LEASE CLAUSES Presented by: Anthony J. Interrante
SAFE LEASING: CLAUSES FOR THE BANKRUPTCY CONSCIOUS • Security Deposits • Recapture Provisions: • Assignment and Subletting • Landlord Remedy for an Event of Default • Event of Default/Bankruptcy – Ipso Facto Clauses • Notice Clauses • Landlord’s Liens • Subordination to Landlord’s Liens • Lease Guaranties
SECURITY DEPOSIT • . . .The security Deposit shall be the Landlord’s property. . .
LANDLORD’S RECAPTURE RIGHTS • Assignment and Subletting • Within thirty (30) days after Landlord's receipt of Tenant's submission of Tenant’s written request for Landlord’s consent to a Transfer, Landlord shall have the option (without limiting Landlord's other rights under this Lease) of terminating this Lease (or, as to a subletting or assignment, terminate this Lease as to the portion of the Premises proposed to be sublet or assigned) as of the latter of either: upon thirty (30) days notice or the date the proposed Transfer was to be effective. If Landlord terminates this Lease as to all or any portion of the Premises, then this Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all Rent accrued through the cancellation date relating to the portion of the Premises covered by the proposed Transfer. Thereafter, Landlord may lease all or such portion of the Premises to the prospective transferee (or to any other person or entity) without liability to Tenant.
LANDLORD’S RECAPTURE RIGHTS • As a Landlord Remedy for an Event of Default • After Tenant’s vacation of all or a substantial portion of the Premises and a resulting Event of Default under Section, then Landlord shall have the option (without limiting Landlord's other rights under this Lease) of terminating this Lease upon written notice to the Tenant. If Landlord terminates this Lease as to all or any portion of the Premises, then this Lease shall cease for such portion of the Premises and Tenant shall pay to Landlord all rent accrued through the cancellation date relating to the portion of the Premises covered by the Landlord’s termination. Thereafter, Landlord’s termination will be without liability to Tenant.
EVENTS OF DEFAULT • Each of the following events shall constitute an “Event of Default” under this Lease: • Monetary Default; Failure to Pay Rent. Tenant fails to pay Rent when due . . . • Bankruptcy; Insolvency. The filing of a petition by or against Tenant or any Guarantor of Tenant’s obligations hereunder (1) in any bankruptcy or other insolvency proceeding; (2) seeking any relief under any debtor relief Law; (3) for the appointment of a liquidator, receiver, trustee, custodian, or similar official for all or substantially all of Tenant’s property or for Tenant’s interest in this Lease; or (4) for reorganization or modification of Tenant’s capital structure (however, if any such petition is filed against Tenant, then the filing of such petition shall not constitute an Event of Default, unless it is not dismissed within 45 days after the filing thereof).
EVENTS OF DEFAULT An “Event of Bankruptcy” shall mean the occurrence, with respect to Tenant, any guarantor . . . or any general partner in Tenant . . . of any of the following: (i) any such person’s becoming insolvent . . . [under] (the “Bankruptcy Code”), or under the insolvency laws of any state (the “Insolvency Laws”); (ii) appointment of a receiver or custodian for any property of any such person or the institution of a foreclosure or attachment action upon any property of any such person; (iii) filing of a voluntary petition under the . . . Bankruptcy Code or Insolvency Laws;
EVENTS OF DEFAULT • (iv) filing of an involuntary petition . . . under the Bankruptcy Code or Insolvency Laws, which either (1) is not dismissed within thirty (30) days of filing, or (2) results in the issuance of an order for relief . . . ; • (v) any such person making or consenting to an assignment for the benefit of creditors . . .; • (vi) the existence of any material inaccuracy in the financial statements for any such person, as submitted to Landlord . . .; or • (vii) the occurrence of a . . . 50% or greater reduction in the net worth of Tenant or any Guarantor.
EVENTS OF DEFAULT • . . . [A]n Event of Bankruptcy shall constitute a default by Tenant and an Event of Default under this Lease. Upon occurrence of an Event of Bankruptcy, . . . Landlord’s right to terminate this Lease shall be subject, to the extent required by the Bankruptcy Code, to any rights of Tenant or its trustee in bankruptcy (collectively “Trustee”) to assume or assign this Lease pursuant to the Bankruptcy Code. Trustee shall not have the right to assume or assign this Lease unless Trustee promptly • (i)cures all defaults under this Lease, • (ii) compensates Landlord for monetary damages incurred as a result of such defaults, • (iii) provides adequate assurance of future performance on the part of Tenant . . ., and • (iv) complies with all other requirements of the Bankruptcy Code.
EVENTS OF DEFAULT • . . . [A]dequate assurance of future performance shall mean that all of the following minimum criteria must be met: Tenant’s gross receipts in the ordinary course of business during the thirty (30) day period immediately preceding the initiation of the case under the Bankruptcy Code • (1)must be greater than ten (10) times the next monthly installment of the Base Rent and additional rent; • (2) both the average and median of Tenant’s monthly gross receipts in the ordinary course of business during the seven (7) month period immediately preceding the initiation of the case under the Bankruptcy Code must be greater than ten (10) times the next monthly installment of the Base Rent and additional rent; • (3) Tenant must pay its estimated pro rata share of the cost of all services performed or provided by Landlord (whether directly or through agents or contractors and whether or not previously included as part of the Base Rent) in advance of the performance or provision of such services;
EVENTS OF DEFAULT • (4) Trustee must agree that Tenant’s business shall be conducted in a first-class manner, and that no liquidating sale, auction or other non-first-class business operation shall be conducted in the Premises; • (5) Trustee must agree that the use of the Premises as stated in this Lease shall remain unchanged and that no prohibited use shall be permitted; • (6) Trustee must agree that the assumption or assignment of this Lease shall not violate or affect the rights of other tenants in the Building; • (7) Trustee must pay at the time the next monthly installment of the Base Rent is due, in addition to such installment, an amount equal to the monthly installments of the Base Rent and additional rent due for the next six (6) months thereafter, such amount to be held as a security deposit in addition to the Security Deposit and any other security deposit under this Lease; and • (8) all assurances of future performance specified in the Bankruptcy Code must be provided.
