5(&200(1'(' )25 )8//7(;7 38%/,&$7,21  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   3XUVXDQW WR 6L[WK &LUFXLW 5XOH  RI2KLRHWDOY'UDELNHWDO (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS $FFRUGLQJO\ ZH $)),50 WKH RUGHU RI WKH +RQRUDEOH sDPHV/*UDKDPRIWKH8QLWHG6WDWHV'LVWULFW&RXUWRIWKH 81,7('67$7(6&28572)$33($/6 6RXWKHUQ'LVWULFWRI2KLR )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB

$662&,$7(' *(1(5$/ ; &2175$&7256 2) 2+,2 ,1&  $662&,$7(' *(1(5$/   1RV  &2175$&7256 2)   1257+:(67 2+,2 ,1& !  3ODLQWLIIV$SSHOOHHV   6+(50$1 5 60227  &203$1< ,1&  ,QWHUYHQRU$SSHOOHH    Y   6$1'5$ $ '5$%,.'LUHFWRU  RI$GPLQLVWUDWLYH6HUYLFHV  5(*,1$/' :,/.,1621   'LUHFWRURI5HKDELOLWDWLRQDQG  &RUUHFWLRQ  'HIHQGDQWV$SSHOODQWV   $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV 1R  nsDPHV/*UDKDP'LVWULFWsXGJH $UJXHG 1RYHPEHU

  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO 'HFLGHGDQG)LOHG 0D\ TXDQWLILFDWLRQRIWKHIHHV7KDWUXOHSURYLGHVWKHORVLQJSDUW\ ZLWKLQFHQWLYHWRUHSHDWHGO\UHTXHVWH[WHQVLRQVRUVHHNDVWD\ %HIRUH .(,7+%2**6DQG&2/(&LUFXLWsXGJHV RQWKHLVVXHRIDWWRUQH\IHHVSHQGLQJWKHPHULWVDSSHDODVWKH VWDWHGLGKHUH7KHSUHYDLOLQJSDUW\ RUSHUKDSVKHUDWWRUQH\ BBBBBBBBBBBBBBBBB ZLOOWKHQEHRXWRISRFNHWIRUZKDWLVSRWHQWLDOO\DORQJSHULRG RIWLPHZKLOHDZDLWLQJTXDQWLILFDWLRQ2QWKHRWKHUKDQGWKH &2816(/ ORVLQJSDUW\ZLOOVXIIHUQRDFWXDOSUHMXGLFHRUXQIDLUEXUGHQE\ WKHDFFUXDORILQWHUHVWIURPWKHGDWHRIHQWLWOHPHQWVLQFHWKDW $5*8('   6KDURQ $ sHQQLQJV 2)),&( 2) 7+( SDUW\KDVWKHXVHRIWKHPRQH\XQWLOSD\PHQW$QDZDUGRI $77251(< *(1(5$/ 2) 2+,2 &ROXPEXV 2KLR IRU LQWHUHVWRQDWWRUQH\IHHVGRHVQRWDFWDVDSHQDOW\EXWUDWKHU $SSHOODQWV.HYLQ50F'HUPRWW6&+277(167(,1=2; VHUYHV WKH VDPH SXUSRVH DV DQ DZDUG RI DWWRUQH\ IHHV  '811 &ROXPEXV 2KLR IRU $SSHOOHHV  21 %5,() (TXLWDEOHFRQVLGHUDWLRQVDVZHOODVWKHSODLQODQJXDJHRIWKH (OL]DEHWK/XSHU6FKXVWHUsXGLWK/)UHQFK2)),&(2)7+( VWDWXWHOHDGXVWRWKHFRQFOXVLRQWKDWWKH&RSSHU/LTXRUUXOH $77251(< *(1(5$/ 2) 2+,2 &ROXPEXV 2KLR IRU LVE\IDUWKHEHWWHUUXOH $SSHOODQWV.HYLQ50F'HUPRWW6&+277(167(,1=2; '811&ROXPEXV2KLRIRU$SSHOOHHV IV. CONCLUSION BBBBBBBBBBBBBBBBB ,Q VXP ZH ILQG WKDW WKH VDPH UHDVRQV WKDW JXLGHG RXU GHFLVLRQ RI ZKHWKHU SRVWMXGJPHQW LQWHUHVW DFFUXHV RQ DQ 23,1,21 DWWRUQH\IHHDZDUGSXUVXDQWWR†  D JXLGHRXUGHFLVLRQ BBBBBBBBBBBBBBBBB RQWKHLVVXH RI WKHWLPLQJRIDFFUXDO:HEHOLHYHWKDWWKH ODQJXDJHRI†  D SHUPLWVWKHLQWHUHVWWRUXQRQDQIHH '$021 s .(,7+ &LUFXLW sXGJH  3ODLQWLIIVDSSHOOHHV DZDUG IURP WKH WLPH RI HQWU\ RI WKH MXGJPHQW ZKLFK ZHUHWKHSUHYDLOLQJSDUW\LQDVXLWDJDLQVWWKH6WDWHRI2KLR XQFRQGLWLRQDOO\ HQWLWOHV WKH SUHYDLOLQJ SDUW\ WR UHDVRQDEOH 7KHGLVWULFWFRXUWLQFOXGHGLQLWVILQDOMXGJPHQWRQWKHPHULWV DWWRUQH\IHHV0RUHRYHUZHGRQRWEHOLHYHWKDWWKH6XSUHPH DQDZDUGRIUHDVRQDEOHDWWRUQH\IHHV(OHYHQPRQWKVODWHU &RXUWjV GHFLVLRQ LQ %RQMRUQR RU 6L[WK &LUFXLW SUHFHGHQW WKHGLVWULFWFRXUWHQWHUHGMXGJPHQWTXDQWLI\LQJWKHIHHDZDUG GLFWDWHDGLIIHUHQWUHVXOW:HVHHQRUHDVRQWRIROORZWKRVH ,QDVXEVHTXHQWRUGHUWKHFRXUWKHOGWKDWSODLQWLIIVDSSHOOHHV IHZ FDVHV WKDW UHDG LQWR WKH WHUP mPRQH\ MXGJPHQWl WKH ZHUHHQWLWOHGWRLQWHUHVWRQDWWRUQH\IHHVUXQQLQJIURPWKHGDWH UHTXLUHPHQWWKDWDQDZDUGRIDWWRUQH\IHHVEHTXDQWLILHGSULRU RI WKH PHULWV MXGJPHQW  )RU WKH UHDVRQV WKDW IROORZ ZH WR DFFUXLQJ LQWHUHVW  )LQDOO\ ZH ILQG WKDW WKH HTXLWDEOH $)),50GHFLVLRQRIWKHGLVWULFWFRXUW FRQVLGHUDWLRQVZHLJKHQWLUHO\LQIDYRURILQWHUHVWDFFUXDORQ ,%$&.*5281' DWWRUQH\IHHVIURPWKHGDWHRIWKHMXGJPHQWWKDWHVWDEOLVKHV WKHSDUW\jVHQWLWOHPHQWWRVXFKIHHV:HKROGWKDW$*&LV ,Q 6HSWHPEHU   WKH 6WDWH RI 2KLR WKURXJK WKH 2KLR HQWLWOHG WR LQWHUHVW RQ LWV DWWRUQH\ IHHV UXQQLQJ IURP 'HSDUWPHQWRI$GPLQLVWUDWLYH6HUYLFHV m'$6l DQGWKH2KLR 1RYHPEHU    WKH GDWH LW EHFDPH XQFRQGLWLRQDOO\ 'HSDUWPHQW RI 5HKDELOLWDWLRQ DQG &RUUHFWLRQ m'5&l  HQWLWOHGWRVXFKIHHV UHFHLYHGELGVIRUWKHFRQVWUXFWLRQRIWKH7ROHGR&RUUHFWLRQDO ,QVWLWXWLRQ $GPLQLVWUDWLRQ %XLOGLQJ  3XUVXDQW WR WKH 2KLR 0LQRULW\ %XVLQHVV (QWHUSULVH $FW m0%($l  2KLR 5HY  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO LQWHUSUHWDWLRQ RI mPRQH\ MXGJPHQWl DV LQFOXGLQJ ERWK WKH &RGH$QQ†WKH'$6DQG'5&VHWDVLGHELGGLQJIRU MXGJPHQW HQWLWOLQJ WKH SDUW\ WR IHHV DQG WKH MXGJPHQW WKH FRQVWUXFWLRQ ZRUN IRU PLQRULW\RZQHG EXVLQHVVHV TXDQWLI\LQJ WKRVH IHHV WKRVH FRXUWV DGGUHVVHG WKH LVVXH RI m0%(Vl RQO\7KHUHIRUHRWKHUZLVHTXDOLILHGQRQ0%(V ZKHWKHUSRVWMXGJPHQWLQWHUHVWDFFUXHGIURPHLWKHUWKHLQLWLDO ZHUHH[FOXGHGIURPELGGLQJRQWKHSURMHFWRQUDFLDOJURXQGV mPRQH\ MXGJPHQWl RU WKH VHFRQG mPRQH\ MXGJPHQWl 7KHUHIRUH HTXLWDEOH FRQFHUQV JXLGHG WKRVH FRXUWV LQ WKHLU 2Q 6HSWHPEHU    SODLQWLIIVDSSHOOHHV $VVRFLDWHG GHFLVLRQV *HQHUDO &RQWUDFWRUV RI 2KLR DQG $VVRFLDWHG *HQHUDO &RQWUDFWRUV RI 1RUWKZHVW 2KLR FROOHFWLYHO\ m$*&l  ILOHG :H UHFRJQL]H WKDW &RQJUHVV HQDFWHG †   ZLWK WKH VXLW SXUVXDQW WR  86& †   DJDLQVW GHIHQGDQWV NQRZOHGJHWKDWDmPRQH\MXGJPHQWlRIWHQLQFOXGHGHLWKHU