Court Opinion

ID: 2969519
Source: CourtListenerOpinion
Date Created: 2015-09-22 15:50:46.428404+00
Date Added: 2024-06-11T08:25:51.415770
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

 686$1 / +26.,16                ;
           3ODLQWLII$SSHOODQW    
                                   
                                     1R
           Y                      
                                    !
                                   
 2$./$1' &2817< 6+(5,))j6 
 '(3$570(17DQG7+(               
 &2817< 2) 2$./$1'                
       'HIHQGDQWV$SSHOOHHV 
                                   
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
      IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW)OLQW
     1Rn3DXO9*DGROD'LVWULFWsXGJH
                  $UJXHGsXQH
             'HFLGHGDQG)LOHGsXO\
%HIRUHs21(60225(DQG*,/0$1&LUFXLWsXGJHV
                   BBBBBBBBBBBBBBBBB
                        &2816(/
$5*8('  sRVHSK & %LUG 67$5. 5($*$1 	
),11(57< 7UR\ 0LFKLJDQ IRU $SSHOODQW  5LFN s
3DWWHUVRQ 3277(5 &$51,$. $1'(5621 	
'H$*267,12 $XEXUQ +LOOV 0LFKLJDQ IRU $SSHOOHHV
21 %5,()  sRVHSK & %LUG sHIIUH\ s )OHXU\ 67$5.

                             
     +RVNLQVY2DNODQG&RXQW\HWDO             1R

5($*$1 	 ),11(57< 7UR\ 0LFKLJDQ IRU $SSHOODQW
5LFN s 3DWWHUVRQ 3277(5 &$51,$. $1'(5621 	
'H$*267,12$XEXUQ+LOOV0LFKLJDQIRU$SSHOOHHV
                     BBBBBBBBBBBBBBBBB
                         23,1,21
                     BBBBBBBBBBBBBBBBB
  .$5(1 1(/621 0225( &LUFXLW sXGJH  3ODLQWLII
DSSHOODQW 6XVDQ / +RVNLQV ZKR ZDV D GHSXW\ ZLWK WKH
2DNODQG &RXQW\ 6KHULIIjV 'HSDUWPHQW ZDV ILUHG DIWHU VKH
VXIIHUHGDQLQMXU\WKDWUHQGHUHGKHUXQDEOHWRUHVWUDLQLQPDWHV
6KH EURXJKW VXLW DJDLQVW WKH 6KHULIIjV 'HSDUWPHQW DQG WKH
&RXQW\ RI 2DNODQG KHUHLQDIWHU UHIHUUHG WR FROOHFWLYHO\ DV
mGHIHQGDQWVl DVVHUWLQJ FODLPV XQGHU ERWK WKH $PHULFDQV
ZLWK'LVDELOLWLHV$FWDQG7LWOH9,,7KHGLVWULFWFRXUWJUDQWHG
VXPPDU\MXGJPHQWWRWKHGHIHQGDQWVDQGIRUWKHIROORZLQJ
UHDVRQVZH$)),50
                     ,%$&.*5281'
  6XVDQ+RVNLQVZRUNHGIRUWKH2DNODQG&RXQW\6KHULIIjV
'HSDUWPHQW m2&6'l IURP  XQWLO KHU WHUPLQDWLRQ LQ
6KHEHJDQKHUFDUHHUDVDGLVSDWFKHUDWWKH2DNODQG
&RXQW\ sDLO  ,Q  +RVNLQV VXFFHVVIXOO\ WHVWHG IRU WKH
SRVLWLRQ RI GHSXW\ VKHULII OHYHO RQH mGHSXW\ RQHl
+RVNLQVjV RULJLQDO SODFHPHQW DV D GHSXW\ RQH ZDV LQ WKH
ZRPHQjV GLYLVLRQ DW WKH 2DNODQG &RXQW\ sDLO  ,Q 
+RVNLQV ZDV DVVLJQHG WR 2DNODQG &RXQW\ &LUFXLW &RXUW
GHWHQWLRQZKHUHKHUGXWLHVLQFOXGHGWUDQVSRUWLQJSULVRQHUV
IURPWKHMDLOWRGHWHQWLRQ)URPXQWLOKHUWHUPLQDWLRQLQ
 +RVNLQV ZDV DVVLJQHG WR WKH 1RYL 'LVWULFW &RXUW D
SRVLWLRQ WKDW DOVR LQYROYHG WKH WUDQVSRUWDWLRQ RI LQPDWHV
+RVNLQVjV SRVLWLRQV DW ERWK WKH FLUFXLW DQG GLVWULFW FRXUWV
LQYROYHG GDLO\ FRQWDFW ZLWK SULVRQHUV DQG WKH SRWHQWLDO IRU
SK\VLFDOFRQIURQWDWLRQ
  2Q$XJXVW+RVNLQVVXIIHUHGVHYHUHQRQZRUN
UHODWHGLQMXULHVZKHQDKRUVHIHOORQKHU+RVNLQVjVSULPDU\
FDUH SK\VLFLDQ 'U ( 3DWULFN 0LWFKHOO LQGLFDWHG WKDW
1R            +RVNLQVY2DNODQG&RXQW\HWDO            

+RVNLQVjVLQMXULHVLQFOXGHGDmQRQGLVSODFHGIUDFWXUHRIWKH
LQIHULRUDQGVXSHULRUSXELFUDPXVRQWKHOHIWDQGIUDFWXUHG
ELODWHUDOFODYLFOHVlsRLQW$SSHQGL[ms$lDW0LWFKHOO
/HWWHU$VDUHVXOWRIWKHVHPXOWLSOHLQMXULHV+RVNLQVZDV
KRVSLWDOL]HG IRU WZR DQG D KDOI ZHHNV DQG XQGHUZHQW D
UHFXSHUDWLRQSHULRGRID\HDUDQGDKDOI+RVNLQVZDVWUHDWHG
E\WZRGLIIHUHQWGRFWRUVDQGREWDLQHGOHWWHUVUHVWULFWLQJKHU
DFWLYLW\IURPERWK2QsXO\'U:LOOLDP%ULDD
SXOPRQDU\VSHFLDOLVWZURWHDOHWWHUVWDWLQJWKDW+RVNLQVmLV
DEOHWRUHWXUQWRZRUNKRZHYHUVKHVKRXOGQRWEHOLIWLQJRU
HQJDJLQJ LQ DQ\ DFWLYLW\ WKDW ZRXOG MDU KHU FKHVW VXFK DV
VKRRWLQJDVKRWJXQRUJHWWLQJLQWRDVLWXDWLRQLQZKLFKVKH
FRXOGJHWKLWLQWKHFKHVWls$DW%ULD/HWWHU2QsXO\
'U0LWFKHOODWWDFKHGDGLVDELOLW\FHUWLILFDWHWR'U%ULDjV
OHWWHUWKHFHUWLILFDWHLQGLFDWHGWKDW+RVNLQVZDVUHVWULFWHGWR
OLJKW ZRUN GXWLHV WKDW GLG QRW LPSDFW KHU DQWHULRU FKHVW RU
VKRXOGHUV'U0LWFKHOODOVRZURWHDOHWWHURQ6HSWHPEHU
WKDWVWDWHG
  >+RVNLQV@ KDV UHVWULFWLRQV RI QR OLIWLQJ SXVKLQJ RU
  SXOOLQJ RYHU  SRXQGV QR XVH RI VKRWJXQ DQG QR
  UHVWUDLQLQJ RI LQPDWHV  6KH VWLOO H[SHULHQFHV SDLQ DQG
  GHFUHDVHGUDQJHRIPRWLRQ6KHKDVVHYHUHOLPLWDWLRQRI
  KHUIXQFWLRQDOFDSDFLW\DQGQHHGVDVHGHQWDU\SRVLWLRQ
  +HUPRWLYDWLRQDQGUHKDELOLWDWLRQSRWHQWLDOLVH[FHOOHQW
  +HUSURJQRVLVLVJXDUGHG
    ,GRQRWEHOLHYHWKDW6XVDQZLOOHYHUEHDEOHWRUHVXPH
  IXOO GXW\ DV D 'HSXW\ ZLWK 2DNODQG &RXQW\ 6KHULIIjV
  'HSDUWPHQW  6KH ZLOO SUREDEO\ QHHG SHUPDQHQW
  UHVWULFWLRQV RI FHUWDLQ DFWLYLWLHV ZKLFK ZRXOG EH
  FRQVLGHUHGGXWLHVRID'HSXW\6KHULII
s$DW0LWFKHOO/HWWHU
  $IWHUUHFHLYLQJ'U%ULDjVsXO\OHWWHUZLWKWKHDWWDFKHG
GLVDELOLW\FHUWLILFDWH+RVNLQVWRRNWKHPWR&DURO9DQ/HXYHQ
DQ HPSOR\HH UHFRUGV VSHFLDOLVW IRU WKH &RXQW\  $OWKRXJK
+RVNLQVH[SUHVVHGDGHVLUHWRUHWXUQWRZRUN9DQ/HXYHQWROG
KHUWKDWVKHFRXOGQRWEHFDXVHQROLJKWGXW\SRVLWLRQVZHUH
DYDLODEOH  7KH &RXQW\ WKHQ FRQGXFWHG D SUHWHUPLQDWLRQ
     +RVNLQVY2DNODQG&RXQW\HWDO             1R       1R         +RVNLQVY2DNODQG&RXQW\HWDO     

KHDULQJRQ1RYHPEHU$WWKHKHDULQJ0DMRU7KRPDV            ZHUHFRPSDUDEOHWRKHULQDOOUHOHYDQWDVSHFWVKHU7LWOH9,,
4XLVHQEHUU\ WKH &KLHI RI 6WDII DW 2&6' LQGLFDWHG WKDW       FODLPZDVSURSHUO\GLVPLVVHG
+RVNLQVZDVEHLQJWHUPLQDWHGEHFDXVHKHUZRUNUHVWULFWLRQV
ZHUHLQFRPSDWLEOHZLWKWKHGXWLHVRIDGHSXW\RQH+RVNLQV                              ,,,&21&/86,21
ZDVDVNHGLIVKHZDVLQWHUHVWHGLQDMREDVDGLVSDWFKHURUD
ERRNLQJFOHUNnMREVWKDWGLGQRWUHTXLUHLQPDWHFRQWDFWEXW            )RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHGLVWULFWFRXUWjV
WKDWDOVRLQYROYHGDVLJQLILFDQWSD\FXWnDQGVKHUHSOLHGWKDW       JUDQWRIVXPPDU\MXGJPHQW
VKHZDVQRWLQWHUHVWHG+RVNLQVVWDWHGm%DVLFDOO\,jGUDWKHU
MXVWEHD'HSXW\ls$DW$IWHUWKHKHDULQJWKHKHDULQJ
RIILFHULVVXHGDGHFLVLRQDIILUPLQJ+RVNLQVjVWHUPLQDWLRQ
   2QsXQH+RVNLQVILOHGVXLWLQWKH8QLWHG6WDWHV
'LVWULFW&RXUWIRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDVVHUWLQJ
FODLPV XQGHU ERWK WKH $PHULFDQV ZLWK 'LVDELOLWLHV $FW
m$'$l86&HWVHTDQG7LWOH9,,RIWKH&LYLO
5LJKWV$FWRI86&HHWVHT2Q0DUFK
 WKH GLVWULFW FRXUW JUDQWHG WKH GHIHQGDQWVj PRWLRQ IRU
VXPPDU\MXGJPHQW7KHGLVWULFWFRXUWGLVPLVVHG+RVNLQVjV
$'$FODLPRQWKHEDVLVWKDWVKHIDLOHGWRHVWDEOLVKWKDWVKH
KDGDGLVDELOLW\ZLWKLQWKHPHDQLQJRIWKH$FW$OWHUQDWLYHO\
WKHGLVWULFWFRXUWUHDVRQHGWKDW+RVNLQVKDGQRWVDWLVILHGWKH
VHFRQGHOHPHQWRIKHUSULPDIDFLHFDVHEHFDXVHVKHKDGQRW
HVWDEOLVKHG WKDW VKH ZDV TXDOLILHG WR SHUIRUP WKH HVVHQWLDO
IXQFWLRQV RI WKH MRE ZLWK UHDVRQDEOH DFFRPPRGDWLRQ
+RVNLQVDOVREURXJKWDGLVSDUDWHWUHDWPHQWFODLPXQGHU7LWOH
9,, DOOHJLQJ WKDW 2&6' KDG SURYLGHG PDOH GHSXWLHV WKH
RSSRUWXQLW\WRZRUNLQOLJKWGXW\GHSXW\SRVLWLRQVIROORZLQJ
GLVDEOLQJLQMXULHV7KHGLVWULFWFRXUWGLVPLVVHGWKLVFODLPRQ
WKHEDVLVWKDW+RVNLQVKDGQRWHVWDEOLVKHGDSULPDIDFLHFDVH
RIJHQGHUGLVFULPLQDWLRQ+RVNLQVWLPHO\DSSHDOHGWKHGLVWULFW
FRXUWjVMXGJPHQW
                        ,,$1$/<6,6
  :H UHYLHZ GH QRYR D GLVWULFW FRXUWjV JUDQW RI VXPPDU\
MXGJPHQW6HH(UFHJRYLFKY*RRG\HDU7LUH	5XEEHU&R
)G WK&LU6XPPDU\MXGJPHQWLV
SURSHURQO\ZKHQWKHUHLVQRGLVSXWHDVWRDPDWHULDOTXHVWLRQ
RIIDFWDQGRQHSDUW\LVHQWLWOHGWRDMXGJPHQWDVDPDWWHURI
ODZ  6HH )(' 5 &,9 3 F  9LHZLQJ DOO IDFWV DQG
    +RVNLQVY2DNODQG&RXQW\HWDO               1R       1R            +RVNLQVY2DNODQG&RXQW\HWDO           

E\WKHGHIHQGDQWVIRUKHUWHUPLQDWLRQWKHGLVWULFWFRXUWVKRXOG        LQIHUHQFHVGUDZQWKHUHIURPLQWKHOLJKWPRVWIDYRUDEOHWRWKH
KDYHDQVZHUHGWKHTXHVWLRQRIZKHWKHU+RVNLQVZDVTXDOLILHG             QRQPRYDQW ZH PXVW GHWHUPLQH ZKHWKHU WKH HYLGHQFH
IRUWKHSRVLWLRQRIGHSXW\RQHZLWKRXWFRQVLGHUDWLRQRIWKLV            SUHVHQWHGLVVXFKWKDWDUHDVRQDEOHMXU\FRXOGILQGIRUWKDW
UHDVRQ:KHQSURSHUO\DQDO\]HGLWLVFOHDUWKDW+RVNLQVKDV           SDUW\6HH0DWVXVKLWD(OHF,QGXV&RY=HQLWK5DGLR&RUS
HVWDEOLVKHGE\DSUHSRQGHUDQFHRIWKHHYLGHQFHWKDWVKHLV            86
TXDOLILHGIRUWKHSRVLWLRQ
                                                                        $$'$&ODLP
   +RVNLQVKDVQRWKRZHYHUPHWKHUEXUGHQRIHVWDEOLVKLQJ
WKDWVKHZDVWUHDWHGGLIIHUHQWO\IURPVLPLODUO\VLWXDWHGPDOH              7KH$'$SURKLELWVFRYHUHGHPSOR\HUVIURPGLVFULPLQDWLQJ
GHSXWLHV  $ SODLQWLII  mQHHG QRW GHPRQVWUDWH DQ H[DFW         mDJDLQVWDTXDOLILHGLQGLYLGXDOZLWKDGLVDELOLW\EHFDXVHRIWKH
FRUUHODWLRQ ZLWK WKH HPSOR\HH UHFHLYLQJ PRUH IDYRUDEOH            GLVDELOLW\ RI VXFK LQGLYLGXDO LQ UHJDUG WR MRE DSSOLFDWLRQ
WUHDWPHQW LQ RUGHU IRU WKH WZR WR EH FRQVLGHUHG µVLPLODUO\    SURFHGXUHV WKH KLULQJ DGYDQFHPHQW RU GLVFKDUJH RI
VLWXDWHGjlKRZHYHUWKHSODLQWLIIDQGWKHFRPSDUDEOHPXVWEH           HPSOR\HHVHPSOR\HHFRPSHQVDWLRQMREWUDLQLQJDQGRWKHU
VLPLODULQDOOUHOHYDQWDVSHFWV(UFHJRYLFK)GDW          WHUPVFRQGLWLRQVDQGSULYLOHJHVRIHPSOR\PHQWl86&
:HFRQFOXGHWKDW+RVNLQVKDVQRWPDGHWKLVVKRZLQJ                     D8QGHUWKH$'$GLVFULPLQDWLRQLQFOXGHVmQRW
                                                                        PDNLQJUHDVRQDEOHDFFRPPRGDWLRQVWRWKHNQRZQSK\VLFDORU
   ,QKHUEULHI+RVNLQVDUJXHVWKDWHOHYHQPDOHGHSXWLHVmDOO          PHQWDOOLPLWDWLRQVRIDQRWKHUZLVHTXDOLILHGLQGLYLGXDOZLWK
VXIIHUHG GLVDEOLQJ LQMXULHV DQG DW OHDVW IRU VRPH SHULRG RI   D GLVDELOLW\ ZKR LV DQ DSSOLFDQW RU HPSOR\HH XQOHVV VXFK
WLPH ZHUH XQDEOH WR SHUIRUP WKH HVVHQWLDO IXQFWLRQV RI D      FRYHUHG HQWLW\ FDQ GHPRQVWUDWH WKDW WKH DFFRPPRGDWLRQ
GHSXW\l DQG VKH FODLPV WKDW WKHVH PHQ ZHUH DOO                 ZRXOG LPSRVH DQ XQGXH KDUGVKLS RQ WKH RSHUDWLRQ RI WKH
DFFRPPRGDWHGE\2&6'$SSHOODQWjV%UDW,QKHU                EXVLQHVV RI VXFK FRYHUHG HQWLW\l   86&
GHSRVLWLRQ KRZHYHU +RVNLQV ZDV QRW DEOH WR LGHQWLI\ DQ\       E$$mTXDOLILHGLQGLYLGXDOZLWKDGLVDELOLW\l
GHSXW\ ZKR ZDV SHUPLWWHG WR FRPH EDFN WR ZRUN ZLWK             LV GHILQHG DV mDQ LQGLYLGXDO ZLWK D GLVDELOLW\ ZKR ZLWK RU
GRFWRUjVUHVWULFWLRQV,QKLVGHSRVLWLRQ0DMRU4XLVHQEHUU\            ZLWKRXWUHDVRQDEOHDFFRPPRGDWLRQFDQSHUIRUPWKHHVVHQWLDO
LGHQWLILHG ILYH PDOH GHSXWLHV ZKR ZHUH DFFRPPRGDWHG               IXQFWLRQV RI WKH HPSOR\PHQW SRVLWLRQ WKDW VXFK LQGLYLGXDO
WHPSRUDULO\ ZKLOH KDYLQJ UHVWULFWLRQV IURP WKHLU GRFWRUV         KROGVRUGHVLUHVl86&
+RZHYHU WKHVH PHQ ZHUH QRW OLNH +RVNLQV SHUPDQHQWO\
UHVWULFWHGIURPSHUIRUPLQJDQHVVHQWLDOIXQFWLRQRIWKHGHSXW\             ,QWKHLQVWDQWFDVHLWLVXQGLVSXWHGWKDW+RVNLQVZDVILUHG
RQHSRVLWLRQ$OWKRXJK+RVNLQVQHHGQRWSURYHWKDWWKHVH               EHFDXVH RI KHU LQDELOLW\ WR UHVWUDLQ LQPDWHV  m>:@KHQ DQ
ILYHPHQZHUHLGHQWLFDOWRKHULQHYHU\UHVSHFWWKHH[SHFWHG           HPSOR\HUDGPLWVWKDWLWUHOLHGXSRQDGLVDELOLW\LQPDNLQJDQ
GXUDWLRQRIGLVDELOLW\LVUHOHYDQWIRUSXUSRVHVRIKHUFODLP           DGYHUVHHPSOR\PHQWGHFLVLRQDQHPSOR\HHPD\HVWDEOLVKD
)XUWKHUPRUH QRQHRIWKHPHQLGHQWLILHGE\+RVNLQVKDGD               SULPD IDFLH FDVH RI HPSOR\PHQW GLVFULPLQDWLRQ XQGHU WKH
UHVWULFWLRQ VLPLODU WR KHUV ZKLFK SUHFOXGHG KHU IURP            $'$E\VKRZLQJWKDWKHRUVKHKDVDGLVDELOLW\DQGLV
SHUIRUPLQJDQHVVHQWLDOIXQFWLRQRIWKHGHSXW\RQHSRVLWLRQ            µRWKHUZLVH TXDOLILHGj IRU WKH SRVLWLRQ GHVSLWH WKH GLVDELOLW\
7KUHHRIWKHPHQZHUHWHPSRUDULO\WDNHQRIIURDGSDWUROGXW\            HLWKHU µD ZLWKRXW DFFRPPRGDWLRQ IURP WKH HPSOR\HU
DQGRQHZDVUHVWULFWHGIURPFDUU\LQJDKDQGJXQEXW0DMRU               EZLWKDQDOOHJHGµHVVHQWLDOjMREUHTXLUHPHQWHOLPLQDWHGRU
4XLVHQEHUU\ WHVWLILHG WKDW VRPH GHSXW\ SRVLWLRQV GR QRW          FZLWKDSURSRVHGUHDVRQDEOHDFFRPPRGDWLRQjl+DPOLQY
UHTXLUHGULYLQJDQGWKDWPRVWGRQRWUHTXLUHWKHFDUU\LQJRID          &KDUWHU7RZQVKLSRI)OLQW)GWK&LU
KDQGJXQ  %HFDXVH +RVNLQV KDV QRW VKRZQ WKDW WKHVH PHQ         TXRWLQJ 0RQHWWH Y (OHFWURQLF 'DWD 6\V &RUS  )G
                                                                        WK&LU$IWHUWKHHPSOR\HHKDVPDGH
        +RVNLQVY2DNODQG&RXQW\HWDO                   1R        1R            +RVNLQVY2DNODQG&RXQW\HWDO         

