Build To Suit Lease Agreement

BUILD TO SUIT LEASE AGREEMENT
-----------------------------------


BY AND BETWEEN


PIZZUTI EQUITIES INC.


("LANDLORD")


AND


VALLEY RECORD DISTRIBUTORS, INC.


("TENANT")


- -------------------------------------------------------------------------------


CONFIDENTIAL


BUILD TO SUIT LEASE AGREEMENT


THIS BUILD TO SUIT LEASE AGREEMENT ("Lease") is dated as of October 1st, 1997 for reference purposes only and is made and entered into by and between PIZZUTI EQUITIES INC. ("Landlord") and VALLEY RECORD DISTRIBUTORS, INC., a California corporation ("Tenant").


1. RECITALS. This Lease is entered into on the basis of the following
facts, intentions and understandings of the parties:


1.1. Landlord is a real estate developer with experience and
expertise in the development of land and the construction of
industrial and commercial buildings of the type hereafter
described as the "Premises."


1.2. Tenant is in the business of distributing compact disks, videos
and other media products.


1.3. Tenant desires to lease, with an option to purchase, a
warehouse and distribution facility with associated office
space to be constructed in the Jefferson Riverport
International Industrial Park at Louisville, Kentucky (the
"Park"). The facility will be comprised of approximately
331,088 usable square feet of space, situated on approximately
16.8131 acres of land, and provide parking for approximately
300 automobiles.


1.4. Tenant has heretofore entered into an Option Agreement and
Contract for Sale dated August 12, 1997 ("Land Sale and Option
Agreement") with the Riverport Authority ("Authority") pursuant
to which Tenant agreed to purchase approximately 16.8131 acres
of land and was granted an option to purchase an additional
parcel of approximately 4.4578 acres (the "Land") within the
Park.


1.5. Tenant has heretofore prepared and distributed a Request for
Proposal ("RFP") soliciting offers from qualified developers to
purchase a portion of the Land, to construct hereon to Tenant's
specifications a building of the nature described in Section
1.3 above, to lease the building to Tenant with an option to
purchase the same, and to provide a means for future expansion
should such expansion be required by Tenant. This Lease
supersedes all provisions of the RFP.


1.6. From among the developers responding to the RFP, Tenant has
selected Landlord's proposal as set forth in Exhibit A.


-2-


CONFIDENTIAL


1.7. Landlord and Tenant now desire, and intend hereby, to set forth
the terms by which Landlord will construct a building on a
portion of the Land to Tenant's specifications, lease the Land
and building to Tenant with an option to purchase the same, and
provide for Tenant's possible future expansion into an
additional building to be constructed by Landlord.


2. PREMISES.


2.1. ASSIGNMENT OF CONTRACT. Not later than ten (10) days after the
date on which both Landlord and Tenant have executed this
Lease, Tenant shall assign to Landlord, by an instrument in
writing mutually agreeable to Landlord and Tenant, all of
Tenant's rights and obligations in the Land Sale and Option
Agreement and Landlord shall accept such assignment and assume
and agree to hold Tenant free and harmless from all obligations
and liabilities arising under or pursuant to such Agreement.
Concurrent with such assignment and acceptance, Landlord shall
reimburse Tenant for all deposits made and other sums expended
by Tenant in connection with the Land Sale and Option Agreement
as detailed in an itemized accounting thereof to be prepared by
Tenant and delivered to Landlord at the time of such
assignment.


2.2. PURCHASE OF INITIAL PARCEL. No later than ten (10) days after
assignment of the Land Sale and Option Agreement, Landlord
shall, at Landlord's sole cost and expense, either (a)
purchase, pursuant to the terms and conditions of said
agreement, fee title to approximately 16.8 acres of the Land
("Initial Parcel") or (b) execute an agreement with the
landowner for immediate commencement of preliminary clearing
and site grading. At the closing of Landlord's purchase of the
Initial Parcel, Landlord shall cause to be recorded in the
official records of the county where the Land is situated a
Memorandum of Lease in the form of Exhibit B hereto and a
Memorandum of Option in the form of Exhibit C hereto which
Memoranda shall for purposes of title priority constitute
encumbrances on the Initial Parcel which are senior to all
other liens or encumbrances except those which are specifically
approved in writing by Tenant. Not later than ten (10) days
after the closing of Landlord's purchase of the Initial Parcel,
Landlord shall provide Tenant, at Landlord's expense, with a
copy of the recorded deed by which Landlord has taken title to
the Initial Parcel, certified copies of the recorded Memoranda
and evidences of title, to Tenant's reasonable satisfaction,
showing fee title vested in Landlord and the encumbrances of
the Memoranda with priority of title as above stated. In
connection with its purchase of the Initial Parcel, Landlord
shall conduct such tests and inspections of the Land and of all
relevant matters pertaining to the development of the Land as
contemplated by this Lease as would a prudent developer of
similar properties and as are necessary to satisfy the terms
and conditions of this Lease. Landlord shall provide Tenant,
within five (5) working days after Landlord's initial receipt
thereof, with copies of all reports


