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Exhibit 4(r)    
    

LEHMAN BROTHERS INC.,  

 LEHMAN BROTHERS HOLDINGS INC.,  

 as Guarantor,  

 AND  

 HSBC BANK USA,  

 as Trustee  

FORM OF FIRST SUPPLEMENTAL INDENTURE  

 Dated as of                         , 2003  

        FIRST SUPPLEMENTAL INDENTURE, dated as of                    , 2003 (the "Supplemental Indenture"),
among LEHMAN BROTHERS INC., a corporation duly organized and existing under the
laws of the State of Delaware (the "Company"), LEHMAN BROTHERS HOLDINGS INC., a corporation duly organized and existing under the laws of the State of Delaware, as guarantor (the "Guarantor"),
and HSBC BANK USA (as successor in interest to Marine Midland Bank, N.A.), a banking corporation duly organized and existing under the laws of the State of New York, as trustee (the "Trustee"). 

 
 

RECITALS    
    

        The Company has duly authorized the execution and delivery of an Indenture, dated as of October 1, 1984 (the "Indenture"), between the Company and the
Trustee, as amended and supplemented, to provide for the issuance from time to time of its unsecured senior subordinated debentures, notes or other evidences of indebtedness to be issued in one or
more series (the "Securities") unlimited as to principal amount, to bear such rates of interest, to mature at such time or times, to be issued in one or more series and to have such other provisions
as in the Indenture provided. 

        The
Guarantor has determined that it is in its best interests to fully and unconditionally guarantee the due and punctual payment of the principal (including any amount in respect of
original issue discount) of, and premium, if any, and interest, if any, on all outstanding and future Securities and the due and punctual payment of the sinking fund payments, if any, and analogous
obligations, if any, provided for pursuant to the terms of such Securities, when and as the same shall become due and payable; 

        The
Company and the Guarantor have duly authorized the execution and delivery of this Supplemental Indenture to provide for the guarantee by the Guarantor of the Securities; 

        All
acts and things necessary to make this Supplemental Indenture a valid agreement of the Company and of the Guarantor, in accordance with its terms and with the terms of the Indenture,
have been done and performed. 

        NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE WITNESSETH:

        For
and in consideration of the premises, and of the sum of one dollar duly paid to the Company and the Guarantor by the Trustee at the execution and delivery of these presents, the
receipt whereof is hereby acknowledged, the Company and the Guarantor covenant and agree, for the equal and
proportionate benefit of all holders of the Securities with the Trustee to supplement the Indenture as follows: 

Section 1. AMENDMENTS TO THE INDENTURE  

        1.1    Amendment to Section 101 of the Indenture.    Section 101 of the Indenture is hereby amended by
deleting the definitions of "Board of Directors," "Board Resolution," "Company," "Officers' Certificate," "Opinion of Counsel" and "Vice President" and inserting the following definitions, in the
appropriate alphabetical sequence: 

        "Board
of Directors" means the board of directors of the Company or the Guarantor, as the case may be, the executive committee thereof or any other committee of either board of directors
duly authorized to act hereunder. 

        "Board
Resolution" means a copy of a resolution certified by the Secretary or an Assistant Secretary of the Company or the Guarantor, as the case may be, to have been duly adopted by the
Board of Directors and to be in full force and effect on the date of such certification, and delivered to the Trustee. 

        "Company"
means Lehman Brothers Inc., and subject to the provisions of Article Ten, shall also include its successors and assigns. 

 

        "Guarantee"
means the full and unconditional guarantee by the Guarantor set forth in Article 15. 

        "Guarantor"
means Lehman Brothers Holdings Inc., a corporation duly organized and existing under the laws of the State of Delaware. 

        "Guarantor
Order" or "Guarantor Request" means a written request or order signed in the name of the Guarantor by its Chairman of the Board, any Vice Chairman of the Board, its President
or a Vice President, and by its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary, and delivered to the Trustee. 

        "Officers'
Certificate" means a certificate signed by the Chairman of the Board, any Vice Chairman of the Board, the President or a Vice President, and by the Treasurer, and Assistant
Treasurer, the Secretary or an Assistant Secretary, of the Company or the Guarantor, as the case may be, and delivered to the Trustee. 

