Expanded Reliance on Third-Party Legal Opinions in Delaware Corp. Transactions, Schemes and Mind Maps of Law

Download Expanded Reliance on Third-Party Legal Opinions in Delaware Corp. Transactions and more Schemes and Mind Maps Law in PDF only on Docsity! SUPPLEMENT TO REPORT OF THE LEGAL OPINION COMMITTEE OF THE BUSINESS LAW SECTION OF TIIE NORTII CAROLINA BAR ASSOCIATION TIIIRD.PARTY LEGAL OPINIONS IN BUSTNESS TRANSACTIONS, SECOND EDITION Co-Chair Christopher B. Capel Raleigh, North Carolina Co-Choir Kerureth M. Greene Greensboro, North Carolina Co-Chair Richard K. Schell Charlotte, North Carolina Committee Members A. Mark Adcock Sean M, Jones Charlotte, North Carolina Charlotte, North Carolina Diana S. Allen Christopher E. Leon Durham, North Carolina Winston-Salem, North Carolina David L. Batty John R. Miller Charlotte, North Carolina Charlotte, North Carolina Mark T. Cain Alfred L. Purrington, III Greensboro, North Carolina Greensboro, North Carolina James L. S. Cobb Manley W. Roberts Raleigh, North Carolina C-harlotte" North Carolina William B. Gwyn, Jr. Raleigh, North Carolina SUPPLEMENT TO RIIPORT OF THE LEGAL OPINION COMMIT'I'EE OF TIIE BUSINESS LAW SECTION OF THE NOR'TII CAROI,INA BAR ASSOCIATION TFIIRD-PARTY LEGAL OPINIONS IN BUSINESS TRANSACTIONS, SECOND EDITION INTRODUCTION 'l'his Supplement to the Reporl on Tbird-Party Legal Opinions in Business'I'ransactions, Second Edition (this "Supplcmcnt") was prepared by the Legal Opinion Committee (the "Comrnittee") of the Business Law Section of the North Caroiina Bar Association. The Business Law Section formed the Committee in late 1994, and in January 1999 the Committee issued its jnitial Reporl on Third-Party Legal Opinions in Business Transactions (the "1999 Report"). Tn 2002, the Business Law Section reconstituted the Committee to reexarnjne the 1999 Reporl and up<late it as necessary. 'I'he Comrnittee determined that the most useful form of an update was a new edition of the 1999 Report, and in March 2004 the Committee issued the Report on Third-Party Legal Opinions in Business Transactions, Second Edition (the '?004 Report").' ln the Fall of 2007, the Business Law Section again reconstituted the Comrnittee and requested thai it reexamine the 2004 Report and update it as appropriate to serve the practicing bar in North Carolina. As with its prior compositions, the Committee included North Carolina lawyers with considerable xperience in busine.ss transactions and in rendering and receiving legal opinions. It included lawyers who were involved in both the 1999 Report and the 2004 Reporl. After examining the 2004 Repofi, the Comminee determined that the most useful form of an uptlate was a supplement o the 2004 Repoft rather than a new, third edition. The Committee submitted this Supplement to tlre Business Law Section Council, and the Council approved and endorsed it in February 2009. As was the case with the 2004 Report, this Supplcment does not necessarily reflect the views of any law firm, institution or individual practitioner, including individual members of thc Committee. ' All capitahzed temu and abbreviatiorrs used in ascribed thereto in the Glossary of 1'errns set forth in $ this Supplenrcnt witlrout delinition shall have lhe nreattitrgs | 0 of tlie 2004 Report, I SEC'IION 2.2. TH.f. ADDR.ESSEE OF THE OPINION $ 2.2 Addressee. ln geneml, a lawyer owes a duty of carc nol only to the addressee of an opinion ietter but to other nonclients whom "the lawyer or (with the lawyer's acquiescence) the lawyer's client invitcs...to rcly''on the opinion so long as the nonclient does in fact rely and "is not, under applicable tofi law, too rernote from the lawver to be entitled to protection."T Consequently, it is important from the standpoint of the opinion giver that the addressees be specifically named - if not individually, at leasl by a dcscription of a group whose membcrs can be ascertained (such as "the Underwriters named in Schedule I to the Underwriting Agrecmcnt"). To make it clear who may rely on an opinion letter, and for what purposes, the opinion giver often expressly prohibits reliance by anyone other than the addressee for any purpose, and prohibits rcliance by the addressee for any purpose other than the transaction with respect to which the opinion is rcndcred.t Given the extensive body of case law concerning who may rely uporr opinions and reports of professionals in other fielcJs, especially accounlants, the Comrnitlee recommends, that opinion letters include an express statement limiting reliance and use of the opinion letter, such as the following: This opinion letter is delivered solely for your benefit in connection with the Transaction and may not be used or relied upon by any other person or for any other purpose without our prior written consent in each instance. The principal exception to this limitationo on reliance has been in syndicated loan transactions (as well as other transactions in which assignment is contemplated, such