           5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
                3XUVXDQW WR 6L[WK &LUFXLW 5XOH                               6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO     1R
        (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
                    )LOH 1DPH DS
                                                                                               BBBBBBBBBBBBBBBBB
                                                                                                    &2816(/
81,7('67$7(6&28572)$33($/6
                                                                         21 %5,()  'RQDOG 5 %DFKDQG ,,, *$55$77 	
                   )257+(6,;7+&,5&8,7                                 %$&+$1' %ORRPILHOG +LOOV 0LFKLJDQ IRU $SSHOODQW
                     BBBBBBBBBBBBBBBBB                                   3HWHU/6LPPRQV)5,(')5$1.+$55,66+5,9(5	
                                                                         s$&2%6211HZ<RUN1HZ<RUNIRU$SSHOOHHV

 *$</( ' 6+,(/'6                 ;                                                           BBBBBBBBBBBBBBBBB
          3ODLQWLII$SSHOODQW      
                                                                                                  23,1,21
                                      1R                                             BBBBBBBBBBBBBBBBB
            Y                      
                                     !                                     6,/(5&LUFXLWsXGJH3ODLQWLII*D\OH'6KLHOGVILOHGD
                                                                        FDXVHRIDFWLRQLQDQHIIRUWWRUHFRYHUVXUYLYRUEHQHILWVXQGHU
 5($'(5j6 ',*(67                                                        KHU GHFHDVHG KXVEDQGjV UHWLUHPHQW SODQ  6KH EURXJKW KHU
 $662&,$7,21 ,1&                                                     FODLPVDJDLQVW463,QF WKH5HDGHUjV'LJHVW$VVRFLDWLRQ
 5(7,5(0(17 3/$1 /,6$                                                  ,QF m5HDGHUjV 'LJHVWl WKH 5HDGHUjV 'LJHVW $VVRFLDWLRQ
 &5,%$5, &/,))25' '835((                                              ,QF5HWLUHPHQW3ODQWKHm3ODQlDQGWKHLQGLYLGXDOPHPEHUV
 s2+1 *,0%/(77( %$55<                                                  RIWKH(PSOR\HH%HQHILWV&RPPLWWHHWKDWDGPLQLVWHUHGWKH
                                                                        3ODQ DW WKH WLPH 3ODLQWLII PDGH KHU FODLP QDPHO\ /LVD
 /,(%0$1 *$5< 5,&+                
 *(25*( 6&,021(                                                         &ULEDUL &OLIIRUG 'X3UHH sRKQ *LPEOHWWH %DUU\ /LHEPDQ
                                                                        *DU\5LFKDQG*HRUJH6FLPRQHKHUHLQDIWHUWKH3ODQDQGWKH
        'HIHQGDQWV$SSHOOHHV                                           LQGLYLGXDOGHIHQGDQWVRIWKH(PSOR\HH%HQHILWV&RPPLWWHH
                                                                        ZLOOEHFROOHFWLYHO\UHIHUUHGWRDVm'HIHQGDQWVl)ROORZLQJ
                                   1                                     DEHQFKWULDOWKHGLVWULFWFRXUWUHMHFWHG3ODLQWLIIjVIDFWXDODQG
       $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW                      OHJDO FKDOOHQJHV WR WKH EHQHILWV HOHFWLRQ DQG ZDLYHU IRUPV
      IRUWKH(DVWHUQ'LVWULFWRI0LFKLJDQDW'HWURLW                   VXEPLWWHGE\3ODLQWLIIDQGKHUKXVEDQG2QDSSHDO3ODLQWLII
    1RnsXOLDQ$&RRNsU'LVWULFWsXGJH                    DUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQLWVOHJDOFRQFOXVLRQWKDW
                                                                         WKHZDLYHUIRUPZDVQRWGHIHFWLYHGXHWRLVVXHVUHODWLQJWRWKH
                  6XEPLWWHG)HEUXDU\                           WLPHOLQHVV RI LWV VXEPLVVLRQ  :H GLVDJUHH DQG WKHUHIRUH
                                                                         $)),50WKHMXGJPHQWRIWKHGLVWULFWFRXUW
                'HFLGHGDQG)LOHGsXQH
   %HIRUH6,/(5DQG52*(56&LUFXLWsXGJHV*:,1
                     'LVWULFWsXGJH

                                                                            
                                                                              7KH FRUSRUDWH GHIHQGDQWV 5HDGHUjV 'LJHVW DQG 463 ,QF ZHUH
                                                                         GLVPLVVHG DV LPSURSHU SDUWLHV 7KDW GLVPLVVDO KDV QRW EHHQ DSSHDOHG
     7KH +RQRUDEOH sDPHV 6 *ZLQ 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU WKH
1RUWKHUQ 'LVWULFW RI 2KLR VLWWLQJ E\ GHVLJQDWLRQ



                                   
1R       6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO          1R

                      ,%$&.*5281'                                     IHGHUDOODZVHH86&DWKHGHIDXOWSHQVLRQ
                                                                            RSWLRQ DYDLODEOH WR PDUULHG UHWLUHHV XQGHU WKH 3ODQ LV WKH
   3ODLQWLIILVWKHZLGRZRIsRVHSK56KLHOGVm0U6KLHOGVl             m4XDOLILHGsRLQWDQG6XUYLYRU$QQXLW\lm4s6$l8QGHUWKH
D IRUPHU ORQJWHUP HPSOR\HH RI 463 ,QF ZKLFK LV D               WHUPVRIWKLVRSWLRQDPRUWL]HGEHQHILWVDUHSDLGGLUHFWO\WRWKH
VXEVLGLDU\RI5HDGHUjV'LJHVW7KH3ODQZKLFKLVVXEMHFWWR               HOLJLEOH UHWLUHH DQG XSRQ KLV RU KHU GHDWK RQH KDOI RI WKH
WKH(PSOR\HH5HWLUHPHQW,QFRPH6HFXULW\$FW(5,6$                     UHPDLQLQJEHQHILWVDUHSDLGWRWKHVXUYLYLQJVSRXVHIRUWKH
86&HWVHTLVDUHWLUHPHQWSODQIRUWKHEHQHILWRI              GXUDWLRQ RI KLV RU KHU OLIH  $OWKRXJK 3ODQ SDUWLFLSDQWV DUH
HPSOR\HHV DQG IRUPHU HPSOR\HHV RI 5HDGHUjV 'LJHVW DQG                HQWLWOHG WR FKRRVH DQ\ RI WKH DYDLODEOH RSWLRQV FHUWDLQ
FHUWDLQRILWVVXEVLGLDULHVLQFOXGLQJ4630U6KLHOGVUHWLUHG            HOHFWLRQVUHTXLUHVSRXVDOFRQVHQW)RUH[DPSOHWRVHOHFWWKH
IURP463DVDSDUWLFLSDQWLQWKH3ODQDQGKHQFHZDVHQWLWOHG                OLIHDQQXLW\EHQHILWDPDUULHGSDUWLFLSDQWPXVWVXEPLWD4s6$
WRHOHFWRQHRIVHYHUDOSHQVLRQEHQHILWRSWLRQVDOORIZKLFK               ZDLYHUIRUPVLJQHGE\KLVRUKHUVSRXVHDQGQRWDUL]HGE\D
DUHGHVLJQHGWREHRIHTXDODFWXDULDOYDOXH                                QRWDU\SXEOLF%\H[HFXWLQJWKLVIRUPWKHVSRXVHFRQVHQWVWR
                                                                            ZDLYLQJVXUYLYRUEHQHILWVLQH[FKDQJHIRUKLJKHUSD\PHQWVWR
  8QGHUWKH3ODQWKHQRUPDODJHRIUHWLUHPHQWLV$Q                  WKHUHWLUHHGXULQJWKHUHWLUHHjVOLIHWLPH
HPSOR\HHPD\HOHFWWRUHWLUHHDUO\KRZHYHULIKHRUVKHLV
DWOHDVW\HDUVROGRUDWOHDVW\HDUVROGDQGKLVRU              0DQ\RIWKHGD\WRGD\DGPLQLVWUDWLYHIXQFWLRQVRIWKH3ODQ
KHU DJH SOXV KLV RU KHU \HDUV RI VHUYLFH HTXDOV   $          DUH KDQGOHG E\ DQ RXWVLGH VHUYLFLQJ FRPSDQ\ :LOOLDP 0
SDUWLFLSDQWHOHFWLQJHDUO\UHWLUHPHQWPD\FKRRVHIURPDQ\RI                0HUFHU,QFm0HUFHUlZKLFKSHUIRUPVWKHDFWXDULDOEHQHILW
WKHDYDLODEOHEHQHILWRSWLRQVDOWKRXJKWKHSD\PHQWOHYHOVDUH              FDOFXODWLRQV SURFHVVHV WKH EHQHILW SDSHUZRUN DQG ILHOGV
DFWXDULDOO\ DGMXVWHG WR UHIOHFW WKH ORQJHU WLPH SHULRG RYHU         WHOHSKRQHLQTXLULHV,QRUGHUWRUHFHLYHEHQHILWVDUHWLULQJ
ZKLFKWKHEHQHILWVZLOOEHSDLG                                            HPSOR\HHPXVWQRWLI\WKH3ODQRIKLVRUKHULQWHQWWRUHWLUHDQG
                                                                            UHTXHVWWKHDSSURSULDWHSDSHUZRUNIURP0HUFHU0HUFHUWKHQ
  2QH RSWLRQ LV D mOLIH DQQXLW\ EHQHILWl XQGHU ZKLFK WKH          PDNHV WKH QHFHVVDU\ FDOFXODWLRQV WR GHWHUPLQH WKH EHQHILWV
UHWLUHHW\SLFDOO\UHFHLYHVDIL[HGPRQWKO\VXPSDLGIRUWKHUHVW            RZHGWRWKHHPSOR\HHDQGVHQGVWKHDSSURSULDWHSDSHUZRUNWR
RIKLVRUKHUOLIHEXWDVXUYLYLQJVSRXVHUHFHLYHVQREHQHILWV             WKHHPSOR\HH
IRU WKH EDODQFH RI WKH VSRXVHjV OLIH  7ZR RWKHU DYDLODEOH
SHQVLRQ RSWLRQV DUH mMRLQW DQG VXUYLYRU EHQHILWVl  8QGHU             2Q 'HFHPEHU   0HUFHU VHQW 0U 6KLHOGV D OHWWHU
WKHVHRSWLRQVWKHUHWLUHHUHFHLYHVDPRQWKO\SD\PHQWIRUWKH               LQGLFDWLQJWKHGLIIHUHQWEHQHILWRSWLRQVDYDLODEOHWRKLPLIKH
GXUDWLRQRIKLVRUKHUOLIHDQGLIWKHUHWLUHHSUHGHFHDVHVKLVRU          ZHUHWRUHWLUHDVRIsDQXDU\7KHOHWWHUVWDWHGWKDWWKH
KHUVSRXVHWKHVXUYLYLQJVSRXVHUHFHLYHVFRQWLQXHGEHQHILWV                GHIDXOW SHQVLRQ SD\PHQW IRU D PDUULHG SDUWLFLSDQW LV WKH
IRU WKH EDODQFH RI WKH VSRXVHjV OLIH  ,Q DFFRUGDQFH ZLWK        4s6$DQGWKDWDGLIIHUHQWEHQHILWRSWLRQPD\UHTXLUHVSRXVDO
                                                                            FRQVHQW7KHOHWWHUVSHFLILFDOO\VWDWHGWKDWWRVHOHFWDSD\PHQW
                                                                            RWKHU WKDQ WKH 4s6$ mWKH HOHFWLRQ PXVW EH PDGH SULRU WR
                                                                            EHQHILWVFRPPHQFLQJEXWQRWHDUOLHUWKDQGD\VEHIRUH\RXU
    
