Document:

Exhibit 4.01

	
  CUSIP NO. 52517PN80

  	
   

  
	
  ISIN NO. US52517PN803

  	
   

  
	
   

  	
   

  
	
  REGISTERED

  	
  PRINCIPAL AMOUNT: $6,000,000

  
	
  No. R-1

  	
   

  

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

PRINCIPAL PROTECTED GLOBAL CASH BASKET
FX-LINKED NOTE
DUE MAY 19, 2008

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

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

 

 

LEHMAN BROTHERS HOLDINGS
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company,” which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to CEDE & Co., or registered assigns, on
the Maturity Date, an amount
equal to the Redemption Amount.

The
“Maturity Date” is May 19, 2008, or if such day is not a Business Day, on the
next following Business Day.

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

The “Additional
Amount” per U.S.$1 of principal amount of each note will equal the Leverage
times the Basket Value, provided that the minimum Additional Amount payable on
the notes shall be zero.  The “Basket Value”
is the sum of the Currency Quotients. The “Currency Quotient” is, for each
Reference Currency and for the USD, a quotient, the numerator of which is the
Initial Currency Amount for such currency and the denominator of which is the
Settlement Rate for such currency.

The “Leverage” is
150%.

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

The “Basket Value”
equals the sum of:

(i) a quotient, the numerator of which is 0.2271 and the denominator of which is the Settlement Rate for CAD plus

(ii) a quotient, the numerator of which is 1.5729 and the denominator of which is the Settlement Rate for CNY plus

(iii) a quotient, the numerator of which is 0.1170 and the denominator of which is the Settlement Rate for EUR plus

(iv) a quotient, the numerator of which is 23.60 and
the denominator of which is the Settlement Rate for JPY plus

(v) a quotient, the numerator of which is 1.6295 and the denominator of which is the Settlement Rate for MXN plus

(vii) a quotient, the numerator of which is 0.1555 and the denominator of which is the Settlement Rate for SGD plus

(viii)
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
Disruption Event).  The Settlement Rate
for the USD shall be 1.

 2
 

 

 

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 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
May 13, 2008; provided that, upon the occurrence of a Disruption Event with
respect to a Reference Currency, the Valuation Date for the affected Reference
Currency may be postponed (as described in “Disruption Events” below).

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

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

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

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

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

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

(A)                              the occurrence and/or
existence of an event on any day that has the effect of preventing or making
impossible (x) the conversion of any Reference Currency into USD through
customary legal channels; or (y) for any Reference Currency other than EUR, 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;

 3
 

 

 

(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 Settlement Rate
being unavailable for a Reference Currency, or the occurrence of an event (i)
for any Reference Currency other than EUR, in a Reference Currency Jurisdiction
that materially disrupts the market for the Reference Currency or (ii) that
generally makes it impossible to obtain the Settlement Rate for a Reference
Currency, on the Valuation Date.

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

	
  Reference Currency

  	
   

  	
  Valuation Business Day

  	
   

  	
  Principal Financial

  Center

  
	
  CAD

  	
   

  	
  New York

  	
   

  	
  Toronto

  
	
  CNY

  	
   

  	
  Beijing

  	
   

  	
  Beijing

  
	
  EUR

  	
   

  	
  New York

  	
   

  	
  TARGET

  
	
  JPY

  	
   

  	
  New York

  	
   

  	
  Tokyo

  
	
  MXN

  	
   

  	
  Mexico City

  	
   

  	
  Mexico City

  
	
  SGD

  	
   

  	
  Singapore

  	
   

  	
  Singapore

  

 

The “Settlement Rate Option” for the CAD is the
Canadian Dollar/U.S. Dollar official fixing rate, expressed as the amount of
Canadian Dollars per one U.S. Dollar, for settlement in one Business Day
reported by the Federal Reserve Bank of New York which appears on Reuters
Screen 1FED to the right of the caption “CAD” at approximately 10:00 a.m. New
York Time, on the Start Date or such other relevant date.  The Settlement Rate Option for the CNY is the
Chinese Renminbi/U.S. Dollar official fixing rate, expressed as the amount of
Chinese Renminbi per one U.S. Dollar, for settlement in two business days
reported by the State Administration of Foreign Exchange of the People’s
Republic of China, Beijing, which appears on the Reuters Screen SAEC Page
opposite the symbol “USDCNY=” at approximately 5:00 p.m., Beijing time, on the Start Date or such other
relevant date.  The Settlement Rate
Option for the EUR is the U.S. Dollar/Euro official fixing rate, expressed as
the amount of U.S. Dollars per one Euro, for settlement in two business days
reported by the Federal Reserve Bank of New York which appears on Reuters
Screen 1FED to the right of the caption “EUR” at approximately 10:00 a.m. New
York time, on the Start Date or such other
relevant date.  The Settlement Rate
Option for the JPY is the Yen/U.S. Dollar official fixing rate, expressed as
the amount of Japanese Yen per one U.S. Dollar, for settlement in two business
days reported by the Federal Reserve Bank of New York which appears on the
Reuters Screen 1FED to the right of the caption “JPY” at approximately 10:00
a.m., New York time, on the Start Date or such other
relevant date.  The Settlement Rate
Option for the MXN is 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 Banco de Mexico which appears on Reuters Screen MEX01
Page

