Hunter v. Caliber System Inc

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21 3XUVXDQW WR 6L[WK &LUFXLW 5XOH  (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU )LOH 1DPH DS 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB '$9,' 7 +817(5   ; 52%(57 $//,621HWDO      1RV 3ODLQWLIIV$SSHOODQWV  !  Y   &$/,%(5 6<67(0 ,1&IND  5RDGZD\6HUYLFHV,QFHW  DO   'HIHQGDQWV$SSHOOHHV  1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV 1RVnsDPHV/*UDKDP'LVWULFW sXGJH $UJXHG0D\ 'HFLGHGDQG)LOHG$XJXVW %HIRUH0(55,77DQG&2/(&LUFXLWsXGJHV48,67 'LVWULFWsXGJH 7KH +RQRUDEOH *RUGRQ s 4XLVW 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH :HVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ   +XQWHUHWDOY&DOLEHU 1RV 6\VWHP,QFHWDO BBBBBBBBBBBBBBBBB &2816(/ $5*8('  7RQ\ & 0HUU\ 0F&$57+< 3$/0(5 92/.(0$ 7+20$6&ROXPEXV2KLRIRU$SSHOODQWV 0LFKDHO 5 5HHG 648,5( 6$1'(56  '(036(< &ROXPEXV2KLR'DQLHO:6UVLF/,77/(50(1'(/621 &ROXPEXV 2KLR $OEHUW s /XFDV &$/)(( +$/7(5 *5,6:2/'&ROXPEXV2KLRIRU$SSHOOHHV21%5,() 7RQ\ & 0HUU\ 0F&$57+< 3$/0(5 92/.(0$ 7+20$6&ROXPEXV2KLRIRU$SSHOODQWV'DYLGs&DOLEHU@ GLVWULEXWLRQ RI (623 DFFRXQWV SULRU WR WKH HQG RI $XJXVW DQGDFFHSWDEOHE\WKHWUXVWHHRIWKH N 3ODQ $JUHHPHQW ZKHQWKHGLVWULEXWLRQDFWXDOO\RFFXUUHGZRXOGQRWKDYH †† E  F s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sXQHGLVWULEXWLRQ SODQ6HHLG † H s$ 7KHSDUWLHVDOVRDJUHHGWKDW FRXOGQRWEHPDGHGXHWRDQXPEHURIVSLQRIIUHODWHGWDVNV &DOLEHUZRXOGDPHQGWKH665,3DQGWKH6%3WRSURYLGHWKDW WKDWKDGWREHFRPSOHWHG7KHUHIRUHZKHQ&DOLEHUPDLOHGRXW DQ\SDUWLFLSDQWHPSOR\HGE\5(;RQsDQXDU\ZRXOG WKHSDUWLFLSDQWV VWDWHPHQWVWRWKHPLQODWH0D\RUHDUO\ QRWEHHOLJLEOHWRUHFHLYHEHQHILWVIURPWKH665,3RUWKH6%3 sXQH LW LQIRUPHG WKH SDUWLFLSDQWV WKDW WKH\ ZRXOG UHFHLYH XQWLOWKHLQGLYLGXDOWHUPLQDWHGKLVRUKHUHPSOR\PHQWZLWK LQIRUPDWLRQUHJDUGLQJGLVWULEXWLRQVE\WKHHQGRIsXO\DQGWKDW 5(;DIWHU'HFHPEHU 6HHLG† I s$ GLVWULEXWLRQV ZRXOG EHJLQ WR RFFXU DW WKH HQG RI $XJXVW $WRUDERXWWKHWLPH&DOLEHUDQG5(;VLJQHGWKH$JUHHPHQW &DOLEHUPDLOHGLQIRUPDWLRQSDFNHWVWRSDUWLFLSDQWVRQsXO\ &DOLEHUDGRSWHGZULWWHQDPHQGPHQWVWRWKH665,3DQGWKH  DQG GLVWULEXWLRQV FRPPHQFHG RQ $XJXVW   6%3 WKH'HFHPEHU$PHQGPHQWV ZKLFKDVVSHFLILHGLQ %DVHG RQ WKDW HYLGHQFH WKH GLVWULFW FRXUW FRQFOXGHG WKDW WKH$JUHHPHQWDPHQGHGWKH665,3DQGWKH6%3WRSURYLGH &DOLEHU GHPRQVWUDWHG WKDW LW ZRXOG QRW KDYH EHHQ WKDWSDUWLFLSDQWVHPSOR\HGE\5(;RQsDQXDU\ZHUH SUDFWLFDEOHWRPDNHGLVWULEXWLRQVSULRUWR$XJXVW7KH QRWHOLJLEOHWRUHFHLYHGLVWULEXWLRQVRIWKHLUDFFRXQWEDODQFHV GLVWULFW FRXUW DOVR QRWHG WKDW 3ODLQWLIIV IDLOHG WR SUHVHQW  +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO SDUWLFLSDQW ILOHG KLV DSSOLFDWLRQ IRU GLVWULEXWLRQ  (623 XQWLOWKHLUHPSOR\PHQWZLWK5(;WHUPLQDWHGDIWHU'HFHPEHU $PHQGPHQW1R†s$  7KHSXUSRVHRIWKHDPHQGPHQWVZDVWRFODULI\WKDW 5(; HPSOR\HHV GLG QRW LQFXU D WHUPLQDWLRQ RI WKHLU 7KH GLVWULFW FRXUW IRXQG WKDW EHFDXVH SDUWLFLSDQWV ZHUH HPSOR\PHQWDVDUHVXOWRIWKHVSLQRIIDQGWKHUHIRUHZHUHQRW QRWLILHGRIWKHDPHQGPHQWE\ODWH0D\RUHDUO\sXQH&DOLEHU HQWLWOHGWRDGLVWULEXWLRQRIWKHLU665,3DQG6%3DFFRXQWV FRPSOLHGZLWK(5,6$ VUHTXLUHPHQWWKDWLWLQIRUPWKH(623 SDUWLFLSDQWVRIWKHDPHQGPHQWZLWKLQGD\VDIWHUWKHHQG 5(; DGRSWHG WKH  N  3ODQ DQG UHFHLYHG D IDYRUDEOH RIWKHSODQ\HDULQZKLFKWKHDPHQGPHQWZDVDGRSWHG6HH GHWHUPLQDWLRQOHWWHU IURPWKH,56DVZHOODVDQRSLQLRQRI 86& ††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sXQH DPHQGPHQW LQ ODWH 0D\ RU HDUO\ sXQH ZLWKRXW FLWLQJ DQ\  HYLGHQFH7KHGLVWULFWFRXUWDFFHSWHG&DOLEHU VVWDWHPHQWDV DQXQGLVSXWHGIDFWEHFDXVH3ODLQWLIIVIDLOHGWRSURGXFHDQ\ 'XULQJ WKH UHFRQFLOLDWLRQ SURFHVV 5(; OHDUQHG IURP LWV HYLGHQFHWRUHEXW&DOLEHU VVWDWHPHQW  7KLVKRZHYHUZDV FRXQVHOWKDWEHFDXVHRIWKHVL]HRIWKH N 3ODQ V&DOLEHU HUURQHRXVEHFDXVH&DOLEHUDVWKHSDUW\PRYLQJIRUVXPPDU\ KROGLQJVWKH N 3ODQZDVGHHPHGDQDIILOLDWHRI&DOLEHU