Document:

Exhibit
4.03

 

CUSIP NO. 5252M0BB2

ISIN NO. US5252M0BB24

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $214,000

  

No. R-1

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

NOTES
LINKED TO A CURRENCY BASKET
 DUE MAY 21, 2010

 

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

 

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

 

 

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

 

The “Maturity Date” is May
21, 2010, or if such day is not a Business Day, on the next following Business
Day.

 

The “Valuation
Date” is May 17, 2010; provided that, upon the occurrence of a Disruption Event
with respect to a Basket Currency, the Valuation Date for the affected Basket
Currency may be postponed (as described in “Disruption Events” below).

 

The
“Redemption Amount” is the amount equal to the sum of the principal amount of
the Notes, plus $1,000, plus the Additional Amount, if any.

 

The
“Additional Amount” is an amount per Note equal to the greater of (a) zero and
(b) $1,000 multiplied by the product of the Basket Return times the
Participation Rate.

 

The
“Participation Rate” is 135%.

 

The “Basket”
is the Euro (EUR), Japanese Yen (JPY), British Pound Sterling (GBP), Canadian
Dollar (CAD), Swedish Krona (SEK) and Swiss Franc (CHF), each a “Basket
Currency” and collectively the “Basket Currencies”.

 

The “Basket Return” is 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 set equal to 100 on the
Trade Date.

 

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

 

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

 

The “Currency Return” for each of EUR and GBP is a
quotient, the numerator of which is the difference of the Initial Spot Rate for
such Basket Currency minus the Final Spot Rate for such Basket Currency and the
denominator of which is the Initial Spot Rate for such Basket Currency. The
Currency Return for each of JPY, CAD, SEK and CHF is a quotient, the numerator
of which is the difference between the Final Spot Rate for such Basket Currency
minus the Initial Spot Rate for such Basket Currency and the denominator of
which is the Final Spot Rate for such Basket Currency.

 

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

 

2

 

The “Weighting” and “Initial Spot Rate” for each
Basket Currency are as follows:

 

	
  Basket 

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Spot 

  Rate

  	
   

  
	
  EUR

  	
   

  	
  57.6

  	
  %

  	
  1.5478

  	
   

  
	
  JPY

  	
   

  	
  13.6

  	
  %

  	
  104.81

  	
   

  
	
  GBP

  	
   

  	
  11.9

  	
  %

  	
  1.9463

  	
   

  
	
  CAD

  	
   

  	
  9.1

  	
  %

  	
  1.0008

  	
   

  
	
  SEK

  	
   

  	
  4.2

  	
  %

  	
  6.0341

  	
   

  
	
  CHF

  	
   

  	
  3.6

  	
  %

  	
  1.0551

  	
   

  

 

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

 

The “Issue
Date” is May 21, 2008.

 

If a Disruption Event relating to one or more of the
Basket Currencies is in effect on the scheduled Valuation Date, the Calculation
Agent will calculate 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 with respect to a
Basket Currency, as determined in good faith by the Calculation Agent:

 

(A)                               the occurrence and/or existence of an event on any day that has the
effect of preventing or making impossible (x) for any Basket Currency other 

 

3

 

than EUR, the delivery of USD from accounts inside the
Basket Currency Jurisdiction for that Basket Currency to accounts outside that
Basket Currency Jurisdiction; or (y) the conversion of the Reference Currency
into USD through customary legal channels;

 

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

 

(C)          the Final Spot Rate being unavailable for the Basket Currency, or the
occurrence of an event (i) 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

  	
   

  	
  Screen Reference*

  	
   

  	
  Valuation Business Day

  	
   

  
	
  EUR

  	
   

  	
  Reuters page 

  EURUSDFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  
	
  JPY

  	
   

  	
  Reuters page USDJPYFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  
	
  GBP

  	
   

  	
  Reuters page GBPUSDFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  
	
  CAD

  	
   

  	
  Reuters page USDCADFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  
	
  SEK

  	
   

  	
  Reuters page USDSEKFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  
	
  CHF

  	
   

  	
  Reuters page USDCHFFIXM=WM (as substitute for 1FED)

  	
   

  	
  London

  	
   

  

 

*In
each case, as observed at approximately 4.00 p.m. London time.

