Williams v. Potash Corp

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

s '28*/$6 &$03%(// ;
3(7(5 + .(66(5 
DQG$/)5(' / 
 1RV
:,//,$06 s5   
3ODLQWLIIV$SSHOOHHV !


Y 

327$6+ &25325$7,21 2) 
6$6.$7&+(:$1 ,1& D 

6DVNDWFKHZDQ&RUSRUDWLRQ 
'HIHQGDQW$SSHOODQW 
1
$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
IRUWKH:HVWHUQ'LVWULFWRI7HQQHVVHHDW0HPSKLV
1RVnsRQ3KLSSV
0F&DOOD'LVWULFWsXGJH
$UJXHG0DUFK
'HFLGHGDQG)LOHG)HEUXDU\
%HIRUH1(/621%2**6DQG1255,6&LUFXLWsXGJHV


 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

BBBBBBBBBBBBBBBBB UHVWULFWHGVWRFNULJKWVWKDW3&6DUJXHVGLGQRWYHVWXQWLO
FRXOGDQGVKRXOGVWLOOEHLQFOXGHGLQWKHVHYHUDQFHSDFNDJH
&2816(/ FDOFXODWLRQV
$5*8('5REHUW+.ORQRIIs21(6'$<5($9,6 2WKHU WKDQ WKHVH IHZ FRUUHFWLRQV ZH DJUHH ZLWK WKH
32*8( :DVKLQJWRQ '& IRU $SSHOODQW  5LFKDUG / FDOFXODWLRQVDVIRXQGE\WKHGLVWULFWFRXUW
)HQWRQ 6211(16&+(,1 1$7+  526(17+$/
&KLFDJR ,OOLQRLV IRU $SSHOOHHV  21 %5,()  5REHUW + 9,
.ORQRII 'DQLHO + %URPEHUJ s21(6 '$< 5($9,6
32*8( :DVKLQJWRQ '& %UXFH 6 .UDPHU sHII 6PLWK 3&6KDVDOUHDG\UHFHLYHGWKHEHQHILWRIWKHEDUJDLQLWVWUXFN
%252' .5$0(50HPSKLV7HQQHVVHHIRU$SSHOODQW FRQFHUQLQJJROGHQSDUDFKXWHVLQKDYLQJDQRUGHUO\FKDQJHLQ
5LFKDUG / )HQWRQ /RUL $QQH :DUG 6211(16&+(,1 FRUSRUDWH FRQWURO DQG LQ LQVXULQJ $UFDGLDQjV KHDOWK LQ WKH
1$7+ 526(17+$/&KLFDJR,OOLQRLVIRU$SSHOOHHV HYHQWRIDIDLOHGHIIRUWWRPHUJHDQGLWFDQQRWQRZUHIXVH
SD\PHQW LQ UHWXUQ  7KHUH ZDV FRQVLGHUDWLRQ IRU WKH
BBBBBBBBBBBBBBBBB DVVXPSWLRQ DJUHHPHQW LQVRIDU DV LW ZDV ERXQG XS LQ WKH
PHUJHUREOLJDWLRQV*ROGHQSDUDFKXWHVDUHQRWYRLGDVDJDLQVW
23,1,21 SXEOLF SROLF\ QRU GLG WKH $UFDGLDQ ERDUG H[KLELW JURVV
BBBBBBBBBBBBBBBBB QHJOLJHQFHLQDSSURYLQJWKHJROGHQSDUDFKXWHVDWLVVXHLQWKLV
FDVH)LQDOO\DOWKRXJKWKHGLVWULFWFRXUWFRUUHFWO\LQWHUSUHWHG
%2**6 &LUFXLW sXGJH  7KH 3RWDVK &RUSRUDWLRQ RI WKHPXOWLSOLHUFODXVHjVODQJXDJHEDVHGRQH[WULQVLFHYLGHQFH
6DVNDWFKHZDQ,QFm3&6lDSSHDOVIURPWKHGLVWULFWFRXUWjV JDWKHUHGDWWULDOLWFRPPLWWHGFOHDUHUURULQFRXQWLQJFHUWDLQ
SDUWLDOJUDQWRIVXPPDU\MXGJPHQWDQGLWVMXGJPHQWDIWHUWULDO LQFHQWLYHSD\PHQWVWKDWZHUHPDGHLQUHVSHFWRIPRUHWKDQ
LQIDYRURISODLQWLIIVDSSHOOHHVs'&DPSEHOO3HWHU.HVVHU WZR \HDUV  )RU WKHVH UHDVRQV WKH MXGJPHQW RI WKH GLVWULFW
DQG $OIUHG :LOOLDPV sU DOO IRUPHU H[HFXWLYHV RI WKH FRXUW RQ SDUWLDO VXPPDU\ MXGJPHQW DQG DIWHU WULDO LV
$UFDGLDQ&RUSRUDWLRQ&DPSEHOOWKHIRUPHU3UHVLGHQWDQG $)),50('LQSDUW5(9(56('LQSDUWDQG5(0$1'('
&(2 .HVVHU WKH IRUPHU 9LFH3UHVLGHQW DQG *HQHUDO EDFNWRWKHGLVWULFWFRXUWIRUIXUWKHUSURFHHGLQJVFRQVLVWHQW
&RXQVHODQG:LOOLDPVWKHIRUPHU9LFH3UHVLGHQWDQG&)2 ZLWKWKLVRSLQLRQ
VXHG3&6IRUEUHDFKRIFRQWUDFWDSSUR[LPDWHO\WZRPRQWKV
DIWHU LWV VXFFHVVIXO 0DUFK   PHUJHU ZLWK $UFDGLDQ
EHFDXVH 3&6 UHIXVHG WR PDNH VHYHUDQFH SD\PHQWV WR WKH
H[HFXWLYHV WULJJHUHG XQGHU WKRVH H[HFXWLYHVj HPSOR\PHQW
DJUHHPHQWV E\WKHFKDQJHLQFRUSRUDWHFRQWURORI$UFDGLDQ
DQGDGGLWLRQDOmJRRGFDXVHl


7KLV RSLQLRQ ZLOO IROORZ WKH GLVWULFW FRXUW LQ XVLQJ WKH WHUPV
mHPSOR\PHQW DJUHHPHQWVl DQG mVHYHUDQFH DJUHHPHQWVl LQWHUFKDQJHDEO\
WR UHIHU WR WKH H[HFXWLYHVj DJUHHPHQW ZLWK $UFDGLDQ
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

