**Exhibit 10.21**

 

SUB-LEASE

 

BYTHIS AGREEMENT MADE this 26th day of February 2001 at Incline Village,Nevada

 

Between(Sub-Lessee): Nevada Security Bank (“Bank”), P.O. Box 6720, Incline Village, NV89450 and (Sub-Lessor): Pine Castle Entertainment Inc. (“PCE”), a NevadaCorporation of P.O. Box 3369, Incline Village, Nevada 89450.

 

Sub-Lesseehereby offer to lease from Sub-Lessor the premises situates in the City ofIncline Village County of Washoe, State of Nevada, described as:

 

Approximately4,159 square feet located at Northeast end of building located at 910 TahoeBoulevard in the Incline / Raleys Shopping Center. (“the “Premises”) Upon thefollowing term and conditions:

 

1)**TERMS & RENT:**Sub-Lessordemises the above Premises for a term of (5) Five Years, to commence on this26th day of February 2001, and terminating on June 30, 2005 or sooneras provided herein at the monthly rental of ($6,238.50) Six Thousand TwoHundred and Thirty-eight Dollars and 50 cents, payable in equal installments inadvance on the first day of each month for that month’s rental, during the termof this Agreement. All rental payments shall be made to Sub-Lessor, at theaddress specified above. Security Deposit of $7,500.00 required with firstmonth’s rent at lease signing. 5% late fee if rent not received by Sub-Lessorby the 10th of each month.

 

2)USE: Sub-Lessee shall use and occupy the Premises for Commercial Banking. ThePremises shall be used for no other purpose. Sub-Lessor represents that thePremises may lawfully be used for such purpose.

 

3)**CARE & MAINTENANCE OF PREMISES:**Sub-Lesseeacknowledges that the Premises are in good order and repair, unless otherwiseindicated herein. Sub-Lessee shall, at his own expense and at all times,maintain the Premises in good and safe condition, including plate glass,electrical wiring, plumbing and heating installations and any other system orequipment upon the Premises and shall surrender the same, at terminationhereof, in as good condition as received, normal wear and tear expected. Actualcommon area maintenance costs, including but not limited to property taxes,utilities, parking lot, building exterior, roofing, snow removal from parkinglot, exterior lighting, etc., shall be shared monthly based on a Pro Rata share(41.6% of square footage). Sub-Lessee shall also maintain in good conditionadjacent to the Premises, such as sidewalks, driveways, lawns, and shrubbery,which would otherwise be required to be maintained by Sub-Lessor. The “Bank”will be responsible to add heating and air conditioning systems to their leasedportion of the building and to install the appropriate metering systems perbuilding codes.

 

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4)**CONDITION OF PREMISES:**ThePremises are being Sub-Leased to Nevada Security Bank, and Nevada Security Bankaccepts the Premises in “AS IS, WHERE IS” CONDITION, “WITH ALL FAULTS”,INCLUDING, BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS, AND NEVADASECURITY BANK SHALL RELY UPON ITS OWN EXAMINATION THEREOF. NO WARRANTIES,EXPRESS OR IMPLIED, ARE MADE BY PINE CASTLE ENTERTAINMENT CONCERNING THISAGREEMENT, THE MASTER SUBLEASE, OR THE LAND, BUILDING, FIXTURES OR OTHERIMPROVEMENTS SUBJECT TO THIS AGREEMENT, INCLUDING, BUT NOT LIMITED TO,WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.

 

5)**ALTERATIONS:**Sub-Lessee shall not,without first obtaining the written consent of Sub-Lessor and Raley’s make anyalterations, additions, or improvements, in, to or about the Premises. SeeExhibit “A” (Floor Plan layout for construction purposes) for definition ofplanned improvements hereby approved by the signing of this Agreement.

 

6)**BANK IMPROVEMENTS:**Nevada SecurityBank shall pay for and engage its own contractor to build-out any NevadaSecurity Bank improvements. In the event Sub-Lessor or Raley’s refuses toapprove of the necessary physical improvements to the Premises, in order tooperate and function as a Commercial Bank, this Agreement is cancelable bySub-Lessee.

 

7)**ORDINANCES & STATUTES:**Sub-Lesseeshall comply with all statutes, ordinances and requirements of all municipal,state and federal authorities now in force, or which may hereafter be in force,pertaining to the Premises, occasioned by or affecting the use thereof bySub-Lessee.

 

8)**ASSIGNMENT & SUBLETTING:**Sub-Lesseeshall not assign this Agreement or sublet any portion of the Premises withoutwritten approval from “PCE” and “Raleys”, which consent will not beunrealistically withheld.

 

9)**MASTER SUB-LEASE**: PCE is thesublessee under a written sublease dated 6/30/1995, wherein Raley’s, aCalifornia Corporation (“Raley’s”) subleased to Total Entertainment LLC, aCalifornia limited liability company which subsequently assigned their interestto “PCE”, the real property located in Incline Village, Nevada, at 910 TahoeBlvd. (“Master Premises”). Said sublease has been amended by the followingamendments: “Amendment to Sublease” dated 6/30/95 between Total EntertainmentLLC and Raley’s; said sublease and amendment are herein collectively called the“Master Sublease” and are attached hereto as Exhibit “B”.

 

ThisAgreement is subject to the provisions of the Master Sublease and allapplicable terms and conditions of the Master Sublease are incorporated intoand made a part of this Agreement as if Sub-Lessor were the lessor thereunder,Sub-Lessee the lessee thereunder, and the Premises the Master Premises.Sub-Lessee assumes all the obligations of Sub-Lessor under the Master Subleasefor the Premises.

 

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10)**WARRANTY BY “PCE”:**“PCE” warrantsand represents to the “Bank” that “PCE” is not in default or breach of theprovisions of the Master Sublease and that “PCE” has no knowledge of any claimby Raley’s that “PCE” is in default or breach of the Master Subleaseprovisions.

 

11)**OPTIONS:**“PCE” has the right andoption to extend the Master Sublease for two consecutive extended terms of fiveyears each. Provided the “Bank” is not in default under this Agreement, the“Bank” shall have the right to extend the term of this Agreement for twoconsecutive five year periods by giving “PCE” written notice at least 210 daysprior to the expiration of the initial term and each extension thereof,provided “PCE” is not in default under the Master Sub-Lease and gives Raley’swritten notice to extend pursuant to the conditions under the Master Sub-Lease.The “Bank” reserves the right to cure any and all defaults of “PCE” regardingthe terms of the Master Sub-Lease. In the event, “PCE” decides not to exerciseeither of its two five year options, the “Bank” reserves the right to exercise“PCE’s” option(s) to extend the Master Sub-Lease pursuant to its terms andconditions with “PCE”.

 

12)**UTILITIES:**All applications andconnections for necessary utility services on the demised Premises shall bemade in the name of the Sub-Lessee only, and Sub-Lessee shall be solely liablefor utility charges as they become due, including those for sewer, water, gas,electricity, and telephone services.

 

13)**ENTRY & INSPECTION:**Sub-Lesseeshall permit Sub-Lessor or Sub-Lessor’s agents, to enter upon the Premises atreasonable times and upon reasonable notice, for the purpose of inspecting thesame, and will permit Sub-Lessor at any time within one hundred twenty (120)days prior to the expiration of this Agreement, to place upon the Premises anyusual “To Let” or “For Lease” signs, and permit persons desiring to lease thesame to inspect the Premises thereafter, during normal business hours.

 

14)**POSSESSION:**If Sub-Lessor isunable to deliver possession of the Premises at the commencement hereof,Sub-Lessor shall not be liable for any damage caused thereby, nor shall thisAgreement be void or voidable, but Sub-Lessee shall not be liable for any rentuntil possession is delivered.

 

15)**INDEMNIFICATION OF SUB-LESSOR:**Sub-Lessorshall not be liable for any damage or injury to Sub-Lessee, or any other personor to any property, occurring on the demised Premises or any part thereof, andSub-Lessee agrees to hold Sub-Lessor harmless from any claims for damages, nomatter how caused.

 

**16) CANCELLATION/DAMAGES:**If Sub-Lessee does not receive FDIC, State ofNevada and County of Washoe approvals for operation, Sub-Lessee may cancel thisAgreement in writing to Sub-Lessor with the following damages due and payableimmediately to Sub-Lessor:

 

A)          Forfeiture of $7,500.00 Deposit (Paid atAgreement Signing).

B)            Forfeiture of First Month Rent (Paid atagreement Signing).

 

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C)            Payment of an additional 2 months rent forconsequential damages to Sub-Lessor due to cancellation by Sub-Lessee.

D)           Restoration of Premises to original conditionif construction is underway or complete; subject to Sub-Lessor’s approval.Restoration must be completed immediately upon notification of cancellationwith as little business interruption as possible.

 

17)**BANKRUPTCY/INSOLVENCY**: Notwithstanding anything to the contrary inthis Agreement, in the event (a) Sub-Lessee or its successors or assigneesshall become insolvent or bankrupt, or it or their interests under thisAgreement shall be levied upon or sold under execution or other legal process,or (b) the depository institution then operating on the Premises is closed, oris taken over by any depository institution regulatory authority (“RegulatoryAuthority”), Sub-Lessor may, in either such event, terminate this Agreementonly with the concurrence of any Receiver or Liquidator appointed by suchRegulatory Authority, provided that, in the event this Agreement is terminatedby the Receiver or Liquidator, the maximum claim of Sub-Lessor for rent,damages or indemnity for injury resulting from the termination, rejection orabandonment of the unexpired Agreement shall in no event be in an amountgreater than all accrued and unpaid rent to the date of termination.

 

18)**INSURANCE**: Sub-Lessee, at its expense, shall maintainplate glass and public liability insurance including bodily injury and propertydamage insuring Sub-Lessee and Sub-Lessor with minimum coverage as follows:$2,000,000 Liability naming Pine Castle Entertainment Inc., John and DonnaBevel and Raley’s as additionally insured or co-insured. Sub-Lessee shallprovide Sub-Lessor and Raley’s with a Certificate of Insurance showingSub-Lessor and Raley’s as additional insured. The Certificate shall provide fora ten-day written notice to Sub-Lessor and Raley’s in the event of cancellationor material change of coverage. To the maximum extent permitted by insurancepolicies which may be owned by Sub-Lessor or Sub-Lessee, Sub-Lessee andSub-Lessor, for the benefit of each other, waive any and all rights ofsubrogation which might otherwise exist.

 

19)**ATTORNEY’S****FEES:**If “PCE” or the “Bank” shall commence anylegal action against the other in connection with this Agreement, theprevailing party shall be entitled to recover its costs of suit and reasonableattorney’s fees.

 

20)**OTHER AGREEMENTS**

 

A)          Rent shall be adjusted annually based on theOctober CPI of San Francisco.