WKLVVKRZLQJm>W@KHHPSOR\HUZLOOEHDUWKHEXUGHQRISURYLQJ                   HVWDEOLVKHV KHU SULPD IDFLH FDVH WKHQ DQ LQIHUHQFH RI
WKDW D FKDOOHQJHG MRE FULWHULRQ LV HVVHQWLDO DQG WKHUHIRUH D          GLVFULPLQDWLRQDULVHV$WWKDWSRLQWWKHEXUGHQRISURGXFWLRQ
EXVLQHVVQHFHVVLW\RUWKDWDSURSRVHGDFFRPPRGDWLRQZLOO                       VKLIWV WR WKH HPSOR\HU ZKR PXVW VHW IRUWK D OHJLWLPDWH
LPSRVHDQXQGXHKDUGVKLSXSRQWKHHPSOR\HUl0RQHWWH                       QRQGLVFULPLQDWRU\UHDVRQIRUWKHSODLQWLIIjVGLVFKDUJH6HHLG
)GDW                                                                   DW7KHSODLQWLIIWKHQKDVWKHRSSRUWXQLW\WRGHPRQVWUDWH
                                                                                WKDWWKHHPSOR\HUjVSURIIHUHGUHDVRQIRUWDNLQJWKHDGYHUVH
        :KHWKHU+RVNLQVLV'LVDEOHG:LWKLQWKH0HDQLQJ                        DFWLRQ ZDV SUHWH[WXDO  6HH LG  7R VR GHPRQVWUDWH WKH
          RIWKH$'$                                                            SODLQWLIIPXVWSURYHmWKDWWKH>HPSOR\HUjV@DVVHUWHGUHDVRQV
                                                                                KDYHQREDVLVLQIDFWWKDWWKHUHDVRQVGLGQRWLQIDFWPRWLYDWH
   7KHGLVWULFWFRXUWGHWHUPLQHGEDVHGXSRQ+RVNLQVjVRZQ                      WKH GLVFKDUJH RU LI WKH\ ZHUH IDFWRUV LQ WKH >HPSOR\HUjV@
WHVWLPRQ\ WKDW VKH GLG QRW HVWDEOLVK WKDW VKH ZDV GLVDEOHG            GHFLVLRQWKDWWKH\ZHUHMRLQWO\LQVXIILFLHQWWRPRWLYDWHWKH
ZLWKLQ WKH PHDQLQJ RI WKH $'$  7KH VWDWXWH GHILQHV                    GLVFKDUJHl,GTXRWDWLRQRPLWWHGDOWHUDWLRQVLQRULJLQDO
mGLVDELOLW\l DV m$ D SK\VLFDO RU PHQWDO LPSDLUPHQW WKDW
VXEVWDQWLDOO\OLPLWVRQHRUPRUHRIWKHPDMRUOLIHDFWLYLWLHVRI                  7KHGLVWULFWFRXUWIRXQGWKDW+RVNLQVIDLOHGWRPDNHRXWD
VXFKLQGLYLGXDO%DUHFRUGRIVXFKDQLPSDLUPHQWRU&                     SULPDIDFLHFDVHRIHPSOR\PHQWGLVFULPLQDWLRQ,WH[SODLQHG
EHLQJUHJDUGHGDVKDYLQJVXFKDQLPSDLUPHQWl86&                        WKDW+RVNLQVjVLQDELOLW\WRSHUIRUPWKHHVVHQWLDOIXQFWLRQRI
   ,W LV XQFRQWHVWHG WKDW +RVNLQV KDV D SK\VLFDO            UHVWUDLQLQJLQPDWHVUHQGHUHGKHUXQTXDOLILHGIRUWKHSRVLWLRQ
LPSDLUPHQWDVKHUFRQGLWLRQDIIHFWVERWKKHUPXVFXORVNHOHWDO                   RI GHSXW\ RQH  $VVXPLQJ DUJXHQGR WKDW +RVNLQV FRXOG
DQG UHVSLUDWRU\    V\VWHPV  6HH  &)5  K               HVWDEOLVKDSULPDIDFLHFDVHWKHGLVWULFWFRXUWFRQFOXGHGWKDW
$GGLWLRQDOO\+RVNLQVjVGLVDELOLW\DIIHFWVVHYHUDORI                 +RVNLQV IDLOHG WR SUHVHQW VXIILFLHQW HYLGHQFH RI SUHWH[W WR
KHU PDMRU OLIH DFWLYLWLHV LQFOXGLQJ EUHDWKLQJ PRYLQJ                   UHEXWWKHGHIHQGDQWVjOHJLWLPDWHQRQGLVFULPLQDWRU\UHDVRQIRU
SHUIRUPLQJPDQXDOWDVNVVXFKDVGRLQJODXQGU\DQGZRUNLQJ                     GLVFKDUJLQJKHU
6HH&)5LGHILQLQJPDMRUOLIHDFWLYLWLHVDV
mIXQFWLRQV VXFK DV FDULQJ IRU RQHVHOI SHUIRUPLQJ PDQXDO                   7KH GLVWULFW FRXUW LQ WKH LQVWDQW FDVH IXQGDPHQWDOO\
WDVNVZDONLQJVHHLQJKHDULQJVSHDNLQJEUHDWKLQJOHDUQLQJ                 PLVDSSOLHGWKH0F'RQQHOO'RXJODVWHVW7KHFRXUWFRQFOXGHG
DQGZRUNLQJl                                                                  WKDW +RVNLQV ZDV QRW TXDOLILHG EHFDXVH RI KHU LQDELOLW\ WR
                                                                                SHUIRUPDQHVVHQWLDOIXQFWLRQRIWKHMRE+RZHYHU+RVNLQVjV
   7KHTXHVWLRQLVZKHWKHU+RVNLQVjVGLVDELOLW\mVXEVWDQWLDOO\                  FODLPLVWKDWDOWKRXJKWKHGHIHQGDQWVILUHGKHUEHFDXVHRIKHU
OLPLWVl DQ\ RI WKHVH PDMRU OLIH DFWLYLWLHV  7KH UHJXODWLRQV           GLVDELOLW\WKH\DFFRPPRGDWHGPDOHVZLWKVLPLODUUHVWULFWLRQV
SURYLGHWKDWVXEVWDQWLDOO\OLPLWVPHDQVmL8QDEOHWRSHUIRUP                  7KH GLVWULFW FRXUWjV DQDO\VLV HVVHQWLDOO\ SUHFOXGHG +RVNLQV
D PDMRU OLIH DFWLYLW\ WKDW WKH DYHUDJH SHUVRQ LQ WKH JHQHUDO          IURP EHLQJ DEOH WR FKDOOHQJH WKH SROLF\ VKH DOOHJHV WR EH
SRSXODWLRQFDQSHUIRUPRULL6LJQLILFDQWO\UHVWULFWHGDVWR                  GLVFULPLQDWRU\:HDGGUHVVHGDVLPLODUVLWXDWLRQLQWKHUHFHQW
                                                                                FDVHRI&OLQHY&DWKROLF'LRFHVHRI7ROHGR)G
                                                                                WK &LU  DQG ZH LQVWUXFWHG WKDW mZKHQ DVVHVVLQJ
     
      $V WKH 6XSUHPH &RXUW H[SODLQHG LQ 6XWWRQ Y 8QLWHG $LU /LQHV ,QF       ZKHWKHU D SODLQWLII KDV PHW KHU HPSOR\HUjV OHJLWLPDWH
 86   DOWKRXJK QR DJHQF\ KDV EHHQ GHOHJDWHG DXWKRULW\ WR         H[SHFWDWLRQVDWWKHSULPDIDFLHVWDJHRIDWHUPLQDWLRQFDVHD
LVVXH UHJXODWLRQV LPSOHPHQWLQJ WKH JHQHUDOO\ DSSOLFDEOH SURYLVLRQV RI WKH       FRXUWPXVWH[DPLQHSODLQWLIIjVHYLGHQFHLQGHSHQGHQWRIWKH
$'$ n LQFOXGLQJ WKH WHUP mGLVDELOLW\l n WKH ((2& KDV QRQHWKHOHVV
LVVXHG UHJXODWLRQV SURYLGLQJ JXLGDQFH UHJDUGLQJ WKH SURSHU LQWHUSUHWDWLRQ
                                                                                QRQGLVFULPLQDWRU\ UHDVRQ µSURGXFHGj E\ WKH GHIHQVH DV LWV
RI WKDW WHUP   6HH LG DW    %HFDXVH QHLWKHU SDUW\ WR WKH LQVWDQW DSSHDO
                                                                                UHDVRQ IRU WHUPLQDWLQJ SODLQWLIIl  ,G DW   %HFDXVH
KDV FKDOOHQJHG WKH YDOLGLW\ RI WKHVH ((2& UHJXODWLRQV ZH DVVXPH WKHLU          +RVNLQVjVLQDELOLW\WRUHVWUDLQLQPDWHVLVWKHUHDVRQSURIIHUHG
YDOLGLW\   6HH LG DW 
    +RVNLQVY2DNODQG&RXQW\HWDO              1R       1R            +RVNLQVY2DNODQG&RXQW\HWDO          

