      5(&200(1'(' )25 )8//7(;7 38%/,&$7,21
           3XUVXDQW WR 6L[WK &LUFXLW 5XOH                    ,QUH)HGHUDWHG'HSjW6WRUHV                        1R
   (/(&7521,& &,7$7,21  )(' $SS 3 WK &LU
               )LOH 1DPH DS
                                                                        'HFLGHGDQG)LOHG0D\
                                                          %HIRUH0225(DQG*,%%216&LUFXLWsXGJHV&2+1
81,7('67$7(6&28572)$33($/6                                          6HQLRU'LVWULFWsXGJH
             )257+(6,;7+&,5&8,7                                              BBBBBBBBBBBBBBBBB
               BBBBBBBBBBBBBBBBB
                                                                                      &2816(/

,QUH)('(5$7('                 ;                       $5*8('  ,DQ $QGHUVRQ 1HZ <RUN 1HZ <RUN IRU
'(3$570(17 6725(6 ,1&                                $SSHOODQWV  'DYLG ' %ODFN ',16025( 	 6+2+/
                                                        &LQFLQQDWL2KLRIRU$SSHOOHHV21%5,(),DQ$QGHUVRQ
                  'HEWRU                                1HZ <RUN 1HZ <RUN IRU $SSHOODQWV  'DYLG ' %ODFN
                                    1R
                                                        ',16025(	6+2+/&LQFLQQDWL2KLRIRU$SSHOOHHV
BBBBBBBBBBBBBBBBBBBBBBBB !
                                                                               BBBBBBBBBBBBBBBBB
                                  
&+5,6723+(5 63,(5(5                                                               23,1,21
0$5,21 63,(5(5                                                                BBBBBBBBBBBBBBBBB
                  $SSHOODQWV 
                                                           .$5(11(/6210225(&LUFXLWsXGJH,QDQHIIRUWWR
                                                        KDVWHQ UHVROXWLRQ RI WKH )HGHUDWHG 'HSDUWPHQW 6WRUHVj DQG
          Y                                            RWKHUGHEWRUVjEDQNUXSWF\HVWDWHWKH%DQNUXSWF\&RXUWIRUWKH
                                                        6RXWKHUQ'LVWULFWRI2KLRRUGHUHGWKRVHFUHGLWRUVZKRKDG
)('(5$7(' '(3$570(17                                    OLWLJDWLRQSHQGLQJDJDLQVWWKHGHEWRUVWRVXEPLWWKHLUFODLPVWR
6725(6 ,1& $//,(' 6725(6                             QRQELQGLQJDUELWUDWLRQEHIRUHEULQJLQJWKHLUFODLPVWRFRXUW
&25325$7,21                                            &UHGLWRUVZHUHJLYHQDQRSSRUWXQLW\WRRSWRXWRIWKLVGLVSXWH
%/220,1*'$/(6                                           UHVROXWLRQSURFHVVDQGVRPHGLG$SSHOODQWV&KULVWRSKHUDQG
                                                        0DULRQ6SLHUHUKRZHYHUGLGQRWDQGWKHEDQNUXSWF\FRXUW
'(3$570(17 6725(6 ,1&                                VWD\HG WKHLU VWDWH FRXUW VXLW DJDLQVW WKH GHEWRUV XQWLO WKH
                   $SSHOOHHV                           6SLHUHUV KDG JRQH WKURXJK WKH DUELWUDWLRQ SURFHVV  7KH
                                                        6SLHUHUVVXEVHTXHQWO\VRXJKWWROLIWWKHVWD\VRWKDWWKH\FRXOG
                                                        SURFHHGGLUHFWO\LQVWDWHFRXUWKRZHYHUDUJXLQJWKDWWKHVWD\
                                                        VKRXOG QHYHU KDYH EHHQ LPSRVHG  7KH EDQNUXSWF\ FRXUW
                                 1                       GHQLHG WKLV PRWLRQ DQG WKH GLVWULFW FRXUW DIILUPHG RQ WKH
     $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW        JURXQGVWKDWWKH6SLHUHUVFRXOGQRWFKDOOHQJHWKHLPSRVLWLRQ
    IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&LQFLQQDWL     RIWKHVWD\LQWKHLUDSSHDOIURPWKHGHQLDORIDPRWLRQWROLIW
  1Rn6DQGUD6%HFNZLWK'LVWULFWsXGJH
               $UJXHG0DUFK                       
                                                              7KH +RQRUDEOH $YHUQ &RKQ 6HQLRU 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
                                                         WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ



                           
1R                   ,QUH)HGHUDWHG'HSjW6WRUHV                     ,QUH)HGHUDWHG'HSjW6WRUHV                  1R

WKH VWD\  7R WKH H[WHQW WKDW WKH 6SLHUHUV FKDOOHQJH WKH         KDQGV RI WKH GHEWRU VHH  86&  E DQG VHFWLRQ
EDQNUXSWF\FRXUWjVMXULVGLFWLRQWRLPSRVHWKHVWD\ZHPD\                 D VWDWHV WKDW D GLVFKDUJH LQ EDQNUXSWF\ VHUYHV DV DQ
KHDUWKHDSSHDO%HFDXVHWKHVWD\ZDVZLWKLQWKHEDQNUXSWF\               LQMXQFWLRQDJDLQVWDFWLRQVWRFROOHFWRQWKHGHEWRUjVSHUVRQDO
FRXUWjVMXULVGLFWLRQKRZHYHUZH$)),50WKHMXGJPHQWRI                   OLDELOLWLHVVHH86&D
WKHEDQNUXSWF\FRXUW
                                                                              $W OHDVW RQH FODLPDQW ZKR KDG REMHFWHG WR WKH 'HEWRUVj
                       ,%$&.*5281'                                      $'5SURSRVDOZDVH[HPSWHGIURPWKH$'5SURFHVVVRORQJ
                                                                           DV KLV WULDO ZRXOG EH FRPPHQFHG E\ D FHUWDLQ GDWH EXW
   &ODLPLQJ WKDW WKH\ KDG VXIIHUHG LQMXULHV DV D UHVXOW RI        FODLPDQWV VXFK DV WKH 6SLHUHUV ZKR KDG QRW RSSRVHG WKH
H[SRVXUH WR WR[LF FKHPLFDOV LQ D PDWWUHVV WKDW WKH\ KDG           SURSRVDOZHUHUHTXLUHGWRVXEPLWWKHLUFODLPVWRDUELWUDWLRQ
REWDLQHGIURPWKHGHIHQGDQWV&KULVWRSKHUDQG0DULRQ6SLHUHU               &ODLPDQWV FRXOG FKRRVH ZKHWKHU WKH DUELWUDWLRQ ZRXOG EH
ILOHGVXLWDJDLQVWWKH)HGHUDWHG'HSDUWPHQW6WRUHVDQGFHUWDLQ             ELQGLQJ DQG LI FODLPDQWV EULQJLQJ SHUVRQDO LQMXU\ DFWLRQV
RI)HGHUDWHGjVVXEVLGLDU\FRPSDQLHVLQ1HZ<RUNVWDWHFRXUW                FKRVHIRUWKHDUELWUDWLRQWREHQRQELQGLQJWKH\FRXOGVHUYH
LQ7KH6SLHUHUVZHUHQRWWKHRQO\LQGLYLGXDOVZKRZHUH              QRWLFHZLWKLQWHQGD\VRIWKHQRQELQGLQJGHFLVLRQWKDWWKH\
VXLQJWKHGHIHQGDQWVDQGRQsDQXDU\WKHGHIHQGDQWV              VWLOOLQWHQGHGWROLWLJDWHWKHLUFODLPV
nQRZWKH'HEWRUVnILOHGIRUEDQNUXSWF\SURWHFWLRQLQWKH
86'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLR/DWHU                 $OWKRXJKWKH6SLHUHUVKDGQRWRSSRVHGWKHPDQGDWRU\$'5
WKDW\HDUKDYLQJGHWHUPLQHGWKDWQRJOREDOVHWWOHPHQWRIWKH              SURFHGXUHEHIRUHLWZDVDGRSWHGWKH\VRRQOHWWKHLUIHHOLQJV
FODLPV DJDLQVW WKH 'HEWRUV ZDV LPPLQHQW WKH EDQNUXSWF\             RQ LW EH NQRZQ  +DYLQJ PRYHG WR )ORULGD WKH 6SLHUHUV
FRXUWOLIWHGWKHDXWRPDWLFVWD\RQDOOSHQGLQJOLWLJDWLRQ7KH            FODLPHG WKDW D PHGLFDO FRQGLWLRQ SUHYHQWHG WKHP IURP
6SLHUHUV ZHUH WKHQ IUHH WR SURFHHG ZLWK WKHLU FODLP DQG           WUDYHOLQJ WR 1HZ <RUN IRU WKH DUELWUDWLRQ  ,Q  WKH
DSSDUHQWO\EHJDQSUHSDULQJIRUDWULDOLQ1HZ<RUNVWDWHFRXUW            EDQNUXSWF\ FRXUW GHQLHG WKH 6SLHUHUVj UHTXHVW WKDW WKH
                                                                           DUELWUDWLRQEHRUGHUHGWRRFFXULQ%RFD5DWRQ)ORULGDDVWKH
   2IWKHWKRXVDQGVRIFODLPVWKDWKDGEHHQEURXJKWDJDLQVW                EDQNUXSWF\FRXUWGHWHUPLQHGWKDWWKHFKRLFHRIYHQXHIRUWKH
WKH'HEWRUVDOOEXWDIHZZHUHUHVROYHGRYHUWKHQH[WVHYHUDO             $'5 ZRXOG EHVW EH OHIW WR WKH DUELWUDWRU  7KH EDQNUXSWF\