B)            Sub-Lessee shall be responsible for allplans, permits, construction and related costs to convert existing space intobanking requirements. All costs incurred by Sub-Lessor to accommodate saidchanges are the responsibility of Sub-Lessee, including, but not limited to:lighting, counters, signage, electrical, movie merchandising, etc.

C)            “PCE” extends free rent to “Bank” - 1st monthdue at signing, next payment due 5/1/01.

 

21)**FDIC AND OTHER APPROVALS**: This Agreement shall be effective uponreceipt of final approvals from the Federal Deposit Insurance Corporation(FDIC), the State of Nevada and

 

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theCounty of Washoe by Nevada Security Bank for the operation of a lendinginstitution at the subject Premises under this Agreement. Sub-Lessee shallprovide Sub-Lessor with a copy(s) of any and all approvals defined above withinfive (5) working days of Sub-Lessee’s receipt thereof.

 

22)**NOTICES**: All notices and demandsshall be in writing and shall be sent by U.S. Mail, postage prepaid, to the“Bank” or to “PCE” at the addressee set forth above.

 

23)**CONFLICTS**: As between “PCE” andthe “Bank”, to the extent of any conflict or inconsistency between the termsand provisions of this Agreement and the Master Sublease, the terms of thisAgreement shall supersede and control.

 
| PINE  CASTLE ENTERTAINMENT INC., A NEVADA CORPORATION: |
|--------------------------------------------------------|
|                                                   |
| By:                                                    | /s/  John Bevel |   |
| Title:  President                                 |
| Date:  7-31-01                                    |
|                                                   |
| NEVADA  SECURITY BANK, A NEVADA CORPORATION:           |
|                                                   |
| By:                                                    | /s/  Joe Bourdeau. |   |
| Title:  E.V.P.                                    |
| Date:  8-16-01                                    |

 

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LEASE ADDENDUM

 

**Reference:**Commercial Sub-Lease Dated January 19, 2001, between NevadaCitizens Bank and Pine Castle Entertainment Inc. (“PCE”)

 

**Change in Name:**“Nevada Citizens Bank” is now “Nevada Security Bank”.

 

**Amended Footage:**Leased square footage is increased to 5,079.

 

**Amended Monthlv Rent:**New amount is $7,618.50 beginning May 1,2001.

 

**Amended CAM Fees:**New amount is 50.8% of actual expenses.

 

**New Lavout:**Included is Exhibit “A” or copy of Floor Plan dated 3/21/01.

 

**Master Sub-Lease:**Pine Castle is the sublessee under a written sublease dated 6/30/1995.wherein Raley’s, a California Corporation (“Sublessor”) subleased to TotalEntertainment LLC, a California limited liability company which subsequentlyassigned their interest to “PCE”, the real property located in Incline Village,Nevada, at 910 Tahoe Blvd. (“Master Premises’’). Said sublease has been amendedby the following amendments: “Amendment to Sublease” dated 6/30/95 betweenTotal Entertainment LLC and Raley’s; said sublease and amendment are hereincollectively called the “Master Sublease” and are attached hereto as Exhibit“B”.

 

Pine Castle hereby leases to Nevada SecurityBank (“Bank”) on the terms and conditions set forth in this lease the “MasterPremises” which includes 5,079 square feet and all access and parkingeasements, rights and appurtenances therewith.

 

**Warrantv Bv “PCE”:**“PCE” warrants and represents to the “Bank” that “PCE” is not indefault or breach of the provisions of the Master Sublease and that “PCE” hasno knowledge of any claim by Raley’s that “PCE” is in default or breach of theMaster Sublease provisions.

 

**Options:**“PCE”has the right and option to extend the Master Sublease for twoconsecutive extended terms of five years each, Provided the “Bank” is not indefault under this lease, the “Bank” shall have the right to extend the term ofthis lease for two consecutive five year periods by giving “PCE” written noticeat least 210 days prior to the expiration of the initial term and eachextension thereof.

 

**Other Lease Provisions:**This lease is subject to the provisions of the Master Sublease and areincorporated into this lease where applicable. Nevada Security Bank assumes theobligations of “PCE” under the Master Sublease for the square footage leased inthe event “PCE” is in default of payment to Raley’s.

 

 

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**Attornev’s Fees:**If “PCE” or the “Bank” shall commence any legal action against theother in connection with this lease, the prevailing party shall be entitled torecover its costs of suit and reasonable attorney’s fees.

 

**Notices:**All notices and demands shall be in writing and shall be sent by U.S.Mail, postage prepaid, to the “Bank” at the Master Premises and/or to “PCE” atthe Master Premises. Post Office Boxes for both parties are identified on theoriginal lease form.

 

**Conflicts:**As between “PCE” and the “Bank”, to the extent of any conflict orinconsistency between the terms and provisions of this lease and the MasterSublease, the terms of this lease shall supersede and control.

 

**Condition of Premises:**The Premises are being Leased to Nevada Security Bank, and NevadaSecurity Bank accepts the Premises in “AS IS, WHERE IS” CONDITION, “WITH ALLFAULTS”, INCLUDING, BUT NOT LIMITED TO, BOTH LATENT AND PATENT DEFECTS, ANDNEVADA SECURITY BANK SHALL RELY UPON ITS OWN EXAMINATION THEREOF. NOWARRANTIES, EXPRESS OR IMPLIED, ARE MADE BY PINE CASTLE ENTERTAINMENTCONCERNING THE LEASE, THE MASTER SUBLEASE, OR THE LAND, BUILDING, FIXTURES OROTHER IMPROVEMENTS SUBJECT TO THE LEASE, INCLUDING. BUT NOT LIMITED TO,WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, OR QUALITY.

 

**Bank Improvements:**Nevada Security Bank shall pay for and engage its own contractor tobuild-out any Nevada Security Bank improvements.

 
| **Pine Castle Entertainment Inc.. a Nevada Corporation:** |
|-----------------------------------------------------------|
|                                                      |
| By:                                                       | /s/  John Bevel |   |
| Title:                                                    | PRESIDENT |   |
| Date:                                                     | 3/27/01 |   |
|                                                      |
| Nevada  Securitv Bank, a Nevada Corporation:              |
|                                                      |
| By:                                                       |
| Title:                                                    |
| Date:                                                     |
|                                                      |
| Ralev’s,  a California Corporation                   |
|                                                      |
| By:                                                       |
| Title:                                                    |
| Date:                                                     |
|                                                           |  |  |  |  |

 

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EXHIBIT “B”

 

**AMENDMENT TO SUBLEASE**

 

Between

RALEY’S,

aCalifornia corporation,

asSublessor,

and

TOT AL ENTERTAINMENT LLC,

aNevada Limited Liability Company,

asSublessee

 

1.                                       The Sublease between the parties is herebyincorporated by reference, in haec verba, as though fully set forth herein.

 

2.Notwithstanding anything contained in the Sublease to the contrary, andspecifically referencing paragraph 3. Minimum Rent. Tenant shall beentitled to an additional maximum of sixty (60) days wherein Tenant shall notbe obligated to pay any minimum rent, far the purpose of obtaining TRPAProvisional Approval.”

 

INWITNESS WHEREOF, the parties hereto have executed this Amendment to Subleaseeffective as of June 30 1995.

 

RALEY’S, a California Corporation

 
| By:                               | /s/  [ILLEGIBLE]        |   |
|-----------------------------------|-------------------------|--------|
|                              |
| Title:                            | Pres/CEO                |   |
|                              |
| TOTAL  ENTERTAINMENT LLC, a       |
| Nevada  Limited Liability Company |
|                              |
| By:                               | /s/  Michael Petragallo |   |
|                              | Michael  Petragallo     |
|                                   |                         |        |  |  |

 

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|   | SUBLEASE                                               |
|--------|--------------------------------------------------------|
|   |                                                   |
|   | Between                                                |
|   |                                                   |
|   | RALEY’S,                                          |
|   | a California corporation,                              |
|   | as Sublessor,                                          |
|   |                                                   |
|   | and                                                    |
|   |                                                   |
|   | TOTAL ENTERTAINMENT LLC,                               |
|   | a California  limited liability company,  as Sublessee |

 

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TABLE OF CONTENTS

 
| 1.     | Premises                                       |   |
|--------|------------------------------------------------|--------|
|   |                                           |   |
| 2.     | Use                                            |   |
|   |                                           |   |
| 3.     | Minimum Rent                                   |   |
|   |                                           |   |
| 4.     | Tenant Improvements                            |   |
|   |                                           |   |
| 5.     | Term                                           |   |
|   | 5.1 Initial Term                               |   |
|   | 5.2 Option Period                              |   |
|   |                                           |   |
| 6.     | Security Deposit                               |   |
|   |                                           |   |
| 7.     | Adjustments                                    |   |
|   | 7.1 Calculation of  Adjustments                |   |
|   | 7.2 Payment of Adjustments                     |   |
|   |                                           |   |
| 8.     | Uses Prohibited                                |   |
|   |                                           |   |
| 9.     | Compliance with Law                            |   |
|   |                                           |   |
| 10.    | Alterations and Additions                      |   |
|   |                                           |   |
| 11.    | Repairs                                        |   |
|   | 11.1   Tenant’s            |   |
|   | 11.2   Landlord’s  Repairs |   |
|   |                                           |   |
| 12.    | Liens                                          |   |
|   |                                           |   |
| 13.    | Assignment and Subletting                      |   |
|   |                                           |   |
| 14.    | Hold Harmless                                  |   |
|   |                                           |   |
| 15.    | Subrogation                                    |   |
|   |                                           |   |
| 16.    | Liability Insurance                            |   |
|   |                                           |   |
| 17.    | Utilities                                      |   |
|   |                                           |   |
| 18.    | Personal Property Taxes                        |   |
|   |                                           |   |
| 19.    | Rules and Regulations                          |   |
|   |                                           |   |
| 20.    | Holding over                                   |   |
|   |                                           |   |
| 21.    | Entry By Landlord                              |   |
|   |                                           |   |
| 22.    | Tenant’s Default                          |   |

 

