ASSET PURCHASE AGREEMENT

 

TABLE OF CONTENTS

 

		Page
Article I	DEFINITIONS	1
1.1	Certain Definitions	1
1.2	Other Definitional and Interpretive Matters	10
Article II	PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES	11
2.1	Purchase and Sale of Assets	11
2.2	Excluded Assets	11
2.3	Assumption of Liabilities	11
2.4	Excluded Liabilities	12
2.5	Cure Amounts	13
2.6	Further Conveyances and Assumptions	13
2.7	Bulk Sales Laws	14
Article III	CONSIDERATION	14
3.1	Consideration	14
3.2	Payment of Cash Amount	14
3.3	Adjustment to Cash Amount	14
Article IV	CLOSING AND TERMINATION	15
4.1	Closing Date	15
4.2	Deliveries by Seller	15
4.3	Deliveries by Purchaser	16
4.4	Termination of Agreement	16
4.5	Procedure Upon Termination	16
4.6	Effect of Termination	16
Article V	REPRESENTATIONS AND WARRANTIES OF SELLER	18
5.1	Organization and Good Standing	18
5.2	Authorization of Agreement	18
5.3	Conflicts; Consents of Third Parties	18
5.4	Title to Purchased Assets	19
5.5	Compliance with Laws; Permits	19
5.6	No Other Representations or Warranties; Schedules	20

 

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		Page
Article VI	REPRESENTATIONS AND WARRANTIES OF PURCHASER	20
6.1	Organization and Good Standing	20
6.2	Authorization of Agreement	21
6.3	Conflicts; Consents of Third Parties	21
6.4	Financial Capability	21
6.5	Condition of the Business	22
Article VII	BANKRUPTCY COURT MATTERS	22
7.1	[Reserved]	22
7.2	Bankruptcy Court Filings	22
Article VIII	COVENANTS	23
8.1	Access to Information	23
8.2	Conduct of the Business Pending the Closing	23
8.3	Consents	26
8.4	Regulatory Approvals	26
8.5	Further Assurances	27
8.6	Confidentiality	28
8.7	Preservation of Records	28
8.8	Publicity	29
8.9	Trademark License	29
8.10	Use of Purchased Intellectual Property	30
8.11	Deferred Transfers	31
8.12	Release of Guarantees	32
8.13	Transition Services	33
8.14	Subleases	33
8.15	Landlord Notice	33
8.16	Artwork	33
Article IX	EMPLOYEES AND EMPLOYEE BENEFITS	34
9.1	Employee Benefits	34
Article X	CONDITIONS TO CLOSING	35

 

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		Page
10.1	Conditions Precedent to Obligations of Purchaser	35
10.2	Conditions Precedent to Obligations of Seller	36
10.3	Conditions Precedent to Obligations of Purchaser and Seller	37
10.4	Frustration of Closing Conditions	37
Article XI	[RESERVED]	37
Article XII	TAXES	37
12.1	Transfer Taxes	37
12.2	Prorations	38
12.3	Purchase Price Allocation	38
12.4	Adjustment to Purchase Price	38
Article XIII	MISCELLANEOUS	38
13.1	Expenses	38
13.2	Injunctive Relief	38
13.3	Submission to Jurisdiction; Consent to Service of Process	39
13.4	Waiver of Right to Trial by Jury	39
13.5	Entire Agreement; Amendments and Waivers	39
13.6	Governing Law	40
13.7	Notices	40
13.8	Severability	42
13.9	Binding Effect; Assignment	42
13.10	Non-Recourse	42
13.11	Counterparts	42
13.12	Scope of Purchased Assets	42

 

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ASSET PURCHASE AGREEMENT

 

ASSET PURCHASE AGREEMENT, dated as of September 16, 2008 (this “ Agreemen t”), among LEHMAN BROTHERS HOLDINGS INC. , a Delaware corporation (“ LBHI ”), LEHMAN BROTHERS INC., a Delaware corporation (“ LBI ” and, together with LBHI, the “ Seller ”), LB 745 LLC , a Delaware limited liability company (“ 745 ”), and BARCLAYS CAPITAL INC. , a Connecticut corporation (“ Purchaser ”).

 

W I T N E S S E T H:

 

WHEREAS, LBHI is a debtor-in-possession under title 11 of the United States Code, 11 U.S.C. § 101 et seq. (the “ Bankruptcy Code ”), and filed voluntary petitions for relief under chapter 11 of the Bankruptcy Code on September 15, 2008 in the United States Bankruptcy Court for the Southern District of New York (Manhattan) (the “ Bankruptcy Court ”) (Case No. [08-13555]) (the “ Bankruptcy Case ”);

 

WHEREAS, the Seller and its Subsidiaries presently conduct the Business;

 

WHEREAS, Seller and 745 desire to sell, transfer and assign to Purchaser, and Purchaser desires to purchase, acquire and assume from Seller and 745, pursuant to Sections 363 and 365 of the Bankruptcy Code, all of the Purchased Assets and Assumed Liabilities, all as more specifically provided herein; and

 

WHEREAS, an Affiliate of Purchaser has agreed to provide to LBHI a debtor-in-possession facility (the “ DIP Facility ”) and has agreed to provide to LBI certain other financing;

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter contained, the parties hereby agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

1.1                                  Certain Definitions .

 

For purposes of this Agreement, the following terms shall have the meanings specified in this Section 1.1 :

 

“ Affiliate ” means, with respect to any Person, any other Person that, directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, and the term “control” (including the terms

 

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“controlled by” and “under common control with”) means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through ownership of voting securities, by contract or otherwise.

 

“ Breakup Fee and Competing Bid Order ” means an order of the Bankruptcy Court in the form attached as Exhibit A hereto.

