Court Opinion

ID: 2969635
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:53:38.897792+00
Date Added: 2024-06-11T11:43:25.586017
License: Public Domain

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 DS

81,7('67$7(6&28572)$33($/6
             )257+(6,;7+&,5&8,7
               BBBBBBBBBBBBBBBBB

,QUH0,&+$(/ '8$1(             ;
:,/&2;                           
                    'HEWRU       
                                     1R
BBBBBBBBBBBBBBBBBBBBBBBB          
                                   !
                                  
&+$5/(6 s 7$8177UXVWHH        
            3ODLQWLII$SSHOOHH 
                                  
           Y                     
                                  
                                  
*(1(5$/ 5(7,5(0(17                
6<67(0 2) 7+( &,7< 2)             
'(752,7DQG%2$5' 2)              
75867((6 2) 7+( *(1(5$/           
5(7,5(0(17 6<67(0 2) 7+(          
&,7< 2) '(752,7                  
                                  
       'HIHQGDQWV$SSHOODQWV 
                                  
                                 1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
   IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW$QQ$UERU
   1Rn%DUEDUD.+DFNHWW'LVWULFWsXGJH
               $UJXHG$XJXVW
        'HFLGHGDQG)LOHG1RYHPEHU

                           
     ,QUH:LOFR[                                      1R

 %HIRUH1(/621DQG1255,6&LUFXLWsXGJHV0$7,$
                &KLHI'LVWULFWsXGJH

                       BBBBBBBBBBBBBBBBB
                            &2816(/
$5*8('  3HWHU $ sDFNVRQ &/$5. +,// 'HWURLW
0LFKLJDQIRU$SSHOODQWV7LPRWK\$)XVFR&+$5/(6s
7$817 	 $662&,$7(6 %LUPLQJKDP 0LFKLJDQ IRU
$SSHOOHH  21 %5,()  /LUD $ sRKQVRQ &/$5. +,//
'HWURLW0LFKLJDQsXGLWK*UHHQVWRQH0LOOHU&/$5.+,//
%LUPLQJKDP0LFKLJDQIRU$SSHOODQWV7LPRWK\$)XVFR
&+$5/(6 s 7$817 	 $662&,$7(6 %LUPLQJKDP
0LFKLJDQIRU$SSHOOHH(UQHVW/sDUUHWW'HWURLW0LFKLJDQ
IRU$PLFXV&XULDH
                       BBBBBBBBBBBBBBBBB
                           23,1,21
                       BBBBBBBBBBBBBBBBB
   '$9,' $ 1(/621 &LUFXLW sXGJH  $OWKRXJK WKH
%DQNUXSWF\&RGHSURYLGHVLQJHQHUDOWKDWDOORIDEDQNUXSW
GHEWRUjVSURSHUW\LQWHUHVWVDUHWREHWXUQHGRYHUWRWKHWUXVWHH
LQEDQNUXSWF\IRUWKHEHQHILWRIFUHGLWRUVWKHFRGHFUHDWHVWKH
IROORZLQJ H[FHSWLRQ  m$ UHVWULFWLRQ RQ WKH WUDQVIHU RI D
EHQHILFLDOLQWHUHVWRIWKHGHEWRULQDWUXVWWKDWLVHQIRUFHDEOH
XQGHUDSSOLFDEOHQRQEDQNUXSWF\ODZLVHQIRUFHDEOHLQDFDVH
XQGHUWKLVWLWOHl86&F
  7KH GHEWRU LQ WKH FDVH DW EDU KDV D EHQHILFLDO LQWHUHVW LQ
DVVHWV KHOG E\ WKH WUXVWHHV RI D PXQLFLSDO HPSOR\HHVj
UHWLUHPHQWSODQ7KHWHUPVRIWKHSODQKDYHEHHQHIIHFWLYHO\
LQFRUSRUDWHGLQWKHFLW\FKDUWHUDGRSWHGE\WKHPXQLFLSDOLW\
SXUVXDQWWRVWDWHODZKRPHUXOHSURYLVLRQV7KHSODQDQG
WKXV WKH FLW\ FKDUWHU SURYLGHV WKDW WKH GHEWRUjV LQWHUHVW LV

    
     7KH +RQRUDEOH 3DXO 5 0DWLD &KLHI 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
WKH 1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ
1R                                           ,QUH:LOFR[          

mXQDVVLJQDEOHlDQGLVQRWVXEMHFWWRH[HFXWLRQDWWDFKPHQWRU
WKHRSHUDWLRQRIEDQNUXSWF\ODZ
  7KH TXHVWLRQ SUHVHQWHG LV ZKHWKHU WKLV UHVWULFWLRQ LV
mHQIRUFHDEOHXQGHUDSSOLFDEOHQRQEDQNUXSWF\ODZl,ILWLV
WKH UHVWULFWLRQ LV HQIRUFHDEOH LQ EDQNUXSWF\ SURFHHGLQJV DV
ZHOODQGWKHGHEWRUjVSHQVLRQULJKWVDUHQRWWREHWXUQHGRYHU
WR WKH WUXVWHH LQ EDQNUXSWF\  ,I WKH UHVWULFWLRQ LV QRW
HQIRUFHDEOHZHVKDOODVVXPHIRUSXUSRVHVRIWKLVRSLQLRQWKDW
WKHWUXVWHHLQEDQNUXSWF\FDQFRPSHODWXUQRYHU7KHUHLVD
WLPLQJLVVXHLQWKLVFRQQHFWLRQEXWZHQHHGQRWUHDFKWKDW
TXHVWLRQ
  &RQFOXGLQJ WKDW WKH UHVWULFWLRQ RQ WUDQVIHU LV QRW
HQIRUFHDEOH XQGHU DSSOLFDEOH QRQEDQNUXSWF\ ODZ WKH
EDQNUXSWF\ FRXUW HQWHUHG D VXPPDU\ MXGJPHQW LQ ZKLFK LW
KHOGWKDWWKHGHEWRUjVUHWLUHPHQWSODQLQWHUHVWKDGWREHWXUQHG
RYHUWRWKHEDQNUXSWF\WUXVWHH7KHGLVWULFWFRXUWDIILUPHG
WKDWMXGJPHQWRQDSSHDO2QGHQRYRUHYLHZKRZHYHUZH
FRQFOXGHWKDWWKHUHVWULFWLRQLVHQIRUFHDEOHXQGHUDSSOLFDEOH
QRQEDQNUXSWF\ODZ:HVKDOOWKHUHIRUHUHYHUVHWKHGLVWULFW
FRXUWjVGLVSRVLWLRQRIWKHFDVH
                                      ,
   7KH0LFKLJDQ&RQVWLWXWLRQJLYHV0LFKLJDQFLWLHVWKHSRZHU
WRDGRSWFKDUWHUVDQGRUGLQDQFHV,WIXUWKHUSURYLGHVWKDWWKH

