Court Opinion

ID: 2970637
Source: CourtListenerOpinion
Date Created: 2015-09-22 16:18:20.146985+00
Date Added: 2024-06-11T11:43:31.072622
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

0,&+,*$1 %(// 7(/(3+21(            ;
&203$1<GED$0(5,7(&+             
0,&+,*$1                           
                                      1R
          3ODLQWLII$SSHOOHH       
                                     !
                                    
            Y                      
                                    
0&,0(752 $&&(66                     
75$160,66,21 6(59,&(6              
,1&                               
                                    
          'HIHQGDQW$SSHOODQW 
                                    
s2+1 * 675$1' 52%(57 %           
1(/621 '$9,' $ 69$1'$            
&RPPLVVLRQHUVRIWKH                
0LFKLJDQ3XEOLF6HUYLFH             
                                    
&RPPLVVLRQLQWKHLURIILFLDO       
FDSDFLWLHVDQGQRWDV               
LQGLYLGXDOV                       
                   'HIHQGDQWV 
                                    
                                    
                                   1
       $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
      IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW
   1Rn9LFWRULD$5REHUWV'LVWULFWsXGJH

                           
        0LFK%HOO7HO&RY0&,0HWURHWDO         1R

                   $UJXHG6HSWHPEHU
                'HFLGHGDQG)LOHG0DUFK
 %HIRUH0$57,1&KLHI&LUFXLWsXGJH0225(&LUFXLW
           sXGJH:,6(0$1'LVWULFWsXGJH

                        BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  %ULDQ s /HVNH :25/'&20 ,1&
:DVKLQJWRQ '& IRU $SSHOODQW  5REHUW 0 'RZ sU
0$<(5%52:152:(	0$:&KLFDJR,OOLQRLVIRU
$SSHOOHH21%5,()%ULDQs/HVNH:25/'&20,1&
:DVKLQJWRQ'&'DUU\O0%UDGIRUGsRKQ5+DUULQJWRQ
s(11(5	%/2&.&KLFDJR,OOLQRLVIRU$SSHOODQW5REHUW
0'RZsUsRKQ(0XHQFK0$<(5%52:152:(	
0$: &KLFDJR ,OOLQRLV sHIIUH\ 9 6WXFNH\ 0LFKDHO *
9DUWDQLDQ',&.,1621:5,*+7/DQVLQJ0LFKLJDQIRU
$SSHOOHH
  0$57,1 & s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ
ZKLFK:,6(0$1'sMRLQHG0225(sSS
GHOLYHUHGDVHSDUDWHFRQFXUULQJRSLQLRQ
                        BBBBBBBBBBBBBBBBB
                            23,1,21
                        BBBBBBBBBBBBBBBBB
   %2<&( ) 0$57,1 s5 &KLHI &LUFXLW sXGJH  7KH
GLVSXWH KHUH EHWZHHQ 0&,0HWUR $FFHVV 7UDQVPLVVLRQ
6HUYLFHV,QFDQG$PHULWHFKDURVHZKHQ0&,DFRPSHWLQJ
HQWUDQWLQWRWKHORFDOWHOHFRPPXQLFDWLRQVPDUNHWLQ0LFKLJDQ
WULHG WR VXEPLW UHVDOH RUGHUV WR $PHULWHFK DQ LQFXPEHQW
WHOHSKRQHFDUULHUYLDIDFVLPLOH7KHRUGHUVZHUHWRSODFHRU

    
        7KH +RQRUDEOH 7KRPDV $ :LVHPDQ sU 8QLWHG 6WDWHV 'LVWULFW
sXGJH IRU WKH 0LGGOH 'LVWULFW RI 7HQQHVVHH VLWWLQJ E\ GHVLJQDWLRQ
1R     0LFK%HOO7HO&RY0&,0HWURHWDO         

PRGLI\ VHUYLFHV WKDW 0&, SURYLGHG WR LWV FXVWRPHUV E\
SXUFKDVLQJWHOHSKRQHXVDJHIURP$PHULWHFKDQGVHOOLQJLWWR
0&,  FXVWRPHUV  $PHULWHFK SURWHVWHG WKDW ID[LQJ RUGHUV
YLRODWHG WKH LQWHUFRQQHFWLRQ DJUHHPHQW DQ DJUHHPHQW
EHWZHHQ WKH WZR SDUWLHV WKDW DOORZV 0&, WR VKDUH QHWZRUN
HOHPHQWV ZLWK $PHULWHFK DQG WR SURYLGH SKRQH VHUYLFH
$PHULWHFK EHOLHYHV WKLV DJUHHPHQW VKRXOG EH WKH VROH
GRFXPHQWJRYHUQLQJWKHVXEPLVVLRQRIUHVDOHRUGHUV0&,
UHOLHG XSRQ D VWDWH WDULII LVVXHG E\ WKH 0LFKLJDQ 3XEOLF
6HUYLFH &RPPLVVLRQ DUJXLQJ WKH VWDWH WDULII ZRXOG DOORZ
0&,WRID[WKHRUGHUV7KH&RPPLVVLRQDJUHHGZLWK0&,jV
SRVLWLRQDQGDOORZHGID[LQJDVDQDFFHSWDEOHDOWHUDWLYHWRWKH
WHUPVRIWKHLQWHUFRQQHFWLRQDJUHHPHQW$PHULWHFKDSSHDOHG
WRWKHGLVWULFWFRXUWIURPWKH&RPPLVVLRQjVGHFLVLRQ7KH
GLVWULFWFRXUWFRQFOXGHGWKDW0&,FRXOGQRWID[RUGHUVXQGHU
$PHULWHFKjVWDULIIWHUPVDQGWKDWWKH0LFKLJDQ3XEOLF6HUYLFH
&RPPLVVLRQjV LQWHUSUHWDWLRQ ZDV DUELWUDU\ DQG FDSULFLRXV
:HGLVDJUHH
         ,%DFNJURXQGDQG5HJXODWRU\)UDPHZRUN
   7RGHUHJXODWHWKHWHOHSKRQHLQGXVWU\&RQJUHVVHQDFWHGWKH
7HOHFRPPXQLFDWLRQV $FW RI  FRGLILHG LQ  86&
6HFWLRQHWVHT7KH$FWKDVEHHQFDOOHGRQHRIWKHPRVW
DPELWLRXVUHJXODWRU\SURJUDPVRSHUDWLQJXQGHUmFRRSHUDWLYH
IHGHUDOLVPlDQGFUHDWHVD UHJXODWRU\IUDPHZRUNWKDWJLYHV
DXWKRULW\WRVWDWHDQGIHGHUDOHQWLWLHVLQIRVWHULQJFRPSHWLWLRQ
LQORFDOWHOHSKRQHPDUNHWV:HKDYHRIWHQUHLWHUDWHGWKH$FWjV
SXUSRVHV ZKLFK DUH HQGLQJ ORFDO WHOHSKRQH FRPSDQ\
PRQRSROLHV DQG SURPRWLQJ FRPSHWLWLRQ LQ ORFDO WHOHSKRQH
PDUNHWV(J0LFK%HOO7HO&RY6WUDQG)G
WK&LU
  7KH$FWHQFRXUDJHVFRPSHWLWLYHORFDOWHOHSKRQHPDUNHWVE\
LPSRVLQJVHYHUDOGXWLHVRQLQFXPEHQWORFDOH[FKDQJHFDUULHUV
WKHWHOHSKRQHFRPSDQLHVKROGLQJPRQRSROLHVLQORFDOPDUNHWV
SULRU WR WKH $FWjV LPSOHPHQWDWLRQ  7KH LQFXPEHQW PXVW
QHJRWLDWH RU DUELWUDWH DJUHHPHQWV ZLWK FRPSHWLQJ ORFDO
FDUULHUV WKH QHZ HQWUDQWV LQWR WKH GHUHJXODWHG PDUNHW E\
SURYLGLQJ RQH RI WKUHH PHWKRGV RI FRPSHWLWLRQ  WKH
     0LFK%HOO7HO&RY0&,0HWURHWDO       1R       1R     0LFK%HOO7HO&RY0&,0HWURHWDO      

LQFXPEHQWFDUULHUPXVWSURYLGHLQWHUFRQQHFWLRQWRLWVQHWZRUN         GHWHUPLQDWLRQV RQO\ WR GHWHUPLQH ZKHWKHU WKH VWDWH
WRDFRPSHWLQJFDUULHUWKDWEXLOGVRUKDVLWVRZQQHWZRUN         FRPPLVVLRQjV LQWHUSUHWDWLRQ RI VWDWH ODZ LV DUELWUDU\ DQG
86&FWKHLQFXPEHQWFDUULHUPXVWSURYLGH            FDSULFLRXV6HH6:%HOO7HO&R)GDW86:
DFFHVVWRLWVQHWZRUNHOHPHQWVRQDQmXQEXQGOHGEDVLVlWRD           &RPPXQLFDWLRQV)GDW
FRPSHWLQJ FDUULHU ZLVKLQJ WR OHDVH DOO RU SDUW RI WKH
LQFXPEHQWjV QHWZRUN UDWKHU WKDQ EXLOG LWV RZQ  86&
FDQGWKHLQFXPEHQWPXVWVHOOLWVUHWDLOVHUYLFHV
DWZKROHVDOHSULFHVWRDFRPSHWLQJFDUULHUWKDWZLOOUHVHOOWKH
VHUYLFHVDWUHWDLOSULFHV86&F
   ,QWHUFRQQHFWLRQ DJUHHPHQWV VHW IRUWK WHUPV UDWHV DQG
FRQGLWLRQVRIWKHDUUDQJHPHQWVEHWZHHQWKHLQFXPEHQWORFDO
H[FKDQJHFDUULHUDQGDFRPSHWLQJORFDOH[FKDQJHFDUULHU7KH
$FW SURYLGHV IRU DUELWUDWLRQ RI DQ DJUHHPHQW UHYLHZ RI
DUELWUDWHGRUQHJRWLDWHGDJUHHPHQWVDQGMXGLFLDOUHYLHZRI
DJUHHPHQWV6WDWHXWLOLW\FRPPLVVLRQVUHYLHZDQGJLYHILQDO
DSSURYDO WR LQWHUFRQQHFWLRQ DJUHHPHQWV   86&
 H  H$ 9HUL]RQ 0G Y 3XE 6HUY
&RPPjQ866&W/(GG
$SDUW\DJJULHYHGE\DFRPPLVVLRQGHFLVLRQ
PD\EULQJVXLWLQIHGHUDOGLVWULFWFRXUWWRUHYLHZZKHWKHUWKH
DJUHHPHQWRUVWDWHPHQWRIWHUPVFRPSOLHVZLWKWKH$FW
86&H9HUL]RQ0G6&WDW/(G
DW
   (IIRUWVWRIRVWHUFRPSHWLWLRQLQWHOHFRPPXQLFDWLRQVKDYH
LQUHFHQW\HDUVJLYHQULVHWRFRPSOH[OLWLJDWLRQUHJDUGLQJWKH
UHODWLRQVKLSVEHWZHHQWHOHSKRQHVHUYLFHFDUULHUVDQGEHWZHHQ
VWDWHDQGIHGHUDOV\VWHPV7KH6XSUHPH&RXUWKDVVWDWHGm>L@W
ZRXOGEHDJURVVXQGHUVWDWHPHQWWRVD\WKDWWKH>$FW@LVQRWD
PRGHORIFODULW\,WLVLQPDQ\LPSRUWDQWUHSVHFWVDPRGHORI
DPELJXLW\RULQGHHGHYHQVHOIFRQWUDGLFWLRQl$7	7&RUSY
,RZD8WLOV%G866&W
/(GG0XFKRIWKHFRPSOH[LW\KDV
UHVXOWHG IURP WKH $FWjV LQFRUSRUDWLRQ RI WKH FRQFHSW RI
mFRRSHUDWLYH IHGHUDOLVPl  8QGHU FRRSHUDWLYH IHGHUDOLVP
mIHGHUDO DQG VWDWH DJHQFLHV VKRXOG HQGHDYRU WR KDUPRQL]H
WKHLUHIIRUWVZLWKRQHDQRWKHUZKLOHIHGHUDOFRXUWVRYHUVHH
WKLV SDUWQHUVKLS E\ LQVLVWLQJ RQ DUWLFXODWLRQV RI UHJXODWRU\
SROLF\ WKDW UHVSHFW WKH YDOXHV HPERGLHG LQ WKH XQGHUO\LQJ
       0LFK%HOO7HO&RY0&,0HWURHWDO                 1R        1R     0LFK%HOO7HO&RY0&,0HWURHWDO        

