Appendix — Frank Lyon Co. v. United States
Supreme Court brief1978
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Text
Octoser TerM. 1976
No.. 76-624
Frank Lyon Company, Appellant,
v.
UNITED States or America, Appellee.
ON PETITION FOR CERTIORARI TO THE UNITED STATES
COURT OF APPEALS FOR THE EIGHTH CIRCUT!
VOLUME II
(Pages 313-748)
PETITION FOR WRIT OF CERTIORARI FILED NOVEMBER 3. 1976
CERTIORARI GRANTED FEBRUARY 22, 1977
IN THE
Supreme Court of the United States
Octoser Term, 1976
No. 76-624
Frank Lyon Company, Appellants
v.
Unrrep States or America, Appellee
Petition for Writ of Certiorari Filed November 3, 1976
Certiorari Granted February 22, 1977
INDEX
Page
Complaint, filed September 27, 1973 ................ 6
Answers, filed November 26, 1973 .................5. s
Stipulation, filed September 16, 1974 ................ 9
Supplemental Stipulation, filed December 23, 1974 ... 14
Transcript of Proceedings, November 26, 1974
Supplementary Findings of Fact and Conclusions of
Law, filed Jume 11, 1975 ...............--ee00: 299
Proposed Findings of Fact and Conclusions of Law... 301
Judgment, filed June 11, 1975
Notice of Appeal, filed August 11, 1975
ewe we,
.} 2a
~ *) eT
ii Index Continued
Page
Plaintiffs’ Exhibit 1: Letter dated August 26, 1967
from Edward M. Penick, President of Worthen
Bank & Trust Company to 0. O. Wyrick, Vice
President of Federal Reserve Bank of St. Louis.. 313
Plaintiffs’ Exhibit 2: Letter dated September 1, 1967
from Edward M. Penick to O. O. Wyrick ........
Plaintiffs’ Exhibit 3: Letter dated —_— 12, 1967
from Edward M. Penick to O. O, Wyrick ........ 324
Plaintiffs’ Exhibit 4: Letter dated September 13, 1967
from O. O. Wyrick to Edward M. Penick ........ 326
Plaintiffs’ Exhibit 5: Letter dated September 1, 1967
from Edward M. Penick to H. C. Adams, Commis-
sioner of State Bank Department .............. 328
Plaintiffs’ Exhibit 6: Letter dated September 5, 1967
from H. C. Adams to Edward M. Penick ........ 336
Plaintiffs’ Exhibit 7: Letter dated September 12, 1967
from Edward M. Penick to H. C. Adams ........ 338
Plaintiffs’ Exhibit 8: Letter dated September 13, 1967
from H. C. Adams to Edward M. Penick ........ 339
Plaintiffs’ Exhibit 9: Sale and Leaseback seminal
dated September 28, 1967 to Goldman, Sachs & Co. 340
Plaintiffs’ Exhibit 10: Revised Sale and Leaseback
proposal dated October 27, 1967 of Stephens, Inc. 344
Plaintiffs’ Exhibit 11: Letter dated October 30, 1967
from Frank Lyon to Worthen
Plaintiffs’ Exhibit 12: C omparison of financing plans
of Frank Lyon, Stephens, Inc. and Goldman,
ET Ee on 00 5bnn ocd 6066 0006566600008606 348
Plaintiffs’ Exhibit 13: Specification for Sale-Lease-
back of Worthen Bank waneng dated October 31, .
tt ipa eeeeehboebdebeedeeds Obe6 6666000060668 34
Plaintiffs’ Exhibit 14: Letter dated November 1, 1967
from Frank Lyon te Worthen containing Lyon's
SED GEE © ccccdcccceccccccccsesecesecs 352
Plaintiffs’ Exhibit 15: Comparison of financing plans
dated November 2, 1967
Index Continued iii
Page
Plaintiffs’ Exhibit 16: Letter dated Noevmber 30, 1967
from Alan W. Peters, Vice President of First Na-
tional City Bank to Edward M. Penick ......... 356
Plaintiffs’ Exhibit 17: Letter dated December 18, 1967
from Richard W. Baker, Jr., Vice President of
New York Life Insurance Company to Frank
ROU TET sancudcesdradcideciedabucekies 358
Plaintiffs’ Exhibit 18: Ground Lease dated May 1,
1968 between Worthen Bank & Trust Company, as
Lessor, and Frank Lyon Company, as Lessee.... 366
Plaintiffs’ Exhibit 19: Building Lease dated May 1,
1968 between Frank Lyon Company, as Lessor, .
and Worthen Bank & Trust Company, as Lessee. 376
Plaintiffs’ Exhibit 20: Note Purchase Agreement dated
May 1, 1968 between Frank Lyon Company and
New York Life Insurance Company ............
Plaintiffs’ Exhibit 21: Building Loan Agreement dated
May 14, 1968 between Frank Lyon Company and
First National City Bank ..................... 462
Plaintiffs’ Exhibit 22: Building Loan Mortgage Note
for $7,000,000 dated — 14, 1968 from Frank
l.von Company to First National City Bank .... 488
Plaintiffs’ Exhibit 23: Building Loan Mortgage dated
May 14, 1968 from Frank Lyon Company and
Worthen Bank & Trust Company to First Na-
tional City Bank ..... 2.00000 cece cece 490
Plaintiffs’ Exhibit 24: Assignment dated May 14, 1968
from Frank Lyon Company to First National City _
ER -Genessséuneueenacnssncdbeus cccebbdabiess
Plaintiffs’ Exhibit 25: Sales Agreement dated May 19,
1968 between Frank Lyon Company, as purchaser,
and Worthen Bank & Trust Company, as seller .. 508
Plaintiffs’ Exhibit 26: Secured Note dated December
1, 1969 for $7,140,000 from Frank Lyon Company
to New York Life Insurance Company ......... 523
j
3
.
‘
£
y
e
-
iy
é
:
~
iv Index Continued
Page
Plaintiffs’ Exhibit 27: First Deed of Tru. t dated De-
cember 1, 1969 from Frank Lyon Company and
Worthen Bank & Trust Company to Darrell D.
Dover and New York Life Insurance Company... 527
Plaintiffs’ Exhibit 28: Assi t dated December 1,
1969 from Frank Lyon Compeny to New York Life
Insurance Company
Plaintiffs’ Exhibit 29: Consent and Agreement dated
December 1, 1969 of Worthen Bank & Trust Com-
pany to New York Life Insurance Company .... 575
Plaintiffs’ Exhibit 32: Specimen bank statement of
Frank Lyon’s account at First National City Bank
with specimen checks and credit ticket attached.. 584
Plaintiffs’ Exhibit 33: Comparative consolidated bal-
ance sheets of Frank Lyon Company and subsidi-
aries as of December 31, 1969 and 1968 ....._... 587
Plaintiffs’ Exhibit 34: Comparative consolidated state-
ment of income years ended December 31, 1969
and 1968 of Frank Lyon Company and sub-
ED eve ccdabeesdbteccessuanordetinies.. 589
Plaintiffs’ Exhibit 35: Guaranty dated May 14, 1968
from Kdward M. Penick, President Worthen
Bank & Trust Company to First National City
NE CT oc ccvecuunticaccci 591
Plaintiffs’ Exhibit 36: Computation of tax loss on
Worthen Building of Frank Lyon Company for
years 1969 through 1993; vears 2007 through 2019
and years 2033 through 2044 .................. 595
Plaintiffs’ Exhibit 37: Letter dated August 22, 1967
from ©. O. Wyrick, Vice President of Federal
Reserve Bank of St. Louis te Edward M. Penick,
President of Worthen Bank and Trust Company
of Little Rock, Arkansas ...................... 597
Plaintiffs’ Exhibit 38: Summary of Conservation with
Mr. O. O. Wyrick dated September Te sineeuse 599
Plaintiffs’ Exhibit 39: Letter dated September 20,
1967 from Mr. Theodore M. Siouris, A General
Partner to E. M. Penick, President of Worthen
Bank & Trust ener An reference to Sale-
Leaseback Financing of ew Bank Headquarters 601
Index Continued Vv
Page
Plaintiffs’ Exhibit 40: Letter dated April 16, 1968
from Edward Penick, President of Worthen Bank
and Trust Company to Mr. H. C. Adams, State
Bank Commissioner, Little Rock, Arkansas ...... 609
Plaintiffs’ Exhibit 41: Letter dated April 16, 1968
from Edward Penick, President of Worthen Bank
and Trust Company to Mr. O. O. Wyrick, Vice
President of Federal Reserve Bank of St. Louis.. 613
Plaintiffs’ Exhibit 42: Letter dated April 19, 1968
from O. 0. Wyrick, Vice President of Federal Re-
serve Bank of St. Louis to Mr. Edward M. Penick,
President, Worthen Bank and Trust Company... 618
Plaintiffs’ Exhibit 43: Letter dated April 22, 1968
from James Penick, Jr., Executive Vice President
of Worthen Bank and Trust Company to Mr. O. O.
Wyrick, Vice President, Federal Reserve Bank of
St Louis
Plaintiffs’ Exhibit 44: Letter dated April 23, 1968
from ©. O. Wyrick, Vice President, Federal Re-
serve Bank of St. Louis to Mr. James Penick, Jr.,
Executive Vice President, Worthen Bank & Trust
REY “bdceda se chousésucdenesasewedsenaass 622
Plaintiffs’ Exhibit 45: Comparison of annual rent with
total of depreciation and interest for first 10 years
of Worthen Bank Building .................... 623
Plaintiffs’ Exhibit 46: Worthen Bank & Trust Co.
Rent Schedule on Worthen Building 1944 ...... 624
Plaintiffs’ Exhibit 47: Safeway Lease .............. 625
Plaintiffs’ Exhibit 48: Inter-office communication dated
May 13, 1969 from B. H. Dean, Jr. to James A.
Rowland for Mr. W. H. Dodge regarding Safe-
a SE odbet dunwhoneartadatdanbneuebasses 641
Plaintiffs’ Exhibit 49: Letter dated July 28, 1971 from
James B. Bolen, Jr. to T. H. Mayer and Nicholas
M. Mayer enclosing Safeway Lease ............. 663
Plaintiffs’ Exhibit 50: Letter dated April 12, 1968
from Frank Lyon Company to Ed Penick, Presi-
dent, Worthen Bank and Trust Company ....... 686
vi Index Continued
Page
Plaintiffs’ Exhibit 51: Letter dated April 26, 1974 from
Rudy Landry, Investment Officer of Cabot, Cabot
& Forbes Equity Trust to Mr. Frank Lyon, Chair-
man of the Board, Frank Lyon Company ...... 687
Plaintiffs’ Exhibit 52: Explanation of Items of Frank
RD SURED ddccucuctdueasanaceanedeccentcc 689
Defendants’ Exhibit 1: Equity interest in land and
buildings of Worthen Bank & Trust Co. ......... 691
Defendants’ Exhibit 2: Cash Flow, Frank Lyon Co.-
ED EE Sccdddsbdesanndaboddebanance 692
Defendants’ Exhibit 3: Loss from Rental Operation,
Frank Lyon Co.-Worthen Building ............. 693
Defendants’ Exhibit 4: Gain on Sale 1980 if 1980 Op-
tion is Exercised, Frank Lyon Co.-Worthen
EET a cng Geld putin a rd ee ae 604
Defendants’ Exhibit 5: Tax Consequences vs. Eco-
nomic Gain if 1980 Option is Exercised, Frank
Lyon Co.-Worthen Building ................... 695
Defendants’ Exhibit 6: Tax Benefit—if Option Exer-
cised November 30, 1980, Taking 1969 Tax Reform
Act into Account, Frank Lyon Co.-Worthen
Building
Defemlants’ Exhibit 7: Schedule of Direct Reduction
loan, Frank Lyon Company, Loan from New
York Life (Schedule December 16, 1969) ........ 697
Defendants’ Exhibit 11: Letter dated November 28,
169 from Frank T. MeGehee, Assistant Vice
President of Worthen Bank and Trust Company
to New York Life Insurance Company .......... 701
Defendants’ Exhibit 12: Letter dated Noverher 25,
169 from Members American Institute of Certi-
fied Publie Accountants of Gotham, Wyman &
llowland to New York Life Insurance Company.. 705
Defendants’ Exhibit 13: Letter dated September 2,
1966 from Richard F. Gates, Vice President to Mr.
Ilarry E. Meek, Attorney, Little Rock .......... 707
Index Continued vii
Page
Defendants’ Exhibit 14: Letter dated October 13, 1966
with enclosures from Harry E. Meek, Attorney
to Worthen Bank & Trust Company ............ 708
Defendants’ Exhibit 15: Letter dated September 8,
1967 from C. J. Giroir, Jr., Attorney to Worthen
Bank and Trust Company ............+..-0005 734
Defendants’ Exhibit 16: Inter-office communication
dated August 11, 1967 from Richard F. Gates to
Edward M. Penick regarding financing of bank
building (pp. 1 and 2, and 8-10) ................ 742
313
P. Ex. 1
WortHen Bank ano Trust Company
EstasLisnHep 1877
Litre Rock, ARKANSAS
August 26, 1967
Mr. O. O. Wyrick, Vice President
Federal Reserve Bank of St. Louis
Post Office Box 442
St. Louis, Missouri, 63166
Dear Mr. Wyrick:
The attached brochure and statements reflect informa-
tion relating to the construction by Worthen Bank of a
new main office, office building and parking facility to cost
between $8,500,000.00 and $9,000,000.00. The building site
is being acquired from Urban Renewal and is located on
Capital Avenue between Louisiana and Center Streets,
comprising approximately three-quarters of a block.
Taking $9,000,000.00 as the total construction cost, it is
contemplated that we will issue $4,000,000.00 non-converti-
ble debentures, maturing in 25 years, to be retired by a
sinking fund beginning the eleventh year. The balance of
the funds would be raised by the negotiation of a mortgage
loan for $5,000,000.00 through a wholly owned subsidiary
with principal payments beginning the fourth year.
Interest payments on debentures at an assumed rate of
61 would be $260,000.00 per annum and interest payments
on the mortguge loan until principal reductions are begun,
assuming a 614 per annum rate would be $325,000.00 for a
total interest cost during the first three years of
$585,000.00,
The combination of debentures, totaling $4,000,000.00
which will be used to purchase stock of the subsidiary, and
4 mortgage loan negotiated by the subsidiary will pay the
entire cost of land and building totaling $9,000,000.00.
314
Operating statements submitted reflect the results of
the occupancy of the new building by Worthen Bank in
the middle of 1969, by projecting growth in earnings and
expenses for the period 1968 through 1973 deducting there
from the occupancy expense of present building and add
Ing expense of occupancy in the new building. We also
project cost of space vacant until building is fully occupied
by tenants as a bank expense. The pro forma statement
of the subsidiary is based on estimates of tenant occupancy
after approximately a three year period and highlights
the need for adjusting the banks rental payments to meet
varying costs of the subsidiary. The pro forma balance
sheets merely show the results of issuing the debentures
by the bank and the placing of the mortgage by the sub
sidiary. We propose to sell our present main office facility,
hopefully before we move into the new building. The pres
ent facility, including fixtures and equipment, is carried
on our books at a depreciated value of $786.526.29
The attached schedule of the cost of construction are the
hudgeted figures agreed upon by the architects, Erhart,
Kichenbaum, Rauch & Blass, and the contractors, being
Matson Construction Company of Little Rock, Ark. and
Bellows Construction Company of Houston, Texas, in con
sultation with Carl E. Morse Company, Consultants, of
New York City.
Wi ex pect to bh rin construction as soon as we have re
ceived approval from you and have arranged the financing,
subject of course, to approval by the Board of Directors
and State Supervisory Authorities. The construction is ex
pected to be completed within 18 months from the date it
beg in
Your early consideration will be appreciated and of
course, we will promptly furnish any additional informa
lion you may require
sincerely,
s/ Kpwarp M. Penick
President
315
WortTHEeEN BankK aNvp Trust CoMPANY
Constr Mé tion (‘ast
Bank & Office Building,
238,255 gross sq. ft. @ 22.82
5 Level Parking, 110,880 gross sq. ft. @ 6.00
Architects Fee—estimated
Financing Charges—estimated
Consultant Fees
Land
60,650 sq. ft. (@ 23.53 per sa. ft.
I i
Estimated Project Cost
[estimated Cost of Equipment
Vault Kquipment
Under Counter Equip.
Pneumatic Kquip.
T V Teller
Kitechen-dining Equip.
Carpeting
Drapes
built-ins
Furniture
Total Constru lion, Financing tf
EL quipme nt Cost
32.000
12.000
10,000
125,000
150,000
42.000
20,000
79.000
80.000
5,436,600
665,280
259,000
378,000
162.000
] 420, OU)
BD BSU
chuet).
329.000
217.000
546,000
$6.87 1,880
—
316 317
Operating Income over
Wortuen Bank anv Trust Company aed 130 a 70
STATEMENT OF Earnineos, Pro Forma (Amount in Thousands) Applicable Federal Income
Tax 367 51(8) —0— 51
SaLe or Non-ConvertisLe Dewentures $4,000,000 @ 642% 656
Mortcace THROUGH SUBSIDIARY $5,000,000 @ 642% Net Operating Earnings an os — == ==
December 31, 1966 Net Operating Earnings adjusted for Interest Cost of (1) Increased by $260,000 interest on Capital Notes.
_ (2) Inereased by $565,000 which is rental paid Subsidiary on new building less
Present Pro-Forma Pro ‘‘orma Pro-Forma ' $192,321.37 decrease in occupancy expense on old building & motor bank.
Statement Statement Subsidiary Adjustments Statement
(4) Depreciation of $175,000.00 and oceupaney expense on new building of
Oreratina INCOME: _- $412,481.00.
Int. & Div. on See. 985 985 985 (5) Rental paid by Worthen to Subsidiary, plus figures used to make Subsid-
=e. & oe. on Loans 5,359 5,359 5,399 iary non-profit.
pe Pg —" 39 39 at (6) Rental income from tenants 78,062 sq. ft. @ 4.50 per with 30% occupancy.