MXGJPHQWKDGWKHLQLWLDOEXUGHQRISURGXFWLRQDQGSHUVXDVLRQ XQGHUWKHIHGHUDOVHFXULWLHVODZV$VD FRQVHTXHQFHRILWV RQWKHPRWLRQ6HH&HORWH[&RUSY&DWUHWW86 DIILOLDWHVWDWXVWKH N 3ODQFRXOGQRWVHOOWKHXQUHJLVWHUHG 6&W  ,QRUGHUWRFDUU\LWV &DOLEHU VWRFN H[FHSW LQ VPDOO DPRXQWV HDFK TXDUWHU DQG EXUGHQRIHVWDEOLVKLQJWKHIDFWWKDWLWFRPSOLHGZLWK(5,6$ V WKXV WKH 3ODQ SDUWLFLSDQWV FRXOG QRW GLYHUVLI\ WKH &DOLEHU GLVFORVXUH UHTXLUHPHQWV &DOLEHU ZDV UHTXLUHG WR SURGXFH VWRFNLQWKHLUDFFRXQWVDVDOORZHGXQGHUWKHWHUPVRIWKH3ODQ HYLGHQFHVKRZLQJWKDWLWDFWXDOO\GLGVR6HHLGDW %HWZHHQ 0D\ DQG sXQH RI  5(; RIILFLDOV H[SORUHG 6 &W DW   7KHUHIRUH 3ODLQWLIIV ZHUH QRW UHTXLUHG WR YDULRXVRSWLRQVIRUVROYLQJWKDWSUREOHP2Qs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s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sDQXDU\ HDUO\ GLVWULEXWLRQ RI WKHLU DFFRXQWV DQG   E\ PLVOHDGLQJ DPHQGHGWKH(623WRSURYLGHWKDWWKHVSLQRIIZRXOG WKHPLQWREHOLHYLQJWKDWWKH\ZRXOGQRWEHHOLJLEOHWRREWDLQ UHVXOWLQDWHUPLQDWLRQRIHPSOR\PHQWIRU5(;HPSOR\HHV DGLVWULEXWLRQXQWLODWOHDVWsXO\3ODLQWLIIVFODLPWKDWKDG JLYLQJSDUWLFLSDQWVDULJKWWRDGLVWULEXWLRQDQGDOVRWKDWD &DOLEHUGLVFORVHGWKHDPHQGPHQWWKH\ZRXOGKDYHUHTXHVWHG SDUWLFLSDQW V DFFRXQW ZRXOG EH GLVWULEXWHG DV VRRQ DV GLVWULEXWLRQ RI WKHLU DFFRXQWV LQ WLPH WR VHOO WKHLU &DOLEHU SUDFWLFDEOHDIWHUWKH3DUWLFLSDQWKDVILOHGKLVDSSOLFDWLRQZLWK VKDUHVEHIRUH&DOLEHU VsXO\HDUQLQJVDQQRXQFHPHQW WKH3ODQ$GPLQLVWUDWRU (623$PHQGPHQW1R† s$    7KH ILUVW (623 GLVWULEXWLRQ ZDV PDGH WR 5(; 7KH SUHDPHQGPHQW YHUVLRQ RI WKH (623 SURYLGHG IRU HPSOR\HHVRQ$XJXVW GLVWULEXWLRQVDVVRRQDVSUDFWLFDEOHDIWHUWKH3DUWLFLSDQWKDV ILOHGKLVDSSOLFDWLRQZLWKWKH3ODQ$GPLQLVWUDWRUEXWLQQR 7KHSULPDU\LPSHWXVEHKLQG3ODLQWLIIV FODLPVRFFXUUHGRQ HYHQWEHIRUHWKHsXQHRIWKH\HDUIROORZLQJWKH\HDULQZKLFK sXO\ZKHQ&DOLEHUDQQRXQFHGWKDWLWVVHFRQGTXDUWHU WKH3DUWLFLSDQWKDVD7HUPLQDWLRQRI(PSOR\PHQW (623 HDUQLQJV ZRXOG EH  SHU VKDUH OHVV WKDQ KDG EHHQ †  s$    $ SDUWLFLSDQW ZDV HQWLWOHG WR UHTXHVW DQWLFLSDWHG  :LWKLQ D IHZ ZHHNV DIWHU WKH DQQRXQFHPHQW GLVWULEXWLRQDWDQHDUOLHUWLPHEXW&DOLEHUZDVQRWREOLJDWHG &DOLEHU VWRFN KDG IDOOHQ IURP DURXQG  SHU VKDUH WR WRKRQRUWKHUHTXHVW 6HHLGs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†  PD\ UHVXOW IURP DQ RPLVVLRQ DV ZHOO DV DQ DFW :KLOH WKDW SURSRVLWLRQ LV WUXH WKH NH\ GLIIHUHQFH EHWZHHQ WKRVH FDVHV DQG WKLV FDVH LV WKDW WKH ILGXFLDULHV LQ WKRVH  3ODLQWLIIV QRWH WKDW WKH\ FRXOG KDYH VROG WKHLU &DOLEHU VWRFN IRU DV FDVHV IDLOHG WR DFW ZLWK UHVSHFW WR D SULRU WUDQVDFWLRQ WKDW ZDV LWVHOI PXFK DV  SHU VKDUH KDG WKH\ UHFHLYHG LW LPPHGLDWHO\ DIWHU WKH VSLQRII SURKLELWHG XQGHU †  +HUH VXFK D SULRU WUDQVDFWLRQ QHYHU RFFXUUHG  +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO IXUWKHULWVJRDORIOLPLWLQJ3ODQRZQHUVKLSRI&DOLEHUVWRFNWR ,,  2Q1RYHPEHU3ODLQWLII+XQWHUILOHGDVHYHQWHHQ 7KHGLVWULFWFRXUWSURSHUO\UHMHFWHG3ODLQWLIIV FODLPIRUD FRXQWFRPSODLQWDJDLQVW&DOLEHU5(;.H\7UXVW1DWLRQDO QXPEHURIUHDVRQV)LUVWE\LWVRZQWHUPV†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†LQZKLFKHLWKHU&DOLEHURU5(;HQJDJHG,Q/RFNKHHG &DOLEHUYLRODWHG(5,6$† J 86&† J E\ &RUS Y 6SLQN  86   6 &W    WKH DPHQGLQJ WKH 665,3 DQG WKH 6%3 WR GHQ\ 3ODLQWLIIV DQ &RXUWGHVFULEHGWKHW\SHVRIWUDQVDFWLRQVVHWIRUWKLQ†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† J E\DPHQGLQJWKH6%3DQGWKH665,3WR 1HLWKHU&DOLEHU VDFWRIWUDQVIHUULQJXQUHJLVWHUHG&DOLEHUVWRFN HOLPLQDWH3ODLQWLIIV ULJKWWRDQLPPHGLDWHGLVWULEXWLRQRIWKHLU WR WKH  N  3ODQ QRU 5(; V GHOD\ RI GLYHUVLILFDWLRQ LQGLYLGXDODFFRXQWVDVDUHVXOWRIWKHVSLQRII7KHGLVWULFW FRQVWLWXWHVHLWKHUGLUHFWO\RULQGLUHFWO\DWUDQVDFWLRQXQGHU FRXUWFRQFOXGHGWKDW&DOLEHUGLGQRWYLRODWH† J EHFDXVH †7RWKHH[WHQWWKDW&DOLEHUDQG5(;EHQHILWWHGDWDOO 3ODLQWLIIVZHUHQRWHQWLWOHGWRDGLVWULEXWLRQRIWKHLULQGLYLGXDO LQ WKLV FDVH LW ZDV PHUHO\ LQFLGHQWDO WR WKHLU RSHUDWLRQ RI DFFRXQWVDVDUHVXOWRIWKHVSLQRIIXQGHUWKHSUHDPHQGPHQW