Aetna Caslty and Sur v. Leahey Constr Co

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 3XUVXDQW WR 6L[WK &LUFXLW 5XOH 

/HDKH\&RQVWUXFWLRQ&RHWDO  (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
)LOH 1DPH DS

,,,&21&/86,21
)RU DOO RI WKH UHDVRQV VWDWHG DERYH ZH 5(9(56( WKH 81,7('67$7(6&28572)$33($/6
GLVWULFW FRXUWjV GHFLVLRQ WKDW  GHQLHG 'RQQHOO\jV DQG )257+(6,;7+&,5&8,7
.H\%DQNjV PRWLRQ IRU MXGJPHQW DV D PDWWHU RI ODZ ZLWK BBBBBBBBBBBBBBBBB
UHVSHFW WR WKH FODLP RI FRQVSLUDF\ WR FRPPLW IUDXG DQG
GHQLHG(OPRUHjVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZ
ZLWKUHVSHFWWRWKHFODLPVRIIUDXGDQGRIDLGLQJDQGDEHWWLQJ
IUDXG:HDOVR5(0$1'WKHFDVHIRUDQHZWULDORQWKH $(71$ &$68$/7< $1' ;
TXHVWLRQRIZKHWKHULQOLJKWRIWKHLQIRUPDWLRQGLVFORVHGE\ 685(7< &203$1<QND 
(OPRUHWR%ODFNDV7UDYHOHUVjVDJHQW7UDYHOHUVHVWDEOLVKHG 75$9(/(56 &$68$/7< $1' 
WKHHOHPHQWRIMXVWLILDEOHUHOLDQFHRQ/HDKH\jVIUDXGUHJDUGLQJ  1RV
685(7< &203$1< 2)  
WKHVXUHW\ERQGVLVVXHGDIWHUWKHGDWHRIGLVFORVXUHDQGWKH
DPRXQW DQG DOORFDWLRQ RI GDPDJHV WR ZKLFK 7UDYHOHUV LV $0(5,&$ !

HQWLWOHGLQOLJKWRIWKHUXOLQJVPDGHWKURXJKRXWWKLVRSLQLRQ 3ODLQWLII$SSHOOHH 
,QDOORWKHUUHVSHFWVZH$)),50WKHMXGJPHQWRIWKHGLVWULFW &URVV$SSHOODQW 
FRXUW 
Y 


/($+(< &216758&7,21 
&203$1< ,1&HWDO 
'HIHQGDQWV 

.(<%$1. 1$7,21$/ 
$662&,$7,21 2+,2DQG 

(':$5' '211(//< 
'HIHQGDQWV$SSHOODQWV 
 
&URVV$SSHOOHHV 

0$5. s (/025(DQG0$5. 

s (/025( &3$ ,1& 
'HIHQGDQWV$SSHOOHHV 
&URVV$SSHOODQWV 
1


 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW LQ UHTXHVWV DLGV HQFRXUDJHV UDWLILHV RU DGRSWV D
IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW$NURQ ZURQJGRHUjVDFWLRQVLQSXUVXDQFHRIDFRPPRQSODQRUGHVLJQ
1RnsDPHV6*ZLQ'LVWULFWsXGJH WRFRPPLWDWRUWLRXVDFWl&OHYHFRQ,QFY1RUWKHDVW2KLR
5HJjO6HZHU'LVW1(G2KLR&W$SS
$UJXHG$SULO 7RUWIHDVRUV ZLOO QRW JHQHUDOO\ EH KHOG MRLQWO\ RU VHYHUDOO\
OLDEOH KRZHYHU ZKHUH WKHLU LQGHSHQGHQW FRQFXUULQJ DFWV
'HFLGHGDQG)LOHGsXO\ KDYHFDXVHGGLVWLQFWDQGVHSDUDWHLQMXULHVWRWKHSODLQWLIIRU
ZKHUHVRPHUHDVRQDEOHPHDQVRIDSSRUWLRQLQJWKHGDPDJHVLV
%HIRUH1255,6DQG*,/0$1&LUFXLWsXGJHV+22' HYLGHQW6HH:LOOLDPVY*UDJVWRQ1(G
'LVWULFWsXGJH
2KLR&W$SS
BBBBBBBBBBBBBBBBB +HUH7UDYHOHUVVHHNVWRLPSRVHMRLQWDQGVHYHUDOOLDELOLW\
EHWZHHQ'RQQHOO\DQG.H\%DQNRQWKHRQHKDQGDQG(OPRUH
&2816(/ RQWKHRWKHU7KHSUREOHPZLWK7UDYHOHUVjVDUJXPHQWLVWKDW
DOWKRXJKHDFKRIWKHWZRVHWVRIGHIHQGDQWVFDQEHFRQVLGHUHG
$5*8('  'DQLHO 5 :DUUHQ 7+203621 +,1( MRLQWWRUWIHDVRUVZLWK/HDKH\WKH\FDQQRWEHFRQVLGHUHGMRLQW
)/25<&OHYHODQG2KLRIRU$SSHOODQW0DUN+/XGZLJ WRUWIHDVRUVZLWKHDFKRWKHU:LWKUHVSHFWWR'RQQHOO\DQG
&2/( &203$1< $NURQ 2KLR 7LPRWK\ s )LW]JHUDOG .H\%DQNWKHMXU\IRXQGWKDWWKH\DLGHGDQGDEHWWLQJ/HDKH\
*$//$*+(56+$53)8/721 1250$1&OHYHODQG LQKLVIUDXGDJDLQVW7UDYHOHUV:HKDYHFRQFOXGHGWKDWWKH
2KLRIRU$SSHOOHHV21%5,()'DQLHO5:DUUHQ7RQLs FRQVSLUDF\YHUGLFWDJDLQVWWKHPPXVWEHUHYHUVHG7KHMXU\
4XHUU\3DWULFN)+DJJHUW\7+203621+,1( )/25< GLGQRWILQGKRZHYHUWKDW'RQQHOO\DQG.H\%DQNLQDQ\ZD\
&OHYHODQG 2KLR IRU $SSHOODQW  0DUN + /XGZLJ &2/( DVVLVWHG(OPRUHLQWKHQHJOLJHQWSHUIRUPDQFHRIKLVGXWLHVYLV
&203$1<$NURQ2KLR7LPRWK\s)LW]JHUDOGsDPHV) jYLV7UDYHOHUV:HKDYHFRQFOXGHGWKDWWKHIUDXGDQGWKH
.RHKOHU*$//$*+(56+$53)8/721 1250$1 DLGLQJDQGDEHWWLQJYHUGLFWVDJDLQVW(OPRUHPXVWEHUHYHUVHG
&OHYHODQG2KLRIRU$SSHOOHHV $VVXFKWKH\FDQQRWEHUHVSRQVLEOHIRUWKHGDPDJHVDVVHVVHG
DJDLQVWKLP6LPLODUO\DOWKRXJKWKHMXU\UHQGHUHGDYHUGLFW
BBBBBBBBBBBBBBBBB ILQGLQJ (OPRUH QHJOLJHQW LW GLG QRW ILQG WKDW KH DVVLVWHG
'RQQHOO\ DQG .H\%DQN LQ PDNLQJ WKH ORDQ IRU ZKLFK WKH\
23,1,21 ZHUHIRXQGOLDEOH$VVXFKKHFDQQRWEHKHOGUHVSRQVLEOHIRU
BBBBBBBBBBBBBBBBB WKHGDPDJHVDVVHVVHGDJDLQVWWKHP
521$/'/((*,/0$1&LUFXLWsXGJH$HWQD&DVXDOW\ 7KHUHZDVVLPSO\QRmFRPPRQSODQRUGHVLJQWRFRPPLWD
DQG6XUHW\&RPSDQ\QRZNQRZQDV7UDYHOHUV&DVXDOW\DQG WRUWLRXV DFWl DV EHWZHHQ WKH WZR VHWV RI GHIHQGDQWV  6HH
6XUHW\ &RPSDQ\ RI $PHULFD 7UDYHOHUV DOOHJHV WKDW WKH &OHYHFRQ1(GDW)RUWKLVUHDVRQZHFRQFOXGH
GHIHQGDQWV HQJDJHG LQ D VFKHPH WR GHIUDXG 7UDYHOHUV LQ WKDW WKH GLVWULFW FRXUW GLG QRW HUU LQ GHQ\LQJ 7UDYHOHUVjV
FRQQHFWLRQ ZLWK LWV LVVXDQFH RI FHUWDLQ VXUHW\ ERQGV PRWLRQWRLPSRVHMRLQWDQGVHYHUDOOLDELOLW\

7KH +RQRUDEOH sRVHSK 0 +RRG 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
(DVWHUQ 'LVWULFW RI .HQWXFN\ VLWWLQJ E\ GHVLJQDWLRQ
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

( 7KH GLVWULFW FRXUW GLG QRW HUU ZKHQ LW UHIXVHG WR 6SHFLILFDOO\ 7UDYHOHUV FRQWHQGV WKDW 3DWULFN /HDKH\ D
LPSRVHMRLQWDQGVHYHUDOOLDELOLW\ SULQFLSDORZQHURIERWK/HDKH\&RQVWUXFWLRQ&RPSDQ\,QF
/&& DQG /HDKH\ *HQHUDO &RQWUDFWLQJ DQG 0DQDJHPHQW
$IWHU WKH MXU\ UHWXUQHG LWV YHUGLFW DJDLQVW 'RQQHOO\ &RUSRUDWLRQ /*& 0 IUDXGXOHQWO\ PDQLSXODWHG WKH
.H\%DQN DQG (OPRUH 7UDYHOHUV ILOHG D PRWLRQ WR LPSRVH ILQDQFLDO SRVLWLRQ RI /*& 0 IRU WKH SXUSRVH RI LQGXFLQJ
MRLQW DQG VHYHUDO OLDELOLW\ IRU WKH FXPXODWLYH WRWDO RI 7UDYHOHUV WR DJUHH WR ERQG /*& 0jV SXEOLF FRQVWUXFWLRQ
$VSUHYLRXVO\QRWHGWKHMXU\DVVHVVHGGDPDJHV SURMHFWV  7UDYHOHUV IXUWKHU FODLPV WKDW /HDKH\jV SHUVRQDO
DJDLQVW'RQQHOO\DQG.H\%DQNLQWKHDPRXQWRI EDQNHU(GZDUG'RQQHOO\RI.H\%DQN1DWLRQDO$VVRFLDWLRQ
DQG DJDLQVW (OPRUH LQ WKH DPRXQW RI   7KH .H\%DQN DQG /HDKH\jV DFFRXQWDQW 0DUN s (OPRUH RI
GLVWULFWFRXUWVXPPDULO\GHQLHGWKLVPRWLRQ 0DUN s (OPRUH &3$ ,QF SDUWLFLSDWHG LQ WKH VFKHPH
/*& 0 VXEVHTXHQWO\ GHIDXOWHG RQ WKUHH ERQGHG SURMHFWV
,QLWVFURVVDSSHDO7UDYHOHUVFRQWHQGVWKDWm>W@KHGLVWULFW FDXVLQJ7UDYHOHUVWRLQFXURYHUPLOOLRQLQORVVHV
FRXUWVKRXOGKDYHHQWHUHGDMXGJPHQWXSRQWKHMXU\jVYHUGLFW
PDNLQJ.H\%DQN'RQQHOO\DQG(OPRUHMRLQWO\DQGVHYHUDOO\ 7KHMXU\UHWXUQHGDYHUGLFWDJDLQVW'RQQHOO\DQG.H\%DQN
OLDEOHIRUWKHPLOOLRQGROODUVFDXVHGE\/HDKH\jVIUDXGl IRUFRQVSLUDF\WRFRPPLWIUDXGDQGDLGLQJDQGDEHWWLQJIUDXG
,W DUJXHV WKDW m>E@HFDXVH 'RQQHOO\ ZDV D FRFRQVSLUDWRU LQ DQGUHWXUQHGDYHUGLFWDJDLQVW(OPRUHDQGKLVILUPIRUIUDXG
>/HDKH\jV@VFKHPHWRGHIUDXG7UDYHOHUVDQG>'RQQHOO\@DQG DLGLQJDQGDEHWWLQJIUDXGDQGQHJOLJHQWPLVUHSUHVHQWDWLRQ
(OPRUH ERWK DLGHG DQG DEHWWHG WKDW IUDXG HDFK RI WKH 7UDYHOHUVWKHUHDIWHUUHTXHVWHGWKDWWKHGLVWULFWFRXUWLPSRVH
GHIHQGDQWVDUHMRLQWO\DQGVHYHUDOO\OLDEOHWRWKHIXOOH[WHQWRI MRLQW DQG VHYHUDO OLDELOLW\ XSRQ WKH GHIHQGDQWV  7KH
DQ\DQGDOOGDPDJHVFDXVHGE\/HDKH\jVIUDXGl GHIHQGDQWVRQWKHRWKHUKDQGUHTXHVWHGMXGJPHQWLQWKHLU
IDYRUDVDPDWWHURIODZRUDOWHUQDWLYHO\DQHZWULDO$OORI
,Q UHVSRQVH 'RQQHOO\ DQG .H\%DQN DVVHUW WKDW WR WKH WKHVHPRWLRQVZHUHGHQLHGE\WKHGLVWULFWFRXUW7KHSDUWLHV
H[WHQW7UDYHOHUVVHHNVWRLPSRVHMRLQWDQGVHYHUDOOLDELOLW\ QRZFKDOOHQJHWKRVHUXOLQJV
EHWZHHQWKHPDQG(OPRUHLWVFRQWHQWLRQPXVWEHUHMHFWHG
7KH\ PDLQWDLQ WKDW  'RQQHOO\ DQG .H\%DQN GLG QRW )RUWKHUHDVRQVVHWIRUWKEHORZZH5(9(56(WKHGLVWULFW
FRQVSLUH ZLWK (OPRUH DQG  WKH UHTXLUHPHQW WKDW HDFK FRXUWjVGHFLVLRQWKDWGHQLHG'RQQHOO\jVDQG.H\%DQNjV
GHIHQGDQWFRQWULEXWHWRDVLQJOHLQMXU\LVQRWSUHVHQW)RUKLV PRWLRQIRUMXGJPHQWDVDPDWWHURIODZZLWKUHVSHFWWRWKH
SDUW(OPRUHQRWHVWKDWKHZDVQRWIRXQGOLDEOHIRUFRQVSLULQJ FODLPRIFRQVSLUDF\WRFRPPLWIUDXGDQGGHQLHG(OPRUHjV
ZLWK'RQQHOO\DQG.H\%DQNDQGWKHUHIRUHFDQQRWEHKHOG PRWLRQIRUMXGJPHQWDVDPDWWHURIODZZLWKUHVSHFWWRWKH
MRLQWO\DQGVHYHUDOO\OLDEOHIRUWKHGDPDJHVFDXVHGE\WKHP FODLPVRIIUDXGDQGRIDLGLQJDQGDEHWWLQJIUDXG:HDOVR
:HDJUHHZLWKWKHGHIHQGDQWVjSRVLWLRQWKDWMRLQWDQGVHYHUDO 5(0$1' WKH FDVH IRU D QHZ WULDO RQ  WKH TXHVWLRQ RI
OLDELOLW\ZRXOGEHLPSURSHULQWKLVFDVH ZKHWKHULQOLJKWRIWKHLQIRUPDWLRQGLVFORVHGE\(OPRUHWR
'DYLG%ODFNDV7UDYHOHUVjVDJHQW7UDYHOHUVHVWDEOLVKHGWKH
msRLQWDQGVHYHUDOOLDELOLW\LPSOLHVWKDWZKHUHGDPDJHVDUH HOHPHQWRIMXVWLILDEOHUHOLDQFHRQ/HDKH\jVIUDXGUHJDUGLQJWKH
FDXVHG E\ WKH MRLQW DFWV RI WZR RU PRUH SHUVRQV HDFK VXUHW\ERQGVLVVXHGDIWHUWKHGDWHRIGLVFORVXUHDQGWKH
GHIHQGDQWPD\EHKHOGOLDEOHIRUGDPDJHVLQFXUUHGMRLQWO\RU DPRXQW DQG DOORFDWLRQ RI GDPDJHV WR ZKLFK 7UDYHOHUV LV
VHYHUDOO\l6KRHPDNHUY&UDZIRUG1(G HQWLWOHGLQOLJKWRIWKHUXOLQJVPDGHWKURXJKRXWWKLVRSLQLRQ
2KLR&W$SS8QGHU2KLRODZm>D@µMRLQWWRUWIHDVRUj ,QDOORWKHUUHVSHFWVZH$)),50WKHMXGJPHQWRIWKHGLVWULFW
KDVEHHQGHILQHGDVRQHZKRDFWLYHO\SDUWLFLSDWHVFRRSHUDWHV FRXUW
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

,%$&.*5281' &RQVROLGDWHG5DLO&RUS)GWK&LU
m,Q2KLRSXQLWLYHGDPDJHVDUHDYDLODEOHLQFLYLOWRUWDFWLRQV
$ )DFWXDOEDFNJURXQG XSRQ D ILQGLQJ RI DFWXDO PDOLFHl FLWLQJ (GPRQGVRQ Y
6WHHOPDQ1(G2KLR&W$SS7KH
 /HDKH\jV HIIRUWV WR REWDLQ ERQGLQJ DQG KLV 6XSUHPH&RXUWRI2KLRKDVKHOGWKDWDFWXDOPDOLFHPD\EH
UHSUHVHQWDWLRQVUHJDUGLQJLQFUHDVHGFDSLWDOL]DWLRQ GHPRQVWUDWHGE\VKRZLQJWKDWVWDWHRIPLQGXQGHUZKLFK
DSHUVRQjVFRQGXFWLVFKDUDFWHUL]HGE\KDWUHGLOOZLOORUD
$WDOOUHOHYDQWWLPHV/HDKH\DQGKLVZLIH6XVDQZHUHWKH VSLULWRIUHYHQJHRUDFRQVFLRXVGLVUHJDUGIRUWKHULJKWV
SULQFLSDO RZQHUV RI /&& DQG /*& 0 WZR 2KLR DQG VDIHW\ RI RWKHU SHUVRQV WKDW KDV D JUHDW SUREDELOLW\ RI
FRUSRUDWLRQV/HDKH\RSHUDWHG/&&SULPDULO\DVDFRQWUDFWRU FDXVLQJVXEVWDQWLDOKDUP6HH3UHVWRQY0XUW\1(G
RIUHVLGHQWLDOKRPHV,QWKHVSULQJRIKRZHYHU/HDKH\ 2KLR
VKLIWHGKLVDWWHQWLRQWRZDUGSXEOLFFRQVWUXFWLRQSURMHFWVDQG
IRUPHG/*& 0LQ$SULORIIRUWKDWSXUSRVH +HUH DOWKRXJK LW ZDV UHDVRQDEOH IRU WKH MXU\ WR LQIHU
NQRZOHGJH RI /HDKH\jV ZURQJGRLQJ IRU WKH SXUSRVH RI
$ SXEOLF HQWLW\ JHQHUDOO\ UHTXLUHV WKDW LWV FRQVWUXFWLRQ UHWXUQLQJ D IDYRUDEOH YHUGLFW RQ 7UDYHOHUVjV DLGLQJ DQG
SURMHFWV EH ERQGHG E\ D VXUHW\ FRPSDQ\ WR JXDUDQWHH WKH DEHWWLQJFODLPDJDLQVW'RQQHOO\DQG.H\%DQN7UDYHOHUVGLG
SHUIRUPDQFHRIWKHFRQWUDFWRU/HDKH\WKHUHIRUHFRQWDFWHG QRW SUHVHQW HQRXJK mFOHDU DQG FRQYLQFLQJl HYLGHQFH IURP
%ODFN ZKR IRU VHYHUDO \HDUV KDG SURYLGHG /HDKH\ ZLWK ZKLFKWKHMXU\FRXOGUHDVRQDEO\ILQGDFWXDOPDOLFHRQWKHLU
LQVXUDQFHFRYHUDJH%ODFNZDVHPSOR\HGE\WKHsDPHV% SDUW
2VZDOG &RPSDQ\ DQ LQVXUDQFH DJHQF\ WKDW DPRQJ RWKHU
WKLQJV VHUYHV DV DQ LQWHUPHGLDU\ EHWZHHQ FRQWUDFWRUV DQG 7RWKHH[WHQWWKDW7UDYHOHUVVRXJKWSXQLWLYHGDPDJHVEDVHG
VXUHW\ FRPSDQLHV  2QH RI %ODFNjV FRQWDFWV ZDV 6WDQOH\ RQmDJJUDYDWHGRUHJUHJLRXVIUDXGlVXFKDWKHRU\FRXOGRQO\
+DOOLGD\D&OHYHODQGEDVHGDFFRXQWPDQDJHUZLWK7UDYHOHUV KDYHDSSOLHGWR(OPRUHEHFDXVHKHZDVWKHRQO\GHIHQGDQW
+DOOLGD\jV LPPHGLDWH VXSHULRU DW 7UDYHOHUV ZDV 'RXJODV WKDWWKHMXU\IRXQGOLDEOHIRUFRPPLWWLQJIUDXG$QGEHFDXVH
%HQGHU$IWHU%ODFNLQIRUPHG+DOOLGD\WKDW/HDKH\mZRXOG RIRXUFRQFOXVLRQWKDW(OPRUHZDVHQWLWOHGWRMXGJPHQWDVD
EH D JRRG RSSRUWXQLW\ IRU XVl +DOOLGD\ WKURXJK %ODFN PDWWHURIODZRQWKHLVVXHRIIUDXGVHH3DUW,,$DERYH
UHTXHVWHGWKDW/HDKH\SURYLGHYDULRXVILQDQFLDOLQIRUPDWLRQ WKLVWKHRU\LVQRZLQDSSOLFDEOHWRKLPDVZHOO
WR7UDYHOHUVIRUDSUHOLPLQDU\UHYLHZ
)LQDOO\ZHILQGQRWKLQJLPSURSHUDERXWWKHGLVWULFWFRXUW
2QsXQH+DOOLGD\PHWZLWK%ODFNDQG/HDKH\ UHQGHULQJ MXGJPHQW RQ WKH LVVXH RI SXQLWLYH GDPDJHV VXD
'XULQJ WKH PHHWLQJ +DOOLGD\ H[SUHVVHG FRQFHUQ ZLWK WKH VSRQWH$OWKRXJKMXGJPHQWDVDPDWWHURIODZLVQRUPDOO\
OHYHORI/*& 0jVFDSLWDOL]DWLRQ+DOOLGD\H[SODLQHGDWWULDO HQWHUHGE\DGLVWULFWFRXUWIROORZLQJDPHULWRULRXVPRWLRQLW
DVIROORZV LV mFOHDUO\ ZLWKLQ WKH FRXUWjV SRZHUl WR GR VR RQ LWV RZQ
LQLWLDWLYH$PHULFDQ )RUHLJQ,QV&RY*HQHUDO(OHF&R
0\ILUVWUHYLHZRI0U/HDKH\jVILQDQFLDOVWDWHPHQWZDV )GWK&LUVHHDOVR)(' 5 &,9 3
ZHGLGQjWIHHOKHKDGWKHILQDQFLDOUHVRXUFHVWRVXSSRUWD D
ERQGLQJSURJUDP
$VDERQGLQJFRPSDQ\ZHIHHOWKHUHLVDFRPPLWPHQWWR
DQDPRXQWRIERWKFDVKDQGZKDWZHFDOOZRUNLQJFDSLWDO
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

