Form 8-K

as tenants in common

UNIF GIFT MIN ACT - _________ Custodian _________

(Cust) (Minor)

as tenants by the entireties

under Uniform Gifts to Minors

as joint tenants with right of

Survivorship and not as tenants in common

-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RYb8vfBDZr2CPZIsolpYTzcYY7t+xAy7f/satX+/SLV1QqpdYd7WQIHRf0J823ES njFigLmczznxzG+G0NVWLw== 0001193125-07-211784.txt : 20071002 0001193125-07-211784.hdr.sgml : 20071002 20071002144352 ACCESSION NUMBER: 0001193125-07-211784 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20070928 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20071002 DATE AS OF CHANGE: 20071002 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-09466 FILM NUMBER: 071149236 BUSINESS ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 8-K 1 d8k.htm FORM 8-K Form 8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of

the Securities Exchange Act of 1934

Date of Report (date of earliest event reported):

September 28, 2007

Lehman Brothers Holdings Inc.

(Exact name of registrant as specified in its charter)

Delaware

(State of or other jurisdiction of incorporation)


1-9466		13-3216325
(Commission File Number)		(I.R.S. Employer Identification No.)

745 Seventh Avenue New York, New York		10019
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code:

(212) 526-7000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))


Item 9.01.		Financial Statements and Exhibits

	(d)	Exhibits

The following Exhibit is incorporated by reference into Registration Statement on Form S-3 No. 333-134553 as an exhibit thereto and is filed as part of this Report.


4.01		Form of senior debt security—medium-term note (100% Principal Protection Enhanced Participation Notes Linked to a Basket of Asian Indices)
4.02		Form of senior debt security—medium-term note (100% Principal Protected Monthly Return Notes Linked to a Seasonal Strategy on the S&P 500^® Index)
4.03		Form of senior debt security—medium-term note (Return Optimization Securities Linked to an International Index Basket)
4.04		Form of senior debt security—medium-term note (Performance Securities with Partial Protection Linked to a Global Index Basket)
4.05		Form of senior debt security—medium-term note (Autocallable Optimization Securities with Contingent Protection Linked to The AMEX Gold BUGS Index^®)

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.


LEHMAN BROTHERS HOLDINGS INC.
		(Registrant)

By:		/s/ James J. Killerlane III
		James J. Killerlane III
		Vice President

Date: October 2, 2007

EXHIBIT INDEX


Exhibit No.		Exhibits
4.01		Form of senior debt security—medium-term note (100% Principal Protection Enhanced Participation Notes Linked to a Basket of Asian Indices)

4.02		Form of senior debt security—medium-term note (100% Principal Protected Monthly Return Notes Linked to a Seasonal Strategy on the S&P 500^® Index)

4.03		Form of senior debt security—medium-term note (Return Optimization Securities Linked to an International Index Basket)

4.04		Form of senior debt security—medium-term note (Performance Securities with Partial Protection Linked to a Global Index Basket)

4.05		Form of senior debt security—medium-term note (Autocallable Optimization Securities with Contingent Protection Linked to The AMEX Gold BUGS Index^®)

EX-4.01 2 dex401.htm FORM OF SENIOR DEBT SECURITY MEDIUM-TERM NOTE (BASKET OF ASIAN INDICES) Form of senior debt security medium-term note (Basket of Asian Indices)

Exhibit 4.01

LEHMAN BROTHERS HOLDINGS INC.

100% Principal Protection Enhanced Participation Notes Linked to a Basket of Asian Indices Due September 28, 2012


Number R-1		$59,000
ISIN US52517P3P49		CUSIP 52517P3P4

See Reverse for Certain Definitions

THIS SECURITY (THIS “SECURITY”) IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS 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 SUCH 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. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the “Company”), for value received, hereby promises to pay to CEDE & CO. or registered assigns, at the office or agency of the Company in the Borough of Manhattan, The City of New York, on the Maturity Date, in such coin or currency of the United States of America at the time of payment shall be legal tender for the payment of public and private debts, for each $1,000 principal amount of the Securities represented hereby, an amount equal to the Payment at Maturity. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

Any amount payable on the Maturity Date hereon will be paid only upon presentation and surrender of this Security.

REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF WHICH FURTHER

PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.

Each Basket Index is a mark of the sponsor of such Basket Index and has been licensed for use by the Company. The Securities, linked to the performance of the Basket Indices, are not sponsored, endorsed, sold or promoted by the sponsors of the Basket Indices and the sponsors of the Basket Indices make no representation regarding the advisability of investing in the Securities.

This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof.

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: September 28, 2007	LEHMAN BROTHERS HOLDINGS INC.

[SEAL]	By:
		Vice President

	Attest:
		Assistant Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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


CITIBANK, N.A.
as Trustee

By:
		Authorized Officer

Reverse of Security

This Security is one of a duly authorized series of Securities of the Company designated as 100% Principal Protection Enhanced Participation Notes Linked to a Basket of Asian Indices Due September 28, 2012 (herein called the “Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such additional securities shall be consolidated and form a single series with the Securities; provided that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank, N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), 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 Company, the Trustee and the Holders of the Securities.

The Payment at Maturity, at the request of the Trustee, shall be determined by the Calculation Agent pursuant to the Calculation Agency Agreement. The Trustee shall fully rely on the determination by the Calculation Agent of the Payment at Maturity and shall have no duty to make any such determination. The Calculation Agent will provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, of the Payment at Maturity on or prior to 11:00 a.m. on the Business Day preceding the Maturity Date.

All calculations with respect to the Basket Ending Level and the Basket Return (including each Index Return) will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the Additional Amount payable at maturity, if any, per $1,000 principal amount Security will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking fund.

If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal to $1,000 plus the Additional Amount. The Additional Amount will be calculated as though the date of acceleration were the Maturity Date and the third Business Day immediately preceding the date of acceleration were the Final Valuation Date. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as possible and in no event later than two Business Days after the date of acceleration.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66²/3% in aggregate principal amount of each series of Securities at the time Outstanding to be affected (each series voting as a class), 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 principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, if any, or reduce any premium payable on redemption, or make the principal thereof, or premium, if any, or interest thereon, if any, 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, or the principal of, or premium, if any, on any of the Securities of such series, or in the payment of any sinking fund installment or analogous obligation with respect to Securities of such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the Payment at Maturity with respect to this Security.

The Securities are issuable in denominations of $1,000 and any whole multiples of $1,000.

The Company, the Trustee, and any agent of the Company or of the Trustee may deem and treat the registered holder (the “Holder”) hereof as the absolute owner of this Security (whether or not this Security shall be overdue and notwithstanding any notation of ownership or other writing hereon), for the purpose of receiving payment hereof, or on account hereof, and for all other purposes and neither the Company nor the Trustee nor any agent of the Company or of the Trustee shall be affected by any notice to the contrary. All such payments made to or upon the order of such registered holder shall, to the extent of the sum or sums paid, effectually satisfy and discharge liability for moneys payable on this Security.

No recourse for the payment of the principal of, premium, if any, or interest on this Security, 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 Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

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

The Company agrees, and by acceptance of beneficial ownership interest in the Securities of this series, each Holder of such Securities will be deemed to have agreed, for United States federal income tax purposes, (i) to treat the Securities 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 Securities of this series. The Company has determined that the comparable yield is an annual rate of 5.28%, compounded semiannually. Based on the comparable yield, the projected payment schedule per $1,000 of such Securities is $1,297.68 due at maturity.

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

Definitions

Set forth below are definitions of the terms used in this Security.

“Additional Amount”, as calculated by the Calculation Agent, per $1,000 principal amount Security paid at maturity shall equal the product of $1,000 × the Basket Return × the Participation Rate; provided, however, that if the Basket Return is less than zero, then the Additional Amount shall equal $0.

“Basket” shall mean the basket consisting of three Basket Indices to which the Securities are linked.

“Basket Ending Level”, as calculated by the Calculation Agent on the Final Valuation Date, is equal to the following:

Basket Starting Level × [1 + (the sum of (Index Return × Index Weighting) for all

Basket Indices)]

“Basket Index” shall refer to each of the Nikkei 225^SM Index, the MSCI Singapore Free Index^SM and the MSCI Taiwan^SM Index (and, together, the “Basket Indices”) or any successor to any of the foregoing.

“Basket Return” as calculated by the Calculation Agent, is calculated as follows:

Basket Ending Level – Basket Starting Level

Basket Starting Level

“Basket Starting Level” equals 100.

“Business Day”, notwithstanding any provision in the Indenture, shall mean any day that is not a Saturday or Sunday and that is not a day on which banking institutions in the City of New York are authorized or obligated by law to close.

“Calculation Agency Agreement” shall mean the Calculation Agency Agreement, dated as of December 21, 2006 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 Payment at Maturity, which term shall, unless the context otherwise requires, include its successors and assigns. The initial Calculation Agent shall be Lehman Brothers Inc.

“Closing Price” of a security, on any particular day, means the last reported sales price for that security on the Relevant Exchange at the scheduled weekday closing time of the regular trading session of the Relevant Exchange. If, however, the security is not listed or traded on a bulletin board, then the Closing Price of the security will be determined using the average execution price per share that an affiliate of the Company pays or receives upon the purchase or sale of the security used to hedge the Company’s obligations under the Securities.

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

“Final Valuation Date” shall mean September 25, 2012; provided, however, that if the Final Valuation Date is not a Trading Day or if there is a Market Disruption Event on such day, with respect to a Basket Index, the Calculation Agent will:

• with respect to each Basket Index for which such day is a Trading Day and for which a Market Disruption Event has not occurred, determine the closing level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the closing level of such Basket Index on that Trading Day; and

• with respect to each Basket Index for which such day is not a Trading Day or for which a Market Disruption Event has occurred, determine the closing level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the closing level of such Basket Index on the next Trading Day for such Basket Index on which there is not a Market Disruption Event; provided, however, if a Market Disruption Event with respect to such Basket Index occurs on each of the eight Trading Days following the originally scheduled Final Valuation Date, then the Calculation Agent shall determine the Closing Level of such Basket Index for use in calculating the Basket Index Ending Level in accordance with the formula for and method of calculating the closing index level of such Basket Index last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of each security most recently included in the Basket Index.

“Holder” shall have the meaning set forth on the reverse of this Security.

