Maharg Inc. v. Van Wert Solid Waste

Court: Court of Appeals for the Sixth Circuit
Date filed: 2001-05-07
Citations:
Copy Citations
Click to Find Citing Cases
Combined Opinion
       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


0$+$5* ,1&                     ;
         3ODLQWLII$SSHOODQW      
                                   
                                     1R
            Y                     
                                    !
                                   
9$1 :(57 62/,' :$67(               
0$1$*(0(17 ',675,&7               
*$5< ' $'$06&KDLUPDQ            
RIWKH%RDUG9DQ:HUW6ROLG        
:DVWH0DQDJHPHQW'LVWULFW         
                                   
$9$ . *22''LUHFWRURI           
9DQ:HUW6ROLG:DVWH               
0DQDJHPHQW'LVWULFW*$5<          
' &223(5'LUHFWRURI9DQ         
:HUW6ROLG:DVWH                   
0DQDJHPHQW'LVWULFW               
                                   
        'HIHQGDQWV$SSHOOHHV 
                                  1
       $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
       IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW7ROHGR
      1RnsDPHV*&DUU'LVWULFWsXGJH
              $UJXHG'HFHPEHU
            'HFLGHGDQG)LOHG0D\



                           
     0DKDUJ,QFY9DQ:HUW                     1R
      6ROLG:DVWHHWDO

    %HIRUH0(55,771(/621DQG%$7&+(/'(5
                    &LUFXLWsXGJHV
                    BBBBBBBBBBBBBBBBB
                         &2816(/
$5*8('  .HYLQ 1 0F0XUUD\ )5267 	 s$&2%6
&LQFLQQDWL2KLRIRU$SSHOODQW$OELQ%DXHU,,($670$1
	60,7+7ROHGR2KLRIRU$SSHOOHHV21%5,().HYLQ
1 0F0XUUD\ &KULVWRSKHU 6 +DEHO )5267 	 s$&2%6
&LQFLQQDWL2KLRIRU$SSHOODQW$OELQ%DXHU,,+HQU\1
+HXHUPDQ ($670$1 	 60,7+ 7ROHGR 2KLR IRU
$SSHOOHHV
                    BBBBBBBBBBBBBBBBB
                        23,1,21
                    BBBBBBBBBBBBBBBBB
   '$9,' $ 1(/621 &LUFXLW sXGJH  7KH TXHVWLRQ
SUHVHQWHGLQWKLVDSSHDOLVZKHWKHUWKHFRQVWLWXWLRQDOULJKWVRI
WKHSODLQWLIIDQ2KLRFRUSRUDWLRQHQJDJHGLQWKHEXVLQHVVRI
VROLGZDVWHFROOHFWLRQDQGGLVSRVDOZHUHYLRODWHGE\ZDVWH
SURFHVVLQJUHVWULFWLRQVLPSRVHGXQGHU2KLRODZE\WKHFRXQW\
ZKHUH WKH ZDVWH RULJLQDWHG  7KH UHVWULFWLRQV LQ TXHVWLRQ
SUHFOXGHGWKHSODLQWLIIIURPFRQWLQXLQJWRGLVSRVHRIWKHZDVWH
DWDQ,QGLDQDODQGILOOWKHRSHUDWRURIZKLFKKDGGHFOLQHGWR
PHHWWKHFRXQW\jVFRQGLWLRQVIRUGHVLJQDWLRQRIWKHODQGILOODV
DQ DSSURYHG GLVSRVDO VLWH  o  FRQGLWLRQV WKDW LQFOXGHG
H[HFXWLRQ RI D VWDQGDUGIRUP DJUHHPHQW WR FROOHFW D
SUHVFULEHGSHUWRQVXUFKDUJHDQGUHPLWLWWRWKHFRXQW\
  ,Q D GHFLVLRQ UHSRUWHG DW  )6XSSG  1' 2KLR
 WKH GLVWULFW FRXUW GLVPLVVHG WKH DFWLRQ XQGHU 5XOH
E)HG5&LY3:HVKDOODIILUPWKHGLVPLVVDO
1R                      0DKDUJ,QFY9DQ:HUW          
                                       6ROLG:DVWHHWDO

                                  ,
  7KH SODLQWLII 0DKDUJ ,QF FROOHFWV VROLG ZDVWH IURP
UHVLGHQWLDO FRPPHUFLDO DQG LQGXVWULDO FXVWRPHUV RI ZKLFK
VRPH  DUH ORFDWHG LQ 1RUWKZHVWHUQ 2KLRjV 9DQ :HUW
&RXQW\3ULRUWR$SULORI0DKDUJSDWURQL]HGDVDQLWDU\
ODQGILOOORFDWHGLQDQDGMDFHQWMXULVGLFWLRQosD\&RXQW\o
LQ,QGLDQD$OO RIWKHZDVWHWKDW0DKDUJFROOHFWHGLQ9DQ
:HUW &RXQW\ ZDV KDXOHG WR WKH sD\ &RXQW\ IDFLOLW\ IRU
GLVSRVDO
  'HIHQGDQW9DQ:HUW6ROLG:DVWH0DQDJHPHQW'LVWULFWLV
DSXEOLFHQWLW\IRUPHGSXUVXDQWWR&KDSWHUVDQGRI
WKH2KLR5HYLVHG&RGH7KHGLVWULFWKDVERXQGDULHVWKDWDUH
FRWHUPLQRXVZLWKWKRVHRI9DQ:HUW&RXQW\DQGWKHHQWLW\LV
KHDGHGE\DERDUGRIGLUHFWRUVPDGHXSRIWKHPHPEHUVRIWKH
FRXQW\jV ERDUG RI FRPPLVVLRQHUV  )RU WKH VDNH RI
FRQYHQLHQFHZHVKDOOXVHWKHWHUPVmGLVWULFWlDQGmFRXQW\l
LQWHUFKDQJHDEO\LQWKLVRSLQLRQ
  7KH GLVWULFW PDLQWDLQV D VROLG ZDVWH PDQDJHPHQW SODQ
SXUVXDQWWR2KLR5HY&RGH†$VSHUPLWWHGE\2KLR
5HY&RGH†(WKHSODQVWDWHVWKDWWKHERDUGLV
DXWKRUL]HGWRPDNHmIDFLOLW\GHVLJQDWLRQVlXQGHU2KLR5HY
&RGH†7KHHIIHFWRIWKLVVWDWHPHQWXQGHUWKHODWWHU
VHFWLRQRIWKHFRGHLVWRDOORZWKHERDUGWRmGHVLJQDWHVROLG
ZDVWHGLVSRVDOWUDQVIHURUUHVRXUFHUHFRYHU\IDFLOLWLHV
ZKHUHVROLGZDVWHVJHQHUDWHGZLWKLQRUWUDQVSRUWHGLQWRWKH
GLVWULFWVKDOOEHWDNHQIRUGLVSRVDOl2KLR5HY&RGH
†$,WLVWKURXJKVXFKIDFLOLW\GHVLJQDWLRQVWKDWWKH
ERDUGFRQGXFWVZKDW0DKDUJUHIHUVWRDVmIORZFRQWUROl
   2KLR 5HY &RGH †  FRQWDLQV GHWDLOHG SURFHGXUDO
UHTXLUHPHQWV IRU PDNLQJ VROLG ZDVWH IDFLOLW\ GHVLJQDWLRQV
7KHSURFHVVEHJLQVZLWKDGRSWLRQRIDUHVROXWLRQLQZKLFKWKH
ERDUG H[SUHVVHV DQ LQWHQW WR GHVLJQDWH VXFK IDFLOLWLHV  6HH
2KLR5HY&RGH†%7KH9DQ:HUWERDUGDGRSWHG
DUHVROXWLRQRIWKLVW\SHRQ$XJXVW
     0DKDUJ,QFY9DQ:HUW                          1R        1R                    0DKDUJ,QFY9DQ:HUW       
      6ROLG:DVWHHWDO                                                                                       6ROLG:DVWHHWDO

