Document:

Exhibit 4.02

CUSIP NO. 52517PP88

ISIN NO. US52517PP881

	
  REGISTERED

  	
   

  	
   

  
	
  No. R-1

  	
   

  	
  PRINCIPAL AMOUNT: $3,000,000

  

 

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

BULLISH GOLD-LINKED NOTE WITH UPPER LIMIT
DUE JANUARY 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 January 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 payment calculated by
the Calculation Agent equal to the principal amount of the Notes multiplied by:

(A) a quotient the numerator of which is the Final Gold Price minus the
Initial Gold Price and the denominator of which is the Initial Gold Price, if
(a) the Final Gold Price is greater than the Initial Gold Price and strictly
less than the Upper Limit and (b) during the Observation Period, the
Continuously Observed Gold Price has not equaled or exceeded the Upper Limit;
or

(B) 5%, if (a) during the Observation Period, the Continuously Observed
Gold Price has equaled or exceeded the Upper Limit or (b) the Final Gold Price
is equal to or greater than the Upper Limit; or

(C)  0%, if (a) the Final Gold
Price is equal to or less than the Initial Gold Price and (b) during the
Observation Period, the Continuously Observed Gold Price has not equaled or
exceeded the Upper Limit.

The “Start Date” is January 9, 2007.

The “Valuation Date” is January 10, 2008; or if such day is not a
Valuation Business Day, the immediately preceding Valuation Business Day.

The “Observation Period” is the period from and including 10:00 a.m.
EST on the Start Date to but excluding 9:30 a.m. EST on the Valuation Date.

The “Reference Asset” is gold.

The “Continuously Observed
Gold Price” is, at any time on any day during the Observation Period, the most
recent traded price per troy ounce of gold, stated in U.S. dollars, on the
continuous trading EBS (Electronic Broking Service) Spot Dealing System as
observed on Reuters Page “XAU=EBS” under the heading “Latest” (subject to the
occurrence of a Disruption Event or a Continuous Observation Unavailability
Event).

The “Upper Limit” is
$754.60, equal to the Initial Gold Price plus $145.00.

The “Initial Gold Price” is
$609.60, which is the Reference Gold Price on the Start Date.

 

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The “Reference Gold Price”
is the fixing price per troy ounce of gold, stated in U.S. dollars, as
calculated by the London Bullion Market Association and displayed on the
Reuters Page “Gold Forward Offered Rate” (GOFO) under the “Lon (GMT) Fixings”
heading and to the right of the caption “PM” at approximately 3:00 p.m., London
time.  GOFO or the time of observation
indicated above shall be deemed to refer to GOFO or such time of observation as
modified or amended from time to time, or to any substitute Reuters Page that
may replace GOFO.

If the
Calculation Agent determines that a Disruption Event is in effect on any day
during the Observation Period to but excluding the earlier of (a) 9:30 a.m. EST
on the Valuation Date and (b) the time on any day at which the Continuously
Observed Gold Price first exceeds the Upper Limit, and for so long as such
Disruption Event is continuing, the Continuously Observed Gold Price for each
such day will be the single daily Reference Gold Price determined by the
Calculation Agent in accordance with the Fallback Price Observation
Methodology.

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

(A)          the material suspension of trading in the Reference Asset
or futures contracts related to the Reference Asset on the Relevant Market; or

(B)           failure of trading to commence, or permanent
discontinuance of trading, in the Reference Asset or futures contracts related
to the Reference Asset in the Relevant Market.

The “Relevant Market” is the market in London on which
members of the London Bullion Market Association quote prices for the buying
and selling of the Reference Asset.

If the
Calculation Agent determines that a Continuous Observation Unavailability Event
is in effect on any day during the Observation Period to but excluding the
earlier of (a) 9:30 a.m. EST on the Valuation Date and (b) the time on any day
at which the Continuously Observed Gold Price first exceeds the Upper Limit,
and for so long as such Continuous Observation Unavailability Event is
continuing, the Continuously Observed Gold Price for each such day will be the
single daily Reference Gold Price published on such day on GOFO, or any
substitute Reuters Page thereto, as determined by the Calculation Agent
(subject to the occurrence of a Reference Price Unavailability Event).

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

If the Calculation Agent determines that a Reference Price
Unavailability Event is in effect on the Valuation Date, or on any day on which
the Reference Gold Price is to be observed in accordance with Continuous
Observation Unavailability Event above, the Calculation Agent will determine
the Final Gold Price or the Reference Gold Price for such day, as applicable,
in accordance with the Fallback Price Observation Methodology.

A “Reference Price Unavailability Event” means the failure
of GOFO, or any substitute Reuters Page thereto, to announce or publish the
Reference Gold Price, or the 

 

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temporary
or permanent discontinuance or unavailability of GOFO (and for which no
substitute Reuters Page has been established).

A “Valuation Business Day” is a 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 in
New York and London.

