Moore v. Cty of Harriman

Opinion

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

5$/3+ 0225( s5 ; 3ODLQWLII$SSHOODQW    1R Y  !  &,7< 2) +$55,0$1  +$55,0$1 32/,&(  '(3$570(17 52< s(1.,16  &KLHIRI3ROLFH+DUULPDQ  3ROLFH'HSDUWPHQW'$55(1   0&%5220 7(55< ),1.  5$1'< +(,'/( 9,5*,/  0&&$57s(55< 6,1*/(721  'HIHQGDQWV$SSHOOHHV   1 $SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH(DVWHUQ'LVWULFWRI7HQQHVVHHDW.QR[YLOOH 1RnsDPHV+sDUYLV'LVWULFWsXGJH $UJXHG'HFHPEHU 'HFLGHGDQG)LOHG1RYHPEHU %HIRUH0$57,1&KLHIsXGJH0(55,771(/621 %2**61255,668+5+(,15,&+6,/(5 %$7&+(/'(5'$8*+75(<0225(&2/(&/$< DQG*,/0$1&LUFXLWsXGJHV

  0RRUHY&LW\RI+DUULPDQHWDO 1R

BBBBBBBBBBBBBBBBB &2816(/ $5*8(''RQDOG.9RZHOO92:(// $662&,$7(6 .QR[YLOOH 7HQQHVVHH IRU $SSHOODQW  1DWKDQ ' 5RZHOO :$7621+2//2: 5((9(6.QR[YLOOH7HQQHVVHH IRU$SSHOOHHV21%5,()'RQDOG.9RZHOO92:(//  $662&,$7(6 .QR[YLOOH 7HQQHVVHH IRU $SSHOODQW 1DWKDQ ' 5RZHOO 5REHUW + :DWVRQ sU :$7621 +2//2: 5((9(6.QR[YLOOH7HQQHVVHHIRU$SSHOOHHV 0$57,1 & s GHOLYHUHG WKH RSLQLRQ RI WKH FRXUW LQ ZKLFK '$8*+75(< 0225( &2/( DQG &/$< ss MRLQHG0(55,77sSGHOLYHUHGDVHSDUDWHFRQFXUULQJ RSLQLRQ*,/0$1sSGHOLYHUHGDVHSDUDWHRSLQLRQ FRQFXUULQJLQWKHUHVXOW68+5+(,15,&+sSS GHOLYHUHGDVHSDUDWHGLVVHQWLQJRSLQLRQLQZKLFK1(/621 %2**61255,66,/(5DQG%$7&+(/'(5ssMRLQHG BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB %2<&( ) 0$57,1 s5 &KLHI sXGJH  5DOSK 0RRUH DSSHDOV WKH GLVWULFW FRXUWjV RUGHU GLVPLVVLQJ KLV  86& †FODLPVDJDLQVWILYHSROLFHRIILFHUVIRUIDLOXUHWRFOHDUO\ QRWLI\ WKH RIILFHUV WKDW WKH\ ZHUH EHLQJ VXHG LQ WKHLU LQGLYLGXDO FDSDFLWLHV XQGHU WKLV &RXUWjV UXOH LQ :HOOV Y %URZQ)GWK&LU$SDQHORIWKLV&RXUW RULJLQDOO\UHYHUVHGWKHGLVWULFWFRXUWjVGHFLVLRQILQGLQJWKDW DOWKRXJKWKHFRPSODLQWFRQWDLQHGDPELJXRXVODQJXDJHWDNHQ DV D ZKROH LW SURYLGHG VXIILFLHQW QRWLFH WR WKH LQGLYLGXDO RIILFHUV6HH0RRUHY&LW\RI+DUULPDQ)GWK &LU7KHIXOO&RXUWYDFDWHGWKDWGHFLVLRQDQGJUDQWHG DUHKHDULQJHQEDQFWRFODULI\WKHSOHDGLQJUHTXLUHPHQWVIRUD †FRPSODLQDQWVHHNLQJUHFRYHU\IURPVWDWHRIILFLDOVLQ WKHLULQGLYLGXDOFDSDFLWLHV6HH0RRUHY&LW\RI+DUULPDQ )GWK&LU)RUWKHIROORZLQJUHDVRQVZH UHYHUVHWKHGLVWULFWFRXUWjVGLVPLVVDORI0RRUHjVFODLP  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

, ,Q $SULO  0RRUH VXHG WKH &LW\ RI +DUULPDQ WKH +DUULPDQ3ROLFH'HSDUWPHQW5R\sHQNLQV&KLHIRI3ROLFH DQG2IILFHUV'DUUHQ0F%URRP7HUU\ )LQN5DQG\+HLGOH 9LUJLO0F&DUWHUDQGsHUU\6LQJOHWRQIRUXVLQJH[FHVVLYHIRUFH GXULQJ 0RRUHjV DUUHVW RQH \HDU EHIRUH  0RRUH DOOHJHG YLRODWLRQVRIWKH)LUVW)RXUWKDQG)RXUWHHQWK$PHQGPHQWV WRWKH8QLWHG6WDWHV&RQVWLWXWLRQDQG$UWLFOH††DQGRI WKH 7HQQHVVHH &RQVWLWXWLRQ DV ZHOO DV WKH VWDWH WRUWV RI PDOLFLRXV SURVHFXWLRQ DQG DEXVH RI SURFHVV  0RRUHjV FRPSODLQWFDSWLRQGLGQRWVSHFLI\ZKHWKHUWKHRIILFHUVZHUH QDPHGLQWKHLURIILFLDORULQGLYLGXDOFDSDFLWLHV ,QsDQXDU\WKHRIILFHUVPRYHGWRGLVPLVVSXUVXDQWWR )HGHUDO5XOHRI&LYLO3URFHGXUHE IRUIDLOXUHWRVWDWHD FODLP DJDLQVW WKHP LQ WKHLU LQGLYLGXDO FDSDFLWLHV  0RRUH UHVSRQGHGWKDWKLVFRPSODLQWVKRZHGWKDWKHKDGVXHGHDFK RIILFHU LQ KLV LQGLYLGXDO FDSDFLW\ EXW RQ )HEUXDU\  WKH GLVWULFWFRXUWJUDQWHGWKHRIILFHUVjPRWLRQZLWKRXWSUHMXGLFH DVWRDOOVXFKFODLPV2Q0DUFK0RRUHPRYHGIRUOHDYHWR DPHQG WKH FRPSODLQW WR DGG WKH ZRUG mLQGLYLGXDOO\l DIWHU HDFKRIILFHUjVQDPHLQWKHFRPSODLQWFDSWLRQ$GGLWLRQDOO\ 0RRUHILOHGD5XOHPRWLRQWRDOWHURUDPHQGWKHMXGJPHQW LQVRIDUDVLWGLVPLVVHGmDQ\FODLPVDJDLQVW>WKHRIILFHUV@LQ WKHLU LQGLYLGXDO FDSDFLWLHVl EHFDXVH LW WKXV SXUSRUWHG WR GLVPLVVWKHVWDWHODZFODLPVDJDLQVWWKHRIILFHUVDORQJZLWKWKH †  FODLPV  2Q $SULO  WKH GLVWULFW FRXUW UHLQVWDWHG 0RRUHjV VWDWH ODZ FODLPV DJDLQVW WKH RIILFHUV EXW GHQLHG 0RRUHWKHRSSRUWXQLW\WRDPHQGKLVFRPSODLQWVWDWLQJWKDW VXFKDQDPHQGPHQWZRXOGEHIXWLOHDVWKHRQH\HDUVWDWXWHRI OLPLWDWLRQV XQGHUO\LQJ WKH †  FODLPV KDG UXQ  0RRUH WLPHO\DSSHDOHG ,, :HUHYLHZWKHGLVWULFWFRXUWjVGLVPLVVDORI0RRUHjV† FODLPVGHQRYR6HH7D[SD\HUV8QLWHGIRU$VVHVVPHQW&XWV Y$XVWLQ)GWK&LU:HUHYLHZZLWK FDUH DOO GLVPLVVDOV RQ WKH SOHDGLQJV DQG m>G@LVPLVVDOV RI FRPSODLQWVXQGHUWKHFLYLOULJKWVVWDWXWHVDUHVFUXWLQL]HGZLWK  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

VSHFLDOFDUHlsRQHVY'XQFDQ)GWK&LU TXRWLQJ'XQQ Y7HQQHVVHH)GWK&LU   ,Q  WKH 6XSUHPH &RXUW UXOHG WKDW VWDWHV DQG VWDWH HPSOR\HHVVXHGLQWKHLURIILFLDOFDSDFLWLHVZHUHQRWmSHUVRQVl XQGHU †  DQG WKHUHIRUH FRXOG QRW EH KHOG OLDEOH IRU PRQH\GDPDJHV6HH:LOOY0LFKLJDQ'HSWRI6WDWH3ROLFH 867KDWVDPH\HDUZHKHOGWKDW:LOO UHTXLUHGSODLQWLIIVVHHNLQJGDPDJHVXQGHU†WRVHWIRUWK FOHDUO\LQWKHLUSOHDGLQJWKDWWKH\ZHUHVXLQJVWDWHRIILFLDOVDV LQGLYLGXDOVUDWKHUWKDQDVRIILFLDOV6HH:HOOVY%URZQ )GWK&LU :HOOVjVSOHDGLQJUHTXLUHPHQWVIRU†FODLPDQWVUHVWRQ WZRUDWLRQDOHV)LUVW:HOOVZDVFRQFHUQHGWKDWGHIHQGDQWV UHFHLYHQRWLFHRIWKHSRVVLELOLW\RILQGLYLGXDOOLDELOLW\6HH 3HOIUH\Y&KDPEHUV)GWK&LUm,W LVFHUWDLQO\UHDVRQDEOHWRDVNWKDWDOOSODLQWLIIVDOHUWSDUW\ GHIHQGDQWV WKDW WKH\ PD\ EH LQGLYLGXDOO\ UHVSRQVLEOH LQ GDPDJHVl:HOOV)GDW6HFRQG:HOOVIRXQGWKDW †  FODLPDQWV PXVW SOHDG FDSDFLW\ IRU MXULVGLFWLRQDO UHDVRQV  :LOO GHWHUPLQHG WKDW WKH (OHYHQWK $PHQGPHQW FUHDWHV D MXULVGLFWLRQDO EDU WR VXLWV DJDLQVW VWDWHV DQG VWDWH HPSOR\HHV VXHG LQ WKHLU RIILFLDO FDSDFLWLHV IRU PRQH\ GDPDJHV 5XOH D VWDWHV LQ UHOHYDQW SDUW WKDW m>L@W LV QRW QHFHVVDU\ WR DYHUWKHFDSDFLW\RIDSDUW\H[FHSWWRWKH H[WHQW UHTXLUHG WR VKRZ WKH MXULVGLFWLRQ RI WKH FRXUWl )('5&,9352 D  $FFRUGLQJO\ :HOOV UHDVRQHG m>E@HFDXVHWKH(OHYHQWK$PHQGPHQWSODFHVDMXULVGLFWLRQDO OLPLWRQIHGHUDOFRXUWVLQFLYLOULJKWVFDVHVDJDLQVWVWDWHVDQG VWDWHHPSOR\HHVZHXQGHUVWDQG5XOHDWRUHTXLUHSODLQWLIIV WRSURSHUO\DOOHJHFDSDFLW\LQWKHLUFRPSODLQWl:HOOV )GDW $OWKRXJKRWKHUFRXUWVKDYHUHDG:HOOVWRHVWDEOLVKDSHUVH UXOH UHTXLULQJ †  SODLQWLIIV WR DIILUPDWLYHO\ SOHDG mLQGLYLGXDO FDSDFLW\l LQ WKH FRPSODLQW VHH HJ %LJJV Y 0HDGRZV  )G   WK &LU  ZH KDYH QHYHU DSSOLHGVXFKDVWULFWLQWHUSUHWDWLRQ,Q:KLWWLQJWRQY0LOE\  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

 )G  WK &LU  GHFLGHG MXVW WZR \HDUV DIWHU :HOOV ZH VWDWHG WKDW m>X@QGHU :HOOV Y %URZQ DEVHQW DQ\ LQGLFDWLRQWKDWWKHVHGHIHQGDQWVDUHEHLQJVXHGLQGLYLGXDOO\ ZH PXVW DVVXPH WKDW WKH\ DUH EHLQJ VXHG LQ WKHLU RIILFLDO FDSDFLWLHV    l  ,G DW  FLWDWLRQ RPLWWHG HPSKDVLV DGGHG  ,Q %URRNV Y $PHULFDQ %URDGFDVWLQJ &RPSDQLHV ,QF)GWK&LUZHUHDIILUPHGWKDWm>D@OO D >† @ FRPSODLQW QHHG GR LV DIIRUG WKH GHIHQGDQW µIDLU QRWLFHRIZKDWWKHFODLPLVDQGWKHJURXQGVXSRQ ZKLFKLW UHVWVjl,GDWTXRWLQJsRQHV)GDWLQWHUQDO TXRWHVDQGFLWDWLRQVRPLWWHG ,QIDFWRXUSRVW:HOOVMXULVSUXGHQFHVKRZVWKDWZHKDYH DSSOLHGDmFRXUVHRISURFHHGLQJVlWHVWWRGHWHUPLQHZKHWKHU †  GHIHQGDQWV KDYH UHFHLYHG QRWLFH RI WKH SODLQWLIIjV LQWHQWWRKROGWKHPSHUVRQDOO\OLDEOHDOEHLWZLWKRXWFOHDUO\ ODEHOLQJWKHWHVWDVVXFK)RULQVWDQFHZHKDYHUHIXVHGWR GLVPLVVD†FRPSODLQWZKLFKIDLOHGWRVWDWHmLQGLYLGXDO FDSDFLW\lZKHUHRQHPRQWKDIWHUWKHFRPSODLQWZDVILOHGWKH SODLQWLII ILOHG D PRWLRQ VWDWLQJ WKDW WKH GHIHQGDQWV DFWHG RXWVLGHWKHVFRSHRIWKHLUHPSOR\PHQWDQGLQEDGIDLWK6HH 3HOIUH\Y&KDPEHUV)GWK&LU:H KDYHDOVRORRNHGWRODWHUSOHDGLQJVVXFKDVDUHVSRQVHWRD PRWLRQIRUVXPPDU\MXGJPHQWWRGHWHUPLQHZKHWKHUSURSHU QRWLFHKDGEHHQJLYHQ6HH$EGXU5DKPDQY0LFKLJDQ'HSW RI&RUUHFWLRQV)GWK&LU7KHUHIRUH ZKLOH LW LV FOHDUO\ SUHIHUDEOH WKDW SODLQWLIIV H[SOLFLWO\ VWDWH ZKHWKHU D GHIHQGDQW LV VXHG LQ KLV RU KHU mLQGLYLGXDO FDSDFLW\lVHHHJ+DUGLQY6WUDXE)G WK&LUIDLOXUHWRGRVRLVQRWIDWDOLIWKHFRXUVHRI SURFHHGLQJVRWKHUZLVHLQGLFDWHVWKDWWKHGHIHQGDQWUHFHLYHG VXIILFLHQWQRWLFH

 7KH mFRXUVH RI SURFHHGLQJVl WHVW FRQVLGHUV VXFK IDFWRUV DV WKH QDWXUH RI WKH SODLQWLIIjV FODLPV UHTXHVWV IRU FRPSHQVDWRU\ RU SXQLWLYH GDPDJHV DQG WKH QDWXUH RI DQ\ GHIHQVHV UDLVHG LQ UHVSRQVH WR WKH FRPSODLQW SDUWLFXODUO\ FODLPV RI TXDOLILHG LPPXQLW\ WR GHWHUPLQH ZKHWKHU WKH GHIHQGDQW KDG DFWXDO NQRZOHGJH RI WKH SRWHQWLDO IRU LQGLYLGXDO OLDELOLW\ 6HH %LJJV  )G DW  7KH WHVW DOVR FRQVLGHUV ZKHWKHU VXEVHTXHQW SOHDGLQJV SXW WKH GHIHQGDQW RQ QRWLFH RI WKH FDSDFLW\  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

7KH 6XSUHPH &RXUW KDV QRWHG WKDW m>W@KH µFRXUVH RI SURFHHGLQJVj LQ VXFK >XQVSHFLILHG FDSDFLW\@ FDVHV W\SLFDOO\ ZLOOLQGLFDWHWKHQDWXUHRIWKHOLDELOLW\VRXJKWWREHLPSRVHGl .HQWXFN\Y*UDKDP86Q,QGHHG WKHYDVWPDMRULW\RIRXUVLVWHUFLUFXLWVDSSO\WKHmFRXUVHRI SURFHHGLQJVlWHVWWRGHWHUPLQHZKHWKHUVXLWKDVEHHQEURXJKW DJDLQVWDVWDWHRIILFLDODVDQRIILFLDORUDVDQLQGLYLGXDO6HH $WFKLQVRQY'LVWULFWRI&ROXPELD)G'& &LU%LJJV)GDW

LQ ZKLFK KH RU VKH LV VXHG :H DUH PLQGIXO RI WKH WLPLQJ RI VXEVHTXHQW ILOLQJV QRW DV WKH RIILFHUV VXJJHVW EHFDXVH WKH\ PXVW EH ILOHG SUDFWLFDOO\ FRQWHPSRUDQHRXV WR WKH RSLQLRQ EXW UDWKHU WR GHWHUPLQH ZKHWKHU WKH SDUWLHV DUH VWLOO LQ WKH HDUO\ VWDJHV RI OLWLJDWLRQ 7KLV HQVXUHV ERWK IDLUQHVV WR GHIHQGDQWV :HOOVjV ILUVW FRQFHUQ DQG WKH UHVROXWLRQ RI DQ\ MXULVGLFWLRQDO SUREOHPV DW DQ HDUO\ VWDJH :HOOVjV VHFRQG FRQFHUQ $V WKLV FDVH DSSHDUV EHIRUH XV RQ DSSHDO IURP D 5XOH E  GLVPLVVDO ZH DVVXPH LW LV VWLOO LQ D UHODWLYHO\ HDUO\ VWDJH RI OLWLJDWLRQ  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

$33(1',; ODQJXDJHVXSSRUWLQJWKLVUHDGLQJZHILQGWKHPRUHUHDVRQDEOH LQWHUSUHWDWLRQWREHWKDW†SODLQWLIIVPXVWFOHDUO\QRWLI\ GHIHQGDQWVRIWKHSRWHQWLDOIRULQGLYLGXDOOLDELOLW\DQGPXVW FOHDUO\QRWLI\WKHFRXUWRILWVEDVLVIRUMXULVGLFWLRQ:KHQD †  SODLQWLII IDLOV WR DIILUPDWLYHO\ SOHDG FDSDFLW\ LQ WKH FRPSODLQW ZH WKHQ ORRN WR WKH FRXUVH RI SURFHHGLQJV WR GHWHUPLQHZKHWKHU:HOOVjVILUVWFRQFHUQDERXWQRWLFHKDVEHHQ VDWLVILHG +HUHWKHGLVWULFWFRXUWHUUHGLQGLVPLVVLQJ0RRUHjV† FODLPV DJDLQVW WKH LQGLYLGXDO RIILFHUV  7KH FDSWLRQ RQ 0RRUHjVFRPSODLQWOLVWVRQO\ WKHRIILFHUVjQDPHVQRWWKHLU RIILFLDOWLWOHV7KHFRPSODLQWUHIHUVWRWKHRIILFHUVWKURXJKRXW DV  WKH mLQGLYLGXDO GHIHQGDQWVl  3DUDJUDSK (OHYHQ RI WKH FRPSODLQWVWDWHVm7KHVDLGRIILFHUVDFWLQJIRUWKHPVHOYHVDQG IRU WKH &LW\l EHKDYHG mZLWK PDOLFH    DQG YLRODWHG WKH SODLQWLIIjVFLYLOULJKWVlHPSKDVLVDGGHG)LQDOO\0RRUH VRXJKWFRPSHQVDWRU\DQGSXQLWLYHGDPDJHVDJDLQVWmHDFKRI WKH GHIHQGDQWVl  7DNHQ DV D ZKROH WKH FRPSODLQW OLNHO\ SURYLGHGVXIILFLHQWQRWLFHWRWKHRIILFHUVWKDWWKH\ZHUHEHLQJ VXHGDVLQGLYLGXDOV (YHQ DVVXPLQJ WKH FRPSODLQW LWVHOI IDLOHG WR SURYLGH VXIILFLHQWQRWLFH0RRUHjVUHVSRQVHWRWKHRIILFHUVjPRWLRQWR GLVPLVVFODULILHGDQ\UHPDLQLQJDPELJXLW\m7KHLQGLYLGXDOV QDPHG DUH SROLFH RIILFHUV ZKR DUH EHLQJ VXHG LQ WKHLU LQGLYLGXDO FDSDFLWLHV IRU XVLQJ H[FHVVLYH DQG XQUHDVRQDEOH IRUFH ZKLOH PDNLQJ DQ DUUHVW RI WKH 3ODLQWLII RQ $SULO  l6XEVHTXHQWILOLQJVLQDFDVHPD\UHFWLI\GHILFLHQFLHV LQWKHLQLWLDOSOHDGLQJV6HH$EGXU5DKPDQ)GDW 3HOIUH\  )G DW   $EGXU5DKPDQ UHYHUVHG WKH GLVPLVVDORIDSODLQWLIIjV†FODLPVEHFDXVHWKHSODLQWLIIjV UHVSRQVHWRWKHGHIHQGDQWVjPRWLRQIRUVXPPDU\MXGJPHQW SURYLGHGVXIILFLHQWQRWLFHWKDWVXLWKDGEHHQEURXJKWDJDLQVW

 :H DUH QRW FRQFHUQHG WRGD\ ZLWK :HOOVjV MXULVGLFWLRQDO UDWLRQDOH 7KH RIILFHUV DUH HPSOR\HHV RI D PXQLFLSDOLW\ DQG WKH (OHYHQWK $PHQGPHQW GRHV QRW DSSO\ WR PXQLFLSDOLWLHV 6HH 0RQHOO Y 1HZ

