Exhibit
10.14


 


 


LEHMAN
BROTHERS HOLDINGS INC.


1994
MANAGEMENT OWNERSHIP PLAN


As
amended through November 8, 2007


 


SECTION 1
— PURPOSE


 


The purpose of this Plan
is to strengthen Lehman Brothers Holdings Inc. (the “Company”) by providing an
incentive to its officers, employees, consultants and directors and thereby
encouraging them to devote their abilities to increase shareholder value and to
sustain excellence.  It is intended that
this be achieved by extending to Eligible Individuals of the Company and its
subsidiaries an added long-term incentive for high levels of performance and
unusual efforts through the grant of Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights, Restricted Stock, Restricted Stock
Units, Performance Units and Performance Shares (as each term is hereinafter
defined).


 


SECTION 2 —
ADMINISTRATION


 


2.1       The
Plan shall be administered by the Committee which shall hold meetings at such
times as may be necessary for the proper administration of the Plan.  The Committee shall keep minutes of its
meetings.  A quorum shall consist of not
less than three members of the Committee and a majority of a quorum may
authorize any action.  Any decision or
determination reduced to writing and signed by a majority of all of the members
shall be as fully effective as if made by a majority vote at a meeting duly
called and held.  Each member of the
Committee shall be a Disinterested Director. 
No member of the Committee shall be liable for any action, failure to
act, determination or interpretation made in good faith with respect to this
Plan or any transaction hereunder.  The
Company hereby agrees to indemnify each member of the Committee as permitted by
applicable law, for any liability incurred in connection with defending against,
responding to, negotiation for the settlement of or otherwise dealing with any
claim, cause of action or dispute of any kind arising in connection with any
actions in administering this Plan or in authorizing or denying authorization
to any transaction hereunder.


 


2.2       Subject
to the express terms and conditions set forth herein, the Committee shall have
the power from time to time to:


 


(a)                                  determine those individuals to whom
Options shall be granted under the Plan and the number of Incentive Stock Options
and/or Non-qualified Stock Options to be granted to each Eligible Individual
and to prescribe the terms and conditions (which need not be identical) of each
Option, including the purchase price per Share subject to each Option, and make
any amendment or modification to any Agreement consistent with the terms of the
Plan; and


 


(b)                                  select those Eligible Individuals to whom
Awards shall be granted under the Plan and to determine the number of Stock
Appreciation Rights, Performance Units, Performance Shares, and/or Shares of
Restricted Stock or Restricted Stock Units to be granted pursuant to each
Award, the terms and conditions of each Award, including the restrictions or
performance criteria relating to such Units or Shares, the maximum value of
each Performance Unit and Performance Share and make any amendment or
modification to any Agreement consistent with the terms of the Plan.


 


2.3       Subject
to the express terms and conditions set forth herein, the Committee shall have
the power from time to time:


 


(a)                                  to construe and interpret the Plan and
the Options and Awards granted thereunder and to establish, amend and revoke rules and
regulations for the administration of the Plan, including, but not limited to,
correcting any defect or supplying any omission, or reconciling any
inconsistency in the Plan or in any Agreement, in the manner and to the extent
it shall deem necessary or advisable to make the Plan fully effective;


 


 

















 


(b)                                  to determine the duration and purposes
for leaves of absence which may be granted to an Optionee or Grantee on an
individual basis without constituting a termination of employment or service
for purposes of the Plan; and


 


(c)                                  to resolve all questions of
interpretation arising under or in connection with the administration of the
Plan, to  exercise its discretion with
respect to the powers and rights granted to it as set forth in the Plan, and
generally, to exercise such powers and to perform such acts as are deemed
necessary or advisable to promote the best interests of the Company with respect
to the Plan.


 


2.4       All
decisions and determinations by the Committee in the exercise of the powers
conferred upon it under the Plan shall be final, binding and conclusive upon
the Company, its Subsidiaries, Eligible Individuals, Optionees, Grantees and
all other persons having any interest therein.


 


SECTION 3 —
STOCK SUBJECT TO THE PLAN


 


3.1       The maximum number of Shares that may be made the
subject of Options and Awards granted under the Plan (other than Restricted
Stock Units to be granted to Non-employee Directors pursuant to Section 9.4)
is 33,000,000 for all Eligible Individuals. 
The maximum number of Shares that may be made the subject of Restricted
Stock Units to be granted to Non-employee Directors pursuant to Section 9.4
is 300,000.  Upon a Change in
Capitalization the maximum number of Shares available on an aggregate and
Eligible Individual basis shall be adjusted in number and kind pursuant to Section 11.  The Company shall reserve for the purposes of
the Plan, out of its authorized but unissued Shares or out of Shares held in
the Company’s treasury, or partly out of each, such number of Shares as shall
be determined by the Board.  The maximum
number of Shares available for Options Stock Appreciation Rights or other
Awards that may be granted to an Eligible Individual shall not exceed 3,300,000
over the life of the Plan.


 


3.2       Upon
the granting of an Option or an Award, the number of Shares available under Section 3.1
for the granting of further Options and Awards shall be reduced as follows:


 


(a)                                  In connection with the granting of an
Option or an Award (other than the granting of a Performance Unit denominated
in dollars), the number of Shares shall be reduced by the number of Shares in
respect of which the Option or Award is granted or denominated.


 


(b)                                  Notwithstanding Section 3.2(a), the
exercise of a Stock Appreciation Right granted in tandem with an Option shall
be treated, for purposes of this Section 3, solely as though the Option
had been exercised through the purchase of Shares, with the result that the
number of Shares shall be reduced by the number of Shares so purchased.  No other reduction in the number of Shares
shall be made on account of such Stock Appreciation Right exercise.


 


(c)                                  In connection with the granting of a
Performance Unit denominated in dollars, the number of Shares shall be reduced
by an amount equal to the quotient of (i) the dollar amount in which the
Performance Unit is denominated, divided by (ii) the Fair Market Value of
a Share on the date the Performance Unit is granted.


 


3.3       Whenever
any outstanding Option or Award or portion thereof expires, is canceled or is
otherwise terminated for any reason without having been exercised or payment
having been made in respect of the entire Option or Award, the Shares allocable
to the expired, canceled or otherwise terminated portion of the Option or Award
shall again be available for grant pursuant to Options or Awards granted
hereunder to the fullest extent permitted by Rule 16b-3 under the Exchange
Act.  In addition, during the period that
any Options and Awards remain outstanding under the Plan, the Committee may
make good faith adjustments upon a Change in Capitalization with respect to the
number of Shares attributable to such Options and Awards for purposes of
calculating the maximum number of Shares available for the granting of future
Options and Awards under the Plan, provided that following such adjustments the
exemptions provided pursuant to Rule 16b-3 under the Exchange Act, and the
exceptions provided pursuant to Section 162(m) of the Code, will not
be adversely affected thereby.