      $ UHWLUHH ZLOO W\SLFDOO\ UHFHLYH D KLJKHU PRQWKO\ SD\PHQW XQGHU WKH   EHQHILWSD\PHQWVFDQEHJLQl$FFRPSDQ\LQJWKHOHWWHUZHUH
OLIH DQQXLW\ RSWLRQ WKDQ XQGHU HLWKHU RI WKH MRLQW DQG VXUYLYRU RSWLRQV
EHFDXVH XQGHU WKH ODWWHU RSWLRQV WKH SD\PHQWV DUH OLNHO\ WR FRQWLQXH IRU   WKH PDQ\ QHFHVVDU\ IRUPV WKDW UHTXLUHG FRPSOHWLRQ DQG
D ORQJHU SHULRG RI WLPH EHFDXVH RI WKH VXUYLYRU EHQHILWV FRPSRQHQW
     
      7KH WZR RSWLRQV DUH mMRLQW DQG  VXUYLYRUl DQG mMRLQW DQG       SDLG WR WKH UHWLUHH 8QGHU WKH MRLQW DQG  VXUYLYRU DSSURDFK WKH
VXUYLYRUl 8QGHU WKH MRLQW DQG  VXUYLYRU DSSURDFK WKH VXUYLYLQJ        VXUYLYLQJ VSRXVHjV PRQWKO\ SD\PHQW LV ILIW\ SHUFHQW RI ZKDW WKH UHWLUHH
VSRXVH FRQWLQXHV UHFHLYLQJ PRQWKO\ SD\PHQWV LQ WKH VDPH DPRXQW DV ZDV       ZDV UHFHLYLQJ
1R       6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO            1R

UHWXUQDVZHOODVDFKDUWLQGLFDWLQJWKHGLIIHUHQWSD\PHQWV0U             0U6KLHOGVGLHGRQ0D\)ROORZLQJKLVGHDWK
6KLHOGVDQG3ODLQWLIIZRXOGUHFHLYHHDFKPRQWKXQGHUHDFKRI              3ODLQWLIIVRXJKWVXUYLYLQJVSRXVHEHQHILWVIURPWKH3ODQ7KH
WKHDYDLODEOHRSWLRQV                                                   3ODQ KRZHYHU GHQLHG WKH FODLP  )ROORZLQJ WKLV GHQLDO
                                                                          3ODLQWLIIjV IRUPHU DWWRUQH\ %HQMDPLQ +RIIL] VHQW
  2QsDQXDU\DWWKHDJHRI0U6KLHOGVUHWLUHG               FRUUHVSRQGHQFH WR WKH 3ODQ VXJJHVWLQJ WKDW 3ODLQWLIIjV
IURP463DIWHUPRUHWKDQWKLUW\\HDUVRIVHUYLFH$VDQHDUO\            VLJQDWXUHRQWKHZDLYHUIRUPKDGEHHQIRUJHGE\0U6KLHOGV
UHWLUHHKHFRXOGKDYHGHIHUUHGUHFHLYLQJSHQVLRQSD\PHQWV                'HVSLWHWKHVHULRXVQDWXUHRIWKLVDFFXVDWLRQ+RIIL]VXEPLWWHG
XQWLOWKHDJHRI,QRWKHUZRUGVWKH3ODQZRXOGDFFHSW0U           QR HYLGHQFH WR VXSSRUW WKLV DVVHUWLRQ  7KH 3ODQ DJDLQ
6KLHOGVjVGHFLVLRQWREHJLQUHFHLYLQJSHQVLRQEHQHILWVDWDQ\             UHYLHZHG WKH ILOH DQG DJDLQ GHQLHG 3ODLQWLIIjV UHTXHVW IRU
WLPHGXULQJWKLVDSSUR[LPDWHO\WKUHH\HDUZLQGRZDQGZRXOG                VXUYLYRUEHQHILWV7KH3ODQjVGHQLDOZDVEDVHGRQZKDWWKH
EHJLQSD\PHQWVDWWKHQH[WDYDLODEOHGDWHDIWHUWKHUHTXLUHG              3ODQEHOLHYHGWREHDYDOLGO\VLJQHGHOHFWLRQRIEHQHILWVIRUP
SDSHUZRUNZDVVXEPLWWHG                                                  DQGDSURSHUO\VLJQHGDQGQRWDUL]HG4s6$ZDLYHUIURPWKH
                                                                          3ODLQWLII  8QDEOH WR FRQYLQFH WKH 3ODQ WKDW 0U 6KLHOGV
  0U 6KLHOGV VXEPLWWHG KLV UHWLUHPHQW IRUPVDOO GDWHG             FRPPLWWHGIRUJHU\+RIIL]ILOHGDVWDWHODZVXLWRQEHKDOIRI
sDQXDU\WR0HUFHU$PRQJWKHIRUPVUHWXUQHGZHUH               3ODLQWLII  3ODLQWLIIjV FDVH ZDV UHPRYHG WR IHGHUDO FRXUW
DQ RSWLRQ HOHFWLRQ IRUP VSHFLI\LQJ KLV VHOHFWLRQ RI WKH OLIH     EHFDXVHRIWKHH[LVWHQFHRIDIHGHUDOTXHVWLRQXQGHU86&
DQQXLW\ EHQHILW DQG D 4s6$ ZDLYHU IRUP EHDULQJ WKH               DQGMXULVGLFWLRQZDVHVWDEOLVKHGSXUVXDQWWR86&
VLJQDWXUHm*D\OH'6KLHOGVlWHUPLQDWLQJWKH3ODLQWLIIjVULJKWV          
XQGHUWKHGHIDXOW4s6$RSWLRQ2QDSSUR[LPDWHO\sDQXDU\
  WKH 3ODQ DSSURYHG SD\PHQW RI EHQHILWV WR 0U             $IWHUVLWWLQJDVWKHWULHURIIDFWWKHGLVWULFWFRXUWKHOGWKDW
6KLHOGV UHWURDFWLYH WR sDQXDU\  WKH GDWH RI KLV           WKH 3ODQ GLG QRW DFW DUELWUDULO\ RU FDSULFLRXVO\ LQ UHMHFWLQJ
UHWLUHPHQW7KLVUHWURDFWLYHSD\PHQWFRYHUHGWKHWLPHSHULRG             3ODLQWLIIjVDOOHJDWLRQVWKDWKHUVLJQDWXUHRQWKH4s6$ZDLYHU
RI sDQXDU\   WR sDQXDU\   DQG ZDV LQ WKH         IRUPKDGEHHQIRUJHG,QVRKROGLQJWKHFRXUWLVVXHGGHWDLOHG
DPRXQW RI   7KH 3ODQ DOVR DUUDQJHG IRU UHJXODU         IDFWXDO ILQGLQJV WKDW UHIOHFW FDUHIXO GHOLEHUDWLRQ RI WKH
SURFHVVLQJ RI EHQHILWV WR EHJLQ RQ )HEUXDU\  ZLWK HDFK        H[WHQVLYHHYLGHQFHVXEPLWWHGGXULQJWULDO,WZDVWKHGLVWULFW
FKHFNWKHUHDIWHUWREHLVVXHGRQWKHWKRIHDFKPRQWKLQWKH            FRXUWjV FRQFOXVLRQ WKDW mWKH 3ODLQWLII GLG QRW SUHVHQW DQ\
DPRXQW RI  ,Q D OHWWHU GDWHG )HEUXDU\           FUHGLEOHHYLGHQFHWRFKDOOHQJHWKHDXWKHQWLFLW\RIWKHGLVSXWHG
0HUFHUDGYLVHG 0U 6KLHOGVWKDWKLVFKHFNVZRXOGEHSDLG
DFFRUGLQJO\,QWRWDORQO\VL[PRQWKO\FKHFNVZHUHLVVXHGWR
0U6KLHOGVSULRUWRKLVGHDWKUHSUHVHQWLQJDWRWDOSD\PHQWRI                
LQEHQHILWV                                                         7KH GLVWULFW FRXUW IRXQG m+RIIL]jV WHVWLPRQ\ WR EH RI OLWWOH FUHGLEOH
                                                                          YDOXH EHFDXVH RI WKH LQFRQVLVWHQF\ LQ KLV WHVWLPRQ\ DQG KLV DVVHUWLRQV
                                                                          ZLWKRXW VXSSRUW DERXW PDWWHUV RI VLJQLILFDQFH WR WKLV FRQWURYHUV\l ,Q KLV
                                                                          OHWWHU WR WKH 3ODQ +RIIL] KDG VWDWHG WKDWm>L@W DSSHDUV WKDW KHU VLJQDWXUH RQ
                                                                          KHU GULYHUjV OLFHQVH KDG EHHQ SKRWRFRSLHG E\ 0U 6KLHOGV ZKR WKHQ WUDFHG
                                                                          LW RQ D ZDLYHU IRUPl %DVHG RQ WULDO WHVWLPRQ\ WKH GLVWULFW FRXUW IRXQG
                                                                          WKDW m>D@W WKH WLPH WKDW +RIIL] VHQW KLV OHWWHU KH KDG QRW FRPSDUHG WKH
    
