TRANSITION SERVICES AGREEMENT

 

TRANSITION SERVICES AGREEMENT

 

This Transition Services Agreement, dated September 29, 2008 (this “ Agreement ”), is made by and between Nomura Holdings Inc., a company incorporated in Japan (“ Nomura ”), and Lehman Brothers Holdings Inc., a Delaware corporation (“ LBHI ”).

 

RECITALS

 

WHEREAS, the Provisional Liquidators, the Sellers and Nomura have entered into an international asset purchase agreement concerning the acquisition by Nomura of certain assets of the business of the Lehman Brothers group in the Asia-Pacific region., dated as of September 29, 2008 (as may be amended from time to time, the “ Nomura Purchase Agreement ”);

 

WHEREAS, it is contemplated by the Nomura Purchase Agreement that (a) Nomura shall provide, or cause to be provided, to LBHI (and/or its Affiliates on the date hereof including the IMD Entities, collectively hereinafter referred to as the “ LBHI Entities ”) certain services, use of facilities and other assistance on a transitional basis and in accordance with the terms and subject to the conditions set forth herein and (b) LBHI shall provide, or cause to be provided, to Nomura (and/or its Affiliates, collectively hereinafter referred to as the “ Nomura Entities ”) certain services, use of facilities and other assistance on a transitional basis and in accordance with the terms and subject to the conditions set forth herein; and

 

WHEREAS, the Nomura Purchase Agreement contemplates the execution and delivery of this Agreement by Nomura and LBHI.

 

NOW, THEREFORE, in consideration of the foregoing and the mutual agreements contained herein and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto hereby agree as follows:

 

ARTICLE 1

DEFINITIONS

 

Section 1.01           Certain Defined Terms .  Unless otherwise defined herein, any capitalized term used herein shall have the same meaning as in the Nomura Purchase Agreement.  The following capitalized terms used in this Agreement shall have the meanings set forth below:

 

“ 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 “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, control by a general partner, by contract or otherwise; provided that such other Person shall no longer be deemed an Affiliate once such control ceases, except to the extent such control ceases as a result of the appointment of liquidators or provisional liquidators, in which case such other Person shall (for the duration of the appointment of the liquidators or provisional liquidators) continue to be deemed an Affiliate.

 

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“ Bankruptcy Case ” means Case No. 08-13555 of the Bankruptcy Court.

 

“ Bankruptcy Court ” means the United States Bankruptcy Court for the Southern District of New York (Manhattan) .

 

“ BarCap ” means Barclays Capital Inc.

 

“ BarCap Purchase Agreement ” means that certain Asset Purchase Agreement (as amended and supplemented), dated as of September 16, 2008, by and among LBHI, Lehman Brothers Inc., LB 745 LLC and BarCap.

 

“ BarCap Services ” means services that were being provided (x) by a Subsidiary of LBHI that was acquired by BarCap or one of its Affiliates pursuant to the BarCap Purchase Agreement or a vendor of such Subsidiary, and (y) by the LBHI Entities or a vendor thereof through the use of the assets acquired by or the employees transferred to BarCap or one of its Affiliates pursuant to the BarCap Purchase Agreement, to the IMD Business and any other businesses of the LBHI Entities prior to the closing of the transactions contemplated by the BarCap Purchase Agreement that were not acquired by BarCap thereunder.

 

“ BarCap TSA ” means that certain Transition Services Agreement, dated as of September 20, 2008, by and between LBHI and BarCap.

 

“ Benchmark Period ” means the twelve-month period prior to the Completion.

 

“ 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.

 

“ Force Majeure ” means, with respect to a Person, an event beyond the control of such Person (or any Person acting on its behalf), including acts of God, storms, floods, riots, fires, sabotage, labor stoppage, civil commotion or civil unrest, interference by civil or military authorities, acts of war (declared or undeclared) or armed hostilities or other national or international calamity or one or more acts of terrorism or failure of energy sources or of Internet or telecommunications services.

 

“ IMD Business ” means the investment management business of LBHI and Lehman Brothers Inc. and their subsidiaries.

 

“ IMD Entities ” means (i) the entities that, on the date hereof, conduct the investment management business of LBHI and its Affiliates and (ii) in each case solely to the extent permitted under Section 9.10 , their successors and assigns with respect to such business.