WHVWLPRQ\ %XW FRXQWLQJWKHLQFHQWLYHVDFFRUGLQJWRZKHQ 3&6PRYHGWRGLVPLVVSODLQWLIIVjFKDUJHVIRUIDLOXUHWRMRLQ
WKH\YHVWHGGRHVQRWMXVWLI\WKHGRXEOHFRXQWLQJRIEHQHILWVRI 3&61LWURJHQWKHPHUJHUVXEVLGLDU\ZKROO\RZQHGE\3&6
ZKLFK3&6FRPSODLQV7KHVHYHUDQFHDJUHHPHQWRQO\FDOOV LQWRZKLFK$UFDGLDQZDVDEVRUEHGDVDQLQGLVSHQVDEOHSDUW\
IRUORRNLQJDWWKHDYHUDJHRIWKHSUHYLRXVWZR\HDUVjmERQXV 7KHGLVWULFWFRXUWGHQLHGWKDWPRWLRQRQ6HSWHPEHU
SURILW VKDULQJ DQG RWKHU LQFHQWLYH SD\PHQWVl VR RQO\ WZR 3&6 DQG 3&6 1LWURJHQ ILOHG VXLW LQ 7HQQHVVHH VWDWH FRXUW
\HDUVRIYHVWLQJVKRXOGEHORRNHGDWUHJDUGOHVVRIZKDWWKH DJDLQVW SODLQWLIIV DW DERXW WKDW WLPH FODLPLQJ EUHDFK RI
YHVWLQJVFKHGXOHPD\DUWLILFLDOO\LQFOXGHRUH[FOXGHIURPWKDW ILGXFLDU\GXWLHVE\WKHH[HFXWLYHVDQGVHHNLQJDGHFODUDWLRQ
WLPHIUDPH WKDW WKH HPSOR\PHQW DJUHHPHQWV ZHUH XQHQIRUFHDEOH
3ODLQWLIIVUHPRYHGWKDWFDVHWRIHGHUDOFRXUWFODLPLQJ(5,6$
+HQFH LQ UHFRQFLOLQJ EHQHILWV WKDW YHVW DOO DW RQFH ZLWK SUHHPSWLRQEXWLWZDVUHPDQGHGEDFNRQsXO\
WKRVHWKDWYHVWUDWDEO\RYHUWLPHZHKROGWKDWWKHPXOWLSOLHU
FODXVHSHUPLWVIRULQVWDQFHWKHFRXQWLQJRIEHQHILWVWKDW +DYLQJUHFHLYHGFURVVPRWLRQVIRUVXPPDU\MXGJPHQWWKH
YHVWHGLQRQWRSRIEHQHILWVWKDWYHVWHGLQ GLVWULFWFRXUWJUDQWHGSDUWLDOVXPPDU\MXGJPHQWWRSODLQWLIIV
7RWKHH[WHQWWKDW3&6REMHFWVWRWKDWDVmGRXEOHFRXQWLQJl RQ $XJXVW   UHMHFWLQJ 3&6jV DUJXPHQWV WKDW WKH
ZH GLVDJUHH  7KH H[HFXWLYH KDG WR UHPDLQ IRU DQRWKHU VHYHUDQFHDJUHHPHQWVZHUHYRLGIRUODFNLQJFRQVLGHUDWLRQDQG
FDOHQGDU\HDULQRUGHUIRUWKHEHQHILWVIURPWZRSULRU\HDUVWR IRUFRQWUDYHQLQJSXEOLFSROLF\DQGKROGLQJWKDWWKHFRQWUDFWV
YHVWVRWKRVHEHQHILWVDUHUHDVRQDEO\FRQVWUXHGDVSD\PHQWV ZHUHHQIRUFHDEOHDJDLQVW3&6$WWKHEHQFKWULDOWKDWEHJDQ
PDGH LQ UHVSHFW RI WKH FDOHQGDU \HDU ZKHQ WKH\ YHVWHG $XJXVW  WKH FRXUW KHDUG WHVWLPRQ\ UHJDUGLQJ WKH SURSHU
+RZHYHUZHIXUWKHUKROGWKDWWKHPXOWLSOLHUFODXVHGRHVQRW FRQVWUXFWLRQ RI WKH PXOWLSOLHU FODXVH LQ WKH VHYHUDQFH
SHUPLWFRXQWLQJDQ\EHQHILWVWKDWYHVWHGLQDVEHLQJmLQ DJUHHPHQWV  7KH FRXUW WKHQ UHQGHUHG D 1RYHPEHU 
UHVSHFWRIlDQHDUOLHU\HDU3&6PDNHVWKLVDUJXPHQWXVLQJ MXGJPHQWWKDWDFFHSWHGWKHSODLQWLIIVjLQWHUSUHWDWLRQRIPRVW
WKHmGRXEOHFRXQWLQJlODEHOWRREXWWKHREMHFWLRQLVEHWWHU DVSHFWVRIWKHPXOWLSOLHUFODXVHDQGLWRUGHUHG3&6WRSD\
VW\OHGDVLPSHUPLVVLEO\FRXQWLQJLQFHQWLYHSD\PHQWVPDGHLQ SODLQWLIIVjDWWRUQH\jVIHHVDQGWD[SHQDOWLHV2Q'HFHPEHU
UHVSHFWRIPRUHWKDQWZRFDOHQGDU\HDUV DIWHUKDYLQJUHFHLYHGUHYLVHGFDOFXODWLRQVIURPWKHSDUWLHVLQ
DFFRUG ZLWK LWV HDUOLHU GHFLVLRQ WKH FRXUW LVVXHG D UHYLVHG
:HSHUFHLYHRQHSRVVLEOHZULQNOHLQWKHFRXQWLQJUXOHMXVW RSLQLRQDZDUGLQJSUHFLVHGDPDJHV:HDJUHHZLWKWKHGLVWULFW
ODLGGRZQ3&6REMHFWVWRWKHLQFOXVLRQRIUHVWULFWHGVWRFN FRXUWjVMXGJPHQWFRQFHUQLQJWKHFRQWUDFWFRQVLGHUDWLRQDQG
IURPLQWKHPXOWLSOLHUEHFDXVHWKHFRPSDQ\FODLPVWKDW SXEOLFSROLF\LVVXHVKRZHYHUZHGLVDJUHHVOLJKWO\ZLWKLWV
WKRVHVWRFNULJKWVYHVWHGLQ7KHGLVWULFWFRXUWGLGQRW GDPDJH FDOFXODWLRQ  7KHUHIRUH ZH ZLOO DIILUP WKH GLVWULFW
WUHDWWKLVSUREOHPLQGHWDLOEXWLWDSSHDUVWKDWWKHYHVWLQJUXOH FRXUW LQ SDUW UHYHUVH LW LQ SDUW DQG UHPDQG WKH FDVH IRU
IRU WKH UHVWULFWHG VWRFN PD\ KDYH EHHQ GLIIHUHQW WKDQ WKH UHYLVLRQVLQWKHFDOFXODWLRQRIGDPDJHV
YHVWLQJUXOHIRUWKH6$5VDQG&(6$5V:KHUHDVWKHODWWHU
EHQHILWV YHVWHG RQ sDQXDU\  LQ WKH \HDU IROORZLQJ WKDW LQ ,
ZKLFKWKH\ZHUHJUDQWHGWKHUHVWULFWHGVWRFNEHQHILWVDSSHDU
WRKDYHYHVWHGDVVRRQDVWKHILUPKLWLWVSHUIRUPDQFHWDUJHWLQ 3&6 D 6DVNDWFKHZDQ IHUWLOL]HU FRUSRUDWLRQ DSSURDFKHG
WKHUHOHYDQW\HDU7KXVULJKWVPD\KDYHYHVWHGLQ $UFDGLDQD7HQQHVVHHIHUWLOL]HUFRUSRUDWLRQDERXWDSRVVLEOH
HYHQ WKRXJK WKH FRPSDQ\ FRXOG QRW FRQILUP WKDW LW KLW WKH PHUJHU LQ $XJXVW   7KH $UFDGLDQ ERDUG GHFLGHG WR
SHUIRUPDQFHWDUJHWVXQWLOVRPHWLPHLQ,IWKHGLVWULFW SXUVXHWKHRYHUWXUHRQ$XJXVWDQGKHDUGDSUHVHQWDWLRQRQ
FRXUW RQ UHPDQG DJUHHV ZLWK WKLV DQDO\VLV WKHQ WKH  SURSRVHG VHYHUDQFH SODQV DW WKDW WLPH  2YHU /DERU 'D\
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

