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m7KXVZLWKUHVSHFWWR WKHVLWXDWLRQSUHVHQWHGZKHQDQHPSOR\HURQLWVRZQLQLWLDWLYH GLVVHPLQDWHVIDOVHDQGPLVOHDGLQJLQIRUPDWLRQDERXWDEHQHILW /(( 1(67(5 720 62:'(56 ; SODQWKHSRVLWLRQRIWKH6L[WK&LUFXLWLVDOLJQHGZLWKWKDWRI '21 6&+1(,'(5 WKH7KLUG&LUFXLWLQ8QLV\Vl ,QWKHPDWWHUEHIRUHXVWRGD\ 3ODLQWLIIV$SSHOODQWV WKHIDFWXDODOOHJDWLRQVDSSHDUWRLQGLFDWHYLDWKHVOLGHVKRZ 1R DQGSULQWHGEXOOHWLQVSUHVHQWHGWR3ODLQWLIIVE\'HIHQGDQWVDV Y ! ZHOO DV YLD 3ODLQWLIIVj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n:DOWHU+5LFH&KLHI'LVWULFWsXGJH RSLQLRQ $UJXHG 6HSWHPEHU 'HFLGHGDQG)LOHG sDQXDU\ %HIRUH .583$16.<DQG&/$<&LUFXLWsXGJHV *:,1 'LVWULFWsXGJH 7KH +RQRUDEOH sDPHV 6 *ZLQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ 1HVWHUHWDOY$OOHJLDQFH 1R 1R 1HVWHUHWDOY$OOHJLDQFH +HDOWKFDUH&RUS +HDOWKFDUH&RUS BBBBBBBBBBBBBBBBB BBBBBBBBBBBBBBBBB &2816(/ &21&855(1&( BBBBBBBBBBBBBBBBB $5*8(' 6FRWW $ /HIHODU 0,//,625 12%,/ &OHYHODQG2KLRIRU$SSHOODQWV%ULDQ7sRKQVRQ%$.(5 &/$< &LUFXLW sXGJH FRQFXUULQJ 7KH PDMRULW\ LV +267(7/(5 &ROXPEXV 2KLR IRU $SSHOOHH FRUUHFWLQLWVFRQFOXVLRQWKDW3ODLQWLIIVjVWDWHODZEUHDFKRI 21 %5,() 3DXO & 0RUULVRQ 0,//,625 12%,/ FRQWUDFWFODLPVVHHNLQJWRUHFRYHUFHUWDLQmWUDQVLWLRQEHQHILWVl &OHYHODQG2KLRIRU$SSHOODQWV%ULDQ7sRKQVRQ(OL]DEHWK DOOHJHGO\ SURPLVHG WR 3ODLQWLIIV E\ 'HIHQGDQW $OOHJLDQFH $0F1HOOLH%$.(5 +267(7/(5&ROXPEXV2KLRIRU +HDOWKFDUH &RUSRUDWLRQ DQG UHOLHG XSRQ E\ 3ODLQWLIIV LQ $SSHOOHH GHFLGLQJ WR WHUPLQDWH WKHLU HPSOR\PHQW ZLWK %D[WHU ,QWHUQDWLRQDO ,QF DUH SUHHPSWHG E\ WKH (PSOR\PHQW .583$16.<sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQ 5HWLUHPHQW 6HFXULW\ $FW RI m(5,6$l 86& ZKLFK&/$<sDQG*:,1'sMRLQHG&/$<s SS HW VHT ,Q DGGLWLRQ WKH PDMRULW\ LV FRUUHFW LQ LWV DOVRGHOLYHUHGDVHSDUDWHFRQFXUULQJRSLQLRQ KROGLQJ WKDW 3ODLQWLIIVj FODLPV IRU WKH XQSDLG WUDQVLWLRQ EHQHILWVIDLODVDPDWWHURIODZXQGHU(5,6$LQDVPXFKDVWKH BBBBBBBBBBBBBBBBB SODQGRFXPHQWVGRQRWSURYLGHIRUWKHEHQHILWVLQTXHVWLRQ 7KHUHIRUH,IXOO\FRQFXULQWKHPDMRULW\RSLQLRQ KRZHYHU, 23,1,21 ZULWHVHSDUDWHO\DWWKLVWLPHWRUHLQIRUFHWKHEDVLVXSRQZKLFK BBBBBBBBBBBBBBBBB WKHPDMRULW\KROGLQJUHVWV .583$16.