 


 


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SECTION 4 —
OPTION GRANTS FOR ELIGIBLE INDIVIDUALS


 


4.1       Authority of Committee.  Subject to the
provisions of the Plan, the Committee shall have full and final authority to
select those Eligible Individuals who will receive Options, the terms and
conditions of which shall be set forth in an Agreement; provided, however,
that no person shall receive any Incentive Stock Options unless he or she is an
employee of the Company, a Parent or a Subsidiary at the time the Incentive
Stock Option is granted.


 


4.2       Purchase Price.  The purchase
price or the manner in which the purchase price is to be determined for Shares
under each Option shall be determined by the Committee and set forth in the
Agreement; provided, however, that the purchase price per Share
under each Incentive Stock Option shall not be less than 100% of the Fair
Market Value of a Share on the date the Incentive Stock Option is granted (110%
in the case of an Incentive Stock Option granted to a Ten-Percent Stockholder)
and the purchase price per Share under each Non-qualified Stock Option shall
not be less than 100% of the Fair Market Value of a Share on the date the
Non-qualified Stock Option is granted.


 


4.3       Maximum Duration.  Options granted hereunder shall be for
such term as the Committee shall determine, provided that an Incentive Stock
Option shall not be exercisable after the expiration of ten (10) years
from the date it is granted (five (5) years in the case of an Incentive
Stock Option granted to a Ten-Percent Stockholder) and a Non-qualified Stock
Option shall not be exercisable after the expiration of ten (10) years
from the date it is granted.  The
Committee may, subsequent to the granting of any Option, extend the term
thereof but in no event shall the term as so extended exceed the maximum term
provided for in the preceding sentence.


 


4.4  Vesting. 
Each
Option shall become exercisable in such installments (which need not be equal)
and at such times as may be designated by the Committee and set forth in the
Agreement.  To the extent not exercised,
installments shall accumulate and be exercisable, in whole or in part, at any
time after becoming exercisable, but not later than the date the Option
expires.  The Committee may accelerate
the exercisability of any Option or portion thereof at any time.


 


4.5  $100,000 Limitation.  If the aggregate Fair Market Value of the Shares with
respect to which Incentive Stock Options are exercisable for the first time by
any Optionee during a calendar year (under all plans of the Company and its
Parents and Subsidiaries) exceeds $100,000, such Incentive Stock Options shall
be treated, to the extent of such excess, as Non-qualified Stock Options.  For purposes of the preceding sentence, the
Fair Market Value of the Shares shall be determined at the time the Incentive
Stock Options covering such Shares were granted.


 


SECTION 5 —
TERMS AND CONDITIONS APPLICABLE TO ALL OPTIONS


 


5.1       Method of Exercise.  The exercise of an Option shall be made
only by a written notice delivered in person, by facsimile transmission or by
mail to the Secretary of the Company at the Company’s principal executive
office, specifying the number of Shares to be purchased and accompanied, at the
time of exercise or as otherwise permitted by the Committee, by payment
therefor and otherwise in accordance with the Agreement pursuant to which the
Option was granted.  The purchase price
for any Shares purchased pursuant to the exercise of an Option shall be paid in
full upon such exercise (or as otherwise permitted by the Committee) by any one
or a combination of the following:  (i) in
cash (in any form of currency acceptable to the Committee), (ii) transferring
Shares to the Company upon such terms and conditions as determined by the
Committee or (iii) transferring Awards to the Company if permitted by, and
upon such terms and conditions as determined by, the Committee.  Notwithstanding the foregoing, the Committee
shall have discretion to determine at the time of grant of each Option or at
any later date (up to and including the date of exercise) the form of payment
acceptable in respect of the exercise of such Option.  Pursuant to procedures established by the
Committee, the written notice pursuant to this Section 5.1 may also
provide instructions from the Optionee to the Company that upon receipt of the
purchase price in cash from the Optionee’s broker or dealer, designated as such
on the written notice, in payment for any Shares purchased pursuant to the
exercise of an Option, the Company shall issue such Shares directly to the
designated broker or dealer.  Any Shares
transferred to the Company as payment of the purchase price under an Option
shall be valued at their Fair Market Value on the date of exercise of such
Option.  If requested by the Committee,
the Optionee shall deliver the Agreement evidencing the Option to the Secretary
of the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Optionee.  No
fractional Shares (or cash in lieu thereof) shall be issued 


 


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upon exercise of an
Option and the number of Shares that may be purchased upon exercise shall be
rounded to the nearest number of whole Shares.


 


5.2       Rights of Optionees.  No Optionee shall be deemed for any
purpose to be the owner of any Shares subject to any Option unless and until (i) the
Option shall have been exercised pursuant to the terms thereof, (ii) the
Company shall have issued and delivered the Shares to the Optionee and (iii) the
Optionee’s name shall have been entered as a stockholder of record on the books
of the Company.  Thereupon, the Optionee
shall have full voting, dividend and other ownership rights with respect to
such Shares.


 


5.3       Limited Rights.  An Optionee may, in the discretion of the
Committee, have the right (a “Limited Right”) to surrender the Option or any
portion thereof to the Company within 30 days following a Change in
Control and to receive from the Company in exchange therefor a cash payment in
an amount equal to (a) the number of unexercised Shares under the Option
which are being surrendered multiplied by (b) the excess of (i) the
greater of (A) the highest price per Share paid in connection with the
Change in Control or (B) the highest Fair Market Value per Share in the
90 day period preceding such Change in Control, over (ii) the
purchase price of the Option as set forth in the Agreement.


 


SECTION 6 —
STOCK APPRECIATION RIGHTS


 


6.1       Authority of Committee. 
The
Committee may, in its discretion, either alone or in connection with the grant
of an Option, grant Stock Appreciation Rights in accordance with the Plan and
the terms and conditions of which shall be set forth in an Agreement.  If granted in connection with an Option, a
Stock Appreciation Right shall cover the same number of Shares covered by the
Option (or such lesser number of Shares as the Committee may determine) and
shall, except as provided in this Section 6.1, be subject to the same terms
and conditions as the related Option.


 


6.2       Time of Grant.  A Stock Appreciation Right may be granted
(i) at any time if unrelated to an Option, or (ii) if related to an
Option, either at the time of grant, or at any time thereafter during the term
of the Option.