  7KH ERDUGjV UHVROXWLRQ LQFOXGHG D UHTXHVW IRU WKH                 0DU\ODQG GLG QRW YLRODWH WKH 'XH 3URFHVV &ODXVH E\ LWV
VXEPLVVLRQRISURSRVDOVE\RSHUDWRUVRIVROLGZDVWHIDFLOLWLHV             RXWULJKWSURKLELWLRQRIWKHRSHUDWLRQRIUHWDLOJDVROLQHVWDWLRQV
LQ WKH 1RUWKZHVWHUQ 2KLR1RUWKHDVWHUQ ,QGLDQD DUHD  7KH            E\LQWHJUDWHGRLOFRPSDQLHVoDQGWKH6XSUHPH&RXUWKDG
UHTXHVWH[SODLQHGDPRQJRWKHUWKLQJVWKDWHDFKVXFFHVVIXO                mQRKHVLWDQF\lLQUHMHFWLQJWKHLQWHJUDWHGRLOFRPSDQLHVjGXH
GHVLJQHH ZRXOG EH UHTXLUHG WR H[HFXWH D mGHVLJQDWLRQ                SURFHVV FKDOOHQJH WR WKH 0DU\ODQG VWDWXWH VHH ([[RQ 
DJUHHPHQWlREOLJDWLQJWKHGHVLJQHHWRFROOHFWDmFRQWUDFWIHHl             86DWoLWIROORZVDIRUWLRULWKDWZHVKRXOGKDYHQR
RI  IRU HDFK WRQ RI VROLG ZDVWH JHQHUDWHG ZLWKLQ WKH        KHVLWDQF\LQUHMHFWLQJ0DKDUJjVGXHSURFHVVFKDOOHQJHWRWKH
GLVWULFW DQG GHOLYHUHG WR WKH GHVLJQDWHG IDFLOLW\  7KH            9DQ:HUW&RXQW\VFKHPH $QGLQSRLQWRIIDFWZHKDYH
UHVROXWLRQIXUWKHUH[SODLQHGWKDWWKHVHIHHVoZKLFKZHUHWR             QRQH
EHUHPLWWHGWRWKHGLVWULFWPRQWKO\oKDGEHHQVHWDWDOHYHO
GHWHUPLQHGmRQWKHEDVLVRIDQWLFLSDWHGILQDQFLDOQHHGRIWKH                7KHGLVWULFWFRXUWjVMXGJPHQWRIGLVPLVVDOLV$)),50('
'LVWULFWLQLPSOHPHQWLQJWKH3ODQDQGHQIRUFLQJFRPSOLDQFH
ZLWKIDFLOLW\GHVLJQDWLRQVl
   &RSLHV RI WKH UHTXHVW IRU SURSRVDOV ZHUH VHQW WR WKH
RSHUDWRUVRIVROLGZDVWHIDFLOLWLHVFRQVLGHUHGWREHZLWKLQ
DUHDVRQDEOHGLVWDQFH(OHYHQRIWKHVHIDFLOLWLHVDUHLQ2KLR
DQGWZRDUHLQ,QGLDQD7KHERDUGDOVRSXEOLVKHGQRWLFHRI
WKHUHTXHVWIRUSURSRVDOVLQ2KLRDQG,QGLDQDQHZVSDSHUV
  2Q $XJXVW   WKH ERDUG RSHQHG VHDOHG ELGV
VXEPLWWHG LQ UHVSRQVH WR LWV VROLFLWDWLRQ  7KH ERDUG WKHQ
DGRSWHGDUHVROXWLRQQRWLI\LQJWKHSXEOLFWKDWLWSURSRVHGWR
GHVLJQDWHVL[VROLGZDVWHIDFLOLWLHVoIRXULQ2KLRDQGWZRLQ
,QGLDQDoDVWKHRQO\IDFLOLWLHVDXWKRUL]HGWRUHFHLYHZDVWH
JHQHUDWHG ZLWKLQ WKH GLVWULFW  7KH ILUVW RI WKH IDFLOLWLHV VR
LGHQWLILHG ZDV WKH RQH 0DKDUJ KDG EHHQ XVLQJ  o  WKH sD\
&RXQW\ODQGILOOLQ3RUWODQG,QGLDQD7KDWIDFLOLW\LVRSHUDWHG
E\ sD\ &RXQW\ /DQGILOO ,QF DQ DIILOLDWH RI WKH :DVWH
0DQDJHPHQWRUJDQL]DWLRQ
  2Q 6HSWHPEHU   DIWHU DQ RSSRUWXQLW\ IRU SXEOLF
FRPPHQW WKH ERDUG DGRSWHG D UHVROXWLRQ GHVLJQDWLQJ IRXU
VROLGZDVWHIDFLOLWLHVoWZRLQ2KLRDQGWZRLQ,QGLDQDoDV
WKH IDFLOLWLHV DXWKRUL]HG WR UHFHLYH ZDVWH JHQHUDWHG LQ 9DQ
:HUW&RXQW\7KHGHVLJQDWLRQVZKLFKZHUHVXEMHFWWRWKH
H[HFXWLRQRIGHVLJQDWLRQDJUHHPHQWVE\WKHIDFLOLWLHVjRZQHUV
RU RSHUDWRUV QDPHG WKH sD\ &RXQW\ ODQGILOO DV RQH RI WKH
DSSURYHGIDFLOLWLHV
    0DKDUJ,QFY9DQ:HUW                         1R        1R                        0DKDUJ,QFY9DQ:HUW              
      6ROLG:DVWHHWDO                                                                                          6ROLG:DVWHHWDO

DUELWUDULO\ H[FOXGH DQ\RQH IURP WKH 5)3 SURFHVV RQ WKH             7KHGHVLJQDWLRQRIWKHsD\&RXQW\ODQGILOOZDVUHVFLQGHGE\
FRQWUDU\DVZHKDYHVHHQWKHFRXQW\ZHQWRXWRILWVZD\WR              UHVROXWLRQDGRSWHGRQ1RYHPEHU7KHUHDVRQIRUWKH
HQFRXUDJH WKH ZLGHVW SRVVLEOH SDUWLFLSDWLRQ  ,W LV QRW 9DQ      UHFLVVLRQ WKH UHVROXWLRQ H[SODLQHG ZDV WKDW msD\ &RXQW\
:HUW &RXQW\jV IDXOW WKDW 0DKDUJ GLG QRW KDSSHQ WR RZQ D         /DQGILOO,QFKDVLQIRUPHGWKH6ROLG:DVWH'LVWULFWWKDWLWZLOO
ZDVWHGLVSRVDOIDFLOLW\oWKDW0DKDUJLQRWKHUZRUGVZDV              QRWHQWHULQWRDGHVLJQDWLRQDJUHHPHQWZLWKWKH'LVWULFWQRU
QRWVLWXDWHGVLPLODUO\WRKDXOHUVWKDWGLGRZQVXFKIDFLOLWLHV            ZLOO LW SDUWLFLSDWH LQ DQ\ UHELG RI WKH 'LVWULFWjV IDFLOLW\
oDQGWKHFRXQW\REYLRXVO\GLGQRWYLRODWH0DKDUJjVHTXDO                GHVLJQDWLRQVl
SURWHFWLRQULJKWV
                                                                            :LWK RQO\ WKUHH IDFLOLWLHV QRZ RQ WKH DSSURYHG OLVW WKH
                                  &                                       ERDUGGHFLGHGWRLVVXHDVHFRQGUHTXHVWIRUSURSRVDOV,QDQ
                                                                          DSSDUHQWHIIRUWWRSURPRWHZLGHUSDUWLFLSDWLRQRQWKHSDUWRI
  6HFWLRQRIWKH)RXUWHHQWK$PHQGPHQWDOVRSURYLGHVWKDW                SURVSHFWLYH GHVLJQHHV WKH ERDUG GLVSHQVHG ZLWK DQ HDUOLHU
QRVWDWHPD\mGHSULYHDQ\SHUVRQRIOLIHOLEHUW\RUSURSHUW\           UHTXLUHPHQWIRUSULFHSHUWRQELGV
ZLWKRXWGXHSURFHVVRIODZl,WKDVFRPHWREHXQGHUVWRRG
WKDW WKLV SURYLVLRQ KDV D mVXEVWDQWLYHl FRPSRQHQW XQGHU              &RSLHVRIWKHVHFRQGUHTXHVWIRUSURSRVDOVZHUHVHQWWRWKH
ZKLFK mD VWDWH RU ORFDO OHJLVODWLYH PHDVXUH LV MXGLFLDOO\         RSHUDWRUVRIVROLGZDVWHIDFLOLWLHVLQFOXGLQJWKHsD\&RXQW\
YRLGDEOH RQ LWV IDFH LI LW QHFHVVDULO\ FRPSHOV UHVXOWV LQ DOO   ODQGILOORSHUDWRUsD\&RXQW\/DQGILOO,QFGLGQRWVXEPLWD
FDVHVZKLFKDUHµDUELWUDU\DQGFDSULFLRXVEHDULQJQRUHODWLRQ            ELGEXWELGVZHUHUHFHLYHGIURPWKHRSHUDWRUVRIHLJKWRWKHU
WR WKH SROLFH SRZHUjl  6DP 	 $OL ,QF Y 2KLR 'HSjW RI      IDFLOLWLHV  7ZR RI WKHVH IDFLOLWLHV DUH ORFDWHG LQ 9DQ :HUW
/LTXRU &RQWURO  )G  WK &LU  TXRWLQJ             &RXQW\ ILYH DUH ORFDWHG HOVHZKHUH LQ 2KLR DQG RQH LV
(DVWODNHY)RUHVW&LW\(QWHUSULVHV,QF86              ORFDWHGLQ)RUW:D\QH,QGLDQD

