216 Jamaica Avenue v. S & R Playhouse Realty Co.

Filing 35

Motion for leave to File Supplemental Brief in Support of its Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment filed by 216 Jamaica Avenue. (Attachments: # 1 Exhibit A - Supplemental Brief in Support of Plaintiff's Motion for Summary Judgment and in Opposition to Defendant's Motion for Summary Judgment# 2 Exhibit B - Deposition of Patrick M. Lott)(Cooper, Charles)

Exhibit B

Patrick Lott

Clevland, OH

February 23, 2007

Page 1
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF OHIO EASTERN DIVISION 216 JAMAICA AVENUE, LLC, Plaintiff, vs. S&R PLAYHOUSE REALTY CO., Defendant. ----DEPOSITION OF PATRICK M. LOTT FRIDAY, FEBRUARY 23, 2007 ----Case No. 06-1288

Deposition of PATRICK M. LOTT, a Witness called by the Plaintiff for examination under the Applicable Rules of Federal Civil Procedure, taken before me, Cynthia A. Sullivan, a Registered Professional Reporter and Notary Public in and for the State of Ohio, pursuant to notice and stipulations of counsel at the

offices of Thompson Hine, LLP, 3900 Key Center, 127 Public Square, Cleveland, Ohio, on the day and date set forth above at 9:50 a.m. -----

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 2
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February 23, 2007
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1 APPEARANCES: 2 On behalf of the Plaintiff: 3 Cooper & Kirk, by 4 DAVID M. LEHN, ESQ. 5 Suite 750 6 555 Eleventh Street, N.W. 7 Washington, D.C. 20004 8 [phone] 9 10 On behalf of the Defendant: 11 Thompson Hine, LLP, by 12 GARY L. WALTERS, ESQ. 13 STEPHEN D. WILLIGER, ESQ. 14 3900 Key Center 15 127 Public Square 16 Cleveland, Ohio 44114 17 [phone] 18 ---19 20 21 22 23 24 25

INDEX (CONTINUED) DEPOSITION OF PATRICK M. LOTT Plaintiff's Deposition Exhibit 7 was marked..................... 52:22 Plaintiff's Deposition Exhibit 8 was marked..................... 57:23 Plaintiff's Deposition Exhibit 9 was marked...................... 59:6 Plaintiff's Deposition Exhibit 10 was marked.................... 75:23 Plaintiff's Deposition Exhibit 11 was marked.................... 85:16

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INDEX DEPOSITION OF PATRICK M. LOTT BY MR. LEHN:............................... 5:7 BY MR. WALTERS:......................... 93:21 BY MR. LEHN:............................. 96:20 Plaintiff's Deposition Exhibit 1 was marked...................... 11:7 Plaintiff's Deposition Exhibit 2 was marked..................... 16:13 Plaintiff's Deposition Exhibit 3 was marked..................... 33:21 Plaintiff's Deposition Exhibit 4 was marked...................... 38:5 Plaintiff's Deposition Exhibit 5 was marked...................... 40:6 Plaintiff's Deposition Exhibit 6 was marked..................... 42:18

PATRICK M. LOTT, of lawful age, called for examination, as provided by the Federal Rules of Civil Procedure, being by me first duly sworn, as hereinafter certified, deposed and said as follows: EXAMINATION OF PATRICK M. LOTT BY MR. LEHN: Q. Good morning. A. Good morning. Q. Mr. Lott, I'm David Lehn. I'm here on behalf of the plaintiff, 216 Jamaica Avenue. Just some preliminary issues to go over. Have you been deposed before? A. Yes. Q. So you're familiar with the basic procedure? A. Reasonably. Q. I'll just refresh your memory. I'll ask a question. You'll answer it to the best of your ability. We'll try not to speak over each other. We'll try to speak slowly. It's a little bit artificial, but it helps the reporter to get down the record. A. Okay. Q. If anything is not clear, please, just

2 (Pages 2 to 5)

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Patrick Lott

Clevland, OH
Page 6
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February 23, 2007
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ask me to clarify what I'm trying to ask. If at any point you want to take a break, it's certainly fine. If there's a pending question, just answer that question, and we'll take a break. A. Okay. Q. This deposition is a 30(b)6 deposition, so you are speaking on behalf of S&R Playhouse. So if I use the word you, I'm referring to S&R or you in your capacity as a representative of S&R here. A. Okay. Q. Could you tell me about the cases in which you were deposed previously? A. There was a matter between a tenant and ours here in Cleveland I'd say 10 or 12 years ago regarding a sublease opportunity the facts of which kind of leave me. There was a suit in one of our projects in Pittsburgh. MR. WALTERS: I'm sorry to interrupt. I want to be clear. When you say our, you're speaking for S&R, and I don't think that is the case here. THE WITNESS: That is not the case. Q. That was for another entity with -Page 7

Q. Can you give me sort of a resume? Just walk me through your educational and employment history after high school. A. BS Arizona State University. IBM corporation, '68 through '72. That was after graduation. Q. What did you do there? A. Office products sales. 1972 to 1977 Coldwell Banker commercial brokerage, office and industrial broker. '77 to '80, vice president manager Sherman Oaks, California, office of CB, Coldwell Banker. 1980 to 1984, vice president resident manager Coldwell Banker, Dallas. '84 to '87 senior vice president Rosewood Properties, Dallas, Texas. 1987 to present, senior vice president, Forest City Commercial Group. Q. How did you prepare for this deposition? A. Read the documents, met with lawyers, met with our attorneys. Q. When you say the documents, which documents? A. I believe everything that you've filed and made available to us. I couldn't enumerate
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A. With another entity within Forest City, yes. Q. The second one? A. Another entity, not S&R, regarding a partnership issue. I can't remember the facts of that, either, frankly. That was also about ten years ago. Q. Is that it? A. There may have been one or two others but further, longer ago than that. Those are the only two that stick in my mind. Q. The details of those you don't recall? A. No. Q. Can you just describe for me where you fit in in the Forest City and S&R organization? A. I'm a senior vice president of Forest City Commercial Group. As such I have several buildings totaling square footage maybe 6 or 7 million square feet under my purview all of which are with either LLCs or limited partnerships, and my job is to keep those buildings full, S&R being one of them. Q. Well, how many LPs, is it a substantial number? A. It's a substantial number.