        "Opinion
of Counsel" means a written opinion of counsel, who may be counsel for or employed by the Company or the Guarantor, as the case may be, and who shall be acceptable to the
Trustee. 

        "Vice
President", when used with respect to the Company, the Guarantor or the Trustee, means any vice president, whether or not designated by a number or a word or words added before or
after the title "vice president." 

        1.2    Amendment to Section 102 of the Indenture.    Section 102 of the Indenture is hereby amended by
inserting the following paragraph as the new second paragraph thereto: 

        "Upon
any application or request by the Guarantor to the Trustee to take any action under any provision of this Indenture, the Guarantor shall furnish to the Trustee an Officers'
Certificate stating that such action is authorized or permitted by this Indenture and that all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been
complied with and an Opinion of Counsel stating that in the opinion of such counsel all such conditions precedent, if any, have been complied with, except that in the case of any such application or
request as to which the furnishing of such documents is specifically required by any provision of this Indenture relating to such particular application or request, no additional certificate or
opinion need by furnished." 

        1.3    Amendment to Section 103 of the Indenture.    Section 103 of the Indenture is hereby amended by
inserting the following paragraph as the new third paragraph thereof: 

        "Any
certificate or opinion of an officer of the Guarantor may be based, insofar as it relates to legal matters, upon a certificate or Opinion of Counsel, or representations by counsel,
unless such officer knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to the matters upon which his certificate or opinion is
based are erroneous. Any such certificate or Opinion of Counsel or representation by counsel may be based, insofar as it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Guarantor stating that the information with respect to such factual matters is in the
possession of the Guarantor, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate or opinion or representations with respect to such matters are
erroneous." 

        1.4    Amendment to Section 105 of the Indenture.    (a) Section 105 of the Indenture is hereby
amended by deleting the current section heading thereof and replacing it with the following: 

        "Notices, Etc., to Trustee, Company or Guarantor" 

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        (b)   Section 105
of the Indenture is hereby amended by deleting the word "or" at the end of paragraph (1), deleting the period and inserting the word ", or" at
the end of paragraph (2) and inserting the following paragraph as the final paragraph thereof: 

        "(3)
the Guarantor by the Trustee or by any Holder shall be sufficient for every purpose hereunder if in writing and mailed, first-class postage prepaid, to the Guarantor addressed to it
at 745 Seventh Avenue, New York, New York 10019, attention: Treasurer or at any other address previously furnished in writing to the Trustee by the Guarantor." 

        1.5    Amendment to Section 301 of the Indenture.    Section 301 of the Indenture is hereby amended by
deleting the word "and" at the end of paragraph (10), redesignating paragraph (11) as paragraph (12) and inserting the following paragraph in proper numerical order: 

        "(11)
the terms and provisions of the Guarantee, to the extent that such provisions differ from those set forth herein; and" 

        1.6    Amendment to Section 303 of the Indenture.    (a) Section 303 of the Indenture is hereby amended
by deleting the word "and" at the end of subparagraph (b), deleting the period and inserting the word "; and" at the end of subparagraph (c) and inserting the following paragraph as the new
subparagraph (d) thereof: 

        "(d)
that the Guarantee of such Securities, when the Securities are authenticated and delivered by the Trustee and issued by the Company in the manner and subject to any conditions
specified in such Opinion of Counsel, will constitute a valid and legally binding obligation of the Guarantor, enforceable in accordance with its terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance,
reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an
implied covenant of good faith and fair dealing." 

        (b)   Section 303
of the Indenture is hereby amended by inserting the words "or Guarantee" immediately following the words "No Security" at the beginning of the final
paragraph of the section. 

        1.7    Amendment to Section 305 of the Indenture.    Section 305 of the Indenture is hereby amended by
deleting the fourth paragraph and inserting in lieu thereof the following paragraph: 

        "All
Securities issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company evidencing the same debt, and entitled to the same
benefits under this Indenture (including the Guarantee), as the Securities surrendered upon such registration of transfer or exchange." 

        1.8    Amendment to Section 308 of the Indenture.    Section 308 of the Indenture is hereby amended by
inserting the words ", the Guarantor" immediately following the words "the Company" in each place such words appear. 