    
     7KH UHOHYDQW SURYLVLRQ UHDGV WKXV

    m8QGHU JHQHUDO ODZV WKH HOHFWRUV RI HDFK FLW\ DQG YLOODJH VKDOO
    KDYH WKH SRZHU DQG DXWKRULW\ WR IUDPH DGRSW DQG DPHQG LWV
    FKDUWHU DQG WR DPHQG DQ H[LVWLQJ FKDUWHU RI WKH FLW\ RU YLOODJH
    KHUHWRIRUH JUDQWHG RU HQDFWHG E\ WKH OHJLVODWXUH IRU WKH
    JRYHUQPHQW RI WKH FLW\ RU YLOODJH (DFK VXFK FLW\ DQG YLOODJH
    VKDOO KDYH SRZHU WR DGRSW UHVROXWLRQV DQG RUGLQDQFHV UHODWLQJ WR
    LWV PXQLFLSDO FRQFHUQV SURSHUW\ DQG JRYHUQPHQW VXEMHFW WR WKH
    FRQVWLWXWLRQ DQG ODZ 1R HQXPHUDWLRQ RI SRZHUV JUDQWHG WR FLWLHV
    DQG YLOODJHV LQ WKLV FRQVWLWXWLRQ VKDOO OLPLW RU UHVWULFW WKH JHQHUDO
    JUDQW RI DXWKRULW\ FRQIHUUHG E\ WKLV VHFWLRQl 0LFK &RQVW $UW
    9,,  
     ,QUH:LOFR[                                        1R   1R                                      ,QUH:LOFR[      

mSURYLVLRQVRIWKLVFRQVWLWXWLRQDQGODZFRQFHUQLQJFRXQWLHV           UHWLUHPHQWV\VWHPFKRRVHVQRWWRKRQRUDUHTXHVWWRGLVEXUVH
WRZQVKLSVFLWLHVDQGYLOODJHVVKDOOEHOLEHUDOO\FRQVWUXHGLQ          IXQGVLQYLRODWLRQRIDSSOLFDEOHODZLWLVHQIRUFLQJWKHODZ
WKHLUIDYRUl0LFK&RQVW$UW9,,                             $QG DW OHDVW RQH 0LFKLJDQ VWDWH FRXUW KDV KHOG WKDW WKH
                                                                        UHWLUHPHQWV\VWHPLVHQWLWOHGWRVHHNWKHMXGLFLDOUHPHG\RI
   7KH 0LFKLJDQ +RPH 5XOH &LW\ $FW 0LFK &RPS /DZV            PDQGDPXV LQ RUGHU WR HQIRUFH WKH WHUPV RI WKH SODQ DV
  HW VHT DXWKRUL]HV FKDUWHU FLWLHV WR H[HUFLVH DQ\    FRQWDLQHGLQWKH'HWURLW&LW\&KDUWHU%GRI7UXVWHHVRIWKH
SRZHUHQXPHUDWHGRUQRWWKDWDGYDQFHVWKHLQWHUHVWVRIWKH            *HQHUDO5HWLUHPHQW6\VWHPY&LW\RI'HWURLW1R
FLW\  0LFK &RPS /DZV  M  0LFKLJDQ FRXUWV         $:&LUFXLWFRXUW:D\QH&RXQW\0LFKRUGHURIsXO\
FRPPRQO\WUHDWFLW\FKDUWHUVMXVWDVWKH\GRDQ\RWKHUVRXUFH           DW$VPHQWLRQHGDERYHWKHVDPH0LFKLJDQFRXUW
RIVWDWHODZ6HHHJ&LW\RI'HWURLWY:DONHU1:G         KDV KHOG WKDW WKH UHWLUHPHQW V\VWHP KDV D ILGXFLDU\ GXW\ WR
0LFKKROGLQJWKDWWUDGLWLRQDOSULQFLSOHVRI           HQIRUFHWKHDQWLDVVLJQPHQWSURYLVLRQRIWKHSODQ/DXGHUGDOH
VWDWXWRU\FRQVWUXFWLRQDSSO\WRWKH'HWURLW&LW\&KDUWHU            Y 'HWURLW 0XQLFLSDO &UHGLW 8QLRQ 1R &3
                                                                        &LUFXLW FRXUW :D\QH &RXQW\ 0LFK RUGHU RI 0DUFK 
  3XUVXDQW WR WKH DXWKRULW\ JUDQWHG E\ WKH 0LFKLJDQ              DW
&RQVWLWXWLRQDQGWKH0LFKLJDQ+RPH5XOH&LW\$FWWKH&LW\
RI'HWURLWKDVHVWDEOLVKHGDGHILQHGFRQWULEXWLRQUHWLUHPHQW               )RU DOO RI WKH IRUHJRLQJ UHDVRQV ZH WKLQN WKDW WKH DQWL
SODQ IRU LWV HPSOR\HHV  7KH SODQ ZKLFK LV IXQGHG E\         DVVLJQPHQWSURYLVLRQRIWKH'HWURLW&LW\&KDUWHUUHSUHVHQWV
YROXQWDU\ HPSOR\HH FRQWULEXWLRQV LV DGPLQLVWHUHG E\ WKH          mHQIRUFHDEOHlQRQEDQNUXSWF\ODZIRUSXUSRVHVRI86&
*HQHUDO5HWLUHPHQW6\VWHPRIWKH&LW\RI'HWURLW                        F  :H WKHUHIRUH5(9(56( WKH GHFLVLRQ RI WKH
                                                                        GLVWULFWFRXUWDQG5(0$1'WKHFDVHVRWKDWWKHEDQNUXSWF\
  )RUGHFDGHVWKHFLW\jVGHILQHGFRQWULEXWLRQUHWLUHPHQWSODQ          FRXUWPD\HQWHUMXGJPHQWLQIDYRURIWKHUHWLUHPHQWV\VWHP
oWKHWHUPVRIZKLFKZHUHLQLWLDOO\ZULWWHQLQWRWKH'HWURLW
&LW\&KDUWHUoKDVFRQWDLQHGDQDQWLDVVLJQPHQWSURYLVLRQ
UHDGLQJDVIROORZV

