Document:

Exhibit 4.03

CUSIP
NO. 52520W549

ISIN NO. US52520W5498

REGISTERED                                                                        PRINCIPAL
AMOUNT: $24,066,340

No. R-1

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX BASKET-LINKED NOTE
 DUE APRIL 30, 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 April 30, 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 310%.

The “Basket Currencies” are the Brazilian Real (BRL), the Russian Ruble
(RUB), the Indian Rupee (INR) and the Chinese Renminbi (CNY).

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 BRL, 2.0385,

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(ii) for RUB, 25.7783,

(iii) for INR, 41.64 and

(iv) for CNY, 7.7293.

The “Trade Date” is April 24, 2007.

The “Valuation Date” is April 23, 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;

(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

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(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

  
	
  BRL

  	
   

  	
  Sao Paolo, Brasilia and Rio de Janeiro

  	
   

  	
  Sao Paolo, Brasilia and Rio de Janeiro

  
	
  RUB

  	
   

  	
  Moscow

  	
   

  	
  Moscow

  
	
  INR

  	
   

  	
  Mumbai

  	
   

  	
  Mumbai

  
	
  CNY

  	
   

  	
  Beijing

  	
   

  	
  Beijing

  

 

The “Spot Rate Source” for
the BRL is the Brazilian Real/U.S. Dollar offered rate for U.S. Dollars,
expressed as the amount of Brazilian Reals per one U.S. Dollar, for settlement
in two Business Days reported by the Banco Central do Brasil on SISBACEN Data
System under transaction code PTAX-800 (“Consulta de Cambio” or Exchange Rate
Inquiry), Option 5 (“Cotacoes para Contabilidade” or Rates for Accounting
Purposes), which appears on Reuters Screen BRFR Page under the caption “Dolar
PTAX” at approximately 6:30 pm Sao Paolo time on the Valuation Date or such
other relevant date.  The Spot Rate
Source for the RUB is the Russian Ruble/U.S. Dollar Specified Rate, expressed
as the amount of Russian Rubles per one U.S. Dollar, for settlement in one
Business Day, calculated by the Chicago Mercantile Exchange (“CME”) and as
published on CME’s website, which appears on the Reuters Screen EMTA Page, at
approximately 1:30 p.m., Moscow time, on the Valuation Date or such other
relevant date.  The 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 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
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.

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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.

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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.

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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: April 30, 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 APRIL 30, 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 Trade
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 Trade 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.

 

 10Exhibit
4.04

 

LEHMAN BROTHERS HOLDINGS
INC.

AND

THE BANK OF NEW YORK

as Trustee

 

 

 

TENTH SUPPLEMENTAL
INDENTURE

Dated as of May 1, 2007

 

 

 

THIS TENTH SUPPLEMENTAL INDENTURE, dated as of May 1,
2007, is between LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized
and existing under the laws of the State of Delaware (the “Company”), and THE
BANK OF NEW YORK (as successor trustee to JPMorgan Chase Bank, N.A.), a banking
corporation duly organized and existing under the laws of the State of New
York, acting as Trustee under the Indenture referred to below (the “Trustee”).

W  I 
T  N  E 
S  S  E 
T  H

WHEREAS, the Company has duly authorized the execution
and delivery of an Indenture dated as of February 1, 1996 (the “Indenture”), as
amended and supplemented, to provide for the issuance from time to time of its
unsecured notes or other evidences of indebtedness to be issued in one or more
series (the “Securities”), as in the Indenture provided, up to such principal
amount or amounts as may from time to time be authorized in or pursuant to one
or more resolutions of the Board of Directors;

WHEREAS, the Company shall issue a series of Securities
entitled the “Fixed and Floating Rate Subordinated Notes due 2032” (the “Subordinated
Notes”);

WHEREAS, the Company has duly authorized the execution
and delivery of this Tenth Supplemental Indenture in order to provide for
certain supplements to the Indenture which shall only be applicable to the
Subordinated Notes;

WHEREAS, all acts and things necessary to make this
Tenth Supplemental Indenture a valid agreement of the Company according to its
terms have been done and performed, and the execution and delivery of this
Tenth Supplemental Indenture have in all respects been duly authorized;

NOW, THEREFORE, in consideration of the premises, of
the purchase and acceptance of the Subordinated Notes by the Holders thereof,
and of the sum of one dollar duly paid to it by the Trustee at the execution
and delivery of these presents, the receipt whereof is hereby acknowledged, the
Company covenants and agrees with the Trustee to supplement the Indenture, only
for purposes of the Subordinated Notes, as follows:

