LEHMAN BROTHERS HOLDINGS INC.
YEELDS(R)
7.5% Yield Enhanced Equity Linked Debt Securities
Due September 3, 2005
Number R-1 $4,000,000
ISIN US524908LT55 CUSIP: 524908LT5
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 its
registered assigns, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, on the Stated 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 (such principal amount of Securities
referred to herein as a "YEELD" and, in the aggregate, "YEELDS"), an amount
equal to the Maturity Payment Amount, and to make coupon payments computed on
the basis of a 360-day year of twelve 30-day months, quarterly on June 3, 2004,
September 3, 2004, December 3, 2004, March 3,
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2005, June 3, 2005 and the Stated Maturity Date (each a "Coupon Payment Date"),
on said principal sum at said office or agency, in like coin and currency, at a
rate per annum equal to [7.5]%, from and including March 3, 2004, June 3, 2004,
September 3, 2004, December 3, 2004, March 3, 2005 or June 3, 2005 to which
coupon payments have been made or duly provided for; provided, that any coupon
payments to be made on any Coupon Payment Date that is not a Business Day shall
be made on the next succeeding Business Day with the same force and effect as if
made on such Coupon Payment Date, and no additional coupon payments shall accrue
as a result of such delayed payment; provided further, that if a Market
Disruption Event with respect to one or more of the Settlement Value Securities
occurs on the Valuation Date, coupon payments will continue to accrue during the
period from September 3, 2005 to and excluding the Stated Maturity Date.
On the Stated Maturity Date, the Company, at its sole option and with
not less than 15 days' prior written notice to the Trustee, may pay the Maturity
Payment Amount in shares of the Settlement Value Securities based upon the
Closing Price of the Settlement Value Securities on the Valuation Date (the
"Stock Settlement Option"). If, however, the Company determines that it is
prohibited from delivering such shares, or that it would be unduly burdensome to
deliver such shares, on the Stated Maturity Date, it will pay the Maturity
Payment Amount in cash. In the event the Company elects the Stock Settlement
Option, the Holder will receive, subject to the preceding sentence, per $1,000
principal amount of YEELDS, a number of shares of the Settlement Value
Securities (together with any cash that may be included in the calculation of
the Settlement Value) that as of the Valuation Date has an aggregate value
(based on the Closing Prices of the Settlement Value Securities on the Valuation
Date) equal to the Maturity Payment Amount, all as determined by the Calculation
Agent pursuant to the Calculation Agency Agreement. If the Company elects the
Stock Settlement Option, in lieu of any fractional shares of the Settlement
Value Securities, the Company will pay cash to the Holder in an amount equal to
the market value of that fractional share based upon the Closing Price of the
Settlement Value Security on the Valuation Date.
The coupon payments due on any Coupon Payment Date shall, subject to
certain exceptions provided in the Indenture referred to on the reverse hereof,
be made to the person in whose name this Security is registered at the close of
business on the date that is 15 days prior to such Coupon Payment Date. All
coupon payments on this Security may, at the option of the Company, be made by
check mailed to the person entitled thereto at such person's address as it
appears on the registry books of the Company.
Any amount payable on the Stated Maturity Date shall 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. SUCH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
"YEELDS" is a registered trademark of Lehman Brothers Inc.
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.
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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: March 3, 2004 LEHMAN BROTHERS HOLDINGS INC.
By: ___________________________
Name:
Title:
Attest: _________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred
to in the within-mentioned Indenture.
Dated: March 3, 2004
CITIBANK, N.A.,
as Trustee
By: __________________________________
Name:
Title:
(Reverse of Security)
This Security is one of a duly authorized series of Securities of the
Company designated as YEELDS(R), 7.5% Yield Enhanced Equity Linked Debt
Securities Due September 3, 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 the Stated Maturity Date.
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 Date and the date three Business
Days prior thereto was the Valuation 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 to make coupon payments thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or coupon
payments therein 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
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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 coupon
payments 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
coupon payments 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
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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 intends to treat and, by purchasing this Security, the
Holder hereof agrees to treat, for all tax purposes, this Security as a
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.
Set forth below are definitions of the terms used in this Security.
"ADR" shall mean American Depositary Receipt.
"Alternative Redemption Amount" shall mean, per YEELD, the product of
(a) $1,000 and (b) the Settlement Value divided by $5.4675.
"AMEX" shall mean the American Stock Exchange LLC.
"Average Execution Price" shall mean, for a security or other property,
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, Nasdaq
or 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 March 3, 2004, 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 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.