    
     7KLV SURYLVLRQ UHDGV DV IROORZV

    m6HF M (DFK FLW\ PD\ LQ LWV FKDUWHU SURYLGH

                                 

    m 0XQLFLSDO SRZHUV )RU WKH H[HUFLVH RI DOO PXQLFLSDO SRZHUV
    LQ WKH PDQDJHPHQW DQG FRQWURO RI PXQLFLSDO SURSHUW\ DQG LQ WKH
    DGPLQLVWUDWLRQ RI WKH PXQLFLSDO JRYHUQPHQW ZKHWKHU VXFK
    SRZHUV EH H[SUHVVO\ HQXPHUDWHG RU QRW IRU DQ\ DFW WR DGYDQFH
    WKH LQWHUHVWV RI WKH FLW\ WKH JRRG JRYHUQPHQW DQG SURVSHULW\ RI
    WKH PXQLFLSDOLW\ DQG LWV LQKDELWDQWV DQG WKURXJK LWV UHJXODUO\
    FRQVWLWXWHG DXWKRULW\ WR SDVV DOO ODZV DQG RUGLQDQFHV UHODWLQJ WR
    LWV PXQLFLSDO FRQFHUQV VXEMHFW WR WKH FRQVWLWXWLRQ DQG JHQHUDO
    ODZV RI WKLV VWDWHl
       ,QUH:LOFR[                                     1R       1R                                   ,QUH:LOFR[         

KDVWKHVWDWXVRIDQ\FLW\FKDUWHUSURYLVLRQ0LFKLJDQFRXUWV               m7KH ULJKW RI D SHUVRQ WR D SHQVLRQ DQQXLW\ RU D
KDYHHQIRUFHGYDULRXVSURYLVLRQVRIWKH'HWURLW&LW\&KDUWHU                 UHWLUHPHQW DOORZDQFH WR WKH UHWXUQ RI DFFXPXODWHG
LQFOXGLQJ WKRVH UHODWLQJ WR WKH 3ODQ ZLWKRXW UHJDUG WR WKH          FRQWULEXWLRQV WKH SHQVLRQ DQQXLW\ RU UHWLUHPHQW
DYDLODELOLW\RIDVWDWXWRU\ULJKWRIDFWLRQ6HHHJ:HHNVY             DOORZDQFH LWVHOI DQ\ RSWLRQDO EHQHILW DQ\ RWKHU ULJKW
%GRI7UXVWHHV&LW\RI'HWURLW*HQHUDO5HWLUHPHQW6\VWHP                   DFFUXHGRUDFFUXLQJWRDQ\SHUVRQXQGHUWKHSURYLVLRQVRI
 1:G  &W $SS 0LFK  KROGLQJ WKDW D                 WKLVFKDSWHUDQGWKHPRQH\VLQWKHYDULRXVIXQGVRIWKH
IRUIHLWXUHSURYLVLRQLQWKHSODQZDVHQIRUFHDEOH/DXGHUGDOH                 UHWLUHPHQWV\VWHPVKDOOEHXQDVVLJQDEOHDQGVKDOOQRWEH
Y'HWURLW0XQLFLSDO&UHGLW8QLRQ1R&3DW                     VXEMHFW WR H[HFXWLRQ JDUQLVKPHQW DWWDFKPHQW WKH
&LUFXLW FRXUW :D\QH &RXQW\ 0LFK 0DUFK                     RSHUDWLRQRIEDQNUXSWF\RULQVROYHQF\ODZRUDQ\RWKHU
KROGLQJWKDWWKH*HQHUDO5HWLUHPHQW6\VWHPRI'HWURLWKDGD                  SURFHVV RI ODZ ZKDWVRHYHU H[FHSW DV VSHFLILFDOO\
ILGXFLDU\GXW\WRHQIRUFHWKHDQWLDVVLJQPHQWSURYLVLRQRIWKH                SURYLGHGLQWKLVFKDSWHUl'HWURLW&LW\&KDUWHU7LWOH
SODQ  :KHQ D 0LFKLJDQ DSSHDOV FRXUW FRQVLGHUHG WKH                  &KDS$UWHPSKDVLVVXSSOLHG
EHQHILWV DYDLODEOH WR 'HWURLW SROLFH RIILFHUV LW VDLG WKDW
m>Z@HOOHVWDEOLVKHG UXOHV RI VWDWXWRU\ FRQVWUXFWLRQ PDQGDWH              6LQFHZKHQDQHZFKDUWHUZDVDGRSWHGE\WKH&LW\RI
WKDW ZH HQIRUFH WKLV FOHDU VWDWXWRU\ DQG FLW\ FKDUWHU               'HWURLWWKHSODQKDVEHHQWKHVXEMHFWRIFROOHFWLYHEDUJDLQLQJ
ODQJXDJHl&URZHY&LW\RI'HWURLW1:G                   EHWZHHQWKHFLW\DQGYDULRXVXQLRQV7KHSODQLVKRZHYHU
&W $SS 0LFK  HQIRUFLQJ D SURYLVLRQ RI 'HWURLWjV           LQFRUSRUDWHGLQWKHFKDUWHUE\UHIHUHQFH7KHFXUUHQWYHUVLRQ
SROLFH UHWLUHPHQW SODQ HPSKDVLV DGGHG  $QG 0LFKLJDQ              RIWKH'HWURLW&LW\&KDUWHUDGRSWHGLQDFFRPSOLVKHV
FRXUWV KDYH HQIRUFHG VLPLODU UHWLUHPHQW SODQ SURYLVLRQV               WKLVLQWKHIROORZLQJODQJXDJH
HQDFWHG LQ FLW\ RUGLQDQFHV  6HH HJ +XEEDUG Y %G RI
7UXVWHHVRI'HDUERUQ5HWLUHPHQW6\VWHP1:G                    m7KH UHWLUHPHQW SODQV RI WKH FLW\ H[LVWLQJ ZKHQ WKLV
0LFK  m7KH GHILQLWLRQV FRQWDLQHG LQ WKH >SHQVLRQ               &KDUWHU WDNHV HIIHFW LQFOXGLQJ WKH H[LVWLQJ JRYHUQLQJ
SODQ@ RUGLQDQFH PXVW EH JLYHQ IXOO IRUFH DQG HIIHFWl                ERGLHV IRU DGPLQLVWHULQJ WKRVH SODQV WKH EHQHILW
0LFKLJDQ FRXUWV REYLRXVO\ KDYH QR GRXEW DERXW WKH                      VFKHGXOHVIRUWKRVHSODQVDQGWKHWHUPVIRUDFFUXLQJULJKW
HQIRUFHDELOLW\RIFLW\FKDUWHURURUGLQDQFHSURYLVLRQVUHODWLQJ               WRDQGUHFHLYLQJEHQHILWVXQGHUWKRVHSODQVVKDOOLQDOO
WRUHWLUHPHQWSODQVVXFKSURYLVLRQVDUHHQIRUFHGZKHQWKH                    UHVSHFWVFRQWLQXHLQH[LVWHQFHH[DFWO\DVEHIRUHXQOHVV
FRXUWIROORZVWKHLUFRPPDQGLQGHFLGLQJDFDVH                              FKDQJHG E\ WKLV &KDUWHU RU DQ RUGLQDQFH DGRSWHG LQ
                                                                              DFFRUGDQFHZLWKWKLVDUWLFOHl'HWURLW&LW\&KDUWHU$UW
 :H QRWH DOVR WKDW WKH QRQDOLHQDWLRQ SURYLVLRQ RI WKH                
'HWURLW SODQ LV HQIRUFHDEOH E\ WKH UHWLUHPHQW V\VWHP LWVHOI
ZKLFK FRQWUROV WKH GLVEXUVHPHQW RI IXQGV  :KHQ WKH                 7KHDQWLDVVLJQPHQWWHUPVRIWKHUHWLUHPHQWSODQKDYHWKXV
                                                                            EHHQFRQWLQXHGXQGHUWKHQHZFKDUWHUmH[DFWO\DVEHIRUHlQR
                                                                            FKDQJH LQ WKHVH WHUPV KDYLQJ EHHQ HIIHFWHG E\ FKDUWHU RU
                                                                            RUGLQDQFH
     