SECTION 1.  
GENERAL TERMS AND CONDITIONS OF THE SUBORDINATED NOTES

1.1           Designation,
Principal Amount and Terms.     There
is hereby authorized and established pursuant to Section 301 of the Indenture a
series of Securities designated the “Fixed and Floating Rate Subordinated Notes
Due 2032” of the Company. The Subordinated Notes shall be issued initially in
an aggregate principal amount of $750,000,000, and shall have the terms
provided for herein, including those set forth in Exhibit A  hereto.
The Company may create and issue additional notes ranking pari passu in right of payment to the
Subordinated Notes and otherwise with the same terms as the Subordinated Notes
other than the Issue Date, Issue Price and the payment of additional interest
accruing prior to the Issue Date of such notes, which notes shall form a single
series with the Subordinated Notes. No such additional notes shall be issued if
an Event of Default has occurred with respect to the Subordinated Notes.

 

1.2           Optional
Redemption.  Pursuant to Section 1101
of the Indenture, the Company may elect to redeem the outstanding Subordinated
Notes, in whole or in part, on May 3, 2027 (the “Redemption Date”) only, at a
Redemption Price equal to 100% of the principal amount of the Subordinated
Notes to be redeemed plus accrued interest on the Subordinated Notes to be
redeemed to the Redemption Date.

1.3           Payment
of Additional Amounts.     The Company
shall pay to a Holder who is a United States Alien (as defined below) such
additional amounts (the “Additional Amounts”) as may be necessary so that every
net payment of principal of and interest on the Subordinated Notes, after
deduction or withholding for or on account of any present or future tax,
assessment or other governmental charge imposed upon such Holder, or by reason
of the making of such payment, by the United States or any taxing authority
thereof or therein, shall not be less than the amount provided for in the
Subordinated Notes to be then due and payable. The Company shall not be
required, however, to make any payment of any Additional Amounts for or on
account of:

a)              any tax, assessment or other governmental
charge which would not have been imposed but for (i) the existence of any
present or former connection between such holder (or between a fiduciary, settlor,
beneficiary of, member or shareholder of, or possessor of a power over, such
Holder, if such Holder is an estate, trust, partnership or corporation) and the
United States, including, without limitation, such Holder (or such fiduciary,
settlor, beneficiary, member, shareholder or possessor) being or having been a
citizen or resident or treated as a resident thereof or being or having been
engaged in trade or business or present therein, or having or having had a
permanent establishment therein, or (ii) the presentation of the Subordinated
Notes appertaining thereto for payment on a date more than 10 days after the
date on which such payment becomes due and payable or the date on which payment
thereof is duly provided for, whichever occurs later;

b)             any estate, inheritance, gift, sales,
transfer, excise, personal property or similar tax, assessment or other
governmental charge;

c)              any tax, assessment or other governmental
charge imposed by reason of such Holder’s past or present status as a passive
foreign investment company, a controlled foreign corporation, a personal
holding company or foreign personal holding company with respect to the United
States, or as a corporation which accumulates earnings to avoid United States
federal income tax;

d)             any tax, assessment or other governmental
charge which is payable otherwise than by withholding from payment of principal
of, or interest on, the Subordinated Notes;

e)              any tax, assessment or other governmental
charge required to be withheld by any paying agent from any payment of
principal of, or interest on, the Subordinated Notes if such payment can be
made without withholding by any other paying agent;

 2
 

 

f)                any tax, assessment or other governmental
charge which would not have been imposed but for the failure to comply with
certification, information, documentation or other reporting requirements
concerning the nationality, residence, identity or connections with the United
States of the Holder or beneficial owner of the Subordinated Notes, if such
compliance is required by statute or by regulation of the United States
Treasury Department as a precondition to relief or exemption from such tax,
assessment or other governmental charge;

g)             any tax, assessment or other governmental
charge imposed on interest received by (i) a 10% shareholder (as defined in
Section 871(h)(3)(B) of the United States Internal Revenue Code of 1986, as
amended (the “Code”), and the regulations that may be promulgated thereunder)
of the Company of (ii) a controlled foreign corporation with respect to the
Company within the meaning of the Code; or

h)             any combination of items (a), (b), (c), (d),
(e), (f) and (g);

nor shall any Additional Amounts be paid to any Holder
who is a fiduciary or partnership or other than the sole beneficial owner of such
Subordinated Notes appertaining thereto to the extent that a beneficiary or
settlor with respect to such fiduciary, or a member of such partnership or a
beneficial owner thereof would not have been entitled to the payment of such
Additional Amounts had such beneficiary, settlor, member or beneficial owner
been the Holder of the Subordinated Notes appertaining thereto.