GLG QRW KDYH D FKDQFH WR UHVSRQG  $V VXFK ZH ILQG LW ZKLFKLVFXUUHQWDVVHWVOHVVFXUUHQWOLDELOLWLHVDQGDOVR
LQDSSURSULDWH WR FRQVLGHU (OPRUHjV DUJXPHQW  6HH 8QLWHG QHWZRUWKRULQYHVWHGFDSLWDOLQDFRPSDQ\
6WDWHV Y %UDQQRQ  )G   Q WK &LU 
HOHFWLQJWRQRWDGGUHVVFHUWDLQDUJXPHQWVEHFDXVHWKH\mZHUH /HDKH\@
UHVSRQGlFLWDWLRQDQGLQWHUQDOTXRWDWLRQVPDUNVRPLWWHG NQHZDQGXQGHUVWRRGWKDWKHZDVJRLQJWRKDYHWRFKDQJH
0RUHRYHUWKLVLVVXHLVPRRWLQOLJKWRIRXUFRQFOXVLRQVHW DOLWWOHELWRIKLVRSHUDWLQJSKLORVRSK\ILQDQFLDOO\
IRUWKLQ3DUW,,$DERYHWKDWWKHHYLGHQFHGRHVQRWVXSSRUW
WKHMXU\jVILQGLQJWKDW(OPRUHHQJDJHGLQIUDXG $VDUHVXOWRIKLVFRQFHUQV+DOOLGD\LQTXLUHGDVWRZKHWKHU
/HDKH\ZRXOGEHDEOHWRLQFUHDVH/*& 0jVDVVHWV+DOOLGD\
' 7KH GLVWULFW FRXUW GLG QRW HUU ZKHQ LW UXOHG VXD WHVWLILHGWKDW/HDKH\DVVXUHGKLPWKDWIXQGVFRXOGEHREWDLQHG
VSRQWHWKDWWKHUHZDVLQVXIILFLHQWHYLGHQFHSUHVHQWHG IURPKLVIDWKHULQODZ$OEHUW%HUVWLFNHU
E\ 7UDYHOHUV WR VXSSRUW DQ DZDUG RI SXQLWLYH
GDPDJHV >/HDKH\@PDGHLWYHU\FOHDUWKDWKLVZLIH6XVDQ/HDKH\
ZDVWKHGDXJKWHU>@RIDJHQWOHPDQZKRjVWKH&(2IRU
$WWKHFORVHRI7UDYHOHUVjVFDVHLQFKLHIWKHGLVWULFWFRXUW )HUUR &RUSRUDWLRQ D )RUWXQH  ILUP EDVHG LQ
UXOHG VXD VSRQWH WKDW WKHUH ZDV LQVXIILFLHQW HYLGHQFH &OHYHODQG  $QG WKDW WKDW JHQWOHPDQ KDG VHW XS
SUHVHQWHG E\ 7UDYHOHUV WR VXSSRUW DQ DZDUG RI SXQLWLYH HVVHQWLDOO\DWUXVWDIDPLO\W\SHRIWUXVWWKDWKDGTXLWHD
GDPDJHV  ,Q LWV FURVVDSSHDO 7UDYHOHUV FRQWHQGV WKDW WKH ELW RI OLTXLG DVVHWV DYDLODEOH WR WKHP WR LQMHFW LQWR
GLVWULFWFRXUWHUUHGLQUXOLQJRQWKHPDWWHUVXDVSRQWHDQGWKDW >/*& 0@DVQHHGHG
LQDQ\HYHQWMXGJPHQWVKRXOGQRWKDYHEHHQHQWHUHGEHFDXVH
DMXU\FRXOGUHDVRQDEO\KDYHIRXQGEDVHGRQWKHHYLGHQFH $QG LI \RX ORRNHG KLVWRULFDOO\ DW WKHLU ILQDQFLDO
SUHVHQWHGWKHUHTXLVLWHPDOLFHWRVXVWDLQDSXQLWLYHGDPDJHV VWDWHPHQWVLQWKHSDVW>/HDKH\@KDGORDQHG
YHUGLFW:HGLVDJUHHZLWK7UDYHOHUVjVDUJXPHQW >@GROODUVWRWKHFRPSDQ\ZKHQLWQHHGHGLW
WRJHWo\RXNQRZWRSURYLGHLWZLWKVRPHFDVKZKHQ
3XQLWLYH GDPDJHV DUH QRW UHFRYHUDEOH IURP D GHIHQGDQW WKHUHZHUHVKRUWIDOOVIURPWLPHWRWLPH6RHVVHQWLDOO\KH
XQGHU 2KLR ODZ XQOHVV m>W@KH DFWLRQV RU RPLVVLRQV RI WKDW IHOW WKDW WKDW ZRXOG EH D JRRG PHFKDQLVP WR IXQG WKH
GHIHQGDQWGHPRQVWUDWHPDOLFHDJJUDYDWHGRUHJUHJLRXVIUDXG FRPSDQ\
RSSUHVVLRQRULQVXOWRUWKDWGHIHQGDQWDVSULQFLSDORUPDVWHU
DXWKRUL]HGSDUWLFLSDWHGLQRUUDWLILHGDFWLRQVRURPLVVLRQVRI $WDOOUHOHYDQWWLPHV%HUVWLFNHUDOVRVHUYHGDVDGLUHFWRURI
DQDJHQWRUVHUYDQWWKDWVRGHPRQVWUDWHl2+,2 5(9 &2'( .H\%DQN
$11†%7KHEXUGHQZDVRQ7UDYHOHUVWRSURYH
E\FOHDUDQGFRQYLQFLQJHYLGHQFHWKDWLWZDVHQWLWOHGWRVXFK %HFDXVH+DOOLGD\GLGQRWZDQWWKHDGGLWLRQDOIXQGVWREH
GDPDJHV  6HH LG † '  7R WKH H[WHQW WKDW DGGHG WR /*& 0 LQ WKH IRUP RI D VLPSOH EDQN ORDQ KH
7UDYHOHUV VRXJKW SXQLWLYH GDPDJHV EDVHG RQ D VKRZLQJ RI VXJJHVWHGDPRUHVHFXUHDUUDQJHPHQW
mPDOLFHlLWKDGWRSURYHDFWXDOPDOLFH6HH6SULQJVWRQY
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

>7@KHUHLV>DQ@RSWLRQFDOOHGVXERUGLQDWHGGHEWV$QG PDGHDIWHU'U$XVWLQKDGFRPSOHWHGKLVWHVWLPRQ\DQGKDG
WKDWjVNLQGRIWULFN\EXWZKDWLWLVLV>/HDKH\@ZRXOGWDNH OHIWWRZQDQGWKHWHVWLPRQ\GLGQRWYLRODWHWKHGLVWULFW
WKLVSHUVRQDOO\WKHLUPRQH\WKDWKHRZQHGDQGFRQWUROOHG FRXUWjVSURVFULSWLRQVEHFDXVHm>'U$XVWLQ@GLGQRWH[SUHVV
SHUVRQDOO\ WKURXJK KLV WUXVW DQG ZRXOG ORDQ LW WR RSLQLRQVDVWRZKHWKHUWKHERQGXQGHUZULWLQJE\7UDYHOHUVIRU
>/*& 0@DQGVLJQDQDJUHHPHQWZLWK>7UDYHOHUV@WKDW WKH/HDKH\FRPSDQ\ZDVDSSURSULDWHl
VWDWHGWKDWWKDWPRQH\ZDVQRWWROHDYH>/*& 0@HYHU
XQOHVV>7UDYHOHUV@DSSURYHGLWWROHDYH>/*& 0@$QG m7UDGLWLRQDOO\WKLVFLUFXLWKDVUHYLHZHGDGLVWULFWFRXUWjV
WKDW WKDW PRQH\ ZRXOG EH XVHG LQ WKH GD\WRGD\ UXOLQJUHJDUGLQJWKHDGPLVVLELOLW\RIH[SHUWWHVWLPRQ\XQGHU
RSHUDWLRQVRIEXVLQHVV 5XOHIRUDQDEXVHRIGLVFUHWLRQl0RUDOHVY$PHULFDQ
+RQGD0RWRU&R)GWK&LUm,QWKH
 FRQWH[W RI DQ HYLGHQWLDU\ UXOLQJ DEXVH RI GLVFUHWLRQ H[LVWV
ZKHQWKHUHYLHZLQJFRXUWLVILUPO\FRQYLQFHGWKDWDPLVWDNH
$QGDWRXUPHHWLQJZHDOODJUHHGDIWHUGLVFXVVLRQWKDW KDV EHHQ PDGH UHJDUGLQJ DGPLVVLRQ RI HYLGHQFHl  3RON Y
WKDWZDVDURXWHWKDWZDVDFFHSWDEOHWR>/HDKH\@DQGWR 7UDYHOHUV@ WKDW ZH FRXOG
FRQFHLYDEO\HVWDEOLVKDEXVLQHVVUHODWLRQVKLS 7UDYHOHUVjVSURFHGXUDODUJXPHQWODFNVPHULW7KHPRWLRQ
WRVWULNHPD\KDYHFRPHWRRODWHEXWWKHUHFRUGLQGLFDWHVWKDW
7KHSDUWLHVDJUHHGDIWHUIXUWKHUGLVFXVVLRQWKDW/HDKH\ZRXOG 'RQQHOO\DQG.H\%DQNPDGHVHYHUDOWLPHO\REMHFWLRQVGXULQJ
DPRQJRWKHUWKLQJVH[HFXWHDVXERUGLQDWLRQDJUHHPHQWZLWK WKHFRXUVHRI'U$XVWLQjVWHVWLPRQ\$VVXFKWKHUHZDVQR
UHVSHFWWRDSUHYLRXVO\PDGHORDQRIDQGWKDWKH GHIDXOWE\WKHGHIHQGDQWV6HH*RUDY&RVWD)G
ZRXOG SHUVRQDOO\ ORDQ DQ DGGLWLRQDO  WR /*& 0 WK&LUILQGLQJQRGHIDXOWZKHUHWKHREMHFWLQJ
WKDWZRXOGDOVREHVXERUGLQDWHGWR7UDYHOHUV SDUW\ILOHGDPRWLRQLQOLPLQHDQGUHDGGUHVVHGWKHLVVXHVDW
WULDOGXULQJDVLGHEDU$OWKRXJKZHILQGQRGHIDXOWZHDOVR
 /HDKH\jVORDQIURP.H\%DQN ILQGQRPHULWLQ'RQQHOO\jVDQG.H\%DQNjVDUJXPHQWWKDWWKH
GLVWULFWFRXUWDEXVHGLWVGLVFUHWLRQ'U$XVWLQjVUHVSRQVHV
'HVSLWH/HDKH\jVUHSUHVHQWDWLRQVWR+DOOLGD\WKDWWKHVRXUFH PD\ KDYH GULIWHG LQWR DQ DUHD LQ ZKLFK KH GRHV QRW KDYH
RIWKHQHHGHGIXQGVZRXOGEHKLVIDPLO\WUXVW/HDKH\LQHDUO\ H[SHUWLVHEXWDUHDGLQJRIWKHGLUHFWH[DPLQDWLRQWUDQVFULSW
sXO\RILQTXLUHGRIKLVSHUVRQDOEDQNHU'RQQHOO\DERXW LQGLFDWHVWKDWWKLVZDVLQFLGHQWDOWRWKHRYHUDOOWKUXVWRIKLV
WKH SRVVLELOLW\ RI REWDLQLQJ D WUDGLWLRQDO EDQN ORDQ IURP WHVWLPRQ\ZKLFKIRFXVHGRQKLVRSLQLRQRISURSHUEDQNLQJ
.H\%DQN6LQFH'RQQHOO\KDGSURFHVVHGVHYHUDOORDQV SUDFWLFHVLQGHWHFWLQJIUDXGXOHQWDFWLYLWLHV:HDUHWKHUHIRUH
IRU /HDKH\ WKH PDMRULW\ RI ZKLFK ZHUH UHODWHG WR ERQGLQJ QRW mILUPO\ FRQYLQFHGl WKDW WKH GLVWULFW FRXUW HUUHG LQ LWV
UHTXLUHPHQWV'RQQHOO\FODLPHGDWWULDOKRZHYHUWKDWKHGLG DGPLVVLELOLW\UXOLQJVUHJDUGLQJ'U$XVWLQjVWHVWLPRQ\
QRW XQGHUVWDQG WKH ERQGLQJ EXVLQHVV  7KH SXUSRVH RI WKLV
SDUWLFXODUORDQDVD.H\%DQNGRFXPHQWLQGLFDWHVZDVmWR & (OPRUHjV FKDOOHQJH WR WKH WHVWLPRQ\ RI 7UDYHOHUVjV
REWDLQ DSSURYDO IURP D QHZ %RQGLQJ &RPSDQ\l  $IWHU IUDXGH[SHUW
.H\%DQN GHQLHG /HDKH\jV UHTXHVW /HDKH\ SURSRVHG DV DQ
DOWHUQDWLYHWKDW%HUVWLFNHUSHUVRQDOO\JXDUDQWHHWKHORDQDQG ,QKLVUHSO\EULHI(OPRUHTXHVWLRQVWKHSURSULHW\RIFHUWDLQ
WKDWSD\PHQWEHGXHLQWKLUW\GD\V WHVWLPRQ\E\7UDYHOHUVjVIUDXGH[SHUW(ULF.UHXWHU%HFDXVH
WKLVLVVXHZDVQRWUDLVHGLQ(OPRUHjVLQLWLDOEULHI7UDYHOHUV
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

ZLWKLQWKHEDQNLQJLQGXVWU\LQHYDOXDWLQJORDQUHTXHVWVIRU 2Q sXO\   'RQQHOO\ ZURWH D PHPRUDQGXP WR
FRPPHUFLDO FRQWUDFWRUV IRU >WKH@ SXUSRVHV RI GHWHFWLQJ /HDKH\FRQWDLQLQJWKHGHWDLOVRIWKHORDQWKDW.H\%DQNZDV
ZKHWKHURUQRWWKDWFRQWUDFWRUPD\EHLQWHQGLQJWRGHIUDXGl SUHSDUHG WR PDNH  ,Q LWV RULJLQDO IRUP WKH GRFXPHQW
KHVDLG LQGLFDWHGWKDWWKHDPRXQWZRXOGEHDORDQWR/&&
SD\PHQWZRXOGEHGXHLQWKLUW\GD\VWKHUHZRXOGEHD
,GRQjWWKLQNWKHUHLVDQ\UHDOO\VWDQGDUGSURFHGXUHRWKHU IHH DQG %HUVWLFNHU ZRXOG EH WKH JXDUDQWRU  7KH
WKDQ WR JR WKURXJK WKH LQIRUPDWLRQ DQG XVH WKH PHPRUDQGXPDOVRVWDWHGDVIROORZV
SURIHVVLRQDO EDFNJURXQG RI WKH LQGLYLGXDOV \RX KDYH
SXUVXLQJLWHLWKHUWKHSULYDWHEDQNHURUVRPHERG\LQWKH 7KH IXQGV DUH EHLQJ XVHG WR LQFUHDVH WKH ERQGLQJ
&RPPHUFLDO&UHGLW'HSDUWPHQWWRWDNHDORRNDWLWDQG FDSDFLW\ RI >/&&@  /&&@jV
DUH UDLVHG E\ WKH YDULRXV IDFWV WKDW DUH IDFLQJ WKH FKHFNLQJDFFRXQWE@RQGLQJQRUPDOO\LVDSHUPDQHQWFDSLWDO ZLOOEHFDQFHOHG
VRXUFHRIIXQGVl7KHQDJDLQGHVSLWHDWLPHO\REMHFWLRQ'U
$XVWLQFRPPHQWHGDVIROORZV $IWHU/HDKH\UHFHLYHGWKHPHPRUDQGXPKHUHWXUQHGLWWR
'RQQHOO\ZLWKVHYHUDOFKDQJHV$PRQJRWKHUWKLQJVKHQRWHG
$QGWKDWjVWKHW\SHRIORQJWHUPFDSLWDOWKDWWKHERQGLQJ WKDWWKHORDQDPRXQWVKRXOGEHOLVWHGDVLQVWHDGRI
FRPSDQ\ZDQWVLQPRVWFDVHV$QGLILWZDVJRLQJ WKDWWKHHQWLW\WRUHFHLYHWKHEHQHILWRIWKHIXQGV
WREHERUURZHGDQGSODFHGLQWRDILUP\RXZRXOGH[SHFW ZRXOGEH/*& 0UDWKHUWKDQ/&&DQGWKDWWKHmPRQWKHQGl
LWWREHWKHUHIRUDSHULRGRIWLPHDWOHDVWHTXDOWRWKH ZRXOGEHmsXO\l/HDKH\DOVRZURWHQH[WWRWKHWKLUW\GD\
ERQGLQJSHULRGEXWPD\EHHYHQORQJHUWKDQWKDWEHFDXVH WHUPmGD\DFWXDO>LOOHJLEOH@JXDUDQWHHE\0U%HUVWLFNHUl
LWZRXOGVKRZHTXLW\RZQHUVKLSRIWKHILUPE\WKHSHUVRQ +HWKHQZURWHWKHIROORZLQJQRWHWR'RQQHOO\DWWKHERWWRPRI
ZKRZDVWKHFRQWUDFWRU WKH VKHHW  m3OHDVH UHZULWH WKLV PHPR IRU SUHVHQWDWLRQ WR
>%HUVWLFNHU@+HKDVQRSUREOHPZ>LWK@WKLV+RZHYHU,QHHG
(PSKDVLVDGGHG >D@SOHGJHIRUPIRU>%HUVWLFNHU@WRVLJQE\)ULGD\DVKHZLOOEH
WUDYHOLQJIRU.ZHHNVLQ(XURSHl
'RQQHOO\DQG.H\%DQNPDLQWDLQWKDWWKHGLVWULFWFRXUWHUUHG
E\ DOORZLQJ 'U $XVWLQ WR H[SUHVV KLV RSLQLRQV RQ ERQG $OWKRXJKWKHORDQKDGWREHDSSURYHGE\*HRUJH6WRUDUD
XQGHUZULWLQJm'U$XVWLQDEDQNLQJH[SHUWGLGQRWOLPLWKLV FUHGLWPDQDJHUDW.H\%DQN'RQQHOO\QHYHULQIRUPHGKLPRI
WHVWLPRQ\WREDQNLQJPDWWHUV+LVWHVWLPRQ\DERXWZKDWD WKHIRXUGD\UHSD\PHQWWHUPDVRXWOLQHGLQWKHsXO\
ERQGLQJFRPSDQ\µZDQWVjDQGµZRXOGH[SHFWjODFNVDUHOLDEOH PHPRUDQGXP  7KH ORDQ ZDV DSSURYHG E\ .H\%DQN
EDVLV LQ WKH NQRZOHGJH DQG H[SHULHQFH RI KLV GLVFLSOLQHl $FFRUGLQJO\RQsXO\ZDVGHSRVLWHGLQWR
(PSKDVLVDGGHG,QUHVSRQVH7UDYHOHUVDVVHUWVWKDWDQ\
REMHFWLRQZDVGHIDXOWHGEHFDXVHDPRWLRQWRVWULNHZDVRQO\
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

