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LEHMAN
RICHARD S. FULD, JR BROTHERS
Chairman and Chief Executive Officer HOLDINGS
INC.
February 26, 1996
Dear Stockholder:
The Annual Meeting of Stockholders of Lehman Brothers Holdings Inc. (the
"Company") will be held on Wednesday, April 10, 1996, at 10:30 a.m. (New York
Time), at the 26th Floor Auditorium, 3 World Financial Center, 200 Vesey
Street, New York, New York 10285. A notice of the meeting, a proxy card and a
proxy statement containing information about the matters to be acted upon are
enclosed. You are cordially invited to attend.
All holders of record of the Company's outstanding shares of common stock, par
value $.10 per share (the "Common Stock"), Cumulative Convertible Voting
Preferred Stock, Series A, Cumulative Voting Preferred Stock and Redeemable
Voting Preferred Stock as of February 12, 1996 will be entitled to vote at the
Annual Meeting. It is important that your shares be represented at the meeting.
You will be asked to (i) elect three Class I Directors; (ii) ratify the Board
of Directors' selection of Ernst & Young LLP as the Company's independent
auditors for the 1996 fiscal year; (iii) approve the 1996 Management Ownership
Plan; and (iv) approve the 1996 Short Term Executive Compensation Plan.
Accordingly, we request that you promptly sign, date and return the enclosed
proxy card regardless of the number of shares you hold.
Very truly yours,
/s/ RICHARD S. FULD, JR.
RICHARD S. FULD, JR.
February 26, 1996
Dear Stockholder:
Enclosed with this letter are the proxy materials for the upcoming Annual
Meeting. You are being asked to approve two incentive compensation plans for
senior management: the 1996 Management Ownership Plan (the "1996 MOP") and the
1996 Short-Term Executive Compensation Plan (the "1996 STEP"). Compensation
paid under the 1996 MOP will consist of long-term equity and compensation paid
under the 1996 STEP will consist of annual cash bonuses. Both of these plans
are successor plans to the substantially similar 1994 MOP and 1994 STEP. The
1994 plans were effective mechanisms for the delivery of performance driven
compensation. In fact, operating results and stock price improved in 1995 as
compared to 1994. The Compensation and Benefits Committee of the Board of
Directors unanimously recommends approval of the 1996 MOP and 1996 STEP.
On behalf of the Committee, I would like to explain the Committee's
incentive compensation philosophy and how these plans further our goal of
increasing Stockholder value in today's environment. It is our current
intention to operate prospectively within this framework.
A fundamental principle of our approach to compensation is to align the
interests of every member of the Firm with those of the Stockholders. In brief,
we believe that this can be accomplished through the following:
. compensate all members of the Firm with an "ownership" stake in the Company,
and thus, encourage actions which build long-term Stockholder value; and
. tie compensation to the achievement of specified performance goals.
The 1996 MOP and 1996 STEP embody this principle and, we believe, meet the
above-stated Firm objectives. Stockholder approval is required to assure that
awards to Executive Officers under such plans are tax-deductible to the
Company, which itself is important to maximize Stockholder value.
The 1996 MOP will permit the Company to pay a portion of the total
compensation of Executive Officers in restricted stock units ("RSUs") and other
equity-based awards, in amounts determined by the Company's financial
performance and stock price. In fact, we intend to continue our current
practice of paying a significant percentage of all employees' total
compensation in stock to provide a strong interest in the financial
performance and growth of the Company and a powerful incentive in working to
build long-term Stockholder value. As in the past, the RSUs paid to both
Executive Officers and other employees will have vesting and resale
restrictions, which will also assist the Firm in retaining key personnel.
The 1996 MOP allows the Company to fund RSUs and other equity based awards
paid to Executive Officers from shares acquired in the secondary market (in
addition to new issuance) and, to the extent practicable, the Company will do
so to reduce share dilution. The Company will fund RSUs and other equity based
awards paid to all the other employees outside of the 1996 MOP through
secondary market purchases to avoid share dilution.
The 1996 STEP will permit the Company to continue to make cash bonus awards
to its Executive Officers tied to the achievement of performance goals based on
specified Firm financial targets. Annual cash bonus awards to other officers
and employees outside of this plan also are tied to the achievement of
performance goals appropriate for their position within the Firm. We believe
that an annual incentive bonus program is a necessary element of the Firm's
ability to attract and retain qualified officers and employees in the
securities industry. It also motivates members of the Firm to achieve
performance goals that are in the best interests of the Company and its
Stockholders.
Sincerely,
/s/ John D. Macomber
John D. Macomber
Chairman
Compensation and Benefits Committee
LEHMAN BROTHERS HOLDINGS INC.
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
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To the Stockholders of Lehman Brothers Holdings Inc.:
The Annual Meeting of Stockholders (the "Annual Meeting") of the Company
will be held on Wednesday, April 10, 1996, at 10:30 a.m. (New York Time), at the
26th Floor Auditorium, 3 World Financial Center, 200 Vesey Street, New York, New
York 10285 to:
(1) Elect three Class I Directors for terms of three years each;
(2) Ratify the Board of Directors' selection of Ernst & Young LLP as the
Company's independent auditors for the 1996 fiscal year;
(3) Approve the 1996 Management Ownership Plan;
(4) Approve the 1996 Short Term Executive Compensation Plan; and
(5) Act on any other business which may properly come before the Annual
Meeting or any adjournment thereof.
THE COMPANY WILL ADMIT TO THE ANNUAL MEETING STOCKHOLDERS OF RECORD,
PERSONS HOLDING PROOF OF BENEFICIAL OWNERSHIP OR WHO HAVE BEEN GRANTED PROXIES
AND ANY OTHER PERSON THAT THE COMPANY, IN ITS SOLE DISCRETION, MAY ELECT TO
ADMIT. IF YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE CHECK THE APPROPRIATE
BOX ON YOUR PROXY CARD.
Stockholders of record at the close of business on February 12, 1996 are
entitled to notice of, and to vote at the Annual Meeting or any adjournment
thereof. A list of such Stockholders will be available at the Annual Meeting
and, during the ten days prior thereto, at the office of the Company's
Corporate Secretary, 3 World Financial Center, 24th Floor, New York, New York
10285.
A copy of the Company's Annual Report to Stockholders is enclosed herewith.
By Order of the Board of Directors
/s/ KAREN C. MANSON
KAREN C. MANSON
Secretary
New York, New York
February 26, 1996
WHETHER OR NOT YOU INTEND TO BE PRESENT AT THE ANNUAL MEETING, PLEASE SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT IN THE ENCLOSED PREPAID
ENVELOPE.
LEHMAN BROTHERS HOLDINGS INC.
3 WORLD FINANCIAL CENTER
NEW YORK, NEW YORK 10285
February 26, 1996
PROXY STATEMENT
VOTE BY PROXY. This proxy statement ("Proxy Statement") is furnished in
connection with the solicitation of the accompanying proxy by the Board of
Directors of the Company (the Company, together with its subsidiaries, the
"Firm") for the Company's Annual Meeting of Stockholders to be held on
Wednesday, April 10, 1996 at 10:30 a.m. (New York Time), or any adjournment
thereof ("Annual Meeting"). This Proxy Statement and the proxy ("proxy card" or
"proxy") are expected to be mailed to stockholders of the Company
("Stockholders") on or about February 26, 1996.
You are cordially invited to attend the Annual Meeting, but whether or not
you expect to attend in person, you are urged to sign and date the enclosed
proxy and return it in the enclosed, prepaid envelope. Stockholders have the
right to revoke their proxies at any time prior to the time their shares are
actually voted by (i) giving written notice to the Corporate Secretary of the
Company, (ii) by subsequently filing a later dated proxy or (iii) by attending
the Annual Meeting and voting in person. Please note that attendance at the
meeting will not by itself revoke a proxy.
The enclosed proxy indicates on its face the number of common and/or
preferred shares registered in the name of each stockholder of record on
February 12, 1996. Proxies furnished to employees also indicate the number of
shares, if any, (i) held by the employee under the Lehman Brothers Holdings
Inc. Employee Stock Purchase Plan ("ESPP"), (ii) allocated to the employee's
Lehman Brothers Holdings Inc. Employee Stock Ownership Plan ("ESOP") account
and (iii) held by the employee in brokerage accounts at Lehman Brothers Inc.
("LBI"). Proxies returned by employees who participate in the ESOP will be
considered to be voting instructions to the ESOP trustee ("ESOP Trustee") with
respect to shares allocated to such account. Pursuant to the terms of the ESOP
trust agreement, the ESOP Trustee shall vote unallocated shares and allocated
shares for which no voting instructions are received in a manner that the
Trustee judges to be in the best interest of participants in the ESOP. Proxies
returned by employees with LBI brokerage accounts will be considered voting
instructions to LBI with respect to shares held in such accounts. Under the
Lehman Brothers Holdings Inc. Tax Deferred Savings Plan ("TDSP"), the trustees
of the TDSP shall vote all the shares held in participating employees'
accounts, in a manner which they believe to be in the best interest of the
participants.
CONFIDENTIAL VOTING. As a matter of policy, the proxies, ballots and voting
tabulations relating to individual Stockholders are kept private by the
Company. Such documents are available for examination only by Inspectors of
Election and certain employees of the Company's tabulating agents engaged in
processing proxy cards and tabulating votes. The vote of any Stockholder is
not disclosed to management except as may be necessary to meet legal
requirements. However, all comments directed to management from Stockholders
whether written on the proxy card or elsewhere, will be forwarded to
management.
GENERAL. Unless contrary instructions are indicated on the proxy, all
shares represented by valid proxies received pursuant to this solicitation
(and not revoked before they are voted) will be voted as follows:
FOR the election of the three nominees for Class I Directors named
below;
FOR the ratification of the Board of Directors' selection of Ernst &
Young LLP as the Company's independent auditors for the 1996 fiscal year;
FOR the approval of the 1996 Management Ownership Plan; and
FOR the approval of the 1996 Short Term Executive Compensation Plan.
In the event a Stockholder specifies a different choice on the proxy, his
or her shares will be voted in accordance with the specification so made.
The Company's 1995 Annual Report has been mailed to Stockholders in
connection with this solicitation. A COPY OF THE COMPANY'S ANNUAL REPORT TO THE
SECURITIES AND EXCHANGE COMMISSION (THE "SEC") ON FORM 10-K, EXCLUSIVE OF
EXHIBITS, MAY BE OBTAINED WITHOUT CHARGE BY WRITING: LEHMAN BROTHERS HOLDINGS
INC., 3 WORLD FINANCIAL CENTER, 24TH FLOOR, NEW YORK, NEW YORK 10285 ATTN.:
CORPORATE SECRETARY.
COST OF SOLICITATION. The cost of soliciting these proxies will be borne by
the Company. In addition to solicitation by mail, proxies may be solicited by
directors, officers or employees of the Company in person or by telephone or
telegram, or other means of communication, for which no additional compensation
will be paid. The Company has engaged the firm of Georgeson & Company Inc. to
assist the Company in the distribution and solicitation of proxies. The Company
has agreed to pay Georgeson & Company Inc. a fee of $18,000 plus expenses for
its services.
The Company also will reimburse brokerage houses, including the Company's
wholly-owned subsidiary, Lehman Brothers Inc., and other custodians, nominees
and fiduciaries for their reasonable expenses, in accordance with the rules and
regulations of the SEC, the New York Stock Exchange, Inc. ("NYSE") and other
exchanges, in sending proxies and proxy materials to the beneficial owners of
shares of the Company's voting securities.
THE VOTING STOCK. The Company has four classes of voting stock: Common
Stock, Cumulative Convertible Voting Preferred Stock, Series A, par value $1.00
per share (the "Series A Preferred Stock"), Cumulative Voting Preferred Stock,
par value $1.00 per share (the "Cumulative Preferred Stock") and Redeemable
Voting Preferred Stock, par value $1.00 per share ("Redeemable Preferred
Stock") (the Series A Preferred Stock, Cumulative Preferred Stock and
Redeemable Preferred Stock are collectively referred to herein as the
"Preferred Stock" and the Common Stock and the Preferred Stock are sometimes
collectively referred to herein as the "Voting Stock").
As of February 12, 1996, there were 103,355,214 shares of Common Stock
outstanding (exclusive of 2,368,777 shares held in the treasury), each of which
is entitled to one vote with respect to each matter to be voted on at the
Annual Meeting, and there were outstanding 13,000,000 shares of Series A
Preferred Stock, 8,000,000 shares of Cumulative Preferred Stock and 1,000
shares of Redeemable Preferred Stock, respectively, each of which is entitled
to .3178313, .295, and 1,059 votes per share, respectively. There is no
cumulative voting provision for Common Stock or Preferred Stock. The Common
Stock and the Preferred Stock will vote together as a single class on each
matter to be voted on at the meeting. The presence in person or by proxy at
the Annual Meeting of the holders of a majority of the shares of Common Stock
and Preferred Stock outstanding and entitled to vote shall constitute a quorum.
As of February 12, 1996, American Express Company ("American Express")
owned no shares of Common Stock and 100% and 92.8% of the outstanding shares of
Cumulative Preferred Stock and Redeemable Preferred Stock, respectively,
representing in the aggregate approximately 3% of the Voting Stock. American
Express has agreed that so long as it or any of its subsidiaries holds any
shares of the Cumulative Preferred Stock or Redeemable Preferred Stock, it will
vote such shares in the same proportion as the votes cast by the holders of
shares of Common Stock on matters to be voted on by Stockholders.
As of February 12, 1996, Nippon Life Insurance Company ("Nippon Life")
owned 100% and 7.2% of the outstanding shares of the Series A Preferred Stock
and Redeemable Preferred Stock, respectively, and approximately 5.3% of the
outstanding Common Stock (approximately 11.6% assuming
2
conversion of the Series A Preferred Stock and exercise of a warrant to
purchase Common Stock), representing in the aggregate approximately 8.7% of
the Voting Stock.
STOCKHOLDERS ENTITLED TO VOTE. Only Stockholders of record at the close of
business on February 12, 1996 will be entitled to notice of and to vote at the
Annual Meeting.
INFORMATION AS TO CERTAIN STOCKHOLDERS
To the knowledge of management, except as described below, no person
beneficially owns more than five percent of any class of Voting Stock as of
December 31, 1995.
TITLE OF CLASS NAME OF BENEFICIAL OWNER NUMBER OF SHARES PERCENT OF CLASS
-------------- ------------------------ ---------------- ----------------
Common Stock................. FMR Corp. (a) 11,510,343(b) 11.01
Common Stock................. Nippon Life Insurance 12,924,489(d) 11.60
Company(c)
Common Stock................. The Prudential Insurance 6,023,188(f) 5.8
Company of America(e)
Cumulative Convertible Voting
Preferred Stock, Series A... Nippon Life Insurance 13,000,000 100.00
Company(c)
Cumulative Voting Preferred
Stock....................... American Express Company(g) 8,000,000(h)(i) 100.00
Redeemable Voting Preferred
Stock....................... American Express Company(g) 928(h) 92.80
Redeemable Voting Preferred
Stock....................... Nippon Life Insurance 72 7.20
Company(c)
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(a) The address of FMR Corp. is 82 Devonshire Street, Boston, MA 02109.
(b) Based on Amendment No. 2 to Schedule 13G, dated February 14, 1996, filed by FMR Corp.