KHUSURSRVHGDFFRPPRGDWLRQLVDUHDVRQDEOHRQH&I+LOOY           WKHFRQGLWLRQPDQQHURUGXUDWLRQXQGHUZKLFKDQLQGLYLGXDO
+DUSHU)6XSSG('9DKROGLQJWKDW           FDQSHUIRUPDSDUWLFXODUPDMRUOLIHDFWLYLW\DVFRPSDUHGWRWKH
IRUPHUGHSXW\VKHULIIjVSURSRVHGDFFRPPRGDWLRQWKDWKHEH              FRQGLWLRQ PDQQHU RU GXUDWLRQ XQGHU ZKLFK WKH DYHUDJH
SODFHG LQ WKH FRQWURO URRP RQ D SHUPDQHQW EDVLV ZDV           SHUVRQLQWKHJHQHUDOSRSXODWLRQFDQSHUIRUPWKDWVDPHPDMRU
XQUHDVRQDEOH mEHFDXVH WKLV DFFRPPRGDWLRQ HIIHFWLYHO\              OLIH DFWLYLW\l   &)5  M  7KH UHJXODWLRQV
HOLPLQDWHG WKH µHVVHQWLDO IXQFWLRQj RI EHLQJ DEOH WR URWDWH    IXUWKHU SURYLGH D OLVW RI IDFWRUV WR EH FRQVLGHUHG LQ
WKURXJKWKHYDULRXVGXW\SRVWVl0F'RQDOGY.DQVDV'HSjW             GHWHUPLQLQJ ZKHWKHU DQ LQGLYLGXDO PHHWV WKLV GHILQLWLRQ
RI&RUUHFWLRQV)6XSS'.DQ              mL 7KH QDWXUH DQG VHYHULW\ RI WKH LPSDLUPHQW LL 7KH
ILQGLQJ WKDW D VWDWH SULVRQ ZDV QRW REOLJDWHG WR DOORZ DQ   GXUDWLRQRUH[SHFWHGGXUDWLRQRIWKHLPSDLUPHQWDQGLLL7KH
REHVHFRUUHFWLRQDORIILFHUZLWKDKHDUWFRQGLWLRQWRZRUNDW           SHUPDQHQWRUORQJWHUPLPSDFWRUWKHH[SHFWHGSHUPDQHQWRU
RQO\FHUWDLQRIWKHSRVWVZLWKLQWKHSULVRQDVVXFKDUHTXHVWHG       ORQJWHUPLPSDFWRIRUUHVXOWLQJIURPWKHLPSDLUPHQWl
DFFRPPRGDWLRQZDVXQUHDVRQDEOH                                       &)5M
   7KHUHIRUHEHFDXVH+RVNLQVKDVIDLOHGWRFUHDWHDJHQXLQH             7KH GLVWULFW FRXUW UHOLHG RQ +RVNLQVjV RZQ WHVWLPRQ\ WR
LVVXHRIPDWHULDOIDFWDVWRZKHWKHUUHVWUDLQLQJLQPDWHVLVDQ         FRQFOXGHWKDWKHULPSDLUPHQWGRHVQRWVXEVWDQWLDOO\OLPLWDQ\
HVVHQWLDO IXQFWLRQ RU DV WR ZKHWKHU VKH FRXOG SHUIRUP WKH     PDMRUOLIHDFWLYLWLHV+RVNLQVWHVWLILHGm,KDYHWREHFDUHIXO
HVVHQWLDOIXQFWLRQVRIWKHGHSXW\RQHSRVLWLRQZLWKUHDVRQDEOH         WKHZD\,PRYHDWWLPHV,WKXUWVWRFRXJKVQHH]HLI,EUHDWKH
DFFRPPRGDWLRQ ZH DIILUP WKH GLVWULFW FRXUWjV JUDQW RI          WKHZURQJZD\%XW,OHDUQHGMXVWWRNLQGRILJQRUHLWRUn,
VXPPDU\MXGJPHQWWRWKHGHIHQGDQWV                                    MXVWEHFDUHIXOZLWKWKHZD\,GRWKLQJVls$DW+RVNLQV
                                                                       'HS+RVNLQVDOVRWHVWLILHGWKDWLQKHUGDLO\DFWLYLWLHVVXFK
%7LWOH9,,&ODLP                                                    DVGRLQJODXQGU\VKHVRPHWLPHVIHHOVSDLQWKDWFDXVHVKHUWR
                                                                       VWRSGRLQJWKDWDFWLYLW\+RZHYHU+RVNLQVLQGLFDWHGWKDWVKH
   +RVNLQVDOVRDVVHUWVDJHQGHUGLVFULPLQDWLRQFODLPEDVHGRQ         GRHVQRWOHWKHULPSDLUPHQWVVWRSKHUIURPGRLQJDQ\WKLQJDQG
WKHVH VDPH IDFWV  6KH DOOHJHV WKDW WKH GHIHQGDQWV             WKDWVKHmDWWHPSW>V@WRGRHYHU\WKLQJls$DW+RVNLQV
DFFRPPRGDWHG VHYHUDO VLPLODUO\ VLWXDWHG PDOH GHSXWLHV E\         'HS7KHGLVWULFWFRXUWTXRWHGWKHIROORZLQJSDVVDJHIURP
DOORZLQJ WKHP WR ZRUN OLJKWGXW\ MREV ZKHQ GLVDEOHG E\         +RVNLQVjVWHVWLPRQ\ILQGLQJLWmHVSHFLDOO\VLJQLILFDQWl
LQMXU\
                                                                         4 :RXOGLWEHDIDLUVWDWHPHQWWKDW\RXKDYHOHDUQHG
   ,Q 0F'RQQHOO 'RXJODV &RUS Y *UHHQ  86                 VRPHEHKDYLRUWKDWDOORZV\RXWRDYRLGGLVFRPIRUW
 WKH 6XSUHPH &RXUW VHW IRUWK WKH IUDPHZRUN IRU               >LQWKHFKHVWDUHD@E\DYRLGLQJFHUWDLQDFWLYLWLHV"
DQDO\]LQJFDVHVDOOHJLQJZRUNSODFHGLVFULPLQDWLRQEDVHGRQ
LQGLUHFW HYLGHQFH  8QGHU WKH 0F'RQQHOO 'RXJODV EXUGHQ           $ 1RQRWDYRLGLQJFHUWDLQDFWLYLWLHV
VKLIWLQJ IUDPHZRUN WKH SODLQWLII EHDUV WKH EXUGHQ RI
HVWDEOLVKLQJ E\ D SUHSRQGHUDQFH RI WKH HYLGHQFH D SULPD        4 sXVWWKHZD\\RXGRWKHP"
IDFLH FDVH E\ GHPRQVWUDWLQJ  m PHPEHUVKLS LQ WKH
SURWHFWHG FODVV  WKDW VKH VXIIHUHG DQ DGYHUVH DFWLRQ        $ <HV$OLWWOHELWPRUHFDUHIXO
WKDWVKHZDVTXDOLILHGIRUWKHSRVLWLRQDQGWKDWVKH
ZDVUHSODFHGE\VRPHRQHRXWVLGHWKHSURWHFWHGFODVVRUZDV             s$DW'&W2S
WUHDWHG GLIIHUHQWO\ IURP VLPLODUO\ VLWXDWHG PHPEHUV RI WKH
XQSURWHFWHGFODVVl:DUILHOGY/HEDQRQ&RUUHFWLRQDO,QVW             :HEHOLHYHWKDWWKHGLVWULFWFRXUWHPSOR\HGDQH[FHHGLQJO\
 )G   WK &LU   ,I WKH SODLQWLII      QDUURZLQWHUSUHWDWLRQRImVXEVWDQWLDOO\OLPLWVl2IFRXUVHLQ
       +RVNLQVY2DNODQG&RXQW\HWDO                 1R        1R              +RVNLQVY2DNODQG&RXQW\HWDO                     

