EX-4.01 2 file2.htm GLOBAL SECURITY


                                                                        Ex. 4.01

                          LEHMAN BROTHERS HOLDINGS INC.

                    Absolute Buffer Notes Due August 3, 2010,
                    Linked to a Basket of Four Stock Indices


Number R-1                                                       $1,200,000
ISIN US524908SJ01                                                CUSIP 524908SJ0


See Reverse for Certain Definitions

THIS SECURITY (THIS "SECURITY") IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A DEPOSITORY
OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR
SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS
A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO SUCH DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY OR BY THE
DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR ITS AGENT
FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE
BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE &
CO., HAS AN INTEREST HEREIN.

     LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter called the "Company"), for
value received, hereby promises to pay to CEDE & CO. or registered assigns, at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, on the Stated Maturity Date, in such coin or currency of the United States
of America at the time of payment shall be legal tender for the payment of
public and private debts, for each $1,000 principal amount of the Securities
represented hereby, an amount equal to the Maturity Payment Amount. THE
SECURITIES REPRESENTED HEREBY SHALL NOT BEAR ANY INTEREST.

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




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

     Each Component Index is a trademark of the sponsor of such Component Index
and has been licensed for use by the Company. The Securities, linked to the
performance of the Component Indices, are not sponsored, endorsed, sold or
promoted by the sponsors of the Component Indices and the sponsors of the
Component Indices make no representation regarding the advisability of investing
in the Securities.

     This Security 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 referred to on the reverse hereof.



                                                                               3

     IN WITNESS WHEREOF, LEHMAN BROTHERS HOLDINGS INC. has caused this
instrument to be signed by its Chairman of the Board, its Vice Chairman, its
President, 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:   August 3, 2006                      LEHMAN BROTHERS HOLDINGS INC.


                                             By: /s/ James J. Killerlane III
                                                 -------------------------------
                                                 Name: James J. Killerlane III
                                                 Title: Vice President

                                             Attest: /s/ Jin Lee
                                                     ---------------------------
                                                     Name: Jin Lee
                                                     Title: Assistant Secretary



                     TRUSTEE'S CERTIFICATE OF AUTHENTICATION

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

Dated:  August 3, 2006

CITIBANK, N.A.
  as Trustee

By: /s/ Wafaa Orfy
    ----------------------------
    Name: Wafaa Orfy
    Title:  Authorized Signatory



                                                                               4

                               Reverse of Security

     This Security is one of a duly authorized series of Securities of the
Company designated as Absolute Buffer Notes Due August 3, 2010, Linked to a
Basket of Four Stock Indices (herein called the "Securities"). The Company may,
without the consent of the holders of the Securities, create and issue
additional notes ranking equally with the Securities and otherwise similar in
all respects so that such further notes shall be consolidated and form a single
series with the Securities; provided that no additional notes can be issued if
an Event of Default has occurred with respect to the Securities. This series of
Securities is one of an indefinite number of series of debt securities of the
Company, issued and to be issued under an indenture, dated as of September 1,
1987, as amended (herein called the "Indenture"), duly executed and delivered by
the Company and Citibank N.A., as trustee (herein called the "Trustee", which
term includes any successor trustee under the Indenture), to which Indenture and
all indentures supplemental thereto reference is hereby made for a description
of the rights, limitations of rights, obligations, duties and immunities
thereunder of the Company, the Trustee and the Holders of the Securities.

     The Maturity Payment Amount, at the request of the Trustee, shall be
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.

     All percentages resulting from any calculation with respect to the
Securities will be rounded at the Calculation Agent's discretion.

     The Trustee shall fully rely on the determination by the Calculation Agent
of the Maturity Payment Amount and shall have no duty to make any such
determination.

     This Security is not subject to any sinking fund.

