Document:

Exhibit
4.1

EXECUTION VERSION

AMENDMENT
NO. 2 TO RIGHTS AGREEMENT

Amendment No. 2
(this “Amendment”), dated as of June 4, 2007, to the Rights
Agreement, dated as of September 29, 2000, between Avaya Inc., a Delaware
corporation (the “Company”), and THE BANK OF NEW YORK, as Rights Agent
(the “Rights Agent”), as amended on February 28, 2002 (the “Agreement”).

WHEREAS, the
Company, Sierra Holdings Corp., a Delaware corporation (“Parent”), and
Sierra Merger Corp., a Delaware corporation (“Merger Sub”), are entering
into an Agreement and Plan of Merger, dated as of June 4, 2007 (the “Merger
Agreement”), pursuant to which the Merger Sub will be merged with and into
the Company, with the Company continuing as the surviving corporation (the “Merger”);

WHEREAS, the Board
of Directors of the Company has approved, authorized and adopted the Merger
Agreement and the transactions contemplated thereby;

WHEREAS, the Board
of Directors of the Company has determined, in connection with the execution of
the Merger Agreement, that it is desirable to amend the Rights Agreement to
exempt the Merger Agreement, and the transactions contemplated thereby,
including, without limitation, the Merger, from the application of the Rights
Agreement as set forth in this Amendment;

WHEREAS, as of the
time immediately prior to the execution of this Amendment, no Person has become
an Acquiring Person;

WHEREAS, Section
27 of the Agreement provides that at any time prior to the time any person
becomes an Acquiring Person, the Company may, and the Rights Agent shall if the
Company so directs, supplement or amend any provision of the Agreement in any
manner which the Company may deem necessary or desirable without the approval
of any holder of Rights, subject to certain limitations provided therein;

WHEREAS, Section
27 of the Agreement provides that any supplement or amendment to the Agreement
becomes effective immediately upon execution by the Company, whether or not
executed by the Rights Agent, so long as it is duly approved by the Company and
does not affect certain sections provided therein, pertaining to the rights,
duties and obligations of the Rights Agent; and

WHEREAS, the
Company desires to amend the Rights Agreement as set forth herein and to direct
the Rights Agent to execute this Amendment.

NOW, THEREFORE, in
consideration of the premises and the mutual agreements herein set forth, the
parties hereby agree as follows:

 

SECTION 1.  AMENDMENTS TO THE AGREEMENT.  The Agreement is hereby amended as follows:

1.1           New Definitions.  Section 1 of the Agreement is hereby amended
by inserting the following subsections at the end of such Section 1:

(ll) “Merger” shall have the meaning set forth
in the Merger Agreement.

(mm) “Merger Agreement” shall mean the
Agreement and Plan of Merger, dated as of June 4, 2007, among Sierra
Holdings Corp., a Delaware corporation (“Parent”), Sierra Merger Corp.,
a Delaware corporation (“Merger Sub”), and the Company, as it may be
amended from time to time.

1.2           Amendment to Definition of “Acquiring
Person”.  Section 1(a) of the
Agreement is hereby amended by inserting the following sentences at the end of
such Section 1(a):

“Notwithstanding anything in this Section 1(a) to the contrary, none of
Parent, its Subsidiaries, Affiliates and Associates, including Merger Sub, is,
nor shall any of them be deemed to be, an Acquiring Person solely by reason of
(i) the approval, adoption, execution, or delivery of the Merger
Agreement, (ii) the approval or consummation of the Merger, (iii) the
approval or consummation of any other transaction contemplated by the Merger
Agreement, or (iv) the announcement of any of the foregoing, it being the
purpose of the Company in adopting this amendment to the Agreement that neither
the execution of the Merger Agreement by any of the parties nor the
consummation of the transactions contemplated thereby shall in any respect give
rise to any provisions of the Agreement becoming effective.  Each event described in subclauses (i)
through (iv) are referred to herein as an “Exempted Transaction.”

