Lease Agreement

EXHIBIT 10.12


INDUSTRIAL LEASE AGREEMENT


DATE: NOVEMBER 27, 1996


BETWEEN


CP-REGENCY BUSINESS PARK, LTD.,
A TEXAS LIMITED PARTNERSHIP


AND


ALADDIN MANUFACTURING CORPORATION,
A DELAWARE CORPORATION
(A DIVISION OF MOHAWK CARPET CORPORATION, INC.)


TABLE OF CONTENTS


Page ARTICLE I - DEFINITIONS...................................................................... 1


ARTICLE II - LEASE GRANT..................................................................... 1


ARTICLE III- CONSTRUCTION OF LEASEHOLD IMPROVEMENTS.......................................... 2
Section 3.1 Landlord's Improvements..................................................... 2
Section 3.2 Leasehold Improvements...................................................... 2
Section 3.3 Construction Guaranty....................................................... 3


ARTICLE IV - RENT............................................................................ 3
Section 4.1 Payment of Rent............................................................. 3
Section 4.2 Periodic Payment of Reimbursable Expenses; Adjustments...................... 3
Section 4.3 Rent Adjustment............................................................. 3
Section 4.4 [INTENTIONALLY OMITTED]..................................................... 4
Section 4.5 Survival of Obligations..................................................... 4
Section 4.6 Delinquent Payments......................................................... 4
Section 4.7 Independent Obligations..................................................... 4


ARTICLE V - OTHER ASSESSMENTS................................................................ 4
Section 5.1 Payment of Impositions...................................................... 4
Section 5.2 Other Impositions........................................................... 4
Section 5.3 Landlord's Right to Contest................................................. 5


ARTICLE VI - UTILITIES....................................................................... 5


ARTICLE VII - USE; COMPLIANCE WITH LAWS...................................................... 5
Section 7.1 Permitted Use............................................................... 5
Section 7.2 Hazardous Materials......................................................... 5
Section 7.3 Compliance with Laws and Ordinances......................................... 6
Section 7.4 Compliance with Permitted Encumbrances...................................... 7


ARTICLE VIII - REPAIRS AND MAINTENANCE....................................................... 7
Section 8.1 By Landlord................................................................. 7
Section 8.2 By Tenant................................................................... 7
Section 8.3 Prohibition Against Waste................................................... 7
Section 8.4 Landlord's Right so Effect Repairs.......................................... 7
Section 8.5 Misuse or Neglect........................................................... 7
Section 8.6 Maintenance/Service Contracts............................................... 8
Section 8.7 Common Area................................................................. 8