HPSOR\HHEHQHILWSODQV/RFNKHHG&RUSUHFRJQL]HVWKDWWKHUH YHUVLRQVRIWKH6%3DQGWKH665,3,QDVXEVHTXHQWRSLQLRQ DUH QXPHURXV OHJLWLPDWH EHQHILWV WKDW D SODQ VSRQVRU PD\ LVVXHG RQ s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o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† D DQG E )LQDOO\ WKH GLVWULFW FRXUW UHMHFWHG 3ODLQWLIIV  FODLPV UHODWLQJ WR WKH (623RQWKHJURXQGVWKDW&DOLEHUDGYLVHGSDUWLFLSDQWVRIWKH DPHQGPHQWWRWKH(623ZLWKLQWKHWLPHSURYLGHGE\(5,6$ E  7UDQVDFWLRQV EHWZHHQ SODQ DQG ILGXFLDU\  $ WKDWDQHDUOLHUGLVWULEXWLRQRI3ODLQWLIIV (623DFFRXQWVZDV ILGXFLDU\ZLWKUHVSHFWWRDSODQVKDOOQRWo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††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s$ LWV GXW\ RI OR\DOW\ WR 3ODQ SDUWLFLSDQWV  )LQDOO\ WKH FRXUW 7KDWPXFKLVGHPRQVWUDWHGE\5(; VLQGHSHQGHQWPHHWLQJV UHMHFWHG3ODLQWLIIV SURKLELWHGWUDQVDFWLRQFODLPVIRUWKHVDPH ZLWKILQDQFLDODGYLVRUVDQGOHJDOFRXQVHODQGWKHILYHERDUG UHDVRQVLWUHMHFWHGWKRVHFODLPVDJDLQVW&DOLEHU PHHWLQJVGXULQJ0D\DQGs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s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†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† D  EHFDXVHZKLOH5(;UHVHUYHGWRLWVHOI UHYLHZLQJWKLVFODLP UHVSRQVLELOLW\IRUGHVLJQDWLQJLQYHVWPHQWIXQGVXQGHU†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sRQHV'DLU\)DUP 0D]]ROD)GDW 7KHXQGLVSXWHGHYLGHQFHVKRZV )G WK&LU 2XUUHYLHZ RI WKHGLVWULFW WKDWDIWHU5(;EHFDPHDZDUHRIWKHVHFXULWLHVODZLVVXHLQ FRXUW VGHWHUPLQDWLRQRIWKHSURSHUVWDQGDUGRIUHYLHZLVGH 0D\5(;PHWZLWKWZRSURPLQHQWLQYHVWPHQWDGYLVRUVDQG QRYR6HH7LHPH\HUY&RPPXQLW\0XW,QV&R)G OHJDOFRXQVHOLQRUGHUWRH[SORUHDOWHUQDWLYHVIRUDGGUHVVLQJ  WK&LU  WKHGLYHUVLILFDWLRQLVVXH5(;DOVRKHOGILYHERDUGPHHWLQJV WR GLVFXVV WKH LVVXH EHIRUH ILQDOO\ DGRSWLQJ WKH 3ODQ 7KH GLVWULFW FRXUW KHOG WKDW WKH DUELWUDU\ DQG FDSULFLRXV DPHQGPHQWRQsXQH3ODLQWLIIV DUJXPHQWWKDW5(; VERDUG VWDQGDUG RI UHYLHZ DSSOLHV EHFDXVH 3ODLQWLIIV  FODLP WKDW PHWRQWKRVHRFFDVLRQVSULQFLSDOO\WRGLVFXVV5(; VFRUSRUDWH &DOLEHUYLRODWHG† J UHTXLUHVLQWHUSUHWDWLRQRIWKH&DOLEHU REMHFWLYHRIOLPLWLQJWKH3ODQ VRZQHUVKLSRI5(;VWRFNWR 3ODQVWRGHWHUPLQHZKHWKHU3ODLQWLIIVKDGDSUHDPHQGPHQW  LV ZLWKRXW VXSSRUW LQ WKH UHFRUG  ,W LV DOVR RI QR ULJKWWRDOXPSVXPGLVWULEXWLRQ7KHGLVWULFWFRXUWEDVHGLWV FRQVHTXHQFHWKDWWKH3ODQ$GPLQLVWUDWLYH&RPPLWWHHGLGQRW FRQFOXVLRQXSRQ†RIWKH6%3DQG†RIWKH665,3 FRQGXFW DQ\ IRUPDO PHHWLQJV EHFDXVH 5(; LWVHOI ZDV WKH ZKLFKJUDQWWKHSODQUHYLHZFRPPLWWHHVVROHDQGDEVROXWH SODQVSRQVRUDQGDGGUHVVHGWKHLVVXHDWWKHKLJKHVWOHYHOLQLWV GLVFUHWLRQWRLQWHUSUHWWKHSURYLVLRQVRIWKH3ODQ LQFOXGLQJ ERDUGPHHWLQJV)LQDOO\5(;GLGQRWKDQGWKHGLYHUVLILFDWLRQ ZLWKRXWOLPLWDWLRQE\VXSSO\LQJRPLVVLRQVIURPFRUUHFWLQJ LVVXH RYHU WR &DOLEHU DV 3ODLQWLIIV VXJJHVW  s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sXO\DQQRXQFHPHQWWKDWLWVVHFRQGTXDUWHUHDUQLQJVZRXOG D FODLP IRU EHQHILWV LV ZKHWKHU WKH GHFLVLRQ ZDV DUELWUDU\ EHRIISHUVKDUHRUWKDWWKHPDUNHW VUHDFWLRQWRWKHQHZV FDSULFLRXVPDGHLQEDGIDLWKRURWKHUZLVHFRQWUDU\WRODZ  ZRXOGOHDGWRDGHFOLQHLQWKHSULFHRIWKHVWRFNEHIRUH +RZHYHUWKH&RXUWREVHUYHGWKDWZKROHVDOHLPSRUWDWLRQRI SDUWLFLSDQWVZRXOGEHDEOHWRVHOOWKHLU&DOLEHUVWRFN WKH DUELWUDU\ DQG FDSULFLRXV VWDQGDUG LQWR (5,6$ >ZDV@ XQZDUUDQWHGEHFDXVHXQOLNHWKH/05$† D RI(5,6$ 5(;DOVRFDQQRWEHKHOGOLDEOHIRUIDLOLQJWRGLYHUVLI\WKH 86&† D FRQWDLQVDQH[SUHVVJUDQWRIMXULVGLFWLRQ 3ODQDVVHWVIRUDQRWKHUUHDVRQ.H\7UXVWWKH3ODQWUXVWHH RYHU FODLPV DJDLQVW ILGXFLDULHV DQG SODQ DGPLQLVWUDWRUV WR KDGWKHVROHUHVSRQVLELOLW\IRUGLYHUVLI\LQJ3ODQLQYHVWPHQWV UHGUHVV YLRODWLRQV RI (5,6$ HQIRUFH FRPSOLDQFH ZLWK WKH XQGHU (5,6$  6HH  86& †  D   7KH 7UXVW WHUPVRIDSODQDQGUHYLHZEHQHILWGHQLDOV)LUHVWRQH $JUHHPHQW EHWZHHQ 5(; DQG .H\ 7UXVW DOVR DVVLJQV 86DW6&WDW HPSKDVLVLQRULJLQDO  UHVSRQVLELOLW\ WR .H\ 7UXVW IRU GLYHUVLILFDWLRQ  6HH 