Includes 11,225,201 shares beneficially owned by Fidelity Management & Research Company,
a registered investment adviser, as a result of acting as investment adviser to various
investment companies registered under Section 8 of the Investment Company Act of 1940
and 285,142 shares beneficially owned by Fidelity Management Trust Company, a bank, as a
result of its serving as investment manager of institutional accounts. FMR Corp. has
sole voting power over 182,882 shares and shared dispositive power over 11,510,343
shares. Edward C. Johnson 3rd, Chairman of FMR Corp., and his wife Abigail P. Johnson,
together with family members and family trusts, may be deemed to be a controlling group
with respect to FMR Corp.
(c) The address of Nippon Life is 2-2, Yurakucho, 1-Chome, Chiyoda-ku, Tokyo, 100, Japan.
(d) Includes 3,304,880 shares of Common Stock issuable upon exercise of a warrant to
purchase shares of Common Stock granted to Nippon Life by the Company in 1990 which
expires April 15, 1996 and 4,131,807 shares of Common Stock issuable upon conversion of
the Series A Preferred Stock. Based upon information furnished by Nippon Life, Nippon
Life has sole investment and sole voting power over all shares.
(e) The address of The Prudential Insurance Company ("Prudential") is 751 Broad Street,
Newark, NJ 07102.
(f) Based on Schedule 13G, dated February 14, 1996, filed by Prudential. Prudential has sole
investment and sole voting power over 13,887 shares and shared voting and shared
dispositive power over 6,009,301 shares.
(g) The address of American Express is 3 World Financial Center, New York, NY 10285.
(h) Based on information furnished by American Express, American Express has sole investment
and sole voting power over all shares.
(i) The Cumulative Voting Preferred Stock was redeemed by the Company on February 15, 1996.
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PROPOSAL 1
ELECTION OF CLASS I DIRECTORS
At the Annual Meeting three Class I Directors are to be elected, each to
serve until the Annual Meeting in 1999 and until his or her successor is
elected and qualifies. The Restated Certificate of Incorporation of the Company
establishes a classified Board of Directors with three classes, designated
Class I, Class II and Class III. The terms of Class II and Class III Directors
continue until the Annual Meetings in 1998 and 1997, respectively.
The three nominees for Director are: John F. Akers, Richard S. Fuld, Jr.
and Katsumi Funaki. Messrs. Akers, Fuld and Funaki were elected Class I
Directors in 1996, 1990 and 1990, respectively. Governor Malcolm Wilson, at
age 82 and after more than 12 years of dedicated service to the Company, has
elected not to stand for reelection as a Class I Director.
Pursuant to the Investment Agreement among Nippon Life, American Express
and the Company, Mr. Katsumi Funaki has been nominated by Nippon Life as a
Class I Director. See "Agreement Among the Company, American Express and
Nippon Life."
The three nominees receiving the greatest number of votes cast by the
holders of the Voting Stock will be elected as Class I Directors of the
Company. Unless authority to vote is withheld, the persons specified in the
enclosed proxy intend to vote for the aforementioned nominees, all of whom
have consented to being named in this proxy statement and to serving if
elected. Although management knows of no reason why any nominee would be
unable to serve, the persons designated as proxies reserve full discretion
to vote for another person in the event any such nominee is unable to serve.
The following information is provided with respect to the nominees for
Director and the incumbent Directors. Italicized wording indicates principal
occupation.
NOMINEES FOR ELECTION AS CLASS I DIRECTORS TO SERVE
UNTIL THE 1999 ANNUAL MEETING OF STOCKHOLDERS
JOHN F. AKERS DIRECTOR SINCE 1996 AGE: 61
Private Investor. Mr. Akers is the retired Chairman of the Board of
Directors of International Business Machines Corporation ("IBM"). Mr. Akers
served as Chairman of the Board of Directors and Chief Executive Officer of IBM
from 1985 until his retirement on May 1, 1993, completing a 33-year career with
IBM. Mr. Akers is a Director of the New York Times Company, PepsiCo, Inc.,
Hallmark Cards, Inc. and Springs Industries and a member of the U.S. Advisory
Board of Zurich Insurance Company and the Advisory Board of Directorship. He is
a former member of the Board of Trustees of the California Institute of
Technology and The Metropolitan Museum of Art, Chairman of the Board of
Governors of United Way of America, and a member of President George Bush's
Education Policy Advisory Committee.
RICHARD S. FULD, JR. DIRECTOR SINCE 1990 AGE: 49
Chairman and Chief Executive Officer. Mr. Fuld was elected Chairman of the
Board of Directors of the Company and LBI in April 1994 and has been Chief
Executive Officer of the Company and LBI since November 1993. He has also
served as a member of the Corporate Management Committee of the Company since
1994. Mr. Fuld was President and Chief Operating Officer of the Company and
LBI from March 1993 to April 1994 and was Co-President and Co-Chief Operating
Officer of both corporations from January 1993 to March 1993. He was President
and Co-Chief Executive Officer of the Lehman Brothers Division from August 1990
to March 1993. Mr. Fuld was a Vice Chairman of LBI from August 1984 until 1990.
He also serves as a Director and executive officer of several of the
4
Company's subsidiaries. Mr. Fuld has been a Director of LBI since 1984 and a
Director of the Company since 1990. Mr. Fuld is a trustee of Mount Sinai Medical
Center, a member of the Executive Committee of Mount Sinai Children's Center
Foundation, a trustee of Wilbraham & Monson Academy and a Director of Ronald
McDonald House. He is Chairman of the Company's Executive Committee and Chairman
and a non-voting member of the Company's Nominating Committee. He is also a
member of the Company's Dividend Committee.
KATSUMI FUNAKI DIRECTOR SINCE 1991 AGE: 54
Senior General Manager of International Business of the Finance and
Investment Planning Office of Nippon Life. Mr. Funaki has been affiliated with
Nippon Life, Japan's largest insurance company, since 1964 and has been Senior
General Manager for International Business of the finance and Investment
Planning Office since March 1994. Mr. Funaki was Chief General Manager for the
Americas from 1993 through March 1994, and Mr. Funaki was General Manager for
North America from March 1991 until 1993. He was Deputy Chief of International
Investment Headquarters of Nippon Life from 1990 to 1991. Mr. Funaki was General
Manager of the International Investment Department of Nippon Life from 1988 to
1990 and Deputy General Manager of the International Investment Department of
Nippon Life from 1986 to 1988. Mr. Funaki has been a Director of the Company
since 1991.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR ALL NOMINEES.
CLASS II DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
1998 ANNUAL MEETING OF STOCKHOLDERS
ROGER S. BERLIND DIRECTOR SINCE 1985 AGE: 65
Private Investor. Roger S. Berlind has been a theatrical producer of Berlind
Productions since 1981. Mr. Berlind, is a Director of LBI, a Governor of the
League of American Theaters and Producers and has served as a Trustee of
Princeton University, the Eugene O'Neill Theater Center and the American Academy
of Dramatic Arts. Mr. Berlind has been a Director of the Company since 1985. He
is Chairman of the Company's Finance Committee and a member of the Company's
Audit Committee.
DINA MERRILL DIRECTOR SINCE 1988 AGE: 67
Actress and Private Investor. Dina Merrill, an actress and private investor,
is a Director and Vice Chairman of RKO Pictures, Inc. Ms. Merrill was a
Presidential Appointee to the Kennedy Center Board of Trustees and is a Vice
President of the New York City Mission Society, a Trustee of the Eugene O'Neill
Theater Foundation and a member of the board of Project Orbis, the Juvenile
Diabetes Foundation and the Museum of Television and Radio. Ms. Merrill has been
a Director of the Company since 1988. She is a member of the Company's
Compensation and Benefits Committee and the Company's Nominating Committee.
MASATAKA SHIMASAKI DIRECTOR SINCE 1994 AGE: 52
Director and General Manager for the Americas of Nippon Life. Mr. Shimasaki
has been affiliated with Nippon Life, Japan's largest insurance company, since
1967, has been General Manager for the Americas since March 1994, and has been a
Director since July 1994. He was General Manager, International Planning
Department of Nippon Life from 1993 until March 1994. Mr. Shimasaki was General
Manager of Nippon Life's International Finance Department from 1990 until 1993,
and Chief Representative of Nippon Life's London Representative Office from 1988
through 1990. Mr. Shimasaki has been a Director of the Company since 1994. He is
a member of the Company's Audit Committee
5
and the Company's Finance Committee. Mr. Shimasaki is also a Director of
PanAgora Asset Management, Inc. See "Agreement Among the Company, American
Express and Nippon Life."
CLASS III DIRECTORS WHOSE TERMS CONTINUE UNTIL THE
1997 ANNUAL MEETING OF STOCKHOLDERS
HENRY KAUFMAN DIRECTOR SINCE 1995 AGE: 68
President of Henry Kaufman & Company, Inc. Dr. Kaufman has been President of
Henry Kaufman & Company, Inc., an investment management and economic and
financial consulting firm, since 1988. For the previous 26 years, he was with
Salomon Brothers Inc., where he was a Managing Director, Member of the Executive
Committee, and in charge of Salomon's four research departments. He was also a
Vice Chairman of the parent company, Salomon Inc. Before joining Salomon
Brothers, Dr. Kaufman was in commercial banking and served as an economist at
the Federal Reserve Bank of New York. Dr. Kaufman is a Director of Federal Home
Loan Mortgage Corporation and W. R. Berkley Corporation. He is the Chairman of
the Board of Trustees of the Institute of International Education, the Chairman
of the Board of Overseers of the Stern Schools of Business of New York
University and the President of the Board of Trustees of the Animal Medical
Center. Dr. Kaufman is a Member of the Board of Trustees of the Whitney Museum
of American Art, a Member of the Board of Trustees of New York University, a
Member of the International Capital Markets Advisory Committee of the Federal
Reserve Bank of New York, a Member of the Advisory Committee to the Investment
Committee of the International Monetary Fund Staff Retirement Plan and a Member
of the Board of Governors of Tel-Aviv University. Dr. Kaufman has been a
Director of the Company since 1995. He is a member of the Company's Finance
Committee.
JOHN D. MACOMBER DIRECTOR SINCE 1994 AGE: 68
Principal of JDM Investment Group. Mr. Macomber has been a Principal of JDM
Investment Group, a private investment firm, since 1992. He was Chairman and
President of the Export-Import Bank of the United States from 1989 to 1992,
Chairman and Chief Executive Officer of Celanese Corporation from 1973 to 1986
and a Senior Partner at McKinsey & Co. from 1954 to 1973. Mr. Macomber is a
Director of Bristol-Myers Squibb Company, The Brown Group, Inc., Pilkington
Ltd., Textron Inc. and Xerox Corporation. He is also a Director of the Atlantic
Council of the United States, the French-American Foundation, the National
Executive Services Corps. and the George Bush Presidential Library Foundation.
Mr. Macomber is Chairman of the Council for Excellence in Government. Mr.
Macomber is on the Advisory Board of the Center for Strategic & International
Studies and the Yale School of Management. He is a Trustee of the Carnegie
Institution of Washington and a member of the Council on Foreign Relations and
the Bretton Woods Committee. Mr. Macomber has been a Director of the Company
since 1994. He is Chairman of the Company's Compensation and Benefits Committee,
and a member of the Company's Executive Committee and the Company's Nominating
Committee.
T. CHRISTOPHER PETTIT DIRECTOR SINCE 1994 AGE: 51
President and Chief Operating Officer. Mr. Pettit was elected President and
Chief Operating Officer of the Company and LBI in April 1994 and has served as a
member of the Corporate Management Committee of the Company since 1994. Mr.
Pettit is responsible for the day-to-day operations of the Firm. He was Managing
Partner of the Company and LBI from 1993 to April 1994 and Managing Director of
LBI from 1992 to April 1994. Mr. Pettit, who was a Senior Executive Vice
President of LBI from 1984 to 1992, was appointed the Managing Partner of the
Lehman Brothers Division in 1991. Mr. Pettit also serves as a Director and
executive officer of several of the Company's
6
subsidiaries. Mr. Pettit has been a Director of the Company since 1994. He is a
member of the Company's Executive Committee and the Company's Finance Committee
and an alternative member of the Company's Dividend Committee.
COMMITTEES OF THE BOARD OF DIRECTORS
The Executive, Audit, Compensation and Benefits, Finance and Nominating
Committees of the Board of Directors are described below.
EXECUTIVE COMMITTEE. The Executive Committee consists of Mr. Fuld, who
chairs the Executive Committee, and Messrs. Macomber and Pettit. The Executive
Committee has the authority, in the intervals between meetings of the Board of
Directors, to exercise all of the authority of the Board of Directors, except
for those matters that the Delaware General Corporation Law ("DGCL") or the
Restated Certificate of Incorporation reserves to the full Board of Directors.
The Executive Committee acted by telephone or unanimous written consent twenty
times during the 1995 fiscal year.
AUDIT COMMITTEE. The Audit Committee consists of Governor Wilson, who chairs
the Audit Committee, and Messrs. Berlind and Shimasaki, all of whom are
Non-employee Directors. The Audit Committee represents the Board in discharging
its responsibilities relating to the accounting, reporting and financial control
practices of the Company. The Audit Committee has general responsibility for
surveillance of financial controls, as well as for the Company's accounting and
audit activities. The Audit Committee annually reviews the qualifications of the
independent auditors, makes recommendations to the Board of Directors as to
their selection, reviews the audit plan, fees and results of their audit, and
approves their non-audit services and related fees. The Audit Committee held
three meetings during the 1995 fiscal year.
COMPENSATION AND BENEFITS COMMITTEE. The Compensation and Benefits Committee
(the "Compensation Committee") consists of Mr. Macomber, who chairs the
Compensation Committee and Ms. Merrill and Governor Wilson, all of whom are
Non-employee Directors. The Compensation Committee establishes corporate policy
and programs with respect to the compensation of officers and employees of the
Firm, including establishing compensation policies and practices, such as
salary, cash incentive, restricted stock, long-term incentive compensation,
stock purchase and other programs and making grants under such plans. The
Compensation Committee also establishes and administers all of the Company's
employee benefit and compensation plans and has the authority, where
appropriate, to delegate its duties. The Compensation Committee held three
meetings during the 1995 fiscal year and acted by telephone or unanimous written
consent five times.
FINANCE COMMITTEE. The Finance Committee consists of Mr. Berlind, who chairs
the Finance Committee, and Messrs. Kaufman, Pettit and Shimasaki. The Finance
Committee reviews and advises the Board of Directors on financial policies and
practices of the Company, and periodically reviews, among other things, major
capital expenditure programs and significant capital transactions and recommends
a dividend policy to the Board of Directors. The Finance Committee held four
meetings during the 1995 fiscal year.
NOMINATING COMMITTEE. The Nominating Committee consists of Mr. Fuld, who
chairs the Nominating Committee but is a non-voting member, and two non-employee
Directors, Mr. Macomber and Ms. Merrill. The Nominating Committee considers and
makes recommendations to the Company's Board of Directors with respect to the
size and composition of the Board of Directors and Board Committees and with
respect to potential candidates for membership on the Board of Directors. The
Nominating Committee held three meetings during the 1995 fiscal year. The
Nominating Committee will consider nominees for Director recommended by
Stockholders. Stockholders wishing to submit recommendations for the 1997 Annual
Meeting of Stockholders should write to the Corporate Secretary, Lehman Brothers
Holdings Inc., 3 World Financial Center, New York, New York 10285. The
7
Company's bylaws contain time limitation, procedures and requirements relating
to Stockholder nominations.
