Drafting a Commercial Lease Agreement Appendix A 5 Leases

Transcription

1 Drafting a Commercial Lease Agreement Appendix A 5 Leases M&A TRANSACTION Lease 1 The Tenant will not assign this Lease in whole or in part nor sublet all or any part of the Leased Premises, nor mortgage by either specific or floating charge or encumber In any way whatsoever this Lease or the Leased Premises or any part thereof, nor suffer or permit the occupation of all or any part of the Leased Premises by others, without the prior written consent of the Landlord in each instance, which consent shall not be unreasonably withheld or delayed. Lease 2 Tenant will not assign this lease in whole or in part, nor sublet all or part of the Premises, nor mortgage or encumber this lease with respect to all or part of the Premises, nor suffer or permit the occupation of, or part with or share possession of, all or part of the Premises with any person including, but not limited to, an assignee or subtenant of an approved subtenant (all the foregoing being sometimes hereinafter-collectively referred to as a "Transfer"), unless, in each case, it has first requested in writing and obtained the Landlord's written consent thereto, which will not be unreasonably withheld. Without limiting the grounds for withholding consent to a Transfer, the Landlord's refusal to consent to a Transfer will not be considered unreasonable if a reason for withholding the consent is (i) that the Landlord has concerns, on reasonable grounds, about the business, financial background, business history or creditworthiness of the proposed transferee,( the "Transferee") or about the use to which the Premises may be put; or (ii) except in the case of a proposed Transfer of this lease in respect of the entire Premises, that the Landlord has other premises in the Project that would suit the Transferee's needs; or (iii) the Transferee's refusal to execute an agreement of the type referred to below; or (iv) that there is 1 P a g e

2 no independent access from the corridor to the part of the Premises in respect of which the Tenant has requested consent to a Transfer (except that the Tenant may, at its cost, provide the necessary inter-connecting corridor for independent access from the corridor to the part of the Premises to which the Transfer pertains, it being understood that such inter-connecting corridor will remain Rentable Area); or (v) that the proposed use or division of the Premises would adversely affect the Common Areas or Building Systems, the appearance or aesthetics of the Building, or the nature of the Building as first class premises. This prohibition against a Transfer is considered to include a prohibition against any Transfer by operation of law. No Transfer will take place by reason of the Landlord's failure to give notice to the Tenant within 15 days as required by this section. Notwithstanding anything to the contrary in this lease, Tenant may, without Landlord's prior written consent and without any participation by the Landlord in assignment and subletting proceeds, sublet the Premises or assign this lease to: (i) a subsidiary, affiliate, division or corporation controlling, controlled by or under common control with Tenant, provided that upon such relationship ceasing to exist, such subletting or assignment shall be rescinded, (ii) a successor corporation related to Tenant by merger, consolidation, reorganization, or government action; or (iii) a purchaser of substantially all of Tenant's business and assets located in Canada. For the purpose of this lease, sale of Tenant's capital stock through any public exchange or issuances for purposes of raising financing shall not be deemed an assignment, subletting, or any other transfer of the lease or the Premises. Lease 3 The Tenant shall not assign or transfer this Lease, (which includes a mortgage, charge or debenture (floating or otherwise) or other encumbrance of this Lease or the Premises or any part of them), nor sublet any part of the Premises nor part with or share possession of the Premises or any part with a third party or undergo a change in effective voting control without the Landlord's consent, which consent may not be unreasonably or arbitrarily withheld notwithstanding any statutory provision to the contrary. Lease 4 The Tenant may assign this Lease or sublet the whole or any part of the Premises with the Landlord's written approval, which approval shall not be unreasonably or arbitrarily withheld or delayed. Notwithstanding anything to the contrary contained herein, the Tenant shall have the right without the approval of the Landlord to assign this Lease or sublet the whole or any part of the Premises to (i) a corporation which is related to the Tenant including, without limitation, a parent, subsidiary or affiliate of the Tenant; (ii) an acquirer of substantially all of the stores of the Tenant; or (iii) a successor corporation resulting from a merger, arrangement or reorganization. Any such assignment or subletting shall relieve the Tenant from its covenants and obligations hereunder. 2 P a g e

