01a0096p.06

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
81,7(' 67$7(6 2) $0(5,&$
3ODLQWLII$SSHOOHH
Y
:,//,$0 +$55,6
'HIHQGDQW
1$7,21$/ 5($/7< ),1$1&(
/& DQG
/$6$//( 1$7,21$/ %$1.

&ODLPDQWV$SSHOODQWV
;!

1
1RV

$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR
1R²'DYLG$.DW]'LVWULFW-XGJH
$UJXHG-DQXDU\
'HFLGHGDQG)LOHG$SULO
%HIRUH-21(6%$7&+(/'(5DQG&/$<&LUFXLW
-XGJHV

-- 1 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
BBBBBBBBBBBBBBBBB
&2816(/
$5*8(' 'DQLHO - )ODQLJDQ 32/6,1(//, :+,7(
9$5'(0$1 .DQVDV &LW\ .DQVDV 0DUYLQ $ 5RERQ
%$5.$1 52%217ROHGR2KLRIRU$SSHOODQWV6HWK
8UDP $66,67$17 81,7(' 67$7(6 $77251(<
7ROHGR2KLRIRU$SSHOOHH21%5,()%UHWW'$QGHUV
32/6,1(//, :+,7( 9$5'(0$1 .DQVDV &LW\
.DQVDV0LFKDHO6-RQHV/<'< 02$16\OYDQLD2KLR
0DUYLQ$5RERQ*UHJRU\5(OGHU%$5.$1 52%21
7ROHGR2KLRIRU$SSHOODQWV6HWK8UDP/DZUHQFH-.LURII
$66,67$17 81,7(' 67$7(6 $77251(<6 7ROHGR
2KLR 6WHSKHQ 5 +HLIHW] '(3$570(17 2) -867,&(
&5,0,1$/',9,6,21:DVKLQJWRQ'&IRU$SSHOOHH
BBBBBBBBBBBBBBBBB
23,1,21
BBBBBBBBBBBBBBBBB
&/$< &LUFXLW -XGJH 7KLV LV D FRQVROLGDWHG DSSHDO
LQYROYLQJWKHGHWHUPLQDWLRQRIULJKWVRILQQRFHQWWKLUGSDUW\
OHQGHUV1DWLRQDO5HDOW\)LQDQFH/& ³15)´ DQG/D6DOOH
1DWLRQDO%DQN ³/1%´ FROOHFWLYHO\³&ODLPDQWV´ LQUHDO
HVWDWH IRUPHUO\ RZQHG E\ 'HIHQGDQW :LOOLDP +DUULV DQG
IRUIHLWHGWR3ODLQWLIIWKH8QLWHG6WDWHVRI$PHULFD&ODLPDQWV
DOODSSHDOIURPWKHVDPHMXGJPHQWVSHFLILFDOO\LQ&DVH1RV
DQGLQYROYLQJ&ODLPDQW15)DQGLQ&DVH
1RLQYROYLQJ&ODLPDQW/1%&ODLPDQWVDSSHDOIURP
WKHMXGJPHQWHQWHUHGE\WKHGLVWULFWFRXUWRQ6HSWHPEHU
DZDUGLQJ &ODLPDQWV ³SULQFLSDO DQG LQWHUHVW RQ WKHLU
ORDQVWR:LOOLDP+DUULVDWWKHGHIDXOWUDWHDQGWRUHDVRQDEOH
FRVWV ODWH FKDUJHV DQG DWWRUQH\ IHHV´ ZKLOH GHQ\LQJ
&ODLPDQWV³SUHSD\PHQWSUHPLXPVRUODWHFKDUJHVEH\RQG
WKRVH UHDVRQDEO\ QHFHVVDU\ WR UHLPEXUVH WKH OHQGHUV IRU
WUDQVDFWLRQFRVWVDVVRFLDWHGZLWKSURFHVVLQJODWHSD\PHQWV´
7KHQDUURZLVVXHRQDSSHDOZKLFKSUHVHQWVLWVHOIIRUWKHILUVW
WLPHLQDIHGHUDODSSHOODWHFRXUWLVZKHWKHUDQLQQRFHQWOHQGHU

-- 2 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
DJDLQVWWKHLQWHQWRI&RQJUHVVLQHQDFWLQJ† Q % 6HH
LG
+DYLQJIRXQGWKDWWKHGLVWULFWFRXUWHUUHGLQKROGLQJWKDW
&ODLPDQWV ZHUH QRW HQWLWOHG WR SUHSD\PHQW SUHPLXPV ZH
QHHG QRW DGGUHVV WKH DGGLWLRQDO DUJXPHQWV UDLVHG E\ WKH
SDUWLHVZKDWWKHJRYHUQPHQWWHUPV³VHFRQGDU\DUJXPHQWV´
LQFOXGLQJ ZKHWKHU WKH JRYHUQPHQW ZDV ERXQG XQGHU
SULQFLSOHV RI UHV MXGLFDWD IURP OLWLJDWLQJ WKH LVVXH RI
SUHSD\PHQW SUHPLXPV DV WR WKH SURSHUWLHV IRU ZKLFK /1%
UHFHLYHGFRJQRYLWMXGJPHQWVLQVWDWHFRXUW
&21&/86,21
)RUWKHDERYHVWDWHGUHDVRQVZH5(9(56(WKHGLVWULFW
FRXUW¶VMXGJPHQWGHQ\LQJ&ODLPDQWVSUHSD\PHQWSUHPLXPVDV
SURYLGHGXQGHUWKHORDQDJUHHPHQWVDQG5(0$1'FDVHWR
WKHGLVWULFWFRXUWIRUSURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ
1RV 8QLWHG6WDWHVY
+DUULVHWDO

LVHQWLWOHGWRSUHSD\PHQWSUHPLXPVDVSURYLGHGLQWKHORDQ
DJUHHPHQW XSRQ WKH UHDO SURSHUW\ EHLQJ IRUIHLWHG WR WKH
JRYHUQPHQWDQGODWHUVROGE\WKHJRYHUQPHQWDVDUHVXOWRI
D FULPLQDO IRUIHLWXUH SURFHHGLQJ DJDLQVW WKH GHEWRU :H
DQVZHU WKLV LVVXH LQ WKH DIILUPDWLYH XQGHU WKH IDFWV RI WKLV
FDVH
$FFRUGLQJO\ZH5(9(56(WKHGLVWULFWFRXUW¶VMXGJPHQW
DQG5(0$1'WKHFDVHWRWKHGLVWULFWFRXUW
%$&.*5281'
3URFHGXUDO+LVWRU\
7KLVFDVHLQYROYHVDFULPLQDOIRUIHLWXUHLQZKLFK'HIHQGDQW
ZDVLQGLFWHGRQYDULRXVFKDUJHVRI0HGLFDUHIUDXGDQGPRQH\
ODXQGHULQJRQ6HSWHPEHU2Q-DQXDU\WKH
JRYHUQPHQW DFFHSWHG 'HIHQGDQW¶V JXLOW\ SOHD ZKHUHLQ
'HIHQGDQW ZLWKGUHZ KLV SUHYLRXV SOHD RI QRW JXLOW\ DQG
HQWHUHGDZULWWHQSOHDDJUHHPHQWWRFKDUJHVDQGRIWKH
LQGLFWPHQW2QWKLVGDWHWKHJRYHUQPHQWDOVRPRYHGIRUD
SUHOLPLQDU\ RUGHU RI IRUIHLWXUH ZKLFK ZDV JUDQWHG ZKLOH
'HIHQGDQWZDLYHGQRWLFHRIIRUIHLWXUHDVZHOODVWKHULJKWWR
DSSHDO WKH RUGHU RI IRUIHLWXUH 7KH SURSHUW\ VHL]HG E\ WKH
JRYHUQPHQW LQFOXGHG UHDO HVWDWH RZQHG E\ +DUULV
0DQDJHPHQW6HUYLFH,QF ³+06,´ DQ2KLR&RUSRUDWLRQ
ZKROO\RZQHGE\'HIHQGDQWDQGKLVZLIH&ODLPDQWVLQWKLV
PDWWHUDUHLQQRFHQWWKLUGSDUW\OHQGHUVZKRKHOGPRUWJDJHVRQ
WKLVUHDOHVWDWHDQGHDFKWKHUHIRUHSHWLWLRQHGWKHGLVWULFWFRXUW
IRUDKHDULQJWRDGMXGLFDWHWKHYDOLGLW\RIWKHOHJDOLQWHUHVWV
DVVHUWHG LQWKHSURSHUW\SXUVXDQWWR86&† Q
³3HWLWLRQIRU+HDULQJDQGIRU9DOLGDWLRQRI0RUWJDJHRI/LHQ
,QWHUHVWV´ 6SHFLILFDOO\15)ILOHGDSHWLWLRQDVVHUWLQJWKDWLW
KHOGYDOLGILUVWSULRULW\OLHQVRQSURSHUW\NQRZQDVWKH)R[
5XQ $SDUWPHQWV DQG WKH 5LYHU%HQG $SDUWPHQWV /1%
OLNHZLVHILOHGDSHWLWLRQDVWRIRXUODUJHDSDUWPHQWFRPSOH[HV
LQ WKH 7ROHGR 2KLR DUHD NQRZQ DV WKH +XQW &OXE
:LQGMDPPHU'HYRQVKLUHDQG:HOOLQJWRQ+RXVH$SDUWPHQW
&RPSOH[HV

