United States Bankruptcy Court Southern District of New York

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 1 of 71 Hearing Date and Time: December 12, 2012 at 10:00 a.m. Objection Deadline: December 5, 2012 at 4:00 p.m. Richard G. Menaker Rebecca Northey MENAKER & HERRMANN LLP 10 East 40th Street New York, New York 10016 Telephone: (212) 545-1900 Facsimile: (212) 545-1656

Special Counsel for James W. Giddens, Trustee for the SIPA Liquidation of Lehman Brothers Inc.

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re

LEHMAN BROTHERS INC., Case No. 08-01420 (JMP) SIPA

Debtor.

LEHMAN BROTHERS INC.,

Plaintiff,

-against- Adv. Proc. No. 11-01681 (JMP)

CITIBANK, N.A., CITIGROUP INC., CITIGROUP GLOBAL MARKETS, INC., CITIBANK JAPAN LTD., CITIBANK EUROPE PLC, CITIBANK INTERNATIONAL PLC, CITIGROUP PTY LIMITED, BANCO DE CHILE, BANCO NACIONAL DE MEXICO SA, CITIBANK DEL PERU SA, BANK HANDLOWY, ZAO KB CITIBANK, CITIBANK AS, CITIBANK MAGHREB, and CITIBANK AFFILIATES 1-5,

Defendants.

NOTICE OF TRUSTEE’S MOTION PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEUDURE 9019 FOR ENTRY OF AN ORDER APPROVING SETTLEMENT AGREEMENT WITH THE CITI PARTIES

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 2 of 71

PLEASE TAKE NOTICE that a hearing on the annexed Motion (the “Motion”)

of James W. Giddens (the “Trustee”), as Trustee for the liquidation of the business of Lehman

Brothers Inc. (the “Debtor” or “LBI”) under the Securities Investor Protection Act of 1970, as

amended, 15 U.S.C. §§ 78aaa et seq. (“SIPA”), pursuant to sections 105(a) of the Bankruptcy

Code and Rule 9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”) for

entry of an Order Approving Settlement Agreement with the Citi Parties, all as more fully

described in the Motion, will be held before the Honorable James M. Peck, United States

Bankruptcy Judge, at the United States Bankruptcy Court, Alexander Hamilton Customs House,

Courtroom 601, One Bowling Green, New York, New York 10004 (the “Bankruptcy Court”), on

December 12, 2012 at 10:00 a.m. (Prevailing Eastern Time) (the “Hearing”).

PLEASE TAKE FURTHER NOTICE that objections, if any, to entry of the

order must (i) be in writing; (ii) state the name and address of the objecting party and nature of

the claim or interest of such party; (iii) state with particularity the legal and factual bases of such

objection; (iv) conform to the Bankruptcy Rules and Local Bankruptcy Rules; (v) be filed with

the Bankruptcy Court, together with proof of service, electronically, in accordance with General

Order M-399 (available at the Court’s website, www.nysb.uscourts.gov) by registered users of

the Court’s Case Management/Electronic Case Filing System, and by all other parties in interest,

on a 3.5 inch disk or CD-ROM, preferably in Portable Document Format (PDF), WordPerfect or

any other Windows-based word processing format no later than December 5, 2012 at 4:00 p.m.

(the “Objection Deadline”); and (vi) served on (a) Menaker & Herrmann LLP, 10 East 40th St.,

New York, New York, 10016, Attn: Richard G. Menaker, Esq., Stephen D. Houck, Esq. and

Rebecca Northey, Esq., (b) Securities Investor Protection Corporation, 805 Fifteenth Street,

N.W., Suite 800, Washington, DC 20005, Attn: Kenneth J. Caputo, Esq., (c) Paul, Weiss,

Rifkind, Wharton & Garrison LLP, 1285 Avenue of the Americas, New York, New York 10019,

Attn: Stephen J. Shimshak, Esq., Claudia L. Hammerman, Esq. and Douglas R. Davis, Esq., (d)

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Weil Gotshal & Manges LLP, 767 Fifth Avenue, New York, New York 10153, Attn: Richard P.

Krasnow, Esq., Lori R. Fife, Esq., Robert J. Lemons, Esq. and Jacqueline Marcus, Esq., and (e)

Milbank, Tweed, Hadley & McCloy LLP, One Chase Manhattan Plaza, New York, New York

10005, Attn: Dennis F. Dunne, Esq., Dennis O’Donnell, Esq. and Evan Fleck, Esq., with a

courtesy copy to the chambers of the Honorable James M. Peck, United States Bankruptcy

Court, One Bowling Green, New York, New York 10004.

PLEASE TAKE FURTHER NOTICE that if no responses are timely filed and

served with respect to the Motion, the Trustee may, on or after the Objection Deadline, submit to

the Bankruptcy Court an order substantially in the form of the proposed order annexed to the

Motion, which may be entered with no further notice or opportunity to be heard offered to any

party.

PLEASE TAKE FURTHER NOTICE that objecting parties are required to

attend the Hearing, and failure to appear may result in relief being granted or denied upon

default.

Dated: New York, New York November 16, 2012 MENAKER & HERRMANN LLP

By: /s/ Richard G. Menaker Richard G. Menaker 10 East 40th Street New York, New York 10016 Telephone: (212) 545-1900 Facsimile: (212) 545-1656 Email: [email protected]

Special Counsel for James W. Giddens, Trustee for the SIPA Liquidation of Lehman Brothers Inc.

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 4 of 71

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re Case No. 08-01420 (JMP) SIPA LEHMAN BROTHERS INC.,

Debtor.

LEHMAN BROTHERS INC., Adv. Proc. No. 11-01681 (JMP)

Plaintiff,

-against-

Defendants.

TRUSTEE’S MOTION PURSUANT TO SECTION 105(a) OF THE BANKRUPTCY CODE AND FEDERAL RULE OF BANKRUPTCY PROCEDURE 9019 FOR ENTRY OF AN ORDER APPROVING SETTLEMENT AGREEMENT WITH THE CITI PARTIES

TO THE HONORABLE JAMES M. PECK UNITED STATES BANKRUPTCY JUDGE:

James W. Giddens (the “Trustee”), as Trustee for the liquidation of

Lehman Brothers Inc. (“LBI”) under the Securities Investor Protection Act (“SIPA”),

by and through his undersigned counsel, hereby submits this motion (the “Motion”) 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 5 of 71

pursuant to Rule 9019(a) of the Federal Rules of Bankruptcy Procedure (the

“Bankruptcy Rules”), for approval of a settlement and compromise among the

Trustee and Citibank, N.A. (“Citibank”) and certain of its affiliates that will bring an

aggregate value of $435,000,000 to the LBI estate, including a cash payment to the

estate of $360,000,000, and the withdrawal of 14 proofs of claim and the

$75,000,000 superpriority administrative claim filed against the estate. In addition,

the Settlement Agreement will end the protracted litigation between the Trustee and

Citi, which will further benefit LBI’s estate. As set forth in the settlement agreement,

dated as of November 16, 2012, attached hereto as Exhibit 1 (the “Settlement

Agreement”), Citigroup Inc., Citibank, N.A. and CGMI, on their own behalf and on

behalf of certain of their affiliates 1 (collectively “Citi”), have agreed to settle and

compromise the above captioned adversary proceeding and the contested matter

brought on by that Motion of Citibank, N.A. and Certain Affiliates for the Entry of an

Order Pursuant to 11 U.S.C. Sections 362(b)(6), 362(b)(7), 362(b)(17), 362(o), 555,

559, 560 and 15 U.S.C. Sections 78eee(b)(2)(C), 78fff(b) Authorizing Exercise of

Certain Contractual, Common Law, and Statutory Rights in Respect of Amounts

Claimed by LBI and Other Related Relief (“Stay Relief Motion,” ECF No. 4306). In

respect of the Motion, the Trustee respectfully states as follows:

1 The Citi affiliates include Citibank Japan Ltd., Citibank Europe plc, Citibank International plc, Citigroup Pty Limited, Banco Nacional de Mexico SA, Citibank del Peru, Bank Handlowy W Warszawie SA, ZAO KB Citibank, Citibank AS, and Citibank Maghreb. - 2 - 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 6 of 71

PRELIMINARY STATEMENT

1. After more than three years of extensive negotiation, litigation and

reconciliation with Citi, the Trustee has achieved a settlement that will bring value to

the estate of at least $435,000,000. The parties, through cooperation and

reconciliation, will avoid the expense and uncertainties of further protracted

litigation, which would expend further estate resources and burden the Court’s

calendar.

2. This proposed settlement is consistent with the Trustee’s statutory

mandate and will enhance the Trustee’s ability to make distributions to LBI’s former

customers and other creditors. Accordingly, the Trustee respectfully requests that the

Court approve the settlement agreement pursuant to section 105(a) of the Bankruptcy

Code and Federal Rules of Bankruptcy Procedure 9019.

I. JURISDICTION AND VENUE

3. Commencing on September 15, 2008, and periodically thereafter,

Lehman Brothers Holdings Inc. (“LBHI”) and certain of its subsidiaries commenced

voluntary cases (the “Chapter 11 Cases”) under chapter 11 of the Bankruptcy Code.

On September 19, 2008 (the “Filing Date”), the Honorable Gerard E. Lynch, Judge of

the United States District Court for the Southern District of New York, entered the

Order Commencing Liquidation of LBHI’s broker-dealer affiliate, Lehman Brothers

Inc. (the “LBI Liquidation Order”) pursuant to the provisions of the Securities

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Investor Protection Act (“SIPA”) in the case captioned Securities Investor Protection

Corporation v. Lehman Brothers Inc. , Case No. 08-CIV-8119 (GEL).

4. The LBI Liquidation Order (i) appointed the Trustee for the

liquidation of the business of LBI pursuant to SIPA section 78eee(b)(3) and (ii)

removed the case to this Court pursuant to section 78eee(b)(1), in the case captioned

In re Lehman Brothers Inc. , Case No. 08-01420 (JMP).

5. Following removal to this Court, this Court has “all of the

jurisdiction, powers, and duties conferred by SIPA upon the court to which the

application for the issuance of the protective decree was made.” SIPA § 78eee(b)(4).

Venue is proper in this Court pursuant to SIPA § 78eee(a)(3) and 15 U.S.C. § 78aa.

II. BACKGROUND

6. Before September 22, 2008, LBI maintained numerous deposit

and securities accounts at Citi throughout the world. Citibank, N.A. provided certain

services to LBI in connection with the settlement of foreign exchange payments

through the Continuous Linked Settlement System operated by CLS Bank

International (“CLS Bank”). CLS Bank operates a global multi-currency cash

settlement system on a payment-versus-payment basis, thereby effecting simultaneous

exchange of the two legs of a foreign exchange transaction. At the time, LBI was a

User Member of CLS Bank, and Citibank acted as LBI’s Designated Settlement

Member. The relationship between LBI and Citibank was governed by a CLS

Settlement Services Amended and Restated Agreement for CLS User Members,

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dated October 28, 2004.

7. The relationship between LBI and Citi extended beyond the

provision of CLS settlement services. The transactions with Citibank, CGMI and

other affiliates were numerous and often complex. Citibank and its affiliates entered

with LBI into (a) International Swap Dealers Association Master Agreements, under

which the parties executed various foreign exchange transactions including swaps

and forward and spot transactions; (b) securities lending agreements, which created a

lending program that allowed LBI to borrow securities in exchange for posting

collateral equal to or greater than the value of the borrowed securities at the time they

were borrowed; (c) repurchase agreements; (d) agreements for purchase and sale of

securities including, without limitation, equity interests, fixed income instruments,

interests in mortgage loans or groups thereof, and warrants or options to purchase the

aforementioned; and (e) underwriting agreements. 2 Also, Citibank and its affiliates

provided a number of financial services to LBI, including accounts for maintenance

of cash deposits worldwide, custodial accounts, credit facilities, and foreign securities

clearing.