/*& 0jV FKHFNLQJ DFFRXQW DQG RQ $XJXVW   WKH +HUH WKH GHIHQGDQWV GR QRW DVVLJQ HUURU WR WKH GLVWULFW
VDPHDPRXQWZDVWUDQVIHUUHGEDFNWR.H\%DQN FRXUWjV SUR[LPDWH FDXVDWLRQ LQVWUXFWLRQV  7KH HYLGHQFH DW
WULDO HVWDEOLVKHG WKDW EXW IRU WKH  ORDQ 7UDYHOHUV
 /*& 0jV sXO\   EDQN VWDWHPHQW DQG ZRXOGQRWKDYHGRQHEXVLQHVVZLWK/HDKH\7KHUHZDVDOVR
/HDKH\jV$XJXVWVXERUGLQDWLRQDJUHHPHQW VXIILFLHQW HYLGHQFH WR VXSSRUW WKH MXU\jV ILQGLQJ WKDW
QRWZLWKVWDQGLQJ7UDYHOHUVjVDOOHJHGHUURUVWKHORDQ
'XULQJ WKH ILUVW ZHHN RI $XJXVW RI  +DOOLGD\ SURGXFHGLQDQDWXUDODQGFRQWLQXRXVVHTXHQFHDQGDOOZLWKLQ
UHTXHVWHG WKURXJK %ODFN D FRS\ RI /*& 0jV EDQN D UHODWLYHO\ VKRUW SHULRG RI WLPH WKH UHVXOWLQJ KDUP WR
VWDWHPHQW IRU WKH PRQWK HQGLQJ sXO\    %ODFN 7UDYHOHUV
SURYLGHG+DOOLGD\ZLWKDFRS\ZKLFKVKRZHGWKDWRQsXO\
 WKH DFFRXQW ZDV mFUHGLWHGl  DQG mGHELWHGl :HUHFRJQL]HWKDWWKHFRQFHSWRISUR[LPDWHFDXVHUHTXLUHV
1RGHVFULSWLRQLVSURYLGHGRQWKHVWDWHPHQWLQGLFDWLQJ PRUHWKDQmEXWIRUlFDXVDWLRQ7KHRWKHUNH\FRQVLGHUDWLRQV
WKHVRXUFHRIWKHFUHGLWHGIXQGVRUWKHUHDVRQIRUWKHGHELW DUHUHDVRQDEOHIRUHVHHDELOLW\DQGWKHODFNRIDQ\LQGHSHQGHQW
/*& 0jVHQGLQJEDODQFHIRUWKHPRQWKZDVDSSUR[LPDWHO\ LQWHUYHQLQJ FDXVHV  6HH :HVWILHOG ,QV &R Y +XOV $P
$WWULDOWKHSDUWLHVVWLSXODWHGWKDWQHLWKHU'RQQHOO\ ,QF1(G2KLR$SS&Wm,QRUGHUWR
QRU DQ\ RWKHU UHSUHVHQWDWLYH RI .H\%DQN HYHU PDGH DQ\ HVWDEOLVK SUR[LPDWH FDXVH IRUHVHHDELOLW\ PXVW EH IRXQGl
YHUEDORUZULWWHQUHSUHVHQWDWLRQVWR7UDYHOHUVZLWKUHVSHFWWR FLWDWLRQDQGLQWHUQDOTXRWDWLRQPDUNVRPLWWHG4XHHQ&LW\
WKHILQDQFLDOFRQGLWLRQRI/HDKH\RU/*& 0 7HUPLQDOV,QFY*HQHUDO$P7UDQVS&RUS1(G
  2KLR  m:H KDYH ORQJ UHFRJQL]HG WKDW WKH
2Q$XJXVW/HDKH\FRQVLVWHQWZLWKWKHDJUHHPHQW FRQQHFWLRQEHWZHHQWKHGHIHQGDQWjVDFWRURPLVVLRQDQGWKH
UHDFKHGGXULQJWKHsXQHPHHWLQJZLWK+DOOLGD\DQG GDPDJHRULQMXU\RFFDVLRQHGE\WKHSODLQWLIIPD\EHEURNHQ
%ODFN H[HFXWHG D FRQWUDFW LQ ZKLFK /HDKH\ DJUHHG WR E\DQLQWHUYHQLQJHYHQWl7KHORQJHUWKHJDSEHWZHHQWKH
VXERUGLQDWHWR7UDYHOHUVKLVLQWHUHVWLQFHUWDLQPRQLHVWKDWKH PDNLQJRIWKHORDQDQG7UDYHOHUVjVGHFLVLRQWRERQG
KDGSXUSRUWHGO\ORDQHGWR/*& 07KHWZRQRWHVOLVWHGLQ DMREDQGWKHPRUHWKDWRWKHUIDFWRUVLQIOXHQFHG7UDYHOHUVjV
WKHDJUHHPHQWZHUHWKHORDQGDWHG$SULO GHFLVLRQVUHJDUGLQJ/*& 0WKHPRUHZHZRXOGEHLQFOLQHG
DQG WKH  ORDQ GDWHG sXO\    $W OHDVW ZLWK WR DJUHH ZLWK WKH GHIHQGDQWVj DUJXPHQW WKDW m7UDYHOHUVjV
UHVSHFW WR WKH  ORDQ KRZHYHU WKLV VXERUGLQDWLRQ WKHRU\ RI FDXVDWLRQ LV WRR DWWHQXDWHG DV D PDWWHU RI ODZl
DJUHHPHQW KDG QR HIIHFW EHFDXVH /*& 0jV SRVVHVVLRQ RI %DVHGRQWKHIDFWVEHIRUHXVKRZHYHUZHFDQQRWVD\DVD
WKRVH IXQGV KDG HQGHG VL[ GD\V HDUOLHU ZKHQ WKH ORDQ ZDV PDWWHU RI ODZ WKDW SUR[LPDWH FDXVH ZDV ODFNLQJ  %HFDXVH
UHSDLG UHDVRQDEOHPLQGVPLJKWGLIIHURQWKDWSRLQWWKHTXHVWLRQZDV
SURSHUO\SXWWRWKHMXU\
 (OPRUHjVLQYROYHPHQW
% 7KHGLVWULFWFRXUWGLGQRWHUULQSHUPLWWLQJFHUWDLQ
/HDKH\ILUVWPHW(OPRUHLQ)HEUXDU\RI,Q0DUFKRI WHVWLPRQ\E\'U$XVWLQ
WKDW \HDU /HDKH\ KLUHG KLP WR VHUYH DV DQ LQGHSHQGHQW
DFFRXQWDQWIRU/&&DQG/*& 0)RUWKHUHPDLQGHURIWKLV 7UDYHOHUVjV EDQNLQJ H[SHUW 'U $XVWLQ RSLQHG WKDW
RSLQLRQUHIHUHQFHVWRm(OPRUHlZLOOLQFOXGHKLVILUP$V .H\%DQNjVKDQGOLQJRIWKHORDQWUDQVDFWLRQGLGQRW
SDUWRIWKDWUROH/HDKH\UHTXHVWHG(OPRUHWRDPRQJRWKHU FRPSO\ZLWKJHQHUDOO\DFFHSWHGSUDFWLFHVZLWKLQWKHEDQNLQJ
WKLQJVFRQGXFWDmUHYLHZlRI/&&jVDQG/*& 0jVILQDQFLDO LQGXVWU\,QUHVSRQVHWRDTXHVWLRQUHJDUGLQJmWKHSUDFWLFH
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

WKH mµSXEOLF LQWHUHVWjl TXRWLQJ 8QLWHG 6WDWHV Y $WNLQVRQ VWDWHPHQWVDVRIsXQH(OPRUHjVSUDFWLFHGLGQRW
86 LQYROYHDXGLWV
E 3UR[LPDWHFDXVDWLRQ (OPRUHjV UROH ZDV GLVFXVVHG GXULQJ WKH sXQH  
PHHWLQJ EHWZHHQ +DOOLGD\ %ODFN DQG /HDKH\  +DOOLGD\
7KHGHIHQGDQWVDOVRDVVHUWWKDW7UDYHOHUVjVORVVHVZHUHQRW FRPPHQWHGDWWULDODVIROORZV
SUR[LPDWHO\FDXVHGE\WKHLUFRQGXFW$UJXLQJWKDW7UDYHOHUV
PDGH XQGHUZULWLQJ PLVMXGJPHQWV WKH\ FRQWHQG WKDW >$@W RXU PHHWLQJ >LW ZDV GLVFXVVHG WKDW@ >/HDKH\@jV
m7UDYHOHUVjVWKHRU\RIFDXVDWLRQLVWRRDWWHQXDWHGDVDPDWWHU ILQDQFLDOUHSRUWLQJZDVQjWZKHUHZHZRXOGOLNHLWWREH
RIODZl'RQQHOO\DQG.H\%DQNDOVRPDLQWDLQWKDWHYHQLIWKH IRU RXU VWDQGDUG FRPPHUFLDO DFFRXQWV DQG WKDWjV QRW
 KDG EHHQ NHSW LQ /*& 0jV DFFRXQWV /*& 0 XQXVXDOHLWKHU:LWKQHZHUDFFRXQWV\RXREYLRXVO\KDYH
ZRXOG VWLOO KDYH GHIDXOWHG RQ LWV FRQWUDFWV DQG 7UDYHOHUV WRGLVFXVVZKDW\RXUQHHGVDUHDVDVXUHW\DQGZKHWKHU
ZRXOG WKHUHIRUH VWLOO KDYH LQFXUUHG ORVVHV  ,Q UHVSRQVH KHZDQWVWRIXOILOOWKHPDVDFRQWUDFWRU$QG>/HDKH\@
7UDYHOHUV DVVHUWV WKDW mWKH HYLGHQFH DW WULDO DGHTXDWHO\ KDGDVNHGWKDW,FRQWDFW0DUN(OPRUHDQGOHWKLPNQRZ
HVWDEOLVKHG SUR[LPDWH FDXVH EHFDXVH LQ WKH VHTXHQFH RI WKH W\SH DQG WKH IRUP RI ILQDQFLDO LQIRUPDWLRQ WKDW KH
HYHQWV.H\%DQNjVORDQWR/HDKH\ZDVWKHIDFWRUWKDWOHGWR ZRXOGQHHGWRSUHVHQWRQEHKDOIRI>/*& 0@
/*& 0jVVHFXULQJERQGVIURP7UDYHOHUVl:HDJUHHZLWK
7UDYHOHUVjVSRVLWLRQ $VDUHVXOWRI/HDKH\jVXUJLQJ+DOOLGD\FRQWDFWHG(OPRUHLQ
ODWH sXO\ RU HDUO\ $XJXVW RI  WR GLVFXVV WKH ZRUN WKDW
:LWKUHVSHFWWRSUR[LPDWHFDXVDWLRQWKH6XSUHPH&RXUWRI (OPRUHKDGEHHQKLUHGWRSHUIRUPIRU/HDKH\+DOOLGD\JDYH
2KLRKDVFRPPHQWHGDVIROORZV WKH IROORZLQJ WHVWLPRQ\ UHJDUGLQJ WKH VXEVWDQFH RI KLV
GLVFXVVLRQZLWK(OPRUH
7KHWHUPmSUR[LPDWHFDXVHlLVRIWHQGLIILFXOWRIH[DFW
GHILQLWLRQ DV DSSOLHG WR WKH IDFWV RI D SDUWLFXODU FDVH >7@KH RWKHU WKLQJ ZH ZHUH JRLQJ WR WDON DERXW LV WKH
+RZHYHULWLVJHQHUDOO\WUXHWKDWZKHUHDQRULJLQDODFW ORDQVWKDWZHUHEHLQJPDGH,I\RXUHPHPEHUWKHGDWH
LVZURQJIXORUQHJOLJHQWDQGLQDQDWXUDODQGFRQWLQXRXV >RIWKHORDQ@ZDVsXO\WKZHZHUHJRLQJWRJHW
VHTXHQFHSURGXFHVDUHVXOWZKLFKZRXOGQRWKDYHWDNHQ DVWDWHPHQWIURP(OPRUHVRWKDWORDQZDVQjW
SODFHZLWKRXWWKHDFWSUR[LPDWHFDXVHLVHVWDEOLVKHGDQG JRLQJWREHUHIOHFWHG>RQWKDWVWDWHPHQW@
WKHIDFWWKDWVRPHRWKHUDFWXQLWHVZLWKWKHRULJLQDODFWWR
FDXVH LQMXU\ GRHV QRW UHOLHYH WKH LQLWLDO RIIHQGHU IURP $QGWKHRWKHUUHDVRQZHZHUHWDONLQJ,ZDVJRLQJWRDVN
OLDELOLW\ >(OPRUH@WRIRRWQRWHWKDWRQVXFKDQGVXFKDGDWH
>/HDKH\@ KDG FDSLWDOL]HG D ORDQ WR WKH FRPSDQ\ IRU
&OLQJHUY'XQFDQ1(G2KLRm,Q WKDWKDGEHHQVXERUGLQDWHGWRXVDQGZDVLQWKH
DQ\ FDVH ZKHUH WKHUH LV D TXHVWLRQ XSRQ ZKLFK UHDVRQDEOH FRPSDQ\VRWKDW,NQHZWKDWWKDWPRQH\ZDVWKHUH
PLQGVPLJKWGLIIHUDVWRWKHIRUHVHHDELOLW\RIDSDUWLFXODUULVN
RUWKHFKDUDFWHURIDQLQWHUYHQLQJFDXVHWKHTXHVWLRQLVRQH $WWULDO(OPRUHGLGQRWWDNHLVVXHZLWK+DOOLGD\jVDFFRXQWRI
IRU VXEPLVVLRQ WR WKH MXU\ XQGHU SURSHU LQVWUXFWLRQV DV WR WKLVFRQYHUVDWLRQ
SUR[LPDWH FDXVHl  2KLR )DLU 3ODQ 8QGHUZULWLQJ $VVjQ Y
$UFDUD1(G2KLR&W$SS 2Q 6HSWHPEHU   (OPRUH LQ DSSDUHQW UHVSRQVH WR
+DOOLGD\jV UHTXHVW VHQW D OHWWHU WR %ODFN DFFRPSDQLHG E\
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