as securitizations) where the opinion recipient often requests that successors and assigns (i.a., fuhrre membcrs of the syndicate) be permitted to rely on the opinion letter as well, to the same extent as the addressee. Although historically many opinion givers have been willing to allow successors and assigns of the addressee to rely on an opinion letter rendered in connection with a syndicated loan transaction, over thc last several years some firms have resisted requests to allow such reliance, The principal leasons for suclr resistance include: ' GLAZER $ 2.3.2, quotins RESTA'TEMENT OF LAW GOVERNING LAWYERS $ 51, t Id. n Oth"t corrunon sitrrations in whjch the opinion givcr may expressly pcr-mit persons othcr than the addressee to rely on the opinion are when (i) counsel for the opinion recipient needs to rely on the opinion in comection with such corrnscl's own opinion that is beirg rendered as part of the same kansaction, and (ii) a lender providing acquisition financing to a company that is acquiring arrolher company requests that the lender be pernrined to lcly, ftrr the pr.rposes of thc loan bansuction, on the opinion dclivered by sellcr's counsel to the buyer in corurection with the acquisition. In those instances, the statemeut limiting reliance will typically be nrodified to add thc pluase "exccpt that [r'rame of law frrnrl may rely on dris opinion letter in connection with ils opimon letter of even date bcrng dclivcred to in connection with thc Transaction" or "exccpt that lhe Lcndcl rnay rely on this opiniorr lefter in connection with the lransaction.s contemplated by the Agreenrcnt ". A perception that problem loans arc likely to be assigned to so-called "vtrlture funds" that are rnore likely than traditional lcnders to view the opinion giver as a deep pocket and to make a claim on the opinion giver in an attempt to recover a portion of the defaulted loan amount. The possibility of multiple claims being made by syndicate members, requiring the opinion giver to negotiate with a number of different claimants and making it difficult to resolve claims expeditiously or with finality, since settling with one claimant wollld not prevent another syndicate member from bringing a later claim. . A concem that successol's and assigns rnay not appreciate the limitations on tire opinion letter (to which the addressee is also subject), that the opinion may be deemed to be re-issuecl as of the date the new syndicate member acquires its interest in the loan, or tlr.at portions of the opinion could differ depending on the status of the new syndicate nrember (such as whether there is an applicable exemption from usury larvs).'o . The possibility of claims in unexpected and distant jurisdictions and unccrtainty as to the governing law. Syndicated lenders have nonetheless generally insisted that the opinion letter permit successors and assigns to rely on the opinion, arguing that failure to authorizc such reliance hinders the loan syndication, and that ftlture syndicate members must be allowed to rely on the opinion to the same extent as the original lenders. The Loan Syrdications and Trading Association, a not-for-profit organizatjon that promotes the development of an efficient trading market for corporate loans and other similar private debt, rcquires administrativc agents in syndicated loan transactions to "request, on behalf of the lenders, that the borrower's counsel's legal opinion permit reliance by assignees."" Section 1.7 of the ABA Guidelines acldresses, in part, the concerns of opinion givers with respect to reliance by successors turd assigns- Section 1.7 provides as follows: 1.7 Rel iance An opinion giver is entitled to assume, withoirt so stating, that in relying on a closing opinion the opinion recipient (alone or with its courrsel) is familiar wilh customary practice conccming the preparation and interpretation of closing opinions. On occasion, a closing opinion cxpressly authorizes persons to whom it is not addressed (for example, assignees of notes) to rely on it. 'l'hose persons are r0 "special J<-rint Conrnrittee of the Maryland State Bar Association and the Bar Association of Baltimore City," ,f 5 B[JS. LAW. 720 ( r 990). " LS?7 Pntnary Market ond Agtznr h'ansfer Prouices (May 2005), Ren'ieved February 9, 2009, Ii'om http ;//www. lsla.or gl . pemitted to rely on the closing opinion to the same cxtent as - but to no greater extent than - the addressee. Opinion givers who permit their opinions to bc relied upon by third parlies, consistent with cr.rstomary practice as articulated in Section 1.7 of the ABA Guidelines, often do so by including language to the following effect: This opinion letter is delivered solely for your benefit, and that of your successors and permitted assigns, in connection with the Transaction and may not be used or relied upon by any other person or for any other purpose without our prior written consent in eacb instance. On the other hand, some opinion