The “Fallback Price Observation Methodology” means that the
Calculation Agent will determine the Reference Gold Price or the Final Gold
Price, as the case may be, applicable to the relevant day by requesting four
leading dealers in the Relevant Market, selected in the sole discretion of the
Calculation Agent (the “Reference Dealers”), to provide price quotations for
the Reference Gold Price or the Final Gold Price, as applicable.  If at least two quotations are provided, the
Reference Gold Price or the Final Gold Price, as applicable, will be the
arithmetic mean of such quotations.  If
only one Reference Dealer provides a price quotation, then the Calculation
Agent, in its sole discretion, will determine whether that quotation is
reasonable to be used.  If the
Calculation Agent determines that such single price quotation is not reasonable
to be used, or if no price quotation is provided, the Calculation Agent will
determine the Reference Gold Price or the Final Gold Price, as the case may be,
in its sole and absolute discretion taking into account the latest available
quotation for the Reference Gold Price or the Final Gold Price, as applicable,
and any other information that in good faith it deems relevant.

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.

 

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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:  January 16, 2007

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name: Jin Lee

  
	
   

  	
   

  	
  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

  	
   

  	
   

  
						

 

 5

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I

BULLISH GOLD-LINKED NOTE WITH UPPER LIMIT

DUE JANUARY 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, Bullish
Gold-Linked Note with Upper Limit (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 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 4.03

CUSIP
NO. 52517PS36

ISIN NO. US52517PS364

	
  REGISTERED

  	
  PRINCIPAL AMOUNT: $5,000,000

  
	
  No. R-1

  	
   

  

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

CRUDE OIL-LINKED SINGLE BARRIER SYNTHETIC
REVERSE CONVERTIBLE NOTE
DUE APRIL 17, 2007

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 17, 2007, 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 (a) the principal
amount of the Notes plus (b) the Fixed Return plus (c) if Crude OilREF is equal to or less than the Lower Barrier on
any Exchange Business Day during the Observation Period, the Principal
Adjustment Amount.

The “Fixed Return” is an amount equal to the principal amount of the
Notes multiplied by 2.8125%, rounded to the nearest whole cent.

The “Principal Adjustment Amount” is an amount equal to the principal
amount of the Notes multiplied by the lesser of (a) the Crude Oil Return, and
(b) 0%, rounded to the nearest whole cent.

The “Observation Period” is the period from and including the Trade
Date to and including the Valuation Date.

The “Trade Date” is January 11, 2007.

The “Valuation Date” is 5 Exchange Business Days prior to the Maturity
Date; provided that, if a Disruption Event is in effect on the scheduled
Valuation Date, the Valuation Date may be postponed (as described below).

“Crude OilREF” is, for any Exchange
Business Day within the Observation Period, the Crude Oil Price on such
Exchange Business Day.  Crude OilREF on the Valuation Date shall equal the Final
Crude Oil Price.

“Crude Oil” is light sweet crude oil.

The “Crude Oil Price” is the official settlement
price of the Crude Oil Contract, expressed as the U.S. dollar price per barrel
of Crude Oil, as made public by the Relevant Exchange (subject to the
occurrence of a Disruption Event).

The “Crude Oil Contract” is the first nearby month Crude Oil futures contract
(or, in the case of the last trading day of the first nearby month contract, the
second nearby month contract) traded on the Relevant Exchange.

The “Lower Barrier” is $41.5040, equal to the Crude
Oil Strike multiplied by 80%.

The “Crude Oil Strike” is $51.88, equal to the Crude
Oil Price on the Trade Date.

 

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The “Final Crude Oil Price” is the Crude Oil Price
on the Valuation Date.

The “Crude Oil Return” is a quotient, (x) the
numerator of which is the Final Crude Oil Price minus the Crude Oil Strike and
(y) the denominator of which is the Crude Oil Strike.

The “Relevant Exchange” is the NYMEX Division, or
its successor, of the New York Mercantile Exchange, Inc., or its successor; or,
if NYMEX is no longer the principal exchange or trading market for Crude Oil
options or futures contracts, such other exchange or principal trading market
for Crude Oil as determined in good faith by the Calculation Agent which serves
as the source of prices for Crude Oil, and any principal exchanges where
options or futures contracts on Crude Oil are traded.

An “Exchange Business Day” is a day, as determined
by the Calculation Agent, on which the Relevant Exchange 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 closing prior to its scheduled closing time).

If a Disruption Event identified in clauses (A), (B)
or (C) below is in effect on any Exchange Business Day during the Observation
Period to but excluding the earlier of (i) the Valuation Date and (ii) the
Exchange Business Day on which Crude OilREF was first equal to or less than the Lower
Barrier, the Calculation Agent will determine Crude OilREF applicable to such Exchange Business Day in
accordance with the Fallback Price Determination below.  If a Disruption Event identified in clauses
(D) or (E) below is in effect on any such Exchange Business Day, the
Calculation Agent will determine Crude OilREF applicable to such Exchange Business Day in
its sole and absolute discretion taking into account the latest available
quotation for the Crude Oil Price and any other information that in good faith
it deems relevant.