     ,Q WKH DEVHQFH RI WKH ZDLYHU 0U 6KLHOGV ZRXOG KDYH UHFHLYHG        VLJQDWXUH RQ WKH ZDLYHU IRUP ZLWK DQ\ RWKHU ZULWLQJ VDPSOHV RWKHU WKDQ
 SHU PRQWK GXULQJ KLV OLIH DQG IROORZLQJ KLV GHDWK 3ODLQWLII   WKH 3ODLQWLIIjV GULYHUjV OLFHQVHl 7KH FRXUW FRQWLQXHG m>L@QWHUHVWLQJO\ WKH
ZRXOG KDYH EHHQ HQWLWOHG WR UHFHLYH  SHU PRQWK IRU WKH EDODQFH   OLFHQVH WKDW +RIIL] FODLPV WR KDYH LQVSHFWHG GLG QRW H[LVW ZKHQ WKH ZDLYHU
RI KHU OLIH 7KHUHIRUH LQ H[FKDQJH IRU 0U 6KLHOGVjV UHFHLYLQJ DQ        ZDV VLJQHG ,QVWHDG DQ HDUOLHU OLFHQVH ZDV LQ HIIHFW 0RUHRYHU KH KDG
DGGLWLRQDO  SHU PRQWK 3ODLQWLII ZDLYHG KHU ULJKW WR UHFHLYH       QRW VSRNHQ WR >WKH QRWDU\ SXEOLF QRWDUL]LQJ 3ODLQWLIIjV VLJQDWXUH@ WR
 SHU PRQWK IROORZLQJ KLV GHDWK                                  LQYHVWLJDWH WKH PDWWHU IXUWKHUl
1R        6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                       6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                     1R

IRUPl7KHFRXUWDOVRUHMHFWHG3ODLQWLIIjVOHJDOFKDOOHQJHVWR              EHQHILWV XQGHU WKH DUELWUDU\ DQG FDSULFLRXV VWDQGDUG  2I
WKHYDOLGLW\RIWKHZDLYHUIRUP6SHFLILFDOO\WKHFRXUWKHOG               FRXUVHZHUHYLHZDGLVWULFWFRXUWjVILQGLQJVRIIDFWIROORZLQJ
WKDWDVDPDWWHURIODZmWKHZDLYHUZDVQRWGHIHFWLYHGXHWR                DEHQFKWULDOIRUFOHDUHUURUDQGLWVFRQFOXVLRQVRIODZDUH
LVVXHV UHODWLQJ WR WKH WLPHOLQHVV RI LWV VXEPLVVLRQl                 UHYLHZHGGHQRYR'DYLHVY&HQWHQQLDO/LIH,QV&R
$FFRUGLQJO\ WKH FRXUW IRXQG WKDW 3ODLQWLII KDG ZDLYHG KHU           )GWK&LU
ULJKWWRUHFHLYHDQ\VXUYLYRUEHQHILWVXQGHUWKH3ODQ
                                                                                                            ,,,$1$/<6,6
                ,,67$1'$5'2)5(9,(:
                                                                             $)DFWXDO'LVSXWHV
   $ FKDOOHQJH WR DQ (5,6$ SODQjV GHQLDO RI EHQHILWV LV
UHYLHZHG GH QRYR mXQOHVV WKH EHQHILW SODQ JLYHV WKH                     2Q DSSHDO 3ODLQWLII FRQWLQXHV WR VWHDGIDVWO\ GHQ\ HYHU
DGPLQLVWUDWRURUILGXFLDU\GLVFUHWLRQDU\DXWKRULW\WRGHWHUPLQH              VLJQLQJWKHZDLYHUIRUP+RZHYHUVKHKDVQRWDVNHGWKLV
HOLJLELOLW\IRUEHQHILWVRUWRFRQVWUXHWKHWHUPVRIWKHSODQl              FRXUW WR UHYLHZ WKH GLVWULFW FRXUWjV IDFWXDO ILQGLQJV
)LUHVWRQH7LUH	5XEEHU&RY%UXFK  86                    $FFRUGLQJO\EHFDXVH3ODLQWLIIKDVQRWGLUHFWO\FKDOOHQJHGWKH
,IDSODQJUDQWVVXFKGLVFUHWLRQDU\DXWKRULW\WKHSODQ             GLVWULFWFRXUWjVIDFWXDOFRQFOXVLRQVEXWUDWKHUKDVVHWIRUWKWKH
DGPLQLVWUDWRUjVGHFLVLRQWRGHQ\EHQHILWVLVUHYLHZHGXQGHU                  IDFWXDOLVVXHVPHUHO\mWRSXWWKH>OHJDO@LVVXHVLQFRQWH[WlDOO
WKHGHIHUHQWLDOmDUELWUDU\DQGFDSULFLRXVlVWDQGDUGRIUHYLHZ               IDFWXDOFRQWURYHUVLHVDUHGHHPHGDEDQGRQHGRQDSSHDODQGWKH
6HH3HUH]Y$HWQD/LIH,QV&R)GWK&LU                GLVWULFWFRXUWjVIDFWXDOILQGLQJVDUHKHUHE\XSKHOG6HH%XVK
 HQ EDQF FHUW GHQLHG  86    $             Y 'LFWDSKRQH &RUS  )G   WK &LU 
GHFLVLRQLVQRWDUELWUDU\RUFDSULFLRXVLILWmLVUDWLRQDOLQOLJKW          LVVXHVQRWSXUVXHGRQDSSHDODUHZDLYHG
RIWKHSODQjVSURYLVLRQVl<HDJHUY5HOLDQFH6WDQGDUG/LIH
,QV&R)GWK&LUTXRWLQJ0LOOHUY                %/HJDO,VVXHV
0HWURSROLWDQ /LIH ,QV &R  )G   WK &LU
7KLVVWDQGDUGmLVWKHOHDVWGHPDQGLQJIRUPRIMXGLFLDO                  (5,6$$QDO\VLV
UHYLHZRIDGPLQLVWUDWLYHDFWLRQ:KHQLWLVSRVVLEOHWRRIIHU
DUHDVRQHGH[SODQDWLRQEDVHGRQWKHHYLGHQFHIRUDSDUWLFXODU                :H DUH SULPDULO\ DVNHG WR GHFLGH WZR LQWHUUHODWHG OHJDO
RXWFRPHWKDWRXWFRPHLVQRWDUELWUDU\RUFDSULFLRXVl'DYLV                TXHVWLRQV RI ILUVW LPSUHVVLRQ RQ DSSHDO QDPHO\ ZKHWKHU
Y.HQWXFN\)LQ&RV5HW3ODQ)GWK&LU                 WKHmDSSOLFDEOHHOHFWLRQSHULRGlZLWKLQ86&
LQWHUQDOTXRWDWLRQPDUNVDQGFLWDWLRQRPLWWHGFHUW                 F$LRI(5,6$HQGVZLWKDSODQSDUWLFLSDQWjVDFWXDO
GHQLHG86                                                 UHWLUHPHQWGDWHHYHQZKHQDSODQLVXQGHUQRREOLJDWLRQWR
                                                                             PDNHEHQHILWSD\PHQWVE\WKHSDUWLFLSDQWjVGDWHRIUHWLUHPHQW
  ,QWKHLQVWDQWFDVHWKHGLVWULFWFRXUWIRXQGDQGWKHSDUWLHV             DQGWKHmDQQXLW\VWDUWLQJGDWHlDVWKDWWHUPLVGHILQHGLQ
DJUHH WKDW WKH 3ODQ FRQIHUV GLVFUHWLRQ WR WKH (PSOR\HH               86&   K$L LV VWDWXWRULO\ PDQGDWHG WR
%HQHILWV&RPPLWWHHWRGHWHUPLQHEHQHILWVDQGLQWHUSUHWWKH                   DOZD\VEHDSODQSDUWLFLSDQWjVGDWHRIDFWXDOUHWLUHPHQW:LWK
3ODQ7KXVZHUHYLHZWKH3ODQjVGHFLVLRQWRGHQ\3ODLQWLII

