SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM 8-K

                                 CURRENT REPORT
                       Pursuant to Section 13 or 15(d) of
                       the Securities Exchange Act of 1934



        Date of Report (date of earliest event reported): September 4, 1997

                          LEHMAN BROTHERS HOLDINGS INC.
             (Exact name of registrant as specified in its charter)

                                    Delaware
                 (State or other jurisdiction of incorporation)

         1-9466                                          13-3216325
(Commission File Number)            (IRS Employer Identification No.)


3 World Financial Center
New York, New York                                      10285
(Address of principal                                (Zip Code)
executive offices)

                    Registrant's telephone number, including
                            area code: (212) 526-7000







Item 7.  Financial Statements and Exhibits

         (c)      Exhibits

                  The following Exhibits are filed as part of this Report.

         10.1  1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans 
         dated as of  September 4, 1997 between the Company and State Street
         Bank & Trust Company, as Trustee
        




         The Exhibit Index to this Report is incorporated herein by reference.








                                    SIGNATURE



         Pursuant to the  requirements  of the Securities  Exchange Act of 1934,
the  Company  has duly  caused  this  Report to be  signed on its  behalf by the
undersigned hereunto duly authorized.


                                               LEHMAN BROTHERS HOLDINGS INC.




                                               By: /s/ Karen M. Muller
                                                   Karen M. Muller
                                                   Managing Director



Date: September 4, 1997









                                  EXHIBIT INDEX



Exhibit No.                         Exhibit


10.1      1997 Trust under Lehman Brothers Holdings Inc. Incentive Plans dated 
          as of September 4, 1997 between the Company and State Street Bank &
          Trust Company, as Trustee









                 1997 TRUST UNDER LEHMAN BROTHERS HOLDINGS INC.
                                 INCENTIVE PLANS



                  This  Agreement  dated as of September 4, 1997 (as amended
from time to time, the  "Agreement"),  by and between Lehman  Brothers  Holdings
Inc. (the "Company", as more fully defined in Exhibit A hereto) and State Street
Bank & Trust Company (the "Trustee", as more fully defined in Exhibit A hereto);

                  WHEREAS,  the Company has adopted and may in the future  adopt
compensation   plans  including  the  Lehman  Brothers  Holdings  Inc.  Employee
Incentive Plan, the Lehman Brothers Holdings Inc. 1994 Management Ownership Plan
and the Lehman  Brothers  Holdings Inc. 1996  Management  Ownership Plan and has
listed certain of such plans on Schedule 2 to this  Agreement,  which Schedule 2
may from time to time be amended in accordance  with Section 15(b) hereof to add
or delete plans (the plans listed on Schedule 2, as such  Schedule may from time
to time be amended,  are each  referred  to herein as a "Plan" and  collectively
referred to herein as "Plans");

                  WHEREAS,   the  Company  has  incurred  or  expects  to  incur
liability  under the terms of the Plans with respect to equity awards made or to
be made to  individuals  participating  in the  Plans,  that will  result in the
payment  of shares of Common  Stock,  $.10 par value per share,  of the  Company
("Shares");

                  WHEREAS, the Company wishes to establish a trust (the "Trust")
and to contribute and/or sell to the Trust assets including  Shares,  that shall
be held therein, subject to the claims of the Company's general creditors in the
event the Company  becomes  insolvent (as  hereinafter  defined),  until paid to
Participants  (as  hereinafter  defined) in such manner and at such times as the
Company may specify to fulfill the Company's obligations under the Plans;

                  WHEREAS,  it is the  intention  of the parties that this Trust
shall  constitute an unfunded  arrangement for all purposes and shall not affect
the  status  of any  Plans as  unfunded  plans  maintained  for the  purpose  of
providing  deferred  compensation  for a select  group of  management  or highly
compensated  employees for purposes of Title I of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), if applicable;

                  WHEREAS, the Company desires that the assets to be held in the
Trust should be  principally  or exclusively  Shares and,  therefore,  expressly
waives any  diversification  of investments  that might  otherwise be necessary,
appropriate, or required pursuant to applicable provisions of law; and

                  WHEREAS,  capitalized  and  certain  other  terms used in this
Agreement have the meanings given them in Exhibit A hereto;

                  NOW, THEREFORE,  the parties do hereby establish the Trust and
agree that the Trust shall be comprised, held and disposed of as follows:

                  Section 1.  Establishment of Trust.

                  (a) The Company  hereby sells or contributes to the Trustee in
trust the cash and other  property  set forth in Schedule 1 hereto,  which shall
initially  become  the  principal  of the  Trust  to be held,  administered  and
disposed of by the Trustee as provided  in this  Agreement.  The parties  intend
that the Trust will be an  independent  legal  entity with title to and power to
convey all of its  assets.  The Trust is not a part of any of the Plans and does
not itself provide retirement or other benefits to any Participant.

