SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): September 4, 1997
LEHMAN BROTHERS HOLDINGS INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of incorporation)
1-9466 13-3216325
(Commission File Number) (IRS Employer Identification No.)
3 World Financial Center
New York, New York 10285
(Address of principal (Zip Code)
executive offices)
Registrant's telephone number, including
area code: (212) 526-7000
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Item 7. Financial Statements and Exhibits
(c) Exhibits
The following Exhibits are filed as part of this Report.
10.1 1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans
dated as of September 4, 1997 between the Company and State Street
Bank & Trust Company, as Trustee
The Exhibit Index to this Report is incorporated herein by reference.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
LEHMAN BROTHERS HOLDINGS INC.
By: /s/ Karen M. Muller
Karen M. Muller
Managing Director
Date: September 4, 1997
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EXHIBIT INDEX
Exhibit No. Exhibit
10.1 1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans dated
as of September 4, 1997 between the Company and State Street Bank &
Trust Company, as Trustee
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1997 TRUST UNDER LEHMAN BROTHERS HOLDINGS INC.
INCENTIVE PLANS
This Agreement dated as of September 4, 1997 (as amended
from time to time, the "Agreement"), by and between Lehman Brothers Holdings
Inc. (the "Company", as more fully defined in Exhibit A hereto) and State Street
Bank & Trust Company (the "Trustee", as more fully defined in Exhibit A hereto);
WHEREAS, the Company has adopted and may in the future adopt
compensation plans including the Lehman Brothers Holdings Inc. Employee
Incentive Plan, the Lehman Brothers Holdings Inc. 1994 Management Ownership Plan
and the Lehman Brothers Holdings Inc. 1996 Management Ownership Plan and has
listed certain of such plans on Schedule 2 to this Agreement, which Schedule 2
may from time to time be amended in accordance with Section 15(b) hereof to add
or delete plans (the plans listed on Schedule 2, as such Schedule may from time
to time be amended, are each referred to herein as a "Plan" and collectively
referred to herein as "Plans");
WHEREAS, the Company has incurred or expects to incur
liability under the terms of the Plans with respect to equity awards made or to
be made to individuals participating in the Plans, that will result in the
payment of shares of Common Stock, $.10 par value per share, of the Company
("Shares");
WHEREAS, the Company wishes to establish a trust (the "Trust")
and to contribute and/or sell to the Trust assets including Shares, that shall
be held therein, subject to the claims of the Company's general creditors in the
event the Company becomes insolvent (as hereinafter defined), until paid to
Participants (as hereinafter defined) in such manner and at such times as the
Company may specify to fulfill the Company's obligations under the Plans;
WHEREAS, it is the intention of the parties that this Trust
shall constitute an unfunded arrangement for all purposes and shall not affect
the status of any Plans as unfunded plans maintained for the purpose of
providing deferred compensation for a select group of management or highly
compensated employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), if applicable;
WHEREAS, the Company desires that the assets to be held in the
Trust should be principally or exclusively Shares and, therefore, expressly
waives any diversification of investments that might otherwise be necessary,
appropriate, or required pursuant to applicable provisions of law; and
WHEREAS, capitalized and certain other terms used in this
Agreement have the meanings given them in Exhibit A hereto;
NOW, THEREFORE, the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:
Section 1. Establishment of Trust.
(a) The Company hereby sells or contributes to the Trustee in
trust the cash and other property set forth in Schedule 1 hereto, which shall
initially become the principal of the Trust to be held, administered and
disposed of by the Trustee as provided in this Agreement. The parties intend
that the Trust will be an independent legal entity with title to and power to
convey all of its assets. The Trust is not a part of any of the Plans and does
not itself provide retirement or other benefits to any Participant.
(b) The assets held by the Trust shall be applied by the
Trustee, in accordance with Instruction Schedules delivered to the Trustee by
the Company, to satisfy the Company's obligations in connection with Eligible
Awards. The Plans under which Eligible Awards may be outstanding at any given
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time will be reflected on Schedule 2 to this Agreement, as such Schedule may be
amended from time to time in accordance with Section 15(b) hereof. The Company
shall submit Instruction Schedules which direct the Trustee to utilize Trust
assets to satisfy, on a calendar year basis, the Company's payment obligations
under Eligible Awards in an amount not less than the lesser of (i) 10% of the
assets held in the Trust at the commencement of such year or (ii) the aggregate
payment obligations under 50% of the Covered Eligible Awards which become due
during such year; provided that the amount of the excess, if any, of 10% of the
Trust assets over the amount paid (or zero if no such amount is paid) in
accordance with clause (ii) in a given calendar year shall be carried forward
and added to the amount payable pursuant to clause (i) in subsequent years until
such excess amounts are paid from the Trust or the Trust is terminated in
accordance with Section 15(c) hereof. For the portion of calendar year 1997
subsequent to the execution of this Agreement the references to 10% in the
foregoing sentence shall be 5% and the reference to 50% shall be 25%.
