Document:

Exhibit 10.2

SEPARATION
AGREEMENT AND MUTUAL RELEASE

This
Separation Agreement and Release (the “Agreement”) is made and entered into as
of January 19, 2007 (the “Effective Date”) by and between SPACEHAB, Inc. (“SPACEHAB”
or the “Company”) and E. Michael Chewning (“Chewning”).

RECITALS

Chewning
is a Senior Vice President with the Company. 
Other than this Agreement, Chewning and the Company are parties to the
following, and only the following, agreements (collectively, the “Ancillary
Agreements”):

a.                       Employment
Agreement, dated as of May 12, 2005 (the “Employment Agreement”), and attached as
Exhibit A; and

b.                      Indemnification
Agreement, dated as of May 12, 2005 (the “Indemnification Agreement”), which
the parties agree to be a valid, binding and enforceable agreement between them
and the provisions of which are not waived, modified or otherwise impaired by
this Agreement in any respect, and attached as Exhibit B;

Under
each of the Indemnification Agreement, the Amended and Restated Articles of
Incorporation of the Company (the “Articles Indemnification”) and the Amended
and Restated Bylaws of the Company (the “Bylaws Indemnification”)
(collectively, the “Existing Indemnification Arrangements”) the Company is
obligated, under certain circumstances, to indemnify Chewning under the terms
and conditions therein stated. 
Notwithstanding any provision of this Agreement to the contrary, the
Existing Indemnification Arrangements shall remain in effect and be enforceable
in accordance with their respective terms and conditions, except as expressly
modified or supplemented by this Agreement.

On
the terms hereinafter set forth, the parties agree that Chewning’s status as an
officer and employee of the Company is terminated as of the Effective Date.

AGREEMENT TERMS

Therefore,
in consideration of the promises and mutual agreements set forth in this
Agreement, the receipt and sufficiency of which is hereby acknowledged by all
parties, the Company and Chewning agree as follows:

1.             Termination of Employment Agreement.  As of the Effective Date, the Employment
Agreement between Chewning and the Company listed in Agreement Recital a. is
cancelled and terminated and will be of no further force or effect except as
provided for in this Agreement.  The
Existing Indemnification Arrangements shall remain binding and enforceable as
between the parties in accordance with their terms.  Therefore, Chewning agrees and acknowledges
that any rights he may have to any payments, benefits, or other perquisites of
any kind whatsoever under the Employment Agreement including, without
limitation, compensation, salary, vacation and sick pay, and travel and car
allowances, if any, are extinguished by this Agreement and Chewning’s right to
any claim or cause of action whatsoever to reimbursement,

payments, benefits, or other perquisites under the Employment Agreement
are released and forever waived under Agreement paragraph 5.

2.             Severance.  Contingent
upon Chewning’s compliance with each of the terms and conditions of this
Agreement, the Company will pay Chewning the amount of Fifty Thousand Dollars
($50,000.00) minus all lawful tax withholdings
(the “Payment”), payable in one lump sum within five days after expiration of
the seven-day Revocation Period described in Agreement paragraph 18.  Additionally, the Company will provide COBRA
continuation health coverage (the “COBRA Payment”) to Chewning in accordance
with the provisions of Paragraph 6 below. 
Chewning understands and agrees that the Payment and COBRA Payment is in
addition to anything of value to which Chewning is already entitled to receive.

3.             Resignation.  Chewning hereby irrevocably resigns all
positions as an officer and employee of the Company as of the Effective Date

4.             SPACEHAB Released Parties. The “SPACEHAB Released Parties” are defined as
SPACEHAB, Inc., each of SPACEHAB subsidiaries and each of SPACEHAB and its
subsidiaries predecessors, successors, parents, joint ventures, holding
companies, subsidiaries, divisions, affiliates, assigns, partnerships, agents,
directors, officers, employees, consultants, committees, employee benefit
committees, fiduciaries, representatives, attorneys, and all persons and
entities acting by, through, under or in concert or in any such capacity with
any of them.  Under this Agreement,
Chewning is excluded from the definition of “SPACEHAB Released Parties.”

5.             Global Release of Claims. 
Chewning, on behalf of himself, his heirs, executors, successors and
assigns, irrevocably and unconditionally releases, waives, and forever
discharges SPACEHAB and the SPACEHAB Released Parties, excluding Chewning
himself, from any and all claims, demands, actions, causes of action, costs,
fees, attorneys’ fees, and all liability whatsoever, whether known or unknown,
fixed or contingent, which Chewning has, had, or may have against SPACEHAB or
any of the SPACEHAB Released Parties, from the beginning of time and up to and
including the date of execution of this Agreement other than as may exist, or
hereafter arise, under this Agreement, the Ancillary Agreements, or the Existing
Indemnification Arrangements, except as expressly modified or supplemented by
this Agreement..  This Agreement
includes, without limitation, claims at law or equity or sounding in contract,
express or implied, or in tort, claims arising under any federal, state, or
local laws of any jurisdiction that prohibit age, sex, race, national origin,
color, disability, religion, veteran, military status, sexual orientation, or
any other form of discrimination, harassment, or retaliation (including,
without limitation, the Age Discrimination in Employment Act, the Older Workers
Benefit Protection Act, the Americans with Disabilities Act, Title VII of the
1964 Civil Rights Act, the Civil Rights Act of 1991, 42 U.S.C. § 1981, the
Rehabilitation Act, the Family and Medical Leave Act, the Sarbanes-Oxley Act of
2002, the Employee Polygraph Protection Act, the Financial Institutions Reform,
Recovery and Enforcement Act (or any other employment-related banking statute
or regulation), the Uniformed Services Employment and Reemployment Rights Act
of 1994, the Texas Commission on Human Rights Act, any federal, state, local or
municipal whistleblower protection or anti-retaliation statute or ordinance, or
any other federal, state, local, or municipal laws of any jurisdiction), claims
arising under the Employee Retirement Income Security Act, or

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any other statutory or common law claims related to Chewning’s
employment or separation from employment with SPACEHAB.

6.             COBRA
Payments.  SPACEHAB agrees to
continue all medical, dental, and other health benefits that were provided to
Chewning (and his eligible dependents) immediately before January 19, 2007, in
accordance with the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”), and the terms of SPACEHAB’s plans, as such may be amended
from time to time.  In the event Chewning
elects COBRA continuation coverage for Chewning (and his eligible dependents)
under the medical and dental plans, SPACEHAB will pay the entire cost of the
premiums for such coverage until the earlier of (i) six (6) months after the
Effective Date or July 31, 2007, whichever is later; (ii) the date that
Chewning obtains employment with another entity under which he is offered the
same or better health insurance coverage given to its employees; (iii) the date
that Chewning breaches the terms of this Agreement, including, without
limitation, the provisions of Agreement paragraphs 7, 9, 11, 12 and 15; or (iv)
the date Chewning (or his eligible dependents) cease to be eligible for COBRA
continuation coverage under a plan for any reason other than failure to pay
premiums.  Chewning understands and
agrees that he will be solely responsible for the payment of any COBRA premiums
for continuation coverage for all periods after the date SPACEHAB’s obligation
in the immediately preceding sentence terminates. Any benefits provided under
this Agreement paragraph 6 to Chewning or his dependents shall be modified to
the extent benefits under any applicable plan are modified for active employees
of SPACEHAB, and SPACEHAB reserves the right to amend, terminate or modify such
plans at any time.

7.             No Admission of
Liability/Confidentiality of Release.  Chewning understands and agrees that this
Agreement shall not in any way be construed as an admission by SPACEHAB or the
SPACEHAB Released Parties of any unlawful or wrongful acts whatsoever against
Chewning or any other person, and SPACEHAB and the SPACEHAB Released Parties
specifically disclaim any liability to or wrongful acts against Chewning or any
other person.  Similarly, the Company
acknowledges and agrees that this Agreement shall not in any way be construed
as an admission by Chewning of any unlawful or wrongful acts against SPACEHAB,
the SPACEHAB Released Parties or any other person, and Chewning specifically
disclaims any liability to or wrongful acts against SPACEHAB, the SPACEHAB
Released Parties or any other person. 
Chewning agrees to keep this Agreement, its terms, and the amount of the
Payment in this Agreement completely confidential unless publicly-disclosed by
the Company; however, Chewning may disclose the terms of this Agreement and the
amount of the Payment to his spouse, attorneys, financial advisors, or as
otherwise required by law.  Accordingly,
nothing in this Agreement is intended to preclude Chewning or SPACEHAB from
disclosing information in response to a subpoena issued by a court of law or
upon the request of a government agency having jurisdiction or power to compel
the disclosure.  Chewning, however,
agrees, as required by Agreement paragraph 10, to provide SPACEHAB prompt
written notice before responding to any subpoena.  Further, Chewning acknowledges and agrees
that nothing in this Agreement prevents SPACEHAB from disclosing the terms of
this Agreement and filing a copy of this Agreement (i) in response to a
subpoena issued by a court of law or a government agency having jurisdiction or
power to compel the disclosure, (ii) in response to a request by a governmental
law enforcement agency or federal or state agency having jurisdiction over the
acts or activities of SPACEHAB or any of its subsidiaries, or (iii) as required
by the applicable federal or state

 3
 

law,
including, without limitation, the provisions, rules or regulations of the
Securities Exchange Act of 1934 ,as amended.