ZLOO KHOS WR HQVXUH WKDW WKH VWDWH DJHQFLHV XQGHUWDNH D                    OHJLVODWLRQl  3KLOLS s :HLVHU )HGHUDO &RPPRQ /DZ
UHDVRQHG FRQVLGHUDWLRQ RI WKH LVVXHV SUHVHQWHG WR WKHPl                     &RRSHUDWLYH)HGHUDOLVPDQGWKH(QIRUFHPHQWRIWKH7HOHFRP
3KLOLS s :HLVHU &KHYURQ &RRSHUDWLYH )HGHUDOLVP DQG                        $FW1<8/5HY,QWKLVUHJXODWRU\
7HOHFRPPXQLFDWLRQV5HIRUP9DQG/5HY                           UHJLPHVWDWHFRPPLVVLRQVDUHGLUHFWHGE\SURYLVLRQVRIWKH
)HGHUDOFRQVLGHUDWLRQRILQWHUFRQQHFWLRQDJUHHPHQWVZLOOQRW                        $FW DQG )&& UHJXODWLRQV LQ PDNLQJ GHFLVLRQV ZKLFK DUH
SUHYHQWVWDWHVIURPFRQVLGHULQJPDWWHUVRIVWDWHODZLWZLOO                       VXEMHFWWRIHGHUDOFRXUWUHYLHZ357HO&RY7HOHFRPPV
RQO\HQVXUHWKDWWKH\GRVRUHDVRQDEO\%HFDXVHZHRQO\ZDQW                       5HJXODWRU\%GRI35)GVW&LU
WRHQVXUHWKDWVWDWHFRPPLVVLRQVUHDVRQDEO\DSSO\VWDWHODZ
IHGHUDOFRXUWVPXVWJLYHGHIHUHQFHWRDVWDWHFRPPLVVLRQjV                             $W WKH VDPH WLPH WKH $FW JLYHV WKH VWDWH FRPPLVVLRQV
UHVROXWLRQRIVWDWHODZLVVXHV6HH0&,7HOHFRPPV&RUSY                       ODWLWXGHWRH[HUFLVHWKHLUH[SHUWLVHLQWHOHFRPPXQLFDWLRQVDQG
%HOO6RXWK 7HOHFRPPV ,QF  ) 6XSS G DW                          QHHGVRIWKHORFDOPDUNHW,G:HDFNQRZOHGJHWKDWZLWKLQ
m$OWKRXJKVRPHOHYHORIUHYLHZRIVWDWHFRPPLVVLRQDFWLRQ                          DSSOLFDEOHVWDQGDUGVRIUHYLHZVWDWHFRPPLVVLRQVDUELWUDWLRQ
PD\ EH QHFHVVDU\ WR UHQGHU PHDQLQJIXO WKH GLVWULFW FRXUWjV                  SDQHOVDQGDGPLQLVWUDWLYHODZMXGJHVKDYHDUHILQHGH[SHUWLVH
UHYLHZIRUFRPSOLDQFHZLWKWKH$FWjVOHJDOUHTXLUHPHQWVWKH                        LQWHOHFRPPXQLFDWLRQVPDWWHUVWKDWFRPHLQIUHTXHQWO\EHIRUH
RPLVVLRQRIDQ\SURYLVLRQIRUUHYLHZIRUDQ\RWKHUSXUSRVH                          WKH UHJLRQDO IHGHUDO FRXUWV  2U DV FRPPHQWDWRUV KDYH
VXJJHVWV WKDW ZLWKLQ WKH ERXQGV RI WKH $FWjV OHJDO                         VXJJHVWHG mLQWULFDWH PDWWHUV VXFK DV UDWHVHWWLQJ DQG
UHTXLUHPHQWVUHYLHZVKRXOGEHGHIHUHQWLDOl7KLVDFFRUGV                        GHWHUPLQLQJWKHIHDVLELOLW\RIUHJXODWRU\PDQGDWHVOLHEH\RQG
ZLWK WKH DSSURDFKHV WDNHQ E\ RWKHU FLUFXLWV WKDW UHFRJQL]H                  WKHFRUHRIMXGLFLDOFRPSHWHQFHl:HLVHUVXSUDDWVHH
IHGHUDO MXULVGLFWLRQ WR UHYLHZ VWDWH FRPPLVVLRQ RUGHUV IRU                   DOVR0LFK%HOO7HO&RY/HYHO&RPPXQLFDWLRQV,QF
FRPSOLDQFHZLWKVWDWHODZ6:%HOO7HO&RY3XE8WLO                        )6XSSG('0LFKVWDWLQJm>W@KLVFRXUW
&RPPjQRI7H[)GDW86:&RPPXQLFDWLRQV                            VKRXOGQRWVLWDVDVXUURJDWHSXEOLFXWLOLWLHVFRPPLVVLRQWR
)GDW                                                                   VHFRQGJXHVVWKHGHFLVLRQVPDGHE\WKHVWDWHDJHQF\WRZKLFK
                                                                                    &RQJUHVV KDV FRPPLWWHG SULPDU\ UHVSRQVLELOLW\ IRU
   ,QVXPWKH$FWJLYHVIHGHUDOFRXUWVMXULVGLFWLRQWRHYDOXDWH                    LPSOHPHQWLQJWKH$FWlFLWDWLRQRPLWWHG
WKHGHWHUPLQDWLRQVRIVWDWHFRPPLVVLRQVIRUFRPSOLDQFHZLWK
VWDWHODZ7KHMXULVGLFWLRQDOJUDQWRIHH[SOLFLWO\                         6HFWLRQ G RI WKH $FW SURYLGHV WKDW D VWDWH
DOORZVIHGHUDOFRXUWVWRUHYLHZQRWRQO\DVWDWHFRPPLVVLRQjV                       UHJXODWLRQ RUGHU RU SROLF\ RI D VWDWH FRPPLVVLRQ WKDW
GHWHUPLQDWLRQ EXW DOVR WKH DJUHHPHQW LQWHUSUHWHG E\ WKDW                    HVWDEOLVKHV DFFHVV DQG LQWHUFRQQHFWLRQ REOLJDWLRQV RI
GHWHUPLQDWLRQ  %\ DOORZLQJ IHGHUDO FRXUWV WR FRQVLGHU WKH                  LQFXPEHQWFDUULHUVZLOOEHXSKHOGDVORQJLVLWPHHWVIHGHUDO
DJUHHPHQW WKH $FW QHFHVVDULO\ SHUPLWV IHGHUDO UHYLHZ RI D                  UHTXLUHPHQWV  7KH SUHUHTXLVLWH IRU SUHVHUYLQJ VWDWH
VWDWHFRPPLVVLRQjVLQWHUSUHWDWLRQRIWKHDJUHHPHQWXQGHUVWDWH                      FRPPLVVLRQ UHJXODWLRQV SROLFLHV DQG RUGHUV LV WKDW WKHVH
ODZ$OWKRXJKWKH$FWFRQWHPSODWHVIHGHUDOMXULVGLFWLRQWR                         GHFLVLRQV PXVW EH FRQVLVWHQW ZLWK 6HFWLRQ  DQG QRW
UHYLHZ VWDWH ODZ GHWHUPLQDWLRQV ZH VKRXOG UHYLHZ VXFK                       VXEVWDQWLDOO\SUHYHQWLPSOHPHQWDWLRQRIWKHSXUSRVHVRIWKH
                                                                                    $FW:LWKQRFOHDUHUURULQLQWHUSUHWDWLRQRIIHGHUDOODZRU
                                                                                    XQVXSSRUWHG DUELWUDU\ DQG FDSULFLRXV ILQGLQJV E\ D VWDWH
                                                                                   FRPPLVVLRQ WKH GHFLVLRQV RI VXFK FRPPLVVLRQV JHQHUDOO\
      1DWXUDOO\   ZH   DOVR   JLYH   GHIHUHQFH   WR   D   FRPPLVVLRQjV   IDFWXDO
                                                                                    VWDQG0LFK%HOO7HO&RY6WUDQG)GDW
GHWHUPLQDWLRQV    m>:@H MRLQ RXU VLVWHU FLUFXLWV LQ DSSO\LQJ WKH µDUELWUDU\
DQG FDSULFLRXVj VWDQGDUGl 0LFK %HOO 7HO &R Y 6WUDQG  )G DW 
 QRWLQJ WKDW XQGHU WKLV VWDQGDUG D mGHFLVLRQ >PXVW@ EH XSKHOG LI LW LV WKH
UHVXOW RI D GHOLEHUDWH SULQFLSOHG UHDVRQLQJ SURFHVV DQG LI LW LV VXSSRUWHG
E\ VXEVWDQWLDO HYLGHQFHl
     0LFK%HOO7HO&RY0&,0HWURHWDO       1R      1R        0LFK%HOO7HO&RY0&,0HWURHWDO            

               ,,)DFWVDQG3URFHGXUDO+LVWRU\                     DJUHHPHQW LW DOVR DXWKRUL]HV IHGHUDO MXGLFLDO UHYLHZ RI WKH
                                                                     DJUHHPHQWLWVHOI
   7KHGLVSXWHEHWZHHQWKHVHWZRSDUWLHVEHJDQZKHQ0&,
WKHFRPSHWLQJORFDOH[FKDQJHFDUULHUWULHGWRVXEPLWUHVDOH           7KH ODQJXDJH RI  H VXJJHVWV WKDW &RQJUHVV
RUGHUV WR $PHULWHFK WKH LQFXPEHQW ORFDO H[FKDQJH FDUULHU     EHOLHYHG PHDQLQJIXO IHGHUDO MXGLFLDO UHYLHZ RI D VWDWH
SURYLGLQJ WHOHSKRQH VHUYLFHV SULRU WR WKH $FWjV                FRPPLVVLRQjV LQWHUSUHWDWLRQ RI DQ DJUHHPHQW     PD\ UHTXLUH
LPSOHPHQWDWLRQ YLD IDFVLPLOH  7KHVH RUGHUV GLUHFWHG          FRQVLGHUDWLRQ RI WKH DJUHHPHQW LWVHOI  %HFDXVH &RQJUHVV
$PHULWHFK WR HVWDEOLVK GLVFRQQHFW RU PRGLI\ WKH ORFDO       GHFLGHGWKDWIHGHUDOFRXUWVFDQFRQVLGHUWKHDJUHHPHQWLWVHOI
WHOHSKRQHVHUYLFH0&,SURYLGHGWRFXVWRPHUVWKURXJKUHVDOH          DOORZLQJIHGHUDOMXGLFLDOUHYLHZRIDVWDWHFRPPLVVLRQjVVWDWH
$FFRUGLQJWRWKHLQWHUFRQQHFWLRQDJUHHPHQWLQWRZKLFK0&,            ODZ GHWHUPLQDWLRQV LV FRQVLVWHQW ZLWK WKH $FWjV YLVLRQ RI
DQG $PHULWHFK KDG HQWHUHG 0&, ZDV SHUPLWWHG WR VXEPLW       FRRSHUDWLYH IHGHUDOLVP  &RRSHUDWLYH IHGHUDOLVP SHUPLWV
ID[HGUHVDOHRUGHUVRQO\RQDQLQWHULPDQGEDFNXSEDVLV7KH        mVWDWH FRPPLVVLRQV >WR@ H[HUFLVH WKHLU H[SHUWLVH DERXW WKH
DJUHHPHQW UHTXLUHG $PHULWHFK WR SURYLGH DQ mHOHFWURQLF         QHHGVRIWKHORFDOPDUNHWDQGORFDOFRQVXPHUVlHYHQDVWKH\
LQWHUIDFHlVR0&,FRXOGHOHFWURQLFDOO\GHOLYHUUHVDOHRUGHUV        mDUH JXLGHG E\ WKH SURYLVLRQV RI WKH $FW DQG E\ WKH
7KHDJUHHPHQWFRQWDLQHGDQLQWHJUDWLRQFODXVHDVZHOOVWDWLQJ       FRQFRPLWDQW)&&UHJXODWLRQVDQGFKHFNHGE\IHGHUDOFRXUW
WKDW WKH DJUHHPHQWjV WHUPV DQG UHIHUHQFHV WR H[WHUQDO         UHYLHZIRUFRQVLVWHQF\ZLWKWKHVHIHGHUDOSURYLVLRQVl35
GRFXPHQWVFRQVWLWXWHGWKHZKROHDJUHHPHQWDQGWKDWQHLWKHU           7HO&R)GDWFLWDWLRQVRPLWWHG$OORZLQJIHGHUDO
SDUW\ZRXOGEHERXQGE\WHUPVWKDWDSSHDUVXEVHTXHQWO\LQ            FRXUWV WR H[HUFLVH WKH MXULVGLFWLRQ VSHFLILFDOO\ DIIRUGHG WR
WKHRWKHUSDUW\jVFRPPXQLFDWLRQVRUGRFXPHQWV                       WKHP E\ WKH $FW FDQQRW SRVVLEO\ XSVHW WKH FRQWHPSODWHG
                                                                     VFKHPHRIFRRSHUDWLYHIHGHUDOLVP,QIDFWEHFDXVHWKH$FW
  )RU DSSUR[LPDWHO\ WZR \HDUV DIWHU WKH &RPPLVVLRQ             VSHFLILFDOO\ DXWKRUL]HV IHGHUDO MXGLFLDO UHYLHZ RI
DSSURYHG0&,DQG$PHULWHFKjVLQWHUFRQQHFWLRQDJUHHPHQW              LQWHUFRQQHFWLRQDJUHHPHQWVDQGWKXVLPSOLFLWO\DOORZVUHYLHZ
0&,SODFHGUHVDOHRUGHUVHOHFWURQLFDOO\%\0D\0&,           RIWKHVWDWHFRPPLVVLRQjVLQWHUSUHWDWLRQRIWKRVHDJUHHPHQWV
KDGEHJXQWRLQFUHDVLQJO\SURYLGHVHUYLFHWKURXJKSXUFKDVHG          XQGHUVWDWHODZIHGHUDOUHYLHZIRUFRPSOLDQFHZLWKVWDWHODZ
QHWZRUNHOHPHQWVUDWKHUWKDQWKURXJKUHVDOHVXEPLWWLQJRQO\         DFWXDOO\IXUWKHUVFRRSHUDWLYHIHGHUDOLVP
WKUHHWRILYHUHVDOHRUGHUVDGD\
                                                                        (YHQDVWKHWHOHFRPPXQLFDWLRQV UHJLPHOHDYHVURRPIRU
  ,Q)HEUXDU\$PHULWHFKQRWLILHGLWVFRPSHWLQJORFDO           VWDWHVWRUHO\RQDQGH[SHULPHQWZLWKVWDWH ODZmWKH$FWjV
H[FKDQJH FDUULHU FXVWRPHUV WKDW LW LQWHQGHG WR XSJUDGH WKH   MXGLFLDOUHYLHZSURYLVLRQVSURYLGHDSURFHGXUDOLVWFKHFNn
HOHFWURQLFUHVDOHVHUYLFHRUGHULQWHUIDFHWREHFRPSOLDQWZLWK       HYHQZLWKDGHIHUHQWLDOUHYLHZRIVXEVWDQWLYHGHFLVLRQVnWKDW
<HDU  FRPSXWHU V\VWHP UHTXLUHPHQWV  $PHULWHFK
GLUHFWHGXVHUVRIWKHLQWHUIDFHWRXSJUDGHWKHLURZQV\VWHPVWR
PDLQWDLQ FRPSDWLELOLW\  2Q 0D\   0&, LQIRUPHG            
                                                                           7KH )LIWK 1LQWK DQG (OHYHQWK &LUFXLWV KDYH DVVXPHG DV PXFK
$PHULWHFKLWSODQQHGWRVXEPLWIXWXUHUHVDOHVHUYLFHRUGHUVE\       ZLWKRXW H[SODLQLQJ WKHLU DVVXPSWLRQ 6: %HOO 7HO &R Y 3XE 8WLO
IDFVLPLOHXQGHUWKHWHUPVRI$PHULWHFKjV0LFKLJDQWDULIIV          &RPPjQ RI 7H[  )G   WK &LU  86 :

