Rybarczyk v. TRW

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,&+$5' s 5<%$5&=<. ; 0,1258 0,=8%$DQG  :,//,$0 5,77(1+286(   1R 3ODLQWLIIV$SSHOOHHV  !  Y   75: ,1&DQG75:  6$/$5,(' 3(16,21 3/$1  'HIHQGDQWV$SSHOODQWV   1

$SSHDOIURPWKH8QLWHG6WDWHV'LVWULFW&RXUW IRUWKH1RUWKHUQ'LVWULFWRI2KLRDW&OHYHODQG 1RVn$QQ$OGULFK'LVWULFWsXGJH $UJXHG'HFHPEHU 'HFLGHGDQG)LOHG'HFHPEHU %HIRUH:(//)25'1(/621DQG'$8*+75(< &LUFXLWsXGJHV

  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

BBBBBBBBBBBBBBBBB LQP\YLHZUHDGLO\GLVWLQJXLVKDEOH6HH0DUVKDOOY6HFXULW\ 6WDWH%DQNRI+DPLOWRQ,QUH0DUVKDOO)G &2816(/ WK &LU  GLVWLQJXLVKLQJ /RUHQ]HQ  ,W ZDV D VSOLW GHFLVLRQDQGWKHUHZDVDVWURQJRYHUWRQHRIZURQJGRLQJE\ $5*8(''DYLG6&XSSV925<66$7(56(<0285 WKHHPSOR\HULQWKDWFDVHXQOLNH75:jVUROHLQWKHLQVWDQW 3($6(&ROXPEXV2KLRIRU$SSHOODQWV(ULF+=DJUDQV FDVH7KH/RUHQ]HQFRXUWZDVSDUWLFXODUO\FRQFHUQHGDERXW =$*5$16 /$: ),50 (O\ULD 2KLR IRU $SSHOOHHV WKHZHOIDUHDQGQHHGIRUmIXOOFRPSHQVDWLRQRIWKHYLFWLPl 21%5,()'DYLG6&XSSV5REHUW1:HEQHU925<6 DQGKLVZLGRZ,ZRXOGDFFRUGLQJO\FRQFOXGHWKDWDZDUGLQJ 6$7(5 6(<0285  3($6( &ROXPEXV 2KLR sRKQ DQ\SUHMXGJPHQWLQWHUHVWEH\RQGWKDWFDOOHGIRULQ86& :LQVKLS 5HDG $PDQGD 0DUWLQVHN 925<6 6$7(5 †ZDVDQDEXVHRIGLVFUHWLRQ 6(<0285 3($6(&OHYHODQG2KLRIRU$SSHOODQWV(ULF +=DJUDQV=$*5$16/$:),50(O\ULD2KLR5REHUW' *DU\/RUDLQ2KLR3DXO(6ODWHU63(5/,1*6/$7(5 63,7=&KLFDJR,OOLQRLVIRU$SSHOOHHV 1(/621sGHOLYHUHGWKHRSLQLRQRIWKHFRXUWLQZKLFK '$8*+75(< s MRLQHG  :(//)25' s SS  GHOLYHUHGDVHSDUDWHRSLQLRQFRQFXUULQJLQSDUWDQGGLVVHQWLQJ LQSDUW BBBBBBBBBBBBBBBBB 23,1,21 BBBBBBBBBBBBBBBBB '$9,' $ 1(/621 &LUFXLW s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7KH GLVWULFWFRXUWIXUWKHUKHOGWKDWWKHPHPEHUVRIWKHFODVVZHUH HQWLWOHGWRSUHMXGJPHQWLQWHUHVWDWWKHJUHDWHURIWKHLQWHUHVW UDWH RQ ZHHN 86 7UHDVXU\ ELOOV RU WKH UDWH RI UHWXUQ  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB DFWXDOO\UHDOL]HGE\75:RQWKHPRQH\IRXQGWRKDYHEHHQ ZURQJIXOO\ZLWKKHOG &21&855,1*,13$57',66(17,1*,13$57 BBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBBB 8SRQGHQRYRUHYLHZRIWKHEHQHILWFDOFXODWLRQLVVXHZH FRQFOXGHWKDWWKHSODLQWLIIFODVVLVQRWHQWLWOHGWRDYDLOLWVHOIRI +$55< : :(//)25' &LUFXLW sXGJH FRQFXUULQJ LQ WKH FROODWHUDO HVWRSSHO GRFWULQH  :H IXUWKHU FRQFOXGH SDUW DQG GLVVHQWLQJ LQ SDUW  , FRQFXU HQWLUHO\ ZLWK P\ KRZHYHU WKDW WKH SRUWLRQ RI WKH OXPS VXP SD\PHQWV FROOHDJXHsXGJH1HOVRQWKURXJKSDUW,,%RIKLVRSLQLRQ, DWWULEXWDEOH WR VHUYLFH UHQGHUHG SULRU WR D FHUWDLQ SODQ ZRXOG KROG KRZHYHU WKDW ZH VKRXOG DGKHUH WR RXU XVXDO DPHQGPHQW DGRSWHG RQ 'HFHPEHU   UHIOHFWV D SURFHGXUH DQG GHHP WKDW SODLQWLIIV KDYH ZDLYHG DQ\ DQWL YLRODWLRQRIWKHmDQWLFXWEDFNUXOHlFRQWDLQHGLQWKH(PSOR\HH FXWEDFNDUJXPHQWLQWKLVDSSHDOXQGHU%ULQGOH\Y0F&XOOHQ 5HWLUHPHQW,QFRPH6HFXULW\$FWRIm(5,6$lDQGWKH )GWK&LUVHHDOVR:ULJKWY+ROEURRN ,QWHUQDO5HYHQXH&RGHWKHm,5&lRUm&RGHl7KHUHZDV )G  WK &LU   7KLV FDVH LV QRW DERXW ORVV RI QR YLRODWLRQ LQ RXU YLHZ ZLWK UHVSHFW WR WKH SRUWLRQ YHVWHGEHQHILWVXQGHURXUUXOLQJDVWRSUH'HFHPEHU DWWULEXWDEOH  WR VHUYLFH UHQGHUHG VXEVHTXHQW WR WKH SURYLVLRQVRIWKHSODQDQGDPHQGHGSODQV75:KDVLQGHHG DPHQGPHQW GHDOWJHQHURXVO\ZLWKLWVHPSOR\HHVDQG,ZRXOGQRWVWUHWFK RXUSURFHGXUHVWRFRQVLGHUWKDWZKLFKSODLQWLIIVKDYHIDLOHG $V WR WKH GLVWULFW FRXUWjV UHVROXWLRQ RI WKH SUHMXGJPHQW DGHTXDWHO\ WR DUJXH RU EULHI  , WKLQN WKDW WKH UDWLRQDOH WR LQWHUHVWTXHVWLRQZHILQGQRDEXVHRIWKHFRXUWjVGLVFUHWLRQ UHYHUVH LV VXSSRUWHG E\ WKH HIIHFW RI WKH ,56j DSSURYDO RU mIDYRUDEOHµGHWHUPLQDWLRQOHWWHUjlLVVXHGZLWKUHVSHFWWRWKH 7KH FKDOOHQJHG MXGJPHQW ZLOO EH DIILUPHG LQ SDUW DQG 75:SODQDPHQGHGHIIHFWLYHsDQXDU\ UHYHUVHGLQSDUW

,QJHQHUDO,GHHP&RQVWDQWLQRQRWFRQWUROOLQJXQGHUWKH , GLIIHULQJIDFWVDQGFLUFXPVWDQFHVRIWKLVFDVH3ODLQWLIIVDUH QRWHQWLWOHGWRWKHSRVWDPHQGPHQWFODLPWKDWWKH\DVVHUW $VRIoSULRUWRWKHHQDFWPHQWE\&RQJUHVVRIWKH ILUVW RI D VHULHV RI (5,6$ DQG ,5& DPHQGPHQWV WKDW ZH ,GLVVHQWZLWKUHVSHFWWRWKHDZDUGRISUHMXGJPHQWLQWHUHVW VKDOOGHVFULEHSUHVHQWO\o75:jV6DODULHG3HQVLRQ3ODQD SDUWLFXODUO\LQYLHZRIWKHJHQHURXVDZDUGVKHUHWRIRUHRUGHUHG GHILQHG EHQHILW SODQ DV RSSRVHG WR D GHILQHG FRQWULEXWLRQ E\WKLVFRXUWDVWRUHWLUHPHQWEHQHILWVGHHPHGWREHDFFUXHG SODQRIIHUHGHPSOR\HHVDmQRUPDOUHWLUHPHQWlRSWLRQDQGDQ ,Q WKH ILUVW SODFH m(5,6$ GRHV QRW PDQGDWH WKH DZDUG RI mHDUO\UHWLUHPHQWlRSWLRQ(PSOR\HHVHOHFWLQJWRUHWLUHDWDJH SUHMXGJPHQWLQWHUHVWWRSUHYDLOLQJSODQSDUWLFLSDQWVl)RUGY  ZHUH HQWLWOHG WR UHFHLYH D QRUPDO UHWLUHPHQW DQQXLW\ 8QLUR\DO3HQVLRQ3ODQ)GWK&LU,W FRQVLVWLQJRIVSHFLILHGPRQWKO\SD\PHQWVVWDUWLQJDWDJH PD\EHDZDUGHGDWWKHUHDVRQDEOHGLVFUHWLRQRIWKHGLVWULFW DQGFRQWLQXLQJXQWLOWKHUHWLUHHjVGHDWK7KHVHFRQGRSWLRQ MXGJH  6HH LG  7KH SXUSRVH RI DQ\ VXFK DZDUG LV QRW WR ZDVGHVLJQHGWRSURYLGHDQLQFHQWLYHIRUHDUO\UHWLUHPHQWE\ SXQLVK WKH HPSOR\HU  6HH LG DW   , ZRXOG KROG WKDW RIIHULQJVDODULHGHPSOR\HHVZKRUHWLUHGEHWZHHQDJHVDQG SODLQWLIIV DUH PRUH WKDQ DGHTXDWHO\ FRPSHQVDWHG E\ DZDUG  WKH VDPH DQQXLW\ ZLWK WKH VDPH PRQWKO\ SD\PHQWV XQGHU86&†DQGQRWVRPHRWKHUUDWH6HH)RUG VWDUWLQJLPPHGLDWHO\RQUHWLUHPHQW,QDGGLWLRQDVOLJKWO\ )GDW/RUHQ]HQY(PSOR\HHV5HWLUHPHQW3ODQRI UHGXFHG PRQWKO\ SD\PHQW ZDV RIIHUHG WR HPSOR\HHV ZKR 6SHUU\ +XWFKLQVRQ&R)GWK&LUFLWHG UHWLUHGEHWZHHQDJHVDQG%HFDXVHWKHOHYHORIEHQHILWV DVVXSSRUWIRUWKHPDMRULW\jVSUHMXGJPHQWLQWHUHVWGHFLVLRQLV IRU HDUO\ UHWLUHHV ZDV QRW ORZHUHG RU ZDV QRW VXIILFLHQWO\ ORZHUHG WR PDNHXSIRUWKHLQFUHDVHLQWKHOHQJWKRIWLPH  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

