00a0301p.06

7KH +RQRUDEOH 5LFKDUG ' &XGDK\ &LUFXLW -XGJH RI WKH 8QLWHG
6WDWHV &RXUW RI $SSHDOV IRU WKH 6HYHQWK &LUFXLW VLWWLQJ E\ GHVLJQDWLRQ

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
3XUVXDQW WR 6L[WK &LUFXLW 5XOH
(/(&7521,& &,7$7,21 )(' $SS 3 WK &LU
)LOH 1DPH DS
81,7('67$7(6&28572)$33($/6
)257+(6,;7+&,5&8,7
BBBBBBBBBBBBBBBBB
)$0,/< 6$)(7< 352'8&76
,1&D0LFKLJDQ&RUSRUDWLRQ
IND7KHUP$FTXLVLWLRQ,QF
3ODLQWLII$SSHOODQW
Y
9,67$ ,1&D'HODZDUH
&RUSRUDWLRQDQG)$0,/<
6$)(7< 352'8&76 ,1&D
*HRUJLD&RUSRUDWLRQ
'HIHQGDQWV$SSHOOHHV
;!

1
1R
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI0LFKLJDQDW*UDQG5DSLGV
1RV²5REHUW+ROPHV%HOO
'LVWULFW-XGJH
$UJXHG0D\
'HFLGHGDQG)LOHG6HSWHPEHU
%HIRUH0(55,77&/$<DQG&8'$+< &LUFXLW
-XGJHV

-- 1 of 6 --

)DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO
1R
$IWHU WKH DVVHW SXUFKDVH 7KHUP $FTXLVLWLRQ ZDV UHQDPHG )DPLO\
6DIHW\ 3URGXFWV ,QF DQG VXHG XQGHU LWV QHZ QDPH )RU WKH VDNH RI
FODULI\ ZH ZLOO UHIHU WR WKH SODLQWLII DV 7KHUP $FTXLVLWLRQ WKURXJKRXW DQG
ZLOO XVH WKH QDPH ³)DPLO\ 6DIHW\´ WR GHVLJQDWH WKH GHIHQGDQW *HRUJLD
FRUSRUDWLRQ ZKLFK ZDV D ZKROO\RZQHG VXEVLGLDU\ RI 9LVWD ZKRVH
DVVHWV 7KHUP ERXJKW
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' )UDQN + -RKQVRQ %255( 3(7(5621
)2:/(5 5((16 3& *UDQG 5DSLGV 0LFKLJDQ IRU
$SSHOODQW 5REHUW ( -RQHV 35,25 -21(6 0DGLVRQ
*HRUJLD IRU $SSHOOHHV 21 %5,() )UDQN + -RKQVRQ
%255( 3(7(5621 )2:/(5 5((16 3& *UDQG
5DSLGV0LFKLJDQIRU$SSHOODQW5REHUW(-RQHV35,25
-21(60DGLVRQ*HRUJLDIRU$SSHOOHHV
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
&8'$+< &LUFXLW -XGJH ,Q 7KHUP $FTXLVLWLRQ
VRXJKWWRSXUFKDVHWKHVXEVWDQWLDOEXVLQHVVDVVHWVRIRQHRI
9LVWD V ZKROO\RZQHG VXEVLGLDULHV )DPLO\ 6DIHW\
3URGXFWV ,QF )DPLO\ 6DIHW\ D *HRUJLD FRUSRUDWLRQ
PDQXIDFWXUHGFDUERQPRQR[LGHGHWHFWRUVDQGRWKHUKRXVHKROG
SURGXFWV$VLQGLFDWHG)DPLO\6DIHW\ZDVDZKROO\RZQHG
VXEVLGLDU\ RI 9LVWD ,QF D 'HODZDUH &RUSRUDWLRQ
VRPHWLPHLQHDUO\7KHUP$FTXLVLWLRQZDVIRUPHGXQGHU
WKHODZVRI0LFKLJDQIRUWKHSXUSRVHRISXUFKDVLQJWKHDVVHWV
RI)DPLO\6DIHW\1HJRWLDWLRQVSURFHHGHGXQWLOWKHWHUPVRI
WKH$VVHW3XUFKDVH$JUHHPHQWZHUHILQDOL]HGDQGRQ$XJXVW
7KHUP$FTXLVLWLRQSXUFKDVHGVXEVWDQWLDOO\DOOWKH
DVVHWV RI )DPLO\ 6DIHW\ IRU 7KHUP SDLG
FDVKDWWKHFORVLQJSURYLGHGDSURPLVVRU\QRWHLQ
WKHDPRXQWRI ZKLFKZDVSD\DEOHWR)DPLO\6DIHW\