 


6.3       Stock Appreciation Right Related to an Option.


 


(a)                                  Exercise. 
Subject to Section 6.7, a Stock Appreciation Right granted in
connection with an Option shall be exercisable at such time or times and only
to the extent that the related Option is exercisable, and will not be
transferable except to the extent the related Option may be transferable.


 


(b)                                  Amount Payable.  Upon the exercise of a Stock Appreciation Right
related to an Option and subject to the provisions of Section 6.6, the
Grantee shall be entitled to receive an amount determined by multiplying (A) the
excess of the Fair Market Value of a Share on the date of exercise of such
Stock Appreciation Right over the per Share purchase price under the related
Option, by (B) the number of Shares as to which such Stock Appreciation
Right is being exercised. 
Notwithstanding the foregoing, the Committee may limit in any manner the
amount payable with respect to any Stock Appreciation Right by including such a
limit in the Agreement evidencing the Stock Appreciation Right at the time it
is granted.


 


(c)                                  Treatment of Related
Options and Stock Appreciation Rights Upon Exercise.  Upon the exercise of a Stock Appreciation Right
granted in connection with an Option, the Option shall be canceled to the
extent of the number of Shares as to which the Stock Appreciation Right is
exercised, and upon the exercise of an Option granted in connection with a
Stock Appreciation Right or the surrender of such Option pursuant to Section 6.5,
the Stock Appreciation Right shall be canceled to the extent of the number of
Shares as to which the Option is exercised or surrendered.


 


6.4(a)                 Stock Appreciation Right
Unrelated to an Option.  The Committee may grant to Eligible
Individuals Stock Appreciation Rights unrelated to Options.  Stock Appreciation Rights unrelated to
Options shall contain such terms and conditions as to exercisability (subject
to Section 6.7), vesting and duration as the Committee shall determine,
but in no event shall they have a term of greater than ten (10) years.  The Committee may accelerate the
exercisability of any Stock Appreciation Right at 


 


 


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any time.  Upon exercise of a Stock Appreciation Right
unrelated to an Option, the Grantee shall be entitled to receive an amount
determined by multiplying (A) the excess of the Fair Market Value of a
Share on the date of exercise of such Stock Appreciation Right over the Fair
Market Value of a Share on the date the Stock Appreciation Right was granted,
by (B) the number of Shares as to which the Stock Appreciation Right is
being exercised.  Notwithstanding the
foregoing, the Committee may limit in any manner the amount payable with
respect to any Stock Appreciation Right by including such a limit in the
Agreement evidencing the Stock Appreciation Right at the time it is granted.


 


(b)                                  Limited SAR Rights.  A Grantee may, in the discretion of the Committee,
have the right (a “Limited SAR Right”) to surrender the Stock Appreciation
Right or any portion thereof to the Company within 30 days following a Change
in Control and to receive from the Company in exchange therefor a cash payment
in an amount equal to (a) the number of Shares under the Stock
Appreciation Right which are being exercised, multiplied by (b) the excess
of (i) the greater of (A) the highest price per Share paid in
connection with the Change in Control or (B) the highest Fair Market Value
per Share in the 90 day period preceding such Change in Control, over (ii) the
Fair Market Value of a Share on the date the Stock Appreciation Right was
granted as set forth in the Agreement.


 


6.5       Method of Exercise.  Stock Appreciation Rights shall be
exercised by a Grantee only by a written notice delivered in person, by
facsimile transmission, or by mail to the Secretary of the Company at the
Company’s principal executive office, specifying the number of Shares with
respect to which the Stock Appreciation Right is being exercised.  If requested by the Committee, the Grantee
shall deliver the Agreement evidencing the Stock Appreciation Right being
exercised and the Agreement evidencing any related Option to the Secretary of
the Company who shall endorse thereon a notation of such exercise and return
such Agreement to the Grantee.


 


6.6       Form of Payment.  Payment of the amount determined under
Sections 6.3(b) or 6.4 may be made in the discretion of the Committee,
solely in whole Shares in a number determined at their Fair Market Value on the
date preceding the date of exercise of the Stock Appreciation Right, or solely
in cash, or in a combination of cash and Shares.  If the Committee decides to make full payment
in Shares and the amount payable results in a fractional Share, payment for the
fractional Share will be made in cash.


 


6.7       Restrictions.  In the case of any Grantee who may be
subject to liability under Section 16(b) of the Exchange Act, no
Stock Appreciation Right may be exercised before the date six (6) months
after the date it is granted.


 


SECTION 7 —
RESTRICTED STOCK


 


7.1       Grant.  The Committee may grant to Eligible
Individuals Awards of Restricted Stock, and may issue Shares of Restricted
Stock in payment of vested Performance Units (as hereinafter provided in Section 8.2),
which shall be evidenced by an Agreement between the Company and the
Grantee.  Each Agreement shall contain
such restrictions, terms and conditions as the Committee may, in its
discretion, determine and (without limiting the generality of the foregoing)
such Agreements may require that an appropriate legend be placed on Share
certificates.  Awards of Restricted Stock
shall be subject to the terms and provisions set forth below in this Section 7.


 


7.2       Rights of Grantee.  Shares of Restricted Stock granted
pursuant to an Award hereunder shall be issued in the name of the Grantee as
soon as reasonably practicable after the Award is granted provided that the
Grantee has executed an Agreement evidencing the Award, the appropriate blank
stock powers and, in the discretion of the Committee, an escrow agreement and
any other documents which the Committee may require as a condition to the
issuance of such Shares.  If a Restricted
Stock Award Agreement, appropriate blank stock powers and such other documents
which the Committee may require are not executed by the Grantee within the time
period prescribed by the Committee at the time the Award is granted, the Award
shall be null and void.  At the
discretion of the Committee, Shares issued in connection with a Restricted
Stock Award shall be deposited together with the stock powers with an escrow
agent (which may be the Company) designated by the Committee.  Unless the Committee determines otherwise and
as set forth in the Agreement, upon delivery of the Shares to the escrow agent,
the Grantee shall have all of the rights of a stockholder with respect to such
Shares, including the right to vote the Shares and to receive all dividends or
other distributions paid or made with respect to the Shares.


 


 


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7.3       Non-transferability.  Until any restrictions upon the Shares of
Restricted Stock Awarded to a Grantee shall have lapsed in the manner set forth
in Section 7.4, such Shares shall not be sold, transferred or  otherwise disposed of and shall not be
pledged or otherwise hypothecated, nor shall they be delivered to the Grantee.