“United States Alien” means any corporation,
partnership, individual or fiduciary that is, as to the United States, a
foreign corporation, a nonresident alien individual, a nonresident fiduciary of
a foreign estate or trust, or a foreign partnership one or more of the members
of which is, as to the United States, a foreign corporation, a nonresident
alien individual or a nonresident fiduciary of a foreign estate or trust.

1.4           Redemption Upon a
Tax Event.   The Subordinated Notes
may be redeemed at the option of the Company in whole, but not in part, on not
more than 60 days’ and not less than 30 days’ notice prior to any Tax
Redemption Date (as defined below) at a redemption price equal to 100% of the
principal amount of the Subordinated Notes and accrued interest, if any, if the
Company determines that as a result of any change in or amendment to the laws
or treaties, or any regulations or rulings promulgated thereunder, of the
United States or of any political subdivision or taxing authority thereof or
therein affecting taxation, or any proposed change in such laws, treaties or
regulations or rulings, or any change in the official application, enforcement
or interpretation of such laws, treaties or regulations or filings (including a
holding by a court of competent jurisdiction in the United States) or any other
action (other than an action predicated on law generally known on or before the
date specified in such Subordinated Note except for proposals before the
Congress before such date) taken by any taxing authority or a court of
competent jurisdiction in the United States, or the official proposal of any
such action, whether or not such action or proposal was taken or made with
respect to the Company, (A) the Company has or shall become obligated to pay
any Additional Amounts pursuant to Section 1.3 on the Subordinated Notes or (B)
there is a substantial possibility that the Company shall be 

 3
 

required to pay such Additional Amounts.  Prior to the publication of any notice of
redemption pursuant to this provision, the Company shall deliver to the Trustee
(i) an Officers’ Certificate stating that the Company is entitled to effect
such redemption and setting forth a statement of facts showing that the
conditions precedent to the right of the Company so to redeem have occurred,
and (ii) an Opinion of Counsel to such effect based on such statement of
facts.  Notice may not be given prior to
60 days before the date on which the Company shall or, if applicable, there is
a substantial possibility that the Company shall, become obligated to pay such
Additional Amounts if a payment of interest were to be made on such date (the “Tax
Redemption Date”).

SECTION
2.   AMENDMENTS TO THE INDENTURE

2.1           Amendment
to Section 101 of the Indenture. 
Section 101 of the Indenture is hereby amended solely with respect to
the Subordinated Notes by adding the following new definitions thereto, in the
appropriate alphabetical sequence:

“Excess Proceeds”
has the meaning specified in Section 1412.

“Other Financial
Obligations” has the meaning specified in Section 1401.

2.2           Amendment to
Section 501 of the Indenture.    Solely with respect to the Subordinated
Notes, clauses (1) through (4) and (7) of Section 501 of the
Indenture shall not apply.

2.3           Amendment to
Section 1005 of the Indenture. 
Solely with respect to the Subordinated Notes, Section 1005 of the
Indenture shall not apply.

2.4           Amendment to
Section 1401 of the Indenture. 
Section 1401 is hereby amended solely with respect to the Subordinated
Notes by deleting Section 1401 in its entirety and inserting in lieu thereof
the following:

“Section 1401.                                          Subordinated Notes Subordinated to Senior Debt and Other Financial
Obligations

The Company agrees, and each Holder of the
Subordinated Notes and related coupons by his acceptance thereof likewise
agrees, that the payment of the principal of (and premium, if any) and
interest, if any, on the Subordinated Notes and related coupons is
subordinated, to the extent and in the manner provided in this Article 14, to
the prior payment in full when due of the principal of (and premium, if any)
and interest, if any, on (i) all Senior Debt and (ii) under the circumstances
described in Section 1412, Other Financial Obligations.