ARTICLE IX - ALTERATIONS AND IMPROVEMENTS.................................................... 9


ARTICLE X - INDEPENDENT OBLIGATIONS.......................................................... 9


ARTICLE XI - ASSIGNMENT AND SUBLETTING....................................................... 10


ARTICLE XII - LIABILITY...................................................................... 10


ARTICLE XIII - MORTGAGES..................................................................... 11


ARTICLE XIV - INSPECTION..................................................................... 11


ARTICLE XV - INSURANCE; WAIVER OF SUBROGATION................................................ 11


ARTICLE XVI - DESTRUCTION AND RESTORATION.................................................... 12


ARTICLE XVII - CONDEMNATION.................................................................. 12


ARTICLE XVIII - HOLDING OVER................................................................. 13


ARTICLE XIX - TAXES ON TENANT'S PROPERTY..................................................... 13


ARTICLE XX - EVENTS OF DEFAULT............................................................... 13


ARTICLE XXI - LANDLORD'S REMEDIES............................................................ 13


ARTICLE XXII - SURRENDER OF PREMISES......................................................... 14


ARTICLE XXIII - ATTORNEYS' FEES.............................................................. 14


ARTICLE XXIV - [INTENTIONALLY OMITTED]....................................................... 15


ARTICLE XXV - MECHANIC'S LIEN................................................................ 15


ARTICLE XXVI - SIGNS......................................................................... 15


ARTICLE XXVII - NOTICES...................................................................... 15


ARTICLE XXVIII - SEPARABILITY................................................................ 16


ARTICLE XXIX - QUIET ENJOYMENT............................................................... 16


ARTICLE XXX - EXISTENCE OF BROKER............................................................ 16


ARTICLE XXXI - TENANT'S REMEDIES............................................................. 16


ARTICLE XXXII - ESTOPPEL CERTIFICATES........................................................ 17


ARTICLE XXXIII - NOTICE TO LENDER............................................................ 17


ARTICLE XXXIV - LANDLORD APPROVALS........................................................... 17


ARTICLE XXXV - JOINT AND SEVERAL LIABILITY................................................... 17


ARTICLE XXXVI - GENDER....................................................................... 18


ARTICLE XXXVII - CAPTIONS.................................................................... 18


ARTICLE XXXVIII - ENTIRE AGREEMENT; AMENDMENTS; BINDING EFFECT............................... 18


ARTICLE XXXIX - GOVERNING LAW AND PLACE OF PERFORMANCE....................................... 18


ARTICLE XL - GOOD STANDING/DUE AUTHORIZATION................................................. 18


ARTICLE XLI - MEMORANDUM OF LEASE............................................................ 18


ARTICLE XLII - RENEWAL OPTION................................................................ 19


SCHEDULES AND EXHIBITS - ----------------------


SCHEDULE 1 - TENANT FINISH CONTRACTORS....................................................... 21


EXHIBIT "A" - LAND........................................................................... 22


EXHIBIT "A-l" - FLOOR PLAN................................................................... 23


EXHIBIT "B" - PERMITTED ENCUMBRANCES......................................................... 25


EXHIBIT "C" - DESIGN CRITERIA................................................................ 26


EXHIBIT "C-1" - PLANS AND SPECIFICATIONS..................................................... 27


EXHIBIT "D" - GUARANTEE...................................................................... 28


INDUSTRIAL LEASE AGREEMENT


THIS INDUSTRIAL LEASE AGREEMENT (the "Lease") is made and entered into by and between the Landlord and Tenant hereinafter named.


ARTICLE I


DEFINITIONS


The following definitions and basic provisions shall be used in conjunction with and limited by the reference thereto in the provisions of this Lease:


(a) "Landlord": CP-REGENCY BUSINESS PARK, LTD., a Texas limited
partnership.


(b) "Tenant": ALADDIN MANUFACTURING CORPORATION, a Delaware
corporation (a division of Mohawk Carpet Corporation, Inc., a
Delaware corporation).


(c) "Premises": That portion of the Building (herein so called)
identified on Exhibit "A-1" attached hereto and made a part
hereof, which Building is situated on that certain real property
described on Exhibit "A" attached hereto and made a part hereof
(the "Land"). The Building and the Land are hereinafter
collectively referred to as the "Property".


(d) "Lease Term": A period commencing December 1, 1996 (the
"Commencement Date") and ending on five (5) years and six (6)
months thereafter (the "Expiration Date").


(e) "Basic Rental": $52,413.25 per month.


(f) [INTENTIONALLY OMITTED]


(g) "Permitted Use": Warehousing, cutting and distribution of carpet
and related items (herein, the "Primary Use") and all other lawful
uses permitted by applicable zoning.


(h) "Maximum Rate": The maximum rate of interest permitted by
applicable law or two percent (2%) above the prime rate of
interest, as announced from time to time by NationsBank, N.A. for
its banks in Dallas, Texas, whichever is less.


(i) "Additional Rent": All sums of money, other than Basic Rental,
which become due under Article V, Section 8.7 or Article XV this
Lease, or are otherwise specified to be "Additional Rent" under
this Lease. Basic Rental and Additional Rent shall collectively
constitute the "Rent" or "Rentals" due or to become due under this
Lease and are herein so called.


(j) "Common Area": All areas and facilities that may exist, from time
to time, outside the Building and within the perimeter boundary
line of the Property for the general, non-exclusive use of the
Landlord, the Tenant and other tenants within the Building and
their respective employees, suppliers, shippers, customers and
invitees, including (without limitation, however) parking areas,
loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, alleys and landscaped areas.


(k) "Tenant's Share": A fraction, the numerator of which is the total
number of square feet of space contained within the Premises and
the denominator of which is the total number of square feet of
space contained within the Building and all other buildings, if
any, on the Property. Under no circumstances shall Tenant's Share
ever exceed Tenant's Share as of the date hereof, which the
parties acknowledge to be 50%.