WKHPLQWKHLULQGLYLGXDOFDSDFLWLHV6HH$EGXU5DKPDQ WKHSDUW\RUWKHQDPLQJRIWKHSDUW\,QDOWHULQJFDSDFLW\RQH )GDW$OWKRXJKWKHRIILFHUVFLWHVHYHUDOXQSXEOLVKHG LVFKDQJLQJWKHSDUW\QRWWKHFODLP6HH)HG5&LY3D FDVHVLQVXSSRUWRIWKHLUDUJXPHQWWKDW0RRUHGLGQRWSURYLGH ,QDQ\HYHQWWKHPDMRULW\DFNQRZOHGJHVWKDWmZHKDYHQRW WKHP ZLWK SURSHU QRWLFH WKH\ IDLO WR PHQWLRQ OHW DORQH DQVZHUHG ZKHWKHU 5XOH F  DSSOLHV ZKHQ D †  GLVWLQJXLVK$EGXU5DKPDQIURPWKHFDVHDWEDU:HILQGWKH SODLQWLIIVHHNVWRDOWHUWKHFDSDFLW\LQZKLFKDGHIHQGDQWKDV WZRVHWVRIIDFWVIXQFWLRQDOO\HTXLYDOHQWDQGWKHUHIRUHUHYHUVH EHHQ VXHG DOWKRXJK ZH KDYH KHOG WKLV W\SH RI DOWHUDWLRQ WKHGLVWULFWFRXUWjVRUGHUGLVPLVVLQJ0RRUHjV†FODLPV DFFHSWDEOH XQGHU 5XOH F l  $QWH VXSUD DW  $SSDUHQWO\WKHPDMRULW\WKLQNVWKDWWKLVDVSHFWRI%URZQLV ,,, GLFWD,ZLOOWRR,QDQ\HYHQWWKHSUHMXGLFHSURQJZDVQRW PHWLQ%URZQJLYHQFRXQVHOjVFRQFHVVLRQDWRUDODUJXPHQW $GGLWLRQDOO\ZHILQGWKDWWKHGLVWULFWFRXUWHUUHGLQUHIXVLQJ WRDOORZ0RRUHWRDPHQGKLVFRPSODLQW7KHGLVWULFWFRXUW ,Q VXP , ZRXOG DIILUP WKH GLVWULFW FRXUWjV GHQLDO RI FRUUHFWO\QRWHGWKDWWKHDSSURSULDWHVWDWXWHRIOLPLWDWLRQVIRU 3ODLQWLIIjVPRWLRQWRDPHQGDVDSURSHUDSSOLFDWLRQRI)HG5 0RRUHjV†FODLPVZDVRQH\HDUDQGWKDWE\WKHWLPHKH &LY3DQG/RYHODFH VRXJKWWRDPHQGKLVFRPSODLQWDOPRVWWZR\HDUVKDGSDVVHG ,W IDLOHG KRZHYHU WR SURSHUO\ DSSO\ )HGHUDO 5XOH RI &LYLO 9 3URFHGXUH F ZKLFK ZRXOG KDYH DOORZHG WKH DPHQGHG FRPSODLQWWRUHODWHEDFNWRWKHRULJLQDOILOLQJGDWHVXFKWKDW $OWKRXJK ZH UHYLHZ DSSHDOV LQ FLYLO ULJKWV FDVHV UDLVLQJ LWZRXOGQRWEHEDUUHGE\WKHRQH\HDUVWDWXWHRIOLPLWDWLRQV LVVXHVVXFKDVWKLVRQHZLWKVSHFLDOFDUHZHVKRXOGQRWJUDQW VSHFLDOOHVVGHPDQGLQJSOHDGLQJUHTXLUHPHQWVWRFLYLOULJKWV 5XOHF DOORZVDPHQGPHQWVWRUHODWHEDFNZKHQmWKH SODLQWLIIV  :H WDNH VSHFLDO FDUH ZLWK SUR VH OLWLJDQWV WRR FODLPRUGHIHQVHDVVHUWHGLQWKHDPHQGHGSOHDGLQJDURVHRXW :HOOV)GDWFLWLQJ+DLQHVY.HUQHU86 RI WKH FRQGXFW WUDQVDFWLRQ RU RFFXUUHQFH VHW IRUWK RU    %XW ZH VWLOO UHTXLUH WKHP WR DOHUW JRYHUQPHQW DWWHPSWHG WR EH VHW IRUWK LQ WKH RULJLQDO SOHDGLQJl  5XOH GHIHQGDQWV WKDW WKH\ PD\ EH KHOG LQGLYLGXDOO\ OLDEOH IRU F DGGUHVVLQJFKDQJHVWRDSDUW\RUmWKHQDPLQJRID GDPDJHVDQGWRFRQIRUPWREDVLFSOHDGLQJUHTXLUHPHQWV,G SDUW\lVWDWHVWKDWDQDPHQGPHQWUHODWHVEDFNLIWKHSURYLVLRQV 7KH VWDQGDUG VKRXOG EH QR GLIIHUHQW IRU UHSUHVHQWHG FLYLO RIF DUHVDWLVILHGWKHGHIHQGDQWUHFHLYHGQRWLFHRIWKH ULJKWVSODLQWLIIVDVKHUH7KH\WRRPXVWSURYLGHJRYHUQPHQW VXLW ZLWKLQ  GD\V IROORZLQJ WKH ILOLQJ RI WKH RULJLQDO GHIHQGDQWVIDLUQRWLFHRIWKHFDSDFLW\LQZKLFKWKH\DUHVXHG FRPSODLQWWKHQRWLFHZDVVXFKWKDWWKHGHIHQGDQWmZLOOQRWEH DQG WKH RQO\ IDLU QRWLFH LV FOHDU QRWLFH E\ WKH IDFH RI WKH SUHMXGLFHGLQPDLQWDLQLQJDGHIHQVHRQWKHPHULWVlDQGWKH FRPSODLQW,G GHIHQGDQWmNQHZRUVKRXOGKDYHNQRZQWKDWEXWIRUDPLVWDNH FRQFHUQLQJWKHLGHQWLW\RIWKHSURSHUSDUW\WKHDFWLRQZRXOG 7KH PDMRULW\jV UXOLQJ WRGD\ IORXWV ZHOOHVWDEOLVKHG KDYHEHHQEURXJKWDJDLQVWWKHSDUW\l$OWKRXJKZHKDYHQRW SUHFHGHQW DQG LJQRUHV WKH XQGHUO\LQJ MXULVGLFWLRQDO DQVZHUHG ZKHWKHU 5XOH F  DSSOLHV ZKHQ D †  SUXGHQWLDODQGSXEOLFSROLF\FRQFHUQVWKDWJDYHULVHWRWKH SODLQWLIIVHHNVWRDOWHUWKHFDSDFLW\LQZKLFKDGHIHQGDQWKDV :HOOVUXOH)XUWKHUPRUHHYHQXQGHUWKHPDMRULW\jVQHZO\ EHHQ VXHG ZH KDYH KHOG WKLV W\SH RI DOWHUDWLRQ DFFHSWDEOH FUDIWHG WHVW FOHDU QRWLFH RI FDSDFLW\ o  DW DQ\ VWDJH LQ WKH XQGHU5XOHF 6HH%URZQY6KDQHU)G SURFHHGLQJV o  ZDV ODFNLQJ KHUH   7KH GLVWULFW FRXUW DOVR WK&LU FRUUHFWO\GHQLHG3ODLQWLIIjVHOHYHQWKKRXUPRWLRQWRDPHQG 7KHGLVWULFWFRXUWjVGLVPLVVDORI0RRUHjVFRPSODLQWVKRXOGEH :HDUHVDWLVILHGWKDWWKHUHTXLUHPHQWVRI5XOHF KDYH DIILUPHG EHHQ PHW KHUH  7KHUH LV QR TXHVWLRQ WKDW WKH RULJLQDO DQG  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

)XUWKHUPRUHLQP\YLHZ%URZQY6KDQHU)G DPHQGHGFRPSODLQWVLQYROYHWKHVDPHFRQGXFWDQGWKHUHE\ WK&LUFHUWGHQLHG86LVLQFRQVLVWHQW VDWLVI\WKHUHTXLUHPHQWVRI5XOHF 7KHRIILFHUVHDFK ZLWK /RYHODFH DQG PRUH IXQGDPHQWDOO\ LQFRQVLVWHQW ZLWK UHFHLYHG SURSHU VHUYLFH RI SURFHVV ZLWKLQ  GD\V RI WKH )HG 5 &LY 3 F   ,Q%URZQ WKLV &RXUW KHOG WKDW D ILOLQJRIWKHFRPSODLQW0RUHRYHUWKHRIILFHUVZLOOQRWEH VHFRQG DPHQGHG FRPSODLQW LQ D †  DFWLRQ H[SOLFLWO\ SUHMXGLFHGLQDQ\ZD\E\DOORZLQJ0RRUHWRFODULI\WKDWKH QDPLQJ GHIHQGDQW SROLFH RIILFHUV LQ WKHLU LQGLYLGXDO VHHNVLQGLYLGXDOOLDELOLW\RQWKH†FODLPV0RRUHVXHG FDSDFLWLHVUHODWHGEDFNWRWKHGDWHRIWKHRULJLQDOSOHDGLQJ WKHRIILFHUVQRWRQO\IRUYLRODWLRQVRI†EXWDOVRIRUWKH ZKLFKGLGQRWVSHFLI\FDSDFLW\7KH%URZQFRXUWKHOGWKDW VWDWHWRUWVRIPDOLFLRXVSURVHFXWLRQDQGDEXVHRISURFHVVDV /RYHODFHZDVQRWFRQWUROOLQJ ZHOO DV IRU VWDWH FRQVWLWXWLRQDO YLRODWLRQV  7KHUHIRUH WKH RIILFHUV UHFHLYHG FOHDU QRWLFH IURP WKH EHJLQQLQJ WKDW WKH\ /RYHODFHGRHVQRWFRQWUROWKLVFDVH)LUVWWKH&RXUW IDFHG LQGLYLGXDO OLDELOLW\ RI VRPH VRUW IRU WKH FRQGXFW RI GLG QRW FRQVLGHU WKH FRPSODLQW LQGHSHQGHQWO\ XQGHU ZKLFK0RRUHFRPSODLQVDQGKDYHWKXVQRWEHHQGHQLHGDQ F EXWVHHPVWRKDYHDVVXPHGZLWKRXWFRPPHQWWKDW RSSRUWXQLW\WRUHWDLQLQGLYLGXDOFRXQVHORUSUHSDUHDGHIHQVH F ZDVLQDSSOLFDEOHLQWKLVFDVHDVDEDVLVIRUUHODWLRQ )LQDOO\WKHRIILFHUVNQHZRUVKRXOGKDYHNQRZQWKDW0RRUHjV EDFN7KH&RXUWjVVLOHQFHUHJDUGLQJDYDLODELOLW\RIF  †WKHRU\FODLPHGWKH\ZHUHLQGLYLGXDOO\OLDEOHIRUWKH OHDYHV RSHQ IRU WKLV &RXUW WR GHFLGH ZKHWKHU F  DOOHJHG YLRODWLRQV  0RRUHjV FRPSODLQW DOOHJHG FRQGXFW DIIRUGVDQLQGHSHQGHQWEDVLVIRUUHODWLRQEDFN6HFRQG FRPPLWWHGE\WKHRIILFHUVmIRUWKHPVHOYHVDQGIRUWKH&LW\l HYHQ LI ZH ZHUH WR IRFXV RQ F  /RYHODFH LV DQGWKDWWKH\DFWHGmZLWKPDOLFHLQYLRODWLRQRISODLQWLIIjV GLVWLQJXLVKDEOHEHFDXVHLWZDVQRWmDSSDUHQWlLQ/RYHODFH FLYLOULJKWVl$FFRUGLQJO\ZHILQGWKDWWKHGLVWULFWFRXUWHUUHG WKDW >WKH GHIHQGDQW@ NQHZ RU VKRXOG KDYH NQRZQ RI D LQGHQ\LQJ0RRUHOHDYHWRDPHQGKLVFRPSODLQWSXUVXDQWWR mPLVWDNHl LQ WKH LGHQWLI\ RI WKH SDUW\ VHW IRUWK LQ WKH 5XOHF  SOHDGLQJV ,9 %URZQ  )G DW   :H H[SODLQHG WKDW WKH RULJLQDO FRPSODLQWLQ/RYHODFHFOHDUO\VWDWHGWKDWWKHGHIHQGDQWmKDG ,QFRQFOXVLRQZHUHDIILUP:HOOVjVUHTXLUHPHQWWKDW† QRW DFWHG DV DQ LQGLYLGXDOl EXW ZLWKLQ WKH mSRZHUV RI KLV SODLQWLIIVPXVWFOHDUO\QRWLI\DQ\GHIHQGDQWVRIWKHLULQWHQWWR RIILFLDOFDSDFLW\l,G%\FRQWUDVWWKHFRPSODLQWLQ%URZQ VHHN LQGLYLGXDO OLDELOLW\ DQG ZH FODULI\ WKDW UHYLHZLQJ WKH GLGQRWVWDWHWKHFDSDFLW\LQZKLFKWKHLQGLYLGXDOGHIHQGDQWV FRXUVH RI SURFHHGLQJV LV WKH PRVW DSSURSULDWH ZD\ WR ZHUH EHLQJ VXHG  ,G  )LQDOO\ WKH GHIHQGDQWVj FRXQVHO LQ GHWHUPLQHZKHWKHUVXFKQRWLFHKDVEHHQJLYHQDQGUHFHLYHG %URZQ mDFNQRZOHGJHG DW RUDO DUJXPHQW WKDW LW ZDV FOHDU DV GHPRQVWUDWHG E\ RXU GHFLVLRQV LQ 3HOIUH\ DQG $EGXU IURPDUHDGLQJRIWKHFRPSODLQWWKDWWKHVHGHIHQGDQWVFRXOG 5DKPDQ  %HFDXVH ZH ILQG WKLV FDVH JRYHUQHG E\ $EGXU QRWEHKHOGOLDEOHLQWKHLURIILFLDOFDSDFLW\l,GHPSKDVLVLQ 5DKPDQZHUHYHUVHWKHGLVWULFWFRXUWjVGLVPLVVDORI0RRUHjV RULJLQDO FRPSODLQW$GGLWLRQDOO\ZHILQGWKDWWKHGLVWULFWFRXUWVKRXOG KDYHDOORZHG0RRUHWRDPHQGKLVFRPSODLQWSXUVXDQWWR5XOH %URZQjVDWWHPSW WR GLVWLQJXLVK/RYHODFH RQ WKH JURXQGV F :HWKXVUHPDQGIRUIXUWKHUSURFHHGLQJV WKDW/RYHODFHGLGQRWFRQVLGHUWKHFRPSODLQWLQGHSHQGHQWO\ XQGHU)HG5&LY3F LVLQFRQVLVWHQWZLWKWKH5XOH 7KH /RYHODFH FDVH GLG QRW FRQVLGHU 5XOH F  EHFDXVH F DSSOLHVZKHQWKHDPHQGPHQWVHHNVWRDGGDFODLPRU GHIHQVH5XOHF DSSOLHVZKHQWKHDPHQGPHQWFKDQJHV  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

BBBBBBBBBBBBBBBBBBBBBB DWWHPSWHG WR EH VHW IRUWK LQ WKH RULJLQDO SOHDGLQJl  5XOH F DOORZVFKDQJHVWRDSDUW\RUmWKHQDPLQJRIDSDUW\l &21&855(1&( LIWKHSURYLVLRQVRIF DUHPHWDQGZLWKLQWKHGD\V BBBBBBBBBBBBBBBBBBBBBB IURP WKH ILOLQJ RI WKH RULJLQDO FRPSODLQW WKH SDUW\ WR EH EURXJKWLQmKDVUHFHLYHGVXFKQRWLFHRIWKHLQVWLWXWLRQRIWKH 0(55,77&LUFXLWsXGJHFRQFXUULQJ,FRQFXULQ6HFWLRQV DFWLRQWKDWWKHSDUW\ZLOOQRWEHSUHMXGLFHGLQPDLQWDLQLQJD , DQG ,, RI WKH &RXUWjV RSLQLRQ EXW , ILQG 6HFWLRQ ,,, GHIHQVHRQWKHPHULWVlDQGmNQHZRUVKRXOGKDYHNQRZQWKDW XQQHFHVVDU\DQGWKHUHIRUHGRQRWFRQFXULQWKDWVHFWLRQ,GR EXWIRUDPLVWDNHFRQFHUQLQJWKHLGHQWLW\RIWKHSURSHUSDUW\ QRWWKLQNZHVKRXOGGHFLGHWKHDPHQGPHQWLVVXHZKHQZH WKHDFWLRQZRXOGKDYHEHHQEURXJKWDJDLQVWWKHSDUW\l)HG KDYHMXVWGHFLGHGLQWKLVFDVHWKDWWKHSODLQWLIIKDVVWDWHGD 5&LY3F  FODLPRILQGLYLGXDOFDSDFLW\,WLVQRWRQO\XQQHFHVVDU\WRJR IXUWKHUEXWLWPD\EHKDUPIXOWRGRVREHFDXVHWKHRSLQLRQ , GR QRW VHH KRZ WKH VHFRQG DQG WKLUG UHTXLUHPHQWV RI ZLOOEHUHDGDVDSSO\LQJWRVWDWHRIILFLDOVIRUZKRPDFOHDU F DUHPHWKHUH)LUVW'HIHQGDQWVZRXOGEHSUHMXGLFHG VWDWHPHQWRIFDSDFLW\LVMXULVGLFWLRQDODQGSUREDEO\VKRXOGQRW LQSUHSDULQJDGHIHQVHRQWKHPHULWV+DGWKH\NQRZQWKH\ UHODWHEDFN,GRWKLQNKRZHYHUWKDWZHVKRXOGIROORZWKH ZHUH  EHLQJ VXHG SHUVRQDOO\ WKH\ PLJKW KDYH GHYHORSHG D PDMRULW\RI&LUFXLWVRQWKHPDMRUTXHVWLRQRIWKHPHDQLQJRI GLIIHUHQWOHJDOVWUDWHJ\VXFKDVmUHWDLQHGLQGHSHQGHQWFRXQVHO RXURSLQLRQLQ:HOOVY%URZQ)GWK&LU RUSDUWLFLSDWHGPRUHIXOO\LQWKHGHIHQVHl/RYHODFH)G DW)XUWKHUPRUH3ODLQWLIIGLGQRWPRYHWRDPHQGXQWLO OLWWOH RYHU D PRQWK EHIRUH WULDO WKLUWHHQ PRQWKV DIWHU WKH &RPSODLQWKDGEHHQILOHGZKLFKZDVPXFKORQJHUWKDQLQ /RYHODFHZKLFKZDVRQO\VHYHUDOPRQWKVDIWHUWKHGD\V DOORZHG IRU VHUYLFH RI WKH VXPPRQV DQG FRPSODLQW WLPH IUDPHDQGSUHVXPDEO\ORQJDIWHUGLVFRYHU\KDGFORVHG$V SUHYLRXVO\QRWHGQRQHRIWKHLQGLYLGXDO'HIHQGDQWVLQWKLV FDVHILOHGDQDQVZHUSOHGWKHDIILUPDWLYHGHIHQVHRITXDOLILHG LPPXQLW\ RU HQJDJHG LQ GLVFRYHU\  8QGHU WKH PDMRULW\jV YLHZWKH\QRQHWKHOHVVZRXOGKDYHKDGWRVWDQGUHDG\IRUWULDO ZLWKLQDPRQWK7KHSUHMXGLFHLVREYLRXV )RUDOOWKHUHDVRQVGLVFXVVHGDWOHQJWKLQWKLVGLVVHQWWKHUH LVQRWKLQJLQWKHUHFRUGWRLQGLFDWHWKDWGHIHQGDQWVNQHZRU VKRXOGKDYHNQRZQWKH†VXLWZRXOGKDYHEHHQEURXJKW DJDLQVWWKHPSHUVRQDOO\EHFDXVH3ODLQWLIIIDLOHGWRJLYHFOHDU QRWLFHHYHQWKRXJKLWZDVLQFXPEHQWRQ3ODLQWLIIWRGRVR, GRQRWVHHKRZWKHVWDWHWRUWFODLPVSURYLGHGFOHDUQRWLFHRI SHUVRQDOFDSDFLW\XQGHU†ZKLFKEHDUQRUHODWLRQWRWKH XQLTXH SOHDGLQJ UHTXLUHPHQWV RI †   ,Q HVVHQFH 'HIHQGDQWVKDYHEHHQSXQLVKHGIRUIDLOLQJWRDVVXPHWKDWWKH\ ZHUHOLDEOHLQWKHLUSHUVRQDOFDSDFLWLHV7KLVLVQRWWKHODZRI WKLV&LUFXLWDQGWKHPDMRULW\KDVQRWWDNHQVXFKDGUDVWLFVWHS  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

UHVSRQGHGWRWKHPRWLRQRQ)HEUXDU\EXWGLGQRW BBBBBBBBBBBBBBBBBBBBB VHHNOHDYHWRDPHQGWRLQVHUWDQDOOHJDWLRQWKDWWKHRIILFHUV ZHUHEHLQJVXHGLQWKHLULQGLYLGXDOFDSDFLWLHVXQWLO0DUFK &21&855(1&( DIWHUWKHRUGHUJUDQWLQJ'HIHQGDQWVjPRWLRQZDVHQWHUHG BBBBBBBBBBBBBBBBBBBBB RQ)HEUXDU\7KXVHYHQLQWKHIDFHRIFOHDUQRWLFH IURP'HIHQGDQWVWKDWQRWLFHRILQGLYLGXDOFDSDFLW\KDGQRW 521$/' /(( *,/0$1 &LUFXLW sXGJH FRQFXUULQJ  , EHHQmUHFHLYHGl3ODLQWLIIGLGQRWGRDQ\WKLQJXQWLODOPRVWWKH FRQFXULQWKHUHVXOWUHDFKHGE\WKHPDMRULW\RSLQLRQDQG, HYHRIWULDOZKLFKKDGEHHQVHWIRU0D\ZKLFKE\ DJUHHZLWKPXFKRILWVUHDVRQLQJ,QSDUWLFXODUWKHDGRSWLRQ WKHZD\ZDVWKLUWHHQPRQWKVDIWHUWKHFRPSODLQWKDGEHHQ RIWKHmFRXUVHRISURFHHGLQJVlWHVWWRGHWHUPLQHWKHFDSDFLW\ ILOHG&I3HOIUH\)GDWDOWKRXJKWKHFRPSODLQW LQZKLFKDSXEOLFRIILFLDOLVVXHGDQGWKHKROGLQJWKDWWKH IDLOHG WR LQGLFDWH FDSDFLW\ WKH SODLQWLII ILOHG D PRWLRQ RQH GLVWULFWFRXUWHUUHGLQUHIXVLQJWRDOORZ0RRUHWRDPHQGKLV PRQWK DIWHU WKH FRPSODLQW ZDV ILOHG FODULI\LQJ WKDW WKH FRPSODLQWVWULNHPHDVWKHSURSHUUXOLQJVLQWKLVFDVH GHIHQGDQWV ZHUH EHLQJ VXHG LQ WKHLU SHUVRQDO FDSDFLWLHV 7KXVWKHPDWWHUEHIRUHXVGLGQRWFRPHWRXVLQWKHSRVWXUH ,ZULWHVHSDUDWHO\KRZHYHUWRH[SUHVVP\DJUHHPHQWZLWK RImVWLOOLQDUHODWLYHO\HDUO\VWDJHRIOLWLJDWLRQl$QWHDWQ WKH IROORZLQJ SRLQW PDGH E\ WKH GLVVHQW m$OWKRXJK WKH PDMRULW\SD\VOLSVHUYLFHWRWKH:HOOVUXOHZKDWLWLVUHDOO\ 7KXVHYHQDIWHUVLIWLQJWKURXJKWKHFRXUVHRISURFHHGLQJV GRLQJ LV DGRSWLQJ D FRXUVH RI SURFHHGLQJV WHVW  ,W LV ZHFRPHXSZLWKOLWWOHHYLGHQFHWRHVWDEOLVKWKDW3ODLQWLIIJDYH GLVLQJHQXRXVWRGRVRZLWKRXWH[SOLFLWO\RYHUUXOLQJ:HOOVl FOHDUQRWLFHRIKLVLQWHQWWRVXH'HIHQGDQWVLQWKHLUSHUVRQDO 'LVVHQWLQJ2SDW7KHPDMRULW\VLWWLQJHQEDQFRIFRXUVH FDSDFLWLHVDQGWKDW'HIHQGDQWVUHFHLYHGWKLVQRWLFH,QRWKHU LVSHUIHFWO\IUHHWRDEDQGRQWKHUXOHLQ:HOOVDQGWKHGLVVHQW ZRUGVLWVLPSO\FDQQRWEHVDLGWKDW3ODLQWLIIjVLQWHQWLRQWR GRHVQRWFODLPRWKHUZLVHEXWLWZRXOGEHSUHIHUDEOHWRGRVR KROG 'HIHQGDQWV SHUVRQDOO\ OLDEOH FRXOG EH mIDLUO\ IRUWKULJKWO\7RGRRWKHUZLVHOHDYHVWKHFRXUWRSHQWRWKH DVFHUWDLQHGl6HH%LJJV)GDWQRWLQJWKDWWKURXJKRXW FULWLFLVP WKDW LW LV GHQ\LQJ WKH REYLRXV XQWLO DQ REMHFWLYH WKHFRXUVHRISURFHHGLQJVmWKHXQGHUO\LQJLQTXLU\UHPDLQV REVHUYHUFULHVRXWWKDWmWKHHPSHURUKDVQRFORWKHVl+DQV ZKHWKHU WKH SODLQWLIIjV LQWHQWLRQ WR KROG D GHIHQGDQW &KULVWLDQ $QGHUVHQ 7KH (PSHURUjV 1HZ &ORWKHV LQ 7KH SHUVRQDOO\OLDEOHFDQEHDVFHUWDLQHGIDLUO\l7KHPDMRULW\jV /LWWOH0HUPDLGDQG2WKHU)DLU\7DOHV KROGLQJLVFRQWUDU\WR:HOOVDQGSURJHQ\GRHVQRWILWZLWKLQ WKHQDUURZH[FHSWLRQFUHDWHGE\3HOIUH\DQGGRHVQRWHYHQ SDVVPXVWHUXQGHUDFRXUVHRISURFHHGLQJVDQDO\VLV ,9 7KH PDMRULW\ DOVR ILQGV WKDW WKH GLVWULFW FRXUW HUUHG LQ UHIXVLQJ WR DOORZ 3ODLQWLII WR DPHQG KLV FRPSODLQW  7KH PDMRULW\DFNQRZOHGJHVWKDWWKHRQH\HDUVWDWXWHRIOLPLWDWLRQV IRU3ODLQWLIIjV†FODLPKDGUXQEXWKROGVWKDWWKHFRXUW IDLOHG WR SURSHUO\ DSSO\ )HGHUDO 5XOH RI &LYLO 3URFHGXUH F5XOHF DOORZVDPHQGPHQWVWRUHODWHEDFNZKHQ mWKHFODLPRUGHIHQVHDVVHUWHGLQWKHDPHQGHGSOHDGLQJDURVH RXW RI WKH FRQGXFW WUDQVDFWLRQ RU RFFXUUHQFH VHW IRUWK RU  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

