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last updated: 7 October 2008

From: xxx  xxx and xxx xxx, co-managers of the xxx xxx product NB (Neuberger Berman)

To: All Members of Lehman's Executive Committee

'As long-term employees and former partners of Neuberger Berman, we feel compelled to express our views on several matters to members of Lehman's Executive Committee.

(1) Top management should forgo bonuses this year (Ed's note - Something that Lehman's top executives subsequently confirmed they would do).

This would serve a dual purpose. Firstly, it would represent a significant expense exposure. Secondly, when the 'world' discovers this in next year's proxy, it would send a strong message to both employees and investors that management is not shirking accountability for recent performance.

(2) Do a partial spin-ot of NB

A partial spin could be an attractive source of capital for Lehman, at a time the company needs capital. It would also serve to highlight a high quality, stable, low-risk earnings stream, a large portion of which would continue to accrue to the parent.

Secondly, this would relieve the anxiety of NB clients, who are placing many worried calls about the fate of NB and their accounts because of the negative publicity and financial stress associated with Lehman.

Finally, it would permit the use of Neuberger Berman stock to pay the non-cash incentive comp for NB employees. Morale at NB is at a dangerously low level, largely because Lehman stock is a significant portion of our compensation, and as such, our comp is not tied to anything within our control. Many believe that a substantial portion of the problems at Lehman are structural rather than merely cyclical in nature. The 'old' Neuberger franchise (which resides at 605 Third) is largely intact. However, this is a people business, and the continuing health of the franchise is dependent on retaining key producers and support personnel.

Don't slam bonuses of key producers and support personnel at NB because of management mistakes elsewhere (Lincoln Capital, Liberty View, elsewhere at Lehman).

Because of the fixed nature of PAM (high net worth) compensation, any adjustment to compensation will by definition fall disproportionately on non-PAM money managers (those of us on the institutional side) and related support staff. Please be aware that there is a serious potential of losing key people. Many money managers at NB are in a position to retire if they feel they are being dealt with unfairly, and others have numerous options open to them. The potential for adverse selection is real, and cannot be underestimated'.

03.06.08

From George H Bush (a member of the Executive Committee, and, yes, a cousin to the President)

To: Members of the Executive Committee

'Sorry team,

I'm not sure what's in the water at 605 Third Avenue today, Amato and I clearly have some work to do (given the today's similar emails from xxx xxx, xxx xxx and now xxx).

The compensation issue she raises (xxx xxx and xxx xxx on the one hand versus xxx xxx and xxx xxx on the other) is a particular issue for a small handful of people at Neuberger and hardly worth the EC's time now.

I'm embarrassed and I apologize'.

03.06.08

From Dick Fuld

To Shelby Lauckhardt

'Don't worry - they are only people who think about their own pockets'.

READER COMMENTS:

1. 'This e-mail exchange shows much of what it wrong in financial markets. At a time of adversity, we see pleas for decent bonuses and threats to leave the firm. No wonder Lehman Fulded'.

2. 'It's e-mails like this that make me start to feel sorry for Dick Fuld'.