Exhibit
10.4


 


200  
STOCK OPTION AWARD


 


AGREEMENT
EVIDENCING A GRANT OF A

NON-QUALIFIED STOCK OPTION


 


1. GRANT OF OPTION. Pursuant to the
Lehman Brothers Holdings Inc. (“Holdings”) 2005 Stock Incentive Plan (the “Plan”),
you are hereby granted, as of                     ,
200  , a nonqualified stock option to purchase the number of common
shares (par value $0.10 per share) of Holdings (“Shares”) set forth on the
award statement delivered to you herewith (the “Award Statement”) (which number
of Shares may be adjusted pursuant to Paragraph 6 below) with an exercise price
of $         per Share as specified in
the Award Statement (the “Option Exercise Price”).


 


2. ADDITIONAL DOCUMENTS; DEFINITIONS. You
have been provided with a copy of the Plan, which is incorporated in this
instrument by reference and made a part hereof, and a copy of the Plan
prospectus. The Plan and the prospectus then in effect should be carefully
examined before any decision is made to exercise the option. In the event of
any conflict or ambiguity between this instrument and the Plan, the terms of
the Plan shall govern. All capitalized terms not defined herein or in Annex A
attached hereto shall have the meaning ascribed to such terms under the Plan.


 


3. EXERCISABILITY. Subject to the
provisions of this Agreement and the applicable provisions of the Plan, you may
exercise this option as follows:


 


(a)   No
part of this option may be exercised after                     ,
200   (the “Expiration Date”).


 


(b)   You
may first exercise this option on the later of (i)                           
or (ii) any date on which the Fair Market Value of a Share exceeds $        ,
but this option will first become exercisable in any event no later than                     ,
regardless of the Fair Market Value of a Share.


 


This option may
not be exercised for a fraction of a Share.


 


4. CONDITIONS TO EXERCISE. This option
may not be exercised unless all of the following conditions are met:


 


(a)   Legal
counsel for Holdings must be satisfied at the time of exercise that the
issuance of Shares upon exercise will be in compliance with the Securities Act
of 1933, as amended, and applicable U.S. federal, state, local and foreign
laws;


 


(b)   You
(or your permitted transferee under paragraph 5) must pay at the time of exercise
the full option price for the Shares being acquired hereunder, by (i) paying in
United States dollars by cash (which may be in the form of a certified check),
(ii) subject to Holdings’ prior consent, tendering Shares owned by you which
have a Fair Market Value on the day of exercise equal to the full purchase
price for the Shares being acquired, (iii) subject to the Company’s prior
consent, by withholding from those Shares


 

















 


that would
otherwise be obtained upon exercise a number of Shares having a Fair Market
Value equal to the option price and/or required withholding taxes, (iv) subject
to Holdings’ prior consent, by delivery of a properly executed exercise notice
together with irrevocable instructions to a securities broker (or, in the case
of pledges, lender) approved by Holdings to (a) sell shares of Common Stock
subject to the option and to deliver promptly to Holdings a portion of the
proceeds of such sale transaction on behalf of the exercising Participant to
pay the option price, or (b) pledge shares of Common Stock subject to the
option to a margin account maintained with such broker or lender, as security
for a loan, and such broker or lender, pursuant to irrevocable instructions,
delivers to Holdings loan proceeds at the time of exercise to pay the option
price, or (v) by any combination of (i), (ii), (iii) or (iv) above; and


 


(c)   You
must, unless otherwise provided below, at all times during the period beginning
with                     ,
200   and ending on the date of such exercise, (x) have been employed
by Holdings or a Subsidiary thereof or (y) not have engaged in Detrimental
Activity.


 


(i)            Termination
before                 
    , 200   . In the
event of your Termination for any reason before                     ,
200  , this option shall be forfeited and canceled.


 


(ii)           Voluntary
Termination with Competitive Activity. In the
event of your voluntary Termination with Competitive Activity on or after                     ,
200  , this option shall be forfeited and canceled.