 


7.4       Lapse of Restrictions. 
Restrictions
upon Shares of Restricted Stock awarded hereunder shall lapse at such time or
times on such terms and conditions as the Committee may determine, which
restrictions shall be set forth in the Agreement evidencing the Award.


 


7.5       Treatment of Dividends. 
At the
time the Award of Shares of Restricted Stock is granted, the Committee may, in
its discretion, determine that the payment to the Grantee of dividends, or a
specified portion thereof, declared or paid on such Shares by the Company shall
be, at the discretion of the Committee, (i) paid in cash to the Grantee or
(ii) deferred until the lapsing of the restrictions imposed upon such
Shares and held by the Company for the account of the Grantee until such
time.  In the event that payment of
dividends is to be deferred, the Committee shall determine whether such
dividends are to be reinvested in shares of Stock (which shall be held as
additional Shares of Restricted Stock) or held in cash.  If deferred dividends are to be held in cash,
there may be credited at the  end of each
year (or portion thereof) interest on the amount of the account at the
beginning of the year at a rate per annum as the 


 


Committee, in its
discretion, may determine.  Payment of deferred
dividends in respect of Shares of Restricted Stock (whether held in cash or as
additional Shares of Restricted Stock), together with interest accrued thereon,
if any, shall be made upon the lapsing of restrictions imposed on the Shares in
respect of which the deferred dividends were paid, and any dividends deferred
(together with any interest accrued thereon) in respect of any Shares of
Restricted Stock shall be forfeited upon the forfeiture of such Shares.


 


7.6       Delivery of Shares.  Upon the lapse of the restrictions on
Shares of Restricted Stock, the Committee shall cause a stock certificate to be
delivered to the Grantee with respect to such Shares, free of all restrictions
hereunder.  Notwithstanding the preceding,
the Committee may withhold sufficient Shares to pay taxes.


 


SECTION 8 —
PERFORMANCE AWARDS


 


8.1       Performance Objectives. 
Performance
objectives for Performance Awards may be expressed in terms of (i) earnings
per Share, (ii) pre-tax profits, (iii) net earnings or net worth, (iv) absolute
and/or relative return on equity or assets, (v) any combination of the
foregoing, or (vi) any other standard or standards deemed appropriate by
the Committee at the time the Award is granted. 
Performance objectives may be in respect of the performance of the
Company and its Subsidiaries (which may be on a consolidated basis), a
Subsidiary or a Division.  Performance
objectives may be absolute and/or relative and may be expressed in terms of a
progression within a specified range. 
Prior to the end of a Performance Cycle, with respect to any Eligible
Individual the deductibility of whose Performance Award will not, in the
reasonable belief of the Committee, be subject to Section 162(m) of
the Code, the Committee may, in its discretion, adjust the performance
objectives to reflect a Change in Capitalization, a change in the book tax rate
of the Company or any Subsidiary or any other event which may materially affect
the performance of the Company, a Subsidiary or a Division, including, but not
limited to, market conditions or a significant acquisition or disposition of
assets or other property by the Company, a Subsidiary or a Division.  With respect to any Eligible Individual the
deductibility of whose compensation may, in the reasonable belief of the Committee,
be subject to Section 162(m) of the Code, the Committee shall
exercise the discretion conferred upon it in the preceding sentence in such
manner as shall be approved by the Company’s auditors and will not result in
loss of deductibility under such Section 162(m).  Notwithstanding the foregoing, the Committee
shall, in such manner as shall be approved by the Company’s auditors, adjust
the performance objectives for all Grantees to whom Performance Units have been
granted to offset the impact of any change in the applicable corporate tax rate
under the Code.


 


8.2       Performance Units.  The Committee, in its discretion, may
grant Awards of Performance Units to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee.  Performance Units may be
denominated in Shares or a specified dollar amount and, contingent upon the
attainment of specified performance objectives within the Performance Cycle,
represent the right to receive payment as provided in Section 8.2(b) of
(i) in the case of Share-denominated Performance Units, the Fair Market
Value of a Share on the date the Performance Unit was granted, the date the
Performance Unit became vested or any other date specified by the Committee, (ii) in
the case of dollar-denominated Performance Units, the specified dollar amount
or (iii) a percentage (which may be more than 100%) of the amount
described in clause (i) or (ii) depending on the 


 


 


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level of performance
objective attainment; provided, however, that the Committee may
at the time a Performance Unit is granted, specify a maximum amount payable in
respect of a vested Performance Unit. 
Each Agreement shall specify the number of the Performance Units to
which it relates, the performance objectives which must be satisfied in order
for the Performance Units to vest and the Performance Cycle within which such
objectives must be satisfied.


 


(a)                                  Vesting and
Forfeiture.  A Grantee shall become vested with
respect to the Performance Units to the extent that the performance objectives
set forth in the Agreement are satisfied for the Performance Cycle.


 


(b)                                  Payment of Awards.  Payment to Grantees in respect of vested Performance
Units shall be made within sixty (60) days after the last day of the
Performance Cycle to which such Award relates unless the Agreement evidencing
the Award provides for the deferral of payment, in which event the terms and
conditions of the deferral shall be set forth in the Agreement.  Such payments may be made entirely in Shares
valued at their Fair Market Value as of the last day of the applicable
Performance Cycle or such other date specified by the Committee, entirely in
cash, or in such combination of Shares and cash as the Committee in its
discretion shall determine at any time prior to such payment; provided, however,
that if the Committee in its discretion determines to make such payment
entirely or partially in Shares of Restricted Stock or Restricted Stock Units,
the Committee must determine the extent to which such payment will be in Shares
of Restricted Stock or Restricted Stock Units and the terms of such Restricted
Stock or Restricted Stock Units at the time the Award is granted.


 


8.3       Performance Shares.  The Committee, in its discretion, may
grant Awards of Performance Shares to Eligible Individuals, the terms and
conditions of which shall be set forth in an Agreement between the Company and
the Grantee.  Performance Shares shall be
denominated in Shares or Restricted Stock Units, as determined by the
Committee.  Awards of Performance Shares
shall be subject to the following terms and provisions:


 


(a)                                  Rights of Grantee.  The Committee shall provide at the time an Award of
Performance Shares is made, the time or times at which the actual Shares or
Restricted Stock Units represented by such Award shall be issued in the name of
the Grantee, and the number of such Shares or Restricted Stock Units so
issuable at different levels of performance goal attainment.