DQG QHLWKHU IXQG DQ LQWHUIDFH XSJUDGH QRU VXEPLW RUGHUV      &RPPXQLFDWLRQV Y 0)6 ,QWHOHQHW ,QF  )G   WK &LU

HOHFWURQLFDOO\DVVWDWHGLQWKHDJUHHPHQW$PHULWHFKQRWLILHG       %HOO6RXWK 7HOHFRPPV ,QF Y 0&,0HWUR $FFHVV 7UDQVPLVVLRQ

0&, LW ZRXOG QRW DFFHSW ID[HG RUGHUV  :KHQ 0&, ID[HG      6HUYV ,QF  )G DW  m>7@KH ODQJXDJH RI   SHUVXDGHV XV WKDW
                                                                     LQ JUDQWLQJ WR WKH SXEOLF VHUYLFH FRPPLVVLRQV WKH SRZHU WR DSSURYH RU
RUGHUVWR$PHULWHFK$PHULWHFKUHIXVHGWRSURFHVVWKHRUGHUV        UHMHFW LQWHUFRQQHFWLRQ DJUHHPHQWV &RQJUHVV LQWHQGHG WR LQFOXGH WKH
                                                                     SRZHU WR LQWHUSUHW DQG HQIRUFH LQ WKH ILUVW LQVWDQFH DQG WR VXEMHFW WKHLU
                                                                     GHWHUPLQDWLRQ WR FKDOOHQJHV LQ WKH IHGHUDO FRXUWVl
       0LFK%HOO7HO&RY0&,0HWURHWDO            1R        1R      0LFK%HOO7HO&RY0&,0HWURHWDO         

   %HFDXVHWKHFLUFXLWVWKDWKDYHDGGUHVVHGWKHVFRSHRI                 %\WKHWLPHWKLVSUREOHPDURVH0&,ZDVID[LQJQRPRUHWKDQ
MXULVGLFWLRQKDYHIDLOHGWRRIIHUSHUVXDVLYHH[SODQDWLRQVIRU                  ILYHVXFKRUGHUVDGD\
WKHLU FRQFOXVLRQV ZH DUH OHIW WR LQWHUSUHW WKH VWDWXWH IRU
RXUVHOYHV:HKDYHUHFRJQL]HGWKDWXQGHUHmWKLV                     0&, ILOHG D FRPSODLQW ZLWK WKH &RPPLVVLRQ RQ sXO\ 
FRXUWjVUHYLHZRI>DVWDWHFRPPLVVLRQjV@RUGHULVOLPLWHGWR                    UHTXHVWLQJ DQ RUGHU UHTXLULQJ $PHULWHFK WR DFFHSW
GHWHUPLQLQJZKHWKHUWKHRUGHULVLQFRQVLVWHQWZLWKVHFWLRQV                    0&,jVID[HGRUGHUVXQGHUWKHWHUPVRIWKH0LFKLJDQWDULIIV
DQGRIWKH$FWl0LFK%HOO7HO&RY6WUDQG                  0&,DOVRDOOHJHGWKDW$PHULWHFKIDLOHGWRDELGHE\WKHWHUPV
)GDW+RZHYHUWKLVUHFRJQLWLRQLJQRUHVDQLPSRUWDQW                   RIWKHDJUHHPHQWDQGGLVFULPLQDWHGDJDLQVW0&,LQYLRODWLRQ
FRPSRQHQW RI IHGHUDO UHYLHZ XQGHU  H  6HFWLRQ                RIIHGHUDODQGVWDWHODZ2Q$XJXVWDQDGPLQLVWUDWLYHODZ
HH[SOLFLWO\FRQWHPSODWHVQRWRQO\IHGHUDOUHYLHZRI                   MXGJHFRQFOXGHGWKHDJUHHPHQWGLGQRWSURKLELW 0&,IURP
WKHVWDWHFRPPLVVLRQjVRUGHULQWHUSUHWLQJDQLQWHUFRQQHFWLRQ                   ID[LQJ UHVDOH RUGHUV  7KH SURYLVLRQV UHJDUGLQJ HOHFWURQLF
DJUHHPHQW EXW DOVR IHGHUDO UHYLHZ RI WKH DJUHHPHQW LWVHOI            UHVDOHVHUYLFHRUGHUVLPSRVHGREOLJDWLRQVRQO\RQ$PHULWHFK
7KH VWDWXWH SURYLGHV m>L@Q DQ\ FDVH LQ ZKLFK D 6WDWH                 7KH DGPLQLVWUDWLYH ODZ MXGJH DOVR VWDWHG WKDW HYHQ LI WKH
FRPPLVVLRQPDNHVDGHWHUPLQDWLRQXQGHUWKLVVHFWLRQDQ\                       DJUHHPHQWLPSRVHGDQREOLJDWLRQRQ0&,WRVXEPLWRUGHUV
SDUW\DJJULHYHGE\VXFKGHWHUPLQDWLRQPD\EULQJDQDFWLRQLQ                   HOHFWURQLFDOO\ 0&, FRXOG DFFHSW WHOHSKRQH VHUYLFH XQGHU
DQDSSURSULDWH)HGHUDOGLVWULFWFRXUWWRGHWHUPLQHZKHWKHUWKH                 $PHULWHFKjVUHWDLOWDULII
DJUHHPHQWRUVWDWHPHQWPHHWVWKHUHTXLUHPHQWVRIVHFWLRQ
RIWKLVWLWOHDQGWKLVVHFWLRQl86&H7KH                    0&, DQG $PHULWHFK ILOHG FURVVPRWLRQV IRU UHYLHZ  2Q
SXUSRVH FODXVH UHIHUV QRW WR HYDOXDWLQJ WKH FRPPLVVLRQjV                sDQXDU\WKH&RPPLVVLRQFRQFOXGHG$PHULWHFKZDV
GHWHUPLQDWLRQIRUFRPSOLDQFHZLWKDQGEXWUDWKHU                  QRWUHTXLUHGWRDFFHSWID[HGUHWDLOVHUYLFHRUGHUVXQGHUWHUPV
WRHYDOXDWLQJWKHDJUHHPHQWRUVWDWHPHQWIRUFRPSOLDQFHZLWK                   RIWKH$JUHHPHQWEXWPXVWDOORZ0&,WRSXUFKDVHVHUYLFHV
DQG7KHSKUDVHmDJUHHPHQWRUVWDWHPHQWlUHIHUV                   XQGHUWKHWHUPVRIWKH0LFKLJDQWDULIIV
WRWKHLQWHUFRQQHFWLRQDJUHHPHQWVGLVFXVVHGWKURXJKRXW
DQGWKHm>V@WDWHPHQWVRIJHQHUDOO\DYDLODEOHWHUPVlGLVFXVVHG                     $PHULWHFK DSSHDOHG DQG WKH GLVWULFW FRXUW UHYHUVHG WKH
LQ  I  6HH 0&, 7HOHFRPPV &RUS Y %HOO6RXWK                   &RPPLVVLRQjVGHFLVLRQJUDQWLQJ$PHULWHFKjVPRWLRQ7KH
7HOHFRPPV,QF)6XSSGQ1')OD                    GLVWULFW FRXUW LQWHUSUHWHG LQWHUFRQQHFWLRQ DJUHHPHQWV LQ WKH
DIIjG)GWK&LU7KXVDOWKRXJK                  $FW DV mELQGLQJl WR PHDQ WKDW VXFK DJUHHPHQWV DUH WKH
HUHIHUVWRDQDJJULHYHGSDUW\jVDFWLRQWRFKDOOHQJH                 H[FOXVLYH PHDQV E\ ZKLFK FRPSHWLQJ FDUULHUV FDQ REWDLQ
WKHVWDWHFRPPLVVLRQjVLQWHUSUHWDWLRQRIDQLQWHUFRQQHFWLRQ                    LQWHUFRQQHFWLRQDQGDFFHVVWRVHUYLFH7KHFRXUWVWDWHGWKDWLI
                                                                               DSDUW\WRDQLQWHUFRQQHFWLRQDJUHHPHQWLVXQLODWHUDOO\DOORZHG
                                                                               WR UHO\ XSRQ PRUH IDYRUDEOH WDULII SURYLVLRQV ZKHQ WKH
                                                                               DJUHHPHQWSURYLVLRQVDUHQRWHFRQRPLFDOO\IHDVLEOHWKH$FWjV
                                                                               SUHIHUHQFH IRU QHJRWLDWHG FRQWUDFWV ZRXOG EH XQGHUPLQHG
     
      7KLV VWDWHPHQW UHIOHFWV QR MXGJPHQW DERXW ZKHWKHU IHGHUDO FRXUWV
                                                                               %HFDXVHWKHSURYLVLRQVLQWKHDJUHHPHQWFRQVWLWXWHGWKHHQWLUH
FDQ UHYLHZ VWDWH ODZ TXHVWLRQV VXFK DV WKH LQWHUSUHWDWLRQ RI DQ               DJUHHPHQW EHWZHHQ $PHULWHFK DQG 0&, WKH GLVWULFW FRXUW
LQWHUFRQQHFWLRQ DJUHHPHQW XQGHU  H ,Q       0LFKLJDQ %HOO   WKLV   FRQFOXGHG WKDW 0&, FRXOG QRW H[HUFLVH $PHULWHFKjV WDULII
FRXUW H[SODLQHG WKDW LW GLG QRW LQWHUSUHW WKH DJUHHPHQWjV WHUPV EHFDXVH WKH    WHUPV DQG WKDW WKH &RPPLVVLRQjV LQWHUSUHWDWLRQ RI WKH
SODLQWLII KDG ZLWKGUDZQ LWV DUJXPHQWV WKDW WKH VWDWH FRPPLVVLRQ RUGHU
HUURQHRXVO\ LQWHUSUHWHG WKH DJUHHPHQW DV D PDWWHU RI VWDWH ODZ  )G
                                                                               DJUHHPHQWZDVDUELWUDU\DQGFDSULFLRXV
DW  Q 7KLV FRXUW GLG QRW LQGLFDWH ZKHWKHU LW ZRXOG KDYH EHHQ
SURSHU WR LQWHUSUHW WKH DJUHHPHQW KDG WKH SODLQWLII QRW ZLWKGUDZQ LWV VWDWH
ODZ FODLPV
    0LFK%HOO7HO&RY0&,0HWURHWDO      1R      1R        0LFK%HOO7HO&RY0&,0HWURHWDO                 

                       ,,,$1$/<6,6                                %\FRQWUDVWWKH)LIWKDQG1LQWK&LUFXLWVKDYHUHFRJQL]HG
                                                                   IHGHUDOMXULVGLFWLRQWRUHYLHZVWDWHFRPPLVVLRQGHFLVLRQVIRU
                     6WDQGDUGRI5HYLHZ                            FRPSOLDQFHZLWKVWDWHODZ6:%HOO7HO&RY3XE8WLO
                                                                   &RPPjQRI7H[)GWK&LU86
  :HUHYLHZGHQRYRGLVWULFWFRXUWRUGHUVJUDQWLQJVXPPDU\         :&RPPXQLFDWLRQVY0)6,QWHOHQHW,QF)G
MXGJPHQW$YHU\Y.LQJ)GWK&LU         WK&LUFHUWGHQLHG86,Q
                                                                   UHDFKLQJ WKLV FRQFOXVLRQ WKH )LIWK &LUFXLW GLVFXVVHG WKH
   :KHQ UHYLHZLQJ VWDWH SXEOLF VHUYLFH FRPPLVVLRQ RUGHUV     SXUSRVHODQJXDJHRIDQGWKH)LUVWDQG6HYHQWK&LUFXLWVj
XQGHUWKH$FWWKLVFRXUWLVmOLPLWHGWRGHWHUPLQLQJZKHWKHU      DUJXPHQWVIRUUHDGLQJWKLVODQJXDJHQDUURZO\EXWXOWLPDWHO\
WKHRUGHULVFRQVLVWHQWZLWKVHFWLRQVDQGRIWKH$FWl     GLG QRW H[SODLQ LWV GHFLVLRQ WR DGRSW mWKH EURDGHU YLHZ
0LFK%HOO7HO&RY6WUDQG)GDW:HUHYLHZWKH     FRQVLGHULQJ GH QRYR ZKHWKHU WKH DJUHHPHQWV FRPSO\ ZLWK
&RPPLVVLRQjV LQWHUSUHWDWLRQ RI WKH $FW GH QRYR DV ZHOO    VHFWLRQVDQGDQGUHYLHZLQJµDOORWKHULVVXHVjXQGHU
DFFRUGLQJOLWWOHGHIHUHQFHWRWKH&RPPLVVLRQjVLQWHUSUHWDWLRQ      DQDUELWUDU\DQGFDSULFLRXVVWDQGDUGl6:%HOO7HO&R
RIWKH$FW,G)XUWKHUPRUHEHFDXVHWKH&RPPLVVLRQmLVQRW     )G DW   6LPLODUO\ WKH 1LQWK &LUFXLW HPSKDVL]HG WKH
DQ µDJHQF\ ZLWKLQ WKH PHDQLQJ RI WKH $GPLQLVWUDWLYH         SXUSRVHODQJXDJHRIWKHVWDWXWHZKHQGLVFXVVLQJWKHVWDQGDUG
3URFHGXUH$FWVHH86&EjVRWKHVWDQGDUGV         RIUHYLHZXQGHUHEXWRIIHUHGQRH[SODQDWLRQIRULWV
SURYLGHGE\WKH$3$DUHQRWGLUHFWO\DSSOLFDEOHl0LFK%HOO       GHFLVLRQWRmFRQVLGHU>@GHQRYRZKHWKHUWKHDJUHHPHQWVDUHLQ
DW                                                            FRPSOLDQFHZLWKWKH$FWDQGWKHLPSOHPHQWLQJUHJXODWLRQV
                                                                   DQG FRQVLGHULQJ DOO RWKHU LVVXHV XQGHU DQ DUELWUDU\ DQG
  :LWK UHVSHFW WR WKH &RPPLVVLRQjV ILQGLQJV RI IDFW ZH    FDSULFLRXVVWDQGDUGl86:&RPPXQLFDWLRQV)GDW
DSSO\WKHDUELWUDU\DQGFDSULFLRXVVWDQGDUG,G7KHDUELWUDU\   
DQGFDSULFLRXVVWDQGDUGLVWKHPRVW GHIHUHQWLDOVWDQGDUGRI
MXGLFLDOUHYLHZRIDJHQF\DFWLRQXSKROGLQJWKRVHRXWFRPHV
VXSSRUWHGE\DUHDVRQHGH[SODQDWLRQEDVHGXSRQWKHHYLGHQFH
LQ WKH UHFRUG DV D ZKROH  6HH .LOOLDQ Y +HDOWKVRXUFH       
3URYLGHQW$GPjUV,QF)GWK&LU              7KH    (OHYHQWK   &LUFXLW   KDV   DOVR   VDLG   WKDW   VWDWH   FRPPLVVLRQ