7UXVW ,QVWHDG WKH &RXUW ORRNHG WR SULQFLSOHV RI WUXVW ODZ ZKLFK $JUHHPHQW †  s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† D  % DFWLRQVFKDOOHQJLQJGHQLDOVRIEHQHILWVEDVHG DODUJHEORFNZDVVROG$ILGXFLDU\LVRQO\ERXQGWRIROORZ RQ SODQ LQWHUSUHWDWLRQV LG DW   6 &W DW  WKH SODQWHUPVWKDWDUHFRQVLVWHQWZLWK(5,6$6HH.XSHU GLVWULFWFRXUWHUUHGLQDSSO\LQJWKHDUELWUDU\DQGFDSULFLRXV )GDW%\FRPPHQFLQJ GLYHUVLILFDWLRQDVXUJHGE\ VWDQGDUGEHFDXVHWKLVLVQRWDEHQHILWVFDVH:HUHMHFWWKLV 3ODLQWLIIV5(;ZRXOGKDYHLJQRUHGLWVGXW\RISUXGHQFHLQ DUJXPHQW$VWKHGLVWULFWFRXUWQRWHG3ODLQWLIIVDOOHJHGXQGHU DGPLQLVWHULQJWKHSODQ6HH86&† D  % 7KH &RXQW;;RIWKHLUILUVWDPHQGHGFRPSODLQWWKDWWKHLU† J HDUOLHVW GDWH GLYHUVLILFDWLRQ EHFDPH SRVVLEOH ZDV sXQH  FODLP ZDV EURXJKW XQGHU †  D  %   7KHUHIRUH WKLV ZKHQWKH3ODQWUXVWHHFRPSOHWHGLWVUHFRQFLOLDWLRQRI FDVHLVDERXWEHQHILWVDQG)LUHVWRQHUHTXLUHVDSSOLFDWLRQRI WKH DFFRXQWV  (YHQ SULRU WR WKDW GDWH 5(; EHJDQ WKH DUELWUDU\ DQG FDSULFLRXV VWDQGDUG LI UHTXLUHG E\ WKH LQYHVWLJDWLQJ YDULRXV SRVVLELOLWLHV IRU RYHUFRPLQJ WKH ODQJXDJHRIWKHSODQ LPSHGLPHQWV WR GLYHUVLILFDWLRQ  5(; PHW ZLWK SURPLQHQW LQYHVWPHQWDGYLVRUV*ROGPDQ6DNVDQG'RQDOGVRQ/XIINLQ 0RUHLPSRUWDQWO\ZHILQGQREDUULHUWRDSSOLFDWLRQRIWKH sHQUHWWHWRFRQVLGHUWKHSRVVLELOLW\RIKLULQJDQLQYHVWPHQW DUELWUDU\DQGFDSULFLRXVVWDQGDUGLQDFDVHVXFKDVWKLVQRW DGYLVRUWRDVVLVWWKH3ODQWUXVWHHLQGLVSRVLQJRI&DOLEHUVWRFN LQYROYLQJDW\SLFDOUHYLHZRIGHQLDORIEHQHILWV0RHQFKY ,QWKRVHPHHWLQJV5(;OHDUQHGWKDWGXHWRWKHVL]HRIWKH 5REHUWVRQ  )G  G &LU   D FDVH FLWHG E\ 3ODQ V&DOLEHUKROGLQJVDQGWKHDYHUDJHYROXPHRI&DOLEHU 3ODLQWLIIVVXSSRUWVWKLVUHVXOW,Q0RHQFKWKH7KLUG&LUFXLW VWRFNLWZRXOGQRWEHSRVVLEOHIRUWKH3ODQWRLPPHGLDWHO\ ZDVFRQIURQWHGZLWKDFODLPWKDWWKHHPSOR\HHVWRFNRSWLRQ VHOODQ\VXEVWDQWLDOSRUWLRQRI&DOLEHUVWRFNZLWKRXWLPSDFWLQJ SODQFRPPLWWHHEUHDFKHGLWVILGXFLDU\GXWLHVXQGHU(5,6$E\ WKH PDUNHW SULFH RI WKH VWRFN  5(; DOVR OHDUQHG WKDW D IDLOLQJWRGLYHUVLI\WKHDVVHWVLQWKHSODQZKLFKZHUHLQYHVWHG PDQDJHGVDOHZRXOGKDYHWRRFFXURYHURQHDQGRQHKDOIWR HQWLUHO\ LQ WKH HPSOR\HU V VWRFN  7KH SODLQWLII DUJXHG WKDW WZR \HDUV  ,Q DGGLWLRQ 5(; OHDUQHG WKDW WKHUH ZDV DQ GHVSLWHODQJXDJHLQWKHSODQUHTXLULQJWKHSODQFRPPLWWHHWR LQVXIILFLHQWDPRXQWRI5(;VWRFNLQWKHPDUNHWDYDLODEOHIRU LQYHVW RQO\ LQ WKH HPSOR\HU V VHFXULWLHV LQ WKH IDFH RI D SXUFKDVH LI WKH 3ODQ VROG D ODUJH EORFN RI &DOLEHU VWRFN VXEVWDQWLDOGHFOLQHLQWKHSULFHRIWKHHPSOR\HU VVWRFNDQG 6OLJKWO\ PRUH WKDQ WZR ZHHNV DIWHU WKH DFFRXQWV ZHUH NQRZOHGJH RI WKH HPSOR\HU V ILQDQFLDO GLIILFXOWLHV WKH UHFRQFLOHG 5(; VROYHG WKH GLYHUVLILFDWLRQ SUREOHP E\ FRPPLWWHH VKRXOG KDYH LQYHVWHG WKH SODQ DVVHWV LQ RWKHU DGRSWLQJ DQ DPHQGPHQW ZKLFK DOORZHG SDUWLFLSDQWV WR VHFXULWLHV$VXEVLGLDU\LVVXHZDVZKHWKHUWKHDUELWUDU\DQG ZLWKGUDZ WKHLU &DOLEHU VWRFN FRPPHQFLQJ LQ $XJXVW DQG FDSULFLRXVVWDQGDUGVKRXOGEHDSSOLHGWRDEUHDFKRIILGXFLDU\ SURYLGHGPRUHRSWLRQVIRUUHLQYHVWLQJWKHSURFHHGV*LYHQ GXW\FODLP7KHFRXUWILUVWDGGUHVVHGWKHSODLQWLII VDUJXPHQW WKHFRPSOH[LVVXHVLQYROYHGWKHEULHIGHOD\LQLPSOHPHQWLQJ WKDWWKHFRXUW VSULRURSLQLRQLQ6WUXEOHY1HZsHUVH\%UHZHU\ WKHGLYHUVLILFDWLRQSODQZDVERWKUHDVRQDEOHDQGSUXGHQW (PSOR\HHV :HOIDUH7UXVW)XQG)G G&LU  UHTXLUHGDSSOLFDWLRQRIWKHGHQRYRVWDQGDUG6WUXEOHDSUH 3ODLQWLIIVFLWHRWKHUVROXWLRQVWKDW5(;FRXOGKDYHDGRSWHG )LUHVWRQHFDVHKHOGWKDWXVHRIWKHDUELWUDU\DQGFDSULFLRXV WRFRPPHQFHGLYHUVLILFDWLRQLQsXO\7KHSUREOHPZLWKWKLV VWDQGDUG LV LQDSSURSULDWH LQ EUHDFK RI ILGXFLDU\ GXW\ FDVHV DSSURDFKLVWKDWLWUHTXLUHVXVWRDVVHVV5(; VFRQGXFWSRVW  +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO ZKRLQEDGIDLWKIDLOVWRIROORZWKHWHUPVRIWKHSODQPD\EH ZKHUH WKH ILGXFLDU\ DFWV LQ D PDQQHU WKDW VDFULILFHV WKH KHOGOLDEOHIRUWKHFRQVHTXHQFHVRIKLVIDLOXUHWRGRVR6HH LQWHUHVWVRIDOOEHQHILFLDULHVWRWKRVHRIQRQEHQHILFLDULHVo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†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sDQXDU\$SULOsXO\RU2FWREHU