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Sample Business Contracts

New Mexico-Santa Fe-Don Diego Avenue and Cordova Road Lease - First Interstate Bank of New Mexico NA and Alfalfa's Santa Fe Inc.

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                                 LEASE OVERVIEW
                                 SANTA FE STORE


                        Location:  Don Diego Avenue & Cordova Road
                            Size:  20,000 square feet
                          Tenant:  Alfalfa's Santa Fe Inc.
                      Lease Type:  Triple Net
                       Guarantor:  Alfalfa's Inc.
                      Lease Date:  December 16, 1994
               Commencement Date:  February 1, 1995
                                  
                            Term:  10 years
                 Renewal Options:  Two (2) five (5) year options
                                  
               Current Base Rent:         $18,152.75
             Current CAM Charges:  Taxes      372.72
                                   Insurance  489.25
                                  
                Annual Base Rent:  $217,833.00
                                   $10.89 per foot per year
                                  
                     Escalations:  CPI beginning after second year
                                  
                 Percentage Rent:  1 1/2% over $10,000,000
                Security Deposit:  $18,152.75
                                  
             "Kick-Out" Provision  Three (3) years, $100,000 per week




<PAGE>   2


                     [FIRST INTERSTATE BANK LETTERHEAD]


                      USPS Certified Mail # P 176 059 896


October 14, 1994

S.M. Hassan, President
Alfalfa's Inc., Corporate
1645 Broadway
Boulder, CO 80302

RE: Lease Agreement
    Don Diego & Cordova, Santa Fe, New Mexico

Dear Hass:

The lease agreement for the above property says that the Landlord shall give
Tenant written notice of the commencement date of the lease not less than
ninety (90) days in advance of such commencement date. This letter shall serve
as notice that the Landlord will be able to deliver possession of the leased
Premises on February 1, 1995.

Please call me if you have any questions. Thank you for your consideration.

Sincerely,



/s/ DAVID B. LLOYD
----------------------------
David B. Lloyd
CFP & Trust Officer

DBL:pm


<PAGE>   3



                     [FIRST INTERSTATE BANK LETTERHEAD]


                   Airborne Express Airbill No. SAF2825874811


June 29, 1994



Bruce James, Esq.
Brownstein Hyatt Farber & Strickland, P.C.
Twenty-Second Floor 410 Seventeenth Street
Denver, CO 80202-4487

Dear Mr. James:

Enclosed are two executed copies of the Lease Guaranty between First
Interstate Bank of New Mexico, N.A. Trustee and Alfalfa's Inc. and Lease
Agreement between First Interstate Bank of New Mexico, N.A. Trustee and
Alfalfa's Santa Fe, Inc. I have kept two original copies of each document.
Please notify Alfalfa's that the agreements have been signed and have the
security deposit in the amount of $18,152.75 and first month's rent in the
amount of $18,152.75 mailed to First Interstate Bank of New Mexico, N.A.
Trustee.

Let me know if you have any questions. Thank you for your consideration.

Sincerely,



/S/ DAVID B. LLOYD
--------------------------------
AVP & Trust Officer


enclosures as stated

cc: Joseph A. Sommer, Esq. (w/ photocopy of enclosure)        NS1[1830] Rent
    Lynda Haran (w/ photocopy of enclosures

DBL:pm


<PAGE>   4

                                LEASE AGREEMENT

This Lease Agreement made and entered into as of the 29 day of June, 1994, by
and between FIRST INTERSTATE BANK OF NEW MEXICO, N.A., AS TRUSTEE OF THE JOSEPH
M. MONTOYA TRUST, THE PATRICK J. MONTOYA TRUST, AND THE LYNDA M. HARAN TRUST,
P.0. Box 969, Santa Fe, New Mexico 87504-0969 (herein "Landlord") and ALFALFA'S
SANTA FE, INC., a Colorado corporation, 1645 Broadway, Boulder, Colorado 80302
(herein "Tenant"), for, and in consideration of, the mutual covenants herein
contained the parties hereto agree as follows:

1.       DEMISE OF PREMISES. Landlord does demise unto Tenant in consideration
of the covenants hereinafter contained, the following described premises (the
"Premises"):

         Improvements and land located at the northwest corner of the
         intersection of Don Diego Avenue and Cordova Road in Santa Fe, New
         Mexico, and as more particularly described on Exhibit "A" attached
         hereto and made a part hereof.
        
2.       TERM OF LEASE. The initial term of the Lease shall be ten (10) years.
The initial term shall commence not sooner than 16 December 1994, nor later
than 16 March 1995, the exact date of which commencement (the "Commencement
Date") shall be determined by Landlord, based upon the date within which period
Landlord is able to deliver possession of the leased Premises, free and clear
of all leases and tenancies, in the condition required by this Lease. Landlord
shall give Tenant written notice of such date not less than ninety (90) days in
advance of such commencement date. The initial term is subject to tenant's
right to terminate, as described in paragraph 32 below, and may be renewed in
accordance with paragraph 14 below.

3.       RENT, ADJUSTMENTS, AND SECURITY. Tenant does hereby covenant and agree
to pay as rent in advance for said Premises, without notice of demand, the sum
of Eighteen Thousand One Hundred Fifty-Two and 75/100 Dollars ($18,152.75) per
month on the first day of each rental month, which shall constitute the monthly
rental payments for the first two years, except that the rent for the first
month of the lease term shall be pro-rated so rent shall be paid from the
Commencement Date until the end of the month in which the Commencement Date
occurs. All references herein to a lease year shall refer to a calendar year
commencing on the first day of January following the Commencement Date;
provided, however, that (i) the period from the Commencement Date to the first
December 31 thereafter and (ii) the period from January 1 through the
Expiration Date occurring in such calendar year shall be considered as partial
lease years, and all payments and prorations shall be equitably adjusted on a
per diem basis during each partial lease year. Beginning in the third year of
the lease term, and for each year thereafter, including any renewal periods, if
exercised, the rent shall be adjusted as follows:

         a.       The rent shall be adjusted for each lease year after 1996, 
         and Tenant shall upon such adjustment pay the adjusted amount as the
         rent. The rent, as adjusted, shall equal (a) the dollar amount
         specified in paragraph 3, plus (b) an amount equal to the product of
         (i) the rent in effect during the preceding lease year, multiplied by
        

<PAGE>   5
         (ii) a fraction, the denominator of which shall be the Consumer Price
         Index published for the calendar month immediately preceding the
         commencement of such preceding lease year (the "Initial Index") and the
         numerator of which is the difference between the Consumer Price Index
         for the calendar month preceding the commencement of the subsequent
         lease year and the Initial Index (provided that such fraction shall not
         in any event result in a decrease in rent). The Consumer Price Index
         shall mean the Consumer Price Index Seasonally Adjusted U.S. City
         Average For All Items For All Urban Consumers (1982=100), Region 6,
         Southwest Statistical Summary, published by the Bureau of Labor
         Statistics of the United States Department of Labor provided, however,
         that if the Consumer Price Index is not so published for such calendar
         month, then the Consumer Price Index for the most recent calendar month
         or other period for which it is so published shall be used and further
         provided, however, that if the Consumer Price Index hereafter uses a
         different standard reference base or is otherwise revised, an
         adjustment shall be made therein for purposes of the provisions of this
         Lease, using such conversion factor, formula, or table for making such
         adjustments as is published by such Bureau, or if such Bureau does not
         publish the same, then as published by Prentice-Hall, Inc., the Bureau
         of National Affairs, Commerce Clearing House, or any other nationally
         recognized publisher of similar statistical information, as reasonably
         selected by Landlord.