EVENTS OF DEFAULT If Trustee shall propose to assume and assign this Lease to any person who shall have made a bona fide offer to accept an assignment of this Lease on terms acceptable to Trustee, then notice of such proposed assignment shall be given to Landlord by Trustee no later than 20 days after receipt by Trustee of such offer, but in any event no later than 10 days prior to the date that Trustee shall make application to a court . . . for authority and approval to assume this Lease and enter into such assignment, and Landlord shall . . . have the option, . . . . to accept an assignment of this Lease upon the same terms and conditions and for the same consideration, if any, as the bona fide offer made by such person, less any brokerage commissions . . . .
WRITTEN NOTICES Any written notice or document required or permitted to be delivered hereunder shall be deemed to be delivered upon the earlier to occur of (1) tender of delivery (in the case of a hand-delivered notice), (2) deposit in the United States Mail, postage prepaid, Certified Mail, or (3) receipt by facsimile transmission followed by a confirmatory letter, in each case, addressed to the parties hereto at the respective addresses set out below, or at such other address as they have theretofore specified by written notice delivered in accordance herewith. If Landlord has attempted to deliver notice to Tenant at Tenant’s address reflected on Landlord’s books but such notice was returned or acceptance thereof was refused, then Landlord may also, but shall not be obligated to, post such notice in or on the Premises, which notice shall be deemed delivered to Tenant upon the posting thereof.
LANDLORD’S LIEN In addition to the statutory landlord’s lien, Tenant grants to Landlord, to secure performance of Tenant’s obligations hereunder, a security interest in all goods, inventory, equipment, trade fixtures, furniture, improvements, fixtures, chattel paper, accounts, and general intangibles, and other personal property of Tenant now or hereafter situated on or relating to Tenant’s use of the Premises, and all proceeds therefrom (the “Collateral”), and the Collateral shall not be removed from the Premises without the consent of Landlord until all obligations of Tenant have been fully performed. Upon the occurrence of an Event of Default, Landlord may, in addition to all other remedies, without notice or demand except as provided below, exercise the rights afforded a secured party under the Uniform Commercial Code of the State in which the Building is located (the “UCC”). In connection with any public or private sale under the UCC, Landlord shall give Tenant five (5) days prior written notice of the time and place of any public sale of the Collateral or of the time after which any private sale or other intended disposition thereof is to be made, which is agreed to be a reasonable notice of such sale or other disposition. Tenant grants to Landlord a power of attorney to execute and file any financing statement or other instrument necessary to perfect Landlord’s security interest under this Section, which power is coupled with an interest and is irrevocable during the Term. Landlord may also file a copy of this Lease or as a financing statement to perfect its security interest in the Collateral.
LANDLORD’S LIEN & SUBORDINATION Notwithstanding the foregoing Section, and provided that Tenant is not in default under any terms or conditions of the Lease, Landlord agrees to use its best efforts to subordinate its landlord’s lien under the following conditions: (1) Tenant’s loan must be to secure financing of Tenant’s personal property located in the Premises and/or to secure working capital financing to the extent that such financing is utilized for the operation of Tenant’s business located in the Premises; (2) the subordination agreement, if any, must be one which is substantially similar to the form attached hereto as Exhibit “__________”; (3) the total amount to be subordinated cannot exceed $____________; and (4) Tenant agrees to a minimum eight-week turn around from the date that Landlord receives Tenant’s written request for such subordination. As consideration for subordinating its lien, Landlord may require additional security from Tenant.
LEASE GUARANTY Guarantor absolutely and unconditionally guarantees to Landlord, its successors and assigns, the full and prompt performance of all Tenant's Obligations including, but not limited to, the payment when due of all rents, charges, and additional sums coming due under the terms of the Lease.
LEASE GUARANTY In the event of the dissolution, bankruptcy, or insolvency of Tenant, or the inability of Tenant to pay debts as they mature, or an assignment by Tenant for the benefit of creditors, or the institution of any bankruptcy or other proceedings by or against Tenant alleging that Tenant is insolvent or unable to pay debts as they mature, or Tenant's default under this Lease, and even if such event shall occur at a time when any of Tenant's Obligations may not then be due and payable, Guarantor agrees to pay to Landlord upon demand, the full amount which would be payable hereunder by Guarantor as if all Tenant's Obligations were then due and payable.
LEASE GUARANTY The validity of this Guaranty and the obligations of Guarantor hereunder shall not be terminated, affected or impaired by reason of any action which Landlord may take or fail to take against Tenant nor by reason of any waiver of, or failure to enforce, any of the rights or remedies reserved to Landlord in the Lease, or otherwise, nor by reason of the bankruptcy, insolvency or inability to pay debts as they mature of the Tenant and whether or not the term of the Lease shall terminate by reason of said bankruptcy, insolvency, or inability to pay debts as they mature.