        1.9    Amendment to Section 503 of the Indenture.    Section 503 of the Indenture is hereby amended by
deleting the final paragraph in its entirety and inserting in lieu thereof the following paragraph: 

        "Any
money deposited with the Trustee or any Paying Agent, or then held by the Company or the Guarantor in trust for the payment of the principal of (and premium, if any) or interest on
any Security of any series and remaining unclaimed for three years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on Company Request or
the Guarantor on Guarantor Request, or (if then held by the Company or the Guarantor) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company and the Guarantor for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and 

3

 

all
liability of the Company or the Guarantor as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may
at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of
Manhattan, The City of New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any
unclaimed balance of such money then remaining will be repaid to the Company or the Guarantor." 

        1.10    Amendment to Section 506 of the Indenture.    Section 506 of the Indenture is hereby amended by
inserting the following paragraphs as the new second and third paragraphs respectively thereof: 

        "The
Guarantor will deliver to the Trustee, within 120 days after the end of each fiscal year of the Guarantor ending after the date hereof, an Officers' Certificate, stating
whether or not to the best knowledge of the signers thereof the Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture, and if the
Guarantor shall be in default, specifying all such defaults and the nature and status thereof of which they may have knowledge. For purposes of this Section 506, any such default shall be
determined without regard to any period of grace or requirement of notice provided under this Indenture. 

        Such
Officers' Certificate or written notice of the Company and the Guarantor may be in the form of one certificate or notice signed by the appropriate officers of the Company and the
Guarantor." 

        1.11    Amendment to Section 602 of the Indenture.    Section 602 of the Indenture is hereby amended by
inserting the words "or the Guarantor" immediately following the words "including the Company" therein. 

        1.12    Amendment to Section 701 of the Indenture.    Section 701 of the Indenture is hereby amended by
deleting the reference to subparagraph (g) in the introductory sentence and inserting in lieu thereof a reference to subparagraph (h), by deleting the word "or" at the end of subparagraph
(f) and by
inserting the following paragraph immediately prior to the final period at the end of subparagraph (g) thereof: 

        ";
or 

        (h)   the
dissolution or insolvency of the Guarantor or the making of an assignment for the benefit of creditors by the Guarantor or the commencement of any proceedings (by
petition, application, answer, consent or otherwise) by the Guarantor to be adjudicated a bankrupt or for the appointment of a receiver or trustee or similar officer for it or for a substantial part
of its property or for reorganization, an arrangement, composition or other relief under the Bankruptcy Act or the taking of corporate action by the Guarantor for any such purpose, or any marshalling
of the assets or liabilities of the Guarantor or the commencement against the Guarantor of any of the aforementioned proceedings and in such latter case the consent thereto by the Guarantor or its
admission of the material allegations thereof or the continuance of such proceedings undismissed for a period of 60 days." 

        1.13    Amendment to Section 711 of the Indenture.    Section 711 of the Indenture is hereby amended by
inserting the words ", the Guarantor" immediately following the words "subject to any determination in such proceeding, the Company" therein. 

        1.14    Amendment to Section 716 of the Indenture.    Section 716 of the Indenture is hereby amended by
inserting the words "or the Guarantor" immediately following the words "suit instituted by the Company" therein. 

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        1.15    Amendment to Section 717 of the Indenture.    Section 717 of the Indenture is hereby amended by
deleting the words "the Company" in each place of the two places where such words appear and inserting in each place in lieu thereof the words "each of the Company and the Guarantor" 

        1.16    Amendment to Section 904 of the Indenture.    (a) Section 904 of the Indenture is hereby amended
by deleting the current section heading thereof and replacing it with the following: 

        "Reports by Company and Guarantor" 

        (b)   Section 904
of the Indenture is hereby amended by redesignating the first paragraph thereof as subsection (a) and by inserting the following paragraph as
the new subsection (b) thereof: 

        "(b)
The Guarantor shall: 

        (1)   file
with the Trustee for the Securities of each series, within 15 days after the Guarantor is required to file the same with the Commission, copies of the annual
reports and of the information, documents and other reports (or copies of such portions of any of the foregoing as the Commission may from time to time by rules and regulations prescribe) which the
Guarantor may be required to file with the Commission pursuant to Section 13 or Section 15(d) of the Securities Exchange Act of 1934; or, if the Guarantor is not required to file
information, documents or reports pursuant to either of said Sections, then it shall file with such Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by
the Commission, such of the supplementary and periodic information, documents and reports which may be required pursuant to Section 13 of the Securities Exchange Act of 1934 in respect of a
security listed and registered on a national securities exchange as may be prescribed from time to time in such rules and regulations; 