                  (b) The  assets  held by the  Trust  shall be  applied  by the
Trustee,  in accordance with Instruction  Schedules  delivered to the Trustee by
the Company,  to satisfy the Company's  obligations in connection  with Eligible
Awards.  The Plans under which  Eligible  Awards may be outstanding at any given



time will be reflected on Schedule 2 to this Agreement,  as such Schedule may be
amended from time to time in accordance  with Section 15(b) hereof.  The Company
shall submit  Instruction  Schedules  which direct the Trustee to utilize  Trust
assets to satisfy,  on a calendar year basis, the Company's payment  obligations
under  Eligible  Awards in an amount  not less than the lesser of (i) 10% of the
assets held in the Trust at the  commencement of such year or (ii) the aggregate
payment  obligations  under 50% of the Covered  Eligible Awards which become due
during such year;  provided that the amount of the excess, if any, of 10% of the
Trust  assets  over  the  amount  paid (or  zero if no such  amount  is paid) in
accordance  with clause (ii) in a given  calendar year shall be carried  forward
and added to the amount payable pursuant to clause (i) in subsequent years until
such  excess  amounts  are paid  from the Trust or the  Trust is  terminated  in
accordance  with Section  15(c)  hereof.  For the portion of calendar  year 1997
subsequent  to the  execution of this  Agreement  the  references  to 10% in the
foregoing sentence shall be 5% and the reference to 50% shall be 25%.

                  (c) Except as otherwise  provided in Section 1 (e) and Section
3 hereof, the Trust hereby established shall be irrevocable by the Company.

                  (d) The Trust is intended to be a grantor trust,  of which the
Company is the  grantor,  for the  purposes and within the meaning of subpart E,
part I,  subchapter J, chapter 1, subtitle A of the Code, and shall be construed
accordingly.

                  (e) The  principal  of the Trust,  and any  earnings  thereon,
shall be held  separate  and apart from other  funds of the Company and shall be
used exclusively for the uses and purposes of Participants and general creditors
as herein  set forth.  Participants  shall  have no  preferred  claim on, or any
beneficial  ownership  interest in, any assets of the Trust.  Any rights created
under the Plans and this Agreement shall be mere unsecured contractual rights of
Participants  against the Company.  Any assets held by the Trust will be subject
to the claims of the Company's  general creditors under federal and state law in
the event the Company becomes insolvent (as defined in Section 3(a) hereof).

                  (f) The Company,  in its sole discretion,  may at any time, or
from time to time, subject to any required approval of the Board of Directors of
the Company, make additional  contributions of cash or contributions or sales of
other  property,  including  Shares,  in trust with the  Trustee to augment  the
principal to be held, administered and disposed of by the Trustee as provided in
this Agreement.  Neither the Trustee nor any Participant shall have any right to
compel such additional contributions or sales.

                  (g) The  assets  held at any time and from time to time  under
the Trust shall  consist of  contributions  received or assets  purchased by the
Trustee,  proceeds of any investments and reinvestment thereof, the earnings and
income  thereon,  less  disbursements  therefrom.  Except  as  herein  otherwise
provided,  title to the assets of the Trust  shall at all times be vested in the
Trustee and  securities  that are part of the Trust shall be held in such manner
that the Trustee's  name and the fiduciary  capacity in which the securities are
held are fully  disclosed,  subject to the right of the Trustee to hold title in
bearer  form or in the name of a  nominee,  and the  interests  of others in the
Trust  shall be only the right to have such  assets  received,  held,  invested,
administered and distributed in accordance with the provisions of the Trust.

                  Section 2.  Payments to Participants and Separate Trusts.

                  (a) Except as otherwise  provided in Section 1(e) or 3 hereof,
Payments  from the  Trust  shall  only be made to  Participants  or to  Separate
Trusts.  When Payments in accordance with the most recent  Instruction  Schedule
submitted by the Company to the Trustee are due, the Trustee shall make Payments
to Participants or Separate Trusts in accordance with such Instruction Schedule,
subject to the terms of this Agreement. The Company shall be responsible for the
maintenance of any accounts for Participants  under the respective Plans and for
all  withholding-related  filings and reports.  The Company shall be responsible
for  determining  whether a Payment is in accordance  with the relevant Plan and
Award  agreement.  Any  Payments to a Separate  Trust shall be made  immediately
prior to the date Shares are  distributable by such Separate Trust to designated
Participants who are also the beneficiaries of such Separate Trust.



                  (b)  Prior to the  Payment  of  Shares,  other  assets  or the
proceeds of any tender or exchange offer to a Participant or Separate Trust, the
Trustee  shall  withhold  the  Withholding  Amount,  if any, as specified in the
Instruction  Schedule pursuant to which the Payment is to be made. The amount so
withheld  shall be  remitted  by the  Trustee  as  directed  by the  Instruction
Schedule. In the case of a Payment to be made in Shares or other securities, the
Trustee  shall  reduce the amount of the Payment due by the  smallest  number of
whole Shares or other  securities  that has a value equal to or greater than the
Withholding Amount. For purposes of the foregoing sentence,  the Shares or other
securities  shall  be  valued  at  their  Fair  Market  Value  on  the  date  of
distribution. Any amount so withheld in excess of the Withholding Amount will be
paid by the Company to the Participant or a Separate Trust in cash.

