Document:

Exhibit 4.01

CUSIP
NO. 52517P5Q0

ISIN NO. US52517P5Q04

 

	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $2,500,000

  
	
  No. R-1

  	
   

  	
   

  

 

 

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES I

FX BASKET-LINKED NOTE
 DUE SEPTEMBER 28, 2009

 

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 September 28, 2009, or if such day is not a Business Day, on
the next following Business Day.

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

The “Additional Amount” is a single U.S.
dollar amount equal the principal amount of the Notes multiplied by the product
of the Leverage times the Basket Return; provided that
the minimum Additional Amount payable on the notes shall be zero.

The “Leverage” is 300%.

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

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

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

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

	
  Reference

  Currency

  	
   

  	
  Weighting

  	
   

  	
  Initial

  Reference 

  Currency Rate

  
	
  BRL

  	
   

  	
  25%

  	
   

  	
  1.8650

  
	
  RUB

  	
   

  	
  25%

  	
   

  	
  25.0533

  
	
  INR

  	
   

  	
  25%

  	
   

  	
  39.87

  
	
  CNY

  	
   

  	
  25%

  	
   

  	
  7.5050

  

 

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

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

 

 

2

 

 

The “Valuation Date” is September 22, 2009; provided
that, upon the occurrence of a Disruption Event with respect to a Reference
Currency, the Valuation Date for the affected Reference Currency may be
postponed (as described in “Disruption Events” below).

The “Issue Date” is September 27, 2007.

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

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

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

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

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

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

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

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

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

 

3

 

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

	
  Reference 

  Currency

  	
   

  	
  Screen 

  Reference

  	
   

  	
  Valuatioen 

  Business 

  Day

  
	
  BRL

  	
   

  	
  BRL

  	
   

  	
  Brazilia, 

  Rio de 

  Janiero or 

  São
  Paulo

  
	
  RUB

  	
   

  	
  EMTA

  	
   

  	
  Moscow

  
	
  INR

  	
   

  	
  RBIB

  	
   

  	
  Mumbai

  
	
  CNY

  	
   

  	
  SAEC

  	
   

  	
  Beijing

  

 

The “Settlement
Rate Option” for the BRL is the Brazilian Real/U.S. dollar offered rate for
U.S. dollars, expressed as the amount of Brazilian Reals per one U.S. dollar,
for settlement in two Business Days reported by the Banco Central do Brasil on
SISBACEN Data System under transaction code PTAX-800 (“Consulta de Cambio” or
Exchange Rate Inquiry), Option 5 ( “Cotacoes para Contabilidade” or Rates for
Accounting Purposes), which appears on Reuters Screen BRFR Page under the
caption “Dolar PTAX” at approximately 6:30 pm Sao Paolo time on the Valuation
Date or such other relevant date.  The Settlement Rate Option for the RUB is the
Russian Ruble/U.S. Dollar Specified Rate, expressed as the amount of Russian
Rubles per one U.S. Dollar, for settlement in one Business Day, calculated by
the Chicago Mercantile Exchange (“CME”) and as published on CME’s website,
which appears on the Reuters Screen EMTA Page, at approximately 1:30 p.m.,
Moscow time, on the Valuation Date or such other relevant date.  The Settlement Rate Option for the INR is the
Indian Rupee/U.S. dollar reference rate, expressed as the amount of Indian
Rupee per one U.S. dollar, for settlement in two Business Days reported by the
Reserve Bank of India which appears on the Reuters Screen RBIB Page at approximately
2:30 p.m., Mumbai time, or as soon thereafter as practicable on the on the Valuation Date or such other
relevant date.  The
Settlement Rate Option for the CNY is the Chinese Renminbi/U.S. dollar official
fixing rate, expressed as the amount of Chinese Renminbi per one U.S. dollar,
for settlement in two Business Days reported by The State Administration of
Foreign Exchange of the People’s Republic of China, Beijing, which appears on
the Reuters Screen SAEC Page opposite the symbol “USDCNY=” at approximately 5:00 p.m.,
Beijing time, on the Valuation Date or other such relevant date.