\HDUV DQG LQ WKH LQWHUHVW RI VHWWOLQJ WKH HVWDWH TXLFNO\ WKH   FRXUWDOVRGHQLHGWKHLUUHTXHVWWKDWWKH\EHH[HPSWHGIURPWKH
'HEWRUV KDG PRYHG WKH EDQNUXSWF\ FRXUW WR DGRSW DQ                 $'5SURFHVVDOWRJHWKHUDQGEHSHUPLWWHGWROLWLJDWHZLWKRXW
$OWHUQDWLYH'LVSXWH5HVROXWLRQm$'5lSURFHGXUHIRUDQ\                   ILUVWJRLQJWKURXJKWKH$'5)LQDOO\WKHEDQNUXSWF\FRXUW
UHPDLQLQJFODLPV  :LWKDOOSDUWLHVLQLQWHUHVWKDYLQJEHHQ              PDGH FOHDU WKDW PDWWHUV JRYHUQLQJ GLVFRYHU\ LQ WKH $'5
JLYHQQRWLFHDQGDIWHUKROGLQJDKHDULQJWKHEDQNUXSWF\FRXUW             SURFHVVZRXOGEHOHIWWRWKHDUELWUDWRU7KH6SLHUHUVILOHGQR
DJUHHG WR RUGHU WKH UHPDLQLQJ FODLPDQWV LQFOXGLQJ WKH              QRWLFHRIDSSHDOIURPWKHVHRUGHUV
6SLHUHUVWREULQJWKHLUFODLPVILUVWWR$'52QsDQXDU\
WKHEDQNUXSWF\FRXUWVWD\HGDOOOLWLJDWLRQRYHUSHUVRQDO               7KH6SLHUHUVVWLOOREMHFWHGWRWKH$'5SURFHVVKRZHYHU
LQMXU\FODLPVWKHQSHQGLQJDJDLQVWWKH'HEWRUV,QGRLQJVR              DQGPRYHGWKHEDQNUXSWF\FRXUWWROLIWLWVVWD\RQOLWLJDWLRQ
WKHEDQNUXSWF\FRXUWFLWHGDVDXWKRULW\VHFWLRQVDQG             ,Q WKH 0D\   RUGHU IURP ZKLFK WKH 6SLHUHUV QRZ
RI7LWOH6HFWLRQJUDQWVEDQNUXSWF\FRXUWVWKH                DSSHDO WKH EDQNUXSWF\ FRXUW QRWHG WKDW WKH 6SLHUHUV KDG
SRZHUWRLVVXHmDQ\RUGHUQHFHVVDU\RUDSSURSULDWHlWR               PLVVHGWKHLURSSRUWXQLW\WRRSWRXWRIWKH$'5SURFHVVDQG
DFFRPSOLVK WKH EDQNUXSWF\ FRGHjV SURYLVLRQV   86&             WKDWWKH$'5ZRXOGH[SHGLWHWKHVHWWOHPHQWRIWKHUHPDLQLQJ
   6HFWLRQ  SURYLGHV WKDW WKH FRQILUPDWLRQ RI D         FODLPV$FFRUGLQJO\WKHEDQNUXSWF\FRXUWUHIXVHGWROLIWLWV
UHRUJDQL]DWLRQSODQYHVWVDOORIWKHHVWDWHjV SURSHUW\LQWKH
1R                  ,QUH)HGHUDWHG'HSjW6WRUHV                    ,QUH)HGHUDWHG'HSjW6WRUHV                     1R

SULRU VWD\ RQ OLWLJDWLRQ DQG LW KHOG WKDW WKH 6SLHUHUV ZHUH   OLIWWKHVWD\WKHDSSHOODQWVQHFHVVDULO\FDOOHGLQWRTXHVWLRQWKH
ERXQGWRXVHWKH$'5SURFHVVEHIRUHWKH\FRXOGJRWRFRXUW              FRXUWjVMXULVGLFWLRQWRLPSRVHLW,WJRHVZLWKRXWVD\LQJWKDW
                                                                         LIWKHEDQNUXSWF\FRXUWODFNHGWKHSRZHUWRLPSRVHWKHVWD\LQ
  7KH 6SLHUHUV ILOHG D QRWLFH RI DSSHDO IURP WKDW 0D\       WKHILUVWSODFHWKHQWKH0RWLRQWR/LIWWKH6WD\VKRXOGKDYH
RUGHUDQGEURXJKWWKHLUFODLPWRWKHGLVWULFWFRXUWZKLFK          EHHQJUDQWHG$OWKRXJKLWGRHVQRWDSSHDUWKDWWKHEDQNUXSWF\
KDGMXULVGLFWLRQRYHUWKHLQWHUORFXWRU\DSSHDOSXUVXDQWWR            FRXUWjVMXULVGLFWLRQWRKDYHLVVXHGWKHVWD\ZDVGLVFXVVHGLQ
86&D$VWKH\GREHIRUHWKLVFRXUWWKH6SLHUHUV          WKHRUGHUIURPZKLFKWKHDSSHDOZDVWDNHQFRXUWVmUHYLHZ>@
DUJXHGWKDWWKHEDQNUXSWF\FRXUWKDGODFNHGWKHSRZHUWRVHQG            MXGJPHQWV QRW RSLQLRQVl RU DUJXPHQWV VHH HJ &KHYURQ
WKHLUFODLPVWR$'57KHGLVWULFWFRXUWUXOHGWKDWWKLVDWWDFN          86$,QFY1DWXUDO5HV'HI&RXQFLO,QF86
ZDVRQWKHsDQXDU\RUGHULPSRVLQJWKH$'5SODQDQG                VR WKH DSSHOODWH FRXUW UHYLHZLQJ WKH MXGJPHQW
WKDWWKHsDQXDU\RUGHUFRXOGQRWEHFKDOOHQJHGLQDQ             UHIXVLQJ WR OLIW WKH VWD\ PXVW FRQVLGHU ZKHWKHU WKH ODZ
DSSHDOIURPWKH0D\UHIXVDOWROLIWWKHVWD\7KH              UHTXLUHGRWKHUZLVH
GLVWULFWFRXUWWKXVGLVPLVVHGWKHDSSHDO
                                                                            2IFRXUVHWKH6SLHUHUVKDYHZDLYHGPRVWRIWKHDUJXPHQWV
  7KH 6SLHUHUV WLPHO\ DSSHDOHG WR WKLV FRXUW DQG ZH KDYH       WKDW PLJKW VXSSRUW WKH WKHRU\ WKDW WKH VWD\ ZDV LPSURSHUO\
MXULVGLFWLRQ RYHU ILQDO RUGHUV RI WKH GLVWULFW FRXUW XQGHU    LPSRVHG7KHLU0RWLRQWR/LIWWKH6WD\QHYHUVXJJHVWVIRU
86&G:HUHYLHZWKHGHFLVLRQRIWKHEDQNUXSWF\               H[DPSOH WKDW WKH VWD\ H[FHHGHG WKH EDQNUXSWF\ FRXUWjV