 4
 

 

under the heading “USDMXNFIX=“ at the close of
business in Mexico City on the Start Date or such other
relevant date.  The Settlement Rate
Option for the SGD is the Singapore Dollar/U.S. Dollar spot rate at 11:00 a.m.,
Singapore time, expressed as the amount of Singapore Dollars per one U.S.
Dollar, for settlement in two business days reported by the Association of
Banks in Singapore which appears on Reuters Page ABSIRFIX01 to the right of the
caption “Spot” under the column “SGD” at approximately 11:30 a.m., Singapore
time, on the Start Date
or such other relevant date. The
term “business day” solely as used in any Settlement Rate Option described
above shall mean any day, other than a Saturday or Sunday, that is neither a
legal holiday nor a day on which commercial banks are authorized or required by
law, regulation or executive order to close (including for dealings in foreign
exchange in accordance with the practice of the foreign exchange market) in the
Principal Financial Center for both (a) the Reference Currency and
(b) the currency against which the Reference Currency is quoted (the “base
currency”) in accordance with the Reference Exchange Rate specified in the
applicable pricing supplement, in each case as specified for the applicable
Reference Currency or base currency in the table below; provided that where
Euro is either the Reference Currency or the base currency, “business day” for
Euro as the Reference Currency or the base currency shall mean any day on which
the Trans-European Automated Real-Time Gross Settlement Express Transfer
(TARGET) System is open.

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

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

The “Calculation Agent” means Lehman Brothers Inc.

 5
 

 

 

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

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

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

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

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

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

 6
 

 

 

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

Dated:  November
17, 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

  	
   

  

 

 

 7

 

[REVERSE
OF NOTE]

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES, SERIES I
PRINCIPAL PROTECTED GLOBAL CASH BASKET
FX-LINKED NOTE
DUE MAY 19, 2008

Section 1.  General.  This Note is one of a duly authorized series
of Notes of the Company designated as the Medium-Term Notes, Series I, Principal Protected Global Cash 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 Additional Amount or the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
or reduce any premium or other amount payable on redemption, or make the
Additional Amount or the principal amount thereof, premium or other amount
payable, if any, or interest thereon payable in any coin or currency other than
that herein above provided, without the consent of the Holder of each Security
so affected, or (ii) change the place of payment on any Security, or impair the
right to institute suit for payment on any Security, or reduce the aforesaid
percentage of Securities, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of each
Security so affected.  It is also
provided in the Indenture that, prior to any declaration accelerating the
maturity of any series of Securities, the holders of a majority in aggregate
principal amount of the Securities of such series Outstanding may on behalf of
the holders of all the Securities of such series waive any past 

 

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

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

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

Section 6.  Authorized
Form and Denominations.  The Notes of
this series are issuable in registered form, without coupons.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the Company, in
denominations of $1,000 or whole multiples of $1,000, either at the office or
agency to be designated and maintained by the Company for such purpose in the
Borough of Manhattan, New York City, pursuant to the provisions of the
Indenture or at any of such other offices or agencies as may be designated and
maintained by the Company for such purpose pursuant to the provisions of the
Indenture, and in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge, except for any tax or
other governmental charges imposed in connection therewith.  Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series of a different
authorized denomination, except that Global Securities will not be exchangeable
for Certificated Notes of this series.

Section 7.  Registration
of Transfer.  As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the Depository
shall no longer be eligible under the Indenture, the Company shall appoint a
successor Depository.  If a successor
Depository for the Notes of this series is not appointed by the Company within
90 days after the Company receives such notice or becomes aware of such
ineligibility, the Company will issue, and the Trustee will 

 

authenticate
and deliver, Notes of this series in definitive form in an aggregate principal
amount equal to the principal amount of this Note.

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Company nor the Trustee nor any agent
of the Company or of the Trustee shall be affected by any notice to the
contrary.