ZHHNHQG $UFDGLDQ DQG 3&6 QHJRWLDWHG WKH WHUPV RI WKH $W WKH EHQFK WULDO FRQFHUQLQJ WKH LQWHUSUHWDWLRQ RI WKH
PHUJHU DQG WKH VHYHUDQFH DJUHHPHQWV  3&6jV ([HFXWLYH PXOWLSOLHUFODXVHSODLQWLIIVSUHVHQWHGWKHWHVWLPRQ\RIWKUHH
&RPPLWWHHDQGWKH$UFDGLDQERDUGDSSURYHGDQGH[HFXWHG PHPEHUVRIWKH$UFDGLDQERDUGZKRVDLGWKH\XQGHUVWRRGWKH
WKH PHUJHU DJUHHPHQW DW UHVSHFWLYH ERDUG PHHWLQJV RQ PXOWLSOLHUWRLQFOXGHDOOLQFHQWLYHVLQFOXGLQJORQJWHUPRQHV
6HSWHPEHU$IWHUDSSURYLQJWKHDJUHHPHQWWKH$UFDGLDQ (623VDQG6(53V.HVVHUOLNHZLVHWHVWLILHGWKDWORQJWHUP
ERDUG DSSURYHG HPSOR\PHQW DJUHHPHQWV IRU QLQH VHQLRU LQFHQWLYHV LQFOXGLQJ (623V DQG 6(53V ZHUH LQFOXGHG
H[HFXWLYHV WKDW LQFOXGHG VRFDOOHG JROGHQ SDUDFKXWHV  6HH 3ODLQWLIIVDOVRVKRZHGWKDW$UFDGLDQKDGSURYLGHG3&6ZLWK
%URZQ Y )HUUR &RUS  )G  WK &LU  GUDIWVGXULQJWKH/DERU'D\ZHHNHQGQHJRWLDWLRQVDQGDPLG
GLVFXVVLQJ WKH RSHUDWLRQ RI JROGHQ SDUDFKXWH VHYHUDQFH 6HSWHPEHUVSUHDGVKHHWWR3&6jVRXWVLGHEHQHILWVFRQVXOWDQW
DJUHHPHQWV  &DPSEHOO .HVVHU DQG :LOOLDPV VLJQHG WKDW LQFOXGHG VXFK ORQJWHUP LQFHQWLYHV  $VLGH IURP WKH
HPSOR\PHQW DJUHHPHQWV FRQWDLQLQJ WKHVH SDUDFKXWHV WKUHH ODQJXDJHRIWKHPXOWLSOLHUDQGWKHGUDIWLQJKLVWRU\3&6EXLOW
GD\VODWHU7KHmJROGHQSDUDFKXWHlSRUWLRQRIWKHVHYHUDQFH LWVFDVHEHORZRQH[SHUWWHVWLPRQ\WKDWORQJWHUPLQFHQWLYHV
SDFNDJHSURYLGHGDIRUPXODWRFRPSHQVDWHVHQLRUH[HFXWLYHV DUHUDUHO\LQFOXGHGLQPXOWLSOLHUFODXVHVDQGWKDWZKHQWKH\
LQFDVHRIDFKDQJHLQFRUSRUDWHFRQWURODFFRPSDQLHGE\D DUHLQFOXGHGWKHFODXVHVDUHYHU\VSHFLILF7KHGLVWULFWFRXUW
PDWHULDO FKDQJH LQ WKH H[HFXWLYHjV SRVLWLRQ DW WKH QHZ DJUHHGZLWK3&6WKDWWKH(623VDQG6(53VZHUHUHWLUHPHQW
FRPSDQ\,QVXFKDFLUFXPVWDQFHWKHH[HFXWLYHFRXOGOHDYH EHQHILWV QRW LQFHQWLYH SD\PHQWV WR EH LQFOXGHG LQ WKH
WKHFRPSDQ\DQGUHFHLYHDQDJJUHJDWHSD\PHQWLQRQHOXPS PXOWLSOLHU+RZHYHULWIRXQGWKDWWKH6$5V&(6$5VDQG
VXPZLWKLQGD\VRIWHUPLQDWLRQWRWDOLQJ VWRFNRSWLRQVZHUHLQFHQWLYHSD\PHQWVWKDW.HVVHULQWHQGHG
WRLQFOXGHWKH$UFDGLDQERDUGWKRXJKWZHUHLQFOXGHGDQGWKH
DQ DPRXQW HTXDO WR WKH VXP RI $ WKUHH  WLPHV VSUHDGVKHHWWR3&6OLVWHGDVLQFOXGHG+HQFHLWGHHPHGWKHP
([HFXWLYHjV %DVH 6DODU\ LQ HIIHFW DW WKH WLPH RI >WKH SURSHUO\ LQFOXGHG LQ WKH PXOWLSOLHU HYHQ WKRXJK RWKHU
([HFXWLYHjV@ WHUPLQDWLRQ     % WKUHH  WLPHV WKH HYLGHQFH VXJJHVWHG WKDW ORQJWHUP LQFHQWLYHV DUH UDUHO\
DYHUDJHRIDOOERQXVSURILWVKDULQJDQGRWKHULQFHQWLYH LQFOXGHG LQ D VHYHUDQFH PXOWLSOLHU  *LYHQ WKH HYLGHQFH
SD\PHQWVPDGHE\WKH&RPSDQ\WR([HFXWLYHLQUHVSHFW SUHVHQWHGDWWULDOZHKROGWKDWWKHGLVWULFWFRXUWjVGHFLVLRQWR
RIWKHWZRFDOHQGDU\HDUVLPPHGLDWHO\SUHFHGLQJVXFK LQFOXGHWKH6$5VDQG&(6$5VZKLOHH[FOXGLQJWKH(623V
WHUPLQDWLRQ DQG & WKH SURUDWD VKDUH RI ([HFXWLYHjV RU 6(53V LQ WKH mRWKHU LQFHQWLYH SD\PHQWVl LV QRW FOHDUO\
WDUJHWERQXVSURILWVKDULQJDQGRWKHULQFHQWLYHSD\PHQWV HUURQHRXV
IRUWKHFDOHQGDU\HDULQZKLFKVXFKWHUPLQDWLRQRFFXUUHG
 :H IXUWKHU KROG WKDW WKH GLVWULFW FRXUW GLG QRW HUU LQ
GHFLGLQJWKDWmLQUHVSHFWRIlDJLYHQ\HDUPHDQVWKDW6$5V
ˆFLLRIWKH(PSOR\PHQW$JUHHPHQW LQFOXGLQJLQGLYLGXDO6$5VDQG&(6$5VVKRXOGFRXQWDVRI
WKH\HDUWKH\YHVW7KHVHEHQHILWVDUHQRWSD\PHQWVZKHQWKH\
$UFDGLDQjVFRPSHQVDWLRQV\VWHPKLVWRULFDOO\HPSKDVL]HG DUHGLVWULEXWHGEXWRQO\RQFHWKH\YHVW7KRXJKWKH\DUHQRW
LQFHQWLYHV HQKDQFLQJ DQ LQGXVWU\ PHGLDQ EDVH VDODU\ ZLWK FDVKFRPSHQVDWLRQSODLQWLIIVDUJXHWKH\PXVWEHWUHDWHGIRU
VXSSOHPHQWDO LQFHQWLYH SD\PHQWV IRU PHHWLQJ SHUIRUPDQFH WD[ SXUSRVHV DV LQFRPH LQ WKH \HDU ZKHQ WKH\ EHFRPH
WDUJHWV DV ZHOO DV SURILWVKDULQJ SD\PHQWV DQG DGGLWLRQDO UHGHHPDEOHIRUFDVK6HH3ODLQWLIIV$SSHOOHHVj%ULHIDW
ERQXVHV8QGHUWKHSURILWVKDULQJSODQRQO\DSSHOOHHV FLWLQJ 3URSRVHG 7UHDV 5HJ † * $  $UFDGLDQ
ZHUH DOVR HOLJLEOH IRU SHUIRUPDQFHEDVHG 6$5V VWRFN WUHDWHGWKHPDVVXFKEHIRUHFRQWHPSODWLQJWKHPHUJHUDQG
DSSUHFLDWLRQULJKWVDQG&(6$5VFDVKHTXLYDOHQW6$5V VXFKWUHDWPHQWRIWKHVHEHQHILWVLVVWDQGDUGDFFRUGLQJWRWULDO
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