1.3           Amendment to Definition of “Beneficial
Owner”.  Section 1(d) of the
Agreement shall be amended by inserting the following at the end of Section
1(d):

“Notwithstanding anything in this Section 1(d) to the contrary, none of
Parent, its Subsidiaries, Affiliates and Associates, including Merger Sub,
shall be deemed to be a Beneficial Owner of, or to beneficially own, any
securities solely by virtue of or as a result of any Exempted Transaction.”

1.4           Amendment to Definition of “Shares
Acquisition Date”.  Section 1(ee) of
the Agreement shall be amended by inserting the following at the end of Section
1(ee):

“Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Shares Acquisition Date shall not occur or be deemed to have
occurred by virtue of or as a result of any Exempted Transaction.”

 2
 

 

1.5           Amendment to Section 3(a).  Section 3(a) of the Agreement shall be
amended by inserting the following at the end of Section 3(a):

“Notwithstanding the foregoing or any provision to the contrary in this
Agreement, a Distribution Date shall not occur or be deemed to have occurred by
virtue of or as a result of any Exempted Transaction.”

1.6           Amendment to Section 7(a).
Clause (i) in Section 7(a) of the Agreement shall be amended and restated in
its entirety to read as follows:

“(i) (A) the Close of Business on September 29, 2010 or (B) immediately
prior to the Effective Time (as defined in the Merger Agreement), but only if
such Effective Time shall occur (the earlier of (A) and (B) being herein
referred to as the “Final Expiration Date”)”.

1.7           Amendment to Section 13(b).
Section 13(b) of the Agreement shall be amended by inserting the following
provisions at the end of Section 13(b):

“Notwithstanding the foregoing or any provision to the contrary in this
Agreement, none of Parent, its Subsidiaries, Affiliates or Associates,
including Merger Sub, is, nor shall any of them be deemed to be, a Principal
Party by virtue of or as a result of any Exempted Transaction”

1.8           Addition of Section 34.   A new Section 34 is hereby added to the end
of the Agreement, which new Section 34 shall read in its entirety as follows:

“SECTION 34. Termination. 
On the Final Expiration Date, (a) this Agreement shall be terminated and
be without any further force or effect, (b) none of the parties to this
Agreement will have any rights, obligations or liabilities thereunder and (c)
the holders of the Rights shall not be entitled to any benefits, rights or
other interests under this Agreement, including, without limitation, the right
to purchase or otherwise acquire Preferred Shares or any other securities of
the Company.”

SECTION 2.  DIRECTION TO RIGHTS AGENT.  The Company hereby directs The Bank of New
York, in its capacity as Rights Agent and in accordance with the terms of
Section 27 of the Agreement, to execute this Amendment.

SECTION 3.  EFFECTIVENESS AND CONTINUED
EFFECTIVENESS.  Except as specifically
supplemented and amended, changed or modified in Section 1 above, the Rights
Agreement, as previously amended to the date hereof, shall be unaffected by
this Amendment and remain in full force and effect in accordance with its
terms; provided, however,
that if for any reason the Merger Agreement is terminated or the Merger is
abandoned, then this Amendment shall be of no further force and effect and the
Agreement shall remain exactly the same as it existed immediately prior to
execution of this Amendment.

 3
 

 

SECTION 4.  DEFINITIONS. 
Terms not otherwise defined in this Amendment shall have the meaning
ascribed to such terms in the Agreement. The term “Agreement” as used in
the Agreement shall be deemed to refer to the Agreement as amended hereby, and
all references to the Agreement shall be deemed to include this Amendment.

SECTION 5.  GOVERNING LAW.  This Amendment shall be deemed to be a
contract made under the laws of the State of Delaware and for all purposes
shall be governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such State.

SECTION 6.  COUNTERPARTS. This Amendment may be executed
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.

SECTION 7.  DESCRIPTIVE HEADINGS.  Descriptive headings of the several Sections
of this Amendment are inserted for convenience only and shall not control or
affect the meaning or construction of any of the provisions hereof.