-- 2 of 6 --

)DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO
1R
$OD &RGH † 7KHUP¶V LQQRFHQW PLVUHSUHVHQWDWLRQ
FODLP IDLOV DV ZHOO $ SODLQWLII VXLQJ IRU DQ LQQRFHQW
PLVUHSUHVHQWDWLRQPXVWEHDEOHWRVKRZWKDWLWVUHOLDQFHRQWKH
PLVUHSUHVHQWDWLRQVZDVUHDVRQDEOHXQGHUWKHFLUFXPVWDQFHV
6HH0DKRQH\Y)RUVPDQ6RG $OD
³:KHUH D SDUW\ KDV UHDVRQ WR GRXEW WKH WUXWK RI WKH
UHSUHVHQWDWLRQ KH KDV QR ULJKW WR DFW WKHUHRQ´ ,W LV
XQGLVSXWHGWKDW7KHUPZDVDZDUHRI)DPLO\6DIHW\¶VWKHQ
UHFHQWILQDQFLDOGLIILFXOWLHVDQGLUUHJXODULWLHV$GGLWLRQDOO\
JLYHQ WKH ODQJXDJH RI † RI WKH $VVHW 3XUFKDVH
$JUHHPHQW 7KHUP ZDV FOHDUO\ RQ QRWLFH WKDW WKH DPRXQWV
VWDWHG E\ )DPLO\ 6DIHW\ ZHUH QRW QHFHVVDULO\ DEVROXWHO\
FRUUHFW EXW ZHUH LQVWHDG DFFXUDWH RQO\ WR )DPLO\ 6DIHW\¶V
³EHVWNQRZOHGJH´$Q\UHOLDQFHRQH[DFWGROODUDPRXQWVLQ
WKLVFRQWH[WZDVXQUHDVRQDEOH7KHUHIRUHZHDJUHHZLWKWKH
GLVWULFW FRXUW WKDW )DPLO\ 6DIHW\ ZDV HQWLWOHG WR VXPPDU\
MXGJPHQWRQ7KHUP¶VDFFRXQWVUHFHLYDEOHFODLPV
,QVXPWKHGLVWULFWFRXUWZDVFRUUHFWWRILQGDJDLQVW7KHUP
RQLWVEUHDFKRIZDUUDQW\DQGIUDXGFODLPVDQGZH$)),50
WKDWSRUWLRQRIWKHGHFLVLRQ+RZHYHUZHEHOLHYHWKDWWKH
GLVWULFWFRXUWLPSURSHUO\JUDQWHGVXPPDU\MXGJPHQWDJDLQVW
7KHUPRQLWVSUHSDLGLQVXUDQFHSUHPLXPFODLP7KHUHIRUH
ZH5(9(56(WKDWSRUWLRQRIWKHGHFLVLRQDQG5(0$1'IRU
WULDORQWKDWLVVXH
1R )DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO

RQ$XJXVW DQGDVVXPHGOLDELOLWLHVLQWKHDPRXQWRI

$IWHUWKHGHDOFORVHGVRPHGLVSXWHVDURVH)LUVW)DPLO\
6DIHW\ IDLOHG WR GHOLYHU SUHSDLG LQVXUDQFH SUHPLXPV RQ
SROLFLHVLWKDGFDQFHOHGSULRUWRWKHDVVHWVDOH)DPLO\6DIHW\
KDGDSSDUHQWO\FDQFHOHGWKHSROLFLHVDIWHUDUHSUHVHQWDWLYHRI
7KHUP$FTXLVLWLRQLQIRUPHGLWWKDW7KHUPZDVQRWJRLQJWR
XVH WKH OLDELOLW\ LQVXUDQFH LQVWHDG RSWLQJ IRU QHZ SROLFLHV
LVVXHG DW D ORZHU SUHPLXP 7KHUP $FTXLVLWLRQ EHOLHYHG
KRZHYHU WKDW XQGHU WKH WHUPV RI WKH $VVHW 3XUFKDVH
$JUHHPHQW LW ZDV HQWLWOHG WR WKH SUHSDLG SUHPLXPV HYHQ
WKRXJKLWZDVQRWJRLQJWRXVHWKHLQVXUDQFH)DPLO\6DIHW\
GLVDJUHHG ZLWK 7KHUP $FTXLVLWLRQ¶V LQWHUSUHWDWLRQ RI WKH
$JUHHPHQW DQG UHIXVHG WR WXUQ RYHU WKH IXQGV ,QVWHDG
)DPLO\6DIHW\UHWDLQHGWKHUHIXQGHGSUHPLXPVDQGXVHGWKHP
WRUHSD\WKHVHFXUHGFUHGLWRUWKDWKDGRULJLQDOO\ILQDQFHGWKH
SXUFKDVHRIWKHLQVXUDQFH
$VHFRQGGLVSXWHDURVHRYHUWKHDFFRXQWVUHFHLYDEOHWKDW
7KHUP$FTXLVLWLRQDFTXLUHGIURP)DPLO\6DIHW\3ULRUWRWKH
SXUFKDVH7KHUP$FTXLVLWLRQKDGEHHQDZDUHWKDWDIRUPHU
H[HFXWLYHRI)DPLO\6DIHW\KDGEHHQLQYROYHGLQIDOVLI\LQJ
ILQDQFLDOLQIRUPDWLRQ3HUKDSVDVDUHVXOWRIWKLVNQRZOHGJH
7KHUP$FTXLVLWLRQUHTXLUHGWKDWWKHDFFRXQWVUHFHLYDEOHEH
LGHQWLILHGERWKE\GHEWRUDQGE\DPRXQWRZHGRQDVFKHGXOH
DWWDFKHGWRWKH$VVHW3XUFKDVH$JUHHPHQW$IWHUFRQFOXGLQJ
WKHDVVHWSXUFKDVH7KHUP$FTXLVLWLRQDWWHPSWHGWRFROOHFWWKH
DFFRXQWV UHFHLYDEOH EXW LW IRXQG WKDW WKH GROODU DPRXQWV
VWDWHGLQWKHVFKHGXOHDWWDFKHGWRWKH$JUHHPHQWZHUHEDGO\
PLVVWDWHGVRPHWLPHVE\WHQVRIWKRXVDQGVRIGROODUV:KHQ
WLPHFDPHIRU7KHUPWRSD\WKHSURPLVVRU\QRWHLW
UHIXVHGWRGRVRDQGIROORZLQJVRPHIUXLWOHVVQHJRWLDWLRQV
WKHSUHVHQWODZVXLWVZHUHILOHG
7KHUP $FTXLVLWLRQ ILOHG VXLW LQ WKH :HVWHUQ 'LVWULFW RI
0LFKLJDQ DOOHJLQJ WKDW )DPLO\ 6DIHW\ DQG 9LVWD KDG
EUHDFKHG WKH $VVHW 3XUFKDVH $JUHHPHQW DQG FRPPLWWHG
FRQYHUVLRQE\ZLWKKROGLQJWKHSUHSDLGLQVXUDQFHSUHPLXPV