SUHOLPLQDU\GUDIWVRIWKHsXQHEDODQFHVKHHWVRI/&& QHFHVVDU\WKDWWKHSULQFLSDODFWXDOO\FRQWUROWKHPDQQHU
DQG /*& 0  (OPRUH XQGHUVWRRG WKDW %ODFN ZDV DQ RUPHDQVRIWKHDJHQWjVDFWLYLWLHV,WLVRQO\QHFHVVDU\
LQVXUDQFH DJHQW DVVLVWLQJ /HDKH\ LQ KLV DWWHPSWV WR VHFXUH WKDWWKHSULQFLSDOKDYHWKHULJKWWRGRVR
ERQGLQJ7KHOHWWHUjVLQWURGXFWRU\WH[WUHDGVDVIROORZV
2YHU'RQQHOO\jVDQG.H\%DQNjVWLPHO\REMHFWLRQKRZHYHU
3XUVXDQW WR RXU WHOHSKRQH GLVFXVVLRQ RQ 0RQGD\>@ WKHGLVWULFWFRXUWGHFOLQHGWRWHOOWKHMXU\WKDWm>D@SULQFLSDOLV
6HSWHPEHU WK \RX ZLOO ILQG EHORZ D VXPPDU\ RI FKDUJHG ZLWK DQG ERXQG E\ DOO NQRZOHGJH REWDLQHG E\ KLV
>/&&jVDQG/*& 0jV@DQWLFLSDWHGEDODQFHVKHHWVDVRI DJHQWZLWKLQWKHVFRSHRIKLVDXWKRULW\DQGLQWKHFRXUVHRIKLV
sXQH7KLVRIILFHLVFXUUHQWO\LQWKHSURFHVVRI GXWLHV DV DQ DJHQWl  7KH FRUUHFWQHVV RI WKH GHIHQGDQWVj
UHYLHZLQJ WKH &RPSDQ\Vj >VLF@ \HDU HQG ILQDQFLDO MXVWLILDEOHUHOLDQFHDUJXPHQWWKHUHIRUHWXUQVRQZKHWKHUWKLV
VWDWHPHQWV DQG , KDYH QRW \HW KDG WKH RSSRUWXQLW\ WR RPLVVLRQ FRQVWLWXWHG UHYHUVLEOH HUURU DQG LI VR ZKHWKHU
UHYLHZ WKH ZRUNSDSHUV WR FRQILUP WKHLU DFFXUDF\  , (OPRUH PD\ EHQHILW IURP LW  :H EHOLHYH LW GLG FRQVWLWXWH
ZRXOG DQWLFLSDWH SURYLGLQJ \RXU RIILFH ZLWK IRUPDO UHYHUVLEOH HUURU DQG WKDW LQ RXU GLVFUHWLRQ (OPRUH PD\
ILQDQFLDOVWDWHPHQWVRQRUEHIRUH6HSWHPEHU EHQHILWRQUHPDQG
$OWKRXJKWKHEDODQFHVKHHWGUDIWVSURYLGHGE\(OPRUHGLG $OWKRXJKWKHMXU\LQVWUXFWLRQDFFXUDWHO\VHWIRUWKWKHEDVLF
QRWPDNHUHIHUHQFHWRWKHORDQ(OPRUHGLVFXVVHG SULQFLSOHVRIDJHQF\ODZLWIDLOHGWRSURYLGHWKHMXU\ZLWKDQ
WKHERUURZLQJLQWKHFRQFOXGLQJSDUDJUDSKRIKLVOHWWHUm,Q HVVHQWLDO SLHFH RI WKH SX]]OHnWKH SUDFWLFDO HIIHFW WKDW D
DGGLWLRQWRWKHDERYHVKDUHKROGHUORDQV>@3DWULFN/HDKH\DOVR ILQGLQJRIDJHQF\ZRXOGKDYHZLWKUHVSHFWWRWKHLUGHFLVLRQRQ
OHQW WR >/*& 0@ DQ DGGLWLRQDO  DIWHU sXQH  MXVWLILDEOHUHOLDQFH$VVXFKDQHZWULDOLVUHTXLUHGDVWRWKDW
l:KHQDVNHGDWWULDODVWRZKDWmVRXUFHVlKHUHOLHGRQ LVVXH6HHsRQHVY)HGHUDWHG)LQDQFLDO5HVHUYH&RUS
LQ GUDIWLQJ WKLV SDUWLFXODU LQIRUPDWLRQ (OPRUH VDLG WKDW KH )GWK&LUUHPDQGLQJIRUDQHZWULDO
UHOLHGRQVWDWHPHQWVE\+DOOLGD\/HDKH\DQG%ODFNDVZHOO LQ SDUW EHFDXVH WKH GLVWULFW FRXUW UHMHFWHG WKH DSSHOODQWjV
DVRQmDFRS\RIDSURPLVVRU\QRWHIRUlWKDWKH UHTXHVWIRUDMXU\LQVWUXFWLRQWKDWZRXOGKDYHLPSXWHGOLDELOLW\
KDGLQKLVILOHV'HVSLWHWKHIDFWWKDW(OPRUHXQGHUVWRRGWKDW WRDSULQFLSDOSDUW\
WKH LQIRUPDWLRQ FRQWDLQHG LQ WKH OHWWHU ZDV WR EH XVHG E\
%ODFNIRUWKHSXUSRVHVRIKHOSLQJ/HDKH\VHFXUHERQGLQJDQG m3ODLQ HUURU LV DQ µREYLRXV DQG SUHMXGLFLDOj HUURU WKDW
GHVSLWH WKH IDFW WKDW (OPRUH NQHZ WKDW /HDKH\ KDG UHTXLUHV DFWLRQ E\ WKH UHYLHZLQJ FRXUW µLQ WKH LQWHUHVWV RI
VXERUGLQDWHG KLV ULJKWV LQ WKH PRQH\ WR 7UDYHOHUV (OPRUH MXVWLFHjl 5H\QROGV Y *UHHQ  )G   WK &LU
QHYHU UHTXHVWHG QRU UHYLHZHG /*& 0jV $XJXVW   FLWDWLRQRPLWWHG:KHWKHUWKHGLVWULFWFRXUWjVHUURULQ
EDQNVWDWHPHQWZKLFKZRXOGKDYHUHYHDOHGWKDWWKHORDQZDV IDLOLQJ WR SURSHUO\ LQVWUXFW WKH MXU\ RQ WKH ODZ RI DJHQF\
QRORQJHURXWVWDQGLQJ FRQVWLWXWHGDQmREYLRXVDQGSUHMXGLFLDOlHUURUUHTXLULQJDFWLRQ
mLQWKHLQWHUHVWVRIMXVWLFHlLVDFORVHTXHVWLRQ%HFDXVHDQHZ
2Q6HSWHPEHU(OPRUHDJDLQSURYLGHG%ODFNYLD WULDORQWKLVLVVXHZLOOEHUHTXLUHGDQ\ZD\DVWR'RQQHOO\DQG
IDFVLPLOHZLWKILQDQFLDOLQIRUPDWLRQRQ/HDKH\jVFRPSDQLHV .H\%DQN KRZHYHU ZH EHOLHYH WKDW WKH LQWHUHVWV RI MXVWLFH
,Q(OPRUHjVFRYHUOHWWHUKHZURWHDVIROORZV ZRXOGEHVHUYHGE\SHUPLWWLQJ(OPRUHWREHQHILWIURPDUHWULDO
RIWKLVTXHVWLRQ6HH3ODWLVY6WRFNZHOO)G
(QFORVHGDUHmGUDIWFRSLHVlRI>/&&jVDQG/*& 0jV@ WK&LUQRWLQJWKDWDFRXUWRIDSSHDOVmKDVGLVFUHWLRQ
sXQH   ILQDQFLDO VWDWHPHQWV  , DP VWLOO LQ WKH WRGLVUHJDUG5XOHlHVSHFLDOO\ZKHQGRLQJVRZRXOGVHUYH
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

DJHQWjV@ DXWKRULW\l  %URZQ Y &KULVWRSKHU ,QQ &R  SURFHVVRIILQDOL]LQJWKHVHVWDWHPHQWVDQGZLOOSURYLGH
1(G2KLR&W$SS \RXURIILFHZLWKWKHILQDOILQDQFLDOVWDWHPHQWVUHVXOWVDV
VRRQ DV SRVVLEOH  $JDLQ 3DWULFN /HDKH\ GLG ORDQ WR
7UDYHOHUVjVILUVWDUJXPHQWLQUHVSRQVHWRWKHGHIHQGDQWVj >/*& 0@DQDGGLWLRQDODIWHUsXQH
MXVWLILDEOH UHOLDQFH FKDOOHQJH LV WKDW %ODFN ZDV QRW DFWLQJ ZKLFKKDVQRW\HWEHHQGLVFORVHGDVDVXEVHTXHQWHYHQW
ZLWKLQ WKH VFRSH RI KLV DXWKRULW\ ZKHQ KH OHDUQHG WKDW WKH RQWKHILQDQFLDOVWDWHPHQW
ORDQKDGEHHQUHSDLGMXVWGD\VDIWHULWZDVH[WHQGHG
:HILQGWKLVDUJXPHQWXQSHUVXDVLYH7KHDJHQF\DJUHHPHQW  (OPRUHOHDUQVRIWKHORDQUHSD\PHQW
EHWZHHQ 7UDYHOHUV DQG WKH sDPHV % 2VZDOG &RPSDQ\ LQ
HIIHFWDWWKHWLPHJDYH%ODFNDVDQHPSOR\HHRIWKHsDPHV% :LWKLQDZHHNRIWKH6HSWHPEHUIDFVLPLOH(OPRUH
2VZDOG&RPSDQ\DXWKRULW\WRDFWDV7UDYHOHUVjVDJHQWZLWK GLVFRYHUHGWKDWWKHORDQKDGDFWXDOO\EHHQUHSDLGRQ
UHVSHFWWRm>E@RQGOLQHVLQFOXGLQJILGHOLW\ILGXFLDU\VXUHW\ $XJXVW,QLWVRSLQLRQDQGRUGHUGDWHG$XJXVW
DQGPDLOLQVXUDQFHl,WDOVRVWDWHGWKDW%ODFNZDVmDXWKRUL]HG  WKH GLVWULFW FRXUW QRWHG WKDW WKH GLVFRYHU\ ZDV PDGH
RQ>7UDYHOHUVjV@EHKDOIWRVROLFLWELQGH[HFXWHDQGVHUYLFH ZKHQ(OPRUHjVDVVLVWDQWsLP$VKZRUWKZDVILQDOL]LQJWKH
SROLFLHV DQG HQGRUVHPHQWV IRU WK>RVH@ OLQHV RI LQVXUDQFH sXQH   ILQDQFLDO VWDWHPHQWV  $V D UHVXOW RI WKLV
   l  7KXV LQIRUPDWLRQ LQGLFDWLQJ WKDW /HDKH\ PLJKW QR GLVFRYHU\(OPRUHSURPSWO\FRQWDFWHG%ODFNDQGLQIRUPHG
ORQJHU EH VDWLVI\LQJ 7UDYHOHUVjV ERQGLQJ UHTXLUHPHQWV ZDV KLPWKDW/*& 0jVsXQHILQDQFLDOVWDWHPHQWVZRXOG
FOHDUO\ UHODWHG WR PDWWHUV ZLWKLQ WKH VFRSH RI %ODFNjV QRWLQFOXGHDQ\UHIHUHQFHWRWKHORDQ:KHQDVNHG
DXWKRULW\ DWWULDOZK\KHGLGQRWDOVRFRQWDFW+DOOLGD\RU%HQGHUXSRQ
GLVFRYHU\ RI WKH UHSD\PHQW (OPRUH VDLG KH EHOLHYHG WKDW
7UDYHOHUV VHFRQG DUJXPHQW SRVLWLQJ WKDW %ODFN ZDV LQIRUPLQJ%ODFNZDVVXIILFLHQWm:KHQ,WROG'DYH%ODFN,
mHQJDJHGLQFRPPLWWLQJDQLQGHSHQGHQWIUDXGXOHQWDFWRQKLV ZDVWHOOLQJ>7UDYHOHUV@l
RZQDFFRXQWlLVHTXDOO\XQSHUVXDVLYH%HFDXVHWKHLVVXHRI
LPSXWHGNQRZOHGJHZDVQHYHUSUHVHQWHGWRWKHMXU\LWZDV 2Q2FWREHU(OPRUHDQG%HQGHUPHWWRGLVFXVV
QRW JLYHQ WKH RSSRUWXQLW\ WR FRQVLGHU DQ\ H[FHSWLRQV WKDW YDULRXVPDWWHUVUHODWLQJWR/*& 0,QODWH$XJXVWRI
PLJKWDSSO\ +DOOLGD\ZDVSURPRWHGDQGWUDQVIHUUHGWR7UDYHOHUVjV2PDKD
RIILFH  %HQGHU KLV VXSHUYLVRU DW WKH WLPH DVVXPHG
:LWKUHVSHFWWRWKHMXU\LQVWUXFWLRQWKDWZDVGHOLYHUHGWKH UHVSRQVLELOLW\IRU+DOOLGD\jVRSHQDFFRXQWVLQFOXGLQJWKRVH
GLVWULFWFRXUWVWDWHGDVIROORZV UHODWHG WR /*& 0  %HQGHU GLG QRW DVN DERXW QRU GLG
(OPRUHSURYLGHDQXSGDWHRQWKHORDQ
,QGHFLGLQJZKHWKHU>7UDYHOHUV@MXVWLILDEO\UHOLHGRQWKH
VWDWHPHQWV RU IDLOXUHV WR GLVFORVH \RX PD\ FRQVLGHU 2Q2FWREHU(OPRUHPDLOHGWKHILQDOUHVXOWVRIKLV
ZKHWKHU 'DYLG %ODFN HPSOR\HG E\ WKH s% 2VZDOG UHYLHZ RI /&&jV DQG /*& 0jV sXQH   ILQDQFLDO
&RPSDQ\DFWHGDVDQDJHQWRI7UDYHOHUV VWDWHPHQWVWR%HQGHU%ODFNDQG/HDKH\1HLWKHUWKHFRYHU
VKHHWQRUWKHVWDWHPHQWVWKHPVHOYHVPDGHDQ\UHIHUHQFHWRWKH
$ SHUVRQ LV DQ DJHQW RI DQRWKHU FDOOHG WKH SULQFLSDO  ORDQ  %HQGHU WHVWLILHG KRZHYHU WKDW KH GLG QRW
ZKHQWKHSULQFLSDOKDVJLYHQWKHDJHQWWKHDXWKRULW\WR UHFHLYH (OPRUHjV GHOLYHU\ XQWLO 'HFHPEHU RI   7KH
DFW RQ WKH SULQFLSDOjV EHKDOI DQG WKH SULQFLSDO KDV WHVWLPRQ\ DW WULDO LQGLFDWHG WKDW DOWKRXJK (OPRUH XVHG WKH
UHWDLQHG WKH ULJKW WR FRQWURO WKH PDQQHU RU PHDQV RI DGGUHVV OLVWHG RQ %HQGHUjV EXVLQHVV FDUG WKH ILQDQFLDO
SHUIRUPLQJWKDWDFW)RUDSHUVRQWREHDQDJHQWLWLVQRW
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

VWDWHPHQWVPD\KDYHEHHQGHOLYHUHGWRWKHZURQJ7UDYHOHUV REMHFWLRQVE\WKHSDUWLHVDQGWKHDSSHOODQWGLGQRWREMHFWDW
RIILFH WKDWWLPH
:KHQ%HQGHUZDVDVNHGDWWULDOZKDWUROHWKH6HSWHPEHU 8QGHU FRPPRQ ODZ D SULQFLSDO LV FKDUJHDEOH ZLWK WKH
 DQG 6HSWHPEHU   GRFXPHQWV IURP (OPRUH NQRZOHGJHRIRUQRWLFHWRKLVDJHQWWKDWLVUHFHLYHGE\WKH
LQGLFDWLQJWKHSUHVHQFHRIWKHORDQSOD\HGLQKLV DJHQWLQWKHGXHFRXUVHRIKLVHPSOR\PHQWDQGLVUHODWHGWR
HYDOXDWLRQRIRQHRIWKHFRQVWUXFWLRQSURMHFWVGLVFXVVHGKH WKHPDWWHUVZLWKLQKLVDXWKRULW\6HH6WDWHH[UHO1LFRGHPXV
DQVZHUHGDVIROORZVm7KDWZDVFULWLFDOWRPHEHFDXVHDJDLQ Y,QGXVWULDO&RPPjQ1(G2KLR
WKH ZKROH ILQDQFLDO EDVLV RI ZULWLQJ WKLV DFFRXQW ZDV WKLV )LQNOHY:HVWHUQ 6/LIH,QV&R1(G
VXERUGLQDWHGPRQH\WKDWZHKDYHEHHQWDONLQJDERXWl+H 2KLR&W$SSm>7@KHODZLVZHOOVHWWOHGWKDWQRWLFHWR
DOVRVWDWHGKRZHYHUWKDWZKHQKHILQDOO\UHFHLYHGWKHsXQH WKHDJHQWLVQRWLFHWRWKHSULQFLSDOl$VWKH6XSUHPH&RXUW
ILQDQFLDOVWDWHPHQWVDQGQRWLFHGWKDWWKH\GLGQRW RI 2KLR KDV H[SODLQHG KRZHYHU D SULQFLSDO ZLOO QRW EH
LQFOXGH DQ\ UHIHUHQFH WR WKH  ORDQ KH ZDV QRW UHVSRQVLEOH IRU VXFK NQRZOHGJH RU QRWLFH LQ FHUWDLQ
DODUPHGm)UDQNO\LWGLGQRWFRQFHUQPHl FLUFXPVWDQFHV
 5DQDOORjVLQYROYHPHQW 7KHUH LV DQ H[FHSWLRQ WR WKLV UXOH ZKHQ WKH DJHQW LV
HQJDJHGLQFRPPLWWLQJDQLQGHSHQGHQWIUDXGXOHQWDFWRQ
,QODWH$XJXVWRI/HDKH\KLUHGsR$QQH5DQDOORWR KLVRZQDFFRXQWDQGWKHIDFWVWREHLPSXWHGUHODWHWRWKLV
VHUYHDVDQLQKRXVHDFFRXQWDQWIRU/&&DQG/*& 0$W IUDXGXOHQW DFW  ,W LV VRPHWLPHV VDLG WKDW LW FDQQRW EH
WULDO5DQDOORWHVWLILHGWKDWVKHSUHSDUHGDPRQJRWKHUWKLQJV SUHVXPHGWKDWDQDJHQWZLOOFRPPXQLFDWHWRKLVSULQFLSDO
WKH EDODQFH VKHHWV IRU /*& 0 DV RI 'HFHPEHU   DFWVRIIUDXGZKLFKKHKDVFRPPLWWHGRQKLVRZQDFFRXQW
)HEUXDU\   DQG 0DUFK   DOO RI ZKLFK VKH LQWUDQVDFWLQJWKHEXVLQHVVRIKLVSULQFLSDODQGWKDWWKH
NQHZZRXOGEHVHQWWR7UDYHOHUV2QHDFKRIWKHVHILQDQFLDO GRFWULQHRILPSXWHGNQRZOHGJHUHVWVXSRQDSUHVXPSWLRQ
VWDWHPHQWV 5DQDOOR NQRZLQJO\ PLVVWDWHG FHUWDLQ EDODQFHV WKDWDQDJHQWZLOOFRPPXQLFDWHWRKLVSULQFLSDOZKDWHYHU
1RWDEO\LQHDFKGRFXPHQWVKHRYHUVWDWHGWKHORQJWHUPQRWHV KH NQRZV FRQFHUQLQJ WKH EXVLQHVV KH LV HQJDJHG LQ
SD\DEOH E\   7KH HIIHFW RI WKLV SDUWLFXODU WUDQVDFWLQJDVDJHQW,WKDVEHHQVXJJHVWHGWKDWWKH
PLVVWDWHPHQW ZDV WR IDOVHO\ LQGLFDWH WKDW DV RI WKH DERYH WUXHUHDVRQIRUWKHH[FHSWLRQLVWKDWDQLQGHSHQGHQWIUDXG
EDODQFHVKHHWGDWHV/*& 0RZHG/HDKH\7KH FRPPLWWHGE\DQDJHQWRQKLVRZQDFFRXQWLVEH\RQGWKH
FRQVLVWHGRIWKHsXO\ORDQIRU VFRSHRIKLVHPSOR\PHQWDQGWKHUHIRUHNQRZOHGJHRILW
DQGDQRWKHUORDQLQWKHDPRXQWRI7KLVODWWHUORDQ DVPDWWHURIODZFDQQRWEHLPSXWHGWRWKHSULQFLSDODQG
ZDVDOVRWKHUHVXOWRIDUHTXHVWE\7UDYHOHUVEXWZDVQHYHU WKH SULQFLSDO FDQQRW EH KHOG UHVSRQVLEOH IRU LW   
DFWXDOO\ GHSRVLWHG LQWR /*& 0jV DFFRXQWV  %HFDXVH ZH :KDWHYHU WKH UHDVRQ PD\ EH WKH H[FHSWLRQ LV ZHOO
EHOLHYHWKDWWKHFLUFXPVWDQFHVVXUURXQGLQJWKHORDQ HVWDEOLVKHG
DUHFXPXODWLYHWRWKHORDQDOUHDG\GHWDLOHGZHZLOO
QRWGLVFXVVLWIXUWKHU $PHULFDQ([SRUW ,QODQG&RDO&RUSY0DWWKHZ$GG\&R
1(2KLR,QDQ\FDVHm>D@SDUW\ZKR
:KHQ5DQDOORZDVDVNHGDWWULDODERXWZKRGLUHFWHGKHUWR FODLPV WKDW D SULQFLSDO LV UHVSRQVLEOH IRU WKH DFWV RI DQ
LQFRUUHFWO\ VWDWH WKHVH EDODQFHV VKH LQGLFDWHG WKDW LW ZDV HPSOR\HHLVREOLJDWHGWRSURYHWKHDJHQF\DQGVFRSHRI>WKH
%ODFN ZKR PDGH WKH UHTXHVW mHYHU\ WLPH >WKH VWDWHPHQWV@
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