DSSHOODQWV6DQGUD'UDELN'LUHFWRURIWKH'$6DQG5HJLQDOG H[SUHVVO\ RU E\ OHJDO LPSOLFDWLRQ DQ DZDUG RI UHDVRQDEOH :LONHQVRQ 'LUHFWRU RI WKH '5& FROOHFWLYHO\ WKH mVWDWHl  DWWRUQH\IHHVDQGFRVWV:HEHOLHYHWKDW&RQJUHVVXVHGWKH $*& DOOHJHG WKDW LWV PHPEHUV ZKR DUH 2KLR EXLOGLQJ WHUPmPRQH\MXGJPHQWlLQLWVFRPPRQO\XQGHUVWRRGVHQVHRI FRQWUDFWRUV ZHUH GHQLHG WKH RSSRUWXQLW\ WR ELG RQ WKH WKHMXGJPHQWRQDYHUGLFW&I(DYHV )GDW QRWLQJ FRQVWUXFWLRQSURMHFW$*&FKDOOHQJHGWKHFRQVWLWXWLRQDOLW\ WKDW mWKH SKUDVH µPRQH\ MXGJPHQWj FRPPRQO\ UHIHUV WR D RIWKH0%($DQGVRXJKWGHFODUDWRU\DQGLQMXQFWLYHUHOLHI MXGJPHQW HQWHUHG XSRQ D MXU\ YHUGLFWl   7KHUHIRUH LW LV ORJLFDOWRFRQFOXGHWKDW&RQJUHVVLQWHQGHGWKDWSRVWMXGJPHQW 7KHGLVWULFWFRXUWFRQVROLGDWHGWKHSUHOLPLQDU\LQMXQFWLRQ LQWHUHVW RQ DOO GDPDJHV LQFOXGLQJ UHDVRQDEOH DWWRUQH\ IHHV KHDULQJZLWKDWULDORQWKHPHULWV2Q1RYHPEHU WKH DQGFRVWVZRXOGUXQIURPHQWU\RIMXGJPHQWRQWKHPHULWV FRXUWHQWHUHGMXGJPHQWLQIDYRURI$*&KROGLQJWKH0%($ m µ%\ OLQNLQJ DOO SRVWMXGJPHQW DFWLYLW\ WR WKH HQWU\ RI D XQFRQVWLWXWLRQDO DQG HQMRLQLQJ LWV HQIRUFHPHQW  6HH MXGJPHQWWKHFRXUWVKDYHEHHQSURYLGHGDXQLIRUPWLPHIURP $VVRFLDWHG*HQ&RQWUDFWRUVRI2KLR,QFY'UDELN1R& ZKLFKWRGHWHUPLQHSRVWMXGJPHQWLVVXHVjl%RQMRUQR    :/DW  6'2KLR2FW   86DW TXRWLQJ&RPPHQW3RVWsXGJPHQW,QWHUHVW 7KHMXGJPHQWLQFOXGHGDVWDWHPHQWWKDW$*&ZDVDSUHYDLOLQJ LQWKH)HGHUDO&RXUWV(PRU\/s     ,QRXU SDUW\ XQGHU  86& †   DQG WKDW WKH FRXUW ZDV YLHZDQDQDO\VLVRIWKHODQJXDJHRI†  D OHDGVWRWKH H[HUFLVLQJLWVGLVFUHWLRQWRDZDUG$*&UHDVRQDEOHDWWRUQH\ FRQFOXVLRQ WKDW D mPRQH\ MXGJPHQWl LV WKH MXGJPHQW WKDW IHHVDQGFRVWV6HHLG7KHVWDWHDSSHDOHGWKHGLVWULFWFRXUWjV XQFRQGLWLRQDOO\ HQWLWOHV WKH SUHYDLOLQJ SDUW\ WR UHDVRQDEOH GHFLVLRQ DQG WKLV &RXUW DIILUPHG  6HH $VVRFLDWHG *HQ DWWRUQH\IHHV &RQWUDFWRUVRI2KLR,QFY'UDELN)G WK &LU FHUWGHQLHG6&W    :KLOH ZH GR QRW EDVH RXU GHFLVLRQ RQ WKH SROLF\ FRQVLGHUDWLRQV HPSKDVL]HG E\ WKH FRXUWV HVSRXVLQJ WKH 3XUVXDQWWRVWLSXODWLRQDQGRUGHURIWKHGLVWULFWFRXUW$*& &RSSHU /LTXRU UXOH ZH DUH FRQYLQFHG WKDW VXFK ILOHG LWV DSSOLFDWLRQ IRU DWWRUQH\ IHHV RQ sDQXDU\    FRQVLGHUDWLRQV VXSSRUW RXU FRQFOXVLRQ  ,QGHHG ZH ILQG 'XULQJ)HEUXDU\DQG0DUFK RQWKUHH RFFDVLRQVWKH LQFRQVLVWHQW WKRVH FRXUW GHFLVLRQV WKDW KROG SRVWMXGJPHQW GLVWULFW FRXUW JUDQWHG WKH VWDWHjV PRWLRQV IRU H[WHQVLRQV RI LQWHUHVWDFFUXHVRQDWWRUQH\IHHVSXUVXDQWWR† EXWWKHQ WLPHWRUHVSRQGWR$*&jVIHHDSSOLFDWLRQ7KHQRQ$SULO QDUURZO\FRQVWUXHWKDWSURYLVLRQWRFRQFOXGHWKDWLQWHUHVWUXQV  WKHVWDWHPRYHGIRUDVWD\RIWKHGLVWULFWFRXUWjVGHFLVLRQ RQO\ IURP WKH MXGJPHQW TXDQWLI\LQJ WKH DZDUG  ,I LQWHUHVW UHJDUGLQJ DWWRUQH\ IHHV SHQGLQJ WKH PHULWV DSSHDO  7KH GRHV QRW DFFUXH IURP WKH WLPH D SDUW\ EHFRPHV HQWLWOHG WR GLVWULFW FRXUW GHQLHG WKH VWDWHjV PRWLRQ RQ 0D\    VXFK IHHV WKH ORVLQJ SDUW\ KDV HYHU\ UHDVRQ WR GHOD\ 7KHUHDIWHUWKHVWDWHILOHGLWVIRXUWKPRWLRQIRUDQH[WHQVLRQRI  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO WLPH WR UHVSRQG WR $*&jV IHH DSSOLFDWLRQ DQG WKH FRXUW WKHSUHYDLOLQJSDUW\GXHWRWKHWLPHYDOXHRIPRQH\DQGWKDW JUDQWHGWKHPRWLRQ)LQDOO\RQsXO\  WKHVWDWHILOHGLWV WKH ORVLQJ SDUW\ mVXIIHUV QR SUHMXGLFH IURP DQ\ GHOD\ LQ UHVSRQVH TXDQWLI\LQJWKHDZDUGEHFDXVHLWKDVWKHXVHRIWKHPRQH\LQ WKHLQWHULPDQGEHFDXVHWKHVWDWXWRU\LQWHUHVWUDWHLVWLHGWRWKH 2Q2FWREHU WKHGLVWULFWFRXUWHQWHUHGMXGJPHQW 86 7UHDVXU\ %LOO UDWHl  ,G DW  FLWLQJ  86& JUDQWLQJ $*&jV PRWLRQ IRU DWWRUQH\ IHHV LQ WKH DPRXQW RI †  D   2Q1RYHPEHU WKHVWDWHILOHGDQRWLFH RI DSSHDO IURP WKH GLVWULFW FRXUWjV MXGJPHQW TXDQWLI\LQJ ,Q%DQN$WODQWLFY%O\WKH(DVWPDQ3DLQH:HEEHU,QFWKH $*&jVIHHDZDUG (OHYHQWK&LUFXLWKHOGWKDWmWKHDZDUG>RIDWWRUQH\IHHVDQG FRVWV@EHDUVLQWHUHVWIURPWKHGDWHRIWKHRULJLQDOMXGJPHQW>@l 2Q 2FWREHU    WKH VWDWH PRYHG IRU D VWD\ RI RQWKHPHULWV)G WK&LU  7KHUH HQIRUFHPHQWRIWKHDWWRUQH\IHHDZDUGSHQGLQJDSSHDODQGIRU WKHGLVWULFWFRXUWDZDUGHGDWWRUQH\IHHVDQGFRVWVDVSDUWRIWKH DSSURYDORIDVXSHUVHGHDVERQGHTXDOWRWKHIXOODPRXQWRIWKH MXGJPHQWRQWKHPHULWVEXWGLGQRWTXDQWLI\WKHDZDUGXQWLO DZDUG2Q'HFHPEHU WKHGLVWULFWFRXUWJUDQWHGWKH DODWHUGDWH6HHLGDW7KH(OHYHQWK&LUFXLWVWDWHGWKDW VWDWHjVPRWLRQDQGRUGHUHGWKDWWKHVWDWHSRVWDERQGRUPDNH 6XSUHPH&RXUWjVSUHFHGHQWUHIHUULQJWR%RQMRUQRDVZHOODV D FDVK GHSRVLW ZLWK WKH FOHUN LQ WKH IXOO DPRXQW RI WKH FLUFXLWSUHFHGHQWQHFHVVLWDWHGWKDWUHVXOW6HHLG MXGJPHQWDQGmDFFUXHGLQWHUHVWl6XEVHTXHQWO\$*&PRYHG WRFODULI\RUDPHQGWKHGLVWULFWFRXUWjVRUGHURI'HFHPEHU )LQDOO\ZHQRWHWKDWWKH1LQWK&LUFXLWKDVDOVRFRQFOXGHG   VHHNLQJ LQWHUHVW RQ WKH DWWRUQH\ IHH DZDUG IURP ZLWKRXWHODERUDWLRQWKDWSRVWMXGJPHQWm>L@QWHUHVWUXQVIURP 1RYHPEHU WKHGDWHRIWKHGLVWULFWFRXUWjVMXGJPHQW WKHGDWHWKDWHQWLWOHPHQWWR>DWWRUQH\@IHHVLVVHFXUHGUDWKHU DZDUGLQJ$*&UHDVRQDEOHDWWRUQH\IHHV,QLWVUHVSRQVHWR WKDQ IURP WKH GDWH WKDW WKH H[DFW TXDQWLW\ RI IHHV LV VHWl $*&jVPRWLRQWKHVWDWHDUJXHGWKDWLQWHUHVWVKRXOGDFFUXH )ULHQG Y .RORG]LHF]DN  )G     WK &LU RQO\IURP2FWREHU WKHGDWHWKHDWWRUQH\IHHDZDUG    FLWLQJ)LQNHOVWHLQY%HUJQD)6XSS  