     If an Event of Default with respect to the Securities shall occur and be
continuing, the amounts payable on all of the Securities may be declared due and
payable in the manner and with the effect provided in the Indenture. The amount
payable to the Holder hereof upon any acceleration permitted under the Indenture
will be equal to the Maturity Payment Amount calculated as though the date of
acceleration was the Stated Maturity Date and the date three Business Days prior
thereto was the Valuation Date.

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



                                                                               5

the holder of each Security so affected, or (ii) change the place of payment on
any Security, or impair the right to institute suit for payment on any Security,
or reduce the aforesaid percentage of Securities, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of each Security so affected. It is also provided in the Indenture
that, prior to any declaration accelerating the maturity of any series of
Securities, the holders of a majority in aggregate principal amount of the
Securities of such series Outstanding may on behalf of the holders of all the
Securities of such series waive any past default or Event of Default under the
Indenture with respect to such series and its consequences, except a default in
the payment of interest, if any, or the principal of, or premium, if any, on any
of the Securities of such series, or in the payment of any sinking fund
installment or analogous obligation with respect to Securities of such series.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future holders and owners of this
Security and any Securities which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Security or such other Securities.

     No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal amount with respect to this
Security.

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

     The Company, the Trustee, and any agent of the Company or of the Trustee
may deem and treat the registered holder (the "Holder") hereof as the absolute
owner of this Security (whether or not this Security shall be overdue and
notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment hereof, or on account hereof, and for all other
purposes and neither the Company nor the Trustee nor any agent of the Company or
of the Trustee shall be affected by any notice to the contrary. All such
payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, effectually satisfy and discharge liability for
moneys payable on this Security.

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

     As provided in the Indenture and subject to certain limitations therein set
forth, the transfer of this Security is registrable in the Security Register,
upon surrender of this Security for registration of transfer at the Corporate
Trust Office or agency in a Place of Payment for this Security, duly endorsed
by, or accompanied by a written instrument of transfer in form



                                                                               6

satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Securities of this series or of like tenor and of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.

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

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

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

     "AMEX" shall mean the American Stock Exchange LLC.

     "Basket" shall mean the basket initially composed of the Component Indices.

     "Business Day", notwithstanding any provision in the Indenture, shall mean
any day that is not a Saturday, a Sunday or a day on which the NYSE, Nasdaq or
AMEX is not open for trading or banking institutions or trust companies in the
City of New York are authorized or obligated by law or executive order to close.

     "Calculation Agency Agreement" shall mean the Calculation Agency Agreement,
dated as of August 3, 2006, between the Company and the Calculation Agent, as
amended from time to time, or any successor calculation agency agreement.

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

     "Close of Trading" shall mean, in respect of any Relevant Exchange, the
scheduled weekday closing time on a day on which the Relevant Exchange is
scheduled to be open for trading for its respective regular trading session,
without regard to after hours or any other trading outside of the regular
trading session hours.

     "Closing Basket Level" shall mean, with respect to any day, the sum of the
products of the Closing Index Level of each Component Index on that day and the
applicable Multiplier for such Component Index.

     "Closing Index Level" shall mean, with respect to any day, in the case of
any Component Index or any Successor Index, the closing level of such Component
Index or Successor Index, as the case may be, as reported by the publisher of
such Component Index or Successor Index, as the case may be, on such day or as
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.



                                                                               7

     "Component Index" shall initially mean any one of the Dow Jones EURO STOXX
50(SM) Index, as calculated, published and disseminated by STOXX Limited, the
FTSE 100 Index(TM), as calculated, published and disseminated by FTSE
International Limited, the Nikkei 225(SM) Index, as calculated, published and
disseminated by Nihon Keizai Shimbun, Inc., and the S&P(R)/ASX 200 Index, as
calculated, published and disseminated by the Standard & Poor's Australian Index
Committee and "Component Indices" shall have the correlative meaning.

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

     "Final Basket Level" shall equal the Closing Basket Level on the Valuation
Date.

