EXHIBIT
10.12


 


Lehman Brothers Holdings Inc.

SUPPLEMENTAL RETIREMENT PLAN


 


(Effective as of October 19, 1998, amended and restated effective
December 10, 2003)


 


PREAMBLE


 


The Lehman Brothers Holdings Inc. Supplemental
Retirement Plan (as amended and restated effective December 10, 2003) (the
“Plan”) is established by Lehman Brothers Holdings Inc. (the “Company”) for the
sole purpose of providing the Chairman and employees of the Company or its
subsidiaries who are the Members of the Company’s non-Board Executive Committee
(the “Executive Committee”) and other key employees of the Company as
determined in the sole discretion of the Committee (as defined below) with
supplemental retirement payments.  The
Plan was originally effective as of October 19, 1998, and was amended and
restated effective December 10, 2003. 
This document describes the benefits provided under the Plan.  The Plan reads as follows:


 


ARTICLE
1


 


DEFINITIONS


 


1.1                                 Benefit
Commencement Date:  The date on
which payment of Full or Prorata Benefits shall begin, as described under
Section 4.3.1 of the Plan.


 


1.2                                 Board:  The Board of Directors of the Company.


 


1.3                                 Cause:  A material breach by a Participant of an
employment contract or other agreement, if any, between the Participant and the
Company and any of its subsidiaries, failure by a Participant to devote
substantially all business time exclusively to the performance of his duties
for the Company or its subsidiaries, willful misconduct, dishonesty related to
the business and affairs of the Company or any subsidiary, conviction of, or a
plea of nolo contendere to, a felony or of a misdemeanor constituting a
statutory disqualification under U.S. securities laws (or failure to contest
prosecution for such a felony or such a misdemeanor), habitual or gross
negligence in the performance of a Participant’s duties, the violation of
policies and practices adopted by the Company or any subsidiary including, but
not limited to the Code of Conduct, engaging in Competitive Activity or
Detrimental Activity, or such other circumstances as may be determined by the
Committee in its sole discretion. 
Following the occurrence of a Change in Control, “Cause” shall mean (i)
the substantial and continuing failure by a Participant to perform the
Participant’s duties for the Company (other than any such failure resulting
from incapacity due to physical or mental illness), at least thirty (30) days
after a written demand for performance is delivered to the Participant by the
Board which specifically identifies the manner in which the Board believes that
the Participant


 

















 


has not performed the Participant’s duties, (ii)
conviction of, or plea of guilty or nolo contendere to, a felony or of or to a
misdemeanor constituting a statutory disqualification under U.S. securities
laws or (iii) engaging in willful misconduct which is demonstrably injurious to
the Company.


 


Any act, or failure to act, based upon authority given
pursuant to a resolution duly adopted by the Board or upon the instructions of
the Chairman or based upon the advice of counsel for the Company shall be
conclusively presumed not to constitute either willful misconduct or
Detrimental Activity.  Following the
occurrence of a Change in Control, the cessation of employment of the
Participant shall not be deemed to be for Cause unless and until there shall
have been duly adopted by the affirmative vote of not less than three-quarters
(3/4) of the entire membership of the Board (excluding the Participant if the
Participant is a member of the Board) at a meeting of the Board called and held
for such purpose (after reasonable notice is provided to the Participant and
the Participant is given an opportunity, together with counsel, to be heard
before the Board) a resolution finding that, in the good faith opinion of the Board,
the Participant has committed the conduct described in (i) or (ii) above, and
specifying the particulars thereof in detail.


 


1.4                                 Chairman:  Chairman of the Executive Committee as of
October 19, 1998.


 


1.5                                 Change
in Control:  The occurrence during
the term of the Plan of:


 


(a)                                  The
commencement (within the meaning of Rule 14d-2 under the Securities Exchange
Act of 1934 (the “Exchange Act”)) of a tender offer for more than 20% of the
Company’s outstanding shares of capital stock having ordinary voting power in
the election of directors (the “Voting Securities”);


 


(b)                                 An
acquisition (other than directly from the Company) of any voting securities of
the Company by any “Person” (as the term person is used for purposes of Section
13(d) or 14(d) of the Exchange Act) immediately after which such Person has
“Beneficial Ownership” (within, the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of the combined voting power of the Company’s then
outstanding Voting Securities; provided, however, in determining whether a
Change in Control has occurred, Voting Securities which are acquired in a
“Non-Control Acquisition” (as hereinafter defined) shall not constitute an
acquisition which would cause a Change in Control.  A “Non-Control Acquisition” shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof or a trustee thereof
acting solely in its capacity as trustee) maintained by (A) the Company or (B)
any corporation or other Person of which a majority of its voting power or its
voting equity securities or equity interest is owned, directly or indirectly,
by the Company (for purposes of this definition, a “Subsidiary”), (ii) the
Company or its Subsidiaries, or (iii) any


 