RUVXFK DQDO\VLVLVFHUWDLQO\UHOHYDQWWRGHWHUPLQHWKHVWDQGDUGRI RWKHU GDWH DV WKH 3ODQ $GPLQLVWUDWRU PD\ GHVLJQDWH  UHYLHZ SHUWDLQLQJ WR DOO FODLPV ILOHG XQGHU (5,6$ VKDOO EH HIIHFWHG GXULQJ VXFK PRQWK EDVHG XSRQ WKH FKDOOHQJLQJDILGXFLDU\ VSHUIRUPDQFH6SHFLILFDOO\WKH QXPEHURIVKDUHVLQWKH$FFRXQW RUDSSOLFDEOHSRUWLRQ &RXUWORRNHGWRWUXVWODZLQODUJHSDUWEHFDXVHWKHWHUPV WKHUHRI  DV RI WKH HQG RI WKH LPPHGLDWHO\ SUHFHGLQJ XVHG WKURXJKRXW (5,6$ o SDUWLFLSDQW EHQHILFLDU\ FDOHQGDU TXDUWHU RU VXFK RWKHU GDWH DV PD\ EH    ILGXFLDU\WUXVWHHILGXFLDU\GXWLHVoDUHWKHODQJXDJHDQG GHVLJQDWHGE\WKH3ODQ$GPLQLVWUDWRU WHUPLQRORJ\ RI WUXVW ODZ  7KDW EHLQJ WKH FDVH ZH EHOLHYHWKDWDIWHU)LUHVWRQHWUXVWODZVKRXOGJXLGHWKH  N 3ODQ† F s$ HPSKDVLVDGGHG  $OWKRXJK VWDQGDUGRIUHYLHZRYHUFODLPVVXFKDVWKRVHKHUHQRW † F SURYLGHVWKDW&DOLEHUVKDUHVPD\EHH[FKDQJHGIRU RQO\ XQGHU VHFWLRQ  D  %  EXW DOVR RYHU FODLPV 5(; VKDUHV RQ D TXDUWHUO\ EDVLV WKH ODQJXDJH LQ WKDW ILOHG SXUVXDQW WR  86& †  D   EDVHG RQ SURYLVLRQDXWKRUL]HV5(;DVSODQDGPLQLVWUDWRUWRGHVLJQDWH YLRODWLRQV RI WKH ILGXFLDU\ GXWLHV VHW IRUWK LQ VHFWLRQ DGLIIHUHQWH[FKDQJHGDWH7KH N 3ODQ6XPPDU\3ODQ  D  'HVFULSWLRQFRQWDLQVVLPLODUODQJXDJHVWDWLQJWKDWWUDQVIHU>V@ LQ LQYHVWPHQWV ZLOO RFFXU RQ WKH ILUVW GD\ RI DQ\ FDOHQGDU ,GDW TXRWLQJ)LUHVWRQH FLWDWLRQVRPLWWHG HPSKDVLVLQ TXDUWHU RU RQ DQ\ RWKHU GDWH WKH 3ODQ $GPLQLVWUDWRU PD\ RULJLQDO  GHVLJQDWH DIWHUD3DUWLFLSDQW VGLUHFWLRQVKDYHEHHQUHFHLYHG   N 3ODQ6XPPDU\3ODQ'HVFULSWLRQDWs$ :HDJUHHZLWK0RHQFK VDQDO\VLVRI)LUHVWRQHDQGILQGLW  %HFDXVHWKHSODQODQJXDJHDOORZHG5(;WRHVWDEOLVK FRQVLVWHQWZLWKRXUSULRUGHFLVLRQVDSSO\LQJWKHDUELWUDU\DQG DOWHUQDWHWUDQVIHUGDWHV5(; VGHFLVLRQWRGLYHUVLI\DWWKHHQG FDSULFLRXVVWDQGDUGRXWVLGHRIWKHEHQHILWVGHQLDOFRQWH[W)RU RI$XJXVWLQVWHDGRIsXO\ZDVQRWDIDLOXUHWRIROORZWKHSODQ H[DPSOH LQ :KLVPDQ Y 5REELQV  )G  WK &LU  ZHDIILUPHGWKHGLVWULFWFRXUW VXVHRIWKHDUELWUDU\DQG FDSULFLRXV VWDQGDUG LQ D FODLP DOOHJLQJ WKDW DQ HPSOR\HU V  +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO VXVSHQVLRQ RI EHQHILWV EHLQJ SDLG WR D SDUWLFLSDQW YLRODWHG ILIWHHQSHUFHQWRI&DOLEHU VRXWVWDQGLQJVWRFN WUDQVIHUUHGWR (5,6$ †  D   86& †  D  DQG WKH UHOHYDQW WKH N 3ODQFRXOGKDYHQHJDWLYHO\LPSDFWHGWKHSULFHRI 'HSDUWPHQWRI/DERU5HJXODWLRQV6HHLGDW:H &DOLEHUVWRFNoDFRQVHTXHQFHZKLFKFRXOGKDYHDIIHFWHGDOO KDYH DOVR DSSOLHG WKLV VWDQGDUG WR EUHDFK RI ILGXFLDU\ GXW\ VKDUHKROGHUVLQFOXGLQJSDUWLFLSDQWVLQWKH665,3WKH6%3 FODLPV6HHHJ/HDK\Y7UDQVsRQHV,QF)G DQGWKH N 3ODQ3ODLQWLIIV RZQH[SHUW/HZLV/RZHQIHOV  WK&LU :HILQGQRUHDVRQWRDSSO\DGLIIHUHQW FRQILUPHGLQKLVWHVWLPRQ\WKDWWKHLPSDFWRQWKHVWRFNSULFH UXOHLQWKLVFDVHZKLFKLQYROYHVDVWDWXWRU\SURYLVLRQVLPLODU LVDOZD\VDIDFWRULQFRQVLGHULQJZKHWKHUWRUHJLVWHUVWRFN WRWKDWLQ:KLVPDQ /RZHQIHOV'HSDWs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† J +HLQY)',&)G G&LU  :H EHJLQ ILUVW ZLWK 3ODLQWLIIV  FODLP WKDW 5(; IDLOHG WR :HVHHQRUHDVRQZK\DQDPHQGPHQWWKDWLQWHUSUHWVDSODQ IROORZWKHWHUPVRIWKH N 3ODQE\ZDLWLQJXQWLO$XJXVWWR PD\QRWOLNHZLVHEHFRQVLGHUHGDQDPHQGPHQWIRUSXUSRVHV FRPPHQFHGLYHUVLILFDWLRQLQVWHDGRIGRLQJVRLPPHGLDWHO\ RI† $Q(5,6$ILGXFLDU\LVVSHFLILFDOO\FKDUJHGZLWKWKHGXW\WR DGPLQLVWHUWKHSODQLQDFFRUGDQFHZLWKWKHGRFXPHQWVDQG LQVWUXPHQWV JRYHUQLQJ WKH SODQ XQOHVV GRLQJ VR ZRXOG EH  $W OHDVW RQH RWKHU FLUFXLW FRXUW KDV DSSOLHG WKH DUELWUDU\ DQG LQFRQVLVWHQW ZLWK (5,6$ V SXUSRVHV   86& FDSULFLRXV VWDQGDUG LQ UHYLHZLQJ D FODLP XQGHU †  J  6HH &RXQWV Y † D  ' VHHDOVR0F0LOODQY3DUURWW)G .LVVDFN :DWHU 2LO 6HUY ,QF   )G   WK &LU    WK&LU TXRWLQJ†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† J  $SODQDPHQGPHQWWKDWHOLPLQDWHVDQRSWLRQDO IXQFWLRQDODQDO\VLVLQWKLVFDVH\LHOGVWKHVDPHUHVXOWEHFDXVH IRUPRIEHQHILWLVFRQVLGHUHGDVUHGXFLQJDFFUXHGEHQHILWV DQHPSOR\HU VH[HUFLVHRIGLVFUHWLRQLQGHWHUPLQLQJZKHWKHU 6HH86&† J  