5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH   'RWVRQHWDOY 1RV (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU :LONLQVRQHWDO )LOH 1DPH DS 'HFLGHGDQG)LOHG 0D\  81,7('67$7(6&28572)$33($/6 %HIRUH 0$57,1&KLHI&LUFXLWsXGJH %2**6 )257+(6,;7+&,5&8,7 %$7&+(/'(5'$8*+75(<0225(&2/(&/$< BBBBBBBBBBBBBBBBB *,/0$1*,%%216DQG52*(56&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB 1R ; &2816(/ :,//,$0 ':,*+7 '27621  3ODLQWLII$SSHOODQW  $5*8('   sRKQ 4 /HZLV s21(6 '$< 5($9,6  1RV 32*8( &OHYHODQG 2KLR IRU $SSHOODQW  7RGG 5 0DUWL  2 ) ) ,& (  2 ) 7 + (  $ 7 7 2 5 1 ( <  * ( 1 ( 5 $ / Y ! &255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR   IRU$SSHOOHHV21%5,() sRKQ4/HZLVs21(6'$< 5(*,1$/' $ :,/.,1621  5($9,6 32*8(&OHYHODQG2KLRIRU$SSHOODQW7RGG 'HIHQGDQW$SSHOOHH  5 0DUWL 2)),&( 2) 7+( $77251(< *(1(5$/  &255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR  IRU$SSHOOHHV  0$57,1 & s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ 1R  52*(5,&2 s2+1621 ZKLFK %2**6 '$8*+75(< 0225( &2/( DQG  &/$< ss MRLQHG  *,/0$1 s SS   GHOLYHUHG D 3ODLQWLII$SSHOODQW  VHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJLQSDUWLQ  ZKLFK %$7&+(/'(5 *,%%216 DQG 52*(56 ss Y  MRLQHG   BBBBBBBBBBBBBBBBB 0$5*$5(77( *+((  'HIHQGDQW$SSHOOHH  23,1,21 1 BBBBBBBBBBBBBBBBB $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUWV IRUWKH1RUWKHUQ'LVWULFWRI2KLR %2<&()0$57,1s5&KLHI&LUFXLWsXGJH5RJHULFR DW7ROHGRDQG<RXQJVWRZQ sRKQVRQDQG:LOOLDP'ZLJKW'RWVRQDSSHDOWKHGLVPLVVDORI 1RV n'DYLG$.DW]DQG WKHLU LQGLYLGXDO  86& †  FODLPV DJDLQVW WKH 2KLR 3HWHU&(FRQRPXV'LVWULFWsXGJHV $GXOW3DUROH$XWKRULW\7KHFODLPVDVVHUWHGLPSURSULHWLHVLQ WKHUHVSHFWLYHSODLQWLIIVjSDUROHSURFHHGLQJV7KHVHFODLPV $UJXHGDQG6XEPLWWHG 'HFHPEHU ZHUH GLVPLVVHG DV QRW FRJQL]DEOH XQGHU VHFWLRQ   DFFRUGLQJ WR WKH UXOH RI +HFN Y +XPSKUH\  86      7KH GLVWULFW FRXUWV UXOHG WKDW WKHVH FODLPV ZHUH  1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO FRJQL]DEOHRQO\XQGHUDSHWLWLRQIRUKDEHDVFRUSXVEHFDXVH %HIRUHWKDWILYH\HDUVODSVHGKRZHYHUWKH2KLRUHJXODWLRQV WKH\ QHFHVVDULO\ LPSOLHG WKH LQYDOLGLW\ RI WKH SULVRQHUVj FKDQJHG DQG WKH QHZ SDUROH UXOHV VDLG WKDW D SULVRQHU FRQILQHPHQW)RUWKHIROORZLQJUHDVRQVZH5(9(56(WKH FRQYLFWHGRIDJJUDYDWHGPXUGHUZDVQRWHOLJLEOHIRUSDUROHIRU MXGJPHQWRIWKHGLVWULFWFRXUWDQGILQGWKDWFHUWDLQSULVRQHU PRUH WKDQ WKLUW\WZR \HDUV  'RWVRQ DWWHQGHG KLV KDOIZD\ FODLPVDUHFRJQL]DEOHXQGHUVHFWLRQ  UHYLHZVFKHGXOHGXQGHUWKHUHJXODWLRQVLQSODFHDWWKHWLPHRI KLVLQLWLDOLQFDUFHUDWLRQ$WWKDWUHYLHZKRZHYHUWKH3DUROH ,Q$SULORI 5RJHULFRsRKQVRQZKRZDVLQFDUFHUDWHG %RDUGGHFLGHGWKHQHZUXOHVDSSOLHGUHWURDFWLYHO\ DQGWKH LQWKHVWDWHRI2KLRKDGDQLQLWLDOSDUROHKHDULQJ$FFRUGLQJ 3DUROH%RDUGDQQRXQFHGWKDW'RWVRQZRXOGQRWEHHOLJLEOHIRU WRWKH2KLR&RGHWKHSDUROHKHDULQJPXVWEHFRQGXFWHGE\ SDUROH XQWLO   7KH\ QHYHUWKHOHVV NHSW WKH  GDWH WKH 3DUROH %RDUG RU E\ DW OHDVW RQH PHPEHU RI WKH 3DUROH VFKHGXOHGIRU'RWVRQjVQH[WKHDULQJ7KH3DUROH%RDUGPDGH %RDUGDQGRQH3DUROH%RDUG+HDULQJ2IILFHU,QsRKQVRQjV DGHWHUPLQDWLRQDERXW'RWVRQjVSDUROHHOLJLELOLW\QRWDERXW FDVHWKHKHDULQJZDVFRQGXFWHGE\RQH3DUROH%RDUGPHPEHU KLVSDUROHVXLWDELOLW\DVZDVUHTXLUHGE\WKHROGUHJXODWLRQV DORQH$WWKHKHDULQJWKDWPHPEHURIWKH3DUROH%RDUGGLG QRWDOORZsRKQVRQWRVSHDNRQKLVRZQEHKDOIDOWKRXJKWKH 'RWVRQILOHG VXLWXQGHUVHFWLRQ DOOHJLQJYLRODWLRQV &RGHUHTXLUHVWKDWVKHFRQVLGHUKLVRUDORUZULWWHQVWDWHPHQWV ZLWKLQ WKH SDUROH KHDULQJ SURFHGXUHV  7KH GLVWULFW FRXUW 6KH GLG QRW DVN sRKQVRQ DQ\ TXHVWLRQV   sRKQVRQ ZDV QRW GLVPLVVHG'RWVRQjVFODLPVWDWLQJLWZDVQRWFRJQL]DEOHXQGHU DOORZHG WR DVN DQ\ TXHVWLRQV  7KH 3DUROH %RDUG PHPEHU VHFWLRQ  EDVHGKHUGHFLVLRQWRGHQ\SDUROHRQWZRDOOHJHGFRQYLFWLRQV IRUZKLFKsRKQVRQZDVQHYHUHYHQFKDUJHGLQYLRODWLRQRIWKH :KHQDGLVWULFWFRXUWGLVPLVVHVDFDVHRUFODLPSXUVXDQWWR &RGHjVSHUPLVVLEOHFRQVLGHUDWLRQV  86& †   H  WKLV FRXUW UHYLHZV VXFK GLVPLVVDO GH QRYR0F*RUHY:ULJJOHVZRUWK)G WK&LU sRKQVRQFODLPVWKDWKLVGXHSURFHVVULJKWVZHUHYLRODWHGE\   7KHJUDQWRIDPRWLRQIRUVXPPDU\MXGJPHQWLVDOVR WKLVSDUROHKHDULQJ+HILOHGDVHFWLRQ FODLPFKDOOHQJLQJ UHYLHZHGGHQRYRDQGWKLVFRXUWDSSOLHVWKHVDPHVWDQGDUGWKH WKH SDUROH KHDULQJ QRW WKH GHQLDO RI SDUROH  +H VRXJKW GLVWULFWFRXUWDSSOLHG6HH3HUU\Y0F*LQQLV )G  GHFODUDWRU\DQGLQMXQFWLYHUHOLHI7KHGLVWULFWFRXUWGLVPLVVHG  WK&LU  sRKQVRQjV VXLW IRU IDLOXUH WR VWDWH D FODLP XQGHU  86& †  H ILQGLQJWKDW+HFNSUHFOXGHGKLVFODLPsRKQVRQ )HGHUDOKDEHDVFRUSXVSXUVXDQWWR86&†LVWKH DOOHJHVWKDWWKLVFKDOOHQJHLVFRJQL]DEOHXQGHUVHFWLRQ  H[FOXVLYH DYHQXH IRU FKDOOHQJLQJ WKH IDFW RU GXUDWLRQ RI D DQGWKDWWKHGLVWULFWFRXUWHUUHGLQGLVPLVVLQJKLVFRPSODLQW SULVRQHUjVFRQILQHPHQWEXWFLYLOULJKWVDFWLRQVSXUVXDQWWR 86&†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l7KH&RXUWUHFRJQL]HGWKHVHFWLRQ  FODLP 7KHROGHVWRIWKHUHOHYDQW6XSUHPH&RXUWFDVHVLV3UHLVHU 86,QWKLVFDVHSULVRQHUVFKDOOHQJHGDSROLF\RI $IWHU D ORQJ SHULRG RI VLOHQFH RQ WKH PDWWHU WKH &RXUW GHSULYDWLRQRIJRRGWLPHFUHGLWVDIWHUGLVFLSOLQDU\KHDULQJV GHFLGHG+HFNY+XPSKUH\86   ,Q+HFND ,GDW7KHSULVRQHUVVRXJKWLQMXQFWLYHUHOLHILQWKH SULVRQHUFODLPHGWKDWWKHGHIHQGDQWVVWDWHSURVHFXWRUVDQG IRUPRILPPHGLDWHUHVWRUDWLRQRIWKHFUHGLWVZKLFKLQHYHU\ LQYHVWLJDWRUVKDGHQJDJHGLQDQXQODZIXOLQYHVWLJDWLRQRIKLP FDVHZRXOGDXWRPDWLFDOO\UHVXOWLQWKHSULVRQHUVjLPPHGLDWH WKDWOHGWRKLVXQODZIXODUUHVWDQGSURVHFXWLRQ+HVRXJKW UHOHDVHIURPFRQILQHPHQW,GDW%HFDXVHWKLVDFWLRQ FRPSHQVDWRU\ DQG SXQLWLYH GDPDJHV EXW QRW UHOHDVH IURP FKDOOHQJHG WKH GXUDWLRQ RI WKHLU FRQILQHPHQW WKH 6XSUHPH FXVWRG\RURWKHULQMXQFWLYHUHOLHI1HYHUWKHOHVVEHFDXVHWKH &RXUWKHOGWKDWmDVWDWHSULVRQHUFKDOOHQJLQJKLVXQGHUO\LQJ &RXUWIRXQGWKDW+HFNZDVDFWXDOO\WHVWLQJWKHUHOLDELOLW\DQG FRQYLFWLRQDQGVHQWHQFHRQIHGHUDOFRQVWLWXWLRQDOJURXQGVLQ OHJDOLW\ RI KLV FRQILQHPHQW KLV FODLP ZDV QRW FRJQL]DEOH DIHGHUDOFRXUWLVOLPLWHGWRKDEHDVFRUSXVl,GDW  XQGHUVHFWLRQ ,GDW $V H[SODLQHG DERYH KRZHYHU 3UHLVHU OHIW RSHQ WKH 7KH&RXUWVRXJKWWRIXUWKHUFODULI\WKHTXHVWLRQKRZHYHU SRVVLELOLW\ WKDW D VHFWLRQ   FODLP PLJKW VWLOO OLH  7KH &LWLQJWKH3UHLVHUTXRWHDERYHWKDWVHHNLQJGDPDJHVLVQRW 6XSUHPH&RXUWVDLGm>,@IDVWDWHSULVRQHULVVHHNLQJGDPDJHV FKDOOHQJLQJ RQHjV FRQILQHPHQW WKH 6XSUHPH &RXUW VDLG KHLVDWWDFNLQJVRPHWKLQJRWKHUWKDQWKHIDFWRUOHQJWKRIKLV m7KDWVWDWHPHQWPD\QRWEHWUXHKRZHYHUZKHQHVWDEOLVKLQJ FRQILQHPHQW DQG KH LV VHHNLQJ VRPHWKLQJ RWKHU WKDQ WKHEDVLVIRUWKHGDPDJHVFODLPQHFHVVDULO\GHPRQVWUDWHVWKH LPPHGLDWHRUPRUHVSHHG\UHOHDVHWKHWUDGLWLRQDOSXUSRVHRI LQYDOLGLW\RIWKHFRQYLFWLRQl,GDW7KH6XSUHPH&RXUW KDEHDV FRUSXVl ,G DW    7KH &RXUW ZHQW RQ WR VD\ ZHQWRQWROLPLWWKHXVHRIVHFWLRQ IRUSULVRQHUFODLPV m$FFRUGLQJO\DGDPDJHVDFWLRQE\DVWDWHSULVRQHUFRXOG VWDWLQJDWWKDW EHEURXJKWXQGHUWKH&LYLO5LJKWV$FWLQIHGHUDOFRXUWZLWKRXW DQ\UHTXLUHPHQWRISULRUH[KDXVWLRQRIVWDWHUHPHGLHVl,G LQ RUGHU WR UHFRYHU GDPDJHV IRU DOOHJHGO\ HPSKDVLVDGGHG  XQFRQVWLWXWLRQDOFRQYLFWLRQRULPSULVRQPHQWRUIRURWKHU KDUP FDXVHG E\ DFWLRQV ZKRVH XQODZIXOQHVV ZRXOG $IWHULPDJLQLQJDSULVRQHUjVFODLPWKDWPLJKWEHFRJQL]DEOH UHQGHUDFRQYLFWLRQRUVHQWHQFHLQYDOLGD†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†$FODLPIRUGDPDJHVEHDULQJWKDWUHODWLRQVKLSWR D FODVV DFWLRQ DQG LW LVVXHG D JHQHUDO FKDOOHQJH WR WKH DFRQYLFWLRQRUVHQWHQFHWKDWKDVQRWEHHQVRLQYDOLGDWHG SURFHGXUHVHPSOR\HGE\WKHVWDWH7KH&RXUWVDLGm>,@WZDV LVQRWFRJQL]DEOHXQGHU†  1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO 7KH &RXUW KRZHYHU WKHQ VDLG m>,@I WKH GLVWULFW FRXUW 7KH6XSUHPH&RXUWVHHPVWKXVWRKDYHGLFWDWHGKRZWKHVH GHWHUPLQHVWKDWWKHSODLQWLII VDFWLRQHYHQLIVXFFHVVIXOZLOO FODLPVFDQSURFHHGEXWWKHFDVHVIURPWKHORZHUFRXUWVDUH QRW GHPRQVWUDWH WKH LQYDOLGLW\ RI DQ\ RXWVWDQGLQJ FULPLQDO DQ\WKLQJEXWFOHDUDQGWKHUXOLQJVIURPWKHYDULRXVFLUFXLWV MXGJPHQWDJDLQVWWKHSODLQWLIIWKHDFWLRQVKRXOGEHDOORZHGWR DUHQRWHQWLUHO\FRQVLVWHQW$VH[SODLQHGPRUHIXOO\EHORZ SURFHHGLQWKHDEVHQFHRIVRPHRWKHUEDUWRWKHVXLWl,GDW WKH'LVWULFWRI&ROXPELD&LUFXLWKDVIRXQGWKDWDFKDOOHQJHWR   7KH FRJQL]DEOH FODLP WKHQ FDQQRW EH WKH NLQG RI SDUROHSURFHHGLQJVLVFRJQL]DEOHXQGHUVHFWLRQ DVKDV FKDOOHQJHWKDWILWVVTXDUHO\ZLWKLQWKHFRUHRIKDEHDVFRUSXV WKH)LIWK7KH6HYHQWK&LUFXLWUHFRJQL]HVWKDWVRPHSULVRQHU D FKDOOHQJH WR WKH IDFW RU GXUDWLRQ RI FRQILQHPHQW  7KH FODLPVDUHFRJQL]DEOHXQGHUVHFWLRQ UDWKHUWKDQKDEHDV TXHVWLRQ EHFRPHV ZKDW WKH 6XSUHPH &RXUW LQWHQGV E\ EXWLWLVQRWFOHDUZKHUHFKDOOHQJHVWRSDUROHSURFHHGLQJVOLH mQHFHVVDULO\GHPRQVWUDWHVl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jV VHQWHQFH ZDV HDUOLHU/LNHZLVHLQ&DUVRQYsRKQVRQ)G QHFHVVDULO\DQGDXWRPDWLFDOO\VKRUWHU7KH6XSUHPH&RXUW WK&LU  WKHFRXUWVDLGm*HQHUDOO\VHFWLRQ VXLWV KHOGWKDWWKHSULVRQHUjVQDUURZLQWHUSUHWDWLRQRIDFRJQL]DEOH DUHWKHSURSHUYHKLFOHWRDWWDFNXQFRQVWLWXWLRQDOFRQGLWLRQVRI FODLPZDVQRWQDUURZHQRXJK WKHQDWXUHRIDFKDOOHQJHWR FRQILQHPHQW DQG SULVRQ SURFHGXUHVl ZKHUHDV D KDEHDV SURFHGXUHVPD\VWLOOLPSO\WKHLQYDOLGLW\RIWKHFRQYLFWLRQRU SHWLWLRQ LV WKH SURSHU YHKLFOH IRU VHHNLQJ UHOHDVH IURP VHQWHQFH  ,G DW   $V D UHVXOW D FODLP DWWDFNLQJ RQO\ LQFDUFHUDWLRQ SURFHGXUH QRW UHVXOW PD\ VWLOO IDLO WR EH FRJQL]DEOH XQGHU VHFWLRQ XQOHVVWKHSULVRQHUFDQVKRZWKDWWKHFRQYLFWLRQ 7KH6HYHQWK&LUFXLWUHFHQWO\VXPPDUL]HGLWVVWDQGDUGLQ RU VHQWHQFH KDV EHHQ SUHYLRXVO\ LQYDOLGDWHG ZKHUH DV LQ 0RUDQ Y 6RQGDOOH  )G   WK &LU  (GZDUGVWKHFKDOOHQJHFDQEHVDLGWRmQHFHVVDULO\lLPSO\WKH LQWHUQDOFLWDWLRQVRPLWWHG LQWKLVZD\ LQYDOLGLW\RIWKHFRQWLQXHGFRQILQHPHQW 6WDWHSULVRQHUVZKRZDQWWRFKDOOHQJHWKHLUFRQYLFWLRQV )LQDOO\DQGPRVWUHFHQWO\LQ6SHQFHUY.HPQD86 WKHLU VHQWHQFHV RU DGPLQLVWUDWLYH RUGHUV UHYRNLQJ    WKH 6XSUHPH &RXUW UHLWHUDWHG WKDW VRPH NLQG RI JRRGWLPH FUHGLWV RU HTXLYDOHQW VHQWHQFHVKRUWHQLQJ SULVRQHUFODLPLVFRJQL]DEOHXQGHUVHFWLRQ 7KH&RXUW GHYLFHVPXVWVHHNKDEHDVFRUSXVEHFDXVHWKH\FRQWHVW ZURWHm,IIRUH[DPSOHSHWLWLRQHUZHUHWRVHHNGDPDJHVµIRU WKHIDFWRUGXUDWLRQRIFXVWRG\6WDWHSULVRQHUVZKRZDQW XVLQJ WKH ZURQJ SURFHGXUHV QRW IRU UHDFKLQJ WKH ZURQJ WRUDLVHDFRQVWLWXWLRQDOFKDOOHQJHWRDQ\RWKHUGHFLVLRQ UHVXOWjDQGLIWKDWSURFHGXUDOGHIHFWGLGQRWµQHFHVVDULO\LPSO\ VXFK DV WUDQVIHU WR D QHZ SULVRQ DGPLQLVWUDWLYH WKHLQYDOLGLW\RIjWKHUHYRFDWLRQWKHQ+HFNZRXOGKDYHQR VHJUHJDWLRQ H[FOXVLRQ IURP SULVRQ SURJUDPV RU DSSOLFDWLRQ>DW@DOOl,GDW LQWHUQDOFLWDWLRQVRPLWWHG  VXVSHQVLRQRISULYLOHJHVPXVWLQVWHDGHPSOR\† RU 1RV 'RWVRQHWDOY  'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO DQRWKHUVWDWXWHDXWKRUL]LQJGDPDJHVRULQMXQFWLRQVZKHQ )LQDOO\WKH(LJKWK&LUFXLWKDVFKDUDFWHUL]HGWKHVWDWHRIWKH WKHGHFLVLRQPD\EHFKDOOHQJHGDWDOO ODZ LQ WKLV ZD\  m&ODLPV FKDOOHQJLQJ WKH FRQGLWLRQV RI FRQILQHPHQW RU WKH PHWKRG E\ ZKLFK D VHQWHQFH LV EHLQJ 7KHTXHVWLRQUHPDLQVKRZHYHUZKHWKHUDSDUROHKHDULQJLV FDUULHGRXWPD\EHDVVHUWHGWKURXJKD† FDXVHRIDFWLRQ DQ mHTXLYDOHQW VHQWHQFHVKRUWHQLQJ GHYLFHl RU mDQ\ RWKHU +RZHYHUDVWDWHSULVRQHUFKDOOHQJLQJWKHIDFWRUGXUDWLRQRI GHFLVLRQlLQWKH6HYHQWK&LUFXLW