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 */(11 : 3+(/36 s5 ; 3ODLQWLII$SSHOOHH 1R Y ! 52%(57 0 &2< s5 'HIHQGDQW$SSHOODQW &+5,67,1 6787(6HWDO 'HIHQGDQWV 1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW'D\WRQ 1Rn:DOWHU+5LFH&KLHI'LVWULFWsXGJH $UJXHG6HSWHPEHU 'HFLGHGDQG)LOHG$SULO %HIRUH6,/(5&/$<DQG*,%621&LUFXLWsXGJHV 7KH +RQRUDEOH sRKQ 5 *LEVRQ &LUFXLW sXGJH RI WKH 8QLWHG 6WDWHV &RXUW RI $SSHDOV IRU WKH (LJKWK &LUFXLW VLWWLQJ E\ GHVLJQDWLRQ 3KHOSVY&R\HWDO 1R BBBBBBBBBBBBBBBBB &2816(/ $5*8(' /DZUHQFH (GZDUG %DUELHUH 6&+52('(5 0$81'5(//%$5%,(5( 32:(56&LQFLQQDWL2KLR IRU $SSHOODQW 'DYLG 0 'HXWVFK 'D\WRQ 2KLR IRU $SSHOOHH 21 %5,() /DZUHQFH (GZDUG %DUELHUH 6&+52('(50$81'5(//%$5%,(5( 32:(56 &LQFLQQDWL2KLRIRU$SSHOODQW'DYLG0'HXWVFK'D\WRQ 2KLRIRU$SSHOOHH BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB s2+1 5 *,%621 &LUFXLW sXGJH ,Q WKLV FDVH D FLYLO ULJKWVGHIHQGDQWWDNHVDQLQWHUORFXWRU\DSSHDOIURPWKHGLVWULFW FRXUWjVGHQLDORIKLVPRWLRQUHTXHVWLQJVXPPDU\MXGJPHQWRQ WKHJURXQGRITXDOLILHGLPPXQLW\*OHQQ3KHOSVVXHG5REHUW 0&R\s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jV FOHDUO\ HVWDEOLVKHG )RXUWK $PHQGPHQWULJKWVDQGDFFRUGLQJO\LWGHQLHG&R\jVTXDOLILHG LPPXQLW\PRWLRQ&R\DUJXHVWKDWWKHGLVWULFWFRXUWDSSOLHG WKH ZURQJ FRQVWLWXWLRQDO VWDQGDUG WKDW WKH ODZ JRYHUQLQJ H[FHVVLYHIRUFHGXULQJERRNLQJZDVQRWFOHDUO\HVWDEOLVKHG DQGWKDW&R\jVDFWLRQVZHUHQRWXQUHDVRQDEOH:HDIILUP :HVWDWHWKHIDFWVDVWKHGLVWULFWFRXUWUHFLWHGWKHP6HH sRKQVRQYsRQHV86m:KHQIDFHG ZLWKDQDUJXPHQWWKDWWKHGLVWULFWFRXUWPLVWDNHQO\LGHQWLILHG 1R 3KHOSVY&R\HWDO FOHDUO\HVWDEOLVKHGODZWKHFRXUWRIDSSHDOVFDQVLPSO\WDNH DV JLYHQ WKH IDFWV WKDW WKH GLVWULFW FRXUW DVVXPHG ZKHQ LW GHQLHGVXPPDU\MXGJPHQWIRUWKDWSXUHO\OHJDOUHDVRQl 7KHOLWLJDWLRQDULVHVRXW RI WKHHYHQWVRI$XJXVW &R\DQG&KULVWLQ6WXWHVDQRWKHU;HQLDSROLFHRIILFHUDUUHVWHG 3KHOSVIRUYLRODWLQJDPXQLFLSDORSHQFRQWDLQHURUGLQDQFH 7KH\ SXW 3KHOSV LQ KDQGFXIIV