-- 3 of 6 --

)DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO
1R
7KHUPDOVRDOOHJHGWKDWYDULDQFHVLQWKHDFFRXQWVUHFHLYDEOH
YLRODWHG WKH $JUHHPHQW¶V ZDUUDQWLHV DQG FRQVWLWXWHG
IUDXGXOHQW RULQQRFHQW PLVUHSUHVHQWDWLRQ)DPLO\6DIHW\DQG
9LVWD ILOHG FRXQWHUFODLPV LQ WKH 0LFKLJDQ DFWLRQ
6KRUWO\WKHUHDIWHU)DPLO\6DIHW\DQG9LVWDILOHGWKHLU
RZQ ODZVXLW DJDLQVW 7KHUP LQ WKH 1RUWKHUQ 'LVWULFW RI
*HRUJLD 7KH\ FODLPHG WKDW 7KHUP $FTXLVLWLRQ KDG
ZURQJIXOO\IDLOHGWRSD\WKHSURPLVVRU\QRWHDQG
KDG EUHDFKHG FHUWDLQ FRQGLWLRQV RI WKH $VVHW 3XUFKDVH
$JUHHPHQW 7KHVHFODLPVZHUHVXEVWDQWLDOO\VLPLODUWRWKHLU
FRXQWHUFODLPV LQ 7KHUP $FTXLVLWLRQ¶V 0LFKLJDQ FDVH
7KHUP$FTXLVLWLRQ¶VPRWLRQLQ*HRUJLDIRUFKDQJHRIYHQXH
ZDV JUDQWHG DQG WKH WZR FDVHV ZHUH FRQVROLGDWHG LQ WKH
0LFKLJDQGLVWULFWFRXUW
7KHUP$FTXLVLWLRQPRYHGIRUVXPPDU\MXGJPHQWRQLWV
EUHDFKRIFRQWUDFWDQG EUHDFKRIZDUUDQW\FODLPV)DPLO\
6DIHW\ DQG 9LVWD DOVR PRYHG IRU VXPPDU\
MXGJPHQW²DJDLQVWDOOFRXQWVRI7KHUP¶VFRPSODLQWDQGRQ
WKHLU FRXQWHUFODLPV 7KH GLVWULFW FRXUW GHQLHG 7KHUP
$FTXLVLWLRQ¶VPRWLRQEXWJUDQWHG)DPLO\6DIHW\¶VDQG9LVWD
V PRWLRQ LQ LWV HQWLUHW\ WKHUHE\ GLVPLVVLQJ 7KHUP¶V
ODZVXLW DQG VXVWDLQLQJ OLDELOLW\ DJDLQVW 7KHUP RQ )DPLO\
6DIHW\¶VSURPLVVRU\QRWHDQGEUHDFKRIFRQWUDFWFODLPV 7KH
LVVXH RI GDPDJHV ZDV OHIW RSHQ 7KHUP $FTXLVLWLRQ
DSSHDOHG
:HUHYLHZWKHGLVWULFWFRXUW¶VGHFLVLRQWRJUDQWVXPPDU\
MXGJPHQWDJDLQVW7KHUP$FTXLVLWLRQGHQRYR6HH7KRPSVRQ
Y :LOOLDPVRQ &RXQW\ 7HQQHVVHH 1R :/
DW WK&LU-XO\ 6XPPDU\MXGJPHQWLV
DSSURSULDWHLI³WKHUHLVQRJHQXLQHLVVXHDVWRDQ\PDWHULDOIDFW
DQGWKHPRYLQJSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHU
RI ODZ´ )(' 5 &,9 3 F ,Q GHFLGLQJ VXPPDU\
MXGJPHQWZHYLHZWKHHYLGHQFHDQGPXVWGUDZDOOUHDVRQDEOH
LQIHUHQFHVLQIDYRURIWKHQRQPRYLQJSDUW\6HH0DWVXVKLWD
(OHF,QGXV&RY=HQLWK5DGLR&RUS86
7KHUP $FTXLVLWLRQ FKDOOHQJHV RQO\ WKH GLVWULFW
FRXUW¶V GHWHUPLQDWLRQV WKDW )DPLO\ 6DIHW\ LV HQWLWOHG WR
1R )DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO

$OVR WKH GLVWULFW FRXUW SURSHUO\ QRWHG WKDW 7KHUP¶V UHFRXUVH IRU
LQDFFXUDWH UHSRUWLQJ RI WKH DFFRXQWV UHFHLYDEOH LV WKURXJK WKH SXUFKDVH
SULFH PRGLILFDWLRQ VFKHPH † RI WKH $VVHW 3XUFKDVH $JUHHPHQW
,, $&&28176 5(&(,9$%/(
7KHUP $FTXLVLWLRQ¶V VHFRQG FODLP LV PXFK PRUH HDVLO\
UHVROYHG7KHUPFODLPVWKDW)DPLO\6DIHW\PDGHDQH[SUHVV
ZDUUDQW\ DV WR WKH YDOXH RI WKH DFFRXQWV UHFHLYDEOH E\
DVVLJQLQJDGROODUYDOXHWRHDFKDFFRXQWRQ6FKHGXOH F
ZKLFKZDVDWWDFKHGWRWKH$VVHW3XUFKDVH$JUHHPHQW%XW
HYHQ DVVXPLQJ WKDW 6FKHGXOH F FUHDWHG DQ LPSOLHG
ZDUUDQW\ZLWKUHVSHFWWRWKHYDOXHRIWKHDFFRXQWVUHFHLYDEOH
WKHVFRSHRIWKDWZDUUDQW\ZDVGHILQHGE\$UWLFOH,9RIWKH
$VVHW3XUFKDVH$JUHHPHQWODEHOHG5(35(6(17$7,216
$1':$55$17,(62)7+(6(//(56HFWLRQRI
$UWLFOH ,9 VWDWHV WKDW ³>W@R WKH EHVW NQRZOHGJH RI >)DPLO\
6DIHW\@ QR UHSUHVHQWDWLRQ RU ZDUUDQW\ PDGH E\ >)DPLO\
6DIHW\@LQWKLV$JUHHPHQWRULQDQ\RWKHU6FKHGXOHUHIHUHQFHG
KHUHLQ FRQWDLQV DQ\ XQWUXH VWDWHPHQW RI PDWHULDO IDFW
´-$YRODW HPSKDVLVDGGHG 7KHHIIHFWRI
†LVWRUHQGHUDQ\ZDUUDQW\²H[SUHVVRULPSOLHG²FUHDWHG
E\WKHVFKHGXOHRIDFFRXQWVUHFHLYDEOHVDWLVILHGVRORQJDV
)DPLO\6DIHW\PDGHWKHVWDWHPHQWVWRLWV³EHVWNQRZOHGJH´
LHLQJRRGIDLWK$VWKHGLVWULFWFRXUWSURSHUO\QRWHG7KHUP
KDVSUHVHQWHGQRHYLGHQFHWKDW)DPLO\6DIHW\ RU9LVWD
NQHZ WKDW WKH DPRXQWV UHSRUWHG RQ 6FKHGXOH F ZHUH
LQFRUUHFW VR XQGHU WKH WHUPV RI WKH $VVHW 3XUFKDVH
$JUHHPHQW7KHUPPXVWORVHWKLVDUJXPHQW
%XW7KHUPDOVRDUJXHVWKDWWKHLQDFFXUDFLHVLQ6FKHGXOH
F ZHUHIUDXGXOHQWPLVUHSUHVHQWDWLRQV+RZHYHUDVQRWHG
HDUOLHU7KHUPKDVSURGXFHGQRHYLGHQFHWKDW9LVWDNQHZWKH
DFFRXQWV UHFHLYDEOH VFKHGXOH WR EH LQFRUUHFW RU DFWHG
UHFNOHVVO\7KHUHIRUH7KHUP¶VIUDXGXOHQWPLVUHSUHVHQWDWLRQ
FODLP IDLOV 6HH $OD &RGH † 6HH DOVR 3DWHO Y
+DQQD6RG $OD 7KHUPDOVRDUJXHVWKDW
PLVUHSUHVHQWDWLRQVVLPSO\PDGHE\PLVWDNHDQGLQQRFHQWO\
DUHDFWLRQDEOHXQGHU$ODEDPDODZ$OWKRXJKWKLVLVWUXHVHH