“Indenture” shall have the meaning set forth on the reverse of this Security.

“Index Closing Level”, as determined by the Calculation Agent, shall mean, with respect to any Trading Day, the closing level of any Basket Index or any Successor Index, as the

case may be, at the regular official weekday close of the principal trading session of the Relevant Exchange or market for the Index or the Successor Index, as the case may be, on such day, or as determined by the Calculation Agent pursuant to the Calculation Agency Agreement as described below under “Discontinuation of a Basket Index; Alteration of Method of Calculation.”

“Index Return”, as calculated by the Calculation Agent, is calculated as follows for each Basket Index:

Index Ending Level –Index Starting Level

Index Starting Level

The “Index Starting Level” for each of the three Basket Indices is as follows:


Nikkei 225^SM Index		16,401.73

MSCI Singapore Free Index^SM		444.35

MSCI Taiwan^SM Index		357.54

“Index Ending Level” shall equal the Index Closing Level of the relevant Basket Index on the Final Valuation Date.

“Index Weightings” shall mean the weighting for the Basket Indices (each an “Index Weighting”). The Index Weightings of the three Basket Indices are as follows:


Nikkei 225^SM Index		33.34%

MSCI Singapore Free Index^SM		33.33%

MSCI Taiwan^SM Index		33.33%

“Market Disruption Event”, with respect to any of the Basket Indices (or any Successor Index) shall mean any of the following events has occurred on any day as determined by the Calculation Agent:

(1) a suspension, absence or material limitation of trading of stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Index) on the Relevant Exchanges for such securities at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange;

(2) a breakdown or failure in the price and trade reporting systems of the primary market of any Relevant Exchange as a result of which the reported trading prices for stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Index) at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange are materially inaccurate;

(3) a suspension, absence or material limitation of trading on any major securities exchange for trading in futures or options contracts or exchange traded funds related to such Basket Index (or the relevant Successor Index) at any time during the one hour period preceding the close of, the principal trading session on such exchange; or

(4) a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds;

For the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in a Basket Index is materially suspended or materially limited at that time, then the relevant percentage contribution of that security to the level of such Basket Index shall be based on a comparison of:

(1) the portion of the level of such Basket Index attributable to that security relative to

(2) the overall level of such Basket Index,

in each case immediately before that suspension or limitation.

For purposes of determining whether a Market Disruption Event has occurred:

(1) a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the Relevant Exchange or market;

(2) limitations pursuant to the rules of any Relevant Exchange similar to NYSE Rule 80B (or any applicable rule or regulation enacted or promulgated by any other self-regulatory organization or any government agency of scope similar to NYSE Rule 80B as determined by the Calculation Agent in its sole discretion) on trading during significant market fluctuations will constitute a suspension, absence or material limitation of trading;

(3) a suspension of trading in futures or options contracts on the Basket Index by the primary securities market trading in such contracts by reason of (i) a price change exceeding limits set by such exchange or market, (ii) an imbalance of orders relating to such contracts, or (iii) a disparity in bid and ask quotes relating to such contracts, will, in each such case, constitute a suspension, absence or material limitation of trading in futures or options contracts related to the Basket Index; and

(4) a suspension, absence or material limitation of trading on any Relevant Exchange or on the primary market on which futures or options contracts related to the Basket Index are traded will not include any time when such market is itself closed for trading under ordinary circumstances.

“Maturity Date” shall mean September 28, 2012, unless that day is not a Business Day, in which case the amount equal to the Payment at Maturity that would otherwise be made on the scheduled Maturity Date will instead be due on the next succeeding Business Day following such scheduled Maturity Date, with the same effect as if paid on the scheduled Maturity Date; provided, that if due to a non-Trading Day or a Market Disruption Event, the Final Valuation Date is postponed so that it falls less than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Final Valuation Date, as postponed.

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

“Participation Rate” shall be equal to 115%.

“Payment at Maturity”, as calculated by the Calculation Agent, shall equal a cash payment per $1,000 principal amount Security of $1,000 plus the Additional Amount (which may be zero).

“Place of Payment” shall mean the place or places where the Payment at Maturity on the Securities is payable.

“Relevant Exchange” shall mean, for any security then included in any Basket Index or any Successor Index, the primary exchange, quotation system (which includes bulletin board services) or other market of trading for such security.

“Securities” shall have the meaning set forth on the reverse of this Security.

“Successor Basket Index” shall have the meaning specified under “Discontinuation of a Basket Index; Alteration of Method of Calculation” with respect to each Basket Index.

“Trade Date” shall mean September 25, 2007.

“Trading Day” means a day, as determined by the Calculation Agent, on which trading is generally conducted on (i) the Relevant Exchanges for securities included in the Basket Indices (or the relevant Successor Indices) and (ii) the exchanges on which futures or options contracts related to the Basket Indices are traded, other than a day on which trading is scheduled to close prior to its regular weekday closing time.

“Trustee” shall have the meaning set forth on the reverse of this Security.

All terms used but not defined in this Security are used herein as defined in the Calculation Agency Agreement or the Indenture.

Calculation Agent

The Calculation Agent will determine, among other things, the Basket Ending Level, the Basket Return, the Index Return for each Basket Index, the Additional Amount, if any, the amount that we will pay you at maturity, as well as whether the Basket Ending Level is equal to or greater than the Basket Starting Level. The Calculation Agent will also be responsible for determining whether a Market Disruption Event has occurred, whether any of the Basket Indices has been discontinued, whether there has been a material change in the method of calculation of any of the Basket Indices. All calculations, determinations and adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities without the Holders’ consent and without notifying Holders.

Discontinuation of a Basket Index; Alteration of Method of Calculation

Nikkei 225^SM Index

for the Successor Basket Index on the Final Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If Nikkei Inc. discontinues publication of the Nikkei 225^SM Index prior to, and such discontinuation is continuing on, the Final Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on the Final Valuation Date, or if Nikkei Inc. (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the Nikkei 225^SM Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Nikkei 225^SM Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the Nikkei 225^SM Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the Nikkei 225^SM Index or Successor Basket Index, as applicable.

If at any time the method of calculating the Nikkei 225^SM Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the Nikkei 225^SM Index or a Successor Basket Index is in any other way modified so that the Nikkei 225^SM Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Nikkei 225^SM Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Nikkei 225^SM Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to Nikkei 225^SM Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the Nikkei 225^SM Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the Nikkei 225^SM Index or a Successor Basket Index is modified so that the level of Nikkei 225^SM Index or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Nikkei 225^SM Index), then the Calculation Agent will adjust its calculation of the Nikkei 225^SM Index or such Successor Basket Index in order to arrive at a level of Nikkei 225^SM Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

MSCI Singapore Free Index^SM

If Morgan Stanley Capital International Inc. (“MSCI”) discontinues publication of the MSCI Singapore Free Index^SM and MSCI or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued MSCI Singapore Free Index^SM (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Final Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If MSCI discontinues publication of the MSCI Singapore Free Index^SM prior to, and such discontinuation is continuing on, the Final Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on the Final Valuation Date, or if MSCI (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the MSCI Singapore Free Index^SM (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the MSCI Singapore Free Index^SM or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the MSCI Singapore Free Index^SM Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the MSCI Singapore Free Index^SM or Successor Basket Index, as applicable.

If at any time the method of calculating the MSCI Singapore Free Index^SM or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the MSCI Singapore Free Index^SM or a Successor Basket Index is in any other way modified so that the MSCI Singapore Free Index^SM or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the MSCI Singapore Free Index^SM or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the MSCI Singapore Free Index^SM Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the MSCI Singapore Free Index^SM or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the MSCI Singapore Free Index^SM or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the MSCI Singapore Free Index^SM or a Successor Basket Index is modified so that the level of the MSCI Singapore Free Index^SM or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the MSCI Singapore Free Index^SM), then the Calculation Agent will adjust its calculation of the MSCI Singapore Free Index^SM or such Successor Basket Index in order to arrive at a level of the MSCI Singapore Free Index^SM or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

MSCI Taiwan^SM Index

If MSCI discontinues publication of the MSCI Taiwan^SM Index and MSCI or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued MSCI Taiwan^SM Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Final Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If MSCI discontinues publication of the MSCI Taiwan^SM Index prior to, and such discontinuation is continuing on, the Final Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on the Final Valuation Date, or if MSCI (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the MSCI Taiwan^SM Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the MSCI Taiwan^SM Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the MSCI Taiwan^SM Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the MSCI Taiwan^SM Index or Successor Basket Index, as applicable.

If at any time the method of calculating the MSCI Taiwan^SM Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the MSCI Taiwan^SM Index or a Successor Basket Index is in any other way modified so that the MSCI Taiwan^SM Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the MSCI Taiwan^SM Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the MSCI Taiwan^SM Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the MSCI Taiwan^SM Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the MSCI Taiwan^SM Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the MSCI Taiwan^SM Index or any Successor Basket Index is modified so that the level of the MSCI Taiwan^SM Index or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the MSCI Taiwan^SM Index), then the Calculation Agent will adjust its calculation of the MSCI Taiwan^SM Index or such Successor Basket Index in order to arrive at a level of the MSCI Taiwan^SM Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

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

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

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

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

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

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

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

Dated:

__________________________________________

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

Signature(s) Guaranteed:

__________________________

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

EX-4.02 3 dex402.htm FORM OF SENIOR DEBT SECURITY MEDIUM-TERM NOTE (S & P 500 INDEX) Form of senior debt security medium-term note (S & P 500 Index)

Exhibit 4.02

LEHMAN BROTHERS HOLDINGS INC.

100% Principal Protected Monthly Return Notes Linked to a Seasonal Strategy on the S&P 500^{^®}Index Due August 3, 2012


Number R-1		$396,000
ISIN US52517P5J60		CUSIP 52517P5J6

See Reverse for Certain Definitions

Any amount payable on the Maturity Date hereon will be paid only upon presentation and surrender of this Security.

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

“Standard & Poor’s”, “S&P”, “S&P 500” and “Standard & Poor’s 500” are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by Lehman Brothers Inc. and sub-licensed for use by the Company. The Securities, which are linked to the performance of the S&P 500^® Index, are not sponsored, endorsed, sold or promoted by Standard & Poor’s, and Standard & Poor’s makes no representation regarding the advisability of investing in the Securities. This Security shall not be valid or become obligatory for any purpose until the certificate of authentication hereon shall have been signed by the Trustee under the Indenture referred to on the reverse hereof.