RYHU ZKLFK SD\PHQWV ZRXOG EH PDGH WR WKHP WKH WRWDO QHLWKHULQVWDQFHZRXOGWKHHIIHFWEHSXQLWLYHDVLWPLJKWKDYH OLIHWLPHSHQVLRQEHQHILWDYDLODEOHWRHDUO\UHWLUHHVZDVJUHDWHU EHHQKDGWKHGLVWULFWFRXUWFKRVHQWRXVHDVWDWHODZUDWHPXFK WKDQWKHWRWDOOLIHWLPHEHQHILWDYDLODEOHWRDJHUHWLUHHV7KH KLJKHUWKDQSUHYDLOLQJPDUNHWUDWHVRIUHWXUQ&I)RUG EHQHILWUHFHLYHGE\HDUO\UHWLUHHVZDVFDOOHGLQWKHMDUJRQRI )G DW  KROGLQJ WKDW 0LFKLJDQjV VWDWH ODZ UDWH RI  WKHFRJQRVFHQWLDmVXEVLGL]HGlEHQHILW SHUFHQWZDVSXQLWLYHIRUSXUSRVHVRI(5,6$EHFDXVHLWZDV PHDQWWRFRPSHQVDWHWKHZLQQHUIRUOLWLJDWLRQH[SHQVHVDQG 7KHSODQDOVRSURYLGHGWKDWUHWLUHHVFRXOGHOHFWWRWDNHWKHLU ZDVKLJKHUWKDQWKHPDUNHWUDWHRIURXJKO\QLQHSHUFHQW SHQVLRQEHQHILWVLQDOXPSVXPSD\DEOHXSIURQWUDWKHUWKDQ DVDVHULHVRIPRQWKO\SD\PHQWV7KHDPRXQWRIWKHOXPS 75:DUJXHVWKDWWKHGLVWULFWFRXUWjVDZDUGRISUHMXGJPHQW VXP ZDV FDOFXODWHG XQGHU D SUHVFULEHG IRUPXOD WKDW LQWHUHVW KDV WKH HIIHFW RI DPHQGLQJ WKH SODQ mWR FRQIHU D GLVFRXQWHGWKHPRQWKO\SD\PHQWVWUHDPWRLWVSUHVHQWYDOXH EHQHILWZKLFKQRRWKHU3ODQSDUWLFLSDQWZLOOUHFHLYHl7KLV 3ULRUWRWKHSODQSURYLGHGWKDWWKHLQWHUHVWUDWHXVHGLQ DUJXPHQWLVLQRXUYLHZPLVJXLGHG,IWKHSODLQWLIIVUHFHLYHG PDNLQJWKHSUHVHQWYDOXHFDOFXODWLRQZRXOGEHWKH0RRG\jV OXPSVXPGLVWULEXWLRQVLQDPRXQWVOHVVWKDQWKRVHWRZKLFK $DDERQGUDWH WKH\ ZHUH DFWXDOO\ HQWLWOHG WKH HQWU\ RI MXGJPHQW IRU WKH DPRXQWRIWKHVKRUWIDOOZLWKLQWHUHVWWKURXJKWKHHQGRIWKH ,Q WKH 5HWLUHPHQW (TXLW\ $FW RI  &RQJUHVV VHW D OLWLJDWLRQZRXOGVLPSO\PDNHWKHSODLQWLIIVZKROH7KLVLVQRW FHLOLQJRQWKHLQWHUHVWUDWHVWKDWFRXOGEHXVHGLQFDOFXODWLQJ DmEHQHILWlIRUZKLFKRWKHUSODQSDUWLFLSDQWVDUHLQHOLJLEOH WKH SUHVHQW YDOXH RI IXWXUH SHQVLRQ SD\PHQWV  ,W ZLOO EH RWKHU SDUWLFLSDQWV ZRXOG KDYH EHHQ HTXDOO\ HOLJLEOH IRU KHOSIXOWRNHHSWKHIROORZLQJUHODWLRQVKLSLQPLQGWKHKLJKHU SUHMXGJHPHQW LQWHUHVW KDG WKH\ IRXQG LW QHFHVVDU\ WR JR WR WKHLQWHUHVWUDWHXWLOL]HGLQWKHSUHVHQWYDOXHFDOFXODWLRQWKH FRXUWWRREWDLQEHQHILWVZURQJIXOO\GHQLHGWKHP ORZHUWKHOXPSVXPSURGXFHGE\WKDWFDOFXODWLRQ8QGHUWKH VWDWXWH WKH LQWHUHVW UDWH ZDV FDSSHG DW D OHYHO VHW E\ WKH 75:DOVRDUJXHVWKDWWKHDZDUGRISUHMXGJPHQWLQWHUHVW 3HQVLRQ %HQHILW *XDUDQW\ &RUSRUDWLRQ  7KLV UDWH o  WKH XQGHUWKHIRUPXODFKDOOHQJHGKHUHZLOOUHVXOWLQDmZLQGIDOO WHFKQLFDOGHULYDWLRQRIZKLFKQHHGQRWFRQFHUQXVKHUHoLV UHFRYHU\IRUSODQSDUWLFLSDQWVl:HGLVDJUHH,IWKHDZDUGRI FRPPRQO\FDOOHGWKHm3%*&UDWHl7KHVWDWXWRU\FDSPHDQW SUHMXGJPHQWLQWHUHVWZHUHORZHUWKDQ75:jVDFWXDOUDWHRI WKDW75:HPSOR\HHVHOHFWLQJWRWDNHWKHLUHDUO\UHWLUHPHQW UHWXUQ LW LV 75: WKDW ZRXOG DUJXDEO\ UHFHLYH D ZLQGIDOO EHQHILWVLQDOXPSVXPZRXOGUHFHLYHSD\PHQWVVXEVWDQWLDOO\ %HFDXVHWKHSODQZLWKZKLFKZHDUHFRQFHUQHGLQWKLVFDVHLV JUHDWHU LQ DPRXQW WKDQ WKH SD\PHQWV WR ZKLFK WKH\ ZRXOG DGHILQHGEHQHILWSODQ75:KDVWRFRQWULEXWHRQO\HQRXJK KDYHEHHQHQWLWOHGXQGHUWKHSODQDVRULJLQDOO\ZULWWHQ PRQH\WRIXQGWKHSODQjVGHILQHGREOLJDWLRQV,I75:ZHUH DEOHWRNHHSSDUWRIWKHUHWXUQRQZURQJIXOO\ZLWKKHOGIXQGV LWZRXOGKDYHWRFRQWULEXWHWKDWPXFKOHVVWRIXQGWKHSODQjV REOLJDWLRQVWRRWKHUUHWLUHHV  3XE / 1R   6WDW   DPHQGLQJ (5,6$ †† H  DQG J   86& †† H  DQG J  DQG 7KHMXGJPHQWRIWKHGLVWULFWFRXUWLV$)),50('LQSDUW ,5&  86& †† D  DQG H   DQG5(9(56('LQSDUWDQGWKHFDVHLV5(0$1'('IRU  IXUWKHUSURFHHGLQJVQRWLQFRQVLVWHQWZLWKWKLVRSLQLRQ 2Q LWV IDFH WKH SURSRVLWLRQ WKDW &RQJUHVV FRXOG DQG GLG SUHVXPH WR DEURJDWH WKH VHWWOHG H[SHFWDWLRQV RI WKH FRQWUDFWLQJ SDUWLHV UHWURDFWLYHO\ PLJKW VHHP RSHQ WR TXHVWLRQ 6HH /DQGJUDI Y 86, )LOP 3URGV  86    75: KDV QRW FKDOOHQJHG WKH FRQVWLWXWLRQDOLW\ RI WKH UHWURDFWLYH DSSOLFDWLRQ RI WKH QHZO\DGRSWHG LQWHUHVW UDWH FDS KRZHYHU DQG ZH LQWLPDWH QR RSLQLRQ RQ WKLV LVVXH RQH ZD\ RU WKH RWKHU  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

