Document:

Exhibit 4.02

 

CUSIP
NO. 52517PF22

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL
  AMOUNT: $10,000,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES H

 

PRINCIPAL PROTECTED
TRADE BALANCE CORRECTION BASKET FX-LINKED NOTE DUE MARCH 24, 2008

 

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

 

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

 

 

LEHMAN BROTHERS HOLDINGS INC., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
the “Company,” which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received, hereby
promises to pay to CEDE & Co., or registered assigns, on the Maturity Date,
an amount equal to the Redemption Amount. The Notes do not bear interest. No
payments on the Notes will be made until the Maturity Date.

 

The “Maturity Date” is March 24, 2008, or if such day
is not a Business Day, on the next following Business Day.

 

The Redemption Amount, for each $1 principal amount of
the Notes represented hereby, is the amount equal to the sum of (a) $1 plus (b) the Additional Amount.

 

The “Additional Amount”, for each $1 principal amount
of the Notes represented hereby will be (subject to the occurrence of a
Disruption Event) the greater of (i) zero and (ii) 140% times the Basket Value.

 

The “Reference Currencies”
are the Canadian Dollar (CAD), Chinese Yuan (CNY), Euro (EUR), Japanese Yen
(JPY), Mexican Peso (MXN), Singapore Dollar (SGD) and U.S. Dollar (USD).

 

The “Basket Value” equals the sum of:

 

(i)
a quotient, the numerator of which is 0.23051 and the denominator of
which is the Settlement Rate for CAD plus

 

(ii)
a quotient, the numerator of which is 1.60780 and the denominator of
which is the Settlement Rate for CNY plus

 

(iii)
a quotient, the numerator of which is 0.12341 and the denominator of
which is the Settlement Rate for EUR plus

 

(iv)
a quotient, the numerator of which is 23.42100 and the denominator of
which is the Settlement Rate for JPY plus

 

(v)
a quotient, the numerator of which is 1.59372 and the denominator of
which is the Settlement Rate for MXN plus

 

(vi)
a quotient, the numerator of which is 0.16182 and the denominator of
which is the Settlement Rate for SGD plus

 

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

 

The “Settlement Rate” for each
Reference Currency is the Reference Exchange Rate on the Valuation Date,
observed as per the Settlement Rate Option (subject to the occurrence of a
Price Source Unavailability Event).

 

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

 

2

 

The “Settlement Rate Option” for each Reference
Currency is as follows:

 

	
  Reference

  Currency

  	
   

  	
  Settlement Rate Option

  
	
  CAD

  	
   

  	
  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 Valuation Date.

  
	
  CNY

  	
   

  	
  The
  Chinese Yuan/U.S. Dollar official fixing rate, expressed as the amount of
  Chinese Yuan 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 1FEE to the right of the caption “CNY” at approximately 12.00 p.m. New
  York time, on that Valuation Date.

  
	
  EUR

  	
   

  	
  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
  Valuation Date.

  
	
  JPY

  	
   

  	
  The Japanese 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 Valuation
  Date.

  
	
  MXN

  	
   

  	
  The Mexican Peso/U.S.
  Dollar official fixing rate, expressed as the amount of Mexican Pesos 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 1FEE to the right of
  the caption “MXN” at approximately 12.00 p.m. New York time, on that
  Valuation Date.

  
	
  SGD

  	
   

  	
  The Singapore
  Dollar/U.S. Dollar official fixing rate, expressed as the amount of Singapore
  Dollar 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 1FEE to
  the right of the caption “SGD” at approximately 12.00 p.m. New York time, on
  that Valuation Date.

  

 

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

 

The “Valuation
Date” is March 18, 2008 or, if such day is not a Valuation Business Day, the
immediately preceding Valuation Business day.

 

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 Settlement Rate Option for that Reference
Currency.

 

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.

 

Upon the occurrence of a Disruption Event with
respect to any Reference Currency on any day during the term of the notes, the
Calculation Agent shall determine the Additional Amount payable on the Maturity
Date in good faith and in a commercially reasonable manner.

 

A “Disruption Event” means any of the following
events (other than a Price Source Unavailability Event), as determined in good
faith by the Calculation Agent:

 

3

 

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

 

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

 

(C)                                the occurrence and/or
existence of any event (other than those set forth in (A) or (B) above or those
constituting a Price Source Unavailability Event) with respect to any Reference
Currency that prevents or makes impossible (x) the Calculation Agent’s ability
to calculate the Additional Amount, (y) the fulfilment of our obligations under
the notes, or (z) our ability or the ability of any of our affiliates through
which we hedge our position under the notes to hedge such position or to unwind
all or a material portion of such hedge.