-- 3 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
2Q -XQH WKH GLVWULFW FRXUW KHOG D KHDULQJ WR
FRQVLGHU WKH H[WHQW RI &ODLPDQWV¶ DVVHUWHG LQWHUHVWV LQ WKH
SURSHUW\)ROORZLQJWKHKHDULQJDQGVXEPLVVLRQRIEULHIVE\
WKH SDUWLHV WKH FRXUW LVVXHG D 0HPRUDQGXP 2SLQLRQ DQG
2UGHUILQGLQJWKDW&ODLPDQWVZHUHHQWLWOHGWR³SULQFLSDODQG
LQWHUHVW DW WKH GHIDXOW UDWH DQG WR UHDVRQDEOH FRVWV ODWH
FKDUJHVDQGDWWRUQH\IHHV´EXWWKDWWKH\ZHUHQRWHQWLWOHGWR
³SUHSD\PHQW SUHPLXPV RU WR ODWH FKDUJHV EH\RQG WKRVH
UHDVRQDEO\QHFHVVDU\WRUHLPEXUVHWKHOHQGHUVIRUWUDQVDFWLRQ
FRVWVDVVRFLDWHGZLWKSURFHVVLQJODWHSD\PHQWV´7KHGLVWULFW
FRXUWHQWHUHGDFRUUHVSRQGLQJMXGJPHQWDQGLWLVIURPWKLV
MXGJPHQWWKDW&ODLPDQWVQRZDSSHDO
)DFWV
'HIHQGDQW DPDVVHG D UHDO HVWDWH HPSLUH FRQVLVWLQJ RI
VHYHUDOUHVLGHQWLDOUHQWDOSURSHUWLHVLQ7ROHGR2KLRZKLFK
DFFRUGLQJ WR WKH JRYHUQPHQW 'HIHQGDQW ILQDQFHG E\
GHIUDXGLQJWKHIHGHUDO0HGLFDUHSURJUDP%HWZHHQ-XO\RI
ZKHQ0HGLFDUHILUVWSDLG'HIHQGDQWIRUZKDWODWHUZHUH
IRXQGWREHIUDXGXOHQWFODLPVDQG6HSWHPEHURIZKHQ
WKH JRYHUQPHQW WRRN DFWLRQ DJDLQVW 'HIHQGDQW WKH
JRYHUQPHQWFODLPVWKDW'HIHQGDQWXVHGRYHURI
WKHPRQLHV ZKLFKKHUHFHLYHGDVDUHVXOWRIKLVIUDXGXOHQW
GHDOLQJV ZLWK 0HGLFDUH DV GRZQ SD\PHQWV IRU GR]HQV RI
SURSHUWLHVZRUWKDWOHVW
6SHFLILFDOO\ RQ 6HSWHPEHU IHGHUDO DJHQWV
H[HFXWHG VHDUFK ZDUUDQWV DW WKH RIILFHV RI +DUULV 0HGLFDO
6XSSO\ ³+06´ DFRPSDQ\WKDW'HIHQGDQWXVHGWRGHIUDXG
0HGLFDUHDQGDW+06,DFRPSDQ\WKDW'HIHQGDQWXVHGWR
PDQDJHKLVUHQWDOSURSHUWLHV:LWKLQWKUHHPRQWKVDIWHUWKH
VHDUFKHV ZHUH H[HFXWHG 'HIHQGDQW HVWDEOLVKHG D QRPLQHH
FRUSRUDWLRQ FDOOHG $VKWRQ %XWWRQ &RPSDQ\ /WG LQ WKH
&D\PDQ ,VODQGV DQG D VHFRQG QRPLQHH FRUSRUDWLRQ FDOOHG
,JXDQD 5HHI /WG DOVR LQ WKH &D\PDQ ,VODQGV 2YHU WKH
HLJKWHHQPRQWKVEHWZHHQ0DUFKRIDQG6HSWHPEHURI
'HIHQGDQWZLUHWUDQVIHUUHGDWOHDVWWRWKH
&D\PDQ,VODQGVDQGXVHGWKHVHIXQGVWREX\UHDOHVWDWHLQWKH
1RV 8QLWHG6WDWHVY
+DUULVHWDO

WUDQVODWHV HDVLO\ LQWR WKH IRUIHLWXUH FRQWH[W GHVFULELQJ D
VFHQDULRVLPLODUWRWKDWRIWKHLQVWDQWFDVH
$IWHU WKH FRPPLVVLRQ RI WKH FULPLQDO DFWV WLWOH WR WKH
IRUIHLWDEOH SURSHUW\ E\ RSHUDWLRQ RI WKH UHODWLRQEDFN
FODXVHDFWXDOO\EHORQJVWRWKHJRYHUQPHQW7KHSURSHUW\
LWVHOI KRZHYHU JHQHUDOO\ UHPDLQV LQ WKH FULPLQDO
GHIHQGDQW¶V SK\VLFDO SRVVHVVLRQ XQWLO WKH JRYHUQPHQW
GLVFRYHUVWKHFULPLQDODFWVDQGWDNHVSRVVHVVLRQRIWKH
IRUIHLWDEOHSURSHUW\:KLOHWKHIRUIHLWDEOHSURSHUW\LVLQ
WKHGHIHQGDQW¶VSRVVHVVLRQWKHGHIHQGDQWSRVVHVVHVRQO\
YRLGDEOHWLWOHEXWRUGLQDULO\DSURVSHFWLYHSXUFKDVHURI
WKH IRUIHLWDEOH SURSHUW\ ZLOO KDYH QR QRWLFH WKDW WKH
GHIHQGDQW ODFNV D YDOLG WUDQVIHUDEOH LQWHUHVW 6HFWLRQ
Q % HQVXUHV WKDW LI LQGHHG WKH GHIHQGDQW
WUDQVIHUVWKHIRUIHLWDEOHSURSHUW\IRUYDOXHWRDSXUFKDVHU
ZKRDWWKHWLPHRIWKHSXUFKDVHLVZLWKRXWNQRZOHGJHRI
WKHJRYHUQPHQW¶VLQWHUHVWLQWKHSURSHUW\WKHJRYHUQPHQW
PD\QRWODWHUDVVHUWWLWOHVXSHULRUWRWKDWRIWKHLQQRFHQW
SXUFKDVHU
,GDW
,QRWKHUZRUGVDVIRXQGE\WKH7KLUG&LUFXLWWKHERQDILGH
SXUFKDVHU H[FHSWLRQ RI † Q % LQFOXGHV WKRVH
LQGLYLGXDOV ZKR SXUFKDVH IRU YDOXH IRUIHLWDEOH SURSHUW\ DV
LQQRFHQW EX\HUV RU OLHQKROGHUV DQG WKDW E\ YLUWXH RI WKH
UHODWLRQEDFN GRFWULQH RQFH WKH SURSHUW\ LV IRUIHLWHG WKH
JRYHUQPHQWVWHSVLQWRWKHVKRHVRIWKHGHIHQGDQWDFTXLULQJ
RQO\WKHULJKWVRIWKHGHIHQGDQWDWWKHWLPHRIWKHFULPLQDO
DFWV DQG QRWKLQJ PRUH 6HH /DYLQ ) G DW
$FFRUGLQJO\LWORJLFDOO\IROORZVWKDWLQWKHFDVHDWKDQGWKH
JRYHUQPHQWDVVXPHGQRJUHDWHUULJKWVWKDQWKDWRI'HIHQGDQW
DQG EHFDXVH 'HIHQGDQW ZRXOG KDYH EHHQ ERXQG WR SD\
SUHSD\PHQW SUHPLXPV WR &ODLPDQWV RQ WKH RXWVWDQGLQJ
GHIDXOWHG ORDQ REOLJDWLRQV WKH JRYHUQPHQW PXVW DOVR EH
ERXQG WR GR VR 7R KROG RWKHUZLVH ZRXOG JLYH WKH
JRYHUQPHQW JUHDWHU ULJKWV WKDQ 'HIHQGDQW DQG ZRXOG JR