"Close of Trading" shall mean, in respect of any primary exchange or
quotation system, the scheduled weekday closing time on a day on which the
primary exchange or quotation system is scheduled to be open for trading for its
respective regular trading session, without regard to after hours or any other
trading outside of the regular trading session hours.
"Closing Price" shall mean, for each Settlement Value Security, as
determined by the Calculation Agent based on information reasonably available to
it:
(i) If the Settlement Value Security is listed on a United
States national securities exchange or quotation system or is a
security quoted on Nasdaq, the last
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reported sale price per share at the Close of Trading, regular way, on
such day, on the primary securities exchange registered under the
Securities Exchange Act of 1934 on which such Settlement Value Security
is listed or admitted to trading or on Nasdaq, as the case may be.
(ii) If the Settlement Value Security is listed or quoted on a
non-United States securities exchange, quotation 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, quotation
system or market on which such Settlement Value Security is listed or
admitted to trading, as the case may be. The Closing Price per share
shall then be converted into U.S. dollars using the Official W.M.
Reuters Spot Closing Rate at 11:00 a.m., New York City time. If there
are several quotes for the Official W.M. Reuters Spot Closing Rate at
that time, the first quoted rate starting at 11:00 a.m. shall be the
rate used. If there is no such Official W.M. Reuters Spot Closing Rate
for a country's currency at 11:00 a.m., New York City time, the Closing
Price shall be converted into U.S. dollars using the last available
U.S. dollar cross-rate quote before 11:00 a.m., New York City time.
(iii) If the Settlement Value Security is not listed on a
national securities exchange or quotation system or is not a Nasdaq
security, and is listed or traded on a bulletin board, the Average
Execution Price per share of the Settlement Value Security. If such
Settlement Value 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 at 11:00
a.m., New York City time. If there are several quotes for the Official
W.M. Reuters Spot Closing Rate at that time, the first quoted rate
starting at 11:00 a.m. shall be the rate used. If there is no such
Official W.M. Reuters Spot Closing Rate for a country's currency at
11:00 a.m., New York City time, the Closing Price shall be converted
into U.S. dollars using the last available U.S. dollar cross-rate quote
before 11:00 a.m., New York City time.
"Company" shall have the meaning set forth on the face of this
Security.
"Coupon Payment Date" shall have the meaning set forth on the face of
this Security.
"Ending Multiplier" shall mean, for each Settlement Value Security, the
initial Multiplier for such Settlement Value Security adjusted from time to time
for the occurrence, prior to the Close of Trading on the Valuation Date, of any
of the extraordinary corporate transactions described in Section 4 of Annex A of
the Calculation Agency Agreement.
"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.
"Issue Date" shall mean March 3, 2004.
"Market Disruption Event", with respect to a Settlement Value Security,
shall mean any of the following events has occurred on any day as determined by
the Calculation Agent:
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(i) A material suspension of or limitation imposed on trading
relating to such Settlement Value Security by the Relevant Exchange, at
any time during the one-hour period that ends at the Close of Trading
on such day, whether by reason of movements in price exceeding limits
permitted by that primary exchange or quotation system or otherwise.
Limitations on trading during significant market fluctuations imposed
pursuant to NYSE Rule 80B or any applicable rule or regulation enacted
or promulgated by the NYSE, any other exchange, quotation system or
market, any other self regulatory organization or the Securities and
Exchange Commission of similar scope or as a replacement for Rule 80B
may be considered material.
(ii) A material suspension of or limitation imposed on trading
in futures or options contracts relating to such Settlement Value
Security by the primary exchange or quotation system on which those
futures or options contracts are traded, at any time during the
one-hour period that ends at the Close of Trading on such day, whether
by reason of movements in price exceeding limits permitted by that
primary exchange or quotation system or otherwise.
(iii) Any event, other than an early closure, that disrupts or
impairs the ability of market participants in general to effect
transactions in, or obtain market values for, that Settlement Value
Security on the primary U.S. exchange or quotation system on which that
Settlement Value Security is traded, or in the case of a Settlement
Value Security not listed or quoted in the United States, on the
primary exchange, quotation system or market for such Settlement Value
Security, at any time during the one hour period that ends at the Close
of Trading on such day.
(iv) Any event, other than an early closure, that disrupts or
impairs the ability of market participants in general to effect
transactions in, or obtain market values for, the futures or options
contracts relating to such Settlement Value Security on the primary
exchange or quotation system on which those futures or options
contracts are traded at any time during the one hour period that ends
at the Close of Trading on such day.