                  Section 3.  Trustee Responsibility Regarding Payments to Trust
 Beneficiary When Company Is Insolvent.

                  (a) Subject to Section 3(b) hereof, the Trustee shall not make
any  Payments  if the Company is  insolvent.  The  Company  shall be  considered
"insolvent"  for purposes of this  Agreement if (i) the Company is unable to pay
its debts as they  become  due,  or (ii) the  Company  is  subject  to a pending
proceeding as a debtor under the United States Bankruptcy Code.

                  (b) At all times  during the  continuance  of this  Trust,  as
provided in Section 1(e) hereof,  the principal and income of the Trust shall be
subject to claims of general  creditors of the Company  under  federal and state
law as set forth below:

                  (1) The Board of Directors and the Chief Executive  Officer of
         the Company shall have the duty to inform the Trustee in writing of the
         Company's  insolvency.  If a person  claiming  to be a creditor  of the
         Company  alleges in writing to the Trustee  that the Company has become
         insolvent, the Trustee shall determine whether the Company is insolvent
         and,  pending  such   determination,   the  Trustee  shall  discontinue
         Payments.

                  (2) Unless the Trustee has actual  knowledge of the  Company's
         insolvency,  or has  received  notice  from  the  Company  or a  person
         claiming to be a creditor  alleging that the Company is insolvent,  the
         Trustee shall have no duty to inquire whether the Company is insolvent.
         The  Trustee  may in all events rely on such  evidence  concerning  the
         Company's solvency as may be furnished to the Trustee and that provides
         the  Trustee  with  a  reasonable  basis  for  making  a  determination
         concerning the Company's solvency. In no event shall "actual knowledge"
         be deemed to include  knowledge of the Company's  credit status held by
         banking  officers  or banking  employees  of the  Trustee  which is not
         permitted to be disclosed to the  administrator of the Trust account or
         any  other   knowledge   which  is  not  actually   possessed  by  such
         administrator.  The Trustee may appoint an  independent  accounting  or
         consulting firm to make any determination of insolvency required by the
         Trustee  under  this  Section  3.  In  such  event,   the  Trustee  may
         conclusively  rely  upon the  determination  of such  firm and shall be
         responsible only for the prudent selection of such firm.

                  (3) If at any time the Trustee has determined that the Company
         is insolvent, the Trustee shall discontinue Payments and shall hold the
         assets of the Trust for the benefit of the Company's general creditors.
         Nothing  in this  Agreement  shall in any way  diminish  any  rights of
         Participants to pursue their rights as general creditors of the Company
         with respect to benefits due under the Plans or otherwise.

                  (4) The Trustee shall not resume  Payments in accordance  with
         Section 2 of this Agreement  until the Trustee has determined  that the
         Company is not insolvent (or is no longer insolvent) and thereafter has
         received an Instruction Schedule.




                  Section 4.  Transfers to Company.

                  Except as otherwise set forth in this  Agreement,  the Company
shall  have no right or power to divert to others or to the  Company  any of the
Trust assets.

                  Section 5.  Investment Authority; Dividends.

                  Unless otherwise  provided for herein,  all Trust assets shall
be invested in Shares.  Any  dividends  paid in cash on Shares held by the Trust
shall be invested in Shares as soon as practicable or, to the extent directed by
the Company,  used to pay Trust  expenses  or, if  specified  in an  Instruction
Schedule,  distributed to Participants or Separate  Trusts.  Dividends which are
not  paid in cash or in  Shares  shall be  reduced  to cash by the  Trustee  and
reinvested in Shares as soon as  practicable  or, to the extent  directed by the
Company, used to pay Trust expenses or, if specified in an Instruction Schedule,
distributed to  Participants  or Separate  Trusts.  At the Company's  direction,
investments  in  Shares  may be  made  through  open-market  purchases,  private
transactions  or (with the Company's  consent)  purchases from the Company.  The
Trustee  may invest any  portion of the Trust,  as well as the  proceeds  of any
tender  offer or exchange  offer,  temporarily,  pending  investment  in Shares,
distribution  or  payment  of  expenses  in (i)  investments  in  United  States
Government   obligations   with   maturities   of  less  than  one  year,   (ii)
interest-bearing  accounts including but not limited to certificates of deposit,
time deposits, saving accounts and money market accounts with maturities of less
than one year in any bank,  including the Trustee if the Trustee is a bank, with
aggregate  capital in excess of  $100,000,000  and a Moody's  Investor  Services
rating of at least P1, or an  equivalent  rating  from a  nationally  recognized
ratings  agency,  which  accounts are insured by the Federal  Deposit  Insurance
Corporation  or other  similar  federal  agency,  (iii)  obligations  issued  or
guaranteed by any agency or instrumentality of the United States of America with
maturities of less than one year,  (iv) short-term  discount  obligations of the
Federal National Mortgage  Association or (v) such money market fund or funds as
may be approved by the Company from time to time.

                  Section 6.  Disposition of Income.

                  During  the term of the  Trust,  all  income  received  by the
Trust, net of expenses and taxes, if any, shall be accumulated and reinvested in
accordance with the provisions of Section 5 hereof.