DQG WRRN KLP WR WKH SROLFH VWDWLRQIRUERRNLQJ:KLOH6WXWHVZDVERRNLQJ3KHOSVZKR ZDVVWLOOKDQGFXIIHGKHDVNHGKLPWRWDNHRIIKLVVKRHVDQG VRFNVVR6WXWHVFRXOGVHHLIKHKDGDQ\WKLQJKLGGHQDERXWKLV IHHW6WXWHVDVNHG3KHOSVWROLIWKLVIHHWEXWDV3KHOSVWULHGWR FRPSO\ RQH RI KLV IHHW JRW FORVH WR 6WXWHVjV IDFH 6WXWHV JUDEEHGWKHIRRWDQGSXVKHGLWDZD\EXW&R\VDZWKHLQFLGHQW DQGLQWHUSUHWHGLWDVDQDWWHPSWWRNLFN6WXWHV&R\WDFNOHG 3KHOSVDQGWKH\ERWKIHOOWRWKHIORRUZLWK&R\RQWRSRIWKH KDQGFXIIHG3KHOSV&R\WROG3KHOSVQRWWRWU\WRNLFNRQHRI KLV RIILFHUV DQG KH KLW 3KHOSV LQ WKH IDFH WZLFH 7KHQ KH JUDEEHG3KHOSVj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j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jVGHQLDORIVXPPDU\MXGJPHQW RSSRUWXQLW\WRSUHYHQW&R\IURPKXUWLQJ3KHOSV :HGHQ\3KHOSVjVPRWLRQWRGLVPLVVWKHDSSHDODQGIRUWKH DZDUGRIVDQFWLRQV &R\VRXJKWVXPPDU\MXGJPHQWRQWKHJURXQGRITXDOLILHG LPPXQLW\DUJXLQJWKDW3KHOSVjVH[FHVVLYHIRUFHFODLPKDGWR EHHYDOXDWHGXQGHUWKHREMHFWLYHUHDVRQDEOHQHVVVWDQGDUGRI WKH)RXUWK$PHQGPHQWDQGWKDWXQGHUWKLVVWDQGDUG&R\KDG QRWYLRODWHG3KHOSVjVFRQVWLWXWLRQDOULJKWV3KHOSVUHVSRQGHG WKDW WKH FODLP ZDV JRYHUQHG HLWKHU E\ WKH )RXUWK RU )RXUWHHQWK$PHQGPHQWV/DWHULQKLVUHSO\PHPRUDQGXP &R\ DUJXHG WKDW WKH (LJKWK $PHQGPHQW VKRXOG JRYHUQ 3KHOSVjVFODLPVRWKDW&R\FRXOGEHOLDEOHRQO\LIKHXVHG IRUFH mPDOLFLRXVO\ DQG VDGLVWLFDOO\ IRU WKH YHU\ SXUSRVH RI FDXVLQJKDUPl 7KHGLVWULFWFRXUWKHOGWKDW3KHOSVjVH[FHVVLYHIRUFHFODLP ZDVJRYHUQHGE\WKH)RXUWK$PHQGPHQWVWDQGDUGDQGWKDW XQGHUWKDWVWDQGDUGWKHUHZDVDQLVVXHRIIDFWDVWRZKHWKHU &R\XVHGXQUHDVRQDEOHIRUFH7KHIDFWVWDNHQLQWKHOLJKW PRVWIDYRUDEOHWR3KHOSVVKRZHGWKDW&R\VDZ3KHOSVjVIRRW DSSURDFK 6WXWHVjV IDFH DQG KH FRQFOXGHG WKDW 3KHOSV ZDV WU\LQJWRNLFN6WXWHV&R\WDFNOHGWKHKDQGFXIIHG3KHOSV$V WKHWZRIHOOWRWKHJURXQGZLWK&R\RQWRSRI3KHOSV&R\ WROG 3KHOSV KH ZRXOGQjW EH SHUPLWWHG WR NLFN mRQH RI KLV RIILFHUVl DQG &R\ KLW 3KHOSV LQ WKH IDFH WZLFH 7KHQ m>Z@KLOH KROGLQJ >3KHOSVjV@ VKLUW