      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


&+5,6723+(5 %52:1,1*             ;
s())5(< 5$'(0$1                   
1$7,21:,6( $872027,9(              
                                     1R
,1& (03/2<(( 672&.                
2:1(56+,3 3/$1DQG1:              !
                                   
/,48,'$7,1* ,1&                 
         3ODLQWLIIV$SSHOODQWV 
                                   
           Y                      
                                   
                                   
6$8/ /(9<                         
                    'HIHQGDQW 
                                   
648,5( 6$1'(56 	                  
'(036(<                           
          'HIHQGDQW$SSHOOHH 
                                   
                                  1
      $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW
     IRUWKH6RXWKHUQ'LVWULFWRI2KLRDW&ROXPEXV
    1Rn*HRUJH&6PLWK'LVWULFWsXGJH
              $UJXHGsDQXDU\
          'HFLGHGDQG)LOHG0DUFK




                           
       %URZQLQJHWDOY/HY\HWDO                    1R

%HIRUH0$57,1&KLHI&LUFXLWsXGJH*,/0$1&LUFXLW
          sXGJH('081'6'LVWULFWsXGJH
                       BBBBBBBBBBBBBBBBB
                             &2816(/
$5*8('  *DU\ ' *UHHQZDOG 6+$<1( 	
*5((1:$/'&2/3$&ROXPEXV2KLRIRU$SSHOODQWV
6WHYHQ : 7LJJHV =(,*(5 	 &$53(17(5 &ROXPEXV
2KLRIRU$SSHOOHH21%5,()*DU\'*UHHQZDOG$QQH
0DULH /D %XH 6+$<1( 	 *5((1:$/' &2 /3$
&ROXPEXV2KLRIRU$SSHOODQWV6WHYHQ:7LJJHVsRKQ:
=HLJHU 6WXDUW * 3DUVHOO =(,*(5 	 &$53(17(5
&ROXPEXV2KLRIRU$SSHOOHH
                       BBBBBBBBBBBBBBBBB
                           23,1,21
                       BBBBBBBBBBBBBBBBB
   521$/' /(( *,/0$1 &LUFXLW sXGJH  1DWLRQZLVH
$XWRPRWLYH,QFjV(PSOR\HH6WRFN2ZQHUVKLS3ODQ(623
(623 SDUWLFLSDQWV &KULVWRSKHU %URZQLQJ DQG sHIIUH\
5DGHPDQDQG1:/LTXLGDWLQJ,QF1:WKHVXFFHVVRUWR
1DWLRQZLVH DSSHDO WKH GLVWULFW FRXUWjV JUDQW RI VXPPDU\
MXGJPHQW LQ IDYRU RI WKH ODZ ILUP RI 6TXLUH 6DQGHUV 	
'HPSVH\ 66'  7KH (623 %URZQLQJ DQG 5DGHPDQ
FODLPHGWKDW66'EUHDFKHGLWVILGXFLDU\GXWLHVDQGHQJDJHGLQ
SURKLELWHG WUDQVDFWLRQV XQGHU WKH (PSOR\PHQW 5HWLUHPHQW
,QFRPH6HFXULW\$FW(5,6$1:RQWKHRWKHUKDQGVXHG
66'IRUOHJDOPDOSUDFWLFHDQGRWKHUEUHDFKHVRIGXW\XQGHU
2KLR ODZ  $OO RI WKHVH FODLPV DULVH IURP 66'jV
UHSUHVHQWDWLRQ RI 6DXO /HY\ 1DWLRQZLVHjV PDMRULW\
VKDUHKROGHUDQG&KDLUPDQRIWKH%RDUGEHIRUH1DWLRQZLVH
ILOHGIRUUHRUJDQL]DWLRQXQGHU&KDSWHURIWKH%DQNUXSWF\
&RGH

    
     7KH +RQRUDEOH 1DQF\ * (GPXQGV 8QLWHG 6WDWHV 'LVWULFW sXGJH IRU
WKH (DVWHUQ 'LVWULFW RI 0LFKLJDQ VLWWLQJ E\ GHVLJQDWLRQ
1R                %URZQLQJHWDOY/HY\HWDO       

   7KHSODLQWLIIVDUJXHWKDWWKHGLVWULFWFRXUWHUUHGLQKROGLQJ
ILUVWZLWKUHVSHFWWRWKH(623DQG1:DQGWKHQLQDODWHU
UXOLQJ ZLWK UHVSHFW WR %URZQLQJ DQG 5DGHPDQ WKDW WKHLU
FODLPVDJDLQVW66'ZHUHEDUUHGE\UHVMXGLFDWDDQGMXGLFLDO
HVWRSSHO7KHVHUXOLQJVZHUHEDVHGRQWKHSODLQWLIIVjIDLOXUH
WRUDLVHRUUHVHUYHWKHLUFODLPVDJDLQVW66'EHIRUHWKH
FRQILUPDWLRQRI1DWLRQZLVHjV3ODQRI5HRUJDQL]DWLRQ)RUWKH
UHDVRQVVHWIRUWKEHORZZH$)),50WKHMXGJPHQWVRIWKH
GLVWULFWFRXUW
                      ,%$&.*5281'
  7KLVFDVHDULVHVRXWRIDGLVSXWHEHWZHHQWKH(623
DQG6DXO/HY\RYHUFRQWURORIWKHFRUSRUDWLRQ1DWLRQZLVHLV
DQ2KLRFRUSRUDWLRQHQJDJHGLQWKHUHWDLOVDOHRIDXWRSDUWV
/HY\RZQHGWKHPDMRULW\RIWKHFRPSDQ\jVYRWLQJVWRFNLQ
EDVHGLQSDUWXSRQVKDUHVWKDWZHUHDOORFDWHGWRKLP
SXUVXDQW WR D  m6XEVFULSWLRQ $JUHHPHQWl  8QGHU WKH
$JUHHPHQW /HY\ ZDV JUDQWHG  PLOOLRQ LQ 1DWLRQZLVH
VKDUHV ZLWKRXW KDYLQJ WR PDNH LPPHGLDWH SD\PHQW
1DWLRQZLVH KRZHYHU FRXOG mFDOOl WKH VXEVFULSWLRQ XSRQ
GHPDQGDQGUHTXLUH/HY\WRSD\WKHSXUFKDVHSULFHIRUWKH
VXEVFULEHGVKDUHV%XW/HY\FRXOGWHUPLQDWHKLVREOLJDWLRQV
XQGHUWKH$JUHHPHQWDWDQ\WLPHVRORQJDVGRLQJVRZRXOG
QRW OHDYH 1DWLRQZLVH ZLWKRXW DGHTXDWH IXQGV WR RSHUDWH
HIIHFWLYHO\:LWKRXWWKHVKDUHVWKDW/HY\RZQHGSXUVXDQWWR
WKH 6XEVFULSWLRQ $JUHHPHQW WKH (623 ZRXOG KDYH KDG
PDMRULW\FRQWURORIWKHFRUSRUDWLRQ
  7KHGLVSXWHLQTXHVWLRQDURVHIURPDGLIIHUHQFHRIRSLQLRQ
EHWZHHQ/HY\DQGWKH(6237UXVWHHVRYHUZKDWVWHSVVKRXOG
EH WDNHQ WR UHPHG\ WKH VHULRXV ILQDQFLDO GLIILFXOWLHV IDFLQJ
1DWLRQZLVHLQDQG.HQW%URZQsDPHV/HJJHWW
DQG/HH7HQHQEDXPZHUHWKH(6237UXVWHHV%URZQZDV
DOVRDPHPEHURI1DWLRQZLVHjV%RDUGRI'LUHFWRUVDORQJZLWK
/HY\ DQG (GZDUG $ 6FKUDJ ZKR ZDV WKHQ 1DWLRQZLVHjV
FRUSRUDWH FRXQVHO DQG D SDUWQHU LQ WKH ODZ ILUP RI 9RU\V
6DWHU6H\PRXU	3HDVH
 2Q sDQXDU\   WKH WKUHH (623 7UXVWHHV DQG
1DWLRQZLVHjV%RDUGRI'LUHFWRUVSURSRVHGDQm2UJDQL]DWLRQ
     %URZQLQJHWDOY/HY\HWDO              1R       1R                 %URZQLQJHWDOY/HY\HWDO       

DQG([SHQVH5HGXFWLRQ3ODQlWKDWUHFRPPHQGHGHOLPLQDWLQJ              XQLWRIWKHGLVWULFWFRXUWDQGWKHUHIRUHDEOHWRVKDUHLQWKH
FHUWDLQ HPSOR\HH SRVLWLRQV VHOOLQJ WKH FRUSRUDWH MHW DQG     GLVWULFWFRXUWVjH[FOXVLYHMXULVGLFWLRQRYHU(5,6$FODLPVWKH
UHVWULFWLQJ WUDYHO DQG HQWHUWDLQPHQW H[SHQVHV  /HY\ LQ DQ   EDQNUXSWF\ FRXUW KDV QR OHVV SRZHU WR KHDU (5,6$ FODLPV
DSSDUHQWFKDQJHRISRVLWLRQUHMHFWHGWKH([SHQVH5HGXFWLRQ           WKDQ LW GRHV DQ\ RWKHU QRQFRUH EDQNUXSWF\ SURFHHGLQJ
3ODQRQsDQXDU\$FWLQJZLWKRXWDXWKRUL]DWLRQIURP          )URQWLHU $LUOLQHV  %5 DW   8QGHU 6DQGHUV
WKH %RDUG RI 'LUHFWRUV /HY\ DWWHPSWHG WR VWRS                 &RQIHFWLRQHU\WKHUHIRUHWKH(623FRXOGKDYHDVVHUWHGLWV
LPSOHPHQWDWLRQ RI WKH 3ODQ E\ ILULQJ %URZQ VXVSHQGLQJ         (5,6$FODLPVDJDLQVW66'LQWKHEDQNUXSWF\FRXUWDQGWKRVH
/HJJHWW DVVXPLQJ WKH SRVLWLRQV RI 3UHVLGHQW DQG &KLHI         FODLPVFRXOGKDYHEHHQUHIHUUHGWRWKHGLVWULFWFRXUW7KLV
2SHUDWLQJ 2IILFHU LQ DGGLWLRQ WR WKRVH RI &KDLUPDQ RI WKH    OHDGV WR WKH FRQFOXVLRQ WKDW WKH (623jV IDLOXUH WR UDLVH LWV
%RDUGDQG&KLHI([HFXWLYH2IILFHUDQGSXUSRUWLQJWRUHVFLQG          FODLPVDJDLQVW66'LQWKHEDQNUXSWF\FRXUWKDVDUHVMXGLFDWD
WKH([SHQVH5HGXFWLRQ3ODQ                                          HIIHFW ZLWK UHVSHFW WR WKRVH FODLPV  ,Q UH &KDWWDQRRJD
                                                                      :KROHVDOH$QWLTXHV,QF)GWK&LU
  ,QUHVSRQVHWKH(6237UXVWHHVDFWLQJXSRQWKHDGYLFHRI           KROGLQJ WKDW WKH FRQILUPDWLRQ RI D SODQ RI UHRUJDQL]DWLRQ
WKHLUODZ\HU(OL]DEHWK%0D\RDSDUWQHULQWKHODZILUPRI         FRQVWLWXWHVDILQDOMXGJPHQWLQDEDQNUXSWF\SURFHHGLQJZLWK
3RUWHU :ULJKW 0RUULV 	 $UWKXU UHFRPPHQGHG WKDW WKH          UHJDUG WR FODLPV WKDW FRXOG KDYH EHHQ KHDUG LQ WKH
%RDUG RI 'LUHFWRUV FDOO /HY\jV 6XEVFULSWLRQ $JUHHPHQW LQ       SURFHHGLQJ
RUGHUWRUDLVHPLOOLRQLQQHHGHGFDVKIRUWKHFRUSRUDWLRQ
DQGWRLPSOHPHQWWKH([SHQVH5HGXFWLRQ3ODQ$PDMRULW\RI                                 ,,,&21&/86,21
WKH %RDUG RI 'LUHFWRUV %URZQ DQG 6FKUDJ YRWHG RQ
sDQXDU\WRPDNHWKHFDVKFDOOXSRQ/HY\SXUVXDQWWR            )RU DOO RI WKH UHDVRQV VHW IRUWK DERYH ZH $)),50 WKH
WKH6XEVFULSWLRQ$JUHHPHQW:KHQ/HY\ZDVXQDEOHWRSD\             MXGJPHQWVRIWKHGLVWULFWFRXUW
WKH PDMRULW\ RI WKH %RDUG FRQVLGHUHG WKH 6XEVFULSWLRQ
$JUHHPHQWQXOODQGYRLGDQGYLHZHGWKH(623UDWKHUWKDQ
/HY\DVKDYLQJYRWLQJFRQWURORI1DWLRQZLVH
   6RRQ WKHUHDIWHU D GLVSXWH DURVH EHWZHHQ /HY\ DQG WKH
PDMRULW\RIWKH%RDUG%URZQDQG6FKUDJZKRWKHQFDXVHG
1DWLRQZLVHWRVXH/HY\LQVWDWHFRXUW7KHFRPSODLQWDOOHJHG
IUDXGLQFRQQHFWLRQZLWKWKH6XEVFULSWLRQ$JUHHPHQW/HY\
ZDVUHSUHVHQWHGLQWKLVOLWLJDWLRQE\66'1DWLRQZLVHZDV
UHSUHVHQWHG E\ 6FKUDJ DQG WKH (623 ZDV UHSUHVHQWHG E\
0D\R  ,Q )HEUXDU\ RI  66' DV FRXQVHO IRU /HY\
UHSHDWHGO\ UHTXHVWHG WKDW WKH (623 7UXVWHHV DSSURYH D
VHWWOHPHQWDJUHHPHQWWKDWZRXOGLQYROYHDFDOORQ/HY\LQWKH
UHGXFHGDPRXQWRIPLOOLRQDQGZRXOGLQFOXGHDFRPSOHWH
UHOHDVHRIWKH(623jVSRWHQWLDOFODLPVDJDLQVWKLP
  2Q0DUFKWKH%RDUGRI'LUHFWRUVXQDQLPRXVO\
YRWHGWRSDUWLDOO\UHVFLQGWKHFDOOUHTXLULQJ/HY\WRSD\IRU
RQO\  PLOOLRQ ZRUWK RI WKH VKDUHV KH RZQHG XQGHU WKH
    %URZQLQJHWDOY/HY\HWDO               1R       1R                %URZQLQJHWDOY/HY\HWDO        