8.             No Re-employment.  Chewning agrees that he relinquishes any
right to re-employment with the Company or its subsidiaries after the Effective
Date.  He further agrees that he will not
seek, apply for, accept, or otherwise pursue employment with the Company or any
of its subsidiaries.  Chewning
acknowledges that if he re-applies for or seeks employment with the Company or
its subsidiaries, the Company’s or its subsidiaries’ refusal to hire him based
on this provision will provide a complete defense to any claims arising from
his attempt to apply for employment.

9.             Non-Disparagement.  Chewning agrees for a period of two (2) years
after the Effective Date not to, directly or indirectly, disclose, communicate,
or publish any disparaging, negative, harmful, or disapproving information,
written communications, oral communications, electronic or magnetic
communications, writings, oral or written statements, comments, opinions,
facts, or remarks, of any kind or nature whatsoever (collectively, “Disparaging
Information”), concerning or related to any of the SPACEHAB Released Parties or
SPACEHAB.  Chewning understands and
acknowledges that this non-disparagement clause prevents him from disclosing,
communicating, or publishing, directly or indirectly, any Disparaging Information
concerning or related to the SPACEHAB Released Parties or SPACEHAB including,
without limitation, information regarding the SPACEHAB Released Parties or
SPACEHAB’s businesses, customers or clients, proprietary or technical
information, documents, operations, inventions, trade secrets, product ideas,
technical information, know-how, processes, plans (including, without
limitation, marketing plans and strategies), specifications, designs, methods
of operation, techniques, technology, formulas, software, improvements,
internal or external audits, internal controls, or any financial, marketing or
accounting information of any nature whatsoever.  Further, Chewning acknowledges that in
executing this Agreement, he has knowingly, voluntarily, and intelligently waived
any free speech, free association, free press or First Amendment to the United
States Constitution (including, without limitation, any counterpart or similar
provision or right under the Texas Constitution or any other state constitution
which may be deemed to apply) rights to disclose, communicate, or publish
Disparaging Information concerning or related to the SPACEHAB Released Parties
or SPACEHAB.  Chewning also understands
and agrees that he has had a reasonable period of time to consider this non-disparagement
clause, to review the non-disparagement clause with his attorney, and to
consent to this clause and its terms knowingly and voluntarily.  Chewning further acknowledge that this
non-disparagement clause is a material term of this Agreement.  If Chewning breaches this paragraph 9,
SPACEHAB will not be limited to a damages remedy, but may seek all other
equitable and legal relief including, without limitation, a temporary
restraining order, temporary injunctive relief, a permanent injunction, and its
attorneys’ fees and costs, against him and any other persons, individuals,
corporations, businesses, groups, partnerships or other entities acting by,
through, under, or in concert with him. 
Nothing in this Agreement shall, however, be deemed to prevent Chewning
from testifying fully and truthfully in response to a subpoena from any court
or from responding to investigative inquiries from any governmental agency.

10.           Cooperation.  After
his separation from employment with SPACEHAB, Chewning agrees to cooperate
reasonably with SPACEHAB in connection with the defense or prosecution of any
claims, causes of action, investigations, hearings, proceedings, arbitrations
or

 4
 

other tribunals now in existence or which may be brought in the future
against or on behalf of SPACEHAB or any of the other SPACEHAB Released Parties
that relate to events or occurrences that transpired while he was employed with
SPACEHAB.  Chewning’s full cooperation in
connection with this Agreement paragraph 10 shall include, without limitation,
making himself reasonably available to meet with counsel to prepare for
discovery or trial, to act as a witness on behalf of SPACEHAB or the other
SPACEHAB Released Parties at convenient times, and to provide true, accurate,
and complete testimony regarding any such matters.  SPACEHAB agrees to compensate Chewning for
actual and reasonable expenses incurred in providing the cooperation
contemplated by this paragraph 10.  If
Chewning is subpoenaed or contacted to cooperate in any manner by a non-governmental
party concerning any matter related to SPACEHAB or any of the other SPACEHAB
Released Parties, he shall immediately notify SPACEHAB, through the notice
procedures identified in Agreement paragraph 19(a), before responding or
cooperating.

11.           Confidentiality of Company Information.  Chewning agrees to
continue to abide by SPACEHAB’s confidentiality policies.  Further, the parties agree that while
Chewning’s Employment Agreement is extinguished by this Agreement, the
covenants and promises concerning safeguarding SPACEHAB Confidential
Information, namely, paragraph 7 of the Employment Agreement, are not
extinguished and are incorporated into this Agreement by reference.  Further, Chewning acknowledges that, during
his SPACEHAB employment, SPACEHAB provided him with information and materials
that are considered Confidential Information, as defined below.  Chewning agrees that he will not at any time
disclose to anyone, including, without limitation, any person, firm,
corporation, or other entity, or publish, or use for any purpose, any
Confidential Information, except as SPACEHAB directs and authorizes.  Chewning agrees that he
shall take all reasonable measures to protect the secrecy of and avoid
disclosure and unauthorized use of the Confidential Information and agrees to
immediately notify SPACEHAB in the event of any unauthorized use or disclosure
of the Confidential Information.  Confidential
Information includes, without limitation, all of SPACEHAB’s technical and
business information, which is of a confidential, trade secret or proprietary
character; engineering plans; drawings; specifications, studies or related
documents; bids or bid proposals; computer programs, ideas or concepts;
business forms or procedures developed by SPACEHAB; financial information
regarding SPACEHAB or its clients; client lists; identity of customers;
identity of prospective customers; contract terms; bidding information and
strategies; pricing methods or information; photographs; internal policies,
procedures, communications and reports; computer software; computer software
methods and documentation; graphic designs; hardware; SPACEHAB or SPACEHAB
Released Parties’ methods of operation; the procedures, forms and techniques
used in servicing accounts; and other information or documents that SPACEHAB
requires to be maintained in confidence for SPACEHAB’s continued business
success.  Confidential Information does
not include any information that is disclosed to the public or, upon reasonable
investigation, is readily ascertainable in the public domain.

12.           Obligations Regarding Transfer of Patents or
Inventions.  Chewning agrees
to continue to abide by SPACEHAB’s confidentiality policies regarding
disclosure and transfer of patents or inventions.  Further, the parties agree that while
Chewning’s Employment Agreement is extinguished by this Agreement, the
covenants and promises concerning disclosure and assignment of inventions and
patents, namely, paragraph 9 of the Employment Agreement, are not extinguished
and are incorporated into this Agreement by reference.  Accordingly, Chewning

 5
 

agrees and acknowledges that will promptly
disclose to SPACEHAB all products, processes, hardware and software inventions,
designs, computer programs and related documentation, other works of authorship
and developments relating to SPACEHAB’s business which Chewning may have made
individually or jointly with others, during his SPACEHAB employment or within a
period of six (6) months following his separation from employment with
SPACEHAB.

13.           Agreement to Return Company
Property/Documents.  Chewning understands and agrees that his last
day of active work as an officer and employee of SPACEHAB shall be January 19,
2007.  Accordingly, Chewning agrees that:
(i) he did not and will not take with him, copy, alter, destroy, or delete any
files, documents, electronically stored information, or other materials whether
or not embodying or recording any Confidential Information, including copies,
without obtaining in advance the written consent of an authorized SPACEHAB
representative; and (ii) he will promptly return to SPACEHAB all Confidential
Information, documents, files, records and tapes (written or electronically
stored) that have been in his possession or control regarding SPACEHAB or any
SPACEHAB Released Party, and he will not use or disclose such materials in any
way or in any format, including written information in any form, information
stored by electronic means, and any and all copies of these materials.  Chewning further agrees that upon or before
the execution of this Agreement, he will return to SPACEHAB all SPACEHAB or
SPACEHAB Released Party property, including, without limitation, all papers,
notebooks, reports, manuals, computer files, software, vehicle, tools, keys,
credit authorizations, apparatus, computer user identifiers, passwords and
other property furnished to Chewning by SPACEHAB or any SPACEHAB Released
Party, or other property which was prepared or made in whole or in part by
Chewning in connection with his SPACEHAB employment.