[Signature
Page to Follow]

 4
 

 

IN WITNESS
WHEREOF, the parties hereto have caused this Amendment to be duly executed and
attested, all as of the day and year first above written.

	
  

  	
  AVAYA INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Pamela F. Craven

  
	
   

  	
   

  	
  Name: Pamela F.
  Craven

  
	
   

  	
   

  	
  Title: Chief
  Administrative Officer

  
	
   

  	
   

  
	
  Attest:

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Eric Sherbet

  	
   

  
	
   

  	
  Name: Eric
  Sherbet

  	
   

  
	
   

  	
  Title: Corporate
  Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James F. Kiszka

  
	
   

  	
   

  	
  Name: James F. Kiszka

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Edward
  Timmons

  	
   

  	
   

  
	
   

  	
  Name: Edward
  Timmons

  	
   

  	
   

  
	
   

  	
  Title: Vice
  President

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
					

 

 5Exhibit
4.01

CUSIP NO. 52520W440

ISIN NO. US52520W4400

REGISTERED                                                                        PRINCIPAL
AMOUNT: $12,997,600

No. R-1

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX BASKET-LINKED NOTE
 DUE MAY 29, 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 May 29, 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 the
principal amount of the Notes multiplied by the Participation Rate multiplied
by the Basket Return, provided that
the minimum Additional Amount payable on the Notes shall be zero.

The “Participation Rate” is 240%.

The “Basket Currencies” are the Chinese
Renminbi (CNY), the Indonesian Rupiah (IDR), the Indian Rupee (INR) and the
Philippine Peso (PHP).

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

The “Basket Currency Weighting” is 25% for
each Basket Currency.

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

The
“Basket Starting Level” is 100.

The
“Basket Ending Level” is equal to 100 multiplied by the sum of 1 plus the sum
of the Weighted Currency Returns.

The
“Weighted Currency Returns” are, for each Basket Currency, the Currency Return
multiplied by the Basket Currency Weighting.

The
“Currency Return” is, for each Basket Currency, a quotient, the numerator of
which is the difference of the Initial Spot Rate minus the Final Spot Rate and
the denominator of which is the Final Spot Rate.

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

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

(i) for CNY, 7.6525,

 2
 

 

(ii) for IDR, 8740,

(iii) for INR, 40.25 and

(iv) for PHP, 46.17.

The “Trade Date” is May 24, 2007.

The “Issue Date” is May 31, 2007.

The “Valuation Date” is May 22, 2009;
provided that, upon the occurrence of a Disruption Event with respect to a
Basket Currency, the Valuation Date for the affected Basket Currency may be
postponed (as described in “Disruption Events” below).

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

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

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

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

For
purposes of the above, “scheduled Valuation Business Day” means a day that is
or, in the judgment of the Calculation Agent, should have been, a Valuation
Business Day for the affected Basket Currency.

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

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

 3
 

 

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

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

A “Valuation Business Day” means,
with respect to each Basket Currency, any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close
(including for dealings in foreign exchange in accordance with the practice of
the foreign exchange market) in the city or jurisdiction indicated in the table
below:

	
  Basket Currency

  	
   

  	
  Valuation Business Day

  	
   

  	
  Principal Financial Center

  	
   

  
	
  CNY

  	
   

  	
  Beijing

  	
   

  	
  Beijing

  	
   

  
	
  IDR

  	
   

  	
  Singapore

  	
   

  	
  Jakarta

  	
   

  
	
  INR

  	
   

  	
  Mumbai

  	
   

  	
  Mumbai

  	
   

  
	
  PHP

  	
   

  	
  Manila

  	
   

  	
  Manila

  	
   

  

The Spot Rate Source for the
CNY is the Chinese Renminbi/U.S. dollar official fixing rate, expressed as the
amount of Chinese Renminbi per one U.S. dollar, for settlement in two Business
Days reported by The State Administration of Foreign Exchange of the People’s
Republic of China, Beijing, which appears on the Reuters Screen SAEC Page
opposite the symbol “USDCNY=” at approximately 5:00 p.m., Beijing time, on the
Valuation Date or such other relevant date. 
The “Spot Rate Source” 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 Valuation Date or other
relevant date.  The Spot Rate Source 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 Valuation Date or such other relevant date.  The Spot Rate Source for the PHP is the
Philippine Peso/U.S. dollar morning weighted average rate, expressed as the
amount of Philippine Pesos per one U.S. dollar, for settlemetn in one Business
Day reported by the Phillipine Dealing system which appears on the Reuters
Screen PHPESO Page to the right of the caption “AM WT AVE” at approximately
12:30 p.m., Manila time, on the Valuation Date or other relevant date.