BBBBBBBBBBBBBBB UDLVHGLQUHVSRQVHWRWKHFRPSODLQWLVDUHOHYDQWIDFWRU6HH %LJJV)GDW+HUHWKHLQGLYLGXDO'HIHQGDQWVGLGQRW ',66(17 UHVSRQGLQDZD\WKDWUHIOHFWVDQ\SHUFHSWLRQRQWKHLUSDUWRI BBBBBBBBBBBBBBB SRWHQWLDOLQGLYLGXDOOLDELOLW\,QGHHGWKHRIILFHUVGLGQRWILOH LQGLYLGXDODQVZHUVDQGWKXVREYLRXVO\QHYHUDVVHUWHGWKH 68+5+(,15,&+&LUFXLWsXGJHGLVVHQWLQJ7KHPDMRULW\ DIILUPDWLYHGHIHQVHRITXDOLILHGLPPXQLW\6HHLGREVHUYLQJ RSLQLRQSXUSRUWVWRmUHDIILUP:HOOVjVUHTXLUHPHQWWKDW† WKDWDVVHUWLRQRITXDOLILHGLPPXQLW\GHIHQVHLQGLFDWHVWKDWWKH SODLQWLIIVPXVWFOHDUO\QRWLI\DQ\GHIHQGDQWVRIWKHLULQWHQWWR GHIHQGDQWLQWHUSUHWHGWKHSODLQWLIIjVDFWLRQDVEHLQJDJDLQVW VHHNLQGLYLGXDOOLDELOLW\DQG>WR@FODULI\WKDWUHYLHZLQJWKH KLPSHUVRQDOO\EHFDXVHTXDOLILHGLPPXQLW\LVRQO\DYDLODEOH FRXUVH RI SURFHHGLQJV LV WKH PRVW DSSURSULDWH ZD\ WR LQDSHUVRQDOFDSDFLW\VXLW GHWHUPLQHZKHWKHUVXFKQRWLFHKDVEHHQJLYHQDQGUHFHLYHG DV GHPRQVWUDWHG E\ RXU GHFLVLRQV LQ 3HOIUH\ DQG $EGXU 5DWKHURQO\RQH$QVZHUZDVILOHGE\WKH&LW\7KH&LW\jV 5DKPDQl  $QWH DW   ,Q DFWXDOLW\ KRZHYHU WKH PDMRULW\ $QVZHU DOVRUHIOHFWVWKH&LW\jVSHUFHSWLRQWKDWWKLVZDVDQ HYLVFHUDWHVWKH:HOOVVWDQGDUGH[SDQGVWKHQDUURZH[FHSWLRQ RIILFLDOFDSDFLW\VXLW7KHILUVWVHQWHQFHRIWKH&LW\jV$QVZHU FUHDWHGLQ3HOIUH\EH\RQGDOOUHDVRQDEOHERXQGVWUDQVIHUVWKH VWDWHVm7KH'HIHQGDQW&LW\RI+DUULPDQDQGLWVHPSOR\HHV SOHDGLQJ EXUGHQ IURP SODLQWLIIV WR FOHDUO\ SOHDG LQGLYLGXDO GR KHUHE\ DSSHDU DQG DQVZHU WKLV &RPSODLQW DV IROORZVl FDSDFLW\WRJRYHUQPHQWGHIHQGDQWVWRFODULI\WKHFDSDFLW\LQ )XUWKHUWKH$QVZHUDOVRSURYLGHVWKDWm>L@WLVPDLQWDLQHGWKDW ZKLFKWKH\DUHVXHGDQGDGRSWVDVWDQGDUGOHVVmFRXUVHRI QHLWKHUWKH&LW\RI+DUULPDQQRULWVHPSOR\HHVGLGDQ\DFW SURFHHGLQJVlWHVWWKDWLJQRUHVWKHFHUWDLQW\WKH5XOHVRI&LYLO ZKLFKZRXOGUHQGHUWKH&LW\RI+DUULPDQUHVSRQVLEOHWRWKH 3URFHGXUHDUHLQWHQGHGWRVHFXUH7KXV,GLVVHQW SODLQWLII IRU GDPDJHV LQ WKLV FDVHl  $QVZHU ˆ  ,W DOVR VWDWHVm>L@WLVKHUHE\VSHFLILFDOO\PDLQWDLQHGWKDWWKHSODLQWLII , LV QRW HQWLWOHG WR UHFRYHU SXQLWLYH GDPDJHV DJDLQVW D JRYHUQPHQWDO HQWLW\ VXFK DV WKH &LW\ RI +DUULPDQ DQG 6HWWLQJ DVLGH IRU WKH PRPHQW WKH EDVLF LOORJLF RI WKH WKHUHIRUH VXFK FODLP IRU SXQLWLYH GDPDJHV IDLOV WR VWDWH D PDMRULW\jVSRVLWLRQoQDPHO\WKDWFRPSOLDQFHZLWKDSOHDGLQJ FODLP XSRQ ZKLFK UHOLHI FDQ EH JUDQWHGl  ,G ˆ   7KLV UXOH UHTXLULQJ FOHDU QRWLFH RI FDSDFLW\ FDQ VRPHKRZ EH $QVZHUFRXSOHGZLWKWKHIDFWWKDWQRWRQHRIWKHRIILFHUVILOHG YHULILHG  WKURXJK VXEVHTXHQW SURFHHGLQJV o WKH PDMRULW\jV DVHSDUDWHDQVZHUVKRXOGKDYHSXW3ODLQWLIIRQQRWLFHWKDWWKH GHFLVLRQ FDQQRW EH UHFRQFLOHG ZLWK :HOOV DQG LWV SURJHQ\ RIILFHUVGLGQRWUHJDUGWKHVXLWDVRQHDJDLQVWWKHPSHUVRQDOO\ 7KHVHFLUFXPVWDQFHVVKRXOGKDYHSURPSWHG3ODLQWLIIWRVHHN OHDYHWRDPHQGKLV&RPSODLQWWRFODULI\KLVFODLPVRUWRVHHN DGHIDXOWMXGJPHQW3ODLQWLIIGLGQHLWKHU  5XOH  RI WKH )HGHUDO 5XOHV RI &LYLO 3URFHGXUH GHILQHV ZKDW FRQVWLWXWHV D mSOHDGLQJl $ WHOOLQJ LQGLFDWLRQ WKDW 'HIHQGDQWV GLG QRW LQWHUSUHW D 3OHDGLQJV 7KHUH VKDOO EH D FRPSODLQW DQG DQ DQVZHU D 3ODLQWLIIjV DFWLRQ DV D SHUVRQDO FDSDFLW\ VXLW LV WKHLU MRLQW UHSO\ WR D FRXQWHUFODLP GHQRPLQDWHG DV VXFK DQ DQVZHU WR D PRWLRQWRGLVPLVVILOHGE\WKH&LW\jVDWWRUQH\VRQsDQXDU\ FURVVFODLP LI WKH DQVZHU FRQWDLQV D FURVVFODLP D WKLUGSDUW\    ,Q LW WKH\ H[SUHVVO\ VWDWH WKDW mWKH IRUHJRLQJ FRPSODLQW LI D SHUVRQ ZKR ZDV QRW DQ RULJLQDO SDUW\ LV 'HIHQGDQWVVKRXOGEHGLVPLVVHGIRUIDLOXUHRIWKH3ODLQWLIIVj VXPPRQHG XQGHU WKH SURYLVLRQV RI 5XOH  DQG D WKLUGSDUW\ DQVZHU LI D WKLUGSDUW\ FRPSODLQW LV VHUYHG 1R RWKHU SOHDGLQJ WRVWDWHDFODLPDJDLQVWWKHPLQWKHLULQGLYLGXDOFDSDFLW\l VKDOO EH DOORZHG H[FHSW WKDW WKH FRXUW PD\ RUGHU D UHSO\ WR DQ 3XUVXDQWWRWKHGLVWULFWFRXUWjVVFKHGXOLQJRUGHU3ODLQWLIIKDG DQVZHU RU D WKLUGSDUW\ DQVZHU XQWLO )HEUXDU\   WR DPHQG WKH SOHDGLQJV  3ODLQWLII )HG 5 &LY 3 D  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

UHIHUHQFHSXWVWKHGHIHQGDQWVRQQRWLFHWKDWERWKWKH† %HFDXVH WKH PDMRULW\ ODUJHO\ LJQRUHV LW H[SOLFDWLRQ RI RXU FODLPVDQGWKHVWDWHODZFODLPVZHUHLQGLYLGXDOFDSDFLW\VXLWV SUHFHGHQWLVLQRUGHU HVSHFLDOO\ZKHQWKHVHSDUDWHSDUDJUDSKGHYRWHGWRWKH† FDXVH RI DFWLRQ PDNHV QR PHQWLRQ RI LQGLYLGXDO FDSDFLW\  $VWKHPDMRULW\QRWHVWKH6XSUHPH&RXUWjVGHFLVLRQLQ:LOO )XUWKHUPRUHZKHQUHDGDJDLQVWWKHEDFNGURSRISDUDJUDSKV Y 0LFK 'HSjW RI 6WDWH 3ROLFH  86    DQGZKLFKVWDWHWKDWDOORIWKHDFWLRQVRIWKHRIILFHUV SURPSWHGRXUUXOLQJLQ:HOOVY%URZQ)GWK&LU ZHUHSHUIRUPHGXQGHUFRORURIODZDQGLQIXUWKHUDQFHRIWKH   :LOO KHOG WKDW D 6WDWH LV QRW D mSHUVRQl ZLWKLQ WKH EXVLQHVVRIWKH&LW\ZHDUHOHIWZLWKDKRSHOHVVDPELJXLW\ PHDQLQJ RI †   :LOO  86 DW   7KH :LOO FRXUW FOHDUO\LQVXIILFLHQWWRDOHUWWKHGHIHQGDQWVWKDWWKH\ZHUHEHLQJ IXUWKHU KHOG WKDW DOWKRXJK mVWDWH RIILFLDOV OLWHUDOO\ DUH VXHGLQWKHLULQGLYLGXDOFDSDFLWLHVXQGHUIHGHUDOODZ SHUVRQVlLGDWmDVXLWDJDLQVWDVWDWHRIILFLDOLQKLVRUKHU RIILFLDOFDSDFLW\LVQRWDVXLWDJDLQVWWKHRIILFLDOEXWUDWKHUD /DVWO\WKHPDMRULW\UHOLHVRQWKHSUD\HUIRUUHOLHIZKHUHLQ VXLWDJDLQVWWKHRIILFLDOjVRIILFHl,G$QGm>D@VVXFKLWLVQR 3ODLQWLIIPDNHVEODQNHWUHTXHVWVIRUERWKFRPSHQVDWRU\DQG GLIIHUHQW IURP D VXLW DJDLQVW WKH 6WDWH LWVHOIl  ,G     $Q SXQLWLYH GDPDJHV mDJDLQVW HDFK RI WKH GHIHQGDQWVl  ,G LPSRUWDQWFRQVLGHUDWLRQLQWKH:LOOFRXUWjVDQDO\VLVZDVWKH HPSKDVLVDGGHG+RZHYHUJLYHQWKHPL[HGQDWXUHRIWKH (OHYHQWK $PHQGPHQW ZKLFK EDUV VXLWV DJDLQVW D 6WDWH LQ FODLPVDJDLQVWWKHYDULRXVGHIHQGDQWVLHERWKIHGHUDODQG IHGHUDOFRXUWDEVHQWDZDLYHURIVRYHUHLJQLPPXQLW\,GDW VWDWHODZFODLPVDFRPSUHKHQVLYHSUD\HUIRUUHOLHIWKDWPLJKW  EHFRQVWUXHGDVLPSO\LQJSHUVRQDOOLDELOLW\FDQQRWEHFDOOHG FOHDUQRWLFH ,Q :HOOV SUR VH SULVRQHUV VXHG QLQH VWDWH FRUUHFWLRQV RIILFLDOVXQGHU†IRUPRQH\GDPDJHV7KHFRPSODLQW ,Q VXP WKH &RPSODLQW XWWHUO\ IDLOV WR DOOHJH LQGLYLGXDO FKDUDFWHUL]HGHDFKGHIHQGDQWRIILFLDOjVFRQGXFWLQWHUPVRI FDSDFLW\ FODLPV 7KXV XQGHU D WUDGLWLRQDO DSSOLFDWLRQ RI WKHLURIILFLDOFDSDFLW\RQO\:HOOV)GDW:HKHOG :HOOVLWPXVWEHDVVXPHGWKDWWKHGHIHQGDQWVZHUHVXHGLQ WKDW :LOO PDGH LW XQQHFHVVDU\ WR UHDFK WKH PHULWV RI WKH WKHLURIILFLDOFDSDFLWLHVRQO\EHFDXVHWKH&RPSODLQWIDLOVWR SODLQWLIIVjFODLPVEHFDXVHWKH:HOOVFRPSODLQWGLGQRWFOHDUO\ DOOHJH WKDW WKH GHIHQGDQWV ZHUH VXHG LQ WKHLU SHUVRQDO VHW IRUWK WKDW WKH\ ZHUH VXLQJ WKH VWDWH GHIHQGDQWV LQ WKHLU FDSDFLWLHV  7KH GLVWULFW FRXUW WKHUHIRUH GLG QRW HUU LQ LQGLYLGXDOFDSDFLW\IRUGDPDJHVQRWPHUHO\LQWKHLUFDSDFLW\ GLVPLVVLQJWKHGHIHQGDQWVLQWKHLULQGLYLGXDOFDSDFLWLHV 7KH mFRXUVH RI SURFHHGLQJVl GRHV QRW GHPRQVWUDWH WKDW QRWLFHRILQGLYLGXDOFDSDFLW\FODLPVZDVmJLYHQDQGUHFHLYHGl HLWKHU$VWKHPDMRULW\LQGLFDWHVWKHQDWXUHRIDQ\GHIHQVHV  %\ FRQWUDVW mVWDWH RIILFLDOV VXHG LQ WKHLU LQGLYLGXDO FDSDFLWLHV DUH µSHUVRQVj ZLWKLQ WKH PHDQLQJ RI †  7KH (OHYHQWK $PHQGPHQW GRHV QRW EDU VXFK VXLWV QRU DUH VWDWH RIILFHUV DEVROXWHO\ LPPXQH IURP SHUVRQDO OLDELOLW\ XQGHU †  VROHO\ E\ YLUWXH RI WKH µRIILFLDOj QDWXUH RI WKHLU DQG WKH XVH RI IRUFH GXULQJ WKH DUUHVW YLRODWHG WKH SODLQWLIIjV DFWVl +DIHU Y 0HOR  86    ULJKWV SULYLOHJHV DQG LPPXQLWLHV VHFXUHG E\ WKH 8QLWHG 6WDWHV )RU D GLVFXVVLRQ RI WKH GLVWLQFWLRQ EHWZHHQ SHUVRQDO DQG RIILFLDO &RQVWLWXWLRQ LQFOXGLQJ WKH ULJKW WR EH IUHH RI DQ XQUHDVRQDEOH FDSDFLW\ DFWLRQV VHH .HQWXFN\ Y *UDKDP  86    VHL]XUH DQG WR EH IUHH RI D GHSULYDWLRQ RI OLEHUW\ XQGHU WKH WK DQG WK $PHQGPHQWV WR WKH &RQVWLWXWLRQ RI WKH 8QLWHG 6WDWHV  DV ZHOO DV KLV ULJKW WR IUHH VSHHFK XQGHU WKH )LUVW $PHQGPHQW 7KH SHWLWLRQHU LQ :LOO ILOHG WKH †  DFWLRQ LQ VWDWH FRXUW ,Q GLFWD 7KH VDLG DFWLRQV DOVR YLRODWHG WKH SODLQWLIIjV ULJKWV VHFXUHG WKH :LOO FRXUW DOVR VXJJHVWHG WKDW WKH (OHYHQWK $PHQGPHQW GRHV QRW DSSO\ E\ $UWLFOH  ††  DQG  RI WKH 7HQQHVVHH &RQVWLWXWLRQ LQ VWDWH FRXUW 6HH :LOO  86 DW  &I $OGHQ Y 0DLQH  86 &RPSODLQW ˆ     QRWLQJ WKDW VWDWHPHQW LQ :LOO LV GLFWD  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

