Document:

EXHIBIT 10.2

 

THIS WARRANT AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE LAWS, AND NO
INTEREST THEREIN MAY BE SOLD, DISTRIBUTED, ASSIGNED, OFFERED, PLEDGED OR
OTHERWISE TRANSFERRED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER
SUCH ACT AND APPLICABLE STATE SECURITIES LAWS COVERING ANY SUCH TRANSACTION OR
SUCH TRANSACTION IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT AND
LAWS, SUCH COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN
OPINION OF WARRANTHOLDER’S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION,
THAT NO VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY
PROPOSED TRANSFER OR ASSIGNMENT.

 

SERIES “EE-1”
COMMON STOCK PURCHASE WARRANT

 

Bioject
Medical Technologies Inc.

 

THIS CERTIFIES that for
good and valuable consideration received, RCC Ventures, LLC, or registered
assigns, is entitled, upon the terms and subject to the conditions hereinafter
set forth, to acquire from Bioject Medical Technologies Inc., an Oregon
corporation (the “Corporation”) up to 39,216 fully paid and nonassessable
shares of common stock, without par value, of the Corporation (“Warrant Stock”)
at a purchase price per share (the “Exercise Price”) of $1.53.

 

1.                                      Term
of Warrant

 

Subject to the terms and
conditions set forth herein, this Warrant shall be exercisable, in whole or
from time to time part, at any time on or after the date hereof and at or prior
to 11:59 p.m., Eastern Standard Time, on June 19, 2010 (the “Expiration
Time”).

 

2.                                      Exercise
of Warrant

 

(a)  This Warrant
may be exercised or converted, in whole or in part, upon surrender to the
Corporation at its then principal offices in the United States of this Warrant
to be exercised, together with the form of election to exercise attached hereto
duly completed and executed, and upon payment to the Corporation of the
Exercise Price for the number of shares of Warrant Stock in respect
of which this Warrant is then being exercised.

 

(b)  Payment of the aggregate Exercise Price may be made (i) in cash or by cashier’s or bank check or (ii) by converting this Warrant through a Cashless Exercise (as defined herein).  Upon a “Cashless Exercise” the holder shall receive Warrant Stock on a net basis such that, without the payment of any funds, the holder shall surrender this Warrant in exchange for the number of shares of Warrant Stock equal to “X” (as defined below), computed using the following formula:
 

	X
	=
	Y * (A-B)
	 
	 

	A

 
Where
 
X    =                    the number of shares of Warrant Stock to be issued to registered holder hereof.
Y    =                     the number of shares of Warrant Stock to be exercised under this
Warrant
A    =                   the Fair Market Value of one share of Warrant Stock.
B    =                     the Exercise Price (as adjusted to the date of such calculations).
 
1

 
(c)  For purposes of this Warrant, the “Fair Market Value” of one share of Warrant Stock shall be (i) if the Corporation’s common stock (the “Common Stock”) is or becomes listed on a national stock exchange or the Nasdaq SmallCap Market, the product of (A) the average closing sale price reported on such exchange or market for the 10-day period prior to the earlier of the day holder delivers its Election of Exercise to the Corporation or the date of determination of Fair Market Value and (B) the number of shares of Common Stock into which a share of Warrant Stock is convertible at the time of such exercise, or (ii) if the Common Stock is traded over-the-counter, the product of (A) the average closing bid price for the Common Stock over the 10-day period immediately prior to the earlier of the day holder delivers its Election of Exercise to the Corporation or the date of determination of Fair Market Value and (B) the number of shares of Common Stock into which one share of Warrant Stock is convertible at the time of such exercise.  If the Common Stock is not traded as contemplated in clauses (i) or (ii), above, the Fair Market Value of the Corporation’s Warrant Stock shall be the price per share which the Corporation could obtain from a willing buyer for shares of Warrant Stock sold by the Corporation from its authorized but unissued shares, as the Board of Directors of the Corporation shall determine in its reasonable good faith judgment.  In the event that holder elects to convert the Warrant Stock through Cashless Exercise in connection with a transaction in which the Warrant Stock is converted into or exchanged for another security, holder may effect a Cashless Exercise directly into such other security.  Notwithstanding the right of the holder to effect a Cashless Exercise, the Corporation may require holder to exercise this Warrant for cash if the Warrant Stock is registered under the Securities Act of 1933, may be traded by holder without restriction under SEC rules and regulations and applicable law and such freely-tradable Common Stock issuable upon exercise of this Warrant is delivered within three (3) Business Days of holder’s exercise.
 

3.                                      Issuance
of Shares; No Fractional Shares of Scrip

 

Certificates for shares
purchased hereunder shall be delivered to the holder hereof by the Corporation’s
transfer agent at the Corporation’s expense within a reasonable time after the
date on which this Warrant shall have been exercised in accordance with the
terms hereof.  Each certificate so
delivered shall be in such denominations as may be requested by the holder
hereof and shall be registered in the name of such holder or, subject to applicable
laws, other name as shall be requested by such holder.  If, upon exercise of this Warrant, fewer than
all of the shares of Warrant Stock evidenced by this Warrant are purchased
prior to the Expiration Time, one or more new warrants substantially in the
form of, and on the terms in, this Warrant will be issued for the remaining
number of shares of Warrant Stock not purchased upon exercise of this
Warrant.  The Corporation hereby
represents and warrants that all shares of Warrant Stock which may be issued
upon the exercise of this Warrant will, upon such exercise, be duly and validly
authorized and issued, fully paid and nonassessable and free from all taxes,
liens and charges in respect of the issuance thereof (other than liens or
charges created by or imposed upon the holder of the Warrant Stock).  The Corporation agrees that the shares so
issued shall be and be deemed to be issued to such holder as the record owner
of such shares as of the close of business on the date on which this Warrant
shall have been surrendered for exercise in accordance with the terms
hereof.  No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of this
Warrant.  With respect to any fraction of
a share called for upon the exercise of this Warrant, an amount equal to such
fraction multiplied by the then current price at which each share may be
purchased hereunder shall be paid in cash to the holder of this Warrant.

 

4.                                      Charges,
Taxes and Expenses

 

Issuance of certificates
for shares of Warrant Stock upon the exercise of this Warrant shall be made
without charge to the holder hereof for any issue or transfer tax or other
incidental expense in respect of the issuance of such certificate, all of which
taxes and expenses shall be paid by the Corporation, and such certificates shall
be issued in the name of the holder of this Warrant or in such name or names as
may be directed by the holder of this Warrant; provided, however, that
in the event certificates for shares of Warrant Stock are to be issued in a
name other than the name of the holder of this Warrant, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the holder hereof.

 

5.                                      No
Rights as Shareholders

 

This Warrant does not
entitle the holder hereof to any voting rights or other rights as a shareholder
of the Corporation prior to the exercise hereof.

 

2

 

6.                                      Exchange
and Registry of Warrant

 

This Warrant is
exchangeable, upon the surrender hereof by the registered holder at the
above-mentioned office or agency of the Corporation, for a new Warrant of like
tenor and dated as of such exchange.  The
Corporation shall maintain at the above-mentioned office or agency a registry
showing the name and address of the registered holder of this Warrant.  This Warrant may be surrendered for exchange,
transfer or exercise, in accordance with its terms, at such office or agency of
the Corporation, and the Corporation shall be entitled to rely in all respects,
prior to written notice to the contrary, upon such registry.

 

7.                                      Loss,
Theft, Destruction or Mutilation of Warrant

 

Upon receipt by the
Corporation of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction of indemnity or security reasonably satisfactory to it, and upon
reimbursement to the Corporation of all reasonable expenses incidental thereto,
and upon surrender and cancellation of this Warrant, if mutilated, the
Corporation will make and deliver a new Warrant of like tenor and dated as of
such cancellation, in lieu of this Warrant.

 

8.                                      Saturdays,
Sundays and Holidays

 

If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday or a Sunday or shall be a legal holiday,
then such action may be taken or such right may be exercised on the next
succeeding day not a Saturday, Sunday or legal holiday.

 

9.                                      Merger,
Sale of Assets, Etc.

 

If at any time the
Corporation proposes to merge or consolidate with or into any other
corporation, effect any reorganization, or sell or convey all or substantially
all of its assets to any other entity, then, as a condition of such
reorganization, consolidation, merger, sale or conveyance, the Corporation or
its successor, as the case may be, shall enter into a supplemental agreement to
make lawful and adequate provision whereby the holder shall have the right to
receive, upon exercise of the Warrant, the kind and amount of equity securities
which would have been received upon such reorganization, consolidation, merger,
sale or conveyance by a holder of a number of shares of common stock equal to
the number of shares issuable upon exercise of the Warrant immediately prior to
such reorganization, consolidation, merger, sale or conveyance.  If the property to be received upon such
reorganization, consolidation, merger, sale or conveyance is not equity
securities, the Corporation shall give the holder of this Warrant ten (10) business
days prior written notice of the proposed effective date of such transaction,
and if this Warrant has not been exercised by or on the effective date of such
transaction, it shall terminate.

 

10.                               Subdivision, Combination,
Reclassification, Conversion, Etc.

 

If the Corporation at any
time shall, by subdivision, combination, reclassification of securities or
otherwise, change the Warrant Stock into the same or a different number of
securities of any class or classes, this Warrant shall thereafter entitle the
holder to acquire such number and kind of securities as would have been
issuable in respect of the Warrant Stock (or other securities which were
subject to the purchase rights under this Warrant immediately prior to such
subdivision, combination, reclassification or other change) as the result of
such change if this Warrant had been exercised in full for cash immediately
prior to such change.  The Exercise Price
hereunder shall be adjusted if and to the extent necessary to reflect such
change.  If the Warrant Stock or other
securities issuable upon exercise hereof are subdivided or combined into a
greater or smaller number of shares of such security, the number of shares
issuable hereunder shall be proportionately increased or decreased, as the case
may be, and the Exercise Price shall be proportionately reduced or increased,
as the case may be, in both cases according to the ratio which the total number
of shares of such security to be outstanding immediately after such even bears
to the total number of shares of such security outstanding immediately prior to
such event.  The Corporation shall give
the holder prompt written notice of any change in the type of securities
issuable hereunder, any adjustment of the Exercise Price for the securities
issuable hereunder, and any increase or decrease in the number of shares
issuable hereunder.

