Court Opinion

ID: 2970775
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:21:36.226049+00
Date Added: 2024-06-11T12:40:43.865983
License: Public Domain

5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
           3XUVXDQW WR 6L[WK &LUFXLW 5XOH                   'RWVRQHWDOY                     1RV
   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                                                                :LONLQVRQHWDO
               )LOH 1DPH DS

                                                                        'HFLGHGDQG)LOHG0D\
81,7('67$7(6&28572)$33($/6                               %HIRUH0$57,1&KLHI&LUFXLWsXGJH%2**6
             )257+(6,;7+&,5&8,7                        %$7&+(/'(5'$8*+75(<0225(&2/(&/$<
               BBBBBBBBBBBBBBBBB                            *,/0$1*,%%216DQG52*(56&LUFXLWsXGJHV
                                                                               BBBBBBBBBBBBBBBBB
       1R             ;                                                    &2816(/
:,//,$0 ':,*+7 '27621          
         3ODLQWLII$SSHOODQW                            $5*8('  sRKQ 4 /HZLV s21(6 '$< 5($9,6 	
                                     1RV   32*8( &OHYHODQG 2KLR IRU $SSHOODQW  7RGG 5 0DUWL
                                                         2 ) ) ,& (  2 ) 7 + (  $ 7 7 2 5 1 ( <  * ( 1 ( 5 $ /
          Y                     !                        &255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR
                                
                                                         IRU$SSHOOHHV21%5,()sRKQ4/HZLVs21(6'$<
5(*,1$/' $ :,/.,1621                                   5($9,6	32*8(&OHYHODQG2KLRIRU$SSHOODQW7RGG
        'HIHQGDQW$SSHOOHH                              5 0DUWL 2)),&( 2) 7+( $77251(< *(1(5$/
                                                         &255(&7,216/,7,*$7,216(&7,21&ROXPEXV2KLR
                                                         IRU$SSHOOHHV
                                                           0$57,1 & s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ
       1R              
52*(5,&2 s2+1621                                         ZKLFK %2**6 '$8*+75(< 0225( &2/( DQG
                                                         &/$< ss MRLQHG  *,/0$1 s SS  GHOLYHUHG D
         3ODLQWLII$SSHOODQW 
                                                          VHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJLQSDUWLQ
                                                         ZKLFK %$7&+(/'(5 *,%%216 DQG 52*(56 ss
          Y                                             MRLQHG
                                
                                                                              BBBBBBBBBBBBBBBBB
0$5*$5(77( *+((                
        'HIHQGDQW$SSHOOHH                                                       23,1,21
                               1                                               BBBBBBBBBBBBBBBBB
     $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUWV
           IRUWKH1RUWKHUQ'LVWULFWRI2KLR                %2<&()0$57,1s5&KLHI&LUFXLWsXGJH5RJHULFR
             DW7ROHGRDQG<RXQJVWRZQ                    sRKQVRQDQG:LOOLDP'ZLJKW'RWVRQDSSHDOWKHGLVPLVVDORI
    1RVn'DYLG$.DW]DQG             WKHLU LQGLYLGXDO  86&  FODLPV DJDLQVW WKH 2KLR
         3HWHU&(FRQRPXV'LVWULFWsXGJHV              $GXOW3DUROH$XWKRULW\7KHFODLPVDVVHUWHGLPSURSULHWLHVLQ
                                                          WKHUHVSHFWLYHSODLQWLIIVjSDUROHSURFHHGLQJV7KHVHFODLPV
      $UJXHGDQG6XEPLWWHG'HFHPEHU            ZHUH GLVPLVVHG DV QRW FRJQL]DEOH XQGHU VHFWLRQ 
                                                          DFFRUGLQJ WR WKH UXOH RI +HFN Y +XPSKUH\  86 
                                                            7KH GLVWULFW FRXUWV UXOHG WKDW WKHVH FODLPV ZHUH

                           
1RV                          'RWVRQHWDOY                'RWVRQHWDOY                      1RV
                                           :LONLQVRQHWDO                  :LONLQVRQHWDO

FRJQL]DEOHRQO\XQGHUDSHWLWLRQIRUKDEHDVFRUSXVEHFDXVH                %HIRUHWKDWILYH\HDUVODSVHGKRZHYHUWKH2KLRUHJXODWLRQV
WKH\ QHFHVVDULO\ LPSOLHG WKH LQYDOLGLW\ RI WKH SULVRQHUVj        FKDQJHG DQG WKH QHZ SDUROH UXOHV VDLG WKDW D SULVRQHU
FRQILQHPHQW)RUWKHIROORZLQJUHDVRQVZH5(9(56(WKH                 FRQYLFWHGRIDJJUDYDWHGPXUGHUZDVQRWHOLJLEOHIRUSDUROHIRU
MXGJPHQWRIWKHGLVWULFWFRXUWDQGILQGWKDWFHUWDLQSULVRQHU           PRUH WKDQ WKLUW\WZR \HDUV  'RWVRQ DWWHQGHG KLV KDOIZD\
FODLPVDUHFRJQL]DEOHXQGHUVHFWLRQ                               UHYLHZVFKHGXOHGXQGHUWKHUHJXODWLRQVLQSODFHDWWKHWLPHRI
                                                                        KLVLQLWLDOLQFDUFHUDWLRQ$WWKDWUHYLHZKRZHYHUWKH3DUROH
   ,Q$SULORI5RJHULFRsRKQVRQZKRZDVLQFDUFHUDWHG             %RDUGGHFLGHGWKHQHZUXOHVDSSOLHGUHWURDFWLYHO\ DQGWKH
LQWKHVWDWHRI2KLRKDGDQLQLWLDOSDUROHKHDULQJ$FFRUGLQJ        3DUROH%RDUGDQQRXQFHGWKDW'RWVRQZRXOGQRWEHHOLJLEOHIRU
WRWKH2KLR&RGHWKHSDUROHKHDULQJPXVWEHFRQGXFWHGE\               SDUROH XQWLO   7KH\ QHYHUWKHOHVV NHSW WKH  GDWH
WKH 3DUROH %RDUG RU E\ DW OHDVW RQH PHPEHU RI WKH 3DUROH     VFKHGXOHGIRU'RWVRQjVQH[WKHDULQJ7KH3DUROH%RDUGPDGH
%RDUGDQGRQH3DUROH%RDUG+HDULQJ2IILFHU,QsRKQVRQjV               DGHWHUPLQDWLRQDERXW'RWVRQjVSDUROHHOLJLELOLW\QRWDERXW
FDVHWKHKHDULQJZDVFRQGXFWHGE\RQH3DUROH%RDUGPHPEHU              KLVSDUROHVXLWDELOLW\DVZDVUHTXLUHGE\WKHROGUHJXODWLRQV
DORQH$WWKHKHDULQJWKDWPHPEHURIWKH3DUROH%RDUGGLG
QRWDOORZsRKQVRQWRVSHDNRQKLVRZQEHKDOIDOWKRXJKWKH                'RWVRQILOHG VXLWXQGHUVHFWLRQDOOHJLQJYLRODWLRQV
&RGHUHTXLUHVWKDWVKHFRQVLGHUKLVRUDORUZULWWHQVWDWHPHQWV         ZLWKLQ WKH SDUROH KHDULQJ SURFHGXUHV  7KH GLVWULFW FRXUW
6KH GLG QRW DVN sRKQVRQ DQ\ TXHVWLRQV  sRKQVRQ ZDV QRW       GLVPLVVHG'RWVRQjVFODLPVWDWLQJLWZDVQRWFRJQL]DEOHXQGHU
DOORZHG WR DVN DQ\ TXHVWLRQV  7KH 3DUROH %RDUG PHPEHU         VHFWLRQ
EDVHGKHUGHFLVLRQWRGHQ\SDUROHRQWZRDOOHJHGFRQYLFWLRQV
IRUZKLFKsRKQVRQZDVQHYHUHYHQFKDUJHGLQYLRODWLRQRIWKH             :KHQDGLVWULFWFRXUWGLVPLVVHVDFDVHRUFODLPSXUVXDQWWR
&RGHjVSHUPLVVLEOHFRQVLGHUDWLRQV                                      86&  H WKLV FRXUW UHYLHZV VXFK GLVPLVVDO GH
                                                                        QRYR0F*RUHY:ULJJOHVZRUWK)GWK&LU
   sRKQVRQFODLPVWKDWKLVGXHSURFHVVULJKWVZHUHYLRODWHGE\          7KHJUDQWRIDPRWLRQIRUVXPPDU\MXGJPHQWLVDOVR
WKLVSDUROHKHDULQJ+HILOHGDVHFWLRQFODLPFKDOOHQJLQJ         UHYLHZHGGHQRYRDQGWKLVFRXUWDSSOLHVWKHVDPHVWDQGDUGWKH
WKH SDUROH KHDULQJ QRW WKH GHQLDO RI SDUROH  +H VRXJKW      GLVWULFWFRXUWDSSOLHG6HH3HUU\Y0F*LQQLV)G
GHFODUDWRU\DQGLQMXQFWLYHUHOLHI7KHGLVWULFWFRXUWGLVPLVVHG        WK&LU
sRKQVRQjV VXLW IRU IDLOXUH WR VWDWH D FODLP XQGHU  86&
HILQGLQJWKDW+HFNSUHFOXGHGKLVFODLPsRKQVRQ                 )HGHUDOKDEHDVFRUSXVSXUVXDQWWR86&LVWKH
DOOHJHVWKDWWKLVFKDOOHQJHLVFRJQL]DEOHXQGHUVHFWLRQ            H[FOXVLYH DYHQXH IRU FKDOOHQJLQJ WKH IDFW RU GXUDWLRQ RI D
DQGWKDWWKHGLVWULFWFRXUWHUUHGLQGLVPLVVLQJKLVFRPSODLQW          SULVRQHUjVFRQILQHPHQWEXWFLYLOULJKWVDFWLRQVSXUVXDQWWR
                                                                        86&DUHDYDLODEOHWRFKDOOHQJHWKHFRQGLWLRQVRIWKDW
  :LOOLDP'ZLJKW'RWVRQZDVFRQYLFWHGLQ2KLRLQRI                FRQILQHPHQWDFFRUGLQJWRWKH6XSUHPH&RXUW6HH3UHLVHUY
DJJUDYDWHG PXUGHU  8QGHU WKH UHJXODWLRQV LQ SODFH DW WKH      5RGULJXH]867KHFDVHVEHIRUHWKLVHQ
WLPHKHZDVQRWHOLJLEOHIRUSDUROHIRUILIWHHQ\HDUV,IKH          EDQF FRXUW WRGD\ LQYROYH WKH LQWHUVHFWLRQ RI WKHVH WZR
ZHUHGHQLHGSDUROHDWWKDWSRLQWWKH3DUROH%RDUGZRXOGEH             SURYLVLRQV  ,W LV RXU WDVN WR GHWHUPLQH XQGHU ZKDW
UHTXLUHG WR JLYH KLP DQRWKHU KHDULQJ ZLWKLQ ILYH \HDUV         FLUFXPVWDQFHVDSULVRQHUPD\XVHDVHFWLRQDFWLRQUDWKHU
'RWVRQZDVGHQLHGSDUROHLQLWLDOO\DQGWKH3DUROH%RDUGVHW            WKDQ D KDEHDV FRUSXV SHWLWLRQ WR FKDOOHQJH WKH SURFHGXUHV
KLV QH[W KHDULQJ IRU WHQ \HDUV ODWHU ZLWK D KDOIZD\ SRLQW    XVHGLQKLVSDUROHKHDULQJ
HYDOXDWLRQ LQ ILYH \HDUV  7KLV SODQ FRPSOLHG ZLWK WKH
UHJXODWLRQVLQHIIHFWZKHQ'RWVRQZDVVHQWHQFHG
1RV                          'RWVRQHWDOY                 'RWVRQHWDOY                       1RV
                                           :LONLQVRQHWDO                   :LONLQVRQHWDO