-3-


CONFIDENTIAL

and test results it obtains regarding the Land, including, but
not limited to, soils reports, environmental assessment
reports, and test results of soil or water samples taken from
the Land. Landlord acknowledges and agrees that the foregoing
items are provided to Tenant for Tenant's information only,
that Tenant shall have no duty to act or inquire with respect
to any matter disclosed or recommended by any such reports, and
that Tenant's receipt of any such report shall not relieve
Landlord of any duty to Tenant at law or under this or any
other agreement between Landlord and Tenant or be the basis of
any defense by Landlord against any claim by Tenant arising out
of any alleged failure or breach by Landlord.


2.3. CONTINUING OPTION. Until the earlier of (a) three (3) years
after the commencement Date or (b) Landlord's receipt of a
written notice from Tenant that Tenant irrevocably waives its
rights hereunder to acquire the Additional Premises, Landlord
shall keep in full force and effect, and do all things required
of Landlord to maintain as operative, the Land Sale and Option
Agreement as it pertains to the remaining 4.5 acres of Land
("Second Parcel") on which the Additional Premises will be
constructed if Tenant shall exercise its option to expand as
provided in this Lease. Tenant shall reimburse Landlord for
any money expended to keep the option in effect.


2.4. CONSTRUCTION OF PREMISES. From and after the closing of
Landlord's purchase of the Initial Parcel, Landlord shall, at
Landlord sole cost and expense, commence and diligently pursue
to completion development and construction of the Premises as
provided in Exhibit D and other provisions of this Lease.


3. LEASE TERM.


3.1. INITIAL TERM. The term of this Lease ("Term") shall be ten
(10) years commencing on the Commencement Date.


3.2. COMMENCEMENT DATE. The Commencement Date shall be the earlier
of (a) the first day of the first calendar month following the
calendar month in which construction of the Tenant Improvements
has been substantially completed or (b) seventy-five (75) days
after delivery of a water-tight building as described in
Exhibit D. Within thirty (30) days after the Commencement
Date, Landlord and Tenant shall execute, acknowledge, and
record a Commencement Date Memorandum in the form of Exhibit E
hereto, setting forth therein the actual Commencement Date of
this Lease.


3.3. DELAY. If the Commencement Date has not occurred by August 15,
1998, Tenant may, at anytime thereafter, upon written notice to
Landlord, ("Termination Notice") terminate this Lease whereupon
neither party shall have any rights or obligations hereunder
except for those which by the express terms of this Lease
survive such termination. If Tenant does not deliver a
Termination Notice, this Lease shall remain in full force and
effect.


-4-


CONFIDENTIAL


3.4. OPTIONS TO EXTEND. Tenant may extend the Term of this Lease
upon the following terms and conditions:


3.4.1. Provided that Tenant is not then in default of any
material term of this Lease, Tenant may, at any
time prior to the last day of the one hundred
fourteenth (114th) month of the Lease Term, by
written notice to Landlord, extend the Term of this
Lease for an additional period of five (5) years
commencing at the end of the Term provided in
Section 3.1 above ("First Extension Term").


3.4.2. Provided that Tenant has exercised its option for
the First Extension Term and is not then in default
of any material term of this Lease, Tenant may, at
any time after commencement of the First Extension
Term and prior to the last day of the fifty-fourth
(54th) month of the First Extension Term, by
written notice to Landlord, extend the Term of this
Lease for an additional period of five (5) years
commencing at the end of the First Extension Term
provided in Section 3.4.1 above ("Second Extension
Term").


3.4.3. Provided that Tenant has exercised its options for
the First Extension Term and the Second Extension
Term and is not then in default of any material
term of this Lease, Tenant may, at any time after
commencement of the Second Extension Term and prior
to the last day of the fifty-fourth (54th) month of
the Second Extension Term, by written notice to
Landlord, extend the Term of this Lease for an
additional period of five (5) years commencing at
the end of the Second Extension Term provided in
Section 3.4.2 above ("Third Extension Term").


3.4.4. In the event that Tenant exercises any of its
options to extend the Term of this Lease, as
hereinabove provided, the word "Term" as used in
this Lease shall, as applicable, include the First
Extended Term, Second Extended Term, and Third
Extended Term.


