Pre-Effective Amendment to Registration Statement (General Form) — Form S-1
Filing Table of Contents
Document/Exhibit Description Pages Size
1: S-1/A Amendment No.1 to Form S-1 164 964K
2: EX-3.1 Certificate of Incorporation 6 26K
3: EX-3.2B Amended Certificate of Designations 23 65K
4: EX-3.3 Certificate of Designation (Cumulative Voting) 12 36K
5: EX-3.4 Certificate of Designation (Redeemable Voting) 21 58K
6: EX-3.5 Restated By-Laws of the Registrant 20 79K
7: EX-4.2 Specimen Common Stock Certificate 2 14K
8: EX-5 Opinion of Thomas A. Russo, Esq. 2 16K
9: EX-7 Opinion of Skadden, Arps, Slate, Meagher & Flom 4 21K
10: EX-8 Opinion of Skadden, Arps, Slate, Meagher & Flom 2 15K
11: EX-10.1 Form of Agreement of Tenants-In-Common 150 249K
14: EX-10.10B Form of Warrant 28 52K
15: EX-10.17 Voluntary Deferred Compensation Plan 21 87K
16: EX-10.18 Executive and Select Employees Plan 10 26K
12: EX-10.2 Restated Tax Allocation Agreement 67 178K
17: EX-10.20 The E.F. Hutton Partnership Award Plan 20 83K
18: EX-10.23 Lehman Brothers Inc. Employee Ownership Plan 25 100K
19: EX-10.23A Amended Employee Ownership Plan 1 11K
20: EX-10.24 1994 Management Ownership Plan. 26 89K
21: EX-10.25 1994 Management Replacement Plan. 16 58K
22: EX-10.26 Short-Term Executive Compensation Plan 7 30K
23: EX-10.27 1994 Employee Stock Purchase Plan 17 61K
24: EX-10.28 Participating Preferred Plan 19 61K
25: EX-10.28A Amendment to Particpating Preferred Plan 1 11K
26: EX-10.29 Purchase and Exchange Agreement 17 61K
13: EX-10.3 Intercompany Agreement 30 85K
27: EX-10.30 Registration Rights Agreement 31 55K
28: EX-10.31 Option Agreement 45 85K
29: EX-10.32 Form of 1994 Agreement 35 102K
30: EX-10.33 Compensation Plan (For Select Executives) 21 87K
31: EX-10.34 Compensation Plan ( for Transferred Participants ) 22 90K
32: EX-10.35 Executive and Select Employee Plan 11 26K
33: EX-23.1 Consent of Ernst & Young 1 11K
34: EX-23.4 Consent of Lazard Freres & Co. 1 11K
35: EX-23.5 Consent of James D. Wolfensohn Incorporated 1 11K
EX-10.23 — Lehman Brothers Inc. Employee Ownership Plan
Exhibit Table of Contents
LEHMAN BROTHERS INC
EMPLOYEE OWNERSHIP PLAN
AUGUST 25, 1993
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TABLE OF CONTENTS
LEHMAN BROTHERS INC. EMPLOYEE OWNERSHIP PLAN
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Introduction................................................. 1
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PART I - OPERATION OF THE PLAN.............................. 1
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1.1 Number of Phantom Shares Available for Issuance.... 1
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1.1 (a) In General......................................... 1
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1.1 (b) Adjustment on Effective Date....................... 1
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1.2 Eligible Participants; Establishment of Phantom
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Unit Account................................ 2
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1.3 Crediting of Phantom Shares and Cash Rights........ 2
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1.3 (a) Mandatory 1993 Total Compensation Deferrals........ 2
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1.3 (b) Voluntary Deferrals................................ 2
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1.3 (c) Plan Agreements.................................... 3
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1.4 Terms of Phantom Shares and Cash Rights............ 3
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1.4 (a) Quarterly Distributions............................ 3
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1.4 (b) Conversion to Common Stock upon IPO................ 3
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1.4 (c) Sale of Holdings to a Single Buyer................. 4
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1.4 (d) No Transaction..................................... 4
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1.5 Vesting and Forfeiture of Phantom Units and
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Deferred Compensation Accounts.............. 5
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1.5 (a) Mandatory Deferrals................................ 5
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1.5 (b) Voluntary Deferrals................................ 5
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1.5 (c) Termination of Employment and Forfeitures.......... 5
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(i) Resignation; Termination for Cause................. 5
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(ii) Termination Without Cause; Death,
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Disability, Governmental Service
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Early Retirement or Normal
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Retirement.................................. 5
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1.6 Provisions Regarding Common Stock Issued upon
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Conversion of Phantom Shares................ 6
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1.6 (a) In General......................................... 6
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1.6 (b) Vesting and Forfeiture of Restricted Shares........ 6
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1.6 (c) Transfer Restrictions............................. 7
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(i) Time-Based Lapse of Restrictions.................. 7
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(ii) Lapse of Restrictions Based on Level of
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American Express Ownership............... 7
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1.6 (d) Termination of Employment; Call Right............. 8
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1.6 (e) Miscellaneous Terms of Restricted Shares.......... 8
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(i) Stockholder Rights................................ 8
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(ii) Dividends and Distributions....................... 8
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PART II - GENERAL ADMINISTRATIVE PROVISIONS................. 9
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2.1 Administration.................................... 9
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2.1 (a) General........................................... 9
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2.1 (b) Adjustments....................................... 9
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2.2 The Company as Payor; Status of Participants
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as Unsecured, Subordinated Creditors;
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Expenses................................... 9
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2.3 Agreements with Participants...................... 10
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2.3 (a) Agreement to Be Bound.............................. 10
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2.3 (b) Designation of Beneficiaries....................... 10
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2.4 Government Regulations............................. 10
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2.5 Withholding Taxes.................................. 11