givers prefer to state with more specificity the lirnitations on reliance implicit under such customary practice. A formulation that has gained wide-spread acceptance'? reads as follows: At your request, we bereby consent to reliance hereon by any future assignee of your interest in the loans under the Credit Agreement pursuant to an assignment hat is made and consented to in accordance with the express provisions of Section I I of the Credit Agreement, on the condition and understanding that (i) this letter speaks only as of the date hereof, (ii) we have no responsibility or obligation to update this letter, to consider its applicability or correctness to any person other than its addressee(s), or to take into account chauges in law, facts or any other developments of which we may later become aware, and (iii) any such reliance by a future rusignce must be actual and reasonable under the circumstances existing at the time of assignrncnt, including any changes in law, facts or nny other developments known to or reasonably knowable by the assignee at such timc. Occasionally an opinion recipient in a loan transaction will request that purchasers of loan participation interests also be permitted to rcly on the opinion letter. The purchaser of a loan participation interest is not in privity of contract with the borrower, and has no rights except those that are derivative of, and that must be assefled by, the holder of the loan. Moreover, sellcrs of loan participation interests generally make no warranties about the loan documents evidencing or securing the loans or any other aspect of the loan transaction, and the loan participation purchasers acknowledge in the underlying participation agreement hat they are relying solcly upon their own due diligence and invesligation in closing the purchase and sale of the loan participation interest. Given these limitations on the holders of loan particination interests, and the potential risks to opinion givers of allowing such reliance (which risks are exacerbated by the potential number of loan participants), the Committee believes that it is generally inappropriate for an opinion recipient to request hat loan participants be permitted to rcly on the opinion letter. t2 See GLAZF.I{ $ 2.3.1, n.3. SECTION 14. STATEMENT OF NO LITI(;A] ' ION $ 14.0 Standard Formulation. The following is a standard fonnulation of the statcment of no litigation: In addition, we advise you that, we do not represent be Company in any action, suit or proceeding now pending at law or in equity, or by or before any governmental instrumentality or agency or arbitral body, or overtly threatened in writing against the Company by a potential clairnant, that challenges the validity or enforceability of, or seeks to enjoin the performance of, the Transaction Documents [except. . ,1. ao*tr*t*" Nature of Stateme4l!. The statement of no litigation is a statement of fact. "fhe language uscd is intended to reflect that the statement is a confirmation of fact and not a legal opinion which requires legal analyses and conclusions. For that reason, the statement is set forth in a separate, runumbered paragraph and may be offset frorn the rest of the opinion by asterisks. Purpose antl Scone af Statemenl. Typically, an opinion recipient requests the statement of no titigation primarily as additional assurance of the nonexistence of pcnding or threatened litigation. Such a statement is requested of the opinion giver because of the belief that the opinion giver would be involved jn the representation of tire Company in corurection with any legalproceedings to which the Compzrny is a party. C)f course, this premise is questionable in cases where the opinion giver is not the primary outside counsel which regularly handles legal matters (including matters other than the lransaction contemplated by the Transaction Documents) for the Company. In instances where the opinion giver is merely acting as local counsel or is otherwise only engagcd with respect to a limited aspect of the transaction, a no Iitigation confirmation is not appropnate. The scope of the standard fiormulation of the statement of no litigation is limited in fwo ways. First, the staternent of no litigation applies only to litigation matters where the law firm renderilg the closing opinion represents the Company. Second, only litigation affecting the transaction or the validity of the Transaction Documents is covered by the standard formulation of the statement of no litigation A broader form of the statement of no litigation, i.e., a statement as to the absence of any pending or thrcatencd litigation gerrerally against the Conrpany, is sometrmes requested. This request is significantly more expansivc than tlre standard formulation in two ways. First, it covcrs any litigation involving the Company where the law firm rendering the closing opinion is not representing the Company. Second, it covers all l it igation involving the Cornpany - not just litigation