(PSOR\HHV5HOLHI$VVjQ)GWK&LU 7KH 5HWLUHPHQW (TXLW\ $FW DOVR SURYLGHG WKDW HDUO\ XVLQJDGMXVWHGSULPHUDWH.DWVDURVY&RG\)G UHWLUHPHQWVXEVLGLHVVXFKDVWKRVHRIIHUHGLQWKH75:SODQ G&LU m([SHUWWHVWLPRQ\UHYHDOHGWKDWDWWKH ZHUHVXEMHFWWRDQmDQWLFXWEDFNlUXOHHPERGLHGLQ(5,6$ WLPH    RWKHU EDQNLQJ LQVWLWXWLRQV ZHUH LQ WKH PDUNHW WR DQG WKH ,QWHUQDO 5HYHQXH &RGH  7KH DQWLFXWEDFN UXOH ERUURZ DW D UDWH RI SULPH SOXV RQH SHUFHQW  $ZDUGLQJ SURKLELWVWKHDPHQGPHQWRISHQVLRQSODQVLQVXFKDZD\DVWR SUHMXGJPHQWLQWHUHVWLQDFFRUGZLWKSUHYDLOLQJLQWHUHVWUDWHV UHGXFHEHQHILWULJKWVWKDWKDYHDOUHDG\DFFUXHG6HH(5,6$ LVFRQVLVWHQWZLWKSULRUFDVHODZl'RQRYDQY0D]]ROD † J  86& † J DQG ,5&  86& )GWK&LU'HVSLWH75:jVFODLP †G  WKDWDQDZDUGRISUHMXGJPHQWLQWHUHVWEDVHGRQWKHDFWXDOUDWH RIUHWXUQLVXQSUHFHGHQWHGWKH6HYHQWK&LUFXLWVHHPVWRKDYH XSKHOGMXVWVXFKDQDZDUG6HH/RUHQ]HQY(PSOR\HHV5HW 3ODQRI6SHUU\ +XWFKLQVRQ&R)GWK &LUm7KHUHWLUHPHQWSODQKHOGPRQH\WKDWEHORQJHGWR 0UV/RUHQ]HQoKHOGLWRQKHUDFFRXQWDVLWZHUH1RZWKDW WKHFROODWHUDOGLVSXWHLVRYHUWKHSODQPXVWUHWXUQLWWRKHU WRJHWKHUZLWKWKHIUXLWVWKDWLWKDVJOHDQHGE\KROGLQJRQWR LWl 8VLQJ WKH LQWHUHVW UDWH DFWXDOO\ UHDOL]HG E\ 75: RQ WKH UHOHYDQWIXQGVVHHPVDQDSSURSULDWHZD\RIDYRLGLQJXQMXVW  (5,6$ † J FDSWLRQHG m'HFUHDVH RI DFFUXHG EHQHILWV HQULFKPHQW$VZHGHFODUHGLQDQHDUOLHUFDVHm>W@RDOORZWKH WKURXJK DPHQGPHQW RI SODQl SURYLGHV LQ SHUWLQHQW SDUW DV IROORZV )XQG WR UHWDLQ WKH LQWHUHVW LW HDUQHG RQ IXQGV ZURQJIXOO\ ZLWKKHOGZRXOGEHWRDSSURYHRIXQMXVWHQULFKPHQWl6ZHHWY m 7KH DFFUXHG EHQHILW RI D SDUWLFLSDQW XQGHU D SODQ PD\ QRW EH &RQVROLGDWHG$OXPLQXP&RUS)GWK&LU GHFUHDVHG E\ DQ DPHQGPHQW RI WKH SODQ      TXRWLQJ 6KRUW Y &HQWUDO 6WDWHV 6RXWKHDVW 6RXWKZHVW$UHDV3HQVLRQ)XQG)GWK&LU  )RU SXUSRVHV RI SDUDJUDSK  D SODQ DPHQGPHQW ZKLFK KDV WKH HIIHFW RIo   $ HOLPLQDWLQJ RU UHGXFLQJ DQ HDUO\ UHWLUHPHQW EHQHILW :HDUHDZDUHRIQRGHFLVLRQDSSURYLQJDIRUPXODOLNHWKH RU D UHWLUHPHQWW\SH VXEVLG\ DV GHILQHG LQ UHJXODWLRQV RQHXVHGKHUHZKHUHWKHSODLQWLIIVDUHWRUHFHLYHWKHKLJKHURI RU WKH†UDWHRUWKHUDWHDFWXDOO\UHDOL]HGE\75:%XW DOWKRXJKWKLVIRUPXODPD\EHXQXVXDOZHDUHQRWSHUVXDGHG % HOLPLQDWLQJ DQ RSWLRQDO IRUP RI EHQHILW

WKDWLWUHSUHVHQWVDQDEXVHRIGLVFUHWLRQ$VZHKDYHDOUHDG\ ZLWK UHVSHFW WR EHQHILWV DWWULEXWDEOH WR VHUYLFH EHIRUH WKH QRWHGWKH†UDWHKDVEHHQXSKHOGQXPHURXVWLPHV,I DPHQGPHQW VKDOO EH WUHDWHG DV UHGXFLQJ DFFUXHG EHQHILWV ,Q WKH WKDWUDWHVKRXOGSURYHWREHWKHKLJKHURQHIRUWKHUHOHYDQW FDVH RI D UHWLUHPHQWW\SH VXEVLG\ WKH SUHFHGLQJ VHQWHQFH VKDOO SHULRG75:ZRXOGSUHVXPDEO\KDYHQROHJLWLPDWHEDVLVIRU DSSO\ RQO\ ZLWK UHVSHFW WR D SDUWLFLSDQW ZKR VDWLVILHV HLWKHU REMHFWLQJWRLW,I75:jVDFWXDOUDWHRIUHWXUQWXUQVRXWWR EHIRUH RU DIWHU WKH DPHQGPHQW WKH SUHDPHQGPHQW FRQGLWLRQV IRU WKH VXEVLG\   l KDYHEHHQKLJKHUWKDQWKH†UDWHRQWKHRWKHUKDQGD UHTXLUHPHQW WKDW 75: SD\ WKH DFWXDO UDWH PHUHO\ GHSULYHV 7KH FRUUHVSRQGLQJ VHFWLRQ RI WKH ,QWHUQDO 5HYHQXH &RGH  86& 75: RI LWV SURILW RQ WKH ZURQJIXOO\ GHQLHG EHQHILWV  ,Q † G  GHQLHV IDYRUDEOH WD[ WUHDWPHQW WR D SODQ DPHQGHG LQ YLRODWLRQ RI DQ DQWLFXWEDFN UXOH IUDPHG LQ HVVHQWLDOO\ WKH VDPH WHUPV  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