Dated: September 28, 2007	LEHMAN BROTHERS HOLDINGS INC.

[SEAL]	By:
		Vice President

	Attest:
		Assistant Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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


CITIBANK, N.A.
as Trustee

By:
		Authorized Officer

Reverse of Security

This Security is one of a duly authorized series of Securities of the Company designated as 100% Principal Protected Monthly Return Notes Linked to a Seasonal Strategy on the S&P 500^® Index Due August 3, 2012 (herein called the “Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such additional securities shall be consolidated and form a single series with the Securities; provided that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank, N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), 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 Company, the Trustee and the Holders of the Securities.

All calculations with respect to the Monthly Index Return, Final Strategy Return or any Index Closing Level will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., ..876545 would be rounded to .87655); all dollar amounts related to determination of the payment per $1,000 principal amount Security on the Maturity Date, if any, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking fund.

If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal to the Payment at Maturity calculated as if the date of acceleration were the Maturity Date and as if the Trading Day preceding the date of acceleration were the Final Observation Day; provided, however, that if the date of acceleration occurs in a month that is not an Index Observation Month, the Final Strategy Return will be the sum of the Monthly Index Returns for the Index Observation Months that occurred before the date of acceleration. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as possible and in no event later than two Business Days after the date of acceleration.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66²/3% in aggregate principal amount of each series of Securities at the time Outstanding to be affected (each series voting as a class), 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 principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, if any, or reduce any premium payable on redemption, or make the principal thereof, or premium, if any, or interest thereon, if any, 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, or the principal of, or premium, if any, on any of the Securities of such series, or in the payment of any sinking fund installment or analogous obligation with respect to Securities of such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.

The Securities are issuable in denominations of $1,000 and any whole multiples of $1,000.

No recourse for the payment of the principal of, premium, if any, or interest on this Security, 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 Security, or because of the creation of any indebtedness represented thereby, shall be had against any incorporator, stockholder, officer or director, as such, past, present or future, of the Company or of any successor corporation, either directly or through the Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

The Company agrees, and by acceptance of beneficial ownership interest in the Securities, each Holder will be deemed to have agreed, for United States federal income tax purposes, (i) to treat the Securities 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 Securities. The Company has determined that the comparable yield is an annual rate of 5.5793%, compounded semiannually. Based on the comparable yield, the projected payment schedule per $1,000 principal amount Security is $1,304.70 due at maturity.

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

Definitions

Set forth below are definitions of the terms used in this Security.

“Additional Amount”, as calculated by the Calculation Agent, per $1,000 principal amount Security paid at maturity shall equal the product of (i) $1,000, (ii) the Final Strategy Return and (iii) the Participation Rate; provided, however, that the Additional Amount will not be less than zero.

“Business Day”, notwithstanding any provision in the Indenture, shall mean any day that is not a Saturday or Sunday and that is not a day on which banking institutions in The City of New York are authorized or obligated by law to close.

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

“Final Strategy Return”, as calculated by the Calculation Agent, is the sum of the Monthly Index Returns for the Index Observation Months.

“Final Observation Day” means the last Monthly Observation Day before the Maturity Date.

“Holder” shall have the meaning set forth on the reverse of this Security.

“Indenture” shall have the meaning set forth on the reverse of this Security.

“Index” shall mean the S&P 500^® Index, as calculated, published and disseminated by S&P.

“Index Closing Level”, as determined by the Calculation Agent, shall mean, with respect to any Trading Day, the closing level of the Index or the Successor Index, as the case may be, at the regular official weekday close of the principal trading session of the Relevant Exchange or market for the Index or the Successor Index, as the case may be, on such day, or as determined by the Calculation Agent pursuant to the Calculation Agency Agreement as described below under “Discontinuation of the Index; Alteration of Method of Calculation.”

The Index Closing Level for a Monthly Observation Day will not be determined on a date later than the eighth scheduled Trading Day after such Monthly Observation Day, as originally scheduled, and if such day is not a Trading Day, or if a Market Disruption Event occurs on such date, the Calculation Agent will determine the Index Closing Level for such day in accordance with the formula for and method of calculating the Index Closing Level last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, the Calculation Agent’s good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of each security most recently making up the Index.

“Index Observation Month” means any one of the following months of each year: January, March, April, May, July, October, November and December, beginning October 2007 and ending July 2012, inclusively.

“Market Disruption Event”, with respect to the Index or any Successor Index shall mean any of the following events has occurred on any day as determined by the Calculation Agent:

(1) a suspension, absence or material limitation of trading of stocks then constituting 20% or more of the level of the Index (or the relevant Successor Index) on the Relevant Exchanges for such securities at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange;

(2) a breakdown or failure in the price and trade reporting systems of any Relevant Exchange as a result of which the reported trading prices for stocks then constituting 20% or more of the level of the Index (or the relevant Successor Index) at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange are materially inaccurate;

(3) a suspension, absence or material limitation of trading on any major securities exchange for trading in futures or options contracts or exchange traded funds related to the Index (or the relevant Successor Index) at any time during the one hour period preceding the close of the principal trading session on such exchange; or

(4) a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds.

For the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in the Index is materially suspended or materially limited at that time, then the relevant percentage contribution of that security to the level of the Index shall be based on a comparison of:

(1) the portion of the level of the Index attributable to that security relative to

(2) the overall level of the Index,

in each case immediately before that suspension or limitation.

For purposes of determining whether a Market Disruption Event has occurred:

(3) a suspension of trading in futures or options contracts on the Index by the primary securities market trading in such contracts by reason of (i) a price change exceeding limits set by such exchange or market, (ii) an imbalance of orders relating to such contracts, or (iii) a disparity in bid and ask quotes relating to such contracts, will, in each such case, constitute a suspension, absence or material limitation of trading in futures or options contracts related to the Index; and

(4) a suspension, absence or material limitation of trading on any Relevant Exchange or on the primary market on which futures or options contracts related to the Index are traded will not include any time when such market is itself closed for trading under ordinary circumstances.

“Maturity Date” shall mean August 3, 2012, unless that day is not a Business Day, in which case the amount equal to the Payment at Maturity will be made on the next succeeding Business Day following August 3, 2012; provided, however, that if due to a non-Trading Day or a Market Disruption Event, the final Monthly Observation Day is postponed so that it falls fewer than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Final Observation Day, as postponed.

“Monthly Index Return” as calculated by the Calculation Agent, for each of the Index Observation Months, shall be calculated as follows:

Observation Month Closing Index Level – Preceding Month Closing Index Level

Preceding Month Closing Index Level

“Monthly Observation Day” means, as to any month, the last scheduled Trading Day of that month, except that, if a Monthly Observation Day is not a Trading Day or if a Market Disruption Event occurs on such day, the applicable Monthly Observation Day will be postponed to the immediately succeeding Trading Day during which no Market Disruption Event shall have occurred or is continuing.

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

“Observation Month Closing Index Level” means, with respect to any Index Observation Month, the Index Closing Level on the Monthly Observation Day of such month.

“Participation Rate” shall equal 110%.

“Payment at Maturity”, as calculated by the Calculation Agent, for each $1,000 principal amount Security shall equal the sum of (i) $1,000 and (ii) the Additional Amount.

“Place of Payment” shall mean the place or places where the Payment at Maturity on the Securities is payable.

“Preceding Month Closing Index Level” means, with respect to any Index Observation Month, the Index Closing Level on the Monthly Observation Day of the immediately preceding month, whether or not that month is an Index Observation Month.

“Pricing Date” shall mean September 25, 2007.

“Relevant Exchange” shall mean, for any security (or any combination thereof) then included in the Index or any Successor Index, the primary exchange, quotation system (which includes bulletin board services) or other market of trading for such security.

“S&P” shall mean Standard & Poor’s, a division of The McGraw-Hill Companies, Inc.

“Securities” shall have the meaning set forth on the reverse of this Security.

“Successor Index” shall have the meaning specified under “Discontinuation of the Index; Alteration of Method of Calculation.”

“Trading Day” means a day, as determined by the Calculation Agent, on which trading is generally conducted on (i) the Relevant Exchanges for securities underlying the Index and (ii) the exchanges on which futures or options contracts related to the Index are traded, other than a day on which trading on such Relevant Exchange or exchange on which such securities, futures or options contracts are traded is scheduled to close prior to its scheduled weekday closing time.

“Trustee” shall have the meaning set forth on the reverse of this Security.

All terms used but not defined in this Security are used herein as defined in the Calculation Agency Agreement or the Indenture.

Calculation Agent

The Calculation Agent will determine, among other things, the Index Closing Level on each applicable Monthly Observation Day; the Monthly Index Returns; the Final Strategy Return; and the Payment at Maturity. In addition, the Calculation Agent will determine whether there has been a Market Disruption Event or a discontinuation of the Index, and whether there has been a material change in the method of calculation of the Index. All calculations, determinations or adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities without the Holders’ consent and without notifying Holders.

Discontinuation of the Index; Alteration of Method of Calculation

If S&P discontinues publication of the Index and S&P or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Index (an “S&P 500^® Successor Index”), then any Index Closing

Level will be determined by reference to the level of such S&P 500^® Successor Index at the close of trading on the Relevant Exchange or market for the S&P 500^® Successor Index on each applicable Monthly Observation Day. Upon any selection by the Calculation Agent of an S&P 500^® Successor Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If S&P discontinues publication of the Index prior to, and such discontinuation is continuing on, an applicable Monthly Observation Day, and the Calculation Agent determines, in its sole discretion, that no S&P 500^{^®}Successor Index is available at such time, or the Calculation Agent has previously selected an S&P 500^{^®}Successor Index and publication of such Successor Index is discontinued prior to, and such discontinuation is continuing on, such applicable Monthly Observation Day, or if S&P (or the publisher of any S&P 500^{^®}Successor Index) fails to calculate and publish an Index Closing Level for the Index (or any S&P 500^{^®}Successor Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Index Closing Level for such date. The Index Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Index or S&P 500^{^®}Successor Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish an Index Closing Level for the Index or S&P 500^{^®}Successor Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the Index or S&P 500^{^®}Successor Index, as applicable.