ATTENDANCE AT MEETINGS BY DIRECTORS
The Board of Directors held eight meetings during the 1995 fiscal year and
acted five times by telephone or unanimous written consent. All Directors other
than Mr. Funaki attended 75 percent or more of the aggregate of (a) the total
number of meetings of the Board held during the period when he or she was a
Director and (b) the total number of meetings held by all Committees of the
Board on which he or she served during the period when he or she was a Director.
The number of meetings held by each Committee during the 1995 fiscal year is set
forth above.
COMPENSATION OF CURRENT DIRECTORS
Non-employee Directors receive an annual retainer of $45,000 and are
reimbursed for reasonable travel and related expenses. No additional fees are
paid for attendance at Board of Directors or committee meetings. Each Director
is expected to attend all Board meetings. Compensation for attending meetings is
deemed to be included within the annual retainers which are paid quarterly;
however, the fourth quarter payment will be withheld for failure to attend 75%
of the required number of meetings. Each Non-employee Director who serves as
chairman of a committee of the Board of Directors receives an additional annual
retainer of $7,500 per committee and each Non-employee Director who serves as a
member of the Executive Committee receives an additional annual retainer of
$15,000.
Restricted Stock Unit Grants for Non-Employee Directors. Under the terms of
the Company's 1994 Management Ownership Plan, a grant of Restricted Stock Units
("RSUs") representing $30,000 fair market value of Common Stock (as of the date
of the Annual Meeting) will be made to each Non-employee Director on the first
business day following the Company's Annual Meeting of Stockholders for each
year that such plan is in effect. As of each date that a dividend is paid on
Common Stock, each Non-employee Director holding RSUs shall be credited with a
number of additional RSUs equal to the product of (A) the dividend paid on one
share of Common Stock, multiplied by (B) the number of RSUs held by the
Non-employee Director, divided by (C) the closing price of Common Stock on the
NYSE on such date. One-third of the RSUs granted to Non-employee Directors will
vest on each of the first three anniversaries of the date of grant, or, if
earlier, immediately upon death, disability or termination of service as a
Non-employee Director after serving ten years. One-third of a Non-employee
Director's vested RSUs is payable in Common Stock on each of the first three
anniversaries following death, disability or termination of service. The number
of RSUs granted will be based on the closing price of the Common Stock on the
NYSE on the day such units are awarded.
The Company's Deferred Compensation Plan for Non-employee Directors. The
Company's Deferred Compensation Plan for Non-employee Directors is a
non-qualified deferred compensation plan which provides each Non-employee
Director an opportunity to elect to defer receipt of compensation to be earned
for services on the Board of Directors. Each Non-employee Director may elect to
defer all or a specified percentage of his or her future compensation (or such
election may be limited to such Non-employee Director's annual retainer fees)
with respect to one or more terms as Director. Such an election can be revoked
only by a showing of financial hardship and with the consent of the Compensation
Committee. Amounts deferred are credited quarterly with interest, based upon the
average 30-day U.S. Treasury Bill rate, and compounded annually. Deferred
amounts will be paid in either a lump sum or in annual installments over a
period not to exceed ten years as elected by the Non-employee Director. Payments
will commence pursuant to an election by the Non-employee Director at a
specified date in the future or upon termination of service as a Non-employee
Director.
8
The Company's Frozen Retirement Plan for Non-employee Directors. Prior to
May 1994, the Company maintained the Company's Retirement Plan for Non-employee
Directors which was a non-qualified retirement plan which provided a limited
annual retirement benefit for Non-employee Directors who had earned five or more
years of service as defined in the Plan. Participation in this plan was frozen
on May 31, 1994. Any Non-employee Director who had, on such date, completed at
least 5 years of service as a Director (determined in accordance with this plan)
has vested benefits under this plan. Any individual who was a Non-employee
Director on such date, but had not completed 5 years of service as of such date,
will acquire vested benefits under this plan at the time such individual
completes such 5 years of service as a Director. Any individual who becomes a
Non-employee Director after such date is ineligible to participate in this plan.
Vested benefits under this plan will be paid after the individual ceases to be a
Director.
EXECUTIVE OFFICERS OF THE COMPANY
The current Executive Officers of the Company are set forth below, excluding
Messrs. Fuld and Pettit whose biographies are included above. The Executive
Officers comprise the Company's Corporate Management Committee, which performs
broad, policy making functions for the Company.
JOHN L. CECIL AGE:41
Chief Administrative Officer. Mr. Cecil has been Chief Administrative
Officer of the Company and LBI as well as a Managing Director of LBI since
January 1994 and has served as a member of the Corporate Management Committee of
the Company since 1994. Mr. Cecil joined McKinsey & Company, Inc. in 1980 where
he was elected a partner in 1986 and was a Director from 1991 through December
1993. Mr. Cecil is a member of the Board of Directors of Graham-Windham Agency
and is the Chairman of its Executive Committee.
ROBERT MATZA AGE:39
Chief Financial Officer. Mr. Matza has been Chief Financial Officer of the
Company and LBI since January 1994 and a Managing Director of LBI since 1992. He
has served as a member of the Corporate Management Committee of the Company
since 1994, and is a member of the Firm Investment Committee. He has also been a
Director of LBI since January 1994. Mr. Matza was Chief Financial Officer of the
Lehman Brothers Division from November 1990 to July 1993. Mr. Matza was
Controller of the Company and LBI from 1987 through November 1990 and Executive
Vice President of LBI from 1987 through 1992.
THOMAS A. RUSSO AGE: 52
Chief Legal Officer. Mr. Russo has been Chief Legal Officer and a member of
the Corporate Management Committee of the Company since 1994. He has been a
Managing Director of LBI since 1993. He is responsible for the Company's Legal,
Compliance, Corporate Communications, Internal Audit, Investor Relations and
Government Relations departments, as well as the Firm Investment and Commitment
Committees. He also serves as Chairman of the Company's New Products and
Business Committee. From 1977 until he joined LBI in 1993, Mr. Russo was a
partner at the law firm of Cadwalader, Wickersham & Taft where he had a
financial markets and general corporate practice.
9
SECURITY OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the beneficial ownership of Common Stock as
of January 31, 1996 for each Director, each nominee for Director, each Executive
Officer named in the Summary Compensation Table and all Directors and Executive
Officers of the Company as a group. Except as described below, each of the
persons listed below has sole voting and investment power with respect to the
shares shown. None of the individuals beneficially owns any of the Company's
outstanding Preferred Stock or as much as 1.0% of the outstanding Common Stock.
NUMBER OF SHARES OF
NUMBER OF SHARES COMMON STOCK WHICH MAY
BENEFICIAL OWNERS(a) OF COMMON STOCK BE ACQUIRED WITHIN 60 DAYS
-------------------- ---------------- --------------------------
John F. Akers.................................... 1,000 0
Roger S. Berlind................................. 107,148(b) 0
John L. Cecil.................................... 8,190 26,666
Richard S. Fuld, Jr.............................. 194,641(c) 164,790
Katsumi Funaki................................... 0 0
Henry Kaufman.................................... 35,000(d) 0
John D. Macomber................................. 20,000 0
Robert Matza..................................... 23,135 33,612
Dina Merrill..................................... 5,240 0
T. Christopher Pettit............................ 135,871(e) 69,459
Thomas A. Russo.................................. 25,070 25,039
Masataka Shimasaki............................... 0 0
Malcolm Wilson................................... 9,938 0
All Current Directors and Executive Officers as a
group
(13 individuals)............................... 565,233 319,566
- ------------
(a) This chart does not include 3,379 RSUs held by each of Messrs. Berlind, Funaki,
Macomber, Shimasaki and Wilson and Ms. Merrill, or 1,678 RSUs held by Mr. Kaufman. Mr.
Akers will receive his first payment of RSUs on April 11, 1996. RSUs held by the
Executive Officers are set forth in footnote (a) of the Summary Compensation Table on
page 13.
(b) Does not include 40,000 shares of Common Stock held by Mr. Berlind's wife, as to which
Mr. Berlind disclaims beneficial ownership.
(c) Includes 3,273 shares held by Mr. Fuld's children, as to which Mr. Fuld acts as
custodian.
(d) Held by Mr. Kaufman's various family trusts, foundations and partnerships. Mr. Kaufman
has sole voting and sole investment power over 10,000 shares and shared voting and
shared investment power over 25,000 shares.
(e) Includes 1,200 shares held by Mr. Pettit's son, as to which Mr. Pettit acts as
custodian and excludes 1,200 shares held by an adult daughter, as to which he disclaims
beneficial ownership.
COMPENSATION COMMITTEE REPORT OF EXECUTIVE OFFICER COMPENSATION
The Company's Compensation and Benefits Committee (the "Committee") makes
decisions with respect to the compensation of the Company's Chief Executive
Officer and the other Executive Officers. The Committee is composed of John D.
Macomber, who chairs the Committee, Dina Merrill and Malcolm Wilson.
In making its decisions with respect to the compensation of Executive
Officers, the Committee has adopted several practical and philosophical
positions:
. Deliver a significant portion of total compensation in equity-based
awards, thereby aligning the financial interest of Executive Officers with
Stockholders and encouraging prudent long-term strategic decisions. Where
feasible, based on market conditions and other factors, shares will be
repurchased in the market to avoid Stockholder dilution.
10
. Tie compensation for Executive Officers to annual and long-term
performance goals, which further harmonizes the interests of Executive
Officers with those of Stockholders and rewards Executive Officers for
achievements.
. Ensure that compensation opportunities are comparable with those at
major competitors, so that the Firm may recruit and retain talented
Executive Officers who are key to the Company's long-term success.
The elements and weightings of the compensation program at the Company are
comparable to those used in the investment banking industry, but are
considerably different from those of other major corporations operating in
different industries. Total compensation is comprised of base salary and both
cash and non-cash incentive compensation. Base salaries are intended to make up
a small portion of total compensation. The greater part of total compensation is
based on the Company's financial performance and other factors and is delivered
through a combination of cash and equity-based awards. This approach results in
overall compensation levels which will vary significantly with the financial
performance of the Company.
As in 1994, a key element of Executive Officer compensation for 1995 was
preestablished compensation formulas for each Executive Officer based on the
Company's net income. The formulas were intended to provide a specific amount of
cash and RSUs, which have significant vesting and sales restrictions. The
percentage of total compensation consisting of RSUs for Executive Officers
increases with the level of executive responsibility. (The Committee has taken a
similar approach in the RSU award program for employees, by paying a percentage
of employee compensation in RSUs, with the percentage increasing commensurate
with employee compensation levels.)
New in 1995 was the creation of a long term incentive program ("LTIP") as a
component of total compensation. Whereas the cash and RSU components of total
compensation are based upon annual performance goals, the LTIP awards
performance stock units over a three year period. Under the LTIP, net income for
1995 and shareholder return through the end of 1996 determine an award of RSUs
which does not vest until the end of 1997. The shareholder return component of
the LTIP seeks to further align executive performance with Stockholder
interests. The vesting component seeks to encourage the retention of talented
executives, particularly if the Company's net income and stock price for 1995
and 1996 result in a meaningful award.
In determining overall Executive Officer compensation for 1995, the
Committee also considered a number of business factors and conditions. The
Committee recognized that significant progress had been made in the area of
expense reduction, for personnel and nonpersonnel related costs, without a
negative impact on operating results. In fact, net income for fiscal 1995 was up
by approximately 100% over annualized 1994 net income. The Committee also
recognized that 1995 continued to present special challenges to the management
of the Company arising from the spin-off from American Express in mid 1994 and
the resulting financial, regulatory and reporting issues and organizational
changes that continued to be addressed. In addition, the Committee reviewed
compensation provided in the prior year, along with estimates of compensation
for the current year, for the companies comprising the peer group (the "Peer
Group") utilized for the Performance Graph on page 17. In making their
determinations, the Committee had available to it third-party advisors
knowledgeable of industry practices.
The Committee also utilized stock option awards to further encourage
Executive Officers to strive for long-term Stockholder value. The options were
awarded with exercise prices equal to fair market and vesting in four and
one-half years. Vesting accelerates ratably in thirds as the market price of the
Common Stock increases to levels well above the issuance price. The Committee
believes that options assist the Firm in maintaining a competitive compensation
program.
11
In establishing 1995 compensation for Richard S. Fuld, Jr., the Company's
Chairman and Chief Executive Officer, the Committee considered the following
performance factors (to which it did not assign any specific relative weights):
. Overseeing the improving financial performance of the Company.
. Developing further the Company's global franchise.
. Providing leadership for the Company's ongoing cost reduction initiatives.
. Restructuring businesses to complete the transition from a retail oriented
to institutional firm, in areas such as equities and retail brokerage.
. Presiding as Chairman of the Board of Directors, thereby ensuring that the
Board of Directors is advised of and consulted regarding all significant Company
matters.
In addition to these specific criteria, the Committee evaluated Mr. Fuld on
his contributions in building and maintaining an effective management team, and
in general, on initiatives taken to build long-term Stockholder value for Lehman
Brothers.
On the general criteria of leadership, management and governance, it is the
Committee's judgment that Mr. Fuld's 1995 performance was above expectations. In
addition, the actual financial results of the Company for 1995 were higher than
for 1994. Since the major portion of Mr. Fuld's compensation is based on
financial results, his 1995 compensation reflects an increase from 1994.
Section 162(m) of the Internal Revenue Code limits the tax deductibility of
compensation in excess of $1 million unless the payments are made under
qualifying performance-based plans. For the compensation year ending December
31, 1995, these procedures were adhered to. While the Committee currently seeks
to maximize the deductibility of compensation paid to named Executive Officers,
it will maintain flexibility to take other actions which may be based on
considerations other than tax deductibility.
COMPENSATION AND BENEFITS COMMITTEE:
John D. Macomber
Dina Merrill
Governor Malcolm Wilson
January 18, 1996
COMPENSATION AND BENEFITS COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year John D. Macomber, Dina Merrill and
Malcolm Wilson served on the Committee. None of these individuals has ever
served as an officer or employee of the Firm.
12
EXECUTIVE COMPENSATION
The following table shows, for the calendar years ending December 31, 1995,
1994 and 1993, as applicable, the cash and other compensation paid or accrued
and certain long-term awards made to the Named Executives for services in all
capacities. None of the Named Executives was an executive officer of the Company
prior to 1993. Mr. Cecil was hired in January of 1994 and was not an Executive
Officer of the Company in 1993.
