Elawyers Elawyers
Washington| Change

Shankle v. Pep Boys, 99-5897 (2003)

Court: Court of Appeals for the Sixth Circuit Number: 99-5897 Visitors: 14
Filed: Jan. 30, 2003
Latest Update: Mar. 02, 2020
Summary: 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 1R ; /,//,$1 3(%%/(6 0255,621  3ODLQWLII$SSHOODQW   1RV  Y !   &,5&8,7 &,7 W@KH $FWRI%RWKRIWKHHPSOR\HHVLQYROYHG/LOOLDQ3HEEOHV DUWLFOHFRQWDLQVDVWUD\VWDWHPHQWE\DQDVVRFLDWLRQH[HFXWLYH 0RUULVRQ DQG 0DUN ) 6KDQNOH ZHUH UH
More
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m&LUFXLW&LW\l DQG VDWLVILHVKHUEXUGHQE\UHO\LQJRQWKHVDPHmVWUD\VWDWHPHQWl 6KDQNOHZLWKWKH3HS%R\V0DQQ\0RH sDFN,QF m3HS WKDW 5DQGROSK DWWHPSWHG LQ YDLQ WR UHO\ RQ EHIRUH WKH %R\Vl   0RUULVRQ DQG 6KDQNOH ERWK VRXJKW WR VXH WKHLU 6XSUHPH&RXUW IRUPHU HPSOR\HUV LQ FRXUW IRU GLVFULPLQDWLRQ DIWHU WHUPLQDWLRQ,Q0RUULVRQjVFDVHWKHGLVWULFWFRXUWKHOGWKDW )XUWKHULQHVWDEOLVKLQJWKDWmDQDYHUDJHHPSOR\PHQWFDVH WKH DUELWUDWLRQ DJUHHPHQW ZDV HQIRUFHDEOH DQG WKXV VWD\HG LQFXUUHGDWRWDORIWRLQDUELWUDWLRQH[SHQVHV 0RUULVRQjVODZVXLWSHQGLQJDUELWUDWLRQ,Q6KDQNOHjVFDVHWKH DQWH DW  WKH PDMRULW\ DJDLQ UHOLHV RQ 0RUULVRQjV EULHI GLVWULFW FRXUW KHOG WKH DJUHHPHQW XQHQIRUFHDEOH DQG VWD\HG ZKLFK DJDLQ UHOLHV RQ WKH VDPH IRRWQRWH LQ &ROH  6HH DUELWUDWLRQSHQGLQJOLWLJDWLRQ:HRUGHUHGDFRQVROLGDWHGHQ $SSHOODQWjV%ULHIDW FLWLQJ&ROH)GDWQ  EDQF KHDULQJ WR DGGUHVV WKH LPSRUWDQW LVVXHV SUHVHQWHG LQ 7KHUHOHYDQWSRUWLRQRIWKH&ROHIRRWQRWHSURYLGHVWKDW WKHVHFDVHVUHJDUGLQJPDQGDWRU\DUELWUDWLRQDJUHHPHQWVLQWKH HPSOR\PHQWFRQWH[W &35 ,QVWLWXWH IRU 'LVSXWH 5HVROXWLRQ HVWLPDWHV DUELWUDWRUV IHHVRIoSHUKRXUDQGoKRXUV 7KH SURSHU UHVROXWLRQ RI WKHVH DSSHDOV UHTXLUHV WKDW ZH RIDUELWUDWRUWLPHLQDW\SLFDOHPSOR\PHQWFDVHIRUWRWDO FDUHIXOO\ UHFRQFLOH WKH mOLEHUDO IHGHUDO SROLF\ IDYRULQJ DUELWUDWRUV  IHHV RI  WR  LQ DQ DYHUDJH DUELWUDWLRQDJUHHPHQWVl0RVHV+&RQH0HPRULDO+RVSLWDO FDVH  6HH &35 ,167 )25 ',6387( 5(62/87,21 Y0HUFXU\&RQVWUXFWLRQ&RUS86  ZLWK (03/2 K@RZGHWDLOHGWKHVKRZLQJ   KROGLQJWKDWPDQGDWRU\DUELWUDWLRQDJUHHPHQWVLQWKH RI SURKLELWLYH H[SHQVH PXVW EH EHIRUH WKH SDUW\ VHHNLQJ HPSOR\PHQWFRQWH[WIDOOXQGHUWKH)$$  DUELWUDWLRQ PXVW FRPH IRUZDUG ZLWK FRQWUDU\ HYLGHQFH WKRXJKLWFRQFOXGHGWKDW5DQGROSKKDGQRWPHWWKDWEXUGHQ ,QVWHDGWKH6XSUHPH&RXUWKDVHPSKDVL]HGWKDWmIHGHUDO ,GDW VWDWXWRU\FODLPVPD\EHWKHVXEMHFWRIDUELWUDWLRQDJUHHPHQWV HQIRUFHDEOHSXUVXDQWWRWKH)$$EHFDXVHWKHDJUHHPHQW ,Q WKH SUHVHQW FDVH WKH PDMRULW\ GHULYHV LWV LQIRUPDWLRQ RQO\ GHWHUPLQHV WKH FKRLFH RI IRUXPl  ((2& Y :DIIOH DERXWWKHFRVWVIDFLQJ0RUULVRQIURPWZRVRXUFHV)LUVWLW +RXVH,QF86Q  7KXVXQGHUWKH SUHVHQWVILJXUHVIURPDVWXG\nQRWIRXQGLQWKHUHFRUGRIWKLV FRUUHFW UHFRQFLOLDWLRQ RI WKH VRPHWLPHVSHUFHLYHG FRQIOLFW FDVH DQG QRW HYHQ UHOHDVHG XQWLO DIWHU RUDO EHWZHHQDUELWUDWLRQDJUHHPHQWVLQ WKHHPSOR\PHQWFRQWH[W DUJXPHQWnSXEOLVKHGE\3XEOLF&LWL]HQDFRQVXPHUDGYRFDF\ DQGIHGHUDODQWLGLVFULPLQDWLRQODZVWKHFKRLFHWRDUELWUDWH RUJDQL]DWLRQ7KLVVWXG\jVILQGLQJVDUHEDVHGRQFRVWVDQG VWDWXWRU\FODLPVZLOOFKDQJHRQO\WKHIRUXPRIGHFLVLRQDQG HVWLPDWHV SXEOLVKHG E\ WKUHH PDMRU DUELWUDWLRQ SURYLGHUV QRW WKH VXEVWDQWLYH SURWHFWLRQV DIIRUGHG E\ WKH VWDWXWHV LQ 3XEOLF &LWL]HQ GRHV QRW DWWHPSW WR KLGH WKH IDFW WKDW LW LV TXHVWLRQm%\DJUHHLQJWRDUELWUDWHDVWDWXWRU\FODLPDSDUW\ PDUVKDOLQJHYLGHQFHWRVKRZZK\FRVWVSOLWWLQJSURYLVLRQVDUH GRHVQRWIRUJRWKHVXEVWDQWLYHULJKWVDIIRUGHGE\WKHVWDWXWH DEDGLGHD)URPLWVVWXG\ZHOHDUQWKDWIRUFODLPVRI LWRQO\VXEPLWVWRWKHLUUHVROXWLRQLQDQDUELWUDOUDWKHUWKDQD WR  WKH FRVWV RI DUELWUDWLRQ DUH RIWHQ PXFK JUHDWHU MXGLFLDOIRUXPl0LWVXELVKL0RWRUV&RUSY6ROHU&KU\VOHU WKDQWKRVHRIOLWLJDWLRQ7KLVPD\EHVREXW,GRQRWVHHKRZ 3O\PRXWK,QF86   WKLVQRQVSHFLILFH[WUDUHFRUGHYLGHQFHnZKLFK&LUFXLW&LW\ KDV KDG QR RSSRUWXQLW\ WR UHIXWHnVDWLVILHV 0RUULVRQjV 7KHIROORZLQJUHVROXWLRQRIWKHFDVHVEHIRUHXVDWWHPSWV EXUGHQ0RUULVRQjVFRPSODLQWGRHVQRWVSHFLI\KRZPXFK DQGZHEHOLHYHDFKLHYHVVXFKDUHFRQFLOLDWLRQRIWKHOLEHUDO VKH LV FODLPLQJ ZH KDYH QR LGHD KRZ &LUFXLW &LW\j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jV VWXG\ UHOLHV RQ@ ZRXOG FRQGXFW WKH ,,% D VWDQGDUG IRU GHWHUPLQLQJ ZKHWKHU D FRVWVSOLWWLQJ DUELWUDWLRQRUWKDWLI>WKH\@GLGVKHZRXOGEHFKDUJHGWKH SURYLVLRQ LQ DQ DUELWUDWLRQ DJUHHPHQW XQGHUPLQHV WKH ILOLQJIHHRUDUELWUDWRU VIHHWKDW>WKHVWXG\@LGHQWLILHG SXUSRVHVRIIHGHUDODQWLGLVFULPLQDWLRQOHJLVODWLRQ&RQVLVWHQW 86 DW  Q  2Q WKH FRQWUDU\ >W@KHVH XQVXSSRUWHG ZLWKWKH6XSUHPH&RXUWjVKROGLQJVLQ*UHHQ7UHHDQG*LOPHU VWDWHPHQWVSURYLGHQREDVLVRQZKLFKWRDVFHUWDLQWKHDFWXDO Y ,QWHUVWDWHsRKQVRQ /DQH &RUS  86    ZH FRVWVDQGIHHVWRZKLFKVKHZRXOGEHVXEMHFWLQDUELWUDWLRQ DGRSWDmFDVHE\FDVHlVWDQGDUGWKDWSURWHFWVSODLQWLIIVjDFFHVV ,G HPSKDVLVDGGHG  WRDQHIIHFWLYHIRUXPMXGLFLDORUDUELWUDOIRUWKHYLQGLFDWLRQ RIWKHLUVWDWXWRU\FODLPV 7KHPDMRULW\jVVHFRQGVRXUFHLV0RUULVRQjVEULHIZKLFKWKH PDMRULW\FLWHVIRUWKHSURSRVLWLRQWKDWDFFRUGLQJWRDUHFHQW  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO HIIHFWLYHO\YLQGLFDWLQJKHUIHGHUDOVWDWXWRU\ULJKWVLQWKH 3DUW ,,, DGGUHVVHV 0RUULVRQj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o IRRWQRWHRPLWWHG $VDIRRWQRWHZLWKLQ 0RUULVRQjVFDVHLQVHFWLRQ,,,(*LYHQRXUFRQFOXVLRQWKDW WKLVSDVVDJHDFNQRZOHGJHV5DQGROSKKDGPDGHVRPHDWWHPSW WKHVH SURYLVLRQV DUH VHYHUDEOH ZH $)),50 WKH GLVWULFW WRVHWIRUWKHYLGHQFHRIWKHFRVWVVKHIDFHGVKHDVVHUWHGDQ FRXUWjV GLVPLVVDO RI 0RUULVRQjV FODLPV DQG LWV RUGHU DYHUDJHILOLQJIHHWKRXJKKHUVRXUFHnLQIRUPDWLRQDOPDWHULDO FRPSHOOLQJDUELWUDWLRQDOWKRXJKIRUUHDVRQVGLIIHUHQWIURP IURPWKH$$$nGLGQRWGLVFXVVWKHDPRXQWRIILOLQJIHHVVKH WKRVHSURYLGHGE\WKHGLVWULFWFRXUW UHOLHGRQDQDUWLFOHn.HQQHWK0D\/DERU/DZ\HUVDW$%$ 6HVVLRQ 'HEDWH 5ROH RI $PHULFDQ $UELWUDWLRQ $VVRFLDWLRQ 3DUW ,9 DGGUHVVHV 3HS %R\Vj DUJXPHQWV RQ DSSHDO  ,Q '$,/ L@W PD\ ZHOO EH WKDW WKH H[LVWHQFH RI ODUJH DUELWUDWLRQ DJUHHPHQW DQG LW KDV PRGLILHG RQH RI WKH UXOHV DW LVVXH LQ WKH SUHVHQW FRVWV FRXOGSUHFOXGHDOLWLJDQWVXFKDV5DQGROSKIURP FDVH 7KLV PRGLILFDWLRQ LV GLVFXVVHG LQ VHFWLRQ ,,,' LQIUD  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO SULQFLSOH WKDW mWKH SURVSHFWLYH OLWLJDQW HIIHFWLYHO\ PD\ KDYHNQRZQRIIDFWVJLYLQJULVHWRWKH$VVRFLDWHjVFODLPlWR YLQGLFDWH>KLVRUKHU@VWDWXWRU\FDXVHRIDFWLRQLQWKHDUELWUDO DYRLGZDLYHURIVXFKFODLPsRLQW$SSHQGL[ ms$l DW IRUXPl86DW FLWDWLRQRPLWWHG *LOPHUVSRNHLQ 5XOH  SURYLGHV WKDW m&LUFXLW &LW\ DQG WKH $VVRFLDWH VKDOO WHUPVRIWKHLQGLYLGXDOOLWLJDQWDQGLPSOLHGQHLWKHUDQHHGQRU SDUWLFLSDWHHTXDOO\LQWKHVHOHFWLRQRIDQ$UELWUDWRUWRGHFLGH DUHTXLUHPHQWIRUDUHYLHZLQJFRXUWWRORRNEH\RQGKLP WKH DUELWUDWLRQl E\ FKRRVLQJ IURP DPRQJ D SDQHO RI VHYHQ QHXWUDO DUELWUDWRUV SURYLGHG E\ 5HVROXWH 6\VWHPV ,QF RU )LQDOO\ WKH FDVHE\FDVH DSSURDFK WKDW WKH PDMRULW\ DQRWKHUDUELWUDWLRQVHUYLFHs$DW HVFKHZVLVQRWVLPSO\WKHDSSURDFKmDGYRFDWHGLQ%UDGIRUGl DVWKHPDMRULW\SXWVLWEXWLVWKHDSSURDFKFRPSHOOHGE\WKH 3XUVXDQWWR5XOH&LUFXLW&LW\LVUHTXLUHGWRDGYDQFHDOO 6XSUHPH&RXUWjVGHFLVLRQLQ*UHHQ7UHH1RWKLQJLQ*UHHQ FRVWVIRUWKHDUELWUDWLRQ H[FHSW IRUWKHILOLQJIHH EXW 7UHHDXWKRUL]HVWKHPDMRULW\jVQRYHOUHTXLUHPHQWWKDWZKHUH HDFK SDUW\ LV UHTXLUHG WR SD\ RQHKDOI RI WKH FRVWV RI RQH SDUW\ WR DQ DJUHHPHQW WR DUELWUDWH FKDOOHQJHV WKH DUELWUDWLRQ IROORZLQJ WKH LVVXDQFH RI DQ DUELWUDWLRQ DZDUG DJUHHPHQWjVFRVWVSOLWWLQJSURYLVLRQWKHIHGHUDOFRXUWnLQWKH XQOHVVWKHDUELWUDWRUGHFLGHVWRXVHKHUGLVFUHWLRQDU\SRZHUWR LQWHUHVW RI DGYDQFLQJ WKH mEURDGHU VRFLDO SXUSRVHVl RI WKH UHTXLUHWKHORVLQJSDUW\WRSD\DOODUELWUDWLRQFRVWV6XFKFRVWV IHGHUDODQWLGLVFULPLQDWLRQVWDWXWHVXQGHUZKLFKWKHFODLPWR LQFOXGH mWKH GDLO\ RU KRXUO\ IHHV DQG H[SHQVHV LQFOXGLQJ EH DUELWUDWHG DULVHVnPXVW GHFLGH WKH HQIRUFHDELOLW\ RI WKH WUDYHO  RI WKH $UELWUDWRU ZKR GHFLGHV WKH FDVH ILOLQJ RU SURYLVLRQE\mDGGUHVVLQJWKHHIIHFWRIDUELWUDWLRQFRVWVRQD DGPLQLVWUDWLYH IHHV FKDUJHG E\ WKH $UELWUDWLRQ 6HUYLFH WKH FODVVlRI VLPLODUO\VLWXDWHGSRWHQWLDOOLWLJDQWV$QWHDW FRVW RI D UHSRUWHU >WR@ WUDQVFULEH>@ WKH SURFHHGLQJ DQG ,QGHHGWKH*UHHQ7UHH&RXUWPDGHLWYHU\FOHDUWKDWWKHFRXUW H[SHQVHVRIUHQWLQJDURRPLQZKLFKWKHDUELWUDWLRQLVKHOGl UHYLHZLQJ VXFK D FKDOOHQJH PXVW GHWHUPLQH ZKHWKHU WKH DVZHOODVLQFLGHQWDOFRVWVVXFKDVmSKRWRFRS\LQJRUWKHFRVWV SDUWLFXODUFKDOOHQJHUKDVGHPRQVWUDWHGWKDWVKHZRXOGLQFXU RI SURGXFLQJ ZLWQHVVHV RU SURRIl  s$ DW   5XOH  SURKLELWLYH DUELWUDWLRQ FRVWV LQ KHU SDUWLFXODU DUELWUDWLRQ IXUWKHUSURYLGHVWKDWDOODUELWUDWLRQFRVWVPXVWEHSDLGZLWKLQ SURFHHGLQJFRVWVWKDWFHUWDLQO\ZRXOGEHJUHDWO\LQIOXHQFHG QLQHW\FDOHQGDUGD\VRIWKHLVVXDQFHRIWKHDUELWUDWLRQDZDUG E\ERWKWKHNLQGDQGQXPEHURIFODLPVWREHDUELWUDWHG7KH ,QDGGLWLRQWKDWUXOHSURYLGHVWKDWLIDQHPSOR\HHLVDEOHWR PDMRULW\RSLQLRQKHUHKRZHYHUH[SOLFLWO\UHTXLUHVnFRQWUDU\ SD\KHUVKDUHRIWKHDUELWUDWLRQFRVWVZLWKLQWKLVQLQHW\GD\ WR*UHHQ7UHHjVGLUHFWLYHnWKDWWKHFRVWVWREHFRQVLGHUHGDUH SHULRGKHUFRVWV QRWLQFOXGLQJDWWRUQH\IHHV DUHWKHQOLPLWHG WKRVHWKDWDUHmDYHUDJHRUW\SLFDOl WRWKHJUHDWHURIHLWKHUILYHKXQGUHGGROODUVRUWKUHHSHUFHQWRI KHUPRVWUHFHQWDQQXDOFRPSHQVDWLRQ$QHPSOR\HHZKRLV 7KHPDMRULW\RSLQLRQFUHDWHVWKHDQRPDORXVOLNHOLKRRGWKDW QRWDEOHWRDUUDQJHWRSD\WKLVDPRXQWZLWKLQQLQHW\GD\VRI DGLVWULFWFRXUWFRXOGVFUXWLQL]HDQGSHUKDSVVWULNHGRZQD