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Person who files in connection with such acquisition a
Schedule 13D which expressly disclaims any intention to seek control of the
Company and does not expressly reserve the right to seek such control;
provided, however, that any amendment to such statement of intent which either
indicates an intention or reserves the right to seek control shall be deemed an
“acquisition” of the securities of the Company reported in such filing as
beneficially owned by such Person for purposes of this paragraph (b);


 


(c)                                  The
individuals who, as of the effective date of the 1994 initial public trading in
Company shares, are members of the Board (the “Incumbent Board”), ceasing for
any reason to constitute at least a majority of the members of the Board;
provided, however, that if the election, or nomination for election by the
Company’s common stockholders, of any new director was approved by a vote of at
least two-thirds of the Incumbent Board, such new director shall, for purposes
of this Plan, be considered as a member of the Incumbent Board; provided
further, however, that no individual shall be considered a member of the
Incumbent Board if such individual initially assumed office as a result of
either an actual or threatened “Election Contest” (as described in Rule 14a-11
promulgated under the Exchange Act or other actual or threatened solicitation
of proxies or consents by or on behalf of a Person other than the Board (a
“Proxy Contest”) including by reason of any agreement intended to avoid or
settle any Election Contest or Proxy Contest; or


 


(d)                                 Approval
by stockholders of the Company of:


 


(i)                                     A
merger, consolidation or reorganization involving the Company, unless such
merger, consolidation or reorganization is a “Non-Control Transaction”; i.e.,
meets each of the requirements described in (A), (B), and (C) below:


 


(A)                              the
stockholders of the Company, immediately before such merger, consolidation or
reorganization, own, directly or indirectly immediately following such merger,
consolidation or reorganization, at least fifty percent (50%) of the combined
voting power of the outstanding voting securities of the corporation resulting
from such merger or consolidation or reorganization (the “Surviving
Corporation”) in substantially the same proportion as their ownership of the
Voting Securities immediately before such merger, consolidation or
reorganization;


 


(B)                                the
individuals who were members of the Incumbent Board immediately prior to the
execution of the agreement providing for such merger, consolidation or reorganization
constitute at least a majority of the members of the board of directors of the
Surviving


 


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Corporation immediately following the
consummation  of such merger,
consolidation or reorganization; and


 


(C)                                no
Person other than the Company, any Subsidiary, any employee benefit plan (or
any trust forming a part thereof or a trustee thereof acting solely in its
capacity as trustee) maintained by the Company, the Surviving Corporation, or
any Subsidiary, or any Person who, immediately prior to such merger,
consolidation or reorganization had Beneficial Ownership of 20% or more of the
then outstanding Voting Securities has Beneficial Ownership of 20% or more of
the combined voting power of the Surviving 
Corporation’s then outstanding voting securities immediately  following the consummation of such merger,
consolidation or reorganization.


 


(ii)                                  A
complete liquidation or dissolution of the Company; or


 


(iii)                               An
agreement for the sale or other disposition of all or substantially all of the
assets of the Company to any Person (other than a transfer to a Subsidiary).


 


Notwithstanding the foregoing, a Change in Control
shall not be deemed to occur solely because any Person (the “Subject  Person”) acquired Beneficial Ownership of
more than the permitted amount of the outstanding Voting Securities as a result
of the acquisition of Voting Securities by the Company which, by reducing the
number of Voting Securities outstanding, increases the proportional number of
shares Beneficially Owned by the Subject Persons, provided that if a Change in
Control would occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company and thereafter such Beneficial
Owner acquires any additional Voting Securities which increases the percentage
of the then outstanding Voting Securities Beneficially Owned by the Subject
Person, then a Change in Control shall occur.


 


1.6                                 Committee:  The Compensation and Benefits Committee of
the Board.


 


1.7                                 Company:  Lehman Brothers Holdings Inc. and except as
otherwise specified in this Plan in a particular context, any successor
thereto, whether by merger, consolidation or acquisition of substantially all
of its assets.


 


1.8                                 Competitive
Activity:  Involvement (whether as
an employee, proprietor, consultant or otherwise) with any person or entity
(including any company and its affiliates) engaged in any business activity
which is materially competitive with any business carried on by the Company or
any of its subsidiaries on the date of termination of a Participant’s
employment with the Company and any of its subsidiaries, as determined in the
sole discretion of the Committee. 
Following the occurrence of a Change in Control, the determination of
whether a Participant has engaged in


 


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“Competitive Activity” shall be made by a resolution
duly adopted by the affirmative vote of three-quarters (3/4) of the entire
membership of the Board (excluding the Participant if the Participant is a
member of the Board) at a meeting of the Board called and held for such purpose
(after reasonable notice is provided to the Participant and the Participant is
given an opportunity, together with counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Participant has committed the
conduct described in the preceding sentence and that such conduct is
demonstrably injurious to the Company.