:HZLOOXSKROGDGHFLVLRQmLILWLVWKHUHVXOWRIDGHOLEHUDWH     LQWHUSUHWDWLRQV RI DJUHHPHQWV DUH VXEMHFW WR IHGHUDO UHYLHZ XQGHU  

SULQFLSOHG UHDVRQLQJ SURFHVV DQG LI LW LV VXSSRUWHG E\    %HOO6RXWK 7HOHFRPPV ,QF Y 0&,0HWUR $FFHVV 7UDQVPLVVLRQ 6HUYV
                                                                   ,QF  )G   WK &LU  HQ EDQF +RZHYHU WKH
VXEVWDQWLDO HYLGHQFHl ,G  1RU ZLOO ZH UHYHUVH WKH        (OHYHQWK &LUFXLW GLG QRW GHFLGH ZKHWKHU   SHUPLWV IHGHUDO UHYLHZ RI
&RPPLVVLRQjVGHFLVLRQDEVHQWDFOHDUHUURURIMXGJPHQWRUWKH      VWDWH ODZ FODLPV LQVWHDG FRQFOXGLQJ WKDW IHGHUDO FRXUWV FDQ H[HUFLVH
&RPPLVVLRQjVIDLOXUHWRFRQVLGHUUHOHYDQWIDFWRUVRUDVSHFWV       SHQGHQW MXULVGLFWLRQ WR FRQVLGHU VWDWH ODZ LVVXHV UHODWHG WR D VWDWH
RIWKHSUREOHP1RQHWKHOHVVZHDUHERXQGE\WKHUHDVRQLQJ        FRPPLVVLRQ RUGHU ,G DW 
FRQWDLQHGLQWKH&RPPLVVLRQjVGHFLVLRQDQGXVHWKHEDVLVIRU            7KH )LIWK &LUFXLW FODLPV WKDW WKH )RXUWK &LUFXLW mZRXOG SHUPLW GLVWULFW
                                                                   FRXUWV WR FRQVLGHU GH QRYR ZKHWKHU WKH DJUHHPHQWV DUH LQ FRPSOLDQFH ZLWK
WKDWGHFLVLRQWRIUDPHRXUDSSOLFDWLRQRIWKH$FWWRWKHLVVXHV    WKH $FW DQG WKH LPSOHPHQWLQJ UHJXODWLRQV EXW    UHYLHZ DOO RWKHU LVVXHV
LQGLVSXWH                                                        GHFLGHG E\ D VWDWH FRPPLVVLRQ XQGHU D PRUH GHIHUHQWLDO VWDQGDUGl 6:
                                                                   %HOO 7HO &R Y 3XE 8WLO &RPPjQ RI 7H[  )G DW  7KH )RXUWK
        sXULVGLFWLRQRYHUVWDWHFRPPLVVLRQGHFLVLRQV               &LUFXLW KRZHYHU KDV QRW LQWHUSUHWHG  H WR SHUPLW IHGHUDO MXGLFLDO
                                                                   UHYLHZ RI VWDWH FRPPLVVLRQ RUGHUV IRU FRPSOLDQFH ZLWK VWDWH ODZ 5DWKHU
  0&, DUJXHV WKDW WKH GLVWULFW FRXUW LQDSSURSULDWHO\         WKH )RXUWK &LUFXLW KHOG WKDW LW UHYLHZV GH QRYR D VWDWH FRPPLVVLRQjV

FRQVLGHUHGTXHVWLRQVRIVWDWHODZWKDWZHUHRXWVLGHWKHVFRSH      LQWHUSUHWDWLRQV RI WKH $FW DQG UHYLHZV WKH FRPPLVVLRQjV IDFWILQGLQJ XQGHU
                                                                   WKH VXEVWDQWLDO HYLGHQFH VWDQGDUG *7( 6 ,QF Y 0RUULVRQ  )G
RISHUPLVVLEOHIHGHUDOUHYLHZXQGHU86&DQGWKH         WK &LU 
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO         

   )HGHUDO FRXUWV WKHUHIRUH KDYH  H MXULVGLFWLRQ WR    VFRSHRIUHYLHZXQGHU86&H2XUUHYLHZRI
UHYLHZDVWDWHFRPPLVVLRQjVLQWHUSUHWDWLRQRIDQDJUHHPHQW            DGLVWULFWFRXUWjVILQGLQJRIMXULVGLFWLRQLVGHQRYR*UHDWHU
DOWKRXJK LW LV QRW FOHDU ZKHWKHU WKDW MXULVGLFWLRQ SHUPLWV     'LVW5HV5HFRYHU\$XWKY(3$)GWK&LU
UHYLHZ RI WKH LQWHUSUHWDWLRQ IRU FRPSOLDQFH ZLWK VWDWH ODZ    
$IWHU DOO WKH $FW VSHFLILFDOO\ SHUPLWV DJJULHYHG SDUWLHV WR
EULQJDIHGHUDODFWLRQIRUDVSHFLILFSXUSRVHnmWRGHWHUPLQH             ,Q9HUL]RQ0DU\ODQG,QFY3XEOLF6HUYLFH&RPPLVVLRQRI
ZKHWKHUWKHDJUHHPHQWRUVWDWHPHQWPHHWVWKHUHTXLUHPHQWVRI           0DU\ODQGWKH6XSUHPH&RXUWUHVROYHGDFLUFXLWVSOLWRQWKH
VHFWLRQ  RI WKLV WLWOH DQG WKLV VHFWLRQl   86&      LVVXH RI ZKHWKHU IHGHUDO FRXUWV KDYH MXULVGLFWLRQ WR UHYLHZ
H7KHFLUFXLWVKDYHVSOLWRQZKHWKHUH           VWDWHFRPPLVVLRQRUGHUVLQWHUSUHWLQJDQGHQIRUFLQJSUHYLRXVO\
VKRXOGEHLQWHUSUHWHGEURDGO\RUQDUURZO\EXWWKRVHFLUFXLWV          DSSURYHGLQWHUFRQQHFWLRQDJUHHPHQWV6HH6&W
UHFRJQL]LQJRQO\MXULVGLFWLRQWRUHYLHZ DVWDWHFRPPLVVLRQ             86 : &RPPXQLFDWLRQV ,QF Y 6SULQJ
GHWHUPLQDWLRQIRUFRPSOLDQFHZLWKIHGHUDOODZUHO\KHDYLO\RQ          &RPPXQLFDWLRQV&R)GQWK&LU
WKLVmSXUSRVHFODXVHl8QIRUWXQDWHO\QRQHRIWKHFLUFXLWVRQ         QRWLQJWKHKROGLQJVRIVHYHUDOFLUFXLWVRQWKHLVVXH
HLWKHU VLGH RI WKH VSOLW RIIHU D SHUVXDVLYH UHDVRQHG          7KH&RXUWKHOGZKLOHGHFOLQLQJWRUXOHWKDW6HFWLRQH
H[SODQDWLRQIRUWKHLUFRQFOXVLRQVDERXWWKHVFRSHRIIHGHUDO           H[SUHVVO\ JLYHV VXFK DXWKRULW\ WKDW IHGHUDO FRXUWV KDYH
MXULVGLFWLRQXQGHUWKH$FW                                            MXULVGLFWLRQWRUHYLHZVWDWHFRPPLVVLRQRUGHUVIRUFRPSOLDQFH
                                                                       ZLWK IHGHUDO ODZ EHFDXVH SURYLVLRQV RI WKH $FW GR QRW
  7KH)LUVWDQG6HYHQWK&LUFXLWVKDYHKHOGWKDWIHGHUDOFRXUWV         SUHFOXGHMXULVGLFWLRQXQGHU86&6&WDW
KDYHMXULVGLFWLRQRQO\WRUHYLHZDVWDWHFRPPLVVLRQjV            /(GDW
GHWHUPLQDWLRQIRUFRPSOLDQFHZLWKIHGHUDOODZQRWVWDWHODZ
7KH )LUVW &LUFXLW UHOLHG RQ WKH SXUSRVH ODQJXDJH RI                               6XSSOHPHQWDOMXULVGLFWLRQ
HWRVXSSRUWWKLVFRQFOXVLRQUHDVRQLQJWKDWWKHUH
ZRXOG KDYH EHHQ OLWWOH QHHG WR LQFOXGH WKLV ODQJXDJH m>L@I      $PHULWHFK DVVHUWV WKDW WKH &RPPLVVLRQ LQFRUUHFWO\
&RQJUHVVKDGLQWHQGHGIHGHUDOFRXUWVjUHYLHZWRHQFRPSDVV              LQWHUSUHWHG 0LFKLJDQ FRQWUDFW ODZ LQ PDNLQJ LWV
DQ\ NLQG RI DOOHJHG OHJDO IODZ LQ D VWDWH FRPPLVVLRQjV        GHWHUPLQDWLRQ6HYHUDOIHGHUDOFRXUWVKDYHKHOGWKDWDVWDWH
GHWHUPLQDWLRQl357HO&RY7HOHFRPPV5HJXODWRU\%G            FRPPLVVLRQjVFRQWUDFWXDOLQWHUSUHWDWLRQRIDQLQWHUFRQQHFWLRQ
RI 35  )G   VW &LU  QRWLQJ WKDW WKLV   DJUHHPHQWLVJRYHUQHGE\VWDWHQRWIHGHUDOODZ6HH,OO%HOO
LQWHUSUHWDWLRQLVDOVRFRQVLVWHQWZLWKWKH$FWjVJHQHUDOVFKHPH        7HO&RY:RUOGFRP7HFK,QF)GWK&LU
RI FRRSHUDWLYH IHGHUDOLVP  7KH 6HYHQWK &LUFXLW VLPLODUO\       QRWLQJ WKDW VWDWH IRUXPV FDQ VXSSO\ UHPHGLHV IRU
FRQFOXGHGWKDW&RQJUHVVLQFOXGHGWKLVODQJXDJHmWRFODULI\             GLVSXWHVJRYHUQHGE\FRQWUDFWODZFHUWGLVPLVVHG6&W
WKDWIHGHUDOFRXUWVPD\UHYLHZDVWDWHFRPPLVVLRQjVDFWLRQV              FHUW GHQLHG  6&W  
ZLWKUHVSHFWWRDQDJUHHPHQWRQO\IRUFRPSOLDQFHZLWKWKH              6RXWKZHVWHUQ %HOO Y 3XE 8WLO &RPPjQ RI 7H[  )G
UHTXLUHPHQWVRIDQGRIWKH7HOHFRPPXQLFDWLRQV                WK &LU KROGLQJ WKDW VWDWH ODZ JRYHUQV
$FW DQG QRW IRU FRPSOLDQFH ZLWK VWDWH ODZl  0&,             TXHVWLRQVRILQWHUSUHWDWLRQRIDJUHHPHQWVDQGHQIRUFHPHQWRI
7HOHFRPPV&RUSY,OO&RPPHUFH&RPPjQ)G                SURYLVLRQV
WK&LUDOVRLQWHUSUHWLQJWKH$FWWRHQYLVLRQVXLWV
UHYLHZLQJ mDFWLRQVl E\ VWDWH FRPPLVVLRQV UDWKHU WKDQ               $PHULWHFK DUJXHV WKDW VWDWXWRU\ VRXUFHV PD\ SURYLGH
m>U@HYLHZRILQWHUFRQQHFWLRQDJUHHPHQWVlWKHPVHOYHV                  DXWKRULW\ WR UHYLHZ WKH VWDWH ODZ LQ WKH GHFLVLRQ RI WKH
                                                                       &RPPLVVLRQ  7KH VXSSOHPHQWDO MXULVGLFWLRQ VWDWXWH 
                                                                       86&   SURYLGHV WKDW GLVWULFW FRXUWV ZLWK RULJLQDO
                                                                       MXULVGLFWLRQRIDFODLPKDYHVXSSOHPHQWDOMXULVGLFWLRQRYHU
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO          

