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EXHIBIT 1.09
LEHMAN BROTHERS HOLDINGS INC.
Prudential Research Universe Diversified Equity Notes(SM)
PRUDENTS(SM) Due July 2, 2006
Linked to a Basket of Healthcare Stocks
Number R-1 $21,000,000
CUSIP: 524908DU1
See Reverse for Certain Definitions
THIS SECURITY (THIS "SECURITY") IS A GLOBAL SECURITY WITHIN THE MEANING
OF THE INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A NOMINEE THEREOF. UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN
PART FOR SECURITIES IN CERTIFICATED FORM, THIS SECURITY MAY NOT BE TRANSFERRED
EXCEPT AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A
NOMINEE OF THE DEPOSITORY TO SUCH DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY OR BY THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR
A NOMINEE OF SUCH SUCCESSOR DEPOSITORY. UNLESS THIS SECURITY IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TO LEHMAN BROTHERS HOLDINGS INC. OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY SECURITY
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and
existing under the laws of the State of Delaware (hereinafter called the
"COMPANY"), for value received, hereby promises to pay to CEDE & CO. or
registered assigns, at the office or agency of the Company in the Borough of
Manhattan, The City of New York, on the Stated Maturity Date, in such coin or
currency of the United States of America at the time of payment shall be legal
tender for the payment of public and private debts, for each $1,000 principal
amount of the Securities represented hereby, an amount equal to the Maturity
Payment Amount.
Any amount payable on the Stated Maturity Date will be paid only upon
presentation and surrender of this Security.
REFERENCE IS HEREBY MADE TO THE FURTHER PROVISIONS OF THIS SECURITY SET
FORTH ON THE REVERSE HEREOF WHICH FURTHER PROVISIONS SHALL FOR ALL PURPOSES HAVE
THE SAME EFFECT AS IF SET FORTH AT THIS PLACE.
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"Prudential Research Universe Diversified Equity Notes" and "PRUDENTS"
are service marks of Prudential Securities.
This Security shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture referred to on the reverse hereof.
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IN WITNESS WHEREOF, LEHMAN BROTHERS HOLDINGS INC. has caused this
instrument to be signed by its Chairman of the Board, its Vice Chairman, its
President, its Chief Financial Officer, one of its Vice Presidents or its
Treasurer, by manual or facsimile signature under its corporate seal, attested
by its Secretary or one of its Assistant Secretaries by manual or facsimile
signature.
Dated: October 2, 2001 LEHMAN BROTHERS HOLDINGS INC.
By: /s/ Barrett DiPaolo
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Name: Barrett DiPaolo
Title: Vice President
[SEAL]
Attest:
--------------------------
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated therein referred
to in the within-mentioned Indenture.
Dated: October 2, 2001
CITIBANK, N.A.,
as Trustee
By:
--------------------------------
Authorized Signatory
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(Reverse of Security)
This Security is one of a duly authorized series of Securities of the
Company designated as Prudential Research Universe Diversified Equity Notes(SM),
PRUDENTS(SM) Due July 2, 2006, Linked to a Basket of Healthcare Stocks (herein
called the "SECURITIES"). The Company may, without the consent of the holders of
the Securities, create and issue additional notes ranking equally with the
Securities and otherwise similar in all respects so that such further notes
shall be consolidated and form a single series with the Securities; provided
that no additional notes can be issued if an Event of Default has occurred with
respect to the Securities. This series of Securities is one of an indefinite
number of series of debt securities of the Company, issued and to be issued
under an indenture, dated as of September 1, 1987, as amended (herein called the
"INDENTURE"), duly executed and delivered by the Company and Citibank N.A., as
trustee (herein called the "TRUSTEE", which term includes any successor trustee
under the Indenture), to which the Indenture and all indentures supplemental
thereto reference is hereby made for a description of the rights, limitations of
rights, obligations, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Securities.
The Maturity Payment Amount shall be determined by the Calculation
Agent pursuant to the Calculation Agency Agreement.
All percentages resulting from any calculation with respect to the
Securities will be rounded at the Calculation Agent's discretion.
The Trustee shall fully rely on the determination by the Calculation
Agent of the Maturity Payment Amount and shall have no duty to make any such
determination.
This Security is not subject to any sinking fund and is not redeemable
prior to the Stated Maturity Date.