 

3

 

11.                               Transferability;
Compliance with Securities Laws

 

(a)                                  This
Warrant may not be transferred or assigned in whole or in part without compliance
with all applicable federal and state securities laws by the transferor and
transferee (including the delivery of investment representation letters and
legal opinions reasonably satisfactory to the Corporation, if requested by the
Corporation).  Subject such restrictions,
prior to the Expiration Time, this Warrant and all rights hereunder are
transferable by the holder hereof, in whole or in part, at the office or agency
of the Corporation referred to in Section 1 hereof.  Any such transfer shall be made in person or
by the holder’s duly authorized attorney, upon surrender of this Warrant
together with the Assignment Form attached hereto properly endorsed.

 

(b)                                 The
holder of this Warrant, by acceptance hereof, acknowledges that this Warrant
and the Warrant Stock issuable upon exercise hereof are being acquired solely
for the holder’s own account and not as a nominee for any other party, and for
investment, and that the holder will not offer, sell or otherwise dispose of
this Warrant or any shares of Warrant Stock to be issued upon exercise hereof
except under circumstances that will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.  Upon exercise of this Warrant, the holder
shall, if requested by the Corporation, confirm in writing, in a form
satisfactory to the Corporation, that the shares of Warrant Stock so purchased
are being acquired solely for holder’s own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.

 

(c)                                  The
Warrant Stock has not been and will not be registered under the Securities Act
of 1933, as amended, and this Warrant may not be exercised except by an “accredited
investor” as defined in Rule 501(a) under the Securities Act of 1933,
as amended.  Each certificate
representing the Warrant Stock or other securities issued in respect of the
Warrant Stock upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall be stamped or otherwise imprinted with a
legend substantially in the following form (in addition to any legend required
under applicable securities laws):

 

THE SECURITIES
REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR
STATE SECURITIES LAWS AND MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE
TRANSFERRED OR ASSIGNED FOR VALUE, DIRECTLY OR INDIRECTLY, NOR MAY THE
SECURITIES BE TRANSFERRED ON THE BOOKS OF THE CORPORATION, WITHOUT REGISTRATION
OF SUCH SECURITIES UNDER ALL APPLICABLE UNITED STATES FEDERAL OR STATE
SECURITIES LAWS OR COMPLIANCE WITH AN APPLICABLE EXEMPTION THEREFROM, SUCH
COMPLIANCE, AT THE OPTION OF THE CORPORATION, TO BE EVIDENCED BY AN OPINION OF
SHAREHOLDER’S COUNSEL, IN FORM ACCEPTABLE TO THE CORPORATION, THAT NO
VIOLATION OF SUCH REGISTRATION PROVISIONS WOULD RESULT FROM ANY PROPOSED
TRANSFER OR ASSIGNMENT.

 

12.                               Representations
and Warranties

 

The Corporation hereby
represents and warrants to the holder hereof that:

 

(a)                                  during the period this Warrant is outstanding, the
Corporation will reserve from its authorized and unissued common stock a
sufficient number of shares to provide for the issuance of Warrant Stock upon
the exercise of this Warrant;

 

(b)                                 the
issuance of this Warrant shall constitute full authority to the Corporation’s
officers who are charged with the duty of executing stock certificates to
execute and issue the necessary certificates for the shares of Warrant Stock
issuable upon exercise of this Warrant;

 

(c)                                  the
Corporation has all requisite legal and corporate power to execute and deliver
this Warrant, to sell and issue the Warrant Stock hereunder, to issue the
common stock issuable upon exercise of the Warrant Stock and to carry out and
perform its obligations under the terms of this Warrant;

 

(d)                                 all corporate action on the part of the Corporation, its
directors and shareholders necessary for the

 

4

 

authorization,
execution, delivery and performance of this Warrant by the Corporation, the
authorization, sale, issuance and delivery of the Warrant Stock and the
performance of the Corporation’s obligations hereunder has been taken;

 

(e)                                  the
Warrant Stock, when issued in compliance with the provisions of this Warrant
and the Corporation’s Articles of Incorporation (as they may be amended from
time to time (the “Articles”)), will be validly issued, fully paid and
nonassessable, and free of all taxes, liens or encumbrances with respect to the
issue thereof, and will be issued in compliance with all applicable federal and
state securities laws; and

 

(f)                                    the issuance of the Warrant Stock will not be subject to any
preemptive rights, rights of first refusal or similar rights.

 

13.                               Corporation

 

The Corporation will not,
by amendment of its Articles or through any reorganization, recapitalization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by the
Corporation, but will at all times in good faith assist in the carrying out of
all the provisions of this Warrant and in the taking of all such action as may
be necessary or appropriate in order to protect the rights of the holder of the
Warrant against impairment.

 

14.                               Notices
of Record Date, etc.

 

In the event:

 

(a)                                  the
Corporation shall take a record of the holders of its Common Stock (or other
stock or securities at the time deliverable upon the exercise of this Warrant)
for the purpose of entitling or enabling them to receive any dividend or other
distribution, or to receive any right to subscribe for or purchase any shares
of stock of any class or any other securities, or to receive any other right;
or

 

(b)                                 of
any capital reorganization of the Corporation, any reclassification of the
Common Stock of the Corporation, any consolidation or merger of the Corporation
with or into another corporation, or any transfer of all or substantially all
of the assets of the Corporation; or

 

(c)                                  of the voluntary or involuntary dissolution, liquidation or
winding-up of the Corporation,

 

then, and in each such
case, the Corporation will send or cause to be sent to the registered holder a
notice specifying, as the case may be, (i) the record date for such
dividend, distribution or right, and the amount and character of such dividend,
distribution or right, or (ii) the effective date on which such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up is to take place, and the time, if any is to be
fixed, as of which the holders of record of Common Stock (or such other stock
or securities at the time deliverable upon the exercise of this Warrant) shall
be entitled to exchange their shares of Common Stock (or such other stock or
securities) for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, transfer, dissolution,
liquidation or winding-up.  To the extent
reasonably practicable, such notice shall be sent at least 10 days prior to the
record date or effective date for the event specified in such notice.

 

15.                               Automatic
Exercise upon Expiration.

 

In the event that, upon
the Expiration Time, the fair market value of one share of Warrant Stock (or
other security issuable upon the exercise hereof) as determined in accordance
with Section 2(c) above is greater than the Exercise Price in effect
on such date, then this Warrant shall automatically be deemed on and as of such
date to be exercised pursuant to Section 2 above as to all Warrant Stock
(or such other securities) for which it shall not previously have been
exercised or converted, and the Corporation shall promptly deliver a
certificate representing the Warrant Stock (or such other securities) issued
upon such conversion to the holder.

 

5

 

16.                               Governing
Law

 

This Warrant shall be
governed by and construed in accordance with the laws of the State of Oregon.

 

IN WITNESS WHEREOF, the
Corporation has caused this Warrant to be executed by its duly authorized
officers.

 

Dated: June 20, 2005

 

 

	
  BIOJECT MEDICAL
  TECHNOLOGIES INC.

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
  Name: Christine M.
  Farrell

  
	
  Title: Controller &
  Secretary

  

 

6

 

NOTICE OF
EXERCISE

 

To:                              Bioject
Medical Technologies Inc.

 

(1)                                  The undersigned hereby exercises its right to subscribe for and purchase                                     fully paid, validly issued and nonassessable shares of common stock of Bioject Medical Technologies Inc. covered by the attached Warrant and tenders payment herewith in the amount of $                            in accordance with the terms thereof.
 

(1)                                  The
undersigned hereby elects to convert the attached Warrant into fully paid,
validly issued and nonassessable shares of common stock of Bioject Medical
Technologies Inc. by Cashless Exercise in the manner specified in Section 2
of the attached Warrant.  This conversion
is exercised with respect to                     
of shares.

 

         [Strike the
paragraph above that does not apply.]

 

(2)                                  Please
issue a certificate or certificates representing said shares of common stock in
the name of the undersigned or in such other name as is specified below:

 

	
   

  	
   

  	
   

  
	
  (Name)

  
	
   

  
	
   

  
	
   

  	
   

  	
   

  
	
  (Address)

  

 

(3)                                  The
undersigned represents that (a) he, she or it is an “accredited investor”
within the meaning of Rule 501(a) under the Securities Act of 1933,
as amended and (b) the aforesaid shares of common stock are being acquired
for the account of the undersigned for investment and not with a view to, or
for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares.

 

 

	
   

  	
   

  	
   

  
	
  (Date)

  	
   

  	
  (Signature)

  

 

7

 

ASSIGNMENT
FORM

 

(To assign the foregoing
Warrant, execute this form and supply required information.  Do not use this form to purchase shares.)

 

FOR VALUE RECEIVED, the
undersigned registered owner of this Warrant hereby sells, assigns and
transfers unto the Assignee named below all of the rights of the undersigned
under the within Warrant, with respect to the number of shares of common stock
of Bioject Medical Technologies Inc. set forth below:

 

	
  Name of Assignee

  	
   

  	
  Address

  	
   

  	
  No. of Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

and
does hereby irrevocably constitute and appoint Attorney                           
to make such transfer on the books of Bioject Medical Technologies Inc.,
maintained for the purpose, with full power of substitution in the premises.