affecting the transaction or the validity of the Transaction Documents. As a. b . discrused below, this broadcr form of the statement of no litigation may require rnore extensive due diligence, and nray involve greater risk for the law firm rendet'ing the closing opinion, than the nan'ower, standal'd fonnulation. Because the staternent of no litigation is entirely a factual confirmation and does not involve any legal analysis or professional judgment, it does not add anything to tlre Company's representations and warranties in the Transaction Documents other than additional assurance from the Company's counsel. Accordingly, a law finn rendering a closing opinion and its client should weigh thc costs and benefits of including the statement of' no litigation in the closing opinion. ln the event thal thc law firm rendering the closing opinion and its client conclude that the broadcr form of the statenrent of no litigation is wananted, the following formulation of tlre statement of no litigation tnay be used: In tddition, we advise you that, to our knowledge without Rny independent investigation ( including without limitation any search of court records, the files of tltis firm or the f i les of the Company), there is no action, suit or proceeding now pending at law or in equity, or by or before any governmental instrumental i ty or agency or arbitral body, or overtly threatened in writing against tbe Company by a potential claimant [, except as llisted on the disclosure schedule to thc Agreemcntlfiisted oD an officer's certificate rendered to us in connection with 11. this opinionlIfol lows: The broader scope of this formulatiol of the staternenl of no litigation jr,rstifies the inclusion of a knowledge qualification. Although the TriBar Report states tbat "[tJhe presence or absence of the phrase'to our knowledge'does not change the rneaning of the [no litigation confirmation]" (see TriBar Report $ 6.8), tlie Committee believes that the "to our knowledge" qualilication emphasizes that the statement i.s fact-based and establishes the scope of the incluiry necessary to meet lhe due diligence obligations of the opinion giver. ,See $ 5 of this Report ("Knowledge Qualification").'t As discussed there, the guiding principle underlying the statement and its knowledge qualification is that the benefits associated rvith the statement should outweigh the costs associated with the scope of the required due diligence. c. No Action. Suit or Proceedi;s, et Law or in Erluit-v. The phrase "no action, suit or proceeding at law or in equity" encompasses all legal proceedings regardless of whether the requested relief is of an equitable or legal nature. 1'he larrguage of the statement is 'n Not. that "[a]s a mattcr of customary diligence lhc [no litigatiorr conlurntion] does not requile that the opiniorr giver check coufl or othel public records or revjew the frm's files (axl an exprcss disclainrer to that effect is not ncccssary)." The purpose of the statement is to elicit factr.ral information already knolryri by corrnsel, not factual infomulion that nught be urrovcred by outside research- J'ee TnBar Itepon $ 6.8 Neverthclc.*s, an exprcss statemcnt of the scope of duc diligcncc review is not inappropriate, l 0 l imited to legai proceedings before bodies that can rcnder injunctive relicf or binding results on the parties to such legal proceedirrgs. 'fherefore, a dispute that is the subject of non-binding arbitration or rncdiation would nol be requir-ed to be disclosed. d. Now Pendinq or Overtl-v Threatened Litigatiort The use of tlre phrase "overtly threatened" may be misinterpleted to inciude both oral and written tlu'eats. Although the Committee believes that the phrase "overtly threatened" does not include oral threats, use of the phrase "overlly threatened in rvriting" is advisable to avoid any confrision on this point. This phrase does not include unasserted claims, even if in writing, that might arise from an existing state of facts that are better left to the audit process.2o e. Disclosure Schedule. The broader formulation of the statenrenl of no litigation set forth in paragraph (b) above references a disclosule schedule or officer's certificate to identify the relevant litigation matters. By referencing all such legal proceedings in this manner, the law firm rendering the closing opinion avoids the need to determine the materiality of any pafticular legal proceeding. The disadvantage of the disclosure schedule or oIilcer's certificatc is that it rnay become so extensive as to make the statement cumbersorre. If this occurs, then the opinion recipient and the opinion giver may reduce the list of legal proceedings to tnaterial legal proceedings, provided they can establish objective criteria for legal proceedings that are required to be disclosed. See $ 1 L2.a of this Report ("No Breach or Default Under Other Agreernents-Agreements Covered"). Of course, equitable proceedings do not present readily identifiable, obje,c.tive