For purposes of this Article 14, “Senior Debt” means
all obligations (whether now outstanding or hereafter created, assumed or
incurred) for the payment of which the Company is responsible or liable as
obligor, guarantor or otherwise in respect of all principal of (and premium, if
any) and interest if any (including any interest, if any, accruing subsequent
to the commencement of a 

 4
 

 

proceeding in bankruptcy by or against the Company) on (i) any
indebtedness for money borrowed or evidenced by bonds, notes, debentures or
similar instruments, (ii) indebtedness under capitalized leases, (iii) any
indebtedness representing the deferred and unpaid purchase price of any
property or business, (iv) indebtedness for money borrowed by another person
that the Company guarantees, and (v) all deferrals, renewals, extensions and
refundings of any such indebtedness or obligation; provided, that the following shall not constitute Senior
Debt:  (a) indebtedness evidenced by the
Subordinated Notes and related coupons, (b) indebtedness which is expressly
made equal in right of payment with the Subordinated Notes or subordinate and
subject in right of payment to the Subordinated Notes, (c) indebtedness for
goods or materials purchased in the ordinary course of business or for services
obtained in the ordinary course of business or indebtedness consisting of trade
payables, or (d) indebtedness which is subordinated to any obligation of the
type specified in clauses (i) through (v) above.

For purposes of this Article 14, “Other Financial
Obligations” means all obligations (whether now outstanding or hereafter
created, assumed or incurred) for the payment of which the Company is
responsible or liable as obligor, guarantor or otherwise in respect of all
principal of (and premium, if any) and interest if any (including any interest,
if any, accruing subsequent to the commencement of a proceeding in bankruptcy
by or against the Company) in respect to derivative products (including without
limitation, interest and foreign exchange rate contracts, commodity contracts
and similar arrangements) except any such obligations that are expressly stated
to have the same rank as or not to be senior to the Subordinated Notes.

This Article 14 shall constitute a continuing offer to
all persons who, in reliance upon such provisions, become holders of, or
continue to hold, Senior Debt and Other Financial Obligations, and such
provisions are made for the benefit of the holders of Senior Debt and Other
Financial Obligations, and such holders and/or each of them may enforce such
provisions.”

SECTION
3.   ADDITIONAL PROVISION

The following
Section 1412 is numbered to conform with the format of the Standard Provisions:

Section 1412.                                                                          Subordinated Notes Subordinated to Prior Payment of
all Other Financial Obligations on Dissolution, Liquidation or Reorganization
of the Corporation.

Upon the occurrence of any of the events specified in
the first paragraph of Section 1402, the provisions of Section 1402 shall be
given effect to determine the amount of cash, property or securities which may
be payable or deliverable as between the Holders of Subordinated Notes, on the
one hand, and the Holders of 

 5
 

 

Senior Debt, on the other hand. Solely upon the occurrence of any
distribution of the assets of the Company in connection with the dissolution,
winding up, liquidation or reorganization of the Company (whether in
bankruptcy, insolvency or receivership proceedings or upon an assignment for
the benefit of creditors or any other marshalling of the assets and liabilities
of the Company or otherwise), if after giving effect to the provisions of
Section 1402, any amount of cash, property or securities shall be available for
payment or distribution in respect of the Subordinated Notes (“Excess Proceeds”),
then such Excess Proceeds shall be made available by the receiver, liquidating
trustee or other Person making such payment or distribution of assets, whether
a trustee in bankruptcy, a receiver or liquidating trustee or otherwise, for
the ratable benefit of the Subordinated Notes; provided that if any creditors
in respect of Other Financial Obligations shall not have received payment in
full of all amounts due or to become due on or in respect of Other Financial
Obligations (and provision shall not have been made for such payment in money
or money’s worth), then the amount of Excess Proceeds available for payment or
distribution in respect of Subordinated Notes shall first be applied to pay or
provide for the ratable payment of Other Financial Obligations remaining
unpaid, to the extent necessary to pay all Other Financial Obligations in full,
after giving effect to any concurrent payment or distribution in respect of
Other Financial Obligations. Any Excess Proceeds originally available in respect
of Subordinated Notes remaining after the payment (or provision for payment) in
full of all Other Financial Obligations shall continue to be available for
payment or distribution in respect of Subordinated Notes.

If the Holders of Subordinated Notes, or any of them,
shall fail to file a proper claim in the form required in any proceeding
referred to in the first paragraph of Section 1402, prior to 30 days before the
expiration of the time to file such claim or claims pursuant to the authority
granted to the Trustee, then the holders of Other Financial Obligations are
hereby authorized to file an appropriate claim or claims for and on behalf of
the holders of Subordinated Notes in the form required in any such proceeding.
If after giving effect to the provisions of Section 1402, in the event that,
notwithstanding the foregoing provisions of this Section 1412, upon the
occurrence of any of the events described in the first paragraph of Section
1402, any payment or distribution of assets of the Corporation of any kind or
character in respect of the Subordinated Notes, whether in cash, property or
securities, including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the
Corporation being subordinated to the payment of the Subordinated Notes, shall
be received by the Trustee, any paying agent or the holders of the Subordinated
Notes before all Other Financial Obligations are paid in full, then, subject to
receipt by the Trustee or any paying agent of notice pursuant to Section 1406,
such payment or distribution shall be held in trust for the benefit of and
shall be paid over to the holders of such Other Financial Obligations or their
representative or representatives, ratably as aforesaid for application to the
payment of all Additional Other Financial Obligations remaining unpaid until
all such Other Financial Obligations shall have been paid in full, after giving
effect to any 

 

 6
 

concurrent payment or distribution to the holders of such Other
Financial Obligations.