FROODU &R\ SURFHHGHG WR VODPKLVKHDGLQWRWKHIORRUDWOHDVWWKUHHWLPHVl7KHGLVWULFW FRXUWFRQFOXGHGWKDWDMXU\FRXOGILQGWKDWWKHEHDWLQJZDVQRW QHFHVVDU\ WR JDLQ FRQWURO RI 3KHOSV m&R\ ZDV RQ WRS RI >3KHOSV@ZKRZDVKDQGFXIIHGZKHQWKHLQFLGHQWRFFXUUHG 7KHUH LV QR HYLGHQFH WKDW ZKLOH LQ WKDW SRVLWLRQ >3KHOSV@ SUHVHQWHGDWKUHDWWR&R\RUWRDQ\RWKHURIILFHUl7KHFRXUW DOVRKHOGWKDW3KHOSVjVULJKWWREHIUHHIURPXVHRIH[FHVVLYH IRUFH ZDV FOHDUO\ HVWDEOLVKHG DW WKH WLPH RI WKH HYHQWV LQ TXHVWLRQ 7KH GLVWULFW FRXUW GHQLHG &R\jV PRWLRQ IRU VXPPDU\MXGJPHQW &R\ ILOHG WKLV LQWHUORFXWRU\ DSSHDO 3KHOSV PRYHG WR GLVPLVVWKHDSSHDOIRUODFNRIMXULVGLFWLRQDQGDOVRDVNHGWKLV FRXUWIRUVDQFWLRQV:HWRRN3KHOSVjVPRWLRQZLWKWKHFDVH 3KHOSVY&R\HWDO 1R 1R 3KHOSVY&R\HWDO )DELDQLFKDSROLFHRIILFHUIRUXVHRIH[FHVVLYHIRUFHZKLOH , VKHZDVEHLQJERRNHGIRUDPLVGHPHDQRU7KHGLVWULFWFRXUW VXEPLWWHGWKHFDVHWRWKHMXU\XQGHUWKH)RXUWK$PHQGPHQW 7REHJLQZLWKZHPXVWDGGUHVV3KHOSVjVPRWLRQWRGLVPLVV VWDQGDUGDQGWKHRIILFHUGLGQRWREMHFWWRWKHLQVWUXFWLRQ+H WKLVDSSHDOIRUODFNRIMXULVGLFWLRQ7KHUHOHYDQWVWDWXWH ODWHU FRQWHQGHG WKDW WKH MXU\ VKRXOG KDYH EHHQ LQVWUXFWHG 86&JUDQWVDSSHOODWHMXULVGLFWLRQRYHUILQDO XQGHUWKH)RXUWHHQWK$PHQGPHQWUDWKHUWKDQWKH)RXUWK:H MXGJPHQWVRQO\DQGGHQLDORIVXPPDU\MXGJPHQWLVXVXDOO\ UHMHFWHGWKHRIILFHUjVDUJXPHQWXQGHUWKHSODLQHUURUVWDQGDUG FRQVLGHUHG DQ LQWHUORFXWRU\ RUGHU QRW D ILQDO MXGJPHQW RIUHYLHZVWDWLQJ sRKQVRQYs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mQHDWDEVWUDFW>LVVXH@RIODZlUDWKHUWKDQ SURFHVVRIEHLQJERRNHGIRUDPLVGHPHDQRUDWWKHWLPHRIWKH WKHTXHVWLRQRIZKHWKHUWKHUHFRUGGHPRQVWUDWHVDJHQXLQH DOOHJHGXVHRIH[FHVVLYHIRUFH+ROPHVjVFDVHGRHVQRWPHDQ LVVXHRIIDFWIRUWULDO%HUU\PDQY5LHJHU)G WKDWWKHODZFRQFHUQLQJ3KHOSVjVULJKWVZDVXQFOHDULQWKLV WK&LUTXRWLQJsRQHV86DWm,I FLUFXLW+ROPHVUHFRXQWVWKHIROORZLQJIDFWVm$IWHU+ROPHV WKHGHIHQGDQWGLVSXWHVWKHSODLQWLIIjVYHUVLRQRIWKHVWRU\ ZDV SODFHG XQGHU DUUHVW VKH ZDV WXUQHG RYHU WR 6HUJHDQW WKH