ARTICLE II


LEASE GRANT


Landlord, in consideration of the Basic Rental to be paid and the other covenants and agreements to be performed by Tenant and upon the terms and conditions hereinafter stated, does hereby lease, demise and let unto Tenant the Premises commencing on the Commencement Date (as defined in Article I(d) hereof), or as adjusted as hereinafter provided) and ending on the last day of the Lease Term, unless sooner terminated as herein provided. If this Lease is executed before the Premises are available and ready for occupancy, and Landlord cannot deliver possession on the Commencement Date, then Landlord shall not be deemed to be in default hereunder, and Tenant agrees to accept possession of the Premises at such time as the Premises are available and ready for occupancy and such date shall be deemed to be the Commencement Date, and the Expiration Date set forth in Article I(d) hereof shall be extended for a period equal to the number of days that the Premises are not available and ready for occupancy beyond the Commencement Date specified in Article I(d) hereof plus the number of
---- days necessary for the Lease Term to expire on the last day of a month; provided, however, that if the Leasehold


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Improvements (as defined in Section 3.2 below) have not been substantially completed within ninety (90) days following the date upon which Landlord and Tenant mutually approve the final plans and specifications for the Leasehold Improvements (as defined in Section 3.2 hereof) (herein, the "Outside Completion Date"), subject to Excused Delays (as hereinafter defined), then Tenant shall have the right to terminate this Lease at any time prior to substantial completion of the Leasehold Improvements, and this Lease shall thereafter be null and void and of no further force or effect and the Commencement Date hereunder shall never occur. If the Tenant fails to terminate this Lease prior to substantial completion or within ten (10) days after Landlord notifies Tenant that the Leasehold Improvements will not be completed on time, then Tenant shall be deemed to have waived its right of termination contained herein. If the delay in completing the Leasehold Improvements by the Outside Completion Date is caused or contributed to by act or neglect of Tenant, or those acting for or under Tenant, labor disputes, casualties, acts of God or the public enemy, governmental embargo restrictions, shortages of fuel, labor, or building materials, action or non-action of public utilities, or of local, state or federal governments affecting the work, or other causes beyond Landlord's reasonable control, then the time of completion of said construction shall be extended for the additional time caused by such delay. Such delays are each referred to as an "Excused Delay." Landlord hereby waives payment of Basic Rental and all Additional Rental and other payments to be made by Tenant hereunder, all of which shall only commence upon the Commencement Date covering any period prior to the date the Premises are available and ready for occupancy; however, should Tenant occupy the Premises prior to the Commencement Date specified in Article I(d) hereof, the Commencement Date and Lease Term shall be altered to coincide with said occupancy with the Expiration Date of this Lease remaining unchanged. For the purpose hereof, the Premises shall be deemed "available and ready for occupancy" at such time as Landlord has substantially completed the construction or installation of any Leasehold Improvements (as defined in Section 3.2 hereof), if any, required to be completed by Landlord pursuant to Section 3.2 of this Lease to the extent reasonably necessary to as to allow Tenant to occupy the Premises and commence operations of its business therein, notwithstanding the fact that there may remain as incomplete certain minor, "punchlist" items which do not materially interfere with Tenant's intended use of the Premises; Landlord agrees to promptly attend to and complete the punchlist items in a good and workmanlike manner. The Leasehold Improvements shall be deemed to have been substantially completed when the following having occurred: (i) the issuance of a certificate of occupancy permitting Tenant to occupy the Premises (or the taking of such other action as may be customary to permit occupancy or use thereof); and (ii) the issuance of a certificate of substantial completion by Landlord's architect. Tenant shall endeavor to provide Landlord with a list of deficiencies in the construction of the Leasehold Improvements within thirty (30) days after it has taken possession of the Premises with all Leasehold Improvements completed; provided, further that nothing herein shall reduce or impair Landlord's Construction Guaranty set forth in Section 3.3 below. After the Commencement Date of this Lease, Tenant shall, upon request from Landlord, execute and deliver to Landlord a letter of acceptance of delivery of the Premises, which letter shall describe any deficiencies with respect to the Leasehold Improvements of which Tenant has actual knowledge and shall also state the Commencement Date and Expiration Date; provided, however, that Landlord also confirms to Tenant the Commencement and Expiration Dates. The Premises are subject to, and Tenant covenants and agrees to comply with, the easements, restrictions, reservations and other matters set forth in Exhibit "B" attached hereto and made a part hereof (collectively, the "Permitted Encumbrances"). Landlord represents to Tenant that none of the Permitted Encumbrances will materially interfere with or preclude Tenants occupancy of the Premises for the Primary Use identified in Article I(g) above.