(c) Except as otherwise provided in Section 1 (e) and Section
3 hereof, the Trust hereby established shall be irrevocable by the Company.
(d) The Trust is intended to be a grantor trust, of which the
Company is the grantor, for the purposes and within the meaning of subpart E,
part I, subchapter J, chapter 1, subtitle A of the Code, and shall be construed
accordingly.
(e) The principal of the Trust, and any earnings thereon,
shall be held separate and apart from other funds of the Company and shall be
used exclusively for the uses and purposes of Participants and general creditors
as herein set forth. Participants shall have no preferred claim on, or any
beneficial ownership interest in, any assets of the Trust. Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights of
Participants against the Company. Any assets held by the Trust will be subject
to the claims of the Company's general creditors under federal and state law in
the event the Company becomes insolvent (as defined in Section 3(a) hereof).
(f) The Company, in its sole discretion, may at any time, or
from time to time, subject to any required approval of the Board of Directors of
the Company, make additional contributions of cash or contributions or sales of
other property, including Shares, in trust with the Trustee to augment the
principal to be held, administered and disposed of by the Trustee as provided in
this Agreement. Neither the Trustee nor any Participant shall have any right to
compel such additional contributions or sales.
(g) The assets held at any time and from time to time under
the Trust shall consist of contributions received or assets purchased by the
Trustee, proceeds of any investments and reinvestment thereof, the earnings and
income thereon, less disbursements therefrom. Except as herein otherwise
provided, title to the assets of the Trust shall at all times be vested in the
Trustee and securities that are part of the Trust shall be held in such manner
that the Trustee's name and the fiduciary capacity in which the securities are
held are fully disclosed, subject to the right of the Trustee to hold title in
bearer form or in the name of a nominee, and the interests of others in the
Trust shall be only the right to have such assets received, held, invested,
administered and distributed in accordance with the provisions of the Trust.
Section 2. Payments to Participants and Separate Trusts.
(a) Except as otherwise provided in Section 1(e) or 3 hereof,
Payments from the Trust shall only be made to Participants or to Separate
Trusts. When Payments in accordance with the most recent Instruction Schedule
submitted by the Company to the Trustee are due, the Trustee shall make Payments
to Participants or Separate Trusts in accordance with such Instruction Schedule,
subject to the terms of this Agreement. The Company shall be responsible for the
maintenance of any accounts for Participants under the respective Plans and for
all withholding-related filings and reports. The Company shall be responsible
for determining whether a Payment is in accordance with the relevant Plan and
Award agreement. Any Payments to a Separate Trust shall be made immediately
prior to the date Shares are distributable by such Separate Trust to designated
Participants who are also the beneficiaries of such Separate Trust.
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(b) Prior to the Payment of Shares, other assets or the
proceeds of any tender or exchange offer to a Participant or Separate Trust, the
Trustee shall withhold the Withholding Amount, if any, as specified in the
Instruction Schedule pursuant to which the Payment is to be made. The amount so
withheld shall be remitted by the Trustee as directed by the Instruction
Schedule. In the case of a Payment to be made in Shares or other securities, the
Trustee shall reduce the amount of the Payment due by the smallest number of
whole Shares or other securities that has a value equal to or greater than the
Withholding Amount. For purposes of the foregoing sentence, the Shares or other
securities shall be valued at their Fair Market Value on the date of
distribution. Any amount so withheld in excess of the Withholding Amount will be
paid by the Company to the Participant or a Separate Trust in cash.
Section 3. Trustee Responsibility Regarding Payments to Trust
Beneficiary When Company Is Insolvent.
(a) Subject to Section 3(b) hereof, the Trustee shall not make
any Payments if the Company is insolvent. The Company shall be considered
"insolvent" for purposes of this Agreement if (i) the Company is unable to pay
its debts as they become due, or (ii) the Company is subject to a pending
proceeding as a debtor under the United States Bankruptcy Code.