        (2)   file
with such Trustee and the Commission, in accordance with rules and regulations prescribed from time to time by the Commission, such additional information,
documents and reports with respect to compliance by the Guarantor with the conditions and covenants of this Indenture as may be required from time to time by such rules and regulations; 

        (3)   transmit
by mail to all Holders, as their names and addresses appear in the Security Register, within 30 days after the filing thereof with the Trustee, such
summaries of any information, documents and reports required to be filed by the Guarantor pursuant to paragraphs (1) and (2) of this Section 904(b) as may be required by rules and
regulations prescribed from time to time by the Commission; and 

        (4)   delivery
of such reports, information and documents to the Trustee is for informational purposes only and the Trustee's receipt of such shall not constitute constructive
notice of any information contained therein or determinable from information contained therein, including the Guarantor's compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates). 

        1.17    Amendment to Section 1001 of the Indenture.    Section 1001 of the Indenture is hereby amended
by redesignating the first paragraph thereof as subsection (a) and by inserting the following paragraph as the new subsection (b) thereof: 

        "(b)
Nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of the Guarantor with or into any other corporation or corporations
(whether or not affiliated with the Guarantor), or successive consolidations or mergers in which the Guarantor or its successor or successors shall be a party or parties, or shall prevent any sale or
transfer (or successive sales or transfers) of the property and assets of the Guarantor (or of its successor or successors) as an entirety or substantially as an entirety, to any other corporation
(whether or not affiliated with the Guarantor) authorized to acquire the same; provided, however, 

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that
the corporation formed by such consolidation or into which the Guarantor shall have been merged or which shall have acquired such property and assets shall be a corporation organized under the
laws of the United States or of any State thereof; and provided, further, and the Guarantor hereby
covenants and agrees, that upon any such consolidation, merger, sale or transfer, the Guarantee of the due and punctual payment of the principal of (and premium, if any) and interest, if any, on all
of the Securities, according to their tenor, and the due and punctual performance and observance of all the terms, covenants and conditions of this Indenture to be kept or performed by the Guarantor,
shall be expressly assumed, by an indenture supplemental hereto, satisfactory in form to the Trustee, executed and delivered to the Trustee by the corporation formed by such consolidation, or into
which the Guarantor shall have been merged, or by the corporation which shall have acquired such property and assets; and in the event of any such sale or transfer, the predecessor Guarantor shall be
released from all liability hereunder and under the Securities and may be dissolved, wound-up and liquidated at any time thereafter." 

        1.18    Amendment to Section 1002 of the Indenture.    Section 1002 of the Indenture is hereby amended
by redesignating the first and second paragraphs thereof as subsection (a) and by inserting the following two paragraphs as the new subsection (b) thereof: 

        "(b)
In case of any such consolidation, merger, sale or transfer and upon the execution by the successor corporation of an indenture supplemental hereto, as provided in
Section 1001(b), such successor corporation shall succeed to and be substituted for the Guarantor, with the same effect as if it had been named herein as the party of the first part; and any
order, certificate, statement, request, instructions, advice or resolutions of the Board of Directors or officers of the Guarantor provided for in this Indenture may be made by like officials of such
successor corporation. 

        Nothing
contained in this Indenture or in any of the Securities shall prevent the Guarantor from merging into itself, or acquiring by purchase or otherwise all or any part of the
property of, any other corporation (whether or not affiliated with the Guarantor)." 

        1.19    Amendment to Section 1101 of the Indenture.    (a) Section 1101 of the Indenture is hereby
amended by inserting the words "the Guarantor, when authorized by a Board Resolution," immediately following the words "the Company, when authorized by a Board Resolution," in the introductory
sentence thereof. 