         b.       Notwithstanding the provisions of Paragraph 3(a), in no event
         shall the Basic Rental payable for any month be less than the Basic
         Rental.

         c.       Monthly rent shall be increased to include one-twelfth (1/12)
         of the taxes and insurance on the Premises in such amounts and covering
         such perils required by this Lease, based on amounts paid for the
         previous year, with adjustments after the end of each calendar year
         throughout the term of the Lease, once new figures are available.

         d.       In addition to the fixed minimum rent, as adjusted from time
         to time, Tenant shall pay Landlord a percentage rent equal to one and
         one-half percent (1-1/2%) of the gross sales (as hereafter defined)
         made from the Premises over $10,000,000.00 per annum (the
         "Breakpoint"). The foregoing Breakpoint shall be adjusted on a pro rata
         basis for any partial or fractional calendar year occurring during the
         term of this Lease.

         e.       Annual percentage rent will be payable cumulatively on an
         annual basis without any prior demand for payment, and without any set
         off or deduction, except as set forth herein. Percentage rent with
         respect to each year (or fraction of a lease year) will be paid on or
         before the sixtieth (60th) day of the next succeeding year.
        
         f.       Within sixty (60) days after the end of each lease year,
         Tenant shall determine the aggregate gross sales of Tenant for that
         lease year (or fraction of the lease year) and report to Landlord as
         provided in paragraph 6 below.
        
                                       2

<PAGE>   6
4.       GROSS SALES DEFINED. The term "gross sales" means all receipts,
revenue, and sales derived from all businesses conducted upon, or from, the
Premises by Tenant and all licensees, concessionaires, and sublessees of
Tenant, or through the filling of mail or telephone orders received at the
Premises or solicited through catalogs, advertisements, or other literature
mailed from the Premises, whether the orders are filled from the Premises or
elsewhere, whether the receipts, revenue, and sales are evidenced by check,
credit, charge account, exchange, or otherwise, and whether the sales are made
by means of merchandise-vending devices on or adjacent to the Premises and will
include the amounts received from the sale or lease of goods, wares, and
merchandise and for services performed on, at, or from the Premises. Each
credit card charge or installment sale or sale on credit will be treated as a
full price cash sale in the month during which the charge, installment, or
credit sale is made.

5.       DEDUCTIONS; EXCLUSIONS. The sales price of merchandise returned by
customers for refund shall be deducted from gross sales, provided that the
sales price of returned merchandise was previously included in gross sales.
Gross sales will not include the amount of any gross receipts, sales, or use
tax imposed by any federal, state, municipal, or governmental authority
directly on sales and collected from customers, provided that the amount of the
tax is added to the selling price or absorbed in the selling price and paid by
Tenant to governmental authority. Franchise or capital stock taxes, license
fees, income, or similar taxes based upon gross receipts or profits or other
similar fees or taxes will never be deducted from gross sales. Gross sales will
not include the sale of merchandise for which a gift certificate is redeemed,
provided that the initial sale of the gift certificate will have been
previously included in gross sales and sales for which a credit card charge or
checks are included in gross sales initially, but which are thereafter
dishonored. Gross sales shall also not include (a) sales to employees at a
discount, (b) credit or finance charges, (c) uncollectible accounts, or (d) the
proceeds from the sale of all, or substantially all, of the assets of Tenant.

6.       REPORTS BY TENANT. Tenant will submit to Landlord, on or before the
sixtieth (60th) day after each year during the term of this Lease, and on or
before the sixtieth (60th) day following the last month (or fraction of the
last month) of the term of this Lease, at the place then fixed for the payment
of percentage rent (whether or not any percentage rent is then due), a written
statement signed and certified by Tenant to be true and correct, showing
accurately and in detail the amount of gross sales during the preceding year
(or fraction of year), together with a check for the amount of percentage rent
then due. Each statement will be in accordance with generally accepted
accounting principles.

7.       TENANT'S RECORDS. To ascertain the amount payable as percentage rent,
Tenant will prepare and keep available on the Premises, or at the principal
offices of Tenant in Denver, Colorado, for a period of not less than two (2)
years following the end of each calendar year, or portion of the calendar year,
adequate books, records, and accounts which will show inventories and receipts
or merchandise at the Premises, and daily receipts and credit sales (cash
register tapes) generated from all sales and other transactions made on or from
the Premises by Tenant and any other persons or entities conducting any
business upon or from

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<PAGE>   7
the Premises. Tenant will record, at the time of sale, in the presence of the
customer, all receipts from sales or other transactions, whether for cash or
credit.

8.       AUDIT. Landlord may cause, at any reasonable time, and during normal
business hours, upon thirty (30) days' prior written notice, an inspection or
partial or complete audit to be made of the entire business affairs and records
of Tenant (as described in paragraph 7 above) relating to the Premises for the
period or periods covered by any percentage rent statement issued by Tenant.
The inspection or audit may be performed by Landlord, or the employees or
designated agents of Landlord, including any accountant chosen by Landlord.
Tenant will promptly remit to Landlord any deficiency in percentage rentals
established by the inspection or audit, together with interest on the
deficiency at the rate of the prime rate announced from time to time by First
Interstate Bank of New Mexico, plus four percent (4%) per annum (the "Default
Rate"). In addition, if the inspection or audit discloses that actual gross
sales for the period in question exceeded those reported by Tenant by ten
percent (10%) or more, Tenant will also promptly reimburse Landlord for the
cost of the inspection or audit. If the inspection or audit discloses that
Tenant overstated the gross sales of Tenant, Landlord will promptly remit such
sum to Tenant. No more than one audit will be permitted within any twelve-
month period.

9.       ADDITIONAL RENT. The fixed minimum rent provided in this Lease will be
absolutely net to Landlord throughout the term of this Lease, except as
provided herein. All costs, expenses, and obligations of every kind relating to
the Premises which may arise or become due during the term of this Lease will
be paid by Tenant, including all maintenance and repair of the Premises, except
as provided herein. Tenant will pay as additional rent, without demand for
payment, except as provided herein, and without set off or deduction, the
expenses and charges described in paragraphs 3.a., 3.c., and 3.d. above.

10.      PAYMENT BY LANDLORD. If Tenant fails to timely pay any of the sums
described below that are due to third parties, or to perform any nonmonetary
obligations described below, Landlord may, after written notice to Tenant and
thirty (30) days to remedy the alleged failure, elect to pay the sums or
perform the obligations on behalf of Tenant and demand (and be entitled to
receive) reimbursement upon ten (10) days' notice from Tenant for the costs and
expenses so incurred, together with interest accruing at the Default Rate from
the date expended until repaid, in which event, the amount of the reimbursement
will be deemed to be additional rent as provided in this Lease.

11.      TAXES. Tenant shall reimburse Landlord for all taxes and assessments
levied against the Premises or personal property in the Premises during the
term of this Lease, as provided in paragraph 3.c. above.

12.      SECURITY DEPOSIT. As security, Tenant agrees to pay to Landlord the
following sums: At the time of executing this Lease, Tenant shall pay the sum
of Eighteen Thousand One Hundred Fifty-Two and 75/100 Dollars ($18,152.75),
which shall be credited against the first month's rent. As additional security,
Tenant agrees to deposit with Landlord the sum of Eighteen Thousand One Hundred
Fifty-Two and 75/100 Dollars ($18,152.75) as a security

                                       4
<PAGE>   8
deposit. If, at any time, Tenant should default before said monthly rental
payments become due and payable, Landlord may apply the security deposit to the
rental payments due, to the taxes due, to insurance due, or to maintain the
Premises for Tenant's benefit. If Landlord applies the security deposit to any
obligation of Tenant, then Tenant shall immediately upon demand replenish the
security deposit by the amount so expended by Landlord.