D VHQWHQFH RI LPSULVRQPHQW DQG VHHNLQJ LPPHGLDWH RU VSHHGLHUUHOHDVHKDVDIHGHUDOUHPHG\WKURXJKKDEHDVFRUSXV 7KH7HQWK&LUFXLWFDVHVDUHLQFRQIOLFW(DUO\7HQWK&LUFXLW DQGFDQQRWEULQJDFODLPXQGHU† l:LOOLDPVY+RSNLQV FDVHVVHHPWRVD\WKDWKDEHDVLVDSSURSULDWHIRUFODLPVDULVLQJ )G WK&LU   IURPSDUROHSURFHGXUHV6HH&URZY3HQU\)G WK&LU  7KLVFDVHKRZHYHUSUHGDWHG6SHQFHUY $VWRZKHUHWKLV&RXUWXOWLPDWHO\VWDQGVRQWKHVHLVVXHVZH .HPQD86   0RUHUHFHQWO\WKH7HQWK&LUFXLW ILUVWORRNWR:DUGY(QJOHU1RV  KDVVDLGDOEHLWLQDQXQSXEOLVKHGRSLQLRQm>6@HFWLRQ  :/ WK&LU0DU  XQSXEOLVKHGRSLQLRQ  DFWLRQV DUH W\SLFDOO\ WKH SURSHU YHKLFOH IRU DWWDFNLQJ ,QUXOLQJWKDWWKHSODLQWLIIVDFWXDOO\REMHFWHGWRWKHRXWFRPHV XQFRQVWLWXWLRQDO FRQGLWLRQV RI FRQILQHPHQW DQG SDUROH RIWKHLUSDUROHKHDULQJVQRWWKHSURFHGXUHVRIWKRVHKHDULQJV SURFHGXUHVl:RRGUXIIY(YHUHWW1R:/ ZH VDLG m(VVHQWLDOO\ SODLQWLII V FODLPV DUH QRW FRJQL]DEOH   WK&LUsXO\  XQGHU† EHFDXVHSODLQWLIIFDQQRWVKRZWKDWWKHGHFLVLRQ WRGHQ\SODLQWLIIFRQVLGHUDWLRQIRUSDUROHZDVLQYDOLGDWHGDQG 7KH1LQWK&LUFXLWUXOHGLVWLQJXLVKHVDPRQJGLIIHUHQWSDUROH D UXOLQJ LQ SODLQWLII V IDYRU LQ WKLV FDVH ZRXOG QHFHVVDULO\ SURFHGXUHV7KDWFRXUWLQ%XWWHUILHOGY%DLO)G LPSOLFDWHWKHFRQWLQXHGYDOLGLW\RIKLVLPSULVRQPHQWl:H  WK &LU    VDLG  m:H KDYH QR GLIILFXOW\ LQ IXUWKHUKDYHVDLG FRQFOXGLQJ WKDW D FKDOOHQJH WR WKH SURFHGXUHV XVHG LQ WKH GHQLDO RI SDUROH QHFHVVDULO\ LPSOLFDWHV WKH YDOLGLW\ RI WKH 2QHUHDVRQZKLFK>WKHSULVRQHU@JDYHIRUZK\KLVSDUROH GHQLDO RI SDUROH DQG WKHUHIRUH WKH SULVRQHU V FRQWLQXLQJ ZDVLPSURSHUO\GHQLHGZDVVRPHRIWKHFRQYLFWLRQVXVHG FRQILQHPHQWl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jFODLPV  ZHUHSURSHUO\EURXJKWXQGHUVHFWLRQ ,G :KLOH WKLV FRXUW OLPLWV WKH SUHFHGHQWLDO YDOXH DQG FLWDWLRQ WR LWV XQSXEOLVKHG FDVHV ZH IHHO LW LV LPSRUWDQW KHUH WR HOXFLGDWH WKH FRQIXVLRQ DPRQJ SDQHOV RI WKLV FRXUW RQ WKH LVVXHV EHIRUH WKH HQ EDQF FRXUW 7KH P\ULDG XQSXEOLVKHG FDVHV RQ WKLV LVVXH DQG WKH GLIIHULQJ UHVXOWV WKHUHLQ PHULW PHQWLRQ DQG FODULILFDWLRQ 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO &KDQGOHUY0LFKLJDQ3DUROH%G1R   :/ ZKLFKDSULVRQHUZLOOEHHOLJLEOHIRUDSDUROHGHWHUPLQDWLRQ   WK&LUsXQ  XQSXEOLVKHGRSLQLRQ  KHDULQJDQGSDUROHGHWHUPLQDWLRQKHDULQJVWKHPVHOYHV7KH 7KHVHGHFLVLRQVZRXOGGHQ\sRKQVRQDQG'RWVRQWKHUHOLHI 1LQWK&LUFXLWKDVHQGRUVHGWKLVGLVWLQFWLRQ&RPSDUH1HDO WKH\VHHN )GDW $7KHRQO\EHQHILWWKDWDYLFWRU\LQWKLVFDVH ZRXOGSURYLGH>WKHSODLQWLIIV@LVDWLFNHWWRJHWLQWKHGRRU 2Q WKH RWKHU VLGH WKLV FRXUW KDV DOVR UHFRJQL]HG FHUWDLQ RIWKHSDUROHERDUGWKXVRQO\PDNLQJWKHPHOLJLEOHIRUSDUROH SULVRQHUSDUROHFODLPVXQGHUVHFWLRQ m:KHQDSULVRQHU FRQVLGHUDWLRQ DFFRUGLQJ WR WKH WHUPV RI WKHLU VHQWHQFHVl LVQRWFODLPLQJLPPHGLDWHHQWLWOHPHQWWRSDUROHEXWUDWKHULV HPSKDVLVDGGHG ZLWK%XWWHUILHOG)GDW ILQGLQJ FKDOOHQJLQJSDUROHSURFHGXUHVKHPD\EULQJKLVDFWLRQXQGHU DFWLRQDOOHJLQJYLRODWLRQRIGXHSURFHVVULJKWVZKHUHSDUROH †  l  &RIIH\ Y 7HQQHVVHH 1R   :/ ERDUGFRQVLGHUHGIDOVHLQIRUPDWLRQGLUHFWO\DQGQHFHVVDULO\    WK&LU0D\  XQSXEOLVKHGRSLQLRQ VHH LPSOLFDWHVWKHYDOLGLW\RIWKHGHQLDORISDUROHDQGWKHUHIRUH DOVR)UDVHUY7HQQ%GRI3DUROHV1R:/ SULVRQHU VFRQWLQXLQJFRQILQHPHQW :KLOHLWLVQRWFOHDUIURP   WK&LU1RY  XQSXEOLVKHGRSLQLRQ  WKH UHFRUG WKDW 'RWVRQ ZDV VXSSRVHG WR UHFHLYH D SDUROH ,Q6HDJURYHVY7HQQHVVHH%RDUGRI3UREDWLRQ 3DUROH1R HOLJLELOLW\ KHDULQJ DV RSSRVHG WR D SDUROH GHWHUPLQDWLRQ RU   :/    WK &LU s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sRKQVRQEHFDXVHZHEHOLHYHWKDWWKHUHDOVR GRQRWEDUDOO† FKDOOHQJHVWRSDUROHSURFHGXUHV PD\H[LVWSURFHGXUDOFKDOOHQJHVWRSDUROHGHWHUPLQDWLRQRU $OWKRXJK D SULVRQHU FDQQRW VXH XQGHU †   IRU VXLWDELOLW\KHDULQJVWKDWZLOOOLNHZLVHQRW$QHFHVVDULO\LPSO\# LPPHGLDWH RU VSHHGLHU UHOHDVH D SULVRQHU FDQ EULQJ D WKH LQYDOLGLW\ RI D SULVRQHU V FRQYLFWLRQ RU FRQWLQXHG † FKDOOHQJHWRVWDWHSDUROHSURFHGXUHVEHFDXVHWKH FRQILQHPHQW VXFFHVV RI VXFK D ODZVXLW ZRXOG RQO\ LQFUHDVH WKH SULVRQHU VFKDQFHVRIGLVFUHWLRQDU\SDUROH+HVHHNV QRW LPPHGLDWH RU VSHHGLHU UHOHDVH EXW D QHZ KHDULQJ XWLOL]LQJ ZKDW KH FRQVLGHUV WKH SURSHU VWDWXWHV DQG SURFHGXUHV  7KH PDMRULW\ ILQGV LW LPSRUWDQW WR QRWH WKDW WKH 6XSUHPH &RXUW $VLVFOHDUWKHFDVHVIURPWKLVFRXUWDUHLQFRQIOLFW$VD FDVHV HVWDEOLVKLQJ WKH SUHFHGHQW IRU WKLV FDVH UHIHU WR QHFHVVDULO\ LPSO\LQJ UHVXOW ZH DUH IRUFHG WR FORVHO\ HYDOXDWH sRKQVRQjV DQG WKH LQYDOLGLW\ RI WKH mFRQYLFWLRQl mVHQWHQFHl RU mMXGJPHQWl 6HH +HFN  'RWVRQjVFODLPVZLWKUHJDUGWRDOOWKHSUHFHGHQW  86 DW  mFRQYLFWLRQ RU VHQWHQFHl VHH DOVR (GZDUGV   86 DW  mMXGJPHQWl  7KH GLVVHQW QHYHUWKHOHVV H[WHQGV WKH UXOH RI WKRVH 7KHGLVVHQWZRXOGGUDZDGLVWLQFWLRQEHWZHHQSURFHGXUDO FDVHV 7KH GLVVHQW UHIHUV WR QHFHVVDULO\ LPSO\LQJ WKH LQYDOLGLW\ RI WKH mKHDULQJl DQG WKH mMXGJPHQWl ZKHUH mMXGJPHQWl UHIHUV WR D GHFLVLRQ RI FKDOOHQJHV WR SDUROH HOLJLELOLW\ KHDULQJV DV GHVFULEHG LQ WKH 2KLR 3DUROH %RDUG 'LV 2S DW    )RU WKH SXUSRVHV RI WKLV 'RWVRQjVFDVHDWZKLFKWKHSDUROHERDUGGHWHUPLQHVDGDWHDW FDVH WKH PDMRULW\ EHOLHYHV mMXGJPHQWl SURSHUO\ UHIHUV RQO\ WR WKH GHFLVLRQ RI D FRQYLFWLQJ FRXUW 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO $OWKRXJK 'RWVRQ FKDOOHQJHV D SDUROH HOLJLELOLW\ 3UHLVHUDPDMRULW\RIRXUVLVWHUFLUFXLWVKDYHKHOGWKDW GHWHUPLQDWLRQDQGs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sRKQVRQPHUHO\UHTXHVWDQRSSRUWXQLW\IRUDIDLU WKH2KLRSDUROHVWDWXWH$LVDJUDQWRIGLVFUHWLRQ LWGRHVQRW DQGXQWDLQWHGSDUROHKHDULQJ FUHDWHDQ\SUHVXPSWLRQWKDWSDUROHZLOOEHLVVXHGDQGGRHVQRW FUHDWHDQH[SHFWDQF\RISDUROHl7KHUHIRUHWKHLPSDFW 'RWVRQ VFKDOOHQJHWRWKHSURFHGXUHVXVHGWRGHWHUPLQHWKH WKHQHZKHDULQJVZRXOGKDYHRQ'RWVRQDQGsRKQVRQ VSDUROH GDWH XSRQ ZKLFK KH ZLOO EH FRQVLGHUHG IRU SDUROH LI RUUHOHDVHLVLQGHWHUPLQDWH%HFDXVHWKHXOWLPDWHLPSDFWRI VXFFHVVIXOZRXOGQRW$QHFHVVDULO\LPSO\#WKHLQYDOLGLW\RIKLV WKHVH QHZ KHDULQJV RQ WKH YDOLGLW\ RI 'RWVRQ RU s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sRKQVRQ ZLOO EH D QHZ GLVFUHWLRQDU\ SDUROH LQYDOLGLW\ RI D SULVRQHU V FRQYLFWLRQ RU VHQWHQFH LI LW ZLOO KHDULQJ/LNH'RWVRQsRKQVRQVLPSO\VHHNVDWLFNHWWRJHW LQHYLWDEO\ RU DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVH  $ EDFNLQWKHGRRURIWKHSDUROHERDUG,WLVXQFOHDUZKDWWKH FKDOOHQJHWRWKHORVVRIJRRGWLPHFUHGLWVLVDQH[DPSOHRI XOWLPDWH UHVXOW RI sRKQVRQ V QHZ SDUROH KHDULQJ ZRXOG EH VXFK D FKDOOHQJH (GZDUGV  86 DW   7KLV sRKQVRQFODLPVWKDWWKH3DUROH%RDUGYLRODWHGGXHSURFHVV GHWHUPLQDWLRQ ZLOO GHSHQG XSRQ WKH IDFWV RI WKH SDUWLFXODU ZKHQ LW IDLOHG WR IROORZ 2KLR ODZ JRYHUQLQJ SDUROH FDVH+RZHYHUZKHUHWKHXOWLPDWHSDUROHGHWHUPLQDWLRQLV GHWHUPLQDWLRQVE\DPRQJRWKHUWKLQJVKDYLQJDQLQVXIILFLHQW GLVFUHWLRQDU\DQGEDVHGRQDKRVWRIIDFWRUVDVLWLVLQ2KLR QXPEHURI3DUROH%RDUGPHPEHUVDWsRKQVRQ VKHDULQJDQG LWZLOOEHGLIILFXOWWRSUHGLFWDQ\KLJKO\OLNHO\RULQHYLWDEOH QRWJLYLQJsRKQVRQDQRSSRUWXQLW\WRVSHDN7KXVVKRXOG FRQVHTXHQFH RI WKH SDUROH GHWHUPLQDWLRQ KHDULQJ  +HUH s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sRKQVRQ VQHZSDUROHKHDULQJ LQWR D OHJDO FODLP ZKDW ZH NQRZ RQ D KXPDQ OHYHO LV UHDOLVWLFDOO\WKHUH DSULVRQHUZKRREMHFWVWRKLVFRQILQHPHQW )XUWKHUDV WKH 'LVWULFWRI&ROXPELD&LUFXLWSRLQWHGRXW PD\QHYHUWKHOHVVUDLVHDVHFWLRQ FODLPDOHJDOFODLPLI FLWLQJ  *UHHQKROW] Y ,QPDWHV RI WKH 1HEUDVND 3HQDO DQG KLVGXHSURFHVVULJKWVKDYHEHHQYLRODWHGDQGWKHFKDOOHQJH &RUUHFWLRQDO&RPSOH[86   m(YHQWKH6XSUHPH GRHVQRWQHFHVVDULO\LPSOLFDWHWKHLQYDOLGLW\RIKLVFRQWLQXHG &RXUW UHDFKHG WKH PHULWV RI D VHFWLRQ   FODLP E\ VWDWH FRQILQHPHQWsRKQVRQDQG'RWVRQDUHQRWUHTXHVWLQJWKDWWKH SULVRQHUVDOOHJLQJGXHSURFHVVYLRODWLRQVLQWKHFRQVLGHUDWLRQ SDUROH ERDUG PDNH D GLIIHUHQW GHFLVLRQ DOWKRXJK ZH RIWKHLUVXLWDELOLW\IRUSDUROHZLWKRXWILUVWDGGUHVVLQJZKHWKHU XQGHUVWDQGWKDWWKH\ZLVKLWZRXOG WKH\DUHPHUHO\UHTXLULQJ 3UHLVHU UHTXLUHG WKH FODLP WR EH EURXJKW LQ KDEHDVl WKDW WKH SDUROH ERDUG FRPSO\ ZLWK WKH ODZ LQ PDNLQJ WKDW $Q\DQZXWDNX)GDW:HVHHQRUHDVRQWRUHTXLUH GHFLVLRQ WKDW sRKQVRQ DQG 'RWVRQjV FODLPV EH ORGJHG DV D JHQHUDO FKDOOHQJHLQDFODVVDFWLRQVXLWUDWKHUWKDQDSDUWLFXODUL]HG :HKROGWKDWSURFHGXUDOFKDOOHQJHVWRSDUROHHOLJLELOLW\DQG FKDOOHQJHWRSURFHGXUHVDVDSSOLHGHVSHFLDOO\ZKHUHQHLWKHU SDUROH VXLWDELOLW\ GHWHUPLQDWLRQV VXFK DV WKRVH PDGH E\ SULVRQHUjV FKDOOHQJH ZLOO QHFHVVDULO\ UHVXOW LQ KLV HDUOLHU 'RWVRQDQGsRKQVRQGRQRW$QHFHVVDULO\LPSO\#WKHLQYDOLGLW\ UHOHDVH RIWKHSULVRQHU VFRQYLFWLRQRUVHQWHQFHDQGWKHUHIRUHPD\ DSSURSULDWHO\ EH EURXJKW DV FLYLO ULJKWV DFWLRQV XQGHU  7KXV ZKHUH D SULVRQHU GRHV QRW FODLP LPPHGLDWH 86& †   UDWKHU WKDQ SXUVXDQW WR DQ DSSOLFDWLRQ IRU HQWLWOHPHQWWRSDUROHRUVHHNDVKRUWHUVHQWHQFHEXWLQVWHDG KDEHDVFRUSXV7RWKHH[WHQWWKDWRXUSULRURSLQLRQVDUHLQ ORGJHVDFKDOOHQJHWRWKHSURFHGXUHVXVHGGXULQJWKHSDUROH FRQIOLFW ZLWK RXU UHDVRQLQJ H[SUHVVHG WRGD\ WKH\ DUH SURFHVVDVJHQHUDOO\LPSURSHURULPSURSHUDVDSSOLHGLQKLV RYHUUXOHG  )RU WKH IRUHJRLQJ UHDVRQV ZH 5(9(56( WKH FDVH DQG WKDW FKDOOHQJH ZLOO DW EHVW UHVXOW LQ D QHZ GLVWULFWFRXUWDVWRsRKQVRQDQG'RWVRQ GLVFUHWLRQDU\ KHDULQJ WKH RXWFRPH RI ZKLFK FDQQRW EH SUHGLFWHGZHKROGVXFKDFKDOOHQJHFRJQL]DEOHXQGHUVHFWLRQ   ,QFRQFOXVLRQDQLQFDUFHUDWHGSHUVRQREYLRXVO\VHHNVWREH UHOHDVHGIURPFRQILQHPHQW$SULVRQHUFDUHVQRWDZKLWDVWR  7KLV LV WKH FOHDUHVW VWDWHPHQW RI WKH VWDQGDUG WKH PDMRULW\ LQWHQGV WR HVWDEOLVK WRGD\ 7KH GLVVHQW UHSHDWHGO\ RYHUVLPSOLILHV WKLV VWDQGDUG VWDWLQJ m%HFDXVH 2KLRjV SDUROH V\VWHP LV GLVFUHWLRQDU\ WKH PDMRULW\ RSLQLRQ UHDVRQV QR †   FODLP UHVXOWLQJ LQ D QHZ KHDULQJ ZLOO QHFHVVDULO\ LPSO\ WKH LQYDOLGLW\ RI WKH XQGHUO\LQJ FRQYLFWLRQ RU VHQWHQFHl 'LV 2S DW  DQG mWKH PDMRULW\ KDV HUUHG LQ UXOLQJ WKDW DOO DWWDFNV RQ SDUROH SURFHGXUHV LQ 2KLR WKDW UHTXLUH D QHZ KHDULQJ WR FRUUHFW DUH FRJQL]DEOH XQGHU †   'LV 2S DW   7KH GLVVHQW IDLOV WR DFNQRZOHGJH WKH PDMRULW\jV UHFRJQLWLRQ WKDW FHUWDLQ VHFWLRQ   FODLPV WKRVH WKDW DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVH ZLOO QHYHU EH FRJQL]DEOH XQGHU FXUUHQW 6XSUHPH &RXUW SUHFHGHQW 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 7KHPDMRULW\RSLQLRQjVmHDUOLHUUHOHDVHlWHVWLQP\RSLQLRQ IDLOVWRSURSHUO\GLVWLQJXLVKEHWZHHQWKHGLVWLQFWQDWXUHVRI &21&855,1*,13$57',66(17,1*,13$57 'RWVRQjV DQG sRKQVRQjV FKDOOHQJHV WR 2KLRjV SDUROH BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB SURFHGXUHV,EHOLHYHWKDW'RWVRQjVFODLPPD\SURFHHGXQGHU † EXWWKDWsRKQVRQjVFODLPPD\QRW6HWIRUWKEHORZLV 521$/'/((*,/0$1&LUFXLWsXGJHFRQFXUULQJLQSDUW P\ DQDO\VLV RI KRZ , EHOLHYH WKH WHVW GHYHORSHG E\ WKH DQGGLVVHQWLQJLQSDUW,EHOLHYHWKDWWKHPDMRULW\RSLQLRQKDV 6XSUHPH &RXUW IURP 3UHVLHU Y 5RGULJXH]  86  DGRSWHGDQRYHUO\EURDGmHDUOLHUUHOHDVHlWHVWWKDWFRQIODWHV   WKURXJK6SHQFHUY.HPQD86   VKRXOG WKH GLVWLQFW IDFWXDO LVVXHV SUHVHQWHG E\ WKHVH WZR DSSHDOV EHDSSOLHGWRWKHLUUHVSHFWLYHFODLPV WKHUHE\FRQIXVLQJWKHDOUHDG\FRPSOLFDWHGDUHDRIODZDWWKH LQWHUVHFWLRQ RI KDEHDV FRUSXV DQG  86& †    6HH ,'27621j6&/$,0 :ROII Y 0F'RQQHOO  86        m>7@KH GHPDUFDWLRQ OLQH EHWZHHQ FLYLO ULJKWV DFWLRQV DQG KDEHDV $ )DFWXDODQGSURFHGXUDOEDFNJURXQG SHWLWLRQVLVQRWDOZD\VFOHDUl +HFNjVEDVLFWHVWRImZKHWKHU DMXGJPHQWLQIDYRURIWKHSODLQWLIIZRXOGQHFHVVDULO\LPSO\ 'RWVRQ FKDOOHQJHV WKH UHWURDFWLYH DSSOLFDWLRQ RI 2KLRjV WKH LQYDOLGLW\ RI >WKH SULVRQHUjV@ FRQYLFWLRQ RU VHQWHQFHl SDUROHHOLJLELOLW\ JXLGHOLQHV WR KLV VHQWHQFH  +H ZDV +HFNY+XPSKUH\86   VXJJHVWVWKDW VHQWHQFHGLQsXO\RI WROLIHLPSULVRQPHQWIRUDJJUDYDWHG SULVRQHU† DFWLRQVPXVWEHH[DPLQHGRQDFDVHE\FDVH PXUGHU'RWVRQDOOHJHVWKDWDWWKHWLPHRIKLVFRQYLFWLRQ EDVLV LQ RUGHU WR GHWHUPLQH ZKHWKHU WKH SODLQWLII KDV D 2KLR 5HYLVHG &RGH †   %  SURYLGHG WKDW SULVRQHUV FRJQL]DEOH FODLP  7KH +HFN WHVW ZDV IXUWKHU UHILQHG E\ VHUYLQJDOLIHVHQWHQFHZHUHHOLJLEOHIRUSDUROHDIWHU\HDUV (GZDUGVY%DOLVRN86   ZKLFKDGGUHVVHV 3XUVXDQW WR WKH SDUROHHOLJLELOLW\ VWDWXWH DQG UHJXODWLRQV mWKHSRVVLELOLW\FOHDUO\HQYLVLRQHGE\+HFNWKDWWKHQDWXUHRI 'RWVRQ UHFHLYHG KLV ILUVW SDUROH KHDULQJ LQ    +H ZDV WKHFKDOOHQJHWRWKHSURFHGXUHVFRXOGEHVXFKDVQHFHVVDULO\ GHQLHGSDUROHDQGWKH%RDUGVFKHGXOHGDVHFRQGKHDULQJIRU WRLPSO\WKHLQYDOLGLW\RIWKHMXGJPHQWl,GDW sXQHRIZLWKDKDOIZD\UHYLHZLQ0DUFKRI2Q 0DUFK    WKH 2KLR 3DUROH %RDUG DGRSWHG QHZ ,QLWVKROGLQJWKHPDMRULW\RSLQLRQIRFXVHVRQZKHWKHUD JXLGHOLQHVWRDVVLVWWKH%RDUGLQGHWHUPLQLQJZKHWKHUWRJUDQW † FODLPZLOOQHFHVVDULO\VKRUWHQDSULVRQHUjVWLPHLQMDLO RUGHQ\SDUROHLQIXWXUHKHDULQJV7KHQHZJXLGHOLQHVZHLJK 7KHPDMRULW\WKXVJORVVHVRYHUZKDW,EHOLHYHLVWKH6XSUHPH WKH VHULRXVQHVV RI WKH RIIHQVH FRPPLWWHG DV ZHOO DV WKH &RXUWjV DFWXDO UXOHnWKDW LW LV WKH MXGJPHQW RI WKH LQPDWHjV FULPLQDO KLVWRU\ DQG ULVN WR VRFLHW\ WR SURYLGH D DGPLQLVWUDWLYH ERG\ LQ WKLV FDVH WKH SDUROH ERDUG  ZKRVH UDQJH RI PRQWKV WKDW PXVW EH VHUYHG EHIRUH WKH LQPDWH YDOLGLW\PD\QRWEHTXHVWLRQHGE\D† DFWLRQUHJDUGOHVV EHFRPHVHOLJLEOHIRUSDUROHUHOHDVH RI WKH MXGJPHQWjV HIIHFW RQ WKH OHQJWK RI WKH SULVRQHUjV XQGHUO\LQJ FRQYLFWLRQ RU VHQWHQFH  %HFDXVH 2KLRjV SDUROH 'RWVRQ DOOHJHV WKDW DW KLV KDOIZD\ UHYLHZ LQ 0DUFK RI V\VWHP LV GLVFUHWLRQDU\ WKH PDMRULW\ RSLQLRQ UHDVRQV QR  WKH 3DUROH %RDUG UHWURDFWLYHO\ DSSOLHG WKH QHZ †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†   DFWLRQV WKDW FDVHVWRWKHHIIHFWWKDWDGHFLVLRQWRUHYRNHSDUROHZKHWKHURU TXHVWLRQWKHYDOLGLW\RIDVWDWHMXGJPHQWGHWHUPLQLQJ QRWSURFHGXUDOO\GHIHFWLYHPXVWQRWEHUHQGHUHGLQYDOLGE\ ZKHWKHUDSULVRQHUVKRXOGEHUHOHDVHGRQSDUROH WKHIHGHUDOFRXUWV ,QLWVDQDO\VLVRIERWK'RWVRQjVDQGsRKQVRQjVFODLPVWKH ,Q DWWHPSWLQJ WR DYRLG WKH UDWLRQDOH RI WKH +HFN DQG PDMRULW\RSLQLRQDGRSWVDQmHDUOLHUUHOHDVHlWHVWLQKROGLQJ (GZDUGVGHFLVLRQVWKHPDMRULW\RSLQLRQSODFHVJUHDWZHLJKW WKDWDOODWWDFNVRQSDUROHSURFHGXUHVLQ2KLRDUHFRJQL]DEOH RQWKHGLVFUHWLRQDU\QDWXUHRI2KLRjVSDUROHV\VWHP%HFDXVH XQGHU †   DV ORQJ DV WKH\ GR QRW QHFHVVDULO\ LPSO\ WKH mWKH LPSDFW WKH QHZ KHDULQJV ZRXOG KDYH RQ 'RWVRQ DQG LQYDOLGLW\ RI D SULVRQHUjV FRQYLFWLRQ RU FRQILQHPHQW E\ sRKQVRQjV SDUROH RU UHOHDVH LV LQGHWHUPLQDWHl WKH PDMRULW\ LQHYLWDEO\RUDXWRPDWLFDOO\UHVXOWLQJLQHDUOLHUUHOHDVH 0DM FRQWHQGVWKDWWKHYDOLGLW\RIWKHDGPLQLVWUDWLYHMXGJPHQWKDV 2SDW ,EHOLHYHWKDWWKHPDMRULW\RSLQLRQjVWHVWLVFRQWUDU\ QRWEHHQTXHVWLRQHG 0DM2SDW $VLPLODUDUJXPHQW WRWKHKROGLQJVRI+HFNDQG(GZDUGV,Q+HFNWKH6XSUHPH KRZHYHUZDVDGYDQFHGE\WKHSHWLWLRQHULQ(GZDUGVWRWKH &RXUW KHOG WKDW mLI WKH GLVWULFW FRXUW GHWHUPLQHV WKDW WKH HIIHFW WKDW D UXOLQJ LQ (GZDUGVjV IDYRU RQ KLV †   SODLQWLIIjVDFWLRQHYHQLIVXFFHVVIXOZLOOQRWGHPRQVWUDWHWKH SURFHGXUDODWWDFNZRXOGQRWQHFHVVDULO\LPSO\WKHLQYDOLGLW\ LQYDOLGLW\RIDQ\RXWVWDQGLQJFULPLQDOMXGJPHQWDJDLQVWWKH RIWKHORVVRIKLVJRRGWLPHFUHGLWVEHFDXVHWKH:DVKLQJWRQ SODLQWLIIWKHDFWLRQVKRXOGEHDOORZHGWRSURFHHGl+HFN FRXUWV FRXOG VWLOO XSKROG WKH DGPLQLVWUDWLYH GHWHUPLQDWLRQ 86DW VHFRQGHPSKDVLVDGGHG 7KH&RXUWZDV RQFHWKHSURFHGXUDOHUURUVZHUHFRUUHFWHG(GZDUGV86 VXJJHVWLQJWKDWWKHUHDOSUREOHPZDVQRWWKDWWKHSULVRQHUjV DW   %XW WKH &RXUW FOHDUO\ UHMHFWHG WKLV DUJXPHQW LQ † DFWLRQZRXOGQHFHVVDULO\JHWKLPRXWRIMDLOVRRQHU (GZDUGV,GDW6LPSO\EHFDXVHWKHDGPLQLVWUDWLYHERG\ EXWUDWKHUWKDWWKHIHGHUDOFRXUWVPXVWQRWDOORZWKHXVHRI PLJKWUHDFKWKHVDPHUHVXOWWKHVHFRQGWLPHDURXQGWKHUHIRUH † WRLPSO\WKHLQYDOLGLW\RIDQ\VWDWHFULPLQDOMXGJPHQWV GRHVQRWVDYHD† SURFHGXUDODWWDFN)XUWKHUPRUHWKH UHODWLQJWRWKHOHQJWKRIDSULVRQHUjVLQFDUFHUDWLRQ PDMRULW\EHOLHYHVWKDWWKH6XSUHPH&RXUWjVXVHRIWKHZRUG mµMXGJPHQWj SURSHUO\ UHIHUV RQO\ WR WKH GHFLVLRQ RI D ,Q (GZDUGV WKH 6XSUHPH &RXUW H[WHQGHG WKLV SULQFLSOH FRQYLFWLQJFRXUWl 0DM2SDWQ ,GLVDJUHHKRZHYHU ZKHQRXWOLQLQJWKHHIIHFWRIFRUUHFWLQJWKHSURFHGXUDOGHIHFW EHFDXVH(GZDUGVLWVHOIZDVGHDOLQJZLWKWKHMXGJPHQWRIDQ LQTXHVWLRQ7KH&RXUWVWDWHG m7KLVLVDQREYLRXVSURFHGXUDO DGPLQLVWUDWLYHERG\(GZDUGV86DW GHIHFWDQGVWDWHDQGIHGHUDOFRXUWVKDYHUHLQVWDWHGJRRGWLPH FUHGLWV DEVHQW D QHZ KHDULQJ  ZKHQ LW LV HVWDEOLVKHGl 7KHKDOIZD\UHYLHZGLGQRWJUDQWRUGHQ\SDUROH (GZDUGV86DW HPSKDVLVDGGHG ,QRWKHUZRUGV LW LV WKH LPSOLHG LQYDOLGLW\ RI WKH DGPLQLVWUDWLYH KHDULQJ 7KHSODFHWREHJLQDQDO\]LQJWKHQDWXUHRI'RWVRQjVFODLP LWVHOInWKDWFDQEHFRUUHFWHGRQO\E\DQHZKHDULQJnWKDWLVDQ DQGLWVOHJDOLPSOLFDWLRQVLVWRORRNDWWKHNLQGRISURFHHGLQJ LPSHUPLVVLEOHUHVXOWRID† FODLP WKDWKHFKDOOHQJHV$WLVVXHLQKLVFRPSODLQWDUHWKHDFWLRQV WDNHQ DW KLV KDOIZD\ UHYLHZ LQ 0DUFK RI   7KLV )LQDOO\ WKH &RXUWjV VWDWHPHQW LQ 6SHQFHU WKDW D †   