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2.6 Applicable Law..................................... 11
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2.7 Rights of Participants............................. 11
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2.8 Non-Transferability of Rights...................... 12
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2.9 Amendment of the Plan.............................. 12
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2.10 Termination of the Plan............................ 12
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2.10 (a) In General......................................... 12
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2.10 (b) Consequences of Termination of the Plan............ 12
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2.11 Severability....................................... 13
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2.12 Certain Rights of Participants..................... 13
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2.13 Actions and Decisions Regarding the Business
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or Operations of the Company, Holdings and
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Any of Their Affiliates..................... 14
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2.14 Offset............................................. 14
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2.15 Notices............................................ 14
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2.16 Arbitration........................................ 15
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2.17 Adjustments for Non-U.S. Participants.............. 15
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2.18 Governing Document................................. 15
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PART III - DEFINITIONS
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3.1 "Affiliate"...................................... 16
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3.2 "Beneficiary".................................... 16
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3.3 "Bonus and Bonuses".............................. 16
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3.4 "Cause".......................................... 16
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3.5 "Disability"..................................... 16
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3.6 "Early Retirement"............................... 17
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3.7 "EBP"............................................ 17
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3.8 "Good Reason".................................... 17
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3.9 "Governmental Service"........................... 17
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3.10 "Initial Value".................................. 17
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3.11 "IPO"............................................ 17
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3.12 "Normal Retirement".............................. 17
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3.13 "Original Value"................................. 18
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3.14 "Participant".................................... 18
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3.15 "Peer Company Yield"............................. 18
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3.16 "Phantom Unit Account"........................... 18
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3.17 "Phantom Unit Value"............................. 18
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3.18 "Retained Earnings".............................. 19
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3.19 "Retained Earnings Per Share".................... 19
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3.20 Miscellaneous................................... 19
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3.21 Other Defined Terms............................. 19
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LEHMAN BROTHERS INC. EMPLOYEE OWNERSHIP PLAN
Effective as of August 25, 1993 (the "Effective Date")
Introduction
The Lehman Brothers Inc. Employee Ownership Plan (the "Plan"),
is intended to motivate and reward certain key employees of Lehman Brothers
Inc. (the "Company") and its Affiliates by providing them grants of, or
opportunities to acquire, phantom equity interests ("Phantom Shares"), each
representing a notional interest in a share of the common stock, par value $.10
per share, of Lehman Brothers Holdings Inc. ("Holdings") (such stock, together
with any class of equity securities of Holdings or any successor of Holdings
into which it may hereafter be converted, the "Common Stock") and related
rights to receive certain amounts in cash ("Cash Rights"). (A Phantom Share
and a related Cash Right from time to time may be referred to together
hereunder as a "Phantom Unit".)
Except where defined elsewhere in the Plan, all capitalized
terms used herein have the meanings assigned to them in Part III below.
PART I - OPERATION OF THE PLAN
1.1 Number of Phantom Shares Available for Issuance.
1.1 (a) In General. Up to 10 million Phantom Shares are available
for issuance to Participants hereunder. In the event that any Phantom Shares
are forfeited pursuant to the terms of the Plan, such Phantom Shares shall
again be available for issuance hereunder.
1.1 (b) Adjustment on Effective Date. Notwithstanding anything
contained herein to the contrary, in the event that on the Effective Date the
number of shares of Common Stock outstanding is not 90 million, then (i) the
number of Phantom Shares issuable hereunder shall be changed to a number equal
to 11.11% of the actual number of shares of Common Stock outstanding on the
Effective Date (and all references to 10 million Phantom Shares hereunder shall
be deemed to refer to such adjusted number) and (ii) the Initial Value and
Original Value of Phantom Shares and Cash Rights, respectively, to be issued as
of January 1, 1994 shall be adjusted to reflect
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such change in the number of shares of Common Stock and the resultant change is
the number of Phantom Shares and Cash Rights issuable hereunder.
1.2 Eligible Participants; Establishment of Phantom Unit
Account.
The Finance Committee of the Board of Directors of Holdings (as
constituted from time to time, together with its designees, the "Finance
Committee") may designate such key employees of the Company and its Affiliates
as Participants as it may determine from time to time in its discretion. Each
Participant shall have a Phantom Unit Account established in the Participant's
name.
1.3 Crediting of Phantom Shares and Cash Rights.
1.3 (a) Mandatory 1993 Total Compensation Deferrals. The Finance
Committee shall designate in its discretion which Participants shall have a
portion of their base salary and Bonus (hereinafter, "Total Compensation")
payable to them with respect to the 1993 fiscal year of Holdings credited,
effective January 1, 1994, as Phantom Shares and Cash Rights to their Phantom
Unit Accounts in lieu of being paid in cash. One Phantom Share (with an Initial
Value of $10) and one Cash Right (with an Original Value of $6.67) will be
credited to such Participant's Phantom Unit Account for each $16.67 of 1993
Total Compensation mandatorily deferred in accordance with the schedule to be
established by the Finance Committee.