Any security deposit shall be held by Landlord without liability for interest
and as security for the performance by Tenant of Tenant's obligations under
this Lease, it being expressly understood that such deposit shall not be
considered an advance payment of rental or a measure of Landlord's damages in
case of default by Tenant. Upon the occurrence of any event of default by
Tenant, Landlord may, from time to time, without prejudice to any other remedy,
use such deposit to the extent necessary to make good any arrearages of rent
and any other damage, injury, expense or liability caused to Landlord by such
event of default.

13.      LATE PAYMENT PENALTY. If Tenant fails to pay the rental required
hereunder, or any part thereof, after the same shall become due, and said rent
remains due and unpaid for ten (10) days or more thereafter, then in addition
to the arrearage, all delinquent rent shall bear interest at the Default Rate
until paid. This late payment penalty is in addition to any other remedies
Landlord has under the terms of this Lease.

14.      RENEWAL OPTION. At Tenant's option, on or before twelve (12) months
preceding the expiration of the initial ten (10) year term, Tenant may exercise
an option to renew the lease for an additional five (5) years on the same terms
and conditions as contained in this Lease, including the rent escalator
described in paragraph 3.a. above. Such option to renew shall be exercised by
Tenant giving to Landlord at its address shown above or such other address as
Landlord shall give to Tenant in writing, a written notice of such exercise not
less than twelve (12) months before the expiration of the initial ten (10) year
term. At Tenant's option, on or before twelve (12) months preceding the
expiration of the first extension term, if exercised, Tenant may exercise a
second option to renew the lease for an additional five (5) years on the same
terms and conditions, including the rent escalator described in paragraph 3.a.
above, excluding any further options. Such second option to renew shall be
exercised by Tenant giving to Landlord at its address shown above or such other
address as Landlord shall give to Tenant in writing, a written notice of such
exercise not less than twelve (12) months before the expiration of the first
renewal term.

The two options to renew are subject to the following: Eleven months before the
beginning of the renewal term, if there is no Event of default by the Tenant
and Tenant has given written notice of the exercise of its option, the parties
shall mutually select, and at Tenant's expense (not to exceed $2,500.00),
employ an impartial and qualified building inspector who will inspect and
determine whether the condition of the Premises is in compliance with Paragraph
17 of this Lease. Such inspector shall render a written report of the foregoing
to Landlord and Tenant not less than nine (9) months before the commencement of
the renewal term. Upon receipt by Tenant of such report, Tenant as a condition
to the commencement of the renewal term, and within thirty days after the
receipt of the report,

                                       5
<PAGE>   9
shall (a) notify Landlord in writing that Tenant will complete the repairs or
replacements, as specified in the report, and (b) diligently and at once
proceed to complete, and actually complete, all such repairs or replacements on
or before the commencement of the renewal term. If the foregoing conditions are
not fulfilled, then the renewal term shall not commence.

15.      REMODELING. Tenant shall complete all renovations, alterations, or
improvements to the Premises to bring the Premises up to the high standards of
other Alfalfa's stores pursuant to the conceptual plans approved by Landlord
and attached hereto as Exhibit B. Completion of such improvements and the
opening to the public for business shall be as soon as possible after the
commencement date of the Lease, but in any event, shall be not later than six
(6) months after commencement of the initial term of the Lease, subject to
events beyond Tenant's control and any delays caused by Landlord. Tenant shall
provide complete and final architectural drawings to Landlord for its review
thirty (30) days in advance of any proposed remodeling. Tenant will obtain
Landlord's written approval prior to making such changes, which approval or
nonapproval shall be given within fifteen (15) days of Tenant's request
therefor. Landlord shall have the right to disapprove the proposed renovations
only if they will cause a building or fire code violation or adversely affect
the structural integrity of the building, or, in the instance of the initial
renovations, alterations, or improvements, a substantial change between Exhibit
B and the complete and final architectural drawings.

All renovations must be completed in with no liens attaching to the Premises;
however, if any liens are filed, Tenant, within twenty (20) days after
receiving notice of any mechanics lien for material or work claimed to have
been furnished to the Premises on Tenant's behalf and at Tenant's request,
shall discharge the lien, or post a bond equal to the amount of the disputed
claim plus costs and attorney's fees as provided by law. If Tenant posts a
bond, Tenant shall contest the validity of the lien. Tenant shall indemnify,
defend, and hold Landlord harmless from losses incurred from these lien(s). If
Tenant fails to post a bond or discharge the lien, Landlord shall have the
right on Tenant's behalf to discharge the lien or post the bond, and Tenant
shall be liable to Landlord for any amounts paid by Landlord together with
interest at the Default Rate from the date expended until repaid.

16.      USE OF PREMISES. Tenant agrees to open its business at the Building
for a grocery store under the trade name of "Alfalfa's," and shall have the
right to use the Premises for any other retail uses as may be, from time to
time, found in other Alfalfa's stores, so long as the use is in compliance with
all governmental authorities' requirements. In addition, Tenant may use the
Premises for any other lawful purpose, with the prior written consent of
Landlord, such consent not to be unreasonably withheld, so long as such use is
in compliance with governmental authorities' requirements. Tenant shall not use
the Premises for personal habitation or any unlawful purpose. Tenant will
conform to and comply with all applicable municipal, state, and federal
ordinances, laws, rules, and regulations in using said Premises. Tenant shall
have no obligation to continuously operate the business in the Building.

                                       6

<PAGE>   10
17.      CONDITION OF PREMISES AND REPAIRS. Tenant shall deliver the Premises
to Landlord in broom cleaned condition and Tenant stipulates and agrees that it
has examined the said Premises prior to the execution hereof, knows the
condition thereof, and acknowledges that it is accepting the Premises in "AS
IS" condition with no warranties or representations from Landlord, except as
provided in paragraph 35 below, and, at the expiration of the term of this
Lease, or any renewal or extension thereof, Tenant will yield up peaceably said
Premises to Landlord in as good order and condition, loss by fire or inevitable
accident, damage by the elements, and reasonable use and wear excepted; that
Tenant will keep the Premises, including glass windows and the exterior of the
Premises, the parking lots, and landscaping in good order and repair during the
term of this Lease, and during any extension or renewal thereof, at Tenant's
own expense, and Tenant will repair and replace promptly any and all damage,
including damage to glass, that may occur from time to time; and that, if Tenant
fails to make such repairs and replacements promptly, or, if such repairs and
replacements have not been made within thirty (30) days after the occurrence of
damage, Landlord may, at Landlord's option, upon not less than thirty (30)
days' written notice to Tenant, make such repairs and replacements, and Tenant
hereby agrees and covenants to repay the cost thereof to Landlord on demand,
with interest on such amount accruing at the Default Rate from the date
expended until paid to Landlord. Tenant at its expense shall repair and shall
maintain the exterior of the leased Premises, including asphalt paving, roof,
outer walls, heating and cooling units, and foundations. Tenant shall stripe
and clean the parking areas as needed and required. In consideration of Tenant's
agreement to keep the premises in good repair, Landlord agrees that Tenant
shall have the sole and exclusive right to make alterations, improvements, or
changes to the Premises, subject to Landlord's approval, when required herein.

