Document:

Exhibit 10.6

 

	
  

  	
   

  	
  600
  Lexington Avenue, 6th Floor, New York, NY 10022

  Phone:  212.759.4433   Fax: 
  212.759.5532

  www.alvarezandmarsal.com

  

 

September 15, 2008

 

Lehman Brothers Holdings, Inc.

745 Seventh Avenue

New York, NY 10019

 

Dear Sir/Madam:

 

This letter
confirms and sets forth the terms and conditions, subject to the approval of
the Bankruptcy Court, of the engagement between Alvarez & Marsal North
America, LLC (“A&M”) and Lehman Brothers Holdings, Inc. (the “Company”),
including the scope of the services to be performed and the basis of
compensation for those services.  Upon
execution of this letter by each of the parties below and receipt of the
retainer described below, this letter will constitute an agreement between the
Company and A&M.

 

1.             Description of
Services

 

a.                                       Personnel.  In connection with this engagement, A&M
shall make available to the Company and its subsidiaries:

 

(i)                                     Bryan
P. Marsal to serve as the Chief Restructuring Officer (the “CRO”); and

 

(ii)                                  upon
the mutual agreement of A&M and the Board of Directors of the Company (the “Board”),
such additional personnel (who may be employees of affiliates of A&M which
affiliates are wholly-owned by A&M’s parent company and employees) as are
necessary to assist in the performance of the duties set forth in clause 1.b
below (the “Additional Personnel”).  Up
to two of such Additional Personnel shall be designated by the Company as
executive officers (the “Additional Officers”).

 

b.                                      Duties.

 

(i)                                     The
CRO, together with any Additional Personnel, in cooperation with the Chief
Executive Officer of the Company (the “CEO”), shall perform a financial review
of the Company, including but not limited to a review and assessment of
financial information that has been, and that will be, provided by the Company
to its creditors, including without limitation its short and long-term
projected cash flows;

 

 

(ii)           The
CRO and any Additional Personnel shall assist in asset sales, the
identification of cost reduction and operations improvement opportunities;

 

(iii)          The
CRO and any Additional Personnel shall assist the CEO in developing for the
Board’s review possible restructuring plans or strategic alternatives for
maximizing the enterprise value of the Company’s various business lines;

 

(iv)          The
CRO shall serve as the principal contact with the Company’s creditors with
respect to the Company’s financial and operational matters; and

 

(v)           The
CRO and any Additional Personnel shall perform such other services in
connection with the restructuring process as reasonably requested or directed
by the Board, the CEO, and other authorized Company personnel.

 

c.                                       Reporting.  The CRO and any Additional Personnel shall
report to the CEO and to the Board.

 

d.                                      Employment
by A&M.  The CRO and any
Additional Personnel will continue to be employed by A&M and while
rendering services to the Company will continue to work with other personnel at
A&M in connection with other unrelated matters, which will not unduly
interfere with services pursuant to this engagement.  With respect to the Company, however, the CRO
and any Additional Officers shall operate under the direction of the Board and
A&M shall have no liability to the Company for any acts or omissions of
such persons other than caused by their gross negligence or willful misconduct.  The CRO shall not undertake another client
engagement for six (6) months from the date hereof.  To the extent required to provide the
services hereunder, the Additional Officers will devote all of their business
time to the business and affairs of the company but it will not be a breach of
the foregoing for them to attend to administrative matters of A&M.

 

e.                                       Projections;
Reliance; Limitation of Duties.  You
understand that the services to be rendered by the CRO and any Additional
Personnel may include the preparation of projections and other forward-looking statements,
and that numerous factors can affect the actual results of the Company’s
operations, which may materially and adversely differ from those projections
and other forward-looking statements.  In
addition, the CRO and any Additional Personnel will be relying on information
provided by other members of the Company’s management in the preparation of
those projections and other forward-looking statements.  Neither the CRO, any Additional Personnel nor
A&M makes any 

 

2

 

representation or guarantee
that an appropriate restructuring proposal or strategic alternative can be
formulated for the Company, that any restructuring proposal or strategic
alternative presented to the Board will be more successful than all other
possible restructuring proposals or strategic alternatives, that restructuring
is the best course of action for the Company or, if formulated, that any
proposed restructuring plan or strategic alternative will be accepted by any of
the Company’s creditors, shareholders and other constituents.  Further, neither the CRO, and any Additional
Personnel nor A&M assumes responsibility for the selection of any
restructuring proposal or strategic alternative that any such officer assists
in formulating and presenting to the Board, and the CRO and any Additional
Personnel shall be responsible for implementation only of the proposal or
alternative approved by the Board and only to the extent and in the manner
authorized and directed by the Board.

