LEHMAN BROTHERS HOLDINGS INC.
10 Uncommon Values(R) Index SUNS(R),
Stock Upside Note Securities(R)Notes Due July 2, 2005
Number R-1 $[20,000,000]
ISIN US524908EE69 CUSIP 524908EE6
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, at Stated Maturity, 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 Maturity Payment Amount.
THE SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.
Any amount payable at Stated Maturity 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.
2
"10 Uncommon Values", "Stock Upside Note Securities" and "SUNS" are
registered trademarks of Lehman Brothers Inc.
3
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 Vice Chairman,
its President, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated: July 2, 2002 LEHMAN BROTHERS HOLDINGS INC.
By: _________________________
Name:Oliver Budde
Title:Vice President
Attest: _____________________
Name:Cindy Gregoire
Title: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.
Dated: July 2, 2002
CITIBANK, N.A.
as Trustee
By: ___________________________
Name:
Title:
4
Reverse of Security
This Security is one of a duly authorized series of Securities of the Company
designated as 10 Uncommon Values(R) Index SUNS(R), Stock Upside Note
Securities(R) Notes Due July 2, 2005 (herein called the "Securities"). The
Company may, without the consent of the holders of the Securities, create and
issue additional notes ranking equally with the Securities and otherwise similar
in all respects so that such further notes shall be consolidated and form a
single series with the Securities; provided that no additional notes 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 Maturity Payment Amount shall be determined by the
Calculation Agent pursuant to the Calculation Agency Agreement.
All percentages resulting from any calculation with respect to
the Securities will be rounded at the Calculation Agent's discretion.
The Trustee shall fully rely on the determination by the
Calculation Agent of the Maturity Payment Amount and shall have no duty to make
any such determination.
This Security is not subject to any sinking fund and is not
redeemable prior to its Stated Maturity.
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 Maturity Payment Amount
calculated as though the date of acceleration was the Stated Maturity and the
date three Business Days prior thereto was the last Measurement Date.
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
5
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 principal amount with
respect to this Security.
The Securities are issuable in denominations of $1,000 and any
integral 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.
The Company agrees, and by acceptance of beneficial ownership
interest in the Securities each beneficial holder of the Securities 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 the "comparable yield" to
be 43% per annum, compounded semi-
6
annually, and the projected "payment schedule" per $1,000 note to be $1,136.14
due at Stated Maturity.
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 INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Set forth below are definitions of the terms used in this
Security.
"Alternative Redemption Amount" shall mean with respect to
each $1,000 principal amount of Securities, the product of:
(1) $1,000; and
(2) 1 + the sum of the Capped Annual Returns for three
annual Measurement Periods.
"AMEX" shall mean the American Stock Exchange.
"Announcement Date" shall mean the date of the public
announcement of the ten common stocks or other equity securities that shall
underlie the 10 Uncommon Values Index for the next twelve months.
"Average Execution Price" for a security or other property
shall mean the average execution price that an affiliate of the Company receives
or pays for such security or property, as the case may be, to hedge the
Company's obligations under the Securities.
"Business Day", notwithstanding any provision in the
Indenture, shall mean any day that is not a Saturday, a Sunday or a day on which
the NYSE, the Nasdaq or the AMEX is not open for trading or banking institutions
or trust companies in the City of New York are authorized or obligated by law or
executive order to close.
"Calculation Agency Agreement" shall mean the Calculation
Agency Agreement, dated as of July 2, 2002, between the Company and the
Calculation Agent, as amended from time to time.
"Calculation Agent" shall mean the person that has entered
into an agreement with the Company providing for, among other things, the
determination of the Maturity Payment Amount, which term shall, unless the
context otherwise requires, include its successors and assigns. The initial
Calculation Agent shall be Lehman Brothers Inc.
7
"Capped Annual Return", when used with respect to any
Measurement Period, shall mean the lesser of:
(x) Ending Index Level - Starting Index Level; and
Starting Index Level
(y) [ ]%.
"Close of Trading" shall mean 4:00 p.m., New York City time.
