Document:

Exhibit 4.06

 

CUSIP NO. 52522L632

ISIN NO. US52522L6323

 

	
  REGISTERED

  	
  PRINCIPAL AMOUNT: $3,380,240

  
	
  No. R-1

  	
   

  

 

LEHMAN BROTHERS HOLDINGS
INC.

 

MEDIUM-TERM NOTE, SERIES
I

 

NOTES
LINKED TO AN ASIAN CURRENCY BASKET

DUE
FEBRUARY 26, 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 February 26,
2010, or if such day is not a Business Day, on the next following Business Day.

 

The “Valuation Date” is February 23, 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:

 

(A) If the Basket Return is greater than zero, an
amount per Note equal to $10 plus the product of $10 times the Participation
Rate times the Basket Return.

 

(B) If the Basket Return is equal to or less than
zero, an amount per Note equal to $10 plus the product of $10 times the Basket
Return; provided that if the Basket Return is equal to or less than zero, the
principal amount of Notes will decrease 1% for every 1% that the Basket Return
is below zero.

 

The “Participation Rate” is 400%.

 

The “Basket Currencies” are the Malaysian Ringgit
(MYR), Indonesian Rupiah (IDR), Indian Rupee (INR) and Philippine Peso (PHP).

 

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

 

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).

 

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

 

2

 

	
  Basket

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Spot 

  Rate

  	
   

  
	
  MYR

  	
   

  	
  25

  	
  %

  	
  3.2025

  	
   

  
	
  IDR

  	
   

  	
  25

  	
  %

  	
  9035

  	
   

  
	
  INR

  	
   

  	
  25

  	
  %

  	
  39.81

  	
   

  
	
  PHP

  	
   

  	
  25

  	
  %

  	
  40.26

  	
   

  

 

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

 

The “Issue Date” is February 29, 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 determine the Basket Return using:

 

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

 

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

 

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

 

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 the delivery of USD from accounts inside the
Basket Currency Jurisdiction for that Basket Currency to accounts outside that
Basket Currency Jurisdiction;

 

(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

 

3

 

(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

  	
   

  
	
  MYR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore

  	
   

  
	
  IDR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore

  	
   

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai

  	
   

  
	
  PHP

  	
   

  	
  PDSPESO (as successor
  to PHPESO)

  	
   

  	
  Manila

  	
   

  

 

The Spot Rate Source for the
MYR is the Malaysian Ringgit/U.S. Dollar spot rate at 11:00 a.m.,
Singapore time, expressed as the amount of Malaysian Ringgit per one U.S.
Dollar, for settlement in two Business Days, reported by the Association of
Banks in Singapore, which appears on the Reuters Page ABSIRFIX01 to the
right of the caption “Spot” under the column “MYR” at approximately 11:30 a.m.,
Singapore time, on the relevant Valuation Date. 
The “Spot Rate Source” for the IDR is the Indonesian Rupiah/U.S. Dollar spot rate at
11:00 a.m., Singapore time, expressed as the amount of Indonesian Rupiah per one U.S. Dollar, for settlement in two Business
Days, reported by the Association
of Banks in Singapore which appears on
the Reuters Page ABSIRFIX01 to the right of the caption “Spot” under the column “IDR” at approximately 11:30 a.m., Singapore
time, on the relevant Valuation
Date.  The Spot Rate Source for the INR
is the Indian Rupee/U.S. dollar reference rate, expressed as the amount of
Indian Rupee per one U.S. dollar, for settlement in two Business Days reported
by the Reserve Bank of India which appears on the Reuters Screen RBIB Page at
approximately 2:30 p.m., Mumbai time, or as soon thereafter as practicable
on the on the Valuation Date or such other relevant date.  The
Spot Rate Source for the PHP is the Philippine Peso/U.S. Dollar morning
weighted average rate, expressed as the amount of Philippine Pesos per one U.S.
Dollar, for settlement in one Business Day reported by the Philippine Dealing
system which appears on the Reuters Screen PHPESO Page to the right of the
caption “AM WT AVE” at approximately 12:30 p.m., Manila time, on the
relevant Valuation Date.

 

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 

 

4

 

applicable pricing supplement. If the Noon Buying Rate is not announced
on that date, the Reference Exchange Rate, Final Spot Rate or other rate for
such Basket Currency will be calculated on the basis of the arithmetic mean of
the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the Valuation Business
Day next succeeding the Valuation Date or such other date specified in the
applicable pricing supplement, for the purchase or sale for deposits in the
basket currency by the New York offices of three leading banks engaged in the
interbank market (selected in the sole discretion of the Calculation Agent)
(the “Reference Banks”). If fewer than three Reference Banks provide spot
quotations, then the Reference Exchange Rate, Final Spot Rate or other rate, as
applicable, will be calculated on the basis of the arithmetic mean of the
applicable spot quotations received by the Calculation Agent at approximately
10:00 a.m., New York City time, on the relevant date from two Reference
Banks (selected in the sole discretion of the Calculation Agent), for the
purchase or sale for deposits in the Basket Currency. If these spot quotations
are available from only one Reference Bank, then the Calculation Agent, in its
sole discretion, will determine whether that quotation is reasonable to be
used. If no spot quotation is available, then the Reference Exchange Rate,
Final Spot Rate or other rate, as applicable, for such Basket Currency will be
determined by the Calculation Agent in good faith and in a commercially
reasonable manner.

 

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

 

The “Calculation Agent” means Lehman Brothers Inc.

 

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

 

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.

 

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:  February 29, 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

  	
   

  

 

6

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS
INC.

