-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, QG2wLUnb2IR/4uZTx7yGm7aHCHH8zU64CZGF8xWBIdQGiWalWRP6TD4hxUaY67J4 PS/K6KsDm3i9+IXfTKAMGA== 0000950136-06-005924.txt : 20060724 0000950136-06-005924.hdr.sgml : 20060724 20060724123558 ACCESSION NUMBER: 0000950136-06-005924 CONFORMED SUBMISSION TYPE: 424B5 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20060724 DATE AS OF CHANGE: 20060724 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LEHMAN BROTHERS HOLDINGS INC CENTRAL INDEX KEY: 0000806085 STANDARD INDUSTRIAL CLASSIFICATION: SECURITY BROKERS, DEALERS & FLOTATION COMPANIES [6211] IRS NUMBER: 133216325 STATE OF INCORPORATION: DE FISCAL YEAR END: 1130 FILING VALUES: FORM TYPE: 424B5 SEC ACT: 1933 Act SEC FILE NUMBER: 333-134553 FILM NUMBER: 06976002 BUSINESS ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 BUSINESS PHONE: 2125267000 MAIL ADDRESS: STREET 1: LEHMAN BROTHERS STREET 2: 745 SEVENTH AVENUE CITY: NEW YORK STATE: NY ZIP: 10019 FORMER COMPANY: FORMER CONFORMED NAME: SHEARSON LEHMAN HUTTON HOLDINGS INC DATE OF NAME CHANGE: 19901017 424B5 1 file1.htm

Filed Pursuant to Rule 424(b)(5)
Registration Statement No. 333-134553

The information in this preliminary pricing supplement is not complete and may
be changed. This preliminary pricing supplement and the accompanying prospectus
supplements and 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 JULY 21, 2006

PRELIMINARY PRICING SUPPLEMENT
to Prospectus Supplement dated May 30, 2006
to Prospectus Supplement dated May 30, 2006
and Prospectus dated May 30, 2006

YEELDS(R)
LEHMAN BROTHERS HOLDINGS INC.
MEDIUM-TERM NOTES, SERIES I
8.50% Yield Enhanced Equity Linked Debt Securities Due August 4, 2007
Performance Linked to the Common Stock of Cisco Systems Inc. (CSCO)

Because these notes are part of a series of Lehman Brothers Holdings' debt
securities called Medium-Term Notes, Series I, this preliminary pricing
supplement and the accompanying prospectus supplement, dated May 30, 2006 (the
"YEELDS prospectus supplement") should also be read with the accompanying
prospectus supplement, dated May 30, 2006 (the "MTN prospectus supplement") and
the accompanying prospectus dated May 30, 2006 (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: Cisco Systems Inc. Cisco Systems 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 PRINCIPAL AMOUNT: An amount per YEELDS equal to the initial value, and, in
the aggregate, $200,000,000.

o STATED MATURITY DATE: August 4, 2007, and if such date is not a business
day, then the following business day, subject to postponement if the
valuation date is postponed.

o AVERAGING PERIOD: The last five scheduled trading days ending on the
valuation date (each an "averaging day"), subject to postponement if a
market disruption event occurs, as described under "Postponement of an
Averaging Day, including Valuation Date, Because of a Market Disruption
Event" on page PS-4 of this preliminary pricing supplement.

o VALUATION DATE: July 30, 2007, subject to postponement if a market
disruption event occurs or if such day is not a scheduled trading day, as
described under "Postponement of an Averaging Day, including Valuation
Date, Because of a Market Disruption Event" on page PS-2 of this
preliminary pricing supplement.

o COUPON RATE: 8.50% per annum.

o COUPON PAYMENT DATES: The 4th day of February, May, August and November,
commencing on November 4, 2006.

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

o DETERMINATION PERIOD: Five business days.

o INITIAL VALUE: The average execution price per share for the index stock
that an affiliate of Lehman Brothers Holdings will pay to hedge Lehman
Brothers Holdings' obligations under the notes.

o EQUITY CAP PRICE: 111.50% of the initial value.

o BASE DIVIDEND: $0.00.

o EFFECTIVE DIVIDEND ADJUSTMENT DATE: The first business day immediately
following the 4th day of each February, May, August and November and the
valuation date, as applicable.

o STOCK SETTLEMENT: Unless you have elected to exercise your cash settlement
option, on the stated maturity date, Lehman Brothers Holdings will deliver
to you, per YEELDS, a number of shares of Cisco Systems Inc. common stock
equal to the sum of the daily settlement share numbers for each averaging
day during the averaging period, all as described beginning on page PS-3
of this preliminary pricing supplement under "Stock Settlement".

o CASH SETTLEMENT OPTION: If you elect to exercise your cash settlement
option, 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) the equity cap price.

