Filed Pursuant to Rule 424(b)(5)
                                                Registration File No.: 333-61878


THE INFORMATION IN THIS PROSPECTUS SUPPLEMENT IS NOT COMPLETE AND MAY BE
CHANGED. THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS ARE NOT AN
OFFER TO SELL THESE SECURITIES AND WE ARE NOT SOLICITING AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.

                  SUBJECT TO COMPLETION, DATED JANUARY 4, 2005

PRELIMINARY PROSPECTUS SUPPLEMENT
(TO PROSPECTUS DATED JUNE 21, 2001)

                                   $20,000,000
                          LEHMAN BROTHERS HOLDINGS INC.
                                   RAPIDS(SM)
         Return Accelerated PortfolIo Debt Securities Due July   , 2006
               Based Upon a Basket of Three Pharmaceutical Stocks

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

General:

o    Senior unsecured debt securities of Lehman Brothers Holdings.

o    Performance linked to a basket of common stocks of the following three
     pharmaceutical companies: Eli Lilly and Company, Merck & Co., Inc. and
     Pfizer Inc. These companies are not involved in this offering and have no
     obligation with respect to the notes.

o    Denominations: $1,000 and whole multiples of $1,000.

o    Stated maturity date: July   , 2006, subject to postponement if a market
     disruption event occurs on the valuation date.

o    Valuation date: July   , 2006, subject to postponement if a market
     disruption event occurs.

o    Application will be made to list the notes on the American Stock Exchange
     under the trading symbol "RPX.A." Approval of the securities for listing,
     if obtained, may not be received prior to the issuance of the notes.

Payments:

o    No interest or other payments prior to maturity.

o    On the stated maturity date, Lehman Brothers Holdings will pay to you, per
     $1,000 note, an amount equal to:

     (a)  if the ending value of the basket (based upon the closing price of
          each stock in the basket on the valuation date) is greater than or
          equal to the starting value of the basket (as set forth herein under
          "The Basket"), the lesser of:

          (i)  a fixed amount, which Lehman Brothers Holdings currently expects
               to range from $1,220 to $1,260; and


                           2 x ending value of the basket
          (ii) $1,000 x  (-------------------------------- - 1)
                            starting value of the basket
     or

     (b)  if the ending value of the basket is less than the starting value of
          the basket,

                          ending value of the basket
               $1,000 x  ----------------------------
                         starting value of the basket


The starting value of the basket will be $1,000.

The ending value of the basket will generally be calculated as the sum of the
products of the closing price of each stock in the basket on the valuation date,
which will be the third business day before the stated maturity date, and the
then current multiplier for that stock. The multiplier will represent the actual
number of shares of each stock in the basket per $1,000 note.

     Investing in the notes involves risks. Risk Factors begin on page S-6.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined that
this prospectus supplement or the accompanying prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.

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

                                                   PER NOTE        TOTAL
                                                  ----------   -------------
Public offering price .........................           %     $
Underwriting discount .........................           %     $
Proceeds to Lehman Brothers Holdings ..........           %     $

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

Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional $3,000,000
aggregate principal amount of notes on the same terms and conditions as set
forth above solely to cover over-allotments, if any.

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

The notes are expected to be ready for delivery in book-entry form only through
The Depository Trust Company on or about January   , 2005.

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

Lehman Brothers Inc., a wholly-owned subsidiary of Lehman Brothers Holdings,
makes a market in Lehman Brothers Holdings' securities. It may act as principal
or agent in, and this prospectus supplement and the accompanying prospectus may
be used in connection with, those transactions. Any such sales will be made at
varying prices related to prevailing market prices at the time of sale.

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

                                 LEHMAN BROTHERS


January   , 2005
"RAPIDS" is a service mark of Lehman Brothers Inc.




YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY REFERENCE
IN THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS. NO ONE HAS BEEN
AUTHORIZED TO PROVIDE YOU WITH DIFFERENT INFORMATION. YOU SHOULD NOT ASSUME THAT
THE INFORMATION CONTAINED IN THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING
PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT COVER OF
THE DOCUMENT. SECURITIES ARE NOT BEING OFFERED IN ANY JURISDICTION WHERE THE
OFFER IS NOT PERMITTED.

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

                                TABLE OF CONTENTS

                                                                            PAGE
                                                                            ----
                              PROSPECTUS SUPPLEMENT

SUMMARY INFORMATION--Q&A.....................................................S-3
RISK FACTORS.................................................................S-6
USE OF PROCEEDS AND HEDGING.................................................S-10
RATIO OF EARNINGS TO FIXED CHARGES..........................................S-10
DESCRIPTION OF THE NOTES....................................................S-11
THE BASKET..................................................................S-17
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES...............................S-20
BOOK-ENTRY ISSUANCE.........................................................S-22
UNDERWRITING................................................................S-24
EXPERTS.....................................................................S-25


                                   PROSPECTUS

PROSPECTUS SUMMARY ............................................................2
WHERE YOU CAN FIND MORE INFORMATION ...........................................6
USE OF PROCEEDS AND HEDGING ...................................................7
RATIO OF EARNINGS TO FIXED CHARGES ............................................8
DESCRIPTION OF DEBT SECURITIES ................................................8
DESCRIPTION OF WARRANTS ......................................................17
DESCRIPTION OF PURCHASE CONTRACTS ............................................22
DESCRIPTION OF UNITS .........................................................25
FORM, EXCHANGE AND TRANSFER ..................................................29
BOOK-ENTRY PROCEDURES AND SETTLEMENT .........................................30
UNITED STATES FEDERAL INCOME TAX CONSEQUENCES ................................32
PLAN OF DISTRIBUTION .........................................................32
ERISA CONSIDERATIONS .........................................................34
LEGAL MATTERS ................................................................35
EXPERTS.......................................................................35


                                       S-2


                            SUMMARY INFORMATION--Q&A

This summary highlights selected information from the prospectus supplement and
the accompanying prospectus to help you understand the notes. You should
carefully read this prospectus supplement and the accompanying prospectus to
understand fully the terms of the notes and the tax and other considerations
that are important to you in making a decision about whether to invest in the
notes. You should pay special attention to the "Risk Factors" section beginning
on page S-6 to determine whether an investment in the notes is appropriate for
you.

WHAT ARE THE NOTES?

The notes are a series of senior debt of Lehman Brothers Holdings Inc. ("Lehman
Brothers Holdings") whose value is linked to the performance of the three
pharmaceutical stocks in the basket. See "The Basket." The notes will rank
equally with all other unsecured debt of Lehman Brothers Holdings, except
subordinated debt, and will mature on July    , 2006, subject to postponement if
a market disruption event occurs on the valuation date.

WHAT IS THE BASKET?

The basket is made up of the common stocks of three pharmaceutical companies:
Eli Lilly and Company, Merck & Co. Inc. and Pfizer Inc. These companies are not
involved in this offering and have no obligation with respect to the notes.

The number of shares of each common stock initially included in the basket per
$1,000 note is equal to the initial multiplier of each common stock in the
basket, as set forth herein under "The Basket." This number of shares will not
change except as a result of transactions, events or occurrences as described
below. See "Description of the Notes--Adjustments to multipliers and to
securities included in the basket."

Please note that an investment in the notes does not entitle you to any
ownership or other interest in the common stocks of the companies included in
the basket.

WHAT PAYMENTS WILL I RECEIVE ON THE NOTES BEFORE MATURITY?

None. No interest or other payments will be made on the notes before maturity.

What will I receive if I hold the notes until the stated maturity date?

On the stated maturity date, Lehman Brothers Holdings will pay to you, per
$1,000 note, an amount equal to:

(a)  if the ending value of the basket (based upon the closing price of each
     stock in the basket on the valuation date) is greater than or equal to the
     starting value of the basket (as set forth herein under "The Basket"), the
     lesser of:

     (i)  a fixed amount, which Lehman Brothers Holdings currently expects to
          range from $1,220 to $1,260; and



                      2 x ending value of the basket
     (ii) $1,000 x  (-------------------------------- - 1)
                       starting value of the basket
or

(b)  if the ending value of the basket is less than the starting value of the
     basket,

                     ending value of the basket
          $1,000 x  ----------------------------
                    starting value of the basket

The starting value of the basket will be $1,000.

The ending value of the basket will be determined by the calculation agent and
will generally be the sum of the products of the closing price of each stock in
the basket on the valuation date, which will be the third business day before
the stated maturity date, and the then current multiplier for that stock. The
multiplier will represent the actual number of shares of each stock in the
basket per $1,000 note. See "Description of the Notes--Adjustments to
multipliers and to securities included in the basket."

If the third business day before the stated maturity date is not an exchange
business day or the calculation agent determines that one or more market
disruption events have occurred on that day, the calculation agent will, subject
to certain limitations, determine the ending value of the basket by reference to
the closing price of each stock in the basket on the next exchange business day
on which there is not a market disruption event. Any such postponement of the
date that would otherwise be the valuation date will cause the stated maturity
date to be postponed until three business days after the date that the ending
value of the basket is determined.


                                      S-3


The maximum amount you will receive on the stated maturity date per $1,000 note
will be a fixed amount, which Lehman Brothers Holdings currently expects to
range from $1,220 to $1,260.

AMOUNT PAYABLE AT MATURITY--EXAMPLES

Here are three examples of hypothetical calculations of the amount payable per
$1,000 note on the stated maturity date. In each of these examples, it is
assumed that the maximum amount you will receive on the stated maturity date per
$1,000 note will be $1,240.

EXAMPLE 1. ASSUMING THAT THE ENDING VALUE OF THE BASKET ON THE VALUATION DATE IS
$800, OR 20% LOWER THAN THE STARTING VALUE OF THE BASKET:

                                 $800
                $1,000 x --------------------- = $800
                                $1,000

As a result, on the stated maturity date, you would receive $800 per $1,000
note, because the ending value of the basket is less than the starting value of
the basket.

EXAMPLE 2. ASSUMING THAT THE ENDING VALUE OF THE BASKET ON THE VALUATION DATE IS
$1,100, OR 10% HIGHER THAN THE STARTING VALUE OF THE BASKET:

                                 2 x $1,100
                $1,000 x ( ---------------------- - 1) = $1,200
                                   $1,000

As a result, on the stated maturity date, you would receive $1,200 per $1,000
note, because the ending value of the basket is greater than the starting value
of the basket and $1,200 is less than $1,240.

EXAMPLE 3. ASSUMING THAT THE ENDING VALUE OF THE BASKET ON THE VALUATION DATE IS
$1,300, OR 30% HIGHER THAN THE STARTING VALUE OF THE BASKET:

                                2 x $1,300
                $1,000 x ( -------------------- - 1) = $1,600
                                  $1,000

As a result, on the stated maturity date, you would receive $1,240 per $1,000
note, because the ending value of the basket is greater than the starting value
of the basket and $1,240 is less than $1,600.

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

To the extent the changes in the ending value of the basket or the maximum
amount you will receive on the stated maturity date per $1,000 note differ from
those assumed above, the results indicated above would be different.

WHEN IS THE VALUATION DATE?

The valuation date will be July    , 2006, subject to postponement if a market
disruption event occurs.

HOW HAVE THE THREE COMMON STOCKS IN THE BASKET PERFORMED HISTORICALLY?

Lehman Brothers Holdings has provided tables, beginning on page S-18, showing
the performance of the common stocks in the basket from 2002 through January 4,
2005. Lehman Brothers Holdings has provided this historical information to help
you evaluate the behavior of the common stocks in the basket so that you can
make an informed decision with respect to an investment in the notes. You should
realize, however, that past performance is not necessarily indicative of how the
basket or the notes will perform in the future.

WHAT CHANGES WILL BE MADE TO THE BASKET?

Changes will be made to the basket if the issuers whose common stocks or other
equity securities comprise the basket or other issuers whose securities are
included in the basket engage in certain transactions and to reflect certain
events affecting the common stocks, such as stock splits, stock dividends and
similar occurrences. For example, if an issuer is not the surviving entity in a
merger, its common stock will be removed from the basket and the basket will
then include equity securities of the successor entity or cash received in the
merger plus accrued interest. Also as an example, if an issuer distributes
equity securities of a subsidiary to shareholders, the subsidiary's equity
securities will then be added to the basket. See "Description of the Notes--
Adjustments to multipliers and to securities included in the basket."

HOW WILL I BE ABLE TO FIND INFORMATION ON THE BASKET?

You may call Lehman Brothers Inc. at 212-526-0905 to obtain the ending value of
the basket and the multiplier of each stock, calculated as if the ending value
of the basket were being determined on that date.

ARE THERE ANY RISKS ASSOCIATED WITH MY INVESTMENT?

Yes, the notes are subject to a number of risks. See "Risk Factors" beginning on
page S-6.


                                      S-4


WHAT ABOUT TAXES?

No statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. Although the issue is not free from doubt,
Lehman Brothers Holdings intends to treat, and by purchasing the notes, for all
purposes you will agree to treat, a note as a financial contract with cash
settlement rather than as a debt instrument. As a result, upon a sale, exchange
or other disposition of a note or upon cash settlement at maturity, you will
recognize gain or loss equal to the difference between the amount of cash
received and your basis in the note. Assuming the note is treated as a financial
contract for United States federal income tax purposes, the gain or loss will be
treated as long-term capital gain or loss. See "United States Federal Income Tax
Consequences."

WHO IS LEHMAN BROTHERS HOLDINGS?

Lehman Brothers Holdings is one of the leading global investment banks, serving
institutional, corporate, government and high-net-worth clients and customers.
Lehman Brothers Holdings' worldwide headquarters in New York and regional
headquarters in London and Tokyo are complemented by offices in additional
locations in the United States, Europe, the Middle East, Latin America and the
Asia Pacific region. See "Lehman Brothers Holdings Inc." and "Where You Can Find
More Information" on page 2 and 6, respectively, of the accompanying prospectus.

You may request a copy of any document Lehman Brothers Holdings Inc. files with
the Securities and Exchange Commission, or the SEC, pursuant to the Securities
Exchange Act of 1934, at no cost, by writing or telephoning Lehman Brothers
Holdings at the following address, which replaces the address provided in the
accompanying prospectus:

     Office of the Corporate Secretary
     399 Park Avenue
     New York, New York 10022
     (212) 526-0858

Lehman Brothers Holdings' principal executive offices are located at the
following address, which likewise replaces the address provided in the
accompanying prospectus:

     745 Seventh Avenue
     New York, New York 10019
     (212) 526-7000

WHAT IS THE ROLE OF LEHMAN BROTHERS INC.?

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, is the
underwriter for the offering and sale of the notes. Lehman Brothers Inc. will
also be the calculation agent for purposes of calculating the amount payable to
you at maturity. Potential conflicts of interest may exist between Lehman
Brothers Inc. and you as a beneficial owner of the notes. See "Risk
Factors--Potential conflicts of interest exist because Lehman Brothers Holdings
controls Lehman Brothers Inc., which will act as the calculation agent" and
"Description of the Notes--Calculation agent."

After the initial offering, Lehman Brothers Inc. intends to buy and sell the
notes to create a secondary market in the notes and may stabilize or maintain
the market price of the notes during the initial distribution of the notes.
However, Lehman Brothers Inc. will not be obligated to engage in any of these
market activities or to continue them once they have begun.

IN WHAT FORM WILL THE NOTES BE ISSUED?

The notes will be represented by one or more global securities that will be
deposited with and registered in the name of The Depository Trust Company or its
nominee. Except in very limited circumstances, you will not receive a
certificate for your notes.

WILL THE NOTES BE LISTED ON A STOCK EXCHANGE?

Lehman Brothers Holdings will apply to list the notes on the American Stock
Exchange under the trading symbol "RPX.A". In some recent offerings by Lehman
Brothers Holdings of securities similar to the notes, approval of the securities
for listing has not been received prior to the date the securities were issued.

You should be aware that the listing of the notes on the American Stock
Exchange, if accepted, will not necessarily ensure that a liquid trading market
will be available for the notes. If accepted, securities may not be listed prior
to the issuance of the notes.


                                      S-5



                                  RISK FACTORS

You should carefully consider the risk factors provided below as well as the
other information contained in this prospectus supplement, the accompanying
prospectus and the documents incorporated in this document by reference. As
described in more detail below, the trading price of the notes may vary
considerably before the stated maturity date due, among other things, to
fluctuations in the prices of the common stocks or other equity securities that
make up the basket and other events that are difficult to predict and beyond
Lehman Brothers Holdings' control.

You should reach an investment decision only after you have carefully considered
with your advisors the suitability of an investment in the notes in light of
your particular circumstances.

THESE NOTES ARE DIFFERENT FROM CONVENTIONAL DEBT SECURITIES OF LEHMAN BROTHERS
HOLDINGS IN SEVERAL WAYS.

o    THE PAYMENT YOU RECEIVE AT MATURITY MAY BE LESS THAN THE PRICE AT WHICH THE
     NOTES ARE INITIALLY BEING SOLD TO THE PUBLIC. If, on the valuation date,
     the ending value of the basket is less than the starting value of the
     basket, Lehman Brothers Holdings will pay you less than $1,000 per $1,000
     note. You will not receive any payment on the stated maturity date if the
     ending value of each common stock included in the basket on the valuation
     date is zero.

o    THE PAYMENT YOU RECEIVE AT MATURITY MAY BE LESS THAN THE YIELD ON A
     CONVENTIONAL DEBT SECURITY OF COMPARABLE MATURITY. The amount Lehman
     Brothers Holdings pays you on the stated maturity date may be less than the
     return you could earn on other investments. Because the amount you receive
     on the stated maturity date may be less than, equal to or only slightly
     greater than the price at which the notes are initially being sold to the
     public, the effective yield to maturity on the notes may be less than that
     which would be payable on a conventional fixed-rate, non-callable debt
     security of Lehman Brothers Holdings. In addition, any return on the notes
     may not fully compensate you for any opportunity cost to you of investing
     in the notes when you take into account inflation and other factors
     relating to the time value of money.

o    NO INTEREST OR OTHER PAYMENTS WILL BE PAID ON THE NOTES PRIOR TO MATURITY.
     No interest or other payments will be made on the notes before maturity.

YOUR RETURN ON THE NOTES COULD BE LESS THAN IF YOU OWNED THE COMMON STOCKS THAT
MAKE UP THE BASKET.

o    YOUR POTENTIAL RETURN ON YOUR PRINCIPAL INVESTMENT IS LIMITED. The notes
     provide less opportunity for equity appreciation than a direct investment
     in each of the common stocks that make up the basket because the
     appreciation of the basket will be limited to a fixed percentage, which
     Lehman Brothers Holdings currently expects to range from 22% to 26%, of the
     basket's starting value. If the basket's starting value increases by more
     than this fixed percentage during the term of the notes, your return on the
     notes will be less than your return had you owned each of the common stocks
     or other equity securities comprising the basket.

o    YOUR RETURN WILL NOT REFLECT DIVIDENDS ON THE COMMON STOCKS OR OTHER EQUITY
     SECURITIES COMPRISING THE BASKET. Your return on the notes will not reflect
     the return you would realize if you actually owned the common stocks or
     other equity securities included in the basket and received the dividends
     paid on those securities. This is because the calculation agent will
     calculate the amount payable to you by reference to the prices of the
     common stocks or other equity securities comprising the basket without
     taking into consideration the value of dividends paid on those securities.

HISTORICAL VALUES OF THE THREE COMMON STOCKS OF PHARMACEUTICAL COMPANIES
COMPRISING THE BASKET SHOULD NOT BE TAKEN AS AN INDICATION OF THE FUTURE
PERFORMANCE OF THE BASKET DURING THE TERM OF THE NOTES.

The trading prices of the common stocks or other equity securities and any cash
included in the basket will determine the amount payable at maturity to you. As
a result, it is impossible to predict whether the value of the basket will fall
or rise. Trading prices of the common stocks or other equity securities included
in the basket will be influenced by complex and interrelated political,
economic, financial and other factors that can affect the markets in which those
securities are traded and the values of those securities themselves.


                                      S-6


CHANGES IN THE VALUE OF ONE OR MORE OF THE COMMON STOCKS OR OTHER EQUITY
SECURITIES COMPRISING THE BASKET MAY OFFSET EACH OTHER.

Price movements in the common stocks or other equity securities comprising the
basket may not correlate with each other. At a time when the value of one or
more of the common stocks or other equity securities included in the basket
increases, the value of one or more of the other common stocks or other equity
securities included in the basket may not increase as much or may even decline
in value. Therefore, in calculating the ending value of the basket on the
valuation date, increases in the value of one or more of the common stocks or
other equity securities included in the basket may be moderated, or wholly
offset, by lesser increases or declines in the value of one or more of the other
common stocks or other equity securities included in the basket. You can review
the historical prices of each of the common stocks in the basket for each fiscal
quarter in the period from January 1, 2002 through January 4, 2005 under "The
Basket--Historical information about the common stocks included in the basket."
You cannot predict the future performance of any of the common stocks or other
equity securities comprising the basket or of the basket as a whole, or whether
increases in the prices of any of the common stocks or other equity securities
comprising the basket will be offset by decreases in the prices of other common
stocks or other equity securities comprising the basket, based on historical
performance. In addition, there can be no assurance that the ending value of the
basket will be higher than the starting value of the basket so that you will
receive at maturity an amount in excess of the price at which the notes are
initially being sold to the public.

THERE ARE RISKS ASSOCIATED WITH A SECTOR INVESTMENT.

The performance of the notes is dependent upon the performance of three issuers
in a particular sector of the economy--namely, the pharmaceutical industry.
Consequently, the value of the notes may be subject to greater volatility and be
more adversely affected by a single economic, political or regulatory occurrence
than an investment linked to a more broadly diversified group of issuers.

