Document:

Exhibit 4.01

 

CUSIP NO. 52517P5P2

ISIN NO. US52517P5P21

 

	
  REGISTERED

  	
  PRINCIPAL
  AMOUNT: $192,000

  
	
  No. R-1

  	
   

  

 

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

COMMODITY BASKET-LINKED NOTE
 DUE OCTOBER 4, 2010

 

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 October 4, 2010, or if such day is not a
Business Day, on the next following Business Day.

 

The “Redemption Amount” is a single U.S. dollar amount per $1,000 Note
equal to (i) the sum of $1,000 plus the product of $1,000 times the Basket
Return times the Participation Rate, if the Final Basket Level is greater than
the Initial Basket Level, or (ii) $1,000, if the Final Basket Level is
equal to or less than the Initial Basket Level.

 

The “Participation Rate” is 115%.

 

The “Basket” is as follows:

 

	
  Component Commodity

  	
   

  	
  Description

  
	
  Crude Oil

  	
   

  	
  Light sweet crude oil

  
	
  Heating Oil

  	
   

  	
  No. 2 fuel heating oil

  
	
  Copper

  	
   

  	
  Copper – Grade A

  
	
  Nickel

  	
   

  	
  Primary Nickel

  
	
  Zinc

  	
   

  	
  Special High Grade Zinc

  
	
  Gold

  	
   

  	
  Gold

  
	
  Platinum

  	
   

  	
  Platinum

  
	
  Corn

  	
   

  	
  Number 2 yellow corn

  
	
  Wheat

  	
   

  	
  Number 2 wheat

  

 

The “Basket Return” is a
percentage equal to a quotient, the numerator of which is the difference of the
Final Basket Level minus the Initial Basket Level and the denominator of which
is the Initial Basket Level.

 

The “Initial Basket Level”
was set to 100 on the Trade Date.

 

The “Final Basket Level” is
the Basket closing level on the Valuation Date, which is equal to the product
of 100 times the sum of 1 plus the sum of the Weighted Component Commodity
Returns.

 

The “Weighted Component Commodity Return” for each
Component Commodity is the product of the Component Commodity Weighting for
such Component Commodity times the Component Commodity Return for such
Component Commodity.

 

The “Component Commodity Weighting” for each Component
Commodity is as follows:

 

2

 

	
  Component 

  Commodity

  	
   

  	
  Component 

  Commodity 

  Weighting

  	
   

  
	
  Crude Oil

  	
   

  	
  20

  	
  %

  
	
  Heating Oil

  	
   

  	
  10

  	
  %

  
	
  Copper

  	
   

  	
  10

  	
  %

  
	
  Nickel

  	
   

  	
  10

  	
  %

  
	
  Zinc

  	
   

  	
  10

  	
  %

  
	
  Gold

  	
   

  	
  10

  	
  %

  
	
  Platinum

  	
   

  	
  10

  	
  %

  
	
  Corn

  	
   

  	
  10

  	
  %

  
	
  Wheat

  	
   

  	
  10

  	
  %

  

 

The “Component Commodity Return” for each Component
Commodity is a quotient, the numerator of which is the difference of the Final
Commodity Price for such Component Commodity minus the Initial Commodity Price
for such Component Commodity and the denominator of which is the Initial
Commodity Price for such Component Commodity.

 

The “Final Commodity Price” is, for each Component Commodity, the Commodity Price for that Component Commodity on the Valuation Date.

 

The “Initial Commodity Price” is, for each Component
Commodity, the Commodity Price for that Component Commodity determined by the
Calculation Agent on the Trade Date as set forth below:

 

	
  Component 

  Commodity

  	
   

  	
  Initial 

  Commodity 

  Price

  	
   

  
	
  Crude Oil

  	
   

  	
  80.30

  	
   

  
	
  Heating Oil

  	
   

  	
  2.1826

  	
   

  
	
  Copper

  	
   

  	
  8,082.00

  	
   

  
	
  Nickel

  	
   

  	
  32,760.00

  	
   

  
	
  Zinc

  	
   

  	
  3,002.00

  	
   

  
	
  Gold

  	
   

  	
  734.75

  	
   

  
	
  Platinum

  	
   

  	
  1,348.00

  	
   

  
	
  Corn

  	
   

  	
  3.7500

  	
   

  
	
  Wheat

  	
   

  	
  9.1725

  	
   

  

 

The Commodity Prices are as follows:

 

	
  Component

  Commodity

  	
   

  	
  Commodity
  Price

  
	
  Crude Oil

  Heating Oil

  	
   

  	
  For each of
  Crude Oil and Heating Oil, the official settlement price of the first nearby
  month futures contract (or, in the case of the last trading day of the first
  nearby month contract, the second nearby month contract) for that Component
  Commodity, expressed (a) in the case of Crude Oil, as the U.S. dollar
  price per barrel, and (b) in the case of Heating Oil, as the U.S. dollar
  price per gallon, in each case as

  

 

3

 

	
   

  	
   

  	
  made public by
  the Relevant Exchange for that Component Commodity (subject to the occurrence
  of a Disruption Event).