        (b)   Section 1101
of the Indenture is hereby amended by redesignating subparagraphs (3), (4), (5), (6), (7), (8), (9) and (10), respectively, as new
subparagraphs (5), (6), (7), (8), (9), (10), (11) and (12), respectively, and by inserting the following paragraphs in proper numerical order: 

        "(3)
to evidence the succession of another corporation to the Guarantor and the assumption by any such successor of the covenants of the Guarantor herein and in the Securities, if
applicable; or 

        "(4)
to add to the covenants of the Guarantor for the benefit of the Holders of all or any series of Securities (and if such covenants are to be for the benefit of less than all series
of Securities, stating that such covenants are expressly being included solely for the benefit of such series) or to surrender any right or power herein conferred upon the Guarantor; or" 

        1.20    Amendment to Section 1102 of the Indenture.    Section 1102 of the Indenture is hereby amended
by inserting the words "the Guarantor, when authorized by a Board Resolution," immediately following the words "the Company, when authorized by a Board Resolution," in the introductory sentence
thereof. 

Section 2. GUARANTEE  

        2.1    Addition of New Article 15 of the Indenture.    Article 15 of the Indenture is hereby created and
the following shall be inserted therein: 

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ARTICLE FIFTEEN    
    
    THE GUARANTEES    
    

        SECTION 1501    Except
as otherwise set forth in a supplemental indenture or provided in or pursuant to a Board Resolution and set forth in an Officers' Certificate, the
Guarantor hereby unconditionally guarantees to the Holder of the Securities of each series authenticated and delivered by the Trustee, and to the Trustee all payments due to the Trustee from the
Company under Section 807 hereof, and on behalf of each such Holder, the due and punctual payment of the principal (including any amount in respect of original issue discount) of, and premium,
if any, and interest, if any, on such Securities and the due and punctual payment of the sinking fund payments, if any, and analogous obligations, if any, provided for pursuant to the terms of such
Securities, when and as the same shall become due and payable, whether at maturity or upon redemption or upon declaration of acceleration or otherwise, according to the terms of such Securities and of
the Indenture and this Supplemental Indenture. The Guarantor agrees that in case of default by the Company in the payment of any such principal (including any amount in respect of original issue
discount), premium, interest, sinking fund payment, or analogous obligation, the Guarantor shall duly and punctually pay the same, as if such payment were made by the Company. The Guarantor hereby
agrees that its obligations hereunder shall be absolute and unconditional, irrespective of any extension of the time for payment of any such Security, any modification of any such Security or any
supplemental indenture or Board Resolution and Officers' Certificate relating thereto, any invalidity, irregularity or unenforceability of any such Security or the Indenture or this Supplemental
Indenture, any failure or delay to enforce the same or any waiver, modification, consent or indulgence granted to the Company with respect thereto by the Holder of such Security or the Trustee, or any
other circumstances which may otherwise constitute a legal or equitable discharge of a surety or guarantor. 

        The
Guarantor further agrees that the Guarantee herein constitutes a guarantee of payment when due (and not a guarantee of collection) and waives (to the extent that it may lawfully do
so) any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Guarantee. 

        The
Guarantor hereby waives (to the extent that it may lawfully do so) diligence, presentment, demand of payment, filing of claims with a court in the event of merger or bankruptcy of
the Company, any
right to require a demand or proceeding first against the Company, protest or notice with respect to any such Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants
that this Guarantee will not be discharged as to any such Security except by payment in full of the principal (including any amount payable in respect of original issue discount) of, and premium, if
any, and interest, if any, and payment of the sinking fund payments, if any, and analogous obligations, if any, thereon. 

        The
Guarantor agrees that the Guarantee with respect to each series of Securities shall remain in full force and effect until payment in full of all the Securities of such series. The
Guarantor further agrees that the Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of the principal (including any
amount payable in respect of original issue discount) of, and premium, if any, and interest, if any, and payment of the sinking fund payments, if any, and analogous obligations, if any, on any series
of Securities is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. 

        The
Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the obligations guaranteed hereby may be
accelerated as provided in Article Seven for the purposes of any Guarantee herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the obligations
guaranteed 

7

 

hereby,
and (y) in the event of any declaration of acceleration of the obligations guaranteed hereby as provided in Article Seven, such obligations (whether or not due and payable) shall
forthwith become due and payable by the Guarantor for the purposes of this Section 1501. 