 

Upon the occurrence of a Price Source Unavailability
Event with respect to a Reference Currency, the Settlement Rate for the
affected Reference Currency will be determined in accordance with the Fallback
Rate Observation Methodology.

 

A “Price Source Unavailability Event” means, as determined in good
faith by the Calculation Agent, the Settlement Rate being unavailable for a
Reference Currency, or the occurrence of an event (other than an event
constituting a Disruption Event) that generally makes it impossible to obtain
the Settlement Rate for a Reference Currency, on the relevant Valuation Date.

 

The “Fallback Rate
Observation Methodology” means that the Settlement Rate for a 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 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 Settlement Rate for such Reference Currency will be
determined by the Calculation Agent in good faith and in a commercially
reasonable manner.

 

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 upon
surrender of this Note at the corporate trust office or agency of the Trustee
(or any duly appointed Paying Agent) maintained for that purpose in the Borough
of Manhattan, New York City (the “Corporate Trust Office”), provided that this
Note is presented to the Trustee (or any such Paying Agent) in time for the
Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.

 

The
Company will pay any administrative costs imposed by banks in making payments
in immediately available funds, but any tax, assessment or governmental charge

 

4

 

imposed upon payments
hereunder, including, without limitation, any withholding tax, will be borne by
the Holder hereof.

 

References
herein to “USD”, “U.S. dollars” or “U.S.$” or “$” 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: March 22,
  2006

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

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

 

CITIBANK, N.A.

  as Trustee

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

6

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES H

PRINCIPAL PROTECTED TRADE BALANCE CORRECTION BASKET FX-LINKED

NOTE
DUE MARCH 24, 2008

 

Section
1. General. This Note is one of a
duly authorized series of Notes of the Company designated as the Medium-Term
Notes, Series H, Principal Protected Trade Balance Correction Basket FX-Linked
Note (herein called the “Notes”). The
Notes are one of an indefinite number of series of debt securities of the
Company (collectively, the “Securities”) issued or issuable under and pursuant
to an indenture dated as of September 1, 1987, as amended and supplemented (the
“Indenture”), duly executed and delivered by the Company and Citibank, N.A., as
Trustee (herein called the “Trustee”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities. The separate series of
Securities may be issued in various aggregate principal amounts, may mature at
different times, may bear interest (if any) at different rates, may be subject
to different redemption provisions or repurchase rights (if any), may be
subject to different sinking, purchase or analogous funds (if any), may be
subject to different covenants and Events of Default and may otherwise vary as
in the Indenture provided.

 

Section
2. Principal Amount for Indenture Purposes. For the purpose of
determining whether Holders of the requisite amount of Notes of this series
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the principal amount of this Note will be deemed to be
the principal amount of this Note then outstanding.

 

Section
3. Modification and Waivers. The Indenture contains provisions
permitting the Company and the Trustee, with the consent of the Holders of not
less than 66-2/3% in aggregate principal amount of each series of the
Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the Redemption Amount or the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
or reduce any premium or other amount payable on redemption, or make the
Redemption Amount or the principal amount thereof, premium or other amount
payable, if any, or interest thereon payable in any coin or currency other than
that hereinabove provided, without the consent of the Holder of each Security
so affected, or (ii) change the place of payment on any Security, or impair the
right to institute suit for payment on any Security, or reduce the aforesaid
percentage of Securities, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each
Security so affected. It is also provided in the Indenture that, prior to any
declaration accelerating the maturity of any series of Securities, the holders
of a majority in aggregate principal amount of the Securities of such series

 

 

Outstanding may on behalf
of the holders of all the Securities of such series waive any past default or
Event of Default under the Indenture with respect to such series and its
consequences, except a default in the payment of interest, if any, on the
Redemption Amount or the principal amount, or premium, if any, on any of the
Securities of such series, or in the payment of any sinking fund installment or
analogous obligation with respect to Securities of such series. Any such
consent or waiver by the Holder of this Note shall be conclusive and binding
upon such Holder and upon all future holders and owners of this Note and any
Notes of this series which may be issued in exchange or substitution herefor,
irrespective of whether or not any notation thereof is made upon this Note or
such other Notes of this series.

