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 DS 81,7('67$7(6&28572)$33($/6 )257+(6,;7+&,5&8,7 BBBBBBBBBBBBBBBBB ,QUH($*/(3,&+(5 ; ,1'8675,(6 ,1&HWDO  'HEWRUV   1R BBBBBBBBBBBBBBBBBBBBBB  !  0$ RI 3URSHUW\ 'DPDJH &ODLPDQWV@ 1$$* >1DWLRQDO $VVRFLDWLRQ RI $WWRUQH\V *HQHUDO@ DQG WKH 3URSHUW\'DPDJH&ODLPV$GPLQLVWUDWRUWKHm3'&$l  7KH 1$$* ZDV 7UXVWHH IRU WKH 6HWWOHPHQW 7UXVW  ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO 1R 1R ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO  VRWKDWLWLVDFWXDOO\UHFHLYHGE\QRODWHUWKDQRQHPRQWK 7KHFRXUWQH[WGHWHUPLQHGWKDWWKHUHKDGEHHQQRSUHMXGLFHWR DIWHUWKHGDWHRIWKHFRXUWjVDSSURYDORIWKLV6WLSXODWLRQ HLWKHUWKH3'&$RU%DOWLPRUHDQG&LQFLQQDWLDVWKHIRUPHU $Q\ &ODLPDQW QRW JLYLQJ VXFK ZULWWHQ QRWLFH VKDOO KDGH[SUHVVO\GLVFODLPHGSUHMXGLFHDQGWKHDELOLW\RIWKHODWWHU DXWRPDWLFDOO\DQGZLWKRXWIXUWKHUDFWLRQE\WKHFODLPDQW SDLUWRDVVHUWDFODLPDQGVHHNUHFRYHU\KDGQRWEHHQKDUPHG KDYH WKHLU FODLP WUHDWHG DV D 7LHU ,, 1RQ3URGXFW ,' ,GDW7KLUGWKHEDQNUXSWF\FRXUWKHOGWKDWWKHUHKDG FODLPKHUHXQGHU EHHQ MXVWLILDEOH H[FXVH IRU $SSHOOHHVj IDLOXUH WR VHUYH SURSHUO\,GDW,QUHDFKLQJWKLVFRQFOXVLRQWKHFRXUW s$SSˆIRRWQRWHDGGHG UHDVRQHG WKDW WKH $SSHOOHHVj SURIIHUHG H[FXVH o WKDW WKHLU IDLOXUH WR VHUYH WKH 3'&$ ZDV EDVHG XSRQ D 2QO\ WZR FODLPDQWV WKH 0D\RU DQG &LW\ &RXQFLO RI PLVXQGHUVWDQGLQJWKDWWKH1$$*ZDVFRRUGLQDWLQJQRWLFHWR %DOWLPRUHm%DOWLPRUHlDQGWKH&LQFLQQDWL6FKRRO'LVWULFW WKHWKLUGSDUW\oVHHPHGUHDVRQDEOHLQOLJKWRIWKHQXPEHURI m&LQFLQQDWLl IXOO\ FRPSOLHG ZLWK WKLV SRUWLRQ RI WKH PRYDQWVXQGHUWKHVDPHLPSUHVVLRQ,G)XUWKHUWKHFRXUW VWLSXODWLRQ E\ SURYLGLQJ ZULWWHQ QRWLFH WR WKH &RPPLWWHH RSLQHG$SSHOOHHVGLGQRWVLPSO\VLWRQWKHLUULJKWVEXWKDG 1$$* DQG WKH 3'&$ RQ RU EHIRUH WKH sXQH   LQVWHDGVXEPLWWHGWKHVWDWHPHQWRILQWHQWWRWZRRIWKHWKUHH GHDGOLQH$SSHOOHHVVWDWHWKDWVL[RIHLJKWFODLPDQWVRU UHTXLUHGSDUWLHV,G$QDO\]LQJWKHIRXUWKIDFWRUWKHFRXUW RIDOOFODLPDQWVVHHNLQJ7LHU,VWDWXVPDGHWKHVDPHWHFKQLFDO GHWHUPLQHGWKDW$SSHOOHHVZRXOGVXIIHUVHYHUHSUHMXGLFHIURP HUURU RI IDLOLQJ WR SURYLGH ZULWWHQ QRWLFH WR WKH 3'&$ GHQLDO RI WKHLU PRWLRQ UHDVRQLQJ WKDW $SSHOOHHVj UHFRYHU\ $SSHOODQWGLVSXWHVWKLVDVVHVVPHQWDQGDUJXHWKDWRQO\WKH ZRXOGEHVXEVWDQWLDOO\UHGXFHGE\WKHLUUHOHJDWLRQWR7LHU,, IRXU$SSHOOHHVPDGHWKHHUURU VWDWXV,GDW 