 

The undersigned also
represents that, by assignment hereof, the Assignee acknowledges that this
Warrant and the shares of stock to be issued upon exercise hereof are being
acquired for investment and that the Assignee will not offer, sell or otherwise
dispose of this Warrant or any shares of stock to be issued upon exercise
hereof except under circumstances which will not result in a violation of the
Securities Act of 1933, as amended, or any state securities laws.  Further, the Assignee shall, if requested by
the Corporation, confirm in writing, in a form satisfactory to the Corporation,
that the shares of stock so purchased are being acquired for investment and not
with a view toward distribution or resale.

 

	
   

  	
  Dated:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Signature:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Holder’s Address:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
						

 

Guaranteed Signature:

 

NOTE:  The signature to this Assignment Form must
correspond with the name as it appears on the face of the Warrant, without
alteration or enlargement or any change whatever, and must be guaranteed by a
bank or trust company.  Officers of
corporations and those action in a fiduciary or other
representative capacity should file proper evidence of authority to assign the
foregoing Warrant.

 

8Exhibit 4.03

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $     

  
	
  No. R-

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  CUSIP NO.

  	
   

  	
  ISIN
  NO.                                

  

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES H

 

PERFORMANCE LINKED TO THE VALUE OF A COMMON STOCK, A 

STOCK INDEX, A BASKET OF COMMON STOCKS OR A BASKET OF STOCK INDICES

 

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

 

THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF
THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR A NOMINEE OF THE DEPOSITORY. 
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY (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.

 

 

ISSUE PRICE:     % of the Principal Amount

 

AGGREGATE PRINCIPAL
AMOUNT:  $

 

AUTHORIZED DENOMINATIONS:

$[1,000] and integral
multiples thereof

 

ISSUE DATE:

 

STATED MATURITY DATE:

 

INTEREST RATE:    % per annum

 

ACCRUE TO PAY:

o YES    o
NO

 

INTEREST PAYMENT DATES:

and of each year,
beginning on

 

REGULAR RECORD DATES:

calendar days prior to each Interest Payment Date

 

REFERENCE EQUITY:

 

INITIAL MULTIPLIER(S):

 

INITIAL BASE DIVIDEND:

 

MULTIPLIER ADJUSTMENT
DATES FOR CHANGES IN DIVIDENDS:

 

INDEX WEIGHTS:

 

THRESHOLD VALUE:

 

DETERMINATION PERIOD:

Business Days

 

DEPOSITORY:

[The Depository Trust
Company]

 

Currency Exchanges and Payments

 

SPECIFIED CURRENCY:

 

EXCHANGE RATE AGENT:

 

Redemption

 

REDEEMABLE NOTE:

o YES    o
NO

 

INITIAL REDEMPTION DATE:

 

REDEMPTION NOTICE PERIOD:

Business Days

 

Sinking Funds and Amortizing Notes

 

SINKING FUND:

 

AMORTIZING NOTE:

o YES    o
NO

 

Optional Repurchase

 

OPTIONAL REPURCHASE:

o YES    
o NO

 

OPTIONAL REPURCHASE
CUTOFF PERIOD:

Business Days

 

Stock Settlement

 

STOCK SETTLEMENT:

o YES    o
NO

 

AT
MATURITY:

o YES o
NO

 

AT
OPTION OF THE COMPANY:

o YES    o
NO

 

AT
OPTION OF THE HOLDER:

o YES    o
NO

 

MANDATORY:

o YES    o
NO

 

UPON
REPURCHASE:

o YES    o
NO

 

AT
OPTION OF THE COMPANY:

o YES    o
NO

 

AT
OPTION OF THE HOLDER:

o YES    o
NO

 

MANDATORY:

o YES    o
NO

 

Optional Interest Reset

 

OPTIONAL INTEREST RATE
RESET:

o YES    o
NO

 

OPTIONAL RESET DATES:

 

Discount Notes

 

DISCOUNT NOTE:

o YES    o
NO

 

TOTAL AMOUNT OF DISCOUNT:

 

YIELD TO MATURITY:

 

INITIAL ACCRUAL PERIOD DISCOUNT:

 

DISCOUNT NOTE PREPAYMENT
AMOUNT:

 

Dual Currency Notes

 

DUAL CURRENCY NOTE:

o YES    o
NO

 

OPTIONAL PAYMENT CURRENCY:

 

DESIGNATED EXCHANGE RATE:

 

OPTION ELECTION DATES:

 

OPTION TO RECEIVE
PAYMENTS IN THE SPECIFIED CURRENCY:

o YES    o
NO

 

OPTION VALUE CALCULATION AGENT:

 

DUAL CURRENCY NOTE
PREPAYMENT AMOUNT:

 

Extension of Maturity Notes

 

EXTENSION OF MATURITY
NOTE:

o YES    o
NO

 

EXTENSION PERIOD:

 

NUMBER OF EXTENSION
PERIODS:

 

Extendible Notes

 

EXTENDIBLE NOTE:

o YES    o
NO

 

INITIAL MATURITY DATE:

 

SPECIAL ELECTION INTERVAL:

 

EXTENDIBLE IN PART:

o YES    o
NO

 

AUTHORIZED EXTENDIBLE
AMOUNTS:

 

SPECIAL ELECTION PERIOD:

 

Tax Matters

 

COMPARABLE YIELD:      % per annum

 

PROJECTED PAYMENT
SCHEDULE:

$      semi-annually and $      due at Stated

Maturity which includes the final interest

payment

 

Miscellaneous

 

OTHER TERMS:

 

 

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 Stated Maturity Date, for
each $1,000 principal amount of the Notes represented hereby not previously
repurchased or redeemed, an amount equal to the Maturity Payment Amount and, if
so specified above, to pay interest on the principal amount hereof from the
Issue Date specified above or from the most recent Interest Payment Date
specified above to which interest has been paid or duly provided for at the
Interest Rate specified above until the amount due on the Stated Maturity Date,
the Optional Repurchase Date or the Redemption Date, as the case may be, is
paid in full or made available for payment and (to the extent that the payment of
such interest shall be legally enforceable) at such rate per annum on any
overdue Payment Amount, premium, if any, and overdue installment of interest.

 

Unless
otherwise specified above, and except as provided in Section 9 on the
reverse hereof if this Note is a Dual Currency Note, payments of the applicable
Payment Amount, premium, if any, and interest hereon will be made in U.S.
dollars; if the Specified Currency set forth above is a currency other than
U.S. dollars (a “Foreign Currency”), such payments will be made in U.S. dollars
based on the equivalent of that Foreign Currency converted into U.S. dollars in
the manner set forth in Section 2 on the reverse hereof.  If the Specified Currency is a Foreign
Currency and it is so provided above, the Holder may elect to receive such
payments in that Foreign Currency by delivery of a written request to the
Trustee (or to any duly appointed Paying Agent) at the Corporate Trust Office
(as defined below) not later than 10 calendar days prior to the applicable payment
date, and such election will remain in effect for the Holder until revoked by
written notice to the Trustee (or to any such Paying Agent) at the Corporate
Trust Office received not later than 10 calendar days prior to the applicable
payment date; provided, however, no such election or revocation
may be made if, with respect to this Note, (i) an Event of Default has
occurred, (ii) the Company has exercised any discharge or defeasance
options or (iii) the Company has given a notice of redemption.  In the event the Holder makes any such
election pursuant to the preceding sentence, such election will not be
effective on any transferee of such Holder and such transferee shall be paid in
U.S. dollars unless such transferee makes an election pursuant to the preceding
sentence; provided, however, that such election, if in effect
while funds are on deposit with the Trustee to satisfy and discharge this Note,
will be effective on any such transferee unless otherwise specified above.

 

Except as provided in the following paragraph, the
Company will pay interest on the Interest Payment Dates specified above,
commencing with the first Interest Payment Date next succeeding the Issue Date,
and on the applicable Principal Payment Date; provided that any payment
of the Payment Amount, premium, if any, or interest to be made on any Interest
Payment Date or on the Principal Payment Date that is not a Business Day shall
be made on the next succeeding Business Day, unless the next succeeding
Business Day falls in the next calendar month, in which case payment will be
made on the first preceding Business Day, in each case with the same force and
effect as if made on such Interest Payment Date or such Principal Payment Date,
as the case may be, and, unless Accrue to Pay is specified on the face of this
Note, no additional interest shall accrue as a result of such delayed payment;
provided further that if the applicable Principal Payment Date is postponed due
to a Market Disruption Event, interest will continue to accrue during the
period from the originally scheduled Principal Payment Date to but

 

2

 

excluding the postponed Principal Payment Date.  If Accrue to Pay is specified on the face of
this Note, any payment of interest on the Interest Payment Date will include
interest accrued through the day before the Interest Payment Date.  Each payment of interest hereon shall include
interest accrued through the day before the Interest Payment Date or applicable
Principal Payment Date, as the case may be. 
Unless otherwise specified above, interest on this Note will be computed
on the basis of a 360-day year of twelve 30-day months or in the case of an
incomplete month, the number of days elapsed. 
In no event shall the interest rate of this Note be higher than the
maximum rate permitted by applicable law, as the same may be modified by United
States law of general application.

 

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

 

Unless
otherwise specified above and except as provided below, all payments of
interest on this Note 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.

 

Payments
of the Payment Amount, premium, if any, and any interest payable on the related
Principal Payment Date will be made in immediately available funds upon
surrender of this Note at the corporate trust office or agency of the Trustee
(or any duly appointed Paying Agent) maintained for that purpose in the Borough
of Manhattan, New York City (the “Corporate Trust Office”), provided that this
Note is presented to the Trustee (or any such Paying Agent) in time for the
Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.