 

Section
4. Obligations Unconditional. No reference herein to the Indenture and
no provisions of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
Redemption Amount or the principal amount on this Note at the place, at the
respective times, at the rate, and in the coin or currency herein prescribed.

 

Section
5. Defeasance. The Indenture contains provisions for the discharge of
the Indenture and defeasance at any time of the indebtedness on this Note upon
compliance by the Company with certain conditions set forth therein, which
provisions apply to this Note.

 

Section
6. Authorized Form and Denominations. The Notes of this series are
issuable in registered form, without coupons. Each Note will be issued
initially as either a Global Security or a Certificated Note, at the option of
the Company, in denominations of $10,000 or whole multiples of $10,000, 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 declared due and payable
upon any acceleration of the Notes will be determined by the Calculation Agent
and will equal the Redemption Amount calculated as though the maturity of the
Notes were the date of early repayment in the manner and with the effect
provided in the Indenture. The amount payable to the Holder hereof upon any
acceleration permitted under the Indenture will be equal to the Redemption
Amount calculated as though the date to which the maturity has been accelerated
were the Maturity Date as determined by the Calculation Agent.

 

Section
9. No Recourse Against Certain Persons. No recourse for the payment of
the Redemption Amount or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any Indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

Section
10. Tax Treatment. The Company agrees, and by acceptance of beneficial
ownership interest in the Notes of this series, each Holder of such Notes will
be deemed to have agreed, for United States federal income tax purposes, (i) to
treat the Notes of this series as indebtedness that is subject to Treas. Reg.
Sec. 1.1275-4 (the “Contingent Payment Regulations”) and (ii) to be bound by
the Company’s determination of the “comparable yield” and “projected payment
schedule,” within the meaning of the Contingent Payment Regulations, with
respect to the Notes of this series.

 

Section
11. Defined Terms. All terms used
but not defined in this Note are used herein as defined in the Indenture.

 

Section
12. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.Exhibit 4.03

 

	
  CUSIP NO. 52517PF48

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL
  AMOUNT: $4,250,000

  
	
  No. R-1

  	
   

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

 

MEDIUM-TERM NOTE, SERIES H

 

RELATIVE VALUE
FX-LINKED NOTE
DUE MARCH 22, 2007

 

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

 

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

 

 

LEHMAN BROTHERS HOLDINGS INC., a corporation duly
organized and existing under the laws of the State of Delaware (herein called
the “Company,” which term includes any successor corporation under the
Indenture referred to on the reverse hereof), for value received, hereby
promises to pay to CEDE & Co., or registered assigns, on the Maturity Date,
an amount equal to the Redemption Amount. 
The Notes do not bear interest. No payments on the Notes will be made
until the Maturity Date.

 

The “Maturity Date” is March 22, 2007, or if such day
is not a Business Day, on the next following Business Day.

 

The Redemption Amount, for each $1 principal amount of
the Notes represented hereby, is the amount equal to the product of (i) the sum
of one plus the Interest Rate times (ii) the
Additional Amount; provided that the minimum Redemption Amount payable shall be
zero.

 

The “Interest Rate” is 13.30%. 

 

The “Additional Amount”, for each $1 principal amount
of the Notes represented hereby will be (subject to the occurrence of a
Disruption Event) the sum of one plus the Basket Value. 

 

The “Reference Currencies”
are the Turkish Lira (TRY) and Euro (EUR).

 

The “Basket Value” equals
the sum of:

 

(i) a quotient, the numerator of which is 1.32200 and the denominator
of which is the Settlement Rate for TRY plus

 

(ii) a quotient, the numerator of which is -0.82440 and the denominator
of which is the Settlement Rate for EUR.

 

The “Settlement
Rate” for each Reference Currency is the Reference Exchange Rate on the
Valuation Date, observed as per the Settlement Rate Option (subject to the
occurrence of a Price Source Unavailability Event).

 

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

 

The “Settlement
Rate Option” for each Reference Currency is as follows:

 

	
  Reference

  Currency

  	
   

  	
  Settlement Rate Option

  
	
  TRY

  	
   

  	
  The spot rate in (A)
  divided by the spot rate in (B)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (A) The Turkish
  Lira/Euro fixing rate, expressed as the amount of Turkish Lira per one Euro
  which appears on Reuters Screen ECB37 to the right of the caption “TRY” at
  approximately 2:15 p.m., Central European time, on that Valuation Date.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (B) The U.S.
  Dollar/Euro fixing rate, expressed as the amount of U.S. Dollar per one Euro
  which appears on Reuters Screen ECB37 to the right of the caption “USD” at
  approximately 2:15 p.m., Central European time, on that Valuation Date.