FRXUWGLUHFWO\UHYLHZLQJLWVIDFWXDOILQGLQJVIRUFOHDUHUURU           VWDWXWRU\ SRZHU XQGHU  86&    RU 
DQGLWVOHJDOFRQFOXVLRQVGHQRYR+DUNHUY7URXWPDQ,QUH            $FFRUGLQJO\ WKH 6SLHUHUV KDYH ZDLYHG WKH DUJXPHQW WKDW
7URXWPDQ (QWHUSULVHV ,QF  )G   WK &LU         LPSRVLQJ WKH VWD\ YLRODWHG WKH VWDWXWRU\ UHVWULFWLRQV  6HH
                                                                   2YHUVWUHHW Y /H[LQJWRQ)D\HWWH 8UEDQ &RXQW\ *RYjW 
                                                                         )GWK&LU
                         ,,$1$/<6,6
                                                                           +RZHYHUWKH6SLHUHUVFRXOGQRWKDYHZDLYHGWKHDUJXPHQW
$$SSHOODWHsXULVGLFWLRQ                                               WKDWWKHsDQXDU\RUGHULPSRVLQJWKHVWD\H[FHHGHGWKH
                                                                         EDQNUXSWF\ FRXUWjV VXEMHFW PDWWHU MXULVGLFWLRQ  m>,@W LV
   $OWKRXJK WKH 6SLHUHUVj 1RWLFH RI $SSHDO WR WKH GLVWULFW       KRUQERRNODZWKDWSDUWLHVPD\QRWZDLYHLQWRRUFRQVHQWWR
FRXUW H[SOLFLWO\ VWDWHG WKDW WKH\ ZHUH DSSHDOLQJ IURP WKH        VXEMHFW PDWWHU MXULVGLFWLRQ ZKLFK D IHGHUDO FRXUW GRHV QRW
EDQNUXSWF\FRXUWjV0D\RUGHUGHQ\LQJWKHLU0RWLRQ               SURSHUO\KDYHl8QLYHUVDO&RQVRO&RVY%DQNRI&KLQD
WR/LIWWKH6WD\DQGPDGHQRPHQWLRQRIWKHsDQXDU\             )G   WK &LU   7KDW WKH 6SLHUHUV IDLOHG WR
RUGHUWKDWLPSRVHGWKHVWD\WKH1RWLFHLVVXIILFLHQWWRDOORZ           VXJJHVWZKLOHEHIRUHWKHEDQNUXSWF\FRXUWWKDWWKHVWD\ZDV
WKHP WR FKDOOHQJH WKH EDQNUXSWF\ FRXUWjV MXULVGLFWLRQ WR          LPSRVHGLQYLRODWLRQRI$UWLFOH,,,LVLUUHOHYDQWDVmVXEMHFW
LPSRVHWKHVWD\7REHVXUHWKH0D\RUGHUZDVQRW             PDWWHUMXULVGLFWLRQFDQEHFKDOOHQJHGDWDQ\WLPHl7DXEPDQ
D ILQDO MXGJPHQW DQ DSSHDO IURP ZKLFK ZRXOG QHFHVVDULO\         &RY:HEIHDWV)GWK&LUQRWLQJ
LQFRUSRUDWH mµDOO SULRU QRQILQDO UXOLQJV DQG RUGHUVjl            WKDWVXEMHFWPDWWHUMXULVGLFWLRQFDQHYHQEHUDLVHGFROODWHUDOO\
1HZPDQY)HG([SUHVV&RUS)GWK&LU                SXUVXDQWWR)HG5&LY3E
TXRWLQJ&UDZIRUGY5RDQH)GWK&LU
FHUWGHQLHG86$QGLQGHHGZH                7KH6XSUHPH&RXUWjVSUDFWLFHLQ0LWFKHOOY0DXUHU
FRQVWUXH D QRWLFH RI DSSHDO IURP D SDUWLFXODU LQWHUORFXWRU\      86VXSSRUWVRXUDSSURDFKKHUH,Q0LWFKHOOD
RUGHUDVEHLQJOLPLWHGWRWKDWRUGHU6HH&UDZIRUG)GDW          SDUW\IURP'HODZDUHVRXJKWLQD&DOLIRUQLDIHGHUDOFRXUWWR
+HUHKRZHYHUE\DSSHDOLQJIURPWKHFRXUWjVUHIXVDOWR
1R                     ,QUH)HGHUDWHG'HSjW6WRUHV                          ,QUH)HGHUDWHG'HSjW6WRUHV                       1R

KDYHFHUWDLQSURSHUW\ORFDWHGLQ&DOLIRUQLDEXWRZQHGE\D                      sDQXDU\RUGHULPSRVLQJWKHVWD\:HDGGUHVVRQO\WKH
'HODZDUHFRUSRUDWLRQSODFHGLQUHFHLYHUVKLS,GDW                    6SLHUHUVjDUJXPHQWWKDWWKHVWD\YLRODWHVMXULVGLFWLRQDOOLPLWV
7KHGLVWULFWFRXUWDSSRLQWHGDUHFHLYHUDQGODWHU&DOLIRUQLD                  DQGZHPDNHQRVWDWHPHQWRQZKHWKHUWKHVWD\ZDVDQDEXVH
VWDWH RIILFLDOV PRYHG WR YDFDWH WKH DSSRLQWPHQW DUJXLQJ                 RI GLVFUHWLRQ RU RWKHU QRQMXULVGLFWLRQDO DUJXPHQWV  7KH
XQVXFFHVVIXOO\WKDWVWDWHRIILFLDOVKDGWDNHQSRVVHVVLRQRIWKH                 6SLHUHUVZDLYHGWKRVHDUJXPHQWVE\QRWSUHVHQWLQJWKHPWR
SURSHUW\EHIRUHWKHUHTXHVWIRUWKHUHFHLYHUKDGEHHQILOHGLQ                  WKHEDQNUXSWF\FRXUWZKHQWKH\PRYHGLWWROLIWWKHVWD\7KH
IHGHUDOFRXUW6HHLGDW7KH6XSUHPH&RXUWUHIXVHG                   6SLHUHUVDOVRPD\QRWFKDOOHQJHWKHEDQNUXSWF\FRXUWjVRUGHU
WRDGGUHVVWKHSDUWLHVjDUJXPHQWVUHJDUGLQJZKHWKHUWKHVWDWH                   RI6HSWHPEHULQZKLFKLWUHIXVHGWRVHWWOHGLVSXWHV