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exactly which ones they were. I read them in some detail. I can't say I read every page. Q. You're referring to documents that we filed with the court? A. Yes. Q. In the lawsuit? A. Yes. Q. Did you read the lease? A. I have read the lease, yes. Q. Did you read the 1982 Assignment and Assumption? A. I believe I have, yes. Q. Do you recall reviewing any documents, other than the ones we've just discussed, other than the ones that were filed with the court, the lease in 1982? A. I read the sheaf of documents that were sent over to me. Q. Sent over to you by counsel? A. Yes. Q. Did you discuss this deposition with anyone other than counsel? A. Yes. Q. Who was that? A. Neil Cawsey.

3 (Pages 6 to 9)

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Patrick Lott

Clevland, OH
Page 10
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February 23, 2007
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Q. Can you spell his name? A. C-A-W-S-E-Y. Q. C-A-W-S-E-Y. What is his job? A. I believe Neil handles all of our outside litigation. He's a Forest City employee. Q. Is he inside counsel at Forest City? A. He's actually not a lawyer, but he does act as our liaison with outside counsel in litigations. I believe that's what Neil does. Q. What was the content of your discussion with him? A. We discussed various aspects of your suit. Q. Such as? A. I can't remember the specifics of it. We've spoken once or twice. I told him I was meeting with our lawyers. I told him we were having a deposition preparation, just in general keeping him aware of what was happening. Q. So I want to talk about the lawsuit for a minute just so that we have a common understanding about what this lawsuit is about. You understand the plaintiff is 216 Jamaica Avenue, the defendant is S&R Playhouse, and the
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Q. It's dated May 21st, 1982? A. Correct. Q. Through this transaction, this document, S&R became the lessee under the lease? A. Evidently, yes. Q. When we say the lease, just for the record, it's the 1912 lease on the property currently owned by Jamaica? A. Correct. Q. Why did Halle Brothers Company assign it to S&R? A. Why did Halle Brothers Company assign it to S&R? We bought the property in 1982, and obviously we had to assume the underlying ground lease at the time we bought the improvements. Q. The improvements meaning the building? A. Yes. Q. I'm sorry. I think I interrupted. Are you done? Were you saying and the theme? A. No. Q. At the time that S&R acquired the building, what was S&R's intention for the use of the property? A. To rehab an old department store into an office building, a for-lease office building.
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claim by Jamaica is that S&R has breached the lease by paying an incorrect amount of rent? A. Yes. MR. LEHN: I'd like to mark this as Exhibit 1. ----(Thereupon, Plaintiff's Deposition Exhibit 1 was marked for purposes of identification.) ----Q. If you want to take a minute to look this over, feel free. A. Okay. Q. Just for the record, can you identify this document? A. I've seen this document before, yes. Q. What is it? A. It is an assignment of lessee's rights under the original ground lease. Q. From whom to whom? A. Well, I guess you can read it. Q. Well, just for the record, it's between Halle Brothers Company who assigned it to? A. S&R Playhouse Realty Company.

Q. Now, in S&R, the S, does that refer to Jerome Schottenstein? A. I believe so. I was not here at the formation of that partnership. Q. Do you know whether Jerome Schottenstein owned the Halle Brothers Company? A. I don't know that. Q. Do you have any idea why the Halle Brothers Company couldn't rehab the building into an office building? A. I have an idea. It's supposition on my part. Schottenstein is not an office developer. He's a retail developer. I believe that he determined that he either couldn't or didn't want to do it himself, and we were brought in, I believe, to develop the building because we had an office background. Q. When you say we, you're referring to? A. Forest City/S&R. S&R is obviously the vehicle by which we bought the building. Q. S&R didn't really exist before this? A. Absolutely not. Q. The R in S&R refers to? A. My guess is it's Ratner, but again, I wasn't here when the formation was done or was

4 (Pages 10 to 13)

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Patrick Lott

Clevland, OH
Page 14
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February 23, 2007
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made. Q. You don't know which Ratner it is? A. There's a lot of them. Q. That's why I'm asking. A. No. I don't know that. Q. After becoming a lessee, S&R obtained a number of redevelopment loans; is that correct? A. Again, I was not here. I joined the company in 1987, so my knowledge of the underlying financial structuring of the building is vague. So, yes, there is some development public, public moneys involved, but again, I couldn't give you the details on it. Q. Do you know who could speak to that within the FCE or the S&R organization? A. No, I really can't. It was '82. The original developer of the building has since retired. The lawyer who put it together I believe has passed away. I don't really know who could give you the background on it. Q. Was this an issue that you investigated at all in preparation for your deposition today? A. I didn't.
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1982 assignment of the property? A. Nothing. Q. Have you spoken to anyone who does know about -A. No. Q. -- the actual assignment, not the text of it, but the discussions or the negotiations? A. No. Q. Let's put this aside for a minute. MR. LEHN: This is going to be Exhibit 2. ----(Thereupon, Plaintiff's Deposition Exhibit 2 was marked for purposes of identification.) ----Q. If you want to take a minute to look this over, feel free. I don't expect you to read the whole thing because we're only going to talk about a couple of pieces of it, but as long as you're familiar. A. I've seen this document before, yes. Q. Just for the record, this is what document? A. I believe this is part of the original
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Q. Do you know if somebody else did? A. I'd ask my lawyers if they did. Q. You have no knowledge yourself? A. I have no knowledge. Q. Are there any loans that are currently outstanding on the property that S&R is the debtor on? A. Yes. Q. What are those loans? A. Again, my role within this company and the building is to lease the building, not really to mind its financial underpinnings. I'm aware there is an HSBC loan, I believe. I believe that's the first mortgage on the building, but again, that's not really my purview. We have a finance department. Q. Do you know how the assignment came about, how Halle Brothers Company and S&R got together in the first place? A. No, I do not. THE WITNESS: Can I have a two minute break to get some coffee? (Brief recess.) Q. Do you know anything about the conversations or negotiations surrounding the

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ground lease. Q. The 1912 lease? A. Yes. Q. It's between The Realty Investment Company, they were the owners of the property, and the lessees are Salmon Halle and the other Halle brother whose name escapes me; is that correct? Do you agree with that? MR. WALTERS: Objection. The document speaks for itself. Q. Well, it says on the top, The Realty Investment Company to Salmon P. Halle et al.; correct? A. It appears to be part of the original ground lease. Q. If we turn to page 2, about two-thirds of the way down there's a sentence that says, all of said rents shall be paid -A. I can't find it. MR. WALTERS: I'm going to help, if you don't mind. See where it starts here (indicating)? THE WITNESS: Got it. A. May I underline this? Q. Of course.

