Transcript LEASE CLAUSES - Kessler Collins

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 nonfirst-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 handdelivered 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.