18.      LIABILITY OF LANDLORD. Landlord shall not be liable for any damage to
persons or property arising from any cause whatsoever, other than the
negligence or misconduct of Landlord or its agents or representatives, which
shall occur in any manner in or about the said premises, and Tenant hereby
agrees to indemnify and to save harmless Landlord from any and all claims and
liability for damage to persons or property arising from any cause whatsoever,
except as provided above, which shall occur in any manner in or about the said
premises. Further, Landlord shall not be liable for any damage to the said
Premises, or to any part thereof, or to any property or effects therein or
thereon, caused by leakage from the roof of said Premises or by bursting,
leakage, or overflowing of any waste pipes, water pipes, tanks, drains, or
stationary washstands or by reason of any damage whatsoever caused by water
from any source whatsoever. Tenant hereby agrees and covenants to indemnify and
save harmless Landlord from any and all claims and liability for any damage to
the said demised Premises, or to any part thereof, or to any property or
effects therein or thereon, except as provided herein.
                                
19.      ALTERATIONS, ADDITIONS AND IMPROVEMENTS. Tenant shall not make, or
suffer or permit to be made, any alterations, additions, or improvements
whatsoever in or about the said demised Premises, which cost in excess of
$25,000.00, or affect the structure of the improvements, without first
obtaining the written consent of Landlord therefor, not unreasonably withheld
or delayed; provided, however, that such consent, if given, shall be

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<PAGE>   11
at Tenant's own expense and in accordance and compliance with all applicable
municipal, state and federal ordinances, laws, rules, and regulations, and that
no liens of mechanics, materialmen, laborers, architects, artisans,
contractors, sub-contractors, or any other lien of any kind whatsoever shall be
created against or imposed upon the said demised Premises, or any part thereof,
and Tenant shall indemnify and save harmless Landlord from any and all
liability and claims for damages of every kind and nature which might be made
or judgment rendered against Landlord or against the demised Premises on
account of or arising out of such alterations, additions, or improvements.
Failure of Landlord to approve or deny any desired alterations, additions, or
improvements within ten (10) days following request by Tenant shall constitute
approval of the same. Landlord shall have the right to disapprove the proposed
alterations, additions, or improvements only if they will cause a building or
fire code violation or adversely affect the structural integrity of the
building.

20.      OWNERSHIP OF ALTERATIONS, ADDITIONS, AND IMPROVEMENTS. Any and all
affixed alterations, additions, and improvements, except coolers, shelving,
cash registers, and other unattached items (such exceptions being hereafter
called "Tenant's Property") made at Tenant's own expense, after having first
obtained the written consent of Landlord therefor, when required herein, shall
immediately merge and become a permanent part of the realty, and any and all
interest of the Tenant therein shall immediately vest in Landlord, and all such
alternations, additions, and improvements, except for Tenant's Property, shall
remain on the said Premises and shall not be removed by Tenant at the
termination of this Lease. If any damage to the Premises is caused by removal
of Tenant's Property, Tenant shall immediately pay Landlord the cost of repair
of such damage plus interest, at the Default Rate, on such amount from the date
expended by Landlord until repaid by Tenant.

21.      ASSIGNMENT AND SUBLETTING. Tenant shall have the right to sublease
this Lease, in whole or in part, only with the prior written consent of
Landlord therefor, such consent not to be unreasonably withheld. However, any
rent paid in excess of the rent specified in paragraph 3 herein, after
deducting all reasonable costs and expenses incurred by Tenant to sublet the
Premises, shall be paid to Landlord. Tenant shall have the right to assign this
Lease, only with the prior written consent of Landlord; however, any rent paid
in excess of the rent specified in paragraph 3 herein, after deducting all
reasonable costs and expenses incurred by Tenant to assign the Premises, shall
be paid to Landlord. No consent shall be required for any assignment or
sublease to any entity affiliated with Tenant, so long as the use complies with
paragraph 16 above, and the Guaranty of this Lease by Alfalfa's, Inc., during
the initial term, shall not be released.

The consent of Landlord to any such assignment or subletting shall not operate
to discharge Tenant or its guarantor.  Tenant's assigns and successors in
interest shall remain liable for the full and complete performance of all of
the terms, conditions, covenants, and agreements herein contained. The consent
of Landlord to any such assignment of subletting shall not operate as a consent
to further assignment or subletting or as a waiver of this covenant and
agreement. Following any such assignment or subletting, the assignee and/or
subtenant shall be bound by all of the terms, conditions, covenants, and
agreements herein contained.

                                       8
<PAGE>   12
This provision was freely negotiated with counsel for Landlord and Tenant.
Tenant further acknowledges this provision by initialling the same hereto.

                                                                    ------------
                                                                      Initials

22.      UTILITY AND OTHER CHARGES. Tenant will pay promptly all charges for
utility and other charges, including electric, gas, garbage, sewage, telephone,
and other services which may be incurred in said Premises, and save harmless
Landlord therefrom.

23.      LANDLORD'S RIGHT OF ENTRY. Landlord, Landlord's heirs, personal
representatives, assigns, agents, attorneys, and successors in interest, upon
reasonable prior notice to Tenant, shall have the right at any time to enter
upon the said Premises to inspect the same during business hours.

24.      TAXES, OTHER ASSESSMENTS, AND INSURANCE. All real property and ad
valorem taxes and other assessments of whatsoever kind and nature which have
been or may be levied upon the said demised Premises and upon any alterations,
additions, and improvements thereon shall be paid by Landlord at the time when
the same shall become due and payable, and as additional rent, Tenant agrees to
pay for such items pursuant to paragraph 3.c. above. All taxes and other
assessments of whatsoever kind and nature which have been or may be levied upon
the personal property located upon the said demised Premises shall be paid by
Tenant at the time when the same shall become due and payable. Tenant will
carry and maintain in full force and effect during the term of this Lease and
the extension or renewal thereof, at Tenant's expense, public liability
insurance covering bodily injury and property damage liability, in a form and
with an insurance company acceptable to Landlord, with limits of coverage of
not less than Two Hundred Twenty-Five Thousand Dollars ($225,000.00) for each
person and One Million Dollars ($1,000,000.00) in the aggregate for bodily
injury or death liability for each accident and Fifty Thousand Dollars
($50,000.00) for each accident for property damage liability, for the benefit
of both Landlord and Tenant, providing protection against all liability claims
arising from the use of the Premises, and cause Landlord to be named as an
additional-named insured on such policy of insurance, and whereby such
insurance company agrees to notify Landlord thirty (30) days in advance of
cancellation or expiration for such policy, and delivering a copy thereof to
Landlord. If requested by Landlord, Tenant shall provide such additional
insurance coverage as is commonly required from time to time for comparable
commercial properties. Fire and extended coverage insurance in the replacement
value upon the demised Premises, and improvements to the demised said Premises
shall be provided by Landlord, and Tenant agrees to pay Landlord as additional
rent the cost of said insurance as provided in paragraph 3.c. above, and fire
and extended coverage insurance in the replacement value upon all of the
contents and other personal property situated upon the said Premises shall be
provided by Tenant.

25.      HOLDING OVER. No holding over by Tenant after the expiration of Lease
shall operate to extend or renew this Lease, and any such holding over shall be
construed as a tenancy from month-to-month, and the monthly rental shall be
computed as provided in paragraph 3, which shall have been payable at the time
immediately prior to when such holding over

                                       9
<PAGE>   13
shall have commenced and such tenancy shall be subject to all the terms,
conditions, covenants, and agreements of this Lease.