If Crude OilREF was equal to or less than the Lower Barrier on
any Exchange Business Day during the Observation Period and, on the Valuation
Date, a Disruption Event identified in clauses (A), (B) or (C) below is in
effect, the Valuation Date will be postponed to, and the Calculation Agent will
determine the Final Crude Oil Price on, the first Exchange Business Day
succeeding the Valuation Date on which no Disruption Event is occurring;
provided that if a Disruption Event is occurring on each of the three scheduled
Exchange Business Days succeeding the Valuation Date, such third scheduled
Exchange Business Day shall be deemed the Valuation Date and the Calculation
Agent will determine the Final Crude Oil Price on such third scheduled Exchange
Business Day succeeding the Valuation Date in accordance with the Fallback
Price Determination below.  If Crude OilREF was less than or equal to the Lower Barrier on
any Exchange Business Day during the Observation Period and, on the Valuation
Date, a Disruption Event identified in clauses (D) or (E) below is in effect,
the Calculation Agent will determine the Final Crude Oil Price on the Valuation
Date in its sole and absolute discretion, taking into account the latest
available quotation for the settlement price of the Crude Oil Contract and any
other information that in good faith it deems relevant.

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

 

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(A)          the
suspension of or material limitation on trading in the Crude Oil Contract or
Crude Oil, or futures contracts or options related to the Crude Oil Contract or
Crude Oil, on the Relevant Exchange;

(B)           either
(i) the failure of trading to commence, or permanent discontinuance of trading,
in the Crude Oil Contract or Crude Oil, or futures contracts or options related
to the Crude Oil Contract or Crude Oil, on the Relevant Exchange, or (ii) the
disappearance of, or of trading in, Crude Oil;

(C)           the failure of the Relevant Exchange to publish the
official daily settlement price for that day for the Crude Oil Contract (or the
information necessary for determining the settlement price);

(D)          the occurrence since the Trade Date of a material change in
the content, composition, or constitution of Crude Oil or the Crude Oil
Contract; or

(E)           the occurrence since the Trade Date of a material change
in the formula for or the method of calculating the settlement price of the
Crude Oil Contract.

For the purpose of determining whether a Disruption
Event 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;

(2)           a
suspension in trading on the Relevant Exchange (without taking into account any
extended or after-hours trading session), in the Crude Oil Contract, 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 the Relevant Exchange will
not include any time when the Relevant Exchange is closed for trading under ordinary
circumstances.

In the event that the “Fallback Price
Determination” is invoked, the Calculation Agent will determine Crude OilREF applicable to the relevant Exchange Business
Day, or the Final Crude Oil Price on the Valuation Date, as the case may be, by
requesting four leading dealers in Crude Oil (selected in the sole discretion
of the Calculation Agent) (the “Reference Dealers”) to provide price quotations
for the relevant Crude OilREF or the Final Crude
Oil Price.  If at least two quotations are
provided, the relevant Crude OilREF or the Final
Crude Oil Price, as the case may be, will be the arithmetic mean of such
quotations.  If only one Reference Dealer
provides a price quotation, then the Calculation Agent, in its sole discretion,
will determine whether that quotation is reasonable to be used.  If the Calculation Agent determines that such
single price quotation is not reasonable to be used, or if no price quotation
is provided, the Calculation Agent will determine the relevant Crude OilREF or the Final Crude Oil Price, as the case may
be, in its sole and absolute discretion taking into account the latest
available quotation for the settlement price of the Crude Oil Contract and any
other information that in good faith it deems relevant.

 

 4
 

 

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

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

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

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

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

 

 5
 

 

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

Dated:  January 17, 2007

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title: Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name: Jin Lee

  
	
   

  	
   

  	
  Title: Assistant Secretary

  

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

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

	
  CITIBANK, N.A.

  
	
  as Trustee

  
	
   

  
	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  

 

 6

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

CRUDE OIL-LINKED SINGLE BARRIER SYNTHETIC
REVERSE CONVERTIBLE NOTE 
DUE APRIL 17, 2007

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, Crude
Oil-Linked Single Barrier Synthetic Reverse Convertible 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 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 and will equal, for each note, the
principal amount plus (a) the Fixed Return deemed to have accrued for the
period from and including the Trade 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, and (b) the Principal Adjustment Amount, calculated as though the
maturity of the notes were the date of early repayment.  If a bankruptcy proceeding is commenced in
respect of Lehman Brothers Holdings, the claim of the beneficial owner of a
note will be capped at the principal amount plus (a) the Fixed Return deemed to
have accrued for the period from and including the Trade Date to but excluding
the date of the commencement of the proceeding 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, and (b) the Principal Adjustment
Amount, calculated as though the maturity of the notes were the date of the
commencement of the proceeding.

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.

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