(v) The closure of the primary exchange or quotation system on
which that Settlement Value Security is traded or on which futures or
options contracts relating to that Settlement Value Security are traded
prior to its scheduled closing time unless the earlier closing time is
announced by the primary exchange or quotation system at least one hour
prior to the earlier of (i) the actual closing time for the regular
trading session on the primary exchange or quotation system and (ii)
the submission deadline for orders to be entered into the primary
exchange or quotation system for execution at the Close of Trading on
such day.
(vi) The Company, or any of its affiliates, is unable, after
using commercially reasonable efforts to unwind or dispose of, or
realize, recover or remit the proceeds of, any transactions or assets
it deems necessary to hedge the equity price risk of entering into and
performing its obligations with respect to the Securities.
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"Maturity Payment Amount" shall equal, for each $1,000 principal
amount of YEELDS, (i) the lesser of (a) the Alternative Redemption Amount and
(b) $1,450 and (ii) any accrued but unpaid coupon payments through the Stated
Maturity Date.
"Multiplier", relating to each Settlement Value Security, shall mean
the number of shares or other units (including ADRs) (or fraction of a share or
other unit expressed as a decimal) of such Settlement Value Security included in
the calculation of the Settlement Value. The initial Multiplier relating to
Calpine Corporation common stock shall be 1.0.
"Nasdaq" shall mean The Nasdaq Stock Market, Inc.
------
"NYSE" shall mean The New York Stock Exchange, Inc.
----
"Official W.M. Reuters Spot Closing Rate" shall mean the closing spot
rate published on Reuters page "WMRA" relevant for a Settlement Value Security.
"Relevant Exchange" shall mean for each Settlement Value Security, the
primary United States national securities exchange, quotation system, including
any bulletin board service, or market on which such Settlement Value Security is
traded, or in case such Settlement Value Security is not listed or quoted in the
United States, the primary exchange, quotation system or market for such
Settlement Value Security.
"Scheduled Trading Day" shall mean any day on which each Relevant
Exchange is scheduled to be open for trading for its respective regular trading
session.
"Securities" shall have the meaning set forth on the reverse of this
Security.
"Security" shall have the meaning set forth on the face of this
Security.
"Settlement Value" shall mean the sum of (a) the products of the
Closing Prices and the applicable Ending Multipliers for each Settlement Value
Security on the Valuation Date and (b) any cash included in the Settlement Value
on the Valuation Date; provided, that if a Market Disruption Event occurs on the
Valuation Date, the Settlement Value will be determined based on (i) with
respect to Settlement Value Securities that have not been subject to a Market
Disruption Event, the Closing Price of each such Settlement Value Security on
the postponed Valuation Date, and (ii) with respect to Settlement Value
Securities that have been subject to a Market Disruption Event, the Average
Execution Price on the postponed Valuation Date.
"Settlement Value Securities" shall mean the securities included in the
calculation of the Settlement Value from time to time and shall initially
consist only of the common stock of Calpine Corporation.
"Stated Maturity Date" shall mean September 3, 2005 (or if September 3,
2005 is not a Business Day, on the next succeeding Business Day); provided, that
if a Market Disruption Event occurs on the Valuation Date, the Stated Maturity
Date shall be the third Business Day following the date the Settlement Value is
determined.
"Stock Settlement Option" shall have the meaning set forth on the face
of this Security.
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"Trustee" shall have the meaning set forth on the reverse of this
Security.
"Valuation Date" shall mean August 31, 2005; provided, that if such
date is not a Scheduled Trading Day, the Valuation Date shall mean the next
succeeding Scheduled Trading Day; provided further, that if a Market Disruption
Event occurs on such date, the Valuation Date will be the next succeeding
Scheduled Trading Day on which no Market Disruption Event occurs.
"YEELD" and "YEELDS" shall have the meaning set forth on the face of
this Security.
All terms used but not defined in this Security are used herein as
defined in the Indenture.
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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:
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TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian ________
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(Cust) (Minor)
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TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
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JT TEN - as joint tenants with right of Act _________________________
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Survivorship and not as tenants in (State)
common
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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
- --------------------------------
- --------------------------------
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(Name and Address of Assignee, including zip code, must be printed or
typewritten.)
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the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing
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to transfer the said Security on the books of the Company, with full power of
substitution in the premises.
Dated:
Signature:___________________________________
NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Security in every particular, without
alteration or enlargement or any change whatever.
Signature(s) Guaranteed:
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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.