 


1.9                                 Detrimental
Activity:  means at any time (i)
using information received during a person’s employment with the Company or any
subsidiary , their affiliates or clients, in breach of such person’s
undertakings to keep such information confidential; (ii) directly or indirectly
persuading or attempting to persuade, by any means, any employee of the Company
or any subsidiary to terminate his or her employment with the foregoing or to
breach any of the terms of his or her employment with the foregoing; (iii)
directly or indirectly making any statement that is, or could be, disparaging
of the Company, its subsidiaries or affiliates, or any of their employees
(except as necessary to respond truthfully to any inquiry from applicable
regulatory authorities or to provide information pursuant to legal process); or
(iv) directly or indirectly engaging in any activity (other than Competitive
Activity) that is substantially injurious to the financial condition,
reputation, or goodwill of the Company or its subsidiaries or affiliates, in
each case as determined in the sole discretion of the Committee.  Following the occurrence of a Change in
Control, the determination of whether a Participant has engaged in “Detrimental
Activity” shall be made by a resolution duly adopted by the affirmative vote of
three-quarters (3/4) of the entire membership of the Board (excluding the
Participant if the Participant is a member of the Board) at a meeting of the
Board called and held for such purpose (after reasonable notice is provided to
the Participant and the Participant is given an opportunity, together with
counsel, to be heard before the Board) finding that, in the good faith opinion
of the Board, the Participant has committed the conduct described in (i), (ii),
(iii), or (iv) above and that such conduct is demonstrably injurious to the Company.


 


1.10                           Disability:  A disability under the Company’s Long-Term
Disability Plan or any other condition, which in the sole discretion of the
Committee constitutes a disability for purposes of this Plan.


 


1.11                           Domestic
Partner:  An individual is a “Domestic
Partner” with respect to a Participant for purposes of this Plan if such
individual and the Participant have a currently registered domestic partnership
with a governmental body pursuant to state or local law authorizing such
registration.  In the absence of a
formal registration, a Participant can register his or her domestic partnership
with another individual by filing an affidavit with the Lehman Brothers
Benefits Service Center, and such individual shall qualify as a Domestic
Partner of such Participant for purposes of this Plan for so long as such
domestic partnership shall remain in effect.


 


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1.12                           Full
Benefits:  Benefits under the Plan
as described under Section 4.1 and payable pursuant to Section 4.3.


 


1.13                           Good
Reason:  The occurrence following a
Change in Control of any of the following without either Cause or a
Participant’s express written consent:


 


(a)                                  a
material adverse change in a Participant’s title, position, authority or key
responsibilities as compared to the Participant’s title, position, authority or
key responsibilities immediately prior to the Change in Control, excluding for
this purpose an action not taken in bad faith and which is remedied by the
Company promptly after receipt of notice thereof given by the Participant;


 


(b)                                 a
material reduction in a Participant’s annual base salary or incentive
compensation opportunities as compared to the Participant’s annual base salary
and incentive compensation opportunities as in effect immediately prior to the
Change in Control; or


 


(c)                                  any
requirement that the Executive (A) be based anywhere more than fifty (50) miles
from the office where the Executive was located immediately prior to the Change
in Control or (B) travel on Company business to an extent substantially greater
than the Executive’s travel obligations immediately prior to the Change in
Control.


 


1.14                           Member:  Any person who is serving on the Executive
Committee as of October 19, 1998, but who is not the Chairman.


 


1.15                           Participant:  Each Member and the Chairman and any other
person who is subsequently designated as a participant in the Plan pursuant to
Section 3.1.


 


1.16                           Present
Value:  The discounted present value
of a payment or stream of payments to be made at a future date, as determined
by the actuary of the Qualified Plan using the interest rate applicable under
the Qualified Plan to determine lump sum payments made at such time.


 


1.17                           Prorata
Benefits:  Benefits under the Plan
as described under Section 4.2 and payable pursuant to Section 4.3.


 


1.18                           Qualified
Plan:  The Lehman Brothers Holdings
Inc. Retirement Plan as from time to time in effect.


 


1.19                           Spouse:  The individual to whom a Participant is
legally married on the date of his death. 
An individual shall be treated as the Spouse of a Participant and as
legally married to such Participant for such period as such individual shall
qualify as the Domestic Partner of such Participant.


 


1.20                           Trust:  The trust or trusts described in Section
2.3.


 


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1.21                           Trustee:  The trustee of the Trust.


 


1.22                           Years
of Service:  A Participant’s “years
of vesting service” as determined under the Qualified Plan.


 


Usage.  Whenever applicable, the masculine gender, when used in the Plan,
will include the feminine gender, and the singular will include the plural.


 


ARTICLE
2


 


COMPANY
FUNDING OBLIGATIONS


 


2.1                                 In
General.  The Company shall have no
obligation under the Plan to make any payments or cause any payments to be made
except as explicitly provided under this Plan.