WKHDZDUGjVLVVXDQFHKRZHYHUPXVWSD\KHUHQWLUHVKDUHRI FRVWVSOLWWLQJSURYLVLRQZKHUHWKHSDUWLFXODUZRUNHUZDVIXOO\ WKHFRVWV&LUFXLW&LW\DOVRUHVHUYHVWKHULJKWWRGHGXFWXSWR DEOHWRSD\WKHFRVWVRIOLWLJDWLRQ,WDOVRFUHDWHVDQHZOD\HU ILYHSHUFHQWRIWKHHPSOR\HHj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mWKDWWKH$VVRFLDWHjVFODLPZDVIULYRORXVRUSUHVHQWHGLQEDG ZLOO EH GHWHUUHG EXW ZKHWKHU WKLV SODLQWLII FDQ DIIRUG WKH IDLWK RU IRU DQ LPSURSHU SXUSRVH VXFK DV WR KDUDVV WKH FRVWV &RPSDQ\ls$DW 1RWRQO\LVWKHPDMRULW\RSLQLRQjVSUHDUELWUDWLRQOD\HURI 5XOH  DGGUHVVHV GLVFRYHU\ SURFHGXUHV IRU DUELWUDWLRQ OLWLJDWLRQ XQQHFHVVDU\ LW LV DOVR ZLWKRXW IRXQGDWLRQ LQ WKH HQWLWOLQJHYHU\FODLPDQWWRGRFXPHQWVLQKHUSHUVRQQHOILOHEXW FDVHV WKDW WKH PDMRULW\ FLWHV WR VXSSRUW LW  7KH PDMRULW\ OLPLWLQJ HDFK SDUW\ WR RQH VHW RI WZHQW\ LQWHUURJDWRULHV GHFOLQHV WR IROORZ DQ DFWXDO FDVHE\FDVH DSSURDFK WR LQFOXGLQJ VXESDUWV DQG WKUHH GHSRVLWLRQV  $Q\ DGGLWLRQDO GHWHUPLQLQJWKHSRVVLEOHmFKLOOLQJHIIHFWlRIDQDJUHHPHQWjV GLVFRYHU\ ZRXOG EH SHUPLWWHG RQO\ XSRQ D VKRZLQJ RI FRVWVSOLWWLQJSURYLVLRQnDQDSSURDFKWKHPDMRULW\DWWULEXWHV VXEVWDQWLDO QHHG DQG DOO GLVFRYHU\ ZRXOG KDYH WR EH WR %UDGIRUG Y 5RFNZHOO 6HPLFRQGXFWRU 6\VWHPV ,QF  FRPSOHWHGZLWKLQQLQHW\FDOHQGDUGD\VDIWHUWKHVHOHFWLRQRI )G  WK &LU    ,QVWHDG WKH PDMRULW\ ORRNV WR DQDUELWUDWRU *LOPHUY,QWHUVWDWHsRKQVRQ/DQH&RUS86   VWDWLQJWKDW 5XOHOLVWVWKHUHPHGLHVWKDWDQDUELWUDWRUPD\DZDUGDQ DVVRFLDWH LQFOXGLQJ LQMXQFWLYH UHOLHI EDFN SD\ IURQW SD\ >W@KLV GLIIHUHQFH LQ DSSURDFK LV SUHPLVHG RQ *LOPHU FRPSHQVDWRU\GDPDJHVDQGSXQLWLYHGDPDJHV5XOHDOVR ZKLFK KHOG WKDW m>V@R ORQJ DV WKH SURVSHFWLYH OLWLJDQW SODFHVOLPLWVRQWKHDPRXQWRIPRQHWDU\GDPDJHVWKDWPD\EH HIIHFWLYHO\PD\YLQGLFDWH>KLVRUKHU@VWDWXWRU\FDXVHRI DZDUGHGDOORZLQJIRUWZHOYHPRQWKVRIEDFNSD\VWDUWLQJ DFWLRQLQWKHDUELWUDOIRUXPWKHVWDWXWHZLOOFRQWLQXHWR mIURPWKHSRLQWDWZKLFKWKH$VVRFLDWHNQHZRUVKRXOGKDYH VHUYH ERWK LWV UHPHGLDO DQG GHWHUUHQW IXQFWLRQl  $V NQRZQRIWKHHYHQWVJLYLQJULVHWRWKHDOOHJHGYLRODWLRQlDQG *LOPHUPDNHVFOHDUIHGHUDODQWLGLVFULPLQDWLRQVWDWXWHV DOORZLQJ DQ\ EDFN SD\ DZDUG WR EH mUHGXFHG E\ LQWHULP SOD\ERWKDUHPHGLDODQGGHWHUUHQWUROH$OWKRXJKWKH HDUQLQJVSXEOLFRUSULYDWHEHQHILWVUHFHLYHGDQGDPRXQWVWKDW IRUPHUUROHLVODUJHO\DPDWWHURIWKHULJKWVRISDUWLFXODU FRXOGKDYHEHHQUHFHLYHGZLWKUHDVRQDEOHGLOLJHQFHls$DW DJJULHYHGLQGLYLGXDOVWKHODWWHULVDTXHVWLRQRImEURDGHU $GGLWLRQDOO\5XOHVWDWHVWKDWDQDUELWUDWRUPD\DZDUG VRFLDOSXUSRVHVl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m&LUFXLW&LW\PD\DOWHURUWHUPLQDWHWKH$JUHHPHQWDQG UHYLHZLQJFRXUWPXVWORRNWRPRUHWKDQMXVWWKHLQWHUHVWV WKHVH 'LVSXWH 5HVROXWLRQ 5XOHV DQG 3URFHGXUHV RQ DQGFRQGXFWRIDSDUWLFXODUSODLQWLII 'HFHPEHU VW RI DQ\ \HDU XSRQ JLYLQJ  FDOHQGDU GD\V ZULWWHQQRWLFHWR$VVRFLDWHVls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jV SDUW\jV DELOLW\ WR SD\ WKHP RU LI WKH DFWXDO FRVWV LQFXUUHG FODLPV  7KH GLVWULFW FRXUW JUDQWHG &LUFXLW &LW\jV PRWLRQ H[FHHGKHUDELOLW\WRSD\WKHPVKHFDQQRWEHUHTXLUHGWRSD\ UHMHFWLQJ0RUULVRQjVDUJXPHQWVWKDWWKHDUELWUDWLRQDJUHHPHQW WKHP  7KH PDMRULW\ LV FRUUHFW LQ QRWLQJ WKDW LQ WKH SDVW ZDVXQHQIRUFHDEOHXQGHUIHGHUDODQGVWDWHODZ SODLQWLIIVKDYHIRXQGWKHPVHOYHVLQDVRUWRI&DWFKZKHQ OLWLJDWLQJ FRVWVSOLWWLQJ SURYLVLRQV DIWHU WKH DUELWUDWLRQ WKH 0RUULVRQjVDSSHDOIROORZHG%HFDXVHWKHDUELWUDWLRQZDV SRWHQWLDO LPSRVLWLRQ RI FRVWV FOHDUO\ GLG QRW GHWHU WKLV QRW VWD\HG EHORZ KRZHYHU LQ $SULO  0RUULVRQ DQG SODLQWLII VR ZK\ VKRXOG WKH FRXUW ILQG WKDW WKH FRVWV ZHUH &LUFXLW &LW\ SDUWLFLSDWHG LQ DQ DUELWUDWLRQ KHDULQJ RQ KHU SURKLELWLYHO\KLJK"%XW*UHHQ7UHHVROYHGWKLVSUREOHPE\ FODLPVDQGRQsXO\WKHDUELWUDWRULVVXHGDQDZDUG HVWDEOLVKLQJWKDWLIDSODLQWLIIFDQQRWDIIRUGWKHOLNHO\FRVWV LQ 1HLWKHU 0RUULVRQ QRU &LUFXLW &LW\ KDV VRXJKW WR YDFDWH DSUHDUELWUDWLRQGHWHUPLQDWLRQ RUDFWXDOO\LPSRVHGFRVWV LQ PRGLI\RUFRUUHFWWKHDZDUGDQGWKHSHULRGLQZKLFKMXGLFLDO D SRVWDUELWUDWLRQ GHWHUPLQDWLRQ  WKHQ WKH FRVWVSOLWWLQJ UHYLHZRIWKHDUELWUDWRUjVDZDUGPLJKWKDYHEHHQVRXJKWKDV SURYLVLRQFDQQRWEHHQIRUFHGDJDLQVWWKDWSODLQWLII2QFHWKLV H[SLUHG  )RU WKLV UHDVRQ &LUFXLW &LW\ PRYHG WKLV FRXUW WR LV XQGHUVWRRG GHWHUUHQFH LV QR ORQJHU DQ LVVXH DQG  WKH GLVPLVV WKLV DSSHDO DV PRRW  :H GHQLHG WKDW PRWLRQ RQ &DWFK GLVDSSHDUV SODLQWLIIV FDQ DSSURDFK DUELWUDWLRQ sDQXDU\ ZLWK FRQILGHQFHnUHJDUGOHVV RI ZKHWKHU WKH\ FKRRVH WR OLWLJDWHWKHLVVXHEHIRUHWKHDUELWUDWLRQRUZKHWKHUWKH\ILQGLW 7KHFDVHZDVRULJLQDOO\DUJXHGEHIRUHDKHDULQJSDQHORQ PRUH FRQYHQLHQW RU FRVWHIIHFWLYH WR GR VR sDQXDU\$PDMRULW\RIWKHDFWLYHMXGJHVRIWKHFRXUW DIWHUZDUGVnNQRZLQJWKDWWKH\ZLOOQRWKDYHWRSD\LIWKH\ YRWHGWRUHKHDUWKHFDVHHQEDQFWKHFRXUWLVVXHGDQRUGHUIRU FDQQRWDIIRUGLW7KHGLVWULFWFRXUWjVMRELVWRGHWHUPLQHQRW UHKHDULQJHQEDQFRQ2FWREHUDQGWKHFRQVROLGDWHG ZKHWKHUWKLVRURWKHUVLPLODUO\VLWXDWHGSODLQWLIIVKDYHEHHQRU  (YHQ WKRXJK 0RUULVRQj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jV GHILFLHQF\ ZDV QRW 6WDWHV 86   KROGLQJ WKDW DSSHDO RI ,56 VXPPRQV ZDV QRW WKDW VKH KDG EURXJKW VXLW WRR HDUO\ EXW WKDW VKH KDG IDLOHG WR FDUU\ KHU PRRW HYHQ WKRXJK VXEMHFW RI VXPPRQV KDG DOUHDG\ WXUQHG RYHU WKH EXUGHQ RI VKRZLQJ WKH mOLNHOLKRRGl WKDW WKH FRVWV LPSRVHG ZRXOG EH HYLGHQFH DW LVVXH EHFDXVH FRXUW FRXOG VWLOO RUGHU VRPH SDUWLDO UHOLHI  $V SURKLELWLYH  86 DW  2Q WKH RWKHU KDQG WKH &RXUW GLG QRW UXOH RXW GLVFXVVHG LQIUD KRZHYHU ZH XOWLPDWHO\ KROG WKDW DOWKRXJK WKH FKDOOHQJHG WKH SRVVLELOLW\ WKDW UHYLHZ RI FRVWV FRXOG EH DSSURSULDWH SRVW KRF DV ZHOO SURYLVLRQV DUH XQHQIRUFHDEOH WKH\ DUH DOVR VHYHUDEOH IURP WKH DJUHHPHQW &RQVHTXHQWO\ WKH PDMRULW\ LV LQFRUUHFW LQ VWDWLQJ WKDW WKH GLVVHQW *LYHQ WKDW WKHVH SURYLVLRQV ZHUH QRW HQIRUFHG LQ 0RUULVRQjV DUELWUDWLRQ IDYRUV D SRVWDUELWUDWLRQ HYDOXDWLRQ RI SDUWLHVj DELOLW\ WR SD\ WKH FRVWV WKH DUELWUDWLRQ SURFHHGHG DV WKRXJK WKH SURYLVLRQV ZHUH LQ IDFW 6HH DQWH DW  0\ TXDUUHO LV QRW ZLWK WKH SURSRVLWLRQ RI D SUHDUELWUDWLRQ XQHQIRUFHDEOH DQG VHYHUHG )RU WKLV UHDVRQ ZH DIILUP WKH GLVWULFW FRXUWjV GHWHUPLQDWLRQ EXW ZLWK WKH HODERUDWH VFKHPH WKH PDMRULW\ FUHDWHV RUGHU RQ WKHVH JURXQGV  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO UHKHDULQJZLWK6KDQNOHY3HS%R\V0DQQ\0RH sDFN,QF BBBBBBBBBBBBBB 1RZDVKHOGRQ0DUFK ',66(17 %6KDQNOH BBBBBBBBBBBBBB 3ODLQWLII$SSHOOHH 6KDQNOH ZDV HPSOR\HG DW D 3HS %R\V $/,&( 0 %$7&+(/'(5 &LUFXLW sXGJH GLVVHQW  , VWRUHLQ1DVKYLOOH7HQQHVVHHIURPsDQXDU\WKURXJK FRQFXU LQ PXFK RI WKH PDMRULW\ RSLQLRQ  %XW , PXVW 0D\6KDQNOHH[HFXWHGDm0XWXDO$JUHHPHQWWR UHVSHFWIXOO\GLVVHQWIURPWKHPDMRULW\jVFUHDWLRQRIDFRPSOH[ $UELWUDWH&ODLPVlDVDFRQGLWLRQRIKLVHPSOR\PHQWZLWK3HS QHZILHOGRIOLWLJDWLRQLQRUGHUWRGHWHUPLQHWKHHQIRUFHDELOLW\ %R\V7KHUHOHYDQWSURYLVLRQVRIWKDWDJUHHPHQWVWDWH RIDFRVWVSOLWWLQJSURYLVLRQLQDQDJUHHPHQWWRDUELWUDWH, GLVVHQWDVZHOOIURPWKHPDMRULW\RSLQLRQjVFRQFOXVLRQWKDWWKH $UELWUDWLRQ3URFHGXUHV FRVWVSOLWWLQJ SURYLVLRQV LQ ERWK 0RUULVRQjV DQG 6KDQNOHjV 7KH&RPSDQ\DQG,DJUHHWKDWH[FHSWDVSURYLGHGLQWKLV DJUHHPHQWVDUHXQHQIRUFHDEOH $JUHHPHQWDQ\DUELWUDWLRQVKDOOEHLQDFFRUGDQFHZLWK WKH WKHQFXUUHQW 0RGHO (PSOR\PHQW $UELWUDWLRQ 5HFRJQL]LQJWKDWKLJKDUELWUDWLRQFRVWVmFRXOGSUHFOXGHD 3URFHGXUHV RI WKH $PHULFDQ $UELWUDWLRQ $VVRFLDWLRQ OLWLJDQW VXFK DV 5DQGROSK IURP HIIHFWLYHO\ YLQGLFDWLQJ KHU m$$$l EHIRUHDQDUELWUDWRUZKRLVOLFHQVHGWRSUDFWLFH IHGHUDO VWDWXWRU\ ULJKWV LQ WKH DUELWUDO IRUXPl *UHHQ 7UHH ODZLQWKHVWDWHLQZKLFKWKHDUELWUDWLRQLVFRQYHQHG WKH )LQDQFLDO &RUS$ODEDPD Y 5DQGROSK  86   m$UELWUDWRUl 7KHDUELWUDWLRQVKDOOWDNHSODFHLQRUQHDU  WKH6XSUHPH&RXUWLQ*UHHQ7UHHKHOGWKDWWKHPHUH WKH FLW\ LQ ZKLFK , DP RU ZDV ODVW HPSOR\HG E\ WKH ULVN WKDW 5DQGROSK ZRXOG KDYH WR SD\ WKRVH FRVWV ZDV QRW &RPSDQ\ HQRXJKWRMXVWLI\WKHLQYDOLGDWLRQRIWKHDUELWUDWLRQDJUHHPHQW 5DWKHU WKH &RXUW KHOG m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jVFRPSOLFDWHGSUHDUELWUDWLRQ TXDVLFODVVDFWLRQOLWLJDWLRQVFKHPHVHHPVWRPHWREHQHLWKHU  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO ,QRUGHUWRDYRLGWKHLQFRQVLVWHQWSURFHGXUHVWKDWDURVHLQWKH $UELWUDWLRQ)HHVDQG&RVWV VWD\HGDUELWUDWLRQ6KDQNOHPD\PRYHWKHGLVWULFWFRXUWIRU 7KH&RPSDQ\DQG,VKDOOHTXDOO\VKDUHWKHFRVWVRIWKH VXFKDQRUGHU,IWKH$$$IDLOVWRFRPSO\ZLWKWKDWRUGHU $UELWUDWRUjVIHHLQWKHDPRXQWDQGPDQQHUGHWHUPLQHGE\ 6KDQNOHPD\UHWXUQWRWKHGLVWULFWFRXUWDIWHUWKHDUELWUDWLRQLV WKH$UELWUDWRUWHQGD\VEHIRUHWKHILUVWGD\RIWKHKHDULQJ FRPSOHWHGDQG PRYH WKDW WKH FRXUW SXUVXDQW WR  86& (DFKSDUW\VKDOOSD\IRULWVRZQFRVWVDQGDWWRUQH\VjIHHV † D   YDFDWHWKHDZDUGRQWKDWEDVLV LI DQ\  +RZHYHU LI DQ\ SDUW\ SUHYDLOV RQ D VWDWXWRU\ FODLPZKLFKDIIRUGVWKHSUHYDLOLQJSDUW\DWWRUQH\VjIHHV 9&21&/86,21 RULIWKHUHLVDZULWWHQDJUHHPHQWSURYLGLQJIRUIHHVWKH $UELWUDWRUPD\DZDUGUHDVRQDEOHIHHVWRWKHSUHYDLOLQJ )RUWKHIRUHJRLQJUHDVRQVZH$)),50WKHGLVWULFWFRXUW SDUW\ RUGHU LQ 0RUULVRQjV FDVH RQ GLIIHUHQW JURXQGV WKDQ WKRVH UHOLHG XSRQ E\ WKH GLVWULFW FRXUW DQG $)),50 LQ SDUW $IWHU6KDQNOHTXLWKLVMREZLWK3HS%R\VKHFRQVXOWHGDODZ 5(9(56(LQSDUWDQG5(0$1'6KDQNOHj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jVODZVXLWVKRXOGEHVWD\HGEHFDXVHRIWKHDUELWUDWLRQ DJUHHPHQW ZKLFK 3HS %R\V DUJXHG UHTXLUHG 