7ZRDQGDKDOIPRQWKVDIWHUWKHEDQNUXSWF\FRXUWjVRUGHU (YDOXDWLQJ WKH IDFWV DW KDQG ZH FDQ ILQG QR DEXVH RI RQ $XJXVW   $SSHOOHHV ILOHG D PRWLRQ HQWLWOHG GLVFUHWLRQE\WKHEDQNUXSWF\FRXUWLQDSSO\LQJWKHVXEVWDQWLDO m0RWLRQ IRU :DLYHU RU 0RGLILFDWLRQ RI 'HDGOLQH WR )LOH FRPSOLDQFHGRFWULQH$SSHOOHHVSUHVHQWHGHYLGHQFHWKDWWKH 6WDWHPHQW RI ,QWHQW ZLWK WKH 3URSHUW\ 'DPDJH &ODLPV 3'&$ UHFHLYHG QRWLFH RI $SSHOOHHVj LQWHQW WR VHHN 7LHU , $GPLQLVWUDWRUl6HHs$S,QWKDWPRWLRQ VWDWXVEHIRUH KHGLVWULEXWHGDQ\FODLPVIRUPV7KH3'&$ $SSHOOHHVVWDWHGWKDWWKH\KDGVXEVWDQWLDOO\FRPSOLHGZLWK DOVR H[SUHVVO\ GLVFODLPHG DQ\ SUHMXGLFH IURP $SSHOOHHVj WKHRUGHUE\ILOLQJZLWKWKH1$$*DQGWKH&RPPLWWHHWKDW IDLOXUH WR VWULFWO\ FRPSO\ ZLWK WKH 2UGHU  )XUWKHU LI WKH3'&$KDGDFWXDOQRWLFHEHIRUHKHPDLOHGWKH7LHU,FODLP %DOWLPRUHDQG&LQFLQQDWLVXIIHUHGDQ\SUHMXGLFHDWDOOIURP WKHFRXUWjVDOORZDQFHRI$SSHOOHHVj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jUHFRYHU\ZRXOGEHJUHDWO\UHGXFHGLIWKHLUHUURU m>F@RPSOL>HG@ ZLWK WKH HVVHQWLDO UHTXLUHPHQWV ZKHWKHU RI D FRQWUDFW RU RI UHOHJDWHGWKHPWR7LHU,,VWDWXV D VWDWXWHl %ODFNjV /DZ 'LFWLRQDU\  WK HG  ,Q WKH OLIH LQVXUDQFH FRQWH[W WKLV FRXUW KDV LQWHUSUHWHG WKH UXOH WR PHDQ WKDW mLI WKH LQVXUHG KDV GRQH HYHU\WKLQJ UHDVRQDEO\ SRVVLEOH WR HIIHFW D FKDQJH LQ EHQHILFLDU\ D FRXUW RI HTXLW\ ZLOO GHFUHH WKDW WR EH GRQH ZKLFK RXJKW WR EH GRQHl &RRSHU Y 8QLWHG 6WDWHV  )G   WK &LU  DFFRUG $HWQD /LIH ,QV &R Y +D\HV  )G   WK &LU   ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO 1R 1R ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO  EDQNUXSWF\FRXUWjVGHFLVLRQWRDSSO\LWPXVWEHUHYLHZHGIRU IRUPVDQGWKDWQRSUHMXGLFHKDGHQVXHG$SSHOOHHVDUJXHG DQDEXVHRIGLVFUHWLRQ,QUH:DWHUPDQ)GDWVHH WKDWGXHWRLQDGYHUWHQFHRUPLVXQGHUVWDQGLQJWKHQRWLFHVRI DOVR0F0DWK )GDWm&RXUWVKDYHGLVFUHWLRQWR LQWHQWLRQZHUHQRWILOHGZLWKWKH3'&$$SSHOOHHVVWDWHGWKDW HPSOR\WKHHTXLWDEOHGRFWULQHRIVXEVWDQWLDOFRPSOLDQFHl WKH\EHOLHYHGWKDWWKH1$$*ZDVFRRUGLQDWLQJWKHVWDWHPHQWV DQGZRXOGPDNHDQ\QHFHVVDU\DGGLWLRQDOILOLQJVRQEHKDOIRI $QDEXVHRIGLVFUHWLRQLVGHILQHGDVDmGHILQLWHDQGILUP WKHFODLPDQWV7KH\UHTXHVWHGWKDWWKHGHDGOLQHEHZDLYHGRU FRQYLFWLRQWKDWWKH>FRXUWEHORZ@FRPPLWWHGDFOHDUHUURU PRGLILHG WR DOORZ IRU DQ DGGLWLRQDO WHQ GD\V WR ILOH VXFK RIMXGJPHQWl6REHUD\0DFK (TXLS&RY05)/WG QRWLFH ,QF)GWK&LU%RZOLQJY3IL]HU ,QF)GWK&LU7KHTXHVWLRQLV 2Q6HSWHPEHU%DOWLPRUHILOHGLWVRSSRVLWLRQWRWKH QRWKRZWKHUHYLHZLQJFRXUWZRXOGKDYHUXOHGEXWUDWKHU $SSHOOHHVj 0RWLRQ IRU :DLYHU RU 0RGLILFDWLRQ  6HH s$ ZKHWKHU D UHDVRQDEOH SHUVRQ FRXOG DJUHH ZLWK WKH SS%DOWLPRUHDUJXHGWKDW$SSHOOHHVjPRWLRQ EDQNUXSWF\FRXUWjVGHFLVLRQLIUHDVRQDEOHSHUVRQVFRXOG ZDVJRYHUQHGE\%DQNU5EZKLFKDOORZVIRUSRVW GLIIHUDVWRWKHLVVXHWKHQWKHUHLVQRDEXVHRIGLVFUHWLRQ GHDGOLQHHQODUJHPHQWRIWLPHZKHUHWKHIDLOXUHWRDFWZDVWKH 6HH:DVKLQJWRQY6KHUZLQ5HDO(VWDWH,QF)G UHVXOW RI H[FXVDEOH QHJOHFW  $SSHOODQW PDLQWDLQHG WKDW   WK &LUVHH DOVR ,Q UH &DUWHU  $SSHOOHHVKDGIDLOHGWRFRPSO\ZLWK5XOHEEHFDXVH %5%DQNU'0H WKH\QHYHUFODLPHGRUHVWDEOLVKHGWKDWWKHLUIDLOXUHVZHUHWKH UHVXOW RI H[FXVDEOH QHJOHFW  %DOWLPRUH DOVR DVVHUWHG WKDW ,QUH:DWHUPDQ)GDWDOWHUDWLRQLQRULJLQDO VXEVWDQWLDOSUHMXGLFHZRXOGUHVXOWWRWKHFODLPDQWVZKRWLPHO\ ILOHGEHFDXVHJUDQWLQJWKHPRWLRQZRXOGH[SDQGWKHQXPEHU ,Q FRQFOXGLQJ WKDW $SSHOOHHV KDG VXEVWDQWLDOO\ FRPSOLHG RITXDOLI\LQJSDUWLFLSDQWVLQWKH7LHU,GLYLVLRQ%DOWLPRUH ZLWKWKH2UGHUjVQRWLFHSURYLVLRQWKHEDQNUXSWF\FRXUWUHOLHG DOVRDUJXHGWKDWWKH3'&$ZRXOGKDYHWRUHFHLYHUHYLHZ XSRQ$SSHOOHHVjVDWLVIDFWLRQRIIRXUIDFWRUVmDWKHSDUW\WKDW DVVHVVDQGFRQVLGHUDJUHDWHUQXPEHURIFODLPV KDG WR EH VHUYHG SHUVRQDOO\ UHFHLYHG DFWXDO QRWLFH E WKH GHIHQGDQW ZRXOG VXIIHU QR SUHMXGLFH IURP WKH GHIHFW LQ 7KH&LQFLQQDWL6FKRRO'LVWULFWDOVRILOHGD0HPRUDQGXPLQ VHUYLFHFWKHUHLVMXVWLILDEOHH[FXVHIRUWKHIDLOXUHWRVHUYH 2SSRVLWLRQ RQ 6HSWHPEHU   6HH s$  SS  SURSHUO\DQGGWKHSODLQWLIIZRXOGEHVHYHUHO\SUHMXGLFHGLI &LQFLQQDWL H[SUHVVHG FRQFHUQ DERXW WKH QXPHURXV RWKHU KLV FRPSODLQW ZHUH GLVPLVVHGl  s$  S  TXRWLQJ SRWHQWLDO FODLPDQWV ZKR DOVR IDLOHG WR FRPSO\ ZLWK WKH %RU]HNDY+HFNOHU)GWK&LU QRWLILFDWLRQ UHTXLUHPHQWV DQG ZRXOG DOVR DUJXH WKDW WKH EDQNUXSWF\ FRXUWjV UHTXLUHPHQWV VKRXOG EH ZDLYHG 7KHEDQNUXSWF\FRXUWIRXQGWKDWWKHILUVWHOHPHQWKDGEHHQ &LQFLQQDWLIXUWKHUSRLQWHGWRWKHFRXUWjVSUHYLRXVUHIXVDORILWV PHWVLQFHWKH&RPPLWWHHDQG1$$*UHFHLYHGZULWWHQQRWLFH UHTXHVWVWRPRGLI\RUZDLYHGHDGOLQHV IURP$SSHOOHHVDQGWKH3'&$KDGDFWXDOQRWLFH,GDW 7ZR DSSHOOHHV 0LFKLJDQ 6FKRROV DQG WKH &RXQW\ RI :D\QHUHSOLHGWR%DOWLPRUHDQG&LQFLQQDWLjVILOLQJVVHHs$  SSVWDWLQJWKDWWKH\mKRQHVWO\EHOLHYHGWKDWWKH\ %HFDXVH %DOWLPRUH GRHV QRW FKDOOHQJH WKH EDQNUXSWF\ FRXUWjV