                                                                            FRQVWUXH   WKH   3ODQ    DQG   WR   GHWHUPLQH   DOO    TXHVWLRQV   WKDW   VKDOO   DULVH
      6HFWLRQ  RI WKH 3ODQ VWDWHV m>W@KH &RPPLWWHH VKDOO DGPLQLVWHU WKH   WKHUHXQGHU   l      7KH 3ODQ DOVR SURYLGHV WKDW m>H@[FHSW DV RWKHUZLVH
3ODQ DQG VKDOO KDYH FRPSOHWH FRQWURO LQ WKH DGPLQLVWUDWLRQ WKHUHRI       SURYLGHG KHUHLQ WKH GHFLVLRQ RI WKH &RPPLWWHH DV WR DQ\ GLVSXWH RU
7KH &RPPLWWHH VKDOO KDYH DOO SRZHUV ZKLFK DUH UHDVRQDEO\ QHFHVVDU\ WR        TXHVWLRQ   DULVLQJ      KHUHXQGHU    LQFOXGLQJ       TXHVWLRQV    RI   FRQVWUXFWLRQ
FDUU\ RXW LWV UHVSRQVLELOLWLHV XQGHU WKH 3ODQ LQFOXGLQJ    WKH SRZHU WR   LQWHUSUHWDWLRQ DQG DGPLQLVWUDWLRQ VKDOO EH ILQDO DQG FRQFOXVLYHl
1R      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                  6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO       1R

UHJDUGWRWKH ILUVW TXHVWLRQZHKROGWKDWZKHQDQ(5,6$               F$  7KH WHUP mDQQXLW\ VWDUWLQJ GDWHl PHDQV
JRYHUQHG SODQ LV QRW XQGHU DQ REOLJDWLRQ WR PDNH EHQHILW       mWKH ILUVW GD\ RI WKH ILUVW SHULRG IRU ZKLFK DQ DPRXQW LV
SD\PHQWVE\DSODQSDUWLFLSDQWjVDFWXDOUHWLUHPHQWGDWHWKH            SD\DEOHDVDQDQQXLW\l,GK$L*HQHUDOO\
DSSOLFDEOH HOHFWLRQ SHULRG GRHV QRW FRQFOXGH ZLWK WKH            m>D@ VXP RI PRQH\ LV VDLG WR EH SD\DEOH ZKHQ D SHUVRQ LV
SDUWLFLSDQWjVGDWHRIDFWXDOUHWLUHPHQW$FFRUGLQJO\ZHILQG          XQGHUDQREOLJDWLRQWRSD\LWl0R\OHY'LUHFWRU2IILFHRI
WKDW XQGHU FHUWDLQ FLUFXPVWDQFHV D SODQ SDUWLFLSDQW ZKR         :RUNHUVj&RPS3URJUDPV)GWK&LU
UHWLUHVHDUO\PD\ZDLYH4s6$EHQHILWVDIWHUKLVRUKHUGDWHRI           TXRWLQJ %/$&.j6 /$: ',&7,21$5<  WK
DFWXDOUHWLUHPHQW5HJDUGLQJWKHVHFRQGLVVXHZHKROGWKDW            HG HPSKDVLV DGGHG FHUW GHQLHG  86 
WKHDQQXLW\VWDUWLQJGDWHLVQRWVWDWXWRULO\UHTXLUHGWRDOZD\V           7KHUHIRUH XQGHU D VWUDLJKWIRUZDUG UHDGLQJ RI
EHDSODQSDUWLFLSDQWjVDFWXDOGDWHRIUHWLUHPHQW7KXVWKH           (5,6$jVWLPLQJSURYLVLRQVDSDUWLFLSDQWDQGVSRXVHPD\RQO\
DQQXLW\VWDUWLQJGDWHLVQRWWKHUHWURDFWLYHGDWHRIDYROXQWDU\        ZDLYHWKH4s6$RSWLRQGXULQJWKHGD\SHULRGHQGLQJRQ
DQGQRQUHTXLUHGEHQHILWSD\PHQWWKDWUHIOHFWVDSDUWLFLSDQWjV          WKHGDWHWKDWDSODQLVXQGHUDQREOLJDWLRQWREHJLQPDNLQJ
DFWXDOUHWLUHPHQWGDWHUDWKHULWLVWKHGDWHWKDWDSODQLVXQGHU     SHQVLRQSD\PHQWV$WWHPSWLQJWRLPSOHPHQWWKHVHVWDWXWRU\
DQ REOLJDWLRQ WR EHJLQ PDNLQJ SHQVLRQ SD\PHQWV                   UHTXLUHPHQWVWKH3ODQSURYLGHVWKDWmDQHOHFWLRQQRWWRWDNH
$FFRUGLQJO\XQGHUWKHIDFWVRIWKLVFDVHWKH4s6$ZDLYHU              DTXDOLILHGMRLQWDQGVXUYLYRUDQQXLW\PXVWEHGHOLYHUHGWRWKH
FRPSOLHGZLWKWKHWLPLQJSURYLVLRQVVHWIRUWKLQ(5,6$DQG              &RPPLWWHHGXULQJWKHSHULRGRIGD\VEHIRUHWKHGDWHRQ
WKHUHIRUHZDVHQIRUFHDEOHDVDPDWWHURIODZ                           ZKLFKSD\PHQWRIWKHEHQHILWFRPPHQFHVl3ODQE
  7KH SULQFLSDO REMHFW RI (5,6$ LV mWR SURWHFW SODQ               ,Q WKH LQVWDQW FDVH 0U 6KLHOGV UHWLUHG HDUO\ HIIHFWLYH
SDUWLFLSDQWV DQG EHQHILFLDULHVl  %RJJV Y %RJJV  86      sDQXDU\3ODLQWLIILQVLVWVWKDWWKHmDQQXLW\VWDUWLQJ
   FLWDWLRQ RPLWWHG  ,Q  &RQJUHVV          GDWHlZDV0U6KLHOGVjVUHWLUHPHQWGDWHLHsDQXDU\)URP
DPHQGHG(5,6$ZLWKWKH5HWLUHPHQW(TXLW\$FW5($                  WKLV SUHPLVH 3ODLQWLII DUJXHV WKDW WKH mDSSOLFDEOH HOHFWLRQ
86&mWRHQVXUHWKDWLQGLYLGXDOVZKRVHVSRXVHV             SHULRGlPHDQLQJWKHSHULRGGXULQJZKLFKDVSRXVDOZDLYHU
GLH EHIRUH WKHLU UHWLUHPHQW ZRXOG QHYHUWKHOHVV UHFHLYH WKH       FRXOG EH HIIHFWXDWHGZDV WKH GD\ SHULRG HQGLQJ RQ
VSRXVHVjSHQVLRQEHQHILWVl/HINRZLW]Y$UFDGLD7UDGLQJ&R           sDQXDU\7KHZDLYHUVLJQHGE\3ODLQWLIIZDVGDWHG
%HQHILWV3HQVLRQ3ODQ)GG&LU7KH           sDQXDU\7KHUHIRUHDFFRUGLQJWR3ODLQWLIIWKH4s6$
6XSUHPH&RXUWKDVQRWHGWKDWULJKWVFRQIHUUHGE\WKH5($                ZDLYHU IRUP ZDV GDWHG DQG VXEPLWWHG DSSUR[LPDWHO\ WKUHH
ZHUH LQWHQGHG WR mHQVXUH D VWUHDP RI LQFRPH WR VXUYLYLQJ       ZHHNV DIWHU WKH FORVH RI WKH HOHFWLRQ SHULRG  7KXV XQGHU
VSRXVHVl%RJJV86DW                                      3ODLQWLIIjVDQDO\VLVmHYHQLI3ODLQWLIIVLJQHGWKHZDLYHULWZDV
                                                                        GHIHFWLYHDVDPDWWHURIODZEHFDXVHLWZDVQRWVLJQHGGXULQJ
  $VDPHQGHGE\WKH5($(5,6$SURYLGHVWKDWVXUYLYLQJ                 WKHDSSOLFDEOHHOHFWLRQSHULRGl
VSRXVHEHQHILWVPD\EHZDLYHGRQO\LIWKHSDUWLFLSDQWREWDLQV
KLV RU KHU VSRXVHjV ZULWWHQ FRQVHQW IRU VXFK D ZDLYHU       $OWKRXJK VXSHUILFLDOO\ SHUVXDVLYH 3ODLQWLIIjV DQDO\VLV
86&F$7KHWLPLQJSURYLVLRQVRI(5,6$                LJQRUHVWKHIDFWWKDWDV0U6KLHOGVZDVDQHDUO\UHWLUHHWKH
SURYLGHWKDWDSODQSDUWLFLSDQWmPD\HOHFWDWDQ\WLPHGXULQJ           3ODQ ZDV XQGHU QR  REOLJDWLRQ WR EHJLQ PDNLQJ SHQVLRQ
WKHDSSOLFDEOHHOHFWLRQSHULRGWRZDLYHWKHTXDOLILHGMRLQWDQG         SD\PHQWVWRKLPXQWLOKLVQRUPDOUHWLUHPHQWGDWHDWWKHDJHRI
VXUYLYRU DQQXLW\ IRUP RI EHQHILWl ,G   F$L     LH2FWREHURULIEHIRUHWKHQDWWKHWLPH0U
7KHWHUPmDSSOLFDEOHHOHFWLRQSHULRGlLVGHILQHGWRPHDQLQ            6KLHOGV VSHFLILHG KH ZLVKHG WR EHJLQ UHFHLYLQJ SHQVLRQ
WKHFDVHRIDQHOHFWLRQWRZDLYHVXUYLYLQJVSRXVHEHQHILWV             EHQHILWV,QRWKHUZRUGVWKHFKRLFHWREHJLQUHFHLYLQJEHQHILW
mWKHGD\SHULRGHQGLQJRQWKHDQQXLW\VWDUWLQJGDWHl,G           SD\PHQWVEHORQJHGWR0U6KLHOGVQRWWKH3ODQDQGDVVXFK
1R        6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                     6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO      1R

