424B5 1 file001.htm FORM 424B5

Filed Pursuant to Rule 424(b)5
Registration No. 333-121067

PRICING SUPPLEMENT No. 1
to Prospectus Supplement dated May 18, 2005
to Prospectus Supplement dated May 18, 2005
and Prospectus dated May 18, 2005

480,000 YEELDS(R)
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES H

7.0% Yield Enhanced Equity Linked Debt Securities Due April 14, 2006
Performance Linked to The Gap, Inc. (GPS) Common Stock

Because these notes are part of a series of Lehman Brothers Holdings' debt
securities called Medium-Term Notes, Series H, this pricing supplement and
the accompanying prospectus supplement, dated May 18, 2005 (the "YEELDS
prospectus supplement") should also be read with the accompanying
prospectus supplement, dated May 18, 2005 (the "MTN prospectus supplement")
and the accompanying prospectus dated May 18, 2005 (the "base prospectus").
Terms used here have the meanings given them in the YEELDS prospectus
supplement, the MTN prospectus supplement or the base prospectus, unless
the context requires otherwise.

o INDEX STOCK ISSUER: The Gap, Inc. The Gap, Inc. is not involved in this
offering and has no obligation with respect to the notes.

o INDEX STOCK: The common stock of the index stock issuer.

o STATED MATURITY DATE: April 14, 2006, subject to postponement if a market
disruption event occurs on the valuation date.

o VALUATION DATE: April 7, 2006, subject to postponement if a market
disruption event occurs, as described under the caption "Description of the
Notes--Settlement value" on page SS-12 of the YEELDS prospectus supplement.

o DETERMINATION PERIOD: Five business days.

o COUPON RATE: 7.0% per annum.

o COUPON PAYMENT DATES: The fourteenth calendar day of each month of each
year, beginning on August 14, 2005.

o COUPON RECORD DATES: 15 calendar days prior to each coupon payment date.

o PRINCIPAL AMOUNT: $21.1819 per YEELDS and, in the aggregate,
$10,167,312.00.

o LISTING: The YEELDS will not be listed on any exchange.

o EQUITY CAP PRICE: $23.30009, which represents 110% of the initial value.

o INITIAL VALUE: $21.1819, which is the average execution price per share for
the index stock that an affiliate of Lehman Brothers Holdings paid to hedge
Lehman Brothers Holdings' obligations under the notes.

o DENOMINATIONS: $21.1819 and integral multiples thereof.

o PAYMENT AT MATURITY: On the stated maturity date, Lehman Brothers Holdings
will pay you in cash, per YEELDS, the lesser of:

(1) the alternative redemption amount; and

(2) $23.30009

Because the principal amount is equal to the initial value, the
alternative redemption amount per YEELDS will equal the settlement
value.

The settlement value will be based upon the adjusted closing price of
the index stock on the valuation date, and shall generally be equal to
the adjusted closing price multiplied by the multiplier, as described
beginning on page PS-2 of this pricing supplement under "Settlement
Value Based Upon Adjusted Closing Price".

o Stock Settlement Option: None.

Investing in the notes involves risks. Risk Factors begin on page SS-6
of the YEELDS prospectus supplement.

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

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Per YEELDS Total
------------- -----------------
Public offering price.................... $21.181900 $10,167,312.00
Underwriting discount.................... $ 0.052955 $ 25,418.40
Proceeds to Lehman Brothers Holdings..... $21.128945 $10,141,893.60

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Lehman Brothers Holdings has granted the underwriter an option to purchase,
within 13 days of the original issuance, up to an additional 72,000 YEELDS on
the same terms and conditions set forth above solely to cover over-allotments,
if any.

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The notes are expected to be ready for delivery in book-entry form only through
The Depository Trust Company on or about July 14, 2005.

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LEHMAN BROTHERS

July 7, 2005

"YEELDS" is a registered trademark of Lehman Brothers Inc.

SETTLEMENT VALUE BASED UPON ADJUSTED CLOSING PRICE

Notwithstanding the statement in the YEELDS prospectus supplement in the first
sentence under "Description of Notes--Settlement value" that the settlement
value will be based upon the closing price of the index stock, in the case of
the YEELDS offered hereby, the settlement value will be based upon the adjusted
closing price of the index stock on the valuation date, and shall generally be
equal to such adjusted closing price multiplied by the multiplier then in
effect. Adjustments to the closing price will occur, as described below, if The
Gap, Inc. changes the per share amount of dividends it pays on its shares of
common stock during the term of the YEELDS.