 

“ Business ” means the U.S. and Canadian investment banking and capital markets businesses of Seller including the fixed income and equities cash trading, brokerage, dealing, trading and advisory businesses, investment banking operations and LBI’s business as a futures commission merchant.

 

“ Business Day ” means any day of the year on which national banking institutions in New York are open to the public for conducting business and are not required or authorized to close.

 

“ Code ” means the Internal Revenue Code of 1986, as amended.

 

“ Contract ” means any contract, indenture, note, bond, lease or other agreement.

 

“ Documents ” means all files, documents, instruments, papers, books, reports, records, tapes, microfilms, photographs, letters, budgets, forecasts, ledgers, journals, title policies, customer lists, regulatory filings, operating data and plans, technical documentation (design specifications, functional requirements, operating instructions, logic manuals, flow charts, etc.), user documentation (installation guides, user manuals, training materials, release notes, working papers, etc.), marketing documentation (sales brochures, flyers, pamphlets, web pages, etc.), and other similar materials related to or necessary for the conduct of the Business and the Purchased Assets in each case whether or not in electronic form.

 

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

“ Excluded Assets ” shall mean the following assets, properties, interests and rights of Seller and its Subsidiaries:

 

(a)                                   the shares of capital stock, limited liability company membership, general and limited partnership, and other equity interests, of Seller and its Subsidiaries (other than (i) the capital stock of Townsend Analytics and (ii) the capital stock or other equity interests of any other Subsidiary that Seller and Purchaser may agree prior to the entry of the Sale Order shall be a Purchased Asset);

 

(b)                                  all cash, cash equivalents, bank deposits or similar cash items of LBI and its Subsidiaries (the “ Retained Cash ”) other than $1.3 billion in cash, cash equivalents, bank deposits or similar cash items;

 

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(c)                                   all intercompany receivables;

 

(d)                                  the Excluded Contracts, including any accounts receivable to the extent arising out of any Excluded Contract;

 

(e)                                   any Intellectual Property Rights that do not constitute Purchased Intellectual Property;

 

(f)                                     any (i) confidential personnel and medical records pertaining to any Excluded Employee; (ii) other books and records that LBI is required by Law to retain, including, but not limited to, books and records required to be retained by Rules 17a-3 and 17a-4 of the Exchange Act with respect to the Purchased Assets or that LBHI reasonably determines are necessary to retain including, without limitation, Tax Returns, financial statements, and corporate or other entity filings; provided , however , that Purchaser shall have the right to make copies of any portions of such retained books and records that relate to the Business or any of the Purchased Assets; and (iv) minute books, stock ledgers and stock certificates of Subsidiaries..

 

 

(g)                                  any claim, right or interest of LBHI or any of its Subsidiaries in or to any refund, rebate, abatement or other recovery for Taxes, together with any interest due thereon or penalty rebate arising therefrom, for any Tax period (or portion thereof) ending on or before the Closing Date;

 

(h)                                  all insurance policies or rights to proceeds thereof relating to the assets, properties, business or operations of Seller or any of its Subsidiaries other than customer account insurance supplemental to SIPC coverage included in the Business;

 

(i)                                      any rights, claims or causes of action of Seller or any of its Subsidiaries against third parties relating to assets, properties, business or operations of Seller or any of its Subsidiaries (other than those primarily related to Purchased Assets) arising out of events occurring on or prior to the Closing Date;

 

(j)                                      commercial real estate investments (including commercial loans, equity investments in such commercial real estate and other commercial real estate assets and all Archstone debt and equity positions), private equity investments and hedge fund investments;

 

(k)                                   50% of each position in residential real estate mortgage securities;

 

(l)                                      assets related to the soliciting, placing, clearing and executing of buy and sell orders for derivatives contracts by Lehman Brothers Derivative Products Inc. and all activities related or ancillary thereto;

 

(m)                                all artwork owned by Seller and its Subsidiaries;

 

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(n)                                  all assets primarily related to the IMD Business and derivatives contracts;

 

(o)                                  any assets set aside, segregated, or otherwise specifically identified as being held for the purpose of satisfying Excluded Liabilities referred to in Section 2.4(e) ;

 

(p)                                  all real property leases of Seller and its Subsidiaries, and all rights and obligations appurtenant thereto, as set forth on Schedule 1.1(a), other than the Transferred Real Property Leases; and

 

(q)                                  Lehman Commercial Paper, Inc. and any assets thereof.

 

“ Excluded Contracts ” means all of the Contracts of Seller and its Subsidiaries, other than the Purchased Contracts.

 

“ Furniture and Equipment ” means all furniture, fixtures, furnishings, equipment, vehicles, leasehold improvements, and other tangible personal property owned or used by Seller and its Subsidiaries in the conduct of the Business, including all desks, chairs, tables, Hardware, copiers, telephone lines and numbers, telecopy machines and other telecommunication equipment, cubicles and miscellaneous office furnishings and supplies.

 

“ GAAP ” means generally accepted accounting principles in the United States as of the date hereof.

 

“ Governmental Body ” means any government or governmental or regulatory, judicial or administrative, body thereof, or political subdivision thereof, whether foreign, federal, state, national, supranational or local, or any agency, instrumentality or authority thereof, or any court or arbitrator (public or private) or any self-regulatory organization, including, but not limited to, the Financial Industry Regulatory Authority.

 

“ Hardware ” means any and all computer and computer-related hardware, networks and peripherals, including, but not limited to, information and communication systems, computers, file servers, facsimile servers, scanners, color printers, laser printers and networks.

 

“ HSR Act ” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended.

 

“ IMD Business ” means the investment management business of Seller and its Subsidiaries.