-- 4 of 6 --

)DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO
1R
7KHUP DOVR FODLPV WKDW 9LVWD FRQYHUWHG WKH XQSDLG LQVXUDQFH
SUHPLXPV 7R VKRZ FRQYHUVLRQ 7KHUP PXVW GHPRQVWUDWH ³D ZURQJIXO
WDNLQJ >RU@ DQ LOOHJDO DVVXPSWLRQ RI RZQHUVKLS ´ +XQWVYLOOH *ROI
'HY ,QF Y 5DWFOLII ,QF 6R G $OD 7KXV WKH
UHVROXWLRQ RI WKLV FODLP GHSHQGV RQ WKH UHVROXWLRQ RI WKH FRQWUDFW TXHVWLRQ
,I 7KHUP GLG QRW RZQ WKH SUHSDLG SUHPLXPV WKHQ 9LVWD FRXOG QRW KDYH
FRQYHUWHG WKHP
$JUHHPHQW 7KHGLVWULFWFRXUWWRRNWKLVODFNRIGLVFORVXUHDV
³DGGLWLRQDO HYLGHQFH WKDW WKH SUHSDLG LQVXUDQFH ZDV QRW
LQWHQGHG DV DQ $VVHW WR EH WUDQVIHUUHG´ 7KH ODFN RI
GLVFORVXUHPLJKWLOOXPLQDWH)DPLO\6DIHW\¶VODFNRILQWHQWEXW
LWGRHVOLWWOHWRFODULI\7KHUP¶VH[SHFWDWLRQVRUWKHVFRSHRI
WKH$VVHW3XUFKDVH$JUHHPHQW
)XUWKHUWKHGLVWULFWFRXUWGLVPLVVHGWKHVWURQJHVWSLHFHRI
HYLGHQFHVXSSRUWLQJWKHLQFOXVLRQRIWKHSUHSDLGLQVXUDQFH
SUHPLXPVDVPHUHO\D³YDJXHUHIHUHQFH´$OWKRXJKLWPD\EH
DWULIOHFRQYROXWHGWKH$VVHW3XUFKDVH$JUHHPHQW¶VUHIHUHQFH
WR SUHSDLG LQVXUDQFH SUHPLXPV DV DQ H[FHSWLRQ WR WKH
³H[FOXGHG DVVHWV´ LV IDU IURP YDJXH ,W LV LQVWHDG VWURQJ
HYLGHQFHWKDW7KHUPDQG)DPLO\6DIHW\LQWHQGHGWRLQFOXGH
SUHSDLG LQVXUDQFH SUHPLXPV DPRQJ WKH DVVHWV WR EH
WUDQVIHUUHGWR7KHUP*LYHQWKHFOHDUUHIHUHQFHWRSUHSDLG
LQVXUDQFH SUHPLXPV ZKLFK LV UHQGHUHG DPELJXRXV E\ WKH
DEVHQFHRISUHSDLGSUHPLXPVIURPDQ\VFKHGXOHRIDVVHWV
DQG WKH FRQIOLFWLQJ LQIHUHQFHV WKDW FDQ EH GUDZQ IURP WKH
H[WULQVLFHYLGHQFHZHGRQRWEHOLHYHWKDWWKLVLVVXHLV³VR
RQHVLGHG WKDW RQH SDUW\ PXVW SUHYDLO DV D PDWWHU RI ODZ´
$QGHUVRQ Y /LEHUW\ /REE\ ,QF 86
6HH DOVR :KLWHWDLO 'HY &RUS Y 1LFNHOVRQ
6RG $OD &LY $SS ³$PELJXLW\ LQ D
FRQWUDFWSUHFOXGHVWKHWULDOFRXUWIURPHQWHULQJDVXPPDU\
MXGJPHQW´ 7KHUHIRUH ZH UHYHUVH WKH GLVWULFW FRXUW¶V
GHFLVLRQ WR JUDQW VXPPDU\ MXGJPHQW ZLWK UHVSHFW WR WKH
SUHSDLGLQVXUDQFHSUHPLXPV
1R )DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO

VXPPDU\MXGJPHQWRQ7KHUP¶VSUHSDLGLQVXUDQFHSUHPLXP
DQGDFFRXQWVUHFHLYDEOHFODLPV:HDGGUHVVHDFKRIWKHVH
FODLPVLQWXUQDSSO\LQJWKHVXEVWDQWLYHODZRI$ODEDPDDV
VSHFLILHGLQWKH$VVHW3XUFKDVH$JUHHPHQW¶VFKRLFHRIODZ
SURYLVLRQ6HHHJ&ROHY0LOHWL)G WK
&LU
, 35(3$,' ,1685$1&( 35(0,806
7KHUP $FTXLVLWLRQ FODLPV WKDW LW SXUFKDVHG WKH XQSDLG
LQVXUDQFH SUHPLXPV XQGHU WKH SODLQ WHUPV RI WKH $VVHW
3XUFKDVH$JUHHPHQW7KHUPSRLQWVWRWKHEURDGODQJXDJHRI
WKHVDOHVFODXVHDUJXLQJWKDWLWLVXQDPELJXRXVHYLGHQFHWKDW
WKHSUHSDLGLQVXUDQFHSUHPLXPVZHUHSDUWRIWKHSXUFKDVH
$UWLFOH,VHFWLRQRIWKH$JUHHPHQWVWDWHVLQSHUWLQHQWSDUW
>)DPLO\ 6DIHW\@ VKDOO VHOO DQG WUDQVIHU WR >7KHUP
$FTXLVLWLRQ@DOORI>)DPLO\6DIHW\@¶VULJKWVWLWOHDQG
LQWHUHVW LQ DQG WR DOO RI WKH DVVHWV DQG SURSHUWLHV RI
>)DPLO\6DIHW\@HPSOR\HGRUKHOGLQFRQQHFWLRQZLWKWKH
%XVLQHVV H[FHSW IRU WKH ([FOXGHG $VVHWV DV GHILQHG
EHORZ
-$YRODW HPSKDVLVDGGHG 7KHUPDUJXHVWKDWWKLV
VHFWLRQFRXOGQRWEHFOHDUHU³>$@OORIWKHDVVHWV´PHDQVZKDW
LWVD\VDOORIWKHDVVHWV7KHSUHSDLGLQVXUDQFHSUHPLXPV
ZHUHVD\V7KHUPDQDVVHWRI)DPLO\6DIHW\DQGWKXVIHOO
ZLWKLQWKHVFRSHRI†RIWKH$VVHW3XUFKDVH$JUHHPHQW
7KHUPILQGVHYHQEHWWHUHYLGHQFHWKDWWKHSUHSDLGLQVXUDQFH
SUHPLXPV ZHUH SDUW RI WKH SXUFKDVH E\ ORRNLQJ WR WKH
GHILQLWLRQRI³([FOXGHG$VVHWV´LQ†RIWKH$JUHHPHQW
ZKLFKSURYLGHV
WKH IROORZLQJ DVVHWV ULJKWV DQG SURSHUWLHV VKDOO EH
VSHFLILFDOO\H[FOXGHGIURPWKHWUDQVDFWLRQVFRQWHPSODWHG
E\WKLV$JUHHPHQW WKH³([FOXGHG$VVHWV´
G DOO SUHSDLG FKDUJHV VXPV DQG IHHV RWKHU WKDQ
SUHSDLGLQVXUDQFHSUHPLXPV