ZDVTXDQWLILHG  1'&DO   DQG3HUNLQVY6WDQGDUG2LO&R )G WK&LU   2Q sDQXDU\   WKH GLVWULFW FRXUW JUDQWHG $*&jV PRWLRQWRFODULI\LWVRUGHURI'HFHPEHU 7KHGLVWULFW ,QLWVUHYLHZRIWKHDERYHFDVHVWKH7KLUG&LUFXLWLQ(DYHV FRXUW KHOG WKDW LQWHUHVW RQ WKH DWWRUQH\ IHHV DFFUXHG IURP QRWHGWKDWm>L@QUHDFKLQJWKHLUUHVXOWWKHOHDGLQJFDVHVKDYH 1RYHPEHU WKHGDWHRIWKHMXGJPHQWRQWKHPHULWV UHOLHG SULQFLSDOO\ XSRQ WKH SROLF\ XQGHUO\LQJ WKH SRVW 7KHVWDWHILOHGDWLPHO\QRWLFHRIDSSHDO MXGJPHQWLQWHUHVWVWDWXWH FRPSHQVDWLRQRIWKHSODLQWLII DQG WKHDWWRUQH\ IRUWKHORVVRIWKHXVHRIWKHPRQH\l )G DW:KLOHZHDJUHHWKDWVRPHRIWKHVHFRXUWVHPSKDVL]HG  sDQXDU\   WKH VWDWH PRYHG WR FRQVROLGDWH WKH DSSHDO ILOHG WKLVDQGRWKHUHTXLWDEOHFRQFHUQVZHGRQRWDJUHHWKDWWKHVH RQ 1RYHPEHU   1XPEHU   ZKLFK FKDOOHQJHG WKH FRXUWVmLJQRUH>G@DWH[WXDODQDO\VLVRI†  D l,G5DWKHU MXGJPHQW TXDQWLI\LQJ $*&jV DWWRUQH\ IHHV ZLWK WKH DSSHDO ILOHG sDQXDU\ ZH EHOLHYH WKDW WKHVH FRXUWV VLPSO\ ZHUH QRW ERXQG E\   1XPEHU   :H JUDQWHG WKH VWDWHjV PRWLRQ 7KH VWDWH SUHFHGHQW WR UHDG LQWR WKH WHUP mPRQH\ MXGJPHQWl D RQO\ UDLVHG RQH FODLP LQ LWV 1XPEHU  DSSHDO 7KH VWDWH QRWHV WKDW WKH DSSHDO IURP WKH GLVWULFW FRXUWjV MXGJPHQW RQ WKH PHULWV HQWHUHG UHTXLUHPHQW WKDW DQ DZDUG RI DWWRUQH\ IHHV WR ZKLFK WKH 1RYHPEHU    ZDV SHQGLQJ 7KHUHIRUH WKH VWDWH FRQWHQGV WKDW m>L@I SUHYDLOLQJ SDUW\ ZDV HQWLWOHG EH UHGXFHG WR D VXP FHUWDLQ WKLV &RXUW UHYHUVHV RU UHPDQGV WKDW MXGJPHQW WKHQ $*& ZRXOG QR ORQJHU %HFDXVH WKH SODLQ ODQJXDJH RI  †   D  SHUPLWV DQ EH D SUHYDLOLQJ SDUW\ HQWLWOHG WR DWWRUQH\Vj IHHV SXUVXDQW WR  86&  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO LQWHUHVWEHJLQVWRUXQRQDQDZDUGRIDWWRUQH\IHHVDQGFRVWV ,,67$1'$5'2)5(9,(: WRDYLFWRULRXVSODLQWLII)G WK&LU  HQEDQF 7KHFRXUWGHWHUPLQHGWKDWm>W@KHUHOHYDQWMXGJPHQW 7KLV DSSHDO LQYROYHV LVVXHV RI VWDWXWRU\ LQWHUSUHWDWLRQ IRUSXUSRVHVRIGHWHUPLQLQJZKHQLQWHUHVWEHJLQVWRUXQ>RQ ZKLFKDVTXHVWLRQVRIODZZHUHYLHZGHQRYR9HUJRVY DWWRUQH\IHHVDQGFRVWV@LVWKHMXGJPHQWHVWDEOLVKLQJWKHULJKW *UHJJjV(QWHUSULVHV,QF )G    WK&LU   WRIHHVRUFRVWVl,G3XUVXDQWWRWKH&RSSHU/LTXRUUXOH LQWHUHVW DFFUXHV RQ DWWRUQH\ IHHV DQG FRVWV ZKHQ VXFK ,,,',6&866,21 H[SHQVHV DUH LQFOXGHG LQ D MXGJPHQW DQG WKH SDUW\ LV XQFRQGLWLRQDOO\HQWLWOHGWRVXFKH[SHQVHVHLWKHUH[SUHVVO\RU $ ,QWHUHVW RQ $WWRUQH\ )HHV 3XUVXDQW WR  86& E\VWDWXWRU\ULJKW ,G †  D 7KH )LIWK &LUFXLW KDG WKH RSSRUWXQLW\ WR UHFRQVLGHU WKH ,QLWLDOO\ ZH QRWH WKDW WKLV &RXUW KDV QHYHU H[SUHVVO\ &RSSHU/LTXRUUXOHLQOLJKWRIWKH6XSUHPH&RXUWjV%RQMRUQR GHFLGHG WKH LVVXH RI ZKHWKHU DQ DZDUG RI DWWRUQH\ IHHV GHFLVLRQ,Q/RXLVLDQD3RZHU /LJKW&RY.HOOVWURPWKH DZDUGHGSXUVXDQWWR86&† DFFUXHVLQWHUHVWXQGHU )LIWK &LUFXLW KHOG WKDW %RQMRUQR GLG QRW RYHUUXOH &RSSHU 86&†  D 6HFWLRQ SURYLGHVLQSHUWLQHQWSDUW /LTXRUEXWUDWKHUIRXQGWKH&RSSHU/LTXRUUXOHFRQVLVWHQW m,QWHUHVWVKDOOEHDOORZHGRQDQ\PRQH\MXGJPHQWLQDFLYLO ZLWK%RQMRUQR)G  WK&LU  $VQRWHG FDVHUHFRYHUHGLQDGLVWULFWFRXUW6XFKLQWHUHVWVKDOOEH DERYH ZH DJUHH ZLWK WKH )LIWK &LUFXLW WKDW DZDUGLQJ FDOFXODWHGIURPWKHGDWHRIWKHHQWU\RIWKHMXGJPHQWl SRVWMXGJPHQWLQWHUHVWRQDQDZDUGRIDWWRUQH\IHHVLQFOXGHG  86&   D   0RVW RI RXU VLVWHU FLUFXLWV KDYH HLWKHU LQDMXGJPHQWZKLFKLVQRWHQWLUHO\VHWDVLGHLVFRQVLVWHQWZLWK H[SUHVVO\ RU LPSOLHGO\ FRQFOXGHG WKDW WKH mDQ\ PRQH\ %RQMRUQR MXGJPHQWlSURYLVLRQRI† LQFOXGHVDMXGJPHQWDZDUGLQJ DWWRUQH\IHHV6HHHJ(DYHVY&RXQW\RI&DSH0D\ ,Q0DWKLVY6SHDUVWKH)HGHUDO&LUFXLWDGRSWHGWKH&RSSHU )G G&LU )ULHQGY.RORG]LHF]DN)G /LTXRUUXOHDVDSSOLHGWRDQDZDUGRIDWWRUQH\IHHVSXUVXDQW   WK&LU  %DQN$WODQWLFY%O\WKH(DVWPDQ WR86&†)G  )HG&LU  7KDW 3DLQH:HEEHU,QF)G WK&LU  FRXUWQRWHGWKDWmFDOFXODWLQJLQWHUHVWIURPHQWU\RIMXGJPHQW 0LG$PHULFD)HG6DY /RDQ$VVRFY6KHDUVRQ$PHULFDQ GHWHUVXVH RI WKHDSSHOODWHSURFHVVE\WKHMXGJPHQWGHEWRU ([SUHVV,QF )G WK&LU  )ROH\ VROHO\DVDPHDQVRISURORQJLQJLWVIUHHXVHRIPRQH\RZHG Y &LW\ RI /RZHOO 0DVV  )G   VW &LU   WKHMXGJPHQWFUHGLWRUl,G7KHFRXUWH[SUHVVHGQRFRQFHUQ sHQNLQVY6WDWHRI0LVVRXUL )G WK&LU WKDWDQXQTXDQWLILHGDWWRUQH\IHHDZDUGPLJKWQRWTXDOLI\DV   )OHPLQJY&RXQW\RI.DQH )G WK DmPRQH\MXGJPHQWlZLWKLQWKHPHDQLQJRI†  &LU  0DWKLVY6SHDUV)G  )HG&LU  ,QsHQNLQVY6WDWHRI0LVVRXULWKH(LJKWK&LUFXLWVLPLODUO\ DGRSWHGWKH&RSSHU/LTXRUUXOHLQWKHFRQWH[WRID86& † IHHDZDUG )G WK&LU  $IWHU †   DQG WKLV &RXUW ZRXOG EH UHTXLUHG WR UHYHUVH WKH MXGJPHQW FRQVLGHULQJWKHSXUSRVHVRIDZDUGLQJSRVWMXGJPHQWLQWHUHVW DZDUGLQJ $*& DWWRUQH\Vj IHHVl $SSHOODQWVj %U DW  7KLV &RXUW KDG