benchmarks. Therefore, if the approach of full disclosure becomes too cumbersome, there may be compelling reasons not to include the statement of no litisation in the ooinion letter. DUE DILIGENCE The opinion giver generally should: o Request certificates of officers or managers of the Company listing actions, suits or proceedings pending or overtly threatened against he Company;rl to The statenrent of no litigation irr an opinion lcttel shorrlci rrot be conftl-setl with a lesponse to auditor's request hat a law firm may render to a certified public accouuting lunr irr corucction with that accouuting firm's audit of the finattcral staternen$ of a company- See generally, ABA Staternent of Policy Regarding Lawyers Responses to Auditor's Reguests for Information, 3l IlLlS. LAW. 1709 (1976). The statement of no litigation is not inteuded to serue lhe same Pu{pose as a response to an auditor's request. Accordingly, the due cliligence that will be undertaken in providing tbe staternenl of no litigatiou may be less cxtensive than the procedures lhal a law film may follow in responding to auditor's r€quesls. ?lExcept with respect o tlre olficer's certificate, thc opurion giver should not be rrguired to inquirc with the Company about pending or overtly tlueatened legal proceedings. The opiruon g.iver is not au audilor. Absent the requirernent of an audit, thc opiniorr giver should not be requirrd to speculate as to whom in an olganization has personal knowlcdge abottt legal proceedings to which thc Cornpany i^s a party, 'l'hercfore, the opinion givcr should bc entitled to rely on the infomration provided to tlre opinion rccipicrrt in thc Agreement (nornrally the Conrpany's representations and warranties) absent infornration known to the opinion giver that would prevent the opinion giver from justifiably relying upon ntchinforntation, Tlre opinion recipient and tlre opinion giver nray aglee, however, that inquiry should be conducted of Company officers ln that case, an express statement of strch reliancc should be iucluded in the opiniou letter- l 1 [n addition, we havc relied, without investigation, on the following assumptions;]rr [insert specific assumptions, if upplicubleJ [rf any opinion is renderecl that includes "lo our knotvledge" or "known to us", insert exp I an ut ory paragraphf'^ The opinions set forth lrerein are limited to matters governed by llie laws of the State of North Carolina [and the federal laws of the lJnited States], and no opinion is expressed herein as to the laws of any other jurisdiction.rt [For purposes of our opinions, we have disregarded thc choice of law provisions in the Transaction Documents and, instead, have assumed that the Transaction Documents are governed exclusively by the interrral, substantive laws and judiciai interpretations of the State of North Carolina.16] We express no opinion concerning any matter respecting or affected by any laws other than laws that a lawyer in North Carolina exercising customary professional diligence would reasonably recognize as being directly applicable to the Company, the Transaction or both.3' rt ^See 5 4 of 2004 Rcport, which sets forth a list of standard assumptions- As noted in that sectior\ the Cornmiflee believes that these assumptious ale implicit and it is not nec€ssary to state them in the opinion. Should the opinion giver prefcr to set forth such assumptions in the opinion letler or in an attachment thereto, $ 4 of the Report provrdes sample language. 'fhe opinion giver should also set forth hcre any specific assumptions not covered by tlle list of standard assumptious. 'o Seu $ 5.0 of 2004 Report. 'Ihe opinioru set forth in this illustrativc lorm of oprniorr pruposelirlly omit arty reference to "lo our knowlcdge" or' "k-nown to trs". If, however, the opinion giver does rendcr an opinion that contains leferences to any of those phrases, the following explanatory paragraph may be included: The pbrases "to oru klrowledge" and "known to us" mean the consciotu awarencss by lawyers in the primary lawyer group of fachrai rnatt€rs such lawycrs recognize as being relcvant to the opinion or corrfirmation so qualified. Where any opinion or confrrmation is qulified by thc ptuase "to or.rr knowledge" or "known to us," the lawyers in the prinrary lawyer group are without knowledge, or consciou.s awaret'less, that the opilion or confirmation is rrntrue. "Prinrary lawyer group" nreans any lawycr in this firm (i) who signs thrs opinion lctter, (ii) who is actively involved in negotiating or documcnting the transaction, or (iii) solely as to informatiorr relevant to a particular opinion or lacrual confirmation issue, who is primarily responsible for providing the response conceming the poflicular opinion or issue. 35 See g 2.6of 7004 Report. 