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

The “Fallback Rate Observation Methodology” means that the
reference exchange rate, Settlement Rate or other rate, as specified in the
applicable pricing supplement, in respect of a reference currency will equal
the noon buying rate in New York for cable transfers in foreign currencies as
announced by the Federal Reserve Bank of New York for customs purposes (the “Noon
Buying Rate”) on the relevant Valuation Date or such other date specified in
the applicable pricing supplement. If the Noon Buying Rate is not announced on
that date, the 

 

4

 

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

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

The “Calculation Agent” means Lehman Brothers
Inc.

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

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

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

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

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: September 27,
  2007

  	
   

  	
   

  	
   

  
	
   

  	
   

  
	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Andrew Yeung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Cindy Buckholz

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  
	
   

  	
   

  	
   

  	
   

  
					

 

 

 

TRUSTEE’S
CERTIFICATE OF AUTHENTICATION

 

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

 

CITIBANK, N.A.

  as Trustee

 

 

	
  By:

  	
   

  
	
   

  	
  Authorized Officer

  
	
   

  	
   

  

 

6

 

 

 

[REVERSE
OF NOTE]

 

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

FX BASKET-LINKED NOTE
 DUE SEPTEMBER 28, 2009

 

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

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

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

 

 

 

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

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

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

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

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

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

 

2

 

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

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

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

Section 8.  Events
of Default.  If an Event of Default
with respect to Notes of this series shall occur and be continuing, the amount
that may be declared due and payable upon any acceleration of the notes will be
determined by the Calculation Agent for the period from and including the Issue
Date to but excluding the date of early repayment and will equal, for each
note, the Redemption Amount, calculated as the date of early repayment were the
Maturity Date. If a bankruptcy proceeding is commenced in respect of Lehman
Brothers Holdings, the claim of the beneficial owner of a note for the period
from and including the Issue Date to but excluding the date of early repayment
will be capped at the Redemption Amount, calculated as though the date of the
commencement of the proceeding were the Maturity Date.

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

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

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

 

 

3Exhibit 4.02

 

	
  CUSIP NO.
  52517P5G2

  	
   

  	
   

  
	
  ISIN NO. US52517P5G22

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  REGISTERED

  	
   

  	
  PRINCIPAL AMOUNT:
  $1,165,000

  
	
  No. R-1

  	
   

  	
   

  

 

 

LEHMAN BROTHERS HOLDINGS INC.

MEDIUM-TERM NOTE, SERIES
I

BUFFERED RETURN ENHANCED NOTES LINKED TO A BASKET OF TEN COMMODITIES AND
TWO COMMODITY INDICES
 DUE MARCH 28, 2011

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 28, 2011, or if such day is not a Business Day, on the next following
Business Day.

The
“Valuation Date” is March 21, 2011, or if such day is not a Valuation Business
Day, the immediately preceding Valuation Business Day; provided that if a
Disruption Event is in effect on the scheduled Valuation Date, the Valuation
Date may be postponed.

The
“Redemption Amount” for each $1,000 note will be a single U.S. dollar payment
on the Maturity Date equal to:

(A)          the
sum of $1,000 plus the product of $1,000 times the Basket Return times the
Upside Participation Rate, if the Final Basket Level is greater than the
Initial Basket Level;

(B)           $1,000,
if the Final Basket Level is equal to or less than the Initial Basket Level but
greater than or equal to the Buffer Level; or

(C)           the
sum of $1,000 plus the product of $1,000 times the sum of the Basket Return
plus the Protection Percentage, if the Final Basket Level is less than the
Buffer Level.