THE COMMON STOCKS OR OTHER EQUITY SECURITIES COMPRISING THE BASKET ARE NOT
NECESSARILY REPRESENTATIVE OF THE PHARMACEUTICAL INDUSTRY.

Although the issuers of the common stocks or other equity securities comprising
the basket have varying market capitalizations, the performance of the basket
may not correlate with the performance of the entire pharmaceutical industry.
The basket may decline in value even if the pharmaceutical industry as a whole
rises in value. Furthermore, one or more of the issuers of the common stocks or
other equity securities included the basket may engage in new lines of business
or cease to be involved in the pharmaceutical industry. Subject to adjustments
to multipliers and to securities included in the basket for specific corporate
events relating to a particular issuer, the basket is a static basket, and the
common stocks or other equity securities included the basket will not vary even
if one or more of the issuers are no longer involved in the pharmaceutical
industry.

INDUSTRY CONSOLIDATION AND OTHER CORPORATE EVENTS MAY ALTER THE COMPOSITION OF
THE BASKET.

If the issuer of a common stock or other equity security included in the basket
is acquired in a stock-for-stock transaction, the common stock or other equity
security of the acquiring company will assume that common stock's or other
equity security's place in the basket, including if the common stock or other
equity security of the acquiror is already in the basket. Consequently,
consolidation among issuers of the common stock or other equity securities
included in the basket will result in an increased weighting for the surviving
company. For the effect of consolidation transactions and other reorganization
events with respect to the common stocks or other equity securities included in
the basket on the multipliers and the basket, see "Description of the
Notes--Adjustments to multipliers and to securities included in the basket."

THE INCLUSION OF COMMISSIONS AND PROJECTED PROFIT FROM HEDGING IN THE PUBLIC
OFFERING PRICE IS LIKELY TO ADVERSELY AFFECT SECONDARY MARKET PRICES.

Assuming no change in market conditions or any other relevant factors, the
price, if any, at which Lehman Brothers Inc. is willing to purchase the notes in
secondary market transactions will likely be lower than the public offering
price, since the public offering price included, and secondary market prices are
likely to exclude, commissions paid with respect to the notes, as well as the
projected profit included in the cost of hedging our obligations under the
notes. In addition, any such prices may differ from values determined by pricing
models used by Lehman Brothers Inc., as a result of dealer discounts, mark-ups
or other transaction costs.

THE NOTES MAY NOT BE ACTIVELY TRADED.

There may be little or no secondary market for the notes. Although Lehman
Brothers Holdings will apply


                                      S-7


to list the notes on the American Stock Exchange, it is not possible to predict
whether the notes will trade in the secondary market. Even if there is a
secondary market, it may not provide significant liquidity. Lehman Brothers Inc.
currently intends to act as a market maker for the notes, but it is not required
to do so.

THE VALUE OF THE NOTES WILL BE AFFECTED BY NUMEROUS FACTORS, SOME OF WHICH ARE
RELATED IN COMPLEX WAYS.

The value of the notes in the secondary market will be affected by supply and
demand of the notes, the closing prices at that time of the common stocks or
other equity securities comprising the basket and a number of other factors,
some of which are interrelated in complex ways. As a result, the effect of any
one factor may be offset or magnified by the effect of another factor. The price
at which you will be able to sell the notes before the stated maturity date may
be at a discount, which could be substantial, from the price at which the notes
are initially being sold to the public, if the value of the basket at that time
is less than the starting value of the basket. A change in a specific factor
could have the following impacts on the market value of the notes, assuming all
other conditions remain constant.

o    BASKET PERFORMANCE. Lehman Brothers Holdings expects that the market value
     of the notes will depend substantially on the performance of the basket at
     any given point in time. If you decide to sell your notes prior to the
     stated maturity date, you may receive substantially less than the amount
     that would be payable on the stated maturity date because of expectations
     that the performance of the basket will continue to fluctuate until the
     amount payable on the stated maturity date is determined. If you decide to
     sell your notes when the value of the basket at that time is less than the
     starting value of the basket, you can expect to receive less than the price
     at which the notes are initially being sold to the public. Political,
     economic and other developments that affect the outlook for the companies
     whose common stocks or other equity securities comprise the basket are
     likely to directly affect the performance of the basket and could
     indirectly affect the value of the notes.

o    INTEREST RATES. The trading value of the notes may be affected by changes
     in interest rates. In general, if U.S. interest rates change, the trading
     value of the notes may be adversely affected.

o    VOLATILITY OF THE THREE COMMON STOCKS INCLUDED IN THE BASKET. Volatility is
     the term used to describe the size and frequency of market fluctuations. If
     the volatility of the basket changes, the trading value of the notes may be
     adversely affected. Lehman Brothers Holdings is unable to predict the
     volatility of the basket.

o    MERGER AND ACQUISITION TRANSACTIONS. Some of the common stocks or other
     equity securities included in the basket may be affected by mergers and
     acquisitions, which can contribute to volatility of the basket.
     Additionally, as a result of a merger or acquisition, one or more common
     stocks or other equity securities included in the basket may be replaced
     with a surviving or acquiring entity's securities. The surviving or
     acquiring entity's securities may not have the same characteristics as the
     common stock or other equity security originally included in the basket.

o    TIME REMAINING TO MATURITY. The value of the notes may be affected by the
     time remaining to maturity. As the time remaining to the maturity of the
     notes decreases, this time value may decrease, adversely affecting the
     trading value of the notes.

o    DIVIDEND YIELDS. If dividend yields on the common stocks or other equity
     securities included in the basket increase, the value of the notes may be
     adversely affected because the basket does not incorporate the value of
     those payments.

o    LEHMAN BROTHERS HOLDINGS' CREDIT RATINGS, FINANCIAL CONDITION AND RESULTS.
     Actual or anticipated changes in Lehman Brothers Holdings' credit ratings,
     financial condition or results may affect the market value of the notes.

o    ECONOMIC CONDITIONS AND EARNINGS PERFORMANCE OF THE UNDERLYING COMPANIES.
     General economic conditions and earnings results of the companies whose
     common stocks or other equity securities are included in the basket and
     real or anticipated changes in those conditions or results may affect the
     market value of the notes.

You should understand that the impact of one of the factors specified above,
such as an increase in interest rates, may offset some or all of any change in
the trading value of the notes attributable to another factor, such as an
increase in basket performance. In general, assuming all relevant factors are
held constant, the effect on the trading value of the notes of a given change in
most of the factors listed above will be less


                                      S-8


if it occurs later than if it occurs earlier in the term of the notes.

Lehman Brothers Holdings cannot control actions by the companies whose common
stocks or other equity securities make up the basket.

Actions by any company whose common stock or other equity security is included
in the basket may have an adverse effect on the basket and the notes. In
addition, these companies are not involved in this offering of notes and have no
obligations with respect to the notes, including any obligation to take Lehman
Brothers Holdings' or your interests into consideration for any reason. These
companies will not receive any of the proceeds of this offering of the notes and
are not responsible for, and have not participated in, the determination of the
timing of, prices for, or quantities of, the notes to be issued. These companies
are not involved with the administration, marketing or trading of the notes and
have no obligations with respect to the amount to be paid to you on the stated
maturity date.

YOU HAVE NO SHAREHOLDER RIGHTS.

Investing in the notes is not equivalent to investing in the component stocks of
the basket. As an investor in the notes, you will not have voting rights or
rights to receive dividends or other distributions or any other rights with
respect to the common stocks or other equity securities that are included the
basket.

POTENTIAL CONFLICTS OF INTEREST EXIST BECAUSE LEHMAN BROTHERS HOLDINGS CONTROLS
LEHMAN BROTHERS INC., WHICH WILL ACT AS THE CALCULATION AGENT.

Lehman Brothers Inc. will act as the calculation agent, which determines the
amount you will receive on the notes at maturity, whether adjustments should be
made to the multiplier or securities included in the basket and whether a market
disruption event has occurred. As a result, potential conflicts of interest may
exist between Lehman Brothers Inc. and you. See "Description of the
Notes--Payment on the stated maturity date," "Description of the Notes--
Adjustments to multipliers and to securities included in the basket" and
"Description of the Notes--Market disruption events."

PURCHASES AND SALES OF THE COMMON STOCKS OR OTHER EQUITY SECURITIES COMPRISING
THE BASKET BY LEHMAN BROTHERS HOLDINGS AND ITS AFFILIATES COULD AFFECT THE
PRICES OF THOSE COMMON STOCKS OR OTHER EQUITY SECURITIES OR THE VALUE OF THE
BASKET.

Lehman Brothers Holdings and its affiliates, including Lehman Brothers Inc., may
from time to time buy or sell shares of the common stocks or other equity
securities comprising the basket or derivative instruments related to those
common stocks or equity securities for their own accounts in connection with
their normal business practices or in connection with hedging of Lehman Brothers
Holdings' obligations under the notes. These transactions could affect the
prices of those common stocks or equity securities or the value of the basket.
See "Use of Proceeds and Hedging."

THE TAX CONSEQUENCES OF AN INVESTMENT IN THE NOTES ARE UNCERTAIN.

Investors should consider the tax consequences of investing in the notes. No
statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. Lehman Brothers Holdings is not requesting any ruling from the
Internal Revenue Service with respect to the notes and cannot assure you that
the Internal Revenue Service will agree with the treatment described in this
document. Lehman Brothers Holdings intends to treat, and by purchasing a note,
for all purposes you agree to treat, a note as a financial contract with cash
settlement rather than as a debt instrument. See "United States Federal Income
Tax Consequences."



                                      S-9


                           USE OF PROCEEDS AND HEDGING

An amount equal to approximately     % of the proceeds to be received by Lehman
Brothers Holdings from the sale of the notes may be used by Lehman Brothers
Holdings or one or more of its subsidiaries before and immediately following the
initial offering of the notes to acquire common stocks or other equity
securities that make up the basket. From time to time, Lehman Brothers Holdings
or one or more of its subsidiaries may also acquire futures contracts or listed
or over-the-counter options contracts in, or other derivative or synthetic
instruments related to, those common stocks or other equity securities to hedge
Lehman Brothers Holdings' obligations under the notes. The balance of the
proceeds will be used for general corporate purposes. These hedging techniques
will result in negligible initial costs to Lehman Brothers Holdings. See "Use of
Proceeds and Hedging" on page 7 of the accompanying prospectus.

From time to time after the initial offering and before the maturity of the
notes, depending on market conditions, including the market price of the common
stocks or any other equity securities that make up the basket, Lehman Brothers
Holdings expects that it or one or more of its subsidiaries will increase or
decrease their initial hedging positions using dynamic hedging techniques.
Lehman Brothers Holdings or one or more of its subsidiaries may take long or
short positions in those common stocks or those other equity securities or in
the futures contracts or in listed or over-the-counter options contracts or
other derivative or synthetic instruments related to those common stocks or
those other equity securities. In addition, Lehman Brothers Holdings or one or
more of its subsidiaries may purchase or otherwise acquire a long or short
position in notes from time to time and may, in their sole discretion, hold or
resell those notes. Lehman Brothers Holdings or one or more of its subsidiaries
may also take positions in other types of appropriate financial instruments that
may become available in the future.

To the extent that Lehman Brothers Holdings or one or more of its subsidiaries
has a long hedge position in any of the common stocks or other equity securities
that make up the basket, or futures or options contracts or other derivative or
synthetic instruments related to those common stocks or other equity securities,
Lehman Brothers Holdings or one or more of its subsidiaries may liquidate a
portion of their holdings at or about the time of the maturity of the notes or
at or about the time of a change in the common stocks or other equity securities
that make up the basket. Depending, among other things, on future market
conditions, the aggregate amount and the composition of the positions are likely
to vary over time. Profits or losses from any of those positions cannot be
ascertained until the position is closed out and any offsetting position or
positions are taken into account. Certain activity by Lehman Brothers Holdings
or one or more of its subsidiaries described above can potentially increase or
decrease the prices of the common stocks or other equity securities that make up
the basket and, accordingly, increase or decrease the performance of the basket.
Although Lehman Brothers Holdings has no reason to believe that any of those
activities will have a material impact on the price of the common stocks or
other equity securities that make up the basket, these activities could have
such an effect.


                       RATIO OF EARNINGS TO FIXED CHARGES

                    YEAR ENDED NOVEMBER 30,
-------------------------------------------------------------  NINE MONTHS ENDED
   1999         2000         2001         2002        2003      AUGUST 31, 2004
----------- ------------ ------------ ------------ ---------- ------------------
   1.12         1.14         1.11         1.13        1.29            1.39


                                      S-10


                            DESCRIPTION OF THE NOTES

GENERAL

You will find information about the notes in two separate documents that
progressively provide more detail:

o    the accompanying prospectus; and

o    this prospectus supplement

Because the terms of the notes may differ from the general information Lehman
Brothers Holdings has provided in the prospectus, in all cases you should rely
on information in this prospectus supplement over different information in the
prospectus. The notes are to be issued as a series of debt securities under the
senior indenture, which is more fully described in the prospectus. For a
description of the rights attaching to different series of debt securities under
the senior indenture, you should refer to the section "Description of Debt
Securities" beginning on page 8 of the accompanying prospectus. The notes are
Senior Debt as described in the accompanying prospectus. Citibank, N.A. is
trustee under the senior indenture.

Lehman Brothers Holdings may initially issue $20,000,000 ($23,000,000 if the
underwriter's over-allotment option is exercised in full) aggregate principal
amount of notes. Lehman Brothers Holdings may, without the consent of the
holders of the notes, create and issue additional notes ranking equally with the
notes and otherwise similar in all respects so that such further notes shall be
consolidated and form a single series with the notes. No additional notes can be
issued if an event of default has occurred with respect to the notes.

The notes will be issued in denominations of $1,000 and whole multiples of
$1,000.

INTEREST

None. No interest or other payments will be made on the notes before maturity.

PAYMENT ON THE STATED MATURITY DATE

The notes will mature on July    , 2006, subject to postponement if a market
disruption event occurs on the valuation date.

On the stated maturity date, Lehman Brothers Holdings will pay to you, per
$1,000 note, an amount equal to:

(a)  if the ending value of the basket (based upon the closing price of each
     stock in the basket on the valuation date) is greater than or equal to the
     starting value of the basket (as set forth herein under "The Basket"), the
     lesser of:

     (i)  a fixed amount, which Lehman Brothers Holdings currently expects to
          range from $1,220 to $1,260; and

                      2 x ending value of the basket
     (ii) $1,000 x  (-------------------------------- - 1)
                       starting value of the basket
or

(b)  if the ending value of the basket is less than the starting value of the
     basket,

                     ending value of the basket
          $1,000 x  ----------------------------
                    starting value of the basket

The maximum amount you will receive on the stated maturity date per $1,000 note
will be a fixed amount, which Lehman Brothers Holdings currently expects to
range from $1,220 to $1,260. If, on the valuation date, the ending value of the
basket is less than the starting value of the basket, Lehman Brothers Holdings
will pay you less than $1,000 per $1,000 note.

The starting value of the basket will be $1,000.

The ending value of the basket will be determined by the calculation agent and
will generally be the sum of the products of the closing price of each stock in
the basket on the valuation date, which will be the third business day before
the stated maturity date, and the then current multiplier for that stock. The
multiplier will represent the actual number of shares of each stock in the
basket per $1,000 note. See "--Adjustments to multipliers and to securities
included in the basket."

If the third business day before the stated maturity date is not an exchange
business day or the calculation agent determines that one or more market
disruption events have occurred on that day, the calculation agent will
determine the ending value of the basket by reference to the closing price of
each stock in the basket on the next exchange business day on which there is not
a market disruption event; provided,


                                      S-11



however, if a market disruption event occurs on each of the eight exchange
business days following the originally scheduled valuation date, then (a) that
eighth exchange business day shall be deemed the valuation date and (b) the
calculation agent shall determine the ending value of the basket based upon its
good faith estimate of the value of the basket on that eighth exchange business
day. Any such postponement of the date that would otherwise be the valuation
date will cause the stated maturity date to be postponed until three business
days after the date that the ending value of the basket is determined.

The "closing price" for a common stock or any equity security included in the
basket means the last reported sales price on the relevant exchange for that
security at the scheduled weekday closing time of the regular trading session of
the relevant exchange. The "relevant exchange" for a common stock or equity
security included in the basket means the primary U.S. exchange, quotation
system, including any bulletin board service, or market on which that security
is traded, or in case the security is not listed or quoted in the United States,
the primary exchange, quotation system or market for the security. If, however,
any common stock or any equity security included in the basket is listed or
traded on a bulletin board at the time the ending value of the basket is
determined, then the closing price of that common stock or other equity security
will be determined using the average execution price that an affiliate of Lehman
Brothers Holdings receives upon the sale of that common stock or other equity
security used to hedge Lehman Brothers Holdings' obligations under the notes.

An "exchange business day" means any day on which the relevant exchanges for all
securities in the basket are scheduled to be open for trading for their
respective regular trading session.

You may call Lehman Brothers Inc. at 212-526-0905 to obtain the ending value of
the basket and the multiplier of each stock, calculated as if the ending value
of the basket were being determined on that date.

THE MULTIPLIERS FOR THE COMMON STOCKS THAT COMPRISE THE BASKET

The initial multiplier for each common stock in the basket will be the number of
shares, or fraction of a share, of each common stock required to be included in
the basket so that each common stock initially represents approximately 33.33%
of the basket on a U.S. dollar weighted basis. The initial multipliers for each
common stock in the basket are listed in the table on page S-17. The price used
to determine the initial multiplier for each common stock was determined based
on the closing price for each common stock on the date of this prospectus
supplement. The multipliers for each security will remain constant unless
adjusted for the extraordinary corporate events described below. Each multiplier
will be rounded at the calculation agent's discretion.

ADJUSTMENTS TO MULTIPLIERS AND TO SECURITIES INCLUDED IN THE BASKET

Adjustments to securities included in the basket will be made by adjusting the
multiplier then in effect for the securities, by adding new securities or cash
and/or by removing current securities in the circumstances described below. For
purposes of these adjustments, except as noted below, ADSs are treated like
common stock if a comparable adjustment to the foreign shares underlying the
ADSs is made pursuant to the terms of the depositary arrangement for the ADSs or
if holders of ADSs are entitled to receive property in respect of the underlying
foreign shares.

o    If a common stock is subject to a stock split or reverse stock split, then
     once the split has become effective, the multiplier relating to that common
     stock will be adjusted. The multiplier will be adjusted to equal the
     product of the number of shares outstanding after the split with respect to
     each share immediately prior to effectiveness of the split and the prior
     multiplier.

o    If a common stock is subject to an extraordinary stock dividend or
     extraordinary stock distribution in common stock that is given equally to
     all holders of shares, then once the common stock is trading ex-dividend,
     the multiplier will be increased by the product of the number of shares
     issued with respect to one share and the prior multiplier.

o    If the issuer of a common stock, or, if a common stock is an ADS, the
     foreign issuer of the underlying foreign share, is being liquidated or
     dissolved or is subject to a proceeding under any applicable bankruptcy,
     insolvency or other similar law, the common stock will continue to be
     included in the basket so long as the primary exchange, quotation system or
     market is reporting a market price for the common stock. If a market price,
     including a price on a bulletin board service, is no longer available for a
     common stock included in the basket, then the value of that common stock
     will equal zero for so long as no market price is available, and no attempt
     will be


                                      S-12


     made to find a replacement stock or increase the basket to compensate for
     the deletion of that common stock.

o    If the issuer of a common stock, or, if a common stock is an ADS, the
     foreign issuer of the underlying foreign share, has been subject to a
     merger or consolidation and is not the surviving entity and holders of the
     common stock are entitled to receive cash, securities, other property or a
     combination of those in exchange for the common stock, then the following
     will be included in the basket per $1,000 note:

     -    To the extent cash is received, the basket will include an amount of
          cash equal to the product of (a) the cash consideration per share of
          common stock and (b) the multiplier for the common stock, each as
          determined as of the time holders of the common stock are entitled to
          receive the cash consideration, plus accrued interest. Interest will
          accrue beginning on the first London business day after the day on
          which holders of the common stock receive the cash consideration until
          maturity. Interest will accrue at a rate equal to LIBOR with a term
          corresponding to the interest accrual period stated in the preceding
          sentence.

     -    To the extent that equity securities that are traded or listed on an
          exchange, quotation system or market are received, once the exchange
          for the new securities has become effective, the former common stock
          will be removed from the basket and the basket will include a number
          of shares of the new securities equal to the multiplier for the new
          securities. The multiplier for the new securities will equal the
          product of the last value of the multiplier of the original underlying
          common stock and the number of securities of the new security
          exchanged with respect to one share of the original common stock.