6KDQNOH WR SXUVXH KLV FODLPV WKURXJK PDQGDWRU\ DUELWUDWLRQ  ,Q LWV VXSSRUWLQJPHPRUDQGXP3HS%R\VDOVRDUJXHGWKDWWKHFRVW VSOLWWLQJ SURYLVLRQ LQ WKH DUELWUDWLRQ DJUHHPHQW ZDV HQIRUFHDEOH 7KHGLVWULFWFRXUWGHQLHG3HS%R\VjPRWLRQVDQGJUDQWHG 6KDQNOHjVPRWLRQWRVWD\DUELWUDWLRQRQsXQH7KH GLVWULFW FRXUW KHOG WKDW WKH FRVWVSOLWWLQJ SURYLVLRQ LQ WKH DUELWUDWLRQ DJUHHPHQW ZDV LQYDOLG DQG XQHQIRUFHDEOH  7KH  7KDW SURYLVLRQ VWDWHV WKDW WKH GLVWULFW FRXUW mPD\ PDNH DQ RUGHU GLVWULFWFRXUWIXUWKHUKHOGWKDWWKHUHPDLQGHURIWKHDJUHHPHQW YDFDWLQJ WKH DZDUG XSRQ WKH DSSOLFDWLRQ RI DQ\ SDUW\ WR WKH DUELWUDWLRQ    GLG QRW FRQVWLWXWH D YDOLG DQG HQIRUFHDEOH FRQWUDFW XQGHU >Z@KHUH WKH DUELWUDWRUV H[FHHGHG WKHLU SRZHUVl  86& †  D    0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO 7HQQHVVHH VWDWH ODZ EHFDXVH GLVFUHSDQFLHV EHWZHHQ WKH GHVWUR\VWKHSXUSRVHRIWKHFRQWUDFWSHUPDQHQWO\7KHILUVW SURFHGXUHVDFWXDOO\EHLQJIROORZHGLQWKH$$$SURFHHGLQJV LOOXVWUDWLRQ IURP WKH 5HVWDWHPHQW 6HFRQG  RI &RQWUDFWV DQG WKH SURFHGXUHV GHVFULEHG LQ WKH DUELWUDWLRQ DJUHHPHQW SURYLGHVDJRRGH[DPSOH7KHUH$DQG%PDGHDFRQWUDFW GHPRQVWUDWHGWKDWmWKHUHZDVQRPHHWLQJRIWKHPLQGVDVWR XQGHU ZKLFK % ZDV WR SD\ $  IRU WKH XVH RI $jV WKHSURFHGXUHVWREHIROORZHGGXULQJWKHDUELWUDWLRQls$DW ZLQGRZRQsDQXDU\WRYLHZDSDUDGHVFKHGXOHGIRUWKDW 7KHGLVWULFWFRXUWSRLQWHGWRDQXPEHURIGLVFUHSDQFLHV GD\  %HFDXVH RI DQ LPSRUWDQW SXEOLF RIILFLDOjV LOOQHVV WKH EHWZHHQWKH$$$SURFHGXUHVDQGWKHDUELWUDWLRQDJUHHPHQW SDUDGHZDVFDQFHOHG%UHIXVHGWRXVHWKHZLQGRZRUSD\WKH 7KH $$$ DV WKH HQWLW\ FRQGXFWLQJ WKH DUELWUDWLRQ IRU ,QWKDWFDVH%jVGXW\WRSD\ZDVGLVFKDUJHG H[DPSOH ZDV IROORZLQJ LWV RZQ SURFHGXUHV DOWKRXJK WKH DQG%ZDVQRWOLDEOHWR$IRUEUHDFKRIFRQWUDFW5HVWDWHPHQW DJUHHPHQWVSHFLILHGWKDWWKHSURFHGXUHVGHVFULEHGLQLWZRXOG 6HFRQG RI&RQWUDFWV†FPWDLOOXV   EH IROORZHG  $GGLWLRQDOO\ WKHUH ZHUH LUUHJXODULWLHV LQ WKH VHOHFWLRQRIWKHDUELWUDWRUDQGGLIIHUHQFHVLQWKHDYDLODELOLW\RI 7KH FRQWUDFW LQ WKH 5HVWDWHPHQW LOOXVWUDWLRQ ZDV WLPH GLVFRYHU\ DQG HYLGHQWLDU\ UXOHV XQGHU WKH WZR VHWV RI VHQVLWLYHDQGLWVSXUSRVHZDVLUUHYRFDEO\GHVWUR\HGE\WKH SURFHGXUHV RIILFLDOjVLOOQHVV,QRXUFDVHKRZHYHUWKHSXUSRVHRIWKH DUELWUDWLRQDJUHHPHQWKDVEHHQmQHDUO\GHVWUR\HGlRQO\IRUWKH 3HS%R\VILOHGDWLPHO\QRWLFHRIDSSHDODQGWKHFDVHZDV PRPHQW$VLGHIURPWKHVHYHUDEOHFRVWVSOLWWLQJSURYLVLRQ DUJXHGRQs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jVFDVHDUELWUDWLRQ UHVSHFWWRWKHHQIRUFHDELOLW\RIWKHUHPDLQLQJWHUPVRIWKH3HS ZDVVWD\HGDQGWKXVWKHDUELWUDWRUQHYHULVVXHGDGHFLVLRQRU %R\VDUELWUDWLRQDJUHHPHQWDQGUHPDQG6KDQNOHjVFDVHWRWKH DQDZDUGLQ6KDQNOHjVFDVH GLVWULFW FRXUW IRU IXUWKHU SURFHHGLQJV FRQVLVWHQW ZLWK WKLV RSLQLRQ7KHGLVWULFWFRXUWLVLQVWUXFWHGWRJUDQW3HS%R\Vj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m$ SDUW\ DJJULHYHG E\ WKH DOOHJHG IDLOXUH 7KLV RSLQLRQ XVHV WKH WHUP mFRVWVSOLWWLQJl UDWKHU WKDQ mFRVW VKDULQJl RU mIHHVSOLWWLQJl WR GHVFULEH WKH DUUDQJHPHQW E\ ZKLFK WKH QHJOHFW RU UHIXVDO RI DQRWKHU WR DUELWUDWH XQGHU D ZULWWHQ SDUWLHV WR DQ DUELWUDWLRQ EHDU WKH FRVWV RI DQ DUELWUDWLRQ HTXDOO\ 6RPH DJUHHPHQWIRUDUELWUDWLRQPD\SHWLWLRQ>WKH@GLVWULFWFRXUW DUELWUDWLRQ DJUHHPHQWV DOVR SURYLGH IRU mFRVWVKLIWLQJl DQ DUUDQJHPHQW E\ IRU DQ RUGHU GLUHFWLQJ WKDW VXFK DUELWUDWLRQ SURFHHG LQ WKH ZKLFK WKH DUELWUDWRU PD\ GHWHUPLQH WKDW RQH RI WKH SDUWLHV VKRXOG EHDU DOO PDQQHUSURYLGHGIRULQVXFKDJUHHPHQWl HPSKDVLVDGGHG  RU PRVW RI WKH FRVWV RI WKH DUELWUDWLRQ  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO UXOHV IRXQG LQ WKH DJUHHPHQW ZKHQ WKHUH ZDV D FRQIOLFW WKRVH FUHDWHG E\ 7LWOH 9,, PD\ EH VXEMHFW WR PDQGDWRU\ EHWZHHQWKHWZR DUELWUDWLRQ RQO\ LI WKH DUELWUDO IRUXP SHUPLWV WKH HIIHFWLYH YLQGLFDWLRQ RI WKRVH ULJKWV  m6R ORQJ DV WKH SURVSHFWLYH 7KHVHOHFWLRQRIDQDUELWUDWRULVFOHDUO\DWWKHKHDUWRIDQ\ OLWLJDQWHIIHFWLYHO\PD\YLQGLFDWH>KLVRUKHU@VWDWXWRU\FDXVH DUELWUDWLRQDJUHHPHQW,QHQWHULQJLQWRWKLVDJUHHPHQWZLWK RI DFWLRQ LQ WKH DUELWUDO IRUXP WKH VWDWXWH ZLOO FRQWLQXH WR 3HS%R\V6KDQNOHEDUJDLQHGIRUDSURFHVVE\ZKLFKKHDQG VHUYH ERWK LWV UHPHGLDO DQG GHWHUUHQW IXQFWLRQl *LOPHU Y 3HS %R\V ZRXOG VWULNH XQDFFHSWDEOH QDPHV IURP $$$ ,QWHUVWDWHsRKQVRQ /DQH &RUS  86    SURYLGHGOLVWVXQWLODFRPPRQO\DFFHSWHGDUELWUDWRUUHPDLQHG TXRWDWLRQRPLWWHG ,IWKHQWKHVSOLWWLQJRUVKDULQJRIWKH 6KDQNOHGLGQRWH[SHFWQRUGLGKHKDYHUHDVRQWRH[SHFWWKDW FRVWV RI WKH DUELWUDO IRUXP XQGHU D SDUWLFXODU DUELWUDWLRQ WKH$$$ZRXOGSUHHPSWWKHSURFHVVE\LPSRVLQJLWVFKRLFH DJUHHPHQWHIIHFWLYHO\SUHYHQWVWKHYLQGLFDWLRQRIDSODLQWLIIjV DIWHUWKHSDUWLHVUHMHFWHGWKHILUVWVODWHRIFDQGLGDWHV%HFDXVH VWDWXWRU\ULJKWVWKRVHULJKWVFDQQRWEHVXEMHFWWRPDQGDWRU\ RIWKHSURYLVLRQVRIWKHDUELWUDWLRQDJUHHPHQWDGRSWLQJWKH DUELWUDWLRQXQGHUWKDWDJUHHPHQW6HHHJ:LOOLDPVY&LJQD )HGHUDO5XOHVRI(YLGHQFHDQG&LYLO3URFHGXUHKHH[SHFWHG )LQ $GYLVRUV ,QF  )G   WK &LU  WKDWWKRVHUXOHVZRXOGJRYHUQWKHDUELWUDWLRQRIDQ\GLVSXWH KROGLQJWKDW*LOPHUmSODLQO\LQGLFDWHVWKDWDQDUELWUDOFRVW EHWZHHQ KLP DQG 3HS %R\V  )LQDOO\ WKH DUELWUDWLRQ DOORFDWLRQ VFKHPH PD\ QRW EH XVHG WR SUHYHQW HIIHFWLYH DJUHHPHQWjVVXSUHPDF\FODXVHJDYH6KDQNOHHYHU\UHDVRQWR YLQGLFDWLRQ RI IHGHUDO VWDWXWRU\ FODLPVl  FHUW GHQLHG  H[SHFWWKDWLWZRXOGDFWXDOO\GLFWDWHWKHZD\DQDUELWUDWLRQ 86  6KDQNOHY%*0DLQW0JPWRI&RO,QF ZRXOGRSHUDWH  )G   WK &LU   m>$@Q DUELWUDWLRQ DJUHHPHQW WKDWSURKLELWVWKHXVHRIWKHMXGLFLDOIRUXPDVD $VGLVFXVVHGDWOHQJWKVXSUDDUELWUDWLRQSURFHGXUHVPXVW PHDQVRIUHVROYLQJVWDWXWRU\FODLPVPXVWDOVRSURYLGHIRUDQ DIIRUG OLWLJDQWV DQ HIIHFWLYH FKDQQHO IRU SXUVXLQJ WKHLU HIIHFWLYHDQGDFFHVVLEOHDOWHUQDWLYHIRUXPl  VWDWXWRU\ FODLPV  *LOPHU  86 DW   $OORZLQJ DQ DUELWUDWLRQ WR JR IRUZDUG XQGHU FRQGLWLRQV VXFK DV WKHVH 7KHDUELWUDWLRQRIVWDWXWRU\FODLPV PXVWEHDFFHVVLEOHWR KRZHYHUZRXOGSUHYHQW6KDQNOHDQGRWKHUHPSOR\HHVIURP SRWHQWLDOOLWLJDQWVDVZHOODVDGHTXDWHWRSURWHFWWKHULJKWVLQ HIIHFWLYHO\ YLQGLFDWLQJ WKHLU VWDWXWRU\ ULJKWV LQ WKH DUELWUDO TXHVWLRQ VR WKDW DUELWUDWLRQ OLNH WKH MXGLFLDO UHVROXWLRQ RI IRUXP6KDQNOHGLGQRWJHWZKDWKHEDUJDLQHGIRUZKHQKH GLVSXWHVZLOOmIXUWKHUEURDGHUVRFLDOSXUSRVHVl*LOPHU HQWHUHGLQWRWKHDUELWUDWLRQDJUHHPHQWZLWK3HS%R\V:KDW 86 DW   7R SXW WKH PDWWHU LQ D VOLJKWO\ GLIIHUHQW ZD\ KH JRW mQHDUO\ GHVWUR\HG WKH    SXUSRVH RI WKH FRQWUDFWl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jVDVVHUWLRQVDVFULELQJNQRZOHGJHRI VXJJHVWHG WKDW VXFK FRVWVSOLWWLQJ SURYLVLRQV SHU VH GHQ\ WKH$$$j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mIDLOHG WR SURYLGH DQ DFFHVVLEOH IRUXP LQ KRZHYHUDVDIUXVWUDWLRQRIFRPPHUFLDOSXUSRVHDUJXPHQW ZKLFK >OLWLJDQW@ FRXOG UHVROYH KLV VWDWXWRU\ ULJKWVl  6KDQNOH FRXOG DOVR EH LQWHUSUHWHG DV HPSOR\LQJ D FDVHE\FDVH DSSURDFK KRZHYHU ZLWK WKH 7KDWGRFWULQHUHFRJQL]HGE\WKH7HQQHVVHH6XSUHPH&RXUWLQ 7HQWK &LUFXLW WDNLQJ D VLJQLILFDQWO\ GLIIHUHQW DSSURDFK WR WKH FDVHE\FDVH 1RUWK$PHULFDQ&DSLWDO&RUSY0F&DQWV6:G DSSURDFK WKDQ RWKHU FLUFXLWV 6HH %UDGIRUG Y 5RFNZHOO 6HPLFRQGXFWRU 7HQQ ZDVIXUWKHUHODERUDWHGE\+DXQY.LQJ 6\V ,QF  )G   WK &LU  m1RWDEO\ DOWKRXJK 6KDQNOH 6:G 7HQQ&W$SS  IRXQG WKDW WKH IHHVSOLWWLQJ SURYLVLRQ UHQGHUHG WKH DUELWUDWLRQ DJUHHPHQW XQHQIRUFHDEOH LW IUDPHG LWV DQDO\VLV LQ WHUPV RI WKH FRPSODLQLQJ SDUW\jV >,@IWKHKDSSHQLQJRIDQHYHQWQRWIRUHVHHQE\WKHSDUWLHV DFWXDO LQDELOLW\ WR DIIRUG WKH DUELWUDWLRQ FRVWV DQG IHHVl  WR WKH FRQWUDFW DQG QHLWKHU FDXVHG E\ QRU XQGHU WKH  FRQWURORIHLWKHUSDUW\KDVGHVWUR\HGRUQHDUO\GHVWUR\HG 6HH 3DODGLQR Y $YQHW &RPSXWHU 7HFKV ,QF  )G   WK &LU  KROGLQJ WKDW mVWHHSl FRVWV DW OHDVW FRQVWLWXWH mD HLWKHUWKHYDOXHRISHUIRUPDQFHRUWKHREMHFWRUSXUSRVH OHJLWLPDWH EDVLV IRU D FRQFOXVLRQ WKDW WKH FODXVH GRHV QRW FRPSRUW ZLWK RIWKHFRQWUDFWWKHQWKHSDUWLHVDUHH[FXVHGIURPIXUWKHU VWDWXWRU\ SROLF\l  SHUIRUPDQFH  7KH 0F&DQWV FRXUW VWDWHG WKDW WKH mVXSHUYHQLQJ HYHQWl PXVW EH mZKROO\ RXWVLGH WKH  FRQWHPSODWLRQ RI WKH SDUWLHVl EXW LI VXFK IUXVWUDWLQJ 6HH &ROH Y %XUQV ,QWjO 6HF 6HUYV  )G   '&  m>:@H KROG WKDW DQ DUELWUDWRUjV FRPSHQVDWLRQ DQG H[SHQVHV PXVW HYHQWZDVUHDVRQDEO\IRUHVHHDEOHWKHGRFWULQHLVQRWD EH SDLG E\ WKH HPSOR\HU DORQHl  VHH DOVR LG DW  m>,@W LV GHIHQVH7KHGRFWULQHLVSUHGLFDWHGRQWKHSUHPLVHRI XQDFFHSWDEOH WR UHTXLUH &ROH WR SD\ DUELWUDWRUVj IHHV EHFDXVH VXFK IHHV DUH XQOLNH DQ\WKLQJ WKDW KH ZRXOG KDYH WR SD\ WR SXUVXH KLV VWDWXWRU\ JLYLQJ UHOLHI ZKHUH WKH SDUWLHV FRXOG QRW SURYLGH FODLPV LQ FRXUWl  LG DW  m,Q VXP ZH KROG WKDW &ROH FRXOG QRW EH WKHPVHOYHVE\WKHSURYLVLRQVRIWKHFRQWUDFWDJDLQVWWKH UHTXLUHG WR DJUHH WR DUELWUDWH KLV SXEOLF ODZ FODLPV DV D FRQGLWLRQ RI KDSSHQLQJRIWKHVXSHUYHQLQJHYHQW HPSOR\PHQW LI WKH DUELWUDWLRQ DJUHHPHQW UHTXLUHG KLP WR SD\ DOO RU SDUW RI WKH DUELWUDWRUjV IHHV DQG H[SHQVHVl  ,W VKRXOG EH QRWHG KRZHYHU WKDW WKH ,Q WKH SUHVHQW FDVH WKH UHFRUG GRHV QRW LQGLFDWH WKDW WKH &ROH FRXUW LQWHUSUHWHG WKH DUELWUDWLRQ DJUHHPHQW DW LVVXH DV QRW UHTXLULQJ SDUWLHVFRXOGKDYHIRUHVHHQWKDWWKH$$$ZRXOGQRWDELGHE\ &ROH WR SD\ DQ\ DUELWUDWLRQ IHHV DQG WKXV LW KHOG WKDW WKH DJUHHPHQW VR FRQVWUXHG ZDV HQIRUFHDEOH 6HH LG WKHUXOHVRIWKHDUELWUDWLRQDJUHHPHQWDQGQHLWKHUSDUW\ZDV LQDSRVLWLRQWRFRQWUROWKH$$$jVEHKDYLRU7KHTXHVWLRQLV  ZKHWKHUWKH$$$GHVWUR\HGRUQHDUO\GHVWUR\HGWKHSXUSRVH 6HH %XUGHQ Y &KHFN ,QWR &DVK RI .