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n:DOWHU+5LFH'LVWULFWsXGJH &RQFOXVLRQ $UJXHG0DUFK )RUWKHIRUHJRLQJUHDVRQVZHDIILUPWKHMXGJPHQWRIWKH 'HFLGHGDQG)LOHGsXQH GLVWULFWFRXUWLQDOOUHVSHFWV %HIRUH&2/(DQG*,/0$1&LUFXLWsXGJHV$/'5,&+ 'LVWULFWsXGJH 7KH +RQRUDEOH $QQ $OGULFK 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ :DWNLQV 6RQ3HW 1R 1R :DWNLQV 6RQ3HW 6XSSOLHVY7KH,DPV&R 6XSSOLHVY7KH,DPV&R BBBBBBBBBBBBBBBBB EHIRUH H[SLUDWLRQ RI WKH FRQWUDFW 7KH FRQWUDFW EHWZHHQ :DWNLQVDQG,DPVRQWKHRWKHUKDQGZDVDFRQWUDFWIRUD &2816(/ IL[HGGXUDWLRQWKDWWHUPLQDWHGZLWKRXWDFWLRQRIHLWKHUSDUW\ )RUWKHIRUHJRLQJUHDVRQVZHKROGWKDWWKHGLVWULFWFRXUWGLG $5*8(' 6WHSKHQ ' &ROEHUW %527+(5721 QRWHUULQJUDQWLQJVXPPDU\MXGJPHQWRQ:DWNLQVjVFODLPIRU &2/%(57+LJKODQG9LOODJH7H[DVIRU$SSHOODQW'RQDOG EUHDFKRIWKHGXW\RIJRRGIDLWK sHIIUH\,UHODQG)$58.,*,//,$0 ,5(/$1''D\WRQ 2KLR IRU $SSHOOHHV 21 %5,() 6WHSKHQ ' &ROEHUW ):DWNLQVjV&ODLP8QGHUWKH&OD\WRQ$FW :LOOLDP s %URWKHUWRQ %527+(5721 &2/%(57 +LJKODQG 9LOODJH 7H[DV IRU $SSHOODQW 'RQDOG sHIIUH\ 7KHGLVWULFWFRXUWJUDQWHGVXPPDU\MXGJPHQWLQIDYRURI ,UHODQG /LVD 0 3DULOR 0DU\ / :LVHPDQ )$58., ,DPVRQ:DWNLQVjVFODLPWKDW,DPVYLRODWHGRIWKH&OD\WRQ *,//,$0 ,5(/$1''D\WRQ2KLRIRU$SSHOOHHV $FW86&:HDIILUP BBBBBBBBBBBBBBBBB $VVXPLQJDUJXHQGRWKDW,DPVYLRODWHGWKH&OD\WRQ$FWE\ RIIHULQJ:DWNLQVDSULFHGLVFRXQWLQUHWXUQIRU:DWNLQVjV 23,1,21 DJUHHPHQWWRVHOO,DPVSURGXFWVH[FOXVLYHO\:DWNLQVjVFODLP BBBBBBBBBBBBBBBBB PXVW IDLO m7KH 6L[WK &LUFXLW LW LV IDLU WR VD\ KDV EHHQ UHDVRQDEO\DJJUHVVLYHLQXVLQJWKHDQWLWUXVWLQMXU\GRFWULQHWR $/'5,&+ 'LVWULFW sXGJH 7KLV FDVH DURVH RXW RI WKH EDUUHFRYHU\ZKHUHWKHDVVHUWHGLQMXU\DOWKRXJKOLQNHGWRDQ WHUPLQDWLRQRIDORQJVWDQGLQJDJUHHPHQWEHWZHHQ:DWNLQV DOOHJHG YLRODWLRQ RI WKH DQWLWUXVW ODZV IORZV GLUHFWO\ IURP WKH SODLQWLII EHORZ DQG ,DPV WKH GHIHQGDQW XQGHU ZKLFK