26.      BANKRUPTCY AND CONDEMNATION. Should Tenant make an assignment for the
benefit of creditors or should Tenant be adjudged a bankrupt, either by
voluntary or involuntary proceedings, or if otherwise a receiver should be
appointed by any court of competent jurisdiction for Tenant because of any
insolvency, and if such proceeding has not been dismissed within sixty (60)
days thereafter, the occurrence of any such event shall be deemed a breach of
this Lease, and, in such event Landlord shall have the option to forthwith
terminate this Lease and to re-enter the said demised Premises and take
possession thereof, whereupon Tenant shall quit and surrender peaceably the
demised Premises to Landlord. Further, in the event the said demised Premises,
or any part thereof, are taken, damaged consequentially or otherwise, or
condemned by public authority, this Lease shall terminate, as to the part so
taken, as of the date title shall vest in the said public authority, and the
rental reserved shall be adjusted so that Tenant shall be required to pay for
the remainder of the term that portion of the rent reserved in the proportion
that the said demised Premises remaining after the taking, damaging, or
condemnation, bears to the whole of the said demised Premises before the
taking, damaging, or condemnation; provided, however, that if such taking
materially interferes with Tenant's use and occupancy of the Premises, Tenant
shall have the right to terminate the Lease. All damages and payments resulting
from the said taking, damaging, or condemnation of the said demised Premises
shall be shared by Tenant and Landlord, so that Tenant receives the unamortized
balance of the cost of the improvements installed or constructed by Tenant (on
a straightline basis over ten (10) years), and Landlord receives the balance of
any such award.

27.      DESTRUCTION. If, at any time during the term of this Lease, or an
extension or renewal thereof, the said demised Premises shall be totally or
partially destroyed by fire, earthquake, or other calamity, then Tenant shall
rebuild or repair the same in as good a condition as they were immediately
prior to such calamity, to the extent of available insurance proceeds. In such
case, the rental herein specified shall be abated while such demised Premises
shall have been rebuilt and repaired.

28.      SIGNS. Tenant may at Tenant's own expense erect and maintain a sign on
the Premises to carry out the purpose for which Tenant is leasing the said
demised Premises, so long as such signs comply with all governmental
requirements.  Upon the expiration of this Lease, or the renewal or extension
thereof, Tenant shall remove such sign and shall repair any damage to the
Premises caused thereby at Tenant's own expense. Further, at any time within
ninety (90) days prior to the termination of this Lease, or the renewal or
extension thereof, Landlord shall have the right to place upon any part of said
demised Premises any "For Rent" or "For Lease" signs that Landlord may select.

29.      EVENTS OF DEFAULT. The following events shall be deemed to be events
of default by Tenant under this lease.

                                       10
<PAGE>   14
         a.     Tenant shall fail to pay, when due, any rental or other sums
         payable by Tenant hereunder and such failure shall continue for a
         period of ten (10) days after written notice is delivered by Landlord
         to Tenant.

         b.     Tenant shall fail to comply with or observe any other
         provisions of this lease, thirty (30) days after written notice is
         delivered by Landlord to Tenant; provided, that, if the alleged
         default is of the nature that it cannot reasonably be cured within
         thirty (30) days, Tenant shall have such additional time as is
         reasonably necessary to cure the default, so long as Tenant is
         diligently pursuing the same.

         c.     In the event of an assignment by Tenant of its rights and
         liabilities under and pursuant to this lease, the following events, in
         addition to the above, shall also be deemed to be events of default,
         with respect to any assignee.

30.      REMEDIES. Upon the occurrence of any event of default specified in
this lease, Landlord shall have the option to pursue any one or more of the
following remedies;

         a.     Terminate this lease, in which event Tenant shall immediately
         surrender the Premises to Landlord, and if Tenant fails to do so,
         Landlord may, without prejudice to any other remedy which it may have
         for possession or arrearages in rent, enter upon and take possession
         and expel or remove Tenant and any other person who may be occupying
         said Premise or any part thereof by any legal means; and Tenant agrees
         to pay to Landlord on demand the amount of loss of rental for the time
         the premise remains unrented, or the remainder of the lease term,
         whichever is less, so long as Landlord is using reasonable efforts to
         relet the Premises.

         b.     Enter upon and take possession of the Premises and expel or
         remove Tenant and any other person who may be occupying the Premises
         or any part thereof, and if Landlord so elects, relet the Premises on
         such terms as Landlord shall deem advisable and receive the rent
         therefor; and Tenant agrees to pay to Landlord on demand any
         deficiency that may arise by reason of such reletting for the
         remainder of the lease term.

         C.     Enter upon the Premises and do whatever Tenant is obligated to
         do under the terms of this lease; and Tenant agrees to reimburse
         Landlord on demand for any reasonable expenses which Landlord may
         incur in thus effecting compliance with Tenant's obligations under
         this lease.

         d.     Any petition shall be filed by or against Tenant of any
         guarantor of Tenant's obligation hereunder under any section or
         chapter of the Federal Bankruptcy Act, as amended, or under any
         similar law or statute of the United States or any state thereof; or
         Tenant or any guarantor of Tenant's obligation hereunder shall be
         adjudged bankrupt or insolvent in proceedings filed hereunder, unless
         any such Petition is dismissed within sixty (60) days after filing.



                                       11

<PAGE>   15
No re-entry or taking possession of the Premises by Landlord shall be construed
as an election on its part to terminate this lease, unless a written notice of
such intention be given to Tenant. Notwithstanding any such reletting or
re-entry or taking possession, Landlord may at any time thereafter elect to
terminate this lease for a previous default. Pursuit of any of the foregoing
remedies shall not preclude pursuit of any of the other remedies herein
provided or any other remedies provided by law, nor shall pursuit of any remedy
herein provided constitute a forfeiture or waiver of any rent due to Landlord
hereunder or of any damages occurring to Landlord by reason of the violation of
any of the terms, provisions and covenants contained herein. Landlord's
acceptance of rent following an event of default hereunder shall not be
construed as Landlord's waiver of such event of default. No waiver by Landlord
of any violation or breach of any of the terms, provisions, and covenants
herein contained shall be deemed or construed to constitute a waiver of any
other violation or default.

31.      SURRENDER OF PREMISES. No act or thing done by Landlord or its agents
during the term hereby granted shall be deemed an acceptance of a surrender of
the Premises, and no agreement to accept a surrender of the Premises shall be
valid unless the same be made in writing and signed by Landlord.

32.      TERMINATION.

         a.     If there is an Event of Default (as defined in paragraph 29
         above), or any part thereof, it shall, and may be, lawful for the
         Landlord, Landlord's assigns or successors in interest, at Landlord's
         election, to declare said term ended and to re-enter the said
         Premises, or any part thereof, with process of law, to expel, remove,
         and put out, the Tenant or any other person or persons occupying the
         same, and to repossess and enjoy the same Premises again as in its
         first and former state, and detainer for any rent that may be due
         thereon any property belonging to Tenant whether the same be exempt
         from execution and distress by law or not, and Tenant in that case
         hereby waives any and all legal rights which Tenant now has or may
         have to hold or retain any such property under any exemption laws not
         in force in the State. And if, at any time said term shall be ended at
         such election of Landlord, Landlord's assigns or successors in
         interest, as aforesaid, or in any other way, Tenant, Tenant's assigns
         or successors in interest, as aforesaid, or in any other way, Tenant,
         Tenant's assigns or successors in interest do hereby covenant and
         agree to surrender and deliver up the above-described Premises and
         property peaceably to Landlord, Landlord's assigns or successors in
         interest, immediately upon the termination of said term as aforesaid,
         and if Tenant shall remain in possession of the same ten (10) days
         after notice of such default, or after the termination of the Lease in
         any of the ways above named, Tenant shall be deemed guilty of a
         forcible detainer of said Premises under the statute and shall be
         subject to all the conditions and provisions above named, and the
         eviction and removal forcible or otherwise, with or without process of
         law as above stated.