 


(iii)         Voluntary
Termination without Competitive Activity. In the
event of your voluntary Termination without Competitive Activity on or after                     ,
200  , you will be permitted to exercise this option, to the extent
not previously exercised, until the Expiration Date, provided you do not engage
in Competitive Activity or Detrimental Activity during that period of time. If
you engage in Competitive or Detrimental Activity, the portion of this option
not previously exercised shall expire immediately.


 


(iv)          Involuntary
Termination with Cause. In the event of your
involuntary Termination with Cause, this option, to the extent not previously
exercised, shall be forfeited and canceled immediately.


 


(v)            Involuntary
Termination without Cause. In the event of your
involuntary Termination without Cause on or after                     ,
200  , you will be permitted to exercise this option, to the extent
not previously exercised, until the Expiration Date, provided you do not engage
in Detrimental Activity during that period of time. If you engage in
Detrimental Activity, the portion of this option not previously exercised shall
expire immediately.


 


(vi)          Termination
Due to Death; Disability. In the event of the
occurrence on or after                     ,
200   of your death or Disability, you (or in the event of your
death, your estate or any person who acquires the right to


 


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exercise this
option by bequest or inheritance or otherwise by reason of your death) will be
permitted to exercise this option, to the extent not previously exercised,
until the Expiration Date.


 


Any remaining
portion of this option, which is not exercisable pursuant to the provisions of
this subparagraph 4(c), shall be canceled by Holdings.


 


5. NON-ASSIGNMENT. This option may not
be sold, assigned, transferred, pledged, hypothecated or otherwise disposed of
by you, except (a) by will or the laws of descent and distribution or (b) to
members of your immediate family or to a trust or such other instrument as may
be established for the direct benefit of a member of your immediate family and
is exercisable during your lifetime only by you or such permitted transferee. If
you or anyone claiming under or through you attempts to violate this Paragraph
5, such attempted violation shall be null and void and without effect, and
Holdings’ obligations hereunder shall terminate.


 


6. EQUITABLE ADJUSTMENTS. In the event
of a Change in Capitalization occurring after the date of grant of this option
and prior to the exercise of the option in full, the number and kind of shares
of Common Stock for which this option may then be exercised and the option
price shall be adjusted so as to reflect such change in a manner consistent
with the provisions of Code Section 409A.


 


7. CHANGE IN CONTROL. Upon the
occurrence of a Hostile Change in Control, all options awarded hereunder will
be exercisable in full through the Expiration Date. Upon the occurrence of a
Friendly Change in Control, one-half of the options awarded hereunder that are
then not exercisable shall become immediately exercisable and remain
exercisable through the Expiration Date, and the remaining one-half of such
options shall become exercisable upon the earliest to occur of (a) two years
following such Change in Control, (b) the date such options would become
exercisable by their terms or (c) your involuntary termination without Cause,
provided however, that if such Change in Control occurs within one year after
this grant date, and such Change in Control will be effected by a merger
involving the issuance of equity shares to Holdings’ stockholders, then the
foregoing provisions of this paragraph will not apply and the Committee shall
have discretion as to the impact of such an event on options granted hereunder
which are not then exercisable, provided however, that the term of the option
shall not be extended beyond the Expiration Date.


 


8. AMENDMENT. The terms of this
Agreement may be amended from time to time by the Committee in its sole
discretion in any manner that it deems appropriate (including, but not limited
to, the acceleration provisions), provided, however, that no such amendment
shall, without your consent, diminish your rights under this Agreement.


 


9. BINDING ACTIONS. Any action taken or
decision made by the Committee or its delegates arising out of or in connection
with the construction, administration, interpretation or effect of the Plan or
this Agreement shall lie within its sole and absolute discretion, as the case
may be, and shall be final, conclusive and binding on you and all persons
claiming under or through you. By accepting this grant or other benefit under
the Plan, you and each person claiming under or through you shall be
conclusively deemed to have indicated


 


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acceptance and ratification of,
and consent to, any action taken under the Plan by the Committee or its
designees.


 


10. NO RIGHT TO CONTINUED EMPLOYMENT. Neither
the grant nor the exercise of the option shall confer on you any right to be
retained in the employ of Holdings or its subsidiaries, or to receive
subsequent options or other awards under the Plan. The right of Holdings or any
subsidiary to terminate your employment with it at any time or as otherwise
provided by any agreement between Holdings or any subsidiary and you is
specifically reserved.