     -    To the extent that equity securities that are not traded or listed on
          an exchange, quotation system or market or non-equity securities or
          other property (other than cash) is received, the calculation agent
          will determine the fair market value of the securities or other
          property received per share of common stock and the basket will
          include an amount of cash equal to the product of (a) the fair market
          value per share of common stock and (b) the multiplier for the common
          stock, each determined as of the time the holders of the common stock
          are entitled to receive the securities or other property. The basket
          will also include accrued interest on that amount. Interest will
          accrue beginning on the first London business day after the day that
          an affiliate of Lehman Brothers Holdings sells the securities or other
          property used to hedge Lehman Brothers Holdings' obligations under the
          notes until maturity. Interest will accrue at a rate equal to LIBOR
          with a term corresponding to the interest accrual period stated in the
          preceding sentence.

o    If all of the shares of a common stock are converted into or exchanged for
     the same or a different number of shares of any class or classes of common
     stock other than that common stock included in the basket, whether by
     capital reorganization, recapitalization or reclassification, then, once
     the conversion has become effective, the former common stock will be
     removed from the basket and the basket will include a number of shares of
     the new common stock per outstanding note equal to the multiplier for the
     new securities. The multiplier for each new common stock added to the
     basket will equal the product of the last value of the multiplier of the
     original common stock and the number of shares of the new common stock
     issued with respect to one share of the original common stock.

o    If the issuer of a common stock, or if a common stock is an ADS, the issuer
     of the underlying foreign share, issues to all of its shareholders common
     stock or another equity security that is traded or listed on an exchange,
     quotation system or market of an issuer other than itself, then the basket
     will include a number of shares of the new common stock per outstanding
     note equal to the multiplier for the new common stock or other equity
     security. The multiplier for the new common stock or other equity security
     will equal the product of the last value of the multiplier with respect to
     the original common stock and the number of shares of the new common stock
     or other equity security issued with respect to one share of the original
     common stock.

o    If an ADS is no longer listed or admitted to trading on a United States
     securities exchange registered under the Securities Exchange Act of 1934 or
     is no longer a security quoted on the Nasdaq Stock Market, then the ADS
     will be removed from the basket, the foreign share


                                      S-13


     underlying the ADS will be deemed to be a new common stock and the basket
     will include a number of shares of the new common stock per outstanding
     note equal to the multiplier for the new common stock. The initial
     multiplier for that new underlying common stock will equal the last value
     of the multiplier for the ADS multiplied by the number of underlying
     foreign shares represented by a single ADS.

o    If the issuer of a common stock distributes an extraordinary dividend or
     makes an extraordinary distribution (including upon liquidation or
     dissolution) of cash, equity securities that are not traded or listed on an
     exchange, quotation system or market, non-equity securities or other
     property of any kind which is received equally by all holders of its common
     stock, then the following will be included in the basket per $1,000 note:

     -    To the extent cash is entitled to be received, the basket will include
          on each day after the time that the common stock trades ex-dividend
          until the date the cash consideration is entitled to be received, the
          present value of the cash to be received per share of common stock
          multiplied by the multiplier for the common stock on such day,
          discounted at a rate equal to LIBOR, with a term beginning that day
          and ending on the date that the cash is entitled to be received. When
          the cash consideration is received, the basket will include an amount
          of cash equal to the product of (a) the cash consideration per share
          of common stock and (b) the multiplier for the common stock, each
          determined as of the time the holders of common stock are entitled to
          receive the cash consideration, plus accrued interest. Interest will
          accrue beginning the first London business day after the day that
          holders of the common stock receive the cash consideration until
          maturity. Interest will accrue at a rate equal to LIBOR with a term
          corresponding to the interest accrual period stated in the preceding
          sentence.

     -    To the extent that equity securities that are not traded or listed on
          an exchange, quotation system or market or non-equity securities or
          other property (other than cash) are received, the calculation agent
          will determine the fair market value of the securities or other
          property received per share of common stock and the basket will
          include an amount of cash equal to the product of (a) the fair market
          value per share of common stock and (b) the multiplier for the common
          stock, each determined as of the time the holders of the common stock
          are entitled to receive the securities or other property. The basket
          will also include accrued interest on that amount. Interest will
          accrue beginning on the first London business day after the day that
          an affiliate of Lehman Brothers Holdings sells the securities or other
          property used to hedge Lehman Brothers Holdings' obligations under the
          notes until maturity. Interest will accrue at a rate equal to LIBOR
          with a term corresponding to the interest accrual period stated in the
          preceding sentence.

o    If similar corporate events occur with respect to the issuer of an equity
     security other than common stock that is included in the basket,
     adjustments similar to the above will be made for that equity security. In
     addition, if any other corporate events occur with respect to the issuer of
     a common stock or other equity security included in the basket, adjustments
     will be made to reflect the economic substance of those events.

The payment of an ordinary cash dividend from current income or retained
earnings will not result in an adjustment to the multiplier or entitle you to
any cash payments.

No adjustments of any multiplier of a common stock will be required unless the
adjustment would require a change of at least 0.1% (.001) in the multiplier then
in effect. The multiplier resulting from any of the adjustments specified above
will be rounded at the calculation agent's discretion.

MARKET DISRUPTION EVENTS

A market disruption event with respect to a common stock or other equity
security included in the basket will occur on any day if the calculation agent
determines in its sole discretion that any of the following events has occurred:

o    A material suspension of or limitation imposed on trading relating to that
     common stock or other equity security, by the relevant exchange for that
     security, 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. Limitations on
     trading during significant market fluctuations imposed pursuant to New York
     Stock Exchange Rule 80B


                                      S-14


     or any applicable rule or regulation enacted or promulgated by the New York
     Stock Exchange, any other exchange, quotation system or market, any other
     self regulatory organization or the SEC of similar scope or as a
     replacement for Rule 80B may be considered material.

o    A material suspension of, or limitation imposed on, trading in futures or
     options contracts relating to that common stock or other equity security 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 that primary exchange or quotation system or
     otherwise.

o    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, that common stock or other equity security on the
     relevant exchange for that security, at any time during the one hour period
     that ends at the close of trading on that day.

o    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 futures or options contracts relating to that
     common stock or other equity security 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 such day.

o    The closure of the relevant exchange for that security or the primary
     exchange or quotation system on which futures or options contracts relating
     to that security are traded prior to its scheduled closing time unless the
     earlier closing time is announced by the exchange or quotation system at
     least one hour prior to the earlier of (1) the actual closing time for the
     regular trading session on the exchange or quotation system and (2) the
     submission deadline for orders to be entered into the exchange or quotation
     system for execution at the close of trading on such day.

A market disruption event with respect to the basket will occur if a market
disruption event occurs with respect to any of the common stocks or other equity
securities included in the basket.

For purposes of determining whether a market disruption event has occurred,
"close of trading" means, 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.

Under certain circumstances, the duties of Lehman Brothers Inc. as the
calculation agent in determining the existence of market disruption events could
conflict with the interests of Lehman Brothers Inc. as an affiliate of the
issuer of the notes.

Events have occurred in the past that would constitute market disruption events.
The existence or non-existence of such circumstances in the past, however, is
not necessarily indicative of the likelihood of those circumstances occurring or
not occurring in the future and Lehman Brothers Holdings cannot predict the
likelihood of a market disruption event in the future.

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical percentage changes in
the ending value of the basket calculated on the valuation date and assuming (a)
the notes have a term of 18 months and (b) the maximum amount payable at stated
maturity per $1,000 note is $1,240:

o    the hypothetical ending value of the basket;

o    the hypothetical total amount payable at stated maturity per $1,000 note;

o    the hypothetical total rate of return; and

o    the hypothetical annualized pre-tax rate of return


                                      S-15




                                                HYPOTHETICAL TOTAL
 HYPOTHETICAL PERCENTAGE                        AMOUNT PAYABLE AT                          HYPOTHETICAL
CHANGE FROM THE STARTING  HYPOTHETICAL ENDING  STATED MATURITY PER  HYPOTHETICAL TOTAL  ANNUALIZED PRE-TAX
   VALUE OF THE BASKET    VALUE OF THE BASKET       $1,000 NOTE       RATE OF RETURN      RATE OF RETURN
------------------------  -------------------  -------------------  ------------------  ------------------

        -100%                  $     0               $     0             -100%               -100.00%
         -75%                  $   250               $   250              -75%                -60.31%
         -50%                  $   500               $   500              -50%                -37.00%
         -30%                  $   700               $   700              -30%                -21.16%
         -20%                  $   800               $   800              -20%                -13.82%
         -10%                  $   900               $   900              -10%                 -6.78%
           0%                  $ 1,000               $ 1,000                0%                  0.00%
           5%                  $ 1,050               $ 1,100               10%                  6.56%
          10%                  $ 1,100               $ 1,200               20%                 12.92%
          15%                  $ 1,150               $ 1,240               24%                 15.42%
          20%                  $ 1,200               $ 1,240               24%                 15.42%
          30%                  $ 1,300               $ 1,240               24%                 15.42%
          50%                  $ 1,500               $ 1,240               24%                 15.42%
          75%                  $ 1,750               $ 1,240               24%                 15.42%
         100%                  $ 2,000               $ 1,240               24%                 15.42%



The above figures are for purposes of illustration only. The actual amount
received by investors and the resulting total and annualized pre-tax rate of
return will depend entirely on the actual closing prices and the amount payable
on the stated maturity date determined by the calculation agent. In particular,
the actual ending value of the basket could be lower or higher than those
reflected in the table.

You should compare the features of the notes to other available investments
before deciding to purchase the notes. Due to the uncertainty concerning the
amount payable on the stated maturity date, the return on investment with
respect to the notes may be higher or lower than the return available on other
securities issued by Lehman Brothers Holdings or by others and available through
Lehman Brothers Inc. You should reach an investment decision only after
carefully considering the suitability of the notes in light of your particular
circumstances.

CALCULATION AGENT

Lehman Brothers Inc., a subsidiary of Lehman Brothers Holdings, will act as
initial calculation agent for the notes. Pursuant to the calculation agency
agreement, Lehman Brothers Holdings may appoint a different calculation agent
from time to time after the date of this prospectus supplement without your
consent and without notifying you.

The calculation agent will determine the amount you receive on the stated
maturity date of the notes.

In addition, the calculation agent will determine, among other things:

o    the price used to determine the initial multiplier for each common stock in
     the basket and the initial multiplier for each common stock in the basket;

o    the ending value of the basket on the valuation date;

o    whether adjustments to the basket, including to the multipliers or the
     securities comprising the basket, are required under various circumstances;
     see "--Adjustments to multipliers and to securities included in the
     basket"; and

o    whether a market disruption event has occurred; see "--Market disruption
     events."

All determinations made by the calculation agent will be at the sole discretion
of the calculation agent and, in the absence of manifest error, will be
conclusive for all purposes and binding on Lehman Brothers Holdings and you. The
calculation agent will have no liability for its determinations, except as
provided in the calculation agency agreement.

EVENTS OF DEFAULT AND ACCELERATION

If an event of default with respect to any notes has occurred and is continuing,
the amount payable to you upon any acceleration permitted under the senior
indenture will be equal to, per $1,000 note, the amount that would have been
payable at maturity, calculated as though the date of acceleration was the
stated maturity date and the date three business days before that date was the
valuation date. If a bankruptcy proceeding is commenced in respect of Lehman
Brothers Holdings, the claims of the holder of a note may be limited, under
Section 502(b)(2) of Title 11 of the United States Code, as though the
commencement of the proceeding was on the stated maturity date and the date
three business days before that date was the valuation date. See "Description of
Debt Securities--Defaults" beginning on page 13 of the accompanying prospectus.


                                      S-16


                                   THE BASKET

THE THREE COMMON STOCKS COMPRISING THE BASKET

The basket will represent a weighted portfolio of the three common stocks of
pharmaceutical companies in the basket. The value of the basket will increase or
decrease by the performance of the common stocks or other equity securities that
make up the basket.

The three common stocks of these pharmaceutical companies in the basket, the
exchange on which each trades, their stock symbol, the price used to determine
the initial multiplier for each common stock, the initial multiplier for each
common stock and the initial percentage of the basket represented by each stock
are as follows:



                                                    PRICE USED TO
  ISSUER OF THE COMMON                            DETERMINE INITIAL  INITIAL MULTIPLIER  INITIAL PERCENTAGE
         STOCK           EXCHANGE   STOCK SYMBOL     MULTIPLIER      (NUMBER OF SHARES)     OF THE BASKET
----------------------   --------   ------------  -----------------  ------------------  ------------------

Eli Lilly & Co........     NYSE          LLY        $                                         33.33%
Merck & Co., Inc......     NYSE          MRK                                                  33.33%
Pfizer Inc............     NYSE          PFE                                                  33.33%

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


Information in the table above was obtained from Bloomberg L.P.

Lehman Brothers Holdings has obtained the following information from the
respective companies' reports filed with the SEC:

Eli Lilly and Company. Eli Lilly and Company discovers, develops, manufactures
and sells pharmaceutical products. The company directs research efforts
primarily toward the search for products to prevent and treat human diseases.
The company also conducts research to find products to treat diseases in animals
and to increase the efficiency of animal food production. The company's products
include neuroscience products, endocrine products, oncology products, animal
health products, cardiovascular agents, anti-infectives and other pharmaceutical
products.

Merck & Co., Inc. Merck & Co., Inc. is a global research-driven pharmaceutical
products company that discovers, develops, manufactures and markets a broad
range of innovative products to improve human and animal health, directly and
through its joint ventures. The company sells its products primarily to drug
wholesalers and retailers, hospitals, clinics, government agencies and managed
health care providers such as health maintenance organizations and other
institutions. The company's products include therapeutic and preventive agents,
generally sold by prescription, for the treatment of human disorders.

Pfizer Inc. Pfizer Inc. is a research-based, global pharmaceutical company. The
company discovers, develops, manufactures and markets prescription medicines for
humans and animals as well as many consumer healthcare products. The company
operates in three business segments: Pharmaceutical, Consumer Healthcare and
Animal Health. The Pharmaceutical segment includes treatments for cardiovascular
and metabolic diseases, central nervous system disorders, arthritis and pain,
infectious and respiratory diseases, urogenital conditions, cancer, eye disease,
endocrine disorders and allergies. The Consumer Products segment includes
treatments for oral care, upper respiratory health, tobacco dependence,
gastrointestinal health, skin care, eye care and hair growth. The Animal Health
segment discovers, develops and sells products for the prevention and treatment
of diseases in livestock and companion animals, such as parasiticides,
anti-inflammatories, vaccines, antibiotics and related medicines.

Each company's common stock is registered under the Securities Exchange Act of
1934. Companies with securities registered under that Act are required to file
periodically certain financial and other information specified by the SEC.
Information provided to or filed with the SEC can be inspected and copied at the
public reference facilities maintained by the SEC or through the SEC's website
described under "Available Information" on page 6 of the accompanying
prospectus. In addition, information regarding the companies may be obtained
from other sources including, but not limited to, press releases, newspaper
articles and other publicly disseminated documents. In connection with this
offering of notes, neither Lehman Brothers Holdings nor any of its affiliates
has participated in the preparation of such documents or made any due diligence
inquiry with respect to the companies. Neither Lehman Brothers Holdings nor any
of its affiliates makes any representation that such


                                      S-17


publicly available documents are or any other publicly available information
regarding the companies is accurate or complete. Furthermore, Lehman Brothers
Holdings and its affiliates cannot give any assurance that all events occurring
prior to the date hereof (including events that would affect the accuracy or
completeness of the publicly available documents) that would affect the trading
price of the companies have been publicly disclosed. Subsequent disclosure of
any such events or the disclosure of or failure to disclose material future
events concerning the companies could affect the value received at maturity with
respect to the notes and therefore the trading prices of the notes. Neither
Lehman Brothers Holdings nor any of its affiliates makes any representation to
you as to the performance of the companies.

Lehman Brothers Holdings and/or its affiliates may presently or from time to
time engage in business with the companies, including extending loans to,
entering into loans with, or making equity investments in, the companies or
providing advisory services to the companies, including merger and acquisition
advisory services. In the course of such business, Lehman Brothers Holdings
and/or its affiliates may acquire non-public information with respect to the
companies and neither Lehman Brothers Holdings nor any of its affiliates
undertakes to disclose any such information to you. In addition, one or more of
Lehman Brothers Holdings' affiliates may publish research reports with respect
to the companies, and these reports may or may not recommend that investors buy
or hold the companies' stock. The statements in the preceding two sentences are
not intended to affect the rights of investors in the notes under the securities
laws. As an investor in your note, you should undertake an independent
investigation of the companies as in your judgment is appropriate to make an
informed decision with respect to an investment in the companies.

HISTORICAL INFORMATION ABOUT THE COMMON STOCKS INCLUDED IN THE BASKET

The following tables present the high and low closing prices for each of the
common stocks included in the basket, as reported on the primary exchange on
which the common stock trades, during each fiscal quarter in 2002, 2003, 2004
and 2005 (through January 4, 2005) and the closing price at the end of each
fiscal quarter in 2002, 2003, 2004 and 2005 (through January 4, 2005). All
values in the table are presented in U.S. dollars. These prices are not
indications of future performance. We cannot assure you that the prices of these
common stocks will increase. Prices below have been adjusted to reflect any
stock splits or reverse stock splits.

All information in the tables that follow was obtained from Bloomberg L.P.,
without independent verification.


                              ELI LILLY AND COMPANY

                                                                   CLOSING PRICE
                                            HIGH PRICE  LOW PRICE  AT PERIOD END
                                            ----------  ---------  -------------
2002
  First Quarter ...........................  $80.69      $72.86       $76.20
  Second Quarter ..........................   78.74       56.40        56.40
  Third Quarter ...........................   62.15       48.15        55.34
  Fourth Quarter ..........................   69.00       55.42        63.50
2003
  First Quarter ...........................  $67.98      $53.70       $57.15
  Second Quarter ..........................   69.83       57.73        68.97
  Third Quarter ...........................   70.33       57.99        59.40
  Fourth Quarter ..........................   73.89       60.78        70.33
2004
  First Quarter ...........................  $74.70      $65.00       $66.90
  Second Quarter ..........................   76.26       67.60        69.91
  Third Quarter ...........................   69.37       60.05        60.05
  Fourth Quarter...........................   62.01       50.44        56.75

2005
  First Quarter (through January 4, 2005)..  $56.25      $55.50       $55.50


                                      S-18


                                MERCK & CO., INC.

                                                                   CLOSING PRICE
                                            HIGH PRICE  LOW PRICE  AT PERIOD END
                                            ----------  ---------  -------------
2002
  First Quarter ...........................  $60.92      $53.91        $54.50
  Second Quarter ..........................   55.08       46.42         47.93
  Third Quarter ...........................   50.92       36.96         43.26
  Fourth Quarter ..........................   57.08       41.77         53.58
2003
  First Quarter ...........................  $56.67      $48.05        $51.85
  Second Quarter ..........................   59.85       51.83         57.31
  Third Quarter ...........................   58.58       49.76         50.62
  Fourth Quarter ..........................   51.16       40.60         46.20
2004
  First Quarter ...........................  $49.08      $43.01        $44.19
  Second Quarter ..........................   48.37       44.58         47.50
  Third Quarter ...........................   47.05       33.00         33.00
  Fourth Quarter...........................   34.23       26.00         32.14

2005
  First Quarter (through January 4, 2005)..  $31.26      $31.13        $31.13



                                   PFIZER INC.

                                                                   CLOSING PRICE
                                            HIGH PRICE  LOW PRICE  AT PERIOD END
                                            ----------  ---------  -------------
2002
  First Quarter ...........................  $42.15      $39.40        $39.74
  Second Quarter ..........................   40.11       33.43         35.00
  Third Quarter ...........................   34.92       25.92         29.02
  Fourth Quarter ..........................   33.87       28.30         30.57
2003
  First Quarter ...........................  $32.00      $28.56        $31.16
  Second Quarter ..........................   36.18       30.37         34.15
  Third Quarter ...........................   34.65       29.55         30.38
  Fourth Quarter ..........................   35.33       30.56         35.33
2004
  First Quarter ...........................  $38.85      $33.70        $35.05
  Second Quarter ..........................   37.62       33.82         34.28
  Third Quarter ...........................   34.16       29.62         30.60
  Fourth Quarter...........................   31.30       24.29         26.89

2005
  First Quarter (through January 4, 2005)..  $26.45      $26.45        $26.45


                                      S-19


                  UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material United States federal income tax
consequences of the purchase, ownership, and disposition of notes as of the date
of this prospectus supplement. Except where noted, this summary deals only with
a note held as a capital asset by a United States holder who purchases the note
at its initial offering price at original issue and does not deal with special
situations. For example, except where noted, this summary does not address:

o    tax consequences to holders who may be subject to special tax treatment,
     such as dealers in securities or currencies, traders in securities that
     elect to use the mark-to-market method of accounting for their securities
     financial institutions, regulated investment companies, real estate
     investment trusts, investors in pass-through entities, tax-exempt entities
     or insurance companies;

o    tax consequences to persons holding notes as part of a hedging, integrated,
     constructive sale or conversion transaction or a straddle;

o    tax consequences to holders of notes whose "functional currency" is not the
     U.S. dollar;

o    alternative minimum tax consequences, if any; or

o    any state, local or foreign tax consequences.

If a partnership holds our notes, the tax treatment of a partner will generally
depend upon the status of the partner and the activities of the partnership. If
you are a partner of a partnership holding our notes, you should consult your
tax advisors.

The discussion below is based upon the provisions of the Internal Revenue Code
of 1986, as amended (the "Code"), and regulations, rulings and judicial
decisions as of the date of this prospectus supplement. Those authorities may be
changed, perhaps retroactively, so as to result in United States federal income
tax consequences different from those discussed below.

The United States federal income tax treatment of securities such as the notes
is not clear. If you are considering the purchase of notes, you should consult
your own tax advisors concerning the federal income tax consequences in light of
your particular situation and any consequences arising under the laws of any
other taxing jurisdiction.

UNITED STATES HOLDERS

The following discussion is a summary of the material United States federal
income tax consequences that will apply to you if you are a United States holder
of notes.

For purposes of this discussion, a United States holder is a beneficial owner of
a note that is for United States federal income tax purposes:

o    an individual citizen or resident of the United States;

o    a corporation (or any other entity treated as a corporation for United
     States federal income tax purposes) created or organized in or under the
     laws of the United States, any state thereof, or the District of Columbia;

o    an estate the income of which is subject to United States federal income
     taxation regardless of its source; or

o    any trust if it (1) is subject to the primary supervision of a court within
     the United States and one or more United States persons has the authority
     to control all substantial decisions of the trust or (2) has a valid
     election in effect under applicable Treasury Regulations to be treated as a
     United States person.

A non-United States holder is a beneficial owner of notes that is not a United
States holder.