(b) At all times during the continuance of this Trust, as
provided in Section 1(e) hereof, the principal and income of the Trust shall be
subject to claims of general creditors of the Company under federal and state
law as set forth below:
(1) The Board of Directors and the Chief Executive Officer of
the Company shall have the duty to inform the Trustee in writing of the
Company's insolvency. If a person claiming to be a creditor of the
Company alleges in writing to the Trustee that the Company has become
insolvent, the Trustee shall determine whether the Company is insolvent
and, pending such determination, the Trustee shall discontinue
Payments.
(2) Unless the Trustee has actual knowledge of the Company's
insolvency, or has received notice from the Company or a person
claiming to be a creditor alleging that the Company is insolvent, the
Trustee shall have no duty to inquire whether the Company is insolvent.
The Trustee may in all events rely on such evidence concerning the
Company's solvency as may be furnished to the Trustee and that provides
the Trustee with a reasonable basis for making a determination
concerning the Company's solvency. In no event shall "actual knowledge"
be deemed to include knowledge of the Company's credit status held by
banking officers or banking employees of the Trustee which is not
permitted to be disclosed to the administrator of the Trust account or
any other knowledge which is not actually possessed by such
administrator. The Trustee may appoint an independent accounting or
consulting firm to make any determination of insolvency required by the
Trustee under this Section 3. In such event, the Trustee may
conclusively rely upon the determination of such firm and shall be
responsible only for the prudent selection of such firm.
(3) If at any time the Trustee has determined that the Company
is insolvent, the Trustee shall discontinue Payments and shall hold the
assets of the Trust for the benefit of the Company's general creditors.
Nothing in this Agreement shall in any way diminish any rights of
Participants to pursue their rights as general creditors of the Company
with respect to benefits due under the Plans or otherwise.
(4) The Trustee shall not resume Payments in accordance with
Section 2 of this Agreement until the Trustee has determined that the
Company is not insolvent (or is no longer insolvent) and thereafter has
received an Instruction Schedule.
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Section 4. Transfers to Company.
Except as otherwise set forth in this Agreement, the Company
shall have no right or power to divert to others or to the Company any of the
Trust assets.
Section 5. Investment Authority; Dividends.
Unless otherwise provided for herein, all Trust assets shall
be invested in Shares. Any dividends paid in cash on Shares held by the Trust
shall be invested in Shares as soon as practicable or, to the extent directed by
the Company, used to pay Trust expenses or, if specified in an Instruction
Schedule, distributed to Participants or Separate Trusts. Dividends which are
not paid in cash or in Shares shall be reduced to cash by the Trustee and
reinvested in Shares as soon as practicable or, to the extent directed by the
Company, used to pay Trust expenses or, if specified in an Instruction Schedule,
distributed to Participants or Separate Trusts. At the Company's direction,
investments in Shares may be made through open-market purchases, private
transactions or (with the Company's consent) purchases from the Company. The
Trustee may invest any portion of the Trust, as well as the proceeds of any
tender offer or exchange offer, temporarily, pending investment in Shares,
distribution or payment of expenses in (i) investments in United States
Government obligations with maturities of less than one year, (ii)
interest-bearing accounts including but not limited to certificates of deposit,
time deposits, saving accounts and money market accounts with maturities of less
than one year in any bank, including the Trustee if the Trustee is a bank, with
aggregate capital in excess of $100,000,000 and a Moody's Investor Services
rating of at least P1, or an equivalent rating from a nationally recognized
ratings agency, which accounts are insured by the Federal Deposit Insurance
Corporation or other similar federal agency, (iii) obligations issued or
guaranteed by any agency or instrumentality of the United States of America with
maturities of less than one year, (iv) short-term discount obligations of the
Federal National Mortgage Association or (v) such money market fund or funds as
may be approved by the Company from time to time.
Section 6. Disposition of Income.
During the term of the Trust, all income received by the
Trust, net of expenses and taxes, if any, shall be accumulated and reinvested in
accordance with the provisions of Section 5 hereof.
Section 7. Accounting by the Trustee.