 

2.             Compensation

 

a.                                       A&M
will be paid by the Company for the services of the CRO and any Additional
Personnel at the following hourly billing rates.  The hourly billing rate for the CRO is
$850.  The current hourly billing rates
for other A&M personnel, based on the position held by such A&M
personnel in A&M, are:

 

	
  i.

  	
  Managing
  Director

  	
   

  	
  $550 - 850

  
	
  ii. 

  	
  Director

  	
   

  	
  $450 - 600

  
	
  iii.

  	
  Associate

  	
   

  	
  $300 - 450

  
	
  iv.

  	
  Analyst

  	
   

  	
  $175 - 300

  

 

Such rates shall be subject to
adjustment annually at such time as A&M adjusts its rates generally.

 

b.                                      In
addition, A&M will be reimbursed by the Company for the reasonable
out-of-pocket expenses of the CRO and any Additional Personnel, and if
applicable, other A&M personnel, incurred in connection with this
assignment, such as travel, lodging, duplications, computer research, messenger
and telephone charges.  In addition,
A&M shall be reimbursed by the Company for the reasonable fees and expenses
of its outside counsel incurred in connection with the preparation,
negotiation, enforcement and approval of this Agreement.  All fees and expenses due to A&M will be
billed on a monthly basis or, at A&M’s discretion, more frequently.

 

c.                                       The
Company shall promptly remit to A&M a retainer in the amount of $2,500,000,
which shall be credited against any amounts due at the termination of this
engagement and returned upon the satisfaction of all obligations hereunder.

 

3

 

d.                                      The
Company and A&M recognize that it is appropriate that A&M receive
incentive compensation for its services hereunder, in addition to the
compensation set forth above.  To
establish such incentive compensation (the “Incentive Fee”), A&M and the
Company will seek to reach agreement within ninety (90) days from the date
hereof on the amount of such Incentive Fee and the terms on which it shall be
payable.

 

3.             Term

 

The engagement
will commence as of the date hereof and may be terminated by either party
without cause by giving 30 days’ written notice to the other party.  A&M normally does not withdraw from an
engagement unless the Company misrepresents or fails to disclose material
facts, fails to pay fees or expenses, or makes it unethical or unreasonably
difficult for A&M to continue to represent the Company, or unless other
just cause exists.  After notice of
termination by the Company, A&M will provide services as reasonably
requested by the Company in connection with the restructuring process for up to
thirty (30) days.  In the event of any
such termination, any fees and expenses due to A&M shall be remitted
promptly (including fees and expenses that accrued prior to but were invoiced
subsequent to such termination).  If the
Company terminates this engagement without Cause or if A&M terminates this
engagement for Good Reason, A&M shall also be entitled to receive the
Incentive Fee upon the occurrence of the event to be agreed upon if such event
occurs within nine (9) months of the termination.  The Company may immediately terminate A&M’s
services hereunder at any time for Cause by giving written notice to
A&M.  Upon any such termination, the
Company shall be relieved of all of its payment obligations under this
Agreement, except for the payment of fees and expenses through the effective
date of termination (including fees and expenses that accrued prior to but were
invoiced subsequent to such termination) and its obligations under paragraphs 7
and 8.  For purposes of this Agreement, “Cause”
shall mean if (i) the CRO or any of the Additional Personnel is convicted
of, admits guilt in a written document filed with a court of competent
jurisdiction to, or enters a plea of nolo contendere to, an allegation of
fraud, embezzlement, misappropriation or any felony; (ii) the CRO or any
of the Additional Personnel willfully disobeys a lawful direction of the Board;
or (iii) a material breach of any of A&M’s or the CRO or any of the
Additional Personnel material obligations under this Agreement which is not
cured within 30 days of the Company’s written notice thereof to A&M
describing in reasonable detail the nature of the alleged breach.  For purposes of this Agreement, termination
for “Good Reason” shall mean either its resignation caused by a breach by the
Company of any of its material obligations under this Agreement that is not
cured within 30 days of A&M having given written notice of such breach to
the Company describing in reasonable detail the nature of the alleged breach.