8. During the week following LBHI’s filing of the Chapter 11

Cases, Citibank continued to provide CLS settlement services for LBI. On September

19, 2008 allegedly immediately before the commencement of the liquidation of LBI,

Citi set off a $1 billion deposit (the “$1 Billion Deposit”) made by LBI earlier that

2 LBI and CGMI, along with other parties, were parties to numerous underwriting syndicates for various stock and bond issuances. The relationship between CGMI and LBI took many forms in these arrangements, including: (l) CGMI or LBI may have acted as the lead underwriter, (2) CGMI or LBI may have acted as the managing or co-managing underwriter, or (3) CGMI and LBI, or both, may have acted as simply underwriter. - 5 - 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 9 of 71

week against losses claimed by Citi in connection with its continued provision to LBI

of CLS services (the “September 19 Setoff”).

9. As set forth in the Turnover Stipulation approved by the

Bankruptcy Court, Citi thereafter asserted administrative holds on LBI’s accounts

maintained at Citi, pending resolution of Citi’s setoff claims against those accounts

and, on or before the June 1, 2009 Bar Date, Citi filed numerous proofs of claim

against the estate of LBI.

10. On December 18, 2008, Citi and the Trustee entered into a

Stipulation and Order (the “Turnover Stipulation”) authorizing (1) the turnover to the

Trustee of $75,000,000 (the “Turnover Amount”) from certain LBI deposit accounts

at Citibank Singapore Branch, Citibank Japan Ltd. and Citibank Korea Inc., (2) the

continuation of an administrative hold on certain LBI deposit accounts, and (3) the

provisional allowance of superpriority administrative claims in favor of the Citibank

affiliates that contributed to the Turnover Amount. The Turnover Stipulation was

approved by the Bankruptcy Court by order entered December 31, 2008 [ECF No.

487]. Thereafter, Citibank Singapore Branch and Citibank Japan, Ltd. turned over an

aggregate of $75,000,000 to the Trustee. On March 31, 2009, Citi filed Citibank’s

Request for Allowance of Superpriority Administrative Expense Claim [ECF No. 916]

(“Citi’s Superpriority Claim”).

11. As part of the Trustee’s statutory duties, the Trustee conducted

an extensive investigation of Citi’s activities as LBI’s CLS Settlement Member bank,

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including review and analyses of documents produced by Citi, review of Lehman

proprietary documents, interviews of former Lehman personnel, and reconciliations

of LBI’s books and records. The Trustee’s investigation and findings have been the

subject of interim reports to the Court. 3 As a result of this investigation, the Trustee

discovered various potential claims against Citi, which Citi disputes.

III. THE TRUSTEE ’S CLAIMS

12. On March 18, 2011, the Trustee filed an adversary proceeding

against Citi (Adv. Proc. No. 11-01681), in which the Trustee asserted a claim for

recovery of the $1 Billion Deposit based on various theories (the “LBI Adversary

Proceeding”). The Trustee also asserted claims for the turnover of cash and securities

deposits at Citi totaling more than $300 million.

13. On May 26, 2011, Citi responded to the complaint with a motion for

partial dismissal under Bankruptcy Rule 7012 and Fed. R. Civ. P. 12(b)(6). The

motion was premised on the “safe harbor” provisions of SIPA and the Bankruptcy

Code, including sections 362(b)(17), 546(g), 553(a) and (b) and 560, as well as other

grounds.

14. Contemporaneously with its motion to dismiss the complaint, on

May 26, 2011, Citi filed its Stay Relief Motion seeking authorization to exercise

setoffs based on the safe harbors of the Bankruptcy Code and other alleged statutory

and common law rights. In addition to its setoff of the $1 Billion Deposit, Citi

3 See Trustee's First through Eight Interim Reports (ECF Nos. 1151, 2055, 3244, 3842, 4245, 4657, 5035 and 5394). - 7 - 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 11 of 71

claimed setoff rights against certain other deposit accounts, securities accounts and

other contractual obligations totaling approximately $440,000,000.

15. In connection with the Adversary Proceeding and the Stay Relief

Motion, and in accordance with a Scheduling Order and Discovery Plan first

approved by the Court on April 14, 2011, as amended most recently on September 5,

2012, the parties have engaged in extensive document discovery, including making

voluminous document productions on a rolling basis and reviewing and evaluating

the exchanged documents and documents produced by third-party recipients of

subpoenas.

16. On June 8, 2012, Citi and the Trustee entered into a stipulation

(the “Transfer Stipulation”) providing for, among other things, the transfer to an

account to be designated by the Trustee (the “Transfer Account”) of cash and the

proceeds of the sale of securities held in certain LBI proprietary accounts at Citi. The

Transfer Stipulation was approved by the Court on June 26, 2012 (ECF. No. 5127).

17. Citi and the Trustee have engaged in extensive discussions,

negotiations and due diligence, as well as exchange of detailed information, all in a

good faith effort to reach an understanding of the relevant facts and a consensual

resolution of the foregoing disputes. The Trustee has undertaken these efforts in

order to achieve a fair and reasonable settlement of the disputed claims that would

provide for substantial recoveries of property for the estate.

18. Neither LBHI nor any of its affiliated reorganized debtors or the

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entities under their collective control is a party to the proposed settlement, and the

proposed settlement is without prejudice to or waiver of any rights or claims they may

have against Citi.

IV. THE SETTLEMENT AGREEMENT

19. The principal terms of the proposed Settlement Agreement are as

follows: 4

(a) Citibank will transfer $349,548,812 from the Transfer Account 5

and CGMI will transfer $10,451,188 (collectively the “Citi Payments”) to an account

to be designated by the Trustee.

(b) Citi will be deemed to have withdrawn with prejudice Citi’s

Superpriority Claim and to have released any and all claims in connection with the

payment of the $75,000,000 Turnover Amount.

totaling approximately $1,044,131,356, (each as set forth on Exhibit C to the

Settlement Agreement, the “Citi Allowed Secured Claims”), and will be permitted to

offset such Citi Allowed Secured Claims against alleged payment obligations of Citi

4 This summary is qualified in its entirety by the terms and conditions of the Settlement Agreement. The terms and conditions of the Settlement Agreement control to the extent that there is any conflict or inconsistency between this summary and the Settlement Agreement. Capitalized terms used but not defined herein shall have the meaning ascribed to such terms in the Settlement Agreement. 5 At the time of the filing of this Motion, the balance in the Transfer Account is $[312,309,225.40] million. The Trustee and Citi anticipate that Citi affiliate, Banco Nacional de Mexico SA (“Banamex”) will transfer on or about November 28, 2012 approximately $7.2 million of additional deposits and proceeds of the liquidation of securities held at Banamex to the Transfer Account. Although the Trustee and Citi have attempted in the current Exhibits to estimate the amount of proceeds that will be received from Banamex, the amount may change due, for example, to fluctuation in foreign currency exchange rates. While only minimal adjustments are expected, following Banamex’s delivery of such deposits and proceeds to the Transfer Account, the Trustee and Citi shall revise the Exhibits to the Settlement Agreement accordingly, and the Trustee shall file a revised set of the Exhibits to the Settlement Agreement prior to the hearing on the Motion . - 9 - 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 13 of 71

owing to LBI, including, without limitation, the $1 Billion Deposit and certain other

deposit accounts and contractual payments obligations, totaling approximately

$1,044,131,356, (each as set forth on Exhibit D to the Settlement Agreement, the

“Security”).

(d) Citibank shall be allowed a general unsecured claim against LBI in the

amount of approximately $253,049,384 with respect to Proof of Claim Number 6248,

and general unsecured claim against LBI in the amount of $2,728,999 as assignee of

Proof of Claim Number 5006 (together, the “Citi Allowed Unsecured Claims”). If

the Settlement Agreement is approved, the Trustee will remain obligated to make

distributions on the Citi Allowed Unsecured Claims on a pro rata basis with all other

general unsecured creditors of LBI. The Trustee shall not object to the Citi Allowed

Unsecured Claims on any ground. The Trustee will retain the right to object to

specified Citi claims that do not constitute Citi Allowed Secured Claims or Citi

Allowed Unsecured Claims, other than any objection based on any ground that was

raised in the LBI Adversary Proceeding or Stay Relief Motion or that arises from a

common nucleus of operative facts as any claim or defense raised in the LBI

Adversary Proceeding or Stay Relief Motion.

(e) The Trustee will release all claims against, and be deemed to have

assigned and transferred to Citibank all rights, interests, title and beneficial

ownership in certain residual LBI proprietary accounts maintained at Citi (as set forth

on Exhibit G of the Settlement Agreement).

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(f) With certain specified exceptions, the parties will grant mutual releases of

all claims that they have against each other and certain affiliates and related parties,

including the claims and potential claims described above.

(g) Citi will withdraw with prejudice the Stay Relief Motion and numerous

proofs of claim (as set forth on Exhibit J of the Settlement Agreement). The Trustee

will dismiss with prejudice the LBI Adversary Proceeding.

V. RELIEF REQUESTED

20. The Trustee has determined that protracted litigation over the

foregoing matters, with attendant costs and risks, would not be in the best interests of

the LBI estate. By this Motion, the Trustee requests approval of the Settlement

Agreement pursuant to Bankruptcy Rule 9019(a).

A. Basis For Relief

21. Bankruptcy Rule 9019(a) provides, in relevant part, that “[o]n

motion by the trustee and after notice and a hearing, the court may approve a

compromise and settlement.” Bankruptcy Rule 9019(a) “empowers the Bankruptcy

Court to approve compromises and settlements if they are in the best interests of the

estate.” Vaughn v. Drexel Burnham Lambert Group, Inc. (In re Drexel Burnham

Lambert Group, Inc.) , 134 B.R. 499, 505 (Bankr. S.D.N.Y. 1991). Accordingly, the

Court is authorized to approve the settlement on the terms set forth in the Settlement

Agreement.

22. In determining whether to approve a proposed settlement pursuant

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to Bankruptcy Rule 9019(a), a court must find that the proposed settlement is fair and

equitable, reasonable, and in the best interests of the debtor’s estate. Protective

Comm. for Independent Stockholders of TMT Trailer Ferry Inc. v. Anderson , 390

U.S. 414, 424 (1968); In re Ionosphere Clubs , Inc., 156 B.R. 414, 426 (S.D.N.Y.

1993), aff’d, 17 F.3d 600 (2d Cir. 1994). A decision to approve a particular

compromise or settlement is within the sound discretion of the bankruptcy court. In

re Drexel Burnham , 134 B.R. at 505. It is appropriate for the court to consider the

opinions of the trustee or debtor in possession that a settlement is fair and reasonable.

Nellis v. Shugrue , 165 B.R. 115, 122 (S.D.N.Y. 1994). In addition, the bankruptcy

court should exercise its discretion “in light of the general public policy favoring

settlements.” In re Hibbard Brown & Co. , 217 B.R. 31 (Bankr. S.D.N.Y. 1998); see

also Shugrue , 165 B.R. at 123 (“the general rule [is] that settlements are favored and,

in fact, encouraged by the approval process outlined above”).