        The
Guarantor shall be subrogated to all rights of the Holders of the Securities of a series against the Company in respect of any amounts paid by the Guarantor on account of such
Security pursuant to the provisions of the Guarantees or this Indenture; provided, however, that the Guarantor agrees that it shall not be entitled to any right of subrogation in relation to the
Holders until payment in full of the principal (including any amount payable in respect of original issue discount) of, and premium, if any, and interest, if any, and payment of the sinking fund
payments, if any, and analogous obligations, if any, on all Securities of such series. The Guarantor hereby waives (to the extent that it may lawfully do so) any and all rights to which it may be
entitled, by operation of law or otherwise, upon making any payment hereunder (i) any right to which it may be entitled to have the assets of the Company first be used and depleted as payment
of the Company's or the Guarantor's obligations hereunder prior to any amounts being claimed from or paid by the Guarantor hereunder; or (ii) to receive any payment, in the nature of
contribution or for any other reason, from any other obligor with respect to such payment. 

Section 3. MISCELLANEOUS  

        3.1    Continuance of Indenture.    This Supplemental Indenture supplements the Indenture and shall be a part of and
subject to all the terms thereof. The Indenture, as supplemented by this Supplemental Indenture, shall continue in full force and effect. 

        3.2    Defined Terms.    All capitalized terms used in this Supplemental Indenture which are defined in the Indenture,
but not otherwise defined herein, shall have the same meanings assigned to them in the Indenture. 

        3.3    Conflict with Trust Indenture Act.    If any provision of this Supplemental Indenture limits, qualifies or
conflicts with another provision hereof which is required to be included in this Supplemental Indenture by any of the provisions of the Trust Indenture Act, such required provision shall control. 

        3.4    Separability Clause.    In case any provision in this Supplemental Indenture shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby. 

        3.5    Benefits of Indenture.    Nothing in this Supplemental Indenture, express or implied, shall give to any Person,
other than the parties hereto and their successors hereunder and the Holders any benefit or any legal or equitable right, remedy or claim under this Supplemental Indenture. 

        3.6    Governing Law.    This Supplemental Indenture shall be governed by and construed in accordance with the laws of
the State of New York. 

        3.7    The Trustee.    The recitals contained herein shall be taken as the statements of the Company and the
Guarantor, and the Trustee assumes no responsibility for their correctness. The Trustee makes no representations as to the validity or sufficiency of this Supplemental Indenture. 

        3.8    Successors and Assigns of Company and Guarantor Bound By Supplemental Indenture.    All the covenants,
stipulations, promises and agreements contained in this Supplemental Indenture by or on behalf of the Company or the Guarantor shall bind their successors and assigns, whether so expressed or not, and
the provisions hereof shall bind the heirs, executors, administrators, successors and assigns of the Holders. 

        3.9    Acts of Board, Committee or Officer of Successor Corporation Valid.    Any act or proceeding by any provision
of this Supplemental Indenture authorized or required to be done or performed by any board, committee or officer of the Company or the Guarantor shall and may be done and performed 

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with
like force and effect by the like board, committee or officer of any corporation that shall at the time be the lawful successor of the Company or the Guarantor, as the case may be. 

        3.10    Counterparts.    This Supplemental Indenture may be executed in any number of counterparts, each of which
shall be an original; but such counterparts shall together constitute but one and the same instrument. 

        HSBC
Bank USA hereby accepts the trusts in this Supplemental Indenture declared and provided, upon the terms and conditions hereinabove set forth. 

9

 

        IN
WITNESS WHEREOF, Lehman Brothers Inc. has caused this Supplemental Indenture to be signed and acknowledged by its Chairman of the Board, one of its Vice Chairmen of the Board,
its President or one of its Vice Presidents, Lehman Brothers Holdings Inc. has caused this Supplemental Indenture to be signed and acknowledged by its Chairman of the Board, one of its Vice
Chairmen of the Board, its President or one of its Vice Presidents, and HSBC Bank USA, as Trustee, has caused this Supplemental Indenture to be signed by one its authorized officers, as of the day and
year first above written. 

	 	 	LEHMAN BROTHERS INC.
	

