Document:

Exhibit 4.01

 

CUSIP NO. 5252M0AL1

ISIN NO. US5252M0AL15

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT: $465,000

  

No. R-1

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

NOTES
LINKED TO A CURRENCY BASKET
 DUE MARCH 22, 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 March 22, 2010, or if such day is not a Business Day, on the
next following Business Day.

 

The “Valuation
Date” is March 16, 2010; 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 “Redemption
Amount” is the amount equal to the sum of the principal amount of the Notes,
plus $1,000, plus the Additional Amount, if any.

 

The “Additional
Amount” is an amount per Note equal to the greater of (a) zero and (b) $1,000
multiplied by the product of the Basket Return times the Participation Rate.

 

The “Participation
Rate” is 135%.

 

The “Basket”
is the Euro (EUR), Japanese Yen (JPY), British Pound Sterling (GBP), Canadian
Dollar (CAD), Swedish Krona (SEK) and Swiss Franc (CHF), each a “Basket
Currency” and collectively the “Basket Currencies”.

 

The “Basket Return” is 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” is set equal to 100 on the
Trade Date.

 

The “Basket Ending Level” is the Basket closing level
on the Valuation Date, 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 Currency Return for such Basket Currency times
the Basket Currency Weighting for such Basket Currency.

 

The “Currency Return” for each of EUR and GBP 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 Initial Spot Rate for such Basket Currency. The
Currency Return for each of JPY, CAD, SEK and CHF is a quotient, the numerator
of which is the difference between the Final Spot Rate for such Basket Currency
minus the Initial Spot Rate for such Basket Currency and the denominator of
which is the Final Spot Rate for such Basket Currency.

 

The “Final Spot Rate” for each Basket Currency is 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).

 

2

 

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

 

	
  Basket 

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Spot 

  Rate

  	
   

  
	
  EUR

  	
   

  	
  57.6

  	
  %

  	
  1.5582

  	
   

  
	
  JPY

  	
   

  	
  13.6

  	
  %

  	
  100.60

  	
   

  
	
  GBP

  	
   

  	
  11.9

  	
  %

  	
  2.0309

  	
   

  
	
  CAD

  	
   

  	
  9.1

  	
  %

  	
  0.9842

  	
   

  
	
  SEK

  	
   

  	
  4.2

  	
  %

  	
  6.0601

  	
   

  
	
  CHF

  	
   

  	
  3.6

  	
  %

  	
  1.0119

  	
   

  

 

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

 

The “Issue
Date” is March 20, 2008.

 

If a Disruption Event relating to
one or more of the Basket Currencies is in effect on the scheduled Valuation
Date, the Calculation Agent will calculate 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.

 

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 with respect to a Basket Currency, 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) for any Basket Currency other 

 

3

 

than EUR, the delivery of USD from accounts inside the
Basket Currency Jurisdiction for that Basket Currency to accounts outside that
Basket Currency Jurisdiction; or (y) the conversion of the Reference 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

  	
   

  	
  Screen Reference*

  	
   

  	
  Valuation Business Day

  
	
  EUR

  	
   

  	
  Reuters page 

  EURUSDFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  JPY

  	
   

  	
  Reuters page 

  USDJPYFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  GBP

  	
   

  	
  Reuters page 

  GBPUSDFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  CAD

  	
   

  	
  Reuters page 

  USDCADFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  
	
  SEK

  	
   

  	
  Reuters page 

  USDSEKFIXM=WM (as

  substitute for 1FED)

  	
   

  	
  London

  
	
  CHF

  	
   

  	
  Reuters page 

  USDCHFFIXM=WM (as 

  substitute for 1FED)

  	
   

  	
  London

  

 

*In
each case, as observed at approximately 4.00 p.m. London time.

 

The
“Spot Rate Source” for the EUR is the U.S. Dollar/Euro official fixing rate, expressed
as the amount of U.S. Dollars per one Euro, for settlement in two Business Days
reported by the Federal Reserve Bank of New York which appears on Reuters
Screen 1FED to the right of the caption “EUR” at approximately 10.00 a.m., New
York time, on the relevant Valuation Date. The Spot Rate Source for the JPY is
the Yen/U.S. Dollar official fixing rate, expressed as the amount of Japanese
Yen per one U.S. Dollar, for settlement in two Business Days reported by the
Federal Reserve Bank of New York which appears on Reuters Screen 1FED to the
right of the caption “JPY” at approximately 10.00 a.m., New York time, on the
relevant Valuation Date. The Spot Rate Source for GBP is the U.S.
Dollar/Sterling official 

 