GLVWULFWFRXUWKHOGWKDWWKHFODXVHLVXQDPELJXRXVDVDPDWWHU ZKLFKYHVWHGUDWDEO\RYHUWKUHH\HDUVDIWHUWKH\ZHUHJUDQWHG
RIODZEXWLWDOVRKHOGWKDWH[WULQVLFHYLGHQFHVXSSRUWHGPRVW ,Q DGGLWLRQ WR WKH IRUPDO SODQ $UFDGLDQ GLVWULEXWHG RWKHU
DVSHFWVRIWKHSODLQWLIIVjLQWHUSUHWDWLRQRIWKHFODXVH7KXVWR VWRFNRSWLRQVZLWKRXWUHJDUGWRFRPSDQ\SHUIRUPDQFH,WDOVR
VHFXUHDUHYHUVDORIWKHWULDOFRXUWjVIDFWXDOILQGLQJVEDVHGRQ FRQWULEXWHGRIHDFKHPSOR\HHjVDQQXDOFRPSHQVDWLRQLQWR
H[WULQVLFHYLGHQFH3&6PXVWVKRZWKDWWKHPXOWLSOLHUFODXVH DQ (PSOR\HH 6WRFN 2ZQHUVKLS 3ODQ (623 DQG LQWR D
LQWKH(PSOR\PHQW$JUHHPHQWVSODLQO\H[FOXGHVORQJWHUP 6XSSOHPHQWDO([HFXWLYH5HWLUHPHQW3ODQ6(53IRUFHUWDLQ
LQFHQWLYHV ZKHQ LW UHIHUV WR mDOO ERQXV SURILW VKDULQJ DQG KLJKHUVDODULHGHPSOR\HHVZKRVHLQFRPHOHYHOSUHFOXGHGWKHLU
RWKHULQFHQWLYHSD\PHQWVlDQGWKDWWKHGLVWULFWFRXUWWKHUHIRUH IXOOSDUWLFLSDWLRQLQDQ(623
FRPPLWWHGFOHDUHUURU
$W 3&6jV LQVLVWHQFH GXULQJ WKH /DERU 'D\ ZHHNHQG
3&6ILUVWDUJXHVIRUDSSOLFDWLRQRIWKHHMXVGHPJHQHULVUXOH GLVFXVVLRQV $UFDGLDQ UHGXFHG WKH QXPEHU RI VHFRQGDU\
RI FRQVWUXFWLRQ VR WKDW mRWKHU LQFHQWLYH SD\PHQWVl ZRXOG HYHQWVWKDWFRXOGWULJJHUWKHJROGHQSDUDFKXWHVIROORZLQJD
PHDQ SD\PHQWV WKDW DUH OLNH ERQXVHV DQG SURILW VKDULQJ LQ FKDQJHLQFRUSRUDWHFRQWURODQGGHYLVHGDIRUPXODEDVHGRQ
EHLQJ VKRUWWHUP LQFHQWLYHV  0RUHRYHU 3&6 DGGV WKHUH DFWXDO FRPSHQVDWLRQ IRU WKH WZR FDOHQGDU \HDUV SUHFHGLQJ
ZRXOGEHQRUHDVRQWRPHQWLRQERQXVHVDQGSURILWVKDULQJLI WHUPLQDWLRQUDWKHUWKDQRQH[SHFWHGFRPSHQVDWLRQIRUWKHWZR
DOO LQFHQWLYHV ZHUH HQFRPSDVVHG E\ WKH ZRUG DOO EHFDXVH \HDUV IROORZLQJ WHUPLQDWLRQ  ,URQLFDOO\ WKH ORRNEDFN
ERQXVHV DQG SURILW VKDULQJ SD\PHQWV ZRXOG EH LQFOXGHG IRUPXODZDVDGRSWHGLQSDUWEHFDXVH3&6IHOWDUHWURVSHFWLYH
DOUHDG\  3&6 DOVR QRWHV WKDW WKH PXOWLSOLHU SURYLGHV IRU IRUPXOD ZRXOG EH OHVV FRQWHVWDEOH WKDQ D SURVSHFWLYH RQH
SD\PHQWRIWKHmSURUDWDVKDUHRI([HFXWLYHjVWDUJHWERQXV 3&6DOVRUHTXHVWHGWKDWWKHPXOWLSOLHUEHOLPLWHGWRVDODU\DQG
SURILWVKDULQJDQGRWKHULQFHQWLYHSD\PHQWVIRUWKHFDOHQGDU ERQXVHVEXW$UFDGLDQLQGLFDWHGWKDWLWVSD\VWUXFWXUHZDVWRR
\HDULQZKLFKVXFKWHUPLQDWLRQRFFXUUHGlHPSKDVLVDGGHG LQFHQWLYHODGHQ IRU WKDW WR EH IHDVLEOH  %UXFH sRF] RI
&RPLQJVRVRRQDIWHUWKHRWKHUUHIHUHQFH3&6UHDVRQVWKDW %UDFHZHOO 3DWWHUVRQ.HVVHUjVIRUPHUODZILUPGUDIWHGWKH
WKH HDUOLHU UHIHUHQFH PXVW DOVR UHIHU WR FDOHQGDU\HDU LH FODXVHXQGHU.HVVHUjVGLUHFWLRQ,QsRF]jVEULHISUHVHQWDWLRQ
VKRUWWHUP LQFHQWLYHV  )XUWKHU EHFDXVH WKH HPSOR\PHQW WRWKHERDUGIROORZLQJDSSURYDORIWKHPHUJHUQRPHQWLRQ
DJUHHPHQW HOVHZKHUH UHIHUV WR 6$5V &(6$5V DQG VWRFN ZDVPDGHRIZKHWKHUWKHmRWKHULQFHQWLYHSD\PHQWVlLQWKH
RSWLRQVDVm6WRFN,QFHQWLYH5LJKWVl3&6UHDVRQVWKDWWKRVH PXOWLSOLHU IRUPXOD LQFOXGHG ORQJWHUP LQFHQWLYHV  5DWKHU
LWHPV FDQQRW EH VXEVXPHG E\ WKH SKUDVH mRWKHU LQFHQWLYH sRF]jVVXPPDU\GHVFULEHGWKHIRUPXODDVWLPHVEDVHVDODU\
SD\PHQWVl  $OWKRXJK WKHVH DUJXPHQWV DUH VRPHZKDW SOXVWLPHVSULRU\HDUVjDYHUDJHSURILWVKDULQJDQGERQXV
SODXVLEOH ZH FDQQRW VD\ WKDW WKH PXOWLSOLHU IRUPXODjV SOXVDSURUDWDVKDUHRIFXUUHQW\HDUjVSURILWVKDULQJRUERQXV
ODQJXDJHSODLQO\H[FOXGHVORQJWHUPLQFHQWLYHV $UFDGLDQ ([HFXWLYH &KDUOHV /DQFH SUHVHQWHG VOLGHV
VXJJHVWLQJWKDWWKHPXOWLSOLHUWRWDOHGPRQWKVRIVDODU\DQG
3&6 DOVR DUJXHV WKDW WKH WHUPV RI WKH HPSOR\PHQW
DJUHHPHQWVKRXOGEHFRQVWUXHGDJDLQVW.HVVHUDVRQHRIWKH
GRFXPHQWjVGUDIWHUVDQGWKDWLWVKRXOGEHFRQVWUXHGQDUURZO\ 
GXH WR RIIHQGLQJ SXEOLF SROLF\  %XW 3&6 WRRN SDUW LQ WKH sRF] PRGHOHG WKH ILUVW LWHUDWLRQ RI WKH HPSOR\PHQW DJUHHPHQWV DIWHU