 	
 	

By:	
 	

    
 Name:

Title:
	

 	
 	

LEHMAN BROTHERS HOLDINGS INC.,

as Guarantor
	

 	
 	

By:	
 	

    
 Name:

Title:
	

 	
 	

HSBC BANK USA,

as Trustee
	

 	
 	

By:	
 	

    
 Name:

Title:

10

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Exhibit 4(r)

RECITALS

ARTICLE FIFTEEN THE GUARANTEESQuickLinks
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EXHIBIT 10.16  

 
 

PACKAGING CORPORATION OF AMERICA
  
  1999 EXECUTIVE INCENTIVE COMPENSATION PLAN
  
  PLAN DOCUMENT    
    

Effective: April 12, 1999  

   PACKAGING CORPORATION OF AMERICA

   

EXECUTIVE INCENTIVE COMPENSATION PLAN  

        Section 1.    Establishment and Purpose    

        1.1    Establishment of the Plan.    Packaging Corporation of America hereby establishes the "PACKAGING CORPORATION OF
AMERICA EXECUTIVE INCENTIVE COMPENSATION PLAN" (The "Plan"), set forth herein, effective April 12, 1999. 

        1.2    Purpose.    The objectives of the Plan are to: 

        (a)   Reinforce
a results-oriented management culture with executive pay that varies according to corporate, division, and individual performance against extraordinarily
aggressive goals. 

        (b)   Provide
incentives, in the form of substantial reward potential, for executives to remain employees of the Company. 

        (c)   Focus
on business results that include financial measures such as net income, cash flow, and working capital, with improvement in quality, safety, environmental, risk
management, effective leadership and equal employment opportunities performance. 

        (d)   De-emphasize
fixed compensation in the form of base salary and place greater emphasis on variable performance-based compensation. 

        (e)   Provide
key executives with competitive levels of total current compensation and incentive earning opportunities commensurate with the results achieved and individual
performance. 

        (f)    Provide
plans that are simple and easy to describe and understand. 

        Section 2.    Plan Definitions    

        (a)   Company means Packaging Corporation of America and any successor employer which adopts the Plan and any subsidiary
corporation designated by the Board as eligible to participate in the Plan; except that when used with reference to authority under this Plan, Company shall mean Packaging Corporation of America
exclusively. 

        (b)   Board means the Board of Directors of the Company. 

        (c)   Compensation Committee means those members of the Compensation Committee of the Board who are not employees of the
Company. This Committee is charged with the overall responsibility for this Plan. 

        (d)   Corporate means the entity which is responsible for the overall management and staff support functions of the Company. 

        (e)   Division means each operating organizational entity which, through the conduct of its business, produces revenues for the
Company. 

        (f)    Executive means a regular, full-time salaried employee of the Company who is in a position meeting the
defined eligibility criteria for participation in the Plan. 

        (g)   Participant means an executive who has been approved for participation in the Plan. 

        (h)   Effective Date means April 12, 1999. 

        (i)    Plan year means the calendar year. 

        (j)    Salary grade means the position classification assigned to the Participant in accordance with the position evaluation
system adopted by Packaging Corporation of America Management for Plan purposes. 

        (k)   EICP Objectives means the "Target" (Budget) level of financial objectives (e.g., net income, cash flow, or other
operating measurements for the Plan Year, assigned annually by the Company to each Division. This represents the expected level of achievement for the Plan Year. The target goal (budget) for the
Corporate will be the Company's consolidated operating measurements. 

        (l)    Individual Incentive Target Award means the anticipated individual incentive award to be allocated to a Participant in
the event EICP objectives are met and his/her individual performance is fully satisfactory. The 

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schedule
of individual incentive target awards applicable to the various salary grades shall be determined by the Company. 

        Section 3.    Eligibility and Participation    

        3.1    Eligibility and Participation.    Eligibility for participation in the Plan will be limited to those key
executives who, by the nature and scope of their positions, regularly and directly make or influence policy decisions which significantly impact the overall results or success of the Company. The
Company will receive recommendations for participation from Division Chief Executive Officers and appropriate Corporate Staff Officers. Each such nominated executive shall become a Participant upon
being approved by the Company. All such executives approved for participation shall be notified of their selection as soon as practical following approval. 

        3.2    Cessation of Participation.    The Company may withdraw its approval of an existing position at any time during
the Plan Year. participants whose employment is terminated during the Plan Year for reasons other than disability, death, or retirement under a Company retirement plan shall forfeit participation in
the Plan unless otherwise authorized by the Company. At the sole discretion of the Company, participation may be prorated for participants who become disabled, die, retire or are assigned to a
non-eligible position during the Plan Year. 