FODLPVWKDWDUHVRUHODWHGWRWKHFODLPWKDWSURYLGHGRULJLQDO           7KH6L[WK&LUFXLWKDVDOUHDG\UHFRJQL]HGWKDWmJLYHV
MXULVGLFWLRQ WKDW mWKH\ IRUP SDUW RI WKH VDPH FDVH RU         WKH VWDWH FRPPLVVLRQ DXWKRULW\ WR LQWHUSUHW DQG HQIRUFH
FRQWURYHUV\l7KH6XSUHPH&RXUWLQ9HUL]RQ0DU\ODQG            DJUHHPHQWVZKHQSRVWDSSURYDOGLVSXWHVDULVHl0LFK%HOO
DOORZHGIHGHUDOFRXUWVWRH[HUFLVHRULJLQDOMXULVGLFWLRQXQGHU         7HO&RY6WUDQG)GWK&LUFLWLQJ
 86&   WR UHYLHZ WKH GHFLVLRQV RI VWDWH              86&  F H DQG  DV WKH EDVLV IRU WKLV
FRPPLVVLRQV LQWHUSUHWLQJ DQG HQIRUFLQJ LQWHUFRQQHFWLRQ             DXWKRULW\  7KH )HGHUDO &RPPXQLFDWLRQV &RPPLVVLRQ
DJUHHPHQWV                                                            m)&&l WKH DJHQF\ FKDUJHG ZLWK LPSOHPHQWLQJ WKH $FW
                                                                       %HOO6RXWK 7HOHFRPPXQLFDWLRQV ,QF Y 0&,0HWUR $FFHVV
  7KXV KDYLQJ RULJLQDO MXULVGLFWLRQ DV FRQWHPSODWHG LQ          7UDQVPLVVLRQ6HUYLFHV,QF)GWK&LU
9HUL]RQDIHGHUDOFRXUWFRXOGSRVVLEO\H[HUFLVHVXSSOHPHQWDO           HQ EDQF KDV OLNHZLVH UHFRJQL]HG WKDW D VWDWH
MXULVGLFWLRQ RYHU VWDWH FRQWUDFW FODLPV WKDW DUH VXIILFLHQWO\   FRPPLVVLRQjVUHVSRQVLELOLWLHVLQFOXGHWKHLQWHUSUHWDWLRQ
UHODWHG WR WKH FODLPV UHJDUGLQJ D VWDWH FRPPLVVLRQjV            DQG HQIRUFHPHQW RI LQWHUFRQQHFWLRQ DJUHHPHQWV  ,Q UH
FRPSOLDQFH ZLWK IHGHUDO ODZ LQ LWV GHWHUPLQDWLRQV DQG           6WDUSRZHU&RPPXQLFDWLRQV//&)&&5
LQWHUSUHWDWLRQVRIDJUHHPHQWV$UHODWHGFODLPLVRQHDULVLQJ         ILQGLQJWKDWmWKH9LUJLQLD&RPPLVVLRQµIDLOHGWR
IURPDFRPPRQQXFOHXVRIIDFWV8QLWHG0LQH:RUNHUVY                DFW WR FDUU\ RXW LWV UHVSRQVLELOLW\j XQGHU VHFWLRQ l E\
*LEEV866&W/(GG              GHFOLQLQJWRLQWHUSUHWDQGHQIRUFH6WDUSRZHUjVLQWHUFRQQHFWLRQ
7KHFODLPVPXVWDOVREHVXFKWKDWDSODLQWLII        DJUHHPHQWV7KH)&&jVLQWHUSUHWDWLRQRIWKHVWDWXWHVXSSRUWV
ZRXOGEHH[SHFWHGWRWU\WKHPLQRQHMXGLFLDOSURFHHGLQJ,G         WKH FRQFOXVLRQ WKDW VWDWH FRPPLVVLRQV PD\ LQWHUSUHW
7KHIDFWVLQWKLVFDVHDOOFHQWHUXSRQWKHLQWHUSUHWDWLRQRIWKH       DJUHHPHQWVZLWKLQWKHSXUYLHZRI
VDPHFRQWUDFWZLWKUHVSHFWWRVWDWHDQGIHGHUDOODZ7KHVWDWH
FODLPDULVHVIURPWKHFRPPRQQXFOHXVRIIDFWV                           0RUHRYHU m>Q@R FRXUW KDV KHOG RU VXJJHVWHG WKDW D VWDWH
                                                                       FRPPLVVLRQ GRHV QRW KDYH WKH DXWKRULW\ WR LQWHUSUHW DQG
  )XUWKHUPRUHWKHVHFODLPVDUHORJLFDOO\WULHGLQWKHVDPH            HQIRUFH LQWHUFRQQHFWLRQ DJUHHPHQWV DIWHU WKH\ KDYH EHHQ
SURFHHGLQJ7KLVSRVLWLRQFRQFXUVZLWKWKHGLVWULFWFRXUWjV           DSSURYHGl%HOO6RXWK7HOHFRPPV,QFY0&,0HWUR$FFHVV
UHFRJQL]DQFHZKHQLWTXRWHG6RXWKZHVWHUQ%HOO7HO&RY             7UDQVPLVVLRQ6HUYV,QF)GDW,QIDFWVHYHUDO
%URRNV)LEHU&RPPXQLFDWLRQVRI2NODKRPD,QFDQGUHOLHG              RWKHUFLUFXLWVKDYHKHOGWKDWE\JLYLQJVWDWHFRPPLVVLRQVWKH
RQ VHYHUDO GLVWULFW FRXUW RSLQLRQV WKDW WKH $FWjV JUDQW RI   SRZHUWRDFFHSWRUUHMHFWLQWHUFRQQHFWLRQDJUHHPHQWV
SRZHUWRIHGHUDOFRXUWVWRUHYLHZVWDWHFRPPLVVLRQGHFLVLRQV           QHFHVVDULO\ LPSOLHV WKHLU DXWKRULW\ WR LQWHUSUHW DQG HQIRUFH
OHDGVWRWKHFRQFOXVLRQWKDWmLWZRXOGEHDZDVWHRIMXGLFLDO          VXFK DJUHHPHQWV  6: %HOO 7HO &R Y %URRNV )LEHU
UHVRXUFHVWROLPLWWKHFRXUWjVFRQVLGHUDWLRQWRIHGHUDOLVVXHV         &RPPXQLFDWLRQVRI2NOD,QF)GWK&LU
RQO\l0LFK%HOO7HO&RY0&,0HWUR$FFHVV7UDQVPLVVLRQ           6:%HOO7HO&RY&RQQHFW&RPPXQLFDWLRQV&RUS
6HUYV  ) 6XSS G   (' 0LFK           )GWK&LU0&,7HOHFRPPVY,OO
TXRWLQJ%URRNV)LEHU)GWK&LU            %HOO 7HO &R  )G   WK &LU  FHUW
VHH DOVR %HOO6RXWK 7HOHFRPPV ,QF Y 0&,0HWUR $FFHVV          GHQLHG866:%HOO7HO&RY3XE8WLO
7UDQVPLVVLRQ6HUYV,QF)6XSSGQ              &RPPjQRI7H[)GWK&LU7KXV
1'*D                                                       LW VHHPV FOHDU WKDW LQWHUSUHWDWLRQ LV D GHWHUPLQDWLRQ XQGHU
                                                                       DQGWKDWDIHGHUDOFRXUWKDVMXULVGLFWLRQRYHUDVWDWH
   2XU DQDO\VLV RI MXULVGLFWLRQ RYHU WKH VWDWH FRQWUDFW ODZ    FRPPLVVLRQ GHFLVLRQ LQWHUSUHWLQJ DQ LQWHUFRQQHFWLRQ
LVVXHV PXVW FRQVLGHU WKH 6XSUHPH &RXUWjV KROGLQJ LQ             DJUHHPHQWSXUVXDQWWRH
3HQQKXUVW6WDWH6FKRRODQG+RVSLWDOY+DOGHUPDQ86
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO          

  +RZHYHUDVVWDWHFRPPLVVLRQVKDYHHPSKDVL]HGWKH\KDYH             6&W/(GGLQ
(OHYHQWK $PHQGPHQW LPPXQLW\ DJDLQVW VWDWH ODZ FODLPV             ZKLFKWKH&RXUWVWDWHGWKDWIHGHUDOFRXUWVFDQQRWHQMRLQVWDWH
EURXJKWLQIHGHUDO FRXUW3HQQKXUVW6WDWH6FK	+RVSY            RIILFLDOV RQ WKH EDVLV RI VWDWH ODZ  0&, DQG WKH
+DOGHUPDQ86,Q0F1HLOXV7UXFNDQG             FRPPLVVLRQHUV DUJXH WKLV VXSSRUWV WKHLU SRVLWLRQ WKDW WKH
0DQXIDFWXULQJ,QFY2KLR)GWK&LUZH          &RPPLVVLRQjVDVVHUWLRQRI(OHYHQWK$PHQGPHQWLPPXQLW\
UHFRJQL]HGWKDWWKLVLVWUXHHYHQZKHUHDIHGHUDOFRXUWZRXOG          SUHFOXGHV WKH IHGHUDO FRXUWjV H[HUFLVH RI VXSSOHPHQWDO
RWKHUZLVH KDYH VXSSOHPHQWDO MXULVGLFWLRQ RYHU D VWDWH ODZ       MXULVGLFWLRQRYHUVWDWHODZFODLPV,Q6RXWKZHVWHUQ%HOOY
FODLP  ,G DW   7KHUHIRUH XQGHU WKH 6L[WK &LUFXLWjV    3XEOLF8WLOLWLHV&RPPLVVLRQRI7H[DV)GDWWKH
SUHFHGHQW D IHGHUDO FRXUW FDQQRW H[HUFLVH VXSSOHPHQWDO          &RXUWRI$SSHDOVIRUWKH)LIWK&LUFXLWKHOGWKDWmWKH)HGHUDO
MXULVGLFWLRQWRDVVHVVWKHFRUUHFWQHVVRIDVWDWHFRPPLVVLRQjV         FRXUWV FDQQRW H[HUFLVH VXSSOHPHQWDO MXULVGLFWLRQ WR UHYLHZ
LQWHUSUHWDWLRQRIDQLQWHUFRQQHFWLRQDJUHHPHQWRQDQ\VWDWH            VWDWHODZGHWHUPLQDWLRQVPDGHE\DVWDWHFRPPLVVLRQZKHUH
ODZ JURXQG HYHQ ZKHUH WKH FRXUW KDV IHGHUDO TXHVWLRQ          WKHFRPPLVVLRQKDVDVVHUWHGVRYHUHLJQLPPXQLW\lQRWXQOLNH
MXULVGLFWLRQRYHUDUHODWHGFODLP                                     WKHSUHVHQWFDVH
   %HFDXVH6L[WK&LUFXLWSUHFHGHQWSUHFOXGHVIHGHUDOFRXUWV               7KH6XSUHPH&RXUWKRZHYHUUXOHGWKDWVWDWHFRPPLVVLRQV
IURP H[HUFLVLQJ VXSSOHPHQWDO MXULVGLFWLRQ WR FRQVLGHU DQ\        GR QRW KDYH LPPXQLW\ XQGHU WKH (OHYHQWK $PHQGPHQW
VWDWH ODZ FODLPV SHUWDLQLQJ WR D VWDWH FRPPLVVLRQjV             LQYRNLQJWKHGRFWULQHRI([3DUWH<RXQJ9HUL]RQ0G
GHWHUPLQDWLRQ ZH PXVW UHYLVLW WKH LVVXH WKDW WKH 6XSUHPH      6&WDW/(GGDW6WLOOZHKHOGLQ0F1HLOXV
&RXUWH[SOLFLWO\OHIWXQUHVROYHGLQ9HUL]RQ0DU\ODQGnWKH             7UXFNDQG0DQXIDFWXULQJ,QFY2KLRWKDWVXLWVLQIHGHUDO
VFRSHRI6SHFLILFDOO\ZHPXVWGHFLGHZKHWKHUWKHWH[W         FRXUW DJDLQVW VWDWH RIILFLDOV IRU YLRODWLRQ RI VWDWH ODZ DUH
RImLPSOLFLWO\HQFRPSDVVHVWKHDXWKRULW\WRLQWHUSUHW            EDUUHGXQGHUWKH6XSUHPH&RXUWjVUXOLQJLQ3HQQKXUVWHYHQ
DQG HQIRUFH DQ LQWHUFRQQHFWLRQ DJUHHPHQW WKDW WKH                LIWKHUHZRXOGRWKHUZLVHEHVXSSOHPHQWDOMXULVGLFWLRQ
FRPPLVVLRQKDVDSSURYHGlDQGZKHWKHUmDQLQWHUSUHWDWLRQRU             )GWK&LU7KXV3HQQKXUVWZRXOGXQGHU
HQIRUFHPHQW GHFLVLRQ LV WKHUHIRUH D µGHWHUPLQDWLRQ XQGHU         RXU SUHFHGHQW SUHFOXGH WKH GLVWULFW FRXUW IURP XVLQJ
>@jVXEMHFWWRIHGHUDOUHYLHZl9HUL]RQ0G6&W          VXSSOHPHQWDO MXULVGLFWLRQ WR GHFLGH WKH FRUUHFWQHVV RI WKH
DW   $VVXPLQJ WKDW LQWHUSUHWDWLRQ GHFLVLRQV DUH      &RPPLVVLRQjV LQWHUSUHWDWLRQ RI WKH DJUHHPHQW XQGHU VWDWH
GHWHUPLQDWLRQV ZH PXVW DOVR GHFLGH WKH HIIHFW RI               FRQWUDFW ODZ DQG HQMRLQ HQIRUFHPHQW RI WKH &RPPLVVLRQjV
HjVVWDWHPHQWDERXWWKHSXUSRVHRIIHGHUDOUHYLHZLQ         RUGHURQDQ\VWDWHODZJURXQGV
 H  7KH $FW SHUPLWV DFWLRQV LQ IHGHUDO FRXUW mWR
GHWHUPLQH ZKHWKHU WKH DJUHHPHQW RU VWDWHPHQW PHHWV WKH            :LWKRXWVXSSOHPHQWDOMXULVGLFWLRQZHPXVWGHFLGHLIWKH
UHTXLUHPHQWVRIVHFWLRQRIWKLVWLWOHDQGWKLVVHFWLRQl       $FWDOORZVIHGHUDOFRXUWVWRH[HUFLVHMXULVGLFWLRQRYHUVWDWH
86&H,EHOLHYHWKDWDVWDWHFRPPLVVLRQjV           FRPPLVVLRQLQWHUSUHWDWLRQVRIVWDWHFRQWUDFWODZ,Q0LFKLJDQ
LQWHUSUHWDWLRQGHFLVLRQLVDmGHWHUPLQDWLRQXQGHU>@lDQG        %HOO7HOHSKRQH&R)GDWZHKHOGWKDW6HFWLRQ
 IHGHUDO UHYLHZ IRU FRPSOLDQFH ZLWK VWDWH ODZ LV            H JLYHV IHGHUDO FRXUWV SRZHU WR UHYLHZ D VWDWH
FRQWHPSODWHGE\WKHSXUSRVHRIGHWHUPLQLQJZKHWKHUDVWDWH             FRPPLVVLRQ RUGHU RQO\ IRU WKH RUGHUjV FRPSOLDQFH ZLWK
FRPPLVVLRQjVRUGHUPHHWVWKHUHTXLUHPHQWVRI                6HFWLRQVDQGRIWKH$FW7KHUHZHGLGQRWGHFLGH
EHFDXVHHSURYLGHVWKDWVXFKUHYLHZPD\EHJLQZLWK           ZKHWKHULWZRXOGEHSURSHUIRUXVWRLQWHUSUHWWKHDJUHHPHQW
FRQVLGHUDWLRQRIWKHLQWHUFRQQHFWLRQDJUHHPHQWLQTXHVWLRQ            EHFDXVH WKH SODLQWLII ZLWKGUHZ LWV DUJXPHQWV WKDW WKH VWDWH
                                                                       FRPPLVVLRQRUGHUHUURQHRXVO\LQWHUSUHWHGWKHDJUHHPHQWDVD
                                                                       PDWWHURIVWDWHODZ,GDWQ2WKHUFLUFXLWVKDYHKHOG
    0LFK%HOO7HO&RY0&,0HWURHWDO       1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO        