If an Event of Default with respect to the Securities shall occur and
be continuing, the amounts payable on all of the Securities may be declared due
and payable in the manner and with the effect provided in the Indenture. The
amount payable to the Holder hereof upon any acceleration permitted under the
Indenture will be equal to the Maturity Payment Amount calculated as though the
date of acceleration was the Stated Maturity Date and the date five Business
Days prior thereto was the Valuation Date.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of not less than 66 2/3% in aggregate
principal amount of each series of Securities at the time Outstanding to be
affected (each series voting as a class), evidenced as in the Indenture
provided, to execute supplemental indentures adding any provisions to, or
changing in any manner or eliminating any of the provisions of the Indenture or
of any supplemental indenture or modifying in any manner the rights of the
holders of the Securities of all such series; PROVIDED, HOWEVER, that no such
supplemental indenture shall, among other things, (i) change the fixed maturity
of any Security, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon or reduce any premium payable on
redemption, or make the principal thereof, or premium, if any, or interest
therein payable in any coin or currency other than that hereinabove provided,
without the consent of the holder of each Security so affected, or (ii) change
the place of payment on any Security, or impair the right to institute suit for
payment on any Security, or reduce the aforesaid percentage of Securities, the
holders of which are required to consent to any such supplemental indenture,
without the consent
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of the holders of each Security so affected. It is also provided in the
Indenture that, prior to any declaration accelerating the maturity of any series
of Securities, the holders of a majority in aggregate principal amount of the
Securities of such series Outstanding may on behalf of the holders of all the
Securities of such series waive any past default or Event of Default under the
Indenture with respect to such series and its consequences, except a default in
the payment of interest, if any or the principal of, or premium if any, on any
of the Securities of such series, or in the payment of any sinking fund
installment or analogous obligation with respect to Securities of such series.
Any such consent or waiver by the Holder of this Security shall be conclusive
and binding upon such Holder and upon all future holders and owners of this
Security and any Securities which may be issued in exchange or substitution
hereof, irrespective of whether or not any notation thereof is made upon this
Security or such other Securities.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal amount with respect to this
Security.
The Securities are issuable in denominations of $1,000 and any integral
multiple of $1,000.
The Company, the Trustee, and any agent of the Company or of the
Trustee may deem and treat the registered holder (the "HOLDER") hereof as the
absolute owner of this Security (whether or not this Security shall be overdue
and notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment hereof, or on account hereof, and for all other
purposes and neither the Company nor the Trustee nor any agent of the Company or
of the Trustee shall be affected by any notice to the contrary. All such
payments made to or upon the order of such registered holder shall, to the
extent of the sum or sums paid, effectually satisfy and discharge liability for
moneys payable on this Security.
No recourse for the payment of the principal of, premium, if any, or
interest on this Security, or for any claim based hereon or otherwise in respect
hereof, and no recourse under or upon any obligation, covenant or agreement of
the Company in the Indenture or any indenture supplemental thereto or in any
Security, or because of the creation of any indebtedness represented thereby,
shall be had against any incorporator, stockholder, officer or director, as
such, past, present or future, of the Company or of any successor corporation,
either directly or through the Company or any successor corporation, whether by
virtue of any constitution, statute or rule of law or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issue hereof, expressly waived
and released.
For United States federal income tax purposes, the Securities will be
governed by the contingent payment debt regulations under Treas. Reg.
ss.1.1275-4. The Company has determined the "Comparable Yield" to be 5.60% per
annum, compounded semi-annually, and the projected payment schedule per note to
be $1,299.97 due at the Stated Maturity Date.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable in the Security
Register, upon surrender of this Security for registration of transfer at the
Corporate Trust Office or agency in a Place of Payment for this Security, duly
endorsed by, or accompanied by a written instrument of transfer in form
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satisfactory to the Company and the Security Registrar duly executed by, the
Holder hereof or such Holder's attorney duly authorized in writing, and
thereupon one or more new Securities of this series or of like tenor and of
authorized denominations and for the same aggregate principal amount, will be
issued to the designated transferee or transferees.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
Set forth below are definitions of the terms used in this Security.
"ALTERNATIVE REDEMPTION AMOUNT" shall mean the product of (a) the Issue
Price and (b) the Average Level of the Underlying Basket divided by 100.