Subject to Section 9(d) hereof, the Trustee shall keep, and
supply the Company with, accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be made by the
Trust, including such specific records as shall be agreed upon in writing
between the Company and the Trustee. Within 60 days following the close of each
calendar year and within 60 days after the removal or resignation of the
Trustee, the Trustee shall deliver to the Company a written account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or resignation, setting
forth all investments, receipts, disbursements and other transactions effected
by it, including, subject to Section 9(d) hereof, a description of all
securities and investments purchased and sold with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other property held in the
Trust at the end of such year or as of the date of such removal or resignation,
as the case may be. In the absence of written notice to the Trustee by the
Company of exceptions or objections to any such account within 90 days of its
receipt of such account from the Trustee, the Company shall be deemed to have
approved such account. In such case, or upon the written approval by the Company
of any such account, the Trustee shall be released, relieved and discharged with
respect to all matters set forth in such account as though such account had been
settled by the decree of a court of competent jurisdiction.
Section 8. Responsibility of the Trustee.
(a) If the Trustee undertakes or defends any litigation
arising in connection with this Trust, the Company agrees, except as otherwise
provided in Section 8(f) hereof, to indemnify the Trustee against the Trustee's
<PAGE>
reasonable costs, expenses and liabilities (including, without limitation,
attorneys' fees and expenses) relating thereto and to be primarily liable for
such payments. Such costs, expenses and liabilities shall be paid from the Trust
to the extent of cash held in the Trust and to the extent not previously paid by
the Company, and any such remaining fees and expenses shall be paid by the
Company.
(b) The Trustee may consult with legal counsel (who may also
be counsel for the Company generally) with respect to any of its duties or
obligations hereunder.
(c) The Trustee may hire agents, accountants, actuaries,
investment advisors, financial consultants or other professionals to assist in
performing any of its duties or obligations hereunder; and may pay their
reasonable fees and expenses, which shall be deemed to be expenses of the Trust
and which shall be paid in accordance with Section 10.
(d) The Trustee shall have, without exclusion, all powers
conferred on trustees by applicable law, unless expressly provided otherwise
herein, and the Trustee shall have the following powers and rights, in addition
to those provided elsewhere in this Agreement or by law, but subject in all
cases to the other provisions of this Agreement:
(i) to retain any asset of the Trust;
(ii) with the consent of the Company, to settle, submit to
arbitration, compromise, contest, prosecute or abandon claims and
demands in favor of or against the Trust;
(iii) to exercise any of the powers and rights of an
individual owner with respect to any asset of the Trust and to perform
any and all other acts that in its judgment are necessary or
appropriate for the proper administration of the Trust even though such
powers, rights and acts are not specifically enumerated in this
Agreement;
(iv) to cause any asset of the Trust to be issued, held or
registered in the Trustee's name or in the name of its nominee, or in
such form that title will pass by delivery, provided that the records
of the Trustee shall indicate the true ownership of such asset;
(v) to utilize another entity (but not the Company, a
Subsidiary or any affiliate thereof) as custodian to hold, but not
invest or otherwise manage or control, some or all of the assets of the
Trust.
(e) Notwithstanding any powers granted to the Trustee pursuant
to this Agreement or applicable law, the Trustee shall not have any power that
could give this Trust the objective of carrying on a business and dividing the
gains therefrom, within the meaning of Section 301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.
(f) The Company shall indemnify, defend and hold harmless the
Trustee from and against any and all liabilities, claims, losses, suits or
expenses (including attorneys' fees) of whatever kind and nature that may be
imposed upon, asserted against or incurred by the Trustee at any time by reason
of its provision of services under this Agreement or its status as the Trustee,
except to the extent that any such liability, claim, loss, suit or expense
arises directly from the Trustee's (or the Trustee's officers, employees or
agents) gross negligence or willful misconduct in the performance of
responsibilities specifically allocated to it under this Agreement. This Section
8(f) shall survive the termination of this Agreement.
(g) Except as prohibited by Section 9(d) hereof, the Trustee
shall provide such reports to the Company as to such matters as the Company may
reasonably request.
Section 9. Voting and Tendering of Shares.