DVVWDWHRIILFLDOV,GDW,QVRUXOLQJZHDGRSWHGWKH VDLG RIILFHUV FRQVWLWXWHG WKH GHSULYDWLRQ RI WKH SODLQWLIIjV (LJKWK&LUFXLWjVVWDQGDUGIRU†SOHDGLQJVWKDWUHTXLUHV ULJKWVXQGHUFRORURIVWDWHODZSURKLELWHGE\86&l SODLQWLIIVWRmFOHDUO\VHWIRUWKLQWKHLUSOHDGLQJWKDWWKH\DUH &RPSODLQWˆ8QGHU:HOOVLWPXVWEHDVVXPHGWKDWLQWKH VXLQJ WKH VWDWH GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLW\ IRU †FODLPWKHGHIHQGDQWVDUHEHLQJVXHGLQWKHLURIILFLDO GDPDJHVQRWVLPSO\LQWKHLUFDSDFLW\DVVWDWHRIILFLDOVl,G FDSDFLW\RQO\ DWFLWLQJ1L[Y1RUPDQ)GWK&LU  7KHPDMRULW\DOVRUHOLHVRQWKHDOOHJDWLRQLQ3DUDJUDSK WKDW  m7KH VDLG RIILFHUV DFWLQJ IRU WKHPVHOYHV DQG IRU WKH &LW\lEHKDYHGmZLWKPDOLFHDQGYLRODWHGWKHSODLQWLIIjV FLYLO ULJKWVl $QWH DW  TXRWLQJ WKH &RPSODLQW HPSKDVLV DGGHGE\PDMRULW\+RZHYHUWKLVDOOHJDWLRQIDLUO\UHDG  GRHVQRWFOHDUO\VHWIRUWKWKDWWKH†FODLPLVDJDLQVWWKH 7KH 6XSUHPH &RXUW DOWKRXJK LW KDV QRWHG WKH VSOLW RI DXWKRULW\ LQ RIILFHUVLQWKHLULQGLYLGXDOFDSDFLWLHV7KHIXOOWH[WRIWKDW WKH &LUFXLWV UHJDUGLQJ SOHDGLQJ UHTXLUHPHQWV IRU †  FODLPV KDV QRW DGGUHVVHG WKH LVVXH EHIRUH XV +DIHU Y 0HOR  86   Q  SDUDJUDSKSURYLGHV FROOHFWLQJ FDVHV DQG H[SUHVVO\ GHFOLQLQJ WR GHFLGH DQ LVVXH QRW SURSHUO\ EHIRUH WKH &RXUW 7KH +DIHU &RXUW LQGLFDWHG KRZHYHU mWKDW µ>L@W LV 7KHVDLGRIILFHUVDFWLQJIRUWKHPVHOYHVDQGIRUWKH&LW\ REYLRXVO\ SUHIHUDEOH IRU WKH SODLQWLII WR EH VSHFLILF LQ WKH ILUVW LQVWDQFH WR LQVWLWXWHGDOORIWKHFULPLQDOFKDUJHVDJDLQVWWKHSODLQWLII DYRLG DQ\ DPELJXLW\jl ,G TXRWLQJ +DIHU Y 0HOR  )G   Q ZLWKRXWSUREDEOHFDXVHDQGZLWKPDOLFH7KHFKDUJHV G &LU  HPSKDVLV DGGHG ZHUHQRWLQVWLWXWHGIRUWKHSURSHUSXUSRVHRIEULQJLQJWKH  SODLQWLII WR MXVWLFH EXW WR VKLHOG DQG FRYHU XS WKH 7KH PDMRULW\ mDFNQRZOHGJHVl WKH RIILFHUVj UHDGLQJ RI :HOOV DV ZURQJIXO DFWLRQV RI WKH VDLG GHIHQGDQWV DV GHVFULEHG DGRSWLQJ WKH (LJKWK &LUFXLWjV UXOH SUHVXPLQJ DQ RIILFLDO FDSDFLW\ VXLW DEVHQW DQ H[SUHVV VWDWHPHQW WR WKH FRQWUDU\ EXW mILQG>V@ WKH PRUH DERYH7KHVDLGFULPLQDOSURVHFXWLRQVIRUFRQWULEXWLQJ UHDVRQDEOH LQWHUSUHWDWLRQ WR EH WKDW †  SODLQWLIIV PXVW FOHDUO\ QRWLI\ WR WKH GHOLQTXHQF\ RI D PLQRU DQG DJJUDYDWHG DVVDXOW GHIHQGDQWV RI WKH SRWHQWLDO IRU LQGLYLGXDO OLDELOLW\ DQG PXVW FOHDUO\ QRWLI\ KDYH DOUHDG\ EHHQ WHUPLQDWHG LQ IDYRU RI WKH SODLQWLII WKH FRXUW RI LWV EDVLV IRU MXULVGLFWLRQl $QWH DW  , KDYH D KDUG WLPH ZLWKWKHVDLGFKDUJHVEHLQJGLVPLVVHGDWWKHSUHOLPLQDU\ XQGHUVWDQGLQJ WKLV JORVV RQ WKH SODLQ ODQJXDJH RI :HOOV KHDULQJ7KHSODFLQJRIVDLGFKDUJHVRIFRQWULEXWLQJWR :H DGRSW WKH (LJKWK &LUFXLWjV LQWHUSUHWDWLRQ RI :LOO ZKLFK WKH GHOLQTXHQF\ RI D PLQRU DQG DJJUDYDWHG DVVDXOW FRQVWLWXWH WKH WRUWV RI PDOLFLRXV SURVHFXWLRQ DQG WKH UHTXLUHV WKDW SODLQWLIIV VHHNLQJ GDPDJHV XQGHU †  VHW IRUWK FOHDUO\ LQ WKHLU SOHDGLQJ WKDW WKH\ DUH VXLQJ WKH VWDWH GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLW\ IRU GDPDJHV QRW VLPSO\ LQ WKHLU DEXVHRISURFHVVDQGYLRODWHGWKHSODLQWLIIjVFLYLOULJKWV FDSDFLW\ DV VWDWH RIILFLDOV 6HH 1L[ Y 1RUPDQ  )G  WK HQXPHUDWHGDERYH &LU  :HOOV  )G DW  HPSKDVHV DGGHG &RPSODLQW †   :KHQ YLHZHG LQ IXOO LW LV DSSDUHQW WKDW 1RWDEO\ LQ :HOOV DOWKRXJK ZH DGRSWHG WKH (LJKWK &LUFXLWjV UXOH XQOLNH WKDW FRXUW ZH GLG QRW UHTXLUH RU VXJJHVW DQ\ mPDJLF ZRUGVl WR EH 3DUDJUDSK  VHWV IRUWK VWDWH ODZ FODLPV RI mWKH WRUWV RI XVHG LQ D FRPSODLQW &RPSDUH :HOOV  )G DW  VWDWLQJ VLPSO\ WKDW PDOLFLRXVSURVHFXWLRQDQGDEXVHRISURFHVVlDQGWDFNVRQD mWKH IDFH RI D FRPSODLQW PXVW LQGLFDWH ZKHWKHU D SODLQWLII VHHNV WR UHFRYHU UHIHUHQFH WR SUHYLRXVO\ DVVHUWHG FLYLO ULJKWV DV VWDWHG LQ GDPDJHV IURP GHIHQGDQWV GLUHFWO\ RU WR KROG WKH VWDWH UHVSRQVLEOH IRU WKH SDUDJUDSKVDQG,VLPSO\GRQRWVHHKRZVXFKDYDJXH FRQGXFW RI LWV HPSOR\HHVl ZLWK 1L[  )G DW  m>:@H KDYH UHSHDWHGO\ VWDWHG WKDW VHFWLRQ  OLWLJDQWV ZLVKLQJ WR VXH JRYHUQPHQW DJHQWV LQ ERWK FDSDFLWLHV VKRXOG VLPSO\ XVH WKH IROORZLQJ ODQJXDJH  µ3ODLQWLII VXHV HDFK DQG DOO GHIHQGDQWV LQ ERWK WKHLU LQGLYLGXDO DQG RIILFLDO 3DUDJUDSK  SURYLGHV FDSDFLWLHVjl TXRWLQJ 5ROOLQV E\ $JRVWD Y )DUPHU  )G   Q 7KH VDLG RIILFHUV XVHG H[FHVVLYH DQG XQUHDVRQDEOH IRUFH LQ WK &LU   DUUHVWLQJ WKH SODLQWLII DQG WKHLU DFWLRQV LQFOXGLQJ ERWK WKH DUUHVW  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

6LPLODUO\ WKH WHUPV mLQGLYLGXDO FDSDFLW\l RU mSHUVRQDO $VWKHPDMRULW\REVHUYHV:HOOVEDVHGLWVKROGLQJRQWZR FDSDFLW\l DUH DOVR QHYHU PHQWLRQHG  LQ WKH ERG\ RI WKH IXQGDPHQWDOFRQFHUQVWKH(OHYHQWK$PHQGPHQWEDUWRVXLWV &RPSODLQW&RQWUDU\WRWKHPDMRULW\jVDVVHUWLRQWKDWm>W@KH DJDLQVWDVWDWHLQIHGHUDOFRXUWDQGQRWLFHWRGHIHQGDQWVWKDW FRPSODLQWUHIHUVWRWKHRIILFHUVWKURXJKRXWDVWKHLQGLYLGXDO SHUVRQDODVVHWVPD\EHDWULVNLQDFDXVHRIDFWLRQ5HJDUGLQJ GHIHQGDQWVDQWHDWWKHSKUDVHLVXVHGRQO\RQFHLQWKH WKHWKUHVKROGLVVXHRIMXULVGLFWLRQZHVWDWHG SDUDJUDSK GHVFULELQJ WKH SDUWLHV WR WKH DFWLRQ  $JDLQ WKH UHIHUHQFHZLWKRXWDGHVLJQDWLRQWRmLQGLYLGXDOFDSDFLW\lGRHV 5XOH D RI WKH )HGHUDO 5XOHV RI &LYLO 3URFHGXUH QRWFODULI\WKDWWKHVXLWDJDLQVWWKHLQGLYLGXDOGHIHQGDQWVZDV UHTXLUHVDVKRUWDQGSODLQVWDWHPHQWRIWKHJURXQGVIRU LQWKHLULQGLYLGXDODQGQRWRIILFLDOFDSDFLWLHV8QGHU:HOOV MXULVGLFWLRQDQGUHOLHI$OWKRXJK5XOHKDVOLEHUDOL]HG WKHmSDVVLQJUHIHUHQFHlWRDJRYHUQPHQWGHIHQGDQWVjSHUVRQDO SOHDGLQJLWVKRXOGQRWEHUHDGWRDOWHUWKHMXULVGLFWLRQRI LQYROYHPHQWDVVHUWLQJWKDWWKH\SDUWLFLSDWHGLQFHUWDLQHYHQWV IHGHUDO FRXUWV  5HDG WRJHWKHU ZLWK WKH MXULVGLFWLRQDO LVQRWVXIILFLHQWWRQRWLI\WKHPWKDWWKH\PD\EHSHUVRQDOO\ OLPLWVRI5XOHDHYHQOLEHUDOL]HGSOHDGLQJXQGHU5XOH OLDEOHIRUGDPDJHV6HH:HOOV)GDW DFDQQRWFRQIHUMXULVGLFWLRQRQWKLV&RXUWWRHQWHUWDLQ VXLWVDJDLQVWVWDWHVDQGVWDWHRIILFLDOVZKHQWKH(OHYHQWK )XUWKHUPRUHWKHIXOOSDVVDJHUHDGVDVIROORZVm7KHRWKHU $PHQGPHQWEDUVXVIURPGRLQJVR5XOHDSURYLGHV LQGLYLGXDOGHIHQGDQWVZHUHDWDOOWLPHVUHOHYDQWWRWKLVDFWLRQ LQSHUWLQHQWSDUW RIILFHUVRIWKH&LW\RI+DUULPDQ3ROLFH'HSDUWPHQWDQGZHUH D&DSDFLW\,WLVQRWQHFHVVDU\WRDYHUWKHFDSDFLW\ DFWLQJLQWKHFRXUVHRIWKHLUHPSOR\PHQWDQGLQIXUWKHUDQFH RIWKHSDUW\WRVXHRUEHVXHGH[FHSWWRWKHH[WHQW RI WKH EXVLQHVV RI WKH &LW\l  &RPSODLQW ˆ F HPSKDVLV UHTXLUHG WR VKRZ WKH MXULVGLFWLRQ RI WKH FRXUW DGGHG7KLVVWDWHPHQWIDLUO\LPSOLHVWKDW3ODLQWLIIZDVVXLQJ HPSKDVLVDGGHG WKHLQGLYLGXDOGHIHQGDQWVLQWKHLUFDSDFLW\DVDJHQWVRIWKH $FFRUGLQJO\EHFDXVHWKH(OHYHQWK$PHQGPHQWSODFHV 3ROLFH'HSDUWPHQW7KLVUHDGLQJLVUHLQIRUFHGLQ3DUDJUDSK DMXULVGLFWLRQDOOLPLWRQIHGHUDOFRXUWVLQFLYLOULJKWVFDVHV ZKLFKH[SOLFLWO\VWDWHVWKDWWKHDFWLRQVRIWKHGHIHQGDQWV DJDLQVWVWDWHVDQGVWDWHHPSOR\HHVZHXQGHUVWDQG5XOH ZHUH WDNHQ DV SDUW RI  WKHLU RIILFLDO GXWLHV  m$W DOO WLPHV DWRUHTXLUHSODLQWLIIVWRSURSHUO\DOOHJHFDSDFLW\LQ UHOHYDQWWRWKLVDFWLRQWKHVDLGRIILFHUVZHUHHPSOR\HHVDQGRU WKHLUFRPSODLQW DJHQWVRIWKH&LW\RI+DUULPDQ$OORIWKHVDLGDFWLRQVRIWKH VDLGRIILFHUVZHUHWDNHQLQWKHFRXUVHRIDQGLQWKHVFRSHRI WKHLU HPSOR\PHQW E\ WKH &LW\ IRU ZKLFK WKH &LW\ DQG WKH GHIHQGDQW SROLFH FKLHI sHQNLQV DUH OLDEOH YLFDULRXVO\ DFFRUGLQJWRWKHSULQFLSOHVRIUHVSRQGHDWVXSHULRUl,Gˆ (PSKDVHVDGGHG(YHQXQGHUWKHPDMRULW\jVVHOHFWLYHO\ FKRVHQ FDVH ODZ WKLV GRHV QRW VHUYH DV VXIILFLHQW QRWLFH ,QGHHGLQ3HOIUH\ZHIRXQGWKHSOHDGLQJDWLVVXHSURYLGHG VXIILFLHQWQRWLFHRIWKHIDFWWKDWWKHGHIHQGDQWVZHUHEHLQJ VXHGLQWKHLULQGLYLGXDOFDSDFLW\LQSDUWEHFDXVHLWmVWDWHGWKDW WKHGHIHQGDQWVDFWHGRXWVLGHWKHVFRSHRIWKHLUHPSOR\PHQWl 3HOIUH\)GDWHPSKDVLVDGGHG 3DUDJUDSKVHWVIRUWKWKH†FODLP3DUDJUDSKVWDWHV DQGLWVWDWHVQRWKLQJHOVHWKHIROORZLQJm7KHDFWLRQVRIWKH  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

,GDWFLWDWLRQVRPLWWHG WKH PDMRULW\jV H[SDQVLYH mFRXUVH RI SURFHHGLQJVl WHVW WKH GLVWULFWFRXUWjVGLVPLVVDORISODLQWLIIjVFRPSODLQWZDVSURSHU $VIRUQRWLFHWRWKHGHIHQGDQWVZHVWDWHGWKDW , EHJLQ DV , PXVW XQGHU HLWKHU WHVW ZLWK 3ODLQWLIIjV >D@OWKRXJKPRGHUQSOHDGLQJLVOHVVULJLGWKDQLQDQHDUOLHU &RPSODLQWZKLFKLVVHWIRUWKLQLWVHQWLUHW\DVDQDSSHQGL[WR GD\ VHH &RQOH\ Y *LEVRQ  86      WKLVRSLQLRQ7KHFDSWLRQRIWKH&RPSODLQWUHDGVDVIROORZV ZHKDYHQRWOHWGRZQDOOSOHDGLQJEDUULHUV,WLV QRW WRR PXFK WR DVN WKDW LI D SHUVRQ RU HQWLW\ LV WR EH 5DOSK0RRUHsU VXEMHFWWRVXLWWKHSHUVRQRUHQWLW\VKRXOGEHSURSHUO\ 6KHOGRQ5G QDPHGDQGFOHDUO\QRWLILHGRIWKHSRWHQWLDOIRUSD\PHQW +DUULPDQ71 RIGDPDJHVLQGLYLGXDOO\ 3ODLQWLII ,G1RWLFHRISHUVRQDOFDSDFLW\LQWXUQDOORZVJRYHUQPHQW GHIHQGDQWV  WR DYDLO WKHPVHOYHV RI WKH TXDOLILHG LPPXQLW\ YV GHIHQVH:HH[SODLQHGWKHSROLF\UDWLRQDOHRIWKHTXDOLILHG LPPXQLW\GRFWULQHLHWKHmGHVLUHWRVKLHOGSXEOLFRIILFLDOV &LW\RI+DUULPDQ7HQQHVVHH+DUULPDQ IURPGLYHUWLQJWKHLUHQHUJLHVWKURXJKWKHIRUFHGGHIHQVHRI 3ROLFH'HSDUWPHQW5R\sHQNLQV&KLHI FKDOOHQJHV WR WKHLU DFWLRQV WDNHQ LQ WKHLU JRYHUQPHQWDO RI3ROLFH'DUUHQ0F%URRP7HUU\)LQN FDSDFLWLHVlDQGWKHUHODWHGUHTXLUHPHQWWKDWWKRVHZKRDUH 5DQG\+HLGOH9LUJLO0F&DUWDQGsHUU\ HQWLWOHGWRVXFKLPPXQLW\mVKRXOGEHJUDQWHGWKDWLPPXQLW\ 6LQJOHWRQ DW WKH HDUOLHVW SRVVLEOH VWDJH RI WKH FDVHl  ,G DW  +DUULPDQ3ROLFH'HSDUWPHQW FLWLQJ+DUORZY)LW]JHUDOG86 7KLV 5RDQH6W PHDQVUHVROYLQJWKHLPPXQLW\TXHVWLRQSULRUWRGLVFRYHU\,G +DUULPDQ71 DWFLWLQJ+DUORZ86DW 'HIHQGDQWV  7KLV FDVH GRHV QRW LPSOLFDWH WKH (OHYHQWK $PHQGPHQW EHFDXVH RQO\ $VQRWHGWKHFDSWLRQGRHVQRWLQGLFDWHWKHFDSDFLW\RIDQ\RI PXQLFLSDO GHIHQGDQWV ZHUH VXHG +RZHYHU WKH VHFRQG UDWLRQDOH WKHGHIHQGDQWV+RZHYHUWKHPDMRULW\ILQGVVLJQLILFDQFHLQ DSSOLHV UHJDUGOHVV RI WKH VWDWH RU ORFDO VWDWXV RI WKH GHIHQGDQWV DQG WKH :HOOV WKHIDFWWKDWWKH&RPSODLQWOLVWVRQO\WKHRIILFHUVjQDPHVQRW FDVH ODZ KDV DSSOLHG LW DV VXFK WKHLURIILFLDOWLWOHV,GRQRWNQRZWKDWWKLVVLJQLILHVDQ\WKLQJ (QWLWLHVFDQRQO\DFWWKURXJKWKHLUDJHQWVVHH3RLQGH[WHUY  :H DGGHG WKDW *UHHQKRZ  86    m>W@KH 6WDWH LV D 7KLV SULQFLSOH LV UHLQIRUFHG E\ WKH IDFW WKDW LQ UHFHQW \HDUV SROLWLFDOFRUSRUDWHERG\>DQG@FDQRQO\DFWWKURXJKDJHQWVl DQ LQFUHDVLQJO\ ODUJH QXPEHU RI IULYRORXV FDVHV KDYH EHHQ ILOHG 7KXVmRIILFLDOFDSDFLW\VXLWVµJHQHUDOO\UHSUHVHQWRQO\DQRWKHU LQ IHGHUDO FRXUWo ERWK E\ ODZ\HUV DQG 0DQ\ RI WKHVH VXLWV ZDVWH WKH WLPH RI SXEOLF RIILFLDOV ODZ\HUV DQG WKH FRXUWV ZD\RISOHDGLQJDQDFWLRQDJDLQVWDQHQWLW\RIZKLFKDQRIILFHU SUR VH

0LQLPXP SOHDGLQJ UHTXLUHPHQWV DUH QHHGHG HYHQ IRU LVDQDJHQWjl+DIHUY0HOR86TXRWLQJ SODLQWLIIV ZKRVH ODZVXLWV QRZ FRPSULVH PRUH WKDQ  RU SUR VH .HQWXFN\Y*UDKDP86 VHHDOVRLG DOPRVW  RI WKH DSSHDOV ILOHG LQ WKLV &RXUW ,W LV FHUWDLQO\ DWQRWLQJWKDWm>V@WDWHRIILFHUVVXHGIRUGDPDJHVLQWKHLU UHDVRQDEOH WR DVN WKDW DOO SODLQWLIIV HYHQ SODLQWLIIV VRPH RIILFLDO FDSDFLW\ DUH QRW µSHUVRQVj IRU SXUSRVHV RI WKH VXLW RI ZKRP ILOH VHYHUDO DSSHDOV HDFK \HDU ZLWK XV DOHUW SDUW\ SUR VH

GHIHQGDQWVWKDWWKH\PD\EHLQGLYLGXDOO\UHVSRQVLEOHLQGDPDJHV EHFDXVH WKH\ DVVXPH WKH LGHQWLW\ RI WKH JRYHUQPHQW WKDW 7KH WULDO DQG DSSHOODWH FRXUWV VKRXOG QRW KDYH WR JXHVV DW WKH HPSOR\VWKHPl  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

7KH FRXUVH RI SURFHHGLQJV WHVW GRHV QRW JXDUDQWHH 7KXVLQ:HOOVZHFRQFOXGHGWKDWm>W@KHSDVVLQJUHIHUHQFH VXEVWDQWLDOMXVWLFHIRUGHIHQGDQWVEHFDXVHLWDOORZVDSODLQWLII WRWKHVHFRUUHFWLRQVRIILFLDOVjµSHUVRQDOLQYROYHPHQWLQWKLV WR EHODWHGO\ VDOYDJH DQ DPELJXRXV RU HYHQ QRQH[LVWHQW FRPSODLQWjDVVHUW>LQJ@WKDWWKH\NQHZRIDQGSDUWLFLSDWHGLQ DVVHUWLRQ RI FDSDFLW\  $ GHIHQGDQW WR KLV VXUSULVH PLJKW FHUWDLQHYHQWV>GLG@QRWFRQYHUWWK>H@ODZVXLWDJDLQVWWKH OHDUQIRUWKHILUVWWLPHLQDUHVSRQVHWRDVXPPDU\MXGJPHQW GHIHQGDQWVj RIILFHV WR RQH WKDW VXIILFLHQWO\ DOHUWV WKHVH PRWLRQWKDWKHPD\EHSHUVRQDOO\OLDEOHIRUPRQH\GDPDJHV RIILFLDOV WKDW WKH\ PD\ EH SHUVRQDOO\ DFFRXQWDEOH IRU DQ\ &I$EGXU5DKPDQ)GDW6XFKDUHVXOWLVFRVWO\ GDPDJHVOLDELOLW\WKDWPD\IORZIURPSODLQWLIIVjGXHSURFHVV DQGLQHIILFLHQWEHFDXVHWKHGHIHQGDQWZRXOGKDYHWRFRQGXFW FODLPl,GDW%HFDXVHWKHSODLQWLIIVjFRPSODLQWGLGQRW DGGLWLRQDOGLVFRYHU\DQGPRWLRQSUDFWLFHDQGUHYLVHKLVWULDO PHHW WKH 1L[ WHVW RI FOHDUO\ SOHDGLQJ WKDW GHIHQGDQWV ZHUH SUHSDUDWLRQDQGVWUDWHJ\$OORIWKLVFDQEHDYRLGHGKRZHYHU EHLQJ VXHG LQ WKHLU LQGLYLGXDO FDSDFLW\ IRU GDPDJHV ZH LIWKHSODLQWLIIIROORZVWKHUXOHVDQGSOHDGVFDSDFLW\SURSHUO\ DIILUPHGWKHGLVWULFWFRXUWjVJUDQWRIVXPPDU\MXGJPHQWDQG LQ WKH FRPSODLQW   7KH GHIHQGDQW FDQ WKHQ UDLVH WKH GLVPLVVHGWKHDSSHDOIRUODFNRIVXEMHFWPDWWHUMXULVGLFWLRQ DIILUPDWLYH GHIHQVH RI TXDOLILHG LPPXQLW\ LQ KLV YHU\ ILUVW ,GDW SOHDGLQJ EH LW DQ DQVZHU RU PRWLRQ WR GLVPLVV DQG WKHQ FRQGXFWGLVFRYHU\DQGPRWLRQSUDFWLFHLIQHFHVVDU\sXGLFLDO &RQWUDU\WRWKHPDMRULW\jVFKDUDFWHUL]DWLRQRIRXUFDVHODZ UHVRXUFHVZRXOGDOVREHFRQVHUYHG ZHKDYHQRWDSSOLHGDmFRXUVHRISURFHHGLQJVlWHVWEXWLQVWHDG KDYH VWULFWO\ IROORZHG :HOOVjV UHTXLUHPHQW WKDW †  7KH:HOOVUXOHDVLWKDVEHHQFRQVLVWHQWO\DSSOLHGLQWKLV SODLQWLIIV FOHDUO\ SOHDG mLQGLYLGXDO FDSDFLW\l LQ WKH &LUFXLWWRUHTXLUHFOHDUQRWLFHRILQGLYLGXDOFDSDFLW\LQWKH FRPSODLQW    ,Q WKH ILUVW SXEOLVKHG FDVH WR DSSO\ :HOOV SOHDGLQJV SURPRWHV IXQGDPHQWDO MXULVGLFWLRQDO DQG MXULVSUXGHQWLDOGRFWULQHV7KHFRXUVHRISURFHHGLQJVWHVWGRHV QRW  )RU WKLV UHDVRQ , VXEPLW WKDW WKH UXOH FUDIWHG E\ WKH PDMRULW\LVLOODGYLVHG QDWXUH RI WKH FODLP DVVHUWHG $00 &ODUN Y 1DWLRQDO 7UDYHOHUV /LIH ,QV &R  )G  WK &LU 