GHIHQGDQW PXVW QRQHWKHOHVV EH ZLOOLQJ WR FRQFHGH WKH *HRUJH)DELDQLFKIRUERRNLQJl,GDW7KLVUHFLWDWLRQ PRVWIDYRUDEOHYLHZRIWKHIDFWVWRWKHSODLQWLIIIRUSXUSRVHV LPSOLHV WKDW )DELDQLFK ZDV QRW WKH DUUHVWLQJ RIILFHU DQG RI WKH DSSHDOl LG RWKHUZLVH ZH FDQQRW HQWHUWDLQ WKH WKHUHIRUH+ROPHVjVFDVHGLGQRWIDOOZLWKLQWKHUXOHZHKDYH GHIHQGDQWjVDUJXPHQWVQRPDWWHUKRZPHULWRULRXVWKH\PD\ UHOLHGRQFRQFHUQLQJDUUHVWHHVLQWKHFXVWRG\RIWKHDUUHVWLQJ EH RIILFHU:HFRQFOXGHWKDWLWZDVFOHDUO\HVWDEOLVKHGLQ WKDW3KHOSVHQMR\HGWKHSURWHFWLRQRIWKH)RXUWK$PHQGPHQW ,QWKLVFDVH&R\FOHDUO\KDVIDLOHGWROLPLWKLVDUJXPHQWWR GXULQJWKHLQFLGHQW TXHVWLRQVRIODZWDNLQJWKHIDFWVLQWKHOLJKWPRVWIDYRUDEOHWR 3KHOSV&R\DUJXHVIRULQVWDQFHWKDWKHmGLGQRWDWWHPSWWR 6LPLODUO\WKHXQUHDVRQDEOHQHVVRIWKHDOOHJHGIDFWVXQGHU LQMXUH 3KHOSV DQG LQWHQGHG WR XVH QR PRUH IRUFH WKDQ ZDV WKH)RXUWK$PHQGPHQWZDVFOHDUO\HVWDEOLVKHGDWWKHWLPHRI QHFHVVDU\ WR UHVWUDLQ DQG FRQWURO KLPl ,I WKHVH DVVHUWLRQV WKH HYHQWV LQ WKLV FDVH 6HH 0F'RZHOO )G DW ZHUHFUXFLDOWR&R\j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jV ULJKWV DW WKH WLPH RI WKH DOOHJHG XVH RI H[FHVVLYH GHIHUHQFHGXHDQRIILFHUj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jVPRWLRQWR WKHUHIRUHXQUHDVRQDEOH'DUQHOOY&DYHU1R GLVPLVVDQGIRULPSRVLWLRQRIVDQFWLRQV :/DW WK&LUXQSXEOLVKHGDIWHUVXVSHFW WKURZQWRJURXQGXQUHDVRQDEOHIRURIILFHUWROLIWVXVSHFWjV ,, KHDGDQGOHWLWGURSWRSDYHPHQW7KHIDFWVUHFLWHGE\WKH GLVWULFWFRXUWZRXOGSHUPLWDILQGLQJWKDW&R\LQIOLFWHGRQ $FODLPRITXDOLILHGLPPXQLW\SUHVHQWVWZRFORVHO\OLQNHG 3KHOSV D EHDWLQJ WKDW ZDV QRW RQO\ XQQHFHVVDU\ EXW DOVR TXHVWLRQV ZKHWKHU WKH GHIHQGDQW YLRODWHG WKH SODLQWLIIjV ZRXOGKDYHEHHQUHFRJQL]HGDVXQQHFHVVDU\E\DUHDVRQDEOH ULJKWVDQGZKHWKHUWKRVHULJKWVZHUHFOHDUO\HVWDEOLVKHGDWWKH RIILFHULQKLVSRVLWLRQ7KHVHIDFWVZRXOGHVWDEOLVKDYLRODWLRQ WLPHRIWKHDOOHJHGYLRODWLRQ6DXFLHUY.DW]86 RI3KHOSVjV)RXUWK$PHQGPHQWULJKWV 6 &W m7KH UHOHYDQW GLVSRVLWLYH