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(a) With respect to any meeting of the stockholders of the
Company at which the stockholders are to vote on any corporate action or with
respect to any solicitation of written consents in lieu of a meeting, the
Company shall provide the Trustee with (i) a list of all Participants holding
Voting Awards setting forth the number of Voting Awards held by each such
Participant on the record date for such meeting or action by written consent and
(ii) the total number of Voting Awards held by such Participants on such record
date. Thereupon, the Trustee shall distribute to each Participant holding Voting
Awards on such record date all proxy or consent solicitation or other materials
distributed to stockholders of the Company generally in connection with such
vote or consent, together with a form requesting instructions from each such
Participant as to the manner in which such Participant desires Shares to be
voted or not voted by the Trustee. The Trustee shall vote or abstain from voting
in accordance with the instructions from each such Participant a number of
Shares held by the Trust determined by multiplying the total number of Shares
held by the Trust on the record date for such meeting or action by written
consent by a fraction the numerator of which is the number of Voting Awards held
by such Participant on such record date as reported to the Trustee by the
Company and as to which the Trustee has received instructions to vote for, vote
against or abstain, and the denominator of which is the total number of Voting
Awards held by all such Participants on such record date as reported to the
Trustee by the Company and as to which the Trustee has received instructions
from such Participants to vote for, vote against or abstain. The Trustee shall
not vote any Shares other than pursuant to this Section 9(a), and the Trustee
shall have no discretion in such matter.
(b) In the event of a tender or exchange offer, the Company
shall provide the Trustee with an Instruction Schedule setting forth all
Participants and the number of Covered Eligible Awards held by each Participant,
together with such information about specific payment provisions applicable to
such Covered Eligible Awards in the case of a tender or exchange offer as may be
necessary for the Trustee to distribute the proceeds of such tender or exchange
offer to Participants who give instructions as provided herein and maintain the
confidentiality of such Participants' instructions as provided herein. Upon
receipt of such Instruction Schedule, the Trustee shall timely distribute or
cause to be distributed to each Participant all written materials distributed to
stockholders of the Company generally in connection with such tender or exchange
offer, together with a form requesting confidential instructions on whether to
tender or exchange Shares. The Trustee shall tender or exchange or refrain from
tendering or exchanging in accordance with the instructions from each
Participant a number of Shares held by the Trust determined by multiplying the
total number of Shares held in the Trust by a fraction the numerator of which is
the number of Covered Eligible Awards held by such Participant as reported to
the Trustee by the Company and the denominator of which is the total number of
Covered Eligible Awards held by all Participants as reported to the Trustee by
the Company. A Participant shall not be limited in the number of instructions to
tender or exchange or withdraw from tender or exchange that he or she may give,
but shall not have the right to give instructions to tender or exchange or
withdraw from tender or exchange after a reasonable time established by the
Trustee. The Trustee shall not tender or exchange Shares other than pursuant to
this Section 9(b), and the Trustee shall have no discretion in such matter. If a
tender offer or exchange offer is not consummated, all Shares tendered or
exchanged shall revert to and continue to be held by the Trust as if such offer
had not been made unless the Company directs in an Instruction Schedule that the
Trustee distribute Shares to one or more Participants, or to one or more
Separate Trusts for distribution to such Participants, to comply with the terms
of a Covered Eligible Award requiring the payment of Shares.
(c) In the event a tender or exchange offer is consummated,
the proceeds from the tender or exchange shall be paid into the Trust. The
proceeds of a tender or exchange offer shall be distributed by the Trustee, as
specified in the Instruction Schedule delivered to the Trustee, as soon as
practicable after receipt, directly, or indirectly through a Separate Trust, to
each Participant who gave instructions to tender or exchange Shares in an amount
equal to (i) the per share consideration paid in the tender or exchange offer
(or such portion of the per share consideration as specified in any payment
terms to which the Covered Eligible Award may be subject) multiplied by (ii) the
lesser of (A) the number of Shares tendered or exchanged as a result of such
Participant's instructions or (B) the number of Covered Eligible Awards held by
such Participant. The proceeds of the tender or exchange not so distributed
shall remain in the Trust, to be utilized as specified herein or in any
Instruction Schedule. In the event of the consummation of an exchange offer, the
<PAGE>
Trustee, if so directed by the Company in an Instruction Schedule, shall sell in
a commercially reasonable manner (but not to, or for the benefit of, the Company
or any affiliate or subsidiary of the Company) the securities received in such
exchange and distribute the cash proceeds in accordance with the second
preceding sentence.