 

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

 

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

 

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

 

3

 

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.

 

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:

  	
   

  
	
   

  	
   

  
	
  [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

  	
   

  

 

4

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES H

PERFORMANCE LINKED TO THE VALUE OF A COMMON STOCK, A 

STOCK INDEX, A BASKET OF COMMON STOCKS OR A BASKET OF STOCK INDICES

 

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

 

Section 2.  Currency
Exchanges and Payments.  If the
Holder elects to receive all or a portion of payments of principal of, premium,
if any, and interest on this Note, if denominated in a Foreign Currency, in
U.S. dollars, the exchange rate agent specified on the face of this Note or a
successor thereto (the “Exchange Rate Agent”), will convert such payments into
U.S. dollars. In the event of such an election, payment to the Holder will be
based upon the exchange rate as determined by the Exchange Rate Agent based on
the highest bid quotation in New York City received by the Exchange Rate Agent at
approximately 11:00 a.m., New York City time, on the second Business Day
preceding the applicable payment date from three recognized foreign exchange
dealers (one of which may be the Exchange Rate Agent unless the Exchange Rate
Agent is an affiliate of the Company) for the purchase by the quoting dealer of
the Foreign Currency for U.S. dollars for settlement on such payment date in
the amount of the Foreign Currency payable in the absence of such an election
to such Holder and at which the applicable dealer commits to execute a
contract. If such bid quotations are not available, such payment will be made
in the Foreign Currency. All currency exchange costs will be borne by the
holder of this Note by deductions from such payments.

 

Unless
otherwise specified on the face of this Note, if payment hereon is required to
be made in a Foreign Currency and such currency is unavailable to the Company
for making payments thereof due to the imposition of exchange controls or other
circumstances beyond the Company’s control, or is no longer used by the
government of the country which issued such currency or for the settlement of
transactions by public institutions of or within the international banking
community, then the Company will be entitled to make payments with respect
hereto in

 

 

U.S. dollars until such
Foreign Currency is again available or so used. 
The amount so payable on any date in such Foreign Currency shall be
converted into U.S. dollars at a rate determined by the Exchange Rate Agent on
the basis of the noon buying rate in New York City for cable transfers in the
Foreign Currency as certified for customs purposes by the Federal Reserve Bank
of New York (the “Market Exchange Rate”) for such Foreign Currency on the
second Business Day prior to such payment date, or on such other basis as may
be specified on the face of this Note. 
In the event such Market Exchange Rate is not then available, the
Company will be entitled to make payments in U.S. dollars (i) if such
Foreign Currency is not a composite currency, on the basis of the most recently
available Market Exchange Rate for such Foreign Currency or (ii) if such
Foreign Currency is a composite currency in an amount determined by the
Exchange Rate Agent to be the sum of the results obtained by multiplying the
number of units of each component currency of such composite currency, as of
the most recent date on which such composite currency was used, by the Market
Exchange Rate for such component currency on the second Business Day prior to
such payment date (or if such Market Exchange Rate is not then available, by
the most recently available Market Exchange Rate for such component currency,
or as otherwise specified on the face of this Note).  Any payment in respect hereof made under such
circumstances in U.S. dollars will not constitute an Event of Default under the
Indenture.

 

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

 

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

 

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

 

2

 

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

 

Section 3.  Redemption.  Unless otherwise specified on the face of
this Note, the Company may, at its option, redeem this Note in whole or from
time to time in part on or after the date designated as the Initial Redemption
Date on the face of this Note at the Redemption Payment Amount, together with
accrued interest to but excluding the Redemption Date.

 

The
Company may exercise such option by causing the Trustee to mail by first-class
mail to the Holder hereof a notice (the “Redemption Notice”) of such redemption
at least 30 but not more than 60 days (or such other period as is specified as
the “Redemption Notice Period” on the face of this Note) prior to the
Redemption Date.  In the event of
redemption of this Note in part only, a new Note or Notes of this series for
the unredeemed portion hereof shall be issued in the name of the Holder hereof
upon the cancellation hereof in accordance with the terms of the
Indenture.  Unless otherwise specified on
the face of this Note, if less than all of the Notes of this series are to be
redeemed, the Notes of this series to be redeemed shall be selected by the
Trustee by such method as the Trustee shall deem fair and appropriate.

 

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

 

Section 5.  Optional
Repurchase.  Unless otherwise
specified on the face of this Note, at any time until the earlier of (a) the
date the Company gives notice of its intention to redeem this Note pursuant to Section 3
of this Note or (b) eight Business Days (or such other Optional Repurchase
Cutoff Period specified on the face of this Note) before the Stated Maturity
Date, the Holder may, at its option, cause the Company to repurchase this Note,
subject to the conditions specified below, on the Optional Repurchase Date at
the Optional Repurchase Amount, together with accrued interest to but excluding
the Optional Repurchase Date.

 

In
order for this Note to be so repurchased, the Trustee must receive, before the
earlier of (a) the date the Company gives notice of its intention to
redeem this Note pursuant to Section 3 of this Note or (b) eight
Business Days (or such other period as is specified as the “Optional Repurchase
Cutoff Period” on the face of this Note) before the Stated Maturity Date,
either (i) this Note with the form below entitled “Option to Elect
Repurchase” duly completed or (ii) a telegram, telex, fax or letter from a
member of a national securities exchange or the National Association of
Securities Dealers, Inc. or a commercial bank or trust company in the
United States setting forth the name of the Holder hereof, the then outstanding
principal amount of this Note, the principal amount of this Note to be repaid,
the certificate number hereof or a description of the tenor and terms of this
Note, a statement that the option to elect repurchase is being exercised
thereby and a guarantee that this Note with the form below entitled “Option to
Elect Repurchase” duly completed will be received by the Paying Agent not later
than five Business Days after the date of such telegram, telex, fax or letter
and this Note and form duly

 

3

 

completed are received by
the Paying Agent by such fifth Business Day. 
Exercise of this repurchase option shall be irrevocable, except as
otherwise provided under Section 7 of this Note or Section 10 of this
Note.  The repurchase option may be
exercised by the Holder of this Note with respect to less than the principal
amount of this Note then outstanding provided that the principal amount of this
Note remaining outstanding after repurchase is an authorized denomination.  Upon such partial repurchase this Note shall
be cancelled and a new Note or Notes of this series for the remaining principal
amount of this Note shall be issued in the name of the Holder of this Note.

 

If
this Note is a Global Security, the Holder of this Note, the nominee of the
Depositary, will be the only entity that can exercise a right to
repurchase.  In order to ensure that the
nominee of the depositary will timely exercise a right to repurchase relating
to this Note, the Holder must instruct the broker or other direct or indirect
participant through which it holds an interest in this Note to notify the
Depositary of its desire to exercise a right to repurchase.

 

Section 6.  Stock Settlement.  If the Reference Equity specified on the face
of this Note is a single common stock and if “Stock Settlement” on the face of
this Note is checked as applicable, this Note may be settled on the Stated
Maturity Date or on the Optional Repurchase Date (but not upon any Redemption,
acceleration of the maturity of this Note or other prepayment of this Note
prior to the Stated Maturity Date unless otherwise specified herein), with
shares of Settlement Value Securities at the Company’s option, at the Holder’s
option or mandatorily, as indicated on the face of this Note.

 

If
Stock Settlement is applicable, the Company will pay the applicable Payment
Amount, subject to the following paragraphs, by delivering, for each $1,000
principal amount of the Notes represented hereby, (a) in the case of
maturity, Settlement Value Securities having a value on the applicable
Valuation Date equal to the Maturity Payment Amount; and (b) in the case
of any Optional Repurchase, Settlement Value Securities having a value on the
applicable Valuation Date equal to the Optional Repurchase Amount.  The Calculation Agent will determine the
number and kind of Settlement Value Securities to be delivered, and whether
cash shall be delivered in lieu of, or in addition to, any Settlement Value
Securities, in accordance with the Calculation Agency Agreement.

 

If
Stock Settlement is applicable and the calculations in the preceding paragraph
result in fractional shares, the applicable Payment Amount shall be paid in
cash in an amount equal to the value of fractional shares based upon the
Closing Prices of the Settlement Value Securities on the applicable Valuation
Date.

 

If the
Company determines that it is prohibited from delivering Settlement Value
Securities, or that it would be unduly burdensome to do so, the Company shall
pay the applicable Payment Amount in cash.

 

Section 7.  Optional Interest Reset.  If so specified on the face of this Note, the
Interest Rate on this Note may be reset at the option of the Company, in the
manner set forth below (unless otherwise specified on the face of this Note),
on the Optional Reset Date or Optional Reset Dates specified on the face of
this Note.  The Company may exercise such
option by notifying the Trustee in writing of such exercise at least 45 but not
more than 60 days prior to an Optional Reset Date.  Not later than five Business Days after
receipt thereof, the Trustee will

 

4

 

mail by first-class mail
to the Holder of this Note a notice (the “Reset Notice”) setting forth (i) the
election of the Company to reset the interest rate, (ii) such new interest
rate and (iii) the provisions, if any, for redemption during the period
from such Optional Reset Date to the next Optional Reset Date or, if there is
no such next Optional Reset Date, to the Stated Maturity Date of this Note
(each such period a “Subsequent Interest Period”), including the date or dates
on which or the period or periods during which and the price or prices at which
such redemption may occur during such Subsequent Interest Period.  The Reset Notice shall be substantially in
the form of Exhibit A to this Note. 
Upon the transmittal by the Trustee of a Reset Notice to the Holder of
this Note, such new interest rate shall take effect automatically, and, except
as modified by the Reset Notice and as described in the next paragraph, this
Note will have the same terms as prior to the transmittal of such Reset Notice.