<&LUFXLWsXGJH,QWKLVGLYHUVLW\VWDWHODZ %DVHGRQWKHOHJDOWKHRU\XSRQZKLFK3ODLQWLIIVjVRXJKWWR EUHDFKRIFRQWUDFWDFWLRQWKHSODLQWLIIDSSHOODQWV/HH1HVWHU UHFRYHUWKHWUDQVLWLRQEHQHILWVLQWKLVFDVHEUHDFKRIFRQWUDFW 7RP 6RZGHUV DQG 'RQ 6FKQHLGHU FROOHFWLYHO\ mWKH LW LV IDFWXDOO\ XQGLVSXWHG WKDW WKH SODQ GRFXPHQWV GR QRW SODLQWLIIVlRUmWKH)RUPHU(PSOR\HHVl KDYHFRQWHVWHGWKH SURYLGHIRUWKHWKHVHEHQHILWVDQGWKDWDVDUHVXOWUHFRYHU\LV GLVWULFW FRXUWjV MXGJPHQW IRU WKHLU HUVWZKLOH HPSOR\HU SUHFOXGHGXQGHU(5,6$+RZHYHUSXUVXDQWWRWKLV&RXUWjV GHIHQGDQWDSSHOOHH $OOHJLDQFH +HDOWKFDUH &RUSRUDWLRQ UHFHQWGHFLVLRQLQsDPHVY3LUHOOL$UPVWURQJ7LUH&R m+HDOWKFDUHlRUmWKHGHIHQGDQWl DVXEVLGLDU\RI$OOHJLDQFH )G WK&LU KDG3ODLQWLIIVSURFHHGHGXQGHUD &RUSRUDWLRQ m$OOHJLDQFHl 7KH )RUPHU (PSOR\HHV KDYH EUHDFKRIILGXFLDU\GXW\WKHRU\DQRSHQTXHVWLRQPD\KDYH FODLPHGWKDW$OOHJLDQFH+HDOWKFDUHSURPLVHGWKHPHLJKW\HDUV UHPDLQHG DV WR ZKHWKHU 'HIHQGDQW RQ LWV RZQ LQLWLDWLYH RIVSHFLDOSHQVLRQSODQFRQWULEXWLRQVUHIHUUHGWRDVmWUDQVLWLRQ SURYLGHGPDWHULDOO\IDOVHRULQDFFXUDWHLQIRUPDWLRQUHJDUGLQJ EHQHILWVlRUmWUDQVLWLRQFRQWULEXWLRQVlLQH[FKDQJHIRUWKHLU IXWXUHEHQHILWVXQGHUWKHSODQXSRQZKLFK3ODLQWLIIVUHOLHGWR YROXQWDU\ LQWHUFRPSDQ\ MRE WUDQVIHUV +RZHYHU WKHLUGHWULPHQW DSSUR[LPDWHO\ WZR \HDUV DIWHU WKRVH UHDVVLJQPHQWV +HDOWKFDUH WHUPLQDWHG WKH HPSOR\PHQW RI HDFK SODLQWLII $VWKHFDVHRI,QUH8QLV\V&RUS)G G&LU VLPXOWDQHRXVO\GLVFRQWLQXLQJWKHLUWUDQVLWLRQEHQHILWV7KH LQVWUXFWVWKH7KLUG&LUFXLWWKDWDUHVHUYDWLRQRIULJKWV WULDOFRXUWUXOHGWKDWWKHSODLQWLIIVKDGQRWSURYHGVXVWDLQDEOH SURYLVLRQ FDQQRW SURWHFW DQ HPSOR\HU IURP OLDELOLW\ IRU D FODLPV XQGHU 2KLR FRQWUDFW ODZ EHFDXVH WKRVH VWDWH ODZ EUHDFK RI ILGXFLDU\ GXW\ FODLP XQGHU (5,6$ ZKHQ WKH FDXVHVRIDFWLRQZHUHSUHFOXGHGE\IHGHUDOSUHHPSWLRQXQGHU HPSOR\HUGHOLEHUDWHO\IRVWHUVDEHOLHIWKDWUHWLUHPHQWEHQHILWV WKH(PSOR\HH5HWLUHPHQW,QFRPH6HFXULW\$FWRI DV 1HVWHUHWDOY$OOHJLDQFH 1R 1R 1HVWHUHWDOY$OOHJLDQFH +HDOWKFDUH&RUS +HDOWKFDUH&RUS HQWLUHO\ E\ (5,6$ MXULVSUXGHQFH 1HVWHU Y $OOHJLDQFH DPHQGHG 86& HW VHT m(5,6$l DQG +HDOWKFDUH&RUS)6XSSG 6'2KLR 7KLV