GHWHUPLQLQJZKHWKHUDGLVDELOLW\VXEVWDQWLDOO\OLPLWVDPDMRU                WHPSRUDULO\UHVWULFWHGIURPSHUIRUPLQJWKHLUXVXDOSRVLWLRQV
OLIHDFWLYLW\WKH6XSUHPH&RXUWKDVLQVWUXFWHGWKDWFRXUWVDUH              +RZHYHU RQFH DQ LQMXUHG HPSOR\HHjV UHVWULFWLRQV EHFDPH
WR FRQVLGHU QDWXUDO DGRSWLYH PHDVXUHV WKDW PLWLJDWH WKH               SHUPDQHQW WKH HPSOR\HH FRXOG QRW UHPDLQ LQ WKH LQWHULP
GLVDELOLW\6HH$OEHUWVRQjV,QFY.LUNLQJEXUJ86             OLJKWGXW\MREEXWZDVUHTXLUHGHLWKHUWRWUDQVIHUWRDQRWKHU
+RZHYHUXQGHUWKHUHDVRQLQJRIWKHGLVWULFW                 SRVLWLRQZKHUHKHFRXOGSHUIRUPWKHUHTXLUHGGXWLHVRUWRJR
FRXUWDQLQGLYLGXDOZRXOGEHGLVDEOHGZLWKLQWKHPHDQLQJRI                 RQmPHGLFDOOD\RIIl,GDW7KHSODLQWLIIVFKDOOHQJHGWKLV
WKH$'$RQO\LIVKHFDQVKRZWKDWVKHKDVDYRLGHGFHUWDLQ                    SROLF\DUJXLQJWKDW([FHOVKRXOGQRWUHPRYHWKHSHUPDQHQWO\
PDMRUOLIHDFWLYLWLHVDVDUHVXOWRIKHULPSDLUPHQW7KLVLVQRW            UHVWULFWHG HPSOR\HHV IURP WKH OLJKWGXW\ MREV WKDW ZHUH
WKHODZDVWKHDSSOLFDEOHUHJXODWLRQVLQVWUXFWDQLQGLYLGXDO               GHVLJQDWHGE\([FHODVWHPSRUDU\UHKDELOLWDWLRQSHULRGMREV
LVVXEVWDQWLDOO\OLPLWHGLIVKHLVDEOHWRSHUIRUPDPDMRUOLIH              7KH 6HYHQWK &LUFXLW ILUVW QRWHG WKDW LW KDG DSSURYHG RI DQ
DFWLYLW\EXWLVm>V@LJQLILFDQWO\UHVWULFWHGDVWRWKHFRQGLWLRQ             HPSOR\HUjV RIIHU RI OLJKWGXW\ DVVLJQPHQWV DV D UHDVRQDEOH
PDQQHU RU GXUDWLRQl XQGHU ZKLFK VKH FDQ SHUIRUP WKDW                 DFFRPPRGDWLRQ IRU LQMXUHG ZRUNHUV  6HH LG DW 
DFWLYLW\   &)5  MLL  :H FRQFOXGH WKDW          +RZHYHUUHO\LQJRQLWVSULRUGHFLVLRQLQ'DOWRQY6XEDUX
+RVNLQVKDVUDLVHGDJHQXLQHLVVXHRIPDWHULDOIDFWUHJDUGLQJ                ,VX]X $XWRPRWLYH ,QF  )G  WK &LU  WKH
ZKHWKHU KHU LPSDLUPHQW VXEVWDQWLDOO\ OLPLWV WKH PDMRU OLIH            FRXUW KHOG WKDW WKH $'$ GRHV QRW FRPSHO DQ HPSOR\HU WR
DFWLYLWLHVRIEUHDWKLQJPRYLQJDQGSHUIRUPLQJPDQXDOWDVNV                 FRQYHUWWHPSRUDU\SRVLWLRQVLWKDVVHWDVLGHLQWRSHUPDQHQW
VXFKDVGRLQJODXQGU\$FFRUGLQJWR+RVNLQVjVWHVWLPRQ\                   SRVLWLRQVIRULWVGLVDEOHGHPSOR\HHV$VWKH'DOWRQFRXUWKDG
ERWKWKHPDQQHUDQGGXUDWLRQXQGHUZKLFKVKHFDQSHUIRUP                     H[SODLQHG m>W@R KROG RWKHUZLVH ZRXOG EH WR UHTXLUH >WKH
WKHVH PDMRU OLIH DFWLYLWLHV DUH VLJQLILFDQWO\ UHVWULFWHG  6KH       HPSOR\HU@WRFUHDWHQHZIXOOWLPHSRVLWLRQVWRDFFRPPRGDWH
WHVWLILHGWKDWDIWHUKHUDFFLGHQWVKHPXVWQRZEHFDUHIXODERXW             LWVGLVDEOHGHPSOR\HHVDFRXUVHRIDFWLRQQRWUHTXLUHGXQGHU
WKH ZD\ WKDW VKH PRYHV  $OWKRXJK VKH mDWWHPSW>V@ WR GR            WKH$'$l,GDW
HYHU\WKLQJlVKHPXVWVRPHWLPHVFHDVHIRUDWLPHSHUIRUPLQJ
GDLO\ DFWLYLWLHV EHFDXVH RI WKH SDLQ  s$ DW  +RVNLQV           $OWKRXJKWKHVH6HYHQWK&LUFXLWFDVHVDUHQRWGLUHFWO\RQ
'HS  7KH GXUDWLRQ RI +RVNLQVjV LPSDLUPHQW LV OLNHO\               SRLQW DV WKH\ LQYROYHG WHPSRUDU\ OLJKWGXW\ SRVLWLRQV    IRU
SHUPDQHQW,QVXSSRUWRIWKHLUSRVLWLRQWKHGHIHQGDQWVFLWH                UHFXSHUDWLQJ HPSOR\HHV UDWKHU WKDQ D UHOLHI SRVLWLRQ ZH
.RFVLVY0XOWL&DUH0DQDJHPHQW,QF)GWK&LU                 QHYHUWKHOHVV ILQG WKHP LQVWUXFWLYH  /LNH WKH SODLQWLIIV LQ
DFDVHLQZKLFKWKLVFRXUWFRQFOXGHGEDVHGXSRQWKH                  +HQGULFNV5RELQVRQDQG'DOWRQ+RVNLQVVXJJHVWVWKDWVKHEH
SODLQWLIIjVRZQDGPLVVLRQVWKDWKHUPXOWLSOHVFOHURVLVGLGQRW              DVVLJQHG WR D URWDWLQJW\SH MRE RQ D SHUPDQHQW EDVLV  :H
VXEVWDQWLDOO\OLPLWDQ\RIKHUPDMRUOLIHDFWLYLWLHV+RZHYHU              DJUHH WKDW +RVNLQVjV UHTXHVW ZRXOG HVVHQWLDOO\ UHTXLUH WKH
ZHILQG.RFVLVLQDSSRVLWHEHFDXVHLQWKDWFDVHXQOLNHLQWKH                FUHDWLRQ RI D QHZ SRVLWLRQ UDWKHU WKDQ UHDVVLJQPHQW WR DQ
LQVWDQWFDVHWKHSODLQWLIImWHVWLILHGLQKHUGHSRVLWLRQWKDWQRQH           RWKHUZLVHH[LVWLQJYDFDQWRQH$VZHKDYHPDGHFOHDUDQ
RIKHULPSDLUPHQWVnDUWKULWLV06RUDQ\FRPELQDWLRQRI                    HPSOR\HUjVGXW\WRUHDVVLJQDQRWKHUZLVHTXDOLILHGGLVDEOHG
KHDOWKSUREOHPVnOLPLWHGKHUDFWLYLW\LQDQ\ZD\l,GDW                  HPSOR\HHGRHVQRWUHTXLUHWKDWWKHHPSOR\HUFUHDWHDQHZMRE
HPSKDVLVDGGHG                                                        LQRUGHUWRGRVR6HH&DVVLG\)GDW:HWKHUHIRUH
                                                                             FRQFOXGHWKDW+RVNLQVKDVQRWPHWKHUEXUGHQRIVKRZLQJWKDW
    
     %HFDXVH RI WKLV FRQFOXVLRQ ZH QHHG QRW DGGUHVV ZKHWKHU +RVNLQV
                                                                                 
LV DOVR VXEVWDQWLDOO\ OLPLWHG LQ WKH PDMRU OLIH DFWLYLW\ RI ZRUNLQJ   6HH        7KH +HQGULFNV5RELQVRQ FRXUW H[SODLQHG WKDW mLW ZRXOG IUXVWUDWH WKH
6XWWRQ  86 DW  FLWLQJ  &)5 SW  $SS  M IRU     $'$ IRU SHUPDQHQWO\ LPSDLUHG HPSOR\HHV WR ILOO WHPSRUDU\ OLJKWGXW\
WKH SURSRVLWLRQ WKDW ZRUNLQJ VKRXOG EH FRQVLGHUHG RQO\ LI DQ LQGLYLGXDO LV   DVVLJQPHQWV   ZKHQ   WKRVH   MREV   KDYH   EHHQ   VHW   DVLGH   VSHFLILFDOO\   IRU
QRW VXEVWDQWLDOO\ OLPLWHG ZLWK UHVSHFW WR DQ\ RWKHU PDMRU OLIH DFWLYLW\    UHFXSHUDWLQJ HPSOR\HHVl     +HQGULFNV5RELQVRQ         )G DW 
    +RVNLQVY2DNODQG&RXQW\HWDO                 1R       1R            +RVNLQVY2DNODQG&RXQW\HWDO          

VXEVWDWLRQSRVLWLRQZDVQRWDYDLODEOHZKHQ2&6'OHDUQHGRI                       :KHWKHU+RVNLQVLVm2WKHUZLVH4XDOLILHGlIRUWKH
+RVNLQVjVGLVDEOLQJLQMXU\QRUZDVLWVDYDLODELOLW\DQWLFLSDWHG                    3RVLWLRQRI'HSXW\2QH
LQ WKH QHDU IXWXUH ZH FRQFOXGH WKDW DVVLJQPHQW WR WKDW
SRVLWLRQZDVQRWDUHDVRQDEOHDFFRPPRGDWLRQ                                     D(VVHQWLDO)XQFWLRQ
   +RVNLQVjVVWURQJHVWDUJXPHQWLVWKDWWKHGHIHQGDQWVVKRXOG                +RVNLQVFRQWHQGVWKDWSK\VLFDOUHVWUDLQWRILQPDWHVLVQRWDQ
KDYHUHDVVLJQHGKHUSHUPDQHQWO\WRDSRVLWLRQLQRQHRIWKH               HVVHQWLDO IXQFWLRQ RI WKH GHSXW\ RQH SRVLWLRQ  ,I SK\VLFDO
FRQWURO ERRWKV ZLWKLQ WKH MDLO IDFLOLW\  7KH FRQWURO ERRWK      UHVWUDLQW RI LQPDWHV LV QRW DQ HVVHQWLDO MRE IXQFWLRQ WKHQ
RSHUDWRUVZKRVLWLQDORFNHGERRWKDUHSULPDULO\UHVSRQVLEOH           +RVNLQVPHHWVWKHGHILQLWLRQRIDTXDOLILHGLQGLYLGXDOZLWKD
IRURSHUDWLQJWKHFRQWUROSDQHOVRDVWRSHUPLWRIILFHUVWRHQWHU         GLVDELOLW\EHFDXVHWKHSDUWLHVDJUHHWKDWVKHLVIXOO\DEOHWR
DQGOHDYHFHOOEORFNV0DMRU4XLVHQEHUU\H[SODLQHGWKDWWKH              SHUIRUPDOOIXQFWLRQVRIWKHGHSXW\RQHSRVLWLRQVDYHWKLVRQH
FRQWUROERRWKSRVLWLRQVDUHDVVLJQHGRQDURWDWLQJEDVLVWRWKH           %HFDXVH+RVNLQVFKDOOHQJHGWKLVMREFULWHULRQDVXQHVVHQWLDO
GHSXWLHV  +H VWDWHG  m7KH QRUPDO DVVLJQPHQW LV WR DOORZ       WKHGLVWULFWFRXUWSURSHUO\SODFHGWKHEXUGHQRQWKHGHIHQGDQWV
>GHSXWLHV@WRZRUNWKH>FHOO@EORFNVDQGWKHQDIWHUDGD\RID            WRGHPRQVWUDWHWKDWWKLVFULWHULRQLVLQIDFWDIXQGDPHQWDOMRE
EORFNRUDSDUWLFXODU>O\@KDUGEORFNWKDW\RXJLYHDGHSXW\D            GXW\
FKDQFHWRKDYHDEUHDNVRPHZKDW7KHERRWKLVFRQVLGHUHG
SUREDEO\ DQ HDVLHU MRE LQ WKH PDLQ MDLO  6R LQ IDLUQHVV WR      m7KHWHUPHVVHQWLDOIXQFWLRQVPHDQVWKHIXQGDPHQWDOMRE
HYHU\ERG\LWKDVWUDGLWLRQDOO\EHHQWKDWWKDW>VLF@ERRWKMRE            GXWLHV RI WKH HPSOR\PHQW SRVLWLRQ WKH LQGLYLGXDO ZLWK D
ZRXOGEHURWDWHGDURXQGVRWKDWHYHU\ERG\KDGDFKDQFHWR                 GLVDELOLW\ KROGV RU GHVLUHVl EXW LW GRHV QRW LQFOXGH RQO\
KDYH WKHLU EUHDNl  s$ DW  4XLVHQEHUU\ 'HS  7KH        PDUJLQDOIXQFWLRQV&)5Q,QGHWHUPLQLQJ
GHIHQGDQWV GR QRW GLVSXWH WKDW WKH FRQWURO ERRWK SRVLWLRQ         ZKHWKHU D SDUWLFXODU IXQFWLRQ LV HVVHQWLDO WKH UHJXODWLRQV
LQYROYHVQRLQPDWHFRQWDFWDQGWKDW+RVNLQVZRXOGWKHUHIRUH               LQVWUXFWFRXUWVWRFRQVLGHUWKHIROORZLQJOLVWRIIDFWRUVZKLFK
EHTXDOLILHGIRULWLQVWHDGWKH\DUJXHWKDWDVVLJQLQJ+RVNLQV           LVLOOXVWUDWLYHUDWKHUWKDQH[KDXVWLYH
WR WKLV WHPSRUDU\ SRVLWLRQ RQ D SHUPDQHQW EDVLV LV QRW D
UHDVRQDEOHDFFRPPRGDWLRQ:HKDYHQRWEHIRUHKDGRFFDVLRQ                  L 7KHHPSOR\HUjVMXGJPHQWDVWRZKLFKIXQFWLRQVDUH
WRDGGUHVVWKHLVVXHRIZKHWKHUDUHDVRQDEOHDFFRPPRGDWLRQ                  HVVHQWLDO
ZRXOG LQFOXGH WXUQLQJ D URWDWLQJ RU UHOLHI SRVLWLRQ LQWR D         LL :ULWWHQMREGHVFULSWLRQVSUHSDUHGEHIRUHDGYHUWLVLQJ
SHUPDQHQWSRVLWLRQ2QWKHIDFWVRIWKLVFDVHZHFRQFOXGH                 RULQWHUYLHZLQJDSSOLFDQWVIRUWKHMRE
WKDWVXFKDQDFFRPPRGDWLRQLVQRWDUHDVRQDEOHRQH                         LLL 7KHDPRXQWRIWLPHVSHQWRQWKHMRESHUIRUPLQJWKH
                                                                            IXQFWLRQ
  ,QVXSSRUWRIWKHLUSRVLWLRQWKDWWKH$'$LPSRVHVQRGXW\                 LY 7KHFRQVHTXHQFHVRIQRWUHTXLULQJWKHLQFXPEHQWWR
RQDQHPSOR\HUWRFRQYHUWDWHPSRUDU\UHOLHISRVLWLRQLQWRD                SHUIRUPWKHIXQFWLRQ
QHZIXOOWLPHSRVLWLRQWKHGHIHQGDQWVFLWHWKH6HYHQWK&LUFXLW             Y 7KHWHUPVRIDFROOHFWLYHEDUJDLQLQJDJUHHPHQW
FDVHRI+HQGULFNV5RELQVRQY([FHO&RUS)GWK                YL 7KHZRUNH[SHULHQFHRISDVWLQFXPEHQWVLQWKHMRE
&LU,Q+HQGULFNV5RELQVRQIRUPHUHPSOR\HHVRIDQ                  DQGRU
([FHOPHDWSDFNLQJSODQWEURXJKWDFODVVDFWLRQDOOHJLQJWKDW                YLL 7KH FXUUHQW ZRUN H[SHULHQFH RI LQFXPEHQWV LQ
([FHOjVPHGLFDOOD\RIISROLF\YLRODWHGWKH$'$EHFDXVHLW                   VLPLODUMREV
IDLOHG WR SURYLGH UHDVRQDEOH DFFRPPRGDWLRQ WR LWV
SHUPDQHQWO\GLVDEOHGHPSOR\HHV([FHOVHWDVLGHDQXPEHURI              &)5Q7KHLQTXLU\LQWRZKHWKHUDIXQFWLRQ
WKHOHDVWSK\VLFDOO\GHPDQGLQJMREVIRUHPSOR\HHVZKRZHUH                LVHVVHQWLDOLVKLJKO\IDFWVSHFLILF6HH%ULFNHUVY&OHYHODQG
                                                                          %G RI (GXF  )G   WK &LU  +DOO Y
    +RVNLQVY2DNODQG&RXQW\HWDO              1R       1R            +RVNLQVY2DNODQG&RXQW\HWDO        

