Exhibit 10.3
BARCLAYS CAPITAL
INC.
As of September 20, 2008
Lehman Brothers Holdings Inc.
Lehman Brothers Inc.
LB 745 LLC
Attn: Steven
Berkenfeld, Esq.
Facsimile: (646) 758-4226
Ladies and Gentlemen:
Reference is made to the Asset
Purchase Agreement, dated as of September 16, 2008 (the
“ Original Agreement ”) as amended by the First
Amendment thereto dated as of September 19, 2008 (the “
First Amendment ” and, the Original Agreement as so
amended, the “ Agreement ”), by and among Lehman
Brothers Holdings Inc. (“ LBHI ”), Lehman
Brothers Inc. (“ LBI ”), LB 745 LLC (“
745 ”) and Barclays Capital Inc. (“
Purchaser ”). Each capitalized term used and not
defined herein shall have the meaning ascribed to it in the
Original Agreement. This letter agreement (this “
Letter ”) clarifies the intention of the parties with
respect to certain provisions of the Agreement, supplements in
certain respects the agreements of the parties stated therein and
amends the Agreement in certain respects, and is binding on the
parties hereto upon its execution and delivery. All
references herein to the Original Agreement are to the conformed
copy attached hereto of the hand marked Original
Agreement.
1.
Purchased Assets; Excluded
Assets .
(a)
The Purchased Assets means
(i) all of the assets of Seller used primarily in the Business
or necessary for the operation of the Business (in each case,
excluding the Excluded Assets) and (ii) none of the assets of
Subsidiaries of LBHI (other than assets of LBI) except as otherwise
specifically provided in the Agreement or this Letter.
Purchased Assets shall include:
(i)
the items set forth in clauses (b),
(c) and (f) through (o) and (q) through
(s) of the definition of “Purchased Assets” in the
Original Agreement;
(ii)
with respect to clauses (a),
(d) and (e) of the definition of “Purchased
Assets” in the Original Agreement, instead of the items
referred to in such clauses, (A) the securities owned by LBI
and transferred to Purchaser or its Affiliates under the Barclays
Repurchase Agreement (as defined below) as specified on Schedule A
previously delivered by Seller and accepted by Purchaser,
(B) such securities and other assets held in LBI’s
“clearance boxes” as of the time of the Closing, which
at the close of business on September 21, 2008 were as
specified on Schedule B previously delivered by Seller and accepted
by Purchaser (provided, however, that Purchaser in its discretion
may
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elect within 60 days after the Closing to return
any such securities to LBI); provided, that no securities owned by
LBHI or any Subsidiary of LBHI (other than LBI and other than as
specified in the Agreement or clause (iii) below) are
Purchased Assets and (C) exchange-traded derivatives (and any
property that may be held to secure obligations under such
derivatives) and collateralized short-term agreements;
(iii)
the equity of Lehman Brothers
Canada, Inc., Lehman Brothers Sudamerica SA and Lehman
Brothers Uruguay SA; and
(iv)
all prime brokerage business and
accounts and repurchase agreement operations and securities lending
operations of the Business (for the avoidance of doubt, other than
those that are part of the IMD Business); and
(v)
any rights or interests Seller may
have with respect to any escrow or other account established in
connection with the Global Research Analyst Settlement entered by
the U.S. District Court on October 31, 2003 (the
“Research Settlement”), or funds otherwise set aside
for the procurement of independent research pursuant to the
Research Settlement, but only to the extent that Purchaser is
required to make payments in accordance with the Research
Settlement as a result of its acquisition of LBI’s investment
banking and research operations.
(b)
For the avoidance of doubt, the
“Business” includes LBI’s commodities business,
government securities trading operations and mortgage-backed
securities trading operations of LBI (but not any securities of
such nature held by Seller except as otherwise specified herein or
in the Agreement).
(c)
The Excluded Assets shall mean the
assets of Seller and its Subsidiaries referred to in clauses (a),
(c) through (j), and (l) through (q) of the
definition of “Excluded Assets” in the Original
Agreement and the other assets identified in this Letter as
Excluded Assets Except as otherwise specified in the definition of
“Purchased Assets,” “Excluded Assets” shall
include any cash, cash equivalents, bank deposits or similar cash
items of Seller and its Subsidiaries; provided that
“Excluded Assets” shall not include any and all
property of any customer, or maintained by or on behalf of LBI to
secure the obligations of any customer, whose account(s) are
being transferred to Purchaser as part of the Business. The
following shall also be Excluded Assets: All of the
investments held by Seller or their Subsidiaries in collateralized
debt obligations, collateralized loan obligations, over-the-counter
derivatives, TBA mortgage notes and similar asset-backed securities
and corporate loans, other than those subject to the Barclays
Repurchase Agreement, and until any securities pledged as
collateral under Seller clearing arrangements with JP Morgan
Chase & Co. or its Affiliates (other than those referred
to in Section 1(a)(ii) of the Letter). Also
included in the Excluded Assets are the mortgage servicing rights
for Ginnie Mae guaranteed securities. Included in clause
(h) of the definition of “Excluded Assets” in the
Original Agreement are life insurance policies owned by Seller and
its Subsidiaries. For the avoidance of doubt, the equity
interests and assets of Lehman Brothers Commodity
Services, Inc., including the equity of, as well as the assets
of the energy marketing and services business of Eagle Energy
Management LLC, are Excluded Assets (rather than Purchased
Assets). The
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reference to “third
parties” in clause (i) of the definition of
“Excluded Assets” includes any person, including
Affiliates of Seller. Clause (h) of the definition of
Excluded Assets in the Original Agreement is hereby amended to
remove the following clause: “other than customer account
insurance supplemental to SIPC coverage included in the
Business.”