Subject to the payment in full of all Other Financial
Obligations, the holders of the Subordinated Notes shall be subrogated to the
rights of the holders of such Other Financial Obligations to receive payments
or distributions of assets of the Corporation applicable to such Other
Financial Obligations until the Subordinated Notes shall be paid in full, and
none of the payments or distributions to the holders of such Other Financial
Obligations to which the holders of the Subordinated Notes or the Trustee would
be entitled except for the provisions of this Article or of payments over,
pursuant to the provisions of this Article, to the holders of such Other
Financial Obligations by the holders of the Subordinated Notes or the Trustee shall,
as between the Corporation, its creditors other than the holders of such Other
Financial Obligations and the holders of the Subordinated Notes, be deemed to
be a payment by the Corporation to or on account of such Other Financial
Obligations; it being understood by the parties hereto that the provisions of
this Section are and are intended solely for the purpose of defining the
relative rights of the holders of the Subordinated Notes, on the one hand, and
the holders of the Other Financial Obligations, on the other hand.

SECTION 4.  
MISCELLANEOUS

4.1           Note.  Attached hereto as Exhibit A is a form of the
Subordinated Note.

4.2           Separability.  In case any provision in this Tenth
Supplemental Indenture shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.

4.3           Continuance of
Indenture.  This Tenth Supplemental
Indenture supplements the Indenture and shall be a part of and subject to all
the terms thereof.  The Indenture, as
supplemented by this Tenth Supplemental Indenture, shall continue in full force
and effect.

4.4           The Trustee.  The Trustee shall not be responsible in any
manner for or in respect of the validity or sufficiency of this Tenth Supplemental
Indenture, or for or in respect of the recitals contained herein, all of which
recitals are made by the Company solely.

4.5           Governing Law.  This Tenth Supplemental Indenture shall be
governed by and construed in accordance with the laws of the State of New York.

4.6           Defined Terms.  All capitalized terms used in this Tenth
Supplemental Indenture which are defined in the Indenture, but not otherwise
defined herein, shall have the same meanings assigned to them in the Indenture.

4.7           Counterparts.  This Tenth Supplemental Indenture may be
executed in any number of counterparts, each of which so executed shall be
deemed to be an original, but all such counterparts shall together constitute
but one and the same instrument.

 

 7
 

IN WITNESS WHEREOF, Lehman Brothers Holdings Inc. has
caused this Tenth Supplemental Indenture to be signed and acknowledge by one of
its Vice Presidents, and The Bank of New York, as Trustee, has caused this
Tenth Supplemental Indenture to be signed as of the day and year first above
written.

	
   

  	
  LEHMAN BROTHERS HOLDINGS
  INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW
  YORK, as Trustee

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  

 

 8

EXHIBIT A

[FORM OF FACE OF NOTE]

THIS SECURITY IS A GLOBAL SECURITY WITHIN THE
MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME
OF A DEPOSITARY OR A NOMINEE OF A DEPOSITARY. THIS SECURITY IS EXCHANGEABLE FOR
SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS
NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE INDENTURE, AND NO
TRANSFER OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY
TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED
EXCEPT IN LIMITED CIRCUMSTANCES.

UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO THE ISSUER OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY 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 HEREON
IS MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE
OR OTHERWISE BY A PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE
CO., HAS AN INTEREST HEREIN.

REPAYMENT OF THE NOTES IS NOT PROTECTED BY ANY
FEDERAL AGENCY OR THE SECURITIES INVESTOR PROTECTION CORPORATION

	
  NO. R-

  	
  $ 

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CUSIP NO. 524908WH9

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  ISIN NO. US524908WH98

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS
INC.