SUMMARY COMPENSATION TABLE
[CAPTION]
LONG-TERM COMPENSATION
AWARDS PAYOUTS
ANNUAL COMPENSATION
LONG- ALL
OTHER RESTRICTED TERM OTHER
ANNUAL STOCK OPTIONS/ INCENTIVE COMPEN-
NAME AND PRINCIPAL POSITIONS COMPEN- AWARDS SARS PAYOUTS SATION
AT DECEMBER 31, 1995 YEAR SALARY ($) BONUS ($) SATION ($) ($)(a) (# SHARES) ($) ($)(b)
R. S. Fuld, Jr................... 1995 750,000 1,450,000 0 2,750,010 400,000 0 7,556
Chairman and Chief Executive
Officer 1994 750,000 675,000 85,093 2,375,000 317,004 858,529 8,562
1993 400,000 8,425,000 175,883 0 0 74,710 5,026
T. C. Pettit..................... 1995 600,000 1,400,000 0 2,499,995 325,000 0 4,838
President and Chief Operating
Officer 1994 600,000 637,500 50,947 2,062,500 195,567 649,277 9,144
1993 300,000 6,800,000 122,272 0 0 0 908
J. L. Cecil...................... 1995 450,000 1,787,500 0 1,203,131 200,000 0 0
Chief Administrative Officer 1994 432,692 1,167,308 80,000 820,000 80,000 0 0
T. A. Russo...................... 1995 450,000 552,500 0 371,873 100,000 0 0
Chief Legal Officer 1994 450,000 825,000 8,438 325,000 75,120 107,529 0
1993 250,000 1,550,000 20,250 0 0 0 0
R. Matza......................... 1995 450,000 487,500 0 328,127 100,000 0 568
Chief Financial Officer 1994 450,000 450,000 7,712 300,000 83,479 98,279 512
1993 200,000 1,550,000 18,509 0 0 0 461
(a) 1995 amounts represent RSUs awarded under the Company's 1994 Management Ownership Plan
on December 31, 1995. Eighty percent of these RSUs vest on July 1, 1996, and the
remaining twenty percent vest on July 1, 2000. Each vested RSU converts to one share of
Common Stock on July 1, 2000. RSUs cannot be sold or transferred until they convert to
Common Stock on July 1, 2000. The value indicated above reflects the market price of the
underlying Common Stock shares, based on the midyear price of the Company's Common Stock
($19.75), the undiscounted payment price for the 1995 RSUs. Dividend equivalents in RSUs
are payable to the extent and on the same date as dividends are paid on all other Common
Stock shares. The number of RSUs paid to date for 1994 and 1995 (including dividend
equivalents paid thereon) to Messrs. Fuld, Pettit, Cecil, Russo, and Matza, is: 301,130,
(161,889 in 1994; 139,241 in 1995); 267,170 (140,588 in 1994; 126,582 in 1995); 108,633
(47,715 in 1994; 60,918 in 1995); 40,982 (22,153 in 1994; 18,829 in 1995); and 37,063
(20,449 in 1994; 16,614 in 1995); and the total value of the RSUs for 1994 and 1995
using a 1995 year end price of $21.25 is $6,399,013, $5,677,363, $2,308,451, $870,868
and $787,589.
(b) Amounts reported under "All Other Compensation" for 1995 consist of the dollar value of
above-market earnings on deferred compensation. Included are credits to compensation
deferred pursuant to the Executive and Select Employees Plan which was established in
1985 and Lehman Brothers Kuhn Loeb Deferred Compensation Plans, which were established
in 1977 and 1980.
13
The following table contains information concerning the grant of
nonqualified stock options in 1995 to the named executives:
OPTION/SAR GRANTS IN 1995
INDIVIDUAL GRANTS
PERCENT OF
TOTAL
OPTIONS/SARS
NUMBER OF GRANTED TO GRANT DATE
OPTIONS/SARS EMPLOYEES IN EXERCISE PRICE EXPIRATION PRESENT
NAME GRANTED(a) 1995 ($/PER SHARE) DATE VALUES($)(b)
---- ------------ ------------ -------------- ---------- ------------
R. S. Fuld, Jr................ 400,000 15.84% $20.875 10/24/00 $ 1,396,000
T. C. Pettit.................. 325,000 12.87% $20.875 10/24/00 $ 1,134,250
J. L. Cecil................... 200,000 7.92% $20.875 10/24/00 $ 698,000
T. A. Russo................... 100,000 3.96% $20.875 10/24/00 $ 349,000
R. Matza...................... 100,000 3.96% $20.875 10/24/00 $ 349,000
- ------------
(a) Granted on October 25, 1995. These options have a five-year term and will become
exercisable in four and one-half years. The options also become exercisable in one-third
increments when the closing price of the Common Stock on the NYSE reaches $26, $28 and
$30, for 30 consecutive trading days.
(b) These values were calculated using the Black-Scholes option pricing model. The
Black-Scholes model is a mathematical formula which is widely used and accepted for
valuing traded stock options. The model is premised on immediate exercisability and
transferability of the options. This is not true for the Company's options granted to
Executive Officers. Therefore, certain discounting assumptions about the time of
exercise and risk of forfeiture were applied, as indicated below. Any estimated value
will depend on the market value of the Common Stock at a future date. The values shown
were calculated using the following assumptions: the exercise price is equal to 100% of
the closing price of the Common Stock on October 25, 1995; the expected dividend rate is
$0.20 per share, per year based on the Company's actual regular quarterly dividends of
$.05; the risk-free rate of return equal to the yield for the U.S. Treasury strip
security with a maturity date closest to the expiration date of the option grant; and
expected stock price volatility used is the historic volatility of the Peer Group (see
page 17). In addition, the assumed option term of the awards reflects the likelihood of
exercise before the expiration of the maximum term. Stock options such as these with a
five year term are assumed to be exercised in three years. The adjustment for
non-transferability or risk of forfeiture during the vesting period is 10% per annum.
The following table sets forth information concerning LTIP awards made in
1995 to the Executive Officers.
LONG-TERM INCENTIVE PLANS--AWARDS IN 1995
MINIMUM TARGET PERFORMANCE OR
NUMBER NUMBER OF OTHER PERIOD UNTIL
NAME OF UNITS (#) UNITS (#) MATURATION OR PAYOUT
---- ------------ --------- ------------------------
R.S. Fuld, Jr............................... 0 90,975 1/1/95 through 12/31/97
T.C. Pettit................................. 0 85,975 1/1/95 through 12/31/97
J.L. Cecil.................................. 0 62,780 1/1/95 through 12/31/97
T.A. Russo.................................. 0 26,390 1/1/95 through 12/31/97
R. Matza.................................... 0 26,390 1/1/95 through 12/31/97
- ------------
(a) Consistent with compensation practices in the securities industry, Performance Stock
Units ("PSUs") will be awarded based on the Company's 1995 profitability and the total
return to Stockholders (which includes dividends and stock price appreciation) from
January 1, 1995 through December 31, 1996. Stockholder return must average at least
11.7% per year before any units are earned, and must average 20.5% for 100% of the above
target units to be earned. Total awards may exceed 100% if higher Stockholder return
levels are achieved. PSUs earned, if any, will convert to RSUs on December 31, 1996 and
vest on December 31, 1997.
14
The following table shows the number of shares of the Common Stock
represented by outstanding stock options held by each of the Executive Officers
as of December 31, 1995. The exercise price of a portion of the options
represented by these shares was lower than the closing price of the Common Stock
at year-end, and thus some of these options were "in-the-money" as of such date.
During 1995, none of the Executive Officers exercised any of the Company's stock
options.
AGGREGATED OPTION/SAR EXERCISES IN 1995 AND
YEAR-END 1995 OPTION/SAR VALUES
NUMBER OF SECURITIES UNDERLYING
OUTSTANDING OPTIONS
AS OF DECEMBER 31, 1995
--------------------------------------------------------
VALUE OF UNEXERCISED
IN-THE-MONEY OPTIONS
AT DECEMBER 31, 1995 (a)
--------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -----------
R. S. Fuld, Jr............................... 164,790 552,214 $535,567.50 $644,695.50
T. C. Pettit................................. 69,459 449,508 $225,741.75 $526,526.00
J. L. Cecil.................................. 26,666 253,334 $ 86,664.50 $248,335.50
T. A. Russo.................................. 25,039 150,081 $ 81,376.75 $200,263.25
R. Matza..................................... 33,612 149,867 $109,239.00 $199,567.75
- ------------
(a) The value represents the excess of $21.25, the closing price of the Common Stock on
December 29, 1995 on the NYSE, over the exercise prices of these options.
PENSION BENEFITS
Lehman Brothers Holdings Inc. Retirement Plan (the "Holdings Retirement
Plan") is a funded, qualified, noncontributory, integrated, defined benefit
pension plan covering eligible employees.
All employees of the Company or a designated subsidiary who have attained
the age of 21 and completed one year of service are generally eligible to
participate in the Holdings Retirement Plan. The Holdings Retirement Plan
formula provides for an annual retirement benefit payable at age 65, calculated
as a straight life annuity. Pensionable earnings are total Form W-2 earnings
(plus elective deferrals under the Lehman Brothers Holdings Inc. Tax Deferred
Savings Plan and certain other health plan deferral amounts) up to the Internal
Revenue Service maximum of $150,000 in 1995 and 1996. For each year of plan
participation prior to 1989, the annual accrual was based on percentages of
pensionable earnings up to and in excess of the social security taxable wage
base. After 1988 the annual accrual is equal to one percent of pensionable
earnings up to the average Social Security taxable wage base plus 1.65% of
pensionable earnings in excess of the average taxable wage base. Generally,
participants have a non-forfeitable right to their accrued benefits upon
completing five years of vesting service. As of January 1, 1996, the estimated
annual projected benefits payable upon retirement at a normal retirement age of
65 for Messrs. Fuld, Pettit, Cecil, Russo and Matza are $92,888, $84,115,
$51,143, $32,134 and $89,451, respectively.
15
EMPLOYMENT CONTRACTS AND OTHER ARRANGEMENTS
WITH EXECUTIVE OFFICERS
Pursuant to its authority to accelerate the vesting and waive transfer
restrictions for grants of RSUs under the Management Ownership Plan, in 1994 the
Committee determined to accelerate the vesting and transfer restrictions of the
RSUs received by the Executive Officers (and made comparable provisions for all
other employees) in the event of a Hostile Change of Control, which generally
means a tender offer, acquisition of 20% of the Company's voting securities or a
change of a majority of the incumbent Board of Directors, in each case without
the prior approval of a majority of the independent members of the incumbent
Board of Directors. To the extent there is a Change of Control which is not
Hostile, then the RSU would be cashed-out but the difference between the
acquisition price and the RSU value at grant would be deferred for the shorter
of two years or the term of any remaining restrictions and the conditions of the
original RSU grant would govern the deferred amounts. Comparable arrangements
were implemented for options and restricted stock held by the Executive Officers
and all other employees. In addition, under a Cash Awards Plan, if a Change of
Control occurs within six months after a grant of RSUs, then the Chief Executive
Officer and President receive a payment equal to 350% of their previous annual
cash compensation, the Chief Administrative Officer shall receive 300% and the
other CMC members shall receive 200%.
16
PERFORMANCE GRAPH
The performance graph below compares the performance of the Company's Common
Stock for each fiscal quarter following the May 31, 1994 spin-off from American
Express, with that of the S&P 500 Index and the Company's Peer Group (Morgan
Stanley Group Inc., The Bear Stearns Companies Inc. and Salomon Inc.). The graph
assumes $100 is invested in the Company's Common Stock on May 31, 1994, using
the closing price of $18, and that all dividends were reinvested.
TOTAL RETURN PERFORMANCE
150 --- S&P 500 INDEX
140 --- LEHMAN BROTHERS
HOLDING INC.
130
120
110 --- PEER GROUP
100
90
80
5/31/94 8/31/94 11/30/94 2/28/95 5/31/95 8/31/95 11/30/95 2/15/96
5/31/94 8/31/94 11/30/94 2/28/95 5/31/95 8/31/95 11/30/95 2/15/96
------- ------- -------- ------- ------- ------- -------- -------
Lehman Brothers Holdings
Inc.......................... 100.00 90.97 83.61 101.94 111.25 133.06 127.78 142.36
S&P 500....................... 100.00 104.91 100.85 108.97 119.73 126.76 137.05 145.65
Peer Group.................... 100.00 97.40 83.05 93.12 105.81 111.37 112.19 121.30
CERTAIN TRANSACTIONS AND AGREEMENTS WITH DIRECTORS
AND EXECUTIVE OFFICERS
In the ordinary course of business, the Firm from time to time engages in
transactions with other corporations or financial institutions whose officers or
Directors are also officers or Directors of the Company. Transactions with such
corporations and financial institutions are conducted on an arm's length basis
and may not come to the attention of the Directors or officers of the Company or
of the other corporations or financial institutions involved.
From time to time, Executive Officers and Directors of the Company and their
associates may be indebted to the Company or its subsidiaries under lending
arrangements offered by those companies to
17
the public. For example, such persons may be indebted to LBI or its
subsidiaries, as customers, in connection with margin account loans, revolving
lines of credit and other extensions of credit. Such indebtedness is in the
ordinary course of business, is substantially on the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and does not involve a more than normal risk of
collectibility or present other unfavorable features. In addition, such
Executive Officers, Directors and associates may engage in transactions in the
ordinary course of business involving other goods and services provided by the
Firm, such as investments services, limited partnership interests and financial
counseling, on terms similar to those extended to employees of the Company
generally. From time to time since the beginning of the 1995 fiscal year, the
Company, through certain of its subsidiaries, in the ordinary course of business
has provided investment, financial advisory and other services to certain
corporations and entities (i) with which its Directors and prior Directors are
affiliated and (ii) which may be 5% or greater Stockholders.
Dina Merrill, a Director of the Company, had an indemnity agreement with The
E.F. Hutton Group Inc., now called LB I Group Inc. ("Group"), providing for her
indemnification for actions taken or omitted to be taken in her capacity as a
Director of such company. Ms. Merrill also is covered by certain undertakings of
Holdings regarding continued indemnification of and liability insurance for
former officers and Directors of Group which undertakings are contained in the
agreement pursuant to which the Company acquired Group.
In April 1995, the Company entered into a one year consulting agreement with
Henry Kaufman & Company, Inc. ("HK Company") pursuant to which HK Company
provides, upon request, advice to the Company on global initiatives, economic
forecasts and other matters. HK Company receives a consulting fee of $12,500 per
month. Henry Kaufman, a Director of the Company, is a principal of HK Company.
Lehman Brothers Capital Partners II, L.P. ("Capital Partners II") is a
limited partnership established in 1988 to provide senior officers and other
employees of the Firm with the opportunity to invest in a portfolio of various
investment opportunities on a leveraged basis. Directors of the Company also
were given an opportunity to invest in Capital Partners II. During 1995, Messrs.
Fuld, Pettit, Matza, Berlind and Wilson received $843,776, $168,755, $210,944,
$1,265,664 and $168,755 respectively, which amounts reflect income distributions
related to the liquidation of assets in Capital Partners II.
Lehman Brothers Capital Partners III is a limited partnership established in
1995 to provide senior officers and other employees, consultants and directors
of the Firm with the opportunity to invest in a portfolio of investment
opportunities. The partnership may enter into high risk investment opportunities
of all kinds in all markets globally. Each of the Executive Officers and Messrs.
Berlind, Kaufman, Macomber and Wilson are limited partners in the partnership.
The Company as general partner is making a capital contribution to the
partnership of up to $200 million and the limited partners are contributing an
aggregate of $25 million. The amount of the general partner's capital
contribution, together with a preferred rate of return, will generally be
distributed to the general partner before any distributions are made to the
limited partners. As a result, the limited partners may not receive a return of
any of their capital. After the general partner has received its capital
contribution and preferred return, any subsequent profits are divided 90% to the
limited partners and 10% to the general partner.
CERTAIN TRANSACTIONS AND AGREEMENTS WITH AMERICAN EXPRESS AND SUBSIDIARIES
American Express has invested $29.4 million in two merchant banking
partnerships in which subsidiaries of the Company act as general partner, and
American Express received partnership distributions in an aggregate amount of
$12.6 million in respect of these investments in 1995.
18
Lehman Brothers Financial Resource Accounts include, as one of the features
of the integrated financial services accounts, the Gold Card, issued by American
Express Travel Related Services Company, Inc. ("TRS"), for which LBI pays TRS a
portion of the fees received from the holders. LBI and TRS agreed in May 1994 to
extend such arrangements for a three-year period on an exclusive basis. TRS also
provides the Corporate Card to employees of the Company, for which TRS receives
annual fees. In January 1994, the Company agreed to consolidate all its business
travel reservations through TRS' Travel Center in Omaha. LBI and TRS agreed in
May 1994 to extend such arrangements with respect to the Corporate Card and
travel services for 5 years, with TRS as the sole provider of such services.
