Nave v. Carter Cnty TN

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 0,&+$(/ 0217*20(5< ; $GPLQLVWUDWRUDGOLWHPRIWKH  (VWDWHRI0DU\/1DYH   1RV 3ODLQWLII$SSHOODQW  &URVV$SSHOOHH !   Y   &$57(5 &2817<  7(11(66(( s$&. 3(5.,16   +LJKZD\6XSHULQWHQGHQW  &DUWHU&RXQW\7HQQHVVHH  &$57(5 &2817<  &200,66,21 '($1 3(55<HW  DO&DUWHU&RXQW\  &RPPLVVLRQHUVLQWKHLU   LQGLYLGXDODQGRIILFLDO  FDSDFLWLHV  'HIHQGDQWV$SSHOOHHV  &URVV$SSHOODQWV   /87+(5 s($1 +$66(//DND   sHDQ:+DVVHOO  'HIHQGDQW   1   0RQWJRPHU\Y&DUWHU 1RV &RXQW\71HWDO $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW*UHHQHYLOOH 1Rn7KRPDV*+XOO'LVWULFWsXGJH $UJXHG$XJXVW 'HFLGHGDQG)LOHG6HSWHPEHU %HIRUH&2/(DQG*,/0$1&LUFXLWsXGJHV7$512: 'LVWULFWsXGJH BBBBBBBBBBBBBBBBB &2816(/ $5*8('  .DWK\ 0RQWJRPHU\ +RXVWRQ 7H[DV IRU $SSHOODQW:LOOLDP5%HUU\0225(67287:$''(//  /(')25' 3& .LQJVSRUW 7HQQHVVHH IRU $SSHOOHHV 21 %5,()  .DWK\ 0RQWJRPHU\ +RXVWRQ 7H[DV IRU $SSHOODQWs3DWULFN/HGIRUG:LOOLDP5%HUU\0225( 67287 :$''(//  /(')25' 3& .LQJVSRUW 7HQQHVVHHIRU$SSHOOHHV BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB 521$/'/((*,/0$1&LUFXLWsXGJH7KLVFDVHZKLFK KDVEHHQLQIHGHUDOFRXUWVLQFHDULVHVIURPDGLVSXWH RYHUWKHRZQHUVKLSRIDQHOHYHQIRRWZLGHVWULSRIDVSKDOWLQ &DUWHU&RXQW\7HQQHVVHH7KHSODLQWLIIWKH(VWDWHRI0DU\ 1DYH FRQWHQGV WKDW WKH VWULS LV QRWKLQJ PRUH WKDQ WKH GULYHZD\WRWKHGHFHGHQWjVUXUDOUHVLGHQFH$VIDUDV&DUWHU &RXQW\LVFRQFHUQHGKRZHYHUWKHFRQWHVWHGVWUHWFKRIDVSKDOW LV D FRXQW\ URDG DQG PXVW UHPDLQ D FRXQW\ URDG XQWLO WKH 7KH +RQRUDEOH $UWKXU s 7DUQRZ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO 7HQQHVVHHVWDWHFRXUWVGHFODUHRWKHUZLVH'LVDJUHHLQJ0DU\ 1DYHEURXJKWVXLWLQWKH8QLWHG6WDWHV'LVWULFW&RXUWIRUWKH (DVWHUQ'LVWULFWRI7HQQHVVHHSXUVXDQWWR86&† DOOHJLQJWKDW&DUWHU&RXQW\jVUHIXVDOWRDEDQGRQLWVFODLPWR WKHGULYHZD\FRQVWLWXWHVDQXQFRQVWLWXWLRQDOWDNLQJRISULYDWH SURSHUW\IRUDSULYDWHXVH1DPHGDVGHIHQGDQWVZHUH&DUWHU &RXQW\ WKH &DUWHU &RXQW\ &RPPLVVLRQ YDULRXV FRXQW\ RIILFLDOV LQ ERWK WKHLU LQGLYLGXDO DQG RIILFLDO FDSDFLWLHV FROOHFWLYHO\WKHFRXQW\GHIHQGDQWV DQG0DU\1DYHjVQH[W GRRUQHLJKERU/XWKHUsHDQ+DVVHOO 7KHGLVWULFWFRXUWGHQLHGWKHFRXQW\GHIHQGDQWVjPRWLRQIRU VXPPDU\MXGJPHQWEXWQHYHUWKHOHVVGLVPLVVHG0DU\1DYHjV FODLPVDJDLQVWWKHPFRQFOXGLQJWKDWKHUFODLPVDJDLQVWWKH FRXQW\GHIHQGDQWVZHUHQRWULSHIRUDGMXGLFDWLRQXQGHUWKH UXOH DQQRXQFHG LQ :LOOLDPVRQ &RXQW\ 5HJLRQDO 3ODQQLQJ &RPPLVVLRQY+DPLOWRQ%DQNRIsRKQVRQ&LW\86  0DU\1DYHjVHVWDWHKDVDSSHDOHGWKHGLVPLVVDODQG WKHFRXQW\GHIHQGDQWVKDYHFURVVDSSHDOHGWKHGLVWULFWFRXUWjV GHQLDORIWKHLUPRWLRQIRUVXPPDU\MXGJPHQWEDVHGERWKRQ TXDOLILHGLPPXQLW\DQGWKHDOOHJHGUXQQLQJRIWKHVWDWXWHRI OLPLWDWLRQV,QDGGLWLRQ0DU\1DYHjVHVWDWHKDVPRYHGWR GLVPLVVWKHFRXQW\GHIHQGDQWVjFURVVDSSHDODVXQWLPHO\ILOHG )RUWKHUHDVRQVVHWIRUWKEHORZZH'(1<WKHHVWDWHjVPRWLRQ WRGLVPLVVWKHFRXQW\GHIHQGDQWVjFURVVDSSHDODVXQWLPHO\ 5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUWWRWKHH[WHQW WKDW LW GLVPLVVHG WKH FODLPV RI 0DU\ 1DYHjV HVWDWH DV SUHPDWXUH$)),50WKHMXGJPHQWRIWKHGLVWULFWFRXUWWRWKH H[WHQW WKDW LW GHQLHG WKH FRXQW\ GHIHQGDQWVj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jV GLVSXWHWKDQWKHRQHWKHFRXQW\GHIHQGDQWVKDYHFUHDWHG SHUPLVVLRQWRJHWULGRIWKHH[FHVVDVSKDOWE\OD\LQJLWGRZQ RQWKHWKHQXQSDYHGGULYHZD\ 7KH DQVZHU WR ZKHWKHU RU QRW &DUWHU &RXQW\ RZQV WKH GULYHZD\VKRXOGEHIRXQGLQLWVDUFKLYHV,I&DUWHU&RXQW\  %XW4XHHQ1DYHRWKHUZLVHPDLQWDLQHGWKHGULYHZD\,Q KDV QR UHFRUG RI 4XHHQ 1DYH 5RDG H[LVWLQJ EHIRUH LW ILUVW  IRU H[DPSOH KH UHSODFHG RQH RI WKH GULYHZD\jV WZR DSSHDUHGRQWKHFRXQW\jVOLVWRIURDGVLQDQGWKHUHLVQR EULGJHVDIWHUDIORRGGHVWUR\HGLW)HGHUDOGLVDVWHUUHOLHIIXQGV UHFRUG RI WKH GULYHZD\jV VDOH JUDQW RU GHGLFDWLRQ WR WKH ZHUH GLVWULEXWHG LQ &DUWHU &RXQW\ DIWHU WKH IORRG  4XHHQ FRXQW\WKHQZHDUHDWDORVVWRXQGHUVWDQGZK\WKHDEVHQFHRI 1DYHDQGKLVGDXJKWHU6KLUOH\0RQWJRPHU\DVNHGWKHWKHQ GRFXPHQWDWLRQ VKRXOG QRW EH FRQFOXVLYH  :K\ WKH FRXQW\ VHUYLQJFRXQW\URDGVXSHULQWHQGHQWDERXWWKHSRVVLELOLW\RI GHIHQGDQWVWKRXJKWWKDWWKH\QHHGHGWRKHDUIURP+DVVHOOLQ REWDLQLQJIHGHUDOIXQGVLQRUGHUWRGHIUD\WKHFRVWRIUHSDLULQJ RUGHUWRGHWHUPLQHZKHWKHU&DUWHU&RXQW\RZQVWKHGULYHZD\ WKHEULGJHEXWZHUHWROGWKDWIHGHUDOIXQGVFRXOGRQO\EHXVHG LVXQFOHDU5HJDUGOHVVRIWKHRXWFRPHRIDQ\GLVSXWHEHWZHHQ WR UHSDLU FRXQW\ URDGV DQG EULGJHV  7KH 1DYHV ZHUH QRW +DVVHOODQGWKH1DYHVRYHUWKHXVHRIWKHGULYHZD\LWZRXOG HOLJLEOH IRU IHGHUDO GLVDVWHUUHOLHI IXQGV WKH URDG QRWIROORZWKDWWKH1DYHVZRXOGKDYHWRWROHUDWHWKHXVHRI VXSHULQWHQGHQWH[SODLQHGEHFDXVH4XHHQ1DYHjVEULGJHZDV WKHLU GULYHZD\ E\ RWKHU XQLQYLWHG PHPEHUV RI WKH JHQHUDO DSULYDWHEULGJHORFDWHGRQSULYDWHSURSHUW\,QZKHQ SXEOLFDQGLWFHUWDLQO\ZRXOGQRWIROORZWKDWWKHGULYHZD\LV 4XHHQ1DYHjVKHDOWKZDVIDLOLQJKLVFRQJUHVVPDQVXEPLWWHG WKHFRXQW\jVSURSHUW\ D SRVWDO SHWLWLRQ RQ KLV EHKDOI WKDW UHVXOWHG LQ WKH 3RVWDO 6HUYLFH GHOLYHULQJ PDLO GLUHFWO\ WR KLV UHVLGHQFHnZKLFK ,,,&21&/86,21 LQYROYHG XVLQJ WKH GULYHZD\nUDWKHU WKDQ WR D PDLOER[ RQ 6LDP5RDG7KHSRVWDOSHWLWLRQZDVQHFHVVDU\EHFDXVHWKH )RU DOO RI WKH UHDVRQV VHW IRUWK DERYH ZH '(1< WKH GULYHZD\ZDVFRQVLGHUHGWREHSULYDWHSURSHUW\ HVWDWHjVPRWLRQWRGLVPLVVWKHFRXQW\GHIHQGDQWVjFURVVDSSHDO DVXQWLPHO\5(9(56(WKHMXGJPHQWRIWKHGLVWULFWFRXUWWR $IWHU4XHHQ1DYHjVGHDWKWKHGULYHZD\ZDVPDLQWDLQHGE\ WKHH[WHQWWKDWLWGLVPLVVHGWKHFODLPVRI0DU\1DYHjVHVWDWH 1DYH IDPLO\ PHPEHUV IULHQGV RI WKH IDPLO\ DQG SHUVRQV DVSUHPDWXUH$)),50WKHMXGJPHQWRIWKHGLVWULFWFRXUWWR KLUHGE\0DU\1DYH4XHHQ1DYHjVZLGRZ0DU\1DYHOLYHG WKHH[WHQWWKDWLWGHQLHGWKHFRXQW\GHIHQGDQWVjVPRWLRQIRU RQWKHSURSHUW\XQWLOKHUGHDWKLQ2ZQHUVKLSRIWKH VXPPDU\MXGJPHQWDQG5(0$1'WKLVFDVHWRWKHGLVWULFW SURSHUW\KDVQRZSDVVHGWRWKH(VWDWHRI0DU\1DYH FRXUWIRUIXUWKHUSURFHHGLQJVFRQVLVWHQWZLWKWKLVRSLQLRQ 1RRQHHOVHjVSURSHUW\DEXWVWKHGULYHZD\7KHGULYHZD\ KRZHYHULVORFDWHGYHU\FORVHWRWKHSURSHUW\OLQHVHSDUDWLQJ WKH 1DYHVj ODQG IURP WKDW RZQHG E\ /XWKHU sHDQ +DVVHOO +DVVHOOjV SURSHUW\ KDV IURQWDJH RQ 6LDP 5RDG MXVW DV WKH 1DYHVj SURSHUW\ GRHV  1HYHUWKHOHVV VLQFH DERXW   0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO 2Q$XJXVWFRXQVHOIRU&DUWHU&RXQW\LQIRUPHG +DVVHOOKDVRFFDVLRQDOO\XVHGWKHGULYHZD\WKDW4XHHQ1DYH .DWK\0RQWJRPHU\WKDWQRWRQO\ZDV&DUWHU&RXQW\JRLQJWR EXLOWUDWKHUWKDQXVLQJKHURZQXQSDYHGGULYHZD\LQRUGHUWR FRUUHFWWKHSUREOHPDGPLQLVWUDWLYHO\EXWWKDWLWKDGDOUHDG\ JHWWRDQGIURP6LDP5RDG:KLOHGHOLYHULQJWKH1DYHVjPDLO GRQH VR E\ UHPRYLQJ 4XHHQ 1DYH 5RDG IURP WKH OLVW RI DORQJ WKH SDYHG GULYHZD\ WKH 3RVWDO 6HUYLFH ZRXOG DOVR FRXQW\URDGV%\OHWWHUGDWHG2FWREHUFRXQVHOIRU GHOLYHU+DVVHOOjVPDLOGLUHFWO\WRKHUKRXVHDVZHOO &DUWHU&RXQW\DGYLVHGWKHSRVWPDVWHUWKDW&DUWHU&RXQW\KDG FKDQJHG LWV SRVLWLRQ DQG ZDV QRZ RI WKH RSLQLRQ WKDW WKH ,QsXQHRIWKH&DUWHU&RXQW\&RPPLVVLRQDGRSWHGDQ 1DYHVj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jVFRXQVHOWRWKHSRVWPDVWHU DVDFRXQW\URDGZDVLQDOOSUREDELOLW\VLPSO\DFOHULFDOHUURU ,Q LWV EULHIV WKH FRXQW\ GHIHQGDQWV IDLO WR GLVFXVV WKH 0DU\1DYHjVGDXJKWHU6KLUOH\0RQWJRPHU\ZKRKDQGOHG GRFWULQH RI HTXLWDEOH HVWRSSHO RU WKH UHOHYDQFH LI DQ\ RI URXWLQHEXVLQHVVPDWWHUVIRUKHUPRWKHUILUVWIRXQGRXWDERXW &DUWHU &RXQW\jV DVVXUDQFHV WR .DWK\ 0RQWJRPHU\ LQ  WKHGHVLJQDWLRQZKHQVKHDVNHG+DVVHOOWRVWRSFXWWLQJDFURVV WKDWWKHFRXQW\URDGOLVWKDGEHHQDGPLQLVWUDWLYHO\FRUUHFWHG WKH1DYHVjSDYHGGULYHZD\LQRUGHUWRJHWWRDQGIURP6LDP ,Q WKH DEVHQFH RI DQ\ VXFK DUJXPHQW ZH DJUHH ZLWK WKH 5RDG+DVVHOOUHVSRQGHGE\WHOOLQJ6KLUOH\0RQWJRPHU\WKDW GLVWULFWFRXUWWKDWWKHH[WHQWWRZKLFKWKHFRXQW\GHIHQGDQWV WKHSDYHGGULYHZD\ZDVDFRXQW\URDGDQGFRQVHTXHQWO\WKDW PD\ UHO\ RQ WKH VWDWXWH RI OLPLWDWLRQV GHIHQVH FDQQRW WKH 1DYHV FRXOG QRW VWRS KHU IURP XVLQJ LW  6KLUOH\ FRQFOXVLYHO\ EH GHWHUPLQHG IURP WKH UHFRUG LQ LWV SUHVHQW 0RQWJRPHU\WKHQPHWZLWKsDFN3HUNLQVWKH&DUWHU&RXQW\ VWDWH   7KH FRXQW\ GHIHQGDQWV DUH WKHUHIRUH QRW HQWLWOHG WR 5RDG 6XSHULQWHQGHQW RQ KHU PRWKHUjV EHKDOI  3HUNLQV VXPPDU\MXGJPHQWRQWKHEDVLVRIWKHVWDWXWHRIOLPLWDWLRQV DGYLVHGKHUWKDWWKHGULYHZD\ZDVOLVWHGRQWKHFRXQW\URDG PDSDQGWKHRIILFLDOFRXQW\URDGOLVWDV4XHHQ1DYH5RDGD *7KHFURVVDSSHDOn+DVVHOOjVLQWHUHVW  FRXQW\URDG$OWKRXJK3HUNLQVFRQFHGHGWKDW&DUWHU&RXQW\ KDG QR UHFRUGV RI HYHU SHUIRUPLQJ PDLQWHQDQFH RQ 4XHHQ ,WLVGLIILFXOWWRDYRLGWKHFRQFOXVLRQWKDWWKHFRVWVRIWKLV 1DYH5RDGDQGWKDWKHKDGQRLGHDKRZLWFDPHWREHOLVWHG OLWLJDWLRQDUHEHLQJFRPSRXQGHGRXWRIDOOSURSRUWLRQWRWKH DV D FRXQW\ URDG LQ WKH ILUVW SODFH KH VDLG WKDW WKHUH ZDV VWDNHVLQYROYHG(YHQPRUHGLVWXUELQJQHDUO\IRXU\HDUVDIWHU QRWKLQJKHFRXOGGRDERXWLWEHFDXVH4XHHQ1DYH5RDGZDV WKHFRPSODLQWLQWKLVFDVHZDVILOHGWKHFRXQW\GHIHQGDQWV RQ WKH RIILFLDO FRXQW\ URDG OLVW DV DGRSWHG E\ WKH &DUWHU DSSHDUWRPLVDSSUHKHQGWKHUROHRI0DU\1DYHjVQHLJKERULQ &RXQW\&RPPLVVLRQ WKLV GLVSXWH  ,Q WKHLU RSHQLQJ EULHI WKH FRXQW\ GHIHQGDQWV PDNHPXFKRIWKHIDFWWKDWZKHQ6KLUOH\0RQWJRPHU\DVNHG  $WWKLVPHHWLQJ6KLUOH\0RQWJRPHU\H[SODLQHGWKDW0DU\ WKH&DUWHU&RXQW\+LJKZD\&RPPLWWHHWRWDNHKHUPRWKHUjV 1DYHKDGEHHQWKHYLFWLPRIWZRDWWHPSWHGUREEHULHV RQHRI GULYHZD\RIIWKHFRXQW\jVOLVWRIURDGVVKHmGLGQRWH[SODLQ ZKLFKVXFFHHGHG LQKHUKRPHDQGWKDWVKHZDQWHGWRHUHFWD    WKDW DQ\ RWKHU SHUVRQ >LH +DVVHOO@ PDGH XVH RIl WKH IHQFHDQGDJDWHRQWKHGULYHZD\3HUNLQVUHSOLHGWKDWWKLV GULYHZD\ ZRXOG EH LOOHJDO EHFDXVH 7HQQHVVHH ODZ SURKLELWV WKH  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO REVWUXFWLRQ RI SXEOLF URDGV DQG WKDW EHFDXVH 4XHHQ 1DYH KDYHQRWGRQHVR\HW7KHLURQO\DVVHUWHGMXVWLILFDWLRQVRIDU 5RDG ZDV OLVWHG LQ &DUWHU &RXQW\jV RIILFLDO UHJLVWHU DV D ERLOVGRZQWRDQDUJXPHQWWKDWHYHQLIWKH\NQHZ WKDWWKH FRXQW\URDGWKHGULYHZD\ZDVDSXEOLFURDGDVIDUDV&DUWHU OLVWLQJRIWKHGULYHZD\DVDFRXQW\URDGZDVDPLVWDNH0DU\ &RXQW\ZDVFRQFHUQHG,QDGGLWLRQDWDQXQVSHFLILHGWLPH 1DYHjVQHLJKERUILQGVLWFRQYHQLHQWWRXVHWKHGULYHZD\VR 0DU\ 1DYH KDG SDUW RI WKH GULYHZD\ H[FDYDWHG VR WKDW DQ &DUWHU&RXQW\ZLOOUHIXVHWROHWJRRIWKHGULYHZD\XQWLOWKH XQGHUJURXQG ZDWHU SLSH FRXOG EH UHSDLUHG  6KLUOH\ UHSUHVHQWDWLYHVRI0DU\1DYHjVHVWDWHMXPSWKURXJKZKDWWKH 0RQWJRPHU\ZDVDGYLVHGE\sLP6OHPSDQ RIILFLDORIWKH FRXQW\GHIHQGDQWVGHHPWREHWKHSURSHUUHPHGLDOKRRSV &DUWHU &RXQW\ 5RDG 'HSDUWPHQW WKDW WKH GLJJLQJ YLRODWHG VWDWHODZEHFDXVHLWZDVDQREVWUXFWLRQRIDSXEOLFURDGDQG )RUWKHUHDVRQVVWDWHGDERYHKRZHYHULIWKHWDNLQJZDVIRU WKDWWKHmURDGlKDGWREHUHSDLUHGDWWKH1DYHVjH[SHQVH DSULYDWHXVHWKHQ0DU\1DYHjVHVWDWHLVQRWUHTXLUHGWRVHHN LQYHUVH FRQGHPQDWLRQ RU REWDLQ D GHFODUDWRU\ MXGJPHQW 2QsXO\6KLUOH\0RQWJRPHU\DSSHDUHGEHIRUHWKH TXLHWLQJWLWOHWRWKHGULYHZD\$QGWKHHVWDWHLVFOHDUO\QRW &DUWHU&RXQW\+LJKZD\&RPPLWWHHRQKHUPRWKHUjVEHKDOI UHTXLUHG WR ILOH D URDG FORVXUH SHWLWLRQ SXUVXDQW WR 7 DVNLQJWKDWWKHGULYHZD\EHUHPRYHGIURPWKHFRXQW\URDGOLVW &  $ †  DV WKH FRXQW\ GHIHQGDQWV KDYH DQG FRXQW\ URDG PDS  6KH WRRN +LJKZD\ 6XSHULQWHQGHQW VXJJHVWHG  7KDW VHFWLRQ GHDOV ZLWK WKH FORVXUH RI SXEOLF 3HUNLQVDQGVHYHUDOPHPEHUVRIWKH+LJKZD\&RPPLWWHHWR URDGVZKLFKSUHVXSSRVHVWKDWWKHURDGLVWKHSXEOLFjVWRFORVH VHH WKH GULYHZD\ IRU WKHPVHOYHV SRLQWLQJ RXW WKDW QR RQH DQGSUHVXPDEO\ZRXOGOHDYH&DUWHU&RXQW\KROGLQJWLWOHWR EHVLGHV0DU\1DYHDQGKHUWHQDQWOLYHGDORQJWKHGULYHZD\ WKHGULYHZD\LQTXHVWLRQ DQGWKDW+DVVHOOKDGKHURZQGLUWGULYHZD\DQGGLGQRWQHHG WRXVHWKH1DYHVjGULYHZD\LQRUGHUWRJHWWRDQGIURPKHU )7KHFURVVDSSHDOnVWDWXWHRIOLPLWDWLRQV KRXVH  2Q sXO\   6KLUOH\ 0RQWJRPHU\ DSSHDUHG EHIRUH WKH &DUWHU &RXQW\ &RPPLVVLRQ DJDLQ DVNLQJ WKDW )LQDOO\ WKH FRXQW\ GHIHQGDQWV DUJXH WKDW 0DU\ 1DYHjV &DUWHU &RXQW\ DEDQGRQ LWV GHVLJQDWLRQ RI 0DU\ 1DYHjV FODLPVDUHEDUUHGE\WKHVWDWXWHRIOLPLWDWLRQV,Q7HQQHVVHH GULYHZD\ DV 4XHHQ 1DYH 5RDG  7KH &DUWHU &RXQW\ WKHVWDWXWHRIOLPLWDWLRQVIRUDFWLRQVSXUVXDQWWR86& &RPPLVVLRQ YRWHG WR UHIHU WKH PDWWHU WR WKH +LJKZD\ †LVRQH\HDU6HHHJsDFNVRQY8QLWHG6WDWHV) &RPPLWWHHDQGWKHFRXQW\DWWRUQH\IRUDUHFRPPHQGDWLRQ 6XSSG :'7HQQ 8QGHU7HQQHVVHHODZ WKHOLPLWDWLRQVSHULRGEHJLQVWRUXQmZKHQWKHSODLQWLIINQRZV $OVRRQsXO\.DWK\0RQWJRPHU\0DU\1DYHjV RU LQ WKH H[HUFLVH RI UHDVRQDEOH FDUH DQG GLOLJHQFH VKRXOG DWWRUQH\ DQGJUDQGGDXJKWHU FRQWDFWHGWKHFRXQW\DWWRUQH\ NQRZWKDWDQLQMXU\KDVEHHQVXVWDLQHGl:\DWWY$%HVW ERWKE\WHOHSKRQHDQGOHWWHUUHTXHVWLQJWKDWWKHFRXQW\URDG &R6:G 7HQQ 7HQQHVVHHODZDOVR OLVWEHDGPLQLVWUDWLYHO\FRUUHFWHGE\UHPRYLQJ4XHHQ1DYH UHFRJQL]HVWKHGRFWULQHRIHTXLWDEOHHVWRSSHO6HH6SDUNVY 5RDGIURPWKHOLVW,QWKHOHWWHU.DWK\0RQWJRPHU\VWDWHG 0HWURSROLWDQ *RYjW RI 1DVKYLOOH  'DYLGVRQ &RXQW\  WKDWWKH1DYHVKDGRZQHGWKHSURSHUW\IRURYHURQHKXQGUHG 6:G 7HQQ&W$SS 8QGHUWKDWGRFWULQH DQGILIW\\HDUVWKDWWKHGULYHZD\ZDVSDUWRIWKHSURSHUW\DQG D GHIHQGDQW PD\ EH HTXLWDEO\ EDUUHG IURP UHO\LQJ RQ WKH WKDWDIXOOWLWOHVHDUFKKDGUHYHDOHGWKDWWKH1DYHVKDGQHYHU VWDWXWHRIOLPLWDWLRQVGHIHQVHLIWKHGHIHQGDQWKDVFDXVHGWKH FRQYH\HG WKH GULYHZD\ WR &DUWHU &RXQW\ RU DQ\RQH HOVH SODLQWLIIWRUHDVRQDEO\EHOLHYHWKDWWKHGHIHQGDQWmLVJRLQJWR 7KUHH GD\V ODWHU WKH FRXQW\ DWWRUQH\ ZURWH +LJKZD\ SD\DFODLPRURWKHUZLVHVDWLVI\WKH>SODLQWLIIjV@FODLPVlDQG 6XSHULQWHQGHQW3HUNLQVDGYLVLQJKLPWKDWLWDSSHDUHGIURP LQUHOLDQFHWKHSODLQWLIIIDLOVWRILOHKLVFRPSODLQWZLWKLQWKH .DWK\ 0RQWJRPHU\jV OHWWHU WKDW &DUWHU &RXQW\ KDG OLPLWDWLRQVSHULRG,GDW  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO (7KHFURVVDSSHDOnSULYDWHWDNLQJ HUURQHRXVO\OLVWHGWKH1DYHVjSULYDWHGULYHZD\DVDFRXQW\ URDG RQ LWV RIILFLDO URDG PDS DQG URDG OLVW DQG WKDW WKH 7KHFRXQW\GHIHQGDQWVDUH RIFRXUVHFRUUHFWZKHQWKH\ GULYHZD\VKRXOGEHUHPRYHGIURPERWK$FRS\RIWKHOHWWHU SRLQW RXW WKDW D WDNLQJ QHHG QRW EHQHILW D ODUJH QXPEHU RI ZDVVHQWWR.DWK\0RQWJRPHU\ SHRSOH LQ RUGHU IRU WKH WDNLQJ WR EH FRQVLGHUHG RQH IRU D SXEOLFSXUSRVH6HH5LQGJH&RY&RXQW\RI/RV$QJHOHV 2Q$XJXVW.DWK\0RQWJRPHU\ZURWHEDFNWRWKH 86   m,WLVQRWHVVHQWLDOWKDWWKHHQWLUH FRXQW\DWWRUQH\WKDQNLQJKLPIRUKLVDWWHQWLRQDQGUHTXHVWLQJ FRPPXQLW\ QRU HYHQ DQ\ FRQVLGHUDEOH SRUWLRQ VKRXOG WKDWVKHEHQRWLILHGRQFHWKHDGPLQLVWUDWLYHFRUUHFWLRQEHFDPH GLUHFWO\HQMR\RUSDUWLFLSDWHLQDQLPSURYHPHQWLQRUGHUWR RIILFLDO  7KH QH[W GD\ WKH FRXQW\ DWWRUQH\ UHVSRQGHG FRQVWLWXWHDSXEOLFXVHl 7KHLUDUJXPHQWKRZHYHUSURYHV LQIRUPLQJ .DWK\ 0RQWJRPHU\ LQ D VKRUW OHWWHU WKDW mWKH WRRPXFK,IDWDNLQJKDGWREHFRQVLGHUHGRQHIRUDSXEOLF DGPLQLVWUDWLYHFRUUHFWLRQLQUHPRYLQJWKHGULYHZD\IURPWKH XVHVLPSO\E\YLUWXHRIWKHIDFWWKDWLWEHQHILWVDWOHDVWRQH FRXQW\URDGOLVWDQGPDSZDVPDGHRQsXO\l6RRQ RWKHUSHUVRQ LH+DVVHOO WKHUHZRXOGEHOLWWOHOHIWWRWKH DIWHUZDUG 0DU\ 1DYH RU D IDPLO\ PHPEHU RQ KHU EHKDOI SURKLELWLRQDJDLQVWSULYDWHXVHWDNLQJV FRQWDFWHGWKHSRVWPDVWHUWRUHTXHVWWKDWWKHPDLOFDUULHUVWRS GHOLYHULQJPDLOWRKHUKRXVH 7KHFRXQW\GHIHQGDQWVjDVVHUWLRQWKDWmWKHRQO\FRQFHLYDEOH ZD\&DUWHU&RXQW\FRXOGDWWHPSWDµSULYDWHjWDNLQJZRXOGEH :KHWKHU WKH DGPLQLVWUDWLYH FRUUHFWLRQ ZDV HYHU DFWXDOO\ WRFRQGHPQ4XHHQ1DYH5RDGIRU+DVVHOOjVH[FOXVLYHXVH PDGHLVQRWFOHDU,QDQ\HYHQWLWDSSHDUVWKDW+DVVHOOWKH DQG WKHQ VRPHKRZ XVH WKH FRXQW\jV DXWKRULW\ WR H[FOXGH 1DYHVj QHLJKERU EHFDPH XSVHW ZKHQ WKH 3RVWDO 6HUYLFH RWKHUVIURPXVLQJWKHURDGlLVXQVXSSRUWHGE\DQ\DXWKRULW\ VWRSSHG GHOLYHULQJ PDLO GLUHFWO\ WR 0DU\ 1DYHjV KRXVH DQG FOHDUO\ PHULWOHVV  $V QRWHG DERYH RQH RI WKH PRVW EHFDXVHLWDOVRVWRSSHGGHOLYHULQJPDLOGLUHFWO\WR+DVVHOOjV LPSRUWDQWLQFLGHQWVRISULYDWHRZQHUVKLSRISURSHUW\LVWKH KRXVH7KLVOHG+DVVHOOWRDSSHDUEHIRUHWKH&DUWHU&RXQW\ ULJKW WR H[FOXGH RWKHUV  7KH FRXQW\ GHIHQGDQWVj UHIXVDO WR &RPPLVVLRQ RQ 2FWREHU   WR UHTXHVW WKDW WKH DEDQGRQ&DUWHU&RXQW\jVFODLPRIRZQHUVKLSWRWKHGULYHZD\ DGPLQLVWUDWLYHFRUUHFWLRQEHUHVFLQGHGDQGWKDWWKHGULYHZD\ KDV WRWDOO\ VWULSSHG 0DU\ 1DYHjV HVWDWH RI WKDW SURSHUW\ FRQWLQXHWREHGHVLJQDWHGDVDSXEOLFURDG7KH&DUWHU&RXQW\ LQWHUHVW$VWKLQJVQRZVWDQGWKH1DYHVPXVWWROHUDWHQRW &RPPLVVLRQWKHQDSSURYHGDUHVROXWLRQWRGLUHFWWKHFRXQW\ RQO\+DVVHOOjVSUHVHQFHRQWKHGULYHZD\EXWDOVRWKHSUHVHQFH DWWRUQH\WRZULWHWKHSRVWPDVWHUDGYLVLQJWKDWmDPLVWDNHKDG RI DQ\ RWKHU PHPEHU RI WKH JHQHUDO SXEOLF  7KH FRXQW\ EHHQPDGHDQGWKHURDGNQRZQDV4XHHQ1DYH5RDGLVD GHIHQGDQWVjDUJXPHQWWKDWWKH\PLJKWKDYHYLRODWHG+DVVHOOjV FRXQW\URDGXQWLOSURYHQGLIIHUHQWlDQGUHTXHVWLQJWKDWPDLO VXEVWDQWLYHGXHSURFHVVULJKWVLIWKH\KDGQRWmPDLQWDLQ>HG@ VHUYLFHmEHUHVWRUHGWRWKHUHVLGHQWVRQWKDWURDGl WKH VWDWXV TXRl E\ UHDVVHUWLQJ FRXQW\ RZQHUVKLS LV HTXDOO\ XQDYDLOLQJ  1RW VXUSULVLQJO\ WKH\ GR QRW PHQWLRQ ZKDW 7KLV FDXVHG 0DU\ 1DYH WR LQLWLDWH WKH SUHVHQW VXLW  6KH mVXEVWDQWLYH GXH SURFHVVl ULJKWV RI +DVVHOOjV WKH\ DUH DVVHUWHGFODLPVDJDLQVWWKHFRXQW\GHIHQGDQWVXQGHUWKH)LIWK UHIHUULQJWR DQG)RXUWHHQWK$PHQGPHQWVSXUVXDQWWR86&† DQGDVWDWHODZFODLPDJDLQVW+DVVHOOIRUFRPPRQODZIUDXG $V SUHYLRXVO\ VWDWHG WKH VWDQGDUG IRU GHPRQVWUDWLQJ D 6HYHUDORWKHUFODLPVZHUHDOVRUDLVHGLQWKHFRPSODLQWEXW WDNLQJWREHRQHIRUDSXEOLFXVHLVDQH[WUHPHO\ORZRQHDQG QRQHRIWKHPDUHDWLVVXHLQWKLVDSSHDODQGFURVVDSSHDO LWLVQRWFRPSOHWHO\RXWVLGHWKHUDQJHRISRVVLELOLW\WKDWWKH FRXQW\GHIHQGDQWVZLOOPHHWWKLVVWDQGDUGDWWULDO%XWWKH\  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO 7KH FRXQW\ GHIHQGDQWV PRYHG IRU VXPPDU\ MXGJPHQW FOHDUWKDWDUHDVRQDEOHRIILFLDOZRXOGXQGHUVWDQGWKDWZKDWKH DVVHUWLQJWKDW  0DU\1DYHjVHVWDWHKDGIDLOHGWRSURGXFH LVGRLQJYLRODWHVWKDWULJKWl'DXJKHQEDXJKY&LW\RI7LIILQ HYLGHQFHWKDWZRXOGVXSSRUWFRJQL]DEOH)LIWKRU)RXUWHHQWK )G WK&LU  FLWDWLRQDQGLQWHUQDO $PHQGPHQW FODLPV   WKH FODLPV ZHUH WLPHEDUUHG DQG TXRWDWLRQPDUNVRPLWWHG  DOWHUDWLRQLQRULJLQDO    DOO RI WKH FRXQW\ GHIHQGDQWV ZHUH HQWLWOHG WR TXDOLILHG LPPXQLW\  5HMHFWLQJ HDFK RI WKHVH DUJXPHQWV WKH GLVWULFW $Q LQGLYLGXDOjV ULJKW QRW WR KDYH KHU UHDO SURSHUW\ FRXUW GHQLHG WKH PRWLRQ EXW QHYHUWKHOHVV GLVPLVVHG WKH FRQILVFDWHGE\JRYHUQPHQWDORIILFLDOVIRUUHDVRQVWKDWODFN HVWDWHjVFODLPVDJDLQVWWKHFRXQW\GHIHQGDQWVDIWHUFRQFOXGLQJ DQ\UDWLRQDOFRQQHFWLRQWRDSODXVLEOHFRQFHSWLRQRIWKHSXEOLF WKDW WKRVH FODLPV ZHUH QRW ULSH IRU DGMXGLFDWLRQ LQ IHGHUDO LQWHUHVWKDVEHHQFOHDUO\HVWDEOLVKHGIRUDYHU\ORQJWLPH6HH FRXUW XQGHU WKH UXOH DQQRXQFHG LQ :LOOLDPVRQ &RXQW\ &LWL]HQVj6DY /RDQ$VVjQY7RSHND86 :DOO 5HJLRQDO3ODQQLQJ&RPPLVVLRQY+DPLOWRQ%DQNRIsRKQVRQ    GHFODULQJWKDWDVWDWXWHSURYLGLQJWKDWmWKH &LW\86   KRPHVWHDG QRZ RZQHG E\ $ VKRXOG QR ORQJHU EH KLV EXW VKRXOG KHQFHIRUWK EH WKH SURSHUW\ RI %l ZRXOG EH LQYDOLG 0DU\ 1DYHjV HVWDWH PRYHG IRU UHFRQVLGHUDWLRQ RI WKH EHFDXVH RI WKH mOLPLWDWLRQV RQ >JRYHUQPHQW@ SRZHU ZKLFK GLVPLVVDODQGDOVRUHTXHVWHGUHFRQVLGHUDWLRQRIDUXOLQJWKDW JURZRXWRIWKHHVVHQWLDOQDWXUHRIDOOIUHHJRYHUQPHQWVl VHH WKHGLVWULFWFRXUWKDGPDGHUHJDUGLQJWKHVWDWXWHRIOLPLWDWLRQV DOVR0DGLVRQYLOOH7UDFWLRQ&RY6W%HUQDUG0LQLQJ&R (VVHQWLDOO\ WKH GLVWULFW FRXUW KDG RULJLQDOO\ FRQFOXGHG WKDW 86   m,WLVIXQGDPHQWDOLQ$PHULFDQ FODLPVDULVLQJIURP&DUWHU&RXQW\jVLQLWLDOFODVVLILFDWLRQRI MXULVSUXGHQFH WKDW SULYDWH SURSHUW\ FDQQRW EH WDNHQ E\ WKH WKHGULYHZD\DVDFRXQW\URDGZHUHWLPHEDUUHGEXWWKDWD JRYHUQPHQWQDWLRQDORUVWDWHH[FHSWIRUSXUSRVHVZKLFKDUH UHDVRQDEOHMXU\FRXOGILQGWKDW&DUWHU&RXQW\ODWHUDEDQGRQHG RIDSXEOLFFKDUDFWHU7KDWSULQFLSOHWKLVFRXUWKDVVDLG LWV FODLPV WR WKH GULYHZD\ DW .DWK\ 0RQWJRPHU\jV XUJLQJ JURZVRXWRIWKHHVVHQWLDOQDWXUHRIDOOIUHHJRYHUQPHQWVl  RQO\WRVXEVHTXHQWO\FKDQJHLWVPLQGDW+DVVHOOjVXUJLQJDQG UHFODVVLI\WKHGULYHZD\DVDFRXQW\URDGUHVXOWLQJLQDVHFRQG 0RUHRYHU LW LV LQFRQFHLYDEOH WKDW UHDVRQDEOH SXEOLF WDNLQJWKDWZRXOGQRWEHWLPHEDUUHG2QUHFRQVLGHUDWLRQWKH RIILFLDOVZRXOGQRWNQRZWKDWWKH\DUHSURKLELWHGIURPWDNLQJ GLVWULFWFRXUWVHWDVLGHLWVUXOLQJRQWKHVWDWXWHRIOLPLWDWLRQV SULYDWHO\RZQHGUHDOSURSHUW\IRUWKHVROHSXUSRVHRIJLYLQJ LVVXHFRQFOXGLQJWKDWIXUWKHUHYLGHQFHPLJKWVKRZWKDWWKH WKHRZQHUjVQHLJKERUWKHXVHRIWKHSURSHUW\2QWKHEDVLVRI VWDWXWHRIOLPLWDWLRQVZDVHTXLWDEO\WROOHGE\&DUWHU&RXQW\jV WKHVXPPDU\MXGJPHQWUHFRUGDUHDVRQDEOHWULHURIIDFWFRXOG DVVXUDQFHV WR .DWK\ 0RQWJRPHU\ LQ sXO\ RI  WKDW WKH FRQFOXGHWKDWWKHFRXQW\GHIHQGDQWVNQHZWKDWWKHGULYHZD\ SUREOHP KDG EHHQ DGPLQLVWUDWLYHO\ FRUUHFWHG  7KH GLVWULFW ZDVWKHSURSHUW\RI0DU\1DYHDQGQRWDFRXQW\URDGEXW FRXUWKRZHYHUGHQLHGUHFRQVLGHUDWLRQRILWVUXOLQJWKDWWKH VLPSO\ UHIXVHG WR JLYH LW EDFN IRU D UHDVRQ WKDW KDV QR FODLPV DJDLQVW WKH FRXQW\ GHIHQGDQWV ZHUH QRW ULSH mFRQQHFWLRQ KRZHYHU WHQXRXV WR VRPH DW OHDVW PLQLPDOO\ 6XEVHTXHQWO\WKHGLVWULFWFRXUWFHUWLILHGWKHGLVPLVVDODVWR SODXVLEOHFRQFHSWLRQRIWKHSXEOLFLQWHUHVWl*DPEOHY(DX WKHFRXQW\GHIHQGDQWVDVDILQDOMXGJPHQWSXUVXDQWWR5XOH &ODLUH &RXQW\  )G   WK &LU    :H WKXV  E RIWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH FRQFOXGH WKDW WKH FRXQW\ GHIHQGDQWV ZHUH QRW HQWLWOHG WR VXPPDU\MXGJPHQWRQWKHEDVLVRITXDOLILHGLPPXQLW\ 2QDSSHDO0DU\1DYHjVHVWDWHDUJXHVWKDWLWVFODLPVDJDLQVW WKHFRXQW\GHIHQGDQWVDUHULSHIRUDGMXGLFDWLRQ7KHFRXQW\ GHIHQGDQWVKDYHFURVVDSSHDOHGWKHGLVWULFWFRXUWjVGHQLDORI WKHLU PRWLRQ IRU VXPPDU\ MXGJPHQW EDVHG RQ TXDOLILHG  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO  )G   G &LU   H[HUFLVLQJ GLVFUHWLRQ WR LPPXQLW\DQGWKHVWDWXWHRIOLPLWDWLRQV)LQDOO\0DU\1DYHjV HQWHUWDLQ D FURVVDSSHDO WKDW ZDV ILOHG RQH GD\ ODWH   6WLOO HVWDWH KDV PRYHG WR GLVPLVV WKH FRXQW\ GHIHQGDQWVj FURVV RWKHUVKDYHKHOGWRWKHFRQWUDU\6HHsRKQVRQY7HDPVWHUV DSSHDODVXQWLPHO\ /RFDO)G VW&LU  FRQFOXGLQJWKDW WKH WLPH OLPLW LV PDQGDWRU\ DQG MXULVGLFWLRQDO  &\UDN Y ,,$1$/<6,6 /HPRQ)G WK&LU  DSSO\LQJWKH WLPHOLQHVVUHTXLUHPHQWVWULFWO\DQGGLVPLVVLQJDFURVVDSSHDO $ 5LSHQHVV IRUODFNRIDSSHOODWHMXULVGLFWLRQ   ,Q:LOOLDPVRQ&RXQW\5HJLRQDO3ODQQLQJ&RPPLVVLRQY $XWKRULW\LQWKLVFLUFXLWLVVFDQWEXWZKDWFDVHVWKHUHDUH +DPLOWRQ %DQN RI sRKQVRQ &LW\  86    WKH KDYHJHQHUDOO\WUHDWHGWKHUHTXLUHPHQWDVMXULVGLFWLRQDOWRWKH RZQHURIDWUDFWRIODQGILOHGVXLWDJDLQVWWKHFRXQW\SODQQLQJ VDPH H[WHQW DV WKH WLPH OLPLW IRU DQ DSSHOODQW  6HH ,Q UH FRPPLVVLRQDQGWKHFRPPLVVLRQjVPHPEHUVLQIHGHUDOFRXUW ,QWHUVWDWH$JHQF\,QF)G Q WK&LU DOOHJLQJWKDWWKHSODQQLQJFRPPLVVLRQKDGWDNHQLWVSURSHUW\   FRQFOXGLQJWKDWWKLVFRXUWODFNHGDSSHOODWHMXULVGLFWLRQ ZLWKRXW MXVW FRPSHQVDWLRQ LQ YLRODWLRQ RI WKH )LIWK DQG RYHUDFURVVDSSHDOEHFDXVHLWZDVILOHGRQHGD\ODWH  m1R )RXUWHHQWK $PHQGPHQWV  (VVHQWLDOO\ WKH WUDFW RZQHU H[WUDµJUDFHjSHULRGDSSOLHVWRWKLVILOLQJRIDFURVVDSSHDOl  DVVHUWHG WKDW WKH SODQQLQJ FRPPLVVLRQ KDG JUDQWHG SUHOLPLQDU\ DSSURYDO IRU WKH FRQVWUXFWLRQ RI D UHVLGHQWLDO ,QDQ\HYHQWWKHFRXQW\GHIHQGDQWVjQRWLFHRIFURVVDSSHDO VXEGLYLVLRQ EXW WKHQ HIIHFWLYHO\ PDGH EXLOGLQJ WKH LQ WKH SUHVHQW FDVH ZDV WLPHO\ ILOHG  5XOH  D   RI WKH VXEGLYLVLRQ LPSRVVLEOH E\ UHSHDWHGO\ FKDQJLQJ LWV PLQG LQ )HGHUDO5XOHVRI$SSHOODWH3URFHGXUHSURYLGHVWKDWRQFHD PLGVWUHDP DERXW WKH UHTXLUHPHQWV RI WKH SHUWLQHQW ]RQLQJ QRWLFHRIDSSHDOLVILOHGE\DQ\SDUW\mDQ\RWKHUSDUW\PD\ ODZVDQGVXEGLYLVLRQUHJXODWLRQVDIWHUPLOOLRQVRIGROODUVKDG ILOHDQRWLFHRIDSSHDOZLWKLQGD\VDIWHUWKHGDWHZKHQWKH DOUHDG\EHHQVSHQWRQFRQVWUXFWLRQ ILUVWQRWLFHZDVILOHGRUZLWKLQWKHWLPHRWKHUZLVHSUHVFULEHG E\ >5XOH @ ZKLFKHYHU SHULRG HQGV ODWHUl  7KH FRXQW\ 7KH6XSUHPH&RXUWFRQFOXGHGWKDWWKHWUDFWRZQHUjVFODLP GHIHQGDQWVILOHGWKHLUQRWLFHRIDSSHDOZHOOZLWKLQIRXUWHHQ ZDVQRWULSH6HHLGDW)LUVWWKHWUDFWRZQHUKDGQRW GD\VDIWHU0DU\1DYHjVHVWDWHILOHGLWVQRWLFHRIDSSHDO7KXV REWDLQHGDmILQDOGHFLVLRQlUHJDUGLQJWKHDSSOLFDWLRQRIWKH WKHQRWLFHRIFURVVDSSHDOZDVWLPHO\ILOHG ]RQLQJRUGLQDQFHDQGVXEGLYLVLRQUHJXODWLRQVWRLWVSURSHUW\ 7KH SODQQLQJ FRPPLVVLRQjV REMHFWLRQV PLJKW KDYH EHHQ '7KHFURVVDSSHDOnTXDOLILHGLPPXQLW\ UHVROYHGWKURXJKYDULDQFHVWKH6XSUHPH&RXUWUHDVRQHGDQG LIWKHYDULDQFHVZHUHJUDQWHGWKH\ZRXOGKDYHDOORZHGWKH  7KH GRFWULQH RI TXDOLILHG LPPXQLW\ JHQHUDOO\VKLHOGV WUDFWRZQHUWREXLOGDVLWGHVLUHGDQGZRXOGHOLPLQDWHWKHQHHG JRYHUQPHQW RIILFLDOV IURP FLYLO OLDELOLW\ IRU SHUIRUPLQJ IRU WKH IHGHUDO FRXUWV WR DGGUHVV WKH GLIILFXOW DQG YH[LQJ GLVFUHWLRQDU\ IXQFWLRQV mLQVRIDU DV WKHLU FRQGXFW GRHV QRW FRQVWLWXWLRQDOTXHVWLRQVDVVRFLDWHGZLWKUHJXODWRU\WDNLQJV YLRODWHFOHDUO\HVWDEOLVKHGVWDWXWRU\RUFRQVWLWXWLRQDOULJKWVRI 6HHLGDW ZKLFK D UHDVRQDEOH SHUVRQ ZRXOG KDYH NQRZQl  %ORFK Y 5LEDU)G WK&LU  TXRWLQJ+DUORZY 6HFRQGWKH6XSUHPH&RXUWUHFRJQL]HGWKDWWKHWUDFWRZQHU )LW]JHUDOG86  )RUDGHIHQGDQWQRWWR KDG QRW \HW VXIIHUHG WKH LQMXU\ FRQWHPSODWHG E\ WKH )LIWK EH HQWLWOHG WR VXPPDU\ MXGJPHQW RQ WKH EDVLV RI TXDOLILHG $PHQGPHQWjV WDNLQJV FODXVH EHFDXVH LW KDG QRW \HW EHHQ LPPXQLW\m>W@KHFRQWRXUVRIWKH ULJKWPXVWEHVXIILFLHQWO\ UHIXVHGMXVWFRPSHQVDWLRQ6HHLGDW Q m7KH )LIWK$PHQGPHQWGRHVQRWSURVFULEHWKHWDNLQJRISURSHUW\  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO LWSURVFULEHVWDNLQJZLWKRXWMXVWFRPSHQVDWLRQ7KXVWKH ,QDQ\HYHQWZKDWHYHUWKHDSSOLFDELOLW\RIWKHFRQFHSWVRI 6WDWHjV DFWLRQ LV QRW µFRPSOHWHj LQ WKH VHQVH RI FDXVLQJ D SURFHGXUDODQGVXEVWDQWLYHGXHSURFHVVWRWDNLQJVFODLPVZH FRQVWLWXWLRQDOLQMXU\µXQOHVVRUXQWLOWKH6WDWHIDLOVWRSURYLGH DJUHHWKDWWKRVHFRQFHSWVPD\QRWEHXVHGLQRUGHUWRPRXQW DQDGHTXDWHSRVWGHSULYDWLRQUHPHG\IRUWKHSURSHUW\ORVVjl