Legal Verbiage Question. What does the following mean?
(c) The involvement of Lessee or its assets in any transaction, or series of transactions (by way of merger, sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee by an amount greater than 25% of such Net Worth as it was represented at the time of the execution of this Lease or at the time of the most recent assignment to which Lessor has consented, or as it exists immediately prior to said transaction or transactions constituting such reduction, whichever was or is greater, shall be considered an assignment of this Lease to which Lessor may withhold its consent. "Net Worth of Lessee" shall mean the net worth of Lessee (excluding any guarantors) established under generally accepted accounting principles.
It means that, if the tenant under the lease wants to enter into a transaction whereby it sells, finances, etc. part of its assets so that the "net worth" of the tenant will be reduced by more than 25%, then it's equivalent to an "assignment" of the lease under the lease terms. That means that all of the conditions stated in the lease that apply to an assignment would apply to that transaction -- so that the landlord has the right to approve or reject the transaction based upon the tenant's fulfillment of the conditions.
The first three answers are correct. It also means that someone does not know how to use plain english.
There may be a part of this that is missing to completely understand the verbiage. It may have to do with keeping you from selling a certain amount of your assets that are tied to the contract you have. With maximum of 25% of value loss with the consent of the landlord or lessor. So thy want to control the amount of assets you say you have under this contract from being sold or transferred to something or someone else.
If you do any transaction that reduces your net worth by 25%+ then it will be held to be an assignment to which the landlord can withhold consent. GAAP will be used and net worth excludes that of any guarantors.