Lease Between Aladdin Manf. & cell Home Fashion

EXHIBIT 10.14


EX-CELL HOME FASHIONS, INC.


AND


ALADDIN MANUFACTURING CORPORATION


-------------------------------
LEASE AGREEMENT


-------------------------------
Dated as of December 3, 1999


Table of Contents
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Page
---- ARTICLE I DEFINITIONS...................................................... 1 ARTICLE II DEMISING CLAUSES AND RENTAL PROVISIONS........................... 3 Section 2.1. Demise of Facility........................................... 3 Section 2.2. Duration of Lease Term....................................... 3 Section 2.3. Rent......................................................... 3 ARTICLE III MAINTENANCE, USE, MODIFICATIONS, TAXES AND INSURANCE............. 5 Section 3.1. Maintenance, Use, and Modifications of Facility by Tenant.... 5 Section 3.2. Installation of Tenant-Owned Equipment....................... 8 Section 3.3. Taxes, Assessments and Utility Charges....................... 9 Section 3.4. Insurance Required........................................... 10 Section 3.5. Additional Provisions Respecting Insurance................... 10 Section 3.6. Right of Landlord to Pay Insurance Premiums and Other Charges 13 ARTICLE IV DAMAGE, DESTRUCTION AND CONDEMNATION............................. 13 Section 4.1. Damage or Destruction........................................ 13 Section 4.2. Condemnation................................................. 15 ARTICLE V SPECIAL COVENANTS................................................ 17 Section 5.1. No Warranty of Condition or Suitability Landlord............. 17 Section 5.2. Hold Harmless Provisions..................................... 18 Section 5.3. Landlord's Repairs........................................... 18 Section 5.4. Responsibility for the Sprinkler System...................... 19 Section 5.5. Right to Inspect the Facility and the Equipment.............. 19 Section 5.6. Good Standing in the State................................... 19 Section 5.7. Agreement to Provide Information............................. 19 Section 5.8. Books of Record and Account; Financial Statements............ 19 Section 5.9. Compliance with orders....................................... 20 Section 5.10. Discharge of Liens and Encumbrances.......................... 20


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Table of Contents
-----------------
(continued)


Page
---- ARTICLE VI ASSIGNMENT AND SUBLEASING; MORTGAGE AND PLEDGE OF INTEREST...... 21 Section 6.1. Assignment and Subleasing.................................... 21 ARTICLE VII EVENTS OF DEFAULT AND REMEDIES................................... 22 Section 7.1. Events of Default Defined.................................... 22 Section 7.2. Remedies on Default.......................................... 24 Section 7.3. Remedies Cumulative.......................................... 25 Section 7.4. Agreement to Pay Attorneys' Fees and Expenses................ 26 ARTICLE VIII RENEWAL OPTION................................................... 26 Section 8.1. Tenant's Renewal Option...................................... 26 ARTICLE IX PURCHASE OPTION.................................................. 27 Section 9.1. Facility Purchase Option..................................... 27 ARTICLE X RIGHT OF FIRST REFUSAL........................................... 30 Section 10.1. Right of First Refusal....................................... 30 ARTICLE XI MISCELLANEOUS.................................................... 32 Section 11.1. Surrender of Facility........................................ 32 Section 11.2. Notices...................................................... 32 Section 11.3. Binding Effect............................................... 33 Section 11.4. Severability................................................. 33 Section 11.5. Amendments, Changes and Modifications........................ 33 Section 11.6. Execution of Counterparts.................................... 33 Section 11.7. Applicable Law............................................... 33 Section 11.8. Table of Contents and Section Headings Not Controlling....... 33 Section 11.9. Estoppel Certificate......................................... 33 Section 11.10. Quiet Enjoyment.............................................. 34 Section 11.11. Security Deposit............................................. 34 Section 11.12. No Additional Waiver Implied By One Waiver................... 35 Section 11.13. Brokerage Agreement.......................................... 35


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THIS LEASE AGREEMENT, dated as of December 3, 1999, by and between EX- CELL HOME FASHIONS, INC., a corporation organized and existing under the laws of New York with an address at 295 Fifth Avenue, New York, New York 10016 ("Landlord"), and ALADDIN MANUFACTURING CORPORATION, a corporation organized and existing under the laws of Delaware with an address at 3090 Sugar Valley Road, NW, Sugar Valley, GA 30746 ("Tenant"),