WKHFRXUWFRQFOXGHGWKDWWKHVHSXUSRVHVZHUHIXUWKHUHGE\WKH QRW \HW DQQRXQFHG LWV GHFLVLRQ LQ WKH PHULWV DSSHDO ZKHQ WKH SDUWLHV EULHIHG WKH &RXUW RQ WKH SUHVHQW DSSHDO +RZHYHU WKLV &RXUW KDV DZDUGLQJRIVXFKLQWHUHVWRQDWWRUQH\IHHV6HHLG7KHFRXUW VXEVHTXHQWO\ DIILUPHG WKH GLVWULFW FRXUWjV 1RYHPEHU    MXGJPHQW RQ QRWHGWKDWLQWHUHVWRQDWWRUQH\IHHVPRUHIXOO\FRPSHQVDWHV WKH PHULWV 6HH 'UDELN   )G DW  7KHUHIRUH WKH VWDWHj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mDQ\PRQH\MXGJPHQWlDVLQFOXGLQJ UHTXLUHPHQWVRI%RQMRUQR6XFKLQWHUHVWZRXOGQRWDFFUXHRQ DMXGJPHQWDZDUGLQJDWWRUQH\IHHV:HDJUHHZLWKWKH)LUVW DQ DZDUG RI GDPDJHV LQFOXGLQJ DWWRUQH\ IHHV LI ODWHU &LUFXLWWKDWmVKRUWRIVWUDLQLQJWKHSODLQODQJXDJHRIVHFWLRQ UHYHUVHG  ,I WKH VWDWH KDG VXFFHHGHG LQ LWV DSSHDO RQ WKH   D GRHVQRWDSSHDUWRSHUPLWDFRQWUDU\UHVXOWl)ROH\ PHULWVDQGWKHRULJLQDOMXGJPHQWEHHQYDFDWHGRUUHYHUVHG )GDW $*&ZRXOGQRWEHHQWLWOHGWRLQWHUHVWRQDWWRUQH\IHHVIURP WKHGDWHRIWKDWMXGJPHQW+RZHYHUVLQFHWKHGLVWULFWFRXUWjV :H QRWH WKDW RXU UHVROXWLRQ RI WKLV LVVXH VHUYHV WKH MXGJPHQWKDVEHHQXSKHOGRQDSSHDO$*&KDVEHHQVLQFH XQGHUO\LQJSXUSRVHRI† ZKLFKmLVWRFRPSHQVDWHWKH HQWU\ RI MXGJPHQW RQ WKH PHULWV HQWLWOHG WR LWV UHDVRQDEOH VXFFHVVIXOSODLQWLIIIRUEHLQJGHSULYHGRIFRPSHQVDWLRQIRU DWWRUQH\IHHV WKH ORVV IURP WKH WLPH EHWZHHQ WKH DVFHUWDLQPHQW RI WKH GDPDJH DQG WKH SD\PHQW E\ WKH GHIHQGDQWl  .DLVHU &RSSHU/LTXRU$SSURDFK $OXPLQXP &KHP&RUSY%RQMRUQR 86    TXRWLQJ3ROHQWRY&RQVRO5DLO&RUS)G +DYLQJ FRQFOXGHG WKDW D mPRQH\ MXGJPHQWl LQFOXGHV D G&LU  %HFDXVHDGROODUWRGD\LVZRUWKPRUHWKDQD MXGJPHQW DZDUGLQJ UHDVRQDEOH DWWRUQH\ IHHV DQG WKDW GROODULQWKHIXWXUHWKHRQO\ZD\DSDUW\FDQEHPDGHZKROH %RQMRUQRDQGWKHODZRIWKLV&LUFXLWGRQRWmGLFWDWHlWKHUXOH LVWRJUDQWLQWHUHVWIURPWKHWLPHRIWKHDZDUGRIIHHVm$Q\ DGYDQFHGE\WKHVWDWHZHWXUQ WR WKRVHFDVHVDGYDQFHGE\ RWKHU UXOH ZRXOG HIIHFWLYHO\ UHGXFH WKH MXGJPHQW IRU $*&WKDWFRQFOXGHWKDWDWWRUQH\IHHVDFFUXHLQWHUHVWIURPWKH DWWRUQH\VjIHHVl5:7Y'DOWRQ)G GDWHRIWKHMXGJPHQWXQFRQGLWLRQDOO\DZDUGLQJVXFKIHHV:H  WK&LU  0RUHRYHUDZDUGLQJLQWHUHVWRQD†  QRWHWKDWWKHVHFDVHVERWKSUHDQGSRVWGDWH%RQMRUQR IHHDZDUGmVHUYHVWKHSXUSRVHRIDZDUGLQJVXFKIHHVWRWKH SUHYDLOLQJSDUW\VLQFHLWZRXOGPRUHQHDUO\FRPSHQVDWHWKH ,Q &RSSHU /LTXRU ,QF Y $GROSK &RRUV &R WKH )LIWK YLFWRUIRUWKHH[SHQVHVRIWKHOLWLJDWLRQl&RSSHU/LTXRU,QF &LUFXLWDUWLFXODWHGDJHQHUDOUXOHWREHDSSOLHGLQGHWHUPLQLQJ Y$GROSK&RRUV&R)G WK&LU   WKH UHOHYDQW MXGJPHQW IRU SXUSRVHV RI GHWHUPLQLQJ ZKHQ :HDOVRQRWHWKDWWKHDZDUGRILQWHUHVWRQDWWRUQH\IHHVLV LQ QR VHQVH D ZLQGIDOO  'HIHQGDQWV ZLOO VXIIHU QR DFWXDO  :H DUH DZDUH WKDW WKLV &RXUW LQ DQ XQSXEOLVKHG RSLQLRQ VXJJHVWHG SUHMXGLFH RU XQIDLU EXUGHQ E\ WKH DFFUXDO RI LQWHUHVW VLQFH WKDW mEHFDXVH †   DSSOLHV WR µPRQH\ MXGJPHQWVj LW RQO\ DSSOLHV WR WKH\ZLOOKDYHXVHRIWKHPRQH\XQWLOSD\PHQWDQGWKHUDWHRI MXGJPHQWV LQ ZKLFK D VXP RI PRQH\ KDV EHHQ HQWHUHGl +DUSHU Y %3 SRVWMXGJPHQW LQWHUHVW SXUVXDQW WR †   D  LV VHW DW WKH ([SORUDWLRQ 2LO ,QF 1RV    :/   DW  86 7UHDVXU\ %LOO UDWH  6HH  86& †   D  WK &LU sDQ    7KH LVVXH EHIRUH WKH &RXUW ZDV ZKHWKHU SRVW MXGJPHQW LQWHUHVW DFFUXHV RQ DWWRUQH\ IHHV SXUVXDQW WR †   IURP WKH ,PSRUWDQWO\DOORZLQJDQDWWRUQH\IHHDZDUGWREHDULQWHUHVW GDWH RI D PHULWV MXGJPHQW ZKLFK GLG QRW LQFOXGH DQ DZDUG RI DWWRUQH\ IHHV ZLOOHOLPLQDWHWKHORVLQJSDUW\jVLQFHQWLYHWRGHOD\SD\PHQW RU IURP WKH GDWH RI WKH MXGJPHQW DZDUGLQJ DQG TXDQWLI\LQJ WKH IHHV ,G DW 6HH'DOWRQ)GDW$FFRUGLQJO\ZHMRLQRXUVLVWHU  7KHUHIRUH WKH &RXUW KDG QR RSSRUWXQLW\ WR FRQVLGHU WKH LVVXH SUHVHQWHG E\ WKLV DSSHDO  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO MXGJPHQW UDWKHU WKDQ IURP WKH GDWH WKDW WKH SODLQWLII FLUFXLWVLQFRQFOXGLQJWKDWWKHSKUDVHmDQ\PRQH\MXGJPHQWl FRQVHQWHGWRUHPLWWLWXURQUHPDQG $UWKXU6/DQJHQGHUIHU LQ†  D LQFOXGHVDMXGJPHQWDZDUGLQJDWWRUQH\IHHV ,QF Y 6( sRKQVRQ &R  )G  WK &LU   KROGLQJWKDWSRVWMXGJPHQWLQWHUHVWGRHVQRWSURSHUO\DFFUXH % 7LPLQJ RI $FFUXDO RI ,QWHUHVW RQ $WWRUQH\ )HHV IURPWKHGDWHRIDYDFDWHGMXGJPHQW  3XUVXDQWWR86&†  D 7KH LVVXH ZH DGGUHVV KHUH KRZHYHU LV XQOLNH WKRVH :HQRZWXUQWRWKHIROORZLQJLVVXH :KHWKHUDQDZDUGRI DGGUHVVHGE\WKH6XSUHPH&RXUWLQ%RQMRUQRDQGWKH6L[WK DWWRUQH\IHHVDFFUXHVLQWHUHVWSXUVXDQWWR86&†  &LUFXLW FDVHV FLWHG DERYH  ,Q QRQH RI WKRVH FDVHV ZDV DQ IURPWKHGDWHRIWKHMXGJPHQWWKDWXQFRQGLWLRQDOO\HQWLWOHVWKH DZDUGRIDWWRUQH\IHHVDWLVVXH5DWKHUWKRVHFDVHVDGGUHVVHG SUHYDLOLQJSDUW\WRUHDVRQDEOHDWWRUQH\IHHVRUWKHGDWHRIWKH ZKHWKHU WKH SODLQWLII ZDV HQWLWOHG WR LQWHUHVW RQ D mPRQH\ MXGJPHQWTXDQWLI\LQJWKDWIHHDZDUG MXGJPHQWlWKDWZDVVXEVHTXHQWO\YDFDWHGUHYHUVHGRULQVRPH ZD\ DOWHUHG  ,Q %RQMRUQR $GNLQV DQG 6( sRKQVRQ D $*&FRQWHQGVDQGWKHGLVWULFWFRXUWDJUHHGWKDWDWWRUQH\ FRPPRQVHQVHDSSURDFKZDVWDNHQLQLQWHUSUHWLQJ†  D  IHHVDFFUXHLQWHUHVWIURPWKHGDWHRIWKHPHULWVMXGJPHQWWKDW DQG WKDW DSSURDFK OHG LQYDULDEO\ WR WKH FRQFOXVLRQ WKDW DQ HVWDEOLVKHVWKHSUHYDLOLQJSDUW\jVXQFRQGLWLRQDOHQWLWOHPHQWWR DZDUGRIGDPDJHVXQVXSSRUWHGE\WKHHYLGHQFHLVQRWHQWLWOHG VXFKIHHV$*&VXJJHVWVWKDWWKLVLVWKHmEHWWHUDSSURDFKl WRDFFUXHLQWHUHVWHYHQWKRXJKSDUWRIDmPRQH\MXGJPHQWl DQGQRWHVWKDWVHYHUDOFLUFXLWDQGGLVWULFWFRXUWVKDYHDGRSWHG 6LPLODUO\LQ&RDO5HVRXUFHVZHFRQFOXGHGWKDWHYHQWKRXJK WKLV DSSURDFK  $*& DUJXHV WKDW mGHOD\LQJ WKH DFFUXDO RI WKHLQLWLDOMXGJPHQWZDVVXEVHTXHQWO\UHGXFHGE\UHPLWWLWXU LQWHUHVWXQWLOGHWHUPLQDWLRQRIWKHIHHDPRXQWZRXOGIUXVWUDWH