GUDIWLQJWRRDQGWKHSDUDFKXWHVGRQRWYLRODWHSXEOLFSROLF\ JROGHQ SDUDFKXWHV WKDW KDG EHHQ GHYLVHG IRU DQRWKHU FOLHQW WR ZDUG RII D
KRVWLOH WDNHRYHU $V VXFK WKH RULJLQDO GUDIW SURSRVDO LQFOXGHG PRUH
VRWKHVHDUJXPHQWVDUHXQDYDLOLQJ JHQHURXV SDUDFKXWHV WKDW FRXOG EH WULJJHUHG VLPSO\ E\ D FKDQJH LQ FRQWURO
3&6 UHMHFWHG WKDW GUDIW DQG VXJJHVWHG XVLQJ WKH JROGHQ SDUDFKXWH
DJUHHPHQWV LW KDG ZLWK LWV RZQ H[HFXWLYHV DV DQ DOWHUQDWLYH PRGHO sRF]
WKHQ DGDSWHG 3&6jV PRGHO WR $UFDGLDQjV QHHGV
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

ERQXV+RZHYHULQDPLG6HSWHPEHUVSUHDGVKHHWSUHSDUHG PHPEHU&KHVWHU9DQDWWDUHOLHGRQE\WKHGLVWULFWFRXUWWKH
IRU 3&6 DQG LWV RXWVLGH EHQHILWV FRQVXOWDQW 5LFKDUG ERDUGXQGHUVWRRGWKHQDWXUHRIWKHEHQHILWVNQHZWKDW3&6
'DYHQSRUW RI 'HORLWWH  7RXFKH FDOFXODWLQJ WKH JROGHQ KDGDSSURYHGWKHVHYHUDQFHSDFNDJHVKDGDURXJKLGHDRIWKH
SDUDFKXWHV/DQFHGLGLQFOXGHVWRFNULJKWVVWRFNRSWLRQVDQG FRVW DQG NQHZ ZKDW ZDV LQFOXGHG ZDQWHG WR UHWDLQ WKH
SHUIRUPDQFHEDVHG6$5VDQG&(6$5VIURPWKHSURILW SHUVRQQHOLQFDVHWKHPHUJHUIDLOHGWRJRWKURXJKDQGYHWWHG
VKDULQJ SODQ LQ WKH PXOWLSOLHU IRUPXOD EXW SHUKDSV WKHVHYHUDQFHSDFNDJHVWKURXJKLWVFRPSHQVDWLRQFRPPLWWHH
LQDGYHUWHQWO\OHIWRWKHULQGLYLGXDO6$5VRXWRILW /DQFH )LQDOO\3&6DOVRVXJJHVWVDPHDVXUHRIVHOIGHDOLQJLQWKH
VHQW 3&6 FRSLHV RI DOO $UFDGLDQ EHQHILW SODQV IRU GXH DSSURYDORIWKHVHVHYHUDQFHSDFNDJHVEXW0U&DPSEHOOLV
GLOLJHQFHSXUSRVHV WKHRQO\SODLQWLIIZKRZDVRQWKHERDUGDQGKHDFNQRZOHGJHG
KLVFRQIOLFWDQGDEVWDLQHGIURPWKHYRWH
6HYHUDO ZHHNV ODWHU /DQFH DGGHG WKH LQGLYLGXDO 6$5V
&(6$5V (623V DQG 6(53V WR WKH VSUHDGVKHHW DQG 7KH $UFDGLDQ ERDUG WKHUHIRUH H[KLELWHG QRWKLQJ OLNH WKH
'DYHQSRUWDGGHGVRPHRWKHUDFFLGHQWDOO\RPLWWHGORQJWHUP ODFN RI NQRZOHGJH DQG WKH VZLIWQHVV RI GHOLEHUDWLRQ
LQFHQWLYHV WR FRUUHFW WKH VSUHDGVKHHW  /DQFH GUDIWHG FRQGHPQHGLQWKH9DQ*RUNRPRU+DQVRQFDVHV6HH6PLWK
DGPLQLVWUDWLYH JXLGHOLQHV LQWHUSUHWLQJ WKH YDULDEOH Y 9DQ *RUNRP  $G  'HO  +DQVRQ 7UXVW
FRPSRQHQWVRIWKHPXOWLSOLHUFODXVH$UFDGLDQjVDFFRXQWLQJ 3/& Y 0/ 6&0 $FTXLVLWLRQ ,QF  )G  G &LU
GHSDUWPHQWFDOFXODWHGSRWHQWLDOVHYHUDQFHSD\PHQWVEDVHGRQ 1RUGRHVWKLVFDVHIHDWXUHWKHNLQGRILQVLGHUGHDOLQJ
DDQGDPHUJHUFORVLQJZKLFK$UFDGLDQjVRXWVLGH RQDVWDFNHGERDUGGHFULHGLQ2FLOOD,QGXV,QFY.DW]
DXGLWRUV 3HDW 0DUZLFN WKHQ UHYLHZHG  7KH FRPSHQVDWLRQ )6XSS('1<1RUGRWKHVHYHUDQFH
FRPPLWWHH UHYLHZHG DQG DSSURYHG WKH DGPLQLVWUDWLYH DJUHHPHQWVDWLVVXHKHUHDSSURDFKWKHSRVVLEO\ZDVWHIXOXVH
JXLGHOLQHVRQ2FWREHUDQGUHSRUWHGLWVDFWLRQWRWKHIXOO RIFRUSRUDWHDVVHWVHQWDLOHGLQWKH:DOW'LVQH\&RPSDQ\jV
ERDUGWKHIROORZLQJGD\,QHDUO\1RYHPEHU/DQFHFRQWDFWHG QRQIDXOWWHUPLQDWLRQRI0LFKDHO2YLW]UHFHQWO\DGMXGLFDWHG
KLVFRXQWHUSDUWDW3&6WRFDOODWWHQWLRQWRWKHPXFKKLJKHU E\WKH'HODZDUH6XSUHPH&RXUW6HH%UHKPY(LVQHU
VHYHUDQFH EHQHILW FRVWV WKDW ZRXOG EH HQWDLOHG E\ D  $G   'HO  GLVPLVVLQJ WKH DFWLRQ ZLWKRXW
FORVLQJ  6KRUWO\ WKHUHDIWHU 3&6 WROG /DQFH LW WKRXJKW WKH SUHMXGLFHRQSURFHGXUDOJURXQGVEXWREVHUYLQJWKDWmWKHVKHHU
VHYHUDQFH SDFNDJHV VKRXOG EH OLPLWHG WR WKUHH WLPHV FDVK VL]H RI WKH SD\RXW WR 2YLW] > PLOOLRQ IRU OHVV WKDQ 
FRPSHQVDWLRQEXW/DQFHVDLGWKDWZDVLQFRQVLVWHQWZLWKERWK PRQWKVRIZRUN@SXVKHVWKHHQYHORSHRIMXGLFLDOUHVSHFW
KLVXQGHUVWDQGLQJRIWKHWHUPVUHDFKHGDQGWKHODQJXDJHRI IRU WKH EXVLQHVV MXGJPHQW RI GLUHFWRUV LQ PDNLQJ
WKHHPSOR\PHQWDJUHHPHQWV FRPSHQVDWLRQGHFLVLRQVl,IWKH2YLW]VHYHUDQFHSD\PHQW
ZKLFKLQFOXGHGPLOOLRQLQFDVKRQO\SXVKHVWKHHQYHORSH
7KH DJUHHPHQWV DOVR FRQWDLQHG D SURYLVLRQ UHTXLULQJ XQGHU'HODZDUHODZWKHQWKHVPDOOHUVXPKHUHVSUHDGDFURVV
$UFDGLDQWRREWDLQDQDVVXPSWLRQDJUHHPHQWIURPDQ\mGLUHFW WKUHHH[HFXWLYHVZLWKORQJHUWHQXUHDWWKHLUFRPSDQ\LVZHOO
RU LQGLUHFWl VXFFHVVRU DJUHHLQJ mWR H[SUHVVO\ DVVXPH DQG ZLWKLQWKHFRQILQHVUHVSHFWHGE\WKHEXVLQHVVMXGJPHQWUXOH
DJUHH WR SHUIRUP E\ D ZULWWHQ DJUHHPHQW LQ IRUP DQG
VXEVWDQFHVDWLVIDFWRU\WR([HFXWLYHDOORIWKHREOLJDWLRQVRI 9
+DYLQJ XSKHOG WKH GLVWULFW FRXUWjV SDUWLDO VXPPDU\
 MXGJPHQWRQWKHFRQVLGHUDWLRQDQGSXEOLFSROLF\LVVXHVZH
$UFDGLDQ RFFDVLRQDOO\ JUDQWHG QRQSHUIRUPDQFHEDVHG 6$5V WR
HPSOR\HHV DV FRPSHQVDWLRQ &DPSEHOO IRU LQVWDQFH DSSDUHQWO\ UHFHLYHG WXUQILQDOO\WRLWVLQWHUSUHWDWLRQRIWKHPXOWLSOLHUFODXVH7KH
VRPH 6$5V DV D NLQG RI VLJQLQJ ERQXV ZKHQ KH FDPH WR $UFDGLDQ
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