In August 1990, American Express agreed to guarantee certain payments to
employees who were then active employees of the Company under certain deferred
compensation programs. As of September 30, 1995, deferred compensation with an
aggregate balance of approximately $141 million was covered by this guarantee.
The Company pays American Express an annual fee equal to 0.625% on approximately
two thirds of the outstanding balance under such deferred compensation plans, in
consideration of American Express maintaining the guarantee, which is scheduled
to expire in August 2000.
On June 28, 1991, Lehman sold its subsidiary, The Balcor Company, to a
wholly owned subsidiary of American Express. In connection therewith, there
remains an interest bearing note with a principal amount of $208 million at
January 31, 1996 with a maturity of June 2000, payable by American Express to
the Company. Portions of this note will be prepaid by American Express prior to
such date in proportion to the Company's payments and prepayments on any
indebtedness related to the World Financial Center.
The Firm, from time to time, provides investment banking, commercial paper
placement, brokerage and various other financial services such as repurchase
transactions, investment advisory, strategic advisory and derivative products to
American Express and its subsidiaries, including acting as placement agent for
medium-term notes, dealer for commercial paper and advisor regarding certain
dispositions. The Firm, American Express and its subsidiaries also engage in the
ordinary course of business in various trading and short-term funding
transactions, including foreign exchange and precious metals transactions.
American Express and its subsidiaries provide travel, banking and other services
to the Firm. All of these transactions are done on an arms-length basis with
customary fees.
TAX ALLOCATION AGREEMENT
The Company and American Express entered into an Agreement (the "Tax
Allocation Agreement") providing for the allocation and settlement of their
respective federal, state and local income tax liabilities and detailing the
procedures that determine the payments to be made to or by the Company with
respect to those liabilities, including payments with respect to adjustments to
tax liabilities resulting from audits or other proceedings with respect to taxes
for taxable periods for which the Company or its subsidiaries were included in a
consolidated federal or combined state or local income tax return with American
Express. The Company's share of federal tax liabilities will generally be based
on its tax liability determined as if the Firm filed federal income tax returns
as a separate taxpayer. The Company will be given credit for additional tax
benefits American Express can use in its consolidated federal income tax return,
provided that it will be subject to any consolidated limitations, as adjusted,
that affect American Express, and, if these limitations apply, the Company's
benefits will be considered to be used after the benefits of other members of
the American Express consolidated group. American Express will control the
filing and content of all consolidated and unitary tax returns which include the
Firm, including all determination whether to file amended returns or claims for
refund. Effective June 1, 1994, the Company files its own consolidated federal
income tax return as well as separate combined state and local returns.
19
WORLD FINANCIAL CENTER
LBI and Lehman Commercial Paper Inc. (collectively, the "LB Co-tenants"),
are co-tenants together with American Express and certain of its subsidiaries
(the "AXP Co-tenants" and, together with the LB Co-tenants, the "Co-tenants") of
the leasehold interest in 3 World Financial Center in New York City (the
"Property"). The Co-tenants' relationship with respect to the Property is
governed by an Agreement of Tenants-In-Common. The agreement provides, among
other things, that each Co-tenant is obligated to pay its proportionate share of
all Property obligations and limits the actions that may be taken by individual
Co-tenants. The Co-tenants issued approximately $649 million aggregate original
principal amount, and American Express issued $175 million original principal
amount (a portion of which was re-loaned to the LB Co-tenants) of long-term debt
to finance the Property, in a series of notes with various financial terms and
maturities through the year 2000. The LB Co-tenants are liable, on a limited
recourse basis, for their proportionate share of the debt issued by the
Co-tenants, which share at January 31, 1996 amounts to approximately $279
million and has been guaranteed by American Express. Certain of the debt issued
by the Co-tenants is secured by a first and/or second mortgage granted on the
interest of the Co-tenants as tenants-in-common in the Property.
CERTAIN TRANSACTIONS AND AGREEMENTS WITH NIPPON LIFE
The Company, American Express and Nippon Life entered into a Business
Association Agreement in 1987. The Company and Nippon Life have conducted
certain personnel exchanges pursuant to such agreement.
On October 3, 1988, the Company entered into a loan agreement with Nippon
Life and borrowed Yen 5,000,000,000 maturing October 5, 1998. The Company has
given Nippon Life notice that it will prepay this borrowing on April 5, 1996.
This borrowing was used to meet the Company's general funding requirements.
Interest on any advance outstanding under the loan is paid at a rate of 5.5% per
annum. Nippon Life invested $137 million in a merchant banking partnership in
which a subsidiary of the Company acts as general partner. Nippon Life has
received partnership distributions in an aggregate amount of $70.7 million in
respect of this investment for 1995.
The Company's relationship with Nippon Life also provides the Company with
access to numerous Asian institutions for private placements and underwritings.
The Firm from time to time engages in certain trading activities, including
securities lending arrangements, with Nippon Life in return for commissions and
fees which are negotiated on an arm's-length basis.
Each of the Company and Nippon Life owns 50% of the outstanding capital
stock of PanAgora Asset Management Inc. ("PanAgora") and PanAgora Asset
Management Limited ("PanAgora Ltd."), both asset management companies. Nippon
Life and the Company also are parties to an agreement regarding the cooperation
and management of PanAgora and PanAgora Ltd.
AGREEMENT AMONG THE COMPANY, AMERICAN EXPRESS AND NIPPON LIFE
Pursuant to a 1987 Investment Agreement as amended in 1990, Nippon Life has
the right to nominate, and American Express will vote its shares of Voting Stock
for, two Directors to the Company's Board of Directors, one of whom will serve
on the Finance Committee of the Board of Directors, (provided however that
American Express must vote its shares of Preferred Stock in the same manner as
other Stockholders). These rights continue so long as Nippon Life owns shares of
Voting Stock, with a value (as determined in accordance with the Investment
Agreement) equal to not less than two-thirds of the aggregate purchase price of
the Series A Preferred Stock ($508.3 million), as adjusted (the "Investor's
Minimum Investment"). Except to the extent Nippon Life may participate in the
20
management of the Company through its nominees, Nippon Life has agreed that it
will not, alone or in concert with any other person, seek to affect or influence
the control of the management or business operations of the Company. Voting
Stock means all securities issued by the Company having the ordinary power to
vote in the election of Directors of the Company, other than securities having
such power only upon the occurrence of a default or any other extraordinary
contingency. Nippon Life has, so long as it owns the Investor's Minimum
Investment, the right to purchase a pro rata share (based on its then current
percentage equity interest in the Company) of any voting equity security or any
securities convertible into or exchangeable for shares of voting equity
securities issued by the Company (excluding shares of any such security offered
pursuant to the Company's employee benefit plans, dividend reinvestment plans
and other offerings other than for cash).
PROPOSAL 2
RATIFICATION OF THE COMPANY'S SELECTION
OF ITS AUDITORS
The Board of Directors recommends to the Stockholders that they ratify the
selection of Ernst & Young LLP, independent auditors, to audit the accounts of
the Firm for fiscal year 1996.
The affirmative vote of the majority of Voting Stock present in person or by
proxy at the meeting is required to ratify the selection of auditors. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions will be counted and will have the same effect as
a vote against the proposal. Broker non-votes will have no impact on such matter
since they are not considered "shares present" for voting purposes.
In the event that the Stockholders fail to ratify the appointment, the Board
of Directors will consider it a direction to select other auditors for the
subsequent year. Even if the selection is ratified, the Board of Directors, in
its discretion, may direct the appointment of a new independent accounting firm
at any time during the year if the Board feels that such a change would be in
the best interests of the Company and its Stockholders.
A representative of Ernst & Young LLP will be present at the Annual Meeting
and will have the opportunity to make a statement if he or she desires to do so
and will be available to respond to appropriate questions.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 2.
PROPOSAL 3
APPROVAL OF 1996 MANAGEMENT OWNERSHIP PLAN
The Board of Directors (the "Board") adopted on January 30, 1996, subject to
approval by the Company's Stockholders, the Lehman Brothers Holdings Inc. 1996
Management Ownership Plan (the "1996 Plan" or the "Plan"). Features of the 1996
Plan are outlined below, but the outline is qualified in its entirety by
reference to the full text of the 1996 Plan itself, which is attached hereto as
Appendix A. Stockholder approval of the 1996 Plan is highly recommended by the
Board of Directors in order to permit the Company to continue to compensate
senior officers in part with RSUs and other stock-based awards instead of cash.
RSUs and other stock-based awards provide an incentive to management to continue
to work for the financial success of the Company and encourage management to
remain with the Company. Stockholder approval also will permit the Company to
maintain the tax-deductible status of any RSUs and other stock-based awards to
the Company's Chief Executive Officer and any other Executive Officers. The 1996
Plan has been designed to permit it to be administered to grant
21
"performance-based" awards to Executive Officers which are intended to qualify
for tax deductibility under Section 162(m) of the Internal Revenue Code (the
"Code").
The 1996 Plan will be administered by the Committee, which is currently
comprised exclusively of Non-employee Directors. The 1996 Plan provides for the
granting of incentive and non-qualified stock options, stock appreciation rights
("SARs"), and other stock based awards including, restricted stock, RSUs and
performance stock units (collectively or individually, "Awards"). The Committee
has discretion to select the individuals to whom Awards will be granted and to
determine the type, size and terms of each Award and the authority to
administer, construe and interpret the 1996 Plan. Awards may be issued to
members of the CMC, members of the Operating Committee or employees holding the
title Managing Director or any title senior thereto. As of January 31, 1996,
approximately 350 individuals were eligible to participate in the 1996 Plan.
The Board believes that adoption of the Plan will provide the Company with
an effective means of retaining, attracting and motivating senior officers of
the Company and its subsidiaries whose performance is of great importance to the
continued development of the Company. The Plan, in the judgment of the Board,
will enhance the Company's position in the highly competitive market for talent
by offering senior management the ability to participate in the growth of the
Company in a meaningful way.
A total of ten million shares of Common Stock may be subject to Awards under
the 1996 Plan, subject to adjustment in accordance with the terms of the 1996
Plan. The ten million shares of Common Stock issuable under the 1996 Plan may be
either authorized but unissued shares, or treasury shares or any combination
thereof. If any shares of Common Stock subject to repurchase or forfeiture
rights are reacquired by Holdings or if any Award is canceled, terminates or
expires unexercised, the shares of Common Stock which were issued or would have
been issuable pursuant thereto will become available for new Awards. No
individual may receive options, SARs or other stock-based Awards during a
calendar year attributable to more than one million shares of Common Stock,
subject to adjustment in accordance with the terms of the 1996 Plan.
An individual to whom an Award is made has no rights as a stockholder with
respect to any Common Stock issuable pursuant to the Award until the date of
issuance of the stock certificate for such shares upon payment of the Award.
Set forth below are the types of awards which may be granted under the 1996
Plan.
Stock Options. A stock option, which may be a non-qualified or an incentive
stock option (each, an "Option"), is the right to purchase a specified number of
shares of Common Stock at a price (the "Option Price") fixed by the Committee.
The Option Price of an incentive Option may be no less than the fair market
value of the underlying Common Stock on the date of grant.
Unless otherwise provided in the Optionee's award agreement, options are not
transferable during the Optionee's lifetime and generally will expire not later
than ten years after the date on which they are granted. Options become
exercisable at such times and in such installments as the Committee shall
determine. The Committee may also accelerate the period for exercise of any or
all Options held by an Optionee. Payment of the Option Price must be made in
full at the time of exercise in cash, by tendering to the Company Common Stock
having a fair market value equal to the Option Price, or, if authorized by the
Committee, by certain withholding methods which constitute a cashless exercise
or by pledging shares of Common Stock as security for a loan to pay the exercise
price or by other means that the Committee deems appropriate. The Committee may,
at the time of the grant of an Option or thereafter, grant a Limited Right,
defined as a right to surrender to Holdings all or a portion of the related
Option in connection with a Change in Control. In exchange for such surrender,
the Optionee would receive cash in an amount equal to the number of shares
subject to the Option multiplied by the excess of the higher of (i) the highest
price per share of Common Stock paid in certain Change in Control transactions
or (ii) the highest fair market value per share of Common Stock at any time
during the
22
90-day period preceding such a Change in Control over the Option Price of the
Option to which the Limited Right relates. A Limited Right can be exercised
within the 30-day period following a Change in Control. A Limited Right will
only be exercisable during the term of the related Option. A "Change in Control"
is deemed to occur when: (i) 20% or more of the combined voting power of
Holdings' voting securities is acquired in certain instances; (ii) individuals
who are members of Holdings' Board prior to the Change in Control cease, subject
to certain exceptions, to constitute at least a majority of such Board; or (iii)
Stockholders approve certain mergers, consolidations, reorganizations, a
liquidation of Holdings or an agreement for the sale or other disposition of all
or substantially all of the assets of Holdings.
Stock Appreciation Rights. A SAR may be granted alone or in tandem with
Options. Upon exercise, a stock appreciation right shall entitle the Participant
to receive from the Company an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over the per share grant or option price, as applicable (or
some lesser amount as the Committee may determine at the time of grant),
multiplied by the number of shares of Common Stock with respect to which the
stock appreciation right is exercised. Upon the exercise of a stock appreciation
right granted in connection with a stock option, the stock 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 a stock option granted
in connection with a stock appreciation right or the surrender of such stock
option, the stock appreciation right shall be canceled to the extent of the
number of shares as to which the stock option is exercised or surrendered. The
Committee shall determine whether the stock appreciation right shall be settled
in cash, Common Stock or a combination of cash and Common Stock. The Committee
may, at the time of the grant of a SAR unrelated to an Option or thereafter,
grant a Limited Right in tandem with the SAR which will operate in a manner
comparable to the Limited Rights described above under the caption "Stock
Options."
Other Stock-Based Awards. Other Awards of Common Stock and Awards that are
valued in whole or in part by reference to, or otherwise based on the Fair
Market Value of Common Stock (all such Awards being referred to herein as "Other
Stock-based Awards"), may be granted under the 1996 Plan in the discretion of
the Committee. Other Stock-based Awards shall be in such form as the Committee
shall determine, including without limitation, (i) the right to purchase shares
of Common Stock, (ii) shares of Common Stock subject to restrictions on transfer
until the completion of a specified period of service, the occurrence of an
event or the attainment of performance objectives, each as specified by the
Committee, and (iii) shares of Common Stock issuable upon the completion of a
specified period of service, the occurrence of an event or the attainment of
performance objectives, each as specified by the Committee. Other Stock-based
Awards may be granted alone or in addition to any other Awards made under the
Plan. Subject to the provisions of the Plan, the Committee shall have sole and
absolute discretion to determine to whom and when such Other Stock-based Awards
will be made, the number of shares of Common Stock to be awarded under (or
otherwise related to) such Other Stock-based Awards and all other terms and
conditions of such Awards. The Committee shall determine whether Other
Stock-based Awards shall be settled in cash, Common Stock or a combination of
cash and Common Stock.
With respect to any RSUs granted under the Plan, the obligations of the
Company or any Subsidiary are limited solely to the delivery of shares of Common
Stock on the date when such shares of Common Stock are due to be delivered under
each Agreement, and in no event shall the Company or any Subsidiary become
obligated to pay cash in respect of such obligation (except that the Company or
any Subsidiary may pay to Participants amounts in cash in respect of a
restricted stock unit equal to cash dividends paid to a holder of shares of
Common Stock).