     "Final Basket Return" shall equal the following:

                    Final Basket Level - Initial Basket Level
                    -----------------------------------------
                              Initial Basket Level

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

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

     "Initial Basket Level" shall equal 1000.

     "Market Disruption Event", with respect to any Component Index or any
Successor Index shall mean any of the following events has occurred on any day
as determined by the Calculation Agent in its sole discretion:

     (1) A material suspension of or limitation imposed on trading relating to
     the securities that then comprise 20% or more of such Component Index or
     Successor Index, by the Relevant Exchanges on which those securities are
     traded, at any time during the one-hour period that ends at the Close of
     Trading on such day, whether by reason of movements in price exceeding
     limits permitted by that Relevant Exchange or otherwise.

     (2) A material suspension of, or limitation imposed on, trading in futures
     or options contracts relating to such Component Index or Successor Index by
     the primary exchange or quotation system on which those futures or options
     contracts are traded, at any time during the one-hour period that ends at
     the Close of Trading on such day, whether by reason of movements in price
     exceeding limits permitted by the exchanges or otherwise.

     (3) Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for, the securities that then comprise 20% or more of
     such Component Index or Successor Index on the Relevant Exchanges on which
     those securities are traded, at any time during the one-hour period that
     ends at the Close of Trading on that day.

     (4) Any event, other than an early closure, that disrupts or impairs the
     ability of market participants in general to effect transactions in, or
     obtain market values for, the



                                                                               8

     futures or options contracts relating to such Component Index or Successor
     Index on the primary exchange or quotation system on which those futures or
     options contracts are traded at any time during the one-hour period that
     ends at the Close of Trading on that day.

     (5) The closure of the Relevant Exchanges on which securities that then
     comprise 20% or more of such Component Index or Successor Index are traded
     or on which futures or options contracts relating to such Component Index
     or Successor Index are traded prior to its scheduled closing time unless
     the earlier closing time is announced by the Relevant Exchanges at least
     one hour prior to the earlier of (i) the actual closing time for the
     regular trading session on the Relevant Exchanges and (ii) the submission
     deadline for orders to be entered into the Relevant Exchanges for execution
     at the Close of Trading on that day.

For purposes of determining whether a Market Disruption Event has occurred, the
relevant percentage contribution of a security to the level of a Component Index
or Successor Index will be based on a comparison of (x) the portion of the level
of such Component Index or Successor Index attributable to that security and (y)
the overall level of such Component Index or Successor Index, in each case
immediately before the occurrence of the Market Disruption Event.

     "Maturity Payment Amount" for each $1,000 principal amount of Securities,
shall equal:

     o   If the Final Basket Return is zero or positive, $1,000 + ($1,000 x the
         Upside Participation Rate x the Final Basket Return).

     o   If the Final Basket Return is negative and the Final Basket Level is
         equal to or greater than the Threshold Level, $1,000 + ($1,000 x the
         absolute value of the Final Basket Return).

     o   If the Final Basket Return is negative and the Final Basket Level is
         less than the Threshold Level, $1,000 + ($1,000 x the Final Basket
         Return).

     If requested by the Trustee, the Maturity Payment Amount shall be
determined by the Calculation Agent pursuant to the Calculation Agency
Agreement.

     "Measurement Day" shall mean (1) with respect to each of the Dow Jones EURO
STOXX 50 Index, the FTSE 100 Index and the S&P/ASX 200 Index (and any Successor
Indices), any day on which such index (or any Successor Index) is published by
its publisher or is otherwise determined by the Calculation Agent pursuant to
the Calculation Agency Agreement and (2) with respect to the Nikkei 225 Index,
any day on which both the Tokyo Stock Exchange and the Osaka Securities Exchange
are scheduled to be open for trading for their respective regular trading
sessions.



                                                                               9

     "Multiplier" of each Component Index shall initially be as follows:

          Component Index                                Initial Multiplier
          ---------------                                ------------------

          The Dow Jones EURO STOXX 50 Index                   .090198
          The FTSE 100 Index                                  .051448
          The Nikkei 225 Index                                .017533
          The S&P/ASX 200 Index                               .018251

The Multipliers shall be subject to adjustment by the Calculation Agent pursuant
to the Calculation Agency Agreement.

