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The Lending Limit Exerciseprepared byHowell E. JacksonProfessor of LawHarvard Law School&Elizabeth R. SchiltzAssociate Professor of LawNotre Dame Law Schoolfor use in connection withHowell E Jackson & Edward L. Symons, Jr. Regulation of FinancialInstitutions (1999)Professor and students are authorized to make copies of this exercise for use inconnection with their own courses. No other reproduction is authorized without the expressconsent of Professors Jackson and Schiltz.1HAYS & BROWN, P.C.Suite 2000180 Greenwich StreetMeridian, Ames 55555MEMORANDUMTo: Incoming AssociateFrom: Nancy I. KimbleRe: Meridian National Bank Loan to Zenith Resorts CorporationDate: October 20, 1998 Welcome to Hays and Brown.Your first assignment is to draft an opinion letter as to theamount that Meridian National Bank may loan to Zenith ResortsCorporation. Meridian National Bank is a new client of the firm,and while this first matter is relatively simple, we hope tocultivate Meridian National Bank into a major client of the firm.Thus, I will appreciate your extra effort on this assignment.I am forwarding to you the file on this loan in which youshould find everything necessary to draft the opinion letter. Asyou will see when you review the attached materials, WilliamColeman, a former associate at this firm, has already done aconsiderable amount of research on this project. In the course ofthat research, William uncovered another Meridian loan, one to theMile High Development Company, that may bear on your analysis. Asa result of William’s research, John Nader has also asked us toinclude in our opinion a quick review of the Mile High loan, asoriginally underwritten. Accordingly, our opinion should bedrafted to address both transactions. William has pulled togetherthe relevant statutes, regulations and agency interpretations,which are appended to the attached file. Before he left, Williammentioned to me that some of the statutes and regulations have beenamended in past couple of years, so some of the cites in the agencyinterpretations do not match the current statutes or regulations.2However, the agency interpretations still represent the currentpositions of the agencies. Since you probably have not worked on an opinion letter ofthis sort before, I am also sending along assorted backgroundmaterials, including a few sample opinion letters from other areasof the law to give you an idea of how to draft the letter. Don’tspend too much time worrying about the content of those otherletters. Instead, focus on drafting an opinion applying thefederal banking laws and regulations to the facts detailed in thefile.The deadline on this project is, I’m afraid, fairly tight. Weneed to get a final opinion to Meridian’s Board of Directors bynext Tuesday, October 27th, so they will be in a position toapprove the transaction at their next meeting. Unfortunately, Iwill be out of town at the ABA convention in Honolulu for theentire week, and you won’t be able to reach me. Just do the bestyou can, and make sure you get your draft on my desk by 10:00 a.m.Tuesday morning.Good luck.enclosuresNIK/jeList of EnclosuresLetter from John H. Nader to Nancy Kimble (October 7,1998) (balance sheet attached)Memorandum from Walter H. Coleman to Nancy Kimble (October 16,1998)Letter from John H. Nader to Nancy Kimble (October 19, 1998)Appendices:I. Compilation of Statutory and Regulatory SourcesA. 12 U.S.C.S. § 84 and Associated Regulations andInterpretations1. 12 U.S.C. § 842. 12 C.F.R. Part 323. OCC Preamble to Revised Part 32, 60 Fed. Reg.3526 (Feb. 15, 1995)4. OCC Int. Ltr. 400 (Nov. 9, 1987)5. OCC No. Obj. Ltr. 88-3 (March 29, 1988)B. 12 U.S.C.S. §§ 375a, 375b and AssociatedRegulations and Interpretation1. 12 U.S.C. § 375a2. 12 U.S.C. § 375b3. 12 C.F.R. Part 215 (“Reg O”)4. 12 C.F.R. Part 315. OCC Int. Ltr. 166 (Oct. 8, 1980) C. 12 U.S.C.S. §§ 371c, 371c-1II. Background Material on Partnership Law -- Claire M.Dickerson, Partnership Law Advisor, § 5.2, at 151-69(1991)III. Background Materials on Opinion LettersA. Stanley J. Friedman, “The Formal Opinion Letter,”in Legal Opinion and Accountant Certification 18-24& Appendix B (1975) (PLI corporate Law & PracticesCourse Handbook Series, No. 166, vol. 1).B. Excerpt from Preliminary Prospectus for NeozymeCorporation and Genzyme Corporation 45-47 (Aug. 13,1990) (summarizing legal opinion).1October 7, 1998Ms. Nancy Kimble, Esq.Hays & Brown, P.C.Suite 2000180 Greenwich StreetMeridian, Ames 55555Dear Ms. Kimble:As I mentioned during our telephone conversation of October 5, Meridian National Bank(“Meridian”) is seeking a new law firm to represent the bank in connection with certain regulatoryissues. You and your firm come highly recommended as federal banking law experts, and I lookforward to working with you in the years ahead. As an initial matter, I am writing to request, onbehalf of Meridian, a legal opinion from your firm as to the size of loan that Meridian may extend toZenith Resorts Corporation (“Zenith”) at this time.Over the years, Meridian and Zenith have worked together on a number of real estatedevelopment projects. At the present time, Meridian’s relationship is limited to a relatively modestrole in financing the firm’s construction of the Apex Hotel and Ski Resort. Meridian holds a $2million participation in a syndicated loan to Zenith for that project. Meridian also has outstandinga $500,000 standby letter of credit issued on Zenith’s account in favor of Acme Window Corporation,a major supplier for the Apex Hotel. In addition, Meridian has a binding loan commitment to Zenithof $8 million for cost overruns, but Zenith has yet to make any draws on that commitment.Recently, we have been looking to expand our relationship with Zenith, and it now appearsthat such an opportunity has presented itself in the form of Zenith’s newest project, the Crown Plaza,a hotel and retail complex to be located in downtown Meridian. Construction costs for the CrownPlaza are currently projected to be $45 million. Zenith’s management has indicated that they wouldprefer to obtain the bulk of their $45 million financing needs from a single lender. As I am sure youwill appreciate, Meridian would very much like to serve as lead lender for this project. Our lendingofficers and in-house legal staff are currently working on a financing proposal for the project, alongwith the standard supporting loan documentation. Where we need your help is in


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