LQWHUHVWUDQIURPWKHLQLWLDOMXGJPHQWVLQFHGDPDJHVKDGEHHQ WKHXQGHUO\LQJSXUSRVHIRULQWHUHVWRQIHHDZDUGVZKLFKLVWR mVXIILFLHQWO\ DVFHUWDLQHGl DW WKDW WLPH   )G DW  FRPSHQVDWHFRXQVHOIRUDVXFFHVVIXOHIIRUWl$SSHOOHHVj%U )LQDOO\ LQ 6NDOND ZH FRQVWUXHG WKH WHUP mMXGJPHQWl LQ DW  FLWLQJsHQNLQV )GDW  †  D WRLQFOXGHDSDUWLDOQRQDSSHDODEOHMXGJPHQWHYHQ WKRXJK WKDW LQWHUSUHWDWLRQ ZDV mSRWHQWLDOO\ EXUGHQVRPH WR 7KH VWDWH DUJXHV WKDW ZKHUH WKH GLVWULFW FRXUW HQWHUV GHIHQGDQWVl)GDW 2XUSUHFHGHQWUHTXLUHVWKHQ MXGJPHQWVWDWLQJWKDWWKHSUHYDLOLQJSDUW\LVHQWLWOHGWRDIHH WKDWSRVWMXGJPHQWLQWHUHVWDFFUXHRQDQDZDUGRIGDPDJHV DZDUGEXWGRHVQRWTXDQWLI\WKHDPRXQWRIWKHDZDUGXQWLOD IURPDMXGJPHQWQRWHQWLUHO\VHWDVLGHRQDSSHDO ODWHU GDWH LQWHUHVW GRHV QRW EHJLQ WR DFFUXH SXUVXDQW WR †  D XQWLOWKHFRXUWIL[HVWKHDPRXQWRIWKHDZDUG7KH +HUH WKH GLVWULFW FRXUW HQWHUHG D ILQDO MXGJPHQW RQ WKH VWDWHDVVHUWVWKDWmWKH6XSUHPH&RXUWWKLV&LUFXLWDQGVHYHUDO PHULWVWKDWLQFOXGHGDQDZDUGRImUHDVRQDEOHDWWRUQH\IHHVlWR RWKHUFLUFXLWFRXUWVKDYHKHOGWKDWWKHPRQHWDU\GDPDJHVPXVW WKHSUHYDLOLQJSDUW\SXUVXDQWWR† 7KLVMXGJPHQWZDV EHµPHDQLQJIXOO\DVFHUWDLQHGjEHIRUHLQWHUHVWDFFUXHVSXUVXDQW IXOO\ VXSSRUWHG E\ WKH HYLGHQFH  6HH $VVRFLDWHG *HQ WR86&† l$SSHOODQWVj%UDW7KHVWDWHDUJXHV &RQWUDFWRUVRI2KLR,QFY'UDELN)G WK WKDWDQDZDUGRIDWWRUQH\IHHVPXVWEHTXDQWLILHGEHIRUHLWLV &LU FHUWGHQLHG6&W   $WWKHWLPH mPHDQLQJIXOO\DVFHUWDLQHGl WKHLQLWLDOMXGJPHQWZDVHQWHUHGWKHGLVWULFWFRXUWFRQFOXGHG WKDWLQRUGHUWRPDNH$*&ZKROHWKHVWDWHZDVUHTXLUHGWR 7KH LVVXH RI ZKHWKHU LQWHUHVW RQ DWWRUQH\ IHHV DFFUXHV SD\$*&jVUHDVRQDEOHDWWRUQH\IHHV7KHUHH[LVWVQRUHDVRQ SXUVXDQW WR †   D  IURP WKH MXGJPHQW ZKLFK LQHLWKHUWKH ODQJXDJHRUKLVWRU\RI† QRULQELQGLQJ XQFRQGLWLRQDOO\HVWDEOLVKHVDSDUW\jVULJKWWRDWWRUQH\IHHVRU SUHFHGHQWWKDWSUHYHQWVWKLV&RXUWIURPKROGLQJWKDWLQWHUHVW IURP WKH MXGJPHQW TXDQWLI\LQJ WKH DZDUG LV RQH RI ILUVW LPSUHVVLRQLQWKLV&RXUW7KHFLUFXLWFRXUWVDUHVSOLWRQWKLV  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO LVVXH&RPSDUH(DYHVY&RXQW\RI&DSH0D\ )G DVFHUWDLQHGl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sHQNLQVY6WDWHRI HVWDEOLVKLQJWKHULJKWWRDWWRUQH\IHHV %DQN$WODQWLFY%O\WKH 0LVVRXUL )G WK&LU   VDPH 0DWKLV (DVWPDQ3DLQH:HEEHU,QF)G WK&LU Y 6SHDUV  )G   )HG &LU    VDPH  &RSSHU    ILQGLQJ VXSSRUW LQ %RQMRUQR IRU LWV FRQFOXVLRQ WKDW /LTXRU,QFY$GROSK&RRUV&R)G WK&LU FRVWVDFFUXHLQWHUHVWIURPWKHGDWHRIWKHPHULWVMXGJPHQWWKDW    HQEDQF  VDPH  LQFOXGHGDQDZDUGRIXQTXDQWLILHGFRVWV sHQNLQVY6WDWHRI 0LVVRXUL  )G   Q WK &LU   .DLVHU$OXPLQXP &KHP&RUSY%RQMRUQR FRQFOXGLQJ WKDW LQWHUHVW DFFUXHV IURP WKH MXGJPHQW HVWDEOLVKLQJDSDUW\jVXQFRQGLWLRQDOULJKWWRDWWRUQH\IHHVDQG %HFDXVHRIWKHVWDWHjVDQGWKH7KLUGDQG7HQWK&LUFXLWVj UHMHFWLQJDFODLPWKDW%RQMRUQRGLFWDWHGDGLIIHUHQWUHVXOW  UHOLDQFHRQWKH6XSUHPH&RXUWjVGHFLVLRQLQ.DLVHU$OXPLQXP &KHP&RUSY%RQMRUQR 86    'HVSLWHWKHVWDWHjVDVVHUWLRQVWRWKHFRQWUDU\%RQMRUQRDQG ZH VWDUW RXU GLVFXVVLRQ ZLWK WKDW FDVH  ,Q %RQMRUQR WKH WKLV &RXUWjV FDVHV LQWHUSUHWLQJ †   GR QRW mGLFWDWHl WKH 6XSUHPH &RXUW FRQVLGHUHG WZR LVVXHV UHOHYDQW IRU RXU UHVXOWLWLVVHHNLQJ7KLV&LUFXLWKDVWDNHQDFRPPRQVHQVH SXUSRVHVQHLWKHURIZKLFKKRZHYHULQYROYHGWKHWLPLQJRI DSSURDFK ZKHQ DSSO\LQJ †   LQ GLIIHUHQW FRQWH[WV DIWHU %RQMRUQR  :H KDYH UHIXVHG WR QDUURZO\ FRQVWUXH WKLV SURYLVLRQEXWUDWKHUKDYHUHVROYHGLQWHUSUHWDWLRQLVVXHVZLWK  ,Q %RQMRUQR WKH SODLQWLII EURXJKW D IHGHUDO DQWLWUXVW VXLW DJDLQVW WKH GXHUHJDUGWRHTXLWDEOHFRQVLGHUDWLRQVZKHUHUHOHYDQW:KLOH GHIHQGDQW   86 DW   ,Q WKH ILUVW WULDO WKH GLVWULFW FRXUW HQWHUHG D ZHKDYHUHPDLQHGIDLWKIXOWRWKH6XSUHPH&RXUWjVGLFWDWHVLQ GLUHFWHG YHUGLFW IRU WKH GHIHQGDQW 7KH 7KLUG &LUFXLW UHYHUVHG DQG %RQMRUQRZHKDYHDOVRHQVXUHGWKDWWKHSXUSRVHRI† LV UHPDQGHG IRU D QHZ WULDO 6HH LG ,Q WKH VHFRQG WULDO WKH MXU\ IRXQG LQ VHUYHGm:HKDYHDSSOLHG.DLVHUWRKROGWKDWSRVWMXGJPHQW IDYRU RI WKH SODLQWLII LQ DQ DPRXQW H[FHHGLQJ  PLOOLRQ DQG MXGJPHQW LQWHUHVWUXQVIURPWKHGDWHRIWKHMXGJPHQWWKDWLVQRWHQWLUHO\ ZDV HQWHUHG RQ $XJXVW     6HH LG DW  7KH GLVWULFW FRXUW IRXQG WKH MXU\jV GDPDJH DZDUG XQVXSSRUWHG E\ WKH HYLGHQFH DQG RUGHUHG D QHZ VHWDVLGHl6NDOND)GDW  KROGLQJWKDWSODLQWLIIV WULDO RQ WKH LVVXH RI GDPDJHV 6HH LG $IWHU D WKLUG WULDO WKH MXU\ UHWXUQHG DUHHQWLWOHGWRSRVWMXGJPHQWLQWHUHVWIURPWKHGDWHRIHQWU\RI DQ DZDUG IRU WKH SODLQWLII RI RYHU   PLOOLRQ LQ GDPDJHV DQG WKH GLVWULFW DQLQLWLDOSDUWLDOXQDSSHDODEOHMXGJPHQWUDWKHUWKDQWKHILQDO FRXUW HQWHUHG MXGJPHQW RQ WKH DZDUG RQ 'HFHPEHU    6HH LG DSSHDODEOHMXGJPHQWGLVSRVLQJRIDOOFODLPV VHHDOVR$GNLQV 7KHUHDIWHU WKH GLVWULFW FRXUW JUDQWHG WKH GHIHQGDQWjV PRWLRQ IRU MXGJPHQW Y$VEHVWRV&RUS)G  WK&LU   KROGLQJWKDW QRWZLWKVWDQGLQJ WKH YHUGLFW 6HH LG 7KH SODLQWLII DSSHDOHG DQG WKH 7KLUG SRVWMXGJPHQW LQWHUHVW SURSHUO\ UXQV IURP WKH GDWH RI &LUFXLW UHYHUVHG DQG UHLQVWDWHG DQG DIILUPHG WKH 'HFHPEHU    MXGJPHQW 6HH LG 7KH GLVWULFW FRXUW VXEVHTXHQWO\ KHOG WKDW †   