3 Lease 5 Transfer" means an assignment of this Lease in whole or in part, a sublease of all or any part of the Premises, any transaction whereby the rights of the Tenant under this Lease or to the Premises are transferred to another person, any transaction by which any right of use or occupancy of all or any part of the Premises is shared with or conferred upon any person, any mortgage, charge or encumbrance of this Lease or the Premises or any part thereof, or any transaction or occurrence whatsoever which has changed or will change the identity of the person having lawful use or occupancy of any part of the Premises; The Tenant shall not effect any Transfer without the prior written consent of the Landlord, which shall not be unreasonably withheld. No consent to any Transfer shall relieve the Tenant from its obligation to pay Rent and to perform all of the covenants, terms and conditions herein contained. In the event of a Transfer, the Landlord may collect Rent or sums on account of Rent from the Transferee, and apply the net amount collected to the Rent payable hereunder but no such Transfer or collection or acceptance of the Transferee as tenant, shall be deemed to be a waiver of this covenant. Any transfer or issue by sale, assignment, bequest, inheritance, operation of law, or other disposition, or by subscription, of any part or all of the corporate shares of the Tenant or any other corporation, which would result in any change in the effective direct or indirect control of the Tenant, shall be deemed to be a Transfer, and the provisions above shall apply mutatis mutandis. 3 P a g e

4 SAMPLE STEPDOWN CLAUSES Tenant Clause (No Consent Transfers) The consent of Landlord shall not be required for, and no recapture or termination right or profit sharing shall be triggered by, any sublease or assignment to any entity: (i) into or with which Tenant or Tenant s parent company is merged or consolidated, (ii) which acquires ownership interests in Tenant or Tenant s parent company by way of sale, transfer or issuance of stock or other ownership interests, (iii) which acquires all or substantially all of Tenant s or Tenant s parent company s assets by purchase, merger or other means, (iv) controlled by, controlling or under common control with Tenant, and/or (v) which is a franchisee of Tenant or Tenant s affiliates. Changes of ownership or control (direct or indirect) in Tenant (including through the sale of substantially all of its assets or through merger) shall not require the consent of Landlord hereunder or otherwise. Without limiting the generality of the foregoing, any changes of ownership (direct or indirect) in Tenant occurring through the over the counter market or nationally (domestic or foreign) recognized stock exchanges shall not require the consent of Landlord hereunder or otherwise. Landlord Clause (No Consent Transfers) Notwithstanding anything to the contrary contained in this Lease, so long at the Tenant is [ ] and is not in default under the terms of this Lease, the Tenant shall have the right, at any time during the Term of this Lease, without the consent of the Landlord but upon at least ten (10) days' prior written notice to the Landlord, to assign this Lease or sublet the whole of the Premises to, or undergo a change in effective voting control of the Tenant where, after such change in control, effective voting control of the Tenant vests in: (i) an entity which is a parent, subsidiary, associate or affiliate corporation of the Tenant (within the meaning of the Canada Business Corporations Act), but only so long as such entity remains a parent, subsidiary, associate or affiliate of the Tenant; (ii) a partnership composed of parent, subsidiary, associate or affiliate corporations of the Tenant but only so long as such partnership remains composed of parent, subsidiary, associate or affiliate corporations of the Tenant; (iii) a corporation formed as a result of a merger or amalgamation (within the meaning of the Canada Business Corporations Act) of the Tenant with another corporation or corporations, provided there is no diminution of the financial covenant of the Tenant; or (iv) the purchaser of at least % (but in any event, not less than [ ]) of the Tenant's other locations in Canada carrying on business under the same trade name as that being used in respect of the Premises. 4 P a g e