                                                                            2Q sDQXDU\   WKH ERDUG DGRSWHG D UHVROXWLRQ
  7KHSRZHUWRSURYLGHE\OHJLVODWLRQIRUVDIHDQGVDQLWDU\               SURSRVLQJ WR LQFOXGH DOO HLJKW IDFLOLWLHV RQ WKH OLVW RI
PDQDJHPHQWRIVROLGZDVWHLVREYLRXVO\DmSROLFH SRZHUl                 GHVLJQHHV3XEOLFFRPPHQWZDVDJDLQLQYLWHG
9DQ :HUW &RXQW\jV ZDVWH PDQDJHPHQW VFKHPH EHDUV DQ
REYLRXVUHODWLRQWRWKLVSROLFHSRZHU0DKDUJFRQWHQGVWKDW                0DKDUJjVODZ\HUVVHQWWKHERDUGDOHWWHUH[SUHVVLQJVWURQJ
WKH FRXQW\ ZDV EHLQJ mDUELWUDU\ DQG FDSULFLRXVl LQ WKH            RSSRVLWLRQWRWKHSURSRVHGGHVLJQDWLRQ$PRQJRWKHUWKLQJV
DGRSWLRQRILWVZDVWHPDQDJHPHQWVFKHPHEXWWKHFRQWHQWLRQ              WKHOHWWHUFRQWHQGHGWKDWm>E@\DXWKRUL]LQJRQO\RQHIDFLOLW\
DVIDUDVZHFDQVHHLVXWWHUO\GHYRLGRIPHULW                         RXWVLGH RI WKH 6WDWH RI 2KLR WR DFFHSW 9DQ :HUW &RXQW\
                                                                          JHQHUDWHGZDVWHWKH'LVWULFWjVSURSRVHGGHVLJQDWLRQYLRODWHV
  5HDVRQDEOH SHRSOH PLJKW TXHVWLRQ WKH ZLVGRP RI WKH               WKH&RPPHUFH&ODXVHRIWKH86&RQVWLWXWLRQl$PRQJ
SDUWLFXODUPHWKRGFKRVHQE\9DQ:HUW&RXQW\WRSURWHFWWKH                WKH FDVHV FLWHG LQ VXSSRUW RI WKLV SURSRVLWLRQ ZDV &	$
KHDOWKDQGZHOIDUHRILWVFLWL]HQVLQVRIDUDVWKHPDQDJHPHQW              &DUERQH,QFY7RZQRI&ODUNVWRZQ1HZ2KLR 5HY               &ODXVH SURWHFWV WKH SDUWLFXODU VWUXFWXUH RU PHWKRGV RI
    &RGH@VHFWLRQ,QRSHUVRQVKDOOGHOLYHURU                     RSHUDWLRQ LQ D >JLYHQ@ PDUNHWl LV D QRWLRQ WKDW KDV EHHQ
    FDXVHWKHGHOLYHU\RIDQ\µ6ROLG:DVWHjJHQHUDWHGZLWKLQ                   VTXDUHO\UHMHFWHGE\WKH6XSUHPH&RXUW6HH([[RQ86
    WKH'LVWULFWDVGHILQHGLQWKHVHFRQG5)3WRDQ\VROLG                    DW
    ZDVWHIDFLOLW\RWKHUWKDQWKH>HLJKW@GHVLJQDWHGIDFLOLWLHV
    l                                                                                                     %
   )URPDQGDIWHU$SULOoDEVHQWDZDLYHUJUDQWHG                       7KHILUVWVHFWLRQRIWKH)RXUWHHQWK$PHQGPHQWSURYLGHV
XQGHU2KLR5HY&RGH†+o0DKDUJ ZRXOG                          DPRQJRWKHUWKLQJVWKDWQRVWDWHVKDOOmGHQ\WRDQ\SHUVRQ
KDYHEHHQVXEMHFWWRDILQHRIQRWPRUHWKDQSHUGD\                     ZLWKLQLWVMXULVGLFWLRQWKHHTXDOSURWHFWLRQRIWKHODZVl7KLV
KDGLWFRQWLQXHGWRXVHWKHsD\&RXQW\ODQGILOODVDGLVSRVDO                   WKH6XSUHPH&RXUWKDVWROGXVmLVHVVHQWLDOO\DGLUHFWLRQWKDW
VLWHIRUVROLGZDVWHJHQHUDWHGLQ9DQ:HUW&RXQW\6HH2KLR                    DOO SHUVRQV VLPLODUO\ VLWXDWHG VKRXOG EH WUHDWHG DOLNHl
5HY&RGH†0DKDUJSURPSWO\EURXJKWVXLWDJDLQVW                       &OHEXUQH Y &OHEXUQH /LYLQJ &WU ,QF  86  
WKHGLVWULFWDQGWKHPHPEHUVRILWVERDUGRIGLUHFWRUVDOOHJLQJ                
WKDWWKHGHIHQGDQWVKDGLPSRVHGDQLPSHUPLVVLEOHUHVWULFWLRQ
RQ WKH IUHH IORZ RI LQWHUVWDWH FRPPHUFH LQ YLRODWLRQ RI                    0DKDUJFRQWHQGVWKDWDOWKRXJKLWVVLWXDWLRQLVVLPLODUWRWKDW
0DKDUJjVFRQVWLWXWLRQDODQGFLYLOULJKWV0DKDUJjVYHULILHG                    RIRWKHUVROLGZDVWHKDXOHUVRSHUDWLQJLQ9DQ:HUW&RXQW\
FRPSODLQW ZKLFK VHW IRUWK WKH IDFWV VXPPDUL]HG DERYH                   0DKDUJKDVEHHQWUHDWHGGLIIHUHQWO\IURPWKHRWKHUKDXOHUV
FRQFOXGHG ZLWK D SUD\HU IRU GHFODUDWRU\ LQMXQFWLYH DQG                 ,W KDV EHHQ WUHDWHG GLIIHUHQWO\ 0DKDUJ VD\V EHFDXVH RWKHU
PRQHWDU\UHOLHI                                                                ZDVWHKDXOHUVRZQHGRUFRQWUROOHGWKHLURZQWUDQVIHUVWDWLRQV
                                                                                DQGRU GLVSRVDO IDFLOLWLHV DQG ZHUH WKXV LQ D SRVLWLRQ WR
                                                                                SDUWLFLSDWH GLUHFWO\ LQ WKH FRXQW\jV IDFLOLW\ GHVLJQDWLRQ
                                                                                SURFHVV  0DKDUJ LQ FRQWUDVW ZDV mH[FOXGHG IURP WKH
                                                                                >5HTXHVWIRU3URSRVDOV@SURFHVVlDQGZDVOHIWWRWKHWHQGHU
     
