Document:

Exhibit 4.01

CUSIP NO. 52517PM32

ISIN NO.
US52517PM326

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $10,000,000

  
	
  No. R-1

  	
   

  	
   

  

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX RANGE NOTE
DUE DECEMBER 27, 2006

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 27, 2006, 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 payment calculated by the Calculation Agent
equal to the principal amount of the Notes multiplied by:

(A) 2.0%, if the
Reference Exchange Rate has traded strictly within the Reference Range from and
including 10:00 a.m. EST on the Start Date to but excluding 10:00 a.m. EST on
the End Date, as observed on the continuous trading EBS (Electronic Broking
Service) Spot Dealing System (subject to the occurrence of a Disruption Event
or a Price Source Unavailability Event); or

(B) 0%, if the Reference
Exchange Rate trades outside the applicable Reference Range (or on either of
the Range Boundaries) on any day from and including 10:00 a.m. EST on the Start
Date to but excluding 10:00 a.m. EST on the End Date, as observed on the
continuous trading EBS Spot Dealing System (subject to the occurrence of a
Disruption Event or a Price Source Unavailability Event).

The “Start Date” is
September 20, 2006.

The “End Date” is
December 20, 2006.

The “Reference Exchange Rate”
is the spot exchange rate for the Reference Currency quoted against the U.S.
Dollar expressed as the number of U.S. Dollars per unit of the Reference
Currency.

The “Reference Currency”
is the Euro (EUR).

The “Reference Range” is the range from and including
the Range Lower Boundary to and including the Range Upper Boundary.

 The “Range
Lower Boundary” is 1.2125, equal to the Range Initial Fixing minus 0.0560.

The “Range Upper Boundary” is 1.3275, equal to the
Range Initial Fixing plus 0.0590.

The “Range Initial Fixing” is 1.2685, which is the
Reference Exchange Rate observed in accordance with the Settlement Rate Option
on September 20, 2006.

A “Valuation
Business Day” means 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

 2
 

law, regulation or executive
order to close (including for dealings in foreign exchange in accordance with
the practice of the foreign exchange market) in New York.

The “Settlement Rate Option” is the U.S. Dollar/Euro
official fixing rate, expressed as the amount of U.S. Dollars per one Euro, for
settlement in two business days reported by the Federal Reserve Bank of New
York which appears on Reuters Screen 1FED to the right of the caption “EUR” at
approximately 10:00 a.m. New York time, on the Start Date or such other
relevant date.

Upon the
occurrence of a Disruption Event with respect to the Reference Currency on any
day from and including 10:00 a.m. EST on the Start Date to but
excluding the earlier of (a) 10:00 a.m. EST on the End Date and (b) the time on any day at which the
Reference Exchange Rate trades outside the Reference Range (or on either the
Range Lower Boundary or Range Upper Boundary), and for so long as such
Disruption Event is continuing, the Reference Exchange Rate for each such day
will be a single daily spot exchange rate determined by the Calculation Agent
in accordance with the Fallback Rate Observation Methodology.

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 the conversion of
the Reference Currency into U.S. Dollars through customary legal channels; or

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

Upon the
occurrence of a Price Source Unavailability Event on any day from and including
10:00 a.m. EST on the Start Date to but
excluding the earlier of (a) 10:00 a.m. EST on the End Date and (b) the time on any day at which the
Reference Exchange Rate trades outside the Reference Range (or on either the
Range Lower Boundary or Range Upper Boundary), and for so long as such Price
Source Unavailability Event is continuing, the Reference Exchange Rate for each
such day will be a single daily spot exchange rate determined by the
Calculation Agent in accordance with the Settlement Rate Option on that day.  If the Reference Exchange Rate is not
available in accordance with the Settlement Rate Option on such day, the
Reference Exchange Rate will be calculated daily in accordance with the
Fallback Rate Observation Methodology.

A “Price Source
Unavailability Event” means, as
determined in good faith by the Calculation Agent, the Reference Exchange Rate being unavailable, or the
occurrence of an event (other than an event constituting a Disruption Event)
that generally makes it impossible to obtain the Reference Exchange Rate, on the EBS Spot Dealing
System.

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
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

 3
 

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 Additional Amount, if any, 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 any
Additional 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.

 4
 

 

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: September 27, 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

  	
   

  	
   

  

 

 5

 

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX RANGE NOTE
DUE 
DECEMBER 27, 2006

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 Range 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 $10,000 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 and will
equal, for each note, the principal amount plus the Additional Amount (if
any) deemed to have accrued for the period from and including the Start Date to
but excluding the date of early repayment calculated on the basis of a 360-day
year consisting of 12 months of 30 days each, and, in the case of an incomplete
month, the number of days elapsed.  If a bankruptcy proceeding is
commenced in respect of the Company, the claim of the beneficial owner of a
note will be capped at the principal amount plus the Additional Amount (if
any) deemed to have accrued for the period from and including the Start Date to
but excluding the date of early repayment calculated on the basis of a 360-day
year consisting of 12 months of 30 days each, and, in the case of an incomplete
month, the number of days elapsed.