-- 5 of 6 --

)DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO
1R
-$YRODW HPSKDVLVDGGHG 7KXVSUHSDLGLQVXUDQFH
SUHPLXPV DUH TXLWH FOHDUO\ H[FHSWHG IURP WKH ([FOXGHG
$VVHWV DQG WKH LPSRUW RI WKLV LV WKDW SUHSDLG LQVXUDQFH
SUHPLXPVZHUHSDUWRIWKHSXUFKDVHFRQFOXGHV7KHUP%DVHG
RQWKHDERYH7KHUPDUJXHVWKDWWKHFRQWUDFWRQWKLVSRLQWLV
³XQDPELJXRXV´DQGWKDWQRWRQO\GLGWKHGLVWULFWFRXUWHUUE\
JUDQWLQJVXPPDU\MXGJPHQWLQIDYRURI)DPLO\6DIHW\EXWWKH
GLVWULFWFRXUWDOVRHUUHGE\QRWJUDQWLQJVXPPDU\MXGJPHQWLQ
IDYRURI7KHUP
:HUH WKH $VVHW 3XUFKDVH $JUHHPHQW WKH RQO\ SHUWLQHQW
GRFXPHQW 7KHUP $FTXLVLWLRQ ZRXOG KDYH D YHU\ VWURQJ
DUJXPHQW %XW DV )DPLO\ 6DIHW\ SRLQWV RXW WKHUH DUH
QXPHURXVVFKHGXOHVDWWDFKHGWRDQGUHIHUHQFHGLQWKH$VVHW
3XUFKDVH$JUHHPHQWDQGZHPXVWWDNHWKHVHGRFXPHQWVLQWR
DFFRXQWZKHQFRQVWUXLQJWKH$JUHHPHQW6HH,QUH3KHOSVY
'DQ7XFNHU$XWR6DOHV,QF6RG $OD
³2WKHU ZULWLQJV RU PDWWHUV FRQWDLQHG WKHUHLQ ZKLFK DUH
UHIHUUHG WR LQ D ZULWWHQ FRQWUDFW PD\ EH UHJDUGHG DV
LQFRUSRUDWHGE\WKHUHIHUHQFHDVDSDUWRIWKHFRQWUDFWDQG>@
WKHUHIRUHPD\SURSHUO\EHFRQVLGHUHGLQWKHFRQVWUXFWLRQRI
WKHFRQWUDFW´ TXRWDWLRQRPLWWHG 6HHDOVR$1&279&DEOH
&R,QFY9LVWD&RPPXQLFDWLRQV/WG 3DUWQHUVKLS,
6RG $OD . &'HYHORSPHQW&RUSY$P6RXWK
%DQN 1$ 6RG $OD 7KH SUHSDLG
LQVXUDQFHSUHPLXPVDUHQRWOLVWHGRQDQ\RIWKHVFKHGXOHVRI
DVVHWVDQG)DPLO\6DIHW\DUJXHVWKDWWKHLUDEVHQFHLQGLFDWHV
WKDWWKH\ZHUHQRWPHDQWWREHWUDQVIHUUHGDVSDUWRIWKHDVVHW
VDOH$VWKHGLVWULFWFRXUWFRUUHFWO\QRWHGWKHUHIHUHQFHWR
SUHSDLG SUHPLXPV DV DQ H[FHSWLRQ WR WKH H[FOXGHG DVVHWV
PDWFKHGZLWKWKHIDLOXUHWRVSHFLI\WKHPRQDQ\RIWKHDVVHW
VFKHGXOHVUHQGHUVWKH$VVHW3XUFKDVH$JUHHPHQWDPELJXRXV
XQGHU$ODEDPDODZ6HHHJ9R\DJHU/LIH,QV&R,QFY
:KLWVRQ6RG $OD ³:KHQDQ\DVSHFW
RI D FRQWUDFW LV FDSDEOH RI PRUH WKDQ RQH PHDQLQJ LW LV
DPELJXRXV´ 7KHUHIRUHWKHGLVWULFWFRXUWSURSHUO\GHQLHG
7KHUP¶VPRWLRQIRUVXPPDU\MXGJPHQW:HDUHKRZHYHU
OHVVFRQYLQFHGRIWKHSURSULHW\RIJUDQWLQJVXPPDU\MXGJPHQW
LQIDYRURI)DPLO\6DIHW\
1R )DPLO\6DIHW\3URGXFWV
Y9LVWDHWDO