14.           Knowing and Voluntary Agreement. 
Chewning understands it is his choice whether or not to enter into this
Agreement and that his decision to do so is voluntary and is made
knowingly.  Chewning acknowledges that he
has been advised by SPACEHAB to seek legal counsel to review this Agreement.

15.           Survival of Certain Restrictive Covenants.  While Chewning acknowledges that his May 12,
2005 Employment Agreement has expired by operation of this Agreement, the
parties agree that paragraphs 8(a)(ii) and 10 of the Employment Agreement,
concerning non-solicitation and definition of the term Restricted Period, shall
survive the termination of the Employment Agreement.  Therefore, the restrictive periods preventing
solicitation will begin to run as of the Effective Date as explained in
paragraphs 8(a)(ii) and 10 of the Employment Agreement.  Accordingly, paragraphs 8(a)(ii) and 10 of
the Employment Agreement are incorporated into this Agreement by reference.

16.           Forfeiture
of Severance Benefits for Breach of Restrictive Covenants. If, during
the six (6) month Restricted Period following the Effective Date, as specified
in Agreement paragraph 15 and paragraphs 8(a)(ii) and 10 of the Employment
Agreement, Chewning fails to fulfill his obligations, SPACEHAB may: (a)
terminate this Agreement; (b) terminate any remaining Payments and benefits set
forth in Agreement paragraphs 2 and 6 and Chewning will forfeit any remaining
Payments or benefits from and after the date of his breach of Agreement
paragraph 15; (c) recover attorneys’ fees SPACEHAB incurs for any
breach of the restrictive covenant in Agreement paragraph 15; and (d) recover
all other damages to which

 6
 

SPACEHAB may be entitled.  The
remaining terms of this Agreement shall continue in full force and effect.

17.           Time to Consider Agreement. 
Chewning acknowledges that he has been advised in writing by the Company
that he should consult an attorney before executing this Agreement, and he
further acknowledges that he has been given a period of twenty-one (21)
calendar days within which to review and consider the provisions of this
Agreement.  Chewning understands that he
is not required to take the full twenty-one (21) days to consider this
Agreement but if he does not sign this Agreement before the 21 calendar day
period expires, this Agreement offer will be withdrawn automatically.

18.           Revocation Period.  Chewning understands and acknowledges that he
has seven (7) calendar days following the execution of this Agreement to revoke
his acceptance of this Agreement.  This
Agreement will not become effective or enforceable, and the Payment in
Agreement paragraph 2 will not become payable until after this revocation
period has expired without Chewning’s revocation.  If Chewning does not revoke this Agreement
within the revocation period, the Company will comply with Agreement paragraph
2 and will send Chewning the Payment within five (5) days after the revocation
period’s expiration date.

19.           Miscellaneous Provisions and Enforcement.

(a)           Notices. 
Any notice or other communication required, permitted or desired to be
given under this Agreement shall be deemed delivered; when personally
delivered, if delivered by overnight courier; the same day, if transmitted by
facsimile on a business day before noon, Central Standard Time; the next
business day, if otherwise transmitted by facsimile; and the third business day
after mailing, if mailed by prepaid certified mail, return receipt requested,
as addressed or transmitted as follows (as applicable):

If to Chewning:

E. Michael Chewning

2225 Scenic Shore Drive

Seabrook, Texas 77586

If to the Company:

SPACEHAB, Inc.

Attention: Chief Financial
officer

12130 Highway 3, Bldg. 1

Webster, Texas  77598-1504

With a copy (which shall not
constitute notice) to:

Arthur S. Berner

Haynes and Boone, LLP

1221 McKinney, Suite 2100

Houston, Texas  77010

Fax: (713) 236-5652

 7
 

Concerning
Chewning’s notice in response to subpoenas (Agreement paragraph 7) or requests
to cooperate with any non-governmental party or entity regarding any claims or
causes of action concerning SPACEHAB or any of the other SPACEHAB Released
Parties (Agreement paragraph 10), Chewning or his attorney must contact and
speak with the President of SPACEHAB or his or her designee.  This telephone conversation must occur no
later than three business days after receiving the subpoena or request for
Chewning’s cooperation.

(b)           Choice of Law.  THIS AGREEMENT SHALL
BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS,
WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS (RULES) OR CHOICE OF LAWS (RULES)
THEREOF.  THE EXCLUSIVE VENUE FOR ALL
SUITS AND PROCEEDINGS ARISING FROM OR RELATED TO THIS AGREEMENT SHALL BE IN A
COURT OF COMPETENT JURISDICTION IN HOUSTON, TEXAS.

(c)           Limitations on Assignment.  Except as provided in this Agreement,
Chewning may not assign this Agreement or any of the rights or obligations set
forth in this Agreement without the explicit written consent of SPACEHAB.  Any attempted assignment by Chewning in
violation of this paragraph 19(c) shall be void ab initio..  Except as
provided in this Agreement, nothing in this Agreement entitles any person,
other than the parties to the Agreement, to any claim, cause of action, remedy,
or right of any kind, including, without limitation, the right of continued
employment.

(d)           Waiver. 
A party’s waiver of any breach or violation of any Agreement provisions
shall not operate as, or be construed to be, a waiver of any later breach of
the same or other Agreement provision.

(e)           Severability.  If any provision or provisions of this
Agreement are held to be invalid, illegal, or unenforceable for any reason
whatsoever, (i) the validity, legality, and unenforceability of the remaining
provisions of this Agreement (including, without limitation, all portions of
any Agreement paragraphs containing any provision held to be invalid, illegal,
or unenforceable, that are not themselves invalid, illegal, or unenforceable),
will not in any way be affected or impaired thereby, and (ii) the provision or
provisions held to be invalid, illegal, or unenforceable will be limited or
modified in its or their application to the minimum extent necessary to avoid
the invalidity, illegality, or unenforceability, and, as so limited or
modified, the provision or provisions and the balance of this Agreement will be
enforceable in accordance with their terms.

(f)            Headings. 
The Agreement headings are for reference purposes only and will not
affect in any way the meaning or interpretation of this Agreement.

(g)           Counterparts.  This Agreement and amendments to it will be
in writing and may be executed in counterparts. 
Each counterpart will be deemed an

 8
 

original,
but both counterparts together will constitute one and the same instrument.

(h)           Entire Agreement, Amendment, Binding Effect.  This
Agreement and the Ancillary Agreements (as the same may be expressly amended,
supplemented or superseded by this Agreement) constitute the entire agreement
between the parties concerning the subject matter in this Agreement and the
Ancillary Agreements.  No oral statements
or other prior written material not specifically incorporated in this Agreement
shall be of any force and effect, and no changes in or additions to this
Agreement shall be recognized, unless incorporated in this Agreement by written
amendment, such amendment to become effective on the date stipulated in
it.  Chewning acknowledges and represents
that in executing this Agreement, he did not rely, and has not relied, on any
communications, promises, statements, inducements, or representation(s), oral
or written, by SPACEHAB or any SPACEHAB Released Party, except as expressly
contained in this Agreement.  Any
amendment to this Agreement must be signed by all parties to this
Agreement.  This Agreement will be
binding on and inure to the benefit of the parties hereto and their respective
successors, heirs, legal representatives, and permitted assigns (if any).  This Agreement supersedes (a) any prior
agreements between Chewning and SPACEHAB concerning the subject matter of this
Agreement and (b) all other agreements between Chewning and SPACEHAB, as
explained in Agreement paragraph 1, unless specifically modified by this
Agreement.  Unless otherwise specified in
this Agreement, SPACEHAB and Chewning agree that to the extent the terms of
this Agreement conflict with any terms of the Employment Agreement, the terms
of this Agreement shall supersede and govern the terms of the Employment
Agreement.