,,, :HOOV  )G DW 

 7KH&RPSODLQWIDLOVWRDOOHJHSHUVRQDOFDSDFLW\XQGHU:HOOV ,Q VXSSRUW RI LWV DVVHUWLRQ WKDW ZH KDYH QHYHU UHDG :HOOV WR HVWDEOLVK D SHU VH UXOH UHTXLULQJ †  SODLQWLII WR DIILUPDWLYH SOHDG mLQGLYLGXDO DQGSURJHQ\EHFDXVHLWGRHVQRWFOHDUO\SOHDGLW,QGHHGLW FDSDFLW\l LQ WKH FRPSODLQW WKH PDMRULW\ FLWHV %URRNV Y $PHULFDQ GRHVQRWXVHWKHWHUPmFDSDFLW\lDWDOO+RZHYHUHYHQXQGHU %URDGFDVWLQJ &RV  )G  WK &LU  DV UHDIILUPLQJ WKDW m>D@OO D >† @ FRPSODLQW QHHG GR LV DIIRUG WKH GHIHQGDQW µIDLU QRWLFH RI ZKDW WKH FODLP LV DQG WKH JURXQGV XSRQ ZKLFK LW UHVWVjl ,G DW  TXRWLQJ sRQHV Y 'XQFDQ  )G   WK &LU  HPSKDVLV DGGHG  %URRNV GRHV QRW FLWH HLWKHU :HOOV RU :KLWWLQJWRQ 3HUKDSV WKDW LV EHFDXVH UHODWH EDFN ZKHQ WKH DPHQGPHQW LV RQH WKDW FKDQJHV D SDUW\ WKH LQWHQGHG FDSDFLW\ ZDV QRW DW LVVXH LQ %URRNV 5DWKHU WKH LVVXH LQ %URRNV ZDV WKH SDUW\ GLG QRW UHFHLYH QRWLFH ZLWKLQ WKH SHULRG IRU VHUYLFH RI SURFHVV XQGHU OHJDO EDVLV IRU KLV †  DQG †  FODLPV :H FRQFOXGHG RQ ERWK 5XOH P LH  GD\V WKHUH LV SUHMXGLFH WR WKH SDUW\ WR EH EURXJKW LQ FRXQWV WKDW WKH SODLQWLIIjV DOOHJDWLRQV ZHUH WRR YDJXH DQG FRQFOXVRU\ WR DQG WKH LQWHQGHG SDUW\ GLG QRW NQRZ RU KDYH UHDVRQ WR NQRZ WKDW EXW IRU ZLWKVWDQG D PRWLRQ WR GLVPLVV ,G DW  6LPLODUO\ LQ 'XQFDQ DW D PLVWDNH WKH DFWLRQ ZRXOG KDYH EHHQ EURXJKW DJDLQVW KLP )HG 5 &LY LVVXH ZDV mWKH VXIILFLHQF\ RI WKH DOOHJDWLRQV LQ D FRPSODLQW IRU DQ DFWLRQ 3 F  XQGHU VHFWLRQ l 'XQFDQ  )G DW  0RUH VSHFLILFDOO\ WKH , QHHG QRW LOOXVWUDWH WKH SRLQW WKURXJK HYHU\ UXOH EXW LW LV DSSDUHQW LVVXH ZDV ZKHWKHU WKH SODLQWLII DGHTXDWHO\ DOOHJHG WKDW WKH GHIHQGDQWVj WKDW WKH )HGHUDO 5XOHV RI &LYLO 3URFHGXUH EDODQFH WKH FRPSHWLQJ LQWHUHVWV DFWLRQV ZHUH WDNHQ mXQGHU FRORU RI ODZl DV UHTXLUHG WR VWDWH D FODLP XQGHU RI SODLQWLIIV DQG GHIHQGDQWV E\ VHWWLQJ XS DQ RUGHUO\ DQG ILQLWH SURFHGXUH †  $JDLQ FDSDFLW\ ZDV QRW DQ LVVXH 7KXV WKH PDMRULW\jV UHOLDQFH IURP FRPSODLQW WR MXGJPHQW RQ WKHVH WZR FDVHV LV QRW RQO\ LQDSSURSULDWH LW LV GLVLQJHQXRXV JLYHQ WKDW  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

:KLWWLQJWRQ Y 0LOE\  )G  WK &LU  SHU FRYHUWKHOHJDOIHHVRUMXGJPHQWVRIWKHLUHPSOR\HHVIRUDFWV FXULDP ZH DIILUPHG WKH GLVWULFW FRXUWjV GLVPLVVDO RI WKH SHUIRUPHGLQWKHLULQGLYLGXDOFDSDFLWLHV6XFKODZVXLWVQRW †  FODLP DJDLQVW D FRXQW\ DWWRUQH\ D ZDUQLQJ RIILFHU RQO\ DIIHFW WKHVH GHIHQGDQWVj ILQDQFLDO UHVRXUFHV EXW DOVR DWWRUQH\DQGMXGJHVWDWLQJWKDWm>X@QGHU:HOOVY%URZQ KDYHDJUHDWLPSDFWRQWKHLUHPRWLRQVDQGWKHLUUHSXWDWLRQV )GWK&LUDEVHQWDQ\LQGLFDWLRQWKDW ERWKSURIHVVLRQDODQGSHUVRQDO,ILQGLWVWUDQJHWKDWZHDVN WKHVHGHIHQGDQWVDUHEHLQJVXHGLQGLYLGXDOO\ZHPXVWDVVXPH DOOWKLVRISHRSOHZKRDJUHHWRSHUIRUPSXEOLFVHUYLFHEXW WKDWWKH\DUHEHLQJVXHGLQWKHLURIILFLDOFDSDFLWLHVoFRXQW\ WKHQZHIDLOWRSURYLGHWKHPWKHFRXUWHV\RIHDUO\QRWLFHWKDW DWWRUQH\ ZDUQLQJ RIILFHU DWWRUQH\ DQG MXGJH UHVSHFWLYHO\ WKH\ PD\ EH LQGLYLGXDOO\ OLDEOH IRU DFWV DULVLQJ RXW RI WKDW %HFDXVH0U:KLWWLQJWRQLVVHHNLQJPRQHWDU\UHOLHIRQO\KLV VHUYLFH †  FODLP DJDLQVW WKHVH RIILFLDOV FDQQRW EH VXVWDLQHGl :KLWWLQJWRQ)GDW,Q:KLWWLQJWRQRQO\WKHQRWLFH 7KHPDMRULW\jVDSSURDFKLVDOVRLQFRQVLVWHQWZLWKWKHWHQRU UDWLRQDOH RI :HOOV ZDV LPSOLFDWHG EHFDXVH WKH VXLW ZDV RIWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH7KHIXQGDPHQWDO DJDLQVWORFDORIILFLDOV7KXVLQ:KLWWLQJWRQZHLPSOLFLWO\ SXUSRVH RI WKH 5XOHV LV mWR VHFXUH WKH MXVW VSHHG\ DQG UHFRJQL]HGWKHQRWLFHUDWLRQDOHDVDQLQGHSHQGHQWEDVLVIRU LQH[SHQVLYHGHWHUPLQDWLRQRIHYHU\DFWLRQl)HG5&LY3 UHTXLULQJWKDWLQGLYLGXDOFDSDFLW\EHSOHDGHGLQWKHFRPSODLQW VHHDOVR&HORWH[&RUSY&DWUHWW86 QRWLQJWKDW5XOHRIWKH)HGHUDO5XOHVRI&LYLO3URFHGXUH LV LQ DFFRUG ZLWK WKH SULPDU\ SXUSRVH RI )HGHUDO 5XOHV DV VWDWHGLQ)HG5&LY3m7KHDSSOLFDWLRQRIRUGHUO\UXOHV RI SURFHGXUH GRHV QRW UHTXLUH WKH VDFULILFH RI IXQGDPHQWDO MXVWLFH EXW UDWKHU WKH 5XOHV PXVW EH FRQVWUXHG WR SURPRWH MXVWLFHIRUERWKSDUWLHVQRWWRGHIHDWLW7KLVPDQGDWHLVPHW LIVXEVWDQWLDOMXVWLFHLVDFFRPSOLVKHGEHWZHHQWKHSDUWLHVl s$0(6:00225((7$/0225(j6)('(5$/ 35$&7,&(ˆ>@>D@GHG

 7KH FRQFHSW RI VXEVWDQWLDO MXVWLFH IRU ERWK SDUWLHV WKURXJK WKH RUGHUO\ DSSOLFDWLRQ RI UXOHV RI SURFHGXUH SHUPHDWHV WKH 5XOHV )RU H[DPSOH WKH 5XOHV SURYLGH WKDW LI VHUYLFH LV QRW PDGH XSRQ D GHIHQGDQW ZLWKLQ  GD\V DIWHU WKH FRPSODLQW LI ILOHG WKH FRXUW VKDOO GLVPLVV WKH DFWLRQ ZLWKRXW SUHMXGLFH XQOHVV WKH SODLQWLII VKRZV JRRG FDXVH 5XOH  IXUWKHU DOORZV DPHQGPHQWV WR VXPPRQV )HG 5 &LY 3 D 7KLV HQVXUHV GHIHQGDQWV DUH WLPHO\ QRWLILHG RI VXLWV DJDLQVW WKHP EXW HQVXUHV DQ RSSRUWXQLW\ IRU SODLQWLIIV WR FRUUHFW RYHUVLJKWV 5XOH  DOVR RIIHUV RSSRUWXQLWLHV IRU SDUWLHV WR VDYH FRVWV RQ FRRSHUDWLRQ UHJDUGLQJ ZDLYHU RI VHUYLFH )HG 5 &LY 3 G $ GHIHQGDQW KDV WZHQW\ GD\V XSRQ UHFHLSW RI WKH VXPPRQV DQG FRPSODLQW WR VHUYH DQ DQVZHU )HG 5 &LY 3 D  EXW PD\ EH VXEMHFW WR GHIDXOW LI KH IDLOV WR DQVZHU RU RWKHUZLVH GHIHQG WKH DFWLRQ )HG 5 &LY 3 D $ GHIDXOWHG GHIHQGDQW KRZHYHU KDV WZR DYHQXHV RI UHFRXUVH XQGHU )HG 5 &LY 3 F DQG E 7KH 5XOHV DUH DOVR OLEHUDO LQ DOORZLQJ D SDUW\ WR DPHQG KLV SOHDGLQJ $00 )HG 5 &LY 3 D $W WKH VDPH WLPH KRZHYHU DQ DPHQGPHQW WKHUH LV DPSOH 6L[WK &LUFXLW DXWKRULW\ RQ WKH LVVXH RI SOHDGLQJ FDSDFLW\ HYHQ RQH WKDW SHUWDLQV WR WKH VDPH WUDQVDFWLRQ RU RFFXUUHQFH GRHV QRW  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

JRYHUQPHQW RIILFLDOV FDQ HQWDLO VXEVWDQWLDO VRFLDO FRVWV 1H[WLQ+DUGLQY6WUDXE)GWK&LU LQFOXGLQJWKHULVNWKDWIHDURISHUVRQDOPRQHWDU\OLDELOLW\DQG ZKLFKLQYROYHGDVWDWHSULVRQRIILFLDODVGHIHQGDQWZHQRWHG KDUDVVLQJ OLWLJDWLRQ ZLOO XQGXO\ LQKLELW RIILFLDOV LQ WKH GLVFKDUJHRIWKHLUGXWLHVlVHHDOVR:\DWWY&ROH86    QRWLQJ WKDW 6XSUHPH &RXUW KDV  5LWFKLH Y :LFNVWURP  )G  WK &LU  ZDV DFWXDOO\ WKH FRQVLVWHQWO\UHFRJQL]HGTXDOLILHGLPPXQLW\IRUJRYHUQPHQW QH[W SXEOLVKHG GHFLVLRQ DSSO\LQJ :HOOV +RZHYHU WKH RSLQLRQ GRHV QRW RIILFLDOVmZKHUHLWZDVQHFHVVDU\WRSUHVHUYHWKHLUDELOLW\WR VKHG PXFK OLJKW RQ :HOOV :LWKRXW GLVFXVVLQJ WKH VSHFLILF ODQJXDJH RI WKH VHUYH WKHSXEOLFJRRGRUWRHQVXUHWKDWWDOHQWHGFDQGLGDWHV FRPSODLQW ZH KHOG WKDW ZHUHQRWGHWHUUHGE\WKHWKUHDWRIGDPDJHVVXLWVIURPHQWHULQJ :KHQ WKH IRUHJRLQJ LV XVHG DV WKH DQDO\WLFDO WRRO WR HYDOXDWH

SXEOLF VHUYLFHl OLVWLQJ FDVHV 8QGHU WKH FRXUVH RI SODLQWLIIjV FODLP LQ WKH FDVH DW EDU LW EHFRPHV LQVWDQWO\ FOHDU WKDW WKH VXLW DJDLQVW FRUUHFWLRQV RIILFHU :LFNVWURP LV DQ mLQGLYLGXDO SURFHHGLQJV DQDO\VLV WKH SURWHFWLRQV RI WKH TXDOLILHG FDSDFLW\l VXLW QRW VXEMHFW WR HOHYHQWK DPHQGPHQW SURWHFWLRQV 

LPPXQLW\GRFWULQHDUHODUJHO\ORVW 6LPLODUO\ ZH EHOLHYH WKH VXLW DJDLQVW .RHKOHU LV DQ mLQGLYLGXDO FDSDFLW\l VXLW QRWZLWKVWDQGLQJ WKDW QR mKDQGV RQl PLVFRQGXFW 7KH PDMRULW\jV QHZ UXOH LQH[SOLFDEO\ WLSV WKH EDODQFH LQ LV FODLPHG IDYRURILQHSWSOHDGLQJDQGLPSURSHUO\SODFHVWKHEXUGHQRQ  :H GR QRW ILQG WKLV KROGLQJ WR EH LQFRQVLVWHQW ZLWK

JRYHUQPHQWGHIHQGDQWVWRIHUUHWRXWZKHWKHUWKH\DUHEHLQJ :HOOV Y %URZQ  )G  WK &LU  ZKHQ :HOOV LV UHDG DJDLQVW WKH FOHDU PDQGDWH RI WKH UHOHYDQW VXHGSHUVRQDOO\7KHSUDFWLFDOHIIHFWRIWKHPDMRULW\jVWHVWLV 6XSUHPH &RXUW GHFLVLRQV WKDW HYHU\ JRYHUQPHQW GHIHQGDQW ZKHQ IDFHG ZLWK DQ ,G DW 

DPELJXRXV FRPSODLQW D FRPSODLQW WKDW LV VLOHQW RQ WKH $ IXOO UHDGLQJ RI 5LWFKLH UHYHDOV WKDW WKH IRFXV RI WKDW RSLQLRQ ZDV WR TXHVWLRQ RI FDSDFLW\ RU HYHQ D FRPSODLQW WKDW FOHDUO\ RQO\ FODULI\ WKH 6L[WK &LUFXLWjV LQWHUSUHWDWLRQ RI (OHYHQWK $PHQGPHQW

DOOHJHVDQRIILFLDOFDSDFLW\VXLWZLOOKDYHWRILOHDPRWLRQIRU LPPXQLW\ 3ULRU WR +DIHU WKLV &RXUW KDG LVVXHG DQ RSLQLRQ &RZDQ Y 8QLYHUVLW\ RI /RXLVYLOOH 6FKRRO RI 0HGLFLQH  )G  WK &LU  DPRUHGHILQLWHVWDWHPHQWLQRUGHUWRHQVXUHWKDWWKH\DUHQRW LQ ZKLFK ZH GLVPLVVHG FODLPV DJDLQVW LQGLYLGXDO GHIHQGDQWV KROGLQJ WKDW EHLQJVXHGLQWKHLULQGLYLGXDOFDSDFLW\7KHSODLQWLIILVWKH WKH FODLP ZDV DQ mRIILFLDO FDSDFLW\l FODLP DQG WKXV ZDV UHDOO\ DQ DWWHPSW PDVWHURIKLVFRPSODLQWDQGLWLVQRWWRRPXFKWRDVNWKDWKH WR FROOHFW PRQH\ GDPDJHV DJDLQVW WKH XQLYHUVLW\ D VWDWH DJHQF\ ZLWK SOHDGKLVFODLPVSURSHUO\&I&DWHUSLOODU,QFY:LOOLDPV (OHYHQWK $PHQGPHQW LPPXQLW\ ,Q +DIHU WKH 6XSUHPH &RXUW

 86    REVHUYLQJ mWKH SDUDPRXQW FKDUDFWHUL]HG &RZDQ DV HQGRUVLQJ WKH YLHZ WKDW VWDWH RIILFLDOV PD\ QRW EH KHOG OLDEOH LQ WKHLU SHUVRQDO FDSDFLW\ IRU DFWLRQV WKH\ WDNH LQ WKHLU RIILFLDO SROLFLHVHPERGLHGLQWKHZHOOSOHDGHGFRPSODLQWUXOHWKDWWKH FDSDFLW\ 6HH +DIHU  86 DW  SODLQWLIILVWKHPDVWHURIWKHFRPSODLQWWKDWDIHGHUDOTXHVWLRQ ,Q 5LWFKLH sXGJH *X\ ZKR ZDV DOVR WKH DXWKRU RI &RZDQ FODULILHG PXVWDSSHDURQWKHIDFHRIWKHFRPSODLQWDQGWKDWWKHSODLQWLII WKDW WKLV ZDV QRW ZKDW &RZDQ KHOG PD\E\HVFKHZLQJFODLPVEDVHGRQIHGHUDOODZFKRRVHWR 7KH GHFLVLRQ LQ &RZDQ RI ZKLFK , ZDV WKH DXWKRU LV EHLQJ KDYHWKHFDXVHKHDUGLQVWDWHFRXUWl1RUVKRXOGZHDOORZ PLVLQWHUSUHWHG E\ WKH GHIHQGDQWV    &RZDQ GRHV QRW VWDQG IRU WKH SURSRVLWLRQ WKDW HYHU\ WLPH D VWDWH RIILFLDO LV FKDUJHG ZLWK OD[SODLQWLIIVWRSXWFRXUWVLQWKHSRVLWLRQRIGLYLQLQJZKHWKHU PLVFRQGXFW ZKLOH DFWLQJ ZLWKLQ WKH JHQHUDO DPELW RI KLV MRE WLWOH DGHIHQGDQWVKRXOGKDYHXQGHUVWRRGWKDWKHZDVEHLQJVXHGLQ HOHYHQWK DPHQGPHQW LPPXQLW\ FRPHV LQWR SOD\ $OO WKDW ZDV KLVSHUVRQDOFDSDFLW\$VZHVWDWHGLQ:HOOVmWKHWULDODQG LQWHQGHG LQ &RZDQ ZDV WR LQGLFDWH WKDW LQ WKDW FDVH WKH WZR DSSHOODWHFRXUWVVKRXOGQRWKDYHWRJXHVVDWWKHQDWXUHRIWKH LQGLYLGXDO GHIHQGDQWV ZHUH PHUHO\ FDUU\LQJ RXW VWDWH SROLF\ DQG FODLPDVVHUWHGl:HOOV)GDW DV VXFK WKH VXLW ZDV QR GLIIHUHQW WKDQ LI LW ZDV EURXJKW VROHO\ DJDLQVW WKH VWDWH 5LWFKLH  )G DW  $V ZH REVHUYHG LQ +DUGLQ m5LWFKLH :HDVDQDWLRQHQFRXUDJHSXEOLFVHUYLFH+RZHYHUSXEOLF GHPRQVWUDWHV WKDW WKH ODZ RI WKLV FLUFXLW ZDV FRQVLVWHQW ZLWK WKH VHUYLFHRIWHQPHDQVORZHUSD\WKDQDSRVLWLRQLQWKHSULYDWH LQWHUSUHWDWLRQ RI (OHYHQWK $PHQGPHQW LPPXQLW\ DGRSWHG E\ WKLV &RXUW LQ VHFWRU   )XUWKHUPRUH PDQ\ JRYHUQPHQW DJHQFLHV GR QRW +DIHUl +DUGLQ  )G DW  Q ,Q VKRUW 5LWFKLH LV QRW SDUWLFXODUO\ UHOHYDQW LQ WKLV FDVH  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

WKDW :HOOV UHTXLUHV SODLQWLIIV WR mVHW IRUWK FOHDUO\ LQ WKHLU SURWHFWLRQVRIWKHGRFWULQHZKLFKSURYLGHVDQLPPXQLW\QRW SOHDGLQJ WKDW WKH\ DUH VXLQJ WKH VWDWH GHIHQGDQWV LQ WKHLU RQO\ IURP OLDELOLW\ EXW IURP VXLW  6HH +DUORZ VXSUD  LQGLYLGXDOFDSDFLW\IRUGDPDJHVQRWVLPSO\LQWKHLUFDSDFLW\ 0LWFKHOOY)RUV\WK86TXDOLILHGLPPXQLW\ DVVWDWHRIILFLDOVl,GDWTXRWLQJ:HOOV)GDW SURYLGHV QRW PHUHO\ LPPXQLW\ IURP OLDELOLW\ EXW DQ 7KH+DUGLQFRXUWIRXQGWKDWWKHSODLQWLIILQWKDWFDVH mLPPXQLW\IURPVXLWl(QJOLVK)GDW7KLVLQ KDGVDWLVILHGWKH:HOOVUHTXLUHPHQWVLQFHWKHFRPSODLQWVWDWHG WXUQGHIHDWVWKHORQJVWDQGLQJSXEOLFSROLF\RIHQFRXUDJLQJ WKDW mµ'HIHQGDQW 6WUDXE LV EHLQJ VXHG LQ KLV LQGLYLGXDO SXEOLF VHUYLFH E\ SURWHFWLQJ JRYHUQPHQW RIILFLDOV IURP FDSDFLW\RQWKHSODLQWLIIjVFODLPIRUGDPDJHVDQGERWKLQKLV IULYRORXV EXW QRQHWKHOHVV GHELOLWDWLQJ OLWLJDWLRQ  6HH HJ LQGLYLGXDODQGRIILFLDOFDSDFLW\RQWKH SODLQWLIIjVFODLPIRU +DUORZ  86 DW  REVHUYLQJ WKDW VXEVWDQWLDO FRVWV LQMXQFWLYHUHOLHIjl,GDWTXRWLQJFRPSODLQW DWWHQG WKH OLWLJDWLRQ DJDLQVW SXEOLF RIILFLDOV LQFOXGLQJ mWKH JHQHUDO FRVWV RI VXEMHFWLQJ RIILFLDOV WR WKH ULVNV RI WULDO ,Q/RYHODFHY2j+DUD)GWK&LUWKH GLVWUDFWLRQ RI RIILFLDOV IURP WKHLU JRYHUQPHQWDO GXWLHV SODLQWLII VXHG D FRXQW\ SROLFH RIILFHU XQGHU †  IRU LQKLELWLRQ RI GLVFUHWLRQDU\ DFWLRQ DQG GHWHUUHQFH RI DEOH GDPDJHVEXWFOHDUO\VHWIRUWKLQKHUFRPSODLQWWKDWKHZDV SHRSOH IURP SXEOLF VHUYLFHl 0LWFKHOO  86 DW  EHLQJVXHGmQRWDVDQLQGLYLGXDOEXWUDWKHUXQGHUWKHFRORU VDPH TXRWLQJ +DUORZ $QGHUVRQ Y &UHLJKWRQ  86 DQGSUHWHQVHRIWKHWLWOHRIKLVRIILFHXQGHUWKHDXWKRULW\RI    mSHUPLWWLQJ GDPDJH VXLWV DJDLQVW KLVRIILFHDVDSROLFHRIILFHUFOHDUO\ZLWKLQWKHH[SUHVVHGDQG LPSOLHG SRZHUV RI KLV RIILFLDO FDSDFLW\l  ,G DW   7KH GLVWULFW FRXUW WKHUHIRUH WUHDWHG WKH FRPSODLQW DV DJDLQVW 2j+DUDLQKLVRIILFLDOFDSDFLW\ RQO\ DQGJUDQWHGVXPPDU\ DVVHUW WKH GHIHQVH SULRU WR GLVFRYHU\ PD\ ZDLYH WKH ULJKW WR DYRLG MXGJPHQW  7KH GLVWULFW FRXUW ODWHU DOORZHG WKH SODLQWLII WR GLVFRYHU\ EXW PD\ QRQHWKHOHVV UDLVH WKH LVVXH DIWHU GLVFRYHU\ RQ