Accounts 528 528 528 (7) Parking rental income (275 cars x 1.00 x 28 days x 12 months.
Other Service egs., comms., -
fees & Collection charges 49 49 49 (8) Reduced taxes 50% of the additional $633,000 expense or $316,000 tax
Fee-Trust Department 170 170 170 reduction over last period.
Other Income 156 156 156
Rental Income:
Worthen Bank §65(5) (565)
Others 281(6) 281
Parking 66 (7) | 66
TOTAL 7,285 7,286 912 7,653
Orer Tinea Expense:
Salaries 1,850 1,850 1,850
Other Personnel Expense 402 402 402
Interest 1,911 2,171(1) 325(3) 2,496
Occupaney 296 669(2) 587 (4) (565 ) 691
Furniture & Equip. 308 308 308
Other Expenses 1,179 1,179 1179
TOTAL 5,946 06,379 912 6,926
318 319
Wearuss Bawa aun Taver Cesstanr Wortuex Bank ann Trust Company
Pro Forma Batance SuHeer
Pro Forma OperatTine STaTEMEN? 1968-1973
~ (Amount in Thousands)
Adjusted to 6-30-67 * Balance Sheet as of 6-30-69 1968 1969 1970 1971 1972 1973
(0's omitted) Operating Earnings —-9,300 10,400 «11,400 12.450 13,500 14,500
Adjustments § Completion Operating Expenses (5) 7,600 8,500 9,450 10400 11,300 12,200
for of Profit before taxes &
6/30/67 financing 6/30/69 additional cost allocable .
Cash 38,488 38.488 to new building 1,700 1.900 1.950 = 2,050 2.200 2.300
as , = ss ——— =—=_—_ : = yore —=
U.S. Government 1,700 1,900 1950 2050 2.200 2 300
Obligations 13,703 13,703 P! = ‘
: : : Ov5e »
—— US. old Pilding xpense 90 192 192 : Ww 192
nst rumentalities 1,119 1,119 ~T.700 1.990 2142 wri 2.242 » 3q" » 4g”
State & Municipal
Obli rations 11,527 11,527 Lees:
Loans & Discounts 87,538 87,538 sao Financing — -
terest ’
scons Guaranteed Rental 900 «5570 BSTATT
by ( CC 6,440 6,440 Vacant Tenant Space 150 144(2) 108(3) 72(4) 72
Stock in Federal Adjusted Parking 2 86
Reserve 270 270 Total Deductions 200,000 653 717 665 29 629
-~ Bldg. he & - Net before taxes 1,500 1,337 1425 1577 1,763 1,863
uipment (1 1,8 1,833 - ang 19 469 496
Cash Value Life Ins. Taxes (1) so LL
—Officers 149 149 Net ()perating Earnings 1,100 981 1,046 1,158 1,294 1,367
Investment in Subsidia 4,000 4,000
Other Resources cd 328 : 398 (1) Taxes are figured at 26.6°% of Net Profit before taxes.
Total Resources 161,395 185,395 (2) 40% of tenant rental—-3:31,000
Capital Stock ~~ 4,000 4,000 (3) 30% of 361,000
Surplus 5,000 5,000 (4) 20% of 361,000
ae Notes 4,000 4,000 (5) Interest on Debentures ineluded.
Tndivided Profits
& Reserves 2,496 2,496
Reserve for Unearned
Interest 2,704 2,704
Deposits 147,195 147,195
Total Liabilities 161,395 185,395
Note: (1) This includes present main-office land, building &
equipment carried @ depreciated amount of $736,-
526.29.
320
Wortuen Bank anv Trust Company
Reau Estate Sursipiary
Pro Forma BaLance SHeet
Assets
Land $1,425,000
Bank Building $7,575,000
Total Assets $9,000,000
Liabilities
Mortgage Note $5,000,000
Capitalization
Capital Stock $4,000,000
Total Liabilities $9,000,000
——
Wortuen Bank anv Trust Compayy
Rear Estate Supsipiary
Pro Forma Oreratine Statement— 3 Years
Arter Occupancy
Estimated Annual Ineome
EXPENSES
Bidg. Operation 192,611 sq. ft. @ 1.50 288,916
Parking Operation 110,580 sq. ft. @ .12 13,305
Real Estate Taxes (estimated)
Land 19,760
Buil. ling 90,500 110,260
Estimate! Net Income before Depreciation
Depreciation (50 yr. st. line)
Net Income
412.421
517.44
NOTE: (1) Amortization of $5,000,000. loan @ 614% for 27 years is $39: 500
per year. This exceeds rental being estimated by bank by $27. }56.
Adjustments would need to be made in bank rental paid to »ub-
sidiary for any losses of subsidiary.
P. Ex. 2
Wortnes Bark anv Trust Compayy
ESTABLISHED 1877
Litre Rock, ARKANSAS
September 1, 1967
Mr. 0. O W yrick, Vice President
Fed ral Re serve Kank
P.O. Box 442
St. Louis, Missouri 60602
Dear Mr. Wvriek
| have discussed with Mr. Harve Adams, Arkansas
State Bank Commissioner, and Mr. Kenneth Sar lers,
,
assistant bank commissioner, financing plans on our new
building which would involve complete abandonment of the
plans Dick Gates and I| diseussed with you. Under the new
proposal we plan to put a portion of the new building. st
, _ , ma
on our books and nhandie the pbalanes totaling S,/ >
’
on a aie’ Al lease DACK arrangeme!l
plan and a copy of the operating figures wh ch reflect the
effect of this plan on o ir operations
We ar presenuy in neg ations with Goldman & Sachs
Com) inv of New York 1 handle the sak and ieasenacKk
Mr. Adams has indicated to us that he can give us his
appre ail Ti th . pian | i’ | “Way ara ye iave tentative iy
sé hed led a wround breaking cerTremot}! ro! by ia it Ter
noon, september lo I am hopet li that you! appro in
be recvived so that we may go ahead with the pians tor this
ground bre ining Ceremony as sched led
l am also enclosing leas ng brochures and a copy of ex
cerpts from the report of Landauer & Associates of New
York regarding the possibility of our leasing this size
building.
These items were discussed at our meeting this week,
and | promised to send you copies.
Very truly yours,
President
324
P. Ex. 3
September 12, 1967
Mr. 0. O. Wyrick, Vice President
Federal Reserve Bank
P. O. Box 442
St. Louis, Missouri 60602
Dear Mr. Wyrick:
[In line with our conversation regarding the proposed
financing of our building by using the sale and leaseback
$742 million and by putting the balance of the cost of the
parking garage and land under the parking garage on our
statement, I am submitting ti you the estimated cost of
this project. These costs have been revised from those
previously furnished you in my letter of September Ist by
dividing the architect fees, consultant jees, and finance
charges between the two buildings, that is the sale and
leaseback bank office building and the parking garage.
The item of finance charges is an estimated figure, as
we will not be financing any of the building cost on our
own statement, but will arrange for the owners-lessors to
finance the building themselves. This will work in the fol-
lowing manner. We will conve title to the land on which
the bank building and office building will be built to the in-
vestors that will own the buiiding and lease it to us. They
will put up the money for the cost of construction in an
escr uw account with a trustee bank and we will take the
money down as we need it for construction costs. We will
be obligated to pay the difference between what the money
costs the investors, if they have to borrow it elsewhere,
and what they are able to earn on it as a short term in-
vestment from the escrow account. So our financing
charges really resolve themselves into being the difference
between these two costs. By handling the construction costs
in this manner it will at no time become an asset of the
325
bank and we will not be required to handle an interim
financing arrangement.
I would appreciate your approval of the plan as we have
outlined it here and in our previous correspondence.
Very truly yours,
President
326
P. Ex. 4
Feperat Reserve Bank or Sr. Lovtis
P. O. Box 442
Sr. Lovis, Missovrr 63166
0. O. Wyrick
Vice President
September 13, 1967
Mr. Edward M. Penick, President
Worthen Bank & Trust Company
P. O. Box 1681
Little Rock, Arkansas 72203
Dear Mr. Penick:
This refers to your letters of September 1 and Septem-
ber 12, 1967 seeking approval of your plans for the con-
struction of a new bank building. We also acknowledge
receipt of copy of letter dated September 1 to Mr. H. C.
Adams, State Bank Commissioner, seeking his approval.
It is understood that the original proposal, outlined in
your letter of August 26, has been abandoned.
As we understand it, the bank and office building is
to be constructed and owned by a non-affiliated corpora-
tion and leased to the bank at an annual rental cost of
approximately $584,250, The lease would be on a long-term
basis with an option to purchase the building after fifteen
years at an agreed upon figure. The cost of construction
is estimated at $6,532,650 which together with the land cost
of $965,000 would make a total investment by the owner of
$7,497,650. It is understood that the bank will have no
financial interest in the building and will furnish none of
the funds for its construction.
It is further understood that the bank will construct a
parking garage at an estimated cost of $1,001,350 on land
327
purchased for $460,000 for a total cost of $1,461,350. This
investment when added to the present carrying value of
leasehold improvements, present bank premises and _ pre-
liminary cost of new bank building in the total amount of
$1,695,768 would result in a total investment of $3,157,118
in bank premises by the bank, exclusive of furniture, fix-
tures and equipment now carried on the bank’s books at
$137,326 and $546,000 estimated cost of additional invest-
ment in such assets. We understand that the investment
in bank premises of $3,157,118 is to be reduced from sale
of present bank building estimated at $600,000 which would
reduce the bank’s total investment in bank premises to
$2,557,118 which combined with investment in furniture,
fixtures and equipment of $683,326 would result in a total
investment in fixed assets of $3,240,444.
Since the total investment in bank premises would not
exceed the bank's capital stock of $4,000,000, the approval
of the Board of Governors, pursuant to the provisions of
Section 24A of the Federal Reserve Act, is not required
and this office will interpose no objection to the expendi-
ture. Llowever, the additional investment in fixed assets
adds considerable pressure to a capital account that is not
relatively strong and the directors are urged to review the
bank's capital position frequently, to continue to conserve
earnings in order that the capital structure may be
strength -ned and to provide additional capital funds upon
completion of the building program should a review at that
time warrant such action,
Very truly yours,
/s/ O. O. Wyrick
0. O. Wyrick
Vice President
328
P. Ex. §
WortHen Bank ano Trust Company
EstTaBlisHep 1877
Litt_.e Rock, ARKANSAS
September 1, 1967
Mr. H. C. Adams
State Bank Commissioner
National Old Line Building
Little Rock, Arkansas
Dear Mr. Adams:
Previously 1 submitted to you a plan for financing our
new building under which we had originally proposed to
issue #4 million in debentures and handle the balance of
the construction cost of $5 million on a real estate mort-
gage loan. Due to the statutory limitations on the rate of
interest we can pay on the debentures, we have been un-
able to locate a purchaser of the debentures at an interest
figure of 6% or less. Consequently, this plan of financing
must be abandoned.
I would like your approval of a plan whereby we would
carry on our bank books the cost of the new equipment
and leasehold improvements amounting to $1,325,000 and
the cost of the parking garage and land on which the park-
ing garage will be situated amounting to $1,195,000, giving
us a total new investment amounting to $2,520,000 in land,
garage, and leasehold improvements. We would carry this
on our books, which with the amount we have previously
invested in this category, will give us a total investment
of $4,353,000 in land, buildings, and leasehold improve-
ments. This figure includes our present land and building
at Fourth and Main Streets, which we plan to sell. It is
presently carried on our books at $600,000. Upon the com-
329
pletion of the sale we would then have in this category on
the balance sheet $3,753,000, which is 32.6% of our capital,
surplus, undivided profits, and reserves. I am enclosing a
pro forma statement of this bank as of June 30, 1967, giv-
ing affect to this additional investment.
The balance of the cost of construction of our building
amounting to approximately $6 million plus $965,000 on
the land would be handled on a sale and leaseback basis,
which would not exceed a maximum of $74 million. We
would have the right to repurchase this building after 15
years at a previously agreed upon figure and the land at
the cost at which it was put in. We are in the process of
negotiating with Goldman & Sachs Company of New York
City the details of this sale and leaseback arrangement.
I am enclosing a copy of a pro forma operating statement
and projections for the next five years on the funds neces-
sary for us to carry this sale and leaseback arrangement
including the projected income we would receive from
rents from this new bank building.
We realize that the sale and leaseback arrangement may
be slightly more expensive in the long run. llowever, we
are of the opinion that the advantages it offers us by not
tving down our capital in land and building leaves us more
leeway in the management of our bank and keeping our
funds more profitably employed.
Previously I furnished you background information on
the history of the bank and general economic conditions
in our city and this same information would suffice for our
request at this time for your approval of this plan of fi-
nancing our new building.
330
I will be most happy to furnish you any other informa-
tion you may need, as we are most anxious to start con-
struction as quickly as possible.
Very truly yours,
President
EMP/mab
Ene. (1) Total Project Cost
(2) Pro Forma Balance Sheet as of 6/30/69
(3) Bank Building Pro Forma Operating Statement
—1973
(4) Pro Forma Operating Statement 1968-1973
331
Wortnen Bank anv Trust Company
Tora, Prosectr Cost
Cost of Bank Office Building € Land—Financed by
Sale-Leaseback
Construction Cost
Bank & Office Building—
296,623 gross sq. ft. @ 20.23 6,000,000
Land
41,050 sq. ft. @ 23.53 per sq. ft. 965,000
Estimated Cost of Bank, Office
Building & Land $6,965,000
Investment in Parking Garage, Furniture & Fixtures
& Leasehold Improvements (June 30, 1967)
Leasehold [Improvement 462,990
Bank Premises (Land & Building) 1,144,037
Furniture, Fixtures & Equipment 137,326
Preliminary Cost of New Bank Building
(architects fees, consultants) __ 88,741
Total Present Investment 1,833,094
Sale of Present Building — 600,000 (1)
Total Investment in Bank & Premises 1,233,094
332
Additional Items to Be Included in Bank’s Assets
Land (parking garage)
333
Wortnen Bank anv Trust Company
Pro Forma BaLance SHEET
19,600 @ 23.53 per sq. ft. 460,000
Parking Garage Adjusted to 6-30-67 + Balance Sheet as of 6-30-69
122,500 sq. ft. @ 6.00 per sq. ft. 735,000 (0’s omitted)
Additional Investment in Furniture, Completion of
Fixtures & Equipment had ey S/S
Vault Equipment 32,000 Cash 38,488 38,488
Under Counter Equip. 12,000 U.S. Government Obligations —_ 13,703 13,703
Pneumatie Equip. 10,000 Obligations U.S.
T.V. Teller 125,000 Inst rumentalities 1,119 1,119
Kitchen-dining Equip. 150,000 State & Municipal Obligations 11,527 11,527
Carpeting 42,000 Loans & Discounts 87,538 87,538
Drapes 20,000 Loans Guaranteed by CCC 6,440 (1) 4,520
Built-ins 75,000 Stock in Fed 270 270
Furniture 80,000 546,000 Bank Bidg., Vault & Equipment = 1,833 3,753
Leasehold improvements os Cash Value Life Ins.—Officers 149 149
Architects Fee 259,000 Other Resources 328 328
Financing Charges 378,000 neti span
Consultants Fee 162,000 779,000 Total Resources 161,395 161,395
Total Balance Sheet Investment in Cap.tal Stock 4,000 4,000
Bank & Premises 3,753,094 (2) Surplus 5,000 5,000
Undivided Profits & Reserves 2,496 2,496
(1) Present bank building sold at book value of $600,000.00, a for Unearned Interest 2,704 coo
(2) Additional Investment in Leasehold Improvement since a =a pa
6 30/67 estimated at $300,000.00. Total Capital & Liabilities 161,395 161,395
Enclosure 1 rennet
(1) Decreased Commodity Credit Corp. loan by additional
investment carried in Bank Bldg., Vault & Equipment.
Enelosure 2
334
Worrnen Bank anv Trust Company
Bank BvILpIneG
Pro-Forma Operatinc StaTEMENT—1973
Income
Tenant (1)—119,380 sq. ft. @ 4.75 per 567,055
Parking—122,500 sq. ft.
312 x 1.00 x 20 days x 12 months 74,880
641,935
Less: 15% vacancy factor tenant space
119,280 x 15% x 4.75 85,058
Estimated Annual Income 556,877
Expenses
Building operation
119,380 sq. ft. @ 1.50 179,070
Parking: 122,500 sq. ft. @ .12 14,700
Real Estate Taxes (estimated)
Land 19,760
Building 90,500 110,260 304,030
Net Income 252,847
Less:
Lease Payment to Investor —5s4,250
Net Income (Loss) —331,403
Net rental per ft. for bank to occupy new bldg.
(114,549 sq. ft.) $2.893 per sq. ft.
Cost to occupy new building 331,403
Cost to occupy present quarters 192,321
Net Increase in occupancy cost 139,082
(1) Bank to oceupy 114,549 sq. ft. including all public areas
and dining facilities.
Enclosure 3
335
Wortnes Bank anv Trust Company
Pro Forma Orernatine Statement 1968-1973
* (Amount in Thousands)
1968 1989970717297
Operating Earnings 9500 10400 11400 12450) 13,500 14,500
Operating Expenses = 7,600 8500 9450 W400) 11,500 12,200
Profit before taxes &
additional co-t alloeable
to new building 1,700 1900 = 1,950 2,050 2.200 2,300
his
Occupaney Expense
old building <a 9601) 192 me we ie
1700 1996 2142 2242 2s) law
Less:
Interium Financing
(‘ost 200 178
Lease payment ol 292(2) 5s4 ont a4 ont
1,500 1526 1.558 1,658 1.805 1,{¥0s
Plus
Income from Building 27(3) 120(4) 6715) 224.6) 25217)
Net before taxes 1,500 1.553 1,668 1.825 2082 2.10
Taxes(8) 39948 aS 0 a
Net after taxes 1,101 1,140 1224 10 1.4%) | oe
(1) Assumes occupancy in new building for 6 months
(2) Assumes 6 month lease paymept on new building
(3) Assumes 6 months operation of building with 50% vaeen-y factor on
tenant space; full operation of parking facility
(4) 40° vaeaney factor on tenant space
(5) 30° vaeuney factor on tenant space
(6) 20° vacaney faetor on tenant space
(7) 15° vacancy factor on tenant space
(8) Taxes are computed at 26.6% of Net Profit before taxes
Enclosure 4
ARKANSAS
Strate Bank DerarTMENT
H. C. Adams
Commssioner
Crry or Lirrie Rock
September 5, 1967
Mr. Edward M. Penick, President
Werthen Bank and Trust Company
Little Rock, Arkansas
Dear Mr. Penick:
Receipt is hereby acknowledged of your letter of Sep-
tember 21, outlining plans and procedure in constructing
new building on property recently purchased by your bank
for this purpose.
