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 81,7(' 67$7(6 2) $0(5,&$ ; 3ODLQWLII$SSHOOHH 1RV Y ! 1(,/ ( &$03%(// 3$8/ &$53(17(5 5,&.(< ' s21(6 'HIHQGDQWV$SSHOODQWV 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL 1Rn6DQGUD6%HFNZLWK'LVWULFWsXGJH $UJXHGDQG6XEPLWWHG1RYHPEHU 'HFLGHGDQG)LOHG)HEUXDU\ %HIRUH.(,7+%2**6DQG0225(&LUFXLWsXGJHV BBBBBBBBBBBBBBBBB &2816(/ $5*8(' 5D\PRQG )DOOHU /2(% 92//0$1 )5,('0$11 &LQFLQQDWL 2KLR 5REHUW ( 5RVHQEHUJ 5DYHQQD 2KLR IRU $SSHOODQWV :LOOLDP ( +XQW $66,67$1781,7('67$7(6$77251(<&LQFLQQDWL 2KLR IRU $SSHOOHHV 21 %5,() /XFLDQ s %HUQDUG 8QLWHG6WDWHVY 1RV &DPSEHOOHWDO 3($5621 %(51$5'&RYLQJWRQ.HQWXFN\5D\PRQG )DOOHU /2(% 92//0$1 )5,('0$11 &LQFLQQDWL 2KLR5REHUW(5RVHQEHUJ5DYHQQD2KLRIRU$SSHOODQWV :LOOLDP ( +XQW $66,67$17 81,7(' 67$7(6 $77251(<&LQFLQQDWL2KLRIRU$SSHOOHHV .(,7+ s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK 0225( s MRLQHG %2**6 s SS GHOLYHUHG D VHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJLQSDUW BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB '$021s.(,7+&LUFXLWsXGJH 'HIHQGDQWV$SSHOODQWV 1HLO ( &DPSEHOO m&DPSEHOOl 5LFNH\'sRQHVmsRQHVlDQG3DXO&DUSHQWHUm&DUSHQWHUl DSSHDOWKHLUFRQYLFWLRQVDQGVHQWHQFHVHQWHUHGRQJXLOW\SOHDV IRU XVH RI D WHOHSKRQH WR IDFLOLWDWH D QDUFRWLFV FRQVSLUDF\ &DPSEHOO UDLVHV D VLQJOH LVVXH LQ KLV DSSHDO ZKHWKHU WKH GLVWULFWFRXUWHUUHGZKHQLWKHOGWKDW&DPSEHOOGLGQRWFDUU\ KLVEXUGHQLQVKRZLQJWKDWKHZDVHQWLWOHG WR D GRZQZDUG DGMXVWPHQW SXUVXDQW WR WKH m0LWLJDWLQJ 5ROHl SURYLVLRQ RI 8QLWHG6WDWHV6HQWHQFLQJ*XLGHOLQHVm866*l% sRQHV UDLVHV WZR LVVXHV RQ DSSHDO ZKHWKHU WKH GLVWULFW FRXUWYLRODWHGKLVFRQVWLWXWLRQDOULJKWVWRGXHSURFHVVDQGD MXU\WULDOE\VHQWHQFLQJKLPWRPRQWKVLQSULVRQLQOLJKW RIWKH6XSUHPH&RXUWjVUHFHQWGHFLVLRQLQ$SSUHQGLY1HZ sHUVH\86DQGZKHWKHU&RXQW2QHRI sRQHVj LQGLFWPHQW ZKLFK FKDUJHG KLP ZLWK FRQVSLUDF\ WR GLVWULEXWH PDULMXDQD FRFDLQH DQG FUDFN FRFDLQH ZDV D GXSOLFLWRXVLQGLFWPHQWLQYLRODWLRQRIKLV6L[WK$PHQGPHQW ULJKW WR MXU\ XQDQLPLW\ &DUSHQWHU UDLVHV WZR LVVXHV RQ DSSHDO ZKHWKHU WKH GLVWULFW FRXUW HUUHG ZKHQ LW KHOG &DUSHQWHUUHVSRQVLEOHIRUWKHFRQVSLUDF\jVWRWDOGLVWULEXWLRQ RI ILIWHHQ NLORJUDPV RI FRFDLQH SXUVXDQW WR WKH m5HOHYDQW &RQGXFWlSURYLVLRQRI866*%DQGZKHWKHUWKH 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO GLVWULFWFRXUWYLRODWHGKLVFRQVWLWXWLRQDOULJKWVHVWDEOLVKHGLQ $SSUHQGLE\VHQWHQFLQJKLPWRPRQWKVLQSULVRQ )RUWKHUHDVRQVVHWIRUWKEHORZZH$)),50WKHGLVWULFW FRXUWjVRUGHUZLWKUHVSHFWWR&DPSEHOO:H9$&$7(sRQHVj PRQWKVHQWHQFHDQG5(0$1'WRWKHGLVWULFWFRXUWIRU UHVHQWHQFLQJ:HDOVR9$&$7(&DUSHQWHUjVVHQWHQFHDQG 5(0$1' WR WKH GLVWULFW FRXUW ZLWK WKH LQVWUXFWLRQ WKDW LW PDNH SDUWLFXODUL]HG ILQGLQJV RQ ZKHWKHU WKH DFWV RI &DUSHQWHUjV FRFRQVSLUDWRUV ZHUH ZLWKLQ WKH VFRSH RI KLV DJUHHPHQW WR MRLQWO\ XQGHUWDNH LQ WKH FRQVSLUDF\jV LOOHJDO DFWLYLWLHV ,)$&78$/$1'352&('85$/+,6725< )URPHDUO\WR0D\'DYRQ5RGULJXH]DQGKLV EURWKHUsRVXHRSHUDWHGDFRFDLQHGLVWULEXWLRQQHWZRUNLQWKH %XWOHU&RXQW\DUHDRI2KLR'XULQJWKHVHWKUHH \HDUVWKH 5RGULJXH] EURWKHUV SDUWLFLSDWHG LQ REWDLQLQJ DQG UHVHOOLQJ DSSUR[LPDWHO\ILIWHHQNLORJUDPVRIFRFDLQH,Q$SULO DJHQWVRIWKH'UXJ(QIRUFHPHQW$JHQF\m'($lEHJDQD GD\ DXWKRUL]HG ZLUHWDS RI 'DYRQ 5RGULJXH]jV FHOOXODU WHOHSKRQH %DVHG RQ WKHVH FRQYHUVDWLRQV '($ DJHQWV LGHQWLILHG$SSHOODQWVsRQHVDQG&DUSHQWHUDVFRUHPHPEHUVRI WKH5RGULJXH]FRFDLQHFRQVSLUDF\$SSHOODQW&DPSEHOOZDV LGHQWLILHGDVDFXVWRPHU $ IHGHUDO JUDQG MXU\ FKDUJHG DOO WKUHH $SSHOODQWV ZLWK FRQVSLUDF\WRGLVWULEXWHPDULMXDQDFRFDLQHDQGFUDFNFRFDLQH LQ YLRODWLRQ RI 86& D DQG E$ 0RUHRYHU&DPSEHOOZDVFKDUJHGZLWKWZRFRXQWVRIXVLQJD WHOHSKRQHWRIDFLOLWDWHWKHFRPPLVVLRQRIDIHORQ\LQYLRODWLRQ RI86&EsRQHVDQG&DUSHQWHUZHUHFKDUJHG ZLWKWZRDQGWKUHHWHOHSKRQHFRXQWVUHVSHFWLYHO\ $OO WKUHH $SSHOODQWV SOHG JXLOW\ WR YDULRXV FKDUJHV LQ H[FKDQJHIRUGLVPLVVDORIWKHUHPDLQLQJFKDUJHV&DPSEHOO SOHGJXLOW\WRWKHWZRWHOHSKRQHFRXQWVsRQHVSOHGJXLOW\WR WKH FRQVSLUDF\ FKDUJH DQG &DUSHQWHU SOHG JXLOW\ WR WKUHH WHOHSKRQHFRXQWV7KHGLVWULFWFRXUWVHQWHQFHG&DPSEHOOWR 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO WZHQW\IRXUPRQWKVLQSULVRQDILQHDQGDRQH\HDU LQGLFDWLRQWKDWKHKDGRWKHUZLVHZLWKGUDZQEHHQLQDFWLYHRU WHUP RI VXSHUYLVHG UHOHDVH sRQHV ZDV VHQWHQFHG WR VHJPHQWHGKLVDFWLYLWLHVIURPWKRVHRIWKHJHQHUDOFRQVSLUDF\ PRQWKV LQ SULVRQ D ILQH DQG D ILYH\HDU WHUP RI VXSHUYLVHGUHOHDVH&DUSHQWHUZDVVHQWHQFHGWRHLJKW\VHYHQ PRQWKV LQ SULVRQ D ILQH DQG D RQH\HDU WHUP RI VXSHUYLVHGUHOHDVH7KH$SSHOODQWVHDFKILOHGWLPHO\QRWLFHV RIDSSHDOV ,,$1$/<6,6 &DPSEHOOjV$SSHDO &DPSEHOODUJXHVWKDWWKHGLVWULFWFRXUWHUUHGZKHQLWUHIXVHG WR JUDQW KLP D GRZQZDUG DGMXVWPHQW SXUVXDQW WR WKH m0LWLJDWLQJ5ROHlSURYLVLRQRI866*%:KHWKHUD GHIHQGDQWLVHQWLWOHGWRDGRZQZDUGGHSDUWXUHXQGHU% GHSHQGVKHDYLO\RQIDFWXDOGHWHUPLQDWLRQVZKLFKZHUHYLHZ RQO\IRUFOHDUHUURU8QLWHG6WDWHVY6HDUDQ)G WK&LU)RUWKHUHDVRQVVWDWHGEHORZZHKROG WKDWWKHGLVWULFWFRXUWGLGQRWFRPPLWFOHDUHUURULQUHIXVLQJWR JUDQW&DPSEHOOjVUHTXHVWIRUDGRZQZDUGDGMXVWPHQWSXUVXDQW WR% )RUVHQWHQFLQJSXUSRVHVm>W@KHVDOLHQWLVVXHLVWKHUROHWKH GHIHQGDQWSOD\HGLQUHODWLRQWRWKHDFWLYLW\IRUZKLFKWKHFRXUW KHOGKLPRUKHUDFFRXQWDEOHl8QLWHG6WDWHVY6DOJDGR )GWK&LUTXRWLQJ8QLWHG6WDWHVY5RSHU )G WK &LU FHUW GHQLHG 86 'HIHQGDQWVPD\EHPLQLPDORUPLQRUSDUWLFLSDQWVLQ UHODWLRQWRWKHVFRSHRIWKHFRQVSLUDF\DVDZKROHEXWWKH\DUH QRW HQWLWOHG WR D PLWLJDWLQJ UROH UHGXFWLRQ LI WKH\ DUH KHOG DFFRXQWDEOH RQO\ IRU WKH TXDQWLWLHV RI GUXJV DWWULEXWDEOH WR WKHP 8QLWHG 6WDWHV Y :DOWRQ )G WK &LU FHUW GHQLHG 86 VHH DOVR 8QLWHG 6WDWHVY:HOFK)GWK&LU ,QWKLVFDVHWKHGLVWULFWFRXUWKHOG&DPSEHOODFFRXQWDEOH IRUDWOHDVWEXWOHVVWKDQJUDPVRIFRFDLQHZKLFK ZDVWKHmDPRXQWRIGUXJVWKDW>&DPSEHOO@DFWXDOO\SXUFKDVHG DQGGLVWULEXWHGRUXVHGlsRLQW$SSHQGL[ms$lDW 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 7KHIXOODPRXQWRIFRFDLQHLQYROYHGLQWKHFRQVSLUDF\ZDV ILIWHHQNLORJUDPV%HFDXVHWKHGLVWULFWFRXUWKHOG&DPSEHOO &21&855,1*,13$57',66(17,1*,13$57 DFFRXQWDEOHRQO\IRUWKHTXDQWLW\RIGUXJVDWWULEXWDEOHWRKLP BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB ZHKROGWKDWWKHGLVWULFWFRXUWFRUUHFWO\GHQLHGKLVUHTXHVWIRU DGRZQZDUGDGMXVWPHQWSXUVXDQWWR866*% %2**6&LUFXLWsXGJHFRQFXUULQJLQSDUWDQGGLVVHQWLQJ LQSDUW:LWKRQHH[FHSWLRQ,DJUHHZLWKDOORIWKHFRXUWjV 0RUHRYHUZHKDYHKHOGWKDWGRZQZDUGGHSDUWXUHVXQGHU H[FHOOHQWRSLQLRQLQWKLVFDVH,GRQRWDJUHHZLWKWKHFRXUWjV %DUHDYDLODEOHRQO\WRDSDUW\ZKRLVmOHVVFXOSDEOH FRQFOXVLRQDWSDJHVWKDWZHVKRXOGDGRSWDVDILUP WKDQPRVWRWKHUSDUWLFLSDQWVlDQGmVXEVWDQWLDOO\OHVVFXOSDEOH UXOHWKH6HFRQG&LUFXLWjVGHFLVLRQLQ8QLWHG6WDWHVY6WXGOH\ WKDQWKHDYHUDJHSDUWLFLSDQWl8QLWHG6WDWHVY/OR\G)G 7KDWFDVHUHTXLUHVWKDWDGLVWULFWFRXUWLQGHWHUPLQLQJGUXJ WK&LUFLWLQJ866*% TXDQWLWLHV IRU ZKLFK D GHIHQGDQW LV UHVSRQVLEOH PDNH D FPWQDQGEDFNJURXQG,QOLJKWRIRXUKROGLQJWKHGLVWULFW SDUWLFXODUL]HGILQGLQJWKDWmWKHDFWVZHUHZLWKLQWKHVFRSHRI FRXUWFRQFOXGHGWKDW WKHGHIHQGDQWjVDJUHHPHQWl,VD\WKLVQRWEHFDXVHWKHUHPD\ QRW EH VRPH FDVHV LQ ZKLFK DQ DJUHHPHQW LV VXIILFLHQWO\ :KLOH 'HIHQGDQW &DPSEHOO PD\ HVWDEOLVK WKDW KH ZDV OLPLWHGWKDWLWZRXOGEHDSSURSULDWHWROLPLWWKHTXDQWLW\IRU OHVV FXOSDEOH WKDQ 'DYRQ DQG s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mDJUHHPHQWlLVVLPSO\WRKHOSDQGSDUWLFLSDWHLQWKHODUJHU s$DWHPSKDVLVDGGHG1RWKLQJSUHVHQWHGWRXVRQ RUJDQL]DWLRQZKRVHVFRSHPD\EHODUJHEXWIRUHVHHDEOH,W DSSHDOGHPRQVWUDWHVWKDWWKHGLVWULFWFRXUWFOHDUO\HUUHGZKHQ LVSRVVLEOHRIFRXUVHWKDWDSHUVRQFRXOGVWDWHH[SOLFLWO\m, LWPDGHWKHILQGLQJWKDW&DPSEHOOZDVQRWmOHVVFXOSDEOHWKDQ DJUHHWRFDUU\WKLVSDUWLFXODUORDGRIPDULMXDQDEXWULJKWDIWHU PRVWRWKHUSDUWLFLSDQWVl7KHUHIRUH&DPSEHOOIDLOVWKHILUVW WKDW,DPJRLQJEDFNWR&KLFDJR/DZ6FKRRODQGZLOOQHYHU SDUWRIWKHWZRSURQJWHVWWKDWZHVHWRXWLQ/OR\GDQGZHDUH GHDOZLWK\RXDJDLQl+RZHYHUVXFKDQRFFXUUHQFHZRXOG UHTXLUHG WR DIILUP WKH GLVWULFW FRXUWjV GHFLVLRQ QRW WR JUDQW GHILQLWHO\EHWKHH[FHSWLRQQRWWKHUXOH,IWKHGHIHQGDQWKDV &DPSEHOODGRZQZDUGDGMXVWPHQWSXUVXDQWWR% DSODXVLEOHFDVHWKDWWKHDJUHHPHQWZDVVXIILFLHQWO\OLPLWHG LWPD\EHWKDWWKHDSSOLFDWLRQRIVXFKDUXOHZRXOGPDNHVHQVH sRQHVj$SSHDO LQWKDWLQVWDQFH+RZHYHU,GRQRWWKLQNWKDWDJHQHUDOUXOH LVZLVH&DUSHQWHUjVDUJXPHQWLVSDUWLFXODUO\ZHDNLQWKDWKLV $ $SSUHQGL RQO\GLIIHUHQWLDWLRQIURPWKHWRWDODPRXQWGLVWULEXWHGE\WKH FRQVSLUDF\ZDVVLPSO\WKDWKHZDVKHDUGRQDZLUHWDSRQRQO\ sRQHV ILUVW DUJXHV WKDW LQ OLJKW RI WKH 6XSUHPH &RXUWjV WKUHH RI WKH WKLUW\ GD\V RI WKDW ZLUHWDS 7KHUH ZDV QR GHFLVLRQLQ$SSUHQGL86WKHGLVWULFWFRXUWYLRODWHG KLV FRQVWLWXWLRQDO ULJKWV WR GXH SURFHVV DQG D MXU\ WULDO E\ 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO VHQWHQFLQJ KLP WR PRQWKV LQ SULVRQ :H UHYLHZ WKHSUHVFULEHGVWDWXWRU\PD[LPXPIRU&DUSHQWHUFRQYLFWLRQV FRQVWLWXWLRQDOFKDOOHQJHVWRDVHQWHQFHGHQRYR8QLWHG6WDWHV ZDVWZHOYH\HDUVPRQWKV%HFDXVH&DUSHQWHUjVHLJKW\ Y 6WUD\KRUQ )G WK &LU )RU WKH VHYHQPRQWKVHQWHQFHLVOHVVWKDQ WKHPRQWKVWDWXWRU\ UHDVRQVVHWIRUWKEHORZZHKROGWKDWWKHGLVWULFWFRXUWHUUHG PD[LPXPKLV$SSUHQGLULJKWVZHUHQHYHUWULJJHUHG LQLWVVHQWHQFH:HWKXVYDFDWHWKHGLVWULFWFRXUWjVRUGHUDQG UHPDQGIRUUHVHQWHQFLQJ )RU WKHVH UHDVRQV ZH GLVPLVV &DUSHQWHUjV $SSUHQGL DUJXPHQW 7KH LVVXH LQ $SSUHQGL ZDV ZKHWKHU WKH )RXUWHHQWK $PHQGPHQWjV 'XH 3URFHVV &ODXVH UHTXLUHV WKDW D IDFWXDO ,,,&21&/86,21 GHWHUPLQDWLRQDXWKRUL]LQJDQLQFUHDVHLQWKHPD[LPXPSULVRQ VHQWHQFH IRU DQ RIIHQVH EH PDGH E\ D MXU\ RQ WKH EDVLV RI )RUWKHUHDVRQVVHWIRUWKDERYHZH$)),50WKHGLVWULFW SURRIEH\RQGDUHDVRQDEOHGRXEW7KH6XSUHPH&RXUWKHOG FRXUWjVRUGHUZLWKUHVSHFWWR&DPSEHOO:H9$&$7(sRQHVj WKDW WKH 'XH 3URFHVV &ODXVH GRHV LQGHHG LPSRVH WKLV PRQWKVHQWHQFHDQG5(0$1'WRWKHGLVWULFWFRXUWIRU UHTXLUHPHQW DQG WKDW mRWKHU WKDQ WKH IDFW RI D SULRU UHVHQWHQFLQJ :H 9$&$7( &DUSHQWHUjV VHQWHQFH DQG FRQYLFWLRQ DQ\ IDFW WKDW LQFUHDVHV WKH SHQDOW\ IRU D FULPH 5(0$1' WR WKH GLVWULFW FRXUW ZLWK WKH LQVWUXFWLRQ WKDW LW EH\RQGWKHSUHVFULEHGVWDWXWRU\PD[LPXPPXVWEHVXEPLWWHG PDNH SDUWLFXODUL]HG ILQGLQJV RQ ZKHWKHU WKH DFWV RI WRDMXU\DQGSURYHGEH\RQGDUHDVRQDEOHGRXEWl$SSUHQGL &DUSHQWHUjV FRFRQVSLUDWRUV ZHUH ZLWKLQ WKH VFRSH RI KLV DW6KRUWO\DIWHUWKH6XSUHPH&RXUWjVGHFLVLRQWKLV&RXUW DJUHHPHQW WR XQGHUWDNH MRLQWO\ LQ WKH FRQVSLUDF\jV LOOHJDO KDGWKHRSSRUWXQLW\WRGHWHUPLQHZKHWKHUWKH$SSUHQGLUXOH DFWLYLWLHV VKRXOG EH H[SDQGHG WR LQFUHDVHV LQ PDQGDWRU\ PLQLPXP SHQDOWLHV,Q8QLWHG6WDWHVY5DPLUH])G ZH KHOG WKDW $SSUHQGL GRHV LQGHHG DSSO\ WR LQFUHDVHV LQ PDQGDWRU\ PLQLPXP VHQWHQFHV DQG WKDW DQ\ IDFWXDO GHWHUPLQDWLRQRWKHUWKDQDSULRUFRQYLFWLRQWKDWLQFUHDVHVWKH SHQDOW\ IURP D QRQPDQGDWRU\ PLQLPXP VHQWHQFH WR D PDQGDWRU\PLQLPXPVHQWHQFHPXVWEHVXEPLWWHGWRDMXU\DQG SURYHGEH\RQGDUHDVRQDEOHGRXEW5DPLUH]DW $SSO\LQJ5DPLUH]WRsRQHVjDSSHDOZHILQGWKDWWKHGLVWULFW FRXUWjVPRQWKVHQWHQFHZDVLQDSSURSULDWHsRQHVSOHG JXLOW\WRRQHFRXQWRIFRQVSLUDF\WRGLVWULEXWHDQXQVSHFLILHG TXDQWLW\RIPDULMXDQDFRFDLQHDQGFUDFNFRFDLQHoDFULPH WKDWLVQRWDFFRPSDQLHGE\DPDQGDWRU\PLQLPXPVHQWHQFH $OWKRXJK sRQHV SOHG JXLOW\ WR FRQVSLUDF\ WR GLVWULEXWH DQ XQVSHFLILHGTXDQWLW\RIQDUFRWLFVWKHGLVWULFWFRXUWKHOGKLP DFFRXQWDEOHIRUILIWHHQNLORJUDPVRIFRFDLQHWKHFRQVSLUDF\jV WRWDOGLVWULEXWLRQDPRXQW%DVHGRQWKLVGHWHUPLQDWLRQWKH GLVWULFW FRXUW KHOG WKDW sRQHV ZDV VXEMHFW WR D PDQGDWRU\ 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO :H FDQ GLVSRVH RI WKLV DUJXPHQW ERWK RQ SURFHGXUDO PLQLPXPVHQWHQFHRIWHQ\HDUVPRQWKV6HH86& JURXQGVDQGRQWKHPHULWV:HKDYHKHOGWKDWmWKHDSSHOODQW E$LL FDQQRWUDLVHQHZLVVXHVLQDUHSO\EULHIKHFDQRQO\UHVSRQG WR DUJXPHQWV UDLVHG IRU WKH ILUVW WLPH LQ DSSHOOHHjV EULHIl 7KH GLVWULFW FRXUWjV GHFLVLRQ WR DWWULEXWH WKH IXOO ILIWHHQ 8QLWHG6WDWHVY&UR]LHU)GWK&LU NLORJUDPVWRsRQHVZDVDIDFWXDOGHWHUPLQDWLRQRWKHUWKDQWKH TXRWLQJ8QLWHG6WDWHVYsHUNLQV)GQWK IDFWRIDSULRUFRQYLFWLRQWKDWLQFUHDVHGKLVSHQDOW\IURPD &LU %HFDXVH &DUSHQWHU IDLOHG WR UDLVH HYHQ QRQPDQGDWRU\PLQLPXPWRDPDQGDWRU\WHQ\HDUPLQLPXP SHUIXQFWRULO\WKH$SSUHQGLLVVXHLQKLVRULJLQDOEULHIZHILQG VHQWHQFH7KHUHIRUH5DPLUH]UHTXLUHVWKDWWKHMXU\QRWWKH WKDWKLVDUJXPHQWIDLOVIRUSURFHGXUDOUHDVRQV GLVWULFW FRXUW VKRXOG KDYH GHWHUPLQHG WKH TXDQWLW\ RI QDUFRWLFV DWWULEXWDEOH WR sRQHV %\ LPSRVLQJ D PDQGDWRU\ :HKROGWKDW&DUSHQWHUjV$SSUHQGLDUJXPHQWDOVRIDLOVRQ PLQLPXP VHQWHQFH ZLWKRXW VXEPLWWLQJ WKH TXHVWLRQ RI WKH