The adjusted closing price of The Gap, Inc. common stock on any scheduled
trading day will equal the closing price of such common stock on such scheduled
trading day, plus the dividend adjustment amount (which may be a negative
number) in effect on such scheduled trading day. The dividend adjustment amount
shall initially be zero.

If, during the period from, but excluding, the date of this pricing supplement
to the valuation date, holders of record of shares of common stock of The Gap,
Inc. are entitled to receive a cash dividend (other than an extraordinary cash
dividend, as determined by the calculation agent in its good faith judgment)
from The Gap, Inc. and the amount of the dividend is less than the base dividend
(as described below) per share of common stock, including if The Gap, Inc. fails
to declare or make a quarterly dividend payment on its shares of common stock
(as determined by the calculation agent in its sole and absolute discretion),
the dividend adjustment amount then in effect shall be reduced on the
ex-dividend date for The Gap, Inc. dividend (any such day, an "effective
adjustment date") by an amount equal to the difference between the base dividend
and the new dividend. Any such downward adjustment of the dividend adjustment
amount may decrease the amount you receive upon maturity. The "base dividend"
shall be $0.045, the amount of the quarterly dividend per share of common stock
most recently paid by The Gap, Inc. prior to the date of this pricing
supplement, subject to adjustment in the event of certain events affecting the
shares of common stock of The Gap, Inc., such as share splits, reverse share
splits or reclassifications, as determined by the calculation agent, in its good
faith judgment. If the calculation agent determines in its sole and absolute
discretion that The Gap, Inc. has failed to declare or make a quarterly dividend
payment, the effective adjustment date for adjusting the dividend adjustment
amount will be the first business day immediately following November 15, 2005
and February 15, 2006 and the valuation date, as applicable.

If, during the period from, but excluding, the date of this pricing supplement
to the valuation date, holders of record of The Gap, Inc. common stock are
entitled to receive a cash dividend (other than an extraordinary cash dividend,
as determined by the calculation agent in its good faith judgment) from The Gap,
Inc. and the amount of the dividend is more than the base dividend per share,
the dividend adjustment amount then in effect shall be increased on the
effective adjustment date by an amount equal to the excess of the new dividend
over the base dividend. Any such upward adjustment to the dividend adjustment
amount may increase the amount you receive upon maturity.

The dividend adjustment amount in effect at any time shall be adjusted in the
event of certain events affecting the shares of common stock of The Gap, Inc.,
such as share splits, reverse share splits or reclassifications, as determined
by the calculation agent, in its good faith judgment.

You may call Lehman Brothers Inc. at 212-526-0905 to obtain the current value of
the dividend adjustment amount.

PS-2

EXAMPLES OF AMOUNT PAYABLE AT MATURITY

Here are three examples of the amount that may be payable on the stated maturity
date. In each of these examples it is assumed that The Gap, Inc. does not change
the amount of the quarterly dividends that it pays on its shares of common stock
during the term of the YEELDS.

EXAMPLE 1. ASSUMING THE SETTLEMENT VALUE IS $15.00:

As a result, on the stated maturity date, you would receive $15.00 per YEELDS,
plus accrued but unpaid coupon payments, because the settlement value of $15.00
is less than $23.30009.

EXAMPLE 2. ASSUMING THE SETTLEMENT VALUE IS $22.00:

As a result, on the stated maturity date, you would receive $22.00 per YEELDS,
plus accrued but unpaid coupon payments, because the settlement value of $22.00
is less than $23.30009.

EXAMPLE 3. ASSUMING THE SETTLEMENT VALUE IS $30.00:

As a result, on the stated maturity date, you would receive $23.30009 per
YEELDS, plus accrued but unpaid coupon payments, because $23.30009 is less than
the settlement value of $30.00.

To the extent the actual settlement value differs from the values assumed above
or that The Gap, Inc. changes the amount of the quarterly dividends it pays, the
results indicated above would be different.

PS-3

INDEX STOCK ISSUER AND INDEX STOCK

THE GAP, INC.

Lehman Brothers Holdings has obtained the following information regarding The
Gap, Inc. from The Gap, Inc.'s reports filed with the SEC.

The Gap, Inc. is a global specialty retailer operating retail and outlet stores
selling casual apparel, accessories, and personal care products for men, women
and children under the Gap, Banana Republic and Old Navy brands. The Gap, Inc.
operates stores in the United States, Canada, the United Kingdom, France and
Japan. In addition, The Gap, Inc.'s U.S. customers may shop online at gap.com,
bananarepublic.com, and oldnavy.com.