SURFHHGLQJGLGQRWUHVXOWLQ'RWVRQEHLQJHLWKHUJUDQWHGRU DFWLRQPLJKWOLHLIWKHmSURFHGXUDOGHIHFWGLGQRWQHFHVVDULO\ GHQLHGSDUROH:LWKRXWUHPRYLQJKLVVFKHGXOHGSDUROH LPSO\WKHLQYDOLGLW\RIWKH>SDUROH@UHYRFDWLRQl6SHQFHU GHWHUPLQDWLRQ KHDULQJ IURP WKH FDOHQGDU WKH 3DUROH %RDUG  86 DW  LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG  LV QRW LQVWHDGGHFLGHGWRUHWURDFWLYHO\DSSO\2KLRjVQHZHOLJLELOLW\ 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO JXLGHOLQHVWR'RWVRQ'RWVRQjVFRPSODLQWGRHVQRWKLQJPRUH PDMRULW\RSLQLRQKHUHDQGWKH'&&LUFXLWLQ$Q\DQZXWDNX WKDQ FKDOOHQJH WKLV LQWHULP DFWLRQ  $OWKRXJK WKH 6XSUHPH m7KHRQO\EHQHILWWKDWDYLFWRU\LQWKLVFDVHZRXOGSURYLGH &RXUW KDV QHYHU GHDOW ZLWK WKLV SDUROHHOLJLELOLW\SDUROH 1HDO DQG 0DUWLQH] EHVLGHV WKH SRVVLELOLW\ RI PRQHWDU\ GHWHUPLQDWLRQ GLVWLQFWLRQ ERWK WKH 1LQWK DQG 'LVWULFW RI GDPDJHVLVDWLFNHWWRJHWLQWKHGRRURIWKHSDUROHERDUGWKXV &ROXPELD&LUFXLWVKDYH RQO\PDNLQJWKHPHOLJLEOHIRUSDUROHFRQVLGHUDWLRQDFFRUGLQJ WR WKH WHUPV RI WKHLU VHQWHQFHVl  ,G DW  HPSKDVLV LQ  7KH 1LQWK DQG '& &LUFXLW GHFLVLRQV RQ SDUROH RULJLQDO ,QRWKHUZRUGVWKHUHZDVQRGHWHUPLQDWLRQWREH HOLJLELOLW\ XQZRXQGE\WKH3DUROH%RDUGLQ1HDOEHFDXVHWKHUHKDGQHYHU EHHQDGHFLVLRQRQKRZPXFKRIWKHWZRLQPDWHVjVHQWHQFHV ,Q HUURQHRXVO\ OXPSLQJ WRJHWKHU ERWK sRKQVRQjV DQG ZRXOG EH VHUYHG  'HFLGLQJ WKDW D SDUROHHOLJLELOLW\ VWDWXWH 'RWVRQjV FODLPV XQGHU WKH EURDG UXEULF RI D FKDOOHQJH WR VKRXOGQRWEHUHWURDFWLYHO\DSSOLHGWRWKHPmZRXOGQRWDOWHU mSDUROHSURFHGXUHVl,EHOLHYHWKDWWKHPDMRULW\KDVDGRSWHGD WKHFDOFXOXVIRUWKHUHYLHZRISDUROHUHTXHVWVLQDQ\ZD\l,G EURDGEDVHGUXOHWKDWZDVUHMHFWHGE\WKH6XSUHPH&RXUWLQ 7KHGHFLVLRQLQ1HDOGLGQRWQHFHVVDULO\LPSO\WKHLQYDOLGLW\ (GZDUGV$PRUHQDUURZUHDGLQJRI$Q\DQZXWDNXY0RRUH RIDQ\SULRUMXGJPHQWEHFDXVHQRSDUROHGHFLVLRQZDVWKURZQ )G '&&LU  DQDO\]HGLQFRQMXQFWLRQZLWK RXWRUDOWHUHGE\WKHFRXUW WZRHDUOLHU1LQWK&LUFXLWFDVHVOHDGVWRZKDW,EHOLHYHLVWKH SURSHU UXOH LQ GHWHUPLQLQJ ZKLFK SDUROH FKDOOHQJHV DUH ,Q UHDFKLQJ WKH GHFLVLRQ LQ 1HDO WKH 1LQWK &LUFXLW FRJQL]DEOHLQ† DFWLRQV GLVWLQJXLVKHG RQH RI LWV HDUOLHU FDVHV WKDW KDG DSSOLHG WKH +HFN(GZDUGVWHVW7KHHDUOLHUFDVHZDV%XWWHUILHOGY%DLO 2QHRIWKHVHFDVHVLV1HDOY6KLPRGD)G WK )G WK&LU  ZKLFKKHOGWKDWDSULVRQHUjV &LU  ZKHUHWKH1LQWK&LUFXLWKHOGWKDWSDUROHHOLJLELOLW\ GXHSURFHVVFKDOOHQJHXQGHU† DWWDFNLQJWKHSURFHGXUHV GHWHUPLQDWLRQV DUH GHFLVLRQV WKDW FDQ EH FKDOOHQJHG LQ D XVHG E\ WKH 3DUROH %RDUG LQ GHQ\LQJ KLP SDUROH ZDV QRW † FODLPZLWKRXWUXQQLQJDIRXORI+HFNDQG(GZDUGV VXVWDLQDEOH  %XWWHUILHOG FORVHO\ WUDFNHG WKH UHDVRQLQJ RI $QDORJRXV WR WKH FDVH EHIRUH XV 1HDO GHDOW ZLWK WKH (GZDUGVDQGKHOGWKDWmDFKDOOHQJHWRWKHSURFHGXUHVXVHGLQ UHWURDFWLYH DSSOLFDWLRQ RI D VH[RIIHQGHU VWDWXWH WKDW WKHGHQLDORISDUROHQHFHVVDULO\LPSOLFDWHVWKHYDOLGLW\RIWKH HVWDEOLVKHG QHZ SDUROHHOLJLELOLW\ JXLGHOLQHV DIWHU SDUROH GHQLDO RI SDUROH DQG WKHUHIRUH WKH SULVRQHUjV FRQWLQXLQJ HOLJLELOLW\KDGDOUHDG\EHHQGHWHUPLQHGIRUWKHWZRLQPDWHVLQ FRQILQHPHQWl,GDW TXHVWLRQ  )ROORZLQJ WKHLU FRQYLFWLRQV RQ FKDUJHV RI NLGQDSSLQJ VH[XDO DVVDXOW DQG DWWHPSWHG UDSH +DZDLL 7KHGLIIHULQJRXWFRPHVLQ1HDODQG%XWWHUILHOGEDVHGXSRQ HQDFWHGWKH6H[2IIHQGHU7UHDWPHQW3URJUDP 6273 7KH WKH QDWXUH RI WKH FODLPV SUHVHQWHG LV LPSRUWDQW EHFDXVH LW SURJUDP UHTXLUHV LQPDWHV FDWHJRUL]HG DV VH[ RIIHQGHUV WR SDUDOOHOV WKH GLVWLQFWLRQ EHWZHHQ WKH WZR FDVHV DW KDQG SDUWLFLSDWH LQ WKH SURJUDP DV D SUHFRQGLWLRQ WR EHFRPLQJ sRKQVRQ ZKRVH FODLP LV GLVFXVVHG LQ 3DUW ,, EHORZ KDV HOLJLEOH IRU SDUROH  %HFDXVH 1HDOjV DQG 0DUWLQH]j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†   HPSOR\LQJ WKH ODQJXDJH TXRWHG E\ ERWK WKH SDUROH5DWKHUOLNHWKHSODLQWLIIVLQ1HDOKHFKDOOHQJHVWKH 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO UHWURDFWLYH DSSOLFDWLRQ RI SDUROHHOLJLELOLW\ JXLGHOLQHV WR HQWLWOHG WR SDUROH  ,Q RUGHU WR UHDFK WKLV FRQFOXVLRQ RQH KLPVHOI  , ILQG WKLV GLVWLQFWLRQ DV DUWLFXODWHG E\ WKH 1LQWK VLPSO\QHHGVWRFRQVLGHUZKDWZLOOKDSSHQLI'RWVRQjVDFWLRQ &LUFXLWWREHSHUVXDVLYH LV VXFFHVVIXO  +HFN  86 DW  QRWLQJ WKDW mLI WKH GLVWULFW FRXUW GHWHUPLQHV WKDW WKH SODLQWLIIjV DFWLRQ HYHQ LI $Q\DQZXWDNXDOVRDGGUHVVHVDSDUROHHOLJLELOLW\VLWXDWLRQ VXFFHVVIXO ZLOO QRW GHPRQVWUDWH WKH LQYDOLGLW\ RI DQ\ DQG HPSOR\V WKH UHDVRQLQJ RI 1HDO  ,Q $Q\DQZXWDNX WKH RXWVWDQGLQJFULPLQDOMXGJPHQWDJDLQVWWKHSODLQWLIIWKHDFWLRQ '&&LUFXLWKHOGWKDWWKHDOOHJHGPLVFDOFXODWLRQRIDSDUROH VKRXOG EH DOORZHG WR SURFHHGl  HPSKDVLV RPLWWHG   +LV HOLJLELOLW\ GDWH SUHVHQWHG D FRJQL]DEOH †   FODLP  7KH VFKHGXOHGSDUROHKHDULQJZRXOGSURFHHGDVSODQQHGDQG RSLQLRQKRZHYHUGRHVQRWGLIIHUHQWLDWHEHWZHHQDFKDOOHQJH QRWKLQJDERXWWKH3DUROH%RDUGjV GHQLDORIKLVSDUROH WRWKHSURFHGXUHVXVHGLQDSDUWLFXODUSDUROHKHDULQJWRGHQ\ ZRXOGFKDQJH$VXFFHVVIXORXWFRPHZRXOGVLPSO\GLFWDWH SDUROHYHUVXVWKHPLVDSSOLFDWLRQRUUHWURDFWLYHDSSOLFDWLRQRI WKDW WKH  KHDULQJ DFWXDOO\ IXQFWLRQ DV D UHDO SDUROH JHQHUDOO\ DSSOLFDEOH SDUROHHOLJLELOLW\ JXLGHOLQHV KHDULQJ UDWKHU WKDQ DV D UXEEHUVWDPS GHQLDO URRWHG LQ WKH $Q\DQZXWDNXLVLQVWHDGEDVHGOLNHWKHPDMRULW\RSLQLRQRQ UHWURDFWLYHDSSOLFDWLRQRIWKHFXUUHQWHOLJLELOLW\JXLGHOLQHV WKHUDWLRQDOHWKDWD† FODLPLVVXVWDLQDEOHVRORQJDVWKH FODLPGRHVQRWQHFHVVDULO\LPSO\RUDXWRPDWLFDOO\UHVXOWLQD ,EHOLHYHWKDWWKLVLVZKDWLVPHDQWE\WKHODQJXDJHmDWLFNHW VSHHGLHU UHOHDVH IURP SULVRQ  $Q\DQZXWDNX  )G DW WRJHWLQWKHGRRURIWKHSDUROHERDUGl1HDO)GDW  7KH6XSUHPH&RXUWKDVQHYHUDGGUHVVHGDVLWXDWLRQOLNHWKH