LQWKHFRXUVHDQGIXUWKHUDQFHRIDVFKHPHWRGHIUDXGLVQRW ZHUHLVVXHGl6KHODWHUUHIHUUHGWR%ODFNDVmDUHSUHVHQWDWLYH
LPSXWHGWRWKHSULQFLSDOl RI>7UDYHOHUV@l5DQDOORDOVRWHVWLILHGWKDWERWK/HDKH\
DQG(OPRUHZHUHDZDUHRIWKHVLWXDWLRQ
$W WKH RXWVHW ZH QRWH WKDW ZLWK UHVSHFW WR (OPRUH WKH
GLVWULFWFRXUWjVIDLOXUHWRLQVWUXFWRQLPSXWHGNQRZOHGJHPXVW 4 'LG \RX HYHU KDYH DQ\ FRQYHUVDWLRQV ZLWK 0U
EHUHYLHZHGXQGHUWKHmSODLQHUURUlVWDQGDUG6HH5H\QROGV (OPRUHFRQFHUQLQJWKHVHILQDQFLDOVWDWHPHQWVZHKDYH
Y*UHHQ)GWK&LUQRWLQJWKDWD MXVWWDONHGDERXW"
IDLOXUHWRREMHFWWRDMXU\LQVWUXFWLRQPD\VWLOOEHUHYLHZHGIRU
mSODLQHUURUl$IWHUWKHGLVWULFWFRXUWLQVWUXFWHGWKHMXU\WKH $ ,EHOLHYHLQLWLDOO\\HV
SDUWLHVZHUHDVNHGZKHWKHUWKH\KDGDQ\REMHFWLRQV(OPRUH
VWDWHGWKDWmKHKDVQRH[FHSWLRQVWRWKHLQVWUXFWLRQVl(OPRUH 4 'LG 0U (OPRUH NQRZ WKDW \RX ZHUH SUHSDULQJ
QRZDUJXHVWKDWm7UDYHOHUVRIIHUVQRVXSSRUWIRULWVDUJXPHQW ILQDQFLDOVWDWHPHQWVWKDWZRXOGPLVUHSUHVHQWWKHILQDQFLDO
WKDW ERWK GHIHQGDQWV PXVW VSHFLILFDOO\ REMHFW WR D FOHDUO\ FRQGLWLRQRI>/*& 0@"
HUURQHRXVMXU\FKDUJHl
$ /HDKH\@KDG FRQFHDOPHQWRIDIDFWZKLFKLVPDWHULDOWRWKHWUDQVDFWLRQ
SXWLQDQGVXERUGLQDWHGWRXVl DWKDQGPDGHIDOVHO\ZLWKNQRZOHGJHRILWVIDOVLW\RU
ZLWKVXFKXWWHUGLVUHJDUGDQGUHFNOHVVQHVVDVWRZKHWKHULWLV
7KH ILUVW DFWXDO LVVXDQFH RI D VXUHW\ ERQG RFFXUUHG RQ WUXH RU IDOVH WKDW NQRZOHGJH PD\ EH LQIHUUHG  ZLWK WKH
6HSWHPEHUZLWKUHVSHFWWRWKH/DNHODQG&RPPXQLW\ LQWHQW RI PLVOHDGLQJ DQRWKHU LQWR UHO\LQJ XSRQ LW
&ROOHJH SURMHFW  6XEVHTXHQW WR WKDW WUDQVDFWLRQ /*& 0  MXVWLILDEOH UHOLDQFH XSRQ WKH UHSUHVHQWDWLRQ RU
GHIDXOWHG RQ WKH IROORZLQJ WKUHH FRQVWUXFWLRQ SURMHFWV IRU FRQFHDOPHQWDQGDUHVXOWLQJLQMXU\SUR[LPDWHO\FDXVHGE\
ZKLFK7UDYHOHUVKDGSURYLGHGVXUHW\ERQGLQJ0DGLVRQ WKHUHOLDQFH6HH&RKHQY/DPNR,QF1(G
:DVWH:DWHU7UHDWPHQW)DFLOLW\LQWKHDPRXQWRI 2KLR   'RQQHOO\ .H\%DQN DQG (OPRUH IRFXV WKHLU
8QLYHUVLW\RI7ROHGRLQWKHDPRXQWRIDQG DSSHDORQWKHODVWWZRHOHPHQWV
 .LUNKDP 3ODFH /LPLWHG 3DUWQHUVKLS LQ WKH DPRXQW RI
%RQGLQJLQWKHDPRXQWRIIRUWKH D sXVWLILDEOHUHOLDQFH
0DGLVRQ SURMHFW ZDV LQLWLDOO\ DSSURYHG RQ 6HSWHPEHU 
 EXW WKH mERQG GDWHl ZDV 1RYHPEHU    7KH 7KHGHIHQGDQWVFRQWHQGWKDWWKH\FDQQRWEHKHOGOLDEOHIRU
7ROHGRSURMHFWERQGLQJZDVDSSURYHGRQ2FWREHUEXW WKHORVVHVLQFXUUHGLQFRQQHFWLRQZLWKWKRVHSURMHFWVERQGHG
WKH DPRXQW ZDV QRW mVXEPLWWHG E\ WKH 3ULQFLSDO WR WKH DIWHU (OPRUH LQIRUPHG %ODFN WKDW WKH  ORDQ KDG
2EOLJHHlXQWLO2FWREHU)LQDOO\7UDYHOHUVDSSURYHG DFWXDOO\EHHQUHSDLG7KH\IXUWKHUQRWHWKDW5DQDOORWHVWLILHG
WKH .LUNKDP 3ODFH ERQGLQJ RQ )HEUXDU\   ZKLFK WKDWDVHDUO\DV'HFHPEHUVKHZDVLQVWUXFWHGE\
DSSHDUVWRKDYHEHHQWKHVDPHGDWHWKDWWKHERQGVEHFDPH %ODFNWRIDOVHO\UHSRUWWKHH[LVWHQFHRIWKHORDQRQWKHEDODQFH
mHIIHFWLYHl  7UDYHOHUV DVVHUWHG DW WULDO WKDW EXW IRU WKH VKHHWV RI /*& 0  7KH GHIHQGDQWV DUJXH WKDW %ODFNjV
SUHVHQFHRIWKHDGGLWLRQDOLWZRXOGQRWKDYHLVVXHG NQRZOHGJH RI WKH UHSD\PHQW VKRXOG KDYH EHHQ LPSXWHG WR
VXUHW\ERQGVWR/*& 0RQDQ\RIWKHVHSURMHFWV 7UDYHOHUV EDVHG RQ ZHOOVHWWOHG DJHQF\ SULQFLSOHV  7KH\
FRQWHQGWKHUHIRUHWKDWLWZDVHUURUIRUWKHGLVWULFWFRXUWWR
% 3URFHGXUDOKLVWRU\ UHIXVHWRLQVWUXFWWKHMXU\WKDWNQRZOHGJHREWDLQHGE\DQDJHQW
LVFKDUJHDEOHWRKLVSULQFLSDO
2QsXQH7UDYHOHUVILOHGDFRPSODLQWDJDLQVW/&&
/*& 0/HDKH\DQG/HDKH\jVZLIH6XVDQ/HDKH\DQGKLV ,QUHVSRQVHWR(OPRUHjVDSSHDO7UDYHOHUVjVFRQWHQGVDQG
ZLIHKRZHYHUILOHGIRUEDQNUXSWF\LQ$SULODQG$XJXVWRI (OPRUH GRHV QRW GLVSXWH WKDW (OPRUH IDLOHG WR UHTXHVW DQ
UHVSHFWLYHO\$GHIDXOWMXGJPHQWLQWKHDSSUR[LPDWH LPSXWHGNQRZOHGJHLQVWUXFWLRQ+HDOVRGLGQRWREMHFWWRWKH
DPRXQWRIZDVHQWHUHGDJDLQVW/&&DQG/*& 0 MXU\LQVWUXFWLRQVLQJHQHUDO:LWKUHVSHFWWR'RQQHOO\jVDQG
RQ 2FWREHU   EXW LW DSSHDUV WKDW QHLWKHU HQWLW\ KDG .H\%DQNjVDVVHUWLRQ7UDYHOHUVPDLQWDLQVWKDWWKHIDFWVRIWKH
DVVHWVDYDLODEOHWRVDWLVI\WKHMXGJPHQW FDVHGRQRWVXSSRUWWKHJLYLQJRIVXFKDQLQVWUXFWLRQ)LUVWLW
FRQWHQGV WKDW %ODFNjV DJHQF\ DXWKRULW\ ZDV WRR OLPLWHG WR
2Q 'HFHPEHU   7UDYHOHUV ILOHG DQ DPHQGHG SHUPLW LPSXWDWLRQ RI VXFK NQRZOHGJH WR WKH SULQFLSDO
FRPSODLQW DGGLQJ .H\%DQN .H\&RUS .H\%DQNjV SDUHQW 6HFRQGLWFODLPVWKDWm>W@KHHYLGHQFHDWWULDOHVWDEOLVKHGWKDW
FRUSRUDWLRQ'RQQHOO\%HUVWLFNHUDQG(OPRUHDVGHIHQGDQWV %ODFNZDVDQDFWLYHSDUWLFLSDQWLQWKHVFKHPHE\WKH/HDKH\V
7UDYHOHUV DVVHUWHG WKH IROORZLQJ 2KLR VWDWH ODZ FODLPV WRGHIUDXG7UDYHOHUVlDQGWKDWmNQRZOHGJHJDLQHGE\DQDJHQW
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

E 6XEVWDQWLDODVVLVWDQFH IUDXGDLGLQJDQGDEHWWLQJIUDXGDQGFRQVSLUDF\WRFRPPLW
IUDXG DJDLQVW .H\%DQN .H\&RUS 'RQQHOO\ DQG (OPRUH
%HFDXVHZHFRQFOXGHWKDWWKHMXU\jVILQGLQJWKDW(OPRUH QHJOLJHQFHRQWKHSDUWRI(OPRUHWRUWLRXVLQWHUIHUHQFH
NQHZRI/HDKH\jVWRUWLRXVFRQGXFWLVQRWVXSSRUWHGE\WKH ZLWK SURVSHFWLYH EXVLQHVV DGYDQWDJH DJDLQVW .H\%DQN
HYLGHQFH ZH QHHG QRW DGGUHVV (OPRUHjV FKDOOHQJH WR WKH .H\&RUS DQG 'RQQHOO\  WRUWLRXV LQWHUIHUHQFH ZLWK
VXIILFLHQF\ RI WKH HYLGHQFH VXSSRUWLQJ WKH VXEVWDQWLDO FRQWUDFW DJDLQVW .H\%DQN .H\&RUS DQG 'RQQHOO\
DVVLVWDQFHSURQJ  IUDXGXOHQW WUDQVIHU RI  DJDLQVW .H\%DQN
.H\&RUS DQG 'RQQHOO\  TXLD WLPHW H[RQHUDWLRQ DQG
 (OPRUHjV PRWLRQ IRU MXGJPHQW DV D PDWWHU RI LQGHPQLW\DJDLQVWDOORIWKHGHIHQGDQWVEUHDFKRIFRQWUDFW
ODZnIUDXG DJDLQVW/HDKH\EUHDFKRIILGXFLDU\GXW\RQWKHSDUWRIDOO
RIWKHGHIHQGDQWVFRQYHUVLRQDJDLQVW/HDKH\DQGKLVZLIH
(OPRUHjVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZZDVDOVR DQG  IUDXGXOHQW WUDQVIHU RI DSSUR[LPDWHO\ 
GLUHFWHGDW7UDYHOHUVjVFODLPWKDW(OPRUHKLPVHOIFRPPLWWHG DJDLQVW.H\%DQN.H\&RUSDQG'RQQHOO\
IUDXG+HEDVLFDOO\UHSHDWVWKHFRQWHQWLRQVVHWIRUWKLQ3DUW
,,$ DERYH UDWKHU WKDQ IRFXV RQ KLV DOOHJHG 2Q 0D\   WKH GHIHQGDQWV PRYHG IRU VXPPDU\
PLVUHSUHVHQWDWLRQV+RZHYHUIRUWKHUHDVRQVVHWIRUWKLQWKDW MXGJPHQWRQDOOFODLPV,QDQRSLQLRQDQGRUGHUGDWHG$XJXVW
3DUW LH KLV ODFN RI SULRU NQRZOHGJH UHJDUGLQJ /HDKH\jV WKHGLVWULFWFRXUWJUDQWHGLQSDUWDQGGHQLHGLQSDUW
IUDXGZHFRQFOXGHWKDWWKHHYLGHQFHGRHVQRWVXSSRUWWKH WKH GHIHQGDQWVj PRWLRQ  6SHFLILFDOO\ WKH GLVWULFW FRXUW
MXU\jV ILQGLQJ WKDW (OPRUH KLPVHOI HQJDJHG LQ IUDXG  7KH JUDQWHGVXPPDU\MXGJPHQWWRWKHGHIHQGDQWVZLWKUHVSHFWWR
GLVWULFWFRXUWWKHUHIRUHHUUHGLQQRWJUDQWLQJ(OPRUHjVPRWLRQ 7UDYHOHUVjV WKLUG IRXUWK DQG ILIWK FODLPV DQG GHQLHG
IRUMXGJPHQWDVDPDWWHURIODZRQWKLVLVVXH VXPPDU\MXGJPHQWLQDOORWKHUUHVSHFWV/DWHULQ$XJXVWRI
WKHGLVWULFWFRXUWSXUVXDQWWRDQDJUHHPHQWEHWZHHQWKH
 7KHGHIHQGDQWVjPRWLRQVIRUMXGJPHQWDVDPDWWHURI SDUWLHVGLVPLVVHG%HUVWLFNHUIURPWKHDFWLRQ6RRQWKHUHDIWHU
ODZnMXVWLILDEOH UHOLDQFH DQG SUR[LPDWH FDXVDWLRQ 7UDYHOHUVYROXQWDULO\GLVPLVVHGWKHWHQWKFODLP
ZLWKUHVSHFWWR/HDKH\jVIUDXG
2Q $XJXVW   .H\%DQN .H\&RUS DQG 'RQQHOO\
:LWKWKHH[FHSWLRQRIWKHLQGHSHQGHQWFODLPRIIUDXGOHYLHG ILOHGDPRWLRQLQOLPLQHUHTXHVWLQJWKDWWKHFRXUWOLPLWWKH
DJDLQVW(OPRUHDOORIWKHIUDXGUHODWHGFDXVHVRIDFWLRQLQWKLV WHVWLPRQ\RI7UDYHOHUVjVEDQNLQJH[SHUW'U'RXJODV$XVWLQ
FDVHLHWKHDLGLQJDQGDEHWWLQJDQGWKHFRQVSLUDF\FODLPV $PRQJ RWKHU WKLQJV WKH\ FRQWHQGHG WKDW mEHFDXVH $XVWLQ
DUH EDVHG RQ /HDKH\jV GHDOLQJV ZLWK 7UDYHOHUV  7KH ODFNVERQGLQJH[SHUWLVHKHVKRXOGQRWEHSHUPLWWHGWRRSLQH
GHIHQGDQWV KDYH QHYHU GHQLHG WKDW /HDKH\jV DFWLRQV ZHUH RQZKDWDERQGLQJXQGHUZULWHUVXFKDV7UDYHOHUVZRXOGUHO\
IUDXGXOHQW7KHLUPRWLRQVIRUMXGJPHQWDVDPDWWHURIODZ RQLQHYDOXDWLQJDERQGLQJULVNl,QUHVSRQVHWRWKHPRWLRQ
KRZHYHULQFOXGHGDUJXPHQWVWRWKHHIIHFWWKDWWKHDLGLQJDQG 7UDYHOHUV DFNQRZOHGJHG WKDW 'U $XVWLQ ZDV QRW D ERQG
DEHWWLQJDQGWKHFRQVSLUDF\FKDUJHVFDQQRWVWDQGEHFDXVHWKH XQGHUZULWLQJH[SHUWEXWDUJXHGWKDWKHFRXOGVWLOOWHVWLI\DVWR
XQGHUO\LQJ FDXVH RI DFWLRQ IRU /HDKH\jV IUDXG ODFNHG WZR FHUWDLQUHODWHGPDWWHUV
HVVHQWLDO HOHPHQWV MXVWLILDEOH UHOLDQFH DQG SUR[LPDWH
FDXVDWLRQ$OWKRXJKWKHGLVWULFWFRXUWGHQLHGWKHGHIHQGDQWVj 'U $XVWLQ GRHV KDYH NQRZOHGJH DERXW ERQG
SRVWWULDOPRWLRQVLQWKHLUHQWLUHW\WKH'HFHPEHU XQGHUZULWLQJ DQG KH VKRXOG QRW EH SUHFOXGHG IURP
RUGHUGRHVQRWLQFOXGHDQ\DQDO\VLVRIWKHMXVWLILDEOHUHOLDQFH WHVWLI\LQJLQWKDWUHJDUGLQRUGHUWRH[SODLQKLVRSLQLRQV
DQGSUR[LPDWHFDXVDWLRQLVVXHV
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

DVWRZK\ WKH .H\%DQNGHIHQGDQWVDFWHGUHFNOHVVO\LQ HYLGHQFHIURPZKLFKWKHMXU\FRXOGUHDVRQDEOHLQIHUWKDWDW
VXSSRUWRIWKHSODLQWLIIjVIUDXGFODLPV WKH WLPH (OPRUH PDGH KLV PLVUHSUHVHQWDWLRQV KH KDG WKH
NQRZOHGJHUHIHUUHGWRDERYH$OWKRXJK5DQDOORWHVWLILHGWKDW
6LQFH'U$XVWLQKDVDFNQRZOHGJHGWKDWKHLVQRWDERQG (OPRUH NQHZ WKDW VKH ZDV PLVVWDWLQJ /*& 0jV ILQDQFLDO
XQGHUZULWLQJH[SHUWKHZLOOQRWEHDVNHGDWWULDOWRRSLQH VWDWHPHQWVVKHGLGQRWLQGLFDWHZKHQ(OPRUHEHFDPHDZDUH
XSRQ WKH ERQG XQGHUZULWLQJ DFWLYLWLHV RI >7UDYHOHUV@jV RIKHUDFWLRQV,QIDFW5DQDOORjVFRPPHQWVZHUHPDGHZLWK
XQGHUZULWHUV  'U $XVWLQ ZLOO QRW mRSLQH RQ ZKDW D UHVSHFWWREDODQFHVKHHWVGDWHG'HFHPEHU)HEUXDU\
ERQGLQJFRPSDQ\ZRXOGUHO\RQLQXQGHUZULWLQJDERQGl   DQG 0DUFK    +HU WHVWLPRQ\ GLG QRW
HVWDEOLVKWKDW/HDKH\ZDVDZDUHRIDQ\ILQDQFLDOLUUHJXODULWLHV
sXVWEHIRUHWULDOWKHGLVWULFWFRXUWGHQLHGWKHPRWLRQLQOLPLQH SULRU WR WKH GDWH KH KLPVHOI OHDUQHG RI WKH  ORDQ
QRWLQJ WKDW m>I@URP WKH PDWHULDOV VXEPLWWHG WR PH , UHSD\PHQWLQODWH6HSWHPEHURI
XQGHUVWDQG WKDW >7UDYHOHUV@ DW WKLV SRLQW LQ WLPH GRHV QRW
VHHNWRPDNHLQTXLU\RI'U$XVWLQFRQFHUQLQJXQGHUZULWLQJ 1RQHRIWKHHYLGHQFHFLWHGE\7UDYHOHUVLQVXSSRUWRIWKH
PDWWHUVl7KHGLVWULFWFRXUWPDGHFOHDUKRZHYHUWKDWWKH MXU\jVDLGLQJDQGDEHWWLQJILQGLQJVXSSRUWVWKHFRQFOXVLRQWKDW
GHQLDO ZDV mVXEMHFW WR D ODWHU UHYLHZ LQ WKH FRQWH[W RI WKH (OPRUHNQHZSULRUWRRUDWWKHWLPHRIKLVPLVUHSUHVHQWDWLRQV
WULDOl WKDW /HDKH\ KDG HQJDJHG LQ WRUWLRXV FRQGXFW  ,Q IDFW
(OPRUHjVDFWRISURPSWO\FRQWDFWLQJ%ODFNLQ6HSWHPEHURI
2Q$XJXVWWKHMXU\WULDOEHJDQ$WWKHFORVHRI ZKHQ(OPRUHILUVWOHDUQHGRI/HDKH\jVPLVUHSUHVHQWDWLRQ
7UDYHOHUVjVFDVHLQFKLHIWKHGLVWULFWFRXUWJUDQWHG(OPRUHjV IDYRUVDILQGLQJWKDWKHODFNHGSULRUNQRZOHGJHRI/HDKH\jV
PRWLRQIRUMXGJPHQWDVDPDWWHURIODZDVWRWKHFRQVSLUDF\ IUDXG6HH&DPS)GDWQRWLQJWKDWIDFHGZLWKDQ
WRFRPPLWIUDXG FODLP  7KH GLVWULFW FRXUW DOVR UXOHG VXD DLGLQJ DQG DEHWWLQJ DOOHJDWLRQ WKH GHIHQGDQWjV ODFN RI
VSRQWH WKDW WKHUH ZDV LQVXIILFLHQW HYLGHQFH WR VXSSRUW DQ NQRZOHGJHZDVGHPRQVWUDWHGE\KLVDFWLRQVXSRQGLVFRYHULQJ
DZDUGRISXQLWLYHGDPDJHVDJDLQVWDQ\RIWKHGHIHQGDQWV$W LPSURSHU FRQGXFW ZKLFK LQFOXGHG FRQWDFWLQJ WZR RWKHU
WKHFORVHRIDOORIWKHHYLGHQFHWKHGLVWULFWFRXUWGHQLHGWKH GHIHQGDQWV DQG QRWLI\LQJ WKH SODLQWLIIjV DWWRUQH\
GHIHQGDQWVjUHQHZHGPRWLRQVIRUMXGJPHQWDVDPDWWHURIODZ )XUWKHUPRUH (OPRUHjV GHFLVLRQ WR IRUHJR FRQWDFWLQJ
7UDYHOHUV GLUHFWO\ DQG KLV IDLOXUH WR UDLVH WKH LVVXH ZLWK
2Q6HSWHPEHUWKHMXU\UHWXUQHGDYHUGLFWDJDLQVW %HQGHU DW WKHLU 2FWREHU   PHHWLQJ GR QRW SURYLGH
'RQQHOO\DQG.H\%DQNIRUDLGLQJDQGDEHWWLQJIUDXGDQGIRU DGHTXDWHHYLGHQFHIURPZKLFKDMXU\FRXOGUHDVRQDEO\LQIHU
FRQVSLUDF\ WRFRPPLWIUDXGDQGUHWXUQHGDYHUGLFWDJDLQVW (OPRUHjV SULRU NQRZOHGJH RI /HDKH\jV IUDXG  $V (OPRUH
(OPRUHIRUIUDXGDLGLQJDQGDEHWWLQJIUDXGDQGQHJOLJHQFH WHVWLILHGKHEHOLHYHGWKDWm>Z@KHQ,WROG'DYH%ODFN,ZDV
1RYHUGLFWZDVUHQGHUHGDJDLQVW.H\&RUSDQGLWDSSHDUVDV WHOOLQJ>7UDYHOHUV@l
WKRXJK WKDW SDUWLFXODU HQWLW\ LV QR ORQJHU LQYROYHG LQ WKLV
FDVH :H WKHUHIRUH FRQFOXGH WKDW WKH GLVWULFW FRXUW HUUHG LQ
GHQ\LQJ(OPRUHjVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZRQ
,Q DQVZHU WR WKH GLVWULFW FRXUWjV LQWHUURJDWRULHV WKH MXU\ WKHDLGLQJDQGDEHWWLQJFODLPDJDLQVWKLP
VSHFLILFDOO\IRXQGWKDW'RQQHOO\KDGmDFWXDONQRZOHGJHlRI
/HDKH\jV IUDXG DQG WKDW 'RQQHOO\ mNQRZLQJO\ SURYLGHG
VXEVWDQWLDO DVVLVWDQFHl LQ IXUWKHUDQFH RI WKDW IUDXG  ,W ZDV
XQDEOH WR UHDFK D YHUGLFW KRZHYHU DV WR 'RQQHOO\jV DQG
.H\%DQNjV RZQ DOOHJHG IUDXG  7KH MXU\ DQVZHUHG
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