RIILFLDOVKDGSURSHUO\WDNHQSRVVHVVLRQRIWKHSURSHUW\LGDW                 RYHU YHQXH DQG GLVFRYHU\ LQ WKH $'5 SURFHVV EHFDXVH
 DQG LQVWHDG UXOHG WKDW EHFDXVH WKH RULJLQDO SDUWLHV             DOWKRXJKWKH6SLHUHUVFDVWWKHLUREMHFWLRQVWRWKRVHRUGHUVLQ
ZHUH QRW VXIILFLHQWO\ GLYHUVH WKH GLVWULFW FRXUW KDG ODFNHG            WHUPV RI WKH EDQNUXSWF\ FRXUW KDYLQJ VWULSSHG LWVHOI RI
VXEMHFWPDWWHUMXULVGLFWLRQWRDSSRLQWWKHUHFHLYHULQWKHILUVW                MXULVGLFWLRQWKRVHFODLPVDUHLQQRZD\LQFRUSRUDWHGLQWKH
SODFHVHHLGDW+DYLQJGHWHUPLQHGWKDWWKHFRXUWKDG                 1RWLFHRI$SSHDOIURPWKH0D\RUGHU7KDWLVWKH
ODFNHGMXULVGLFWLRQWRLVVXHWKHRULJLQDORUGHUWKH6XSUHPH                    GHFLVLRQRQWKH0RWLRQWR/LIWWKH6WD\RQSHQGLQJVWDWHFRXUW
&RXUWRUGHUHGWKHGLVWULFWFRXUWWRGLVPLVVWKHFDVHDOWRJHWKHU                OLWLJDWLRQ GRHV QRW UHTXLUH DQ\ MXGJPHQW DV WR ZKHWKHU WKH
,GDW sXVWDVWKH6XSUHPH&RXUWFRXOGDGGUHVVWKHUH                     $'5 SURFHVV WUHDWHG GLVFRYHU\ DQG YHQXH LVVXHV
ZKHWKHUWKHORZHUFRXUWKDGMXULVGLFWLRQWRLVVXHWKHRULJLQDO                  DSSURSULDWHO\
RUGHUHYHQZKHQLWZDVWKHPDQDJHPHQWRIWKDWRUGHUDQGQRW
WKHLVVXDQFHRILWWKDWZDVRQDSSHDOZHKDYHMXULVGLFWLRQWR                  %0HULWVRIWKH$SSHDO
DGGUHVVZKHWKHUWKHORZHUFRXUWKDGMXULVGLFWLRQWRLPSRVHD
VWD\ HYHQ WKRXJK LW LV WKH UHIXVDO WR OLIW WKH VWD\ QRW LWV           :KHWKHURUQRWWKHSODLQWLIIVFRXOGPHHWWKHKLJKEXUGHQRI
LVVXDQFHWKDWLVRQDSSHDO7KHMXULVGLFWLRQDOTXHVWLRQFRXOG                 VKRZLQJ WKDW WKH EDQNUXSWF\ FRXUW DEXVHG LWV GLVFUHWLRQ LQ
QRWKDYHEHHQZDLYHG                                                          VWD\LQJWKHVWDWHFRXUWOLWLJDWLRQXQGHU 86&D
                                                                                WKHUH LV QR GRXEW WKDW WKH VWDWXWH JLYHV EDQNUXSWF\ FRXUWV
  7KXVZHKDYHMXULVGLFWLRQRYHUWKH6SLHUHUVjFODLPVWRWKH                    MXULVGLFWLRQWRGRVR6HHHJLGDm7KHFRXUWPD\
H[WHQW WKDW WKH\ PRXQW D MXULVGLFWLRQDO FKDOOHQJH WR WKH                LVVXH DQ\ RUGHU SURFHVV RU MXGJPHQW WKDW LV QHFHVVDU\ RU
                                                                                DSSURSULDWH WR FDUU\ RXW WKH SURYLVLRQV RI WKLV WLWOHl
                                                                                $FFRUGLQJO\ WKH MXULVGLFWLRQDO FKDOOHQJH WR WKH sDQXDU\ 
    
                                                                                RUGHULPSRVLQJWKHVWD\DQGUHTXLULQJWKHSDUWLHVWRJR
        7KH 'HEWRUV GR QRW DGGUHVV WKH 0LWFKHOO FDVH EXW LQVWHDG SRLQW WR      WR$'5EHIRUHOLWLJDWLQJLVSXUHO\DFRQVWLWXWLRQDOTXHVWLRQ
ZKDW WKH\ YLHZ DV FRQWUDU\ DXWKRULW\    +RZHYHU ZH GR QRW UHDG &HORWH[        JRYHUQHG E\ WKH OLQH RI FDVHV EHJLQQLQJ ZLWK 1RUWKHUQ
&RUS Y (GZDUGV      86   Q  RQ ZKLFK WKH 'HEWRUV
                                                                                3LSHOLQH&RQVWUXFWLRQ&RY0DUDWKRQ3LSH/LQH&R
UHO\ WR VWDQG IRU WKH SURSRVLWLRQ WKDW MXULVGLFWLRQ FDQ EH ZDLYHG 1RW RQO\
ZRXOG VXFK D KROGLQJ EH XWWHUO\ DQRPRORXV VHH HJ &OLQWRQ Y &LW\ RI
                                                                                86
1HZ <RUN  86    VWDWLQJ WKDW MXULVGLFWLRQDO
DUJXPHQWV ZKHWKHU VWDWXWRU\ RU FRQVWLWXWLRQDO FDQQRW EH ZDLYHG EXW WKH
'HEWRUVj UHDGLQJ RI &HORWH[ LJQRUHV LWV FRQWH[W 7KH &RXUW LQ &HORWH[
                                                                                    
QRWHG WKDW EHFDXVH WKH GLVWULFW FRXUW KDG SURSHUO\ H[HUFLVHG LWV MXULVGLFWLRQ         7KH LVVXH LV QRW DV WKH 6SLHUHUV IUDPH LW ZKHWKHU WKH EDQNUXSWF\