 

“ Information Systems ” means computing, telecommunications or other digital operating or processing systems or environments, including computer programs, data, databases, computers, computer libraries, communications equipment, networks and systems.  When referenced in connection with the Services, Information Systems shall mean the Information Systems accessed and/or used in connection with the Services.

 

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

 

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

 

“ Prime Rate ” means the prime rate published in the Eastern Edition of The Wall Street Journal or a comparable newspaper if The Wall Street Journal shall cease to publish the prime rate.

 

“ Provider ” means the party hereto or its subsidiary or Affiliate providing a Service under this Agreement.

 

“ Recipient ” means a party hereto or its subsidiary or Affiliate to whom a Service is being provided under this Agreement.

 

“ Representative ” of a Person means any director, officer, employee, agent, consultant, accountant, auditor, attorney or other representative of such Person.

 

“ 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 a party.

 

“ 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,

 

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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.

 

 “ Termination Charges ” shall mean any portion of any fees or expenses payable to any unaffiliated, third-party provider as a result of any early termination or reduction of a Service that cannot reasonably be avoided by the Provider.

 

“ Virus ” shall mean any computer instructions (i) that adversely affect the operation, security or integrity of a computing, telecommunications or other digital operating or processing system or environment, including without limitation, other programs, data, databases, computer libraries and computer and communications equipment, by altering, destroying, disrupting or inhibiting such operation, security or integrity; (ii) that without functional purpose, self-replicate without manual intervention; and/or (iii) that purport to perform a useful function but which actually perform either a destructive or harmful function, or perform no useful function and utilize substantial computer, telecommunications or memory resources.

 

ARTICLE 2

SERVICES AND TERMS

 

Section 2.01           Services; Scope .

 

(a)           Subject to the terms and conditions set forth in this Agreement, (i) Nomura shall provide, or cause to be provided, to the LBHI Entities those services (the “ Nomura Services ”) that were being provided by LBHI Entities which are transferring assets to the Purchasers and which employed the Transferred Employees  prior to the date of the Nomura Purchase Agreement, or a vendor thereof, to the IMD Business and any other businesses of the LBHI Entities receiving such services that were not acquired by Nomura under the Nomura Purchase Agreement (each such business, a “ Retained LBHI Business ”), and (ii) LBHI shall provide, or cause to be provided, to the Nomura Entities those services that were being provided by an LBHI Entity or a vendor thereof prior to the date of the Nomura Purchase Agreement to LBHI Entities which are transferring assets to the Purchasers and which employed the Transferred Employees  prior to the date of the Nomura Purchase Agreement (the “ Nomura-Acquired Business ”) (the “ LBHI Services ” and collectively with the Nomura Services, the “ Services ”).  For the avoidance of doubt, neither the LBHI Services nor the Nomura Services shall include any of the BarCap Services.  The parties acknowledge and agree that any BarCap Services of which Nomura will be the Recipient shall be provided by virtue of an assignment of the BarCap TSA pursuant to Section 9.10 thereof, and any BarCap Services of which LBHI Entities will be the Recipient shall be provided by virtue of the BarCap TSA.  If, for any reason, Nomura is unable to provide any Nomura Service to the LBHI Entities pursuant to the terms of this Agreement, Nomura shall provide to the applicable LBHI Entity a substantially equivalent service (a “ Nomura Substitute Service ”) in accordance with the terms of this Agreement, which such service shall be considered a Nomura Service for purposes of this Agreement.  The scope of each Nomura Service shall be substantially the same as the scope of such services provided by

 

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the applicable LBHI Entity to the applicable Retained LBHI Business in the ordinary course during the Benchmark Period (in each case, to the extent such Nomura Service was provided by Transferred Employees), and the use of each Nomura Service by an LBHI Entity shall include use by such LBHI Entity’s contractors in substantially the same manner as used by such contractors in the ordinary course, during the Benchmark Period.  If, for any reason, an LBHI Entity is unable to provide any LBHI Service to the Nomura Entities pursuant to the terms of this Agreement, LBHI shall provide to the applicable Nomura Entity a substantially equivalent service (an “ LBHI Substitute Service ”) in accordance with the terms of this Agreement, which such service shall be considered an LBHI Service for purposes of this Agreement.  The scope of each LBHI Service shall be substantially the same as the scope of such service provided by the applicable Retained LBHI Business to the applicable LBHI Entity in the ordinary course during the Benchmark Period, and the use of each LBHI Service by a Nomura Entity shall include use by such Nomura Entity’s contractors in substantially the same manner as used by such contractors in the ordinary course, during the Benchmark Period.  All Services shall be for the sole use and benefit of the respective Recipient, including any of such Recipient’s customers or clients of the type who received the use and benefit of the equivalent services in the ordinary course during the Benchmark Period; provided , however , that the Recipient agrees that it shall not re-market or act as a service provider with respect to any of the Services hereunder to a third party.