WKDW6HFWLRQHJLYHVFRXUWVSRZHUWRGHWHUPLQHRQO\           &RPPjQRI0G866&W
LIDVWDWHFRPPLVVLRQjVGHFLVLRQYLRODWHGIHGHUDOODZDQGQRW        %HFDXVHHQHLWKHUmHVWDEOLVK>HV@DGLVWLQFWLYHUHYLHZ
WR UHYLHZ VWDWH FRPPLVVLRQ GHFLVLRQV IRU FRPSOLDQFH ZLWK       PHFKDQLVP IRU WKH FRPPLVVLRQ DFWLRQV WKDW LW FRYHUVl QRU
VWDWHODZ357HO&R)GDW,OO%HOO)GDW    mGLVSOD\V DQ\ LQWHQW WR ZLWKGUDZ IHGHUDO MXULVGLFWLRQ XQGHU
                                                                  lWKH6XSUHPH&RXUWVDZQRQHHGWRUHO\RQIRU
                                                                      MXULVGLFWLRQRYHUDIHGHUDOTXHVWLRQ,GDW$VWKH&RXUW
   7KH ODQJXDJH RI 6HFWLRQ H DOORZV IHGHUDO FRXUW      H[SODLQHGmHYHQLIHGRHVQRWFRQIHUMXULVGLFWLRQ
UHYLHZRImWKHDJUHHPHQWRUVWDWHPHQWlIRUFRPSOLDQFHZLWK            LWDWOHDVWGRHVQRWGLYHVWWKHGLVWULFWFRXUWVRIWKHLUDXWKRULW\
6HFWLRQV  DQG   7KH mDJUHHPHQWl UHIHUV WR              XQGHU86&WRUHYLHZWKH&RPPLVVLRQjVRUGHUIRU
LQWHUFRQQHFWLRQ DJUHHPHQWV DQG mVWDWHPHQWl UHIHUV WR            FRPSOLDQFHZLWKIHGHUDOODZl,GDW7KXVWKH&RXUW
m>V@WDWHPHQWV RI JHQHUDOO\ DYDLODEOH WHUPVl GLVFXVVHG LQ        FRQFOXGHGWKDWIHGHUDOFRXUWVFDQUHYLHZIRUFRPSOLDQFHZLWK
6HFWLRQI7RUHYLHZDQDJUHHPHQWIRUFRPSOLDQFHZLWK           IHGHUDO ODZ ERWK VWDWH FRPPLVVLRQ GHFLVLRQV DFFHSWLQJ DQ
IHGHUDOODZDVLVDXWKRUL]HGH[SUHVVO\E\6HFWLRQH         LQWHUFRQQHFWLRQ DJUHHPHQW DQG GHFLVLRQV LQWHUSUHWLQJ RU
UHTXLUHV LQWHUSUHWLQJ ZKDW WHUPV DUH FRQWDLQHG LQ WKH          HQIRUFLQJ DQ DOUHDG\ DFFHSWHG LQWHUFRQQHFWLRQ DJUHHPHQW
DJUHHPHQW7KH)HGHUDO&RPPXQLFDWLRQV&RPPLVVLRQKDV                 9HUL]RQ0DU\ODQGGLGQRWDGGUHVVZKHWKHUVXFKGHFLVLRQVDUH
GHWHUPLQHGWKDWLQWHUSUHWLQJWKHDJUHHPHQWLVDIXQFWLRQJLYHQ        DOVRUHYLHZDEOHIRUFRPSOLDQFHZLWKVWDWHODZ
WR VWDWH FRPPLVVLRQV XQGHU WKH $FW ,Q UH 6WDUSRZHU
&RPPXQLFDWLRQV//&)&&5               7KH6XSUHPH&RXUWjVGHFLVLRQWRUHO\RQUDWKHUWKDQ
DQG QR FRXUW KDV GHQLHG D VWDWH FRPPLVVLRQ WKH SRZHU WR     HDVDEDVLVIRUMXULVGLFWLRQVXJJHVWVWKDWIHGHUDO
LQWHUSUHW DJUHHPHQWV  %HOO6RXWK 7HOHFRPPV ,QF Y            FRXUWVPD\EHDEOHWRH[HUFLVHVXSSOHPHQWDOMXULVGLFWLRQRYHU
0&,0HWUR$FFHVV7UDQVPLVVLRQ6HUYV,QF)G             DQ\VWDWHODZLVVXHVUHODWHGWRDSDUWLFXODUIHGHUDOTXHVWLRQ
WK&LUHQEDQF7KXVLQWHUSUHWDWLRQRIDQ          DERXWDVWDWHFRPPLVVLRQjVWUHDWPHQWRIDQLQWHUFRQQHFWLRQ
DJUHHPHQWLVDQDXWKRUL]HGVWDWHFRPPLVVLRQGHWHUPLQDWLRQ             DJUHHPHQW7KHVXSSOHPHQWDOMXULVGLFWLRQVWDWXWH86&
XQGHU6HFWLRQ*LYHQWKDWIHGHUDOFRXUWVPD\UHYLHZVWDWH        SURYLGHVmLQDQ\ FLYLODFWLRQRIZKLFKWKHGLVWULFW
FRPPLVVLRQGHWHUPLQDWLRQVZHMRLQRXUVLVWHUFLUFXLWVDQG            FRXUWVKDYHRULJLQDOMXULVGLFWLRQWKHGLVWULFWFRXUWVVKDOOKDYH
KROGWKDWIHGHUDOFRXUWVKDYHMXULVGLFWLRQXQGHU6HFWLRQWR       VXSSOHPHQWDO MXULVGLFWLRQ RYHU DOO RWKHU FODLPV WKDW DUH VR
UHYLHZVWDWHFRPPLVVLRQLQWHUSUHWDWLRQVIRUFRPSOLDQFHZLWK           UHODWHGWRFODLPVLQWKHDFWLRQZLWKLQVXFKRULJLQDOMXULVGLFWLRQ
VWDWH ODZ  6HH %HOO6RXWK 7HOHFRPPV  )G DW       WKDW WKH\ IRUP SDUW RI WKH VDPH FDVH RU FRQWURYHUV\ XQGHU
6RXWKZHVWHUQ%HOO7HO&RY3XE8WLO&RPPjQRI7H[          $UWLFOH ,,, RI WKH 8QLWHG 6WDWHV &RQVWLWXWLRQl  6WDWH DQG
)GDW86:&RPPXQLFDWLRQVY0)6,QWHOHQHW              IHGHUDO FODLPV DULVLQJ IURP D VWDWH FRPPLVVLRQjV
)GWK&LUFHUWGHQLHG86           LQWHUSUHWDWLRQRIDQDJUHHPHQWFOHDUO\DULVHIURPDmFRPPRQ
                                                          QXFOHXVRIRSHUDWLYHIDFWVlDQGDUHVXFKWKDWDSODLQWLIIZRXOG
                                                                      H[SHFWWRWU\WKHPLQRQHMXGLFLDOSURFHHGLQJ8QLWHG0LQH
  :H DGRSW D VWDQGDUG RI UHYLHZ WKDW HQVXUHV VWDWH            :RUNHUV RI $PHULFD Y *LEEV  86   
FRPPLVVLRQVUHDVRQDEO\DSSO\VWDWHODZ:HJLYHGHIHUHQFH            7KXVVXSSOHPHQWDOMXULVGLFWLRQZRXOGSURSHUO\HVWDEOLVKD
WR D VWDWH FRPPLVVLRQjV UHVROXWLRQ RI VWDWH ODZ LVVXHV DQG   EDVLV IRU IHGHUDO UHYLHZ RI VWDWH ODZ FODLPV UHODWHG WR D
DSSO\DQDUELWUDU\DQGFDSULFLRXVVWDQGDUGLQRXUUHYLHZ            GHWHUPLQDWLRQRIZKHWKHUDVWDWHFRPPLVVLRQGHFLVLRQLVLQ
                                                                      FRPSOLDQFHZLWKIHGHUDOODZ
       0LFK%HOO7HO&RY0&,0HWURHWDO             1R         1R      0LFK%HOO7HO&RY0&,0HWURHWDO          

                     BBBBBBBBBBBBBBBBBBBBB                                                           0LFKLJDQ&RQWUDFW/DZ
                        &21&855(1&(                                                8QGHU0LFKLJDQFRQWUDFWODZmWKHWULDOFRXUWPXVWJLYHWKH
                     BBBBBBBBBBBBBBBBBBBBB                                       ODQJXDJH LQ WKH FRQWUDFW LWV RUGLQDU\ DQG SODLQ PHDQLQJl
                                                                                 0LFK7RZQVKLS3DUWLFLSDWLQJ3ODQY3DYORYLFK1:G
  .$5(11(/6210225(&LUFXLWsXGJHFRQFXUULQJ,                              0LFK$SS&RXUWVPXVWFRQVWUXHFRQWUDFWV
ZULWH VHSDUDWHO\ WR H[SODLQ LQ PRUH GHWDLO ZK\ , DJUHH WKDW            mDVDZKROHLIUHDVRQDEO\SRVVLEOHDOOSDUWVDQGHYHU\ZRUG
IHGHUDOFRXUWVKDYHMXULVGLFWLRQWRUHYLHZWKHGHWHUPLQDWLRQV                    VKRXOGEHFRQVLGHUHGQRSDUWVKRXOGEHHOLPLQDWHGRUVWULFNHQ
RIVWDWHSXEOLFVHUYLFHFRPPLVVLRQVIRUFRPSOLDQFHZLWKERWK                     E\ DQRWKHU SDUW XQOHVV DEVROXWHO\ QHFHVVDU\l :RUNPRQ Y
IHGHUDOODZDQGVWDWHODZ                                                       3XEOLVKHUV &OHDULQJ +RXVH  )G   WK &LU
                                                                                 $VVRFLDWHG7UXFN/LQHV,QFY%DHU1:G
   7KH )HGHUDO 7HOHFRPPXQLFDWLRQV $FW RI  m$FWl                      0LFK$FRXUW ZLOO DVFHUWDLQWKHLQWHQWRIWKH
SURYLGHVm>L@QDQ\FDVHLQZKLFKD6WDWHFRPPLVVLRQPDNHV                       SDUWLHV IURP WKH SODLQ DQG XQDPELJXRXV ODQJXDJH RI D
D GHWHUPLQDWLRQ XQGHU WKLV VHFWLRQ DQ\ SDUW\ DJJULHYHG E\               FRQWUDFW+D\ZRRGY)RZOHU1:G0LFK
VXFK GHWHUPLQDWLRQ PD\ EULQJ DQ DFWLRQ LQ DQ DSSURSULDWH                 $SS
)HGHUDOGLVWULFWFRXUWWRGHWHUPLQHZKHWKHUWKHDJUHHPHQWRU
VWDWHPHQWPHHWVWKHUHTXLUHPHQWVRIVHFWLRQRIWKLVWLWOH                       7KH LQWHUFRQQHFWLRQ DJUHHPHQW DW LVVXH KHUH GRHV QRW
DQGWKLVVHFWLRQl86&H7KH6L[WK&LUFXLW                    H[SUHVVO\DGGUHVVZKHWKHU0&,FDQVWLOOEX\VHUYLFHVRQWKH
KDV FOHDUO\ UHFRJQL]HG WKDW D IHGHUDO FRXUW H[HUFLVLQJ                    WHUPVRI$PHULWHFKjVWDULII0&,DUJXHVLWFDQSODFHRUGHUVLQ
MXULVGLFWLRQ XQGHU   PD\ UHYLHZ D VWDWH FRPPLVVLRQjV                 DFFRUGDQFH ZLWK WKH WDULII EHFDXVH WKH DJUHHPHQW GLG QRW
GHWHUPLQDWLRQIRUFRPSOLDQFHZLWKIHGHUDOODZ+RZHYHUWKLV                    H[SUHVVO\ZDLYHLWVULJKWWRGRVR$PHULWHFKDUJXHVWKDWWKH
FRXUWKDVQRWGHFLGHGZKHWKHUDXWKRUL]HVIHGHUDOFRXUWV                    SDUWLHVEDUJDLQHGDJDLQVWWKHEDFNGURSRILWVWDULIIVR0&,jV
WRUHYLHZDVWDWHFRPPLVVLRQjVGHWHUPLQDWLRQIRUFRPSOLDQFH                      ULJKW WR SXUFKDVH XQGHU WKH WDULII WHUPV ZRXOG QHHG WR EH
ZLWKVWDWHODZ                                                                 H[SUHVVO\ SUHVHUYHG E\ WKH DJUHHPHQW LQ OLJKW RI WKH
                                                                                 DJUHHPHQWjVLQWHJUDWLRQFODXVH
  7KH 6XSUHPH &RXUW DOWKRXJK H[SUHVVO\ GHFOLQLQJ WR
LQWHUSUHWWKHVFRSHRIHMXULVGLFWLRQKDVUHFRJQL]HG                    7ZRSURYLVLRQVDSSHDUWREHLQFRQIOLFWDERXWZKHWKHU0&,
WKDW IHGHUDO FRXUWV KDYH MXULVGLFWLRQ WR UHYLHZ VWDWH                     PD\SODFHRUGHUVXQGHUWKHWDULIIWHUPV)LUVWWKHLQWHJUDWLRQ
FRPPLVVLRQ GHFLVLRQV LQWHUSUHWLQJ RU HQIRUFLQJ                               FODXVH VWDWHV WKDW WKH DJUHHPHQW LV WKH HQWLUH DJUHHPHQW
LQWHUFRQQHFWLRQDJUHHPHQWVIRUFRPSOLDQFHZLWKIHGHUDOODZ                       mVXSHUVHGLQJDOOSULRUXQGHUVWDQGLQJVSURSRVDOVDQGRWKHU
XQGHU  86&    9HUL]RQ 0G ,QF Y 3XE 6HUY              FRPPXQLFDWLRQVRUDORUZULWWHQl$QRWKHUVHFWLRQKRZHYHU
                                                                                 SURYLGHVWKDWHDFKSDUW\PXVWFRPSO\DWLWVRZQH[SHQVHZLWK
                                                                                 DSSOLFDEOHVWDWHUHJXODWLRQVWKDWUHODWHWRREOLJDWLRQVXQGHUWKH
                                                                                DJUHHPHQW
     )HGHUDO FRXUWV KDYH JHQHUDOO\ UHFRJQL]HG WKDW WKH LQWHUSUHWDWLRQ RI
DQ LQWHUFRQQHFWLRQ DJUHHPHQW LV JRYHUQHG E\ VWDWH FRQWUDFW ODZ QRW
                                                                                    8QGHU 0LFKLJDQ FRQWUDFW ODZ WKH DJUHHPHQW FRXOG EH
IHGHUDO ODZ   6HH HJ ,OO %HOO 7HO &R Y :RUOGFRP 7HFKV ,QF
)G   WK &LU    FHUW GHQLHG    6 &W  
                                                                           