      $V WKH SURYLVLRQV RI WKH 0LFKLJDQ &RQVWLWXWLRQ DQG +RPH 5XOH &LW\
$FW PDNH FOHDU FLWLHV VXFK DV 'HWURLW DUH HPSRZHUHG WR HQDFW DQ\             :HQRWHSDUHQWKHWLFDOO\WKDW0LFKLJDQODZDOVRUHVWULFWV
RUGLQDQFH RU FKDUWHU SURYLVLRQ GHHPHG QHFHVVDU\ IRU WKH SXEOLF LQWHUHVW    WKHWUDQVIHURIUHWLUHPHQWSODQLQWHUHVWVRISXEOLFHPSOR\HHV
DV ORQJ DV WKH HQDFWPHQW LV QRW FRQWUDU\ WR RU SUHHPSWHG E\ WKH VWDWH
                                                                            ZKRDUHQRWRQWKHSD\UROORIDKRPHUXOHPXQLFLSDOLW\
FRQVWLWXWLRQ RU VWDWH ODZV   5HQWDO 3URSHUW\ 2ZQHUV $VVjQ RI .HQW &RXQW\
Y &LW\ RI *UDQG 5DSLGV    1:G   0LFK  $QWL
DOLHQDWLRQ SURYLVLRQV FOHDUO\ PHHW WKLV WHVW DQG WKH EDQNUXSWF\ WUXVWHH
                                                                              m7KH ULJKW RI D SHUVRQ WR D SHQVLRQ DQ DQQXLW\ D
GRHV QRW FRQWHQG RWKHUZLVH                                                   UHWLUHPHQW DOORZDQFH DQ\ RSWLRQDO EHQHILW DQ\ RWKHU
        ,QUH:LOFR[                                    1R      1R                                    ,QUH:LOFR[      