"AMEX" shall mean the American Stock Exchange.
"AVERAGE EXECUTION PRICE" shall mean, for a security or other property,
the average execution price that an affiliate of the Company receives or pays
for such security or property, as the case may be, to hedge the Company's
obligations under the Securities.
"AVERAGE LEVEL OF THE UNDERLYING BASKET" shall mean the arithmetic
average of the Level of the Underlying Basket on each of the Calculation Dates.
"BUSINESS DAY", notwithstanding any provision in the Indenture, shall
mean any day that is not a Saturday, a Sunday or a day on which the NYSE, Nasdaq
or AMEX is not open for trading or banking institutions or trust companies in
the City of New York are authorized or obligated by law or executive order to
close.
"CALCULATION AGENCY AGREEMENT" shall mean the Calculation Agency
Agreement, dated as of October 2, 2001, between the Company and the Calculation
Agent, as amended, modified or supplemented from time to time.
"CALCULATION AGENT" shall mean the person that has entered into an
agreement with the Company providing for, among other things, the determination
of the Level of the Underlying Basket and the Maturity Payment Amount, which
term shall, unless the context otherwise requires, include its successors and
assigns. The initial Calculation Agent shall be Lehman Brothers Inc.
"CALCULATION DATE" shall mean each of December 25, 2001, March 25,
2002, June 25, 2002, September 25, 2002, December 25, 2002, March 25, 2003, June
25, 2003, September 25, 2003, December 25, 2003, March 25, 2004, June 25, 2004,
September 25, 2004, December 25, 2004, March 25, 2005, June 25, 2005, September
25, 2005, December 25, 2005, March 25, 2006 and June 25, 2006; PROVIDED, that if
any of these dates is not a Business Day, the Calculation Date for such
quarterly period shall be the next succeeding Business Day.
"CASH INCLUDED IN THE UNDERLYING BASKET" shall have the meaning
ascribed to such term in the Calculation Agency Agreement.
"CLOSE OF TRADING" shall mean 4:00 p.m., New York City time.
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"CLOSING PRICE", with respect to each Underlying Equity Security on any
Calculation Date, means the following, determined by the Calculation Agent based
on information reasonably available to it:
(i) If the Underlying Equity Security is listed on a United States
national securities exchange or trading system or is a Nasdaq security, the
last reported sale price at the Close of Trading, regular way, on such day,
on the primary securities exchange or trading system registered under the
Securities Exchange Act of 1934 on which such Underlying Equity Security is
listed or admitted to trading or on Nasdaq, as the case may be.
(ii) If the Underlying Equity Security is listed on a non-United States
securities exchange, trading system (other than a bulletin board) or
market, the last reported sale price at the Close of Trading, regular way,
on such day, on the primary exchange, trading system or market on which
such Underlying Equity Security is listed or admitted to trading, as the
case may be. The Closing Price shall then be converted into U.S. dollars
using the Official W.M. Reuters Spot Closing Rate.
(iii) If the Underlying Equity Security is not listed on a national
securities exchange or trading system or is not a Nasdaq security, and is
listed or traded on a bulletin board, the Average Execution Price of the
Underlying Equity Security. If such Underlying Equity Security is listed or
traded on a non-United States bulletin board, the Closing Price will then
be converted into U.S. dollars using the Official W.M. Reuters Spot Closing
Rate.
(iv) If a Market Disruption Event has occurred for the Underlying
Equity Security on such Calculation Date, the Closing Price for such
Underlying Equity Security shall initially be determined using the Closing
Price for such Underlying Equity Security on the next preceding Trading Day
on which a Market Disruption Event did not occur. Once the Market
Disruption Event has ceased, the Closing Price of such Underlying Equity
Security shall then be adjusted to equal the Average Execution Price of the
Underlying Equity Security.
"COMPANY" shall have the meaning set forth on the face of this
Security.
"HOLDER" shall have the meaning set forth on the reverse of this
Security above.
"INDENTURE" shall have the meaning set forth on the reverse of this
Security above.
"ISSUE PRICE" shall mean $1,000.
"LEVEL OF THE UNDERLYING BASKET", when used with respect to any
Calculation Date, shall equal the sum of (a) the sum of the products of the
Closing Prices and the applicable Multipliers for each Underlying Equity
Security and (b) any Cash Included in the Underlying Basket on such Calculation
Date.