\ //&  )G   WK &LU  m$V WR WKH SRWHQWLDOO\ EXUGHQVRPH FRVWV RI DUELWUDWLRQ WKH RI WKH FRQWUDFW ZKHQ LW DSSOLHG LWV RZQ SURFHGXUHV IRU SDUW\ UHVLVWLQJ DUELWUDWLRQ KDV WKH EXUGHQ RI VKRZLQJ WKH OLNHOLKRRG WKDW VHOHFWLQJDQDUELWUDWRULQGLFDWHGWKDWLWLQWHQGHGWRDSSO\LWV DUELWUDWLRQ ZRXOG EH SURKLELWLYHO\ H[SHQVLYHl TXRWDWLRQ RPLWWHG  FHUW RZQSURFHGXUDOUXOHVDQGJDYHLWVRZQUXOHVSULPDF\RYHUWKH GHQLHG o 86 o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mZH ZLWKRXW WKH VXEPLVVLRQ RI DQ DGGLWLRQDO OLVW  6HFRQG WKH ODFN    LQIRUPDWLRQ DERXW KRZ FODLPDQWV IDUH XQGHU DUELWUDWLRQ DJUHHPHQW SURYLGHV WKDW WKH )HGHUDO 5XOHV RI *UHHQ7UHHjVDUELWUDWLRQFODXVHl)GDW7KH (YLGHQFHDQGWKH)HGHUDO5XOHVRI&LYLO3URFHGXUHZLOOEH UHFRUGUHYHDOVRQO\WKHDUELWUDWLRQDJUHHPHQWjVVLOHQFHRQ DSSOLHGE\WKHDUELWUDWRUEXWWKH$$$GRHVQRWDSSO\WKHVH WKHVXEMHFWDQGWKDWIDFWDORQHLVSODLQO\LQVXIILFLHQWWR IHGHUDOUXOHVDQGKDVLQGLFDWHGWKDWLWLQWHQGVWRDSSO\LWVRZQ UHQGHULWXQHQIRUFHDEOH7KHmULVNlWKDW5DQGROSKZLOOEH UXOHV7KLUGWKHDUELWUDWLRQDJUHHPHQWSURYLGHVWKDWLWVWHUPV VDGGOHGZLWKSURKLELWLYHFRVWVLVWRRVSHFXODWLYHWRMXVWLI\ VKRXOGDSSO\LIDQ\RILWVSURYLVLRQVFRQIOLFWZLWK$$$UXOHV WKHLQYDOLGDWLRQRIDQDUELWUDWLRQDJUHHPHQW EXWWKH$$$UXOHVSURYLGHWKDWm>L@IDSDUW\HVWDEOLVKHVWKDWDQ DGYHUVHPDWHULDOLQFRQVLVWHQF\H[LVWVEHWZHHQWKHDUELWUDWLRQ 7R LQYDOLGDWH WKH DJUHHPHQW RQ WKDW EDVLV ZRXOG DJUHHPHQW DQG WKHVH UXOHV WKH DUELWUDWRU VKDOO DSSO\ WKHVH XQGHUPLQHWKHmOLEHUDOIHGHUDOSROLF\IDYRULQJDUELWUDWLRQ UXOHVls$DW DJUHHPHQWVl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n0DQQ\0RH s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jV IDLOXUH WR EXUGHQRIGHPRQVWUDWLQJ WKDW LQFXUULQJVXFKFRVWVLVOLNHO\ IROORZWKHSURFHGXUHVVHWIRUWKLQWKH3HS%R\VDUELWUDWLRQ XQGHUDJLYHQVHWRIFLUFXPVWDQFHVUHVWVDWOHDVWLQLWLDOO\ZLWK DJUHHPHQWFRQVWLWXWHGDPDWHULDODOWHUDWLRQRIWKHDJUHHPHQW WKHSDUW\RSSRVLQJDUELWUDWLRQ DQG DOVR VKRZHG WKDW WKHUH ZDV D ODFN RI D PHHWLQJ RI WKH PLQGVZLWKUHVSHFWWRWKHDJUHHPHQWLWVHOI%DVHGRQWKHVH +RZHYHU*UHHQ7UHHGRHVQRWSURYLGHXVZLWKDVWDQGDUG JURXQGV WKH GLVWULFW FRXUW KHOG WKDW WKH UHPDLQGHU RI WKH IRUm>K@RZGHWDLOHGWKHVKRZLQJRISURKLELWLYHH[SHQVHVPXVW DUELWUDWLRQ DJUHHPHQW ZDV XQHQIRUFHDEOH XQGHU 7HQQHVVHH EHlWRVXSSRUWWKHFRQFOXVLRQWKDWWKHSURYLVLRQDWPLQLPXP VWDWHODZ$OWKRXJKZHKROGWKDWWKHGLVWULFWFRXUWHUUHGLQ LV XQHQIRUFHDEOH  ,Q WKDW FDVH RI FRXUVH WKH SODLQWLII KDG UHDFKLQJWKLVFRQFOXVLRQZHDJUHHZLWKWKHGLVWULFWFRXUWWKDW UHOLHG VROHO\ RQ WKH DUELWUDWLRQ DJUHHPHQWjV VLOHQFH RQ WKH WKHSURFHGXUHVIROORZHGE\WKH$$$LQWKHSUHVHQWFDVHZHUH DOORFDWLRQRIDUELWUDWLRQFRVWVDQGWKXVWKHULVNRILQFXUULQJ LQFRQVLVWHQW ZLWK WKH WHUPV RI WKH 3HS %R\V DUELWUDWLRQ VXFKSURKLELWLYHFRVWVZDVKLJKO\VSHFXODWLYHLQGHHG,QWKH DJUHHPHQW0RUHRYHUZHVKDUHWKHGLVWULFWFRXUWjVFRQFHUQ FDVHVEHIRUHXVKRZHYHUWKHDUELWUDWLRQDJUHHPHQWVH[SOLFLWO\ WKDWWKHDFWLRQVRIDQDUELWUDWRUFDQXQGHUPLQHWKHOHJLWLPDF\ SURYLGH IRU FRVWVSOLWWLQJ  7KXV ZH PXVW GHWHUPLQH WKH RI WKH DUELWUDO IRUXP  :H KROG KRZHYHU WKDW WKH SURSHU DSSURSULDWHVWDQGDUGIRUGHWHUPLQLQJZKHWKHUDFRVWVSOLWWLQJ UHPHG\LQVXFKFDVHVLVDQRUGHUSXUVXDQWWR†RIWKH)$$ SURYLVLRQFRQWDLQHGLQDQDUELWUDWLRQDJUHHPHQWLVLQYDOLG UHTXLULQJ WKDW WKH DUELWUDWLRQ SURFHHGLQJV FRQIRUP WR WKH WHUPVRIWKHDUELWUDWLRQDJUHHPHQWHQWHUHGLQWRE\WKHSDUWLHV 7KH )RXUWK &LUFXLW KDV SRVLWHG VXFK D VWDQGDUG  ,Q %UDGIRUGY5RFNZHOO6HPLFRQGXFWRU6\VWHPV,QF)G  WK&LU WKDWFRXUWVHWIRUWKWKHIROORZLQJ  WHVW :H KDYH SUHYLRXVO\ KHOG WKDW mLOOHJDO FRQWUDFW SURYLVLRQV VKRXOG QRW UHQGHU WKH HQWLUH FRQWUDFW YRLG XQOHVV WKH µIRUELGGHQ SURYLVLRQ LV VR >7@KHDSSURSULDWHLQTXLU\LVRQHWKDWHYDOXDWHVZKHWKHU EDVLF WR WKH ZKROH VFKHPH RI D FRQWUDFW DQG VR LQWHUZRYHQ ZLWK DOO LWV WKHDUELWUDOIRUXPLQDSDUWLFXODUFDVHLVDQDGHTXDWHDQG WHUPV WKDW LW PXVW VWDQG RU IDOO DV DQ HQWLW\jl &KDWWDQRRJD 0DLOHUVj /RFDO 1R  Y 7KH &KDWWDQRRJD 1HZV)UHH 3UHVV &R  )G DFFHVVLEOH VXEVWLWXWH WR OLWLJDWLRQ LH D FDVHE\FDVH 8QLRQ   WK &LU  TXRWLQJ 1/5% Y 5RFNDZD\ 1HZV 6XSSO\ &R DQDO\VLV WKDW IRFXVHV DPRQJ RWKHU WKLQJV XSRQ WKH  86     DEURJDWLRQ RQ RWKHU JURXQGV UHFRJQL]HG E\ %DFDVKLKXD Y 8QLWHG 6WDWHV 3RVWDO 6HUYLFH  )G  WK &LU    0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO DGMXGLFDWLRQVKDOOQRWDIIHFWWKHYDOLGLW\RIWKHUHPDLQGHURI FODLPDQWjVDELOLW\WRSD\WKHDUELWUDWLRQIHHVDQGFRVWVWKH WKH$JUHHPHQWls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jVGHWHUPLQDWLRQ WKDWWKH FRVWVSOLWWLQJ SURYLVLRQ DW LVVXH LQ WKH SUHVHQW FDVH ZDV ,G FLWDWLRQVRPLWWHG 8QGHU%UDGIRUGWKHLQTXLU\FDQEH VHYHUDEOH IURP WKH UHVW RI WKH DUELWUDWLRQ DJUHHPHQW  7KDW EURNHQLQWRWKUHHSDUWV  WKHSRWHQWLDOOLWLJDQWjVDELOLW\WR SURYLVLRQZDVQRWLQWHUZRYHQZLWKWKHUHVWRIWKHDJUHHPHQW SD\DUELWUDWLRQFRVWVDQGIHHV  WKHGLIIHUHQFHEHWZHHQWKH DQG PD\ EH GHOHWHG ZLWKRXW DIIHFWLQJ WKH UHVW RI WKH H[SHFWHGFRVWRIDUELWUDWLRQWRWKHOLWLJDQWDQGWKHH[SHFWHG DJUHHPHQWjVSURYLVLRQVUHJDUGLQJDUELWUDWLRQ7KLVFRQFOXVLRQ FRVWRIDMXGLFLDOIRUXPDQG  ZKHWKHUWKDWGLIIHUHQFHmLVVR LVFRQVLVWHQWZLWKERWK7HQQHVVHHFRQWUDFWODZDQGRXURZQ VXEVWDQWLDODVWRGHWHUWKHEULQJLQJRIFODLPVlLQWKHDUELWUDO IRUXP:LWKUHVSHFWWR  DQG  %UDGIRUGHPSKDVL]HGWKDW mDQ DSSURSULDWH FDVHE\FDVH LQTXLU\ PXVW IRFXV XSRQ D FODLPDQWjVH[SHFWHGRUDFWXDODUELWUDWLRQFRVWVDQGKLVDELOLW\ WR SD\ WKRVH FRVWV PHDVXUHG DJDLQVW D EDVHOLQH RI WKH FODLPDQWjVH[SHFWHGFRVWVIRUOLWLJDWLRQDQGKLVDELOLW\WRSD\  WKRVHFRVWVl,GQ,QNHHSLQJZLWK*UHHQ7UHHWKHSDUW\ )RU H[DPSOH D 7HQQHVVHH DSSHOODWH FRXUW DSSO\LQJ WKH DJUHHPHQWjV VHYHUDELOLW\ FODXVH HQIRUFHG WKH UHPDLQGHU RI DQ DUELWUDWLRQ DJUHHPHQW RSSRVLQJDUELWUDWLRQnLHWKHSODLQWLIInEHDUVWKHEXUGHQ DIWHU KROGLQJ WKDW D YHQXH FODXVH LQFOXGHG LQ WKH DJUHHPHQW ZDV LQYDOLG RIGHPRQVWUDWLQJWKHVHHOHPHQWV6HH%UDGIRUG)GDW XQGHU 7HQQHVVHH ODZ 6HH .QDIIO Y 'RXJODV &R 1R $&+    :/  DW  7HQQ &W $SS   7KH FRXUW UHDVRQHG WKDW m>H@QIRUFHPHQW RI D FRQWUDFW FODXVH WR DUELWUDWH GLVSXWHV LV 7KH%UDGIRUGWHVWDQGVLPLODUDSSURDFKHVKRZHYHUVXIIHU IDYRUHG E\ OHJLVODWLYH SROLF\l DQG WKDW mµ>L@W LV WKH UHVSRQVLELOLW\ RI WKH IURPDWOHDVWWZRLQILUPLWLHV)LUVWUHTXLULQJWKHSODLQWLIIWR FRXUWV WR JLYH DV EURDG D FRQVWUXFWLRQ WR DQ DUELWUDWLRQ DJUHHPHQW DV WKH ZRUGV DQG LQWHQWLRQV RI WKH SDUWLHV GUDZQ IURP WKHLU H[SUHVVLRQV ZLOO FRPH IRUZDUG ZLWK FRQFUHWH HVWLPDWHV RI DQWLFLSDWHG RU ZDUUDQW DQG WR UHVROYH DQ\ GRXEWV LQ IDYRU RI DUELWUDWLRQjl ,G TXRWLQJ H[SHFWHGDUELWUDWLRQFRVWVDVNVWRRPXFKDWWKLVLQLWLDOVWDJHLQ :DFKWHO Y 6KRQH\jV ,QF  6:G   7HQQ &W $SS   WKHSURFHHGLQJV%HIRUHDQDUELWUDWRUKDVEHHQVHOHFWHGIRU VHH DOVR )UL]]HOO &RQVWU &R Y *DWOLQEXUJ //&  6:G   7HQQ H[DPSOHDSODLQWLIIFDQRQO\HVWLPDWHWKHKRXUO\UDWHWKDWWKH  VWDWLQJ WKDW mWKH FDUGLQDO UXOHl LQ 7HQQHVVHH FRQWUDFW ODZ mLV WR DUELWUDWRU ZLOO FKDUJH  8QGHU WKH %UDGIRUG FDVHE\FDVH DVFHUWDLQ WKH LQWHQWLRQ RI WKH SDUWLHV DQG WR JLYH HIIHFW WR WKDW LQWHQWLRQ FRQVLVWHQW ZLWK OHJDO SULQFLSOHVl DQG WKDW WKH SDUWLHVj LQWHQW VKRXOG EH DSSURDFKVXFKDYHUDJHILJXUHVPD\DSSHDUmWRRVSHFXODWLYHl GHULYHG IURP LQWHU DOLD mD IDLU FRQVWUXFWLRQ RI WKH WHUPV DQG SURYLVLRQV WRVXSSRUWDILQGLQJWKDWWKHFRVWVDUHSURKLELWLYHO\H[SHQVLYH RI WKH FRQWUDFWl TXRWDWLRQV RPLWWHG  3HQVNH 7UXFN /HDVLQJ &R Y HYHQ WKRXJK WKH SODLQWLII KDV QR RWKHU HYLGHQFH RI FRVWV +XGGOHVWRQ   6:G   7HQQ  VWDWLQJ WKDW VHYHUDELOLW\ 0RUHRYHU ZKHUH DUELWUDWLRQ DJUHHPHQWV SURYLGH IRU WKH RI FRQWUDFW LV D PDWWHU RI WKH SDUWLHVj LQWHQW LQ HQWHULQJ LQWR WKH FRQWUDFW   0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO VKLIWLQJRIIHHVDQGFRVWVE\WKHDUELWUDWRURQWKHEDVLVRIWKH ZKHUHWKHDJUHHPHQWLWVHOISURYLGHVWKDWWKHSODLQWLIILVOLDEOH DUELWUDWRUj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jVVKDUHRIWKHIHHVDQGFRVWVWRDYRLGVXFK DQLQGLYLGXDOFODLPDQWZRXOGEHSUHFOXGHGIURPHIIHFWLYHO\ DKROGLQJ YLQGLFDWLQJKLVRUKHUULJKWVLQDQDUELWUDOIRUXPE\WKHULVNRI LQFXUULQJVXEVWDQWLDOFRVWVEXWDOVRZKHWKHURWKHUVLPLODUO\ +RZHYHUDVLQ0RUULVRQjVFDVHWKHDUELWUDWLRQDJUHHPHQW VLWXDWHGLQGLYLGXDOVZRXOGEHGHWHUUHGE\WKRVHULVNVDVZHOO LQ6KDQNOHjVFDVHLQFOXGHGDVHYHUDELOLW\FODXVH7KDWFODXVH $ FRVWVSOLWWLQJ SURYLVLRQ VKRXOG EH KHOG XQHQIRUFHDEOH VWDWHGm,IDQ\SURYLVLRQRIWKLV$JUHHPHQWLVDGMXGJHGWREH ZKHQHYHULWZRXOGKDYHWKHmFKLOOLQJHIIHFWlRIGHWHUULQJD YRLG RU RWKHUZLVH XQHQIRUFHDEOH LQ ZKROH RU LQ SDUW VXFK VXEVWDQWLDO QXPEHU RI SRWHQWLDO OLWLJDQWV IURP VHHNLQJ WR YLQGLFDWHWKHLUVWDWXWRU\ULJKWV7KLVLVVXHLVDGGUHVVHGLQSDUW ,,%LQIUD  3HS %R\V DOVR DUJXHV WKDW WKH $$$ ZLOO GHIHU RU ZDLYH LWV $3RVW+RFsXGLFLDO5HYLHZRI$UELWUDWLRQ&RVWV DGPLQLVWUDWLYH IHHV LQ FDVHV RI H[WUHPH KDUGVKLS VHH s$ DW  $$$ 5XOHV  DQG WKXV WKDW 6KDQNOH ZRXOG QRW EH UHTXLUHG WR SD\ WKH IHHV LI KH FRXOG HVWDEOLVK VXFK KDUGVKLS 7KLV UXOH RQO\ UHODWHV WR DGPLQLVWUDWLYH $QXPEHURIFRXUWVKDYHVXJJHVWHGWKDWMXGLFLDOUHYLHZRI IHHV VXFK DV WKH  QRQUHIXQGDEOH ILOLQJ IHH ZKLFK PXVW EH SDLG XSRQ DUELWUDWLRQDZDUGVZLOODGHTXDWHO\VDIHJXDUGWKHUHPHGLDODQG D ILOLQJ RI D GHPDQG IRU DUELWUDWLRQ 7KH $$$ JUDQWHG 6KDQNOH D GHWHUUHQW IXQFWLRQV RI IHGHUDO DQWLGLVFULPLQDWLRQ VWDWXWHV WHPSRUDU\ IHH