Client Assets Update - Amended Claim Resolution Agreement - 08/12/2011

This update relates to the Claim Resolution Agreement (the "Agreement"), which was declared effective on 29 December 2009 by Lehman Brothers International (Europe) (in administration) ("LBIE") in respect of certain of its clients and counterparties.  Further background information in relation to the Offer and the Agreement is set out in our update of 24 November 2009.  Capitalised terms not defined in this update shall have the meaning given to them in the Agreement.

The Joint Administrators hereby notify you of the following modifications to the Agreement, which are being made in accordance with Clause 80.3 (Minor, technical or not materially prejudicial amendments) of the Agreement. These modifications add a new Collateralisation Election which allows a TA Signatory to collateralise its Net Financial Liability by paying cash to be held as a Collateral Amount, thereby reducing the Gross Uncollateralised Liability on which interest accrues. The modifications also clarify that a TA Signatory may, as agreed with LBIE,  Transfer Agreed Claims to another person (whether Signatory or Non-Signatory). This clarification is prompted by the intention of the Administrators (where they consider it possible or desirable in all of the relevant circumstances) to enter into claims determination deeds (“Claims Determination Deeds”) with Signatories who have unsecured claims (and who may also have Pre-Administration Client Money Claims) to agree their Agreed Claims. The modifications also correct an error in Clause 60.8.3 of the Agreement and update the names and address of the Administrators.

1. The addition of a new Collateralisation Election – Cash Payment Election

• In order to decrease the Gross Uncollateralised Liability on which interest accrues, a TA Signatory may elect to collateralise its Net Financial Liability with an amount to be paid by the TA Signatory by giving not less than 5 Business Days’ Notice to LBIE (or such other notice period as agreed with LBIE) showing the amount, the proposed payment date of such Payment and giving details of the relevant account from which any amount for such Payment will be paid.
• When LBIE receives a Payment of a cash amount in accordance with such notice the amount will constitute a “Cash Payment Amount” of the TA Signatory.
• If the TA Signatory fails to pay any cash amount in accordance with the notice it shall be deemed not to have made a Cash Payment Election and the notice given in connection with it shall be deemed not given.
• If LBIE incurs any costs and expenses as a result of the TA Signatory’s failure to make such Payment in accordance with the notice, such costs and expenses shall be a Non-Financial Contract Liability in respect of such TA Signatory.
• The aggregate amount of all Cash Payment Amounts of the TA Signatory shall increase the Collateral Amount which shall be applied as a Distribution Asset in the priority of payment under Clause 60.8. 
• To the extent that Cash Payment Amounts result in a surplus Collateral Amount under Clause 59.10, any such surplus would be applied in accordance with Clause 60.4 and if any part of such surplus Collateral Amount remains after the waterfall in Clause 60.4 is applied, it will be returned to the relevant TA Signatory.

2. Other changes or clarifications

• The Agreement is amended to clarify that a TA Signatory may Transfer an Agreed Claim to another person (whether a Signatory or Non-Signatory) where such Transfer is made in accordance with the transfer provisions agreed between LBIE and the relevant Signatory in relation to such Agreed Claim. A transfer to a Non-Signatory does not have the effect of making such a person a Signatory.
• Agreed Claim is defined as (i) any Ascertained Claim determined in accordance with the terms of the Agreement (for example, an Agreed Claim consisting of a Net Financial Claim and Asset Shortfall Claim) the quantum of which has been agreed by the Company and the Claimant in writing; (ii) any Claim to which Clauses 4 and 5 of the Agreement are not applicable (for example a Claim consisting of a Pre-Administration Client Money Claim) the quantum of which has been agreed by the Company and the Claimant in writing; and (iii) any combination of Claims that would have fallen in (i) and/or (ii) above if their quantum was agreed in writing, the aggregate quantum of which has been agreed by the Company and the Claimant in writing, whether or not the quantum of each individual Claim in this combination of Claims has been agreed or is subsequently agreed, and for the purposes of this definition of “Agreed Claim”, the quantum of a Claim will only be regarded as being agreed in writing if set out in a Closing Statement or in a deed or other agreement executed on behalf of the Company by an Administrator and,  for the avoidance of doubt, a Determination Notice will not constitute agreement by the Company and the TA Signatory in writing as to quantum for the purpose of the definition of Agreed Claims.
• This clarification is prompted by the intention of the Administrators (where the Joint Administrators determine agreement is possible and desirable in all of the relevant circumstances) to enter into Claims Determination Deeds with Signatories who have unsecured claims (and may also have Pre-Administration Client Money Claims) in order to agree their Agreed Claims. The current intention is that the Claim Determination Deeds will set out provisions relating to the transfer of the Agreed Claim and provide forms of the transfer notice to be sent to LBIE in relation to the transfer. The use of the provided transfer notices will speed up the process of dealing with, and the acknowledgment of, transfers of Agreed Claims by LBIE and it is expected that in practice transfers of Agreed Claims will be made in accordance with the provisions of the relevant Claims Determination Deed. LBIE shall propose a Claims Determination Deed only to Signatories who have submitted a proof of debt. LBIE shall, acting in good faith, choose the order in which it proposes Claims Determination Deeds to Signatories who have submitted a proof of debt in its sole discretion.
• Clause 60.8.3 has been amended to correct an erroneous clause number cross-reference.
• The definition of “Administrators” has been amended to state the names of the current administrators and their current address.

3. Modified Agreement

A copy of the Agreement modified for the above is available here along with a comparison of the Agreement against the version posted on 27 January 2011.

4. Further information

In the event that you require further information with regard to the above, please send an email to generalqueries@lbia-eu.com .

Please continue to check this website for information on matters relating to the administration of LBIE.