 


(b)                                  Non-transferability.  Until any restrictions upon the Performance Shares
awarded to a Grantee shall have lapsed in the manner set forth in Section 8.3(d) such
Performance Shares shall not be sold, transferred or otherwise disposed of and
shall not be pledged or otherwise hypothecated, nor shall they be delivered to
the Grantee.  The Committee may also
impose such other restrictions and conditions on the Performance Shares, if
any, as it deems appropriate.


 


(c)                                  Treatment of Dividend
Equivalents.  At the time the Award of Performance
Shares is granted, the Committee may, in its discretion, determine that the
Grantee shall have the right to receive payments equivalent in value to
dividends or other distributions paid or made with respect to the underlying
Shares (which may include, in the case of Performance Shares denominated in
Restricted Stock Units, the Shares underlying such Restricted Stock Units) (“Dividend
Equivalents”).  The payment to the
Grantee of Dividend Equivalents, or a specified portion thereof, shall be, at
the discretion of the Committee, (i) paid in cash to the Grantee or (ii) deferred
until the lapsing of the restrictions imposed upon such Performance Shares and
held by the Company for the account of the Grantee until such time.  In the event that payment of Dividend
Equivalents is to be deferred, the Committee shall determine whether such
Dividend Equivalents are to be reinvested in shares of Stock (which shall be
held as additional Performance Shares) or held in cash.  If deferred Dividend Equivalents are to be
held in cash, there may be credited at the end of each year (or portion
thereof) interest on the amount of the account at the beginning of the year at
a rate per annum as the Committee, in its discretion, may determine.  Payment of deferred Dividend Equivalents in
respect of Performance Shares (with interest accrued thereon, if any), shall be
made upon the lapsing of restrictions imposed on the Performance Shares in
respect to which the deferred Dividend Equivalents were paid, and any Dividend
Equivalents deferred (together with any interest accrued thereon) in respect of
any Performance Shares shall be forfeited upon the forfeiture of such
Performance Shares.


 


 


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(d)                                  Delivery of Shares.  Upon the satisfaction of the performance goals on
Performance Shares awarded hereunder, the Committee shall cause a stock
certificate to be delivered to the Grantee with respect to such Performance
Shares, free of all restrictions hereunder. 
Alternatively, if specified in the Award Agreement, the Committee may
determine that earned Performance Shares be conveyed to a Grantee in the form
of Restricted Stock Units and/or an amount of cash sufficient to satisfy
anticipated tax obligations to be incurred in connection with such Shares.


 


8.4       Non-transferability.  No Performance Awards shall be
transferable by the Grantee otherwise than by will or the laws of descent and
distribution.


 


8.5       Modification.  Subject to the terms of the Plan, the
Committee may modify outstanding Performance Awards; provided, however,
that no modification may be made with respect to Performance Awards held by
Executive Officers (such term is as defined in the Exchange Act).  Notwithstanding the foregoing, no
modification of a Performance Award shall materially adversely alter or
materially impair any rights or obligations under the Agreement without the
Grantee’s consent.


 


SECTION 9 —
RESTRICTED STOCK UNITS


 


9.1       Grant.  The Committee may grant to Eligible
Individuals Awards of Restricted Stock Units which shall be evidenced by an
Agreement between the Company and the Grantee. 
Each Agreement shall contain such restrictions, terms and conditions as
the Committee may, in its discretion, determine in accordance with the
following provisions of this Section 9. 
A Restricted Stock Unit shall represent the right to receive one Share
upon lapse of the conditions established in the grant.


 


9.2       Lapse of Restrictions. 
Restrictions
upon Restricted Stock Units awarded hereunder shall lapse at such time or times
and on such conditions as the Committee may determine, which restrictions shall
be set forth in the Agreement evidencing the Award.  Upon such lapse, all Shares represented by
such Restricted Stock Unit shall vest and be payable immediately.


 


9.3       Dividend Equivalents.  At the time the Award of Restricted Stock
Units is granted, the Committee may, in its discretion, determine that the
payment to the Grantee of dividend equivalents declared or paid on Shares by
the Company shall be (i) deferred until the lapsing of the restrictions
imposed on such Restricted Stock Units and (ii) held by the Company for
the account of the Grantee until such time. 
In the event that the dividend equivalents are to be deferred, the
Committee shall determine whether such dividends are to be reinvested in Shares
(which shall be held as additional Restricted Stock Units) or held in
cash.  If deferred dividends are to be
held in cash, there may be credited at the end of the year (or portion thereof)
interest on the amount of the account at the beginning of the year at a rate
per annum as the Committee, in its discretion, may determine. Payment of
deferred dividends in respect of Restricted Stock Units (whether held in cash
or as additional Restricted Stock Units), together with interest accrued
thereon, if any, shall be made upon the lapsing of restrictions imposed on the
Restricted Stock Units in respect of which the deferred dividends were paid,
and any dividends deferred (together with any interest accrued thereon) in
respect of any Restricted Stock Units shall be forfeited upon the forfeiture of
such Restricted Stock Unit.


 


9.4       Units and Options for Non-employee Directors.  Notwithstanding anything to the contrary in the Plan,
Restricted Stock Units and Options shall be granted to Non-employee Directors
of the Company in accordance with the following provisions.  Each Non-employee Director shall receive
2,500 Restricted Stock Units on the day of the Company’s annual meeting for
each year that the Plan is in effect.  At
the election of each Non-employee Director, Options in an amount equal to three
times the number of Restricted Stock Units paid, may be paid in place of the
Restricted Stock Units.  The Options
shall have a ten year term, an exercise price equal to Fair Market Value on the
date of payment and shall become exercisable in one-third increments on the
first, second and third anniversaries of the date of payment.  Restricted Stock Units shall vest immediately
upon grant.  As of each date a dividend
or other distribution is paid or made on Shares, each Non-employee Director
holding Restricted Stock Units shall be credited with a number of additional
Restricted Stock Units equal to the product of (A) the dividend or other
distribution paid on one Share, multiplied by (B) the number of Restricted
Stock Units held by the Non-employee Director, divided by (C) the closing
price of one Share on the New York Stock Exchange on such date.  Such additional Restricted Stock Units shall
vest immediately.  In the event a
Non-employee Director’s service terminates, all Options shall 


 


 


8

















 


 


become immediately
exercisable and remain exercisable through their scheduled term.  Restricted Stock Units are payable in shares
upon termination of a Non-employee Director’s service on the Board.