RQHSUHVHQWHGKHUHEXWLWVFDVHVFOHDUO\LQGLFDWHWKDWWKHUHDUH %HFDXVH$Q\DQZXWDNXGHDOWZLWKWKHDOOHJHGPLVDSSOLFDWLRQ VRPH DWWDFNV RQ SDUROH SURFHGXUHV WKDW UHPDLQ FRJQL]DEOH RI SDUROHHOLJLELOLW\ JXLGHOLQHV KRZHYHU , GR QRW GLVDJUHH XQGHU† $IWHUDOOWKH&RXUWZDVYHU\FDUHIXOLQ+HFNWR ZLWKWKHUHVXOWUHDFKHGLQWKDWFDVHHYHQWKRXJK,GLVDJUHH GLVWLQJXLVK :ROII Y 0F'RQQHOO  86      D ZLWK LWV UDWLRQDOH  , DOVR EHOLHYH WKDW WKH 1LQWK &LUFXLWjV †   FODVVDFWLRQ VXLW EURXJKW E\ SULVRQHUV FKDOOHQJLQJ WUHDWPHQW RI WKH LVVXH LV PRUH LQVWUXFWLYH WKDQ WKDW RI VHYHUDORID1HEUDVNDSULVRQjVDGPLQLVWUDWLYHUXOHVSUDFWLFHV $Q\DQZXWDNX EHFDXVH WKH 1HDO DQG %XWWHUILHOG GHFLVLRQV DQGSURFHGXUHVRQWKHIROORZLQJJURXQGV H[SOLFDWH WKH NH\ GLIIHUHQFH EHWZHHQ D SDUROHHOLJLELOLW\ FKDOOHQJHWKDWDWWDFNVDJHQHUDOO\DSSOLFDEOHSULVRQUHJXODWLRQ >:@HWKLQN>:ROII@UHFRJQL]HGD† FODLPIRUXVLQJ YHUVXV DQ DWWHPSW WR mVHW DVLGHl RU mUHYHUVHl WKH GHQLDO RI WKHZURQJSURFHGXUHVQRWIRUUHDFKLQJWKHZURQJUHVXOW SDUROHLQDQLQGLYLGXDOFDVH LH GHQ\LQJ JRRGWLPH FUHGLWV   1RU LV WKHUH DQ\ LQGLFDWLRQLQWKHRSLQLRQRUDQ\UHDVRQWREHOLHYHWKDW  3DUROHHOLJLELOLW\ DFWLRQV XQGHU †   PHHW WKH XVLQJ WKH ZURQJ SURFHGXUHV QHFHVVDULO\ YLWLDWHG WKH +HFN(GZDUGVWHVW GHQLDORIJRRGWLPHFUHGLWV7KXVWKHFODLPDWLVVXHLQ :ROII GLG QRW FDOO LQWR TXHVWLRQ WKH ODZIXOQHVV RI WKH ,EHOLHYHWKDWWKHSULQFLSOHVVHWIRUWKLQ+HFNDQG(GZDUGV SODLQWLIIjVFRQWLQXLQJFRQILQHPHQW DV DSSOLHG E\ WKH 1LQWK &LUFXLW LQ 1HDO DQG %XWWHUILHOG SURYLGH D UHDVRQDEOH IUDPHZRUN IRU DQDO\]LQJ 'RWVRQjV +HFN86DW HPSKDVLVLQRULJLQDO  FODLP  7KH QDWXUH RI 'RWVRQjV FODLPnDQ DWWDFN RQ WKH UHWURDFWLYHDSSOLFDELOLW\RI2KLRjVVWDWXWRU\SDUROHHOLJLELOLW\ 6LPLODUO\ WKHUH LV QR LQGLFDWLRQ WKDW 'RWVRQjV FODLP LI VFKHPHnGRHV QRW QHFHVVDULO\ LPSO\ WKH LQYDOLGLW\ RI DQ\ DOORZHGWRSURFHHGZRXOGYLWLDWHWKHHDUOLHUGHQLDORISDUROH MXGJPHQW E\ DQ DGPLQLVWUDWLYH ERG\ WKDW KH LV RU LV QRW +LVDSSHDOLVDFODVVLFmFODLPIRUXVLQJWKHZURQJSURFHGXUHV 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO QRWIRUUHDFKLQJWKHZURQJUHVXOWl,G)XUWKHUVXSSRUWIRU WKH GRRU RI WKH SDUROH ERDUGl  +RZHYHU WKH RSLQLRQ WKLV FRQFOXVLRQ FRPHV IURP WKH IDFW WKDW 'RWVRQjV ODZVXLW RYHUUHDFKHV ZKHQ LW VXJJHVWV WKDW EHFDXVH sRKQVRQjV DQG FRXOG MXVW DV HDVLO\ KDYH EHHQ FDVW DV D FODVVDFWLRQ FODLP 'RWVRQjVSURFHGXUDOFKDOOHQJHVZLOOUHVXOWLQQRWKLQJPRUH FKDOOHQJLQJ WKH UHWURDFWLYH DSSOLFDELOLW\ RI 2KLRjV SDUROH WKDQDQHZKHDULQJWKHLUFODLPVPXVWEHDOORZHGWRSURFHHG HOLJLELOLW\JXLGHOLQHV7KLVZRXOGKDYHSODFHGWKHFDVHLQWKH 0DM2SDW 7KLVUXOLQJLVRYHUEURDGLQOLJKWRIWKH VDPH SRVWXUH DV WKDW SUHVHQWHG LQ :ROII UHTXHVWLQJ 6XSUHPH &RXUWjV KROGLQJ LQ (GZDUGV ZKLFK UHMHFWHG WKH SURVSHFWLYHLQMXQFWLYHUHOLHIWKDWVHHPVFOHDUO\ SHUPLVVLEOH 1LQWK&LUFXLWjVGHFLVLRQEDVHGRQWKDWFLUFXLWjVmSUHFHGHQWWR XQGHUWKH6XSUHPH&RXUWjVUXOH WKH HIIHFW WKDW D FODLP FKDOOHQJLQJ RQO\ WKH SURFHGXUHV HPSOR\HGLQDGLVFLSOLQDU\KHDULQJLVDOZD\VFRJQL]DEOHXQGHU 'RWVRQjV FODLP DOVR EULQJV WR PLQG WKH H[DPSOHV RI †  l  (GZDUGV  86 DW   m7KDW SULQFLSOH LV K\SRWKHWLFDO 3DUROH %RDUG GHFLVLRQV UKHWRULFDOO\ XVHG E\ LQFRUUHFWVLQFHLWGLVUHJDUGVWKHSRVVLELOLW\FOHDUO\HQYLVLRQHG sRKQVRQjVODZ\HUVLQWKHLU5HSO\%ULHIWRSRLQWRXWWKHQHHG E\+HFNWKDWWKHQDWXUHRIWKHFKDOOHQJHWRWKHSURFHGXUHV IRUWKHDYDLODELOLW\RI† DFWLRQV FRXOG EH VXFK DV QHFHVVDULO\ WR LPSO\ WKH LQYDOLGLW\ RI WKH MXGJPHQWl  ,G  ,Q OLJKW RI (GZDUGV , EHOLHYH WKDW WKH &DQ WKH 2KLR 3DUROH %RDUG GHWHUPLQH WKDW DOO ZKLWH PDMRULW\ KDV HUUHG LQ UXOLQJ WKDW DOO DWWDFNV RQ SDUROH PDOHVZKRDUHHOLJLEOHIRUSDUROHUHOHDVHZLOOKDYHWKHLU SURFHGXUHVLQ2KLRWKDWUHTXLUHDQHZKHDULQJWRFRUUHFWDUH UHOHDVHJUDQWHGZKLOHQRRQHHOVHFDQ"&DQWKH%RDUG FRJQL]DEOHXQGHU†  GHQ\SDUROHWRDOO+LVSDQLFLQPDWHVDVDPDWWHURISROLF\" &DQWKH%RDUGIOLSDFRLQWRGHWHUPLQHZKRJHWVSDUROH" 7KDWEHLQJVDLG,EHOLHYHWKDWWKHPDMRULW\KDVUHDFKHGWKH FRUUHFW FRQFOXVLRQ LQ DOORZLQJ 'RWVRQjV FODLP WR SURFHHG ,WKLQNWKHDQVZHUWRWKHVHTXHVWLRQVLVFOHDUO\QRZLWKWKH XQGHU† ,WKHUHIRUHFRQFXULQWKHUHVXOWRQO\ H[DPSOHV LOOXVWUDWLQJ ZK\ DOO †   DFWLRQV DWWDFNLQJ D VWDWHjVSDUROHVFKHPHDUHQRWVXEMHFWWRWKHKDEHDVFRUSXV ,,s2+1621j6&/$,0 H[KDXVWLRQRIVWDWHUHPHGLHVUHTXLUHPHQW6HH3UHLVHU 86 DW   EDUULQJ FODLPV WKDW VRXJKW WKH UHVWRUDWLRQ RI $ )DFWXDODQGSURFHGXUDOEDFNJURXQG JRRGWLPHFUHGLWVXQGHU† EXWDFNQRZOHGJLQJDSRVVLEOH VLWXDWLRQnDQ DFWLRQ IRU GDPDJHV RQO\nWKDW mFRXOG EH $VLQGLFDWHGDERYHsRKQVRQjVFODLPLQYROYHVYHU\GLIIHUHQW EURXJKWXQGHUWKH&LYLO5LJKWV$FWLQIHGHUDOFRXUWZLWKRXW IDFWVIURP'RWVRQjV,Q2KLRRQRUDERXWWKHGDWHRISDUROH DQ\ UHTXLUHPHQW RI SULRU H[KDXVWLRQ RI VWDWH UHPHGLHVl  HOLJLELOLW\WKH3DUROH%RDUGPXVWKROGDKHDULQJWRGHWHUPLQH 7KHVHDFWLRQVZRXOGKDYHQRQHFHVVDU\EHDULQJRQDSDUWLFXODU ZKHWKHUWKHSULVRQHUVKRXOGEHSDUROHG2+,2 $'0,1 &2'( SDVW MXGJPHQW ZLWK UHJDUG WR D SULVRQHU EXW WKH\ ZRXOG † 5HFRPPHQGDWLRQVIRURUDJDLQVWUHOHDVHFDQ HQVXUHWKDWWKHVWDWHVDUHQRWYLRODWLQJSULVRQHUVjEDVLFIHGHUDO EHPDGHE\mDSDQHOFRQVLVWLQJRIRQHRUPRUHPHPEHUVRI ULJKWV WKH 3DUROH %RDUG DQG RQH RU PRUH 3DUROH %RDUG KHDULQJ RIILFHUVl,G †  & $WWKHKHDULQJWKH3DUROH  $ SURSHU DSSOLFDWLRQ RI WKH +HFN(GZDUGV WHVW %RDUG RU WKH UHFRPPHQGLQJ SDQHO  VKDOO FRQVLGHU DPRQJ FRLQFLGHVZLWKWKHPDMRULW\jVGHFLVLRQRQ'RWVRQjV RWKHUWKLQJVm>Z@ULWWHQRURUDOVWDWHPHQWVE\WKHLQPDWHRWKHU FODLP WKDQ JULHYDQFHV ILOHG XQGHU UXOH   RI WKH $GPLQLVWUDWLYH&RGHl,G †  %   7KHPDMRULW\RSLQLRQSXUSRUWVWRDSSO\WKH+HFN(GZDUGV