ZDLYHU ZLWK UHVSHFW WR WKLV SD\PHQW 6HH s$ DW  6HH HJ 5RVHQEHUJ Y 0HUULOO /\QFK 3LHUFH )HQQHU 7KHVH DGPLQLVWUDWLYH IHHV KRZHYHU LQYROYH D VHSDUDWH REOLJDWLRQ IURP WKH 6PLWK,QF)G VW&LU  m>,@IXQUHDVRQDEOH SDUWLHVj REOLJDWLRQ WR VKDUH WKH DUELWUDWRUjV FRVWV ,Q D OHWWHU WR 6KDQNOH DQG 3HS %R\V WKH $$$ LQIRUPHG WKH SDUWLHV RI WKH IROORZLQJ IHHV ZHUH WR EH LPSRVHG    WKH DUJXPHQW    FRXOG EH &RPSHQVDWLRQ WR WKH DUELWUDWRU V UHSUHVHQWV DQ LQGHSHQGHQW SUHVHQWHG E\ WKH HPSOR\HH WR WKH UHYLHZLQJ FRXUWl  REOLJDWLRQ RI WKH SDUWLHV DQG LW LV XQGHUVWRRG WKDW WKH $$$ KDV .RYHOHVNLHY6%&&DSLWDO0NWV,QF)G WK QR OLDELOLW\ GLUHFW RU LQGLUHFW IRU VXFK SD\PHQW (DFK SDUW\ VKDOO &LU  m>:@HDUHFRQYLQFHGWKDWMXGLFLDOUHYLHZRIDUELWUDWLRQ SURPSWO\ GHSRVLW LQ DGYDQFH ZLWK WKH $$$ VXFK VXPV RI PRQH\ DZDUGVLVVXIILFLHQWWRSURWHFWVWDWXWRU\ULJKWVl FHUWGHQLHG DV UHTXLUHG E\ WKH DGPLQLVWUDWRU WR GHIUD\ WKH FRVWV RI WKH DUELWUDWRUjV IHHV  86    %R\G Y 7RZQ RI +D\QHYLOOH  ) s$ DW  7KH UHFRUG GRHV QRW LQGLFDWH WKDW WKH DUELWUDWRUjV IHHV FDQ EH 6XSS G   0' $OD   QRWLQJ WKDW ZDLYHG RU GHIHUUHG LQ WKH FDVH RI H[WUHPH KDUGVKLS 7KXV 3HS %R\Vj DUJXPHQW RQ WKLV KHDGLQJ LV ODUJHO\ LUUHOHYDQW  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO LQGLFDWHGWKDWDQ$UELWUDWRUKDGEHHQVHOHFWHGDQGWKDWWKH mMXGLFLDO UHYLHZl RI DQ\ DUELWUDWLRQ DZDUG LV DYDLODEOH LQ $UELWUDWRUjVIHHVZRXOGDPRXQWWRSHUKRXUDQG UHMHFWLQJ DUJXPHQW WKDW SRWHQWLDO FRVWV RI DUELWUDWLRQ ZHUH SHUKRXUIRUVWXG\WLPH>7KH$$$FDVH H[FHVVLYH $UDNDZDYsDSDQ1HWZRUN*URXS)6XSSG PDQDJHU@ DOVR VWDWHV LQ KHU OHWWHU WKDW 3ODLQWLII LV  6'1 FRXOG QRW@ DIIRUG WR SD\ WKH ILOLQJ IHHV RU DUELWUDWRUjV SURFHVVWKDWLPSRVHVFRVWVWKDWUHQGHUWKHDUELWUDOIRUXPOHVV IHHVls$DW 6KDQNOH$II  DFFHVVLEOH WKDQ D MXGLFLDO IRUXPl WKDW WKH DUELWUDWRU LV mREOLJDWHGWR>DOORFDWHFRVWVDQGIHHV@LQDFFRUGDQFHZLWKWKH *LYHQ WKDW WKH W\SLFDO HPSOR\PHQW GLVFULPLQDWLRQ ODZlDQGWKDWWKHUHIRUHmSODLQWLIIEHDUVQRULVNE\SURFHHGLQJ DUELWUDWLRQ LQYROYHV EHWZHHQ ILIWHHQ DQG IRUW\ KRXUV RI WR DUELWUDWLRQl   ,W LV DSSDUHQWO\ IRU WKHVH UHDVRQV WKDW WKH DUELWUDWRU WLPH VHH 6KDQNOH  )G DW  Q WKH GLVVHQWIDYRUVDSRVWDUELWUDWLRQHYDOXDWLRQRISDUWLHVj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jVLQFRPHDQGRYHUDOOILQDQFLDOVLWXDWLRQZHFRQFOXGH DUELWUDO IRUXP SURKLELWLYHO\ H[SHQVLYH IRU WKH LQGLYLGXDO WKDW VXFK D SURYLVLRQ ZRXOG GHWHU D VXEVWDQWLDO QXPEHU RI SODLQWLII WKHQ GHWHUPLQLQJ ZKHWKHU WKH DFWXDO FRVWV RI VLPLODUO\VLWXDWHGSRWHQWLDOOLWLJDQWVIURPVHHNLQJWRYLQGLFDWH FRPSOHWHGDUELWUDWLRQUHDFKWKDWOHYHOZRXOGEHPXFKVLPSOHU WKHLUVWDWXWRU\ULJKWVLQWKHDUELWUDOIRUXP)RUWKLVUHDVRQWKH WKDQGHWHUPLQLQJLQDGYDQFHZKHWKHUWKHSURMHFWHGFRVWVRI FRVWVSOLWWLQJSURYLVLRQLVQRWHQIRUFHDEOHLQWKHSUHVHQWFDVH DUELWUDWLRQ ZLOO UHDFK WKDW OHYHO  5HTXLULQJ SODLQWLIIV WR DUELWUDWHWKHLUFODLPVDQGWKHQDUJXHHLWKHUWRWKHDUELWUDWRURU 2QDSSHDO3HS%R\VDUJXHVWKDW6KDQNOHFDQQRWPHHWKLV WRWKHUHYLHZLQJFRXUWWKDWWKHFRVWVZHUHSURKLELWLYHDYRLGV EXUGHQ EHFDXVH LW KDV DJUHHG LQ ZULWLQJ WR SD\ 6KDQNOHjV WKH SUREOHP LGHQWLILHG LQ *UHHQ 7UHH QDPHO\ WKH VKDUHRIWKHDUELWUDWLRQIHH7KXV3HS%R\VDUJXHVWKDWZH mVSHFXODWLYHl RU mFRQMHFWXUDOl QDWXUH RI WKH FRVWV RI QHHGQRWUHDFKWKHLVVXHRIWKHYDOLGLW\RIWKHFRVWVSOLWWLQJ DUELWUDWLRQ  7KH UHYLHZLQJ FRXUW ZRXOG KDYH EHIRUH LW WKH SURYLVLRQ DV WKDW SURYLVLRQ QR ORQJHU DSSOLHV WR 6KDQNOH DFWXDO FRVWV DQG ZRXOG EH FKDUJHG ZLWK WKH WDVN RI $SSHOODQWjV6XSS%UDW:HUHMHFW3HS%R\VjDUJXPHQW GHWHUPLQLQJ ZKHWKHU WKRVH DFWXDO FRVWV PDNH WKH DUELWUDO LQWKHSUHVHQWFDVH,QFRQVLGHULQJWKHDELOLW\RISODLQWLIIVWR IRUXP SURKLELWLYHO\ FRVWO\  6HH .OLQHGLQVW  :/ SD\ DUELWUDWLRQ FRVWV XQGHU DQ DUELWUDWLRQ DJUHHPHQW DW  m%\WKHWLPHWKHDUELWUDWRUUHDFKHVWKHFRVWV UHYLHZLQJFRXUWVVKRXOGQRWFRQVLGHUDIWHUWKHIDFWRIIHUVE\ DQGIHHVLVVXHVWKHUHFRUGZLOOREYLRXVO\EHIDUOHVVYDJXH HPSOR\HUVWRSD\WKHSODLQWLIIjVVKDUHRIWKHDUELWUDWLRQFRVWV DQG VSHFXODWLYH WKDQ LW LV QRZl  VHH DOVR $UDNDZD  )  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO 6XSSGDW m$WWKLVSRLQWLQWKHOLWLJDWLRQLWLVQRWFOHDU WKDW0RUULVRQZDVQRWUHTXLUHGWRSD\DQ\VKDUHRIWKHFRVWV KRZ ODUJH WKH IHHV RI WKH DUELWUDWLRQ ZLOO EH RU ZKHWKHU RI WKH DUELWUDWLRQ DQG WKDW WKH DUELWUDWRU GLG QRW DSSO\ WKH SODLQWLIIZLOOEHUHTXLUHGWRSD\DQ\SRUWLRQRILWl  OLPLWDWLRQ RQ UHPHGLHV  *LYHQ WKHVH IDFWV UHPDQG LV QRW QHFHVVDU\DQGWKXVZHZLOODIILUPWKHGLVWULFWFRXUWjVRUGHU 7KLVDWWUDFWLYHQHVVLVKRZHYHURQO\VXSHUILFLDOWKHUHDUH FRPSHOOLQJDUELWUDWLRQRQWKHVHGLIIHUHQWJURXQGV DW OHDVW WZR SUREOHPV ZLWK WKLV DSSURDFK  )LUVW MXGLFLDO UHYLHZ RI DUELWUDWLRQ DZDUGV LV YHU\ QDUURZ  6HH HJ ,96KDQNOH 1R 'DZDKDUHY6SHQFHU)G WK&LU  QRWLQJ WKH mPDQLIHVW GLVUHJDUG RI WKH ODZl VWDQGDUG RI UHYLHZ IRU $6WDQGDUGRI5HYLHZ DUELWUDWLRQDZDUGVDQGDOVRQRWLQJWKDWUHYLHZLVPDGHHYHQ PRUH GLIILFXOW ZKHUH DUELWUDWRUV GR QRW H[SODLQ WKHLU :H UHYLHZ GH QRYR D GLVWULFW FRXUWjV GHWHUPLQDWLRQV GHFLVLRQV  FHUW GHQLHG  86    *OHQQRQ Y UHJDUGLQJWKHH[LVWHQFHRIDYDOLGDUELWUDWLRQDJUHHPHQW6HH 'HDQ:LWWHU5H\QROGV,QF)G WK&LU HJ)ORVV)GDW$VH[SODLQHGVXSUDZHUHYLHZ GLVFXVVLQJ WKH VWDQGDUG IRU YDFDWLQJ DQ DUELWUDWLRQ DZDUG WKHHQIRUFHDELOLW\RIWKHDUELWUDWLRQDJUHHPHQWDFFRUGLQJWR EDVHGRQmPDQLIHVWGLVUHJDUGRIWKHODZlVWDQGDUG 7KXVLW WKH DSSOLFDEOH VWDWH ODZ RI FRQWUDFW IRUPDWLRQ ZKLFK WKH LV QRW DOWRJHWKHU FOHDU WKDW MXGLFLDO UHYLHZ FDQ DGHTXDWHO\ SDUWLHVVHHPWRDJUHHLVSURYLGHGE\7HQQHVVHHODZ SURWHFWVWDWXWRU\ULJKWVLQVXFKFDVHV7KHUHLVVXSSRUWLQWKH FDVH ODZ KRZHYHU IRU WKH YLHZ WKDW FRXUWV UHYLHZLQJ %&RVW6SOLWWLQJ DUELWUDWLRQ DZDUGV PD\ YDFDWH RU UHGXFH WKH DVVHVVPHQW RI FRVWVLQDSSURSULDWHFLUFXPVWDQFHV6HH*LOPHU86DW 7XUQLQJWRWKHLVVXHVUDLVHGLQ6KDQNOHjVFDVHZHKROGWKDW Q QRWLQJWKDWMXGLFLDOUHYLHZRIDUELWUDWLRQDZDUGVmLV WKHFRVWVSOLWWLQJSURYLVLRQDWLVVXHLQ6KDQNOHjVFDVHZDVQRW VXIILFLHQW WR HQVXUH WKDW DUELWUDWRUV FRPSO\ ZLWK WKH HQIRUFHDEOH XQGHU WKH VWDQGDUG SURYLGHG LQ VHFWLRQ ,,% UHTXLUHPHQWV RI WKH VWDWXWH DW LVVXHl TXRWDWLRQ RPLWWHG  VXSUD7KDWSURYLVLRQTXRWHGLQVHFWLRQ,%VXSUDUHTXLUHG %R\G)6XSSGDW TXRWLQJ*LOPHULQVXSSRUW 6KDQNOHWRSD\RQHKDOIRIWKHDUELWUDWRUjVIHHDQGWRGHSRVLW RI WKH YLHZ WKDW MXGLFLDO UHYLHZ RI DUELWUDWLRQ DZDUGV LV WKDW DPRXQW ZLWK WKH DUELWUDWRU WHQ GD\V SULRU WR WKH ILUVW DGHTXDWHWRSURWHFWVWDWXWRU\ULJKWV  DUELWUDWLRQKHDULQJ 6HFRQGHYHQLIMXGLFLDOUHYLHZFRXOGVHUYHWKLVIXQFWLRQLQ 7KH GLVWULFW FRXUW LQ 6KDQNOHjV FDVH UHOLHG RQ &ROH DQG WKH DEVWUDFW WKHUH LV D PRUH WHOOLQJ SUREOHP ZLWK WKLV 6KDQNOH WR KROG WKDW FRVWVSOLWWLQJ SURYLVLRQV DUH SHU VH mDUELWUDWHILUVWDQGUHYLHZWKHDZDUGRIFRVWVODWHUl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jV FRXQVHO UHFHLYHGDOHWWHUIURP>WKH$$$FDVHPDQDJHU@ZKLFK  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO SURYLVLRQ DW LVVXH LQ WKLV FDVH DUH mLQ FRQIOLFW ZLWK D SODLQWLII KDV DOUHDG\ DUELWUDWHG KHU FODLPV  ,Q $KLQJ Y PDQGDWRU\SURYLVLRQRIDSSOLFDEOHODZl7KXVLWFRXOGEH /HKPDQ %URV ,QF 1R &LY &6+   :/ DUJXHGWKDWWKHSDUWLHVGLGQRWLQWHQGIRU5XOHWRDSSO\LQ DW  6'1 W@KH VHYHUDELOLW\ RI D FRQWUDFW LV D HIIHFWl RI WKH FRVWVSOLWWLQJ SURYLVLRQ RQ VLPLODUO\ VLWXDWHG TXHVWLRQRIODZDQGGHSHQGVXSRQWKHLQWHQWRIWKHSDUWLHVl SRWHQWLDO OLWLJDQWV DV RSSRVHG WR LWV HIIHFW PHUHO\ RQ WKH 7ROHGR 3ROLFH 3DWUROPHQjV $VVjQ Y &LW\ RI 7ROHGR  DFWXDOSODLQWLIILQDQ\JLYHQFDVH7KLVGLIIHUHQFHLQDSSURDFK 1(G 2KLR&W$SS DSSHDOGHQLHG1(G LV SUHPLVHG RQ *LOPHU ZKLFK KHOG WKDW m>V@R ORQJ DV WKH  2KLR    m:KHWKHU D FRQWUDFW    LV HQWLUH RU SURVSHFWLYH OLWLJDQW HIIHFWLYHO\ PD\ YLQGLFDWH >KLV RU KHU@ GLYLVLEOHGHSHQGVJHQHUDOO\XSRQWKHLQWHQWLRQRIWKHSDUWLHV VWDWXWRU\FDXVHRIDFWLRQLQWKHDUELWUDOIRUXPWKHVWDWXWHZLOO DQG WKLV PXVW EH DVFHUWDLQHG E\ WKH RUGLQDU\ UXOHV RI FRQWLQXHWRVHUYHERWKLWVUHPHGLDODQGGHWHUUHQWIXQFWLRQl FRQVWUXFWLRQl,G TXRWDWLRQVRPLWWHG  86DW TXRWDWLRQRPLWWHG $V*LOPHUPDNHVFOHDU IHGHUDODQWLGLVFULPLQDWLRQVWDWXWHVSOD\ERWKDUHPHGLDODQG 7KH DUELWUDWLRQ DJUHHPHQW DW LVVXH LQ WKH SUHVHQW FDVH GHWHUUHQWUROH$OWKRXJKWKHIRUPHUUROHLVODUJHO\DPDWWHURI FRQWDLQV D VHYHUDELOLW\ FODXVH  5XOH  RI WKH DUELWUDWLRQ WKHULJKWVRISDUWLFXODUDJJULHYHGLQGLYLGXDOVWKHODWWHULVD DJUHHPHQWVWDWHVLQUHOHYDQWSDUW TXHVWLRQ RI mEURDGHU VRFLDO SXUSRVHVl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s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jV6XSS%UDW,QGHHG&LUFXLW&LW\jVFRXQVHO D FDVHE\FDVH DQDO\VLV VKRXOG QRW WUHDW VLPLODU FDVHV LQIRUPHG XV DW RUDO DUJXPHQW WKDW DV RI s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sRKQVRQ Y &LUFXLW &LW\ 6WRUHV ,QF 1R   :/  DW  WK &LU sDQ   FHUW GHQLHG  86    SODLQWLIIjV LQFRPH DQG UHVRXUFHV DV UHSUHVHQWDWLYH RI WKLV ODUJHUFODVVjVDELOLW\WRVKRXOGHUWKHFRVWVRIDUELWUDWLRQ%XW  DV RQH GLVWULFW FRXUW KDV QRWHG *UHHQ 7UHH mGRHV QRW 6HH *DQQRQ Y &LUFXLW &LW\ 6WRUHV ,QF 1R &9 s&+  :/  (' 0R sXO\    UHYjG RQ RWKHU JURXQGV  QHFHVVDULO\PDQGDWHDVHDUFKLQJLQTXLU\LQWRDQHPSOR\HHjV )G  WK &LU   7KH GLVWULFW FRXUW KHOG WKDW WKH OLPLWDWLRQ RQ ELOOVDQGH[SHQVHVl*LRUGDQRY3HS%R\Vn0DQQ\0RH SXQLWLYH GDPDJHV XQGHU WKH &LUFXLW &LW\ DUELWUDWLRQ DJUHHPHQW SUHYHQWHG sDFN ,QF 1R &,9 $   :/  