                                                                                PHUFLHV RI IDFLOLW\ RZQHUV sD\ &RXQW\ /DQGILOO HJ WKDW
      6HFWLRQ + SURYLGHV LQ SDUW WKDW m>X@SRQ WKH UHTXHVW RI D       FRXOGGHFOLQHWRSDUWLFLSDWHRQDmZKLPl
SHUVRQ    WKH ERDUG RI FRXQW\ FRPPLVVLRQHUV RI D FRXQW\ GLVWULFW    PD\
JUDQW D ZDLYHU DXWKRUL]LQJ WKH GHOLYHU\ RI DOO RU DQ\ SRUWLRQ RI WKH VROLG        0HUHO\ WR VWDWH VXFK DQ DUJXPHQW LV WR FRPH FORVH WR
ZDVWHV JHQHUDWHG LQ D PXQLFLSDO FRUSRUDWLRQ RU WRZQVKLS WR D    IDFLOLW\
RWKHU WKDQ WKH IDFLOLW\ GHVLJQDWHG XQGHU VHFWLRQ     l 0DKDUJ
                                                                                UHIXWLQJ LW  7KH SURFHVV RI GHVLJQDWLQJ DSSURYHG IDFLOLWLHV
DFNQRZOHGJHV WKDW LW QHYHU UHTXHVWHG D ZDLYHU EXW VXJJHVWV WKDW LW ZRXOG       PXVWLQWKHQDWXUHRIWKLQJVEHGLUHFWHGWRWKRVHZKRKDYH
KDYH EHHQ D YDLQ DFW WR GR VR                                                  IDFLOLWLHV LQ WKH ILUVW SODFH  9DQ :HUW &RXQW\ GLG QRW
    0DKDUJ,QFY9DQ:HUW                       1R       1R                     0DKDUJ,QFY9DQ:HUW         
      6ROLG:DVWHHWDO                                                                                    6ROLG:DVWHHWDO

                                                                        7KH GHIHQGDQWV GHPXUUHG WR WKH FRPSODLQW PRYLQJ IRU
                                                                       GLVPLVVDO SXUVXDQW WR 5XOH E )HG 5 &LY 3  7KH
   7KLV EULQJV XV WR WKH TXHVWLRQ ZKHWKHU WKH 9DQ :HUW        GLVWULFWFRXUWJUDQWHGWKHPRWLRQ6HH)6XSSGDW
&RXQW\VFKHPHLIQRQGLVFULPLQDWRU\VKRXOGQRQHWKHOHVVEH            7KLVDSSHDOIROORZHG
IRXQGWRUXQDIRXORIWKH&RPPHUFH&ODXVHRQWKHJURXQGWKDW
LWmLPSRVHVDEXUGHQRQLQWHUVWDWHFRPPHUFHWKDWLVFOHDUO\                                            ,,
H[FHVVLYH LQ UHODWLRQ WR WKH SXWDWLYH ORFDO EHQHILWVl  &	$
&DUERQH  86 DW  FLWDWLRQ DQG LQWHUQDO TXRWHV            0DKDUJjVSULQFLSDODUJXPHQWRQDSSHDOLVWKDW9DQ:HUW
RPLWWHG:HDUHVDWLVILHGWKDWWKHVFKHPHLPSRVHVQRVXFK            &RXQW\jVSURKLELWLRQDJDLQVWGLVSRVDORIVROLGZDVWHDWDQ\
LPSHUPLVVLEOHEXUGHQ                                                  ODQGILOOWKHRSHUDWRURIZKLFKKDVQRWVRXJKWDQGREWDLQHGD
                                                                       IDFLOLW\ GHVLJQDWLRQ IURP WKH FRXQW\ DQG KDV QRW DJUHHG WR
   7KH mSXWDWLYH ORFDO EHQHILWVl RI WKH 9DQ :HUW &RXQW\        FROOHFWDQGUHPLWWKHSHUWRQFRQWUDFWIHHYLRODWHVWKH
VFKHPHDUHREYLRXVIURPWKHFRPSODLQWDQGLWVDWWDFKPHQWV             QHJDWLYHLPSOLFDWLRQVWKHVRFDOOHGmGRUPDQWlDVSHFWRIWKH
DOO RI ZKLFK PXVW EH UHDG LQ WKH OLJKW RI WKH SHUWLQHQW     &RPPHUFH &ODXVH 86 &RQVW DUW  †  FO   0DKDUJ
SURYLVLRQV RI WKH 2KLR 5HYLVHG &RGH  7KH VFKHPH ZDV          IXUWKHUFRQWHQGVWKDWWKHSURKLELWLRQYLRODWHV0DKDUJjVULJKWV
GHYLVHGDVDPHDQVRISURYLGLQJIRUmWKH VDIHDQGVDQLWDU\            XQGHUWKH(TXDO3URWHFWLRQDQG'XH3URFHVV&ODXVHVRIWKH
PDQDJHPHQW RI >WKH FRXQW\jV@ VROLG ZDVWHVl LQ DFFRUGDQFH        )RXUWHHQWK$PHQGPHQW7KHFRPSODLQWDOVRDVVHUWHGDVWDWH
ZLWK2KLR5HY&RGH†$7KHILUVWRIWKHVHULHVRI          ODZFODLPIRUWRUWLRXVLQWHUIHUHQFHZLWK0DKDUJjVFRQWUDFWXDO
UHVROXWLRQVPHQWLRQHGLQ3DUW,RIWKLVRSLQLRQH[SODLQVWKDW          ULJKWVEXWWKDWFODLPDSSHDUVWRKDYHEHHQDEDQGRQHGLQWKH
9DQ:HUW&RXQW\jVVROLGZDVWHPDQDJHPHQWSODQZKLFKZDV               GLVWULFWFRXUWDQGLVQRWSUHVVHGRQDSSHDO:HVKDOODGGUHVV
DSSURYHG E\ WKH 'LUHFWRU RI WKH 2KLR (QYLURQPHQWDO              WKHFRQVWLWXWLRQDODUJXPHQWVLQWKHVHTXHQFHLQZKLFK0DKDUJ
3URWHFWLRQ $JHQF\ mSURYLGHV IRU WKH >FRXQW\jV@                   KDVSUHVHQWHGWKHPWRXV
LPSOHPHQWDWLRQ RI QXPHURXV VROLG ZDVWH PDQDJHPHQW
DFWLYLWLHVGHVLJQHGWRDFKLHYHWKH6WDWHRI2KLRjVREMHFWLYHV                                          $
IRU VROLG ZDVWH UHF\FOLQJ UHXVH DQG PLQLPL]DWLRQl  7KH
UHVROXWLRQIXUWKHUH[SODLQVWKDWWKHFRXQW\GHFLGHGWRVHWWKH                                         
SHUWRQFRQWUDFWIHHDWZLWKDYLHZWRFRYHULQJWKHFRVWV
RI mLPSOHPHQWLQJ WKH 3ODQ DQG HQIRUFLQJ FRPSOLDQFH ZLWK           0DKDUJjVILUVWOLQHRIDWWDFNXQGHUWKH&RPPHUFH&ODXVHLV
IDFLOLW\GHVLJQDWLRQVl7KHmVDIHDQGVDQLWDU\PDQDJHPHQWl            EDVHGSULPDULO\RQDSDVVDJHIURPWKHRSHQLQJSDUDJUDSKRI
RIVROLGZDVWHJHQHUDWHGZLWKLQWKHFRXQW\LQRWKHUZRUGVLV         3DUW9RIWKHSOXUDOLW\RSLQLRQLQ(GJDUY0LWH&RUS
WREHFRQGXFWHGRQDVHOIILQDQFLQJEDVLV                             86    6SHDNLQJ IRU KLPVHOI DQG WKUHH RWKHU
                                                                       PHPEHUVRIWKH&RXUWsXVWLFH:KLWHVDLGWKHUHWKDWm>W@KH
  :H KDYH QR TXDUUHO ZLWK 0DKDUJjV VXEPLVVLRQ WKDW WKH         &RPPHUFH&ODXVHSHUPLWVRQO\LQFLGHQWDOUHJXODWLRQRI
RSHUDWLRQ RI WKH VFKHPH SODFHV D EXUGHQ XSRQ LQWHUVWDWH        LQWHUVWDWH FRPPHUFH E\ WKH 6WDWHV GLUHFW UHJXODWLRQ LV
FRPPHUFH%XWQHLWKHUGRZHKDYHDQ\UHDVRQWRGRXEWWKDW             SURKLELWHGl,GDW
WKH EXUGHQ LV LQ OLQH ZLWK WKH FRVW RI HQVXULQJ VDIH DQG
VDQLWDU\PDQDJHPHQWRIWKHFRXQW\jVRXWSXWRIVROLGZDVWH               9DQ:HUW&RXQW\jVVFKHPHFRQVWLWXWHVDmGLUHFWUHJXODWLRQl
7KHIDFWVZHOOSOHDGHGLQWKHFRPSODLQWIDLODVDPDWWHURIODZ        RI LQWHUVWDWH FRPPHUFH 0DKDUJ VXEPLWV mEHFDXVH LW
                                                                       H[SUHVVO\EDQVLQWHUVWDWHWUDGHZLWKDQ\RIWKHWKRXVDQGVRI
                                                                       XQGHVLJQDWHGODQGILOOVQDWLRQZLGHl$VDmGLUHFWUHJXODWLRQl
       0DKDUJ,QFY9DQ:HUW                              1R         1R                      0DKDUJ,QFY9DQ:HUW          
        6ROLG:DVWHHWDO                                                                                              6ROLG:DVWHHWDO