EUHDFKRIILGXFLDU\GXW\XQGHU(5,6$86&DQG            6XEVFULSWLRQ $JUHHPHQW  7KH %RDUG DOVR DSSURYHG D QHZ
 HQWHULQJ DV D mSDUW\ LQ LQWHUHVWl  LQWR SURKLELWHG      HPSOR\PHQWDJUHHPHQWIRU%URZQDV3UHVLGHQWRI1DWLRQZLVH
WUDQVDFWLRQVZLWKDSODQXQGHU(5,6$86&WKH            7HQHQEDXP DQG /HJJHWW WKHQ UHVLJQHG DV (623 7UXVWHHV
(623DUJXHVWKDWmEHFDXVHWKHH[FOXVLYHJUDQWRIMXULVGLFWLRQ          OHDYLQJ%URZQDVWKHVROHUHPDLQLQJ7UXVWHH
RYHU(5,6$FODLPVWRWKHIHGHUDOGLVWULFWFRXUWVVWULSSHGWKH
EDQNUXSWF\ FRXUW RI MXULVGLFWLRQ WR KHDU VXFK FODLPV WKH        )LQDOO\RQ$SULOWKH(6231DWLRQZLVH/HY\
(6233ODLQWLIIVFRXOGQRWKDYHEURXJKWWKHLU(5,6$FODLPV              DQG WKH RWKHU DIIHFWHG SDUWLHV HQWHUHG LQWR D VHWWOHPHQW
DJDLQVW66'LQWKH%DQNUXSWF\/LWLJDWLRQl                             DJUHHPHQW DQG UHOHDVH  8QGHU WKH WHUPV RI WKH 6HWWOHPHQW
                                                                       $JUHHPHQW/HY\SDLG1DWLRQZLVHDSSUR[LPDWHO\PLOOLRQ
   ,QGHHG WKH VWDWXWRU\ JUDQW RI H[FOXVLYH MXULVGLFWLRQ RYHU   DQG UHPDLQHG WKH PDMRULW\ VKDUHKROGHU  7KH VWDWH FRXUW
(5,6$FODLPVLQIHGHUDOGLVWULFWFRXUWVGLYHVWVRWKHUFRXUWVRI        HQWHUHGDILQDOMXGJPHQWDSSURYLQJWKHVHWWOHPHQWRQ0D\
WKH SRZHU WR DGMXGLFDWH WKHP 7KRLNRO &RUS Y 'HSW RI       
7UHDVXU\6WDWHRI0LFKLJDQ5HYHQXH'LY)G
WK&LUKROGLQJWKDWVWDWHFRXUWVFRXOGQRWDGMXGLFDWH          1DWLRQZLVHILOHGIRU&KDSWHUEDQNUXSWF\SURWHFWLRQRQ
(5,6$ FODLPV EHFDXVH &RQJUHVV JUDQWHG H[FOXVLYH                   $XJXVW)LYHGD\VODWHU&KULVWRSKHU%URZQLQJDQG
MXULVGLFWLRQRYHUWKHPWRWKHIHGHUDOGLVWULFWFRXUWVm,WLV        sHIIUH\5DGHPDQERWKRIZKRPZHUH1DWLRQZLVHHPSOR\HHV
ZHOOVHWWOHGWKDWDVWDWXWHZKLFKYHVWVMXULVGLFWLRQLQD        DQG SDUWLFLSDQWV LQ WKH (623 EURXJKW VXLW DJDLQVW /HY\
SDUWLFXODUFRXUWFXWVRIIRULJLQDOMXULVGLFWLRQLQRWKHUFRXUWVLQ     7KHLU FRPSODLQW DOOHJHG WKDW WKH  VHWWOHPHQW ZDV
DOOFDVHVFRYHUHGE\WKDWVWDWXWHl7HOHFRPPV5HVHDUFK	             SURFXUHG E\ IUDXG DQG WKH\ DVNHG WKH GLVWULFW FRXUW WR VHW
$FWLRQ&WUY)&&)G'&&LU&ODLPV          DVLGHWKHVHWWOHPHQWDQGDOORZWKHVXLWWREHUHOLWLJDWHG
EURXJKWE\DQ(623DOOHJLQJWKDWDQ(5,6$ILGXFLDU\KDV
EUHDFKHGLWVILGXFLDU\GXWLHVRUWKDWDmSDUW\LQLQWHUHVWlKDV         ,Q  WKH (623 DQG 1: LQWHUYHQHG DV SODLQWLIIV LQ
HQJDJHGLQFHUWDLQSURKLELWHGWUDQVDFWLRQVZLWKWKHSODQIDOO         %URZQLQJjVDQG5DGHPDQjVVXLWMRLQLQJ66'DVDQDGGLWLRQDO
XQGHUWKHVWDWXWHjVH[FOXVLYHMXULVGLFWLRQSURYLVLRQ86&        GHIHQGDQW  %URZQLQJ DQG 5DGHPDQ WKHQ DPHQGHG WKHLU
 H SURYLGLQJ IRU H[FOXVLYH MXULVGLFWLRQ LQ WKH       FRPSODLQW WR DOVR VXH 66'  7KH (623 DOOHJHG WKDW LQ
IHGHUDO GLVWULFW FRXUWV RYHU FHUWDLQ W\SHV RI FODLPV DULVLQJ   SURFXULQJ WKH  VHWWOHPHQW 66' EUHDFKHG LWV ILGXFLDU\
XQGHU WKH (5,6$ VWDWXWH  86&  D FUHDWLQJ        GXWLHVXQGHU(5,6$86&1:DOOHJHG
OLDELOLW\IRUEUHDFKRIILGXFLDU\GXW\IRUm>D@Q\SHUVRQZKRLV        WKDW66'FRPPLWWHGOHJDOPDOSUDFWLFHDQGRWKHUEUHDFKHVRI
DILGXFLDU\ZLWKUHVSHFWWRDSODQlDQG86&         GXW\ XQGHU 2KLR ODZ  $FFRUGLQJ WR WKH (623 DQG 1:
FUHDWLQJOLDELOLW\IRUDmSDUW\LQLQWHUHVWlLIWKH\HQJDJHLQ        66'jV ZURQJGRLQJ mUHPDLQHG ODWHQW XQWLO PLG ZKHQ
FHUWDLQSURKLELWHGWUDQVDFWLRQVZLWKWKHSODQ                        GLVFRYHU\ FRQGXFWHG LQ WKH LQVWDQW OLWLJDWLRQ UHYHDOHG WKH
                                                                       GHSWK DQG FKDUDFWHU RI 66'jV LQYROYHPHQW LQ IRUFLQJ
  %XW WKH H[FOXVLYH MXULVGLFWLRQ RI WKH GLVWULFW FRXUWV RYHU   DFFHSWDQFHRIWKHVHWWOHPHQWDJUHHPHQWXSRQ1DWLRQZLVHDQG
FHUWDLQ (5,6$ FODLPV GRHV QRW SUHFOXGH VXFK FODLPV IURP        (623l
EHLQJ EURXJKW LQ EDQNUXSWF\ SURFHHGLQJV EHFDXVH WKH
mEDQNUXSWF\FRXUWLVQRWDIUHHVWDQGLQJFRXUWlEXWUDWKHUmD           7KH(623DQG1:VSHFLILFDOO\FRQWHQGWKDWLQ)HEUXDU\
µXQLWjRIWKHGLVWULFWFRXUWl,QUH)URQWLHU$LUOLQHV,QF      DQG0DUFKRI66'FRHUFHG6FKUDJDQGWKH9RU\VILUP
%5   %DQNU &ROR  KROGLQJ WKDW WKH            LQWRDSSURYLQJWKHSURSRVHGVHWWOHPHQWE\WKUHDWHQLQJWRVXH
EDQNUXSWF\FRXUWKDGMXULVGLFWLRQWRKHDUFODLPVDULVLQJXQGHU         WKHPRQEHKDOIRI/HY\IRUPDOSUDFWLFHLQFRQQHFWLRQZLWK
(5,6$86&%HFDXVHWKHEDQNUXSWF\FRXUWLVD            6FKUDJjV GUDIWLQJ RI DQG DGYLFH WR /HY\ UHJDUGLQJ WKH
                                                                       6XEVFULSWLRQ$JUHHPHQW$FFRUGLQJWRWKH(623DQG1:
     %URZQLQJHWDOY/HY\HWDO               1R       1R                   %URZQLQJHWDOY/HY\HWDO         