23. In determining whether to approve a proposed settlement, a

bankruptcy court need not decide the numerous issues of law and fact raised by the

settlement, but rather, should “canvas the issues and see whether the settlement ‘falls

below the lowest point in the range of reasonableness.’” Cosoff v. Rodman (In re

W.T. Grant Co.) , 699 F.2d 599, 608 (2d Cir. 1983); In re Purified Down Prods. , 150

B.R. 519, 522 (S.D.N.Y. 1993) (in making the determination of reasonableness, the

court need not conduct a “mini-trial” on the merits). “All that [the proponent of the

settlement] must do is establish [that] it is prudent to eliminate the risks of litigation

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to achieve specific certainty though admittedly [the settlement] might be considerably

less (or more) than were the case fought to the bitter end.” Florida Trailer & Equip.

Co. v. Deal , 284 F.2d 567, 573 (5th Cir. 1960) (citation omitted). Significantly, there

is no requirement that “the value of the compromise . . . be dollar-for-dollar the

equivalent of the claim.” Ionosphere Clubs, Inc ., 156 B.R. at 427. Instead, “there is

no reason, at least in theory, why a satisfactory settlement could not amount to a

hundredth or even a thousandth part of a single percent of the potential recovery.” Id .

at 427-28 (quoting City of Detroit v. Grinnell Corp ., 495 F.2d 448 (2d Cir. 1974)).

B. The Settlement Falls Within the Range of Reasonableness

24. In these proceedings, weighing the reasonableness factors for

purposes of Rule 9019, the Trustee has concluded that the Settlement Agreement

should be approved.

25. First, prosecuting the complaint and defending against the Stay

Relief Motion would be expensive and protracted and would divert significant

resources and attention of the Trustee, his counsel and staff. The factual and legal

issues under consideration in this litigation have never before been ruled upon by any

court in the United States, and factual issues may require a lengthy trial that could

delay final determination of the disputes for several years. Given Citi’s defenses with

respect to the Trustee’s claims and the absence of controlling authority from prior

cases, the Trustee and Citi cannot be certain of the results of any such litigation.

26. Second, the proposed settlement would secure the return of $360

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million in cash to the LBI estate and the release of $75 million in superpriority

administrative claims against the estate. LBI’s estate will therefore receive $435

million in value under the settlement without the uncertainty and delay of litigation,

and such value will be used for distribution consistent with the Trustee’s mandate

under SIPA.

27. Third, the proposed settlement is the product of significant efforts to

reconcile Citi’s substantial claims against the estate. If approved, the Settlement

Agreement would resolve a significant portion of Citi’s claims, permitting the

Trustee, his counsel and staff to refocus resources and attention on other claims and

claimants.

28. Fourth, pursuant to the proposed Settlement Agreement, Citi grants

releases to the LBI estate, which include the release of potential counterclaims

against LBI’s estate that, if pursued in litigation, could potentially reduce recovery for

the claims. The settlement would avoid this risk of reduced recovery in return for

substantial settlement consideration.

29. Finally, the Settlement Agreement is the product of arm’s-length

good faith negotiations between the Trustee, in coordination with the Securities

Investor Protection Corporation, and Citi.

30. In sum, the Trustee’s agreement to the settlement is based on his

exhaustive investigation and Citi’s active cooperation and constructive efforts with

respect to the return of property. The proposed settlement avoids the uncertainty,

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expense and distraction of litigation; produces a benefit to the LBI estate because the

settlement consideration consists of property which will be available for prompt

distribution to creditors of the estate; and protects the LBI estate from counterclaims

and factual defenses that could prolong litigation and reduce ultimate recovery.

31. Accordingly, the Trustee submits that the settlement and

compromise embodied in the Settlement Agreement is appropriate in light of the

relevant factors, is fair and equitable, serves the interests of LBI’s customers and

creditors, and should be approved.

VI. NOTICE

32. The Trustee has provided notice of the Motion pursuant to the

Amended Case Management Order entered in this proceeding [ECF No. 3466] and

the parties to the Adv. Proc. No. 11-01681. The Trustee submits that no further notice

need be given.

VII. NO PRIOR REQUEST

33. No previous request for the relief sought herein has been made to

this Court or any other court.

WHEREFORE, the Trustee respectfully requests that the Court enter

the proposed Order annexed hereto as Exhibit 2, approving the Settlement Agreement

and granting such additional and further relief as the Court deems just and

appropriate.

Dated: November 16, 2012

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New York, New York

MENAKER & HERRMANN LLP

By: /s/ Richard G. Menaker Richard G. Menaker Rebecca Northey MENAKER & HERRMANN LLP 10 East 40 th Street New York, New York 10016 Telephone: (212) 545-1900 Facsimile: (212) 545-1656

Special Counsel to James W. Giddens, Esq., as Trustee for the SIPA liquidation of Lehman Brothers Inc.

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Exhibit 1

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SETTLEMENT AGREEMENT

This settlement agreement (the “Settlement Agreement ”) is entered into as of

November 16, 2012 by and among Citigroup Inc., Citibank, N.A. (“Citibank ”), and Citigroup

Global Markets Inc. (“CGMI ”) (on their own behalf and on behalf of certain of their affiliates as

(i) defendants (the “Citi Defendants ”) in Lehman Brothers, Inc. v. Citibank, N.A. et al. , Adv.

Pro. No. 11-1681 (JMP) in Case No. 08-01420 SIPA (Bankr. S.D.N.Y.) (the “LBI Adversary

Proceeding ”), (ii) movants (the “Citi Movants ”) in a motion for an order authorizing the exercise

of certain contractual, common law, and statutory rights, including rights under sections 362,

555, 559, and 560 of the Bankruptcy Code and various provisions of the Securities Investor

Protection Act (“SIPA ”) and other related relief dated May 26, 2011 [ECF Nos. 4306-4307,

Case No. 08-1420] (the “Stay Relief Motion ”), and (iii) claimants (the “Citi Claimants ”) against

the estate of Lehman Brothers, Inc. (“LBI ”) all as set forth on Exhibit A hereto (collectively or

individually and whether in the capacity as Citi Defendants, Citi Movants and Citi Claimants, as

the case may be, “Citi ”)) and James W. Giddens, as trustee (the “Trustee ”) for the liquidation of

the business of Lehman Brothers, Inc. (“LBI ”) pursuant to SIPA. Each of Citigroup Inc.,

Citibank, CGMI, and the Trustee shall constitute a “Party” and together comprise the “Parties”

to this Settlement Agreement. Citigroup Inc., Citibank, and CGMI shall be collectively referred

to as the “Citi Parties.” The Citi affiliates identified on Exhibit A hereto that are not Parties to

this Settlement Agreement shall constitute the “Citi Beneficiaries.”

RECITALS

A. On September 19, 2008, the Honorable Gerard E. Lynch entered an order (the

“Liquidation Order ”) pursuant to the provisions of SIPA in the case captioned Securities

Investor Protection Corporation v. Lehman Brothers Inc. , Case No. 08-CIV-8119 (GEL). 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 22 of 71

Among other things, the Liquidation Order: (i) appointed the Trustee to conduct the liquidation

of the business of LBI pursuant to section 78eee(b)(3) of SIPA; (ii) appointed counsel to the

Trustee pursuant to section 78eee(b)(3) of SIPA; and (iii) removed the SIPA liquidation

proceeding of LBI to the United States Bankruptcy Court for the Southern District of New York

(the “Bankruptcy Court ”) pursuant to section 78eee(b)(4) of SIPA.

B. By order dated November 7, 2008, the Bankruptcy Court established June 1,

2009 as the “Bar Date ” for filing claims against the estate of LBI.

C. On or before the Bar Date, each of the Citi Claimants filed its claim(s) against the

estate of LBI (including as amended thereafter, the “Citi Claims ”).

D. On December 18, 2008, Citi and the Trustee entered into a Stipulation and Order

(the “Turnover Stipulation ”) authorizing (1) the turnover to the Trustee of $75,000,000 (the

“Turnover Amount ”) from certain LBI deposit accounts at Citibank Singapore Branch, Citibank

Japan Ltd. and Citibank Korea Inc., (2) the continuation of an administrative hold on certain LBI

deposit accounts, and (3) the provisional allowance of superpriority administrative claims in

favor of the Citibank affiliates that contributed to the Turnover Amount. The Turnover

Stipulation was approved by the Bankruptcy Court by order entered December 31, 2008 [ECF

No. 487, Case No. 08-1420], and on March 31, 2009, Citi filed Citibank’s Request for

Allowance of Superpriority Administrative Expense Claim in the Bankruptcy Court Case No. 08-

1420 (Bankr. S.D.N.Y.) (JMP) (SIPA) [ECF No. 916, Case No. 08-1420] (“Citi ’s Superpriority

Claim ”).

E. On March 18, 2011, the Trustee on behalf of LBI filed the complaint [ECF No. 1,

Adv. Pro. No. 11-01681] (the “LBI Complaint ”) in the LBI Adversary Proceeding against the

Citi Defendants. In the Complaint, the Trustee, among other things, (i) challenged, on various

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theories, a $1 billion setoff exercised by Citi on September 19, 2008 of a portion of Citi’s claim

arising from Citi’s provision to LBI of continuous-linked settlement services for LBI foreign

exchange transactions (“CLS Services ,” and such setoff, the “September 19 Setoff ”) against a $1

billion deposit obligation otherwise owed by Citi to LBI (the “Citibank, N.A. Deposit

Account ”); (ii) sought the turnover of various deposits and other payables allegedly owed by Citi

to LBI; (iii) claimed a breach of contract by Citi in connection with Citi’s provision to LBI of

CLS Services and an unrelated Citi indemnification of amounts paid in respect of certain

deferred compensation obligations; and (iv) sought the equitable subordination of many of the

Citi Claims under section 510(c) of the Bankruptcy Code, as well as the disallowance of any

secured Citi Claims under section 506(d) of the Bankruptcy Code and the disallowance of many

of the Citi Claims under section 502(d) of the Bankruptcy Code.

F. On May 26, 2011, the Citi Defendants moved to dismiss the LBI Complaint [ECF

Nos. 17-19, Adv. Pro. No. 11-1681] (the “Dismissal Motion ”). That same day, the Citi Movants

also filed the Stay Relief Motion.

G. On August 5, 2011, the Trustee on behalf of LBI filed LBI’s opposition to the

Dismissal Motion and the Stay Relief Motion. [ECF Nos. 4468-4469, Case No. 08-1420]

H. On September 2, 2011, the Citi Defendants filed a reply in support of the

Dismissal Motion [ECF No. 30, Adv. Pro. No. 11-1681] and the Citi Movants filed a reply in

support of the Stay Relief Motion. [ECF No. 4530, Case No. 08-1420]

I. On June 8, 2012, Citi and the Trustee entered into a stipulation (the “Transfer

Stipulation ”) providing for, among other things, (1) transfer of certain LBI deposits, (2)

liquidation and transfer of proceeds of certain LBI securities, (3) cooperation among Citi and the

Trustee to effect conversion of deposits to U.S. dollars, liquidation of securities, and transfer of

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deposits and securities liquidation proceeds to a designated LBI account at Citibank (the

“Transfer Account ”); and (4) preservation of the rights of Citi and the Trustee, if any, in respect

of amounts transferred. The Court approved the Transfer Stipulation on June 26, 2012. [ECF

No. 5127, Case No. 08-1420]

J. On September 27, 2012 and November 7, 2012, the Trustee issued instructions to

Citigroup’s Mexican subsidiary, Banco Nacional de Mexico SA (“Banamex”), requesting the

liquidation of cash and securities positions in accounts -9029, -3351, and -9002 and the transfer

of the proceeds to the Transfer Account.