(YHQLIZHRXUVHOYHVGLGQRWSHUFHLYHDJRRGUDWLRQDOHIRU WKH&RPSDQ\>$UFDGLDQ@XQGHUWKLV$JUHHPHQWl)DLOXUHE\
WKHVH SDUDFKXWHV FRXUWV VKRXOG EH ORDWK WR FRQGHPQ D $UFDGLDQ WR REWDLQ VXFK DQ DJUHHPHQW IURP D VXFFHVVRU
EXVLQHVVSUDFWLFHVLPSO\EHFDXVHWKH\GRQRWSHUFHLYHDJRRG DXWRPDWLFDOO\WULJJHUHGWKHJROGHQSDUDFKXWHVXSRQDFKDQJH
UDWLRQDOHIRUDJLYHQSUDFWLFH&RQGHPQLQJSRRUO\XQGHUVWRRG LQFRQWURO3&6DQG$UFDGLDQILOHGDsRLQW3UR[\6WDWHPHQW
SUDFWLFHVVLPSO\IRUODFNRIDFOHDUUDWLRQDOHZRXOGVXEVWLWXWH ZLWKWKH6(&RQsDQXDU\OD\LQJRXWWKHVHYHUDQFH
WKHFRXUWjVEXVLQHVVMXGJPHQWIRUWKHFRUSRUDWLRQjVm,IZKDW IRUPXOD LQFOXGLQJ LQFHQWLYH SD\PHQWV OXPSVXP SHQVLRQ
PDQDJHPHQWGLGZDVLOOHJDOLWVKRXOGEHHQMRLQHG,ILW EHQHILWVDQGWKHWD[JURVVXSIHDWXUHZKHUHE\WKHFRPSDQ\
ZDVQjWLOOHJDOLWVKRXOGEHDOORZHGHYHQLISKLORVRSKLFDOO\ LQFUHDVHGWKHJROGHQSDUDFKXWHVWRFRYHUUHODWHGWD[HV
XQSDODWDEOHDQGLIDFRXUWFDQQRWWHOOLWVHHPVWKDWWKLVLV
ZKDW WKH EXVLQHVV MXGJPHQW UXOH LV DOO DERXW DQG WKH QRG 3&6FRQWLQXHGWRUHVLVW$UFDGLDQjVLQFOXVLRQRIORQJWHUP
VKRXOGEHJLYHQWR WKRVHZKRDUHYHVWHGZLWKWKHEXVLQHVV LQFHQWLYHV LQ WKH IRUPXOD  3ODLQWLIIVj FRXQVHO WKXV
GHFLVLRQPDNLQJUHVSRQVLELOLW\l(GHOPDQY)UXHKDXI&RUS UHFRPPHQGHG WKDW SODLQWLIIV HQJDJH $UWKXU $QGHUVRQ WR
)GWK&LU*X\sGLVVHQWLQJ,Q SURGXFH D UHSRUW MXVWLI\LQJ SODLQWLIIVj LQWHUSUHWDWLRQ RI WKH
VKRUWHYDOXDWLQJWKHFRVWVDQGEHQHILWVRIJROGHQSDUDFKXWHV JROGHQSDUDFKXWHVWRGHIHQGDJDLQVWDSRVVLEOHFKDOOHQJHE\
LV TXLQWHVVHQWLDOO\ D MRE IRU FRUSRUDWH ERDUGV DQG QRW IRU 3&67KHDXGLWFRQILUPHGWKDWWKHHPSOR\PHQWDJUHHPHQWV
IHGHUDOFRXUWV ZHUHmZHOOZLWKLQFRPSHWLWLYHSUDFWLFHl7KHFRPSHQVDWLRQ
FRPPLWWHH KHDUG WKH UHSRUW RQ )HEUXDU\  EXW WRRN QR
,Q'HODZDUHZKRVHODZWKHSDUWLHVDJUHHGZRXOGJRYHUQ DFWLRQ7KHQ$UFDGLDQjVFKDLUPDQUHIXVHGWRKHDUDUHSRUWWR
GLVSXWHV XQGHUWKLVFRQWUDFWDSODLQWLIIPXVWVKRZWKDWWKH WKHIXOOERDUGVWDWLQJWKDWLWZDVSDUWRI3&6jVGXHGLOLJHQFH
PDMRULW\RIWKHERDUGDFWHGLQDPDQQHUWKDWmULVH>V@WRWKH DQGmZKDWHYHULWFRVWVLWFRVWVl
OHYHORIJURVVQHJOLJHQFHlEHIRUHDFRXUWPD\VHFRQGJXHVVLWV
EXVLQHVVMXGJPHQW0RXQW0RULDK&HPHWHU\H[UHO'XQ 7ZR GD\V EHIRUH WKH 0DUFK   FORVLQJ .HVVHU
%UDGVWUHHW &RUS Y 0RULW] &LY $ 1R   :/ GHPDQGHGWKDW3&6DQG3&61LWURJHQH[SUHVVO\DVVXPHWKH
DW
'HO&K$SULODIIjG$G JROGHQSDUDFKXWHVHYHUDQFHDJUHHPHQWVVLJQHGE\SODLQWLIIV
'HO3&6DUJXHVWKDWWKH$UFDGLDQERDUGZDVPLVOHG 3&6 6HQLRU 9LFH3UHVLGHQW DQG *HQHUDO &RXQVHO sRKQ
E\LQFRPSOHWHVOLGHVDQGSUHVHQWDWLRQVPDGHWRLWDERXWWKH +DPSWRQ UHIXVHG VD\LQJ 3&6 ZDV QRW WKH VXFFHVVRU WR
JROGHQSDUDFKXWHVDQGVWDWHVWKDWWKHERDUGGLGQRWNQRZWKH $UFDGLDQjV EXVLQHVV RU DVVHWV  .HVVHU WKUHDWHQHG WR GHOD\
WRWDO SRVVLEOH FRVW RI WKH JROGHQ SDUDFKXWHV DW WKH WLPH LW FORVLQJ RQ 0DUFK  FDXVLQJ +DPSWRQ WR KDYH %DUU\
DSSURYHGWKHP$VHYLGHQFHRIQHJOHFWRIWKHERDUGjVGXW\RI +XPSKUH\V3&6jV6HQLRU9LFH3UHVLGHQWIRU)LQDQFHVLJQ
FDUH3&6SRLQWVWRWKHVWDWHPHQWVE\$UFDGLDQjVFKDLUPDQ WKHDVVXPSWLRQDJUHHPHQWRQEHKDOIRI3&6WRDYRLGGHOD\LQJ
DERXWWKHSDUDFKXWHVWKDWmZKDWHYHUWKH\FRVWWKH\FRVWlDQG FORVLQJ DQG LQFXUULQJ GLIILFXOWLHV ZLWK PHUJHU ILQDQFLQJ
WKDW LW ZRXOG EH 3&6jV UHVSRQVLELOLW\ WR SD\ WKH VHYHUDQFH +DPSWRQ KLPVHOI VLJQHG RQ EHKDOI RI 3&6 1LWURJHQ DV LWV
SDFNDJHVDQ\ZD\%XWHYHQLIGHHPHGLQFULPLQDWLQJWKHVH 6HFUHWDU\
UHPDUNVGRQRWVKRZJURVVQHJOLJHQFHE\DPDMRULW\RIWKH
ERDUG%RDUGPHPEHUVKDGDUHDVRQDEOHDPRXQWRIDFFXUDWH 3ULRUWRFORVLQJ&DPSEHOODQG:LOOLDPVZHUHRIIHUHGMREV
LQIRUPDWLRQDERXWWKHVHYHUDQFHSDFNDJHVEHIRUHWKHPZKHQ DW3&61LWURJHQPDWHULDOO\GLIIHUHQWIURPWKHLUSUHYLRXVRQHV
WKH\ DFWHG  7KH ODFN RI D FRPSOHWHO\ DFFXUDWH WRWDO RXWOD\ ZLWK$UFDGLDQVRERWKWHUPLQDWHGDWFORVLQJIRUJRRGFDXVH
HVWLPDWHEHIRUHDSSURYDOGRHVQRWULVHWRWKHOHYHORIJURVV +DPSWRQUHOHDVHG.HVVHUIURPWKHQHZFRPSDQ\jVHPSOR\DW
QHJOLJHQFH$FFRUGLQJWRWKHGHSRVLWLRQRILQGHSHQGHQWERDUG WKHFORVLQJ7KRXJK3&6DFNQRZOHGJHGWKDWLWRZHGVRPH
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