(d)
Sections 3 and 4 of the First
Amendment are hereby deleted in their entirety and shall be of no
effect ab initio . LBI hereby instructs Purchaser to
pay at the Closing $250 million of the Cash Amount to the
Depository Trust Clearance Corporation (“ DTC ”)
for deposit as collateral against LBI’s obligations to DTC
(including its affiliated clearing organizations). Such
collateral account shall be maintained in accordance with the
agreement among LBI, Purchaser and DTC entered into in connection
with the Closing.
(e)
Seller hereby represents and
warrants to Purchaser that LB I Group Inc. has and had as of the
date on which LB I Group Inc. transferred to LBI the equity of
Townsend Analytics, Ltd., LB I Group Inc. no
indebtedness.
2.
IMD Business
. For purposes of the
Agreement, the IMD Business consists of the asset management and
the alternatives – private equity businesses of Seller and
the Subsidiaries, but not the private investment management
business of Seller and the Subsidiaries (other than the CTS
(Corporate Cash) business). As a result, Excluded Assets
include the asset management business, the alternatives-private
equity business and the CTS (Corporate Cash) business. The
private investment management business (other than the CTS
(Corporate Cash) business) (the “PIM Business”) is a
Purchased Asset and the Purchased Assets shall include the assets
of the Seller used exclusively in the PIM Business. The
forgivable notes issued by PIM employees to Seller or its
Affiliates shall be an Excluded Asset. Excluded Liabilities
shall include any pre-closing legal, tax or compliance Liabilities
associated with IRA accounts for the benefit of clients of the PIM
Business.
3.
Assumed and Excluded
Liabilities .
Clause (a) of the definition of “Assumed
Liabilities” consists solely of all Liabilities incurred by
Purchaser and arising after the Closing in connection with the
Business. Clause (d) of the definition of “Assumed
Liabilities” in the Original Agreement is understood as
though it read as follows: “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 accounts payable arising out of or in
connection with any Excluded Contract), including, for the
avoidance of doubt, to the extent arising after such date
(i) invoiced accounts payable and (ii) accrued but
uninvoiced accounts payable).” Consistent with the
other provisions of this Letter, no Liabilities described in clause
(i) of the definition of Assumed Liabilities shall be
“Assumed Liabilities.” For the avoidance of
doubt, any Liabilities of Seller or its Subsidiaries under the
$15.8 billion tri-party repurchase facility dated on or about
September 18, 2008 funded by JP Morgan Chase shall be
“Excluded Liabilities.”
4.
Consideration
. The parties, after
considering the available appraisal information, have agreed upon
the value of the Lehman headquarters at 745 Seventh Avenue , the
Cranford New Jersey Data Center and the Piscataway New Jersey Data
Center shall be in the aggregate $1,290,000,000 and shall not be
subject to reduction with respect to any commission
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and, accordingly, the Cash Amount shall be
$1,540,000,000 (subject to certain holdback amounts relating to the
real estate being transferred pursuant to the Agreement as provided
by Section 12.2 of the Agreement).
5.
License . All marks containing the words
“LEHMAN” or “LEHMAN BROTHERS” assigned
under the Agreement shall be considered Licensed Marks under
Section 8.9 of the Agreement. The license to use the
Licensed Marks granted pursuant to Section 8.9 of the
Agreement with respect to the investment banking and capital
markets businesses of Seller and its Subsidiaries is limited to a
term of 2 years from the Closing Date (without limiting the
perpetual term of the license granted for use in connection with
the IMD Business (including in respect of any one or more of the
private equity or other investment funds within the IMD Business)
or in connection with winding up of any operations or businesses of
Seller or any of its Subsidiaries). The licenses pursuant to
Section 8.9 are not assignable or sublicensable, except that
such licenses are assignable and sublicensable (i) for use in
connection with IMD Business or any portion of the IMD Business and
(ii) to Seller’s Subsidiaries or to a purchaser of any
business of Seller and its Subsidiaries solely for use by such
Subsidiaries or purchaser in connection with the winding up of such
business.
6.
Subordinated Notes of
LBI . The
outstanding subordinated notes of LBI are not Assumed Liabilities,
and such subordinated notes and any Liabilities associated with
such subordinated notes therefore are Excluded
Liabilities.
7.
Breakup Fee
. 745 is jointly and severally
liable with LBHI and LBI for Seller’s obligations under the
Agreement to pay the Breakup Fee and Expense Reimbursement (each of
which has the meaning ascribed to it in the Breakup Fee and
Competing Bid Order).
8.
Transfer of Customer
Accounts . All
customer accounts of LBI (other than customer who are Affiliates of
LBI) shall