(i)            Injunctive Relief.  Chewning and the Company acknowledge and
agree that the covenants, obligations and agreements contained in this
Agreement concern special, unique and extraordinary matters and that a
violation of any of the terms of these covenants, obligations or agreements
will cause irreparable injury for which adequate remedies at law are not
available.  These injunctive remedies are
cumulative and in, addition to any other rights and remedies the parties may
have. SPACEHAB and Chewning irrevocably submit to the exclusive jurisdiction of
the state courts and federal courts in the city of SPACEHAB’s headquarters
(Houston, Texas) regarding the injunctive remedies set forth in this paragraph
and the interpretation and enforcement of this paragraph (i) solely insofar as
the interpretation and enforcement relate to an application for injunctive
relief in accordance with the provisions of this Agreement. Further, the
parties irrevocably agree that (i) the sole and exclusive appropriate venue for
any suit or proceeding relating to injunctive relief shall be in the courts
listed in this paragraph (i), (ii) all claims with respect to any application
for injunctive relief shall be heard and determined exclusively in these
courts, (iii) these courts will have exclusive jurisdiction over the parties to
this Agreement and over the subject matter of any dispute relating to
application for injunctive relief, and (iv) each party waives all objections
and defenses based on service of process, forum, venue, or personal or subject
matter jurisdiction, as these defenses may relate to

 9
 

an
application for injunctive relief in a suit or proceeding under the provisions
of this paragraph (i).

PLEASE READ CAREFULLY

AS THIS DOCUMENT INCLUDES A RELEASE OF CLAIMS.

As evidenced by my signature below, I certify that I have read the
above Agreement and agree to its terms.

 

	
  

  	
   

  	
  SPACEHAB, INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   /s/E. Michael Chewning

  	
   

  	
  By:

  	
  /s/Brian K. Harrington

  
	
  E. Michael
  Chewning

  	
   

  	
  Brian K. Harrington, Senior Vice President and

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
  January 22, 2007

  	
   

  	
  January 22, 2007

  

 

 10Exhibit 4.01

LEHMAN BROTHERS HOLDINGS INC.

15.00% Reverse Exchangeable Notes Linked to
the Least Performing Common Stock in a 

Basket of Common Stocks due February 15, 2008

 

	
  Number R-1

  	
  $1,000,000

  
	
  ISIN US524908UV01

  	
  CUSIP 524908UV0

  

 

See Reverse for Certain Definitions

THIS SECURITY (THIS “SECURITY”) IS A
GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF A DEPOSITORY OR A NOMINEE THEREOF.  UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR
IN PART FOR SECURITIES IN CERTIFICATED FORM, THIS 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 SUCH 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. 
UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

LEHMAN BROTHERS HOLDINGS INC., a corporation
duly organized and existing under the laws of the State of Delaware
(hereinafter called the “Company”), for value received, hereby promises
to pay to CEDE & CO. or registered assigns, at the office or agency of the
Company in the Borough of Manhattan, The City of New York, on the Maturity
Date, in such coin or currency of the United States of America at the time of
payment shall be legal tender for the payment of public and private debts, for
each $1,000 principal amount of the Securities represented hereby, an amount
equal to the Payment at Maturity and to make coupon payments on the principal
amount hereof, as provided below under “Coupon Payments.”

Any amount payable on the Maturity Date
hereon will be paid only upon presentation and surrender of this Security.

REFERENCE IS HEREBY MADE TO THE FURTHER
PROVISIONS OF THIS SECURITY SET FORTH ON THE REVERSE HEREOF WHICH FURTHER 

PROVISIONS SHALL FOR ALL PURPOSES HAVE THE SAME
EFFECT AS IF SET FORTH AT THIS PLACE.

 2
 

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
14, 2007

	
  [SEAL]

  	
  LEHMAN BROTHERS HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James J. Killerlane III

  	
   

  
	
   

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
  Attest:

  	
  /s/ Jin Lee  

  	
   

  
	
   

  	
   

  	
  Assistant Secretary

  
	
   

  	
   

  	
   

  

 

TRUSTEE’S CERTIFICATE OF AUTHENTICATION

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

	
  CITIBANK, N.A.

   as Trustee

  	
   

  
	
   

  	
   

  
	
  By:

  	
  /s/ John J. Byrnes

  	
   

  	
   

  
	
   

  	
  Authorized Officer

  
					

 

 

 3

Reverse of Security

This Security is one of a duly authorized
series of Securities of the Company designated as 15.00% Reverse Exchangeable
Notes Linked to the Least Performing Common Stock in a Basket of Common Stocks
Due February 15, 2008 (herein called the “Securities”).  The Company may, without the consent of the
holders of the Securities, create and issue additional notes ranking equally
with the Securities and otherwise similar in all respects so that such further
notes shall be consolidated and form a single series with the Securities;
provided that no additional notes can be issued if an Event of Default has
occurred with respect to the Securities. 
This series of Securities is one of an indefinite number of series of
debt securities of the Company, issued and to be issued under an indenture,
dated as of September 1, 1987, as amended (herein called the “Indenture”),
duly executed and delivered by the Company and Citibank N.A., as trustee
(herein called the “Trustee”, which term includes any successor trustee
under the Indenture), 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 Company, the
Trustee and the Holders of the Securities.

The Payment at Maturity and the amount to be
paid on each Coupon Payment Date, at the request of the Trustee, shall be
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.  The Trustee shall fully rely
on the determination by the Calculation Agent of the Payment at Maturity and
the amount to be paid on each Coupon Payment Date and shall have no duty to
make any such determination.  The Calculation Agent
will provide written notice to the Trustee at its New York office, on which
notice the Trustee may conclusively rely, of the Payment at Maturity and the
amount to be paid on each Coupon Payment Date on or prior to 11:00 a.m. on the
Business Day preceding the Maturity Date and each Coupon Payment Date.

All calculations with respect to the Initial Share Prices, the Prices or
Closing Prices, as applicable, of the Reference Stocks during the Monitoring
Period, the Final Share Prices and the Payment at Maturity will be rounded to
the nearest ten-thousandth, with five one hundred-thousandths rounded upward (e.g., .76545 would be rounded up to .7655); and all dollar
amounts paid on the aggregate principal amount of Securities per Holder will be
rounded to the nearest cent, with one-half cent rounded upward.

This Security is not subject to any sinking
fund.

If an Event of Default with respect to the
Securities shall occur and be continuing, the amounts payable on all of the
Securities may be declared due and payable 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 Payment at Maturity calculated as though the
date of acceleration were the Observation Date, plus, if applicable, any
accrued and unpaid coupon payments on the Securities. Upon any acceleration of
the Securities, any coupon payment will be calculated on the basis of a 360-day
year of twelve 30-day months and the actual number of days elapsed from and
including the previous Coupon Payment Date for which a coupon payment was
made.  If the maturity of the Securities
is accelerated because of an Event of Default, the Company shall, or shall
cause the Calculation Agent to, provide written notice to the Trustee at its
New York office, on which notice the Trustee may conclusively rely, and to The
Depository Trust Company of the cash amount due with respect to the Securities
as promptly as possible and in no event later than two Business Days after the
date of acceleration.

The Indenture contains provisions permitting
the Company and the Trustee, with the consent of the holders of not less than
662/3% in aggregate principal amount of each series of Securities at the time
Outstanding to be affected (each series voting as a class), 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 principal amount thereof, or
reduce the rate or extend the time of payment of interest thereon, if any, or
reduce any premium payable on redemption, or make the principal thereof, or
premium, if any, or interest thereon, if any, 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, or the
principal of, 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 Security shall be
conclusive and binding upon such Holder and upon all future holders and owners
of this Security and any Securities which may be issued in exchange or
substitution hereof, irrespective of whether or not any notation thereof is
made upon this Security or such other Securities.

No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the Payment
at Maturity and coupon payments with respect to this Security.

The Securities are issuable in denominations
of $1,000 and any whole multiples of $1,000.

The Company, the Trustee, and any agent of
the Company or of the Trustee may deem and treat the registered holder (the “Holder”)
hereof as the absolute owner of this Security (whether or not this Security
shall be overdue and notwithstanding any notation of ownership or other writing
hereon), for the purpose of receiving payment hereof, or on account hereof, and
for all other 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.  All such payments made to or
upon the order of such registered holder shall, to the extent of the sum or
sums paid, effectually satisfy and discharge liability for moneys payable on
this Security.