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

 4
 

 

The “Fallback
Rate Observation Methodology” means
that the reference exchange rate, Final Spot Rate or other rate, as specified
in the applicable pricing supplement, in respect of a Basket Currency will
equal the noon buying rate in New York for cable transfers in foreign
currencies as announced by the Federal Reserve Bank of New York for customs
purposes (the “Noon Buying Rate”) on the relevant Valuation Date or such other
date specified in the applicable pricing supplement. If the Noon Buying Rate is
not announced on that date, the Reference Exchange Rate, Final Spot Rate or
other rate for such Basket Currency will be calculated on the basis of the
arithmetic mean of the applicable spot quotations received by the Calculation
Agent at approximately 10:00 a.m., New York City time, on the Valuation
Business Day next succeeding the Valuation Date or such other date specified in
the applicable pricing supplement, for the purchase or sale for deposits in the
Basket Currency by the New York offices of three leading banks engaged in the
interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”). If fewer than three Reference Banks provide spot
quotations, then the Final Spot Rate or other rate, as applicable, will be
calculated on the basis of the arithmetic mean of the applicable spot
quotations received by the Calculation Agent at approximately 10:00 a.m.,
New York City time, on the relevant date from two Reference Banks (selected in
the sole discretion of the Calculation Agent), for the purchase or sale for
deposits in the Basket Currency. If these spot quotations are available from
only one Reference Bank, then the Calculation Agent, in its sole discretion,
will determine whether that quotation is reasonable to be used. If no spot
quotation is available, then the Final Spot Rate or other rate, as applicable,
for such Basket Currency will be determined by the Calculation Agent in good
faith and in a commercially reasonable manner.

A “Business Day”,
notwithstanding any provision in the Indenture, is any day that is not is not a
Saturday or Sunday and that is not a day on which banking institutions in New
York City generally are authorized or obligated by law or executive order to be
closed.

The “Calculation Agent” means
Lehman Brothers Inc.

Except as provided below, the Redemption Amount may, at the option of
the Company, be made by check mailed to the person entitled thereto at such
person’s address as it appears on the registry books of the Company.

Payment of the Redemption Amount will be made in immediately available
funds in accordance with the normal procedures of the Trustee (or any duly
appointed Paying Agent).

The Company will pay any administrative costs imposed by banks
in making payments in immediately available funds, but any tax, assessment or
governmental charge imposed upon payments hereunder, including, without
limitation, any withholding tax, will be borne by the Holder hereof.

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.

 

 5
 

This Note shall not be
valid or become obligatory for any purpose until the certificate of
authentication hereon shall have been signed by the Trustee under the
Indenture.

 

 6
 

IN WITNESS
WHEREOF, Lehman Brothers Holdings Inc. has caused this instrument to be signed
by its Chairman of the Board, its President, its Vice Chairman, its Chief
Financial Officer, one of its Vice Presidents or its Treasurer, by manual or
facsimile signature under its corporate seal, attested by its Secretary or one
of its Assistant Secretaries by manual or facsimile signature.

	
  Dated: May 31, 2007

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

This is one of the
Securities of the series designated herein referred to in the within-mentioned
Indenture.

	
  CITIBANK, N.A.

  	
   

  
	
     as Trustee

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  

 

 7
 

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
 FX BASKET-LINKED NOTE
 DUE MAY 29, 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 

 8
 

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 $10 or whole multiples of $10, 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 

 

 9
 

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 though 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.

 

 10

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