 

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

 

If the
Company elects to reset the interest rate of this Note, the Holder of this Note
will have the option to elect repurchase by the Company of this Note, or any
portion hereof, on any Optional Reset Date at a price calculated with reference
to (a) the then outstanding principal amount of this Note, (b) the
Maturity Payment Amount calculated as though the Optional Reset Date were the
Stated Maturity Date and the date that is a number of business days equal to
the Determination Period before that date were the Valuation Date, or (c) such
other amount or amounts, in each case as specified on the face of this Note,
plus any interest accrued to, such Optional Reset Date.  In order to obtain repurchase on an Optional
Reset Date, the Holder must follow the procedures set forth above in Section 5
of this Note for Optional Repurchase except that the period for delivery or
notification to the Trustee shall be at least 25 but not more than 35 days
prior to such Optional Reset Date and except that, if the Holder has tendered
this Note for repurchase pursuant to the Reset Notice, the Holder may, by
written notice to the Trustee, revoke such tender for repurchase until the
close of business on the tenth day prior to such Optional Reset Date; provided,
however, that if such day is not a Business Day, then such notice may be given
on the next succeeding Business Day.

 

Section 8.  Discount Notes.  If this Note is a Discount Note, the amount
payable in the event of Redemption, Optional Repurchase or acceleration of
maturity shall be (i) the Amortized Principal Amount of this Note as of
the Redemption Date, Optional Repurchase Date or date of such acceleration, as
the case may be, rather than the relevant Payment Amount of this Note or (ii) such
other amount as specified on the face of this Note (such amount, the “Discount
Note Prepayment Amount”).

 

Section 9.  Dual Currency Notes.  If it is specified on the face of this Note
that this Note is a Dual Currency Note, the Company has a one time option,
exercisable on any one of the Option Election Dates specified on the face of
this Note in whole, but not in part, with respect to

 

5

 

all Dual Currency Notes
of this series, of thereafter making all payments of Maturity Payment Amount,
premium, if any, and interest (which payments would otherwise be made in the
Specified Currency of such Notes) in the Optional Payment Currency specified on
the face of this Note.  If the Company
makes such an election, the amount of Optional Payment Currency payable in
respect hereof shall be determined by the Exchange Rate Agent by converting the
amount of Specified Currency that would otherwise be payable into the Optional
Payment Currency at the Designated Exchange Rate specified on the face of this
Note.

 

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

 

If
this Note is a Dual Currency Note, notwithstanding any prior election made by
the Company, the amount payable hereon in the event of any Redemption, any
Optional Repurchase, any acceleration of the maturity of this Note or other
prepayment of this Note prior to the Stated Maturity Date shall be (a) an
amount equal to the amount otherwise due and payable plus accrued interest to
but excluding the Redemption Date, Optional Repurchase Date, date of
acceleration or other prepayment minus the Total Option Value multiplied by a
fraction, the numerator of which is the then outstanding principal amount of
this Note and the denominator of which is the aggregate principal amount of all
Dual Currency Notes of this series then outstanding or (b) such other
amount as specified on the face of this Note (such amount, the “Dual Currency
Note Prepayment Amount”).  In no event
will such payment be less than zero. 
Notwithstanding any prior election made by the Company, such payment
shall be made in the Specified Currency unless otherwise provided on the face
of this Note.

 

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

 

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

 

The
Company may exercise its option by notifying the Trustee of such exercise at
least 45 but not more than 60 days prior to the Stated Maturity Date in effect
prior to the exercise of such option (the “Original Stated Maturity”).  Not later than five Business Days after
receipt thereof, the Trustee will mail to the Holder a notice (the “Extension
Notice”), first class, postage prepaid, setting forth (i) the election of
the Company to extend the Stated Maturity Date, (ii) the

 

6

 

new Stated Maturity Date,
(iii) the Interest Rate applicable to the Extension Period and (iv) the
provisions, if any, for redemption during the Extension Period, including the
date on which or the period or periods during which and the price at which such
redemption may occur during the Extension Period.  Upon the mailing by the Trustee of an
Extension Notice to the Holder, the Stated Maturity Date hereof shall be
extended automatically, and, except as modified by the Extension Notice and as
described in the next paragraph, this Note will have the same terms as prior to
the mailing of such Extension Notice.

 

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

 

If the
Company extends the Stated Maturity Date of this Note, the Holder will have the
option to elect repurchase by the Company of this Note, or any portion hereof,
on the Original Stated Maturity at a price calculated with reference to (a) the
then outstanding principal amount of this Note, (b) the Optional
Repurchase Amount calculated as though the Original Stated Maturity were the
Stated Maturity Date and the date that is a number of business days equal to
the Determination Period before that date were the Valuation Date, or (c) such
other amount or amounts, in each case as specified on the face of this
Note.  In order for this Note to be so
repaid on the Original Stated Maturity, the Holder must follow the procedures
set forth in Section 5 of this Note for Optional Repurchase, except that
the period for delivery of this Note or notification to the Trustee shall be at
least 25 but not more than 35 days prior to the Original Stated Maturity and
except that the Holder may, by written notice to the Trustee, revoke any such
tender for repurchase until the close of business on the tenth day prior to the
Original Stated Maturity; provided, however, that if such day is not a Business
Day, then such notice may be given on the next succeeding Business Day.

 

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

 

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

 

7

 

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

 

The
Holder may elect to extend the Stated Maturity Date of this Note, or if so
specified above, any portion hereof, by delivering a notice to such effect to the
Trustee (or any duly appointed Paying Agent) at the Corporate Trust Office not
less than 3 nor more than 15 days prior to such Maturity Extension Date (unless
another period is specified on the face of this Note as the “Special Election
Period”).  Such election will be
irrevocable and will be binding upon each subsequent Holder of this Note.  An election to extend the Stated Maturity
Date of this Note may be exercised with respect to less than the entire
principal amount of this Note then outstanding only if so specified on the face
of this Note and only in such principal amount, or any integral multiple in
excess thereof, as is specified on the face of this Note.  Notwithstanding the foregoing, the maturity
of this Note will not be extended beyond the Stated Maturity Date specified on
the face of this Note.

 

Unless
otherwise specified above, any election not to extend will be effective only if
this Note is presented to the Trustee (or any duly appointed Paying Agent) as
soon as practicable.  Following receipt
of this Note the Trustee (or any duly appointed Paying Agent) shall issue in
exchange herefor in the name of the Holder (i) a Note, in a face amount
equal to the principal amount of this Note for which no election to extend was
exercised, with terms identical to those specified herein (except for the Issue
Date and the Initial Interest Rate and except that such Note shall have a
fixed, non-extendable maturity on the Extended Stated Maturity Date) and (ii) if
such election not to extend is made with respect to less than the principal
amount of this Note then outstanding, a replacement Extendible Note, in a face
amount equal to the principal amount of this Note for which an election to
extend was made, with terms identical to this Note.

 

Section 12.  Principal Amount for Indenture Purposes.  For the purpose of determining whether
Holders of the requisite amount of Notes 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; provided, however, if this Note is a Discount
Note, the outstanding principal amount of this Note will be deemed to be the
amount of the principal thereof that would be due and payable as of the date of
such determination upon a declaration of acceleration of the maturity thereof.

 

Section 13.  Modification and Waivers.  The Indenture contains provisions permitting
the Company and the Trustee, with the consent of the Holders of not less than 66-2/3%
in aggregate principal amount of each series of the Securities at the time
Outstanding to be affected, evidenced as in the Indenture provided, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the Indenture or of any supplemental
indenture or modifying in any manner the rights of the holders of the
Securities of all such series; provided, however, that no such supplemental
indenture shall, among other things, (i) change the fixed maturity of any
Security, or reduce the Payment 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 Payment

 

8

 

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 hereinabove provided, without
the consent of the Holder of each Security so affected, or (ii) change the
place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent of the holders of each Security so affected.  It is also provided in the Indenture that,
prior to any declaration accelerating the maturity of any series of Securities,
the holders of a majority in aggregate principal amount of the Securities of
such series Outstanding may on behalf of the holders of all the Securities of
such series waive any past default or Event of Default under the Indenture with
respect to such series and its consequences, except a default in the payment of
interest, if any, on the Payment 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 14.  Obligations Unconditional.  No reference herein to the Indenture and no
provisions of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
Payment Amount or the principal amount, premium, if any, and interest, if any,
on this Note at the place, at the respective times, at the rate, and in the
coin or currency herein prescribed.

 

Section 15.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

 

Section 16.  Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Notes
of this series denominated in U.S. dollars shall be issued in the principal
amount denominations specified on the face of this Note.  Notes of this series denominated in a Foreign
Currency will be issued in a denomination approximately equivalent to Notes of
this series denominated in U.S. dollars. 
Each Note will be issued initially as either a Global Security or a
Certificated Note, at the option of the Company, 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 17.  Registration of Transfer.  As provided in the Indenture and subject to
certain limitations as therein set forth, the transfer of this Note is
registrable in the Security Register, upon surrender of this Note for
registration of transfer, at the Corporate Trust Office or

 

9

 

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
this Note is a Global Security and if at any time the Depository notifies the
Company that it is unwilling or unable to continue as Depository or if at any
time the Depository shall no longer be eligible under the Indenture, the
Company shall appoint a successor Depository. 
If a successor Depository for the 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 18.  Events of Default.  If an Event of Default with respect to Notes
of this series shall occur and be continuing, the principal of the Notes of
this series may be declared due and payable in the manner and with the effect
provided in the Indenture.  Unless
otherwise provided on the face of this Note, the amount payable to the Holder
hereof upon any acceleration permitted under the Indenture will be equal to the
Maturity Payment Amount calculated as though the date to which the maturity has
been accelerated were the Stated Maturity Date and the date that is a number of
business days equal to the Determination Period before that date were the
Valuation Date.  In any such case, even
if Stock Settlement is applicable, the Notes of this series will be settled in
cash.  Upon payment (i) of the
aggregate applicable amounts on the Notes of this series so declared due and
payable and (ii) of interest on any overdue Payment Amount and overdue
interest (in each case to the extent that the payment of such interest shall be
legally enforceable), all of the Company’s obligations in respect of the
payment of the Maturity Payment Amount of and interest, if any, on the Notes of
this series shall terminate.