The
“Component Commodities” and “Commodity Weightings” are as follows:

	
  Component Commodities

  	
   

  	
  Component

  Weighting

  
	
  Light sweet crude oil (“Crude Oil”)

  	
   

  	
  15%

  
	
   

  	
   

  	
   

  
	
  Henry Hub natural gas (“Natural Gas”)

  	
   

  	
  10%

  
	
   

  	
   

  	
   

  
	
  Reformulated
  gasoline blendstock for oxygen blending (“RBOB Gasoline”)

  	
   

  	
  5%

  
	
   

  	
   

  	
   

  
	
  No. 2 fuel heating oil (“Heating Oil”)

  	
   

  	
  5%

  
	
   

  	
   

  	
   

  
	
  High Grade Primary Aluminium (“Aluminum”)

  	
   

  	
  7%

  
	
   

  	
   

  	
   

  
	
  Copper – Grade A (“Copper“)

  	
   

  	
  7%

  
	
   

  	
   

  	
   

  
	
  Primary Nickel (“Nickel“)

  	
   

  	
  6%

  
	
   

  	
   

  	
   

  
	
  Special High Grade Zinc (“Zinc”)

  	
   

  	
  5%

  
	
   

  	
   

  	
   

  
	
  Standard Lead (“Lead”)

  	
   

  	
  5%

  
	
   

  	
   

  	
   

  
	
  Gold (“Gold”)

  	
   

  	
  5%

  

 

 

2

 

 

	
  Component Commodities

  	
   

  	
  Component

  Weighting

  
	
  S&P GSCI Livestock Index Excess Return (“GSCI® Livestock”) calculated
  and published by the Index Sponsor, subject to adjustment in accordance with
  Index Adjustment below

  	
   

  	
  10%

  
	
   

  	
   

  	
   

  
	
  S&P GSCI Agriculture Index Excess Return (“GSCI® Agriculture”) calculated
  and published by the Index Sponsor, subject to adjustment in accordance with
  Index Adjustment below

  	
   

  	
  20%

  

The “Upside Participation Rate” is
172%.

The
“Protection Percentage” is 20.0%.

The
“Buffer Level” is the product of 80.0% times the Initial Basket Level.

The
“Basket Return” is a quotient, the numerator of which is the difference of the
Final Basket Level minus the Initial Basket Level and the denominator of which
is the Initial Basket Level, expressed as a percentage rounded to three decimal
places.

The
“Final Basket Level” is the product of 100 times the sum of 1 plus the sum of
the Weighted Component Commodity Returns.

The
“Initial Basket Level” is set to 100 on the Trade Date.

The
“Trade Date” is September 21, 2007.

The
“Issue Date” is September 28, 2007.

The
“Weighted Component Commodity Returns” are, for each Component Commodity, the
product of the Component Weighting times a quotient, the numerator of which is
the difference of the Final Commodity Price minus the Initial Commodity Price
and the denominator of which is the Initial Commodity Price for such Component
Commodity.

The
“Initial Commodity Prices” for each Component Commodity are as follows:

	
  Component

  Commodity

  	
   

  	
  Initial Commodity

  Price

  
	
  Crude
  Oil

  	
   

  	
  US$81.62

  
	
   

  	
   

  	
   

  
	
  Natural
  Gas

  	
   

  	
  US$6.08

  
	
   

  	
   

  	
   

  
	
  RBOB
  Gasoline

  	
   

  	
  US$2.1145

  
	
   

  	
   

  	
   

  
	
  Heating
  Oil

  	
   

  	
  US$2.2562

  
	
   

  	
   

  	
   

  
	
  Aluminum

  	
   

  	
  US$2380

  
	
   

  	
   

  	
   

  
	
  Copper

  	
   

  	
  US$7980

  

 

 

3

 

 

	
  Nickel

  	
   

  	
  US$32605

  
	
   

  	
   

  	
   

  
	
  Zinc

  	
   

  	
  US$2906

  
	
   

  	
   

  	
   

  
	
  Lead

  	
   

  	
  US$3450

  
	
   

  	
   

  	
   

  
	
  Gold

  	
   

  	
  US$737

  
	
   

  	
   

  	
   

  
	
  GSCI®
  Livestock

  	
   

  	
  364.8513

  
	
   

  	
   

  	
   

  
	
  GSCI®
  Agriculture

  	
   

  	
  77.27619

  

The “Final Commodity Price” is, for
each Component Commodity, the Commodity Price on the Valuation Date.