$V RI 2FWREHU   WKH 7D[ 5HIRUP $FW RI  & UHWURDFWLYHO\UDLVHGWKHLQWHUHVWUDWHFHLOLQJZKHUHWKHYHVWHG DFFUXHGEHQHILWFDOFXODWHGLQDPDQQHUVSHFLILHGE\VWDWXWH $V WR WKH GLVWULFW FRXUWjV DZDUG RI SUHMXGJPHQW LQWHUHVW H[FHHGHG7KHQHZFHLOLQJIRUVXFKGLVWULEXWLRQVZDV XQGHUWKHIRUPXODGHVFULEHGDWSVXSUDZHKDYHmORQJ SHUFHQWRIWKH3%*&UDWH7KHDPHQGHGFHLOLQJoLH UHFRJQL]HG WKDW WKH GLVWULFW FRXUW PD\ >DZDUG SUHMXGJPHQW WKH3%*&UDWHIRUGLVWULEXWLRQVRIRUOHVVDQG LQWHUHVW@DWLWVGLVFUHWLRQLQDFFRUGDQFHZLWKJHQHUDOHTXLWDEOH SHUFHQWRIWKH3%*&UDWHIRUGLVWULEXWLRQVH[FHHGLQJ SULQFLSOHVl)RUGY8QLUR\DO)GWK&LU o LV FRPPRQO\ FDOOHG WKH m†  UDWHl DIWHU WKH UHOHYDQW :HWKHUHIRUHDSSO\DQmDEXVHRIGLVFUHWLRQlVWDQGDUG VHFWLRQRIWKH7D[5HIRUP$FW7KH&RGHDQG(5,6$DOVR LQUHYLHZLQJWKHDZDUG SURYLGHGWKDWDSODQFRXOGQRWGLVWULEXWHDEHQHILWLQDOXPS VXPZLWKRXWWKHSDUWLFLSDQWjVFRQVHQWLIWKHEHQHILWZDVRYHU $PRQJ WKH FRQVWUDLQWV RQ D GLVWULFW FRXUWjV GLVFUHWLRQ WR  VKDSHDQDZDUGRISUHMXGJPHQWLQWHUHVWLQDQ(5,6$FDVHLV WKHIDFWWKDWZHORRNZLWKGLVIDYRURQVLPSO\DGRSWLQJVWDWH ODZLQWHUHVWUDWHV(5,6$LVmQRWDQDUHDµSULPDULO\RIVWDWH FRQFHUQjl)RUG)GDW,QWHUHVWDZDUGVVKRXOGQRW EHSXQLWLYHEXWVKRXOGmVLPSO\FRPSHQVDWHDEHQHILFLDU\IRU WKHORVWLQWHUHVWYDOXHRIPRQH\ZURQJO\ZLWKKHOGIURPKLP RUKHUl,GDW 7KHTXHVWLRQIDFHGE\WKHGLVWULFWFRXUWLQWKLVFDVHWKHQ ZDVKRZEHVWWRFDOFXODWHWKHmORVWLQWHUHVWYDOXHRIPRQH\ ZURQJO\ZLWKKHOGl75:XUJHVWKDWWKHRQO\DSSURSULDWH UDWHZRXOGEHHLWKHUWKDWHVWDEOLVKHGE\86&†oD UDWHWLHGWRWKHDYHUDJHZHHN8QLWHG6WDWHV7UHDVXU\ELOO UDWHIRUWKHUHOHYDQWSHULRGoRUDUDWHOLQNHGWRWKH3%*&UDWH LQWKHPDQQHUSUHVFULEHGE\† :H KDYH XSKHOG D GLVWULFW FRXUWjV DZDUG RI SUHMXGJPHQW LQWHUHVWFDOFXODWHGXQGHU86&†)RUG)GDW 2WKHUFRXUWVKDYHGRQHVRDVZHOO6HHHJ$OJLHY  5&$*OREDO&RPPXQLFDWLRQ,QF)GG&LU 3XE / 1R  †   6WDW    FRGLILHG DW (5,6$ †† H  DQG J   86& †† H  DQG XSKROGLQJDGLVWULFWFRXUWjVFKRLFHRIWKH†UDWH J   DQG ,5&  86& †† D  % DQG H  RQWKHJURXQGVWKDWLWSURYLGHGDmFORVHUDSSUR[LPDWLRQRIWKH  7KH DERYHFLWHG VHFWLRQV RI (5,6$ DQG WKH ,5& ZHUH ODWHU OLNHO\UHWXUQRQSODLQWLIIVjXQSDLGEHQHILWVl DPHQGHG E\ WKH 5HWLUHPHQW 3URWHFWLRQ $FW RI  3XE / 1R   6WDW   7KDW $FW KRZHYHU GLG QRW EHFRPH DSSOLFDEOH 7KLVLVQRWWRVD\KRZHYHUWKDWWKH†UDWHLVWKHRQO\ XQWLO sXO\   o D GDWH ZKLFK QRW FRLQFLGHQWDOO\ LV WKH FORVLQJ GDWH SHUPLVVLEOHSUHMXGJPHQWLQWHUHVWUDWH2XUFRXUWDQGRWKHUV IRU PHPEHUVKLS LQ WKH SUHVHQW SODLQWLII FODVV 7KH FODVV UHSUHVHQWDWLYHV DQG 75: KDYH DJUHHG WKDW WKH ROGHU VWDWXWRU\ SURYLVLRQV JRYHUQ WKLV FDVH KDYHDOVRXSKHOGDZDUGVRISUHMXGJPHQWLQWHUHVWWKDWZHUH WLHG WR SUHYDLOLQJ PDUNHW UDWHV WKXV UHIOHFWLQJ ZKDW WKH  6SHFLILFDOO\ ,5& † H  DQG  SURYLGHG DV IROORZV GHIHQGDQWV ZRXOG KDYH KDG WR SD\ LQ RUGHU WR ERUURZ WKH PRQH\ DW LVVXH  6HH HJ ((2& Y :RRVWHU %UXVK &R  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

GHWHUPLQDWLRQEDVHGRQWKLVLQFRUUHFWDVVXPSWLRQLVHQWLWOHG %HFDXVHRIWKHEDOORRQLQJHIIHFWRIWKH5HWLUHPHQW(TXLW\ WRQRSUHVXPSWLRQRIYDOLGLW\ $FW RQ HDUO\ UHWLUHPHQW OXPS VXP GLVWULEXWLRQV RU VR ZH VXUPLVH 75: HYHQWXDOO\ GHFLGHG WR HOLPLQDWH DQ\ HDUO\ 7KH6HFRQG&LUFXLWPRUHRYHUKDVVDLGWKDWDmIDYRUDEOH UHWLUHPHQWVXEVLG\ZKHUHWKHOXPSVXPIRUPRISD\PHQWZDV GHWHUPLQDWLRQ OHWWHU LQGLFDWHV RQO\ WKDW DQ HPSOR\HH UHWLUHPHQW SODQ TXDOLILHV IRU IDYRUDEOH WD[ WUHDWPHQW E\ PHHWLQJWKHIRUPDOUHTXLUHPHQWVRI,5&†Dl(VGHQ Y %DQN RI %RVWRQ 1R   86 $SS /(;,6 DW G&LU6HSW7KDWFRXUWZHQWRQ m 3ODQ PD\ GLVWULEXWH EHQHILW LQ H[FHVV RI  RQO\ ZLWK WRVD\WKDWmDGMXGLFDWLRQRI>DQHPSOR\HHjV@ULJKWVLVIRUWKH FRQVHQW n ,I n $ WKH SUHVHQW YDOXH RI WKH TXDOLILHG MRLQW DQG VXUYLYRU IHGHUDOFRXUWVQRWWKHILHOGRIILFHVRIWKH,56l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o (PSOR\HHV WDNLQJ HDUO\ UHWLUHPHQW DIWHU 'HFHPEHU   DQG HOHFWLQJ WR UHFHLYH WKHLU  'HWHUPLQDWLRQ RI SUHVHQW YDOXH n DFFUXHG UHWLUHPHQW EHQHILWV LQ D OXPS VXP DUH $ ,Q JHQHUDO n )RU SXUSRVHV RI SDUDJUDSKV  DQG  HQWLWOHG WR KDYH WKH †  UDWH XVHG LQ WKH WKH SUHVHQW YDOXH VKDOO EH FDOFXODWHG n GHWHUPLQDWLRQ RI WKH SUHVHQW YDOXH RI VXEVLGL]HG EHQHILWV DWWULEXWDEOH WR VHUYLFH EHIRUH WKH L E\ XVLQJ DQ LQWHUHVW UDWH QR JUHDWHU WKDQ WKH DPHQGPHQW DSSOLFDEOH LQWHUHVW UDWH LI WKH YHVWHG DFFUXHG EHQHILW XVLQJ VXFK UDWH LV QRW LQ H[FHVV RI  DQG o :LWK UHVSHFW WR XQVXEVLGL]HG UHWLUHPHQW EHQHILWV DWWULEXWDEOH WR VHUYLFH DIWHU WKH DPHQGPHQW VXFK LL E\ XVLQJ DQ LQWHUHVW UDWH QR JUHDWHU WKDQ  SHUFHQW RI WKH DSSOLFDEOH LQWHUHVW UDWH LI WKH YHVWHG DFFUXHG HPSOR\HHVDUHHQWLWOHGWRUHFHLYHWKHDGYDQWDJHRI EHQHILW H[FHHGV  DV GHWHUPLQHG XQGHU FODXVH WKHDOWHUQDWLYHSUHVHQWYDOXHFDOFXODWLRQSUHVFULEHG L  E\ WKH SODQ DPHQGPHQWV DGRSWHG RQ 2FWREHU  DQG ,Q QR HYHQW VKDOO WKH SUHVHQW YDOXH GHWHUPLQHG XQGHU VXEFODXVH ,, >VLF@ EH OHVV WKDQ  o (DFK PHPEHU RI WKH SODLQWLII FODVV VKRXOG EH % $SSOLFDEOH LQWHUHVW UDWH n )RU SXUSRVHV RI DZDUGHGMXGJPHQWIRUWKHDPRXQWLIDQ\E\ZKLFK VXESDUDJUDSK $ WKH WHUP µDSSOLFDEOH LQWHUHVW UDWHj PHDQV WKHOXPSVXPWRZKLFKKHRUVKHLVHQWLWOHGH[FHHGV WKH LQWHUHVW UDWH ZKLFK ZRXOG EH XVHG DV RI WKH GDWH RI WKH WKHOXPSVXPDFWXDOO\SDLG GLVWULEXWLRQ E\ WKH 3HQVLRQ %HQHILW *XDUDQW\ &RUSRUDWLRQ IRU SXUSRVHV RI GHWHUPLQLQJ WKH SUHVHQW YDOXH RI D OXPS VXP GLVWULEXWLRQ RQ SODQ WHUPLQDWLRQl (5,6$jV SDUDOOHO SURYLVLRQ VLQFH DPHQGHG ZDV FRGLILHG DW  86& † J   5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