 


2.2                                 Unfunded
Plan.  The Plan is intended to
constitute an unfunded plan for a select group of management or highly
compensated employees as defined in sections 201(2), 301(a)(3) and 401(a)(1)
of  the Employee Retirement Income
Security Act of 1974, as amended (“ERISA”). 
All amounts payable under the Plan shall be paid out of the general
assets of the Company, and any individuals entitled to have payments made on
their behalf under the Plan shall have no rights to payment greater than the
rights of general unsecured creditors of the Company.


 


2.3                                 Rabbi
Trust.  The Company shall establish
promptly a revocable trust to hold assets, subject to the claims of the
Company’s creditors in the event of the Company’s insolvency, for the purpose of
the payment of the benefits hereunder, which shall become irrevocable upon the
first to occur of any of the events described in Section 1.5(a), (b) or (c), or
upon the consummation of a merger, consolidation, reorganization, complete
liquidation or dissolution, or agreement for sale or other disposition of all
or substantially all of the assets of the Company as described in Section
1.5(d).  The Company shall contribute to
the Trust cash in such amounts and at such times as are specified in this Plan
and in the Trust.  Amounts paid to
Participants from the Trust shall discharge the obligations of the Company
hereunder to the Participants to the extent of the payments so made.


 


ARTICLE
3


 


PARTICIPATION
AND ELIGIBILITY


 


3.1                                 Participation.  Participation in the Plan is limited
initially to the Chairman and the Members. 
The Committee, in its sole discretion, may extend the benefits of this
Plan to other key employees of the Company.


 


3.2                                 Eligibility
for Full Benefits.  A Participant is
eligible to receive Full Benefits as described in Section 4.1 under the Plan
if:


 


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(a)                                  (i)  he retires on or after he attains age sixty
(60) or the combination of his age and number of Years of Service exceeds
eighty-five (85), and (ii) he has not otherwise forfeited his benefits under
Section 4.5 of this Plan;


 


(b)                                 (i)  he is a Participant other than a Member or
the Chairman and retires after fulfilling any combination of eligibility
criteria other than as specified in paragraph 3.2(a), if any, that has been
communicated to such Participant in writing by the Committee in connection with
such Participant’s initial participation in the Plan, and (ii) he has not
otherwise forfeited his benefits under Section 4.5 of this Plan; or


 


(c)                                  (i)
within three (3) years following the occurrence of a Change in Control, his
employment is terminated by the Company without Cause or the Participant
terminates his employment with Good Reason, and (ii) he has not otherwise
forfeited his benefits under Section 4.5 of this Plan.


 


(1)                                  Notwithstanding
the foregoing, if all or any portion of the above payouts, either alone or
together with other payments and benefits a Participant receives or is then
entitled to receive from the Company and its subsidiaries, would constitute a
payment described in Section 280G(b)(2) (or its successors) of the Internal
Revenue Code of 1986, as amended (the “Code”), such payments and benefits
provided to the Participant shall be reduced to the extent necessary so that no
portion thereof shall be subject to the excise tax imposed by Section 4999 of
the Code; but only if, by reason of such reduction, the net after tax benefit
to the Participant shall exceed the net after tax benefit if such reduction
were not made.  For this purpose, the
determination as to whether such payments and benefits constitute a payment
described in Code Section 280G(b)(2) and as to the amount of such reduction, if
any, necessary to avoid the excise tax shall be based upon the agreement of the
Company and the Participant, or in the absence of such agreement, a
determination by the accounting firm as described in (2) below.  In the event of a determination that such
reduction is to take place, the Participant shall be entitled to designate
which payments and benefits shall be reduced, but in the event the Participant
fails to make such designation within 15 days following notification of such
determination, the Company shall allocate the reduction among such payments and
benefits in its sole discretion; provided, however, that the payments provided
pursuant to the Plan shall be the last payments to be reduced.


 


(2)                                  “Net
after tax benefit” shall mean the sum of (A) the total payments payable to the
Participant hereunder, plus (B) all other payments and benefits which the
Participant receives


 


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or is then entitled to
receive from the Company and its subsidiaries that would constitute a payment
described in Section 280G(b)(2) of the Code, less (C) the amount of federal,
state and local income taxes payable with respect to the foregoing calculated
at the maximum marginal income tax rate for each year in which the foregoing
shall be paid to the Participant (based upon the rate in effect for such year
as set forth in the Code at the time of termination of the Participant’s
employment), less (D) the amount of excise taxes imposed with respect to the
payments and benefits described in (A) and (B) above by Section 4999 of the
Code.  The foregoing calculations shall
be made, at the Company’s expense, by the Company and the Participant.  If no agreement on the calculations is
reached, the Participant and the Company shall agree to the selection of an
accounting firm to make the calculations. 
If no agreement can be reached regarding the selection of an accounting
firm, the Company shall select a nationally recognized accounting firm other
than the Company’s independent auditors. 
The determination of any such firm selected shall be conclusive and
binding on all parties.