-- 4 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
7KH7KLUG&LUFXLWIRXQGLW³KHOSIXOWRDVFHUWDLQWKHVRXUFH
RI&RQJUHVV¶ODQJXDJH´LQRUGHUWREHWWHUXQGHUVWDQG ZKDW
LQGLYLGXDOV &RQJUHVV LQWHQGHG WR SURWHFW WKURXJK WKH
HQDFWPHQWRIWKHVHWZRVXEVHFWLRQV6SHFLILFDOO\WKHFRXUW
UHDVRQHGDVIROORZV
$VIDUDVZHFDQWHOO&RQJUHVVGHULYHGERWKH[FHSWLRQV
HVVHQWLDOO\ IURP KRUQERRN FRPPHUFLDO ODZ 7KH ILUVW
H[FHSWLRQFRGLILHGLQVHFWLRQ Q $ UHIOHFWVWKH
FRPPRQODZ SULQFLSOH HPERGLHG LQ WKH YHQHUDEOH
PD[LPQHPRGDWTXLQRQKDEHWWKDWDEX\HUDFTXLUHVQR
EHWWHUWLWOHWKDQWKDWRIWKHVHOOHU6HH8&&†
³$ SXUFKDVHU RI JRRGV DFTXLUHV DOO WLWOH ZKLFK KLV
WUDQVIHURUKDGDWKDGSRZHUWRWUDQVIHU´ 8QGHUWKH
UHODWLRQEDFN GRFWULQH WKH JRYHUQPHQW DFTXLUHV LWV
LQWHUHVWLQWKHGHIHQGDQW¶VIRUIHLWHGSURSHUW\DWWKHWLPH
RIWKHFRPPLVVLRQRIWKHFULPLQDODFWVJLYLQJULVHWRWKH
IRUIHLWXUH 6HH 86& † F 7KXV LI D WKLUG
SDUW\¶VLQWHUHVWLQWKHIRUIHLWHGSURSHUW\DWWKHWLPHRIWKH
FULPLQDODFWVZDVVXSHULRUWRWKHFULPLQDOGHIHQGDQW¶V
LQWHUHVWWKHQWKHLQWHUHVWWKDWWKHJRYHUQPHQWDFTXLUHV
ZKHQLWVWHSVLQWRWKHGHIHQGDQW¶VVKRHVLVVXERUGLQDWHWR
WKDWRIWKHWKLUGSDUW\
7KH VHFRQG H[FHSWLRQ FRGLILHG LQ VHFWLRQ
Q % UHIOHFWV DQRWKHU FRPPRQODZ UXOH DQ
H[FHSWLRQ WR WKH QHPR GDW TXL QRQ KDEHW SULQFLSOH
QDPHO\ WKDW DQ ³LQQRFHQW SXUFKDVHU IRU YDOXDEOH
FRQVLGHUDWLRQ PXVW EH SURWHFWHG´ 7KH JRRGIDLWK
SXUFKDVHU H[FHSWLRQ GHYHORSHG RYHU WLPH LQ RUGHU WR
SURPRWHILQDOLW\LQFRPPHUFLDOWUDQVDFWLRQVDQGWKXVWR
HQFRXUDJHSXUFKDVHVDQGWRIRVWHUFRPPHUFH,WGRHVVR
E\ SURWHFWLQJ WKH WLWOH RI D SXUFKDVHU ZKR DFTXLUHV
SURSHUW\IRUYDOXDEOHFRQVLGHUDWLRQDQGZKRDWWKHWLPH
RI WKH SXUFKDVH LV ZLWKRXW QRWLFH WKDW WKH VHOOHU ODFNV
YDOLGDQGWUDQVIHUDEOHWLWOHLQWKHSURSHUW\
/DYLQ)GDW IRRWQRWHDQGFLWDWLRQVRPLWWHG
7KHFRXUWWKHQIRXQGWKDWWKHJRRGIDLWKSXUFKDVHUH[FHSWLRQ
1RV 8QLWHG6WDWHVY
+DUULVHWDO

QDPH RI KLV WZR &D\PDQ ,VODQG FRUSRUDWLRQV 7KH
JRYHUQPHQWDOOHJHGWKDW'HIHQGDQWREWDLQHGWKHIXQGVWKDWKH
ZLUHGWRWKH&D\PDQ,VODQGVIURPVHYHUDOVRXUFHVEXWWKDW
PRVWRIWKHIXQGVFDPHIURPWKHUHILQDQFLQJRI'HIHQGDQW¶V
DSDUWPHQWEXLOGLQJV
$ &ODLPDQW15)
$V WR &ODLPDQW 15) 'HIHQGDQW RQ EHKDOI RI +06,
REWDLQHG ORDQV IURP 15) LQ WKH DPRXQW RI DSSUR[LPDWHO\
RQH QRWH GDWHG $XJXVW ZDV LQ WKH
DPRXQWRIDQGWKHVHFRQGQRWHRIWKHVDPHGDWH
ZDVLQWKHDPRXQWRI7KHVHORDQVZHUHVHFXUHG
E\WZRPRUWJDJHVJLYHQWR15)E\+06,RQHPRUWJDJHRQ
WKH)R[5XQ$SDUWPHQW&RPSOH[DQGWKHRWKHUPRUWJDJHRQ
WKH 5LYHU%HQG $SDUWPHQW &RPSOH[ $V SDUW RI WKH ORDQ
DJUHHPHQW +06, DJUHHG WKDW LW ZRXOG SD\ ³SUHSD\PHQW
FRQVLGHUDWLRQ´WR15)LIWKHORDQVZHUHSUHSDLG15)DQG
WKHJRYHUQPHQWVWLSXODWHGWKDWWKHSUHSD\PHQWFRQVLGHUDWLRQ
RZHG XQGHU WKH )R[ 5XQ QRWH LV DQG WKH
SUHSD\PHQWFRQVLGHUDWLRQRZHGXQGHUWKH5LYHU%HQGQRWHLV
KRZHYHU ZKLOH WKH JRYHUQPHQW DJUHHV WKDW
WKHVHDUHWKHDPRXQWVGXHDVSUHSD\PHQWFRQVLGHUDWLRQWKH
JRYHUQPHQWFODLPVWKDWWKHDPRXQWVDUHQRWUHFRYHUDEOHE\
15)DVSDUWRIWKHIRUIHLWXUHSURFHVV8QGHUWKHWHUPVRIWKH
QRWHV SUHSD\PHQW FRQVLGHUDWLRQ EHFRPHV GXH DQG RZLQJ
XSRQ FHUWDLQ HYHQWV LQFOXGLQJ DQ ³(YHQW RI 'HIDXOW´ DV
SURYLGHGLQWKHDJUHHPHQW
+06,IDLOHGWRPDNHLWV$XJXVWLQVWDOOPHQWSD\PHQW
LQDOHWWHUGDWHG$XJXVW15)LQIRUPHG+06,WKDW
LWKDGQRWUHFHLYHGLWVSD\PHQWGXH$XJXVWRQERWK
WKH)R[5XQDQG5LYHU%HQGORDQVDQGWKDWLWKDGILYHGD\VLQ
ZKLFK WR PDNH WKH SD\PHQW LQ RUGHU WR FXUH WKH GHIDXOW
RWKHUZLVH WKH IDLOXUH WR SD\ ZRXOG EH DQ HYHQW RI GHIDXOW
XQGHUWKHORDQGRFXPHQWV+06,GLGQRWFXUHLWVGHIDXOWDQG
DFFRUGLQJWR15)WKHGHEWZDVDFFHOHUDWHGRQERWKORDQV