KHFRXOGSRVWSRQHKLVHOHFWLRQ     RIEHQHILWVXQWLOKLVQRUPDO              PRQWKXQGHUHDFKRIWKHIRXUEHQHILWRSWLRQV%HFDXVH0U
UHWLUHPHQWGDWH7KHUHIRUHFRQWUDU\WR3ODLQWLIIjVSRVLWLRQ               6KLHOGVGLGQRWVSHFLI\ZKHQKHZLVKHGWREHJLQUHFHLYLQJ
WKHIDFWWKDW0U6KLHOGVUHWLUHGRQsDQXDU\LVQRW                  EHQHILW SD\PHQWV 0HUFHU KDG WR LQGHSHQGHQWO\ DVVXPH DQ
GLVSRVLWLYH RI WKLV FRXUWjV FDOFXODWLRQ RI WKH mDSSOLFDEOH             DQQXLW\VWDUWLQJGDWH0HUFHUjVDVVXPSWLRQWKDW0U6KLHOGVjV
HOHFWLRQSHULRGlRUWKHmDQQXLW\VWDUWLQJGDWHl$VWKHGLVWULFW             UHWLUHPHQWGDWHZRXOGDOVREHKLVDQQXLW\VWDUWLQJGDWHZDVD
FRXUWH[SODLQHGm(5,6$GRHVQRWUHTXLUHDUHWLUHHWRHOHFWD                 ORJLFDODVVXPSWLRQ+RZHYHU0HUFHUjVJXHVVGLGQRWFRQYHUW
FHUWDLQ W\SH RI EHQHILW RQ RU DERXW WKH DQQXLW\jV >ILUVW             0U6KLHOGVjVVLOHQFHLQWRWKHDFWXDODQQXLW\VWDUWLQJGDWHQRU
SRVVLEOH@VWDUWLQJGDWH5DWKHULQWKHMXGJPHQWRIWKH&RXUW               GLGLWVHWLQVWRQHWKHGDWHWKDW0U6KLHOGVjVDQQXLW\SD\PHQWV
>(5,6$@UHTXLUHVWKHUHWLUHPHQWSODQWRDOORZWKHUHWLUHHWR                  KDGWREHJLQ7KHsDQXDU\GDWHZDVPHUHO\DPDUNHUWKDW
GRVRl(PSKDVLVDGGHG7KXVZHILQGWKDW0U6KLHOGV                    HQDEOHG0HUFHUWRLOOXVWUDWHPRQHWDULO\WKHGLIIHUHQWPRQWKO\
ZDVQRWUHTXLUHGWRVXEPLWWKHHOHFWLRQRIEHQHILWVIRUPRUWKH               SD\PHQWVDYDLODEOHXQGHUWKHRSWLRQV$VPHQWLRQHGDERYH
4s6$ZDLYHUIRUPSULRUWRKLVHDUO\UHWLUHPHQWGDWHEHFDXVH                   0U6KLHOGVZDVIUHHWRSRVWSRQHKLVDQQXLW\VWDUWLQJGDWHIRU
WKHUHZDVQRREOLJDWLRQWKDWWKH3ODQPDNHEHQHILWSD\PHQWV                   DOPRVWWKUHH\HDUVDIWHUUHFHLYLQJWKHH[SODQDWLRQRIEHQHILWV
E\WKDWGDWH$OVRZHILQGWKDWDOWKRXJK0U6KLHOGVZDVIUHH               SDFNDJH  :KHQ 0U 6KLHOGV FRPSOHWHG DQG UHWXUQHG WKH
WR HOHFW DQ DQQXLW\ VWDUWLQJ GDWH WKDW FRUUHVSRQGHG WR KLV           IRUPVDOOGDWHGsDQXDU\QRGDWHZDVGHVLJQDWHGDV
UHWLUHPHQW GDWH KH ZDV QRW PDQGDWHG E\ (5,6$ WR GR VR             WKH GDWH WKDW KH ZLVKHG KLV EHQHILWV WR FRPPHQFH
7KHUHIRUH WKH 4s6$ ZDLYHU IRUP ZDV QRW LQYDOLG PHUHO\                $FFRUGLQJO\DVWKHGLVWULFWFRXUWFRUUHFWO\IRXQGm>W@KHRQO\
EHFDXVHLWDUULYHGDIWHU0U6KLHOGVjVHDUO\UHWLUHPHQWGDWH                 >VSHFLILHG@GDWH>IRUEHQHILWVWREHJLQ@ZDVDQLPSOLFLWRQHµDV
                                                                              VRRQDVSRVVLEOHjl
  )XUWKHUPRUHWKHIDFWWKDWWKH'HIHQGDQWVmDVVXPHGlWKDW
sDQXDU\ZDVWKHDQQXLW\VWDUWLQJGDWHRUWKDW0HUFHU                   :KHQWKH3ODQUHFHLYHG0U6KLHOGVjVFRPSOHWHGIRUPVLW
FDOFXODWHG 0U 6KLHOGVjV UHWLUHPHQW EHQHILW RSWLRQV ZLWK D             KDGWZRRSWLRQVLWFRXOGSURFHVV0U6KLHOGVjVIRUPVDQG
sDQXDU\DQQXLW\VWDUWGDWHGRHVQRWSURYHWKDW0U6KLHOGVjV                EHJLQKLVSD\PHQWVDVRI)HEUXDU\WKH3ODQRQO\SD\V
DQQXLW\ VWDUWLQJ GDWH ZDV LQ IDFW sDQXDU\   :KHQ 0U             LQZKROHPRQWKF\FOHVRULWFRXOGUHWURDFWLYHO\SD\0U
6KLHOGV UHTXHVWHG WR UHFHLYH DQ H[SODQDWLRQ RI EHQHILWV                6KLHOGVDVRIsDQXDU\+DGWKH3ODQFKRVHQWREHJLQ
SDFNDJH0HUFHUSXWWRJHWKHUDFKDUWVHWWLQJIRUWKWKHEHQHILW                LVVXLQJ SD\PHQWV DV RI )HEUXDU\  LW ZRXOG KDYH EHHQ
SD\PHQWVWKDW0U6KLHOGVDQG3ODLQWLIIZRXOGUHFHLYHHYHU\                   UHTXLUHGWRUHFDOFXODWH0U6KLHOGVjVPRQWKO\EHQHILWVEHFDXVH
                                                                              0HUFHUjVEHQHILWLOOXVWUDWLRQDVVXPHGDsDQXDU\DQQXLW\VWDUW
                                                                              GDWH$OVRLIWKH3ODQGHFLGHGWREHJLQSD\PHQWVLQ)HEUXDU\
    
      %\ GHIHUULQJ KLV SD\PHQWV XQWLO D ODWHU GDWH 0U 6KLHOGV ZRXOG
                                                                              QRWRQO\ZRXOG0U6KLHOGVORVHKLVsDQXDU\SD\PHQWEXWKLV
DYRLG D UHGXFWLRQ LQ KLV PRQWKO\ SD\PHQWV VLQFH DQ HDUO\ UHWLUHHjV EHQHILWV   PRQWKO\SD\PHQWVZRXOGDOVRKDYHEHHQVOLJKWO\UHGXFHGGXH
DUH W\SLFDOO\ UHGXFHG WR DGMXVW IRU WKH H[SHFWDWLRQ WKDW WKH UHWLUHH ZLOO     WRDQLQVXUDQFHSHFXOLDULW\,QVWHDGRIWDNLQJWKLVDSSURDFK
FROOHFW SD\PHQWV IRU D ORQJHU SHULRG RI WLPH 3ODQ                    DQGWR0U6KLHOGVjVDGYDQWDJHWKH3ODQSDLG0U6KLHOGVKLV
    