 

The
“Spot Rate Source” for the EUR is the U.S. Dollar/Euro official fixing rate,
expressed as the amount of U.S. Dollars per one Euro, for settlement in two
Business Days reported by the Federal Reserve Bank of New York which appears on
Reuters Screen 1FED to the right of the caption “EUR” at approximately 10.00
a.m., New York time, on the relevant Valuation Date. The Spot Rate Source for
the JPY is the Yen/U.S. Dollar official fixing rate, expressed as the amount of
Japanese Yen per one U.S. Dollar, for settlement in two Business Days reported
by the Federal Reserve Bank of New York which appears on Reuters Screen 1FED to
the right of the caption “JPY” at approximately 10.00 a.m., New York time, on
the relevant Valuation Date. The Spot Rate Source for GBP is the U.S.
Dollar/Sterling official fixing rate, expressed as the amount of U.S. Dollars per
one Sterling, for settlement in two Business Days reported by the Federal
Reserve Bank of New York which appears on Reuters Screen 1FED to the right of
the caption “GBP” at approximately 10.00 a.m., New York time, on the relevant
Valuation Date. The Spot Rate Source for the CAD is the Canadian Dollar/U.S.
Dollar official 

 

4

 

fixing
rate, expressed as the amount of Canadian Dollars per one U.S. Dollar, for
settlement in one Business Day reported by the Federal Reserve Bank of New York
which appears on Reuters Screen 1FED to the right of the caption “CAD” at
approximately 10.00 a.m. New York time, on the relevant Valuation Date. The
Spot Rate Source for the SEK is the Swedish Krona/U.S. Dollar official fixing rate,
expressed as the amount of Swedish Krona per one U.S. Dollar, for settlement in
two Business Days reported by the Federal Reserve Bank of New York which
appears on Reuters Screen 1FED to the right of the caption “SEK” at
approximately 10.00 a.m., New York time, on the relevant Valuation Date. The
Spot Rate Source for the CHF is the Swiss Franc/U.S. Dollar official fixing
rate, expressed as the amount of Swiss Francs per one U.S. Dollar, for
settlement in two Business Days reported by the Federal Reserve Bank of New
York which appears on Reuters Screen 1FED to the right of the caption “CHF” at
approximately 10.00 a.m., New York time, on the relevant Valuation Date. The term “business day”
solely as used in any Spot Rate Source described above shall mean any day,
other than a Saturday or Sunday, that is neither a legal holiday nor a day on
which commercial banks are authorized or required by law, regulation or
executive order to close (including for dealings in foreign exchange in
accordance with the practice of the foreign exchange market) in the Principal
Financial Center for both (a) the Basket Currency and (b) the currency against
which the Basket Currency is quoted (the “base currency”) in accordance with
the Reference Exchange Rate specified in the applicable pricing supplement, in
each case as specified for the applicable Basket Currency or base currency in
the table above. 

 

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

 

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

 

5

 

whether
that quotation is reasonable to be used. If no spot quotation is available,
then the Reference Exchange Rate, Final Spot Rate or other rate, as applicable,
for such Basket Currency will be determined by the Calculation Agent in good
faith and in a commercially reasonable manner.

 

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

 

The “Calculation Agent” means Lehman Brothers Inc.

 

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

 

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

 

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

 

References herein to “U.S. dollars” or
“U.S.$” or “$” or “USD” are to the coin or currency of the United States as at
the time of payment is legal tender for the payment of public and private
debts.

 

REFERENCE IS
HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS
IF SET FORTH AT THIS PLACE.