DPHQG WKH FRPSODLQW WR QDPH WKH RIILFHU LQ KLV LQGLYLGXDO VXPPDU\ MXGJPHQW RU DW WULDO

FDSDFLW\KRZHYHUGHVSLWHWKHIDFWWKDWWKHRQH\HDUVWDWXWHRI (QJOLVK  )G DW  FLWDWLRQV TXRWDWLRQV DQG IRRWQRWH RPLWWHG OLPLWDWLRQVKDGUXQ,G7KHFRXUWJUDQWHGVXPPDU\MXGJPHQW WRWKHSROLFHRIILFHURQTXDOLILHGLPPXQLW\JURXQGV,G2Q  ,Q +DUORZ WKH 6XSUHPH &RXUW DOWHUHG WKH VWDQGDUG RI TXDOLILHG DSSHDO WKLV &RXUW IRXQG WKDW WKH GLVWULFW FRXUW HUUHG LQ LPPXQLW\ E\ GHILQLQJ LPPXQLW\ LQ ZKROO\ REMHFWLYH WHUPV XQOLNH HDUOLHU DOORZLQJWKHDPHQGPHQW,GDW FDVHV ZKLFK XVHG D VXEMHFWLYH JRRGIDLWK GHIHQVH EHFDXVH WKH VXEMHFWLYH WHVW mIUHTXHQWO\ >KDG@ SURYHG LQFRPSDWLEOH ZLWK RXU DGPRQLWLRQ    WKDW ,QYRNLQJ:HOOVZHUHPDUNHG LQVXEVWDQWLDO FODLPV VKRXOG QRW SURFHHG WR WULDOl +DUORZ  86 DW  7KXV +DUORZ KHOG WKDW JRYHUQPHQW RIILFLDOV SHUIRUPLQJ

7KLV FRXUW KDV UHFRJQL]HG WKH LPSRUWDQFH RI JLYLQJ GLVFUHWLRQDU\ IXQFWLRQV mDUH VKLHOGHG IURP OLDELOLW\ IRU FLYLO GDPDJHV LQVRIDU DV WKHLU FRQGXFW >GLG@ QRW YLRODWH FOHDUO\ HVWDEOLVKHG VWDWXWRU\ RU GHIHQGDQWVQRWLFHRIWKHFDSDFLW\LQZKLFKWKH\DUHEHLQJ FRQVWLWXWLRQDO ULJKWV RI ZKLFK D UHDVRQDEOH SHUVRQ ZRXOG KDYH NQRZQl VXHG,Q:HOOVY%URZQ)GWK&LU ,G DW  7KH &RXUW FRQFOXGHG WKDW WKLV REMHFWLYH VWDQGDUG ZRXOG mDYRLG

WKLVFRXUWVWDWHG H[FHVVLYH GLVUXSWLRQ RI JRYHUQPHQW DQG SHUPLW WKH UHVROXWLRQ RI PDQ\ >7@KHIDFHRIDFRPSODLQWPXVWLQGLFDWHZKHWKHUD LQVXEVWDQWLDO FODLPV RQ VXPPDU\ MXGJPHQWl ,G

SODLQWLIIVHHNVWRUHFRYHUGDPDJHVIURPGHIHQGDQWV  GLUHFWO\ RU WR KROG WKH VWDWH UHVSRQVLEOH IRU WKH ,W LV IRU WKLV UHDVRQ WKDW GHQLDOV RI TXDOLILHG LPPXQLW\ DUH

FRQGXFW RI LWV HPSOR\HHV  $OWKRXJK PRGHUQ LPPHGLDWHO\ DSSHDODEOH EHFDXVH DQ HUURU EHORZ FDQQRW EH UHPHGLHG SRVW MXGJPHQW RQ DSSHDO 6HH 0LWFKHOO Y )RUV\WK  86    SOHDGLQJLVOHVVULJLGWKDQLQDQHDUOLHUGD\ZHKDYH m7KH HQWLWOHPHQW LV DQ LPPXQLW\ IURP VXLW UDWKHU WKDQ D PHUH GHIHQVH WR QRWOHWGRZQDOOSOHDGLQJEDUULHUV,WLVQRWWRRPXFK OLDELOLW\ DQG OLNH DQ DEVROXWH LPPXQLW\ LW LV HIIHFWLYHO\ ORVW LI D FDVH LV HUURQHRXVO\ SHUPLWWHG WR JR WR WULDOl  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

MXULVGLFWLRQ WKH\ H[HUFLVH RQO\ WKDW DXWKRULW\ FRQIHUUHG RQ WRDVNWKDWLIDSHUVRQRUHQWLW\LVWREHVXEMHFWWR WKHP E\ $UWLFOH ,,, DQG FRQJUHVVLRQDO HQDFWPHQWV SXUVXDQW VXLWWKHSHUVRQRUHQWLW\VKRXOGEHSURSHUO\QDPHG WKHUHWR DQGFOHDUO\QRWLILHGRIWKHSRWHQWLDOIRUSD\PHQWRI GDPDJHVLQGLYLGXDOO\ 6LPLODUO\WKHQRWLFHUDWLRQDOHVHUYHVWRDOHUWGHIHQGDQWVDW ,GDWFLWDWLRQVRPLWWHG WKHODZVXLWjVLQFHSWLRQZKHWKHUWKH\ZLOOEHSHUVRQDOO\OLDEOH IRUGDPDJHV:LWKRXWVXFKWLPHO\QRWLFHGHIHQGDQWVPLJKW ,G DW   :H IRXQG WKDW WKH RULJLQDO FRPSODLQW mFOHDUO\ UHO\RQWKHLUJRYHUQPHQWDOHPSOR\HUIDLOWRDQVZHUDQGEH IDLO>HG@ WR FRPSRUW ZLWK WKH UHTXLUHPHQW RI :HOOV WKDW D VXEMHFW WR GHIDXOW MXGJPHQW LQ WKHLU SHUVRQDO FDSDFLWLHV GHIHQGDQWEHµFOHDUO\QRWLILHGRIWKHSRWHQWLDOIRUSD\PHQWRI )XUWKHUZLWKRXWHDUO\QRWLFHJRYHUQPHQWGHIHQGDQWVFDQQRW GDPDJHVLQGLYLGXDOO\jl,GTXRWLQJ:HOOV)GDW SURSHUO\GHFLGHZKHWKHUWRUHWDLQLQGHSHQGHQWFRXQVHORUWR :H DOVR FLWHG WKH SROLF\ FRQVLGHUDWLRQV ZH KDG SUHYLRXVO\ SDUWLFLSDWH LQ FROOHFWLYH GHIHQVH VWUDWHJLHV RU VHWWOHPHQW GLVFXVVHGLQ:HOOV QHJRWLDWLRQV1RUZRXOGWKHLQGLYLGXDOGHIHQGDQWVEHDEOHWR DVVHVVKRZEHVWWRHQJDJHLQGLVFRYHU\8QGHUWKHFRXUVHRI )XUWKHUPRUH WKH GLVWLQFWLRQ EHWZHHQ DQ RIILFLDO SURFHHGLQJV DQDO\VLV LQGLYLGXDO FDSDFLW\ GHIHQGDQWV DUH FDSDFLW\DQGDQLQGLYLGXDOFDSDFLW\VXLWLVVLJQLILFDQW$V GHSULYHG RI WKH DELOLW\ WR PDNH D PXOWLWXGH RI GHFLVLRQV WKHGLVVHQWLQ+LOOY6KHODQGHUQRWHGmDQDPHQGPHQWLQ UHJDUGLQJWKHLURZQGHIHQVH D GHIHQGDQWjV FDSDFLW\ LQ D ODZVXLW XQGHU  86& †DOWHUVWKHHOHPHQWVRIUHFRYHU\DQGGHIHQVH :LWKRXWWKDWQRWLFHDJRYHUQPHQWGHIHQGDQWPD\DOVRIDLO >DQG@ UHTXLUH>V@ PDMRU FKDQJHV LQ SOHDGLQJ GLVFRYHU\ WRSOHDGWKHDIILUPDWLYHGHIHQVHRITXDOLILHGLPPXQLW\DQG WULDOSUHSDUDWLRQDQGVHOHFWLRQDQGORFDWLRQRIZLWQHVVHV WKHUHE\ ZDLYH WKH GHIHQVH  6HH +DUORZ  86 DW   WRWHVWLI\DWWULDOl)GWK&LU TXDOLILHGLPPXQLW\LVDQDIILUPDWLYHGHIHQVHZKLFKPXVWEH &RIIH\sGLVVHQWLQJ$V2j+DUDDUJXHVNQRZOHGJH SOHG  (QJOLVK Y '\NH  )G   WK &LU WKDWKHZDVEHLQJVXHGSHUVRQDOO\PD\KDYHSURPSWHG 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jWRI7UHDVXU\)GWK IDLOXUH WR DVVHUW WKH GHIHQVH LQ D SUHDQVZHU PRWLRQ WR GLVPLVV &LU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jV IDLOHG WR H[HUFLVH GXH GLOLJHQFH RU KDV DVVHUWHG WKH GHIHQVH IRU GLVPLVVDORIWKHSODLQWLIIjVPRWLRQWRDPHQGWRDGGD† GLODWRU\ SXUSRVHV 6XFK D ZDLYHU KRZHYHU QHHG QRW ZDLYH WKH GHIHQVH IRU DOO SXUSRVHV EXW ZRXOG JHQHUDOO\ RQO\ ZDLYH WKH FODLP DJDLQVW LQWHU DOLD WKH QDPHG RIILFLDOV EHFDXVH DQ GHIHQVH IRU WKH VWDJH DW ZKLFK WKH GHIHQVH VKRXOG KDYH EHHQ DPHQGPHQWZRXOGEHIXWLOH DVVHUWHG 7KXV IRU H[DPSOH D GHIHQGDQW ZKR IDLOV WR WLPHO\  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

7KLV &RXUW KDV KHOG WKDW VHFWLRQ  SODLQWLIIV PXVW DW  SODLQWLII IDLOHG WR FODULI\ FDSDFLW\ DIWHU PRUH WKDQ FOHDUO\VHWIRUWKLQWKHLUSOHDGLQJVWKDWWKH\DUHVXLQJWKH WKUHHPRQWKV RIILFLDOVLQWKHLULQGLYLGXDOFDSDFLWLHVIRUGDPDJHVQRW VLPSO\ LQ WKHLU FDSDFLWLHV DV VWDWH RIILFLDOV +DUGLQ Y :LWK RQH PLQRU H[FHSWLRQ WKH PDMRULW\jV GHFLVLRQ LV 6WUDXE)GWK&LU:HOOVY FRQWUDU\WRORQJVWDQGLQJ6L[WK&LUFXLWSUHFHGHQW$OWKRXJK %URZQ)GWK&LU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 FHUW GHQLHG  86   ZH PRGLI\LQJWKH:HOOVUXOH)LUVWRIDOOWKHPDMRULW\jVGHFLVLRQ REVHUYHG PDNHV QR VHQVH  1HHGOHVV WR VD\ LI LW WDNHV D VLJQLILFDQW FRXUVH RI SURFHHGLQJV WR FODULI\ WKH FDSDFLW\ LQ ZKLFK WKH *HQHUDOO\ SODLQWLIIV PXVW GHVLJQDWH LQ ZKLFK FDSDFLW\ GHIHQGDQWVDUHVXHGWKHQFDSDFLW\FRXOGQRWKDYHEHHQFOHDUO\ WKH\ DUHVXLQJGHIHQGDQWVLIQRWE\RSHUDWLRQRIODZ SOHGLQWKHILUVWLQVWDQFH:HOOVDQGWKHFRXUVHRISURFHHGLQJV GHIHQGDQWVDUHGHHPHGVXHGLQWKHLURIILFLDOFDSDFLWLHV WHVWDUHLQFRQVLVWHQWZLWKHDFKRWKHU 6HH +DUGLQ Y 6WUDXE  )G   WK &LU :HOOVY%URZQ)GWK&LU 0RUHLPSRUWDQWO\WKH:HOOVUXOHJLYHVHIIHFWWRLPSRUWDQW 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sRQHV)GQWK&LU DW WKH RXWVHWZKHWKHULWKDVMXULVGLFWLRQWRGHFLGHWKHFDVH QRWLQJWKDWGHVSLWHFODLPVZKLFKFRXOGEHFRQVWUXHGDV 6HHHJ8QLWHG6WDWHVY8QLWHG0LQH:RUNHUVRI$PHULFD DJDLQVWWKHRIILFHULQKLVLQGLYLGXDOFDSDFLW\WKHRIILFHUZDV  86    FRXUWV KDYH MXULVGLFWLRQ WR MRLQHGRQO\LQKLVRIILFLDOFDSDFLW\VRWKDW:HOOVZDVQRWPHW GHWHUPLQHWKHLURZQMXULVGLFWLRQ)LUHPDQjV)XQG,QV&RY FI6DQGHUIHUY1LFKROV)GQWK&LU 5DLOZD\([SUHVV$JHQF\)GWK&LU DVVXPLQJFRXUWRUGHUHGVXEVWLWXWLRQRISDUW\LQKHULQGLYLGXDO 6SKHUH 'UDNH ,QV /WG Y $OO $PHULFDQ ,QV &R  )G FDSDFLW\ JLYHQ :HOOV VWDQGDUG DQG LQ OLJKW RI WKH FRXUWjV   WK &LU sXO\   

,QKLVFRPSODLQW5DKPDQGLGQRWVWDWHLQZKDWFDSDFLW\ UHTXLULQJWKHSODLQWLIIWRFOHDUO\SOHDGLQGLYLGXDOFDSDFLW\LQ KHVXHG0F*LQQLV+RZHYHULQKLVUHSO\WR0F*LQQLVjV WKHSOHDGLQJVKDVEHHQVWULFWO\DQGFRQVLVWHQWO\IROORZHG PRWLRQIRUVXPPDU\MXGJPHQW5DKPDQPDNHVFOHDUWKDW KH LQWHQGHG WR VXH 0F*LQQLV LQ KLV LQGLYLGXDO DQG 2XUXQSXEOLVKHGGHFLVLRQVOLNHZLVHGHPRQVWUDWHWKDWIRU RIILFLDOFDSDFLWLHV8QGHU3HOIUH\Y&KDPEHUV)G RYHUDGHFDGHZHKDYHVWULFWO\DSSOLHGWKH:HOOVVWDQGDUGWR WK&LUFHUWGHQLHG6&W UHTXLUHWKDWWKHSODLQWLIIDIILUPDWLYHO\SOHDGFDSDFLW\LQWKH  5DKPDQjV UHVSRQVH WR 0F*LQQLVjV PRWLRQ IRU FRPSODLQW DV D SUHGLFDWH WR PRQHWDU\ UHOLHI 6HH HJ VXPPDU\MXGJPHQWLVVXIILFLHQWQRWLFHWR0F*LQQLVWKDW &KHQDXOWY7HQQ'HSjWRI0HQWDO+HDOWK)G KHLVEHLQJVXHGLQKLVLQGLYLGXDOFDSDFLW\ 86$SS/(;,6DW WK&LURUGHU EHFDXVHFRPSODLQWGLGQRWLQGLFDWHWKDWWKHGHIHQGDQWVZHUH ,G EHLQJVXHGSHUVRQDOO\FRXUWDVVXPHGWKDWWKH\ZHUHVXHGLQ WKHLU RIILFLDO FDSDFLW\ DV VWDWH HPSOR\HHV FLWLQJ :HOOV $EGXU5DKPDQ FDQQRW EH UHFRQFLOHG ZLWK :HOOV  ,W LV SHWLWLRQIRUFHUWILOHG86/:sXQH1R XQGLVSXWHGWKDWWKHFRPSODLQWGLGQRWLQGLFDWHFDSDFLW\7KXV   sDVPDQ Y 6FKPLGW  )G   :/ XQGHU:HOOVE\RSHUDWLRQRIODZWKHGHIHQGDQWZDVVXHGLQ  DW  WK &LU  DIILUPLQJ GLVWULFW FRXUWjV KLVRIILFLDOFDSDFLW\RQO\)XUWKHUWKHGHIHQGDQWLQ$EGXU KROGLQJ WKDW GHIHQGDQWV ZHUH LPPXQH IURP PRQHWDU\ 5DKPDQGLGQRWUHFHLYHQRWLFHWKDWKHZDVEHLQJVXHGLQKLV GDPDJHVEHFDXVHWKHSODLQWLIIIDLOHGWRDOOHJHFDSDFLW\FLWLQJ LQGLYLGXDOFDSDFLW\XQWLOWKHSODLQWLIIILOHGKLVUHVSRQVHWRWKH :HOOV/LOOLHY(JHOKRII)G:/ GHIHQGDQWjVPRWLRQIRUVXPPDU\MXGJPHQWREYLRXVO\RXWVLGH DW WK&LURUGHUVDPHFHUWGHQLHG6&W RISOHDGLQJDQGDIWHUGLVFRYHU\KDGFORVHG7KXVWKHUXOLQJ   0LOHV Y %RRWK  )G   :/ LQ$EGXU5DKPDQDOVRUXQVDIRXORIWKHQRWLFHUDWLRQDOHRI  DW  WK &LU  RUGHU VDPH7XUQERH Y :HOOVEHFDXVHWKHGHIHQGDQWZRXOGQRWKDYHEHHQDEOHWR 6WHJDOO)G:/DW WK&LU GHYHORSDOHJDOVWUDWHJ\FRQVLVWHQWZLWKDSHUVRQDOFDSDFLW\ RUGHUVDPHFHUWGHQLHG6&W VXLW OHW DORQH DYRLG VXLW DOWRJHWKHU E\ LQYRNLQJ TXDOLILHG $VKLHJEXY:LOOLDPV)G:/DW LPPXQLW\  )RU WKLV ODWWHU UHDVRQ $EGXU5DKPDQ LV DOVR WK&LURUGHUVDPHFHUWGLVPLVVHG6&W LQFRQVLVWHQW ZLWK 3HOIUH\ DQG LWV UHOLDQFH RQ WKDW FDVH LV    *UHHQ Y :DOGUHQ  )G   :/ WKHUHIRUH LPSURSHU  )LQDOO\ DOWKRXJK WKH PDMRULW\ IDLOV WR  DW  WK &LU  RUGHU VDPH 2YHUKROW Y QRWHLW$EGXU5DKPDQLVPHUHO\DSXEOLVKHGRUGHUDQGDV 8QLEDVH'DWD(QWU\,QF)G:/ VXFKLVHQWLWOHGWROHVVZHLJKWWKDQRWKHUSXEOLVKHGRSLQLRQV DW WK&LURUGHUVDPHsRQHVY3RUWHU)G   :/  DW  WK &LU  RUGHU ,QVXPDSDUWIURP3HOIUH\DQG$EGXU5DKPDQZHKDYH KROGLQJWKDWGLVWULFWFRXUWGLGQRWHUUE\IDLOLQJWRFRQVWUXH VWULFWO\DSSOLHGWKH:HOOVVWDQGDUG0RUHRYHUWKHGHDUWKRI WKHFRPSODLQWDVDOOHJLQJDQDEXVHRISURFHVVFODLPFLWLQJ UHIHUHQFHWR3HOIUH\LQRXUSUHFHGHQWLOOXVWUDWHVWKDWZHKDYH :HOOV 0DUFHDX[ Y 5DPVH\  )G   :/ FRQVWUXHG WKDW FDVH QDUURZO\ DQG NHSW LW FRQVWUDLQHG WR LWV DW WK&LUKROGLQJWKDWGHIHQGDQWVZHUH SHFXOLDUIDFWV,QGHHGWKHIHZUHIHUHQFHVWR3HOIUH\LQRXU VXHGLQWKHLURIILFLDOFDSDFLWLHVEHFDXVHFRPSODLQWIDLOHGWR XQSXEOLVKHG FDVHV GHPRQVWUDWH WKDW ZH JHQHUDOO\ YLHZ WKH VSHFLI\FDSDFLW\FLWLQJ:HOOV$YHU\Y1LFRO)G FDVH DV UHTXLULQJ DIILUPDWLYH FRQGXFW RQ WKH SDUW RI WKH  :/  DW  WK &LU  KROGLQJ WKDW VXLW SODLQWLIIWRFODULI\WKHQDWXUHRIKLVVXLWLQDWLPHO\PDQQHU VHHNLQJ PRQH\ GDPDJHV FRXOG SURFHHG DJDLQVW GHIHQGDQWV 6HH HJ &XPPLQJV  :/  DW   SODLQWLII EHFDXVHFRPSODLQWDOOHJHGWKDWGHIHQGDQWVZHUHVXHGLQWKHLU QHYHUDFWHGWRFODULI\FDSDFLW\+DUYHVW:/ LQGLYLGXDOFDSDFLW\FLWLQJ:HOOV9DQ0DUWLQY1HZNLUN  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