66' ODWHU SUHVVXUHG WKH (623 7UXVWHHV WR DSSURYH WKH           HVWDEOLVKHV WKH (623jV VXEVWDQWLDO SDUWLFLSDWLRQ LQ WKH
VHWWOHPHQW DQG WR SHUVXDGH 0D\R WR VXSSRUW WKH SURSRVHG        EDQNUXSWF\SURFHHGLQJ
VHWWOHPHQW E\ DPRQJ RWKHU WKLQJV RIIHULQJ %URZQ DQ
HQKDQFHGHPSOR\PHQWSDFNDJH66'DOVRDOOHJHGO\LQGXFHG                     7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDWWKH
/HJJHWWDQG7HQHQEDXPWRUHVLJQDVWUXVWHHVE\IDOVHO\WHOOLQJ                 (623VKRXOGKDYHUDLVHGRUUHVHUYHGLWVFODLPVLQWKH
WKHPWKDWDQLQGHSHQGHQWVXFFHVVRUWUXVWHHKDGEHHQDUUDQJHG                   1DWLRQZLVHEDQNUXSWF\SURFHHGLQJ
WRUHSODFHWKHPZKHQLQIDFW66'ZDVOLQLQJXS%URZQWR
VHUYHDVWKHVROH(623WUXVWHHRQDQLQWHULPEDVLVXQWLODIWHU            $VH[SODLQHGDERYHLQ3DUW,,%FDFODLPPXVWEHUDLVHG
WKHVHWWOHPHQWZDVFRQFOXGHG                                        LQ D SULRU EDQNUXSWF\ SURFHHGLQJ LI LW LV mUHODWHG WRl WKH
                                                                       SURFHHGLQJPHDQLQJWKDWLWZRXOGKDYHDIIHFWHGWKHGHEWRUjV
  7KHSODLQWLIIVFRQWHQGWKDWDVDUHVXOWRIWKHVHWWOHPHQWWKH       ULJKWVRUOLDELOLWLHV86&,QUH'RZ&RUQLQJ
YDOXHRIWKHVKDUHVRZQHGE\WKH(623ZDVGLOXWHGDQGWKDW             &RUS)GWK&LU6LPLODUWR1:jV
1DWLRQZLVHUHFHLYHGVXEVWDQWLDOO\OHVVFDVKWKDQLWQHHGHGWR          FODLPV DJDLQVW 66' WKH (623jV FODLPV DUH UHODWHG WR WKH
UHPDLQ ILQDQFLDOO\ YLDEOH  $FFRUGLQJ WR WKH SODLQWLIIV WKH   1DWLRQZLVH EDQNUXSWF\ EHFDXVH LI WKH\ KDG EHHQ EURXJKW
EDQNUXSWF\RI1DWLRQZLVHUHVXOWHGLQSDUWIURPWKHILQDQFLDO           GXULQJWKHEDQNUXSWF\SURFHHGLQJWKH\ZRXOGKDYHDIIHFWHG
KDUGVKLSVFDXVHGE\WKHIUDXGXOHQWO\LQGXFHGDQGWKHUHIRUH            WKHGHEWRUjVHVWDWH
YRLGVHWWOHPHQWDQGUHOHDVH
                                                                          7KH m3URRI RI &ODLPl HQWHUHG E\ 6WDU %DQN LQ WKH
   8SRQ WKH ILOLQJ RI WKH &KDSWHU  EDQNUXSWF\ SHWLWLRQ      EDQNUXSWF\SURFHHGLQJRQEHKDOIRIWKH(623ZDVEDVHGLQ
1DWLRQZLVH EHJDQ WR RSHUDWH DV D GHEWRULQSRVVHVVLRQ           SDUWXSRQWKH(623jVRZQHUVKLSRI1DWLRQZLVHVKDUHV,QLWV
1DWLRQZLVH FKDQJHG LWV QDPH WR 1: /LTXLGDWLQJ ,QF             FXUUHQW VXLW DJDLQVW 66' WKH (623 DOOHJHV WKDW 66'
IROORZLQJFRQILUPDWLRQRIWKH3ODQRI5HRUJDQL]DWLRQLQ          FRQWULEXWHGWRWKHILQDQFLDOGLVWUHVVDQGUHVXOWLQJEDQNUXSWF\
1:WKHQVXFFHHGHG1DWLRQZLVHIXQFWLRQLQJDVWKHGHEWRULQ            RI1DWLRQZLVHWKHUHE\FDXVLQJWKHORVVLQWKHYDOXHRIWKH
SRVVHVVLRQ RI WKH EDQNUXSWF\ HVWDWH DQG SUHVLGLQJ RYHU WKH     (623jVVKDUHV%HFDXVHWKH(623LVQRWHQWLWOHGWRDGRXEOH
OLTXLGDWLRQRIWKHFRUSRUDWLRQjVDVVHWVZLWKDOOWKHSRZHUVDQG        UHFRYHU\ RQ WKH YDOXH RI LWV VKDUHV DQ\ UHFRYHU\ WKDW WKH
GXWLHVRIDWUXVWHH                                                   (623PLJKWKDYHUHFHLYHGRQLWVFODLPVDJDLQVW66'LQWKH
                                                                       EDQNUXSWF\ SURFHHGLQJ ZRXOG KDYH UHGXFHG WKH (623jV
  $WWKHWLPH1DWLRQZLVHILOHGLWV&KDSWHUSHWLWLRQDQG            FODLPVDJDLQVWWKHEDQNUXSWF\HVWDWHWKXVDOWHULQJWKHRYHUDOO
GXULQJ WKH ILUVW PRQWK RI WKH EDQNUXSWF\ SURFHHGLQJ            GLVWULEXWLRQ RI DVVHWV DPRQJ FUHGLWRUV 6HH ,Q UH /HQ] 
1DWLRQZLVHZDVUHSUHVHQWHGVROHO\E\66'7KHODZILUPRI             %5   %DQNU &ROR  VWDWLQJ WKDW m>L@I >D
$UWHU 	 +DGGHQ UHSODFHG 66' RQ 6HSWHPEHU   DV          FUHGLWRU@ZHUHDOORZHGWRVKDUHDVRWKHUXQVHFXUHGFUHGLWRUV
1DWLRQZLVHjVJHQHUDOFRXQVHOIURPWKDWSRLQWIRUZDUGZLWK             LQWKHHVWDWHWRWKHH[WHQWRILWVFODLPDIWHUKDYLQJDOUHDG\
66'FRQWLQXLQJWRUHSUHVHQW1DWLRQZLVHDVVSHFLDOFRXQVHO              UHFHLYHG WKH    YDOXH RI WKH SURSHUW\     LW ZRXOG EH
RQO\                                                                  UHFHLYLQJ µGRXEOHj EHQHILWV WR WKH GHWULPHQW RI RWKHU
                                                                       XQVHFXUHGFUHGLWRUVl
   6WDU%DQN7UXVW)LQDQFLDO6HUYLFHV6WDU%DQNHQWHUHGLWV
DSSHDUDQFHRQ$XJXVWRQHZHHNDIWHU1DWLRQZLVH                 7KH(623jVFODLPVDJDLQVW66'DUHWKXVFOHDUO\mUHODWHG
ILOHGLWVSHWLWLRQIRUWKHSXUSRVHRIUHSUHVHQWLQJWKH(623LQ        WRlWKH1DWLRQZLVHEDQNUXSWF\%XWLWFDQQRWEHVDLGWKDWWKH
WKHEDQNUXSWF\SURFHHGLQJ,Q6HSWHPEHURI6WDU%DQN            (623VKRXOGKDYHUDLVHGRUUHVHUYHGWKHVHFODLPVLILWFRXOG
ILOHGGRFXPHQWVVWDWLQJWKDWLWmLVDSDUW\LQLQWHUHVWKHUHLQDV      QRW KDYH GRQH VR IRU D UHDVRQ RWKHU WKDQ WKHLU UHODWHGQHVV
WKH7UXVWHHRIWKH(PSOR\HH6WRFN2ZQHUVKLS3ODQlDQGmLV             &KDUDFWHUL]LQJLWVFODLPVDJDLQVW66'DVDOOHJDWLRQVRID
     %URZQLQJHWDOY/HY\HWDO             1R       1R                %URZQLQJHWDOY/HY\HWDO       

ZKHWKHUWKH(623jVFODLPVmVKRXOGKDYHEHHQOLWLJDWHGlLQ             DSDUW\LQLQWHUHVWKHUHLQDVWKHUHSUHVHQWDWLYHRIWKHGHEWRUjV
WKHEDQNUXSWF\SURFHHGLQJnUHTXLUHVHSDUDWHDQDO\VLV                  PLQRULW\VKDUHKROGHUVl6WDU%DQNDOVRILOHGVHYHUDOVHSDUDWH
                                                                      REMHFWLRQV DQG PRWLRQV GXULQJ WKH EDQNUXSWF\ SURFHHGLQJ
      7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDWWKH         2Q'HFHPEHU6WDU%DQNILOHGDm3URRIRI&ODLPl
        mLGHQWLW\RIWKHSDUWLHVlUHTXLUHPHQWIRUUHVMXGLFDWD        WKDWVRXJKWUHOLHIEDVHGXSRQLWVKROGLQJRIWLWOHWR1DWLRQZLVH
        LVVDWLVILHGZLWKUHVSHFWWRWKH(623                         VKDUHVDQGOLVWHGHDFKRIWKHLQGLYLGXDOSODQSDUWLFLSDQWVRQ
                                                                      ZKRVHEHKDOILWZDVDVVHUWLQJDFODLP6WDU%DQNREMHFWHGD
   66' DUJXHV WKDW WKH VHFRQG HOHPHQW RI UHV MXGLFDWD LV     PRQWK ODWHU WR WKH FRQILUPDWLRQ RI 1DWLRQZLVHjV
VDWLVILHGZLWKUHVSHFWWRWKH(623EHFDXVHERWKWKH(623DQG          5HRUJDQL]DWLRQ 3ODQ RQ EHKDOI RI mDSSUR[LPDWHO\ 
66'ZHUHSDUWLHVWRWKH1DWLRQZLVHEDQNUXSWF\SURFHHGLQJ             SDUWLFLSDQWVlZKRDUHmSULPDULO\HPSOR\HHVRIWKHGHEWRUl
)RUWKHUHDVRQVVHWIRUWKDERYHLQ3DUW,,%E66'ZDVD          )LQDOO\RQ2FWREHU6WDU%DQNILOHGDGRFXPHQWLQ
SDUW\7KH(623ZDVDOVRDSDUW\EHFDXVHIRUWKHSXUSRVHV           VXSSRUWRILWVSURRIRIFODLPDVVHUWLQJWKDWLWmKROGVWKHVKDUHV
RI UHV MXGLFDWD DOO VKDUHKROGHUFUHGLWRUV DUH FRQVLGHUHG       RI WKH 'HEWRUjV VWRFN IRU WKH EHQHILW RI SODQ SDUWLFLSDQWV
mSDUWLFLSDQWVlLQWKHEDQNUXSWF\SURFHHGLQJ6HH,QUH0LFUR        QDPHO\HOLJLEOHHPSOR\HHVRI'HEWRUl
7LPH0JPW6\V,QF:/DWWK&LUsDQ
 XQSXEOLVKHG WDEOH GHFLVLRQ KROGLQJ WKDW D                 1HLWKHU WKH (623 WKURXJK 6WDU %DQN QRU 1DWLRQZLVH
VKDUHKROGHUFUHGLWRU RI WKH GHEWRU ZDV D SDUWLFLSDQW LQ WKH   UHVHUYHGSULRUWRWKHFRQFOXVLRQRIWKHEDQNUXSWF\SURFHGLQJ
EDQNUXSWF\ SURFHHGLQJ DQG WKHUHIRUH D SDUW\ WR LW IRU WKH   WKHVSHFLILFFODLPVWKH\QRZDVVHUWDJDLQVW66'1DWLRQZLVH
SXUSRVHVRIUHVMXGLFDWD6DQGHUV&RQIHFWLRQHU\3URGV,QF       GLGKRZHYHULQFOXGHWKHIROORZLQJRPQLEXVUHVHUYDWLRQRI
Y +HOOHU )LQ ,QF  )G   WK &LU      ULJKWVLQLWV'LVFORVXUH6WDWHPHQW)RU3ODQRI5HRUJDQL]DWLRQ
KROGLQJWKDWDVKDUHKROGHUFUHGLWRURIWKHGHEWRUZDVDSDUW\        ILOHGLQWKHEDQNUXSWF\SURFHHGLQJRQ'HFHPEHU
WR WKH EDQNUXSWF\ SURFHHGLQJ VR WKDW LWV FODLPV DJDLQVW
DQRWKHUFUHGLWRUDQGWKHFUHGLWRUjVDWWRUQH\VZHUHEDUUHGE\            ,Q DFFRUGDQFH ZLWK VHFWLRQ E RI WKH %DQNUXSWF\
WKH UHV MXGLFDWD HIIHFW RI WKH FRQILUPDWLRQ RUGHU  $V D     &RGH WKH &RPSDQ\ VKDOO UHWDLQ DQG PD\ HQIRUFH DQ\
VKDUHKROGHUFUHGLWRURI1DWLRQZLVHWKH(623ZDVWKHUHIRUH              FODLPVULJKWVDQGFDXVHVRIDFWLRQWKDWWKH'HEWRURULWV
DSDUW\WRWKHEDQNUXSWF\SURFHHGLQJ                                 EDQNUXSWF\HVWDWHPD\KROGDJDLQVWDQ\SHUVRQRUHQWLW\
                                                                        LQFOXGLQJZLWKRXWOLPLWDWLRQFODLPVDQGFDXVHVRIDFWLRQ
  7KH (623 KRZHYHU DUJXHV WKDW LW VKRXOG QRW EH               DULVLQJXQGHUVHFWLRQVRU
FRQVLGHUHGDSDUW\WRWKH1DWLRQZLVHEDQNUXSWF\EHFDXVHLW              RIWKH%DQNUXSWF\&RGH
KDG mQR PHDQLQJIXO SDUWLFLSDWLRQl LQ WKH SURFHHGLQJ  %\
mPHDQLQJIXOlWKH(623FRQWHQGVWKDWLWVLQWHUHVWVZHUHQRW             7KH EDQNUXSWF\ FRXUW DSSURYHG 1DWLRQZLVHjV 'LVFORVXUH
VXIILFLHQWO\UHSUHVHQWHG7KLVDUJXPHQWIDLOVIRUWZRUHDVRQV       6WDWHPHQWRQ'HFHPEHU1DWLRQZLVHWKHQILOHGLWV
)LUVWWKH(623FLWHVQRDXWKRULW\IRUWKHSURSRVLWLRQWKDWWKH       SURSRVHG3ODQRI5HRUJDQL]DWLRQRQsDQXDU\DQG
UHODWLYHYLJRURIDFUHGLWRUjVUHSUHVHQWDWLRQLQDEDQNUXSWF\         DGGHGFRUUHFWLRQVWRWKHSURSRVHG3ODQRQ)HEUXDU\
SURFHHGLQJLVUHOHYDQWWRLWVLGHQWLILFDWLRQDVDSDUW\6HFRQG     7KH EDQNUXSWF\ FRXUW FRQILUPHG WKH 3ODQ ZKLFK KDG EHHQ
HYHQLIDUHTXLUHPHQWRImPHDQLQJIXOlSDUWLFLSDWLRQH[LVWHG          DSSURYHGE\1DWLRQZLVHjVFUHGLWRUVLQFOXGLQJWKH(623RQ
WKHUHFRUGVKRZVWKDWWKH(623ZDVDFWLYHO\UHSUHVHQWHGLQ            WKHVDPHGDWH
WKHSURFHHGLQJE\6WDU%DQNDFWLQJDVWKH(623jVWUXVWHH
7KHQXPHURXVREMHFWLRQVDQGWKHm3URRIRI&ODLPlRIIHUHGE\              ,QsDQXDU\RI66'PRYHGIRUVXPPDU\MXGJPHQWRQ
6WDU%DQNRQEHKDOIRIWKH(623DQGDOORILWVSDUWLFLSDQWV           DOOFODLPVSHQGLQJDJDLQVWLW7KHFRXUWJUDQWHG66'jVPRWLRQ
                                                                      ZLWKUHVSHFWWRWKH(623DQG1:RQ1RYHPEHU
     %URZQLQJHWDOY/HY\HWDO                1R       1R                %URZQLQJHWDOY/HY\HWDO      