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 arithmetic average of the adjusted
closing prices of the index stock on each averaging day during the averaging
period, and shall generally be equal to such arithmetic average multiplied by
the multiplier, as described beginning on page PS-2 of this preliminary pricing
supplement under "Settlement Value Based Upon Arithmetic Average of Adjusted
Closing Prices".

You must provide the trustee with prior written notice no later than the first
averaging day if you elect the cash settlement option.

o DENOMINATIONS: An amount equal to the initial value and integral multiples
thereof.

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

o CUSIP NO.: 52520W739

o ISIN NO.: US52520W7395

Investing in the notes involves risks. Risk Factors begin on page PS-2
of this preliminary pricing supplement and page
SS-7 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
preliminary pricing supplement, any accompanying YEELDS prospectus supplement or
any accompanying prospectus is truthful or complete. Any representation to the
contrary is a criminal offense.

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

Per YEELDS 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 YEELDS on
the same terms and conditions 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 July 28, 2006.

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

LEHMAN BROTHERS

, 2006
"YEELDS" is a registered trademark of Lehman Brothers Inc.

ADDITIONAL RISK FACTOR

IF A MARKET DISRUPTION EVENT OCCURS ON A DAY THAT WOULD OTHERWISE BE AN
AVERAGING DAY, THERE WILL BE A DELAY IN SETTLEMENT OF THE YEELDS.

If a market disruption event occurs on a day that would otherwise be an
averaging day, settlement of the YEELDS will be delayed, depending on the
circumstances surrounding the market disruption event, for up to 40 trading days
following the stated maturity date.

SETTLEMENT VALUE BASED UPON ARITHMETIC AVERAGE OF ADJUSTED CLOSING PRICES

If the holder of a note has elected to exercise its cash settlement option, the
settlement value will be based upon the arithmetic average of the adjusted
closing prices of the index stock on each of the last five scheduled trading
days ending on, and including, the valuation date, and shall generally be equal
to such arithmetic average multiplied by the multiplier. Adjustments to the
closing prices will occur if Cisco Systems Inc. begins to pay cash dividends on
its shares of common stock during the term of the YEELDS. See "Description of
the Notes-Settlement value" on page SS-14 in the accompanying YEELDS prospectus
supplement.

POSTPONEMENT OF AN AVERAGING DAY, INCLUDING VALUATION DATE, BECAUSE OF A
MARKET DISRUPTION EVENT

If a market disruption event occurs on a day that would otherwise be an
averaging day, as set forth on the cover page of this pricing supplement, such
averaging day will be postponed until the next scheduled trading day on which no
market disruption event occurs; provided, however, if a market disruption event
occurs on each of the eight scheduled trading days following the originally
scheduled averaging day, then (a) that eighth scheduled trading day shall be
deemed to be that averaging day and (b) the calculation agent shall determine
the adjusted closing price of the index stock for that eighth scheduled trading
day, based upon its good faith estimate of the value of the index stock as of
the close of trading on the relevant exchange on such day. If any averaging day
is postponed, all subsequent averaging days will also be postponed; the next
subsequent averaging day will then be the next scheduled trading day on which no
market disruption event occurs (subject to the eight scheduled trading day
limitation described above). As a consequence, the occurrence of a market
disruption event on a day that would otherwise be an averaging day may result in
non-consecutive averaging days.

PS-2

STOCK SETTLEMENT

Unless the holder elects to exercise its cash settlement option, Lehman Brothers
Holdings will, subject to the next paragraph, deliver on the stated maturity
date a number of shares of Cisco Systems Inc. common stock equal to, per YEELDS,
the sum of the daily settlement share numbers for each averaging day during the
averaging period, as determined by the calculation agent in its good faith
judgment. The daily settlement share number for any averaging day will generally
equal:

o if the product of the adjusted closing price on such averaging day times
the multiplier exceeds the equity cap price:

equity cap price
0.2 x ---------------- ; or
closing price

o if the product of the adjusted closing price on such averaging day times
the multiplier is equal to or less than the equity cap price:

adjusted closing price
0.2 x ---------------------- x multiplier
closing price

If, however, Lehman Brothers Holdings determines that it is prohibited from
delivering such shares, or that it would otherwise be unduly burdensome to
deliver such shares, on the stated maturity date, it will pay in cash the amount
payable at maturity.