8QLWHG 6WDWHV 3RVWDO 6HUY  )G   WK &LU     FLUFXPVWDQFHV FRXOG SURPRWH HPSOR\HH OR\DOW\ DQG
 m6XFK D GHWHUPLQDWLRQ VKRXOG EH EDVHG XSRQ PRUH         WHDPZRUN  +RZHYHU HPSOR\HUV DUH QRW UHTXLUHG WR GR VR
WKDQ VWDWHPHQWV LQ D MRE GHVFULSWLRQ DQG VKRXOG UHIOHFW WKH   XQGHU WKH $'$l VHH DOVR  &)5 SW  $SS
DFWXDO IXQFWLRQLQJ DQG FLUFXPVWDQFHV RI WKH SDUWLFXODU            R m$Q HPSOR\HU RU RWKHU FRYHUHG HQWLW\ LV QRW
HQWHUSULVHLQYROYHGl                                                UHTXLUHGWRUHDOORFDWHHVVHQWLDOIXQFWLRQVl
  ,Q VXSSRUW RI WKHLU SRVLWLRQ WKDW SK\VLFDOO\ UHVWUDLQLQJ         +RVNLQV QH[W DUJXHV WKDW WKH GHIHQGDQWV IDLOHG WR
LQPDWHVLVDIXQGDPHQWDOGXW\RIDGHSXW\RQHWKHGHIHQGDQWV          DFFRPPRGDWHKHUE\UHDVVLJQLQJKHUWRDGLIIHUHQWSRVLWLRQ
VXEPLWWHGDZULWWHQMREGHVFULSWLRQDVZHOODVWKHWHVWLPRQ\RI        +RVNLQVLGHQWLILHVVHYHUDOSRVLWLRQVWKDWDUHHTXLYDOHQWWRKHU
0DMRU 4XLVHQEHUU\  7KH JHQHUDO VXPPDU\ RI WKH MRE RI         ROGSRVLWLRQEXWWKDWGRQRWUHTXLUHWKHUHVWUDLQWRILQPDWHV
GHSXW\RQHUHDGVLQSHUWLQHQWSDUWDVIROORZV                       7KHILUVWSRVLWLRQLGHQWLILHGE\+RVNLQVLVWKHLQWDNHSRVLWLRQ
                                                                       DWWKHQHZFRPPHUFHVXEVWDWLRQZKLFKUHTXLUHVDQVZHULQJ
  8QGHU JHQHUDO VXSHUYLVLRQ DQG DV D 'HSXW\ 6KHULII             SKRQHVDQGWDNLQJZDONLQUHSRUWVIURPWKHJHQHUDOSXEOLF,W
  DSSRLQWHG E\ WKH 2DNODQG &RXQW\ 6KHULII SHUIRUPV              LVZHOOHVWDEOLVKHGKRZHYHUWKDWDQHPSOR\HULVQRWREOLJDWHG
  GXWLHVZLWKLQWKHFRUUHFWLRQVRURQRFFDVLRQURDGSDWURO             WRFUHDWHDSRVLWLRQQRWWKHQLQH[LVWHQFH6HHHJ&DVVLG\
  DUHDV$VD'HSXW\,LQWKHFRUUHFWLRQVDUHDSHUIRUPV              Y'HWURLW(GLVRQ&R)GWK&LU7KH
  URXWLQH VHFXULW\ DQG FXVWRG\ DFWLYLWLHV  $VVLVWV LQ          FRPPHUFHVXEVWDWLRQSRVLWLRQGLGQRWH[LVWGXULQJWKHWLPHLQ
  PDLQWDLQLQJDQGHQIRUFLQJSURFHGXUHVDQGUHJXODWLRQVWR              ZKLFKWKHGHIHQGDQWVDWWHPSWHGWRILQGDVXLWDEOHDVVLJQPHQW
  HQVXUH VHFXULW\ LV PDLQWDLQHG DW WKH MDLO DQG VDWHOOLWH      IRU +RVNLQVIDOORIRUDWWKHWLPHVKHZDVILUHGRQ
  IDFLOLWLHV  'LVWULEXWHV PHDOV EHGGLQJ DQG VXSSOLHV WR       1RYHPEHU    ,QGHHG +RVNLQV ZDV GHSRVHG RQ
  LQPDWHV  6FUHHQV YLVLWRUV LVVXHV SDVVHV DQG HQVXUHV         'HFHPEHU   DQG DW WKDW WLPH VKH VWDWHG WKDW WKH
  YLVLWDWLRQUHJXODWLRQVDUHPDLQWDLQHG7UDQVSRUWVLQPDWHV           FRPPHUFHVXEVWDWLRQSRVLWLRQKDGMXVWEHHQFUHDWHGDQGZDV
  WRDXWKRUL]HGIDFLOLWLHVHQVXULQJWKDWVHFXULW\SURFHGXUHV          WRVWDUWRQsDQXDU\$OWKRXJKDQHPSOR\HUPD\EH
  DUH IROORZHG  3K\VLFDOO\ UHVWUDLQV LQGLYLGXDOV DV             UHTXLUHG WR UHDVVLJQ DQ LQGLYLGXDO WR D SRVLWLRQ WKDW LV
  QHFHVVDU\  0D\ DW WLPHV SHUIRUP FHUWDLQ 'HSXW\ ,,         FXUUHQWO\XQDYDLODEOHEXWWKDWZLOOEHFRPHYDFDQWZLWKLQ D
  IXQFWLRQVLQOLPLWHGLQVWDQFHV                                      UHDVRQDEOH DPRXQW RI WLPH LQ WKH LQVWDQW FDVH WKH QHZ
                                                                       SRVLWLRQ ZDV FUHDWHG ZHOO RYHU D \HDU DIWHU 2&6' EHFDPH
s$ DW   7KH ZULWWHQ GHVFULSWLRQ OLVWV DV DPRQJ WKH    DZDUHRI+RVNLQVjVGLVDELOLW\6HH&)5SW$SS
W\SLFDOGXWLHVIRUDGHSXW\RQHZLWKLQWKHFRUUHFWLRQVDUHD            R m$V DQ H[DPSOH VXSSRVH WKHUH LV QR YDFDQW
GULYLQJWKHWUDQVSRUWDWLRQYHKLFOHDQGVXSHUYLVLQJWKHFRQGXFW         SRVLWLRQ DYDLODEOH DW WKH WLPH WKDW DQ LQGLYLGXDO ZLWK D
RI LQPDWHV GXULQJ WUDQVSRUWDWLRQ WR DXWKRUL]HG IDFLOLWLHV       GLVDELOLW\ UHTXHVWV UHDVVLJQPHQW DV D UHDVRQDEOH
VXSHUYLVLQJLQPDWHVEHLQJKHOGDWWKHFRXUWKRXVHDQGDZDLWLQJ          DFFRPPRGDWLRQ  7KH HPSOR\HU KRZHYHU NQRZV WKDW DQ
FRXUW DSSHDUDQFHV JXDUGLQJ LQPDWHV GXULQJ FRXUWURRP              HTXLYDOHQWSRVLWLRQIRUZKLFKWKHLQGLYLGXDOLVTXDOLILHGZLOO
DSSHDUDQFHVWRHQVXUHWKDWVHFXULW\LVPDLQWDLQHGVXSHUYLVLQJ         EHFRPHYDFDQWQH[WZHHN8QGHUWKHVHFLUFXPVWDQFHVWKH
WKH DFWLYLWLHV RI LQPDWHV DVVLJQHG WR DOO MDLO IDFLOLWLHV     HPSOR\HUVKRXOGUHDVVLJQWKHLQGLYLGXDOWRWKHSRVLWLRQZKHQ
VHDUFKLQJLQPDWHVDQGHQVXULQJWKDWVHFXULW\LVPDLQWDLQHGDW         LW EHFRPHV DYDLODEOHl 0RQHWWH  )G DW  m,I
MDLOIDFLOLWLHVs$DW7KHGHIHQGDQWVDOVRSUHVHQWHG       SHUKDSV DQ HPSOR\HU NQRZV WKDW D SRVLWLRQ IRU ZKLFK WKH
WKH WHVWLPRQ\ RI 0DMRU 4XLVHQEHUU\ WKH &KLHI RI 6WDII DW     GLVDEOHGDSSOLFDQWLVTXDOLILHGZLOOEHFRPHYDFDQWLQDVKRUW
2&6' ZKR VWDWHG WKDW KH EHOLHYHG SK\VLFDO UHVWUDLQW RI        SHULRG RI WLPH WKH HPSOR\HU PD\ EH UHTXLUHG WR RIIHU WKH
                                                                       SRVLWLRQ WR WKH HPSOR\HHl  %HFDXVH WKH FRPPHUFH
     +RVNLQVY2DNODQG&RXQW\HWDO                  1R        1R             +RVNLQVY2DNODQG&RXQW\HWDO           