PHULWV $SSUHQGL ULJKWV DUH WULJJHUHG ZKHQ WKH FRXUW TXDQWLW\ WR WKH MXU\ WKH GLVWULFW FRXUW YLRODWHG sRQHVj GXH LPSRVHVDVHQWHQFHWKDWLVmEH\RQGWKHSUHVFULEHGVWDWXWRU\ SURFHVVULJKWVDVDUWLFXODWHGE\$SSUHQGLDQG5DPLUH])RU PD[LPXPl $SSUHQGL DW ,Q RUGHU WR FDOFXODWH WKH WKLVUHDVRQZHYDFDWHWKHGLVWULFWFRXUWjVPRQWKVHQWHQFH SUHVFULEHGVWDWXWRU\PD[LPXPVHQWHQFHIRUGHIHQGDQWVZKR DQGUHPDQGIRUUHVHQWHQFLQJ KDYH EHHQ FRQYLFWHG RQ PXOWLSOH FRXQWV DQG ZKR IDLOHG WR REMHFWWRWKHGLVWULFWFRXUWPDNLQJIDFWXDOGHWHUPLQDWLRQVWKDW % 'XSOLFLWRXV,QGLFWPHQW ZRXOG LQFUHDVH WKHLU VHQWHQFH ZH KDYH KHOG WKDW mWKH 6HQWHQFLQJ *XLGHOLQHV ZRXOG UHTXLUH WKDW WKH VHQWHQFH sRQHV DOVR DUJXHV WKDW &RXQW 2QH RI WKH JUDQG MXU\jV LPSRVHG RQ RQH RU PRUH RI WKH VXEVWDQWLYH FRXQWV UXQ LQGLFWPHQWZDVDGXSOLFLWRXVLQGLFWPHQWLQYLRODWLRQRIKLV FRQVHFXWLYHWRWKHVHQWHQFHRQWKHFRQVSLUDF\FRXQWWRWKH 6L[WK$PHQGPHQWJXDUDQWHHRIMXU\XQDQLPLW\EHFDXVHWKDW H[WHQWQHFHVVDU\WRSURGXFHDFRPELQHGVHQWHQFHHTXDOWRWKH FRXQWMRLQHGWRJHWKHUWKUHHVHSDUDWHRIIHQVHVFRQVSLUDF\WR WRWDOSXQLVKPHQWl8QLWHG6WDWHVY3DJH)G GLVWULEXWH PDULMXDQD FRQVSLUDF\ WR GLVWULEXWH FRFDLQH DQG WK &LU FLWLQJ 866* *G 7KXV WKH FRQVSLUDF\ WR GLVWULEXWH FUDFN FRFDLQH :KHWKHU sRQHVj SUHVFULEHGVWDWXWRU\PD[LPXPIRU$SSUHQGLSXUSRVHVZRXOG LQGLFWPHQWZDVGXSOLFLWRXVLVDOHJDOTXHVWLRQWKDWZHUHYLHZ EHWKHVXPRIWKHVWDWXWRU\PD[LPXPVIRUHDFKRIWKHFRXQWV GHQRYR8QLWHG6WDWHVY6PLWK)GWK&LU XSRQZKLFKWKHGHIHQGDQWZDVFRQYLFWHG )RUWKHUHDVRQVVHWIRUWKEHORZZHKROGWKDW&RXQW 2QHRIWKHJUDQGMXU\jVLQGLFWPHQWZDVQRWGXSOLFLWRXV &DUSHQWHUjVVHQWHQFHGLGQRWH[FHHGWKHSUHVFULEHGVWDWXWRU\ PD[LPXP /LNH WKH GHIHQGDQWV LQ 3DJH &DUSHQWHU ZDV $QLQGLFWPHQWLVGXSOLFLWRXVLILWmMRLQVLQDVLQJOHFRXQW FRQYLFWHGRQPXOWLSOHFRXQWVDQGIDLOHGWRREMHFWWRWKHIDFW WZRRUPRUHGLVWLQFWDQGVHSDUDWHRIIHQVHVl8QLWHG6WDWHVY WKDW WKH GLVWULFW FRXUW UDWKHU WKDQ WKH MXU\ KHOG KLP 6KXPSHUW+RRG)GWK&LUTXRWLQJ DFFRXQWDEOHIRUWKHDFWVRIWKHHQWLUHFRQVSLUDF\7KHUHIRUH 8QLWHG 6WDWHV Y 5RELQVRQ )G WK &LU &DUSHQWHUjV SUHVFULEHG VWDWXWRU\ PD[LPXP IRU $SSUHQGL 7KH YLFH RI GXSOLFLW\ LV WKDW D mMXU\ PD\ ILQG D SXUSRVHVZDVWKHVXPRIWKHVWDWXWRU\PD[LPXPVIRUHDFKRI GHIHQGDQW JXLOW\ RQ WKH FRXQW ZLWKRXW KDYLQJ UHDFKHG D WKHWKUHHFRXQWVXSRQZKLFKKHZDVFRQYLFWHG&DUSHQWHUZDV XQDQLPRXV YHUGLFW RQ WKH FRPPLVVLRQ RI DQ\ SDUWLFXODU FRQYLFWHGRIWKUHHFRXQWVRIXVLQJDWHOHSKRQHWRIDFLOLWDWHWKH RIIHQVHl 6KXPSHUW +RRG DW %\ FROODSVLQJ VHSDUDWH FRPPLVVLRQRIDIHORQ\LQYLRODWLRQRI86&E RIIHQVHVLQWRDVLQJOHFRXQWGXSOLFLWRXVLQGLFWPHQWVmSUHYHQW (DFKFRXQWFDUULHVDVWDWXWRU\PD[LPXPRIIRXU\HDUVWKXV WKH MXU\ IURP FRQYLFWLQJ RQ RQH RIIHQVH DQG DFTXLWWLQJ RQ 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO DQRWKHUl,G7KHUHIRUHGXSOLFLWRXVLQGLFWPHQWVLPSOLFDWH &DUSHQWHU ZDV DZDUH WKDW WKH FRQVSLUDF\ ZDV EURDGHU WKDQ WKH SURWHFWLRQV RI WKH 6L[WK $PHQGPHQW JXDUDQWHH RI MXU\ PHUHO\WKHWKUHHWUDQVDFWLRQVZLWKZKLFKKHZDVLQYROYHGDQG XQDQLPLW\,G WKDWDVDUHVXOWWKHFRQGXFWRIWKHFRQVSLUDF\DVDZKROHZDV UHDVRQDEO\IRUHVHHDEOHWRKLP+RZHYHUWKHUHFRUGLVYRLG $OWKRXJK ZH DFNQRZOHGJH WKH JUDYLW\ RI GXSOLFLWRXV RIDQ\LQGLFDWLRQWKDWWKHGLVWULFWFRXUWVSHFLILFDOO\DGGUHVVHG LQGLFWPHQWV ZH KROG WKDW &RXQW 2QH RI WKH JUDQG MXU\jV WKH ILUVW SURQJ RI 6WXGOH\ o ZKHWKHU WKH DFWV RI WKH FR LQGLFWPHQWZDVQRWDGXSOLFLWRXVLQGLFWPHQW,Q8QLWHG6WDWHV FRQVSLUDWRUVZHUHZLWKLQWKHVFRSHRI&DUSHQWHUjVDJUHHPHQW Y'DOH)GWK&LUZHDGGUHVVHGDQLVVXH 1HLWKHU WKH MXGJPHQW QRU WKH WUDQVFULSW RI WKH VHQWHQFLQJ VLPLODUWRWKHRQHUDLVHGE\sRQHVZKHWKHUDVLQJOHFRXQWWKDW KHDULQJGHPRQVWUDWHWKDWWKHGLVWULFWFRXUWPDGHSDUWLFXODUL]HG FKDUJHV D FRQVSLUDF\ WR GLVWULEXWH PXOWLSOH FRQWUROOHG ILQGLQJVZLWKUHVSHFWWRWKHVFRSHRI&DUSHQWHUjVH[SOLFLWRU VXEVWDQFHVFRQVWLWXWHVDGXSOLFLWRXVLQGLFWPHQW,Q'DOHWKH LPSOLFLW DJUHHPHQWV ZLWK KLV FRFRQVSLUDWRUV 7KH GHIHQGDQW ZDV FKDUJHG DQG FRQYLFWHG RQ RQH FRXQW RI JRYHUQPHQWDUJXHVWKDW&DUSHQWHUjVDZDUHQHVVRIWKHEURDGHU FRQVSLUDF\WRGLVWULEXWHERWKFUDFNFRFDLQHDQGPDULMXDQDLQ FRQVSLUDF\VDWLVILHVWKHILUVWSURQJRIWKH6WXGOH\WHVW:H YLRODWLRQRI86&DDQG:LWKUHVSHFWWR ILQGWKLVDUJXPHQWWREHZLWKRXWPHULW7KHPHUHIDFWWKDW WKHGHIHQGDQWjVDUJXPHQWWKDWWKHLQGLFWPHQWZDVGXSOLFLWRXV &DUSHQWHUZDVDZDUHRIWKHVFRSHRIWKHRYHUDOORSHUDWLRQLV ZHKHOGWKDW QRWHQRXJKWRKROGKLPDFFRXQWDEOHIRUWKHDFWLYLWLHVRIWKH ZKROHRSHUDWLRQ6WXGOH\DW ,WKDVEHHQFOHDUVLQFH%UDYHUPDQY8QLWHG6WDWHV 86WKDWWKHDOOHJDWLRQLQDVLQJOHFRXQW $OWKRXJKZHGHIHUWRWKHGLVWULFWFRXUWjVILQGLQJWKDWWKHFR RIFRQVSLUDF\RIDQDJUHHPHQWWRFRPPLWVHYHUDOFULPHV FRQVSLUDWRUVj FRQGXFW ZDV UHDVRQDEO\ IRUHVHHDEOH WR LVQRWGXSOLFLWRXVDVFRQVSLUDF\LVLWVHOIWKHFULPH6HH &DUSHQWHUZHYDFDWHWKHGLVWULFWFRXUWjVVHQWHQFHEHFDXVHWKH DOVR8QLWHG6WDWHVY6ROLPLQH)GQ FRXUWIDLOHGWRPDNHSDUWLFXODUL]HGILQGLQJVZLWKUHVSHFWWRWKH WK &LU $ VLQJOH FRQVSLUDF\ PD\ KDYH DV LWV VFRSHRI&DUSHQWHUjVDJUHHPHQW:HUHPDQGWKHFDVHWRWKH REMHFWLYHWKHGLVWULEXWLRQRIWZRGLIIHUHQWGUXJVZLWKRXW GLVWULFW FRXUW ZLWK WKH VSHFLILF LQVWUXFWLRQ WKDW WKH FRXUW UHQGHULQJ LW GXSOLFLWRXV 6HH HJ 8QLWHG 6WDWHV Y GHWHUPLQH ZKHWKHU WKH DFWV RI &DUSHQWHUjV FRFRQVSLUDWRUV &ODUN )G WK &LU 7KH ZHUHZLWKLQWKHVFRSHRIKLVDJUHHPHQWWRXQGHUWDNHMRLQWO\LQ FRQVSLUDF\ FRXQW ZDV QRW GXSOLFLWRXV DQG WKH GLVWULFW WKHFRQVSLUDF\jVLOOHJDODFWLYLWLHV FRXUWGLGQRWHUULQUHIXVLQJWRVHYHURUGLVPLVVWKHFRXQW % $SSUHQGL 'DOH)GDWHPSKDVLVDGGHG&RQVHTXHQWO\ ZHKROGWKDW&RXQW2QHRIWKHJUDQGMXU\jVLQGLFWPHQWZDV &DUSHQWHU DUJXHV LQ KLV UHSO\ EULHI WKDW E\ KROGLQJ KLP QRWGXSOLFLWRXVDQGGLGQRWYLRODWHsRQHVj6L[WK$PHQGPHQW DFFRXQWDEOH IRU WKH DFWV RI WKH HQWLUH FRQVSLUDF\ ZLWKRXW JXDUDQWHHRIMXU\XQDQLPLW\ PDNLQJDSDUWLFXODUL]HGILQGLQJDVWRZKHWKHUWKHVHDFWVZHUH ZLWKLQWKHVFRSHRIKLVDJUHHPHQWWRMRLQWO\XQGHUWDNHLQWKH FRQVSLUDF\jVLOOHJDODFWLYLWLHVWKHGLVWULFWFRXUWYLRODWHGKLV FRQVWLWXWLRQDOULJKWVWKDWHQWLWOHKLPWRDmMXU\GHWHUPLQDWLRQ WKDW>KH@LVJXLOW\RIHYHU\HOHPHQWRIWKHFULPHZLWKZKLFKKH LVFKDUJHGEH\RQGDUHDVRQDEOHGRXEWl$SSUHQGL86 DW 8QLWHG6WDWHVY 1RV 1RV 8QLWHG6WDWHVY &DPSEHOOHWDO &DPSEHOOHWDO :HFKRRVHWRIROORZWKH6HFRQG&LUFXLWjVLQWHUSUHWDWLRQRI &DUSHQWHUjV$SSHDO %D%DQGKROGWKDWWKLVVXEVHFWLRQUHTXLUHVWKDW