16 See g 10.3.a of 20O4 Reporl This senterrce is used only where the Transaction Documents provide that lhe law of a jwisdiction olher than Norlh Carolina will govern the Transactjou Documents. Where thc opinion covers the enforccability of such choice-ofJaw provision, lhe opinion language set forth in $ 10.3 b of the Report may be usetl. I I rsed as an operalive opinion, rather than an a-ssunrptiou, such opinion clause nray properly be placed alor:g with the otlrcr operative opinion clauses in the marn body of the letter. 17 See g 2.-t of 2OO4 Report. t4 Based upon and subject to the foregoing and the frrrthcr assurnptions, limitations and qualifications hereinafler expressed, it is onr opinion lhat:r8 l. The Company is a corporation flimited liability company] in existence under the laws of the State of North Carolina.re 2- Carolina.to Company Subsidizry is authorized to transact business in the State of Norlh 3. The authorizcd capital stock of the Cornpany consists of colnmon shares. of which shares are outstanding. [Describe other classes if applicable.] The Sharcs have been duly authorized and validly issued, and are fully paid and nonassessable"al 4. The Cornpany has the corporate flimited liability company] powef to execute, dcliver and perform its obligations under the Transaction Documents [and to operate i{s business as currcntly conducled, For purposes of this opinion, we have assumed that the business presently conducted by the Company consists of and it .!ee $ 2.8 of 2004 Report. to 5", g 6 0 of 2004 Reporl no See $ 7,0 of 2004 Reporl. Since paragraph I of ttus form of opuuon reflects that the Company is a North Carolina entiry, this forcign authorization clause is un-itten to cover a subsidiary for illusrative pulposes. In acttral trsage, the subsidiary would need to be identihed properly. '' See 5 9.0 of 2004 Reporl. "Shares" should be defured rn the opuuon to mcan thc shares to be isstred or transferred in the Transaction or to nrean all outstanding shares, as the case nray be. The sample opiruon applies only to Shares of a corpontion; il does not apply to limited liability conrpanics. Because of Ore wide variatiorrs afforded to orga-uizers of linited liabilily companies in plannilg LLC ownership anangenrents, it is not practicable to lormnlate a standard opinion regarding the authorization and issuance of LLC nrembership interests ,See $ 9.0 of 2004 Report at footnote 87" The following fornrulation is a slartrng point if a capitalizatiorr opimon is given for an LLC: The authorized membership interests of the Company couist of [rnsert appropriate descriprionl, of which nrmbershrp interests are oulstandirg. All of the Company's nrcnrbership interests have been duly arrthorized and validly issrred. Currently, lhere appears to be no cousensus as to whether opinions on the authorization and issuance of LLC membenhip interests should be reqr.rested or rendered. Depending on the nature of the LLC membership interests, such opinions n:ay be expensrve to prepare, aud the relative costs and benefits should be weiglred prior to requesting or rendering the opinion, See GI-AZER $ 19.5. Unlike corporatc stock that is created pursuant o statule and corporate charler, menrbership interests in an LLC ars conh'actual obligations of the LLC crealed in the limited liability company opemting agreement or by the default rules of the applicable LLC stanrte- ld at n.4. An opinion on tlre validity of membership intcrcsts in an LLC covers both state contract law and the applicable LLC stanrE. Il an opinion is lendered regardiug membership intercsts in an LLC, the opiruon giver should consider pelforming drre diligence that confirnrs (i) complction of the procedrual requirements puusuanl to both the LLC stahrte and the conh'achral provrsions of thc lirnited liability company operating agrecment, (ii) that the righls, powels, alrd drrtics providcd in tlrc limitcd liability company operating agreernjnt are permincd by the LLC statute and thc lirnited liabiliry conlpany opcrating agreement, and (iii) that any considemtion required to bc paid for the LLC membcrship interest to be issued was either received by tbe LLC, or thal such receipt was covercd hy an express assrrmphon i the opinion. See GLAZER $ 19.5. Widr respect to LI-Cs formecl irr Delawarc, sce {i 6.0.9 srrprn. l 5 activities directly related thereto, as set fbrth in an officer's certificale renderecl to us in connection with this opinionl.o? 5. l'he Company has authoriz.ed the execution, delivery and performance of the Transaction Documents by all necessary corporate flimited liability company] action and has duly executed and delivered the Transaction Documents.ul 6, The Transaction Documents constitutc the legal, valid and bincJing obligation of the Company, enforceable against he Company in accordarce with their respective terrns.e 7. 