FRQGXFWWKDWLVQRWLWVHOIDQDQWLWUXVWYLRODWLRQl9DOOH\3URGV :DWNLQV GLVWULEXWHG ,DPVj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jV FODLP XQGHU WKH 0LFKLJDQ )UDQFKLVH ,QYHVWPHQW VXIIHULQJDVDUHVXOWRIWKHDUUDQJHPHQWZKHUHE\,DPVJUDQWV /DZ SXUVXDQW WR )HG 5 &LY 3 E DQG JUDQWHG :ROYHUWRQH[FOXVLYHWHUULWRULHVDQGDGLVFRXQWLQUHWXUQIRUDQ VXPPDU\MXGJPHQWRQLWVFODLPVXQGHUWKH&OD\WRQ$FWWKH DJUHHPHQWWRVHOO,DPVSURGXFWVH[FOXVLYHO\ZHDJUHHZLWK 5RELQVRQ3DWPDQ $FW DQG WKH 6KHUPDQ $FW DQG RQ LWV 3URIHVVRU$UHHGDj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jVVHUYLFHVLQWKHDUHDKHSURSRVHGWRORFDWHKLV GHDOHUVKLS2QWKHVHIDFWVWKHFRXUWKHOGWKDWWKHUHZDVQR ,DPV LV LQ WKH EXVLQHVV RI PDQXIDFWXULQJ DQG VHOOLQJ SHW ELQGLQJFRQWUDFW,GDW7KHUXOHRI*HQHUDO0RWRUV IRRGV )RU PDQ\ \HDUV :DWNLQV ZDV D QRQH[FOXVLYH DSSOLHV KHUH EHFDXVH WKH FRQWUDFW PDNHV LW FOHDU WKDW ,DPV GLVWULEXWRURI,DPVSURGXFWVLQ0LFKLJDQ,QRU UHWDLQHGGLVFUHWLRQWRUHIXVHWRUHQHZLIWKHWHUPVSURSRVHG ,DPV EHJDQ WR UHTXLUH :DWNLQV DV ZHOO DV LWV RWKHU ZHUHQRWmPXWXDOO\DJUHHDEOHl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sXO\ 1HJRWLDWLRQ&ROXP/5HY:KHUHDV DQG DQQXDOO\ WKHUHDIWHU WKURXJK 1HYHUWKHOHVV KHUH WKH SODLQWLII FDQ VKRZ QR SURPLVH WR PDNH D GHDO RQ ,DPVQRWLILHG:DWNLQVLQ6HSWHPEHUWKDWLWZRXOGQRW ZKLFKLWUHDVRQDEO\FRXOGKDYHUHOLHGWKHFRXUWZLOOQRWDOORZ UHQHZLWVGLVWULEXWRUVKLSFRQWUDFWDQGWKHFRQWUDFWH[SLUHGLQ UHFRYHU\6HHLGDWQFLWLQJ 5HSURV\VWHP%9Y DFFRUGDQFH ZLWK LWV WHUPV RQ sDQXDU\ ,DPV 6&0&RUS)GG&LU VXEVHTXHQWO\HQWHUHGLQWRDQH[FOXVLYHGLVWULEXWLRQFRQWUDFWLQ 0LFKLJDQZLWK:ROYHUWRQ :DWNLQVFLWHVVHYHUDOFDVHVIRUWKHSURSRVLWLRQWKDW2KLR FRPPRQ ODZ mGRHV QRW SHUPLW D SDUW\ WR WHUPLQDWH >D 7KH FRQWUDFW RI sDQXDU\ EHWZHHQ ,DPV DQG FRQWUDFW@LQµEDGIDLWKjl%UDW%XWWKHVHFDVHVLQYROYH :DWNLQVFRQWDLQVWKHIROORZLQJSURYLVLRQV XQLODWHUDOWHUPLQDWLRQE\RQHSDUW\UDWKHUWKDQH[SLUDWLRQRI