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| 23.    | Remedies in Default                             |   |
|--------|-------------------------------------------------|--------|
|   |                                            |   |
| 24.    | Default by Landlord                             |   |
|   |                                            |   |
| 25.    | Reconstruction                                  |   |
|   |                                            |   |
| 26.    | Eminent Domain                                  |   |
|   |                                            |   |
| 27.    | Parking and Common Areas                        |   |
|   |                                            |   |
| 28.    | Displays and Signage                            |   |
|   |                                            |   |
| 29.    | Auctions                                        |   |
|   |                                            |   |
| 30.    | Hours of Business                               |   |
|   |                                            |   |
| 31.    | Brokers                                         |   |
|   |                                            |   |
| 32.    | Hazardous Substances                            |   |
|   | 32.1  Hazardous  Substances           |   |
|   | 32.2  Tenant’s  Restrictions     |   |
|   | 32.3  Environmental  Clean-up         |   |
|   | 32.4  Tenant’s Indemnity         |   |
|   |                                            |   |
| 33.    | General Provisions                              |   |
|   | 33.1    Plats and Riders         |   |
|   | 33.2     Waiver                  |   |
|   | 33.3    Joint Obligation         |   |
|   | 33.4    Marginal Headings        |   |
|   | 33.5    Time                     |   |
|   | 33.6    Successors and Assigns   |   |
|   | 33.7     Recordation             |   |
|   | 33.8    Quiet Possession         |   |
|   | 33.9     Late Charges            |   |
|   | 33.10  Prior Agreements                    |   |
|   | 33.11  Inability to Perform                |   |
|   | 33.12  Partial Invalidity                  |   |
|   | 33.23  Cumulative Remedies                 |   |
|   | 33.14   Choice of Law                      |   |
|   | 33.15   Attorney Fees                      |   |
|   | 33.16  Subordination. Attornment           |   |
|   | 33.17   Notices                            |   |
|   | 33.18  Tenant’s Statement             |   |
|   | 33.19   Authority                          |   |
|   | 33.20  Negotiated Transaction              |   |
|   | 33.21  Broker Commission                   |   |
|   | EXHIBIT A - Legal Description of  Center        |   |
|   | EXHIBIT B - Map of Center Delineating  Premises |   |

 

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SUBLEASE

 

RALEY’S,a California corporation (hereinafter referred to as “Landlord”), and TOTALENTERTAINMENT LLC, a California limited liability company (hereinafter referredto as “Tenant”), hereby agree as follows:

 

RECITALS

 

A.                                   Landlorddesires to lease to Tenant and Tenant desires to hire from Landlord a portionof that certain real property (“Center”) described on Exhibit A attachedhereto, including that portion of the building (“Building”) located thereonpursuant to the following terms and conditions.

 

B.                                     Tenantacknowledges that pursuant to that certain lease (“Master Lease”) Landlordleases the Center from Joyce Teel, as Trustee of the Thomas P. Raley Trustdated March 3, 1987 and that this Lease is subject to the terms andconditions of the Master Lease, and all other documents of record affecting theCenter.

 

SUBLEASE

 

1.                                       Premises. Subjectto the reservation set forth below in this Section 1, Landlord does herebysublease to Tenant and Tenant hereby subleases from Landlord that certain space(herein called the “Premises”) consisting of approximately ten thousand(10,000) square feet of floor area in the Building. The location of thePremises are delineated on Exhibit B attached hereto and incorporated by****reference herein. The Building isgenerally known as 910 Tahoe Boulevard, Incline Village, County

 

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of Washoe, State of Nevada. Tenant has inspected the Premises and istaking same subject to this Sublease “as is.”

 

ThisSublease is subject to the terms, covenants and conditions herein set forth andthe Tenant covenants as a material part of the consideration for this Subleaseto keep and perform each and all of said terms, covenants and conditions by itto be kept and performed.

 

Landlordhereby reserves the right, during the normal business hours of Tenant, to allowthe disabled employees, customers, agents and invitees of the other occupant ofthe Building to use the restroom located on the Premises, and the right toallow Landlord’s employees and agents to enter onto the Premises and haveaccess to the equipment room (shown on Exhibit B hereto) for inspection,maintenance, alteration and repair during Tenant’s regular business hours, andany other time consented to by Tenant, and during any emergency situation afterreasonable attempt has been made to inform Tenant, to the extent practicablegiven the emergency situation.

 

2.                                       Use. Tenantshall use the Premises solely for the purpose of conducting a sales and rentalof video tapes, video games and recorded music business including incidentalsales of prepared food and snacks for on-Premises consumption (from no morethan two thousand five hundred (2,500) square feet of floor area on thePremises) and related merchandise, and shall not use or permit the Premises tobe used for any other purpose. Landlord makes no representation or warrantythat Tenant is permitted to use the Premises as set forth above. Tenant has

 

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made its own determination that****suchuse is or will be legally permissible on the Premises****prior to executing this Sublease and shall have no right toterminate this Sublease if such determination is not correct, except, Tenantmay terminate this Sublease if Tenant delivers written notice to Landlord on orprior to sixty (60) days after the effective date of this Sublease stating thatTenant has failed to obtain the necessary permits and approvals to operate itsbusiness on the Premises from the Tahoe Regional Planning Agency (“TRPA”) andthat it is terminating this Sublease, provided Tenant has diligently pursuedseeking such permits and approvals from TRPA from the effective date of thisSublease.

 

3.                                       MinimumRent. Tenantagrees to pay to Landlord as, minimum rent, without notice or demand, themonthly sums identified below, in advance, on or before the first day of eachand every successive month during the term hereof. The rental shall commenceupon the effective date of this Sublease. Rent for any period which is lessthan one month shall be a prorated portion of the monthly installment hereinbased upon a thirty (30) day month. Said rental shall be paid to Landlordwithout deduction or offset, in lawful money of the United States of Americaand at such place as Landlord may from time to time designate in writing.

 

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Monthlv Rental Schedule

 

| **Months**                             |   | **Monthly Rental** |      |
|----------------------------------------|--------|--------------------|-----------|
| Any first partial month and 1–36* |   | $8,000.00          |      |
| 37–72                             |   | $                  | 10,500.00 |   |
| 73–96                             |   | $                  | 12,000.00 |   |
| 37–120                            |   | $                  | 13,500.00 |   |
| If options Valid and Exercised         |   |               |      |
| 121–180                           |   | $                  | 15,525.00 |   |
| 181–240                           |   | $                  | 17,853.75 |   |

 

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*                      Tenantshall not be obligated to pay any minimum rent for the first one hundred twenty(120) days of the  initial term of thisSublease, unless Tenant defaults ij, under this Sublease, in which case theminimum rent due for such 120-day period shall be due and payable upon suchdefault.

 

4.                                       Tenant Improvements. Landlord shall provide to Tenant an improvement allowance notto exceed Two Hundred Fifty Thousand Dollars ($250,000.00) to be appliedtowards the cost and expenses of making improvements to the Building andinstalling Tenant trade fixtures and equipment in the Premises. Once Tenantobtains all necessary permits and approvals from TRPA to operate its businessfrom the Premises and provides Landlord satisfactory evidence of same, Landlordshall make payment to Tenant of such allowance from time-to-time, but no morefrequently than monthly and only in amounts equal to the amounts identified inthe lien releases provided to Landlord by Tenant from Tenant’s contractorsundertaking such work on the Premises.

 

IfTenant defaults under this Sublease during the initial 120-month term, then****Tenant shall be obligated to repay

 

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toLandlord all amounts of the****allowancepaid by Landlord to Tenant hereunder upon such default. If Tenant does notexercise the first option period to extend the term of this Sublease sixty (60)months, or during such 60-month period Tenant defaults under this Sublease,then Tenant shall be obligated to repay to Landlord up to One Hundred FiftyThousand Dollars ($150,000.00) of the allowance paid by Landlord to Tenanthereunder upon the end of the initial term or upon such default, respectively.If Tenant does not exercise the second option period to extend the term of thisSublease an additional sixty (60) months, or during such additional 60-monthperiod Tenant defaults under this Sublease, then Tenant shall. be obligated torepay to Landlord up to Twenty-Five Thousand Dollars ($25,000.00) of theallowance paid by Landlord to Tenant hereunder upon the end of the first60-month option period or upon such default, respectively.

 

5.                                       Term.

 

5.1                                 InitialTerm. Theinitial term of this Sublease shall be one hundred twenty (120) full calendarmonths, plus any partial month, from the date of this Sublease, unlessotherwise terminated as set forth herein.

 

5.2                                 Option Period. Tenantis hereby granted the option to extend the term of this Sublease for two(2)additional periods of sixty (60) months each, unless otherwise terminated hereunder,pursuant to the terms and conditions of this Sublease. To effectuate theabove-noted option Tenant must not be in default under this Sublease and havenot been in default for the last thirty (30) months of the then current term

 

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of thisSublease**,**and deliver writtennotice to Landlord of its desire to exercise this option no sooner than twelve(12) months, and no later than six (6) months, prior to the additional periodto be exercised, otherwise said option shall terminate and this Sublease shallexpire at the end of the then current term.

 

6.                                       SecurityDeposit.Concurrently with Tenant’s execution of this Sublease, Tenant has depositedwith Landlord a sum of Ten Thousand Dollars ($10,000.00). Said sum shall beheld by Landlord as security for the faithful performance by Tenant of all theterms, covenants and conditions of this Sublease, to be kept and performed byTenant during the term hereof. If Tenant defaults with respect to any provisionof this Sublease, including without limitation the provisions relating to thepayment of rent, Landlord may, (but shall not be required to) (use, apply orretain all or any part of this security deposit for the payment of any rent orany other sum in default, or for the payment of any amount (including attorneyfees) which Landlord may spend or become obligated to spend by reason ofTenant’s default, or to compensate Landlord for any other loss or damage whichLandlord may suffer by reason of Tenant’s default. If any portion of saiddeposit is so used or applied Tenant shall, within five (5) days after writtendemand therefor, deposit cash with Landlord in an amount sufficient to restorethe security deposit to its original amount and Tenant’s failure to do so shallbe a default under this Sublease. Landlord shall not be required to keep thissecurity deposit separate from its general funds and****Tenant shall not be entitled to interest on such

 

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deposit. If Tenant shall fully andfaithfully perform every provisionof this Sublease to be performed byit, the security deposit or any balance thereof shall be returned to Tenant (orat Landlord’s option, to the last assignee of Tenant’s interest hereunder)within ten (10) days following expiration of the Sublease term.

 

7.                                       Adjustments.

 

7.1                                 Calculationof Adjustments. Inaddition to the minimum rent provided in Section 3 hereinabove, and commencingat**the sametime as any rental commences under this Sublease, Tenant shall pay to Landlord46.3% of the total cost of the following items (based on Tenant’s total floorarea as it bears to the total leasable area of the Building as a percentage),herein called Adjustments:

(i)                                     All realestate taxes and insurance premiums on the Center, includingland*,*building,and improvements thereon. Said real estate taxes shall include all real estatetaxes and assessments that are levied upon and/or assessed against the Center,including any taxes which may be levied on rents. Said insurance shall includeall insurance premiums for fire, extended coverage, liability; and any otherinsurance that Landlord deems necessary on the Center.

 

(ii)                                  All coststo *maintain, repair**,*and replace common areas, parking lots,sidewalks, driveways, utilities, exterior walls, roof and other areas used incommon by the tenants and subtenants of the Center.