%HFDXVH WKH FRQWUDFW LV DPELJXRXV ZH PD\ SURSHUO\
FRQVLGHUH[WULQVLFHYLGHQFHLQGHWHUPLQLQJWKHLQWHQWRIWKH
SDUWLHVDQGWKHVFRSHRIWKH$VVHW3XUFKDVH$JUHHPHQW6HH
5LPH 6KDWWHQ 'HY &R Y %LUPLQJKDP &DEOH
&RPPXQLFDWLRQV,QF6RG $OD
,Q GHFLGLQJ WKDW 7KHUP ZDV QRW HQWLWOHG WR WKH SUHSDLG
SUHPLXPVDVDPDWWHURIODZWKHGLVWULFWFRXUWUHOLHGRQWZR
SLHFHVRIH[WULQVLFHYLGHQFH)LUVWDFRXSOHRIGD\VEHIRUHWKH
FORVLQJ9LVWD VJHQHUDOFRXQVHO²ZKRZDVQHJRWLDWLQJ
WKH DVVHW VDOH RQ EHKDOI RI )DPLO\ 6DIHW\²DVNHG 7KHUP¶V
SULPDU\QHJRWLDWRUZKHWKHU7KHUPLQWHQGHGWRXVHWKHSUHSDLG
LQVXUDQFHSROLFLHV7KHUPUHSOLHGWKDWLWGLGQRWEXWZRXOGEH
XVLQJLWVRZQOHVVH[SHQVLYHLQVXUDQFHLQVWHDG6HFRQGWKH
GLVWULFW FRXUW QRWHG WKDW EHFDXVH )DPLO\ 6DIHW\ KDG IXOO\
ILQDQFHG WKH SXUFKDVH RI WKH LQVXUDQFH SROLFLHV DQG WKH
ILQDQFLHUKHOGDSHUFHQWVHFXULW\LQWHUHVWLQWKHSROLFLHV
WKHSUHSDLGSROLFLHVKDG]HURQHWYDOXH%DVHGRQWKHVHWZR
SLHFHV RI HYLGHQFH WRJHWKHU ZLWK WKH IDFW WKDW WKH SUHSDLG
SUHPLXPVZHUHQRWOLVWHGDVDQDVVHWRQDQ\VFKHGXOH WKH
GLVWULFWFRXUWFRQFOXGHGWKDWWKHXQDPELJXRXVLQWHQWRIWKH
SDUWLHVZDVQRWWRWUDQVIHUWKHSUHSDLGLQVXUDQFHSUHPLXPVWR
7KHUP7KLVLVFHUWDLQO\RQHSODXVLEOHFRQFOXVLRQWKDWFRXOG
EH GUDZQ IURP WKH HYLGHQFH EXW ZH GR QRW EHOLHYH WKDW LW
UHDFKHVWKHOHYHORIFHUWLWXGHUHTXLUHGIRUVXPPDU\MXGJPHQW
7KHUP¶VVWDWHPHQWWR9LVWD VJHQHUDOFRXQVHOWKDWLW
ZDVQRWJRLQJWR³XVH´WKHSROLFLHVFDQVXSSRUWWKHLQIHUHQFH
WKDW 7KHUP GLG QRW ZDQW WKH SROLFLHV DV SDUW RI WKH DVVHW
SXUFKDVH%XWWKLVLVQRWWKHRQO\VXSSRUWDEOHLQIHUHQFHWKDW
FDQEHGUDZQIURP7KHUP¶VVWDWHPHQW'UDZLQJWKHLQIHUHQFH
LQIDYRURI7KHUPDVZHDUHUHTXLUHGWRGRLQFRQVLGHULQJ
VXPPDU\ MXGJPHQW VHH 0DWVXVKLWD 86 DW WKLV
VWDWHPHQW HTXDOO\ VXSSRUWV 7KHUP¶V LQWHQW WR UHFHLYH WKH
LQVXUDQFH FDQFHO LW DQG FROOHFW WKH UHIXQG RI WKH SUHSDLG
SUHPLXPV7KHIDFWWKDWWKHUHZDVDVHFXULW\LQWHUHVWRQWKH
SROLFLHV²ZKLFKJDYHWKHLQVXUDQFHSROLFLHVD]HURQHWYDOXH
LQ WKH KDQGV RI )DPLO\ 6DIHW\²GRHV QRW XQGHUPLQH WKLV
LQIHUHQFHEHFDXVH)DPLO\6DIHW\GLGQRWGLVFORVHWKHVHFXULW\
LQWHUHVW WR 7KHUP DV UHTXLUHG E\ WKH $VVHW 3XUFKDVH

-- 6 of 6 --