 


SECTION 10
— EFFECT OF A TERMINATION
OF EMPLOYMENT


 


The Agreement evidencing
the grant of each Option and each Award shall set forth the terms and
conditions applicable to such Option or Award upon a termination or change in
the status of the employment of the Optionee or Grantee by the Company, a
Subsidiary or a Division (including a termination or change by reason of the
sale of a Subsidiary or a Division), as the Committee may, in its discretion,
determine at the time the Option or Award is granted or thereafter; provided,
however, that the Committee shall have no such discretion with respect
to Restricted Stock Units granted to Non-employee Directors pursuant to Section 9.4,
the Agreements evidencing which shall contain the provisions regarding
termination described in such Section.


 


SECTION 11
— ADJUSTMENT UPON CHANGES
IN CAPITALIZATION


 


(a)                                  In the event of a Change in
Capitalization, the Committee shall conclusively determine the appropriate
adjustments, if any, to the (i) maximum number and class of Shares or
other stock or securities with respect to which Options or Awards may be
granted under the Plan or to any individual, and (ii) the number and class
of Shares or other stock or securities which are subject to outstanding Options
or Awards granted under the Plan, and the purchase price therefor, if
applicable; provided, however, that with respect to Restricted
Stock Units granted to Non-employee Directors pursuant to Section 9.4, any
such adjustments shall be made only as necessary to maintain the proportionate
interest of each Non-employee Director in Shares and preserve, without
exceeding, the value of such Restricted Stock Units.


 


(b)                                  Any such adjustment in the Shares or
other stock or securities subject to outstanding Incentive Stock Options
(including any adjustments in the purchase price) shall be made in such manner
as not to constitute a modification as defined by Section 424(h)(3) of
the Code and only to the extent otherwise permitted by Sections 422 and 424 of
the Code.


 


(c)                                  If, by reason of a Change in
Capitalization, a Grantee of an Award shall be entitled to or an Optionee shall
be entitled to exercise an Option with respect to, new, additional or different
shares of stock or securities, such new, additional or different shares shall
thereupon be subject to all of the conditions, restrictions and performance
criteria which were applicable to the Shares subject to the Award or Option, as
the case may be prior to such Change in Capitalization.


 


(d)                                  The Committee shall apply this Section 11
in a manner consistent with the preservation of the Company’s tax deduction for
the payment or exercise of Awards under Section 162(m) of the Code.


 


SECTION 12 —
TERMINATION AND AMENDMENT OF THE PLAN; MODIFICATION OF AWARDS


 


(a)                                  The Plan shall terminate on the day
preceding the tenth anniversary of the date of its adoption by the Board and no
Option or Award may be granted thereafter. 
The Board may sooner terminate the Plan and the Board may at any time
and from time to time amend, modify or suspend the Plan or any Option or Award;
provided, however, that:


 


(i)            No such amendment, modification,
suspension or termination shall materially impair or materially adversely alter
any Options or Awards theretofore granted under the Plan, except with the
consent of the Optionee or Grantee, nor shall any amendment, modification,
suspension or termination deprive any Optionee or Grantee of any Shares which
he or she may have acquired through or as a result of the Plan; and


 


(ii)        To the extent necessary to comply with Rule 16b-3
of the Exchange Act and the rules and regulations promulgated thereunder,
or to preserve the Company’s tax deduction for the payment or exercise of
Awards under Section 162(m) of the Code, no amendment shall be effective
unless approved by the stockholders of the Company in accordance with
applicable law and regulations.


 


9
















 


 


(b)                                  Notwithstanding the above, the Committee shall not
have the right to modify any outstanding Award to the extent such restriction
is necessary to preserve the Company’s tax deduction for the payment or
exercise of Awards under Section 162(m) of the Code.


 


SECTION 13
— NON-EXCLUSIVITY OF THE
PLAN


 


The adoption of the Plan
by the Board shall not be construed as amending, modifying or rescinding any
previously approved incentive arrangement or as creating any limitations on the
power of the Board to adopt such other incentive arrangements as it may deem
desirable, including, without limitation, the granting of stock options
otherwise than under the Plan, and such arrangements may be either applicable
generally or only in specific cases.


 


 


SECTION 14 — LIMITATION OF LIABILITY


 


As illustrative of the
limitations of liability of the Company, but not intended to be exhaustive
thereof, nothing in the Plan shall be construed to:


 


(i)                                    give any person any right to be granted an Option or
Award other than at the sole discretion of the Committee;


 


(ii)                                give any person any rights whatsoever with respect to
Shares except as specifically provided in the Plan;


 


(iii)                            limit in any way the right of the Company
to terminate the employment of any person at any time; or


 


(iv)                               be evidence of any agreement or understanding,
expressed or implied, that the Company will employ any person at any particular
rate of compensation or for any particular period of time.


 


SECTION 15 — REGULATIONS AND OTHER APPROVALS;
GOVERNING LAW


 


15.1        Except as to matters of federal law, this Plan and the
rights of all persons claiming hereunder shall be construed and determined in
accordance with the laws of the State of Delaware without giving effect to
conflicts of law principles.


 


15.2        The obligation of the Company to sell or deliver
Shares with respect to Options and Awards granted under the Plan shall be
subject to all applicable laws, rules and regulations, including all
applicable federal and state securities laws, and the obtaining of all such
approvals by governmental agencies as may be deemed necessary or appropriate by
the Committee.


 


15.3        The Plan is intended to comply with Rule 16b-3
promulgated under the Exchange Act and the Committee shall interpret and
administer the provisions of the Plan or any Agreement in a manner consistent
therewith.  Any provisions inconsistent
with such Rule shall be inoperative and shall not affect the validity of
the Plan.


 


15.4        The Board may make such changes in the Plan or any
Awards as may be necessary or appropriate to comply with the rules and
regulations of any government authority, or to obtain for Eligible Individuals
granted Incentive Stock Options any tax benefits under the applicable
provisions of the Code and regulations promulgated thereunder.


 


15.5        Each Option and Award is subject to the requirement
that, if at any time the Committee determines, in its discretion, that the
listing, registration or qualification of Shares issuable pursuant to the Plan
is required by any securities exchange or under any state or federal law, or
the consent or approval of any governmental regulatory body is necessary or
desirable as a condition of, or in connection with, the grant of an Option or
Award or the issuance of Shares, no Options or Awards shall be granted or payment
made or Shares issued, in whole or in part, 




 


 


10

















 


 


unless listing,
registration, qualification, consent or approval has been effected or obtained
free of any conditions as acceptable to the Committee.