 


(3)                                  In
the event a determination is made as described in (1) and (2) above that any
such payouts are to be reduced and if such determination occurs after the
Participant has received accelerated awards as described above without such
reduction having been made, the amount by which such payment is to be reduced
as provided above shall be deemed to be a loan from the Company to the
Participant and shall be due and payable by the Participant to the Company
three days following notification by the Company to the Participant of such
determination and the amount owing.  No
interest shall be due on such amount and the Company shall hold the Participant
harmless, on an after-tax basis, from any excise tax or income tax (including
interest or penalties with respect thereto) imposed with respect to such amount
or with respect to any imputed income with respect to such advance.


 


3.3                                 Eligibility
for Prorata Benefits.  A Participant
is eligible to receive Prorata Benefits as described in Section 4.2 under the
Plan if:


 


(a)                                  he
terminates his employment (i) after attaining age forty-five (45) or having
completed five (5) Years of Service (but before he attains age sixty (60) or
the combination of his age and number of Years of Service exceed eighty-five
(85)) or (ii) if he is a Participant other than a Member or the Chairman, after
fulfilling any combination of eligibility criteria other than as specified in
clause (i) of this paragraph, if any, that has been communicated to


 


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such Participant in writing by the Committee in
connection with such Participant’s initial participation in the Plan, and


 


(b)                                 he
has not otherwise forfeited his benefits under Section 4.5 of this Plan.


 


ARTICLE
4


 


BENEFITS


 


4.1                                 Amount
of Full Benefit.  In accordance with
the payment provisions of Section 4.3, a Participant who meets the eligibility
requirements under Section 3.2 shall be eligible to receive Full Benefits under
the Plan.  Full Benefits shall be equal
to (a) twenty-five (25) annual payments of $700,000 for Participants other than
the Chairman and (b) twenty-five (25) annual payments of $1,250,000 for the
Chairman.


 


4.2                                 Amount
of Prorata Benefit.  In accordance
with the payment provisions of Section 4.3, a Participant who meets the
eligibility requirements under Section 3.3 shall be eligible to receive Prorata
Benefits under the Plan.  Prorata
Benefits shall be equal to (a) twenty-five (25) annual payments of $700,000 for
Participants other than the Chairman and (b) twenty-five (25) annual payments
of $1,250,000 for the Chairman, multiplied by the ratio of (A) the
Participant’s Years of Service at termination or retirement to (B) the
projected Years of Service the Participant would have had at age sixty (60)
(or, if the Participant is other than a Member or the Chairman, at such other
age for eligibility for Full Benefits that is communicated to such Participant
in writing by the Committee at the time of such Participant’s initial
participation in the Plan) had his employment not terminated.


 


4.3                                 Payment
of Benefits.


 


4.3.1                        Except as provided in Section
4.4, Full and Prorata Benefits under the Plan shall commence the first day of
the first month coincident with or next following the later of (a) the month
that a Participant attains age sixty (60), or (b) the month a Participant
retires or terminates employment with the Company (the “Benefit Commencement
Date”).


 


4.3.2                        Prior to the occurrence of a
Change in Control, each Participant shall be entitled to make an election
pursuant to which, in the event such Participant’s employment is terminated
within three (3) years following a Change in Control either by the Company
without Cause or by the Participant for Good Reason, he shall be entitled to
receive in one lump sum payment the Present Value of his Full or Prorata
Benefits, as applicable, as soon as practicable after such termination of
employment.


 


 


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4.4                                 Benefits
on Death or Disability.


 


4.4.1                        In the event of the death of
the Participant after the Benefit Commencement Date, his Spouse, if any, shall
receive annually the remainder of the Participant’s annual payments under the
Plan.  If the Spouse shall die before
all annual payments have been paid (or if the Participant has no Spouse on the
date of his death), the Present Value of the remaining payments shall be paid
in one lump sum to such Spouse’s estate (or the Participant’s estate, as the
case may be) as soon as practicable following the date of death of such Spouse
(or of the Participant, as the case may be).


 


4.4.2                        In the event of the death of a
Participant prior to the Benefit Commencement Date, payments of any Full
Benefits (if the Participant had then satisfied the requirements of Section
3.2) or Prorata Benefits (if the Participant had then satisfied the
requirements of Section 3.3) shall be paid annually to the Participant’s Spouse
commencing on the later of (i) the first day of the month immediately following
the Participant’s death or (ii) the first day of the month coincident with or
next following the month during which the Participant would have attained age
sixty (60).  If the Spouse shall die
before all annual payments have been paid or before benefit payment commences
(or if the Participant has no Spouse on the date of his death), the Present
Value of the remaining payments shall be paid in one lump sum to such Spouse’s
estate (or the Participant’s estate, as the case may be) as soon as practicable
following the date of death of such Spouse (or of the Participant, as the case
may be).