 

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

 

6

 

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

 

Dated:  May 21, 2008

 

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew Yeung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cindy Buckholz

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  

 

TRUSTEE’S CERTIFICATE OF
AUTHENTICATION

 

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

 

CITIBANK, N.A.

as Trustee

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  

 

7

 

[REVERSE
OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I

NOTES
LINKED TO A CURRENCY BASKET
 DUE MAY 21, 2010

Section 1.
General. This Note is one of a duly authorized series of Notes of the
Company designated as the Medium-Term Notes, Series I, Notes Linked to a Currency Basket (herein called the “Notes”). The Notes are one of an indefinite
number of series of debt securities of the Company (collectively, the
“Securities”) issued or issuable under and pursuant to an indenture dated as of
September 1, 1987, as amended and supplemented (the “Indenture”), duly executed
and delivered by the Company and Citibank, N.A., as Trustee (herein called the
“Trustee”), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Trustee, the
Company and the holders of the Securities. The separate series of Securities
may be issued in various aggregate principal amounts, may mature at different
times, may bear interest (if any) at different rates, may be subject to
different redemption provisions or repurchase rights (if any), may be subject
to different sinking, purchase or analogous funds (if any), may be subject to
different covenants and Events of Default and may otherwise vary as in the
Indenture provided.

 

Section 2. Principal Amount for Indenture
Purposes. For the purpose of determining whether Holders of the requisite amount
of Notes of this series outstanding under the Indenture have made a demand,
given a notice or waiver or taken any other action, the principal amount of
this Note will be deemed to be the principal amount of this Note then
outstanding.

 

Section 3. Modification and Waivers.
The Indenture contains provisions permitting the Company and the Trustee, with
the consent of the Holders of not less than 66-2/3% in aggregate principal
amount of each series of the Securities at the time Outstanding to be affected,
evidenced as in the Indenture provided, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in
any manner the rights of the holders of the Securities of all such series;
provided, however, that no such supplemental indenture shall, among other
things, (i) change the fixed maturity of any Security, or reduce the Additional
Amount or the principal amount thereof, or reduce the rate or extend the time
of payment of interest thereon or reduce any premium or other amount payable on
redemption, or make the Additional Amount or the principal amount thereof,
premium or other amount payable, if any, or interest thereon payable in any coin
or currency other than that herein above provided, without the consent of the
Holder of each Security so affected, or (ii) change the place of payment on any
Security, or impair the right to institute suit for payment on any Security, or
reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Security so affected. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of any series of
Securities, the holders of a majority in aggregate principal amount of the
Securities of such series 

 

 

Outstanding may on behalf of the holders of all the Securities of such
series waive any past default or Event of Default under the Indenture with
respect to such series and its consequences, except a default in the payment of
interest, if any, on the Additional Amount or the principal amount, or premium,
if any, on any of the Securities of such series, or in the payment of any
sinking fund installment or analogous obligation with respect to Securities of
such series. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future holders and owners
of this Note and any Notes of this series which may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes of this series.

 

Section 4. Obligations Unconditional.
No reference herein to the Indenture and no provisions of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the Additional Amount or the principal
amount on this Note at the place, at the respective times, at the rate, and in
the coin or currency herein prescribed.

 

Section 5. Defeasance. The Indenture
contains provisions for the discharge of the Indenture and defeasance at any
time of the indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.

 

Section 6. Authorized Form and
Denominations. The Notes of this series are issuable in registered form,
without coupons. Each Note will be issued initially as either a Global Security
or a Certificated Note, at the option of the Company, in denominations of
$1,000 or whole multiples of $1,000, either at the office or agency to be
designated and maintained by the Company for such purpose in the Borough of
Manhattan, New York City, pursuant to the provisions of the Indenture or at any
of such other offices or agencies as may be designated and maintained by the
Company for such purpose pursuant to the provisions of the Indenture, and in
the manner and subject to the limitations provided in the Indenture, but
without the payment of any service charge, except for any tax or other
governmental charges imposed in connection therewith. Notes of this series are
exchangeable for a like aggregate principal amount of Notes of this series of a
different authorized denomination, except that Global Securities will not be
exchangeable for Certificated Notes of this series.