IXUWKHUPRUHWKHSODLQWLIIVKDGIDLOHGWRSURYHWKDWWKH(5,6$ UHYLHZLQJFRXUWIROORZLQJFDUHIXOVWXG\DQGFRQVLGHUDWLRQRI SODQGRFXPHQWVVXSSRUWHGWKHLUFODLPV1HVWHUY$OOHJLDQFH WKHGLVWULFWFRXUWjVZHOOUHDVRQHGRSLQLRQDQGMXGJPHQWIRU +HDOWKFDUH&RUS)6XSSG 6'2KLR 7KH WKH GHIHQGDQW WKH EULHIV DQG DUJXPHQWV RI FRXQVHO WKH VROHTXHVWLRQSRVHGRQUHYLHZLVZKHWKHUWKHSODLQWLIIVKDYH PDWHULDOV LQFOXGHG LQ WKH SDUWLHVj MRLQW DSSHQGL[ DQG WKH YDOLG EUHDFK RI FRQWUDFW FODLPV XQGHU HLWKHU 2KLR ODZ RU FRQWUROOLQJOHJDODXWKRULWLHVKDVXSRQGHQRYRH[DPLQDWLRQ (5,6$ MXULVSUXGHQFH DJDLQVW WKHLU IRUPHU HPSOR\HU LGHQWLILHG QR UHYHUVLEOH HUURU RI IDFW RU ODZ LQ WKH GLVWULFW DQFKRUHG LQ LWV IDLOXUH WR FRQWULEXWH DOOHJHGO\SURPLVHG MXGJHjVUHVROXWLRQRIWKHSODLQWLIIjVFODLPV$FFRUGLQJO\WKH WUDQVLWLRQ EHQHILWV WR WKH )RUPHU (PSOR\HHVj (5,6$ GLVWULFW FRXUWjV $SULO UXOLQJ LV DGRSWHG DV WKH JRYHUQHGSHQVLRQDFFRXQWVDIWHU$XJXVW GHFLVLRQRIWKLVUHYLHZLQJFRXUW 7KH)RUPHU(PSOR\HHVKDYHHYLGHQFHGWKDWLQ WKHLU %HFDXVHHDFKRIWKH SODLQWLIIVjDVVLJQPHQWVRIHUURUZDV WKHQHPSOR\HU %D[WHU ,QWHUQDWLRQDO ,QF m%D[WHUl PLVFRQFHLYHG ILQDO MXGJPHQW IRU WKH GHIHQGDQW LV UHRUJDQL]HG LWV RSHUDWLRQV $ SRUWLRQ RI %D[WHUj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mWUDQVLWLRQ FRQWULEXWLRQVl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mDUELWUDU\ DQG FDSULFLRXVl SODQ\HDUEHHPSOR\HGE\$OOHJLDQFHRQWKHODVWGD\RIWKH VWDQGDUG)LUHVWRQH7LUH 5XEEHU&RY%UXFK 86 VXEMHFWSODQ\HDU ZKLFKZDV'HFHPEHURIWKHRUGLQDU\ 6DQIRUGY+DUYDUG,QGXV,QF)G FDOHQGDU \HDU )XUWKHUPRUH WKH 3ODQ 6XPPDU\ VSHFLILHG WK &LU 7KH $OOHJLDQFH &RUSRUDWLRQ WKDW DOWKRXJK D mWUDQVLWLRQl HPSOR\HH FRXOG UHFHLYH 5HWLUHPHQW3ODQGRFXPHQW EHVWRZHGmFRPSOHWHDQG WUDQVLWLRQEHQHILWVIRUDPD[LPXPRIHLJKW\HDUVKHRUVKH XQIHWWHUHGGLVFUHWLRQlXSRQWKHDGPLQLVWUDWLYHFRPPLWWHHWR ZRXOGIRUIHLWDQ\IXWXUHXQDFFUXHGWUDQVLWLRQEHQHILWVVKRXOG FRQVWUXHSODQWHUPVDQGGHILQHWKHULJKWVDQGEHQHILWVRISODQ WKHHPSOR\HHKDYHmLQFXUUHGD7HUPLQDWLRQRI(PSOR\PHQWl SDUWLFLSDQWV +RZHYHU WKH GLVWULFW FRXUW UHVROYHG WKDW RUZDVRWKHUZLVHQRWmHPSOR\HGRQWKHODVWGD\RIWKH3ODQ $OOHJLDQFHKDGZDLYHGWKDWFRQWHQWLRQE\QHJOHFWLQJWRDVVHUW