  
	
   

  	
   

  	
   

  
	
  EUR

  	
   

  	
  One divided by the spot
  rate in (A):

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (A)  The U.S. Dollar/Euro fixing rate, expressed
  as the amount of U.S. Dollar per one Euro which appears on 

  

 

2

 

	
   

  	
   

  	
  Reuters Screen ECB37 to
  the right of the caption “USD” at approximately 2:15 p.m., Central European
  time, on that Valuation Date.

  

 

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

 

The “Valuation
Date” is March 16, 2007 or, if such day is not a Valuation Business Day, the
immediately preceding Valuation Business day. 

 

A “Valuation Business Day” means, with respect each Reference Currency,
any day on which the Trans-European Automated Real-Time Gross Settlement
Express Transfer (TARGET) System is open.

 

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.

 

Upon the occurrence of a Disruption Event with respect
to any Reference Currency on any day during the term of the notes, the
Calculation Agent shall determine the Additional Amount payable on the Maturity
Date in good faith and in a commercially reasonable manner.

 

A “Disruption Event” means any of the following
events (other than a Price Source Unavailability Event), as determined in good
faith by the Calculation Agent:

 

(A)                              for any Reference Currency other than EUR, the
occurrence and/or existence of an event on any day that has the effect of
preventing or making impossible 

 

i) the conversion of any Reference Currency into USD through
customary legal channels; or

 

ii) for TRY only,
the delivery of (x) USD from accounts inside Turkey to accounts outside Turkey
or (y) of TRY between accounts inside Turkey or to a party that is a
non-resident of Turkey; 

 

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

 

(C)                                the occurrence and/or
existence of any event (other than those set forth in (A) or (B) above or those
constituting a Price Source Unavailability Event) with respect to any Reference
Currency that prevents or makes impossible (x) the Calculation Agent’s ability
to calculate the Additional Amount, (y) the fulfilment of our obligations under
the notes, or (z) our ability or the ability of any of our affiliates through
which we hedge our position under the notes to hedge such position or to unwind
all or a material portion of such hedge.

 

Upon the occurrence of a Price Source Unavailability
Event with respect to a Reference Currency, the Settlement Rate for the
affected Reference Currency will be determined in accordance with the Fallback
Rate Observation Methodology.

 

A “Price Source Unavailability Event” means, as determined in good
faith by the Calculation Agent, the Settlement Rate being unavailable for a
Reference Currency, or the

 

3

 

occurrence of an event (other than an event
constituting a Disruption Event) that generally makes it impossible to obtain
the Settlement Rate for a Reference Currency, on the relevant Valuation Date.

 

The “Fallback Rate
Observation Methodology” means that the Settlement Rate for a 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 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 Settlement Rate for such
Reference Currency will be determined by the Calculation Agent in good faith
and in a commercially reasonable manner.

 

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 upon
surrender of this Note at the corporate trust office or agency of the Trustee
(or any duly appointed Paying Agent) maintained for that purpose in the Borough
of Manhattan, New York City (the “Corporate Trust Office”), provided that this
Note is presented to the Trustee (or any such Paying Agent) in time for the
Trustee (or any such Paying Agent) to make such payments in such funds in
accordance with its normal procedures.

 

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 “USD”, “U.S. dollars” or “U.S.$” or “$” 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.

 

4

 

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 22,
  2006

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  

 

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

 

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

 

CITIBANK, N.A.

  as Trustee

 

 

	
  By:

  	
   

  	
   

  
	
   

  	
  Authorized
  Officer

  

 

5

 

[REVERSE OF NOTE]

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES H

RELATIVE VALUE FX-LINKED NOTE
DUE MARCH 22, 2007

 

Section
1. 
General.  This Note is one
of a duly authorized series of Notes of the Company designated as the
Medium-Term Notes, Series H, Relative Value FX-Linked Note (herein called the “Notes”).  The
Notes are one of an indefinite number of series of debt securities of the
Company (collectively, the “Securities”) issued or issuable under and pursuant
to an indenture dated as of September 1, 1987, as amended and supplemented (the
“Indenture”), duly executed and delivered by the Company and Citibank, N.A., as
Trustee (herein called the “Trustee”), to which Indenture and all indentures
supplemental thereto reference is hereby made for a description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Trustee, the Company and the holders of the Securities.  The separate series of Securities may be issued
in various aggregate principal amounts, may mature at different times, may bear
interest (if any) at different rates, may be subject to different redemption
provisions or repurchase rights (if any), may be subject to different sinking,
purchase or analogous funds (if any), may be subject to different covenants and
Events of Default and may otherwise vary as in the Indenture provided.