  
	
  Copper

  Nickel

  Zinc

  	
   

  	
  For each of
  Copper, Nickel and Zinc, the official settlement price of that Component
  Commodity for cash delivery, expressed as the U.S. dollar price per metric
  ton of the Component Commodity, as made public by the Relevant Exchange for
  that Component Commodity (subject to the occurrence of a Disruption Event).

  
	
  Gold

  	
   

  	
  For Gold, the
  official afternoon fixing price, stated in U.S. dollars per troy ounce, as
  calculated and quoted by the Relevant Exchange (subject to the occurrence of
  a Disruption Event).

  
	
  Platinum

  	
   

  	
  For Platinum,
  the official afternoon fixing price, stated in U.S. dollars per troy ounce,
  as calculated and quoted by the Relevant Exchange (subject to the occurrence
  of a Disruption Event).

  
	
  Corn

  Wheat

  	
   

  	
  For each of Corn
  and Wheat, the official settlement price of the relevant contract, determined
  to be the contract with the next succeeding Notice Date (as defined below),
  stated in U.S. dollars, per bushel, as made public by the Relevant Exchange
  for that Component Commodity (subject to the occurrence of a Disruption
  Event).

  

 

The “Relevant Exchange” is, for each Component
Commodity, the exchange set forth opposite such Component Commodity below, or
its successor, or if the exchange set forth below is no longer the principal
exchange or trading market for a Component Commodity or options or futures
contracts for such Component Commodity, such other exchange or principal
trading market for the relevant Component Commodity as determined in good faith
by the Calculation Agent which serves as the source of prices for that
Component Commodity, and any principal exchanges where options or futures
contracts on that Component Commodity are traded.

 

	
  Component 

  Commodity

  	
   

  	
  Commodity
  Price

  
	
  Crude Oil

  	
   

  	
  The NYMEX
  Division, or its successor, of the New York Mercantile

  Exchange, Inc. (“NYMEX”)

  
	
  Heating Oil

  	
   

  	
  NYMEX

  
	
  Copper

  	
   

  	
  London Metals
  Exchange (“LME”)

  
	
  Nickel

  	
   

  	
  LME

  
	
  Zinc

  	
   

  	
  LME

  
	
  Gold

  	
   

  	
  London Bullion
  Market Association (the “LBMA”)

  
	
  Platinum

  	
   

  	
  London Platinum &
  Palladium Market (the “LPPM”)

  
	
  Corn

  	
   

  	
  Chicago Board of
  Trade (“CBOT”)

  
	
  Wheat

  	
   

  	
  CBOT

  

 

4

 

The “Valuation Date” is September 27, 2010; provided that, upon
the occurrence of a Disruption Event with respect to a Component Commodity, the
Valuation Date for the affected Component Commodity may be postponed (as
described in “Disruption Events” below).

 

The “Trade Date” is September 26, 2007.

 

The “Issue Date” is October 2, 2007.

 

If the Calculation Agent determines that a
Disruption Event identified in clauses A, B or C below relating to one or more
of the Component Commodities is in effect on the scheduled Valuation Date, the
Calculation Agent will determine the Final Basket Level using:

 

•                                          for each Component
Commodity that did not suffer a Disruption Event on the scheduled Valuation
Date, the Final Commodity Price on the scheduled Valuation Date, and

 

•                                          for each Component
Commodity that did suffer a Disruption Event on the scheduled Valuation Date,
the Final Commodity Price on the immediately succeeding trading day for such
Component Commodity on which no Disruption Event occurs or is continuing with
respect to such Component Commodity;

 

provided, however, that if a
Disruption Event has occurred or is continuing with respect to a Component
Commodity on each of the three scheduled trading days following the scheduled
Valuation Date, then (a) such third scheduled trading day shall be deemed
the Valuation Date for the affected Component Commodity; and (b) the Calculation
Agent will determine the Final Commodity Price for the affected Component
Commodity on such day in its sole and absolute discretion taking into account
the latest available quotation for the Commodity Price for the affected
Component Commodity and any other information that in good faith it deems
relevant.

 

If a Disruption Event identified in clauses (D) or
(E) below relating to one or more Component Commodities (other than Gold
or Platinum) is in effect on the Valuation Date, the Calculation Agent will
determine the Final Commodity Price for the affected Component Commodity on the
scheduled Valuation Date in its sole and absolute discretion taking into
account the latest available quotation for the Commodity Price for the affected
Component Commodity and any other information that in good faith it deems
relevant.