IRUPXODWLRQ RI WKH VXEVWDQWLDO FRPSOLDQFH WHVW ZH DVVXPH ZLWKRXW GHFLGLQJ WKDW WKLV DSSURDFK ZDV FRUUHFW 6HH 'RUULV Y $EVKHU  )G    WK &LU  LVVXH QRW UDLVHG LQ EULHIV FRQVLGHUHG ZDLYHG :KLOH ERWK %DOWLPRUH DQG &LQFLQQDWL ILOHG WLPHO\ QRWLFH WR WKH XQOHVV mH[FHSWLRQDO FDVHl H[LVWV ZKHUH FRXUW RI DSSHDOVjV IDLOXUH WR 3'&$ DQG RSSRVHG $SSHOOHHVj PRWLRQ LQ WKH EDQNUXSWF\ FRXUW RQO\ DGGUHVV DUJXPHQW ZRXOG UHVXOW LQ D PLVFDUULDJH RI MXVWLFH %DOWLPRUH DSSHDOHG WKH EDQNUXSWF\ FRXUWjV GHFLVLRQ  ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO 1R 1R ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO  KDGDOUHDG\IXOILOOHGWKHLUREOLJDWLRQWRJLYHQRWLFHRIWKHLU VWULFWFRPSOLDQFHZLWKWHFKQLFDOUHTXLUHPHQWVl6KHUHUY LQWHQWWRILOH7LHU,FODLPVE\KDYLQJSUHYLRXVO\VLJQHGDQG &RQVWUXFFLRQH$HURQDXWLFDV6$)GWK VHQWWKHµ&ODLPV4XHVWLRQQDLUHjSURYLGHGE\1$$*PRQWKV &LUFLWLQJ9HOLGRUY/3*%HQJKD]L)G EHIRUH WKH ILOLQJ GHDGOLQHVXEVHTXHQWO\ HVWDEOLVKHG E\ WKH UG &LU GLVFXVVLQJ WKH QRWLFH SURYLVLRQV LQ WKH &RXUWls$S 7KH\DUJXHGWKDWWKHFODLPDQWV )RUHLJQ6RYHUHLJQ,PPXQLWLHV$FWVHHDOVR6WUDXEY$3 ZKRKDGWLPHO\ILOHGmZLOOVXIIHUQRSUHMXGLFHE\ORVLQJWKH *UHHQ ,QF  )G  WK &LU  VXEVWDQWLDO XQH[SHFWHGRSSRUWXQLW\WRHQKDQFHWKHYDOXHRIWKHLUFODLPV FRPSOLDQFH ZLWK )6,$ VHUYLFH RI SURFHVV UHTXLUHPHQWV DWWKHH[SHQVHRIWKRVHFODLPDQWVZKRKDYHZRUNHGORQJDQG DFKLHYHGE\DFWXDOQRWLFHDQGODFNRISUHMXGLFH KDUG WR DVVHPEOH WKH SURGXFW LGHQWLILFDWLRQ HYLGHQFH QHFHVVDU\WRVXSSRUW7LHU,FODLPVls$ S,Q 86&†DJLYHVDEDQNUXSWF\FRXUWEURDGHTXLWDEOH IXUWKHU VXSSRUW RI WKHLU 0RWLRQ $SSHOOHHV VXEPLWWHG WZR SRZHUWRmSUHYHQWDQDEXVHRISURFHVVlDQGWKHUHLVQRUHDVRQ OHWWHUVIURPWKH3'&$,QWKHILUVWOHWWHUGDWHG$XJXVW ZK\ WKHVH HTXLWDEOH SRZHUV ZRXOG QRW LQFOXGH PDNLQJ D  WKH 3'&$ VWDWHG WKDW KH KDG UHFHLYHG FRSLHV RI WKH ILQGLQJRIVXEVWDQWLDOFRPSOLDQFHZKHUHVXFKDILQGLQJZRXOG GRFXPHQWV ILOHG ZLWK WKH 1$$* LQ ZKLFK FODLPDQWV SUHYHQW WKH QHHG IRU D 5XOH E H[FXVDEOH QHJOHFW H[SUHVVHG WKHLU LQWHQWLRQ RI VHHNLQJ 7LHU , VWDWXV  ,Q WKH DQDO\VLV  &I 6KHUHU VXSUD VXEVWDQWLDO FRPSOLDQFH WHVW VHFRQGZKLFKZDVGDWHG$XJXVWWKH3'&$VWDWHG DSSURSULDWH IRU VHUYLFH RI IRUHLJQ VRYHUHLJQV HYHQ WKRXJK KLV LQWHQWLRQ QRW WR RSSRVH WKH 0RWLRQ IRU :DLYHU RU UHOHYDQW VWDWXWH ZDV FOHDU LQ LWV UHTXLUHPHQWV DQG PDGH QR 