The Committee shall establish the performance objectives that must be
attained in order for the Company to grant other Other Stock-based awards.
Accordingly, unless the Committee determines at the time of grant not to qualify
the award as performance based compensation under Section 162(m),
23
the performance objectives for awards made under the 1996 Plan will be based
upon one or more of the following criteria: (i) before or after tax net income;
(ii) earnings per share; (iii) book value per share; (iv) stock price; (v)
return on Stockholders' equity; (vi) the relative performance of peer group
companies; (vii) expense management; (viii) return on investment; (ix)
improvements in capital structure; (x) profitability of an identifiable business
unit or product; (xi) profit margins; (xii) budget comparisons; and (xiii) total
return to Stockholders. Participants who have primary responsibility for a
business unit of the Company may be measured on business unit operating profit,
business unit operating profit as a percent of revenue, and/or measures related
to business unit profitability above its cost of capital, in place of some or
all of the corporate performance measures. The Committee must certify as to the
attainment of the applicable performance goals prior to payment of any Other
Stock-based award, and may reduce the amount of any Other Stock-based award.
Additional Information. Under the 1996 Plan, if there is any change in the
outstanding shares of Common Stock by reason of any stock split, stock dividend,
combination, subdivision or exchange of shares, recapitalization, merger,
consolidation, reorganization or other extraordinary or unusual event, the
Committee shall direct that appropriate changes be made in the number or kind of
securities that may be issued under the 1996 Plan and in the terms of
outstanding Awards. The Committee may accelerate or waive vesting or exercise
periods or the lapse of restrictions on all or any portion of any Award or
extend the exercisability of Options or SARs.
Unless otherwise provided in an individual's award agreement, an
individual's rights under the 1996 Plan may not be assigned or transferred
(except in the event of death). The Company shall have the right to deduct from
all amounts paid to any Participant in cash (whether under the Plan or
otherwise) any taxes required by law to be withheld therefrom. In the case of
payments of Awards in the form of Common Stock, at the Committee's discretion,
the Participant may be required to pay to the Company the amount of any taxes
required to be withheld with respect to such Common Stock, or, in lieu thereof,
the Company shall have the right to retain the number of shares of Common Stock
the fair market value of which equals the amount required to be withheld.
Without limiting the foregoing, the Committee may, in its discretion and subject
to such conditions as it shall impose, permit share withholding to be done at
the Participant's election.
No awards may be granted on or after the tenth anniversary of the date of
the adoption of the 1996 Plan by Holdings. The Committee or the Board may amend,
suspend or terminate the 1996 Plan or any portion hereof at any time, provided
that no amendment shall be made without approval of the Stockholders which shall
(i) increase (except as provided in Section 14 hereof) the total number of
shares or the percentage of shares reserved for issuance pursuant to the Plan;
(ii) change the class of employees eligible to be participants; or (iii) extend
the date after which Awards cannot be granted under the 1996 Plan.
Certain Federal Income Tax Consequences of Options. Certain of the federal
income tax consequences to Optionees and their employers of Options granted
under the 1996 Plan should generally be as set forth in the following summary:
An employee to whom an incentive stock option ("ISO") which qualifies under
Section 422 of the Code is granted will not recognize income at the time of
grant or exercise of such Option. No federal income tax deduction will be
allowable to the employee's employer upon the grant or exercise of such ISO.
However, upon the exercise of an ISO, special alternative minimum tax rules
apply for the employee. When the employee sells such shares more than one year
after the date of transfer of such shares and more than two years after the date
of grant of such ISO, the employee will normally recognize a long-term capital
gain or loss equal to the difference, if any, between the sale prices of such
shares and the Option exercise price. If the employee does not hold such shares
for this period, when the employee sells such shares, the employee will
recognize ordinary compensation income and possibly capital gain or loss in such
amounts as are prescribed by the Code and regulations thereunder and the
24
employee's employer will generally be entitled to a federal income tax deduction
in the amount of such ordinary compensation income.
An individual to whom a non-qualified Option is granted will not recognize
income at the time of grant of such Option. When such optionee exercises such
non-qualified Option, the optionee will recognize ordinary compensation income
equal to the difference, if any, between the Option Price paid and the fair
market value, as of the date of Option exercise, of the share the optionee
receives. The tax basis of such shares to such optionee will be equal to the
Option Price paid plus the amount includable in the optionee's gross income, and
the optionee's holding period for such shares will commence on the day after
which the optionee recognized taxable income in respect of such shares. Subject
to applicable provisions of the Code and regulations thereunder, the employer of
such optionee will generally be entitled to a federal income tax deduction in
respect of non-qualified Options in an amount equal to the ordinary compensation
income recognized by the optionee. Any compensation includable in the gross
income of an employee in respect of a non-qualified Option will be subject to
appropriate federal, state, local and foreign income and employment taxes.
The discussion set forth above does not purport to be a complete analysis of
all potential tax consequences relevant to recipients of Options or their
employers or to describe tax consequences based on particular circumstances and
does not address Awards other than Options. It is based on federal income tax
law and interpretational authorities as of the date of this prospectus, which
are subject to change at any time.
The affirmative vote of the holders of a majority of all the shares of
Voting Stock present in person or by proxy at the Annual Meeting is required for
adoption of the proposal concerning the 1996 Plan, provided that the holders of
a majority of the outstanding shares of voting stock vote on the proposal. In
determining whether the proposal has received the requisite number of
affirmative votes, abstentions will be counted and will have the same effect as
a vote against the proposal. Broker non-votes will have no impact on such matter
since they are not considered "shares present" for voting purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 3
PROPOSAL 4
APPROVAL OF 1996 SHORT-TERM EXECUTIVE COMPENSATION PLAN
The Board of Directors (the "Board") adopted, on January 30, 1996, subject
to approval by the Stockholders, the 1996 Short Term Executive Compensation Plan
(the "1996 STEP" or the "STEP"). Features of the 1996 STEP are outlined below,
but the outline is qualified in its entirety by reference to the full text of
the 1996 STEP itself, which is attached hereto as Appendix B. The 1996 STEP
provides annual incentive awards to senior officers of the Firm and is being
submitted to Stockholders in an effort to meet the requirements for
deductibility by the Company under Section 162(m) of the Code. Future incentive
awards under the 1996 STEP are not currently determinable. However, incentive
awards granted in 1994 and 1995 to the Executive Officers under the 1994 STEP
would not have been increased had they been made under the 1996 STEP. Awards may
be issued to members of the CMC, members of the Operating Committee or employees
holding the title Managing Director or any title senior thereto. As of January
31, 1996, approximately 350 individuals were eligible to participate in the 1996
STEP.
Stockholder approval of the STEP is recommended by the Board in order to
permit the Company to maintain the tax-deductible status of certain annual
incentive bonus payments to the Executive Officers (described below as "Special
Bonuses") in compliance with Section 162(m) of the Code. Special Bonuses will be
contingent upon Stockholder approval and therefore, no such award will be paid
unless the Stockholders of the Company approve this proposal.
25
With such approval, the Company will continue to have an effective vehicle
to focus and motivate the annual performance of senior officers of the Firm,
offer such employees opportunities to attain competitive levels of compensation
and reward those senior officers who have contributed to the profitability of
the Company.
The purpose of the STEP is to motivate and reward executives by making a
significant portion of their annual bonuses directly dependent upon achieving
key strategic objectives. The plan provides the opportunity for the Executive
Officers to earn substantial incentive cash compensation for attaining financial
and operational objectives that are critical to the Company's ongoing growth and
profitability.
The 1996 STEP allows the Committee (or, in certain situations, its delegate)
to grant to certain employees of the Company annual awards of two
types--"Standard Bonuses" and "Special Bonuses" (each, a "Bonus").
A Standard Bonus may be granted in the discretion of the Committee or its
delegate to any employee. The amount of the Standard Bonus will be based on any
criteria the Committee or its delegate wishes to consider, including but not
limited to, the objective or subjective performance of the employee, the Company
or any subsidiary or division thereof. A Standard Bonus will be paid at the time
determined by the Compensation Committee or its delegate.
The 1996 STEP has been designed and will be administered to provide
"performance based" incentives as set forth under Section 162(m) of the Code. A
Special Bonus may be granted in the discretion of the Committee to any member of
the Company's Operating Committee or CMC who the Committee reasonably believes
may be a "Covered Employee," as defined in Section 162(m) of the Code. Section
162(m) limits the Company's deduction to $1 million per year per executive for
certain compensation paid to each of its Chief Executive Officer ("CEO") and the
four highest compensated executives other than the CEO. In general, the
regulations exclude from this limitation compensation that is calculated based
on "objective" performance criteria. The amount of any Special Bonus will be
based on objective performance goals established by the Committee. The
performance criteria for Special Bonuses made under the 1996 STEP will be based
upon one or more of the following criteria: (i) before or after tax net income;
(ii) earnings per share; (iii) book value per share; (iv) stock price; (v)
return on Stockholders' equity; (vi) the relative performance of peer group
companies; (vii) expense management; (viii) return on investment; (ix)
improvements in capital structure; (x) profitability of an identifiable business
unit or product; (xi) profit margins; (xii) budget comparisons; and (xiii) total
return to Stockholders. Participants who have primary responsibility for a
business unit of the Company may be measured on business unit operating profit,
business unit operating profit as a percent of revenue, and/or measures related
to business unit profitability above its cost of capital, in place of some or
all of the corporate performance measures. The Committee must certify as to the
attainment of the applicable performance goals prior to payment of any Special
Bonus, and may reduce the amount of any Special Bonus. All terms and conditions
of Special Bonuses, and the STEP provisions referring thereto, are intended to
be administered and interpreted in accordance with Section 162(m) of the Code,
to ensure the deductibility by the Company of the Special Bonuses.
The maximum amount of a Special Bonus under the STEP is 2.0% of the
consolidated pre-tax net income of the Company. The maximum amount need not be
awarded.
The Committee has the authority to determine in its sole discretion the
applicable performance period relating to any Bonus; provided, however, that any
such determination with respect to a Special Bonus shall be subject to any
applicable restrictions imposed by Section 162(m) of the Code. Initially, the
performance period for purposes of the 1996 STEP Plan is the 12-month period
ending December 31 each year. Bonuses may be paid, as soon as practicable after
certification of attainment of performance goals, where required, by the
Committee, in cash, stock, or a combination thereof. Payment may be deferred, in
part or whole, on a mandatory basis by the Committee or electively by
participants with Committee approval.
26
The affirmative vote of the holders of a majority of all the shares of
Common Stock present in person or by proxy at the Annual Meeting is required for
adoption of the proposal concerning the 1996 STEP. In determining whether the
proposal has received the requisite number of affirmative votes, abstentions
will be counted and will have the same effect as a vote against the proposal.
Broker non-votes will have no impact on such matter since they are not
considered "shares present" for voting purposes.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL NO. 4.
OTHER MATTERS
Management does not know of any business to be transacted at the meeting
other than as indicated herein. Should any such matter properly come before the
meeting for a vote, the persons designated as proxies will vote thereon in
accordance with their best judgment.
You are urged to sign, date and return the enclosed proxy in the prepaid
envelope provided for such purpose. It is hoped that registered Stockholders
will give us advance notice of their plans by marking the box provided on the
proxy card.
If you will need special assistance at the Annual Meeting because of a
disability please call the Corporate Secretary of the Company at (212) 526-1911.
Directions to the meeting are on the back page of this proxy statement.
DEADLINE FOR SUBMITTING PROPOSALS FOR NEXT YEAR'S MEETING. Stockholders who
intend to present proposals in connection with the Company's 1997 Annual Meeting
of Stockholders must submit their proposals to the Corporate Secretary of the
Company on or before October 30, 1996.
New York, New York
February 26, 1996
Karen C. Manson
Secretary
27
APPENDIX A
LEHMAN BROTHERS HOLDINGS INC.
1996 MANAGEMENT OWNERSHIP PLAN
SECTION 1--PURPOSE
The purpose of the Lehman Brothers Holdings Inc. 1996 Management Ownership
Plan (the "Plan") is to strengthen Lehman Brothers Holdings Inc. (the "Company")
by providing selected employees of the Company with the opportunity to acquire a
proprietary and vested interest in the growth and performance of the Company,
thus generating an increased incentive to contribute to the Company's future
success and prosperity, enhancing the value of the Company for the benefit of
Stockholders, and enhancing the Company's ability to attract and retain
individuals of exceptional talent.
The purposes of the Plan are to be achieved through the grant of various
types of stock-based awards.
SECTION 2--DEFINITIONS
For purposes of the Plan, the capitalized terms shall have the meanings
ascribed to them in Exhibit A hereof.
SECTION 3--SHARES SUBJECT TO THE PLAN
(a) Shares of Common Stock which may be issued under the Plan may be either
authorized and unissued shares of Common Stock or authorized and issued shares
of Common Stock held in the Company's treasury, or any combination thereof.
Subject to adjustment as provided in Section 14, the number of shares of Common
Stock with respect to which Awards (whether distributable in shares of Common
Stock or in cash) may be granted under the Plan shall be ten million shares. The
maximum number of shares of Common Stock available for stock options, stock
appreciation rights or other Stock-based Awards that may be granted to a
Participant during a calendar year shall not exceed one million.
(b) Notwithstanding the last sentence of Section 3(a), to the extent that
the number of shares of Common Stock with respect to which Awards may be granted
under the Plan in any calendar year exceeds the number of shares of Common Stock
with respect to which Awards were granted under the Plan during that calendar
year, such excess shall be available for grant under the Plan in succeeding
calendar years.
(c) In the event that any other Award subject to repurchase or forfeiture
rights is reacquired by the Company or if any Award is canceled, terminates or
expires unexercised (except with respect to a stock option which terminates on
the exercise of a stock appreciation right) for any reason under the Plan, any
Common Stock allocated in connection with such Award, shall thereafter again be
available for grant pursuant to the Plan.
SECTION 4--ELIGIBILITY
Members of the Corporate Management Committee and the Operating Committee
(and successor entities of such committees) and all Managing Directors and
officers holding a title senior to Managing Director are eligible to be
Participants in the Plan.
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SECTION 5--ADMINISTRATION
The Plan shall be administered by the Committee, which shall have the power
to select those Participants who shall receive Awards and to determine the terms
of such Awards. As to the selection of, and the terms of Awards granted to,
Participants who are not Executive Officers, the Committee may delegate any or
all of its responsibilities to officers or employees of the Company. With
respect to any "Covered Employee" (as such term is defined in Section 162(m) of
the Code), the Committee shall administer the Plan in such a manner as to comply
with the requirements for deductibility under Section 162(m) of the Code.
The Committee's authority hereunder shall include, without limitation, the
establishment of vesting schedules or exercisability in installments with
respect to Awards. The Committee may, in its sole discretion, accelerate or
waive vesting or exercise periods or the lapse of restrictions on all or any
portion of any Award, or extend the exercisability (including to extend or
provide for post-termination exercisability) of Stock Options or Stock
Appreciation Rights; provided that such exercisability shall not extend past ten
years from the date of grant of any incentive stock options.
