  Minors Act

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  (State)

  

 

Additional abbreviations may also be used
though not in the above list.

 

FOR VALUE RECEIVED, the undersigned hereby sell(s),
assign(s) and transfer(s) unto

 

	
   

  

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

 

 

	
   

  

Please print or type name and address,
including zip code of assignee

 

 

	
   

  

the within Note of LEHMAN BROTHERS HOLDINGS
INC. and all rights thereunder and does hereby irrevocably constitute and
appoint                                                                                                                  
Attorney to transfer the said Note on the books of the within-named Company,
with full power of substitution in the premises.

 

	
  Dated:

  	
   

  	
   

  

 

	
  SIGNATURE GUARANTEED:

  	
   

  	
   

  
	
   

  	
  NOTICE: The signature to this

  
	
   

  	
  assignment must correspond with the

  
	
   

  	
  name as it appears upon the face of

  
	
   

  	
  the within Note in every particular,

  
	
   

  	
  without alteration or enlargement or

  
	
   

  	
  any change whatsoever.

  

 

 

17

 

 

SCHEDULE I

 

Amortization Table

 

	
  Date

  	
   

  	
  Payment

  

 

 

 

 

 

EXHIBIT
A

 

RESET NOTICE

 

LEHMAN BROTHERS HOLDINGS
INC.

Medium-Term Notes, Series I

(Fixed Rate)

CUSIP No. ___________

Registered Nos. ___-___

LEHMAN BROTHERS HOLDINGS INC., a corporation duly
organized and existing under the laws of the State of Delaware (the “Company”),
is the issuer of the above-referenced Notes (the “Notes”).  Capitalized terms used herein and not defined
are used as defined in the Notes.

 

The Company hereby elects to reset the Interest Rate
set forth on the face of the Notes.  On
and after _________________(1), the Interest Rate shall be _______________.

 

Each Holder of a Note has the option to elect
repayment by the Company of such Note, or any portion thereof, on any Optional
Reset Date pursuant to the terms of such Note. 
The Notes may be repaid on the dates and at the prices set forth below:

 

	
  Date

  	
   

  	
  Redemption Price

  
	
   

  	
   

  	
   

  

 

 

 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this Reset Notice 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 and to be attested by its Secretary or one of its
Assistant Secretaries.

 

	
  Dated:

  	
  LEHMAN BROTHERS HOLDINGS INC. 

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Title: 

  
	
   

  	
   

  
	
   

  	
  Attest: 

  	
   

  
	
   

  	
   

  	
  Title:

  
				

 

 

 

 

(1)   Insert applicable Optional Reset Date.Exhibit
4.02

 

CUSIP
NO. 5252M0DC8

ISIN NO. US5252M0DC88

 

 

	
  REGISTERED

  	
  PRINCIPAL AMOUNT: $4,550,000

  
	
  No. R-1

  	
   

  

 

 

LEHMAN
BROTHERS HOLDINGS INC.

MEDIUM-TERM
NOTE, SERIES I

FX DIGITAL NOTE

DUE AUGUST 6, 2008

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 August 6, 2008, 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 calculated by the Calculation Agent equal to the
principal amount of the Notes multiplied by:

(A) 5.50%, if the Settlement Rate is less
than or equal to the Reference Level; or

(B) 0.00%, if the
Settlement Rate is greater than the Reference Level.

The “Trade Dates” are February 1, 2008
($4,050,000 aggregate principal amount) and February 4, 2008 ($500,000
aggregate principal amount).

The “Issue Date” is February 6, 2008.

The “Valuation Date” is August 1, 2008; provided that, upon the occurrence of a Disruption Event,
the Valuation Date may be postponed (as described below).

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

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

The “Reference Currency” is the Turkish Lira
(TRY).

The “Reference Level” is 1.1300, equal to the
Reference Initial Fixing minus 0.0375.

The “Reference Initial Fixing” is 1.1675, which is
the Reference Exchange Rate observed on January 1, 2008, in accordance with the
Settlement Rate Option.

A “Valuation Business Day” means any day, other than
a Saturday or Sunday, that is neither a legal holiday nor a day on which
commercial banks are authorized or required by law, regulation or executive
order to close (including for dealings in foreign exchange in accordance with
the practice of the foreign exchange market) in Sao Paulo, Brasilia or Rio de
Janeiro.

The
“Settlement Rate Option” 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 

 

2

 

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.

If a Disruption Event is in effect on the Valuation
Date, the Valuation Date will be postponed to, and the Calculation Agent will
determine the Settlement Rate on, the first Valuation Business Day succeeding
the Valuation Date on which no Disruption Event is occurring; provided that if
a Disruption Event remains in effect on each of the three scheduled Valuation
Business Days succeeding the Valuation Date, then such third scheduled
Valuation Business Day shall be deemed the Valuation Date and the Calculation
Agent will determine the Settlement Rate on such day in accordance with the
Fallback Rate Observation Methodology.

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

(A)             
the occurrence and/or existence of
an event on any day that has the effect of preventing or making impossible (x)
the delivery of USD from accounts inside the Reference Currency Jurisdiction
for that Reference Currency 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 to be split into dual or multiple currency
exchange rates, or the Settlement Rate
being unavailable on the Valuation Date; or

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

The “Fallback Rate
Observation Methodology” means that the Reference Exchange Rate,
Settlement Rate or other rate, as specified in the applicable pricing
supplement, in respect of a reference currency will equal the noon buying rate
in New York for cable transfers in foreign currencies as announced by the
Federal Reserve Bank of New York for customs purposes (the "Noon Buying
Rate") on the relevant Valuation Date or such other date specified in the
applicable pricing supplement. If the Noon Buying Rate is not announced on that
date, the Reference Exchange Rate, Settlement Rate or other rate for such
Reference Currency will be calculated on the basis of the arithmetic mean of
the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the Valuation Business
Day next succeeding the Valuation Date or such other date specified in the
applicable pricing supplement, for the purchase or sale for deposits in the
Reference Currency by the New York offices of three leading banks engaged in
the interbank market (selected in the sole discretion of the Calculation Agent)
(the "Reference Banks"). If fewer than three Reference Banks provide
spot quotations, then the Reference Exchange Rate, Settlement Rate or other
rate, as applicable, will be calculated on the basis of the arithmetic mean of
the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the relevant date from
two Reference Banks (selected in the sole discretion of the Calculation

 

3

 

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 any
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.

 

4

 

                        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 6, 2008

 

	
  [SEAL]

  	
  .

  	
  LEHMAN BROTHERS HOLDINGS INC

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew M.W. 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

 

5

 

[REVERSE
OF NOTE]

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX DIGITAL NOTE

DUE AUGUST 6, 2008

 

 

                                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
Digital 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 Redemption
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.

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