   )LYHVRPHZKDWFRQIXVLQJ6XSUHPH&RXUWFDVHVJRYHUQWKH               SURSHU IRU WKH >FRXUWV@ WR GHWHUPLQH WKH YDOLGLW\ RI WKH
LVVXH KHUH DQG RXU VLVWHU FLUFXLWV KDYH VWUXJJOHG ZLWK         SURFHGXUHV IRU UHYRNLQJ JRRGWLPH FUHGLWV DQG WR IDVKLRQ
DSSOLFDWLRQRIWKHLUKROGLQJV:HKDYHVWUXJJOHGDVZHOODV           DSSURSULDWH UHPHGLHV IRU DQ\ FRQVWLWXWLRQDO YLRODWLRQV
HYLGHQFHGE\WKHFRQIOLFWLQJRSLQLRQVPRVWO\XQSXEOLVKHGRI           DVFHUWDLQHGVKRUWRIRUGHULQJWKHDFWXDOUHVWRUDWLRQRIJRRG
WKLVFRXUWWKXVIDU:HQRZVHHNWRFODULI\WKHFRQIOLFW              WLPHDOUHDG\FDQFHOOHGl7KH&RXUWUHFRJQL]HGWKHVHFWLRQ
                                                                        FODLP
   7KHROGHVWRIWKHUHOHYDQW6XSUHPH&RXUWFDVHVLV3UHLVHU
86,QWKLVFDVHSULVRQHUVFKDOOHQJHGDSROLF\RI             $IWHU D ORQJ SHULRG RI VLOHQFH RQ WKH PDWWHU WKH &RXUW
GHSULYDWLRQRIJRRGWLPHFUHGLWVDIWHUGLVFLSOLQDU\KHDULQJV           GHFLGHG+HFNY+XPSKUH\86,Q+HFND
,GDW7KHSULVRQHUVVRXJKWLQMXQFWLYHUHOLHILQWKH           SULVRQHUFODLPHGWKDWWKHGHIHQGDQWVVWDWHSURVHFXWRUVDQG
IRUPRILPPHGLDWHUHVWRUDWLRQRIWKHFUHGLWVZKLFKLQHYHU\            LQYHVWLJDWRUVKDGHQJDJHGLQDQXQODZIXOLQYHVWLJDWLRQRIKLP
FDVHZRXOGDXWRPDWLFDOO\UHVXOWLQWKHSULVRQHUVjLPPHGLDWH             WKDWOHGWRKLVXQODZIXODUUHVWDQGSURVHFXWLRQ+HVRXJKW
UHOHDVHIURPFRQILQHPHQW,GDW%HFDXVHWKLVDFWLRQ             FRPSHQVDWRU\ DQG SXQLWLYH GDPDJHV EXW QRW UHOHDVH IURP
FKDOOHQJHG WKH GXUDWLRQ RI WKHLU FRQILQHPHQW WKH 6XSUHPH        FXVWRG\RURWKHULQMXQFWLYHUHOLHI1HYHUWKHOHVVEHFDXVHWKH
&RXUWKHOGWKDWmDVWDWHSULVRQHUFKDOOHQJLQJKLVXQGHUO\LQJ            &RXUWIRXQGWKDW+HFNZDVDFWXDOO\WHVWLQJWKHUHOLDELOLW\DQG
FRQYLFWLRQDQGVHQWHQFHRQIHGHUDOFRQVWLWXWLRQDOJURXQGVLQ            OHJDOLW\ RI KLV FRQILQHPHQW KLV FODLP ZDV QRW FRJQL]DEOH
DIHGHUDOFRXUWLVOLPLWHGWRKDEHDVFRUSXVl,GDW            XQGHUVHFWLRQ,GDW
  $V H[SODLQHG DERYH KRZHYHU 3UHLVHU OHIW RSHQ WKH                7KH&RXUWVRXJKWWRIXUWKHUFODULI\WKHTXHVWLRQKRZHYHU
SRVVLELOLW\ WKDW D VHFWLRQ  FODLP PLJKW VWLOO OLH  7KH   &LWLQJWKH3UHLVHUTXRWHDERYHWKDWVHHNLQJGDPDJHVLVQRW
6XSUHPH&RXUWVDLGm>,@IDVWDWHSULVRQHULVVHHNLQJGDPDJHV          FKDOOHQJLQJ RQHjV FRQILQHPHQW WKH 6XSUHPH &RXUW VDLG
KHLVDWWDFNLQJVRPHWKLQJRWKHUWKDQWKHIDFWRUOHQJWKRIKLV          m7KDWVWDWHPHQWPD\QRWEHWUXHKRZHYHUZKHQHVWDEOLVKLQJ
FRQILQHPHQW DQG KH LV VHHNLQJ VRPHWKLQJ RWKHU WKDQ              WKHEDVLVIRUWKHGDPDJHVFODLPQHFHVVDULO\GHPRQVWUDWHVWKH
LPPHGLDWHRUPRUHVSHHG\UHOHDVHWKHWUDGLWLRQDOSXUSRVHRI            LQYDOLGLW\RIWKHFRQYLFWLRQl,GDW7KH6XSUHPH&RXUW
KDEHDV FRUSXVl ,G DW   7KH &RXUW ZHQW RQ WR VD\       ZHQWRQWROLPLWWKHXVHRIVHFWLRQIRUSULVRQHUFODLPV
m$FFRUGLQJO\DGDPDJHVDFWLRQE\DVWDWHSULVRQHUFRXOG          VWDWLQJDWWKDW
EHEURXJKWXQGHUWKH&LYLO5LJKWV$FWLQIHGHUDOFRXUWZLWKRXW
DQ\UHTXLUHPHQWRISULRUH[KDXVWLRQRIVWDWHUHPHGLHVl,G                LQ RUGHU WR UHFRYHU GDPDJHV IRU DOOHJHGO\
HPSKDVLVDGGHG                                                           XQFRQVWLWXWLRQDOFRQYLFWLRQRULPSULVRQPHQWRUIRURWKHU
                                                                            KDUP FDXVHG E\ DFWLRQV ZKRVH XQODZIXOQHVV ZRXOG
   $IWHULPDJLQLQJDSULVRQHUjVFODLPWKDWPLJKWEHFRJQL]DEOH              UHQGHUDFRQYLFWLRQRUVHQWHQFHLQYDOLGDSODLQWLII
XQGHUVHFWLRQLQ3UHLVHUWKH6XSUHPH&RXUWGHFLGHGLQ                 PXVW SURYH WKDW WKH FRQYLFWLRQ RU VHQWHQFH KDV EHHQ
:ROII Y 0F'RQQHOO  86    WKDW D            UHYHUVHGRQGLUHFWDSSHDOH[SXQJHGE\H[HFXWLYHRUGHU
VHFWLRQFODLPIRUGDPDJHVEDVHGRQDFKDOOHQJHWRWKH                  GHFODUHGLQYDOLGE\DVWDWHWULEXQDODXWKRUL]HGWRPDNH
SURFHGXUHVHPSOR\HGE\WKHVWDWHLQLPSRVLQJVDQFWLRQVRQD                 VXFKGHWHUPLQDWLRQRUFDOOHGLQWRTXHVWLRQE\DIHGHUDO
SULVRQHULQFOXGLQJWKHORVVRIJRRGWLPHFUHGLWVIRUIODJUDQW              FRXUW
V LVVXDQFH RI D ZULW RI KDEHDV FRUSXV  86&
RUVHULRXVPLVFRQGXFWZDVLQIDFWFRJQL]DEOH7KHVXLWZDV                $FODLPIRUGDPDJHVEHDULQJWKDWUHODWLRQVKLSWR
D FODVV DFWLRQ DQG LW LVVXHG D JHQHUDO FKDOOHQJH WR WKH          DFRQYLFWLRQRUVHQWHQFHWKDWKDVQRWEHHQVRLQYDOLGDWHG
SURFHGXUHVHPSOR\HGE\WKHVWDWH7KH&RXUWVDLGm>,@WZDV                LVQRWFRJQL]DEOHXQGHU
1RV                            'RWVRQHWDOY                 'RWVRQHWDOY                    1RV
                                             :LONLQVRQHWDO                   :LONLQVRQHWDO

7KH &RXUW KRZHYHU WKHQ VDLG m>,@I WKH GLVWULFW FRXUW             7KH6XSUHPH&RXUWVHHPVWKXVWRKDYHGLFWDWHGKRZWKHVH
GHWHUPLQHVWKDWWKHSODLQWLII
VDFWLRQHYHQLIVXFFHVVIXOZLOO          FODLPVFDQSURFHHGEXWWKHFDVHVIURPWKHORZHUFRXUWVDUH
QRW GHPRQVWUDWH WKH LQYDOLGLW\ RI DQ\ RXWVWDQGLQJ FULPLQDO         DQ\WKLQJEXWFOHDUDQGWKHUXOLQJVIURPWKHYDULRXVFLUFXLWV
MXGJPHQWDJDLQVWWKHSODLQWLIIWKHDFWLRQVKRXOGEHDOORZHGWR           DUHQRWHQWLUHO\FRQVLVWHQW$VH[SODLQHGPRUHIXOO\EHORZ
SURFHHGLQWKHDEVHQFHRIVRPHRWKHUEDUWRWKHVXLWl,GDW           WKH'LVWULFWRI&ROXPELD&LUFXLWKDVIRXQGWKDWDFKDOOHQJHWR
  7KH FRJQL]DEOH FODLP WKHQ FDQQRW EH WKH NLQG RI         SDUROHSURFHHGLQJVLVFRJQL]DEOHXQGHUVHFWLRQDVKDV
FKDOOHQJHWKDWILWVVTXDUHO\ZLWKLQWKHFRUHRIKDEHDVFRUSXV            WKH)LIWK7KH6HYHQWK&LUFXLWUHFRJQL]HVWKDWVRPHSULVRQHU
D FKDOOHQJH WR WKH IDFW RU GXUDWLRQ RI FRQILQHPHQW  7KH        FODLPVDUHFRJQL]DEOHXQGHUVHFWLRQUDWKHUWKDQKDEHDV
TXHVWLRQ EHFRPHV ZKDW WKH 6XSUHPH &RXUW LQWHQGV E\                 EXWLWLVQRWFOHDUZKHUHFKDOOHQJHVWRSDUROHSURFHHGLQJVOLH
mQHFHVVDULO\GHPRQVWUDWHVlDVWRWKHYDOLGLW\RIDFRQYLFWLRQ            7KH7HQWKWKH1LQWKDQGWKH(LJKWK&LUFXLWVKDYHFRQIOLFWLQJ
RUVHQWHQFH,GDW                                                 SUHFHGHQW
  7KH 6XSUHPH &RXUW IXUWKHU H[SORUHG WKDW TXHVWLRQ LQ                 ,Q$Q\DQZXWDNXY0RRUH)G'&&LU
(GZDUGVY%DOLVRN86,QWKDWFDVHDVWDWH           WKH&RXUWRI$SSHDOVIRUWKH'LVWULFWRI&ROXPELD&LUFXLWKHOG
SULVRQHUFODLPHGWRFKDOOHQJHRQO\WKHSURFHGXUHVXVHGLQKLV             WKDW DQ LQPDWH
V FRQVWLWXWLRQDO FKDOOHQJH DOOHJLQJ
GLVFLSOLQDU\SURFHHGLQJEHOLHYLQJWKDWKHKDGFDUYHGRXWWKH             PLVFDOFXODWLRQRIDSDUROHHOLJLELOLW\GDWHFRXOGEHEURXJKWDV
VRUW RI FODLP FRJQL]DEOH XQGHU VHFWLRQ  3UHLVHU DQG         DVHFWLRQDFWLRQ7KHFRXUWLQGLFDWHGWKDWEHFDXVHSDUROH
+HFN7KHSURFHGXUHVDWLVVXHKRZHYHUUHJDUGHGWKHORVVRI             GHFLVLRQVLQWKH'LVWULFWRI&ROXPELDZHUHGLVFUHWLRQDU\WKHUH
JRRGWLPH FUHGLWV  ,Q VHHNLQJ DQG VXFFHVVIXOO\ DWWDLQLQJ          ZDVQRJXDUDQWHHWKHLQPDWHZRXOGKDYHEHHQUHOHDVHGDQ\
UHVWRUDWLRQ RI JRRGWLPH FUHGLWV D SULVRQHUjV VHQWHQFH ZDV        HDUOLHU/LNHZLVHLQ&DUVRQYsRKQVRQ)G
QHFHVVDULO\DQGDXWRPDWLFDOO\VKRUWHU7KH6XSUHPH&RXUW                 WK&LUWKHFRXUWVDLGm*HQHUDOO\VHFWLRQVXLWV
KHOGWKDWWKHSULVRQHUjVQDUURZLQWHUSUHWDWLRQRIDFRJQL]DEOH            DUHWKHSURSHUYHKLFOHWRDWWDFNXQFRQVWLWXWLRQDOFRQGLWLRQVRI
FODLPZDVQRWQDUURZHQRXJKWKHQDWXUHRIDFKDOOHQJHWR                 FRQILQHPHQW DQG SULVRQ SURFHGXUHVl ZKHUHDV D KDEHDV
SURFHGXUHVPD\VWLOOLPSO\WKHLQYDOLGLW\RIWKHFRQYLFWLRQRU            SHWLWLRQ LV WKH SURSHU YHKLFOH IRU VHHNLQJ UHOHDVH IURP
VHQWHQFH  ,G DW   $V D UHVXOW D FODLP DWWDFNLQJ RQO\   LQFDUFHUDWLRQ
SURFHGXUH QRW UHVXOW PD\ VWLOO IDLO WR EH FRJQL]DEOH XQGHU
VHFWLRQXQOHVVWKHSULVRQHUFDQVKRZWKDWWKHFRQYLFWLRQ                7KH6HYHQWK&LUFXLWUHFHQWO\VXPPDUL]HGLWVVWDQGDUGLQ
RU VHQWHQFH KDV EHHQ SUHYLRXVO\ LQYDOLGDWHG ZKHUH DV LQ         0RUDQ Y 6RQGDOOH  )G   WK &LU 
(GZDUGVWKHFKDOOHQJHFDQEHVDLGWRmQHFHVVDULO\lLPSO\WKH             LQWHUQDOFLWDWLRQVRPLWWHGLQWKLVZD\
LQYDOLGLW\RIWKHFRQWLQXHGFRQILQHPHQW
                                                                              6WDWHSULVRQHUVZKRZDQWWRFKDOOHQJHWKHLUFRQYLFWLRQV
  )LQDOO\DQGPRVWUHFHQWO\LQ6SHQFHUY.HPQD86                  WKHLU VHQWHQFHV RU DGPLQLVWUDWLYH RUGHUV UHYRNLQJ
 WKH 6XSUHPH &RXUW UHLWHUDWHG WKDW VRPH NLQG RI                JRRGWLPH FUHGLWV RU HTXLYDOHQW VHQWHQFHVKRUWHQLQJ
SULVRQHUFODLPLVFRJQL]DEOHXQGHUVHFWLRQ7KH&RXUW                   GHYLFHVPXVWVHHNKDEHDVFRUSXVEHFDXVHWKH\FRQWHVW
ZURWHm,IIRUH[DPSOHSHWLWLRQHUZHUHWRVHHNGDPDJHVµIRU                 WKHIDFWRUGXUDWLRQRIFXVWRG\6WDWHSULVRQHUVZKRZDQW
XVLQJ WKH ZURQJ SURFHGXUHV QRW IRU UHDFKLQJ WKH ZURQJ                WRUDLVHDFRQVWLWXWLRQDOFKDOOHQJHWRDQ\RWKHUGHFLVLRQ
UHVXOWjDQGLIWKDWSURFHGXUDOGHIHFWGLGQRWµQHFHVVDULO\LPSO\              VXFK DV WUDQVIHU WR D QHZ SULVRQ DGPLQLVWUDWLYH
WKHLQYDOLGLW\RIjWKHUHYRFDWLRQWKHQ+HFNZRXOGKDYHQR                    VHJUHJDWLRQ H[FOXVLRQ IURP SULVRQ SURJUDPV RU
DSSOLFDWLRQ>DW@DOOl,GDWLQWHUQDOFLWDWLRQVRPLWWHG               VXVSHQVLRQRISULYLOHJHVPXVWLQVWHDGHPSOR\RU
1RV                         'RWVRQHWDOY              'RWVRQHWDOY                            1RV
                                          :LONLQVRQHWDO                 :LONLQVRQHWDO