Subject to the provisions of the Plan, the Committee shall be authorized to
interpret the Plan, to establish, amend, and rescind any rules and regulations
relating to the Plan, to determine the terms and provisions of any agreements
entered into hereunder, and to make all other determinations necessary or
advisable for the administration of the Plan. The Committee may correct any
defect, supply any omission or reconcile any inconsistency in the Plan or in any
Award in the manner and to the extent it shall deem desirable to carry the Plan
or any such Award into effect. The determinations of the Committee in the
administration of the Plan, as described herein, shall be final and conclusive.
The validity, construction and effect of the Plan and any rules and
regulations relating to the Plan shall be determined in accordance with the laws
of the State of Delaware and applicable Federal law.
SECTION 6--STOCK OPTIONS
(a) Any stock options granted under the Plan shall be in such form as the
Committee may from time to time approve and shall be subject to the terms and
conditions provided herein and such additional terms and conditions not
inconsistent with the terms of the Plan, as the Committee shall deem desirable.
(b) Stock options may be granted to any Participant. Each grant of stock
options shall specify whether the underlying options are intended to be
incentive stock options or non-incentive stock options. In the case of incentive
stock options, the terms and conditions of such grants shall be subject to and
comply with such requirements as may be prescribed by Section 422(b) of the
Code, as from time to time amended, and any implementing regulations, including,
but not limited to, the requirement that such stock options are exercisable
during the Participant's lifetime, only by such Participant. The Committee shall
establish the option price at the time each stock option is granted, which price
in the case of an incentive stock option shall not be less than 100 percent of
the Fair Market Value of the Common Stock on the date of grant.
(c) No stock options may be exercisable later than ten years after their
date of grant. The option price of each share of Common Stock as to which a
stock option is exercised shall be paid in full at the time of such exercise.
Such payment may be made at the sole discretion of the Committee, pursuant to
and in accordance with criteria and guidelines established by the Committee
(which criteria and guidelines may be different for Executive Officers and for
other Participants), as the same may be modified from time to time, (i) in cash,
(ii) by tender of shares of Common Stock already owned by the Participant,
valued at Fair Market Value as of the date of exercise, (iii) if authorized by
the Committee, by withholding pursuant to the election of the Participant, which
election is subject to the disapproval of the Committee, from those shares that
would otherwise be obtained upon exercise of the option a
29
number of shares having a Fair Market Value equal to the option price, (iv) if
authorized by the Committee, and in combination with services rendered by the
exercising Participant, 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 the Company to, (a) sell shares of Common Stock
subject to the option and to deliver promptly to the Company 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 the
Company the loan proceeds, at the time of exercise to pay the option price, (v)
by any combination of (i), (ii), (iii) or (iv) above or (vi) by other means that
the Committee deems appropriate.
(d) A stock option holder may, in the discretion of the Committee, have the
right (a "Limited Right") to surrender a Stock 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 of Common Stock under the option which are being
surrendered multiplied by (b) the excess of (i) the greater of (A) the highest
price per share of Common Stock paid in connection with the Change in Control or
(B) the highest Fair Market Value per share of Common Stock in the 90 day period
preceding such Change in Control, over (ii) the purchase price of the option as
set forth in the underlying option agreement.
SECTION 7--STOCK APPRECIATION RIGHTS
(a) Stock appreciation rights may be granted independent of any stock option
or in conjunction with all or any part of any stock option granted under the
Plan, either at the same time as the stock option is granted or at any later
time during the term of the option. Stock appreciation rights shall be subject
to such terms and conditions as determined by the Committee, not inconsistent
with the provisions of the Plan.
(b) Upon exercise, a stock appreciation right shall entitle the Participant
to receive from the Company an amount equal to the excess of the Fair Market
Value of a share of Common Stock on the date of exercise of the stock
appreciation right over the per share grant or option price, as applicable (or
such lesser amount as the Committee may determine at the time of grant),
multiplied by the number of shares of Common Stock with respect to which the
stock appreciation right is exercised. Upon the exercise of a stock appreciation
right granted in connection with a stock option, the stock 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 a stock option granted
in connection with a stock appreciation right or the surrender of such stock
option, the stock appreciation right shall be canceled to the extent of the
number of shares as to which the stock option is exercised or surrendered. The
Committee shall determine whether the stock appreciation right shall be settled
in cash, Common Stock or a combination of cash and Common Stock.
(c) A holder of a stock appreciation right 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 of Common
Stock 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 of
Common Stock paid in connection with the Change in Control or (B) the highest
Fair Market Value per share of Common Stock in the 90 day period preceding such
Change in Control, over (ii) the per share grant price of the stock appreciation
right as set forth in the underlying agreement.
30
SECTION 8--OTHER STOCK-BASED AWARDS
(a) Other Awards of Common Stock and Awards that are valued in whole or in
part by reference to, or otherwise based on the Fair Market Value of Common
Stock (all such Awards being referred to herein as "Other Stock-based Awards"),
may be granted under the Plan in the discretion of the Committee. Other
Stock-based Awards shall be in such form as the Committee shall determine,
including without limitation, (i) the right to purchase shares of Common Stock,
(ii) shares of Common Stock subject to restrictions on transfer until the
completion of a specified period of service, the occurrence of an event or the
attainment of performance objectives, each as specified by the Committee, and
(iii) shares of Common Stock issuable upon the completion of a specified period
of service, the occurrence of an event or the attainment of performance
objectives, each as specified by the Committee. Other Stock-based Awards may be
granted alone or in addition to any other Awards made under the Plan. Subject to
the provisions of the Plan, the Committee shall have sole and absolute
discretion to determine to whom and when such Other Stock-based Awards will be
made, the number of shares of Common Stock to be awarded under (or otherwise
related to) such Other Stock-based Awards and all other terms and conditions of
such Awards. The Committee shall determine whether Other Stock-based Awards
shall be settled in cash, Common Stock or a combination of cash and Common
Stock.
(b) With respect to any restricted stock units ("RSUs") granted under the
Plan, the obligations of the Company or any Subsidiary are limited solely to the
delivery of shares of Common Stock on the date when such shares of Common Stock
are due to be delivered under each Agreement, and in no event shall the Company
or any Subsidiary become obligated to pay cash in respect of such obligation
(except that the Company or any Subsidiary may pay to Participants amounts in
cash in respect of a restricted stock unit equal to cash dividends paid to a
holder of shares of Common Stock, for fractional shares or for any amounts
payable in cash upon the occurrence of a Change in Control).
(c) The Committee shall establish the performance objective that must be
attained in order for the Company to grant other Other Stock-based awards.
Accordingly, unless the Committee determines at the time of grant not to qualify
the award as performance based compensation under Section 162(m), the
performance objectives for awards made under the Plan will be based upon one or
more of the following criteria: (i) before or after tax net income; (ii)
earnings per share; (iii) book value per share; (iv) stock price; (v) return on
Stockholders' equity; (vi) the relative performance of peer group companies;
(vii) expense management; (viii) return on investment; (ix) improvements in
capital structure, (x) profitability of an identifiable business unit or
product; (xi) profit margins; (xii) budget comparison; and (xiii) total return
to Stockholders. Participants who have primary responsibility for a business
unit of the Company may be measured on business unit operating profit, business
unit operating profit as a percent of revenue, and/or measures related to
business unit profitability above its cost of capital, in place of some or all
of the corporate performance measures. The Committee must certify as to the
attainment of the applicable performance goals prior to payment of any Other
Stock-based awards and may reduce the amount of any Other Stock-based award.
SECTION 9--DIVIDENDS, EQUIVALENTS AND VOTING RIGHTS
Awards other than stock options may, at the discretion of the Committee,
provide the Participant with dividends or dividend equivalents and voting rights
prior to either vesting or earnout.
SECTION 10--AWARD AGREEMENTS
Each Award under the Plan shall be evidenced by an agreement setting forth
the terms and conditions, not inconsistent with the provisions of the Plan, as
determined by the Committee, which shall apply to such Award.
31
SECTION 11--WITHHOLDING
The Company shall have the right to deduct from all amounts paid to any
Participant in cash (whether under this Plan or otherwise) any taxes required by
law to be withheld therefrom. In the case of payments of Awards in the form of
Common Stock, at the Committee's discretion, the Participant may be required to
pay to the Company the amount of any taxes required to be withheld with respect
to such Common Stock, or, in lieu thereof, the Company shall have the right to
retain the number of shares of Common Stock the Fair Market Value of which
equals the amount required to be withheld. Without limiting the foregoing, the
Committee may, in its discretion and subject to such conditions as it shall
impose, permit share withholding to be done at the Participant's election.
SECTION 12--NON-TRANSFERABILITY
No Award shall be assignable or transferable, and no right or interest of
any Participant in any Award shall be subject to any lien, obligation or
liability of the Participant, except by will, the laws of descent and
distribution, or as otherwise set forth in the Award agreement.
SECTION 13-- NO RIGHT TO EMPLOYMENT OR CONTINUED PARTICIPATION IN PLAN/NO RIGHTS
AS STOCKHOLDERS
(a) No person shall have any claim or right to the grant of an Award, and
the grant of an Award shall not be construed as giving a Participant the right
to be retained in the employ of the Company or to be eligible for any subsequent
Awards. Further, the Company expressly reserves the right at any time to dismiss
a Participant free from any liability, or any claim under the Plan, except as
provided herein or in any agreement entered into hereunder.
(b) The grant of an Award shall not be construed as giving a Participant the
rights of a Stockholder of Common Stock unless and until shares of Common Stock
have been issued to Participants pursuant to Awards hereunder.
SECTION 14--ADJUSTMENT OF AND CHANGES IN COMMON STOCK
In the event of any change in the outstanding shares of Common Stock by
reason of any Common Stock dividend or split, recapitalization, merger,
consolidation, spin-off, combination or exchange of shares or other corporate
exchange, or any distribution to Stockholders of Common Stock other than regular
cash dividends, the Committee shall make a substitution or adjustment, to the
number or kind of shares of Common Stock or other securities issued or reserved
for issuance pursuant to the Plan, and to outstanding Awards, as well as the
option price or other affected terms of such Awards as in its judgment shall be
necessary to preserve the Participant's rights substantially proportionate to
the rights existing prior to such event.
Unless otherwise provided in an award agreement, after a merger of one or
more corporations into the Company or after a consolidation of the Company and
one or more corporations (a "Merger Event") in which the Company shall be the
surviving or resulting corporation, an Award holder shall, where applicable, at
the same cost, be entitled upon the exercise of an Award, to receive (subject to
any action required by Stockholders) such securities of the surviving or
resulting corporation as shall be equivalent to the shares underlying such Award
as nearly as practicable to the nearest whole number and class of shares of
stock or other securities.
Unless otherwise provided in an award agreement, if the Company enters into
any agreement with respect to any transaction which would, if consummated,
result in a Merger Event in which the Company will not be the surviving
corporation, the Committee in its sole discretion and without liability to any
person shall determine what actions shall be taken with respect to outstanding
Awards, if any, including, without limitation, the payment of a cash amount in
exchange for the cancellation of an
32
Award or the requiring of the issuance of substitute Awards that will
substantially preserve the value, rights and benefits of any affected Awards
previously granted hereunder as of the date of the consummation of the Merger
Event.
SECTION 15--AMENDMENT
The Committee or the Board may amend, suspend or terminate the Plan or any
portion hereof at any time, provided that no amendment shall be made without
approval of the Stockholders of the Company which shall (i) increase (except as
provided in Section 14 hereof) the total number of shares or the percentage of
shares reserved for issuance pursuant to the Plan; (ii) change the class of
Employees eligible to be Participants; or (iii) extend the date after which
Awards cannot be granted under the Plan.
SECTION 16--UNFUNDED STATUS OF PLAN
The Plan is intended to constitute an "unfunded" plan for long-term
incentive compensation. With respect to any payments not yet made to a
Participant, including any Participant optionee, by the Company, nothing herein
contained shall give any Participant any rights that are greater than those of a
general creditor of the Company. In its sole discretion, the Committee may
authorize the creation of trusts or other arrangements to meet the obligations
created under the Plan to deliver Common Stock or payments in lieu thereof or
with respect to options, stock appreciation rights and other Awards under the
Plan; provided, however, that the existence of such trusts or other arrangements
is consistent with the unfunded status of the Plan.
SECTION 17--EFFECTIVE DATE
Subject to approval of the Stockholders of the Company, in accordance with
Rule 16b-3 under the Securities Exchange Act of 1934, and Code Sections 162(m)
and 422, this Plan shall be effective on April 10, 1996. No Awards may be
granted under the Plan on or after January 10, 2006.
33
EXHIBIT A
(a) "Award" shall mean any type of stock-based award granted pursuant to the
Plan.
(b) "Board" shall mean the Board of Directors of the Company; provided,
however, that any action taken by a duly authorized committee of the Board
within the scope of authority delegated to such committee by the Board shall be
considered an action of the Board for purposes of this Plan.
(c) "Change in Control" shall mean the occurrence during the term of the
Plan of:
a) The commencement (within the meaning of Rule 14d-2 under the
Securities Exchange Act of 1934 (the "Exchange Act")) of a tender offer for
more than 20% of the Company's outstanding shares of capital stock having
ordinary voting power in the election of directors (the "Voting
Securities").
b) An acquisition (other than directly from the Company) of any voting
securities of the Company by any "Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the Exchange Act) immediately after
which such Person has "Beneficial Ownership" (within, the meaning of Rule
13d-3 promulgated under the Exchange Act) of 20% or more of the combined
voting power of the Company's then outstanding Voting Securities; provided,
however, in determining whether a Change in Control has occurred, Voting
Securities which are acquired in a "Non-Control Acquisition" (as hereinafter
defined) shall not constitute an acquisition which would cause a Change in
Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an
employee benefit plan (or a trust forming a part thereof or a trustee
thereof acting solely in its capacity as trustee) maintained by (A) the
Company or (B) any corporation or other Person of which a majority of its
voting power or its voting equity securities or equity interest is owned,
directly or indirectly, by the Company (for purposes of this definition, a
"Subsidiary"), (ii) the Company or its Subsidiaries, or (iii) any Person who
files in connection with such acquisition a Schedule 13D which expressly
disclaims any intention to seek control of the Company and does not
expressly reserve the right to seek such control; provided, however, that
any amendment to such statement of intent which either indicates an
intention or reserves the right to seek control shall be deemed an
"acquisition" of the securities of the Company reported in such filing as
beneficially owned by such Person for purposes of this paragraph (b).
c) The individuals who, as of the effective date of the 1994 initial
public trading in Company shares, are members of the Board (the "Incumbent
Board"), ceasing for any reason to constitute at least a majority of the
members of the Board; provided, however, that if the election, or nomination
for election by the Company's common Stockholders, of any new director was
approved by a vote of at least two-thirds of the Incumbent Board, such new
director shall, for purposes of this Plan, be considered as a member of the
Incumbent Board; provided further, however, that no individual shall be
considered a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened "Election
Contest" (as described in Rule 14a-11 promulgated under the 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; or
d) Approval by Stockholders of the Company of:
(i) A merger, consolidation or reorganization involving the Company,
unless such merger, consolidation or reorganization is a "Non-Control
Transaction;" i.e., meets each of the requirements described in (A), (B),
and (C) below:
(A) the Stockholders of the Company, immediately before such
merger, consolidation or reorganization, own, directly or indirectly
immediately following such merger,
34
consolidation or reorganization, at least eighty percent (80%) 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 20% or more of the then
outstanding Voting Securities has Beneficial Ownership of 20% or more
of the combined voting power of the Surviving Corporation's then
outstanding voting securities immediately following the consummation
of such merger, consolidation or reorganization.