"Closing Price" means the following, determined by the
Calculation Agent based on information reasonably available to it:
(i) If the Index Security is listed on a United States national securities
exchange, trading system or is a Nasdaq security, the last reported
sale price at the Close of Trading, regular way, on such day, on the
primary securities exchange or trading system registered under the
Securities Exchange Act of 1934 on which such Index Security is listed
or admitted to trading or Nasdaq, as the case may be.
(ii) If the Index Security is listed on a non-United States securities
exchange, trading system (other than a bulletin board) or market, the
last reported sale price at the Close of Trading, regular way, on such
day, on the primary exchange, trading system or market on which such
Index Security is listed or admitted to trading, as the case may be.
The Closing Price will then be converted into U.S. dollars using the
Official W.M. Reuters Spot Closing Rate.
(iii) If the Index Security is not listed on a national securities exchange
or trading system or is not a Nasdaq security, and is listed or traded
on a bulletin board, the average execution price that an affiliate of
the Company receives upon the sale of such Index Security used to hedge
the Company's obligations for this Security. If such Index Security is
listed or traded on a non-United States bulletin board, the Closing
Price will then be converted into U.S. dollars using the Official W.M.
Reuters Spot Closing Rate.
(iv) If a Market Disruption Event has occurred for an Index Security on any
Measurement Date, the Closing Price for such Index Security shall
initially be determined using the Closing Price for such Index Security
on the next preceding Trading Day on which a Market Disruption Event
did not occur. Once the Market Disruption Event has ceased, the Closing
Price of such Index Security shall then be adjusted to equal the
Average Execution Price of the Index Security. The rollover closing
level and the resulting Multipliers shall then be recalculated and
adjusted accordingly, as described in the Calculation Agency Agreement.
"Company" shall have the meaning set forth on the face of this
Security.
"Ending Index Level" shall mean, for any Measurement Period,
the Index Level on the Measurement Date at the end of that Measurement Period.
"Holder" shall have the meaning set forth on the reverse of
this Security.
8
"Indenture" shall have the meaning set forth on the reverse of
this Security.
"Index Level", when used with respect to any Measurement Date,
shall equal the sum of (a) the sum of the products of the Closing Prices and the
applicable Multipliers for each Index Security for which a Market Disruption
Event does not occur on such Measurement Date, (b) if a Market Disruption Event
occurs for an Index Security on such Measurement Date, the product of the
Closing Price for such Index Security and the Multiplier for such Index Security
and (c) any cash included in the 10 Uncommon Values Index on such Measurement
Date.
"Index Securities" shall mean the securities included in the
10 Uncommon Values Index from time to time.
"Market Disruption Event", with respect to an Index Security,
means any of the following events as determined by the Calculation Agent:
(i) A suspension, absence or material limitation of trading of such Index
Security has occurred on that day, in each case, for more than two hours of
trading or during the one-half hour period preceding the Close of Trading
on the primary organized U.S. exchange or trading system on which such
Index Security is traded or, in the case of an Index Security not listed or
quoted in the United States, on the primary exchange, trading system or
market for such Index Security. Limitations on trading during significant
market fluctuations imposed pursuant to NYSE Rule 80B or any applicable
rule or regulation enacted or promulgated by the NYSE, any other exchange,
trading system, or market, any other self regulatory organization or the
Securities and Exchange Commission of similar scope or as a replacement for
Rule 80B, may be considered material. Notwithstanding the first sentence of
this paragraph, a Market Disruption Event for an Index Security traded on a
bulletin board means a suspension, absence or material limitation of
trading of such Index Security for more than two hours or during the one
hour period preceding 4:00 p.m., New York City time.
(ii) A suspension, absence or material limitation has occurred on that day, in
each case, for more than two hours of trading or during the one-half hour
period preceding the Close of Trading in options contracts related to such
Index Security, whether by reason of movements in price exceeding levels
permitted by an exchange, trading system or market on which such options
contracts are traded or otherwise.
(iii)Information is unavailable on that date, through a recognized system of
public dissemination of transaction information, for more than two hours of
trading or during the one-half hour period preceding the Close of Trading,
of accurate price, volume or related information in respect of such Index
Security or in respect of options contracts related to such Index Security,
in each case traded on any major U.S. exchange or trading system or in the
case of Index Securities of a non-U.S. issuer, traded on the primary
non-U.S. exchange, trading system or market.