K. As of November 14, 2012, the Transfer Account has received deposits and

liquidation proceeds, which together with accrued interest total $312,309,225.40. Additional

deposits and liquidation proceeds of approximately $7,200,000 are expected to be received from

Banamex accounts -3351 and -9002 on or about November 28, 2012.

L. After lengthy and extensive good-faith negotiations conducted at arm’s length,

the Parties have agreed to resolve the LBI Adversary Proceeding, the Stay Relief Motion and

certain other matters pertaining to certain claims held by certain of the Citi Claimants pursuant

to the terms and conditions (the “Settlement ”) set forth in this Settlement Agreement.

AGREEMENT

NOW, THEREFORE, IT IS HEREBY AGREED, by and among the undersigned

Parties as follows:

1. Effective Date . The Settlement set forth in this Settlement Agreement shall be

effective three (3) business days after the order of the Bankruptcy Court (or such Court other

than the Bankruptcy Court with jurisdiction over the Settlement and the Settlement Agreement)

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approving the Settlement Agreement (the “Approval Order ”) is final and no longer subject to

any motion for reconsideration or rehearing or to any stay or appeal (the “Effective Date ”).

2. Aggregate Value to LBI . The value to LBI of (i) the payments to be made by

Citibank as set forth in Paragraph 3(b) and CGMI as set forth in Paragraph 3(c) (such payments

collectively, the “Citi Payments ”) and (ii) the withdrawal of Citi’s Superpriority Claim as set

forth in Paragraph 4 is $435,000,000.

3. Payments to LBI .

(a) Following the receipt in the Transfer Account of approximately

$7,200,000 in additional deposits and securities liquidation proceeds from Banamex as

described in Recitals J and K of this Settlement Agreement, within three (3) business days after

the Effective Date Citibank will transfer to the Transfer Account an amount sufficient to bring

the balance to $349,548,812.

(b) Within two (2) business days after the payment from Citibank described

in Paragraph 3(a), Citibank will transfer $349,548,812 from the Transfer Account to an account

designated by the Trustee in accordance with the instructions provided in Paragraph 32 below.

in Paragraph 3(a), CGMI will transfer $10,451,188 to an account designated by the Trustee in

accordance with the instructions provided in Paragraph 32 below.

4. Citi Withdrawal of Superpriority Administrative Expense Claim . As of the

Effective Date, Citi will be deemed to have withdrawn with prejudice Citi’s Superpriority Claim

and to have released any and all claims in connection with payment of the Turnover Amount.

5. Citi ’s Exercise of Setoffs . For purposes of this Settlement, the Citi Claims

against LBI set forth on Exhibit C shall constitute the “Citi Allowed Secured Claims ,” and shall

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be deemed allowed pursuant to 11 U.S.C. §§ 502(a) and 502(b) and deemed secured pursuant to

11 U.S.C. §§ 506(a)(1) and 506(b) by the items set forth on Exhibit D (the “Security ”).

Effective upon the Trustee’s receipt of the Citi Payments, the Trustee releases any and all rights

to, interests in and claims with respect to the Security, and Citi shall set off against the Security

to reduce the Citi Allowed Secured Claims by the amount of the Security.

6. Citi Allowed Unsecured Claims . After the setoffs described in Paragraph 5,

Citibank shall retain allowed general unsecured claims against LBI in the amounts set forth on

Exhibit E (the “Citi Allowed Unsecured Claims ”). The Citi Allowed Unsecured Claims shall

not be subject to any objection, impairment, or adverse claim, including, without limitation, any

claim for subordination or recharacterization on any ground. The Trustee shall cause the LBI

claims agent to amend the claims registry to reflect the Citi Allowed Unsecured Claims within

three (3) business days after receipt by the Trustee of the Citi Payments.

7. Citi Preserved Proofs of Claim . The Parties and the Citi Beneficiaries reserve

all rights with respect to the Citi proofs of claim listed on Exhibit F to this Settlement

Agreement (the “Citi Preserved Proofs of Claim ”), provided that the Trustee waives any

objection or defense to the Citi Preserved Proofs of Claim based on any ground that was raised

in the LBI Adversary Proceeding or Stay Relief Motion or that arises from a common nucleus of

operative facts as any claim or defense raised in the LBI Adversary Proceeding or Stay Relief

Motion.

8. LBI Accounts Held at Citi .

(a) Set forth on Exhibit G are LBI proprietary accounts at Citi that may

contain assets that have not been transferred to the Trustee or to the Transfer Account (the

“Listed Residual Proprietary Accounts ”).

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(b) Set forth on Exhibit H are accounts, which are now closed, that LBI

opened and/or maintained at Citi (the “Closed Accounts ”).

deemed to have assigned and transferred to Citibank all rights, interest, title, and beneficial

ownership in all Listed Residual Proprietary Accounts and the Transfer Account.

(d) Set forth on Exhibit I are LBI customer accounts at Citi that may contain

assets that have not been transferred to the Trustee or to the Transfer Account (the “Listed

Customer Accounts ”). As of the Effective Date, Citi shall be deemed to have released all claims

against the Listed Customer Accounts, other than claims for unpaid account fees and other

expenses incurred in connection with the Listed Customer Accounts.

(e) If Citi, LBI or the Trustee identifies any other account at Citi that is not a

Listed Residual Proprietary Account, Closed Account, Listed Customer Account, or otherwise

identified in the Transfer Stipulation, this Settlement Agreement, or any exhibit to the Transfer

Stipulation or this Settlement Agreement, and contains assets believed to be owned by LBI or its

customers (any such account, an “Unlisted Residual Account ”), they or it shall give prompt

notice to the other Parties of the existence of such account. The rights and duties of Citi and the

Trustee in respect of any Unlisted Residual Account that is a segregated customer account shall

be expressly preserved. With respect to any Unlisted Residual Account that is not a segregated

customer account, Citi, on five (5) business days’ notice to LBI and the Trustee, may assert and,

in the absence of an objection by the Trustee within that period, may exercise a claim of

ownership, setoff, recoupment, or any other legal or equitable interest in such Residual Account,

including, without limitation, in respect of any of the Citi Allowed Unsecured Claims and any

right to payment (such as account fees, for example), in such order and to such extent as Citi

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shall determine in its sole discretion, without need for the execution and delivery of additional

documentation or the entry by the Bankruptcy Court of any order other than the Approval Order.

Citi shall advise LBI in writing of each payment to itself under the preceding sentence within

five (5) business days after the completion of such payment.

9. Releases .

(a) Citi Parties ’ Release of the Trustee . As of the Effective Date, without

the need for the execution and delivery of additional documentation or the entry by the

Bankruptcy Court of any order other than the Approval Order and except as provided in this

Settlement Agreement (including but not limited to Paragraphs 5, 6, 7 and 9(b) hereof), the Citi

Parties and the successors and assigns of the Citi Parties and any other person or entity that

claims or might claim through, on behalf of, or for the benefit of any of the foregoing

(collectively, the “Citi Releasors ”) shall each be deemed to have irrevocably and

unconditionally, fully, finally, and forever waived, released, acquitted, and discharged the

Trustee and his representatives and attorneys, successors and assigns (collectively, the “LBI

Releasees ”) from any and all claims, demands, rights, liabilities, or causes of action of any and

every kind, character, or nature whatsoever, in law or in equity, known or unknown based on any

matter, thing, act, event, or occurrence whatsoever, whether asserted or unasserted, from the

beginning of the world to the Effective Date of this Settlement Agreement, which the Citi

Releasors, or any of them, or anyone claiming through them, on their behalf or for their benefit,

have, had, or may claim to have, now or in the future, against any of the LBI Releasees;

provided, however, that this Release does not apply to the Citi Allowed Unsecured Claims listed

on Exhibit E and the Citi Preserved Proofs of Claim listed on Exhibit F.

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(b) Limitation of Release of LBI by Citi . For the avoidance of doubt,

nothing contained in Paragraph 9(a) or elsewhere is intended to release, nor shall it have the

effect of releasing, the LBI Releasees from: (i) the performance of their obligations in

accordance with the Settlement, this Settlement Agreement, and the terms of the Approval

Order; (ii) any claim by Citi to account fees in respect of any Listed Customer Account in

accordance with Paragraph 8(d); (iii) Citi’s right to defend its proposed disposition of any

Unlisted Residual Account in accordance with Paragraph 8(e); (iv) Citi’s right to defend any

proof of claim listed on Exhibit F on any ground; or (v) Citi’s right to distributions, if and when

made, on the Citi Allowed Unsecured Claims.

Upon receipt by the Trustee of the Citi Payments, without the need for the execution and

delivery of additional documentation or the entry of any order of the Bankruptcy Court other

than the Approval Order and except as provided in this Settlement Agreement (including but not

limited to Paragraph 9(d) hereof), the Trustee and his successors and assigns, and any other

person or entity that claims or might claim through, on behalf of, or for the benefit of any of the

foregoing (collectively, the “LBI Releasors ”) shall be deemed to have irrevocably and

unconditionally, fully, finally and forever waived, released, acquitted, and discharged (i) the Citi

Parties, their respective directors, officers, employees, representatives, and attorneys, and the

successors and assigns of any of them (collectively, the Citi Party Releasees ”) from any and all

claims, demands, rights, liabilities, or causes of action of any and every kind, character or nature

whatsoever, in law or in equity, known or unknown based on any matter, thing, act, event, or

occurrence whatsoever, whether asserted or unasserted, from the beginning of the world to the

Effective Date of this Settlement Agreement, which the LBI Releasors, or any of them, or

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anyone claiming through them, on their behalf or for their benefit, have, had, or may claim to

have, now or in the future, against any of the Citi Party Releasees, and (ii) the Citi Beneficiaries,

past or present parents, subsidiaries, affiliates, and the directors, officers, employees,

representatives, and attorneys, and the successors and assigns of any of them (the “Citi

Beneficiary Releasees ,” and together with the Citi Party Releasees, the “Citi Releasees ”) from

any and all claims, demands, rights, liabilities, or causes of action of any and every kind,

character or nature whatsoever, in law or in equity, known or unknown based on any matter,

thing, act, event, or occurrence whatsoever, whether asserted or unasserted, relating to the

Transfer Stipulation or to accounts, transactions, property, cash, or securities identified in the

Transfer Stipulation, on any exhibit to the Transfer Stipulation, in Recital J of this Settlement

Agreement, Exhibit C (Secured Claims), Exhibit D (Security), Exhibit E (Allowed Unsecured

Claims), Exhibit G (Listed Residual Proprietary Accounts), Exhibit H (Closed Accounts), or

Exhibit J (Proofs of Claim to be Withdrawn), which the LBI Releasors, or any of them, or

anyone claiming through them, on their behalf or for their benefit, have, had, or may claim to

have, now or in the future, against any of the Citi Beneficiary Releasees.

(d) Limitation of Release of Citi by the Trustee . For the avoidance of

doubt, nothing contained in Paragraph 9(c) or elsewhere is intended to release, nor shall it have

the effect of releasing, the Citi Releasees from: (i) the performance of their obligations in

accordance with the Settlement, this Settlement Agreement, and the terms of the Approval

Order; (ii) the LBI Releasors’ right to challenge Citi’s proposed disposition of any Listed

Customer Account or Unlisted Residual Account in accordance with Paragraph 8(d)-(e); or (iii)

the LBI Releasors’ right to object to any proof of claim listed on Exhibit F on any ground other

than any ground that was raised in the LBI Adversary Proceeding or Stay Relief Motion or that

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arises from a common nucleus of operative facts as any claim or defense raised in the LBI

Adversary Proceeding or Stay Relief Motion.