FKRVHQ7KLVGHFLVLRQZDVLPSOHPHQWHGLQSODQDPHQGPHQWV 7KH ODQJXDJH RI WKH 75: SODQ LWVHOI VXJJHVWV WKDW WKH DGRSWHGRQ'HFHPEHUoDGDWHFULWLFDOO\LPSRUWDQW GUDIWHUVVKDUHGRXUXQGHUVWDQGLQJWKDWSULRUWR'HFHPEHU DVZHVKDOOVHHWRWKHUHVROXWLRQRIWKHFDVHQRZEHIRUHXV  HDUO\ UHWLUHPHQW VXEVLGLHV ZHUH VXEMHFW WR DFFUXDO 6HFWLRQRIWKHSODQIRUH[DPSOHVD\VWKDWWKHOXPSVXP :LWK WKH 'HFHPEHU  DPHQGPHQWV ZKLFK ZHUH PDGH EHQHILWZLOOEHFDOFXODWHGDVWKHJUHDWHURIWKH0RRG\jVUDWH UHWURDFWLYH WR sDQXDU\   75:jV UHWLUHPHQW SODQ DSSOLHG WR WKH mDFFUXHG RU VXEVLGL]HG (DUO\ 5HWLUHPHQW SURYLGHGLQUHOHYDQWSDUWDVIROORZV %HQHILWl>HPSKDVLVDGGHG@RUSHUFHQWRIWKH3%*&UDWH DSSOLHGWRWKHmDFFUXHG1RUPDORUXQVXEVLGL]HGlEHQHILW%\ m7KHOXPSVXPEHQHILWVKDOOEHWKHSUHVHQWYDOXHRIWKH XVLQJmDFFUXHGlDQGmVXEVLGL]HGlDVV\QRQ\PVWKLVSURYLVLRQ PRQWKO\ VLQJOH OLIH DQQXLW\ H[FOXGLQJ DQ\ HDUO\ LQGLFDWHVWKDWWKHHDUO\UHWLUHPHQWVXEVLGL]HGEHQHILWFDQEH UHWLUHPHQWVXEVLG\WRZKLFKWKH3DUWLFLSDQWZRXOGKDYH DFFUXHG EHHQ HQWLWOHG H[FHSW IRU WKH HOHFWLRQ RI WKH OXPS VXP IRUP RI SD\PHQW  7KH OXPS VXP VKDOO LQFOXGH WKH 2XU FRQFOXVLRQ LV QRW XQGHUPLQHG DV ZH VHH LW E\ WKH SUHVHQW YDOXH RI WKH DQWLFLSDWHG 3RVW5HWLUHPHQW IDYRUDEOHmGHWHUPLQDWLRQOHWWHUlWKDW75:UHFHLYHGIURPWKH $GMXVWPHQWV ZKLFK ZRXOG KDYH EHHQ PDGH KDG WKH ,QWHUQDO5HYHQXH6HUYLFHZLWKUHVSHFWWRWKH75:SHQVLRQ 3DUWLFLSDQWHOHFWHGPRQWKO\SD\PHQWVl75:6DODULHG SODQDVDPHQGHGHIIHFWLYHsDQXDU\$OWKRXJKWKLV 3HQVLRQ3ODQ6HFWLRQE LDVDPHQGHG'HFHPEHU OHWWHUE\LWVWHUPVmUHODWHVRQO\WRWKHVWDWXVRI>75:jV@SODQ HPSKDVLVVXSSOLHG XQGHU WKH ,QWHUQDO 5HYHQXH &RGHl (5,6$ FRQWDLQV D SURYLVLRQUHTXLULQJWKH6HFUHWDU\RI/DERUWRDFFHSWIDYRUDEOH 7KHHOLPLQDWLRQRIWKHHDUO\UHWLUHPHQWOXPSVXPVXEVLG\ GHWHUPLQDWLRQ OHWWHUV mDV SULPD IDFLH HYLGHQFH RI LQLWLDO JDYHULVHWRWKHFODVVDFWLRQLQZKLFKZHLVVXHGWKHGHFLVLRQ FRPSOLDQFH E\ WKH SODQ ZLWK WKH VWDQGDUGV >RI UHOHYDQW UHSRUWHGDV&RVWDQWLQRY75:,QF)GWK&LU SRUWLRQVRI(5,6$@l86&†G$VIDU DVWKH   7KH &RVWDQWLQR FODVV ZDV PDGH XS RI 75: DQWLFXWEDFNUXOHLVFRQFHUQHGKRZHYHUZHDUHQRWSHUVXDGHG HPSOR\HHVZKRKDGWDNHQHDUO\UHWLUHPHQWEHWZHHQsDQXDU\ WKDWWKHOHWWHULVSULPDIDFLHHYLGHQFHRIDQ\WKLQJ   DQG 2FWREHU   DQG ZKR KDG HOHFWHG WR UHFHLYHOXPSVXPGLVWULEXWLRQV,WZDVFODLPHGRQEHKDOIRI 7KLVLVVREHFDXVHRIWKHUHSUHVHQWDWLRQVWKDW75:PDGHWR WKLV FODVV WKDW WKH UHWURDFWLYH DPHQGPHQWV DGRSWHG RQ WKH ,56 LQ UHTXHVWLQJ WKH OHWWHU  ,Q DQ ,56 IRUP HQWLWOHG 'HFHPEHUYLRODWHGWKHDQWLFXWEDFNUXOHTXRWHGLQ m$SSOLFDWLRQIRU'HWHUPLQDWLRQIRU(PSOR\HH%HQHILW3ODQl QRWHVXSUD 75:ZDVDVNHGWKLVTXHVWLRQm'RHVDQ\DPHQGPHQWWRWKH SODQ UHGXFH RU HOLPLQDWH DQ\ VHFWLRQ G  SURWHFWHG EHQHILW"l,WPD\EHUHFDOOHGWKDW†G LVWKH,5& FRXQWHUSDUW RI WKH DQWLFXWEDFN UXOH FRQWDLQHG LQ (5,6$  7KH DPHQGHG SODQ DOVR SURYLGHG DV WR GLVWULEXWLRQV ZLWK UHVSHFW WR † J  ,Q UHVSRQVH WR WKLV TXHVWLRQ DV WR ZKHWKHU DQ\  DQG  WKDW WKH LQWHUHVW UDWH IRU GLVWULEXWLRQV QRW H[FHHGLQJ DPHQGPHQW WR WKH 75: SODQ UHGXFHG RU HOLPLQDWHG DQ\  ZRXOG EH WKH 3%*& UDWH DW WKH EHJLQQLQJ RI WKH FDOHQGDU \HDU EHQHILWSURWHFWHGE\WKHDQWLFXWEDFNUXOH75:FKHFNHGD ZKLOH IRU GLVWULEXWLRQV RYHU  WKH LQWHUHVW UDWH ZRXOG EH WKH OHVVHU ER[PDUNHGm1Rl RI WKH 0RRG\jV $DD UDWH RU WKH †  UDWH DW WKH EHJLQQLQJ RI WKH FDOHQGDU \HDU 7KH DPHQGHG SODQ FRQWDLQHG DQ DOPRVW LGHQWLFDO SURYLVLRQ 75:jVDQVZHUDVZHKDYHGHPRQVWUDWHGZDVLQFRUUHFW UHJDUGLQJ LQWHUHVW UDWHV IRU WKH \HDUV  DQG WKHUHDIWHU H[FHSW WKDW WKH 3%*& UDWH ZRXOG EH WKH RQH LQ HIIHFW GXULQJ WKH PRQWK RI GLVWULEXWLRQ 7KH ,56 KRZHYHU ZDV HQWLWOHG WR DVVXPH WKDW 75: KDG 75: 6DODULHG 3HQVLRQ 3ODQ †† E LLL % DQG & DV DPHQGHG DQVZHUHG WKH TXHVWLRQ FRUUHFWO\ o DQG D IDYRUDEOH 'HFHPEHU    5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

