Exhibit 10.6

         
 
  Re:   Valwood Distribution Center

 
      13950 Senlac Drive

 
      Farmers Branch, Texas

THIRD AMENDMENT TO LEASE

         
THE STATE OF TEXAS
  §    
 
  §   KNOW ALL MEN BY THESE PRESENTS:
COUNTY OF DALLAS
  §    

THIS THIRD AMENDMENT TO LEASE (this “Amendment”) has been entered into as of the
___ day of September, 2007, by THE REALTY ASSOCIATES FUND VI, L.P., a Delaware
limited partnership (“Landlord”) and SPORT SUPPLY GROUP, INC., a Delaware
corporation, formerly known as COLLEGIATE PACIFIC, INC. (“Tenant”).
R E C I T A L S:
A. Post-Valwood, Inc. (“Prior Landlord”) and Tenant have heretofore executed
that certain Industrial Lease Agreement (the “Original Lease”), dated as of
October 26, 2000, as amended by Modification and Ratification of Lease, dated as
of June 10, 2002, and Second Amendment to Lease, dated as of February 10, 2003,
by and between Landlord and Tenant, pursuant to which Tenant leased
approximately 88,000 square feet (the “Original Premises”) in that certain
building located at Valwood Distribution Center, 13950 Senlac Drive, Farmers
Branch, Texas, and more particularly described in the Lease. (The terms
“Building” and “Project” shall remain as defined in the Lease.) The Original
Lease, as so amended, is hereafter referred to as the “Lease.” Unless otherwise
defined herein, all initially capitalized terms will have the respective
meanings assigned thereto in the Lease.
B. Landlord has acquired the Building and succeeded to all of Prior Landlord’s
interest as landlord under the Lease.
C. Landlord and Tenant desire to execute this Amendment in order to evidence
their agreement to (i) reduce the size of the Premises; (ii) extend the Term of
the Lease; and (iii) make certain other amendments to the Lease, all as more
particularly set forth in this Amendment.
NOW THEREFORE, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Landlord and Tenant agree as follows:
THIRD AMENDMENT TO LEASE — Page 1 of 8

 

 

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Article I
CERTAIN AMENDMENTS
SECTION 1.01. Reduction of Original Premises. As of November 1, 2007 (the
“Effective Date”), and subject to the terms and conditions set forth in this
Amendment, the Lease shall be amended to reflect that the Original Premises
shall be reduced by approximately 40,000 rentable square feet as outlined on the
cross-hatched floor plan attached hereto as Exhibit A-1 (the “Give-Back
Premises”), so that after the Effective Date the Premises shall consist of
approximately 48,000 square feet of rentable area, located in the Building, as
shown on Exhibit A-2 attached hereto (as so reduced, the “Premises”).
SECTION 1.02. Surrender/Vacate. As of the Effective Date, Tenant shall have
vacated and abandoned the Give-Back Premises and removed all equipment and other
personal property located in the Give-Back Premises as required under the Lease.
Tenant will be required to remove all improvements required by the Lease. As of
the Effective Date, Tenant shall deliver the Give-Back Premises to Landlord in
broom-clean condition and in the condition as otherwise required by the Original
Lease and shall have no further right to the Give-Back Premises or possession of
the Give-Back Premises (i.e., Landlord may re-lease the Give-Back Premises to
another occupant and commence improvements). If Tenant fails to deliver
possession of the Give-Back Premises, with all of Tenant’s personal property
removed, on the Effective Date, Tenant shall be deemed for all purposes to be in
hold-over, at the rates set forth in the Lease and Tenant shall be responsible
for any damages associated with Landlord’s lease of the Give-Back Premises to a
new tenant in addition to all other remedies available to Landlord at law or in
equity, and, in addition thereto, the Effective Date shall be extended as
appropriate.
SECTION 1.03. Term. As of the date hereof, the Term of the Lease shall be
extended for a period of thirty-eight (38) months through and including
December 31, 2010, subject to adjustment or earlier termination as set forth in
the Lease. Except as set forth on Exhibit B attached hereto, Tenant shall have
no further extension or renewal rights under the Lease and any and all of such
rights are hereby deleted.
SECTION 1.04. Base Rent. As of November 1, 2007, the Base Rent for the Premises
during the Term of the Lease, as hereby extended, shall be on a triple net basis
as follows:
THIRD AMENDMENT TO LEASE — Page 2 of 8