W I T N E S S E T H
-------------------


WHEREAS, Landlord desires to lease the real property described on Exhibit A hereto, the existing building and other improvements thereon and the Equipment (as hereinafter defined), and Tenant desires to hire such real property, existing building and other improvements thereon and Equipment from Landlord, upon the terms and conditions set forth in this Lease Agreement;


NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements of the parties hereto herein contained, the parties hereto hereby covenant and agree as follows:


ARTICLE I
DEFINITIONS


The following words and terms as used in this Lease Agreement shall have the following meanings:


"Landlord" means Ex-Cell Home Fashions, Inc., a corporation duly
---------- organized and existing under the laws of New York.


"Landlord's Plant" means Landlord's existing plant located on the Land
------------------ located in Bentonville, Arkansas.


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"Condemnation" means the taking of title to, or the use of, property
-------------- under the exercise of the power of eminent domain by any governmental entity or other Person acting under governmental authority.


"Equipment" means all machinery, equipment and other personal property
----------- located at the Facility, except the computer equipment, checking stations, and all equipment in the office areas.


"Facility" means the Land together with the Landlord's Plant
---------- (consisting of approximately 134,067 square feet), less the Storage Area.


"Land" means the interest in real estate leased pursuant to this Lease
------ Agreement as more particularly described on Exhibit A attached hereto.


"Lease Term" means the duration of the leasehold estate created by
------------ this Lease Agreement as specified in Section 2.2 hereof.


"Storage Area" means that area of the Plant identified on Exhibit B
-------------- attached hereto and consisting of approximately 3,600 square feet.


"Permitted Encumbrances" means (i) this Lease Agreement, (ii) utility,
------------------------ access and other easements and rights of way, restrictions and exceptions that do not materially impair the utility or the value of the property affected thereby for the purposes for which it is intended, (iii) mechanics', materialmen's, warehousemen's, carriers' and other similar liens to the extent permitted by this Lease Agreement hereof and (iv) liens for taxes at the time not delinquent.


"Person" means an individual, partnership, corporation, trust or
-------- unincorporated organization, and a government or agency or political subdivision thereof.
"Structural Repairs" means any repair that involves the substantial
-------------------- repair, renovation or restoration of a structural component of the Facility.


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"Tenant" means Aladdin Manufacturing Corporation, a corporation duly
-------- organized under the laws of Delaware.


ARTICLE II
DEMISING CLAUSES AND RENTAL PROVISIONS


Section 2.1. Demise of Facility. Landlord hereby demises and leases the
------------------ Facility and the Equipment to Tenant and Tenant hereby hires and leases the Facility and the Equipment from Landlord upon the terms and conditions of this Lease Agreement.


Section 2.2. Duration of Lease Term. The Lease Term shall commence on
---------------------- December 3, 1999 (the "Term Commencement Date"), and end on December 31, 2002 (the "Expiration Date"), unless sooner terminated in accordance with the provisions hereof.


Section 2.3. Rent. (a) Tenant shall pay to Landlord rent during the
----- Lease Term at the rate of (i) Eighteen Cents per square foot per month or Two Hundred Eighty-One Thousand Eight Hundred and Eight Dollars and 72/100 ($281,808.72) per annum, payable in equal monthly installments of Twenty-Three Thousand Four Hundred Eighty-Four Dollars and 06/100 ($23,484.06) for the Facility (the "Fixed Rent"), and (ii) Thirty-six Thousand Dollars ($36,000.00) per annum, payable in equal monthly installments of Three Thousand Dollars ($3000.00) (the "Equipment Rent"). Both Fixed Rent and Equipment Rent are payable in advance on the first day of each month during such period.


(b) It is the intention of the parties that this is a gross lease, without responsibility or cost to Tenant, except as expressly set out in this Lease Agreement.


(c) Tenant agrees to make the payments of Fixed Rent and Equipment Rent, without any further notice, in lawful money of the United States of America as, at the time of payment, shall be legal tender for the payment of public and private debts. In the event Tenant shall fail to timely make any payment required in this Section 2.3, Tenant shall pay the same


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together with interest thereon at the rate equal to the then higher of (i) fifteen per centum (15%) or (ii) the prime rate as published in The Wall Street Journal on the date such payments were due plus eight and one-half per centum (8.5%) per annum, in either case as calculated from the date on which such payment was due until the date on which such payment is made.