5 (Pages 14 to 17)

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4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 18
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February 23, 2007
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A. Gotcha. Thank you. Q. It says, all of said rents shall be paid in gold coin of the United States of the present standard of weight and fineness by depositing it to the credit of the lessor, its successors or assigns, with the Citizens Savings & Trust Company of Cleveland, Ohio, or in such other place in the City of Cleveland as the said lessor, its successors or assigns, may from time to time designate. We're just going to refer to this as the gold clause for today. A. Okay. Q. Do you have any knowledge as to whether this clause was discussed by anyone at S&R in the course of preparing the 1982 assignment? A. No, I do not. Q. You have no knowledge? A. I have no knowledge. Q. Do you know whether prior to the initiation of this litigation anyone at S&R ever discussed this clause with anyone? A. No. I know I didn't. I would have no way of knowing if anybody else that were
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So that gives you a particular number in eventually ounces. You have to convert the units. You get a number of ounces of gold. It's approximately 1,693. This amount stays constant for the duration of the lease. And the effect of that is as the price of gold varies, the value of the rent varies. The contention of the defendant is that the rent is simply $35,000 payable in currency. A. I don't know that that's our contention, but go ahead. Q. What do you understand your contention to be? MR. WALTERS: Objection. Just understand that everything that Mr. Lehn has just said is his representation of the parties' contentions. You don't have to accept any of that as true. THE WITNESS: I don't accept the last part of the statement. MR. WALTERS: I'm assuming he's prefacing a question here. Q. Could you tell me what your understanding of what the rent is?
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officers of S&R might have. Q. No one ever spoke to you about it? A. No. Q. Do you know whether anyone ever prepared an analysis of this clause? A. No. Q. No, it was never prepared, or no, you don't know? A. No, I don't know. Q. Just to make sure we're clear on things, the way that the plaintiff contends that this clause should be understood is the following. You take the face amount of the rent, and if you back up a couple sentences on this page we can see what the face amount is. Probably the easiest way to find this is to just look for the $35,000. A. I see it. Q. It says, for the remainder of said term, to wit 89 years, the sum of $35,000 per year. Plaintiffs contention is that you take $35,000 and you ascertain how many ounces of gold were in $35,000 in gold coin of the standard of weight and fineness in 1912. That's defined by statute.

A. $35,000 a year. Q. Period? A. Period. Q. You could pay it, the $35,000, in one dollar bills? A. Or gold coins. It's still $35,000. Q. How would you calculate how many gold coins to pay? A. Fewer as the price of gold went up, obviously. Q. It would be the number of gold coins at the price or valued on the day that you paid it that was necessary to equal $35,000 in cash? A. Of course. MR. WALTERS: Objection. The question is confusing, and Mr. Lott, please allow him to finish the complete question so that the record is clear at the end of this. THE WITNESS: Okay. MR. WALTERS: Thanks. Q. We'll do this in pieces. Is it your understanding of the way that the rent is to be paid under the lease is that you determine the price of gold on the date that you're going to tender the payment, and then the amount of gold

6 (Pages 18 to 21)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 22
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February 23, 2007
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that would be necessary to equal $35,000 at that price of gold is the amount of gold that you would owe under the lease? MR. WALTERS: Objection, confusing. Answer it if you can. A. It could be done that way, as I understand the language. I don't know anybody in 30 years of real estate that still pays in gold, but the language to me is clear that the rent is $35,000. Q. What is your understanding then of the purpose of this gold clause? A. My opinion of it is within the context of the time it was written, 1912, where you had certain people that didn't trust the currency, and this clause was inserted to have an alternative method of paying in gold coin if the lessor so preferred. So that you could pay in gold coin if you desired, or you could pay in currency, but it was still $35,000 for the term of the lease other than in those first years where it was escalated. Q. Have you ever encountered a gold clause in any other properties that you've
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number? I'm not going to hold you to this. Just for purposes of conversation here, if you were the owner of the property that Jamaica owns and you were going to lease that ground today, approximately -A. Assuming there was no building on it? Q. Assuming there's no building on it, what would you lease it at? MR. WALTERS: Objection. A. I have no idea. In Cleveland, Ohio, right now I wouldn't lease it. Q. If there was a building on it, what would you lease it for? MR. WALTERS: Objection. A. I have no idea. Q. Does S&R have any properties where it is the lessor or sublessor and the duration of the lease is somewhere around 100 years? A. No. Q. What is the longest lease that S&R is a part of as lessor? A. Well, if you include that S&R owns a portion of the Halle Building, obviously we write leases in the building to tenants who use the space. A typical long term lease in an
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worked on? A. No. Q. When I say other properties, I'm including not just properties you manage at S&R but your entire history. A. In 30 years in the real estate business, I've never noticed this clause nor dealt with it in any business setting. Q. When did you first become aware of this gold clause? A. When you filed your lawsuit. Q. If we assume that the gold clause means what you just said it means, how does that actually protect the lessor against currency problems? A. I'm not sure it was designed to. I mean, it was merely a rent. I mean, there are plenty of leases that don't escalate based on indexing, cost of living, or anything else. It's a fixed number. Q. Just approximate -A. Go ahead. Q. I'm sorry. Please, continue. A. No. That's fine. Q. Could you give me an approximate

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office building would be 10 to 15 years. Most leases in office space are five, five to ten. Q. When S&R writes those leases, does it determine the rent based on approximately market value at that time? A. Yes. Q. Do any of those leases hold that value constant for the duration of the lease? A. I'm not sure I understand your question. Q. Do any of the leases for which S&R is the lessor specify a rent amount and then keep that rent amount constant for the duration of the lease? A. Define rent. Q. Well, the amount that the lessee pays to the lessor on a periodic basis or sublessee. A. The rent very often will stay constant. Now, there are other charges, utilities, tax increases, et cetera, that the tenant might be responsible for which we would call escalations or pass throughs. So what that tenant may pay us in rent would very definitely be constant for five years. If it's longer than five years, we might try to get an increase say