If at any time the method of calculating the Index or an S&P 500^{^®}Successor Index, or the level thereof, is changed in a material respect, or if the Index or an S&P 500^{^®}Successor Index is in any other way modified so that the Index or such S&P 500^{^®}Successor Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Index or such S&P 500^{^®}Successor Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Index or such S&P 500^{^®}Successor Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the Index or such S&P 500^{^®}Successor Index, as adjusted. Accordingly, if the method of calculating the Index or an S&P 500^{^®}Successor Index is modified so that the level of the Index or such S&P 500^{^®}Successor Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), then the Calculation Agent will adjust its calculation of the Index or such S&P 500^{^®}Successor Index in order to arrive at a level of the Index or such S&P 500^{^®}Successor Index as if there had been no such modification (e.g., as if such split had not occurred).

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

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

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

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

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

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

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

Dated:

__________________________________________

Signature(s) Guaranteed:

__________________________

EX-4.03 4 dex403.htm FORM OF SENIOR DEBT SECURITY MEDIUM-TERM NOTE (INTERNATIONAL INDEX BASKET) Form of senior debt security medium-term note (International Index Basket)

Exhibit 4.03

LEHMAN BROTHERS HOLDINGS INC.

Return Optimization Securities Linked to an International Index Basket Due March 31, 2009


Number R-1		$16,785,040
ISIN US52522L2363		CUSIP 52522L236

See Reverse for Certain Definitions

LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the “Company”), for value received, hereby promises to pay to CEDE & CO. or registered assigns, at the office or agency of the Company in the Borough of Manhattan, The City of New York, on the Maturity Date, in such coin or currency of the United States of America at the time of payment shall be legal tender for the payment of public and private debts, for each $10 principal amount of the Securities represented hereby, an amount equal to the Payment at Maturity. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

Any amount payable on the Maturity Date hereon will be paid only upon presentation and surrender of this Security.

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


Dated: September 28, 2007	LEHMAN BROTHERS HOLDINGS INC.

[SEAL]	By:
		Vice President

	Attest:
		Assistant Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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


CITIBANK, N.A. as Trustee

By:
		Authorized Officer

Reverse of Security

This Security is one of a duly authorized series of Securities of the Company designated as Return Optimization Securities Linked to an International Index Basket Due March 31, 2009 (herein called the “Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such additional securities shall be consolidated and form a single series with the Securities; provided that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank, N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), 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 Company, the Trustee and the Holders of the Securities.

The Payment at Maturity at the request of the Trustee shall be determined by the Calculation Agent pursuant to the Calculation Agency Agreement. The Trustee shall fully rely on the determination by the Calculation Agent of the Payment at Maturity and shall have no duty to make any such determination. The Calculation Agent will provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, of the Payment at Maturity on or prior to 11:00 a.m. on the Business Day preceding the Maturity Date.

All calculations with respect to the Basket Ending Level and the Basket Return will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the payment per $10 principal amount Security at maturity will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking fund.

If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal to the Payment at Maturity calculated as though the date of acceleration were the Maturity Date and the third Business Day immediately preceding the date of acceleration were the Valuation Date. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as possible and in no event later than two Business Days after the date of acceleration.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66²/3% in aggregate principal amount of each series of

Securities at the time Outstanding to be affected (each series voting as a class), 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 principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, if any, or reduce any premium payable on redemption, or make the principal thereof, or premium, if any, or interest thereon, if any, 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, or the principal of, or premium, if any, on any of the Securities of such series, or in the payment of any sinking fund installment or analogous obligation with respect to Securities of such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.

The Securities are issuable in denominations of $10 and any whole multiples of $10.

Company or any successor corporation, whether by virtue of any constitution, statute or rule of law or by the enforcement of any assessment or penalty or otherwise, all such liability being, by the acceptance hereof and as part of the consideration for the issue hereof, expressly waived and released.

The Company intends to treat, and by purchasing this Security, the Holder agrees to treat, for all tax purposes, this Security as a cash-settled financial contract, rather than as a debt instrument.

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

Definitions

Set forth below are definitions of the terms used in this Security.

“Basket” shall mean the basket of six indices to which the Securities are linked. The Basket consists of the Dow Jones EURO STOXX 50^® Index, the FTSE 100 Index^®, the Nikkei 225^SM Index, the Swiss Market Index^®, the S&P^®/ASX 200 Index and the MSCI Emerging Markets Index^SM.

“Basket Ending Level”, as calculated by the Calculation Agent, is calculated as follows:

Basket Starting Level × [1 + (the sum of (Basket Index Return × Index Weighting)

for all Basket Indices)]

“Basket Index” refers to each of the Dow Jones EURO STOXX 50^® Index, the FTSE 100 Index^®, the Nikkei 225^SM Index, the Swiss Market Index^®, the S&P^® /ASX 200 Index and the MSCI Emerging Markets Index^SM.

“Basket Index Ending Level” of a Basket Index is the Closing Level of that Basket Index on the Valuation Date.

“Basket Index Return”, as calculated by the Calculation Agent, is calculated as follows for each Basket Index:

Basket Index Ending Level – Basket Index Starting Level

Basket Index Starting Level

“Basket Index Starting Level” for each of the six Basket Indices is as follows:


Dow Jones EURO STOXX 50^® Index		4,328.89

FTSE 100 Index^®		6,396.90

Nikkei 225^SM Index		16,401.73

Swiss Market Index^®		8,829.15

S&P^®/ASX 200 Index		6,483.00

MSCI Emerging Markets Index^SM		1,170.09

“Basket Return”, as calculated by the Calculation Agent, is calculated as follows:

Basket Ending Level – Basket Starting Level

Basket Starting Level

“Basket Starting Level” will be set to equal 100 on the Pricing Date.

“Closing Level” of a Basket Index on any Trading Day will equal the official closing level of such Basket Index, or any Successor Basket Index thereto, published following the regular official weekday close of trading for such Basket Index on that Trading Day.

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

“Holder” shall have the meaning set forth on the reverse of this Security.

“Indenture” shall have the meaning set forth on the reverse of this Security.

“Index Weighting” shall mean, with respect to each Basket Index, the weighting for such Basket Index (each an “Index Weighting”). The Index Weightings of the six Basket Indices are as follows:


Dow Jones EURO STOXX 50^® Index	35	%

FTSE 100 Index^®	25	%

Nikkei 225^SM Index	25	%

Swiss Market Index^®	5	%

S&P^®/ASX 200 Index	5	%

MSCI Emerging Markets Index^SM	5	%

“Leverage Factor” shall equal 3.

“Market Disruption Event”, with respect to any of the Basket Indices (or any Successor Basket Index), means:

•

a suspension, absence or material limitation of trading of stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Basket Index) on the Relevant Exchanges for such securities at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange;

•

a breakdown or failure in the price and trade reporting systems of the primary market of any Relevant Exchange as a result of which the reported trading prices for stocks then constituting 20% or more of the level of such Basket Index (or the relevant Successor Basket Index) at any time during the one hour period preceding the close of the principal trading session on such Relevant Exchange are materially inaccurate;

•

a suspension, absence or material limitation of trading on any major securities exchange for trading in futures or options contracts or exchange traded funds related to such Basket Index (or the relevant Successor Basket Index) at any time during the one hour period preceding the close of the principal trading session on such exchange; or

•

a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds;

in each case as determined by the Calculation Agent in its sole discretion.

For the purpose of determining whether a Market Disruption Event exists at any time, if trading in a security included in a Basket Index (or the relevant Successor Basket Index) is materially suspended or materially limited at that time, then the relevant percentage contribution of that security to the level of such Basket Index (or the relevant Successor Basket Index) shall be based on a comparison of:

•

the portion of the level of such Basket Index (or the relevant Successor Basket Index) attributable to that security relative to

•

the overall level of such Basket Index (or the relevant Successor Basket Index),

•

in each case immediately before that suspension or limitation.

•

For purposes of determining whether a Market Disruption Event has occurred:

•

a limitation on the hours or number of days of trading will not constitute a Market Disruption Event if it results from an announced change in the regular business hours of the Relevant Exchange or market;

•

limitations pursuant to the rules of any Relevant Exchange similar to NYSE Rule 80B (or any applicable rule or regulation enacted or promulgated by any other self-regulatory organization or any government agency of scope similar to NYSE Rule 80B as determined by the Calculation Agent in its sole discretion) on trading during significant market fluctuations will constitute a suspension, absence or material limitation of trading;

•

a suspension of trading in futures or options contracts on a Basket Index (or the relevant Successor Basket Index) by the primary securities market trading in such contracts by reason of:

•

a price change exceeding limits set by such exchange or market,

•

an imbalance of orders relating to such contracts, or

•

a disparity in bid and ask quotes relating to such contracts

will, in each such case, constitute a suspension, absence or material limitation of trading in futures or options contracts related to such Basket Index (or the relevant Successor Basket Index); and

•

a suspension, absence or material limitation of trading on any Relevant Exchange or on the primary market on which futures or options contracts related to a Basket Index (or the relevant Successor Basket Index) are traded will not include any time when such market is itself closed for trading under ordinary circumstances.

“Maturity Date” shall mean March 31, 2009, unless that day is not a Business Day, in which case the amount equal to the Payment at Maturity that would otherwise be due on the scheduled Maturity Date will instead be due on the next succeeding Business Day following such scheduled Maturity Date, with the same effect as if paid on the scheduled Maturity Date; provided that if due to a non-Trading Day or a Market Disruption Event, the Valuation Date is postponed so that it falls less than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Valuation Date, as postponed.

“Payment at Maturity”, as calculated by the Calculation Agent for each $10 principal amount Security, shall equal:

•

If the Basket Ending Level is above the Basket Starting Level, the lesser of:

(1) $10 + ($10 × Basket Return × Leverage Factor); and

(2) $12.97

•

If the Basket Ending Level is equal to or below the Basket Starting Level, $10 + ($10 × Basket Return).

“Place of Payment” shall mean the place or places where the Payment at Maturity on the Securities is payable.

“Pricing Date” shall mean September 25, 2007.

“Relevant Exchange” for any security (or any combination thereof) then included in a Basket Index or any Successor Basket Index, means the primary exchange, quotation system (which includes bulletin board services) or other market of trading for such security.