DQG.H\%DQNjVPRWLRQIRUMXGJPHQWDVDPDWWHURIODZRQWKH ml WR WKH IROORZLQJ TXHVWLRQ  m6WDWH WKH WRWDO
FRQVSLUDF\WRFRPPLWIUDXGFODLP DPRXQWRIGDPDJHVVXVWDLQHGE\>7UDYHOHUV@ZKLFK\RXILQG
KDYHUHVXOWHGIURPWKHIUDXGRI'RQQHOO\RU.H\%DQNRU
 (OPRUHjV PRWLRQ IRU MXGJPHQW DV D PDWWHU RI WKDW UHVXOWHG IURP IUDXG E\ 3DWULFN RU 6XVDQ /HDKH\ DV WR
ODZnDLGLQJDQGDEHWWLQJ ZKLFK'RQQHOO\RU.H\%DQNDLGHGRUDEHWWHGl,WGRHV
QRW DSSHDU WKDW WKH MXU\ ZDV SUHVHQWHG LQWHUURJDWRULHV ZLWK
7XUQLQJ QRZ WR (OPRUHjV DSSHDO KH ILUVW FKDOOHQJHV WKH UHVSHFW WR WKH DOOHJDWLRQ WKDW 'RQQHOO\ DQG .H\%DQN
GLVWULFWFRXUWjVUXOLQJWKDWWKHHYLGHQFHVXIILFLHQWO\HVWDEOLVKHG FRQVSLUHGZLWK/HDKH\,QLWVMXGJPHQWKRZHYHUWKHGLVWULFW
KLVOLDELOLW\IRUDLGLQJDQGDEHWWLQJ/HDKH\/LNH'RQQHOO\ FRXUWGHFODUHGWKDWWKHMXU\mUHWXUQHGDQDZDUGRIGDPDJHVl
DQG.H\%DQN(OPRUHFRQWHQGVWKDWQHLWKHUWKHNQRZOHGJH LQWKHDPRXQWRImRQWKHLVVXHVRIFRQVSLUDF\DQG
QRU WKH VXEVWDQWLDO DVVLVWDQFH HOHPHQWV ZDV SURYHQ E\ WKH DLGLQJDQGDEHWWLQJl
HYLGHQFHDWWULDO(OPRUHjVDUJXPHQWVHVVHQWLDOO\PLUURUWKRVH
RI'RQQHOO\DQG.H\%DQN :LWK UHVSHFW WR WKH DOOHJDWLRQV RI IUDXG RQ WKH SDUW RI
(OPRUH WKH MXU\ IRXQG WKDW KH mKDG DFWXDO NQRZOHGJH RI
D .QRZOHGJH LPSRUWDQW RU QHFHVVDU\ LQIRUPDWLRQ DERXW WKH /HDKH\Vj
ILQDQFLDO FRQGLWLRQl DQG WKDW KH HLWKHU PDGH D IDOVH
(OPRUHVXPPDUL]HVKLVDUJXPHQWDVIROORZVm(OPRUHjV UHSUHVHQWDWLRQWRRUFRQFHDOHGDNQRZQIDFWIURP7UDYHOHUV
DZDUHQHVVWKDW/HDKH\FODLPHGKHZDVERUURZLQJPRQH\RQ 7KHMXU\DOVRVSHFLILFDOO\IRXQGWKDW7UDYHOHUVKDGSURYHQWKH
D VKRUW WHUP >EDVLV@ IRU ERQGLQJ SXUSRVHV ZDV VLPSO\ QRW HOHPHQWVRIFLYLODLGLQJDQGDEHWWLQJZLWKUHVSHFWWR(OPRUH
VXIILFLHQWWRSURYHWKDW(OPRUHKDGDFWXDONQRZOHGJHWKDW ,WDQVZHUHGmlWRWKHIROORZLQJTXHVWLRQm6WDWH
/HDKH\ZDVGHIUDXGLQJ7UDYHOHUVl(PSKDVLVLQRULJLQDO WKHWRWDODPRXQWRIGDPDJHVVXVWDLQHGE\>7UDYHOHUV@ZKLFK
\RXILQGKDYHUHVXOWHGIURPWKHIUDXGRI(OPRUHRUWKDW
$V GLVFXVVHG SUHYLRXVO\ IRU WKH SXUSRVH RI HVWDEOLVKLQJ UHVXOWHGIURPIUDXGE\3DWULFNRU6XVDQ/HDKH\DVWRZKLFK
DLGLQJ DQG DEHWWLQJ OLDELOLW\ NQRZOHGJH PD\ EH VKRZQ E\ (OPRUHDLGHGRUDEHWWHGl,QDVHSDUDWHVHFWLRQRIWKH
FLUFXPVWDQWLDOHYLGHQFH6HH0HWJHY%DHKOHU)G LQWHUURJDWRULHVWKHMXU\IRXQGWKDW(OPRUHZDVQHJOLJHQWLQ
 WK &LU   :H DJUHH ZLWK 7UDYHOHUVjV YLHZ WKDW WKHSHUIRUPDQFHRIKLVGXWLHVDQGWKDWWKHUHVXOWLQJGDPDJHV
WKHUHZDVVXIILFLHQWFLUFXPVWDQWLDOHYLGHQFHIURPZKLFKDMXU\ DPRXQWHGWR7KHMXU\DOVRIRXQGKRZHYHUWKDW
FRXOG UHDVRQDEO\ LQIHU WKDW DW VRPH SRLQW (OPRUH EHFDPH 7UDYHOHUVZDVFRQWULEXWRULO\QHJOLJHQWE\WKLUW\SHUFHQW,QLWV
DZDUH WKDW /HDKH\ ZDV HQJDJHG LQ WRUWLRXV FRQGXFW  $V MXGJPHQWWKHGLVWULFWFRXUWVWDWHGWKDWWKHMXU\mUHWXUQHGDQ
7UDYHOHUV QRWHV LQ LWV EULHI 5DQDOOR /*& 0jV LQKRXVH DZDUGRIGDPDJHVlLQWKHDPRXQWRImDVWRWKH
DFFRXQWDQWWHVWLILHGWKDWVKHWROG(OPRUHWKDWVKHKDGEHHQ LVVXHVRIIUDXGDLGLQJDQGDEHWWLQJDQGQHJOLJHQFHl
LQVWUXFWHGWRPLVUHSUHVHQWWKHILQDQFLDOFRQGLWLRQRI/*& 0
DQGWKDWKHZDVWKHUHIRUHIXOO\DZDUHRIWKDWIDFW%DVHGRQ 7UDYHOHUV VXEVHTXHQWO\ UHTXHVWHG WKDW WKH GLVWULFW FRXUW
WKLVWHVWLPRQ\DORQHZKLFKWKHMXU\ZDVHQWLWOHGWRFUHGLWZH LPSRVHMRLQWDQGVHYHUDOOLDELOLW\RQ'RQQHOO\.H\%DQNDQG
EHOLHYHWKDWWKHMXU\FRXOGUHDVRQDEO\LQIHUWKDW(OPRUHNQHZ (OPRUH7KHVHGHIHQGDQWVLQFRQWUDVWUHTXHVWHGMXGJPHQWLQ
RI/HDKH\jVWRUWLRXVFRQGXFW WKHLUIDYRUDVDPDWWHURIODZRUDQHZWULDO7KHGLVWULFW
FRXUW GHQLHG DOO RI WKH SRVWWULDO PRWLRQV LQ RUGHUV GDWHG
:H FDQQRW IXUWKHU FRQFOXGH KRZHYHU WKDW WKH HYLGHQFH 'HFHPEHU
VXSSRUWV WKH MXU\jV XOWLPDWH ILQGLQJ WKDW (OPRUH DLGHG DQG
DEHWWHG LQ /HDKH\jV IUDXG  7KH UHFRUG LV GHYRLG RI DQ\
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

2QDSSHDOWKHSDUWLHVFKDOOHQJHYDULRXVUXOLQJVPDGHE\ .H\%DQN DJUHHG WR mVKDUH>@ LQ WKH JHQHUDO FRQVSLUDWRULDO
WKH GLVWULFW FRXUW GXULQJ DQG DIWHU WKH WULDO  'RQQHOO\ REMHFWLYHl+RRNV)GDW
.H\%DQN DQG (OPRUH DVVHUW WKDW WKHUH ZDV LQVXIILFLHQW
HYLGHQFHWRVXSSRUWWKHYHUGLFWUHQGHUHGLQFRQQHFWLRQZLWK $VVXJJHVWHGE\3DUW,,$RIWKLVRSLQLRQWKHGHJUHHRI
WKHIUDXGFODLPVLQFOXGLQJLQVXIILFLHQWHYLGHQFHWRVXSSRUWD LQYROYHPHQWUHTXLUHGIRUFLYLOFRQVSLUDF\LVKLJKHUWKDQWKDW
ILQGLQJ RI MXVWLILDEOH UHOLDQFH E\ 7UDYHOHUV RQ /HDKH\jV IRU FLYLO DLGLQJ DQG DEHWWLQJ  :KHUHDV m>D@LGLQJDEHWWLQJ
PLVUHSUHVHQWDWLRQVRUDFDXVDOOLQNEHWZHHQWKHDOOHJHGIUDXG IRFXVHVRQZKHWKHUDGHIHQGDQWNQRZLQJO\JDYHµVXEVWDQWLDO
DQG7UDYHOHUVjVORVVHV(OPRUHKDVQRWDSSHDOHGWKHDGYHUVH DVVLVWDQFHjWRVRPHRQHZKRSHUIRUPHGZURQJIXOFRQGXFWl
QHJOLJHQFHYHUGLFW FRQVSLUDF\IRFXVHVmRQZKHWKHUWKHGHIHQGDQWDJUHHGWRMRLQ
LQWKHZURQJIXOFRQGXFWl+DOEHUVWDPY:HOFK)G
7KH SDUWLHV DOVR PDLQWDLQ WKDW WKH GLVWULFW FRXUW HUUHG E\ '&&LUHPSKDVLVDGGHG,Q+DOEHUVWDP
DOORZLQJFHUWDLQH[SHUWWHVWLPRQ\'RQQHOO\DQG.H\%DQN WKHFRXUWSURYLGHGWKHIROORZLQJDGGLWLRQDOJXLGDQFH
WDNH LVVXH ZLWK 7UDYHOHUVjV EDQNLQJ H[SHUW DQG (OPRUH
FKDOOHQJHVWKHDGPLVVLELOLW\RIWHVWLPRQ\E\7UDYHOHUVjVIUDXG &RXUWV DQG FRPPHQWDWRUV KDYH IUHTXHQWO\ EOXUUHG WKH
H[SHUW  7UDYHOHUV RQ WKH RWKHU KDQG DSSHDOV WKH GLVWULFW GLVWLQFWLRQ EHWZHHQ WKH WZR WKHRULHV RI FRQFHUWHG
FRXUWjV  VXD VSRQWH UXOLQJ WKDW WKHUH ZDV LQVXIILFLHQW OLDELOLW\0RVWFRPPRQO\FRXUWVKDYHUHOLHGRQHYLGHQFH
HYLGHQFH WR VXSSRUW DQ DZDUG RI SXQLWLYH GDPDJHV DQG RIDVVLVWDQFHWRWKHPDLQWRUWIHDVRUWRLQIHUDQDJUHHPHQW
 UHIXVDO WR LPSRVH MRLQW DQG VHYHUDO OLDELOLW\ RQ WKH DQG WKHQ DWWDFKHG WKH ODEHO mFLYLO FRQVSLUDF\l WR WKH
GHIHQGDQWV  7KH 2KLR %DQNHUVj $VVRFLDWLRQ DV DPLFXV UHVXOWDQWDPDOJDP6RPHWLPHVDOWKRXJKQRWDOZD\VWKH
FXUDLH KDV DOVR ILOHG D EULHI LQ WKLV PDWWHU VXSSRUWLQJ WKH LQIHUHQFH KDV EHHQ IDFWXDOO\ MXVWLILHG PDQ\ WRUW
DUJXPHQWVDVVHUWHGE\'RQQHOO\DQG.H\%DQN GHIHQGDQWVKDYHERWKFRQVSLUHGZLWKDQGVXEVWDQWLDOO\
DVVLVWHGHDFKRWKHU7KHUHLVDTXDOLWDWLYHGLIIHUHQFH
,,$1$/<6,6 EHWZHHQSURYLQJDQDJUHHPHQWWRSDUWLFLSDWHLQDWRUWLRXV
OLQH RI FRQGXFW DQG SURYLQJ NQRZLQJ DFWLRQ WKDW
$ 7KHGLVWULFWFRXUWHUUHGLQSDUWZKHQLWGHQLHG VXEVWDQWLDOO\DLGVWRUWLRXVFRQGXFW,QVRPHVLWXDWLRQV
WKHGHIHQGDQWVjPRWLRQVIRUMXGJPHQWDVDPDWWHU WKHWULHURIIDFWFDQQRWUHDVRQDEO\LQIHUDQDJUHHPHQW
RIODZ IURPVXEVWDQWLDODVVLVWDQFHRUHQFRXUDJHPHQW$FRXUW
PXVW WKHQ HQVXUH WKDW DOO WKH HOHPHQWV RI WKH VHSDUDWH
 6WDQGDUGRIUHYLHZ EDVLVRIDLGLQJDEHWWLQJKDYHEHHQVDWLVILHG
7KH VWDQGDUG RI UHYLHZ DSSOLFDEOH WR D GLVWULFW FRXUWjV ,GHPSKDVLVDGGHG
GHWHUPLQDWLRQVSXUVXDQWWR5XOHRIWKH)HGHUDO5XOHVRI
&LYLO3URFHGXUHLQDGLYHUVLW\DFWLRQKDVEHHQVXPPDUL]HGE\ 7KHVLWXDWLRQGHVFULEHGE\WKH+DOEHUVWDPFRXUWLVSUHVHQW
WKLVFRXUWDVIROORZV LQWKLVFDVH$OWKRXJKLWZDVUHDVRQDEOHIRUWKHMXU\WRLQIHU
EDVHGRQWKHFLUFXPVWDQWLDOHYLGHQFHSUHVHQWHGE\7UDYHOHUV
>$@ IHGHUDO FRXUW VLWWLQJ LQ GLYHUVLW\ UHYLHZV GH QRYR WKDW 'RQQHOO\ NQHZ WKDW /HDKH\ ZDV HQJDJLQJ LQ WRUWLRXV
OHJDO GHWHUPLQDWLRQV UDLVHG E\ D 5XOH  PRWLRQ DQG FRQGXFWLWZDVXQUHDVRQDEOHIRUWKHMXU\WRIXUWKHULQIHUWKDW
PXVWDSSO\WKHIRUXPVWDWHjVVWDQGDUGRIUHYLHZmRQO\ /HDKH\ mDJUHHG WR MRLQ LQl KLV VFKHPH  :H WKHUHIRUH
ZKHQD5XOHFKDOOHQJHLVPRXQWHGWRWKHVXIILFLHQF\ FRQFOXGHWKDWWKHGLVWULFWFRXUWHUUHGLQGHQ\LQJ'RQQHOO\jV
RI WKH HYLGHQFH VXSSRUWLQJ D MXU\jV ILQGLQJV  1R
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

$V SUHYLRXVO\ RXWOLQHG WKH IROORZLQJ HOHPHQWV PXVW EH GHIHUHQFH LV DSSURSULDWH LQ GLYHUVLW\ FDVHV WR WKH WULDO
SURYHQLQRUGHUWRHVWDEOLVKDFODLPRIFLYLOFRQVSLUDF\mD FRXUWjVUHVROXWLRQVRIOHJDOTXHVWLRQVl
PDOLFLRXVFRPELQDWLRQWZRRUPRUHSHUVRQVLQMXU\WR
SHUVRQ RU SURSHUW\ DQG  H[LVWHQFH RI DQ XQODZIXO DFW 3DOPHU Y )R[ 6RIWZDUH ,QF  )G   WK &LU
LQGHSHQGHQWIURPWKHDFWXDOFRQVSLUDF\l8QLYHUVDO&RDFK TXRWLQJ. 7(QWHUV,QFY=XULFK,QV&R)G
,QFY1HZW@KHHOHPHQWRIDJUHHPHQWLVQHDUO\DOZD\V mPRXQWHGWRWKHVXIILFLHQF\RIWKHHYLGHQFHlDQGWKHUHIRUH
HVWDEOLVKHG E\ FLUFXPVWDQWLDO HYLGHQFH DV FRQVSLUDWRUV WKLVFRXUWPXVWDSSO\2KLRjVVWDQGDUGRIUHYLHZ
VHOGRP PDNH UHFRUGV RI WKHLU LOOHJDO DJUHHPHQWVl  :LWK
UHVSHFWWRWKHOHYHORIDJUHHPHQWWKDWPXVWEHHVWDEOLVKHGWKLV ,Q 2KLR WKH SURSHU VWDQGDUG RI UHYLHZ RI D WULDO FRXUWjV
FRXUWKDVVWDWHGWKDWm>D@OOWKDWPXVWEHVKRZQLVWKDWWKH UXOLQJRQDPRWLRQIRUMXGJPHQWQRWZLWKVWDQGLQJWKHYHUGLFW
DOOHJHG FRFRQVSLUDWRU VKDUHG LQ WKH JHQHUDO FRQVSLUDWRULDO QRZNQRZQDVDPRWLRQIRUMXGJPHQWDVDPDWWHURIODZLQ
REMHFWLYHl+RRNVY+RRNV)GWK&LU WKHIHGHUDOFRXUWVLVDVIROORZV