RI LQWHUVWDWH FRPPHUFH 0DKDUJ FRQWHQGV WKH 9DQ :HUW                      FROOHFWHGZLWKLQWKHMXULVGLFWLRQWREHGLVSRVHGRIDWDZDVWH
&RXQW\ VFKHPH LV SURKLELWHG UHJDUGOHVV RI DQ\ EHQHILFHQW                   WRHQHUJ\ IDFLOLW\ RZQHG E\ 0HWUR LWVHOI  ,G DW   7KH
SXUSRVHWKDWPD\XQGHUOLHLW                                                     SODLQWLII ZDV SURKLELWHG IURP GLVSRVLQJ RI VXFK ZDVWH DW D
                                                                                  FKHDSHUIDFLOLW\DQGWKHRUGLQDQFHUHSUHVHQWHGSUHFLVHO\WKH
   $OWKRXJKWKHUHKDYHEHHQSHULRGVLQRXUOHJDOKLVWRU\ZKHQ                     NLQG RI mVLPSOH HFRQRPLF SURWHFWLRQLVPl WKDW ZDV
WKH FRQVWLWXWLRQDOLW\ RI VWDWH WD[HV RU RWKHU PHDVXUHV                     FRQGHPQHG E\ WKH 6XSUHPH &RXUW LQ FDVHV VXFK DV
EXUGHQLQJ LQWHUVWDWH FRPPHUFH ZDV WKRXJKW WR WXUQ RQ WKH                  3KLODGHOSKLD2UHJRQ:DVWHDQG&	$&DUERQH:HKHOGWKH
DQVZHUWRWKHTXHVWLRQZKHWKHUWKHEXUGHQZDVmGLUHFWlRU                         RUGLQDQFHXQFRQVWLWXWLRQDO RQ WKDWEDVLV0HWURQRWKDYLQJ
mLQGLUHFWlVHHHJ)UHHPDQY+HZLW86                        GHPRQVWUDWHGWKHXQDYDLODELOLW\RImRWKHUPHDQVWRDGYDQFHD
 WKDW WHVW QRZ DSSHDUV WR KDYH EHHQ UHSXGLDWHG IRU               OHJLWLPDWHORFDOLQWHUHVWl0HWUR1DVKYLOOH)GDW
JRRGoRUDWOHDVWIRUWKHSUHVHQW6HH4XLOO&RUSY1RUWK                   TXRWLQJ&	$&DUERQH86DW
'DNRWD86ZKHUHWKH&RXUWH[SODLQHGWKDW
WKHHDUOLHUFDVHODZjVmIRUPDOGLVWLQFWLRQEHWZHHQµGLUHFWjDQG                      7KH 0HWUR 1DVKYLOOH SDQHO DFNQRZOHGJHG WKDW WKH
µLQGLUHFWjWD[HVRQLQWHUVWDWHFRPPHUFHloDGLVWLQFWLRQZLWK                   FKDOOHQJHGIORZFRQWURORUGLQDQFHGLGQRWUHTXLUHVROLGZDVWH
DQ RQDJDLQRIIDJDLQ KLVWRU\  o  KDG EHHQ UHMHFWHG LQ                   RIFRPPHUFLDORULQGXVWULDORULJLQWREHVHQWWRWKHIDYRUHG
&RPSOHWH $XWR 7UDQVLW ,QF Y %UDG\  86                    IDFLOLW\0HWUR1DVKYLOOH)GDW7KHIDFWWKDWmDOO
  4XLOO  86 DW   :KDW LV LPSRUWDQW WKH               UHVLGHQWLDOZDVWHlZDVUHTXLUHGWREHVHQWWKHUHKRZHYHUZDV
6XSUHPH&RXUWQRZEHOLHYHVLVWKHmSUDFWLFDOHIIHFWlRIWKH                      KHOGWREHDIDWDOGHIHFW,G7KHSODLQWLIIjVDELOLW\WRVHQG
FKDOOHQJHGWD[4XLOOLGTXRWLQJ&RPSOHWH$XWR86                      VRPHZDVWHWRRWKHUIDFLOLWLHVWKHSDQHOREVHUYHGmJRHVWRWKH
DW                                                                          H[WHQW RI WKH GLVFULPLQDWLRQ QRW ZKHWKHU WKHUH ZDV
                                                                                  GLVFULPLQDWLRQLQWKHILUVWSODFHl,G
   /RRNLQJDWWKHSUDFWLFDOLWLHVRIWKHFDVHDWKDQGZHILQG
WKDWZKLOHLWPD\EHWUXHLQDIRUPDOLVWLFVHQVHWKDW0DKDUJLV                      0DKDUJVHL]HVRQWKHODQJXDJHODVWTXRWHGDVVXSSRUWIRUDQ
SUHFOXGHGIURPGLVSRVLQJRI9DQ:HUW&RXQW\VROLGZDVWHDW                        DVVHUWLRQWKDWWKHFRQVWLWXWLRQDOLW\RI9DQ:HUW&RXQW\jVVROLG
mWKRXVDQGVRIXQGHVLJQDWHGODQGILOOVQDWLRQZLGHlWKHUHLVQR                     ZDVWH VFKHPH LV QRW VDYHG E\ WKH IDFW WKDW WKH FRXQW\ KDV
UHDVRQ WR VXSSRVH WKDW 0DKDUJ KDV WKH VOLJKWHVW LQWHUHVW LQ              GHVLJQDWHGHLJKWVLWHVDVDSSURYHGGLVSRVDOIDFLOLWLHVQRWMXVW
GLVSRVLQJ RI 9DQ :HUW &RXQW\ ZDVWH DW DQ\ XQGHVLJQDWHG                    RQH7KHQXPEHURIDSSURYHGIDFLOLWLHVDFFRUGLQJWR0DKDUJ
ODQGILOORWKHUWKDQWKHRQHLWIRUPHUO\SDWURQL]HGLQQHDUE\sD\                  mRQO\JRHVWRWKHH[WHQWRIWKHGLVFULPLQDWLRQQRWZKHWKHU
&RXQW\7KHSUDFWLFDOHIIHFWRI9DQ:HUW&RXQW\jVVFKHPH                         WKHUH ZDV GLVFULPLQDWLRQ LQ WKH ILUVW SODFHl  %XW 0DKDUJ
oDQGZKDW0DKDUJLVUHDOO\FRPSODLQLQJDERXWoLVWKDWWKH                    LJQRUHVWKHREYLRXVIDFWWKDW9DQ:HUW&RXQW\ZRXOGKDYH
sD\ &RXQW\ ODQGILOO KDV EHHQ SXW RII OLPLWV IRU 9DQ :HUW                DSSURYHGWKHsD\&RXQW\ODQGILOOWRRLIWKHRSHUDWRURIWKDW
                                                                                  ODQGILOOKDGEHHQZLOOLQJWRVLJQWKHVDPHNLQGRIDJUHHPHQW
                                                                                  WKDWZDVVLJQHGE\WKHRSHUDWRUVRIHDFKRIWKHHLJKWDSSURYHG
                                                                                 IDFLOLWLHV7KHVLWXDWLRQSUHVHQWHGLQWKHFDVHDWEDUXQOLNHWKH
      sXVWLFH :KLWH KLPVHOI UHDG    &RPSOHWH $XWR  DV UHSXGLDWLQJ PRUH RI         VLWXDWLRQLQ0HWUR1DVKYLOOHLQYROYHVQRGLVFULPLQDWLRQLQWKH
WKH HDUOLHU XQGHUVWDQGLQJ WKDQ KLV FROOHDJXHV PD\ KDYH WKRXJKW LW GLG
m:KDW ZH GLVDYRZHG LQ &RPSOHWH $XWRl sXVWLFH :KLWH ZURWH LQ            4XLOO 
                                                                                  ILUVWSODFH
mZDV QRW MXVW WKH IRUPDO GLVWLQFWLRQ EHWZHHQ µGLUHFWj DQG µLQGLUHFWj WD[HV
RQ LQWHUVWDWH FRPPHUFH    EXW DOVR WKH ZKROH QRWLRQ     WKDW µLQWHUVWDWH
FRPPHUFH LV LPPXQH IURP VWDWH WD[DWLRQj    l      4XLOO  86 DW 
:KLWH s FRQFXUULQJ LQ SDUW DQG GLVVHQWLQJ LQ SDUW
    0DKDUJ,QFY9DQ:HUW                         1R       1R                     0DKDUJ,QFY9DQ:HUW          
      6ROLG:DVWHHWDO                                                                                      6ROLG:DVWHHWDO