DW  WKH SODLQWLII mIURP HIIHFWLYHO\ YLQGLFDWLQJ KHU ULJKWVl ,G DW  ,Q DGGLWLRQ WKH GLVWULFW FRXUW FRQFOXGHG WKDW WKH RIIHQGLQJ SURYLVLRQ ZDV QRW (' 3D 0DUFK     m>1@RWKLQJ LQ *UHHQ 7UHH VHYHUDEOH 7KH (LJKWK &LUFXLW UHYHUVHG KROGLQJ WKDW WKH SURYLVLRQ OLPLWLQJ UHPHGLHV ZDV VHYHUDEOH 6HH  )G DW  &LUFXLW &LW\ DSSDUHQWO\ GLG QRW DSSHDO WKH GLVWULFW FRXUWjV FRQFOXVLRQ WKDW WKH SURYLVLRQ ZDV XQHQIRUFHDEOH LQ WKDW FDVH 6HH LG ,Q LWV VXSSOHPHQWDO DPLFXV EULHI WKH  7KH *LRUGDQR FDVH LQYROYHG D SODLQWLII YHU\ VLPLODU WR WKH SODLQWLII ((2& VXJJHVWV WKDW &LUFXLW &LW\jV DSSHDO LQ *DQQRQ VKRZV WKDW WKH LQ WKH 6KDQNOH FDVH $IWHU UHYLHZLQJ WKH FDVH ODZ sXGJH 3ROODN KHOG FRPSDQ\ QR ORQJHU HQIRUFHV WKH OLPLWDWLRQ RQ SXQLWLYH GDPDJHV LQ LWV 7KLV LV DQ HDV\ FDVH *LRUGDQR ZDV D IDLUO\ ORZOHYHO DUELWUDWLRQ DJUHHPHQW 6HH ((2& 6XSS $PLFXV %U DW  VHH DOVR HPSOR\HH RI 3HS %R\V HDUQLQJ D UHODWLYHO\ ORZ ZDJH RI  *DQQRQ  )G DW  QRWLQJ WKDW &LUFXLW &LW\ PRYHG WKH GLVWULFW FRXUW SHU ZHHN DW WKH WLPH RI KLV WHUPLQDWLRQ +H DYHUV WKDW KH FRXOG WR UHFRQVLGHU LWV KROGLQJ WKDW WKH OLPLWDWLRQV SURYLVLRQ ZDV XQHQIRUFHDEOH QRW DIIRUG WKH ILOLQJ IHHV DQG DUELWUDWRUVj FRVWV IRU ZKLFK KH DV mLW QR ORQJHU HQIRUFHG WKH    FODXVHl  ZRXOG EH UHVSRQVLEOH SXUVXDQW WR WKH DJUHHPHQW DQG WKH $$$jV  UXOHV *LRUGDQR LV VLPLODU WR WKH SODLQWLIIV LQ &ROH DQG 6KDQNOH 6HH :ULJKW Y &LUFXLW &LW\ 6WRUHV ,QF  ) 6XSS G   DQG XQOLNH WKH ZHDOWKLHU HPSOR\HHV LQ >RWKHU FDVHV@    1' $OD  m%HFDXVH SXQLWLYH GDPDJHV DQG EDFNIURQW SD\ DUH  :/  DW  $V sXGJH 3ROODN QRWHG LQ *LRUGDQR PDQ\ RI WKH LPSRUWDQW GHWHUUHQWV WR HPSOR\HUV ZKR PLJKW RWKHUZLVH GLVFULPLQDWH RQ FDVHV ILQGLQJ FRVWVSOLWWLQJ SURYLVLRQV HQIRUFHDEOH LQYROYHG mKLJKO\ SDLG WKH EDVLV RI UDFH WKH IDLOXUH RI WKH &LUFXLW &LW\ DUELWUDWLRQ SURYLVLRQ WR HPSOR\HHVl UHODWLYHO\ VSHDNLQJ 6HH HJ %UDGIRUG Y 5RFNZHOO SURYLGH UHPHGLHV HTXLYDOHQW WR WKRVH DOORZHG XQGHU >IHGHUDO ODZ@ SUHYHQWV 6HPLFRQGXFWRU 6\V ,QF  )G   Q WK &LU  KROGLQJ WKH 3ODLQWLIIV IURP HIIHFWLYHO\ YLQGLFDWLQJ WKHLU ULJKWVl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jFODLPVLQDUELWUDOIRUDl,G UHPHGLHV LQ &LUFXLW &LW\jV DUELWUDWLRQ DJUHHPHQW ZHUH QRW HQIRUFHDEOH XQGHU*LOPHU  6HH &LUFXLW &LW\ 6WRUHV ,QF Y 0RUHRYHULQDGGUHVVLQJWKHHIIHFWRIDUELWUDWLRQFRVWVRQD $GDPV  )G   WK &LU  m&LUFXLW &LW\jV FODVVWKHUHYLHZLQJFRXUWVKRXOGORRNWRDYHUDJHRUW\SLFDO DUELWUDWLRQDJUHHPHQWIDLOVWRSURYLGHIRUDOORIWKHW\SHV DUELWUDWLRQFRVWVEHFDXVHWKDWLVWKHNLQGRILQIRUPDWLRQWKDW RIUHOLHIWKDWZRXOGRWKHUZLVHEHDYDLODEOHLQFRXUWl  SRWHQWLDOOLWLJDQWVZLOOWDNHLQWRDFFRXQWLQGHFLGLQJZKHWKHU FHUWGHQLHG866&W s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nZLWKRQHLPSRUWDQWH[FHSWLRQ,QWKHDUELWUDOIRUXP WKHOLWLJDQWIDFHVDQDGGLWLRQDOH[SHQVHnWKHDUELWUDWRUjVIHH DQGFRVWVnZKLFKDUHQHYHULQFXUUHGLQWKHMXGLFLDOIRUXP 6HH &ROH  )G DW  m>:@H DUH XQDZDUH RI DQ\ VLWXDWLRQLQ$PHULFDQMXULVSUXGHQFHLQZKLFKDEHQHILFLDU\RI DIHGHUDOVWDWXWHKDVEHHQUHTXLUHGWRSD\IRUWKHVHUYLFHVRI DOWKRXJK 0RUULVRQ KDV DVVHUWHG WKDW WKH GLVFRYHU\ DOORZHG XQGHU WKH WKH MXGJH DVVLJQHG WR KHDU KHU RU KLV FDVHl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mWKHIDFWWKDW>WKH@IHHV HPSOR\PHQW 7KHUHIRUH ZH UHMHFW 0RUULVRQjV DUJXPHQWV UHJDUGLQJ WKH ZRXOGEHSDLGWRWKHDUELWUDWRUl%UDGIRUG)GDW GLVFRYHU\ DQG OLPLWDWLRQV SURYLVLRQV LQ WKH &LUFXLW &LW\ DUELWUDWLRQ DJUHHPHQW  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO %HFDXVH WKH OLPLWDWLRQ RQ UHPHGLHV IRXQG LQ WKH &LUFXLW EXWUDWKHUZKHWKHUWKHmRYHUDOOFRVWRIDUELWUDWLRQlLGIURP &LW\ DUELWUDWLRQ DJUHHPHQW VLJQLILFDQWO\ XQGHUPLQHV 7LWOH WKHSHUVSHFWLYHRIWKHSRWHQWLDOOLWLJDQWLVJUHDWHUWKDQmWKH 9,,jVUHPHGLDOSXUSRVHRIPDNLQJYLFWLPVRIGLVFULPLQDWLRQ FRVWRIOLWLJDWLRQLQFRXUWlLG ZKROH DQG LWV GHWHUUHQW SXUSRVHV RI IRUFLQJ HPSOR\HUV WR HOLPLQDWH DQG SUHYHQW GLVFULPLQDWRU\ SUDFWLFHV LQ WKH )LQDOO\ XQGHU WKLV DQDO\VLV WKH UHYLHZLQJ FRXUW VKRXOG ZRUNSODFHZHKROGWKDWWKHSURYLVLRQDWLVVXHLQWKLVFDVHZDV GLVFRXQWWKHSRVVLELOLWLHVWKDWWKHSODLQWLIIZLOOQRWEHUHTXLUHG QRWHQIRUFHDEOH6HH3DODGLQR)GDW QRWLQJWKDW WRSD\FRVWVRUDUELWUDOIHHVEHFDXVHRIXOWLPDWHVXFFHVVRQWKH WKH DUELWUDELOLW\ RI GLVFULPLQDWLRQ mFODLPV UHVWV RQ WKH PHULWV HLWKHU EHFDXVH RI FRVWVKLIWLQJ SURYLVLRQV LQ WKH DVVXPSWLRQ WKDW WKH DUELWUDWLRQ FODXVH SHUPLWV UHOLHI DUELWUDWLRQDJUHHPHQWRUEHFDXVHWKHDUELWUDWRUGHFLGHVWKDW HTXLYDOHQWWRFRXUWUHPHGLHVl  HPSKDVLVDGGHG 7UXPEXOOY VXFKFRVWVRUIHHVDUHFRQWUDU\WRIHGHUDOODZ7KHLVVXHLV &HQWXU\0NWJ&RUS)6XSSG 1'2KLR ZKHWKHUWKHWHUPVRIWKHDUELWUDWLRQDJUHHPHQWLWVHOIZRXOG   KROGLQJWKDWDQDUELWUDWLRQFODXVHZDVXQHQIRUFHDEOH GHWHU D VXEVWDQWLDO QXPEHU RI VLPLODUO\ VLWXDWHG HPSOR\HHV EHFDXVHLWSURKLELWHGDQDZDUGRISXQLWLYHGDPDJHVZKLFK IURPEULQJLQJWKHLUFODLPVLQWKHDUELWUDOIRUXPDQGWKXVWKH ZDVDYDLODEOHWRWKHSODLQWLIIXQGHU7LWOH9,, FI3HUH] FRXUW PXVW FRQVLGHU WKH GHFLVLRQPDNLQJ SURFHVV RI WKHVH )G DW  KROGLQJ WKDW mIHGHUDO VWDWXWRU\ FODLPV DUH SRWHQWLDO OLWLJDQWV  ,Q PDQ\ FDVHV LI QRW PRVW HPSOR\HHV DUELWUDEOHRQO\ZKHQDUELWUDWLRQFDQVHUYHWKHVDPHUHPHGLDO FRQVLGHULQJWKHFRQVHTXHQFHVRIEULQJLQJWKHLUFODLPVLQWKH DQGGHWHUUHQWIXQFWLRQVDVOLWLJDWLRQDQGDQDJUHHPHQWWKDW DUELWUDOIRUXPZLOOEHLQFOLQHGWRHUURQWKHVLGHRIFDXWLRQ OLPLWVWKHUHPHGLHVDYDLODEOHFDQQRWDGHTXDWHO\VHUYHWKRVH HVSHFLDOO\ZKHQWKHZRUVWFDVHVFHQDULRZRXOGPHDQQRWRQO\ IXQFWLRQVl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mUHJDUGOHVV RI WKH RXWFRPH RI WKH DUELWUDWLRQl ,I DUELWUDWLRQ LV  FRQFOXGLQJWKDWLQGLYLGXDOZLWKVL[ILJXUHLQFRPHZDVQRW WR RIIHU FODLPDQWV WKH IXOO VFRSH RI UHPHGLHV DYDLODEOH XQGHU 7LWOH 9,, GHWHUUHGIURPDUELWUDOIRUXPE\FRVWVSOLWWLQJSURYLVLRQ ,Q DUELWUDWRUV &KULVWLDQVEXUJ LQ 7LWOH 9,, FDVHV MXVW OLNH FRXUWV PXVW DQG PXVW RUGLQDULO\ JUDQW DWWRUQH\ IHHV WR SUHYDLOLQJ EH JXLGHG E\ WKH FDVH RI RWKHU HPSOR\HHV KRZHYHU WKLV VWDQGDUG ZLOO FODLPDQWV UHQGHUFRVWVSOLWWLQJSURYLVLRQVXQHQIRUFHDEOHLQPDQ\LIQRW PRVW FDVHV  6HH HJ 6KDQNOH  )G DW   m$VVXPLQJ0U6KDQNOHjVDUELWUDWLRQZRXOGKDYHODVWHGDQ :H FRQFOXGH KRZHYHU WKDW WKH SURYLVLRQV UHJDUGLQJ GLVFRYHU\ DQG WKH OLPLWDWLRQV SHULRG IRU ILOLQJ D UHTXHVW IRU DUELWUDWLRQ LQ WKH DJUHHPHQW DYHUDJHOHQJWKRIWLPHKHZRXOGKDYHKDGWRSD\DQDUELWUDWRU DW LVVXH DUH HQIRUFHDEOH ,Q *LOPHU  WKH 6XSUHPH &RXUW UHMHFWHG DQ EHWZHHQ  DQG  WR UHVROYH KLV FODLPV  0U DUJXPHQW VLPLODU WR 0RUULVRQjV UHJDUGLQJ GLVFRYHU\ QRWLQJ WKDW LW ZDV 6KDQNOHFRXOGQRWDIIRUGVXFKDIHHDQGLWLVXQOLNHO\RWKHU mXQOLNHO\    WKDW    GLVFULPLQDWLRQ FODLPV UHTXLUH>G@ PRUH H[WHQVLYH GLVFRYHU\ WKDQ RWKHU FODLPV WKDW >WKH &RXUW@ IRXQG WR DUELWUDEOH VXFK DV 5,&2 DQG DQWLWUXVW FODLPVl *LOPHU   86 DW  7KH 6XSUHPH &RXUW IXUWKHU KHOG WKDW WKH FODLPDQW KDG IDLOHG WR PDNH D VKRZLQJ WKDW WKH GLVFRYHU\ SURYLVLRQV IRU DUELWUDWLRQ mZLOO SURYH LQVXIILFLHQW WR DOORZ    FODLPDQWV    D IDLU RSSRUWXQLW\ WR SUHVHQW WKHLU FODLPVl ,G ,Q WKLV FDVH  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO VLPLODUO\ VLWXDWHG HPSOR\HHV FRXOG HLWKHUl  IRRWQRWH &LUFXLW&LW\jVDUELWUDWLRQDJUHHPHQWZKLFKOLPLWVSXQLWLYH RPLWWHG  GDPDJHVWRWKHJUHDWHURIRUWKHVXPRIDFODLPDQWjV EDFNSD\DQGIURQWSD\DZDUGVHYLVFHUDWHV&RQJUHVVjVLQWHQW ,,,0RUULVRQ 1R WR XWLOL]H SXQLWLYH GDPDJHV DV D WRRO IRU FRPEDWLQJ GLVFULPLQDWLRQ SDUWLFXODUO\ LQ FDVHV ZKHUH QR EDFNSD\ RU $6WDQGDUGRI5HYLHZ IURQWSD\LVDZDUGHG(YHQLI0RUULVRQZHUHWRUHFHLYHWKH PD[LPXPDPRXQWRIEDFNSD\DQGIURQWSD\DYDLODEOHWRKHU :HUHYLHZGHQRYRDQRUGHUFRPSHOOLQJDUELWUDWLRQ)ORVV XQGHU&LUFXLW&LW\jVDUELWUDWLRQDJUHHPHQWVKHFRXOGUHFHLYH Y5\DQj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jVDUELWUDWLRQDJUHHPHQWZRXOGDOORZRQO\ DSXQLWLYHGDPDJHVDZDUGLQVXFKDFDVH/LNHZLVH ZKHUHDV 7LWOH 9,, ZRXOG DOORZ 0RUULVRQ WR FROOHFW XS WR  7R WKRVH ZKR ZRXOG FRPSODLQ WKDW HPSOR\HUV VKRXOG QRW EH LQSXQLWLYHGDPDJHVHYHQLIRQO\QRPLQDOGDPDJHV UHTXLUHG WR SD\ DOO WKH FRVWV RI WKH DUELWUDO IRUXP LQ FDVHV ZKHUH WKH FRVW ZHUH DZDUGHG &LUFXLW &LW\j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mDSODLQWLIIZKRSURYHVDFDXVHRIDFWLRQXQGHU FDVH $W RUDO DUJXPHQW FRXQVHO IRU &LUFXLW &LW\ VWDWHG WKDW DUELWUDWRUV †PD\UHFRYHUSXQLWLYHGDPDJHVZKHUHWKHSODLQWLIILV RIWHQ UHTXLUHG WKH FRPSDQ\ WR SD\ WKH HPSOR\HHjV VKDUH RI WKH FRVWV RI WKH HQWLWOHG WR DQ DZDUG RI FRPSHQVDWRU\ GDPDJHV HYHQ LI QRPLQDOl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jV UHPHGLHV LQ DQ LPSRUWDQW VHQVH $OWKRXJK WKXV DUELWUDWLRQ LV PXFK OHVV H[SHQVLYH WKDQ OLWLJDWLRQ IURP WKHLU WKH UXOH LQ HIIHFW DW WKH WLPH 0RUULVRQ EURXJKW KHU FODLPV JUDQWHG WKH SHUVSHFWLYH HYHQ ZKHQ WKH\ DUH UHTXLUHG WR FRYHU WKH HQWLUH FRVW RI WKH DUELWUDWRU WKH GLVFUHWLRQ WR DZDUG WKH FODLPDQW DWWRUQH\ IHHV LW GLG QRW VWDWH DUELWUDWLRQ WKDW WKH DUELWUDWRU VKRXOG JUDQW DWWRUQH\ IHHV mLQ DFFRUGDQFH ZLWK  DSSOLFDEOH ODZl 8QGHU 7LWOH 9,, LW LV FOHDU WKDW mD SUHYDLOLQJ SODLQWLII ,Q *UHHQ 7UHH )LQDQFLDO &RUS$ODEDPD Y 5DQGROSK  86  RUGLQDULO\ LV WR EH DZDUGHG DWWRUQH\jV IHHV LQ DOO EXW VSHFLDO    WKH 6XSUHPH &RXUW XQDQLPRXVO\ KHOG WKDW D GLVWULFW FRXUW RUGHU FLUFXPVWDQFHVl & KULVWLDQVEXUJ *DUPHQW &R Y ((2&  86  