7 (Pages 22 to 25)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 26
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after the fifth year. There might be charges to the tenant for these operating expenses or tax expenses which could escalate every year, but I'm not sure that's really rent. That's a pass on. That's an expense that we get from the city, from our vendors, from our cleaning agencies, et cetera. Those contracts are usually year to year, and they might increase every year, and we pass those increases on to our tenants year to year on a prorated basis as does every other landlord, office landlord, that I'm aware of. Q. Let's consider those pass throughs and not rent for purposes of this discussion. So if the lease term is longer than about five years, then typically S&R will provide for the rent to be increased after five years? A. I'm not sure typically is correct, but on occasion we will, yes. But we will also write leases longer than five years with a specific flat rent. Q. Do you know what the longest lease is right now that S&R has? A. I'd have to check. I don't really know.
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there would be a default, a purchase, a bankruptcy. We don't think in terms of that long for office building leases. Q. Did you think it was a wise thing to do for the lessor, assuming this is what the lessor did in this case, to lease this property for $35,000 a year for 99 years? MR. WALTERS: Objection. A. No idea. Q. Do you think that $35,000 today will have the same value 99 years from now? MR. WALTERS: Objection. A. No idea. Q. Do you think it likely to be more valuable or less valuable? A. That $35,000 would have the same value? Q. Yes. A. I think it would have exactly the same value. I don't think it would have the same purchasing power. Q. When I say value, if you want to understand that as purchasing power, then let's do that. A. I have no idea what $35,000 would be
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Q. Approximately. A. Ten years would be the longest lease that we would typically write, but I don't think we've -- we made a ten year lease about two years ago which would now have about eight years to run, but we would rarely write anything longer than ten years. Q. Do you know whether your ten year lease held the rent amount constant for all ten years? A. I can't remember. Q. If you were going to make a 99 year lease, would you hold the rent constant for 99 years? MR. WALTERS: Objection. Q. You can answer. A. In 30 years I've never made a 99 year lease. Q. But if you were going to make one? A. I wouldn't. Q. You wouldn't make a 99 year lease? A. No. Q. Why not? A. I don't know many companies that have been around for 99 years. I would expect that

worth 99 years from now, less or more. We have inflation, and we have deflation. Q. If the plaintiff's view of this gold clause is correct and you're supposed to be paying an amount up to 1,693 ounces of gold coin a year -- strike that. Since S&R became the lessee in 1982, is it correct that it has paid $35,000 in currency every year? A. I believe so. Q. Do you have any reason to believe that they have paid a different amount? A. No. Q. If the plaintiff's understanding of the gold clause is correct, then for the past 24 years S&R has had a pretty good deal? MR. WALTERS: Objection. A. Pretty good deal, I would say, no, they have not had a pretty good deal. Q. Why is that? A. Because the building has lost money all but a few years since we built it. Q. If you had had to pay -- I'll use the term gold adjusted amount to refer to the rent according to plaintiff's understanding of the

8 (Pages 26 to 29)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 30
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February 23, 2007
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gold clause just so we have a simple way of referring to it. A. Okay. Q. If you had had to pay the gold adjusted amount of rent since 1982 when you became the lessee, your losses would have been much larger than -A. Yes, they would have. MR. WALTERS: Objection. Foundation. For the record, there's been no establishment of Mr. Lott's knowledge of the rise and fall of the price of gold. Q. You can answer the question. You were saying yes. A. If we had paid the adjusted value, was that your question? Q. Yes. A. Of gold, then yes, our losses would have been greater had we paid it. Q. So to the extent that you were paying the unadjusted amount instead of the adjusted amount, if plaintiff is correct, then you got a benefit -MR. WALTERS: Objection. Q. -- for having paid the unadjusted
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should pay that its losses would be even greater? A. Let me make a comment on the line of questioning because I think it's so hypothetical that you're getting into the realm of the ridiculous. The building has lost over its history somewhere each year, at best I think we might have had three or four years, this is again the objective and it will occasionally cash flow, but we've lost millions of dollars on this building. I believe two years ago we lost $5 million on the building. We couldn't have, S&R could not have paid any more than the $35,000. If it was the kind of number that you're speculating by your calculation of the price of gold, we would never have paid it. We would have gone into default, and we would allow the building to go back to the lender or to the ground lessor. There is no way that S&R could pay that kind of ground lease payment. Q. You'd be in breach of the lease if you did that; is that right? A. I'm not a lawyer, but I would guess that we would be, yes.
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amount? A. I suppose based on the way you've constructed the question, yes. Q. I mean, I'm assuming plaintiff is correct. Obviously, if defendant is correct, then you paid what you were supposed to pay. A. Yes. I answered your question. MR. WALTERS: David, when you get to a short break, if we could take just a couple minutes. (Brief recess.) Q. Do you know what the price of gold is today approximately? A. Not a clue. Q. I'll stipulate to you that it's about $675 an ounce. MR. WALTERS: He'll represent to you. MR. LEHN: Either way. Q. And I'll represent to you that the gold adjusted amount of rent is approximately $1.1 million a year. Do you agree that if -let's assume that S&R is going to lose $4 million this year on the property. Do you agree that if S&R paid the gold adjusted amount instead of the amount that S&R contends that it

Q. Do you know what S&R is going to do with the property if Jamaica wins this lawsuit? MR. WALTERS: Objection. Calls for speculation. A. No. Q. You agree with me in principle, don't you, that if S&R did pay the gold adjusted amount, its loss would be greater than if it doesn't pay the gold adjusted amount for this year let's say? A. Yes, but -Q. Significantly by about a million dollars? A. It is so hypothetical the way you constructed the question that the answer would be yes, but it's a situation where there's not the money to pay it. Q. Okay. Let's go to another document, Exhibit 3. ----(Thereupon, Plaintiff's Deposition Exhibit 3 was marked for purposes of identification.) ----Q. Take a minute to look this over.

9 (Pages 30 to 33)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 34
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A. Okay. Q. Have you ever seen this document before? A. Yes. Q. What is it? A. It could be called an offset or something like that that basically confirms the lease being in effect at the time of the transfer. Q. I'm sorry, which part are you referring to? A. The document that you just gave me. I believe that's what it is. It was executed between Halle Cleveland, LLC, and Jamaica Avenue, LLC, your client. Q. I understand this to be a deed that conveys the title in the property. A. Okay. Excuse me. If this is the deed, that's fine. Q. Do you agree with that? A. Fine. Yes, I agree. Q. When did you become aware that Jamaica purchased the property at issue? A. At the time I learned of your lawsuit. Q. Prior to that you had no idea the
Page 35

December blank, 2001 made to grantor HSBC bank USA. Had you ever noticed this provision before today? A. No. Q. Do you know if anyone at S&R was aware of this provision before today? A. No. Q. Do you think it matters that this is in here from your perspective, from S&R's perspective? Does it affect anything that you do? A. I don't know. Does it affect anything that I do? MR. WALTERS: Objection. If you want to talk about the estoppel certificate, then he should see the estoppel certificate. Q. You can answer the question. A. I don't know. Q. Did you ever look at the deed by which Halle Cleveland became the owner of the property? A. No. Q. Do you know if anyone at S&R ever looked at it? A. No.
Page 37

property had been sold? A. No idea. Q. So S&R was not apprised of any sale before it happened or after? A. I was not. There are other officers. There are officers of S&R that could have been. Q. You don't have any knowledge as to whether they were? A. No. Q. Did you have any dealings with Halle Cleveland while they were the owner? A. No. Q. Who at S&R did deal with them? A. I don't know. Q. So S&R is not a party to this transaction that's represented in the deed that we're looking at; correct? MR. WALTERS: The document speaks for itself. A. It appears that they are not, no. Q. When did you first -- well, let me back up. Let's turn to page 3 of this document. A. That's the Schedule A? Q. Schedule A, and then there's point 3. It says, subject to: Estoppel certificate dated