  DQRWKHUVWDWXWHDXWKRUL]LQJGDPDJHVRULQMXQFWLRQVZKHQ               )LQDOO\WKH(LJKWK&LUFXLWKDVFKDUDFWHUL]HGWKHVWDWHRIWKH
  WKHGHFLVLRQPD\EHFKDOOHQJHGDWDOO                       ODZ LQ WKLV ZD\ m&ODLPV FKDOOHQJLQJ WKH FRQGLWLRQV RI
                                                                      FRQILQHPHQW RU WKH PHWKRG E\ ZKLFK D VHQWHQFH LV EHLQJ
7KHTXHVWLRQUHPDLQVKRZHYHUZKHWKHUDSDUROHKHDULQJLV            FDUULHGRXWPD\EHDVVHUWHGWKURXJKDFDXVHRIDFWLRQ
DQ mHTXLYDOHQW VHQWHQFHVKRUWHQLQJ GHYLFHl RU mDQ\ RWKHU        +RZHYHUDVWDWHSULVRQHUFKDOOHQJLQJWKHIDFWRUGXUDWLRQRI
GHFLVLRQlLQWKH6HYHQWK&LUFXLW                                    D VHQWHQFH RI LPSULVRQPHQW DQG VHHNLQJ LPPHGLDWH RU
                                                                      VSHHGLHUUHOHDVHKDVDIHGHUDOUHPHG\WKURXJKKDEHDVFRUSXV
  7KH7HQWK&LUFXLWFDVHVDUHLQFRQIOLFW(DUO\7HQWK&LUFXLW       DQGFDQQRWEULQJDFODLPXQGHUl:LOOLDPVY+RSNLQV
FDVHVVHHPWRVD\WKDWKDEHDVLVDSSURSULDWHIRUFODLPVDULVLQJ       )GWK&LU
IURPSDUROHSURFHGXUHV6HH&URZY3HQU\)G
WK&LU7KLVFDVHKRZHYHUSUHGDWHG6SHQFHUY               $VWRZKHUHWKLV&RXUWXOWLPDWHO\VWDQGVRQWKHVHLVVXHVZH
.HPQD860RUHUHFHQWO\WKH7HQWK&LUFXLW          ILUVWORRNWR:DUGY(QJOHU1RV
KDVVDLGDOEHLWLQDQXQSXEOLVKHGRSLQLRQm>6@HFWLRQ           :/WK&LU0DUXQSXEOLVKHGRSLQLRQ
DFWLRQV DUH W\SLFDOO\ WKH SURSHU YHKLFOH IRU DWWDFNLQJ         ,QUXOLQJWKDWWKHSODLQWLIIVDFWXDOO\REMHFWHGWRWKHRXWFRPHV
XQFRQVWLWXWLRQDO FRQGLWLRQV RI FRQILQHPHQW DQG SDUROH            RIWKHLUSDUROHKHDULQJVQRWWKHSURFHGXUHVRIWKRVHKHDULQJV
SURFHGXUHVl:RRGUXIIY(YHUHWW1R:/               ZH VDLG m(VVHQWLDOO\ SODLQWLII
V FODLPV DUH QRW FRJQL]DEOH

WK&LUsXO\                                XQGHUEHFDXVHSODLQWLIIFDQQRWVKRZWKDWWKHGHFLVLRQ
                                                                      WRGHQ\SODLQWLIIFRQVLGHUDWLRQIRUSDUROHZDVLQYDOLGDWHGDQG
  7KH1LQWK&LUFXLWUXOHGLVWLQJXLVKHVDPRQJGLIIHUHQWSDUROH         D UXOLQJ LQ SODLQWLII
V IDYRU LQ WKLV FDVH ZRXOG QHFHVVDULO\
SURFHGXUHV7KDWFRXUWLQ%XWWHUILHOGY%DLO)G      LPSOLFDWHWKHFRQWLQXHGYDOLGLW\RIKLVLPSULVRQPHQWl:H
 WK &LU  VDLG  m:H KDYH QR GLIILFXOW\ LQ      IXUWKHUKDYHVDLG
FRQFOXGLQJ WKDW D FKDOOHQJH WR WKH SURFHGXUHV XVHG LQ WKH
GHQLDO RI SDUROH QHFHVVDULO\ LPSOLFDWHV WKH YDOLGLW\ RI WKH     2QHUHDVRQZKLFK>WKHSULVRQHU@JDYHIRUZK\KLVSDUROH
GHQLDO RI SDUROH DQG WKHUHIRUH WKH SULVRQHU
V FRQWLQXLQJ       ZDVLPSURSHUO\GHQLHGZDVVRPHRIWKHFRQYLFWLRQVXVHG
FRQILQHPHQWl  $V VXSSRUW LQ )RRWQRWH  WKH FRXUW FLWHG      WRGHQ\KLVSDUROHZHUHLQYDOLG$VDUXOLQJRQWKHSDUROH
&URZ Y 3HQU\  )G DW  DQG 0F*UHZ Y 7H[DV          ERDUG
V GHFLVLRQ GHQ\LQJ >KLP@ SDUROH ZRXOG WKXV
%RDUG RI 3DUGRQV 	 3DUROHV  )G   WK &LU        TXHVWLRQ WKH YDOLGLW\ RI WKHVH FKDOOHQJHG FRQYLFWLRQV
,G7KHFRXUWFRQWUDVWHGWKHIDFWVLQ1HDOY6KLPRGD         +HFNGLUHFWVWKDWWKHFRPSODLQWEHGLVPLVVHG)XUWKHUDV
)GWK&LUWRWKHIDFWVLQ%XWWHUILHOG,Q          >WKHSULVRQHU@LVFRQWHVWLQJKLVDFWXDOFRQILQHPHQWKLV
1HDO SULVRQHUV EURXJKW D VHFWLRQ  DFWLRQ WR FKDOOHQJH      VROHUHPHG\LVDZULWRIKDEHDVFRUSXVQRWDFLYLOULJKWV
WKHLUFKDUDFWHUL]DWLRQDVVH[RIIHQGHUVIRUSXUSRVHVRIDVWDWH         DFWLRQ
UHJLVWUDWLRQSURJUDP7KH1LQWK&LUFXLWQRWHGWKDWVXFFHVVRQ
WKHPHULWVIRUWKHFODLPDQWVZRXOGQRWFDOOLQWRTXHVWLRQWKH
YDOLGLW\RIWKHLUFRQILQHPHQWLWZRXOGPHUHO\UHPRYHWKHP
IURP WKH VH[ RIIHQGHU OLVW DQG UHJLVWUDWLRQ SURJUDP
UHTXLUHPHQWV,GDW$VDUHVXOWWKHSULVRQHUVjFODLPV              
ZHUHSURSHUO\EURXJKWXQGHUVHFWLRQ,G                                 :KLOH WKLV FRXUW OLPLWV WKH SUHFHGHQWLDO YDOXH DQG FLWDWLRQ WR LWV
                                                                      XQSXEOLVKHG FDVHV ZH IHHO LW LV LPSRUWDQW KHUH WR HOXFLGDWH WKH FRQIXVLRQ
                                                                      DPRQJ SDQHOV RI WKLV FRXUW RQ WKH LVVXHV EHIRUH WKH   HQ EDQF   FRXUW   7KH
                                                                      P\ULDG XQSXEOLVKHG FDVHV RQ WKLV LVVXH DQG WKH GLIIHULQJ UHVXOWV WKHUHLQ
                                                                      PHULW PHQWLRQ DQG FODULILFDWLRQ
1RV                          'RWVRQHWDOY               'RWVRQHWDOY                           1RV
                                           :LONLQVRQHWDO                   :LONLQVRQHWDO

&KDQGOHUY0LFKLJDQ3DUROH%G1R :/                  ZKLFKDSULVRQHUZLOOEHHOLJLEOHIRUDSDUROHGHWHUPLQDWLRQ

WK&LUsXQXQSXEOLVKHGRSLQLRQ              KHDULQJDQGSDUROHGHWHUPLQDWLRQKHDULQJVWKHPVHOYHV7KH
7KHVHGHFLVLRQVZRXOGGHQ\sRKQVRQDQG'RWVRQWKHUHOLHI                1LQWK&LUFXLWKDVHQGRUVHGWKLVGLVWLQFWLRQ&RPSDUH1HDO
WKH\VHHN                                                              )GDW$7KHRQO\EHQHILWWKDWDYLFWRU\LQWKLVFDVH
                                                                        ZRXOGSURYLGH>WKHSODLQWLIIV@LVDWLFNHWWRJHWLQWKHGRRU
   2Q WKH RWKHU VLGH WKLV FRXUW KDV DOVR UHFRJQL]HG FHUWDLQ   RIWKHSDUROHERDUGWKXVRQO\PDNLQJWKHPHOLJLEOHIRUSDUROH
SULVRQHUSDUROHFODLPVXQGHUVHFWLRQm:KHQDSULVRQHU            FRQVLGHUDWLRQ DFFRUGLQJ WR WKH WHUPV RI WKHLU VHQWHQFHVl
LVQRWFODLPLQJLPPHGLDWHHQWLWOHPHQWWRSDUROHEXWUDWKHULV          HPSKDVLVDGGHGZLWK%XWWHUILHOG)GDWILQGLQJ
FKDOOHQJLQJSDUROHSURFHGXUHVKHPD\EULQJKLVDFWLRQXQGHU            DFWLRQDOOHJLQJYLRODWLRQRIGXHSURFHVVULJKWVZKHUHSDUROH
 l  &RIIH\ Y 7HQQHVVHH 1R   :/            ERDUGFRQVLGHUHGIDOVHLQIRUPDWLRQGLUHFWO\DQGQHFHVVDULO\

WK&LU0D\XQSXEOLVKHGRSLQLRQVHH            LPSOLFDWHVWKHYDOLGLW\RIWKHGHQLDORISDUROHDQGWKHUHIRUH
DOVR)UDVHUY7HQQ%GRI3DUROHV1R:/               SULVRQHU VFRQWLQXLQJFRQILQHPHQW:KLOHLWLVQRWFOHDUIURP

WK&LU1RYXQSXEOLVKHGRSLQLRQ             WKH UHFRUG WKDW 'RWVRQ ZDV VXSSRVHG WR UHFHLYH D SDUROH
,Q6HDJURYHVY7HQQHVVHH%RDUGRI3UREDWLRQ	3DUROH1R              HOLJLELOLW\ KHDULQJ DV RSSRVHG WR D SDUROH GHWHUPLQDWLRQ RU
  :/ 
 WK &LU sXQ              VXLWDELOLW\KHDULQJZHDJUHHZLWKWKHGLVVHQWWKDWSURFHGXUDO
LQWHUQDOFLWDWLRQVRPLWWHGXQSXEOLVKHGRSLQLRQZHVDLG           FKDOOHQJHVWRSDUROHHOLJLELOLW\KHDULQJVZLOOUDUHO\LIHYHU
                                                                        $QHFHVVDULO\LPSO\#WKHLQYDOLGLW\RIDSULVRQHU VFRQYLFWLRQRU
  7KHGLVWULFWFRXUWVKRXOGQRWKDYHGLVPLVVHG6HDJURYHV
V              FRQWLQXHGFRQILQHPHQW6HH1HDO)GDWREVHUYLQJ
  FRPSODLQWXQGHU3UHLVHUEHFDXVHKHLVFKDOOHQJLQJWKH                 WKDWSULVRQHU VFKDOOHQJHVWRSDUROHHOLJLELOLW\GHWHUPLQDWLRQV
  SURFHGXUHVXVHGWRGHWHUPLQHKLVSDUROHHOLJLELOLW\UDWKHU            LI VXFFHVVIXO ZRXOG QRW $QHFHVVDULO\ VKRUWHQ WKHLU SULVRQ
  WKDQWKHGHFLVLRQLWVHOI3UHLVHUDQG+HFNY+XPSKUH\               VHQWHQFHV E\ D VLQJOH GD\#  :H GLIIHU ZLWK WKH GLVVHQW
  866&W/(GG                 KRZHYHUDVWRsRKQVRQEHFDXVHZHEHOLHYHWKDWWKHUHDOVR
  GRQRWEDUDOOFKDOOHQJHVWRSDUROHSURFHGXUHV          PD\H[LVWSURFHGXUDOFKDOOHQJHVWRSDUROHGHWHUPLQDWLRQRU
  $OWKRXJK D SULVRQHU FDQQRW VXH XQGHU   IRU               VXLWDELOLW\KHDULQJVWKDWZLOOOLNHZLVHQRW$QHFHVVDULO\LPSO\#
  LPPHGLDWH RU VSHHGLHU UHOHDVH D SULVRQHU FDQ EULQJ D         WKH LQYDOLGLW\  RI D SULVRQHU V FRQYLFWLRQ RU FRQWLQXHG
  FKDOOHQJHWRVWDWHSDUROHSURFHGXUHVEHFDXVHWKH               FRQILQHPHQW
  VXFFHVV RI VXFK D ODZVXLW ZRXOG RQO\ LQFUHDVH WKH
  SULVRQHU
VFKDQFHVRIGLVFUHWLRQDU\SDUROH+HVHHNV
  QRW LPPHGLDWH RU VSHHGLHU UHOHDVH EXW D QHZ KHDULQJ
  XWLOL]LQJ ZKDW KH FRQVLGHUV WKH SURSHU VWDWXWHV DQG
  SURFHGXUHV
                                                                                 