                                       12

<PAGE>   16
         b.     The Lease may be terminated by Tenant (and the Guaranty
         released) prior to the expiration of the initial term on the following
         terms:

                i.    Tenant shall have the right to terminate the Lease if
                Tenant's gross sales have not averaged $100,000.00 per week
                over any twenty-six (26) consecutive week period, commencing on
                the first anniversary of the date when Tenant opens for
                business and terminating on the third anniversary of the date
                when Tenant opens for business.

                ii.   Tenant must give Landlord not less than twelve (12)
                months' written notice of the exercise of this termination
                right, together with weekly sales figures for verification.
                Landlord shall have the right to a single audit, as described
                in Paragraph 8 herein, to verify the weekly sales figures
                reported by Tenant without being limited by the restriction of
                one audit within any twelve (12) month period.

                iii.  In no event shall the effective date of termination be
                earlier than the third anniversary of the date when Tenant
                opens for business or later than the date which is the
                fifty-fourth (54th) month (four and one-half (4-1/2) years)
                following the date when Tenant opens for business.

                iv.   If Tenant has not exercised this right within the six (6)
                month period following the third anniversary of the date when
                Tenant opens for business, this right shall expire and have no
                further force or effect.

                v.    As a condition to such termination, Tenant shall be
                obligated to leave at the Building all leasehold improvements,
                including, without limitation, all flooring, ceiling tiles,
                lighting fixtures, plumbing, electrical doors, and similar
                items; provided, however, that Tenant shall be entitled to
                remove all coolers, shelving, cash registers, and other
                unattached items, so long as any damage caused by such removal
                is repaired by Tenant.

                vi.   As a condition to termination, Tenant shall pay Landlord
                a termination fee equal to the unamortized balance (amortized
                on a straight-line basis over the initial lease term) of all
                real estate commissions earned in connection with this Lease
                Agreement, all attorneys' fees of Landlord incurred in
                preparation of this Lease Agreement, the Lease Guaranty, and
                the Letter of Intent, and any architectural, engineering,
                consulting, or other similar fees incurred by Landlord in
                reviewing Tenant's renovation plans. An itemized list of the
                foregoing commissions and fees will be furnished by Landlord to
                Tenant by the time Tenant opens for business.

33.      ENVIRONMENTAL REGULATIONS, ADA, AND OTHER LAWS.

         a.     ADA



                                       13
<PAGE>   17
                i.    TERMS. The Americans with Disabilities Act (ADA). ADA
                means the Americans with Disabilities Act, Public Law 101-336,
                which prohibits discrimination on the basis of disability by
                public or private entities in places of public accommodation
                requires that public accommodations be accessible to persons
                with disabilities.

                ii.   REQUIREMENTS. Tenant acknowledges it is responsible for
                compliance of the Premises with the ADA.

                iii.  INDEMNIFICATION. To the fullest extent of the law, Tenant
                shall indemnify and hold harmless Landlord and its agents and
                employees from and against all damages, losses, and expenses,
                including reasonable attorneys' fees, arising out of, or
                resulting from claims for any violation of the ADA, including
                any and all claims against the Landlord or any of its agents or
                employees by any employee of the Landlord, anyone directly or
                indirectly employed by it, or anyone for whose acts it may be
                liable.  The indemnification obligation under this paragraph
                shall not be limited in any way by any limitation on the amount
                or type of damages, compensation, or benefits payable under
                Workers' Compensation Acts, disability benefit acts, or other
                employee benefit acts in connection with the ADA. The
                obligations of Tenant under this paragraph shall not extend to
                the liability of Landlord, its agents, or employees arising out
                of (1) the preparation or approval of maps, drawings, opinions,
                reports, surveys, change orders, designs, or specifications, or
                (2) the giving of, or the failure to give, directions or
                instructions by Landlord, its agents, or employees, provided
                such giving or failure to give is the primary cause of the
                injury or damage.

         b.     ENVIRONMENTAL REGULATIONS. As used below, "Hazardous
         Substances" shall mean and include all hazardous and toxic substances,
         waste or materials, any pollutants or contaminants (including, without
         limitation, asbestos and materials that include hazardous
         constituents), or other similar substances, or materials which are
         included under or regulated by any local, state, or federal law, rule,
         or regulation pertaining to environmental regulation, contamination,
         or cleanup, including, without limitation, "CERCLA," "RCRA," state
         lien, superlien, or environmental cleanup statutes and amendments
         thereto (all such laws, rules and regulations being referred to
         collectively as "Environmental Laws"). Any other terms mentioned in
         the following subsections which are defined in Environmental Laws
         shall have their meaning subscribed to such terms in said
         Environmental Laws.

         C.     USE OF PROPERTY. Tenant further agrees that the Premises will
         not be used to generate, manufacture, refine, transport, treat store,
         handle, or dispose of Hazardous Substances, except in the ordinary
         course of business in compliance with all laws.

         d.     NO RELEASING OR DUMPING. Tenant shall not cause or permit to
         exist, as a result of an intentional or unintentional act or omission
         on its part, a releasing,



                                       14

<PAGE>   18
         spilling, leaking, pumping, emitting, pouring, emptying, or dumping of
         a Hazardous Substance from the Premises into waters or onto lands of
         the State of New Mexico, or into waters outside the jurisdiction of
         the State of New Mexico where damage may result to the lands, waters,
         fish, shellfish, wildlife, biota, air, and/or other resources owned,
         managed, held in trust or otherwise controlled by the State of New
         Mexico, unless said release, spill, leak, etc., is pursuant to and in
         compliance with the conditions of a permit issued by the appropriate
         federal or state governmental authorities.

         e.     NOTIFICATION TO LANDLORD. Tenant shall promptly notify Landlord
         should Tenant have actual knowledge of:

                i.    any Hazardous Substance or other environmental problem or
                liability with respect to the Premises, including dumping,
                releasing, spilling, leaking, pumping, emitting, pouring,
                emptying, etc., of Hazardous Substances by other parties on the
                Premises or adjacent grounds; or

                ii.   any lien, action, or notice of the nature described
                above. Tenant shall (except as provided below for pre-existing
                Hazardous Substances, which are Landlord's responsibility),
                when there shall occur, as a result of an intentional or
                unintentional act or omission on its part, a releasing,
                spilling, leaking, pumping, emitting, pouring, emptying, or
                dumping of Hazardous Substance, at its own cost and expense,
                take all actions as shall be necessary or advisable, in the
                sole opinion of Landlord, for the cleanup of the Premises or
                other property affected by such act or omission, including all
                removal, containment and remedial actions in accordance with
                all applicable Environmental Laws (and in all events in a
                manner satisfactory to Landlord), and shall further pay or
                cause to be paid, at no expense to Landlord, all cleanup,
                administrative, and/or enforcement costs or penalties of
                applicable governmental agencies which may be asserted against
                the Premises or the Landlord.

f.       If Tenant breaches the obligations stated above, or if the presence of
Hazardous Substances on or about the Premises caused or permitted by Tenant
results in contamination of the Premises, or if contamination of the Premises
by Hazardous Substances otherwise occurs for which Tenant is legally or
otherwise liable to Landlord for damage resulting therefrom, then Tenant shall
indemnify, defend and hold Landlord harmless from any and all claims,
judgements, damages, penalties, fines, costs, liabilities, or losses which
shall be limited to the cost to remediate or clean up only contamination,
governmental fines, or sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise during or after the term of this
Lease as a result of such contamination.