Q. No, they didn't, or no, you don't know? A. No, I don't know. Q. Is it typical for S&R to look at the deed by which -- let me rephrase this. For the properties for which S&R is the lessee, is it typical for S&R to look at the deed of the property? A. I don't know of any other properties in which S&R is a lessee. Q. This is the only one as far as you know? A. As far as I know. Q. Is S&R the lessor of any properties other than -- I believe that there are two parcels that S&R owns that are contiguous with this parcel, and the Halle Building sits on all of those; is that correct? A. I believe so. Q. So S&R is the lessor on those properties? A. Correct. Q. Are there any other properties that S&R is the lessor of? A. I don't believe so. I believe S&R is

10 (Pages 34 to 37)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 38
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a single asset corporation, as far as I know. Q. Put that aside. MR. LEHN: I think this is Exhibit 4. ----(Thereupon, Plaintiff's Deposition Exhibit 4 was marked for purposes of identification.) ----Q. Are you familiar with this? A. I don't believe I've seen this copy before, no. Q. Do you ever see the -- well, this is a copy of a rent check that was delivered to Jamaica. Does that square with what it appears to be to you? A. Yes. It appears to be a quarterly payment. Q. Who writes the checks? A. I believe this comes out of our payables department. I don't. Q. You see the check is from an entity called Forest City Commercial Management, Inc.? A. Yes. Q. You were saying you were the senior vice president of Forest City Commercial Group?
Page 39

A. Sure. Q. -- they are sending these checks? A. Yes. MR. LEHN: The next exhibit will be 5. ----(Thereupon, Plaintiff's Deposition Exhibit 5 was marked for purposes of identification.) ----A. Okay. Q. So this is it looks like another quarterly rent payment? A. Uh-huh. Q. Well, it was actually paid to Halle Cleveland, but I'll represent to you that it was forwarded to Jamaica. A. Uh-huh. Q. At the top it lists what appear to be four different account numbers. Do you know what these entities are? A. Yes. Q. So one is Halle Office, and then it's B-U-I-L, Building, I take it? A. Yeah. Q. Then there are three S&R Playhouse
Page 41

A. Yes. Q. Is that a different entity? A. Yes. Q. What is Forest City Commercial Management? A. They are the company that manages I believe all of our real estate. Q. Our here means Forest City Enterprises? A. Yes. Let me clarify. Forest City Commercial Management manages all of our commercial properties as differentiated from our apartment properties or our land developments. This would be shopping centers and office buildings primarily. Q. Do you know why the rent payment came from Forest City Commercial Management instead of from S&R? A. No. Q. Is there any agreement between S&R and Forest City Commercial Management of who would pay? A. I assume there is, yes. Q. You would assume that pursuant to that agreement --

entities? A. Correct. Q. Are those different legal entities? A. Yes. Q. Can you tell me the full name of each of them? A. Well, I'll do my best. Halle Office Building Partnership, S&R Playhouse, Limited, I believe, and S&R Playhouse -- I believe it's all S&R Playhouse Limited, but I couldn't absolutely tell you for sure. Q. When you say it's all S&R Playhouse Limited, you mean the three? A. The three, yes. Q. They are distinct entities? A. Distinct from Halle Office Building, yes. I can't read the whole description here on the stub, so I don't know exactly. Q. But you don't know if they are distinct from each other? A. I don't know. Q. Is there more than one entity under the Forest City umbrella called S&R something? A. I don't know that. I've never heard it being referred to as anything other than S&R

11 (Pages 38 to 41)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 42
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Playhouse Limited. Q. You've never had another entity being referred to as S&R something? A. No. Q. Halle Office Building, why are they sending or why are they listed as one of the payees here or payers here? A. I believe that this is how we code these payments to the two entities that actually own the improvements. Q. Those two entities are? A. Halle Office Building Limited and S&R Playhouse. So I assume that these numbers were actually debited to the various accounts or two accounts to make up the total of 8,750. Q. All right. That's it for that. ----(Thereupon, Plaintiff's Deposition Exhibit 6 was marked for purposes of identification.) ----Q. I don't expect you to read the whole thing right now. A. Good. Q. But maybe if you can just get familiar
Page 43

The Realty Investment Company, as lessor, and Salmon P. Halle and Samuel H. Halle, as lessees, filed for record, et cetera. Let's skip to, which leasehold estate was assigned to S&R -A. You lost me. Where? Q. I'm skipping about three or four lines. A. Okay. Q. There's a parenthesis, Parcel No. 3 Lease, close parenthesis. A. Got it. Q. Which leasehold estate was assigned to S&R by the Assignment and assumption dated May 21, 1982, and filed for record, et cetera. So am I correct that Parcel No. 3 is the property that Jamaica owns? A. I believe so. I'm assuming that that's it. Q. Then let's go to the bottom of that page. Whereas, it is the intention of S&R to convey to Halle Office Building Limited Partnership (HOB), a certain portion of the premises on which is located what is commonly known as the fifth, sixth, seventh, eighth,
Page 45

with what it is, and then I'll point you to certain places. A. Okay. All right. Q. Have you ever seen this document? A. I don't believe I've seen this one. Q. Do you know what it is? A. I could read it. Q. It says, deed from S&R Playhouse Realty Company to -A. I can read that. Q. -- Halle Office Building Limited Partnership? A. Yes. Q. I just want to if we go to the second page -A. This one (indicating)? Q. Yes. At the bottom it says JAM 01473. A. Yes. Q. Toward the bottom of that page, it says, whereas, the four parcels of real estate which are included within the premises consist of, and let's skip to B, one parcel in which S&R holds the leasehold estate (hereinafter referred to as Parcel No. 3) created by the virtue of an indenture of lease dated March 15, 1912, between

ninth, tenth, and eleventh floors of building, as further described hereinafter, that's defined as the fifth through eleventh floors, together with certain easements and other rights appurtenant thereto, but subject to all easements, restrictions, covenants, and reservations contained herein (the fifth through eleventh floors and said other easements and rights being hereinafter collectively referred to as HOB's interests.) And if we turn the page -- actually, we need to go back to get the piece of this just one page. This is JAM 01475. There's a heading, granting clauses. A. Okay. Q. It says, now, therefore, S&R in consideration of one dollar and other good and valuable consideration received to its satisfaction from HOB does hereby give, grant, bargain, sell, assign, transfer, and convey to HOB, its successors and assigns forever, and now let's flip the page, under part B, the leasehold portion of HOB's interests more particularly described as all of S&R's right, title, and interest in and to the Parcel 3 lease. Are you