The “Commodity Price” for each
Component Commodity is as follows:

	
  Component

  Commodity

  	
   

  	
  Commodity
  Price

  
	
  Crude Oil

  Natural Gas

  RBOB Gasoline

  Heating Oil

  	
   

  	
  For each of Crude Oil, Natural Gas, RBOB
  Gasoline and Heating Oil, the official settlement price of the first nearby
  month futures contract (or, in the case of the last trading day of the first
  nearby month contract, the second nearby month contract) for that Component
  Commodity, expressed (a) in the case of Crude Oil, as the U.S. dollar price
  per barrel, (b) in the case of Natural Gas, as the U.S. dollar price per
  million British thermal units (Btu), and (c) in the case of RBOB Gasoline and
  Heating Oil, as the U.S. dollar price per gallon, in each case as made public
  by the Relevant Exchange for that Component Commodity (subject to the
  occurrence of a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  Aluminum

  Copper

  Nickel

  	
   

  	
  For each of Aluminum, Copper, Nickel, Zinc and Lead, the official settlement price of that
  Component

  

 

 

4

 

 

	
  Zinc

  Lead

  	
   

  	
  Commodity for cash delivery, expressed
  as the U.S. dollar price per metric ton of the Component Commodity, as made
  public by the Relevant Exchange for that Component Commodity (subject to the
  occurrence of a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  Gold

  	
   

  	
  The official afternoon fixing price of Gold, stated
  in U.S. dollars per troy ounce, as calculated and quoted by the London
  Bullion Market Association (the “LBMA”) (subject to the occurrence of a Disruption Event).

  
	
   

  	
   

  	
   

  
	
  GSCI® Livestock

  GSCI®
  Agriculture

  	
   

  	
  For each of GSCI® Livestock and GSCI® Agriculture (each an “Index”
  and collectively the “Indices”), the closing level of
  that Index, as determined and published by the Index Sponsor (subject to the occurrence of a
  Disruption Event), rounded to four decimal places.

  

The “Relevant Exchange” for each
Component Commodity is as follows:

	
  Component

  Commodity

  	
   

  	
  Relevant Exchange

  
	
  Crude Oil

  	
   

  	
  The NYMEX Division, or its successor, of
  the New York Mercantile Exchange, Inc. (“NYMEX”)

  
	
   

  	
   

  	
   

  
	
  Natural Gas

  	
   

  	
  NYMEX

  
	
   

  	
   

  	
   

  
	
  RBOB Gasoline

  	
   

  	
  NYMEX

  
	
   

  	
   

  	
   

  
	
  Heating Oil

  	
   

  	
  NYMEX

  
	
   

  	
   

  	
   

  
	
  Aluminum

  	
   

  	
  London Metal Exchange (“LME”)

  
	
   

  	
   

  	
   

  
	
  Copper

  	
   

  	
  LME

  
	
   

  	
   

  	
   

  
	
  Nickel

  	
   

  	
  LME

  
	
   

  	
   

  	
   

  
	
  Zinc

  	
   

  	
  LME

  
	
   

  	
   

  	
   

  
	
  Lead

  	
   

  	
  LME

  
	
   

  	
   

  	
   

  
	
  Gold

  	
   

  	
  The market in London on which members of
  the LBMA quote prices for the buying and selling of Gold.

  

 

5

 

A “Valuation Business Day” is a
day, as determined in good faith by the Calculation Agent, on which (a) the
Relevant Exchange for each Component Commodity and (b) each organized exchange
or market of trading for any Index Contract, is scheduled to be (or, but for
the occurrence of a Disruption Event, would have been) open for trading during
its regular trading session (notwithstanding the Relevant Exchange or organized
exchange or market, as applicable, closing prior to its scheduled closing
time).

