Document:

EXHIBIT 10.2

Exhibit A

SUBORDINATED NOTE

	
  $

  	
  , 2007

  

 

FREEDOMROADS
HOLDING COMPANY, LLC, a Minnesota limited liability company (the “Company”),
for value received, hereby promises to pay to AFFINITY GROUP, INC. and its
registered assigns (the “Payee”) the principal sum of                                               
($                  )
on the Maturity Date (capitalized terms used herein and not otherwise defined
herein are defined in Section 3 hereof) and to pay interest thereon from the
date hereof as provided herein.

Section 1.               Interest.

Interest shall be
payable semi-annually in arrears on each Record Date at the Bond Rate.  Until interest is required to be paid in cash
in respect of the AGHI Bonds, interest shall be accrued and compounded on each
Record Date.  Thereafter, interest shall
be paid in cash on each Record Date. From and after the occurrence of an Event
of Default, interest shall accrue (or be paid in cash, as the case may be) at
the Default Rate on the outstanding principal hereof and all accrued but unpaid
interest thereon.

Section 2.               Subordination to Senior
Indebtedness.

(a)           Subordination.  The indebtedness evidenced by this Note shall
be subordinate and junior, to the extent and in the manner hereinafter set
forth, to all Senior Indebtedness, whether outstanding at the date hereof or
hereafter created, incurred, assumed or guaranteed:

(i)            In the event of any insolvency,
receivership, liquidation, reorganization or other similar proceedings in
connection therewith relative to the Company, or to its property, and in the
event of any proceedings for voluntary liquidation, dissolution or other
winding up of the Company, whether or not involving insolvency, receivership,
liquidation, reorganization or other similar proceedings, then the holders of
Senior Indebtedness shall be entitled to receive payment in full of all
principal of and interest on all Senior Indebtedness before the Payee is
entitled to receive any payment on account of principal of or interest on the
Note, and to that end the holders of Senior Indebtedness shall be entitled to
receive for application in payment thereof any payment or distribution of any
kind or character, whether in cash or property or securities, which may be
payable or deliverable in any such proceedings by the trustee in bankruptcy,
receiver, assignee for the benefit of creditors or other liquidating agent in
respect of the Note.

(ii)           The
Payee, by acceptance of this Note,

(A)          irrevocably authorizes and empowers
(without imposing any obligation on) each holder of Senior Indebtedness
(hereinafter in this clause (ii) called a “Senior Lender”) at the time
outstanding and such Senior Lender’s representatives to demand, sue for,
collect, receive and receipt for such Senior Lender’s  ratable share of all payments and
distributions in respect of the Note which are required to be paid or delivered
to the Senior

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Lenders as provided in clause (i) above, and to
file and prove all claims therefor and take all such other action (including
the right to vote the Payee’s interest in the Note), in the name of the Payee
or otherwise, as such Senior Lender or such Senior Lender’s representatives may
determine to be necessary or appropriate for the enforcement of clause (i)
above, provided, however, that no action may be taken by any
Senior Lender or such Senior Lender’s representatives pursuant to the
authorization conferred by this item (A) of this clause (ii) unless
written notice shall have been given by such Senior Lender or such Senior
Lender’s representatives to the Payee requesting the Payee to take such action
and the Payee shall not have taken such action within 15 days after the
giving of such notice; and

(B)           agrees to execute and deliver to each
Senior Lender and such Senior Lender’s representatives all such further
instruments confirming the above authorization, and all such powers of
attorneys, proofs of claim, assignments of claim and other instruments, and to
take all such other action, as may be requested by such Senior Lender or such
Senior Lender’s representatives in order to enable such Senior Lender to
enforce all claims upon or in respect of the Payee’s interest in the Note.

(b)           Payment to
Holders of Senior Indebtedness of Certain Amounts Received by Payee.  In the event that, notwithstanding the
provisions hereof prohibiting such distribution or payment, any distribution of
assets of the Company or payment by or on behalf of the Company of any kind or
character, whether in cash, property or securities, to which the Payee would be
entitled but for the provisions of this Section 2 prohibiting such
distribution or payment, shall be received by the Payee before the principal of
and interest on all Senior Indebtedness is paid in full, or provision is made
for its payment, such distribution or payment shall be held in trust for the
benefit of, and shall be paid over or delivered to, the holders of such Senior
Indebtedness or their representative or representatives, or to the trustee or
trustees under any indenture pursuant to which any instruments evidencing any
of such Senior Indebtedness may have been issued, ratably according to the
aggregate amounts remaining unpaid on account of the Senior Indebtedness held
or represented by each, for application to the payment of all Senior
Indebtedness remaining unpaid to the extent necessary to pay the principal of
(and premium, if any) and interest on all such Senior Indebtedness in full,
after giving effect to any concurrent distribution or payment, or provision
therefor, from any source, to the holders of such Senior Indebtedness or their
representatives or trustees.