DQHQGUXQDURXQGWKHULSHQHVVUHTXLUHPHQWVRI:LOOLDPVRQ FLWDWLRQ RPLWWHG   %HFDXVH 7HQQHVVHH KDG DQ DGHTXDWH &RXQW\%HFDXVH0DU\1DYHjVHVWDWHLVFRPSODLQLQJDERXWD SURFHGXUHIRUSXUVXLQJLQYHUVHFRQGHPQDWLRQUHPHGLHVWKH WDNLQJIRUDSULYDWHXVHKRZHYHUWKHULSHQHVVUHTXLUHPHQWV WUDFW RZQHU ZDV UHTXLUHG WR XWLOL]H WKDW SURFHGXUH EHIRUH RI:LOOLDPVRQ&RXQW\GRQRWDSSO\DQGZHQHHGQRWFRQFHUQ WXUQLQJWRWKHIHGHUDOFRXUWV RXUVHOYHVZLWKWKHSURVSHFW WKDWWKHHVWDWHLVDWWHPSWLQJWR DUWIXOO\SOHDGDVDVXEVWDQWLYHGXHSURFHVVFODLPZKDWLVLQ ,QKROGLQJWKDWWKHWUDFW RZQHUjVFODLPZDVQRWULSHWKH IDFWDWDNLQJVFODLPWKDWLVQRWULSHIRUDGMXGLFDWLRQLQIHGHUDO 6XSUHPH &RXUW WRRN SDLQV WR GLVWLQJXLVK WKH FRQFHSW RI FRXUW ILQDOLW\ IURP WKH VRPHZKDW UHODWHG EXW GLVWLQFW FRQFHSW RI H[KDXVWLRQRIVWDWHUHPHGLHV6HHLGDW7KHUHDVRQ &7KHFURVVDSSHDOnWLPHOLQHVV ZK\WKHWUDFWRZQHULQ:LOOLDPVRQ&RXQW\ZDVUHTXLUHGWR SXUVXHVWDWHUHPHGLHVILUVWZDVQRWVRWKDWLWFRXOGREWDLQD 5XOH  D  $  RI WKH )HGHUDO 5XOHV RI WKH $SSHOODWH MXGJPHQWDERXWZKHWKHUWKHSODQQLQJFRPPLVVLRQjVDFWLRQV 3URFHGXUHSURYLGHVWKDWWKHWLPHIRUILOLQJDQRWLFHRIDSSHDO YLRODWHGLWVULJKWV7KDWZRXOGEHDQH[KDXVWLRQUHTXLUHPHQW LQDFLYLOFDVH VXEMHFWWRFHUWDLQH[FHSWLRQVQRQHRIZKLFK 6HH LG DW  m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†  DFWLRQ EHFDXVH WKRVH SURFHGXUHV DUH DVKDUSVSOLWRIDXWKRULW\KRZHYHUUHJDUGLQJZKHWKHUDWLPHO\ FOHDUO\UHPHGLDOl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s FHUWGHQLHG86  6SDQQY 7KHKROGLQJRI:LOOLDPVRQ&RXQW\WKHUHIRUHLVWKDWWDNLQJV &RORQLDO9LOODJH,QF)G '&&LU  5 FODLPVGRQRWULSHQLQ]RQLQJFDVHVXQWLO  WKHUHKDVEHHQD *LQVEXUJ s   $W OHDVW RQH RWKHU FLUFXLW KDV KHOG WKDW WKH ILQDOGHFLVLRQE\WKHUHOHYDQWVWDWHGHFLVLRQPDNHUDQG  WKH UHTXLUHPHQW RI D WLPHO\ QRWLFH RI FURVVDSSHDO LV QRW SURSHUW\ RZQHU KDV XWLOL]HG DSSURSULDWH VWDWH LQYHUVH MXULVGLFWLRQDO6HHHJ7H[SRUW2LO&RY09$PRO\QWRV  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO    FRQFOXGLQJWKDWDSODLQWLIIZKRVHPRELOHKRPHZDV FRQGHPQDWLRQ SURFHGXUHV  7KLV ODWWHU UHTXLUHPHQW DSSOLHV LOOHJDOO\ FDUWHG DZD\ ZLWK WKH DVVLVWDQFH RI ORFDO GHSXW\ RQO\ LI D mUHDVRQDEOH FHUWDLQ DQG DGHTXDWH SURYLVLRQ IRU VKHULIIVFRXOGVWDWHD)RXUWK$PHQGPHQWFODLPLQDGGLWLRQWR REWDLQLQJ FRPSHQVDWLRQl LG DW  FLWDWLRQ DQG LQWHUQDO D GXH SURFHVV FODLP  :KHQ WKDW RFFXUV m>W@KH SURSHU TXRWDWLRQ PDUNV RPLWWHG  H[LVWV LQ WKDW VWDWH  7KH TXHVWLRQLVQRWZKLFK$PHQGPHQWFRQWUROVEXWZKHWKHUHLWKHU UHTXLUHPHQWWKDWWDNLQJVFODLPVEHULSHKRZHYHULVQRWWKH $PHQGPHQWLVYLRODWHGl8QLWHG6WDWHVYsDPHV'DQLHO*RRG VDPHDVDQH[KDXVWLRQUHTXLUHPHQW6HHLGDW 5HDO3URSHUW\86   $OWKRXJK :LOOLDPVRQ &RXQW\jV UHTXLUHPHQW RI SXUVXLQJ 6XEVWDQWLYH GXH SURFHVV KRZHYHU LV DQ H[FHSWLRQ DYDLODEOH LQYHUVH FRQGHPQDWLRQ UHPHGLHV LQ VWDWH FRXUW %HFDXVHRIWKHKLJKO\GHVWUXFWLYHSRWHQWLDORIRYHUH[WHQGLQJ DSSOLHVJHQHUDOO\WRWDNLQJVFDVHVDQGQRWMXVWWR]RQLQJFDVHV VXEVWDQWLYHGXHSURFHVVSURWHFWLRQVHHHJ:DVKLQJWRQY :LOOLDPVRQ &RXQW\ GRHV QRW GLVFXVV ZKDW VKRXOG KDSSHQ *OXFNVEHUJ  86     H[SODLQLQJ WKH ZKHQDSODLQWLIIILOHVDFRPSODLQWLQIHGHUDOFRXUWDOOHJLQJWKDW GDQJHUV DQGEHFDXVHWKHGRFWULQHjVERUGHUVDUHVRXQGHILQHG KHUSURSHUW\ZDVWDNHQE\WKHJRYHUQPHQWIRUDSULYDWHXVH WKH6XSUHPH&RXUWKDVUHSHDWHGO\FDXWLRQHGWKDWWKHFRQFHSW 7KH)LIWK$PHQGPHQWSURYLGHVWKDWSULYDWHSURSHUW\VKDOOQRW RIVXEVWDQWLYHGXHSURFHVVKDVQRSODFHZKHQDSURYLVLRQRI mEHWDNHQIRUSXEOLFXVHZLWKRXWMXVWFRPSHQVDWLRQl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mWKHPRUH LWV RZQ IRUFH UDWKHU WKDQ WKH FRQFHSW RI VXEVWDQWLYH GXH JHQHUDOL]HGQRWLRQRIµVXEVWDQWLYHGXHSURFHVVjl  SURFHVVIRUELGVWDNLQJVIRUVROHO\SULYDWHXVHV  7KHWDNLQJVFODXVHLWVHOIDGGUHVVHVZKHWKHUDQGXQGHUZKDW ([DPSOHVRIDWDNLQJIRUDSULYDWHXVHWHQGWREHmHVRWHULFl FLUFXPVWDQFHV WKH JRYHUQPHQW PD\ WDNH DQ LQGLYLGXDOjV *DPEOH Y (DX &ODLUH &RXQW\  )G   WK &LU SULYDWHSURSHUW\ZKLFKLVZK\DQXPEHURIRWKHUFLUFXLWVKDYH   EHFDXVH DOO WKDW LV UHTXLUHG IRU WKH WDNLQJ WR EH FRQFOXGHGWKDWQRURRPLVOHIWIRUWKHFRQFHSWRIVXEVWDQWLYH FRQVLGHUHGIRUSXEOLFXVHLVDUDWLRQDOUHODWLRQVKLSWRVRPH GXHSURFHVV6HHHJ$UPHQGDUL]Y3HQPDQ)G mFRQFHLYDEOHSXEOLFSXUSRVHl6HH+DZDLL+RXVLQJ$XWKY  WK &LU   HQ EDQF  m>6@LQFH WKH 7DNLQJV 0LGNLII86  9HU\IHZWDNLQJVZLOOIDLO &ODXVHSURYLGHVDQH[SOLFLWWH[WXDOVRXUFHRIFRQVWLWXWLRQDO WRVDWLVI\WKDWVWDQGDUG$VDUHVXOWWKHH[DPSOHVVXJJHVWHG SURWHFWLRQDJDLQVWSULYDWHWDNLQJVWKH)LIWK$PHQGPHQW DV LQ WKH UHSRUWHG FDVHV WHQG WR EH KLJKO\ LPSODXVLEOH LQFRUSRUDWHG E\ WKH )RXUWHHQWK  QRW WKH PRUH JHQHUDOL]HG K\SRWKHWLFDOV 6HH HJ*DPEOH)GDW XVLQJWKH QRWLRQ RI VXEVWDQWLYH GXH SURFHVV PXVW EH WKH JXLGH LQ H[DPSOHRIDILFWLRQDOVWDWHODZDXWKRUL]LQJWKHJRYHUQRUWR UHYLHZLQJWKHSODLQWLIIVjFODLPRIDSULYDWHWDNLQJl  LQWHUQDO WDNHDSHUVRQjVKRPHDQGJLYHLWWRKLVEURWKHULQODZ  TXRWDWLRQ PDUNV DQG FLWDWLRQV RPLWWHG  &RQLVWRQ &RUS Y 9LOODJHRI+RIIPDQ(VWDWHV)G WK&LU 7KHSUHVHQWFDVHSUHVHQWVXVZLWKDUDUHUHDOOLIHH[DPSOH VXJJHVWLQJ WKDW WKH QHJDWLYH LPSOLFDWLRQV