 

Section 19.  No Recourse Against Certain Persons.  No recourse for the payment of Payment
Amount, premium, if any, or interest on this Note, or for any claim based
hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or any
Indenture supplemental thereto or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of

 

10

 

any assessment or penalty
or otherwise, all such liability being, by the acceptance hereof and as part of
the consideration for the issue hereof, expressly waived and released.

 

Section 20.  Tax Treatment.  The Company agrees, and by acceptance of
beneficial ownership interest in the Notes of this series, each Holder of such
Notes will be deemed to have agreed, for United States federal income tax
purposes, (i) to treat the Notes of this series as indebtedness that is
subject to Treas. Reg. Sec. 1.1275-4 (the “Contingent Payment Regulations”) and
(ii) to be bound by the Company’s determination of the “comparable yield”
and “projected payment schedule,” within the meaning of the Contingent Payment
Regulations, with respect to the Notes of this series. The “comparable yield”
and the “projected payment schedule”, as determined by the Company per $1,000
note, are specified on the face of this Note.

 

Section 21.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

 

Section 22.  GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

 

Section 23.
Definitions.  Set forth below are
definitions of certain of the terms used in this Note.  The definitions set forth below are subject
to the terms and provisions on the face of this Note.  If any definition below is different than, or
inconsistent with, the terms and provisions on the face of this Note, the terms
and provisions on the face shall prevail.

 

“ADS”
shall mean American Depositary Share.

 

“Alternative Redemption
Amount” shall mean, for each $1,000 principal amount of the Notes
represented hereby, the product of (a) $1,000 and (b) the Settlement
Value on the applicable Valuation Date divided by the Threshold Value.

 

“AMEX” shall mean the
American Stock Exchange LLC.

 

“Amortized Principal Amount”  of this Note at any time shall mean
the amount equal to (a) the Issue Price multiplied by the then outstanding
principal amount of this Note plus (b) that portion of the difference
between the amount calculated pursuant to clause (a) and the principal
amount of this Note that has accrued at the Yield to Maturity set forth on the
face of this Note (computed in accordance with generally accepted United States
bond yield computation principles) at the date as of which the Amortized
Principal Amount is calculated, but in no event shall the Amortized Principal
Amount of this Note exceed the principal amount of this Note.

 

“Average Execution Price”
shall mean, for a security or other property, the average per unit execution
price that an affiliate of the Company receives or pays for such security or
property, as the case may be, to hedge the Company’s obligations under the
Notes of this series.

 

“Business Day”, notwithstanding any provision in the Indenture,
shall mean, unless otherwise set forth on the face of this Note, any day that
is not a Saturday, a Sunday or a day on which the NYSE, the Nasdaq or the AMEX
is not open for trading or banking institutions or trust companies in New York
City are authorized or obligated by law or executive order to

 

11

 

close,
and, (a) if the Specified Currency is a Foreign Currency other than Euros,
not a day on which banking institutions are authorized or required by law to
close in the Principal Financial Center of the country issuing the Foreign
Currency and (b) if the Specified Currency is Euros, a day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer System is
open.  “Principal Financial Center” shall
mean the capital city of the country issuing the specified currency.  However, for U.S. dollars, Australian
dollars, Canadian dollars and Swiss francs, the Principal Financial Center will
be New York City, Sydney, Toronto and Zurich, respectively.

 

“Calculation
Agency Agreement” shall mean the Calculation Agency Agreement, dated as of May 18,
2005, between the Company and the Calculation Agent, as amended from time to
time, or any successor
calculation agency agreement.

 

“Calculation
Agent” shall mean the person that has entered into an agreement with the
Company providing for, among other things, the determination of the Settlement
Value and the Payment Amount, which term shall, unless the context otherwise
requires, include its successors and assigns. 
The initial Calculation Agent shall be Lehman Brothers Inc.

 

“Close of Trading” shall mean, in respect of any Relevant
Exchange or other exchange or quotation system, the scheduled weekday closing
time on a day on which the Relevant Exchange or other exchange or quotation
system is scheduled to be open for trading for its respective regular trading
session, without regard to after hours or any other trading outside of the
regular trading session hours.

 

“Closing Level”, shall mean, when used with respect to any
Relevant Index on any particular day, (a) the closing level of the
Relevant Index on such day as reported by the publisher of the Relevant Index,
as determined and adjusted by the Calculation Agent pursuant to the Calculation
Agency Agreement, or (b) as otherwise determined by the Calculation Agent
pursuant to the Calculation Agency Agreement if the Relevant Index has been
discontinued or in the circumstances described in the definition of the term “Valuation
Date” herein.

 

“Closing Price” shall mean, for each Settlement Value Security,
as determined by the Calculation Agent pursuant to the Calculation Agency
Agreement on any particular day, based on information reasonably available to
it:

 

(1) 
if the Settlement Value Security is listed on a Relevant Exchange, the last
reported sale price per share at the Close of Trading on such day on the
Relevant Exchange;

 

(2) 
if the Settlement Value Security is not listed on a national securities
exchange or quotation system or is not a Nasdaq security, and is listed or
traded on a bulletin board, the Average Execution Price per share of the
Settlement Value Security; or

 

(3) 
as otherwise determined by the Calculation Agent pursuant to the Calculation
Agency Agreement in the circumstances described in the definition of the term “Valuation
Date” herein.

 

12

 

In
the case of both (1) and (2) above, if the Settlement Value Security
is listed or quoted on a non-United States Relevant Exchange or on a non-United
States bulletin board, the Closing Price will then be converted into U.S.
dollars using the Official W.M. Reuters Spot Closing Rate at 11:00 a.m.,
New York City time.  If there are several
quotes for the Official W.M. Reuters Spot Closing Rate at that time, the first
quoted rate starting at 11:00 a.m. shall be the rate used.  If there is no such Official W.M. Reuters
Spot Closing Rate for a country’s currency at 11:00 a.m., New York City
time, the Closing Price shall be converted into U.S. dollars using the last
available U.S. dollar cross-rate quote before 11:00 a.m., New York City
time.

 

“common stock” shall mean common stock or any other equity
security (which may be an ADS).

 

“Company” shall have the meaning set forth on the face of this
Note.

 

“Designated Exchange Rate” shall mean the exchange rate
specified as such on the face of this Note.

 

“Determination Period” shall be the number of days specified as
such on the face of this Note.

 

“Discount Note” shall mean any Note
that has been issued at an Issue Price less than 100%.

 

“Discount Note Prepayment
Amount” shall have the meaning set forth in Section 8 of this Note.

 

“Dual Currency Note” shall mean any Note designated as such on
the face of this Note.

 

“Dual Currency Note Prepayment Amount” shall have the meaning
set forth in Section 9 of this Note.

 

“Exchange Rate Agent” shall have the meaning set forth in Section 2
of this Note.

 

“Extended Stated Maturity
Date” shall have the meaning set forth in Section 11 of this Note.

 

“Extension Notice”
shall have the meaning set forth in Section 10 of this Note.

 

“Foreign Currency”
shall mean any currency other than U.S. dollars.

 

“Global Security” shall have the meaning set forth on the face
of this Note.

 

“Indenture” shall have the meaning set forth in Section 1
of this Note.

 

“Index Stock” shall mean the common stock specified as the
Reference Equity on the face of this Note.

 

“Index Weight” shall mean, if the Reference Equity set forth on
the face of this Note is a basket of stock indices, for each Relevant Index,
the number by which the Closing Level of such Relevant Index will be multiplied
in order to calculate the Settlement Value on a particular day.  The Index Weight relating to each Relevant
Index included in the Reference Equity shall be as specified on the fact of
this Note.

 

13

 

“Initial Maturity Extension Date” shall have the meaning set
forth in Section 11 of this Note.

 

“Initial Redemption Date” shall mean the date specified as such
on the face of this Note.

 

“Interest Payment Date” shall have the meaning set forth on the
face of this Note.

 

“Interest Rate” shall be the rate specified as such on the face
of this Note.

 

“Issue Date” shall have the meaning set forth on the face of
this Note.

 

“Issue Price” shall mean the price specified as such on the face
of this Note.

 

“Market Disruption Event”,
unless indicated otherwise on the face of this Note, with respect to a
Settlement Value Security or a Relevant Index shall mean any of the following
events has occurred on any day as determined by the Calculation Agent in
accordance with the Calculation Agency Agreement:

 

(1) 
(a) In the case of a Settlement Value Security, a material suspension of,
or limitation imposed on trading relating to, such Settlement Value Security,
or (b) in the case of a Relevant Index, a suspension of, or limitation
imposed on trading relating to, the securities that then comprise 20% or more
of such Relevant Index, in each case, by the Relevant Exchange for each such
security, at any time during the one-hour period that ends at the Close of
Trading on such day, whether by reason of movements in price exceeding limits
permitted by that Relevant Exchange or otherwise.  Limitations on trading during significant
market fluctuations imposed pursuant to NYSE Rule 80B or any applicable rule or
regulation enacted or promulgated by the NYSE, any other exchange, quotation
system or market, any other self regulatory organization or the Securities and
Exchange Commission of similar scope or as a replacement for Rule 80B may
be considered material.