“Securities” shall have the meaning set forth on the reverse of this Security.

“Successor Basket Index” shall have the meaning specified under “Discontinuation of a Basket Index; Alteration of Method of Calculation” with respect to each Basket Index.

“Trading Day” means a day, as determined by the Calculation Agent, on which trading is generally conducted (i) on the Relevant Exchanges for securities included in the Basket Index (or the relevant Successor Basket Index) and (ii) the exchanges on which futures or options contracts related to the Basket Index (or the relevant Successor Basket Index) are traded, other than a day on which trading on such Relevant Exchange or exchange on which such securities, futures or options contracts are traded is scheduled to close prior to its scheduled weekday closing time.

“Trustee” shall have the meaning set forth on the reverse of this Security.

“Valuation Date” shall mean March 26, 2009; provided, however, that if the Valuation Date is not a Trading Day or if there is a Market Disruption Event on such day, with respect to a Basket Index, the Calculation Agent will:

•

with respect to each Basket Index for which such day is a Trading Day and for which a Market Disruption Event has not occurred, determine the Closing Level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the Closing Level of such Basket Index on that Trading Day; and

•

with respect to each Basket Index for which such day is not a Trading Day or for which a Market Disruption Event has occurred, determine the Closing Level of such Basket Index for use in calculating the Basket Index Ending Level by reference to the Closing Level of such Basket Index on the next Trading Day for such Basket Index on which there is not a Market Disruption Event; provided, however, if a Market Disruption Event with respect

to such Basket Index occurs on each of the eight Trading Days following the originally scheduled Valuation Date, then the Calculation Agent shall determine the Closing Level of such Basket Index for use in calculating the Basket Index Ending Level in accordance with the formula for and method of calculating the Closing Level of such Basket Index last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of each security most recently included in the Basket Index.

All terms used but not defined in this Security are used herein as defined in the Calculation Agency Agreement or the Indenture.

Calculation Agent

The Calculation Agent will determine, among other things, the Basket Ending Level (including each Basket Index Return and each Basket Index Ending Level), the Basket Return and the Payment at Maturity, if any, on the Securities. In addition, the Calculation Agent will determine whether there has been a Market Disruption Event or a discontinuation of any Basket Index (or the relevant Successor Basket Index) and whether there has been a material change in the method of calculating any of the Basket Indices. All calculations, determinations and adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities without Holders’ consent and without notifying Holders.

Discontinuation of a Basket Index; Alteration of Method of Calculation

Dow Jones EURO STOXX 50^® Index

If STOXX Limited discontinues publication of the Dow Jones EURO STOXX 50^® Index and STOXX Limited or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Dow Jones EURO STOXX 50^® Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If STOXX Limited discontinues publication of the Dow Jones EURO STOXX 50^® Index prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such

Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if STOXX Limited (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the Dow Jones EURO STOXX 50^® Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Dow Jones EURO STOXX 50^® Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the Dow Jones EURO STOXX 50^® Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the Dow Jones EURO STOXX 50^® Index or Successor Basket Index, as applicable.

If at any time the method of calculating the Dow Jones EURO STOXX 50^® Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the Dow Jones EURO STOXX 50^® Index or a Successor Basket Index is in any other way modified so that the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Dow Jones EURO STOXX 50^® Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the Dow Jones EURO STOXX 50^® Index or a Successor Basket Index is modified so that the level of the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Dow Jones EURO STOXX 50^® Index), then the Calculation Agent will adjust its calculation of the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index in order to arrive at a level of the Dow Jones EURO STOXX 50^® Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

FTSE 100 Index^®

If FTSE discontinues publication of the FTSE 100 Index^{^®}and FTSE or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued FTSE 100 Index^{^®}(such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the level of such Successor Basket Index at the close of trading on the relevant exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If FTSE discontinues publication of the FTSE 100 Index^{^®}prior to, and such discontinuance is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if FTSE (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the FTSE 100 Index^{^®}(or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the FTSE 100 Index^{^®}or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the FTSE 100 Index^{^®}or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the FTSE 100 Index^{^®}or Successor Basket Index, as applicable.

If at any time the method of calculating the FTSE 100 Index^{^®}or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the FTSE 100 Index^{^®}or a Successor Basket Index is in any other way modified so that the FTSE 100 Index^{^®}or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the FTSE 100 Index^{^®}or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the FTSE 100 Index^{^®}Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the FTSE 100 Index^{^®}or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the FTSE 100 Index^{^®}or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the FTSE 100 Index^{^®}or a Successor Basket Index is modified so that the level of such FTSE 100 Index^{^®}or FTSE or Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the FTSE 100 Index^®), then the Calculation Agent will adjust such FTSE 100 Index in order to arrive at a level of the FTSE 100 Index^{^®}or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

Nikkei 225^SM Index

If Nikkei Inc. discontinues publication of the Nikkei 225^SM Index and Nikkei Inc. or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Nikkei 225^SM Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level for such Basket Index will be determined by reference to the level of such Successor Basket Index at the close of trading on the Tokyo Stock Exchange (2^nd session) or the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If Nikkei Inc. discontinues publication of the Nikkei 225^SM Index prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on the Valuation Date, or if Nikkei Inc. (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the Nikkei 225^SM Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Nikkei 225^SM Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the Nikkei 225^SM Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the Nikkei 225^SM Index or Successor Basket Index, as applicable.

Swiss Market Index^®

If SWX Swiss Exchange discontinues publication of the Swiss Market Index^® and SWX Swiss Exchange or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Swiss Market Index^{^®}(such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If SWX Swiss Exchange discontinues publication of the Swiss Market Index^{^®}prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if SWX Swiss Exchange (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the SWX Swiss Exchange Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Swiss Market Index^{^®}or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the Swiss Market Index^® or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the Swiss Market Index^{^®}or Successor Basket Index, as applicable.

If at any time the method of calculating the Swiss Market Index^{^®}or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the Swiss Market Index^{^®}or a Successor Basket Index is in any other way modified so that the Swiss Market Index^{^®}or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Swiss Market Index^{^®}or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Swiss Market Index^{^®}Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Swiss Market Index^{^®}or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the Swiss Market Index^{^®}or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the Swiss Market Index^{^®}or a Successor Basket Index is modified so that the level of such Swiss Market Index^{^®}or such or Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Swiss Market Index^®), then the Calculation Agent will adjust such Swiss Market Index^{^®}in order to arrive at a level of the Swiss Market Index^{^®}or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

S&P^®/ASX 200 Index

If the S&P/ASX Committee discontinues publication of the S&P^®/ASX 200 Index and the S&P/ASX Committee or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued S&P^®/ASX 200 Index (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If the S&P/ASX Committee discontinues publication of the Successor Basket Index prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if the S&P/ASX Committee (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the S&P^®/ASX 200 Index (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level on such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the S&P^®/ASX 200 Index or Successor Basket Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish a Closing Level for the S&P^®/ASX 200 Index or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently included in the S&P^®/ASX 200 Index or Successor Basket Index, as applicable.

If at any time the method of calculating the S&P^®/ASX 200 Index or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the S&P^®/ASX 200 Index or a Successor Basket Index is in any other way modified so that the S&P^®/ASX 200 Index or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the S&P^®/ASX 200 Index or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the S&P^®/ASX 200 Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the S&P^®/ASX 200 Index or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the S&P^®/ASX 200 Index or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the S&P^®/ASX 200 Index or a Successor Basket Index is modified so that the level of such S&P^®/ASX 200 Index or Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the S&P^®/ASX 200 Index), then the Calculation Agent will adjust such S&P^®/ASX 200 Index in order to arrive at a level of the S&P^®/ASX 200 Index or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

MSCI Emerging Market Index^SM

If MSCI discontinues publication of the MSCI Emerging Markets Index^SM and MSCI or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued MSCI Emerging Markets Index^SM (such index being referred to herein as a “Successor Basket Index”), then any Basket Index Closing Level will be determined by reference to the level of such Successor Basket Index at the close of trading on the Relevant Exchange or market for the Successor Basket Index on the Valuation Date. Upon any selection by the Calculation Agent of a Successor Basket Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If MSCI discontinues publication of the MSCI Emerging Markets Index^SM prior to, and such discontinuation is continuing on, the Valuation Date and the Calculation Agent determines, in its sole discretion, that no Successor Basket Index is available at such time, or the Calculation Agent has previously selected a Successor Basket Index and publication of such Successor Basket Index is discontinued prior to, and such discontinuation is continuing on, the Valuation Date, or if MSCI (or the publisher of any Successor Basket Index) fails to calculate and publish a Closing Level for the MSCI Emerging Markets Index^SM (or any Successor Basket Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Closing Level for such date. The Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the MSCI Emerging Markets Index^SM or Successor Basket Index, as applicable, last in effect prior to such discontinuation, or failure to calculate or publish a Closing Level for the MSCI Emerging Markets Index^SM or Successor Basket Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the MSCI Emerging Markets Index^SM or Successor Basket Index, as applicable.

If at any time the method of calculating the MSCI Emerging Markets Index^SM or a Successor Basket Index, or the level thereof, is changed in a material respect, or if the MSCI Emerging Markets Index^SM or a Successor Basket Index is in any other way modified so that the MSCI Emerging Markets Index^SM or such Successor Basket Index does not, in the opinion of the Calculation Agent, fairly represent the level of the MSCI Emerging Markets Index^SM or such Successor Basket Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the MSCI Emerging Markets Index^SM Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the MSCI Emerging Markets Index^SM or such Successor Basket Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Closing Level with reference to the MSCI Emerging Markets Index^SM or such Successor Basket Index, as adjusted. Accordingly, if the method of calculating the

MSCI Emerging Markets Index^SM or a Successor Basket Index is modified so that the level of the MSCI Emerging Markets Index^SM or such Successor Basket Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the MSCI Emerging Markets Index^SM), then the Calculation Agent will adjust its calculation of the MSCI Emerging Markets Index^SM or such Successor Basket Index in order to arrive at a level of the MSCI Emerging Markets Index^SM or such Successor Basket Index as if there had been no such modification (e.g., as if such split had not occurred).

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

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

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

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

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

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

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

Dated:

__________________________________________

Signature(s) Guaranteed:

__________________________

EX-4.04 5 dex404.htm FORM OF SENIOR DEBT SECURITY MEDIUM-TERM NOTE (GLOBAL INDEX BASKET) Form of senior debt security medium-term note (Global Index Basket)

Exhibit 4.04

LEHMAN BROTHERS HOLDINGS INC.