6HFWLRQ J PLUURUVWKHDQWL HPSOR\HU VHFXULWLHV VKRXOG EH WUDQVIHUUHG WR D QHZ WUXVW LV FXWEDFN SURYLVLRQ IRXQG LQ †  G   RI WKH ,QWHUQDO LQFLGHQWDOWRWKHHPSOR\HU VEXVLQHVVGHFLVLRQWRPDNHDWUXVW 5HYHQXH&RGH86&† G  7KHVHDQWLFXWEDFN WRWUXVWWUDQVIHU SURYLVLRQV SUHFOXGH UHWURDFWLYH DSSOLFDWLRQ RI DPHQGPHQWV WKDW HOLPLQDWH RU GHFUHDVH FHUWDLQ W\SHV RI EHQHILWV  6HH 7KHGLVWULFWFRXUWDOVRFRUUHFWO\QRWHGWKDWWKHSURYLVLRQVRI &RQVWDQWLQRY75:,QF)G WK&LU  WKH $JUHHPHQW ZKLFK 3ODLQWLIIV FLWH OHIW WKH ILQDO GHFLVLRQ $OXPSVXPSD\PHQWRIEHQHILWVLVFRQVLGHUHGDQRSWLRQDO UHJDUGLQJWKHW\SHRIDVVHWVWREHWUDQVIHUUHGWRWKH N IRUPRIEHQHILW6HH&)5† G 4 $ E  3ODQVROHO\LQWKHKDQGVRI.H\&RUSWKH N 3ODQWUXVWHH &RXQWV)GDW (YHQ WKRXJK &DOLEHU KDG VRPH ODWLWXGH LQ GHWHUPLQLQJ WKH FRPSRVLWLRQ RI WKH WUDQVIHUUHG DVVHWV WKH ILQDO GHFLVLRQ 7KHWDVNLQDSSO\LQJ†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†RIWKH UHJLVWUDWLRQ RI WKH ODUJH QXPEHU RI VKDUHV DPRXQWLQJ WR 6%3 DQG †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†  s$  665,3 †  s$  HPSKDVLV LQWDFWSXUVXDQWWRWKDWDJUHHPHQWGLGQRWLPSOLFDWHILGXFLDU\ DGGHG    (PSOR\HU LQFOXGHV &DOLEHU DQG DQ\ RWKHU FRQFHUQVEHFDXVHLWGLGQRWLQYROYHLQYHVWPHQWRISODQDVVHWV &RQWUROOHG*URXS0HPEHUWKDWKDVDGRSWHGWKHSODQ 6HH RUSODQDGPLQLVWUDWLRQ2QWKDWEDVLVZHEHOLHYHWKDWLWLV 6%3†s$665,3†s$ 7KHWHUP PRUHDSSURSULDWHWRFKDUDFWHUL]HVXFKDGHWHUPLQDWLRQDVD &RQWUROOHG *URXS 0HPEHU LQFOXGHV DOO FRUSRUDWLRQV DQG VHWWORUIXQFWLRQUDWKHUWKDQDILGXFLDU\IXQFWLRQ,Q$NHUVZH EXVLQHVVHVRZQHGE\&DOLEHUUHTXLUHGWREHWUHDWHGDVDVLQJOH KHOGWKDWWKHGHIHQGDQWGLGQRWEUHDFKKLVILGXFLDU\GXWLHVLQ HPSOR\HU XQGHU WKH WD[ ODZV  6HH 6%3 †  s$  IXQGLQJ DQ HPSOR\HH VWRFN RSWLRQ SODQ ZLWK QHZO\ LVVXHG 665,3†s$ 5(;FHDVHGWREHD&RQWUROOHG VWRFNYDOXHGDWLWVPDUNHWYDOXHRI7KDWGHFLVLRQ *URXS 0HPEHU DQG WKHUHIRUH DQ (PSOR\HU DV RI WKH UHVWHGXSRQWKHIDFWWKDWWKHDOOHJHGEUHDFKHVRFFXUUHGSULRU HIIHFWLYHGDWHRIWKHVSLQRIIsDQXDU\6HH86& †† E  F  D  3ODLQWLIIVFRQWHQGWKDWWKH\ ZHUHHQWLWOHGWRGLVWULEXWLRQVXQGHU6%3†DQG665,3  †  DV RI sDQXDU\   EHFDXVH 5(; WHUPLQDWHG LWV 6HQJSLHO 9DULW\ &RUS Y +RZH  86   6 &W    DV DQ H[DPSOH RI KRZ DQ FLWHG WKH 6XSUHPH &RXUW V GHFLVLRQ LQ SDUWLFLSDWLRQLQWKHSODQVRQWKDWGDWH  HPSOR\HU DFWV LQ D ILGXFLDU\ GXW\ LQ FDUU\LQJ RXW D EXVLQHVV GHFLVLRQ 7KDW FDVH GHDOW ZLWK D VLWXDWLRQ LQ ZKLFK WKH HPSOR\HU PDGH PLVUHSUHVHQWDWLRQV :LWK UHJDUG WR WKH 665,3 ZKLFK ZH ZLOO GLVFXVV ILUVW WR FHUWDLQ HPSOR\HHV GHVLJQHG WR LQGXFH WKRVH HPSOR\HHV WR DFFHSW &DOLEHUFLWHV†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† E s$ 7KHRQO\ HYLGHQFH3ODLQWLIIVRIIHUHGRQWKHLVVXHFRQVLVWHGRIFHUWDLQ 7KH 6%3 GRHV QRW FRQWDLQ D VLPLODU SURYLVLRQ DSSDUHQWO\ XQDXWKHQWLFDWHG GRFXPHQWV VKRZLQJ WKDW VHYHUDO WHQWDWLYH EHFDXVHWKH6%3LVQRWD N SODQ WUDQVIHU GHDGOLQHV H[SLUHG EHIRUH WKH WUDQVIHU ZDV DFWXDOO\ PDGH  2WKHU HYLGHQFH LQ WKH UHFRUG VXJJHVWV WKDW WKRVH &DOLEHUDVVHUWVWKDW†SUHFOXGHVDGLVWULEXWLRQEHFDXVH GHDGOLQHVZHUHVLPSO\WDUJHWGDWHVVXEMHFWWRH[WHQVLRQEDVHG DSSOLFDEOH,56UHJXODWLRQVGHHP5(;WRKDYHPDLQWDLQHG XSRQXQH[SHFWHGHYHQWVRUGHOD\V 6HH:LFNKDP'HSDW WKH665,3EHFDXVHDWUDQVIHURIDVVHWVDQGOLDELOLWLHVVXEMHFW s$ $OWKRXJK3ODLQWLIIVFODLPWKDWWKHWUDQVIHUGLGQRW WR †  O  RI WKH 7D[ &RGH RFFXUUHG  7KH GLVWULFW FRXUW RFFXU LQ D WLPHO\ IDVKLRQ WKH\ KDYH QRW VKRZQ WKDW WKH FRQFOXGHGWKDW†SHUPLWVDGLVWULEXWLRQRQO\LQVLWXDWLRQV WUDQVIHUVKRXOGKDYHRFFXUUHGE\DFHUWDLQGDWHRUZLWKLQD ZKHUHDSXUFKDVHURIWKHDVVHWVRUVXEVLGLDU\RIDQHPSOR\HU FHUWDLQDPRXQWRIWLPH0RUHRYHU3ODLQWLIIV RZQH[SHUWZDV GRHVQRWPDLQWDLQDTXDOLILHG†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†7KHDSSOLFDEOHUHJXODWLRQSURYLGHVWKDW>D@ FDVKVHFXULWLHVRURWKHUSURSHUW\RUDFRPELQDWLRQWKHUHRI SXUFKDVHU >@ PDLQWDLQV WKH SODQ LI WKH SODQ LV PHUJHG RU DVUHDVRQDEO\GHWHUPLQHGE\>&DOLEHU@DQGDFFHSWDEOHE\WKH