 

Section 7. Registration of Transfer.
As provided in the Indenture and subject to certain limitations as therein set
forth, the transfer of this Note is registrable in the Security Register, upon
surrender of this Note for registration of transfer, at the Corporate Trust
Office or agency in a Place of Payment for this Note, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar requiring such written instrument of
transfer duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.

 

If at any time the Depository notifies the
Company that it is unwilling or unable to continue as Depository or if at any
time the Depository shall no longer be eligible under the Indenture, the
Company shall appoint a successor Depository. If a successor Depository for the
Notes of this series is not appointed by the Company within 90 days after the
Company receives 

 

 

such notice or becomes aware of such ineligibility, the Company will
issue, and the Trustee will authenticate and deliver, Notes of this series in
definitive form in an aggregate principal amount equal to the principal amount
of this Note.

 

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

 

Prior to due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the person in whose name this Note is registered as
the owner hereof for all purposes, and neither the Company nor the Trustee nor
any agent of the Company or of the Trustee shall be affected by any notice to
the contrary.

 

Section 8. Events of Default. If an
Event of Default with respect to Notes of this series shall occur and be
continuing, the amount that may be declared due and payable upon any
acceleration of the notes will be determined by the Calculation Agent for the
period from and including the Issue Date to but excluding the date of early
repayment and will equal, for each note, the Redemption Amount, calculated as
the date of early repayment were the Maturity Date. If a bankruptcy proceeding
is commenced in respect of Lehman Brothers Holdings, the claim of the
beneficial owner of a note for the period from and including the Issue Date to
but excluding the date of early repayment will be capped at the Redemption
Amount, calculated as though the date of the commencement of the proceeding
were the Maturity Date.

 

Section 9. No Recourse Against Certain
Persons. No recourse for the payment of the Additional Amount or for any
claim based hereon or otherwise in respect hereof, and no recourse under or
upon any obligation, covenant or agreement of the Company in the Indenture or
any Indenture supplemental thereto or in any Note, or because of the creation
of any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.

 

Section 10.
Defined Terms. All terms used but not defined in this Note are used
herein as defined in the Indenture.

 

Section 11. GOVERNING LAW.
THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.Exhibit 4.04

 

CUSIP
NO. 5252M0FE2

ISIN NO. US5252M0FE27

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $267,000

  

No. R-1

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

NOTES LINKED TO A BASKET OF COMMODITIES
 DUE NOVEMBER 23, 2012

 

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 at Maturity.

 

The “Maturity Date” is November 23, 2012,
or if such day is not a Business Day, on the next following Business Day.

 

The “Valuation
Date” is November 15, 2012, or if such day is not a Valuation Business
Day, the immediately preceding Valuation Business Day; provided
that if a Disruption Event is in effect on the scheduled Valuation Date, the
Valuation Date may be postponed (as described below).

 

The “Redemption
Amount at Maturity” for each $1,000 note will be a single U.S. dollar payment
on the Maturity Date equal to:

 

(A) 
$1,000, plus the product of $1,000 times the Basket Return times the
Participation Rate, if the Final Basket Level is greater than the Initial
Basket Level; or

 

(B) 
$1,000, if the Final Basket Level is equal to or less than the Initial Basket
Level.

 

The “Component
Commodities” and “Component Commodity Weightings” are as follows:

 

	
  Component Commodities

  	
   

  	
  Component 

  Commodity

  Weighting

  	
   

  
	
  Light sweet
  crude oil (“Crude Oil”)

  	
   

  	
  10

  	
  %

  
	
  Brent crude oil
  (“Brent Crude Oil”)

  	
   

  	
  10

  	
  %

  
	
  No. 2 fuel heating oil (“Heating Oil”)

  	
   

  	
  10

  	
  %

  
	
  Copper – Grade A (“Copper”)

  	
   

  	
  10

  	
  %

  
	
  Primary Nickel (“Nickel”)

  	
   

  	
  10

  	
  %

  
	
  Special High Grade Zinc (“Zinc”)

  	
   

  	
  10

  	
  %

  
	
  Gold (“Gold”)

  	
   

  	
  10

  	
  %

  
	
  Cocoa (“Cocoa”)

  	
   

  	
  10

  	
  %

  
	
  Class III milk (“Milk”)

  	
   

  	
  10

  	
  %

  
	
  Soybeans (“Soybeans”)

  	
   

  	
  10

  	
  %

  

 

The “Participation
Rate” is 140%.