 

(b)           Each Service shall include, and the Service Charges reflect charges for, such maintenance, support, error correction, updates and enhancements normally and customarily provided by (i) the LBHI Entities which are transferring assets to the Purchasers and which employed the Transferred Employees to the other LBHI Entities that received such service prior to the date of the Nomura Purchase Agreement; and (ii) those other LBHI Entities that provided such services prior to the date of the Nomura Purchase Agreement to the LBHI Entities which are transferring assets to the Purchasers and which employed the Transferred Employees.  Each Service shall include all functions, responsibilities, activities and tasks, and the materials, documentation, resources, rights and licenses to be used, granted or provided by the relevant Provider that are not specifically described in this Agreement as a part of such Service, but are incidental to, and would normally be considered an inherent part of, or necessary subpart included within, such Service or are otherwise necessary for such Provider to provide, or the Recipient to receive, such Service.

 

(c)           Throughout the term of this Agreement, (i) each Provider and each Recipient of any Service shall cooperate with one another and use their good faith and commercially reasonable efforts to effect the efficient, timely and seamless provision and receipt of such Service and (ii) the Recipient shall use its good faith and commercially reasonable efforts to transition away and wind down its use of the Services.

 

(d)           This Agreement shall not assign any rights to Technology or Intellectual Property between the parties hereto.

 

(e)           Notwithstanding anything to the contrary herein, for the avoidance of doubt, Lehman Brothers Holdings plc, Lehman Brothers Limited, LB UK RE Holdings Limited and Lehman Brothers International (Europe) shall not be deemed LBHI Entities hereunder.

 

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Section 2.02           Conversion Services .

 

(a)           During the term of this Agreement, the parties shall provide, or cause to be provided, the following information and support to the other party, as applicable, which support shall be included within the Services described herein or in the Schedules hereto:

 

(i)            current and reasonably available historical data owned by the Provider and related to the Services and predecessor services thereto as reasonably required by the relevant Recipient in connection with the conduct of the Nomura-Acquired Business (in the case of Nomura) or the Retained LBHI Business (in the case of the LBHI Entities) or for litigation or regulatory purposes, in a manner and within a time period as mutually agreed by the parties; and

 

(ii)           on commercially reasonable terms, which will be added to the Service Charges, the services of the employees and contractors of the relevant Provider whose assistance, expertise or presence is necessary to assist the Recipient’s transition team in establishing a fully functioning stand-alone environment (it being understood that the services of employees and contractors pursuant to this clause (ii) are not intended to be a substitute for the services of its own employees and third party consultants and advisors to be engaged by the relevant Recipient in connection with such transition or similar services, but instead to facilitate coordination with such individuals).

 

Section 2.03           Transition Services Managers .

 

(a)           Nomura shall appoint an individual, by giving written notice thereof to LBHI within three (3) Business Days following the date hereof, to act as its initial services manager (the “ Nomura Services Manager ”), who will be directly responsible for coordinating and managing the delivery of the Nomura Services and have authority to act on Nomura’s behalf with respect to matters relating to this Agreement.  The Nomura Services Manager will work with the personnel of Nomura to periodically address issues and matters raised by LBHI relating to this Agreement.  Notwithstanding the requirements of Section 9.05 , all communications from LBHI to Nomura pursuant to this Agreement regarding routine matters involving the Nomura Services shall be made through the Nomura Services Manager, or such other individual as specified by the Nomura Services Manager in writing and delivered to LBHI by email or facsimile transmission with receipt confirmed.  Nomura shall reasonably promptly notify LBHI of the appointment of a different Nomura Services Manager, if necessary, in accordance with Section 9.05 .