4. RENT.


MONTHLY RENT. Tenant shall pay to Landlord, at Landlord's address for notices set forth in Section 24 hereof, in lawful money of the United States, for each calendar month of the Term, Monthly Rent in advance, on the first day of each calendar month, without abatement, deduction, claim, offset, prior notice or demand, except as otherwise provided for herein. Any payment of rent received more than twenty (20) days past its due date shall be assessed a late payment penalty of three (3) percent. Monthly rent for the Initial Term shall be as follows:


-5-


CONFIDENTIAL


LEASE MONTH MONTHLY RENT AMOUNT


------------- -------------------

1-60 $71,735.73


61-120 $78,357.50


Monthly Rent during the Extended Terms, if any, shall be as provided below.


4.1.1. MONTHLY RENT - FIRST EXTENDED TERM. Monthly Rent payable during
each month of the First Extended Term, if applicable, shall be no
greater than 115% of the Monthly Rent in effect during the last
year of the initial lease term.


4.1.2. MONTHLY RENT - SECOND EXTENDED TERM. Monthly Rent payable during
each month of the Second Extended Term, if applicable, shall be
no greater than 115% of the Monthly Rent in effect during the
last year of the First Extended Term.


4.1.3. MONTHLY RENT - THIRD EXTENDED TERM. Monthly Rent payable during
each month of the Third Extended Term, if applicable, shall be no
greater than 115% of the Monthly Rent in effect during the last
year of the Second Extended Term.


5. CHANGE ORDERS. Any change orders must be agreed to in writing by both Landlord and Tenant in order to be effective. Any change to the land or construction costs in connection with any such change orders shall be multiplied by a factor of 0.12 to calculate the change in annual rent. All costs associated with change orders will be identified to Tenant on an open book basis.


6. SECURITY DEPOSIT. On the Commencement Date, Tenant shall deposit with Landlord an amount equal to half the Monthly Rent payable for the first month of the Term as a Security Deposit for the full and faithful performance of every provision of this Lease to be performed by Tenant. If Tenant defaults with respect to any provisions of this Lease, Landlord may apply all or any part of the Security Deposit to the payment of any Rent or other sum in default, the repair of any damage to the Premises, the payment of any other amount which Landlord may spend or become obligated to spend by reason of Tenant's default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant's default to the full extent permitted by law. Landlord's obligations with respect to the Security Deposit are those of a trustee and not a debtor and Tenant shall be entitled to interest on the Security Deposit. If Tenant is not otherwise in default, the Security Deposit and all interest earned thereon shall be returned to Tenant within twenty-one (21) days of termination of the Lease.


7. CONSTRUCTION AND DELIVERY OF IMPROVEMENTS. Upon the occurrence of any Delay Event, the targeted date for the substantial completion of the construction of the Improvements will be extended by a number of days equal to the number of days of the actual delay caused by the occurrence of such Delay Event. For the purposes of this Lease, the Improvements will be deemed "substantially completed" on the earlier of: (a) the date on


-6-


CONFIDENTIAL


which Tenant occupies the Building for the conduct of all aspects of its business operation; or (b) the date on which a temporary or permanent certificate of occupancy for the improvements is issued by the appropriate governmental authority, which certificate of occupancy will permit Tenant to operate its business in the normal course. Landlord shall construct the improvements and deliver possession of the Premises no later than May 1, 1998, subject only to delays caused by events which are beyond its control ("Delay Events"). Such Delay Events are agreed to be limited to the following: (a) Tenant's failure to respond to the drawings, plans, and specifications submitted for its review and approval within a five day period; (b) Tenant's change orders, but only to the minimum extent absolutely necessary; (c) any governmental authority's refusal to issue the requisite approvals for the Improvements, which refusal is directly and solely attributable to Tenant's failure to complete any improvements or installations to the interior of the premises, which are to be undertaken as Tenant's sole responsibility and expense; (d) acts of God, such as major natural disasters; (e) failure by the Authority to complete the various infrastructure improvements by the times indicated in the Land Sale and Option Agreement; provided however, that if Landlord uses a delay in infrastructure improvements as a Delay Event, Landlord will pass any and all liquidated damages received from the Authority through to Tenant; and (f) seriously adverse weather conditions, but only to the minimum extent that such seriously adverse weather-related Delay Events actually affect the schedule. Any Delay Event resulting from seriously adverse weather under sub-paragraph (f) above is limited to a total of 30 days. All Delay Events shall be considered concurrent (not cumulative or consecutive), unless in the totality of circumstances, any individual Delay Event shall be considered to have an individually adverse affect on the critical path schedule.


7.1. LIQUIDATED DAMAGES. Landlord will use its best efforts to proceed
with the construction of the Improvements, so as to facilitate the
achievement of Tenant's operational objectives as set forth in Exhibit
D. If, for any reason other than the occurrence of a Delay Event,
Landlord fails to meet the required level of construction for each
operational objective set forth in Exhibit D, then Landlord shall pay
to Tenant as liquidated damages and not as a penalty the sum of
$5,000.00 for each and every day Landlord fails to meet the required
level of construction or the operational objective is delayed by
Landlord's failure. These liquidated damages are intended to
reimburse Tenant for its lost opportunity costs resulting from such
delay.