MXGJPHQWDIWHUUHPDQGUDWKHUWKDQYDFDWHGMXGJPHQW &RDO UHTXLUHG LQWHUHVW RQ GDPDJHV WR EH FDOFXODWHG IURP 'HFHPEHU    WKH 5HV )GDW KROGLQJWKDWSRVWMXGJPHQWLQWHUHVW GDWH RI WKH VHFRQG MXU\ YHUGLFW DQG WKH 7KLUG &LUFXLW DIILUPHG 6HH LG DW SURSHUO\ DFFUXHV IURP WKH GDWH RI WKH LQLWLDO GLVWULFW FRXUW   $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO FRPSRUWVZLWKWKH6XSUHPH&RXUWjVUHTXLUHPHQWWKDWGDPDJHV LQWHUHVW DFFUXDO RQ DQ DWWRUQH\ IHH DZDUG  )LUVW WKH &RXUW EHDVFHUWDLQHGLQDPHDQLQJIXOZD\SULRUWRDFFUXLQJLQWHUHVW DGGUHVVHG WKH LVVXH RI ZKHWKHU SXUVXDQW WR †   D  6HH/RXLVLDQD3RZHU /LJKW&RY.HOOVWURP)G  LQWHUHVW RQ GDPDJHV VKRXOG EH FDOFXODWHG IURP WKH GDWH RI  WK&LU  %DQN$WODQWLFY%O\WKH(DVWPDQ3DLQH YHUGLFWRUWKHGDWHRIWKHMXGJPHQW6HHLGDW$WWKDW :HEEHU,QF)G WK&LU   WLPHWKHUHZDVDFLUFXLWVSOLWRQWKHLVVXH6HHLGDW 7KRVHFRXUWVWKDWKHOGLQWHUHVWDFFUXHGIURPWKHYHUGLFWEDVHG :H QRWH WKDW WKH VWDWH KDV DWWHPSWHG WR EOXU WKH OLQH WKHLUGHFLVLRQVRQmWKHSROLF\XQGHUO\LQJWKHSRVWMXGJPHQW EHWZHHQ WKH 6XSUHPH &RXUWjV GLVFXVVLRQ RI WKH LVVXHV LW LQWHUHVWVWDWXWHFRPSHQVDWLRQRIWKHSODLQWLIIIRUORVVRIWKH DGGUHVVHG LQ %RQMRUQR  7KH 6XSUHPH &RXUWjV GLVFXVVLRQ XVHRIWKHPRQH\l,G7KH&RXUWFRQFOXGHGKRZHYHU UHJDUGLQJWKH† UHTXLUHPHQWWKDWGDPDJHVEHDVFHUWDLQHG WKDW WKH SODLQ ODQJXDJH RI †   DQG WKH DEVHQFH RI LQDPHDQLQJIXOZD\EHIRUHDFFUXLQJLQWHUHVWZDVSDUWRILWV OHJLVODWLYHLQWHQWWRWKHFRQWUDU\UHTXLUHGWKDWSRVWMXGJPHQW UHVROXWLRQ RI WKH LVVXH RI ZKHWKHU LQWHUHVW DFFUXHV RQ D LQWHUHVWUXQIURPWKHGDWHRIWKHHQWU\RIMXGJPHQWUDWKHUWKDQ YDFDWHGGDPDJHVMXGJPHQWQRWDVWKHVWDWHUHSUHVHQWVDV WKHGDWHRIYHUGLFW6HHLGDW SDUWRILWVUHVROXWLRQRIWKHLVVXHRIZKHWKHULQWHUHVWDFFUXHV RQ D YHUGLFW RU MXGJPHQW  (YHQ D FXUVRU\ JODQFH RI WKH 7KHVHFRQGLVVXHWKH&RXUWDGGUHVVHGZDVZKHWKHULQWHUHVW 6XSUHPH&RXUWjV%RQMRUQRRSLQLRQZRXOGPDNHFOHDUWKDWWKLV RQGDPDJHVVKRXOGEHFDOFXODWHGIURPWKHGDWHRIDMXGJPHQW LVDQLQDFFXUDWHDQGPLVOHDGLQJUHSUHVHQWDWLRQRIWKDW&RXUWjV WKDWZDVVXEVHTXHQWO\YDFDWHGDVLWZDVXQVXSSRUWHGE\WKH GLVFXVVLRQ HYLGHQFH6HHLGDW7KH&RXUWjVGLVFXVVLRQRIWKLV LVVXHZDVEULHI)LUVWWKH&RXUWUHFRJQL]HGWKDWmWKHSXUSRVH 7KHGLVWLQFWLRQLVLPSRUWDQWZHEHOLHYHEHFDXVHLWPDNHV RI SRVWMXGJPHQW LQWHUHVW LV WR FRPSHQVDWH WKH VXFFHVVIXO FOHDU WKDW WKH 6XSUHPH &RXUW ZDV QRW VWDWLQJ WKDW SODLQWLIIIRUEHLQJGHSULYHGRIFRPSHQVDWLRQIRUWKHORVVIURP mPHDQLQJIXOO\ DVFHUWDLQHGl PHDQV D VXP FHUWDLQ LQ WKH WKHWLPHEHWZHHQWKHDVFHUWDLQPHQWRIWKHGDPDJHDQG WKH FRQWH[WRIDQDZDUGRIDWWRUQH\IHHV7KH&RXUWVLPSO\GLG SD\PHQWRIWKHGHIHQGDQWl,GDW TXRWLQJ3ROHWRY QRWLQGLFDWHWKDWZHPXVWUHDGLQWR† DUHTXLUHPHQWWKDW &RQVRO 5DLO &RUS  )G   G &LU    DQDZDUGRIDWWRUQH\IHHVDVSDUWRIDILQDOMXGJPHQWRQWKH 1H[WWKH&RXUWQRWHGWKDWm>Z@KHUHWKHMXGJPHQWRQGDPDJHV PHULWV PXVW ILUVW EH TXDQWLILHG SULRU WR DFFUXLQJ LQWHUHVW ZDV QRW VXSSRUWHG E\ WKH HYLGHQFH WKH GDPDJHV KDYH QRW :KHQ D MXGJPHQW LV YDFDWHG LW LV OHJDOO\ YRLG DQG EHHQµDVFHUWDLQHGjLQDPHDQLQJIXOZD\l,GDW)LQDOO\ XQHQIRUFHDEOH$MXGJPHQWZKLFKKDVQRWEHHQYDFDWHGRU WKH&RXUWDVVHUWHGWKDWmLWZRXOGEHFRXQWHULQWXLWLYHWR UHYHUVHG DQG ZKLFK XQFRQGLWLRQDOO\ DZDUGV UHDVRQDEOH EHOLHYHWKDW&RQJUHVVLQWHQGHGSRVWMXGJPHQWLQWHUHVWWREH DWWRUQH\IHHVLVDYDOLGDQGHQIRUFHDEOHmPRQH\MXGJPHQWl FDOFXODWHGIURP>DMXGJPHQWRQGDPDJHVQRWVXSSRUWHGE\WKH $V VXFK UHDVRQDEOH DWWRUQH\ IHHV DUH mVXIILFLHQWO\ HYLGHQFH@l,GDW%DVHGRQWKHIRUHJRLQJWKH&RXUW FRQFOXGHG WKDW SRVWMXGJPHQW LQWHUHVW VKRXOG QRW EH FDOFXODWHGIURPWKHGDWHRIDOHJDOO\LQVXIILFLHQWMXGJPHQW  6HHLG 7KH VWDWH DVVHUWV mWKH 8QLWHG 6WDWHV 6XSUHPH &RXUW FRQVLGHUHG ZKHWKHU LQWHUHVW UDQ IURP D MXU\ YHUGLFW DZDUGLQJ GDPDJHV RU IURP WKH GDWH WKH FRXUW HQWHUHG MXGJPHQW RQ WKH YHUGLFW 7KH &RXUW KHOG WKDW LQWHUHVW UDQ IURP WKH GDWH RI WKH FRXUWjV MXGJPHQW QRW WKH GDWH RI WKH YHUGLFW EHFDXVH WKH PRQHWDU\ GDPDJHV ZHUH QRW PHDQLQJIXOO\ DVFHUWDLQHG XQWLO WKH ILQDO MXGJPHQWl $SSHOODQWVj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jV GHFLVLRQ EXW UDWKHU RQ LWV RZQ GHFLVLRQ VXEVHTXHQWO\UHYHUVHGLQWKDWVDPHFDVH6HHLGDW UHIHUULQJWR%RQMRUQRY.DLVHU$OXPLQXP &KHP&R  7KH VWDWH DVVHUWV WKDW m>W@KH 6HYHQWK (LJKWK 1LQWK DQG 7HQWK )G G&LU  2QFHDJDLQZHQRWHWKDWWKH &LUFXLW &RXUWV DQG VHYHUDO GLVWULFW FRXUWV KDYHIROORZHG WKH UHDVRQLQJ LQ 6XSUHPH&RXUWEDVHGLWVFRQFOXVLRQWKDWLQWHUHVWGLGQRWUXQ >%RQMRUQR@ DQG DZDUGHG LQWHUHVW RQ DWWRUQH\Vj IHHV IURP WKH GDWH RI WKH IURP D YHUGLFW RQ WKH SODLQ ODQJXDJH RI †   D  ZKLFK MXGJPHQW TXDQWLI\LQJ WKH DWWRUQH\Vj IHHVl $SSHOODQWVj %U DW  HPSKDVLV VWDWHVWKDWmLQWHUHVWVKDOOEHFDOFXODWHGIURPWKHGDWHRIWKH DGGHG  7KH VWDWHjV DVVHUWLRQ LV TXLWH LQDFFXUDWH HQWU\ RI WKH MXGJPHQWl   86& †   D  HPSKDVLV )LUVW WKH VWDWH FLWHV HLJKW FDVHV IRU WKLV SURSRVLWLRQ EXW RQO\ WKUHH RI WKH HLJKW SRVWGDWHG WKH 6XSUHPH &RXUWjV %RQMRUQR GHFLVLRQ 2I WKH WKUHH DGGHG  FDVHV ZKLFK SRVWGDWH %RQMRUQR RQO\ WZR PHQWLRQ WKDW GHFLVLRQ DQG ERWK RI WKHVH FDVHV DUH IURP WKH VDPH FRXUW 