Exhibit 4.01


 


CUSIP
NO. 52517PF30


 


	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $3,000,000

  
	
  No. R-1

  	
   

  	
   

  



 


LEHMAN BROTHERS HOLDINGS INC.


 


MEDIUM-TERM NOTE, SERIES H


 


PRINCIPAL PROTECTED DIGITAL BASKET FX-LINKED
NOTE

DUE MARCH 24, 2008


 


THIS NOTE IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY OR A NOMINEE OF THE DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER
STREET, NEW YORK, NEW YORK) TO THE COMPANY (AS DEFINED BELOW) OR ITS AGENT FOR
REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY AND ANY PAYMENT IS
MADE TO CEDE & CO., ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF,
CEDE & CO., HAS AN INTEREST HEREIN.


 


UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM (A “CERTIFICATED NOTE”), THIS GLOBAL SECURITY MAY
NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE
OF THE DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR
DEPOSITORY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITORY.


 

















 


LEHMAN BROTHERS HOLDINGS INC., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
the “Company,” which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received, hereby
promises to pay to CEDE & Co., or registered assigns, on the Maturity Date,
an amount equal to the Redemption Amount. The Notes do not bear interest. No
payments on the Notes will be made until the Maturity Date.


 


The “Maturity Date” is March 24, 2008, or if such
day is not a Business Day, on the next following Business Day.


 


The Redemption Amount, for each $1 principal amount
of the Notes represented hereby, is the amount equal to the sum of (a) $1 plus (b) the Additional Amount.


 


The “Additional Amount”, for each $1 principal
amount of the Notes represented hereby will be (subject to the occurrence of a
Disruption Event) $1 multiplied by (i) 31.45%, if the Basket Value is greater
than or equal to 0, or (ii) 0% if the Basket Value is less than 0.


 


The “Reference Currencies” are the Brazilian
Real (BRL), Indonesian Rupiah (IDR), Turkish Lira (TRY) and U.S. Dollar (USD).


 


The “Basket Value” equals the sum of:


 


(i) a quotient, the numerator of which is 0.70183
and the denominator of which is the Settlement Rate for BRL plus


 


(ii) a quotient, the numerator of which is
3052.66361 and the denominator of which is the Settlement Rate for IDR plus


 


(iii) a quotient, the numerator of which is 0.44133
and the denominator of which is the Settlement Rate for TRY plus


 


(iv) a quotient, the numerator of which is -1.0000 and the denominator of which is the
Settlement Rate for USD.


 


The
“Settlement Rate” for each Reference Currency is the Reference Exchange Rate on
the Valuation Date, observed as per the Settlement Rate Option (subject to the
occurrence of a Price Source Unavailability Event).


 


The “Reference Exchange Rates” are the spot
exchange rates for each of the Reference Currencies quoted against the U.S.
dollar expressed as number of currency units per USD 1.


 


The
“Settlement Rate Option” for each Reference Currency is as follows:


 


	
  Reference

  Currency

  	
   

  	
  Settlement Rate Option

  
	
  BRL

  	
   

  	
  The
  Brazilian Real/U.S. Dollar offered rate for U.S. Dollars, expressed as the
  amount of Brazilian Reais per one U.S. Dollar, for settlement in two Business
  Days reported by the Banco Central do Brasil on SISBACEN Data System under
  transaction code PTAX-800 (“Consulta de Cambio” or Exchange Rate Inquiry),
  Option 5 (“Cotacoes para Contabilidade” or Rates for Accounting Purposes),
  which appears on Reuters Screen BRFR Page under the caption “Dolar PTAX” at
  approximately 6:30 pm Sao Paolo time on the Valuation Date

  
	
  IDR

  	
   

  	
  The
  Indonesian Rupiah/U.S. Dollar spot rate at 11:00 a.m., Singapore time,
  expressed as the amount of Indonesian Rupiah per one U.S. Dollar, for
  settlement in two Business Days, reported by the Association of 

  



 


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  Banks
  in Singapore which appears on the Telerate Page 50157 to the right of the
  caption “Spot” under the column “IDR” at approximately 11:30 a.m., Singapore
  time, on the Valuation Date.

  
	
  TRY

  	
   

  	
  The
  spot rate in (A) divided by the spot rate in (B)

  
	
   

  	
   

  	
  (A)
  The Turkish Lira/Euro fixing rate, expressed as the amount of Turkish Lira
  per one Euro which appears on Reuters Screen ECB37 to the right of the
  caption “TRY” at approximately 2:15 p.m., Central European time, on that
  Valuation Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (B)
  The U.S. Dollar/Euro fixing rate, expressed as the amount of U.S. Dollar per
  one Euro which appears on Reuters Screen ECB37 to the right of the caption
  “USD” at approximately 2:15 p.m., Central European time, on that Valuation
  Date.

  



 


The
screen or time of observation indicated in relation to any Settlement Rate
Option above shall be deemed to refer to such screen or time of observation as
modified or amended from time to time, or to any substitute screen thereto.