'fhe execution and delivery by the Cornpany of the Transaction Documents and the perfonnance by the Company of its obligations therein (a) do not violate the articlcs of incorporation [articles of organization] or bylaws [opcrating agreementl of the Company, (b) do nol breach or result in a default under any Other Agreement, and (c) do not violate the terms of any Coun Order. For purposes hereof, (I) the term "Olher Agreement" means any of those agreements listed on [the disclosure schedule to the Agreement][an officer's certificate rendcrcd to us in connection with this opinion] and (II) the term "Court Order" nleans any judieial or administrative judgment, order, decree or arbitral decision that names the Cornpany and is specifically directed to it or its properties and that is listed on [the disclosure schedule to the Agreernent] [an officer's certificate rendered to us in connection with this opinion].oj L Thc execution and delivery by the Company of thc Transaction Documents, and performance by the Company of its obligations therein, do not violate applicable provisions of statutory law.s or regulations.o6 9. No consent, approval, authorization or other action by, or filing with, any governmental authority of the United State.s or the State of North Carolina is required for the Company's execution and delivery of the Transaction Documents and consummation of the Transaction [except . . , ] .ot The opinions expressed above are subject to the following assumptions, qualifications and limitations:nE nt 5'"" 5 E 0 of 20M Report. t' 5'", g 8.1 of 2004 Repon- * See g 10.0 of 2004 Rcport. a5 Seeg ll of2004 Report. oo See $ 12 of Z}O|Report. o' S"e $ 13.0 of 200a Report. u8 See $$ 10,1, 10.2, 10.3 and 10.4 of 2004 Reporl 16 claimant, that clrallenges the validity or enforceability of, or seeks to cnjoin the performance of, the Transaction Documents [except . , .].t' This opinion ietter is delivered solely for your benefit in connection with the Transaction and may not be used or relied upon by any other person or for any other purpose withottt our prior written consent in each instance.5r Our opinions expressed herein are as of the date hereof, ancl we undertake no obligation to advise you of any changes in applicable law or any other matters that may come to our attention after the date hereof that may affect our opinions cxprcssed herein.'o Very tmly yotrs, Signature of Opining Lawyer or Firm5s 5? See $ 14 0 of 2004 Report as rnodificd by the Supplement. In the event that the opiniorr givel and its client conclrrde that thc broadcr form of thc stalcmcnt of no litigation is warranted, the following may be trsedl In addition, we advise you that, to eur knowledge without any independent investigation (including without limitation any search of coult records, the frles of this firm or thc ltles of the Conrpany), there is no action, suit or procccding now pending at Iaw or in eqtrity, or by or before any govet'luncntat instrumentality or agency or arbitral body, or overtly threatened in writing against the Company by a potential claimant [,except as Ilisted on the <Iisciosrue schedule to the Agreement][the ofiicer's certificate rcndered to us in connection with this opinion][follows: l l . 53 See $ 2.2 of 20O4 Report as modified by the Supplemenr. Opinion givers who perrnit their opinions to be relicd upon by thud parties, consistent with custolnary practice as articulated in Scction 1.7 of the ABA Guidelines, often do so by inclirding langtrage to the following etl'ect: This opinion lettel is delivcred solcly fol yorn benetit, and that of yortr successols and permitted assigns, in connection with the Transaction and may not be used or relied r.rpon by any othcr person or for any other purpose without ou prior written consent in each instance On the other hand" some opinion givers prefer to state with more specificity the limitations on reliatrce inrplicrt under suc[ custorrary plactice in the context of a 'lransaction involving a syndicated credit facility by using tlte following statemerl: At your request, we hereby consent io rcliancc hereon by any future assignec of yotu iltelesl in the loans under thc Agrcemcnt pursrunt to an assignmeut that is made and consented to in accordance with tbe express provisions of Section [ ] of the Agreenrent, on tlre condition and undcrstanding that (i) this letter speaks only as of the date hereof, (ii) we have no responsibility or obligation to update this lefter, to consider its applicability or corroctness to any person other than its addressee(s), or to take into account changes in law, facts or any other developnreDts of which we may laler beconre aware, and (iii) any such reliance by a futule assignce rnust be actual and reasonable under the circumstanccs cxisting al the timc of assignnrent, including alry changes In law, facts or any other developnrents known to or reasonably knowable by the assignee al such tlnte. ir S-ec $ 2.1 of 2004 Rcport. tt .iee 5 2.9 af 2004 Report. t 9 APPENDIX _ STAI'ENIENT OF CUSTOMARY PRACTTCE Angust l , 2008 Statement on the Role of Customary Practice in the Preparation and Understanding of Third-Party Legal Opinions At tlre closing of many business transactions, the lawyers for one party deliver to the other party a legal opinion letter