                                                                                 LQWHUSUHWHG HLWKHU ZD\ HLWKHU WR SUHFOXGH XVH RI WKH VWDWH
                                                                                 WDULII WHUP RU WR DOORZ LW DORQJVLGH WKH LQWHUFRQQHFWLRQ
     
      m7KH GLVWULFW FRXUWV VKDOO KDYH RULJLQDO MXULVGLFWLRQ RI DOO FLYLO
                                                                                 DJUHHPHQW,IWKHODZFDQEHUHDVRQDEO\LQWHUSUHWHGHLWKHU
DFWLRQV DULVLQJ XQGHU WKH &RQVWLWXWLRQ ODZV RU WUHDWLHV RI WKH 8QLWHG
                                                                                 ZD\ DQG WKH &RPPLVVLRQ XVHG WKH GHOLEHUDWH UHDVRQLQJ
6WDWHVl  86&                                                         SURFHVV UHTXLUHG E\ .LOOLDQ ZH PXVW GHIHU WR WKH
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO          

&RPPLVVLRQjVFRQWUDFWLQWHUSUHWDWLRQEHFDXVHLWLVVXSSRUWHG              :H ILQG LQDSSOLFDEOH WKH LVVXH $PHULWHFK DUJXHG LQ WKH
E\WKHHYLGHQFH7KXVZHKROGWKDWWKH&RPPLVVLRQGLGQRW            DOWHUQDWLYHWKDWWKH&RPPLVVLRQjVRUGHUYLRODWHVIHGHUDOODZ
UHDFK DQ DUELWUDU\ DQG FDSULFLRXV UHVXOW XQGHU 0LFKLJDQ         XQGHUWKH6LHUUD0RELOHGRFWULQHZKLFKKDVEHHQDSSOLHGWR
FRQWUDFWODZDQGUHYHUVHWKHGLVWULFWFRXUWjVLQWHUSUHWDWLRQ         SURVFULEHXQLODWHUDODOWHUDWLRQRIWKHWHUPVRIFRQWUDFWWDULIIV
                                                                       EHWZHHQ FDUULHUV 6HH )HG 3RZHU &RPPjQ Y 6LHUUD 3DF
             3UHHPSWLRQDQG9LRODWLRQRIWKH$FW                       3RZHU&R868QLWHG*DV3LSH/LQH&R
                                                                       Y0RELOH*DV6HUY&RUS867KHFDVHV
   7KH ILQDO LVVXH LQ DQDO\]LQJ WKH &RPPLVVLRQjV RUGHU LV      LQZKLFKWKHGRFWULQHKDVEHHQDSSOLHGDUHGLIIHUHQWIURPWKLV
ZKHWKHULWFRQIOLFWHGZLWKWKH$FW$PHULWHFKDUJXHVWKDWWKH         FDVH  $PHULWHFKjV GXW\ WR DELGH E\ WKH WHUPV RI VWDWH ODZ
&RPPLVVLRQjV RUGHU GLUHFWLQJ $PHULWHFK mWR LPPHGLDWHO\            WDULIIVH[LVWHGSULRUWRWKHH[HFXWLRQRIWKHLQWHUFRQQHFWLRQ
EHJLQSURFHVVLQJID[HGPRYHDGGFKDQJHDQGGLVFRQQHFW               DJUHHPHQWDQGQHLWKHUFDUULHULVDWWHPSWLQJWRLQFUHDVHWKH
VHUYLFH RUGHUV VXEPLWWHG E\ 0&,0HWURl YLRODWHV WKH $FW         EDVHWDULIIUDWHV
8QGHU WKH &RPPLVVLRQjV LQWHUSUHWDWLRQ RI WKH DJUHHPHQW
$PHULWHFK GLG QRW KDYH WR DFFHSW ID[HG RUGHUV  7KH              7KLV FDVH LV QRW RQH ZKHUH FRPSHWLQJ FDUULHUV ZHUH
&RPPLVVLRQKRZHYHUIRXQGWKDW$PHULWHFKjVVWDWHWDULIIGLG           DWWHPSWLQJ WR E\SDVV WKH QHJRWLDWLRQ SURFHVV WKDW FUHDWHV
DOORZID[HGRUGHUV$PHULWHFKDUJXHVWKDWWKHFRXUWVKRXOG           LQWHUFRQQHFWLRQDJUHHPHQWV,QRXUUHYLHZRILQWHUFRQQHFWLRQ
QRWDOORZDFRPSHWLQJFDUULHUWRXVHDVWDWHWDULIIWRGRDQHQG      DJUHHPHQWV DQG VWDWH FRPPLVVLRQ GHWHUPLQDWLRQV ZH DUH
UXQDURXQGDQHJRWLDWHGLQWHUFRQQHFWLRQDJUHHPHQWHQWHUHG              PLQGIXO RI WKH LQWHQW RI &RQJUHVV DQG WKH )HGHUDO
SXUVXDQWWRWKH$FW7KH$FWLWDVVHUWVmIRUELGVUHOLDQFHRQ        &RPPXQLFDWLRQV &RPPLVVLRQ ZKLFK LV WR SURPRWH ORFDO
H[WUDQHRXVWDULIIVWKDWFRYHUWKHVDPHVXEMHFWPDWWHUDVWKH           WHOHSKRQH VHUYLFH FRPSHWLWLRQ DQG SURKLELW DFWLYLWLHV WKDW
LQWHUFRQQHFWLRQ DJUHHPHQWV EXW SXUSRUW WR RIIHU GLIIHUHQW        SUHYHQWVXFKFRPSHWLWLRQ+HUHWKHSDUWLHVKDYHFRPSOLHG
WHUPVl                                                                ZLWK WKH $FW E\ HQJDJLQJ LQ WKH QHJRWLDWLRQ DQG UHYLHZ
                                                                       SURFHVV(PSOR\LQJDGLIIHUHQWPHWKRGDOORZDEOHXQGHUVWDWH
   $FFRUGLQJWR$PHULWHFKWKHRUGHULVLPSHUPLVVLEOHIRULW          ODZ WR WUDQVPLW UHVDOH RUGHUV GRHV QRW HYLVFHUDWH WKH
LPSRVHV D VWDWH WDULII WKDW LQWHUIHUHV ZLWK DQG PXVW EH       DJUHHPHQWDQGGRHVQRWSUHYHQWFRPSHWLWLRQ$OORZLQJWKH
SUHHPSWHGE\WKHmGHWDLOHGSURFHVVIRULQWHUFRQQHFWLRQVHWRXW         VWDWHWDULIILQWKLVSDUWLFXODULQVWDQFHWRVWDQGDORQJVLGHWKH
E\ &RQJUHVV LQ WKH >$FW@l 9HUL]RQ 1 ,QF Y 6WUDQG    $JUHHPHQWGRHVQRWIUXVWUDWHWKHSXUSRVHVRIWKH$FW7KXV
)GWK&LU:HVDLGLQ9HUL]RQ1RUWKWKDW          ZH5(9(56(WKHGLVWULFWFRXUWDQG$)),50WKHRUGHURIWKH
m>H@YHQLQWKHFDVHRIDVKDUHGJRDOWKHVWDWHODZLVSUHHPSWHG       0LFKLJDQ3XEOLF6HUYLFH&RPPLVVLRQ
µLILWLQWHUIHUHVZLWKWKHPHWKRGVE\ZKLFKWKHIHGHUDOVWDWXWH
ZDVGHVLJQHGWRUHDFKLWVJRDOjl,GDWTXRWLQJ*DGHY
1DWjO6ROLG:DVWHV0JPW$VVjQ866&W
  /(GG    $FFRUGLQJ WR $PHULWHFK
&RQJUHVVjV HIIRUW WR HVWDEOLVK ERWK D SHUYDVLYH UHJXODWRU\
VFKHPH DQG GHWDLOHG SURFHGXUDO PHFKDQLVPV IRU
LPSOHPHQWLQJLQWHUFRQQHFWLRQDJUHHPHQWVGHPRQVWUDWHVWKDW
&RQJUHVV LQWHQGHG SULYDWH SDUWLHV QRW VWDWH UHJXODWRUV WR
GLFWDWHWKHWHUPVRILQWHUFRQQHFWLRQ
  6WDWH ODZV FDQ EH H[SUHVVO\ RU LPSOLHGO\ SUHHPSWHG E\
IHGHUDOODZ)HGHUDOODZPD\SUHHPSWVWDWHODZZKHQIHGHUDO
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO          