DPRXQWVWR&DPSEHOO.HVVHUDQG:LOOLDPVLWUHIXVHGWRSD\ FRPSDQ\IRUDWLPHDIWHUWKHPHUJHU)RXUGLGQRWLQFOXGLQJ
HYHQ WKH XQGLVSXWHG SRUWLRQV RI WKHLU VHYHUDQFH SDFNDJHV WKH WKUHH SODLQWLIIV LQ WKLV FDVH  $W OHDVW RQH FRXUW KDV
ZLWKLQWKHDOORWWHGWKLUW\GD\VWKHUHE\SUHFLSLWDWLQJWKLVVXLW HPEUDFHGDVLPLODUUDWLRQDOHIRUJROGHQSDUDFKXWHVLQWKHSDVW
6HH .RHQLQJV Y sRVHSK 6FKOLW] %UHZLQJ &R  1:G
,, :LVF
7KLV FRXUW UHYLHZV D GLVWULFW FRXUWjV JUDQW RI SDUWLDO 0L[HGZLWKLWVDUJXPHQWDERXWSXEOLFSROLF\3&6DUJXHV
VXPPDU\MXGJPHQWXQGHUDGHQRYRVWDQGDUG6HH:DWKHQY DJDLQVWDSSOLFDWLRQRIWKHEXVLQHVVMXGJPHQWUXOHWRWKLVFDVH
*HQHUDO (OHF &R  )G   WK &LU  6HH %URZQ  )G DW  Q GLVFXVVLQJ WKH EXVLQHVV
5HYLHZIRUH[LVWHQFHRIDJHQXLQHLVVXHRIPDWHULDOIDFWLV MXGJPHQW UXOH  1RW RQO\ GLG WKH PDQQHU RI WKH JROGHQ
OLPLWHGWRWKHHYLGHQFHEHIRUHWKHGLVWULFWFRXUWZKHQLWUXOHG SDUDFKXWHVjDGRSWLRQYLRODWHSXEOLFSROLF\DFFRUGLQJWR3&6
6HH'LFNHUVRQY0F&OHOODQ)GWK&LU LW DOVR YLRODWHG D GXW\ RI FDUH SUHUHTXLVLWH WR DSSO\LQJ WKH
7KLVFRXUWUHYLHZVWKHWULDOFRXUWjVIDFWXDOILQGLQJV EXVLQHVVMXGJPHQWUXOH3&6UHSHDWHGO\UHIHUVWRWKH*DLOODUG
RQO\IRUFOHDUHUURU6HH7KXUPDQYFORVLQJ@ WKLV
FRQWURO 0RUH UHFHQWO\ FRPPHQWDWRUV KDYH QRWHG WKH SRWHQWLDO PRUDO $JUHHPHQWPD\EHDPHQGHGRUVXSSOHPHQWHGLQZULWLQJE\
KD]DUG HQWDLOHG E\ JROGHQ SDUDFKXWHV LQDVPXFK DV WKH\ PD\ HQFRXUDJH 3&60HUJHU6XEDQG$UFDGLDQZLWKUHVSHFWWRDQ\RIWKH
LQHIILFLHQW PDQDJHPHQW WR LQGXFH D WDNHRYHU WKDW LV OXFUDWLYH IRU GHSDUWLQJ
WHUPVFRQWDLQHGLQWKLV$JUHHPHQWl8QGHUWKHIDFWVRI
PDQDJHUV 7KH JROGHQ SDUDFKXWHV KHUH ZHUH DGRSWHG DIWHU DSSURYDO RI WKH
PHUJHU VR QHLWKHU RI WKHVH REMHFWLRQV FDQ EH PDGH DJDLQVW WKHP
WKLVFDVHZHKROGWKHDVVXPSWLRQDJUHHPHQWILWVZLWKLQWKLV
0RUHRYHU WKH\ UHTXLUHG WZR WULJJHULQJ HYHQWV DV WHUPLQDWLRQ RU D UROH
GHVFULSWLRQLVQRWDPRGLILFDWLRQWRDSUHH[LVWLQJFRQWUDFW
UHGXFWLRQ KDG WR DFFRPSDQ\ D FKDQJH LQ FRQWURO EHIRUH WKH JROGHQ DQG LV WKXV YDOLG ZLWKRXW DQ\ FRQVLGHUDWLRQ EH\RQG WKDW
SDUDFKXWHV FRXOG EH GHPDQGHG 7KXV DFWLYDWLRQ RI WKH SDUDFKXWHV ZDV LQKHUHQWLQWKHPHUJHULWVHOI
ZLWKLQ 3&6jV FRQWURO
 &DPSEHOOHWDO 1RV 1RV &DPSEHOOHWDO 
Y3RWDVK&RUS Y3RWDVK&RUS