 

The “Basket
Return” is a quotient, the numerator of which is the difference of the Final
Basket Level minus the Initial Basket Level and the denominator of which is the
Initial Basket Level, expressed as a percentage rounded to three decimal
places.

 

The “Initial
Basket Level” is set to 100 on the Trade Date.

 

2

 

The “Final
Basket Level” is the product of 100 times the sum of 1 plus the sum of the Weighted
Component Commodity Returns.

 

The “Trade
Date” is May 15, 2008.

 

The “Issue
Date” is May 22, 2008.

 

The “Weighted
Component Commodity Returns” are, for each Component Commodity, the product of
the Component Commodity Weighting times a quotient, the numerator of which is
the difference of the Final Commodity Price minus the Initial Commodity Price
and the denominator of which is the Initial Commodity Price for such Component
Commodity.

 

The “Initial
Commodity Price” and “Relevant Exchange” for each Component Commodity are as
follows:

 

	
  Component

  Commodity

  	
   

  	
  Initial Commodity

  Price

  	
   

  	
  Relevant Exchange

  	
   

  
	
  Crude Oil

  	
   

  	
  $

  	
  124.12

  	
   

  	
  The NYMEX Division, or its successor, of the New
  York Mercantile Exchange, Inc. (“NYMEX”)

  	
   

  
	
  Brent Crude Oil

  	
   

  	
  $

  	
  122.63

  	
   

  	
  The Intercontinental Exchange (“ICE”)

  	
   

  
	
  Heating Oil

  	
   

  	
  $

  	
  3.6224

  	
   

  	
  NYMEX

  	
   

  
	
  Copper

  	
   

  	
  $

  	
  8,360.00

  	
   

  	
  London Metals Exchange (“LME”)

  	
   

  
	
  Nickel

  	
   

  	
  $

  	
  26,455.00

  	
   

  	
  LME

  	
   

  
	
  Zinc

  	
   

  	
  $

  	
  2,261.00

  	
   

  	
  LME

  	
   

  
	
  Gold

  	
   

  	
  $

  	
  881.25

  	
   

  	
  The market in London
  on which members of the London Bullion Market Association (“LBMA”) quote
  prices for the buying and selling of Gold.

  	
   

  
	
  Cocoa

  	
   

  	
  $

  	
  2,629.00

  	
   

  	
  ICE

  	
   

  
	
  Milk

  	
   

  	
  $

  	
  18.08

  	
   

  	
  CME Group (“CME”) (as successor to The Chicago Board
  of Trade and the Chicago Mercantile Exchange)

  	
   

  
	
  Soybeans

  	
   

  	
  $

  	
  1,347.50

  	
   

  	
  CME

  	
   

  

 

The “Final
Commodity Price” is, for each Component Commodity, the Commodity Price of the
Component Commodity on the Valuation Date, subject to the occurrence of a
Disruption Event.

 

A “Valuation
Business Day” is a day, as determined in good faith by the Calculation Agent,
on which the Relevant Exchange for each Component Commodity is scheduled to be
(or, but for the occurrence of a Disruption Event, would have been) open for
trading during its regular trading session (notwithstanding the Relevant
Exchange or organized exchange or market, as applicable, closing prior to its
scheduled closing time).