-- 5 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
6SHFLILFDOO\RQ$XJXVW15)ILOHGLWVDPHQGHG
FRPSODLQWLQIRUHFORVXUHIRU GHFODUDWRU\MXGJPHQWDQGIRU
DSSRLQWPHQW RI D UHFHLYHU DJDLQVW +06, LQ WKH &RXUW RI
&RPPRQ3OHDVRI/XFDV&RXQW\2KLR2Q$XJXVW
WKH &RXUW RI &RPPRQ 3OHDV HQWHUHG DQ RUGHU DSSRLQWLQJ
'HQQLV1RQHPDQDVUHFHLYHURIWZRDSDUWPHQWFRPSOH[HVWKDW
VHFXUHGWKHGHEWRZHGWR15)
,Q WKH FULPLQDO SURFHHGLQJ LQYROYLQJ 'HIHQGDQW RQ
6HSWHPEHU 8QLWHG6WDWHV'LVWULFW-XGJH-DPHV*
&DUUHQWHUHGDQRUGHULQDLGRIH[HFXWLRQRIVHL]XUHZDUUDQWDV
WR'HIHQGDQW¶VSURSHUW\7KH)R[5XQ$SDUWPHQW&RPSOH[
DQG WKH 5LYHU%HQG $SDUWPHQW &RPSOH[ ZHUH DPRQJ WKH
SURSHUWLHVLQYROYHG'HIHQGDQWZDVLQGLFWHGRQ6HSWHPEHU

2Q6HSWHPEHUDVDUHVXOWRIWKHJRYHUQPHQW¶V
VHL]XUHRIWKHSURSHUWLHV15)ILOHGDQDPHQGHGFRPSODLQWLQ
IRUHFORVXUH LQ LWV 2KLR VXLW QDPLQJ WKH 8QLWHG 6WDWHV RI
$PHULFD DV D SDUW\ GHIHQGDQW 7KH JRYHUQPHQW UHPRYHG
15)¶VFLYLOIRUHFORVXUHDFWLRQWRWKH8QLWHG6WDWHV'LVWULFW
&RXUW IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR DQG XSRQ WKH
JRYHUQPHQW¶VPRWLRQWKHFLYLOIRUHFORVXUHFDVHWRJHWKHUZLWK
IRUHFORVXUHFDVHVILOHGE\RWKHULQQRFHQWWKLUGSDUW\OHQGHUV
LQFOXGLQJ /1% ZDV WUDQVIHUUHG WR 8QLWHG 6WDWHV 'LVWULFW
-XGJH 'DYLG $ .DW] ZKR KDG EHHQ UHDVVLJQHG WR KDQGOH
'HIHQGDQW¶VFULPLQDOFDVH
% &ODLPDQW/1%
$V WR &ODLPDQW /1% 'HIHQGDQW RQ EHKDOI RI +06,
REWDLQHGIRXUORDQVIURP0LGODQG/RDQ6HUYLFHV/3 IRU
ZKLFK/1%LVWKH$VVLJQHHRIDOOORDQGRFXPHQWV HDFKRI
ZKLFKZDVVHFXUHGE\DPRUWJDJHRQDQDSDUWPHQWEXLOGLQJ
DQG WRWDOHG DSSUR[LPDWHO\ 7KH DSDUWPHQW
FRPSOH[HVZHUHQDPHGDVWKH+XQW&OXEWKH:LQGMDPPHU
WKH'HYRQVKLUHDQGWKH:HOOLQJWRQ+RXVH7KHORDQVRQWKH
+XQW &OXE DQG WKH :LQGMDPPHU FRPSOH[HV FURVV
FROODWHUDOL]HGERWKWKH+XQW&OXEDQGWKH:LQGMDPPHUGHEWV
1RV 8QLWHG6WDWHVY
+DUULVHWDO

:HDUHIXUWKHUJXLGHGLQRXUFRQFOXVLRQEDVHGXSRQWKHIDFW
WKDW&ODLPDQWVDUHERQDILGHSXUFKDVHUVIRUYDOXHXQGHU
86&† Q DVVWLSXODWHGE\WKHJRYHUQPHQWDQGWKDWLQ
SDVVLQJ† Q &RQJUHVVH[SUHVVO\FDUYHGRXWDQH[FHSWLRQ
IRU WKH ULJKWV RI ERQD ILGH SXUFKDVHUV LQ WKH FRQWH[W RI
IRUIHLWXUHSURFHHGLQJV$VWKH7KLUG&LUFXLWRSLQHG
$VZHUHDGWKHUHOHYDQWKLVWRU\&RQJUHVVGLGQRWLQWHQG
VHFWLRQ Q WRVHUYHDVDYHKLFOHE\ZKLFKDOOLQQRFHQW
WKLUGSDUWLHVZKRDUHDJJULHYHGE\DQRUGHURIFULPLQDO
IRUIHLWXUHFDQSHWLWLRQIRUMXGLFLDOUHOLHI5DWKHULWVHHPV
WRXVWKDW&RQJUHVVLQHQDFWLQJVHFWLRQ Q $ DQG
% LQWHQGHG WR DFFRUG VWDQGLQJ WR RQO\ WZR QDUURZ
FODVVHVRIWKLUGSDUWLHVDQGLQWHQGHGWRUHTXLUHDOORWKHU
WKLUGSDUWLHVWRSHWLWLRQWKH$WWRUQH\*HQHUDOIRUUHOLHI
VHH86&† L
8QLWHG 6WDWHV Y /DYLQ )G G &LU
IRRWQRWH RPLWWHG 7KH 7KLUG &LUFXLW DGGHG WKDW WKH
'HSDUWPHQWRI-XVWLFHDQG&RQJUHVVDJUHHGWRFDUYHRXWWKHVH
OLPLWHGH[FHSWLRQVEHFDXVHWKH\ZHUHWURXEOHGE\WKHIRUPHU
SUDFWLFH ZKLFK UHTXLUHG WKDW ³μDOO WKLUG SDUWLHV ZKHWKHU
DVVHUWLQJDOHJDORUHTXLWDEOHEDVLVIRUUHOLHIIURPDQRUGHURI
FULPLQDOIRUIHLWXUH>ZHUHUHTXLUHGWR@SXUVXHWKHUHPHG\RI
SHWLWLRQLQJWKH$WWRUQH\*HQHUDOIRUUHPLVVLRQRUPLWLJDWLRQ
RIIRUIHLWXUH¶´,G TXRWLQJ65HS1RWK&RQJVW
6HVV UHSULQWHG LQ 86&&$1
HPSKDVLV DQG DOWHUDWLRQ LQ /DYLQ 7KH WZR H[FHSWLRQV
FDUYHGRXWE\&RQJUHVVLQ† Q $ DQG % LQYROYH
WKRVHLQVWDQFHV³ZKHUHWKHWKHSHWLWLRQHUKDGDOHJDOLQWHUHVW
LQWKHSURSHUW\WKDWDWWKHWLPHRIWKHFRPPLVVLRQRIWKHDFWV
JLYLQJULVHWRWKHIRUIHLWXUHZDVYHVWHGLQKLPUDWKHUWKDQWKH
GHIHQGDQWRUZDVVXSHULRUWRWKHLQWHUHVWRIWKHGHIHQGDQW´LG
TXRWLQJ 6 5HS DW DQG ³ZKHUH WKH SHWLWLRQHU
DFTXLUHG KLV OHJDO LQWHUHVW DIWHU WKH DFWV JLYLQJ ULVH WR WKH
IRUIHLWXUHEXWGLGVRLQWKHFRQWH[WRIDERQDILGHSXUFKDVHIRU
YDOXH DQG KDG QR UHDVRQ WR EHOLHYH WKDW WKH SURSHUW\ ZDV
VXEMHFWWRIRUIHLWXUH´,G TXRWLQJ65HSDW