 


15.6        Notwithstanding anything contained in the Plan or any
Agreement to the contrary, in the event that the disposition of Shares acquired
pursuant to the Plan is not covered by a then current registration statement
under the Securities Act of 1933, as amended, and is not otherwise exempt from
such registration, such Shares shall be restricted against transfer to the
extent required by the Securities Act of 1933, as amended, and Rule 144 or
other regulations thereunder.  The
Committee may require any individual receiving Shares pursuant to an Option or
Award granted under the Plan, as a condition precedent to receipt of such
Shares, to represent and warrant to the Company in writing that the Shares
acquired by such individual are acquired without a view to any distribution
thereof and will not be sold or transferred other than pursuant to an effective
registration thereof under said Act or pursuant to an exemption applicable
under the Securities Act of 1933, as amended, or the rules and regulations
promulgated thereunder.  The certificates
evidencing any of such Shares shall be appropriately amended to reflect their
status as restricted securities as aforesaid.


 


15.7        Awards granted under the Plan to persons which the
Committee reasonably believes may be subject to Section 162(m) of the
Code will not be exercisable, and compensation under the Plan will not be paid,
unless and until any necessary shareholder approvals shall have been obtained
and the Committee has certified as to the attainment of any applicable
performance goals, in each case to the extent required under said Section 162(m).


 


SECTION 16 — MISCELLANEOUS


 


16.1  Multiple Agreements.  The terms of each Option or Award may differ from
other Options or Awards granted under the Plan at the same time, or at some
other time.  The Committee may also grant
more than one Option or Award to a given Eligible Individual during the term of
the Plan in addition to Options or Awards previously granted to that Eligible
Individual.


 


16.2   Withholding of Taxes.


 


(a)                                  The Company shall have the right to deduct from any
distribution of cash to any Optionee or Grantee, an amount equal to the
federal, state and local income taxes and other amounts as may be required by
law to be withheld (the “Withholding Taxes”) with respect to any Option or
Award.  If an Optionee or Grantee is to
experience a taxable event in connection with the receipt of Shares pursuant to
an Option exercise or payment of an Award, the Optionee or Grantee shall pay
the Withholding Taxes to the Company prior to the issuance, or release from
escrow, of such Shares.  In satisfaction
of the obligation to pay Withholding Taxes to the Company, the Optionee or
Grantee may make a written election, which may be accepted or rejected in the
discretion of the Committee, to have withheld a portion of the Shares then
issuable to him or her having an aggregate Fair Market Value, on the date
preceding the date of such issuance, equal to the Withholding Taxes, provided
that the Committee shall accept such an election in respect of an Optionee
subject to Section 16(b) of the Exchange Act only if such election
complies with Rule 16b-3 under the Exchange Act.


 


(b)                                  If an Optionee makes a disposition, within the meaning
of Section 424(c) of the Code and regulations promulgated thereunder,
of any Share or Shares issued to such Optionee pursuant to the exercise of an
Incentive Stock Option within the two-year period commencing on the day after
the date of the grant or within the one-year period commencing on the day after
the date of transfer of such Share or Shares to the Optionee pursuant to such
exercise, the Optionee shall, within ten (10) days of such disposition,
notify the Company thereof, by delivery of written notice to the Company at its
principal executive office.


 


16.3   Non-transferability.  No Option, Stock Appreciation Right, Performance Unit
denominated in Stock or Restricted Stock Unit granted hereunder shall be
transferable by the Optionee or Grantee to whom granted otherwise than by will
or the laws of descent and distribution or pursuant to a “qualified domestic
relations order,” as defined by the Code or title I of ERISA, or the rules thereunder,
and an Award may be exercised during the lifetime of such Optionee or Grantee
only by the Optionee or Grantee, or his or her guardian or legal
representative.  The terms of 




 


 


11

















 


 


such Award shall be
final, binding and conclusive upon the beneficiaries, executors,
administrators, heirs and successors of the Optionee or Grantee.


 


16.4  Acceleration of Awards.  The Committee may accelerate vesting, exercisability
or lapse of restrictions on all or any portion of any Award at any time, other
than with respect to:


 


(a)                                  Awards of Restricted Stock Units to Non-employee
Directors pursuant to Section 9.4, vesting of which may be accelerated
only under such circumstances as will not cause such persons to fail to be “disinterested
persons,” within the meaning of Rule 16b-3 under the Exchange Act; and


 


(b)                                  Awards other than Options or Stock
Appreciation Rights, to the extent that such acceleration would jeopardize,
under Section 162(m) of the Code, the Company’s tax deduction
otherwise available for the payment or exercise of the Awards.


 


SECTION 17 — EFFECTIVE DATE


 


The effective date of the
Plan shall be the date of its adoption by the Board, subject only to (i) the
approval by the affirmative vote of the holders of a majority of the securities
of the Company present, or represented, and entitled to vote at a meeting of
stockholders duly held in accordance with the applicable laws of the State of
Delaware or (ii) subject to any other such means of approval which shall
satisfy the Exchange Act, within twelve (12) months of such adoption.


 


SECTION 18 — DEFINITIONS


 


For purpose of the Plan:


 


18.1    “Agreement” means the written agreement between the
Company and an Optionee or Grantee or the written document furnished to an
Optionee or Grantee by the Company evidencing the grant of an Option or Award
and setting forth the terms and conditions thereof.


 


18.2    “Award” means a grant of Incentive Stock Options,
Non-qualified Stock Options, Restricted Stock, Restricted Stock Units, Stock
Appreciation Rights, Performance Awards or any or all of them.


 


18.3    “Board” means the Board of Directors of the Company.


 


18.4    “Change in Capitalization” means any increase or
reduction in the number of Shares, or any change (including, but not limited
to, a change in value) in the Shares or exchange of Shares for a different
number or kind of shares or other securities of the Company, by reason of a
reclassification, recapitalization, merger, consolidation, reorganization,
spin-off, split-up, issuance of warrants or rights or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares, change in corporate
structure or otherwise.


 


18.5    “Change in Control” shall mean the occurrence during
the term of the Plan of:


 


(a)                                  An acquisition (other than directly from the Company)
of any voting securities of the Company (the “Voting Securities”) 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
thirty percent (30%) 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 




 


 


12

















 


 


Company (for purposes of
this definition, a “Subsidiary”), (ii) the Company or its Subsidiaries, or
(iii) any Person in connection with a “Non-Control Transaction” (as
hereinafter defined);


 


(b)                                  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 two-thirds 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 1934 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;


 


(c)                                  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 seventy percent (70%) 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 two-thirds of the members of the board of directors of the
Surviving 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 thirty percent (30%) or more of
the then outstanding Voting Securities has Beneficial Ownership of thirty
percent (30%) 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); or


 


(d)                                 An event that would constitute a “Change
in Control” within the meaning of Section 2(g) in the Lehman Brothers
Holdings Inc. 2005 Stock Incentive Plan.