IURPWKHPDMRULQWHJUDWHGRLOFRPSDQLHVWKHORFDOUHWDLOHUV             &RXQW\ZDVWHEHFDXVHRIWKHUHIXVDORIWKHRSHUDWRURIWKHsD\
ZHUHQRWEHLQJSURWHFWHGDJDLQVWFRPSHWLWLRQIURPDVPDOO                &RXQW\ IDFLOLW\ WR HQWHU LQWR D GHVLJQDWLRQ DJUHHPHQW
QXPEHURILQWHUVWDWHFRPSDQLHVWKDWFKRVHWRHQJDJHVROHO\LQ            REOLJDWLQJLWWRFROOHFWDSHUWRQFRQWUDFWIHHDWD[LQ
JDVROLQH UHWDLOLQJ  7KLV FLUFXPVWDQFH LQ WKH &RXUWjV            HFRQRPLFHIIHFWRQEHKDOIRI9DQ:HUW&RXQW\
MXGJPHQWmIXOO\GLVWLQJXLVK>HG@l([[RQIURPFDVHVVXFKDV
+XQWY:DVKLQJWRQ$SSOH$GYHU&RPPjQ,IDQ\LQWHJUDWHG                  7KH FRQVWLWXWLRQDOLW\ RI WKLV  SHU WRQ  EXUGHQ RQ
RLOFRPSDQLHVKDGEHHQEDVHGLQ0DU\ODQGPRUHRYHUWKH\                 LQWHUVWDWH FRPPHUFH LV QRW WR EH GHWHUPLQHG DV ZH VHH LW
ZRXOGKDYHEHHQEDUUHGIURPWKHUHWDLOEXVLQHVVMXVWDVHYHU\            XQGHUWKHmGLUHFWLQGLUHFWlWHVW,WLVWREHGHWHUPLQHGUDWKHU
RWKHUSURGXFHUUHILQHUZDV7KLVZDVmDPRVWFULWLFDOIDFWRU            XQGHU D OLQH RI ZDVWH GLVSRVDO FDVHV WKDW LQFOXGHV
LQ([[RQlWKH6XSUHPH&RXUWVXEVHTXHQWO\VXJJHVWHG6HH                3KLODGHOSKLDY1HZsHUVH\86&KHPLFDO
/HZLVY%7,QYHVWPHQW0JUV,QF86              :DVWH0DQDJHPHQW,QFY+XQW86)RUW
                                                                         *UDWLRW6DQLWDU\/DQGILOO,QFY0LFKLJDQ'HSWRI1DWXUDO
   ([[RQPD\QRWEHGLVSRVLWLYHRI0DKDUJjVmSUDFWLFDOHIIHFWl           5HVRXUFHV862UHJRQ:DVWH6\VWHPV,QF
DUJXPHQW EXW LW FRPHV SUHWW\ FORVH  $W WKH YHU\ OHDVW LW   Y'HSWRI(QYLURQPHQWDO4XDOLW\RIWKH6WDWHRI2UHJRQ
VHHPV WR XV([[RQVKRZVDZLOOLQJQHVVRQWKHSDUWRIWKH              86   DQG &	$ &DUERQH ,QF Y 7RZQ RI
6XSUHPH &RXUW WR HQJDJH LQ VRPH IDLUO\ ILQH VOLFLQJ DQG         &ODUNVWRZQ1HZV@VROLGZDVWHH[SRUWVWREXWRQH         6WDWHRI0DU\ODQG7KHUHGLGQRWKDSSHQWREHDQ\0DU\ODQG
RXWRIVWDWHODQGILOOl                                         EDVHGSHWUROHXPSURGXFHUVRUUHILQHUVoDFLUFXPVWDQFHWKDW
                                                                       PDGHLWSODXVLEOHWRVD\WKHOHDVWIRU([[RQDQGRWKHUPDMRU
   8QOLNHWKHUHVWULFWLRQDWLVVXHLQ3KLODGHOSKLDKRZHYHUWKH       RLO FRPSDQLHV WR DUJXH DV WKH\ GLG WKDW WKH VWDWXWH ZDV
UHVWULFWLRQLPSRVHGE\9DQ:HUW&RXQW\LVQRWWHUULWRULDOO\            XQFRQVWLWXWLRQDO EHFDXVH LWV HIIHFW ZDV mWR SURWHFW LQVWDWH
EDVHG  0DKDUJjV FRPSODLQW DQG WKH H[KLELWV DWWDFKHG WR LW    LQGHSHQGHQWGHDOHUVIURPRXWRIVWDWHFRPSHWLWLRQl([[RQ
VKRZWKDW0DKDUJLVQRWEHLQJIRUELGGHQWRGLVSRVHRILWV9DQ          86DW
:HUW&RXQW\ZDVWHDWWKHsD\&RXQW\ODQGILOOEHFDXVHWKDW
ODQGILOOLVORFDWHGLQ,QGLDQD7KHELGGLQJSURFHVVGHVFULEHG           3ODXVLEOHWKRXJKWKHDUJXPHQWPD\KDYHEHHQWKH6XSUHPH
LQ3DUW,DERYHLJQRUHGFRXQW\DQGVWDWHOLQHVWKHSURFHVVZDV        &RXUWUHMHFWHGLWm>7@KHIDFWWKDWWKHEXUGHQRIWKHGLYHVWLWXUH
RSHQRQDQHTXDOIRRWLQJWRDOOSRWHQWLDOIDFLOLW\GHVLJQHHV          UHTXLUHPHQWVIDOOVVROHO\RQLQWHUVWDWHFRPSDQLHVlWKH&RXUW
UHJDUGOHVVRIZKHUHWKH\ZHUHORFDWHG7KHUHDVRQ0DKDUJ              FRQFOXGHGmGRHVQRWOHDGHLWKHUORJLFDOO\RUDVDSUDFWLFDO
FDQQRW GLVSRVH RI LWV ZDVWH DW WKH sD\ &RXQW\ ODQGILOO KDV   PDWWHUWRDFRQFOXVLRQWKDWWKH6WDWHLVGLVFULPLQDWLQJDJDLQVW
QRWKLQJWRGRZLWKWKHODQGILOOjV,QGLDQDVLWXV7KHUHDVRQ          LQWHUVWDWHFRPPHUFHDWWKHUHWDLOOHYHOl,G
UDWKHULVWKDWWKHRSHUDWRURIWKLVSDUWLFXODUODQGILOOoXQOLNH
WKHRSHUDWRURIWKH)RUW:D\QHODQGILOOoXOWLPDWHO\GHFOLQHG          7KH ([[RQ &RXUW SRLQWHG RXW WKDW WKH 0DU\ODQG VWDWXWH
WRVLJQDGHVLJQDWLRQDJUHHPHQWWKDWZRXOGKDYHREOLJDWHGLW           FUHDWHG QR EDUULHUV DJDLQVW FRPSHWLWLRQ IURP LQWHUVWDWH
WRFROOHFWDQGUHPLWWKHSHUWRQFRQWUDFWIHHWKDW9DQ           LQGHSHQGHQWUHWDLOHUVoZKLFKLVWRVD\WKDWDOWKRXJKORFDO
:HUW &RXQW\ LQVLVWV RQ UHFHLYLQJ IURP HYHU\ VROLG ZDVWH        0DU\ODQGUHWDLOHUVZHUHEHLQJSURWHFWHGDJDLQVWFRPSHWLWLRQ
    0DKDUJ,QFY9DQ:HUW                      1R       1R                        0DKDUJ,QFY9DQ:HUW           
      6ROLG:DVWHHWDO                                                                                      6ROLG:DVWHHWDO