1.3 (b) Voluntary Deferrals. (i) The Finance Committee shall
offer certain Participants the opportunity to elect to have up to a specified
portion or dollar amount of their 1993 Total Compensation (or commissions
earned with respect to the 1993 fiscal year of Holdings) credited as Phantom
Units to their Phantom Unit Accounts in lieu of being paid in cash. Such
portion or dollar amount of 1993 Total Compensation (or commissions) shall be
determined by the Finance Committee in its discretion, and may vary among
individual Participants or categories of Participants. Each Participant who
voluntarily defers 1993 Total Compensation (or commissions) shall be credited
with one Phantom Share (with an Initial Value of $10) and one Cash Right (with
an Original Value of $6.67) for each $16.67 of 1993 Total Compensation (or
commissions) so deferred.
(ii) If the mandatory deferrals described in Section 1.3(a) above
and the voluntary deferrals described above in this Section 1.3(b) result in
fewer than 10 million Phantom Shares being credited to Participants' Phantom
Unit Accounts as of January 1, 1994, then the Finance Committee may extend
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the mandatory deferral provisions of Section 1.3(b) above to the 1994 fiscal
year and later fiscal years of Holdings and may offer certain 1993 Participants
and certain additional employees and new hires the opportunity to have Phantom
Units credited to their Phantom Unit Accounts in lieu of Total Compensation (or
commissions) payable in respect of the 1994 fiscal year or later fiscal years
of Holdings. The Initial Value of Phantom Shares credited in lieu of Total
Compensation (or commissions) in respect of the 1994 fiscal year or later
fiscal years of the Company shall be determined by the Finance Committee in its
discretion with reference to the then value of Common Stock and the
restrictions applicable to Phantom Shares hereunder.
1.3 (c) Plan Agreements. The Finance Committee shall establish
procedures for the issuances of Phantom Units pursuant to this Section 1.3 and
shall set forth the terms of such issuances in such documents, including,
without limitation, deferral agreements, consents and offering memoranda, as it
may deem necessary or appropriate in its discretion. All such documentation
shall incorporate the terms of the Plan by reference and shall contain such
other terms, not inconsistent with the Plan, as the Finance Committee may
establish.
1.4 Terms of Phantom Shares and Cash Rights.
1.4 (a) Quarterly Distributions. As soon as practicable following
the end of each fiscal quarter of Holdings (beginning with the first fiscal
quarter of 1994 and ending with the fiscal quarter ending immediately prior to,
or coincident with, the payment or conversion of the last Phantom Share
hereunder), the Company shall pay an amount in cash (the "Quarterly
Distribution") in respect of each outstanding Phantom Unit equal to (i) the sum
of (A) the Phantom Unit Value of such Phantom Unit, and (B) Retained Earnings
Per Share after December 31, 1993 (or such other date immediately preceding the
date on which such Phantom Unit was credited to the Participant's Phantom Unit
Account) through the last day of Holdings' fiscal quarter for which such
Quarterly Distribution is being paid, multiplied by (ii) the Peer Company Yield
for such fiscal quarter.
1.4 (b) Conversion to Common Stock upon IPO. In the event of an
IPO, each Participant with Phantom Units credited to the Participant's Phantom
Unit Account as of the closing of the IPO shall receive at or about the time of
the closing of such IPO with respect to each such Phantom Unit (i) a share of
Common Stock and (ii) an amount in cash in full satisfaction of the related
Cash Right equal to the Original
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Value of such Cash Right. Each share of Common Stock so issued shall be
subject to the terms of Section 1.6 below.
1.4 (c) Sale of Holdings to a Single Buyer. (i) In the event of
the sale of all or substantially all of the Common Stock or the assets of
Holdings to a person or group (as defined under Section 13(d)(3) of the
Securities Exchange Act of 1934, as amended) that is not an Affiliate of
Holdings (a "Third Party Sale"), each Phantom Unit shall be revalued so that
the Participant will be credited with a value per Phantom Share equal to the
price paid per share of Common Stock (including as Common Stock for this
purpose all Phantom Shares then outstanding) by such person or group (in the
case of an asset sale, using a value per share of Common Stock determined by
the Finance Committee prior to the consummation of such Third Party Sale based
on the purchase price of Holdings' assets) and a value per Cash Right equal to
the Original Value of such Cash Right.
(ii) The value of each Participant's Phantom Unit Account as so
recalculated shall be paid, together with interest calculated from the closing
of the Third Party Sale to the relevant date of payment at a rate equal to the
cost to the third party effecting the Third Party Sale of three year debt
determined by the Finance Committee as of the closing of the Third Party Sale,
in three equal installments on each of the first, second and third
anniversaries of the closing of the Third Party Sale.
(iii) The excess of the value of each Participant's Phantom Unit
Account as so recalculated over the value of the Participant's Phantom Unit
Account based on the Phantom Unit Value (the "Sale Premium") shall be forfeited
if a Participant resigns for any reason other than Good Reason or is terminated
for Cause prior to the relevant payment date, and the portion of such
Participant's Phantom Unit Account not representing the Sale Premium shall
continue to be subject to the vesting schedule originally applicable to such
Participant's Phantom Units. In determining which portion of the Phantom Unit
Account is to be paid on a given installment date pursuant to this Section
1.4(c), vested amounts shall be paid prior to the payment of any unvested
amounts.
1.4 (d) No Transaction. In the event that no IPO or Third Party
Sale occurs on or prior to July 1, 1997, the value of the Phantom Units
credited to a Participant's Phantom Unit Account on such date shall be valued
as of such date and shall be paid, subject to the vesting schedule and
forfeiture terms applicable to such Phantom Units, in cash to the Participant
in equal installments, together with interest
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at a rate equal to the Company's cost of three-year debt as of July 1, 1997, on
each of July 1, 1998, July 1, 1999 and July 1, 2000. The amount payable with
respect to each Phantom Unit shall be the sum of (i) the Phantom Unit Value of
such Phantom Unit and (ii) Retained Earnings Per Share for the period after
December 31, 1993 (or such other date immediately preceding the date on which
such Phantom Unit was credited to the Participant's Phantom Unit Account) to
June 30, 1997.