6HH sRVHSK 0IJ &R Y 2O\PSLF 7KH0LG$PHULFDFRXUWVLPLODUO\DVVHUWHGWKDWWKH6XSUHPH )LUH &R  )G   WK &LU   GLVFXVVLQJ LQWHUHVW RQ &RXUWjVGHFLVLRQLQ%RQMRUQRGLFWDWHGWKHUHVXOWLWUHDFKHG FRVWV 0LG$PHULFD  )G DW  GLVFXVVLQJ LQWHUHVW RQ IHHV  2I 7KHFRXUWVWDWHGWKDWWKHUXOHWKDWSRVWMXGJPHQWLQWHUHVWRQ WKH WZR FDVHV WKDW PHQWLRQ %RQMRUQR RQO\ RQH DGGUHVVHV WKH LVVXH RI DWWRUQH\IHHVGRHVQRWDFFUXHXQWLOVXFKIHHVDUHTXDQWLILHG DWWRUQH\ IHHV 6HFRQG WKH (LJKWK DQG 1LQWK &LUFXLWV KDYH FRQFOXGHG WKDW DQ DZDUG ZDVmFRQVLVWHQWZLWKWKH>%RQMRUQR@UHTXLUHPHQWWKDWLQWHUHVW RI DWWRUQH\ IHHV DFFUXHV LQWHUHVW IURP WKH GDWH RI WKH MXGJPHQW WKDW RQDQ\W\SHRIGDPDJHVVKRXOGQRWDFFUXHXQWLOWKHGDPDJHV XQFRQGLWLRQDOO\ HQWLWOHV WKH SUHYDLOLQJ SDUW\ WR VXFK IHHV UHJDUGOHVV RI DUH µPHDQLQJIXOO\ DVFHUWDLQHGj l  ,G DW  TXRWLQJ ZKHQ WKH IHHV DUH TXDQWLILHG 6HH )ULHQG Y .RORG]LHF]DN  )G  %RQMRUQR   86 DW   7KH 0LG$PHULFD FRXUW   WK &LU   sHQNLQV Y 6WDWH RI 0LVVRXUL  )G   DSSDUHQWO\LQWHUSUHWHGWKH6XSUHPH&RXUWjVUHTXLUHPHQWWKDW  WK &LU    7KH 1LQWK &LUFXLW FDVH FLWHG E\ WKH VWDWH 3HUNLQV Y GDPDJHVEHDVFHUWDLQHGLQDPHDQLQJIXOZD\DVDUHTXLUHPHQW 6WDQGDUG 2LO &R  )G   WK &LU   KHOG WKDW LQWHUHVW RQ DWWRUQH\ IHHV GRHV QRW UXQ IURP WKH GDWH RI WKH SUHYDLOLQJ SDUW\jV FODLP IRU WKDW VXFK GDPDJHV EH UHGXFHG WR D VXP FHUWDLQ  7KLV IHHV ,Q WKDW FDVH WKH FRXUW KHOG WKDW WKH YLFWRU ZDV HQWLWOHG WR IHHV DQG LQWHUSUHWDWLRQRYHUORRNVWKHFRQWH[WRIWKH6XSUHPH&RXUWjV TXDQWLILHG WKRVH IHHV DV SDUW RI D VLQJOH MXGJPHQW ,G DW  ,Q WKH DSSOLFDWLRQRIWKDWUXOH7KH6XSUHPH&RXUWjVVWDWHPHQWWKDW (LJKWK &LUFXLW FDVH FLWHG E\ WKH VWDWH 5:7 Y 'DOWRQ  )G  GDPDJHVPXVWEHDVFHUWDLQHGLQDPHDQLQJIXOZD\ZDVPDGH WK &LU    LW LV QRW FOHDU WKDW WKH SODLQWLIIV VRXJKW LQWHUHVW IURP WKH LQWKHFRQWH[WRILWVGLVFXVVLRQRIZKHWKHUSXUVXDQWWR†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mIURP D GDWH (QYWO5HVWRUDWLRQ0JPW&RUS)G  WK&LU  GD\V DIWHU WKH HQG RI WKH PRQWK LQ ZKLFK WKH VHUYLFHV ZHUH UHQGHUHGl ,Q UH %XUOLQJRQ 1RUWKHUQ ,QF  )G   WK &LU     VWDWLQJWKDWmSRVWMXGJPHQWLQWHUHVWUXQVIURPWKHGDWH DGGUHVVLQJ ZKHWKHU LQWHUHVW UDQ IURP FRQVHQW GHFUHH RU ILQDO MXGJPHQW RIDQ\MXGJPHQWWKDWLVQRWHQWLUHO\VHWDVLGH %XWKHUHLQ 0F&XOORXJK Y &DG\  ) 6XSS    (' 0LFK   FRQWUDVWZHDUHGHDOLQJZLWKDYDOLGILQDOMXGJPHQWDZDUGLQJ DZDUGLQJ DQG TXDQWLI\LQJ IHHV LQ VLQJOH MXGJPHQW  UHDVRQDEOHDWWRUQH\IHHV:HEHOLHYHWKDWWKHUXOHSHUPLWWLQJ ,Q VXP RQO\ RQH FDVH WKH 7HQWK &LUFXLWjV 0LG$PHULFD FDVH KDV LQWHUHVWWRUXQIURPWKHLQLWLDOMXGJPHQWDZDUGLQJVXFKIHHV mIROORZHG WKH UHDVRQLQJ LQ >%RQMRUQR@ DQG DZDUGHG LQWHUHVW RQ DWWRUQH\Vj  $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO &LU  7KHFRXUWGLGQRWKRZHYHUDUWLFXODWHZK\WKLV G&LU 0LG$PHULFD)HGHUDO6DY /RDQ$VVRFY mWUDGLWLRQDOQRWLRQlVKRXOGDSSO\LQWKHFRQWH[WRIDQDZDUG 6KHDUVRQ$PHULFDQ([SUHVV,QF )G RIUHDVRQDEOHDWWRUQH\IHHV:HQRWHDOVRWKDWWKH6HYHQWK WK &LU     7KHVH FRXUWV DVVHUW HVVHQWLDOO\ WZR &LUFXLW FDVH UHOLHG RQ E\ WKH 0LG$PHULFD FRXUW GRHV QRW LQWHUUHODWHGEDVHVIRUWKHLUGHFLVLRQ)LUVWWKH\KROGWKDWSRVW VXSSRUWLWVFRQWHQWLRQWKDWWKHUHLVVXFKDmWUDGLWLRQDOQRWLRQl MXGJPHQWLQWHUHVWDFFUXHVSXUVXDQWWR† RQO\RQDVXP FHUWDLQ 6HH (DYHV   )G DW   0LG$PHULFD  :H UHVSHFWIXOO\ GHFOLQH WR DFFHSW WKH 7KLUG DQG 7HQWK )GDW6HFRQGWKH\VXJJHVWWKDWWKH6XSUHPH&RXUWjV &LUFXLWVjDVVHUWLRQVWKDWLQWKHFRQWH[WRIDQDZDUGRIDWWRUQH\ GHFLVLRQ LQ %RUMRUQR mGLFWDWHVl WKH FRQFOXVLRQ WKDW SRVW IHHVWKHWHUPmPRQH\MXGJPHQWlLVmFRPPRQO\XQGHUVWRRGl MXGJPHQW LQWHUHVW DFFUXHV RQO\ IURP D VXP FHUWDLQ  6HH WRUHTXLUHDQDZDUGRIDIL[HGVXPWRWKHSUHYDLOLQJSDUW\ (DYHV )GDW 0LG$PHULFD )GDW:H 5DWKHU RXU UHYLHZ RI WKH FDVHV DGGUHVVLQJ WKLV LVVXH DGGUHVVHDFKRIWKHVHFRQFOXVLRQVLQWXUQ GHPRQVWUDWHV D JHQHUDO UXOH WKDW D MXGJPHQW WKDW XQFRQGLWLRQDOO\HQWLWOHVDSDUW\WRUHDVRQDEOHDWWRUQH\IHHVLV D6XP&HUWDLQ WKHmPRQH\MXGJPHQWlFRQWHPSODWHGE\† 6HHHJ )ULHQGY.RORG]LHF]DN)G  WK&LU  ,Q (DYHV Y &RXQW\ RI &DSH 0D\ WKH 7KLUG &LUFXLW LQWHUSUHWLQJ† LQWKHFRQWH[WRIDQDWWRUQH\IHHDZDUG FRQFOXGHGWKDWSXUVXDQWWR†  D SRVWMXGJPHQWLQWHUHVW /RXLVLDQD3RZHU /LJKW&RY.HOOVWURP)G  RQDQDWWRUQH\IHHDZDUGUXQVIURPWKHGDWHWKDWWKHGLVWULFW  WK&LU   VDPH %DQN$WODQWLFY%O\WKH(DVWPDQ FRXUWHQWHUHGMXGJPHQWTXDQWLI\LQJWKHDZDUGUDWKHUWKDQWKH 3DLQH:HEEHU,QF)G WK&LU  GDWH WKH FRXUW HQWHUV D MXGJPHQW WKDW DZDUGV UHDVRQDEOH VDPH sHQNLQVY6WDWHRI0LVVRXUL )G WK DWWRUQH\ IHHV    )G DW   7KH (DYHV FRXUWjV &LU   VDPH 0DWKLVY6SHDUV)G  )HG&LU LQWHUSUHWDWLRQRIWKH†  D WHUPmPRQH\MXGJPHQWlOHGLW    VDPH &RSSHU/LTXRU,QFY$GROSK&RRUV&R WRFRQFOXGHWKDWDmPRQH\MXGJPHQWlmPXVWEHFRPSULVHGRI )G WK&LU   HQEDQF  VDPH :HQRWHWKDW µD GHILQLWH DQG FHUWDLQ GHVLJQDWLRQ RI WKH DPRXQW  ZKLFK WKRVH IHZ FRXUWV WKDW KROG D mPRQH\ MXGJPHQWl GRHV QRW SODLQWLIILVRZHGE\GHIHQGDQWjl,GDW TXRWLQJ3HQQ LQFOXGHDMXGJPHQWDZDUGLQJUHDVRQDEOHDWWRUQH\IHHVGRQRW 7HUUD/7'Y'HSDUWPHQWRI(QYWO5HV)G RIIHUDQ\EHQHILWIRUWKLVQDUURZUHDGLQJRI† DQGZH