QRUHDVRQWRVXSSRVHWKDWWKHPRYHPHQWRIZDVWHEHWZHHQWKH           IDFLOLW\GHVLJQHHZKHWKHURUQRWWKHGHVLJQHHLVORFDWHGLQ
WZR VWDWHV ZRXOG EH HOLPLQDWHG RU VHYHUHO\ LPSDLUHG  7KH    9DQ:HUW&RXQW\
SUDFWLFDO HIIHFW RI HYHU\ FRXQW\jV DGRSWLQJ WKH 9DQ :HUW
PRGHOPLJKWZHOOEHDQLQFUHDVHLQWKHRYHUDOOOHYHORIZDVWH            8QGHU WKHVH FLUFXPVWDQFHV ZH EHOLHYH WKH FRXQW\jV
GLVSRVDOFRVWVEXWZHGRQRWEHOLHYHWKDWWKLVFDQIDLUO\EH         VFKHPHFDQQRWUHDVRQDEO\EHVDLGWRGLVFULPLQDWHRQLWVIDFH
HTXDWHG ZLWK WKH EDONDQL]DWLRQ WKH &RPPHUFH &ODXVH LV          DJDLQVWLQWHUVWDWHFRPPHUFH$OWKRXJKmDVWDWHPD\QRWWD[
LQWHQGHGWRSUHYHQW                                                  DWUDQVDFWLRQRULQFLGHQWPRUHKHDYLO\ZKHQLWFURVVHVVWDWH
                                                                      OLQHVWKDQZKHQLWRFFXUVHQWLUHO\ZLWKLQWKH6WDWHl&KHPLFDO
                                LL                                    :DVWH0DQDJHPHQW,QFY+XQW86
                                                                      TXRWLQJ$UPFR,QFY+DUGHVW\86
  ,Q WKH VHFRQG EUDQFK RI LWV mSUDFWLFDO HIIHFWl DUJXPHQW    WKDWLVQRWZKDW9DQ:HUW&RXQW\LVSXUSRUWLQJWRGR2QWKH
0DKDUJFRQWHQGVWKDWWKHUHVWULFWLRQVLPSRVHGE\9DQ:HUW             IDFHRIWKLQJVDWOHDVW9DQ:HUW&RXQW\LVQRWHQJDJLQJLQ
&RXQW\GHSULYHG0DKDUJRIWKHFRPSHWLWLYHDGYDQWDJHLWKDG            WKH mVLPSOH HFRQRPLF SURWHFWLRQLVPl FRQGHPQHG E\ WKH
JDLQHGE\XWLOL]LQJWKHLQWHUVWDWHPDUNHW0DKDUJVD\VWKDWLW       6XSUHPH&RXUWLQ3KLODGHOSKLD
LQYHVWHGLQODUJHUWUXFNVWKDQLWVFRPSHWLWRUVGLGKLUHGPRUH
SHRSOH WKDQ WKH\ SODQQHG LWV URXWHV EHWWHU DQG QHJRWLDWHG                                       E
ORZHU IHHV ZLWK WKH sD\ &RXQW\ ODQGILOO  7KH &RPPHUFH
&ODXVH0DKDUJFRQWHQGVSUHYHQWV9DQ:HUW&RXQW\IURP                  0DKDUJJRHVRQWRVXJJHVWLQLWVRSHQLQJDSSHOODWHEULHI
mVWULSSLQJDZD\lWKHUHVXOWDQWFRPSHWLWLYHDGYDQWDJH                 WKDWIDFLDOGLVFULPLQDWLRQDVLGHWKHUHVWULFWLRQVLPSRVHGE\
                                                                      9DQ :HUW &RXQW\ mPD\l KDYH KDG DQ LPSHUPLVVLEOH
  0DKDUJUHOLHVIRUWKLVSURSRVLWLRQRQ+XQWY:DVKLQJWRQ            GLVFULPLQDWRU\SXUSRVH,QWKLVFRQQHFWLRQ0DKDUJVSHFXODWHV
6WDWH$SSOH$GYHU&RPPjQ86ZKHUH            WKDWWKHFRXQW\FRPPLVVLRQHUVPLJKWKDYHEHHQPRWLYDWHGE\
D1RUWK&DUROLQDVWDWXWHKDGWKHHIIHFWRIUHTXLULQJZHVWHUQ          DGHVLUHmWRDVVLVWORFDOKDXOHUVWRWKHGHWULPHQWRIWKHODUJHU
DSSOHJURZHUVWREULQJWKHLUPDUNHWLQJSUDFWLFHVLQWROLQHZLWK       KDXOHUVVXFKDV0DKDUJl
WKRVHRILQVWDWHJURZHUV7KH6XSUHPH&RXUWKHOGWKHVWDWXWH
WR EH XQFRQVWLWXWLRQDO ERWK EHFDXVH RI LWV GLVFULPLQDWRU\       %XW0DKDUJjVFRPSODLQWSURYLGHVQRUHDVRQZKDWHYHUWR
LPSDFWRQWKHFRVWRIGRLQJEXVLQHVVLQ1RUWK&DUROLQDDQG            VXSSRVHWKDWWKHFRPPLVVLRQHUVZHUHDFWLQJRXWRIDGHVLUHWR
EHFDXVHmWKHVWDWXWHKDVWKHHIIHFWRIVWULSSLQJDZD\IURPWKH        IDYRUKDXOHUVWKDWFXVWRPDULO\XVHGRQHRIWKHVHYHQDSSURYHG
:DVKLQJWRQ DSSOH LQGXVWU\ WKH FRPSHWLWLYH DQG HFRQRPLF          2KLRIDFLOLWLHVRQO\WZRRIZKLFKDUHLQ9DQ:HUW&RXQW\
DGYDQWDJHV LW KDV HDUQHG IRU LWVHOI WKURXJK LWV H[SHQVLYH     7KHGLVFULPLQDWRU\SXUSRVHDUJXPHQWORRNVWRXVOLNHDUHG
LQVSHFWLRQDQGJUDGLQJV\VWHPl                                       KHUULQJ
   1RFRPSDUDEOHHIIHFWLVHYLGHQWLQWKHFDVHDWEDU,WLVWUXH
                                                                          