)DLOXUH WR UDLVH DQ LVVXH RQ DSSHDO ZRXOG QRUPDOO\ 75:DUJXHGLQ&RVWDQWLQRWKDWWKHDPHQGPHQWVKDGQRW FRQVWLWXWHDZDLYHURIWKDWLVVXH%ULQGOH\Y0F&XOOHQ UHGXFHGWKHEHQHILWLQWHUPVRIUHDOGROODUV7KLVFRXUWKHOG )GWK&LU+HUHKRZHYHUZHKDYHDSXUH KRZHYHUWKDWUHJDUGOHVVRIWKHGROODUDPRXQWRIWKHOXPSVXP TXHVWLRQRIODZWKDWFULHVRXWIRUUHVROXWLRQoDQGLQVXFKD GLVWULEXWLRQWKHDQWLFXWEDFNUXOHSURKLELWHGHOLPLQDWLRQRI VLWXDWLRQZHDUHQRWIRUHFORVHGIURPFRQVLGHULQJWKHLVVXH WKH HDUO\ UHWLUHPHQW VXEVLG\ IRU D UHWLUHH ZKR KDG DOUHDG\ 6HH'RUULVY$EVKHU)GWK&LU TXDOLILHGIRUWKHVXEVLG\&RVWDQWLQR)GDW DOORZLQJDSSHOODWHFRQVLGHUDWLRQRIDQXQEULHIHGLVVXHWKDW LQYROYHGDPLVLQWHUSUHWDWLRQRIDmSXUHTXHVWLRQRIODZZLWK 75: DOVR DUJXHG LQ &RVWDQWLQR WKDW WKH UDWH FDS ZDV QRPDWHULDOIDFWVEHLQJLQGLVSXWHl*LYHQWKHSDWHUQDOLVWLF DSSOLFDEOHRQO\WRmDFFUXHGEHQHILWVlDWHUPWKDWDFFRUGLQJWR SXUSRVHV XQGHUO\LQJ (5,6$ DQG JLYHQ WKH &RQJUHVVLRQDO 75: PHDQW RQO\ XQVXEVLGL]HG EHQHILWV  ,G DW   7KLV ILQGLQJVDQGGHFODUDWLRQRISROLF\VHWIRUWKLQ7LWOH,†RI FRXUWUHMHFWHG75:jVDUJXPHQWVLQDWZRSDUWDQDO\VLV)LUVW WKHVWDWXWH86&†ZHFRQVLGHUWKLVDSDUWLFXODUO\ ZHQRWHGD7UHDVXU\'HSDUWPHQWUHJXODWLRQFRGLILHGDW DSSURSULDWHFDVHIRUH[HUFLVLQJRXUGLVFUHWLRQWRDGGUHVVWKH &)5†DD UHTXLUHGWKDWWKHDPRXQWRIDQ\ XQEULHIHGLVVXH:HVKDOOSURFHHGWRGRVR DFFUXHGEHQHILWEHFDOFXODWHGLQDFFRUGDQFHZLWKSUHVFULEHG YDOXDWLRQ UXOHV WKDW FRQWHPSODWHG XVH RI WKH †  UDWH 7KH7D[5HIRUP$FWDVZHKDYHVHHQUHTXLUHG75:WR &RVWDQWLQR)G6HFRQGWKHUHJXODWLRQUHTXLUHGWKDW GHWHUPLQH WKH SUHVHQW YDOXH RI WKH DQQXLW\ EHQHILWV RI WKH VXEVLGL]HG HDUO\ UHWLUHPHQW EHQHILW EH WUHDWHG DV DQ HPSOR\HHVHOHFWLQJHDUO\UHWLUHPHQWmXVLQJDQLQWHUHVWUDWHQR DFFUXHGEHQHILWIRUSXUSRVHVRIWKHDQWLFXWEDFNUXOH,G7KH JUHDWHU WKDQ  SHUFHQW RI WKH >3%*&@ UDWH LI WKH YHVWHG UHJXODWLRQ &RVWDQWLQR GHFODUHG mH[SUHVVO\ UHTXLUHV WKDW DFFUXHGEHQHILWH[FHHGVl86&†H  ZKHUH D SODQ SURYLGHV WKDW D OXPS VXP GLVWULEXWLRQ RI D TXRWHGDWQVXSUD8QGHUWKHDQWLFXWEDFNUXOHWKHULJKWWR VXEVLGL]HGHDUO\UHWLUHPHQWEHQHILWLVDYDLODEOHDVDQRSWLRQ DSUHVHQWYDOXHFDOFXODWLRQPDGHXQGHUWKLVVWDWXWRU\LQWHUHVW WKHVHFWLRQLQWHUHVWUDWHPXVWEHDSSOLHGWRFDOFXODWHWKH UDWHFDSmZLWKUHVSHFWWREHQHILWVDWWULEXWDEOHWRVHUYLFHEHIRUH YDOXH RI WKH GLVWULEXWLRQl  ,G  $QG WKH UHJXODWLRQ VDLG WKHDPHQGPHQWlLVDULJKWWKDWPXVWEHWUHDWHGDVmDFFUXHGlDV &RVWDQWLQRmWUHDWVVXEVLGL]HGEHQHILWVDVLIWKH\ZHUHDFFUXHG ORQJ DV WKH DPHQGPHQW KDV WKH HIIHFW RI mHOLPLQDWLQJ RU EHQHILWVlIRUWKHSXUSRVHRImOLPLWLQJDQHPSOR\HUjVDELOLW\WR UHGXFLQJ DQ HDUO\ UHWLUHPHQW EHQHILW RU D UHWLUHPHQWW\SH GLVWULEXWHEHQHILWVZLWKRXWDSSURSULDWHO\FDOFXODWLQJWKHYDOXH VXEVLG\l(5,6$†JTXRWHGDWQVXSUD$QG RIDQ\VXEVLGLHVl,G EHFDXVHVXFKDULJKWPXVWEHWUHDWHGDVKDYLQJDFFUXHGLQVRIDU DVLWLVDWWULEXWDEOHWRVHUYLFHEHIRUHWKHSODQDPHQGPHQWLWLV 7XUQLQJWRWKHFDVHDWEDUZHQRWHWKDWSODLQWLII5LFKDUG WR WKDW H[WHQW SURWHFWHG E\ WKH SURKLELWLRQ FRQWDLQHG LQ 5\EDUF]\N UHSUHVHQWV D FODVV RI 75: UHWLUHHV ZKR UHWLUHG †J m7KHDFFUXHGEHQHILWRIDSDUWLFLSDQWXQGHUD EHWZHHQ 2FWREHU   DQG sXO\    3ODLQWLIIV SODQPD\QRWEHGHFUHDVHGE\DQDPHQGPHQWRIWKHSODQl 0LQRUX0L]XEDDQG:LOOLDP5LWWHQKRXVHUHSUHVHQWDFODVVRI 7KDWLVZKDWWKHVWDWXWHFOHDUO\VD\VDQGWKDWLVFOHDUO\WKH UHWLUHHV ZKR UHWLUHG EHWZHHQ sDQXDU\   DQG sXO\  ORJLFRIRXUGHFLVLRQLQ&RVWDQWLQR 7KHWZRFODVVHVKDYHEHHQPHUJHGIRUSXUSRVHVRIWKH ODZVXLW$OOPHPEHUVRIWKHPHUJHGFODVVKDYHUHFHLYHGOXPS VXPGLVWULEXWLRQVRIPRUHWKDQ  2QH RI WKH FRQVLGHUDWLRQV WKDW OHG WR WKH HQDFWPHQW RI (5,6$ LV 7KHPHPEHUVRIWKLVFODVVZHUHEHQHILFLDULHVRIFHUWDLQSODQ GHVFULEHG LQ WKHVH WHUPV mGHVSLWH WKH HQRUPRXV JURZWK LQ VXFK >UHWLUHPHQW@ SODQV>@ PDQ\ HPSOR\HHV ZLWK ORQJ \HDUV RI HPSOR\PHQW DUH DPHQGPHQWVDGRSWHGE\75:RQ2FWUHWURDFWLYH ORVLQJ DQWLFLSDWHG UHWLUHPHQW EHQHILWV RZLQJ WR WKH ODFN RI YHVWLQJ WRsDQ,QVRIDUDVOXPSVXPSD\PHQWVRIPRUHWKDQ SURYLVLRQV LQ VXFK SODQV    l ,G  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