If the calculation above results in a fractional share, Lehman Brothers Holdings
will pay cash to you in an amount equal to that fractional share, calculated on
an aggregate basis in respect of the YEELDS you own, multiplied by the market
value based upon the arithmetic average of the adjusted closing price of Cisco
Systems Inc. common stock (and any equity securities included in the calculation
of the settlement value) on each averaging day during the five-trading-day
averaging period.

Upon the occurrence of certain events, or if Cisco Systems Inc. is involved in
certain extraordinary transactions, the number of shares of Cisco Systems Inc.
common stock to be delivered may be adjusted and Lehman Brothers Holdings may
deliver, in lieu of or in addition to Cisco Systems Inc. common stock, cash and
any other equity securities used in the calculation of the daily settlement
share numbers, all as determined by the calculation agent. See "Description of
the Notes-Adjustments to multipliers and to securities included in the
calculation of the settlement value" on page SS-16 of the accompanying YEELDS
prospectus supplement.

Because the daily settlement share numbers will ordinarily be determined over
the five-trading-day averaging period ending on the fifth business day prior to
the stated maturity date, the effect to holders will be as if the YEELDS matured
over a five trading day period ending on the fifth business day prior to the
stated maturity date. Thus, the aggregate value of the shares of Cisco Systems
Inc. common stock and any other equity securities and cash that you receive at
maturity may be more or less than the amount you would have received had Lehman
Brothers Holdings paid the amount payable at maturity in cash. Consequently, it
is possible that the aggregate value of the cash and securities that you receive
at maturity may be less than the payment that you would have received at
maturity in cash if you elected cash settlement. In the absence of any election
notice to the trustee, holders of notes will be deemed to have elected stock
settlement as described above.

PS-3

EXAMPLES OF AMOUNT PAYABLE AT MATURITY

Here are three examples of the amount that may be payable on the stated maturity
date if you elect to exercise your cash settlement option. In each of these
examples it is assumed that (a) the investment is held from the date on which
the YEELDS are first issued until the stated maturity date, (b) Cisco Systems
Inc. does not pay any cash dividends on its shares of common stock during the
term of the YEELDS, (c) the initial value is $17.90 and (d) the equity cap price
is $19.9585.

EXAMPLE 1. ASSUMING THE SETTLEMENT VALUE IS $14.32:

As a result, because the settlement value of $14.32 is less than $19.9585, on
the stated maturity date, you would receive $14.32 per YEELDS, plus accrued but
unpaid coupon payments.

EXAMPLE 2. ASSUMING THE SETTLEMENT VALUE IS $19.69:

As a result, because the settlement value of $19.69 is less than $19.9585, on
the stated maturity date, you would receive $19.69 per YEELDS, plus accrued but
unpaid coupon payments.

EXAMPLE 3. ASSUMING THE SETTLEMENT VALUE IS $28.68:

As a result, because $19.9585 is less than the settlement value of $28.68, on
the stated maturity date, you would receive $19.9585 per YEELDS, plus accrued
but unpaid coupon payments.

To the extent the actual settlement value, initial value or equity cap price
differs from the values assumed above or that Cisco Systems Inc. begins to pay
cash dividends during the term of the YEELDS, the results indicated above would
be different.

If you do not elect to exercise your cash settlement option, the market price of
the shares of Cisco Systems Inc. common stock that you receive per YEELDS on the
stated maturity date may be less than the amount that you would have received
had Lehman Brothers Holdings paid the amount payable at maturity in cash because
the number of shares you receive will ordinarily be calculated based upon the
adjusted closing prices of Cisco Systems Inc. common stock during the
five-trading-day averaging period ending on the fifth business day prior to the
stated maturity date.

PS-4

INDEX STOCK ISSUER AND INDEX STOCK

CISCO SYSTEMS INC.

Lehman Brothers Holdings has obtained the following information regarding Cisco
Systems Inc. from Cisco Systems Inc.'s reports filed with the SEC.

Cisco Systems Inc. manufactures and sells networking and communications products
and provides services associated with that equipment and its use. Cisco Systems
Inc.'s products are installed at corporations, public institutions,
telecommunication companies, and commercial businesses and are also found in
personal residences. Cisco Systems Inc. provides a broad line of products for
transporting data, voice, and video within buildings, across campuses, and
around the world.