GENERAL

No statutory, judicial or administrative authority directly addresses the
characterization of the notes or instruments similar to the notes for United
States federal income tax purposes. As a result, significant aspects of the
United States federal income tax consequences of an investment in the notes are
not certain. No ruling is being requested from the Internal Revenue Service with
respect to the notes and no assurance can be given that the Internal Revenue
Service will agree with the treatment described herein. Lehman Brothers Holdings
intends to treat, and by purchasing a note, for all purposes you agree to treat,
a note as a financial contract rather than as a debt instrument. Except where
noted, the remainder of this discussion assumes that this treatment is correct,
although no assurance is given in this regard.


                                      S-20



SALE, EXCHANGE OR OTHER DISPOSITION, OR CASH SETTLEMENT UPON MATURITY

Upon a sale, exchange or other disposition, or payment upon cash settlement at
maturity of a note, you will recognize gain or loss equal to the difference
between the amount of cash received and your basis in the note. The gain or loss
will be treated as capital gain or loss. If you are an individual and have held
the note for more than one year, such capital gain will be subject to reduced
rates of taxation. The deductibility of capital losses is subject to
limitations. Your basis in the note will generally equal your cost of such note.

ALTERNATIVE CHARACTERIZATIONS

There can be no assurance that the Internal Revenue Service will agree with the
foregoing treatment of the notes, and it is possible that the Internal Revenue
Service could assert another treatment and a court could agree with such
assertion. For instance, it is possible that the Internal Revenue Service could
seek to apply the regulations governing contingent payment debt obligations, in
particular because the notes in form are debt instruments. Those regulations
would require you to accrue interest income at a market rate, notwithstanding
that no cash interest payments are actually made, and generally would
characterize gain or, to some extent, loss as ordinary rather than capital. The
Internal Revenue Service could also assert other characterizations that could
affect the timing, amount and character of income or deductions.

NON-UNITED STATES HOLDERS

The following discussion is a summary of the material United States federal tax
consequences that will apply to you if you are a non-United States holder of
notes.

Special rules may apply to you if you are a controlled foreign corporation,
passive foreign investment company, a corporation that accumulates earnings to
avoid United States federal income tax, or an individual who is a United States
expatriate and therefore subject to special treatment under the Code. You should
consult your own tax advisors to determine the United States federal, state,
local and other tax consequences that may be relevant to you.

UNITED STATES FEDERAL WITHHOLDING TAX

Based on the treatment of the notes described above, you should not be subject
to United States federal withholding tax for payments on any sale, exchange or
other disposition or payment upon maturity of the notes or on payments received
at maturity in respect of the notes, provided that the index stock issuers are
not United States real property holding corporations as defined in Section
897(c)(2) of the Code.

As discussed above, alternative characterizations of a note for United States
federal income tax purposes are possible, which could result in the imposition
of United States federal withholding tax on the sale, exchange or other
disposition of a note. You should consult your own tax advisor regarding the
United States federal income tax consequences of an investment in the notes.

UNITED STATES FEDERAL INCOME TAX

Based on the treatment of the notes described above, any gain or income realized
upon the sale, exchange or other disposition of a note generally will not be
subject to United States federal income tax unless (i) the gain or income is
effectively connected with a trade or business in the United States of a
non-United States holder, (ii) in the case of a non-United States holder who is
an individual, such individual is present in the United States for 183 days or
more in the taxable year of the sale, exchange or other disposition, and certain
other conditions are met or (iii) the index stock issuers are United States real
property holding corporations.

UNITED STATES FEDERAL ESTATE TAX

If you are an individual non-United States holder of notes, notes held by you at
the time of death may be included in your gross estate for United States federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.

INFORMATION REPORTING AND BACKUP WITHHOLDING

If you are a United States holder of notes, information reporting requirements
will generally apply to all payments received by you or upon the sale, exchange
or other disposition of a note, unless you are an exempt recipient such as a
corporation. Backup withholding tax will apply to those payments if you fail to
provide a taxpayer identification number, a certification of exempt status, or
if you fail to comply with applicable certification requirements.

If you are a non-United States holder of notes, Lehman Brothers Holdings must
report annually to the Internal Revenue Service and to you the amount of all
payments paid to you and the amount of tax, if any, withheld with respect to
those payments. Copies of the information returns may also be made available to
the tax authorities in the country in which you reside under the provisions of
an applicable income tax treaty. In


                                      S-21


general, you will not be subject to backup withholding with respect to payments
Lehman Brothers Holdings makes to you provided that Lehman Brothers Holdings
does not have actual knowledge or reason to know that you are a United States
holder and you provide your name and address on an IRS Form W-8BEN and certify,
under penalties of perjury, that you are not a United States holder. Alternative
documentation may be applicable in some situations. Special certification rules
apply to holders that are pass-through entities. In addition, you will be
subject to information reporting and, depending on the circumstances, backup
withholding regarding the proceeds of the sale of a note made within the United
States or conducted through United States-related financial intermediaries,
unless the payor receives the statement described above and does not have actual
knowledge or reason to know that you are a United States holder, or you
otherwise establish an exemption.

Any amounts withheld under the backup withholding rules will be allowed as a
refund or credit against your United States federal income tax liability
provided the required information is furnished to the Internal Revenue Service.


                               BOOK-ENTRY ISSUANCE

The notes will be represented by one or more global securities that will be
deposited with and registered in the name of The Depository Trust Company, or
DTC, or its nominee. This means that Lehman Brothers Holdings will not issue
certificates to you for the notes. Each global security will be issued to DTC
which will keep a computerized record of its participants (for example, a
broker) whose clients have purchased the notes. Each participant will then keep
a record of its clients. Unless it is exchanged in whole or in part for a
certificated security, a global security may not be transferred. However, DTC,
its nominees and their successors may transfer a global security as a whole to
one another.

Beneficial interests in a global security will be shown on, and transfers of the
global security will be made only through, records maintained by DTC and its
participants. DTC holds securities that its direct participants deposit with
DTC. DTC also records the settlements among direct participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for direct participants' accounts. This eliminates the need
to exchange certificates. Direct participants include securities brokers and
dealers, banks, trust companies, clearing corporations and certain other
organizations. DTC's book-entry system is also used by other organizations such
as securities brokers and dealers, banks and trust companies that work through a
direct participant.

When you purchase notes through the DTC system, the purchases must be made by or
through a direct participant, who will receive credit for the notes on DTC's
records. Since you actually own the notes, you are the beneficial owner. Your
ownership interest will only be recorded on the direct or indirect participants'
records. DTC has no knowledge of your individual ownership of the notes. DTC's
records only show the identity of the direct participants and the amount of the
notes held by or through them. You will not receive a written confirmation of
your purchase or sale or any periodic account statement directly from DTC. You
should instead receive these from your direct or indirect participant. As a
result, the direct or indirect participants are responsible for keeping accurate
account of the holdings of their customers like you.

The trustee for the notes will wire payments on the notes to DTC's nominee.
Lehman Brothers Holdings and the trustee will treat DTC's nominee as the owner
of each global security for all purposes. Accordingly, Lehman Brothers Holdings,
the trustee and any paying agent will have no direct responsibility or liability
to pay amounts due on the global security to you or any other beneficial owners
in the global security. It is DTC's current practice, upon receipt of any
payment, to proportionally credit direct participants' accounts on the payment
date based on their holdings. In addition, it is DTC's current practice to pass
through any consenting or voting rights to the participants by using an omnibus
proxy. Those participants in turn will make payments to and solicit votes from
you, the ultimate owner of notes based on customary practices. Payments to you
will be the responsibility of the participants and not of DTC, the trustee or
Lehman Brothers Holdings.


                                      S-22


Notes represented by a global security will be exchangeable for certificated
securities with the same terms in authorized denominations only if:

o    DTC is unwilling or unable to continue as depositary or ceases to be a
     clearing agency registered under applicable law and a successor is not
     appointed by Lehman Brothers Holdings within 90 days; or

o    Lehman Brothers Holdings decides to discontinue use of the book-entry
     system.

If the global security is exchanged for certificated securities, the trustee
will keep the registration books for the notes at its corporate office and
follow customary practices and procedures.

DTC has provided Lehman Brothers Holdings with the following information: DTC is
a limited-purpose trust company organized under the New York Banking Law, a
"banking organization" within the meaning of the New York Banking Law, a member
of the United States Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the provisions of Section 17A of the Securities Exchange Act of
1934. DTC is owned by a number of its direct participants and by The New York
Stock Exchange, the American Stock Exchange and the National Association of
Securities Dealers, Inc. The rules that apply to DTC and its participants are on
file with the Securities and Exchange Commission.

CLEARSTREAM AND EUROCLEAR

Links have been established among DTC, Clearstream Banking and Euroclear (two
European book-entry depositories similar to DTC), to facilitate the initial
issuance of the notes and cross-market transfers of the notes associated with
secondary market trading.

Although DTC, Clearstream and Euroclear have agreed to the procedures provided
below in order to facilitate transfers, they are under no obligation to perform
those procedures and those procedures may be modified or discontinued at any
time.

Clearstream and Euroclear will record the ownership interests of their
participants in much the same way as DTC, and DTC will record the aggregate
ownership of each U.S. agent of Clearstream and Euroclear, as participants in
DTC.

When notes are to be transferred from the account of a DTC participant to the
account of a Clearstream participant or a Euroclear participant, the purchaser
must send instructions to Clearstream or Euroclear through a participant at
least one business day prior to settlement. Clearstream or Euroclear, as the
case may be, will instruct its U.S. agent to receive the notes against payment.
After settlement, Clearstream or Euroclear will credit its participant's
account. Credit for the notes will appear on the next day, European time.

Because the settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending notes to the relevant
U.S. agent acting for the benefit of Clearstream or Euroclear participants. The
sale proceeds will be available to the DTC seller on the settlement date. Thus,
to the DTC participant, a cross-market transaction will settle no differently
than a trade between two DTC participants.

When a Clearstream or Euroclear participant wishes to transfer notes to a DTC
participant, the seller must send instructions to Clearstream or Euroclear
through a participant at least one business day prior to settlement. In these
cases, Clearstream or Euroclear will instruct its U.S. agent to transfer notes
against payment. The payment will then be reflected in the account of the
Clearstream or Euroclear participant the following day, with the proceeds
back-valued to the value date; which day would be the preceding day, when
settlement occurs in New York. If settlement is not completed on the intended
value date (i.e., the trade fails), proceeds credited to the Clearstream or
Euroclear participant's account would instead be valued as of the actual
settlement date.


                                      S-23


                                  UNDERWRITING

Lehman Brothers Holdings has agreed to sell to Lehman Brothers Inc., the
underwriter, all of the notes.

The underwriter has advised Lehman Brothers Holdings that it proposes to
initially offer the notes to the public at the public offering price indicated
on the cover page of this prospectus supplement; it may also offer notes to
certain dealers at the same price less a concession not in excess of     % of
the principal amount of the notes. After the initial public offering of the
notes is completed, the public offering price and concessions may be changed.

In connection with the offering, the rules of the Securities and Exchange
Commission permit the underwriter to engage in various transactions that
stabilize the price of the notes. These transactions may consist of bids or
purchases for the purpose of pegging, fixing or maintaining the price of the
notes. If the underwriter creates a short position in the notes in connection
with the offering (that is, if it sells a larger number of the notes than is
indicated on the cover page of this prospectus supplement), the underwriter may
reduce that short position by purchasing notes in the open market.

In general, purchases of a security for the purpose of stabilization or to
reduce a syndicate short position could cause the price of the security to be
higher than it might otherwise be in the absence of those purchases. Neither
Lehman Brothers Holdings nor the underwriter makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the notes. In addition, neither Lehman
Brothers Holdings nor the underwriter makes any representation that the
underwriter will in fact engage in transactions described in this paragraph, or
that those transactions, once begun, will not be discontinued without notice.

Lehman Brothers Holdings has granted to the underwriter an option to purchase,
at any time within 13 days of the original issuance of the notes, up to
$3,000,000 additional aggregate principal amount of notes solely to cover
over-allotments. To the extent that the option is exercised, the underwriter
will be committed, subject to certain conditions, to purchase the additional
notes. If this option is exercised in full, the total public offering price,
underwriting discount and proceeds to Lehman Brothers Holdings would be $      ,
$       and $       , respectively.


The underwriter may not confirm sales to any account over which it exercises
discretionary authority without the prior written approval of the customer.

Lehman Brothers Holdings will pay certain expenses, expected to be approximately
$         , associated with the offer and sale of the notes.

Lehman Brothers Holdings has agreed to indemnify the underwriter against some
liabilities, including liabilities under the Securities Act of 1933.

The underwriting arrangements for this offering comply with the requirements of
Rule 2720 of the National Association of Securities Dealers, Inc. regarding a
National Association of Securities Dealers, Inc. member firm underwriting
securities of its affiliate.

A prospectus supplement and the accompanying prospectus in electronic format may
be made available on the Internet sites or through other online services
maintained by the underwriter and/or selling group members participating in this
offering, or by their affiliates. In those cases, prospective investors may view
offering terms online and, depending upon the particular underwriter or selling
group member, prospective investors may be allowed to place orders online. The
underwriter may agree with Lehman Brothers Holdings to allocate a specific
number of shares for sale to online brokerage account holders. Any such
allocation for online distributions will be made by the underwriter on the same
basis as other allocations.

Other than the prospectus supplement and the accompanying prospectus in
electronic format, the information on the underwriter's or any selling group
member's website and any information contained in any other website maintained
by the underwriter or selling group member is not part of the prospectus
supplement, the accompanying prospectus or the registration statement of which
this prospectus supplement and the accompanying prospectus form a part, has not
been approved and/or endorsed by Lehman Brothers Holdings or the underwriter or
any selling group member in its capacity as underwriter or selling group member
and should not be relied upon by investors.


                                      S-24


                                     EXPERTS

The consolidated financial statements and financial statement schedule of Lehman
Brothers Holdings as of November 30, 2003 and 2002, and for each of the years in
the three-year period ended November 30, 2003, have been audited by Ernst &
Young LLP, independent certified public accountants, as set forth in their
report on the consolidated financial statements. The consolidated financial
statements and accountant's report are incorporated by reference in Lehman
Brothers Holdings' annual report on Form 10-K for the year ended November 30,
2003, and incorporated by reference in this prospectus supplement. The
consolidated financial statements of Lehman Brothers Holdings referred to above
are incorporated by reference in this prospectus supplement in reliance upon the
report given on the authority of Ernst & Young LLP as experts in accounting and
auditing.



                                      S-25



                      [THIS PAGE INTENTIONALLY LEFT BLANK.]



PROSPECTUS



                                 $1,165,000,000


                          LEHMAN BROTHERS HOLDINGS INC.


MAY OFFER--


                                 DEBT SECURITIES
                                    WARRANTS
                               PURCHASE CONTRACTS
                                      UNITS


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


     The Securities may be offered in one or more series, in amounts, at prices
and on terms to be determined at the time of the offering.




     Lehman Brothers Holdings will provide the specific terms of these
securities in supplements to this prospectus. You should read this prospectus
and the accompanying prospectus supplement carefully before you invest.




     The securities offered pursuant to this prospectus will have an initial
aggregate offering price of up to $1,165,000,000 or the equivalent thereof in
one or more foreign currencies, foreign currency units or composite currencies,
subject to reduction as a result of the sale under certain circumstances of
other securities.




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




     Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus or any accompanying prospectus supplement is truthful or
complete. Any representation to the contrary is a criminal offense.




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




June 21, 2001




                               PROSPECTUS SUMMARY

     This summary provides a brief overview of the key aspects of Lehman
Brothers Holdings and all material terms of the offered securities that are
known as of the date of this prospectus. For a more complete understanding of
the terms of a particular issuance of offered securities, before making your
investment decision, you should carefully read:

     o   this prospectus, which explains the general terms of the securities
         that Lehman Brothers Holdings may offer;

     o   the accompanying prospectus supplement for such issuance, which
         explains the specific terms of the securities being offered and which
         may update or change information in this prospectus; and

     o   the documents referred to in "Where You Can Find More Information" on
         page 6 for information about Lehman Brothers Holdings, including its
         financial statements.


                         LEHMAN BROTHERS HOLDINGS INC.

     Lehman Brothers Holdings is one of the leading global investment banks,
serving institutional, corporate, government and high-net-worth individual
clients and customers. The company's worldwide headquarters in New York and
regional headquarters in London and Tokyo are complemented by offices in
additional locations in the United States, Europe, the Middle East, Latin
America and the Asia Pacific region.

     The company's business includes capital raising for clients through
securities underwriting and direct placements, corporate finance and strategic
advisory services, private equity investments, securities sales and trading,
research, and the trading of foreign exchange, derivative products and certain
commodities. The company acts as a market-maker in all major equity and fixed
income products in both the domestic and international markets. The company is
a member of all principal securities and commodities exchanges in the United
States, as well as the National Association of Securities Dealers, Inc., and
holds memberships or associate memberships on several principal international
securities and commodities exchanges, including the London, Tokyo, Hong Kong,
Frankfurt, Paris and Milan stock exchanges.

     Lehman Brothers Holdings' principal executive office is at Three World
Financial Center, New York, New York 10285, and its telephone number is (212)
526-7000.


                THE SECURITIES LEHMAN BROTHERS HOLDINGS MAY OFFER

     Lehman Brothers Holdings may use this prospectus to offer up to
$1,165,000,000 of:

     o   debt securities,

     o   warrants,

     o   purchase contracts, and

     o   units, comprised of two or more debt securities, warrants and purchase
         contracts, in any combination.

     A prospectus supplement will describe the specific types, amounts, prices
and detailed terms of any of these offered securities and may describe certain
risks associated with an investment in the securities. Terms used in the
prospectus supplement will have the meanings described in this prospectus,
unless otherwise specified.

     The debt securities, warrants, purchase contracts and units are unsecured
obligations of Lehman Brothers Holdings. Since Lehman Brothers Holdings is a
holding company, its cash flow and consequent ability to satisfy its
obligations under the offered securities are dependent upon the


                                       2




earnings of its subsidiaries and the distribution of those earnings or loans or
other payments by those subsidiaries to Lehman Brothers Holdings. Lehman
Brothers Holdings' subsidiaries will have no obligation to pay any amount in
respect of offered securities or to make any funds available therefor.
Dividends, loans and other payments by Lehman Brothers Inc. and certain other
subsidiaries are restricted by net capital and other rules of various
regulatory bodies. Additionally, the ability of Lehman Brothers Holdings to
participate as an equity holder in any distribution of assets of any subsidiary
is subordinate to the claims of creditors of the subsidiary, except to the
extent that any claims Lehman Brothers Holdings may have as a creditor of the
subsidiary are judicially recognized.


DEBT SECURITIES

     Debt securities are unsecured general obligations of Lehman Brothers
Holdings in the form of senior or subordinated debt. Senior debt includes
Lehman Brothers Holdings' notes, debt and guarantees and any other indebtedness
for money borrowed that is not subordinated. Subordinated debt, so designated
at the time it is issued, will not be entitled to interest, principal or other
payments if payments on the senior debt are not made. The senior and
subordinated debt will be issued under separate indentures. Neither indenture
limits the amount of debt that Lehman Brothers Holdings may issue.

     Debt securities may bear interest at a fixed or a floating rate and may
provide that the amount payable at maturity, and/or the amount of interest
payable on an interest payment date, will be determined by reference to:

     o   securities of one or more issuers, including Lehman Brothers Holdings,

     o   one or more currencies,

     o   one or more commodities,

     o   any other financial, economic or other measure or instrument, including
         the occurrence or non-occurrence of any event or circumstance, and/or

     o   one or more indices or baskets of the items described above.

     For any particular debt securities Lehman Brothers Holdings offers, the
prospectus supplement will describe the specific designation, the aggregate
principal or face amount and the purchase price; the ranking, whether senior or
subordinated; the stated maturity; the redemption terms, if any; the rate or
manner of calculating the rate and the payment dates for interest, if any; the
amount or manner of calculating the amount payable at maturity and whether that
amount may be paid by delivering cash, securities or other property; and any
other specific terms.


WARRANTS

     Lehman Brothers Holdings may offer two types of warrants:

     o   warrants to purchase Lehman Brothers Holdings' debt securities, and

     o   warrants to purchase or sell, or whose cash value is determined by
         reference to the performance, level or value of, one or more of the
         following:

         o   securities of one or more issuers, including Lehman Brothers
             Holdings,

         o   one or more currencies,

         o   one or more commodities,

         o   any other financial, economic or other measure or instrument,
             including the occurrence or non-occurrence of any event or
             circumstance, and

         o   one or more indices or baskets of the items described above.


                                       3



     For any particular warrants Lehman Brothers Holdings offers, the
prospectus supplement will describe the underlying property; the expiration
date; the exercise price or the manner of determining the exercise price; the
amount and kind, or the manner of determining the amount and kind, of property
or cash to be delivered by you or us upon exercise; and any other specific
terms. Lehman Brothers Holdings will issue the warrants under warrant
agreements between Lehman Brothers Holdings and one or more warrant agents and
may issue warrants under a unit agreement described below.


PURCHASE CONTRACTS

     Lehman Brothers Holdings may offer purchase contracts for the purchase or
sale of, or whose cash value is determined by reference to the performance,
level or value of, one or more of the following:

     o   securities of one or more issuers, including Lehman Brothers Holdings,

     o   one or more currencies,

     o   one or more commodities,

     o   any other financial, economic or other measure or instrument, including
         the occurrence or non-occurrence of any event or circumstance, and

     o   one or more indices or baskets of the items described above.

     For any particular purchase contracts Lehman Brothers Holdings offers, the
prospectus supplement will describe the underlying property; the settlement
date; the purchase price or manner of determining the purchase price and
whether it must be paid when the purchase contract is issued or at a later
date; the amount and kind, or the manner of determining the amount and kind, of
property or cash to be delivered at settlement; whether the holder will pledge
property to secure the performance of any obligations the holder may have under
the purchase contract; and any other specific terms. Lehman Brothers Holdings
will issue prepaid purchase contracts under an indenture for debt securities
described above and may issue purchase contracts under a unit agreement
described below.