10. No Effect on Claims or Rights Against Third Parties. No Party to this

Settlement Agreement or Citi Beneficiary is hereby waiving or releasing, or shall be deemed to

have waived or released, any claim, security interest, collateral, right of setoff, defense, or other

right or remedy of any kind asserted against any person, whether as primary obligor, guarantor,

indemnitor, or otherwise, or asserted against the property of any person, other than the Parties

hereto, LBI, and the Citi Beneficiaries, and all such claims, rights, remedies, and defenses are

expressly reserved.

11. Withdrawal of Stay Relief Motion and Relief from Stay . Not later than three

(3) business days following the Effective Date, Citi shall cause the Stay Relief Motion to be

withdrawn with prejudice pursuant to a stipulation of withdrawal substantially in the form of

Exhibit L specifically stating that the withdrawal is intended to have the effect of a final

judgment of dismissal and granting stay relief to the extent necessary to effectuate this

Settlement.

12. Notice of Dismissal of the LBI Adversary Proceeding. Not later than three (3)

business days following the Trustee’s receipt of the Citi Payments, the Trustee shall cause the

LBI Complaint and the LBI Adversary Proceeding to be dismissed with prejudice pursuant to a

notice of dismissal substantially in the form of Exhibit M.

13. Withdrawal of Proofs of Claim . As of the Effective Date, the proofs of claim

listed on Exhibit J shall be deemed satisfied (including as a result of the setoffs taken under

Paragraph 5 of this Settlement Agreement) and not later than sixty (60) days following the

Effective Date, shall be withdrawn with prejudice, provided that the foregoing shall not impair

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Citi’s right to recover unpaid account fees and other expenses incurred in connection with the

Listed Customer Accounts or any Unlisted Residual Account.

14. Representations and Warranties of Citi . For purposes of this Settlement

Agreement, the Citi Parties represent, warrant, covenant, and agree that: (a) they are duly

organized, validly existing and in good standing under the laws of the jurisdiction of their

organization with all requisite power and authority to carry on the business in which they are

engaged, to execute this Settlement Agreement and to consummate the settlement and the

transactions contemplated hereby; (b) they have full requisite power and authority to execute and

deliver and to perform their obligations under this Settlement Agreement, and the execution,

delivery and performance hereof, and the instruments and documents required to be executed by

them in connection herewith (i) have been duly and validly authorized by them and (ii) are not in

contravention of their organizational documents or any agreements specifically applicable to

them; (c) this Settlement Agreement constitutes the legally and validly binding and enforceable

agreement of the Citi Parties in accordance with the terms herein, subject to the Approval Order;

(d) no proceeding, litigation, or adversary proceeding before any court, arbitrator, or

administrative or governmental body is pending against the Citi Parties which would adversely

affect their ability to enter into this Agreement or to perform their obligations hereunder. Each

of the representations and warranties made by the Citi Parties in this Paragraph 14 shall be

deemed to be repeated on the Effective Date and shall have the same force and effect as though

this Settlement Agreement were dated as of the Effective Date.

15. Representations and Warranties of the Trustee .

(a) Authority . The Trustee hereby represents, warrants, covenants, and

agrees that (i) subject to entry of the Approval Order, he has full requisite power and authority to

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execute and deliver and to perform his obligations under this Settlement Agreement, and the

execution, delivery and performance hereof, and the instruments and documents required to be

executed by him in connection herewith have been duly and validly authorized by him and by

any other entity required to approve such instruments and documents, including without

limitation, the Securities Investor Protection Corporation; (ii) this Settlement Agreement

constitutes his legally and validly binding and enforceable agreement in accordance with the

terms herein, subject to the Approval Order; and (iii) no proceeding, litigation or adversary

proceeding before any court, arbitrator, or administrative or governmental body is pending

against him which would adversely affect his ability to enter into this Settlement Agreement or

to perform his obligations hereunder. The representations and warranties made by the Trustee in

this Paragraph 15(a) shall be deemed to be repeated on and shall survive the Effective Date and

shall have the same force and effect as though this Settlement Agreement were dated as of the

Effective Date.

(b) Representations of the Trustee as to Claims . The Trustee hereby

represents, warrants, covenants, and agrees that he is not a party to any agreement to assign, sell,

participate, grant, convey, or otherwise transfer, and has not entered into any other agreement to

assign, sell, participate, grant, or otherwise transfer, in whole or in part, any portion of his right,

title or interests in any claims against Citi. Each of the representations and warranties made by

the Trustee in this Paragraph 15(b) shall be deemed to be repeated on and shall survive the

Effective Date and shall have the same force and effect as though this Settlement Agreement

were dated as of the Effective Date.

Property of the LBI Estate . The Trustee hereby represents, warrants, covenants and agrees

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that, as of the date hereof, the accounts, cash, securities, and claims identified in Exhibit K of

this Settlement Agreement are property of the LBI estate. This representation shall be deemed to

be repeated on and shall survive the Effective Date and shall have the same force and effect as

though this Settlement Agreement were dated as of the Effective Date.

16. Cooperation of the Parties .

(a) Cooperation in Obtaining Approvals . The Parties shall cooperate in

taking all actions reasonably necessary to obtain, and shall take no action to impede or preclude,

the prompt entry of the Approval Order and thereafter to ensure the enforceability of the

Approval Order, including without limitation, the affirmance of the Approval Order on any

appeal. Such actions by LBI and the Trustee shall include, but shall not be limited to, (i) filing a

motion in a form reviewed by and reasonably satisfactory to Citi in advance of such motion’s

filing, (ii) seeking (A) approval of the Settlement Agreement pursuant to Fed. R. Bank. P. 9019

and the relevant provisions of the Bankruptcy Code and SIPA and (B) entry of the Approval

Order (the “Settlement Approval Motion ”) and (iii) prosecuting the Settlement Approval Motion

at any and all hearing(s) or other proceedings, in a good faith effort to obtain entry as soon as

possible of the Approval Order as final and no longer subject to any motion for reconsideration

or rehearing or to any stay or appeal.

(b) Continuing Cooperation to Recover Listed Residual Proprietary

Accounts, Listed Customer Accounts, and Unlisted Residual Accounts . After receipt by the

Trustee of the Citi Payments, Citi shall continue to maintain the Transfer Account in LBI’s

name, without any charge to LBI or the Trustee, for a reasonable period to permit further

transfers from other accounts and until such time as Citi shall determine in its sole discretion to

close the Transfer Account. Citi and the Trustee shall cooperate as may be required from time to

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time to assist each other in the recovery of deposits and securities located in the Listed Residual

Proprietary Accounts, Listed Customer Accounts, or Unlisted Residual Accounts, and the

closing of such accounts. Such assistance may include, but is not limited to, the issuance of

instruction letters by the Trustee or LBI to the relevant Citi depository or custodian requesting

the liquidation of cash and securities positions and the transfer of proceeds thereof to the

Transfer Account or such other account(s) as Citi may direct or the closing of accounts, the

submission of documentation evidencing the Trustee’s release of any interest in the Listed

Residual Proprietary Accounts, Closed Accounts, or Unlisted Residual Accounts, as applicable,

or the provision of any other materials that may be requested by Citi to comply with local law

and regulations. Such cooperation shall also include Citi’s supplying of any information

reasonably requested by the Trustee with respect to LBI Listed Residual Proprietary Accounts,

Closed Accounts, Listed Customer Accounts or Unlisted Residual Accounts.

17. Interpretation . The Parties have participated jointly in the negotiation and

drafting of this Settlement Agreement. If any ambiguity or question of intent or interpretation

arises, this Settlement Agreement will be construed as if drafted jointly by the Parties and no

presumption or burden of proof will arise favoring or disfavoring any Party because of the

authorship of any provision of this Settlement Agreement.

18. Headings . The headings of the sections, paragraphs and subsections of this

Settlement Agreement are inserted for convenience only and are not part of this Settlement

Agreement and do not in any way limit or modify the terms or provisions of this Settlement

Agreement and shall not affect the interpretation hereof.

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19. Amendments . This Settlement Agreement may not be modified, amended or

supplemented except by a written agreement executed by each Party to be affected by such

modification, amendment or supplement.

20. No Admission of Liability . The execution of this Settlement Agreement is not

intended to be, nor shall it be construed as an admission or evidence in any pending or

subsequent suit, action, proceeding or dispute, of any liability, wrongdoing, or obligation

whatsoever (including as to the merits of any claim or defense) by any Party or Citi Beneficiary

to any other party or any other person or entity with respect to any of the matters addressed in

this Settlement Agreement. Except as expressly provided herein, this Settlement Agreement, the

Settlement, and any act performed or any document executed pursuant to or in furtherance of the

Settlement, the transactions contemplated hereby or this Settlement Agreement, may not: (a) be

deemed to be or used as an admission or evidence of the validity of any claim or allegation by

any person or entity; (b) be deemed to be or used as an admission or evidence of any liability,

fault or omission of Citi in any proceeding in any court, administrative agency, or other tribunal;

LBI, the Trustee, or the LBI Estate in any proceeding in any court, administrative agency, or

other tribunal; or (d) be admissible in any proceeding for any purposes, except to enforce the

terms of this Settlement Agreement.

21. Good Faith Negotiations . The Parties recognize and acknowledge that each of

the Parties hereto is represented by counsel, and that such Party received independent legal

advice with respect to the advisability of entering into the Settlement and this Settlement

Agreement. Each of the Parties acknowledges that the negotiations leading up to the Settlement

and this Settlement Agreement were conducted regularly and at arm’s length; that this

16 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 37 of 71

Settlement Agreement is made and executed by and of each Party’s own free will; and that he or

it has not been improperly influenced or induced to make this Settlement and this Settlement

Agreement as a result of any act or action on the part of any Party or employee, agent, attorney,

or representative of any Party to this Settlement Agreement. The Parties further acknowledge

that they entered into the Settlement and this Settlement Agreement because of, among other

things, their desire to avoid the further expense and inconvenience of litigation and other

disputes, and with the intent to compromise permanently and settle the claims by and among the

Parties hereto and the Citi Beneficiaries with the full force and effect of a final judgment.

22. Third Party Beneficiaries . The Citi Beneficiaries identified on Exhibit A hereto

are express third party beneficiaries of this Settlement Agreement. Nothing in this Settlement

Agreement, express or implied, is intended or shall be construed to confer upon, or to give to,

any person or entity other than the Parties hereto and the Citi Beneficiaries, any right, remedy, or

claim under or by reason of this Settlement Agreement or any covenant, condition, or stipulation

thereof; and the covenants, stipulations, and agreements contained in this Settlement Agreement

are and shall be for the sole and exclusive benefit of the Parties hereto and the Citi Beneficiaries.

23. Indemnification . The Citi Parties will indemnify and hold harmless LBI and the

Trustee for (a) any payment obligation to any Citi Beneficiary, and (b) any reasonable litigation

expenses and/or fees, incurred by the Trustee as a consequence of any claim asserted by a Citi

Beneficiary against LBI or the Trustee arising from or relating to the LBI Adversary Proceeding,

LBI Stay Relief Motion, and any proof of claim identified on Exhibit J, provided that, for the

avoidance of doubt, this indemnity does not extend to claims asserted by a Citi Beneficiary

against the Trustee arising under, allowed under, or preserved by this Settlement Agreement, or

arising from fees and expenses relating to Listed Customer Accounts or Unlisted Residual

17 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 38 of 71

Accounts, or relating to any alleged breach by the LBI Releasors of this Settlement Agreement

or their duties hereunder.

24. Governing Law; Retention of Jurisdiction; Service of Process .

(a) Governing Law . This Settlement Agreement shall be governed by and

construed in accordance with (i) the Bankruptcy Code and SIPA, as applied by courts within the

Second Circuit and (ii) the internal laws of the State of New York, without giving effect to any

principles of conflicts of law.