No recourse for the payment of the principal
of, premium, if any, or interest on this Security, 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 Security, or because of the creation
of any indebtedness represented thereby, shall be had against any incorporator,
stockholder, officer or director, as 

 2
 

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.

As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security for
registration of transfer at the Corporate Trust Office or agency in a Place of
Payment for this Security, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar duly executed by, the Holder hereof or such Holder’s attorney duly
authorized in writing, and thereupon one or more new Securities of this series
or of like tenor and of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.

The Company intends to treat, and by
purchasing this Security, the Holder agrees to treat, for all tax purposes,
this Security as a financial contract giving rise to capital gain or loss,
rather than as a debt instrument.

THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

Definitions

Set forth below are definitions of the terms
used in this Security.

“Basket” shall mean the basket
initially composed of the common
stocks of General Electric Company (NYSE: GE), International Business Machines
Corporation (NYSE: IBM), Intel Corporation (NASDAQ: INTC) and Wal-Mart Stores,
Inc. (NYSE: WMT) (each a “Reference Stock” and, together, the “Reference
Stocks”). Any Reference Stock issuer may be changed in certain circumstances, as
described below under “Anti-dilution
Adjustments—Reorganization Events.”

“Business Day”, notwithstanding any
provision in the Indenture, shall mean any day that is not a Saturday or Sunday
and that is not a day on which banking institutions in the City of New York are
authorized or obligated by law to close.

“Calculation Agency Agreement” shall
mean the Calculation Agency Agreement, dated as of December 21, 2006 between
the Company and the Calculation Agent, as amended from time to time, or any
successor calculation agency agreement.

“Calculation Agent” shall mean the
person that has entered into an agreement with the Company providing for, among
other things, the determination of the Payment at Maturity, which term shall,
unless the context otherwise requires, include its successors and assigns.  The initial Calculation Agent shall be Lehman
Brothers Inc.

 3
 

“Cash Value” shall mean the amount in cash equal to the product of (1)
$1,000 divided by the Initial Share Price of the Least Performing Reference
Stock and (2) the Final Share Price of the Least Performing Reference Stock.

“Closing Price” of one share of each
Reference Stock (or one unit of any other security for which a Closing Price
must be determined) on any Trading Day means:

·                  if such Reference Stock (or any such other security)
is listed or admitted to trading on a national securities exchange, the last
reported sale price, regular way, of the principal trading session on such day
on the principal United States securities exchange registered under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), on which such
Reference Stock (or any such other security) is listed or admitted to trading,

·                  if such Reference Stock (or any such other security)
is listed or admitted to trading on any national securities exchange but the
last reported sale price is not available pursuant to the preceding bullet
point, the last reported sale price of the principal trading session on the
over-the-counter market as reported on the Nasdaq National Market or the OTC
Bulletin Board Service (the “OTC Bulletin Board”) operated by the National
Association of Securities Dealers, Inc. (“NASD”) on such day;

·                  if such Reference Stock (or any such other
security)  is not listed or admitted to
trading on any national securities exchange but is included in the OTC Bulletin
Board, the last reported sale price of the principal trading session on the OTC
Bulletin Board on such day; or

·                  if, because of a Market Disruption Event or
otherwise, the last reported sale price for such Reference Stock (or any such
other security) is not available pursuant to the preceding bullet points, the
mean, as determined by the Calculation Agent, of the bid prices for such
Reference Stock (or any such other security) obtained from as many recognized
dealers in such security, but not exceeding three, as will make such bid prices
available to the Calculation Agent.  Bids
of any of the Company’s affiliates may be included in the calculation of such
mean, but only to the extent that any such bid is not the highest or the lowest
of the bids obtained.

The term OTC Bulletin Board will include any
successor service thereto.

“Company” shall have the meaning set
forth on the face of this Security.

“Coupon Payment Date” shall mean the 15th day of each
month, commencing on March 15, 2007 to, and including, the Maturity Date.  If any Coupon Payment Date falls on a day
that is not a business day, then any payment required to be made on such Coupon
Payment Date will instead be made on the next succeeding Business Day following
such scheduled Coupon Payment Date, unless that day falls in the next calendar
month, in which case the Coupon Payment Date will be the first preceding day
that is a Business Day.

 4
 

“Coupon Period” is the period
beginning on, and including, the issue date of the Securities and ending on,
but excluding, the first Coupon Payment Date, and each successive period
beginning on, and including, a Coupon Payment Date and ending on, but excluding, the next succeeding
Coupon Payment Date.

“Coupon Rate” shall mean 15.00% per annum.

“Final Share Price” for each Reference
Stock shall equal the Closing Price of the Reference Stock on the Observation Date.

“Holder” shall have
the meaning set forth on the reverse of this Security.

“Indenture” shall
have the meaning set forth on the reverse of this Security.

“Initial Share Price” for each
Reference Stock shall equal the Closing Price of such Reference Stock on the
Pricing Date, divided by the Stock Adjustment Factor for such Reference Stock.
The Initial Share Price of each Reference Stock shall initially be as follows:

	
  Reference Stock

  	
   

  	
   

  	
   

  	
  Initial Share Price

  	
   

  
	
  General Electric
  Company

  	
   

  	
  $

  	
  35.53

  	
   

  
	
  International
  Business Machines Corporation

  	
   

  	
  $

  	
  98.55

  	
   

  
	
  Intel
  Corporation

  	
   

  	
  $

  	
  21.02

  	
   

  
	
  Wal-Mart Stores, Inc.

  	
   

  	
  $

  	
  47.97

  	
   

  

 

“Least Performing Reference Stock”
shall mean the Reference Stock
with the lowest value of all the Reference Stocks included in the Basket, with
value calculated as the product of (i) $1,000 divided by the Initial Share
Price for such Reference Stock times (ii) the Final Share Price for such
Reference Stock.

“Market Disruption Event” means, with respect to each Reference Stock (or any security for which a Closing
Price must be determined):

(1)           the occurrence or existence of a suspension, absence or
material limitation of trading of such Reference Stock (or such security) on
the primary market for such Reference Stock (or such security) at any time
during the one hour period preceding the close of the principal trading session
in such market;

(2)           a breakdown or failure in the price and trade reporting
systems of the primary market for such Reference Stock (or such security) as a
result of which the reported trading prices for such Reference Stock (or such
security) during the last one hour period preceding the close of the principal
trading session in such market are materially inaccurate;

(3)           the occurrence or existence of a suspension, absence or
material limitation of trading on the primary market for trading in futures or
options contracts related to such Reference Stock (or such security), if
available, at any time during the last one hour period preceding the close of
the principal trading session in the applicable market; or

(4)           a decision to permanently discontinue trading in the
relevant futures or options contracts,

 5
 

in each case as determined by the Calculation
Agent in its sole discretion.

For the purpose of determining whether a Market
Disruption Event has occurred:

(1)           a limitation on the hours or number
of days of trading will not constitute a Market Disruption Event if
it results from an announced change in the regular business hours of the
Relevant Exchange or market for such Reference Stock,

(2)           limitations pursuant to the rules of any Relevant Exchange
similar to NYSE Rule 80B (or any applicable rule or regulation enacted or
promulgated by the NYSE, any other U.S. self-regulatory organization, the
Securities Exchange Commission or any other relevant authority of scope similar
to NYSE Rule 80B as determined by the Calculation Agent in its sole discretion)
on trading during significant market fluctuations will constitute a suspension,
absence or material limitation of trading,

(3)           a suspension of trading in futures or options contracts on
such Reference Stock (or such security) by the primary securities market
trading in such contracts, if available, by reason of:

·                  a price change exceeding limits set by such securities exchange or
market,

·                  an imbalance of orders relating to such contracts, or

·                  a disparity in bid and ask quotes relating to such contracts

will,
in each such case, constitute a suspension, absence or material limitation of
trading in futures or options contracts related to such Reference Stock (or
such security); and

(4)           a “suspension, absence
or material limitation of trading” on the primary securities market on which
futures or options contracts related to such Reference Stock (or such other
security) are traded will not include any time when such securities market is
itself closed for trading under ordinary circumstances.

“Maturity Date” shall
mean February 15, 2008, unless that day is not a Business Day, in which case
the amount equal to the Payment at Maturity will be made on the next succeeding
Business Day following February 15, 2008; provided, that if due to a
non-Trading Day or a Market Disruption Event, the Observation Date is postponed so that it falls
less than three Business Days prior to the scheduled Maturity Date, the
Maturity Date will be the third Business Day following the Observation Date, as
postponed.