(c)           Obligation to Pay Not Impaired.  Nothing contained in this Section 2 or
elsewhere herein, is intended to or shall alter or impair, as between the
Company, its creditors other than the holders of the Senior Indebtedness and
the Payee, the obligation of the Company, which is absolute and unconditional,
to pay to the Payee the principal of and interest on the Note at the time and
place and at the rate prescribed, or to affect the relative rights of the Payee
and the creditors of the Company other than the holders of the Senior
Indebtedness, nor shall anything herein or therein prevent the Payee from
exercising all remedies otherwise permitted by applicable law upon default
under the Note, subject to the rights, if any, under this Section 2 of the
holders of the Senior Indebtedness to receive cash, property or securities
otherwise payable or deliverable to the Payee.

(d)           Reliance by Senior Indebtedness on
Subordination Provisions.  The Payee,
by acceptance of the Note, acknowledges and agrees that the foregoing
subordination provisions are, and are intended to be, an inducement and a
consideration to the holders of the Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the

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issuance of the Note, to acquire and continue to hold,
or to continue to hold, such Senior Indebtedness, and such holder of the Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.

(e)           Certain Payments and Credits
Permitted.  Nothing contained in this
Note shall prevent (a) the Company from making payment of or on account of
the interest on the Note  not then contrary
to the conditions described in Section 2(c) hereof, or (b) the
retention by the Payee of moneys so paid to it on account of the interest on
the Note.

(f)            Subordination Not to be
Prejudiced by Certain Acts.  No right
of any present or future holder of any Senior Indebtedness to enforce
subordination as herein provided shall at any time in any way be prejudiced or
impaired by any act or failure to act on the part of the Company or by any act
or failure to act on the part of the Company or by any act or failure to act by
any such holder, or by any noncompliance by the Company with the terms,
provisions and covenants of this Note, regardless of any knowledge thereof any
such holder may have or be otherwise charged with.

(g)           Company Authorized to Effectuate
Subordination.  The Payee, by
acceptance of this Note, authorizes and directs the Company on Payee’s behalf
to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination, as between the Payee and the holders of the
Senior Indebtedness, as provided in this Section 2 and appoints the
Company Payee’s attorney-in-fact for any and all such purposes.  Payee, by its acceptance of this Note, agrees
to execute and deliver to the Company such other and further intercreditor agreements
and subordination agreements as the Senior Lender may reasonably require, all
in such form as customarily used by the Senior Lender.

Section 3.               Certain Terms Defined.  The following terms for all purposes of this
Note shall have the respective meanings specified below:

AGHI means Affinity Group
Holding, Inc., the parent of the Payee.

AGHI Bonds
means the notes in the original principal amount of $88.2 million issued by
AGHI pursuant to the terms of the Indenture.

 Indenture means that certain indenture made between AGHI
and The Bank of New York, as trustee, dated as of March 24, 2005.

“Bond Rate”
means the eleven and one-half percent (111⁄2%) per annum, which, with the face
rate and original issue discount, is the effective interest rate payable in respect
of the AGHI Bonds.

“Default”
means any condition or event which constitutes an Event of Default or which
with the giving of notice or lapse of time or both would, unless cured or
waived, become an Event of Default.

“Default
Rate” means the interest rate payable in respect of the AGHI Bonds in the
event of the occurrence of an event of default in the payment or performance by
the AGHI of the terms of the Indenture of the AGHI Bonds.

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“Event
of Default” has the meaning set forth in Section 5.

“Maturity
Date” means the earlier to occur of (i) the sale or other disposition by
the Company of the Shares other than to an entity controlled by, controlling or
under common control with the Company, (ii) the third anniversary of the date
hereof, (iii) the day preceding the date on which the Company declares or pays
any dividend or makes any other distribution to its shareholders (other than,
so long at the shareholders of the Company are taxes on the income of the
Company,  dividends in an amount equal to
taxes at the highest marginal federal tax rate on the taxable income of the
Company) .