UNITS

     Lehman Brothers Holdings may offer units, comprised of two or more debt
securities, warrants and purchase contracts, in any combination. For any
particular units Lehman Brothers Holdings offers, the prospectus supplement
will describe the particular securities comprising each unit; the terms on
which those securities will be separable, if any; whether the holder will
pledge property to secure the performance of any obligations the holder may
have under the unit; and any other specific terms of the units. Lehman Brothers
Holdings may issue the units under unit agreements between Lehman Brothers
Holdings and one or more unit agents.


FORM OF SECURITIES

     Lehman Brothers Holdings will generally issue the securities in book-entry
form through one or more depositaries, such as The Depository Trust Company,
Euroclear or Clearstream, Luxembourg, named in the applicable prospectus
supplement. Each sale of a security in book-entry form will settle in
immediately available funds through the depositary, unless otherwise stated.
Lehman Brothers Holdings will issue the securities only in registered form,
without coupons.


PAYMENT CURRENCIES

     Amounts payable in respect of the securities, including the purchase
price, will be payable in U.S. dollars, unless the prospectus supplement states
otherwise.


                                       4




LISTING

     If any securities are to be listed or quoted on a securities exchange or
quotation system, the applicable prospectus supplement will so state.


                                USE OF PROCEEDS

     Lehman Brothers Holdings will use the net proceeds it receives from any
offering of these securities for general corporate purposes, primarily to fund
its operating units and subsidiaries. Lehman Brothers Holdings may use some of
the proceeds to refinance or extend the maturity of existing debt obligations.
Lehman Brothers Holdings may use a portion of the proceeds from the sale of
securities to hedge its exposure to payments that it may have to make on such
securities as described below under "Use of Proceeds and Hedging".


                             PLAN OF DISTRIBUTION

     Lehman Brothers Holdings may sell the offered securities in any of the
following ways:

     o   to or through underwriters or dealers;

     o   by itself directly;

     o   through agents; or

     o   through a combination of any of these methods of sale.

     The prospectus supplement will explain the ways Lehman Brothers Holdings
will sell specific securities, including the names of any underwriters and
details of the pricing of the securities, as well as the commissions,
concessions or discounts Lehman Brothers Holdings is granting the underwriters,
dealers or agents.

     If Lehman Brothers Holdings uses underwriters in any sale, the
underwriters will buy the securities for their own account and may resell the
securities from time to time in one or more transactions, at a fixed public
offering price or at varying prices determined at the time of sale. In
connection with an offering, underwriters and selling group members and their
affiliates may engage in transactions to stabilize, maintain or otherwise
affect the market price of the securities, in accordance with applicable law.

     Lehman Brothers Holdings expects that the underwriters for any offering
will include one or more of its broker-dealer affiliates. It also expects that
one or more of these affiliates may offer and sell previously issued offered
securities as part of their business, and may act as principals or agents in
such transactions. Lehman Brothers Holdings or such affiliates may use this
prospectus and the related prospectus supplements and pricing supplements in
connection with these activities.


                                       5




                       WHERE YOU CAN FIND MORE INFORMATION

     As required by the Securities Act of 1933, Lehman Brothers Holdings filed
a registration statement (No. 333-61878) relating to the securities offered by
this prospectus with the Securities and Exchange Commission. This prospectus is
a part of that registration statement, which includes additional information.

     Lehman Brothers Holdings files annual, quarterly and current reports,
proxy statements and other information with the SEC. You may read and copy any
document Lehman Brothers Holdings files at the SEC's public reference rooms in
Washington, D.C., New York, New York and Chicago, Illinois. You can also
request copies of the documents, upon payment of a duplicating fee, by writing
the Public Reference Section of the SEC. Please call the SEC at 1-800-SEC-0330
for further information on the public reference rooms. These SEC filings are
also available to the public from the SEC's web site at http://www.sec.gov.

     The SEC allows Lehman Brothers Holdings to "incorporate by reference" the
information it files with the SEC, which means that it can disclose important
information to you by referring you to those documents. The information
incorporated by reference is considered to be part of this prospectus.
Information that Lehman Brothers Holdings files later with the SEC will
automatically update information in this prospectus. In all cases, you should
rely on the later information over different information included in this
prospectus or the prospectus supplement. Lehman Brothers Holdings incorporates
by reference the documents listed below and any future filings made with the
SEC under Section 13(a), 13(c), 14, or 15(d) of the Securities Exchange Act of
1934:

     o   Annual Report on Form 10-K for the year ended November 30, 2000, filed
         with the SEC on February 28, 2001;

     o   Amendment No. 1 to Annual Report on Form 10-K for the year ended
         November 30, 2000, filed with the SEC on March 9, 2001;

     o   Quarterly Report on Form 10-Q for the quarter ended February 28, 2001,
         filed with the SEC on April 16, 2001;

     o   Current Reports on Form 8-K, filed with the SEC on January 4, January
         5, February 27, March 13, March 21, April 26 (two filings), May 2, May
         22, June 1, June 14 and June 19, 2001.

     All documents Lehman Brothers Holdings files pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this prospectus and
before the later of (1) the completion of the offering of the securities
described in this prospectus and (2) the date affiliates of Lehman Brothers
Holdings stop offering securities pursuant to this prospectus shall be
incorporated by reference in this prospectus from the date of filing of such
documents.

     You may request a copy of these filings, at no cost, by writing or
telephoning Lehman Brothers Holdings at the following address:

      Controller's Office
      Lehman Brothers Holdings Inc.
      Three World Financial Center
      New York, New York 10285
      (212) 526-0660

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

     YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED IN THIS PROSPECTUS AND
THE PROSPECTUS SUPPLEMENT, AS WELL AS THE INFORMATION INCORPORATED BY
REFERENCE. LEHMAN BROTHERS HOLDINGS HAS NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH DIFFERENT INFORMATION. LEHMAN BROTHERS HOLDINGS IS NOT MAKING AN OFFER OF
THESE SECURITIES IN ANY JURISDICTION WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS, THE PROSPECTUS
SUPPLEMENT OR ANY DOCUMENTS INCORPORATED BY REFERENCE IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE OF THE APPLICABLE DOCUMENT.


                                       6




                           USE OF PROCEEDS AND HEDGING

     General. Lehman Brothers Holdings will use the proceeds it receives from
the sale of the offered securities for general corporate purposes, principally
to:

     o   fund the business of its operating units;

     o   fund investments in, or extensions of credit or capital contributions
         to, its subsidiaries; and

     o   lengthen the average maturity of liabilities, by reducing short-term
         liabilities or re-funding maturing indebtedness.

     Lehman Brothers Holdings expects to incur additional indebtedness in the
future to fund its businesses. Lehman Brothers Holdings or an affiliate may
enter into one or more swap agreements in connection with sales of the offered
securities and may earn additional income from those transactions.

     Hedging. Lehman Brothers Holdings or its subsidiaries may use all or some
of the proceeds received from the sale of offered securities to purchase or
maintain positions in the securities or other assets underlying the offered
securities or assets used to determine the relevant index or indices. Lehman
Brothers Holdings or its subsidiaries may also purchase or maintain positions
in options, futures contracts, forward contracts or swaps, or options on such
securities, or other derivative or similar instruments relating to the relevant
index or underlying assets. Lehman Brothers Holdings may also use the proceeds
to pay the costs and expenses of hedging any currency, interest rate or other
risk relating to offered securities.

     Lehman Brothers Holdings expects that it or its subsidiaries will increase
or decrease their initial hedging position over time using techniques which
help evaluate the size of any hedge based upon a variety of factors affecting
the value of the underlying instrument. These factors may include the history
of price changes in that underlying instrument and the time remaining to
maturity. Lehman Brothers Holdings may take long or short positions in the
underlying instrument, the assets underlying any such instrument or other
derivative or similar instruments related thereto. These other hedging
activities may occur from time to time before the offered securities mature and
will depend on market conditions and the value of the underlying instrument.

     In addition, Lehman Brothers Holdings or its subsidiaries may purchase or
otherwise acquire long or short positions in offered securities from time to
time and may, in their sole discretion, hold, resell, exercise, cancel or
retire such offered securities. Lehman Brothers Holdings or its subsidiaries
may also take hedging positions in other types of appropriate financial
instruments that may become available in the future.

     If Lehman Brothers Holdings or its subsidiaries have long hedge positions
in, options contracts in, or other derivative or similar instruments related
to, the underlying assets or measures, Lehman Brothers Holdings or its
subsidiaries may liquidate all or a portion of their holdings at or about the
time of the maturity of the offered securities. The aggregate amount and type
of such positions are likely to vary over time depending on future market
conditions and other factors. Lehman Brothers Holdings is only able to
determine profits or losses from any such position when the position is closed
out and any offsetting position or positions are taken into account.

     Lehman Brothers Holdings has no reason to believe that its hedging
activities will have a material impact on the price of such options, swaps,
futures contracts, options on the foregoing, or other derivative or similar
instruments, or on the value of the underlying securities, index (or the assets
underlying the index), currency, commodity or interest rate. However, Lehman
Brothers Holdings cannot guarantee to you that its hedging activities will not
affect such prices or value. Lehman Brothers Holdings will use the remainder of
the proceeds from the sale of offered securities for general corporate purposes
as described above.


                                       7




                      RATIO OF EARNINGS TO FIXED CHARGES



                                                                                                               THREE
                                                                                                               MONTHS
                                                                YEAR ENDED NOVEMBER 30,                        ENDED
                                               ---------------------------------------------------------    FEBRUARY 28,
                                                  1996        1997        1998        1999        2000          2001
                                               ---------   ---------   ---------   ---------   ---------   -------------

Ratio of Earnings to Fixed Charges .........       1.06        1.07        1.07        1.12        1.14          1.12



                         DESCRIPTION OF DEBT SECURITIES

     Please note that in this section entitled "Description of Debt
Securities", references to Lehman Brothers Holdings refer only to Lehman
Brothers Holdings and not to its consolidated subsidiaries. Also, in this
section, references to "holders" mean those who own debt securities registered
in their own names, on the books that Lehman Brothers Holdings or the trustee
maintains for this purpose, and not those who own beneficial interests in debt
securities registered in street name or in debt securities issued in book-entry
form through one or more depositaries. Owners of beneficial interests in the
debt securities should read the section below entitled "Book-Entry Procedures
and Settlement".


GENERAL

     The debt securities offered by this prospectus will be unsecured
obligations of Lehman Brothers Holdings and will be either senior or
subordinated debt. Senior debt will be issued under a senior debt indenture.
Subordinated debt will be issued under a subordinated debt indenture. The
senior debt indenture and the subordinated debt indenture are sometimes
referred to in this prospectus individually as an "indenture" and collectively
as the "indentures". The indentures (including all amendments and a separate
related document containing standard multiple series indenture provisions) have
been filed with the SEC and are incorporated by reference in the registration
statement of which this prospectus forms a part. You can obtain copies of the
indentures by following the directions on page 6 or by contacting the
applicable indenture trustee.

     A form of each debt security, reflecting the particular terms and
provisions of a series of offered debt securities, has been filed with the SEC
or will be filed with the SEC at the time of the offering and incorporated by
reference in the registration statement of which this prospectus forms a part.
You can obtain a copy of any form of debt security when it has been filed by
following the directions on page 6 or by contacting the applicable indenture
trustee.

     The following briefly summarizes the material provisions of the indentures
and the debt securities. You should read the more detailed provisions of the
applicable indenture, including the defined terms, for provisions that may be
important to you. As you read this section, please remember that the specific
terms of your debt security as described in the prospectus supplement will
supplement and, if applicable, modify or replace the general terms described in
this section. You should read carefully the particular terms of a series of
debt securities, which will be described in more detail in the prospectus
supplement. If there are differences between the prospectus supplement and this
prospectus, the prospectus supplement will control. Thus, the statements made
in this section may not apply to your debt security.

     Unless otherwise provided for a particular issuance in an accompanying
prospectus supplement, the trustee under the senior debt indenture will be
Citibank, N.A., and the trustee under the subordinated debt indenture will be
The Chase Manhattan Bank (formerly known as Chemical Bank).

     The indentures provide that unsecured senior or subordinated debt
securities of Lehman Brothers Holdings may be issued in one or more series,
with different terms, in each case as authorized from time to time by Lehman
Brothers Holdings. Lehman Brothers Holdings also has the right to "reopen" a
previous issue of a series of debt securities by issuing additional debt
securities of such series.


TYPES OF DEBT SECURITIES

     Lehman Brothers Holdings may issue fixed rate debt securities, floating
rate debt securities or indexed debt securities.


                                       8




     Fixed and Floating Rate Debt Securities

     Fixed rate debt securities will bear interest at a fixed rate described in
the prospectus supplement. This type includes zero coupon debt securities,
which bear no interest and are often issued at a price lower than the principal
amount. Federal income tax consequences and other special considerations
applicable to any debt securities issued by Lehman Brothers Holdings at a
discount will be described in the applicable prospectus supplement.

     Upon the request of the holder of any floating rate debt security, the
calculation agent will provide for that debt security the interest rate then in
effect, and, if determined, the interest rate that will become effective on the
next interest reset date. The calculation agent's determination of any interest
rate, and its calculation of the amount of interest for any interest period,
will be final and binding in the absence of manifest error.

     All percentages resulting from any interest rate calculation relating to a
debt security will be rounded upward or downward, as appropriate, to the next
higher or lower one hundred-thousandth of a percentage point. All amounts used
in or resulting from any calculation relating to a debt security will be
rounded upward or downward, as appropriate, to the nearest cent, in the case of
U.S. dollars, or to the nearest corresponding hundredth of a unit, in the case
of a currency other than U.S. dollars, with one-half cent or one-half of a
corresponding hundredth of a unit or more being rounded upward.

     In determining the base rate that applies to a floating rate debt security
during a particular interest period, the calculation agent may obtain rate
quotes from various banks or dealers active in the relevant market, as
described in the prospectus supplement. Those reference banks and dealers may
include the calculation agent itself and its affiliates, as well as any
underwriter, dealer or agent participating in the distribution of the relevant
floating rate debt securities and its affiliates, and they may include
affiliates of Lehman Brothers Holdings.


     Indexed Debt Securities

     Lehman Brothers Holdings may also offer indexed debt securities, which may
be fixed or floating rate debt securities or bear no interest. An indexed debt
security provides that the amount payable at its maturity, and/or the amount of
interest (if any) payable on an interest payment date, will be determined by
reference to:

     o   securities of one or more issuers, including Lehman Brothers Holdings,

     o   one or more currencies,

     o   one or more commodities,

     o   any other financial, economic or other measure or instrument, including
         the occurrence or non-occurrence of any event or circumstance, which
         may include any credit event (as defined in the prospectus supplement)
         relating to any company or companies or other entity or entities (which
         may include a government or governmental agency) other than Lehman
         Brothers Holdings, and/or

     o   one or more indices or baskets of the items described above.

     Each instrument, measure or event described above is referred to as an
"index property". If you are a holder of an indexed debt security, you may
receive an amount at maturity that is greater than or less than the face amount
of your debt security depending upon the value of the applicable index property
at maturity. The value of the applicable index property will fluctuate over
time.

     An indexed debt security may provide either for cash settlement or for
physical settlement by delivery of the index property or another property of
the type listed above. An indexed debt security may also provide that the form
of settlement may be determined at Lehman Brothers Holdings' option or at the
holder's option. Some indexed debt securities may be exchangeable, at Lehman
Brothers Holdings' option or the holder's option, for securities of an issuer
other than Lehman Brothers Holdings.


                                       9




     If you purchase an indexed debt security, the prospectus supplement will
include information about the relevant index property, about how amounts that
are to become payable will be determined by reference to the price or value of
that index property and about the terms on which the security may be settled
physically or in cash.

     No holder of an indexed debt security will, as such, have any rights of a
holder of the index property referenced in the debt security or deliverable
upon settlement, including any right to receive payment thereunder.

INFORMATION IN THE PROSPECTUS SUPPLEMENT

     The prospectus supplement for any offered series of debt securities will
describe the following terms, as applicable:

     o   the title;

     o   whether senior or subordinated debt;

     o   the total principal amount offered;

     o   the percentage of the principal amount at which the securities will be
         sold and, if applicable, the method of determining the price;

     o   the maturity date or dates;

     o   whether the debt securities are fixed rate debt securities, floating
         rate debt securities or indexed debt securities;

     o   if the debt securities are fixed rate debt securities, the yearly rate
         at which the debt security will bear interest, if any, and the interest
         payment dates;

     o   if the debt security is an original issue discount debt security, the
         yield to maturity;

     o   if the debt securities are floating rate debt securities, the interest
         rate basis; any applicable index currency or maturity, spread or spread
         multiplier or initial, maximum or minimum rate; the interest reset,
         determination, calculation and payment dates; the day count used to
         calculate interest payments for any period;

     o   the date or dates from which interest, if any, will accrue, or how such
         date or dates will be determined, and the interest payment dates and
         any related record dates;

     o   if the debt securities are indexed debt securities, the amount Lehman
         Brothers Holdings will pay you at maturity, the amount of interest, if
         any, Lehman Brothers Holdings will pay you on an interest payment date
         or the formula Lehman Brothers Holdings will use to calculate these
         amounts, if any, and the terms on which your debt security will be
         exchangeable for or payable in cash, securities or other property;

     o   if the index property is an index, the method of providing for a
         substitute index or indices or otherwise determining the amount payable
         on the indexed debt securities if any index changes or ceases to be
         made available by its publisher;

     o   if other than in United States dollars, the currency or currency unit
         in which the securities are denominated and in which payment will be
         made;

     o   any provisions for the payment of additional amounts for taxes;

     o   the denominations in which the securities will be issuable if other
         than denominations of $1,000 and integral multiples thereof;

     o   the terms and conditions on which the securities may be redeemed at the
         option of Lehman Brothers Holdings;

     o   any obligation of Lehman Brothers Holdings to redeem, purchase or repay
         the securities at the option of a holder upon the happening of any
         event and the terms and conditions of redemption, purchase or
         repayment;


                                       10




     o   any provisions for the discharge of Lehman Brothers Holdings'
         obligations relating to the securities by deposit of funds or United
         States government obligations;

     o   the names and duties of any co-trustees, depositaries, authenticating
         agents, calculation agents, paying agents, transfer agents or
         registrars for the debt securities;

     o   any material provisions of the applicable indenture described in this
         prospectus that do not apply to the securities; and

     o   any other specific terms of the securities.

     The terms on which a series of debt securities may be convertible into or
exchangeable for other securities of Lehman Brothers Holdings or any other
entity will be set forth in the prospectus supplement relating to such series.
Such terms will include provisions as to whether conversion or exchange is
mandatory, at the option of the holder or at the option of Lehman Brothers
Holdings. The terms may include provisions pursuant to which the number of
other securities to be received by the holders of such series of debt
securities may be adjusted.


PAYMENT AND PAYING AGENTS

     Distributions on the debt securities other than those represented by
global notes will be made in the designated currency against surrender of the
debt securities at the principal corporate trust office of the relevant trustee
in New York City. Payment will be made to the registered holder at the close of
business on the record date for such payment. Interest payments will be made at
the principal corporate trust office of the relevant trustee in New York City,
or by a check mailed to the holder at his registered address. Payments in any
other manner will be specified in the prospectus supplement.


CALCULATION AGENTS

     Calculations relating to floating rate debt securities and indexed debt
securities will be made by the calculation agent, an institution that Lehman
Brothers Holdings appoints as its agent for this purpose. That institution may
include any affiliate of Lehman Brothers Holdings, such as Lehman Brothers Inc.
Lehman Brothers Holdings may appoint a different institution to serve as
calculation agent from time to time after the original issue date of the debt
security without your consent and without notifying you of the change. The
initial calculation agent will be identified in the prospectus supplement.


SENIOR DEBT

     The senior debt securities will be issued under the senior debt indenture
and will rank on an equal basis with all other unsecured debt of Lehman
Brothers Holdings except subordinated debt.


SUBORDINATED DEBT

     The subordinated debt securities will be issued under the subordinated
debt indenture and will rank subordinated and junior in right of payment, to
the extent set forth in the subordinated debt indenture, to all "senior debt"
(as defined below) of Lehman Brothers Holdings.

     If Lehman Brothers Holdings defaults in the payment of any principal of,
or premium, if any, or interest on any senior debt when it becomes due and
payable after any applicable grace period, then, unless and until the default
is cured or waived or ceases to exist, Lehman Brothers Holdings cannot make a
payment on account of or redeem or otherwise acquire the subordinated debt
securities.

     If there is any insolvency, bankruptcy, liquidation or other similar
proceeding relating to Lehman Brothers Holdings, its creditors or its property,
then all senior debt must be paid in full before any payment may be made to any
holders of subordinated debt securities.

     Furthermore, if Lehman Brothers Holdings defaults in the payment of the
principal of and accrued interest on any subordinated debt securities that is
declared due and payable upon an event of default under the subordinated debt
indenture, holders of all senior debt will first be entitled to receive payment
in full in cash before holders of such debt can receive any payments.


                                       11




   "Senior debt" means:

   (1)   the principal, premium, if any, and interest in respect of (A)
         indebtedness of Lehman Brothers Holdings for money borrowed and (B)
         indebtedness evidenced by securities, notes, debentures, bonds or
         other similar instruments issued by Lehman Brothers Holdings,
         including the senior debt securities;

   (2)   all capitalized lease obligations of Lehman Brothers Holdings;

   (3)   all obligations of Lehman Brothers Holdings representing the deferred
         purchase price of property; and

   (4)   all deferrals, renewals, extensions and refundings of obligations of
         the type referred to in clauses (1) through (3);

but senior debt does not include:

   (a)   subordinated debt securities;

   (b)   any indebtedness that by its terms is subordinated to, or ranks on an
         equal basis with, subordinated debt securities;

   (c)   indebtedness for goods or materials purchased in the ordinary course
         of business or for services obtained in the ordinary course of
         business or indebtedness consisting of trade payables; and

   (d)   indebtedness that is subordinated to an obligation of Lehman Brothers
         Holdings of the type specified in clauses (1) through (4) above.