 

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(iii)                               All coststo supervise and administer said common areas, parking lots, sidewalks,driveways, utilities (common and Tenant’s pursuant to Section 17 below),and other areas used in common by the tenants or occupants of the Center. Saidcosts shall include such fees as**may bepaid to a third party in connection with same and shall in any event include a feeto Landlord to supervise and**administersame in an amount equal to five (5%) percent of the total costs of (ii)above.

 

(iv)                              Anyparking charges, utilities surcharges, or any other costs levied, assessed orimposed by, or at the direction of, or resulting from statutes or regulations,or interpretations thereof, promulgated by any governmental authority inconnection with the use or occupancy of the Center or the parking facilitiesserving the Center. 

 

A11insurance referred to in this Section 7.1 shall be for the benefit ofLandlord.

 

7.2                                                          Payment of Adjustments. Tenant acknowledges that currently, the other occupant of theBuilding, Village Hardware, Inc., is acting as the Center Manager and may billTenant on a monthly basis for those Adjustments it causes to be done on theCenter, and that Tenant shall pay such billing within five (5) days after itsreceipt thereof. Tenant shall pay Landlord all other Adjustments not billed bysuch Center Manager, within five (5) days after Tenant’s receipt of a bill thereforfrom Landlord. If Tenant does not challenge the accuracy of any Adjustmentwithin eighteen (18) months after Tenant’s receipt of

 

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the billing or statement establishing theAdjustment, then Tenant shall thereafter be estopped from making any claim orcomplaint against or challenge to such Adjustment.

 

8.                                       Uses Prohibited.Tenant shall not do or permit anything to be done in or about the Premises norbring or keep anything therein which is not within the permitted use of thePremises, which will in any way increase the existing rate of or affect anyfire or other insurance upon the Center or any of its contents, or cause acancellation of any insurance policy covering the Center or any part thereof orany of its contents. Tenant shall not do or permit anything to be done in orabout the Premises which will in any way obstruct or interfere with the rightsof other tenants or occupants of the Center or injure or annoy them or use orallow the Premises to be used for any improper, immoral, unlawful orobjectionable purpose; nor shall Tenant cause, maintain or permit any nuisancein, on or about the Premises. Tenant shall not commit or allow to be committedany waste in or upon the Premises.

 

9.                                       Compliance with Law. Tenant shall not use the Premises, or permit anything to be donein or about the Premises, which will in any way conflict with any law, statute,ordinance or governmental rule or regulation now in force or which mayhereafter be enacted or promulgated including without limitation those lawsrelating to hazardous waste. Tenant shall, at its sole cost and expense,promptly comply with all laws, statutes, ordinances and governmental rules,regulations or requirements now in force or which may hereafter be in force andwith the

 

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requirements of any board offire underwriters or other similar bodies now or hereafter constituted relatingto or affecting the condition, use or occupancy of the Premises, excludingstructural changes not related to or affected by Tenant’s improvements or acts.The judgment of any court of competent jurisdiction or the admission of Tenantin any action against Tenant, whether Landlord be a party thereto or not, thatTenant has violated any law, statute, ordinance or governmental rule,regulation or requirement, shall be conclusive of that fact as between theLandlord and Tenant.

 

10.                                 Alterations andAdditions. Tenant shall not make or allow to be made any alterations,additions or improvements to or of the Premises or any part thereof withoutfirst obtaining the written consent of Landlord and any alterations, additionsor improvements to or of said Premises, including, but not limited to, wallcovering, paneling and built-in cabinet work, but excepting movable furnitureand trade fixtures, shall at once become a part of the realty and belong to theLandlord and shall be surrendered with the Premises. In the event Landlordconsents to the making of any alterations, additions or improvements to thePremises by Tenant, the same shall be made by Tenant at Tenant’s sole cost andexpense in a good workmanlike manner and Tenant shall be responsible to obtainat Tenant’s expense, all necessary government permits and approvals for same. Uponthe expiration or sooner termination of the term hereof, Tenant shall, uponwritten demand****by Landlord, givenat least thirty (30) days prior to the end of the term, at Tenant’s sole

 

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cost and expense, forthwith andwith all due diligence, remove any alterations, additions, or improvements madeby**Tenant, designated by Landlord to be removed, and Tenant shall,forthwith and with all due diligence, at its sole cost and expense, repair anydamage to the Premises caused by such removal.

 

11.                                 Repairs.

 

11.1                           Tenant’s Repairs. By entry hereunder, Tenantshall be deemed to have accepted the Premises as being in good, sanitary order,condition and repair. Tenant shall, at Tenant’s sole cost and expense, keep thePremises and every partthereof in good condition and repair (except as hereinafterprovided with respect to Landlord’s obligations) including without limitation,the maintenance, replacement and repair of any storefront, doors, windowcasements, glazing, plumbing, pipes, electrical wiring and conduits, heatingand air conditioning system (when there is an air conditioning system). Tenantshall, upon the expiration or sooner termination of this Sublease hereof,surrender the Premises to the Landlord in good condition, broom clean, ordinarywear and tear excepted. Any damage to adjacent premises caused by Tenant’s useof the Premises shall be repaired at the sole cost and expense of Tenant.

 

11.2                           Landlord’s Repairs. Notwithstanding theprovisions of Section 11.1 hereinabove, Landlord shall repair and maintainthe structural portions of the Center (however, Tenant shall be responsible forits****pro rata share of themaintenance and repair of the exterior walls and the roof as provided in

 

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Section 7.1(ii) above),unless such maintenance and repairs are caused in part or in whole by the act,neglect, fault or omission of any duty by the Tenant, its agents, servants,employees, invitees, or any damage caused by breaking and entering, in whichcase Tenant shall pay to Landlord the actual cost of such maintenance andrepairs. Landlord shall not be liable for any failure to make such repairs orto perform any maintenance unless such failure shall persist for any unreasonabletime after written notice of the need of such repairs or maintenance is givento Landlord by Tenant. Except as provided in Section 25 hereof, thereshall be no abatement of rent and no liability of Landlord by reason of anyinjury to or interference with Tenant’s business arising from the making of anyrepairs, alterations or improvements in or to any portion of the Center or thePremises or in or to fixtures, appurtenances and equipment therein. Tenantwaives the right to make repairs at Landlord’s expense under any law, statuteor ordinance now or hereafter in effect.

 

12.                                 Liens. Tenant shall keep the Premises and the property in which thePremises are situated free from any liens arising cut of any work performed,materials furnished or obligations incurred by or on behalf of Tenant. Landlordmay require, at Landlord’s sole option, that Tenant shall provide to Landlord,at Tenant’s sole cost and expense, a lien and completion bond, by a bondingcompany acceptable to Landlord, in an amount equal to one and one-half (1- 1/2)times the estimated cost of any improvements, additions, or alterations in thePremises which the Tenant desires to make, to insure Landlord against

 

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any liability for mechanics’and materialmen’s liens and to insure completion of the work.

 

13.                                 Assignment andSubletting. Tenant shall not either voluntarily, or by operation of law,assign, transfer, mortgage, pledge, hypothecate or encumber this sublease orany interest therein, and shall not sublet the said Premises or any partthereof, or any right or privilege appurtenant thereto, or allow any otherperson (the employees, agents, servants and invitees of Tenant excepted) tooccupy or use the said Premises, or any portion thereof, without firstobtaining the written consent of Landlord, which consent may be withheld atLandlord’s sole discretion; however, Landlord shall not unreasonably withholdits consent to any sublease by Tenant to a food vendor to operate a food andsnack business for on-sites consumption, provided the subleased area does notexceed two thousand five hundred (2,500) square feet of the Premises and thereis no separate entrance into such subleased area from outside the Building thatdoes not allow access to the rest of the Premises and such food vendor operatesits business only while Tenant’s business is open to the public. A consent toone assignment, subletting, occupation or use by any other person shall not bedeemed to be a consent to any subsequent assignment, subletting, occupation oruse by another person. Consent to any such assignment or subletting shall in noway relieve Tenant of any liability under this Sublease. Any such assignment orsubletting without such consent shall be void, and shall, at the option of

 

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the Landlord, constitute****a default under the terms of thisSublease.

 

In the event thatLandlord shall consent to a sublease or assignment hereunder, Tenant shall payLandlord reasonable costs and attorney fees, incurred in connection with theprocessing of documents necessary to give such consent.

 

14.                                 Hold Harmless. Tenant shall indemnify and hold harmless Landlord against andfrom any and all claims, actions, proceedings, costs (including attorney fees)and damages arising from Tenant’s use and enjoyment of the Premises, from theconduct of its business or from any activity, work, or other things done,permitted or suffered by the Tenant in or about the Premises, and shall furtherindemnify and hold harmless Landlord against and from any and all claims,proceedings, actions, costs (including attorney fees) and damages arising fromany breach or default in the performance of any obligation or, Tenant’s part tobe performed under the terms of this Sublease, or arising from any act ornegligence of the Tenant, or any officer, agent, employee, guest, or invitee ofTenant, and from all costs, attorney fees, and liabilities incurred in or aboutthe defense of any such claim or any action or proceeding brought thereon andin case any action or proceeding be brought against Landlord by reason of suchclaim, Tenant upon notice from Landlord shall defend the same at Tenant’sexpense by counsel reasonably satisfactory to Landlord. Tenant, as a materialpart of the consideration to Landlord, hereby assumes all risk of damage toproperty or injury to person in, upon or about the Premises, from any causeother

 

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than Landlord’s negligence; andTenant hereby waives all claims in respect thereof against Landlord. Tenantshall give prompt notice to Landlord in case of casualty or accidents in, on orabout the Premises or Center.

 

Landlord or its agentsshall not be liable for any loss or damage to persons or property resultingfrom fire, explosion, falling plaster, steam, gas, electricity, water or rainwhich may leak from any part of the Center or from the pipes, appliances orplumbing works therein or from the roof, street or subsurface or from any otherplace resulting from dampness or any other cause whatsoever, unless caused byor due to the negligence of Landlord, its agents, servants or employees.Landlord or its, agents shall not be liable for interference with the light,air, or for any latent defect in the Premises.

 

15.                                 Subrogation. As long as its insurer so permits, Tenant hereby mutually waivesits rights-of recovery against Landlord for any loss insured by fire, extendedcoverage and other property insurance policies existing for the benefit of Tenant;up to the extent of the covered amount of such policies. Tenant shall apply toits insurers to obtain said waivers. Tenant shall obtain any specialendorsements, if required by its insurer to evidence compliance with theaforementioned waiver.