FIXED AND FLOATING RATE
SUBORDINATED NOTE DUE 2032

Lehman Brothers Holdings Inc., a corporation duly
organized and existing under the laws of the State of Delaware (herein referred
to as the “Company”), for value received, hereby promises to pay to CEDE &
CO., or registered assigns, at the office or agency of the Company in the
Borough of Manhattan, the City of New York, the principal sum of
_________________ DOLLARS on May 3, 2032, in such coin or currency of the
United States of America as at the time of payment shall be legal tender for
the payment of public and private debts, and to pay interest on said principal
sum at said office or agency, in like coin or currency, from and including May
1, 2007 to but excluding May 3, 2027 at the rate per annum of 6.00%, and from
and including May 3, 2027 to but excluding May 3, 2032 at the rate of 3-month
LIBOR (Reuters Screen LIBOR01 Page) plus 0.78% until the principal hereof
becomes due and 

 9
 

 

payable, and on any overdue principal and (to the
extent that payment of such interest is enforceable under applicable law) on
any overdue installment of interest at the same rate per annum during the
period in which such principal is overdue, compounded quarterly at the rate of
3-month LIBOR plus 0.78%, to the registered holder of this Note, until payment
of said principal sum has been made or duly provided for.

“Interest
Reset Date” means May 3, 2027 and each Floating Rate Interest Payment Date.

“Interest
Determination Date” means two London banking days before each Interest Reset
Date.

“Calculation
Agent” means Lehman Brothers Inc., in its capacity as calculation agent.

With
respect to an Interest Determination Date, LIBOR will be the offered rate for
deposits in U.S. dollars for the 3-month period (commencing on the Interest
Reset Date) which appears on the display designated as page “LIBOR01” on the
Reuters Monitor Money Rates Service, or any successor service or page for the
purpose of displaying London interbank offered rates of major banks (the “Reuters
Screen LIBOR01 Page”), at approximately 11:00 A.M., London time, on such
Interest Determination Date.

With
respect to an Interest Determination Date on which no rate appears on the
Reuters Screen LIBOR01 Page, as specified above, the Calculation Agent will
request the principal London office of each of four major banks in the London
interbank market, as selected by the Calculation Agent after consultation with
the Company, to provide the Calculation Agent with its offered quotation for
deposits in U.S. dollars for the 3-month period (commencing on the Interest
Reset Date) to prime banks in the London interbank market at approximately
11:00 A.M., London time, on such Interest Determination Date in a principal
amount that is representative of a single transaction in such market at such
Interest Determination Date.  If two or
more quotations are provided on such Interest Determination Date, LIBOR in
respect of such Interest Determination Date will be the arithmetic mean of such
quotations. If fewer than two such quotations are provided, LIBOR in respect of
such Interest Determination Date will be the arithmetic mean of the rates
quoted on such Interest Determination Date by three leading European banks
selected by the Calculation Agent after consultation with the Company for loans
in U.S. dollars to leading European banks, for the 3-month period (commencing
on the Interest Reset Date) of in a principal amount that is representative of
a single transaction in such market at such time, provided, however, that if
the European banks selected as aforesaid by the Calculation Agent are not
quoting as mentioned in this sentence, LIBOR for the applicable period will be
LIBOR as in effect on such Interest Determination Date.  If there was no LIBOR Rate in effect on
such Interest Determination Date, the LIBOR Rate will be the initial interest
rate. The applicable principal
financial center will be New York City and the approximate time for which
quotes for loans in U.S. dollars would be requested from New York City banks
will be 3:00 p.m., New York City time.

The Stated Maturity of the Note shall be May 3,
2032. From May 1, 2007 to and including May 3, 2027, interest on this Note
(computed as set forth herein) shall be payable semi-annually in arrears on May
3 and November 3 of each year (each a “Fixed Rate Interest Payment Date”),
commencing November 3, 2007, from the Fixed Rate Interest Payment Date next
preceding the date of this Note to which interest has been paid or duly
provided for. From but excluding May 3, 2027 to and including the Stated
Maturity of the Note, interest on this Note (computed as set forth herein)
shall be payable quarterly in arrears on February 3, May 3, August 3 and
November 3 of each year (each a “Floating Rate Interest Payment Date”),
commencing August 3, 2027, from the Floating Rate Interest Payment Date next
preceding the date of this Note to which interest has been paid or duly
provided for. Interest on this Note shall be payable to the holder in whose
name the Note is registered at the close of business on the applicable Record
Date. The Record Date for any Fixed Rate Interest Payment Date or Floating Rate

 10
 

 