“Monitoring Period”
shall mean the period from, but excluding, the Pricing Date to, but including,
the Observation Date.

“NYSE” shall mean
The New York Stock Exchange, Inc.

“Observation Date” shall mean February
12, 2008, provided, that if an Observation Date is
not a Trading Day or if there is a Market Disruption Event on such day with
respect to a Reference Stock, the Calculation Agent will: (1) with respect to
each Reference Stock for which such day is a Trading
Day and for which a Market Disruption Event has not

 6
 

occurred, determine the Final Share Price of the
Reference Stock by reference to the Final Share Price of the Reference Stock on
that Trading Day; and (2) with respect to each Reference Stock for which such
day is not a Trading Day or for which a
Market Disruption Event has occurred,
determine the Final Share Price of the Reference Stock by reference to the
Final Share Price of the Reference Stock on the next Trading Day for the
Reference Stock on which there is not a Market Disruption Event; provided, however, if a Market Disruption Event with respect
to the Reference Stock occurs on each of the eight Trading Days following the
originally scheduled Observation Date, then the Calculation Agent shall
determine the Final Share Price of the Reference Stock based upon the mean, as determined by the Calculation Agent,
of three bid prices for the Reference Stock obtained from recognized dealers in such security on that eighth
Trading Day.

“Payment at Maturity”, as calculated
by the Calculation Agent, for each $1,000 principal amount Security shall equal
$1,000 plus any accrued and unpaid coupon payments unless:

(i)             the Final Share Price of any Reference Stock is less than its Initial
Share Price; and

(ii)          a Trigger Event has occurred.

If the conditions described in
(i) and (ii) are both satisfied, the Payment at Maturity shall be, instead of
$1,000 for each $1,000 principal amount Security, the number of shares of the
Least Performing Reference Stock equal to the Physical Delivery Amount plus any
cash that the Company will pay in lieu of fractional shares in an amount equal
to the product of the Final Share Price of the Least Performing Reference Stock
multiplied by such fractional amount, plus any accrued and unpaid coupon
payments. However, the Company may elect, in lieu of delivering the Physical
Delivery Amount, to pay the Cash Value of the Physical Delivery Amount.

The Company may designate any of its affiliates to deliver any shares of
the Least Performing Reference Stock pursuant to the terms of the Securities
and the Company shall be discharged of any obligation to deliver such shares of
the Least Performing Reference Stock to the extent of such performance by its
affiliates.

“Physical Delivery Amount” shall mean
the
number of shares of the Least Performing Reference Stock, per $1,000 principal
amount of the Securities, equal to $1,000 divided by the Initial Share Price of
the Least Performing Reference Stock.

“Place of Payment” shall mean the
place or places where the Payment at Maturity or amount due upon an automatic
call upon the occurrence of a Knock-Out Event, if applicable, on the Securities
is payable.

“Price” of one share of each Reference
Stock (or one unit of any other
security for which a Price must be determined) on any Trading Day means:

·                  if such Reference Stock (or any such other security)
is listed or admitted to trading on a national securities exchange, the highest
intraday bid price on such day on the principal United States securities
exchange registered under 

 7
 

the Exchange Act, on which such Reference Stock (or
any such other security) is listed or admitted to trading;

·                  if such Reference Stock (or any such other security)
is not listed or admitted to trading on any national securities exchange but is
included in the OTC Bulletin Board, the highest reported bid price reported on
the OTC Bulletin Board on such day; or

·                  if a bid price is not available pursuant to the preceding bullet points, the mean, as
determined by the Calculation Agent, of the bid prices for such Reference
Stock (or any such other security) obtained from as many
recognized dealers in such security, but not exceeding three, as will make such
bid prices available to the Calculation Agent. Bids of any of the Company’s
affiliates may be included in the calculation of such mean, but only to the
extent that any such bid is not the highest of the bids obtained.

The term OTC Bulletin Board will include any
successor service thereto.

“Pricing Date” shall mean February 9,
2007.

“Reference Stock” shall be as defined
under “Basket.”

“Relevant Exchange” for each Reference
Stock shall mean the primary U.S. exchange or market for trading for such Reference Stock.

“Securities”
shall have the meaning set forth on the reverse of this Security.

“Security”
shall have the meaning set forth on the face of this Security.

“Stock Adjustment Factor” for each Reference Stock
shall initially equal 1.0, subject to adjustment under certain circumstances as
described under “Anti-dilution Adjustments” below.

“Trading Day” means a day, asdetermined by the Calculation Agent, on which trading is generally conducted on the
NYSE, the American Stock Exchange (the “AMEX”), the Nasdaq Global Select
Market, the Nasdaq Global Market, the Chicago Mercantile Inc., the Chicago
Board Options Exchange, Incorporated and in the over-the-counter market for
equity securities in the United States.

“Trigger Event”
shall occur if, on any Trading Day during the Monitoring Period, the Closing Price
of any Reference Stock is below such Reference Stock’s Trigger Price.

“Trigger Price” for each Reference
Stock shall equal a dollar amount that represents
80% of the applicable Initial Share Price of such Reference Stock in effect on
such Trading Day. The Trigger Price of each Reference Stock shall initially be as follows:

	
  Reference Stock

  	
   

  	
   

  	
   

  	
  Trigger Price

  	
   

  
	
  General Electric
  Company

  	
   

  	
  $

  	
  28.4240

  	
   

  
	
  International
  Business Machines Corporation

  	
   

  	
  $

  	
  78.8400

  	
   

  
	
  Intel
  Corporation

  	
   

  	
  $

  	
  16.8160

  	
   

  
	
  Wal-Mart Stores, Inc.

  	
   

  	
  $

  	
  38.3760

  	
   

  

 

 8
 

“Trustee” shall
have the meaning set forth on the reverse of this Security.

All terms used but not defined in this
Security are used herein as defined in the Calculation Agency Agreement or the
Indenture.

Calculation Agent

The Calculation
Agent will determine, among other things, the Initial Share Price of each
Reference Stock, the Trigger Price applicable to each of the Reference Stocks, the Price of each Reference Stock quoted
on the applicable Relevant Exchange at any time or the Closing Price of each
Reference Stock on any trading day, as applicable, in each case
during the Monitoring Period, the Stock Adjustment Factor of each Reference
Stock, anti-dilution adjustments and reorganization events, the selection of
any Successor Reference Stock, the Final Share Price of each Reference Stock,
the amount of any coupon payment payable on any Coupon Payment Date and the
Payment at Maturity, as well as, in determining whether a Trigger Event has
occurred, whether and how much the Price or Closing Price, as applicable, of
each Reference Stock during the Monitoring Period and the Final Share Price of
each Reference Stock have declined from the relevant Initial Share Price. In
addition, the Calculation Agent will determine whether there has been a Market
Disruption Event and whether a day is a Coupon Payment Date. All determinations
made by the Calculation Agent will be at the sole discretion of the Calculation
Agent and will, in the absence of manifest error, be conclusive for all
purposes and binding on Holders and the Company. The Company may appoint a
different Calculation Agent from time to time after the date of the original
issue of the Securities without the Holders’ consent and without notifying
Holders.

Anti-dilution Adjustments

The Stock Adjustment Factor for each
Reference Stock is subject to adjustment by the Calculation Agent as a result
of the anti-dilution and reorganization adjustments described in this section.

No adjustments to any Stock Adjustment Factor
will be required unless such Stock Adjustment Factor adjustment would require a
change of at least 0.1% in such Stock Adjustment Factor then in effect. A Stock
Adjustment Factor resulting from any of the adjustments specified in this
section will be rounded to the nearest one ten-thousandth with five one hundred-thousandths being rounded
upward. The Calculation Agent will not be required to make any adjustments to
the Stock Adjustment Factor for any Reference Stock after the close of business
on the Business Day immediately preceding the Maturity Date.

No adjustments to the Stock Adjustment Factor
for any Reference Stock will be required other than those specified below.

The Calculation Agent shall be solely
responsible for (1) the determination and calculation of any adjustments to the
Stock Adjustment Factors and of any related determinations and calculations
with respect to any distributions of stock, other securities or other property
or 

 9
 

assets, including cash, in connection with any
corporate event described in this section, and (2) the determination of any
Successor Reference Stock, and its determinations and calculations shall be
conclusive absent manifest error.