 


The “Valuation Date” is March 17, 2008 or, if such
day is not a Valuation Business Day, the immediately preceding Valuation
Business day.


 


A
“Valuation Business Day” means, with respect to (a) TRY, any day on which the
Trans-European Automated Real-Time Gross Settlement Express Transfer (TARGET)
System is open, and (b) BRL or IDR, any day, other than a Saturday or Sunday,
that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close
(including for dealings in foreign exchange in accordance with the practice of
the foreign exchange market) in Sao Paolo or Singapore, respectively.


 


A
“Business Day”, notwithstanding any provision in the Indenture, is any day that
is not is not a Saturday or Sunday and that is not a day on which banking
institutions in New York City generally are authorized or obligated by law or
executive order to be closed.


 


Upon the occurrence of a Disruption Event with
respect to any Reference Currency on any day during the term of the notes, the
Calculation Agent shall determine the Additional Amount payable on the Maturity
Date in good faith and in a commercially reasonable manner.


 


A “Disruption Event” means any of the following
events (other than a Price Source Unavailability Event), as determined in good
faith by the Calculation Agent:


 


(A)                              for any Reference Currency other than EUR, the occurrence and/or
existence of an event on any day that has the effect of preventing or making
impossible


 


i)  the
conversion of any Reference Currency into USD through customary legal channels;
or


 


ii)  the
delivery (x) of USD from accounts inside the country for which a Reference
Currency is the lawful currency (such jurisdiction with respect to such
Reference Currency, the “Reference Currency Jurisdiction”) to accounts outside
that Reference Currency Jurisdiction or (y) of any Reference Currency between
accounts inside any Reference Currency Jurisdiction or to a party that is a
non-resident of such Reference Currency Jurisdiction;


 


(B)                                the occurrence of any event causing the Reference Exchange Rate for any
Reference Currency to be split into dual or multiple currency exchange rates;
or


 


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(C)                                the occurrence and/or existence of any event (other than those set
forth in (A) or (B) above or those constituting a Price Source Unavailability
Event) with respect to any Reference Currency that prevents or makes impossible
(x) the Calculation Agent’s ability to calculate the Additional Amount, (y) the
fulfilment of our obligations under the notes, or (z) our ability or the
ability of any of our affiliates through which we hedge our position under the
notes to hedge such position or to unwind all or a material portion of such
hedge.


 


Upon the occurrence of a Price Source Unavailability
Event with respect to a Reference Currency, the Settlement Rate for the
affected Reference Currency will be determined in accordance with the Fallback
Rate Observation Methodology.


 


A
“Price Source Unavailability Event” means, as determined in good faith by the
Calculation Agent, the Settlement Rate being unavailable for a Reference
Currency, or the occurrence of an event (other than an event constituting a
Disruption Event) that generally makes it impossible to obtain the Settlement Rate
for a Reference Currency, on the relevant Valuation Date.


 


The
“Fallback Rate Observation Methodology” means that the Settlement Rate for a
Reference Currency will be calculated on the basis of the arithmetic mean of
the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the Valuation Business Day
next succeeding the Valuation Date for the purchase or sale for deposits in the
Reference Currency by the New York offices of three leading banks engaged in
the interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”). If fewer than three Reference Banks provide spot
quotations then the Settlement Rate for such Reference Currency will be
determined by the Calculation Agent in good faith and in a commercially
reasonable manner.


 


Except as provided below, the Redemption Amount 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.


 


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


 


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


 


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


 


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


 


This Note shall not be valid or become obligatory
for any purpose until the certificate of authentication hereon shall have been
signed by the Trustee under the Indenture.


 


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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 22, 2006

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  



 


 


TRUSTEE’S CERTIFICATE OF AUTHENTICATION


 


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


 


CITIBANK,
N.A.


  as
Trustee


 


 


	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  



 


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[REVERSE OF
NOTE]


 


LEHMAN BROTHERS HOLDINGS INC.


MEDIUM-TERM NOTES, SERIES H


PRINCIPAL PROTECTED DIGITAL BASKET FX-LINKED
NOTE

DUE MARCH 24, 2008


 


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


 


Section 2. Principal Amount for Indenture
Purposes. For the purpose of determining whether Holders of the requisite
amount of Notes of this series outstanding under the Indenture have made a
demand, given a notice or waiver or taken any other action, the principal
amount of this Note will be deemed to be the principal amount of this Note then
outstanding.