Performance Securities with Partial Protection Linked to a Global Index Basket Due September 30, 2010


Number R-1		$21,821,000
ISIN US52522L2447		CUSIP 52522L244

See Reverse for Certain Definitions

LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the “Company”), for value received, hereby promises to pay to CEDE & CO. or registered assigns, at the office or agency of the Company in the Borough of Manhattan, The City of New York, on the Maturity Date, in such coin or currency of the United States of America at the time of payment shall be legal tender for the payment of public and private debts, for each $10 principal amount of the Securities represented hereby, an amount equal to the Payment at Maturity. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

Any amount payable on the Maturity Date hereon will be paid only upon presentation and surrender of this Security.

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

Each Basket Index is a mark of the sponsor of such Basket Index and has been licensed for use by the Company. The Securities, which are linked to the performance of the Basket Indices, are not sponsored, endorsed, sold or promoted by the sponsors of the Basket Indices and the sponsors of the Basket Indices make no representation regarding the advisability of investing in the Securities.


Dated: September 28, 2007	LEHMAN BROTHERS HOLDINGS INC.

[SEAL]	By:

		Vice President

	Attest:
		Assistant Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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


CITIBANK, N.A. as Trustee

By:
		Authorized Officer

Reverse of Security

This Security is one of a duly authorized series of Securities of the Company designated as Performance Securities with Partial Protection Linked to a Global Index Basket Due September 30, 2010 (herein called the “Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such further securities shall be consolidated and form a single series with the Securities; provided, however, that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank, N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), 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 Company, the Trustee and the Holders of the Securities.

All calculations with respect to the Basket Ending Level and the Basket Return (including each Index Return) will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the Payment at Maturity per $10 principal amount Security will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking fund.

If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal the Payment at Maturity, which will be calculated as though the date of acceleration were the Maturity Date and the third Business Day immediately preceding the date of acceleration were the Final Valuation Date. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as possible and in no event later than two Business Days after the date of acceleration.

The Securities are issuable in denominations of $10 and any whole multiples of $10.

The Company intends to treat, and by purchasing this Security, the Holder agrees to treat, for all tax purposes, this Security as a cash-settled financial contract, rather than as a debt instrument.

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

Definitions

Set forth below are definitions of the terms used in this Security.

“Basket” shall mean the basket of three Basket Indices.

“Basket Ending Level,” as calculated by the Calculation Agent on the Final Valuation Date, shall be calculated as follows:

Basket Starting Level × [1 + (the sum of (Index Return × Index Weighting) for all Basket Indices)]

“Basket Index” refers to each of the S&P 500^® Index (SPX), the Dow Jones EURO STOXX 50^® Index (SX5E) and the Nikkei 225^SM Index (NKY) or any successor to any of the foregoing.

“Basket Return” as calculated by the Calculation Agent, is calculated as follows:

Basket Ending Level – Basket Starting Level

Basket Starting Level

“Basket Starting Level” equals 100.

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

“Final Valuation Date” shall mean September 27, 2010; provided, however, that if the Final Valuation Date is not a Trading Day or if there is a Market Disruption Event on such day, with respect to a Basket Index, the Calculation Agent will:

•

with respect to each Basket Index for which such day is a Trading Day and for which a Market Disruption Event has not occurred, determine the closing level of such Basket Index for use in calculating the Index Ending Level by reference to the closing level of such Basket Index on that Trading Day; and

•

with respect to each Basket Index for which such day is not a Trading Day or for which a Market Disruption Event has occurred, determine the closing level of such Basket Index for use in calculating the Index Ending Level by reference to the closing level of such Basket Index on the next Trading Day for such Basket Index on which no Market Disruption Event occurs; provided, however, if a Market Disruption Event with respect to such Basket Index occurs on each of the eight Trading Days following the originally scheduled Final Valuation Date, the Calculation Agent shall determine the Closing Level of such Basket Index for use in calculating the Index Ending Level in accordance with the formula for and method of calculating the closing index level of such Basket Index last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the closing price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the closing price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of each security most recently included in the Basket Index.

“Holder” shall have the meaning set forth on the reverse of this Security.

“Indenture” shall have the meaning set forth on the reverse of this Security.

“Index Closing Level”, as determined by the Calculation Agent, shall mean, with respect to any Trading Day and any Basket Index, the closing level of such Basket Index or the related Successor Index, as the case may be, at the regular official weekday close of the principal trading session of the Relevant Exchange or market for the Basket Index or the Successor Index, as the case may be, on such day, or as determined by the Calculation Agent pursuant to the Calculation Agency Agreement as described below under “Discontinuation of a Basket Index; Alteration of Method of Calculation.”

“Index Return,” as calculated by the Calculation Agent, is calculated as follows for each Basket Index:

Index Ending Level – Index Starting Level

Index Starting Level

“Index Ending Level” shall equal the Index Closing Level of a Basket Index on the Final Valuation Date.

“Index Starting Level”, with repect to any Basket Index, is the closing level of the Basket Index on September 25, 2007. The Index Starting Level for each of the three Basket Indices is as follows:


S&P 500^® Index (SPX)		1,517.21

Dow Jones EURO STOXX 50^® Index (SX5E)		4,328.89

Nikkei 225^SM Index (NKY)		16,401.73

“Index Weighting” shall mean the weighting for Basket Index. The Index Weightings of the three Basket Indices are as follows:


S&P 500^® Index (SPX)	33.34	%

Dow Jones EURO STOXX 50^® Index (SX5E)	33.33	%

Nikkei 225^SM Index (NKY)	33.33	%

(4) a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds;

in each case as determined by the Calculation Agent in its sole discretion.

(1) the portion of the level of such Basket Index attributable to that security relative to

(2) the overall level of such Basket Index,

in each case immediately before that suspension or limitation.

For purposes of determining whether a Market Disruption Event has occurred:

“Maturity Date” shall mean September 30, 2010, unless that day is not a Business Day, in which case the amount equal to the Payment at Maturity that would otherwise be made on the scheduled Maturity Date will instead be due on the next succeeding Business Day following such scheduled Maturity Date, with the same effect as if paid on the scheduled Maturity Date; provided, that if due to a non-Trading Day or a Market Disruption Event, the Final Valuation Date is postponed so that it falls less than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Final Valuation Date, as postponed.

“non-Trading Day” shall mean a day other than a Trading Day.

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

“Participation Rate” shall be equal to 115.3%.

“Payment at Maturity”, as calculated by the Calculation Agent, shall equal a cash payment per $10 principal amount Security equal to:

if the Basket Return is positive or zero,

$10 + [$10 × (Basket Return × Participation Rate)]; or

if the Basket return is less than zero but equal to or greater than -20%,

$10; or

if the Basket Return is less than -20%,

$10 + [$10 × (Basket Return + the Protection Percentage)].

“Place of Payment” shall mean the place or places where the Payment at Maturity on the Securities is payable.

“Protection Percentage” equals 20%.

“Relevant Exchange” shall mean, for any security (or any combination thereof) then included in any Basket Index or any Successor Index, the primary exchange, quotation system (which includes bulletin board services) or other market of trading for such security.

“Securities” shall have the meaning set forth on the reverse of this Security.

“Successor Index” shall mean an S&P 500^® Index Successor Index, a Dow Jones EURO STOXX 50^® Index Successor Index and a Nikkei 225^SM Index Successor Index, each as specified under “Discontinuation of a Basket Index; Alteration of Method of Calculation” with respect to each Basket Index.

“Trade Date” shall mean September 25, 2007.

“Trustee” shall have the meaning set forth on the reverse of this Security.

All terms used but not defined in this Security are used herein as defined in the Calculation Agency Agreement or the Indenture.

Calculation Agent

The Calculation Agent will determine, among other things, the Basket Ending Level, the Basket Return, the Index Return for each Basket Index, and the Payment at Maturity, as well as whether the Basket Ending Level is equal to or greater than the Basket Starting Level. The Calculation Agent will also be responsible for determining whether a Market Disruption Event has occurred, whether any of the Basket Indices has been discontinued, and whether there has been a material change in the method of calculation of any of the Basket Indices. All calculations, determinations and adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities without the Holders’ consent and without notifying Holders.

Discontinuation of a Basket Index; Alteration of Method of Calculation

S&P 500^® Index

If S&P discontinues publication of the S&P 500^® Index and S&P or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued S&P 500^® Index (an “S&P 500^® Index

Successor Index”), then the Index Closing Level for such Basket Index will be determined by reference to the level of such S&P 500^® Index Successor Index at the close of trading on the Relevant Exchange or market for the S&P 500^® Index Successor Index on the Final Valuation Date. Upon any selection by the Calculation Agent of an S&P 500^® Index Successor Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If S&P discontinues publication of the S&P 500^{^®}Index prior to, and such discontinuation is continuing on, the Final Valuation Date, and the Calculation Agent determines, in its sole discretion, that no S&P 500^® Index Successor Index is available at such time, or the Calculation Agent has previously selected an S&P 500^® Index Successor Index and publication of such S&P 500^® Index Successor Index is discontinued prior to, and such discontinuation is continuing on, the Final Valuation Date, or if S&P (or the publisher of any S&P 500^® Index Successor Index) fails to calculate and publish an Index Closing Level for the S&P 500^{^®}Index (or any S&P 500^® Index Successor Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Index Closing Level for such date. The Index Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the S&P 500^{^®}Index or S&P 500^® Index Successor Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish an Index Closing Level for the S&P 500^{^®}Index or S&P 500^® Index Successor Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the S&P 500^{^®}Index or S&P 500^® Index Successor Index, as applicable.