WKH FRQWUDFW LQ DFFRUGDQFH ZLWK LWV H[SOLFLW WHUPV (J 1RWZLWKVWDQGLQJ WKH DSSRLQWPHQW KHUHLQ WKH &RPSDQ\ 5DQGROSKY1HZ(QJODQG0XW/LIH,QV&R)G >,DPV@UHVHUYHVWKHULJKWIRULWVHOIWRVHOO3URGXFWVZLWKLQ WK&LUFODXVHSURYLGHGIRUWHUPLQDWLRQEHIRUH HQGRIFRQWUDFWE\HLWKHUSDUW\RQVL[W\GD\VjQRWLFH5HHVY %DQN%OGJ (TXLS&RUS)GWK&LU QRW EHIRUH XV (QHUWHFK (OHF Y 0DKRQLQJ &RXQW\ &RPPjUV )G WHUPLQDWLRQ RI HPSOR\PHQW FRQWUDFW ZLWK mQR IL[HG WK &LU GXUDWLRQl=LPPHUY:HOOV0JPW&RUS)6XSS 6'1< WHUPLQDWLRQ RI HPSOR\PHQW FRQWUDFW :ROYHUWRQ ZDV D GHIHQGDQW EHORZ :H JUDQWHG D PRWLRQ GLVPLVVLQJ ,DPVjV DSSHDO DV WR :ROYHUWRQ :DWNLQV 6RQ3HW 1R 1R :DWNLQV 6RQ3HW 6XSSOLHVY7KH,DPV&R 6XSSOLHVY7KH,DPV&R WKH7HUULWRU\,QDGGLWLRQWKH&RPSDQ\PD\DSSRLQWDQ\ %HFDXVH WKH FRQWUDFW EHWZHHQ :DWNLQV DQG ,DPV LV RWKHU GLVWULEXWRU WR VHOO 3URGXFWV ZLWKLQ WKH 7HUULWRU\ JRYHUQHGE\WKH8&&2KLRODZLPSRVHVDGXW\RIJRRG IDLWKLQLWVSHUIRUPDQFH2KLR5HY&RGH7KH TXHVWLRQ LV ZKHWKHU WKH UHQHZDO SURYLVLRQ LQ WKH FRQWUDFW 7KLV$JUHHPHQWVKDOOEHHIIHFWLYHRQ)HEUXDU\ LPSOLHVDGXW\WRQHJRWLDWHIRUDUHQHZDOLQJRRGIDLWKLQOLJKW DQGVKDOODXWRPDWLFDOO\H[SLUHZLWKRXWDQ\IXUWKHUDFWLRQ RIWKHFRQWUDFWjVH[SLUDWLRQSURYLVLRQ)HZFDVHVGLVFXVVWKH E\ HLWKHU SDUW\ UHTXLUHG RQ sDQXDU\ XQOHVV GXW\WRQHJRWLDWHWKHH[WHQVLRQRIDIUDQFKLVHLQJRRGIDLWK HDUOLHU WHUPLQDWHG DV VHW IRUWK LQ 6HFWLRQ RU RU ,Q9\OHQH(QWHUV,QFY1DXJOHV,QF,QUH9\OHQH(QWHUV RWKHUZLVH LQ DFFRUGDQFH ZLWK WKH SURYLVLRQV RI WKLV ,QF)GWK&LUWKHIUDQFKLVHUHQHZDO $JUHHPHQW7KLV$JUHHPHQWPD\EHUHQHZHGWKHUHDIWHU FODXVHSURYLGHGWKDWWKHIUDQFKLVHHKDGWKHULJKWWRH[WHQGWKH RQ WHUPV PXWXDOO\ DJUHHDEOH WR WKH SDUWLHV RQO\ LQ D IUDQFKLVHDJUHHPHQWmRQWHUPVDQGFRQGLWLRQVWREHQHJRWLDWHG ZULWLQJVLJQHGE\WKHSDUWLHVKHUHWR ZLWKLQVDLGVL[W\GD\Vl7KXVWKHFRXUWKHOG 7KHGLVWULEXWRU>:DWNLQV@VKDOOFPDLQWDLQLQVWRFN DOWKRXJKWKHWHUPVRIWKHUHQHZDOSURYLVLRQGLGQRWJLYH