RI WKH WDNLQJV 7KLVLVQRWD]RQLQJFDVHLQZKLFKWKHODQGRZQHUKDVDVVHUWHG FODXVH LWVHOI UDWKHU WKDQ WKH FRQFHSW RI VXEVWDQWLYH GXH WKDWJRYHUQPHQWDOUHJXODWLRQKDVmJRQHWRRIDUl0DF'RQDOG SURFHVVIRUELGWDNLQJVIRUVROHO\SULYDWHXVHV  6RPPHU )UDWHVYDQG@ SODLQWLIIjV SURSHUW\ WKHUH LV JHQHUDOO\ QR QHHG WR DVN WKH SURSHUW\l 86 & $% DPHQGV 9  ;,9 †  QRW WKH UHOHYDQW VWDWH GHFLVLRQPDNHU WR FODULI\ LWV ILQDO SRVLWLRQ LQ SURFHGXUHVGHVLJQHGWRSURWHFWOLIHOLEHUW\DQGSURSHUW\6HH RUGHUWRGHWHUPLQHZKHWKHUDWDNLQJKDVRFFXUUHG6HH.UXVH 2OLPY:DNLQHNRQD86   QRWLQJWKDW Y9LOODJH RI&KDJULQ)DOOV)G WK&LU m>S@URFHVV LV QRW DQ HQG LQ LWVHOIl   ,Q WDNLQJV FDVHV   H[SODLQLQJ ZK\ FDVHV LQYROYLQJ OLWHUDO WDNLQJV SRVWGHSULYDWLRQSURFHVVLVVXIILFLHQW6HH:LOOLDPVRQ&RXQW\ LQFOXGLQJ SK\VLFDO LQYDVLRQV RU RFFXSDWLRQV DUH WUHDWHG 86DW Q REVHUYLQJWKDWmWKH&RQVWLWXWLRQGRHV GLIIHUHQWO\WKDQFDVHVLQYROYLQJUHJXODWRU\WDNLQJV 6LQDORD QRWUHTXLUHSUHWDNLQJFRPSHQVDWLRQDQGLVLQVWHDGVDWLVILHGE\ /DNH2ZQHUV$VVjQY&LW\RI6LPL 9DOOH\)G D UHDVRQDEOH DQG DGHTXDWH SURYLVLRQ IRU REWDLQLQJ  WK&LU  m$SK\VLFDOWDNLQJLVE\GHILQLWLRQ FRPSHQVDWLRQDIWHUWKHWDNLQJl  DILQDOGHFLVLRQDQGWKHUHE\VDWLVILHV:LOOLDPVRQ&RXQW\jV ILUVWH[KDXVWLRQUHTXLUHPHQWl RYHUUXOHGRQRWKHUJURXQGV $ORFDOJRYHUQPHQWDOERG\LQDFDVHLQYROYLQJDWDNLQJIRU $UPHQGDUL] Y 3HQPDQ  )G  WK &LU   HQ DSXEOLFXVHUHJXODWRU\RURWKHUZLVHKDVDFKRLFHmGHVLVWRU EDQF  SD\l  *RVQHOO Y &LW\ RI 7UR\  )G   WK &LU    ,I WKH ORFDO JRYHUQPHQW RSWV WR GHVLVW WKHUH LV QR ,W LV WUXH WKDW DJHQWV RI &DUWHU &RXQW\ DUH QRW OLWHUDOO\ WDNLQJH[FHSWSRVVLEO\GXULQJWKHLQWHULPSHULRG$QGLIWKH RFFXS\LQJ WKH GULYHZD\ REYLRXVO\ &DUWHU &RXQW\ KDV QRW ORFDOJRYHUQPHQWHOHFWVWRSD\MXVWFRPSHQVDWLRQWKHUHLVDOVR FDUWHGWKHGULYHZD\RIIDQGLPSRXQGHGLW DQGWKDWPHPEHUV QRLOOHJDOWDNLQJDQGWKHODQGRZQHUZLOOUHFHLYHDOORIWKH RIWKH1DYHIDPLO\DUHDOORZHGWRGULYHRQLW%XWEHFDXVHWKH SURFHVVVKHLVGXH7KHORFDOJRYHUQPHQWjVDFWLRQZRXOGEH GULYHZD\LVFODVVLILHGDVDFRXQW\URDGWKH1DYHIDPLO\QRZ OHJDODVIDUDVWKHWDNLQJVFODXVHLVFRQFHUQHGUHJDUGOHVVRI HQMR\V QR JUHDWHU ULJKW WR XVH WKH GULYHZD\ WKDQ DQ\ RWKHU ZKHWKHULWDIIRUGHGWKHODQGRZQHUH[WHQVLYHSUHGHSULYDWLRQ PHPEHURIWKHJHQHUDOSXEOLF7KH1DYHIDPLO\ZRXOGOLNHWR SURFHVVRUQRSUHGHSULYDWLRQSURFHVVDWDOO2IFRXUVHLID SXWXSDVHFXULW\JDWHRQWKHGULYHZD\nKDUGO\DQLUUDWLRQDO ODQGRZQHU FDQ SURYH WKDW KHU ODQG ZDV WDNHQ IRU D VWULFWO\ ZLVKLQOLJKWRIWKHDWWHPSWHGUREEHULHVnEXWKDVEHHQWROG SULYDWH XVH mGHVLVWl RU mSD\l ZRXOG QRW EH DQ HLWKHURU WKDWGRLQJVRZRXOGEHFRQVLGHUHGDQLOOHJDOREVWUXFWLRQRID SURSRVLWLRQ IRU WKH ORFDO JRYHUQPHQW LW ZRXOG KDYH WR GR SXEOLF URDG DQG WKHUHIRUH D FULPH  7KH\ KDYH WKXV EHHQ ERWK GLVSRVVHVVHGRIWKHGULYHZD\XQGHUDQ\UHDVRQDEOHVWDQGDUG 6HH HJ &ROOHJH 6DY %DQN Y )ORULGD 3UHSDLG 6LPLODUO\LWLVQRWFOHDUZK\WKHFRQFHSWRIVXEVWDQWLYHGXH 3RVWVHFRQGDU\(GXF([SHQVH%G86  SURFHVVVKRXOGKDYHDQ\SODFHLQWDNLQJVFDVHV7REHVXUH m7KHKDOOPDUNRIDSURWHFWHGSURSHUW\LQWHUHVWLVWKHULJKWWR LQ RWKHU FRQWH[WV D VLQJOH DFWLRQ RU VHW RI DFWLRQV E\ H[FOXGHRWKHUVl 'RODQY&LW\RI7LJDUG86 JRYHUQPHQWRIILFLDOVPD\YLRODWHPRUHWKDQRQHSURYLVLRQRI   GHVFULELQJWKHULJKWWRH[FOXGHRWKHUVDVmRQHRIWKH WKH&RQVWLWXWLRQ6HH6ROGDOY&RRN&RXQW\86  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO HVWDWH EHFDXVH LW LQVLVWV LQ LWV EULHIV WKDW WKH RQO\ WDNLQJV PRVW HVVHQWLDO VWLFNV LQ WKH EXQGOH RI ULJKWV WKDW DUH FODLPLWLVSXUVXLQJLVDSULYDWHXVHFODLPQRWDFODLPWKDWLWV FRPPRQO\FKDUDFWHUL]HGDVSURSHUW\l  TXRWLQJ.DLVHU$HWQD SURSHUW\ ZDV WDNHQ IRU D SXEOLF SXUSRVH  0DU\ 1DYHjV Y8QLWHG6WDWHV86   FRPSODLQWLVVRPHZKDWDPELJXRXVRQWKHVXEMHFWEXWIRUWKH UHDVRQV GLVFXVVHG DERYH HYHQ LI LW KDG LQFOXGHG D MXVW 0RUHRYHU DOWKRXJK RQH XVXDOO\ GRHV QRW WKLQN RI D FRPSHQVDWLRQFODLP:LOOLDPVRQ&RXQW\ZRXOGQRWUHTXLUH GULYHZD\DVDQLQGHSHQGHQWO\PDUNHWDEOHLWHPWKHGULYHZD\ WKHSULYDWHXVHWDNLQJVFODLPWREHGLVPLVVHGDORQJZLWKWKH LVRQ UHDO SURSHUW\WKDWLVYDOXDEOHDQGFRXOGRWKHUZLVHEH SUHPDWXUH MXVWFRPSHQVDWLRQ FODLP  )XUWKHUPRUH 0DU\ VROGRUGHYLVHG%HFDXVH&DUWHU&RXQW\jVSRVLWLRQLVWKDWWKH 1DYHjVHVWDWHKDVPDGHFOHDUWKDWLWLVQRWDWWHPSWLQJWRDVVHUW GULYHZD\ LV D SXEOLF URDG &DUWHU &RXQW\ SUHVXPDEO\ DOVR DMXVWFRPSHQVDWLRQFODLP EHOLHYHVWKDWWKH1DYHVFDQQRWVHOOWKHGULYHZD\RURWKHUZLVH GLVSRVHRILWDQGWKDWLIWKH1DYHVZLVKWRVHOOWKHLUSURSHUW\ % 2WKHUFRQVWLWXWLRQDOFODLPV WKHGHHGZRXOGKDYHWRUHIOHFWWKDW4XHHQ1DYH5RDGLVQRW WKH1DYHVjWRVHOO ,QDGGLWLRQWRD)LIWK$PHQGPHQWWDNLQJVFODLPZKLFKIRU WKH UHDVRQV VHW IRUWK DERYH LV ULSH IRU MXGLFLDO UHYLHZ WKLV 7KHUHLVDQRWKHUFULWLFDOGLVWLQFWLRQEHWZHHQWKLVFDVHDQG FLUFXLWjV SUHFHGHQWV SHUPLW 0DU\ 1DYHjV HVWDWH WR DVVHUW :LOOLDPVRQ&RXQW\%HFDXVHWKH1DYHVjFODLPLVWKDWWKHLU VXEVWDQWLYHGXHSURFHVVDQGSURFHGXUDOGXHSURFHVVFODLPVDV SURSHUW\ KDV EHHQ WDNHQ IRU D VWULFWO\ SULYDWH XVH VWDWH ZHOO6HH3HDUVRQY&LW\RI*UDQG%ODQF)G HPLQHQW GRPDLQ SURFHHGLQJV DUH XQQHFHVVDU\ WR GHWHUPLQH  WK &LU   VWDWLQJ WKDW