 


Section 3. Modification and Waivers. The
Indenture contains provisions permitting the Company and the Trustee, with the
consent of the Holders of not less than 66-2/3% in aggregate principal amount
of each series of the Securities at the time Outstanding to be affected,
evidenced as in the Indenture provided, to execute supplemental indentures
adding any provisions to or changing in any manner or eliminating any of the
provisions of the Indenture or of any supplemental indenture or modifying in
any manner the rights of the holders of the Securities of all such series;
provided, however, that no such supplemental indenture shall, among other
things, (i) change the fixed maturity of any Security, or reduce the Redemption
Amount or the principal amount thereof, or reduce the rate or extend the time
of payment of interest thereon or reduce any premium or other amount payable on
redemption, or make the Redemption Amount or the principal amount thereof,
premium or other amount payable, if any, or interest thereon payable in any
coin or currency other than that hereinabove provided, without the consent of
the Holder of each Security so affected, or (ii) change the place of payment on
any Security, or impair the right to institute suit for payment on any
Security, or reduce the aforesaid percentage of Securities, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of each Security so affected. It is also provided in the
Indenture that, prior to any declaration accelerating the maturity of any
series of Securities, the holders of a majority in aggregate principal amount
of the Securities of such series Outstanding may on behalf of the holders of
all the Securities of such series waive any past


 

















 


default
or Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on the
Redemption Amount or the principal amount, or premium, if any, on any of the
Securities of such series, or in the payment of any sinking fund installment or
analogous obligation with respect to Securities of such series. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future holders and owners of this Note and any
Notes of this series which may be issued in exchange or substitution herefor,
irrespective of whether or not any notation thereof is made upon this Note or
such other Notes of this series.


 


Section 4. Obligations Unconditional. No
reference herein to the Indenture and no provisions of this Note or of the
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the Redemption Amount or the principal
amount on this Note at the place, at the respective times, at the rate, and in
the coin or currency herein prescribed.


 


Section 5. Defeasance. The Indenture contains
provisions for the discharge of the Indenture and defeasance at any time of the
indebtedness on this Note upon compliance by the Company with certain
conditions set forth therein, which provisions apply to this Note.


 


Section 6. Authorized Form and Denominations.
The Notes of this series are issuable in registered form, without coupons. Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the Company, in denominations of $10,000 or whole
multiples of $10,000, either at the office or agency to be designated and
maintained by the Company for such purpose in the Borough of Manhattan, New
York City, pursuant to the provisions of the Indenture or at any of such other
offices or agencies as may be designated and maintained by the Company for such
purpose pursuant to the provisions of the Indenture, and in the manner and
subject to the limitations provided in the Indenture, but without the payment
of any service charge, except for any tax or other governmental charges imposed
in connection therewith. Notes of this series are exchangeable for a like
aggregate principal amount of Notes of this series of a different authorized
denomination, except that Global Securities will not be exchangeable for
Certificated Notes of this series.


 


Section 7. Registration of Transfer. As
provided in the Indenture and subject to certain limitations as therein set
forth, the transfer of this Note is registrable in the Security Register, upon
surrender of this Note for registration of transfer, at the Corporate Trust
Office or agency in a Place of Payment for this Note, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to the
Company and the Security Registrar requiring such written instrument of
transfer duly executed by, the Holder hereof or his attorney duly authorized in
writing, and thereupon one or more new Notes of this series, of authorized
denominations and for the same aggregate principal amount, will be issued to
the designated transferee or transferees.


 


If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository. If a successor Depository for the Notes of this
series is not appointed by the Company within 90 days after the Company
receives such notice or becomes aware of such ineligibility, the Company will
issue, and the Trustee will authenticate and deliver, Notes of this series in
definitive form in an aggregate principal amount equal to the principal amount
of this Note.


 

















 


No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.


 


Prior to due presentment of this Note for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the person in whose name this Note is registered as
the owner hereof for all purposes, and neither the Company nor the Trustee nor
any agent of the Company or of the Trustee shall be affected by any notice to
the contrary.


 


Section 8. Events of Default. If an Event of
Default with respect to Notes of this series shall occur and be continuing, the
amount declared due and payable upon any acceleration of the Notes will be
determined by the Calculation Agent and will equal the Redemption Amount
calculated as though the maturity of the Notes were the date of early repayment
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 Redemption Amount calculated as though the date to which the
maturity has been accelerated were the Maturity Date as determined by the
Calculation Agent.


 


Section 9. No Recourse Against Certain Persons.
No recourse for the payment of the Redemption Amount or for any claim based
hereon or otherwise in respect hereof, and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or any
Indenture supplemental thereto or in any Note, or because of the creation of
any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as such, past, present or future, of the
Company or of any successor corporation, either directly or through the Company
or any successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or otherwise,
all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released.


 


Section 10. Tax Treatment. The Company
agrees, and by acceptance of beneficial ownership interest in the Notes of this
series, each Holder of such Notes will be deemed to have agreed, for United
States federal income tax purposes, (i) to treat the Notes of this series as
indebtedness that is subject to Treas. Reg. Sec. 1.1275-4 (the “Contingent
Payment Regulations”) and (ii) to be bound by the Company’s determination of
the “comparable yield” and “projected payment schedule,” within the meaning of
the Contingent Payment Regulations, with respect to the Notes of this series.


 


Section 11. Defined Terms. All terms used but
not defined in this Note are used herein as defined in the Indenture.


 


Section 12. GOVERNING LAW. THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.