ARTICLE III


CONSTRUCTION OF LEASEHOLD IMPROVEMENTS


Section 3.1 Landlord's Improvements. The "Landlord's Work" (so called herein) is described by the Design Criteria set forth on Exhibit "C" attached hereto and made a part hereof.


Section 3.2 Leasehold Improvements. Any improvements to be made to the Premises other than the Landlord's Work as described in Section 3.1 above are herein referred to as the "Leasehold Improvements". Immediately after the execution hereof, Landlord and Tenant will cooperate with one another to prepare final plans and specifications for the construction and installation of the Leasehold Improvements. Such final plans and specifications, when approved in writing by Landlord and Tenant, shall be attached to this Lease as Exhibit "C-1" and shall become a part hereof. No failure or refusal on the part of Tenant to approve final plans and specifications within a reasonable time after the execution hereof shall render this Lease void or voidable nor shall it delay the Commencement Date set forth in Article I(d) hereof. No delay caused by Tenant during the construction or installation of the Leasehold Improvements shall delay the Commencement Date of this Lease from what it would have been had such delay not occurred.


Landlord and Tenant acknowledge that Landlord has computed the Basic Rental by budgeting an allowance of $600,000.00 (the "Allowance") for the Leasehold Improvements to be constructed within the Premises. Landlord and Tenant acknowledge that the Allowance is not a firm budget nor final estimate of costs. Upon mutual approval of the final plans and specifications, Landlord agrees to obtain competitive bids for the cost of the Leasehold Improvements from no fewer than three (3) of the contractors listed on Schedule I attached hereto and made a part hereof. Landlord will provide to Tenant copies of any bids received by Landlord. It is understood, however, that Landlord need not necessarily select the contractor providing the lowest bid; however, unless Landlord provides Tenant a reasonable basis for rejecting the lowest bid, Landlord will select the contractor providing the lowest bid. Landlord shall promptly inform Tenant of Landlord's selection of the contractor and the final cost of the Leasehold Improvements. Should the total cost of the Leasehold Improvements exceed the Allowance, the Tenant shall pay such excess, in cash, to Landlord within ten (10) days following the date Landlord informs Tenant of such excess, and Landlord will not be required to commence construction of the Leasehold Improvements until Tenant pays such


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excess to Landlord. Any delay in Landlord's commencement of construction resulting from Tenant's failure to pay such amount to Landlord as required herein shall not delay the Commencement Date of this Lease from what is would have been had such delay not occurred. Should the total cost of the Leasehold Improvements be less than the Allowance, the Tenant shall be entitled to receive such amount by crediting the first installment(s) of Basic Rental due to the Landlord following the Abatement Period (as defined in Section 4.1 hereof).


Section 3.3 Construction Guaranty. Landlord guarantees the Leasehold Improvements against defective workmanship and/or materials or non-compliance with the final plans and specifications for the Leasehold Improvements for a period of one year from the date of substantial completion of the Leasehold Improvements, and Landlord agrees, at its sole cost and expense, to repair or replace any defective item occasioned by poor workmanship and/or materials or non-compliance with the final plans and specifications for the Leasehold Improvements during said one-year period, and performance of such one-year guaranty shall be Landlord's sole and exclusive obligation with respect to defective workmanship and/or materials, and Tenant's rights to enforce such one-year guaranty shall be Tenant's sole and exclusive remedy with respect to such defective workmanship and/or materials in limitation of any contract, warranty or other rights, whether express or implied, that Tenant may otherwise have under applicable law. From and after the expiration of the one year guaranty of Landlord against defective workmanship and materials, Landlord agrees to cooperate with Tenant in the enforcement by Tenant, at Tenant's sole cost and expense, of any express warranties or guaranties of workmanship or materials given by subcontractors or materialmen that guarantee or warrant against defective workmanship or materials for a period of time in excess of the one-year period described above and to cooperate with Tenant in the enforcement by Tenant, at Tenant's sole cost and expense, of any service contracts that provide service, repair or maintenance to any item incorporated in the Building for a period of time in excess of such one-year period.