(d) The Trustee shall maintain procedures to ensure that all
instructions of Participants pursuant to Section 9(b) are collected, tabulated,
transmitted to and carried out by the Trustee without being divulged or released
to the Company or any person affiliated with the Company. All such actions taken
by Participants shall be held confidential by the Trustee and, except as
required by applicable law or court order, shall not be divulged or released to
any person other than (i) agents of the Trustee who are not affiliated with the
Company or its affiliates or (ii) by virtue of the execution by the Trustee of
any letter of transmittal for any of the Shares held in the Trust.
(e) Upon the occurrence of an event which would constitute a
Hostile Change in Control as defined in the terms under which any Covered
Eligible Awards have been granted, other than the commencement of, or the
purchase or exchange of any Shares pursuant to, a tender offer or exchange
offer, the Company shall deliver an Instruction Schedule to the Trustee
directing the Trustee to distribute Shares, to the extent available in the
Trust, to satisfy all vested Covered Eligible Awards as specified in such
Instruction Schedule.
Section 10. Compensation and Expenses of the Trustee.
Other than payments pursuant to Section 8(f) hereof, all
reasonable fees and expenses incurred by the Trustee in administering the Trust
shall be paid by the Company or, if directed by the Company, shall be paid from
the Trust to the extent of cash held in the Trust.
Section 11. Resignation and Removal of the Trustee.
(a) The Trustee may resign at any time by written notice to
the Company, which shall be effective 30 days after receipt of such notice
unless the Company and the Trustee agree otherwise; provided, however, that no
such resignation shall be effective until a successor Trustee has assumed the
office of the Trustee hereunder.
(b) The Trustee may be removed by the Company on 10 days
notice or upon shorter notice accepted by the Trustee.
(c) Upon resignation or removal of the Trustee and appointment
of a successor Trustee, all assets held in the Trust shall be transferred to the
successor Trustee. The transfer shall be completed within 30 days after receipt
of notice of resignation, removal or transfer, unless the Company extends the
time limit.
(d) If the Trustee resigns or is removed, a successor Trustee
shall be appointed, in accordance with Section 12(a) hereof by the effective
date of resignation or removal. If no such appointment has been made, the
Trustee may apply to a court of competent jurisdiction for appointment of a
successor or for instructions. All expenses of the Trustee in connection with
such proceeding shall be allowed as administrative expenses of the Trust and
paid as provided in Section 10 hereof.
Section 12. Appointment of Successor.
(a) If the Trustee resigns or is removed in accordance with
Section 11(a) or (b) hereof, the Company may appoint any third party, which is a
bank trust department or other party that may be granted corporate trustee
powers under state law, as a successor to replace the Trustee upon resignation
or removal. The appointment shall be effective when accepted in writing by the
successor trustee, who shall have all of the rights and powers of the former
Trustee, including ownership rights in the Trust assets. The former Trustee
shall execute any instrument necessary or reasonably requested by the Company or
the successor Trustee to evidence the transfer. Any successor Trustee must be an
institutional trustee that is unaffiliated with the Company.
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(b) The successor Trustee need not examine the records and
acts of any prior Trustee and may retain or dispose of existing Trust assets in
accordance with the terms of this Agreement. The successor Trustee shall not be
responsible for and the Company shall indemnify and defend the successor Trustee
from any claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.
Section 13. Changes in Organization of the Trustee.
In the event that any corporate Trustee hereunder shall be
converted into, shall merge or consolidate with, or shall sell or transfer
substantially all of its assets and business to, another corporation, state or
federal, the corporation resulting from such merger or consolidation or to which
such sale or transfer shall thereafter be made, shall thereunder become and be
the Trustee under the Trust with the same effect as though originally so named.
Section 14. Continuance of the Trustee's Powers in Event of
Termination of the Trust.
In the event of the termination of the Trust, as provided
herein, the Trustee shall dispose of the assets of the Trust in accordance with
the provisions hereof. Until the final distribution of the assets of the Trust,
the Trustee shall continue to have all powers provided hereunder as necessary or
expedient for the orderly liquidation and distribution of the assets of the
Trust.
Section 15. Amendment or Termination.
(a) Except as otherwise provided herein, the Company may amend
the Trust at any time and from time to time in any manner which it deems
desirable, provided that no amendment may (i) make the Trust revocable; (ii)
alter the provisions of Sections 1(b), 2(a), 4, 9 or 15 hereof or paragraphs
(b), (d), (e), (f), (g), (k), (l), (m), (n), (o), (p), (q), (r), (s), (t) or (v)
of Exhibit A hereto or (iii) change the duties of the Trustee without the
Trustee's consent, which consent shall not be unreasonably withheld.