KROGLQJWKDWWKH(623jVFODLPVDUHEDUUHGE\UHVMXGLFDWDDQG          OHDGV WR WKH FRQFOXVLRQ WKDW 1:jV IDLOXUH WR GLVFORVH ZDV
WKDW1:jVFODLPVDUHEDUUHGE\ERWKUHVMXGLFDWDDQGMXGLFLDO           ZLWKRXW DQ\ HYLGHQFH WR WKH FRQWUDU\ LQDGYHUWHQW  66'
HVWRSSHO  $SSUR[LPDWHO\ RQH \HDU ODWHU WKH GLVWULFW FRXUW     SURYLGHVQRHYLGHQFHWKDW1:LQWHQGHGWRmKDYHLWVFDNHDQG
JUDQWHG VXPPDU\ MXGJPHQW LQ IDYRU RI 66' UHJDUGLQJ               HDWLWWRRl7KXV1:jVLQDGYHUWHQFHUHQGHUVWKHDSSOLFDWLRQ
%URZQLQJjVDQG5DGHPDQjVFODLPV7KLVDSSHDOIROORZHG                 RI MXGLFLDO HVWRSSHO LQDSSURSULDWH WR SUHYHQW LW IURP QRZ
%HFDXVH%URZQLQJDQG5DGHPDQDUHLQWKHVDPHSRVLWLRQDV               DVVHUWLQJLWVFODLPVDJDLQVW66'
WKH(623IRUWKHSXUSRVHVRIWKLVDSSHDODQGWKH$SSHOODQWVj
EULHIGLGQRWWUHDWWKHLULQWHUHVWVVHSDUDWHO\IURPWKRVHRIWKH          %HFDXVHWKHILUVWUHTXLUHPHQWIRUWKHDSSOLFDWLRQRIMXGLFLDO
(623 RXU DQDO\VLV DQG FRQFOXVLRQV FRQFHUQLQJ WKH (623           HVWRSSHO KDV QRW EHHQ PHW ZH QHHG QRW UHDFK WKH VHFRQG
DOVRDSSO\WR%URZQLQJDQG5DGHPDQ                                    UHTXLUHPHQWnWKDW WKH EDQNUXSWF\ FRXUW mDGRSWHGl WKH
                                                                        SRVLWLRQWKDW1:KDGQRFODLPVDJDLQVW66'66'jVIDLOXUH
                        ,,$1$/<6,6                                  WRPHHWWKHILUVWUHTXLUHPHQWLVVXIILFLHQWIRUXVWRFRQFOXGH
                                                                        WKDW WKH GLVWULFW FRXUW HUUHG LQ KROGLQJ WKDW 1:jV FODLPV
$ 6WDQGDUGRIUHYLHZ                                                   DJDLQVW66'DUHEDUUHGE\MXGLFLDOHVWRSSHOLQDGGLWLRQWRUHV
                                                                        MXGLFDWD
   7KLV FRXUW UHYLHZV GH QRYR D GLVWULFW FRXUWjV JUDQW RI
VXPPDU\MXGJPHQW+ROORZD\Y%UXVK)G                 ' 7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDWWKH
WK&LU6XPPDU\MXGJPHQWLVSURSHUZKHUHWKHUHDUH               (623jVFODLPVDUHEDUUHGE\WKHUHVMXGLFDWDHIIHFWRI
QRJHQXLQHLVVXHVRIPDWHULDOIDFWLQGLVSXWHDQGWKHPRYLQJ               WKHFRQILUPDWLRQRUGHULQWKH1DWLRQZLVHEDQNUXSWF\
SDUW\LVHQWLWOHGWRMXGJPHQWDVDPDWWHURIODZ)HG5&LY            SURFHHGLQJ
3F,QGHFLGLQJDPRWLRQIRUVXPPDU\MXGJPHQWWKH
FRXUW PXVW YLHZ WKH HYLGHQFH DQG GUDZ DOO UHDVRQDEOH               7KH(623OLNH1:DUJXHVWKDWWKHGLVWULFWFRXUWHUUHGLQ
LQIHUHQFHVLQIDYRURIWKHQRQPRYLQJSDUW\0DWVXVKLWD(OHF           FRQFOXGLQJWKDWLWVFODLPVZHUHEDUUHGE\UHVMXGLFDWDEHFDXVH
,QGXV&RY=HQLWK5DGLR&RUS86              66'jV DOOHJHG FRQFHDOPHQW SUHYHQWHG WKH (623 IURP
7KHMXGJHLVQRWWRmZHLJKWKHHYLGHQFHDQGGHWHUPLQHWKH               NQRZLQJWKDW66'VKRXOGEHDGGHGDVDGHIHQGDQWXQWLODIWHU
WUXWKRIWKHPDWWHUEXWWRGHWHUPLQHZKHWKHUWKHUHLVDJHQXLQH         WKH FRQILUPDWLRQ RI WKH 3ODQ RI 5HRUJDQL]DWLRQ LQ WKH
LVVXHIRUWULDOl$QGHUVRQY/LEHUW\/REE\,QF86            1DWLRQZLVHEDQNUXSWF\DQG66'KDVQRWVDWLVILHGWKHIRXU
$JHQXLQHLVVXHIRUWULDOH[LVWVRQO\ZKHQ            HOHPHQWVRIUHVMXGLFDWDZLWKUHVSHFWWRWKH(623jVFODLPV
WKHUH LV VXIILFLHQW mHYLGHQFH RQ ZKLFK WKH MXU\ FRXOG           7KH(623jVFRQFHDOPHQWDUJXPHQWIDLOVIRUWKHVDPHUHDVRQV
UHDVRQDEO\ILQGIRUWKHSODLQWLIIl,GDW                        VHWIRUWKDERYHLQ3DUW,,%ZLWKUHVSHFWWR1:6LPLODUO\
                                                                        WZRRIWKHIRXUUHVMXGLFDWDHOHPHQWVDUHHDVLO\VDWLVILHGIRU
% 7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDW1:jV               WKH UHDVRQV SUHYLRXVO\ VWDWHG  7KH ILUVW RI WKHVHnWKDW WKH
   FODLPV DUH EDUUHG E\ WKH UHV MXGLFDWD HIIHFW RI WKH         FRQILUPDWLRQRIWKH3ODQRI5HRUJDQL]DWLRQLQWKH1DWLRQZLVH
   FRQILUPDWLRQ RUGHU LQ WKH 1DWLRQZLVH EDQNUXSWF\                 EDQNUXSWF\ SURFHHGLQJ FRQVWLWXWHV D ILQDO MXGJPHQWnLV
   SURFHHGLQJ                                                           FRYHUHG DERYH LQ 3DUW ,,%D   /LNHZLVH WKH IRXUWK
                                                                        HOHPHQWnDQmLGHQWLW\RIFODLPVlnLVVDWLVILHGZLWKUHVSHFWWR
  1: FRQWHQGV WKDW WKH GLVWULFW FRXUW HUUHG LQ JUDQWLQJ         WKH (623 IRU WKH VDPH UHDVRQV VHW IRUWK DERYH LQ 3DUW
VXPPDU\ MXGJPHQW LQ IDYRU RI 66' RQ WKH EDVLV RI UHV          ,,%G  7KH VHFRQG DQG WKLUG HOHPHQWV RI UHV MXGLFDWD
MXGLFDWDDQGMXGLFLDOHVWRSSHOEHFDXVH66'jVFRQFHDOPHQW            KRZHYHUnZKHWKHUWKHUHH[LVWVDQmLGHQWLW\RIWKHSDUWLHVlDQG
SUHYHQWHG1:IURPNQRZLQJDERXWLWVFODLPVDJDLQVW66'DW
WKH WLPH RI WKH FRQILUPDWLRQ RUGHU   66' KDV IDLOHG WR
    %URZQLQJHWDOY/HY\HWDO               1R       1R                %URZQLQJHWDOY/HY\HWDO       