XQGHU  86&   WKHUH ZDV QR QHHG WR DGGUHVV ZKHWKHU  F        FRXUW FRXOG mUHPRYHl WKHLU VWDWH OLWLJDWLRQ WR IHGHUDO FRXUW $OWKRXJK WKDW
FRQIHUUHG VXIILFLHQW DXWKRULW\ IRU WKH GLVWULFW FRXUWjV DFWLRQV :KDW WKH       LVVXH PLJKW ODWHU DULVH LI HLWKHU SDUW\ VRXJKW WR OLWLJDWH WKH WRUW VXLW
UHVSRQGHQWV mZDLYHGl LQ &HORWH[ ZDV QRW WKHLU DUJXPHQW WKDW MXULVGLFWLRQ        IROORZLQJ WKH DUELWUDWLRQ DQG LI WKH EDQNUXSWF\ FRXUW RU GLVWULFW FRXUW
GLG QRW H[LVW EXW WKDW  F ZDV UHOHYDQW WR WKH FDVH DW DOO 6HH        DVVHUWHG MXULVGLFWLRQ RYHU WKHLU VWDWH FDVH SXUVXDQW WR  86&  F
&HORWH[  86 DW  Q                                                   QR IHGHUDO FRXUW KDV DVVHUWHG MXULVGLFWLRQ RYHU WKHLU VWDWH SURFHHGLQJV DW
1R                     ,QUH)HGHUDWHG'HSjW6WRUHV                      ,QUH)HGHUDWHG'HSjW6WRUHV                     1R

   ,Q 1RUWKHUQ 3LSHOLQH WKH 6XSUHPH &RXUW VWUXFN GRZQ D                 WKHH[WHQWWRZKLFKWKHQRQ$UWLFOH,,,IRUXPH[HUFLVHV
SURYLVLRQRIWKH%DQNUXSWF\$FWWKDWJDYHEDQNUXSWF\                        WKHUDQJHRIMXULVGLFWLRQDQGSRZHUVQRUPDOO\YHVWHGRQO\
MXGJHVIXOOSRZHUWRLVVXHILQDORUGHUVDQGMXGJPHQWVLQFDVHV                   LQ$UWLFOH,,,FRXUWVWKHRULJLQVDQGLPSRUWDQFHRIWKH
WKDW ZHUH RQO\ mUHODWHG WRl 7LWOH  FDVHV  $ SOXUDOLW\               ULJKW WR EH DGMXGLFDWHG DQG WKH FRQFHUQV WKDW GURYH
UHDVRQHGWKDWDOWKRXJK&RQJUHVVFRXOGHPSRZHUQRQ$UWLFOH                        &RQJUHVVWRGHSDUWIURPWKHUHTXLUHPHQWVRI$UWLFOH,,,
,,, MXGJHV WR LVVXH ILQDO RUGHUV DQG MXGJPHQWV LQ FDVHV
LQYROYLQJEDQNUXSWF\ULJKWVEHFDXVHWKRVHULJKWVH[LVWHGRQO\                 ,GDW1RRQHIDFWRUSUHGRPLQDWHV,G
EHFDXVH RI D FRQJUHVVLRQDO JUDQW &RQJUHVV FRXOG QRW
HPSRZHUQRQ$UWLFOH,,,MXGJHVWRDFWZLWKWKHIXOOmMXGLFLDO                     &UXFLDOKHUHLVWKDWDEDQNUXSWF\FRXUWjVSRZHUWRVWD\RWKHU
3RZHURIWKH8QLWHG6WDWHVl86&RQVWDUW,,,LQFDVHV               OLWLJDWLRQ OHDYHV WKH HVVHQWLDO DWWULEXWHV RI WKH QDWLRQjV
LQYROYLQJULJKWVWKDWOLNHWKHULJKWWRUHFRYHUXQGHUVWDWHODZ               mMXGLFLDO3RZHUl86&RQVWDUW,,,VDIHO\LQWKH$UWLFOH
IRUDSHUVRQDOLQMXU\DWLVVXHKHUHH[LVWHGLQGHSHQGHQWRIDQ\                ,,, FRXUWV  7KH IHGHUDO GLVWULFW FRXUW PDLQWDLQV DOO RI LWV
FRQJUHVVLRQDOJUDQW$FFRUGLQJO\WKHSOXUDOLW\UXOHGWKDWWKH                SUHYLRXVSRZHUV*UDQWLQJWKHEDQNUXSWF\FRXUWWKLVDELOLW\
EDQNUXSWF\FRXUWFRXOGQRWLVVXHDILQDOMXGJPHQWLQDVWDWH                   WR VWD\ VWDWH FRXUW SURFHHGLQJV LQ QR ZD\ DJJUDQGL]HV
ODZ FRQWUDFW FDVH EURXJKW E\ D GHEWRU  6HH 1RUWKHUQ                 &RQJUHVVjVSRZHUZLWKUHVSHFWWRWKHMXGLFLDU\VHH6FKRU
3LSHOLQH86DW,Q&RPPRGLW\)XWXUHV7UDGLQJ                     86DWDV$UWLFOH,,,WULEXQDOVPDLQWDLQRYHUVLJKWRIWKH
&RPPLVVLRQ Y 6FKRU  86   WKH &RXUW                    EDQNUXSWF\FRXUWjVDFWLRQ7KHIDFWWKDWXOWLPDWHUHYLHZRI
HQGRUVHG D FDVHE\FDVH IXQFWLRQDO LQTXLU\ LQWR $UWLFOH ,,,            WKHQRQ$UWLFOH,,,WULEXQDOjVDFWLRQVUHVWVLQ$UWLFOH,,,FRXUWV
FKDOOHQJHV                                                                    LQGLFDWHVWKDWWKH$UWLFOH,,,FRXUWVUHWDLQDQXQTXHVWLRQDEO\
                                                                               LPSRUWDQW DVSHFW RI WKHLU MXGLFLDO SRZHU  6HH 1RUULV Y
  $PRQJWKHIDFWRUVXSRQZKLFKZHKDYHIRFXVHGDUHWKH                         6FKRWWHQ  )G   WK &LU HPSKDVL]LQJ
  H[WHQW WR ZKLFK WKH mHVVHQWLDO DWWULEXWHV RI MXGLFLDO                 LPSRUWDQFHRI$UWLFOH,,,UHYLHZRIIHGHUDOPDJLVWUDWHMXGJHVj
  SRZHUlDUHUHVHUYHGWR$UWLFOH,,,FRXUWVDQGFRQYHUVHO\                   GHFLVLRQV FHUW GHQLHG  86   5LFKDUG +