 

16.                                 Liability Insurance.Tenant shall, at Tenant’s expense, obtain and keep in. force during the term ofthis Sublease a policy****ofcomprehensive public liability insurance insuring Landlord and Tenant againstany liability arising out of the ownership, use, occupancy or maintenance ofthe Premises and

 

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all areas appurtenant thereto.Such insurance shall be in the amount of not less than $2,000,000.00 combinedsingle limit for all bodily injury and property damage claims, which amount maybe increased from time to time by Landlord to reflect industry standards, andwhich insurance shall name Landlord, and any lender requested by Landlord, asan additional insured. The limit of any such insurance shall not, however,limit the liability of the Tenant hereunder. Tenant may provide this insuranceunder a blanket policy, provided that said insurance shall have a Landlord’sprotective liability endorsement attached thereto. If Tenant shall fail toprocure and maintain said insurance, Landlord may, but shall not be requiredto, procure and maintain same, but at the expense of Tenant. Insurance requiredhereunder shall be in companies licensed to do business in the state of Nevadaand reasonably acceptable to Landlord. Tenant shall also maintain workerscompensation insurance as required by state and federal law. Tenant shalldeliver to Landlord, prior to right of entry, copies of policies of liabilityinsurance required herein or certificates evidencing the existence and amountsof such insurance with loss payable clauses satisfactory to Landlord. No policyshall be cancelable, terminate or be subject to reduction of coverage withoutat least thirty (30) days written notice to Landlord. All such policies shallbe written as primary policies not contributing with and not in excess ofcoverage which Landlord may carry. Prior to the delivery of the Premises byLandlord to Tenant, Tenant shall provide to Landlord certificates evidencingthe insurance

 

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provided for under thisSection 16 and, thereafter, within five (5) days after request byLandlord, copies of such policies.

 

17.                                 Utilities.Tenant shall pay for all water,gas, heat, light, power, sewer charges, sanitation, telephone service and allother services and utilities supplied to the Premises, together with any taxesthereon. If any such services are not separately metered or billed to Tenant,Tenant shall pay a reasonable proportion to be determined by Landlord of all chargesjointly metered or billed with other premises of the Center which chargesLandlord shall add to the Adjustments described in Section 7.1(ii).

 

18.                                 Personal Property Taxes.Tenant shall pay, or cause to be paid, before delinquency any and all, taxeslevied or assessed and which becomepayableduring the term hereof upon all Tenant’s leasehold improvements, equipment,furniture, fixtures, and any other personal property located in the Premises.In the event any or all of the Tenant’s leasehold improvements, equipment,furniture, fixtures and other personal property shall be assessed and taxedwith the real property. Tenant shall pay to Landlord its share of such taxeswithin ten (10) days after delivery to Tenant by Landlord of a statement inwriting setting forth the amount of such taxes applicable to Tenant’s property.

 

19.                                 Rules and Regulations.Tenant shall faithfully observe and comply with the rules and regulations thatLandlord may from time to time promulgate and/or modify for the mutual benefitof all tenants and occupants of the Center. The rules and regulations shall bebinding upon the Tenant upon delivery of

 

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a copy****of them to Tenant. Landlord shall not beresponsible to Tenant for the nonperformance of any said rules and regulationsby other tenants or occupants.

 

20.                                 Holding Over. If Tenant remains in possession of the Premises or any partthereof after the expiration of the term hereof with the express writtenconsent of Landlord, such occupancy shall be a tenancy from month to month at arental in the amount of two hundred percent (200%) of the last monthly minimumrent, plus all other charges payable hereunder, and upon all the terms hereofapplicable to a month to month tenancy.

 

21.                                 Entry By Landlord.Landlord reserves, and shall at any and all times have, the right to enter thePremises to inspect the same, to submit said Premises to prospective purchasersor tenants, to post notice of non-responsibility, to repair, maintain or remediatethe Premises and any portion of the Building of which the Premises are a partthat Landlord may deem necessary or desirable, without abatement of rent, andmay for that purpose erect scaffolding and other necessary structures wherereasonably required by the character of the work to be performed, alwaysproviding that the entrance to the Premises shall not be unreasonably blockedthereby, and further providing that the business of the Tenant shall not beinterfered with unreasonably. Tenant hereby waives any claim for damages or forany injury or inconvenience to or interference with Tenant’s business, any lossof occupancy or quiet enjoyment of the Premises, and any other loss occasionedthereby. For each of the aforesaid purposes,****Landlordshall at all times have and retain a

 

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key with which to unlock all ofthe doors in, upon and about the Premises, excluding Tenant’s vaults, safes andfiles, and Landlord shall have the right to use any and all means whichLandlord may deem proper to open said doors in an emergency, in order to obtainentry to the Premises without liability to Tenant except for any failure toexercise due care for Tenant’s property and any entry to the Premises obtainedby Landlord by any of said means, or otherwise, shall not under anycircumstances be construed or deemed to be a forcible or unlawful entry into,or a detainer of, the Premises, or an eviction of Tenant from the Premises orany portion thereof.

 

22.                                 Tenant’s Default.The occurrence of any one or more of the following events shall constitute adefault and breach of this Sublease by Tenant:

 

A.                                   Thevacating or abandonment of the Premises by Tenant.

 

B.                                     Thefailure by Tenant to make any payment of rent or any other payment required tobe made by Tenant hereunder, as and when due, where such failure shall continuefor a period of three (3) days after written notice thereof by Landlord toTenant.

 

C.                                     Thefailure by Tenant to observe or perform any of the covenants, conditions orprovisions of this Sublease to be observed or performed by the Tenant, otherthan described in Section 22.B, above, where such failure shall continuefor a period of thirty (30) days after written notice thereof by Landlord toTenant.

 

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D.                                    Themaking by Tenant of any general assignment or general arrangement for thebenefit of creditors; or the filing by or against Tenant of a petition to haveTenant adjudged a bankrupt, or a petition or reorganization or arrangementunder any law relating to bankruptcy (unless, in the case of a petition filedagainst Tenant, the same is dismissed within sixty (60) days); or theappointment of a trustee or a receiver to take possession of substantially allof Tenant’s assets located at the Premises or of Tenant’s interest in thisSublease, where possession is not restored to Tenant within thirty (30) days;or the attachment, execution or other judicial seizure of substantially all ofTenant’s assets located at the Premises or of Tenant’s interest in thisSublease, where such seizure is not discharged within thirty (30) days.

 

23.                                 Remedies in Default.In the event of any such default or breach by Tenant, Landlord may at any timethereafter, in its sole discretion, with or without notice or demand andwithout limiting Landlord in the exercise of a right or remedy which Landlordmay have by reason of such default or breach:

 

A.                                   TerminateTenant’s right to possession of the Premises by any lawful means, in which casethis Sublease shall terminate and Tenant shall immediately surrender possessionof the Premises to Landlord. In such event Landlord shall be entitled torecover from Tenant all damages incurred by Landlord by reason of Tenant’s****default including, but not limited to, thecost of recovering possession of the Premises; expenses of reletting, includingnecessary****renovation andalteration of the

 

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Premises; reasonable attorneyfees; the worth of the time of award by the court having****jurisdiction thereof of the amount bywhich the unpaid rent and other charges and Adjustments called for herein forthe balance of the term after the time of such award exceeds the amount of suchloss for the same period that Tenant proves could be reasonably avoided; andthat portion of any leasing commission paid by Landlord and applicable to theunexpired term of this Sublease. Unpaid installments of rent or other sumsshall bear interest from the date due at the maximum legal rate; or

 

B.                                     MaintainTenant’s right to possession, in which case this Sublease shall continue ineffect whether or not Tenant shall have abandoned the Premises. In such eventLandlord shall be entitled to enforce all of Landlord’s rights and remediesunder this Sublease, including the right to recover the rent and any othercharges and Adjustments as may become due hereunder; or

 

C.                                     Pursueany other remedy now or hereafter available to Landlord under the laws orjudicial decisions of the State of Nevada.

 

24.                                 Default by Landlord.Landlord shall not be in default unless Landlord fails to perform obligationsrequired of Landlord within a reasonable time, but in no event later thanthirty (30) days after written notice by Tenant to Landlord and to the holderof any mortgage or deed of trust covering the Premises whose name and addressshall have theretofore been furnished to Tenant in writing, specifying whereinLandlord has

 

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failed to perform suchobligation; provided, however, that if the nature of Landlord’s obligation issuch that more than thirty (30) days are required for performance then Landlordshall not be in default if Landlord commences performance within such thirty(30) day period and thereafter diligently prosecutes the same to completion. Inno event shall Tenant have the right to terminate this Sublease as a result ofLandlord’s default and Tenant’s remedies shall be limited to damages and/or aninjunction.

 

25.                                 Reconstruction. Notwithstanding the degree of damage to the Premises, if theCenter is destroyed by fire, earthquake, or other accident or action of theelements, or is partially destroyed so as to render the Center wholly unfit foroccupancy, or if the Center is so badly injured or damaged that it cannot berepaired within ninety (90) days after the happening of the damage, then thisSublease shall, at the written option of the Landlord, cease and become nulland void from the date of such damage and destruction, and upon notice by theLandlord the Tenant shall at once surrender the Premises and all interesttherein to the Landlord and shall not be liable for any further payments orrental on account of this Sublease for any period after the date of such damageor destruction; and in case of partial destruction of the Premises, theLandlord may, at its option, reenter and repossess such portion of the Premisesas may be required to make the necessary repairs, and repair the Premises, andthis Sublease shall continue in full force and effect but a proper allowanceupon the rent of the Premises shall be

 

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made for the time consumed inmaking such repairs; but it is expressly understood and agreed that the Tenantshall in no case be entitled to compensation or damage on account of anyinconvenience or annoyance or loss of business occasioned to anyone in makingsuch repairs, or on account of such destruction on account of fire, earthquake,or other accident or action of the elements, and that no allowance or deductionfrom the rent herein provided for shall be made for any partial destruction ofthe Premises which does not prevent the Tenant from carrying on business asusual.

 

26.                                 Eminent Domain. If the Premises or asubstantial part thereof are condemned or taken by purchase in lieu thereof,then this Sublease shall terminate as of the time possession is taken. If nosubstantial part of the Premises should be condemned, this Sublease shallcontinue as to the portion not taken, in which event Tenant shall be entitledto a reduction in rental in the proportion that the part taken bears to thetotal area of the Premises. Tenant shall have no interest in and to thecondemnation award or compensation, provided, however, that Landlord shall notbe entitled to any portion, of the award made to Tenant for loss of business,depreciation to and cost of removal of stock and fixtures. In the event thisSublease should be terminated for any of the reasons contained and set forth inthis Section 26, Landlord shall refund to Tenant any unused advance rentalwhich Tenant may have paid as of the date of any such termination of thisSublease.

 

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27.                                 Parking and Common Areas**.**Landlord covenants thatthe common****and parking areas asshown on the attached Exhibit “B” shall be at all times available for thenon-exclusive use of Tenant during the full term of this Sublease or anyextension of the term hereof; however, Landlord shall reserve the right tobuild any improvements upon such areas for its exclusive use. In addition,Landlord reserves the right to change the entrances, exits, traffic lanes andthe boundaries and locations of such parking area or areas.