Notwithstanding the foregoing, (x) the Company shall retain the power under all
circumstances to amend the Trust to correct any errors or clarify any
ambiguities or similar issues of interpretation in this Agreement and (y) the
matters referred to in clause (ii) of the preceding sentence may be amended with
the consent of Participants holding at least a majority of the Voting Awards.
(b) Schedule 2 hereto may be amended by adding thereto or
subtracting therefrom one or more employee benefit plans (within the meaning of
Section 3(3) of ERISA) or plans or arrangements that are not employee benefit
plans (within the meaning of such Section); provided that (i) in making any
modification to Schedule 2 hereto, the Company shall act in good faith taking
into account the best interests of a broad cross-section of employees, and (ii)
the Company shall ensure that at all times Schedule 2 shall include at least one
Plan that is not an employee benefit plan within the meaning of Section 3(3) of
ERISA.
(c) The Trust may be terminated at any time by the Company
provided that, upon such termination, all assets held by the Trust shall be
distributed directly, or indirectly through a Separate Trust, to Participants in
accordance with an Instruction Schedule. Unless earlier terminated in accordance
with the provisions of this Section 15(c), the Trust shall terminate on the
earlier of (i) the date on which Participants are no longer entitled to benefits
pursuant to the terms of the Plans, (ii) the twenty-first anniversary of the
death of the last to survive of individuals who are Participants on the date of
the creation of the Trust or (iii) at such time as the Trust no longer holds any
assets. In the case of termination pursuant to clause (i) or (ii) of the
preceding sentence all assets held by the Trust shall be distributed directly,
or indirectly through a Separate Trust, to Participants and, if at the time of
termination pursuant to clause (i) or (ii) there are no Participants, the
Company shall amend Schedule 2 so that there are Participants.
<PAGE>
Section 16. Miscellaneous.
(a) Any provision of this Agreement prohibited by law shall be
ineffective to the extent of any such prohibition, without invalidating the
remaining provisions hereof.
(b) Benefits payable to Participants under this Agreement may
not be anticipated, assigned (either at law or in equity), alienated, pledged,
encumbered or subjected to attachment, garnishment, levy, execution or other
legal or equitable process.
(c) Any capitalized terms used herein which are not defined
herein or in Exhibit A hereto shall have the meaning ascribed to such term in
the Plan or other documents which relate to the Eligible Award.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts.
Section 17. Effective Date.
The effective date of this Agreement shall be the date first
above written.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
LEHMAN BROTHERS HOLDINGS INC.
By: /s/ John L. Cecil
Name: John L. Cecil
Title: Chief Administatrive Officer
STATE STREET BANK & TRUST COMPANY
By: /s/ F. S. Feely
Name: F.S. Feely
Title: Vice President
<PAGE>
Exhibit A. Definitions.
As used in the Agreement, the following terms shall have the
meanings set forth below (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
(a) "Agreement" shall have the meaning given it in the
preamble to this Agreement.
(b) "Award" shall mean any award under a Plan which consists
of, or entitles the holder thereof to receive upon the payment of consideration,
the passage of time, the fulfillment of conditions or otherwise, Shares and
shall include any Plan which permits the deferral of compensation into an
account payable in Shares.
(c) "Code" shall mean the Internal Revenue Code of 1986,
as amended.
(d) "Company" shall mean Lehman Brothers Holdings Inc., and,
except as otherwise specified in this Agreement in a particular context, any
successor thereto, whether by merger, consolidation, purchase of substantially
all its assets or otherwise.
(e) "Covered Eligible Award" shall mean an Eligible Award
which may be paid from the Trust, as designated from time to time by the Company
on Schedule 3 hereto, and shall initially include RSUs and CSAs.
(f) "CSAs" shall mean Contingent Stock Awards granted pursuant
to a Plan.
(g) "Eligible Award" shall mean any Award under a Plan listed
in Schedule 2, other than Non-qualifying Awards; provided, that upon the
commencement of a tender offer or exchange offer for Shares, the term "Eligible
Award" shall only include Covered Eligible Awards and, upon the termination or
abandonment of such tender offer or exchange offer without the purchase or
exchange of any Shares thereunder, the term "Eligible Award" shall include all
Awards issued under Plans listed on Schedule 2 other than Non-qualifying Awards.