XQGHU SUHYDLOLQJ 6L[WK ZKHWKHUWKHUHKDVEHHQDFRQVWLWXWLRQDOYLRODWLRQ3ULYDWHXVH &LUFXLW SUHFHGHQW mWKH YHU\ H[LVWHQFH RI DQ DOOHJHGO\ WDNLQJVUDUHDVWKH\PD\EHDUHXQFRQVWLWXWLRQDOUHJDUGOHVV XQODZIXO]RQLQJDFWLRQZLWKRXWPRUHPDNHVDVXEVWDQWLYH RIZKHWKHUMXVWFRPSHQVDWLRQLVSDLG6HHHJ0LGNLII GXHSURFHVVFODLPULSHIRUIHGHUDODGMXGLFDWLRQl 1DVLHURZVNL 86DW m$SXUHO\SULYDWHWDNLQJFRXOGQRWZLWKVWDQGWKH %URV,QY&RY&LW\RI6WHUOLQJ+HLJKWV)G VFUXWLQ\ RI WKH SXEOLF XVH UHTXLUHPHQW LW ZRXOG VHUYH QR WK &LU   FRQFOXGLQJ WKDW mWKH DOOHJHGO\ LQILUP OHJLWLPDWHSXUSRVHRIJRYHUQPHQWDQGZRXOGWKXVEHYRLGl  SURFHVVl LQ D ]RQLQJ FDVH LV mDQ LQMXU\ LQ LWVHOIl WKDW LV 3RUWHUY'L%ODVLR)G WK&LU  m7KH mLQVWDQWO\FRJQL]DEOHLQIHGHUDOFRXUWZLWKRXWUHTXLULQJDILQDO &RQVWLWXWLRQ IRUELGV D WDNLQJ H[HFXWHG IRU QR RWKHU UHDVRQ GHFLVLRQ RQ D SURSRVHG GHYHORSPHQW IURP WKH UHVSRQVLEOH WKDQWRFRQIHUDSULYDWHEHQHILWRQDSDUWLFXODUSULYDWHSDUW\ PXQLFLSDODJHQF\l  FLWDWLRQRPLWWHG FI1DVLHURZVNL%URV HYHQZKHQWKHWDNLQJLVFRPSHQVDWHGl 0RUHRYHUHPLQHQW  )G DW  0DUWLQ s FRQFXUULQJ  m>:@H UHWDLQ WKH GRPDLQSURFHHGLQJVGRQRWVXSSO\WKHDSSURSULDWHUHPHG\ ILQDOLW\UHTXLUHPHQWVIRUSURFHGXUDOGXHSURFHVVFODLPVZKHUH 8QZLOOLQJODQGRZQHUVPXVWDFFHSWEHLQJIRUFLEO\ERXJKWRXW ZHFDQQRWILQGDVLQJOHFRQFUHWHVHSDUDWHLQMXU\RUZKHUHWKH E\ WKH VWDWH LI WKH SXUFKDVH LV IRU D SXEOLF XVH DQG LI MXVW SURFHGXUDO GXH SURFHVV FODLP LV LQ UHDOLW\ DQ DGMXQFW WR D FRPSHQVDWLRQ ZKLFKLVmEDUHPDUNHWYDOXHl*DPEOH)G WDNLQJRURWKHUFRQVWLWXWLRQDOFODLPl %LJHORZY0LFKLJDQ DW LVSDLG$SHUVRQZKRVHSURSHUW\LVFRQILVFDWHGIRUD 'HSjW RI 1DWXUDO 5HVRXUFHV  )G   WK &LU VWULFWO\SULYDWHXVHQHHGQRWVHWWOHIRUmMXVWFRPSHQVDWLRQl   FRQFOXGLQJLQDFDVHLQYROYLQJFRPPHUFLDOILVKHUPHQ ZKRVHILVKLQJOLFHQVHVZHUHUHQGHUHGZRUWKOHVVE\DFRQVHQW  5HTXLULQJDSODLQWLIIWRZDLWEHIRUHVXLQJLQIHGHUDOFRXUW GHFUHH EHWZHHQ 0LFKLJDQ WKH IHGHUDO JRYHUQPHQW DQG ZKHQKHUVROHFODLPLVWKDWVKHZDVGLVSRVVHVVHGRISURSHUW\ VHYHUDO ,QGLDQ WULEHV WKDW ZKHQ LVVXHV RI SURFHGXUDO GXH IRUDSULYDWHXVHZRXOGKDYHRQO\RQHDSSDUHQWSXUSRVHnWR SURFHVVDUHDQFLOODU\WRDWDNLQJVLVVXHWKHSODLQWLIIVFRXOGQRW IRUFHWKHSODLQWLIIWRYHWKHUFODLPVLQVWDWHSURFHHGLQJV VXFK  0RQWJRPHU\Y&DUWHU 1RV 1RV 0RQWJRPHU\Y&DUWHU  &RXQW\71HWDO &RXQW\71HWDO DVDVWDWHFRXUWGHFODUDWRU\MXGJPHQWDFWLRQWRTXLHWWLWOHDV ILOLQJDIHGHUDOWDNLQJV FODLPXQGHUWKHUXOHRI:LOOLDPVRQ WKHFRXQW\GHIHQGDQWVKDYHVXJJHVWHG EHIRUHWKHFODLPVFDQ &RXQW\l 7KH6HYHQWK&LUFXLWKDVUHDFKHGWKHFRQWUDU\ EHDLUHGLQIHGHUDOFRXUW%XWIRUFLQJWKHSODLQWLIIWRSXUVXH FRQFOXVLRQ VHH &RYLQJWRQ &RXUW /WG Y 9LOODJH RI 2DN VWDWH mUHPHGLDOl SURFHGXUHV ZRXOG EH DQ H[KDXVWLRQ %URRN  )G   WK &LU   KROGLQJ WKDW UHTXLUHPHQWDUHTXLUHPHQWWKDW:LOOLDPVRQ&RXQW\H[SOLFLWO\ SODLQWLIIV ZKR DVVHUW FODLPV RI WDNLQJV IRU VWULFWO\ SULYDWH GRHVQRWLPSRVH6HH:LOOLDPVRQ&RXQW\86DW SXUSRVHVPXVWQHYHUWKHOHVVmH[KDXVWlWKHLUUHPHGLHVLQVWDWH GLVWLQJXLVKLQJ WKH REWDLQLQJ RI ILQDO DGPLQLVWUDWLYH DFWLRQ FRXUW %XWWKH6HYHQWK&LUFXLWjVRSLQLRQLQ&RYLQJWRQUHDGV UHTXLUHG  IURP WKH H[KDXVWLRQ RI MXGLFLDO UHPHGLHV QRW :LOOLDPVRQ &RXQW\ DV LI LW LPSRVHV DQ H[KDXVWLRQ UHTXLUHG VHHDOVR6WHIIHOY7KRPSVRQ86 UHTXLUHPHQWDQGDVGLVFXVVHGDERYHLWGRHVQRW   QRWLQJ WKH JHQHUDO UXOH WKDW H[KDXVWLRQ RI VWDWH UHPHGLHVLVQRWDSUHUHTXLVLWHWRD†DFWLRQ 0RUHRYHU 7KHFRXQW\GHIHQGDQWVVXJJHVWWKDWDOORZLQJSODLQWLIIVWR WKHUHLVOLWWOHTXHVWLRQWKDW0DU\1DYHjVHVWDWHKDVUHFHLYHG VSOLWWKHLUFODLPVLQWKLVIDVKLRQZRXOGHQFRXUDJHSODLQWLIIVWR mILQDO DGPLQLVWUDWLYH DFWLRQl IURP &DUWHU &RXQW\  &DUWHU DWWHPSW HQG UXQV DURXQG :LOOLDPVRQ &RXQW\ VLPSO\ E\ &RXQW\jVSRVLWLRQLVWKDWXQOHVVWKHHVWDWHVXFFHVVIXOO\SXUVXHV DOOHJLQJWKDWWKHLUSURSHUW\ZDVWDNHQIRUDSULYDWHXVHDQG D UHPHGLDO SURFHGXUH RI WKH W\SH WKDW :LOOLDPVRQ &RXQW\ VXLQJ LPPHGLDWHO\  :H GLVDJUHH  $OWKRXJK LW LV HDV\ WR REVHUYHGQHHGQRWEHSXUVXHGLQVWDWHFRXUW WKHGULYHZD\LV DOOHJHVRPHWKLQJLQDFRPSODLQWLQRUGHUWRVWDWHDFRJQL]DEOH WKHFRXQW\j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j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jV GLUHFWLYH E\ DSSURDFKRIWKH)LIWKDQG1LQWK&LUFXLWV6HH6DPDDGY&LW\ LPSRVLQJDQH[KDXVWLRQUHTXLUHPHQWRQWKHIHZSODLQWLIIVZKR RI'DOODV)G WK&LU  FRQFOXGLQJWKDWD FDQSUHVHQWFRORUDEOHSULYDWHWDNLQJVFODLPV SULYDWHSXUSRVH WDNLQJV FODLP ZDV LPPHGLDWHO\ ULSH IRU MXGLFLDOGHWHUPLQDWLRQEXWWKDWDFODLPRIDQXQFRPSHQVDWHG ,Q VXPPDU\ ZH FRQFOXGH WKDW WR WKH H[WHQW WKDW 0DU\ WDNLQJ IRU D SXEOLF SXUSRVH ZDV QRW ULSH  $UPHQGDUL] Y 1DYHjVHVWDWHFODLPVWKDWWKHGULYHZD\ZDVWDNHQIRUDSULYDWH 3HQPDQ)G Q WK&LU  HQ XVHWKHFODLPLVULSHEXWWRWKHH[WHQWWKDWLWDOOHJHVWKDWWKH EDQF  m%HFDXVHDµSULYDWHWDNLQJjFDQQRWEHFRQVWLWXWLRQDO GULYHZD\ZDVWDNHQIRUDSXEOLFXVHIRUZKLFKWKHHVWDWHLV HYHQLIFRPSHQVDWHGDSODLQWLIIDOOHJLQJVXFKDWDNLQJZRXOG RZHGMXVWFRPSHQVDWLRQWKHFODLPLVQRWULSH$VDSUDFWLFDO QRW QHHGWRVHHNFRPSHQVDWLRQLQVWDWHSURFHHGLQJVEHIRUH PDWWHU WKLV ZLOO QRW EH D VLJQLILFDQW ORVV IRU 0DU\ 1DYHjV