     The effect of clause (d) is that Lehman Brothers Holdings may not issue,
assume or guarantee any indebtedness for money borrowed which is junior to the
senior debt securities and senior to the subordinated debt securities.


COVENANTS

     Limitations on Liens. The indentures provide that Lehman Brothers Holdings
will not, and will not permit any designated subsidiary to, incur, issue,
assume or guarantee any indebtedness for money borrowed if such indebtedness is
secured by a pledge of, lien on, or security interest in any shares of common
stock of any designated subsidiary, without providing that each series of debt
securities and, at Lehman Brothers Holdings' option, any other indebtedness
ranking equally and ratably with such indebtedness, is secured equally and
ratably with (or prior to) such other secured indebtedness.

     "Designated subsidiary" means any subsidiary of Lehman Brothers Holdings,
the consolidated net worth of which represents at least 5% of the consolidated
net worth of Lehman Brothers Holdings. As of February 28, 2001, the designated
subsidiaries were Lehman Brothers Bancorp Inc., Lehman Brothers Bank, FSB,
Lehman Brothers Inc., Lehman Brothers Holdings Plc, Lehman Brothers
(International) Europe, Lehman Brothers Japan Inc., Lehman Brothers U.K.
Holdings (Delaware) Inc., Lehman Brothers UK Holdings Ltd., Lehman Commercial
Paper Inc., LCPI Properties Inc., LW-LP Inc., Lehman Re Ltd. and Structured
Asset Securities Corp.

     Limitations on Mergers and Sales of Assets. The indentures provide that
Lehman Brothers Holdings will not merge or consolidate or transfer or lease all
or substantially all its assets, and another person may not transfer or lease
all or substantially all of its assets to Lehman Brothers Holdings unless:

     o   either (1) Lehman Brothers Holdings is the continuing corporation, or
         (2) the successor corporation, if other than Lehman Brothers Holdings,
         is a U.S. corporation and expressly assumes by supplemental indenture
         the obligations evidenced by the securities issued pursuant to the
         indenture and

     o   immediately after the transaction, there would not be any default in
         the performance of any covenant or condition of the indenture.


                                       12




     Other than the restrictions described above, the indentures do not limit
the amount of debt or other securities that Lehman Brothers Holdings may issue
or contain any covenants or provisions that would protect holders of the debt
securities in the event of a highly leveraged transaction.


MODIFICATION OF THE INDENTURES

     Under the indentures, Lehman Brothers Holdings and the relevant trustee
can enter into supplemental indentures to establish the form and terms of any
new series of debt securities without obtaining the consent of any holder of
debt securities.

     Lehman Brothers Holdings and the trustee may, with the consent of the
holders of at least 662/3% in aggregate principal amount of the debt securities
of a series, modify the applicable indenture or the rights of the holders of
the securities of such series to be affected.

     No such modification may, without the consent of the holder of each
security so affected:

     o   extend the fixed maturity of any such securities,

     o   reduce the rate or change the time of payment of interest on such
         securities,

     o   reduce the principal amount of such securities or the premium, if any,
         on such securities,

     o   change any obligation of Lehman Brothers Holdings to pay additional
         amounts,

     o   reduce the amount of the principal payable on acceleration of any
         securities issued originally at a discount,

     o   adversely affect the right of repayment or repurchase at the option of
         the holder,

     o   reduce or postpone any sinking fund or similar provision,

     o   change the currency or currency unit in which any such securities are
         payable or the right of selection thereof,

     o   impair the right to sue for the enforcement of any such payment on or
         after the maturity of such securities,

     o   reduce the percentage of securities referred to above whose holders
         need to consent to the modification or a waiver without the consent of
         such holders,

     o   change any obligation of Lehman Brothers Holdings to maintain an office
         or agency.


DEFAULTS

     Each indenture provides that events of default regarding any series of
debt securities will be:

     o   failure to pay required interest on any debt security of such series
         for 30 days;

     o   failure to pay principal or premium, if any, on any debt security of
         such series when due;

     o   failure to make any required scheduled installment payment for 30 days
         on debt securities of such series;

     o   failure to perform for 90 days after notice any other covenant in the
         relevant indenture other than a covenant included in the relevant
         indenture solely for the benefit of a series of debt securities other
         than such series; and

     o   certain events of bankruptcy or insolvency, whether voluntary or not.

     If an event of default regarding debt securities of any series issued
under the indentures should occur and be continuing, either the trustee or the
holders of 25% in the principal amount of outstanding debt securities of such
series may declare each debt security of that series due and payable. Lehman
Brothers Holdings is required to file annually with the trustee a statement of
an officer as to the fulfillment by Lehman Brothers Holdings of its obligations
under the indenture during the preceding year.


                                       13




     No event of default regarding one series of debt securities issued under
an indenture is necessarily an event of default regarding any other series of
debt securities.

     Holders of a majority in principal amount of the outstanding debt
securities of any series will be entitled to control certain actions of the
trustee under the indentures and to waive past defaults regarding such series.
The trustee generally will not be requested, ordered or directed by any of the
holders of debt securities, unless one or more of such holders shall have
offered to the trustee reasonable security or indemnity.

     If an event of default occurs and is continuing regarding a series of debt
securities, the trustee may use any sums that it holds under the relevant
indenture for its own reasonable compensation and expenses incurred prior to
paying the holders of debt securities of such series.

     Before any holder of any series of debt securities may institute action
for any remedy, except payment on such holder's debt security when due, the
holders of not less than 25% in principal amount of the debt securities of that
series outstanding must request the trustee to take action. Holders must also
offer and give the satisfactory security and indemnity against liabilities
incurred by the trustee for taking such action.


DEFEASANCE

     Except as may otherwise be set forth in an accompanying prospectus
supplement, after Lehman Brothers Holdings has deposited with the trustee, cash
or government securities, in trust for the benefit of the holders sufficient to
pay the principal of, premium, if any, and interest on the debt securities of
such series when due, then:

     o   if the terms of the debt securities so provide, Lehman Brothers
         Holdings will be deemed to have paid and satisfied its obligations on
         all outstanding debt securities of such series, which is known as
         "defeasance and discharge"; or

     o   Lehman Brothers Holdings will cease to be under any obligation, other
         than to pay when due the principal of, premium, if any, and interest on
         such debt securities, relating to the debt securities of such series,
         which is known as "covenant defeasance".

     When there is a defeasance and discharge, (1) the applicable indenture
will no longer govern the debt securities of such series, (2) Lehman Brothers
Holdings will no longer be liable for payment and (3) the holders of such debt
securities will be entitled only to the deposited funds. When there is a
covenant defeasance, however, Lehman Brothers Holdings will continue to be
obligated to make payments when due if the deposited funds are not sufficient.

     For a discussion of the principal United States federal income tax
consequences of covenant defeasance and defeasance and discharge, see the
discussion of United States federal income tax consequences in the prospectus
supplement.


PAYMENT OF ADDITIONAL AMOUNTS

     If so noted in the applicable prospectus supplement for a particular
issuance, Lehman Brothers Holdings will pay to the holder of any debt security
who is a "United States Alien" (as defined below) such additional amounts as
may be necessary so that every net payment of principal of and interest on the
debt security, after deduction or withholding for or on account of any present
or future tax, assessment or other governmental charge imposed upon the holder
by the United States or any taxing authority thereof or therein, will not be
less than the amount provided in such debt security to be then due and payable.
Lehman Brothers Holdings will not be required, however, to make any payment of
additional amounts for or on account of:

     o   any tax, assessment or other governmental charge that would not have
         been imposed but for (1) the existence of any present or former
         connection between such holder (or between a fiduciary, settlor,
         beneficiary of, member or shareholder of, or possessor of a power over,
         such holder, if such holder is an estate, trust, partnership or
         corporation) and the United States


                                       14



         including, without limitation, such holder (or such fiduciary,
         settlor, beneficiary, member, shareholder or possessor), being or
         having been a citizen or resident or treated as a resident of the
         United States or being or having been engaged in trade or business or
         present in the United States, or (2) the presentation of a debt
         security for payment after 10 days;

     o   any estate, inheritance, gift, sales, transfer, excise, personal
         property or similar tax, assessment or other governmental charge;

     o   any tax, assessment or other governmental charge imposed by reason of
         such holder's past or present status as a passive foreign investment
         company, a controlled foreign corporation, a personal holding company
         or foreign personal holding company with respect to the United States,
         or as a corporation which accumulates earnings to avoid United States
         federal income tax;

     o   any tax, assessment or other governmental charge which is payable
         otherwise than by withholding from payment of principal of, or interest
         on, such debt security;

     o   any tax, assessment or other governmental charge required to be
         withheld by any paying agent from any payment of principal of, or
         interest on, any debt security if such payment can be made without
         withholding by any other paying agent;

     o   any tax, assessment or other governmental charge that is imposed or
         withheld by reason of the failure to comply with certification,
         information, documentation or other reporting requirements concerning
         the nationality, residence, identity or connections with the United
         States of the holder or beneficial owner of such debt security, if such
         compliance is required by statute or by regulation of the United States
         Treasury Department as a precondition to relief or exemption from such
         tax, assessment or other governmental charge;

     o   any tax, assessment or other governmental charge imposed on interest
         received by (1) a 10% shareholder (as defined in Section 871(h)(3)(B)
         of the Code and the regulations that may be promulgated thereunder) of
         Lehman Brothers Holdings, or (2) a controlled foreign corporation with
         respect to Lehman Brothers Holdings within the meaning of the Code; or

     o   any combinations of items identified in the bullet points above.

     In addition, Lehman Brothers Holdings will not be required to pay any
additional amounts to any holder who is a fiduciary or partnership or other
than the sole beneficial owner of such debt security to the extent that a
beneficiary or settlor with respect to such fiduciary, or a member of such
partnership or a beneficial owner thereof would not have been entitled to the
payment of such additional amounts had such beneficiary, settlor, member or
beneficial owner been the holder of the debt security.

     The term "United States Alien" means any corporation, partnership,
individual or fiduciary that is, as to the United States, a foreign
corporation, a nonresident alien individual, a nonresident fiduciary of a
foreign estate or trust, or a foreign partnership one or more of the members of
which is, as to the United States, a foreign corporation, a nonresident alien
individual or a nonresident fiduciary of a foreign estate or trust.


REDEMPTION UPON A TAX EVENT

     If so noted in the applicable prospectus supplement for a particular
issuance, the debt securities may be redeemed at the option of Lehman Brothers
Holdings in whole, but not in part, on not more than 60 days' and not less than
30 days' notice, at a redemption price equal to 100% of their principal amount,
if Lehman Brothers Holdings determines that as a result of a "change in tax
law" (as defined below):

     o   Lehman Brothers Holdings has or will become obligated to pay additional
         amounts as described under the heading "--Payment of Additional
         Amounts" on any debt security, or


                                       15



     o   there is a substantial possibility that Lehman Brothers Holdings will
         be required to pay such additional amounts.

     A "change in tax law" that would trigger the provisions of the preceding
paragraph is any change in or amendment to the laws, treaties, regulations or
rulings of the United States or any political subdivision or taxing authority
thereof, or any proposed change in the laws, treaties, regulations or rulings,
or any change in the official application, enforcement or interpretation of the
laws, treaties, regulations or rulings (including a holding by a court of
competent jurisdiction in the United States) or any other action (other than an
action predicated on law generally known on or before the date of the
applicable prospectus supplement for the particular issuance of debt securities
to which this section applies except for proposals before the Congress prior to
that date) taken by any taxing authority or a court of competent jurisdiction
in the United States, or the official proposal of the action, whether or not
the action or proposal was taken or made with respect to Lehman Brothers
Holdings.

     Prior to the publication of any notice of redemption, Lehman Brothers
Holdings shall deliver to the Trustee (1) an officers' certificate stating that
Lehman Brothers Holdings is entitled to effect the aforementioned redemption
and setting forth a statement of facts showing that the conditions precedent to
the right of Lehman Brothers Holdings so to redeem have occurred, and (2) an
opinion of counsel to such effect based on such statement of facts.


GOVERNING LAW

     Unless otherwise stated in the prospectus supplement, the debt securities
and the indentures will be governed by New York law.


CONCERNING THE TRUSTEES

     Lehman Brothers Holdings has had and may continue to have banking and
other business relationships with the trustees in the ordinary course of
business.


                                       16




                             DESCRIPTION OF WARRANTS

     Please note that in this section entitled "Description of Warrants",
references to Lehman Brothers Holdings refer only to Lehman Brothers Holdings
and not to its consolidated subsidiaries. Also, in this section, references to
"holders" mean those who own warrants registered in their own names, on the
books that Lehman Brothers Holdings or its agent maintains for this purpose,
and not those who own beneficial interests in warrants registered in street
name or in warrants issued in book-entry form through one or more depositaries.
Owners of beneficial interests in the warrants should read the section below
entitled "Book-Entry Procedures and Settlement".


GENERAL

     Lehman Brothers Holdings may issue warrants that are debt warrants or
universal warrants. Lehman Brothers Holdings may offer warrants separately or
together with its debt securities. Lehman Brothers Holdings may also offer
warrants together with other warrants, purchase contracts and debt securities
in the form of units, as summarized below in "Description of Units".

     Lehman Brothers Holdings may issue warrants in such amounts or in as many
distinct series as Lehman Brothers Holdings wishes. This section summarizes
terms of the warrants that apply generally to all series. Most of the financial
and other specific terms of your warrant will be described in the prospectus
supplement. Those terms may vary from the terms described here.

     The warrants of a series will be issued under a separate warrant agreement
to be entered into between Lehman Brothers Holdings and one or more banks or
trust companies, as warrant agent, as set forth in the prospectus supplement,
and, if part of a unit, may be issued under a unit agreement as described below
under "Description of Units". A form of each warrant agreement, including a
form of warrant certificate representing each warrant, reflecting the
particular terms and provisions of a series of offered warrants, will be filed
with the SEC at the time of the offering and incorporated by reference in the
registration statement of which this prospectus forms a part. You can obtain a
copy of any form of warrant agreement when it has been filed by following the
directions on page 6 or by contacting the applicable warrant agent.

     The following briefly summarizes the material provisions of the warrant
agreements and the warrants. As you read this section, please remember that the
specific terms of your warrant as described in the prospectus supplement will
supplement and, if applicable, may modify or replace the general terms
described in this section. You should read carefully the prospectus supplement
and the more detailed provisions of the warrant agreement and the warrant
certificate, including the defined terms, for provisions that may be important
to you. If there are differences between the prospectus supplement and this
prospectus, the prospectus supplement will control. Thus, the statements made
in this section may not apply to your warrant.


TYPES OF WARRANTS

     Lehman Brothers Holdings may issue debt warrants or universal warrants.

     Debt Warrants

     Lehman Brothers Holdings may issue warrants for the purchase of its debt
securities on terms to be determined at the time of sale. This type of warrant
is referred to as a "debt warrant".

     Universal Warrants

     Lehman Brothers Holdings may also issue warrants, on terms to be
determined at the time of sale, for the purchase or sale of, or whose cash
value is determined by reference to the performance, level or value of, one or
more of the following:

     o   securities of one or more issuers, including Lehman Brothers Holdings,

     o   one or more currencies,


                                       17




     o   one or more commodities,

     o   any other financial, economic or other measure or instrument, including
         the occurrence or non-occurrence of any event or circumstance, which
         may include any credit event (as defined in the prospectus supplement)
         relating to any company or companies or other entity or entities (which
         may include a government or governmental agency), and

     o   one or more indices or baskets of the items described above.

     This type of warrant is referred to as a "universal warrant". Each
instrument, measure or event described above is referred to as a "warrant
property".

     Lehman Brothers Holdings may satisfy its obligations, if any, with respect
to any universal warrants by delivering:

     o   the warrant property,

     o   the cash value (as defined in the prospectus supplement) of the warrant
         property, or

     o   the cash value of the warrants determined by reference to the
         performance, level or value of the warrant property.

     The prospectus supplement will describe what Lehman Brothers Holdings may
deliver to satisfy its obligations with respect to any universal warrants. Any
securities deliverable by Lehman Brothers Holdings with respect to any
universal warrants will be freely transferable by the holder.


INFORMATION IN THE PROSPECTUS SUPPLEMENT

     The prospectus supplement may contain, where applicable, the following
information about your warrants:

     o   the specific designation and aggregate number of, and the price at
         which Lehman Brothers Holdings will issue, the warrants,

     o   the currency or currency unit with which the warrants may be purchased
         and in which any payments due to or from the holder upon exercise must
         be made,

     o   the date on which the right to exercise the warrants will begin and the
         date on which that right will expire or, if you may not continuously
         exercise the warrants throughout that period, the specific date or
         dates on which you may exercise the warrants,

     o   whether and under what circumstances the warrants may be cancelled by
         Lehman Brothers Holdings prior to their expiration date, in which case
         the holders will be entitled to receive only the applicable
         cancellation amount, which may be either a fixed amount or an amount
         that varies during the term of the warrants in accordance with a
         schedule or formula,

     o   whether the warrants will be issued in global or non-global form,
         although, in any case, the form of a warrant included in a unit will
         correspond to the form of the unit and of any debt security or purchase
         contract included in that unit,

     o   the identities of the warrant agent, any depositaries and any paying,
         transfer, calculation or other agents for the warrants,

     o   any securities exchange or quotation system on which the warrants or
         any securities deliverable upon exercise of the warrants may be listed,

     o   whether the warrants are to be sold separately or with other
         securities, as part of units or otherwise, and if the warrants are to
         be sold with the securities of another company or other companies,
         certain information regarding such company or companies, and

     o   any other terms of the warrants.

     If warrants are issued as part of a unit, the prospectus supplement will
specify whether the warrants will be separable from the other securities in the
unit before the warrants' expiration date. A warrant issued in a unit in the
United States may not be so separated before the 91st day after the unit is
issued.


                                       18




     No holder of a warrant will, as such, have any rights of a holder of the
debt securities or warrant property purchasable under or in the warrant,
including any right to receive payment thereunder.


ADDITIONAL INFORMATION IN THE PROSPECTUS SUPPLEMENT

     Debt Warrants

     If you purchase debt warrants, the prospectus supplement may contain,
where appropriate, the following additional information about the debt
warrants:

     o   the designation, aggregate principal amount, currency and terms of the
         debt securities that may be purchased upon exercise of the debt
         warrants,

     o   whether the exercise price may be paid in cash, by the exchange of any
         debt warrants or other securities or both and the method of exercising
         the debt warrants, and

     o   the designation, terms and amount of debt securities, if any, to be
         issued together with each of the debt warrants and the date, if any,
         after which the debt warrants and debt securities will be separately
         transferable.

     After the close of business on the expiration date (or such later date to
which the expiration date may be extended by Lehman Brothers Holdings),
unexercised debt warrants will become void.

     Universal Warrants

     If you purchase universal warrants, the prospectus supplement may contain,
where appropriate, the following additional information about the universal
warrants:

     o   whether the universal warrants are put warrants (entitling the holder
         to sell the warrant property or receive the cash value of the right to
         sell the warrant property), call warrants (entitling the holder to buy
         the warrant property or receive the cash value of the right to buy the
         warrant property), or spread warrants (entitling the holder to receive
         a cash value determined by reference to the amount, if any, by which a
         specified reference value of the warrant property at the time of
         exercise exceeds a specified base value of the warrant property),

     o   the warrant property or cash value, and the amount or method for
         determining the amount of warrant property or cash value, deliverable
         upon exercise of each universal warrant,

     o   the price at which and the currency with which the warrant property may
         be purchased or sold upon the exercise of each universal warrant, or
         the method of determining that price,

     o   whether the exercise price may be paid in cash, by the exchange of any
         universal warrants or other securities or both, and the method of
         exercising the universal warrants,

     o   whether the exercise of the universal warrants is to be settled in cash
         or by delivery of the warrant property or both and whether settlement
         will occur on a net basis or a gross basis,

     o   the minimum number, if any, of universal warrants that must be
         exercised at any one time, other than upon automatic exercise,

     o   the maximum number, if any, of universal warrants that may, subject to
         election by Lehman Brothers Holdings, be exercised by all owners (or by
         any person or entity) on any day,

     o   any provisions for the automatic exercise of the warrants at expiration
         or otherwise,

     o   if the warrant property is an index, the method of providing for a
         substitute index or indices or otherwise determining the amount payable
         in connection with the exercise of the warrants if any index changes or
         ceases to be made available by its publisher, and

     o   whether, following the occurrence of a market disruption event or force
         majeure event (as defined in the prospectus supplement), the cash
         settlement value of a universal warrant will be determined on a
         different basis than under normal circumstances.


                                       19




CALCULATION AGENTS

     Calculations relating to universal warrants will be made by the
calculation agent, an institution that Lehman Brothers Holdings appoints as its
agent for this purpose. That institution may be an affiliate of Lehman Brothers
Holdings, such as Lehman Brothers Inc. Lehman Brothers Holdings may appoint a
different institution to serve as calculation agent from time to time after the
original issue date of the warrant without your consent and without notifying
you of the change. The initial calculation agent will be identified in the
prospectus supplement.


NO LIMIT ON ISSUANCE OF WARRANTS

     The warrant agreements do not limit the number of warrants or other
securities that Lehman Brothers Holdings may issue.