ARTICLE IV


RENT


Section 4.1 Payment of Rent. In consideration of this Lease, Tenant promises and agrees to pay Landlord the Basic Rental, without deduction or set off, except for any set off explicitly provided for herein, for each and every month of the Lease Term and further promises and agrees to pay all Additional Rent which becomes due hereunder. The nonpayment of any Additional Rent or any other sums due by Tenant to Landlord under this Lease shall afford Landlord all the rights and remedies as are herein provided in the case of nonpayment of the Basic Rental. Any term or provision of this Lease to the contrary notwithstanding, the covenant and obligation of Tenant to pay Rent hereunder shall be independent from any obligations, warranties, representations, express or implied, if any, of Landlord herein contained.


Tenant's obligation to pay the Basic Rental shall abate for a period commencing on the Commencement Date and continuing through and until, and including, May 31, 1997 (the "Abatement Period"). The abatement provided herein shall apply to Basic Rental only and shall not include any other costs, charges or expenses payable by Tenant.


Section 4.2 Periodic Payment of Reimbursable Expenses; Adjustments. Landlord may estimate in advance the amount of any taxes, reimbursable maintenance expenses and insurance premiums due from Tenant under this Lease (the "Reimbursable Expenses") for each calendar year during the Lease Term, and the same shall be payable quarterly, during each twelve (12) month period of the Lease Term on the same day as Basic Rental is due hereunder, with an adjustment to be made between the parties at a later date as hereinafter provided. As soon as practicable following the end of each calendar year, but no later than the first day of May, beginning with the end of the first calendar year, Landlord shall submit to Tenant a statement setting forth the exact amount of the Reimbursable Expenses for the calendar year just completed. Further, Landlord shall notify Tenant of the difference, if any, between the actual amount of the Reimbursable Expenses for the calendar year just completed and the estimated amount of the Reimbursable Expenses (which was paid in accordance with this paragraph) for such year. Such statement shall also set forth the amount of the estimated Reimbursable Expenses for the new calendar year computed in accordance with the foregoing provisions. To the extent that the actual Reimbursable Expenses for any period covered by such statement is greater than the estimated amounts which Tenant previously paid during the calendar year just completed, Tenant shall pay to Landlord the difference within ten (10) days following receipt of said statement from Landlord. To the extent that the actual Reimbursable Expenses for the period covered by the statement is less than the estimated payment previously paid by Tenant during the calendar year just completed, Landlord shall credit the difference against the Tenant's estimated payment of Reimbursable Expenses for the current calendar year and such credit will be applied to the next payment or payments due from Tenant to Landlord. In addition, until Tenant receives such statement, Tenant's payment of the Reimbursable Expenses for the new calendar year shall continue to be paid at the rate for the previous calendar year, but Tenant shall commence payment to Landlord of the quarterly installments of Reimbursable Expenses on the basis of the new statement beginning on the first installment date following the date upon which Tenant receives such statement. If the statement reflects a change in the reimbursement amount, such difference shall be adjusted by increasing or decreasing the first reimbursement payment after the statement is given in order to bring the reimbursement amount for the new calendar year current as of such date.


Landlord shall retain its records relating to the taxes, insurance and other reimbursable expenses at Landlord's principal office (or such other office as Landlord may designate in writing to Tenant), and upon reasonable prior notice to Landlord, Tenant shall have the right to inspect all of Landlord's records relating to such costs. Appropriate adjustments shall be made for errors in the computation of such costs revealed by such audit or inspection. If any audit by Tenant indicates an overcharge in the amount of Tenant's Share by more than five percent (5%), the reasonable cost of such audit (up to a maximum of


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$1,500.00) shall be paid on demand by Landlord to Tenant. Land ...