-- 6 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
³$PRQJRWKHUWKLQJVDSUHSD\PHQWSUHPLXPLQVXUHV
WKHOHQGHUDJDLQVWORVVRIKLVEDUJDLQLILQWHUHVWUDWHVGHFOLQH´
/+'5HDOW\)GDW2EYLRXVO\LIOHQGHUVDUHVHQW
D PHVVDJH WKDW WKH\ ZLOO EHDU WKH ULVN RI ORVV IRU WKH
FULPLQDOLW\RIWKHLUERUURZHUV±SDUWLFXODUO\ZKHQWKHOHQGHU
LV GHHPHG D ERQD ILGH SXUFKDVHU ± WKHQ OHQGHUV ZLOO WDNH
PHDVXUHVGHVLJQHGWRSURWHFWWKDWULVNRIORVVZKLFKZLOOEH
ERUQH E\ LQQRFHQW ERUURZHUV WKHUHE\ PDNLQJ WKH
JRYHUQPHQW¶VSROLF\DUJXPHQWZHDN
,QVXPPDU\WKHJRYHUQPHQW¶VDUJXPHQWVDUHQRWVXSSRUWHG
E\WKHDQDORJRXVFDVHODZDQGIDLOWRGHPRQVWUDWHWKHWUHQGRI
WKH ODZ LQ WKLV DUHD ,QGHHG WKH JRYHUQPHQW DGDPDQWO\
RSSRVHGWKHDZDUGRISRVWVHL]XUHLQWHUHVWDQGDWWRUQH\¶VIHHV
DQGFRVWVDVSURYLGHGLQWKHORDQDJUHHPHQWVEHORZKRZHYHU
WKH GLVWULFW FRXUW ZDV QRW SHUVXDGHG E\ WKH JRYHUQPHQW¶V
FODLPZKHUHWKHFLUFXLWVWKDWKDYHDGGUHVVHGWKHLVVXHKDYH
KHOGLQIDYRURIWKHOHQGHUVZKRH[SUHVVO\EDUJDLQHGIRUVXFK
SURYLVLRQVLQWKHORDQDJUHHPHQWV6HH8QLWHG6WDWHVY5HDO
3URS/RFDWHGDW1DW¶O7UDLOV:D\'DJJHWW&D
)G WK&LU 8QLWHG6WDWHVY5HDO3URS
/RFDWHG DW9HQXV'ULYH/RV$QJHOHV&D)G
WK &LU 8QLWHG 6WDWHV Y )HG 1DW¶O
0RUWJDJH$VV¶Q)G WK&LU DIILUPLQJ
SUHYLRXVGHFLVLRQLQ,QUH0HWPRU)LQ,QF)G
WK&LU WKDWLQQRFHQWOLHQKROGHUVLQDIRUIHLWXUH
SURFHHGLQJDUHHQWLWOHGWRSRVWVHL]XUHLQWHUHVWDQGDWWRUQH\¶V
IHHV 8QLWHG6WDWHVY6L[3DUFHOVRI5HDO3URS)G
WK&LU UHO\LQJRQ0HWPRUWRKROGWKDWWKH
LQQRFHQW OLHQKROGHU ZDV HQWLWOHG WR UHFRYHU LQWHUHVW DQG
SULQFLSDO :HEHOLHYHWKDWWKHVDPHVKRXOGKROGWUXHZLWK
UHJDUG WR SUHSD\PHQW SUHPLXPV DV EDUJDLQHG IRU E\
&ODLPDQWVDQG'HIHQGDQWEHFDXVH&ODLPDQWVVKRXOGUHFHLYH
WKH EHQHILW RI WKHLU EDUJDLQV 6HH $XOWPDQ +RVS $VV¶Q Y
&PW\ 0XW ,QV &R 1(G 2KLR
ILQGLQJ WKDW LW LV QRW WKH FRXUW¶V IXQFWLRQ WR UHZULWH WKH
SDUWLHV¶FRQWUDFW
1RV 8QLWHG6WDWHVY
+DUULVHWDO

7KH ORDQV RQ WKH :HOOLQJWRQ +RXVH DQG WKH 'HYRQVKLUH
FRPSOH[HVZHUHVHSDUDWH
,Q 6HSWHPEHU DQG 2FWREHU RI /1% ILOHG IRXU
IRUHFORVXUHDFWLRQVLQ/XFDV&RXQW\2KLR&RPPRQ3OHDV
&RXUW DJDLQVW +06, DIWHU +06, GHIDXOWHG RQ LWV ORDQ
REOLJDWLRQVQDPLQJWKH8QLWHG6WDWHVRI$PHULFDDVDSDUW\
GHIHQGDQWLQHDFKDFWLRQ7KH&RPPRQ3OHDV&RXUWHQWHUHG
FRJQRYLWMXGJPHQWVLQIDYRURI/1%LQWKUHHRIWKHDFWLRQV
DZDUGLQJWKHIXOODPRXQWRQWKUHHRIWKHPRUWJDJHVLQFOXGLQJ
SULQFLSDO LQWHUHVW DW D GHIDXOW UDWH DQG SUHSD\PHQW
FRQVLGHUDWLRQ6SHFLILFDOO\RQ6HSWHPEHUWKHFRXUW
HQWHUHG MXGJPHQW LQ IDYRU RI /1% LQ WKH DPRXQW RI
UHJDUGLQJ WKH +XQW &OXE FRPSOH[ RQ
6HSWHPEHUWKHFRXUWHQWHUHGMXGJPHQWLQIDYRURI
/1% LQ WKH DPRXQW RI UHJDUGLQJ WKH
:LQGMDPPHUFRPSOH[RQ2FWREHUWKHFRXUWHQWHUHG
MXGJPHQWLQIDYRURI/1%LQWKHDPRXQWRI
UHJDUGLQJWKH'HYRQVKLUHFRPSOH[7KHIRXUWKIRUHFORVXUH
DFWLRQ WKH RQH LQYROYLQJ WKH :HOOLQJWRQ +RXVH FRPSOH[
ZKHUHLQ /1% VRXJKW MXGJPHQW LQ WKH DPRXQW RI
ZDVQRWUHGXFHGWRMXGJPHQWEHFDXVHRIWKH
JRYHUQPHQW¶V LQWHUYHQWLRQ 6KRUWO\ DIWHU MXGJPHQWV ZHUH
HQWHUHGWKHJRYHUQPHQWPRYHGWRWUDQVIHUWKHFDVHVWRWKH
8QLWHG6WDWHV'LVWULFW&RXUWDQGWKHPDWWHUXOWLPDWHO\FDPH
EHIRUH-XGJH.DW]ZKRVHGHFLVLRQLVQRZWKHVXEMHFWRIWKLV
DSSHDO
2Q2FWREHUWKHJRYHUQPHQWDXFWLRQHGRIIWKHIRXU
DSDUWPHQWFRPSOH[HVLQYROYHGLQWKH/1%ORDQDJUHHPHQWV
IRUDWRWDOVXPRI7KHSD\RIIILJXUHVWR/1%
7UXVWHHWRWDOHGSOXVDIHZGD\VRISHUGLHP
LQWHUHVW OHDYLQJ WKH JRYHUQPHQW ZLWK D SURILW RI
RQ WKHVHSURSHUWLHV/1%FODLPVWKDWDVRI
6HSWHPEHURIWKHWLPHDWZKLFK'HIHQGDQWGHIDXOWHGRQ
WKH ORDQV WKH SUHSD\PHQW SUHPLXPV RZHG WR /1% WRWDOHG
KRZHYHU/1%QRWHVLQLWVEULHIRQDSSHDOWKDW
EHFDXVH LQWHUHVW UDWHV VSLUDOHG XSZDUG WKH SUHSD\PHQW
SUHPLXPVZHUHLQWKH)DOORI