1.5 Vesting and Forfeiture of Phantom Units.
1.5 (a) Mandatory Deferrals. All Phantom Units credited to Phantom
Unit Accounts pursuant to Section 1.3(a) above shall vest as determined by the
Finance Committee.
1.5 (b) Voluntary Deferrals. All Phantom Units credited to Phantom
Unit Accounts pursuant to Section 1.3(b) shall be vested immediately upon such
crediting.
1.5 (c) Termination of Employment and Forfeitures.
(i) Resignation; Termination for Cause. In the event a
Participant's employment with the Company or any of its Affiliates terminates
by reason of a termination of employment by the Company or the relevant
Affiliate for Cause or a resignation for any reason, then (I) all unvested
Phantom Units credited to the Participant's Phantom Unit Account as of the date
of such termination shall be forfeited without payment therefor, and (II) the
Participant shall be paid promptly an amount in cash for each vested Phantom
Unit credited to the Participant's Phantom Unit Account as of the date of such
termination equal to the Phantom Unit Value of such Phantom Unit plus (only if
negative) Retained Earnings Per Share for the period after December 31, 1993
(or such other date immediately preceding the date on which such Phantom Unit
was credited to the Participant's Phantom Unit Account) to the last day of
Holdings' fiscal quarter ending immediately prior to, or coincident with, the
relevant date of termination of employment.
(ii) Termination Without Cause; Death, Disability, Governmental
Service, Early Retirement or Normal Retirement. In the event a Participant's
employment with the Company or any of its Affiliates terminates by reason of a
termination by the Company or the relevant Affiliate without Cause, or of the
Participant's death, Disability, entry into Governmental Service, Early
Retirement or Normal Retirement, then all
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Phantom Units credited to the Participant's Phantom Unit Account as of the
relevant date of termination of employment shall vest and the Participant (or
his Beneficiary, as the case may be) shall be paid promptly an amount in cash
for each Phantom Unit credited to the Participant's Phantom Unit Account as of
the relevant date of termination of employment equal to the sum of (A) the
Phantom Unit Value of such Phantom Unit, (B) Retained Earnings Per Share for
the period after December 31, 1993 (or such other date immediately preceding
the date on which such Phantom Unit was credited to the Participant's Phantom
Unit Account) to the last day of Holdings' fiscal quarter ending immediately
prior to, or coincident with, the relevant date of termination of employment,
and (C) the Quarterly Distribution payable per Phantom Share for the fiscal
quarter ending immediately prior to, or coincident with, the relevant date of
termination of employment.
1.6 Provisions Regarding Common Stock Issued upon
Conversion of Phantom Shares.
1.6 (a) In General. The shares of Common Stock issued to
Participants pursuant to Section 1.4(b) above (hereinafter, "Restricted
Shares") shall be subject to the terms and conditions of this Section 1.6. At
the time of the issuance of Restricted Shares to a Participant, a legended
certificate evidencing the appropriate number of shares of Common Stock issued
to the Participant as Restricted Shares shall be issued in the Participant's
name but shall be held by the Company in a brokerage account for the account of
the Participant until such time as such Restricted Shares become transferable
hereunder. Upon the lapse of transfer restrictions as to Restricted Shares
held by a Participant, the certificate evidencing such shares shall be
delivered to the Participant.
1.6 (b) Vesting and Forfeiture of Restricted Shares. The Restricted
Shares shall vest in accordance with the schedules applicable to the Phantom
Shares in respect of which they were issued pursuant to Section 1.4(b). Upon
any termination of a Participant's employment with the Company or any of its
Affiliates by reason of a resignation by the Participant for any reason or a
termination of employment by the Company or the relevant Affiliate for Cause,
all unvested Restricted Shares shall be forfeited without payment therefor, and
all vested Restricted Shares shall be subject to the provisions of Sections
1.6(c) and 1.6(d) below. Upon any termination of a Participant's employment
with the Company or any of its Affiliates by reason of a termination
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by the Company or the relevant Affiliate without Cause, or of the Participant's
death, Disability, entry into Governmental Service, Early Retirement or Normal
Retirement, all unvested Restricted Shares shall vest as of the date of such
termination of employment, but shall be subject to the provisions of Sections
1.6(c) and 1.6(d) below.
1.6 (c) Transfer Restrictions. The Restricted Shares issued to a
Participant may not be sold, gifted, pledged, hypothecated or otherwise
transferred in any way, except by will or the laws of descent and distribution,
so long as they are unvested and, in any event, shall continue to be subject to
such transfer restrictions until such transfer restrictions lapse in accordance
with the schedules set forth in clauses (i) and (ii) below:
(i) Time-Based Lapse of Restrictions. Subject to clause (ii)
below, transfer restrictions applicable to the Restricted Shares will
lapse as to one third of the Restricted Shares issued to a Participant
on each of the first through third anniversaries of the closing date of
the IPO.
(ii) Lapse of Restrictions Based on Level of American Express
Ownership. Notwithstanding clause (i) above, for five years after the
closing date of the IPO, transfer restrictions as to the Restricted
Shares issued to a Participant shall lapse no more rapidly than in
accordance with the following schedule (or interpolations therefrom)
based on the percentage ownership of outstanding Common Stock by
American Express Company ("American Express") or any of its Affiliates,
calculated for purposes of the Plan on a monthly basis.