The index 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 "Where You Can Find More Information" on page 58 of the
accompanying base prospectus. In addition, information regarding the index stock
issuer 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 shares of common stock of Cisco Systems Inc. are quoted on The NASDAQ Stock
Market under the symbol "CSCO".

The following table presents the high and low closing prices for the shares of
common stock of Cisco Systems Inc., as reported on The NASDAQ Stock Market
during each fiscal quarter in 2003, 2004, 2005 and 2006 (through the business
day immediately prior to the date of this preliminary pricing supplement), and
the closing price at the end of each quarter in 2003, 2004, 2005 and 2006
(through the business day immediately prior to the date of this preliminary
pricing supplement).

The historical prices of the index stock are not necessarily indicative 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.

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

PS-5

HIGH LOW PERIOD END
------ ------ ----------
2003
First Quarter .............................. $15.58 $12.69 $12.98
Second Quarter.............................. 18.73 12.98 16.79
Third Quarter............................... 21.42 17.24 19.59
Fourth Quarter.............................. 24.40 19.80 24.23

2004
First Quarter .............................. $29.13 $22.12 $23.57
Second Quarter.............................. 24.81 20.91 23.70
Third Quarter............................... 23.11 17.79 18.10
Fourth Quarter.............................. 19.97 18.06 19.32

2005
First Quarter .............................. $19.32 $17.18 $17.89
Second Quarter ............................. 20.00 17.02 19.08
Third Quarter .............................. 20.17 17.40 17.92
Fourth Quarter ............................. 17.87 16.93 17.12
2006
First Quarter............................... $21.97 $17.45 $21.67
Second Quarter ............................. 21.86 19.30 19.53
Third Quarter (through the business day
immediately prior to the date of this
preliminary pricing supplement)........... 20.00 17.88 17.88

PS-6

HYPOTHETICAL RETURNS

The table below illustrates, for a range of hypothetical settlement values on
the valuation date, in each case assuming that (a) you have elected to exercise
your cash settlement option, (b) Cisco Systems Inc. does not pay any cash
dividends on its shares of common stock during the term of the YEELDS, (c) the
initial value is 17.90 and (d) the equity cap price is 19.9585:

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 per YEELDS; and

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

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

$10.7400 -40% $1.5469 $10.7400 -32.63% -39.50%
$14.3200 -20% $1.5469 $14.3200 -11.89% -19.71%
$16.1100 -10% $1.5469 $16.1100 -1.55% -9.84%
$17.9000 0% $1.5469 $17.9000 8.77% 0.00%
$19.6900 10% $1.5469 $19.6900 19.09% 9.83%
$21.4800 20% $1.5469 $19.9585 20.63% 19.64%
$22.3750 25% $1.5469 $19.9585 20.63% 24.54%
$25.0600 40% $1.5469 $19.9585 20.63% 39.23%
$28.6400 60% $1.5469 $19.9585 20.63% 58.77%
$32.2200 80% $1.5469 $19.9585 20.63% 78.27%
$35.8000 100% $1.5469 $19.9585 20.63% 97.74%

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

(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.

The above figures are for purposes of illustration only. The actual amount
received by investors and the resulting total annualized yield 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-7

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 the 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 the 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 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 $ , $ and $ ,
respectively.

Lehman Brothers Holdings expects to deliver the YEELDS against payment on or
about July 28, 2006, which is the fifth business day following the date of the
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 the 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 the pricing supplement, to specify an alternate settlement
cycle at the time of any such trade to prevent a failed settlement.

Lehman Brothers Holdings or an affiliate will enter into swap agreements or
related hedge transactions with one of Lehman Brothers Holdings' other
affiliates or unaffiliated counterparties in connection with the sale of the
notes and Lehman Brothers Inc. and/or an affiliate will earn additional income
as a result of payments pursuant to the swap, or related hedge transactions.

PS-8

YEELDS(R)

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

8.50% YIELD ENHANCED EQUITY LINKED DEBT SECURITIES DUE AUGUST 4, 2007
PERFORMANCE LINKED TO THE COMMON STOCK OF CISCO SYSTEMS INC. (CSCO)

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

PRELIMINARY PRICING SUPPLEMENT
JULY 21, 20006

(INCLUDING PROSPECTUS SUPPLEMENT
DATED MAY 30, 2006

PROSPECTUS SUPPLEMENT
DATED MAY 30, 2006 AND

PROSPECTUS
DATED MAY 30, 2006)

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

LEHMAN BROTHERS

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