The Gap, Inc. designs virtually all of its products, which are manufactured by
independent sources, and sells them under three brands:

o GAP. Founded in 1969, Gap stores offer extensive selections of classically
styled, high quality, casual apparel at moderate price points. Products
range from wardrobe basics such as denim, khakis and T-shirts to fashion
apparel, accessories and personal care products for men and women, ages
teen through adult. The Gap, Inc. entered the children's apparel market
with the introduction of GapKids in 1986 and babyGap in 1989. These stores
offer casual apparel and accessories in the tradition of Gap style and
quality for children, ages newborn through pre-teen. Launched in 1998,
GapBody offers women's underwear, sleepwear, swimwear and personal care
products.

o BANANA REPUBLIC. The Gap, Inc. acquired Banana Republic in 1983 with two
stores. Banana Republic now offers sophisticated, fashionable collections
of dress-casual and tailored apparel, shoes and accessories for men and
women at higher price points than Gap. Banana Republic products range from
apparel, including intimate apparel, to personal care products.

o OLD NAVY. The Gap, Inc. launched Old Navy in 1994 to address the market for
value-priced family apparel. Old Navy offers broad selections of apparel,
shoes and accessories for adults, children and infants as well as other
items, including personal care products, in an innovative, exciting
shopping environment. Old Navy also offers a line of maternity and plus
sizes in its stores.

The index stock is registered under the Securities Exchange Act of 1934 and is
currently listed on the New York Stock Exchange. 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 "Where You
Can Find More Information" on page 6 of the accompanying base prospectus. In
addition, information regarding the index stock may be obtained from other
sources including, but not limited to, press releases, newspaper articles and
other publicly disseminated documents.

HISTORICAL INFORMATION ABOUT THE INDEX STOCK

The index stock is listed on the New York Stock Exchange under the symbol "GPS".

The following table presents the high and low closing prices for The Gap, Inc.
common stock, as reported on the New York Stock Exchange during each quarter in
2002, 2003, 2004 and 2005 (through the date of this pricing supplement), and the
closing price at the end of each quarter in 2002, 2003, 2004 and 2005 (through
the date of this pricing supplement).

As indicated below, the market price of the index stock has been highly volatile
during recent periods.

It is impossible to predict whether the price of the index stock will rise or
fall. The historical prices of the index stock are not indications of future
performance. Lehman Brothers Holdings cannot assure you that the price of the
index stock will remain at, or increase above, the initial value; accordingly,
there can be no assurance that the payment you receive at maturity will equal or
exceed the principal amount. The historical prices below have been adjusted to
reflect any stock splits or reverse stock splits.

PS-4

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

<TABLE>

HIGH LOW PERIOD END
------------- -------------- ----------------

2002
First Quarter............................... $16.35 $11.97 $15.04
Second Quarter.............................. 16.89 13.55 14.20
Third Quarter............................... 14.80 10.85 10.85
Fourth Quarter.............................. 16.30 8.84 15.52

2003
First Quarter............................... $16.07 $12.70 $14.49
Second Quarter.............................. 18.76 14.70 18.76
Third Quarter............................... 21.03 17.12 17.12
Fourth Quarter.............................. 23.24 17.63 23.21

2004
First Quarter............................... $23.10 $18.40 $21.92
Second Quarter.............................. 25.66 21.70 24.25
Third Quarter............................... 24.52 18.65 18.65
Fourth Quarter.............................. 23.60 18.95 21.12

2005
First Quarter............................... $22.58 $20.65 $21.84
Second Quarter.............................. 21.90 19.55 19.75
Third Quarter (through the date of this
pricing supplement)......................... 20.99 19.82 20.99

</TABLE>

PS-5

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical settlement values on
the valuation date, in each case assuming that (a) the investment is held from
the date on which the YEELDS are first issued until the stated maturity date and
(b) The Gap, Inc. does not change the amount of the quarterly dividends that it
pays on its shares of common stock during the term of the YEELDS:

o the percentage change from the issue price to the hypothetical settlement
value on the valuation date;

o the total coupon payments paid or payable on or before the stated maturity
date per YEELDS;

o the hypothetical total amount payable per YEELDS on the stated maturity
date;

o the hypothetical total annualized yield on the YEELDS on the stated
maturity date; and

o the hypothetical total annualized yield from direct ownership of the index
stock.