    ULJKW DFFUXHG RU DFFUXLQJ WR DQ\ SHUVRQ XQGHU WKH               1DW3HQVLRQ)XQG86/(GG
    SURYLVLRQVRIWKLVDFWWKHYDULRXVIXQGVFUHDWHGE\WKLV               6&Wl3DWWHUVRQ86DW
    DFWDQGDOOPRQH\DQGLQYHVWPHQWVDQGLQFRPHRIWKH
    IXQGVDUHH[HPSWIURPDQ\VWDWHFRXQW\PXQLFLSDORU                  :KLOH WKH 3DWWHUVRQ &RXUW GLG PHQWLRQ DV HYLGHQFH RI
    RWKHU ORFDO WD[ DQG VKDOO QRW EH VXEMHFW WR H[HFXWLRQ      HQIRUFHDELOLW\WKHH[LVWHQFHRIDVWDWXWRU\ULJKWWRILOHDFLYLO
    JDUQLVKPHQWDWWDFKPHQWWKHRSHUDWLRQRIEDQNUXSWF\RU               DFWLRQWKH&RXUWGLGQRWVXJJHVWWKDWWKHH[LVWHQFHRIVXFKD
    LQVROYHQF\ODZVRURWKHUSURFHVVRIODZDQGVKDOOEH                ULJKWLVDQLQGLVSHQVDEOHFRQGLWLRQRIHQIRUFHDELOLW\2QWKH
    XQDVVLJQDEOHH[FHSWDVRWKHUZLVHSURYLGHGLQWKLVDFWl               FRQWUDU\ WKH &RXUW PHQWLRQHG WZR RWKHU LQGLFLD RI
    0LFK&RPS/DZVHPSKDVLVVXSSOLHG                    HQIRUFHDELOLW\(5,6$jVVWDWXWRU\UHTXLUHPHQWWKDWSODQ
                                                                          WUXVWHHV DQG ILGXFLDULHV GLVFKDUJH WKHLU GXWLHV DQG  WKH
  7KHGHEWRULQWKHFDVHDWEDU0LFKDHO'XDQH:LOFR[LV                 6XSUHPH &RXUWjV RZQ HQIRUFHPHQW RI  (5,6$jV DQWL
ERWKDQHPSOR\HHRIWKH&LW\RI'HWURLWDQGDSDUWLFLSDQWLQ              DOLHQDWLRQSURYLVLRQ,Q*XLGU\WKHFDVHFLWHGE\3DWWHUVRQ
WKHFLW\jVGHILQHGFRQWULEXWLRQUHWLUHPHQWSODQ7KHWHUPVRI            LQFRQQHFWLRQZLWKWKHODVWSRLQWQRRQHKDGILOHGVXLWXQGHU
WKHSODQSHUPLWWKHZLWKGUDZDORIIXQGVIURP0U:LOFR[jV                 (5,6$jVFLYLODFWLRQSURYLVLRQWKH*XLGU\&RXUWQRQHWKHOHVV
DFFRXQW RQO\ XSRQ KLV GHDWK WKH WHUPLQDWLRQ RI KLV               HQIRUFHGDQDQWLDOLHQDWLRQSURYLVLRQ,WLVWKXVUHDVRQDEO\
HPSOR\PHQW KLV FRPSOHWLRQ RI  \HDUV RI VHUYLFH RU KLV        FOHDUZHWKLQNWKDWDVWDWXWRU\ULJKWRIDFWLRQLVQRWQHFHVVDU\
UHWLUHPHQWXQGHUDGLVDELOLW\1RQHRIWKHVHFRQGLWLRQVKDV              IRU QRQEDQNUXSWF\ ODZ WR EH HQIRUFHDEOH IRU SXUSRVHV RI
EHHQPHW                                                                 F
  0U:LOFR[HQWHUHGLQWRDUHYROYLQJORDQDJUHHPHQWZLWK                    2XUVLVWHUFLUFXLWVKDYHODUJHO\DJUHHGWKDWDIWHU3DWWHUVRQ
WKH 'HWURLW 0XQLFLSDO &UHGLW 8QLRQ RQ sXO\                VWDWH DQG IHGHUDO UHVWULFWLRQV RQ DOLHQDWLRQ FDQ VDWLVI\
1RWZLWKVWDQGLQJ WKH DQWLDVVLJQPHQW SURYLVLRQ RI WKH                 FHYHQZKHUHWKHUHLVQRVWDWXWRU\ULJKWRIDFWLRQ
UHWLUHPHQWSODQDQGLQNHHSLQJ ZLWK ZKDWDSSHDUVWRKDYH               6HHHJ:KHW]DOY$OGHUVRQ)GWK
EHHQDFRPPRQSUDFWLFH0U:LOFR[SXUSRUWHGWRSOHGJHKLV                &LU  KROGLQJ WKDW WKH &LYLO 6HUYLFH 5HWLUHPHQW
LQWHUHVWLQWKHSODQDVFROODWHUDOIRUWKHORDQ                        6\VWHPjV DQWLDOLHQDWLRQ SURYLVLRQ ZDV HQIRUFHDEOH
                                                                          QRQEDQNUXSWF\ODZZLWKRXWUHJDUGWRZKHWKHUDSULYDWHULJKW
                                                                          RIDFWLRQZDVDYDLODEOH,QUH0HHKDQ)G
     
     ,Q WKLV FRQQHFWLRQ 0U :LOFR[ VLJQHG D GRFXPHQW HQWLWOHG m6HFXULW\
                                                                          WK&LUKROGLQJWKDWD*HRUJLDVWDWXWHUHVWULFWLQJ
$JUHHPHQW 3OHGJH DQG $VVLJQPHQW 5H 'HILQHG &RQWULEXWLRQ 3ODQ           DOLHQDWLRQ RI LQGLYLGXDO UHWLUHPHQW DFFRXQWV ZDV DQ
$QQXLW\ 6DYLQJV )XQGl     7KH GRFXPHQW FRQWDLQHG WKH IROORZLQJ         HQIRUFHDEOHQRQEDQNUXSWF\ODZ,QUH<XKDV)G
SURYLVLRQV DPRQJ RWKHUV                                                 G&LUVDPHZLWKUHJDUGWRD1HZsHUVH\VWDWXWH
                                                                          %XW VHH ,Q UH /RZHQVFKXVV  )G   WK &LU
     m, 0LFKDHO :LOFR[    GR KHUHE\ SOHGJH DVVLJQ FRQYH\
     WUDQVIHU DQG JUDQW D VHFXULW\ LQWHUHVW WR WKH 'HWURLW 0XQLFLSDO
                                                                          KROGLQJWKDWDVWDWHDQWLDOLHQDWLRQSURYLVLRQPXVW FRQWDLQ
     FUHGLW 8QLRQ µ6HFXUHG 3DUW\j RI WKH SURFHHGV RI P\ 'HILQHG         VRPH mPHFKDQLVPl IRU HQIRUFHPHQW LQ RUGHU WR VDWLVI\
     &RQWULEXWLRQ 3ODQ DOVR NQRZQ DV P\ DQQXLW\ VDYLQJV IXQG             FFHUWGHQLHG6&W
     DPRXQWV FRPPRQO\ UHIHUUHG WR DV D UHIXQG RI SURFHHGV RI
     GHILQHG FRQWULEXWLRQ SODQ KHOG E\ WKH %RDUG RI WUXVWHHV RI WKH        7KH DQWLDVVLJQPHQW SURYLVLRQ RI WKH 'HWURLW SODQ LV
     *HQHUDO RU 3ROLFHPHQ DQG )LUHPHQ 5HWLUHPHQW 6\VWHP RI WKH
     &LW\ RI 'HWURLW , DFNQRZOHGJH WKDW WKH GHFLVLRQ RI WKH 'HWURLW
                                                                          HQIRUFHDEOHEHFDXVHLWLVSDUWRIWKH'HWURLW&LW\&KDUWHUDQG
     0XQLFLSDO &UHGLW 8QLRQ WR JUDQW P\ ORDQ UHTXHVW ZDV EDVHG
     XSRQ WKH SOHGJH DQG DVVLJQPHQW RI WKH SURFHHGV RI P\ DQQXLW\
     VDYLQJV IXQG DPRXQWV QRZ RQ GHSRVLW DQG DFTXLUHG KHUHDIWHU DV
       ,QUH:LOFR[                                   1R        1R                                       ,QUH:LOFR[         

