Joint Declaration of Stickney and Kessler in Support of Motion for ...

Case 1:09-md-02017-LAK Document 807 Filed 03/08/12 Page 32 of 63
million and $80 million. By June 29, 2011, an application requested payment from the fifth or
sixth excess layer, which covered $85 million to $110 million. Thus, as they continued to
litigate the action against the D&O Defendants, Lead Plaintiffs remained cognizant of the status
of the D&O insurance policies.
59. In a November 9, 2011 Bankruptcy Court filing, Lehman stated that, “taking into
account settlement payments that have been or are contemplated to be made, as well as defense
costs that have been or are contemplated to be paid by Lehman’s third party insurers under the
Debtor’s 2007-08 D&O Policies, the Debtors anticipate that the limits of liability of the 2007-
2008 D&O policies [the insurance policies that have been used to cover this Action] will be fully
exhausted before the end of the year.”
60. In August 2011, Lead Plaintiffs and the D&O Defendants finally reached an
agreement in principle to settle for $90 million in cash pursuant to a mediator’s proposal, subject
to the satisfaction of certain conditions, including a confidential assessment of the liquid net
worth of the Officer Defendants by a highly-respected neutral. Following the execution of the
term sheet, Lead Counsel and the D&O Defendants negotiated the specific terms of the D&O
Settlement, as set forth in the October 14, 2011 D&O Stipulation and related exhibits.
61. Additionally, as required by the D&O Stipulation, the D&O Defendants moved
the Bankruptcy Court overseeing Lehman’s bankruptcy for a comfort order approving the use of
D&O insurance proceeds to fund the D&O Settlement. Individual officers and directors of a
Lehman-related entity objected to the D&O Defendants’ motion, noting that the D&O insurance
proceeds were rapidly dwindling and requesting that the Court preserve the remaining coverage
under the 2007-2008 policies for them and provide a means to distribute the proceeds to resolve
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