 

(b)           LBHI shall appoint an individual, by giving written notice thereof to Nomura within three (3) Business Days following the date hereof, to act as its initial services manager (the “ LBHI Services Manager ”), who will be directly responsible for coordinating and managing the delivery of the LBHI Services and have authority to act on LBHI’s behalf with respect to matters relating to this Agreement.  The LBHI Services Manager will work with the personnel of LBHI to periodically address issues and matters raised by Nomura relating to this Agreement.  Notwithstanding the requirements of Section 9.05 , all communications from Nomura to LBHI pursuant to this Agreement regarding routine matters involving the Services shall be made through the LBHI Services Manager, or such other individual as specified by the

 

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LBHI Services Manager in writing and delivered to Nomura by email or facsimile transmission with receipt confirmed.  LBHI shall reasonably promptly notify Nomura of the appointment of a different LBHI Services Manager, if necessary, in accordance with Section 9.05 .

 

Section 2.04           Personnel; Authorized Signatories .  The Provider will have the right, in its sole discretion, to (i) designate which personnel or third party service providers it will assign to perform Services, and (ii) remove and replace such personnel or third party service providers at any time.

 

Section 2.05           Performance and Receipt of Services .  The following provisions shall apply to the Services:

 

(a)           Security and Privacy .  Each Provider and Recipient shall at all times comply with its own then in-force security guidelines and policies applicable to the performance, access and/or use of the Services and Information Systems.  Where a Provider or Recipient receives access to the other party’s Information Systems, then it shall also comply with such other party’s security guidelines and policies.  The parties acknowledge that historically the Services governed by this Agreement have been rendered within a single group of related entities and a shared security environment, and that in order for Services to be rendered among and between the Nomura Entities and the LBHI Entities as unrelated entities additional systems, procedures, guidelines and policies may need to be established to render the Services in compliance with Law, regulation, and applicable privacy and security policies.  Each of the LBHI Entities and the Nomura Entities shall use its reasonable efforts to establish such additional systems, procedures, guidelines and policies in a manner that will not disrupt the rendering of Services or the LBHI Retained Businesses or the Nomura-Acquired Business, respectively.  Recipient shall bear all of its own costs and expenses in connection with such an effort; Provider’s costs and expenses in connection with such an effort will be included in the Service Charges to the extent directly related to providing the Services.

 

(b)           No Viruses .  Each of LBHI and Nomura shall take commercially reasonable measures to ensure that no Viruses or similar items are coded or introduced into the Services or Information Systems.  If a Virus is found to have been introduced into the Services or Information Systems, the parties hereto shall use their commercially reasonable efforts to cooperate and to diligently work together to eliminate the effects of such Virus.

 

(c)           Reasonable Care .  Each Provider and Recipient shall exercise reasonable care in providing and receiving the Services to (i) prevent access to the Services or Information Systems by unauthorized Persons and (ii) not damage, disrupt or interrupt the Services or Information Systems.

 

Section 2.06           Termination Services .  Each Provider shall reasonably cooperate with the Recipient of each Service, upon request and on commercially reasonable terms (which will be added to the Service Charges), to facilitate such Recipient’s transition to provision of such services by a replacement provider or by its own employees.

 

Section 2.07           Superseding Provisions .  Notwithstanding anything to the contrary contained in this Agreement:

 

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(a)           no Provider shall be required hereunder to take any action (including by providing any Services) that would constitute, or that the Provider reasonably believes would constitute, (i) a violation of applicable Law, including any requirement of any Governmental Body, (ii) a breach of such Provider’s contractual obligations or (iii) any other violation of a third party’s rights; provided that in each of the foregoing circumstances the Provider shall use reasonable efforts to work around the impediment and endeavor to provide Services in a manner that does not violate Law, contractual obligations or third party rights;

 

(b)           no Provider shall be required hereunder to fund the Services or otherwise provide financial support, benefits or other consideration on the Recipient’s behalf to third parties, or to take custody of, settle, clear or handle securities, in connection with the Services, and the obligation to perform any Service involving funds shall be subject to the Recipient having previously made such funds available to the Provider specifically for such purpose;

 

(c)           any obligation to provide Services or otherwise undertake activities hereunder shall be limited to the party’s use of good faith and commercially reasonable efforts; and

 

(d)           the Provider shall not be responsible for any failure to provide Services hereunder to the extent arising from (i) the Recipient’s operations or systems or otherwise by the acts or omissions of the Recipient or individuals acting on its behalf, (ii) a third party’s failure to provide such Services or (iii) the failure of Recipient or its Affiliates to provide Services to Provider.