 

“ Intellectual Property Rights ”  means, collectively, all intellectual property and other similar proprietary rights in any jurisdiction, whether owned or held for use

 

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under license, whether registered or unregistered, including without limitation such rights in and to:  (i) patents and applications therefor, including continuations, divisionals, continuations-in-part, reissues, continuing patent applications, reexaminations, and extensions thereof, any counterparts claiming priority therefrom and patents issuing thereon (collectively, “ Patents ”) and inventions, invention disclosures, discoveries and improvements, whether or not patentable, (ii) all trademarks, service marks, trade names, service names, brand names, all trade dress rights, logos, slogans, Internet domain names and corporate names and general intangibles of a like nature, together with the goodwill associated with any of the foregoing, and all applications, registrations and renewals thereof and all common law rights thereto (collectively, “ Marks ”), (iii) copyrights and registrations and applications therefor and renewals and extensions thereof, and works of authorship, databases and mask work rights, and all moral rights (collectively, “ Copyrights ”), (iv) all Software, Technology, trade secrets and market and other data, and rights to limit the use or disclosure of any of the foregoing by any Person, and (v) all claims, causes of action and defenses relating to the enforcement of any of the foregoing.

 

“ Intellectual Property Licenses ” means (i) any grant to a third Person of any license, immunity, a covenant not to sue or otherwise any right to use or exploit, any of the Purchased Intellectual Property owned by Seller or any of its Subsidiaries, and (ii) any grant to Seller or its Subsidiaries of a license, immunity, a covenant not to sue or otherwise any right to use or exploit any Purchased Intellectual Property which is not owned by Seller or any of the Subsidiaries.

 

“ Knowledge of Seller ” means the knowledge after due inquiry, as of the date of this Agreement, of the senior officers and directors of Seller and its Subsidiaries.

 

“ Law ” means any federal, state, local or foreign law, statute, code, ordinance, rule or regulation (including rules of any self-regulatory organization).

 

“ Legal Proceeding ” means any judicial, administrative or arbitral actions, suits, proceedings (public or private) or claims or any proceedings or investigations by or before a Governmental Body.

 

“ Liability ” means any debt, liability or obligation (whether direct or indirect, known or unknown, absolute or contingent, accrued or unaccrued, liquidated or unliquidated, or due or to become due), and including all costs and expenses relating thereto.

 

“ Lien ” means any lien, encumbrance, pledge, mortgage, deed of trust, security interest, claim, lease, charge, option, right of first refusal, easement, servitude, proxy, voting trust or agreement, transfer restriction under any shareholder or similar agreement or encumbrance.

 

 “ Order ” means any order, injunction, judgment, decree, ruling, writ, assessment or arbitration award of a Governmental Body.

 

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“ Ordinary Course of Business ” means the ordinary and usual course of normal day-to-day operations of the Business through September 14, 2008 consistent with past practice.

 

“ Permits ” means any approvals, authorizations, consents, licenses, permits, registrations or certificates of a Governmental Body.

 

“ Permitted Exceptions ” means all (i) defects, exceptions, restrictions, easements, rights of way and encumbrances of record, (ii) statutory liens for current Taxes, assessments or other governmental charges not yet delinquent or the amount or validity of which is being contested in good faith by appropriate proceedings provided an appropriate reserve is established therefor; (iii) mechanics’, carriers’, workers’, repairers’ and similar Liens arising or incurred in the Ordinary Course of Business; (iv) zoning, entitlement and other land use and environmental regulations by any Governmental Body provided that such regulations have not been violated; (v) title of a lessor under a capital or operating lease; (vi) Liens arising under the DIP Facility; and (vii) the terms and provisions of the ground lease and related documents affecting the property located at 745 Seventh Avenue, New York, NY (the “ 745 Seventh Ground Lease ”).

 

“ Person ” means any individual, corporation, limited liability company, partnership, firm, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Body or other entity.

 

“ Purchased Assets ” means all of the assets of Seller and its Subsidiaries used in connection with the Business (excluding the Excluded Assets), including;

 

(a)                                   the Retained Cash;

 

(b)                                  all deposits (including customer deposits, security deposits for rent, electricity, telephone or otherwise and required capital deposits) and prepaid charges and expenses of Seller and its Subsidiaries associated with the Business, other than any deposits or prepaid charges and expenses paid in connection with or relating to any Excluded Assets;

 

(c)                                   the Transferred Real Property Leases, together with all improvements, fixtures and other appurtenances thereto and rights in respect thereof;

 

(d)                                  government securities, commercial paper, corporate debt, corporate equity, exchange traded derivatives and collateralized short-term agreements with a book value as of the date hereof of approximately $70 billion (collectively, “ Long Positions ”);

 

(e)                                   50% of each position in the residential real estate mortgage securities;

 

(f)                                     the Furniture and Equipment;

 

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(g)                                  the Purchased Intellectual Property and all income, royalties, damages and payments due or payable at the Closing or thereafter relating to the Purchased Intellectual Property (including damages and payments for past or future infringements or misappropriations thereof), the right to sue and recover damages for past or future infringements or misappropriations thereof and the right to fully and entirely stand in the place of Seller in all matters related thereto;

 

(h)                                  the Purchased Contracts;

 

(i)                                      all Documents that are used in, held for use in or intended to be used in, or that arise in connection with, or are necessary to carry on or are related to the operation of the Business, including Documents relating to products, services, marketing, advertising, promotional materials, Purchased Intellectual Property, personnel files for Transferred Employees and all files, customer files and documents (including credit information), account agreements, books and records required to be maintained in connection with the Business under applicable Law, compliance manuals, supervisory policies and procedures, customer lists, supplier lists, records, literature and correspondence, whether or not physically located on any of the premises referred to in clause (d) above, but excluding (i) personnel files for Excluded Employees of Seller or its Subsidiaries who are not Transferred Employees, (ii) such files as may be required under applicable Law regarding privacy, (iii) Documents which Seller is not permitted to transfer pursuant to any contractual confidentiality obligation owed to any third party, and (iv) any Documents primarily related toany Excluded Assets;