12 (Pages 42 to 45)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 46
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with me? A. I'm with you. Q. So am I right that the effect of this document was basically to create a sublease between S&R and HOB for the fifth through eleventh floors of the building? A. Is it a sublease or is it a deed? I mean, it appears to be a conveyance between S&R and HOB. Q. My understanding is that the deed with respect to -- if we back up to the second page of the document, the second whereas clause, whereas, the four parcels of real estate which are included within the premises consist of (a) two parcels which S&R owns in fee simple by virtue of a deed dated May 21, 1982. A. Right. Q. I assume that the deed part of this is with respect to the properties S&R owns in fee simple? A. Right. Q. And that Parcel 3 is a lease? A. That's fine. I'm not really familiar with the documents. Q. So HOB has an interest in basically
Page 47

60 percent of the rent each month; is that right? A. I believe so, yes. Q. It doesn't pay it directly. It pays it directly to the lessor, or does it pay it to S&R and then S&R forwards it? A. Again, I don't know. I'm not part of Forest City Commercial Management. Frankly, that's the first check stub that I've seen that has anything to do with this building. It appears that it's a 60/40 proration between S&R and HOB. Q. HOB, is that a Forest City entity? A. Yes. Q. Is there a difference in the way the building is used? Is there a difference in the way that HOB uses its interest in the building and S&R uses its interest in the building? A. I don't understand the question. Q. Do they both use it for the same purpose? Do they both use it for commercial office rental? A. Yes. Q. Is that every floor is used in that fashion?
Page 49

the top roughly half of the building? A. Correct. MR. WILLIGER: Could you read the last question back? (Record read.) Q. Can we turn to the page that's stamped 1483, JAM 01483? A. Okay. Q. It says at the bottom, there's a paragraph (b), HOB's share unless specifically agreed otherwise -- skip a little bit and turn the page -- means 60 percent. A. I don't see the 60 percent. Q. At the top of the page. MR. WALTERS: It's blurred. The very first line. A. Okay. Q. It is a bit blurry. But if you turn to page 1486, it defines S&R's share, and I believe it defines it as 40 percent? A. Right. Q. I'm inferring that's a 60 percent for HOB. A. Right. Q. So HOB is responsible for paying

A. No. Q. What floors are not used in that fashion? A. The lobby, and we have a downstairs basement level food court, mostly vacant I might add. In the lobby, there is some retail in it, mostly vacant, and the upper floors two and above are office space. Q. Do you know anything about how the tax laws are structured for the Halle Building? MR. WALTERS: Objection. Vague. A. Do I know anything about it? Some. Q. Do you know whether S&R's interest under the lease is its own tax lot or is part of a larger tax lot that includes the rest of S&R's interest in the Halle Building? A. I don't really know. Q. Who would be able to speak to the way in which the tax lots are structured for the Halle Building and the properties underneath them? A. Layton McCown, another associate of mine in the building. He's chief financial officer for the commercial group. Q. Could you spell his name?

13 (Pages 46 to 49)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 50
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February 23, 2007
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A. L-A-Y-T-O-N, M-C-C-O-W-N. Q. What is his job? A. He's chief financial officer for the commercial group, I believe. Or perhaps one of our lawyers, our in-house. Layton probably, though. Q. Do you know how the building is classified for tax purposes? A. No. Q. Do you know whether it's possible to combine a leasehold and a fee simple into a single tax lot? A. No. Q. You don't know? A. I don't know. Q. Do you know whether it's possible to split a leasehold in the air? A. I'm not sure I understand. When you say split, what do you mean? Q. To let's say assign a lease, a portion of a lease, and the way that the portion is determined is by basically the height off the ground, in other words. A. I think you could describe it as such. I don't know that you could get a separate
Page 51

Office Building? A. Right. Q. It's dated 1984 at the bottom. This is defined on the third page of the document. It defines HOB's interest as being the fifth through eleventh floors. Do you follow that? A. Yes. Q. I'm just asking, HOB is not the lessee? A. I don't believe they are, no. Q. For that interest? A. Correct. Q. Do you know why the fifth through eleventh floors were assigned to HOB, why S&R didn't just keep them? A. I believe it was because of a syndication we did for the upper floors of the building which was entitled HOB. Again, this was done before I arrived on the scene. Q. Let's do another document. ----(Thereupon, Plaintiff's Deposition Exhibit 7 was marked for purposes of identification.) ----Page 53

parcel or a lot split. But, again, it's a little out of my field. I'm not a lawyer. Q. But in your experience? A. In my experience you could apportion the responsibility for the payment as we've done here as an accounting provision as to who pays what, but I have no knowledge of whether you could actually get a lot split or a separate tax parcel. Q. HOB is not the lessee under the lease; right? A. It appears not. Q. S&R is the lessee? A. I believe so. Q. Just to be clear, for the entire lease including the part that is assigned to HOB? A. For the entire lease. Q. Including the portion that is defined as HOB's interest? A. Well, I believe -- rephrase that, would you, or ask it again. I may be getting confused. I'm not sure where you're heading with this. Q. If we look at Exhibit 6 for a second, this is the deed from S&R Playhouse to Halle

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

Q. You don't have to read that entire document. Have you ever seen this document before? A. I don't believe I have, no. Q. It says at the top, confidential memorandum? A. Uh-huh. Q. Halle Office Building Limited Partnership. Do you know whether this document -- well, let's find a date on this thing. Would you turn to the third page, FCID 0395? A. Yes. Q. It says the date of this considerable memorandum is September 17, 1984? A. Right. Q. Do you know whether this document was related to the syndication of the upper floor that you were just talking about? A. I don't know. It appears that it is. Q. Let's go to page 51 of the document which is FCID 0450. A. Right. Q. You see the heading federal income tax consequences? A. Okay.