 


4.4.3                        In the event of the death or
Disability of a Participant, the Committee may, in its sole discretion, (i)
increase the Participant’s Prorata Benefit up to a maximum of the Full Benefit,
(ii) accelerate the date on which payment of Full or Prorata Benefits commences
to any date prior to the otherwise applicable Benefit Commencement Date, and
(iii) provide that the Present Value of the Participant’s Prorata or Full
Benefit (or the Present Value of the remaining payments, as applicable) shall
be paid immediately in one lump sum.


 


4.5                                 Forfeiture
and Cessation of Payments.  A
Participant shall forfeit all rights to Full or Prorata Benefits (including the
right to any such benefits after the Benefit Commencement Date) if (i) he
engages in Competitive Activity at any time other than following termination of
his employment (A) by the Company without Cause within three (3) years
following a Change in Control or (B) by the Participant with Good Reason within
three (3) years following a Change in Control, (ii) he engages in Detrimental
Activity at any time, (iii) his employment is terminated with Cause, (iv) he is
a Member or the Chairman and his employment terminates on or before July 1,
2001, or (v) he is a Participant other than a Member or the Chairman and his employment
terminates for a reason other than death or Disability before the earlier of
(x) the date determined by the Committee in connection with such Participant’s
initial participation in the Plan and (y) a Change in Control.


 


4.6                                 Withholding.  All payments and benefits under the Plan
shall be subject to any applicable withholding requirements imposed by any tax
or other law. The


 


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Company shall have the right to satisfy any
withholding obligation against any other payments, including regular wages, due
the Participant.


 


ARTICLE
5


 


AMENDMENT
AND TERMINATION


 


5.1                                 Amendment
and Termination.  Subject to Section
5.2, the Company, by action of the Committee, may at any time amend the Plan,
retroactively or otherwise, in any respect or terminate the Plan; provided,
however, that no such amendment or termination shall reduce the amount of  Full or Prorata Benefit for which a
Participant was eligible under the Plan in effect immediately prior to the date
of such amendment or termination (determined as though the Participant’s
employment with the Company had then terminated but without regard to the
requirement of Section 4.5 relating to employment on July 1, 2001, or such
later date, as specified by the Committee with respect to a Participant who is
neither a Member nor the Chairman); and further provided that no amendment made
within six (6) months before a Change in Control or at any time after a Change
in Control that reduces or otherwise adversely affects a Participant’s rights
with respect to Full or Prorata Benefits shall be given effect.


 


5.2                                 Restrictions
on Company’s Action.  Without the
express written consent of the Participant, no action taken by the Company
shall adversely affect a Participant’s (or his Spouse’s) right to receive a
Full or Prorata Benefit upon satisfaction by the Participant of the conditions
precedent to entitlement to such a benefit as they exist under the terms of the
Plan in effect immediately prior to such action, and at the time and on the
terms then in effect.  Notwithstanding
the foregoing, the Company reserves the right to pay in one lump sum the
Present Value of any Full or Prorata Benefit upon termination of the Plan.


 


5.3                                 Notwithstanding
anything herein to the contrary, the provisions of this Article 5 may not be
amended without the express written consent of each Participant.


 


ARTICLE
6


 


ADMINISTRATION;
FUNDING OF TRUST


 


6.1                                 Committee.  The Plan shall be administered by the
Committee.  Without limiting the
generality of the foregoing, the Committee shall have the power and discretion:


 


(a)                                  to
make and enforce rules and regulations and to prescribe the use of forms
necessary or advisable for efficient administration of the Plan;


 


(b)                                 to
interpret the Plan, to resolve ambiguities, inconsistencies and omissions and
to decide questions concerning the eligibility of any person to


 


12

















 


receive benefits under the Plan, such interpretations,
resolutions and decisions to be final and conclusive on all persons;


 


(c)                                  to
direct payment of amounts due with respect to each Participant under the Plan;


 


(d)                                 to
delegate authority to agents and other persons to act on its or his behalf in
carrying out the provisions and administration of the Plan and to take or
direct any action required or advisable with respect to the administration of
the Plan and Trust; and


 


(e)                                  to
perform any other acts as the Committee deems necessary or appropriate for the
proper administration of this Plan.


 


6.2                                 Claims
Procedure.  If any claim for
benefits under the Plan is denied, the Committee shall follow procedures
similar to those then in effect under the Qualified Plan for notifying the
applicant of such denial and for affording the applicant an opportunity to
appeal such denial.


 


6.3                                 Service
of Process.  The Company or such
other person as may from time to time be designated by the Committee shall be
the agent for service of process under the Plan.


 


6.4                                 No
Bond Required.  No bond or other
security shall be required of any individual or the Committee except as may be
required by law.


 


6.5                                 Limitation
of Liability; Indemnity.  Except to
the extent otherwise provided by law, if any duty or responsibility of the
Committee has been allocated or delegated to any other person in accordance
with any provision of the Plan, then the Committee shall not be liable for any
act or omission of such person in carrying out such duty or
responsibility.  The Company shall
indemnify and save each person who is a member of the Committee and each
employee or director of the Company harmless against any and all loss,
liability, claim, damage, cost and expense which may arise by reason of, or be
based upon, any matter connected with or related to the Plan or the
administration of the Plan (including, but not limited to, any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or in settlement of any such claim
whatsoever) to the fullest extent permitted under applicable law.