For purposes of determining whether a Market Disruption Event has
occurred:
9
(i) a limitation on the hours or number of days of trading shall not constitute
a Market Disruption Event if it results from an announced change in the
regular business hours of the relevant exchange, trading system or market;
(ii) any suspension in trading in an options contract on an Index Security by a
major securities exchange, trading system or market by reason of (a) a
price change violating limits set by such securities market, (b) an
imbalance of orders relating to those contracts, or (c) a disparity in bid
and ask quotes relating to those contracts shall constitute a Market
Disruption Event notwithstanding that the suspension or material limitation
is less than two hours;
(iii)a suspension or material limitation on an exchange, trading system or in a
market shall include a suspension or material limitation of trading by one
class of investors provided that the suspension continues for more than two
hours of trading or during the last one-half hour period preceding the
Close of Trading on the relevant exchange, trading system or market but
shall not include any time when the relevant exchange, trading system or
market is closed for trading as part of that exchange's, trading system's
or market's regularly scheduled business hours; and
(iv) "Trading systems" include bulletin board services.
"Maturity Payment Amount", for each $1,000 principal amount of
Securities, shall mean the greater of (a) $1,000 and (b) the Alternative
Redemption Amount.
"Measurement Date" shall mean, (a) when used with respect to
the first and second annual Measurement Periods, the Trading Day immediately
prior to the Announcement Date occurring in 2003 and 2004, respectively and (b)
when used with respect to the third annual Measurement Period, June __, 2005.
"Measurement Period" shall mean each of the following three
periods: (a) the period commencing on June 27, 2002 and ending at the Close of
Trading on the Measurement Date occurring in 2003 (sometimes referred to as the
"first annual Measurement Period"); (b) the period commencing on the
Announcement Date occurring in 2003 and ending at the Close of Trading on the
Measurement Date occurring in 2004 (sometimes referred to as the "second annual
Measurement Period"); and (c) the period commencing on the Announcement Date
occurring in 2004 and ending at the Close of Trading on June , 2005 (sometimes
referred to as the "third annual Measurement Period").
"Multiplier" relating to each Index Security shall mean the
number of shares (including any fractional share expressed as a decimal) of such
Index Security included in the 10 Uncommon Values Index. The Multipliers with
respect to each Index Security shall only be adjusted for certain extraordinary
corporate events as described in the Calculation Agency Agreement.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"NYSE" shall mean the New York Stock Exchange.
10
"Official W.M. Reuters Spot Closing Rates" shall mean the
closing spot rates published on Reuters page "WMRA" relevant for such Index
Security.
"Securities" shall have the meaning set forth on the reverse
of this Security.
"Security" shall have the meaning set forth on the reverse of
this Security.
"Starting Index Level" shall mean (a) when used with respect
to the first Measurement Period, 100, and (b) when used with respect to any
other Measurement Period, the Ending Index Level for the immediately preceding
Measurement Period.
"Stated Maturity" shall mean July 2, 2005, or if a Market
Disruption Event occurs on June 29, 2005, on the third Business Day after the
date that an affiliate of the Company completes the sale of all Index Securities
with respect to which a Market Disruption Event occurred to hedge the Company's
obligations under the Securities.
"Trading Day" shall mean a day on which trading generally is
conducted on the NYSE, AMEX and the Nasdaq and in the over-the-counter market
for equity securities as determined by the Calculation Agent.
"Trustee" shall have the meaning set forth on the reverse of
this Security.
"10 Uncommon Values Index" shall mean the group of common
stocks (or the depositary receipts representing such common stocks) of 10
corporations, selected each year by the Investment Policy Committee of Lehman
Brothers Inc. with the assistance of its Equity Research Department, as adjusted
for certain extraordinary corporate events as described in the Calculation
Agency Agreement.
All terms used but not defined in this Security are used
herein as defined in the Indenture or the Calculation Agency Agreement.
11
--------------------------------
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:
TEN COM - as tenants in common UNIF GIFT MIN ACT - ______ Custodian ________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act _________________________
Survivorship and not as (State)
tenants in common
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.