mKDY>LQJ@>RQHjV@FDNHDQGHDW>LQJ@LWWRRl)GDW          HVWDEOLVKWKHHOHPHQWVRIUHVMXGLFDWDDQG1:H[SUHVVO\
DOWHUDWLRQLQRULJLQDO$OWKRXJKWKLVFRXUWKDVQRWDGGUHVVHG       UHVHUYHGLWVULJKWWREULQJFODLPVDJDLQVW66'
ZKHWKHU EDG IDLWK RU DQ DWWHPSW WR PLVOHDG WKH FRXUW LV D
QHFHVVDU\SUHUHTXLVLWHWRWKHDSSOLFDWLRQRIMXGLFLDOHVWRSSHO             7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDW1:
RWKHUFRXUWVKDYHKHOGWKDWMXGLFLDOHVWRSSHOLVLQDSSURSULDWH                IDLOHG WR SUHVHQW D JHQXLQH LVVXH RI PDWHULDO IDFW
LQFDVHVRIFRQGXFWDPRXQWLQJWRQRWKLQJPRUHWKDQPLVWDNH                    UHJDUGLQJ66'jVDOOHJHGFRQFHDOPHQW
RULQDGYHUWHQFH6HHHJ8QLWHG6WDWHVY+XVVHLQ)G
G&LU.LQJY+HUEHUWs7KRPDV0HPjO                 ,Q VXSSRUW RI LWV FRQWHQWLRQ WKDW 66' FDQQRW LQYRNH WKH
+RVS  )G   WK &LU  +HOIDQG Y       GRFWULQHRIUHVMXGLFDWDEHFDXVH66'ZURQJIXOO\FRQFHDOHGLWV
*HUVRQ)GWK&LU:HFRQVLGHUWKLV           SURIHVVLRQDO PLVFRQGXFW 1: FLWHV 0F&DUW\ Y )LUVW RI
DSSURDFKWREHPRUHFRQVLVWHQWZLWKWKHSROLF\UHDVRQVEHKLQG          *HRUJLD,QVXUDQFH&RPSDQ\)GWK&LU
WKH GRFWULQH RI MXGLFLDO HVWRSSHO WKDQ WKH 7KLUG &LUFXLWjV     0F&DUW\ KHOG WKDW ZKHUH D SODLQWLIIjV IDLOXUH WR UDLVH RU
DSSURDFKLQ2QHLGD                                                    UHVHUYH LWV FDXVH RI DFWLRQ LQ DQ HDUOLHU FDVH EHWZHHQ WKH
                                                                       SDUWLHV ZDV FDXVHG E\ WKH GHIHQGDQWjV mZURQJIXO
   7KH)LIWK&LUFXLWLQ,QUH&RDVWDO3ODLQV,QF)G          FRQFHDOPHQWlRIIDFWVJLYLQJULVHWRWKHFODLPWKHUHVMXGLFDWD
WK&LUGHILQHGWZRFLUFXPVWDQFHVXQGHUZKLFK             GHIHQVHLVQRWDYDLODEOH,GDW7KHWZRHOHPHQWVWKDW
DGHEWRUjVIDLOXUHWRGLVFORVHDFDXVHRIDFWLRQLQDEDQNUXSWF\       PXVWEHVKRZQXQGHU0F&DUW\DUHZURQJIXOFRQFHDOPHQW
SURFHHGLQJPLJKWEHGHHPHGLQDGYHUWHQW2QHLVZKHUHWKH             RIPDWHULDOIDFWVWKDWSUHYHQWHGSODLQWLIIVIURPDVVHUWLQJ
GHEWRUODFNVNQRZOHGJHRIWKHIDFWXDOEDVLVRIWKHXQGLVFORVHG         WKHLUFODLPVLQWKHILUVWDFWLRQ,G
FODLPVDQGWKHRWKHULVZKHUHWKHGHEWRUKDVQRPRWLYHIRU
FRQFHDOPHQW,GDW$OWKRXJKWKLVFRXUWLVQRWERXQGE\             $OWKRXJKWKH7HQWK&LUFXLWjVGHFLVLRQLQ0F&DUW\LVQRW
&RDVWDO3ODLQV,QFWKHVHWZRUHTXLUHPHQWVIRUDILQGLQJRI          ELQGLQJRQWKLVFRXUWLWVDQDO\VLVDSSHDUVVRXQGDQGSURYLGHV
DQLQDGYHUWHQWRPLVVLRQVHHPUHDVRQDEOHDQGDSSURSULDWHLQ             DXVHIXOIUDPHZRUNIRUUHVROYLQJWKHLVVXHDWKDQGm:URQJIXO
OLJKW RI WKH SROLFLHV XQGHUO\LQJ WKH GRFWULQH RI MXGLFLDO      FRQFHDOPHQWlFDQEHGHWHUPLQHGE\DQDORJ\WRFDVHVLQWKLV
HVWRSSHODVH[SUHVVHGE\WKLVFRXUWLQ7HOHG\QHDQG5H\QROGV          FLUFXLWGHDOLQJZLWKmIUDXGXOHQWFRQFHDOPHQWlWKHSUHVHQFHRI
:HWKHUHIRUHDGRSWWKHPLQRXUDQDO\VLVRIWKHSUHVHQWFDVH           ZKLFK EDUV D GHIHQGDQW IURP DVVHUWLQJ WKH VWDWXWH RI
                                                                       OLPLWDWLRQVDVDGHIHQVH,QRUGHUWRLQYRNHWKHGRFWULQHRI
   1:jVNQRZOHGJHRIWKHIDFWXDOEDVLVIRULWVFODLPVDJDLQVW          IUDXGXOHQWFRQFHDOPHQWm>D@IILUPDWLYHFRQFHDOPHQWPXVWEH
66'HVWDEOLVKHGDERYHLQ3DUW,,%IRUHFORVHVDILQGLQJRI       VKRZQ PHUH VLOHQFH RU XQZLOOLQJQHVV WR GLYXOJH ZURQJIXO
LQDGYHUWHQFHGXHWRDODFNRINQRZOHGJH2QWKHRWKHUKDQG          DFWLYLWLHVLVQRWVXIILFLHQWl+HOPOLJKWY0DUWLQV)HUU\1R
1:KDGQRPRWLYHIRUFRQFHDOPHQWLQOLJKWRILWVUROHDVD               :/  DW  WK &LU sXO\  
GHEWRULQSRVVHVVLRQ KDYLQJ DOO WKH ULJKWV DQG GXWLHV RI D    KROGLQJWKDWWKHSODLQWLIIjVFLYLOULJKWVFODLPVZHUHEDUUHGE\
WUXVWHH   86&    8QGHU 1DWLRQZLVHjV 3ODQ RI      WKHVWDWXWHRIOLPLWDWLRQVm&RQFHDOPHQWE\PHUHVLOHQFHLV
5HRUJDQL]DWLRQDOORIWKHHVWDWHjVDVVHWVDUHWREHUHGXFHGWR        QRW HQRXJK  7KHUH PXVW EH VRPH WULFN RU FRQWULYDQFH
FDVKE\1:DQGGLVWULEXWHGWRFUHGLWRUVLQDFFRUGDQFHZLWK             LQWHQGHGWRH[FOXGHVXVSLFLRQDQGSUHYHQWLQTXLU\l3LQQH\
WKH WHUPV RI WKH SODQ DQG WKH SULRULW\ SURYLVLRQV RI WKH     'RFNDQG7UDQVS&RY3HQQ&HQW&RUS)G
%DQNUXSWF\ &RGH  1: ZLOO WKXV UHFHLYH QR ZLQGIDOO DV D      WK&LU
UHVXOW RI LWV IDLOXUH WR GLVFORVH LWV FODLPV EHFDXVH RQO\
1DWLRQZLVHjV FUHGLWRUV ZLOO UHFHLYH WKH GLVWULEXWLRQ RI DQ\       66'jVDOOHJHGSURIHVVLRQDOPLVFRQGXFWDFFRUGLQJWR1:
UHFRYHU\ IURP 66'  7KLV ODFN RI PRWLYH IRU FRQFHDOPHQW       SUHYHQWHG 1: IURP UDLVLQJ RU UHVHUYLQJ LWV FODLPV DJDLQVW
                                                                       66'7KHDOOHJHGDFWVRIFRQFHDOPHQWFRQVLVWRIIDLOLQJ
    %URZQLQJHWDOY/HY\HWDO              1R      1R                 %URZQLQJHWDOY/HY\HWDO       

WR GLVFORVH WR WKH EDQNUXSWF\ FRXUW WKH IDFW WKDW 66'jV     LVZLWKDQDIILUPDWLYHDVVHUWLRQ,QDUJXLQJWKDWDGHEWRUjV
UHSUHVHQWDWLRQRI6DXO/HY\LQWKHOLWLJDWLRQZDVDGYHUVH       IDLOXUHWRGLVFORVHLWVFODLPVLVDORQHVXIILFLHQWWRFRQVWLWXWH
WR1DWLRQZLVHDQGHQJDJLQJLQREVWUXFWLRQLVWGLVFRYHU\          WKHDVVHUWLRQRIDmSRVLWLRQlLQDEDQNUXSWF\SURFHHGLQJ66'
WDFWLFVZLWKWKHSODLQWLIIVLQWKHLQVWDQWVXLW1:FRQWHQGV        FLWHV2QHLGD0RWRU)UHLJKW,QFY8QLWHGsHUVH\%DQN
WKDWEHJLQQLQJLQ$XJXVWRI66'SUHYHQWHG1:IURP             )G  G &LU  ZKLFK KHOG WKDW WKH GHEWRUjV
UHFHLYLQJWKHGRFXPHQWVQHFHVVDU\WRVXEVWDQWLDWHLWVFODLPV         SRVWSHWLWLRQEDQNUXSWF\FODLPDJDLQVWDEDQNZDVSUHFOXGHG
DJDLQVW 66' XQWLO $SULO RI  RYHU D \HDU DIWHU WKH     E\MXGLFLDOHVWRSSHOEHFDXVHWKHGHEWRUIDLOHGWRGLVFORVHWKH
FRQILUPDWLRQRIWKH1DWLRQZLVH5HRUJDQL]DWLRQ3ODQ                  FODLPLQWKHSULRUEDQNUXSWF\SURFHHGLQJ,GDW
  ,Q UHVSRQVH WR WKH ILUVW DOOHJHG DFW RI DIILUPDWLYH           66' DOVR SRLQWV RXW WKDW WKLV FRXUW KDV FLWHG 2QHLGD
FRQFHDOPHQW  66' DUJXHV WKDW LWV SDUWQHU * &KULVWRSKHU    DSSURYLQJO\IRUWKHSURSRVLWLRQWKDWmVWDWHPHQWVRURPLVVLRQV
0H\HUIXOILOOHG66'jVGXW\RIGLVFORVXUHE\VXEPLWWLQJWKH          E\ D GHEWRU LQ D GLVFORVXUH VWDWHPHQW >DUH@ VXIILFLHQW IRU D
IROORZLQJ VWDWHPHQW LQ DQ $XJXVW   DIILGDYLW           ILQGLQJRIMXGLFLDOHVWRSSHOl5H\QROGVY&RPPjU)G
DFFRPSDQ\LQJ 1:jV DSSOLFDWLRQ WR HPSOR\ 66' LQ WKH              WK &LU   DSSO\LQJ MXGLFLDO HVWRSSHO WR
EDQNUXSWF\SURFHHGLQJ                                               SUHYHQW WKH ,QWHUQDO 5HYHQXH 6HUYLFH IURP DUJXLQJ WKDW D
                                                                     KXVEDQGZDVOLDEOHIRUWKHWD[HVRQDFHUWDLQFDSLWDOJDLQDIWHU
  66	'KDGSULRUWRWKHILOLQJRIWKLVEDQNUXSWF\FDVH             FRQYLQFLQJDQRWKHUFRXUWLQDQHDUOLHUEDQNUXSWF\SURFHHGLQJ
  UHSUHVHQWHG6DXO/HY\LQPDWWHUVERWKUHODWHGWR         WKDW WKH ZLIH ZDV OLDEOH IRU WKH WD[  7KH ODQJXDJH LQ
  1DWLRQZLVH DQG XQUHODWHG      %RWK /HY\ DQG WKH     5H\QROGVKRZHYHUZKLFKQRWHGWKDWRWKHUFRXUWVKDYHKHOG
  'HEWRU KDYH DJUHHG WR 66	'jV UHSUHVHQWDWLRQ RI WKH          WKDWDQmRPLVVLRQlE\DGHEWRUFDQVXSSRUWDILQGLQJRI
  'HEWRU DVGHVFULEHGLQWKH0RWLRQDQGKDYHDJUHHGWR              MXGLFLDOHVWRSSHOLVGLFWDEHFDXVHWKH,56LQ5H\QROGVKDG
  ZDLYHDQ\SRWHQWLDOFRQIOLFWRILQWHUHVWZKLFKPD\DULVH           DIILUPDWLYHO\XUJHGLWVFRQIOLFWLQJSRVLWLRQVXSRQWKHFRXUWVLQ
  DVDUHVXOWRIVXFKUHSUHVHQWDWLRQ6XFKDJUHHPHQWDQG            ERWKWKHILUVWDQGVHFRQGSURFHHGLQJDQGWKH,56ZDVD
  ZDLYHUE\/HY\KDVEHHQPDGHRQWKHEDVLVWKDW66	'                FUHGLWRUQRWDGHEWRULQWKHEDQNUXSWF\SURFHHGLQJ:HDUH
  ZLOO QRW UHSUHVHQW WKH 'HEWRU ZLWK UHVSHFW WR DQ\          QRWERXQGE\WKHTXRWHGODQJXDJHLQ5H\QROGVEHFDXVHLWZDV
  OLWLJDWLRQ GLUHFWO\ FKDOOHQJLQJ DQ\ FODLP RU LQWHUHVW        QRWHVVHQWLDOWRWKHKROGLQJRIWKDWFDVH%UHQWZRRG$FDGHP\
  DVVHUWHGE\/HY\LQWKHVHFDVHVZKLFKPDWWHUVLIDQ\            Y 7HQQHVVHH 6HFRQGDU\ $WKOHWLF $VVjQ  )G  
  ZLOOEHKDQGOHGE\RWKHUFRXQVHOIRU'HEWRU                     WK&LUGHFOLQLQJWRIROORZQRQGLVSRVLWLYHVWDWHPHQWV
                                                                     LQ D SULRU 6L[WK &LUFXLW FDVH EHFDXVH WKH VWDWHPHQWV ZHUH
1:FRPSODLQVWKDW0H\HUjVVWDWHPHQWIDLOVWRGLVFORVHWKDW           mGLFWD DQG GR QRW KDYH WKH IRUFH RI ODZl UHYjG RQ RWKHU
66'jVUHSUHVHQWDWLRQRI/HY\ZDVDGYHUVHWR1DWLRQZLVH%XW         JURXQGV86
WKHDGYHUVHUHSUHVHQWDWLRQZRXOGKDYHEHHQNQRZQWR1:
WKURXJKLWVSUHGHFHVVRUjVILUVWKDQGH[SHULHQFHZLWKWKH           7KLVFRXUWKDVVWUHVVHGWKDWWKHGRFWULQHRIMXGLFLDOHVWRSSHO
DQG  GLVSXWH DQG OLWLJDWLRQ  ,Q DGGLWLRQ 66'jV         LVXWLOL]HGLQRUGHUWRSUHVHUYHmWKHLQWHJULW\RIWKHFRXUWVE\
UHSUHVHQWDWLRQ RI /HY\ LQ FRQQHFWLRQ ZLWK WKH DFWLRQV WKDW   SUHYHQWLQJDSDUW\IURPDEXVLQJWKHMXGLFLDOSURFHVVWKURXJK
IRUPWKHEDVLVRI1:jVFODLPVZHUHPDWWHUVRISXEOLFUHFRUG          F\QLFDOJDPHVPDQVKLSl7HOHG\QH,QGXV,QFY1/5%
LQWKHVWDWHFRXUWIROORZLQJWKHFRPPHQFHPHQWRI%URZQLQJjV          )GWK&LU,Q5H\QROGVWKHHYLOWREH
DQG5DGHPDQjVVXLWLQ$XJXVWRI&RQFHDOPHQWRIWKH            DYRLGHG LV FRORUIXOO\ GHVFULEHG DV mWKH SHUYHUVLRQ RI WKH
DGYHUVH QDWXUH RI 66'jV UHSUHVHQWDWLRQ ZDV WKHUHIRUH QRW      MXGLFLDOPDFKLQHU\lmSOD\LQJIDVWDQGORRVHZLWKWKHFRXUWVl
SRVVLEOHHYHQLILWKDGEHHQDWWHPSWHG                             mEORZLQJ KRW DQG FROG DV WKH RFFDVLRQ GHPDQGVl DQG
    %URZQLQJHWDOY/HY\HWDO              1R       1R                %URZQLQJHWDOY/HY\HWDO      