 


11. NO RIGHTS OF A STOCKHOLDER. Neither
you nor your permitted transferee under Paragraph 5 shall have any of the
rights of a stockholder with respect to Shares subject to the option except to
the extent that such Shares of Common Stock shall have been issued to you or
such transferee upon the exercise of the option.


 


12. APPLICABLE LAW. The validity,
construction, interpretation, administration, and effect of the Plan, and of
its rules and regulations, and rights relating to the Plan and to this
Agreement, shall be governed by the substantive laws, but not the choice of law
rules, of the State of Delaware.


 


13. WITHHOLDING. Holdings shall have
the right to deduct applicable taxes from all amounts payable to you. It shall
be a condition to the obligation of Holdings to issue Shares upon exercise of
an option hereunder (a) that you (or in the event of your death, your estate or
any person who acquires the right to exercise this option by bequest or
inheritance or otherwise by reason of your death) pay to Holdings or its
designee upon its demand in accordance with the Plan, either in the form of
cash or Shares (including Shares otherwise issuable pursuant to exercise this
option) such amount as may be required by law for the purpose of satisfying its
obligation or the obligation of any other person to withhold any taxes required
by law which are incurred by reason of the exercise of the option and (b) that
you or your permitted transferee under Paragraph 5 provide Holdings with any
forms, documents or other information reasonably required in connection with
the grant. If the amount requested for the purpose of satisfying the
withholding obligation is not paid, Holdings may refuse to furnish Shares upon
exercise of the option. Holdings shall further have the right to deduct from
all amounts remaining payable to you after satisfaction of the minimum
statutory withholding obligations described above, the amount of any deficit,
debt, tax obligation or other liability or obligation of any kind which you may
at that time have with respect to Holdings or any subsidiary.


 


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ANNEX A


 


DEFINITIONS


 


“Cause”
means a material breach by a person of an employment contract between the
person and Holdings or any Subsidiary, failure by a person to devote
substantially all business time exclusively to the performance of his or her
duties for Holdings or any Subsidiary, willful misconduct, dishonesty related
to the business and affairs of Holdings or any Subsidiary, conviction of a
felony or of a misdemeanor constituting a statutory disqualification under U.S.
securities laws (or failure to contest prosecution for a felony or such a
misdemeanor), habitual or gross negligence in the performance of the person’s
duties, solicitation of employees of Holdings or any Subsidiary to work at
another company, improper use or disclosure of confidential information, the
violation of policies and practices adopted by Holdings or any Subsidiary,
including but not limited to the Code of Conduct, a material violation of the
conflict of interest, proprietary information or business ethics policies of
Holdings or any Subsidiary.


 


“Change in
Capitalization” means the occurrence of a circumstance
described in Section 14 of the Plan.


 


“Committee”
means the Compensation and Benefits Committee of the Incumbent Board (see
definition of Change in Control in the Plan).


 


“Competitive Activity”
means 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 Holdings or any of its Subsidiaries or affiliates on the date of
termination of a person’s employment with Holdings or any of its Subsidiaries,
as determined in the sole discretion of the Committee.


 


“Detrimental Activity”
means (i) using information received during a person’s employment with Holdings
or any of its Subsidiaries relating to the business affairs of Holdings or any
of its Subsidiaries, affiliates or clients, in breach of such person’s
undertaking to keep such information confidential; (ii) directly or indirectly
persuading or attempting to persuade, by any means, any employee of Holdings or
any of its Subsidiaries or affiliates to terminate employment with any of 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 Holdings, its Subsidiaries or affiliates, or any of their
affiliates (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 that is, or
could be, substantially injurious to the financial condition, reputation or
goodwill of Holdings or its Subsidiaries or affiliates, in each case as
determined in the sole discretion of the Committee.


 


“Disability”
means a disability under both the Long-Term Disability Insurance Plan and the
Social Security Act.


 


“Termination”
means the end of your active service with Holdings or a Subsidiary. The reason
for your Termination for purposes of this agreement shall be as determined in
the sole discretion of the Committee.