WKDWWKHRSHUDWRUVRI,QGLDQDVROLGZDVWHIDFLOLWLHVZRXOGKDYH             ,Q LWV UHSO\ EULHI 0DKDUJ DUJXHV IRU WKH ILUVW WLPH WKDW 9DQ :HUW
WRLQFXUWKHFRVWVRIFROOHFWLQJDQGUHPLWWLQJWKHSHUWRQ      &RXQW\ ZDV mFRPPDQGHHULQJ WKH PDUNHWl LQ RUGHU WR FRPSHQVDWH IRU D
VXUFKDUJH LI WKH\ ZDQWHG WR UHFHLYH ZDVWH IURP 9DQ :HUW      GLVDSSRLQWLQJ UHYHQXH IORZ DW WKH FRXQW\RZQHG 9DQ :HUW 7UDQVIHU
&RXQW\ EXW WKH RSHUDWRUV RI 2KLR IDFLOLWLHV ZRXOG KDYH WR   6WDWLRQ %XW LI WKH FRXQW\ KDG LQ IDFW EHHQ DFWLQJ LPSURSHUO\ LQ WKLV
                                                                      UHJDUG ZH DVVXPH WKDW 0DKDUJ ZRXOG KDYH WROG XV VR LQ LWV RSHQLQJ EULHI
LQFXUSUHFLVHO\WKHVDPHFRVWVLQRUGHUWRTXDOLI\WRUHFHLYH         :H QRWH IXUWKHU WKDW LI 9DQ :HUW &RXQW\ KDG VLPSO\ LPSRVHG D  SHU
9DQ:HUW&RXQW\ZDVWH0DKDUJjVLQYHVWPHQWLQWKHWUXFNV             WRQ WD[ RQ WKH FROOHFWLRQ RI ZDVWH ZLWKLQ WKH FRXQW\ 0DKDUJ FRQFHGHV WKDW
                                                                      LW ZRXOG KDYH KDG QR EDVLV IRU FKDOOHQJLQJ WKH WD[ XQGHU WKH 8QLWHG 6WDWHV
       0DKDUJ,QFY9DQ:HUW                        1R        1R                    0DKDUJ,QFY9DQ:HUW        
         6ROLG:DVWHHWDO                                                                                     6ROLG:DVWHHWDO

                                   F                                        RUGLQDQFHl WKDW UHTXLUHG WKDW DOO QRQKD]DUGRXV VROLG ZDVWH
                                                                            RULJLQDWLQJZLWKLQWKH7RZQRI&ODUNVWRZQ1HZ&RPPHUFH@
   0DKDUJjV mSUDFWLFDO HIIHFWl DUJXPHQW KDV WZR EUDQFKHV               &ODXVHLVSULPDULO\LQWHQGHGWRSUHYHQWl&	$&DUERQH
7KH ILUVW LV EDVHG RQ WKH FRQFHSW  o  HYRFDWLYH RI .DQWjV         86DW2j&RQQRUsFRQFXUULQJIRRWQRWHDQG
FDWHJRULFDO LPSHUDWLYH  o  WKDW D VWDWH PD\ QRW DGRSW               FLWDWLRQVRPLWWHG
OHJLVODWLRQWKHUHSOLFDWLRQRIZKLFKLQRWKHUVWDWHVZRXOGKDYH
WKHHIIHFWRIVWUDQJOLQJLQWHUVWDWHFRPPHUFH6HH+HDO\Y                   ,I9DQ:HUW&RXQW\KDGUHTXLUHGWKDWDOOORFDOO\JHQHUDWHG
7KH%HHU,QVWLWXWH,QF86ZKHUHWKH               ZDVWHEHWDNHQWRDIDYRUHGLQFRXQW\IDFLOLW\UHIXVLQJWROHW
6XSUHPH &RXUW REVHUYHG WKDW mWKH SUDFWLFDO HIIHFW RI WKH            IDFLOLWLHVORFDWHGHOVHZKHUHTXDOLI\DVDSSURYHGGLVSRVDOVLWHV
VWDWXWH PXVW EH HYDOXDWHG QRW RQO\ E\ FRQVLGHULQJ WKH               LWLVFOHDUWKDWWKHFRQFHUQVH[SUHVVHGE\sXVWLFH2j&RQQRU
FRQVHTXHQFHVRIWKHVWDWXWHLWVHOIEXWDOVRE\FRQVLGHULQJKRZ             ZRXOGKDYHEHHQLPSOLFDWHGKHUH%XWWKHFRXQW\KDVVLPSO\
WKH FKDOOHQJHG VWDWXWH PD\ LQWHUDFW ZLWK WKH OHJLWLPDWH              QRW UHVRUWHG WR WKH VRUW RI mIORZ FRQWUROl WKDW sXVWLFH
UHJXODWRU\UHJLPHVRIRWKHU6WDWHVDQGZKDWHIIHFWZRXOGDULVH              2j&RQQRUZDVWDONLQJDERXW7KH9DQ:HUW&RXQW\VFKHPH
LI QRW RQH EXW PDQ\ RU HYHU\ 6WDWH DGRSWHG VLPLODU               GRHVQRWDXWRPDWLFDOO\SUHYHQWORFDOO\JHQHUDWHGZDVWHIURP
OHJLVODWLRQl(PSKDVLVVXSSOLHG                                         EHLQJWDNHQWRIDFLOLWLHVRXWVLGHWKHFRXQW\WKHUHDGHUZLOO
                                                                            UHFDOOWKDWWKHUHDUHRQO\WZRLQFRXQW\VROLGZDVWHIDFLOLWLHV
  $OVRSHUWLQHQWLQWKLVFRQQHFWLRQLV&	$&DUERQH,QWKDW                DPRQJWKHHLJKWIDFLOLWLHVWKDWVRXJKWDQGREWDLQHG9DQ:HUW
FDVHWKH6XSUHPH&RXUWVWUXFNGRZQDORFDOmIORZ FRQWURO                   &RXQW\jV GHVLJQDWLRQ DV DSSURYHG VLWHV DQG WKH FRXQW\
                                                                            DSSHDUVWREHFRUUHFWLQDUJXLQJDVLWGRHVWKDWLWVmIDLURSHQ
                                                                            DQGQRQH[FOXVLYH5)3SURFHVVDVVXUHGWKDWDQ\RXWRIVWDWH
&RQVWLWXWLRQ                                                               IDFLOLW\WKDWZDQWHGDFFHVVWRWKH'LVWULFWjVZDVWHZRXOGJHW
                                                                            LWl
     
     /RJLFDOO\ SHUKDSV WKLV FRQFHSW KDV PRUH WR GR ZLWK WKH mH[FHVVLYH
EXUGHQl OLQH RI DQDO\VLV WKDQ ZLWK WKH mGLVFULPLQDWLRQl OLQH RI DQDO\VLV     ,IHYHU\FRXQW\LQERWK,QGLDQDDQG2KLRZHUHWRDGRSWD
,Q WKH LQWHUHVW RI FRQVLVWHQF\ KRZHYHU ZH VKDOO IROORZ 0DKDUJjV           UHJXODWRU\VFKHPHLGHQWLFDOWR9DQ:HUW&RXQW\jVZHKDYH
WD[RQRP\