 

28.                                 Displays and Signage. The Tenant may not display or sell merchandise or allow grocerycarts or other similar devices within the control of Tenant to be stored or toremain outside the defined exterior walls and permanent doorways of thepremises. Tenant further agrees not to install any exterior lighting,amplifiers or similar devices or use in or about the Premises any advertisingmedium which may be heard or seen outside the Premises, such as flashinglights, searchlights, loudspeakers, phonographs or radio broadcasts without thewritten consent of Landlord which may be unreasonably withheld.

 

Tenant, at its sole costand expense, may display signs on the front of the Building (but not the roof)adjacent to the Premises, and on any standard constructed in the parking areaof the Center, provided (a) Tenant obtains all the necessary governmentalapprovals, (b) such signage only identifies the business being operated on thePremises, and (c) Tenant obtains Landlords prior written consent, which consentshall not be unreasonably withheld. In addition, Tenant may display in the

 

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windows of the Premises canlighted, framed movie posters, provided Tenant obtains any necessarygovernmental permits and approvals for same and such posters are not unlawful,immoral, lewd, obscene or contain “fighting words,” obscenities, grisly orgruesome displays or highly inflammatory slogans likely to provoke adisturbance.

 

29.                                 Auctions. Tenant shall not conduct or permit to be conducted any sale byauction in, upon or from the Premises whether said auction be voluntary,involuntary, pursuant to any assignment for the payment of creditors orpursuant to any bankruptcy or other insolvency proceeding.

 

30.                                 Hours of Business.Subject to the provisions of Section 25 hereof, Tenant shall continuouslyduring the entire term hereof conduct and carry on Tenant’s business in thePremises and shall keep the Premises open for business and cause Tenant’sbusiness to be conducted therein during the usual business hours of each andevery business day as is customary for businesses of like character in thelocal area of the Premises to be open for business; provided, however, thatthis provision shall not apply if the Premises should be closed and thebusiness of Tenant temporarily discontinued therein on account of strikes,lockouts or similar causes beyond the reasonable control of Tenant. Tenantshall keep the Premises adequately stocked with merchandise, and withsufficient sales personnel to care for the patronage, and to conduct saidbusiness in accordance with sound business practices.

 

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31.                                 Brokers.****Tenant warrantsthat it has had no dealings with any real estate broker or agents in connectionwith the negotiation of this Sublease and it knows of no real estate broker oragent who is entitled to a commission or fee in connection with this Subleaseand hereby agrees to indemnify, defend and hold Landlord harmless from andagainst any action, proceeding, claim, cost (including attorney fees) or damagearising from any broker or agent not having an agreement with Landlord claimingany said commission or fee.

 

32.                                 Hazardous Substances.

 

32.1                           Hazardous Substances.The term “Hazardous Substances,as used in this Lease, shall include, without limitation, flammable, explosives,radioactive materials, asbestos, polychlorinated biphenyls (“PCPs”), chemicalsknown to cause cancer or reproductive toxicity, pollutants, contaminants,hazardous wastes, toxic substances or related materials, petroleum andpetroleum products, and substances declared to be hazardous or toxic under naylaw or regulation now or hereafter enacted or promulgated by any governmentalauthority.

 

Landlord,to the best of its actual knowledge knows of no Hazardous Substances locatedin, on or under the Premises.

 

32.2                           Tenant’s Restrictions. Tenant shall not causeor permit to occur:

 

(a)                                  Anyviolation of any federal, state, or local law, ordinance, or regulation now orhereafter enacted, related to environmental conditions on, under or about thePremises, or arising****from Tenant’suse or occupancy of the

 

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Premises, including, but****not limited to, soil and groundwaterconditions; or

 

(b)                                 Theuse, generation, release, manufacture, refining, production, processing,storage, or disposal of any Hazardous Substance on, under or about thePremises, or the transportation to or from the Premises of any HazardousSubstance, except for those Hazardous Substances that may be generally found inthe equipment, fixtures, supplies, machinery or furniture incident to theoperations of the business identified in Section 2 above, in quantitiesgenerally associated with such business.

 

32.3                           Environmental Clean-up. Tenant shall, at Tenant’s own expense, comply with all laws regulatingthe use, generation, storage, transportation, or disposal of HazardousSubstances (“Laws”).

 

Tenantshall, at Tenant’s own expense, make all submissions to, provide allinformation required by, and comply with all requirements of all governmental authorities(the “Authorities”) under the Laws.

 

Shouldany Authority or any third party demand that a cleanup plan be prepared andthat a clean-up be undertaken because of any deposit, spill, discharge or other release ofHazardous Substances that occurs during the term of this Sublease, at or fromthe Premises, or which arises at any time from Tenant’s use or occupancy of thePremises, then Tenant shall, at Tenant’s own expense, prepare and submit therequired

 

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plans and all related bonds andother financial assurances; and Tenant shall carry out all such cleanup plans.

 

Tenantshall immediately notify Landlord of the presence of any hazardous Substance onor about the Premises known to Tenant (except those excluded inSection 32.2(b) above) and of any spills, discharge or other releases ofsuch Hazardous Substances which are in violation of any Federal, State or locallaw. Tenant shall promptly submit to Landlord copies of all correspondence,plans, notices and other documents relating to the cleanup and remediation ofHazardous Substances on the Premises.

 

Tenantshall promptly provide all information regarding the use, generation, storage,transportation, or disposal of Hazardous Substances that is requested byLandlord. If Tenant fails to fulfill any duty imposed under thisSection 32 within a reasonable time, Landlord may do so; and in such case,Tenant shall cooperate with Landlord in order to prepare all documents Landlorddeems necessary or appropriate to determine the applicability of the Laws tothe Premises and Tenant’s use thereof and for compliance therewith, and Tenantshall execute all documents promptly upon Landlord’s request. No such action byLandlord and no attempt made by Landlord to mitigate damages under any Lawshall constitute a waiver of any of Tenant’s obligations under thissection 32.3.

 

Tenant’sobligations****and liabilities underthis Section 32.3 shall survive the expiration of this Lease.

 

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32.4                           Tenant’s Indemnity. Tenantshall indemnify, defend, and hold harmless Landlord, the manager of theproperty, and their respective officers, directors, beneficiaries,shareholders, partners, agents and employees from all fines, suits, procedures,claims, and actions of every kind, and all costs associated therewith(including attorney fees, consultant fees and administrative procedural costs)arising out of or in any way connected with (i) any deposit, spill, discharge,or other release of Hazardous Substances that occurs during the term of thisLease, at or from the Premises, or which arises at any time from Tenant’s useor occupancy of the Premises, or from Tenant’s failure to provide allinformation, make all submissions, and take all steps required by allAuthorities under the Laws and all other environmental laws or (ii) the cost ofany required or necessary investigation, remediation, removal, repair, cleanupor-detoxification and the preparation of required plans as a result of the presenceor use, generation, storage, release, threatened release or disposal ofHazardous Substances by Tenant during the term of this Lease at or from thePremises or which arises at any time from Tenant’s use or occupancy of thePremises, including costs by a federal, state or local government agencyrelated to a facility or site to which materials attributable to or connectedwith the Premises are removed to, disposed of, treated or stored.

 

Tenant’sobligations and liabilities under this Section 32.3 shall survive theexpiration of this Lease.

 

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33.                                 General Provisions.

 

33.1                           Plats and Riders. Clauses, plats, riders and addendums, if any, affixed to thisSublease are a part hereof.

 

33.2                           Waiver. The waiver by Landlord of any term, covenant or condition hereincontained shall not be deemed to be a waiver of such term, covenant orcondition or any subsequent breach of the same or any other term, covenant orcondition herein contained. The subsequent acceptance of rent hereunder byLandlord shall not be deemed to be a waiver of any preceding default by Tenantof any term, covenant or condition of this Sublease, other than the failure ofthe Tenant to pay the particular rental so accepted, regardless of Landlord’sknowledge of such preceding default at the time of the acceptance of such rent.

 

33.3                           Joint Obligation. If there be more than oneTenant the obligations hereunder imposed shall be joint and several.

 

33.4                           Marginal Headings. The marginal headingsand section titles to the articles of this Sublease are not a part of theSublease and shall have no effect upon the construction or interpretation ofany part hereof.

 

33.5                           Time. Time is of the essence of this Sublease and each and all of itsprovisions in which performance is a factor.

 

33.6                           Successors and Assigns.The covenants and conditions herein contained, subject to the provisions as tothe

 

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assignment, apply to and bindthe heirs, successors, executors, administrators and assigns of the partieshereto.

 

33.7                           Recordation. Neither Landlord nor Tenant shall record this Sublease, but ashort form memorandum hereof may be recorded at the request of Landlord.

 

33.8                           Quiet Possession. Upon Tenant paying the rentreserved hereunder and observing and performing all of the covenants,conditions and provisions on Tenant’s part to be observed and performedhereunder, Tenant shall have quiet possession of the Premises for the entireterm hereof, subject to all the provisions of this Sublease.

 

33.9                           Late Charges. Tenant herebyacknowledges that late payment by Tenant to Landlord of rent or other sums duehereunder will cause Landlord to incur costs not contemplated by this Sublease,the exact amount of which will be extremely difficult to ascertain. Such costsinclude, but are not limited to, processing and accounting charges, and latecharges which may be imposed upon Landlord by terms of any mortgage or trustdeed covering the Premises. Accordingly, if any installment of rent or any sumdue from Tenant shall not be received by Landlord or Landlord’s designee withinthree (3) days after written notice that said amount is past due, then Tenantshall pay to Landlord a late charge equal to the maximum amount permitted by law(and in the absence of any governing law, ten percent of such overdue amount),plus any attorney fees incurred****byLandlord by reason of Tenant’s failure to payrent and/or other charges when due hereunder.****The parties hereby agree that such latecharges

 

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representa fair and reasonable estimate of the cost that Landlord will incur by reasonof the late payment by Tenant. Acceptance of such late charges by the Landlordshall in no event constitute a waiver of Tenant’s default with respect to suchoverdue amount, nor prevent Landlord from exercising any of the other rightsand remedies granted hereunder.

 

33.10                     Prior Agreements. This Sublease contains all of the agreements of the partieshereto with respect to any matter covered or mentioned in this Sublease, and noprior agreements or understanding pertaining to any such matters shall beeffective for any purpose. No provision of this Sublease may be amended oradded to except by an agreement in writing signed by the parties hereto ortheir respective successors in interest. This Sublease shall not be effectiveor binding on any party until fully executed by both parties hereto.

 

33.11                     Inability to Perform. This Sublease and theobligations of the Tenant hereunder shall not be affected or impaired becausethe Landlord is unable to fulfill any of its obligations hereunder or isdelayed in doing so, if such inability or delay is caused by reason of strike,labor troubles, acts of God, or any other cause beyond the reasonable controlof the Landlord.