  1:jV EODQNHW UHVHUYDWLRQ ZDV RI OLWWOH YDOXH WR WKH            $VWRWKHVHFRQGDOOHJHGDFWRIDIILUPDWLYHFRQFHDOPHQW
EDQNUXSWF\ FRXUW DQG WKH RWKHU SDUWLHV WR WKH EDQNUXSWF\      1: FRQWHQGV WKDW 66' KLG LWV LPSURSHU UHSUHVHQWDWLRQ RI
SURFHHGLQJ EHFDXVH LW GLG QRW HQDEOH WKH YDOXH RI 1:jV       /HY\ E\ HQJDJLQJ LQ D GLVFRYHU\ GLVSXWH LQ ZKLFK 66'
FODLPV WR EH WDNHQ LQWR DFFRXQW LQ WKH GLVSRVLWLRQ RI WKH   DVVHUWHG FODLPV RI DWWRUQH\FOLHQW SULYLOHJH  $FFRUGLQJ WR
GHEWRUjVHVWDWH6LJQLILFDQWO\LWQHLWKHUQDPHV66'QRUVWDWHV      1:WKHVHWDFWLFVIRUHVWDOOHGLWVUHFHLSWRIFUXFLDOGLVFRYHU\
WKH IDFWXDO EDVLV IRU WKH UHVHUYHG FODLPV  :H WKHUHIRUH     GRFXPHQWV XQWLO $SULO RI   7KHVH GRFXPHQWV 1:
FRQFOXGHWKDW1:jVEODQNHWUHVHUYDWLRQGRHVQRWGHIHDWWKH            DUJXHV  mFRQILUPHGnIRU WKH ILUVW WLPHnWKDW >LW@ KDG
DSSOLFDWLRQRIUHVMXGLFDWDWRLWVFODLPVDJDLQVW66'              VXSSRUWDEOHFODLPVDJDLQVW66'l%XWWKHIDFWWKDW/HY\ZDV
                                                                      UHSUHVHQWHG E\ 66' GXULQJ WKH WLPH WKDW KH ZDV DOOHJHGO\
& 7KH GLVWULFW FRXUW HUUHG LQ FRQFOXGLQJ WKDW 1:jV            GHIUDXGLQJ 1DWLRQZLVH ZDV NQRZQ WR 1: EHFDXVH RI WKH
   FODLPVDJDLQVW66'DUHEDUUHGE\MXGLFLDOHVWRSSHO                 DOOHJDWLRQV FRQWDLQHG LQ %URZQLQJjV DQG 5DGHPDQjV 
                                                                      FRPSODLQWDJDLQVW/HY\7KHTXHVWLRQWKHQLVZKHWKHUWKDW
  ,QDGGLWLRQWRFRQFOXGLQJWKDW1:jVFODLPVDJDLQVW66'              NQRZOHGJHVXIILFHGIRU1:WREULQJLWVFODLPVDJDLQVW66'
ZHUH EDUUHG E\ WKH DIIUPDWLYH GHIHQVH RI UHV MXGLFDWD WKH   LQ WKH EDQNUXSWF\ FRXUW EHIRUH WKH FRQFOXVLRQ RI WKH
GLVWULFWFRXUWUXOHGIRU66'RQWKHDOWHUQDWLYHJURXQGWKDWWKH       SURFHHGLQJ LQ )HEUXDU\ RI  RU LQVWHDG ZKHWKHU 1:
GRFWULQHRIMXGLFLDOHVWRSSHOSUHFOXGHG1:IURPSXUVXLQJLWV          OHDUQHGRIWKHH[LVWHQFHRIVXSSRUWDEOHFODLPVDJDLQVW66'
DFWLRQDJDLQVWWKHODZILUP7KHGRFWULQHRIMXGLFLDOHVWRSSHO       RQO\DIWHUUHFHLYLQJWKHGRFXPHQWVLQ$SULORI
EDUVDSDUW\IURPDVVHUWLQJDSRVLWLRQWKDWLVFRQWUDU\WR
RQH WKDW WKH SDUW\ KDV DVVHUWHG XQGHU RDWK LQ D SULRU          ,QUHMHFWLQJ1:jVFODLPVWKDWWKHVHGRFXPHQWVFRQWDLQHG
SURFHHGLQJ ZKHUH  WKH SULRU FRXUW DGRSWHG WKH FRQWUDU\    D  mVPRNLQJ JXQl WKH GLVWULFW FRXUW FLWHG 1:jV IDLOXUH WR
SRVLWLRQmHLWKHUDVDSUHOLPLQDU\PDWWHURUDVSDUWRIDILQDO        mDWWDFKSDUDSKUDVHRUHYHQVXPPDUL]HWKHFRQWHQWVRIWKH
GLVSRVLWLRQl7HOHG\QH,QGXV,QFY1/5%)G          FUXFLDO GRFXPHQWVl LQ RUGHU WR VKRZ WKDW WKH\ UHYHDOHG
WK&LU:HUHYLHZGHQRYRDGLVWULFWFRXUWjV           VRPHWKLQJPDWHULDOWKDW1:SUHYLRXVO\GLGQRWNQRZ7KH
DSSOLFDWLRQRIMXGLFLDOHVWRSSHO6PLWKY)LUHPDQjV)XQG,QV       GLVWULFWFRXUWWKHUHIRUHFRQFOXGHGWKDW1:NQHZHQRXJKWR
&R1R:/DWWK&LUsDQ          EULQJ VXLW DJDLQVW 66' EHIRUH WKH FRQFOXVLRQ RI WKH
XQSXEOLVKHGWDEOHGHFLVLRQ                                         EDQNUXSWF\SURFHHGLQJ
  5HJDUGLQJWKHILUVWUHTXLUHPHQWIRUMXGLFLDOHVWRSSHO66'             1: DWWHPSWV WR UHPHG\ WKLV SUREOHP E\ GLVFXVVLQJ WKH
DUJXHVWKDW1:jVSUHGHFHVVRUWRRNDSRVLWLRQXQGHURDWKWKDW          GLVFORVHG66'GRFXPHQWVLQGHWDLOLQLWVDSSHOODWHEULHI7KH
ZDVFRQWUDU\WR1:jVFXUUHQWFODLPVDJDLQVW66'ZKHQLQ              GRFXPHQWV KRZHYHU VKRZ RQO\ WKDW 66' UHSUHVHQWHG DQG
WKH 1DWLRQZLVH EDQNUXSWF\ SURFHHGLQJ LW IDLOHG WR LQFOXGH     DGYLVHG  /HY\  LQ FRQQHFWLRQ ZLWK PDWWHUV WKDW LQYROYHG
WKHVHFODLPVLQLWV'LVFORVXUH6WDWHPHQWILOHGRQ'HFHPEHU         DOOHJHGO\ WRUWLRXV DFWLYLW\ RQ /HY\jV SDUW  1RWKLQJ LQ WKH
$GHEWRUKDVDQDIILUPDWLYHGXW\WRGLVFORVHDOORILWV        GRFXPHQWVDSSHDUWRDGGDQ\PDWHULDOIDFWVWRWKRVHVHWIRUWK
DVVHWVWRWKHEDQNUXSWF\FRXUW86&DQG66'           LQ %URZQLQJjV DQG 5DGHPDQjV RULJLQDO  FRPSODLQW
DVVHUWVWKDW1:jVIDLOXUHWRUDLVHRUOLVWWKHVHVSHFLILFFODLPV      DJDLQVW/HY\7KHVHVDPHIDFWVDUHXVHGE\1:WRDVVHUWLWV
DVDVVHWVLQLWV'LVFORVXUH6WDWHPHQWFRQVWLWXWHVWKHSRVLWLRQ        FODLPVDJDLQVW66'LQLWVIRXUWKDPHQGHGFRPSODLQW
WKDWQRVXFKFODLPVH[LVWHG                                         )RUH[DPSOHSDUDJUDSKV DQGRIWKHIRXUWKDPHQGHG
                                                                      FRPSODLQW ZKLFK VHW IRUWK WKH NH\ IDFWV XQGHUO\LQJ 1:jV
  %XW66'SUHVHQWHGQRSURRIWRVKRZWKDW1:LQWHQGHGWR              FODLPVDJDLQVW/HY\DQG66'UHVSHFWLYHO\FRUUHVSRQGLQDOO
FRQYLQFHWKHEDQNUXSWF\FRXUWWKDWLWKDGQRFODLPVDJDLQVW           VLJQLILFDQWUHVSHFWVWRSDUDJUDSKRIWKHRULJLQDOFRPSODLQW
66'1:jVRPLVVLRQLVDVFRQVLVWHQWZLWKLQDGYHUWHQFHDVLW
      %URZQLQJHWDOY/HY\HWDO              1R       1R                %URZQLQJHWDOY/HY\HWDO     