LQTXLU\LQGHWHUPLQLQJZKHWKHUDULJKWLVFOHDUO\HVWDEOLVKHG ,,, LVZKHWKHULWZRXOGEHFOHDUWRDUHDVRQDEOHRIILFHUWKDWKLV FRQGXFW ZDV XQODZIXO LQ WKH VLWXDWLRQ KH FRQIURQWHGl ,G 2XULQTXLU\GRHVQRWHQGZLWKWKHGHWHUPLQDWLRQWKDWWKH %HFDXVHLQWKLVSURFHGXUDOSRVWXUHZHPXVWWDNHWKHIDFWVLQ IDFWVDOOHJHGZRXOGDPRXQWWRDYLRODWLRQRI3KHOSVjV)RXUWK WKHOLJKWPRVWIDYRUDEOHWRWKHSODLQWLIIWKHVHTXHVWLRQVDUH $PHQGPHQWULJKWV6DXFLHUY.DW]866&W VWULFWO\ OHJDO DQG ZH UHYLHZ WKHP GH QRYR 'LFNHUVRQ Y &R\ PD\ \HW EH HQWLWOHG WR VXPPDU\ 0F&OHOODQ)GWK&LU MXGJPHQWLI3KHOSVjVULJKWVZHUHQRWFOHDUO\HVWDEOLVKHGDWWKH WLPHRIWKHLQFLGHQWRUPRUHSUHFLVHO\LILQ$XJXVWLW 7R GHFLGH ZKHWKHU 3KHOSV SUHVHQWHG HYLGHQFH WKDW &R\ ZRXOGQRWKDYHEHHQmFOHDUWRDUHDVRQDEOHRIILFHU>LQ&R\jV YLRODWHG KLV FRQVWLWXWLRQDO ULJKW QRW WR EH VXEMHFWHG WR SRVLWLRQ@WKDWKLVFRQGXFW ZDVXQODZIXOLQWKHVLWXDWLRQKH XQQHFHVVDU\EHDWLQJZHPXVWILUVWDVFHUWDLQWKHVRXUFHRIWKDW FRQIURQWHGl,G ULJKW6HH*UDKDPY&RQQRU86m,Q DGGUHVVLQJDQH[FHVVLYHIRUFHFODLPEURXJKWXQGHU 7KHOHJDOSUHFHGHQWRQZKLFKZHUHO\LQFRQFOXGLQJWKDW DQDO\VLVEHJLQVE\LGHQWLI\LQJWKHVSHFLILFFRQVWLWXWLRQDOULJKW 3KHOSV HQMR\HG WKH SURWHFWLRQ RI WKH )RXUWK $PHQGPHQW DOOHJHGO\LQIULQJHGE\WKHFKDOOHQJHGDSSOLFDWLRQRIIRUFHl ZKLOH LQ WKH FXVWRG\ RI WKH DUUHVWLQJ RIILFHUV DQWHGDWHV WKH %HWZHHQWKHP3KHOSVDQG&R\KDYHSURSRVHGWKUHHSRVVLEOH LQFLGHQWLQWKLVFDVHE\DOPRVWDGHFDGH6HH0F'RZHOOY VRXUFHVWKH)RXUWK$PHQGPHQWWKHGXHSURFHVVFODXVHRIWKH 5RJHUV )G WK &LU 7KHUH LV )RXUWHHQWK $PHQGPHQWDQGWKH(LJKWK$PHQGPHQW7KH KRZHYHURQHRIRXUFDVHVZKLFKZKLOHZHFRQFOXGHLWGLGQRW TXHVWLRQRIZKLFKDPHQGPHQWVXSSOLHV3KHOSVjVULJKWVLVQRW DIIHFW WKH DXWKRULW\ RI 0F'RZHOO QHYHUWKHOHVV PHULWV PHUHO\ DFDGHPLF IRU WKH VWDQGDUGV RI OLDELOLW\ YDU\ GLVFXVVLRQ,Q+ROPHVY&LW\RI0DVVLOORQ)GWK VLJQLILFDQWO\ DFFRUGLQJ WR ZKLFK DPHQGPHQW DSSOLHV 6HH &LU +ROPHV EURXJKW D VHFWLRQ VXLW DJDLQVW 3KHOSVY&R\HWDO 1R 1R 3KHOSVY&R\HWDO WKDWWKH)RXUWK$PHQGPHQWLWVHOISURYLGHVZHDNWH[WXDO 'DUUDK