 

33.12                     Partial Invalidity. Any provision of this Sublease which shall prove to be invalid,void, or illegal shall in no way affect, impair or invalidate any otherprovision hereof and such other provision shall****remain in full force and effect.

 

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33.13                   Cumulative Remedies.No remedy or election hereunder shall be deemed exclusive but shall, wheneverpossible, be cumulative with all other remedies at law or in equity.

 

33.14                     Choice of Law.  This Lease shall begoverned by the laws of the State of Nevada.

 

33.15                     Attorney Fees.In the event of any action or proceeding brought by either party against theother under this Sublease the prevailing party shall be entitled to recover forthe fees of its attorneys in such action or proceeding, including costs ofappeal, if any, in such amount as the court may adjudge reasonable as attorneyfees. In addition., should it be necessary for Landlord to employ legal counselto enforce any of the provisions herein contained, Tenant agrees to pay allattorney fees and court costs reasonably incurred including any such fees orcosts incurred in executing on any judgment.

 

33.16                     Subordination.Attornment. Upon request of the Landlord, Tenant will in writing subordinateits rights hereunder to the lien of any mortgage or deed of trust, to any bank,insurance company or other lending institution, now or hereafter in forceagainst the Premises, and to all advances made or hereafter to be made upon thesecurity thereof.

 

In the event anyproceedings are brought for foreclosure, or in the event of the exercise of thepower of sale under any mortgage or deed****oftrust covering the Premises, the Tenant shall attorn to the purchase upon anysuch foreclosure or sale and recognize such purchaser as the Landlord underthis Sublease.

 

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33.17                     Notices. All notices and demandswhich may or are to be required or permitted to be given by either party on theother hereunder shall be in writing. All notices and demands by the Landlord tothe Tenant shall be sent by United States Mail, postage prepaid, addressed tothe Tenant at the Premises, and to the address hereinbelow, or to such otherplace as Tenant may from time to time designate in a notice to the Landlord.A11 notices and demands by the Tenant to the Landlord shall be sent by UnitedStates Mail, postage prepaid, addressed to the Landlord at the address setforth herein, and to such other person or place as the Landlord may from timeto time designate in a notice to the Tenant.

 

If toLandlord:                                             500 West Capitol Avenue

WestSacramento, CA 95605-2696

 

If toTenant:                                                       1027 Emerald Bay Road

SouthLake Tahoe, CA 96150

 

33.18                     Tenant’s Statement. Tenant shall at anytime and from time to time, upon not less than three (3) days prior writtennotice from Landlord, execute, acknowledge and deliver to Landlord a statementin writing (a) certifying that this Sublease is unmodified and in full forceand effect (or, if modified, stating the nature of such modification andcertifying that this Sublease as so modified is in full force and effect), andthe date to which the rental and other charges are paid in advance, if any, (b)acknowledging that there are not, to Tenant’s knowledge, any uncured defaultson the part of the Landlord hereunder, or specifying such defaults if any are

 

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claimed, (c) setting forth thedate of commencement of rents and expiration of the term hereof, and (d)certifying any other matter reasonably requested by Landlord. Any suchstatement may be relied upon by the prospective purchaser or encumbrancer ofall or any portion of the real property of which the Premises are a part.

 

33.19                     Authority. If a party is an entity, each individual executing this Subleaseon behalf of said entity represents and warrants that he or she is dulyauthorized to execute and deliver this Sublease on behalf of said entity, inaccordance with the governing documents of said entity, and that this Subleaseis binding upon said entity. The signatories on this Sublease represent andwarrant that they are all the members of Tenant and that any consent, approvalor other action to be taken by Tenant under this Sublease may be done by oneindividual (“Designatee”) who shall initially be Michael Petrogallo, and theacts by the Designatee shall be binding upon Tenant until Landlord receives awritten notice from Tenant executed by a majority of the members controllingTenant that the individual acting as Designatee may no longer act on behalf ofTenant under this Sublease, that identifies one or more individuals as a newDesignatee(s) that may act on behalf of Tenant (but if more than one individualis identified, Landlord may rely on the action of anyone such Designatee and nomore than one Designatee’s actions will be necessary to bind Tenant under theterms of this Sublease) and that they represent and warrant that they have theauthority to****so replace theDesignatee on behalf of Tenant.

 

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33.20                     Negotiated Transaction.The parties mutually acknowledge that this Sublease has been negotiated atarm’s length. The provisions of this Sublease shall be deemed drafted by bothparties and this Sublease shall not be interpreted or construed against anyparty solely by the virtue of the fact that such party or its counsel isresponsible for its preparation.

 

33.21                     Broker Commission. Landlord shall pay abroker’s commission pursuant to a separate agreement with Tom Watson of TruckeeRiver Associates, Inc., a California licensed real estate broker, whorepresented Landlord in connection with this transaction. Tenant has beenrepresented by Rod Campbell. Except as provided in this Section, Seller andBuyer each represent and warrant to the other that no broker, agent or finder,licensed or otherwise, has been engaged by it, respectively, in connection withthe transaction contemplated by this Agreement and that all negotiationsrelative to these instructions and this transaction have been carried out bysuch party directly with the other party without the intervention of any personin such a manner as to give rise to any valid claim against either of theparties for a broker’s commission, finder’s fee or other like payment. Each ofthe parties shall indemnify and defend the other party and hold it harmlessfrom any and all loss, damage, liability or expense, including cots andreasonable attorney****fees, whichthe other party may incur or sustain by reason of or in connection with anymisrepresentation or breach

 

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of warranty by the indemnifyingparty with respect to the foregoing.

 

INWITNESS WHEREOF, the parties hereto have executed this Sublease effective as OfJune 30, 1995.

 
| LANDLORD:                  | TENANT:                      |
|----------------------------|------------------------------|
| RALEY’S, a California | TOTAL ENTERTAINMENT LLC, a   |
| corporation                | California limited liability |
|                       | company                      |
|                       |                         |
| By:                        | /s/                          |   | By : | /s/ Michael Petrogallo |   |
| Title:                     | Pres/CEO                     |   | Michael Petrogallo |
|                       |                         |
|                       | By :                         | /s/ Ricardo Brockman |   |
|                       | Ricardo  Brockman            |
|                       |                         |
|                       | By :                         | /s/ Diego Cespedes |   |
|                       | Diego Cespedes               |
|                       |                         |
|                       | By :                         | /s/ Enrique Martinez De  Velasco |   |
|                       | Enrique Martinez De  Velasco |
|                       |                         |
|                       | By :                         | /s/ Carlos Uhthoff |   |
|                       | Carlos Uhthoff               |
|                       |                         |
|                       | By :                         | /s/ Pablo Girault |   |
|                       | Pablo Girault                |
|                       |                         |
|                       | By :                         | /s/ Enrique  Hurtado |   |
|                       | Enrique Hurtado              |
|                       |                         |
|                       | By :                         | /s/ Gustavo Serrano |   |
|                       | Gustavo Serrano              |
|                       |                         |
|                       | By :                         | /s/ Susana Mariscal |   |
|                       | Susana Mariscal              |
|                            |                              |  |  |  |  |  |  |  |  |  |  |  |

 

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LECGAL DESCRTPTION

 

Parcel One

 

All that certain. real propertybeinga portion ofSection 15, Township 16 North, Range 18 East, M.D.B. & M. situate inthe County of Washoe, State of Nevada, more particularly described as follows:

 

Commencing at the mostSoutherly terminus of that certain curve designated A-170 on the Easterlyboundary of Village Blvd. as said curve (A-170) and Blvd. are shown on the mapof Fairway Estates No.  2, Washoe County, Nevada filed in the Office of the CountvRecorder of Washoe County, State of Nevada on August 28, 1963; thence S19° 26’ 35” W 202.90 feet; thence Southwesterly along the arc of a tangentcurve to the left having a radius of 1551.36 feet, a central angle of 2° 52’45” and an arc distance of 77.95 feet to the true point of beginning of thisdescription; thence S 83° 23’ 57” E, 308.35 feet; thence S 4° 47’ 23” W, 547.4 feet to apoint on the Northerly boundary of Tahoe Blvd.; thence N 85° 55’ 41” W, 140.00feet; thence leaving said Northerly boundary of Tahoe Blvd. N 4° 47’ 23” E,200.90 feet; thence N 85` 55’ 41” W, 200.90 feet to a point on the Easterlyboundary of Village Blvd.;**thence N 4° 47’ 23” E, 43.21 feet; thence Northeasterly along thearc of a tangent curve to the right having a radius of 1560.00 feet, a centralangle of 5° 12’ 01”, a tangent of 70.84 feet, an arc length of 141.59’ and along chord bearing N 7° 23’ 23.5” E, 141.54 feet; thence Northeasterly alongthe arc of a curve to the right havingaradius of 1551.36 feet, a central angle of 6° 34’ 26”, the tangent to which bears N 9° 59’ 24” E, 89.10 feet,an arc length of 178.00 feet and a long chord bearing N 13° 16’ 37” 177.90 feetto the true point of beginning of this description; containing 3.335 acres,more or less.

 

Parcel Two

 

Together with a non-exclusiveeasement for roadways, walkways, ingress and egress, and vehicular parking asset forth in that certain Grant of Easement with Covenants and Restrictionsaffecting Land recorded May 3, 1974 in Book 813, Page 735, File No.325614. Official Records, and Amendments thereto, recorded November 30,1976, in Book 1028, page 679, File No. 437149, Official Records, and Amendmentsthereto, recorded January 20, 1978, in Book 1185, page 631, File No.509942, Official Records.

 

EXHIBIT“A”

 

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Exhibit B

 

[FloorPlan]

 

1.               MechanicalRoom

2.               HandicappedRestrooms

 

The total area of the building(center) is 22,920 square feet.

 

Village Ace Hardware leases12,320 square feet which includes half of the square footage of the handicappedrestrooms and a portion of the mechanical room.

 

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[SitePlan]

 

 

EXHIBITB-1

 

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GUARANTY

 

This Guaranty (the“Guaranty”) is attached to and made part of that certain Sublease (the “Lease”)dated June      , 1995, between RALEY’S, aCalifornia corporation, as Landlord, and TOTAL ENTERTAINMENT LLC, a Californialimited liability company, as Tenant, covering the Premises described thereinand located at 910 Lake Tahoe Boulevard, Incline Village, Nevada. In order toinduce Landlord to enter into the Lease with Tenant, Michael Petrogallo,Ricardo Brockmann, Diego Cespedes, Enrique Martinez De Velasco, Carlos Uhthoff,Pablo Girault, Enrique Hurtado, Gustavo Serrano and Susana Mariscal(“Guarantors”), have agreed to execute and deliver this Guaranty to Landlord.Each Guarantor acknowledges that Landlord would not enter into the Lease ifeach Guarantor did not execute and deliver this Guaranty to Landlord.