DWDOOWLPHVDQLQYHQWRU\RISURGXFWVLQVXFKTXDQWLWLHVDV 9\OHQH D JXDUDQWHHG ULJKW WR UHQHZ RQ D GHWHUPLQDEOH LQWKH&RPSDQ\jVRSLQLRQDIWHUFRQVXOWDWLRQDQGUHYLHZ EDVLV WKH SURYLVLRQ REOLJDWHG 1DXJOHV WR QHJRWLDWH LQ ZLWK WKH 'LVWULEXWRU HLWKHU GLUHFWO\ RU WKURXJK WKH JRRG IDLWK FRQFHUQLQJ WKH WHUPV DQG FRQGLWLRQV RI D &RPSDQ\j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l SDUWLHV ,G DW Q ,Q WKH LQVWDQW FDVH WKH SDUWLHV GR QRW VR DJUHH0RUHRYHULQ$OOPDQGLGDWDQG,PDJLQJ)LQ )RUWKHIRUHJRLQJUHDVRQVZHILQGWKDW:DWNLQVjVUHOLDQFH 6HUYV VXSUD DW WKH DOOHJHGO\ IUDXGXOHQW RQ ,DPVjV UHSUHVHQWDWLRQV ZDV XQUHDVRQDEOH DV D PDWWHU RI PLVUHSUHVHQWDWLRQV ZHUH PLVUHSUHVHQWDWLRQV RI IDFW WKDW ODZ DQG WKHUHIRUH WKDW WKH GLVWULFW FRXUW SURSHUO\ JUDQWHG LQGXFHGWKHSODLQWLIIWRHQWHUDFRQWUDFW,QWKHLQVWDQWFDVHRQ VXPPDU\ MXGJPHQW RQ :DWNLQVjV FODLPV IRU IUDXG DQG WKH RWKHU KDQG WKH IUDXG DOOHJHG LV SURPLVVRU\ IUDXG SURPLVVRU\HVWRSSHO :DWNLQV DOOHJHV WKDW ,DPV PDGH SURPLVHV RI IXWXUH SHUIRUPDQFHWKDWLWGLGQRWLQWHQGWRNHHS7KHGLVWLQFWLRQ ':DWNLQVjV&ODLP8QGHUWKH0),/ EHWZHHQVXFKDFODLPDQGDFODLPIRUEUHDFKRIFRQWUDFWLVVR VOLJKWWKDWWKHSDUWLHVjDJUHHPHQWWKDW2KLRODZZRXOGJRYHUQ 7KH GLVWULFW FRXUW GLVPLVVHG :DWNLQVjV FODLP XQGHU WKH WKHLUDJUHHPHQWLHWKHLUFRQWUDFWLVDVXIILFLHQWUHDVRQWR 0LFKLJDQ )UDQFKLVH ,QYHVWPHQW /DZ 0LFK &RPS /DZV GLVSODFH WKH ODZ RI 0LFKLJDQ DQG DSSO\ 2KLR ODZ WR HWVHTIRUIDLOXUHWRVWDWHDFODLPXSRQZKLFK :DWNLQVjVIUDXGFODLP7KHUHIRUHZHFRQFOXGHWKDWWKH&RXUW UHOLHI FDQ EH JUDQWHG :H UHYLHZ GLVPLVVDOV IRU IDLOXUH WR GLGQRWHUUE\DSSO\LQJ2KLRODZWRWKHFODLP VWDWHDFODLPGHQRYR*DRYs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jVDOOHJDWLRQV LQWKHLQGXFHPHQWLVQRWEDUUHGE\WKHSDUROHYLGHQFHUXOH WKDW,DPVPDGHSDUROUHSUHVHQWDWLRQVDIWHUH[HFXWLRQRIWKH &RDO5HVRXUFHV,QFY*XOI :,QGXV,QF)G ZULWWHQ FRQWUDFW GHSHQGV RQ WKH