WHVWE\VLPSO\JLYLQJ'RWVRQDQGsRKQVRQDmWLFNHWWRJHWLQ 1RV 'RWVRQHWDOY   'RWVRQHWDOY 1RV :LONLQVRQHWDO :LONLQVRQHWDO sRKQVRQDOOHJHVWKDWWKHVHSURFHGXUHVZHUHQRWIROORZHGDW ZDV KHOG WR EH D FRJQL]DEOH †   DFWLRQ DQG ZDV ODWHU KLV$SULO  SDUROHKHDULQJZKHQKHZDVGHQLHGSDUROH GLVWLQJXLVKHGE\WKH6XSUHPH&RXUWLQ+HFNRQWKHJURXQGV +H DOOHJHV WKDW LQ YLRODWLRQ RI 2KLR $GPLQLVWUDWLYH &RGH TXRWHGLQWKHGLVFXVVLRQRI'RWVRQjVFODLPXQGHU3DUW,DERYH †   &  KLV KHDULQJ SDQHO FRQVLVWHG RI RQO\ RQH )XUWKHUPRUHWKHLQMXQFWLYHUHOLHIVRXJKWLQ:ROIIZDVVWULFWO\ 3DUROH%RDUGKHDULQJRIILFHUUDWKHUWKDQDSDQHOFRQVLVWLQJRI SURVSHFWLYH DQG WKXV GLG QRW DIIHFW WKH YDOLGLW\ RI DQ\ DW OHDVW RQH PHPEHU RI WKH 3DUROH %RDUG DQG DW OHDVW RQH MXGJPHQW WKDW KDG DOUHDG\ RFFXUUHG HYHQ WKRXJK WKH 3DUROH%RDUGKHDULQJRIILFHU6HFRQGO\KHDOOHJHVWKDWLQ SURFHGXUDO FKDQJHV VRXJKW E\ WKH SODLQWLIIV ZRXOG KDYH YLRODWLRQRI2KLR$GPLQLVWUDWLYH&RGH†  %   FOHDUO\ LPSOLHG WKDW SDVW DGMXGLFDWLRQV GLG QRW SDVV KHZDVQRWDOORZHGWRVSHDNRQKLVRZQEHKDOIRUDVNDQ\ FRQVWLWXWLRQDOPXVWHU,GDW TXHVWLRQV)LQDOO\sRKQVRQFRQWHQGVWKDWWKHKHDULQJSDQHOjV GHFLVLRQLQFRUUHFWO\UHOLHGXSRQWZRDOOHJHGFRQYLFWLRQVLQKLV ,I sRKQVRQjV FRPSODLQW FRXOG EH FRQVWUXHG DV D EURDGO\ UHFRUGIRUDJJUDYDWHGDUVRQLQGHFLGLQJWRGHQ\KLVSDUROH FRQFHLYHGDWWDFNRQWKHSUDFWLFHVSROLFLHVDQGSURFHGXUHV XVHGE\WKH2KLRSDUROHDXWKRULWLHVWKHQDSODXVLEOHDUJXPHQW 7KDW ODVW SKUDVHnmGHFLGLQJ WR GHQ\ KLV FRXOG EH PDGH WKDW KLV FODLP WRR VKRXOG SURFHHG XQGHU SDUROHlnLPPHGLDWHO\ LQGLFDWHV ZK\ sRKQVRQjV FODLP LV † ,IsRKQVRQKDGVRXJKWSURVSHFWLYHUHOLHIRQO\DQGGLG GLIIHUHQW IURP 'RWVRQjV DQG ZK\ LW PXVW EH DQDO\]HG QRW QHFHVVDULO\ VXJJHVW WKDW WKH LUUHJXODULWLHV LQ KLV SDUROH GLIIHUHQWO\ XQGHU +HFN DQG (GZDUGV  sRKQVRQjV †   KHDULQJZHUHXQLTXHWRKLPWKHQKLVDFWLRQZRXOGQRWDIIHFW DFWLRQZDVGLVPLVVHGE\WKHGLVWULFWFRXUWIRUIDLOLQJWRVWDWH WKHYDOLGLW\RIDQ\MXGJPHQWWKDWKDGDOUHDG\RFFXUUHGHYHQ DFODLPXSRQZKLFKUHOLHIFDQEHJUDQWHG+LVFRXQVHOQRZ WKRXJKWKHSURFHGXUDOFKDQJHVVRXJKWZRXOGLPSO\WKDWWKH DUJXHVRQDSSHDOWKDWKLVFODLPLVQRWEDUUHGE\+HFNEHFDXVH SDVWDGMXGLFDWLRQGLGQRWSDVVFRQVWLWXWLRQDOPXVWHU KH mFKDOOHQJHV RQO\ WKH SURFHGXUHV WKDW ZHUH XVHG DW KLV SDUROHKHDULQJDQGVHHNVWRKDYHWKHKHDULQJUHGRQHLQDZD\ %XWWKLVFKDUDFWHUL]DWLRQLVQRWDYDOLGRQHIRUsRKQVRQjV WKDWFRPSOLHVZLWKWKHVDIHJXDUGVDIIRUGHGKLPl FODLP  $OWKRXJK sRKQVRQjV SUR VH FRPSODLQW LWVHOI LV DPELJXRXVKLVDWWRUQH\VRQDSSHDOKDYHFOHDUO\VWDWHGWKDWKH % $QDO\VLV ZDQWVWRKDYHKLVKHDULQJmUHGRQHl,QRWKHUZRUGVKHVHHNV WR KDYH WKLV FRXUW WKURZ RXW WKH SUHYLRXV 3DUROH %RDUGjV ,QKROGLQJWKDWsRKQVRQFDQSXUVXHKLVFODLPXQGHU†  GHWHUPLQDWLRQ WKDW GHQLHG KLP SDUROH  sRKQVRQ FDQQRW WKH PDMRULW\ RSLQLRQ HPSOR\V LWV mHDUOLHUUHOHDVHl WHVW WR SRVVLEO\EHPDNLQJD:ROIIW\SHFODLPEDVHGRQWKHUHOLHIKH FUHDWH D EURDG UXOH WKDW DOORZV †   DWWDFNV RQ DOO VHHNV  )XUWKHUPRUH WKH SURFHGXUDO LUUHJXODULWLHV WKDW KH GLVFUHWLRQDU\3DUROH%RDUGKHDULQJSURFHGXUHV$VGLVFXVVHG FRPSODLQVDERXWDUHQRWSUREOHPVZLWKWKHSUDFWLFHVRIWKH DERYH WKLV LV LPSHUPLVVLEOH XQGHU (GZDUGV  2QO\ LI 2KLR3DUROH%RDUGDVDZKROH WKH\DUHGHYLDWLRQVIURPWKH sRKQVRQjVFODLPZHUHDQDORJRXVWRWKDWLQ:ROIIVKRXOGKHEH $GPLQLVWUDWLYH&RGHWKDWDOOHJHGO\WRRNSODFHLQsRKQVRQjV DOORZHGWRSXUVXHKLVDFWLRQXQGHU†  KHDULQJ)RUWKHVHUHDVRQVWKHUHLVQRZD\WRFKDUDFWHUL]HWKH QDWXUHRIsRKQVRQjVFKDOOHQJHDVDQ\WKLQJRWKHUWKDQDFODLP :ROIIZDVDFODVVDFWLRQWKDWFKDOOHQJHGWKHUXOHVSUDFWLFHV WKDW QHFHVVDULO\ LPSOLHV WKH LQYDOLGLW\ RI D SULRU VWDWH DQGSURFHGXUHVDWD1HEUDVNDSULVRQFRPSOH[7KHSODLQWLIIV MXGJPHQW  $V GLVFXVVHG DERYH LW LV QRW WKH IDFW RI WKH LQ WKHLU VXLW IRU GDPDJHV DOOHJHG WKDW WKH SROLFLHV RI WKH SULVRQHUjV LQFDUFHUDWLRQ WKDW LV WKH FRQFHUQ LW LV WKH YHU\ SULVRQDGPLQLVWUDWLRQZHUHIODZHGDVDZKROHQRWDVDSSOLHG MXGJPHQW RI WKH VWDWHnDGPLQLVWUDWLYH RU MXGLFLDOnZKRVH WRDQ\RQHLQPDWH:ROII86DW7KLVDFWLRQ LQYDOLGLW\PD\QRWEHLPSOLHGE\D† FODLP 1RV 'RWVRQHWDOY  :LONLQVRQHWDO , WKXV FRQFOXGH WKDW WKH PDMRULW\ KDV UHDFKHG WKH ZURQJ UHVXOWLQsRKQVRQjVDSSHDO,WKDVGRQHVRE\DOORZLQJ†  WREHXVHGDVDYHKLFOHIRUDOOSURFHGXUDODWWDFNVRQ3DUROH %RDUGSURFHHGLQJVWKDWUHVXOWLQDQHZKHDULQJDUHVXOWWKDWLV FRQWUDU\WR6XSUHPH&RXUWSUHFHGHQW,WKHUHIRUHUHVSHFWIXOO\ GLVVHQWIURPWKHUHVXOWUHDFKHGRQsRKQVRQjVFODLP ,,,&21&/86,21 ,GLVDJUHHZLWKWKHPDMRULW\jVFRQFOXVLRQWKDWDmVXFFHVVIXO FKDOOHQJH ZLOO RQO\ µQHFHVVDULO\ LPSO\j WKH LQYDOLGLW\ RI D SULVRQHUjVFRQYLFWLRQRUFRQILQHPHQWLILWZLOOLQHYLWDEO\RU DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVHl  0DM 2S DW  5DWKHUWKHLVVXHLVZKHWKHUWKHQDWXUHRIWKHFODLPVRIWKH LQGLYLGXDOSULVRQHUVQHFHVVDULO\LPSOLHVWKHLQYDOLGLW\RIWKHLU XQGHUO\LQJ FRQYLFWLRQV RU VHQWHQFHV  %HFDXVH 'RWVRQ SUHVHQWV ZKDW DPRXQWV WR D SURVSHFWLYH DWWDFN RQ WKH UHWURDFWLYH DSSOLFDELOLW\ RI 2KLRjV SDUROHHOLJLELOLW\ JXLGHOLQHV,EHOLHYHWKDWKHKDVDFRJQL]DEOH† FODLP sRKQVRQRQWKHRWKHUKDQGDWWDFNVWKHSURFHGXUHVXVHGLQD SUHYLRXV KHDULQJ WKDW GHQLHG KLP SDUROH DQG DVNV WKDW KLV KHDULQJEHmUHGRQHl9DFDWLQJWKHROGKHDULQJDQGRUGHULQJ WKH2KLR3DUROH%RDUGWRSURYLGHsRKQVRQZLWKDQHZHUURU IUHH KHDULQJ LV WKH YHU\ W\SH RI DWWDFN RQ DQ XQGHUO\LQJ VHQWHQFH WKDW +HFN DQG (GZDUGV H[SUHVVO\ SURKLELW sRKQVRQjVFKDOOHQJHLQVWHDGUHTXLUHVWKHH[KDXVWLRQRIVWDWH UHPHGLHVDQGLIQHFHVVDU\DSHWLWLRQIRUKDEHDVFRUSXVUHOLHI +HFN  86 DW   , WKHUHIRUH FRQFXU LQ WKH UHVXOW UHDFKHG RQ 'RWVRQjV FODLP DQG UHVSHFWIXOO\ GLVVHQW ZLWK UHJDUGWRsRKQVRQjV