Section 8.  Events
of Default.  If an Event of Default
with respect to Notes of this series shall occur and be continuing, the amount
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 Additional Amount or for any claim based hereon
or otherwise in respect hereof, and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture or any Indenture supplemental
thereto or in any Note, or because of the creation of any indebtedness
represented thereby, shall be had against any incorporator, stockholder,
officer or director, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any successor
corporation, whether by virtue of any constitution, statute or rule of law or
by the enforcement of any assessment or penalty or otherwise, all such
liability being, by the acceptance hereof and as part of the consideration for
the issue hereof, expressly waived and released.

Section 10.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.Exhibit 4.02

CUSIP NO.
52517PP39
ISIN NO. US52517PP394

	
  REGISTERED

  	
  PRINCIPAL AMOUNT:
  $15,000,000

  

No. R-1

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

DOUBLE CONDITIONAL GOLD AND SILVER RANGE NOTE
DUE MARCH 1, 2007

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

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

LEHMAN BROTHERS HOLDINGS
INC., a corporation duly organized and existing under the laws of the State of
Delaware (herein called the “Company,” which term includes any successor
corporation under the Indenture referred to on the reverse hereof), for value
received, hereby promises to pay to CEDE & Co., or registered assigns, on
the Maturity Date, an amount
equal to the Redemption Amount.

The
“Maturity Date” is March 1, 2007, or if such day is not a Business Day, on the
next following Business Day.

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

 

The “Additional Amount”
is a single U.S. Dollar payment calculated by the Calculation Agent equal to
the principal amount of the Notes multiplied by:

 

(A) 3.15%, if, during the
Observation Period, (a) the Continuously Observed Gold Price has traded
strictly within the Gold Reference Range and (b) the Continuously Observed
Silver Price has traded strictly within the Silver Reference Range; or

 

(B) 0%, if, during the
Observation Period, either (a) the Continuously Observed Gold Price trades
outside the Gold Reference Range (or on either the Gold Range Lower Boundary or
the Gold Range Upper Boundary) or (b) the Continuously Observed Silver Price
trades outside the Silver Reference Range (or on either the Silver Range Lower
Boundary or the Silver Range Upper Boundary).

 

The “Start Date” is
November 13, 2006.

 

The “End Date” is
February 23, 2007; or if such day is not a Valuation Business Day, the
immediately preceding Valuation Business Day.

 

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

 

The “Reference Assets”
are gold and silver.

 

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

 

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

 

 2
 

The “Gold Reference Range” is the range from (but
excluding) the Gold Range Lower Boundary to (but excluding) the Gold Range
Upper Boundary.

The “Gold Lower Boundary” is $530.00, equal to the
Gold Initial Fixing minus $93.50.

The “Gold Upper Boundary” is $740.00, equal to the
Gold Initial Fixing plus $116.50.

The “Gold Initial Fixing” is $623.50, which is the
Reference Gold Price on the Start Date.

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

The “Silver Reference Range” is the range from (but
excluding) the Silver Range Lower Boundary to (but excluding) the Silver Range
Upper Boundary.

The “Silver Lower Boundary” is $10.40, equal to the
Silver Initial Fixing minus $2.46.

The “Silver Upper Boundary” is $15.75, equal to the
Gold Initial Fixing plus $2.89.

The “Silver Initial Fixing” is $12.86, which is the Reference
Silver Price, stated in U.S. dollars, on the Start Date.

The “Reference Silver Price” is the fixing price per
troy ounce of silver, stated in U.S. cents, as calculated by the London Bullion
Market Association and displayed on the Reuters Page “Silver Forward Offered
Rate” (SIFO) under the “Lon (GMT) Fixg, USc/oz” heading at approximately 12:00
p.m.., London time.  SIFO or the time of
observation indicated above shall be deemed to refer to SIFO or such time of
observation as modified or amended from time to time, or to any substitute
Reuters Page that may replace SIFO.

If the Calculation Agent
determines that a Disruption Event is in effect with respect to a Reference
Asset on any day during the Observation Period to but excluding the earlier of
(a) 9:30 a.m. EST on the End Date or (b) the time on any day at which
either  the Continuously Observed Gold
Price first trades outside the Gold Reference Range (or on either the Gold
Lower Boundary or Gold Upper Boundary) or the Continuously Observed Silver Price
first trades outside the Silver Reference Range (or on either the Silver Lower
Boundary or Silver Upper Boundary), and for so long as such Disruption Event is
continuing, the Continuously Observed Gold Price or Continuously Observed
Silver Price, as applicable, for the affected Reference Asset for each such day
will be the single daily Reference Gold Price or Reference Silver Price, as
applicable, determined by the Calculation Agent in accordance with the Fallback
Price Observation Methodology.