7KH WHVW WR EH DSSOLHG E\ D WULDO FRXUW LQ UXOLQJ RQ D
6LPLODU WR WKHLU DUJXPHQW FKDOOHQJLQJ WKH DLGLQJ DQG PRWLRQIRUMXGJPHQWQRWZLWKVWDQGLQJWKHYHUGLFWLVWKH
DEHWWLQJ YHUGLFW 'RQQHOO\ DQG .H\%DQN DVVHUW WKDW m>W@KH VDPHWHVWWREHDSSOLHGRQDPRWLRQIRUDGLUHFWHGYHUGLFW
RQO\ HYLGHQFH 7UDYHOHUV SRLQWHG WR RI DQ\ DJUHHPHQW RU 7KHHYLGHQFHDGGXFHGDWWULDODQGWKHIDFWVHVWDEOLVKHGE\
XQGHUVWDQGLQJEHWZHHQ.H\>%DQN@DQG/HDKH\RWKHUWKDQWKH DGPLVVLRQVLQWKHSOHDGLQJVDQGLQWKHUHFRUGPXVWEH
ORDQ DJUHHPHQW LWVHOI ZDV 'RQQHOO\jV sXO\   FRQVWUXHG PRVW VWURQJO\ LQ IDYRU RI WKH SDUW\ DJDLQVW
PHPRUDQGXPl  7KH\ IXUWKHU FRQWHQG WKDW mWK>H@ ZKRPWKHPRWLRQLVPDGHDQGZKHUHWKHUHLVVXEVWDQWLDO
PHPRUDQGXPGRHVQRWHVWDEOLVKWKDW'RQQHOO\NQHZRIOHW HYLGHQFH WR VXSSRUW KLV VLGH RI WKH FDVH XSRQ ZKLFK
DORQH DJUHHG WR SDUWLFLSDWH LQ D IUDXGXOHQW VFKHPHl UHDVRQDEOHPLQGVPD\UHDFKGLIIHUHQWFRQFOXVLRQVWKH
$OWKRXJK ZH WDNH LVVXH ZLWK WKHLU VWDWHPHQW WKDW WKH PRWLRQ PXVW EH GHQLHG  1HLWKHU WKH ZHLJKW RI WKH
PHPRUDQGXP ZDV m>W@KH RQO\ HYLGHQFHl LGHQWLILHG E\ HYLGHQFHQRU WKHFUHGLELOLW\RIWKHZLWQHVVHVLVIRUWKH
7UDYHOHUVZHDJUHHWKDWLWZDVXQUHDVRQDEOHIRUWKHMXU\WR FRXUWjVGHWHUPLQDWLRQLQUXOLQJXSRQHLWKHURIWKHDERYH
LQIHUIURPWKHHYLGHQFHSUHVHQWHGWKDW'RQQHOO\DQGWKHUHIRUH PRWLRQV
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

3RVLQY$%&0RWRU&RXUW+RWHO,QF1(G ,Q OLJKW RI WKHVH IDFWRUV WKHUH FDQ EH OLWWOH GRXEW WKDW
2KLR .H\%DQNjVORDQVXEVWDQWLDOO\DVVLVWHG/HDKH\LQKLV
HIIRUWVWRWHPSRUDULO\LQIODWHWKHDVVHWVRI/*& 0DQGLQGXFH
 $LGLQJDQGDEHWWLQJIUDXGXQGHU2KLRODZ 7UDYHOHUV WR ERQG /*& 0jV FRQVWUXFWLRQ SURMHFWV  $V
GLVFXVVHG LQ 3DUW ,,$D RI WKLV RSLQLRQ /HDKH\jV IUDXG
7KHPRGHUQDSSOLFDWLRQRIFLYLODLGLQJDQGDEHWWLQJFDQEH FRQVLVWHG RI WKH ZURQJIXO PDQLSXODWLRQ RI /*& 0jV
WUDFHG WR WKH 6HFRQG 5HVWDWHPHQW RI 7RUWV m)RU KDUP ILQDQFLDOSRVLWLRQ%\VHFXULQJWKHORDQ/HDKH\
UHVXOWLQJ WR D WKLUG SHUVRQ IURP WKH WRUWLRXV FRQGXFW RI ZDVDEOHWRmYHULI\lWR7UDYHOHUVWKDWKHKDGFRPSOLHGZLWKLWV
DQRWKHURQHLVVXEMHFWWROLDELOLW\LIKHNQRZVWKDWWKH ILUVWIXQGLQJUHTXHVWWKHUHE\HVWDEOLVKLQJDYLWDODQGLQLWLDO
RWKHUjV FRQGXFW FRQVWLWXWHV D EUHDFK RI GXW\ DQG JLYHV OHYHO RI FUHGLELOLW\  %HFDXVH WKLV FUHGLELOLW\ VHUYHG DV WKH
VXEVWDQWLDO DVVLVWDQFH RU HQFRXUDJHPHQW WR WKH RWKHU VR WR IRXQGDWLRQ IRU LQFUHDVHG WUXVW EHWZHHQ WKH SDUWLHV ZH
FRQGXFWKLPVHOIl5(67$7(0(17 6(&21' 2) 72576 FRQFOXGH WKDW WKH H[WHQVLRQ RI WKH ORDQ ZDV RI VXEVWDQWLDO
† E   $W WKH RXWVHW 'RQQHOO\ .H\%DQN DQG DVVLVWDQFHWR/HDKH\
(OPRUH TXHVWLRQ ZKHWKHU 6HFWLRQ E LV D UHFRJQL]DEOH
FDXVHRIDFWLRQXQGHU2KLRODZ 'RQQHOO\ DQG .H\%DQN SODFH JUHDW HPSKDVLV RQ WKRVH
DVSHFWVRI/HDKH\jVIUDXGWKDWGLGQRWGHSHQGRQWKH
$VWKH&RXUWRI$SSHDOVRI2KLRKDVREVHUYHGWKHVWDWHjV ERUURZLQJDQGDUJXHWKDWWKHORDQmZDVQRWHYHQDQHFHVVDU\
KLJKHVW FRXUW mKDV QHYHU H[SUHVVO\ DSSURYHG 6HFWLRQ  FRPSRQHQWRI/HDKH\jVVFKHPHl(YHQLIRQHZHUHWRDFFHSW
   l  $QGRQLDQ Y $&  6 ,QF  1(G   WKH FRQWHQWLRQ WKDW WKH ORDQ ZDV QRW mQHFHVVDU\l WR WKH
2KLR &W $SS   $OWKRXJK WKDW PD\ EH WUXH WKH VFKHPH'RQQHOO\jVDQG.H\%DQNjVDUJXPHQWZRXOGVWLOOIDLO
6XSUHPH&RXUWRI2KLRnDVWKH$QGRQLDQFRXUWQRWHGnKDV 6XEVWDQWLDO DVVLVWDQFH DIWHU DOO GRHV QRW PHDQ QHFHVVDU\
RQDWOHDVWRQHRFFDVLRQDSSOLHG6HFWLRQE6HH*UHDW DVVLVWDQFH&I&DPSY'HPD)GWK&LU
&HQW,QV&RY7RELDV1(G2KLR LPSO\LQJWKDWWKHWHVWLVZKHWKHUWKHDVVLVWDQFHPDNHV
VHWWLQJ IRUWK WKH UHTXLUHPHQWV RI 6HFWLRQ E DQG LWmHDVLHUlIRUWKHVHFXULWLHVYLRODWLRQWRRFFXUQRWZKHWKHUWKH
FRQFOXGLQJ WKDW mWKH WKHRU\ RI MRLQW OLDELOLW\ IRU WKH DVVLVWDQFHZDVQHFHVVDU\,QDGGLWLRQDOWKRXJKLWLVWUXHWKDW
HQFRXUDJHPHQWRIWRUWLRXVFRQGXFWDGRSWHGE\WKHFRXUWRI mWKH URXWLQH H[WHQVLRQ RI D ORDQ GRHV QRW DPRXQW WR
DSSHDOV FDQQRW DSSO\ WR DSSHOODQW XQGHU WKHVH VXEVWDQWLDODVVLVWDQFHl%DQHY6LJPXQGU([SORUDWLRQ&RUS
FLUFXPVWDQFHVl%\DSSO\LQJ6HFWLRQEWRWKHIDFWVRI )GWK&LUWKHORDQDWLVVXHLQWKLV
WKHFDVHEHIRUHLWWKH*UHDW&HQWUDOFRXUWLPSOLFLWO\LQGLFDWHG FDVHZDVDVSUHYLRXVO\GLVFXVVHGDQ\WKLQJEXWURXWLQH
WKDWLWFRQVLGHUHGFLYLODLGLQJDQGDEHWWLQJDYLDEOHFDXVHRI
DFWLRQ6HH)DLOODY&LW\RI3DVVDLF)GG  'RQQHOO\jVDQG.H\%DQNjVPRWLRQIRUMXGJPHQWDVD
&LU  UHO\LQJ LQ SDUW RQ D 1HZ sHUVH\ ORZHU FRXUW PDWWHURIODZnFRQVSLUDF\
GHFLVLRQLQILQGLQJWKDWWKHUHLVmQRUHDVRQWREHOLHYHWKDWWKH
1HZ sHUVH\ 6XSUHPH &RXUW ZRXOG DGRSW D FRQVWUXFWLRQ RI 'RQQHOO\ DQG .H\%DQN IXUWKHU PDLQWDLQ WKDW WKH GLVWULFW
FLYLODLGLQJDQGDEHWWLQJOLDELOLW\XQGHUWKH>1HZsHUVH\/DZ FRXUW HUUHG ZKHQ LW GHQLHG WKHLU PRWLRQ IRU MXGJPHQW DV D
$JDLQVW'LVFULPLQDWLRQ@WKDWGLIIHUVIURP>6HFWLRQERI@ PDWWHU RI ODZ RQ7UDYHOHUVjVFLYLOFRQVSLUDF\FODLP7KH\
WKH 5HVWDWHPHQWl  $FFRUGLQJO\ ZH FRQFOXGH WKDW WKH FRQWHQGWKDWmWKHUHZDVQRHYLGHQFHWKDW.H\>%DQN@KDGDQ
6XSUHPH&RXUWRI2KLRZRXOGUHFRJQL]HDLGLQJDQGDEHWWLQJ DJUHHPHQWRUXQGHUVWDQGLQJZLWK/HDKH\WRGHIUDXG7UDYHOHUV
l2QWKLVLVVXHZHDJUHHZLWKWKHLUDUJXPHQW
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

FLUFXPVWDQWLDOHYLGHQFHRUE\UHFNOHVVFRQGXFWEXWWKHSURRI OLDELOLW\ LI VTXDUHO\ IDFHG ZLWK WKH LVVXH DQG ZH WKHUHIRUH
PXVWGHPRQVWUDWHDFWXDODZDUHQHVVRIWKHSDUW\jVUROHLQWKH GHFOLQH7UDYHOHUVjVLQYLWDWLRQWRFHUWLI\WKHVWDWHODZTXHVWLRQ
IUDXGXOHQWVFKHPHl
m6HFWLRQEUHTXLUHVWZRHOHPHQWVNQRZOHGJHWKDW
E 6XEVWDQWLDODVVLVWDQFH WKH SULPDU\ SDUW\jV FRQGXFW LV D EUHDFK RI GXW\ DQG
 VXEVWDQWLDO DVVLVWDQFH RU HQFRXUDJHPHQW WR WKH SULPDU\
'RQQHOO\ DQG .H\%DQN DOVR WDNH LVVXH ZLWK WKH MXU\jV SDUW\LQFDUU\LQJRXWWKHWRUWLRXVDFWl$QGRQLDQ1(G
ILQGLQJ WKDW WKH\ KDG SURYLGHG VXEVWDQWLDO DVVLVWDQFH WR DW  VHH DOVR )DLOOD  )G DW  m&RXUWV KDYH
/HDKH\7KH\DVVHUWWKDWm/HDKH\GLGQRWQHHGDORDQIURP UHFRJQL]HGWKDW5HVWDWHPHQW>6HFWLRQE@VHWVIRUWK
.H\>%DQN@ WR GHFHLYH 7UDYHOHUV KH FRXOG HDVLO\ KDYH WKH VWDQGDUG IRU FLYLO DLGLQJ DQG DEHWWLQJ OLDELOLW\l
GHIUDXGHG 7UDYHOHUV ZLWKRXW ERUURZLQJ PRQH\ IURP 1RWZLWKVWDQGLQJWKLVFOHDUSURQRXQFHPHQWE\DQ2KLRFRXUW
.H\>%DQN@l  $JDLQ ZH ILQG 'RQQHOO\jV DQG .H\%DQNjV RI WKH UHOHYDQW HOHPHQWV 7UDYHOHUV FRQWHQGV WKDW m>D@FWXDO
DUJXPHQWXQSHUVXDVLYH NQRZOHGJH LV QRW UHTXLUHG WR HVWDEOLVK DLGLQJ DQG DEHWWLQJ
OLDELOLW\l,QVXSSRUWRIWKLVSURSRVLWLRQ7UDYHOHUVFLWHV
$V SUHYLRXVO\ QRWHG LQ RUGHU WR HVWDEOLVK DLGLQJ DQG DPRQJRWKHUWKLQJVWKHIROORZLQJSDVVDJHIURPWKLVFRXUWjV
DEHWWLQJ OLDELOLW\ D SODLQWLII PXVW SURYH WKDW WKH GHIHQGDQW GHFLVLRQLQ6HFXULWLHV ([FKDQJH&RPPLVVLRQY&RIIH\
SURYLGHG mVXEVWDQWLDO DVVLVWDQFH RU HQFRXUDJHPHQW WR WKH )GWK&LU
SULPDU\SDUW\LQFDUU\LQJRXWWKHWRUWLRXVDFWl$QGRQLDQ
1(GDWm(VWDEOLVKLQJWKLVHOHPHQWUHTXLUHVWKH $LGLQJ DQG DEHWWLQJ KDV EHHQ GHILQHG E\ WKH FRXUWV
SODLQWLIIWRVKRZWKDWWKHVHFRQGDU\SDUW\SUR[LPDWHO\FDXVHG FRQVLGHULQJVHFXULWLHVODZFDVHVZLWKUHIHUHQFHWRERWK
WKHYLRODWLRQRULQRWKHUZRUGVWKDWWKHHQFRXUDJHPHQWRU WKH5HVWDWHPHQWRI7RUWVDQGWKHFULPLQDO
DVVLVWDQFHZDVDVXEVWDQWLDOIDFWRULQFDXVLQJWKHWRUWl. 6 ODZ86&†:LWKRXWPHDQLQJWRVHWIRUWK
3DUWQHUVKLS  )G DW   :LWK UHVSHFW WR WKLV DQLQIOH[LEOHGHILQLWLRQRIDLGLQJDQGDEHWWLQJZHILQG
GHWHUPLQDWLRQWKH7KLUG&LUFXLWKDVH[SODLQHGDVIROORZV WKDWDSHUVRQPD\EHKHOGDVDQDLGHUDQGDEHWWRURQO\LI
VRPH RWKHU SDUW\ KDV FRPPLWWHG D VHFXULWLHV ODZ
>7@KH FRPPHQWV WR VHFWLRQ  RI WKH 5HVWDWHPHQW YLRODWLRQ LI WKH DFFXVHG SDUW\ KDG JHQHUDO DZDUHQHVV
SURYLGH D OLVW RI ILYH IDFWRUV mWKH QDWXUH RI WKH DFW WKDW KLV UROH ZDV D SDUW RI DQ RYHUDOO DFWLYLW\ WKDW LV
HQFRXUDJHG WKH DPRXQW RI DVVLVWDQFH JLYHQ E\ WKH LPSURSHUDQGLIWKHDFFXVHGDLGHUDEHWWRUNQRZLQJO\DQG
GHIHQGDQWKLVSUHVHQFHRUDEVHQFHDWWKHWLPHRIWKHWRUW VXEVWDQWLDOO\DVVLVWHGWKHYLRODWLRQ
KLV UHODWLRQ WR WKH RWKHU DQG KLV VWDWH RI PLQGl
$GGLWLRQDOO\WKHFRXUWLQ+DOEHUVWDPSURYLGHGDVL[WK ,GDWHPSKDVLVDGGHG
IDFWRUWKHGXUDWLRQRIWKHDVVLVWDQFHSURYLGHG)LQDOO\
WKHDOOHJHGVXEVWDQWLDODVVLVWDQFHPXVWEHWKHSUR[LPDWH 2WKHUFRXUWVKDYHVLPLODUO\UHIHUHQFHG6HFWLRQDQGWKHQ
FDXVHRISODLQWLIIVjKDUP FRQFOXGHGWKDWHYLGHQFHRIDmJHQHUDODZDUHQHVVRIDUROHLQ
DQLPSURSHUDFWLYLW\lZLOOVDWLVI\WKHILUVWHOHPHQWRIDQDLGLQJ
7HPSRURPDQGLEXODUsRLQW70s,PSODQW5HFLSLHQWVY'RZ DQG DEHWWLQJ FODLP  6HH HJ 7HPSRURPDQGLEXODU sRLQW
&KHP&R)GWK&LUFLWDWLRQV 70s,PSODQW5HFLSLHQWVY'RZ&KHP&R)G
RPLWWHG  WK &LU  DFNQRZOHGJLQJ WKDW OLDELOLW\ XQGHU
6HFWLRQ E ZLOO DWWDFK ZKHQ WKH DFWRU mNQRZV WKDW WKH
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