DSSOLFDWLRQ RI 2KLR 5HY QWK&LUDFFRUG*DOPLVKVXSUDDW &RGH%D8&&SURYLVLRQLQGHURJDWLRQRIWKH 1(GDW%XWmIUDXGLQWKHLQGXFHPHQWlLQWKHVHQVH FRPPRQODZWKDWJRYHUQVRUDOPRGLILFDWLRQRUUHFLVVLRQRI LQWHQGHG LQ &RDO 5HVRXUFHV DQG *DOPLVK LV D IUDXGXOHQW ZULWWHQFRPPHUFLDOFRQWUDFWV PLVVWDWHPHQWRIIDFWWKDWLQGXFHVDSDUW\WRHQWHUDFRQWUDFW QRWDIUDXGXOHQWSURPLVHRIIXWXUHSHUIRUPDQFHWKDWLVZLWKLQ :KLOHZHKDYHRQRFFDVLRQGLVFXVVHGWKHFODVVLILFDWLRQRI WKHVFRSHRIWKHVXEMHFWPDWWHURIWKHZULWWHQFRQWUDFWEXWWKDW DGLVWULEXWRUVKLSDJUHHPHQWDVDVDOHVFRQWUDFWZKHQGHFLGLQJ ZDVQRWLQFOXGHGLQLW FDVHV QRW JRYHUQHG E\ 2KLR ODZ VHH HJ $% 3URGV Y 'DPSQH\ &R ,QF 1R 86 $SS /(;,6 >7@KHSDUROHYLGHQFHUXOHGRHVDSSO\WRSURPLVVRU\ DW WK &LU sXO KROGLQJ WKDW XQGHU IUDXG LI WKH HYLGHQFH LQ TXHVWLRQ LV RIIHUHG WR VKRZ D 0LFKLJDQODZGLVWULEXWRUVKLSDJUHHPHQWZLWKRXWDTXDQWLW\ SURPLVH ZKLFK FRQWUDGLFWV DQ LQWHJUDWHG ZULWWHQ WHUPZDVQRWDFRQWUDFWIRUWKHVDOHRIJRRGV+HUPDQ%URV DJUHHPHQW 8QOHVV WKH IDOVH SURPLVH LV HLWKHU 6DOHV&RUSY+LOOj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s$ DW DIIjG )G WK &LU :DWNLQV 6RQ3HW 1R 1R :DWNLQV 6RQ3HW 6XSSOLHVY7KH,DPV&R 6XSSOLHVY7KH,DPV&R IURPWKHWH[WRIWKHZULWWHQDJUHHPHQWEHWZHHQ:DWNLQVDQG DJUHHPHQW 7KH UXOH LV QRW D UXOH RI HYLGHQFH EXW RI ,DPVWKDWWKHLUUHODWLRQVKLSZDVSULPDULO\DERXWWKHVDOHRISHW VXEVWDQWLYHFRQWUDFWODZ,QRWKHUZRUGVWKHSDUROHYLGHQFH IRRGE\,DPVWR:DWNLQVDQG:DWNLQVj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jV&ODLPV2I)UDXGDQG3URPLVVRU\(VWRSSHO IUDXG +DUULV Y (TXLORQ (QWHUV //& )6XSSG6'2KLRSURPLVVRU\HVWRSSHO 7KH GLVWULFW FRXUW JUDQWHG ,DPVjV PRWLRQ IRU VXPPDU\ MXGJPHQW RQ :DWNLQVjV FODLPV RI IUDXG DQG SURPLVVRU\ :H ILQG WKDW WKH ZULWWHQ DJUHHPHQW DW LVVXH KHUH ZDV D HVWRSSHO:HUHYLHZVXPPDU\MXGJPHQWVGHQRYR3HFNY FRPSOHWHLQWHJUDWLRQ8QGHU2KLRODZWKHFRXUWGHWHUPLQHV %ULGJHSRUW0DFKV,QF)GWK&LU ZKHWKHU D