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.Exhibit 4.02

	
  CUSIP NO. 52517PM40

  	
   

  	
   

  
	
  ISIN NO. US52517PM409

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $45,000,000

  
	
  No. R-1

  	
   

  	
   

  

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX RANGE NOTE
DUE DECEMBER 27, 2006

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 27, 2006, 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 payment calculated by the Calculation Agent equal to
the principal amount of the Notes multiplied by:

(A) 3.0%, if the
Reference Exchange Rate has traded strictly within the Reference Range from and
including 10:00 a.m. EST on the Start Date to but excluding 10:00 a.m. EST on
the End Date, as observed on the continuous trading EBS (Electronic Broking
Service) Spot Dealing System (subject to the occurrence of a Disruption Event
or a Price Source Unavailability Event); or

(B) 0%, if the Reference
Exchange Rate trades outside the applicable Reference Range (or on either of
the Range Boundaries) on any day from and including 10:00 a.m. EST on the Start
Date to but excluding 10:00 a.m. EST on the End Date, as observed on the
continuous trading EBS Spot Dealing System (subject to the occurrence of a
Disruption Event or a Price Source Unavailability Event).

The “Start Date” is
September 21, 2006.

The “End Date” is
December 21, 2006.

The “Reference Exchange
Rate” is the spot exchange rate for the Reference Currency quoted against the
U.S. Dollar expressed as the number of U.S. Dollars per unit of the Reference
Currency.

The “Reference Currency”
is the Euro (EUR).

The “Reference Range” is the range from and including
the Range Lower Boundary to and including the Range Upper Boundary.

 The “Range
Lower Boundary” is 1.2288, equal to the Range Initial Fixing minus 0.045.

The “Range Upper Boundary” is 1.3188, equal to the
Range Initial Fixing plus 0.045.

The “Range Initial Fixing” is 1.2738, which is the
Reference Exchange Rate observed in accordance with the Settlement Rate Option
on September 21, 2006.

A “Valuation Business Day” means 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 

 2
 

 

 

law,
regulation or executive order to close (including for dealings in foreign
exchange in accordance with the practice of the foreign exchange market) in New
York.

The “Settlement Rate Option” is the U.S. Dollar/Euro
official fixing rate, expressed as the amount of U.S. Dollars per one Euro, for
settlement in two business days reported by the Federal Reserve Bank of New
York which appears on Reuters Screen 1FED to the right of the caption “EUR” at
approximately 10:00 a.m. New York time, on the Start Date or such other
relevant date.

Upon the occurrence of a Disruption Event with respect to
the Reference Currency on any day from and including 10:00 a.m. EST on the Start Date to but
excluding the earlier of (a) 10:00 a.m. EST on the End Date and (b) the time on any day at which the
Reference Exchange Rate trades outside the Reference Range (or on either the
Range Lower Boundary or Range Upper Boundary), and for so long as such
Disruption Event is continuing, the Reference Exchange Rate for each such day
will be a single daily spot exchange rate determined by the Calculation Agent
in accordance with the Fallback Rate Observation Methodology.

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 the conversion of the Reference Currency into
U.S. Dollars through customary legal channels; or

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

Upon the occurrence of a Price Source Unavailability Event
on any day from and including 10:00 a.m. EST on the Start Date to but
excluding the earlier of (a) 10:00 a.m. EST on the End Date and (b) the time on any day at which the
Reference Exchange Rate trades outside the Reference Range (or on either the
Range Lower Boundary or Range Upper Boundary), and for so long as such Price
Source Unavailability Event is continuing, the Reference Exchange Rate for each
such day will be a single daily spot exchange rate determined by the
Calculation Agent in accordance with the Settlement Rate Option on that day.  If the Reference Exchange Rate is not
available in accordance with the Settlement Rate Option on such day, the
Reference Exchange Rate will be calculated daily in accordance with the
Fallback Rate Observation Methodology.

A “Price Source Unavailability Event” means, as determined in good faith by the Calculation
Agent, the Reference Exchange Rate being unavailable, or the
occurrence of an event (other than an event constituting a Disruption Event)
that generally makes it impossible to obtain the Reference Exchange Rate, on the EBS Spot Dealing
System.

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 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 

 3
 

 

 

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 Additional Amount, if
any, 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 any Additional 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.

 4
 

 

 

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:  September 27, 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

  	
   

  
					

 

 5

 

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX RANGE NOTE
DUE 
DECEMBER 27, 2006

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 Range
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 $10,000 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 and will equal, for each note, the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.  If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the beneficial owner of a note will be capped at the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.

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.

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