 

4

 

4.             No Audit, Duty to
Update.

 

It is
understood that the CRO, any Additional Personnel and A&M are not being
requested to perform an audit, review or compilation, or any other type of
financial statement reporting engagement that is subject to the rules of
the AICPA, SEC or other state or national professional or regulatory body.  They are entitled to rely on the accuracy and
validity of the data disclosed to them or supplied to them by employees and
representatives of the Company.  The CRO,
any Additional Personnel and A&M are under no obligation to update data
submitted to them or review any other areas unless specifically requested by
the Board to do so.

 

5.             No Third Party
Beneficiary.

 

The Company
acknowledges that all advice (written or oral) given by A&M to the Company
in connection with this engagement is intended solely for the benefit and use
of the Company (limited to its Board and management) in considering the matters
to which this engagement relates.  The
Company agrees that no such advice shall be used for any other purpose or
reproduced, disseminated, quoted or referred to at any time in any manner or
for any purpose other than accomplishing the tasks referred to herein without
A&M’s prior approval (which shall not be unreasonably withheld), except to
Company counsel or as required by law.

 

6.             Conflicts.

 

A&M is not
currently aware of any relationship that would create a conflict of interest
with the Company or those parties-in-interest of which you have made us
aware.  Because A&M is a consulting
firm that serves clients on an international basis in numerous cases, both in
and out of court, it is possible that A&M may have rendered or will render
services to or have business associations with other entities or people which
had or have or may have relationships with the Company, including creditors of
the Company.  In the event you accept the
terms of this engagement, A&M will not represent, and A&M has not
represented, the interests of any such entities or people in connection with
this matter.  Each of the Companies acknowledges
and agrees that the services being provided hereunder are being provided on
behalf of each of them and each of them hereby waives any and all conflicts of
interest that may arise on account of the services being provided on behalf of
any other Company.  Each Company
represents that it has taken all corporate action necessary and is authorized
to waive such potential conflicts of interest.

 

7.             Confidentiality /
Non-Solicitation.

 

The CRO, and
Additional Personnel and A&M shall keep as confidential all non-public
information received from the Company in conjunction with this engagement,
except (i) as requested by the Company or its legal counsel; (ii) as 

 

5

 

required by
legal proceedings or (iii) as reasonably required in the performance of
this engagement.  All obligations as to
non-disclosure shall cease as to any part of such information to the extent
that such information is or becomes public other than as a result of a breach
of this provision.  Except as
specifically provided for in this letter, the Company on behalf of itself and
its subsidiaries and affiliates and any person which may acquire all or
substantially all of its assets agrees that, until two (2) years
subsequent to the termination of this engagement, it will not solicit, recruit,
hire or otherwise engage any employee of A&M who worked on this engagement
while employed by A&M (“Solicited Person”). 
Should the Company or any of its subsidiaries or affiliates or any
person who acquires all or substantially all of its assets extend an offer of
employment to or otherwise engage any Solicited Person and should such offer be
accepted, A&M shall be entitled to a fee from the party extending such
offer equal to the Solicited Person’s hourly client billing rate at the time of
the offer multiplied by 4,000 hours for a Managing Director, 3,000 hours for a
Senior Director and 2,000 hours for any other A&M employee.  The fee shall be payable at the time of the
Solicited Person’s acceptance of employment or engagement.

 

8.             Indemnification.

 

The Company
shall indemnify the CRO and all Additional Personnel to the same extent as the
most favorable indemnification it extends to its officers or directors, whether
under the Company’s bylaws, its certificate of incorporation, by contract or
otherwise, and no reduction or termination in any of the benefits provided
under any such indemnities shall affect the benefits provided to the CRO or
Additional Personnel.  The Company shall
use its reasonable best efforts to cover the CRO and each Additional Officer
under the Company’s existing director and officer liability insurance
policy.  If such insurance is obtained, a
Certificate of Insurance evidencing such coverage shall be furnished to A&M
and the Company shall give thirty (30) days’ prior written notice to A&M of
cancellation, non-renewal, or material change in coverage, scope, or amount of
such director and officer liability policy. 
If such insurance is obtained, the Company shall also maintain such
insurance coverage for the CRO and each Additional Officer for a period of not
less than two years following the date of the termination of such officer’s
services hereunder.  The provisions of
this section 8 are in the nature of contractual obligations and no change in
applicable law or the Company’s charter, bylaws or other organizational
documents or policies shall affect the CRO’s or any Additional Officer’s rights
hereunder.  The attached indemnity
provisions are incorporated herein and the termination of this agreement or the
engagement shall not affect those provisions, which shall survive termination.