 

A “Disruption Event” for a Component Commodity, in
each case as determined in
good faith by the Calculation Agent, constitutes:

 

(A)                              the suspension of or material limitation on trading
in the Component Commodity or futures contracts or options related to the
Component Commodity, on the Relevant Exchange for that Component Commodity;

 

(B)                                either (i) the
failure of trading to commence, or permanent discontinuance of trading, in the
Component Commodity, or futures contracts or options related to the Component
Commodity, on the Relevant Exchange for that 

 

5

 

Component Commodity, or (ii) the disappearance
of, or of trading in, the Component Commodity;

 

(C)                                the failure of the
Relevant Exchange for the Component Commodity to publish the official daily
settlement price of the Component Commodity for that day (or the information
necessary for determining the settlement price); and

 

(D)                               solely with respect to
Component Commodities other than Gold or Platinum, the occurrence since the
Trade Date of a material change in the content, composition, or constitution of
the Component Commodity; or

 

(E)                                 solely with respect to
Component Commodities other than Gold or Platinum, the occurrence since the
Trade Date of a material change in the formula for or the method of calculating
the settlement price of the Component Commodity.

 

For the purpose of determining whether a Disruption Event
for a Component Commodity has occurred:

 

(1)                                  a limitation on the hours in a trading day and/or
number of days of trading will not constitute a Disruption Event if it results
from an announced change in the regular business hours of the Relevant Exchange
for the Component Commodity;

 

(2)                                  a suspension in trading in a Component Commodity on
the Relevant Exchange for that Component Commodity (without taking into account
any extended or after-hours trading session), by reason of a price change
reflecting the maximum permitted price change from the previous trading day’s
settlement price will constitute a Disruption Event; and

 

(3)                                  a suspension of or material limitation on trading on
a Relevant Exchange for a Component Commodity will not include any time when
the Relevant Exchange for that Component Commodity is closed for trading under
ordinary circumstances.

 

For
purposes of calculating the Final Basket Level in the event of a Disruption
Event relating to one or more Component Commodities in accordance with the
above, “trading day” means a day, as determined in good faith by the
Calculation Agent, on which trading is generally conducted on the Relevant
Exchange applicable to the affected Component Commodity.

 

A
“Valuation Business Day” means, with respect to each Component Commodity, a
day, as determined in good faith by the Calculation Agent, on which the
Relevant Exchange for each Component Commodity is scheduled to be (or, but for
the occurrence of a Disruption Event, would have been) open for trading during
its regular trading session (notwithstanding the Relevant Exchange or organized
exchange or market, as applicable, closing prior to its scheduled closing
time).

 

6

 

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
Commodity Services 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.

 

7

 

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:  October 2, 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

  

 

8

 

[REVERSE OF NOTE]

 

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I

COMMODITY BASKET-LINKED NOTE
 DUE OCTOBER 4, 2010

 

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,
Commodity 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 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 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
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 $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
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. 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. 52517P3N9

ISIN NO. US52517P3N90

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL
  AMOUNT: $190,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

FX BASKET-LINKED NOTE
 DUE APRIL 2, 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 April
2, 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 per $1,000 Note equal the greater of (a)
zero and (b) the product of $1,000 times the Basket Return times the
Participation Rate.

 

The “Participation
Rate” is 220%.

 

The “Basket”
is the Indonesian rupiah (IDR), Indian rupee (INR), Malaysian ringgit (MYR) and
Singapore dollar (SGD) (each a “Basket Currency” and, collectively, the “Basket
Currencies”).

 

The “Basket Return” is a percentage equal to a
quotient, the numerator of which is the difference of the Basket Ending Level
minus the Basket Starting Level and the denominator of which is the Basket
Starting Level.

 

The “Basket Starting Level” was set to 100 on the
Trade Date.

 

The “Basket Ending Level” is the Basket closing
level on the Valuation Date, which is equal to the product of 100 times the sum
of 1 plus the sum of the Weighted Currency Returns.

 

The “Weighted Currency Return” for each Basket
Currency is the product of the Basket Currency Weighting for such Basket
Currency times the Currency Return for such Basket Currency.

 

The “Basket Currency Weighting” for each Basket
Currency is as follows:

 

	
  Basket 

  Currency

  	
   

  	
  Basket 

  Currency

  Weighting

  	
   

  
	
  MYR

  	
   

  	
  25

  	
  %

  
	
  IDR

  	
   

  	
  25

  	
  %

  
	
  INR

  	
   

  	
  25

  	
  %

  
	
  SGD

  	
   

  	
  25

  	
  %

  

 

The “Currency Return” for each Basket Currency is a
quotient, the numerator of which is the difference of the Initial Spot Rate for
such Basket Currency minus the Final Spot Rate for such Basket Currency and the
denominator of which is the Final Spot Rate for such Basket Currency.