                                                                                  7KH PDMRULW\ ILQGV LW LPSRUWDQW WR QRWH WKDW WKH 6XSUHPH &RXUW
$VLVFOHDUWKHFDVHVIURPWKLVFRXUWDUHLQFRQIOLFW$VD           FDVHV HVWDEOLVKLQJ WKH SUHFHGHQW IRU WKLV FDVH UHIHU WR QHFHVVDULO\ LPSO\LQJ
UHVXOW ZH DUH IRUFHG WR FORVHO\ HYDOXDWH sRKQVRQjV DQG         WKH LQYDOLGLW\ RI WKH mFRQYLFWLRQl mVHQWHQFHl RU mMXGJPHQWl   6HH +HFN   

'RWVRQjVFODLPVZLWKUHJDUGWRDOOWKHSUHFHGHQW                        86 DW  mFRQYLFWLRQ RU VHQWHQFHl   VHH DOVR (GZDUGV     86
                                                                        DW  mMXGJPHQWl 7KH GLVVHQW QHYHUWKHOHVV H[WHQGV WKH UXOH RI WKRVH

  7KHGLVVHQWZRXOGGUDZDGLVWLQFWLRQEHWZHHQSURFHGXUDO               FDVHV 7KH GLVVHQW UHIHUV WR QHFHVVDULO\ LPSO\LQJ WKH LQYDOLGLW\ RI WKH
                                                                        mKHDULQJl DQG WKH mMXGJPHQWl ZKHUH mMXGJPHQWl UHIHUV WR D GHFLVLRQ RI
FKDOOHQJHV WR SDUROH HOLJLELOLW\ KHDULQJV DV GHVFULEHG LQ       WKH 2KLR 3DUROH %RDUG 'LV 2S DW    )RU WKH SXUSRVHV RI WKLV
'RWVRQjVFDVHDWZKLFKWKHSDUROHERDUGGHWHUPLQHVDGDWHDW           FDVH WKH PDMRULW\ EHOLHYHV mMXGJPHQWl SURSHUO\ UHIHUV RQO\ WR WKH GHFLVLRQ
                                                                        RI D FRQYLFWLQJ FRXUW
1RV                          'RWVRQHWDOY              'RWVRQHWDOY                     1RV
                                           :LONLQVRQHWDO                  :LONLQVRQHWDO

  $OWKRXJK 'RWVRQ FKDOOHQJHV D SDUROH HOLJLELOLW\                    3UHLVHUDPDMRULW\RIRXUVLVWHUFLUFXLWVKDYHKHOGWKDW
GHWHUPLQDWLRQDQGsRKQVRQDSDUROHUHOHDVHGHWHUPLQDWLRQWKH             FKDOOHQJHV WR VWDWH SDUROH SURFHGXUHV ZKRVH VXFFHVV
VXFFHVVRIHLWKHUFKDOOHQJHZRXOGUHVXOWLQDQHZKHDULQJWKDW            ZRXOG QRW QHFHVVDULO\ UHVXOW LQ LPPHGLDWH RU VSHHGLHU
ZRXOG IROORZ WKH DSSURSULDWH SURFHGXUHV XQGHU 2KLR ODZ            UHOHDVH QHHG QRW EH EURXJKW LQ KDEHDV FRUSXV HYHQ
8QGHU2KLRODZSDUROHLVGLVFUHWLRQDU\6HH2KLR5HY&RGH              WKRXJKWKHSULVRQHUVILOHGWKHLUVXLWVIRUWKHYHU\SXUSRVH
$QQ 
   2KLR $GPLQ &RGH 

              RILQFUHDVLQJWKHLUFKDQFHVRISDUROH
%&$VWKH6XSUHPH&RXUWRI2KLRVDLGLQ6WDWHH[
UHO%ODNHY6KRHPDNHU1(G2KLR               'RWVRQDQGsRKQVRQPHUHO\UHTXHVWDQRSSRUWXQLW\IRUDIDLU
WKH2KLRSDUROHVWDWXWH$LVDJUDQWRIGLVFUHWLRQLWGRHVQRW          DQGXQWDLQWHGSDUROHKHDULQJ
FUHDWHDQ\SUHVXPSWLRQWKDWSDUROHZLOOEHLVVXHGDQGGRHVQRW
FUHDWHDQH[SHFWDQF\RISDUROHl7KHUHIRUHWKHLPSDFW            'RWVRQ VFKDOOHQJHWRWKHSURFHGXUHVXVHGWRGHWHUPLQHWKH
WKHQHZKHDULQJVZRXOGKDYHRQ'RWVRQDQGsRKQVRQ VSDUROH              GDWH XSRQ ZKLFK KH ZLOO EH FRQVLGHUHG IRU SDUROH LI
RUUHOHDVHLVLQGHWHUPLQDWH%HFDXVHWKHXOWLPDWHLPSDFWRI            VXFFHVVIXOZRXOGQRW$QHFHVVDULO\LPSO\#WKHLQYDOLGLW\RIKLV
WKHVH QHZ KHDULQJV RQ WKH YDOLGLW\ RI 'RWVRQ RU sRKQVRQ V      FRQWLQXHG FRQILQHPHQW  5DWKHU VXFFHVV RQ WKLV FKDOOHQJH
FRQWLQXHG FRQILQHPHQW LV XQFOHDU ZH FDQQRW VD\ WKDW D          ZRXOG VLPSO\ SURYLGH 'RWVRQ ZLWK D GLVFUHWLRQDU\ SDUROH
VXFFHVVIXOVHFWLRQDFWLRQWKDWVLPSO\UHVXOWVLQDQHZ             KHDULQJDWZKLFKWKH3DUROH%RDUGZRXOGGHWHUPLQHZKHWKHU
GLVFUHWLRQDU\ SDUROH KHDULQJ $QHFHVVDULO\ LPSOLHV# WKH             SDUROHZDVDSSURSULDWHLQKLVFDVH
LQYDOLGLW\RIHLWKHUSODLQWLII VFRQYLFWLRQRUVHQWHQFH
                                                                          6LPLODUO\ WKH FRQVHTXHQFH RI D VXFFHVVIXO SURFHGXUDO
   $ VXFFHVVIXO FKDOOHQJH ZLOO RQO\$QHFHVVDULO\ LPSO\# WKH       FKDOOHQJH E\ sRKQVRQ ZLOO EH D QHZ GLVFUHWLRQDU\ SDUROH
LQYDOLGLW\ RI D SULVRQHU V FRQYLFWLRQ RU VHQWHQFH LI LW ZLOO   KHDULQJ/LNH'RWVRQsRKQVRQVLPSO\VHHNVDWLFNHWWRJHW
LQHYLWDEO\ RU DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVH  $       EDFNLQWKHGRRURIWKHSDUROHERDUG,WLVXQFOHDUZKDWWKH
FKDOOHQJHWRWKHORVVRIJRRGWLPHFUHGLWVLVDQH[DPSOHRI             XOWLPDWH UHVXOW RI sRKQVRQ V QHZ SDUROH KHDULQJ ZRXOG EH
VXFK D FKDOOHQJH (GZDUGV  86 DW   7KLV              sRKQVRQFODLPVWKDWWKH3DUROH%RDUGYLRODWHGGXHSURFHVV
GHWHUPLQDWLRQ ZLOO GHSHQG XSRQ WKH IDFWV RI WKH SDUWLFXODU      ZKHQ LW IDLOHG WR IROORZ 2KLR ODZ JRYHUQLQJ SDUROH
FDVH+RZHYHUZKHUHWKHXOWLPDWHSDUROHGHWHUPLQDWLRQLV              GHWHUPLQDWLRQVE\DPRQJRWKHUWKLQJVKDYLQJDQLQVXIILFLHQW
GLVFUHWLRQDU\DQGEDVHGRQDKRVWRIIDFWRUVDVLWLVLQ2KLR         QXPEHURI3DUROH%RDUGPHPEHUVDWsRKQVRQ VKHDULQJDQG
LWZLOOEHGLIILFXOWWRSUHGLFWDQ\KLJKO\OLNHO\RULQHYLWDEOH         QRWJLYLQJsRKQVRQDQRSSRUWXQLW\WRVSHDN7KXVVKRXOG
FRQVHTXHQFH RI WKH SDUROH GHWHUPLQDWLRQ KHDULQJ  +HUH          sRKQVRQ VXFFHHG RQ WKLV FODLP KH ZRXOG VLPSO\ UHFHLYH D
QHLWKHURIWKHLQPDWHV UHOHDVHLVQHFHVVDULO\DWLVVXHQRUGR         QHZKHDULQJDWZKLFKWKH3DUROH%RDUGZRXOGIROORZSURSHUO\
WKHVH FKDOOHQJHV FDOO LQWR TXHVWLRQ WKH GXUDWLRQ RU IDFW RI    WKH SURFHGXUHV DV VHW IRUWK XQGHU 2KLR ODZ  1RW HYHU\
HLWKHUSULVRQHU VFRQILQHPHQW,Q$Q\DQZXWDNX)GDW               SURFHGXUDOGHIHFWQHFHVVDULO\KDVDQLPSDFWRQWKHXOWLPDWH
WKH'&&LUFXLWVDLG                                      RXWFRPHRIDSURFHGXUDOO\GHIHFWLYHKHDULQJ7KHUHPHG\LQJ
                                                                        RI PDQ\ SURFHGXUDO GHIHFWV ZLOO QRW FDXVH DQ\ GLIIHUHQW
  $OWKRXJK $Q\DQZXWDNX ZRXOG KDYH EHHQ HOLJLEOH IRU               RXWFRPHDWDOOPXFKOHVV$QHFHVVDULO\LPSO\#WKDWWKHSULVRQHU
  SDUROHDWDQHDUOLHUGDWHKDGKHSUHYDLOHGRQKLVFODLPVLQ           VKRXOGEHUHOHDVHGLPPHGLDWHO\RUVRRQHUWKDQKHZRXOGKDYH
  WKH GLVWULFW FRXUW EHFDXVH '& SDUROH GHFLVLRQV DUH          EHHQUHOHDVHGDEVHQWWKHFKDOOHQJH,QDQ\HYHQWXQGHU2KLR
  HQWLUHO\GLVFUHWLRQDU\WKHUHLVQRJXDUDQWHHWKDWKH            ODZWKHEURDGGLVFUHWLRQDIIRUGHGWRWKH3DUROH%RDUGOHDYHV
  ZRXOG KDYH EHHQ UHOHDVHG DQ\ HDUOLHU ,QWHUSUHWLQJ
1RV                               'RWVRQHWDOY                'RWVRQHWDOY                     1RV
                                                :LONLQVRQHWDO                    :LONLQVRQHWDO

XVZLWKOLWWOHDELOLW\WRSUHGLFWZKDWZLOO$QHFHVVDULO\#RFFXUDV             KRZWKDWKDSSHQVEXWWKLVFRXUWPXVWFDUH:HGRQRWUHDG
DUHVXOWRIsRKQVRQ VQHZSDUROHKHDULQJ                                   LQWR D OHJDO FODLP ZKDW ZH NQRZ RQ D KXPDQ OHYHO LV
                                                                               UHDOLVWLFDOO\WKHUHDSULVRQHUZKRREMHFWVWRKLVFRQILQHPHQW
   )XUWKHUDV WKH 'LVWULFWRI&ROXPELD&LUFXLWSRLQWHGRXW                 PD\QHYHUWKHOHVVUDLVHDVHFWLRQFODLPDOHJDOFODLPLI
FLWLQJ  *UHHQKROW] Y ,QPDWHV RI WKH 1HEUDVND 3HQDO DQG               KLVGXHSURFHVVULJKWVKDYHEHHQYLRODWHGDQGWKHFKDOOHQJH
&RUUHFWLRQDO&RPSOH[86m(YHQWKH6XSUHPH                     GRHVQRWQHFHVVDULO\LPSOLFDWHWKHLQYDOLGLW\RIKLVFRQWLQXHG
&RXUW UHDFKHG WKH PHULWV RI D VHFWLRQ  FODLP E\ VWDWH            FRQILQHPHQWsRKQVRQDQG'RWVRQDUHQRWUHTXHVWLQJWKDWWKH
SULVRQHUVDOOHJLQJGXHSURFHVVYLRODWLRQVLQWKHFRQVLGHUDWLRQ                 SDUROH ERDUG PDNH D GLIIHUHQW GHFLVLRQ DOWKRXJK ZH
RIWKHLUVXLWDELOLW\IRUSDUROHZLWKRXWILUVWDGGUHVVLQJZKHWKHU               XQGHUVWDQGWKDWWKH\ZLVKLWZRXOGWKH\DUHPHUHO\UHTXLULQJ
3UHLVHU UHTXLUHG WKH FODLP WR EH EURXJKW LQ KDEHDVl                   WKDW WKH SDUROH ERDUG FRPSO\ ZLWK WKH ODZ LQ PDNLQJ WKDW
$Q\DQZXWDNX)GDW:HVHHQRUHDVRQWRUHTXLUH                     GHFLVLRQ
WKDW sRKQVRQ DQG 'RWVRQjV FODLPV EH ORGJHG DV D JHQHUDO
FKDOOHQJHLQDFODVVDFWLRQVXLWUDWKHUWKDQDSDUWLFXODUL]HG                   :HKROGWKDWSURFHGXUDOFKDOOHQJHVWRSDUROHHOLJLELOLW\DQG
FKDOOHQJHWRSURFHGXUHVDVDSSOLHGHVSHFLDOO\ZKHUHQHLWKHU                   SDUROH VXLWDELOLW\ GHWHUPLQDWLRQV VXFK DV WKRVH PDGH E\
SULVRQHUjV FKDOOHQJH ZLOO QHFHVVDULO\ UHVXOW LQ KLV HDUOLHU             'RWVRQDQGsRKQVRQGRQRW$QHFHVVDULO\LPSO\#WKHLQYDOLGLW\
UHOHDVH                                                                       RIWKHSULVRQHU VFRQYLFWLRQRUVHQWHQFHDQGWKHUHIRUHPD\
                                                                               DSSURSULDWHO\ EH EURXJKW DV FLYLO ULJKWV DFWLRQV XQGHU 
  7KXV ZKHUH D SULVRQHU GRHV QRW FODLP LPPHGLDWH                       86&   UDWKHU WKDQ SXUVXDQW WR DQ DSSOLFDWLRQ IRU
HQWLWOHPHQWWRSDUROHRUVHHNDVKRUWHUVHQWHQFHEXWLQVWHDG                   KDEHDVFRUSXV7RWKHH[WHQWWKDWRXUSULRURSLQLRQVDUHLQ
ORGJHVDFKDOOHQJHWRWKHSURFHGXUHVXVHGGXULQJWKHSDUROH                    FRQIOLFW ZLWK RXU UHDVRQLQJ H[SUHVVHG WRGD\ WKH\ DUH
SURFHVVDVJHQHUDOO\LPSURSHURULPSURSHUDVDSSOLHGLQKLV                    RYHUUXOHG  )RU WKH IRUHJRLQJ UHDVRQV ZH 5(9(56( WKH
FDVH DQG WKDW FKDOOHQJH ZLOO DW EHVW UHVXOW LQ D QHZ                GLVWULFWFRXUWDVWRsRKQVRQDQG'RWVRQ
GLVFUHWLRQDU\ KHDULQJ WKH RXWFRPH RI ZKLFK FDQQRW EH
SUHGLFWHGZHKROGVXFKDFKDOOHQJHFRJQL]DEOHXQGHUVHFWLRQ