MODIFICATIONS

     Lehman Brothers Holdings and the relevant warrant agent may, without the
consent of the holders, amend each warrant agreement and the terms of each
issue of warrants, for the purpose of curing any ambiguity or of correcting or
supplementing any defective or inconsistent provision, or in any other manner
that Lehman Brothers Holdings may deem necessary or desirable and that will not
adversely affect the interests of the holders of the outstanding unexercised
warrants in any material respect.

     Lehman Brothers Holdings and the relevant warrant agent also may, with the
consent of the holders of at least a majority in number of the outstanding
unexercised warrants affected, modify or amend the warrant agreement and the
terms of the warrants.

     No such modification or amendment may, without the consent of the holders
of each warrant affected:

     o   reduce the amount receivable upon exercise, cancellation or expiration,

     o   shorten the period of time during which the warrants may be exercised,

     o   otherwise materially and adversely affect the exercise rights of the
         beneficial owners of the warrants, or

     o   reduce the percentage of outstanding warrants whose holders must
         consent to modification or amendment of the applicable warrant
         agreement or the terms of the warrants.


MERGER AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS OR EVENTS
OF DEFAULT

     Warrant agreements will not restrict Lehman Brothers Holdings' ability to
merge or consolidate with, or sell its assets to, another firm or to engage in
any other transactions. If at any time there is a merger or consolidation
involving Lehman Brothers Holdings or a sale or other disposition of all or
substantially all of the assets of Lehman Brothers Holdings, the successor or
assuming company will be substituted for Lehman Brothers Holdings, with the
same effect as if it had been named in the warrant agreement and in the
warrants as Lehman Brothers Holdings. Lehman Brothers Holdings will be relieved
of any further obligation under the warrant agreement or warrants, and, in the
event of any such merger, consolidation, sale or other disposition, Lehman
Brothers Holdings as the predecessor corporation may at any time thereafter be
dissolved, wound up or liquidated.

     Warrant agreements will not include any restrictions on Lehman Brothers
Holdings' ability to put liens on its assets, including Lehman Brothers
Holdings' interests in its subsidiaries, nor will they provide for any events
of default or remedies upon the occurrence of any events of default.


WARRANT AGREEMENTS WILL NOT BE QUALIFIED UNDER TRUST INDENTURE ACT

     No warrant agreement will be qualified as an indenture, and no warrant
agent will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of warrants issued under a warrant agreement will not have
the protection of the Trust Indenture Act with respect to their warrants.


                                       20




ENFORCEABILITY OF RIGHTS BY BENEFICIAL OWNER

     Each warrant agent will act solely as an agent of Lehman Brothers Holdings
in connection with the issuance and exercise of the applicable warrants and
will not assume any obligation or relationship of agency or trust for or with
any registered holder of or owner of a beneficial interest in any warrant. A
warrant agent will have no duty or responsibility in case of any default by
Lehman Brothers Holdings under the applicable warrant agreement or warrant
certificate, including any duty or responsibility to initiate any proceedings
at law or otherwise or to make any demand upon Lehman Brothers Holdings.

     Holders may, without the consent of the applicable warrant agent, enforce
by appropriate legal action, on their own behalf, their right to exercise their
warrants, to receive debt securities, in the case of debt warrants, and to
receive payment, if any, for their warrants, in the case of universal warrants.


GOVERNING LAW

     Unless otherwise stated in the prospectus supplement, the warrants and
each warrant agreement will be governed by New York law.


                                       21




                        DESCRIPTION OF PURCHASE CONTRACTS

     Please note that in this section entitled "Description of Purchase
Contracts", references to Lehman Brothers Holdings refer only to Lehman
Brothers Holdings and not to its consolidated subsidiaries. Also, in this
section, references to "holders" mean those who own purchase contracts
registered in their own names, on the books that Lehman Brothers Holdings, its
agent or the trustee maintains for this purpose, and not those who own
beneficial interests in purchase contracts registered in street name or in
purchase contracts issued in book-entry form through one or more depositaries.
Owners of beneficial interests in the purchase contracts should read the
section below entitled "Book-Entry Procedures and Settlement".


GENERAL

     Lehman Brothers Holdings may issue purchase contracts in such amounts and
in as many distinct series as Lehman Brothers Holdings wishes. In addition,
Lehman Brothers Holdings may issue a purchase contract separately or as part of
a unit, as described below under "Description of Units".

     This section summarizes terms of the purchase contracts that will apply
generally to all purchase contracts. Most of the financial and other specific
terms of your purchase contract will be described in the prospectus supplement.
Those terms may vary from the terms described here.

     A form of each purchase contract reflecting the particular terms and
provisions of a series of offered purchase contracts will be filed with the SEC
at the time of the offering and incorporated by reference in the registration
statement of which this prospectus forms a part. You can obtain a copy of any
form of purchase contract when it has been filed by following the directions on
page 6.

     The following briefly summarizes the material provisions of the purchase
contracts. As you read this section, please remember that the specific terms of
your purchase contract as described in the prospectus supplement will
supplement and, if applicable, may modify or replace the general terms
described in this section. You should read carefully the prospectus supplement
and the more detailed provisions of the purchase contract, including the
defined terms, for provisions that may be important to you. If there are
differences between the prospectus supplement and this prospectus, the
prospectus supplement will control. Thus, the statements made in this section
may not apply to your purchase contract.


PURCHASE CONTRACT PROPERTY

     Lehman Brothers Holdings may offer purchase contracts for the purchase or
sale of, or whose cash value is determined by reference to the performance,
level or value of, one or more of the following:

     o   securities of one or more issuers, including Lehman Brothers Holdings'
         securities described in this prospectus and securities of third
         parties,

     o   one or more currencies,

     o   one or more commodities,

     o   any other financial, economic or other measure or instrument, including
         the occurrence or non-occurrence of any event or circumstance, which
         may include any credit event (as defined in the prospectus supplement)
         relating to any company or companies or other entity or entities (which
         may include a government or governmental agency) other than Lehman
         Brothers Holdings, and

     o   one or more indices or baskets of the items described above.

     Each instrument, measure or event described above is referred to as a
"purchase contract property". Each purchase contract will obligate:

     o   the holder to purchase or sell, and obligate Lehman Brothers Holdings
         to sell or purchase, on specified dates, one or more purchase contract
         properties at a specified price or prices, or


                                       22



     o   the holder or Lehman Brothers Holdings to settle the purchase contract
         with a cash payment determined by reference to the value, performance
         or level of one or more purchase contract properties, on specified
         dates and at a specified price or prices.

     Some purchase contracts may include multiple obligations to purchase or
sell different purchase contract properties, and both Lehman Brothers Holdings
and the holder may be sellers or buyers under the same purchase contract. No
holder of a purchase contract will, as such, have any rights of a holder of the
purchase contract property purchasable under or referenced in the contract,
including any right to receive payments on that property. Any securities
deliverable by Lehman Brothers Holdings with respect to any purchase contracts
will be freely transferrable by the holder.


PREPAID PURCHASE CONTRACTS; APPLICABILITY OF INDENTURE

     Some purchase contracts may require the holders to satisfy their
obligations under the contracts at the time the contracts are issued. Those
contracts are referred to as "prepaid purchase contracts". Lehman Brothers
Holdings' obligation to settle a prepaid purchase contract on the relevant
settlement date will be one of its senior debt securities or subordinated debt
securities, which are described above under "Description of Debt Securities".
Prepaid purchase contracts will be issued under the applicable indenture, and
the provisions of that indenture will govern those contracts, including the
rights and duties of the holders, the trustee and us with respect to those
contracts.


NON-PREPAID PURCHASE CONTRACTS

     Some purchase contracts do not require the holders to satisfy their
obligations under the contracts until settlement. Those contracts are referred
to as "non-prepaid purchase contracts". The holder of a non-prepaid purchase
contract may remain obligated to perform under the contract for a substantial
period of time.

     Non-prepaid purchase contracts will be issued under a unit agreement, if
they are issued in units, or under some other document, if they are not. For
example, Lehman Brothers Holdings may issue non-prepaid purchase contracts
under which the holder has multiple obligations to purchase or sell, some of
which are prepaid and some of which are not, under one of its indentures. Unit
agreements generally are described under "Description of Units" below. The
particular governing document that applies to your non-prepaid purchase
contracts will be described in the prospectus supplement.

     No Trust Indenture Act Protection

     Non-prepaid purchase contracts will not be senior debt securities or
subordinated debt securities and will not be issued under one of Lehman
Brothers Holdings' indentures, unless stated otherwise in the applicable
prospectus supplement. Consequently, no governing documents for non-prepaid
purchase contracts will be qualified as indentures, and no third party will be
required to qualify as a trustee with regard to those contracts, under the
Trust Indenture Act. Holders of non-prepaid purchase contracts will not have
the protection of the Trust Indenture Act with respect to those contracts.

     Pledge by Holders to Secure Performance

     If provided in the prospectus supplement, the holder's obligations under
the purchase contract and governing document will be secured by collateral. In
that case, the holder, acting through the unit agent as its attorney-in-fact,
if applicable, will pledge the items described below to a collateral agent
named in the prospectus supplement, which will hold them, for Lehman Brothers
Holdings' benefit, as collateral to secure the holder's obligations. This is
referred to as the "pledge" and all the items described below as the "pledged
items". The pledge will create a security interest in the holder's entire
interest in and to:

     o   any other securities included in the unit, if the purchase contract is
         part of a unit, or any other property specified in the applicable
         prospectus supplement,


                                       23



     o   all additions to and substitutions for the pledged items,

     o   all income, proceeds and collections received in respect of the pledged
         items, and

     o   all powers and rights owned or acquired later with respect to the
         pledged items.

     The collateral agent will forward all payments from the pledged items to
Lehman Brothers Holdings, unless the payments have been released from the
pledge in accordance with the purchase contract and the governing document.
Lehman Brothers Holdings will use the payments from the pledged items to
satisfy the holder's obligations under the purchase contract.

     Settlement of Purchase Contracts That Are Part of Units

     If so provided in the prospectus supplement, the following will apply to a
non-prepaid purchase contract that is issued together with any of Lehman
Brothers Holdings' debt securities as part of a unit. If the holder fails to
satisfy its obligations under the purchase contract, the unit agent may apply
the principal and interest payments on the debt securities to satisfy those
obligations as provided in the governing document. If the holder is permitted
to settle its obligations by cash payment, the holder may be permitted to do so
by delivering the debt securities in the unit to the unit agent as provided in
the governing document.

     Book-entry and other indirect owners should consult their banks or brokers
for information on how to settle their purchase contracts.

     Failure of Holder to Perform Obligations

     If the holder fails to settle its obligations under a non-prepaid purchase
contract as required, the holder will not receive the purchase contract
property or other consideration to be delivered at settlement. Holders that
fail to make timely settlement may also be obligated to pay interest or other
amounts.


     Merger and Similar Transactions Permitted; No Restrictive Covenants or
     Events of Default

     Purchase contracts that are not prepaid will not restrict Lehman Brothers
Holdings' ability to merge or consolidate with, or sell its assets to, another
firm or to engage in any other transactions. If at any time Lehman Brothers
Holdings merges or consolidates with, or sells its assets substantially as an
entirety to, another firm, the successor company will succeed to and assume
Lehman Brothers Holdings' obligations under these purchase contracts. Lehman
Brothers Holdings will then be relieved of any further obligation under these
purchase contracts and, in the event of any such merger, consolidation or sale,
Lehman Brothers Holdings as the predecessor company may at any time thereafter
be dissolved, wound up or liquidated.

     Purchase contracts that are not prepaid will not include any restrictions
on Lehman Brothers Holdings' ability to put liens on its assets, including
Lehman Brothers Holdings' interests in its subsidiaries. These purchase
contracts also will not provide for any events of default or remedies upon the
occurrence of any events of default.


INFORMATION IN THE PROSPECTUS SUPPLEMENT

     The prospectus supplement may contain, where applicable, the following
information about your purchase contract:

     o   whether the purchase contract obligates the holder to purchase or sell,
         or both purchase and sell, one or more purchase contract properties and
         the nature and amount of each of those properties, or the method of
         determining those amounts,

     o   whether the purchase contract is to be prepaid or not and the governing
         document for the contract,


                                       24




     o   whether the purchase contract is to be settled by delivery of, or by
         reference or linkage to the value, performance or level of, the
         purchase contract properties,

     o   any acceleration, cancellation, termination or other provisions
         relating to the settlement of the purchase contract,

     o   if the purchase contract property is an index, the method of providing
         for a substitute index or indices or otherwise determining the amount
         payable in connection with the settlement of the purchase contract if
         any index changes or ceases to be made available by its publisher,

     o   whether, following the occurrence of a market disruption event or force
         majeure event (as defined in the prospectus supplement), the settlement
         delivery obligation or cash settlement value of a purchase contract
         will be determined on a different basis than under normal
         circumstances,

     o   whether the purchase contract will be issued as part of a unit and, if
         so, the other securities comprising the unit and whether any unit
         securities will be subject to a security interest in Lehman Brothers
         Holdings' favor as described below,

     o   whether the purchase contract will be issued in global or non-global
         form, although, in any case, the form of a purchase contract included
         in a unit will correspond to the form of the unit and of any debt
         security or warrant included in that unit,

     o   the identities of any depositaries and any paying, transfer,
         calculation or other agents for the purchase contracts,

     o   any securities exchange or quotation system on which the purchase
         contracts or any securities deliverable in settlement of the purchase
         contracts may be listed, and

     o   any other terms of the purchase contracts.

     If Lehman Brothers Holdings issues a purchase contract as part of a unit,
the prospectus supplement will state whether the contract will be separable
from the other securities in the unit before the contract settlement date. A
purchase contract issued in a unit in the United States may not be so separated
before the 91st day after the unit is issued.


CALCULATION AGENTS

     Calculations relating to purchase contracts will be made by the
calculation agent, an institution that Lehman Brothers Holdings appoints as its
agent for this purpose. That institution may be an affiliate of Lehman Brothers
Holdings, such as Lehman Brothers Inc. Lehman Brothers Holdings may appoint a
different institution to serve as calculation agent from time to time after the
original issue date of the purchase contract without your consent and without
notifying you of the change. The initial calculation agent will be identified
in the prospectus supplement.


NO LIMIT ON ISSUANCE OF PURCHASE CONTRACTS

     There is no limit on the number of purchase contracts or other securities
that Lehman Brothers Holdings may issue.


GOVERNING LAW

     Unless stated otherwise in the prospectus supplement, the purchase
contracts and any governing documents will be governed by New York law.


                             DESCRIPTION OF UNITS

     Please note that in this section entitled "Description of Units",
references to Lehman Brothers Holdings refer only to Lehman Brothers Holdings
and not to its consolidated subsidiaries. Also, in this section, references to
"holders" mean those who own units registered in their own names, on the


                                       25




books that Lehman Brothers Holdings or its agent maintains for this purpose,
and not those who own beneficial interests in units registered in street name
or in units issued in book-entry form through one or more depositaries. Owners
of beneficial interests in the units should read the section below entitled
"Book-Entry Procedures and Settlement".


GENERAL

     Lehman Brothers Holdings may issue units in such amounts and in as many
distinct series as Lehman Brothers Holdings wishes. This section summarizes
terms of the units that apply generally to all series. Most of the financial
and other specific terms of your series will be described in the prospectus
supplement. Those terms may vary from the terms described here.

     The units of a series will be issued under a separate unit agreement to be
entered into between Lehman Brothers Holdings and one or more banks or trust
companies, as unit agent, as set forth in the prospectus supplement. A form of
each unit agreement, including a form of unit certificate representing each
unit, reflecting the particular terms and provisions of a series of offered
units will be filed with the SEC at the time of the offering and incorporated
by reference in the registration statement of which this prospectus forms a
part. You can obtain a copy of any form of unit agreement when it has been
filed by following the directions on page 6 or by contacting the applicable
unit agent.

     The following briefly summarizes the material provisions of the unit
agreements and the units. The specific terms of your unit as described in the
prospectus supplement will supplement and, if applicable, may modify or replace
the general terms described in this section. You should read carefully the
prospectus supplement and the more detailed provisions of the unit agreement
and the unit certificate, including the defined terms, for provisions that may
be important to you. If there are differences between the prospectus supplement
and this prospectus, the prospectus supplement will control. Thus, the
statements made in this section may not apply to your unit.

     Lehman Brothers Holdings may issue units comprised of one or more debt
securities, warrants and purchase contracts in any combination. Each unit will
be issued so that the holder of the unit is also the holder of each security
included in the unit. Thus, the holder of a unit will have the rights and
obligations of a holder of each included security. The unit agreement under
which a unit is issued may provide that the securities included in the unit may
not be held or transferred separately, at any time or at any time before a
specified date.


INFORMATION IN THE PROSPECTUS SUPPLEMENT

     The prospectus supplement may contain, where applicable, the following
information about your unit:

     o   the designation and terms of the units and of the securities comprising
         the units, including whether and under what circumstances those
         securities may be held or transferred separately;

     o   any provisions of the governing unit agreement that differ from those
         described below;

     o   whether the units will be issued in global or non-global form,
         although, in any case, the form of a unit will correspond to the form
         of the debt securities, warrants and/or purchase contracts included in
         that unit,

     o   the identities of the unit agent, any depositaries and any paying,
         transfer, calculation or other agents for the units,

     o   any securities exchange or quotation system on which the units and the
         securities separable therefrom may be listed, and

     o   any other terms of the units.

     The applicable provisions described in this section, as well as those
described under "Description of Debt Securities", "Description of Warrants" and
"Description of Purchase Contracts", will apply to each unit and to any debt
security, warrant or purchase contract included in each unit, respectively.


                                       26




UNIT AGREEMENTS: PREPAID, NON-PREPAID AND OTHER

     Lehman Brothers Holdings will issue the units under one or more unit
agreements to be entered into between Lehman Brothers Holdings and a bank or
other financial institution, as unit agent. Lehman Brothers Holdings may add,
replace or terminate unit agents from time to time. Lehman Brothers Holdings
may also choose to act as its own unit agent. Lehman Brothers Holdings will
identify the unit agreement under which your units will be issued and the unit
agent under that agreement in the applicable prospectus supplement.

     If a unit includes one or more purchase contracts and all those purchase
contracts are prepaid purchase contracts, Lehman Brothers Holdings will issue
the unit under a "prepaid unit agreement". Prepaid unit agreements will reflect
the fact that the holders of the related units have no further obligations
under the purchase contracts included in their units. If a unit includes one or
more non-prepaid purchase contracts, Lehman Brothers Holdings will issue the
unit under a "non-prepaid unit agreement". Non-prepaid unit agreements will
reflect the fact that the holders have payment or other obligations under one
or more of the purchase contracts comprising their units. Lehman Brothers
Holdings may also issue units under other kinds of unit agreements, which will
be described in the applicable prospectus supplement. In some cases, Lehman
Brothers Holdings may issue units under one of its indentures.

     A unit agreement may also serve as the governing document for a security
included in a unit. For example, a non-prepaid purchase contract that is part
of a unit may be issued under and governed by the relevant unit agreement.

     This prospectus refers to prepaid unit agreements, non-prepaid unit
agreements and other unit agreements, generally, as "unit agreements".


GENERAL PROVISIONS OF A UNIT AGREEMENT

     The following provisions will generally apply to all unit agreements
unless otherwise stated in the prospectus supplement.

     Enforcement of Rights

     The unit agent under a unit agreement will act solely as Lehman Brothers
Holdings's agent in connection with the units issued under that agreement. The
unit agent will not assume any obligation or relationship of agency or trust
for or with any registered holder of or owner of a beneficial interest in those
units or of the securities comprising those units. The unit agent will not be
obligated to take any action on behalf of those holders or owners to enforce or
protect their rights under the units or the included securities.

     Except as indicated in the next paragraph, a holder of a unit may, without
the consent of the unit agent or any other holder, enforce its rights as holder
under any security included in the unit, in accordance with the terms of that
security and the indenture, warrant agreement or unit agreement under which
that security is issued. Those terms are described elsewhere in this prospectus
under the sections relating to debt securities, warrants and purchase
contracts.

     Notwithstanding the foregoing, a unit agreement may limit or otherwise
affect the ability of a holder of units issued under that agreement to enforce
its rights, including any right to bring a legal action, with respect to those
units or any securities, other than debt securities and prepaid purchase
contracts, that are included in those units. Limitations of this kind will be
described in the prospectus supplement.

     Modification Without Consent of Holders

     Lehman Brothers Holdings and the applicable unit agent may amend any unit
or unit agreement without the consent of any holder:

     o   to cure any ambiguity,


                                       27




     o   to correct or supplement any defective or inconsistent provision, or

     o   to make any other change that Lehman Brothers Holdings believes is
         necessary or desirable and will not adversely affect the interests of
         the affected holders in any material respect.

     Lehman Brothers Holdings does not need any approval to make changes that
affect only units to be issued after the changes take effect. Lehman Brothers
Holdings may also make changes that do not adversely affect a particular unit
in any material respect, even if they adversely affect other units in a
material respect. In those cases, Lehman Brothers Holdings does not need to
obtain the approval of the holder of the unaffected unit; Lehman Brothers
Holdings only needs to obtain any required approvals from the holders of the
affected units.

     The foregoing applies also to any security issued under a unit agreement,
as the governing document.

     Modification With Consent of Holders

     Lehman Brothers Holdings may not amend any particular unit or a unit
agreement with respect to any particular unit unless Lehman Brothers Holdings
obtains the consent of the holder of that unit, if the amendment would:

     o   impair any right of the holder to exercise or enforce any right under a
         security included in the unit if the terms of that security require the
         consent of the holder to any changes that would impair the exercise or
         enforcement of that right,

     o   impair the right of the holder to purchase or sell, as the case may be,
         the purchase contract property under any non-prepaid purchase contract
         issued under the unit agreement, or to require delivery of or payment
         for that property when due, or

     o   reduce the percentage of outstanding units of any series or class the
         consent of whose holders is required to amend that series or class, or
         the applicable unit agreement with respect to that series or class, as
         described below.