 

(j)                                      all Permits used by Seller in the Business to the extent assignable under applicable Law;

 

(k)                                   all supplies owned by Seller and used in connection with the Business;

 

(l)                                      all rights of Seller under non-disclosure or confidentiality, non-compete, or non-solicitation agreements with employees, contractors and agents of Seller or its Subsidiaries or with third parties to the extent relating to the Business or the Purchased Assets (or any portion thereof);

 

(m)                                rights to “Lehman” indices and analytics that support the indices and all other indices and analytics used in the Business;

 

(n)                                  general trading tools supporting the Business;

 

(o)                                  the stock of  Townsend Analytics and the stock, equity interests or assets of any other Subsidiary of LBI that the Seller and Purchaser may mutually agree on prior of the entry of the Sale Order and of which a notice has been provided to any statutory committee;

 

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(p)                                  the equity interests or assets (at the election of Purchaser in its sole discretion prior to the entry of the Sale Order) of Eagle Energy Management LLC;

 

(q)                                  all past and present goodwill and other intangible assets associated with or symbolized by the Business, including customer and supplier lists and the goodwill associated with the Purchased Intellectual Property;

 

(r)                                     Mercantile Exchange license agreements with respect to 335 South LaSalle Street, Chicago, IL and 400 South LaSalle Street, Chicago, IL; and

 

(s)                                   any insurance proceeds from the occurrence after the date hereof and prior to Closing, of any casualty or event loss with respect to any Transferred Real Property Leases or any properties subject thereto.

 

“ Purchased Contracts ” means all Contracts designated as Purchased Contracts pursuant to Section 2.5 .

 

“ Purchased Intellectual Property ” means the Purchased Marks and all other Intellectual Property Rights, Software and Technology throughout the world that are used in, related to, or otherwise necessary for the Business, including all Intellectual Property Rights embodied in or arising from the Purchased Assets.

 

“ Purchased Marks ” means the Mark “LEHMAN” and “LEHMAN BROTHERS” throughout the world, all other Marks throughout the world containing or incorporating the name “LEHMAN,” the Internet domain name www.lehman.com, all other Internet domain names containing or incorporating any Purchased Marks, and any other Mark throughout the world that is used in, related to, or otherwise necessary for the Business; in each case, together with all of the goodwill associated therewith and all registrations and applications for the foregoing and all common law rights thereto.

 

“ Sale Motion ” means the motion or motions of Seller, in form and substance reasonably acceptable to Purchaser and Seller, seeking approval and entry of the Breakup Fee and Competing Bid Order and Sale Order.

 

“ Sale Order ” shall be an order or orders of the Bankruptcy Court in form and substance reasonably acceptable to Purchaser and Seller approving this Agreement and all of the terms and conditions hereof, and approving and authorizing Seller to consummate the transactions contemplated hereby.  Without limiting the generality of the foregoing, such order shall find and provide, among other things, that (i) the Purchased Assets sold to Purchaser pursuant to this Agreement shall be transferred to Purchaser free and clear of all Liens (other than Liens created by Purchaser and Permitted Exceptions) and claims, such Liens and claims to attach to the Purchase Price; (ii) Purchaser has acted in “good faith” within the meaning of Section 363(m) of the Bankruptcy Code; (iii) this Agreement was negotiated, proposed and entered into by the parties without collusion, in good faith and from arm’s length bargaining positions; (iv) the Bankruptcy Court shall

 

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retain jurisdiction to resolve any controversy or claim arising out of or relating to this Agreement, or the breach hereof as provided in Section 13.3 hereof; and (v) this Agreement and the transactions contemplated hereby may be specifically enforced against and binding upon, and not subject to rejection or avoidance by, Seller or any chapter 7 or chapter 11 trustee of Seller.

 

“ Software ” means any and all (i) computer programs, including any and all software implementations of algorithms, models and methodologies and application programming interfaces, whether in source code or object code, (ii) databases and compilations, including any and all data and collections of data, whether machine readable or otherwise, (iii) descriptions, flow-charts and other work product used to design, plan, organize and develop any of the foregoing, screens, user interfaces, report formats, firmware, development tools, templates, menus, buttons and icons, and (iv) all software-related specifications documentation including user manuals and other training documentation related to any of the foregoing.

 

“ Subsidiary ” means any Person of which a majority of the outstanding voting securities or other voting equity interests are owned, directly or indirectly, by Seller.

 

“ Tax Authority” means any state or local government, or agency, instrumentality or employee thereof, charged with the administration of any law or regulation relating to Taxes.

 

“ Taxes ” means (i) all federal, state, local or foreign taxes, charges or other assessments, including, without limitation, all net income, gross receipts, capital, sales, use, ad valorem, value added, transfer, franchise, profits, inventory, capital stock, license, withholding, payroll, employment, social security, unemployment, excise, severance, stamp, occupation, property and estimated taxes, and (ii) all interest, penalties, fines, additions to tax or additional amounts imposed by any taxing authority in connection with any item described in clause (i).

 

“ Tax Return ” means all returns, declarations, reports, estimates, information returns and statements required to be filed in respect of any Taxes.

 

“ Technology ” means, collectively, all designs, formulae, algorithms, procedures, methods, techniques, ideas, know-how, business and marketing information, research and development, technical data, programs, subroutines, tools, materials, specifications, processes, inventions (whether patentable or unpatentable and whether or not reduced to practice), apparatus, creations, improvements, works of authorship and other similar materials, non-public or confidential information, and all recordings, graphs, drawings, reports, analyses, and other writings, and other tangible embodiments of the foregoing, in any form whether or not specifically listed herein, and all related technology.