I interpose no objections to the plans as propose and
you have this Department's approval with the understand-
ing that investment in parking garage will be charged off
and amortized over a twenty year period, and that other
investments in furniture, fixtures and leaseheld improve-
ments will be charged off and amortized over a ten year
period and that title will be vested in Worthen Bank and
Trust Company subject to no liens. It is noted in your
projection cost that in the end, the total cost of land, build-
ing and leasehold improvements will aggregate $4,953,-
000.00, and upon the sale of the present land and building
that vou own at 4th and Main Street which is carried at
$600,000.00 and will reduce this category to $3,753,000.00.
Estimated cost for construction of bank office building
is estimated at $6,976,000.00, and would not exceed maxi-
337
mum of #7,500,000.00 and would be handled on a sale and
leaseback basis. This is agreeable with this Department
with the understanding that you would have the right to
repurchase this building after fifteen years at agreed upon
figure and the land at the cost at which it was, not to ex-
ceed $965,000.00.
Very truly yours,
/s/ H. C. Apams
H. C. Adams
State Bank Commissioner
338
P. Ex. 7
September 12, 1967
Mr. H. C. Adams
State Bank Commissioner
National Old Line Insurance Building
Little Rock, Arkansas
Dear Mr. Adams:
Mr. Wyrick, vice president of the Federal Reserve Bank,
called today and wanted us to revise the figures of our
total project cost that we had previously furnished you.
He requested us to divide the items of architect fees,
finance charges, and consultant fees into those parts
chargeable to the bank-office building and those parts
chargeable to the parking garage. We have done this and
1 am enclosing a breakdown showing this allocation of
these fees which is different from that previously furnished
you.
Mr. Wyrick also wanted assurances from us that we
would not handle the construction of this building on our
statement at anytime by using a direct interim financing
plan. We have assured him that the owners-lessors of the
land can finance the construction of the building them-
selves and we will only be obligated to pay the cost of
carrying the funds used in this construction period.
I am enclosing a copy of my letter to Mr. Wyrick, which
I thought you would like to have for your files. If you have
any questions, please call me.
Very truly yours,
President
339
P. Ex. 8
ARKANSAS
State Bank DeparRTMENT
H. C. Adams
Commssioner
Crty or Latrrie Rock
September 13, 1967
Mr. Ed Penick, President
Worthen Bank & Trust Company
Little Rock, Arkansas
Dear Mr. Penick:
I have your letter of September 12 in which you request
several changes be made in the project cost of parking
garage, furniture and fixtures and leasehold improvements.
I have no objection to these changes and you are author-
ized to proceed in accordance with your title project cost
as presented to me in your letter of September 12.
Kindest personal regards, | am
Yours very truly,
/s/ H. C. Apams,
Il. C. Adams
State Bank Commis.ioner
- |
P. Ex. 9 ~
Wortnen Bank anv Trust Company
Sate anp LEASEBACK {
Outline of Proposed Principal Lease Terms
Property: An 18-story office tower rising out of a ground
floor banking space with drive-in banking facilities, to
be constructed on 41,050 square feet of land in down-
town Little Rock, Arkansas.
Interim Lease Term: From date of closing until the earlier
of (1) 10 months after completion of the building or
(2) , 1970, except as that date may be
extended by the number of days delay in construction
caused by strikes or other events of force majeure.
Primary Lease Term: 25 years from the end of the Interim
lease term; at the end of the Primary Lease Term the
Bank either will exercise a 10-year renewal option or
will make an offer, which may be rejected by the own-
er, to purchase the property for 20% of its original
cost.
Renewals: After the ten year renewal term, the Bank will
have eight consecutive 5-vear renewal terms to provide
for use and occupancy for up to 75 years.
Rent: A. During the Interim Lease Term, rent will com-
mence on the completion date and will be payable
quarterly in amounts equal to —% (the interest rate
on the required financing) of the completed cost of
the property.
I. During the Primary Lease Term, rent will be pay-
able quarterly in arrears in an annual amount equal
to —% of the cost (assuming land cost of $965,000,
building cost of $6,535,000 and 6%4% interest rate on
341
the required borrowing, rent will be 7.619%, or $571,-
430 annually).
Renewal Rents: Rent during the renewal terms will be as
follows:
Years of Annual Rent as a
Occupancy % of Original Cost
26-35 3.00%
36-40 2.25%
41-45 1.50%
46 and
thereafter 1.00%
Completion Agreement: The Bank will complete the con-
struction of the building so that the completion date
will oceur not later than ...... ...... , 1969, except as
such date may be extended by the number of days of
construction time lost because of strikes or other
events of force majeure, the completion date shal! not
have oecurred on or before ............ , 1971, the
Bank will offer to purchase the land and building. Such
offer may be rejected, in which even the Primary Lease
Term will commence on that date and the Lease will
remain in foree and effect.
Net Lease: The Bank will have the same responsibilities
in regard to the property as if it had complete owner-
ship. The Lease will be completely ‘‘net’’ in that the
Bank will pay as additional rent all expenses in con-
nection with the property including, without limita-
tion, real estate taxes, assessments, insurance pre.
miums, costs of operation, repair and maintenance,
and other charges related to use or occupancy.
Use and Occupancy: The Bank will be permitted to use the
Property for any lawful purpose and will maintain
342
the Property in good condition subject to normal wear
and tear. It is anticipated that part of the office space
will be subleased to others and, in addition, the Bank
may assign the Lease or sublet the Property providing
that no such assignment or sublease shall affect or re-
duce any of its obligations as Lessee.
Property Additions or Improvements: The Bank will have
the right to make additions and improvements to the
Property from time to time, which additions and im-
provements will become the property of the owner
at the end of the lease period, if not removed prior
thereto. If the amount of such additions or improve-
ments to the Property exceeds $.......... during
any two-year period, the Bank may request the owner
to pay for these and owner will agree to do so. In the
event that the owner pays for any such additions or
improvements, rent will be increased to amortize the
cost with interest over the remaining lease term. The
interest cost will be then-current rates, as agreed upon
by the Bank and the owner, and the owner wil] agree
to accept or equal any interest cost which may be ar-
ranged by or offered through the efforts of the Bank.
Economic Abandonment: If, at any time after the end of
the tenth year of the Primary Lease Term, in the opin-
ion of the Bank, the Property no longer is suitable or
economic for use in its operations, the Bank may ter-
minate the Lease. The notice of termination must be
accompanied by an offer to purchase the Property for
an amount approximately equal to the remaining un-
amortized cost. The owner may reject that offer. If
it is accepted, the Bank must purchase the property
but must discontinue use thereof and make appropri-
ate provisions for its disposition.
Cond: mnation or Casualty: In the event of a condemna-
tion or a casualty, the Bank will restore or repair the
property and will continue rental payments unabated
343
and the Bank will receive the condemnation award or
the insurance proceeds; provided, however, that in the
event of a condemnation or casualty of such nature
that the Property no longer is usable by the Bank as
determined by its Board of Directors, the Lease can be
terminated. Notice of termination must be accompa-
nied by an offer to purchase the Property for an
amount approximately equal to the remaining amor-
tized cost. This offer may be rejected. If accepted,
the Bank will receive the condemnation award or in-
surance proceeds.
Purchase Options: The Bank will have options to purchase
the property as follows:
Purchase Option
End of Year as % of Original Cost
15 72%
20 63%
(These amounts are based on an assumed land cost of
$965,000 and building cost of $6,535,000.) In addition,
the Bank will have an option to purchase the property
at the end of the Primary Lease Term for an amount
equal to the greater of fair market value or 20% of
the original cost of the property. Thereafter the Bank
will have options to purchase the property at fair
market value at the end of each renewal period.
Investment Tax Credit: Any investment tax credit will be
passed through to the Bank.
GotpmMan, Sacus & Co.
344
P. Ex. 10
Wortnen Bank anv Trust Company
Proposep FINANCING
Submitted By: Stephens, Inc.
Revised: October 27, 1967
General Description: The proposed method to be used to
finance the Bank’s new building is a sale-leaseback of
the building.
Amount of Financing: The sale-leaseback financing pro-
posed will provide $7,500,000.
Cost of Financing: Stand-by fees, legal, printing, and other
direct costs of financing to be absorbed by the Bank.
Lease Provisions: In general, there will be a complete
‘*net’’ lease.
Interim Term: With First National City as negotiated at
cost.
Primary Term: 25 Years beginning at the end of the in-
terim lease term.
Renewal Options: Eight 5-year renewal options with rent
at 4% of original loan ($7,500,000) or $300,000 per
year.
Annu! Rental: The annual rent during the primary lease
term will be $583,000 payable quarterly for the first
11 years of the lease, and beginning the 12th year rent
will be $612,750.00.
Land: All land owned by Worthen Bank ‘‘involved in the
new building project’’ will be leased to the Corpora-
tion ‘‘owning’’ the building for a period of 80 years.
~ 345
Sales Taxes and Investment Credit: All savings on State
Sales Taxes and all investment credit will be passed
on to Worthen Bank.
Stand-By Fee: None.
Commitment Fee: 1%—Bank can escrow Government
Bonds and receive income from the bonds during the
interim period. At closing of permanent loan, the
escrow account will be liquidated and the bonds re-
turned to Worthen Bank.
Purchase Options: The Bank will receive options to repur-
chase the building at the end of the 11th, 15th, 20th,
and 25th year as shown:
Year or Oprion Morteace BaLANCE Purcuase Price*
llth $5,517,275.75 $6,225,000
15th $4,426,274.78 $5,325,000
20th $2,580,069.43 $3,800,000
25th —IO— $2,850,000
*The above purchase price assumes that Worthen
Bank will continue the mortgage loan with New York
Life for the balance of the term of the loan, and the
Bank assumes any penalty imposed by the lender for
prepayment of the balance of the loan.
Summary of Redemption Restrictions and Prepayment
Penalties By New York Life: Non-refundable for
eleven (11) years from funds borrowed at lower in-
terest rate. Refundable beginning the 1ith year at 103,
decreasing |, of 1% per year to 101 and remaining at
101 for the balance of the term of the loan. Refundable
after the 11th year at 101 from excess earnings by
Worthen Bank.
All terms and conditions outlined above are subject to
our ability to borrow the necessary funds from New
York Life.
346
P. Ex. 11
Frank Lyon Company
October 30, 1967
Mr. Ed Penick, President
Worthen Bank & Trust Company
401 Main Street
Little Rock, Arkansas 72201
Dear Ed:
In our prior conversations, I have stated a definite in-
terest in Frank Lyon Company’s owning the new Worthen
Building. We propose to purchase the building from you
for $7,500,000 under a sale and lease back agreement and
to borrow the money from New York Life Insurance Com-
pany on a note secured by a first mortgage on the build-
ing, a conditional assignment of your lease, and the general
credit of Frank Lyon Company. The lease will require you
to pay all expenses necessary to operate and maintain the
building, including all repairs, all taxes, and the required
insurance.
The annual rental payments will be $50,000 less than the
amount of the mortgage payments for the first ten years,
will he equal to our mortgage payments for the duration of
the original mortgage, and will be $600,000 per year for
the remainder of the lease. Worthen will have the option
to purchase the building after fifteen years for $1,700,000
cash plus the assumption of the original mortgage.
Worthen will also have options to re-purchase the building
after twenty, twenty-five, thirty, thirty-five and forty years
on a basis acceptable to Worthen Bank.
—— ——
347
This letter merely outlines our proposal. We are flexible
and want to negotiate an arrangement which is fair and
equitable to both parties.
Sincerely,
Frank Lyon Company
/s/ Frank Lyon
Frank Lyon
Chairman of the Board
348 349
P. Ex. 12 P. Ex. 13
CoMPARISON OF FINANCING PLANS October 31, 1967
Sale-Leaseback $7,500,000.00 25 Years Specirication For Save-Leasesack or Wortuen Bank
ann Orrice Buitpine
Frank Lyon Stephens firm — oe ;
$714,000— $682,584— Goldman Sale will include office building and banking quarters,
ry ry tentative exclusive of building site and parking deck for $7,500,000.
Annual Lease Rentals 532,332.00 583,000 (11 yrs) —«571,430 The investor will submit offer based on loan to be made
613,157.28 612,750 (12-25 yrs.) by New York Life Insurance Company @ 6% % to be fully
Maturity Basic Lease 25 yrs 25 yrs 25 yrs repaid in 25 years. Payments on this loan are to amortize
. ; 90% of the loan over 25 years for the first 11 years and
Percentage Mortgage Retire 100% 100% L007 100% of the balance over the remaining 14 years, with
= YY Options : 9% on on payments being made quarterly in arrears. Worthen will
o 5 ee 8% 4% 30% have option to purchase at end of 11th, 15th, 20th, and
4. 5 years 8% 4% 2.25% 25th vear.
4,.5y 8% 49 O% . : ~~
5. 58 cease 8% m roe . Worthen will execute a net lease for entire building from
Interim Coat Matimet ) investor and lease land to investor for the required term.
ae — — Land and parking deck will be subordinated to loan of
sis coms came same New York Life Insurance Company.
Repurchase : , . ,
Hith year 6,225,000 All investment tax credit and sales tax savings will ac-
sn year 6,152,903.62 5,325,000 5,400,000 erue to Worthen Bank.
th year 3,800,000 4,725,000 ;
25th year 2,850,000 Worthen Bank reserves the right to approve any subse-
Total amount paid on basie quent purchaser and to cancel ground lease upon its elee-
rent @ 15th year 8,308,281.12 8,864,000 8,571,450 tion to terminate lease after basic Jease term or renewal
Cost of funds lease term. In lieu of cancellation, adequate ground rental
onus shall be provided for lease of land after basic lease term.
OTAL @ 15th year: Worthen’s lease wil! be for a basic term of 25 years with
Basic Rent 8,308,281.12 8,864,000 8,571,400 @ S.vear renewal entions ;
Repurchase 6,152,903.62 5,325,000 5,400,000 » > ptions.
14,461,184.74 14,189,000 13,971,450 Worthen Bank will pay agreed commitment fee, attorney
fees and printing costs.
Interim financing during constructior is to be supplied
by the First National City Bank of New York at the prime
350
rate of interest, such interest to be paid by Worthen Bank
on amounts actually disbursed.
Investors interested in the above described sale and
lease-back will supply the following information:
1. Equity to be supplied by investor $500,000 and annual
rate of interest to be charged thereon 6%.
2. Lease rental payments to be required per annum
payable quarterly:
(a) 1 through 11 years $ 571,010
(b) 11 through 25 years $ 601,476
3. Rate of lease payments for each 5 year renewal op-
tion. Dollar amount $300,000.
4. Lease rental payments to be paid on land to Worthen
Bank during each renewal 5 year term:
25 through 30 years $100,000
30 through 35 years $150,000
35 through 40 years $200,000
40 through 45 years $250,000
45 through 50 years $250,000
50 through 55 years $250,000
5 through 60 years $250,000
60 through 65 years $250,000
5. Options of Worthen Bank to repurchase subject to
assumption of mortgage loan by Worthen:
(949,150—126,788)
(1,198,280—198,280)
lith year $822,362
15th year $1,000,000
20th vear $1,603,568
25th vear $2,145,935
351
6. Repurchase at 15th year—Summary:
(a) Total rental payments at end
15th year $ 8,687,014
(b) Total of equity and accrued interest
at end 15th yr $ 1,198,280
(ec) Add any premium or deduct any
discount + $ -198,280
(d) Total cost of sale leaseback
including balance due on
mortgage”. $14,038,230
*Mortgage balance end of 15th year $4,351,216
These figures may not be entirely accurate since tables used
were carried to only two places; minor differences will
therefore obtain.
352
P. Ex. 14
Frank Lyon Company
November 1, 1967
Mr. Ed Penick, President
Worthen Bank & Trust Company
401 Main Street
Little Rock, Arkansas 72201
Dear Ed:
We have reviewed your proposal submitted to us yester-
day. Unequivocably, we would like to accept it.
However, we do not feel that this proposal is the best
for Worthen Bank, therefore, we accept your proposal
with one m. jor change. Your lease payments for the first
five years will be reduced by $21,000 annually. On the en-
closed sheet we have listed the points contained in your
specification for easy comparison of our amended pro-
posal with your proposal.
Ed, as you know already, we want very much to be of
service to Worthen Bank.
Yours truly,
Frank Lyon Company
/s/ Franx Lyow
Frank Lyon
Chairman of the Board
353
Specirication For Save-Leasepack or Wortuexn Bank
ano Orrice Bvitprne
. Equity to be supplied by investor $500,000 and annual
rate of interest to be charged thereon 6%.
Lease rental payments to be required per annum pay-
able quarterly:
(a) 1 through 5 years $550,000
(b) 6 through 11 years $570,000
(c) 12 through 15 years $600,000
(d) 16 through 25 years $601,500
. Rate of lease payments for each 5 year renewal option.
Dollar amount $300,000.