MEDIUM-TERM NOTES, SERIES
I

NOTES
LINKED TO AN ASIAN CURRENCY BASKET
 DUE FEBRUARY 26, 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 an Asian 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 4.07

 

CUSIP NO. 52523J412

ISIN NO. US52523J4123

 

	
  REGISTERED

  	
  PRINCIPAL AMOUNT: $13,692,000

  
	
  No. R-1

  	
   

  

 

LEHMAN BROTHERS HOLDINGS
INC.

 

MEDIUM-TERM NOTE, SERIES
I

 

NOTES
LINKED TO AN ASIAN CURRENCY BASKET

DUE
FEBRUARY 26, 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 February 26,
2010, or if such day is not a Business Day, on the next following Business Day.

 

The “Valuation Date” is February 23, 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 $10, plus the Additional Amount, if
any.

 

The “Additional Amount” is an amount per Note equal to
the greater of (a) zero and (b) $10 multiplied by the product of the
Basket Return times the Participation Rate.

 

The “Participation Rate” is 190%.

 

The “Basket Currencies” are the Indonesian Rupiah
(IDR), Indian Rupee (INR), Malaysian Ringgit (MYR) and Philippine Peso (PHP).

 

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

 

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).

 

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

 

	
  Basket

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial Spot 

  Rate

  	
   

  
	
  IDR

  	
   

  	
  25

  	
  %

  	
  9035

  	
   

  
	
  INR

  	
   

  	
  25

  	
  %

  	
  39.81

  	
   

  
	
  MYR

  	
   

  	
  25

  	
  %

  	
  3.2025

  	
   

  
	
  PHP

  	
   

  	
  25

  	
  %

  	
  40.26

  	
   

  

 

2

 

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

 

The “Issue Date” is February 29, 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 determine the Basket Return using:

 

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

 

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

 

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

 

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 the delivery of USD from accounts inside the
Basket Currency Jurisdiction for that Basket Currency to accounts outside that
Basket Currency Jurisdiction;

 

(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 

 

3

 

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

  	
   

  
	
  IDR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore

  	
   

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai

  	
   

  
	
  MYR

  	
   

  	
  ABSIRFIX01

  	
   

  	
  Singapore

  	
   

  
	
  PHP

  	
   

  	
  PDSPESO (as successor
  to PHPESO)

  	
   

  	
  Manila

  	
   

  

 

The “Spot Rate Source” for the IDR is the Indonesian Rupiah/U.S. Dollar spot rate at
11:00 a.m., Singapore time, expressed as the amount of Indonesian Rupiah per one U.S. Dollar, for settlement in two Business
Days, reported by the Association
of Banks in Singapore which appears on
the Reuters Page ABSIRFIX01 to the right of the caption “Spot” under the column “IDR” at approximately 11:30 a.m., Singapore
time, on the relevant Valuation
Date.  The Spot Rate Source for the INR
is the Indian Rupee/U.S. dollar reference rate, expressed as the amount of
Indian Rupee per one U.S. dollar, for settlement in two Business Days reported
by the Reserve Bank of India which appears on the Reuters Screen RBIB Page at
approximately 2:30 p.m., Mumbai time, or as soon thereafter as practicable
on the on the Valuation Date or such other relevant date.  The
Spot Rate Source for the MYR is the Malaysian Ringgit/U.S. Dollar spot rate at
11:00 a.m., Singapore time, expressed as the amount of Malaysian Ringgit
per one U.S. Dollar, for settlement in two Business Days, reported by the
Association of Banks in Singapore, which appears on the Reuters Page ABSIRFIX01
to the right of the caption “Spot” under the column “MYR” at approximately
11:30 a.m., Singapore time, on the relevant Valuation Date.  The Spot Rate Source for the PHP is the
Philippine Peso/U.S. Dollar morning weighted average rate, expressed as the
amount of Philippine Pesos per one U.S. Dollar, for settlement in one Business
Day reported by the Philippine Dealing system which appears on the Reuters
Screen PHPESO Page to the right of the caption “AM WT AVE” at
approximately 12:30 p.m., Manila time, on the relevant Valuation Date.

 

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 

 

4

 

Calculation Agent at approximately 10:00 a.m., New York City time,
on the Valuation Business Day next succeeding the Valuation Date or such other
date specified in the applicable pricing supplement, for the purchase or sale
for deposits in the basket currency by the New York offices of three leading
banks engaged in the interbank market (selected in the sole discretion of the
Calculation Agent) (the “Reference Banks”). If fewer than three Reference Banks
provide spot quotations, then the Reference Exchange Rate, Final Spot Rate or
other rate, as applicable, will be calculated on the basis of the arithmetic
mean of the applicable spot quotations received by the Calculation Agent at
approximately 10:00 a.m., New York City time, on the relevant date from
two Reference Banks (selected in the sole discretion of the Calculation Agent),
for the purchase or sale for deposits in the Basket Currency. If these spot
quotations are available from only one Reference Bank, then the Calculation
Agent, in its sole discretion, will determine whether that quotation is
reasonable to be used. If no spot quotation is available, then the Reference
Exchange Rate, Final Spot Rate or other rate, as applicable, for such Basket Currency
will be determined by the Calculation Agent in good faith and in a commercially
reasonable manner.

 

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

 

The “Calculation Agent” means Lehman Brothers Inc.

 

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

 

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.

 

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:  February 29, 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

  	
   

  

 

6

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS
INC.

MEDIUM-TERM NOTES, SERIES
I

NOTES
LINKED TO AN ASIAN CURRENCY BASKET
 DUE FEBRUARY 26, 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 an Asian 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.

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