eovering matters the recipient has asked those lawyers to address, These opinion letters, also comnronly known as closing or third-party legal opinions, are prepared and understootl in accordance with the customary practice of lawyers who regularly give them and review them for clients. Customary practice permits an opinion giver and an opinion recipient (directly or through its counsel) to have common understandings about an opinion without spelling thcm out, The use of customary practice does this in two principal ways: l. It identifies the worlc (factual and legal) opinion givers are expected to perfbrm to give opinions. Cnstomary practicc rcflccts a realistic assessment of the nature and scope of the opinions being given and the difficrrlty and extent of the work required to sr-rpport them. 2. It provides gtridance on how certain words and phrases commonJy used in opinions should be understood. Customary practice may expand or limit the plain meaning of tlrose words and phrases, Dy providing content to abbreviated opinion language, customary practice permits tlre omission ftom an opinion lctter of descriptions of the procedures that the opinion giver has performed and of many definitions, assumptions, limitations, and exceptions. Thus, it reduces the nurnber of words needed to communicate complex thoughts. As a matter of customary practice, the explicit inclusion in an opinion letter of some but not all of these matters does not exclude others customarily understood to apply. A departure from customary practice is not implied and should not be inferred unless the departure is clear in the opinion letter, The role of customary practice in third-party legal opinion practice is well established. The American Law Institute's Restatement (Third) of the Law Governing Lawyerss6 statcs: In giving "closing" opiniorrs, lawycrs typically usc custorn and practice to provide abbreviatecl opinions that facilitate the closing. Such opinions rnay not recite certain assumptions, limitations, and standards of diligeuce because they are understood betwccn counsel. The Restatement also refers to customary practice as an element in detennining the "meaning of the opinion letter." 56 Tlre references to the Resratement in this statenrenl are to Sectious 51,52, and 95 of rhe Restatentent. The references also include the following Coulncnts, Illustrations, and Notes to those sections: Sectiorr 51, Comment e; Section 52, Conrment b, Comrnent e, ilh,rstration 2; and Section 95, Reporler's Note lo Comnrent b, Reponer's Note ta Cornment c. The Restalemen! sometimes refers to "custom and practice." The Reslolement uses the phrascs "cuslonr and practice" and "custornry practice" to mean the same thrng. 20 The Restatement identifies customary practicc as a source of the criteria for deterrnining whether the opinion giver has satisfied its obligations of conrpetence and diligence. Under the Restatemenl the "professional community whose practices and standards are relevant" in making that determination is that of "lawyers undertaking simiiar matters." That professional community may vary based on, among other things, the subject of the opinion and the relevant jurisdiction. Tlre Rastntement treats bar association reports on opinion practice as valuable sourscs of guidance on custonlary practice. Customary practice evolves to reflect changes in law and practlce. Some closing opinions refer to the application of cuslomary practice. Others do not. Either way, cutstomary practice applies. * * : k * : * This Statement is upproved by thefollowing bar and lawyer groups: . Legal Opinions Conrnrittee of tlre Section of Busincss Law of the American Bar Association . Legal Opinions in Rcai Estate Transactions Committee of the Real Property, TrLrst ald Estate Law Section of the American Bar Association . American College of CommercialFinance Lawyers . American College of Mortgage Attorneys o Attorneys Opinions Committee of the American Coliege of Real Estate Lawyers . Business and Finance Section of the Atlanta Bar Association . Business Law Section of the Boston Bar Association o Business Law Section of the California State Bar . Commercial Law Section of'the Delaware State Bar Association r Real & Personal Property Section of the Delaware State Bar Association r Corporate Law Committee of I.he Bar Association of the District of Columbia r Business Law Section of T'he Flonda Bar o Reai Property, Probate and Trust Law Section of The Florida Bar r Real Properly and Financial Services Section of the Hawaii State Bar Association r Business Law Section of the Maryland State Bar Association . Real Property Scction of the Maryland Statc Bar Association . State Bar of Michigan Business Law Sect:on . TriBar Opinion Committee (consisting of mcmbers of (i) the Special Conrmittee on Legal Opinions in Commercial Transactions, New York County Lawycrs' Association; (ii) the Corporation Law Committee, The Association of the Bar of the City of New York, (iii) 21