  ,QFRQFOXVLRQDQLQFDUFHUDWHGSHUVRQREYLRXVO\VHHNVWREH
UHOHDVHGIURPFRQILQHPHQW$SULVRQHUFDUHVQRWDZKLWDVWR

         
          7KLV LV WKH FOHDUHVW VWDWHPHQW RI WKH VWDQGDUG WKH PDMRULW\
LQWHQGV WR HVWDEOLVK WRGD\ 7KH GLVVHQW UHSHDWHGO\ RYHUVLPSOLILHV WKLV
VWDQGDUG VWDWLQJ m%HFDXVH 2KLRjV SDUROH V\VWHP LV GLVFUHWLRQDU\ WKH
PDMRULW\ RSLQLRQ UHDVRQV QR   FODLP UHVXOWLQJ LQ D QHZ KHDULQJ ZLOO
QHFHVVDULO\ LPSO\ WKH LQYDOLGLW\ RI WKH XQGHUO\LQJ FRQYLFWLRQ RU VHQWHQFHl
'LV 2S DW  DQG mWKH PDMRULW\ KDV HUUHG LQ UXOLQJ WKDW DOO DWWDFNV RQ
SDUROH SURFHGXUHV LQ 2KLR WKDW UHTXLUH D QHZ KHDULQJ WR FRUUHFW DUH
FRJQL]DEOH XQGHU   'LV 2S DW  7KH GLVVHQW IDLOV WR
DFNQRZOHGJH WKH PDMRULW\jV UHFRJQLWLRQ WKDW FHUWDLQ VHFWLRQ  FODLPV
WKRVH WKDW DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVH ZLOO QHYHU EH FRJQL]DEOH
XQGHU FXUUHQW 6XSUHPH &RXUW SUHFHGHQW
1RV                         'RWVRQHWDOY             'RWVRQHWDOY                       1RV
                                          :LONLQVRQHWDO                 :LONLQVRQHWDO

  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                         7KHPDMRULW\RSLQLRQjVmHDUOLHUUHOHDVHlWHVWLQP\RSLQLRQ
                                                                      IDLOVWRSURSHUO\GLVWLQJXLVKEHWZHHQWKHGLVWLQFWQDWXUHVRI
  &21&855,1*,13$57',66(17,1*,13$57                              'RWVRQjV DQG sRKQVRQjV FKDOOHQJHV WR 2KLRjV SDUROH
  BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB                       SURFHGXUHV,EHOLHYHWKDW'RWVRQjVFODLPPD\SURFHHGXQGHU
                                                                      EXWWKDWsRKQVRQjVFODLPPD\QRW6HWIRUWKEHORZLV
   521$/'/((*,/0$1&LUFXLWsXGJHFRQFXUULQJLQSDUW               P\ DQDO\VLV RI KRZ , EHOLHYH WKH WHVW GHYHORSHG E\ WKH
DQGGLVVHQWLQJLQSDUW,EHOLHYHWKDWWKHPDMRULW\RSLQLRQKDV      6XSUHPH &RXUW IURP 3UHVLHU Y 5RGULJXH]  86 
DGRSWHGDQRYHUO\EURDGmHDUOLHUUHOHDVHlWHVWWKDWFRQIODWHV         WKURXJK6SHQFHUY.HPQD86VKRXOG
WKH GLVWLQFW IDFWXDO LVVXHV SUHVHQWHG E\ WKHVH WZR DSSHDOV   EHDSSOLHGWRWKHLUUHVSHFWLYHFODLPV
WKHUHE\FRQIXVLQJWKHDOUHDG\FRPSOLFDWHGDUHDRIODZDWWKH
LQWHUVHFWLRQ RI KDEHDV FRUSXV DQG  86&    6HH                       ,'27621j6&/$,0
:ROII Y 0F'RQQHOO  86    m>7@KH
GHPDUFDWLRQ OLQH EHWZHHQ FLYLO ULJKWV DFWLRQV DQG KDEHDV       $ )DFWXDODQGSURFHGXUDOEDFNJURXQG
SHWLWLRQVLVQRWDOZD\VFOHDUl+HFNjVEDVLFWHVWRImZKHWKHU
DMXGJPHQWLQIDYRURIWKHSODLQWLIIZRXOGQHFHVVDULO\LPSO\            'RWVRQ FKDOOHQJHV WKH UHWURDFWLYH DSSOLFDWLRQ RI 2KLRjV
WKH LQYDOLGLW\ RI >WKH SULVRQHUjV@ FRQYLFWLRQ RU VHQWHQFHl    SDUROHHOLJLELOLW\ JXLGHOLQHV WR KLV VHQWHQFH  +H ZDV
+HFNY+XPSKUH\86VXJJHVWVWKDW             VHQWHQFHGLQsXO\RIWROLIHLPSULVRQPHQWIRUDJJUDYDWHG
SULVRQHUDFWLRQVPXVWEHH[DPLQHGRQDFDVHE\FDVH            PXUGHU'RWVRQDOOHJHVWKDWDWWKHWLPHRIKLVFRQYLFWLRQ
EDVLV LQ RUGHU WR GHWHUPLQH ZKHWKHU WKH SODLQWLII KDV D      2KLR 5HYLVHG &RGH  % SURYLGHG WKDW SULVRQHUV
FRJQL]DEOH FODLP  7KH +HFN WHVW ZDV IXUWKHU UHILQHG E\      VHUYLQJDOLIHVHQWHQFHZHUHHOLJLEOHIRUSDUROHDIWHU\HDUV
(GZDUGVY%DOLVRN86ZKLFKDGGUHVVHV              3XUVXDQW WR WKH SDUROHHOLJLELOLW\ VWDWXWH DQG UHJXODWLRQV
mWKHSRVVLELOLW\FOHDUO\HQYLVLRQHGE\+HFNWKDWWKHQDWXUHRI      'RWVRQ UHFHLYHG KLV ILUVW SDUROH KHDULQJ LQ   +H ZDV
WKHFKDOOHQJHWRWKHSURFHGXUHVFRXOGEHVXFKDVQHFHVVDULO\          GHQLHGSDUROHDQGWKH%RDUGVFKHGXOHGDVHFRQGKHDULQJIRU
WRLPSO\WKHLQYDOLGLW\RIWKHMXGJPHQWl,GDW              sXQHRIZLWKDKDOIZD\UHYLHZLQ0DUFKRI2Q
                                                                      0DUFK   WKH 2KLR 3DUROH %RDUG DGRSWHG QHZ
  ,QLWVKROGLQJWKHPDMRULW\RSLQLRQIRFXVHVRQZKHWKHUD           JXLGHOLQHVWRDVVLVWWKH%RDUGLQGHWHUPLQLQJZKHWKHUWRJUDQW
FODLPZLOOQHFHVVDULO\VKRUWHQDSULVRQHUjVWLPHLQMDLO      RUGHQ\SDUROHLQIXWXUHKHDULQJV7KHQHZJXLGHOLQHVZHLJK
7KHPDMRULW\WKXVJORVVHVRYHUZKDW,EHOLHYHLVWKH6XSUHPH          WKH VHULRXVQHVV RI WKH RIIHQVH FRPPLWWHG DV ZHOO DV WKH
&RXUWjV DFWXDO UXOHnWKDW LW LV WKH MXGJPHQW RI WKH            LQPDWHjV FULPLQDO KLVWRU\ DQG ULVN WR VRFLHW\ WR SURYLGH D
DGPLQLVWUDWLYH ERG\ LQ WKLV FDVH WKH SDUROH ERDUG ZKRVH    UDQJH RI PRQWKV WKDW PXVW EH VHUYHG EHIRUH WKH LQPDWH
YDOLGLW\PD\QRWEHTXHVWLRQHGE\DDFWLRQUHJDUGOHVV         EHFRPHVHOLJLEOHIRUSDUROHUHOHDVH
RI WKH MXGJPHQWjV HIIHFW RQ WKH OHQJWK RI WKH SULVRQHUjV
XQGHUO\LQJ FRQYLFWLRQ RU VHQWHQFH  %HFDXVH 2KLRjV SDUROH        'RWVRQ DOOHJHV WKDW DW KLV KDOIZD\ UHYLHZ LQ 0DUFK RI
V\VWHP LV GLVFUHWLRQDU\ WKH PDMRULW\ RSLQLRQ UHDVRQV QR       WKH 3DUROH %RDUG UHWURDFWLYHO\ DSSOLHG WKH QHZ
FODLPUHVXOWLQJLQDQHZKHDULQJZLOOQHFHVVDULO\LPSO\        JXLGHOLQHVWRGHWHUPLQHKLVSDUROHHOLJLELOLW\$VDUHVXOWWKH
WKHLQYDOLGLW\RIWKHXQGHUO\LQJFRQYLFWLRQRUVHQWHQFH0DM       3DUROH%RDUGQRWHG WKDW'RWVRQZRXOGVWLOOEHVHYHQ\HDUV
2SDW                                                         VKRUWRISDUROHHOLJLELOLW\XQGHUWKHQHZJXLGHOLQHVDWWKHWLPH
                                                                      RIKLVQH[WVFKHGXOHGKHDULQJLQ
1RV                          'RWVRQHWDOY             'RWVRQHWDOY                      1RV
                                           :LONLQVRQHWDO                 :LONLQVRQHWDO