g.       RIGHT OF INSPECTION. Landlord and Landlord's agents shall have the
right but not the obligation, to inspect investigate, sample, and/or monitor
the Premises, including any soil, water, groundwater or other sampling, and any
other testing,



                                       15

<PAGE>   19
digging, drilling or analyses, at any time to determine whether Tenant is
complying with the terms of Paragraph 33 and in connection therewith, Tenant
shall provide Landlord with full access to all relevant facilities, records and
personnel. If Tenant is not in compliance with any of the provisions of
Paragraph 33, Landlord and Landlord's agents and employees shall have the
right, but not the obligation, without limitation upon any of Landlord's other
rights and remedies under this Lease, to enter upon the Premises, upon not less
than thirty (30) days' written notice, and to discharge Tenant's obligation
under Paragraph 33 at Tenant's expense, notwithstanding any other provision of
this Lease.  Landlord and Landlord's agents and employees shall endeavor to
minimize interference with Tenant's business. All sums reasonably disbursed,
deposited or incurred by Landlord in connection therewith, including, but not
limited to, all costs, expenses, and actual attorneys' fees, shall be due and
payable by Tenant to Landlord, as an item of additional rent, on demand by
Landlord, together with interest thereon at the Default Rate from the date
expended until paid by Tenant.

h.       PRE-EXISTING ENVIRONMENTAL CONDITIONS. Tenant shall not be held liable
for any environmental conditions pre-existing as of the commencement date of
this Lease. Landlord shall indemnify and hold Tenant harmless from any and all
liabilities, costs, or expenses, including attorneys' fees, arising out of, or
in connection with, the existence of any Hazardous Substances in, on, under, or
adjacent to, the Premises as of the date of the Lease.

i.       SURRENDER. Promptly upon the expiration or sooner termination of this
Lease, Tenant shall represent to Landlord, in writing, that Tenant has fully
complied with all the terms, conditions, and obligations of this Paragraph 33.

34.      NON-DISTURBANCE. Landlord represents to Tenant that there is no
mortgage, deed of trust, encumbrance, or other lien upon the Premises as of the
date hereof. If there is now, or at any time in the future, a mortgage or other
lien encumbering the Premises, Landlord shall obtain from the holder thereof a
non-disturbance agreement which is reasonably satisfactory to Tenant, whereby
the lender agrees to not disturb Tenant's possession, so long as Tenant is not
in default under this Lease.

35.      REPRESENTATIONS. Landlord hereby represents to Tenant that:

         a.     Landlord has no knowledge of the existence of any hazardous
         waste or material, in, on, under, or about the Premises (without
         conducting any additional inspection);

         b. Landlord has no knowledge of any material defects (without
conducting any additional inspection) in the structural components of the
Premises; and

         C.     Landlord has not received written notice of any violation of
law or regulations concerning the Premises.



                                       16
<PAGE>   20
36.      FAILURE TO TERMINATE.  The failure, neglect or omission of Landlord to
terminate this Lease for any one or more breaches of any of the covenants
hereof, shall not be deemed a consent by Landlord of such breach and shall not
stop, bar, or prevent Landlord from thereafter terminating this Lease, either
for such violation, or for prior or subsequent violation of any covenant
hereof.

37.      BINDING ON ASSIGNS AND SUCCESSORS IN INTEREST. The covenants and
agreements herein contained shall extend to and be binding upon the assigns and
successors in interest of the parties to this Lease.

38.      THIS LEASE EMBODIES ALL AGREEMENTS BETWEEN THE PARTIES. This Lease
incorporates all of the agreements, covenants, and understandings between the
parties hereto concerning the subject matter hereof, and that all such
covenants, agreements, and understandings have been merged into this written
Lease. No prior agreement or understanding, verbal or otherwise, of the parties
or their agents shall be valid or enforceable unless embodied in this Lease.

39.      AMENDMENTS. This Lease shall not be altered, changed or amended except
by instrument in writing executed by the parties hereto.

40.      ATTORNEY'S FEES. In any litigation by Landlord or Tenant concerning
this Lease Agreement, the prevailing party shall be entitled to collect all its
costs and attorney's fees associated with the litigation.

41.      WAIVER. The failure of either party to exercise any of its rights is
not a waiver of those rights. A party waives only those rights specified in
writing and signed by the party waiving its rights.

42.      PARTIAL INVALIDITY. If any Lease provision is invalid or unenforceable
to any extent, then that Lease provision shall be deleted, and the remainder of
this Lease Agreement shall continue in effect and be enforceable to the fullest
extent permitted by law.

43.      CONSTRUCTION. The parties chose this Lease Agreement because it is
fair to both parties. Therefore, the parties agree that any provision that
remains unchanged from the provision as it appears shall be construed as if
both parties were equally responsible for drafting the provision.

44.      GOVERNING LAW. This Agreement shall be governed by the laws of the
State of New Mexico and the parties hereto consent to jurisdiction of the State
of New Mexico in the event of litigation or a dispute arising under this
Agreement.

45.      LIABILITY. First Interstate Bank of New Mexico, N.A., is signing this
Lease in its capacity as Trustee of the Joseph M. Montoya Trust the Patrick J.
Montoya Trust, and the Lynda M. Haran Trust and First Interstate Bank of New
Mexico, N.A., in its individual capacity has no liability in connection with
this Lease. Any liability First Interstate Bank


                                       17


<PAGE>   21
of New Mexico, N.A., as Trustee, may have in connection with this Lease is
limited to the assets of the Trust.

46.      DEFAULT BY LANDLORD. If Landlord breaches any covenant, agreement,
representation, or warranty contained herein, and fails to remedy the same
within thirty (30) days after written notice from Tenant, Tenant shall have all
rights and remedies at law or equity, including, without limitation, the right
to expend all sums necessary to cure such default and offset all such sums
against any rent due hereunder. Any amounts expended by Tenant shall earn
interest at the Default Rate until paid. Anything in the foregoing
notwithstanding, if an alleged breach is of the nature that it cannot
reasonably be cured within thirty (30) days after written notice from Tenant to
Landlord, Landlord shall have such additional time as is reasonably necessary
to cure the breach, so long as Landlord is diligently pursuing the same.

IN WITNESS WHEREOF, the parties hereto have hereunto set their hands the day
and year first above written.

LANDLORD:

First Interstate Bank of New Mexico, N.A., 
as Trustee of the Joseph M. Montoya Trust, 
the Patrick J. Montoya Trust, and 
the Lynda M. Haran Trust

By:    /s/ DAVID B. LLOYD
    ----------------------------
Name:  David B. Lloyd
     ---------------------------
Title: Trust Officer & AVP
      --------------------------


By:    /s/ JAMES D. HILL
    ----------------------------
Name:  James D. Hill
     ---------------------------
Title: Sr. Trust Officer & VP
      --------------------------



TENANT:

Alfalfa's Santa Fe, Inc., 
a Colorado corporation

By:    /s/ S.M. HASSAN
    ----------------------------
Name:  S. M. Hassan
     ---------------------------
Title:
      --------------------------
      



                                       18


<PAGE>   22
STATE OF NEW MEXICO  )
                     )     ss.
COUNTY OF SANTA FE   )


The foregoing instrument was acknowledged before me this 29 day of June 1994,
by David B. Lloyd, for First Interstate Bank of New Mexico, N.A., as Trustee of
the Joseph M. Montoya Trust, the Patrick J. Montoya Trust, and the Lynda M.
Haran Trust

                                                  /s/ Patricia S. Marshall
                                                 -------------------------------
                                                 Notary Public
                                                 My Commission Expires:  4/23/97

STATE OF NEW MEXICO  )
                     )     ss.
COUNTY OF SANTA FE   )


The foregoing instrument was acknowledged before me this 29 day of June 1994,
by James D. Hill, for First Interstate Bank of New Mexico, N.A., as Trustee of
the Joseph M. Montoya Trust, the Patrick J. Montoya Trust, and the Lynda M.
Haran Trust


                                                  /s/ Patricia S. Marshall
                                                 -------------------------------
                                                 Notary Public
                                                 My Commission Expires:  4/23/97


STATE OF COLORADO    )
                     )     ss.
COUNTY OF BOULDER    )

The foregoing instrument was acknowledged before me this 17th day of June 1994,
by S. M. Hassan, as President of Alfalfa's Santa Fe, Inc.