The “Index Sponsor” is Standard
& Poor’s, a division of the McGraw-Hill Companies.

If a
Disruption Event identified in clauses (A), (B) or (C) below relating to one or
more Component Commodities (other than the Indices) is in effect on the
scheduled Valuation Date, the Calculation Agent will calculate the Final Basket
Level using:

•               for
each such Component Commodity that did not suffer a Disruption Event on the
scheduled Valuation Date, the Final Commodity Price for that Component
Commodity on the scheduled Valuation Date, and

•               for
each such Component Commodity that did suffer a Disruption Event on the
scheduled Valuation Date, the Final Commodity Price on the immediately
succeeding trading day for such Component Commodity on which no Disruption
Event occurs or is continuing with respect to such Component Commodity;

provided however that if a
Disruption Event has occurred or is continuing with respect to a Component Commodity
on each of the three scheduled trading days following the scheduled Valuation
Date, then (a) that third scheduled trading day shall be deemed the Valuation
Date for the affected Component Commodity; and (b) the Calculation Agent will
determine the Final Commodity Price for the affected Component Commodity on
such day in its sole and absolute discretion taking into account the latest
available quotation for the Commodity Price for the affected Component
Commodity and any other information that in good faith it deems relevant.

If a
Disruption Event identified in clauses (D) or (E) below relating to one or more
Component Commodities (other than Gold or the Indices) is in effect on the
Valuation Date, the Calculation Agent will determine the Final Commodity Price
for the affected Component Commodity on the scheduled Valuation Date in its
sole and absolute discretion taking into account the latest available quotation
for the Commodity Price for the affected Component Commodity and any other
information that in good faith it deems relevant.

With
respect to any Component Commodity that is an Index, if a Disruption Event
relating to one or more futures contracts then included in the Index or any
Successor Index (each such contract, an “Index Contract”) is in effect on the
scheduled Valuation Date, the Calculation Agent will calculate the Final
Commodity Price for such Index or Successor Index in 

 

6

 

 

good faith in accordance with the
formula for and method of calculating the Index or Successor Index last in
effect prior to commencement of the Disruption Event, using:

•                                          for each Index
Contract that did not suffer a Disruption Event on the scheduled Valuation
Date, the settlement price on the applicable organized exchange or market of
trading for such Index Contract on the scheduled Valuation Date, and

•                                          for each Index
Contract that did suffer a Disruption Event on the scheduled Valuation Date,
the settlement price on the organized exchange or market of trading for such
Index Contract on the immediately succeeding trading day on which no Disruption
Event occurs or is continuing  with
respect to such Index Contract;

provided however that if a
Disruption Event has occurred or is continuing with respect to such Index
Contract on each of the three scheduled trading days following the scheduled
Valuation Date, then (a) that third scheduled trading day shall be deemed the
Valuation Date for such Index Contract and (b) the Calculation Agent will
determine the price for such Index Contract on such day in its sole and
absolute discretion taking into account the latest available quotation for the
price for such Index Contract and any other information that in good faith it
deems relevant.

A
“Disruption Event” (a) for a Component Commodity other than an Index, any of
the following events with respect to that Component Commodity or (b) with
respect to an Index any of the following events with respect to an Index
Contract, in each case as determined in good faith by the Calculation Agent:

(A)                              the suspension of or
material limitation on trading in the Component Commodity or Index Contract, or
futures contracts or options related to the Component Commodity or Index
Contract, on the Relevant Exchange for that Component Commodity or organized
exchange or market of trading for that Index Contract;

(B)                                either (i) the failure
of trading to commence, or permanent discontinuance of trading, in the
Component Commodity or Index Contract, or futures contracts or options related
to the Component Commodity or Index Contract, on the Relevant Exchange for that
Component Commodity or organized exchange or market of trading for that Index
Contract, or (ii) the disappearance of, or of trading in, the Component
Commodity or Index Contract;