% $QDO\VLV                                                            LQFRQVLVWHQW ZLWK WKH KROGLQJV LQ(GZDUGV DQG +HFN  7KH
                                                                       &RXUW JDYH QR LQGLFDWLRQ RI DQ\ GHSDUWXUH IURP LWV HDUOLHU
     +HFN DQG (GZDUGV IRUELG   DFWLRQV WKDW              FDVHVWRWKHHIIHFWWKDWDGHFLVLRQWRUHYRNHSDUROHZKHWKHURU
       TXHVWLRQWKHYDOLGLW\RIDVWDWHMXGJPHQWGHWHUPLQLQJ           QRWSURFHGXUDOO\GHIHFWLYHPXVWQRWEHUHQGHUHGLQYDOLGE\
       ZKHWKHUDSULVRQHUVKRXOGEHUHOHDVHGRQSDUROH                 WKHIHGHUDOFRXUWV
   ,QLWVDQDO\VLVRIERWK'RWVRQjVDQGsRKQVRQjVFODLPVWKH             ,Q DWWHPSWLQJ WR DYRLG WKH UDWLRQDOH RI WKH +HFN DQG
PDMRULW\RSLQLRQDGRSWVDQmHDUOLHUUHOHDVHlWHVWLQKROGLQJ           (GZDUGVGHFLVLRQVWKHPDMRULW\RSLQLRQSODFHVJUHDWZHLJKW
WKDWDOODWWDFNVRQSDUROHSURFHGXUHVLQ2KLRDUHFRJQL]DEOH           RQWKHGLVFUHWLRQDU\QDWXUHRI2KLRjVSDUROHV\VWHP%HFDXVH
XQGHU   DV ORQJ DV WKH\ GR QRW QHFHVVDULO\ LPSO\ WKH   mWKH LPSDFW WKH QHZ KHDULQJV ZRXOG KDYH RQ 'RWVRQ DQG
LQYDOLGLW\ RI D SULVRQHUjV FRQYLFWLRQ RU FRQILQHPHQW E\         sRKQVRQjV SDUROH RU UHOHDVH LV LQGHWHUPLQDWHl WKH PDMRULW\
LQHYLWDEO\RUDXWRPDWLFDOO\UHVXOWLQJLQHDUOLHUUHOHDVH0DM       FRQWHQGVWKDWWKHYDOLGLW\RIWKHDGPLQLVWUDWLYHMXGJPHQWKDV
2SDW,EHOLHYHWKDWWKHPDMRULW\RSLQLRQjVWHVWLVFRQWUDU\     QRWEHHQTXHVWLRQHG0DM2SDW$VLPLODUDUJXPHQW
WRWKHKROGLQJVRI+HFNDQG(GZDUGV,Q+HFNWKH6XSUHPH             KRZHYHUZDVDGYDQFHGE\WKHSHWLWLRQHULQ(GZDUGVWRWKH
&RXUW KHOG WKDW mLI WKH GLVWULFW FRXUW GHWHUPLQHV WKDW WKH    HIIHFW WKDW D UXOLQJ LQ (GZDUGVjV IDYRU RQ KLV  
SODLQWLIIjVDFWLRQHYHQLIVXFFHVVIXOZLOOQRWGHPRQVWUDWHWKH       SURFHGXUDODWWDFNZRXOGQRWQHFHVVDULO\LPSO\WKHLQYDOLGLW\
LQYDOLGLW\RIDQ\RXWVWDQGLQJFULPLQDOMXGJPHQWDJDLQVWWKH            RIWKHORVVRIKLVJRRGWLPHFUHGLWVEHFDXVHWKH:DVKLQJWRQ
SODLQWLIIWKHDFWLRQVKRXOGEHDOORZHGWRSURFHHGl+HFN     FRXUWV FRXOG VWLOO XSKROG WKH DGPLQLVWUDWLYH GHWHUPLQDWLRQ
86DWVHFRQGHPSKDVLVDGGHG7KH&RXUWZDV                RQFHWKHSURFHGXUDOHUURUVZHUHFRUUHFWHG(GZDUGV86
VXJJHVWLQJWKDWWKHUHDOSUREOHPZDVQRWWKDWWKHSULVRQHUjV           DW   %XW WKH &RXUW FOHDUO\ UHMHFWHG WKLV DUJXPHQW LQ
DFWLRQZRXOGQHFHVVDULO\JHWKLPRXWRIMDLOVRRQHU            (GZDUGV,GDW6LPSO\EHFDXVHWKHDGPLQLVWUDWLYHERG\
EXWUDWKHUWKDWWKHIHGHUDOFRXUWVPXVWQRWDOORZWKHXVHRI           PLJKWUHDFKWKHVDPHUHVXOWWKHVHFRQGWLPHDURXQGWKHUHIRUH
WRLPSO\WKHLQYDOLGLW\RIDQ\VWDWHFULPLQDOMXGJPHQWV         GRHVQRWVDYHDSURFHGXUDODWWDFN)XUWKHUPRUHWKH
UHODWLQJWRWKHOHQJWKRIDSULVRQHUjVLQFDUFHUDWLRQ                  PDMRULW\EHOLHYHVWKDWWKH6XSUHPH&RXUWjVXVHRIWKHZRUG
                                                                       mµMXGJPHQWj SURSHUO\ UHIHUV RQO\ WR WKH GHFLVLRQ RI D
   ,Q (GZDUGV WKH 6XSUHPH &RXUW H[WHQGHG WKLV SULQFLSOH        FRQYLFWLQJFRXUWl0DM2SDWQ,GLVDJUHHKRZHYHU
ZKHQRXWOLQLQJWKHHIIHFWRIFRUUHFWLQJWKHSURFHGXUDOGHIHFW          EHFDXVH(GZDUGVLWVHOIZDVGHDOLQJZLWKWKHMXGJPHQWRIDQ
LQTXHVWLRQ7KH&RXUWVWDWHGm7KLVLVDQREYLRXVSURFHGXUDO         DGPLQLVWUDWLYHERG\(GZDUGV86DW
GHIHFWDQGVWDWHDQGIHGHUDOFRXUWVKDYHUHLQVWDWHGJRRGWLPH
FUHGLWV DEVHQW D QHZ KHDULQJ ZKHQ LW LV HVWDEOLVKHGl          7KHKDOIZD\UHYLHZGLGQRWJUDQWRUGHQ\SDUROH
(GZDUGV86DWHPSKDVLVDGGHG,QRWKHUZRUGV
LW LV WKH LPSOLHG LQYDOLGLW\ RI WKH DGPLQLVWUDWLYH KHDULQJ       7KHSODFHWREHJLQDQDO\]LQJWKHQDWXUHRI'RWVRQjVFODLP
LWVHOInWKDWFDQEHFRUUHFWHGRQO\E\DQHZKHDULQJnWKDWLVDQ          DQGLWVOHJDOLPSOLFDWLRQVLVWRORRNDWWKHNLQGRISURFHHGLQJ
LPSHUPLVVLEOHUHVXOWRIDFODLP                              WKDWKHFKDOOHQJHV$WLVVXHLQKLVFRPSODLQWDUHWKHDFWLRQV
                                                                       WDNHQ DW KLV KDOIZD\ UHYLHZ LQ 0DUFK RI   7KLV
  )LQDOO\ WKH &RXUWjV VWDWHPHQW LQ 6SHQFHU WKDW D       SURFHHGLQJGLGQRWUHVXOWLQ'RWVRQEHLQJHLWKHUJUDQWHGRU
DFWLRQPLJKWOLHLIWKHmSURFHGXUDOGHIHFWGLGQRWQHFHVVDULO\         GHQLHGSDUROH:LWKRXWUHPRYLQJKLVVFKHGXOHGSDUROH
LPSO\WKHLQYDOLGLW\RIWKH>SDUROH@UHYRFDWLRQl6SHQFHU     GHWHUPLQDWLRQ KHDULQJ IURP WKH FDOHQGDU WKH 3DUROH %RDUG
 86 DW  LQWHUQDO TXRWDWLRQ PDUNV RPLWWHG LV QRW     LQVWHDGGHFLGHGWRUHWURDFWLYHO\DSSO\2KLRjVQHZHOLJLELOLW\
1RV                        'RWVRQHWDOY            'RWVRQHWDOY                       1RV
                                         :LONLQVRQHWDO                :LONLQVRQHWDO

JXLGHOLQHVWR'RWVRQ'RWVRQjVFRPSODLQWGRHVQRWKLQJPRUH         PDMRULW\RSLQLRQKHUHDQGWKH'&&LUFXLWLQ$Q\DQZXWDNX
WKDQ FKDOOHQJH WKLV LQWHULP DFWLRQ  $OWKRXJK WKH 6XSUHPH   m7KHRQO\EHQHILWWKDWDYLFWRU\LQWKLVFDVHZRXOGSURYLGH
&RXUW KDV QHYHU GHDOW ZLWK WKLV SDUROHHOLJLELOLW\SDUROH    1HDO DQG 0DUWLQH] EHVLGHV WKH SRVVLELOLW\ RI PRQHWDU\
GHWHUPLQDWLRQ GLVWLQFWLRQ ERWK WKH 1LQWK DQG 'LVWULFW RI    GDPDJHVLVDWLFNHWWRJHWLQWKHGRRURIWKHSDUROHERDUGWKXV
&ROXPELD&LUFXLWVKDYH                                            RQO\PDNLQJWKHPHOLJLEOHIRUSDUROHFRQVLGHUDWLRQDFFRUGLQJ
                                                                    WR WKH WHUPV RI WKHLU VHQWHQFHVl  ,G DW  HPSKDVLV LQ
     7KH 1LQWK DQG '& &LUFXLW GHFLVLRQV RQ SDUROH        RULJLQDO,QRWKHUZRUGVWKHUHZDVQRGHWHUPLQDWLRQWREH
       HOLJLELOLW\                                                  XQZRXQGE\WKH3DUROH%RDUGLQ1HDOEHFDXVHWKHUHKDGQHYHU
                                                                    EHHQDGHFLVLRQRQKRZPXFKRIWKHWZRLQPDWHVjVHQWHQFHV
  ,Q HUURQHRXVO\ OXPSLQJ WRJHWKHU ERWK sRKQVRQjV DQG          ZRXOG EH VHUYHG  'HFLGLQJ WKDW D SDUROHHOLJLELOLW\ VWDWXWH
'RWVRQjV FODLPV XQGHU WKH EURDG UXEULF RI D FKDOOHQJH WR   VKRXOGQRWEHUHWURDFWLYHO\DSSOLHGWRWKHPmZRXOGQRWDOWHU
mSDUROHSURFHGXUHVl,EHOLHYHWKDWWKHPDMRULW\KDVDGRSWHGD      WKHFDOFXOXVIRUWKHUHYLHZRISDUROHUHTXHVWVLQDQ\ZD\l,G
EURDGEDVHGUXOHWKDWZDVUHMHFWHGE\WKH6XSUHPH&RXUWLQ          7KHGHFLVLRQLQ1HDOGLGQRWQHFHVVDULO\LPSO\WKHLQYDOLGLW\
(GZDUGV$PRUHQDUURZUHDGLQJRI$Q\DQZXWDNXY0RRUH            RIDQ\SULRUMXGJPHQWEHFDXVHQRSDUROHGHFLVLRQZDVWKURZQ
)G'&&LUDQDO\]HGLQFRQMXQFWLRQZLWK        RXWRUDOWHUHGE\WKHFRXUW
WZRHDUOLHU1LQWK&LUFXLWFDVHVOHDGVWRZKDW,EHOLHYHLVWKH
SURSHU UXOH LQ GHWHUPLQLQJ ZKLFK SDUROH FKDOOHQJHV DUH         ,Q UHDFKLQJ WKH GHFLVLRQ LQ 1HDO WKH 1LQWK &LUFXLW
FRJQL]DEOHLQDFWLRQV                                       GLVWLQJXLVKHG RQH RI LWV HDUOLHU FDVHV WKDW KDG DSSOLHG WKH
                                                                    +HFN(GZDUGVWHVW7KHHDUOLHUFDVHZDV%XWWHUILHOGY%DLO
   2QHRIWKHVHFDVHVLV1HDOY6KLPRGD)GWK         )GWK&LUZKLFKKHOGWKDWDSULVRQHUjV
&LUZKHUHWKH1LQWK&LUFXLWKHOGWKDWSDUROHHOLJLELOLW\    GXHSURFHVVFKDOOHQJHXQGHUDWWDFNLQJWKHSURFHGXUHV
GHWHUPLQDWLRQV DUH GHFLVLRQV WKDW FDQ EH FKDOOHQJHG LQ D    XVHG E\ WKH 3DUROH %RDUG LQ GHQ\LQJ KLP SDUROH ZDV QRW
FODLPZLWKRXWUXQQLQJDIRXORI+HFNDQG(GZDUGV             VXVWDLQDEOH  %XWWHUILHOG FORVHO\ WUDFNHG WKH UHDVRQLQJ RI
$QDORJRXV WR WKH FDVH EHIRUH XV 1HDO GHDOW ZLWK WKH       (GZDUGVDQGKHOGWKDWmDFKDOOHQJHWRWKHSURFHGXUHVXVHGLQ
UHWURDFWLYH DSSOLFDWLRQ RI D VH[RIIHQGHU VWDWXWH WKDW        WKHGHQLDORISDUROHQHFHVVDULO\LPSOLFDWHVWKHYDOLGLW\RIWKH
HVWDEOLVKHG QHZ SDUROHHOLJLELOLW\ JXLGHOLQHV DIWHU SDUROH     GHQLDO RI SDUROH DQG WKHUHIRUH WKH SULVRQHUjV FRQWLQXLQJ
HOLJLELOLW\KDGDOUHDG\EHHQGHWHUPLQHGIRUWKHWZRLQPDWHVLQ      FRQILQHPHQWl,GDW
TXHVWLRQ  )ROORZLQJ WKHLU FRQYLFWLRQV RQ FKDUJHV RI
NLGQDSSLQJ VH[XDO DVVDXOW DQG DWWHPSWHG UDSH +DZDLL          7KHGLIIHULQJRXWFRPHVLQ1HDODQG%XWWHUILHOGEDVHGXSRQ
HQDFWHGWKH6H[2IIHQGHU7UHDWPHQW3URJUDP62737KH             WKH QDWXUH RI WKH FODLPV SUHVHQWHG LV LPSRUWDQW EHFDXVH LW
SURJUDP UHTXLUHV LQPDWHV FDWHJRUL]HG DV VH[ RIIHQGHUV WR     SDUDOOHOV WKH GLVWLQFWLRQ EHWZHHQ WKH WZR FDVHV DW KDQG
SDUWLFLSDWH LQ WKH SURJUDP DV D SUHFRQGLWLRQ WR EHFRPLQJ    sRKQVRQ ZKRVH FODLP LV GLVFXVVHG LQ 3DUW ,, EHORZ KDV
HOLJLEOH IRU SDUROH  %HFDXVH 1HDOjV DQG 0DUWLQH]jV          FKDOOHQJHGWKHSURFHGXUHVXVHGLQDKHDULQJWKDWGHQLHGKLP
FRQYLFWLRQVWRRNSODFHEHIRUH6273ZDVLQVWLWXWHGWKHGDWH         SDUROH$OWKRXJKKHVHHNVWRFKDUDFWHUL]HKLVFODLPDVRQH
RIWKHLUSDUROHHOLJLELOLW\KDGDOUHDG\EHHQGHWHUPLQHGXQGHU       UHTXHVWLQJ WKDW D IXWXUH KHDULQJ E\ WKH 3DUROH %RDUG EH
ROGHUJXLGHOLQHV,GDW                                   XQWDLQWHGE\SURFHGXUDOGHIHFWVKHLVQHFHVVDULO\LPSO\LQJWKH
                                                                    LQYDOLGLW\RIWKHFKDOOHQJHGKHDULQJ'RWVRQLQFRQWUDVWGRHV
  7KH 1LQWK &LUFXLW KHOG WKDW WKHLU DFWLRQ ZDV FRJQL]DEOH   QRWFKDOOHQJHWKHSURFHGXUHVXVHGLQDKHDULQJWKDWGHQLHGKLP
XQGHU   HPSOR\LQJ WKH ODQJXDJH TXRWHG E\ ERWK WKH    SDUROH5DWKHUOLNHWKHSODLQWLIIVLQ1HDOKHFKDOOHQJHVWKH
1RV                            'RWVRQHWDOY              'RWVRQHWDOY                        1RV
                                             :LONLQVRQHWDO                  :LONLQVRQHWDO