(c) In the event Tenant exercises its option for the Extended Term under Article 8 of this Lease Agreement, Landlord shall have the right to increase the base rent for the Extended Term in direct proportion to the three year aggregate of the annual percentage increase in the level of the Consumer Price Index, All Items, U.S. City Average, All Urban Consumers (1982-1984=100), published by the Bureau of Labor Statistics, U.S. Department of Labor (the "B.L.S. Index"), as published during the preceding three years.


It is understood that the B.L.S. Index is now being published monthly by the Bureau of Labor Statistics of the U.S. Department of Labor. Should said Bureau of Labor Statistics change the manner of computing the B.L.S. Index, the Bureau shall be requested to furnish a conversion factor designed to adjust the B.L.S. Index to the one previously in use, and adjustment to the new Index shall be made on the basis of such conversion factor. Should the publication of a B.L.S. Index be discontinued by said Bureau of Labor Statistics, then such other index as may be published by such Bureau most nearly approaching said discontinued B.L.S. Index shall be used in making the adjustments herein provided. Should said Bureau discontinue the publication of any index approximating the B.L.S. Index, then such index as may be published by another United States Governmental Agency as most nearly approximates the B.L.S. Index shall govern and be substituted as the index to be used, subject to the application of an appropriate conversion factor to be furnished by the Governmental Agency publishing the adopted index. If such Governmental Agency will not furnish such conversion factor, then the


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parties shall agree upon a conversion factor, or a new index, and in the event an agreement cannot be reached as to such conversion factor or such new index, then the selection of a new index approximating as nearly as can be the B.L.S. Index shall be determined by arbitration in accordance with the Rules of the American Arbitration Association and the index selected in such arbitration shall be binding upon the parties hereto.


ARTICLE III
MAINTENANCE, USE, MODIFICATIONS, TAXES AND INSURANCE


Section 3.1. Maintenance, Use, and Modifications of Facility by Tenant.
--------------------------------------------------------- (a) Tenant agrees that during the Lease Term it will at its own expense (i) keep the Facility and the Equipment in a safe condition; (ii) make all necessary nonstructural repairs and replacements to the Facility and the Equipment (whether ordinary or extraordinary, foreseen or unforeseen), which repairs and replacements shall be of a quality or class equal to the original work or construction; and (iii) make all Structural Repairs necessitated by or arising out of any act, failure to act or negligence of Tenant. Tenant shall use and operate the Facility and the Equipment for the manufacturing, assembling, warehousing and wholesale distribution of pillow filling and other pillow filling products and for other uses reasonably related to the business of assembling, warehousing and the wholesale distribution of pillow filling and for no other purpose, unless Landlord consents in writing to other uses. If Landlord consents to a different use, and such use is lawful, Tenant shall be responsible for any additional costs associated with such different use, including, but not limited to insurance costs. Landlord shall deliver the Facility to Tenant clean and free of debris on the Term Commencement Date and warrants to Tenant that all aspects of the building to be maintained and repaired by Tenant shall be in good operating condition and repair as of the Term Commencement Date.


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(b) In the event that Tenant shall at any time during the term of this Lease receive a notice, order, or violation to the effect that Tenant's use and operation of the Facility for the manufacturing, assembling, warehousing and wholesale distribution of pillow filling and other pillow filling products is not permitted in the Facility under the provisions of the zoning code of the Town of Bentonville as existing as of the date of this Lease Agreement (the "Zoning Code"), then Tenant shall promptly give notice thereof to Landlord. Following receipt of such notice from Tenant, Landlord shall have a period of 180 days in order to obtain a variance, special exception, or otherwise cure or dismiss the notice, violation or order. During such 180 day period Landlord agrees to use good faith efforts to cure or remove such notice, violation or order and Tenant agrees to cooperate with Landlord (by joining in applications, supplying information, attending hearings and otherwise as may be necessary). If Landlord does not notify Tenant within such 180 day period that Landlord has cured or removed, or has arranged to cure or remove, such notice, violation or order, then Tenant shall have a right to terminate this Lease by notice to Landlord within 10 days following the end of such 180 day period, which notice shall specify a date for such termination which shall be not less than 30 days following the date of Tenant's notice. In such event, the date set forth in Tenant's notice shall be substituted for the Expiration Date provided for herein and the Tenant shall vacate and surrender the Facility on such Expiration Date in accordance with the terms of this Lease Agreement. Notwithstanding the foregoing, Tenant shall not have the right to terminate this Lease Agreement pursuant to this paragraph if the notice, order or violation arises as a result of Tenant's breach or violation of any law, rule or regulation other than the Zoning Code. Provided that Landlord has complied with its obligations pursuant to this paragraph, Tenant's right to terminate this Lease Agreement pursuant to this paragraph because Tenant's use and operation of the Facility for the purposes provided for