Interest Payment Date for the Note will be the date,
whether or not a Business Day, 15 calendar days immediately preceding the
Interest Payment Date. Notwithstanding the foregoing, from May 1, 2007 to and
including May 3, 2027, any Fixed Rate Interest Payment Date that would
otherwise be a day that is not a Business Day shall instead be the next
succeeding Business Day, no additional interest shall accrue as a result of
such delayed payment, and interest on the Note shall be computed on the basis
of a 360-day year of twelve 30-day months. Notwithstanding the foregoing, from
but not including May 3, 2027 to and including the Stated Maturity of the Note,
any Floating Rate Interest Payment Date other than the Stated Maturity of the
Note that would otherwise be a day that is not a Business Day shall instead be
the next succeeding Business Day, unless such next Business Day falls in the
next calendar month in which case such payment shall be made on the immediately
preceding day that is a Business Day, and interest shall accrue to the date
that interest is actually paid, and interest on the Note shall be computed on
the basis of a 360-day year and the actual number of days elapsed in each
floating rate interest period. With respect to the period from but excluding May
3, 2027 to and including the Stated Maturity of the Note, Business Day shall
also be a London Business Day. 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.

REFERENCE IS 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 THOUGH FULLY 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 referred to on the reverse hereof.

 11
 

 

IN WITNESS WHEREOF, LEHMAN BROTHERS HOLDINGS INC.
has caused this instrument to be signed by its Chairman of the Board, its Vice
Chairman, 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.

	
  

  	
  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 therein referred to in the within-mentioned Indenture.

 

	
  Dated:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  THE BANK OF NEW YORK,

  	
   

  
	
   

  	
  as Trustee

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  

 

 12

[FORM OF REVERSE OF NOTE]

(Reverse of Note)

LEHMAN BROTHERS HOLDINGS
INC.

FIXED AND FLOATING RATE
SUBORDINATED NOTE, DUE 2032

This Note is one of a duly authorized series of
Securities of the Company designated as the Fixed and Floating Rate
Subordinated Notes Due 2032 of the Company (herein called the “Notes”), limited
(except as otherwise provided in the Indenture referred to below) in aggregate
principal amount to $750,000,000.  The
Notes are one of an indefinite number of series of debt securities of the
Company (herein collectively called the “Securities”), issued or issuable under
and pursuant to an indenture, dated as of February 1, 1996, as amended and
supplemented from time to time and as amended and supplemented with respect to
the Notes herein by the Tenth Supplemental Indenture dated as of May 1, 2007
between the Company and the Trustee (as so amended and supplemented, the “Indenture”),
between the Company and The Bank of New York, successor trustee to JPMorgan
Chase Bank, N.A., as Trustee (herein called the “Trustee”), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
description of rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the holders of the
Notes.  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, as defined in the
Indenture, and may otherwise vary as provided in the Indenture.

Payment of the principal of and interest on this
Note is, to the extent provided in the Indenture, subordinated and subject in
right of payment to the prior payment in full when due of the principal of (and
premium, if any) and interest, if any, on all Senior Debt, as defined in the
Indenture and this Note is issued subject to the provisions of the Indenture
with respect thereto.  In addition, upon
the dissolution, winding-up, liquidation or reorganization of the Company, this
Note is, to the extent provided in the Indenture, subordinated and subject in
right of payment to the prior payment in full when due of the principal of (and
premium, if any) and interest, if any, on all Other Financial Obligations, as
defined in the Indenture. Each registered holder of this Note, by accepting the
same, (a) agrees to and shall be bound by such provisions, (b) authorizes and
expressly directs the Trustee on his or her behalf to take such action as may
be necessary or appropriate to effectuate the subordination so provided and (c)
appoints the Trustee as his or her attorney-in-fact for any and all such
purposes.  Each registered holder hereof,
by his or her acceptance hereof, hereby waives all notice of the acceptance of
the subordination provisions contained herein and in the Indenture by each holder
of Senior Debt and Other Financial Obligations, whether now outstanding or
hereafter incurred, and waives reliance by each such holder upon said
provisions.

As provided in the Indenture and subject to certain
limitations therein set forth, the Company may at its option redeem the Notes
in whole or in part on the Redemption Date.

As provided in the Indenture
and subject to certain limitations therein set forth, the Company will pay to a
Holder who is a United States Alien such Additional Amounts as may be necessary
so that every net payment of principal of and interest on the Notes, after
deduction or withholding for or on account of 

 13
 

 

any
present or future tax, assessment or other governmental charge imposed upon
such Holder, or by reason of the making of such payment, by the United States
or any taxing authority thereof or therein, will not be less than the amount
provided for in the Notes to be then due and payable.