                                                                              EHQHILWVUHWURDFWLYHWRsDQXDU\VRWKDWKHZRXOGQRWIRUIHLW
      3ODLQWLII FLWHV WULDO WHVWLPRQ\ IURP 3ODQ DGPLQLVWUDWRUV ZKR            KLVsDQXDU\SD\PHQWDQGVRKHFRXOGUHFHLYHSD\PHQWVDWWKH
DSSDUHQWO\ FRQFHGHG WKDW WKH HOHFWLRQ RI EHQHILWV DQG ZDLYHU IRUPV ZHUH       KLJKHU UDWH WKDW ZDV LOOXVWUDWHG RQ WKH VFKHGXOH VHQW IURP
QRW VXEPLWWHG GXULQJ WKH DSSOLFDEOH HOHFWLRQ SHULRG         2Q DSSHDO
'HIHQGDQWV H[SODLQ WKDW WKHVH DGPLQLVWUDWRUV ZHUH mPRPHQWDULO\
                                                                              0HUFHU7KH3ODQKDVIROORZHGWKLVSUDFWLFHLQWKHFDVHRI
EDPERR]OHGl LQWR DJUHHLQJ ZLWK D mEL]DUUHl DQG mLOORJLFDOl LQWHUSUHWDWLRQ
                                                                              RWKHUSDUWLFLSDQWVZKRVHIRUPVZHUHUHFHLYHGPLGPRQWK
RI (5,6$ DQG WKH 3ODQ +RZHYHU EHFDXVH WKH SDUWLHV KDYH DVNHG XV WR
UHVROYH OHJDO TXHVWLRQV RQ DSSHDO DQ\ FRQFHVVLRQV RU DVVXPSWLRQV E\ WKH
'HIHQGDQWV DUH RI QR FRQVHTXHQFH WR RXU DQDO\VLV
1R        6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO            1R

   *LYHQ WKHVH FLUFXPVWDQFHV KDG WKH 3ODQ FRPPHQFHG                       7KH3ODQjV7LPLQJ3URYLVLRQV
SD\PHQWV DV RI )HEUXDU\ DQG QRW PDGH D UHWURDFWLYH
SD\PHQW IRU sDQXDU\DV LW ZDV DSSDUHQWO\ HQWLWOHG WR GR                 8QGHUWKHWHUPVRIWKH3ODQLWVHOIWKH'HIHQGDQWVDOVRGLG
3ODLQWLIIZRXOGQRWKDYHEHHQDEOHWRFKDOOHQJHWKHWLPHOLQHVV                 QRWWHFKQLFDOO\YLRODWHWKHDSSOLFDEOHEHQHILWVHOHFWLRQWLPLQJ
RIWKHHOHFWLRQDQGZDLYHUIRUPVEHFDXVHRQWKHLUIDFHWKH                    SURYLVLRQ6HFWLRQRIWKH3ODQSURYLGHVWKDWmDQHOHFWLRQ
IRUPVZRXOGKDYHEHHQVLJQHGGDWHGDQGVXEPLWWHGLHRQ                    QRW WR WDNH D TXDOLILHG MRLQW DQG VXUYLYRU DQQXLW\ PXVW EH
DSSUR[LPDWHO\ sDQXDU\   GXULQJ WKH GD\ SHULRG                GHOLYHUHG WR WKH &RPPLWWHH GXULQJ WKH SHULRG RI  GD\V
HQGLQJRQWKHDQQXLW\VWDUWLQJGDWHLH)HEUXDU\                  EHIRUH WKH    GDWH RQ ZKLFK SD\PHQW RI WKH EHQHILW
0LVLQWHUSUHWLQJWKHPHDQLQJRIWKHRSHUDWLYHWHUPVJRYHUQLQJ                   FRPPHQFHVl   3ODQ   E HPSKDVLV DGGHG  7R
WKLVDQDO\VLVWKHSDUWLHVVHHPWRDJUHHWKDWEHFDXVHWKH3ODQ                 FRPPHQFHLVm>W@RLQLWLDWHE\SHUIRUPLQJWKHILUVWDFWRUVWHS
PDGH D UHWURDFWLYH SD\PHQW RI EHQHILWV WKH mWHFKQLFDOl                    >RU@ >W@R EHJLQ LQVWLWXWH RU VWDUWl  %/$&.j6 /$:
FRPPHQFHPHQWRIEHQHILWVGDWHZDVSULRUWRWKHGDWHWKDWWKH                   ',&7,21$5< WKHG5HDGOLWHUDOO\WKHJRYHUQLQJ
IRUPV ZHUH VLJQHG DQG VXEPLWWHG DQG KHQFH D WHFKQLFDO                  GDWHIRUSXUSRVHVRIWKHFRPPHQFHPHQWRIEHQHILWGDWHLVWKH
YLRODWLRQRI(5,6$DQGWKH3ODQ+RZHYHUIRUSXUSRVHVRI                     mUHDOWLPHlGDWHWKDWWKHILUVWSD\PHQWZDVGLVWULEXWHGQRWWKH
DQ (5,6$ DQDO\VLV WKH SHUWLQHQW GDWH LV QRW WKH GDWH WKDW           UHWURDFWLYHGDWHWKDWSHUPLWWHGWKH3ODQWRDFFRXQWIRUDSULRU
EHQHILWVFRPPHQFHGEXWUDWKHUWKHmDQQXLW\VWDUWLQJGDWHlDV                 SD\SHULRG$VWKHGLVWULFWFRXUWREVHUYHGm>W@KHIDFWWKDWWKH
WKDWWHUPLVGHILQHGLQWKHVWDWXWH6HFWLRQK$L              3ODQ SHUPLWWHG WKH LQFRUSRUDWLRQ RI DGGLWLRQDO PRQLHV LQWR
SURYLGHVWKDWWKHDQQXLW\VWDUWLQJGDWHLVWKHmILUVWGD\RIWKH               WKLV >ILUVW@ SD\PHQW VR DV WR DVVLVW WKH EHQHILFLDU\ LQ
ILUVWSHULRGIRUZKLFKDQDPRXQWLVSD\DEOHDVDQDQQXLW\l                    DFFRXQWLQJIRUDSULRUSD\SHULRGGRHVQRWFKDQJHWKHDFWXDO
*HQHUDOO\m>D@VXPRIPRQH\LVVDLGWREHSD\DEOHZKHQD                     FRPPHQFHPHQWGDWHl%DVHGRQHYLGHQFHSUHVHQWHGWRWKH
SHUVRQLVXQGHUDQREOLJDWLRQWRSD\LWl0R\OH)GDW                  GLVWULFWFRXUWWKHGDWHLQWHUPVRImUHDOWLPHlWKDWWKHILUVW
:KHQWKH3ODQUHFHLYHG0U6KLHOGVjVIRUPVLQPLG                      EHQHILW SD\PHQW ZDV PDGH WR 0U 6KLHOGV ZDV VRPH WLPH
sDQXDU\LWZDVQRWXQGHUDQREOLJDWLRQWRFRPPHQFHEHQHILW                    EHWZHHQ sDQXDU\  DQG )HEUXDU\    $V GLVFXVVHG
SD\PHQWV XQWLO )HEUXDU\ WKH QH[W DYDLODEOH PRQWKO\                    DERYH(5,6$UHTXLUHGWKDW0U6KLHOGVEHJLYHQXQWLODWOHDVW
SD\PHQWF\FOH7KHIDFWWKDWWKH3ODQPDGHDYROXQWDU\DQG                    )HEUXDU\WRHOHFWWRZDLYHWKH4s6$RSWLRQ7KXV
QRQUHTXLUHG UHWURDFWLYH EHQHILW SD\PHQW WKDW UHIOHFWV 0U               EHWZHHQWKHUHTXLUHPHQWVRI(5,6$DQGWKHWHUPVRIWKH3ODQ
6KLHOGVjV DFWXDO UHWLUHPHQW GDWH GRHV QRWFRQWUDU\ WR WKH              0U6KLHOGVKDGXQWLODWOHDVW)HEUXDU\DQGGHSHQGLQJRQ
SDUWLHVjDSSDUHQWDJUHHPHQWFKDQJHWKHDQQXLW\VWDUWLQJGDWH                 ZKHQSD\PHQWVFRPPHQFHGSRWHQWLDOO\)HEUXDU\WR
7KHUHIRUHIRUSXUSRVHVRI(5,6$DQGXQGHUWKHIDFWVRIWKLV
FDVH WKH DQQXLW\ VWDUWLQJ GDWH ZDV )HEUXDU\  
$FFRUGLQJO\ WKH 3ODQjV UHWURDFWLYH SD\PHQW RI sDQXDU\                   VSRXVHjV ZDLYHU ZRXOG KDYH EHHQ DWWDLQHG DSSUR[LPDWHO\  GD\V EHIRUH
EHQHILWVD SD\PHQW LW ZDV QRW REOLJDWHG WR PDNHGLG QRW              WKH DQQXLW\ VWDUWLQJ GDWHZHOO EH\RQG (5,6$jV UHTXLUHPHQW WKDW D VSRXVH
YLRODWHWKHWLPLQJSURYLVLRQVRI(5,6$                                      ZDLYH KLV RU KHU VXUYLYRU EHQHILWV GXULQJ WKH GD\ SHULRG HQGLQJ RQ WKH
                                                                               DQQXLW\ VWDUWLQJ GDWH