Y &LW\ RI 2DN 3DUN )G WK &LU VXSSRUW IRU VXFK DQ H[WHQVLRQ $V WKH )RXUWK m$VXEVWDQWLDOO\KLJKHUKXUGOHPXVWEHVXUSDVVHGWR $PHQGPHQWSURWHFWVDJDLQVWXQUHDVRQDEOHmVHL]XUHVlLW PDNH D VKRZLQJ RI H[FHVVLYH IRUFH XQGHU WKH )RXUWHHQWK VHHPVSULPDULO\GLUHFWHGWRWKHLQLWLDODFWRIUHVWUDLQLQJ $PHQGPHQWWKDQXQGHUWKHµREMHFWLYHUHDVRQDEOHQHVVjWHVWRI DQLQGLYLGXDOjVOLEHUW\VXFKDVDQLQYHVWLJDWRU\VWRSRU >WKH)RXUWK$PHQGPHQW@l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jVFODLPDULVHVXQGHU ZRXOGQRWKDYHFRQVLGHUHGLWVUHDVRQLQJJHUPDQHWRWKHFDVH WKH )RXUWK $PHQGPHQW DQG LWV UHDVRQDEOHQHVV VWDQGDUG RI DQ DUUHVWHH LQ FXVWRG\ RI WKH RIILFHUV ZKR DUUHVWHG KLP *UDKDP 86 DW 7KDW VWDQGDUG UHTXLUHV WKDW WKH 9DOHQFLDLVDOWRJHWKHULUUHOHYDQWLQWKLVFDVHZKLFKGRHVQRW RIILFHUjVXVHRIIRUFHEHREMHFWLYHO\UHDVRQDEOHEDODQFLQJWKH LQYROYHDMDLOGLVWXUEDQFHDQGZKLFKGRHVLQYROYHDQDUUHVWLQ FRVWWRWKHLQGLYLGXDODJDLQVWWKHJRYHUQPHQWjVLQWHUHVWVLQ SURJUHVV0RUHRYHULQ*DQWWWKHFDVHRIDSUHWULDOGHWDLQHH HIIHFWLQJWKHVHL]XUH,GDW7KLVVWDQGDUGFRQWDLQVD ZKRKDGEHHQLQFDUFHUDWHGEHFDXVHKHFRXOGQRWSRVWERQG EXLOWLQ PHDVXUH RI GHIHUHQFH WR WKH RIILFHUjV RQWKHVSRW ZHUHMHFWHGDQLQYLWDWLRQWRDSSO\WKH(LJKWK$PHQGPHQWLQ MXGJPHQWDERXWWKHOHYHORIIRUFHQHFHVVDU\ LQ OLJKWRIWKH UHOLDQFHRQ9DOHQFLDEHFDXVHm*DQWWZDVE\QRVWUHWFKRIWKH FLUFXPVWDQFHVRIWKHSDUWLFXODUFDVH,G6DXFLHU6&W LPDJLQDWLRQ JXLOW\ RI FDXVLQJ D SULVRQ GLVWXUEDQFHl DW7KHRIILFHUj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jV ULJKWV ,Q DVVHVVLQJ WKH $PHQGPHQWVWDQGDUGIRFXVHVRQWKHRIILFLDOjVmREGXUDF\DQG UHDVRQDEOHQHVV RI &R\jV DFWLRQV ZH DQDO\]H WKH HYHQWV LQ ZDQWRQQHVVl:KLWOH\Y$OEHUV86 VHJPHQWV'LFNHUVRQY0F&OHOODQ)G DVNLQJmZKHWKHUIRUFHZDVDSSOLHGLQDJRRGIDLWKHIIRUWWR WK&LU7KHUHOHYDQWVHJPHQWRIWKLVVWRU\LVZKDW PDLQWDLQRUUHVWRUHGLVFLSOLQHRUPDOLFLRXVO\DQGVDGLVWLFDOO\ KDSSHQHGDIWHU&R\WDFNOHGWKHKDQGFXIIHG3KHOSVDQGZDV IRUWKHYHU\SXUSRVHRIFDXVLQJKDUPl,GDWTXRWLQJ VLWWLQJRQWRSRIKLP7KHGLVWULFWFRXUWKHOGWKDWRQFH&R\ sRKQVRQY*OLFN)GG&LU ZDV RQ WRS RI 3KHOSV WKHUH ZDV QR HYLGHQFH WKDW 3KHOSV SUHVHQWHGDWKUHDWWR&R\RUDQ\RWKHURIILFHU$OWKRXJKZH )LQDOO\LIDSODLQWLIILVQRWLQDVLWXDWLRQZKHUHKLVULJKWVDUH PXVWDOZD\VZHLJKWKHJRYHUQPHQWjVLQWHUHVWMXVWLI\LQJWKH JRYHUQHGE\WKHSDUWLFXODUSURYLVLRQVRIWKH)RXUWKRU(LJKWK XVHRIIRUFHDJDLQVWWKHLQGLYLGXDOjVLQWHUHVWLQDYRLGLQJWKDW $PHQGPHQWV WKH PRUH JHQHUDOO\ DSSOLFDEOH GXH SURFHVV IRUFH&R[)GDWDQGZHPXVWDGGLQWKHPHDVXUHRI FODXVH RI WKH )RXUWHHQWK $PHQGPHQW VWLOO SURYLGHV WKH 3KHOSVY&R\HWDO 1R 1R 3KHOSVY&R\HWDO LQGLYLGXDOVRPHSURWHFWLRQDJDLQVWSK\VLFDODEXVHE\RIILFLDOV &R\ DUJXHV WKDW 3KHOSV VKRXOG EH FODVVLILHG DV D SUHWULDO 'DUUDK)GDW,QSDUWLFXODUm>L@WLVFOHDU GHWDLQHH DQG WKDW m>W@KH VWDQGDUG XQGHU ZKLFK D SUHWULDO WKDWWKH'XH3URFHVV&ODXVHSURWHFWVDSUHWULDOGHWDLQHHIURP GHWDLQHHjV FODLP RI H[FHVVLYH IRUFH LV HYDOXDWHG OLHV LQ WKH WKH XVH RI H[FHVVLYH IRUFH WKDW DPRXQWV WR SXQLVKPHQWl PXUN\ DUHD EHWZHHQ WKH )RXUWK DQG (LJKWK $PHQGPHQWVl *UDKDP86DWQ TXRWLQJ*DQWWY$NURQ&RUU)DFLOLW\1R:/ WK &LU sDQ XQSXEOLVKHG :KDWHYHU 7KH GLVWULFW FRXUW FRUUHFWO\ GHWHUPLQHG WKDW WKH DOOHJHG DUJXPHQWVFDQEHPDGHDERXWSUHWULDOGHWDLQHHVjULJKWVDUH EHDWLQJ RFFXUUHG GXULQJ WKH FRXUVH RI WKH DUUHVW RI D IUHH EHVLGHWKHSRLQWLQWKLVFDVHLQZKLFKWKHSODLQWLIIZDVVWLOOLQ SHUVRQ DQG WKHUHIRUH WKH SDUWLHVj ULJKWV DQG OLDELOLWLHV DUH WKH FXVWRG\ RI WKH DUUHVWLQJ RIILFHUV DQG ZDV QHYHU JRYHUQHG E\ WKH )RXUWK $PHQGPHQWjV UHDVRQDEOHQHVV LQFDUFHUDWHG 7KH mPXUN\ DUHDl GRHV QRW EHJLQ XQWLO WKH VWDQGDUG&R\FRQWHQGVWKDWWKH)RXUWK$PHQGPHQWGRHVQRW SURWHFWLRQRIWKH)RXUWK$PHQGPHQWHQGVDQGRXUSUHFHGHQW DSSO\ WR 3KHOSVjV FDVH EHFDXVH 3KHOSV KDG DOUHDG\ EHHQ HVWDEOLVKHV WKDW DQ DUUHVWHH LQ WKH FXVWRG\ RI WKH DUUHVWLQJ DUUHVWHGZKHQWKHLQFLGHQWWRRNSODFH2XUFDVHVUHIXWHWKH RIILFHUVLVVWLOOVKHOWHUHGE\WKH)RXUWK$PHQGPHQW LGHDWKDWWKHSURWHFWLRQRIWKH)RXUWK$PHQGPHQWGLVDSSHDUV