 

If a
Disruption Event identified in clauses (A), (B) or (C) below relating
to one or more Component Commodities is in effect on the scheduled Valuation
Date, the Calculation Agent will calculate the Final Basket Level using:

 

3

 

·                                          for each such Component Commodity that did not suffer a Disruption
Event on the scheduled Valuation Date, the Final Commodity Price for that
Component Commodity on the scheduled Valuation Date, and

 

·                                          for each such Component Commodity that did suffer a Disruption Event on
the scheduled Valuation Date, the Final Commodity Price on the immediately
succeeding trading day for such Component Commodity on which no Disruption
Event occurs or is continuing with respect to such Component Commodity;

 

provided however that if a Disruption Event has occurred or is continuing with
respect to a Component Commodity on each of the three scheduled trading days
following the scheduled Valuation Date, then (a) that third scheduled
trading day shall be deemed the Valuation Date for the affected Component
Commodity; and (b) the Calculation Agent will determine the Final
Commodity Price for the affected Component Commodity on such day in its sole
and absolute discretion taking into account the latest available quotation for
the Commodity Price for the affected Component Commodity and any other
information that in good faith it deems relevant.

 

If a Disruption Event identified in
clauses (D) or (E) below relating to one or more Component
Commodities (other than Gold) is in effect on the Valuation Date, the
Calculation Agent will determine the Final Commodity Price for the affected
Component Commodity on the scheduled Valuation Date in its sole and absolute
discretion taking into account the latest available quotation for the Commodity
Price for the affected Component Commodity and any other information that in
good faith it deems relevant.

 

A “Disruption
Event” for a Component Commodity means any of the following events, in each
case as determined in good faith by the Calculation Agent:

 

(A)                               the
suspension of or material limitation on trading in the Component Commodity or
futures contracts or options related to the Component Commodity, on the
Relevant Exchange for that Component Commodity;

 

(B)                               either (i) the
failure of trading to commence, or permanent discontinuance of trading, in the
Component Commodity, or futures contracts or options related to the Component
Commodity, on the Relevant Exchange for that Component Commodity, or (ii) the
disappearance of, or of trading in, the Component Commodity;

 

(C)                               the failure of the Relevant
Exchange for the Component Commodity to publish the official daily settlement
price of the Component Commodity for that day (or the information necessary for
determining the settlement price); and

 

(D)                               solely
with respect to Component Commodities other than Gold, the occurrence since the
Trade Date of a material change in the content, composition, or constitution of
the Component Commodity; or

 

(E)                                solely
with respect to Component Commodities other than Gold, the occurrence since the
Trade Date of a material change in the formula for or

 

4

 

the method of calculating the settlement price of the
Component Commodity.

 

For the
purpose of determining whether a Disruption Event for a Component Commodity has
occurred:

 

(1)                                 a limitation on the hours in a trading day and/or number of days of
trading will not constitute a Disruption Event if it results from an announced
change in the regular business hours of the Relevant Exchange for the Component
Commodity;

 

(2)                                 a
suspension in trading in a Component Commodity on the Relevant Exchange for
that Component Commodity (without taking into account any extended or
after-hours trading session), by reason of a price change reflecting the
maximum permitted price change from the previous trading day’s settlement price
will constitute a Disruption Event; and

 

(3)                                 a
suspension of or material limitation on trading on a Relevant Exchange for a
Component Commodity will not include any time when the Relevant Exchange for
that Component Commodity is closed for trading under ordinary circumstances.

 

For purposes of calculating the Final Basket Level in the event of a
Disruption Event relating to one or more Component Commodities in accordance
with the above, “trading day” means a day, as determined in good faith by the
Calculation Agent, on which trading is generally conducted on the Relevant
Exchange applicable to the affected Component Commodity.

 

The “Calculation Agent” means Lehman Brothers Commodity Services Inc,
the determinations and calculations of which will be binding absent manifest
error.

 

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

 

Payment of any Redemption Amount at Maturity 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.

 

5

 

REFERENCE IS
HEREBY MADE TO THE FURTHER PROVISIONS OF THIS NOTE SET FORTH ON THE REVERSE
HEREOF.  SUCH FURTHER PROVISIONS SHALL
FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

 

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

 

6

 

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

 

	
  Dated:  May 22, 2008

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title:   Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name: Cindy Buckholz

  
	
   

  	
   

  	
  Title:   Assistant
  Secretary

  
				

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

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

 

	
  CITIBANK, N.A.