-- 7 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
3ULRU WR RUDO DUJXPHQW WKH JRYHUQPHQW PRYHG WR ZLWKGUDZ LWV WKLUG
DUJXPHQW DQG ZH ZLOO WKHUHIRUH QRW FRQVLGHU LW KHUH
',6&866,21
:HUHYLHZDGLVWULFWFRXUW¶VILQGLQJVRIIDFWIRUFOHDUHUURU
DQGLWVFRQFOXVLRQVRIODZGHQRYRLQWKLVPL[HGLVVXHRIODZ
DQGIDFW6HH5D]DYLY&RPP¶URI,56)G WK
&LU VHHDOVR6FKUR\HUY)UDQNHO)G
WK&LU
7KH JRYHUQPHQW¶V IRXU PDLQ DUJXPHQWV DV WR ZK\
&ODLPDQWV DUH QRW HQWLWOHG WR SUHSD\PHQW SUHPLXPV DUH DV
IROORZV EHFDXVH WKH WUDQVIHU RI WKH SURSHUW\ WR WKH
JRYHUQPHQWZDVLQYROXQWDU\LWGLGQRWWULJJHUWKHSUHSD\PHQW
SUHPLXPVSURYLVLRQ EHFDXVHWKH&ODLPDQWVDFFHOHUDWHG
WKHORDQVWKHUHE\GHPDQGLQJIXOOSD\PHQWLQDGYDQFHRIWKH
PDWXULW\ GDWH &ODLPDQWV FDQQRW FROOHFW SUHSD\PHQW
SUHPLXPV HYHQLI&ODLPDQWVZHUHSHUPLWWHGWRDFFHOHUDWH
WKHORDQVDQGWKHQFROOHFWSUHSD\PHQWSUHPLXPV&ODLPDQWV
FRXOGQRWGRVRKHUHEHFDXVHWKH\GLGQRWDFFHOHUDWHWKHORDQV
XQWLOVRPHWLPHDIWHUWKH\OHDUQHGRI'HIHQGDQW¶VFULPHVDQG
EHFDXVH WKH ULVN WKDW OHQGHUV ZLOO ORVH SUHSD\PHQW
SUHPLXPVGXHWRWKHLUERUURZHUV¶FULPLQDOFRQGXFWLVDULVN
WKDWLVEHWWHUERUQHE\WKHOHQGHUVWKDQE\WKHYLFWLPVRIWKH
FULPHV
:H GLVDJUHH ZLWK HDFK RI WKH JRYHUQPHQW¶V DUJXPHQWV
ZKHUHWKHFDVHODZWKDWKDVVSRNHQWRSUHSD\PHQWSUHPLXPV
LQJHQHUDODVZHOODVRWKHUSURYLVLRQVIRUZKLFKDQLQQRFHQW
OLHQKROGHUKDVEDUJDLQHGGRHVQRWVXSSRUWWKHJRYHUQPHQW¶V
SRVLWLRQ$VVWDWHGWKHLVVXHRIZKHWKHUDQLQQRFHQWOHQGHU
LVHQWLWOHGWRSUHSD\PHQWSUHPLXPVDVSURYLGHGLQWKHORDQ
DJUHHPHQW XSRQ WKH UHDO SURSHUW\ EHLQJ IRUIHLWHG WR WKH
JRYHUQPHQW DV D UHVXOW RI D FULPLQDO IRUIHLWXUH SURFHHGLQJ
DJDLQVWWKHGHEWRULVDQLVVXHRIILUVWLPSUHVVLRQLQWKLVFLUFXLW
DVZHOODVWKHFLUFXLWVDFURVVWKHFRXQWU\KRZHYHUZKHQZH
DSSO\DQDORJRXVFDVHODZDOWKRXJKQRWGLUHFWO\RQSRLQWLW
1RV 8QLWHG6WDWHVY
+DUULVHWDO

ORQJ DV WKH ORDQ DJUHHPHQW SURYLGHG IRU SUHSD\PHQW
SUHPLXPV XSRQ DFFHOHUDWLRQ RI WKH GHEW E\ WKH OHQGHU WKH
SUHSD\PHQWSUHPLXPVVKRXOGEHDZDUGHG6HH/+'5HDOW\
)GDW$FFRUGLQJO\EHFDXVHWKHFDVHXSRQZKLFK
WKHJRYHUQPHQWUHOLHVGLGQRWDFFRXQWIRUWKHTXDOLILFDWLRQRI
ZKHQ WKH SDUWLHV EDUJDLQ IRU SD\PHQW RI SUHSD\PHQW
SUHPLXPVXSRQDFFHOHUDWLRQE\WKHOHQGHUDTXDOLILFDWLRQWKDW
KDG EHHQ HPEUDFHG E\ WKH FRXUWV ORQJ EHIRUH WKDW DQG
EHFDXVHWKHFRXUWVWKDWKDYHORRNHGDWWKHLVVXHDOORZIRUWKH
TXDOLILFDWLRQWKHJRYHUQPHQW¶VVHFRQGDUJXPHQWIDLOVDVGLG
LWVILUVWDUJXPHQW
)LQDOO\WKHJRYHUQPHQWUHOLHVXSRQDSROLF\DUJXPHQWWKDW
³WKHULVNWKDWOHQGHUVZLOOORVHSUHSD\PHQWSUHPLXPVEHFDXVH
WKHLUERUURZHUVFRPPLWFULPHVLVDULVNWKDWLVEHWWHUERUQHE\
WKHOHQGHUVWKDQE\WKHYLFWLPVRIWKHFULPHV´7KLVSROLF\
DUJXPHQWPD\KDYHVRPHVXSHUILFLDODSSHDOEHFDXVHLQWKLV
FDVH WKH IHGHUDO 0HGLFDUH SURJUDP ZDV GHIUDXGHG DQG LW
VHHPV WKDW SURYLGLQJ WKH SUHSD\PHQW PRQLHV ZKLFK WKH
OHQGHUVVHHNWRDSURJUDPWKDWFDUHVIRUWKHZHOOEHLQJRIWKH
HOGHUO\LVDJRRGSROLF\GHFLVLRQ+RZHYHUVXFKDSROLF\
DUJXPHQWFDQQRWSUHYDLOLQWKHIDFHRIFOHDUSURYLVLRQVLQWKH
ORDQGRFXPHQWVWRWKHFRQWUDU\DQGFDVHODZHVWDEOLVKLQJWKDW
VXFKSURYLVLRQVDUHQRWXQHQIRUFHDEOH)XUWKHUWDNLQJDPRUH
JOREDOORRNDWWKLVDUJXPHQWGHQ\LQJOHQGHUVWKHSUHSD\PHQW
PRQLHVWKDWWKH\EDUJDLQHGIRU VXPVZKLFKDUHVXEVWDQWLDO
PD\IRUFHWKHOHQGHUVWRWDNHRWKHUPHDVXUHVWRLQVXUHWKHLU
EDUJDLQHGIRUSD\PHQWV)RUH[DPSOHOHQGHUVPD\VFUHHQ
ORDQ DSSOLFDQWV PRUH FDUHIXOO\ DQG QRW H[WHQG FUHGLW WR DQ
LQGLYLGXDOVHHNLQJWRVWDUWDVPDOOEXVLQHVVRUWKHOHQGHUV
PD\LQFUHDVHIHHVDVVRFLDWHGZLWKWKHORDQVWRPDNHXSIRUWKH
SRVVLEOHORVVRIWKHVHSUHPLXPV
³7KH FOHDU SXUSRVH IRU D SUHSD\PHQW SHQDOW\ LV WR
FRPSHQVDWHWKHOHQGHUIRUWKHULVNWKDWPDUNHWUDWHVRILQWHUHVW
DWWKHWLPHRISUHSD\PHQWPLJKWEHORZHUWKDQWKHUDWHRIWKH
ORDQEHLQJSUHSDLG6XFKDSURYLVLRQZRXOGFRPSHQVDWHWKH
OHQGHUIRUDQWLFLSDWHGLQWHUHVWWKDWZRXOGQRWEHUHFHLYHGLI
WKHORDQZHUHSDLGSUHPDWXUHO\´5LGJHZRRG%5DW