WKHGLVWULFWFRXUWPDNHSDUWLFXODUL]HGILQGLQJVZLWKUHVSHFWWR $ 4XDQWLW\RI&RFDLQH$WWULEXWDEOHWR&DUSHQWHU ERWK WKH VFRSH RI WKH GHIHQGDQWjV DJUHHPHQW DQG WKH IRUHVHHDELOLW\RIKLVFRFRQVSLUDWRUVjFRQGXFWEHIRUHKROGLQJ &DUSHQWHUILUVWDUJXHVWKDWWKHGLVWULFWFRXUWHUUHGZKHQLW WKH GHIHQGDQW DFFRXQWDEOH IRU WKH VFRSH RI WKH HQWLUH KHOGKLPUHVSRQVLEOHIRUWKHFRQVSLUDF\jVWRWDOGLVWULEXWLRQRI FRQVSLUDF\:LWKRXWWKHUHTXLUHPHQWWKDWWKHGLVWULFWFRXUW ILIWHHQ NLORJUDPV RI FRFDLQH SXUVXDQW WR WKH m5HOHYDQW PDNHWKHVHWZRSDUWLFXODUL]HGILQGLQJVZHH[SRVHGHIHQGDQWV &RQGXFWlSURYLVLRQRI866*%$GLVWULFWFRXUWjV WREHLQJVHQWHQFHGRQFRQVSLUDFLHVZKRVHDFWLYLWLHVWKH\GLG GHWHUPLQDWLRQ RI WKH TXDQWLW\ RI GUXJV XVHG WR FRPSXWH D QRWDJUHHWRMRLQWO\XQGHUWDNHRUFRXOGQRWIRUHVHH$YHUWLQJ GHIHQGDQWjVVHQWHQFHLVDILQGLQJRIIDFWWKDWVKRXOGEHXSKHOG VHQWHQFHV EDVHG RQ VXFK FRQVSLUDFLHV WKDW DUH SRWHQWLDOO\ XQOHVVFOHDUO\HUURQHRXV8QLWHG6WDWHVY:LOVRQ)G RYHUEURDG LQ VFRSH LV RQH RI WKH VSHFLILF SXUSRVHV RI WK&LU)RUWKHUHDVRQVVWDWHGEHORZZH %D% 6HH 866* % FPW Q KROGWKDWWKHGLVWULFWFRXUWFRPPLWWHGFOHDUHUURUZLWKUHVSHFW m%HFDXVHDFRXQWPD\EHZRUGHGEURDGO\DQGLQFOXGHWKH WR&DUSHQWHUjVVHQWHQFHWKHUHIRUHZHYDFDWHDQGUHPDQGWR FRQGXFWRIPDQ\SDUWLFLSDQWVRYHUDSHULRGRIWLPHWKHVFRSH WKHGLVWULFWFRXUWIRUUHVHQWHQFLQJ RIWKHFULPLQDODFWLYLW\MRLQWO\XQGHUWDNHQE\WKHGHIHQGDQW LV QRW QHFHVVDULO\ WKH VDPH DV WKH VFRSH RI WKH HQWLUH ,QDUULYLQJDW&DUSHQWHUjVHLJKW\VHYHQPRQWKVHQWHQFHWKH FRQVSLUDF\ ,Q RUGHU WR GHWHUPLQH WKH GHIHQGDQWjV GLVWULFW FRXUW VHW KLV EDVH RIIHQVH OHYHO DW SXUVXDQW WR DFFRXQWDELOLW\ IRU WKH FRQGXFW RI RWKHUV XQGHU VXEVHFWLRQ 866* 'F EHFDXVH WKH FRXUW FRQFOXGHG WKDW D% WKH FRXUW PXVW ILUVW GHWHUPLQH WKH VFRSH RI WKH &DUSHQWHU VKRXOG EH KHOG UHVSRQVLEOH IRU WKH FRQVSLUDF\jV FULPLQDO DFWLYLW\ WKH SDUWLFXODU GHIHQGDQW DJUHHG WR MRLQWO\ WRWDOGLVWULEXWLRQRIILIWHHQNLORJUDPVRIFRFDLQH&DUSHQWHU XQGHUWDNH LH WKH VFRSH RI WKH VSHFLILF FRQGXFW DQG REMHFWHG WR WKLV EDVH OHYHO DUJXLQJ WKDW WKH GLVWULFW FRXUW REMHFWLYHV HPEUDFHG E\ WKH GHIHQGDQWjV DJUHHPHQWl VKRXOGKDYHVHWLWDWSXUVXDQWWR'FEHFDXVHWKH )XUWKHUPRUHEHFDXVHRIWKH6XSUHPH&RXUWjVFRQGHPQDWLRQ TXDQWLW\RIFRFDLQHIRUZKLFKKHZDVLQGLYLGXDOO\UHVSRQVLEOH RI GUDJQHW FRQVSLUDFLHV ZH FKRRVH WR DGRSW WKH 6HFRQG &LUFXLWjVKROGLQJLQ6WXGOH\$QGHUVRQY8QLWHG6WDWHV 86KROGLQJWKDWmFRQVSLUDFLHVDUHQRWWREH PDGHRXWE\SLOLQJLQIHUHQFHXSRQLQIHUHQFHWKXVIDVKLRQLQJ DGUDJQHWWRGUDZLQDOOVXEVWDQWLYHFULPHVl $SSO\LQJWKH6WXGOH\UXOHWRWKHIDFWVRIRXUFDVHZHILQG 866* 'F VWDWHV LQ SDUW WKDW D EDVH RIIHQVH OHYHO RI VKDOO EH DVVLJQHG WR DQ\ SHUVRQ UHVSRQVLEOH IRU mDW OHDVW NJ EXW OHVV WKDQ WKDWWKHGLVWULFWFRXUWGLGLQGHHGPDNHSDUWLFXODUL]HGILQGLQJV NJ RI FRFDLQHl ZLWKUHVSHFWWRWKHIRUHVHHDELOLW\SURQJ7KHFRXUWKHOGWKDW $IWHU DGMXVWPHQWV &DUSHQWHUjV WRWDO RIIHQVH OHYHO ZDV VHW DW &RPELQHG ZLWK KLV FULPLQDO KLVWRU\ FDWHJRU\ RI ,,, KLV JXLGHOLQH VHQWHQFH UDQJH ZDV WR PRQWKV 7KH 6WXGOH\ UXOH KDV DOVR EHHQ DFFHSWHG LQ WKH '& &LUFXLW WKH (OHYHQWK &LUFXLW DQG WKH )LIWK &LUFXLW 6HH 8QLWHG 6WDWHV Y $QGHUVRQ )G '& &LU 8QLWHG 6WDWHV Y %XVK )G 866* 'F VWDWHV WKDW D EDVH RIIHQVH OHYHO RI VKDOO WK &LU 8QLWHG 6WDWHV Y (YEXRPZDQ )G EH DVVLJQHG WR DQ\ SHUVRQ UHVSRQVLEOH IRU mDW OHDVW J EXW OHVV WKDQ WK &LU NJ RI FRFDLQHl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jVREMHFWLRQQRWLQJ 1RWHIXUWKHUVWDWHVWKDW WKDW LQ WKH FDVH RI MRLQWO\ XQGHUWDNHQ FULPLQDO DFWLYLW\ D GHIHQGDQWLVDFFRXQWDEOHIRUDOOUHDVRQDEO\IRUHVHHDEOHDFWV ,QRUGHUWRGHWHUPLQHWKHGHIHQGDQWjVDFFRXQWDELOLW\IRU DQG RPLVVLRQV RI RWKHUV LQ IXUWKHUDQFH RI WKH MRLQWO\ WKH FRQGXFW RI RWKHUV XQGHU VXEVHFWLRQ D% WKH XQGHUWDNHQFULPLQDODFWLYLW\6HH866*%D% FRXUW PXVW ILUVW GHWHUPLQH WKH VFRSH RI WKH FULPLQDO %HFDXVH WKH GLVWULFW FRXUW GHWHUPLQHG mWKDW WKH DFWLYLW\ WKH SDUWLFXODU GHIHQGDQW DJUHHG WR MRLQWO\ FRQGXFW RI WKH FRQVSLUDF\ DV D ZKROH ZDV UHDVRQDEO\ XQGHUWDNHLHWKHVFRSHRIWKHVSHFLILFFRQGXFWDQGWKH IRUHVHHDEOHWR>&DUSHQWHU@LQOLJKWRIKLVNQRZOHGJHRIWKH REMHFWLYHVHPEUDFHGE\WKHGHIHQGDQWjVDJUHHPHQW VFRSH DQG H[WHQW RI WKH FRQVSLUDF\l WKH GLVWULFW FRXUW FRQFOXGHGWKDWDWWULEXWLQJWR&DUSHQWHUWKHFRQVSLUDF\jVWRWDO ,GHPSKDVLVDGGHG GLVWULEXWLRQRIILIWHHQNLORJUDPVRIFRFDLQHZDVSURSHU:H EHOLHYHWKLVUXOLQJZDVFOHDUO\HUURQHRXV ,QOLJKWRIWKLV$SSOLFDWLRQ1RWHWKH6HFRQG&LUFXLWKDV VWDWHGWKDWmLQRUGHUWRKROGDGHIHQGDQWDFFRXQWDEOHIRUWKH $FFRUGLQJ WR 866* %D% D EDVH RIIHQVH DFWVRIRWKHUV>XQGHU866*%D%@DGLVWULFW OHYHOVKRXOGEHGHWHUPLQHGRQWKHEDVLVRIWKHIROORZLQJ FRXUWPXVWPDNHWZRSDUWLFXODUL]HGILQGLQJVWKDWWKHDFWV ZHUHZLWKLQWKHVFRSHRIWKHGHIHQGDQWjVDJUHHPHQWDQG >,@QWKHFDVHRIDMRLQWO\XQGHUWDNHQFULPLQDODFWLYLW\D WKDWWKH\ZHUHIRUHVHHDEOHWRWKHGHIHQGDQWl8QLWHG6WDWHVY FULPLQDO SODQ VFKHPH HQGHDYRU RU HQWHUSULVH 6WXGOH\)GG&LU7KHILUVWSURQJRI XQGHUWDNHQ E\ WKH GHIHQGDQW LQ FRQFHUW ZLWK RWKHUV WKH 6WXGOH\ WHVW VHUYHV WR GLIIHUHQWLDWH EHWZHHQ FR ZKHWKHURUQRWFKDUJHGDVDFRQVSLUDF\DOOUHDVRQDEO\ FRQVSLUDWRUVjYDU\LQJGHJUHHVRIFXOSDELOLW\8QLWHG6WDWHVY IRUHVHHDEOHDFWVDQGRPLVVLRQVRIRWKHUVLQIXUWKHUDQFHRI sHQNLQV )G WK &LU KROGLQJ WKDW WKH MRLQWO\ XQGHUWDNHQ FULPLQDO DFWLYLW\ WKDW RFFXUUHG %mLQVWUXFWVWKDWGLIIHUHQWLDWLRQEHWZHHQFRFRQVSLUDWRUV GXULQJWKHFRPPLVVLRQRIWKHRIIHQVHRIFRQYLFWLRQLQ LV UHTXLUHGl ,Q RUGHU WR GHWHUPLQH WKH VFRSH RI WKH SUHSDUDWLRQ IRU WKDW RIIHQVH RU LQ WKH FRXUVH RI GHIHQGDQWjVDJUHHPHQWmWKHGLVWULFWFRXUWPD\FRQVLGHUDQ\ DWWHPSWLQJWRDYRLGGHWHFWLRQRUUHVSRQVLELOLW\IRUWKDW H[SOLFLWDJUHHPHQWRULPSOLFLWDJUHHPHQWIDLUO\LQIHUUHGIURP RIIHQVH WKH FRQGXFW RI WKH GHIHQGDQW DQG RWKHUVl 6WXGOH\ DW TXRWLQJ 866* % FPW Q 7KH IDFW WKDW WKH 866*%D%HPSKDVLVDGGHG GHIHQGDQWLVDZDUHRIWKHVFRSHRIWKHRYHUDOORSHUDWLRQLVQRW HQRXJKWRVDWLVI\WKHILUVWSURQJRIWKHWHVWDQGWKHUHIRUHLV QRWHQRXJKWRKROGKLPDFFRXQWDEOHIRUWKHDFWLYLWLHVRIWKH $IWHU DGMXVWPHQWV &DUSHQWHU DUJXHV WKDW KLV WRWDO RIIHQVH OHYHO ZKROHRSHUDWLRQ6WXGOH\DW VKRXOG KDYH EHHQ VHW DW &RPELQHG ZLWK KLV FULPLQDO KLVWRU\ FDWHJRU\ RI ,,, &DUSHQWHU DUJXHV WKDW KLV JXLGHOLQH VHQWHQFH UDQJH VKRXOG KDYH EHHQ WR PRQWKV