 

2

 

The “Final Spot Rate” is, for each Basket Currency,
the Reference Exchange Rate for that Basket Currency on the Valuation Date,
determined by the Calculation Agent in accordance with the Spot Rate Source
(subject to the occurrence of a Disruption Event).

 

The “Initial Spot Rate” is, for each Basket
Currency, the Reference Exchange Rate for that Basket Currency determined by
the Calculation Agent on the Trade Date as set forth below:

 

	
  Basket 

  Currency

  	
   

  	
  Initial Spot

  Rate

  	
   

  
	
  MYR

  	
   

  	
  3.4251

  	
   

  
	
  IDR

  	
   

  	
  9142

  	
   

  
	
  INR

  	
   

  	
  39.7

  	
   

  
	
  SGD

  	
   

  	
  1.4983

  	
   

  

 

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

 

The “Valuation
Date” is March 27, 2009; provided that, upon the occurrence of a Disruption
Event with respect to a Basket Currency, the Valuation Date for the affected
Basket Currency may be postponed (as described in “Disruption Events” below).

 

The “Trade
Date” is September 26, 2007.

 

The “Issue
Date” is October 2, 2007.

 

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

 

•                                          for each Basket Currency
that did not suffer a Disruption Event on the scheduled Valuation Date, the
Final Spot Rate on the scheduled Valuation Date, and

 

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

 

provided, however, that if a
Disruption Event has occurred or is continuing with respect to a Basket
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 Basket Currency; and (b)
the Calculation Agent will determine the Final Spot Rate for the affected
Basket Currency on such day in accordance with Fallback Rate Observation
Methodology.

 

3

 

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 Basket 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 delivery of
USD from accounts inside the country for which a Basket Currency is the lawful
currency (such jurisdiction with respect to such Basket Currency, the “Basket
Currency Jurisdiction”) for that Basket Currency to accounts outside that
Basket Currency Jurisdiction; or (y) for SGD only, the conversion of the Basket
Currency into USD through customary legal channels;

 

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

 

(C)                                the Final Spot Rate being unavailable for the Basket
Currency, or the occurrence of an event (i) in the Basket Currency Jurisdiction
for that Basket Currency that materially disrupts the market for the Basket
Currency or (ii) that generally makes it impossible to obtain the Final Spot
Rate for the Basket Currency, on the Valuation Date.

 

A
“Valuation Business Day” means, with respect to each Basket 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:

 

	
  Basket

  Currency

  	
   

  	
  Valuation
  Business Day

  
	
  MYR

  	
   

  	
  Singapore

  
	
  IDR

  	
   

  	
  Singapore

  
	
  INR

  	
   

  	
  Mumbai

  
	
  SGD

  	
   

  	
  Singapore

  

 

The “Spot Rate Source” for
the IDR is 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 Banks in
Singapore which appears on the Reuters Page ABSIRFIX01 to the right of the
caption “Spot” under the column “IDR” at approximately 11:30 a.m., Singapore
time, on the Valuation Date or such other relevant date. The “Spot Rate Source”
for the INR is the Indian Rupee/U.S. dollar reference rate, expressed as the
amount of Indian Rupee per one U.S. dollar, for settlement in two Business Days
reported by the Reserve Bank of India which appears on the Reuters Screen RBIB
Page at approximately 2:30 p.m., Mumbai time, or as soon thereafter as
practicable on the on the Valuation Date or such other relevant date. The “Spot Rate Source” for the MYR is the
Malaysian Ringgit/U.S. dollar spot rate, expressed as the amount of Malaysian
Ringgit per one 

 

4

 

U.S. dollar, for settlement
in two Business Days reported by the Association of Banks in Singapore, which
appears on the Reuters Page ABSIRFIX01 to the right of the caption “Spot” under
the column “MYR” at approximately 11:30 a.m. Singapore time on the Valuation
Date or such other relevant date. The “Spot Rate Source”
for the SGD is the Singapore Dollar/U.S. dollar spot rate at 11:00 a.m.,
Singapore time, expressed as the amount of Singapore Dollar per one U.S.
dollar, for settlement in two Business Days, reported by the Association of
Banks in Singapore which appears on the Reuters Page ABSIRFIX01 to the right of
the caption “Spot” under the column “SGD” at approximately 11:30 a.m.,
Singapore time, on the Valuation Date or such other relevant date.

 

The
screen or time of observation indicated in relation to any Spot Rate Source
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, Final Spot
Rate or other rate, as specified in the applicable pricing supplement, in
respect of a Basket 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 date, the
Reference Exchange Rate, Final Spot Rate or other rate for such Basket 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 Basket 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, Final Spot 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 Basket
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, Final Spot Rate or other rate, as applicable, for such
Basket 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.

 

5

 

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.

 

6

 

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: October
  2, 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

  	
   

  

 

7

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I

FX BASKET-LINKED NOTE
 DUE APRIL 2, 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.

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