The Company will, within ten Business Days
following the occurrence of an event that requires an adjustment to any Stock
Adjustment Factor (other than as a result of a Reorganization Event as
described below), or if the Company is not aware of this occurrence, as soon as
practicable after becoming so aware, provide notice to the Calculation Agent,
which shall provide written notice to the trustee, which shall provide notice
to Holders of the occurrence of this event and, if applicable, a statement in
reasonable detail setting forth such adjusted Stock Adjustment Factor.

Stock Splits and Reverse Stock Splits

If a Reference Stock is subject to a stock
split or reverse stock split, then once any split has become effective, the
Stock Adjustment Factor relating to such Reference Stock will be adjusted so
that the new Stock Adjustment Factor shall equal the product of:

·                  the prior Stock Adjustment Factor for such Reference Stock, and

·                  the number of shares which a holder of one
share of such Reference Stock before the effective date of that stock split or
reverse stock split would have owned or been entitled to receive immediately
following the applicable effective date.

Stock Dividends or Distributions

If a Reference Stock is subject to a (i)
stock dividend, i.e., issuance of additional shares of such Reference Stock,
that is given ratably to all holders of shares of such Reference Stock, or (ii)
distribution of shares of such Reference Stock as a result of the triggering of
any provision of the corporate charter of the issuer of such Reference Stock, then, once the dividend has become
effective and the shares are trading ex-dividend, the Stock Adjustment Factor
for such Reference Stock will be adjusted so that the new Stock Adjustment
Factor for such Reference Stock shall equal the prior Stock Adjustment Factor
for such Reference Stock plus the product of:

·                  the prior Stock Adjustment Factor for such Reference Stock, and

·                  the number of additional shares issued in the stock dividend with respect to one
share of such Reference Stock.

Non-cash Distributions

If the issuer of a Reference Stock
distributes shares of capital stock, evidences of indebtedness or other assets
or property of the issuer of such Reference Stock to holders of such Reference
Stock (other than (i) dividends, distributions and rights or warrants referred
to under “—Stock Splits and Reverse Stock Splits” and “—Stock Dividends or
Distributions” above and (ii) cash distributions or dividends referred under
“—Cash Dividends or Distributions” below), 

 10
 

then, once the distribution has become effective and
the shares are trading ex-dividend, the Stock Adjustment Factor for such
Reference Stock will be adjusted so that the new Stock Adjustment Factor for
such Reference Stock shall equal the product of:

·                  the prior Stock Adjustment Factor for such Reference Stock, and

·                  a fraction, the numerator of which is the
Current Market Price of such Reference Stock and the denominator of which is
the amount by which such Current Market Price exceeds the Fair Market Value of such distribution; provided that if the Fair
Market Value of such distribution equals or exceeds the Current Market Price of
such Reference Stock, the Calculation Agent shall determine in its sole discretion
the appropriate adjustment to the Stock Adjustment Factor for such Reference
Stock.

The “Current Market Price” of a Reference
Stock means the arithmetic average of the Closing Prices of such Reference
Stock for the ten Trading Days prior to the Trading Day immediately preceding
the ex-dividend date of the distribution requiring an adjustment to the Stock
Adjustment Factor for such Reference Stock.

The “ex-dividend date” shall mean the first Trading Day on which transactions
in such Reference Stock trade on the Relevant Exchange without the right to
receive that distribution.

The “Fair Market Value” of any such distribution means the value of such
distribution on the ex-dividend date for such distribution, as determined by
the Calculation Agent. If such distribution consists of property traded on the
ex-dividend date on a U.S. national securities exchange, the Fair Market Value
will equal the Closing Price of such distributed property on such ex-dividend
date.

Notwithstanding the foregoing, a distribution
on a Reference Stock described in clause (a), (d) or (e) of the section
entitled “—Reorganization Events” below that also would require an adjustment
under this section shall not cause an adjustment to the Stock Adjustment Factor
of such Reference Stock and shall only be treated as a Reorganization Event (as defined below) pursuant to clause (a), (d)
or (e) under the section entitled “—Reorganization Events.” A distribution on a
Reference Stock described in the section entitled “—Issuance of Transferable Rights
or Warrants” that also would require an adjustment under this section shall
only cause an adjustment pursuant to the section entitled “—Issuance of
Transferable Rights or Warrants.”

Cash Dividends or Distributions

If the issuer of a Reference Stock pays
dividends or makes other distributions consisting exclusively of cash to all
holders of such Reference Stock during any fiscal quarter during the term of
the notes, in an aggregate amount that, together with other such dividends or
distributions made during such quarterly fiscal period, exceeds the Dividend
Threshold, then, once the dividend or distribution has become effective and the
shares are trading ex-dividend, the Stock Adjustment Factor for such Reference
Stock will be adjusted so that the new Stock Adjustment Factor for such
Reference Stock shall equal the product of:

 11
 

·                  the prior Stock Adjustment Factor for such
Reference Stock, and

·                  a fraction, the numerator of which is the
Current Market Price of such Reference Stock and the denominator of which is
the amount by which such Current Market Price exceeds the amount in cash per
share the issuer of such Reference Stock distributes to holders of such
Reference Stock in excess of the Dividend Threshold; provided that if the
amount in cash per share of such dividend or distribution equals or exceeds the
Current Market Price of such Reference Stock, the Calculation Agent shall
determine in its sole discretion the appropriate adjustment to the Stock
Adjustment Factor for such Reference Stock.

“Dividend Threshold” shall mean the amount of
any cash dividend or cash distribution distributed per share of a Reference
Stock that exceeds the immediately preceding cash dividend or other cash
distribution, if any, per share of such Reference Stock by more than 10% of the
Closing Price of such Reference Stock on the Trading Day immediately preceding
the ex-dividend date.

Issuance of Transferable Rights or Warrants

If the issuer of a Reference Stock issues
transferable rights or warrants to all holders of such Reference Stock to
subscribe for or purchase such Reference Stock, including new or existing
rights to purchase such Reference Stock at an exercise price per share less
than the closing price of such Reference Stock on both (i) the date the
exercise price of such rights or warrants is determined and (ii) the expiration
date of such rights and warrants pursuant to a shareholder’s rights plan or
arrangement, and if the expiration date of such rights or warrants precedes the
Maturity Date, then the Stock Adjustment Factor for such Reference Stock will
be adjusted on the business day
immediately following the issuance of such transferable rights or warrants so
that the new Stock Adjustment Factor for such Reference Stock shall equal the
prior Stock Adjustment Factor for such Reference Stock plus the product of:

·                  the prior Stock Adjustment Factor for such
Reference Stock, and

·                  the number of shares of such Reference Stock
that can be purchased with the cash value of such warrants or rights
distributed on one share of such Reference Stock.

The number of shares that can be purchased
will be based on the Closing Price of such Reference Stock on the date the new Stock Adjustment Factor for such Reference Stock
is determined. The cash value of such warrants or rights, if the warrants or
rights are traded on a U.S. national securities exchange, will equal the
Closing Price of such warrant or right, or, if the warrants or rights are not
traded on a U.S. national securities exchange, will be determined by the
Calculation Agent and will equal the average (mean) of the bid prices obtained
from three dealers at 3:00 p.m., New York City time, on the date the new Stock
Adjustment Factor for such Reference Stock is determined, provided that if only
two such bid prices are available, then the cash value of such warrants or
rights will equal the average (mean) of such bids and if only one such bid is
available, then the cash value of such warrants or rights will equal such bid.