(b) Retention of Jurisdiction . By the execution and delivery of this

Settlement Agreement, each of the Parties hereby irrevocably and unconditionally agrees for

such Party that any legal action, suit, or proceeding between any or all of the Parties with respect

to any matter under or arising out of or in connection with this Settlement Agreement or, to the

extent appropriate, for recognition or enforcement of any judgment rendered in any such action,

suit or proceeding, shall be brought in the Bankruptcy Court, or if that Court does not have

jurisdiction, in the United States District Court for the Southern District of New York, or in the

absence of federal jurisdiction, in the Supreme Court of the State of New York, County of New

York, and, by the execution and delivery of this Settlement Agreement, each hereby irrevocably

accepts and submits itself to the jurisdiction of each Court, generally and unconditionally, with

respect to any such action, suit, or proceeding.

the Parties hereby agree and consent that service of process may be made, and personal

jurisdiction over any Party hereto in any such action, suit or proceeding may be obtained, by

service of a copy of the summons, complaint, and other pleadings required to commence such

action, suit, or proceeding upon the Party at the address of such party set forth in Paragraph 31

18 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 39 of 71

hereof, unless another address has been designated by such party in a notice given to the other

Parties in accordance with Paragraph 31 hereof. For the avoidance of doubt, notwithstanding the

foregoing, in the event the Approval Order is not entered and does not become final, nothing in

this Paragraph 24(c) shall impair the right of Citi, LBI or the Trustee, in such capacity, to assert

any arguments concerning jurisdiction or venue in any legal proceeding.

25. Jury Trial . Each of the Parties irrevocably waives all right to trial by jury in any

action, proceeding or counterclaim (whether based on contract, tort or otherwise) arising out of

or relating to the Settlement or the Settlement Agreement, including the negotiation,

administration, performance, or enforcement thereof.

26. Specific Performance . It is understood and agreed by the Parties that money

damages would not be a sufficient remedy for any breach of this Settlement Agreement by any

Party and each non-breaching Party shall be entitled to specific performance and injunctive or

other equitable relief as a remedy of any such breach.

27. Fees and Expenses . Except as otherwise provided in Paragraph 5 and Exhibit C

of this Settlement Agreement, each Party shall bear its own expenses incurred in connection

with the negotiation, execution, and delivery of this Settlement Agreement.

28. Binding Agreement; Successors and Assigns; Joint and Several Obligations .

This Settlement Agreement is intended to bind and inure to the benefit of the Parties, the Citi

Beneficiaries and their respective successors, assigns, administrators, constituents, and

representatives. Unless otherwise provided, the agreements, representations, covenants, and

obligations of the Parties under this Settlement Agreement are several only and not joint in any

respect and none shall be responsible for the performance or breach of this Settlement

Agreement by another.

19 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 40 of 71

29. Entire Agreement . This Settlement Agreement constitutes the full and entire

agreement among the Parties with regard to the subject hereof, and, except as expressly provided

herein, supersedes all prior agreements, negotiations, representations, promises, or warranties

(oral or otherwise) made by any Party or Citi Beneficiary with respect to the subject matter

hereof. No Party has entered into this Settlement Agreement in reliance on any prior

representation, promise or warranty (oral or otherwise) of any other Party or any Citi

Beneficiary, except for those that are expressly set forth in this agreement.

30. Counterparts . This Settlement Agreement may be executed in one or more

counterparts, each of which shall be deemed an original copy of this Settlement Agreement and

all of which, when taken together, shall constitute one and the same Settlement Agreement.

Copies of executed counterparts, transmitted by telecopy or other electronic transmission, shall

be considered original executed counterparts, provided receipt of copies of such counterparts is

confirmed. The Parties shall act in good faith to provide original signature copies if reasonably

requested for purposes of filing with a Court or for any other purpose.

31. Notices . Except as may be set forth to the contrary herein, all demands, notices,

requests, consents, and other communications hereunder shall be in writing and shall be deemed

to have been duly given when (a) if by courier service or messenger, then when personally

delivered, (b) if transmitted by facsimile or telecopier with confirmation of receipt, then upon

actual receipt (as established by confirmation of receipt or otherwise) during normal business

hours, otherwise on the first Business Day thereafter, or (c) if by certified or registered mail,

postage prepaid-return receipt requested, then three (3) Business Days after being duly deposited

in the mail to the following addresses, or such other addresses as may be furnished hereafter by

notice in writing to the following:

20 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 41 of 71

If to LBI, the Trustee or the LBI Estate:

James W. Giddens, Trustee c/o Hughes Hubbard & Reed LLP One Battery Park Plaza New York, New York 10004-1482 Telephone: (212) 837-6000 Telecopy: (212) 422-4726

with a copy to:

Menaker & Herrmann LLP 10 East 40th Street New York, New York 10016 Attention: Richard G. Menaker Telephone: (212) 545-1900 Telecopy: (212) 545-1645 [email protected]

If to Citi:

Mary Jane Lee Director & Associate General Counsel Citi 388 Greenwich Street 17th Floor New York, New York 10013 Telephone: (212) 816-5755 Telecopy: (646) 291-5593

with a copy to:

Paul, Weiss, Rifkind, Wharton & Garrison LLP 1285 Avenue of the Americas New York, New York 10019-6064 Attention: Claudia L. Hammerman Telephone: (212) 373-3321 Telecopy: (212) 757-3990 [email protected]

Attention: Stephen J. Shimshak Telephone: (212) 373-3133 Telecopy: (212) 757-3990 [email protected]

21 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 42 of 71

32. Payment Instructions . The payments by each of Citibank and CGMI specified

in Paragraphs 3(b) and 3(c) of this Settlement Agreement shall be made by wire transfer to such

account(s) as the Trustee shall identify in instructions given to each of Citibank and CGMI on or

before the Effective Date. Each such wire transfer will be made in an amount that assures that

the Trustee will receive the full value of the Citi Payments without reduction for fees associated

with the transfer.

33. Further Assurances . Each of the Parties hereto agrees to execute and deliver, or

to cause to be executed and delivered, all such instruments, and to take all such action as the

other Parties or Citi Beneficiaries may reasonably request to effectuate the intent and purposes

of, and to carry out the terms of, this Settlement Agreement.

34. Claims Not Released . Nothing contained herein or in any documents ancillary

hereto shall in any way be deemed to release any Party or Citi Beneficiary from any claim or

obligation either arising under, or preserved under, this Settlement Agreement or any document

ancillary hereto.

35. Authority . The signatories hereto represent that they have full authority on

behalf of themselves and/or their respective principals, as applicable, to execute this Settlement

Agreement and to make the representations, warranties, covenants, and agreements set forth

herein.

[Remainder of this page intentionally left blank]

22 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 43 of 71

IN WITNESS WI-II":REOI, the Parties hereto have caused this Agreement to be executed as of

the Execution Date.

JAMES W. GIDDENS, AS SIPA TRUSTEE FOR THE LIQUIDATION OF LEHMAN BROTHERS INC.

y: James W. Giddens

CITIBANK, N.A.

By: Title:

CITIGROUP GLOBAL MARKETS INC.

By: Title:

CITIGROUP INC. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 44 of 71 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 45 of 71

Exhibit A

Citi Defendants Citi Claimants Citibank, N.A. Citibank, N.A. Citigroup Inc. Citigroup Inc. Citigroup Global Markets, Inc. Citigroup Global Markets, Inc. Citibank Japan Ltd. Citibank Japan Ltd. Citibank Europe plc Citibank Europe plc Citibank International plc Citibank International plc Citigroup Pty Limited Banco Nacional de Mexico SA Banco de Chile Citibank del Peru SA Banco Nacional de Mexico SA Bank Handlowy W Warszawie SA Citibank del Peru SA ZAO KB Citibank Bank Handlowy W Warszawie SA Citibank AS ZAO KB Citibank Citibank Maghreb Citibank AS Citibank Korea Inc. Citibank Maghreb Citibank Canada Citibank Affiliates 1-5 Citi Ventus Ltd. Citigroup 401K Plan c/o Western Management Co. Citi Movants Cititrust MF 10039700 Citibank, N.A. Citigroup Pension Plan Citigroup Global Markets, Inc. Citibank, N.A. as custodian for BNP Paribas Citibank Japan Ltd. Citibank Europe plc Citibank International plc Citigroup Pty Limited Banco Nacional de Mexico SA Citibank del Peru SA Bank Handlowy W Warszawie SA ZAO KB Citibank Citibank AS Citibank Maghreb 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 46 of 71

Exhibit B

Value of Settlement to Lehman Brothers Inc.

$75,000,000 Release of Superpriority Administrative Expense Claim [$319,509,225] Expected Balance of Transfer Account as of November 29, 2012 $10,451,188 Payment from Citigroup Global Markets Inc. [$30,039,587] Payment from Citibank, N.A. in respect of ISDA Agreement $435,000,000 Total value to Lehman Brothers Inc. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 47 of 71

Exhibit C

Citi Allowed Secured Claims

Citi Claimant Description of Claim Claim Number(s)* Amount (USD) Banco de Chile Account Fees 72,000 CGMI Underwriting 6249 ** 5,409,268 CGMI Securities Lending 6249 2,979,384 CGMI Brokerage Fees 6249 666,881 Citibank del Peru Account Fees & Legal Fees 5012 / 5583 123,934 5011 / 5585 Citibank International plc Account Fees 5005 / 5589 19,986 Citibank Japan Ltd. FX Trade (plus interest 12/31/12) 4999 / 5593 1,216,627 Citibank Japan Ltd. Account Fees 4999 / 5593 493 Citibank, N.A. Wire Transfers 6248 *** 12,795,775 Citibank, N.A. Overdraft 6248 1,931,285 Citibank, N.A. Late Settlement 6248 207,624 Citibank, N.A. Check Fraud 6248 35,389 Citibank, N.A. Account Fees 6248 1,285,755 Citibank, N.A. Legal & Advisory Fees 6248 10,085,662 Citibank, N.A. CLS Services 6248 [$1,007,277,510] Citigroup Pty Ltd Account Fees 183 ZAO KB Citibank Account Fees 5008 / 5587 23,600 Total Claims [$1,044,131,356]

* Where duplicate proofs of claim were filed, both claim numbers are listed. ** Amends and replaces Claim Numbers 5382 / 5446. *** Amends and replaces Claim Numbers 5383 / 5447. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 48 of 71

Exhibit D

Security

Description Amount Citibank, N.A. ISDA Obligation [$25,294,266] Citibank, N.A. Securities Lending Obligation 8,358,995 Citibank Japan Deposit Account -9419 1,290,619 * Citibank Peru Deposit Account -4018 131,943 ** CGMI Repurchase Obligation 436,940 CGMI Failed Trades Obligation 8,618,593 Citibank, N.A. Deposit Account 1,000,000,000 Total Security [$1,044,131,356]

*Estimated USD balance as of 11/16/12 **Estimated USD Balance as of 11/14/12 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 49 of 71

Exhibit E

Citi Allowed Unsecured Claims

Description Claim Number(s)* Amount Citibank N.A. claim for CLS services 6248** [$253,049,384]

Citibank N.A. (as assignee of Citibank Korea Inc. (see Docket No. 4803)) 5006 / 5590 2,728,999

* Where duplicate proofs of claim were filed, both claim numbers are listed. ** Amends and replaces Claim Numbers 5383 / 5447. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 50 of 71