 

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“ Transferred Real Property Leases ” means the leases listed on Schedule 1.1(b)  attached hereto and any rights and obligations appurtenant thereto.

 

1.2                                  Other Definitional and Interpretive Matters

 

(a)                                   Unless otherwise expressly provided, for purposes of this Agreement, the following rules of interpretation shall apply:

 

Calculation of Time Period .  When calculating the period of time before which, within which or following which any act is to be done or step taken pursuant to this Agreement, the date that is the reference date in calculating such period shall be excluded.  If the last day of such period is a non-Business Day, the period in question shall end on the next succeeding Business Day.

 

Dollars .  Any reference in this Agreement to $ shall mean U.S. dollars.

 

Exhibits/Schedules .  All Exhibits and Schedules annexed hereto or referred to herein are hereby incorporated in and made a part of this Agreement as if set forth in full herein.  Any matter or item disclosed on one schedule shall be deemed to have been disclosed on each other schedule.  Any capitalized terms used in any Schedule or Exhibit but not otherwise defined therein shall be defined as set forth in this Agreement.

 

Gender and Number .  Any reference in this Agreement to gender shall include all genders, and words imparting the singular number only shall include the plural and vice versa.

 

Headings .  The provision of a Table of Contents, the division of this Agreement into Articles, Sections and other subdivisions and the insertion of headings are for convenience of reference only and shall not affect or be utilized in construing or interpreting this Agreement.  All references in this Agreement to any “Section” are to the corresponding Section of this Agreement unless otherwise specified.

 

Herein .  The words such as “ herein ,” “ hereinafter ,” “ hereof ,” and “ hereunder ” refer to this Agreement as a whole and not merely to a subdivision in which such words appear unless the context otherwise requires.

 

Including .  The word “ including ” or any variation thereof means “ including, without limitation ” and shall not be construed to limit any general statement that it follows to the specific or similar items or matters immediately following it.

 

(b)                                  The parties hereto have participated jointly in the negotiation and drafting of this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as jointly drafted by the parties hereto and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provision of this Agreement.

 

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ARTICLE II

PURCHASE AND SALE OF ASSETS; ASSUMPTION OF LIABILITIES

 

2.1                                  Purchase and Sale of Assets .  On the terms and subject to the conditions set forth in this Agreement, at the Closing (as defined below), Purchaser shall purchase, acquire and accept from the Seller and 745, and Seller and 745 shall sell, transfer, assign, convey and deliver (or cause to be sold, transferred, assigned, conveyed and delivered) to Purchaser, all of Seller’s and its applicable Subsidiaries’ right, title and interest in, to and under the Purchased Assets free and clear of all Liens pursuant to Section 363(f) of the Bankruptcy Code.

 

2.2                                  Excluded Assets .  Nothing herein contained shall be deemed to sell, transfer, assign or convey the Excluded Assets to Purchaser, and Seller (directly and indirectly) shall retain all right, title and interest to, in and under the Excluded Assets.

 

2.3                                  Assumption of Liabilities .  On the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser shall assume, effective as of the Closing, and shall timely perform and discharge in accordance with their respective terms, the following  Liabilities of Seller and its Subsidiaries (collectively, the “ Assumed Liabilities ”):

 

(a)                                   all Liabilities of Seller incurred, after the Closing, in connection with the Business;

 

(b)                                  all Liabilities of Seller under the Purchased Contracts arising after, with respect to each entity comprising Seller, the date on which such entity commenced a voluntary case or cases under Chapter 11 or Chapter 7, as the case may be, of the Bankruptcy Code;

 

(c)                                   all Liabilities assumed under Article IX ;

 

(d)                                  accounts payable incurred in the Ordinary Course of Business of Seller after, with respect to each entity comprising Seller, the date on which such entity commenced a voluntary case or cases under Chapter 11 or Chapter 7, as the case may be, of the Bankruptcy Code, associated with the Business other than any accounts payable arising out of one in connection with any Excluded Contract (including, for the avoidance of doubt, (i) invoiced accounts payable and (ii) accrued but uninvoiced accounts payable);

 

(e)                                   all Transfer Taxes applicable to the transfer of the Purchased Assets pursuant to this Agreement;

 

(f)                                     all other Liabilities to the extent related to the Business, the Purchased Assets or the Transferred Employees arising after the Closing;

 

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(g)                                  all Liabilities under Transferred Real Property Leases from the date of Closing forward;

 

(h)                                  all Liabilities relating to amounts required to be paid by Purchaser hereunder; and

 

(i)                                      all short positions and “repos” relating to any securities or interests of the types included in the definition of “Long Positions” with a book value as of the date hereof of approximately $69 billion (collectively, “ Short Positions ” and, together with the Long Positions, “ Positions ”).