If at any time the method of calculating the S&P 500^{^®}Index or an S&P 500^® Index Successor Index, or the level thereof, is changed in a material respect, or if the S&P 500^{^®}Index or an S&P 500^® Index Successor Index is in any other way modified so that the S&P 500^{^®}Index or such S&P 500^® Index Successor Index does not, in the opinion of the Calculation Agent, fairly represent the level of the S&P 500^{^®}Index or such S&P 500^® Index Successor Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the S&P 500^{^®}Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the S&P 500^{^®}Index or such S&P 500^® Index Successor Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the S&P 500^{^®}Index or such S&P 500^® Index Successor Index, as adjusted. Accordingly, if the method of calculating the S&P 500^® Index or a Successor S&P 500^{^®}Index is modified so that the level of the S&P 500^{^®} Index or such S&P 500^® Index Successor Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), then the Calculation Agent will adjust its calculation of the S&P 500^{^®}Index or such S&P 500^® Index Successor Index in order to arrive at a level of the S&P 500^{^®}Index or such S&P 500^® Index Successor Index as if there had been no such modification (e.g., as if such split had not occurred).

Dow Jones EURO STOXX 50^® Index

Dow Jones EURO STOXX 50^® Index (a “Dow Jones EURO STOXX 50^® Index Successor Index”), then the Index Closing Level for such Basket Index will be determined by reference to the level of such Dow Jones EURO STOXX 50^® Index Successor Index at the close of trading on the Relevant Exchange or market for the Dow Jones EURO STOXX 50^® Index Successor Index on the Final Valuation Date. Upon any selection by the Calculation Agent of a Dow Jones EURO STOXX 50^® Index Successor Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If STOXX LIMITED discontinues publication of the Dow Jones EURO STOXX 50^® Index prior to, and such discontinuation is continuing on, the Final Valuation Date, and the Calculation Agent determines, in its sole discretion, that no Dow Jones EURO STOXX 50^® Index Successor Index is available at such time, or the Calculation Agent has previously selected a Dow Jones EURO STOXX 50^® Index Successor Index and publication of such Dow Jones EURO STOXX 50^® Index Successor Index is discontinued prior to, and such discontinuation is continuing on, the Final Valuation Date, or if STOXX LIMITED (or the publisher of any Dow Jones EURO STOXX 50^® Index Successor Index) fails to calculate and publish an Index Closing Level for the STOXX LIMITED EAFE Index (or any Dow Jones EURO STOXX 50^® Index Successor Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Index Closing Level for such date. The Index Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Dow Jones EURO STOXX 50^® Index or Dow Jones EURO STOXX 50^® Index Successor Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish an Index Closing Level for the Dow Jones EURO STOXX 50^® Index or Dow Jones EURO STOXX 50^® Index Successor Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the Dow Jones EURO STOXX 50^® Index or Dow Jones EURO STOXX 50^® Index Successor Index, as applicable.

If at any time the method of calculating the Dow Jones EURO STOXX 50^® Index or a Dow Jones EURO STOXX 50^® Index Successor Index, or the level thereof, is changed in a material respect, or if the Dow Jones EURO STOXX 50^® Index or a Dow Jones EURO STOXX 50^® Index Successor Index is in any other way modified so that the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index, as adjusted. Accordingly, if the method of calculating the Dow Jones EURO STOXX 50^® Index or a Dow Jones EURO STOXX 50^® Index Successor Index is modified so that the level of the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), then the Calculation Agent will adjust its calculation of the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index in order to arrive at a level of the Dow Jones EURO STOXX 50^® Index or such Dow Jones EURO STOXX 50^® Index Successor Index as if there had been no such modification (e.g., as if such split had not occurred).

Nikkei 225^SM Index

If Nikkei Inc. discontinues publication of the Nikkei 225^SM Index and Nikkei Inc. or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Nikkei 225^SM Index (an “Nikkei 225^SM Index Successor Index”), then the Index Closing Level for such Basket Index will be determined by reference to the level of such Nikkei 225^SM Index Successor Index at the close of trading on the Relevant Exchange or market for the Nikkei 225^SM Index Successor Index on the Final Valuation Date. Upon any selection by the Calculation Agent of a Nikkei 225^SM Index Successor Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If Nikkei Inc. discontinues publication of the Nikkei 225^SM Index prior to, and such discontinuation is continuing on, the Final Valuation Date, and the Calculation Agent determines, in its sole discretion, that no Nikkei 225^SM Index Successor Index is available at such time, or the Calculation Agent has previously selected a Nikkei 225^SM Index Successor Index and publication of such Nikkei 225^SM Index Successor Index is discontinued prior to, and such discontinuation is continuing on, the Final Valuation Date, or if Nikkei Inc. (or the publisher of any Nikkei 225^SM Index Successor Index) fails to calculate and publish an Index Closing Level for the Nikkei 225^SM Index (or any Nikkei 225^SM Index Successor Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Index Closing Level for such date. The Index Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Nikkei 225^SM Index or Nikkei 225^SM Index Successor Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish an Index Closing Level for the Nikkei 225^SM Index or Nikkei 225^SM Index Successor Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the Nikkei 225^SM Index or Nikkei 225^SM Index Successor Index, as applicable.

If at any time the method of calculating the Nikkei 225^SM Index or a Nikkei 225^SM Index Successor Index, or the level thereof, is changed in a material respect, or if the Nikkei 225^SM Index or a Nikkei 225^SM Index Successor Index is in any other way modified so that the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index, as adjusted. Accordingly, if the method of calculating the Nikkei 225^SM Index or a Nikkei 225^SM Index Successor Index is modified so that the level of the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), then the Calculation Agent will adjust its calculation of the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index in order to arrive at a level of the Nikkei 225^SM Index or such Nikkei 225^SM Index Successor Index as if there had been no such modification (e.g., as if such split had not occurred).

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

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

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

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

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

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

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

Dated:

__________________________________________

Signature(s) Guaranteed:

__________________________

EX-4.05 6 dex405.htm FORM OF SENIOR DEBT SECURITY MEDIUM-TERM NOTE (AMEX GOLD BUGS INDEX) Form of senior debt security medium-term note (AMEX Gold BUGS Index)

Exhibit 4.05

LEHMAN BROTHERS HOLDINGS INC.

Autocallable Optimization Securities with Contingent Protection Linked to The AMEX Gold BUGS Index^® Due March 30, 2009


Number R-1		$7,218,600
ISIN US52522L2694		CUSIP 52522L269

See Reverse for Certain Definitions

LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware (hereinafter called the “Company”), for value received, hereby promises to pay to CEDE & CO. or registered assigns, at the office or agency of the Company in the Borough of Manhattan, The City of New York, on the Maturity Date, in such coin or currency of the United States of America at the time of payment shall be legal tender for the payment of public and private debts, for each $10 principal amount of the Securities represented hereby, an amount equal to the Payment at Maturity or amount due upon an Automatic Call, if applicable. THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

Any amount payable on the Maturity Date or upon an Automatic Call, if applicable, hereon will be paid only upon presentation and surrender of this Security.

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

The Amex Gold BUGS Index (HUI) (“Index”) is sponsored by, and is a service mark of, the American Stock Exchange LLC (“Exchange”). The Index will be used with the permission of the Exchange.

The American Stock Exchange LLC in no way sponsors, endorses or is otherwise involved in the transactions specified and described in this document (“Transaction”) and the Exchange disclaims any liability to any party for any inaccuracy in the data on which the Index is based, for any mistakes, errors, or omissions in the calculation and/or dissemination of the Index, or for the manner in which it is applied in connection with the Transaction.


Dated: September 28, 2007		LEHMAN BROTHERS HOLDINGS INC.

[SEAL]	By:
		Vice President

	Attest:
		Assistant Secretary

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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


CITIBANK, N.A. as Trustee

By:
		Authorized Officer

Reverse of Security

This Security is one of a duly authorized series of Securities of the Company designated as Autocallable Optimization Securities with Contingent Protection Linked to The AMEX Gold BUGS Index^® Due March 30, 2009 (herein called the “Securities”). The Company may, without the consent of the holders of the Securities, create and issue additional securities ranking equally with the Securities and otherwise similar in all respects so that such additional securities shall be consolidated and form a single series with the Securities; provided that no additional securities can be issued if an Event of Default has occurred with respect to the Securities. This series of Securities is one of an indefinite number of series of debt securities of the Company, issued and to be issued under an indenture, dated as of September 1, 1987, as amended (herein called the “Indenture”), duly executed and delivered by the Company and Citibank, N.A., as trustee (herein called the “Trustee”, which term includes any successor trustee under the Indenture), 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 Company, the Trustee and the Holders of the Securities.

The Payment at Maturity or amount due upon an Automatic Call, if applicable, at the request of the Trustee, shall be determined by the Calculation Agent pursuant to the Calculation Agency Agreement. The Trustee shall fully rely on the determination by the Calculation Agent of the Payment at Maturity or amount due upon an Automatic Call, if applicable, and shall have no duty to make any such determination. The Calculation Agent will provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, of the Payment at Maturity or amount due upon an Automatic Call, if applicable, on or prior to 11:00 a.m. on the Business Day preceding the Maturity Date or applicable Call Settlement Date.

All calculations with respect to the Initial Index Level, the Ending Index Level, the Index Return or any Index Closing Level will be rounded to the nearest one hundred-thousandth, with five one-millionths rounded upward (e.g., .876545 would be rounded to .87655); all dollar amounts related to determination of the payment per $10 principal amount Security on the Maturity Date or Call Settlement Date, if any, will be rounded to the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., ..76545 would be rounded up to .7655); and all dollar amounts paid on the aggregate principal amount of Securities per Holder will be rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking fund.

If an Event of Default with respect to the Securities shall occur and be continuing, the amounts payable on all of the Securities may be declared due and payable in the manner and with the effect provided in the Indenture. The amount payable to the Holder hereof upon any acceleration permitted under the Indenture will be equal to the Payment at Maturity calculated as though the date of acceleration were the Final Valuation Date. If the maturity of the Securities is accelerated because of an Event of Default, the Company shall, or shall cause the Calculation Agent to, provide written notice to the Trustee at its New York office, on which notice the Trustee may conclusively rely, and to The Depository Trust Company of the cash amount due with respect to the Securities as promptly as possible and in no event later than two Business Days after the date of acceleration.

The Indenture contains provisions permitting the Company and the Trustee, with the consent of the holders of not less than 66²/3% in aggregate principal amount of each series of Securities at the time Outstanding to be affected (each series voting as a class), 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 principal amount thereof, or reduce the rate or extend the time of payment of interest thereon, if any, or reduce any premium payable on redemption, or make the principal thereof, or premium, if any, or interest thereon, if any, 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, or the principal of, or premium, if any, on any of the Securities of such series, or in the payment of any sinking fund installment or analogous obligation with respect to Securities of such series. Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future holders and owners of this Security and any Securities which may be issued in exchange or substitution hereof, irrespective of whether or not any notation thereof is made upon this Security or such other Securities.