 

9.             Miscellaneous.

 

This Agreement
shall (together with the attached indemnity provisions be: (a) governed
and construed in accordance with the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of 

 

6

 

conflict of
laws thereof; (b) incorporates the entire understanding of the parties
with respect to the subject matter thereof; and (c) may not be amended or
modified except in writing executed by each of the signatories hereto.  The Company and A&M agree to waive trial
by jury in any action, proceeding or counterclaim brought by or on behalf of the
parties hereto with respect to any matter relating to or arising out of the
performance or non-performance of the Company or A&M hereunder.  The Company and A&M agree that the
Bankruptcy Court having jurisdiction over the Company’s Chapter 11 case (or any
case into which it may be converted) shall have exclusive jurisdiction over any
and all matters arising under or in connection with their obligations
hereunder.  Notwithstanding anything
herein to the contrary, A&M may reference or list the Company’s name and/or
a general description of the services in A&M’s marketing materials,
including, without limitation, on A&M’s website.

 

The next page is the
signature page.

 

7

 

If the foregoing is acceptable
to you, kindly sign the enclosed copy to acknowledge your agreement with its
terms.

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  Alvarez & Marsal North America,
  LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bryan P. Marsal

  
	
   

  	
   

  	
  Bryan P. Marsal

  
	
   

  	
   

  	
  Managing Director

  

 

Accepted and Agreed:

 

	
  Lehman
  Brothers Holdings, Inc.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Steven
  Berkenfeld

  	
   

  
	
   

  	
  Name:

  	
  Steven Berkenfeld

  
	
   

  	
  Title:

  	
  Vice
  President

  
				

 

8

 

INDEMNIFICATION AGREEMENT

 

This indemnity
is made part of an agreement, dated September 15, 2008 (which together
with any renewals, modifications or extensions thereof, is herein referred to
as the “Agreement”) by and between Alvarez & Marsal North America, LLC
(“A&M”) and Lehman Brothers Holdings, Inc. (the “Company”), for
services to be rendered to the Company by A&M.

 

A.            The Company agrees to indemnify and
hold harmless each of A&M, its affiliates and their respective
shareholders, members, managers, employees, agents, representatives and
subcontractors (each, an “Indemnified Party” and collectively, the “Indemnified
Parties”) against any and all losses, claims, damages, liabilities, penalties,
obligations and expenses, including the costs for counsel or others (including
employees of A&M, based on their then current hourly billing rates) in
investigating, preparing or defending any action or claim, whether or not in
connection with litigation in which any Indemnified Party is a party, or
enforcing the Agreement (including these indemnity provisions), as and when
incurred, caused by, relating to, based upon or arising out of (directly or
indirectly) the Indemnified Parties’ acceptance of or the performance or
nonperformance of their obligations under the Agreement; provided, however,
such indemnity shall not apply to any such loss, claim, damage, liability or
expense to the extent it is found in a final judgment by a court of competent
jurisdiction (not subject to further appeal) to have resulted primarily and
directly from such Indemnified Party’s gross negligence or willful
misconduct.  The Company also agrees that
no Indemnified Party shall have any liability (whether direct or indirect, in
contract or tort or otherwise) to the Company for or in connection with the
engagement of A&M, except to the extent that any such liability for losses,
claims, damages, liabilities or expenses are found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) to have
resulted primarily and directly from such Indemnified Party’s gross negligence
or willful misconduct.  The Company
further agrees that it will not, without the prior consent of an Indemnified
Party, settle or compromise or consent to the entry of any judgment in any
pending or threatened claim, action, suit or proceeding in respect of which
such Indemnified Party seeks indemnification hereunder (whether or not such
Indemnified Party is an actual party to such claim, action, suit or
proceedings) unless such settlement, compromise or consent includes an
unconditional release of such Indemnified Party from all liabilities arising
out of such claim, action, suit or proceeding.