 

(2) 
A material suspension of, or limitation imposed on, trading in futures or
options contracts relating to such Settlement Value Security or to such
Relevant Index, as the case may be, by the primary exchange or quotation system
on which those futures or options contracts are traded, at any time during the
one-hour period that ends at the Close of Trading on such day, whether by
reason of movements in price exceeding limits permitted by that primary
exchange or quotation system or otherwise.

 

(3) 
Any event, other than an early closure, that disrupts or impairs the ability of
market participants in general to effect transactions in, or obtain market
values for, (a) in the case of a Settlement Value Security, that
Settlement Value Security, or (b) in the case of a Relevant Index, the
securities that then comprise 20% or more of such Relevant Index, in each case
on the Relevant Exchanges for that Settlement Value Security or those
securities, or in the case of a Settlement Value Security or a security not
listed or quoted in the United States, on the primary exchange, quotation
system or market for such Settlement Value Security or security, at any time
during the one hour period that ends at the Close of Trading on such day.

 

14

 

(4) 
Any event, other than an early closure, that disrupts or impairs the ability of
market participants in general to effect transactions in, or obtain market
values for, the futures or options contracts relating to such Settlement Value
Security or to such Relevant Index, as the case may be, on the primary exchange
or quotation system on which those futures or options contracts are traded at
any time during the one hour period that ends at the Close of Trading on such
day.

 

(5) 
The closure of, (a) in the case of a Settlement Value Security, the
Relevant Exchange for that Settlement Value Security or the primary exchange or
quotation system on which futures or options contracts relating to that
Settlement Value Security are traded, or (b) in the case of a Relevant
Index, the Relevant Exchanges for securities that then comprise 20% or more of
such Relevant Index or the primary exchange or quotation system on which
futures or options contracts relating to such Relevant Index is traded, in each
case, prior to its scheduled closing time unless the earlier closing time is
announced by the primary exchange or quotation system at least one hour prior
to the earlier of (i) the actual closing time for the regular trading
session on the exchanges or quotation system and (ii) the submission
deadline for orders to be entered into the exchanges or quotation system for
execution at the Close of Trading on such day.

 

If the Reference Equity
specified on the face of this Note is a basket of common stocks or indices, a
Market Disruption Event will occur if a Market Disruption Event occurs with
respect to any of the Settlement Value Securities or Relevant Indices included
in the basket.

 

For purposes of determining
whether a Market Disruption Event has occurred, the relevant percentage
contribution of a security to the level of a Relevant Index will be based on a
comparison of (x) the portion of the level of the Relevant Index attributable
to that security and (y) the overall level of the Relevant Index, in each case
immediately before the occurrence of the Market Disruption Event.

 

“Market Exchange Rate”
shall have the meaning set forth in Section 2 of this Note.

 

“Maturity Extension Date” shall have the meaning set forth in Section 11
of this Note.

 

“Maturity Payment Amount” shall mean, for each $1,000 principal
amount of the Notes represented hereby, an amount equal to the greater of (a) $1,000
and (b) the Alternative Redemption Amount.

 

“Multiplier” shall mean, if the Reference Equity set forth on
the face of this Note is a common stock or basket of common stocks, for each
Settlement Value Security, the number of shares or other units (including ADSs)
(or fraction of a share or other unit expressed as a decimal) of such
Settlement Value Security included in the calculation of the Settlement Value
on a particular day, as determined by the Calculation Agent pursuant to the
Calculation Agency Agreement.  The
initial Multiplier relating to each Settlement Value Security initially
included in the Reference Equity shall be specified as such on the face of this
Note. The initial Multiplier for any security which may subsequently become a
Settlement Value Security shall be the number of shares or other units of such
security which are to be included in the calculation of the Settlement

 

15

 

Value
at the time such security becomes a Settlement Value Security.  Multipliers may be adjusted by the
Calculation Agent in accordance with the Calculation Agency Agreement in
certain circumstances.

 

“Nasdaq” shall mean The Nasdaq Stock Market, Inc.

 

“Notes” shall have the meaning set forth in Section 1 of
this Note.

 

“NYSE”
shall mean The New York Stock Exchange, Inc.

 

“Official W.M. Reuters Spot Closing Rate” shall mean the closing
spot rate published on Reuters page ”WMRA” relevant for a Settlement Value
Security.

 

“Option Election Dates”
shall mean the date(s) specified as such on the face of this Note.

 

“Option
Value” shall mean, with respect to an Interest Payment Date or the Stated
Maturity Date, the amount calculated by the Option Value Calculation Agent to
be the arithmetic average of the prices quoted on the date of calculation by
three reference banks (which banks shall be selected by the Option Value
Calculation Agent and shall be reasonably acceptable to the Company) for the
right on the Option Election Date immediately preceding such Interest Payment
Date or Stated Maturity Date to purchase for value on such Interest Payment
Date or Stated Maturity Date from such reference banks (A) the aggregate
amount of the Specified Currency due on such Interest Payment Date or Stated Maturity
Date with respect to all of the Dual Currency Notes of this series in exchange
for (B) the amount of the Optional Payment Currency that would be received
if the amount in clause (A) were converted into the Optional Payment
Currency at the Designated Exchange Rate.

 

“Optional Payment
Currency” shall mean the currency specified as such on the face of this
Note.

 

“Optional Repurchase”
shall mean the option of a Holder to elect to require the Company to repurchase
Notes of this series pursuant to Section 5 of this Note.

 

“Optional Repurchase
Amount” shall mean, for each $1,000 principal amount of Notes
represented hereby, the Alternative Redemption Amount.

 

“Optional Repurchase
Cutoff Period” shall be the number of days specified as such on the face of
this Note.

 

16

 

“Optional Repurchase Date”
shall mean the eighth Business Day (or such other date as is specified
on the face of this Note) following the Business Day on which the Company
receives a written notice of election to require repurchase of this Note in the
manner specified in Section 5 of this Note; provided, however,
if the Calculation Agent determines that a Market Disruption Event with respect
to any Settlement Value Security has occurred on the day that would otherwise
be the applicable Valuation Date, or if the applicable Valuation Date is not a
Scheduled Trading Day, then the Optional Repurchase Date shall be postponed by
a number of Business Days equal to the number of Scheduled Trading Days by
which the applicable Valuation Date is postponed.

 

“Optional Reset Dates”
shall be the dates specified as such on the face of this Note.

 

“Original Stated Maturity”
shall have the meaning set forth in Section 10 of this Note.

 

“Payment Amount”
shall mean the Maturity Payment Amount, the Redemption Payment Amount or the
Optional Repurchase Amount, as the case may be.

 

“Principal Payment Date”
shall mean the Stated Maturity Date, the Redemption Date or the Optional
Repurchase Date, as the case may be.

 

“Redemption” shall
mean the option of the Company to redeem, at any time on or after the date
specified on the face of this Note, in whole or from time to time in part, the
Notes of this series pursuant to Section 3 of this Note.

 

“Redemption Date”
shall mean the date specified as such in the notice demanded in Section 3
of this Note; provided, however, if the Calculation Agent
determines that a Market Disruption Event with respect to any Reference Equity
has occurred on a day that would otherwise be the applicable Valuation Date, or
if the applicable Valuation Date is not a Scheduled Trading Day, then the
Redemption Date shall be postponed by a number of Business Days equal to the
number of Scheduled Trading Days by which the applicable Valuation Date is
postponed.

 

“Redemption
Notice” shall mean the notice of redemption mailed to the Holders pursuant
to Section 3 of this Note.

 

“Redemption
Notice Period” shall
have the meaning set forth in Section 3 of this Note.

 

“Redemption Payment
Amount” shall mean, for each $1,000 principal amount of Notes
represented hereby, the greater of (a) $1,000 and (b) the Alternative
Redemption Amount.

 

“Reference Equity”
shall mean the common stock, stock index, basket of common stocks or basket of
stock indices specified as such on the face of this Note.

 

“Relevant Exchange”
shall mean, for any Settlement Value Security, the primary United States
national securities exchange, quotation system, including any bulletin board

 

17

 

service, or market on which such Settlement
Value Security is traded, or in case such Settlement Value Security is not
listed or quoted in the United States, the primary exchange, quotation system
or market for such Settlement Value Security.

 

“Relevant Index” shall
mean, if the Reference Equity specified on the face of this Note is a stock
index or basket of stock indices, any stock index included in the calculation
of the Settlement Value by the Calculation Agent in accordance with the
Calculation Agency Agreement, including any successor or substitute index
selected by the Calculation Agent in accordance with the Calculation Agency
Agreement upon discontinuance of an index. The Relevant Indices will initially
consist of those indices designated as the Reference Equity on the face of this
Note.

 

“Reset Notice” shall
have the meaning specified in Section 7 of this Note.

 

“Scheduled Trading Day”
means (a) in the case of any Settlement Value Security, any day on which
the Relevant Exchange for such security is scheduled to be open for trading for
its regular trading session and (b) in the case of a Relevant Index, any
day on which the Relevant Index is published by its publisher or otherwise
determined by the Calculation Agent pursuant to the Calculation Agency Agreement.

 

“Securities” shall have
the meaning set forth in Section 1 of this Note.