 ZHUH FRQFHUQHG WKH  DPHQGPHQWV FDOOHG IRU UHJXODWLRQV WKDW FDQ IDLUO\ EH VDLG WR PDNH VXFK D ERQXV DOWHUQDWLYH FDOFXODWLRQV  WKH 0RRG\jV $DD UDWH ZDV WR EH SUREOHPDWLFLQDQ\ZD\ DSSOLHG WR WKHVXEVLGL]HG HDUO\ UHWLUHPHQW EHQHILW DQG  SHUFHQW RI WKH 3%*& UDWH ZDV WR EH DSSOLHG WR WKH 8QOHVVZHLJQRUHWKHDQWLFXWEDFNUXOHHPERGLHGLQ(5,6$ XQVXEVLGL]HGHDUO\UHWLUHPHQWEHQHILWZLWKWKHDPRXQWRIWKH † J KRZHYHU WKH  SODQ DPHQGPHQWV ZRXOG EH OXPSVXPSD\PHQWEHLQJGHWHUPLQHGXQGHUWKHFDOFXODWLRQ KLJKO\SUREOHPDWLFWRWKHH[WHQWWKH\HOLPLQDWHGWKHSURVSHFW WKDW ZRXOG JLYH WKH HPSOR\HH WKH ODUJHU EHQHILW RIHDUO\UHWLUHPHQWOXPSVXPSD\PHQWVFDOFXODWHGRQWKHEDVLV 1RWZLWKVWDQGLQJ WKDW WKH  DPHQGPHQWV \LHOGHG PRUH RI VXEVLGL]HG DQQXLW\ EHQHILWV DWWULEXWDEOH WR VHUYLFH JHQHURXVOXPSVXPSD\PHQWVWKDQWKRVHSURYLGHGIRUE\WKH SHUIRUPHGEHIRUHWKHGDWH'HFHPEHURQZKLFKWKH YHUVLRQ RI WKH SODQ LQ HIIHFW SULRU WR WKH DPHQGPHQWV WKH DPHQGPHQWVZHUHDGRSWHG7KHDQWLFXWEDFNUXOHZKLFKLV SODLQWLIIV FRQWHQG WKDW XVH RI WKH 0RRG\jV UDWH XQGHU DQ\ TXRWHGLQQRWHVXSUDFOHDUO\EDUUHG75:IURPDPHQGLQJ FLUFXPVWDQFHYLRODWHVWKHUHOHYDQWSURYLVLRQVRI(5,6$DQG LWVUHWLUHPHQWSODQLQVXFKDZD\DVWRUHGXFHDFFUXHGHDUO\ WKH,5& UHWLUHPHQW EHQHILWV mDWWULEXWDEOH WR VHUYLFH EHIRUH WKH DPHQGPHQW    l  0RVW RU DOO RI WKH UHWLUHHV LQ WKH FODVV ,QJUDQWLQJVXPPDU\MXGJPHQWWRWKHSODLQWLIIVWKHGLVWULFW EHIRUHXVKHUHPXVWKDYHKDGZKDWZRXOGDPRXQWWRDPL[RI FRXUWUHOLHGRQWKHGRFWULQHRIFROODWHUDOHVWRSSHO&RVWDQWLQR DFFUXHGHDUO\UHWLUHPHQWEHQHILWVZLWKSDUWEHLQJDWWULEXWDEOH VDLGWKHGLVWULFWFRXUWKDGmFOHDUO\KHOGWKDW†DSSOLHV WR VHUYLFH UHQGHUHG EHIRUH WKH SODQ ZDV DPHQGHG RQ ZKHQHYHUDSODQFDOFXODWHVWKHSUHVHQWYDOXHRIVXEVLGL]HG 'HFHPEHU   DQG SDUW EHLQJ DWWULEXWDEOH WR VHUYLFH EHQHILWVl5\EDUF]\NY75:,QF86'LVW/(;,6 UHQGHUHGDIWHUWKDWGDWH$OWKRXJKQRWKLQJLQ(5,6$†J DW 1'2KLR7KHUHIRUHWKHGLVWULFWFRXUW SUHYHQWHG75:IURPUHGXFLQJEHQHILWVDWWULEXWDEOHWRSRVW FRQFOXGHG 75: FRXOG mQR ORQJHU DVVHUW   WKDW WKH ODZ 'HFHPEHU  VHUYLFH DFFUXHG EHQHILWV DWWULEXWDEOH WR SUH DOORZVLWWRFDOFXODWHWKHSUHVHQWYDOXHRIDVXEVLGL]HGEHQHILW 'HFHPEHUVHUYLFHKDGWRUHPDLQLQYLRODWH$QGXQGHU ZLWKRXW XVLQJ WKH †  UDWH  75: UDLVHG WKHVH YHU\ † J EHQHILWV DWWULEXWDEOH WR SUH'HFHPEHU  VHUYLFH UHPDLQ LQYLRODWH ZKHWKHU WKH DJH FRQGLWLRQ EH VDWLVILHG mEHIRUHRUDIWHUWKHDPHQGPHQWl  7KH SODQ UHWDLQHG WKH GLVWLQFWLRQ EHWZHHQ \HDUV  DQG  IRU ZKLFK WKH 3%*& UDWH ZDV VHW DW WKH EHJLQQLQJ RI WKH FDOHQGDU \HDU DQG $VPHQWLRQHGLQQVXSUD0U5\EDUF]\NUDLVHGWKLVLVVXH \HDUV  DQG  IRU ZKLFK WKH 3%*& UDWH ZDV VHW DW WKH PRQWK RI LQSDUDJUDSKRIKLVFODVVDFWLRQFRPSODLQW3DUDJUDSK GLVWULEXWLRQ UHDGVDVIROORZV  7KH SODLQWLIIV SHUVLVWHQWO\ FKDUDFWHUL]H WKHLU FODLPV DV DOOHJLQJ m75:jV3ODQYLRODWHVWKHDQWLFXWEDFNSURYLVLRQVRI YLRODWLRQV RI WKH ,5& HJ  86& † H  7HFKQLFDOO\ YLRODWLRQV (5,6$ DQG WKH &RGH DQG SURYLGHV ORZHU OXPS VXP RI WKH &RGH PHUHO\ UHVXOW LQ WKH ORVV RI SUHIHUUHG WD[ WUHDWPHQW LQFOXGLQJ WKH HPSOR\HUjV GHGXFWLRQ IRU FRQWULEXWLRQV XQGHU ,5& † D DQG WKH GLVWULEXWLRQVWR3ODQSDUWLFLSDQWVWKDQWKH\DUHSURSHUO\ HPSOR\HHVj WD[ GHIHUUDO XQGHU ,5& † D %HFDXVH (5,6$ HQWLWOHG WR UHFHLYH ZKHQ LW DSSOLHV WKH SUHVHQW YDOXH SURYLVLRQV DUH GHOLEHUDWHO\ GHVLJQHG WR SDUDOOHO WKRVH RI WKH ,5& FDOFXODWLRQ WR DQ LPSHUPLVVLEOH EHQHILW H[FOXGLQJ WKH KRZHYHU ZH VKDOO WUHDW WKH SODLQWLIIVj FODLPV DV DULVLQJ XQGHU (5,6$ DQG HDUO\UHWLUHPHQWVXEVLG\QRWZLWKVWDQGLQJWKHIDFWWKDWWKH DV EURXJKW SXUVXDQW WR (5,6$jV ULJKWRIDFWLRQ SURYLVLRQ  86& FDOFXODWLRQXVHVWKHSHUPLVVLEOHLQWHUHVWUDWHl †  6HH &RXQWV Y .RVVDFN :DWHU 2LO 6HUY ,QF   )G   Q WK &LU  :H DOVR QRWH WKDW (5,6$ SURYLGHV WKDW UHJXODWLRQV SURPXOJDWHG E\ WKH 7UHDVXU\ 'HSDUWPHQW SXUVXDQW WR ,5& &XULRXVO\ KRZHYHU WKH SODLQWLIIV KDYH IDLOHG WR SUHVV WKLV †† D  DQG  DUH GHHPHG DSSOLFDEOH WR WKH SDUDOOHO SURYLVLRQV SRLQWRQDSSHDO RI (5,6$  86& † F  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

XQVXEVLGL]HG DPRXQW RU WKH 0RRG\jV UDWH DSSOLHG WR D DUJXPHQWV EHIRUH WKH 6L[WK &LUFXLW LQ &RVWDQWLQR DQG WKH VXEVLGL]HGDPRXQW\LHOGVDODUJHUDPRXQWl 6L[WK&LUFXLWUXOHGDJDLQVWLWl,GDW  )LQDOO\75:VWUHVVHVWKDW(5,6$GRHVQRWPDQGDWHDQ\ 7KHGLVWULFWFRXUWDOVRDZDUGHGSUHMXGJPHQWLQWHUHVWWRWKH SDUWLFXODUEHQHILWV6SHFLILFDOO\75:SRLQWVRXWQRWKLQJLQ SODLQWLIIV DW D UDWH GHWHUPLQHG LQ DFFRUGDQFH ZLWK WKH (5,6$ UHTXLUHV WKDW SHQVLRQ SODQV mRIIHU VXEVLGL]HG OXPS IROORZLQJIRUPXOD VXPHDUO\UHWLUHPHQWSD\PHQWVl m>7@KHJUHDWHURIDLQWHUHVWDWDUDWHHTXDOWRWKHFRXSRQ 75:jV DUJXPHQW VHHPV VRXQG DV IDU DV LW JRHV  ,W LV LVVXH\LHOGHTXLYDOHQWDVGHWHUPLQHGE\WKH6HFUHWDU\RI FHUWDLQO\WUXHWKDWXQWLOWKHDPHQGPHQWVOLEHUDOL]HGWKH WKH7UHDVXU\RIWKHDYHUDJHDFFHSWHGDXFWLRQSULFHIRU OXPS VXP EHQHILW FDOFXODWLRQ IRU HDUO\ UHWLUHHV WKH  WKHODVWDXFWLRQRIILIW\WZRZHHN8QLWHG6WDWHV7UHDVXU\ YHUVLRQRIWKHSODQGLGQRWSURYLGHIRUOXPSVXPGLVWULEXWLRQV ELOOVVHWWOHGLPPHGLDWHO\SULRUWRWKHGDWHRIWKHLQLWLDO RIVXEVLGL]HGEHQHILWVWKHRQO\OXPSVXPRQRIIHUWRDQHDUO\ OXPSVXPGLVWULEXWLRQWRWKHFODVVPHPEHUFRPSRXQGHG UHWLUHHXQGHUWKHSODQZDVDVXPEDVHGRQWKHSUHVHQW DQQXDOO\ RU E LQWHUHVW HTXDO WR WKH UDWH RI UHWXUQ YDOXH RI WKH QRUPDO LH XQVXEVLGL]HG UHWLUHPHQW DQQXLW\ DFWXDOO\ HDUQHG RQ WKH SULQFLSDO DPRXQW RI WKH EHQHILW  $QG VHWWLQJ DVLGH WKH DQWLFXWEDFN UXOH IRU WKH XQGHUSD\PHQW GXULQJ WKH SUHMXGJPHQW SHULRGl PRPHQW ZH VHH DEVROXWHO\ QRWKLQJ ZURQJ LQ WKLV  7KH 5\EDUF]\N86'LVW/(;,6DW   DSSOLFDEOH 7UHDVXU\ 'HSDUWPHQW UHJXODWLRQV VD\ XQDPELJXRXVO\WKDW ,Q WKH SUHVHQW DSSHDO 75: FKDOOHQJHV ERWK WKH GLVWULFW FRXUWjVXVHRIFROODWHUDOHVWRSSHODQGWKHFRXUWjVSUHMXGJPHQW mLI D SODQ WKDW SURYLGHV D VXEVLGL]HG HDUO\ UHWLUHPHQW LQWHUHVWUDWHIRUPXOD DQQXLW\EHQHILWVSHFLILHVWKDWWKHVLQJOHVXPGLVWULEXWLRQ EHQHILW DYDLODEOH DW HDUO\ UHWLUHPHQW DJH LVWKH SUHVHQW ,, YDOXHRIWKHQRUPDOUHWLUHPHQWDQQXLW\EHQHILWWKHQWKH QRUPDOUHWLUHPHQWDQQXLW\EHQHILWLVXVHGWRDSSO\WKH $ YDOXDWLRQUHTXLUHPHQWVRIWKLVVHFWLRQDQGWKHUHVXOWLQJ DPRXQWRIWKHVLQJOHVXPGLVWULEXWLRQDYDLODEOHDWHDUO\ 7KH GRFWULQH RI FROODWHUDO HVWRSSHO DV WKH GLVWULFW FRXUW UHWLUHPHQWDJHl&)5†DD HPSKDVLV H[SODLQHGSUHFOXGHVDSDUW\IURPUHOLWLJDWLQJLVVXHVUHVROYHG VXSSOLHG DJDLQVWWKDWSDUW\LQDSULRUSURFHHGLQJ6HH3DUNODQH+RVLHU\ &R,QFY6KRUH86,IWKHEHQHILW :LWKWKHOLEHUDOL]DWLRQRIWKHEHQHILWFDOFXODWLRQIRUPXODLQ RI WKH FROODWHUDO HVWRSSHO GRFWULQH LV WR EH FODLPHG  RI FRXUVH WKH SODQ LQWURGXFHG D SRVVLELOLW\ WKDW WKH VXFFHVVIXOO\ VXEVLGL]HGHDUO\UHWLUHPHQWDQQXLW\EHQHILWZRXOGSOD\DUROH LQWKHFDOFXODWLRQ%XWVXFKXVHRIWKHVXEVLGL]HGEHQHILWZDV mWKHSUHFLVHLVVXHUDLVHGLQWKHSUHVHQWFDVHPXVWKDYH SUHVFULEHGRQO\ZKHUHDSSOLFDWLRQRIWKH0RRG\jVUDWHWRWKDW EHHQUDLVHGDQGDFWXDOO\OLWLJDWHGLQWKHSULRUSURFHHGLQJ EHQHILW\LHOGHGDODUJHUOXPSVXPWKDQWKHUHWLUHHZRXOGKDYH UHFHLYHG XQGHU WKH  HGLWLRQ RI WKH SODQ LQ ZKLFK WKH GHWHUPLQDWLRQRIWKHLVVXHPXVWKDYHEHHQQHFHVVDU\ †UDWHKDGWREHDSSOLHGWRWKHXQVXEVLGL]HGUHWLUHPHQW WRWKHRXWFRPHRIWKHSULRUSURFHHGLQJ DQQXLW\EHQHILW7KHDPHQGPHQWVPHUHO\SURYLGHGIRU  WKH SULRU SURFHHGLQJ PXVW KDYH UHVXOWHG LQ D ILQDO WKHSRVVLELOLW\RIVRPHLFLQJRQWKHHDUO\UHWLUHPHQWFDNHo MXGJPHQWRQWKHPHULWVDQG DQG ZH DUH DZDUH RI QRWKLQJ LQ (5,6$ WKH &RGH RU WKH  5\EDUF]\NHWDOY75:HWDO 1R 1R 5\EDUF]\NHWDOY75:HWDO 