(ii) A complete liquidation or dissolution of the Company; or
(iii) An agreement for the sale or other disposition of all or
substantially all of the assets of the Company to any Person (other
than a transfer to a Subsidiary).
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur solely because any Person (the "Subject Person") acquired
Beneficial Ownership of more than the permitted amount of the outstanding
Voting Securities as a result of the acquisition of Voting Securities by
the Company which, by reducing the number of Voting Securities
outstanding, increases the proportional number of shares Beneficially
Owned by the Subject Persons, provided that if a Change in Control would
occur (but for the operation of this sentence) as a result of the
acquisition of Voting Securities by the Company, and after such
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.
(d) "Code" shall mean the Internal Revenue Code of 1986, as from time to
time amended.
(e) "Committee" shall mean the Compensation and Benefits Committee of the
Company.
(f) "Common Stock" shall mean the common stock of the Company, $.10 par
value.
(g) "Company" shall mean Lehman Brothers Holdings Inc. and, except as
otherwise specified in this Plan in a particular context, any successor thereto,
whether by merger, consolidation, purchase of substantially all its assets or
otherwise.
(h) "Executive Officer" shall mean a Participant who is subject to the
requirements of Sections 16(a) and 16(b) of the Securities Exchange Act of 1934.
(i) "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
35
market in which such prices are regularly quoted, or, if there have been no
published bid or asked quotations with respect to share 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.
(j) "Other Stock-based Award" shall mean any of those Awards described in
Section 8 hereof.
(k) "Participant" shall mean a member of the Corporate Management Committee,
the Operating Committee or a Managing Director who is selected by the Committee
to receive an Award under the Plan.
(l) "Subsidiary" shall mean any corporation which at the time qualifies as a
subsidiary of the Company under the definition of "subsidiary corporation" in
Section 424(f) of the Code, as amended from time to time.
(m) "Total Disability" shall mean a physical or mental incapacity, which
would entitle the individual to benefits under the long-term disability program
sponsored by the Company employing such individual; provided, however, that if
an individual is not covered under the applicable program, the Committee shall
determine whether the individual has incurred a Total Disability by utilizing
the criteria of such program and provided further that for incentive stock
options the definition of Total Disability shall be as set forth in Section
22(e)(3) of the Code.
36
APPENDIX B
LEHMAN BROTHERS HOLDINGS INC.
1996 SHORT TERM EXECUTIVE COMPENSATION PLAN
1. PURPOSE. The purpose of the 1996 Short Term Executive Compensation Plan
(the "Plan") is to advance the interests of Lehman Brothers Holdings Inc., a
Delaware corporation (the "Company"), and its stockholders by providing
incentives in the form of periodic bonus awards to certain employees of the
Company and any of its subsidiaries or other related business units or entities
("Affiliates") including those who contribute significantly to the strategic and
long-term performance objectives and growth of the Company and its Affiliates.
2. ADMINISTRATION. The Plan shall be administered by the Compensation and
Benefits Committee of the Board of Directors (the "Committee"), as such
committee is from time to time constituted. The Committee may delegate its
duties and powers in whole or in part (i) to any subcommittee thereof consisting
solely of at least two "outside directors," as defined under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), or (ii) to the
extent consistent with Section 162(m) of the Code, to any other individual or
individuals.
The Committee has all the powers vested in it by the terms of the Plan set
forth herein, such powers to include the exclusive authority to select the
employees to be granted bonus awards ("Bonuses") under the Plan, to determine
the size and terms of the Bonus to be made to each individual selected (subject
to the limitation imposed on "Special Bonuses", as defined below), to modify the
terms of any Bonus that has been granted (except with respect to any
modification which would increase the amount of compensation payable to a
"Covered Employee," as such term is defined in Section 162(m) of the Code), to
determine the time when Bonuses will be awarded, to establish performance
objectives in respect to Bonuses and to certify that such performance objectives
were attained. The Committee is authorized to interpret the Plan, to establish,
amend and rescind any rules and regulations relating to the Plan, and to make
any other determinations which it deems necessary or desirable for the
administration of the Plan. The Committee may correct any defect or supply any
omission or reconcile any inconsistency in the Plan in the manner and to the
extent the Committee deems necessary or desirable to carry it into effect. Any
decision of the Committee in the interpretation and administration of the Plan,
as described herein, shall lie within its sole and absolute discretion and shall
be final, conclusive and binding on all parties concerned. No member of the
Committee and no officer of the Company shall be liable for anything done or
omitted to be done by him or her, by any other member of the Committee or by any
officer of the Company in connection with the performance of duties under the
Plan, except for his or her own willful misconduct or as expressly provided by
statute.
3. PARTICIPATION. The Committee shall have exclusive power (except as may be
delegated as permitted herein) to select the employees of the Company and its
Affiliates who may participate in the Plan and be granted Bonuses under the Plan
("Participants"); provided, however, that Special Bonuses (as defined below) may
only be granted to members of the Company's Operating Committee and Corporate
Management Committee (or any successor entities of such committees in accordance
with subsection (c) below) and Managing Directors and officers holding a title
senior to Managing Director.
4. BONUSES UNDER THE PLAN.
(a) In General. The Committee shall determine the amount of a Bonus to be
granted to each Participant in accordance with subsections (b) and (c) below.
37
(b) Standard Bonuses. The Committee may in its discretion grant to a
Participant a cash Bonus (a "Standard Bonus") in the amount, and payable at the
time, determined by the Committee or its delegate in its discretion. The amount
of a Participant's Standard Bonus may be based upon any criteria the Committee
wishes to consider, including but not limited to the objective or subjective
performance of the Participant, the Company or any subsidiary or division
thereof.
(c) Special Bonuses. (i) The Committee may in its discretion award a Bonus
to a Participant who it reasonably believes may be a Covered Employee (a
"Special Bonus") for the taxable year of the Company in which such Bonus would
be deductible, under the terms and conditions of this subsection (c). Subject to
clause (iii) of this Section 4(c), the amount of a Participant's Special Bonus
shall be an amount determinable from written performance goals approved by the
Committee while the outcome is substantially uncertain and no more than 90 days
after the commencement of the period to which the performance goal relates or,
if less, the number of days which is equal to 25 percent of the relevant
performance period. The maximum Special Bonus that may be granted in respect of
a (calendar year) shall be 2.0% of the consolidated pre-tax net income of the
Company.
(ii) The amount of any Special Bonus will be based on objective performance
goals established by the Committee. The performance criteria for Special Bonuses
made under the Plan will be based upon one or more of the following criteria:
(A) before or after tax net income; (B) earnings per share; (C) book value per
share; (D) stock price; (E) return on Stockholders' equity; (F) the relative
performance of peer group companies; (G) expense management; (H) return on
investment; (I) improvements in capital structure; (J) profitability of an
identifiable business unit or product; (K) profit margins; (L) budget
comparisons; and (M) total return to Stockholders. Participants who have primary
responsibility for a business unit of the Company may be measured on business
unit operating profit, business unit operating profit as a percent of revenue
and/or measures related to business unit profitability above its cost of
capital, in place of some or all of the corporate performance measures.
(iii) The Committee shall determine whether the performance goals have been
met with respect to any affected Participant and, if they have, so certify and
ascertain the amount of the applicable Special Bonus. No Special Bonuses will be
paid until such certification is made by the Committee.
(iv) The provisions of this Section 4(c) shall be administered and
interpreted in accordance with Section 162(m) of the Code to ensure the
deductibility by the Company or its affiliates of the payment of Special
Bonuses.
5. DESIGNATION OF BENEFICIARY BY PARTICIPANT. The Committee or its delegate
shall create a procedure whereby a Participant may file, on a form to be
provided by the Committee, a written election designating one or more
beneficiaries with respect to the amount, if any, payable in the event of the
Participant's death. The Participant may amend such beneficiary designation in
writing at any time prior to the Participant's death, without the consent of any
previously designated beneficiary. Such designation or amended designation, as
the case may be, shall not be effective unless and until received by the duly
authorized representatives of the Committee or its delegate prior to the
Participant's death. In the absence of any such designation, the amount payable,
if any, shall be delivered to the legal representative of such Participant's
estate.
6. MISCELLANEOUS PROVISIONS.
(a) No employee or other person shall have any claim or right to be paid a
Bonus under the Plan. Determinations made by the Committee under the Plan need
not be uniform and may be made selectively among eligible individuals under the
Plan, whether or not such eligible individuals are similarly situated. Neither
the Plan nor any action taken hereunder shall be construed as giving any
employee or other person any right to continue to be employed by or perform
services for the Company
38
or any Affiliate, and the right to terminate the employment of or performance of
services by any Participant at any time and for any reason is specifically
reserved to the Company and its Affiliates.
(b) Except as may be approved by the Committee, a Participant's rights and
interest under the Plan may not be assigned or transferred, hypothecated or
encumbered in whole or in part either directly or by operation by law or
otherwise (except in the event of a Participant's death) including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner; provided, however, that, subject to applicable law, any
amounts payable to any Participant hereunder are subject to reduction to satisfy
any liabilities owed to the Company or any of its Affiliates by the Participant.
(c) The Committee shall have the authority to determine in its sole
discretion the applicable performance period relating to any Bonus; provided,
however, that any such determination with respect to a Special Bonus shall be
subject to any applicable restrictions imposed by Section 162(m) of the Code.
(d) The Company and its Affiliates shall have the right to deduct from any
payment made under the Plan any federal, state, local or foreign income or other
taxes required by law to be withheld with respect to such payment.
(e) The Company is the sponsor and legal obligor under the Plan, and shall
make all payments hereunder, other than any payments to be made by any of the
Affiliates, which shall be made by such Affiliate, as appropriate. Nothing
herein is intended to restrict the Company from charging an Affiliate that
employs a Participant for all or a portion of the payments made by the Company
hereunder. The Company shall not be required to establish any special or
separate fund or to make any other segregation of assets to assure the payment
of any amounts under the Plan, and rights to the payment hereunder shall be no
greater than the rights of the Company's unsecured, subordinated creditors, and
shall be subordinated to the claims of the customers and clients of the Company.
All expenses involved in administering the Plan shall be borne by the Company.
(f) The validity, construction, interpretation, administration and effect of
the Plan and rights relating to the Plan and to Bonuses granted under the Plan,
shall be governed by the substantive laws, but not the choice of law rules, of
the State of Delaware.
(g) Any controversy or dispute arising in connection with the Plan shall be
resolved by arbitration pursuant to the Constitution and rules of the New York
Stock Exchange, Inc. or the National Association of Securities Dealers, Inc.
(h) The Plan shall be effective as of April 10, 1996, subject to the
affirmative vote of the holders of a majority of all shares of Common Stock of
the Company present in person or by proxy at the Annual Meeting of the Company
to be held on April 10, 1996.
7. PLAN AMENDMENT OR SUSPENSION. The Plan may be amended or suspended in
whole or in part at any time and from time to time by the Committee.
8. PLAN TERMINATION. This Plan shall terminate upon the adoption of a
resolution of the Committee terminating the Plan.
9. ACTIONS AND DECISION REGARDING THE BUSINESS OR OPERATIONS OF THE COMPANY
AND/OR ITS AFFILIATES. Notwithstanding anything in the Plan to the contrary,
neither the Company nor any of its Affiliates nor their respective officers,
directors, employees or agents shall have any liability to any Participant (or
his or her beneficiaries or heirs) under the Plan or otherwise on account of any
action taken, or not taken, in good faith by any of the foregoing persons with
respect to the business or operations of the Company or any Affiliates.
10. SUBORDINATED CAPITAL STATUS. Notwithstanding any other provision of this
Plan, any amounts due to Participants hereunder may be treated, in the
Committee's sole discretion, to the extent that the Company accrues a liability
in respect thereof, as subordinated capital of the Company in calculating the
Company's net capital for regulatory purposes, and the terms of the Plan
applicable to such amounts shall include (and, may be amended to add) such
provisions as the Committee determines are necessary or appropriate in order to
secure such treatment, including without limitation, provisions for the
suspension of any payment obligation under the Plan under certain prescribed
circumstances.
39
DIRECTIONS TO THE 1996 LEHMAN BROTHERS HOLDINGS INC.
ANNUAL MEETING OF STOCKHOLDERS
The Firm's World Headquarters, site of the 1996 Annual Meeting of
Stockholders, is located at 200 Vesey Street on the west side of lower Manhattan
in the office complex known as the World Financial Center. The World Financial
Center is a part of Battery Park City, a 10 acre development of office
buildings, residences and parks amongst former Hudson River piers on the
southwestern tip of Manhattan. It is connected to the World Trade Center by two
pedestrian overpasses and is also accessible at street level by automobile.
BY SUBWAY
Take any of the several subway lines (A, C, E, N, R or the 1, 2, 3, 4, 5, or
9 trains) that stop at or near the World Trade Center. Walk from the World Trade
Center across the Westside Highway (also known as West Street) via one of the
two pedestrian overpasses. The Company's offices are in 3 World Financial Center
which is the building on the north side of the Winter Garden in the World
Financial Center.
BY AUTOMOBILE OR TAXICAB
Proceed to the Westside Highway in lower Manhattan, orienting toward the
twin towers of the World Trade Center. Enter the World Financial Center, which
is directly across the Westside Highway from the towers, by turning west on
either Murray Street or Vesey Street. Proceed to the main entrance of 3 World
Financial Center which is the building located at the corner of Vesey Street and
the Westside Highway.
40
LEHMAN BROTHERS HOLDINGS INC.
Proxy for Annual Meeting of Stockholders
This proxy is solicited by the Board of Directors
Karen C. Manson, Karen M. Muller and Thomas A. Russo, or each of them (with full
power to act without the other and with full power of substitution) are hereby
appointed attorneys and proxies to attend the Annual Meeting of Stockholders to
be held on April 10, 1996, and at any adjournment thereof, and to vote and act
for the undersigned on the matters listed on the reverse side which are set
forth in the accompanying Proxy Statement.
This proxy revokes all previous proxies. Unless specified to the contrary, it
will be voted FOR all proposals. In their discretion, the proxies are
authorized to vote upon any other matters which may properly come before the
meeting or any adjournment.
CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE
- --- Please mark
X votes as in this example
- ---
----------------------------------------------------------
The Board of Directors recommends a vote FOR all proposals
----------------------------------------------------------
1. Election of Three Class I Directors. 2. Ratification of Ernst & Young as independent FOR AGAINST ABSTAIN
Nominees: John F. Akers, public auditors for fiscal year 1996.
Richard S. Fuld, Jr. and ---- ---- ----
Katsumi Funaki
---- ---- ----
FOR WITHHELD
--- ---
--- ---
- ----
---------------------------
- ---- For all nominees except as
noted on the line above
3. Approval of the 1996 Management 4. Approval of the 1996 Short Term
Ownership Plan. Executive Compensation Plan.
FOR AGAINST ABSTAIN
---- ---- ----
---- ---- ----
FOR AGAINST ABSTAIN
- ---- ---- ----
- ---- ---- ----
MARK HERE MARK HERE PLEASE SIGN, DATE AND
FOR ADDRESS ---- IF YOU PLAN ---- MAIL YOUR PROXY CARD
CHANGE AND TO ATTEND PROMPTLY IN THE ENCLOSED
NOTE AT LEFT ---- THE MEETING ---- ENVELOPE
IMPORTANT: Please sign exactly
as your name or names appear hereon and
when signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If
the signature is by a corporation, sign
the full corporate name by a
duly authorized officer.
Signature: ____________________________ Date_________________
Signature: ____________________________ Date_________________