m:KHQWKHHPSOR\HHVHHNVDUHDVRQDEOHDFFRPPRGDWLRQVKH                     LQPDWHVWREHDIXQGDPHQWDOSDUWRIWKHMRERIGHSXW\RQH
PXVWHVWDEOLVKWKDWDµUHDVRQDEOHjDFFRPPRGDWLRQLVSRVVLEOH                0DMRU4XLVHQEHUU\H[SODLQHG
DQGEHDUVDWUDGLWLRQDOEXUGHQRISURRIWKDWVKHLVTXDOLILHGIRU
WKH SRVLWLRQ ZLWK VXFK UHDVRQDEOH DFFRPPRGDWLRQ  ,I WKH               7KH GHSXW\ RQH LV WKH GHSXW\ WKDWjV WKH HQWU\ OHYHO
SODLQWLII HVWDEOLVKHV WKDW D UHDVRQDEOH DFFRPPRGDWLRQ LV                 SRVLWLRQ DQG LWjV WKH RQH SHUVRQ ZKR KDV WKH FORVHVW
SRVVLEOHWKHHPSOR\HUEHDUVWKHEXUGHQRISURYLQJWKDWVXFK                   LQGLYLGXDO FRQWDFW ZLWK SULVRQHUV RU LQPDWHV LQ WKH
UHDVRQDEOH DFFRPPRGDWLRQ ZRXOG LPSRVH DQ XQGXH                            2DNODQG&RXQW\sDLO7KH\jUHWKHILUVWOLQHRIGHIHQVH,
KDUGVKLSl0RQHWWH)GDWQ                                     VXSSRVHZLWKWKHSULVRQHUZKHWKHULWEHIURPWKHWLPH
                                                                               WKH\JHWXSLQWKHPRUQLQJZLWKWKHLUIHHGLQJVXQWLOWKH\
  +RVNLQVILUVWFRQWHQGVWKDWVKHFDQSHUIRUPWKHIXQFWLRQRI                  JRWREHGDWQLJKW,WjVJHQHUDOO\WKHGHSXW\RQHVZKR
UHVWUDLQLQJ LQPDWHV ZLWK WKH DVVLVWDQFH RI RWKHUV  6KH                KDYH WKH GD\WRGD\ FRQWDFW ZLWK SULVRQHUV  $QG WKH
H[SODLQV WKDW LW LV 2&6'jV SROLF\ WKDW GHSXWLHV FDOO IRU              RSSRUWXQLW\DQGDWWLPHVWKHQHFHVVLW\WKDWWKH\KDYHWR
DVVLVWDQFH ZKHQ DWWHPSWLQJ WR UHVWUDLQ DQ LQPDWH DQG VKH              KDYH SK\VLFDO FRQWDFW ZLWK WKRVH LQPDWHV , WKLQN IDOOV
UHDVRQVWKDWm>L@ILWLVGHSDUWPHQWSROLF\WKDWPXOWLSOHGHSXWLHV              ZLWKLQWKLVSK\VLFDOO\UHVWUDLQLQGLYLGXDOVDVQHFHVVDU\
DUH WR EH XVHG ZKHQ DWWHPSWLQJ WR SK\VLFDOO\ UHVWUDLQ DQ              OLQHWKDWZHjUHUHIHUULQJWR
LQPDWHWKHQLWLVQRWXQUHDVRQDEOHIRU'HIHQGDQWVWRSURYLGH
WKLVVDPHDFFRPPRGDWLRQWR3ODLQWLIIRQDPRUHSHUPDQHQW                     s$DW
EDVLVl$SSHOODQWjV%UDW+RZHYHUWKH$'$GRHVQRW
UHTXLUHHPSOR\HUVWRDFFRPPRGDWHLQGLYLGXDOVE\VKLIWLQJDQ                    ,QUHVSRQVHWRWKLVVKRZLQJ+RVNLQVILUVWSRLQWVRXWWKDW
HVVHQWLDOMREIXQFWLRQRQWRRWKHUV6HHHJ%UDWWHQY66,               GHSXW\RQHVUDUHO\LIHYHUDUHUHTXLUHGSK\VLFDOO\WRUHVWUDLQ
6HUYV,QF)G WK&LUm7KHRQO\                  LQPDWHV WKXV VXJJHVWLQJ WKDW WKH IXQFWLRQ LV QRW HVVHQWLDO
SRVVLEOHDFFRPPRGDWLRQ>WKHSODLQWLII@LGHQWLILHVLVDOORZLQJ                +RVNLQV SUHVHQWHG WHVWLPRQ\ UHJDUGLQJ KHU RZQ ZRUN
FRZRUNHUV WR SHUIRUP DV PXFK DV  RI WKH HVVHQWLDO               H[SHULHQFHDOWKRXJKVKHDFNQRZOHGJHGWKDWKHUMRELQYROYHG
DXWRPRWLYHPHFKDQLFGXWLHVIRU%UDWWHQZKHQKHQHHGVVXFK                    WKH SRWHQWLDO IRU SK\VLFDO FRQIURQWDWLRQ ZLWK LQPDWHV RQ D
DVVLVWDQFH&RQWLQXLQJWKHSUDFWLFHRIµDVVLVWLQJj%UDWWHQ             GDLO\ EDVLV +RVNLQV WHVWLILHG WKDW LQ KHU HQWLUH FDUHHU DV D
LQ WDVNV RQ DQ DG KRF EDVLV PD\ EH VRXQG ODERU UHODWLRQV          GHSXW\ RQH VKH KDG RQO\ RQH SK\VLFDO DOWHUFDWLRQ ZLWK DQ
SROLF\ IRU GHIHQGDQWV DV ZH FDQ LPDJLQH WKDW VXFK                   LQPDWH  +RVNLQV DOVR SRLQWHG WR 0DMRU 4XLVHQEHUU\jV
                                                                             WHVWLPRQ\WKDWPRVWRIWKHWLPHYHUEDORUGHUVWRSULVRQHUVZLOO
                                                                             VXIILFHWRPDLQWDLQVHFXULW\VRWKDWSK\VLFDOFRQIURQWDWLRQLV
                                                                             UDUH6HFRQG+RVNLQVDUJXHVWKDWWKHIDFWWKDWQRSK\VLFDO
GLVDELOLW\l   ,QVWHDG LI +RVNLQV FDQ GHPRQVWUDWH WKDW DQ HTXLYDOHQW        WHVWLQJLVUHTXLUHGIRUWKHSRVLWLRQRIGHSXW\RQHLQGLFDWHVWKDW
SRVLWLRQ ZDV RSHQ IRU ZKLFK VKH ZDV RWKHUZLVH TXDOLILHG WKHQ VKH ZLOO
                                                                             SK\VLFDOUHVWUDLQWRILQPDWHVLVXQHVVHQWLDO
SUHYDLO RQ KHU FODLP6HH 1RUYLOOH Y 6WDWHQ ,VODQG 8QLY +RVS  )G
  G &LU  m5HDVVLJQPHQW GRHV QRW FRQVWLWXWH UHDVRQDEOH
DFFRPPRGDWLRQ    ZKHUH D SRVLWLRQ FRPSDUDEOH WR WKH HPSOR\HHjV
                                                                               :HFRQFOXGHWKDWWKHHYLGHQFHSUHVHQWHGE\+RVNLQVLVQRW
IRUPHU SODFHPHQW LV DYDLODEOH EXW WKH HPSOR\HH LQVWHDG LV DVVLJQHG WR D     VXIILFLHQWWRFUHDWHDPDWHULDOLVVXHRIIDFWRQWKLVLVVXH7KH
SRVLWLRQ WKDW ZRXOG LQYROYH D VLJQLILFDQW GLPLQXWLRQ LQ VDODU\ EHQHILWV    VXPPDU\MXGJPHQWHYLGHQFHWDNHQDVDZKROHUHYHDOVWKDWWKH
VHQLRULW\ RU RWKHU DGYDQWDJHV WKDW VKH SRVVHVVHG LQ KHU IRUPHU MRE          GHSXW\ RQH SRVLWLRQ H[LVWV WR VXSHUYLVH LQPDWHV DQG WR
$FFRUGLQJO\ WR SUHYDLO RQ DQ $'$ FODLP ZKHUH WKH HPSOR\HU KDV RIIHUHG       PDLQWDLQVHFXULW\$OWKRXJKDGHSXW\RQHPD\EHUHTXLUHG
UHDVVLJQPHQW DV D UHDVRQDEOH DFFRPPRGDWLRQ WKH HPSOR\HH PXVW RIIHU
HYLGHQFH VKRZLQJ ERWK WKDW WKH SRVLWLRQ RIIHUHG ZDV LQIHULRU WR KHU IRUPHU
                                                                             SK\VLFDOO\WRUHVWUDLQLQPDWHVRQO\LQIUHTXHQWO\WKHSRWHQWLDO
MRE DQG WKDW D FRPSDUDEOH SRVLWLRQ IRU ZKLFK WKH HPSOR\HH ZDV TXDOLILHG
                                                                             IRUSK\VLFDOFRQIURQWDWLRQZLWKLQPDWHVH[LVWVRQDGDLO\EDVLV
ZDV RSHQl                                                                 DQGWKHFRQVHTXHQFHRIIDLOLQJWRUHTXLUHDGHSXW\WRSHUIRUP
    +RVNLQVY2DNODQG&RXQW\HWDO               1R       1R               +RVNLQVY2DNODQG&RXQW\HWDO               