UHWURDFWLYH DSSOLFDWLRQ RI SDUROHHOLJLELOLW\ JXLGHOLQHV WR          HQWLWOHG WR SDUROH  ,Q RUGHU WR UHDFK WKLV FRQFOXVLRQ RQH
KLPVHOI  , ILQG WKLV GLVWLQFWLRQ DV DUWLFXODWHG E\ WKH 1LQWK   VLPSO\QHHGVWRFRQVLGHUZKDWZLOOKDSSHQLI'RWVRQjVDFWLRQ
&LUFXLWWREHSHUVXDVLYH                                                 LV VXFFHVVIXO  +HFN  86 DW  QRWLQJ WKDW mLI WKH
                                                                          GLVWULFW FRXUW GHWHUPLQHV WKDW WKH SODLQWLIIjV DFWLRQ HYHQ LI
   $Q\DQZXWDNXDOVRDGGUHVVHVDSDUROHHOLJLELOLW\VLWXDWLRQ              VXFFHVVIXO ZLOO QRW GHPRQVWUDWH WKH LQYDOLGLW\ RI DQ\
DQG HPSOR\V WKH UHDVRQLQJ RI 1HDO  ,Q $Q\DQZXWDNX WKH          RXWVWDQGLQJFULPLQDOMXGJPHQWDJDLQVWWKHSODLQWLIIWKHDFWLRQ
'&&LUFXLWKHOGWKDWWKHDOOHJHGPLVFDOFXODWLRQRIDSDUROH            VKRXOG EH DOORZHG WR SURFHHGl HPSKDVLV RPLWWHG  +LV
HOLJLELOLW\ GDWH SUHVHQWHG D FRJQL]DEOH   FODLP  7KH       VFKHGXOHGSDUROHKHDULQJZRXOGSURFHHGDVSODQQHGDQG
RSLQLRQKRZHYHUGRHVQRWGLIIHUHQWLDWHEHWZHHQDFKDOOHQJH              QRWKLQJDERXWWKH3DUROH%RDUGjVGHQLDORIKLVSDUROH
WRWKHSURFHGXUHVXVHGLQDSDUWLFXODUSDUROHKHDULQJWRGHQ\             ZRXOGFKDQJH$VXFFHVVIXORXWFRPHZRXOGVLPSO\GLFWDWH
SDUROHYHUVXVWKHPLVDSSOLFDWLRQRUUHWURDFWLYHDSSOLFDWLRQRI            WKDW WKH  KHDULQJ DFWXDOO\ IXQFWLRQ DV D UHDO SDUROH
JHQHUDOO\ DSSOLFDEOH SDUROHHOLJLELOLW\ JXLGHOLQHV                    KHDULQJ UDWKHU WKDQ DV D UXEEHUVWDPS GHQLDO URRWHG LQ WKH
$Q\DQZXWDNXLVLQVWHDGEDVHGOLNHWKHPDMRULW\RSLQLRQRQ               UHWURDFWLYHDSSOLFDWLRQRIWKHFXUUHQWHOLJLELOLW\JXLGHOLQHV
WKHUDWLRQDOHWKDWDFODLPLVVXVWDLQDEOHVRORQJDVWKH
FODLPGRHVQRWQHFHVVDULO\LPSO\RUDXWRPDWLFDOO\UHVXOWLQD                ,EHOLHYHWKDWWKLVLVZKDWLVPHDQWE\WKHODQJXDJHmDWLFNHW
VSHHGLHU UHOHDVH IURP SULVRQ  $Q\DQZXWDNX  )G DW           WRJHWLQWKHGRRURIWKHSDUROHERDUGl1HDO)GDW
                                                                    7KH6XSUHPH&RXUWKDVQHYHUDGGUHVVHGDVLWXDWLRQOLNHWKH
                                                                          RQHSUHVHQWHGKHUHEXWLWVFDVHVFOHDUO\LQGLFDWHWKDWWKHUHDUH
   %HFDXVH$Q\DQZXWDNXGHDOWZLWKWKHDOOHJHGPLVDSSOLFDWLRQ              VRPH DWWDFNV RQ SDUROH SURFHGXUHV WKDW UHPDLQ FRJQL]DEOH
RI SDUROHHOLJLELOLW\ JXLGHOLQHV KRZHYHU , GR QRW GLVDJUHH       XQGHU$IWHUDOOWKH&RXUWZDVYHU\FDUHIXOLQ+HFNWR
ZLWKWKHUHVXOWUHDFKHGLQWKDWFDVHHYHQWKRXJK,GLVDJUHH              GLVWLQJXLVK :ROII Y 0F'RQQHOO  86   D
ZLWK LWV UDWLRQDOH  , DOVR EHOLHYH WKDW WKH 1LQWK &LUFXLWjV      FODVVDFWLRQ VXLW EURXJKW E\ SULVRQHUV FKDOOHQJLQJ
WUHDWPHQW RI WKH LVVXH LV PRUH LQVWUXFWLYH WKDQ WKDW RI          VHYHUDORID1HEUDVNDSULVRQjVDGPLQLVWUDWLYHUXOHVSUDFWLFHV
$Q\DQZXWDNX EHFDXVH WKH 1HDO DQG %XWWHUILHOG GHFLVLRQV              DQGSURFHGXUHVRQWKHIROORZLQJJURXQGV
H[SOLFDWH WKH NH\ GLIIHUHQFH EHWZHHQ D SDUROHHOLJLELOLW\
FKDOOHQJHWKDWDWWDFNVDJHQHUDOO\DSSOLFDEOHSULVRQUHJXODWLRQ             >:@HWKLQN>:ROII@UHFRJQL]HGDFODLPIRUXVLQJ
YHUVXV DQ DWWHPSW WR mVHW DVLGHl RU mUHYHUVHl WKH GHQLDO RI       WKHZURQJSURFHGXUHVQRWIRUUHDFKLQJWKHZURQJUHVXOW
SDUROHLQDQLQGLYLGXDOFDVH                                               LH GHQ\LQJ JRRGWLPH FUHGLWV  1RU LV WKHUH DQ\
                                                                            LQGLFDWLRQLQWKHRSLQLRQRUDQ\UHDVRQWREHOLHYHWKDW
     3DUROHHOLJLELOLW\ DFWLRQV XQGHU   PHHW WKH               XVLQJ WKH ZURQJ SURFHGXUHV QHFHVVDULO\ YLWLDWHG WKH
       +HFN(GZDUGVWHVW                                                    GHQLDORIJRRGWLPHFUHGLWV7KXVWKHFODLPDWLVVXHLQ
                                                                            :ROII GLG QRW FDOO LQWR TXHVWLRQ WKH ODZIXOQHVV RI WKH
  ,EHOLHYHWKDWWKHSULQFLSOHVVHWIRUWKLQ+HFNDQG(GZDUGV              SODLQWLIIjVFRQWLQXLQJFRQILQHPHQW
DV DSSOLHG E\ WKH 1LQWK &LUFXLW LQ 1HDO DQG %XWWHUILHOG
SURYLGH D UHDVRQDEOH IUDPHZRUN IRU DQDO\]LQJ 'RWVRQjV               +HFN86DWHPSKDVLVLQRULJLQDO
FODLP  7KH QDWXUH RI 'RWVRQjV FODLPnDQ DWWDFN RQ WKH
UHWURDFWLYHDSSOLFDELOLW\RI2KLRjVVWDWXWRU\SDUROHHOLJLELOLW\             6LPLODUO\ WKHUH LV QR LQGLFDWLRQ WKDW 'RWVRQjV FODLP LI
VFKHPHnGRHV QRW QHFHVVDULO\ LPSO\ WKH LQYDOLGLW\ RI DQ\            DOORZHGWRSURFHHGZRXOGYLWLDWHWKHHDUOLHUGHQLDORISDUROH
MXGJPHQW E\ DQ DGPLQLVWUDWLYH ERG\ WKDW KH LV RU LV QRW         +LVDSSHDOLVDFODVVLFmFODLPIRUXVLQJWKHZURQJSURFHGXUHV
1RV                          'RWVRQHWDOY              'RWVRQHWDOY                       1RV
                                           :LONLQVRQHWDO                  :LONLQVRQHWDO

QRWIRUUHDFKLQJWKHZURQJUHVXOWl,G)XUWKHUVXSSRUWIRU           WKH GRRU RI WKH SDUROH ERDUGl  +RZHYHU WKH RSLQLRQ
WKLV FRQFOXVLRQ FRPHV IURP WKH IDFW WKDW 'RWVRQjV ODZVXLW       RYHUUHDFKHV ZKHQ LW VXJJHVWV WKDW EHFDXVH sRKQVRQjV DQG
FRXOG MXVW DV HDVLO\ KDYH EHHQ FDVW DV D FODVVDFWLRQ FODLP   'RWVRQjVSURFHGXUDOFKDOOHQJHVZLOOUHVXOWLQQRWKLQJPRUH
FKDOOHQJLQJ WKH UHWURDFWLYH DSSOLFDELOLW\ RI 2KLRjV SDUROH       WKDQDQHZKHDULQJWKHLUFODLPVPXVWEHDOORZHGWRSURFHHG
HOLJLELOLW\JXLGHOLQHV7KLVZRXOGKDYHSODFHGWKHFDVHLQWKH        0DM2SDW7KLVUXOLQJLVRYHUEURDGLQOLJKWRIWKH
VDPH SRVWXUH DV WKDW SUHVHQWHG LQ :ROII UHTXHVWLQJ              6XSUHPH &RXUWjV KROGLQJ LQ (GZDUGV ZKLFK UHMHFWHG WKH
SURVSHFWLYHLQMXQFWLYHUHOLHIWKDWVHHPVFOHDUO\ SHUPLVVLEOH           1LQWK&LUFXLWjVGHFLVLRQEDVHGRQWKDWFLUFXLWjVmSUHFHGHQWWR
XQGHUWKH6XSUHPH&RXUWjVUXOH                                       WKH HIIHFW WKDW D FODLP FKDOOHQJLQJ RQO\ WKH SURFHGXUHV
                                                                        HPSOR\HGLQDGLVFLSOLQDU\KHDULQJLVDOZD\VFRJQL]DEOHXQGHU
  'RWVRQjV FODLP DOVR EULQJV WR PLQG WKH H[DPSOHV RI             l  (GZDUGV  86 DW   m7KDW SULQFLSOH LV
K\SRWKHWLFDO 3DUROH %RDUG GHFLVLRQV UKHWRULFDOO\ XVHG E\          LQFRUUHFWVLQFHLWGLVUHJDUGVWKHSRVVLELOLW\FOHDUO\HQYLVLRQHG
sRKQVRQjVODZ\HUVLQWKHLU5HSO\%ULHIWRSRLQWRXWWKHQHHG            E\+HFNWKDWWKHQDWXUHRIWKHFKDOOHQJHWRWKHSURFHGXUHV
IRUWKHDYDLODELOLW\RIDFWLRQV                                 FRXOG EH VXFK DV QHFHVVDULO\ WR LPSO\ WKH LQYDOLGLW\ RI WKH
                                                                        MXGJPHQWl  ,G  ,Q OLJKW RI (GZDUGV , EHOLHYH WKDW WKH
  &DQ WKH 2KLR 3DUROH %RDUG GHWHUPLQH WKDW DOO ZKLWH            PDMRULW\ KDV HUUHG LQ UXOLQJ WKDW DOO DWWDFNV RQ SDUROH
  PDOHVZKRDUHHOLJLEOHIRUSDUROHUHOHDVHZLOOKDYHWKHLU             SURFHGXUHVLQ2KLRWKDWUHTXLUHDQHZKHDULQJWRFRUUHFWDUH
  UHOHDVHJUDQWHGZKLOHQRRQHHOVHFDQ"&DQWKH%RDUG                FRJQL]DEOHXQGHU
  GHQ\SDUROHWRDOO+LVSDQLFLQPDWHVDVDPDWWHURISROLF\"
  &DQWKH%RDUGIOLSDFRLQWRGHWHUPLQHZKRJHWVSDUROH"                 7KDWEHLQJVDLG,EHOLHYHWKDWWKHPDMRULW\KDVUHDFKHGWKH
                                                                        FRUUHFW FRQFOXVLRQ LQ DOORZLQJ 'RWVRQjV FODLP WR SURFHHG
,WKLQNWKHDQVZHUWRWKHVHTXHVWLRQVLVFOHDUO\QRZLWKWKH           XQGHU,WKHUHIRUHFRQFXULQWKHUHVXOWRQO\
H[DPSOHV LOOXVWUDWLQJ ZK\ DOO   DFWLRQV DWWDFNLQJ D
VWDWHjVSDUROHVFKHPHDUHQRWVXEMHFWWRWKHKDEHDVFRUSXV                               ,,s2+1621j6&/$,0
H[KDXVWLRQRIVWDWHUHPHGLHVUHTXLUHPHQW6HH3UHLVHU
86 DW  EDUULQJ FODLPV WKDW VRXJKW WKH UHVWRUDWLRQ RI     $ )DFWXDODQGSURFHGXUDOEDFNJURXQG
JRRGWLPHFUHGLWVXQGHUEXWDFNQRZOHGJLQJDSRVVLEOH
VLWXDWLRQnDQ DFWLRQ IRU GDPDJHV RQO\nWKDW mFRXOG EH                  $VLQGLFDWHGDERYHsRKQVRQjVFODLPLQYROYHVYHU\GLIIHUHQW
EURXJKWXQGHUWKH&LYLO5LJKWV$FWLQIHGHUDOFRXUWZLWKRXW             IDFWVIURP'RWVRQjV,Q2KLRRQRUDERXWWKHGDWHRISDUROH
DQ\ UHTXLUHPHQW RI SULRU H[KDXVWLRQ RI VWDWH UHPHGLHVl         HOLJLELOLW\WKH3DUROH%RDUGPXVWKROGDKHDULQJWRGHWHUPLQH
7KHVHDFWLRQVZRXOGKDYHQRQHFHVVDU\EHDULQJRQDSDUWLFXODU           ZKHWKHUWKHSULVRQHUVKRXOGEHSDUROHG2+,2 $'0,1 &2'(
SDVW MXGJPHQW ZLWK UHJDUG WR D SULVRQHU EXW WKH\ ZRXOG        5HFRPPHQGDWLRQVIRURUDJDLQVWUHOHDVHFDQ
HQVXUHWKDWWKHVWDWHVDUHQRWYLRODWLQJSULVRQHUVjEDVLFIHGHUDO       EHPDGHE\mDSDQHOFRQVLVWLQJRIRQHRUPRUHPHPEHUVRI
ULJKWV                                                                WKH 3DUROH %RDUG DQG RQH RU PRUH 3DUROH %RDUG KHDULQJ
                                                                        RIILFHUVl,G &$WWKHKHDULQJWKH3DUROH
     $ SURSHU DSSOLFDWLRQ RI WKH +HFN(GZDUGV WHVW              %RDUG RU WKH UHFRPPHQGLQJ SDQHO VKDOO FRQVLGHU DPRQJ
       FRLQFLGHVZLWKWKHPDMRULW\jVGHFLVLRQRQ'RWVRQjV              RWKHUWKLQJVm>Z@ULWWHQRURUDOVWDWHPHQWVE\WKHLQPDWHRWKHU
       FODLP                                                            WKDQ JULHYDQFHV ILOHG XQGHU UXOH  RI WKH
                                                                        $GPLQLVWUDWLYH&RGHl,G %
  7KHPDMRULW\RSLQLRQSXUSRUWVWRDSSO\WKH+HFN(GZDUGV
WHVWE\VLPSO\JLYLQJ'RWVRQDQGsRKQVRQDmWLFNHWWRJHWLQ
1RV                          'RWVRQHWDOY              'RWVRQHWDOY                       1RV
                                           :LONLQVRQHWDO                  :LONLQVRQHWDO