 

 

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                    Annual Base Rent   Monthly   Period:   per R.S.F.:   Base
Rent:    
11/1/07 – 12/31/10
  $3.75 NNN* $15,000.00 NNN*  

*  
Landlord hereby conditionally abates the first consecutive full monthly
installment of Base Rent described above on the condition Tenant fulfills all
Lease obligations. Tenant shall pay all other obligations accruing during such
month. If Tenant defaults under this Lease beyond any applicable period of
notice and cure, any remaining rent abatement shall cease from the date of such
default, and Tenant shall immediately pay to Landlord all sums previously abated
hereunder.

Prior to November 1, 2007, the Base Rent shall remain as set forth in the Lease.
The Base Rent shall be due and payable in equal monthly installments, each such
monthly installment due and payable on the first day of each calendar month, in
advance, without demand and without setoff or deduction whatsoever. All other
charges shall remain as set forth in the Lease.
SECTION 1.05. Operating Expenses. In addition to Base Rent and other sums due
under the Lease, the triple net Operating Expenses per rentable square foot per
annum are estimated as follows:

         
 
 
Taxes, Insurance and Common Area Maintenance
  $1.63 per rentable square foot per annum (i.e., $6,520.00 monthly)

Section 1(b) of Exhibit C of the Original Lease is deleted and replaced with the
following: “Operating Expenses are comprised of “Controllable Expenses” and
“Non-Controllable Expenses.” Controllable Expenses are those components of
Operating Expenses that are not related to taxes, insurance, snow removal,
utilities, and/or collectively-bargained union wages. Non-Controllable Expenses
are those components of Operating Expenses that are not Controllable Expenses.
Notwithstanding any provision of the Lease to the contrary, for the purpose of
calculating Tenant’s Proportionate Share of Operating Expenses each calendar
year through December 31, 2010, the items of Controllable Expenses shall be
deemed not to increase more than ten percent (10%) per calendar year (determined
on a compounding basis throughout said Term of the Lease) from each prior
calendar year (calculated on a per square foot basis to take into account
deletion of the Give-Back Premises on the Effective Date and annualized to
account for partial years); provided, however, that no item of Operating
Expenses other than Controllable Expenses shall be subject to the foregoing
limitation; and provided further, that the percentage increase shall be
determined on a cumulative basis such that if the average increase for all
expired calendar years and the next calendar year is less than ten percent
(10%), then the percentage increase for the next calendar year may exceed ten
percent (10%) so long as the average increase for all expired calendar years and
the next calendar year do not exceed ten percent (10%) per calendar year. There
shall be no cap on Non-Controllable Expenses.
THIRD AMENDMENT TO LEASE — Page 3 of 8

 

 