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American Express Percentage of
Ownership Percentage Restricted Shares
of Outstanding Common Stock Transferable
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100% 0%
80 20
60 40
40 60
20 80
0 100
In the event of a Participant's termination of employment for any reason other
than death or Disability, the transfer restrictions of this Section 1.6(c)
shall continue to apply to any Restricted Shares that are not forfeited and not
repurchased by Holdings pursuant to Section 1.6(d) below. In
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such an event, clauses (i) and (ii) above shall be applied so that the
percentages or fractions of Restricted Shares transferable thereunder refer to
percentages or fractions of the number of Restricted Shares held by a
terminated Participant after taking into account forfeitures and repurchases
pursuant to Section 1.6(d) below.
1.6 (d) Termination of Employment; Call Right. For a period of 10
business days following the termination of a Participant's employment with the
Company or any of its Affiliates by reason of a resignation by the Participant
for any reason or of a termination of employment by the Company or the relevant
Affiliate for Cause, Holdings shall have the right, but not the obligation,
upon written notice to the Participant, to purchase from the Participant any or
all vested Restricted Shares at a price per share equal to the sum of (i) the
Initial Value of the Phantom Share in respect of which such Restricted Share
was issued pursuant to Section 1.4(b) above, and (ii) the Retained Earnings Per
Share for the period after December 31, 1993 (or such other date immediately
preceding the date on which such Phantom Unit was credited to the Participant's
Phantom Unit Account) to the last day of the fiscal quarter of Holdings ending
immediately prior to, or coincident with, the relevant date of exercise of the
purchase right described in this Section 1.6(d).
1.6 (e) Miscellaneous Terms of Restricted Shares.
(i) Stockholder Rights. A Participant shall have all rights of
a stockholder as to the Restricted Shares, including the right to receive
dividends and the right to vote for directors and upon other matters in
accordance with Holdings' Certificate of Incorporation, subject to the vesting
and transfer restrictions contained above in this Section 1.6.
(ii) Dividends and Distributions. Any shares of Common Stock
or other property received in respect of a Restricted Share as a result of a
distribution to holders of Common Stock or as a dividend on Common Stock shall
be subject to the same restrictions hereunder as such Restricted Share.
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PART II - GENERAL ADMINISTRATIVE PROVISIONS
2.1 Administration.
2.1 (a) General. The terms of the Plan shall be administered,
interpreted (which shall include the power to supply any omission and reconcile
any inconsistencies) and adjusted, as appropriate, by the Finance Committee.
Any action taken or determination made by the Finance Committee which has been
assigned to the Finance Committee pursuant to the terms of the Plan shall be
within its sole discretion and shall be final and binding on all interested
parties. The Finance Committee shall have no liability to any Participant (or
his Beneficiaries or heirs) under the Plan or otherwise on account of any
action taken, or not taken, or any determination made in good faith by the
Finance Committee pursuant to the terms of the Plan or authority delegated to
it under the Plan.
2.1 (b) Adjustments. In the event of a change in the number of
shares of Common Stock outstanding by reason of any stock dividend or split or
recapitalization, the Finance Committee shall make appropriate adjustments to
the terms of the Plan and to any outstanding Phantom Shares. In addition, the
Finance Committee may make adjustments to the terms of the Plan and its
applicability to any Participant which, in its discretion, it deems equitable
and necessary in order to preserve the economic rights and expectations of the
Participants, Holdings and the Company hereunder, in the event:
(i) that there occurs an event such as a merger, sale of
substantially all of the assets of, or a consolidation, reorganization
or other restructuring of Holdings or the Company; or
(ii) that any anticipated benefits of deferral under, or
other aspects of, the Plan are altered by reason of any interpretation
of or change in applicable laws, governmental regulations or accounting
rules;
provided, however, that any rights under Section 2.12 may not be materially
adversely affected without such Participant's written consent.
2.2 The Company as Payor; Status of Participants as Unsecured,
Subordinated Creditors; Expenses.
The Company is the sponsor and legal obligor under the Plan, and
shall make all payments hereunder. Nothing
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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 to such Participant. 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 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. As a condition to participation in the
Plan, each Participant shall agree that, in the event the Finance Committee
concludes that the obligation of the Company under the Plan should qualify as
subordinated capital of the Company for regulatory purposes, such Participant
shall execute from time to time such subordinated debt agreements, and shall
consent to such modifications to the Plan, as the Finance Committee may
determine are necessary or appropriate in order to ensure that the Company's
obligations so qualify. All expenses involved in administering the Plan shall
be borne by the Company.
2.3 Agreements with Participants.
2.3 (a) Agreement to Be Bound. By becoming a Participant in the
Plan, each Participant (and each person claiming under or through a
Participant) shall be conclusively bound by the terms of the Plan and any
action taken or not taken under the Plan by the Company, Holdings, or the
Finance Committee.
2.3 (b) Designation of Beneficiaries. The Finance Committee shall
create a procedure whereby a Participant may file, on a form to be provided by
the Finance Committee, a written election designating one or more Beneficiaries
with respect to the vested portion of such Participant's Phantom Unit Account
or of such Participant's Restricted Shares 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 (to the extent permitted by law); provided,
however, that such amended designation shall not be effective unless and until
received by the duly authorized representative of the Company prior to the
Participant's death.