WKLV IXQFWLRQ ZKHQ WKH RFFDVLRQ DULVHV FRXOG EH D VHULRXV      WKDWDQHPSOR\HUPD\QRWGHQ\DQHPSOR\PHQWRSSRUWXQLW\WR
WKUHDWWRVHFXULW\6HH&)5SW$SSQ           D GLVDEOHG LQGLYLGXDO EDVHG RQ D VOLJKWO\ LQFUHDVHG ULVN LV
m7KH FRQVHTXHQFHV RI IDLOLQJ WR UHTXLUH WKH HPSOR\HH WR        WDNHQ IURP WKH SRUWLRQ RI WKH RSLQLRQ GHDOLQJ ZLWK WKH
SHUIRUPWKHIXQFWLRQPD\EHDQRWKHULQGLFDWRURIZKHWKHUD              GHIHQGDQWjVFODLPWKDWWKHSODLQWLIIZDVQRWTXDOLILHGEHFDXVH
SDUWLFXODU IXQFWLRQ LV HVVHQWLDO  )RU H[DPSOH DOWKRXJK D      KHSRVHGDmGLUHFWWKUHDWlWRWKHVDIHW\RIKLPVHOIDQGRWKHUV
ILUHILJKWHU PD\ QRW UHJXODUO\ KDYH WR FDUU\ DQ XQFRQVFLRXV      DQHQWLUHO\GLIIHUHQWLQTXLU\WKDQWKHRQHEHIRUHXVWRGD\6HH
DGXOWRXWRIDEXUQLQJEXLOGLQJWKHFRQVHTXHQFHRIIDLOLQJWR          LGDW
UHTXLUH WKH ILUHILJKWHU WR EH DEOH WR SHUIRUP WKLV IXQFWLRQ
ZRXOGEHVHULRXVl%ULFNHUV)GDWm$OWKRXJK                E5HDVRQDEOH$FFRPPRGDWLRQ
DV%ULFNHUVKDVDUJXHGLWPD\EHWUXHWKDWD>@>EXV@DWWHQGDQW
>RQ VSHFLDO HGXFDWLRQ EXVHV WUDQVSRUWLQJ KDQGLFDSSHG                 $VVXPLQJWKDWUHVWUDLQLQJLQPDWHVLVDQHVVHQWLDOIXQFWLRQ
VWXGHQWV@VHOGRPLIHYHUPXVWSHUIRUPDQ\OLIWLQJWKHDELOLW\        RI WKH GHSXW\ RQH SRVLWLRQ +RVNLQV QH[W SURSRVHV VHYHUDO
WROLIWZRXOGEHFUXFLDOLQDQHPHUJHQF\VLWXDWLRQl           DFFRPPRGDWLRQV WKDW VKH FRQWHQGV ZRXOG SHUPLW KHU WR
                                                                        SHUIRUPWKHHVVHQWLDOIXQFWLRQV5HDVRQDEOHDFFRPPRGDWLRQ
   +RVNLQVQH[WFLWHV+DPOLQY&KDUWHU7RZQVKLSRI)OLQW              PD\LQFOXGHmMREUHVWUXFWXULQJSDUWWLPHRUPRGLILHGZRUN
)GWK&LUIRUWKHSURSRVLWLRQWKDWWKHPHUH         VFKHGXOHVUHDVVLJQPHQWWRDYDFDQWSRVLWLRQDFTXLVLWLRQRU
SRWHQWLDOWKDWDGHSXW\ZRXOGKDYHWRUHVWUDLQDQLQPDWHLV             PRGLILFDWLRQRIHTXLSPHQWRUGHYLFHVDSSURSULDWHDGMXVWPHQW
LQVXIILFLHQWWRUHQGHUWKDWMREIXQFWLRQHVVHQWLDO,Q+DPOLQ         RU PRGLILFDWLRQV RI H[DPLQDWLRQV WUDLQLQJ PDWHULDOV RU
WKHSODLQWLIIZKRZDVDQDVVLVWDQWILUHFKLHIVXIIHUHGDKHDUW        SROLFLHVWKHSURYLVLRQRITXDOLILHGUHDGHUVRULQWHUSUHWHUVDQG
DWWDFNDQGZDVDXWKRUL]HGWRUHWXUQWRZRUNRQFRQGLWLRQWKDW           RWKHU VLPLODU DFFRPPRGDWLRQV IRU          LQGLYLGXDOV ZLWK
KHQRWHQJDJHLQVWUHQXRXVSK\VLFDODFWLYLWLHVVXFKDVIURQW           GLVDELOLWLHVl86&%:HKDYHH[SODLQHG
OLQHILUHILJKWLQJ$IWHUEHLQJILUHGEHFDXVHRIKLVLQDELOLW\WR
HQJDJHLQIURQWOLQHILUHILJKWLQJWKHSODLQWLIIEURXJKWVXLWDQG           
FKDOOHQJHG WKLV SDUWLFXODU UHTXLUHPHQW DV XQHVVHQWLDO  7KH             7KH UHJXODWLRQV SURYLGH WKDW DOWKRXJK DQ HPSOR\HH LV QRW UHTXLUHG
SODLQWLIISUHVHQWHGSURRImWKDWWKHNH\IXQFWLRQVRIKLVMRE>DV        WR DFFHSW DQ RIIHUHG DFFRPPRGDWLRQ LI DQ LQGLYLGXDO UHMHFWV D mUHDVRQDEOH

DVVLVWDQWILUHFKLHI@ZHUHVXSHUYLVRU\ DQGDGPLQLVWUDWLYHLQ           DFFRPPRGDWLRQ    WKDW LV QHFHVVDU\ WR HQDEOH WKH LQGLYLGXDO WR SHUIRUP
                                                                        WKH HVVHQWLDO IXQFWLRQV RI WKH SRVLWLRQ KHOG RU GHVLUHG DQG FDQQRW DV D
QDWXUH DV GLVWLQJXLVKHG IURP WKRVH RI D ILUHILJKWHU ZKLFK     UHVXOW RI WKDW UHMHFWLRQ SHUIRUP WKH HVVHQWLDO IXQFWLRQV RI WKH SRVLWLRQ WKH
LQFOXGH KRXU VKLIWV EHLQJ WKH SULPDU\ UHVSRQGHU WR           LQGLYLGXDO ZLOO QRW EH FRQVLGHUHG D TXDOLILHG LQGLYLGXDO ZLWK D GLVDELOLW\l
HPHUJHQFLHV DQG HQJDJLQJ LQ VWUHQXRXV IURQWOLQH ILUH             &)5  G VHH +DQNLQV Y 7KH *DS ,QF  )G  
VXSSUHVVLRQVHDUFKDQGUHVFXHl,GDW,IWKHDVVLVWDQW        WK &LU  )XUWKHUPRUH mDQ HPSOR\HH FDQQRW PDNH KLV HPSOR\HU
ILUHFKLHIZHUHHYHUQHHGHGDWWKHVFHQHRIDQHPHUJHQF\WKH           SURYLGH D VSHFLILF DFFRPPRGDWLRQ LI DQRWKHU UHDVRQDEOH DFFRPPRGDWLRQ
                                                                        LV LQVWHDG SURYLGHGl +DQNLQV  )G DW  ,Q WKH LQVWDQW FDVH WKH
SODLQWLII WHVWLILHG WKDW KLV UROH ZRXOG EH VXSHUYLVRU\ UDWKHU   GHIHQGDQWV RIIHUHG +RVNLQV UHDVVLJQPHQW WR WZR GLIIHUHQW SRVLWLRQV
WKDQDFWLYHHQJDJHPHQWLQILUHILJKWLQJ:HDIILUPHGDMXU\             +RZHYHU XQOLNH LQ +DQNLQV WKH SRVLWLRQV RIIHUHG LQ WKH LQVWDQW FDVH ZHUH
YHUGLFWLQIDYRURIWKHSODLQWLIIUHDVRQLQJWKDWWKHLVVXHRI          QRW FRPSDUDEOH WR D GHSXW\ RQH SRVLWLRQ DV ERWK LQYROYHG D SD\ FXW 7KH
ZKHWKHUIURQWOLQHILUHILJKWLQJZDVDQHVVHQWLDOIXQFWLRQZDV           UHJXODWLRQV LQVWUXFW WKDW HPSOR\HUV mVKRXOG UHDVVLJQ WKH LQGLYLGXDO WR DQ
SURSHUO\VXEPLWWHGWRWKHMXU\7KHVLWXDWLRQLQ+DPOLQLV             HTXLYDOHQW SRVLWLRQ LQ WHUPV RI SD\ VWDWXV HWF LI WKH LQGLYLGXDO LV

HQWLUHO\GLIIHUHQWWKDQWKHVLWXDWLRQLQWKHLQVWDQWFDVHIRUWKH      TXDOLILHG DQG LI WKH SRVLWLRQ LV YDFDQW ZLWKLQ D UHDVRQDEOH DPRXQW RI
                                                                        WLPHl DQG VKRXOG RQO\ UHDVVLJQ DQ LQGLYLGXDO WR D ORZHU JUDGHG SRVLWLRQ
SODLQWLII LQ +DPOLQ SURGXFHG RYHUZKHOPLQJ HYLGHQFH WKDW           LI WKH LQGLYLGXDO FDQQRW EH DFFRPPRGDWHG LQ DQ HTXLYDOHQW SRVLWLRQ 
ILUHILJKWLQJZDVQRWDQHVVHQWLDOIXQFWLRQRIKLVVXSHUYLVRU\           &)5 SW  $SS  R 7KHUHIRUH ZH KROG WKDW +RVNLQVjV
SRVLWLRQ7KHTXRWHRQZKLFK+RVNLQVUHOLHVZKLFKLQGLFDWHV           UHIXVDO WR DFFHSW RQH RI WKH ORZHU JUDGHG SRVLWLRQV GRHV QRW DXWRPDWLFDOO\
                                                                        SUHFOXGH KHU IURP EHLQJ FRQVLGHUHG D mTXDOLILHG LQGLYLGXDO ZLWK D