"MARKET DISRUPTION EVENT", with respect to an Underlying Equity
Security, means any of the following events as determined by the Calculation
Agent:
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(i) A suspension, absence or material limitation of trading of such
Underlying Equity Security has occurred on that day, in each case, for more
than two hours of trading or during the one-half hour period preceding the
Close of Trading on the primary organized U.S. exchange or trading system
on which such Underlying Equity Security is traded or, in the case of an
Underlying Equity Security not listed or quoted in the United States, on
the primary exchange, trading system or market for such Underlying Equity
Security. Limitations on trading during significant market fluctuations
imposed pursuant to the rules of any primary organized U.S. exchange or
trading system similar to NYSE Rule 80B or any applicable rule or
regulation enacted or promulgated by the NYSE, any other exchange, trading
system, or market, any other self regulatory organization or the Securities
and Exchange Commission of similar scope or as a replacement for Rule 80B,
may be considered material. Notwithstanding the first sentence of this
paragraph, a Market Disruption Event for an Underlying Equity Security
traded on a bulletin board means a suspension, absence or material
limitation of trading of such Underlying Equity Security for more than two
hours or during the one hour period preceding the Close of Trading.
(ii) A suspension, absence or material limitation has occurred on that
day, in each case, for more than two hours of trading or during the
one-half hour period preceding the Close of Trading in options contracts
related to such Underlying Equity Security, whether by reason of movements
in price exceeding levels permitted by an exchange, trading system or
market on which options contracts related to such Underlying Equity
Security are traded or otherwise.
(iii) Information is unavailable on that date, through a recognized
system of public dissemination of transaction information, for more than
two hours of trading or during the one-half hour period preceding the Close
of Trading, of accurate price, volume or related information in respect of
such Underlying Equity Security or in respect of options contracts related
to such Underlying Equity Security, in each case traded on any major U.S.
exchange or trading system or, in the case of Underlying Equity Securities
of a non-U.S. issuer, the primary non-U.S. exchange, trading system or
market.
For purposes of determining whether a Market Disruption Event has occurred:
(i) a limitation on the hours or number of days of trading shall not
constitute a Market Disruption Event if it results from an announced change
in the regular business hours of the relevant exchange, trading system or
market;
(ii) any suspension in trading in an options contract on an Underlying
Equity Security by a major securities exchange, trading system or market by
reason of (a) a price change violating limits set by such securities
market, (b) an imbalance of orders relating to those contracts, or (c) a
disparity in bid and ask quotes relating to those contracts shall
constitute a Market Disruption Event notwithstanding that the suspension or
material limitation is less than two hours;
(iii) a suspension or material limitation on an exchange, trading
system or in a market shall include a suspension or material limitation of
trading by one class of investors provided that the suspension continues
for more than two hours of trading or
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during the last one-half hour period preceding the Close of Trading on the
relevant exchange, trading system or market, but shall not include any time
when the relevant exchange, trading system or market is closed for trading
as part of that exchange's, trading system's or market's regularly
scheduled business hours; and
(iv) "trading systems" include bulletin board services.
"MATURITY PAYMENT AMOUNT" shall equal, for each $1,000 principal amount
of Securities, the greater of (a) $1,000 and (b) the Alternative Redemption
Amount.
"MULTIPLIER", relating to each Underlying Equity Security, shall mean
the number of shares or other units (including ADRs) (or fractional share or
other unit expressed as a decimal) of such Underlying Equity Security included
in the Underlying Basket. The initial Multipliers are set forth below:
<Table>
<Caption>
UNDERLYING EQUITY SECURITY INITIAL MULTIPLIER (NUMBER OF SHARES)
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Abbott Laboratories 0.1032
Aetna Inc. 0.1838
American Home Products Corporation 0.0892
Amgen Inc. 0.0885
Baxter International Inc. 0.0973
Bristol-Myers Squibb Company 0.0959
Cardinal Health, Inc. 0.0717
Eli Lilly and Company 0.0648
Forest Laboratories, Inc. 0.0726
Genentech, Inc. 0.1236
Genzyme Corporation-- General Division 0.1126
Gilead Sciences, Inc. 0.0955
IMS Health Incorporated 0.1961
Johnson & Johnson 0.0944
MedImmune, Inc. 0.1513
Medtronic, Inc. 0.1214
Merck & Co., Inc. 0.0801
Pfizer Inc. 0.1352
Serono S.A. (ADRs) 0.2577
WellPoint Health Networks, Inc. 0.0490
</Table>
The Multiplier with respect to each Underlying Equity Security shall
remain constant until the Stated Maturity Date, unless adjusted for certain
extraordinary corporate events as described in the Calculation Agency Agreement.