VDOHV FRQWUDFW LV FRPSOHWHO\ LQWHJUDWHG E\ 6XPPDU\MXGJPHQWLVSURSHUZKHQWKHUHLVQRJHQXLQHLVVXH FRQVLGHULQJWKHmIRXUFRUQHUVRIWKHGRFXPHQWlDQGHYLGHQFH DV WR DQ\ PDWHULDO IDFW DQG WKH PRYLQJ SDUW\ LV HQWLWOHG WR H[WULQVLFWRWKHZULWLQJ&LQFLQQDWL%HOO,QFY$QL[WHU%URV MXGJPHQWDVDPDWWHURIODZ,G ,QF )6XSSG 6' 2KLR FLWLQJ &DUPDUJR &DGLOODF &R Y *DUILHOG (QWHUV ,QF 2KLR 5HDVRQDEOH UHOLDQFH LV DQ HOHPHQW RI ERWK SURPLVVRU\ $SSG1(G+HUHRI HVWRSSHODQGIUDXG6HH1LOYDUY2VERUQ2KLR$SSG WKHDJUHHPHQWTXRWHGDERYHSURYLGHVVWURQJHYLGHQFHWKDW 1(GSURPLVVRU\HVWRSSHO'DXS WKHSDUWLHVLQWHQGHGWKHLUZULWWHQDJUHHPHQWWREHDFRPSOHWH Y 7RZHU &HOOXODU ,QF 2KLR $SSG LQWHJUDWLRQ:DWNLQVGRHVQRWSUHVHQWH[WULQVLFHYLGHQFHWR 1(GIUDXG2QWKHIDFWVRIWKLVFDVHZH VKRZRWKHUZLVH,QVWHDGLWPHUHO\DUJXHVWKDWWKHUHQHZDO ILQG WKDW :DWNLQVjV UHOLDQFH RQ ,DPVjV UHSUHVHQWDWLRQV ZDV SURYLVLRQLQWKHZULWWHQDJUHHPHQWGRHVQRWFRQWDLQWKHWHUPV XQUHDVRQDEOHDVDPDWWHURIODZ7KHUHIRUHZHILQGQRHUURU RI WKH SURSRVHG UHQHZDO DQG WKDW WKHUHIRUH WKH FRQWUDFW LV LQWKHGLVWULFWFRXUWjVGHFLVLRQWRJUDQWVXPPDU\MXGJPHQWRQ RQO\DSDUWLDOLQWHJUDWLRQoILQDOEXWQRWFRPSOHWH WKHWZRFODLPV :DWNLQVjVDUJXPHQWLVZLWKRXWPHULW,WLVFOHDUIURPWKH ,Q WKLV FDVH WKH UHDVRQDEOHQHVV RI :DWNLQVjV UHOLDQFH WH[WRIWKHUHQHZDOFODXVHWKDWWKHSDUWLHVPHDQWWRPDNHD GHSHQGVXSRQWKHHIIHFWRIWKHLQWHJUDWLRQFODXVH:KHQD ILQDODJUHHPHQWDQGWROHDYHWKHWHUPVRIDIXWXUHDJUHHPHQW ZULWWHQ FRQWUDFW LV WKH ILQDO DQG FRPSOHWH VWDWHPHQW RI WKH IRUODWHUQHJRWLDWLRQ7KLVFRQFOXVLRQLVPDGHHYHQFOHDUHU SDUWLHVjDJUHHPHQWZKHQWKDWLVLWLVDFRPSOHWHLQWHJUDWLRQ ZKHQRQHFRQVLGHUVWKHLQWHJUDWLRQFODXVH$VZHQRWHLQRXU WKH SDURO HYLGHQFH UXOH SURKLELWV WKH SDUWLHV IURP GLVFXVVLRQRI:DWNLQVjVFODLPIRUEUHDFKRIWKHGXW\RIJRRG LQWURGXFLQJ H[WULQVLF HYLGHQFH RI WKH WHUPV RI WKHLU 7KHUH DUH H[FHSWLRQV WR WKH SDURO HYLGHQFH UXOH WKH UHOHYDQW H[FHSWLRQV DUH GLVFXVVHG LQIUD