 

2.4                                  Excluded Liabilities .  Notwithstanding anything herein to the contrary, Purchaser will not assume or be liable for any Excluded Liabilities.  “ Excluded Liabilities ” shall mean all Liabilities of Seller and its Subsidiaries to the extent they do not arise out of the Business and the following Liabilities:

 

(a)                                   all Liabilities arising out of Excluded Assets, including Contracts that are not Purchased Contracts;

 

(b)                                  except as otherwise provided in Article XII , all Liabilities for Taxes of Seller for any Tax periods (or portions thereof) ending on or before the Closing Date;

 

(c)                                   except as otherwise provided in this Agreement and other than any cure amounts that Purchaser is required to pay pursuant to Section 2.5 , Liabilities incurred in the Ordinary Course of Business existing prior to the filing of the Bankruptcy Case that are subject to compromise under the Bankruptcy Case (the “ Compromised Liabilities ”);

 

(d)                                  except as expressly assumed pursuant to Article IX hereof, any Liabilities relating to the employment, potential employment or termination of employment of any Person relating to or arising out of any period prior to the Closing, including without limitation any Liability under or relating to any employee benefit plan, program, agreement or arrangement, including in respect of equity compensation plans and tax-qualified or not tax-qualified pension or saving plans as to which the parties agree there shall be no transfer to or assumption of Liabilities by the Purchaser;

 

(e)                                   all Liabilities relating to amounts required to be paid by Seller, hereunder, including upon any breach;

 

(f)                                     all Liabilities under Excluded Real Property Leases and Transferred Real Property Leases other than Liabilities under Transferred Real Property Leases from the date of Closing forward; and

 

(g)                                  all intercompany payables.

 

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2.5                                  Cure Amounts . For a period of 60 days after the Closing, the Purchaser shall have the right upon notice to Seller to designate any contract related to the assets purchased from the Seller by Purchaser or its Affiliates (the “ Related Contracts ”) as either (1) a Purchased Contract or (2) a Contract not designated as a Purchase Contract (a “ Rejected Contract ”).  Until a Related Contract is so designated, Buyer shall be obligated to pay or cause to be paid ordinary course amounts due under such contracts in accordance with the terms thereof.  If a Related Contract is designated as a Purchased Contract, such Purchased Contract shall be assigned to the Purchaser and upon such assignment Purchaser shall be obligated to pay or cause to be paid the cure amount in respect of such Purchased Contract.  If a Related Contract is designated as a Rejected Contract, Purchaser shall have no further obligations in respect thereof.  In the event of any dispute relating to such cure amount, Purchaser shall escrow such funds in a manner satisfactory to the court. This Section will not apply to real property leases.

 

2.6                                  Further Conveyances and Assumptions .

 

(a)                                   From time to time following the Closing, Seller shall, or shall cause its Affiliates to, make available to Purchaser such data in personnel records of Transferred Employees as is reasonably necessary for Purchaser to transition such employees into Purchaser’s records.

 

(b)                                  From time to time following the Closing, without further consideration, Seller and Purchaser shall, and shall cause their respective Affiliates to, do, execute, acknowledge and deliver, or cause to be done, executed, acknowledged or delivered, all such further conveyances, deeds, assignments, notices, assumptions, releases, acquaintances, powers of attorney and assurances (including any notarization, authentication, legalization and consularization of the signatures of Seller’s and its Subsidiaries’ representatives), and such other instruments, and shall take such further actions, as may be reasonably necessary or appropriate to assure fully to Purchaser and its respective successors or assigns, all of the properties, rights, titles, interests, estates, remedies, powers and privileges intended to be conveyed to Purchaser under this Agreement and the Seller Documents, and to assure fully to Seller and its Affiliates and their successors and assigns, the assumption of the liabilities and obligations intended to be assumed by Purchaser under this Agreement and the Seller Documents, and to otherwise make effective the transactions contemplated hereby and thereby.

 

(c)                                   If any third-party consent is required for the assignment of any Intellectual Property Licenses to Purchaser and such consent cannot be obtained, then, to the extent permitted by Applicable Law, Seller shall sublicense whatever rights they are permitted to sublicense under the respective Intellectual Property Licenses, provided such sublicense is at no cost to Seller.  If, however, Seller is permitted to sublicense only at a one time, fixed payment or an ongoing fee, Seller shall notify Purchaser thereof and, only if Purchaser agreed in writing to be responsible to such payment or fee, as applicable, Seller shall sublicense whatever rights it is permitted to sublicense under the respective Intellectual Property Licenses, subject to the payment or fee being paid by Purchaser.

 

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2.7                                  Bulk Sales Laws .  Purchaser hereby waives compliance by Seller and its Subsidiaries with the requirements and provisions of any “bulk-transfer” Laws of any jurisdiction that may otherwise be applicable with respect to the sale and transfer of any or all of the Purchased Assets to Purchaser.

 

ARTICLE III

CONSIDERATION

 

3.1                                  Consideration .  The aggregate consideration for the Purchased Assets shall be (a) the Cash Amount and (b) the assumption of the Assumed Liabilities by Purchaser.  The “ Cash Amount ” shall equal an amount in cash equal to the sum of (i) $250 million, (ii) the appraised value (as reasonably determined by an independent, recognized appraiser) of the Lehman headquarters at 745 Seventh Avenue in New York City less a reasonable market commission that would be paid assuming a sale of such property as of the Closing, (iii) the appraised value (as reasonably determined by an independent, recognized appraiser) of the Cranford New Jersey Data Center less a reasonable market commission that would be paid assuming a sale of such property as of the Closing, and (iv) the appraised value (as reasonably determined by an independent, recognized appraiser) of the Piscataway New Jersey Data Center less a reasonable market commission that would be paid assuming a sale of such property as of the Closing.  For illustrative purposes only, the parties note that as of the date hereof they expect that the Cash Amount will be approximately $1.7 billion (less the aforementioned assumed commissions).

 

3.2                                  Payment of  Cash Amount .  On the Closing Date, Purchaser shall pay the Cash Amount to Seller, which shall be paid by wire transfer of immediately available funds into an account designated by Seller.