G&LU   HPSKDVLVLQRULJLQDO  FDQ VHH QR EHQHILW WR UHDGLQJ LQ WKH TXDQWLILFDWLRQ RI IHHV UHTXLUHPHQW 7KH(DYHVFRXUWEDVHGLWVFRQFOXVLRQUHJDUGLQJWKHSURSHU LQWHUSUHWDWLRQ RI †  jV mPRQH\ MXGJPHQWl WHUP RQ WKDW E $SSOLFDWLRQRI.DLVHU$OXPLQXP &KHPLFDO&RUSY FRXUWjV SULRU LQWHUSUHWDWLRQ RI WKH WHUP mHQIRUFHPHQW RI D %RQMRUQR PRQH\ MXGJPHQWl IRXQG ZLWKLQ WKH IRUPHU  86& 7KH7KLUG&LUFXLWLQ(DYHVDOVRVWDWHGWKDWLWVGHFLVLRQZDV mGLFWDWHGlE\WKH6XSUHPH&RXUWjVGHFLVLRQLQ%RQMRUQR )GDW 7KH(DYHVFRXUWVXJJHVWHGWKDWDGLVWULFWFRXUW MXGJPHQWDZDUGLQJUHDVRQDEOHDWWRUQH\IHHVmLVWKHIXQFWLRQDO IHHV IURP WKH GDWH RI WKH MXGJPHQW TXDQWLI\LQJ WKH DWWRUQH\Vj IHHVl HTXLYDOHQW RI WKH    XQOLTXLGDWHG OLDELOLW\ YHUGLFWl LQ %RQMRUQR,GDW1RWLQJWKDWWKH6XSUHPH&RXUWUHMHFWHG  :H QRWH WKDW WKH 7KLUG &LUFXLW GHOLYHUHG LWV GHFLVLRQ LQ ,;08 DIWHU WKH DUJXPHQW WKDW LQWHUHVW VKRXOG UXQ IURP WKH GDWH RI WKH RUDO DUJXPHQW LQ WKLV FDVH 7KH VWDWH SURYLGHG WKLV &RXUW ZLWK WKH GHFLVLRQ DV VXSSOHPHQWDO DXWKRULW\ SXUVXDQW WR )HG 5 $SS 3  M   $VVRFLDWHG*HQ&RQWUDFWRUV 1RV   1RV   $VVRFLDWHG*HQ&RQWUDFWRUV  RI2KLRHWDOY'UDELNHWDO RI2KLRHWDOY'UDELNHWDO †  E   RI WKH %DQNUXSWF\ &RGH  6HH LG  7KH (DYHV WRJLYHWKHVWDWHVVXIILFLHQWODWLWXGHLQEULQJLQJDFWLRQVWKDW FRXUWDGRSWHGLWVXQVXSSRUWHGVWDWHPHQWLQ3HQQ7HUUDWKDWD JHQHUDOO\VKRXOGQRWEHVWD\HGmIRUUHDVRQVRIHLWKHUSROLF\RU mPRQH\MXGJPHQWlQHHGRQO\FRQVLVWRIWZRHOHPHQWVRQHRI SUDFWLFDOLW\l  ,G  7KHUHIRUH ZH TXHVWLRQ WKH SURSULHW\ RI ZKLFK LV mD GHILQLWH DQG FHUWDLQ GHVLJQDWLRQ RI WKH DPRXQW ORRNLQJWR3HQQ7HUUDIRUJXLGDQFHLQFRQVWUXLQJWKHmDQ\ ZKLFKSODLQWLIILVRZHGE\GHIHQGDQWl,GDW TXRWLQJ PRQH\ MXGJPHQWl WHUP RI †   D  LQ WKLV FRQWH[W 3HQQ7HUUD )GDW $FFRUGLQJO\WKH(DYHVFRXUW 0RUHRYHUWKH(DYHVFRXUWGLGQRWLGHQWLI\LQRXURSLQLRQ VXJJHVWHG WKDW LW ZDV mFRQVWUDLQHG WR DJUHH ZLWK WKH DQ\SHUVXDVLYHVXSSRUWIRULWVFRQWHQWLRQWKDWWKHWHUPmPRQH\ >GHIHQGDQW@ WKDW †   D  VLPSO\ GRHV QRW SHUPLW MXGJPHQWl LV FRPPRQO\ FRQVWUXHG WR UHTXLUH WKH SRVWMXGJPHQWLQWHUHVWRQDQDWWRUQH\jVIHHDZDUGWRUXQIURP GHWHUPLQDWLRQRIDVXPFHUWDLQLQWKHFRQWH[WRIDQDZDUGRI WKHGDWHWKDWWKHFRXUWLQLWLDOO\GHWHUPLQHVWKDWWKHSUHYDLOLQJ DWWRUQH\IHHV SDUW\ LV HQWLWOHG WR DQ DZDUG LI WKH DPRXQW ZDV QRW DOVR TXDQWLILHGDQGLQFOXGHGLQWKDWMXGJPHQWl,GDW /LNH WKH (DYHV FRXUW WKH 7HQWK &LUFXLW IRXQG WKDW SRVW MXGJPHQWLQWHUHVWRQDQDWWRUQH\IHHDZDUGUXQVIURPWKHGDWH :HDUHDGPLWWHGO\SX]]OHGE\WKH7KLUG&LUFXLWjVUHOLDQFH WKHGLVWULFWFRXUWHQWHUHGMXGJPHQWTXDQWLI\LQJWKHDZDUG6HH RQLWV3HQQ7HUUDGHFLVLRQZKHQFRQVWUXLQJWKHWHUPmPRQH\ 0LG$PHULFD  )G DW   7KH FRXUW IRXQG WKLV UXOH MXGJPHQWl LQ †   D   ,Q 3HQQ 7HUUD WKH FRXUW ZDV mFRQVLVWHQWZLWKWKHWUDGLWLRQDOQRWLRQWKDWLQWHUHVWVKRXOGQRW UHTXLUHGWRGHWHUPLQHZKHWKHUDQDFWLRQZDVDQmDWWHPSWWR DFFUXH RQ DQ XQOLTXLGDWHG GDPDJH DPRXQWl  ,G DW  HQIRUFHDPRQH\MXGJPHQWlDQGWKXVDQmH[FHSWLRQWRWKH FLWLQJ)OHPLQJY&RXQW\RI.DQH )G WK H[FHSWLRQl WR WKH DXWRPDWLF VWD\ SURYLVLRQ  86& † D )GDW7KHFRXUWQRWHGWKDWWKHSURYLVLRQ mVKRXOGEHFRQVWUXHGQDUURZO\VRDVWROHDYHWRWKH6WDWHVDV  PXFK RI WKHLU SROLFH SRZHU DV D IDLU UHDGLQJ RI WKH VWDWXWH 7KH (DYHV FRXUW ORRNHG DW D KDQGIXO RI FDVHV QRQH RI ZKLFK DSSOLHG DOORZVl  ,G DW  HPSKDVLV LQ RULJLQDO   7KH FRXUW WKH WHUP mPRQH\ MXGJPHQWl LQ WKH FRQWH[W RI DQ DWWRUQH\ IHH DZDUG 6HH VXJJHVWHGDVHFRQGUHDVRQWRFRQVWUXHWKHWHUPQDUURZO\VRDV LG DW  GLVFXVVLQJ ((2& Y *XUQHH ,QQV ,QF  )G   WK &LU   FRQVWUXLQJ WKH WHUP mPRQH\ MXGJPHQWl LQ †   D WR LQFOXGH D MXGJPHQW WKDW RUGHUHG WKH GHIHQGDQW WR SD\ D VXP RI GDPDJHV WR WKH SODLQWLIIV OHVV DQ XQGHWHUPLQHG DPRXQW UHSUHVHQWLQJ mDSSURSULDWH SD\UROO GHGXFWLRQVl +DSS\ &KHI 6\V ,QF Y sRKQ +DQFRFN 0XW /LIH  7LWOH  86& †  LV WKH DXWRPDWLF VWD\ SURYLVLRQ RI WKH ,QV &R  )G   WK &LU   LQWHUSUHWLQJ †   D DV %DQNUXSWF\ &RGH 6XEVHFWLRQ  E  SURYLGHG DQ H[FHSWLRQ WR WKH LW DSSOLHG WR MXGJPHQW LQ IDYRU RI WKH SODLQWLII WKDW JUDQWHG VXSSOHPHQWDO DXWRPDWLF VWD\ IRU SURFHHGLQJV WR HQIRUFH SROLFH DQG UHJXODWRU\ SRZHUV UHOLHI EXW GLG QRW FRQWDLQ DQ DPRXQW RI GDPDJHV GXH WR LQVXIILFLHQW $W WKH WLPH RI WKH3HQQ 7HUUD GHFLVLRQ †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jV LQWHUSUHWDWLRQ MXGJPHQW RWKHU WKDQ D PRQH\ MXGJPHQW  REWDLQHG LQ DQ DFWLRQ RU RI  86& †  E  ,Q UH 9DOHQFLD  %5     ' &ROR SURFHHGLQJ E\ D JRYHUQPHQWDO XQLW WR HQIRUFH VXFK JRYHUQPHQWDO   TXRWLQJ LQ UH 'HYLWW  %5   %DQNU '0G   ,Q XQLWjV SROLFH RU UHJXODWRU\ SRZHU UH 'RZ &RUQLQJ &RUS  %5   %DQNU (' 0LFK   86& †  E  HPSKDVLV DGGHG  7KLV SURYLVLRQ ZDV UHSHDOHG LQ DSSO\LQJ 3HQQ 7HUUDjV GHILQLWLRQ RI mPRQH\ MXGJPHQWl ,Q UH 'HYLWW   6HH 3XE / 1R  'LY , 7LWOH 9, †    2FW     %5 DW  VWDWLQJ WKDW D EDQNUXSWF\ FRXUW KDV MXULVGLFWLRQ WR  6WDW     7KH mPRQH\ MXGJPHQWl WHUP LV QRZ SDUW RI GHWHUPLQH GLVFKDUJHDELOLW\ RI D GHEW DQG WR mUHQGHU D PRQH\ MXGJPHQW LQ  86& †  E   DQ DPRXQW FHUWDLQ ZLWKRXW WKH DVVLVWDQFH RI D MXU\l