ZKLFK VHWV IRUWK WKH IDFWXDO EDVLV IRU %URZQLQJjV DQG           VXEPLWWHGWRWKHEDQNUXSWF\FRXUWLQ'HFHPEHURI5HV
5DGHPDQjV FODLPV DJDLQVW /HY\  %HFDXVH 1:jV IRXUWK              MXGLFDWDGRHVQRWDSSO\ZKHUHDFODLPLVH[SUHVVO\UHVHUYHGE\
DPHQGHGFRPSODLQWDGGV66'DVDGHIHQGDQWZLWKRXWUHO\LQJ               WKH OLWLJDQW LQ WKH HDUOLHU EDQNUXSWF\ SURFHHGLQJ  ' 	 .
LQDQ\FUXFLDOZD\RQ WKH GRFXPHQWVGLVFORVHGLQ$SULORI             3URSV&U\VWDO/DNHY0XW/LIH,QV&R)G
ZHILQGQRHUURULQWKHGLVWULFWFRXUWjVFRQFOXVLRQWKDW          WK&LU%HFDXVHDOORIWKHHOHPHQWVRIUHVMXGLFDWD
1:KDGVXIILFLHQWLQIRUPDWLRQWREULQJLWVFODLPVEHIRUHLW             DUH VDWLVILHG LQ WKH SUHVHQW FDVH 1: PXVW KDYH HLWKHU
UHFHLYHGWKH66'GRFXPHQWVLQTXHVWLRQ                                DGMXGLFDWHG LWV FODLPV LQ WKH EDQNUXSWF\ SURFHHGLQJ RU
                                                                        UHVHUYHG WKHP LQ WKH UHRUJDQL]DWLRQ SODQ RU FRQILUPDWLRQ
  :H DOVR ILQG VLJQLILFDQW WKH IDFW WKDW 1: GRHV QRW           RUGHU,GDW,QUH0LFUR7LPH0JPW6\V,QF
FKDOOHQJHWKHDSSURSULDWHQHVVRI66'jVDVVHUWLRQRISULYLOHJH           :/DW
RYHUWKHGRFXPHQWVLQTXHVWLRQQRUGRHV1:DUJXHWKDWWKHVH
FODLPVZHUHVRPHKRZDSUHWH[WFRQVWLWXWLQJDQDIILUPDWLYHDFW              7KHFODLPVDJDLQVW66'ZHUHREYLRXVO\QRWOLWLJDWHGLQWKH
RIFRQFHDOPHQW7KHUHIRUHUHJDUGOHVVRIWKHZRUWKRIWKHVH            EDQNUXSWF\ SURFHHGLQJ  1: DUJXHV KRZHYHU WKDW LW
GRFXPHQWVWR1:ZHILQGQREDVLVWRVXSSRUWWKHDOOHJDWLRQ             H[SUHVVO\ UHVHUYHG LWV FODLPV DJDLQVW 66' WKURXJK WKH
WKDW66'ZURQJO\FRQFHDOHGDQ\PDWHULDOIDFWVWKDWSUHYHQWHG            RPQLEXVSURYLVLRQLQFOXGHGLQLWV'LVFORVXUH6WDWHPHQW%XW
1:IURPDVVHUWLQJLWVFODLPVLQWKHEDQNUXSWF\SURFHHGLQJ              DJHQHUDOUHVHUYDWLRQRIULJKWVGRHVQRWVXIILFHWRDYRLGUHV
                                                                        MXGLFDWD  ' 	 . 3URSV &U\VWDO /DNH  )G DW 
          7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDW1:jV      KROGLQJ WKDW WKH GHEWRUjV DWWHPSWHG UHVHUYDWLRQ RI ULJKWV
            FODLPVDJDLQVW66'DUHEDUUHGE\UHVMXGLFDWD               ODFNHGWKHVSHFLILFLW\UHTXLUHGWRUHVHUYHDFDXVHRIDFWLRQ
                                                                        FLWLQJ,QUH0LFUR7LPH0JPW6\V,QF$VLGHE\VLGH
   $ FODLP LV EDUUHG E\ WKH UHV MXGLFDWD HIIHFW RI SULRU      FRPSDULVRQVKRZVWKDWWKHEODQNHWUHVHUYDWLRQRIULJKWVWKDW
OLWLJDWLRQLIDOORIWKHIROORZLQJHOHPHQWVDUHSUHVHQWmD         ZDV GHHPHG LQVXIILFLHQWO\ VSHFLILF LQ ,Q UH 0LFUR7LPH
ILQDO GHFLVLRQ RQ WKH PHULWV E\ D FRXUW RI FRPSHWHQW           0DQDJHPHQW6\VWHPV,QFLVHVVHQWLDOO\WKHVDPHDV1:jV
MXULVGLFWLRQDVXEVHTXHQWDFWLRQEHWZHHQWKHVDPHSDUWLHV          SXUSRUWHGUHVHUYDWLRQLQLWV'LVFORVXUH6WDWHPHQW
RUWKHLUµSULYLHVjDQLVVXHLQWKHVXEVHTXHQWDFWLRQZKLFK
ZDVOLWLJDWHGRUZKLFKVKRXOGKDYHEHHQOLWLJDWHGLQWKHSULRU                     0LFUR7LPH0DQDJHPHQW6\VWHPV,QF
DFWLRQDQGDQLGHQWLW\RIWKHFDXVHVRIDFWLRQl%LWWLQJHU
Y7HFXPVHK3URGV&R)GWK&LU                $OO FDXVHV RI DFWLRQ ZKLFK WKH GHEWRU PD\ FKRRVH WR
:HZLOOUHYLHZGHQRYRDGLVWULFWFRXUWjVDSSOLFDWLRQRIUHV              LQVWLWXWHVKDOOEHYHVWHGZLWKWKHGHEWRU
MXGLFDWD,QUH3LSHU$LUFUDIW&R,QF)G
WK &LU  ZLWK WKH SDUW\ DVVHUWLQJ WKH GHIHQVH KHUH   ,QUH0LFUR7LPH0JPW6\V,QF:/DW
66'EHDULQJWKHEXUGHQRISURRI,GDW
                                                                                                       1:
       D     7KH  EDQNUXSWF\ FRXUW FRQILUPDWLRQ RUGHU LV D
              ILQDO MXGJPHQW IRU WKH SXUSRVHV RI UHV MXGLFDWD      ,Q DFFRUGDQFH ZLWK VHFWLRQ E RI WKH %DQNUXSWF\
              ZLWKUHVSHFWWR1:jVFODLPVDJDLQVW66'                     &RGH WKH &RPSDQ\ VKDOO UHWDLQ DQG PD\ HQIRUFH DQ\
                                                                          FODLPVULJKWVDQGFDXVHVRIDFWLRQWKDWWKH'HEWRURULWV
  $V D JHQHUDO UXOH WKH m>F@RQILUPDWLRQ RI D SODQ RI            EDQNUXSWF\HVWDWHPD\KROGDJDLQVWDQ\SHUVRQRUHQWLW\
UHRUJDQL]DWLRQ FRQVWLWXWHV D ILQDO MXGJPHQW LQ EDQNUXSWF\           LQFOXGLQJZLWKRXWOLPLWDWLRQFODLPVDQGFDXVHVRIDFWLRQ
SURFHHGLQJVl6DQGHUV&RQIHFWLRQHU\3URGV,QFY+HOOHU               DULVLQJXQGHUVHFWLRQRU
)LQ ,QF  )G   WK &LU   6XFK            RIWKH%DQNUXSWF\&RGH
      %URZQLQJHWDOY/HY\HWDO                 1R      1R                   %URZQLQJHWDOY/HY\HWDO         

       G     7KH GLVWULFW FRXUW GLG QRW HUU LQ FRQFOXGLQJ WKDW   FRQILUPDWLRQ E\ D EDQNUXSWF\ FRXUW mKDV WKH HIIHFW RI D
              WKHUHLVDQmLGHQWLW\RIFODLPVlEHWZHHQWKHFODLPV         MXGJPHQWE\WKHGLVWULFWFRXUWDQGUHVMXGLFDWDSULQFLSOHVEDU
              1: FXUUHQWO\ DVVHUWV DQG WKH 1DWLRQZLVH                UHOLWLJDWLRQRIDQ\LVVXHVUDLVHGRUWKDWFRXOGKDYHEHHQUDLVHG
              EDQNUXSWF\SURFHHGLQJ                                       LQ WKH FRQILUPDWLRQ SURFHHGLQJVl  ,Q UH &KDWWDQRRJD
                                                                          :KROHVDOH$QWLTXHV,QF)GWK&LU
   7KHILQDOHOHPHQWRIUHVMXGLFDWDnWKDWWKHUHEHDQmLGHQWLW\           ,QOLJKWRIWKHFRQFOXVLRQLQ3DUW,,%FEHORZnWKDW1:jV
RIFODLPVlnLVVDWLVILHGLImWKHFODLPVDURVHRXWRIWKHVDPH              FODLPVDJDLQVW66'VKRXOGKDYHEHHQUDLVHGLQWKHEDQNUXSWF\
WUDQVDFWLRQ RU VHULHV RI WUDQVDFWLRQV RU ZKHWKHU WKH FODLPV      SURFHHGLQJnWKH EDQNUXSWF\ FRXUWjV FRQILUPDWLRQ RI
DURVHRXWRIWKHVDPHFRUHRIRSHUDWLYHIDFWVl,QUH0LFUR             1DWLRQZLVHjV 3ODQ RI 5HRUJDQL]DWLRQ FRQVWLWXWHV D ILQDO
7LPH0JPW6\V,QF:/DW,QWKHSUHVHQW               MXGJPHQWUHJDUGLQJ1:jVFODLPV
FDVHWKHmLGHQWLW\RIFODLPVlLVVKRZQE\WKHIDFWWKDW1:
DOOHJHV WKDW m66' NQHZ RU VKRXOG KDYH NQRZQ WKDW WKH                  E    7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDWWKH
VHWWOHPHQW RI WKH >@ 1DWLRQZLVH /LWLJDWLRQ DQG WKH                        mLGHQWLW\ RI WKH SDUWLHVl UHTXLUHPHQW IRU UHV
WHUPLQDWLRQ RI WKH 6XEVFULSWLRQ $JUHHPHQW ZRXOG KDYH D                        MXGLFDWDLVVDWLVILHGZLWKUHVSHFWWR1:DQG66'
QHJDWLYHGHWULPHQWDOLPSDFWXSRQ1DWLRQZLVHlDQGWKDWmWKH
HYHQWVRIHDUO\HVVHQWLDOO\GHVWUR\HGWKHFRPSDQ\l                    5HVMXGLFDWDEDUVQRWRQO\WKHDFWXDOSDUWLHVWRDQHDUOLHU
                                                                          EDQNUXSWF\SURFHHGLQJIURPODWHUEULQJLQJVXLWVZKLFKVKRXOG
   %HFDXVH 1:jV FODLPV DJDLQVW 66' DOOHJH WKDW 66'jV               KDYHEHHQEURXJKWLQWKHFRQWH[WRIWKHSURFHHGLQJEXWDOVR
UHSUHVHQWDWLRQRI/HY\LQFRQQHFWLRQZLWKWKHDQG               WKRVH LQ SULYLW\ ZLWK WKH SDUWLHV  6DQGHUV &RQIHFWLRQDU\
GLVSXWH RYHU WKH FRQWURO RI 1DWLRQZLVH DQG WKH UHVXOWLQJ          3URGV,QF)GDWm3ULYLW\LQWKLVVHQVHPHDQVD
OLWLJDWLRQ DQG VHWWOHPHQW FRQWULEXWHG WR 1DWLRQZLVHjV                VXFFHVVRU LQ LQWHUHVW WR WKH SDUW\    l  ,G  %\ LWV RZQ
EDQNUXSWF\WKHFXUUHQWFODLPVDJDLQVW66'mDULVHRXWRIWKH              DGPLVVLRQ1:LVWKHVXFFHVVRULQLQWHUHVWWR1DWLRQZLVHWKH
VDPHWUDQVDFWLRQlRUmWKHVDPHFRUHRIRSHUDWLYHIDFWVlDVWKH           GHEWRULQWKHEDQNUXSWF\SURFHHGLQJ1:LVWKHUHIRUHLQWKH
1DWLRQZLVHEDQNUXSWF\SURFHHGLQJ6XUH6QDS&RUSY6WDWH               VDPHSRVLWLRQDV1DWLRQZLVHZRXOGKDYHEHHQUHJDUGLQJWKH
6WUHHW%DQNDQG7UXVW&R)GG&LU               UHVMXGLFDWDHIIHFWRIWKHFRQILUPDWLRQ
KROGLQJWKDWWKHUHH[LVWHGDQLGHQWLW\RIFODLPVEHWZHHQDQ
HDUOLHU &KDSWHU  EDQNUXSWF\ SURFHHGLQJ DQG D SRVW                  ,Q KROGLQJ WKDW 66' ZDV DOVR D SDUW\ WR WKH EDQNUXSWF\
FRQILUPDWLRQFODLPE\WKHGHEWRUWKDWDOOHJHGWKDWWKHDFWLRQV            SURFHHGLQJWKHGLVWULFWFRXUWFLWHV,QUH0LFUR7LPH0JPW
RIRQHRILWVFUHGLWRUVmIRUFHG>WKHGHEWRU@LQWREDQNUXSWF\l           6\V,QF1RV:/DWWK
                                                                          &LU sDQ   XQSXEOLVKHG WDEOH GHFLVLRQ IRU WKH
  )RUDOORIWKHUHDVRQVVHWIRUWKDERYHZHFRQFOXGHWKDWWKH            SURSRVLWLRQ WKDW DV D UXOH WKH GHEWRUjV DWWRUQH\V DUH
HOHPHQWVRIUHVMXGLFDWDDUHVDWLVILHGZLWKUHVSHFWWR1:jV               SDUWLFLSDQWVLQWKHSURFHHGLQJIRUWKHSXUSRVHVRIUHVMXGLFDWD
FODLPVDJDLQVW66'                                                       ,GKROGLQJWKDWWKHGHEWRUjVIRUPHUODZILUPZDVDmSDUW\WR
                                                                          WKHSURFHHGLQJRUDWOHDVWSULY\WRSDUWLHVRIWKHSURFHHGLQJl
          7KHGLVWULFWFRXUWGLGQRWHUULQFRQFOXGLQJWKDW1:          IRUUHVMXGLFDWDSXUSRVHV1:DUJXHVWKDW66'ZDVQRWD
            IDLOHG WR H[SUHVVO\ UHVHUYH LWV FODLPV E\ GLVFORVLQJ   SDUWLFLSDQWLQWKH1DWLRQZLVHEDQNUXSWF\SURFHHGLQJEHFDXVH
            WKHPWRWKHEDQNUXSWF\FRXUW                                  LWZDVUHSODFHGDVWKHGHEWRUjVFRXQVHORQO\RQHPRQWKDIWHU
                                                                          WKHSHWLWLRQZDVILOHG%XW66'jVHDUO\H[LWDVJHQHUDOFRXQVHO
  7R DYRLG WKH HIIHFW RI UHV MXGLFDWD RQ LWV FODLPV DJDLQVW     IRU1DWLRQZLVHGRHVQRWFKDQJHWKHIDFWRILWVSDUWLFLSDWLRQLQ
66'1:DUJXHVWKDWLWUHVHUYHGLWVULJKWWRVXH66'LQWKH               WKHSURFHHGLQJRQEHKDOIRIWKHGHEWRUQRUGRHVLWWDNHLQWR
'LVFORVXUH 6WDWHPHQW )RU 3ODQ RI 5HRUJDQL]DWLRQ WKDW LW
    %URZQLQJHWDOY/HY\HWDO              1R       1R                  %URZQLQJHWDOY/HY\HWDO        