 

3.3                                  Adjustment to Cash Amount .  Promptly following the first anniversary of the Closing Date, Purchaser shall determine with respect to each Position (long or short, including repos), that was part of the Purchased Assets and was sold on or prior to such first anniversary, the profit or loss realized from such sale (such profit or loss determined by reference to LBI’s mark (book value) for such Position as of the date hereof).  Purchaser shall provide reasonable supporting information to Seller with respect to such calculation of profit or loss.  If the aggregate amount of all such profits exceeds the aggregate amount of all such losses (a) by up to $500 million, Purchaser shall promptly pay Seller such net amount, or (b) by more than $500 million, Purchaser shall promptly pay Seller the sum of $500 million plus one-half of the excess of such net amount over $500 million (but in no event shall Purchaser pay Seller more than $750 million pursuant to this Section 3.3 ).  For purposes of this Section 3.3 , the time value of money shall be disregarded and no interest shall be deemed earned.

 

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ARTICLE IV

 

CLOSING AND TERMINATION

 

4.1                                  Closing Date .  Subject to the satisfaction of the conditions set forth in Sections 10.1 , 10.2 and 10.3 hereof (or the waiver thereof by the party entitled to waive that condition), the closing of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities provided for in Article II hereof (the “ Closing ”) shall take place at the offices of Weil, Gotshal & Manges LLP located at 767 Fifth Avenue, New York, New York 10153 (or at such other place as the parties may designate in writing) at 10 a.m (New York time) on the day of, or at Purchaser’s election the Business Day following, the satisfaction or waiver of the conditions set forth in Article X (other than conditions that by their nature are to be satisfied at the Closing, but subject to the satisfaction or waiver of such conditions), unless another time or date, or both, are agreed to in writing by the parties hereto.  The date on which the Closing shall be held is referred to in this Agreement as the “ Closing Date .”  Unless otherwise agreed by the parties in writing, the Closing shall be deemed effective and all right, title and interest of Seller to be acquired by Purchaser hereunder shall be considered to have passed to Purchaser as of 12:01 a.m. (New York time) on the Closing Date.

 

4.2                                  Deliveries by Seller .  At the Closing, Seller shall deliver to Purchaser:

 

(a)                                   a duly executed, reasonably customary bill of sale in the form of Exhibit A hereto;

 

(b)                                  duly executed, reasonably customary assignment and assumption agreements (including, with respect to the 745 Seventh ground lease, all assignments that were entered into in connection with Seller’s acquisition of such lease) and duly executed assignments of the U.S. and Canadian trademark registrations and applications included in the Purchased Intellectual Property, in a form suitable for recording in the U.S. and Canadian trademark office, and general assignments of all other Purchased Intellectual Property;

 

(c)                                   a certificate, duly executed by Seller, that Seller is not a “foreign person” within the meaning of Section 1445 of the Code;

 

(d)                                  duly executed Seller Sublease and Purchaser Subleases; and

 

(e)                                   all other instruments of conveyance and transfer, in form and substance reasonably acceptable to Purchaser, as may be necessary to convey the Purchased Assets to Purchaser or as Purchaser may reasonably request, including such instruments of conveyance and transfer in form and substance comparable to the instruments of conveyance and transfer exchanged in connection with Seller’s acquisition of the 745 Seventh Ground Lease.

 

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4.3                                  Deliveries by Purchaser .  At the Closing, Purchaser shall deliver to Seller:

 

(a)                                   the Purchase Price, in immediately available funds, as set forth in Section 3.2 hereof;

 

(b)                                  a duly executed, reasonably customary assignment and assumption agreement; and

 

(c)                                   duly executed Purchaser Subleases and Seller Sublease.

 

4.4                                  Termination of Agreement .  This Agreement may be terminated prior to the Closing as follows:

 

(a)                                   by Purchaser or Seller, if the Closing shall not have occurred by the close of business on September 24, 2008 (the “ Termination Date ”);

 

(b)                                  by mutual written consent of Seller and Purchaser;

 

(c)                                   by Seller or Purchaser if there shall be in effect a final nonappealable Order of a Governmental Body of competent jurisdiction restraining, enjoining or otherwise prohibiting the consummation of the transactions contemplated hereby; it being agreed that the parties hereto shall promptly appeal any adverse determination which is not nonappealable (and pursue such appeal with reasonable diligence);

 

(d)                                  by Purchaser upon the entry of an order by the Bankruptcy Court authorizing a Competing Transaction; or

 

(e)                                   by Purchaser if the Breakup Fee and Competing Bid Order is not approved by the Bankruptcy Court in the form attached hereto as Exhibit A.

 

4.5                                  Procedure Upon Termination .  In the event of termination and abandonment by Purchaser or Seller, or both, pursuant to Section 4.4 hereof, written notice thereof shall forthwith be given to the other party or parties, and this Agreement shall terminate, and the purchase of the Purchased Assets hereunder shall be abandoned, without further action by Purchaser or Seller.  If this Agreement is terminated as provided herein each party shall redeliver all documents, work papers and other material of any other party relating to the transactions contemplated hereby, whether so obtained before or after the execution hereof, to the party furnishing the same.

 

4.6                                  Effect of Termination .

 

(a)                                   In the event that this Agreement is validly terminated as provided herein, then each of the parties shall be relieved of its duties and obligations arising under this Agreement after the date of such termination and such termination shall be without liability to Purchaser or Seller; provided , however , that the obligations of the parties set

 

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forth in Sections 4.6 and 8.6 and Article XIII hereof shall survive any such termination and shall be enforceable hereunder.

 

(b)                                  Nothing in this Section 4.6 shall relieve Purchaser or Seller of any liability for a material breach of this Agreement prior to the date of termination, The damages recoverable by the non-breaching party shall include all attorneys’ fees reasonably incurred by such party in connection with the transactions contemplated hereby.