0RGLILFDWLRQRIWKH'HDGOLQH PHQWLRQ RI VXEVWDQWLDO FRPSOLDQFH  $V WKLV FRXUW KDV SUHYLRXVO\ QRWHG mEDQNUXSWF\ ODZ SHUKDSV PRUH WKDQ DQ\ 7KHEDQNUXSWF\FRXUW3HUOPDQsLVVXHGDGHFLVLRQDQG RWKHUOHJDOILHOGUHFRJQL]HVWKDWSHRSOHZLOOPDNHPLVWDNHV RUGHURQsDQXDU\LQZKLFKLWDOORZHG$SSHOOHHVWR DQGQHHGQRWEHSHQDOL]HGIRUHYHU\HUURUl%LWWHOY RXQG@WKDWPRYDQWVKDYHQRWVRXJKWUHOLHIIURPWKLV WK&LU1RYDFFRUG,QUH5LJJDQ%5 FRXUW XQGHU DQ H[FXVDEOH QHJOHFW VWDQGDUG DV KDV EHHQ %DQNU:'7HQQm5HOLDQFHRQWKH%DQNUXSWF\ VXJJHVWHG E\ WKH RSSRVLWLRQ  ,QVWHDG WKH\ KDYH SUHVHQWHG &RGH FKDSWHU DQG YHUVH LV ODXGDEOH EXW VWDWXWRU\ GHWDLO DUJXPHQWVXQGHUDVXEVWDQWLDOFRPSOLDQFHWKHRU\DQGLWLVRQ VKRXOG QHYHU REVFXUH IDLU DQG HTXLWDEOH SULQFLSOHVl WKDWEDVLVWKDWWKLVFRXUWKDVFRQVLGHUHGWKHPDWWHUl,GDW $FFRUGLQJO\ ZH KROG WKDW VXEVWDQWLDO FRPSOLDQFH FDQ EH 1RWLQJWKDWWKH6WLSXODWLRQjVQRWLFHSURYLVLRQZDVQRW SURSHUO\ DSSOLHG WR ILQG GHDGOLQH FRPSOLDQFH LQ VLWXDWLRQV LQWHQGHGWREHQHILWRWKHU7LHU,FODLPDQWVWKHFRXUWIRXQGWKDW ZKHUHDGHDGOLQHH[WHQVLRQZRXOGEHSHUPLVVLEOHRQO\E\WKH WKH RQO\ SDUWLHV ZKR FRXOG EH SUHMXGLFHG ZHUH WKH WKUHH mH[FXVDEOHQHJOHFWlVWDQGDUGRI%DQNU5E SDUWLHV UHFHLYLQJ QRWLFH DQG WKDW WKH 3'&$ KDG H[SUHVVO\ GLVFODLPHGDQ\SUHMXGLFH7KHFRXUWDOVRDFNQRZOHGJHGWKDW ,, DOO SDUWLHV NQHZ WKDW WKH $SSHOOHHV KDG SURSHUW\ GDPDJH FODLPVDJDLQVWWKH'HEWRU%HFDXVHRIWKHQXPEHURISDUWLHV +DYLQJ FRQFOXGHG WKDW VXEVWDQWLDO FRPSOLDQFH LV QRW PDNLQJ WKH VDPH PLVWDNH WKH EDQNUXSWF\ FRXUW IRXQG LW FDWHJRULFDOO\LQDSSOLFDEOHWRVLWXDWLRQVOLNHWKHSUHVHQWRQH ZHQRZWXUQWRWKHEDQNUXSWF\FRXUWjVGHFLVLRQWRDSSO\WKH GRFWULQHLQ$SSHOOHHVjIDYRU7KHVXEVWDQWLDOFRPSOLDQFHUXOH  7KH 3'&$ DQG RQH PHPEHU RI WKH &RPPLWWHH DOVR VXEPLWWHG D LV DQ HTXLWDEOH GRFWULQH %DQN$PHULFD 3HQVLRQ 3ODQ Y 5HVSRQVH LQ VXSSRUW RI WKH $SSHOOHHVj 0RWLRQ ZKLFK FULWLFL]HG %DOWLPRUH 0F0DWK)GWK&LUVHH$HWQD/LIH DQG &LQFLQQDWLjV DUJXPHQW DV mHOHYDW>LQJ@ IRUP RYHU VXEVWDQFHl $00 ,QV&RY+D\HV)GWK&LUVRWKH s$  SS   ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO 1R 1R ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO  ,Q WKH VHFRQG FDVH 0DUJUDI Y 2OLYHU ,Q UH 2OLYHU  UHDVRQDEOHWREHOLHYHWKDWVRPHW\SHRIPLVXQGHUVWDQGLQJZDV %5%DQNU6'2KLRWKHEDQNUXSWF\FRXUWVHQW SUHVHQW7KHFRXUWFRQFOXGHGWKDWWKH$SSHOOHHVjVXEPLVVLRQ 