. Lease rental payments to be paid on land to Worthen
Bank during each renewal 5 year term:
25 through 30 years $100,000
30 through 35 years $150,000
35 through 40 years $200,000 ~
40 through 45 years $250,000
45 through 50 years $250,000
50 through 55 years $250,000
55 through 60 years $250,000
60 through 65 years $250,000
. Options of Worthen Bank to repurchase subject to as-
sumption of mortgage loan by Worthen:
llth year $800,000 (949,150—149,150)
15th year $1,000,000 (1,198,280—198,280 )
on, 355
r P. Ex. 15
20th year $1,603,568
25th year $2,145,935 Comparison or Finance Puans
11/12/67
Repurchase at 11th year—Summary:
(a) Total rental payments at end ; Lyons(2) Ours Lyons(1) stephens
ai eel $ 6,170,000 Lease Rentals: , -
‘ > years 550,000 571,010 932,332 083,000
—s | vear 57 571.010 532,332 59835,000
: 1d accrued interest (i years 170,000 71, 32 083,00
(b) Total of equity ar 949.150 + vears 600,000 601,476 613,157 612,750
at end 11th year ~~? 10 years 601,500 601,476 613,157 612,750
(c) Add any premium or deduct any | Investor Equity 500,000 500,000 860,000 60,000
:, 9 150
(discount) (149,190) Rate 6% 6% 644, % 6,
(d) Balance of mortgage assumed D,419,074 Maturity Basic
$12,389 774 Lease 25 yrs 25 yrs. 25 yrs 20 Ps.
, © = ; b Cc ; y a « »f i
(e) Total cost of sale-leaseba Pn ae al Rencwal Options
1) vears 4% 4% 8% i
Land Rental to Worthen
after 25 we ars:
25-30 yrs 100,000 199,000 () 0
40.35 vrs 150.000 150.000 0 ()
- 40 vrs 200 000 200,000 () ()
HW). 65 vrs 250.000 250,000 ) ()
Peis Same Same Same Same
Interim Finance Cost: 334,000 334,000 334,000 334,000
Ri purchase Options:
lth year 800,000 822 362 — 707,724
loth vear 1.000.000 1,000,000 1,700,000 S98 725
-"h year 1,603,568 1,603 568 —— 1,219,930
Jth vear 2.145.935 9.145.925 - 2 850,000
Total @ 15th year:
Basie Rent
Repurchase
8 570.000
— 9,351,216
§ 687.014
5,351,216
8,308,281
8,864,000
6,152,903 5.295.000
$14,038,230
Cost of Funds $14.461,184
$13,921,216
$14,189,000
356
P. Ex. 16
First Nationa City Bank
Alan W. Peters
Vice President
November 30, 1967
Mr. Kkdward M. Penick
President
Worthen Bank and Trust Company
P.O. Box 1681
Little Rock, Ark. 72203
Dear Kd:
It is a pleasure to confirm the understanding worked
out over the past few weeks regarding construction financ-
ing for your new building. We stand ready to lend up to
$7,000,000 at our best commercial rate (fluctuating) to a
mutually aceeptable real estate corporation. We under-
stand that there is a firm New York Life commitment for
this amount and that Worthen Bank will guarantee com-
pletion of the building and minimum rentals required by
the takeout.
Since Worthen Bank will not actually be guaranteeing
our loan, we feel it reasonable to have some protection in
the unlikely event that the New York Life loan does not
become operative. May we suggest the best way to cover
this eventuality is for Worthen to provide FNCB with a
guarantee of rentals adequate to amortize the construction
loan on a 20-year level payment schedule at 144% above
our then existing Best Rate.
With a real estate company as the actual borrower, we
trust vou agree with our feeling that this financing should
be struetured in the standard construction loan pattern.
I sugezest that our Mortgage & Rea) Estate Department
people contact Dick Gates or one of your other off.zers to
357
work out mechanics of the many details such as review of
the takeout, handling of the mortgage, certification of the
draws, and so forth.
I trust that the arrangements outlined above are com-
pletely agreeable to everyone at Worthen Bank. If so,
let’s move forward as quickly as possible to put the details
in order. We are anxious to cooperate and certainly do
not want the first draw to be delayed by any teclinical
problem.
Best regards,
Sincerely,
Al
358
P. Ex. 17
New York Lire Insurance CoMPANy
Richard W. Baker, Jr., Vice President
in Charge of Real Estate and Mortgage Loans
December 18, 1967
Frank Lyon Company
P.O. Box 4408
Little Rock, Arkansas
Gentlemen:
You have advised us as follows with respect to the
Worthen Building, which is being constructed in Little
Rock, Arkansas, and with respect to the financing program
for this property:
(1) Worthen Bank and Trust Company (the ‘‘ Bank’’)
owns a parcel of land (the ‘‘Land’’) located at 200 West
Central Capitol Avenue, Little Rock, Arkansas, and hav-
ing an area of approximately 61,720 square ieet, upon
which the Bank is constructing the Worthen Building and
a separate parking facility (the ‘‘Parking Facility’’) to
provide parking for about 387 automobiles. The Worthen
Building will be a 24-story and single basement, centrally
air-conditioned, steel, conerete and masonry bank and
office building, with 6 elevators and about 217,860 square
feet of net rentable space. It is expected that construction
will he completed by July, 1969.
(2) The Bank’s estimated costs total $10,304,000, being
$964,198 for acquisition of the site of the Worthen Build-
ing, $460,802 for acquisition of the site of the Parking
Facility, $6,463,000 for construction of the Worthen Build-
ing, $1,015,000 for construction of the Parking Facility,
$857,000 for consultant’s and architect’s fees and financing
charges and $544,000 for fixtures and equipment.
359
(3) Upon the completion of construction, the Bank, as
lessor, and a wholly-owned real estate subsidiary (the
*‘Company’’) of Frank Lyon Company, as lessee, will
enter into a lease (the ‘‘Ground Lease’’) of the land
underlying the Worthen Building for an initial term of
25 years at a nominal ground rent, with renewals for an
additional 40 years. At the same time, the Company will
purchase the Worthen Building and possibly certain fix-
tures and equipment (the ‘‘ Personal Property’’) from the
Bank for $7,640,000, which amount will not exceed those
eosts to the Bank of construction of the Worthen Building
and of the Personal Property which are properly capital-
izable in accordance with sound accounting practice, as
such costs shall have been verified by us and to our
satisfaction.
(4) The purchase of the Worthen Building and the
Personal Property by the Company is to be financed by a
corporate loan in the principal amount of $7,140,000 to be
made to the Company at the time of such purchase, which
loan will he evidenced by the 63,% secured note (the
‘**Note’’) of the Company secured by an assignment to us
of a lease (the *‘Sublease’’) of the Worthen Building,
the lessee’s interest in the Ground Lease and the Per-
sonal Property between the Company, as landlord. and
the Bank, as tenant. The Note is to be additionally secured
by a deed of trust (the ‘Deed of Trust’’) constituting a
first lien on the Land, the Worthen Building, the Parking
Facility and the leasehold estate created by the Ground
Lease and a chattel mortgage or other effective first lien
on the Personal Properiy. The Deed of Trust
will mene.
among other provisions, provisions requiring continuance
of the corporate existence of the Company until full pay-
ment of the Note.
(5) The Note will be fully repaid over the period of
25 years by constant quarterly payments of $145,581.03
during the first 11 years of such period and of $153,289.32
360
during the remaining 14 years of such period, all such
payments to be applied first to interest at the rate of
634% per annum and the balance to principal.
(6) The Sublease shall be an absolutely net lease, shall
permit no abatement or reduction of rent except upon
conditions acceptable to us and shall be non-cancellable
except upon such conditions as shall assure payment of
the Note in full. If, and to the extent that, we so elect,
the Deed of Trust shall be subordinate to the Sublease.
The fixed expiration date of the Sublease shall in no event
be earlier than the final maturity date of the Note. The
Sublease shall provide for the payment of net rent in
quarterly installments in amounts at least equal to the
amounts of the quarterly payments required to be made
hy the Company pursuant to the terms of the Note, as
above provided.
(7) The value of the Land, as determined by our ap-
praisers, shal! not be less than $1,425,000. Those costs to
the Bank of acquisition of the Land and of construction
of the Worthen Building and the Parking Facility (in-
eluding consultant’s and architect’s fees and financing
charges) which are properly capitalizable in accordance
with sound accounting practice, as such costs shall have
been verified to our satisfaction by a firm of independent
certified publie accountants satisfactory to us, shall be not
less than $9,500,000.
(8) All costs and expenses in connection with the pro-
posed transaction, including, without limitation, the cost
of titie insurance, survey charges, the fees and disburse-
ments of our special counsel, recording fees, documentary
stamp and other taxes and printing expenses will be paid
by vou or the Company.
We are pleased to advise you that, on the basis of the
foregoing, and subject to our approval of the plans and
specifications of the Worthen Building and the Parking
361
Facility, the title to the properties (including any ease-
ments affecting the Land), all proceedings to be taken in
connection with the loan herein contemplated and the form
and substance of ali documents incident thereto, including,
without limitation, the Note, the Deed of Trust, the
Ground Lease, the Sublease and the instrument assigning
to us all of the lessor’s interest in the Sublease, and
subject further to the several matters referred to or set
forth in this letter or in the Summary of Certain Prinei-
pal Terms and Conditions (the ‘‘Summary’’) attached
hereto as Exhibit A, we will agree that, upon the perform-
ance of all of the terms and conditions referred to or set
forth in this letter or in the Summary, we will purchase
the Note in the principal amount of $7,140,000.
It is understood that our agreement to purchase the
Note will be contained in a separate Note Agreement
hetween the Company and us, setting forth all of the
terms and conditions of the loan and in form and sub-
stance satisfactory to the Company and to us (and inelud-
ing, as exhibits thereto, the forms of the Ground Lease.
the Sublease, the Deed of Trust and other appropriate
documents), and that the Note Agreement will be entered
into as soon as practicable.
We shall expect you to pay or reimburse us for, and
by vour confirmation of this letter vou agree to reimburse
us for, the fees and disbursements of our special counsel
and all other out-of-pocket expenses which may be paid
or ineurred by us in connection with the proposed loan
even if, for any reason whatsoever, the Note Agreement
is not exceuted or, if exeeuted, the transaction is net con
summated.
By your confirmation of this letter, vou further agree
to indemnify and hold us harmless against any claim for
brokerage commission or other such compensation which
may he made against us by any person, firm or corpora-
362
tion in connection with the transaction contemplated
herein.
If the foregoing is satisfactory to you, please so con-
firm by signing the enclosed copy of this letter and return-
ing it to me within 15 days of the date of this letter.
Very truly yours,
New York Lire Insvrance CoMPANY
By /s/ Ricnarp W. Baker, JR.
Vice President in Charge
of Real Estate and Mortgage Loans
Confirmed as of the date first above written.
Frank Lyon CoMPANY
By /s/ Frank Lyon
President
363
Kanreir A
634% Secured Note
of
Wholly-Owned Subsidiary of
Frank Lyon Company
Summary or Certain Principat Terms anp Conpitions
Issuer: Wholly-owned subsidiary of Frank Lyon Com-
pany.
Amount of Note: $7,140,000.
Rate: 634%.
Maturity: 25 years from date of Note.
Date of Closing: August, 1969.
Mandatory Payments: Constant quarterly payments of
$145,581.03 during the first 11 years and of $153,289.32
during the remaining 14 years prior to maturity, all
such payments to be applied first to interest at the
rate of 634% per annum and the balanee to principal.
Optional Prepayments: No privilege to prepay prior to
the end of the 11th loan year. Privilege to prepay the
Note in full at the end of the 11th loan year and there-
after at a premium starting at 344% at the end of the
11th loan year and decreasing % of 1% per year to
the end of the 21st loan year and at a premium of 1%
thereafter.
Security: First deed of trust on the fee title of the Bank
to the Land and the Parking Facility, on the fee title
of the Company to the Worthen Building and on the
leasehold estate of the Company under the Ground
Lease and first chattel mortgage or other effective first
lien on the Personal Property, subject only to the
Ground Lease, the Sublease, the assignment of all of
364
the lessor’s right, title and interest in the Sublease and
such other matters as New York Life may approve.
Title Evidence: Title insurance to be furnished with re-
spect to liens on real property in the amount of
$7,140,000 by title insurance companies, and pursuant
to policies, in form, substance and amount, satisfactory
to New York Life. Attorney’s opinion to be furnished
with respect to lien on fixtures and equipment by coun-
sel, and pursuant to opinion in form and substance,
satisfactory to New York Life.
Sublease: The lessee’s interest under the Ground Lease
ond all real property, fixtures and equipment acquired
by the Company to be leased by the Company to the
Bank. The Sublease to be an absolutely net, nonean-
cellable lease for a term of at least 25 years from the
date of the Note and to provide for nei rent payable
in quarterly installments at least equal to the amounts
of the quarterly mandatory payments required by the
Note. The Sublease to provide for furnishing of finan-
cial, operating and other statements by the Bank.
Assignment of Sublease: The Company’s unencumbered
right, title and interest in the Sublease to be assigned
to New York Life to secure payment of the Note.
Insurance: The Bank to maintain public liability, fire and
extended coverage and boiler insurance and war dam-
age insurance when a state of war or public emer-
veney exists and, as required by New York Life, other
insuranee when customarily carried by prudent owners
of comparable properties.
Deed of Trust Provisions: Deed of Trust to include,
among other provisions, provisions satisfactory to
New York Life relative to compliance with the terms
of the Ground Lease and the Sublease, continuance of
the corporate existence of the Company until full pay-
ment of the Note and furnishing of financial and other
365
statements, and prohibiting the Company from engag-
ing in any business other than owning, holding, leasing,
maintaining and operating real property and fixtures
and equipment incident thereto and from transferring
the security except to an assuming domestic corpora-
tion.
Escrow: If, on the date of closing, more than 15% of the
net rentable space in the Worthen Building is unfin-
ished for occupancy, $5.00 per square foot of such un-
finished space will be deposited by the Company in
escrow upon terms and conditions satisfactory to New
York Life until no more than 15% of such spaee re-
mains unfinished.
Expenses: All expenses incident to the transaction. in-
cluding, without limitation, title insurance and survey
charges, fees and disbursements of New York Life’s
special counsel, recording fees, documentary stamp and
other taxes and printing expenses are to be paid by
you.
Note Agreement: Agreement to be entered into between
the Company and New York Life with respect to the
issuance and purchase of the Note as soon as practica-
ble containing representations and warranties and
other provisions satisfactory to New York Life in-
cluding, among other provisions, provisions satisfac-
tory to New York Life relative to closing conditions
and indemnification with respect to brokerage and
other commissions, if any.
366
P. Ex. 18
Exhibit D
Wortnen Bank & Trust Company, Lessor
and
Frank Lyon Company, Lessee
Ground Lease
Dated as of May 1, 1968
Grounp LEASE
This Lease is dated as of May 1, 1968, between Worthen
Bank & Trust Company (the ‘* Bank’’), an Arkansas bank-
ing corporation with its principal office and place of busi-
ness at Fourth and Main Streets, Little Rock, Arkansas,
and Frank Lyon Company (the *‘Company’’), an Arkan-
sas corporation with its principal office and place of busi-
ness at West Sixty-fifth Street and Scott Hamilton Drive,
Little Rock, Arkansas.
1. Leased Property. Upon and subject to the conditions
and limitations set forth herein, the Bank leases to the
Company, and the Company rents from the Bank, the real
property (called ‘‘Tract A’’) described in Schedule 1
hereto.
2. Term of Lease. Subject to the further provisions
hereof, this lease shall remain in full force and effect for a
term commencing on May 1, 1968, and expiring at mid-
367
night on November 30, 2044*, unless the lease shall sooner
terminate as provided in Paragraph 9 hereof.
3. Rent. The Company will pay to the Bank rent as fol-
lows :
(a) For the entire period commencing May 1, 1968,
and ending November 30, 1994, the rent shall be the
sum of $50.00, payable upon the execution of this
(‘round Lease, receipt of which is hereby acknowledged.
(b) For the period commencing December 1, 1994,
and ending November 30, 1999, an anaual rent of $100,-
000 per year and one-fourth thereof shall be paid on
the last day of each February, May, August and No-
vember during each year of such period.
(ec) For the period commencing December 1, 1999,
and ending November 30, 2004, an annual rent of
$150,000 per year and one-fourth thereof shall be
paid on the last day of each February, May, August
and November during each year of such period.
(d) For the period commencing December 1, 2004,
and ending November 30, 2009, an annual rent of
$200,000 per year and one-fourth thereof shall be paid
on the last day of each February, May, August and
November during each year of such period.
(e) For the period commencing December 1, 2009,
und ending November 30, 2014, an annual rent of
+200,000 per year and one-fourth thereof shall be paid
on the last day of each February, May, August and
November during each year of such period.
(f) For the period commencing December 1, 2014,
and ending November 30, 2034, an annual rent of
* All dates contained herein, other than May 1, 1968, shall be chanyed ac.
cordingly if the closing date in the Note Purchase Agreement shall be other
than December 1, 1969.
368
$250,000 per year and one-fourth thereof shall be paid
on the last day of each February, May, August and
November during each year of such period.
(g) For the period commencing December 1, 2034,
and ending November 30, 2044, an annual rent of
$10,000 per year and one-fourth thereof shall be paid
on the last day of each February, May, August and
November during each year of such period.
4. No Claims Against the Bank. Nothing contained in
this Ground Lease be construed as giving the Company any
right, power or authority to contract for or permit the
performance of any labor or services or the furnishing of
any materials or other property in such fashion as would
permit the making of any claim against the Bank in re-
spect thereof.
5. Indemnification by the Bank. During the term of the
Building Lease dated as of May 1, 1968, between the Bank
and the Company, the Bank will protect, indemnify and
save harmless the Company from and against all liabilities,
obligations, claims, damages, penalties, causes of action,
costs and expenses (including attorney’s fees) imposed
upon or incurred by or asserted against the Company in
connection with this Ground Lease. If any action, suit or
proceeding is brought against the Company by reason of
any occurrence on or about Tract A during the term of
said Building Lease, the Bank will at its expense resist
and defend such action, suit or proceeding or cause the
same to be resisted and defended by counsel designated by
the Bank.