As
provided in the Indenture and subject to certain limitations therein set forth,
the Notes may be redeemed at the option of the Company in whole if the Company
determines that as a result of any change in or amendment to the laws or
treaties, or any regulations or rulings promulgated thereunder, of the United
States or of any political subdivision or taxing authority thereof or therein
affecting taxation, or any proposed change in such laws, treaties or
regulations or rulings, or any change in the official application, enforcement
or interpretation of such laws, treaties or regulations or filings (including a
holding by a court of competent jurisdiction in the United States) or any other
action (other than an action predicated on law generally known on or before the
date specified in such Note except for proposals before the Congress before
such date) taken by any taxing authority or a court of competent jurisdiction
in the United States, or the official proposal of any such action, whether or
not such action or proposal was taken or made with respect to the Company, (A)
the Company has or will become obligated to pay any Additional Amounts referred
to in the foregoing paragraph pursuant to the Indenture on the Note or (B)
there is a substantial possibility that the Company will be required to pay
such Additional Amounts.

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 (each series voting as a class), evidenced as
provided in the Indenture, 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 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, or amend the Indenture to modify its provisions relating
to the subordination of each Security in a manner adverse to the holder
thereof, 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.  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 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.

As provided in the Indenture and subject to certain
limitations therein set forth, in case an Event of Default with respect to the Notes shall have
occurred and be continuing, the principal hereof may be declared, and upon such
declaration shall become due and payable, in the manner, with the effect and
subject to the conditions provided in the Indenture.

No reference herein to the Indenture and no
provisions of this Note or of the Indenture shall alter or impair the
obligations of the Company, which is absolute and unconditional, to pay the
principal and interest of this Note at the place, at the time and in the coin
or currency herein prescribed.

 14
 

 

The
Company may omit to comply with any term, provision or condition set forth in
Section 801 of the Indenture, and any such omission with respect to such
Section shall not be an Event of Default, in each case with respect to the
Notes, provided that the conditions of Section 1009 of the Indenture have been satisfied.

The
covenant set forth in Section 1005 of the Indenture shall not apply to the
Notes.

Notwithstanding the provisions of Section 401(a)(B)
of the Indenture, the Company may satisfy and discharge the entire indebtedness
on all the Notes as provided therein only when the Notes are by their terms due
and payable within one year.

The Company, the Trustee, and any agent of the
Company or of the Trustee may deem and treat the registered holder hereof as
the absolute owner of this Note (whether or not this Note shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment hereof, or on account hereof, and for all other
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.  All such payments made to or upon the order
of such registered holder shall, to the extent of the sum or sums paid,
effectually satisfy and discharge liability for moneys payable on this Note.

The Notes are issuable in registered form without
coupons in denominations of $1,000 and any multiple of $1,000.  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, The City of New York, 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 may be exchanged for an equal aggregate principal amount of
Notes of like tenor and of other authorized denominations.

As provided in the Indenture and subject to certain
limitations 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 office or agency of the Company in any place where the principal of this
Note is payable, duly endorsed by, or accompanied by a written instrument of
transfer in form satisfactory to the Company and the Security Registrar duly executed
by, the holder hereof or such holder’s attorney duly authorized in writing, and
thereupon one or more new Notes of this series of like tenor and of authorized
denominations and for the same aggregate principal amount will be issued to the
designated transferee or transferees.

No recourse for the payment of the principal of or
the 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.

THE INDENTURE AND THE NOTES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 15
 

 

All items used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.

______________________________________

The following abbreviations, when used in the inscription on the face
of the within Note, 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 tenants by their entireties

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  JT TEN – 

  	
   

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

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  UNIF GIFT MIN ACT –

  	
   

  	
  Custodian

  	
   

  	
   under Uniform
  Gifts to

  	 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  (Cust)

  	
  (Minor)

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
  Minors Act

  	
   

  	
   

  	 

	
   

  	
   

  	
  (State)

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
   

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

  	 

	
   

  	
   

  	 

	
   

  	
   

  	 

	
   

  	
   

  	
   

  	 

	
   

  
												

 

 16
 

 

ASSIGNMENT

FOR VALUE RECEIVED, the undersigned hereby sells,
assigns and transfers unto

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

(Please insert social security or other identifying
number of Assignee)

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

__________________________________________________________________________________________________

(Name and address of Assignee, including zip code,
must be printed or typewritten.)

the within Note, and all rights thereunder, hereby
irrevocably constituting and appointing

__________________________________________________________________________________________________

__________________________________________________________________________________________________

_____________ to transfer the said Note on the books
of the Company, with full power of substitution in the premises.

Date:_____________

 

	
  

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  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 whatever.

  

 

Signature(s) Guaranteed:
_____________________________

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE
GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND
CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE
PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

 17

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