5 SAMPLE LEASE PROVISION Landlord Clause Transfers Section 1.01 Consent Required (a) In this Article "Transfer" means (i) an assignment, sale, conveyance, sublease, disposition, or licensing of this Lease or the Premises, or any part of them, or any interest in this Lease (whether or not by operation of law) or in a partnership that is a Tenant under this Lease or an amalgamation of the Tenant with another corporation, (ii) a mortgage, charge, lien or debenture (floating or otherwise) or other encumbrance of this Lease or the Premises or any part of them or of any interest in this Lease or of a partnership or partnership interest where the partnership is a Tenant under this Lease, (iii) a parting with or sharing of possession of all or part of the Premises, and (iv) a transfer or issue by sale, assignment, bequest, inheritance, operation of law or other disposition, or by subscription of all or part of the corporate shares of the Tenant or an "Affiliate" of the Tenant which results in a change in the effective voting control of the Tenant. "Transferor" and "Transferee" have meanings corresponding to the definition of "Transfer" set out above (it being understood that for a Transfer described in Section 1.01(a)(iv), the Transferor is the Person that has effective voting control before the Transfer and the Transferee is the Person that has effective voting control after the Transfer). (b) The Tenant will not effect or permit a Transfer without the consent of the Landlord which consent will not be unreasonably withheld, except that despite anything in the Landlord and Tenant Act and despite any other statute or law: (i) (ii) (iii) (iv) (v) the Landlord may unreasonably withhold its consent to a Transfer within twenty-four (24) months of the Commencement Date, and without limiting the grounds upon which a Transfer may be refused, in deciding whether to give its consent to a Transfer after that twenty-four (24) month period the Landlord may refuse to give its consent if: (the likely effect of the Transfer on the merchandise mix of the Shopping Centre may be adverse; covenants, restrictions, or commitments given by the Landlord to other tenants in the Shopping Centre or to Mortgagees, the Owners, or other parties regardless of when given, prevent or inhibit the Landlord from giving its consent to the Transfer; the Transferee (A) does not have a history of successful business operation in the business to be conducted in the Premises, (B) does not have a good credit rating and a substantial net worth, or (C) is not able to finance the Transferee's acquisition of its interest in the Premises and its operations in the Premises without a material risk of defaulting under this Lease and in a manner that will enable the Transferee to carry on business successfully in the Premises throughout the Term; 5 P a g e

6 (vi) (vii) there is a history of defaults under commercial leases by the Transferee, or by companies or partnerships in which the Transferee, or any of its directors, senior officers or principal shareholders was a director, senior officer, principal shareholder or partner at the time of the defaults; the length of time since the previous Transfer is less than twenty-four (24) months; (viii) the length of time remaining in the Term of this Lease is less than eighteen (18) complete months; (ix) (x) (xi) (xii) (xiii) the Transferee pays or gives money or other value that is reasonably attributable to the desirability of the location of the Premises or to leasehold improvements that are owned by the Landlord or for which the Landlord has paid in whole or in part; the Transfer is a mortgage, charge, debenture (floating or otherwise) of, or in respect of, this Lease or the Premises or any part of them; there is reasonable ground to believe that the proposed Transfer may result in a reduction of Gross Revenue; the Landlord does not receive sufficient information from the Tenant or the Transferee to enable it to make a determination concerning the matters set out above; and the Landlord shall not be liable for any claims or actions by or any damages, liabilities, losses or expenses of the Tenant or any proposed Transferee arising out of the Landlord unreasonably withholding its consent to any Transfer and the Tenant's only recourse shall be to bring an application for a declaration that the Landlord shall grant its consent to such Transfer. (c) Section 1.01(b) does not apply to (i) a Transfer that occurs on the death of the Transferor, (ii) a Transfer described in Section 1.01(a)(iv) which occurs when the sole Tenant in occupation of the Premises is a corporation (a "Public Corporation") whose shares are traded and listed on a stock exchange in Canada or the United States, or (iii) a Transfer that occurs when (1) the Tenantmises is a "subsidiary body corporate" (as that term is defined on the date of this Lease under the Canada Business Corporations Act, R.S.C. 1985, c.c-44) of a Public Corporation and (2) it is the shares of the Public Corporation and not of the Tenant that are transferred or issued. However, if after any of the Transfers described in this Section 1.01(c) the Tenant fails to satisfy the Landlord (who is to act reasonably) that there will be continuity or improvement of the business practices and policies of the Tenant that existed before the Transfer, the Landlord may, at any time after the Transfer, until sixty (60) days after the Tenant notifies the Landlord in writing of the Transfer, notify the Tenant of its dissatisfaction, and a default of Section 1.01(b) will be considered to have occurred as of the date of the Landlord's notice. 6 P a g e

7 (d) The Landlord will have a period of thirty (30) days following receipt of sufficient information to make a determination concerning the matters set forth in Section 1.01(b) to notify the Tenant in writing that the Landlord either gives or refuses to give its consent to the proposed Transfer, but the Landlord's failure to respond within that thirty (30) day period will not be construed as a consent by the Landlord nor will it entitle the Tenant to damages. 7 P a g e