                                                                                    
                                                                                      7KH ODQJXDJH RI WKH WLPLQJ SURYLVLRQV UHOHYDQW WR WKH ZDLYHU RI
    
       2XU DQDO\VLV GRHV QRW LPSOLFDWH WKH VLWXDWLRQ ZKHUH D VSRXVH VLJQV      4s6$ EHQHILWV LV VOLJKWO\ GLIIHUHQW XQGHU WKH WHUPV RI WKH 3ODQ WKDQ XQGHU
D 4s6$ ZDLYHU IRUP RXWVLGH WKH DSSOLFDEOH HOHFWLRQ SHULRG %\ ZD\ RI           WKH VWDWXWRU\ SURYLVLRQV RI (5,6$ 7KH 3ODQ LPSUHFLVHO\ VSHDNV RI D
H[DPSOH LI D VSRXVH VLJQV D ZDLYHU IRUP LQ sXQH  DQG WKH DQQXLW\         EHQHILW mFRPPHQFHPHQW GDWHl DV RSSRVHG WR DQ mDQQXLW\ VWDUWLQJ GDWHl
VWDUWLQJ GDWH LV LQ 2FWREHU  WKHQ LQ WKLV VLWXDWLRQ WKH SODLQ ODQJXDJH   $OWKRXJK HQFRPSDVVLQJ VOLJKWO\ GLIIHUHQW PHDQLQJV IRU SXUSRVHV RI WKLV
RI (5,6$ DV ZHOO DV WKH XQGHUO\LQJ SROLF\ RI (5,6$jV WLPLQJ SURYLVLRQV         DQDO\VLV WKH 3ODQjV WHUPV DUH QRW LQFRQVLVWHQW ZLWK UHTXLUHPHQWV RI
UHTXLUH VXFK D ZDLYHU WR EH GHHPHG LQYDOLG ,Q WKLV K\SRWKHWLFDO WKH          (5,6$ DQG WKHUHIRUH DUH HQIRUFHDEOH
1R         6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO          1R

PDNH KLV EHQHILW HOHFWLRQ DQG 4s6$ ZDLYHU  7KH GLVWULFW               UHWLUHGIURP463HIIHFWLYHsDQXDU\DWWKHDJHRI
FRXUW IRXQG WKDW WKH FRPPHQFHPHQW RI EHQHILWV GDWH ZDV                  $V DQ HDUO\ UHWLUHH KH ZDV QRW UHTXLUHG WR VWDUW UHFHLYLQJ
VRPH WLPH EHWZHHQ sDQXDU\  DQG )HEUXDU\                        EHQHILWVXQWLOKLVQRUPDOUHWLUHPHQWGDWHRI2FWREHU
5HJDUGOHVV RI WKH SUHFLVH EHQHILW FRPPHQFHPHQW GDWH WKH                 :KHQ KH UHWXUQHG KLV FRPSOHWHG IRUPV GDWHG sDQXDU\ 
HOHFWLRQDQGZDLYHUIRUPVGDWHGsDQXDU\ZHUHLQ                        KH GLG QRW GHVLJQDWH D GDWH RQ ZKLFK KH ZLVKHG KLV
IDFWGHOLYHUHGmGXULQJWKHSHULRGRIGD\VEHIRUHWKHGDWHRQ                 EHQHILWVWRFRPPHQFH7KH'HIHQGDQWVjFRQFOXVLRQWKDWKH
ZKLFKSD\PHQWRIWKHEHQHILWFRPPHQFHVl3ODQE                    ZDQWHGKLVEHQHILWVWREHJLQmDVVRRQDVSRVVLEOHlZDVQRW
7KHUHIRUHFRQWUDU\WRWKH3ODLQWLIIjVDUJXPHQWVWKH3ODQjV                    DUELWUDU\RUFDSULFLRXV
UHWURDFWLYH SD\PHQW RI  EHQHILWV GLG QRW YLRODWH WKH WLPLQJ
SURYLVLRQVRIWKH3ODQ                                                          $OVR ZKHQ 0U 6KLHOGV GLG QRW VSHFLI\ WKH GDWH WKDW KH
                                                                                ZDQWHGKLVEHQHILWVWRFRPPHQFHWKH3ODQFRXOGKDYHHLWKHU
& :KHWKHU WKH 'HIHQGDQWV $FWHG $UELWUDULO\ RU                             EHJXQ SHQVLRQ SD\PHQWV DV RI )HEUXDU\   RU
   &DSULFLRXVO\                                                                 UHWURDFWLYHO\ SDLG KLP DV RI sDQXDU\    7KH ODWWHU
                                                                                RSWLRQZRXOGDYRLGWKHGLIILFXOW\RIKDYLQJWRUHFDOFXODWHWKH
  7KH'HIHQGDQWVGLGQRWDFWDUELWUDULO\RUFDSULFLRXVO\E\                     PRQWKO\EHQHILWVDQGZRXOGDOVRSUHYHQW0U6KLHOGVIURP
DFFHSWLQJ0U6KLHOGVjVEHQHILWHOHFWLRQIRUPVLQFOXGLQJWKH                   ORVLQJKLVsDQXDU\SD\PHQW7KHGLVWULFWFRXUWIRXQGWKDWWKH
4s6$ZDLYHUDVWLPHO\$VDOUHDG\GLVFXVVHG0U6KLHOGV                      3ODQIROORZHGWKHODWWHURSWLRQLQWKHFDVHRIRWKHUSDUWLFLSDQWV
                                                                                ZKRVHIRUPVZHUHUHFHLYHGPLGPRQWK*LYHQWKHIDFWVRI
                                                                                WKLV FDVH WKHUH LV QRWKLQJ DUELWUDU\ RU FDSULFLRXV LQ WKH
                                                                              'HIHQGDQWVjGHFLVLRQWRPDNHDYROXQWDU\UHWURDFWLYHSD\PHQW
        7KLV LQWHUSUHWDWLRQ DOVR JLYHV PHDQLQJ WR WKH UHVW RI   E
ZKLFK SURYLGHV WKDW m>D@Q\ HOHFWLRQ PDGH XQGHU WKLV 6HFWLRQ PD\ EH
                                                                                WRWKHDGYDQWDJHRI0U6KLHOGVDSD\PHQWWKDWGLGQRWDIIHFW
UHYRNHG LQ ZULWLQJ GXULQJ WKH VSHFLILHG HOHFWLRQ SHULRG    l ,I ZH DFFHSW
                                                                                WKH mDQQXLW\ VWDUWLQJ GDWHl DV GHILQHG E\ (5,6$ RU WKH
3ODLQWLIIjV DUJXPHQW WKDW WKH DSSOLFDEOH HOHFWLRQ SHULRG HQGHG RQ               mEHQHILWFRPPHQFHPHQWGDWHlDVVHWIRUWKLQWKH3ODQ
sDQXDU\   WKHQ 0U 6KLHOGV DQG 3ODLQWLII ZRXOG KDYH EHHQ GHQLHG
WKHLU UHYRFDWLRQ ULJKW XQGHU WKH 3ODQ 7KDW LV 0U 6KLHOGV DQG 3ODLQWLII         2XUFRQFOXVLRQILQGVVXSSRUWLQDUHFHQWGHFLVLRQIURPWKH
REYLRXVO\ ZRXOG EH XQDEOH WR UHYRNH WKHLU GHVLJQDWLRQ E\ sDQXDU\  ZKHQ        1RUWKHUQ'LVWULFWRI2KLRWKHRQO\IHGHUDOFDVHZHKDYHEHHQ
WKH\ VXEPLWWHG WKHLU IRUPV RQ DSSUR[LPDWHO\ sDQXDU\  8QGHU RXU
DQDO\VLV 0U 6KLHOGV DQG 3ODLQWLII ZRXOG KDYH XQWLO DW OHDVW )HEUXDU\ 
                                                                                DEOHWRORFDWHWKDWDGGUHVVHVDVLPLODUVLWXDWLRQDVWKHFDVHDW
 DQG SRWHQWLDOO\ )HEUXDU\   WR UHYRNH WKHLU sDQXDU\ 
                                                                                KDQG,Q:HLUDXFKY6SULQW5HWLUHPHQW3HQVLRQ3ODQ)
HOHFWLRQ DQG ZDLYHU                                                            6XSS G  1' 2KLR  D VSRXVH DUJXHG WKDW KHU
     $OVR E\ LQWHUSUHWLQJ mFRPPHQFHPHQWl WR PHDQ WKH UHDO WLPH GDWH WKDW       ZDLYHURIVXUYLYRUEHQHILWVVKRXOGQRWEHHQIRUFHGEHFDXVH
WKH ILUVW SD\PHQW ZDV GLVWULEXWHG ZH DOVR JLYH SURSHU PHDQLQJ WR   F      WKHZDLYHUZDVXQWLPHO\6SHFLILFDOO\VKHDUJXHGWKDWXQGHU
RI WKH 3ODQ ZKLFK SURYLGHV WKDW mWKH &RPPLWWHH VKDOO IXUQLVK WR WKH
                                                                                WKHWHUPVRIKHUGHFHDVHGKXVEDQGjVSODQKHUZDLYHUVKRXOG
3DUWLFLSDQW ZLWKLQ D UHDVRQDEOH WLPH QR OHVV WKDQ  GD\V DQG QR PRUH
WKDQ  GD\V EHIRUH WKH GDWH DV RI ZKLFK WKH ILUVW DQQXLW\ SD\PHQW LV WR
                                                                                KDYH EHHQ PDGH GXULQJ WKH   GD\ SHULRG EHIRUH KHU
FRPPHQFH    D ZULWWHQ H[SODQDWLRQ RI >EHQHILWV@   l 7KH 3ODQ VHQW 0U    KXVEDQGjVDQQXLW\VWDUWLQJGDWH ,GDW%HFDXVHWKH
6KLHOGV DQG 3ODLQWLII D ZULWWHQ H[SODQDWLRQ RI EHQHILWV SDFNDJH RQ              DQQXLW\ VWDUWLQJ GDWH ZDV UHWURDFWLYHO\ GHWHUPLQHG WR EH
'HFHPEHU   ,I WKH EHQHILW FRPPHQFHPHQW GDWH ZDV VRPH WLPH
EHWZHHQ sDQXDU\  DQG )HEUXDU\  WKHQ WKH 'HFHPEHU  SDFNDJH ZRXOG
KDYH EHHQ GHOLYHUHG ZLWKLQ WKH WLPH SHULRG DOORZHG E\ WKH 3ODQ
                                                                                     