     "Nasdaq" shall mean The Nasdaq Stock Market, Inc.

     "NYSE" shall mean The New York Stock Exchange, Inc.

     "Place of Payment" shall mean the place or places where the principal of
(and premium, if any) and interest, if any, on the Securities are payable.

     "Relevant Exchange" shall mean, for any security (or any combination
thereof then underlying any Component Index or any Successor Index), the primary
exchange, quotation system (which includes bulletin board services) or other
market of trading for such security.

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

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

     "Stated Maturity Date" shall mean August 3, 2010 (or if August 3, 2010 is
not a Business Day, on the next Business Day); provided, that if the Valuation
Date with respect to any Component Index is postponed, the Stated Maturity Date
shall be the third Business Day following the date that the Final Basket Level
on the postponed Valuation Date is determined.

     "Successor Index" shall mean such successor or substitute index as the
Calculation Agent may select pursuant to the Calculation Agency Agreement upon
discontinuance of a Component Index.

     "Threshold Level" shall mean 800, as it may be adjusted from time to time
by the Calculation Agent to the extent it believes appropriate, in a manner
consistent with the adjustments to the method of calculation of a Component
Index or a Successor Index described in the Calculation Agency Agreement.

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

     "Upside Participation Rate" shall mean 157%.

     "Valuation Date" shall mean July 29, 2010; provided, that if such day is
not a Measurement Day with respect to a Component Index or a Successor Index or
if a Market



                                                                              10

Disruption Event occurs with respect to a Component Index or a Successor Index
on such day, then: (1) with respect to each Component Index and Successor Index
for which such day is a Measurement Day and for which a Market Disruption Event
has not occurred, such day shall be the date on which the Calculation Agent
determines the Closing Index Level of such Component Index or Successor Index
for use in calculating the Final Basket Level; (2) with respect to each
Component Index and Successor Index for which such day is not a Measurement Day
or for which a Market Disruption Event has occurred, the date on which the
Calculation Agent determines the Closing Index Level of such Component Index or
Successor Index for use in calculating the Final Basket Level shall be the next
following Measurement Day on which no Market Disruption Event occurs; provided,
however, if a Market Disruption Event with respect to the Component Index or
Successor Index occurs on each of the eight Measurement Days following the
originally scheduled Valuation Date, then the Calculation Agent shall determine
the Closing Index Level of that Component Index or Successor Index for use in
calculating the Final Basket Level based upon its good faith estimate of the
level of the Component Index or Successor Index on that eighth Measurement Day;
and (3) the day on which the Closing Index Level of the last remaining Component
Index or Successor Index is determined for purposes of calculating the Final
Basket Level shall be deemed the Valuation Date.

     "Weight" of each Component Index shall initially be as follows:

                                                         Initial Weight in
          Component Index                                    the Basket
          ---------------                                    ----------

          The Dow Jones EURO STOXX 50 Index                     333
          The FTSE 100 Index                                    305
          The Nikkei 225 Index                                  271
          The S&P/ASX 200 Index                                  91

The Weights shall be subject to adjustment by the Calculation Agent pursuant to
the Calculation Agency Agreement.

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



                        --------------------------------

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



TEN COM -     as tenants in common                   UNIF GIFT MIN ACT - ______ Custodian ______
                                                                         (Cust)           (Minor)
TEN ENT -     as tenants by the entireties           under Uniform Gifts to Minors
JT TEN  -     as joint tenants with right of         Act ______________________________________
              Survivorship and not as tenants in                       ( State)
              common



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

                        --------------------------------

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

PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE

--------------------------------

--------------------------------


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

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

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

     Dated:

                                       -----------------------------------------

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

Signature(s) Guaranteed:


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