   sRKQVRQDOOHJHVWKDWWKHVHSURFHGXUHVZHUHQRWIROORZHGDW           ZDV KHOG WR EH D FRJQL]DEOH   DFWLRQ DQG ZDV ODWHU
KLV$SULOSDUROHKHDULQJZKHQKHZDVGHQLHGSDUROH             GLVWLQJXLVKHGE\WKH6XSUHPH&RXUWLQ+HFNRQWKHJURXQGV
+H DOOHJHV WKDW LQ YLRODWLRQ RI 2KLR $GPLQLVWUDWLYH &RGH       TXRWHGLQWKHGLVFXVVLRQRI'RWVRQjVFODLPXQGHU3DUW,DERYH
 & KLV KHDULQJ SDQHO FRQVLVWHG RI RQO\ RQH       )XUWKHUPRUHWKHLQMXQFWLYHUHOLHIVRXJKWLQ:ROIIZDVVWULFWO\
3DUROH%RDUGKHDULQJRIILFHUUDWKHUWKDQDSDQHOFRQVLVWLQJRI         SURVSHFWLYH DQG WKXV GLG QRW DIIHFW WKH YDOLGLW\ RI DQ\
DW OHDVW RQH PHPEHU RI WKH 3DUROH %RDUG DQG DW OHDVW RQH     MXGJPHQW WKDW KDG DOUHDG\ RFFXUUHG HYHQ WKRXJK WKH
3DUROH%RDUGKHDULQJRIILFHU6HFRQGO\KHDOOHJHVWKDWLQ            SURFHGXUDO FKDQJHV VRXJKW E\ WKH SODLQWLIIV ZRXOG KDYH
YLRODWLRQRI2KLR$GPLQLVWUDWLYH&RGH%              FOHDUO\ LPSOLHG WKDW SDVW DGMXGLFDWLRQV GLG QRW SDVV
KHZDVQRWDOORZHGWRVSHDNRQKLVRZQEHKDOIRUDVNDQ\                FRQVWLWXWLRQDOPXVWHU,GDW
TXHVWLRQV)LQDOO\sRKQVRQFRQWHQGVWKDWWKHKHDULQJSDQHOjV
GHFLVLRQLQFRUUHFWO\UHOLHGXSRQWZRDOOHJHGFRQYLFWLRQVLQKLV           ,I sRKQVRQjV FRPSODLQW FRXOG EH FRQVWUXHG DV D EURDGO\
UHFRUGIRUDJJUDYDWHGDUVRQLQGHFLGLQJWRGHQ\KLVSDUROH             FRQFHLYHGDWWDFNRQWKHSUDFWLFHVSROLFLHVDQGSURFHGXUHV
                                                                        XVHGE\WKH2KLRSDUROHDXWKRULWLHVWKHQDSODXVLEOHDUJXPHQW
  7KDW ODVW SKUDVHnmGHFLGLQJ WR GHQ\ KLV                           FRXOG EH PDGH WKDW KLV FODLP WRR VKRXOG SURFHHG XQGHU
SDUROHlnLPPHGLDWHO\ LQGLFDWHV ZK\ sRKQVRQjV FODLP LV               ,IsRKQVRQKDGVRXJKWSURVSHFWLYHUHOLHIRQO\DQGGLG
GLIIHUHQW IURP 'RWVRQjV DQG ZK\ LW PXVW EH DQDO\]HG            QRW QHFHVVDULO\ VXJJHVW WKDW WKH LUUHJXODULWLHV LQ KLV SDUROH
GLIIHUHQWO\ XQGHU +HFN DQG (GZDUGV  sRKQVRQjV             KHDULQJZHUHXQLTXHWRKLPWKHQKLVDFWLRQZRXOGQRWDIIHFW
DFWLRQZDVGLVPLVVHGE\WKHGLVWULFWFRXUWIRUIDLOLQJWRVWDWH         WKHYDOLGLW\RIDQ\MXGJPHQWWKDWKDGDOUHDG\RFFXUUHGHYHQ
DFODLPXSRQZKLFKUHOLHIFDQEHJUDQWHG+LVFRXQVHOQRZ              WKRXJKWKHSURFHGXUDOFKDQJHVVRXJKWZRXOGLPSO\WKDWWKH
DUJXHVRQDSSHDOWKDWKLVFODLPLVQRWEDUUHGE\+HFNEHFDXVH           SDVWDGMXGLFDWLRQGLGQRWSDVVFRQVWLWXWLRQDOPXVWHU
KH mFKDOOHQJHV RQO\ WKH SURFHGXUHV WKDW ZHUH XVHG DW KLV
SDUROHKHDULQJDQGVHHNVWRKDYHWKHKHDULQJUHGRQHLQDZD\              %XWWKLVFKDUDFWHUL]DWLRQLVQRWDYDOLGRQHIRUsRKQVRQjV
WKDWFRPSOLHVZLWKWKHVDIHJXDUGVDIIRUGHGKLPl                        FODLP  $OWKRXJK sRKQVRQjV SUR VH FRPSODLQW LWVHOI LV
                                                                        DPELJXRXVKLVDWWRUQH\VRQDSSHDOKDYHFOHDUO\VWDWHGWKDWKH
% $QDO\VLV                                                             ZDQWVWRKDYHKLVKHDULQJmUHGRQHl,QRWKHUZRUGVKHVHHNV
                                                                        WR KDYH WKLV FRXUW WKURZ RXW WKH SUHYLRXV 3DUROH %RDUGjV
   ,QKROGLQJWKDWsRKQVRQFDQSXUVXHKLVFODLPXQGHU           GHWHUPLQDWLRQ WKDW GHQLHG KLP SDUROH  sRKQVRQ FDQQRW
WKH PDMRULW\ RSLQLRQ HPSOR\V LWV mHDUOLHUUHOHDVHl WHVW WR       SRVVLEO\EHPDNLQJD:ROIIW\SHFODLPEDVHGRQWKHUHOLHIKH
FUHDWH D EURDG UXOH WKDW DOORZV   DWWDFNV RQ DOO         VHHNV  )XUWKHUPRUH WKH SURFHGXUDO LUUHJXODULWLHV WKDW KH
GLVFUHWLRQDU\3DUROH%RDUGKHDULQJSURFHGXUHV$VGLVFXVVHG            FRPSODLQVDERXWDUHQRWSUREOHPVZLWKWKHSUDFWLFHVRIWKH
DERYH WKLV LV LPSHUPLVVLEOH XQGHU (GZDUGV  2QO\ LI            2KLR3DUROH%RDUGDVDZKROHWKH\DUHGHYLDWLRQVIURPWKH
sRKQVRQjVFODLPZHUHDQDORJRXVWRWKDWLQ:ROIIVKRXOGKHEH            $GPLQLVWUDWLYH&RGHWKDWDOOHJHGO\WRRNSODFHLQsRKQVRQjV
DOORZHGWRSXUVXHKLVDFWLRQXQGHU                              KHDULQJ)RUWKHVHUHDVRQVWKHUHLVQRZD\WRFKDUDFWHUL]HWKH
                                                                        QDWXUHRIsRKQVRQjVFKDOOHQJHDVDQ\WKLQJRWKHUWKDQDFODLP
  :ROIIZDVDFODVVDFWLRQWKDWFKDOOHQJHGWKHUXOHVSUDFWLFHV        WKDW QHFHVVDULO\ LPSOLHV WKH LQYDOLGLW\ RI D SULRU VWDWH
DQGSURFHGXUHVDWD1HEUDVNDSULVRQFRPSOH[7KHSODLQWLIIV           MXGJPHQW  $V GLVFXVVHG DERYH LW LV QRW WKH IDFW RI WKH
LQ WKHLU VXLW IRU GDPDJHV DOOHJHG WKDW WKH SROLFLHV RI WKH   SULVRQHUjV LQFDUFHUDWLRQ WKDW LV WKH FRQFHUQ LW LV WKH YHU\
SULVRQDGPLQLVWUDWLRQZHUHIODZHGDVDZKROHQRWDVDSSOLHG            MXGJPHQW RI WKH VWDWHnDGPLQLVWUDWLYH RU MXGLFLDOnZKRVH
WRDQ\RQHLQPDWH:ROII86DW7KLVDFWLRQ             LQYDOLGLW\PD\QRWEHLPSOLHGE\DFODLP
1RV                          'RWVRQHWDOY     
                                           :LONLQVRQHWDO

  , WKXV FRQFOXGH WKDW WKH PDMRULW\ KDV UHDFKHG WKH ZURQJ
UHVXOWLQsRKQVRQjVDSSHDO,WKDVGRQHVRE\DOORZLQJ
WREHXVHGDVDYHKLFOHIRUDOOSURFHGXUDODWWDFNVRQ3DUROH
%RDUGSURFHHGLQJVWKDWUHVXOWLQDQHZKHDULQJDUHVXOWWKDWLV
FRQWUDU\WR6XSUHPH&RXUWSUHFHGHQW,WKHUHIRUHUHVSHFWIXOO\
GLVVHQWIURPWKHUHVXOWUHDFKHGRQsRKQVRQjVFODLP
                      ,,,&21&/86,21
   ,GLVDJUHHZLWKWKHPDMRULW\jVFRQFOXVLRQWKDWDmVXFFHVVIXO
FKDOOHQJH ZLOO RQO\ µQHFHVVDULO\ LPSO\j WKH LQYDOLGLW\ RI D
SULVRQHUjVFRQYLFWLRQRUFRQILQHPHQWLILWZLOOLQHYLWDEO\RU
DXWRPDWLFDOO\ UHVXOW LQ HDUOLHU UHOHDVHl  0DM 2S DW 
5DWKHUWKHLVVXHLVZKHWKHUWKHQDWXUHRIWKHFODLPVRIWKH
LQGLYLGXDOSULVRQHUVQHFHVVDULO\LPSOLHVWKHLQYDOLGLW\RIWKHLU
XQGHUO\LQJ FRQYLFWLRQV RU VHQWHQFHV  %HFDXVH 'RWVRQ
SUHVHQWV ZKDW DPRXQWV WR D SURVSHFWLYH DWWDFN RQ WKH
UHWURDFWLYH DSSOLFDELOLW\ RI 2KLRjV SDUROHHOLJLELOLW\
JXLGHOLQHV,EHOLHYHWKDWKHKDVDFRJQL]DEOHFODLP
sRKQVRQRQWKHRWKHUKDQGDWWDFNVWKHSURFHGXUHVXVHGLQD
SUHYLRXV KHDULQJ WKDW GHQLHG KLP SDUROH DQG DVNV WKDW KLV
KHDULQJEHmUHGRQHl9DFDWLQJWKHROGKHDULQJDQGRUGHULQJ
WKH2KLR3DUROH%RDUGWRSURYLGHsRKQVRQZLWKDQHZHUURU
IUHH KHDULQJ LV WKH YHU\ W\SH RI DWWDFN RQ DQ XQGHUO\LQJ
VHQWHQFH WKDW +HFN DQG (GZDUGV H[SUHVVO\ SURKLELW
sRKQVRQjVFKDOOHQJHLQVWHDGUHTXLUHVWKHH[KDXVWLRQRIVWDWH
UHPHGLHVDQGLIQHFHVVDU\DSHWLWLRQIRUKDEHDVFRUSXVUHOLHI
+HFN  86 DW   , WKHUHIRUH FRQFXU LQ WKH UHVXOW
UHDFKHG RQ 'RWVRQjV FODLP DQG UHVSHFWIXOO\ GLVVHQW ZLWK
UHJDUGWRsRKQVRQjV