LEASE CLAUSES

1
LEASE CLAUSES

• Presented by
• Anthony J. Interrante

2
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
• Landlords Liens
• Subordination to Landlords Liens
• Lease Guaranties

3
SECURITY DEPOSIT

• . . .The security Deposit shall be the Landlords
  property. . .

4
LANDLORDS RECAPTURE RIGHTS

• Assignment and Subletting
• Within thirty (30) days after Landlord's receipt
  of Tenant's submission of Tenants written
  request for Landlords 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.

5
LANDLORDS RECAPTURE RIGHTS

• As a Landlord Remedy for an Event of Default
• After Tenants 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 Landlords
  termination. Thereafter, Landlords termination
  will be without liability to Tenant.

6
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 Tenants
  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 Tenants property or for
  Tenants interest in this Lease or (4) for
  reorganization or modification of Tenants
  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).

7
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 persons 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

8
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.

9
EVENTS OF DEFAULT

• . . . An Event of Bankruptcy shall constitute a
  default by Tenant and an Event of Default under
  this Lease. Upon occurrence of an Event of
  Bankruptcy, . . . Landlords 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.

10
EVENTS OF DEFAULT

• . . . Adequate assurance of future performance
  shall mean that all of the following minimum
  criteria must be met Tenants 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 Tenants
  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

11
EVENTS OF DEFAULT

• (4) Trustee must agree that Tenants 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.

12
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 . . . .

13
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
  Tenants address reflected on Landlords 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.

14
LANDLORDS LIEN

• In addition to the statutory landlords lien,
  Tenant grants to Landlord, to secure performance
  of Tenants 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 Tenants 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 Landlords 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.

15
LANDLORDS 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
  landlords lien under the following conditions
  (1) Tenants loan must be to secure financing of
  Tenants 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 Tenants 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
  Tenants written request for such subordination.
  As consideration for subordinating its lien,
  Landlord may require additional security from
  Tenant.

16
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.

17
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.

18
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.