WKHSDUW\DJDLQVWZKRPHVWRSSHOLVVRXJKWPXVWKDYH % KDGIXOODQGIDLURSSRUWXQLW\WROLWLJDWHWKHLVVXHLQWKH SULRU SURFHHGLQJl  8QLWHG 6WDWHV Y 6DQGR] 7KHLQDSSOLFDELOLW\RIFROODWHUDOHVWRSSHOGRHVQRWPHDQWKDW 3KDUPDFHXWLFDOV&RUS)GWK&LU 75:DXWRPDWLFDOO\ZLQV:HPXVWVWLOOH[DPLQHWKHSDUWLHVj  DUJXPHQWV LQ OLJKW RI WKH &RVWDQWLQR GHFLVLRQ ZKLFK KDV SUHFHGHQWLDOHIIHFWXQGHUWKHGRFWULQHRIVWDUHGHFLVLVDQGWKH 7KHILUVWRIWKHVHUHTXLUHPHQWVDVZHVHHLWKDVQRWEHHQ UHOHYDQWIHGHUDOODZDQGUHJXODWLRQV PHWLQWKHFDVHDWEDU75:DVVHUWHGLQ&RVWDQWLQRWKDWWKH UHJXODWLRQV GLG QRW UHTXLUH XVH RI WKH †  UDWH IRU 7KHSODLQWLIIVPDNHPXFKRIWKHVWDWHPHQWLQ&RVWDQWLQR VXEVLGL]HG EHQHILWV XQGHU WKH  SODQ DPHQGPHQWV WKDW&)5†DD mH[SUHVVO\UHTXLUHVWKDW LQDVPXFKDVDGRSWLRQRIWKHDPHQGPHQWVPHDQWWKDWWKHSODQ ZKHUH D SODQ SURYLGHV WKDW D OXPS VXP GLVWULEXWLRQ RI D GLG QRW RIIHU D VXEVLGL]HG OXPS VXP DV DQ RSWLRQ  7KH VXEVLGL]HGHDUO\UHWLUHPHQWEHQHILWLVDYDLODEOHDVDQRSWLRQ &RVWDQWLQRFRXUWUHVSRQGHGWKDWZKLOH75:jVDVVHUWLRQmPD\ WKHVHFWLRQLQWHUHVWUDWHPXVWEHDSSOLHGWRFDOFXODWHWKH EH WUXH LW LV QRW UHOHYDQW LQ WKH SUHVHQW FDVH LQ ZKLFK YDOXHRIWKHGLVWULEXWLRQl&RVWDQWLQR)GDW75:jV 3ODLQWLIIVTXDOLILHGIRUWKHLUVXEVLGLHVSULRUWRWKHSODQ UHVSRQVHLVWKDWWKHSODQGRHVQRWRIIHUDQRSWLRQRIDmOXPS DPHQGPHQWl&RVWDQWLQR)GDW,QWKHFDVHDWEDU VXP GLVWULEXWLRQ RI D VXEVLGL]HG HDUO\ UHWLUHPHQW EHQHILWl KRZHYHUWKHSODLQWLIIFODVVLVSUHVXPDEO\PDGHXSODUJHO\LI %HIRUHWKHDPHQGPHQWVUDWKHUWKHSODQRIIHUHGDOXPS QRWHQWLUHO\RISHRSOHZKRGLGQRWWDNHHDUO\UHWLUHPHQWXQWLO VXPGLVWULEXWLRQRIWKHXQVXEVLGL]HGEHQHILWFDOFXODWHGZLWK DIWHUWKHDPHQGPHQWV7KLVFODVVWKXVLQFOXGHVUHWLUHHV WKH3%*&UDWHoDQGWKHDPHQGPHQWVPHUHO\DGGHGDQ ZKRDVVHUWWKDWWKH\TXDOLILHGIRUVXEVLGLHVDWOHDVWSDUWLDOO\RQ DOWHUQDWH FDOFXODWLRQ PHWKRG LQ ZKLFK WKH 0RRG\jV UDWH LV WKHVWUHQJWKRIVHUYLFHSHUIRUPHGDIWHUWKHDPHQGPHQWV DSSOLHG WR WKH VXEVLGL]HG OHYHO RI EHQHILW  7KLV DOWHUQDWH 7R WKDW H[WHQW REYLRXVO\ WKLV FDVH GRHV QRW LQYROYH WKH FDOFXODWLRQLQ75:jVVXEPLVVLRQGRHVQRWFUHDWHDVWDQG mSUHFLVHLVVXHlGHFLGHGLQ&RVWDQWLQR DORQH RSWLRQ RI D OXPS VXP GLVWULEXWLRQ RI WKH VXEVLGL]HG EHQHILW  7KH RSWLRQ HQWDLOV WKH HOHFWLRQ RI D OXPS VXP ,Q&RVWDQWLQRPRUHRYHUQRWKLQJPXFKWXUQHGRQWKH GLVWULEXWLRQSHUVHDQGRQO\DIWHUWKHOXPSVXPGLVWULEXWLRQ DPHQGPHQWV,QWKHSUHVHQWFDVHE\FRQWUDVWWKHSODLQWLIIV LV VHOHFWHG GRHV WKH SODQ SUHVHQW DOWHUQDWLYH FDOFXODWLRQ FRQFHQWUDWH PRVW LI QRW DOO RI WKHLU ILUH RQ WKH  PHWKRGV DPHQGPHQWV7KDWEHLQJVRZHDUHQRWSHUVXDGHGWKDWWKH SODLQWLIIV DUH HQWLWOHG WR DYDLO WKHPVHOYHV RI WKH FROODWHUDO 75:IXUWKHUSRLQWVWRWKLVFRXUWjVGHILQLWLRQRImRSWLRQDO HVWRSSHOGRFWULQH IRUP RI EHQHILWl LQ 5RVV Y 3HQVLRQ 3ODQ IRU +RXUO\ (PSOR\HHVRI6.),QGXV)GWK&LUDV PHDQLQJ D EHQHILW WKDW mLQYROYHV WKH SRZHU RU ULJKW RI DQ HPSOR\HHWRFKRRVHWKHZD\LQZKLFKSD\PHQWVGXHWRKLP XQGHU D SODQ ZLOO EH PDGH RU DSSOLHGl ,G DW   75: DUJXHVWKDWWKHSODLQWLIIVGRQRWKDYHWKHmSRZHURUULJKWlWR  FKRRVH D VXEVLGL]HG OXPS VXP IRU SD\PHQW RQFH D JLYHQ :H QRWH WKDW 75: DWWHPSWV WR GUDZ D GLVWLQFWLRQ EHWZHHQ UHWLUHHKDVFKRVHQDOXPSVXPGLVWULEXWLRQUDWKHUWKHSODQ &RVWDQWLQR DQG WKLV FDVH RQ WKH JURXQG WKDW &RVWDQWLQR LQYROYHG mDXWRPDWLFDOO\GHWHUPLQHVWKHSD\PHQWDPRXQWEDVHGVROHO\ (5,6$jV DQWLFXWEDFN UXOH ZKLOH KHUH WKH SODLQWLIIV mGR QRW HYHQ LQYRNH WKRVH SURYLVLRQVl 0U 5\EDUF]\N GLG LQYRNH (5,6$jV DQWLFXWEDFN UXOH XSRQZKHWKHUWKH6HFWLRQUDWHDSSOLHGWRWKHVWDQGDUG LQ ˆ  RI KLV FODVV DFWLRQ FRPSODLQW KRZHYHU VR WKLV GLVWLQFWLRQ ZLOO QRW ZDVK