 

B.            These indemnification provisions
shall be in addition to any liability which the Company may otherwise have to
the Indemnified Parties.  In the event
that, at any time whether before or after termination of the engagement or the
Agreement, as a result of or in connection with the Agreement or A&M’s and
its personnel’s role under the Agreement, A&M or any Indemnified Party is
required to produce any of its personnel (including former employees) for
examination, deposition or other written, recorded or oral presentation, or
A&M or any of its personnel (including former employees) or any other
Indemnified Party is required to produce or otherwise review, compile, submit,
duplicate, search for, organize or report on any material within such Indemnified
Party’s possession or control pursuant to a subpoena or other legal (including
administrative) process, the Company will reimburse the Indemnified Party for
its out of pocket expenses, including the reasonable fees and expenses of its
counsel, and will compensate the Indemnified Party for the time expended by its
personnel based on such personnel’s then current hourly rate.

 

1

 

C.            If any action, proceeding or
investigation is commenced to which any Indemnified Party proposes to demand
indemnification hereunder, such Indemnified Party will notify the Company with
reasonable promptness; provided, however, that any failure by such Indemnified
Party to notify the Company will not relieve the Company from its obligations
hereunder, except to the extent that such failure shall have actually
prejudiced the defense of such action. 
The Company shall promptly pay expenses reasonably incurred by any
Indemnified Party in defending, participating in, or settling any action,
proceeding or investigation in which such Indemnified Party is a party or is
threatened to be made a party or otherwise is participating in by reason of the
engagement under the Agreement, upon submission of invoices therefor, whether
in advance of the final disposition of such action, proceeding, or
investigation or otherwise.  Each
Indemnified Party hereby undertakes, and the Company hereby accepts its
undertaking, to repay any and all such amounts so advanced if it shall
ultimately be determined that such Indemnified Party is not entitled to be
indemnified therefor.  If any such
action, proceeding or investigation in which an Indemnified Party is a party is
also against the Company, the Company may, in lieu of advancing the expenses of
separate counsel for such Indemnified Party, provide such Indemnified Party
with legal representation by the same counsel who represents the Company,
provided such counsel is reasonably satisfactory to such Indemnified Party, at
no cost to such Indemnified Party; provided, however, that if such counsel or
counsel to the Indemnified Party shall determine that due to the existence of
actual or potential conflicts of interest between such Indemnified Party and
the Company such counsel is unable to represent both the Indemnified Party and
the Company, then the Indemnified Party shall be entitled to use separate
counsel of its own choice, and the Company shall promptly advance its
reasonable expenses of such separate counsel upon submission of invoices
therefor.  Nothing herein shall prevent
an Indemnified Party from using separate counsel of its own choice at its own
expense.  The Company will be liable for
any settlement of any claim against an Indemnified Party made with the Company’s
written consent, which consent shall not be unreasonably withheld.

 

D.            In order to provide for just and
equitable contribution if a claim for indemnification pursuant to these
indemnification provisions is made but it is found in a final judgment by a
court of competent jurisdiction (not subject to further appeal) that such
indemnification may not be enforced in such case, even though the express
provisions hereof provide for indemnification, then the relative fault of the
Company, on the one hand, and the Indemnified Parties, on the other hand, in
connection with the statements, acts or omissions which resulted in the losses,
claims, damages, liabilities and costs giving rise to the indemnification claim
and other relevant equitable considerations shall be considered; and further
provided that in no event will the Indemnified Parties’ aggregate contribution
for all losses, claims, damages, liabilities and expenses with respect to which
contribution is available hereunder exceed the amount of fees actually received
by the Indemnified Parties pursuant to the Agreement.  No person found liable for a fraudulent
misrepresentation shall be entitled to contribution hereunder from any person
who is not also found liable for such fraudulent misrepresentation.

 

E              The Company and A&M shall seek
judicial approval for the assumption of the Agreement or authorization to enter
into a new engagement agreement pursuant to either of which A&M would
continue to be engaged by the Company, the Company shall promptly pay expenses
reasonably incurred by the Indemnified Parties, including attorneys’ fees and
expenses, in connection with any motion, action or claim made either in support
of or in opposition to any such retention or authorization, whether in advance
of or following any judicial disposition of 

 

2

 

such motion,
action or claim, promptly upon submission of invoices therefor and regardless
of whether such retention or authorization is approved by any court.  The Company will also promptly pay the
Indemnified Parties for any expenses reasonably incurred by them, including
attorneys’ fees and expenses, in seeking payment of all amounts owed it under
the Agreement (or any new engagement agreement) whether through submission of a
fee application or in any other manner, without offset, recoupment or
counterclaim, whether as a secured claim, an administrative expense claim, an
unsecured claim, a prepetition claim or a postpetition claim.