 

“Settlement Value”,
when used with respect to an applicable Valuation Date, shall equal:

 

(1) if the Reference Equity specified on the face of this Note is
a common stock or a basket of common stocks, the sum of the products of the
Closing Prices on the applicable Valuation Date and the applicable Multipliers
(as adjusted from time to time by the Calculation Agent pursuant to the
Calculation Agency Agreement prior to the Close of Trading on the Valuation
Date) for each Settlement Value Security on the Valuation Date, together with
any cash or other property included in the Settlement Value on the Valuation
Date by the Calculation Agent pursuant to the Calculation Agency Agreement;
provided that if the originally scheduled Valuation Date is postponed because
of the occurrence of a Market Disruption Event, the Settlement Value will equal
(a) the sum of the products of the Closing Prices on the postponed
Valuation Date and the applicable Multipliers for each Settlement Value
Security for which no Market Disruption Event occurred plus (b) the sum of
the products of the average per share execution price an affiliate of the
Company receives or pays on the postponed Valuation Date upon the sale or
purchase of each Settlement Value Security for which a Market Disruption Event
has occurred which was used to hedge the Company’s obligations under the Notes
of this series and the applicable Multipliers (in case, as adjusted from time
to time by the Calculation Agent pursuant to the Calculation Agency Agreement
prior to the Close of Trading on the postponed Valuation Date), together with
any cash or other property included in the Settlement Value on the Valuation
Date by the Calculation Agent pursuant to the Calculation Agency Agreement;

 

(2) if the Reference Equity specified on the face of this Note is
a stock index, the Closing Level of the Relevant Index on the Valuation Date;
or

 

18

 

(3) if the Reference Equity specified on the face of this Note is
a basket of stock indices, the sum of the products of the Closing Levels on the
Valuation Date and the applicable Index Weight for each Relevant Index.

 

The Settlement Value, and
any adjustments thereto, shall be determined by the Calculation Agent pursuant
to the Calculation Agency Agreement.

 

“Settlement Value
Securities” shall mean, if the Reference Equity specified on the face of
this Note is a common stock or a basket of common stocks, the securities
included in the calculation of the Settlement Value by the Calculation Agent
pursuant to the Calculation Agency Agreement. The Settlement Value Securities
will initially consist of the common stocks designated as the Reference Equity
on the face of this Note.

 

“Special Election
Interval” shall have the meaning set forth in Section 10 of this Note.

 

“Special Election Period”
shall have the meaning set forth in Section 10 of this Note.

 

“Specified Currency”
shall mean U.S. dollars or such other currency as is specified as such on the
face of this Note.

 

“Stated Maturity Date”
shall mean the date specified as such on the face of this Note (except as
otherwise provided in the case of an Extension of Maturity Note or an
Extendible Note); provided, that if a Market Disruption Event with respect to
one or more of the Settlement Value Securities or Relevant Indices, as the case
may be, occurs on the applicable Valuation Date, or if the applicable Valuation
Date is not a Scheduled Trading  Day, then the Stated Maturity Date shall be postponed by a number of
Business Days equal to the number of Scheduled Trading Days by which the
applicable Valuation Date is postponed. In the event of any acceleration of the
maturity of this Note prior to the Stated Maturity Date specified on the face
of this Note, the term “Stated Maturity Date” when used herein shall refer,
where applicable, to the date of acceleration of this Note.

 

“Stock Settlement”
shall mean the option or right to pay or receive the Maturity Payment Amount or
Optional Repurchase Amount in shares of the Settlement Value Securities, as set
forth in Section 6 of this Note.

 

“Subsequent Interest
Period” shall have the meaning set forth in Section 7 of this Note.

 

“Threshold Value”
shall have the meaning set forth on the face of this Note.

 

“Total Option Value”
shall mean, with respect to any Dual Currency Note on any date, an
amount (calculated as of such date by the Option Value Calculation Agent
specified on the face of this Note) equal to the sum of the Option Values
(calculated as of such date by the Option Value Calculation Agent) for all
Interest Payment Dates occurring after the date of calculation up to and
including the Stated Maturity Date.

 

19

 

“Trustee”
shall have the meaning set forth in Section 1 of this Note.

 

“Valuation
Date” shall mean, unless otherwise specified on the face of this Note, (a) in
the case of payment on the Stated Maturity Date, the third Business Day prior
to the Stated Maturity Date, (b) in the case of Redemption, the date that
the Redemption Notice is mailed and (c) in the case of Optional
Repurchase, the date that is a number of Business Days equal to the
Determination Period before the Optional Repurchase Date; provided, however,
in each case, if a Market Disruption Event occurs on any such date, as
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement, or if such date is not a Scheduled Trading Day, the Valuation Date
shall be postponed to the next Scheduled Trading Day on which no Market
Disruption Event occurs; provided, further, if a Market
Disruption Event occurs on each of the eight Scheduled Trading Days following
the originally scheduled Valuation Date, then that eighth Scheduled Trading Day
shall be deemed the Valuation Date and the Calculation Agent shall determine,
in accordance with the Calculation Agency Agreement, the Closing Price of the
affected Settlement Value Securities or the Closing Level of the Relevant
Index, as the case may be, based upon its estimate of the value of the
Settlement Value Security or Relevant Index, as of the Close of Trading on that
eighth Scheduled Trading Day.

 

“Yield
to Maturity” shall mean the percentage specified as such on the face of
this Note.

 

20

 

OPTION TO ELECT REPURCHASE

 

The
undersigned owner of this Note hereby irrevocably elects to have the Company
repurchase the principal amount of this Note or portion hereof below designated
at (i) the Optional Repurchase Amount plus accrued interest to but
excluding the Optional Repurchase Date, if this Note is to be repurchased
pursuant to the Optional Repurchase provision described in Section 5 of
this Note, or (ii) the price specified pursuant to the Optional Interest
Reset provision described in Section 7 of this Note or the Extension of
Maturity Notes provision described in Section 10 of this Note.  Any such election is irrevocable except as
provided in Section 7 of this Note or Section 10 of this Note.

 

If the
repurchase of this Note is pursuant to Section 5 of this Note and if the undersigned has the option to
elect to have the repurchase settled in stock, the undersigned has indicated
below if that option is being exercised.

 

	
  Dated: 

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

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

  
	
   

  	
   

  
	
   

  	
   

  
	
  Principal Amount to be repurchased, if amount to be repurchased is
  less than the principal amount of this Note 

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

  
	
  (principal amount remaining must be an authorized denomination)

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Address:

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Please print name and address including zip code)

  
	
   

  	
   

  
	
   

  	
   

  
	
  Stock Settlement option

  elected

  	
  SOCIAL SECURITY OR

  OTHER TAXPAYER ID NUMBER:

  
	
   

  	
   

  	
   

  
	
  o
  YES    o
  NO

  	
   

  	
   

  
									

 

 

OPTION TO ELECT TERMINATION OF AUTOMATIC EXTENSION

 

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

 

 

	
  Dated:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Signature

  
	
   

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

  
	
   

  	
   

  
	
  Principal Amount to be terminated, if amount to be

  terminated is less than the principal amount of this Note

  (such principal amount must be an authorized denomination)

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

  
	
   

  	
  Name:

  	
   

  	
   

  
	
  $

  	
   

  	
   

  	
  Address:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (Please print name and address including zip code)

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SOCIAL SECURITY OR OTHER TAXPAYER ID NUMBER 

  
								

 

 

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

 

	
  TEN COM

  	
  —

  	
  as tenants in
  common

  
	
  TEN ENT

  	
  —

  	
  as tenant by the
  entireties

  
	
  JT TEN

  	
  —

  	
  as joint tenants with right of survivorship

  
	
   

  	
   

  	
  and not as tenants in common

  
	
   

  	
   

  	
   

  
	
  UNIF GIFT

  	
   

  	
   

  
	
  MIN ACT

  	
  —

  	
   

  	
  Custodian

  	
   

  	
   

  
	
   

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  
	
   

  	
   

  	
  under Uniform Gifts to Minors Act

  
	
   

  	
   

  	
   

  	
  (State)

  
							

 

 

	
   

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

  	
   

  
	
   

  	
   

  	
   

  
	
   

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

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING
  NUMBER OF ASSIGNEE)

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  (PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING
  ZIP CODE, OF ASSIGNEE)

  	
   

  

 

 

 

 

 

the within Note of LEHMAN
BROTHERS HOLDINGS INC. and all rights thereunder and does hereby irrevocably
constitute and appoint

 

 

	
   

  
	
  Attorney to
  transfer the said Note on the books of the within-named Company, with full
  power of substitution in the premises.

  

 

 

	
  Dated:

  	
   

  	
   

  	
  Signature:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  NOTICE:  The signature to this assignment must
  correspond with the name as it appears upon the face of the within Note in
  every particular, without alteration or enlargement or any change whatsoever.

  	
   

  
							

 

 

	
  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 signature guarantee medallion
  program), pursuant to SEC rule 17Ad-15.

  	
   

  
			

 

 

Schedule I

 

Amortization Table

 

	
  Date

  	
   

  	
  Payment

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

 

EXHIBIT A

 

RESET NOTICE

 

LEHMAN BROTHERS HOLDINGS
INC.

Medium-Term Notes, Series H

Performance Linked to the
Value of a Common Stock, a 

Stock Index, a Basket of Common Stocks or a Basket of Stock Indices

CUSIP No. 

Registered Nos.     -    

 

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

 

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

 

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

 

	
  Date

  	
   

  	
  Redemption Price

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

IN
WITNESS WHEREOF, Lehman Brothers Holdings Inc. has caused this Reset Notice to
be signed by its Chairman of the Board, its President, its Vice Chairman, its
Chief Financial Officer, one of its Vice Presidents or its Treasurer and to be
attested by its Secretary or one of its Assistant Secretaries.

 

Dated:

 

	
   

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
    Title:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
    Title:

  	
   

  	
   

  
						

 

(1) Insert applicable Optional Reset Date.

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