 


6.6                                 Powers
of the Committee.  Notwithstanding
any other provisions of this Plan or the Trust to the contrary, the Committee
may:


 


(a)                                  accelerate
a Participant’s eligibility for Prorata or Full Benefits under the Plan;


 


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(b)                                 pay
the Present Value of any Full or Prorata Benefit in one lump sum cash payment;


 


(c)                                  establish
eligibility criteria for any Participant other than a Member or the Chairman to
receive Full and Prorata Benefits, provided such criteria are communicated to
each such Participant in writing by the Committee at the time of such
Participant’s initial participation in the Plan; and


 


(d)                                 cause
the Company to fund the Trust at any time by determining each Participant’s
Full or Prorata Benefit and causing the Company to contribute to a separate
account maintained for each Participant under the Trust, in cash, an amount
equal to the Present Value of such Participant’s Full or Prorata Benefit (or,
if annual payments have already commenced, the Present Value of the remaining
benefit) less any amount credited to such Participant’s account under the Trust
as of the date of the contribution.


 


Notwithstanding the provisions of paragraph (d), the
Committee shall upon the occurrence of a Change in Control determine each
Participant’s Full or Prorata Benefit as of the end of such Participant’s
latest completed month of service. 
Within five (5) days following such a Change in Control (or, if later,
on the date when every Participant’s Full or Prorata Benefit has been
determined), the Company shall contribute to a separate account maintained for
each Participant under the Trust, in cash, an amount equal to 110% of the
Present Value of each such Participant’s Full or Prorata Benefit (or, if annual
payments have already been made, the Present Value of the remaining payments)
less any amount credited to such Participant’s account under the Trust as of
the date of the contribution.  Within
five (5) days of each anniversary of the Change in Control (or, if later, on
the date when each Participant’s benefit that has accrued as of the date of
such anniversary has been determined), the Company shall make an additional
contribution to the Trust, in cash, such that the amount maintained in each
Participant’s account shall equal at least 110% of the then Present Value of
each such Participant’s Full or Prorata Benefit (or, if annual payments have
already been made, the Present Value of the remaining payments) less any amount
credited to such Participant’s account under the Trust as of the date of such
additional contribution. 
Notwithstanding anything in this Plan to the contrary, as of each
anniversary of the Change in Control, the Company shall be entitled to receive,
if it so elects, a payment from the Trust such that after such payment, the
assets credited to each Participant’s account equal at least 120% of the then
Present Value of the Participant’s Full or Prorata Benefit (or, if annual
payments have already been made, the Present Value of the remaining payments).  For purposes of determining the Present
Value of amounts described in this paragraph for Participants who have not
commenced receiving benefits under the Plan, the Company shall assume that each
Participant’s Benefit Commencement Date will occur at age sixty (60), or if a
Participant has already attained age sixty (60), will occur immediately.


 


6.7                                 Legal
Fees and Interest.  If after the
occurrence of a Change in Control, (i) a dispute arises with respect to the
enforcement of a Participant’s rights under


 


14

















 


this Plan, or (ii) any legal or arbitration proceeding
shall be brought to enforce or interpret any provision contained herein or to
recover damages for breach hereof and the Participant prevails in whole or in
part, in either case so long as the Participant is not acting in bad faith, the
Participant shall recover from the Company any reasonable attorneys’ fees and
necessary costs and disbursements incurred as a result of such dispute, legal
or arbitration proceeding (“Expenses”), and prejudgment interest on any money
judgment or arbitration award obtained by the Participant calculated at the
prime rate of interest as reported by The
Wall Street Journal from the date that payments to the Participant
should have been made under this Plan. 
Within ten (10) days after the Participant’s written request therefor,
the Company shall pay to such Participant, or such other person or entity as
such Participant may designate in writing to the Company, the Participant’s
Expenses.


 


ARTICLE
7


 


MISCELLANEOUS


 


7.1                                 Payment
to Incompetent.  If any person
entitled to benefits under this Plan shall be a minor or shall be either
physically or mentally incompetent in the judgment of the Committee, such
benefits may be paid pursuant to the same procedures as specified from time to
time under the Qualified Plan.  In the
event of such payment the Company and the Trust shall be discharged from all
further liability for such payment.


 


7.2                                 Doubt
as to Right to Payment.  If any doubt
exists as to the right of any person to any benefits under this Plan or the
amount of time of payment of such benefits (including, without limitation, any
case of doubt as to identity, or any case in which any notice has been received
from any other person claiming any interest in amounts payable hereunder, or
any case in which a claim from other persons may exist by reason of community
property or similar laws), the Committee will be entitled, in its discretion,
to direct that payment of such benefits be deferred until such right or amount
or time is determined or until order of a court of competent jurisdiction, or
to pay such sum into court in accordance with appropriate rules of law in such
case then provided, or to make payment only upon receipt of a bond or similar
indemnification (in such amount and in such form as is satisfactory to the
Committee).