  	
   

  
	
  as Trustee

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  By: 

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  	
   

  

 

7

 

[REVERSE
OF NOTE]

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

NOTES LINKED TO A BASKET OF COMMODITIES  
 DUE NOVEMBER 23, 2012

 

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, Notes Linked to a Basket of Commodities
(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 Redemption Amount at Maturity 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 Redemption
Amount at Maturity or the principal amount thereof, premium or other amount
payable, if any, or interest thereon payable in any coin or currency other than
that herein above provided, without the consent of the Holder of each Security
so affected, or (ii) change the place of payment on any Security, or
impair the right to institute suit for payment on any Security, or reduce the
aforesaid percentage of Securities, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of each Security so affected.  It is also
provided in the Indenture that, prior to any declaration accelerating the
maturity of any series of Securities, the holders of a majority in aggregate
principal amount of

 

 

the Securities of such
series Outstanding may on behalf of the holders of all the Securities of such
series waive any past default or Event of Default under the Indenture with
respect to such series and its consequences, except a default in the payment of
interest, if any, on the Redemption Amount at Maturity 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 any Redemption
Amount at Maturity on this Note at the place, at the respective times, at the
rate, and in the coin or currency herein prescribed.

 

Section 5.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

 

Section 6.  Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the Company, in denominations of $1,000 or whole
multiples of $1,000, either at the office or agency to be designated and
maintained by the Company for such purpose in the Borough of Manhattan, New
York City, pursuant to the provisions of the Indenture or at any of such other
offices or agencies as may be designated and maintained by the Company for such
purpose pursuant to the provisions of the Indenture, and in the manner and
subject to the limitations provided in the Indenture, but without the payment
of any service charge, except for any tax or other governmental charges imposed
in connection therewith.  Notes of this
series are exchangeable for a like aggregate principal amount of Notes of this
series of a different authorized denomination, except that Global Securities
will not be exchangeable for Certificated Notes of this series.

 

Section 7.  Registration of Transfer.  As provided in the Indenture and subject to
certain limitations as therein set forth, the transfer of this Note is
registrable in the Security Register, upon surrender of this Note for
registration of transfer, at the Corporate Trust Office or agency in a Place of
Payment for this Note, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Security Registrar
requiring such written instrument of transfer duly executed by, the Holder
hereof or his attorney duly authorized in writing, and thereupon one or more
new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

 

If at any time the
Depository notifies the Company that it is unwilling or unable to continue as
Depository or if at any time the Depository shall no longer be eligible under
the Indenture, the Company shall appoint a successor Depository.  If a successor Depository for the Notes of
this series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
issue, and the Trustee will

 

 

authenticate and deliver,
Notes of this series in definitive form in an aggregate principal amount equal
to the principal amount of this Note.

 

No service charge
shall be made for any such registration of transfer or exchange, but the
Company may require payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in connection therewith.

 

Prior to due presentment
of this Note for registration of transfer, the Company, the Trustee and any
agent of the Company or the Trustee may treat the person in whose name this
Note is registered as the owner hereof for all purposes, and neither the
Company nor the Trustee nor any agent of the Company or of the Trustee shall be
affected by any notice to the contrary.

 

Section 8.  Events of Default.  If an Event of Default with respect to Notes
of this series shall occur and be continuing, the amount that may be declared
due and payable upon any acceleration of the notes will be determined by the
Calculation Agent for the period from and including the Original Issue Date to
but excluding the date of early repayment and will equal, for each note, the
Redemption Amount at Maturity, calculated as the date of early repayment were
the Maturity Date. If a bankruptcy proceeding is commenced in respect of Lehman
Brothers Holdings, the claim of the beneficial owner of a note for the period
from and including the Original Issue Date to but excluding the date of early
repayment will be capped at the Redemption Amount at Maturity, calculated as
though the date of the commencement of the proceeding were the Maturity Date.

 

Section 9.  No Recourse Against Certain Persons.  No recourse for the payment of the Redemption
Amount at Maturity or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any Indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

Section 10.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

 

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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