        Section 4.    Fund Generation    

        4.1    Division/Corporate Incentive Amounts.    Annually, the Company shall establish Division and Corporate EICP
Objectives (Target/Budget) applicable to each participating Division. In addition, the Company shall determine for each participating Division a target incentive amount equal to the sum of individual
incentive targets. The Company may adjust the target incentive amount during the Plan Year to accommodate the admission or elimination of Participants to the Plan and to incorporate adjustments to
individual incentive targets of Participants whose salary grade changes during the Plan Year. Division and corporate incentive funds will be determined based on the budgeted financial objectives
(e.g., net income, cash flow) with each weighted to reflect appropriate emphasis. 

        The
size of the incentive fund applicable to each division will be determined as follows: 

FINANCIAL OBJECTIVES  

        A preliminary fund will be established based on performance against financial objectives from the Annual Operating Plan (AOP). 

	•
	Performance  on AOP will generate a fund equal to the sum of individual target awards.

	•
	Performance
below AOP will result in a lower incentive fund as determined by the Board taking into consideration the reasons
that AOP was not attained.

	•
	Performance
above AOP may result in a higher than target level fund as determined by the Board taking into consideration the
reasons that AOP was exceeded. 

NON-FINANCIAL OBJECTIVES  

Quantitative Adjustments  

        Once the preliminary fund is established, the following quantitative adjustment factors may be applied to determine a final incentive fund: 

	•
	Cash
Management/Debt Reduction

	•
	Environmental
Performance

	•
	Safety &
Health Performance

	•
	Cost
Reduction Performance

	•
	EEO
Performance 

        Each
of these quantitative adjustment factors will be applied a maximum of 5% for a total increase/decrease to the fund of as much as 25%. 

2

 

Qualitative Adjustments  

        The following qualitative adjustment factors for overall leadership will also be applied: 

	•
	Management
Development (Recruiting/Staffing/Training)

	•
	Customer
Satisfaction

	•
	Leadership
of Change 

        These
qualitative factors will be applied a maximum of 31/3% for a total increase/decrease to the fund as much as 10%. 

        4.2    Committee Authority.    The Committee shall have the right at any time in its sole discretion to modify,
eliminate or withdraw for such period or periods as it may determine, the incentive amounts, in part or in whole, to be made available under this Section 4 for payment of awards to any or all
participating Corporate or Division entities or any Participant or Participants hereunder. 

        Section 5.    Determination of Individual Awards    

        5.1    Determination of Individual Incentive Target Awards.    Annually, the Compensation and Benefits Committee shall
determine the Salary Grade applicable to the Chairman and CEO of the Company and the Company shall determine the salary grade applicable to all other Participants. Each participant's individual
incentive target award will be determined by the Company. 

        5.2    Determination of Individual Incentive Awards.    Actual individual awards to be paid to Participants will vary
above or below the assigned individual incentive target awards dependent upon each individual's performance in accordance with guidelines prescribed by the Company. The actual award to a Participant
must be approved by
both the Company and the Compensation Committee (or only the Committee for awards applicable to the Chairman and President of the Company) and shall not exceed 100% of the Participant's annual base
salary without approval of the Committee. 

        Section 6.    Form of Timing of Awards    

        Payment of Individual Awards.    The actual awards to be paid to participants in accordance with Section 5.2 shall be
paid in cash as soon as practical once final operating performance is available. 

        Section 7.    Administration    

        This
Plan shall be administered by the Company in accordance with rules that may be established from time to time by the Compensation Committee. The determination of the Company as to
any disputed question arising under this Plan, including any question of construction or interpretation, shall be final, binding, and conclusive upon all persons. 

        Section 8.    Amendment and Termination    

        The
Committee, in its absolute discretion and without notice, may at any time and from time to time modify or amend, in whole or in part, any or all of the provisions of this Plan, or
suspend or terminate it entirely. 

        Section 9.    Applicable Laws    

        This
Plan shall be construed, administered and governed in all respects under and by the laws of the State of Illinois. 

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QuickLinks

PACKAGING CORPORATION OF AMERICA 1999 EXECUTIVE INCENTIVE COMPENSATION PLAN PLAN DOCUMENT

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