 

(c)                                   The Confidentiality Agreement shall survive any termination of this Agreement and nothing in this Section 4.6 shall relieve Purchaser or Seller of their obligations under the Confidentiality Agreement; provided , that upon the termination of this Agreement, the non-solicitation obligations of Purchaser and its Affiliates under the Confidentiality Agreement shall be of no further force and effect; provided further that upon the Closing, the non-solicitation obligation of Purchaser and its Affiliates under the Confidentiality Agreement with respect to non-U.S. employees of the broker-dealer and investment banking business shall be of no further force and effect.

 

(d)                                  In the event that Purchaser terminates this Agreement pursuant to Section 4.4(d) , Sellers shall pay to Purchaser (i) the Break-Up Fee promptly upon such termination and (ii) the Expense Reimbursement as provided in the Breakup Fee and Competing Bid Order.

 

(e)                                   In the event that Purchaser or Seller terminates this Agreement pursuant to Section 4.4(a)  and at any time after the date of this Agreement and prior to such termination a bona fide proposal for a Competing Transaction shall have been publicly disclosed or otherwise communicated to the Sellers and shall not have been irrevocably withdrawn, then if a Qualified Bid shall be consummated within twelve months after such termination Sellers shall pay to Purchaser (i) the Break-Up Fee and (ii) the Expense Reimbursement as provided in the Breakup Fee and Competing Bid Order on the date of such consummation.

 

(f)                                     The parties hereto acknowledge that the agreements contained in this Section 4.6 are an integral part of the transactions contemplated by this Agreement. The Sellers shall be jointly and severally liable for any amount due to Purchaser pursuant to this Section 4.6 .  In the event that the Sellers shall fail to pay any amounts due pursuant to this Section 4.6 , the Sellers shall reimburse Purchaser for all reasonable costs and expenses actually incurred or accrued by Purchaser (including reasonable fees and expenses of counsel) in connection with the collection under and enforcement of this Section 4.6 .

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF SELLER

 

Seller hereby represents and warrants to Purchaser that:

 

5.1                                  Organization and Good Standing .  Seller is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has all requisite corporate power and authority to own, lease and operate its properties and to carry on its business as now conducted.  Seller is duly qualified or authorized to do business as a foreign corporation and is in good standing under the laws of each jurisdiction in which it owns or leases real property and each other jurisdiction in which the conduct of its business or the ownership of its properties requires such qualification or authorization, except where the failure to be so qualified, authorized or in good standing would not have a material adverse effect.

 

5.2                                  Authorization of Agreement .  Except for such authorization as is required by the Bankruptcy Court (as hereinafter provided for), Seller has all requisite power, authority and legal capacity to execute and deliver this Agreement and Seller has all requisite power, authority and legal capacity to execute and deliver each other agreement, document, or instrument or certificate contemplated by this Agreement or to be executed by Seller in connection with the consummation of the transactions contemplated by this Agreement (the “ Seller Documents ”), to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby.  The execution and delivery of this Agreement and the Seller Documents and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all requisite corporate action on the part of Seller.  This Agreement has been, and each of the Seller Documents will be at or prior to the Closing, duly and validly executed and delivered by Seller which is a party thereto and (assuming the due authorization, execution and delivery by the other parties hereto and thereto, the entry of the Sale Order, and, with respect to Seller’s obligations under Section 4.4 , the entry of the Breakup Fee and Competing Bid Order) this Agreement constitutes, and each of the Seller Documents when so executed and delivered will constitute, legal, valid and binding obligations of Seller enforceable against Seller or, as the case may be, its Subsidiary in accordance with their respective terms, subject to applicable bankruptcy, insolvency, reorganization, moratorium and similar laws affecting creditors’ rights and remedies generally, and subject, as to enforceability, to general principles of equity, including principles of commercial reasonableness, good faith and fair dealing (regardless of whether enforcement is sought in a proceeding at law or in equity).

 

5.3                                  Conflicts; Consents of Third Parties .

 

(a)                                   None of the execution and delivery by Seller of this Agreement or by Seller and its Subsidiaries of the Seller Documents, the consummation of the transactions contemplated hereby or thereby, or compliance by Seller and its Subsidiaries with any of the provisions hereof or thereof will conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination or cancellation under any provision of (i) the certificate of incorporation and by-laws or comparable organizational documents of Seller or any Subsidiary; (ii) subject

 

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to entry of the Sale Order, any Order of any Governmental Body applicable to Seller or any of the properties or assets of Seller as of the date hereof; other than, in the case of clause (ii), such conflicts, violations, defaults, terminations or cancellations that would not have a material adverse effect.

 

(b)                                  No consent, waiver, approval, Order, Permit or authorization of, or declaration or filing with, or notification to, any Person or Governmental Body is required on the part of Seller or any Subsidiary in connection with the execution and delivery of this Agreement or the Seller Documents, the compliance by Seller or any Subsidiary with any of the provisions hereof or thereof, the consummation of the transactions contemplated hereby or thereby or the taking by Seller or any Subsidiary of any other action contemplated hereby or thereby, except for (i) compliance with the applicable requirements of the HSR Act, (ii) the entry of the Sale Order, (iii) the entry of the Breakup Fee and Competing Bid Order with respect to Seller’s obligations under Section 4.6 , (iv) filings of applications and notices with, and receipt of consents, authorizations, approvals, exemptions or non-objections from, the Securities and Exchange Commission (the “ SEC ”), foreign and state securities authorities, the Financial Industry Regulatory Authority (“ FINRA ”), the Commodity Futures Trading Commission (“ CFTC ”), National Futures Association (“ NFA ”) applicable securities, commodities and futures exchanges, the Financial Services Authority (“ FSA ”) and other industry self-regulatory organizations (“ SRO ”), (v) the filing of any other required applications, filings or notices with the Board of Governors of the Federal Reserve System (the “ Federal Reserve ”), any foreign, federal or state banking, other regulatory, self-regulatory or enforcement authorities or any courts, administrative agen