WKDWKRPHUXOHFLW\FKDUWHUVDUHHQIRUFHDEOHLQ0LFKLJDQDVD                 $IHZPRQWKVDIWHUWDNLQJRXWWKHFUHGLWXQLRQORDQ0U
YDOLG H[HUFLVH RI PXQLFLSDO SRZHU  ,Q :\U]\NRZVNL WKH             :LOFR[ ILOHG D YROXQWDU\ SHWLWLRQ XQGHU &KDSWHU  RI WKH
0LFKLJDQ6XSUHPH&RXUWGHFOLQHGWRDOORZDFUHGLWRUWRUHDFK               %DQNUXSWF\&RGH,QWKHFRXUVHRIWKHHQVXLQJSURFHHGLQJV
WKHLQWHUHVWDFLW\HPSOR\HHKHOGLQKLVPXQLFLSDOSHQVLRQ                WKHEDQNUXSWF\FRXUWRUGHUHGWKDW0U:LOFR[jVLQWHUHVWLQWKH
7KHGLVWULFWFRXUWGLVWLQJXLVKHG:\U]\NRZVNLRQWKHJURXQG                 SODQZKLFKWKHQDPRXQWHGWREHWXUQHGRYHUWR
WKDWLQWKDWFDVHWKHFLW\KDGIXQGHGWKHSHQVLRQLWVHOIZKLFK           WKH EDQNUXSWF\ WUXVWHH  7KH UHWLUHPHQW V\VWHP GHFOLQHG WR
PHDQWWKDWWKHUHZDVDYDOLGVSHQGWKULIWWUXVWXQGHUVWDWHODZ            FRPSO\ZLWKWKHRUGHUDGYLVLQJWKHEDQNUXSWF\WUXVWHHWKDW
:LOFR[ VXSUD DW   7KH GLVWULFW FRXUW WKHQ UHLWHUDWHG LWV     0U:LOFR[jVLQWHUHVWFRXOGQRWEHWXUQHGRYHUEHFDXVHDWKH
FHQWUDOKROGLQJWKHDQWLDVVLJQPHQWSURYLVLRQLQWKH'HWURLW              SODQFRQWDLQHGDQDQWLDOLHQDWLRQSURYLVLRQSURKLELWLQJVXFK
SODQLVXQHQIRUFHDEOHEHFDXVHWKHm&KDUWHUGRHVQRWFRQWDLQ                WUDQVIHUV E 0U :LOFR[ ZDV QRW \HW HOLJLEOH WR UHFHLYH
DQ\ ODQJXDJH ZKLFK ZRXOG DOORZ D 3ODQ SDUWLFLSDQW                  EHQHILWVDQGFWKHV\VWHPZDVQRWERXQGE\WKHEDQNUXSWF\
EHQHILFLDU\ ILGXFLDU\ RU D GHSDUWPHQW RI WKH 6WDWH RI            FRXUWjVRUGHU
0LFKLJDQWRILOHDFLYLODFWLRQWRHQMRLQDQ\DFWRUSUDFWLFH
ZKLFK YLRODWHV WKH WHUPV RI WKH 3ODQl  ,G DW   ,Q WKLV     7KH EDQNUXSWF\ WUXVWHH WKHQ FRPPHQFHG WKH SUHVHQW
FRQQHFWLRQWKHFRXUWUHIHUUHGWR3DWWHUVRQ86DW               DGYHUVDU\ SURFHHGLQJ DJDLQVW WKH UHWLUHPHQW V\VWHP DQG LWV
                                                                           ERDUGRIWUXVWHHV2QFURVVPRWLRQVIRUVXPPDU\MXGJPHQW
  :HEHOLHYHWKDWWKHGLVWULFWFRXUWHUUHGLQUHDGLQJ3DWWHUVRQ            WKH EDQNUXSWF\ FRXUW UXOHG LQ IDYRU RI WKH WUXVWHH LQ
DVUHTXLULQJWKDWVXFKDULJKWRIDFWLRQEHSURYLGHGLIDQDQWL           EDQNUXSWF\  )ROORZLQJ DQ XQVXFFHVVIXO PRWLRQ IRU
DVVLJQPHQWSURYLVLRQLVWREHFRQVLGHUHGmHQIRUFHDEOHlIRU                 UHFRQVLGHUDWLRQWKHUHWLUHPHQWV\VWHPILOHGDWLPHO\QRWLFHRI
SXUSRVHVRIF:KHQWKH3DWWHUVRQ&RXUWGLVFXVVHG               DSSHDO WR WKH 8QLWHG 6WDWHV 'LVWULFW &RXUW IRU WKH (DVWHUQ
WKHHQIRUFHDELOLW\RIWKHDQWLDOLHQDWLRQSURYLVLRQDWLVVXHLQ
WKDWFDVHWKH&RXUWPDGHWKUHHSRLQWV
  m3ODQWUXVWHHVRUILGXFLDULHVDUHUHTXLUHGXQGHU(5,6$WR                    FROODWHUDO IRU WKH ORDQ DPRXQW 6DLG DQQXLW\ VDYLQJV IXQG
  GLVFKDUJHWKHLUGXWLHVµLQDFFRUGDQFHZLWKWKHGRFXPHQWV                     DPRXQW LV RQO\ DYDLODEOH XSRQ UHWLUHPHQW RU WHUPLQDWLRQ RI
  DQG LQVWUXPHQWV JRYHUQLQJ WKH SODQj   86&                       HPSOR\PHQW

