Exhibit 4.04


 


CUSIP
NO. 5252M0BC0


ISIN NO. US5252M0BC07


 


	
  REGISTERED

  	
  PRINCIPAL
  AMOUNT: $1,689,000

  
	
  No. R-1

  	
   

  



 


LEHMAN BROTHERS HOLDINGS INC


 


MEDIUM-TERM NOTE, SERIES I


 


FX BASKET-LINKED NOTE

DUE DECEMBER 28, 2009


 


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 “Maturity Date” is December 28,
2009, or if such day is not a Business Day, on the next following Business Day.


 


The “Redemption Amount” is
the amount equal to the sum of the principal amount of the Notes plus the
Additional Amount, if any.


 


The “Additional Amount” is a
single U.S. dollar amount equal to the principal amount of the notes multiplied
by the product of the Upside Leverage times the Basket Return, if the Basket
Return is greater than zero, and the Downside Return Rate times the product of
-1 times the Basket Return, if the Basket Return is less than or equal to zero;
provided that the minimum Additional Amount payable on the notes shall be zero.


 


The “Upsize Leverage” is
100%.


 


The “Downside Return Rate”
is 50%.


 


The “Reference Currencies”
are the Euro (EUR), Japanese Yen (JPY), British Pound (GBP), Canadian Dollar
(CAD), Swedish Krona (SEK) and Swiss Franc (CHF).


 


The “Basket Return” equals the sum of the Weighted
Currency Returns for each Reference Currency.


 


The “Weighted
Currency Return” for EUR and GBP, the product of the Weighting for such
Reference Currency times a quotient, the numerator of which is the difference
of the Initial Reference Currency Rate for such Reference Currency minus the
Settlement Rate for such Reference Currency and the denominator of which is the
Settlement Rate for such Reference Currency. 
For JPY, CAD, SEK and CHF, the product of the Weighting for such
Reference Currency times a quotient, the numerator of which is the difference
of the Settlement Rate for such Reference Currency minus the Initial Reference
Currency Rate for such Reference Currency and the denominator of which is the
Initial Reference Currency Rate for such Reference Currency.


 


The “Weighting”
and “Initial Reference Currency Rate” for each Reference Currency are as
follows:


 




	
  Reference Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Reference 

  Currency Rate

  
	
  EUR

  	
   

  	
  57.6%

  	
   

  	
  1.43445

  
	
  JPY

  	
   

  	
  13.6%

  	
   

  	
  112.915

  
	
  GBP

  	
   

  	
  11.9%

  	
   

  	
  1.98145

  
	
  CAD

  	
   

  	
  9.1%

  	
   

  	
  0.99875

  
	
  SEK

  	
   

  	
  4.2%

  	
   

  	
  6.58860

  
	
  CHF

  	
   

  	
  3.6%

  	
   

  	
  1.15640

  






 


2

















 


The “Settlement Rate” for each Reference
Currency is the Reference Exchange Rate on the Valuation Date, determined in
accordance with the applicable Settlement Rate Option (subject to the
occurrence of a Disruption Event).


 


The “Reference Exchange Rates” are, for EUR
and GBP, the spot exchange rates for each of EUR and GBP quoted against the
U.S. dollar, expressed as the number of USD per unit of the Reference Currency.
For JPY, CAD, SEK and CHF, the spot exchange rate for each of JPY, CAD, SEK and
CHF, respectively, quoted against the U.S. dollar, expressed as the number of
units of the Reference Currency per one USD.


 


The “Valuation Date” is December 21,
2009; provided that, upon the occurrence of a Disruption Event with respect to
a Reference Currency, the Valuation Date for the affected Reference Currency
may be postponed (as described in “Disruption Events” below).


 


The “Issue Date” is December 28,
2007.


 


If the Calculation Agent determines that a
Disruption Event relating to one or more of the Reference Currencies is in
effect on the scheduled Valuation Date, the Calculation Agent will determine
the Basket Return using:


 


·                                          for each
Reference Currency that did not suffer a Disruption Event on the scheduled
Valuation Date, the Settlement Rate on the scheduled Valuation Date, and


 


·                                          for each
Reference Currency that did suffer a Disruption Event on the scheduled
Valuation Date, the Settlement Rate on the immediately succeeding scheduled
Valuation Business Day for such Reference Currency on which no Disruption Event
occurs or is continuing with respect to such Reference Currency;


 


provided, however, that
if a Disruption Event has occurred or is continuing with respect to a Reference
Currency on each of the three scheduled Valuation Business Days following the
scheduled Valuation Date, then (a) such third scheduled Valuation Business
Day shall be deemed the Valuation Date for the affected Reference Currency; and
(b) the Calculation Agent will determine the Settlement Rate for the
affected Reference Currency on such day in accordance with Fallback Rate
Observation Methodology.