6. Payment of Taxes. The Bank (a) shall pay all taxes,
assessments, water or sewer charges, license fee, inspec-
tion fees, and other governmental charges with respect to
Tract A, and (b) shall have the right to contest the amount
or validity of such charge if such proceedings shall operate
369
to prevent or stay the sale of Tract A to satisfy such
charge.
7. /nsurance. Any insurance with respect to Tract A
shall be procured, maintained, and paid for by the Bank.
8. Condemnation of Property. In case of a taking of all
or part of Tract A as a result of the exercise of the power
of eminent domain, or the commencement of any proceed-
ings or negotiations which might result in any such taking,
the Company shall promptly give written notice thereof
to the Bank, generally describing the nature and extent
of such taking or the nature of such proceedings or ne-
gotiations and the nature and extent of the taking might re-
sult therefrom, as the case may be. In the absence of
any judicial determination or allocation of values as be-
tween Tract A and the improvements thereon, any payment
or award received by the Bank or by the Company shall
he held in trust by the recipient pending a determination
of the respective interests of the Bank and the Company
therein. The Company irrevocably authorizes and em-
powers the Bank, in its name or otherwise, to file and
prosecute what would be the Company’s claim for any
such award or payment and to collect, give a receipt for,
and retain the same as herein provided. The Bank will
pay all costs, fees and expenses reasonably incurred by
the Company in connection with any such taking and
seeking and obtaining any award or payment on account
thereof.
%. Termination, This Ground Lease shall terminate (a)
upon termination of the Building Lease dated as of May
1, 1968, between the Bank and the Company pursuant to
Articles XVIII or XX thereof, or (b) upon the purchase
by the Bank of the improvements on Tract A pursvaiit to
Articles XVIT or XVIII or said Building Lease.
10. Mortgage or Assignment to Leasehold Mortgagec.
The Company shall have the authority, without the consent
370
or approval of the Bank, to mortgage is leasehold interest
and to assign this Ground Lease and the leasehold estate
created thereby (including, but not limited to, an assign-
ment in lieu of a foreclosure) to a Leasehold Mortgagee.
As used herein, the term ‘‘Leasehold Mortgagee’’ shall
mean each person, firm, corporation, or other entity ‘>
whieh any part of the Company’s leasehold under this
lease or any other rights (beneficial or otherwise) of the
Company under this lease shall at the time have been con-
veyed, conditionally or otherwise, by the Company under
a mortgage or deed of trust. This Lease shall not be modi-
fied, altered, amended or terminated without the written
consent of any such Leasehold Mortgagee.
11. Default and Termination. Commencing December 1,
1994, if the Company shal! fail to pay any rent to the Bank
when the same shall have become due and payable, and
such failure shall continue for more than (30) days after
receipt of written notice from the Bank, then the Bank at
any time thereafter may at its option give a written termi-
nation notice to the Company, and upon the date speci-
fied in euch notice the term of this lease shall expire and
terminate, and all rights of the Company under this lease
shall cease, subject to the following limitations:
(a) When giving notice to the Company with re-
spect to any default under the provisions of this lease,
the Bank shall also serve a copy of such notice upon
any Leasehold Mortgagee by first class registered or
certified mail, and no such notice to the Company shall
he effective unless a copy of such notice is so served
upon the Leasehold Mortgagee.
(hb) If the Company shall fail to eure the default
in the time prescribed herein, further notice to that
effect shall likewise be given to the Leasehold Mortga-
gee by first class registered or certified mail.
371
(¢) The Leasehold Mortgagee shall be allowed such
additional time as may be required within which either
to cure the default or to institute and complete fore-
closure proceedings, or otherwise acquire title to the
leasehold interest, and, so long as the Leasehold Mort-
gagee shall be engaged either in curing the default or
in proceeding to foreclose the mortgage or deed of
trust, no such default shall operate or permit the Bank
to terminate the lease.
(d) If this lease should be terminated as provided
herein, the Leasehold Mortgagee shall be entitled to
receive a new lease for the remainder of the term upon
the same terms and conditions as herein contained and
having the same relative priority as the original lease
if (i) the Leasehold Mortgagee agrees to take prompt
steps to eure all defaults of the Company, (ii) the
leasehold Mortgagee makes a written request upon
the Bank for such new lease within thirty (30) days
from the date of termination of this lease, and (iii)
such written request is accompanied by payment to
the Bank of all amounts then due to the Bank.
(e) The Leasehold Mortgagee shall be granted the
right to cure any default on the part of the Company
and the further right to enter upon the premises and
do all things necessary to that end,
12. Liability of Leasehold Mortgagee. The Leasehold
Mortgagee shall not become personally liable for the obli-
gations of this lease unless and until it becomes the owner
of the leasehold estate by foreclosure, assignment in lieu
of foreclosure or otherwise, and thereafter shall remain
liable for such obligations only so long as the Leasehold
Mortgagee remains the owner of the leasehold estate. If
the Leasehold Mortgagee should become the owner of the
leasehold estate, it may assign the lease without the Bank’s
consent, and any purchase money mortgage delivered in
372
connection with any such assignment shall be entitled to
the benefit of all of the provisions of this lease with re-
spect to the mortgage or deed of trust of the leasehold
estate.
13. No Waiver. No failure by the Bank to insist upon
the strict performance of any term hereof or to exercise
any right, power or remedy consequent upon a breach
hereof, and no acceptance of full or partial rent during
the continuance of any such breach, shall constitute a
waiver of any such breach or of any such term. No waiver
of any breach shall affect or alter this lease, which shall
continue in full foree and effect, or the rights of the
Bank with respect to any other then existing or subse-
quent breach.
14. Notices. All notices and other communications here-
under shall be in writing and shall be deemed to have been
given when mailed by first class registered or certified
mail, postage prepaid, addressed (a) if to the Bank, to
Worthen Bank & Trust Company, at Fourth and Main
Streets, Little Rock, Arkansas, or at such other address
as the Bank shall have furnished to the Company in writ-
ing, or (b) if to the Company, at West Sixty-fifth Street
and Seott Hamilton Drive, Little Rock, Arkansas, to the
attention of Mr. Ralph Cotham, or at such other address
as the Company shall have furnished to the Bank in writ-
ing, or (c) if to any Leasehold Mortgagee, at such address
as such Leasehold Mortgagee shall have furnished in writ-
ing to the Bank and the Company.
15. No Merger of Title. There shall be no merger of this
lease or of the leasehold estate created by this lease with
the fee estate in Tract A or any part thereof by reason
of the fact that the same person, firm, corporation or other
entity may acquire or own or hold, directly or indirectly,
(a) this lease or the leasehold estate created by this lease
or any interest in this lease or in any such leasehold estate
373
and ()) the fee estate in Tract A or in any part thereof or
any interest in such fee estate. No such merger shall occur
unless and until all persons, corporations, firms and other
entities, including each Leasehold Mortgagee, having any
interest in (i) this lease or the leasehold estate created
by this lease and (ii) the fee estate in Tract A or any part
thereof shall join in any written instrument effecting such
merger and shall duly record the same.
16. General. Neither this lease nor any provision hereof
may be changed, waived, discharged, or terminated oral-
ly, but only by an instrument in writing signed by the par-
ty against which enforcement of such change, waiver, dis-
charge or termination is sought. All terms and provisions
of this lease shall be binding upon and inure to the bene-
fit of and be enforceable by the respective successors and
assigns of the parties hereto. The paragraph headings in
this lease are for purposes of reference only and shall not
limit or define the meaning hereof. This lease may be exe-
cuted in several counterparts, each of which is an original,
but all of which shall constitute one instrument.
In Wrirness Wuereor, the parties hereto have caused
this lease to be executed and their respective corporate
seals to be hereunto affixed and attested by their respective
officers thereunto duly authorized.
Attest: Worthen Bank & Trust Company
/s/ Booker WortHen By /s/ Epwarp M. Penick
Secretary President
Frank Lyon Company
Attest: By /s/ C. W. Apams
/s/ M. R. Gopwix
Secretary
(Acknowledgements Omitted in Printing)
374
ScHEDULE 1 Or Grounp LEASE
The land (Tract A) referred to in Paragraph 1 of the
Ground Lease, dated as of May 1, 1968, between Worthen
Bank & Trust Company, Lessor and Frank Lvon Company,
Lessee, to which this Schedule 1 is attached, consists of
a parcel in Little Rock, Pulaski County, Arkansas, and is
more particularly described as follows:
Becrxnrxnc at the Southwest corner of Lot 6, Block
84, Original City of Little Rock; thence northerly
160.33 feet along the West side of Lots 6, 5, 4 and 3
to a point 139.67 feet South of the Northwest corner
of said Block 84; thence easterly 140.0 feet to a point
on the East side of Lot 3, located 139.67 feet South
of ibe Northeast corner of Lot 1; thence 43.88 feet ina
southerly direction along the Fast side of Lots 3 and
4; thence easterly 160.0 feet to a point on the East side
of Lot 9, located 116.45 feet North of the Southeast
corner of Lot 7; thence southerly 116.45 feet along the
ast side of Lots 9, 8 and 7 to the Southeast corner of
Lot 7; thence westerly 300.0 feet along the South side
of Lots 7 and 6 to the point of beginning,
Suspsect, However, to certain restrictions, conditions
and reservations contained in a Special Warranty
Deed dated September 15, 1967, filed for record Sep-
tember 15, 1967, and reeorded in Book 1009 at Page
537 of the records of the Cireuit Clerk of Pulaski
County, Arkansas, executed by Housing Authority of
City of Little Rock, Arkansas, to Worthen Bank &
Trust Company.
Less AND Except
(a) the air space above the North 29.33 feet of
Tract A beginning at an elevation of 318.23 feet above
sea level and extending upward therefrom; excluding,
however, the portion of said air space to be occupied
——
375
by the elevator shaft and stair well on the plans and
specifications for construction of the improvements on
Tract A, prepared by the architectural firm of Erhart,
Eichenbaum, Rauch & Blass of Little Rock, Arkansas,
and
(b) an easement retained by Worthen Bank & Trust
Company, its successors and assigns forever, upon the
North 29.33 feet of Tract A to construct, repair and
replace structural supports, columns or foundations
thereon, together with the right of ingress and egress
for such purposes; provided that Worthen Bank &
Trust Company (or its successor in interest) shall
repair any damage to improvements on Tract A as a
result of the use of this easement and shall indemnify
Frank Lyon Company (or its assignee) against any
loss or damage caused by the use of this easement.
f'urTHER SusJEct to liens for unpaid taxes and assess-
ments and to unfiled mechanics’ and materialmens’
liens.
376
P. Ex. 19
Exhibit E
Frank Lyon Company, Lessor
AND
WortHEN Bank & Trust Company, Lessee
Building Lease
Dated as of May 1, 1968
(Table of Contents Omitted in Printing)
Buitpinc LEASE
Lease, dated as of May 1, 1968, between Frank Lyon
Company (Lessor’’), an Arkansas corporation having its
principal office and place of business at West 65th Street
and Scott Hamilton Drive,, Little Rock, Arkansas, and
Worthen Bank & Trust Company (*‘ Lessee’’), an Arkansas
banking corporation having its principal office and place
of business at Fourth and Main Streets, Little Rock,
Arkansas.
ARTICLE 1
Leasep Property; Initia, TerM or LEASE
Section 1.1 Upon and subject to the conditions and
limitations set forth herein, Lessor leases to Lessee, and
Lessee rents from Lessor, the following properties (collec-
tively, the ‘‘Property’’) :
(a) All buildings, structures and other improvements
now or hereafter located on the land (Tract A’’) described
in Schedule 1 hereto (collectively called the ‘‘Improve-
ments’’); and
377
(b) All machinery and fixtures of every kind and na-
ture whatsoever (collectively called the ‘‘ Building Service
Equipment’’) which may be used or procured for use in
connection with the operation and maintenance of the Im-
provements, including but not limited to engines, motors,
generators, dynamos, pumps and similar apparatus; fur-
naces, boilers, incinerators, oil burners, radiators and pip-
ing; stokers, heaters, tanks and heating equipment; wiring
and electrical equipment; gas, electric, lighting, heating,
plumbing, and bathroom fixtures, including pipes and con-
duits; elevators, escalators and lifting apparatus; refrig-
erating, air cooling, air conditioning, ventilating and
sprinkling apparatus; partitions, built-in kitchen and res-
taurant equipment; plants and shrubbery: and wall-to-
wall carpeting and all other equipment and furnishings
used or procured for use in connection with the operation
and maintenance of the Improvements, together with all
replacements thereof and additions thereto, but specifically
excluding safety deposit boxes, vault doors, banking trade
fixtures, furniture, china, glassware, silverware and simi-
lar personalty; and,
(ec) All of the leasehold estates, right, title and interest
of Lessor created by that certain Ground Lease between
Worthen Bank & Trust Company, as landlord, and Frank
Lyon Company, as tenant, dated as of May 1, 1968, re-
corded in the office of the Cireuit Clerk and Ex-Officio,
Recorder of Pulaski County, Arkansas, on 1968,
in Book-—— at page , in and to Tract A.
Secrion 1.2. Subject to the further provisions hereof,
this Lease shall remain in full force and effect for an initial
term (the *‘Initial Term’’) commencing on May 1, 1968,
and expiring at midnight on November 30, 1994,* unless
this Lease shall sooner terminate as hereinafter provided,
* To be adjusted accordingly if the Closing Date of the Note Purchase Agree-
ment shal! be other than December 1, 1969.
OE
378
with privilege unto Lessee, its successor and assigns, to
extend the term of this Lease as provided in Section 2.1.
ARTICLE II
Extenpep Term or Lease
Section 2.1. If Lessee is not in default in the perform-
ance of any of its obligations hereunder, it shall have the
options to extend the term hereof successively for eight
(8) additional terms of five (5) years each upon the same
terms as herein contained except that the Basic Rent pay-
able during each such extended term shall be as set forth
in Section 3.1 (b) and the number of extended terms per-
mitted hereunder shall be reduced by one upon each such
extension. Lease shall exercise each such option by giving
written notice of such exercise to Lessor not less than
twelve (12) months prior to the expiration of the term
or the extended term, as the case may be, then in effect.
Should Lessee fail to exercise any option to extend the
term hereof, it shall have no right thereafter to exercise
any succeeding option to extend the term hereof.
ARTICLE IUl
Basic Rent
Section 3.1. Lessee will pay to Lessor or Assignee a
net basic rent (**‘ Basie Rent’’) as follows:
(a) For the portion of the Initial Term of this Lease
prior to December 1, 1969,* no Basie Rent shall be
payable, and for the balance of the Initial Term of
this Lease a Basie Rent shall be payable as follows:
(1) For the period commencing December 1,
1969,* and ending November 30, 1980,° $145,581.03
* To be adjusted accordingly if the Closing Date of the Note Purchase Agree-
ment shall be other than December 1, 1969.
379
on each of the forty-four (44) Quarterly Install-
ment Dates (as defined in Section 3.3 hereof) with-
in such period.
(2) For the period commencing December 1,
1980, and ending November 30, 1994,* $153,-
289.32 on each of the fifty-six (56) Quarterly In-
stallment Dates within such period.
(b) For each five-year extended term, a Basic Rent
at an annual rate of $300,000. Such Basie Rent shall
be payable in equal quarterly installments on the
Quarterly Installment Dates within each such extended
term.
Section 3.2. The Basie Rent and other sums payable to
Lessor or Assignee hereunder shall be payable in such
coin or currency of the United States of America as at the
time of payment shall be legal tender for the payment of
public and private debts and shall be paid to Lessor or
Assignee at Lessor’s address set forth above or to such
agent or person or persons or at such other address as
Lessor or Assignee from time to time may designate in
writing. The Basie Rent shall be absolutely net to Lessor
or Assignee so that this Lease shall vield to Lessor or
Assignee the full amount of the installments of Basic
Rent throughout the term of this Lease without deduction.
Section 3.3. The Quarterly Installment Dates are the
last day of each February, May, August and November
during the term of this Lease or any extension thereof
commencing February 28, 1970.*
* To be adjusted accordingly if the Closing Date of the Note Purchase Agree
ment sha!) be other than December 1, 1969.
380
ARTICLE IV
AppiTionaL Rent
Section 4.1. Lessee will also pay, from time to time as
provided in this Lease as additional rent (‘‘ Additional
Rent’’), (a) all other amounts, liabilities and obligations
which Lessee herein assumes or agrees to pay, (b) interest
at the rate of 10% per annum on such of the foregoing
amounts, liabilities and obligations as are payable to Les-
sor or Assignee and are not paid when due, from the due
date until payment thereof, and (c) interest at the rate of
10% per annum on all overdue installments of Basic Rent,
from the due date thereof until payment. In the event of
any failure on the part of Lessee to pay any Additional
Rent, Lessor or Assignee shal] have all the rights, powers
and remedies provided for in this Lease or at law or in
equity or otherwise in the case of non-payment of the
Basic Rent.
ARTICLE V
No CounTercLaimM, ABATEMENT, ETc.
Section 5.1. The Basic Rent, Additional Rent and all
other sums payable by Lessee hereunder shall be paid
without notice, demand, counterclaim, setoff, deduction or
defense and without abatement, suspension, deferment,
dimunition or reduction, and the obligations and liabilities
of Lessee hereunder shall in no way be released, discharged
or otherwise affected (except as expressly provided here-
in) for any reason, including, without limitation, whether
occurring before or after the Completion Date: (a) any
defect in the condition, quality or fitness for use of the
Property or any part thereof; (b) any change of grade of
any abutting street; (c) any damage to or destruction of or
any Taking (for a limited period or otherwise) of the
Property or any part thereof; (d) any restriction, pre-
vention or curtailment of or interference with any of the
Property or any part thereof; (e) any title defect or en-
cumbrance or any eviction or prospective eviction from the
il
381
Property or any part thereof by title paramount or other-
wise; (f) any change, waiver, extension, indulgence or
other action or omission in respect of any obligation or
liability of Lessor; (g) any bankruptcy, insolvency, re-
organization, composition, adjustment, dissolution, liquida-
tion or other like proceeding relating to Lessor or As-
signee, or any action taken with respect to this Lease by
any trustee or receiver of Lessor or of Assignee, or by
any court, in any such proceeding; (h) any claim which
Lessee has or might have against Lessor or Assignee;
(i) any failure on the part of Lessor to perform or com-
ply with any of the terms hereof or of any other agree-
ment with Lessee; or (j) any other occurrence whatsoever,
whether similar or dissimilar to the foregoing: whether or
not Lessee shall have notice of knowledge of any of the
foregoing. Except as expressly provided herein, Lessee
waives all rights now or hereafter conferred by statute or
otherwise to quit, terminate or surrender this Lease or the
Property or any part thereof, or to any abatement, sus-
pension, deferment, diminution or reduction of Basie Rent,
Additional Rent or any other suin payable by Lessee here-
under. All payments by Lessee to Lessor hereunder shall
be final, and Lessee will not seek to recover any such pay-
ment or any part thereof for any reason whatsoever.