                  Section 7.  Accounting by the Trustee.

                  Subject to Section 9(d) hereof,  the Trustee  shall keep,  and
supply the Company  with,  accurate  and  detailed  records of all  investments,
receipts,  disbursements,  and all other transactions required to be made by the
Trust,  including  such  specific  records  as shall be agreed  upon in  writing
between the Company and the Trustee.  Within 60 days following the close of each
calendar  year and  within  60 days  after the  removal  or  resignation  of the
Trustee,  the  Trustee  shall  deliver to the  Company a written  account of its
administration of the Trust during such year or during the period from the close
of the last preceding year to the date of such removal or  resignation,  setting
forth all investments,  receipts,  disbursements and other transactions effected
by  it,  including,  subject  to  Section  9(d)  hereof,  a  description  of all
securities and  investments  purchased and sold with the cost or net proceeds of
such  purchases  or sales  (accrued  interest  paid or  receivable  being  shown
separately),  and showing all cash,  securities  and other  property held in the
Trust at the end of such year or as of the date of such removal or  resignation,
as the case may be. In the  absence  of  written  notice to the  Trustee  by the
Company of exceptions  or  objections to any such account  within 90 days of its
receipt of such account from the  Trustee,  the Company  shall be deemed to have
approved such account. In such case, or upon the written approval by the Company
of any such account, the Trustee shall be released, relieved and discharged with
respect to all matters set forth in such account as though such account had been
settled by the decree of a court of competent jurisdiction.

                  Section 8.  Responsibility of the Trustee.

                  (a)  If the  Trustee  undertakes  or  defends  any  litigation
arising in connection with this Trust,  the Company agrees,  except as otherwise
provided in Section 8(f) hereof,  to indemnify the Trustee against the Trustee's



reasonable  costs,  expenses and  liabilities  (including,  without  limitation,
attorneys' fees and expenses)  relating  thereto and to be primarily  liable for
such payments. Such costs, expenses and liabilities shall be paid from the Trust
to the extent of cash held in the Trust and to the extent not previously paid by
the  Company,  and any such  remaining  fees and  expenses  shall be paid by the
Company.

                  (b) The Trustee may consult  with legal  counsel (who may also
be  counsel  for the  Company  generally)  with  respect to any of its duties or
obligations hereunder.

                  (c) The  Trustee  may  hire  agents,  accountants,  actuaries,
investment advisors,  financial  consultants or other professionals to assist in
performing  any of its  duties  or  obligations  hereunder;  and may  pay  their
reasonable fees and expenses,  which shall be deemed to be expenses of the Trust
and which shall be paid in accordance with Section 10.

                  (d) The Trustee  shall  have,  without  exclusion,  all powers
conferred on trustees by applicable law,  unless  expressly  provided  otherwise
herein,  and the Trustee shall have the following powers and rights, in addition
to those  provided  elsewhere  in this  Agreement  or by law, but subject in all
cases to the other provisions of this Agreement:

                  (i)  to retain any asset of the Trust;

                  (ii) with the  consent of the  Company,  to settle,  submit to
         arbitration,  compromise,  contest,  prosecute  or  abandon  claims and
         demands in favor of or against the Trust;

                  (iii)  to  exercise  any  of  the  powers  and  rights  of  an
         individual  owner with respect to any asset of the Trust and to perform
         any  and  all  other  acts  that  in  its  judgment  are  necessary  or
         appropriate for the proper administration of the Trust even though such
         powers,  rights  and  acts  are  not  specifically  enumerated  in this
         Agreement;

                  (iv) to cause  any asset of the  Trust to be  issued,  held or
         registered in the Trustee's  name or in the name of its nominee,  or in
         such form that title will pass by delivery,  provided  that the records
         of the Trustee shall indicate the true ownership of such asset;

                  (v)  to  utilize  another  entity  (but  not  the  Company,  a
         Subsidiary  or any  affiliate  thereof) as custodian  to hold,  but not
         invest or otherwise manage or control, some or all of the assets of the
         Trust.

                  (e) Notwithstanding any powers granted to the Trustee pursuant
to this  Agreement or applicable  law, the Trustee shall not have any power that
could give this Trust the  objective  of carrying on a business and dividing the
gains therefrom,  within the meaning of Section  301.7701-2 of the Procedure and
Administrative Regulations promulgated pursuant to the Code.

                  (f) The Company shall indemnify,  defend and hold harmless the
Trustee  from and  against any and all  liabilities,  claims,  losses,  suits or
expenses  (including  attorneys'  fees) of whatever  kind and nature that may be
imposed upon,  asserted against or incurred by the Trustee at any time by reason
of its provision of services  under this Agreement or its status as the Trustee,
except to the  extent  that any such  liability,  claim,  loss,  suit or expense
arises  directly from the Trustee's  (or the  Trustee's  officers,  employees or
agents)  gross   negligence  or  willful   misconduct  in  the   performance  of
responsibilities specifically allocated to it under this Agreement. This Section
8(f) shall survive the termination of this Agreement.