 “Senior Indebtedness” means the
principal of, accrued but unpaid interest on and other obligations of the
Company to the Senior Lender in respect of up to $145 million in principal
amount of indebtedness of the Company which is designated by the Company as “Senior
Indebtedness” for purposes hereof.

“Senior
Lender” means the holder or holders of the Senior Indebtedness.

Section 4.               Event
of Default Defined; Remedies.  In
case one or more of the following events (each an “Event of Default”) shall
have occurred and be continuing:

(a)           default
in the payment of any interest under Section 1 as and when the payment
shall become due and payable, if the Company shall have failed to cure such
default in full within 30 calendar days after the occurrence of any such
default; or

(b)           default in the payment of all or any
part of the principal on this Note as and when the same shall become due and
payable, whether on the Maturity Date, by acceleration or

Section
5.               Prepayments.

This Note may be prepaid at any time and from time to
time without premium or penalty.

Section 6.               Miscellaneous.  This Note shall be deemed to be a contract
under the laws of the State of Minnesota and shall be governed by and construed
in accordance with the laws of said State, without regard to principles of
conflict of laws.  The parties hereto
hereby waive presentment, demand, notice, protest and all other demands and
notices in connection with the delivery, acceptance, performance and
enforcement of this Note, except as specifically provided herein.  The Payee, by acceptance of this Note, agrees
to be bound by the provisions hereof. 
This Section headings herein are for convenience only and shall not
modify, restrict or otherwise affect the construction of any of the terms and
provisions hereof.  In case any
provisions of this Note shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions of this Note
shall not in any way be affected or impaired thereby.

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IN
WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

	
  

  	
  FREEDOMROADS HOLDING COMPANY, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

 5Exhibit 4.01

  
	
  CUSIP NO. 52517PX22

  
	
  ISIN NO. US52517PX224

  
	
   

  
	
  REGISTERED

  	
  PRINCIPAL AMOUNT:
  $2,500,000

  
	
  No. R-1

  
	
   

  
	
   

  
	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  
	
  MEDIUM-TERM
  NOTE, SERIES I

  
	
   

  
	
  FX BASKET-LINKED
  NOTE

  
	
  DUE APRIL 16,
  2008

  

 

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

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

LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the “Company,” which
term includes any successor corporation under the Indenture referred to on the
reverse hereof), for value received, hereby promises to pay to CEDE & Co.,
or registered assigns, on the Maturity Date, an amount equal to the Redemption
Amount.

The “Maturity Date” is April 16, 2008, or if such day is not a Business
Day, on the next following Business Day.

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

The “Additional Amount” is a single U.S. Dollar amount equal the
principal amount of the Notes multiplied by the Leverage multiplied by the
Basket Value, provided that the minimum
Additional Amount payable on the Notes shall be zero.

The “Leverage” is 235%.

The “Reference Currencies” are the Brazilian
Real (BRL), the Russian Ruble (RUB), the Indian Rupee (INR) and the Chinese
Renminbi (CNY).

The “Basket Value” equals the sum of:

(i) a quotient, the numerator of which is 0.5076 and the denominator of which is the Settlement Rate for BRL plus

(ii) a quotient, the numerator of which is 6.4913 and the denominator of which is the Settlement Rate for RUB plus

(iii) a quotient, the numerator of which is 10.7125 and the denominator of which is the Settlement Rate for INR plus

(iv) a quotient, the numerator of which is 1.9336 and the denominator of which is the Settlement Rate for CNY plus

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

The “Settlement
Rate” for each Reference Currency is the Reference Exchange Rate on the
Valuation Date, determined in accordance with the Settlement Rate Option
(subject to the occurrence of a Disruption Event).  The Settlement Rate for the USD shall be 1.

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

The “Trade Date” is April 4, 2007.

The “Valuation Date” is April 7, 2008;
provided that, upon the occurrence of a Disruption Event with respect to a
Reference Currency, the Valuation Date for the affected Reference Currency may
be postponed (as described in “Disruption Events” below).