2.4 Government Regulations.
All transactions in Phantom Shares, Cash Rights and Restricted
Shares and all amounts payable by the Company under the Plan shall be
contingent upon compliance with any
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and all applicable federal, state, local and foreign laws and rules and
regulations of any regulatory or self-regulatory body in effect at the time, as
deemed necessary or desirable by the Finance Committee. No changes to the Plan
that are necessary in order to comply with such laws, rules or regulations
shall be deemed to violate the Participant's rights protected under Section
2.12, provided that the Company takes all reasonable steps necessary to provide
the Participants with the benefits intended under the Plan.
2.5 Withholding Taxes.
The Company may make such provisions and take such steps as it
may deem necessary or appropriate for the withholding of any taxes which the
Company or any of its Affiliates is required by any law or regulation of any
governmental authority, whether federal, state, local or foreign, to withhold
in connection with payments pursuant to the Plan, including, but not limited
to, (a) the withholding of funds or other property (or any portion thereof)
until the Participant reimburses the Company or such Affiliate for the amount
that is required with respect to such taxes, (b) the cancelling of any portion
of such payment in an amount sufficient to reimburse itself or such Affiliate
for the amount of taxes required to be withheld, or (c) the withholding of
appropriate sums from any amount otherwise payable to the Participant (or his
Beneficiary).
2.6 Applicable Law.
The Plan and all actions taken hereunder shall be governed by,
and construed in accordance with, the substantive laws, but not the choice of
law rules, of the State of New York.
2.7 Rights of Participants.
No employee or other person shall have any claim or right to
receive Phantom Shares, Cash Rights or Restricted Shares under the Plan except
as expressly provided herein and neither the Plan nor any action taken under
(or inaction involving) the Plan shall be construed as (a) giving any employee
any right to be retained in the employ of the Company or any of its Affiliates
or (b) affecting the right of any of the above-mentioned entities to terminate
the employment of any individual with or without Cause. Notwithstanding
anything that may be to the contrary herein, until the issuance of Restricted
Shares hereunder, no relationship is intended between the Company or any
Affiliate and any Participant under the Plan other than that of
12
employer and employee (and, in particular, no partnership or other organization
among the Company, any Affiliate of the Company or any Participant is intended)
and no position to the contrary shall be taken for any purpose.
2.8 Non-Transferability of Rights.
Except as previously provided hereunder, a Participant's rights
and interest under the Plan may not be assigned or transferred in whole or in
part either directly or by operation of law or otherwise including, but not by
way of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy
or in any other manner, and no such right or interest of any Participant under
the Plan shall be subject to any obligation or liability of such Participant
other than any obligations or liabilities owed by such Participant to the
Company, Holdings or their respective subsidiaries.
2.9 Amendment of the Plan.
The Finance Committee may amend the Plan at any time or from
time to time. However, no amendment of the Plan shall materially adversely
affect any rights described in Section 2.12, without an affected Participant's
written consent.
2.10 Termination of the Plan.
2.10 (a) In General. Notwithstanding any other provision herein
that may be to the contrary, the Plan is subject to termination at any time by
action of the Finance Committee.
2.10 (b) Consequences of Termination of the Plan. In the event of
a termination of the Plan, no further Phantom Shares, Cash Rights or Restricted
Shares shall be issued hereunder, and all outstanding Phantom Shares, Cash
Rights and Restricted Shares shall remain subject to the terms of the Plan as
in effect prior to its termination. Notwithstanding the foregoing, in the
event the Finance Committee determines to terminate the Plan, it may elect to
cash out all outstanding Phantom Units based on a value per Phantom Unit equal
to the sum of (x) the Phantom Unit Value of such Phantom Unit and (y) Retained
Earnings Per Share for the period after December 31, 1993 (or such other date
immediately preceding the date on which such Phantom Unit was credited to a
Participant's Phantom Unit Account) to the last day of the fiscal quarter
ending immediately prior to, or coincident with, the date of the termination of
the Plan; provided, however, that in the event such termination of the Plan
occurs in connection with an IPO, the Phantom Unit Value
13
shall be calculated using a value per Phantom Share equal to the price paid per
share of Common Stock in the IPO (or, in the case of an IPO which is a
spin-off, the valuation per share used in such transaction). The value of the
Phantom Units so calculated shall be paid, to the extent vested, promptly
following the date of termination of the Plan and to the extent unvested,
promptly following the date or dates on which such amounts would have vested
had the Plan not been terminated, together with interest at a rate equal to the
Company's cost of three-year debt as of the date of termination of the Plan.
2.11 Severability.
The invalidity or unenforceability of any one or more provisions
of the Plan shall not affect the validity or enforceability of any other
provision of the Plan, which shall remain in full force and effect.
2.12 Certain Rights of Participants.
Subject to the Finance Committee's ability to amend the Plan
pursuant to Section 2.9, to terminate the Plan in accordance with Section 2.10
or to adjust the terms of the Plan as provided expressly elsewhere under the
Plan, none of the following rights of a Participant may be materially adversely
affected by any adjustment, amendment or termination of the Plan without such
Participant's written consent:
(a) the right to vest in, or to become free of transfer
restriction with respect to, any Phantom Shares or Cash Rights credited
to the Participant's Phantom Unit Account under the Plan or Restricted
Shares held by the Participant, as of the date of such adjustment,
amendment or termination, based on (i) his continued service (if any)
with the Company, Holdings or any of their respective subsidiaries and
(ii) the vesting, forfeiture and transfer restriction provisions of the
Plan as in effect prior to such adjustment, amendment or termination;
(b) the right to receive Quarterly Distributions with
respect to all Phantom Units credited to the Participant's Phantom Unit
Account as of the date of such adjustment, amendment or termination,
based on the terms of the Plan as in effect prior to such adjustment,
amendment or termination; and
(c) the right to receive payments or Common Stock with
respect to the Phantom Shares credited to the
14
Participant's Phantom Unit Account or with respect to Restricted Shares
held by the Participant, as of the date of adjustment, amendment or
termination, in accordance with the terms of the Plan as in effect prior
to such adjustment, amendment or termination.