                  (g) Except as prohibited  by Section 9(d) hereof,  the Trustee
shall  provide such reports to the Company as to such matters as the Company may
reasonably request.

                  Section 9.  Voting and Tendering of Shares.



                  (a) With  respect to any  meeting of the  stockholders  of the
Company at which the  stockholders  are to vote on any corporate  action or with
respect to any  solicitation  of  written  consents  in lieu of a  meeting,  the
Company  shall provide the Trustee with (i) a list of all  Participants  holding
Voting  Awards  setting  forth the  number of  Voting  Awards  held by each such
Participant on the record date for such meeting or action by written consent and
(ii) the total number of Voting Awards held by such  Participants on such record
date. Thereupon, the Trustee shall distribute to each Participant holding Voting
Awards on such record date all proxy or consent  solicitation or other materials
distributed to  stockholders  of the Company  generally in connection  with such
vote or consent,  together with a form  requesting  instructions  from each such
Participant  as to the manner in which  such  Participant  desires  Shares to be
voted or not voted by the Trustee. The Trustee shall vote or abstain from voting
in  accordance  with the  instructions  from each such  Participant  a number of
Shares held by the Trust  determined by  multiplying  the total number of Shares
held by the Trust on the  record  date for such  meeting  or  action by  written
consent by a fraction the numerator of which is the number of Voting Awards held
by such  Participant  on such  record  date as  reported  to the  Trustee by the
Company and as to which the Trustee has received  instructions to vote for, vote
against or abstain,  and the  denominator of which is the total number of Voting
Awards  held by all such  Participants  on such  record  date as reported to the
Trustee by the Company and as to which the  Trustee  has  received  instructions
from such  Participants to vote for, vote against or abstain.  The Trustee shall
not vote any Shares other than  pursuant to this Section  9(a),  and the Trustee
shall have no discretion in such matter.

                  (b) In the event of a tender or  exchange  offer,  the Company
shall  provide  the  Trustee  with an  Instruction  Schedule  setting  forth all
Participants and the number of Covered Eligible Awards held by each Participant,
together with such information about specific payment  provisions  applicable to
such Covered Eligible Awards in the case of a tender or exchange offer as may be
necessary for the Trustee to distribute  the proceeds of such tender or exchange
offer to Participants who give  instructions as provided herein and maintain the
confidentiality  of such  Participants'  instructions as provided  herein.  Upon
receipt of such  Instruction  Schedule,  the Trustee shall timely  distribute or
cause to be distributed to each Participant all written materials distributed to
stockholders of the Company generally in connection with such tender or exchange
offer, together with a form requesting  confidential  instructions on whether to
tender or exchange Shares.  The Trustee shall tender or exchange or refrain from
tendering  or  exchanging  in  accordance  with  the   instructions   from  each
Participant a number of Shares held by the Trust  determined by multiplying  the
total number of Shares held in the Trust by a fraction the numerator of which is
the number of Covered  Eligible  Awards held by such  Participant as reported to
the Trustee by the Company and the  denominator  of which is the total number of
Covered  Eligible Awards held by all  Participants as reported to the Trustee by
the Company. A Participant shall not be limited in the number of instructions to
tender or exchange or withdraw  from tender or exchange that he or she may give,
but shall  not have the right to give  instructions  to  tender or  exchange  or
withdraw  from tender or exchange  after a reasonable  time  established  by the
Trustee.  The Trustee shall not tender or exchange Shares other than pursuant to
this Section 9(b), and the Trustee shall have no discretion in such matter. If a
tender  offer or  exchange  offer is not  consummated,  all Shares  tendered  or
exchanged  shall revert to and continue to be held by the Trust as if such offer
had not been made unless the Company directs in an Instruction Schedule that the
Trustee  distribute  Shares  to  one or  more  Participants,  or to one or  more
Separate Trusts for distribution to such Participants,  to comply with the terms
of a Covered Eligible Award requiring the payment of Shares.

                  (c) In the event a tender or  exchange  offer is  consummated,
the  proceeds  from the tender or  exchange  shall be paid into the  Trust.  The
proceeds of a tender or exchange offer shall be  distributed by the Trustee,  as
specified in the  Instruction  Schedule  delivered  to the  Trustee,  as soon as
practicable after receipt,  directly, or indirectly through a Separate Trust, to
each Participant who gave instructions to tender or exchange Shares in an amount
equal to (i) the per share  consideration  paid in the tender or exchange  offer
(or such  portion of the per share  consideration  as  specified  in any payment
terms to which the Covered Eligible Award may be subject) multiplied by (ii) the
lesser of (A) the number of Shares  tendered  or  exchanged  as a result of such
Participant's  instructions or (B) the number of Covered Eligible Awards held by
such  Participant.  The  proceeds of the tender or exchange  not so  distributed
shall  remain  in the  Trust,  to be  utilized  as  specified  herein  or in any
Instruction Schedule. In the event of the consummation of an exchange offer, the



Trustee, if so directed by the Company in an Instruction Schedule, shall sell in
a commercially reasonable manner (but not to, or for the benefit of, the Company
or any affiliate or subsidiary of the Company) the  securities  received in such
exchange  and  distribute  the cash  proceeds  in  accordance  with  the  second
preceding sentence.