                                                                               )DOORQsU2I/HJLVODWLYH&RXUWV$GPLQLVWUDWLYH$JHQFLHV
                                                                               DQG $UWLFOH ,,,  +DUY / 5HY   
WKLV WLPH 7KH EDQNUXSWF\ FRXUW VLPSO\ JDYH WKH SDUWLHV QRWLFH RI WKH
                                                                               VXJJHVWLQJWKDWUHYLHZE\$UWLFOH,,,FRXUWLVQHFHVVDU\DQG
SURSRVHG $'5 SURFHGXUH SHUPLWWHG WKRVH ZKR REMHFWHG WR WKH SURFHGXUH          VXIILFLHQWFRQGLWLRQRIUHVHUYLQJDSSURSULDWHSRZHULQ$UWLFOH
WR RSW RXW RI LW DQG HQMRLQHG RWKHU SURFHHGLQJV LQYROYLQJ WKH UHPDLQLQJ       ,,,FRXUWV
FODLPDQWV XQWLO WKRVH FODLPDQWV KDG VXEPLWWHG WKHLU FODLPV WR $'5
$FFRUGLQJO\ WKH LVVXH EHIRUH XV QRZ LV WKH SRZHU WR HQMRLQ VWDWH                6HFRQGWKHSRZHUH[HUFLVHGE\WKHEDQNUXSWF\FRXUWLVQRW
OLWLJDWLRQ QRW WKH SRZHU WR DVVHUW MXULVGLFWLRQ RYHU D VWDWH FDVH 7KDW
LVVXH OLNH WKH UHODWHG LVVXH RI ZKHWKHU LQ OLJKW RI WKH 'HEWRUVj LQVXUDQFH
                                                                               RQHWKDWPXVWEHH[HUFLVHGH[FOXVLYHO\ZLWKLQWKHFRQILQHVRI
VWDWXV WKH 6SLHUHUVj SHUVRQDO LQMXU\ FODLP ZRXOG DIIHFW WKH 'HEWRUVj          $UWLFOH,,,7KHRUGHUHQMRLQLQJWKHVWDWHSURFHHGLQJVSHQGLQJ
HVWDWH ZRXOG EH SURSHU RQO\ DW D ODWHU GDWH :H H[SUHVV QR RSLQLRQ RQ         QRQELQGLQJDUELWUDWLRQGRHVQRWUHVROYHWKDWOLWLJDWLRQEXW
HLWKHU LVVXH                                                                  PHUHO\DIIHFWVLWVWLPLQJ7KLVSRZHUWRLPSRVHDVWD\LVWKXV
    
                                                                               IDUIURPWKHmXOWLPDWHGHFLVLRQPDNLQJDXWKRULW\l1RUWKHUQ
      &RQJUHVV UHVSRQGHG WR    1RUWKHUQ 3LSHOLQH  E\ DGRSWLQJ WKH SUHVHQW      3LSHOLQH86DWWKDWPXVWUHPDLQLQWKH$UWLFOH,,,
YHUVLRQ RI  86&  F ZKLFK SHUPLWV EDQNUXSWF\ FRXUWV WR mKHDUl       FRXUW5DWKHULWLVRQHRIWKHPDQ\mIXQFWLRQVKLVWRULFDOO\
D SURFHHGLQJ WKDW LV UHODWHG WR D 7LWOH  FDVH EXW ZKLFK IRUELGV WKH
EDQNUXSWF\ FRXUW IURP LVVXLQJ ILQDO RUGHUV DQG MXGJPHQWV LQ VXFK D FDVH
                                                                               SHUIRUPHG E\ MXGJHVl LG DW  WKDW PD\ EH VWDWXWRULO\
,QVWHDG WKH EDQNUXSWF\ FRXUW PXVW RIIHU LWV UHFRPPHQGHG ILQGLQJV RI IDFW
                                                                               GHOHJDWHGWRQRQ$UWLFOH,,,MXGJHV&RQJUHVVFDQDIWHUDOO
DQG FRQFOXVLRQV RI ODZ WR WKH GLVWULFW FRXUW ZKLFK PD\ LVVXH ILQDO            RUGHU FHUWDLQ SDUWLHV WR VXEPLW WR DUELWUDWLRQ ZLWK OLPLWHG
MXGJPHQWV LWVHOI
1R                  ,QUH)HGHUDWHG'HSjW6WRUHV                 ,QUH)HGHUDWHG'HSjW6WRUHV                  1R

$UWLFOH,,,UHYLHZZLWKRXWHQFURDFKLQJRQWKHUHDOPRI$UWLFOH             )LQDOO\WRZKDWHYHUH[WHQWWKH6SLHUHUVZLVKWRFKDOOHQJH
,,,VHH7KRPDVY8QLRQ&DUELGH$JULF3URGV&R86            WKHGHQLDORIWKHLU0RWLRQWR/LIWWKH6WD\RQWKHJURXQGVWKDW
  XSKROGLQJ VWDWXWH WKDW UHTXLUHG DSSOLFDQWV IRU       HYHQLIWKHVWD\KDGEHHQLPSRVHGSXUVXDQWWRWKHEDQNUXSWF\
(3$ SHVWLFLGH SHUPLWV ZKR FDQQRW DJUHH RQ KRZ WR VKDUH         FRXUWjVSURSHUSRZHUVWKHVWD\VKRXOGKDYHEHHQOLIWHGLQWKH
FRVWV RI FHUWDLQ UHVHDUFK WR VXEPLW WR DUELWUDWLRQ ZLWK RQO\   0D\   RUGHU WKHLU FKDOOHQJH IDLOV  :H UHYLHZ D
PLQLPDO$UWLFOH,,,UHYLHZZKLFKVXJJHVWVWKDWWKHSRZHUWR           EDQNUXSWF\FRXUWjVUHIXVDOWROLIWDVWD\IRUDEXVHRIGLVFUHWLRQ
VWD\ SURFHHGLQJV SHQGLQJ QRQELQGLQJ DUELWUDWLRQ LV QRW D        6HH:KLWHY:KLWH,QUH:KLWH)GWK&LU