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The above amounts are estimates only and subject to actual costs and expenses.
The payments set forth above shall be due and payable in equal monthly
installments, each such monthly installment due and payable on the first day of
each calendar month, in advance, without demand and without setoff or deduction
whatsoever.
SECTION 1.06. AS IS. Except as set forth on Exhibit B attached hereto, Landlord
is leasing the Premises to Tenant “as is” “where is” without representation or
warranty, without any obligation to alter, remodel, improve, repair or decorate
any part of the Premises.
SECTION 1.07. Commissions. Landlord and Tenant acknowledge that no brokers have
been involved in this Amendment other than The Holt Companies, Inc. and
Transwestern Commercial Services (collectively, the “Brokers”), and Landlord
will be solely responsible for the commissions, if any, owed the Brokers.
Landlord and Tenant hereby indemnify each other from the payment of any
commissions owed to any broker with respect to this Amendment resulting from the
acts of such party, but not otherwise.
SECTION 1.08. Further Amendments. The Lease shall be and hereby is further
amended wherever necessary, even though not specifically referred to herein, in
order to give effect to the terms of this Amendment. Section 4 of Exhibit C of
the Original Lease is deleted. The reference to “$1,000,000.00” in
Section 8(a)(i) of the Original Lease is deleted and replaced with
“$3,000,000.00.” In addition to the insurance coverages set forth in the Lease,
Tenant shall be required to maintain business interruption insurance and
workers’ compensation required by law. Notwithstanding anything in the Lease to
the contrary, Landlord’s consent to assignment and subletting shall be required
if there is any decrease in Tenant’s tangible net worth below Tenant’s tangible
net worth on the date of this Amendment, and in all cases of transfer by Tenant
under the Lease, Tenant will remain fully liable for all obligations. As Tenant
is publicly traded, the reference to “stock transfer” in the second sentence of
Section 29 of the Original Lease is hereby deleted so long as Tenant is publicly
traded. In addition, the last sentence of Section 29 of the Original Lease is
modified to provide that the prospective subtenant need only have financial
strength reasonably acceptable to Landlord (and not necessarily financial
strength similar to Tenant).
SECTION 1.09. NO EXISTING MORTGAGE. Landlord represents that no party has a
mortgage on the Building as of the date hereof.
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Article II
MISCELLANEOUS
SECTION 2.01. Ratification. The Lease, as amended hereby, is hereby ratified,
confirmed and deemed in full force and effect in accordance with its terms.
Tenant represents to Landlord that Tenant (a) is currently unaware of any
default by Landlord under the Lease; and (b) has full power and authority to
execute and deliver this Amendment and this Amendment represents a valid and
binding obligation of Tenant enforceable in accordance with its terms. Landlord
represents to Tenant that Landlord (a) Landlord has received Base Rent through
August 31, 2007; and (b) has full power and authority to execute and deliver
this Amendment and this Amendment represents a valid and binding obligation of
Landlord enforceable in accordance with its terms.
SECTION 2.02. Governing Law. This Amendment shall be governed by and construed
in accordance with the laws of the State of Texas.
SECTION 2.03. Counterparts. This Amendment may be executed in multiple
counterparts each of which is deemed an original but together constitute one and
the same instrument. This Amendment may be executed by facsimile and each party
has the right to rely upon a facsimile counterpart of this Amendment signed by
the other party to the same extent as if such party had received an original
counterpart.
SECTION 2.04. Calculation/Security Deposit. Landlord and Tenant are
