LEHMAN BROTHERS HOLDINGS INC.
Dow Jones Industrial Average(SM) SUNS(R)
112.5% Minimum Redemption PrincipalPlus Stock Upside Note Securities(R)
Due August 5, 2007
Number R-1 $55,600,000
ISIN US524908 EK 20 CUSIP 524908 EK 2
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
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PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT THIS
PLACE.
"Dow Jones" and "Dow Jones Industrial Average" are
servicemarks of Dow Jones & Company, Inc. and have been licensed for use by
Lehman Brothers Holdings Inc. This Security, based on the performance of the Dow
Jones Industrial Average, is not sponsored, endorsed, sold or promoted by Dow
Jones, and Dow Jones makes no representation regarding the advisability of
investing in this Security.
"SUNS" and "Stock Upside Note Securities" are trademarks of Lehman Brothers
Inc.
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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: August 5, 2002 LEHMAN BROTHERS HOLDINGS INC.
By: ____________________________
Name:
Title:
Attest: ____________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein
referred to in the within-mentioned Indenture.
Dated: August 5, 2002
CITIBANK, N.A.
as Trustee
By: ___________________________
Name:
Title:
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Reverse of Security
This Security is one of a duly authorized series of Securities
of the Company designated as Dow Jones Industrial Average(SM) SUNS(R), 112.5%
Minimum Redemption PrincipalPlus Stock Upside Note Securities(R) Due August 5,
2007 (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 Equity Bonus and 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 Equity Bonus and 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 66 2/3% 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
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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 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
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Company has determined the "comparable yield" to be 5% per annum, compounded
semi-annually, and the projected "payment schedule" per $1,000 note to be
$1,280.08 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.
"AMEX" shall mean the American Stock Exchange LLC.
"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 August 5, 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 Equity Bonus and 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.
"Capped Quarterly 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) 6%.
"Close of Trading" shall mean 4:00 p.m., New York City time.
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"Closing Level" shall mean the last reported level of the
Index or the Successor Index, as the case may be, at 4:00 p.m., New York City
time, as reported by Dow Jones & Company, Inc. or the publisher of the Successor
Index, as the case may be.
"Company" shall have the meaning set forth on the face of this
Security.
"Ending Index Level" shall mean, for any Measurement Period,
the Closing Level on the Measurement Date at the end of that Measurement Period.
"Equity Bonus" shall mean with respect to each $1,000
principal amount of Securities, the greater of (i) zero and (ii) the product of:
(1) $1,000; and
(2) the sum of the Capped Quarterly Returns for 20
quarterly Measurement Periods less 12.5%.
"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 Dow Jones Industrial Average, as
calculated by Dow Jones & Company, Inc. The Dow Jones Industrial Average is a
price-weighted index of 30 common stocks chosen by the editors of The Wall
Street Journal as representative of a broad cross-section of U.S. industry. As
of July 29, 2002, the component companies of the Dow Jones Industrial Average
were as follows: 3M Company, Alcoa Inc., American Express Company, AT&T Corp.,
The Boeing Company, Caterpillar Inc., Citigroup Inc., The Coca-Cola Company,
E.I. du Pont de Nemours and Company, Eastman Kodak Company, Exxon Mobil
Corporation, General Electric Company, General Motors Corporation,
Hewlett-Packard Company, The Home Depot, Inc., Honeywell International Inc.,
Intel Corporation, International Business Machines Corporation, International
Paper Company, J.P. Morgan Chase & Co., Johnson & Johnson, McDonald's
Corporation, Merck & Co., Inc., Microsoft Corporation, Philip Morris Companies.
Inc., The Procter & Gamble Company, SBC Communications Inc., United Technologies
Corporation, Wal-Mart Stores, Inc. and The Walt Disney Company.
"Market Disruption Event", on any day, shall mean any of the
following events as determined by the Calculation Agent:
(i) A suspension, absence or material limitation of trading in
20% of more of the underlying stocks which then comprise the Index or
any Successor Index, as the case may be, 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 those stocks are traded or, if
in the case of a common stock not listed or quoted in the United
States, on the primary exchange, trading system or market for that
security. Limitations on trading during significant market fluctuations
imposed pursuant to the rules of any primary organized U.S. exchange or
trading system similar 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
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regulatory organization or the Securities and Exchange Commission of
similar scope or as replacement for Rule 80B, may be considered
material. Notwithstanding the first sentence of this paragraph, a
Market Disruption Event for a security traded on a bulletin board means
a suspension, absence or material limitation of trading of that
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 the Index or any Successor Index, as the case may
be, whether by reason of movements in price exceeding levels permitted
by an exchange, trading system or market on which those 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 20% or more of the underlying stocks which
then comprise the Index or any Successor Index, as the case may be, or
in respect of options contracts related to the Index or any Successor
Index, as the case may be, in each case traded on any major U.S.
exchange or trading system or in the case of 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:
(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 the
Index or any Successor Index, as the case may be, by a major securities
exchange, trading system or market by reason of (a) a price change
violating limits set by that 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 sum of (a) $1,125 and (b) the Equity Bonus.
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"Measurement Date" shall mean November 1, 2002, February 1,
2003, May 1, 2003, August 1, 2003, November 1, 2003, February 1, 2004, May 1,
2004, August 1, 2004, November 1, 2004, February 1, 2005, May 1, 2005, August 1,
2005, November 1, 2005, February 1, 2006, May 1, 2006, August 1, 2006, November
1, 2006, February 1, 2007, May 1, 2007 and August 1, 2007, or if such day is not
a Business Day, the next Business Day.
"Measurement Period" shall mean (a) the period between July
31, 2002 and the first Measurement Date and (b) the period between any two
consecutive Measurement Dates.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
"NYSE" shall mean The New York Stock Exchange, Inc.
"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, 8736.59, 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 August 5, 2007, or if a Market
Disruption Event occurs on August 1, 2007, on the third Business Day after such
Market Disruption event ceases.
"Successor Index" shall mean such substitute index as the
Calculation Agent may select pursuant to the Calculation Agency Agreement upon
discontinuance of the Index.
"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 Indenture or the Calculation Agency Agreement.
--------------------------------
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)
Additional abbreviations may also be used though not in
the above list.
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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.