 12
 

Reorganization Events

If prior to the maturity date,

(a)          there occurs any
reclassification or change of a Reference Stock, including, without limitation,
as a result of the issuance of tracking stock by the issuer of such Reference
Stock,

(b)         the issuer of a
Reference Stock, or any surviving entity or subsequent surviving entity of the
issuer of a Reference Stock (a “Successor Entity”), has been subject to a
merger, combination or consolidation and is not the surviving entity,

(c)          any statutory
exchange of securities of the issuer of a Reference Stock or any Successor
Entity with another corporation occurs, other than pursuant to clause (b)
above,

(d)         the issuer of a
Reference Stock is liquidated or is subject to a proceeding under any
applicable bankruptcy, insolvency or other similar law,

(e)          the issuer of a
Reference Stock issues to all of its shareholders equity securities of an
issuer other than the issuer of such Reference Stock, other than in a
transaction described in clauses (b), (c) or (d) above (a “Spin-off Event”), or

(f)            a tender or
exchange offer or going-private transaction is commenced for all the
outstanding shares of the issuer of a Reference Stock and is consummated for
all or substantially all of such shares, as determined by the Calculation Agent
in its sole discretion (an event in clauses (a) through (f), a “Reorganization
Event”),

then,
instead of adjusting the Stock Adjustment Factor for such Reference Stock, the
Calculation Agent, in its sole discretion without consideration for the
interests of investors, shall either:

(A)
determine a Successor Reference Stock (as defined below) to such Reference
Stock that experiences any such Reorganization Event (the “Original Reference
Stock”) after the close of the principal trading session on the Trading Day
immediately prior to the effective date of such Reorganization Event in
accordance with the following paragraph (each successor reference stock as so
determined, a “Successor Reference Stock” and such successor reference stock
issuer, a “Successor Reference Stock Issuer”); or

(B)
deem the Closing Price and the Stock Adjustment Factor of such Original
Reference Stock on the Trading Day immediately prior to the effective date of
such Reorganization Event to be the Closing Price (in the case of daily
monitoring) or Price (in the case of continuous monitoring) and Stock
Adjustment Factor of such Original Reference Stock on every remaining Trading
Day to, and including, the last Trading Day in the Monitoring Period.

 13
 

Upon the
determination by the Calculation Agent of any Successor Reference Stock
pursuant to clause (A) of the preceding sentence, references in this Security
to such “Reference Stock” shall no longer be deemed to refer to the Original
Reference Stock and shall be deemed instead to refer to any such Successor
Reference Stock for all purposes, and references in Security to “issuer” of the
Original Reference Stock shall be deemed to be to any such Successor Reference
Stock Issuer.

Upon the selection
of any Successor Reference Stock by the Calculation Agent pursuant to clause
(A) of the preceding sentence:

(i)             the Initial Share
Price for such Successor Reference Stock will be the Closing Price of such
Successor Reference Stock on the Trading Day immediately following the
effective date of the Reorganization Event multiplied by the Initial Share
Price of the Original Reference Stock and divided by the Closing Price of the
Original Reference Stock on the Trading Day immediately prior to the effective
date of such Reorganization Event;

(ii)          the Trigger Price
for such Successor Reference Stock will be an amount that represents the same
percentage of the Initial Share Price for such Successor Reference Stock as the
percentage of the Initial Share Price of the Original Reference Stock
represented by the Trigger Price of the Original Reference Stock, as determined
by the Calculation Agent; and

(iii)
the Stock Adjustment Factor for such Successor Reference Stock shall be 1.0,
subject to adjustment for certain corporate events related to such Successor
Reference Stock in accordance with “— Anti-dilution Adjustments.”

For the avoidance of doubt, in the case of an
issuance by the issuer of a Reference Stock to all of its shareholders of
equity securities of an issuer other than the issuer of such Reference Stock as
described in clause (e) above, if the
Closing Price of such Reference Stock as of the effective date of such issuance
does not increase or decline by at least 50% from the Initial Share Price of
such Reference Stock, such issuance shall not constitute a Reorganization Event
and no adjustments shall be made under this “— Reorganization Events” section.
Instead, such Reference Stock will be subject to adjustments as described under
“— Non-cash Distributions” above.

The “Successor
Reference Stock” will be the common stock of a U.S. company selected by the
Calculation Agent from among the common stocks of U.S. companies then
registered to trade on the NYSE, Nasdaq
Global Select Market or Nasdaq Global Market that is not
already a Reference Stock, with the same primary Standard Industrial
Classification Code (“SIC Code”) as the Original Reference Stock that, in the
sole discretion of the Calculation Agent, is the most comparable to the
Original Reference Stock, taking into account such factors as the Calculation
Agent deems relevant, including, without limitation, market capitalization,
dividend history and stock price volatility; provided, however, that a Successor
Reference Stock will not be any stock that is subject to a trading restriction
under the trading restriction policies of the Company or any of its affiliates
that would materially limit the ability of the Company or any of its affiliates
to hedge the notes with respect to such stock (a “Hedging Restriction”); provided further that
if a Successor Reference Stock cannot be identified as set forth above for 

 14
 

which a Hedging Restriction does not exist, the
Successor Reference Stock will be selected by the Calculation Agent from the
largest market capitalization stock of a U.S. company within the same Division
and Major Group classification (as defined by the Office of Management and
Budget) as the primary SIC Code for the Original Reference Stock.

Following a Reorganization Event in which a
Successor Reference Stock is selected, the Stock Adjustment Factor of the
Successor Reference Stock will be subject to adjustment as described above
under this “Anti-dilution Adjustments” section, and, if no Successor Reference
Stock is selected, the Original Reference Stock Issuer will, upon a subsequent Reorganization Event, be
subject to the election by the Calculation Agent described in clause (A) and
(B) of the first paragraph under “— Anti-dilution Adjustments — Reorganization
Events.”

The Company will, or will cause the
Calculation Agent to, provide written notice to the Trustee, to the Company and
to The Depository Trust Company (“DTC”) within thirty business days immediately
following the effective date of any Reorganization Event, of the Successor
Reference Stock Issuer, the Successor Reference Stock, the Trigger Price and
the Initial Share Price for such Successor Reference Stock, as well as the
Original Reference Stock
so replaced. The Company expects that such notice will be passed on to Holders
in accordance with the standard rules and procedures of DTC and its direct and
indirect participants.

Coupon
Payments

For each Coupon
Period for each $1,000 principal amount Security, the coupon payment for each
Coupon Period will be calculated as follows:

$1,000
x Coupon Rate x (number of days in the Coupon Period / 360),

where the number of days will be calculated
on the basis of a year of 360 days with twelve months of thirty days each.

Coupon payments
will be made at the Coupon Rate. Coupon payments will accrue from, and
including, the issue date of the Securities to, but excluding, the Maturity
Date. Coupon payments will be paid in arrears on each Coupon Payment Date to,
and including, the Maturity Date, to the Holders at the close of business on
the date 15 calendar days prior to that Coupon Payment Date, whether or not
such fifteenth calendar day is a Business Day. If the Maturity Date is adjusted
as the result of a Market Disruption Event, the coupon payment due on the
Maturity Date will be made on the Maturity Date as adjusted, with the same
force and effect as if the Maturity Date had not been adjusted, but no additional
coupon payment will accrue or be payable as a result of the delayed payment.

 15
 

The following abbreviations, when used in the
inscription on the face of the within Security, shall be construed as though
they were written out in full according to applicable laws or regulations:

	
  TEN COM -

  	
  as tenants in common

  	
  UNIF GIFT MIN ACT -

  	
   

  	
  Custodian

  	
   

  
	
   

  	
   

  	
  (Cust)

  	
  (Minor)

  
	
  TEN ENT -

  	
  as tenants by the entireties

  	
  under Uniform Gifts to Minors

  
	
  JT TEN -

  	
  as joint tenants with right of

  	
  Act 

  	
   

  	
   

  
	
   

  	
  Survivorship and not as tenants in 

  common

  	
   

  	
  (State)

  
	
   

  	
   

  	
   

  
	
  Additional abbreviations may also be used
  though not in the above list.

  
	
   

  
	
   

  	
   

  	
   

  
												

 

FOR VALUE RECEIVED, the undersigned hereby
sells, assigns and transfers unto

PLEASE INSERT SOCIAL SECURITY OR OTHER

IDENTIFYING NUMBER OF ASSIGNEE

	
  

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  
	
   

  
	
   

  
	
  (Name and Address of Assignee, including zip code,
  must be printed or typewritten.)

  
	
   

  
	
   

  
	
  the within Security, and all rights thereunder,
  hereby irrevocably constituting and appointing

  
	
   

  
	
   

  
	
  to transfer the said
  Security on the books of the Company, with full power of substitution in the
  premises.

  
	
   

  
	
   

  	
  Dated:

  
	
   

  
	
   

  	
   

  
				

 

NOTICE:  The signature to this assignment must
correspond with the name as it appears upon the face of the within Security in
every particular, without alteration or enlargement or any change whatever.

	
  Signature(s) Guaranteed:

  
	
   

  
	
   

  	
   

  

THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN
ELIGIBLE GUARANTOR INSTITUTION (BANKS, STOCKBROKERS, SAVINGS AND LOAN
ASSOCIATIONS AND CREDIT UNIONS WITH MEMBERSHIP IN AN APPROVED MEDALLION
SIGNATURE GUARANTEE PROGRAM), PURSUANT TO S.E.C. RULE 17Ad-15.

 

 

 16

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