Exhibit F

Citi Preserved Proofs of Claim

Claimant Claim Number(s)* Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5176 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5658 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5820 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5379 / 5444 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5378 / 5443 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5377 / 5442 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5546 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5547 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5570 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5684 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5857 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5659 Citigroup Global Markets Inc. (on behalf of itself and certain other underwriters) 5975 Cititrust MF 10039700 3459 Citi Ventus Ltd. 2199 / 7000545 Morgan Stanley Senior Funding, Inc. (as assignee of Citigroup 401k Plan - per 2585 Docket No. 4111) Citigroup Pension Plan 7000490 Citibank, N.A. as custodian for BNP Paribas 7002100

* Where duplicate proofs of claim were filed, both claim numbers are listed. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 51 of 71

Exhibit G

Listed Residual Proprietary Accounts

Open Cash Accounts 10/31/12 Country Branch/Affiliate Account Number USD Balance Chile Banco de Chile -7019 0 Chile Banco de Chile -2838 3,416 Mexico Banco Nacional de Mexico SA -9018 0 Mexico Banco Nacional de Mexico SA -9029 0 * Mexico Banco Nacional de Mexico SA -9002 0 * Peru Citibank del Peru SA -4018 8,009 ** Greece Citibank International plc -1025 97 Japan Citibank Japan Limited -9419 73,499 ** Korea Citibank Korea Inc. -9108 43 Korea Citibank Korea Inc. -9116 3 Korea Citibank Korea Inc. -9019 934 Korea Citibank Korea Inc. -9027 104 Korea Citibank Korea Inc. -9035 419 Korea Citibank Korea Inc. -9191 938 Korea Citibank Korea Inc. -3019 0 Korea Citibank Korea Inc. -9043 0 Korea Citibank Korea Inc. -9205 0 Korea Citibank Korea Inc. -9051 0 Korea Citibank Korea Inc. -9078 0 Argentina Citibank NA-Buenos Aires -5015 1,027,341 Venezuela Citibank NA-Caracas -7015 2,924 Venezuela Citibank NA-Caracas -7031 908 U.A.E. Citibank NA-Dubai -8004 o/d Philippines Citibank NA-Makati -6018 292 U.S. Citibank NA-New York -5409 0 *** U.S. Citibank NA-New York -4658 0 U.S. Citibank NA-New York -4113 0 U.S. Citibank NA-New York -2455 o/d U.S. Citibank NA-New York -2741 0 U.S. Citibank NA-New York -3702 0 U.S. Citibank NA-New York -8247 0 Australia Citibank NA-Sydney -1038 175 Taiwan Citibank NA-Taipei -3219 0 Russia ZAO KB Citibank -8001 0

*Expected balance following transfer in Paragraph 3(a). **Expected balance following setoff in Paragraph 5. ***Expected balance following transfer in Paragraph 3(b). 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 52 of 71

Exhibit G - Listed Residual Proprietary Accounts (cont'd)

Open Securities Accounts 10/31/12 Country Branch/Affiliate Account Number USD Balance Mexico Banco Nacional de Mexico SA -8757 818 Mexico Banco Nacional de Mexico SA -3351 0 * Turkey Citibank A.S. -3472 0 Peru Citibank del Peru -3900 0 Peru Citibank del Peru -5400 0 Greece Citibank International plc -6781 19,096 Argentina Citibank NA-Buenos Aires -8165 12 Venezuela Citibank NA-Caracas -7015 2,053 Venezuela Citibank NA-Caracas -7031 0 Philippines Citibank NA-Makati -0001 0 Australia Citigroup Pty Ltd -0005 325

*Expected balance following transfer in Paragraph 3(a). 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 53 of 71

Exhibit H

Closed Accounts

Proprietary Accounts Closed Pursuant to Transfer Stipulation Country Branch/Affiliate Account Number Mexico Banco Nacional de Mexico SA -4024 Poland Bank Handlowy W Warszawie SA -8001 Turkey Citibank AS -5008 Turkey Citibank AS -6001 Czech Rep. Citibank Europe plc -6011 Hungary Citibank Europe plc -6008 Portugal Citibank International plc -7026 Portugal Citibank International plc -0600 Morocco Citibank Maghreb -0506 U.S. Citibank NA-Delaware -6983 England Citibank NA-London -6427 England Citibank NA-London -1697 England Citibank NA-London -7654 England Citibank NA-London -0409 England Citibank NA-London -0417 U.S. Citibank NA-Miami -0914 Kenya Citibank NA-Nairobi -7007 U.S. Citibank NA-New York -0193 U.S. Citibank NA-New York -7403 U.S. Citibank NA-New York -3874 U.S. Citibank NA-New York -9041 U.S. Citibank NA-New York -1934 U.S. Citibank NA-New York -5624 Singapore Citibank NA-Singapore -4005 Switzerland Citibank NA-Switzerland -2001

Other Closed Proprietary Accounts Country Branch/Affiliate Account Number Argentina Citibank NA-Buenos Aires -5013 Argentina Citibank NA-Buenos Aires -9016 U.S. Citibank NA-Delaware -6991 U.S. Citibank NA-Delaware -7486 Jamaica Citibank NA-Kingston -8004 UK Citibank NA-London -0425 UK Citibank NA-London -0433 UK Citibank NA-London -0441 Italy Citibank NA-Milan -7017 U.S. Citibank NA-New York -8618 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 54 of 71

Exhibit H - Closed Accounts (cont'd)

Other Closed Proprietary Accounts (cont'd) Country Branch/Affiliate Account Number U.S. Citibank NA-New York -3013 U.S. Citibank NA-New York -3559 U.S. Citibank NA-New York -5699 U.S. Citibank NA-New York -5205 Canada Citibank NA-Toronto (Citibank Canada) -8045 U.S. Citibank NA-Uruguay -2002 Russia ZAO KB Citibank -0000

Closed Customer Accounts Country Branch/Affiliate Account Number U.S. Citibank NA-New York -2407 Switzerland Citibank NA -2002 Portugal Citibank International plc-Portugal -1400 Russia ZAO KB Citibank -0001 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 55 of 71

Exhibit I

Listed Customer Accounts

Country Branch/Affiliate Account Number Mexico Banco Nacional de Mexico SA -8758 Korea Citibank Korea, Inc. -0002 Korea Citibank Korea Inc. -9124 Korea Citibank Korea Inc. -9132 Korea Citibank Korea, Inc. -9086 Korea Citibank Korea, Inc. -9094 Korea Citibank Korea, Inc. -9159 Korea Citibank Korea, Inc. -9167 Venezuela Citibank NA-Caracas -7023 Philippines Citibank NA-Makati -0002 Taiwan Citibank NA-Taipei -3006 Peru Citibank del Peru -0411 Greece Citibank International plc -4975 Argentina Citibank NA-Buenos Aires -8166 Australia Citigroup Pty Ltd -0006 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 56 of 71

Exhibit J

Proofs of Claim to Be Withdrawn

Citi Beneficiaries Claim Number(s)* Banco Nacional de Mexico S.A. 5009 / 5588

Bank Handlowy W Warszawie S.A. 5665

Citibank A.S. 5004 / 5591

Citibank Canada 5380 / 5445

Citibank del Peru S.A. 5012 / 5583

Citibank Europe plc, Hungary Branch 5010 / 5584

Citibank Europe plc, Prague Branch 5003 / 5592

Citibank International plc, Athens Branch 5011 / 5585

Citibank International plc, Lisbon Branch 5005 / 5589

Citibank Japan Ltd. 4999 / 5593

Citibank Maghreb 5007 / 5586

Citigroup Inc. 5381 / 5449

Citigroup Global Markets Inc. 6249 / 5382 / 5446

ZAO KB Citibank 5008 / 5587

* Where duplicate proofs of claim were filed, both claim numbers are listed. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 57 of 71

Exhibit K

Items Subject to Representation in Paragraph 15(c)

Open Cash Accounts Country Branch/Affiliate Account Number Chile Banco de Chile -7019 Chile Banco de Chile -2838 Mexico Banco Nacional de Mexico S.A. -9018 Peru Citibank del Peru SA -4018 Greece Citibank International plc -1025 Japan Citibank Japan Limited -9419 Korea Citibank Korea Inc. -9108 Korea Citibank Korea Inc. -9116 Korea Citibank Korea Inc. -9019 Korea Citibank Korea Inc. -9027 Korea Citibank Korea Inc. -9035 Korea Citibank Korea Inc. -9191 Korea Citibank Korea Inc. -3019 Korea Citibank Korea Inc. -9043 Korea Citibank Korea Inc. -9205 Korea Citibank Korea Inc. -9051 Korea Citibank Korea Inc. -9078 Argentina Citibank NA-Buenos Aires -5015 Venezuela Citibank NA-Caracas -7015 Venezuela Citibank NA-Caracas -7031 U.A.E. Citibank NA-Dubai -8004 Philippines Citibank NA-Makati -6018 U.S. Citibank NA-New York -5409 U.S. Citibank NA-New York -4658 U.S. Citibank NA-New York -4113 U.S. Citibank NA-New York -2455 U.S. Citibank NA-New York -2741 U.S. Citibank NA-New York -3702 U.S. Citibank NA-New York -8247 Australia Citibank NA-Sydney -1038 Taiwan Citibank NA-Taipei -3219 Russia ZAO KB Citibank -8001

Open Securities Accounts Country Branch/Affiliate Account Number Mexico Banco Nacional de Mexico SA -8757 Turkey Citibank A.S. -3472 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 58 of 71

Exhibit K - Items Subject to Representation in Paragraph 15(c) (cont'd)

Open Securities Accounts (cont'd) Country Branch/Affiliate Account Number Peru Citibank del Peru -3900 Peru Citibank del Peru -5400 Greece Citibank International plc -6781 Argentina Citibank NA-Buenos Aires -8165 Venezuela Citibank NA-Caracas -7015 Venezuela Citibank NA-Caracas -7031 Philippines Citibank NA-Makati -0001 Australia Citigroup Pty Ltd -0005

Exhibit K - Items Subject to Representation in Paragraph 15(c) (cont'd)

Other Closed Proprietary Accounts Country Branch/Affiliate Account Number Argentina Citibank NA-Buenos Aires -5013 Argentina Citibank NA-Buenos Aires -9016 U.S. Citibank NA-Delaware -6991 U.S. Citibank NA-Delaware -7486 Jamaica Citibank NA-Kingston -8004 UK Citibank NA-London -0425 UK Citibank NA-London -0433 UK Citibank NA-London -0441 Italy Citibank NA-Milan -7017 U.S. Citibank NA-New York -8618 U.S. Citibank NA-New York -3013 U.S. Citibank NA-New York -3559 U.S. Citibank NA-New York -5699 U.S. Citibank NA-New York -5205 Canada Citibank NA-Toronto (Citibank Canada) -8045 U.S. Citibank NA-Uruguay -2002 Russia ZAO KB Citibank -0000

Other Citi Entity Description Claim Number Citibank NA $55,333,853 ISDA Obligation 6248 Citibank NA $8,358,995 Securities Lending Obligation 6248 CGMI $436,940 Repurchase Obligation 6249 CGMI $19,069,781 Failed Trades Obligation 6249 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 60 of 71

Exhibit L

Form of Withdrawal of Stay Relief Motion 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 61 of 71

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK

------x : In re: : : Case No. 08-01420 (JMP) SIPA LEHMAN BROTHERS INC. : Debtor. : Ref. No. 4306 : ------x STIPULATION OF WITHDRAWAL OF MOTION

WHEREAS, on or about March 18, 2011, James W. Giddens (the

“Trustee”), as Trustee for the liquidation of the business of Lehman Brothers Inc.