7.2. EXPANSION OPTION. Landlord will construct the Improvements to
facilitate the future construction of an additional 88,000 square feet
of warehouse space (the "Expansion"), and will keep the adjacent land
between the building and the western property line and Second Parcel
free of any easements or construction to facilitate the construction
of such expansion. Tenant shall have the option for the first three
(3) years of the lease to require the Landlord to develop and
construct the Expansion, which shall be built on substantially the
same specifications and materials as the initial Improvements and
which shall be integrated into the initial Improvements in an
essentially seamless manner. The lease rate for the


-7-


CONFIDENTIAL


Expansion shall be calculated by multiplying Landlord's total project
cost, including hard, soft and land costs (which shall be identified
to Tenant on an open book basis) by a constant which is equal to
the greater of 11% or 300 basis points over the corresponding
like-term treasury rate for the remaining term of this Agreement.


7.3. REPRESENTATIONS AND WARRANTIES. Landlord represents and warrants to
Tenant that the Premises are constructed entirely with new materials
and in strict compliance with the Final Plans. Landlord further
represents and warrants to Tenant that on the Commencement Date the
Premises complies with all applicable covenants or restrictions of
record, and with all applicable building codes, regulations,
ordinances, laws and statutes in effect on the Commencement Date,
including, without limitation, the Americans with Disabilities Act
("Legal Requirements"). In the event of non-compliance with said
warranty, Landlord shall promptly and in all events within thirty (30)
days after receipt of written notice from Tenant at any time during
the Term setting forth with specificity the nature and extent of such
non-compliance with this warranty, rectify same in a good and
workmanlike manner and in compliance with all Legal Requirements at
Landlord's sole cost and expense.


8. USE OF THE PREMISES; HAZARDOUS MATERIALS.


8.1. TENANT'S USE. Tenant may use the Premises for any lawful purpose.


8.2. COMPLIANCE. Tenant shall not use the Premises or suffer or permit
anything to be done in or about the Premises which will in any way
conflict with any law, statute, zoning restriction, private covenant
or restriction of record ordinance or governmental law, rule,
regulation or requirement of duly constituted public authorities now
in force or which may hereafter be in force, or the requirements of
the Board of Fire Underwriters or other similar body now or hereafter
constituted relating to or affecting the condition, use or occupancy
of the Premises. Tenant shall not commit any public or private
nuisance or any other act or thing which might or would unreasonably
disturb the quiet enjoyment of any occupant of nearby property.
Tenant shall place no loads upon the floors, walls or ceilings in
excess of the maximum designed load determined by Landlord or which
endanger the structure; nor place any harmful liquids in the drainage
systems; nor dump or store waste materials or refuse or allow such to
remain outside the building proper, except in the enclosed trash areas
provided. Tenant shall not store or permit to be stored or otherwise
placed any other material of any nature whatsoever outside the
building, except in storage areas approved by Landlord.


8.3. HAZARDOUS MATERIALS.


8.3.1. TENANT'S COMPLIANCE. From and after the Commencement Date,
Tenant shall comply with all statutes, laws, ordinances, rules
and regulations now or hereinafter promulgated by any federal,
state, local or other governmental agency with respect to the
use, generation, storage or


-8-


CONFIDENTIAL


disposal of Hazardous Materials (as hereinafter defined) on or
about the Premises. Tenant (including Tenants employees, agents
and contractors) shall not cause any Hazardous Materials, other
than in compliance (which shall be at Tenant's sole cost and
expense) with all applicable local, state and federal laws,
codes, statutes, ordinances, regulations and permits now or
hereafter in effect and using all necessary and appropriate
precautions, to be used, generated, stored or disposed of on,
under or about, or transported to or from the Premises
("Hazardous Materials Activities"). Landlord shall not be liable
to Tenant for any Hazardous Materials Activities by Tenant,
Tenant's employees, agents, contractors, licensees or invitees.
Tenant shall indemnify, defend with counsel acceptable to
Landlord and hold Landlord harmless from any claims, costs and
liabilities arising out of Hazardous Materials Activities by
Tenant, Tenant's employees, agents, contractors, licensees or
invitees on, under or about the Premises, whether during the Term
or after the expiration thereof, and Landlord shall provide to
Tenant reasonable access to the Premises following expiration of
the Term to perform remedial work arising with respect to
Tenant's use of Hazardous Materials. For purposes of this Lease,
the term "Hazardous Materials" shall include, but not be limited
to, any flammable, corrosive or ignitable materials, any
explosives, petroleum or petroleum by-products, any radioactive
materials, wastes or substances, or any toxic substances and
other substances defined as "hazardous substances," "hazardous
wastes," "extremely hazardous wastes," "hazardous materials" or
"toxic substances" in the Comprehensive Enviro ...