ARTICLE VI
ConpDITION aND Use or Property
Section 6.1. Lessor makes no representation or war-
ranty with respect to the present or future condition of the
Property or its fitness or availability for any particular
use, and neither Lessor nor Assignee shall be liable for
any latent or patent defect therein. Lessee may use the
Property for any lawful purpose and will not do or per-
mit any act or thing which is contrary to any Legal Re-
quirement or Insurance Requirement, or which might im-
pair the value or usefulness of the Property or any part
EEE EEE
382
thereof, or which constitutes a public or private nuisance
or abandonment or waste of the Property or any part
thereof.
ARTICLE VII
Repairs AND MAINTENANCE OF PREMISES
Section 7.1. Lessee convenants throughout the term of
this J.ease, at Lessee’s sole cost and expense, to take good
care of the Property and the adjoining sidewalks, curbs
and vaults, and subject to the provisions of this Lease
elsewhere set forth, to keep the same in good order and
condition, excepting reasonable wear and tear, and prompt-
ly at Lessee’s own cost and expense to make all neces-
sary repairs, interior and exterior, structural and non-
structural, ordinary as well as extraordinary, foreseen as
well as unforeseen, and to shore the foundations and walls
of the Property, and to do any other acts necessary for
the preservation and safety of the Property if an exca-
vation or other building operation shall be made upon any
adjoining premises or streets. When used in this Section,
the term ‘‘repairs’’ shall include replacements or renew-
als when necessary, and all such repairs made by Lessee
shall he at least equal in quality and class to the original
work. Lessee shall keep and maintain all portions of the
Property and the adjoining sidewaks in a clean and order-
ly condition, free of accumulation of dirt, rubbish, snow
and ice.
ARTICLE VIII
REPLACEMENT AND ReMovVAL or BUILDING
SERVICE EQuIPMENT
Section 8.1. All improvements and alterations to the
Property, all replacements or renewals of Building Serv-
ice Kquipment, and all personal property and fixtures ac-
quired or installed by or on behalf of Lessee pursuant to
383
Lessee’s covenants in Section 7.1 hereof shall, immediate-
ly upon completion, acquisition or installation thereof, be
and become the property of Lessor without payment there-
for by Lessor and shall be surrendered to Lessor upon the
expiration or earlier termination of the term of this Lease.
Lessee shall be entitled to remove any of Lessee’s per-
sonal property, as defined in ARTICLE XXXI hereof,
during the term of this Lease, or if the term shall end prior
to the date herein specifically fixed for such termination,
then within a reasonable time thereafter, but Lessee shall,
at its own cost and expense, repair any and all damage
to the Property resulting from or caused by their removal
therefrom.
ARTICLE IX
Pusiiec Urimiry CHarGces
Section 9.1. Lessee agrees to pay or cause to be paid
all charges for gas, electricity, light, heat, power, water,
storm and sanitary sewage, telephone and other communi-
cation service used, rendered or supplied upon or in con-
nection with the Property throughout the term of this
Lease, and to indemnify Lessor and save it harmless
against any liability or damages on such account. Lessee
shall also at its sole cost and expense procure any and
ail necessary permits, licenses or other authorizations re-
quired for the lawful and proper installation and main-
tenance upon the Property of wires, pipes, conduits, tubes
and other equipment and appliances for use in supplying
any such services to and upon the Property.
ARTICLE X
Mecuanics’ Liens
Section 10,1. Lessee shall not suffer or permit any
mechanics’ liens to be filed against the Property nor against
Lessee’s leasehold interest in the Property by reason of
384
work, labor, services or materials supplied or claimed to
have been supplied to Lessee or anyone holding the Prop-
erty or any part thereof through or under Lessee. If any
such mechanics’ lien shall at any time be filed, Lessee
shall, within thirty (30) days after notice of the filing
thereof, cause the same to be discharged of record by
payment, deposit, bond, order of a court of competent
jurisdiction or otherwise, or deposit with Lessor or As-
signee the amount of such lien together with all interest
and penalties that may or might accrue thereon (any bal-
ance remaining after the discharge of such lien of record
to be returned, without interest, to Lessee). If Lessee shall
fail to cause such lien to be discharged within the period
aforesaid, then, in addition to anv other right or remedy
of Lessor, Lessor, if at any time Lessor believes that the
nonpayment of such lien may subject the Property or
some part thereof to forfeiture or loss, may, but shall
not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge
of such lien by deposit or by bonding proceedings, and
in any such event Lessor shall be entitled, if Lessor so
elects, to cormpel the prosecution of an action for the fore-
closure of such mechanics’ lien by the lienor and to pay
the amount of the judgment for and in favor of the lienor
with interest, costs and allowances. Any amount paid by
Lessor, in excess of any amount so deposited with Lessor
or Assignee, for any of the aforesaid purposes with in-
terest thereon at the rate of ten per centum (10%) per
annum from the date of payment shall be repaid by Les-
see to Lessor on demand, and if unpaid may be treated as
Additional Rent as provided in Section 4.1 hereof. Nothing
in this Lease contained shall be deemed or construed in
any way as constituting the consent or request of Lessor,
express or implied, by inference or otherwise, to any con-
tractor, subcontractor, laborer or materialman for the
performance of any labor or the furnishing of any mate-
rials for any specific improvement, alteration or repair of
-
385
or to the Property or any part thereof, nor as giving
Lessee a right, power or authority to contract for or per-
mit the rendering of any services or the furnishing of any
materials that would give rise to the filing of any me-
chanics’ lien against the Property.
ARTICLE XI
INDEMNIFICATION OF LESSOR
Section 11.1. Lessee agrees to indemnify and save Les-
sor harmless against and from any and all claims by or
on behalf of any person or persons, firm or firms, corpora-
tion or corporations, arising from the conduct or manage-
ment of or from any work or thing whatsoever done in
and on the Property and will further indemnify and save
Lessor harmless against and from any and all claims
arising during the term of this Lease from any condition
of the Property or any street, curb or sidewalk adjoining
the Property, or of any vaults, tunnels, passageways or
space therein or appurtenant thereto, or arising from
any breach or default on the part of Lessee in the per-
formance of any covenant or agreement on the part of
Lessee to be performed, pursuant to the terms of this
Lease, or arising from any act or negligence of Lessee, or
any of its agents, contractors, servants, employees, or
licensees or arising from any accident, injury or damage
whatsoever caused to any person, firm or corporation oc-
curring during the term of this Lease, in or about the
Property, or upon or under the sidewalks and the land ad-
jacent thereto, and from and against all costs, expenses
and liabilities incurred in or in connection with any such
claim or action or proceeding brought thereon; and in case
any action or proceeding be brought against Lessor by
reason of any such claim, Lessee upon notice from Les-
sor convenants to resist and defend such action or pro-
ceeding and to employ counsel therefor satisfactory to
Lessor. Lessee covenants and agrees to pay, and to in-
386
demnify Lessor against, all legal costs and charges in-
cluding counsel fees lawfully and reasonably incurred in
obtaining possession of the Property after default of Les-
see or after Lessee’s default in surrendering possession
upon expiration or earlier termination of the term of this
Lease or enforcing any covenant or agreement of Lessee
herein contained.
ARTICLE XII
AppiTionaL Rent, PayMent or Taxes,
ASSESSMENT, Etc.
Sr ‘TION 12.1. Lessee covenants and agrees to pay as
Additional Rent (subject as hereinafter provided), before
any fine, penalty, interest or cost may be added thereto
for the nonpayment thereof, all real estate taxes, personal
property taxes, assessments, water rates and water
charges, and other governmental levies and charges, gen-
era, and special, ordinary and extraordinary, unforeseen
as well as foreseen, of any kind and nature whatsoever
(all of which taxes, assessments, water rates or water
charges, and other governmental levies and charges are
hereinafter referred to as ‘‘imposition”’ or ‘‘impositions’’)
which are assessed, levied, confirmed, imposed or bosses
a lien upon the Property or any part thereof or become
payable during the term of this Lease. If, by law, any such
imposition is payable, or may at the option of the taxpayer
be paid, in installments (whether or not interest shall
accrue on the unpaid balance of such imposition), Lessee
may pay the same (and any accrued interest on the un-
paid balance of such imposition), in installments as the
samme respectively become due and before any tine, penalty,
interest or cost may be added thereto for the non-payment
of any such installment and interest. Any imposition relat-
ing to a fiscal period of the taxing authority, a part of which
period is included within the term of this Lease and a part
of which is included in a period of time after the expira-
wd
387
tion of this Lease shall (whether or not such imposition
shall be assessed, levied, confirmed, imposed or become a
lien upon the Property, or shall become payable during the
term of this Lease) be adjusted between Lessor and Lessee
as of the expiration of this Lease.
Section 12.2. Nothing in this Lease contained shall re-
quire Lessee to pay any franchise, corporate, estate, in-
heritance, succession, capital levy or transfer tax of lessor,
or any income, profit or revenue tax or any other tax,
assessment, charge or levy upon the rent payable by Les-
see under this Lease, nor shall any tax, assessment, ch-rge
or levy of the character hereinabove in this Section de-
seribed he deemed to be included within the term **impo-
sition’ as defined in Section 12.1. If at any time during
the term of this Lease under the laws of the State of Ar-
kansas or any political subdivision thereof a tax or excise
on rents is levied or assessed against Lessor or the Basie
Rent, as a substitution in whole or in part for taxes as-
sessed or imposed by said State or any political subdivi-
sion thereof on land, buildings or personal property, the
same shall he deemed to be included within the term ‘‘im-
position’? as defined as aforesaid, and Lessee covenants
(but to the extent only that such substitution so far as as-
certainable relieves Lessee from the payment of imposi-
tions as in Section 12.1 provided) to pay and discharge
such tax or excise on rent in accordance with the provisions
of Section 12.1 in respect of the payment of impositions.
If Lessee shall be required by law to pay, and pursuant
to such requirement does pay, any such tax, assessment,
charge or levy in this Section deseribed Lessor shall, upon
written request, reimburse Lessee for any such payments
with interest at six per centum (6%) per annum (other
than payments made by Lessee pursuant to the provisions
in the preceding sentence in respect of a tax or excise
on rents levied or assessed as a substitution in whole or in
part for taxes assessed or imposed on land, buildings or
personal property).
388
Section 12.3. Within a reasonable time after a request
therefor is made by Lessor, Lessee covenants to furnish
to Lessor for its inspection official receipts of the appro-
priate taxing authority, or other proof satisfactory to Les-
sor, evidencing the payment of any imposition payable by
Lessee as provided in this Article.
Section 12.4. Lessee shall have the right to contest
the amount or validity of any such imposition by appro-
priate proceedings. Lessee shall, nevertheless, promptly
pay such imposition in accordance with the terms and
provisions of this Lease, and nothing herein shall imply
any right on the part of Lessee to postpone or defer such
payment for any such purpose, unless such proceedings
shall operate to prevent or stay the collection of the imposi-
tion so contested and the sale of the Property, or any part
thereof, to satisfy the same. Lessee shall set aside on its
hooks adequate reserves with respect to such contested
liability and shall fursish such security, if any, as may
be required in the proceedings or reasonably requested by
Lessor or Assignee, which security may include a deposit
by Lessee with Lessor of a sum equal to the amount so
contested and unpaid together with all interest and penal-
ties in connection therewith and all charges that may or
might be assessed against or become a charge on the prop-
erty, or any part thereof, in said proceedings. Upon the
termination of such proceedings, Lessee shall pay the
amount of any such imposition, or part thereof, as finally
determined in such proceedings, the payment of which
may have been deferred during the prosecution of such
proceedings, together with any costs, fees, interest, penal-
ties or other liabilities in connection therewith, and up-
on such payment, Lessor shall return the amount of any
deposit above referred to without interest. If at any time
during the continuance of such proceedings Lessor shall
deem the amount deposited with it insufficient, Lessee shall,
upon demand, deposit with Lessor such additional sum
eR ee
<
389
as Lessor may reasonably request, and upon failure of
Lessee so to do, the amount theretofore deposited may
be applied to the payment, removal and discharge of said
imposition and the interest and penalties in connection
therewith and any costs, fees or other liabilities accruing
in any such proceedings, and the balance, if any, shall be
returned to Lessee, provided Lessee is not in default here-
under. If the amount so deposited shail be insufficient for
this purpose, Lessee shall forthwith pay to Lessor such
additional sum as may be necessary to pay the same. Les-
sor shall not be required to join in any such proceedings
except that if any law hereafter in effect shall require that
such proceedings be brought by or in the name of Lessor
or any owner of the Property, Lessor agrees not unrea-
sonably to withhold its consent to joining in any such pro-
ceedings, or permittting the same to be brought in its name.
Lessor shall not be subjected to any liability for the pay-
ment of any costs or expenses in connection with any such
procecding, and Lessee covenants to indemnify and save
harmless Lessor from any such costs or expenses. Lessee
shall be entitled to any refund of any such imposition and
penalties or interest thereon, which shall have been paid
by Lessee, or if paid by Lessor, for which Lessor shall
have heen fully reimbursed.
Section 12.5. The certificate, advice or bill of the ap-
propriate official designated by law to make or issue the
same or to receive payment of such imposition, of non-
payment of any such imposition shall be prima facie evi-
dence that such imposition is due and unpaid at the time
of the making or issuance of such certificate, advice or bill.
ARTICLE XIII
Compiiance WitH Orpers, Orpinances, Ec.
Section 13.1. Lessee covenants throughout the term of
this Lease, at Lessee’s sole cost and expense, promptly to
comply with all requirements of all laws, orders, ordi-
390
nances, rules and regulations of the Federal, state, county
and municipal authorities, and with any direction or cer-
tificate of occupancy of any public officer or officers, and
the orders, rules and regulations of the National Board
of Fire Underwriters and each other body having similar
functions, and with the requirements of all policies of
public liability, fire and other insurance at any time in force
with respect to the Property, which shall impose any duty
upon the Lessee with respect to the Property or the use,
occupancy or control thereof or the conduct of any busi-
ness therein, whether or not any of the same require
structural repairs or alterations.
Section 13.2. Lessee shall have the right to contest by
appropriate legal proceedings, in the name of Lessee or
Lessor or both, but without cost or expense to Lessor, the
validity of any law, ordinance, order, rule, regulation or
requirement of the nature referred to in Section 13.1 and
if by the terms of any such law, ordinance, order, rule,
regulation or requirement, compliance therewith may legal-
lv be held in abeyance without the ineurrence of any lien,
charge or liability of any kind against the fee of the Prop-
erty or Lessee’s leasehold interest in said Property and
without subjecting Lessee or Lessor to any liability, civil
or criminal, of whatsoever nature for failure so to comply
therewith, Lessee may postpone compliance therewith un-
til the final determination of any proceedings, provided
that all such proceedings shall be prosecuted with all due
diligence and dispatch, and, if any lien, charge or civil lia-
bility is incurred by reason of non-compliance, Lessee may
nevertheless make the contest aforesaid and delay compli-
ance as aforesaid, provided that Lessee furnishes to Les-
sor security reasonably satisfactory to Lessor against any
loss or injury by reason of such non-compliance or delay
therein and prosecutes the contest aforesaid with due dili-
gence and dispatch.
Section 13.3. This Lease is upon and subject to all of
the terms, covenants and agreements of the Ground Lease
eee
Pie
391
described in granting clause (c) of Section 1.1 hereof.
Lessee covenants to keep, perform and observe all of such
terms, covenants and agreements on the part of the tenant
thereunder to be kept, observed and performed, including
the payment of all rent and other sums payable by the
tenant thereunder. Lessee shall do all things necessary to
prevent any default on the part of the tenant thereunder,
or any termination, surrender, cancellation, forfeiture or
impairment thereof, to the end that the rights of Lessor,
as tenant thereunder, may be kept unimpaired and free
from default.
Srecrion 14.1. Lessee shall, at Lessee’s sole cost and ex-
pense, throughout the term of this Lease:
A. Keep the Property insured against loss or dam-
age by fire and lightning and such other risks as are
insurable against under the present or future standard
forms of extended coverage insurance, in amounts not
less than one hundred per centum (100%) of then
full insurable value;
B. Keep the Property insured against war risks as
and when such insurance is obtainable from the United
States of America or an agency thereof, in an amount
net less than one hundred per centum (100%) of
then full insurable value ;
(. Keep the Property insured in an amount not
less than ten per centum (10%) of then full insurable
value against loss or damage from leakage of sprink-
ler systems now or hereafter installed therein ;
D). Keep the Property insured against loss or dam-
age by explosion of steam boilers, pressure vessels
or similar apparatus, with respect to all steam boilers,
pressure vessels or similar apparatus, now or here-
after installed therein, in an amount not less than
$100,000 with respect to any one accident; and
392
FE. Keep the Property insured as reasonably re-
quired by Lessor or Assignee and against all risks
insured against by prudent persons owning like prop-
erties in like localities, giving due regard to the height
and type of building, its construction, location, use
and occupancy.