(C)                                the failure of the
Relevant Exchange for the Component Commodity or organized exchange or market
of trading for that Index Contract to publish the official daily settlement
price of the Component Commodity or Index Contract for that day (or the
information necessary for determining the settlement price); and

solely with respect to Component Commodities other than
Gold or any Index (or any Index Contract then comprising an Index or any
Successor Index),

 

7

 

(D)                               the occurrence since
the Trade Date of a material change in the content, composition, or
constitution of the Component Commodity; or

(E)                                 the occurrence since
the Trade Date of a material change in the formula for or the method of
calculating the settlement price of the Component Commodity.

For
the purpose of determining whether a Disruption Event for a Component Commodity
or an Index Contract has occurred: 

(1)                                  a limitation on the
hours in a trading day and/or number of days of trading will not constitute a
Disruption Event if it results from an announced change in the regular business
hours of the Relevant Exchange for the Component Commodity or organized
exchange or market of trading for that Index Contract;

(2)                                  a suspension in
trading in a Component Commodity on the Relevant Exchange for that Component
Commodity or in an Index Contract on the organized exchange or market of
trading for that Index Contract (without taking into account any extended or after-hours
trading session), by reason of a price change reflecting the maximum permitted
price change from the previous trading day's settlement price will constitute a
Disruption Event; and

(3)                                  a suspension of or
material limitation on trading on a Relevant Exchange for a Component Commodity
or an organized exchange or market of trading for an Index Contract will not
include any time when the Relevant Exchange for that Component Commodity or an
organized exchange or market of trading for that Index Contract is closed for
trading under ordinary circumstances.

For
purposes of calculating the Final Basket Level in the event of a Disruption
Event relating to one or more Component Commodities or Index Contracts in
accordance with the above, “trading day” means a day, as determined in good
faith by the Calculation Agent, on which trading is generally conducted on the
Relevant Exchange applicable to the affected Component Commodity or on the
organized exchange or market of trading for the affected Index Contract.

If an
Index Unavailability Event is in effect on the scheduled Valuation Date (and no
Disruption Event is then in effect), the Calculation Agent will determine the
Final Commodity Price for the affected Index on the Valuation Date in good
faith in accordance with the formula for and method of calculating the Index
last in effect prior to commencement of the Index Unavailability Event, using
the closing price for each Index Contract most recently constituting the Index
on the organized exchange or market of trading for that Index Contract.

An
“Index Unavailability Event” means that an Index is not calculated and
published by the Index Sponsor or any Successor Index is not calculated and
published by the sponsors thereof.

 

8

 

If the Index Sponsor
discontinues publication of an Index and the Index Sponsor or another entity
publishes a successor or substitute index that the Calculation Agent
determines, in its sole discretion, to be comparable to the discontinued Index
(such index, a “Successor Index”), then the Final Commodity Price for such
Index will be determined by reference to the level of such Successor Index at
the close of trading on the organized exchange or market of trading for any
futures contract (or any combination thereof) included in the Successor Index
last to close on the Valuation Date; provided, however, that the Calculation
Agent, in its sole discretion, may make such adjustments as it deems necessary
to the level of the Successor Index so that the level of the Successor Index
reflects the same level as that of the discontinued Index before it was
discontinued.  Upon any selection by the
Calculation Agent of a Successor Index, the Calculation agent will cause
written notice thereof to be promptly furnished to the trustee, to the Issuer
and to the holders of the notes.

If the Index Sponsor
discontinues publication of an Index prior to, and such discontinuation is
continuing on, the Valuation Date, and the Calculation Agent determines, in its
sole discretion, that no Successor Index is available at such time, then the
Calculation Agent will determine the Final Commodity Price for such Index on
the Valuation Date.  The Final Commodity
Price for such Index will be computed by the Calculation Agent in accordance
with the formula for and method of calculating the Index last in effect prior
to such discontinuation, using the settlement prices at the close of trading on
the Valuation Date on the organized exchange or market of trading for any
futures contract (or any combination thereof) then included in the Index (or,
if trading in any such futures contract has been materially suspended or
materially limited, its good faith estimate of the settlement price that would
have prevailed but for such suspension or limitation).