 

1.                                       **Guaranty.**Inconsideration of the execution of the Lease by Landlord and as a materialinducement to Landlord to execute the Lease, each Guarantor hereby irrevocably,unconditionally, jointly and severally guarantees the full, timely and completepayment, as such may become due under Section 4 of the Lease, of anyrepayment owing to Landlord by Tenant of the “allowance” pursuant toSection 4 of the Lease. The payment of those amounts shall be conducted inaccordance with all terms, covenants and conditions set forth in the Lease,without deduction, offset or excuse of any nature and without regard to theenforceability or validity of the Lease, or any part thereof, or any disabilityof Tenant.

 

2.                                       **Landlord’s Rights**. Landlord may perform any of the following. acts at any timeduring the Lease Term, without notice to or assent of any Guarantor and withoutin any way releasing, affecting or impairing any of Guarantor’s obligations orliabilities under this Guaranty: (a) alter, modify or amend the Lease by agreementor course of conduct, (b) grant extensions or renewals of the Lease, (c) assignor otherwise transfer its interest in the Lease, the Premises, or thisGuaranty, (d) consent to any transfer or assignment of Tenant’s or any futurelessee’s interest under the Lease, (e) release one or more Guarantor, or amendor modify this Guaranty with respect to any Guarantor, without releasing ordischarging any other Guarantor from any of such Guarantor’s obligations orliabilities under this Guaranty, (f) take and hold security for the payment ofthis Guaranty and exchange, enforce, waive and release any such security, (g)apply such security and direct the order or manner of sale thereof as Landlord,in its sole discretion, deems appropriate, and (h) foreclose upon any suchsecurity byjudicial or nonjudicialsale, without affecting or impairing in any way the liability of Guarantorunder this Guaranty, except to the extent the indebtedness has****been paid.

 

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3.                                       **Tenant’s Default.**This Guaranty is a guaranty of payment, and not of collection.Upon any breach or default by Tenant under the Lease, Landlord may proceedimmediately against Tenant and/or any Guarantor to enforce any of Landlord’srights or remedies against Tenant or any Guarantor pursuant to this Guaranty, theLease, or at law or in equity without notice to or demand upon either Tenant orany Guarantor. This Guaranty shall not be released, modified or affected by anyfailure or delay by Landlord to enforce any of its rights or remedies under theLease or this Guaranty, or at law or in equity.

 

4.                                       **Guarantor Waivers**. Each Guarantor hereby waives (a)presentment, demand for payment and protest of nonperformance under the Lease,(b) notice of any kind including, without limitation, notice of acceptance ofthis Guaranty, protest, presentment, demand for payment, default, nonpayment,or the creation or incurring of new or additional obligations of Tenant toLandlord, (c) any right to require Landlord to enforce its rights or remediesagainst Tenant under the Lease, or otherwise, or against any other Guarantor,(d) any right to require Landlord to proceed against any security held fromTenant or any other party, (e) any right of subrogation and (f) any defensearising out of the absence, impairment or loss of any right of reimbursement orsubrogation or other right or remedy of Guarantors against Landlord or any suchsecurity., whether resulting from an election by Landlord, or otherwise. Anypart payment by Tenant or other circumstance which operates to toll any statuteof limitations as to Tenant shall operate to toll the statute of limitations asto the Guarantors.

 

5.                                       **Separate and Distinct Obligations**. Each Guarantor acknowledges and agrees that such Guarantor’sobligations to Landlord under this Guaranty are separate and distinct fromTenant’s obligations to Landlord under the Lease. The occurrence of any of thefollowing events shall not have any effect whatsoever on any Guarantor’sobligations to Landlord hereunder, each of which obligations shall continue infull force or effect as though such event had not occurred: (a) thecommencement by Tenant of a voluntary case under the federal bankruptcy laws,as now constituted or hereafter amended or replaced, or any other applicablefederal or state bankruptcy, insolvency or other similar law (collectively, the“Bankruptcy Laws”), (b) the consent by Tenant to the appointment of or takingpossession by a receiver, liquidator, assignee, trustee, custodian,sequestrator or similar official of Tenant or for any substantial party of itsproperty, (c) any assignment****byTenant for the benefit of creditors, (d) the failure****of Tenant generally to pay its debts as such debts becomedue, (e) the taking of corporate action by Tenant in the furtherance of any ofthe foregoing; or (f) the entry of a decree or order for relief by a courthaving jurisdiction in respect of Tenant in any involuntary case under theBankruptcy Laws, or appointing a receiver, liquidator,

 

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assignee,custodian, trustee, sequestrator (or similar official) of Tenant or for anysubstantial part of its-property, or ordering the winding-up or liquidation ofany of its affairs and the continuance of any such decree or order unstayed andin effect for a period of sixty (60) consecutive days. The liability ofGuarantors under this Guaranty is not and shall not be affected or impaired byany payment made to Landlord under or related to the Lease for which Landlordis required to reimburse Tenant pursuant to any court order or in settlement ofany dispute, controversy or litigation in any bankruptcy, reorganization,arrangement, moratorium or other federal or state debtor relief proceedings.If, during any such proceedings, the Lease is assumed by Tenant or any trustee,or thereafter assigned by Tenant or any trustee to a third party, this Guarantyshall remain in full force and effect with respect to the full performance ofTenant, any such trustee or any such third party’s obligations under the Lease.If the Lease is terminated or rejected during any such proceeding, or if any ofthe events described in Subparagraphs (a) through (f) of this Paragraph 5occur, as between Landlord and each Guarantor, Landlord shall have the right toaccelerate all of Tenant’s obligations under the Lease with respect to anyrepayment of the allowance under Section 4 thereof, and each Guarantor’sobligations under this Guaranty. In such event, all such obligations shallbecome immediately due and payable by Guarantors to Landlord. Guarantors waiveany defense arising by reason of any disability or other defense of Tenant orby reason of the cessation from any cause whatsoever of the liability ofTenant.

 

6.                                       **Subordination.**All existing and future advances by Guarantors to Tenant, and allexisting and future debts of Tenant to any Guarantor, shall be subordinated toall obligations owed to Landlord under the Lease and this Guaranty.

 

7.                                       **Successors and Assigns**. This Guaranty binds each Guarantor’s personal representatives,successors and assigns.

 

8.                                       **Encumbrances.**If Landlord’s interest in the Premises or the Lease, or the rents,issues or profits therefrom, are subject to any deed of trust, mortgage orassignment for security, any Guarantor’s acquisition of Landlord’s interest inthe Premises or Lease shall not affect any of Guarantor’s obligations underthis Guaranty. In such event, this Guaranty shall nevertheless continue in fullforce and effect for the benefit of any mortgagee, beneficiary, trustee orassignee or any purchaser at any sale by judicial foreclosure or under anyprivate power of sale, and their successors and assign.

 

9.                                       **Guarantor Duty.**Guarantors assume the responsibility to remain informed of thefinancial condition of Tenant and of all other circumstances bearing upon therisk of Tenant’s default, which reasonable inquiry would reveal, and

 

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agree that Landlord shall haveno duty to advise Guarantors of information known to it regarding suchcondition or any such circumstance.

 

10.                                 **Landlord’s Reliance**.Landlord shall not be required to inquire into the powers of Tenant or theofficers, managers, employees, partners or agents acting or purporting to acton its behalf, and any indebtedness made or created in reliance upon theprofessed exercise of such powers shall be guaranteed under this Guaranty.

 

11.                                 **Incorporation of Certain Provisions.**Each Guarantor hereby represents and warrants to Landlord thatsuch Guarantor has received a copy of the Lease, has read or had theopportunity to read the Lease, and understands the terms of the Lease. Theprovisions in the Lease relating to the execution of additional documents,legal proceedings by Landlord against Tenant, severability of the provisions ofthe Lease, interpretation of the Lease, notices, waivers, the applicable lawswhich govern the interpretation of the Lease and the authority of the Tenant toexecute the Lease are incorporated herein in their entirety by this referenceand made a part hereof. Any reference in those provisions to “Tenant” shallmean each Guarantor and any reference in those provisions to the “Lease” shallmean this Guaranty, except that (a) any notice which any Guarantor desires oris required to provide to Landlord shall be effective only if signed by allGuarantors and (b) any notice which Landlord desires or is required to provideto any Guarantor shall be sent to such Guarantor at such Guarantor’s addressindicated below, or if no address is indicated below, at the address fornotices to be sent to Tenant under the Lease.

 
|   | /s/ Michael Petrogallo   |                     |
|--------|--------------------------|--------------------------|
|   |  MICHAEL PETROGALLO |
|   |                     |
|   | Address:                 | 1027 Emerald Bay Road    |
|   |                     | So. Lake Tahoe, CA 96150 |
|   |
|   | /s/ Ricardo Brockmann    |                     |
|   |  RICARDO BROCKMANN  |
|   |
|   | Address:                 | Amberes 45               |
|   |                     | Mexico DF 06600          |
|        |                          |                          |  |  |

 

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|   | /s/ Diego Cespedes                |                              |
|--------|-----------------------------------|-----------------------------------|
|   | DIEGO CESPEDED                    |
|   |
|   | Address:                          | Bosque De Anteguera               |
|   |                              | 128 Herradura Edo De Mex  53920   |
|   |                              |                              |
|   | /s/ Enrique Martinez De  Velasco  |                              |
|   | ENRIQUE MARTINEZ  DE VELASCO |
|   |
|   | Address:                          | Blvd Interlomas No 5 SN.          |
|   |                              | FDO La Herradura                  |
|   |                              | Edo De Mer                        |
|   |                              |                              |
|   | /s/ Carlos Uhthoff                |                              |
|   | CARLOS UHTHOFF                    |
|   |
|   | Address:                          | Hamburgo 260                      |
|   |                              | Mexico  DF   06600 |
|   |                              |                              |
|   | /s/ Pablo Girault                 |                              |
|   | PABLO GIRAULT                     |
|   |
|   | Address:                          | 115 East 54 Street                |
|   |                              | 1st Floor                         |
|   |                              | New York, NY 10022                |
|   |                              |                              |
|   | /s/ Enrique Hurtado               |                              |
|   | ENRIQUE HURTADO                   |
|   |
|   | Address:                          | 161 West 61, Apt., 17E            |
|   |                              | New York, NY                      |
|   |                              |                              |
|   | /s/ Gustavo Serrano               |                              |
|   | GUSTAVO SERRANO                   |
|   |
|   | Address:                          | 1027 Emerald Bay Road             |
|   |                              | So. Lake Tahoe, CA 96150          |
|   |                              |                              |
|   | /s/ Susana Mariscal               |                              |
|   | SUSANA MARISCAL                   |
|   |
|   | Address:                          | 1027 Emerald Bay Road             |
|   |                              | So. Lake Tahoe, CA 96150          |
|        |                                   |                                   |  |  |  |

 

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