 

Section
2.  Principal Amount for Indenture
Purposes.  For the purpose of
determining whether Holders of the requisite amount of Notes of this series
outstanding under the Indenture have made a demand, given a notice or waiver or
taken any other action, the principal amount of this Note will be deemed to be
the principal amount of this Note then outstanding.

 

Section
3.  Modification and Waivers.  The Indenture contains provisions permitting
the Company and the Trustee, with the consent of the Holders of not less than
66-2/3% in aggregate principal amount of each series of the Securities at the
time Outstanding to be affected, evidenced as in the Indenture provided, to
execute supplemental indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental indenture or modifying in any manner the rights of the holders of
the Securities of all such series; provided, however, that no such supplemental
indenture shall, among other things, (i) change the fixed maturity of any
Security, or reduce the Redemption Amount or the principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon or reduce any
premium or other amount payable on redemption, or make the Redemption Amount or
the principal amount thereof, premium or other amount payable, if any, or
interest thereon payable in any coin or currency other than that hereinabove
provided, without the consent of the Holder of each Security so affected, or
(ii) change the place of payment on any Security, or impair the right to
institute suit for payment on any Security, or reduce the aforesaid percentage
of Securities, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of each Security so
affected.  It is also provided in the
Indenture that, prior to any declaration accelerating the maturity of any
series of Securities, the holders of a majority in aggregate principal amount
of the Securities of such series Outstanding may on behalf of the holders of
all the Securities of such series waive any past

 

 

default or Event of
Default under the Indenture with respect to such series and its consequences,
except a default in the payment of interest, if any, on the Redemption Amount
or the principal amount, or premium, if any, on any of the Securities of such
series, or in the payment of any sinking fund installment or analogous
obligation with respect to Securities of such series.  Any such consent or waiver by the Holder of
this Note shall be conclusive and binding upon such Holder and upon all future
holders and owners of this Note and any Notes of this series which may be
issued in exchange or substitution herefor, irrespective of whether or not any
notation thereof is made upon this Note or such other Notes of this series.

 

Section
4.  Obligations Unconditional.  No reference herein to the Indenture and no
provisions of this Note or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
Redemption Amount or the principal amount on this Note at the place, at the
respective times, at the rate, and in the coin or currency herein prescribed.

 

Section
5.  Defeasance.  The Indenture contains provisions for the
discharge of the Indenture and defeasance at any time of the indebtedness on
this Note upon compliance by the Company with certain conditions set forth
therein, which provisions apply to this Note.

 

Section
6.  Authorized Form and Denominations.  The Notes of this series are issuable in
registered form, without coupons.  Each
Note will be issued initially as either a Global Security or a Certificated
Note, at the option of the Company, in denominations of $10,000 or whole
multiples of $10,000, 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 declared due and
payable upon any acceleration of the Notes will be determined by the Calculation
Agent and will equal the Redemption Amount calculated as though the maturity of
the Notes were the date of early repayment in the manner and with the effect
provided in the Indenture.  The amount
payable to the Holder hereof upon any acceleration permitted under the
Indenture will be equal to the Redemption Amount calculated as though the date
to which the maturity has been accelerated were the Maturity Date as determined
by the Calculation Agent.

 

Section
9.  No Recourse Against Certain
Persons.  No recourse for the payment
of the Redemption Amount or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any Indenture supplemental thereto or in any
Note, or because of the creation of any indebtedness represented thereby, shall
be had against any incorporator, stockholder, officer or director, as such,
past, present or future, of the Company or of any successor corporation, either
directly or through the Company or any successor corporation, whether by virtue
of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.

 

Section
10.  Tax Treatment.  The Company agrees, and by acceptance of beneficial ownership interest
in the Notes of this series, each Holder of such Notes will be deemed to have
agreed, for United States federal income tax purposes, to treat the Notes of
this series as cash-settled financial contracts (rather than as debt
instruments) subject to the foreign currency rules of section 988 of the
Internal Revenue Code of 1986, as amended. 

 

Section
11. 
Defined Terms.  All terms
used but not defined in this Note are used herein as defined in the Indenture.

 

Section
12.  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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