 


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 after such share
acquisition by the Company, the Subject 




 


13

















 


 


Person becomes the
Beneficial Owner of 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.


 


18.6    “Code” means the Internal Revenue Code of 1986, as
amended.


 


18.7    “Committee”
means a committee consisting of at least three (3) Disinterested Directors
appointed by the Board to administer the Plan and to perform the functions set
forth herein.  The authority of the
Committee to administer the Plan may be delegated to a subcommittee composed
exclusively of two or more individuals who are “outside directors,” within the
meaning of Section 162(m) of the Code, and proposed or final Treasury
Regulations issued thereunder, to the extent required to satisfy the provisions
of that Section; provided, however, that at all times such
subcommittee shall satisfy the applicable requirements of Rule 16b-3 under
the Exchange Act.  References to the
Committee herein refer to such subcommittee to the extent of such a delegation.


 


18.8    “Company” means Lehman Brothers Holdings Inc.


 


18.9    “Disability” means a physical or mental infirmity
which impairs the Optionee’s or Grantee’s ability to perform substantially his
or her duties for a period of one hundred eighty (180) consecutive days.


 


18.10  “Disinterested Director” means a director of the
Company who is “disinterested” within the meaning of Rule 16b-3 under the
Exchange Act.


 


18.11  “Dividend Equivalents” has the meaning ascribed to it
in Section 8.3(c).


 


18.12  “Division” means any of the operating units or
divisions of the Company designated as a Division by the Committee.


 


18.13  “Eligible Individual” means any officer, salaried or
commission employee, consultant and Non-employee Director of the Company or a
Subsidiary, designated by the Committee as eligible to receive Awards subject
to the conditions set forth herein.


 


18.14  “ERISA” means the Employee Retirement Income Security
Act of 1974, as amended.


 


18.15  “Exchange Act” means the Securities Exchange Act of
1934, as amended.


 


18.16  “Fair Market Value” on any date means the closing
price of the Shares on such date on the principal national securities exchange
on which such Shares 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), 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 on such date, the Fair Market Value
shall be the value established by the Committee in good faith and, in the case
of an Incentive Stock Option, in accordance with Section 422 of the
Code.  Notwithstanding the foregoing, for
Awards and Options granted before the 
commencement of initial 1994 regular way public trading in Shares, Fair
Market Value of the Shares means the closing price on the first day on which
initial 1994 regular way public trading in the Shares commences.


 


18.17  “Grantee” means a person to whom an Award has been
granted under the Plan.


 


18.18  “Incentive Stock Option” means an Option satisfying
the requirements of Section 422 of the Code and designated by the
Committee as an Incentive Stock Option.


 


18.19  “Non-employee Director” means a director of the
Company who is not an employee of the Company or any Subsidiary.


 


18.20  “Non-qualified Stock Option” means an Option which is
not an Incentive Stock Option.


 


 


14

















 


 


18.21  “Option” means an Incentive Stock Option, a
Non-qualified Stock Option, or both of them, as the context requires.


 


18.22  “Optionee” means a person to whom an Option has been
granted under the Plan.


 


18.23  “Parent” means any corporation which is a parent
corporation (within the meaning of Section 424(e) of the Code) with
respect to the Company.


 


18.24  “Performance
Awards” means Performance Units, Performance Shares or either or both of them.


 


18.25  “Performance Cycle” means the time period specified by
the Committee at the time a Performance Award is granted during which the
performance of the Company, a Subsidiary or a Division will be measured.


 


18.26  “Performance Shares” means Shares issued or
transferred to an Eligible Individual under Section 8.3 hereof.


 


18.27  “Performance Unit” means Performance Units granted to
an Eligible Individual under Section 8.2 hereof.


 


18.28  “Plan” means the Lehman Brothers Holdings Inc. 1994
Management Ownership Plan.


 


18.29  “Restricted Stock” means Shares issued or transferred
to an Eligible Individual pursuant to Section 7 hereof.


 


18.30  “Restricted Stock Unit” means an Award granted to an
Eligible Individual to receive payment upon the lapse of all restrictions in
the form of Shares as provided for in Section 9 hereof.


 


18.31  “Shares” means the common stock, par value $.10 per
share, of the Company.


 


18.32  “Stock Appreciation Right” means a right to receive
all or some portion of the increase in the value of the Shares as provided in Section 6
hereof.


 


18.33  “Subsidiary” means any corporation which is a
subsidiary corporation (within the meaning of Section 424(f) of the
Code) with respect to the Company.


 


18.34  “Successor Corporation” means a corporation, or a
parent or subsidiary thereof within the meaning of Section 424(a) of
the Code, which issues or assumes a stock option in a transaction to which Section 424(a) of
the Code applies.


 


18.35  “Ten-Percent Stockholder” means an Eligible
Individual, who, at the time an Incentive Stock Option is to be granted to him
or her, owns (within the meaning of Section 422(b)(6) of the Code)
stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Company, or of a Parent or a Subsidiary.


 


SECTION 19
— SECTION 409A


 


Notwithstanding
other provisions of the Plan or any Award agreements thereunder, no Award shall
be granted, deferred, accelerated, extended, paid out or modified under this
Plan in a manner that would result in the imposition of an additional tax under
Section 409A of the Code upon a Grantee. 
In the event that it is reasonably determined by the Committee that, as
a result of Section 409A of the Code, payments or deliveries of shares in
respect of any Award under the Plan may not be made at the time contemplated by
the terms of the Plan or the relevant Award agreement, as the case may be,
without causing the Grantee holding such Award to be subject to taxation under Section 409A
of the Code, the Company will make such payment or delivery of shares on the
first day that would not result in the Grantee incurring any tax liability
under Section 409A of the Code.  In
the case of a Grantee who is a “specified employee” (within the meaning of Section 409A(a)(2)(B)(i) of
the Code), payments and/or deliveries of shares in respect of any Award subject
to Section 409A of the Code that are linked to the date of the Grantee’s
separation from service shall not be made prior to the date which is six (6) months
after the date of such Grantee’s 




 


 


15

















 


 


separation from service
from the Company and its affiliates, determined in accordance with Section 409A
of the Code and the regulations promulgated thereunder.  The Company shall use commercially reasonable efforts to implement the
provisions of this Section 19 in good faith; provided that neither
the Company, the Committee nor any of the Company’s employees, directors or
representatives shall have any liability to Grantees with respect to this Section 19.  


 


 


 


 


16