SRZHUH[FOXVLYHWR$UWLFOH,,,&I)LUVW)HG6DY%DQN	             7KHUHIXVDOWROLIWWKHVWD\DSSHDUVWRKDYHEHHQZHOO
7UXVW Y 5\DQ  )G   WK &LU m>7@KH          ZLWKLQ WKH EDQNUXSWF\ FRXUWjV GLVFUHWLRQ  7KH EDQNUXSWF\
DSSRLQWPHQW RI D FRQVHUYDWRU RU UHFHLYHU LV QRW D µMXGLFLDO    FRXUW QRWHG WKDW WKH HDUOLHU sDQXDU\   RUGHU ZKLFK
SRZHUjVXEMHFWWR$UWLFOH ,,,lFHUWGHQLHG86           UHTXLUHGFHUWDLQUHPDLQLQJFODLPDQWVWREULQJWKHLUFODLPVLQ
1RULHJD3HUH]Y8QLWHG6WDWHV)G            $'5EHIRUHOLWLJDWLQJKDGDLPHGWRmH[SHGLW>H@WKHUHVROXWLRQ
WK&LUILQGLQJWKDWDOWKRXJK$/sjVLPSRVLWLRQRI           RIDUHODWLYHO\IHZUHPDLQLQJFODLPVls$DW$OWKRXJK
DILQHmPD\VHHPWREHZLWKLQWKHSXUYLHZRIDQ$UWLFOH,,,             WKH 6SLHUHUV FODLP WKDW WKLV $'5 SURFHVV LPSRVHG DQ
FRXUWWKLVFRQFHUQLVPLWLJDWHGEHFDXVH$/sVGRQRWKDYHWKH           XQQHFHVVDU\KDUGVKLSRQWKHPDUJXLQJWKDWWKHLUKHDOWKZRXOG
DXWKRULW\WRHQIRUFHWKHILQHl,QUH&OD\)G           SURKLELWWKHPIURPWUDYHOLQJWR1HZ<RUNIRUWKHKHDULQJDQG
WK&LUFDOOLQJWKHSRZHUWRFRQGXFWMXU\WULDOVmWKH          WKDWWKHDUELWUDWRUjVSURSRVHGDOWHUQDWLYHRIDYLGHRFRQIHUHQFH
KHDUWRIµWKHMXGLFLDO3RZHUjl                                        ZDV SURKLELWLYHO\ H[SHQVLYH WKH EDQNUXSWF\ FRXUW GLG QRW
                                                                        DEXVH LWV GLVFUHWLRQ LQ ILQGLQJ WKDW $'5jV H[SHGLWLRXV
   :LWKUHVSHFWWR6FKRUjVWKLUGDQGIRXUWKFULWHULDDOWKRXJK          SURFHGXUHVRXWZHLJKHGWKH6SLHUHUVjKDUGVKLSV7KH6SLHUHUV
WKHULJKWDWLVVXHLVDQLPSRUWDQWRQHWKHUHVWULFWLRQVLPSRVHG        KDG FRXQVHO LQ 1HZ <RUN ZKR SUHVXPDEO\ FRXOG KDYH
RQ WKDW ULJKW DUH PLQLPDO DQG IRU LPSRUWDQW DQG OHJLWLPDWH     UHSUHVHQWHG WKHLU LQWHUHVWV DW WKH $'5 WKHLU SURSRVHG
SXUSRVHV  :KHUHDV &RQJUHVVjV SRZHU WR UHOHJDWH FDVHV            DOWHUQDWLYHRIOLWLJDWLQJLQ1HZ<RUNVWDWHFRXUWDSSHDUVWR
LQYROYLQJ mSXEOLFl ULJKWV WR QRQ$UWLFOH ,,, IRUD LV             LPSRVHQROHVVRIDEXUGHQDQGXQGHUWKHsDQXDU\
XQTXHVWLRQHGVHH*UDQILQDQFLHUD6$Y1RUGEHUJ86            RUGHUjV$'5SODQWKH6SLHUHUVFRXOGVWLOOSURFHHGWRFRXUW
ZHVKRXOGEHZDU\RIOLPLWLQJWKHDELOLW\WR          HYHQLIWKH\SDUWLFLSDWHGLQWKH$'5DQGORVW)XUWKHUDVWKH
HQIRUFH ULJKWV WKDW H[LVW EHWZHHQ SULYDWH SDUWLHV DQG            EDQNUXSWF\FRXUWQRWHGDWOHDVWRQHRWKHUFODLPDQWREMHFWHG
LQGHSHQGHQWO\ RI DQ\ FRQJUHVVLRQDO DFWLRQ VHH 1RUWKHUQ           WRWKH$'5SURSRVDODQGZDVH[HPSWHGIURPWKHSURFHVVVR
3LSHOLQH86DWSOXUDOLW\LGDW5HKQTXLVW          ORQJDVKHSURFHHGHGLQVWDWHFRXUWLQDWLPHO\PDQQHUWKLV
sFRQFXUULQJ$VVXJJHVWHGDERYHKRZHYHUWKHUHVWULFWLRQ          URXWHDSSHDUVWRKDYHEHHQHTXDOO\RSHQWRWKH6SLHUHUV
DWLVVXHKHUHLVPLQLPDODVLWDIIHFWVQRWWKHDELOLW\WRHQIRUFH
WKHVHSULYDWHULJKWVEXWRQO\WKHWLPLQJRIWKDWHQIRUFHPHQW                               ,,,&21&/86,21
*UDQWLQJ EDQNUXSWF\ FRXUWV WKLV SRZHU SURWHFWV WKH FRXUWjV
DELOLW\WRDGPLQLVWHUWKHHVWDWHHIILFLHQWO\DQGRWKHUFUHGLWRUVj         %HFDXVHZHGHWHUPLQHWKDWZHKDYHMXULVGLFWLRQWRFRQVLGHU
DELOLW\WRVDWLVI\WKHLUFODLPV                                        WKH 6SLHUHUVj $UWLFOH ,,, FKDOOHQJH WR WKH sDQXDU\  
                                                                        RUGHUZH9$&$7(WKHGLVWULFWFRXUWjVMXGJPHQWGLVPLVVLQJ
   :H WKXV FRQFOXGH WKDW WKH SRZHU WR VWD\ RWKHU SHQGLQJ       WKHDSSHDO%HFDXVHWKHRUGHUUHIXVLQJWROLIWWKHVWD\ZDV
OLWLJDWLRQ LQYROYLQJ WKH GHEWRUV RU WKH HVWDWH LV ZLWKLQ WKH   ZLWKLQ WKH EDQNUXSWF\ FRXUWjV MXULVGLFWLRQ KRZHYHU ZH
EDQNUXSWF\FRXUWjVFRQVWLWXWLRQDOMXULVGLFWLRQ                         $)),50WKHMXGJPHQWRIWKHEDQNUXSWF\FRXUW