 3
 

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

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

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

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

If the Calculation Agent
determines that a Continuous Observation Unavailability Event is in effect with
respect to a Reference Asset on any day during the Observation Period to but
excluding the earlier of (a) 9:30 a.m. EST on the End Date or (b) the time on
any day at which either  the Continuously
Observed Gold Price first trades outside the Gold Reference Range (or on either
the Gold Range Lower Boundary or Gold Range Upper Boundary) or the Continuously
Observed Silver Price first trades outside the Silver Reference Range (or on
either the Silver Range Lower Boundary or Silver Range Upper Boundary), and for
so long as such Continuous Observation Unavailability Event is continuing, the
Continuously Observed Gold Price or Continuously Observed Silver Price, as
applicable, for the affected Reference Asset for each such day will be the
single daily Reference Gold Price or Reference Silver Price, as applicable,
published on such day on GOFO, in the case of the Reference Gold Price, or on
SIFO, in the case of the Reference Silver Price, as determined by the
Calculation Agent (subject to the occurrence of a Reference Price
Unavailability Event).

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

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

A “Reference Price
Unavailability Event” means the failure of GOFO (with respect to gold) or SIFO
(with respect to silver), or any substitute Reuters Page to GOFO or SIFO, to
announce or publish the Reference Gold Price or Reference Silver Price, as
applicable, or the temporary or permanent discontinuance or unavailability of
GOFO or SIFO (and for which no substitute Reuters Page has been established),
as applicable.

A “Valuation Business Day”
is a day, other than a Saturday or Sunday, that is neither a legal holiday nor
a day on which commercial banks are authorized or required by law, regulation
or executive order to close in New York and London.

The “Fallback Price
Observation Methodology” means that the Calculation Agent will determine the
Reference Gold Price or the Reference Silver Price, as the case may be,

 4
 

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

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

The “Calculation
Agent” means Lehman Brothers Inc.

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

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

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

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

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

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

 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:  November 17, 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 I
DOUBLE CONDITIONAL GOLD AND SILVER
RANGE NOTE

DUE MARCH 1, 2007

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

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

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

 

 

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

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

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

Section 6.  Authorized
Form and Denominations.  The Notes of
this series are issuable in registered form, without coupons.  Each Note will be issued initially as either
a Global Security or a Certificated Note, at the option of the Company, in
denominations of $1,000 or whole multiples of $1,000, either at the office or
agency to be designated and maintained by the Company for such purpose in the
Borough of Manhattan, New York City, pursuant to the provisions of the
Indenture or at any of such other offices or agencies as may be designated and
maintained by the Company for such purpose pursuant to the provisions of the
Indenture, and in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge, except for any tax or
other governmental charges imposed in connection therewith.  Notes of this series are exchangeable for a
like aggregate principal amount of Notes of this series of a different
authorized denomination, except that Global Securities will not be exchangeable
for Certificated Notes of this series.

Section 7.  Registration
of Transfer.  As provided in the
Indenture and subject to certain limitations as therein set forth, the transfer
of this Note is registrable in the Security Register, upon surrender of this
Note for registration of transfer, at the Corporate Trust Office or agency in a
Place of Payment for this Note, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Security
Registrar requiring such written instrument of transfer duly executed by, the
Holder hereof or his attorney duly authorized in writing, and thereupon one or
more new Notes of this series, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

If at any time the Depository notifies the Company
that it is unwilling or unable to continue as Depository or if at any time the
Depository shall no longer be eligible under the Indenture, the Company shall
appoint a successor Depository.  If a
successor Depository for the Notes of this series is not appointed by the
Company within 90 days after the Company receives such notice or becomes aware
of such ineligibility, the Company will issue, and the Trustee will

 

 

authenticate
and deliver, Notes of this series in definitive form in an aggregate principal
amount equal to the principal amount of this Note.

No service charge shall be made for any such
registration of transfer or exchange, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be
imposed in connection therewith.

Prior to due presentment of this Note for registration
of transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the person in whose name this Note is registered as the owner
hereof for all purposes, and neither the Company nor the Trustee nor any agent
of the Company or of the Trustee shall be affected by any notice to the
contrary.

Section 8.  Events
of Default.  If an Event of Default
with respect to Notes of this series shall occur and be continuing, the amount
that may be declared due and payable upon any acceleration of the notes will be
determined by the calculation agent and will equal, for each note, the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.  If a bankruptcy proceeding is commenced in respect of
the Company, the claim of the beneficial owner of a note will be capped at the
principal amount plus the Additional Amount (if any) deemed to have
accrued for the period from and including the Start Date to but excluding the
date of early repayment calculated on the basis of a 360-day year consisting of
12 months of 30 days each, and, in the case of an incomplete month, the number
of days elapsed.

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

Section 10.  Defined
Terms.  All terms used but not
defined in this Note are used herein as defined in the Indenture.

Section 11.  GOVERNING LAW.  THIS NOTE SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.

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