The term ‘‘full insurable value’’ shall mean the actual
replacement cost (excluding foundation and excavation
cost for the purposes of the foregoing Subsections A and C
but including such foundation and excavation costs for the
purposes of the foregoing Subsection B), less physical de-
preciation, and said ‘‘full insurable value’’ shall be de-
termined from time to time at the request of Lessor (but
not more frequently than once in every twelve (12) months’
period) by an architect, contractor, appraiser, appraisal
company or one of the insurers selected and paid by Les-
see and acceptable to Lessor.
All insurance for which provision has been made in
Subsection EF of this Section shall be maintained in such
amounts as such insurance is usually carried by prudent
persons enegaged in the same or a similar business; and
all insurance therein provided for shall be effected under
a valid and enforceable policy or policies issued by in-
surers of recognized responsibility.
The policy or other contract of insurance in respect of
the hazard of the character described in Subsection D of
this Neetion may provide in effect that the first $1,000 of
loss sustained shall be paid by Lessee and that additional
losses sustained, which are insured against under such
policy or other contract of insurance, shall be paid by the
insurer.
Any such insurance may be effected by policies of blan-
ket insurance, which may cover other property not in-
cluded, as well as the Property; provided however, that
either (1) any such policy of blanket insurance shall speci-
ee ————
fy therein, or (2) Lessee shall furnish Lessor with a
written statement from the insurers under such policy
specifying the amount of the total insurance allocated to
the Property (which amount shall at all times be not less
than the applicable amounts required by this Article);
and provided, further, that in all other respects, any such
policy shall comply with the other provisions of this
Article.
Section 14.2. Lessee shall at Lessee’s sole cost and ex-
pense, throughout the term of this Lease and for the mutual
benefit of Lessor and Lessee, maintain general public
liability imsurance against claims for bodily injury or
death occurring on, in or about the Property or any ele-
vator or escalator therein and upon, in or about the ad-
joining streets, sidewalks and passageways thereof, such
public liability insurance to afford protection to the limit
of not less than $200,000 in respect of bodily injury or
death to any one person, and not less than $1,000,000 in
respect to bodily injury or death to any number of persons
in any one accid’ t or occurance.
Section 14.3. All proceeds of policies of insurance in
respect of hazards of the character described in Section
14.1 shall be payable to Lessor or Assignee, as its interest
may appear (by means of the standard mortgagee clause
without contribution, if obtainable). The loss, if any, under
any such policy shall be adjusted with the insurance com-
panies (a) by Lessee in case of any particular casualty
resulting in a loss payment not exceeding $50,000 in the
aggregate, or (b) by Lessor and Lessee in the case of any
particular casualty resulting in a loss payment exceeding
$50,000 in the aggregate; provided, however, that the loss,
if any, under any such policy shall be adjusted with the
insurance companies by Lessor and Lessee in the case of
any particular casualty resulting in a loss payment ex-
ceeding $200,000 in the aggregate only if the Assignee shall
have consented to such adjustment. The loss so adjusted
394
shall be paid (i) to Lessee in the case of any particular
casualty resulting in a loss payment not exceeding $50,000
in the aggregate, or (ii) to Lessor or to the Assignee in
the case of any particular casualty resulting in a loss pay-
ment exceeding $50,000 in the aggregate. All such policies
or certificates therefore issued by the respective insurers
shall provide that the loss, if any, thereunder shall be ad-
justed and paid as provided in this Lease.
Section 14.4. All insurance provided for in this Article
shall be effected under valid and enforceable policies is-
sued by insurers of recognized responsibility satisfactory
to Lessor, and such policies shall name Lessor and Lessee
as the assureds, as their respective interests may appear.
All policies of insurance provided for in Section 14.1, shall
provide (a) that such policies shall not be cancelled with-
out at least ten (10) days’ prior written notice to each as-
sured named therein and to the Assignee to whom loss
thereunder may be payable, and (b) to the extent obtain-
able, that any loss shall be payable to Lessor or to the
Assignee, notwithstanding any act or negligence of Lessee
which might otherwise result in forfeiture of said insur-
ance.
Section 14.5 Promptly upon request and thereafter not
less than fifteen (15) days prior to the expiration dates of
the expiring policies, originals of the policies provided for
in Section 14.1 and certificates issued by the respective in-
surers of the policies provided for in Section 14.2, shall
be delivered to Lessor and Assignee. Within twenty (20)
days after each Quarterly Installment Date, Lessee will
furnish satisfactory evidence to Lessor and Assignee that,
as to all policies or contracts so delivered with respect to
which the amount of premiums thereon shall have been
determined and shall have become due and payable during
such quarterly period, payment of all such premiums has
been made. Lessee shall also furnish to Lessor and As-
signee upon the execution of this Lease and thereafter at
__——_
395
any time upon Lessor’s request, a certificate signed by
an executive officer of Lessee, containing a statement of the
insurance effected by Lessee pursuant to this Article and
then in force and stating that the insurance then in force
complies with the provisions of this Article, together with
such evidence in support of such certificate as Lessor and
Assignee may reasonably require. The premiums on all
insurance policies in force at the termination of this
Lease shall be apportioned between Lessor and Lessee
in such manner that Lessor shall reimburse Lessee for
that portion of the aggregate premiums unearned on all
such policies in force at such termination of this lease.
ARTICLE XV
CHANGES AND ALTERATIONS BY LESSEE
Section 15.1. Unless an Event of Default (as defined
in the Deed of Trust) shall have occurred which shal] not
have been remedied, Lessee shall have the right, at any time
and from time to time during the term of this Lease, to
make such changes and alterations, structural or other-
wise, to the Property as Lessee shall deem necessary or
desirable in connection with the requirements of its busi-
ness, including, without limiting the foregoing, the right to
connect any building with any adjoining building or build-
ings or part thereof. Such changes, alterations or new con-
struction (herein collectively referred to as ‘‘changes and
alterations’’ or ‘‘changes or alterations’’), other than
changes or alterations of Lessees personal property and
fixtures, shall be made in all cases subject to the following
conditions which Lessee covenants and agrees to observe
and perform:
A. No change or alteration shall be undertaken or
carried on until Lessee shall have procured and paid
for, so far as the same may be required, from time to
time, all municipal and other governmental permits
396
and authorizations of the various mu-icipal depart-
ments and governmental subdivisions having juris-
diction which are required for the completion of such
change or alteration, and Lessor agrees to join in
the application for such permits or authorizations
whenever such action is necessary.
B. The building or buildings as so altered or im-
proved, upon completion of the work, shall be of a
value not less than the value of such building or build-
ings immediately prior to the making of such altera-
tion or improvement.
C. Any change or alteration involving an estimated
cost of more than $100,000 shall be conducted under
the supervision of an architect or engineer selected
hy Lessee, who may be in the employ of Lessee and
shall be satisfactory to Lessor, and no such change
or alteration shall be undertaken until twenty-five (25)
days after there shall have been filed with Lessor de-
tailed plans and specifications and cost estimates there-
for, prepared and approved in writing by such archi-
tect or engineer and accompanied by a certificate of
such architect or engineer stating that such plans and
specifications conform to all applicable provisions of
this Article, and during such 25-day period lessor
shall not have served notice on Lessee that it is not
satisfied with said architect or engineer.
D. No change or alteration involving an estimated
cost of more than $250,000 shall be undertaken until
either (1) Lessor shall have been furnished by Lessee,
at Lessee’s expense, with a bond in which Lessee shall
shall be principal and a surety company of recognized
responsibility shall be surety, and which, at Lessor’s
request, shall run in favor of the Assignee, and which
shall be in form satisfactory to Lessor, conditioned
upon the completion of and payment in full for such
397
change or alteration within a reasonable time, sub-
ject, however to Unavoidable Delays, or (2) Lessee
shall have deposited with Lessor a sum sufficient to
pay the entire cost of any such change or alteration
as estimated by the architect or engineer referred
to in Subsection C of this Section.
E. Moneys deposited with Lessor pursuant to the
foregoing Subsection D may be withdrawn by Lessee,
provided Lessee is not in default in the payment of
the Basie Rent, or any item of Additional Rent or
other charge payable by Lessee hereunder and shall
he paid by Lessor as hereinafter provided, from time
to time, upon receipt by the Lessor of the following:
(1) .. certificate of the architect or engineer
referred to in Subsection C of this Section dated
dated not more than thirty (30) days prior to
the application for such withdrawal setting forth
in substance as follows:
(i) That the sum then requested to he
withdrawn either has been paid by Lessee
and/or is justly due to contractors, subcon-
tractors, materialmen, engineers, architects
or other persons (whose names and addresses
shall be stated) who have rendered services
or furnished materials for any such change
or alteration, pursuant to the plans and speci-
fications therefor referred to in Subsection
( of this Section and giving a brief desecrip-
tion of such services and the materials and
the principal subdivisions or categories there-
of and the several amounts so paid or due
to each of said persons iu respect thereof,
and stating the progress of such change or al-
teration pursuant to said plans and specitica-
tions up to the date of said certificate, and
a
that, so far as they are applicable to the con-
duct of such change or alteration, the pro-
visions of Subsections A and G of this See-
have been duly and fully compiled with;
(ii) That the sum then requested to be
withdrawn, plus all sums previously with-
drawn on account of such change or altera-
tion, does not exceed the total cost thereof
in so far as actually accomplished up to the
date of such certificate, and that in the opinion
of said architect or engineer the remaining
moneys so deposited with Lessor will be suffi-
cient to pay in full for the completion of such
change or alteration; and
(iii) That, except for the amounts, if any
stated in said certificate, pursuant to Sub-
clause (i) of this Clause, to be due for serv-
ices or materials, there is not outstanding in-
debtness known, after due inquiry, to said
architect or engineer, which is then due and
payable for labor, wages, services, materials
or supplies in connection with such change or
alteration which, if unpaid, might become the
basis of a vendors’, mechanics’, laborers’, ma-
terialmen’s, statutory or other similar lien
upon the Property or any part thereof.
——s PN
ee eI A lS as ee 6
399
brances, except those created by Lessor and
undetermined or inchoate liens or charges
for indebtedness incidental to such changes
and alterations and which have not at the
time been filed pursuant to law, and except
encumbrances, if any, securing indebtedness
due to persons (whose names and addresses
and the several amounts due them shall be
stated) specified in said certificate pursuant
to the foregoing Clause (1) of this Subsection,
which encumbrances will be discharged upon
payment of such indebtedness ;
(ii) That no part of the several amounts
paid and/or due, as stated in said certifi-
cate pursuant to the foregoing Clause (1) of
this Subsection, has been or is being made
the basis of the withdrawal of any money
so deposited with Lessor in any previous or
then pending application, or has been paid
out of the proceeds of insurance received by
Lessee as provided in Section 14.3 hereof;
(iii) That the provisions of Subsection G
of this Section have been duly and fully com-
plied with; and
(3) An official search or other evidence satis-
| factory to Lessor showing that there has not heen
filed with respect to the Property any mechanics’
of Lessee not more than thirty (30) days prior | of other lien which has not been discharged of
to the application for such withdrawal setting | record, except such as will be discharged upon
forth in substance as follows: payment of the amount then requested.
(i) That al’ materials and all property con- | Upon compliance with the foregoing provisions of this
stituting the changes and alterations described Subsection E, Lessor shall, on Lessee’s request, pay
in said certificate pursuant to the foregoing to the persons named in said certificate pursuant to
Clause (1) of this Subsection and every part Clause (1) (i) of this Subsection the respective
thereof, are free and clear of all encum- amounts stated in said certificate to be due to them
(2) An affidavit sworn to by an executive officer
ee eee
400
and/or pay to Lessee the amount stated in said certi-
ficate to have been paid by Lessee. Lessee agrees to
file a notice of completion of such changes and altera-
tions promptly, and not less than one hundred twenty
(120) days nor more than one hundred thirty (130)
days after the filing of such notice Lessee shall fur-
nish to Lessor an official search or other evidence
satisfactory to Lessor showing that there has not
been filed with respect to the Property any mechanics’
or other lien which has not been discharged of record.
In the event that any change or alteration made
under this Article shall be made in conjunction with
the restoration, repair or replacement required to be
made by Lessee under Article XVII or Article XVIII,
the amount of the bond to be furnished or the deposit
to be made under Subsection D of this Section need
not exceed the aggregate cost of the work under both
this Article and Article XVII or Article XVIII, as
the case may be (as estimated by the architect or
engineer referred to in Subsection C of this Section),
less the proceeds of any insurance or proceeds of a
condemnation award received by Lessor or the As-
signee and which are applicable to work to be done
by Lessee under Article XVII or Article XVIII, as
the case may be. Any moneys deposited pursuant to
Subsection D shall not be used or disbursed until such
proceeds of any insurance or proceeds of a condem-
nation award shall have been fully withdrawn and
paid over in the manner and to the extent provided
in Article XVII or Article XVIII for such alteration,
restoration, repair or replacement.
F. At any time after the completion in full, pur-
suant to the plans and specifications therefor previous-
ly submitted under Subsection C of this Section, of
any change or alteratior. in respect whereof such
moneys were deposited, the whole balance of moneys
Oe ae ee
401
so deposited with Lessor and then remaining on de-
posit may be withdrawn by Lessee, provided Lessee is
not in default in the payment of the Basic Rent or
any item of Additional Rent or other charge payable
by Lessee hereunder, and shall be paid to Lessee
upon receipt by Lessor of a certificate of the orchitect
or engineer referred to in Subsection C of this Section
dated not more than five (5) days prior to the appli-
eation for such withdrawal setting forth in substance
as follows:
(1) That such change or alteration in respect
of which such moneys were deposited has been
completed in full pursuant to the plans and speci-
fications therefor previously filed with Lessor
under Subsection C of this Section;
(2) That all amounts which Lessee is or may
be entitled to withdraw under Subsection E of
this Section on account of services rendered or
materials furnished in connection with such
change or alteration have been withdrawn under
said Subsection E; and
(3) That all amounts for whose payment Les-
see is or may become liable in respect of such
change or alteration have been paid in full.
G. All work done in connection with any change
or alteration shall be done promptly and in good and
workmanlike manner and in compliance with the build-
ing and zoning laws of the municipality or other gov-
ernmental subdivision wherein the Property is situated
and with all laws, ordinances, orders, rules, regulations
and requirements of all federal, state and municipal
governments and the appropriate departments, com-
missions, boards and officers thereof, and in accord-
ance with the orders, rules and regulations of the Na-
tional Board of Fire Underwriters or any other body
402
now or hereafter constituted exercising similar func-
tions ; the cost of any such change or alteration shall
be paid in cash or its equivalent, so that the Property
shall at all times be free of liens for labor and ma-
terials supplied or claimed to have been supplied; and
the work of any change or alteration shall be prose-
cuted with reasonable dispatch, Unavoidable Delays
excepted. Workmen’s compensation insurance covering
all persons employed in connection with the work and
with respect to whom death or bodily injury claims
could be asserted against Lessor, Lessee or the Prop-
erty, and general liability insurance for the mutual
benefit of Lessee and Lessor, expressly covering the
additional hazards due to any change or alteration,
with limits of not less than $200,000 in the event of
bodily injury or death to one person and not less than
$1,000,000 in the event of bodily injury or death to
any number of persons in any one accident, and with
limits of not less than $50,000 for property damage
shall be maintained by Lessee at Lessee’s sole cost and
expense at all times when any work is in process in
connection with any change or alteration. The general
liability imsurance provided for in this Subsection
shall be in addition to the insurance required to be
maintained by Lessee pursuant to Section 14.2 and
may be effected by an appropriate endorsement, if
obtainable, upon the insurance referred to in Section
14.2. Ail such insurance shall be in a company or
companies of recognized responsibility, and all ‘such
policies or certificates therefor issued by the respective
insurers shall be delivered to Lessor endorsed “‘Pre-
mium Paid’’ by the company or agency issuing the
same or with other evidence of payment of the pre-
miums satisfactory to Lessor.
SECTION 15.2. Lessee covenants and agrees that in per-
forming any work or repairs to or restoration of the Prop-
|
|
403
erty, required to be performed by Lessee pursuant to
to the provisions of Article VII, Article XIII, Article
XVII or Article XVIII, it will also observe and perform
the conditions relating to changes and alterations set forth
in Subsections A, B, C, and G of Section 15.1 to the extent
that the nature and estimated cost of such repairs or
restoration, if the same were changes or alterations made
under this Article, would make such observance and per-
formance applicable.
ARTICLE XVI
Excavations on Apsorxntnc Property axp VAULT SPACE
Secrion 16.1. If an excavation or other building opera-
tion shall be about to be made or shall be made upon any
adjoining premises or streets, Lessee shall permit Lessor
or Lessor’s agents, or the owner or lessee of such adjoining
premises, and their respective representatives, to enter the
Property and to shore the foundations and walls of any
building thereon, and to do any other act or thing necessary
for the safety and preservation of the Property, and Lessor
shall not be liable for any inconvenience, annoyance, dis-
turbance, loss of business or other damage arising there-
from, and Lessee’s obligation hereunder shall not thereby
be affected. Lessor agrees in connection with any work
done by Lessor pursuant to the provisions of this Article
to cause as little inconvenience, annoyance and disturbance
to Lessee as possible, consistent with the nature of the
work involved. Nothing in this Article contained shall im-
ply or be deemed to create any obligation upon Lessor to
shore foundations or walls or to do any other act or thing
necessary for the safety and preservation of the Property.
Section 16.2. All vaults, canopies, marquees or other
structures now or hereafter built projecting beyond the
building line of the Property are not included within the
premises demised by this Lease, but Lessor covenants that
404
Lessee may occupy and use the same during the term of
this Lease, subject only to such laws, rules and regula-
tions as may be imposed by the appropriate municipal de-
partments with respect thereto. No revocation on the part
of any municipal department or authority of the license
to maintain and use such vaults, canopies, marquees or
other structures shall in any way affect this Lease or the
amount of the Basic Rent or any item of Additional Rent
or other charges payable by Lessee hereunder. If any such
license so to maintain and use such vaults, canopies, mar-
quees or other structures shall be revoked, Lessee will, at
its sole cost and expense, do and perform all such work as
may be necessary to comply with any order revoking the
same. Lessor agrees to cooperate with Lessee in obtaining
and renewing such license or licenses.