                  (d) The Trustee shall  maintain  procedures to ensure that all
instructions of Participants pursuant to Section 9(b) are collected,  tabulated,
transmitted to and carried out by the Trustee without being divulged or released
to the Company or any person affiliated with the Company. All such actions taken
by  Participants  shall be held  confidential  by the  Trustee  and,  except  as
required by applicable law or court order,  shall not be divulged or released to
any person other than (i) agents of the Trustee who are not affiliated  with the
Company or its  affiliates  or (ii) by virtue of the execution by the Trustee of
any letter of transmittal for any of the Shares held in the Trust.

                  (e) Upon the  occurrence of an event which would  constitute a
Hostile  Change in  Control  as defined  in the terms  under  which any  Covered
Eligible  Awards  have been  granted,  other  than the  commencement  of, or the
purchase  or  exchange  of any Shares  pursuant  to, a tender  offer or exchange
offer,  the  Company  shall  deliver  an  Instruction  Schedule  to the  Trustee
directing  the Trustee to  distribute  Shares,  to the extent  available  in the
Trust,  to satisfy  all vested  Covered  Eligible  Awards as  specified  in such
Instruction Schedule.

                  Section 10.  Compensation and Expenses of the Trustee.

                  Other than  payments  pursuant  to Section  8(f)  hereof,  all
reasonable fees and expenses  incurred by the Trustee in administering the Trust
shall be paid by the Company or, if directed by the Company,  shall be paid from
the Trust to the extent of cash held in the Trust.

                  Section 11.  Resignation and Removal of the Trustee.

                  (a) The  Trustee  may resign at any time by written  notice to
the  Company,  which  shall be  effective  30 days after  receipt of such notice
unless the Company and the Trustee agree otherwise;  provided,  however, that no
such  resignation  shall be effective until a successor  Trustee has assumed the
office of the Trustee hereunder.

                  (b)      The Trustee may be removed by the Company on 10 days
notice or upon shorter notice accepted by the Trustee.

                  (c) Upon resignation or removal of the Trustee and appointment
of a successor Trustee, all assets held in the Trust shall be transferred to the
successor Trustee.  The transfer shall be completed within 30 days after receipt
of notice of  resignation,  removal or transfer,  unless the Company extends the
time limit.

                  (d) If the Trustee resigns or is removed,  a successor Trustee
shall be  appointed,  in  accordance  with Section 12(a) hereof by the effective
date of  resignation  or  removal.  If no such  appointment  has been made,  the
Trustee may apply to a court of  competent  jurisdiction  for  appointment  of a
successor or for  instructions.  All expenses of the Trustee in connection  with
such  proceeding  shall be allowed as  administrative  expenses of the Trust and
paid as provided in Section 10 hereof.

                  Section 12.  Appointment of Successor.

                  (a) If the Trustee  resigns or is removed in  accordance  with
Section 11(a) or (b) hereof, the Company may appoint any third party, which is a
bank trust  department  or other  party that may be  granted  corporate  trustee
powers under state law, as a successor  to replace the Trustee upon  resignation
or removal.  The appointment  shall be effective when accepted in writing by the
successor  trustee,  who shall  have all of the  rights and powers of the former
Trustee,  including  ownership  rights in the Trust assets.  The former  Trustee
shall execute any instrument necessary or reasonably requested by the Company or
the successor Trustee to evidence the transfer. Any successor Trustee must be an
institutional trustee that is unaffiliated with the Company.



                  (b) The  successor  Trustee  need not  examine the records and
acts of any prior Trustee and may retain or dispose of existing  Trust assets in
accordance with the terms of this Agreement.  The successor Trustee shall not be
responsible for and the Company shall indemnify and defend the successor Trustee
from any claim or liability  resulting  from any action or inaction of any prior
Trustee or from any other past event,  or any condition  existing at the time it
becomes successor Trustee.

                  Section 13.  Changes in Organization of the Trustee.

                  In the event that any  corporate  Trustee  hereunder  shall be
converted  into,  shall  merge or  consolidate  with,  or shall sell or transfer
substantially all of its assets and business to, another  corporation,  state or
federal, the corporation resulting from such merger or consolidation or to which
such sale or transfer shall thereafter be made,  shall thereunder  become and be
the Trustee under the Trust with the same effect as though originally so named.

                  Section 14.  Continuance  of the Trustee's  Powers in Event of
Termination of the Trust.

                  In the event of the  termination  of the  Trust,  as  provided
herein,  the Trustee shall dispose of the assets of the Trust in accordance with
the provisions hereof.  Until the final distribution of the assets of the Trust,
the Trustee shall continue to have all powers provided hereunder as necessary or
expedient  for the orderly  liquidation  and  distribution  of the assets of the
Trust.

                  Section 15.  Amendment or Termination.