knowledgeable and experienced in commercial transactions and agree that the
provisions set forth in this Lease for determining charges, amounts and
additional rent payable by Tenant are commercially reasonable and valid even
though such methods may not state a precise mathematical formula for determining
such charges. ACCORDINGLY, TENANT HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ALL
RIGHTS AND BENEFITS OF TENANT UNDER SECTION 93.004 OF THE TEXAS PROPERTY CODE,
AS SUCH SECTION NOW EXISTS OR AS MAY BE HEREAFTER AMENDED OR SUCCEEDED.
Notwithstanding anything in the Lease to the contrary, Tenant hereby expressly
waives the requirements and applicability of Tex. Prop. Code §§ 93.005-93.011,
and agrees that Landlord shall return to Tenant the balance of the Security
Deposit not applied to satisfy Tenant’s obligations within a reasonable time
after the term ends, provided Tenant has performed all of its obligations under
the Lease. If such waiver is not effective under applicable law, Landlord shall,
within the time required by applicable law, return to Tenant the portion of the
Security Deposit remaining after deducting all damages, charges and other
amounts permitted by law. Landlord and Tenant agree that such deductions shall
include, without limitation, all damages and losses that Landlord has suffered
or that Landlord reasonably estimates that it will suffer as a result of any
breach of this Lease by Tenant. Exhibit C attached to the Lease is deleted,
other than Sections 1(a), 1(c) (however, Landlord’s reimbursement right for the
cost of the audit shall not exceed $1,000.00 and said audit will be prepared by
a CPA firm on a non-contingency basis, said firm shall be reasonably acceptable
to both parties and Tenant shall agree to keep the results confidential as
provided in Section 2.06 below), and 2. Notwithstanding anything herein to the
contrary, if Tenant is not in default under the Lease beyond any applicable
notice and cure period, at such time as Tenant has vacated the Give-Back
Premises and returned such space to the condition required by the Lease,
Tenant’s Security Deposit shall be reduced to $15,000.00 and not later than
thirty (30) days thereafter, Landlord shall return the excess portion
($10,975.00) to Tenant.
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SECTION 2.05. WAIVER OF JURY TRIAL. WITH REGARD TO MONETARY OBLIGATIONS, TENANT
AND LANDLORD WAIVE ANY RIGHT TO TRIAL BY JURY OR TO HAVE A JURY PARTICIPATE IN
RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE BETWEEN
LANDLORD AND TENANT ARISING OUT OF THE LEASE OR ANY OTHER INSTRUMENT, DOCUMENT,
OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS
RELATED HERETO.
SECTION 2.06. Confidentiality. Tenant acknowledges and agrees that the terms of
this Lease are confidential and constitute proprietary information of Landlord.
Disclosure of the terms hereof could adversely affect the ability of Landlord to
negotiate other leases with respect to the Building and may impair Landlord’s
relationship with other tenants of the Building. Tenant agrees that it and its
partners, officers, directors, employees and attorneys, if any, shall not
disclose the terms and conditions of this Lease to any other person or entity
without the prior written consent of Landlord which may be given or withheld by
Landlord, in Landlord’s sole discretion. It is understood and agreed that
damages alone would be an inadequate remedy for the breach of this provision by
Tenant, and Landlord shall also have the right to seek specific performance of
this provision and to seek injunctive relief to prevent its breach or continued
breach. Notwithstanding the foregoing, Tenant may disclose such terms to its
lenders, investors, prospective purchasers and others with a genuine need to
know, provided that such parties agree to keep such information confidential. In
addition, Tenant may disclose such information as may be required by applicable
law (including, without limitation, under the rules and regulations of the
Securities and Exchange Commission).