 )G   :/  DW  WK &LU  SOHDGLQJ ZH EHOLHYH WKDW GHIHQGDQWV ZHUH JLYHQ VXIILFLHQW KROGLQJWKDWGLVWULFWFRXUWSURSHUO\GLVPLVVHGPRQH\GDPDJHV QRWLFHRIWKHIDFWWKDWWKH\ZHUHEHLQJVXHGLQWKHLULQGLYLGXDO VXLWEHFDXVHSODLQWLIIIDLOHGWRVSHFLI\FDSDFLW\LQZKLFKKH FDSDFLW\l,GHPSKDVLVDGGHG)XUWKHUPRUHEHFDXVHWKH ZDVVXLQJGHIHQGDQWVFLWLQJ:HOOV6LOOHUY&UXLVH)G SODLQWLIIjV FDVH ZDV GLVPLVVHG DW DQ HDUO\ VWDJH LQ WKH   :/  DW  WK &LU  DIILUPLQJ SURFHHGLQJVWKHIDLOXUHWRSOHDGFDSDFLW\FRXOGEHFXUHGE\DQ GLVPLVVDORIGDPDJHVDFWLRQEHFDXVHGHIHQGDQWVZHUHVXHG DPHQGPHQWWRWKHFRPSODLQWXQGHU)HG5&LY3D,G RQO\ LQ WKHLU RIILFLDO FDSDFLW\ DV VWDWH HPSOR\HHV FLWLQJ :HOOV6KDZY0LFKLJDQ)G:/ 7KH3HOIUH\FRXUWSUHPLVHGLWVUXOLQJRQWKHIDFWWKDWWKH DW WK&LUVDPH$EGXU5HKHHP;Y0F*LQQLV GHIHQGDQWVUHFHLYHGmVXIILFLHQWlQRWLFHWKDWWKH\ZHUHEHLQJ  )G   :/  DW  WK &LU  VXHGLQWKHLULQGLYLGXDOFDSDFLWLHVQDPHO\RQO\RQHPRQWK RUGHUKROGLQJWKDWPRQH\GDPDJHVFODLPFRXOGSURFHHGDV DIWHUWKHFRPSODLQWKDGEHHQILOHGDQGZHOOZLWKLQWKHWLPH WR VRPH GHIHQGDQWV ZKR ZHUH VXHG LQ WKHLU LQGLYLGXDO IRUDPHQGPHQWRIWKHFRPSODLQW,QVRUXOLQJWKH3HOIUH\ FDSDFLWLHVFLWLQJ:HOOV1REOHY6DSS)G FRXUW H[SUHVVO\ WLHG LWV KROGLQJ WR WKH QRWLFH UDWLRQDOH RI :/  DW  WK &LU  RUGHU KROGLQJ WKDW :HOOV7KXVDOWKRXJKQRWLQVWULFWFRPSOLDQFHZLWKWKHUXOH GLVWULFWFRXUWSURSHUO\GLVPLVVHGVXLWWRH[WHQWLWGHPDQGHG RI:HOOV3HOIUH\LVFRQVLVWHQWZLWK:HOOVEHFDXVHLWVDWLVILHG PRQH\GDPDJHVDJDLQVWGHIHQGDQWVLQWKHLURIILFLDOFDSDFLWLHV RQHRIWKHRYHUDUFKLQJJRDOVRI:HOOVoWRSURYLGHHDUO\QRWLFH EXWVXLWIRUPRQH\GDPDJHVFRXOGSURFHHGDJDLQVWGHIHQGDQWV WRGHIHQGDQWVRIWKHSRWHQWLDOIRULQGLYLGXDOOLDELOLW\ WRH[WHQWWKH\ZHUHVXHGLQWKHLULQGLYLGXDOFDSDFLWLHVFLWLQJ :HOOV*UDKDPY0HUFHU)G:/ 7KH 3HOIUH\ FRXUW QHYHU XVHG  WKH WHUP mFRXUVH RI DW WK&LURUGHUKROGLQJVWDWHGHIHQGDQWVZHUH SURFHHGLQJVlRUFLWHGWRDQ\RWKHU&LUFXLWWKDWKDGDGRSWHG QRWVXEMHFWWRVXLWIRUPRQHWDU\GDPDJHVEHFDXVHWKHSODLQWLII VXFKDUXOH5DWKHULWUHSUHVHQWVDQDUURZH[FHSWLRQWRWKH IDLOHG WR GHVLJQDWH FDSDFLW\ WKXV LW ZDV DVVXPHG WKDW WKH\ :HOOVUXOHOLPLWHGE\WKHSHFXOLDUIDFWVRIWKDWFDVHQDPHO\ ZHUHVXHGLQWKHLURIILFLDOFDSDFLW\FLWLQJ:HOOV1DSLHUY WKHSODLQWLIIjVFODULI\LQJPRWLRQILOHGRQO\RQHPRQWKDIWHU %DURQ  )G   :/  DW  WK &LU WKHFRPSODLQW3HOIUH\FDQQRWEHUHDGDVDGRSWLQJDEURDG RUGHUVDPHFHUWGHQLHG866WLOO mFRXUVHRISURFHHGLQJVlWHVW Y:LONLQVRQ)G:/DW WK &LURUGHUKROGLQJ:HOOVPHWLQWKHSODLQWLIIjVWKLUG 7KHRWKHUFDVHUHOLHGRQE\WKHPDMRULW\oLQGHHGWKHRQH FODLPEHFDXVHKHVSHFLILHGLQKLVSURVHFRPSODLQWWKDWKHZDV WKH PDMRULW\ GHHPV FRQWUROOLQJ o  LV $EGXU5DKPDQ Y VXLQJ GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLWLHV QRWLQJ DOVR 0LFKLJDQ'HSWRI&RUUHFWLRQV)GWK&LU WKDW WKH SODLQWLII DJDLQ H[SUHVVHG KLV LQWHQW WR VXH WKH RUGHU,Q$EGXU5DKPDQ$EGXU5DKPDQDSURVHSULVRQHU GHIHQGDQWVLQWKHLULQGLYLGXDOFDSDFLWLHVLQKLVUHVSRQVHWRWKH VXHGWKH0LFKLJDQ'HSDUWPHQWRI&RUUHFWLRQVDQG.HQQHWK GHIHQGDQWVj PRWLRQ IRU VXPPDU\ MXGJPHQW FLWLQJ  $EGXU 0F*LQQLVWKH'LUHFWRURIWKH'HSDUWPHQW7KHSODLQWLIIGLG 5DKPDQ6FRWWY.LQNHOD)G:/ QRWLQGLFDWHWKHLQGLYLGXDOGHIHQGDQWjVFDSDFLW\,GDW DW WK&LU:HOOVQRWPHWEHFDXVHSODLQWLIIIDLOHGWR :LWKRXWUHIHUULQJWR:HOOVWKHFRXUWUXOHG SOHDG FDSDFLW\ &ROH Y 6PLWK  )G   :/  DW  Q WK &LU  SHU FXULDP VDPH QHYHUWKHOHVVDGGUHVVLQJERWKFDSDFLWLHVZKHUHQHLWKHUSDUWLHV QRU FRXUW DGGUHVVHG :HOOV DQG XSKROGLQJ GLVPLVVDO RI WKH  &XULRXVO\ WKH 3HOIUH\ FRXUW GLG QRW GLVFXVV WKH (OHYHQWK DFWLRQ.QHFKWY&ROOLQV)G:/ $PHQGPHQW HYHQ WKRXJK WKH GHIHQGDQW RIILFHUV ZHUH VWDWH HPSOR\HHV

DW  WK &LU  SHU FXULDP :HOOV QRW PHW EHFDXVH 7KH RYHUVLJKW LV GLIILFXOW WR XQGHUVWDQG JLYHQ WKH MXULVGLFWLRQDO LPSOLFDWLRQV  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

FRQVLGHUHGE\SDQHOVLQGHWHUPLQLQJZKHWKHUDGHFLVLRQZLOO VHFRQG DPHQGHG FRPSODLQW GLG QRW QDPH GHIHQGDQW LQ KLV EHGHVLJQDWHGIRUSXEOLFDWLRQLQFOXGLQJLQWHUDOLDmZKHWKHU LQGLYLGXDOFDSDFLW\'L[RQY1XVKROW])G LW HVWDEOLVKHV D QHZ UXOH RI ODZ RU DOWHUV RU PRGLILHV DQ :/DW WK&LUEHFDXVHWKHSODLQWLIIGLG H[LVWLQJUXOHRIODZRUDSSOLHVDQHVWDEOLVKHGUXOHWRDQRYHO QRWVSHFLI\WKHFDSDFLW\LQZKLFKKHVXHGWKHGHIHQGDQWLWZDV IDFWVLWXDWLRQl SUHVXPHG XQGHU :HOOV WKDW WKH GHIHQGDQW ZDV VXHG LQ KLV RIILFLDOFDSDFLW\%XFNQHUY:RRGV)G:/ ,URQLFDOO\ WKH PDMRULW\ UHOLHV RQ WKH RQO\ WZR GHFLVLRQV DW WK&LUVDPH3DUNVY&RQOH\ ZKLFKGHYLDWHIURPDVWUDLJKWIRUZDUGDSSOLFDWLRQRIWKH:HOOV )G:/DW WK&LUVDPH UXOH,Q3HOIUH\Y&KDPEHUV)GWK&LU 0DUWLQY0LOOLRQ)G:/DW  WKHGHIHQGDQWVVWDWHFRUUHFWLRQVRIILFLDOVDUJXHGWKDW WK &LU  FRPSODLQW QDPHG WKH GHIHQGDQWV LQ WKHLU WKHSODLQWLIIjV†FRPSODLQWVKRXOGEHGLVPLVVHGXQGHU RIILFLDOFDSDFLWLHVDIILUPLQJ WKH GLVWULFWFRXUWjVVXDVSRQWH :HOOVEHFDXVHWKHSODLQWLIIjVFRPSODLQWGLGQRWVSHFLI\WKDWKH GLVPLVVDOIRUIDLOXUHWRVWDWHDFODLPEHFDXVHGHIHQGDQWSULVRQ ZDV VXLQJ WKH GHIHQGDQW FRUUHFWLRQDO RIILFHUV LQ WKHLU HPSOR\HHVDUHQRWmSHUVRQVlVXEMHFWWRVXLWLQWKHLURIILFLDO LQGLYLGXDO FDSDFLWLHV  ,G DW   7KH GLVWULFW FRXUW FDSDFLWLHVFLWLQJ:LOODQG:HOOV5XVKY&R\OH)G GLVPLVVHGWKHFRPSODLQWDQG WKH SODLQWLIIDSSHDOHG7KLV :/DW WK&LUKROGLQJWKDW &RXUWUHYHUVHG GLVWULFWFRXUWGLVPLVVDORIFRPSODLQWZDVDSSURSULDWHEHFDXVH WKH FRPSODLQW GLG QRW LQGLFDWH WKDW WKH ZDUGHQ ZDV VXHG 7KH3HOIUH\FRXUWDFNQRZOHGJHGWKHUXOHRI:HOOVDVZHOO SHUVRQDOO\DQGXQGHU:HOOVLWPXVWEHDVVXPHGWKDWKHZDV DVLWVUDWLRQDOH VXHG LQ KLV RIILFLDO FDSDFLW\ DQG WKHUHIRUH QRW VXEMHFW WR GDPDJHVXQGHU/XWFKH\Y2KLR)G ,Q:HOOVWKLV&RXUWKHOGWKDWLQPDWHVVHHNLQJGDPDJHV :/DW WK&LUVDPH%R\GY0\HUV XQGHU†ZHUHUHTXLUHGWRVHWIRUWKFOHDUO\LQWKHLU )G   :/  DW  WK &LU  VDPH SOHDGLQJV WKDW WKH\ ZHUH VXLQJ VWDWH RIILFLDOV LQ WKHLU %ODFNVKHDUY5XVVHOO)G:/DW  LQGLYLGXDO FDSDFLWLHV DV VWDWH RIILFLDOV  7KH UDWLRQDOH WK&LUVDPHFHUWGHQLHG86.HOORQ EHKLQG WKLV UHTXLUHPHQW ZDV WR DIIRUG VWDWH RIILFLDOV Y6PLWK)G:/DW QWK&LU VXIILFLHQW QRWLFH RI WKH IDFW WKDW WKH\ FRXOG EH KHOG SHUFXULDPVDPH0F&OHQQRQY%HOO)G SHUVRQDOO\OLDEOHIRUWKHSD\PHQWRIDQ\GDPDJHDZDUG  :/  DW  WK &LU  RUGHU VDPH REWDLQHG E\ WKH SODLQWLII  $EVHQW VSHFLILF QRWLFH WKH %XUUHOOY6XPQHU)G:/DW  FRXUWKHOGWKDWLWZRXOGFRQVWUXHDQDPELJXRXVFRPSODLQW WK&LUVDPH)HQQHOOY6LPPRQV)G DV D FRPSODLQW DJDLQVW WKH RIILFHUV LQ WKHLU RIILFLDO  :/  DW  WK &LU  1HOVRQ s FDSDFLWLHV GLVPLVVLQJ DSSHDO RQ MXULVGLFWLRQDO JURXQGV EHFDXVH WKH FRPSODLQWIDLOHGWRFOHDUO\VHWIRUWKWKDWWKHSODLQWLIIZDVVXLQJ ,G DW  FLWDWLRQV RPLWWHG HPSKDVLV DGGHG  3HOIUH\ WKH VWDWH GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLWLHV FLWLQJ QRQHWKHOHVVGLVWLQJXLVKHG:HOOVHYHQWKRXJKWKHFRPSODLQW :HOOVE@DVHGRQWKLV  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

:DONHUY&KDWWDQRRJD3ROLFH'HSjW)G FRPSODLQW ZKLFK KDG DW OHDVW RQH FODLP PHUHO\ DOOHJLQJ :/DW WK&LUVDPHDIILUPLQJGLVWULFW LQGLYLGXDO FRQGXFW WKHQ ORRNLQJ WR VXEVHTXHQW FRQGXFW RI FRXUW MXGJPHQW GLVPLVVLQJ VXLW VHHNLQJ PRQHWDU\ UHOLHI SDUWLHVWRVXEVWDQWLDWHWKDWGHIHQGDQWVKDGQRWLFH+DUULVY QRWLQJWKDWWKHSODLQWLIIIDLOHGWRVSHFLI\FDSDFLW\DQGDEVHQW 0RUULV)G:/DW  QWK VXFKDVWDWHRIILFLDOZLOOEHFRQVWUXHGDVVXHGLQKLVRIILFLDO &LUSHUFXULDPQRWLQJWKDWWKHSODLQWLIIGLGQRWVWDWH FDSDFLW\ FLWLQJ :HOOV 0RUULV Y 0HWULVK  )G  LQ KLV FRPSODLQW WKDW KH ZDV VXLQJ DQ\ RI WKH LQGLYLGXDO :/DW WK&LUDIILUPLQJGLVPLVVDO GHIHQGDQWVLQWKHLURIILFLDOFDSDFLW\DQGDFNQRZOHGJLQJWKH RIFRPSODLQWVHHNLQJVROHO\PRQHWDU\GDPDJHVXQGHU† FRPSODLQW ZDV QRW D mPRGHO RI FODULW\l EXW QRQHWKHOHVV EHFDXVH WKH SODLQWLII GLG QRW VSHFLI\ WKDW KH ZDV VXLQJ WKH KROGLQJWKDWLQGLYLGXDOFDSDFLW\ZDVSURSHUO\SOHGDVWRWKUHH GHIHQGDQWLQKHULQGLYLGXDOFDSDFLW\DQGWKDWXQGHU:HOOVLW GHIHQGDQWVEDVHGRQDOOHJDWLRQVLQERG\RIFRPSODLQWVWDWLQJ PXVW EH DVVXPHG WKDW WKH GHIHQGDQW ZDV VXHG LQ RIILFLDO LQWHUDOLDWKDWWKHGHIHQGDQWVZHUHDZDUHRIWKHSODLQWLIIjV FDSDFLW\RQO\7ZHHGY:LONLQVRQ)G FRPSODLQWV EXW IDLOHG WR LQYHVWLJDWH DQG WKDW HDFK RI WKH :/  DW  WK &LU  VDPH %URZQHU Y GHIHQGDQWVFRQWLQXDOO\SODFHGWKHSODLQWLIILQOLIHWKUHDWHQLQJ 0D\QDUG)G:/DW WK&LU VLWXDWLRQV &DUU Y %ODQFKDUG  )G   :/  VDPH %URZQHU Y +LOO  )G   :/ DW WK&LURUGHUYDFDWLQJGLVPLVVDORQ DW WK&LURUGHUVDPH&XPPLQJVY JURXQGVRI:HOOVDQGUHPDQGLQJIRUUHFRQVLGHUDWLRQEHFDXVH :LONHUVRQ)G:/DW WK&LU WKHSODLQWLIIVRXJKWWRDPHQGKLVFRPSODLQWWRVXHGHIHQGDQWV 5\DQsKROGLQJWKDWWKHSODLQWLIIjVVXLWIRUPRQH\ LQWKHLULQGLYLGXDOFDSDFLW\DQGFRXUWLPSURSHUO\GHQLHGWKH GDPDJHVZDVEDUUHGE\WKH(OHYHQWK$PHQGPHQWEHFDXVHWKH PRWLRQLQOLJKWRI+DIHU&R[Y6DSS)G FRPSODLQWIDLOHGWRFOHDUO\LQGLFDWHWKDWKHZDVVXLQJWKHVWDWH :/  DW  WK &LU  SHU FXULDP :HOOV QRW GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLWLHV GLVWLQJXLVKLQJ PHWEXWFRQVWUXLQJFRPSODLQWJHQHURXVO\EHFDXVHLWZDVILOHG 3HOIUH\ RQ JURXQGV WKDW LQ FDVH VXE MXGLFH WKH GHIHQGDQWV SULRUWR:HOOVDQGZDVRQO\DJDLQVWWKHLQGLYLGXDOGHIHQGDQW PRYHGIRUGLVPLVVDOQRWWKHSODLQWLIIDQGGLVDOORZLQJWKLUG DQG GLG QRW QDPH WKH &RPPRQZHDOWK RI .HQWXFN\ RU DQ\ DPHQGPHQW WR FRPSODLQW  6WUDGHU Y &DPSEHOO  )G GHSDUWPHQW DV D SDUW\EXW VHH DOVR .UXVLQVNL Y 86'$  :/DW WK&LURUGHUOLPLWLQJ )G   :/  DW  WK &LU  SHU VXLWWRHTXLWDEOHSRUWLRQVRIVHFRQGDQGWHQWKFODLPVEHFDXVH FXULDPUHYHUVLQJLQSDUWRQJURXQGVWKDWHDFKGHIHQGDQWZDV WKH SODLQWLII GLG QRW VSHFLI\ WKH FDSDFLW\ LQ ZKLFK KH VXHG QDPHG LQGLYLGXDOO\ LQ WKH FRPSODLQW IRU DFWLRQV H[FHHGLQJ GHIHQGDQW SULVRQ RIILFLDOV LQYRNLQJ :HOOV  &OHPRQV Y VFRSHRIKLVRIILFLDOGXWLHVEXWZLWKRXWFLWDWLRQWR:HOOV,G )UDVVHWWR  )G   :/  DW  WK &LU DWDW 6XKUKHLQULFKsGLVVHQWLQJQRWLQJFRPSODLQWIDLOHG  RUGHU XSKROGLQJ GLVPLVVDO RI FRPSODLQW LQ SDUW WR LQGLFDWH FDSDFLW\ DV UHTXLUHG E\ :HOOV UHYLHZLQJ HQWLUH EHFDXVHVWDWHWKHSODLQWLIIGLGQRWVSHFLI\WKDWKHZDVVXLQJ FRPSODLQW WKHVWDWHGHIHQGDQWVIRUPRQHWDU\GDPDJHVLQWKHLULQGLYLGXDO FDSDFLWLHV FLWLQJ :HOOV 3RZHUV Y =LPPHUPDQ  )G 7KHLQHVFDSDEOHFRQFOXVLRQWREHGUDZQIURPWKLVFDWDORJ   :/  DW  WK &LU  VDPH RI SXEOLVKHG DQG XQSXEOLVKHG GHFLVLRQV LV WKLV &RXUW KDV :LPEHUO\Y/HDYHOO)G:/DW  SUHGRPLQDQWO\YLHZHGWKH:HOOVUXOHDVUHTXLULQJSODLQWLIIVWR WK&LURUGHUDIILUPLQJJUDQWRIVXPPDU\MXGJPHQW DIILUPDWLYHO\SOHDGSHUVRQDOFDSDFLW\LQWKHFRPSODLQW7KDW LQSDUWEHFDXVHWKHSODLQWLIIGLGQRWVSHFLI\WKHFDSDFLW\LQ WKH EXON RI WKHVH GHFLVLRQV DUH XQSXEOLVKHG LV VLJQLILFDQW ZKLFKKHVXHGWKHGHIHQGDQWFLWLQJ:HOOV+XJKHVY&ROOLQV EHFDXVHLWVXJJHVWVWKDWQXPHURXVSDQHOVRIWKLV&RXUWKDYH )G:/DW WK&LURUGHU SHUFHLYHGWKHDSSOLFDWLRQRIWKHUXOHDVURXWLQH&I&LU5 DIILUPLQJGLVPLVVDORIFRPSODLQWIRUPRQH\GDPDJHVEHFDXVH m3XEOLFDWLRQRI'HFLVLRQVloHVWDEOLVKLQJFULWHULDWREH  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

GDPDJHVFLWLQJ:LOO*UHHQY6PLWK)G WKHSODLQWLIIGLGQRWVSHFLI\FDSDFLW\LQZKLFKWKHGHIHQGDQWV :/DW WK&LURUGHUVDPH&DUWHUY ZHUHEHLQJVXHGDQGXQGHU:HOOVmZHUHJDUGWKHPDVKDYLQJ sRQHV)G:/WK&LURUGHU EHHQVXHGLQWKHLURIILFLDOFDSDFLWLHVl+DUYHVWY5DQGROI QRWLQJWKDWGLVPLVVDOZDVDSSURSULDWHEHFDXVHWKHFRPSODLQW )G:/DW WK&LUSHU FRPSOHWHO\ IDLOHG WR VHW IRUWK FOHDUO\ WKDW WKH SODLQWLII ZDV FXULDP KROGLQJ WKDW VWDWH GHIHQGDQW VKDUHG DEVROXWH VXLQJ WKH VWDWH GHIHQGDQWV LQ WKHLU LQGLYLGXDO FDSDFLW\ IRU (OHYHQWK $PHQGPHQW LPPXQLW\ ZLWK VWDWH GHSDUWPHQW RI GDPDJHVFLWLQJ:HOOV3HUVRQY1RUULV)G WUDQVSRUWDWLRQEHFDXVHWKHFRPSODLQWGLGQRWVSHFLI\FDSDFLW\ :/DW WK&LURUGHUVDPH+D\QLHY LQZKLFKKHZDVVXHGVWDWLQJWKDWm>X@QGHUWKHVHWWOHGODZRI 7HQQ6WDWH3HQLWHQWLDU\ +RVS)G86 WKLV&LUFXLWZKHUHDFRPSODLQWVHHNLQJPRQHWDU\GDPDJHV $SS /(;,6  DW  WK &LU  RUGHU VDPH DJDLQVW D VWDWH RIILFLDO XQGHU  86& †  GRHV QRW /RZHY+XIIVWXWOHU)G86$SS/(;,6 FOHDUO\ VWDWH WKDW WKH RIILFLDO LV VXHG LQ KLV LQGLYLGXDO RU DW WK&LURUGHUKROGLQJWKDWWKHSODLQWLII SHUVRQDO FDSDFLW\ WKH FRXUW PXVW WUHDW WKH ODZVXLW DV RQH ZDVQRWHQWLWOHGWRFROOHFWPRQH\GDPDJHVIURPDQ\RIWKH DJDLQVWWKHGHIHQGDQWLQKLVRIILFLDOFDSDFLW\lFLWLQJ:HOOV VWDWH GHIHQGDQWV EHFDXVH KH IDLOHG WR DOOHJH WKDW WKH\ ZHUH :KLWWLQJWRQ +DUGLQ 7KLNRO GLVWLQJXLVKLQJ 3HOIUH\ RQ WKH EHLQJVXHGSHUVRQDOO\UDWKHUWKDQLQWKHLURIILFLDOFDSDFLWLHVDV JURXQGVWKDWWKHSODLQWLIIWRRNQRDFWLRQWRFODULI\FDSDFLW\LQ VWDWHHPSOR\HHVFLWLQJ:LOODQG:HOOV0XUSK\Y%HQWO\ PRUHWKDQWKUHHPRQWKVDIWHUWKHGHIHQGDQWVILOHGPRWLRQVWR )G:/DW WK&LURUGHU GLVPLVV6KDUSY5D\)G:/DW  VDPH 6HH Y :LONLQVRQ  )G   86 $SS WK&LURUGHUKROGLQJWKDWWKHGHIHQGDQWZDVQRW /(;,6DW WK&LURUGHUVDPH5LFHY VXEMHFWWRVXLWIRUPRQHWDU\GDPDJHVEHFDXVHWKHSODLQWLIIGLG 'R\OH)G86$SS/(;,6DW  QRWVSHFLI\WKHFDSDFLW\LQZKLFKKHVXHGWKHGHIHQGDQWDQG WK&LURUGHUVDPH7D\ORUY6KXOO)G LW ZDV WKHUHIRUH SUHVXPHG WKDW KH ZDV VXHG LQ KLV RIILFLDO 86$SS/(;,6DW WK&LURUGHU FDSDFLW\FLWLQJ:HOOV1DjLPY%UDGOH\)G VDPH+D\QLHY%DVV)G:/DW  :/DW WK&LURUGHUVDPH6DZ\HUY WK&LURUGHUVDPH/DWKDPY.\&RUUV&DELQHW 7UDXJKEHU)G:/DW WK&LU )G86$SS/(;,6DW WK&LU  RUGHU VDPH 0XOOLQV Y &UDQVWRQ  )G  VDPH+RSNLQVY.HUQV)G86 :/DW WK&LURUGHUVDPH+DUULV $SS/(;,6DW WK&LURUGHUVDPH)LWH Y0XFKQLFNL)G:/DW WK&LU Y+HVVRQ)G86$SS/(;,6DW  RUGHUVDPH0XOOLQVY=HQW)G WK&LURUGHUVDPH*LEEVY1RUPDQ)G :/DW WK&LURUGHUVDPH$OH[DQGHU 86$SS/(;,6DW WK&LU Y0DUJROLV)G:/DW RUGHU RUGHU VDPH :LOVRQ Y 6HLWHU  )G   86 KROGLQJWKDWVXPPDU\MXGJPHQWWRGHIHQGDQWVZDVSURSHU $SS /(;,6  DW  WK &LU  RUGHU VDPH EHFDXVH WKH SODLQWLII VXHG WKH GHIHQGDQWV LQ WKHLU RIILFLDO sRKQVRQY0DQGHQEHUJ)G:/DW FDSDFLWLHVIRUZKLFKPRQHWDU\UHOLHILVQRWDYDLODEOHFLWLQJ