+RZHYHU XQGHU WKH 3ODLQWLIIjV LQWHUSUHWDWLRQ LI sDQXDU\  ZDV WKH EHQHILW           7KH SODQ VSHFLILFDOO\ SURYLGHG WKDW m>W@KH ZDLYHU PXVW EH H[HFXWHG
FRPPHQFHPHQW GDWH WKHQ WKH 3ODQ ZRXOG QRW EH LQ FRPSOLDQFH ZLWK            DQG FRQVHQWHG WR E\ WKH 0HPEHUjV VSRXVH    GXULQJ WKH GD\ SHULRG
F HYHQ WKRXJK 0U 6KLHOGV DQG 3ODLQWLII KDG LQ WHUPV RI mUHDO WLPHl DW        HQGLQJ RQ WKH 0HPEHUjV $QQXLW\ 6WDUWLQJ 'DWH   l  ) 6XSS G DW
OHDVW  GD\V WR FRQVLGHU WKHLU RSWLRQV                                         HPSKDVLV UHPRYHG
1R         6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO                      6KLHOGVY5HDGHUjV'LJHVW$VVjQHWDO            1R

sDQXDU\   DQG WKH SODLQWLII VLJQHG KHU ZDLYHU RQ                DW)LQGLQJWKDWWKHSODQFRPSOLHGZLWKWKHSURYLVLRQRI
)HEUXDU\WKHSODLQWLIIFRQWHQGHGWKDWWKHZDLYHUZDV                  WKH 5HYHQXH 3URFHGXUH WKH FRXUW KHOG WKDW WKH mXVH DQG
XQWLPHO\DQGWKXVLQYDOLGXQGHUWKHSODQ,GDW7KH                   LQWHUSUHWDWLRQRIWKH(5,6$SURYLVLRQZDVUHDVRQDEOHEHFDXVH
GHIHQGDQW DUJXHG WKDW WKH DQQXLW\ VWDUWLQJ GDWH ZDV PDGH                WKH 3ODQ GLG QRW DGGUHVV VTXDUHO\ WKH FLUFXPVWDQFHV RI
UHWURDFWLYHIRUWKHEHQHILWRIWKHSODLQWLIIDQGKHUKXVEDQGDQG               SODLQWLIIjVFODLPl,GDW,QWKHFDVHDWEDUEHFDXVH
WKDWLIWKHSODQKDGUHIXVHGWKHKXVEDQGjVUHTXHVWWRJUDQWKLV                 WKHEHQHILWHOHFWLRQDQGZDLYHUIRUPVZHUHQRWXQWLPHO\WKH
UHWLUHPHQW DSSOLFDWLRQ UHWURDFWLYH WR sDQXDU\  KLV DQQXLW\             'HIHQGDQWVGLGQRWDFWLQDQDUELWUDU\RUFDSULFLRXVPDQQHULQ
VWDUWLQJGDWHZRXOGKDYHEHHQDIWHU)HEUXDU\WKH                      DFFHSWLQJ DQG SURFHVVLQJ WKH EHQHILW HOHFWLRQ DQG 4s6$
GDWHRIWKHZDLYHU,G                                                      ZDLYHUIRUPV
   5HYLHZLQJWKHSODQjVGHFLVLRQWRGHQ\EHQHILWVXQGHUWKH                       $)),50('
DUELWUDU\ DQG FDSULFLRXV VWDQGDUG WKH FRXUW IRXQG WKDW WKH
SODLQ ODQJXDJH RI WKH DSSOLFDEOH SODQ VHFWLRQ GLG mQRW
LQYDOLGDWHZDLYHUVWKDWDUHH[HFXWHGDIWHUWKHDQQXLW\VWDUWLQJ
GDWHl,G$OVREHFDXVHQRSODQWHUPVTXDUHO\DGGUHVVHGWKH
LVVXH RI ZDLYHU XQWLPHOLQHVV GXH WR D UHWURDFWLYH EHQHILW
SD\PHQWWKHFRXUWGHIHUUHGWRWKHSODQjVUHOLDQFHRQ5HYHQXH
3URFHGXUH,5%:/
WRLQWHUSUHWWKHSODQDQGGHWHUPLQHWKHSODLQWLIIjVFODLP,G


       
       ,Q   :HLUDXFK  WKH GLVWULFW FRXUW ZDV QRW DVNHG WR GHFLGH WKH DQQXLW\
VWDUWLQJ GDWH LQVWHDG WKH FRXUW DFFHSWHG DW IDFH YDOXH WKH SODQjV
GHWHUPLQDWLRQ WKDW WKH UHWURDFWLYH GDWH RI DQ DQQXLW\ SD\PHQW ZDV WKH
DQQXLW\ VWDUWLQJ GDWH 6HH    ) 6XSS G DW  m %HFDXVH WKH VWDUWLQJ
GDWH  ZDV GHWHUPLQHG UHWURDFWLYHO\ WR EH sDQXDU\   DQG SODLQWLII
VLJQHG KHU ZDLYHU RQ )HEUXDU\   SODLQWLII FRQWHQGV WKH ZDLYHU ZDV
QRW WLPHO\ DQG WKXV XQGHU WKH 3ODQ LV LQYDOLGl HPSKDVLV DGGHG ,Q WKH
LQVWDQW FDVH ZH KDYH EHHQ DVNHG WR GHWHUPLQH ZKHWKHU DV D PDWWHU RI ODZ
WKH DQQXLW\ VWDUWLQJ GDWH LV WKH GDWH RI D QRQUHTXLUHG UHWURDFWLYH SD\PHQW
WKDW FRLQFLGHV ZLWK WKH DFWXDO UHWLUHPHQW GDWH ,W LV QRW ,QVWHDG LW LV WKH
GDWH WKDW D SODQ LV XQGHU DQ REOLJDWLRQ WR EHJLQ PDNLQJ SHQVLRQ SD\PHQWV
7KHUHIRUH DOWKRXJK WKH GLVWULFW FRXUWjV DQDO\VLV LQ :HLUDXFK ZDV
SUHPLVHG RQ DQ DVVXPSWLRQ ZH UHMHFW KHUH WKDW DVVXPSWLRQ ZDV QRW LQ
GLVSXWH QRU ZDV LW WKH SURGXFW RI OHJDO DQDO\VLV $FFRUGLQJO\ ZH WDNH QR
LVVXH ZLWK WKH GLVWULFW FRXUWjV DQDO\VLV RQ WKH LVVXHV EHIRUH LW QDPHO\
ZKHWKHU D 4s6$ ZDLYHU VLJQHG DIWHU WKH DQQXLW\ VWDUWLQJ GDWHDV WKDW GDWH
ZDV GHWHUPLQHG E\ WKH SODQZDV LQYDOLG DQG ZKHWKHU WKH SODQjV FRUUHFWLYH
DSSURDFK ZDV DUELWUDU\ DQG FDSULFLRXV

       
       7KH SHUWLQHQW SURYLVLRQ RI WKH 5HYHQXH 3URFHGXUH SURYLGHV WKDW LQ        SURYLGLQJ LQIRUPHG FRQVHQW IRU WKH GLVWULEXWLRQ DFWXDOO\ PDGH RU UHFHLYLQJ
FHUWDLQ VLWXDWLRQV m>W@KH SHUPLWWHG FRUUHFWLRQ PHWKRG >IRU XQWLPHO\ RU         D TXDOLILHG MRLQW DQG VXUYLYRU DQQXLW\l   5HY 3URF  
PLVVLQJ FRQVHQWV@ LV WR JLYH HDFK DIIHFWHG SDUWLFLSDQW D FKRLFH EHWZHHQ         ,5%$SS $ DW 