   D'  $ SODQ SDUWLFLSDQW EHQHILFLDU\ RU                                              

  ILGXFLDU\RUWKH6HFUHWDU\RI/DERUPD\ILOHDFLYLODFWLRQ
  WRµHQMRLQDQ\DFWRUSUDFWLFHjZKLFKYLRODWHV(5,6$RU                      m, DXWKRUL]H DQG GLUHFW DQ\ SHUVRQ LQYROYHG LQ WKH SURFHVVLQJ RU
  WKHWHUPVRIWKHSODQDDQG,QGHHGWKLV                   KDQGOLQJ RI WKH VDLG UHIXQG RI WKH SURFHHGV RI VDLG DQQXLW\
  &RXUWLWVHOIYLJRURXVO\KDVHQIRUFHG(5,6$
VSURKLELWLRQ                     VDYLQJV IXQG WR IRUZDUG VXFK FKHFN WR WKH 'HWURLW 0XQLFLSDO

  RQ WKH DVVLJQPHQW RU DOLHQDWLRQ RI SHQVLRQ EHQHILWV                  &UHGLW 8QLRQ IRU GHSRVLW LQ P\ DFFRXQW , DXWKRUL]H WKH 6HFXUHG
                                                                               3DUW\ WR HQGRUVH VDLG FKHFN DQG GHSRVLW WKH SURFHHGV LQ P\
  GHFOLQLQJ WR UHFRJQL]H DQ\ LPSOLHG H[FHSWLRQV WR WKH                  DFFRXQW , DXWKRUL]H WKH 6HFXUHG 3DUW\ WR SURYLGH D FRS\ RI WKLV
  EURDGVWDWXWRU\EDU6HH*XLGU\Y6KHHW0HWDO:RUNHUV                       GRFXPHQW WR P\ HPSOR\HU DQG UHWLUHPHQW V\VWHP ZKLFK FRS\
                                                                               VKDOO VHUYH DV DQ LUUHYRFDEOH GLUHFWLRQ DQG DXWKRULW\ RI P\
                                                                               HPSOR\HU DQG UHWLUHPHQW V\VWHP WR IRUZDUG VDLG FKHFN WR
                                                                               6HFXUHG 3DUW\ , DXWKRUL]H WKH 'HWURLW 0XQLFLSDO &UHGLW 8QLRQ
     
     :H ILQG WKLV GLVWLQFWLRQ XQDYDLOLQJ 7KH VRXUFH RI WKH SODQjV             WR HQIRUFH LWV OLHQ DQG VHFXULW\ LQWHUHVW RQ WKH DQQXLW\ VDYLQJV
IXQGLQJ ZRXOG EH UHOHYDQW RQO\ LI VWDWH VSHQGWKULIW WUXVW ODZ ZHUH             IXQG SURFHHGV E\ ZLWKGUDZLQJ IURP P\ DFFRXQW RZLQJ WR WKH
QHFHVVDULO\ WKH GHWHUPLQLQJ IDFWRU $V ZH KDYH DOUHDG\ VHHQ WKH 6XSUHPH       'HWURLW 0XQLFLSDO &UHGLW 8QLRQ RU DQ\ RWKHU PHWKRG RI OLHQ
&RXUW KHOG LQ  !,9907843  WKDW WKH QRQEDQNUXSWF\ ODZ UHIHUUHG WR LQ          HQIRUFHPHQW DXWKRUL]HG E\ ODZ LQ WKH HYHQW RI P\ GHIDXOW XQGHU
86&  F LV QRW OLPLWHG WR VSHQGWKULIW WUXVW ODZ                    WKLV ORDQ WUDQVDFWLRQ RI WKLV GDWHl
     ,QUH:LOFR[                                      1R       1R                                     ,QUH:LOFR[       