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in this paragraph is not permitted by the Zoning Code shall be Tenant's sole remedy and Tenant hereby waives, and releases Landlord with respect to, any and all other claims for damages, equitable relief or otherwise.


(c) Any structural additions, modifications or improvements to the Facility or any part thereof made by Tenant must be in accordance with plans and specifications approved in writing in advance by Landlord, which consent shall not be unreasonably withheld or delayed. Tenant shall pay to Landlord as additional rent within 20 days after demand therefor: (i) Landlord's reasonable expenses incurred as a result of having the plans, specifications, work-in- progress and as-built plans reviewed by an architect or engineer and (ii) reasonable attorneys' fees and expenses arising in connection with any such structural additions, modifications or improvements to the Facility. All such structural additions, modifications or improvements so made by Tenant shall become a part of the Facility and shall remain upon and be surrendered with the Facility at the end of the Lease Term.


(d) Tenant shall use the Equipment in a careful and proper manner and shall comply with and conform to all national, state, municipal, police and other laws, ordinances and regulations in anywise relating to the possession, use or maintenance of the equipment. If at any time during the term hereof Landlord supplies Tenant with labels, plates or other markings stating that the equipment is owned by Landlord, Tenant shall affix and keep the same upon a prominent place on the equipment.


(e) If Tenant fails after ten days notice to proceed with due diligence to make repairs or replacements which Tenant is required to make hereunder, the same may be made by Landlord at the expense of Tenant, and the expenses thereof incurred by Landlord shall be


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collectible as Additional Rent and payable by Tenant within 20 days following rendition of a bill or statement therefor.


(f) All repairs and replacements shall be done in a good and workmanlike manner and shall at all times comply with laws, rules, ordinances, orders, codes and regulations of governmental, quasi-governmental and regulatory authorities, and all requirements of insurance carriers issuing policies covering the Facility and the Equipment and the Board of Fire Underwriters.


(g) Tenant agrees that it will not, either directly or indirectly, use any contractors and/or labor and/or materials if the use of such contractors and/or labor and/or materials would or will create any difficulty with other contractors and/or labor engaged by Tenant or Landlord or others in the maintenance and/or operation of any part of the Facility or the Equipment. Tenant shall, before making any repairs or replacements, at its sole cost and expense, obtain all permits, approvals and certificates required by any governmental or quasi-governmental bodies and (upon completion) certificates of final approval and shall deliver promptly duplicates of all such permits, approvals and certificates to Landlord, and Tenant agrees to carry, and will cause Tenant's contractors and sub-contractors to carry such workers' compensation, builder's risk, general liability, personal and property damage insurance as Landlord may reasonably require.


Section 3.2. Installation of Tenant-Owned Equipment. Tenant from time to
-------------------------------------- time may install its own machinery, equipment or other personal property in the Facility (which may be attached or affixed to the Facility), and such machinery, equipment or other personal property shall not become, or be deemed to become, a part of the Facility. Tenant from time to time may remove or permit the removal of such machinery, equipment and other personal property from


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the Facility, provided that any such removal of such machinery, equipment or other personal property shall not adversely affect the structural integrity of the Facility or impair the overall operating efficiency of the Facility and provided further that if any damage is occasioned to the Facility by such removal, Tenant agrees to promptly repair such damage at its own expense.


Section 3.3. Taxes, Assessments and Utility Charges. Tenant agrees to pay,
-------------------------------------- (i) all taxes and governmental charges of any kind whatsoever which may at any time be assessed or levied against or with- respect to the Facility and any machinery, equipment or other property installed or brought by Landlord or Tenant therein or thereon and the employees of Tenant or Landlord located at or assigned to the Facility, including without limiting the generality of the foregoing any sales or use taxes and any taxes levied upon or with respect to the income or revenues of Tenant from the Facility, (ii) all utility and other charges, including, without limitation, "service charges", incurred or imposed for the operation, maintenance, use, occupancy, upkeep and improvement of the Facility, and (iii) all assessments and charges of any kind whatsoever made by any governmental body for public improvements.


