Lease Agreement

STATE OF NORTH CAROLINA
LEASE AGREEMENT COUNTY OF CABARRUS


THIS LEASE AGREEMENT is made and entered into as of the 9th day of July, 1997, by and between Performance Park Partners, LLC a North Carolina limited liability company with offices in Charlotte, North Carolina ("Landlord") and Sports Image, Inc. an Arizona corporation ("Tenant").


PRELIMINARY STATEMENT


A. Landlord is the owner of that certain parcel of land (the "Land") containing approximately 16.3 acres located on Hudspeth Road (S.R. 1302) near its intersection with Morehead Road (S.R. 1300) in Cabarrus County, North Carolina. The Land is depicted on the boundary and division survey dated June 2, 1997 attached hereto as Exhibit A.


B. Landlord shall construct on the Land an office warehouse building (the "Building") containing approximately 113,755 square feet of floor area, together with associated improvements such as parking areas, sidewalks, landscaped areas and utility facilities (collectively, with the Building, the "Improvements") on the Land. Tenant intends to occupy the Building and use the other Improvements for office, warehouse and related purposes.


C. The Land, the Building and the other Improvements are referred to collectively in this Lease as the "Premises." In order to evidence their agreement regarding Tenant's lease of the Premises, the parties are entering into this Lease Agreement (this "Lease").


LEASE


NOW, THEREFORE, in consideration of $1.00 paid in hand by Tenant to Landlord, the mutual covenants and conditions contained in this Lease, including the covenant to pay rent, and other good and valuable consideration, Landlord and Tenant hereby agree, for themselves, their successors and assigns, as follows:


1. Premises. Landlord leases to Tenant and Tenant leases from Landlord the Premises, for the term and on the terms and conditions set forth in this Lease.


2. Term. The term of this Lease shall begin on the date that the substantially completed Premises are delivered to Tenant, as provided in paragraph 5, and shall end at midnight on the last day of the Two Hundred Fortieth (240th) complete calendar month following the commencement date.


3. Renewal. Provided Tenant is not in default under this Lease, Tenant shall have the right to renew this Lease for four (4) periods of five (5) years each. Each renewal period shall be on the same terms and conditions set forth in this Lease except that Tenant shall have no further renewal rights after the final renewal period. All references in this Lease to the term of this Lease shall be deemed to include the renewal periods provided for herein unless the context clearly indicates a different meaning.


4. Exercise of Renewal. The right of Tenant to renew this Lease shall be exercised by written notice delivered to Landlord in the manner provided in paragraph 25 below not less than ninety (90) days prior to the expiration of the initial term or the then current renewal period, as applicable, after which Tenant's renewal right shall expire, time being of the essence. Notwithstanding the foregoing, Tenant's right to exercise its renewal option shall not expire until ten (10) days after Landlord has delivered notice to Tenant that Tenant has failed to timely exercise its option to renew.


5. Delivery of Premises. Landlord shall deliver the Premises to Tenant when the Premises are substantially completed. Landlord and Tenant expect the Premises to be substantially completed within nine (9) months after commencement of construction, and Landlord and Tenant agree to exercise reasonable efforts to meet the expectation. If, however, the Premises are not substantially completed by the end of the twelfth (12th) month after commencement of construction, and if such failure to achieve substantial completion is not due to force majeure or to delays caused by Tenant, Tenant may terminate this Lease by written notice to Landlord and neither party shall have any further rights or obligations under this Lease. In this lease, the Premises shall be deemed to be "substantially completed" on the date the last of the following occurs:


(a) Landlord's contractor states in writing for the benefit of Tenant that the Premises have been substantially completed in accordance with the nine (9) page Scope of the Work Specifications of G.L. Wilson Building Company (the "Contractor") dated May 28, 1997 and the five (5) page site plan, floor plan, elevation and main and upper level enlarged plan of the Contractor both attached as Exhibit B to this Lease, subject only to minor punchlist items that do not materially impair the use of the Premises for their intended purpose; and


(b) A temporary certificate of occupancy is issued for the Premises by the appropriate authority, subject only to conditions that do not materially impair the use of the Premises for their intended purpose.
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Tenant shall inspect the Premises within thirty (30)days after delivery thereof and submit a written punchlist of construction defects to Landlord. If Tenant does not submit such punchlist on or before the thirtieth (30th) day after delivery of the Premises, Tenant shall be deemed to have accepted the Premises "as is". If Tenant omits any item from such punchlist, Tenant shall be deemed to have accepted such item "as is". Tenant acknowledges that Landlord makes no representations or warranties as to the condition of the Premises or their suitability for any particular purpose, and that Landlord shall have no responsibility to make any repairs or alterations to the Premises prior to or after their delivery to Tenant. Tenant shall look to the contractor and not to Landlord for corrections of punchlist items. Landlord shall assign to Tenant all of Landlord's rights in, to and under any warranties affecting the Premises.