SECTION 2.07. Landlord’s Liability/Default. Notwithstanding anything in the
Lease to the contrary, Landlord shall not be in default hereunder and Tenant
shall not have any remedy or cause of action unless Landlord fails to perform
any of its obligations hereunder within thirty (30) days after written notice
from Tenant specifying such failure (unless such performance will, due to the
nature of the obligation, require a period of time in excess of thirty
(30) days, then after such period of time as is reasonably necessary). If
Landlord is in default hereunder, Tenant’ exclusive remedy shall be an action
for actual damages (excluding, without limitation, consequential, special and
punitive damages). Notwithstanding the foregoing, in the event a bona fide
emergency involving a bona fide threat to people or property, Tenant shall first
attempt to use commercially reasonable efforts to contact the property manager
and if the property manager fails to timely respond, then Tenant, without any
additional notice to Landlord, may perform an obligation otherwise the
responsibility of Landlord, and Landlord shall reimburse Tenant for the
reasonable, third-party costs of such performance within thirty (30) days after
receipt of invoice (but in no event shall such amount exceed one month of Base
Rent). In no event shall Tenant take any action which would invalidate any
warranty applicable to the Project, including, without limitation, the roof, and
if Landlord later commences action, Tenant shall cease and desist further
action. Tenant shall provide appropriate lien wavers before being entitled to
reimbursement. To the extent Landlord incurs an expense hereunder, it is subject
to reimbursement as an Operating Expense as provided in Section 6 of the
Original Lease.
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SECTION 2.08. Deceptive Trade Practices. Landlord and Tenant waive their rights
under the Deceptive Trade Practices-Consumer Protection Act, Section 17.41 et.
seq., Business & Commerce Code, a law that gives consumers special rights and
protections. Each, after consultation with an attorney of its selection,
voluntarily consents to this waiver.
SECTION 2.09. Waiver of Subrogation. Section 8.(d) of the Original Lease is
modified as follows:
“(d) NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THE LEASE, LANDLORD
AND TENANT HEREBY WAIVE ANY RIGHTS EACH MAY HAVE AGAINST THE OTHER (OR THEIR
AGENTS OR EMPLOYEES) ON ACCOUNT OF ANY LOSS OR DAMAGE OCCASIONED TO LANDLORD OR
TENANT, AS THE CASE MAY BE, THEIR RESPECTIVE PROPERTY, THE DEMISED PREMISES, ITS
CONTENTS OR TO THE OTHER PORTIONS OF THE BUILDING, ARISING FROM ANY RISK COVERED
BY ALL RISKS FIRE AND EXTENDED COVERAGE INSURANCE OF THE TYPE AND AMOUNT
REQUIRED TO BE CARRIED HEREUNDER, EVEN IF SUCH LOSS OR DAMAGE ARISES DUE TO THE
NEGLIGENCE OF SUCH OTHER PARTY. THE PARTIES HERETO SHALL CAUSE THEIR RESPECTIVE
INSURANCE COMPANIES INSURING THE PROPERTY OF EITHER LANDLORD OR TENANT AGAINST
ANY SUCH LOSS, TO WAIVE ANY RIGHT OF SUBROGATION THAT SUCH INSURERS MAY HAVE
AGAINST LANDLORD OR TENANT, AS THE CASE MAY BE.”
SECTION 2.10. Subordination of Landlord’s Lien. The following is hereby added to
the Lease:
“Provided Tenant is not in default under the Lease, Landlord agrees to
subordinate its security interest to liens in connection with financing from
third party institutional lenders used for working capital in Tenant’s business
on Landlord’s form with such changes as are commercially reasonable. All of
Landlord’s reasonable expenses and attorneys’ fees associated therewith shall be
reimbursed to Landlord by Tenant upon demand.”
SECTION 2.11. Operating Expense Percentage. As of the Effective Date, the
following is hereby added to the Lease: As of the Effective Date, Tenant’s
Operating Expense Percentage in Section 1(j) of the Original Lease is hereby
changed to 41.38%.
[SIGNATURES FOLLOW NEXT PAGE]
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IN WITNESS WHEREOF, this Amendment has been executed as of the date and year
first above written.