LQWHUFRQQHFWLRQ DJUHHPHQW DQG ZLWK DSSURYDO RI WKH VWDWH        VWDWXWRU\SURYLVLRQVRUREMHFWLYHVZRXOGEHIUXVWUDWHGE\WKH
FRPPLVVLRQ,GDW                                           DSSOLFDWLRQRIVWDWHODZ0RUHRYHUZKHUH&RQJUHVVLQWHQGV
                                                                       IRUIHGHUDOODZWRJRYHUQDQHQWLUHILHOGIHGHUDOODZSUHHPSWV
  $PHULWHFK FRQWHQGV WKDW 0&,jV DWWHPSW WR XVH WKH              DOOVWDWHODZLQWKDWILHOG,Q6SULQJVWRQY&RQVROLGDWHG5DLO
0LFKLJDQWDULIILVQRWFRYHUHGXQGHU6HFWLRQLRIWKH$FW        &RUS ZH KHOG WKDW ZKHQ D VWDWH ODZ LV QRW H[SUHVVO\
EHFDXVH0&,QHLWKHULQWHQGHGWRLQFOXGHVWDWHWDULIIVLQWKH           SUHHPSWHGFRXUWVPXVWEHJLQZLWKWKHSUHVXPSWLRQWKDWWKH
LQWHUFRQQHFWLRQDJUHHPHQWQRUSRLQWHGWRDVSHFLILFSURYLVLRQ          ODZLVYDOLG)GWK&LUFHUWGHQLHG
LQDQRWKHUDJUHHPHQW7KRXJK0&,GLGQRWLQFOXGHLQWKH               86:HZURWHmµ>L@WZLOOQRWEHSUHVXPHG
LQWHUFRQQHFWLRQDJUHHPHQWDQH[SUHVVSURYLVLRQDOORZLQJLWWR          WKDWDIHGHUDOVWDWXWHZDVLQWHQGHGWRVXSHUVHGHWKHH[HUFLVHRI
RSWLQWRDWDULIIDOORZLQJ0&,WRSXUFKDVHXQGHU WHUPVRI            SRZHU RI WKH VWDWH XQOHVV WKHUH LV D FOHDU PDQLIHVWDWLRQ RI
$PHULWHFKjV0LFKLJDQWDULIIVZLOOHQVXUHWKDWFRPSHWLWRUVDUH          LQWHQWLRQWRGRVR7KHH[HUFLVHRIIHGHUDOVXSUHPDF\LVQRW
DEOHWREX\RQWKHPRVWIDYRUDEOHWHUPVDYDLODEOHLQDJLYHQ           OLJKWO\WREHSUHVXPHGjl,GTXRWLQJ1<6WDWH'HSjWRI
ORFDO PDUNHW  0LFKLJDQjV WDULIIV DQG WKH DJUHHPHQWV            6RF6HUYVY'XEOLQR86
QHJRWLDWHG SXUVXDQW WR WKH $FW ZRUN WRZDUG WKH FRPPRQ
SXUSRVHRIJLYLQJQHZHQWUDQWVDPHDQVRIFRPSHWLQJZLWK                  0LFKLJDQ HQDFWHG WDULII SURYLVLRQV IRU ORFDO VHUYLFH
LQFXPEHQW ORFDO H[FKDQJH FDUULHUV  8QGHU WKH V\VWHP RI        SURYLGHUVLQXQGHUWKH0LFKLJDQ7HOHFRPPXQLFDWLRQV
FRRSHUDWLYH IHGHUDOLVP HVWDEOLVKHG E\ WKH $FW LW LV            $FW 0LFK &RPS /DZV   HW VHT  7R IDFLOLWDWH
SHUPLVVLEOHIRU0LFKLJDQWRPDLQWDLQDWDULIIV\VWHPDORQJVLGH         UHVDOH RI ORFDO H[FKDQJH VHUYLFH DQG LQWHUFRQQHFWLRQ RI
WKHDJUHHPHQWVQHJRWLDWHGXQGHUWKH$FW                               WHOHFRPPXQLFDWLRQV SURYLGHUV ZLWK EDVLF ORFDO H[FKDQJH
                                                                       VHUYLFH 0LFKLJDQ UHTXLUHV WKDW mHDFK SURYLGHU RI ORFDO
   $PHULWHFKFLWHGRXURSLQLRQLQ9HUL]RQ1RUWKWRVXSSRUWLWV         H[FKDQJHVHUYLFHVKDOOILOHWDULIIVZLWKWKHFRPPLVVLRQZKLFK
DUJXPHQWWKDWDOORZLQJXVHRIWKHWDULIIFRQIOLFWVZLWKWKH$FW       VHWIRUWKWKHZKROHVDOHUDWHVWHUPVDQGFRQGLWLRQVIRUEDVLF
,Q9HUL]RQ1RUWKD&RPPLVVLRQRUGHUGLUHFWHGDQLQFXPEHQW             ORFDOH[FKDQJHVHUYLFHVl,G
FDUULHU WR SXEOLVK WDULIIV RIIHULQJ WR VHOO HOHPHQWV RI LWV
QHWZRUNDWSUHGHWHUPLQHGUDWHVDQGWRSURYLGHFRPSHWLWRUV                :KHQ&RQJUHVVHQDFWHGWKHIHGHUDO$FWLWGLGQRWH[SUHVVO\
ZLWKDFFHVVWRRSHUDWLRQDOSUHDVVHPEOHGVHUYLFHSODWIRUPV           SUHHPSW VWDWH UHJXODWLRQ RI LQWHUFRQQHFWLRQ  ,Q IDFW LW
9HUL]RQ1)GDW:HLQYDOLGDWHGWKLVRUGHUDVLQ          H[SUHVVO\ SUHVHUYHG H[LVWLQJ VWDWH ODZV WKDW IXUWKHUHG
FRQIOLFWZLWKWKH$FW,GDW:HGLVWLQJXLVKWKLVFDVH         &RQJUHVVjV JRDOV DQG DXWKRUL]HG VWDWHV WR LPSOHPHQW
WKRXJK  7KH SDUWLHV LQ 9HUL]RQ 1RUWK  ZHUH QRW GLVSXWLQJ    DGGLWLRQDO UHTXLUHPHQWV WKDW ZRXOG IRVWHU ORFDO
ZKHWKHU WR DOORZ XVH RI D WHUP IURP DQ H[LVWLQJ               LQWHUFRQQHFWLRQDQGFRPSHWLWLRQVWDWLQJWKDWWKH$FWGRHVQRW
LQWHUFRQQHFWLRQDJUHHPHQWRUIURPDQH[LVWLQJWDULIIDVLVWKH        SURKLELWVWDWHFRPPLVVLRQUHJXODWLRQVmLIVXFKUHJXODWLRQVDUH
VLWXDWLRQLQWKHLQVWDQWFDVH,Q9HUL]RQ1RUWKZHIRXQGWKH          QRWLQFRQVLVWHQWZLWKWKHSURYLVLRQVRI>WKH)7$@l86&
&RPPLVVLRQjV RUGHU LPSURSHU EHFDXVH LW mSURYLGH>G@ DQ            $GGLWLRQDOO\6HFWLRQGRIWKH$FWVWDWHVWKDW
DOWHUQDWLYH URXWH DURXQG WKH HQWLUH LQWHUFRQQHFWLRQ SURFHVV      WKH)HGHUDO&RPPXQLFDWLRQV&RPPLVVLRQVKDOOQRWSUHFOXGH
ZLWKLWVDWWHQGDQWQHJRWLDWLRQDUELWUDWLRQVWDWHFRPPLVVLRQ          HQIRUFHPHQWRIVWDWHUHJXODWLRQVWKDWHVWDEOLVKLQWHUFRQQHFWLRQ
DSSURYDO )&& RYHUVLJKW DQG IHGHUDO FRXUW UHYLHZ                DQGDUHFRQVLVWHQWZLWKWKH$FW86&G
SURFHGXUHVl   )G DW   +HUH ERWK SDUWLHV KDYH
HQJDJHGLQWKHHQWLUHLQWHUFRQQHFWLRQSURFHVVDQGWKHWDULIIV           7KH $FW SHUPLWV D JUHDW GHDO RI VWDWH FRPPLVVLRQ
SUHH[LVWHGWKHLQWHUFRQQHFWLRQDJUHHPHQW                              LQYROYHPHQWLQWKHQHZUHJLPHLWVHWVXSIRUWKHRSHUDWLRQRI
                                                                       ORFDO WHOHFRPPXQLFDWLRQV PDUNHWV mDV ORQJ DV VWDWH
    0LFK%HOO7HO&RY0&,0HWURHWDO        1R       1R      0LFK%HOO7HO&RY0&,0HWURHWDO         

FRPPLVVLRQ UHJXODWLRQV DUH FRQVLVWHQW ZLWK WKH $FWl             7KH &RPPLVVLRQ FDQ HQIRUFH VWDWH ODZ UHJXODWLRQV HYHQ
9HUL]RQ1)GDW7KH)HGHUDO&RPPXQLFDWLRQV               ZKHUHWKRVHUHJXODWLRQVGLIIHUIURPWKHWHUPVRIWKH$FWRUDQ
&RPPLVVLRQjVUXOLQJLQ,QUH3XEOLF8WLOLW\&RPPLVVLRQRI              LQWHUFRQQHFWLRQDJUHHPHQWDVORQJDVWKHUHJXODWLRQVGRQRW
7H[DV)&&52FWGUDZVVHYHUDO             LQWHUIHUHZLWKWKHDELOLW\RIQHZHQWUDQWVWRREWDLQVHUYLFHV
FRQFOXVLRQVIURPWKHVHSURYLVLRQVRIWKH$FW                          $VVXPLQJWKDWWKHLQWHUFRQQHFWLRQDJUHHPHQWGLGQRWSUHFOXGH
                                                                       0&,jV SODFLQJ UHVDOH RUGHUV XQGHU $PHULWHFKjV WDULII
      &RQJUHVV KDV PDGH FOHDU WKDW WKH 6WDWHV DUH QRW     REOLJDWLRQVWKHDJUHHPHQWDQGWKH0LFKLJDQWDULIIREOLJDWLRQV
  RXVWHG IURP SOD\LQJ D UROH LQ WKH GHYHORSPHQW RI             FDQ FRH[LVW DQG ZRUN LQ FRQFHUW WR SURPRWH ORFDO VHUYLFH
  FRPSHWLWLYHWHOHFRPPXQLFDWLRQVPDUNHWVKRZHYHU              FRPSHWLWLRQ
  &RQJUHVVGLGQRWLQWHQGWRSHUPLWVWDWHUHJXODWLRQVWKDW
  FRQIOLFWHG ZLWK WKH  $FW7KXV D VWDWH PD\ QRW           0&, IXUWKHU DUJXHV WKDW LWV REOLJDWLRQV XQGHU WKH
  LPSRVH DQ\ UHTXLUHPHQW WKDW LV FRQWUDU\ WR WHUPV RI          LQWHUFRQQHFWLRQDJUHHPHQWDUHELQGLQJRQO\ZKHQLWSXUFKDVHV
  VHFWLRQVWKURXJKRUWKDWmVWDQGVDVDQREVWDFOHWR           VHUYLFHVE\ZD\RIWKHDJUHHPHQW$PHULWHFKDUJXHVWKDWWKH
  WKHDFFRPSOLVKPHQWDQGH[HFXWLRQRIWKHIXOOREMHFWLYHV              LQWHUFRQQHFWLRQDJUHHPHQWRQFHLWKDVEHHQQHJRWLDWHGLVWKH
  RI&RQJUHVVl&RQJUHVVSODLQO\DXWKRUL]HGDJHQF\              RQO\ ZD\ IRU 0&, WR SXUFKDVH VHUYLFHV DQG DV D ELQGLQJ
  SUHHPSWLRQEDVHGRQDFRQIOLFWEHWZHHQHQDFWHGIHGHUDO               DJUHHPHQWXQGHUWKH$FWLVDOVRH[FOXVLYH7KH&RPPLVVLRQ
  UXOHVDQGVWDWHUHTXLUHPHQWV                                        KRZHYHUGLGQRWUHTXLUH0&,WRSXUFKDVHVHUYLFHVWKURXJK
                                                                       RQO\ WKH LQWHUFRQQHFWLRQ DJUHHPHQW  7KH ULJKW RI WKH
$FFRUGLQJWRWKH)HGHUDO&RPPXQLFDWLRQV&RPPLVVLRQDV                 &RPPLVVLRQWRHQIRUFHSUHH[LVWLQJWDULIIVDVVWDWHUHJXODWLRQ
ORQJDVVWDWHUHJXODWLRQVGRQRWSUHYHQWDFDUULHUIURPWDNLQJ         LVFRQVLVWHQWZLWKWKH$FW7KHQHJRWLDWLRQSURFHGXUHXQGHU
DGYDQWDJH RI VHFWLRQV  DQG  RI WKH $FW VWDWH           6HFWLRQ  RI WKH $FW LV QRW WKH RQO\ ZD\ IRU WKH
UHJXODWLRQVDUHQRWSUHHPSWHG,G                          &RPPLVVLRQWRRUGHUDQGUHJXODWHWHOHFRPPXQLFDWLRQV
  ,Q/DZ2IILFHVRI&XUWLV97ULQNRY%HOO$WODQWLF&RUS              7KH7HQWK&LUFXLWKHOGLQ86:&RPPXQLFDWLRQV,QFY
)GQG&LUWKH&RXUWRI$SSHDOVIRU             6SULQW&RPPXQLFDWLRQV&RWKDWDFRPSHWLWRUjVGHFLVLRQWR
WKH6HFRQG&LUFXLWVWDWHGWKDWWKH$FWLQWHQGHGIRULQFXPEHQW          SXUFKDVH VHUYLFHV XQGHU WKH LQFXPEHQWjV WDULII GLG QRW
FDUULHUV WR EH JRYHUQHG E\ WKH LQWHUFRQQHFWLRQ DJUHHPHQW        DEDQGRQ WKH LQWHUFRQQHFWLRQ DJUHHPHQW EXW DPHQGHG LW WR
UDWKHUWKDQJHQHUDOGXWLHVSXWIRUWKLQVXEVHFWLRQVEDQG         LQFOXGH WKH WDULII WHUPV   )G DW   7KDW FRXUW
F7KHVHWZRVXEVHFWLRQVUHTXLUHDQLQFXPEHQWWRQHJRWLDWH          LQWHUSUHWHG6HFWLRQLRIWKH$FWDVDOORZLQJDFRPSHWLQJ
DJUHHPHQWV DQG SURYLGH LQWHUFRQQHFWLRQ EXW RQFH DQ              FDUULHU WR mHIIHFWLYHO\ DPHQG LWV RZQ LQWHUFRQQHFWLRQ
DJUHHPHQWLVDSSURYHGWKHVHJHQHUDOGXWLHVGRQRWFRQWURO            DJUHHPHQWE\WDNLQJDGYDQWDJHRIPRUHIDYRUDEOHSURYLVLRQV
OHVW FDUULHUV KDYH GLPLQLVKHG LQFHQWLYH WR HQWHU                 FRQWDLQHG LQ RWKHU >FRPSHWLQJ FDUULHUVj@ LQWHUFRQQHFWLRQ
LQWHUFRQQHFWLRQ DJUHHPHQWV   )G DW   7KRXJK DQ      DJUHHPHQWV     >7@KH SURYLVLRQ E\ DOORZLQJ >FRPSHWLQJ
DSSURYHGLQWHUFRQQHFWLRQDJUHHPHQWPHDQVWKHJHQHUDOGXWLHV            FDUULHUV@ WR SXUFKDVH VHUYLFHV DW HTXDO SULFHV DQG RQ HTXDO
RI E DQG F QR ORQJHU DSSO\ WKH $FW LV VLOHQW ZLWK   WHUPVHQDEOHVD>FRPSHWLQJFDUULHU@WRUHPDLQFRPSHWLWLYH
UHVSHFWWRSUHH[LVWLQJVWDWHGXWLHV                                   ZLWKRWKHU>FRPSHWLQJFDUULHUV@LQWKHORFDOPDUNHWl,GDW
                                                                       8OWLPDWHO\6SULQWZDVDOORZHGWRSXUFKDVHVHUYLFHVDW
  7KH$FWWKHQUHFRJQL]HVWKDWLQWHUFRQQHFWLRQDJUHHPHQWV            UDWHV DQG WHUPV DUWLFXODWHG LQ HLWKHU WKH LQWHUFRQQHFWLRQ
DUH QRW WKH VROH ZD\ WR SURPRWH FRPSHWLWLRQ DPRQJ ORFDO       DJUHHPHQWRUWKHLQFXPEHQWjVWDULII%RWKPHDQVRISXUFKDVH
VHUYLFHSURYLGHUVIRULWDOORZVURRPIRUVWDWHUHJXODWLRQ7KH       KRZHYHU ZHUH FRQVLGHUHG WR EH SXUVXDQW WR WKH
$FW GRHV QRW LPSOLHGO\ SUHHPSW 0LFKLJDQjV WDULII UHJLPH