14 (Pages 50 to 53)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 54
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February 23, 2007
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Q. You see there's several pages. If you flip to page 58, it says, in the opinion of counsel, this is toward the top, neither the partnership nor any partner will be personally liable for repayment of the First Mortgage loan and the UDAG loan and such loans more likely than not constitute non-recourse obligations of the partnership. A. Uh-huh. Q. The partners will be entitled to include in their adjusted basis their allocable share (determined in accordance with their interest in partnership profits) of such indebtedness. Do you see that? A. Yes. Q. Let's turn the page once to page 59. There's a carryover paragraph at the top, and the last sentence of it says, the partnership intends to elect to claim cost recovery deductions with respect to the portion of the project constituting 18-year real property over an 18-year period in accordance with the straight line method. The deduction allowable for any given year is limited to the number of months the project is actually in service during
Page 55

paragraph, it says, it is not anticipated that the partnership will be treated as related to any entity that owned the project during 1980 nor will the project be leased to any person or entity that owned the project during 1980 or any person related to any owner. Do you know why this is relevant? A. Let me read it again. Q. Okay. Let me ask the question differently. What is the relevance of this sentence to the placement memorandum? MR. WALTERS: Objection. The witness has said that he's never seen this before. A. I don't know what the relevance is. Q. Let's go to page 47. A. Okay. Q. Toward the bottom there's a heading, ground leases, and it says, a portion of the building is situated on parcels which are subject to the following ground leases: A. Indenture of lease dated March 15, 1912, by and between The Realty Investment Company, as lessor, and Salmon P. Halle and Samuel H. Halle, as lessees. S&R is successor to the interest of Salmon and Samuel. This is
Page 57

the year. Are you familiar with any of these tax issues? A. Vaguely. Tax is not my field of expertise. Q. If you go to the next paragraph, the expenditures incurred with respect to a certified rehabilitation of a certified historic structure will add value to and prolong the life of the project and therefore will be added to the recoverable basis of the project. The partnership also intends to claim cost recovery deductions with respect to such rehabilitation expenditures over the applicable recovery period applying the straight line method. So it appears that there were certain tax consequences. We don't have to go through all of them, but there were certain tax consequences to this transaction? A. Sure. Q. Do you know whether these tax consequences were a factor in the decision to assign or partially assign the lease to HOB? A. Well, no, I don't know that. Q. If we go to page 60, the first full

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25

referring to the lease at issue in this lawsuit? A. Uh-huh. Q. It says, the Halle lease is for an initial term expiring March 31, 2011. If you want to just take a minute and read the remainder of that paragraph? A. Under the Halle lease? Q. Yes. Basically, the two paragraphs under point A. A. Okay. Q. It doesn't make any reference to the gold clause; does it? A. No. Q. Do you know whether the investors in HOB were ever apprised of the existence of a gold clause? A. No. Q. You don't know the answer? A. I don't know the answer. Q. Let's get a new exhibit. MR. LEHN: This is 8. ----(Thereupon, Plaintiff's Deposition Exhibit 8 was marked for purposes of identification.)

15 (Pages 54 to 57)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 58
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----A. Okay. Q. Have you ever seen any of these documents? A. No. Q. If you turn to the page marked FCID 0062? A. Okay. Q. It says, limited partners roster for Halle Office Building Limited Partnership? A. Uh-huh. Q. Then you can turn a couple of pages, and the roster goes on for a while, maybe five pages. A. Okay. Q. Do you know whether these are the limited partners in Halle Office Building? A. I don't know that, but it appears that they are. Q. You don't know whether any of them was ever informed about the existence of the gold clause? A. I do not know. Q. Do you know who would know that? A. No. As I said before, the original
Page 59

are the sole partners doing business under the name of S&R Playhouse Realty Company. Did you follow that? A. Yes. Q. Is that true that Playhouse Square Investment and Forest City Rental are the only partners of S&R? A. As of this date they were. Q. What about today? A. I have no idea. Q. Let's turn a couple more, I guess two more pages to FCID 0139. The heading is general partnership agreement of S&R Playhouse Realty Company. A. Uh-huh. Q. This partnership agreement is made and entered into this 21 day of May 1982. This is the same day as the assignment? A. Yes. Q. If we flip this page over, Article 3, there's a little table, a column for partner and a column for amount. Are these the original partners of S&R? A. I don't know. There's a lot of Schotts.
Page 61

developer of the building has retired, and the lawyer that was involved since passed away. I don't know of anyone else who would know. Q. Let's put that aside then. ----(Thereupon, Plaintiff's Deposition Exhibit 9 was marked for purposes of identification.) ----Q. Mr. Lott, would you like to take a break? A. No. I just need some water. MR. WALTERS: I'll tell you what, let's go off the record for a minute. (Brief recess.) Q. Are you familiar with this document? A. No. Q. Let's go to, well, it's the third physical page. It's marked FCID 0135. A. Okay. Q. It says, amended and restated general partnership certificate of S&R Playhouse Realty Company. It says, the undersigned hereby certificate that: Playhouse Square Investment, and Forest City Rental Properties Corporation

Q. Am I right that you have no knowledge as to whether they were ever informed about the gold clause? A. I have no idea. Q. All right. Well, that's it for that one. Have any of the current subtenants in the Halle Building been informed of the existence of a gold clause? A. By subtenants you mean the office tenants in the building? Q. Correct. A. I don't believe they have. I have not informed any of them of it. It wouldn't affect them. Q. Why is that? A. Ground lease payments are not a part of operating expenses of the building. Q. Does it affect, and when I say it, the gold clause, does the gold clause affect HOB? A. If you were to win, I guess it would. Q. Because pursuant to Exhibit 6, HOB is responsible for 60 percent of the rent; correct? A. Correct. Q. Let's go back to actually Exhibit 6. Let's go to the page that's marked JAM 1493.

16 (Pages 58 to 61)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 62
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A. Okay. Q. Part eight, assumption of leases, the second sentence, each party agrees, and each party here refers to HOB and S&R, each party agrees with the other to take all steps necessary to exercise any and all renewal options under the Parcel 3 lease for the maximum periods permitted thereby. A. Uh-huh. Q. Are you familiar with the renewal option in the lease? A. Only that part that I just read in the document you handed to me previously. Q. In the lease itself? A. Yes. Q. Or was it in a different document? A. It was in one of these documents. I noticed there were a series of renewal options that we hold at the same rent for varying periods of years at our option. Q. Let's go to I think it was Exhibit 2 which was the lease. A. Exhibit 2? Okay. Q. Page 5. Roughly in the middle of the page you'll see there's a slash that somebody
Page 63