Further, Sections 2.9, 2.10, and 2.12 shall not be adjusted or amended in any
way that would have a material adverse effect on a Participant without the
consent of the affected Participant. Nothing in this Section 2.12 shall be
construed to confer a right to remain employed by the Company, Holdings or any
of their respective subsidiaries or otherwise affect the application of Section
2.7 above.
2.13 Actions and Decisions Regarding the Business or Operations
of the Company, Holdings, and any of their Subsidiaries.
Notwithstanding anything in the Plan to the contrary, neither
the Company nor Holdings, nor any of their respective subsidiaries nor their
respective officers, directors, employees or agents shall have any liability to
any Participant (or his 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,
Holdings or any of their respective subsidiaries. In particular, nothing
herein shall be interpreted as limiting in any way Holdings' right to pay
dividends to American Express or other holders of Common Stock in such amounts
as the Board of Directors of Holdings determines in its discretion are
appropriate.
2.14 Offset.
Subject to applicable law, any amounts payable to any
Participant hereunder as credited to the Participant's Phantom Unit Account are
subject to reduction to satisfy any liabilities owed to the Company, Holdings
or any of their respective subsidiaries by the Participant.
2.15 Notices.
The Finance Committee shall give each Participant prompt notice
of any credits, charges, adjustments, redemptions, forfeitures, reallocations
or other transactions affecting such Participant's Phantom Unit Account. The
Company shall maintain the Phantom Unit Accounts under the Plan and shall
effect all credits and debits to such accounts in accordance with the terms of
the Plan under the direction of the Finance Committee.
15
2.16 Arbitration.
Any dispute between a Participant and the Company, Holdings or
any of their respective subsidiaries arising from or relating to the terms of
the Plan shall be submitted to arbitration under the auspices and in accordance
with the rules of the New York Stock Exchange, Inc. (or, in the case of any
such dispute between the Participants as a group and the Company, Holdings or
any of their respective subsidiaries, the rules of the American Arbitration
Association (the "AAA")), and each Participant shall be deemed to have agreed
to such submission by becoming a Participant in the Plan. In the event of any
such dispute between the Participants as a group and the Company, Holdings or
any of their respective subsidiaries, the party seeking relief shall give
written notice of its intention to seek resolution of such dispute to the other
party. The arbitral tribunal shall be appointed within 30 days of the notice
of dispute, and shall consist of three arbitrators, one of which shall be
appointed by Holdings (or the Company or the relevant subsidiary, as the case
may be), one by the Participants as a group (which first two arbitrators shall
have knowledge of the securities industry and familiarity with the compensation
practices of such industry), and the third jointly by such two arbitrators;
provided, however, that, if such two arbitrators shall be unable to select the
third arbitrator within such 30-day period, such third arbitrator shall be
chosen by the AAA as soon as practicable following notice to the AAA by such
two arbitrators of their inability to choose such third arbitrator; and
provided further that in the case of a third arbitrator so chosen by the AAA,
such third arbitrator shall be required to have knowledge of the securities
industry and be familiar with the compensation practices of such industry.
2.17 Adjustments for Non-U.S. Participants.
The Finance Committee may approve such adjustments to the terms
of the Plan applicable to Participants who are subject to taxes in non-United
States jurisdictions as it deems appropriate in order to accomplish the
purposes of the Plan.
2.18 Governing Document.
The Plan (including any instruments or documents expressly
referred to herein) contains all of the terms and conditions of the program
described herein and shall be its sole governing document and authority, and
shall supersede all prior descriptions or understandings, both written and
oral, with respect to the subject matter of the Plan.
16
PART III - DEFINITIONS
For purposes of the Plan, the following terms are defined as set forth below:
3.1 "Affiliate" of a person means any enterprise (whether a
corporation, partnership, joint venture or other business or
legal entity) controlling, controlled by or under common control
with such person.
3.2 "Beneficiary" means the person or persons designated in writing
by a Participant under Section 2.3 above, or, in the absence of
an effective designation, or if such designated person shall
have died before the Participant, the legal representative of
the Participant's estate.
3.3 "Bonus" and "Bonuses" mean the annual discretionary compensation
awarded by the Board of Directors of Holdings (or a Committee
thereof) to Participants and other employees of the Company or
its Affiliates.
3.4 "Cause" means a material breach by a Participant of, or "cause"
as defined under, an employment contract (if any) between the
Participant and the Company or any of its Affiliates, failure by
a Participant to devote substantially all business time
exclusively to the performance of his duties, willful
misconduct, dishonesty related to the business and affairs of
his employer or an Affiliate of his employer, conviction of a
felony (or failure to contest prosecution for a felony),
habitual or gross negligence in the performance of a
Participant's duties or failure to satisfactorily perform such
duties after notification of such failure and a reasonable
opportunity to cure the same, the violation of policies and
practices adopted by his employer or an Affiliate of his
employer or a material violation of the conflict of interest,
proprietary information or business ethics policies of his
employer or an Affiliate of his employer.
3.5 "Disability" shall have the meaning set forth in the Company's
Long-Term Disability Program as in effect from time to time or
any successor thereto.