ARTICLE XVII
DaMaGE on DestrucTION
Section 17.1. Lessee covenants and agrees that in case
of damage to or destruction of the Property (except for
Total Destruction as defined in Section 17.6 below) by fire
or otherwise, it will promptly, at its sole cost and expense,
restore, repair or replace the same as nearly as possible
to the condition immediately prior to such damage or de-
struction or with such changes or alterations as Lessee
may be permitted to make in conformity with Artiele XV.
Such restoration, repairs, replacements, changes or altera-
tions shall be commenced promptly and prosecuted to com-
pletion with all due diligence and in no event later than two
years from the time of such damage or destruction, Un-
avoidable Delays excepted.
Section 17.2 Except as provided in Section 17.6, all in-
surance money recovered by Lessor or Assignee on account
of such damage or destruction less the cost, if any, to
Lessor or Assignee of such recovery, may be withdrawn
by Lessee and shall be paid by Lessor or Assignee, as the
———
ee
405
case may be, either to reimburse Lessee for expenditures
made to repair, restore or replace the Property so damaged
or destroyed (including expenditures made for temporary
repairs or for the protection of the Property pending the
completion of permanent repairs, restorations or replace-
ments, or to prevent interference with the business op-
erated thereon, and repairs, restorations and replacements
then in process in so far as actually made or constructed)
or to pay contractors, subcontractors, materialmen, engi-
neers, architects or other persons who have rendered serv-
ices or furnished materials for such repairs, restorations
or replacements (hereinafter referred to as ‘‘ Restoration’”’
or as the ‘‘work’’), and shali be paid out as hereinafter pro-
vided from time to time as such work progresses upon the
written request of Lessee, which shall be accompanied by
A. A certificate of an architect or engineer in charge
of the work (who shall be selected by Lessee, who may
be in the employ of Lessee and who shall be satisfac-
tory to Lessor and Assignee) dated not more than
thirty (30) days prior to such request, setting forth in
substance as follows:
(1) That the sum then requested to be with-
drawn either has been paid by Lessee, and/or is
justly due, to contractors, subcontractors, mate-
rialmen, engineers, architects or other persons
(whose names and addresses shall be stated) who
have rendered services or furnished materials for
certain work, and giving a brief description of
such services and materials and the principal sub-
divisions or categories thereof and the several
amounts so paid and/or due to each of said per-
sons in respect thereof, and stating the fair value
of such work at the date of the acquisition thereof ;
and
(2) That, except for the amounts, if any, stated
in said certificate pursuant to the foregoing Sub-
section A(1), to be due for services or materials,
there is no outstanding indebtedness known to said
architect or engineer, after due inquiry, which is
then due and payable for labor, wages, materials,
supplies or services in connection with such work
which, if unpaid, might become the basis of a
vendors’, mechanics’, laborers’ or materialmen’s
statutory or otber similar lien upon the Property
or any part thereof.
407
received by Lessee as provided in Section 14.3
hereof; and
(3) That there is no default in the payment of
the Basic Rent or any item of Additional Rent
or other charge payable by Lessee hereunder.
C. An official search or other evidence satisfactory
to Lessor and Assignee showing that there has not been
filed with respect to the Property any mechanics’ or
other lien which has not been @ischarged of record,
B. An affidavit sworn to by an executive officer of
Lessee not more than thirty (30) days prior to the
application for such withdrawal setting forth in sub-
stance as follows:
except such as will be discharged upon payment of the
amount then requested.
Upon compliance with the foregoing provisions of this
(1) That all materials and all property consti-
tuting the work described in the said certificate
pursuant to the foregoing Subsection A of this
Section and every part thereof, are free and clear
of all encumbrances, except those created by Les-
sor and undetermined or inchoate liens or charges
for indebtedness incidental to the work and which
have not at the time been filed pursuant to law,
and except encumbrances, if any, securing in-
debtedness due to persons (whose names and ad-
dresses and the several amounts due them shall be
stated) specified in said certificate pursuant to the
foregoing Subsection A of this Section, which en-
cumbrances will be discharged upon payment of
such indebtedness ;
(2) That no part of the several amounts paid
and/or due, as stated in said certificate pursuant
to the foregoing Subsection A of this Section, has
been or is being made the basis of the withdrawal
of any moneys pursuant to this Section or Section
18.3 in any previous or then pending application,
or has been paid out of the proceeds of insurance
Section, Lessor shall, out of such insurance money, on re-
quest of Lessee or Assignee, pay or cause to be paid to
the persons named in the certificate, pursuant to the fore-
going Subsection A(1), the respective amounts stated in
said certificate to be due to them, and/or shall pay or
cause to be paid to Lessee the amount stated in said certifi-
cate to have been paid by Lessee, provided, however, that
such payments shall not exceed in amount the fair value
as stated in said certificate of the relevant work. Lessee
agrees to file a notice of completion of such changes and
alterations promptly and not less than one hundred twenty
(120) days nor more than one hundred thirty (130) days
after the filing of such notice Lessee shall furnish to Lessor
an official search or other evidence satisfactory to Lessor
showing that there has not been filed with respect to the
Property any mechanics’ or other lien which has not been
discharged of record.
If the insurance money in the hands of Lessor or As-
signee shall be insufficient to pay the entire cost of such
work, Lessee agrees te pay the deficiency.
Section 17.3. Lessee’s obligation to make payment of
the Basic Rent and all items of Additional Rent and other
408
charges on the part of Lessee to be paid and to perform
all other covenants and agreements on the part of Lessee to
be performed shall not be affected by any such destruction
or damage of the Property and Lessee hereby waives the
provision of any statute or law now or hereafter in effect
contrary to such obligation of Lessee as herein set forth,
or which releases Lessee therefrom.
Section 17.4. Notwithstanding the other provisions of
this Article, any insurance moneys in the hands of Lessor
or Assignee shall not be required to be paid out (nor shall
Section 17.6 be operative) if Lessee is in default in the
performance of any of the terms, covenants or conditions in
this Lease centained in respect to a matter as to which
notice of default has been given and has not been remedied
within the time limited in this Lease. Any insurance moneys
payable to Assignee pursuant to the provisions of Article
XIV shall be disbursed by Assignee in accordance with and
to the extent provided in this Article.
Section 17.5. In the event that in conjunction with any
work required to be performed under this Article, Lessee
shall make other changes or alterations in accordance with
the applicable provisions and conditions in Article XV,
and Lessee shall have furnished a bond or made the deposit
required under Section 15.1D, the insurance money received
by Lessor or Assignee shall, nevertheless, be used and ap-
plied to the payment of the cost of changes or alterations
under Article XV as well as to the payment for work done
under this Article, in the manner and to the extent in this
Article provided before the money sc deposited as afore-
said under Article XV shall be used or disbursed under the
provisions of Section 15.1E thereof.
Section 17.6. As used herein, the term ‘‘Total Destruc-
tion’’ shall mean the destruction on or after December 1,
1980° of all or such a substantial part of the Property that
* To be adjusted accordingly if the Closing Date of the Note Purchase Agree
ment shall be other than December 1, 1969.
ee
ee ee ee
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7
i
409
the Board of Directors of Lessee (i) shall determine in its
good faith judgment within sixty (60) days after such de-
struction that restoration is not economically feasible, (ii)
shall give written notice to Lessor and Assignee of such
determination within ten (10) days thereafter, and (iii)
shall agree to purchase the Property on the date that the
insurance proceeds are finally adjusted and paid to the
Lessor or Assignee at a purchase price as hereinafter
determined in this Section 17.6.
Said purchase price shall be determined pursuant to the
termination table, attached hereto as Table A, interpolated
on a daily basis between the immediately preceding and
next succeeding option dates; provided, however, that if
the amount then required under the provisions of the Note
to fully prepay the same plus accrued interest and premium
under the provisions thereof and to discharge all other
obligations of the Lessor under the Deed of Trust exceeds
said purchase price determined pursuant to said Table A,
then the purchase price shall be such greater amount. Said
insurance proceeds (less any cost of recovery) shall be ap-
plied in payment of Lessee’s obligation hereunder; and
said insurance proceeds, together with such additional
amount, if any, as may be paid by Lessee as the purchase
price of the Property pursuant to this Section, shall be
applied in the following order of priority:
A. Such amount shall first be applied to pay the
Assignee the amount then required under the provi-
sions of the Note to fully prepay the same plus ac-
crued interest and premium, and to discharge all other
obligations of Lessor under the Deed of Trust.
B. The balance of such amount, if any, shall then
be paid to the Lessor; provided that in no event will
the amount paid to Lessor, when added to the amount
paid pursuant to paragraph A, exceed said purchase
410
C. Any excess after making the payments provided
for in paragraphs A and B above shall be paid to the
Lessee.
On payment by Lessee of said purchase price, and As-
signee’s receipt of the entire amount specified in paragraph
A of this Section and Lessor’s receipt of the entire amount
specified in paragraph B, Lessor at Lessee’s expense shall
convey the Property by general warranty deed to Lessee
free of any mortgage, lien, or encumbrance unless created
by Lessee’s default hereunder.
The right of Lessee to purchase the Property as provided
in this Section 17.6 shall be exercisable only upon condition
that at the time of the exercise of such right there exists
no default in the performance of any of the terms, cov-
enants or conditions of this Lease upon the part of Lessee
to be performed, and such purchase shall become effective
only upon compliance with all such terms, covenants and
conditions to the date thereof.
ARTICLE XVIII
CONDEMNATION
Section 18.1. If, during the term of this Lease, all of the
Property shall be taken as a result of the exercise of the
power of eminent domain (hereinafter referred to as the
‘*Taking’’ or as the ‘‘proceeding’’), this Lease and all
right, title and interest of Lessee hereunder shall cease and
come to an end on the date of payment in full of the award
as finally determined pursuant to such Taking, provided
that Lessee shall pay a purchase price, which shall be de-
termined and paid in accordance with Section 18.4 hereof
in consideration for the assignment of all of Lessor’s right,
title and interest in and to such award with respect to the
Property.
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a
Re ore et Ue WA ete,
411
Section 18.2. If, during the term of this Lease, less than
all of the Property shall be taken in any such Taking, and
the Board of Directors of Lessee shall determine in its
good faith judgment within sixty (60) days after such
Taking that the injury, damage or loss suffered from such
Taking cannot be so repaired, restored or replaced that the
remainder thereof can be effectively used in the business of
Lessee, Lessee shall give written notice to Lessor and As-
signee of such determination within ten (10) days there-
after and shall agree to purchase the Property for a pur-
chase price, which shall ve determined and paid in aecord-
ance with Section 18.4.
Upon payment by Lessee of said purchase price and Les-
sor’s receipt of the entire amount specified in paragraph
B of Section 18.4 and Assignee’s receipt of the entire
amount specified in paragraph A of Section 18.4, Lessor at
Lessee’s expense shall convey the Property by general war-
ranty deed to Lessee free of any mortgage, lien or encum-
brance unless created by Lessee’s default hereunder.
The right of Lessee to purchase the Property as provided
in this Section 18.2 shall not apply prier to December 1,
1980, without the written consent of Lessor or Assignee and
shall be exercisable only upon condition that at the time
of the exercise of such right there exists no default in the
performance of any of the terms, covenant. or conditions of
this Lease upon the part of Lessee to be performed. Such
purchase shall become etfective only upon « mpiianee with
all such terms, covenants and cond: -ions to the date thereof.
Seorron 18.3. If, during the term of this Lease, less than
all the Property shall be taken in any such proceeding and
Lessee does not purchase the Property as in Section 18.2
provided, this Lease shall, upon the vesting of title in the
proceeding, terminate only as to the part so taken, and
Lessor shall be entitled to and shall receive the total award
made in such proceeding, and Lessee hereby assigns such
award to Lessor. In any such case, Lessee covenants and
412
agrees, at Lessee’s sole cost and expense (subject to reim-
bursement to the extent hereinafter provided) and under
the supervision of an architect or engineer selected by Les-
see, who may be in the employ of Lessee and shall be sat-
isfactory to Lessor or Assignee, promptly to restore, repair
or replace that portion of the Property not so taken to a
complete architectural unit or units for the use and oceu-
pancy of Lessee as in this Lease expressed. Lessor agrees,
in connection with such restoration, repair or replacement,
to apply or cause to be applied the net amount of any
award for damage to said building or buildings that may be
received by it in any such proceeding, either to reimburse
Lessee for expenditures made (1) to repais or restore the
remaining portion of such building or buildings so that the
same shall constitute a complete architectural unit or units
or (2) to replace on the remainder of the Property the
portion of any such building or buildings so taken (which
shall include expenditures made for temporary repairs or
for the protection of the Property pending the completion
of permanent repairs, restorations or replacements, or to
prevent interference with the business operated thereon,
and repairs, restorations and replacements then in process
in so far as actually made or constructed) or to pay con-
tractors, subcontractors, materialmen, engineers, architects
or other persons who have rendered services or furnished
materials for said repairs, restorations or replacements
(but the amount so applied shall not include the cost of any
alteration, construction, change or improvement that Lessee
may desire to make that is not necessary to restore that
portion of the building or buildings not so taken to a com-
plete architectural unit of substantially the same useful-
ness, design and construction as immediately before such
taking), and the said net award may be withdrawn and
shall be paid out as hereinafter provided from time to
time as such repair, restoration or replacement progresses
upon the written request of Lessee, which shall be accom-
panied by
oe
et i Ee ee eS
413
A. A certificate of the architect or engineer in
charge of the repair, restoration or replacement, dated
not more than thirty (30) days prior to such request,
setting forth in substance as follows:
(1) That the injury, damage and loss from such
Taking have been or can be so repaired, restored
or replaced that the remaining portions of the
Property can be effectively nsed in the business
of Lessee;
(2) That the sum then requested to be with-
drawn either has been paid by Lessee and/or is
justly due to contractors, subcontractors, material-
men, engineers, architects or other persons (whose
names and addresses shall be stated), who have
rendered services or furnished materials for cer-
tain repairs, restorations or replacements, and
giving a brief description of such services and
materials and the principal subdivisions or cate-
gories thereof and the several amounts so paid
and/or due to each of said persons in respect
thereof, and also stating the fair value of such
repairs, restorations or replacements at the time
of acquisition thereof; and
(3) That, except for the amounts, if any, stated
in said certificate pursuant to the foregoing Sub-
section A(2) to be due for services or materials,
there is no outstanding indebtedness known, after
due inquiry, to said architect or engineer, which is
then due and payable for labor, wages, services,
materials or supplies in connection with said re-
pairs, restorations or replacements, which, if un-
paid, might become the basis of a vendor's, me-
chanics’, laborers’ materialmen’s statutory or
other similar lien upon the Property or any part
thereof.
SE eT ee
Lessee not more than thirty (30) days prior to the
application for such withdrawal setting forth in sub-
stance as follows:
as will be discharged upon payment of the amount then
requested.
(1) That all materials and all property consti-
tuting the repairs, restorations and replacements
described in the said certificate pursuant to the
foregoing Subsection A of this Section and every
part thereof, are free and clear of all encum-
brances, except those created by Lessor and unde-
termined or inchoate liens or charges for indebted-
ness incidental to such repairs, restorations and re-
placements and which have not at the time been
filed pursuant to law, and except encumbrances, if
any, securing indebtedness due to persons (whose
names and addresses and the several amounts due
them shall be stated) specified in said certificate
pursuant to the foregoing Subsection A of this See-
tion, which encumbrances will be discharged upon
payment of such indebtedness ;
(2) That no part of the several amounts paid
and or due, as stated in said certificate pursuant
to the foregoing Subsection A of this Section, has
been or is being made the basis of the withdrawal
of any moneys pursuant to this Section or Section
17.2 in any previous or then pending application
or has been paid out of the proceeds of insurance
received by Lessee as provided in Section 14.3 here-
of ; and
(3) That there is no default in the payment of
the Basic Rent or any item of Additional Rent
or other charge payable by Lessee hereunder.
pote
ee ly
Upon compliance with the foregoing provisions of this
Section, Lessor shall, out of the proceeds of such net award,
on request of Lessee, pay or cause to be paid to the per-
sons named in the certificate, pursuant to the foregoing
Subsection A(2), the respective amounts stated in said cer-
tificate to be due to them, and/or shall pay or cause to be
paid to Lessee the amount stated in said certificate to have
heen paid by Lessee, provided however, that such payments
shall not exceed in amount the fair value as stated in said
certificate of the relevant repairs, restorations or replace-
ments. Lessee agrees to file a notice of completion of such
changes and alterations promptly and not less than one—
hundred twenty (120) days nor more than one hundred
thirty (130) days after the filing of such notice, Lessee
shall furnish to Lessor an official search or other evidence
satisfactory to Lessor showing that there has not been filed
with respect to the Property any mechanics’ or other lien
which has not been discharged of record.
414 415
B. An affidavit sworn to by an executive officer of which has not been discharged of record, except such
If payment of the net award as aforesaid shall not be
received by Lessor in time to permit payments as the work
of repairs, restorations or replacements progresses, Les-
see shall, nevertheless, perform and fully pay for such work
without delay (except for Unavoidable Delays), and pay-
ment of the amount to which Lessee may be entitled shali
thereafter be made by Lessor out of said net award as
and when payment of such net award is received by Lessor.
If the funds to be applied by Lessor as in this Section
provided shall be insufficient to pay the entire cost of such
repairs, restorations or replacements, Lessee agrees to
C. An official search or other evidence satisfactory pay the deficiency.
to Lessor showing that there has not been filed with
Section 18.4. The purchase price referred to in Section
respect to the Property any mechanics’ or other lien
18.1 and 18.2 hereof shall be determined pursuant to the
416
termination table, attached hereto as. Table A, interpolated
on a daily basis between the immediately preceding and
next succeeding option dates; provided, however, that if
the amount then required under the provisions of the Note
to fully prepay the same plus accrued interest and pre-
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