VRVXGGHQO\$WWKHWLPHRIWKHLQFLGHQW3KHOSVZDVVWLOOLQ &R\DUJXHGEHORZWKDWWKH(LJKWK$PHQGPHQWJRYHUQHG WKHFXVWRG\RI&R\DQG6WXWHVWKHDUUHVWLQJRIILFHUV6WXWHV 3KHOSVj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m>7@KH WKH)LIWK&LUFXLWDSSOLHGWKH(LJKWK$PHQGPHQWVWDQGDUGWR VHL]XUH WKDW RFFXUV ZKHQ D SHUVRQ LV DUUHVWHG FRQWLQXHV WKH FDVH RI D SUHWULDO GHWDLQHH LQYROYHG LQ D SULVRQ WKURXJKRXWWKHWLPHWKHSHUVRQUHPDLQVLQWKHFXVWRG\RIWKH GLVWXUEDQFH 7KH )LIWK &LUFXLW KHOG WKDW HYHQ WKRXJK WKH DUUHVWLQJ RIILFHUVl 0F'RZHOO Y 5RJHUV )G ULJKWVRIDSUHWULDOGHWDLQHHDUHJRYHUQHGE\WKH)RXUWHHQWK WK&LU,Q&R[Y7UHDGZD\)G $PHQGPHQWjV GXH SURFHVV FODXVH LG DW WKHUH LV QR WK&LUsXGJH5\DQZULWLQJIRUWKHFRXUWVWDWHGWKDW UHDVRQWRWUHDWSUHWULDOGHWDLQHHVGLIIHUHQWO\IURPFRQYLFWVLQ WKH FRQVWLWXWLRQDO DQDO\VLV GRHV QRW LQVWDQWO\ FKDQJH WKH WKHFRQWH[WRISULVRQRUMDLOGLVWXUEDQFHV,GDW,Q PRPHQWDVXVSHFWLVVXEGXHGE\WKHSROLFHDQGWKDWmFUHDWLQJ GHEDWLQJZKLFKVWDQGDUGWRDSSO\WKH)LIWK&LUFXLWH[SOLFLWO\ DGLIIHUHQW)RXUWK$PHQGPHQWVWDQGDUGDSSOLFDEOHWRWKHXVH GLVWLQJXLVKHG EHWZHHQ LQFDUFHUDWHG SUHWULDO GHWDLQHHV DQG RIIRUFHLQDSRVWDUUHVWVLWXDWLRQWKDQLVDSSOLFDEOHWRSUH DUUHVWHHVVWLOOLQWKHFXVWRG\RIWKHDUUHVWLQJRIILFHUV DUUHVWFRQGXFW>ZRXOGLQWURGXFH@DGLVWLQFWLRQLQPHDQLQJRI WKH )RXUWK $PHQGPHQW WKDW LV IRXQG QRZKHUH LQ LWV :HGRQRWEHOLHYHWKDWWKH)RXUWK$PHQGPHQWSURYLGHV ODQJXDJHl :KLOH WKH FRQWLQXLQJ VHL]XUH UXOH LV QRW DQDSSURSULDWHFRQVWLWXWLRQDOEDVLVIRUSURWHFWLQJDJDLQVW XQLYHUVDOO\DFFHSWHGLQRWKHUFLUFXLWVVHH)RQWDQDY+DVNLQ GHOLEHUDWHRIILFLDOXVHVRIIRUFHRFFXUULQJDVLQWKLVFDVH )G QWK&LUGHWDLOLQJFLUFXLW DIWHU WKH LQFLGHQWV RI DUUHVW DUH FRPSOHWHG DIWHU WKH VSOLWRQWKLVLVVXHLWLVWKHODZLQWKLVFLUFXLWDQGKDVEHHQ SODLQWLII KDV EHHQ UHOHDVHG IURP WKH DUUHVWLQJ RIILFHUjV VLQFH0F'RZHOO FXVWRG\ DQG DIWHU WKH SODLQWLII KDV EHHQ LQ GHWHQWLRQ DZDLWLQJ WULDO IRU D VLJQLILFDQW SHULRG RI WLPH 2XU UHDVRQVIRUVRGHFLGLQJDUHWKUHHIROG)LUVWZHEHOLHYH