                  (a) Except as otherwise provided herein, the Company may amend
the  Trust  at any  time  and  from  time to time in any  manner  which it deems
desirable,  provided  that no amendment may (i) make the Trust  revocable;  (ii)
alter the  provisions  of Sections  1(b),  2(a), 4, 9 or 15 hereof or paragraphs
(b), (d), (e), (f), (g), (k), (l), (m), (n), (o), (p), (q), (r), (s), (t) or (v)
of  Exhibit A hereto or (iii)  change  the  duties of the  Trustee  without  the
Trustee's   consent,   which  consent  shall  not  be   unreasonably   withheld.
Notwithstanding the foregoing,  (x) the Company shall retain the power under all
circumstances  to  amend  the  Trust  to  correct  any  errors  or  clarify  any
ambiguities  or similar issues of  interpretation  in this Agreement and (y) the
matters referred to in clause (ii) of the preceding sentence may be amended with
the consent of Participants holding at least a majority of the Voting Awards.

                  (b)  Schedule 2 hereto  may be  amended  by adding  thereto or
subtracting  therefrom one or more employee benefit plans (within the meaning of
Section 3(3) of ERISA) or plans or  arrangements  that are not employee  benefit
plans  (within the  meaning of such  Section);  provided  that (i) in making any
modification  to Schedule 2 hereto,  the Company  shall act in good faith taking
into account the best interests of a broad cross-section of employees,  and (ii)
the Company shall ensure that at all times Schedule 2 shall include at least one
Plan that is not an employee  benefit plan within the meaning of Section 3(3) of
ERISA.

                  (c) The Trust  may be  terminated  at any time by the  Company
provided  that,  upon such  termination,  all assets  held by the Trust shall be
distributed directly, or indirectly through a Separate Trust, to Participants in
accordance with an Instruction Schedule. Unless earlier terminated in accordance
with the  provisions  of this Section  15(c),  the Trust shall  terminate on the
earlier of (i) the date on which Participants are no longer entitled to benefits
pursuant to the terms of the Plans,  (ii) the  twenty-first  anniversary  of the
death of the last to survive of individuals who are  Participants on the date of
the creation of the Trust or (iii) at such time as the Trust no longer holds any
assets.  In the  case  of  termination  pursuant  to  clause  (i) or (ii) of the
preceding  sentence all assets held by the Trust shall be distributed  directly,
or indirectly  through a Separate Trust, to Participants  and, if at the time of
termination  pursuant  to  clause  (i) or (ii)  there are no  Participants,  the
Company shall amend Schedule 2 so that there are Participants.



                  Section 16.  Miscellaneous.

                  (a) Any provision of this Agreement prohibited by law shall be
ineffective  to the extent of any such  prohibition,  without  invalidating  the
remaining provisions hereof.

                  (b) Benefits payable to Participants  under this Agreement may
not be anticipated,  assigned (either at law or in equity), alienated,  pledged,
encumbered or subjected to  attachment,  garnishment,  levy,  execution or other
legal or equitable process.

                  (c) Any  capitalized  terms used herein  which are not defined
herein or in Exhibit A hereto  shall have the  meaning  ascribed to such term in
the Plan or other documents which relate to the Eligible Award.

                  (d)      This Agreement shall be governed by and construed in 
accordance with the laws of the Commonwealth of Massachusetts.

                  Section 17.  Effective Date.

                  The effective date of this  Agreement  shall be the date first
above written.




                  IN WITNESS WHEREOF, the parties hereto have executed this 
Agreement as of the date first above written.

                                 LEHMAN BROTHERS HOLDINGS INC.


                                 By:      /s/ John L. Cecil
                                          Name: John L. Cecil
                                          Title:  Chief Administatrive Officer


                                 STATE STREET BANK & TRUST COMPANY


                                 By:      /s/ F. S. Feely
                                          Name: F.S. Feely
                                          Title: Vice President





                             Exhibit A. Definitions.

                  As used in the Agreement,  the following  terms shall have the
meanings  set forth below (such  meanings to be equally  applicable  to both the
singular and plural forms of the terms defined):

                  (a) "Agreement" shall have the meaning given it in the
preamble to this Agreement.

                  (b) "Award"  shall mean any award under a Plan which  consists
of, or entitles the holder thereof to receive upon the payment of consideration,
the passage of time,  the  fulfillment  of conditions  or otherwise,  Shares and
shall  include any Plan which  permits  the  deferral  of  compensation  into an
account payable in Shares.

                  (c) "Code" shall mean the Internal Revenue Code of 1986,
 as amended.

                  (d) "Company" shall mean Lehman  Brothers  Holdings Inc., and,
except as otherwise  specified in this  Agreement in a particular  context,  any
successor thereto, whether by merger,  consolidation,  purchase of substantially
all its assets or otherwise.

                  (e) "Covered  Eligible  Award"  shall mean an Eligible  Award
which may be paid from the Trust, as designated from time to time by the Company
on Schedule 3 hereto, and shall initially include RSUs and CSAs.

                  (f) "CSAs" shall mean Contingent Stock Awards granted pursuant
 to a Plan.