1RWLFHWRDOOFUHGLWRUVRI'HEWRUVj3HWLWLRQDQGSURSRVHG3ODQ RI WKHLU VWDWHPHQWV RI LQWHQW FRQVWLWXWHG VXEVWDQWLDO ZKLFK LQFOXGHG QRWLILFDWLRQ RI DQ $XJXVW   FRPSOLDQFHZLWKWKHQRWLFHSURYLVLRQXVLQJWKHIRXUIDFWRU FRQILUPDWLRQKHDULQJ,GDW7KLV1RWLFHDOVRSURYLGHG WHVWRI%RU]HNDY+HFNOHU)GWK&LU WKDWm&RPSODLQWVREMHFWLQJWRFRQILUPDWLRQVKDOOEHILOHGDW OHDVW ILYH  >GD\V@ EHIRUH WKH FRQILUPDWLRQ KHDULQJl  ,G $IWHU EULHILQJ DQG ZLWKRXW D KHDULQJ WKH 8QLWHG 6WDWHV 2QH FUHGLWRU ILOHG D &RPSODLQW RQ $XJXVW  D PHUH GD\ 'LVWULFW&RXUWIRUWKH6RXWKHUQ'LVWULFWRI2KLR:HEHUs EHIRUHWKHKHDULQJ,G,QUHVSRQVHWR'HEWRUVjUHTXHVWWR DIILUPHGWKHEDQNUXSWF\FRXUWjVUXOLQJ6HH5SS GLVPLVVWKH&RPSODLQWWKHFUHGLWRUDOOHJHGJRRGIDLWKDWWHPSW WR FRPSO\ ZLWK WKH FRXUWjV SURFHGXUH DQG VXEVWDQWLDO ',6&866,21 FRPSOLDQFHZLWKWKHGHDGOLQH,G7KHFUHGLWRUFODLPHGWKDW KHZDVXQDEOHWRFRPSOHWHWKH&RPSODLQWXQWLO$XJXVW,G ,QDEDQNUXSWF\DSSHDOWKH&RXUWRI$SSHDOVmUHYLHZ>V@WKH ,QLWLDOO\QRWLQJWKDWWKH&RPSODLQWZDVXQTXHVWLRQDEO\ODWH EDQNUXSWF\ FRXUWjV GHFLVLRQ UDWKHU WKDQ WKH GLVWULFW FRXUWjV WKHFRXUWQRQHWKHOHVVIRXQGWKDWWKHFUHGLWRUKDGVXEVWDQWLDOO\ UHYLHZRIWKHEDQNUXSWF\FRXUWjVGHFLVLRQl%DUORZY0s FRPSOLHGZLWKWKH2UGHUDQGWKDWWKLVVXEVWDQWLDOFRPSOLDQFH :DWHUPDQ $VVRFV,QF,QUH0s:DWHUPDQ $VVRFV MXVWLILHGH[WHQGLQJWKHGHDGOLQHIRUH[FXVDEOHQHJOHFW,GDW ,QF  )G   WK &LU   7KH EDQNUXSWF\  FRXUWjVIDFWXDOILQGLQJVDUHH[DPLQHGIRUFOHDUHUURULHmWKH PRVW FRJHQW HYLGHQFH RI PLVWDNH RI MXVWLFHl ZKLOH DOO 7KHVHWZRFDVHVLOOXVWUDWHWKDWWKHVXEVWDQWLDOFRPSOLDQFH FRQFOXVLRQVRIODZDUHUHYLHZHGGHQRYR,GEDQNUXSWF\ GRFWULQH LV QRW LQFRPSDWLEOH ZLWK WKH H[FXVDEOH QHJOHFW FRXUWjV FRQFOXVLRQV RI ODZ UHYLHZHG GH QRYR :HVEDQFR VWDQGDUGIRUGHDGOLQHH[WHQVLRQ$OWKRXJKQHLWKHUFDVHKHOG %DQN%DUQHVYLOOHY5DIRWK,QUH%DNHU *HWW\)LQDQFLDO WKDW WKH VXEVWDQWLDO FRPSOLDQFH GRFWULQH FRXOG EH XVHG WR 6HUYV,QF)G WK&LUGLVWULFW REYLDWH WKH QHHG IRU D 5XOH E WLPH H[WHQVLRQ ERWK FRXUWjV FRQFOXVLRQV RI ODZ UHYLHZHG GH QRYR  0L[HG HPSOR\HG QRWLRQV RI VXEVWDQWLDO FRPSOLDQFH ZLWKLQ WKH TXHVWLRQV RI ODZ DQG IDFW PXVW EH VHSDUDWHG LQWR WKHLU IUDPHZRUN RI 5XOH EjV H[FXVDEOH QHJOHFW VWDQGDUG FRQVWLWXHQW SDUWV DQG HDFK DQDO\]HG XVLQJ WKH DSSURSULDWH :LWK SRVWGHDGOLQH VXEVWDQWLDO FRPSOLDQFH DYDLODEOH DV D VWDQGDUGRIUHYLHZ,QUH%DNHU *HWW\)GDW FRQVLGHUDWLRQ LQ WKH 5XOH E FDOFXOXV LW LV QRW )LQDOO\WKHEDQNUXSWF\FRXUWjVHTXLWDEOHGHWHUPLQDWLRQVDUH LQFRQFHLYDEOHWKDWSUHGHDGOLQHVXEVWDQWLDOFRPSOLDQFHFRXOG UHYLHZHGIRUDQDEXVHRIGLVFUHWLRQ,QUH:DWHUPDQ DOVREHDYDLODEOHWRDYRLGWKHFDOFXOXVDOWRJHWKHU )G DW  *RUGRQ 6HO:D\ ,QF Y 8QLWHG 6WDWHV ,Q UH *RUGRQ6HO:D\,QF)GWK&LU $GGLWLRQDOO\ WKH 6WLSXODWLRQjV ILOLQJ UHTXLUHPHQW ZDV D QRWLFHSURYLVLRQ:KHQGHDOLQJZLWKQRWLFHSURYLVLRQVFRXUWV , KDYHUHFRJQL]HGWKDWmDFWXDOQRWLFH>LV@PRUHLPSRUWDQWWKDQ %DOWLPRUHDWWHPSWVWRSRUWUD\WKHORZHUFRXUWVjXVHRIWKH mVXEVWDQWLDOFRPSOLDQFHlGRFWULQHDVDVXEVWLWXWHIRU%DQNU5  EjV mH[FXVDEOH QHJOHFWl UHTXLUHPHQW  7KLV $ WKLUG UHOHYDQW FDVH ,Q UH 5LJJDQ  %5  %DQNU :' FKDUDFWHUL]DWLRQUHSUHVHQWVDPLVXQGHUVWDQGLQJRIERWKWHUPVj 7HQQ  KHOG WKDW )HG 5 &LY 3 E UHOLHI EDVHG XSRQ mPLVWDNH XVDJHLQWKLVFDVH7KHEDQNUXSWF\FRXUWKHOGWKDW$SSHOOHHVj LQDGYHUWHQFH VXUSULVH RU H[FXVDEOH QHJOHFWl ZDV MXVWLILHG ZKHUH GHEWRU KDG VXEVWDQWLDOO\ FRPSOLHG ZLWK ILOLQJ UHTXLUHPHQW GHVSLWH PLVQDPLQJ VXEVWDQWLDOFRPSOLDQFHZLWKWKHQRWLFHSURYLVLRQPDGHWKHLU DQVZHU DQG PLVILOLQJ LW XQGHU WKH JHQHUDO FDVH QXPEHU 7LHU , HOHFWLRQ WLPHO\ QRW WKDW $SSHOOHHVj VXEVWDQWLDO  ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO 1R 1R ,QUH(DJOH3LFKHU,QGXVWULHV,QFHWDO  FRPSOLDQFHZLWKWKHSURYLVLRQMXVWLILHGDQH[WHQVLRQRIWLPH GHDGOLQH&RQVHTXHQWO\WKHWH[WRI5XOHESRVHVQR 7KXV DFFRUGLQJ WR WKH FRXUW $SSHOOHHV WLPHO\ FRPSOLHG REVWDFOH WR WKH XVH RI WKH VXEVWDQWLDO FRPSOLDQFH GRFWULQH PDNLQJ D GHDGOLQH H[WHQVLRQ DQG D UHVRUW WR 5XOH E 7KHWH[WSURYLGHVQRUHDVRQZK\WKHVXEVWDQWLDOFRPSOLDQFH H[FXVDEOHQHJOHFWXQQHFHVVDU\ GRFWULQH VKRXOG EH FDWHJRULFDOO\ LQDSSOLFDEOH LQ VLWXDWLRQV ZKHUH WKH UXOHjV mH[FXVDEOH QHJOHFWl VWDQGDUG JRYHUQV &RUUHVSRQGLQJO\ WKH DSSURSULDWH LQTXLU\ LV ZKHWKHU WKH GHDGOLQH H[WHQVLRQV  (QWLUHO\ GLIIHUHQW DUH WKH DUJXPHQWV VXEVWDQWLDO FRPSOLDQFH GRFWULQH FDQ EH DSSOLFDEOH WR WKH WKDW5XOHEjVmH[FXVDEOHQHJOHFWlVWDQGDUGSUHYHQWV 6WLSXODWLRQjVQRWLFHUHTXLUHPHQWRUZKHWKHUVWULFWFRPSOLDQFH GHDGOLQHH[WHQVLRQEDVHGXSRQVXEVWDQWLDOFRPSOLDQFHDQG LV UHTXLUHG  7KLV HYDOXDWLRQ RI VXEVWDQWLDO FRPSOLDQFHjV  WKDW 5XOH E SUHYHQWV HTXLW\ IURP HYHU ILQGLQJ JHQHUDODSSOLFDELOLW\LVDTXHVWLRQRIODZWKDWLVUHYLHZHGGH GHDGOLQHFRPSOLDQFHGHVSLWHWHFKQLFDOQRQFRPSOLDQFH QRYR6HH,QUH:DWHUPDQ)GDW,QUH%DNHU *HWW\)GDW $OWKRXJK WKH FRXUW LV XQDZDUH RI DQ\ SUHYLRXV FDVH DSSO\LQJ WKH VXEVWDQWLDO FRPSOLDQFH GRFWULQH WR DYRLG $SSHOODQW %DOWLPRUH DUJXHV WKDW %DQNUXSWF\ 5XOH GHDGOLQHH[WHQVLRQLVVXHVWZREDQNUXSWF\FDVHVZLWKLQWKLV E SUHYHQWV WKH XVH RI WKH HTXLWDEOH VXEVWDQWLDO FLUFXLWKDYHGLVFXVVHGWKHGRFWULQHLQWKHFRQWH[WRISDUWLHV FRPSOLDQFHGRFWULQH,QSHUWLQHQWSDUWWKDWUXOHVWDWHV VHHNLQJH[WHQVLRQV,Q,QUH9HONHU%5%DQNU1' 2KLR  WKH EDQNUXSWF\ FRXUW DSSURYHG 'HEWRUjV E(QODUJHPHQW UHRUJDQL]DWLRQSODQSHQGLQJDOHJDOGHVFULSWLRQE\sXQH ,GDW$IWHU'HEWRUZDVJLYHQDQH[WHQVLRQXQWLO ,QJHQHUDO sXO\VKHVWLOOPLVVHGWKHGHVFULSWLRQGHDGOLQHDQG KHU EDQNUXSWF\ SHWLWLRQ ZDV GLVPLVVHG IRU ZDQW RI >:@KHQDQDFWLVUHTXLUHGRU DOORZHG WREHGRQHDWRU SURVHFXWLRQ  ,G  'HEWRU ILOHG D 0RWLRQ WR 5HFRQVLGHU RQ ZLWKLQDVSHFLILHGSHULRGE\RUGHURIWKHFRXUWWKHFRXUW sXO\WKDWFRQWDLQHGWKHUHTXLVLWHGHVFULSWLRQ,G$W IRUFDXVHVKRZQPD\DWDQ\WLPHLQLWVGLVFUHWLRQRQ DQ$XJXVWKHDULQJRQ'HEWRUjV0RWLRQ'HEWRUjV PRWLRQPDGHDIWHUWKHH[SLUDWLRQRIWKHVSHFLILHGSHULRG UHSUHVHQWDWLYHLQIRUPHGWKHFRXUWIRUWKHILUVWWLPHWKDW'HEWRU SHUPLWWKHDFWWREHGRQHZKHUHWKHIDLOXUHWRDFWZDVWKH KDGVXEPLWWHGWKHOHJDOGHVFULSWLRQWRWKH7UXVWHHRQsXO\ UHVXOWRIH[FXVDEOHQHJOHFW HLJKW GD\V DIWHU WKH ILOLQJ GHDGOLQH DQG FODLPHG WKDW WKLV %DQNU 5   $SSHOODQW LQVLVWV WKDW WKH UXOH SHUPLWV DFWLRQFRQVWLWXWHGVXEVWDQWLDOFRPSOLDQFHZLWKWKHGHDGOLQH GHYLDWLRQ IURP WKH sXQH  GHDGOLQH RQO\ IRU PRYDQWjV ZKLFKPDGHWKHIDLOXUHWRDFWRQHRImH[FXVDEOHQHJOHFWl6HH mH[FXVDEOHQHJOHFWl LGDW7KHEDQNUXSWF\FRXUWUHIXVHGWRILQGH[FXVDEOH QHJOHFW QRWLQJ WKDW WKH 'HEWRU QHYHU SURYLGHG DQ\ 5XOHEKRZHYHUDSSOLHVRQO\WRWKHHQODUJHPHQWRI MXVWLILFDWLRQIRUKHUDGPLWWHGO\WDUG\ILOLQJ,GDW WLPH+HUHWKHEDQNUXSWF\FRXUWGLGQRWHQODUJH$SSHOOHHVj WLPH WR ILOH EXW LQVWHDG GHWHUPLQHG WKDW WKH\ KDG DOUHDG\ WLPHO\ILOHG,QGHHG$SSHOOHHVVXEPLWWHGQRILOLQJDIWHUWKH  $OWKRXJK $SSHOOHHVj 0RWLRQ ZDV VW\OHG m0RWLRQ IRU :DLYHU RU 0RGLILFDWLRQ RI 'HDGOLQH WR )LOH 6WDWHPHQW RI ,QWHQW ZLWK WKH 3URSHUW\ 'DPDJH &ODLPV $GPLQLVWUDWRUl $SSHOOHHVj VXEVWDQWLYH DUJXPHQW ZDV WKDW WKH\ KDG VXEVWDQWLDOO\ FRPSOLHG ZLWK WKH GHDGOLQH 6HH s$   $GGLWLRQDOO\ WKH EDQNUXSWF\ FRXUW UXOHG WKDW WKH $SSHOOHHV KDG DOUHDG\ FRPSOLHG ZLWK WKH RUGHU DQG WKH FRXUW GLG QRW ZDLYH PRGLI\ RU H[WHQG WKH GHDGOLQH 6HH s$  SS