FRQVROLGDWHGZLWKRUDQ\DVVHWVRUOLDELOLWLHVDUHWUDQVIHUUHG > N 3ODQ7UXVWHH@>LQ@DQDPRXQWHTXDOWRWKHDFFRXQW IURP WKH SODQ WR D SODQ PDLQWDLQHG E\ WKH SXUFKDVHU LQ D EDODQFHVDWWULEXWDEOHWR5(;(PSOR\HHV $JUHHPHQW WUDQVDFWLRQ VXEMHFW WR VHFWLRQ  O    7UHDV 5HJ †† E  F s$ $FFRUGLQJWR3ODLQWLIIVEHFDXVH †  N  G    7KXV XQGHU †  DQG WKH DSSOLFDEOH &DOLEHU H[HUFLVHG LWV GLVFUHWLRQ XQGHU WKHVH SURYLVLRQV LQ UXOHV SURPXOJDWHG E\ WKH ,56 3ODLQWLIIV KDG QR ULJKW WR D GHWHUPLQLQJWKHIRUPRIWKHWUDQVIHUUHGDVVHWV&DOLEHUDFWHG OXPSVXPGLVWULEXWLRQEHFDXVHWKHLUDFFRXQWVZHUHWUDQVIHUUHG LQDILGXFLDU\FDSDFLW\ WRWKH N 3ODQZKLFKLVGHHPHGWRPDLQWDLQWKH665,3 7KHFLUFXPVWDQFHVLQWKLVFDVHGRQRWILWQHDWO\ZLWKLQ†  +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO EHFDXVH5(;ZDVQRWDSXUFKDVHURIDVVHWVRUDVXEVLGLDU\ VSLWH RI NQRZOHGJH WKDW WKH HPSOR\HH V SHUIRUPDQFH LV UDWKHU5(;VWRFNZDVGLVWULEXWHGWR&DOLEHUVKDUHKROGHUVEXW LQDGHTXDWH6HH6FKPLGW)GDW0HLQKDUGWY 5(; VFRUSRUDWHVWUXFWXUHUHPDLQHGLQWDFW+RZHYHUEHFDXVH 8QLV\V&RUS ,QUH8QLV\V6DYV3ODQ/LWLJ )G G WKH665,3GRHVQRWDGGUHVVVSLQRIIVWKHFLUFXPVWDQFHVLQ &LU   DQRWKHU FDVH FLWHG E\ 3ODLQWLIIV LV DOVR †  DUH VXIILFLHQWO\ DQDORJRXV WR WKRVH LQ WKLV FDVH WR GLVWLQJXLVKDEOH  7KH LVVXH LQ WKDW FDVH EHLQJ ZKHWKHU WKH UHDVRQDEO\VXSSRUW&DOLEHU VFRQFOXVLRQWKDW3ODLQWLIIVZHUH HPSOR\HUZDVDGHTXDWHO\HTXLSSHGWRDVVHVVWKHVRXQGQHVVRI QRWHQWLWOHGWRDGLVWULEXWLRQRIWKHLU665,3DFFRXQWV7KXV D SDUWLFXODU LQYHVWPHQW LV IDU GLIIHUHQW IURP WKH LVVXH ZLWKRXWUHJDUGWRRWKHUVHFWLRQVRIWKH665,33ODLQWLIIV FODLP SUHVHQWHGKHUH3ODLQWLIIVGRQRWDOOHJHWKDW&DOLEHUIDLOHGWR LVEDUUHGE\† WUDLQLWVHPSOR\HHVRUWKDWWKHWUDQVIHURIDVVHWVZDVERWFKHG E\DQLQFRPSHWHQWHPSOR\HH 3ODLQWLIIVQRWHWKDWWKH6%3GRHVQRWFRQWDLQDSURYLVLRQ VLPLODUWR665,3†3ODLQWLIIVUHDVRQWKDWWKH\PXVWKDYH &DOLEHU VGHFLVLRQUHJDUGLQJWKHOHYHORIVWDIILQJUHTXLUHGWR KDG GLVWULEXWLRQ ULJKWV XQGHU 665,3 †  DGGUHVVLQJ DFFRPSOLVKWKHWUXVWWRWUXVWWUDQVIHUZDVDEXVLQHVVGHFLVLRQ GLVWULEXWLRQV XSRQ WHUPLQDWLRQ RI HPSOR\PHQW  RU 665,3 ZKLFK KDG RQO\ DQ LQFLGHQWDO HIIHFW RQ WKH SODQV  :KLOH †EHFDXVHLIWKH\GLGQRWKDYHGLVWULEXWLRQULJKWVXQGHU &DOLEHU FHUWDLQO\ H[HUFLVHG VRPH GHJUHH RI GLVFUHWLRQ LQ WKRVHVHFWLRQV†ZRXOGEHPHUHVXUSOXVDJH3ODLQWLIIV GHWHUPLQLQJLWVVWDIILQJQHHGVIRUFRPSOHWLQJWKHWUDQVIHULW DVVHUW WKDW WKH DEVHQFH RI D VLPLODU SURYLVLRQ LQ WKH 6%3 LV QRW WKH H[HUFLVH RI GLVFUHWLRQ DORQH WKDW PDNHV DQ PHDQV WKDW WKH\ KDG D ULJKW WR D GLVWULEXWLRQ RI WKHLU 6%3 HPSOR\HU VDFWLRQVXEMHFWWRILGXFLDU\VWDQGDUGV6HQJSLHO DFFRXQWVXQGHUWKHSURYLVLRQVRIWKH6%3FRUUHVSRQGLQJWR )GDW5DWKHUWKHH[HUFLVHRIGLVFUHWLRQPXVWUHODWH 665,3††DQG WRSODQPDQDJHPHQWRUDGPLQLVWUDWLRQ,Q6HQJSLHOZHKHOG WKDW WKH HPSOR\HU GLG QRW DFW LQ D ILGXFLDU\ FDSDFLW\ LQ 7KHSUREOHPZLWK3ODLQWLIIV DUJXPHQWZKLFKOHDGVXVWR GLYLGLQJLWVUHWLUHPHQWSODQVLQWRIRXUVHSDUDWHSODQVDQGXVLQJ H[DPLQH3ODLQWLIIV VHFRQGEDVLVIRUGLVWULEXWLRQULJKWVLH DQ DUELWUDU\ PHWKRG RI DVVLJQLQJ VRPH RI LWV HPSOR\HHV WR WKDWWKHUHZDVDWHUPLQDWLRQRIHPSOR\PHQWLVWKDW† WKRVH SODQV LQ FRQQHFWLRQ ZLWK D VSLQRII RI D FRUSRUDWH SUHFOXGHV GLVWULEXWLRQ ULJKWV EHFDXVH LW DVVXPHV WKDW D GLYLVLRQ6HHLG:HIRXQGWKDWWKHGLYLVLRQRIWKHSODQDQG 7HUPLQDWLRQ RI (PSOR\PHQW JLYLQJ ULVH WR GLVWULEXWLRQ DVVLJQPHQWRIHPSOR\HHVGLGQRWFRQFHUQSODQDGPLQLVWUDWLRQ ULJKWVXQGHU†KDVRFFXUUHG7KXVDSDUWLFLSDQWPD\QRW RUPDQDJHPHQW:HEHOLHYHWKDWWKHFLUFXPVWDQFHVLQWKLV KDYHGLVWULEXWLRQULJKWVXQGHUWKH665,3HLWKHUEHFDXVHWKHUH FDVHDUHDQDORJRXVLQWKDWWKHWUDQVIHURISODQDVVHWVLWVHOIGLG ZDV QR 7HUPLQDWLRQ RI (PSOR\PHQW RU EHFDXVH WKH\ DUH QRWDPRXQWWRPDQDJHPHQWRUDGPLQLVWUDWLRQRIDQ(5,6$ EDUUHGE\†7HUPLQDWLRQRI(PSOR\PHQWLVGHILQHGDV SODQ:HHPSKDVL]HWKDWRXUFRQFOXVLRQLQWKLVFDVHVKRXOG WKHHDUOLHURID3DUWLFLSDQW VFHVVDWLRQRIDFWLYHHPSOR\PHQW QRW EH FRQVWUXHG DV DQ XQTXDOLILHG UXOH WKDW GHFLVLRQV ZLWKWKH&RQWUROOHG*URXSWKURXJKTXLWGLVFKDUJHGHDWKRU