6. Rent. Tenant shall pay to Landlord as monthly rent the applicable amount stated below in this paragraph 6, payable in advance on the first day of each calendar month without deduction or setoff, commencing on the commencement date of the term of this Lease and continuing throughout the term of this Lease. If the commencement date falls on a day other than the first day of a calendar month, the installment of rent payable for the initial partial calendar month shall be payable on the first day of the following calendar month. All rent shall be paid to Landlord at the address to which notices to Landlord are given as set forth in paragraph 25 below, and shall be paid without demand, setoff or deduction. Rent for any partial month shall be prorated on a daily basis. All past due rent shall bear interest at the rate of twelve percent (12%) per annum from the date due until the date paid. The following are the amounts of rent applicable to the respective portions of the terms of this Lease:


113,755 sq.ft. Years Monthly Rent Annual Rent (Annual Rent/sq.ft.) ----- ------------ ----------- --------------------


1-2 $ 57,833.33 $688,000 $ 5.69 3-4 $ 61,833.33 $736,000 $ 6.09 5-6 $ 65,833.33 $784,000 $ 6.49 7-8 $ 69,833.33 $832,000 $ 6.88 9-10 $ 73,833.33 $880,000 $ 7.28


Annual rent for each of years 11-20 of the term of this Lease be adjusted as of the first day of each such year and shall equal the greater of (a) the sum of (i) annual rent for the immediately preceding year plus (ii) three percent (3%) of annual rent for the immediately preceding year, or (b) the sum of (i) annual rent for the immediately preceding year plus (ii) annual rent for the preceding year multiplied by the percentage increase in "CPI" during the immediately preceding year, stated as a decimal. "CPI" on each rent adjustment date shall be measured by the U.S. Department of Labor Consumer Price Index for all Urban Consumers (U.S. City Average, 1982-84=100) most recently published prior to
-3- each such date; or if such index is not then in use, by the index most nearly comparable thereto. Tenant shall pay to Landlord as monthly rent for each of years 11-20 of the term of this Lease an amount equal to one-twelfth (1/12) of the applicable annual rent, payable in advance on the first day of each calendar month without deduction or setoff. Rent for each year of each renewal period, if any, exercised during the term of this Lease shall be calculated and paid in the same manner as for years 11-20 of the term of this Lease.


7. Additional Rent. If Tenant does not pay such expenses directly as provided in this Lease, Tenant shall pay to Landlord, as additional rent, the following operating expenses incurred by Landlord with respect to the Premises during the term of this Lease:


(a) All real estate taxes and assessments levied or assessed
against the Premises;


(b) The premiums for all policies of casualty and liability
insurance maintained by Landlord with respect to the Premises;


(c) The cost of all utility services provided to the Premises,
including but not limited to electricity, natural gas, water and sewer
services and trash removal;


(d) The cost of all repairs to the Premises, including any
alterations, structural or otherwise, necessary to comply with
applicable laws; and


(e) All other costs incurred by Landlord in operating and
maintaining the Premises, including but not limited to the cost of
janitorial services, security services, maintenance of landscaped and
paved areas, maintenance of utility systems and other similar
expenditures.


Tenant shall reimburse Landlord for each of the foregoing expenses within ten (10) days after receipt of a written statement from Landlord, detailing the expense incurred by Landlord. This paragraph 7 shall not be deemed either to obligate Landlord to pay any such amounts or to constitute consent by Landlord to Tenant's failure to pay such amounts directly as required in the other provisions of this Lease, but this paragraph 7 is intended only to provide an alternate remedy for the protection of Landlord exercisable by Landlord at Landlord's sole option and at Landlord's sole discretion in case of Tenant's failure to pay such amounts directly.


8. Repair and Maintenance. Tenant shall maintain in good condition and repair the entire Premises, including without
-4- limitation the Building and other Improvements on the Premises, and all roofs and exterior walls, landscaping, driveways and parking areas, and shall make all necessary repairs to the building structure and concealed systems (including without limitation plumbing, electrical, heating and air conditioning) within or servicing the Premises. Tenant shall also make any modifications to the Premises required to comply with applicable legal requirements, including without limitation the Americans with Disabilities Act.


9. Alterations and Personal Property. Tenant shall have no right to make any alterations in the Premises without the prior written consent of Landlord, which shall not be unreasonably withheld, conditioned or delayed. Tenant shall submit to Landlord a written request for consent to alterations, and such request shall include a complete description of the proposed scope and schedule of work, together with complete plans and specifications. Landlord may withhold, condition or delay its consent if the alterations will decrease the value of Premises or will violate any applicable laws, ordinances or restrictions affecting the Premises. If Landlord approves any such alterations, Tenant must obtain advance written approval from Landlord of plans and specifications for the work, and shall keep the Premises free and clear of any lien or claim of lien arising out of any such work occurring, or allegedly occurring, by, through or under Tenant. Tenant shall immediately pay and discharge any such lien or claim of lien that is filed. ...