"NASDAQ" shall mean The Nasdaq Stock Market, Inc.
"NYSE" shall mean the New York Stock Exchange.
"OFFICIAL W.M. REUTERS SPOT CLOSING RATE" shall mean the closing
spot rate published on Reuters page "WMRA" relevant for an Underlying Equity
Security.
"SECURITIES" shall have the meaning set forth on the reverse of
this Security above.
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"SECURITY" shall have the meaning set forth on the face of this
Security.
"STATED MATURITY DATE" shall mean July 2, 2006, or if July 2,
2006 is not a Business Day, the next succeeding Business Day; PROVIDED, that if
a Market Disruption Event with respect to one or more Underlying Equity
Securities occurs on the Valuation Date, then the Stated Maturity Date shall be
five Business Days after the date on which an affiliate of the Company has
completed the sale of each such common stock or other equity security used to
hedge the Company's obligations under the Securities.
"TRADING DAY" shall mean a day on which trading generally is
conducted on the NYSE, AMEX and Nasdaq and in the over-the-counter market for
equity securities, as determined by the Calculation Agent.
"TRUSTEE" shall have the meaning set forth on the reverse of this
Security above.
"UNDERLYING BASKET" shall mean the basket composed of the
Underlying Equity Securities.
"UNDERLYING EQUITY SECURITIES" shall mean the securities included
in the Underlying Basket from time to time and shall initially be the following
twenty common stocks or other equity securities (as identified by trading
symbol): Abbott Laboratories (ABT), Aetna Inc. (AET), American Home Products
Corporation (AHP), Amgen Inc. (AMGN), Baxter International Inc. (BAX),
Bristol-Myers Squibb Company (BMY), Cardinal Health, Inc. (CAH), Eli Lilly and
Company (LLY), Forest Laboratories, Inc. (FRX), Genentech, Inc. (DNA), Genzyme
Corporation--General Division (GENZ), Gilead Sciences, Inc. (GILD), IMS Health
Incorporated (RX), Johnson & Johnson (JNJ), MedImmune, Inc. (MEDI), Medtronic,
Inc. (MDT), Merck & Co., Inc. (MRK), Pfizer Inc. (PFE), Serono S.A. (ADR's)
(SRA) and WellPoint Health Networks, Inc. (WLP). The Underlying Equity
Securities shall only be adjusted by the Calculation Agent pursuant to the
Calculation Agency Agreement for certain extraordinary corporate events.
"VALUATION DATE" shall mean June 25, 2006; PROVIDED, that if such
date is not a Business Day, the Valuation Date shall be the next succeeding
Business Day.
All terms used but not defined in this Security are used herein
as defined in the Indenture.
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The following abbreviations, when used in the inscription on
the face of the within Security, shall be construed as though they were written
out in full according to applicable laws or regulations:
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TEN COM - as tenants in common UNIF GIFT MIN ACT - ________ Custodian ________
(Cust) (Minor)
TEN ENT - as tenants by the entireties under Uniform Gifts to Minors
JT TEN - as joint tenants with right of Act _________________________
Survivorship and not as (State)
tenants in common
</Table>
Additional abbreviations may also be used though not in the above list.
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FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
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--------------------------------
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(Name and Address of Assignee, including zip code, must be printed or
typewritten.)
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the within Security, and all rights thereunder, hereby irrevocably constituting
and appointing
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to transfer the said Security on the books of the Company, with full power of
substitution in the premises.
Dated:
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NOTICE: The signature to this assignment must correspond with the name
as it appears upon the face of the within Security in every particular, without
alteration or enlargement or any change whatever.
Signature(s) Guaranteed:
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THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED MEDALLION SIGNATURE GUARANTEE PROGRAM), PURSUANT TO
S.E.C. RULE 17Ad-15.