(h) "ERISA" shall have the meaning given it in the fourth
recital to this Agreement.
(i) "Fair Market Value" on any date means the closing price of
the Shares or other securities for which the Fair Market Value is to be
determined on such date on the principal national securities exchange on which
such Shares or securities are listed or admitted to trading (or, if such
exchange is not open on such date, the immediately preceding date on which such
exchange is open), or if the Shares or securities are not so listed or traded,
the arithmetic mean of the per share closing bid price and per share closing
asked price on such date as quoted on the National Association of Securities
Dealers Automated Quotation System, or such other market in which such prices
are regularly quoted, or, if there have been no published bid or asked
quotations with respect to Shares or such other securities on such date, the
Fair Market Value shall be the value established by the Company in good faith.
(j) "insolvent" shall have the meaning given it in Section
3(a) of the Agreement.
(k) "Instruction Schedule" shall mean a schedule provided by
the Company to the Trustee indicating, with respect to a Participant or all
Participants, information which will enable the Trustee to make Payments or
solicit instructions including, without limitation, (i) the number of Covered
Eligible Awards held by a Participant which are to be paid from the Trust, (ii)
the form in which amounts due to such Participant are to be paid, (iii) the
Withholding Amount applicable to any Payment to such Participant, (iv) the time
of payment of such amounts, (v) the approved beneficiaries of such Participant,
(vi) whether such Participant is to receive dividends paid on the Shares
corresponding to his or her Eligible Awards in cash or kind or have such
dividends invested in additional Shares, (vii) special payment provisions with
respect to the proceeds of the purchase or exchange, of Shares pursuant to a
<PAGE>
tender or exchange offer, (viii) the number of Voting Awards held by any
Participant and (ix) whether Payments are to be made to a Separate Trust.
(l) "Non-qualifying Award" shall mean an Award which the
Company determines from time to time should not be funded from the Trust or a
Separate Trust because of tax or regulatory characteristics of the jurisdiction
of which the holder of the Award is a citizen or resident.
(m) "Participant" shall mean an individual who holds an
Eligible Award or such individual's estate or beneficiaries.
(n) "Payment" shall mean a payment from the Trust to a
Participant or a Separate Trust pursuant to Sections 2(a), 9(c) or 15(c) of the
Agreement.
(o) "Plan" shall have the meaning given it in the first
recital to the Agreement.
(p) "RSUs" shall mean Restricted Stock Units granted pursuant
to a Plan.
(q) "Separate Trust" shall mean a trust, other than the Trust,
the purpose of which is to receive and disburse Payments to satisfy the
obligations of the Company to Participants who are also beneficiaries of such
trust, and which Payments are to be distributed immediately on receipt by the
Separate Trust to the Participants whose Awards are funded through such Separate
Trust, subject to applicable withholding taxes.
(r) "Shares" shall have the meaning given it in the second
recital to the Agreement.
(s) "Termination Date" shall mean the date that the Trust is
terminated pursuant to Section 15(c) of the Agreement.
(t) "Trust" shall mean the trust established pursuant to
Section 1(a) hereof.
(u) "Trustee" shall mean State Street Bank & Trust Company or
any successor thereto pursuant to the terms of the Agreement.
(v) "Voting Award" shall mean an Eligible Award which is a
Covered Eligible Award and which is held by a Participant who is an employee of
the Company or its participating affiliates on the record date for a meeting of
stockholders of the Company or action by written consent in lieu of a meeting;
provided that Voting Awards shall be held by not less than 50% of the employees
of the Company and its participating affiliates on such record date.
(w) "Withholding Amount" shall mean the percentage of any
federal, state, local or foreign taxes that may be required to be withheld with
respect to any Payment.
<PAGE>
SCHEDULE 1
Property Sold or Contributed to the Trust
1. Contributed Property
(a) Cash in the amount of $1,100,000
(b) 5,000,000 shares of treasury stock of the Company
2. Property Sold to the Trust
(a) 11,000,000 shares of the Company's authorized but unissued
shares sold to the Trust for $.10 per share
<PAGE>
SCHEDULE 2
Plans Under Which Eligible Awards Are Issued
1. 1994 Management Ownership Plan
2. 1996 Management Ownership Plan
3. Employee Incentive Plan
<PAGE>
SCHEDULE 3
Covered Eligible Awards
1. Restricted Stock Units
2. Contingent Stock Awards