 


For purposes of the above, “scheduled Valuation
Business Day” means a day that is or, in the judgment of the Calculation Agent,
should have been, a Valuation Business Day for the affected Reference Currency.


 


A “Disruption Event” means any of the following events as
determined in good faith by the Calculation Agent:


 


(A)                              the occurrence and/or existence of an
event on any day that has the effect of preventing or making impossible (x) the
conversion of the Reference Currency into USD through customary legal channels;
or (y) for any Reference Currency other than EUR, the delivery of USD from
accounts 


 


3

















 


 


inside the Reference Currency Jurisdiction with
respect to such Reference Currency to accounts outside that Reference Currency
Jurisdiction;


 


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


 


(C)                                the Settlement Rate being unavailable for
the Reference Currency, or the occurrence of an event (i) for any
Reference Currency other than EUR, in the Reference Currency Jurisdiction for
that Reference Currency that materially disrupts the market for the Reference
Currency or (ii) that generally makes it impossible to obtain the
Settlement Rate for the Reference Currency, on the Valuation Date.


 


A “Valuation Business Day” means, with respect to each Reference
Currency, 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 the
city or jurisdiction indicated in the table below:


 




	
  Reference Currency

  	
   

  	
  Screen Reference*

  	
   

  	
  Valuation Business Day

  
	
  EUR

  	
   

  	
  Reuters
  page 

  EURUSDFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  JPY

  	
   

  	
  Reuters
  page 

  USDJPYFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  GBP

  	
   

  	
  Reuters
  page 

  GBPUSDFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  CAD

  	
   

  	
  Reuters
  page 

  USDCADFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  SEK

  	
   

  	
  Reuters
  page 

  USDSEKFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  CHF

  	
   

  	
  Reuters
  page 

  USDCHFFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  






 


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 “Fallback Rate Observation Methodology” means that the reference exchange rate,
Settlement Rate or other rate, as specified in the applicable pricing
supplement, in respect of a reference currency will equal the noon buying rate
in New York for cable transfers in foreign currencies as announced by the
Federal Reserve Bank of New York for customs 


 


4

















 


purposes (the “Noon
Buying Rate”) on the relevant Valuation Date or such other date specified in
the applicable pricing supplement. If the Noon Buying Rate is not announced on
that date, the Reference Exchange Rate, Settlement Rate or other rate for such
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 or such other date specified in the
applicable pricing supplement, 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 Reference Exchange Rate, Settlement Rate or other rate, as
applicable, 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 relevant date from two Reference
Banks (selected in the sole discretion of the Calculation Agent), for the purchase
or sale for deposits in the Reference Currency. If these spot quotations are available
from only one Reference Bank, then the Calculation Agent, in its sole
discretion, will determine whether that quotation is reasonable to be used. If
no spot quotation is available, then the Reference Exchange Rate, Settlement
Rate or other rate, as applicable, for such Reference Currency will be
determined by the Calculation Agent in good faith and in a commercially
reasonable manner.


 


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.


 


The “Calculation Agent” means Lehman Brothers Inc.


 


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 in accordance with the normal procedures of the Trustee (or any duly
appointed Paying Agent).


 


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 “U.S. dollars” or “U.S.$” or “$”
or “USD” 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.


 


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.


 


5

















 


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:  December 28, 2007


 


	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew Yeung

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Cindy Buckholz

  	
   

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  	
   

  



 


 


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

  	
   

  



 


6

















 


[REVERSE
OF NOTE]


 


 


LEHMAN BROTHERS
HOLDINGS INC.


MEDIUM-TERM NOTES,
SERIES I


FX BASKET-LINKED NOTE

DUE DECEMBER 28, 2009


 


 


Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series I, FX
Basket-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 Additional 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 Additional 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 herein above
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
Additional 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
Additional 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 $1,000 or whole
multiples of $1,000, 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 that may be declared
due and payable upon any acceleration of the notes will be determined by the
Calculation Agent for the period from and including the Issue Date to but
excluding the date of early repayment and will equal, for each note, the
Redemption Amount, calculated as the date of early repayment were the Maturity
Date. If a bankruptcy proceeding is commenced in respect of Lehman Brothers
Holdings, the claim of the beneficial owner of a note for the period from and including
the Issue Date to but excluding the date of early repayment will be capped at
the Redemption Amount, calculated as though the date of the commencement of the
proceeding were the Maturity Date.


 


Section 9.  No Recourse Against Certain Persons.  No recourse for the payment of the Additional
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.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.


 


Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.