 

F              The rights provided herein shall
not be deemed exclusive of any other rights to which the Indemnified Parties
may be entitled under the certificate of incorporation or bylaws of the
Company, any other agreements, any vote of stockholders or disinterested
directors of the Company, any applicable law or otherwise.

 

	
  LEHMAN BROTHERS HOLDINGS, INC.

  	
   

  	
  ALVAREZ & MARSAL NORTH AMERICA, LLC

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Steven Berkenfeld

  	
   

  	
  By:

  	
  /s/ Bryan P. Marsal

  
	
   

  	
  Name: Steven Berkenfeld

  	
   

  	
   

  	
  Bryan P. Marsal, Managing Director

  
	
   

  	
  Title: Vice President

  	
   

  	
   

  

 

3Exhibit 10.7

 

The Depository Trust &
Clearing Corporation

55 Water Street, 22nd Floor

New York, NY 10041-0099

 

September 22, 2008

 

Mr. John Roderfeld

Director of Operations

Barclays Capital, Inc.

200 Park Avenue

New York, NY 10166

 

Mr. James W. Giddens, as Trustee

(the “Trustee” For the liquidation of Lehman
Brothers, Inc.

Under the Securities Investor Protection Act

c/o Hughes Hubbard

One Battery Park Plaza

New York, NY 10004

Attention: James B. Kobak, Jr.

 

Re: Winding Down of Accounts
and Guaranty

 

Ladies and Gentlemen:

 

We are writing in connection with the Asset
Purchase Agreement among Lehman Brothers Holdings, Inc., Lehman Brothers, Inc.
(“LBI”), LB 745 LLC and Barclays Capital, Inc. (“Barclays”) dated as of September 16,
2008, and as amended by the First Amendment thereto dated as of September 19,
2008 (collectively, the “Agreement”). 
The United States Bankruptcy Court for the Southern District of New York
(Manhattan) (Case No. 08-13555) (the “Bankruptcy Court”) has approved the
Agreement on September 20, pursuant to which Barclays is to acquire
certain assets, and assume certain liabilities of LBI (the “APA Approval Order”).

 

On September 19, 2008, in a proceeding
brought by the Securities Investor Protection Corporation in the United States
State District Court for the Southern District of New York, James Giddens was
appointed as the SIPC Trustee for the LBI estate and the creditors of the
estate (the “Trustee”) and the District Court entered that certain Order
Commencing Liquidation (the “SIPC Proceeding”). 
On September 20, 2008, the Bankruptcy Court entered an order
adopting the APA Approval Order in the SIPC Proceeding (collectively with the
APA Approval Order, the “Orders”).

 

In connection with the Agreement and for good
and valuable consideration, the receipt of which is acknowledged, Barclays, the
Trustee and The Depository Trust & Clearing Corporation (“DTCC”) (on
behalf of The Depository Trust Company (“DTC”), the Fixed Income Clearing
Corporation (“FICC”) and National Securities Clearing Corporation (“NSCC”)
(DTC, NSCC

 

 

and FICC collectively referred to as the “Clearing
Agency Subsidiaries”)), on behalf and for the benefit of its Clearing Agency
Subsidiaries, hereby agree as follows:

 

1.             Winding Down of Accounts.  Barclays has indicated, and hereby agrees,
that all of the accounts of LBI maintained at the Clearing Agencies
Subsidiaries (the “Accounts”) constitute “Excluded Assets” within the meaning
of the APA.  Accordingly, pursuant to the
authority granted to the Trustee in the Orders, the Trustee hereby instructs
the Clearing Agency Subsidiaries to close out the pending transactions in the
Accounts of the Clearing Agency Subsidiaries and to use the proceeds in
accordance with the Rules and Procedures of the Clearing Agency
Subsidiaries. Such liquidation transactions shall be transferred to, and closed
out by, the relevant Clearing Agency Subsidiary, in the same manner as it
closes out positions of Participants/Members for whom it has ceased to act.