The Securities are issuable in denominations of $10 and any whole multiples of $10.

The Company intends to treat, and by purchasing this Security, the Holder agrees to treat, for all tax purposes, this Security as a cash-settled financial contract, rather than as a debt instrument.

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

Definitions

Set forth below are definitions of the terms used in this Security.

“AMEX” shall mean The American Stock Exchange LLC.

An “Automatic Call” occurs if the Index Closing Level on any Observation Date is above or equal to the Call Level. Upon the occurrence of an Automatic Call, the Securities will be automatically called for a cash payment, per $10 principal amount Security that will equal the applicable Call Price.

If the Securities are subject to an Automatic Call on an Observation Date other than the Final Valuation Date, the Holders will receive a cash payment of applicable Call Price on the applicable Call Settlement Date. If the Securities are subject to an Automatic Call on the Final Valuation Date, the Holders will receive a cash payment of the applicable Call Price on the Maturity Date.

“Call Level” shall equal 391.47.

“Call Price”, as calculated by the Calculation Agent, per $10 principal amount Security paid upon an Automatic Call shall equal:

(1) $10.67 if called on the First Observation Date;

(2) $11.35 if called on the Second Observation Date

(3) $12.02 if called on the Third Observation Date

(4) $12.69 if called on the Fourth Observation Date

(5) $13.36 if called on the Fifth Observation Date; or

(6) $14.04 if called on the Final Valuation Date.

“Call Settlement Date” shall mean, with respect to the First Observation Date, the Second Observation Date, the Third Observation Date, the Fourth Observation Date and the Fifth Observation Date, the third Business Day after the applicable Observation Date.

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

“Ending Index Level” shall equal the Index Closing Level on the Final Valuation Date.

“Fifth Observation Date” shall mean December 26, 2008, subject to postponement as described in the second paragraph of the definition of Observation Date.

“Fourth Observation Date” shall mean September 25, 2008, subject to postponement as described in the second paragraph of the definition of Observation Date.

“Final Valuation Date” shall mean March 25, 2009, subject to postponement as described in the second paragraph of the definition of Observation Date.

“First Observation Date” shall mean December 26, 2007, subject to postponement as described in the second paragraph of the definition of Observation Date.

“Holder” shall have the meaning set forth on the reverse of this Security.

“Indenture” shall have the meaning set forth on the reverse of this Security.

“Index” shall mean The AMEX Gold BUGS Index^®, as calculated, published and disseminated by AMEX.

“Index Return”, as calculated by the Calculation Agent, is calculated as follows:

Ending Index Level – Initial Index Level

Initial Index Level

“Initial Index Level” shall equal 391.47.

“Market Disruption Event”, with respect to the Index or any Successor Index shall mean any of the following events has occurred on any day as determined by the Calculation Agent:

(4) a decision to permanently discontinue trading in the relevant futures or options contracts or exchange traded funds.

(1) the portion of the level of the Index attributable to that security relative to

(2) the overall level of the Index,

in each case immediately before that suspension or limitation.

For purposes of determining whether a Market Disruption Event has occurred:

“Maturity Date” shall mean March 30, 2009, unless that day is not a Business Day, in which case the amount equal to the Payment at Maturity will be made on the next succeeding Business Day following March 30, 2009; provided, that if due to a non-Trading Day or a Market Disruption Event, the Final Valuation Date is postponed so that it falls fewer than three Business Days prior to the scheduled Maturity Date, the Maturity Date will be the third Business Day following the Final Valuation Date, as postponed.

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

“Observation Date” shall mean any of the First Observation Date, the Second Observation Date, the Third Observation Date, the Fourth Observation Date, the Fifth Observation Date and the Final Valuation Date.

If an Observation Date is not a Trading Day or if there is a Market Disruption Event on such day, the applicable Observation Date will be the immediately succeeding Trading Day during which no Market Disruption Event shall have occurred or is continuing; provided, however, that the Index Closing Level will not be determined on a date later than the eighth scheduled Trading Day after the scheduled Observation Date, and if such day is not a Trading Day, or if there is a Market Disruption Event on such date, the Calculation Agent will determine the Index Closing Level on such date in accordance with the formula for and method of calculating the Index Closing Level last in effect prior to commencement of the Market Disruption Event (or prior to the non-Trading Day), using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation or non-Trading Day) on such eighth scheduled Trading Day of each security most recently constituting the Index.

“Observation Period” shall mean the period commencing on the Pricing Date and extending to and including the Final Valuation Date.

“Payment at Maturity”, as calculated by the Calculation Agent and if the Securities are not called pursuant to an Automatic Call, for each $10 principal amount Security shall equal:

(1)

If the Index Closing Level has not declined below the Trigger Level on any Trading Day during the Observation Period, $10; or

(2)

If the Index Closing Level has declined below the Trigger Level on any Trading Day during the Observation Period, $10 × (1 + Index Return).

“Place of Payment” shall mean the place or places where the Payment at Maturity or amount due upon an Automatic Call, if applicable, on the Securities is payable.

“Pricing Date” shall mean September 25, 2007.

“Second Observation Date” shall mean March 25, 2008, subject to postponement as described in the second paragraph of the definition of Observation Date.

“Securities” shall have the meaning set forth on the reverse of this Security.

“Successor Index” shall have the meaning specified under “Discontinuation of the Index; Alteration of Method of Calculation.”

“Third Observation Date” shall mean June 25, 2008, subject to postponement as described in the second paragraph of the definition of Observation Date.

“Trigger Level” shall equal 313.18, 80% of the Initial Index Level.

“Trustee” shall have the meaning set forth on the reverse of this Security.

All terms used but not defined in this Security are used herein as defined in the Calculation Agency Agreement or the Indenture.

Calculation Agent

The Calculation Agent will determine, among other things, the Initial Index Level, the Index Closing Level on each Observation Date, whether the Automatic Call feature has triggered a mandatory redemption, the Ending Index Level, the Index Return if the Securities are not automatically called, the Call Price and the Payment at Maturity, if any. In addition, the Calculation Agent will determine whether there has been a Market Disruption Event or a discontinuation of the Index, and whether there has been a material change in the method of calculation of the Index. All calculations, determinations or adjustments made by the Calculation Agent will be at the sole discretion of the Calculation Agent and will, in the absence of manifest error, be conclusive for all purposes and binding on Holders and on the Company. The Company may appoint a different Calculation Agent from time to time after the date of the original issue of the Securities without the Holders’ consent and without notifying Holders.

Discontinuation of the Index; Alteration of Method of Calculation

If AMEX discontinues publication of the Index and AMEX or another entity publishes a successor or substitute index that the Calculation Agent determines, in its sole discretion, to be comparable to the discontinued Index (“The AMEX Gold BUGS Index^® Successor Index”), then any Index Closing Level will be determined by reference to the level of such The AMEX Gold BUGS Index^® Successor Index at the close of trading on the Relevant Exchange or market for The AMEX Gold BUGS Index^® Successor Index on each Observation Date. Upon any selection by the Calculation Agent of The AMEX Gold BUGS Index^® Successor Index, the Calculation Agent will cause written notice thereof to be promptly furnished to the Trustee, to the Company and to the Holders.

If AMEX discontinues publication of the Index prior to, and such discontinuation is continuing on, a Observation Date, and the Calculation Agent determines, in its sole discretion, that no The AMEX Gold BUGS Index^® Successor Index is available at such

time, or the Calculation Agent has previously selected The AMEX Gold BUGS Index^® Successor Index and publication of such Successor Index is discontinued prior to, and such discontinuation is continuing on, such Observation Date, or if AMEX (or the publisher of any The AMEX Gold BUGS Index^® Successor Index) fails to calculate and publish an Index Closing Level for the Index (or any The AMEX Gold BUGS Index^® Successor Index) on any date when it would ordinarily do so in accordance with its customary practice, then the Calculation Agent will determine the Index Closing Level for such date. The Index Closing Level will be computed by the Calculation Agent in accordance with the formula for and method of calculating the Index or The AMEX Gold BUGS Index^® Successor Index, as applicable, last in effect prior to such discontinuation or failure to calculate or publish an Index Closing Level for the Index or The AMEX Gold BUGS Index^® Successor Index, as applicable, using the Closing Price (or, if trading in the relevant securities has been materially suspended or materially limited, its good faith estimate of the Closing Price that would have prevailed but for such suspension or limitation) at the close of the principal trading session on such date of each security most recently composing the Index or The AMEX Gold BUGS Index^® Successor Index, as applicable.

If at any time the method of calculating the Index or The AMEX Gold BUGS Index^® Successor Index, or the level thereof, is changed in a material respect, or if the Index or The AMEX Gold BUGS Index^® Successor Index is in any other way modified so that the Index or such The AMEX Gold BUGS Index^® Successor Index does not, in the opinion of the Calculation Agent, fairly represent the level of the Index or such The AMEX Gold BUGS Index^® Successor Index had such changes or modifications not been made, then the Calculation Agent will, at the close of business in New York City on each date on which the Index Closing Level is to be determined, make such calculations and adjustments as, in the good faith judgment of the Calculation Agent, may be necessary in order to arrive at a level of a stock index comparable to the Index or such The AMEX Gold BUGS Index^® Successor Index, as the case may be, as if such changes or modifications had not been made, and the Calculation Agent will calculate the Index Closing Level with reference to the Index or such The AMEX Gold BUGS Index^® Successor Index, as adjusted. Accordingly, if the method of calculating the Index or The AMEX Gold BUGS Index^® Successor Index is modified so that the level of the Index or such The AMEX Gold BUGS Index^® Successor Index is a fraction of what it would have been if there had been no such modification (e.g., due to a split in the Index), then the Calculation Agent will adjust its calculation of the Index or such The AMEX Gold BUGS Index^® Successor Index in order to arrive at a level of the Index or such The AMEX Gold BUGS Index^® Successor Index as if there had been no such modification (e.g., as if such split had not occurred).

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

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

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

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

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

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

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

Dated:

__________________________________________

Signature(s) Guaranteed:

__________________________

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