                              Dated: September __, 2007   LANDLORD:    
 
                                THE REALTY ASSOCIATES FUND VI, L.P.,
a Delaware limited partnership    
 
                                    By:   Realty Associates Fund VI LLC,
a Massachusetts limited liability company,
general partner    
 
                                        By:   Realty Associates Advisors LLC,
a Delaware limited liability company,
Manager    
 
                                            By:   Realty Associates Advisors
Trust,
a Massachusetts business trust,
Manager    
 
                           
 
                  By:    
 
   
 
                     
Officer
   
 
                                    By:   Realty Associates Fund VI Texas
Corporation,
a Texas corporation, general partner    
 
                           
 
          By:                                                      
Officer
   

              Date: September __, 2007   TENANT:    
 
                SPORT SUPPLY GROUP, INC.,
a Delaware corporation    
 
           
 
  By:    
 
   
 
  Name:    
 
   
 
  Title:    
 
   

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EXHIBIT A-1
GIVE-BACK PREMISES
EXHIBIT A-1 — Page 1 of 1

 

 

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EXHIBIT A-2
THE PREMISES
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EXHIBIT B
TENANT FINISH-WORK: ALLOWANCE
1. Except as set forth in this Exhibit, Tenant accepts the Premises in their “as
is” condition on the date that the Lease is entered into.
2. Not later then ten (10) days following execution of this Amendment, Landlord
shall provide to Tenant for its approval final working drawings, prepared by its
architect that has all improvements. Tenant will review the same and provide
comments within five (5) days following Landlord’s delivery thereof to Tenant.
As used herein, “Working Drawings” shall mean the final working drawings
approved by Landlord and Tenant (such approval not to be unreasonably withheld)
as amended from time to time by any approved changes thereto, and “Work” shall
mean all improvements to be constructed in accordance with and as indicated on
the Working Drawings. Approval by Landlord of the Working Drawings shall not be
a representation or warranty of Landlord that such drawings are adequate for any
use, purpose, or condition, or that such drawings comply with any applicable law
or code, but shall merely be the consent of Landlord to the performance of the
Work. Tenant shall, at Landlord’s request, sign the Working Drawings to evidence
its review and approval thereof. All changes in the Work must receive the prior
written approval of Landlord and Tenant, and in the event of any such approved
change initiated by Tenant, Tenant shall, upon completion of the Work, furnish
Landlord with an accurate, reproducible “as-built” plan (e.g., sepia) of the
improvements as constructed, which plan shall be incorporated into this Lease by
this reference for all purposes.
3. The Work shall be performed only by Landlord’s contractors and
subcontractors. Landlord shall bid the Work to at least three (3) such
contractors and accept the most competitive bid after reasonable consultation
with Tenant.
4. Tenant shall bear the entire cost of performing the Work (including, without
limitation, design of the Work and preparation of the Working Drawings, costs of
construction labor and materials, electrical usage during construction,
additional janitorial services, general tenant signage, related taxes and
insurance costs, all of which costs are herein collectively called the “Total
Construction Costs”) in excess of the Construction Allowance (hereinafter
defined). Upon approval of the Working Drawings and selection of a contractor,
Tenant shall promptly (a) execute a work order agreement prepared by Landlord
which identifies such drawings, itemizes the Total Construction Costs and sets
forth the Construction Allowance; and (b) pay to Landlord 50% of the amount by
which the estimated Total Construction Costs exceed the Construction Allowance.
Upon substantial completion of the Work, Tenant shall pay to Landlord not later
than ten (10) days after receipt of invoice, an amount equal to the Total
Construction Costs (as adjusted for any approved changes to the Work), less
(i) the amount of the payments already made by Tenant; (ii) the amount of the
Construction Allowance; and (iii) the cost reasonably estimated by Landlord for
completing all “punch list” items; finally, upon completion of the punch list
items, Tenant shall pay to Landlord within ten (10) days after invoice the costs
incurred in completing the same.
EXHIBIT B — Page 1 of 2

 

 

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5. Provided Tenant is not in default under the Lease, Landlord shall provide a
construction allowance (the “Construction Allowance”) equal to $74,400.00 to be
used toward the Total Construction Costs, as adjusted for any approved changes
to the Work. In addition, any portion of the Construction Allowance remaining
after completion of the Work may be used toward warehouse lighting, warehouse
fans or other leasehold improvements (collectively, the “Secondary
Improvements”). As a condition to reimbursement, Tenant must deliver to Landlord
paid invoices therefor on or before December 31, 2007 (or, in the case of the
Secondary Improvements, January 31, 2008), and any remaining Construction
Allowance remaining after January 31, 2008 shall remain Landlord’s property and
be forfeited by Tenant.
6. Landlord or its affiliate shall supervise the Work, make disbursements
required to be made to the contractor, and act as a liaison between the
contractor and Tenant and coordinate the relationship between the Work, the
Building, and the Building’s systems. In consideration for Landlord’s
construction supervision services, Tenant shall pay to Landlord a construction
supervision fee equal to five percent (5%) of the Total Construction Costs,
which may be deducted from the Construction Allowance.
7. Landlord shall use commercially reasonable efforts to complete the Work prior
to November 1, 2007, subject to Tenant delays and force majeure events.
8. To the extent not inconsistent with this Exhibit, the Lease shall govern the
performance of the Work and the Landlord’s and Tenant’s respective rights and
obligations regarding the improvements installed pursuant thereto.
EXHIBIT B — Page 2 of 2