 

As part of this closeout process, the Trustee
hereby authorizes DTC to accept and act upon instructions from NSCC to deliver
securities from the DTC LBI Account to NSCC’s account, in order to reduce or
eliminate LBI’s outstanding delivery obligations to NSCC.

 

2.             Guaranty.  In order to
induce DTCC to take the foregoing actions, Barclays hereby agrees to guaranty,
indemnify and hold harmless DTCC and each of the Clearing Agency Subsidiaries,
and each of its or their officers, directors, employees, owners, agents and
representatives (the “Guaranty”) against any and all losses, claims, damages,
expenses (including legal fees) or liabilities (“Losses”) that any of them may
incur as a result of winding down and closing out the Accounts, which Guaranty
is limited to the Cash Deposit described below.

 

To secure the Guaranty, Barclays shall wire
transfer $250 million (the “Cash Deposit”) by 8 a.m., September 22,
2008 pursuant to the following instructions:

 

Bank: JPMorgan Chase

ABA#=   021000021

Account # 617330026

FAO: DTCC general funds

REF: BARCLAYS GUARANTY

 

Recourse with respect of this Guaranty shall
be solely limited to the Cash Deposit, and upon payment of the Cash Deposit to
DTCC, Barclays shall have no further liability in respect of such Guaranty.

 

Any Losses shall first be satisfied from the
Cash Deposit.  Any Losses in excess of
the Cash Deposit shall be satisfied in accordance with the rules and
procedures of the applicable Clearing Agency Subsidiary.  Should any portion of the Cash Deposit remain
following the closeout of the Accounts and satisfaction of all obligations in
accordance with the Rules and Procedures of the Clearing Agency
Subsidiaries, such amounts shall be remitted to the Trustee.

 

2

 

3.             Miscellaneous.

 

(a)           No
authorizations, approvals, consents or waivers by, or notifications to, a
governmental authority or other third party (including but not limited to
licenses, notifications, registrations or declarations) (collectively, “Authorizations”)
are required for the execution, delivery or satisfaction by Barclays of this
Letter Agreement or the satisfaction of any of the obligations of Barclays
contemplated thereby, or, if required, all such Authorizations have been
obtained.

 

(b)           This
Letter Agreement and the provisions herein shall be governed by and construed
and interpreted in accordance with the law of the State of New York exclusive
of its conflict of laws provisions.  In
addition, the parties hereby: (i) irrevocably and unconditionally submit
to the non-exclusive jurisdiction of any Federal or State court in the County
of New York, in the State of New York in respect of any action or proceeding
brought against it or relating in any way to this Letter Agreement (ii) irrevocably
and unconditionally waive, to the fullest extent permitted by law, any
objection to the laying of venue in the aforesaid courts, and (iii) waive
any right to trial by jury with respect to any action brought against it or
relating in any way to this Letter Agreement.

 

(c)           This
Letter Agreement may be executed in counterparts, each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.

 

4.             Waivers.

 

Barclays hereby waives presentment, demand,
notices, protest and formalities of any kind.

 

Signature Page to Follow:

X

X

X

X

X

X

X

X

X

X

X

 

3

 

Please indicate your agreement to the above
by signing and returning the enclosed receipt copy of this letter.

 

Very truly yours,

 

The Depository Trust & Clearing
Corporation, on behalf of itself and

The Depository Trust Company, National Securities Clearing Corporation,

and Fixed Income Clearing Corporation

 

 

	
  By:

  	
  /s/ Larry E. Thompson

  	
   

  
	
   

  	
  Larry E. Thompson

  
	
   

  	
  Managing Director and
  General Counsel

  

 

Enclosures

 

Accepted and agreed as of the
date first above written:

 

James W. Giddens as Trustee
for the Liquidation of Lehman Brothers, Inc. under the Securities Investor
Protection Act

 

	
  By:

  	
  Hughes Hubbard, Counsel
  for the Trustee

  	
   

  

 

 

	
  By:

  	
       /s/
  Anson B Frelinghuysen

  	
   

  
	
   

  	
  James B. Kobak Jr.

  
	
   

  	
  Anson B. Frelinghuysen,
  Counsel

  

 

 

Barclays Capital, Inc.

 

 

	
  By:

  	
       /s/
  Gerard LaRocca

  	
   

  
	
  Name:

  	
  Gerard LaRocca

  
	
  Title: 

  	
  Chief Executive Officer

  
				

 

4

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