     Any other change to a particular unit agreement and the units issued under
that agreement would require the following approval:

     o   If the change affects only the units of a particular series issued
         under that agreement, the change must be approved by the holders of a
         majority of the outstanding units of that series.

     o   If the change affects the units of more than one series issued under
         that agreement, it must be approved by the holders of a majority of all
         outstanding units of all series affected by the change, with the units
         of all the affected series voting together as one class for this
         purpose.

     These provisions regarding changes with majority approval also apply to
changes affecting any securities issued under a unit agreement, as the
governing document.

     In each case, the required approval must be given by written consent.

     Unit Agreements Will Not Be Qualified Under Trust Indenture Act

     No unit agreement will be qualified as an indenture, and no unit agent
will be required to qualify as a trustee, under the Trust Indenture Act.
Therefore, holders of units issued under unit agreements will not have the
protections of the Trust Indenture Act with respect to their units.


ADDITIONAL PROVISIONS OF A NON-PREPAID UNIT AGREEMENT

     In addition to the provisions described above, a non-prepaid unit
agreement will include the following provisions.


                                       28




     Obligations of Unit Holder

     Each holder of units issued under a non-prepaid unit agreement will:

     o   be bound by the terms of each non-prepaid purchase contract included in
         the holder's units and by the terms of the unit agreement with respect
         to those contracts, and

     o   appoint the unit agent as its authorized agent to execute, deliver and
         perform on the holder's behalf each non-prepaid purchase contract
         included in the holder's units.

     The unit agreement for a unit that includes a non-prepaid purchase
contract will also include provisions regarding the holder's pledge of
collateral and special settlement provisions. These are described above under
"Description of Purchase Contracts--Additional Terms of Non-Prepaid Purchase
Contracts".

     Assumption of Obligations by Transferee

     When the holder of a unit issued under a non-prepaid unit agreement
transfers the unit to a new holder, the new holder will assume the obligations
of the prior holder with respect to each non-prepaid purchase contract included
in the unit, and the prior holder will be released from those obligations.
Under the non-prepaid unit agreement, Lehman Brothers Holdings will consent to
the transfer of the unit, to the assumption of those obligations by the new
holder and to the release of the prior holder, if the transfer is made in
accordance with the provisions of that agreement.


MERGERS AND SIMILAR TRANSACTIONS PERMITTED; NO RESTRICTIVE COVENANTS OR EVENTS
OF DEFAULT

     The unit agreements will not restrict Lehman Brothers Holdings's ability
to merge or consolidate with, or sell its assets to, another firm or to engage
in any other transactions. If at any time Lehman Brothers Holdings merges or
consolidates with, or sells its assets substantially as an entirety to, another
firm, the successor company will succeed to and assume Lehman Brothers
Holdings' obligations under the unit agreements. Lehman Brothers Holdings will
then be relieved of any further obligation under these agreements and, in the
event of any such merger, consolidation or sale, Lehman Brothers Holdings as
the predecessor corporation may at any time thereafter be dissolved, wound up
or liquidated.

     The unit agreements will not include any restrictions on Lehman Brothers
Holdings' ability to put liens on its assets, including Lehman Brothers
Holdings' interests in its subsidiaries. The unit agreements also will not
provide for any events of default or remedies upon the occurrence of any events
of default.


NO LIMIT ON ISSUANCE OF UNITS

     There is no limit on the number of units or other securities that Lehman
Brothers Holdings may issue.


GOVERNING LAW

     Unless otherwise stated in the prospectus supplement, the unit agreements
and the units will be governed by New York law.


                           FORM, EXCHANGE AND TRANSFER

     Securities will only be issued in registered form; no securities will be
issued in bearer form. Lehman Brothers Holdings will issue each debt security,
warrant, purchase contract or unit in book-entry form only, unless otherwise
specified in the prospectus supplement. Securities in book-entry form will be
represented by a global security registered in the name of a depositary, which
will be the holder of all the securities represented by the global security.
Those who own beneficial interests in a global security will do so through
participants in the depositary's system, and the rights


                                       29




of these indirect owners will be governed solely by the applicable procedures
of the depositary and its participants. Only the depositary will be entitled to
transfer or exchange a security in global form, since it will be the sole
holder of the security. These book-entry securities are described below under
"Book-Entry Procedures and Settlement".

     If any securities are issued in non-global form or cease to be book-entry
securities (in the circumstances described in the next section), the following
will apply to them:

     o   The securities will be issued in fully registered form in denominations
         stated in the prospectus supplement. Holders may exchange their
         securities for debt securities, warrants, purchase contracts or units,
         as the case may be, of the same series of smaller denominations or
         combined into fewer securities of the same series of larger
         denominations, as long as the total amount is not changed.

     o   Holders may exchange, transfer, present for payment or exercise their
         securities at the office of the trustee, warrant agent, unit agent or
         other agent indicated in the prospectus supplement. They may also
         replace lost, stolen, destroyed or mutilated securities at that office.
         Lehman Brothers Holdings may appoint another entity to perform these
         functions or may perform them itself.

     o   Holders will not be required to pay a service charge to transfer or
         exchange their securities, but they may be required to pay any tax or
         other governmental charge associated with the transfer or exchange. The
         transfer or exchange, and any replacement, will be made only if Lehman
         Brothers Holdings' transfer agent is satisfied with the holder's proof
         of legal ownership. The transfer agent may also require an indemnity
         before replacing any securities.

     o   If Lehman Brothers Holdings has the right to redeem, accelerate or
         settle any securities before their maturity or expiration, and Lehman
         Brothers Holdings exercises that right as to less than all those
         securities, Lehman Brothers Holdings may block the transfer or exchange
         of those securities during the period beginning 15 days before the day
         Lehman Brothers Holdings mails the notice of exercise and ending on the
         day of that mailing, in order to freeze the list of holders to prepare
         the mailing. Lehman Brothers Holdings may also refuse to register
         transfers of or exchange any security selected for early settlement,
         except that Lehman Brothers Holdings will continue to permit transfers
         and exchanges of the unsettled portion of any security being partially
         settled.

     o   If fewer than all of the securities represented by a certificate that
         are payable or exercisable in part are presented for payment or
         exercise, a new certificate will be issued for the remaining amount of
         securities.


                      BOOK-ENTRY PROCEDURES AND SETTLEMENT

     Most offered securities will be book-entry (global) securities. Upon
issuance, all book-entry securities will be represented by one or more fully
registered global securities without coupons. Each global security will be
deposited with, or on behalf of, The Depository Trust Company, a securities
depository, and will be registered in the name of DTC or a nominee of DTC. DTC
will thus be the only registered holder of these securities.

     Purchasers of securities may only hold interests in the global securities
through DTC if they are participants in the DTC system. Purchasers may also
hold interests through a securities intermediary--banks, brokerage houses and
other institutions that maintain securities accounts for customers--that has an
account with DTC or its nominee. DTC will maintain accounts showing the
security holdings of its participants, and these participants will in turn
maintain accounts showing the security holdings of their customers. Some of
these customers may themselves be securities intermediaries holding securities
for their customers. Thus, each beneficial owner of a book-entry security will
hold that security indirectly through a hierarchy of intermediaries, with DTC
at the "top" and the beneficial owner's own securities intermediary at the
"bottom".


                                       30




     The securities of each beneficial owner of a book-entry security will be
evidenced solely by entries on the books of the beneficial owner's securities
intermediary. The actual purchaser of the securities will generally not be
entitled to have the securities represented by the global securities registered
in its name and will not be considered the owner under the declaration. In most
cases, a beneficial owner will also not be able to obtain a paper certificate
evidencing the holder's ownership of securities. The book-entry system for
holding securities eliminates the need for physical movement of certificates
and is the system through which most publicly traded securities are held in the
United States. However, the laws of some jurisdictions require some purchasers
of securities to take physical delivery of their securities in definitive form.
These laws may impair the ability to transfer book-entry securities.

     A beneficial owner of book-entry securities represented by a global
security may exchange the securities for definitive (paper) securities only if:

     o   DTC is unwilling or unable to continue as depositary for such global
         security and Lehman Brothers Holdings does not appoint a qualified
         replacement for DTC within 90 days; or

     o   Lehman Brothers Holdings in its sole discretion decides to allow some
         or all book-entry securities to be exchangeable for definitive
         securities in registered form.

     Unless we indicate otherwise, any global security that is exchangeable
will be exchangeable in whole for definitive securities in registered form,
with the same terms and of an equal aggregate principal amount or aggregate
number of warrants or units, as the case may be. Definitive securities will be
registered in the name or names of the person or persons specified by DTC in a
written instruction to the registrar of the securities. DTC may base its
written instruction upon directions that it receives from its participants.

     In this prospectus, for book-entry securities, references to actions taken
by security holders will mean actions taken by DTC upon instructions from its
participants, and references to payments, notices of redemption and other
notices to security holders will mean payments, notices of redemption and other
notices to DTC as the registered holder of the securities for distribution to
participants in accordance with DTC's procedures.

     DTC is a limited purpose trust company organized under the laws of the
State of New York, a member of the Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under section 17A of the Securities Exchange Act
of 1934. The rules applicable to DTC and its participants are on file with the
SEC.

     Lehman Brothers Holdings will not have any responsibility or liability for
any aspect of the records relating to, or payments made on account of,
beneficial ownership interest in the book-entry securities or for maintaining,
supervising or reviewing any records relating to the beneficial ownership
interests.


CLEARSTREAM AND EUROCLEAR

     Links have been established among DTC, Clearstream Banking, societe
anonyme, Luxembourg ("Clearstream Banking SA") and Euroclear (two international
clearing systems that perform functions similar to those that DTC performs in
the U.S.), to facilitate the initial issuance of book-entry securities and
cross-market transfers of book-entry securities associated with secondary
market trading.

     Although DTC, Clearstream Banking SA and Euroclear have agreed to the
procedures provided below in order to facilitate transfers, they are under no
obligation to perform such procedures, and the procedures may be modified or
discontinued at any time.

     Clearstream Banking SA and Euroclear will record the ownership interests
of their participants in much the same way as DTC, and DTC will record the
aggregate ownership of each of the U.S. agents of Clearstream Banking SA and
Euroclear, as participants in DTC.


                                       31




     When book-entry securities are to be transferred from the account of a DTC
participant to the account of a Clearstream Banking SA participant or a
Euroclear participant, the purchaser must send instructions to Clearstream
Banking SA or Euroclear through a participant at least one business day prior
to settlement. Clearstream Banking SA or Euroclear, as the case may be, will
instruct its U.S. agent to receive book-entry securities against payment. After
settlement, Clearstream Banking SA or Euroclear will credit its participant's
account. Credit for the book-entry securities will appear on the next day
(European time).

     Because settlement is taking place during New York business hours, DTC
participants can employ their usual procedures for sending book-entry
securities to the relevant U.S. agent acting for the benefit of Clearstream
Banking SA or Euroclear participants. The sale proceeds will be available to
the DTC seller on the settlement date. Thus, to the DTC participant, a
cross-market transaction will settle no differently than a trade between two
DTC participants.

     When a Clearstream Banking SA or Euroclear participant wishes to transfer
book-entry securities to a DTC participant, the seller must send instructions
to Clearstream Banking SA or Euroclear through a participant at least one
business day prior to settlement. In these cases, Clearstream Banking SA or
Euroclear will instruct its U.S. agent to transfer the book-entry securities
against payment. The payment will then be reflected in the account of the
Clearstream Banking SA or Euroclear participant the following day, with the
proceeds back-valued to the value date (which would be the preceding day, when
settlement occurs in New York). If settlement is not completed on the intended
value date (i.e., the trade fails), proceeds credited to the Clearstream
Banking SA or Euroclear participant's account would instead be valued as of the
actual settlement date.


                  UNITED STATES FEDERAL INCOME TAX CONSEQUENCES

     The prospectus supplement will contain a summary of the material U.S.
federal income tax consequences to U.S. persons investing in offered
securities. The summary of U.S. federal income tax consequences contained in
the prospectus supplement will be presented for informational purposes only,
however, and will not be intended as legal or tax advice to prospective
purchasers. You are urged to consult your own tax advisor prior to any
acquisition of offered securities.


                              PLAN OF DISTRIBUTION

     Lehman Brothers Holdings may offer the offered securities in one or more
of the following ways from time to time:

     o   to or through underwriters or dealers;

     o   by itself directly;

     o   through agents; or

     o   through a combination of any of these methods of sale.

     Any such underwriters, dealers or agents may include Lehman Brothers Inc.
or other affiliates of Lehman Brothers Holdings.

     The prospectus supplement relating to a particular offering of securities
will set forth the terms of such offering, including:

     o   the name or names of any underwriters, dealers or agents;

     o   the purchase price of the offered securities and the proceeds to Lehman
         Brothers Holdings from such sale;

     o   any underwriting discounts and commissions or agency fees and other
         items constituting underwriters' or agents' compensation;

     o   the initial public offering price;

     o   any discounts or concessions to be allowed or reallowed or paid to
         dealers; and


                                       32




     o   any securities exchanges on which such offered securities may be
         listed.

     Any initial public offering prices, discounts or concessions allowed or
reallowed or paid to dealers may be changed from time to time.

     If underwriters are used in an offering of offered securities, such
offered securities will be acquired by the underwriters for their own account
and may be resold from time to time in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale. The securities may be either offered to the
public through underwriting syndicates represented by one or more managing
underwriters or by one or more underwriters without a syndicate. Unless
otherwise set forth in the prospectus supplement, the underwriters will not be
obligated to purchase offered securities unless specified conditions are
satisfied, and if the underwriters do purchase any offered securities, they
will purchase all offered securities.

     In connection with underwritten offerings of the offered securities and in
accordance with applicable law and industry practice, underwriters may
over-allot or effect transactions that stabilize, maintain or otherwise affect
the market price of the offered securities at levels above those that might
otherwise prevail in the open market, including by entering stabilizing bids,
effecting syndicate covering transactions or imposing penalty bids, each of
which is described below:

     o   A stabilizing bid means the placing of any bid, or the effecting of any
         purchase, for the purpose of pegging, fixing or maintaining the price
         of a security.

     o   A syndicate covering transaction means the placing of any bid on behalf
         of the underwriting syndicate or the effecting of any purchase to
         reduce a short position created in connection with the offering.

     o   A penalty bid means an arrangement that permits the managing
         underwriter to reclaim a selling concession from a syndicate member in
         connection with the offering when offered securities originally sold by
         the syndicate member are purchased in syndicate covering transactions.

     These transactions may be effected on the NYSE, in the over-the-counter
market, or otherwise. Underwriters are not required to engage in any of these
activities, or to continue such activities if commenced.

     If dealers are utilized in the sale of offered securities, Lehman Brothers
Holdings will sell such offered securities to the dealers as principals. The
dealers may then resell such offered securities to the public at varying prices
to be determined by such dealers at the time of resale. The names of the
dealers and the terms of the transaction will be set forth in the prospectus
supplement relating to that transaction.

     Offered securities may be sold directly by Lehman Brothers Holdings to one
or more institutional purchasers, or through agents designated by Lehman
Brothers Holdings from time to time, at a fixed price or prices, which may be
changed, or at varying prices determined at the time of sale. Any such agent
may be deemed to be an underwriter as that term is defined in the Securities
Act. Any agent involved in the offer or sale of the offered securities in
respect of which this prospectus is delivered will be named, and any
commissions payable by Lehman Brothers Holdings to such agent will be set
forth, in the prospectus supplement relating to that offering. Unless otherwise
indicated in such prospectus supplement, any such agent will be acting on a
best efforts basis for the period of its appointment.

     If so indicated in the applicable prospectus supplement, Lehman Brothers
Holdings will authorize agents, underwriters or dealers to solicit offers from
certain types of institutions to purchase offered securities from Lehman
Brothers Holdings at the public offering price set forth in such prospectus
supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject only
to those conditions set forth in the prospectus supplement and the prospectus
supplement will set forth the commission payable for solicitation of such
contracts.


                                       33




     Lehman Brothers Inc., the U.S. broker-dealer subsidiary of Lehman Brothers
Holdings, is a member of the National Association of Securities Dealers, Inc.
and may participate in distributions of the offered securities. Accordingly,
offerings of offered securities in which Lehman Brothers Inc. participates will
conform to the requirements set forth in Rule 2720 of the Conduct Rules of the
NASD. Furthermore, any underwriters offering the offered securities will not
confirm sales to any accounts over which they exercise discretionary authority
without the prior approval of the customer.

     This prospectus together with any applicable prospectus supplement may
also be used by Lehman Brothers Inc. and other affiliates of Lehman Brothers
Holdings in connection with offers and sales of the offered securities in
market-making transactions at negotiated prices related to prevailing market
prices at the time of sale. Such affiliates may act as principals or agents in
such transactions. Such affiliates have no obligation to make a market in any
of the offered securities and may discontinue any market-making activities at
any time without notice, at its sole discretion.

     Underwriters, dealers and agents may be entitled, under agreements with
Lehman Brothers Holdings, to indemnification by Lehman Brothers Holdings
relating to material misstatements and omissions. Underwriters, dealers and
agents may be customers of, engage in transactions with, or perform services
for, Lehman Brothers Holdings and affiliates of Lehman Brothers Holdings in the
ordinary course of business.

     Each series of offered securities will be a new issue of securities and
will have no established trading market. Any underwriters to whom offered
securities are sold for public offering and sale may make a market in such
offered securities, but such underwriters will not be obligated to do so and
may discontinue any market making at any time without notice. The offered
securities may or may not be listed on a national securities exchange. No
assurance can be given that there will be a market for the offered securities.


UNITED KINGDOM SELLING RESTRICTIONS

     Each underwriter will represent and agree that:

     o   it has not offered or sold and prior to the date six months after the
         date of issue of the offered securities will not offer or sell offered
         securities in the United Kingdom except to persons whose ordinary
         activities involve them in acquiring, holding, managing or disposing of
         investments (as principal or agent) for the purposes of their business
         or otherwise in circumstances which have not resulted and will not
         result in an offer to the public in the United Kingdom within the
         meaning of the Public Offers of Securities Regulations 1995;

     o   it has complied and will comply with all applicable provisions of the
         Financial Services Act 1986 with respect to anything done by it in
         relation to the offered securities in, from or otherwise involving the
         United Kingdom; and

     o   it has only issued or passed on, and will only issue or pass on, in the
         United Kingdom any document received by it in connection with the issue
         of the offered securities to a person who is of a kind described in
         Article 11(3) of the Financial Services Act 1986 (Investment
         Advertisement) (Exemptions) Order 1996 (as amended) or is a person to
         whom the document may otherwise lawfully be issued or passed on.


                              ERISA CONSIDERATIONS

     Lehman Brothers Holdings has subsidiaries, including Lehman Brothers Inc.,
that provide services to many employee benefit plans. Lehman Brothers Holdings
and any direct or indirect subsidiary of Lehman Brothers Holdings may each be
considered a "party in interest" within the meaning of the Employee Retirement
Income Security Act of 1974 ("ERISA"), and a "disqualified person" under
corresponding provisions of the Internal Revenue Code of 1986 (the "Code"),
relating to many employee benefit plans. "Prohibited transactions" within the
meaning of ERISA and the Code may result if any offered securities are acquired
by an employee benefit plan relating to which Lehman Brothers Holdings or any
direct or indirect subsidiary of Lehman Brothers Holdings is a party in


                                       34




interest, unless such offered securities are acquired pursuant to an applicable
exemption. Any employee benefit plan or other entity subject to such provisions
of ERISA or the Code proposing to acquire the offered securities should consult
with its legal counsel.


                                  LEGAL MATTERS

     Barrett S. DiPaolo, Vice President and Associate General Counsel of Lehman
Brothers Holdings, has rendered an opinion to Lehman Brothers Holdings
regarding the validity of the securities offered by the prospectus. Simpson
Thacher & Bartlett, New York, New York, or other counsel identified in the
applicable prospectus supplement, will act as legal counsel to the
underwriters. Simpson Thacher & Bartlett has from time to time acted as counsel
for Lehman Brothers Holdings and its subsidiaries and may do so in the future.


                                     EXPERTS

     The consolidated financial statements and financial statement schedule of
Lehman Brothers Holdings Inc. as of November 30, 2000 and 1999, and for each of
the years in the three-year period ended November 30, 2000, have been audited
by Ernst & Young LLP, independent certified public accountants, as set forth in
their report on the consolidated financial statements. The consolidated
financial statements and such report are incorporated by reference in Lehman
Brothers Holdings' annual report on Form 10-K for the year ended November 30,
2000, and incorporated by reference in this prospectus. The consolidated
financial statements of Lehman Brothers Holdings referred to above are
incorporated by reference in this prospectus in reliance upon such report given
on the authority of said firm as experts in accounting and auditing. To the
extent that Ernst & Young LLP audits and reports on consolidated financial
statements of Lehman Brothers Holdings issued at future dates, and consents to
the use of their report thereon, such consolidated financial statements also
will be incorporated by reference in the registration statement in reliance
upon their report given on said authority.


                                       35



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                                   $20,000,000


                          LEHMAN BROTHERS HOLDINGS INC.


                                   RAPIDS(SM)


        RETURN ACCELERATED PORTFOLIO DEBT SECURITIES DUE JULY    , 2006
               BASED UPON A BASKET OF THREE PHARMACEUTICAL STOCKS


                               -------------------
                              PROSPECTUS SUPPLEMENT
                                JANUARY   , 2005


                              (INCLUDING PROSPECTUS
                               DATED JUNE 21, 2001)
                               -------------------

                                 LEHMAN BROTHERS

                                [GRAPHIC OMITTED]