UHJDUGLQJWKHQXPEHURIHPSOR\HHVQHHGHGWRSHUIRUP(5,6$ UHWLUHPHQWRUWKHGDWHWKDWLVWZHOYH  PRQWKVDIWHUKLVODVW SODQ IXQFWLRQV DUH QHYHU VXEMHFW WR (5,6$ V ILGXFLDU\ GD\ZRUNHGZLWKWKH&RQWUROOHG*URXS 665,3†s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†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† D s$ 7KHSHUWLQHQW  ODQJXDJHRI† G VWDWHVWKDWD WHUPLQDWLRQLQLWLDWHGE\DQ (PSOR\HU PHDQVDWHUPLQDWLRQRID3DUWLFLSDQW VHPSOR\PHQW 3ODLQWLIIVFRQWHQGWKDW&DOLEHUEUHDFKHGLWVILGXFLDU\GXWLHV ZLWKDOO&RQWUROOHG*URXS0HPEHUVDWWKHUHTXHVWRUGHPDQG LQVHYHUDOZD\V3ODLQWLIIVFRQFHGHDVWKH\PXVWLQOLJKWRI RI RQH RU PRUH &RQWUROOHG *URXS 0HPEHUV      6%3 RXU GHFLVLRQ LQ .XSHU Y ,RYHQNR  )G  WK &LU † G s$ 3ODLQWLIIVLQWHUSUHW†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s  WKHUHTXHVWRI&DOLEHU5(;RUERWKPLVFRQVWUXHVWKHSODLQ 86'LVW/(;,6 '8WDK0DU 7KRVHFDVHV PHDQLQJRI† G EHFDXVHWKHVSLQRIISODQGLGQRWLQYROYH DUHLQDSSRVLWHKHUHEHFDXVHWKH\LQYROYHGVLWXDWLRQVLQZKLFK D UHTXHVW RU GHPDQG E\ DQ\RQH WR WHUPLQDWH 3ODLQWLIIV HPSOR\HHV DGPLQLVWHULQJ (5,6$ SODQV ZHUH HLWKHU HPSOR\PHQW0RUHRYHUQRWKLQJLQ†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o WKDW WKH\ DFWLQJLQDOLNHFDSDFLW\DQGIDPLOLDUZLWKVXFKPDWWHUV EHFDPHHQWLWOHGWRDGLVWULEXWLRQXQGHU6%3†665,3 ZRXOG XVH LQ WKH FRQGXFW RI DQ HQWHUSULVH RI D OLNH †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†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†  DQG 665,3 †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†  RU 665,3 †   +XQWHUHWDOY&DOLEHU 1RV 1RV +XQWHUHWDOY&DOLEHU  6\VWHP,QFHWDO 6\VWHP,QFHWDO )LQDOO\ZHDIILUPWKHJUDQWRIVXPPDU\MXGJPHQWRQWKH IROORZLQJDWUDQVIHURIDVVHWVWRDQHZHPSOR\HU6HH*LOOLVY † J FODLPRQWKHDOWHUQDWLYHJURXQGFLWHGE\WKHGLVWULFW +RHFKVW &HODQHVH &RUS  )G   G &LU FRXUWLQLWVRSLQLRQ7KDWJURXQGIRFXVHVRQWKHWLPLQJRIWKH  FLWLQJ5HY5XO5HY5XO3ULY/WU GLVWULEXWLRQ8QGHU6%3† D DSDUWLFLSDQWLVHQWLWOHGWR 5XO sDQ ,QUH)DLUFKLOG,QGXV,QF DGLVWULEXWLRQEDVHGXSRQWHUPLQDWLRQRIHPSOR\PHQWLQQR *0),QY,QF(5,6$/LWLJ)6XSS 1' HYHQWEHIRUHWKH$SULORIWKH\HDUIROORZLQJWKH\HDULQZKLFK )OD  PHP RS QRWLQJ WKDW >W@KH >,56@ WDNHV WKH WKH3DUWLFLSDQWWHUPLQDWHVHPSOR\PHQWZLWKWKH&RQWUROOHG SRVLWLRQWKDWDGLVWULEXWLRQWRDQHPSOR\HHZKLFKRFFXUV *URXS  6%3 †  D  s$    $ GLVWULEXWLRQ PD\ EH GXULQJDFRUSRUDWHUHRUJDQL]DWLRQRUOLTXLGDWLRQLQZKLFKWKH PDGH XQGHU WKH 665,3 LQ WKH FDVH RI D WHUPLQDWLRQ RI HPSOR\HH UHPDLQV LQ WKH VDPH MRE EXW HPSOR\HG E\ D HPSOR\PHQWLQQRHYHQWEHIRUHWKHHQGRIWKHVHFRQGPRQWK GLIIHUHQWHQWLW\GRHVQRWTXDOLI\DVDGLVWULEXWLRQRQDFFRXQW IROORZLQJ WKH PRQWK RI WKH 3DUWLFLSDQW V 7HUPLQDWLRQ RI RIDVHSDUDWLRQRIVHUYLFH FLWLQJ5HY5XO5HY5XO (PSOR\PHQW 665,3† E s$ $WHUPLQDWLRQRI  ,QDGGLWLRQWKHGLVWULFWFRXUWUHOLHGRQ,56*HQHUDO HPSOR\PHQW RFFXUV XQGHU WKH 665,3 IRU SXUSRVHV RI WKLV &RXQVHO 0HPRUDQGXP  ZKLFK FRQFOXGHV WKDW QR FDVH WZHOYH   PRQWKV DIWHU >WKH SDUWLFLSDQW V@ ODVW GD\ VHYHUDQFHRIHPSOR\PHQWRFFXUVXQGHUFLUFXPVWDQFHVZKHUH ZRUNHG ZLWK WKH &RQWUROOHG *URXS  665,3 †  s$ DVKHUHWKHDVVHWVDQGOLDELOLWLHVRIDSODQDUHWUDQVIHUUHGWRD  SODQFUHDWHGRUPDLQWDLQHGE\WKHWUDQVIHUHHHPSOR\HU6HH *HQ&RXQV0HP sXO\ :/ 8QGHU 3ODLQWLIIV  WKHRU\ D WHUPLQDWLRQ RI HPSOR\PHQW ,56  RFFXUUHGLIDWDOORQsDQXDU\ZKHQ5(;FHDVHGWREH DQHPSOR\HUXQGHUWKH6%3DQGWKH665,3$SSO\LQJ6%3 3ODLQWLIIV GR QRW DUJXH WKDW WKH GLVWULFW FRXUW HUUHG LQ † D DQG665,3††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† D  ZKLFKSURYLGHV ULJKWWRUHFHLYHGLVWULEXWLRQVZKHUHDVWKHLVVXHLQ:XOIZDV WKDW DW ZKDW SRLQW WKH SODLQWLIIV ZHUH HQWLWOHG WR GLVWULEXWLRQV :XOI)GDW1RWZLWKVWDQGLQJ RXUVWDWHPHQWVLQ DILGXFLDU\VKDOOGLVFKDUJHKLVGXWLHVZLWKUHVSHFWWRD :XOIQRWKLQJLQWKDWFDVHVWDQGVIRUWKH EURDG SURSRVLWLRQ SODQ VROHO\ LQ WKH LQWHUHVW RI WKH SDUWLFLSDQWV DQG XUJHGE\3ODLQWLIIVWKDWWD[FDVHVDQGUXOLQJVPD\QRWEHXVHG EHQHILFLDULHVDQGo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