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

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

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

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

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

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

(A)                              the occurrence and/or existence of an event on any
day that has the effect of preventing or making impossible the delivery of USD
from accounts inside the country for which a Reference Currency is the lawful
currency (such jurisdiction with respect to such Reference Currency, the “Reference
Currency Jurisdiction”) for that Reference Currency to accounts outside that
Reference Currency Jurisdiction;

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

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

A “Valuation Business Day” means,
with respect to each Reference Currency, any day, other than a Saturday or
Sunday, that is neither a legal holiday nor a day on which commercial banks are
authorized or required by law, regulation or executive order to close
(including for dealings in foreign exchange in accordance with the practice of
the foreign exchange market) in the city or jurisdiction indicated in the table
below:

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  ReferenceCurrency

  	
   

  	
  Valuation
  Business Day

  	
   

  	
  Principal
  Financial

  Center

  
	
  BRL

  	
   

  	
  Sao Paolo, Brasilia and Rio 

  de Janeiro

  	
   

  	
  Sao Paolo, Brasilia and

  Rio de Janeiro

  
	
  RUB

  	
   

  	
  Moscow

  	
   

  	
  Moscow

  
	
  INR

  	
   

  	
  Mumbai

  	
   

  	
  Mumbai

  
	
  CNY

  	
   

  	
  Beijing

  	
   

  	
  Beijing

  

 

The “Settlement Rate Option”
for the BRL is the Brazilian Real/U.S. Dollar offered rate for U.S. Dollars,
expressed as the amount of Brazilian Reals per one U.S. Dollar, for settlement
in two Business Days reported by the Banco Central do Brasil on SISBACEN Data
System under transaction code PTAX-800 (“Consulta de Cambio” or Exchange Rate
Inquiry), Option 5 (“Cotacoes para Contabilidade” or Rates for Accounting
Purposes), which appears on Reuters Screen BRFR Page under the caption “Dolar
PTAX” at approximately 6:30 pm Sao Paolo time on the Valuation Date or such
other relevant date.  The Settlement Rate
Option for the RUB is the Russian Ruble/U.S. Dollar Specified Rate, expressed
as the amount of Russian Rubles per one U.S. Dollar, for settlement in one
Business Day, calculated by the Chicago Mercantile Exchange (“CME”) and as
published on CME’s website, which appears on the Reuters Screen EMTA Page, at
approximately 1:30 p.m., Moscow time, on the Valuation Date or such other
relevant date.  The Settlement Rate
Option 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 Valuation Date or such other relevant date.  The Settlement Rate Option for the CNY is the
Chinese Renminbi/U.S. Dollar official fixing rate, expressed as the amount of
Chinese Renminbi per one U.S. Dollar, for settlement in two Business Days
reported by The State Administration of Foreign Exchange of the People’s
Republic of China, Beijing, which appears on the Reuters Screen SAEC Page
opposite the symbol “USDCNY=“ at approximately 5:00 p.m., Beijing time, on the
Valuation Date or such other relevant date.

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

The “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 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 

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spot quotations, then the Reference Exchange Rate,
Settlement Rate or other rate, as applicable, will be calculated on the basis
of the arithmetic mean of the applicable spot quotations received by the
Calculation Agent at approximately 10:00 a.m., New York City time, on the
relevant date from two Reference Banks (selected in the sole discretion of the
Calculation Agent), for the purchase or sale for deposits in the Reference
Currency. If these spot quotations are available from only one Reference Bank,
then the Calculation Agent, in its sole discretion, will determine whether that
quotation is reasonable to be used. If no spot quotation is available, then the
Reference Exchange Rate, Settlement Rate or other rate, as applicable, for such
Reference Currency will be determined by the Calculation Agent in good faith
and in a commercially reasonable manner.

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

The “Calculation Agent” means
Lehman Brothers Inc.

Except as provided below, the
Redemption Amount may, at the option of the Company, be made by check mailed to
the person entitled thereto at such person’s address as it appears on the
registry books of the Company.

Payment of the Redemption
Amount will be made in immediately available funds in accordance with the
normal procedures of the Trustee (or any duly appointed Paying Agent).

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

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

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

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

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IN WITNESS WHEREOF, Lehman
Brothers Holdings Inc. has caused this instrument to be signed by its Chairman
of the Board, its President, its Vice Chairman, its Chief Financial Officer,
one of its Vice Presidents or its Treasurer, by manual or facsimile signature
under its corporate seal, attested by its Secretary or one of its Assistant Secretaries
by manual or facsimile signature.

	
   

  	
  Dated: April 16, 2007

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  [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

  
						

 

 6

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX BASKET-LINKED NOTE
 DUE APRIL 16, 2008

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series 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 662/3% 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 Trade
Date to but excluding the date of early repayment and will equal, for each
note, the Redemption Amount, calculated as though 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 Trade 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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