 

ARTICLE 3

ADDITIONAL AGREEMENTS AND ARRANGEMENTS

 

Section 3.01           Computer-Based Resources .  Commencing on the Completion, and for ninety (90) days thereafter, each party (the “ Accessing Party ”) shall continue to have access to the Information Systems of the other party (the “ Providing Party ”), to the extent such access to such Information Systems was available to the Accessing Party (or, in the case of Nomura, was available to the LBHI Entities which are transferring assets to the Purchasers and which employed the Transferred Employees prior to the date of the Nomura Purchase Agreement) immediately prior to the Completion and remains necessary for the Accessing Party to operate its business; provided , that (a) the Nomura Entities may take reasonable measures to restrict access by the LBHI Entities to any systems or data unrelated to the Retained LBHI Business to which the LBHI Entities are not entitled to access, (b) the LBHI Entities may take reasonable measures to restrict access by the Nomura Entities, to any systems or data unrelated to the Nomura-Acquired Business to which the Nomura Entities are not entitled to access, and (c) such continued access shall be subject to the Accessing Party complying with all reasonable security measures implemented by the Providing Party as deemed necessary by such Providing Party to protect its Information Systems.  Commencing no later than ten (10) Business Days after the Completion, representatives of Nomura and LBHI with authority in the area of Information Systems (the “ IT Committee ”) shall meet at such reasonable time, place and manner as they may agree, to develop a plan for migrating from the Information System infrastructure as deployed as of the Completion, to a final Information Systems infrastructure satisfactory to both Nomura and

 

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LBHI (the “ IT Migration Plan ”).  The parties shall use reasonable efforts to enter into an IT Migration Plan no later than one month after the Completion and shall include, among other provisions, a time line for completing the migration of Information Services and a final migration deadline after which neither Nomura nor any LBHI Entity shall have access to all or any part of the Information Systems of the other party, except to the extent reasonably necessary for the receipt of the Services (subject to the accessing party complying with all reasonable security measures implemented by the providing party as deemed necessary by such providing party to protect its Information Systems), or as otherwise agreed in a separate agreement.  When finalized in writing and executed by the authorized representatives of Nomura and the LBHI Entities, the IT Migration Plan shall be deemed to be incorporated into this Agreement as an amendment and addition hereto.

 

Section 3.02           Intentionally left. blank

 

Section 3.03           Intentionally left blank.

 

Section 3.04           Access .  Nomura or LBHI, as the case may be, will allow the relevant Provider and its Representatives reasonable access to the facilities and personnel of the relevant Recipient, and shall provide such other reasonable cooperation and assistance, at the Recipient’s cost, necessary for the performance of the Services for the Provider to fulfill its obligations under this Agreement.

 

Section 3.05           Schedules .  The parties acknowledge and agree that the Services contemplated to be provided hereunder are not enumerated, defined or described in detail.  For purposes of illustration, the Services may include (or include aspects of) operational, financial, corporate, human resources, information technology and other services.  The parties shall cooperate in good faith to create Schedules to this Agreement, within thirty days following the Completion, that will contain a specific list of certain of the Services to be provided pursuant hereto, including, with respect to the IMD Business, potential additional specificity on the pricing model.  For the avoidance of doubt, but subject to Section 3.07 , none of the Services shall require the relevant Provider to provide the legal services of any attorney to the Recipient in connection with any such Service (unless otherwise agreed in writing by the parties hereto).

 

Section 3.06           Intentionally left blank.

 

Section 3.07           Further Access .

 

(a)           For a period of two years after the Completion, the Nomura Entities shall provide, or use reasonable efforts to cause to be provided to, the LBHI Entities at no charge (other than Nomura’s out-of-pocket costs and expenses including contractor fees) with reasonable access to all individuals who were employees or contractors of the LBHI Entities prior to the Completion (and are employees or contractors of the Nomura Entities at the time of requested access), and who have material knowledge about the Retained LBHI Businesses or liabilities that were excluded pursuant to the Nomura Purchase Agreement, and Nomura shall use reasonable efforts to provide such individuals’ cooperation therewith. As part of the foregoing, for a period of ninety (90) days after Completion, (i) such employees shall provide reasonably necessary assistance to the LBHI Entities in the unwinding of the Retained LBHI Business and

 

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(ii) such employees that are attorneys shall provide reasonably necessary legal services in the unwinding of the Retained LBHI Business (which legal services shall include but not be limited to legal services with respect to regulatory matters), provided that such assistance in (i