 


7.3                                 Spendthrift
Clause.  To the maximum extent
permitted by law, (a) no benefit, distribution or payment under the Plan may be
anticipated, assigned (either at law or in equity), alienated or subject to
attachment, garnishment, levy, execution or other legal or equitable process,
whether pursuant to a “qualified domestic relations order”, as defined in
section 414(p) of the Code, or otherwise; and (b) the Plan shall in no manner
be liable for or subject to the debts or liabilities of any Participant.


 


7.4                                 Data.  Any Participant or Spouse entitled to
benefits under the Plan must furnish to the Committee such documents, evidence
or information as the Committee considers necessary or desirable for the
purpose of administering the Plan, or


 


15

















 


to protect the Committee; and it is a condition of the
Plan that each such Participant or Spouse must furnish promptly true and
complete data, evidence or information and sign such documents as the Committee
may require before any benefits become payable under the Plan.


 


7.5                                 Separability.  If any provision of the Plan is held invalid
or unenforceable, its invalidity or unenforceability will not affect any other
provisions of the Plan, and the Plan will be construed and enforced as if such
provision had not been included therein.


 


7.6                                 Captions.  The captions contained herein are inserted
only as a matter of convenience and for reference and in no way define, limit,
enlarge or describe the scope or intent of the Plan nor shall, in any way,
affect the Plan or the construction of any provision thereof.


 


7.7                                 Right
of Discharge Reserved.  The
establishment of the Plan shall not be construed to confer upon any Participant
any legal right to be retained in the employ of the Company or give any
Participant or any other person any right to benefits, except to the extent
expressly provided for hereunder.  All
Participants will remain subject to discharge to the same extent as if the Plan
had never been adopted, and may be treated without regard to the effect such
treatment might have upon them under the Plan.


 


7.8                                 Not
Compensation for Other Plans.  No
compensation payable as a consequence of participation in the Plan shall be
considered in calculating or determining benefits, coverage or contributions
under any other employee benefit plan or program, unless otherwise explicitly
provided under such plan or program or as otherwise required by applicable law.


 


7.9                                 Arbitration.  Prior to a Change in Control, any dispute,
controversy or claim between a Participant and the Company arising out of or
relating to or concerning the provisions of the Plan shall be finally settled
by arbitration in the City of New York before, and in accordance with, the
commercial arbitration rules of the American Arbitration Association
(“AAA”).  If, after the occurrence of a
Change in Control, any dispute, controversy or claim arises between a
Participant and the Company out of or relating to or concerning the provisions
of the Plan, such dispute, controversy or claim shall be finally settled by a
court of competent jurisdiction in the City of New York which, notwithstanding
the provisions of Article 6 or any other provision of the Plan, shall apply a de
novo standard of review to any determination made by the Company, the
Board or the Committee.


 


7.10                           Governing
Law and Limitations on Actions.  The
Plan is intended to constitute an arrangement that is unfunded and maintained
primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees, all within the meaning of  ERISA, as amended.  To that extent, rights under this Plan shall be governed by and
construed in accordance with rules of Federal law applicable to such
plans.  To the extent that such rules of
Federal law are not


 


16

















 


applicable, the Plan shall be construed, and all
provisions hereof shall be enforced and administered, according to the laws of
the State of New York without regard to principles of choice of law; provided,
however, that any determination of whether a Change in Control has occurred for
purposes of this Plan shall be determined in accordance with the laws of the
State of Delaware without regard to principles of choice of law.  No action (whether at law, in equity or
otherwise) or arbitration claim shall be brought by or on behalf of any
Participant or Spouse for or with respect to benefits due under this Plan
unless the person bringing such action has timely exhausted the Plan’s claim
review procedure.  Any action (whether
at law, in equity or otherwise) or arbitration claim must be commenced within
three years.  This three year period shall
be computed from the earlier of (a) the date a final determination denying such
benefit, in whole or in part, is issued under the Plan’s claim review procedure
and (b) the date such individual’s cause of action first accrued (as determined
under the laws of the State of New York or the State of Delaware, as
applicable, without regard to principles of choice of laws).


 


17

















 


IN WITNESS WHEREOF, LEHMAN BROTHERS HOLDINGS INC. has
caused this instrument to be executed by its duly authorized officers, and its
corporate seal to be hereunto affixed, this 10th   day of December, 2003.


 


	
   

  	
  LEHMAN BROTHERS
  HOLDINGS INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Tracy Binkley

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Vice President and

  Director of Global Human Resources

  
	
  ATTEST:

  	
   

  
	
  /s/ Madeline L. Shapiro

  	
   

  	
   

  
	
  Assistant Secretary

  	
   

  
					



 


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