-- 8 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
SULRUWRWKHGHEWRUILOLQJDEDQNUXSWF\SHWLWLRQWKHEDQNUXSWF\
FRXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLRKHOGWKDWEHFDXVHWKH
GHEWZDVQHYHU³SUHSDLG´ GXHWRWKHEDQNUXSWF\SHWLWLRQDQG
EDQNUXSWHVWDWH LWQHHGQRWGHFLGHWKHLVVXHRIZKHWKHUWKH
SUHSD\PHQW SUHPLXP ZDV HQIRUFHDEOH KRZHYHU WKH FRXUW
DOVRDFNQRZOHGJHGWKDWWKHSUHSD\PHQWSUHPLXPZRXOGEH
GXHZKHWKHUWKHSUHSD\PHQWZDVYROXQWDU\RULQYROXQWDU\
EHFDXVHWKHSDUWLHVH[SUHVVO\EDUJDLQHGIRULW,G
6LPLODUO\ WKH IHGHUDO FLUFXLW FRXUWV WR KDYH DGGUHVVHG
SUHSD\PHQWSUHPLXPVLQJHQHUDOKDYHIRXQGWKDWSUHSD\PHQW
SUHPLXPVZRXOGEHDOORZHGLQWKHFDVHRIDFFHOHUDWLRQRIWKH
GHEWE\WKHOHQGHULIWKHSDUWLHVKDGH[SUHVVO\SURYLGHGIRU
VXFK LQ WKH ORDQ DJUHHPHQW 6HH 3DUNHU Y 3OD]D :HVW
3DUWQHUVY81803HQVLRQ ,QV)G WK
&LU QRWLQJ WKDW D SUHSD\PHQW SUHPLXP ZRXOG EH
XSKHOGHYHQZKHUHWKHOHQGHUDFFHOHUDWHGWKHGHEWVRORQJDV
WKHUHOHYDQWSURYLVLRQVLQWKHORDQDJUHHPHQWZHUHFOHDUDQG
XQDPELJXRXV /+'5HDOW\)GDW VDPH VHHDOVR
0,(0G([HFXWLYH3DUN*HQ3¶VKLSY/D6DOOH1DW¶O%DQN
1R :/ DW WK &LU 0D\
XQSXEOLVKHG SHU FXULDP ILQGLQJ WKDW EHFDXVH WKH
SDUWLHV KDG EDUJDLQHG IRU WKH SD\PHQW RI SUHSD\PHQW
SUHPLXPV WKH SUHSD\PHQW SUHPLXPV VXUYLYHG WKH ORDQ
PRGLILFDWLRQ ZKHUH WKH PRGLILFDWLRQ GLG QRW DGGUHVV WKH
SUHSD\PHQW SUHPLXPV DJUHHPHQW ZKLOH QRWLQJ WKDW
SUHSD\PHQWSUHPLXPVSURYLVLRQVDUHQRW³SHULSKHUDO´DQGFDQ
DPRXQWWRYHU\VXEVWDQWLDOVXPV 6LPLODUO\WKHXQSXEOLVKHG
FDVH RI (\GH %URWKHUV 'HYHORSPHQW &R Y (TXLWDEOH /LIH
$VVXUDQFH6RFLHW\1R:/DW
WK &LU 1RY XQSXEOLVKHG SHU FXULDP
DIILUPHG WKH GLVWULFW FRXUW¶V GHFLVLRQ GHQ\LQJ WKH OHQGHU¶V
FODLPWRSUHSD\PHQWSUHPLXPVEHFDXVHXQOLNHWKHFDVHDW
KDQG WKH ORDQ GRFXPHQWV GLG QRW H[SUHVVO\ SURYLGH IRU
SUHSD\PHQWSUHPLXPVLQWKHHYHQWRIDFFHOHUDWLRQ
,QWHUHVWLQJO\WKHJRYHUQPHQWUHOLHVXSRQ/+'5HDOW\LQ
VXSSRUWRILWVILUVWDUJXPHQWEXWIDLOVWRPHQWLRQWKDWFDVHLQ
LWVVHFRQGDUJXPHQWOLNHO\EHFDXVH/+'5HDOW\IRXQGWKDWVR
1RV 8QLWHG6WDWHVY
+DUULVHWDO

EHFRPHV HYLGHQW WKDW WKH JRYHUQPHQW¶V DUJXPHQWV GR QRW
FDUU\WKHGD\
$OWKRXJKWKLVLVVXHLVXOWLPDWHO\RQHRIIHGHUDOODZXQGHU
86&† Q % ERWKSDUWLHVDJUHHWKDW2KLRODZ
JRYHUQVWKHRXWFRPH$VWKLV&RXUWVWDWHGLQ8QLWHG6WDWHVY
6PLWK
EHFDXVHIRUIHLWXUHSURFHHGLQJVLPSOLFDWHSURSHUW\ULJKWV
ZKLFKKDYHWUDGLWLRQDOO\EHHQPHDVXUHGLQWHUPVRIVWDWH
ODZ DQG EHFDXVH VHFWLRQ FRQWDLQV QR UXOH IRU
GHWHUPLQLQJWKHVFRSHRISURSHUW\ULJKWVLWLVDSSURSULDWH
WR UHIHU WR VWDWH ODZ LQ GHWHUPLQLQJ WKH QDWXUH RI WKH
SURSHUW\LQWHUHVWLQYROYHGLQDIRUIHLWXUHSURFHHGLQJ
)G Q WK &LU FLWDWLRQV DQG
LQWHUQDOTXRWDWLRQPDUNVRPLWWHG
7KHJRYHUQPHQWDFFXUDWHO\QRWHVWKDWWKHRQO\FDVHXQGHU
2KLRODZWRVSHDNWRSUHSD\PHQWSUHPLXPVRUSUHSD\PHQW
FRQVLGHUDWLRQ DV WKH WHUP LV DOVR NQRZQ LQ WKLV UHJDUG LV
/DQG2KLR &RUS Y 1RUWKZHVWHUQ 0XW /LIH 0RUWJDJH
5HDOW\,QYHVWRUV)6XSS 1'2KLR 7KH
JRYHUQPHQW UHOLHV XSRQ /DQG2KLR LQ VXSSRUW RI LWV ILUVW
DUJXPHQW WKDW ³DQ LQYROXQWDU\ WUDQVIHU RI SURSHUW\ WR WKH
JRYHUQPHQW FDQQRW WULJJHU D SUHSD\PHQW SUHPLXP´
+RZHYHU ZH DUH QRW SHUVXDGHG E\ WKH JRYHUQPHQW¶V
DUJXPHQWEHFDXVHLWIDLOVWRDFFXUDWHO\UHSUHVHQWWKHKROGLQJ
RI/DQG2KLRDQGLQVWHDGUHOLHVXSRQRQO\DVHOHFWSRUWLRQ
WKHUHRI
/DQG2KLRLQYROYHGDWDNLQJXQGHUHPLQHQWGRPDLQZKHUH
WKHPRUWJDJHOLHQKROGHUVRXJKWSUHSD\PHQWFRQVLGHUDWLRQDV
SURYLGHGLQWKHOHQGLQJDJUHHPHQW/DQG2KLR)6XSS
DW7KHGLVWULFWFRXUWQRWHGWKDWWKH2KLRFRXUWVKDG
\HW WR VSHDN RQ WKH LVVXH DQG WKDW XQGHU (ULH 55 &R Y
7RPSNLQV 86 WKH FRXUW KDG D GXW\ WR
GHWHUPLQHZKDWWKH2KLRFRXUWVZRXOGGRLISUHVHQWHGZLWK
WKLVTXHVWLRQ/DQG2KLR)6XSSDW7KHGLVWULFW
FRXUWORRNHGWRDFDVHIURP1HZ-HUVH\ZKLFKZDVIDFWXDOO\