<TABLE>

PERCENTAGE TOTAL COUPON HYPOTHETICAL
CHANGE FROM THE PAYMENTS PAID OR HYPOTHETICAL TOTAL ANNUALIZED HYPOTHETICAL
ISSUE PRICE TO PAYABLE ON OR AMOUNT PAYABLE YIELD ON THE TOTAL ANNUALIZED
HYPOTHETICAL THE HYPOTHETICAL BEFORE THE PER YEELDS ON NOTES ON THE YIELD FROM
SETTLEMENT VALUE ON SETTLEMENT VALUE ON STATED MATURITY THE STATED STATED MATURITY DIRECT OWNERSHIP
THE VALUATION DATE THE VALUATION DATE DATE PER YEELDS MATURITY DATE (1) DATE PER YEELDS (2) OF INDEX STOCK (3)
-------------------- --------------------- ------------------ ------------------ -------------------- ---------------------

$ 8.4728 -60% $1.11205 $ 8.47276 -66.8% -69.9%
12.7091 -40 1.11205 12.70914 -44.4 -48.7
16.9455 -20 1.11205 16.94552 -19.6 -24.9
19.0637 -10 1.11205 19.06371 -6.4 -12.3
21.1819 0 1.11205 21.18190 7.2 0.9
23.3001 10 1.11205 23.30009 21.3 14.4
25.4183 20 1.11205 23.30009 21.3 28.4
29.6547 40 1.11205 23.30009 21.3 57.6
33.8910 60 1.11205 23.30009 21.3 88.1
38.1274 80 1.11205 23.30009 21.3 120.0
42.3638 100 1.11205 23.30009 21.3 153.1
</TABLE>

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(1) Excludes accrued but unpaid coupon payments payable on the stated maturity
date.
(2) The hypothetical total annualized yield on the stated maturity date
represents the coupon rate per year used in determining the present values,
discounted to the original issue date (computed on the basis of a 360-day
year of twelve 30-day months compounded annually), of all payments made or
to be made on the YEELDS, including the amount payable on the stated
maturity date and all coupon payments through the stated maturity date, the
sum of these present values being equal to the original issue price.
(3) Assumes the dividend on the index stock is $0.045 per share per quarter.

The above figures are for purposes of illustration only. The actual amount
received by investors and the resulting total and pre-tax rates of return will
depend entirely on the actual settlement value determined by the calculation
agent. In particular, the actual settlement value could be lower or higher than
those reflected in the table.

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

PS-6

SUPPLEMENTAL PLAN OF DISTRIBUTION

Lehman Brothers Holdings has agreed to sell to Lehman Brothers Inc. and Lehman
Brothers Inc. has agreed to purchase, all of the YEELDS at the price indicated
on the cover of this pricing supplement.

Lehman Brothers Holdings has agreed to indemnify Lehman Brothers Inc. against
liabilities, including liabilities under the Securities Act of 1933, as amended,
or to contribute to payments that Lehman Brothers Inc. may be required to make
relating to these liabilities as described in the MTN prospectus supplement and
the base prospectus.

Lehman Brothers Inc. will offer the YEELDS initially at a public offering price
equal to the issue price set forth on the cover of this pricing supplement.
After the initial public offering, the public offering price may from time to
time be varied by Lehman Brothers Inc.

Lehman Brothers Holdings has granted to Lehman Brothers Inc. an option to
purchase, at any time within 13 days of the original issuance of the YEELDS, up
to 72,000 additional YEELDS solely to cover over-allotments. To the extent that
the option is exercised, Lehman Brothers Inc. will be committed, subject to
certain conditions, to purchase the additional YEELDS. If this option is
exercised in full, the total public offering price, the underwriting discount
and proceeds to Lehman Brothers Holdings would be approximately $11,692,409,
$29,231 and $11,663,178, respectively.

Lehman Brothers Holdings expects to deliver the YEELDS against payment on or
about July 14, 2005, which is the fifth business day following the date of this
pricing supplement.

Under Rule 15c6-1 of the Exchange Act, trades in the secondary market generally
are required to settle in three business days, unless the parties to any such
trade expressly agree otherwise. Accordingly, if any purchaser wishes to trade
the YEELDS on the date of this pricing supplement, it will be required, by
virtue of the fact that the YEELDS initially will settle on the fifth business
day following the date of this pricing supplement, to specify an alternate
settlement cycle at the time of any such trade to prevent a failed settlement.

An affiliate of Lehman Brothers Holdings has entered into a swap transaction in
connection with the YEELDS and has received customary compensation for that
transaction.

PS-7

480,000 YEELDS(R)

LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES H

7.0% YIELD ENHANCED EQUITY LINKED DEBT SECURITIES DUE APRIL 14, 2006
PERFORMANCE LINKED TO THE GAP, INC. (GPS) COMMON STOCK

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PRICING SUPPLEMENT
JULY 7, 2005

(INCLUDING PROSPECTUS SUPPLEMENT
DATED MAY 18, 2005,

PROSPECTUS SUPPLEMENT
DATED MAY 18, 2005 AND

PROSPECTUS
DATED MAY 18, 2005)

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LEHMAN BROTHERS