4

 

fixing
rate, expressed as the amount of U.S. Dollars per one Sterling, for settlement
in two Business Days reported by the Federal Reserve Bank of New York which
appears on Reuters Screen 1FED to the right of the caption “GBP” at
approximately 10.00 a.m., New York time, on the relevant Valuation Date. The
Spot Rate Source for the CAD is the Canadian Dollar/U.S. Dollar official fixing
rate, expressed as the amount of Canadian Dollars per one U.S. Dollar, for
settlement in one Business Day reported by the Federal Reserve Bank of New York
which appears on Reuters Screen 1FED to the right of the caption “CAD” at
approximately 10.00 a.m. New York time, on the relevant Valuation Date. The
Spot Rate Source for the SEK is the Swedish Krona/U.S. Dollar official fixing
rate, expressed as the amount of Swedish Krona per one U.S. Dollar, for
settlement in two Business Days reported by the Federal Reserve Bank of New
York which appears on Reuters Screen 1FED to the right of the caption “SEK” at
approximately 10.00 a.m., New York time, on the relevant Valuation Date. The
Spot Rate Source for the CHF is the Swiss Franc/U.S. Dollar official fixing
rate, expressed as the amount of Swiss Francs per one U.S. Dollar, for
settlement in two Business Days reported by the Federal Reserve Bank of New
York which appears on Reuters Screen 1FED to the right of the caption “CHF” at
approximately 10.00 a.m., New York time, on the relevant Valuation Date. The term “business day” solely as used in any Spot Rate Source
described above shall mean 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 Principal Financial Center for both (a) the Basket Currency and
(b) the currency against which the Basket Currency is quoted (the “base
currency”) in accordance with the Reference Exchange Rate specified in the
applicable pricing supplement, in each case as specified for the applicable
Basket Currency or base currency in the table above.

 

The
screen or time of observation indicated in relation to any Final Spot Rate
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 

 

5

 

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.

 

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:  March 20, 2008

 

	
  [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

NOTES
LINKED TO A CURRENCY BASKET
 DUE MARCH 22, 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, Notes Linked to a
Currency Basket (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.Exhibit 4.02

 

CUSIP
NO. 5252M0ED5

ISIN NO. US5252M0ED52

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $20,622,000

  

No. R-1

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES I

 

FX BASKET-LINKED NOTE

DUE MARCH 19, 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 March 19, 2010,
or if such day is not a Business Day, on the next following Business Day.

 

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

 

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

 

The “Upsize
Leverage” is 100%.

 

The “Downside
Return Rate” is 40%.

 

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

 

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

 

The “Weighted
Currency Return” is, for
each Reference Currency, the product of the Weighting for such Reference
Currency times a quotient, the numerator of which is the difference of the
Initial Reference Currency Rate for such Reference Currency minus the
Settlement Rate for such Reference Currency and the denominator of which is the
Initial Reference Currency Rate for such Reference Currency.

 

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

 

	
  Reference Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Reference 

  Currency Rate

  	
   

  
	
  BRL

  	
   

  	
  20

  	
  %

  	
  1.6971

  	
   

  
	
  RUB

  	
   

  	
  20

  	
  %

  	
  23.6792

  	
   

  
	
  INR

  	
   

  	
  20

  	
  %

  	
  40.45

  	
   

  
	
  CNY

  	
   

  	
  20

  	
  %

  	
  7.0882

  	
   

  
	
  KRW

  	
   

  	
  20

  	
  %

  	
  988.30

  	
   

  

 

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

 

2

 

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

 

The “Valuation
Date” is March 16, 2010; provided that, upon the occurrence of a
Disruption Event with respect to a Reference Currency, the Valuation Date for
the affected Reference Currency may be postponed (as described in “Disruption
Events” below).

 

The “Issue
Date” is March 19, 2008.

 

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

 

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

 

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

 

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

 

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

 

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

 

(A)                              the occurrence and/or existence of an event on any day that has the
effect of preventing or making impossible the delivery of USD from accounts
inside 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 

 

3

 

Currency
or (ii) that generally makes it impossible to obtain the Settlement Rate
for the Reference Currency, on the Valuation Date.

 

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

 

	
  Reference Currency

  	
   

  	
  Screen Reference

  	
   

  	
  Valuation Business Day

  
	
  BRL

  	
   

  	
  BRFR

  	
   

  	
  Brazilia, Rio de
  Janiero or São Paulo

  
	
  RUB

  	
   

  	
  EMTA

  	
   

  	
  Moscow

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai

  
	
  CNY

  	
   

  	
  SAEC

  	
   

  	
  Beijing

  
	
  KRW

  	
   

  	
  KFTC18

  	
   

  	
  Seoul

  

 

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 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 other such relevant date.  The Settlement Rate Option for the KRW is the
South Korean Won/U.S. Dollar market average Seoul rate, expressed as the amount
of South Korean Won per one U.S. Dollar, for settlement in two Business Days
reported by the Korea Financial Telecommunications and Clearing Corporation
which appears on the Reuters Screen KFTC18 Page to the right of the
caption “USD Today” that is available at approximately 5:30 p.m., Seoul
time, on the Valuation Date or as soon thereafter as practicable, but in no
event later than 9:00 a.m., Seoul time, on the first Business Day
following the relevant Valuation Date.

 

4

 

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 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.

 

5

 

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:  March 19, 2008

 

	
  [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 MARCH 19, 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, 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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