If at any time the method
of calculating an Index or a Successor Index, or the level thereof, is, in the
good faith judgment of the Calculation Agent, changed or modified in a material
respect, the Calculation Agent may (but is not obligated to) make such
adjustments to the Index or Successor Index or their respective methods of
calculation as, in the good faith judgment of the Calculation Agent, may be
necessary in order to arrive at a level of a commodity index comparable to the
Index or such Successor Index, as the case may be, as if such changes or
modifications had not been made, and the Calculation Agent will calculate the
Final Commodity Price for such Index or Successor Index with reference to the
Index or such Successor Index as adjusted. 
Accordingly, if the method of calculating the Index or a Successor Index
is modified or rebased so that the level of the Index or Successor Index is a
fraction or multiple of what it would have been if it had not been modified or
rebased, then the Calculation Agent will adjust the level of the Index or
Successor Index in order to arrive at a level of the Index or Successor Index
as if it has not been modified or rebased.

The “Calculation Agent” means Lehman Brothers Commodity Services Inc,
the determinations and calculations of which will be binding absent manifest
error.

Except as provided below, any 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.  

 

9

 

Payment of any 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.

 

 

10

 

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:  September 28, 2007

 

	
  [SEAL]

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name: 

  	
  Andrew M.W. Yeung

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Attest:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   Cindy Buckholz

  
	
   

  	
   

  	
  Title:

  	
  Assistant Secretary

  
					

 

TRUSTEE'S
CERTIFICATE OF AUTHENTICATION

 

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

 

CITIBANK, N.A.

  as Trustee

 

 

	
  By: 

  	
   

  
	
   

  	
  Authorized Officer

  

 

11

[REVERSE
OF NOTE]

 

 

LEHMAN BROTHERS
HOLDINGS INC.

MEDIUM-TERM NOTES,
SERIES I

BUFFERED RETURN ENHANCED NOTES LINKED TO A
BASKET OF TEN COMMODITIES AND TWO COMMODITY INDICES  
 DUE 
MARCH 28, 2011

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

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

Section 3.  Modification
and Waivers.  The Indenture contains
provisions permitting the Company and the Trustee, with the consent of the
Holders of not less than 66-2/3% in aggregate principal amount of each series
of the Securities at the time Outstanding to be affected, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; provided, however, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the Redemption Amount or the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon
or reduce any premium or other amount payable on redemption, or make the
Redemption Amount or the principal amount thereof, premium or other amount
payable, if any, or interest thereon payable in any coin or currency other than
that 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 Redemption Amount or the
principal amount, or premium, if any, on any of the Securities of such series,
or in the payment of any sinking fund installment or analogous obligation with
respect to Securities of such series. 
Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future holders and owners
of this Note and any Notes of this series which may be issued in exchange or
substitution herefor, irrespective of whether or not any notation thereof is
made upon this Note or such other Notes of this series.

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

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

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

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

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

 

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

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

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

Section
8.  Events of Default.  If an Event of Default with respect to Notes
of this series shall occur and be continuing, the amount that may be declared
due and payable upon any acceleration of the notes will be determined by the
Calculation Agent for the period from and including the Issue Date to but
excluding the date of early repayment and will equal, for each note, the
Redemption Amount, calculated as the date of early repayment were the Maturity
Date. If a bankruptcy proceeding is commenced in respect of Lehman Brothers
Holdings, the claim of the beneficial owner of a note for the period from and
including the Issue Date to but excluding the date of early repayment will be
capped at the Redemption Amount, calculated as though the date of the
commencement of the proceeding were the Maturity Date.

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

Section 10.  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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