 WK &LU  SHU FXULDP KROGLQJ WKDW WKH :HOOV :HOOV/RQJY0F*LQQLV)G:/ VWDQGDUG RI FOHDUO\ SOHDGLQJ LQGLYLGXDO FDSDFLW\ LQ WKH DW WK&LUSHUFXULDP:HOOVVWDQGDUGPHWIRUWZR FRPSODLQWZDVQRWPHWZKHUHWKHFRPSODLQWPHUHO\DYHUUHG GHIHQGDQWV EHFDXVH WKH FRPSODLQW VSHFLILHG WKDW WKH WZR WKDW WKH GHIHQGDQWV mZHUH DFWLQJ LQ WKHLU RIILFLDO GHIHQGDQWV ZHUH VXHG LQ ERWK WKHLU RIILFLDO DQG LQGLYLGXDO FDSDFLWLHVlDQG GLG QRW DOOHJH WKDW WKH\ ZHUH VXHG LQ WKHLU FDSDFLWLHV EXW QRW PHW IRU D WKLUG GHIHQGDQW EHFDXVH WKH LQGLYLGXDOFDSDFLWLHV%XWVHH3HUU\Y&URXFKHU)G FRPSOLDQW GLG QRW LQGLFDWH WKH FDSDFLW\ LQ ZKLFK WKDW :/DW WK&LUORRNLQJILUVWWR GHIHQGDQWZDVVXHG%HVVHUY:LONLQVRQ)G  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

:/  DW  WK &LU  RUGHU EHFDXVH WKH WK&LURUGHUKROGLQJWKDWWKHSODLQWLIIFRXOGQRW SODLQWLIIGLGQRWVSHFLI\WKHFDSDFLW\LQZKLFKKHVXHGWKHVWDWH DYRLGWKHDIILUPDWLYHGXW\WRSOHDGWKHFDSDFLW\LQZKLFKVKH GHIHQGDQWVIRUPRQH\GDPDJHVVWDWHRIILFLDOZDVFRQVWUXHG VXHV WKH GHIHQGDQW FLWLQJ :HOOV 0XUUD\ Y 2KLR $GXOW WREHVXHGLQKLVRIILFLDOFDSDFLW\XQGHU:HOOVDQGWKHUHIRUH 3DUROH$XWK)G86$SS/(;,6DW QRWVXEMHFWWRVXLWIRUPRQH\GDPDJHV+RGJHVY7HQQHVVHH WK&LURUGHUKROGLQJWKDWVWDWHGHIHQGDQWVXHG )G:/DW WK&LURUGHU LQKLVRIILFLDOFDSDFLW\ZDVLPPXQHIURPVXLWIRUPRQHWDU\ VDPH:LOOLDPVY6HFRU)G:/ GDPDJHV FLWLQJ :HOOV DQG :LOO 'LFNHQV Y :LWKURZ  DW  WK &LU  RUGHU VDPH 0F0DQDZD\ Y )G:/DW WK&LURUGHU 6DSLHQ]D  )G   :/  DW  WK &LU KROGLQJ WKDW WKH GHIHQGDQW ZDV QRW VXEMHFW WR VXLW IRU  RUGHU GHIHQGDQWV ZHUH QRW VXEMHFW WR VXLW IRU PRQHWDU\GDPDJHVXQGHU†ZKHUHWKHSODLQWLIIGLGQRW PRQHWDU\ GDPDJHV EHFDXVH WKH SODLQWLII RQO\ VXHG WKH SOHDGWKHFDSDFLW\LQZKLFKWKHGHIHQGDQWVZHUHVXHGFLWLQJ GHIHQGDQWVLQWKHLURIILFLDOFDSDFLWLHVFLWLQJ:LOODQG:HOOV :HOOV&DUWHUYsDEH)G86$SS/(;,6 /\OHY.RROH)G:/DW WK&LU DW WK&LUVWDWHGHIHQGDQWVQRWOLDEOHIRU  RUGHU EHFDXVH WKH SODLQWLII IDLOHG WR DOOHJH LQ KLV PRQHWDU\ GDPDJHV EHFDXVH WKH SODLQWLII GLG QRW QDPH WKH FRPSODLQWWKHFDSDFLW\LQZKLFKKHZDVVXLQJWKHGHIHQGDQW GHIHQGDQWVLQWKHLULQGLYLGXDOFDSDFLW\FLWLQJ:LOODQG:HOOV WKH GHIHQGDQW ZDV FRQVLGHUHG VXHG LQ KLV RIILFLDO FDSDFLW\ :DOWRQY'DOOPDQ)G:/DW  XQGHU:HOOVDQGQRWVXEMHFWWRVXLWIRUPRQHWDU\GDPDJHV WK &LU  RUGHU EHFDXVH WKH SODLQWLII FKDUDFWHUL]HG %DUUHWWY/DQH)G:/DW WK HDFKRIILFLDOjVFRQGXFWLQWHUPVRIWKHLURIILFLDOFDSDFLWLHVWKH &LURUGHUVDPH:LOVRQY/DQH)G SODLQWLIIjVFODLPVIRUPRQHWDU\UHOLHIZHUHSURSHUO\GLVPLVVHG :/DW WK&LURUGHUVDPH.HUVH\Y IRUODFNRIMXULVGLFWLRQFLWLQJ:LOODQG:HOOV&KDQGOHUY 7HQQ%GRI3DUROHV)G:/DW  &ODUN)G86$SS/(;,6DW  RUGHUVDPH+D\GHQY&RPEHVW)G:/ WK&LURUGHUKROGLQJWKDWWKHGHIHQGDQWVZHUHQRW DW WK&LURUGHUVDPH$GDPVY8SSHU VXEMHFWWRVXLWEHFDXVHWKHSODLQWLIIVRXJKWWRKROGWKHPOLDEOH )G:/DW WK&LURUGHU LQWKHLURIILFLDOFDSDFLW\IRUPRQHWDU\GDPDJHVXQGHU† VDPH )UHGHULFN Y $EUDPDMW\V  )G   :/ FLWLQJ:LOODQG:HOOV0DQLHFHY.HQWXFN\)G DW WK&LURUGHUVDPH7D\ORUY6SLHU :/DW WK&LURUGHUKROGLQJWKDW )G:/DW WK&LURUGHU GDPDJHVVXLWDJDLQVWLQGLYLGXDOVWDWHGHIHQGDQWZDVEDUUHGDV VDPH0HUFHUY1REOH)G:/DW KHZDVQDPHGLQKLVRIILFLDOFDSDFLW\FLWLQJ:HOOV/HLERZLW]

 WK&LURUGHUVDPH6ZHHWY6XWKHUODQG  Y8QLWHG6WDWHV)G:/DW WK )G   :/  DW  WK &LU  RUGHU &LUSHUFXULDPKROGLQJWKDWZKHUHQRWKLQJRQWKH VDPH/XQDY6XWKHUODQG)G:/ IDFHRIWKHFRPSODLQWVXJJHVWHGWKDWWKHWKUHHHPSOR\HHVKDG DW WK&LURUGHUVDPHsXOLDQ%H\Y8SFKXUFK EHHQVXHGRWKHUWKDQLQDQRIILFLDOFDSDFLW\XQGHU:HOOVLW )G:/DW WK&LURUGHU ZDVmFOHDUWKDWWKHFRPSODLQWIDLO>HG@WRPDNHWKHUHTXLVLWH VDPH+LOOY:LONLQVRQ)G:/DW VKRZLQJRIMXULVGLFWLRQZLWKUHVSHFWWRWKHVHGHIHQGDQWVl

WK&LURUGHUVDPH&DOOLKDQY.HQWXFN\ 6HHY&ROOLQV)G:/DW WK&LU )G   :/  DW  WK &LU  RUGHU RUGHUVDPH+XJKHVY$YHU\)G VDPH%HUU\Y2j&RQQHOO)G:/ :/  DW  WK &LU  RUGHU EHFDXVH WKH DW WK&LUVDPH7KRPDVY0LFK6WDWH%GRI SODLQWLIIGLGQRWSOHDGWKHFDSDFLW\LQZKLFKWKHGHIHQGDQWV /DZ([DPjUV)G:/DW WK&LU ZHUHVXHGDVUHTXLUHGE\:HOOVWKHVWDWHGHIHQGDQWZDVVXHG RUGHUVDPH%HUU\Y$OOHQ)G:/ LQKHURIILFLDOFDSDFLW\DQGQRWVXEMHFWWRVXLWIRUPRQHWDU\  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

HPSOR\HHVZHUHEHLQJVXHGSHUVRQDOO\FLWLQJ:HOOV5RGJHUV  DW  WK &LU  RUGHU VDPH 'RQDOG Y Y%URZQ)G:/DW WK&LU 0HQGHO)G:/DW WK&LU RUGHU†GDPDJHVDFWLRQZDVSURSHUO\GLVPLVVHG RUGHU VDPH .LUN Y *ULQHU  )G   :/ EHFDXVHWKHSODLQWLIIGLGQRWLQGLFDWHWKDWKHLQWHQGHGWRVXH  DW  WK &LU  RUGHU VDPH 0HHKDQ Y WKHVWDWHGHIHQGDQWLQKLVLQGLYLGXDOFDSDFLW\FLWLQJ:LOODQG 3DUGXH)G:/DW WK&LU :HOOVsXVWLFHY%URZQ)G:/DW RUGHU VDPH 3UXQW\ Y :LOVRQ  )G   :/

 WK &LU  RUGHU VDPH%XFKDQDQ Y :LONLQVRQ DW WK&LURUGHUVDPH:LOVRQY9LOODJH )G:/DW WK&LURUGHU RI&DVVRSROLV)G:/DW WK&LU VDPHFLWLQJ:HOOVRQO\(O$PLQY%URZQ)G RUGHUVDPH*URWHY0F*LQQLV)G 86$SS/(;,6DW WK&LURUGHU :/DW WK&LURUGHUVDPH+LWFKFRFN VDPHFLWLQJ:LOODQG:HOOV)DYRUVY %DUQHWW)G Y )RZOHU  )G   :/  DW  WK &LU :/DW WK&LURUGHUVDPH RUGHUVDPH%RVZHOOY/XQGVWURP)G 0RRUHY'DKOEHUJ)G:/DW  :/DW WK&LURUGHUVDPH6PLWK(OY WK&LURUGHUQRWLQJWKDWWKHSODLQWLIIjVFODLPIRU sHQVHQ)G:/DW WK&LU PRQHWDU\UHOLHILVEDUUHGE\WKH(OHYHQWK$PHQGPHQWEHFDXVH RUGHUVDPH+XQWY5H\QROGV$IWHU5HPDQG)G KLVFRPSODLQWGRHVQRWVKRZWKDWWKHGHIHQGDQWVZHUHVXHGDV  :/  DW  WK &LU  RUGHU VDPH LQGLYLGXDOV UDWKHU WKDQ LQ WKHLU RIILFLDO FDSDFLW\ DV VWDWH KROGLQJLQWKHDOWHUQDWLYHWKDWHYHQLIWKHSODLQWLIIDOOHJHGDQ HPSOR\HHV FLWLQJ :HOOV %DVV Y 5H\QROGV  )G  LQGLYLGXDOFDSDFLW\VXLWWKHGLVWULFWFRXUWSURSHUO\IRXQGWKH  :/  DW  WK &LU  RUGHU VXLW ZDV GHIHQGDQWVZHUHHQWLWOHGWRTXDOLILHGLPPXQLW\0DUWLQY SURSHUO\ GLVPLVVHG WR H[WHQW WKH SODLQWLII VRXJKW GDPDJHV 2j'HD)G:/DW WK&LU VWDWLQJWKDWm>H@YHQSURVHSODLQWLIIVPXVWVSHFLI\WKDWWKH\DUH RUGHU QRWLQJ WKDW WKH SODLQWLII GLG QRW DOOHJH FDSDFLW\ LQ VXLQJVWDWHRIILFLDOVLQWKHLULQGLYLGXDOFDSDFLWLHVLQRUGHUWR ZKLFK KH VXHG WKH GHIHQGDQWV DQG WKDW XQGHU :HOOV WKH DYRLG GLVPLVVDO RQ WKLV JURXQGl FLWLQJ :LOO DQG :HOOV GHIHQGDQWVDUHFRQVWUXHGWREHVXHGLQWKHLURIILFLDOFDSDFLWLHV *RQJROHZVNLY/H[LQJWRQ)D\HWWH8UEDQ&RXQW\*RYjW DQGWKHUHIRUHQRWVXEMHFWWRVXLWIRUPRQH\GDPDJHV:RRGV )G   :/  DW   WK &LU SHU Y'DKOEHUJ)G:/DW WK&LU FXULDP QRWLQJ WKDW D FRXUW VKRXOG H[DPLQH D FRPSODLQWjV RUGHUVDPH7D\ORUY0LFK'HSjWRI&RUUV KHDGLQJDQGERG\ZKHQGHWHUPLQLQJWKHFDSDFLW\LQZKLFKD )G:/DW WK&LURUGHU GHIHQGDQW LV VXHGKROGLQJWKDWWKHFRPSODLQWGLGQRWVWDWH VDPH0F'RQDOG(OY$QWKRQ\)G86 FODLPVDJDLQVWWKHLQGLYLGXDOGHIHQGDQWVLQWKHLULQGLYLGXDO $SS/(;,6DW WK&LURUGHUQRWLQJ FDSDFLWLHV DQG WKDW WKH SODLQWLII ZDV QRW HQWLWOHG WR KDYH WKDW WKH SODLQWLIIjV FODLPV IRU GDPDJHV DJDLQVW WKH VWDWH LQGLYLGXDOFDSDFLW\OLDELOLW\VXEPLWWHGWRWKHMXU\FLWLQJ:HOOV GHIHQGDQWVLQWKHLURIILFLDOFDSDFLW\DUHEDUUHGE\WKH(OHYHQWK DQG 1RUPDQ +XJKHV Y 3HUU\  )G   :/ $PHQGPHQW DIILUPLQJ GLVWULFW FRXUWjV JUDQW RI VXPPDU\  DW  WK &LU  RUGHU KROGLQJ WKDW WKH MXGJPHQWWRGHIHQGDQWV&DUPHQjV(DVW,QFY+XJJLQV SODLQWLIIjVFODLPODFNHGDQDUJXDEOHEDVLVLQODZDVLPPXQH )G   86 $SS /(;,6  DW  WK &LU XQGHUWKH(OHYHQWK$PHQGPHQWEHFDXVHWKHFRPSODLQWGLGQRW  0HUULWW s KROGLQJ WKDW :HOOV VWDQGDUG ZDV PHW DOOHJHWKDWWKHVWDWHGHIHQGDQWZDVEHLQJVXHGSHUVRQDOO\DQG EHFDXVH WKH GHIHQGDQWV ZHUH VXHG LQ WKHLU LQGLYLGXDO XQGHU:HOOVLWPD\EHDVVXPHGWKDWWKHGHIHQGDQWZDVVXHGLQ FDSDFLWLHV5XVVHOOY3RWWV)G:/ KLVRIILFLDOFDSDFLW\RQO\%DQWXY&ROHPDQ)G DW  WK &LU  RUGHU KROGLQJ WKDW WKH SODLQWLIIjV  :/  DW  WK &LU  RUGHU VDPH FRPSODLQWIDLOHGWRVSHFLI\LQZKDWFDSDFLW\KHZDVVXLQJWKH 0XVLFNY:LJJLQWRQ)G:/DW  GHIHQGDQWVFRXUWZDVWKHUHIRUHUHTXLUHGWRDVVXPHWKDWKH  0RRUHY&LW\RI+DUULPDQHWDO 1R 1R 0RRUHY&LW\RI+DUULPDQHWDO 

ZDV VXLQJ WKH GHIHQGDQWV LQ WKHLU RIILFLDO FDSDFLW\ FLWLQJ ZKR ZHUH VSHFLILFDOO\ VXHG LQ WKHLU LQGLYLGXDO DQG RIILFLDO :HOOV5LFKY%URZQ)G86$SS/(;,6 FDSDFLWLHVFLWLQJ:HOOV6ZDUW]Y+XUW)G  DW  WK &LU  RUGHU QRWLQJ WKDW WKH VWDWH :/  DW  WK &LU  RUGHU KROGLQJ WKDW WKH GHIHQGDQWV ZHUH QRW VXEMHFW WR VXLW IRU PRQHWDU\ GDPDJHV GHIHQGDQWVZHUHVXHGLQ WKHLURIILFLDOFDSDFLW\EHFDXVHWKH XQGHU†FLWLQJ:LOODQG:HOOV6WDIIQH\Y5REOHGR FRPSODLQW GLG QRW LQGLFDWH WKDW WKH\ ZHUH EHLQJ VXHG )G:/DW WK&LURUGHU SHUVRQDOO\DQGDVVXFKWKHGHIHQGDQWVWDWHHPSOR\HHVZHUH KROGLQJ WKDW WKH GHIHQGDQWV ZHUH VXHG LQ WKHLU RIILFLDO LPPXQH IURP GDPDJHV XQGHU †  FLWLQJ :HOOV FDSDFLWLHVDVVWDWHHPSOR\HHVEHFDXVHWKHFRPSODLQWGLGQRW )OHHWZRRGY%URZQ)G:/DW  LQGLFDWH WKDW WKH\ ZHUH EHLQJ VXHG SHUVRQDOO\ DQG ZHUH WK&LURUGHUVDPHsRKQVRQY%HQWO\)G WKHUHIRUHLPPXQHIURP†GDPDJHVFLWLQJ:HOOVsRQHV   :/  DW  WK &LU  SHU FXULDP Y &DONLQV)G:/DW WK&LU VDPHDOVRQRWLQJWKDWWKHFRXUWODFNHGMXULVGLFWLRQRYHUWKH RUGHUVDPH)UHGHULFNY7HQQHVVHH)G SODLQWLIIjVGDPDJHVFODLP%HUU\PDQYsRKQVRQ)G :/DW WK&LURUGHUDVVXPLQJDVD :/DW WK&LU1HOVRQs PDWWHU RI ODZ WKDW VHYHUDO GHIHQGDQWV ZHUH VHUYHG LQ WKHLU :HOOVVWDQGDUGRIFOHDUO\SOHDGLQJLQGLYLGXDOFDSDFLW\PHW RIILFLDOFDSDFLW\EHFDXVHWKHFRPSODLQWGLGQRWLQGLFDWHWKDW EHFDXVHWKHFRPSODLQWDOOHJHGWKDWWKHGHIHQGDQWVZHUHVXHG WKH\ ZHUH EHLQJ VXHG DV LQGLYLGXDOV DQG WKDW WKH\ ZHUH LQ ERWK WKHLU RIILFLDO FDSDFLWLHV DQG WKHLU LQGLYLGXDO WKHUHIRUH QRW mSHUVRQVl VXEMHFW WR OLDELOLW\ XGQHU †  FDSDFLWLHV*HQWU\Y5ROOLQV)G86$SS FLWLQJ :HOOV :LQJDUG Y 6PLWK  )G   :/ /(;,6DW WK&LURUGHUKROGLQJWKDWWKH  DW  WK &LU  RUGHU DIILUPLQJ GLVWULFW SODLQWLIIjVFODLPIRUPRQHWDU\GDPDJHVDJDLQVWWKHGHIHQGDQWV FRXUWjVMXGJPHQWIRUGHIHQGDQWVEHFDXVHWKHGHIHQGDQWVLQ ZDV EDUUHG XQGHU WKH (OHYHQWK $PHQGPHQW ZKHUH WKH WKHLURIILFLDOFDSDFLWLHVDUHQRWmSHUVRQVlVXEMHFWWRVXLWIRU FRPSODLQWPHUHO\DOOHJHGWKDWWKHGHIHQGDQWVDFWHGmLQWKHLU PRQHWDU\GDPDJHVXQGHU†FLWLQJ:LOODQGQRWLQJWKDW UHVSHFWLYH SURIHVVLRQDO FDSDFLW\l FLWLQJ :LOO DQG :HOOV m>H@YHQSURVHSODLQWLIIVPXVWVSHFLI\WKDWWKH\DUHVXLQJVWDWH :LOVRQYsDEH)G:/DW WK RIILFLDOV LQ WKHLU LQGLYLGXDO FDSDFLWLHV LQ RUGHU WR DYRLG &LU  RUGHU KROGLQJ WKDW WKH SODLQWLIIjV FODLPV IRU GLVPLVVDORQWKLVJURXQGlFLWLQJ:HOOV6LPSVRQY+DZOH\ PRQHWDU\UHOLHIODFNHGDQDUJXDEOHEDVLVLQODZEHFDXVHKH )G:/DW WK&LURUGHU IDLOHG WR VSHFLI\ WKDW VWDWH GHIHQGDQWV ZHUH VXHG LQ WKHLU VDPH RQ SODLQWLIIjV FRQFHVVLRQ .LUN Y 1HJHQGDQN  LQGLYLGXDO FDSDFLWLHV FLWLQJ :HOOV DQG :LOO %RVZHOO Y )G:/DW WK&LUSHUFXULDP 7RRPEV  )G   :/  DW  WK &LU KROGLQJ WKDW WKH FRXUW ODFNHG MXULVGLFWLRQ RYHU WKH VWDWH RUGHUVDPH*DOODJKHUY