DFFRXQWWKDW66'UHPDLQHGDVVSHFLDOFRXQVHOWKURXJKRXWWKH           QRQFRUHFODLPHYHQWKRXJKWKHFODLPFRXOGQRWKDYHEHHQ
SURFHHGLQJ,IDQ\WKLQJWKHIDFWWKDW66'ZDVUHSODFHGE\           ILQDOO\DGMXGLFDWHGLQWKHEDQNUXSWF\FRXUW
$UWHU	+DGGHQHDUO\LQWKHSURFHHGLQJHQVXUHGWKDW1:KDG
DPSOHRSSRUWXQLW\WRUDLVHRUUHVHUYHLWVFODLPVDJDLQVW66'            :KLOH WKH EDQNUXSWF\ FRXUW FRXOG QRW PDNH D ILQDO
EHIRUH WKH FRQILUPDWLRQ RI LWV 3ODQ RI 5HRUJDQL]DWLRQ LQ        GHFLVLRQLQDQRQFRUHSURFHHGLQJDEVHQWWKHFRQVHQWRI
)HEUXDU\RI                                                      WKH SDUWLHV LW FRXOG KHDU WKH PDWWHU DQG UHIHU LW WR WKH
                                                                        GLVWULFWFRXUW7KURXJKLWVEDQNUXSWF\MXULVGLFWLRQWKH
     F   7KH GLVWULFW FRXUW GLG QRW HUU LQ FRQFOXGLQJ WKDW     GLVWULFW FRXUW FRXOG GHFLGH WKH FODLP DOORZLQJ IRU D
          1:jVFODLPVDJDLQVW66'VKRXOGKDYHEHHQUDLVHG               FRUUHFW DGMXVWPHQW RI WKH UHODWLRQV EHWZHHQ DOO RI WKH
          RU UHVHUYHG LQ WKH 1DWLRQZLVH EDQNUXSWF\                 SDUWLHV7KHUHIRUHDFRQILUPHGSODQLQDEDQNUXSWF\FDVH
          SURFHHGLQJ                                                    PD\RSHUDWHWREDUERWKFRUHDQGQRQFRUHSURFHHGLQJV
   %HIRUHGHFLGLQJZKHWKHU1:jVFODLPVDJDLQVW66'VKRXOG              )G DW   ,I 1:jV FODLPV DJDLQVW 66' DUH WKXV
KDYH EHHQ EURXJKW LQ WKH EDQNUXSWF\ FRXUW ZH PXVW ILUVW     GHHPHGmUHODWHGWRlWKH1DWLRQZLVHEDQNUXSWF\SURFHHGLQJ
FRQVLGHUZKHWKHUWKRVHFODLPVFRXOGKDYHEHHQEURXJKWLQWKDW         WKHEDQNUXSWF\FRXUWFRXOGKDYHKHDUGWKHFDVHDQGUHIHUUHG
IRUXP%DQNUXSWF\FRXUWVKDYHRULJLQDOMXULVGLFWLRQRYHU         LWWRWKHGLVWULFWFRXUWSXUVXDQWWR86&F
DOO FODLPV DULVLQJ XQGHU WKH %DQNUXSWF\ &RGH   86&
E6XFKFODLPVUHIHUUHGWRDVmFRUHlSURFHHGLQJV              1:jVFODLPVZLOOEHFRQVLGHUHGmUHODWHGWRlWKH1DWLRQZLVH
HLWKHU LQYRNH>@ D VXEVWDQWLYH ULJKW FUHDWHG E\ IHGHUDO         EDQNUXSWF\ SURFHHGLQJ LI mWKH RXWFRPH RI WKDW SURFHHGLQJ
EDQNUXSWF\ ODZ RU    FRXOG QRW H[LVW RXWVLGH RI WKH     FRXOG FRQFHLYDEO\ KDYH DQ\ HIIHFW RQ WKH HVWDWH EHLQJ
EDQNUXSWF\l6DQGHUV&RQIHFWLRQDU\3URGV,QF)GDW          DGPLQLVWHUHGLQEDQNUXSWF\l6DQGHUV&RQIHFWLRQHU\3URGV
1:jVFODLPVDJDLQVW66'DUHmQRQFRUHlSURFHHGLQJV              ,QF)GDW6WDWHGDQRWKHUZD\DFODLPLVmUHODWHG
EHFDXVHDVFODLPVRIWKHVXFFHVVRULQLQWHUHVWWRWKHGHEWRU         WRlWKHEDQNUXSWF\SURFHHGLQJLILWZRXOGKDYHDIIHFWHGWKH
DJDLQVWDQRQFUHGLWRUWKLUGSDUW\WKH\DUHQRWDPRQJWKHFRUH       GHEWRUjVULJKWVRUOLDELOLWLHV,QUH'RZ&RUQLQJ&RUS
SURFHHGLQJVDULVLQJXQGHUWKH%DQNUXSWF\&RGHRUOLVWHGLQ         )GWK&LUKROGLQJWKDWDFODLPLVmUHODWHG
86&E$2                                             WREDQNUXSWF\LIWKHRXWFRPHFRXOGDOWHUWKHGHEWRUjVULJKWV
                                                                      OLDELOLWLHVRSWLRQVRUIUHHGRPRIDFWLRQHLWKHUSRVLWLYHO\RU
   1:jVFODLPVDJDLQVW66'KRZHYHUFRXOGKDYHEHHQUDLVHG           QHJDWLYHO\DQGZKLFKLQDQ\ZD\LPSDFWVXSRQWKHKDQGOLQJ
LQ WKH EDQNUXSWF\ FRXUW SXUVXDQW WR WKH FRXUWjV OLPLWHG       DQGDGPLQLVWUDWLRQRIWKHEDQNUXSWHVWDWHl8QGHUWKLVWHVW
MXULVGLFWLRQ RYHU QRQFRUH SURFHHGLQJV XQGHU  86&          1:jV FODLPV DJDLQVW 66' DUH UHODWHG WR WKH EDQNUXSWF\
 F  $OWKRXJK D EDQNUXSWF\ FRXUW GRHV QRW KDYH      SURFHHGLQJ EHFDXVH LI WKH\ KDG EHHQ EURXJKW GXULQJ WKH
MXULVGLFWLRQ WR UHDFK D ILQDO GHFLVLRQ UHJDUGLQJ D QRQFRUH   SURFHHGLQJ DQ\ UHFRYHU\ UHFHLYHG E\ 1: ZRXOG KDYH
FODLPLWmPD\KHDUDSURFHHGLQJWKDWLVQRWDFRUHSURFHHGLQJ        UHSUHVHQWHGDQDVVHWDYDLODEOHIRUGLVWULEXWLRQWR1DWLRQZLVHjV
EXWWKDWLVRWKHUZLVHUHODWHGWRDFDVHXQGHUWLWOHlDQGLQ       FUHGLWRUV DQG VKDUHKROGHUV  ,Q UH 0LFUR7LPH 0JPW 6\V
VXFK D VLWXDWLRQ mVXEPLW SURSRVHG ILQGLQJV RI IDFW DQG       ,QF:/DWKROGLQJWKDWDGHEWRUjVVXLWDJDLQVW
FRQFOXVLRQVRIODZWRWKHGLVWULFWFRXUWDQGDQ\ILQDORUGHURU      KLVDWWRUQH\LQWKHEDQNUXSWF\SURFHHGLQJVKRXOGKDYHEHHQ
MXGJPHQWVKDOOEHHQWHUHGE\WKHGLVWULFWMXGJHl,G    EURXJKWEHIRUHWKHFRQILUPDWLRQEHFDXVHWKHVXLWZRXOGKDYH
                                                                      DIIHFWHGWKHGHEWRUjVULJKWVDQGOLDELOLWLHV
  %DVHGXSRQDEDQNUXSWF\FRXUWjVSRZHUWRKHDUQRQFRUH
UHODWHGFODLPVSXUVXDQWWR86&FWKLVFRXUWLQ
6DQGHUV &RQIHFWLRQHU\ 3URGXFWV DSSOLHG UHV MXGLFDWD WR D