                  (g) "Eligible  Award" shall mean any Award under a Plan listed
in  Schedule  2,  other  than  Non-qualifying  Awards;  provided,  that upon the
commencement of a tender offer or exchange offer for Shares,  the term "Eligible
Award" shall only include  Covered  Eligible Awards and, upon the termination or
abandonment  of such tender  offer or  exchange  offer  without the  purchase or
exchange of any Shares  thereunder,  the term "Eligible Award" shall include all
Awards issued under Plans listed on Schedule 2 other than Non-qualifying Awards.

                  (h) "ERISA" shall have the meaning given it in the fourth
 recital to this Agreement.

                  (i) "Fair Market Value" on any date means the closing price of
the  Shares  or  other  securities  for  which  the Fair  Market  Value is to be
determined on such date on the principal national  securities  exchange on which
such  Shares or  securities  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),  or if the Shares or securities  are not so listed or traded,
the  arithmetic  mean of the per share  closing bid price and per share  closing
asked price on such date as quoted on the  National  Association  of  Securities
Dealers  Automated  Quotation  System, or such other market in which such prices
are  regularly  quoted,  or,  if  there  have  been no  published  bid or  asked
quotations  with respect to Shares or such other  securities  on such date,  the
Fair Market Value shall be the value established by the Company in good faith.

                  (j) "insolvent" shall have the meaning given it in Section
 3(a) of the Agreement.

                  (k) "Instruction  Schedule" shall mean a schedule  provided by
the Company to the Trustee  indicating,  with  respect to a  Participant  or all
Participants,  information  which will  enable the  Trustee to make  Payments or
solicit instructions  including,  without limitation,  (i) the number of Covered
Eligible Awards held by a Participant  which are to be paid from the Trust, (ii)
the form in which  amounts  due to such  Participant  are to be paid,  (iii) the
Withholding Amount applicable to any Payment to such Participant,  (iv) the time
of payment of such amounts, (v) the approved  beneficiaries of such Participant,
(vi)  whether  such  Participant  is to  receive  dividends  paid on the  Shares
corresponding  to his or her  Eligible  Awards  in cash  or  kind  or have  such
dividends invested in additional  Shares,  (vii) special payment provisions with
respect to the  proceeds of the purchase or  exchange,  of Shares  pursuant to a



tender or  exchange  offer,  (viii)  the  number of  Voting  Awards  held by any
Participant and (ix) whether Payments are to be made to a Separate Trust.

                  (l)  "Non-qualifying  Award"  shall  mean an Award  which  the
Company  determines  from time to time  should not be funded from the Trust or a
Separate Trust because of tax or regulatory  characteristics of the jurisdiction
of which the holder of the Award is a citizen or resident.

                  (m) "Participant" shall mean an individual who holds an 
Eligible Award or such individual's estate or beneficiaries.

                  (n)  "Payment"  shall  mean a  payment  from  the  Trust  to a
Participant or a Separate Trust pursuant to Sections 2(a),  9(c) or 15(c) of the
Agreement.

                  (o)  "Plan" shall have the meaning given it in the first 
recital to the Agreement.

                  (p)  "RSUs" shall mean Restricted Stock Units granted pursuant
 to a Plan.

                  (q) "Separate Trust" shall mean a trust, other than the Trust,
the  purpose  of which is to  receive  and  disburse  Payments  to  satisfy  the
obligations of the Company to Participants  who are also  beneficiaries  of such
trust,  and which Payments are to be  distributed  immediately on receipt by the
Separate Trust to the Participants whose Awards are funded through such Separate
Trust, subject to applicable withholding taxes.

                  (r)  "Shares" shall have the meaning given it in the second
 recital to the Agreement.

                  (s)  "Termination Date" shall mean the date that the Trust is
terminated pursuant to Section 15(c) of the Agreement.

                  (t)  "Trust" shall mean the trust established pursuant to
Section 1(a) hereof.

                  (u) "Trustee"  shall mean State Street Bank & Trust Company or
any successor thereto pursuant to the terms of the Agreement.

                  (v) "Voting  Award"  shall mean an  Eligible  Award which is a
Covered  Eligible Award and which is held by a Participant who is an employee of
the Company or its participating  affiliates on the record date for a meeting of
stockholders  of the Company or action by written  consent in lieu of a meeting;
provided  that Voting Awards shall be held by not less than 50% of the employees
of the Company and its participating affiliates on such record date.

                  (w)  "Withholding  Amount"  shall mean the  percentage  of any
federal,  state, local or foreign taxes that may be required to be withheld with
respect to any Payment.





                                   SCHEDULE 1

                    Property Sold or Contributed to the Trust


1.       Contributed Property

         (a)      Cash in the amount of $1,100,000

         (b)      5,000,000 shares of treasury stock of the Company

2.       Property Sold to the Trust

         (a)      11,000,000 shares of the Company's authorized but unissued 
                  shares sold to the Trust for $.10  per share





                                   SCHEDULE 2

                  Plans Under Which Eligible Awards Are Issued


1.       1994 Management Ownership Plan

2.       1996 Management Ownership Plan

3.       Employee Incentive Plan





                                   SCHEDULE 3

                             Covered Eligible Awards


1.       Restricted Stock Units

2.       Contingent Stock Awards