17
3.6 "Early Retirement" means a Participant's termination of
employment with the Company and its Affiliates on or after age
55 and ten full years of employment with not less than five full
years of participation in the Plan (including, for this purpose,
participation in the EBP and the Lehman Brothers Equity
Program).
3.7 "EBP" means the Lehman Brothers Equity Unit and Bonus Plan, as
amended and restated as of January 1, 1993, as amended from time
to time.
3.8 A resignation for "Good Reason" means a refusal of a Participant
to accept an offer of employment from the buyer effecting a
Third Party Sale, or a resignation from such employment within
one year following a Third Party Sale, if (a) the assignment of
a Participant's new employment duties is substantially
diminished from the scope of responsibilities of the Participant
immediately prior to the Third Party Sale or (b) the
Participant's annual cash compensation for his new employment
position is significantly reduced from his annual compensation
prior to the Third Party Sale for reasons other than "across the
board" reductions in cash compensation.
3.9 "Governmental Service" means full-time employment in an elective
or nonelective capacity with any federal or state government or
political subdivision thereof or any agency or other
instrumentality thereof.
3.10 The "Initial Value" of a Phantom Share means $10 in the case of
a Phantom Share credited to a Phantom Unit Account as of January
1, 1994, and a price determined by the Finance Committee in
accordance with Section 1.3(b) in all other cases.
3.11 "IPO" means an offering of Common Stock pursuant to a
registration statement filed under the Securities Act of 1933,
as amended, or a spinoff of the Common Stock to the shareholders
of American Express.
3.12 "Normal Retirement" means a Participant's termination of
employment with the Company and its Affiliates on or after age
65 with not less than two full years of participation in the
Plan (including, for this purpose, participation in the EBP and
the Lehman Brothers Equity Program).
18
3.13 The "Original Value" of a Cash Right means $6.67 in the case of
a Cash Right credited to a Phantom Unit Account as of January 1,
1994, and in the case of any other Cash Right a price equal to
66.67% of the Initial Value of the related Phantom Share which,
together with such Cash Right, comprise a Phantom Unit.
3.14 "Participant" means an employee of the Company or any of its
Affiliates who is designated to participate in the Plan pursuant
to Section 1.2.
3.15 "Peer Company Yield" means a percentage determined by
calculating the average of the Dividend Yields of The Bear
Stearns Companies Inc., Merrill Lynch & Co., Inc., Morgan
Stanley Group, Inc. and Salomon Inc (or such other or additional
entities which the Finance Committee from time to time
determines constitute peer competitors of the Company) for the
fiscal quarter of each such entity ending immediately prior to,
or coincident with, the date as of which the Peer Company Yield
is to be calculated. As used in this Section 3.15, "Dividend
Yield" means a percentage determined by dividing (a) the dollar
amount or value of a dividend paid per share of common stock
with respect to a fiscal quarter, by (b) the average of the
daily New York Stock Exchange Composite Transactions Tape
closing prices of such share of common stock for each trading
day during such fiscal quarter; provided, however, that, in the
event of extraordinary dividends or similar transactions, the
Finance Committee in its discretion may make such adjustments to
the Dividend Yield as it deems necessary or appropriate to carry
out the objectives of the Plan.
3.16 "Phantom Unit Account" means the bookkeeping account created and
maintained under the Plan for each Participant to or against
which Phantom Shares, Cash Rights or other amounts are credited
or charged pursuant to the terms of the Plan.
3.17 "Phantom Unit Value" means the sum of the Initial Value of a
Phantom Share and the Original Value of the related Cash Right
which, together with such Phantom Share, comprise a Phantom
Unit. The Phantom Unit Value of Phantom Units acquired by
Participants pursuant to deferrals of 1993 Total Compensation
shall be $16.67.
19
3.18 "Retained Earnings" means the retained earnings of Holdings as
determined in accordance with United States Generally Accepted
Accounting Principles; provided, however, that the Finance
Committee in its discretion may make such adjustments to
Retained Earnings as it deems necessary or appropriate to carry
out the objectives of the Plan. For purposes of the Plan,
calculations of Retained Earnings for a specified period up to
the end of a fiscal quarter of Holdings shall reflect all
dividends and Quarterly Distributions payable with respect to
such fiscal quarter, whether or not paid during such fiscal
quarter.
3.19 "Retained Earnings Per Share" means (a) the net increase or
decrease in Retained Earnings over a specified period, divided
by (b) the average number of shares of Common Stock and Phantom
Shares outstanding during such period (calculated for purposes
of the Plan on a quarterly basis).
3.20 Miscellaneous. Where appropriate, all references in the Plan to
the masculine pronoun shall include the feminine, and all
references to the singular shall include the plural.
3.21 Other Defined Terms. The following terms are defined in the
Plan in the Section indicated:
[Download Table]
Term Section
---- -------
"AAA" 2.16
---
"American Express" 1.6(c)
----------------
"Cash Rights" Introduction
-----------
"Common Stock" Introduction
------------
"Company" Introduction
-------
"Dividend Yield" 3.16
--------------
"Effective Date" Title
--------------
"Finance Committee" 1.2
-----------------
20
[Download Table]
"Holdings" Introduction
--------
"Phantom Shares" Introduction
--------------
"Phantom Unit" Introduction
------------
"Plan" Introduction
----
"Quarterly Distribution" 1.4(a)
----------------------
"Restricted Shares" 1.6(a)
-----------------
"Sale Premium" 1.4(c)
------------
"Third Party Sale" 1.4(c)
----------------
"Total Compensation" 1.3(a)
------------------
Dates Referenced Herein and Documents Incorporated by Reference
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