FRPSHOOLQJ DUELWUDWLRQ DQG GLVPLVVLQJ DOO WKH FODLPV EHIRUH WKH FRXUW LV    7KH ZRUGLQJ RI WKH DUELWUDWLRQ DJUHHPHQW KRZHYHU LV YHU\ LPPHGLDWHO\ DSSHDODEOH XQGHU  86& †  D   $IWHU *UHHQ 7UHH RXU VLPLODU WR WKH VWDWXWRU\ SURYLVLRQ LQ TXHVWLRQ †  N RI 7LWOH 9,,  MXULVGLFWLRQ LQ WKH SUHVHQW DSSHDO LV FOHDUO\ HVWDEOLVKHG 86& † H N  ZKLFK DXWKRUL]HV WKH FRXUW mLQ LWV GLVFUHWLRQl WR  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO WKHWHUPVRIWKHOLPLWDWLRQVIRXQGLQWKHDUELWUDWLRQDJUHHPHQW DJUHHPHQWLVYDOLG6HHLG%HFDXVHZHKDYHSUHYLRXVO\KHOG WKDQVKHFRXOGKDYHXQGHU7LWOH9,, WKDW7LWOH9,,FODLPVPD\EHKHDUGLQDQDUELWUDOIRUXPVHH :LOOLVY'HDQ:LWWHU5H\QROGV,QF)G WK ,QVXPWKH&LUFXLW&LW\DUELWUDWLRQDJUHHPHQWGRHVPRUH &LU   ZH SURFHHG WR WKH VHFRQG VWHS LQ WKH UHYLHZ WKDQ OLPLW 0RUULVRQjV SRWHQWLDO PRQHWDU\ UHPHG\ IRU SURFHVVLHGHWHUPLQLQJZKHWKHUWKH&LUFXLW&LW\DUELWUDWLRQ GLVFULPLQDWLRQE\OLPLWLQJDQ\EDFNSD\DQGIURQWSD\DZDUGV DJUHHPHQWLVYDOLGDQGHQIRUFHDEOH ,QDGGLWLRQLWDOVRSUHYHQWVWKHUHPHGLDOSULQFLSOHVRI7LWOH 9,,IURPEHLQJHIIHFWXDWHGEHFDXVHLWGRHVQRWDOORZ0RUULVRQ 8QGHUVHFWLRQ RIWKH)$$DQDUELWUDWLRQDJUHHPHQWLV WREHIXOO\FRPSHQVDWHGIRUDQ\KDUPVFDXVHGE\ZURQJIXO mYDOLGLUUHYRFDEOHDQGHQIRUFHDEOHVDYHXSRQVXFKJURXQGV GLVFULPLQDWLRQ  6LPLODUO\ &LUFXLW &LW\jV DUELWUDWLRQ DVH[LVWDWODZRULQHTXLW\IRUWKHUHYRFDWLRQRIDQ\FRQWUDFWl DJUHHPHQWXQGHUPLQHVWKHGHWHUUHQWSXUSRVHVRI7LWOH9,,E\ 86&†:HUHYLHZWKHHQIRUFHDELOLW\RIDQDUELWUDWLRQ SODFLQJ VWULQJHQW OLPLWV RQ SXQLWLYH GDPDJHV DYDLODEOH WR DJUHHPHQWDFFRUGLQJWRWKHDSSOLFDEOHVWDWHODZRIFRQWUDFW 0RUULVRQDQGRWKHUFODLPDQWVXQGHUWKHDUELWUDWLRQDJUHHPHQW IRUPDWLRQ)LUVW2SWLRQVRI&KLFDJR,QFY.DSODQ86 7KH 6XSUHPH &RXUW KDV UHSHDWHGO\ DFNQRZOHGJHG WKDW   ,Q0RUULVRQjVFDVHZHDSSO\WKH2KLR PRQHWDU\ DZDUGV IRU FODLPDQWV ZKR EULQJ GLVFULPLQDWLRQ ODZ RI FRQWUDFW IRUPDWLRQ DV 0RUULVRQ ZDV HPSOR\HG E\ FODLPVRIWHQVHUYHDVDQLQFHQWLYHIRUHPSOR\HUVWRHOLPLQDWH &LUFXLW&LW\LQWKHVWDWHRI2KLRDQGWKHSDUWLHVKDYHDJUHHG WKHLU GLVFULPLQDWRU\ SUDFWLFHV  6HH .ROVWDG Y $PHULFDQ WKDW 2KLR ODZ DSSOLHV  6HH s$ DW  $UELWUDWLRQ 'HQWDO$VVjQ86  VHHDOVR0F.HQQRQ $JUHHPHQW  VWDWLQJ WKDW m>W@KH $UELWUDWRU VKDOO DSSO\ WKH 86DW m&RQJUHVVGHVLJQHGWKHUHPHGLDOPHDVXUHV VXEVWDQWLYHODZRIWKH6WDWHLQZKLFKWKH$VVRFLDWHLVRUZDV LQ>7LWOH9,,@WRVHUYHDVDVSXURUFDWDO\VWWRFDXVHHPSOR\HUV SUHGRPLQDQWO\HPSOR\HGl  WR VHOIH[DPLQH DQG WR VHOIHYDOXDWH WKHLU HPSOR\PHQW SUDFWLFHVDQGWRHQGHDYRUWRHOLPLQDWHVRIDUDVSRVVLEOHWKH %(QIRUFHDELOLW\RIWKH$JUHHPHQW ODVWYHVWLJHVRIGLVFULPLQDWLRQl  TXRWDWLRQVRPLWWHG ((2& Y)UDQNjV1XUVHU\ &UDIWV,QF)G WK&LU %HIRUHFRQVLGHULQJ0RUULVRQjVDUJXPHQWVRQFRVWVSOLWWLQJ   QRWLQJWKDW&RQJUHVVDSSURYHGRIGDPDJHVDVDWRROIRU DQG WKH OLPLWDWLRQ RQ UHPHGLHV XQGHU WKH &LUFXLW &LW\ HUDGLFDWLQJ GLVFULPLQDWLRQ mZKHQ LW DGGHG WKH UHPHGLHV RI DUELWUDWLRQDJUHHPHQWZHILUVWFRQVLGHUDYDULHW\RIDUJXPHQWV FRPSHQVDWRU\ DQG SXQLWLYH GDPDJHV E\ HQDFWLQJ WKH &LYLO WKDWVKHUDLVHVZLWKUHVSHFWWRWKHIRUPDWLRQRIWKHFRQWUDFW 5LJKWV$FWRIl  XQGHUVWDWHODZ 0RUULVRQ ILUVW DUJXHV WKDW WKH DUELWUDWLRQ DJUHHPHQW LV XQFRQVFLRQDEOHEHFDXVHLWFRQWDLQVXQIDLUDQGXQUHDVRQDEOH  0RUHRYHU &LUFXLW &LW\jV DUELWUDWLRQ DJUHHPHQW IXUWKHU XQGHUFXWV WHUPVFRQFHUQLQJUHPHGLHVWKHSD\PHQWRIDUELWUDWLRQIHHV &RQJUHVVj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jW  )G 8QGHU 2KLR ODZ WKH XQFRQVFLRQDELOLW\ GRFWULQH KDV WZR   WK &LU  FHUW GHQLHG  86    5DVLPDV Y FRPSRQHQWV 0LFK 'HSjW RI 0HQWDO +HDOWK  )G   WK &LU   FHUW GHQLHG  86     0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO   VXEVWDQWLYH XQFRQVFLRQDELOLW\ LH XQIDLU DQG 6HFRQG IHGHUDO ODZ GRHV QRW OLPLW 0RUULVRQjV WRWDO XQUHDVRQDEOH FRQWUDFW WHUPV DQG   SURFHGXUDO GDPDJHVEXWUDWKHURQO\OLPLWVWKHVXPRIKHUFRPSHQVDWRU\ XQFRQVFLRQDELOLW\ LH LQGLYLGXDOL]HG FLUFXPVWDQFHV DQGSXQLWLYHGDPDJHVIXUWKHUPRUHLWSODFHVQROLPLWVRQWKH VXUURXQGLQJHDFKRIWKHSDUWLHVWRDFRQWUDFWVXFKWKDWQR DPRXQWRIEDFNSD\RUIURQWSD\WKDW0RUULVRQPD\UHFHLYH YROXQWDU\ PHHWLQJ RI WKH PLQGV ZDV SRVVLEOH  %RWK ,QGHHG  86& † D H[SOLFLWO\ VWDWHV WKDW HOHPHQWV PXVW EH SUHVHQW WR ILQG D FRQWUDFW m>F@RPSHQVDWRU\GDPDJHVDZDUGHGXQGHUWKLVVHFWLRQVKDOO XQFRQVFLRQDEOH QRWLQFOXGHEDFNSD\LQWHUHVWRQEDFNSD\RUDQ\RWKHUW\SHRI UHOLHIDXWKRUL]HGXQGHUVHFWLRQ J RIWKH&LYLO5LJKWV$FW sHIIUH\ 0LQLQJ 3URGV /3 Y /HIW )RUN 0LQLQJ &R  RI l   86& † D E   HPSKDVLV DGGHG  1(G 2KLR&W$SS  TXRWDWLRQRPLWWHG  $GGLWLRQDOO\IHGHUDOODZGRHVQRWUHTXLUHWKDWDFODLPDQWj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mIDFWRUVEHDULQJRQWKHUHODWLYHEDUJDLQLQJSRVLWLRQRI SD\DZDUGLQH[FHVVRIWKHPHUHWZR\HDUVDOORZHGXQGHUWKH WKH FRQWUDFWLQJ SDUWLHV LQFOXGLQJ WKHLU DJH HGXFDWLRQ DUELWUDWLRQ DJUHHPHQW  ,Q RWKHU ZRUGV LI 0RUULVRQ KDG LQWHOOLJHQFH EXVLQHVV DFXPHQ DQG H[SHULHQFH UHODWLYH UHFHLYHGDIDYRUDEOHMXGJPHQWLQFRXUWLQWKHRU\VKHFRXOG EDUJDLQLQJSRZHUZKRGUDIWHGWKHFRQWUDFWZKHWKHUWKHWHUPV KDYH FROOHFWHG D EDFNSD\ DZDUG HTXDO WR WKUHH WLPHV KHU ZHUHH[SODLQHGWRWKHZHDNHUSDUW\DQGZKHWKHUDOWHUDWLRQV VDODU\DVRSSRVHGWRRQHDQGDIURQWSD\ DZDUGZKLFKLI LQWKHSULQWHGWHUPVZHUHSRVVLEOHl&URVVY&DUQHV JLYHQLQOLHXRIUHLQVWDWHPHQWFRXOGKDYHHTXDOHGDVPXFKDV 1(G 2KLR&W$SS m7KHFUXFLDOTXHVWLRQ WKHDPRXQWRISD\VKHZRXOGKDYHUHFHLYHGIURPWKHGDWHRI LVZKHWKHUµHDFKSDUW\WRWKHFRQWUDFWFRQVLGHULQJKLVREYLRXV KHU MXGJPHQW WR WKH GDWH RI KHU UHWLUHPHQW  6HH HJ HGXFDWLRQ RU ODFN RI LW >KDG@ D UHDVRQDEOH RSSRUWXQLW\ WR 3DVVDQWLQRYsRKQVRQ sRKQVRQ&RQVXPHU3URGV)G XQGHUVWDQGWKHWHUPVRIWKHFRQWUDFWRUZHUHWKHLPSRUWDQW  WK&LU  XSKROGLQJIURQWSD\DZDUGEDVHGRQ WHUPVKLGGHQLQDPD]HRIILQHSULQW"jl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mIURP D GDWH &LW\DQGZDVDSSDUHQWO\QRWRSHQWRQHJRWLDWLRQZHGRQRW >QR@ PRUH WKDQ WZR \HDUV SULRU WR WKH ILOLQJ RI >KHU@ FKDUJH ZLWK WKH VXSSRVH WKDW 2KLR FRXUWV ZRXOG ILQG WKLV KLJKO\ HGXFDWHG &RPPLVVLRQl $V 0RUULVRQ ILOHG KHU FKDUJH ZLWK WKH ((2& ZLWKLQ D IHZ SODLQWLII ZKR JUDGXDWHG IURP WKH $LU )RUFH $FDGHP\ DQG PRQWKV DIWHU KHU WHUPLQDWLRQ XQGHU 7LWOH 9,, VKH ZRXOG EH HOLJLEOH IRU D EDFNSD\ DZDUG VWDUWLQJ IURP WKH GDWH RI KHU WHUPLQDWLRQ  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO GDPDJHV LQ DFFRUGDQFH ZLWK DSSOLFDEOH ODZ DQG SXQLWLYH KHOG D PDVWHUjV GHJUHH LQ DGPLQLVWUDWLRQ D YLFWLP RI GDPDJHVXSWRRUWKHVXPRIDFODLPDQWjVEDFNSD\DQG SURFHGXUDOXQFRQVFLRQDELOLW\&I&ROOLQVY&OLFN&DPHUD IURQWSD\DZDUGVZKLFKHYHULVJUHDWHU 9LGHR ,QF  1(G   2KLR &W $SS  UHIXVLQJWRILQGSURFHGXUDOXQFRQVFLRQDELOLW\ZKHUH+DUYDUG &LUFXLW&LW\DUJXHVVRPHZKDWFRXQWHULQWXLWLYHO\WKDWVXFK JUDGXDWH ZLWK mH[WHQVLYH EXVLQHVV DQG FRQWUDFWLQJ OLPLWV GR QRW XQGHUPLQH WKH SXUSRVHV RI 7LWOH 9,, EHFDXVH H[SHULHQFHlDGPLWWHGWRVHHLQJWKHUHOHYDQWFODXVHEXWIDLOHG 0RUULVRQFRXOGSRWHQWLDOO\UHFHLYHDJUHDWHUVXPRIGDPDJHV WRUHDGLWVFRQWHQWV $FFRUGLQJO\RQWKHVHIDFWVZHILQGWKDW XQGHULWVDJUHHPHQWWKDQVKHFRXOGUHFHLYHXQGHU7LWOH9,, WKHUHZDVQRSURFHGXUDOXQFRQVFLRQDELOLW\ $VZHUHDGWKHWHUPVRIWKHDUELWUDWLRQDJUHHPHQWKRZHYHU &LUFXLW&LW\jVDUJXPHQWLVIODZHGIRUDQXPEHURIUHDVRQV 0RUULVRQ QH[W DUJXHV WKDW WKH DUELWUDWLRQ DJUHHPHQW LV )LUVW XQGHU &LUFXLW &LW\jV DUELWUDWLRQ DJUHHPHQW 0RUULVRQ XQHQIRUFHDEOHEHFDXVHLWLVXQVXSSRUWHGE\FRQVLGHUDWLRQDQG FRXOG QRW FROOHFW D SRWHQWLDO FRPSHQVDWRU\ DQG SXQLWLYH EHFDXVHWKHUHLVQRPXWXDOLW\RIREOLJDWLRQ0RUULVRQDUJXHV GDPDJHV DZDUG RI  $SSHOOHHjV %U DW  Q EXW WKDWWKHUHZDVQRPXWXDOLW\RIREOLJDWLRQRUFRQVLGHUDWLRQIRU RQO\   7R FDOFXODWH WKLV ZH VXSSRVH WKDW DQ WKHDUELWUDWLRQDJUHHPHQWEHFDXVH&LUFXLW&LW\KDGWKHSRZHU DUELWUDWRU ZHUH WR DZDUG 0RUULVRQ WKH IXOO DPRXQW RI WRDOWHURUWHUPLQDWHWKHDJUHHPHQWRQ'HFHPEHURIHDFK FRPSHQVDWRU\GDPDJHVWKDWWKHDUELWUDWLRQDJUHHPHQWDOORZV \HDUXSRQJLYLQJWKLUW\GD\VjQRWLFHWRLWV HPSOR\HHV:H %HFDXVH WKH DJUHHPHQWjV 5XOH    DOORZV FRPSHQVDWRU\ FRQFOXGHKRZHYHUWKDWWKH&LUFXLW&LW\DUELWUDWLRQDJUHHPHQW GDPDJHVmLQDFFRUGDQFHZLWKDSSOLFDEOHODZlZHVXSSRVHDQ ZDVVXSSRUWHGE\VXIILFLHQWFRQVLGHUDWLRQDQGDPXWXDOLW\RI DZDUGRIWKHPD[LPXPILJXUHDOORZHGXQGHU7LWOH REOLJDWLRQ,QPDNLQJWKLVGHWHUPLQDWLRQZHORRNWR2KLR 9,,  :H WKHQ VXSSRVH WKDW WKH DUELWUDWRU ZHUH WR DZDUG ODZ$OWKRXJKWKH2KLR6XSUHPH&RXUWKDVQRW\HWDGGUHVVHG 0RUULVRQ SXQLWLYH GDPDJHV XQGHU 5XOH    ZKLFK WKH WKLVTXHVWLRQWZRFRXUWVRIDSSHDOVKDYHDGGUHVVHGUHODWHG DJUHHPHQWFDSVDWDPRXQWmHTXDOWRWKHPRQHWDU\DZDUGLI TXHVWLRQV7KHILUVWLV+DUPRQY3KLOLS0RUULV,QF DQ\UHQGHUHGSXUVXDQWWR6XEVHFWLRQVDQGRUlRI5XOH 1(G 2KLR&W$SS ,Q+DUPRQWKHFRXUWUXOHG 6XSSRVLQJWKDWWKHDUELWUDWRUZHUHWRDZDUGSXQLWLYHGDPDJHV WKDWDQDUELWUDWLRQDJUHHPHQWUHTXLULQJHPSOR\HHVWRVXEPLW HTXDOWRWKHPD[LPXPDOORZHGXQGHU5XOHV  DQG   WKHLU FODLPV WR DUELWUDWLRQ EXW LPSRVLQJ QR UHFLSURFDO 0RUULVRQ ZRXOG UHFHLYH SXQLWLYH GDPDJHV HTXDO WR5XOH REOLJDWLRQRQWKHHPSOR\HUDQGJLYLQJWKHHPSOR\HUWKHULJKW   jVPD[LPXPRIRQH\HDURIEDFNSD\RU DQG WRDPHQGRUWHUPLQDWHWKHDUELWUDWLRQSURJUDPmDWDQ\WLPHl 5XOH   jV PD[LPXP RI WZR \HDUV RI IURQW SD\ RU ODFNHGFRQVLGHUDWLRQEHFDXVHLWmQHLWKHURIIHUHGDEHQHILWWR   7KH VXP RI WKHVH ILJXUHV n WKH DJUHHPHQWjV LWVHPSOR\HHVQRULQFXUUHGDQ\GHWULPHQWE\PRGLI\LQJWKH PD[LPXPFRPSHQVDWRU\GDPDJHVDQGWKHPD[LPXPSXQLWLYH WHUPVRIWKHHPSOR\PHQWUHODWLRQVKLSl6HHLGDW7KH GDPDJHVnLV &LUFXLW&LW\DJUHHPHQWLVLGHQWLFDOWRWKHDJUHHPHQWDWLVVXH LQ +DUPRQ LQ WKDW LW UHTXLUHV HPSOR\HHV WR VXEPLW WKHLU GLVSXWHVWRDUELWUDWLRQEXWPDNHVQRVLPLODUGHPDQGRQWKH HPSOR\HU  s$ DW   $FFRUGLQJO\ WKH RQO\ TXHVWLRQ LV  &LUFXLW &LW\ DSSDUHQWO\ DUULYHG DW LWV ILJXUH RI  E\ ZKHWKHU WKH &LUFXLW &LW\jV WLPLQJ SURYLVLRQ ZKLFK DOORZV DVVXPLQJ WKDW 0RUULVRQ ZRXOG UHFHLYH WZHQW\QLQH PRQWKV RI EDFNSD\ &LUFXLW&LW\WRDPHQGXQLODWHUDOO\WKHDJUHHPHQWRQO\RQD ZKLFK ZRXOG FRYHU WKH WLPH IURP ZKHQ VKH ZDV ILUHG WR WKH GDWH RI KHU VSHFLILHG GDWH LV HQRXJK RI D OLPLWDWLRQ WR FRQVWLWXWH DUELWUDWLRQ ZKLFK ZDV VFKHGXOHG IRU $SULO RI  +RZHYHU &LUFXLW FRQVLGHUDWLRQ &LW\jV DJUHHPHQW H[SOLFLWO\ OLPLWV D EDFNSD\ DZDUG WR mRQO\ XS WR RQH \HDUl  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO 7KH VHFRQG UHOHYDQW 2KLR FDVH &HQWXU\  $PHULFDQ 7LWOH9,,DQGZRXOGWKHUHE\FRQWUDYHQH&RQJUHVVjVLQWHQWWR /DQGPDUN,QFY0F,QW\UH1(G 2KLR&W$SS XWLOL]HFHUWDLQGDPDJHVDVDWRROIRUFRPSHQVDWLQJYLFWLPVRI  PD\ SURYLGHVRPHLQVLJKWRQWKLVTXHVWLRQ,QWKDW GLVFULPLQDWLRQDQGIRUGHWHUULQJHPSOR\PHQWGLVFULPLQDWLRQ FDVHWKHFRXUWVWDWHGWKDWmDFRQWUDFWLVLOOXVRU\RQO\ZKHQE\ PRUHEURDGO\7KHFULWLFDOTXHVWLRQLVQRWZKHWKHUDFODLPDQW LWVWHUPVWKHSURPLVRUUHWDLQVDQXQOLPLWHGULJKWWRGHWHUPLQH PD\ REWDLQ VRPH DPRXQW RI WKH HQWLUH UDQJH RI UHPHGLHV WKHQDWXUHRUH[WHQWRIKLVSHUIRUPDQFHWKHXQOLPLWHGULJKWLQ XQGHU 7LWOH 9,, EXW ZKHWKHU WKH OLPLWDWLRQ RQ UHPHGLHV DW HIIHFW GHVWUR\V KLV SURPLVH DQG WKXV PDNHV LW PHUHO\ LVVXH XQGHUPLQHV WKH ULJKWV SURWHFWHG E\ WKH VWDWXWH  6HH LOOXVRU\l,GDW$OWKRXJKWKHFRXUWGLGQRWGHILQHWKH *LOPHU86DW6HHDOVR0F&DVNLOOY6&,0JPW VRUWVRIOLPLWVWKDWZRXOGEHUHOHYDQWWRVXFKDQLQTXLU\LW &RUS  )G   WK &LU   KROGLQJ WKDW IRXQGDOLPLWVXIILFLHQWZKHQDKRPHRZQHUjVXQLODWHUDOSRZHU DUELWUDWLRQ DJUHHPHQW WKDW GLG QRW SURYLGH IRU DZDUG RI WR WHUPLQDWH D KRPH VDOH FRQWUDFW mDURVH RQO\ XSRQ WKH DWWRUQH\ IHHV WR VXFFHVVIXO 7LWOH 9,, FODLPDQW ZDV KDSSHQLQJRIDQHYHQWLHDUHSDLURUGHUUHVXOWLQJIURP>D XQHQIRUFHDEOHEHFDXVHm>W@KHULJKWWRDWWRUQH\jVIHHVLV WKLUGSDUW\ LQVSHFWLRQ RI WKH KRPH@ RYHU ZKLFK WKH FHQWUDOWRWKHDELOLW\RISHUVRQVWRVHHNUHGUHVVIURPYLRODWLRQV >KRPHRZQHU@KDGQRFRQWUROl,GDW7KLVFRXOGVXJJHVW RI7LWOH9,,l 3HUH]Y*OREH$LUSRUW6HF6HUYV,QF WKDW2KLRFRXUWVZRXOGFRQVLGHUDXQLODWHUDOULJKWWRDPHQGRU )G WK&LU  m>)@HGHUDOVWDWXWRU\FODLPV WHUPLQDWH D FRQWUDFW mXQOLPLWHGl ZKHQHYHU WKH SRZHU OLHV DUH DUELWUDEOH RQO\ ZKHQ DUELWUDWLRQ FDQ VHUYH WKH VDPH HQWLUHO\ZLWKLQWKHDPHQGLQJRUWHUPLQDWLQJSDUW\jVFRQWURO UHPHGLDO DQG GHWHUUHQW IXQFWLRQV DV OLWLJDWLRQ DQG DQ DQG VXEMHFW RQO\ WR WKDW SDUW\jV GHFLVLRQ WR DPHQG RU DJUHHPHQW WKDW OLPLWV WKH UHPHGLHV DYDLODEOH FDQQRW WHUPLQDWH DGHTXDWHO\VHUYHWKRVHIXQFWLRQVl  FLWLQJ3DODGLQRY$YQHW &RPSXWHU 7HFKV ,QF  )G   WK &LU :HDUHKHVLWDQWWRGLYLQHVXFKDSULQFLSOHIURPWKH2KLR   FRXUWVRQWKHEDVLVRIWKLVVLQJOHGHFLVLRQZKHQWKDWGHFLVLRQ LWVHOIH[SUHVVHVQRVXFKSULQFLSOHDQG LV HTXDOO\FRQVLVWHQW 7KHOLPLWDWLRQRQUHPHGLHVSURYLVLRQDWLVVXHLQ0RUULVRQjV ZLWK DQ RSSRVLQJ LQWHUSUHWDWLRQ  $OWKRXJK ZH FDQQRW EH FDVHXQGHUPLQHVERWKWKHUHPHGLDODQGGHWHUUHQWSULQFLSOHVRI FHUWDLQKRZ2KLRFRXUWVZLOOSURFHHGZHFRQFOXGHWKDW2KLR 7LWOH9,,7KHDUELWUDWLRQDJUHHPHQWjVOLPLWDWLRQRQUHPHGLHV FRXUWVZRXOGILQGFRQVLGHUDWLRQVXIILFLHQWDQGWKHFRQWUDFW FOHDUO\LPSHGHV7LWOH9,,jVUHPHGLDOJRDORImPDNLQJSHUVRQV HQIRUFHDEOH  :H GR WKLV LQ SDUW EDVHG RQ WKH 5HVWDWHPHQW ZKROH IRU LQMXULHV VXIIHUHG WKURXJK SDVW GLVFULPLQDWLRQl 6HFRQG RI&RQWUDFWVZKLFKFRQVLGHUVDWKLUW\GD\VQRWLFH $OEHPDUOH3DSHU&RY0RRG\86   SURYLVLRQ VXIILFLHQW WR FRQVWLWXWH FRQVLGHUDWLRQ  7KH 7KH6XSUHPH&RXUWKDVFRQVLVWHQWO\UHFRJQL]HGWKDWRQHRI 5HVWDWHPHQWVXJJHVWVWKDWZKHQ$SURPLVHV%WRDFWDV%jV WKHREMHFWVRI7LWOH9,,LVm>F@RPSHQVDWLRQIRULQMXULHVFDXVHG DJHQW IRU WKUHH \HDUV RQ FHUWDLQ WHUPV DQG % DJUHHV EXW E\ WKH SURKLELWHG GLVFULPLQDWLRQl  6HH HJ 0F.HQQRQ Y UHVHUYHVWKHSRZHUWRWHUPLQDWHWKHDJUHHPHQWRQWKLUW\GD\V 1DVKYLOOH%DQQHU3XEOjJ&R86  ,Q QRWLFHm%jVDJUHHPHQWLVFRQVLGHUDWLRQVLQFHKHSURPLVHVWR WKLVFDVHWKHUHPHGLHVSRWHQWLDOO\DYDLODEOHWRPDNH0RUULVRQ FRQWLQXH WKH DJHQF\ IRU DW OHDVW WKLUW\ GD\Vl  5HVWDWHPHQW ZKROH ZHUH VLJQLILFDQWO\ OLPLWHG XQGHU WKH DUELWUDWLRQ 6HFRQG RI&RQWUDFWV†FPWELOOXV  ,QFRQWUDVW DJUHHPHQW ZKLFK DOORZV RQO\ LQMXQFWLYH UHOLHI LQFOXGLQJ LI % UHVHUYHV WKH ULJKW WR WHUPLQDWH mDW DQ\ WLPHl WKH UHLQVWDWHPHQW RQH \HDU RI EDFNSD\ DQG UHLPEXUVHPHQW IRU DJUHHPHQWODFNVFRQVLGHUDWLRQmVLQFHLWLQYROYHVQRSURPLVHl ORVWIULQJHEHQHILWV ZKLFKPD\EHIXUWKHUUHGXFHGE\LQWHULP E\%,GDWFPWDLOOXV$FFRUGLQJO\WKH5HVWDWHPHQW HDUQLQJV RU SXEOLFSULYDWH EHQHILWV UHFHLYHG  WZR \HDUV RI VXJJHVWV WKDW &LUFXLW &LW\jV SURPLVH WR PDLQWDLQ WKH IURQW SD\ LI UHLQVWDWHPHQW LV QRW SRVVLEOH FRPSHQVDWRU\  0RUULVRQHWDOY&LUFXLW 1RV 1RV 0RUULVRQHWDOY&LUFXLW  &LW\6WRUHVHWDO &LW\6WRUHVHWDO DJUHHPHQWZRXOGGHWHUDVXEVWDQWLDOSHUFHQWDJHRISRWHQWLDO DUELWUDWLRQDJUHHPHQWIRUDWOHDVWWKLUW\GD\VDQGXQWLOWKHHQG OLWLJDQWVIURPEULQJLQJWKHLUFODLPVLQWKHDUELWUDOIRUXP RIHDFKFDOHQGDU\HDUFRQVWLWXWHVVXIILFLHQWFRQVLGHUDWLRQ6R DOWKRXJKWKH2KLRFRXUWVGRQRWDSSHDUWRKDYHDGGUHVVHGWKLV 7KHSURYLVLRQUHGXFLQJWKH IRUPHU HPSOR\HHjVH[SRVXUH LVVXH ZH DGRSW D SRVLWLRQ WKDW LV FRQVLVWHQW ZLWK WKHLU WR WKH JUHDWHU RI  RU WKUHH SHUFHQW RI KHU DQQXDO GHFLVLRQV DQG HQGRUVHG E\ WKH 5HVWDWHPHQW  6HH DOVR FRPSHQVDWLRQSUHVHQWVDFORVHULVVXH+RZHYHUDSRWHQWLDO +DUPRQ1(GDW QRWLQJWKDWXQGHU2KLRODZmD OLWLJDQWFRQVLGHULQJDUELWUDWLRQZRXOGVWLOOKDYHWRDUUDQJHWR GHWULPHQWWRWKHSURPLVHHlVXFKDVmIRUEHDUDQFHE\WKH SD\ WKUHH SHUFHQW RI KHU PRVW UHFHQW VDODU\ LQ WKLV FDVH SURPLVHHlPD\FRQVWLWXWHFRQVLGHUDWLRQ  ZLWKLQDWKUHHPRQWKSHULRGRUULVNLQFXUULQJKHUIXOO KDOIRIWKHFRVWVXQGHUWKHGHIDXOWUXOH)DFHGZLWKWKLVFKRLFH )XUWKHUWKHSUHVHQWFDVHLVGLVWLQJXLVKDEOHIURP)ORVVLQ nZKLFKUHDOO\ERLOVGRZQWRULVNLQJRQHjVVFDUFHUHVRXUFHV ZKLFK ZH FRQFOXGHG WKDW DQ DUELWUDWLRQ DJUHHPHQW ZDV LQWKHKRSHVRIDQXQFHUWDLQEHQHILWnLWDSSHDUVWRXVWKDWD XQHQIRUFHDEOH EHFDXVH WKH HPSOR\HU KDG mXQIHWWHUHG VXEVWDQWLDO QXPEHU RI VLPLODUO\ VLWXDWHG SHUVRQV ZRXOG EH GLVFUHWLRQLQFKRRVLQJWKHQDWXUHRI>WKHDUELWUDO@IRUXPl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jQRWLFHEHIRUHGRLQJVR SURYLVLRQLQWKHDJUHHPHQWZDVXQHQIRUFHDEOHZLWKUHVSHFWWR KHUFODLPV7KHVHYHUDELOLW\RIWKHSURYLVLRQLVFRQVLGHUHGLQ 0RUULVRQ DOVR DUJXHV WKDW WKH DUELWUDWLRQ DJUHHPHQW ZDV VHFWLRQ,,,(LQIUD LQHIIHFWLYHWRZDLYHSURVSHFWLYHFODLPVEHFDXVHVKHGLGQRW KDYHDQ\EDVLVXSRQZKLFKWREULQJDQDFWLRQDJDLQVW&LUFXLW ' /LPLWDWLRQ RQ 5HPHGLHV LQ WKH &LUFXLW &LW\ &LW\ZKHQVKHVLJQHGWKHDJUHHPHQW,QUHYLHZLQJZKHWKHUD $UELWUDWLRQ$JUHHPHQW ZDLYHURISURVSHFWLYHFODLPVZDVYDOLGZHDSSO\RUGLQDU\ FRQWUDFWSULQFLSOHVmUHPDLQLQJDOHUWWRHQVXUHWKDWHPSOR\HUV :HDOVRFRQFOXGHWKDWWKHOLPLWDWLRQVWKDWWKH&LUFXLW&LW\ GRQRWGHIHDWWKHSROLFLHVRI7LWOH9,,E\WDNLQJDGYDQWDJH DUELWUDWLRQDJUHHPHQWSODFHVRQWKHGDPDJHVDFODLPDQWPD\ RI WKHLU VXSHULRU EDUJDLQLQJ SRVLWLRQ RU E\ RYHUUHDFKLQJl UHFRYHU IURP DUELWUDWLRQ DUH XQHQIRUFHDEOH  ,W LV ZHOO $GDPV Y 3KLOLS 0RUULV ,QF  )G   WK &LU HVWDEOLVKHGWKDWmDSDUW\GRHVQRWIRUJRWKHVXEVWDQWLYHULJKWV  m,QHYDOXDWLQJZKHWKHUD>ZDLYHU@KDVEHHQNQRZLQJO\ DIIRUGHG E\ >D@ VWDWXWH >ZKHQ VKH DJUHHV WR DUELWUDWH D DQGYROXQWDULO\H[HFXWHGZHORRNWR  SODLQWLII VH[SHULHQFH VWDWXWRU\ FODLP EXW@ RQO\ VXEPLWV WR WKHLU UHVROXWLRQ LQ DQ EDFNJURXQG DQG HGXFDWLRQ   WKH DPRXQW RI WLPH WKH DUELWUDOUDWKHUWKDQDMXGLFLDOIRUXPl*LOPHU86DW SODLQWLIIKDGWRFRQVLGHUZKHWKHUWRVLJQWKHZDLYHULQFOXGLQJ TXRWDWLRQRPLWWHG ,QWKLVFDVHKRZHYHUWKHHQIRUFHPHQW ZKHWKHUWKHHPSOR\HHKDGDQRSSRUWXQLW\WRFRQVXOWZLWKD RIWKHDUELWUDWLRQDJUHHPHQWZRXOGUHTXLUH0RUULVRQWRIRUHJR ODZ\HU  WKHFODULW\RIWKHZDLYHU  FRQVLGHUDWLRQIRUWKH KHUVXEVWDQWLYHULJKWVWRWKHIXOOSDQRSO\RIUHPHGLHVXQGHU ZDLYHUDVZHOODV  WKHWRWDOLW\RIWKHFLUFXPVWDQFHVl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jVUHODWLYHFRVWLQFUHDVHV)RUDQFODLPn WKHWHUPVRI5XOHLIVKHFRXOGKDYHDUUDQJHGWRSD\WKH WKHODUJHVWFODLPWKDWWKLVVWXG\FRQVLGHUHGn WKH FRVWVRI JUHDWHURIRUWKUHHSHUFHQWRIKHUDQQXDOVDODU\ LQWKLV DUELWUDWLQJ UDQJHG IURP  WR  VHH LG DW  FDVHWKUHHSHUFHQWRIRU ZLWKLQQLQHW\GD\V EHFDXVH7LWOH9,,DOORZVFRPSHQVDWRU\GDPDJHDZDUGVXSWR RIWKHDUELWUDWRUjVDZDUG&LUFXLW&LW\DUJXHVWKDWJLYHQWKLV  WKH FRVWV RI DUELWUDWLQJ ZLOO UDQJH KLJKHU DQG SURYLVLRQZHPXVWUHDFKWKHFRQFOXVLRQWKDW0RUULVRQGLGQRW KLJKHU0RUULVRQFLWHGDUHFHQWHVWLPDWHE\WKH$$$WKDWWKH IDFHSURKLELWLYHFRVWVLQWKHSUHVHQWFDVHEHFDXVHDWPRVWVKH DYHUDJHDUELWUDWRUIHHZDVSHUGD\DQGWKDWDQDYHUDJH ZRXOG KDYH EHHQ UHTXLUHG WR SD\  IRU WKH DUELWUDO HPSOR\PHQW FDVH LQFXUUHG D WRWDO RI  WR  LQ IRUXP DUELWUDWLRQH[SHQVHV$SSHOODQWjV%UDW%DVHGRQWKHVH FRQVLGHUDWLRQV DORQJ ZLWK WKH HYLGHQFH WKDW 0RUULVRQ ,QWKHDEVWUDFWWKLVVXPPD\QRWDSSHDUSURKLELWLYHEXWLW SUHVHQWHGUHJDUGLQJKHUSUHYLRXVVDODU\ZHFRQFOXGHWKDWWKH PXVWEHFRQVLGHUHGIURPWKHYDQWDJHSRLQWRIWKHSRWHQWLDO GHIDXOW FRVWVSOLWWLQJ UXOH LQ WKH &LUFXLW &LW\ DUELWUDWLRQ OLWLJDQW LQ D FDVH VXFK DV WKLV  5HFHQWO\ WHUPLQDWHG WKH
Source:  CourtListener

Can't find what you're looking for?

Post a free question on our public forum.
Ask a Question
Search for lawyers by practice areas.
Find a Lawyer