'LVWULFWRI0LFKLJDQ7KDWFRXUWDIILUPHGDQGWKHDSSHDOWR             XQGHUIHGHUDORUVWDWHODZl,G,QUHDFKLQJWKLVFRQFOXVLRQ
RXUFRXUWIROORZHG                                                       WKHFRXUWUHOLHGKHDYLO\RQ,QUH'XQQ%5%DQNU
                                                                          ('0LFK
                                  ,,
                                                                             7KHEDQNUXSWF\FRXUWjVUHDVRQLQJERWKKHUHDQGLQ'XQQ
   7KH TXHVWLRQ EHIRUH XV WR UHSHDW LV ZKHWKHU WKH DQWL       VHHPV WR XV WR FRQIOLFW ZLWK WKH 8QLWHG 6WDWHV 6XSUHPH
DVVLJQPHQWSURYLVLRQRIWKHGHILQHGFRQWULEXWLRQUHWLUHPHQW               &RXUWjV KROGLQJ LQ 3DWWHUVRQ Y 6KXPDWH  86 
SODQDVLQFRUSRUDWHGLQWKHFLW\FKDUWHULVm>D@UHVWULFWLRQRQ         7KHUHDSHWLWLRQHUKDGDUJXHGDPRQJRWKHUWKLQJV
WKHWUDQVIHURIDEHQHILFLDOLQWHUHVWRIWKHGHEWRULQDWUXVWWKDW       WKDWWKHSKUDVHmHQIRUFHDEOHQRQEDQNUXSWF\ODZlHPEUDFHG
LVHQIRUFHDEOHXQGHUDSSOLFDEOHQRQEDQNUXSWF\ODZl            VWDWHVSHQGWKULIWWUXVWODZRQO\7KH6XSUHPH&RXUWUHMHFWHG
86&F                                                       WKLVSURSRVLWLRQDVRXUFRXUWKDGGRQHHDUOLHULQWKHFDVHRI,Q
                                                                          UH/XFDV)GWK&LU5HVROYLQJDFLUFXLW
  $Q LQTXLU\ XQGHU  F QRUPDOO\ KDV WKUHH SDUWV          VSOLW RQ WKH LVVXH WKH 3DWWHUVRQ &RXUW KHOG WKDW ZKLOH
)LUVW GRHV WKH GHEWRU KDYH D EHQHILFLDO LQWHUHVW LQ D WUXVW"   &RQJUHVVLQWHQGHGWRLQFOXGHVWDWHVSHQGWKULIWWUXVWODZWKHUH
6HFRQGLVWKHUHDUHVWULFWLRQRQWKHWUDQVIHURIWKDWLQWHUHVW"          ZDVQRWDmVXIILFLHQWEDVLVIRUFRQFOXGLQJLQGHURJDWLRQRIWKH
7KLUGLVWKHUHVWULFWLRQHQIRUFHDEOHXQGHUQRQEDQNUXSWF\ODZ"            VWDWXWHjVFOHDUODQJXDJHWKDW&RQJUHVVLQWHQGHGWRH[FOXGH
                                                                          RWKHUVWDWHDQGIHGHUDOODZIURPWKHSURYLVLRQjVVFRSHl,GDW
   +HUHLWLVXQGLVSXWHGWKDW0U:LOFR[jVLQWHUHVWLQWKHSODQ           7KH3DWWHUVRQ&RXUWOHIWQRURRPIRUGRXEWWKDWm>W@KH
LVDQLQWHUHVWLQDmWUXVWl,WLVDOVRXQGLVSXWHGWKDWWKHDQWL        QDWXUDOUHDGLQJ>RIF@HQWLWOHVDGHEWRUWRH[FOXGH
DVVLJQPHQWSURYLVLRQSXUSRUWVWRUHVWULFWWKHWUDQVIHURIWKDW            IURPSURSHUW\RIWKHHVWDWHDQ\LQWHUHVWLQDSODQRUWUXVWWKDW
LQWHUHVW7KHSDUWLHVIXUWKHUDJUHHWKDWQRIHGHUDOVWDWXWHVXFK        FRQWDLQVDWUDQVIHUUHVWULFWLRQHQIRUFHDEOHXQGHUDQ\UHOHYDQW
DV WKH (PSOR\HH 5HWLUHPHQW ,QFRPH 6HFXULW\ $FW RU WKH             QRQEDQNUXSWF\ODZl,GDWHPSKDVLVVXSSOLHG7KH
,QWHUQDO5HYHQXH&RGHUHVWULFWVWKHWUDQVIHURI0U:LOFR[jV             6XSUHPH&RXUWKDVWKXVFOHDUO\LQGLFDWHGWKDWVWDWHODZRWKHU
LQWHUHVW7KHRQO\LVVXHZHDUHFDOOHGXSRQWRGHFLGHWKHQLV          WKDQ VSHQGWKULIW WUXVW ODZ FDQ VHUYH DV mHQIRUFHDEOH
ZKHWKHUWKHLQFRUSRUDWLRQRIWKHDQWLDVVLJQPHQWSURYLVLRQLQ             QRQEDQNUXSWF\ODZlXQGHUF
WKHFLW\FKDUWHUPHDQVWKDWmXQGHUDSSOLFDEOHQRQEDQNUXSWF\
ODZlWKHSURYLVLRQLVmHQIRUFHDEOHl                                        :KHQWKHLQVWDQWFDVHUHDFKHGWKHGLVWULFWFRXUWWKDWFRXUW
                                                                          WRRNDWDFNGLIIHULQJVRPHZKDWIURPWKHEDQNUXSWF\FRXUWjV
   'LVPLVVLQJ DV mXQVXSSRUWHGl WKH UHWLUHPHQW V\VWHPjV               7KH GLVWULFW FRXUW FRQFOXGHG WKDW WKH 'HWURLW &LW\ &KDUWHU
DUJXPHQW WKDW WKH UHVWULFWLRQ RQ DOLHQDWLRQ LV HQIRUFHDEOH         SURYLVLRQZDVQRWmHQIRUFHDEOHlIRUSXUSRVHVRIF
XQGHU0LFKLJDQODZMXVWDVDQ\RWKHUSURYLVLRQRIWKH'HWURLW             EHFDXVHWKHFKDUWHUSURYLGHGQRHQIRUFHPHQWPHFKDQLVPLW
&LW\&KDUWHULVHQIRUFHDEOHWKHEDQNUXSWF\FRXUWGHFLGHGWKDW            GLGmQRWFRQWDLQDQ\µHQIRUFHPHQWjODQJXDJHVLPLODUWRWKDW
WKH SURYLVLRQ LV QRW HQIRUFHDEOH EHFDXVH WKH GHILQHG               IRXQGLQ(5,6$TXDOLILHGSODQVl,QUH:LOFR[1R&9
FRQWULEXWLRQ SODQ LV IXQGHG VROHO\ WKURXJK WKH YROXQWDU\           $$('0LFKRUGHUGDWHGDW7KHFRXUW
FRQWULEXWLRQVRIFLW\HPSOR\HHV7KLVPDNHVWKHSODQDmVHOI            IXUWKHU KHOG WKDW WKH GHEWRUjV LQWHUHVW LQ WKH SODQ GLG QRW
VHWWOHGlWUXVWWKHEDQNUXSWF\FRXUWQRWHGDQGDVHOIVHWWOHG            TXDOLI\ IRU H[HPSWLRQ IURP WKH EDQNUXSWF\ HVWDWH DV DQ
WUXVWFDQQRWEHFRQVLGHUHGDVSHQGWKULIWWUXVWXQGHU0LFKLJDQ             LQWHUHVWXQGHUDVSHQGWKULIWWUXVW,GDW
ODZ,QUH:LOFR[1R6$GYHUVDU\3URFHHGLQJ
1R6%DQNU('0LFKRSLQLRQGDWHGDW                7KHUHWLUHPHQWV\VWHPKDGUHOLHGRQ:\U]\NRZVNLY&LW\RI
%HFDXVHWKH'HWURLWSODQLVQRWDVSHQGWKULIWWUXVWWKH             +DPWUDPFN1:G0LFKIRUWKHSURSRVLWLRQ
EDQNUXSWF\FRXUWFRQFOXGHGmWKHUHVWULFWLRQLVQRWHQIRUFHDEOH