RWKHUjVFRQGXFWFRQVWLWXWHVDEUHDFKRIGXW\lEXWDOVRQRWLQJ DERXW /HDKH\jV VXERUGLQDWLRQ DJUHHPHQWl DQG WKDW QHLWKHU
WKDW m>F@RXUWV KDYH UHFRJQL]HGl WKH UHTXLUHPHQW WKDW mWKH 7UDYHOHUV QRU (OPRUH HYHU mLQIRUP>HG@ .H\>%DQN@ WKDW
DLGHUDQGDEHWWRUPXVWEHJHQHUDOO\DZDUHRIKLVUROHLQWKH 7UDYHOHUVZDVUHO\LQJRQWKHDVDORQJWHUPFDSLWDO
RYHUDOOZURQJIXODFWLYLW\DWWKHWLPHDVVLVWDQFHLVSURYLGHGl FRQWULEXWLRQl WR /*& 0  $Q DOOHJHG DLGHU DQG DEHWWRU
KRZHYHU QHHG QRW NQRZ DOO RI WKH GHWDLOV RI WKH SULPDU\
:HVHHQRFRQIOLFWEHWZHHQWKHSRVLWLRQWKDWDQDLGHUDQG SDUW\jV VFKHPH IRU OLDELOLW\ WR DWWDFK  6HH HJ :RRGV Y
DEHWWRUPXVWKDYHDFWXDONQRZOHGJHRIWKHSULPDU\SDUW\jV %DUQHWW%DQNRI)RUW/DXGHUGDOH)GWK
ZURQJGRLQJDQGWKHVWDWHPHQWWKDWLWLVHQRXJKIRUWKHDLGHU &LUKROGLQJWKDWWKHNQRZOHGJHUHTXLUHPHQWRIDLGLQJ
DQG DEHWWRU WR KDYH D JHQHUDO DZDUHQHVV RI LWV UROH LQ WKH DQGDEHWWLQJHOHPHQWZDVPHWHYHQWKRXJKWKHEDQNmPD\QRW
RWKHUjVWRUWLRXVFRQGXFWIRUOLDELOLW\WRDWWDFK6HH&DPSY KDYH NQRZQ RI DOO WKH GHWDLOV RI WKH SULPDU\ IUDXGnWKH
'HPD)GWK&LUm,IDGHIHQGDQWKDV PLVUHSUHVHQWDWLRQV RPLVVLRQV DQG RWKHU IUDXGXOHQW
D JHQHUDO DZDUHQHVV RI KLV UROH LQ WKH SULPDU\ YLRODWRU
V SUDFWLFHVl
ZURQJIXODFWLYLW\KRZHYHUWKLVPD\EHVXIILFLHQWWRVDWLVI\
WKHNQRZOHGJHUHTXLUHPHQWl,IRQHLVDZDUHWKDWKHKDVD 2XUFRQFOXVLRQZLWKUHVSHFWWR'RQQHOO\jVDQG.H\%DQNjV
UROHLQDQLPSURSHUDFWLYLW\VHH&RIIH\)GDW NQRZOHGJHVKRXOGQRWEHPLVXQGHUVWRRG2UGLQDULO\DEDQN
WKHQ VXUHO\ KH NQRZV WKDW WKH SULPDU\ SDUW\jV FRQGXFW LV GRHV QRW KDYH DQ REOLJDWLRQ WR LQYHVWLJDWH RU TXHVWLRQ LWV
WRUWLRXVVHH$QGRQLDQ1(GDW FXVWRPHUVjIDFLDOO\OHJDOWUDQVDFWLRQV6HH6PLWKY$PHULFDQ
1DWjO%DQN 7UXVW&R)GWK&LU
 &RQVSLUDF\WRFRPPLWIUDXGXQGHU2KLRODZ m7KHIDFWWKDWWKHEDQNZDVLQWKHEXVLQHVVRIOHQGLQJPRQH\
GLGQRWVXEMHFWLWWRDQ\VSHFLDOGXW\RIGLVFORVXUH$OHQGLQJ
7KH6XSUHPH&RXUWRI2KLRGHILQHVFLYLOFRQVSLUDF\DVmµD LQVWLWXWLRQ KDV QR GXW\ WR GLVFORVH EDVHG RQ LWV UROH DV D
PDOLFLRXV FRPELQDWLRQ RI WZR RU PRUH SHUVRQV WR LQMXUH OHQGHUl$EDQNKRZHYHULVQRWLPPXQHIURPFLYLODLGLQJ
DQRWKHULQSHUVRQRUSURSHUW\LQDZD\QRWFRPSHWHQWIRURQH DQGDEHWWLQJFODLPVDQGWRWKHH[WHQWWKDWLWVNQRZOHGJHRI
DORQHUHVXOWLQJLQDFWXDOGDPDJHVjl.HQW\Y7UDQVDPHULFD WKHSULPDU\SDUW\jVWRUWLRXVFRQGXFWFDQEHSURYHQHLWKHUE\
3UHPLXP,QV&R1(G2KLRTXRWLQJ GLUHFWRUFLUFXPVWDQWLDOHYLGHQFHOLDELOLW\ZLOODWWDFKLIWKH
/H)RUWY&HQWXU\0DLWODQG5HDOW\&R1(G RWKHUHOHPHQWVDUHSUHVHQW
2KLR7KXVLQRUGHUWRHVWDEOLVKDFODLPRIFLYLO
FRQVSLUDF\ WKH IROORZLQJ HOHPHQWV PXVW EH SURYHQ m D :HVWUHVVWKDWWKHUHTXLUHPHQWLVDFWXDONQRZOHGJHZKLFK
PDOLFLRXVFRPELQDWLRQWZRRUPRUHSHUVRQVLQMXU\WR DJDLQ PD\ EH SURYHQ E\ FLUFXPVWDQWLDO HYLGHQFH DQG
SHUVRQ RU SURSHUW\ DQG  H[LVWHQFH RI DQ XQODZIXO DFW WKHUHIRUHHYLGHQFHHVWDEOLVKLQJQHJOLJHQFHLHWKDWDEDQN
LQGHSHQGHQWIURPWKHDFWXDOFRQVSLUDF\l8QLYHUVDO&RDFK mVKRXOGKDYHNQRZQlZLOOQRWVXIILFH6HH&DPSY'HPD
,QFY1HZ$@EDUHLQIHUHQFHWKDW
2KLR&W$SS WKH GHIHQGDQW µPXVW KDYH KDGj NQRZOHGJH RI WKH SULPDU\
YLRODWLRQLVLQVXIILFLHQW6RPHNQRZOHGJHPXVWEHVKRZQ
7KH'LVWULFWRI&ROXPELD&LUFXLWKDVVXFFLQFWO\LGHQWLILHG EXWWKHH[DFWOHYHOQHFHVVDU\IRUOLDELOLW\UHPDLQVIOH[LEOHDQG
WKHIROORZLQJGLIIHUHQFHEHWZHHQWKHWRUWVRIFRQVSLUDF\WR PXVW EH GHFLGHG RQ D FDVHE\FDVH EDVLV  1HJOLJHQFH
FRPPLW IUDXG DQG DLGLQJ DQG DEHWWLQJ IUDXG m7KH SULPH KRZHYHULVQHYHUVXIILFLHQWlFLWDWLRQDQGLQWHUQDOTXRWDWLRQ
GLVWLQFWLRQEHWZHHQFLYLOFRQVSLUDFLHVDQGDLGLQJDEHWWLQJLV PDUNVRPLWWHG:RRGZDUGY0HWUR%DQNRI'DOODV)G
WKDWDFRQVSLUDF\LQYROYHVDQDJUHHPHQWWRSDUWLFLSDWHLQD   WK &LU  m.QRZOHGJH PD\ EH VKRZQ E\
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

WR EHOLHYH WKDW DV D EDQN RIILFHU ZKR KDG SUHYLRXVO\ ZURQJIXO DFWLYLW\  $LGLQJDEHWWLQJ IRFXVHV RQ ZKHWKHU D
SURFHVVHG ORDQV IRU ERQGLQJ SXUSRVHV KH NQHZ HQRXJK WR GHIHQGDQWNQRZLQJO\JDYHµVXEVWDQWLDODVVLVWDQFHjWRVRPHRQH
UHDOL]H WKDW DGGLQJ VLJQLILFDQW IXQGV WR D FRPSDQ\jV EDQN ZKR SHUIRUPHG ZURQJIXO FRQGXFW QRW RQ ZKHWKHU WKH
DFFRXQWIRURQO\DIRXUGD\SHULRGZRXOGQRWVHUYHWRPHHWD GHIHQGDQW DJUHHG WR MRLQ LQ WKH ZURQJIXO FRQGXFWl
ERQGLQJ FRPSDQ\jV FDSLWDOL]DWLRQ UHTXLUHPHQWV  7KLV LV +DOEHUVWDP Y :HOFK  )G   '& &LU 
HVSHFLDOO\ WUXH LQ OLJKW RI WKH IDFW WKDW LQ WKLV VLWXDWLRQ HPSKDVLVDGGHG%XWVHH. 63DUWQHUVKLSY&RQWLQHQWDO
/HDKH\VWUHVVHGWR'RQQHOO\WKDWWKHIXQGVZRXOGKDYHmWREH %DQN1$)GWK&LUm>/@LDELOLW\IRU
WKHUHlDWPRQWKHQGEXWZRXOGOLNHO\EHUHWXUQHGWR.H\%DQN FLYLOFRQVSLUDF\LVLQVXEVWDQFHWKHVDPHWKLQJDVDLGLQJDQG
LPPHGLDWHO\WKHUHDIWHU DEHWWLQJ OLDELOLW\l  8QGHU HLWKHU WRUW KRZHYHU WKH
GHIHQGDQWjVNQRZOHGJHLVRISDUDPRXQWLPSRUWDQFH
,QIXUWKHUVXSSRUWRIWKHLUSRVLWLRQ'RQQHOO\DQG.H\%DQN
DUJXHWKDWWKHORDQmZDVDODZIXOWUDQVDFWLRQlmVKRUW m,ILWLVDVVXPHGWKDWDQLOOHJDOVFKHPHH[LVWHGDQGWKDW
WHUP ORDQV DUH µFRPPRQSODFHjl DQG  mWKHUH LV QRWKLQJ WKHEDQNjVORDQRURWKHUDFWLYLW\SURYLGHGDVVLVWDQFHWR
XQXVXDORULPSURSHUDERXWERUURZLQJIRUERQGLQJSXUSRVHVl WKDWVFKHPHVRPHUHPDLQLQJGLVWLQJXLVKLQJIDFWRUPXVW
:HGRQRWWDNHLVVXHZLWKDQ\RIWKHVHLQGLYLGXDOVWDWHPHQWV EH IRXQG LQ RUGHU WR SUHYHQW VXFK DXWRPDWLF OLDELOLW\
:KHQFRQVLGHUHGLQFRQWH[WKRZHYHURWKHUZLVHOHJLWLPDWH 7KHEDQNjVNQRZOHGJHRIWKHLOOHJDOVFKHPHDWWKHWLPH
FRQGXFWFDQJLYHULVHWRDQHJDWLYHLQIHUHQFH6HH0HWJHY LWORDQHGWKHPRQH\RUDJUHHGWRORDQWKHPRQH\SURYLGHV
%DHKOHU  )G   WK &LU  UHYHUVLQJ WKH WKDWDGGLWLRQDOIDFWRU.QRZOHGJHRIZURQJIXOSXUSRVH
GLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWLQIDYRURIDEDQN WKXVEHFRPHVDFUXFLDOHOHPHQWLQDLGLQJDQGDEHWWLQJRU
DFFXVHGRIDVVLVWLQJZLWKDFXVWRPHUjVIUDXGFRQFOXGLQJWKDW FRQVSLUDF\FDVHVl
m>D@OWKRXJKWKHIDFWVDUHXQUHPDUNDEOHWDNHQLQLVRODWLRQ
ZHILQGWKDWWDNHQWRJHWKHUWKH\SUHVHQWZKDWVKRXOGKDYH :RRGZDUGY0HWUR%DQNRI'DOODV)GWK&LU
EHHQ D MXU\ LVVXH RQ WKH TXHVWLRQ RI DLGLQJDQGDEHWWLQJ HPSKDVLVDGGHGTXRWLQJ5XGHU0XOWLSOH'HIHQGDQWV
OLDELOLW\l LQ6HFXULWLHV/DZ$LGLQJDQG$EHWWLQJ&RQVSLUDFLHV,Q3DUL
'HOLFWR ,QGHPQLILFDWLRQ DQG &RQWULEXWLRQ  8 3$ /
0RUHRYHU DOWKRXJK VKRUWWHUP OHQGLQJ PD\ EH 5(9
mFRPPRQSODFHlWKHGHWDLOVRIWKLVSDUWLFXODUORDQHJLWV
IRXUGD\GXUDWLRQVWUDGGOLQJWKHsXO\PRQWKHQGZHUH  'RQQHOO\jVDQG.H\%DQNjVPRWLRQIRUMXGJPHQWDVD
KLJKO\XQXVXDO6HH&DPSY'HPD)GWK PDWWHURIODZnDLGLQJDQGDEHWWLQJ
&LU  m$ SDUW\ ZKR HQJDJHV LQ DW\SLFDO EXVLQHVV
WUDQVDFWLRQVPD\EHIRXQGOLDEOHDVDQDLGHUDQGDEHWWRU ,Q WKHLU DSSHDO 'RQQHOO\ DQG .H\%DQN DUJXH WKDW WKH
ZLWK D PLQLPDO VKRZLQJ RI NQRZOHGJHl :RRGZDUG Y HYLGHQFHZDVLQVXIILFLHQWWRHVWDEOLVKOLDELOLW\IRUFLYLODLGLQJ
0HWUR%DQNRI'DOODV)GWK&LUm>,@I DQGDEHWWLQJ6SHFLILFDOO\WKH\FRQWHQGWKDWWKHHYLGHQFH
WKHPHWKRGRUWUDQVDFWLRQLVDW\SLFDOLWPD\EHSRVVLEOH GLG QRW VKRZ WKDW 'RQQHOO\ RU DQ\ RWKHU .H\%DQN
WR LQIHU WKH NQRZOHGJH QHFHVVDU\ IRU DLGLQJ DQG DEHWWLQJ UHSUHVHQWDWLYHNQHZRI/HDKH\jVIUDXGDQG.H\%DQNjV
OLDELOLW\l ORDQ GLG QRW SURYLGH /HDKH\ ZLWK VXEVWDQWLDO DVVLVWDQFH LQ
FDUU\LQJRXWKLVVFKHPH:HZLOODGGUHVVHDFKDUJXPHQWLQ
'RQQHOO\ DQG .H\%DQN DOVR DVVHUW WKDW mWKHUH ZDV QR WXUQm>P@LQGIXORIWKHSRWHQWLDOO\GHYDVWDWLQJLPSDFWDLGLQJ
HYLGHQFHWKDW'RQQHOO\RUDQ\RQHHOVHDW.H\>%DQN@NQHZ DQG DEHWWLQJ OLDELOLW\ PLJKW KDYH RQ FRPPHUFLDO
 $HWQD&DVXDOW\DQG6XUHW\&RY 1RV 1RV $HWQD&DVXDOW\DQG6XUHW\&RY 
/HDKH\&RQVWUXFWLRQ&RHWDO   /HDKH\&RQVWUXFWLRQ&RHWDO

UHODWLRQVKLSV>@l:RRGVY%DUQHWW%DQNRI)RUW/DXGHUGDOH 7UDYHOHUV WR DJUHH WR ERQG WKH FRPSDQ\jV FRQVWUXFWLRQ
)GWK&LU SURMHFWV&HQWUDOWRWKDWPDQLSXODWLRQZDV'RQQHOO\jVDQG
.H\%DQNjVIRXUGD\ORDQ$WDPLQLPXPLWSHUPLWWHG/HDKH\
D .QRZOHGJH WR SURYLGH 7UDYHOHUV ZLWK D sXO\   EDQN VWDWHPHQW
VKRZLQJ WKDW  KDG EHHQ DGGHG WR /*& 0jV
m,IDQLOOHJDOVFKHPHH[LVWVDQGDEDQNjVORDQDVVLVWVLQWKDW DFFRXQWV
VFKHPHWKHEDQNjVNQRZOHGJHRIWKHVFKHPHLVWKHFUXFLDO
HOHPHQWWKDWSUHYHQWVLWIURPVXIIHULQJDXWRPDWLFOLDELOLW\IRU )RU WKH SXUSRVHV RI HVWDEOLVKLQJ DLGLQJ DQG DEHWWLQJ
WKHFRQGXFWRILQVLGHUVWRZKRPLWORDQHGWKHPRQH\l. 6 OLDELOLW\m>W@KHUHTXLVLWHLQWHQWDQGNQRZOHGJHPD\EHVKRZQ
3DUWQHUVKLS Y &RQWLQHQWDO %DQN 1$  )G   E\FLUFXPVWDQWLDOHYLGHQFHl0HWJHY%DHKOHU)G
WK&LUFLWLQJ:RRGZDUGY0HWUR%DQNRI'DOODV WK&LUVHHDOVR5ROIY%O\WK(DVWPDQ'LOORQ
 )G   WK &LU   m>7@KH H[DFW OHYHO >RI &R)GG&LUm3URRIRIDGHIHQGDQWjV
NQRZOHGJH@QHFHVVDU\IRUOLDELOLW\UHPDLQVIOH[LEOHDQGPXVW NQRZOHGJHRULQWHQWZLOORIWHQEHLQIHUHQWLDO>@l:HDJUHH
EH GHFLGHG RQ D FDVHE\FDVH EDVLVl &DPS Y 'HPD  ZLWK 7UDYHOHUVjV FRQWHQWLRQ WKDW WKHUH ZDV VXIILFLHQW
)GWK&LU'RQQHOO\DQG.H\%DQNDVVHUW FLUFXPVWDQWLDOHYLGHQFHIURPZKLFKDMXU\FRXOGUHDVRQDEO\
WKDWmWKHUHZDVQRFRPSHWHQWHYLGHQFHWKDW.H\>%DQN@NQHZ LQIHU WKDW 'RQQHOO\ DQG .H\%DQN NQHZ WKDW /HDKH\ ZDV
WKDW/HDKH\LQWHQGHGWRFRPPLWIUDXGl:HGLVDJUHH HQJDJLQJLQWRUWLRXVFRQGXFW)LUVW'RQQHOO\DFNQRZOHGJHG
GXULQJWULDOWKDWKHDQG/HDKH\KDGNQRZQHDFKRWKHUVLQFH
,QVXSSRUWRIWKHLUDUJXPHQW'RQQHOO\DQG.H\%DQNFODLP DQGWKDWRQVHYHUDORFFDVLRQVKHKDGDVVLVWHG/HDKH\
WKDW/HDKH\jVIUDXGmFRQVLVWHGRI>KLV@UHSUHVHQWDWLRQVWKDWKH ZLWK ORDQV IRU ERQGLQJ SXUSRVHV  6HFRQG DV HDUO\ DV
KDG VXERUGLQDWHG WR 7UDYHOHUV KLV ULJKW WR UHSD\PHQW RI D )HEUXDU\   'RQQHOO\ XQGHUVWRRG WKDW /HDKH\jV
ORDQWKDWKDGDOUHDG\EHHQSDLGl7KLVGHILQHVWKH HQWUDQFH LQWR FRPPHUFLDO FRQVWUXFWLRQ ZRXOG mUHTXLUH>@
VFRSHRI/HDKH\jVIUDXGPXFKWRRQDUURZO\7KHHYLGHQFHDW VSHFLDO ERQGLQJl DQG WKDW DV D UHVXOW /HDKH\ KDG EHHQ
WULDOHVWDEOLVKHGWKDW/HDKH\VHWLQPRWLRQKLVIUDXGXOHQWSODQ mSXWWLQJ IXQGV LQWR WKH EXVLQHVVl  7KLUG .H\%DQNjV RZQ
EHFDXVH7UDYHOHUVZDVWURXEOHGE\/*& 0jVORZOHYHORI GRFXPHQWV UHYHDO WKDW RQ RU EHIRUH sXO\   LW ZDV
FDSLWDOL]DWLRQ,QRUGHUWRDOOHYLDWHWKHVHFRQFHUQV/HDKH\ LQIRUPHGE\/HDKH\WKDWWKHSXUSRVHRIWKHORDQ
KDG WR DGG PRQLHV WR /*& 0  $OWKRXJK 7UDYHOHUV DOVR ZDV mWR REWDLQ DSSURYDO IURP D QHZ %RQGLQJ &RPSDQ\l
UHTXHVWHGWKDW/HDKH\VXERUGLQDWHKLVULJKWVWRWKHVHIXQGV )RXUWKWKHsXO\PHPRUDQGXPVHWVIRUWK'RQQHOO\jV
WKLV IHDWXUH ZDV RI VHFRQGDU\ LPSRUWDQFH  7KH SULPDU\ XQGHUVWDQGLQJWKDW/HDKH\UHTXHVWHGmWKHVHIXQGVWREHWKHUH
REMHFWLYH ZDV WR HQVXUH WKDW /*& 0 ZDV DGHTXDWHO\ DW PRQWKHQGl  )LIWK WKH PHPRUDQGXP UHYHDOV WKDW HYHQ
FDSLWDOL]HG WKRXJK WKH ORDQ ZDV FODVVLILHG DV D WKLUW\GD\ DJUHHPHQW
/HDKH\LQWHQGHGWRUHSD\LWMXVWWZRGD\VDIWHUWKHsXO\
7KLVREMHFWLYHZDVSXUSRUWHGO\UHDOL]HGZKHQDQDGGLWLRQDO PRQWKHQG
ZDVSODFHGRQWKHERRNVRI/*& 0DVRIsXO\
  7KXV WKH IUDXG GLG QRW VLPSO\ FRQVLVW RI *LYHQWKLVHYLGHQFHZHFDQQRWVD\WKDWLWZDVXQUHDVRQDEOH
UHSUHVHQWDWLRQV UHJDUGLQJ WKH YDOLGLW\ RI D VXERUGLQDWLRQ IRUWKHMXU\WRLQIHUWKDW'RQQHOO\DQG.H\%DQNNQHZWKDW
DJUHHPHQW  5DWKHU /HDKH\jV WRUWLRXV FRQGXFW LV PRUH /HDKH\ZDVHQJDJLQJLQWRUWLRXVFRQGXFW$OWKRXJKLWPD\
DSSURSULDWHO\ GHVFULEHG DV WKH ZURQJIXO PDQLSXODWLRQ RI ZHOOEHWUXHWKDW'RQQHOO\GLGQRWKDYHDIXOOXQGHUVWDQGLQJ
/*& 0jV ILQDQFLDO SRVLWLRQ IRU WKH SXUSRVH RI LQGXFLQJ RIWKHERQGLQJEXVLQHVVLWZDVQRWXQUHDVRQDEOHIRUWKHMXU\