-- 9 of 10 --

8QLWHG6WDWHVY
+DUULVHWDO
1RV
&ODLPDQWV EDUJDLQHG IRU WKH ULJKW WR SUHSD\PHQW FRQVLGHUDWLRQ HYHQ
LQ WKH HYHQW WKDW 'HIHQGDQW ORVW RZQHUVKLS RI WKH SURSHUW\ WKURXJK
DFFHOHUDWLRQ RI WKH GHEW RU IRUHFORVXUH
RQSRLQWSDUWLFXODUO\UHJDUGLQJWKHIDFWWKDWOLNH/DQG2KLR
WKH OHQGHUV LQ WKH 1HZ -HUVH\ FDVH IDLOHG WR LQFOXGH D
SURYLVLRQDVWRWKHSD\PHQWRISUHSD\PHQWSUHPLXPVZKHQ
WKHODQGZDVVROGLQYROXQWDULO\EHIRUHWKHQRWHPDWXUHG,G
FLWLQJ-DOD&RUSY%HUNHOH\6DYV /RDQ$VV¶QRI1HZDUN
1-$G 1-6XSHU 7KHGLVWULFWFRXUW
WKHQDGRSWHGWKH-DODUXOHWKDW³ZKHQWKHVWDWHFRHUFHVWKH
VDOH RI D PRUWJDJRU¶V SURSHUW\ WKURXJK WKH H[HUFLVH RI LWV
FRQGHPQDWLRQ SRZHU WKH PRUWJDJRU LV UHOLHYHG RI WKH
FRQWUDFWXDO GXW\ WR UHQGHU D SUHSD\PHQW SUHPLXP WR WKH
PRUWJDJHHXQOHVVWKHSDUWLHVKDYHH[SOLFLWO\DJUHHGWKDWVXFK
DSD\PHQWVKDOOEHPDGHHYHQLQWKHHYHQWWKDWWKHPRUWJDJRU
LVIRUFHGWRVHOOKLVSURSHUW\´,GDW FLWLQJ-DOD
$GDW
7KH JRYHUQPHQW FLWHV RQO\ WKH SRUWLRQ RI WKH /DQG2KLR
FDVH ZKHUHLQ WKH GLVWULFW FRXUW KHOG WKDW D SUHSD\PHQW
SUHPLXPPD\QRWEHDVVHVVHGDJDLQVWDOLHQKROGHUZKHQWKH
ODQGLVVROGLQYROXQWDULO\EXWIDLOVWRLQFOXGHWKHTXDOLILFDWLRQ
RI WKH ³-DOD UXOH´ WKDW ³XQOHVV WKH SDUWLHV KDYH H[SOLFLWO\
DJUHHGWKDWVXFKDSD\PHQWVKDOOEHPDGHLQWKHHYHQWWKDWWKH
PRUWJDJRULVIRUFHGWRVHOOKLVSURSHUW\´/DQG2KLR)
6XSSDW,QGHHGWKHGLVWULFWFRXUWLQ/DQG2KLRDGRSWHG
WKH-DODUXOHLQLWVHQWLUHW\LQFOXGLQJWKHTXDOLILFDWLRQDQG
EHFDXVH&ODLPDQWVLQWKHPDWWHUDWKDQGH[SUHVVO\SURYLGHG
IRUWKHSD\PHQWRISUHSD\PHQWSUHPLXPVHYHQLIWKHERUURZHU
ZHUHIRUFHGWRVHOOWKHSURSHUW\WKHJRYHUQPHQW¶VDUJXPHQW
WKDW SUHSD\PHQW SUHPLXPV DUH IRUELGGHQ XQGHU /DQG2KLR
EHFDXVH WKH WUDQVIHU LQ WKH PDWWHU DW KDQG ZDV LQYROXQWDU\
IDLOV 6HH LG VHH DOVR -RKQ & 0XUUD\ (QIRUFHDELOLW\ RI
3UHSD\PHQW3UHPLXP 3URYLVLRQV LQ &RPPHUFLDO /RDQ
'RFXPHQWV 3UDF / ,QVW
DFNQRZOHGJLQJ WKH KROGLQJ RI /DQG2KLR WR LQFOXGH WKH
TXDOLILFDWLRQRIWKHSDUWLHVEHLQJDEOHWRVSHFLILFDOO\EDUJDLQ
1RV 8QLWHG6WDWHVY
+DUULVHWDO

IRU WKH ULJKW WR SUHSD\PHQW SUHPLXPV LQ WKH FDVH RI DQ
LQYROXQWDU\WUDQVIHU
:H DUH QRW SHUVXDGHG RWKHUZLVH E\ WKH JRYHUQPHQW¶V
UHOLDQFHRQDFDVHIURPWKH6HYHQWK&LUFXLW,QUH/+'5HDOW\
&RUS )G WK &LU ZKHUH OLNH WKH
FRXUWLQ/DQG2KLRWKH6HYHQWK&LUFXLWH[SOLFLWO\KHOGWKDWWKH
OHQGHUZDVQRWHQWLWOHGWRDSUHSD\PHQWSUHPLXPEHFDXVHWKH
OHQGHU DFFHOHUDWHG WKH GHEW LH WKH SUHSD\PHQW ZDV
LQYROXQWDU\ DQG WKH SUHSD\PHQW FODXVH GLG QRW FOHDUO\
SURYLGH WKDW WKH SUHPLXP FRXOG EH FROOHFWHG XSRQ
DFFHOHUDWLRQDIWHUGHIDXOW6LPSO\SXWWKH6HYHQWK&LUFXLW
ZRXOGKDYHDOORZHGIRUWKHSUHSD\PHQWSUHPLXPLQWKHFDVH
RI DQ LQYROXQWDU\ WUDQVIHU LI WKH SDUWLHV KDG H[SUHVVO\
EDUJDLQHG IRU LW ,G 7KH SDUWLHV GLG EDUJDLQ IRU LW LQ WKH
PDWWHUDWKDQG
7KLVEULQJVXVWRWKHJRYHUQPHQW¶VQH[WFODLPZKLFKLVWKDW
³DOHQGHUPD\QRWDFFHOHUDWHDORDQWKHUHE\GHPDQGLQJIXOO
SD\PHQWLQDGYDQFHRIWKHPDWXULW\GDWHDQGDOVRFODLPD
SUHSD\PHQWSUHPLXP´$VQRWHG&ODLPDQWVEDUJDLQHGIRUWKH
ULJKW WR SUHSD\PHQW FRQVLGHUDWLRQ HYHQ LQ WKH HYHQW WKDW
'HIHQGDQWORVWRZQHUVKLSRIWKHSURSHUW\WKURXJKDFFHOHUDWLRQ
RIWKHGHEWRUIRUHFORVXUH7KHJRYHUQPHQWDUJXHVWKDWXQGHU
:LGH6FRSH,QFY)UHHGRP)HG6DYV /RDQ$VV¶Q
1(G 2KLR 0LVF G 2KLR ODZ SUHYHQWV WKH
SD\PHQW RI SUHSD\PHQW SUHPLXPV ZKHQ WKH OHQGHU KDV
DFFHOHUDWHGWKHGHEW:HDFNQRZOHGJH:LGH6FRSH¶VKROGLQJ
WKDW³>L@IDOHQGHUUHTXLUHVSD\PHQWLQIXOOLWPD\QRWDOVR
HQIRUFH D SUHSD\PHQW SHQDOW\>@´ KRZHYHU :LGH 6FRSH D
GHFLVLRQIURPWKH)UDQNOLQ&RXQW\0XQLFLSDO&RXUW IDLOHGWR
DFFRXQWIRU/DQG2KLR¶VHDUOLHUTXDOLILFDWLRQWRWKHJHQHUDO
SUHPLVHWKDWSUHSD\PHQWSUHPLXPVDUHQRWDOORZHGZKHQWKH
WUDQVIHU LV LQYROXQWDU\ QDPHO\ WKDW WKH SUHPLXPV ZLOO EH
DOORZHGLIWKHSDUWLHVH[SUHVVO\EDUJDLQHGIRUWKHSUHPLXPV
XQGHUVXFKFLUFXPVWDQFHV6HH/DQG2KLR)6XSSDW
0RUHRYHUDVFLWHGE\&ODLPDQWVLQ,QUH5LGJHZRRG
$SWVRI'HNDOE&RXQW\/7'%5 %DQNU
6'2KLR ZKHUHWKHOHQGHUDFFHOHUDWHGWKHHQWLUHGHEW

-- 10 of 10 --