3ODLQWLIIVDUJXHWKDWDGGLWLRQDOFRQVLGHUDWLRQH[LVWVDQ\ZD\ ,9
LQWKHIRUPRIVHWWOLQJDERQDILGHGLVSXWHDYRLGLQJGHOD\LQ
WKH PHUJHU DQG DYHUWLQJ WKH FRVW WR 3&6 RI DXWRPDWLFDOO\ 3&6QH[WDUJXHVWKDWWKHJROGHQSDUDFKXWHVYLRODWHSXEOLF
WULJJHULQJ WKH JROGHQ SDUDFKXWHV RI DOO QLQH $UFDGLDQ SROLF\ DQG WKHUHIRUH WKDW WKH DVVXPSWLRQ DJUHHPHQW
H[HFXWLYHV XSRQ IDLOXUH WR JHW D VLJQHG DVVXPSWLRQ SURPLVLQJWKHPLVYRLG 3&6DGYDQFHVWKLVDUJXPHQWHYHQ
DJUHHPHQW  0RUHRYHU $UFDGLDQ FODLPV LW ZLOO KDYH WKRXJKLWRIIHUVJROGHQSDUDFKXWHVWRLWVRZQWRSPDQDJHUV
GHWULPHQWDOO\ UHOLHG RQ WKH YDOLGLW\ RI WKH DVVXPSWLRQ +\SRFULV\DVLGH3&6FLWHVQRFLUFXLWFDVHODZVXSSRUWLQJLWV
DJUHHPHQWLQFORVLQJWKHPHUJHULIWKHDVVXPSWLRQDJUHHPHQW SURSRVLWLRQ  $W PRVW WKLV FRXUW KDV IURZQHG RQ JROGHQ
LV YRLGHG DIWHU WKH IDFW IRU ODFN RI FRQVLGHUDWLRQ  3&6 SDUDFKXWHV LQ SDVW GLFWD EXW ZH KDYH QHYHU KHOG WKDW VXFK
UHVSRQGV WKDW LW UHFHLYHG QR EHQHILW EHFDXVH DSSHOOHHV VHYHUDQFHSDFNDJHVDUHSHUVHXQODZIXO6HH%URZQY)HUUR
IRUHERUH D QRQH[LVWHQW ULJKW DQG WKHUHIRUH VXIIHUHG QR &RUS  )G DW   1RU GRHV 3&6 SURYLGH PXFK
GHWULPHQW  )XUWKHUPRUH DUJXHV 3&6 VLQFH LW ZDV QRW WKH UHDVRQ WR HTXDWH WKLV W\SH RI H[HFXWLYH FRPSHQVDWLRQ ZLWK
VXFFHVVRU WKHUH ZDV QR ERQD ILGH GLVSXWH EHWZHHQ LW DQG FRQWUDFWVSURKLELWHGE\SXEOLFSROLF\VXFKDVRQHVWRSHUIRUP
$UFDGLDQDQGWKHDEVHQFHRILWVVLJQDWXUHRQWKHDVVXPSWLRQ LOOHJDO DFWV  3&6 FLWHV D &RQJUHVVLRQDO FRPPLWWHH UHSRUW
DJUHHPHQWZRXOGQRWKDYHHQWLWOHGSODLQWLIIVWRGHSOR\WKHLU VD\LQJ WKDW JROGHQ SDUDFKXWHV VKRXOG EH GLVFRXUDJHG DQG
SDUDFKXWHV,WLVSRVVLEOHWKDW3&6ZDVDQLQGLUHFWVXFFHVVRU QRWHVWKDWWKHUHLVDKHDY\H[FLVHWD[RQSDUDFKXWHVRYHUD
DVWKHVROHRZQHURIWKH3&61LWURJHQVXEVLGLDU\DQGWKXV FHUWDLQ YDOXH H[FHHGHG KHUH EXW DV 3ODLQWLIIV SRLQW RXW
WKH FRQVLGHUDWLRQ DGPLWWHGO\ VXIILFLHQW IRU 3&6 1LWURJHQ &RQJUHVVWD[HGJROGHQSDUDFKXWHVLWGLGQRWSURKLELWWKHP
DSSOLHV HTXDOO\ WR 3&6  :H GHFOLQH WR DGGUHVV WKHVH 3&6 IXUWKHU DUJXHV WKDW WKHVH SDUWLFXODU JROGHQ SDUDFKXWHV
DGGLWLRQDOLVVXHVKRZHYHUEHFDXVHZKHWKHURUQRW3&6ZDV YLRODWHSXEOLFSROLF\EHFDXVHWKH\DUHH[FHVVLYHDQGKDYHD
REOLJDWHGWRVLJQWKHDVVXPSWLRQDJUHHPHQWE\WKHWHUPVRI JURVVXS IHDWXUH WR FRPSHQVDWH WKH UHFLSLHQW IRU DQ\ WD[
WKH HPSOR\PHQW DJUHHPHQW EHWZHHQ $UFDGLDQ DQG WKH SHQDOW\7KHVHIHDWXUHVGRQRWPDNHWKHJROGHQSDUDFKXWHV
SODLQWLIIV LH ZKHWKHU RU QRW WKH ODFN RI 3&6jV VLJQDWXUH YLRODWLYHRISXEOLFSROLF\DQGSDUDFKXWHVZLWKVXFKIHDWXUHV
ZRXOGKDYHWULJJHUHGWKHSODLQWLIIVjSDUDFKXWHV3&6HOHFWHG KDYH EHHQ XSKHOG  6HH 7DWH  /\OH 3/& Y 6WDOH\
WRVLJQLWDQGLWVVLJQDWXUHRQWKHDVVXPSWLRQDJUHHPHQWELQGV &RQWLQHQWDO,QF&LY$1R:/DW

LW
$QRWKHU VRXUFH RI FRQVLGHUDWLRQ XSRQ ZKLFK WKH GLVWULFW 
FRXUWPD\KDYHUHOLHGLVWKHH[HFXWLYHVjVWDWXVDVWKLUGSDUW\ 7KHUH LV D ULFK DOEHLW VRPHZKDW GDWHG VHFRQGDU\ OLWHUDWXUH

EHQHILFLDULHV XQGHU WKH DVVXPSWLRQ DJUHHPHQW  $V DQ GLVFXVVLQJ WKH SURV DQG FRQV RI JROGHQ SDUDFKXWHV :KDWHYHU HOVH PLJKW
EH JOHDQHG IURP WKLV PDWHULDO JROGHQ SDUDFKXWHV DUH QRW XQLIRUPO\
DJUHHPHQW VLJQHG E\ 3&6 3&6 1LWURJHQ DQG $UFDGLDQ FRQGHPQHG DV RIIHQVLYH WR SXEOLF SROLF\ 6HH HJ .HQQHWK sRKQVRQ
XQGHUZKLFK3&6DVVXPHVVRPHREOLJDWLRQVEHORQJLQJWRLWV 1RWH *ROGHQ 3DUDFKXWHV DQG WKH %XVLQHVV sXGJPHQW 5XOH 7RZDUG D
VXEVLGLDU\ WKH H[HFXWLYHV SXUSRUW WR KDYH VWDQGLQJ DV 3URSHU 6WDQGDUG RI 5HYLHZ