Taxes and governmental charges shall be deemed to exclude any payments in lieu of, addition to, or in partial or complete substitution for real estate related taxes, including, without limitation, (i) taxes, assessments, levies, impositions or charges (special or otherwise) wholly or partially as a capital levy or otherwise on the rents received from the Facility, (ii) taxes, assessments, levies, impositions, or charges (special or otherwise) measured by, or based in whole or in part upon the Facility and imposed upon the Landlord, (iii) license fees measured by the rent payable by the tenants in the Facility to the Landlord, and (iv) such other additional or substitute taxes, assessments, levies, impositions, or charges (special or otherwise).


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Section 3.4. Insurance Required. At all times throughout the Lease Term,
------------------ Tenant shall maintain insurance, except general facility insurance, against such risks and for such amounts as are customarily insured against by businesses operating facilities of like size and type as the Facility in the manner and for the purposes for which the Facility will be operated by Tenant under this Lease Agreement, paying, as the same become due and payable, all premiums in respect thereto, including, but not necessarily limited to:


(a) business interruption insurance or rent insurance, sufficient to cover unabated rent payments in the event of a casualty.


(b) worker's compensation insurance, disability benefits insurance, and each other form of insurance which Landlord or Tenant is required by law to provide, covering loss resulting from injury, sickness, disability or death of employees of Landlord or Tenant who are located at or assigned to the Facility; and


(c) insurance protecting Landlord and Tenant against loss or losses from liabilities imposed by law or assumed in any written contract and arising from personal injury and death or damage to the property of others caused by any accident or occurrence with limits of not less than $5,000,000 per accident or occurrence on account of personal injury, including death resulting therefrom and damage to the property of others.


(d) Tenant shall keep the Equipment insured against all risks of loss or damage from every cause whatsoever for not less than the full replacement value thereof as determined by Landlord and shall carry public liability and property damage insurance covering the Equipment.


Section 3.5. Additional Provisions Respecting Insurance. (a) All
------------------------------------------ insurance required by this Article shall be procured and maintained with responsible insurance companies which are (i)


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financially-sound and generally-recognized and with a Best's rating of A or better, (ii) approved by Landlord and (iii) authorized to write such insurance in the State of Arkansas. The insurance coverage shall be of a type and scope and in the amounts as shall be acceptable to Landlord. Such insurance may not be written with deductible amounts in excess of such deductible amounts as Landlord may have agreed to in advance. All policies evidencing such insurance shall provide for payment of losses to Landlord and Tenant, as their respective interests may appear.


(b) All policies of insurance required by this Article, or a certificate or certificates of the insurers that such insurance is in force and effect, or other evidence of such insurance satisfactory to Landlord, shall be deposited with Landlord prior to Tenant's taking possession of the Facility and the Equipment. Tenant shall deliver to Landlord on or before the first day of each calendar year thereafter certificates dated not earlier than the immediately preceding November 1 reciting that there is in full force and effect with a term covering at least the next succeeding calendar year, insurance in the amounts and of the types required by this Article. Prior to expiration of any such policy, Tenant shall furnish Landlord satisfactory evidence that the policy has been renewed or replaced.


(c) All policies of insurance procured by Tenant shall contain endorsements providing that (i) such policies may not be materially changed, amended, reduced, cancelled (including for nonpayment of premium) or allowed to lapse with respect to the Landlord except after 60 days' prior notice from the insurance company to each, sent by registered or certified mail, return receipt requested to the addresses and in the manner then provided in this Lease Agreement for notices; and (ii) Tenant shall be solely responsible for the payment of all premiums under such policies and the Landlord shall have no obligation for the payment thereof notwithstanding that the Landlord is or may be named as an insured. Any endorsements to any


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such policies shall be so deposited with the Landlord upon issuance thereof and each renewal or replacement of a policy shall be so deposited with the Landlord at least 20 days prior to the expiration of such policy.


(d) Tenant shall not take out separate insurance concurrent in form or contributing in the event of loss with that required (or which may reasonably be required) pursuant to this Sectio ...