March 31, 2010? A. Right. Q. So we're not there yet? A. We're not there yet. Q. Do you know whether S&R intends to renew the lease? A. No, I do not. MR. WALTERS: Objection. Q. Have there been any discussions about the renewal of the lease? A. No, there have not. Not with me. Q. Who would participate in that decision? A. Myself, Dave LaRue. Q. Can you spell that, please? A. L-A capital R-U-E, president of the commercial group; Jim Ratner, chairman of the commercial group; and there might be some others, but those would be the primary ones. Q. Let's go back to that page. I think I asked you to stop reading at the second slash. A. Uh-huh. Q. Let's go to the second sentence after that. A. In the event of?
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wrote in, and then it begins it looks like Roman numeral XII, the lessor for itself. Do you see that? A. Yes. Q. Why don't you just take a minute and read everything between that slash and the next slash which is about 12 or so lines down. A. Okay. I thought I saw a time quote here. Okay. Q. So this clause of the lease is giving S&R a right to renew the lease? A. Right. Q. If S&R elects to renew the lease at all, it can elect a 25 year, a 50 year, or a 99 year renewal period? A. That's the way I read it, yes. Q. In order to exercise this option, S&R has to provide to the lessor written notification of its intention; correct? A. It appears that way. Q. That notice has to specify whether it's electing the 25, 50, or 99 year period? A. Right. Q. The notice is due somewhere between March -- excuse me -- April 1, 2009, and

Q. Yes. Just take a minute to read that sentence. A. Okay. Q. Let's read it. This is the last sentence I'm going to ask you. This one is the following one after Roman XIII. A. Whenever this lease? Q. Whenever this lease or renewal thereof, just because there's some words that aren't clear -- whenever this lease or any renewal thereof shall expire without election on the part of lessees to renew, then the lessees shall vacate said premises at the termination of this lease or any renewal thereof as the case may be and surrender possession thereof to the lessor, its successors and assigns. The copy is just not very good. A. I see it. Q. So if S&R does not elect to renew the lease, then it has to vacate the premises; is that right? A. That's what it says. Q. Does S&R have a right to holdover? A. I haven't read this entire ground lease. I have no idea if there's holdover

17 (Pages 62 to 65)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
Page 66
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February 23, 2007
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provisions or not. I don't believe it says so here. Q. If S&R does elect to renew the lease, it basically gets a new lease for 25, 50, or 99 years? A. That's my understanding. Q. Nothing requires S&R to renew the lease? A. I don't believe -- in what I've read that you had asked me to read, it's an option. Q. This might be a little bit difficult to find, but if you recall the sentence that begins after the slash, in the event of such renewal? A. Yes. Q. If we go up about, let's see, three lines, it says, and the lessor and the lessees shall thereupon execute such further instruments and agreements that may at such time be proper or necessary for the full protection of the respective rights of the said parties during such extension of the original term thereof. A. Uh-huh. Q. Do you have any idea what further instruments or agreements might be necessary?
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election and intention? A. Right. Q. And then if we continue down, and after the service of said notice upon the lessor, such extension and renewal shall become effectual for all purposes. A. Right. Q. That's what you're referring to? A. Right. Q. The notification has the effect of renewing the lease? A. It sounds like it to me. The lessee can say, yes, we're renewing, and it wouldn't be necessary for a mutually executed document. Q. So then the question is, where it refers to such further instruments and agreements, do you have any idea what those might be? A. I have no idea. Q. There's nothing that comes to mind that you think S&R would need? A. Supposition on my part, I would guess that it appears that that language might be in somewhat of a conflict, but I would guess that the two parties would probably feel better if
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A. I have an idea. I would guess it would be some kind of formal amendment that would renew the lease. Q. Beyond the notice? A. Well, that's interesting. I thought I read above when we were reading something that it said all you had to do was notify and it would automatically be renewed. Didn't I read that someplace? Q. I think you did. Let's back up a couple of lines. It says, well, if we go about five or six lines, there's a sentence. A. Above? Q. Do you see the word on the left is periods? That's the word that's flush with the left margin. A. How far up? Q. From where we were it's about six lines. A. Got it. Q. In the event that the lessees shall elect to exercise such option for any such extension of this lease, the lessees shall within the period that we've already discussed notify the lessor in writing of lessees'

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they mutually executed something, but that's just my opinion. Q. So let's flip back for a second to the 1984 document between HOB and S&R. A. Which document is that? Q. This was Exhibit 6. A. Okay. Q. We were looking at paragraph 8. A. What page? Q. Jam 01493. A. 93 did you say? Q. Yes. A. Okay. Q. Paragraph 8, in the last sentence of that, each party agrees with the other to take all steps necessary to exercise any and all renewal options under the Parcel 3 lease for the maximum periods permitted thereby. The maximum period under this lease is 99 years? A. Correct. Q. So this is an agreement between S&R and HOB by which S&R is agreeing to renew the lease for 99 years? A. That's the way it reads to me, yes. Q. But there's been no discussions of

18 (Pages 66 to 69)

Alderson Reporting Company 1-800-FOR-DEPO

4104ccfc-48b8-485d-9049-2837c9a86669

Patrick Lott

Clevland, OH
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February 23, 2007
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whether or not you're going to renew? A. No. Q. If S&R does not renew the lease at all, does that affect S&R's subtenants in the building? A. That calls for a legal opinion, and I'm not sure I'm qualified. I would assume it would, yes, I mean if we have to abandon the premises. Again, though, somebody has got to own it. Those leases would run with the land. Would they affect the tenants in the building? Maybe not. You know, there is -- I'm not sure they would, actually. Somebody has got to own it. The leases would run to whomever would own it, and perhaps they wouldn't be. Q. Do any of the current subtenants of S&R have a sublease that extends beyond 2012? A. Yes. Q. Yes? A. Yes. Q. At this point in time S&R has no right to be on the property beyond 2012; is that right? A. Until such time as we would extend the term, I would guess, yes.
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A. The same document? Q. Exhibit 2. Toward the bottom, this is Roman XIII, I think we read this a minute ago, whenever this lease or any renewal thereof -A. Wait a second. I haven't found it on page 2. Q. I'm sorry, page 5, the fifth line from the bottom. A. Got it. Yes. Q. Whenever this lease or any renewal thereof shall expire without election on the part of lessees to renew, then the lessee shall vacate said premises at the termination of this lease or any renewal thereof. A. Okay. Q. So if you don't exercise your renewal option, then you have to vacate; right? A. Right. Q. Because you haven't yet exercised your renewal option, you don't right now have the right to stay after 2012? MR. WALTERS: Objection. Calls for a legal conclusion. A. Are you asking me to answer? Q. Yes.
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Q. To make the record clear, 2012 is when the current lease expires? A. Yes. Q. So right now you have no right to stay beyond 2012. You have to exercise your renewal option? A. Well, I would say we have the right because the renewal option is fairly explicit. So, again, I'm not sure exactly technically if we haven't given our notification that we're extending the term of the lease, if you assume that means no rights beyond that date, then you're correct. The fact that we hold an option for beyond that date woul