(“LBI”), filed a complaint (the “Complaint”) commencing an adversary proceeding (the

“Adversary Proceeding”) against Citibank, N.A., Citigroup Inc., Citigroup Global

Markets, Inc., Citibank Japan Ltd., Citibank Europe plc, Citibank International plc,

Citigroup Pty Limited, Banco de Chile, Banco Nacional de Mexico SA, Citibank del Peru

SA, Bank Handlowy W Warszawie SA, ZAO KB Citibank, Citibank AS, Citibank

Maghreb, and Citi Affiliates 1-5 (collectively, the “Citi Defendants”) asserting claims for,

inter alia, the avoidance and recovery of certain allegedly preferential and fraudulent

transfers, turnover of certain cash deposits and securities maintained by the Citi

Defendants, and equitable subordination of claims asserted by the Citi Defendants;

WHEREAS, the Complaint named the Citi Defendants as defendants in

the Adversary Proceeding;

WHEREAS, on or about May 26, 2011, the Citi Defendants filed a

motion to partially dismiss the claims asserted in the Complaint;

WHEREAS, on or about May 26, 2011, contemporaneously with their

motion to dismiss, Citibank, N.A., Citigroup Global Markets, Inc., Citibank Japan Ltd., 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 62 of 71

Citigroup Pty Limited, Banco Nacional de Mexico SA, Citibank International plc, Bank

Handlowy W Warszawie SA, Citibank AS, Citibank del Peru SA, Citibank Europe plc,

Citibank Maghreb, and ZAO KB Citibank (collectively, the “Citi Movants”) filed a

motion for the entry of an order authorizing the exercise of certain contractual, common

law, and statutory rights in respect of amounts claimed by LBI, and other related relief

(the “Stay Relief Motion”) [ECF No. 4306]; and

WHEREAS, in connection with the terms of that certain Settlement

Agreement dated as of November 16, 2012 (the “Settlement Agreement”), which was

approved by the Court on [______], 2012 [ECF No. ___] (the “Approval Order”), the

Trustee and the Citi Movants have resolved the claims addressed in the Stay Relief

Motion.

NOW, THEREFORE, the undersigned parties hereby stipulate and

agree, pursuant to Rule 41(a)(1)(A)(ii) of the Federal Rules of Civil Procedure, Federal

Rules of Bankruptcy Procedure 7041 and 9014, and the Amended Case Management

Order dated July 13, 2010, that (i) any applicable stay is modified under the Approval

Order solely to the extent necessary to effectuate the terms of the Settlement Agreement,

including without limitation Paragraph 5 thereof, (ii) the Stay Relief Motion shall be

hereby withdrawn, with prejudice, (iii) such withdrawal is intended to have the effect of a

final judgment of dismissal. Except as otherwise provided in Paragraph 5 and Exhibit C

of the Settlement Agreement, each party shall bear its own attorneys’ fees and costs.

[remainder of this page intentionally left blank] 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 63 of 71

Dated: New York, New York , 2012

JAMES W. GIDDENS, AS TRUSTEE CITIBANK, N.A., CITIGROUP FOR THE LIQUIDATION OF LEHMAN GLOBAL MARKETS, INC., BROTHERS INC. CITIBANK JAPAN LTD., CITIGROUP PTY LIMITED, By: BANCO NACIONAL DE MEXICO SA, MENAKER & HERRMANN LLP CITIBANK INTERNATIONAL PLC, Richard G. Menaker BANK HANDLOWY W WARSZAWIE Rebecca Northey SA, CITIBANK AS, CITIBANK DEL Stephen D. Houck PERU SA, CITIBANK EUROPE PLC, 10 East 40th Street CITIBANK MAGHREB, AND ZAO KB New York, New York 10016 CITIBANK Telephone: (212) 545-1900 Facsimile: (212) 545-1656 By: PAUL, WEISS, RIFKIND, WHARTON & GARRISON LLP Brad S. Karp Stephen J. Shimshak Douglas R. Davis Claudia L. Hammerman 1285 Avenue of the Americas New York, New York 10019 Telephone: (212) 373-3000 Facsimile: (212) 757-3990

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 64 of 71

Exhibit M

Form of Notice of Dismissal of Complaint 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 65 of 71

UNITED STATES BANKRUPTCY COURT FOR THE SOUTHERN DISTRICT OF NEW YORK In re:

LEHMAN BROTHERS INC., Case No. 08-01420 (JMP) SIPA

Debtor.

LEHMAN BROTHERS INC., Adv. Proc. No. 11-01681 (JMP) Plaintiff,

-against-

Defendants.

NOTICE OF DISMISSAL WITH PREJUDICE

WHEREAS, on or about March 18, 2011, James W. Giddens (the “Trustee”), as

Trustee for the liquidation of the business of Lehman Brothers Inc. (“LBI”), filed a complaint (the

“Complaint”) commencing this adversary proceeding (the “Adversary Proceeding”) against

Citibank, N.A., Citigroup Inc., Citigroup Global Markets, Inc., Citibank Japan Ltd., Citibank Europe

plc, Citibank International plc, Citigroup Pty Limited, Banco de Chile, Banco Nacional de Mexico

SA, Citibank del Peru SA, Bank Handlowy W Warszawie SA, ZAO KB Citibank, Citibank AS,

Citibank Maghreb, and Citi Affiliates 1-5 (collectively, the “Citi Defendants”) asserting claims for,

inter alia, the avoidance and recovery of certain allegedly preferential and fraudulent transfers,

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 66 of 71

turnover of certain cash deposits and securities maintained by the Citi Defendants, and equitable

subordination of claims asserted by the Citi Defendants;

WHEREAS, the Complaint named the Citi Defendants as defendants in the

Adversary Proceeding;

WHEREAS, on or about May 26, 2011, the Citi Defendants filed a motion to

partially dismiss the claims asserted in the Complaint;

WHEREAS, on or about May 26, 2011, contemporaneously with their motion to

dismiss, Citibank, N.A., Citigroup Global Markets, Inc., Citibank Japan Ltd., Citigroup Pty Limited,

Banco Nacional de Mexico SA, Citibank International plc, Bank Handlowy W Warszawie SA,

Citibank AS, Citibank del Peru SA, Citibank Europe plc, Citibank Maghreb, and ZAO KB Citibank

(collectively, the “Citi Movants”) filed a motion for the entry of an order authorizing the exercise of

certain contractual, common law, and statutory rights in respect of amounts claimed by LBI, and

other related relief (the “Stay Relief Motion”) [ECF No. 4306, Case No. 08-1420];

WHEREAS, in connection with the terms of that certain Settlement Agreement dated

as of November 16, 2012 and approved by this Court on [_____], 2012 (the “Settlement

Agreement”), the Trustee and the Citi Movants resolved the claims addressed in the Stay Relief

Motion, and on [_____], 2012 the Trustee and the Citi Movants filed a stipulation withdrawing the

Stay Relief Motion [ECF No. [_____], Case No. 08-1420]; and

WHEREAS, in connection with the terms the Settlement Agreement, the Trustee and

the Citi Defendants have settled the Adversary Proceeding.

NOW, THEREFORE, the Trustee hereby provides notice pursuant to Rule

41(a)(1)(A)(i) of the Federal Rules of Civil Procedure and Federal Rule of Bankruptcy Procedure

7041, that this Adversary Proceeding, including any and all claims therein, is hereby dismissed, with 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 67 of 71

prejudice. Except as otherwise provided in Paragraph 5 and Exhibit C of the Settlement Agreement,

each party shall bear its own attorneys’ fees and costs.

Dated: New York, New York , 2012

JAMES W. GIDDENS, AS TRUSTEE FOR THE LIQUIDATION OF LEHMAN BROTHERS INC.

By: MENAKER & HERRMANN LLP Richard G. Menaker Rebecca Northey Stephen D. Houck 10 East 40th Street New York, New York 10016 Telephone: (212) 545-1900 Facsimile: (212) 545-1656

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 68 of 71

Exhibit 2

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 69 of 71

UNITED STATES BANKRUPTCY COURT SOUTHERN DISTRICT OF NEW YORK

In re Case No. 08-01420 (JMP) SIPA LEHMAN BROTHERS INC.,

Debtor.

LEHMAN BROTHERS INC., Adv. Proc. No. 11-01681 (JMP)

Plaintiff,

-against-

Defendants.

[PROPOSED] ORDER APPROVING SETTLEMENT AGREEMENT BETWEEN THE TRUSTEE AND CITIBANK, N.A. AND CERTAIN OF ITS AFFILIATES

Upon the motion dated November 16, 2012 (the “Motion,” ECF No.

[TBD])11 of James W. Giddens (the “Trustee”), as trustee for the liquidation of the

business of Lehman Brothers Inc. (“LBI”) under the Securities Investor Protection

Act, 15 U.S.C. § 78aaa et seq. (“SIPA”), seeking entry of an order pursuant to Rule

1 Capitalized terms not defined herein shall have the meaning ascribed to them in the Motion. 08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 70 of 71

9019 of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”)

approving the settlement agreement entered into by the Trustee and Citigroup Inc.,

Citibank, N.A. (“Citibank”) and Citigroup Global Markets Inc. (“CGMI”), on their

own behalf and on behalf of certain of their affiliates (collectively “Citi”); and the

Court having jurisdiction to consider the Motion and the relief requested therein in

accordance with 15 U.S.C. § 78eee(b)(4); and venue being proper before this Court

pursuant to 15 U.S.C. § 78eee(a)(3) and 15 U.S.C. § 78aa; and due and proper notice

of the Motion having been provided in accordance with the Amended Case

Management Order [ECF No. 3466]; and a reasonable opportunity to object or be

heard regarding the Motion having been afforded to all such parties; and it appearing

that no other or further notice need be provided; and the compromise and settlement

provided for herein is fair and reasonable; and the relief requested in the Motion is

appropriate and in the best interests of the LBI estate, its customers, its creditors, and

all parties in interest; and sufficient cause appearing therefore, it is

ORDERED that the Court having determined and found that the

proposed compromises and settlements set forth in the Settlement Agreement are

reasonable and appropriate and consummation of the transactions contemplated by the

Agreement is in the best interests of the LBI estate, its customers and creditors, the

Motion is GRANTED; and it is further

ORDERED that the Settlement Agreement and the transactions and

other performance contemplated thereby are approved in their entirety with all of the

terms, covenants, waivers, releases, duties and obligations set forth in the Settlement

- 2 -

08-01420-jmp Doc 5450 Filed 11/16/12 Entered 11/16/12 18:11:50 Main Document Pg 71 of 71

Agreement incorporated herein and expressly made a part of this Order as if fully set

forth herein; and it is further

ORDERED that the Trustee is authorized to take any and all actions

reasonably necessary to consummate the Settlement Agreement and perform any and

all obligations contemplated therein; and it is further;

ORDERED that any objections to the Motion that have not otherwise

been withdrawn, waived, or settled, are overruled; and it is further

ORDERED that any applicable stay is hereby modified solely to allow

Citi to exercise the setoffs described in the Settlement Agreement; and it is further;

ORDERED that the failure to specifically include any particular

provision of the Settlement Agreement in this Order shall not diminish or impair the

effectiveness of such provision, it being the intent of the Court that the Trustee’s

implementation of the transactions contemplated in the Settlement Agreement be

approved in its entirety; and it is further;

ORDERED that notice of the Motion as provided therein shall be

deemed good and sufficient notice of such Motion; and it is further

ORDERED that this Court shall retain jurisdiction to hear and determine

all matters arising from or related to this Order.

Dated: New York, New York ______, 2012

______HONORABLE JAMES M. PECK, UNITED STATES BANKRUPTCY JUDGE - 3 -