                                                /s/ Nancy J. Novell
                                                --------------------------------
                                                Notary Public
                                                My Commission Expires: 4/15/97




                                       19

<PAGE>   23

                                   EXHIBIT A

All that certain land and real estate lying, situate, and being at the
northeast corner of the intersection of Don Diego Avenue, as extended, and
Cordova Road in the City of Santa Fe, New Mexico, more particularly described
as follows:

         Commencing at the northwest corner of this tract a point from which
         the southwest comer of the intersection of Camino de las Marquez and
         Don Diego Avenue bears by courses and distances west 30.00 feet to a
         point; and thence N.6 degrees 38'E., 151.70 feet to said point of
         intersection of said streets. And from said place of beginning running
         thence along the easterly side of Don Diego Avenue as extended S.25
         degrees 11'W., 183.42 feet to a point; and thence S.14 degrees 44'W.,
         30.0 feet to the southwest corner of this tract at the intersection of
         the easterly side of Don Diego Avenue as extended and the northerly
         side of Cordova road; thence along the northerly side of Cordova Road
         S.75 degrees 16'E., 366.50 feet to the southeast corner of this tract;
         thence N.14 degrees 44'E., 198.08 feet to the northeast corner of this
         tract, thence N.73 degrees 08'W., 333.65 feet to the point and place
         of beginning; all as shown by plat entitled "Lands Surveyed 4-29-54
         for Santa Fe Holding Company, Ward No. 2, Santa Fe, N.M." prepared by
         Walter G. Turley, Reg. Prof. Eng. & Land Surveyor, said plat being
         designated 54-E-26-D.


<PAGE>   24
                                   Exhibit B

                      Description of Building Renovations

1.       Asphalt Removal and Patching in Parking Lot (Patching parking lot
         after new lighting)

2.       Floor Slab Sawing
         (Cutting for new floor under plumbing slab)

3.       Masonry Demolition
         (Demolition for compressor room vent)

4.       Construction of Handicapped Ramp (ADA Ramp compliance)

5.       Concrete Patching and Masonry (Concrete Patch at floor cuts)

6.       Structural Steel (New HVAC curbs)

7.       Wood Framing
         (New front facade to building comparable to other Alfalfa's stores)

8.       Door Repair and Improvements
         (New doors in food, prep areas, storefronts,
         restrooms, office)

9.       Glazing

10.      Lath, Plaster, Stucco
         (New front facade comparable to other Alfalfa's stores)

11.      Drywall
         (Interior drywall & soffits)

12.      Installation of Flooring
         (New flooring in retail store & in food prep area)

13.      Installation of Acoustic Ceiling

14.      Painting
         (Interior & exterior painting)

15.      Signage

16.      Awnings

17.      Toilet Repair and Improvements
<PAGE>   25
         (Bathroom ADA compliance)

18.      Plumbing
         (includes kitchen hot water heater, bathrooms rebuilt to ADA, all
         underground plumbing)

19.      Fire Protection (fully sprinklered)

20.      HVAC (full re-construction of system)

21.      Electrical
         (New electrical distribution to
         equipment, new site lighting, new
         interiors lighting throughout)

22.      Landscaping and Draining Improvements
         (per City of Santa Fe requirements)


<PAGE>   26
                                 LEASE GUARANTY

This Guaranty is given by Alfalfa's, Inc., a Colorado corporation
("Guarantor"), whose address is 1645 Broadway, Boulder, Colorado 80302, to
First Interstate Bank of New Mexico, N.A., Trustee of the Joseph M. Montoya
Trust the Patrick J. Montoya Trust and the Lynda M. Haran Trust, whose address
is P.O. Box 969, Santa Fe, New Mexico 875040969, and its successors and assigns
("Landlord"), on this 29 day of June, 1994.

                                    RECITALS

A.       Alfalfa's Santa Fe,Inc.("Tenant"),entered into a Lease, dated June 29,
1994, with Landlord of certain premises (the "Premises") located at the
northeast corner of the intersection of Don Diego Avenue and Cordova Road,
Santa Fe, New Mexico (the "Lease").

B.       Guarantor desires to give to Landlord, and Landlord desires to receive
from Guarantor, Guarantor's unconditional and irrevocable guaranty of all of
Tenant's obligations under the Lease, subject to the terms and conditions as
hereinafter set forth.

Now, therefore, in consideration of the Premises, including, but not limited
to, Landlord consenting to a wholly owned subsidiary of Guarantor being the
Tenant under the Lease, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Guarantor hereby
agrees as follows:

                                   AGREEMENT

1.       GUARANTY. Guarantor guarantees the prompt payment when due, or
whenever payment may become due under the terms of the Lease, all payments of
rent percentage rent additional rent, and all other charges, expenses, and
costs of every kind and nature which are, or may be, due now or in the future
under the terms of the Lease, and to the complete and timely performance,
satisfaction, and observation of the terms and conditions of the Lease required
to be performed, satisfied, or observed by Tenant.

2.       COVERAGE OF GUARANTY. This Guaranty extends to any and all liability
which Tenant has, or may have, to Landlord. This Guaranty extends to any
successor of Tenant, any assignee or subtenant of Tenant during the initial
term of the Lease. This Guaranty shall, however, be limited to the initial
term, and shall not extend to any additional terms.

3.       PERFORMANCE GUARANTY. In the event that Tenant fails to perform,
satisfy, or observe the terms and conditions of the Lease, rules and
regulations, and related Lease obligations required to be performed, satisfied,
or observed by Tenant including, but not limited to, the completion of the
renovations in a timely manner as described in paragraph 15 of the Lease,
Guarantor will, upon not less than thirty (30) days' written notice, fully
perform, satisfy, and observe the obligation(s) in the place of Tenant.
Guarantor shall pay, reimburse, and indemnify Landlord for any and all damages,
costs, expenses, reasonable attorneys' fees,
<PAGE>   27
losses, and other liabilities arising or resulting from the failure of Tenant
to perform, satisfy or observe any of the terms and conditions of the Lease.

4.       WAIVER OF NOTICES. Guarantor authorizes Landlord, without notice to,
or further assent from, Guarantor, and without discharging or otherwise
affecting the obligations and liabilities of Guarantor hereunder from time to
time, to: (a) renew, compromise, extend, accelerate, waive, modify, or
otherwise change the terms of the Lease and any rules and regulations or
related Tenant obligations; (b) consent to any assignment of the Lease or
sublease thereunder; (c) release or substitute in whole or in part any one or
more guarantors of Tenant's obligations under the Lease; and (d) assign
Landlord's interest in this Guaranty, in whole or in part, in connection with a
sale or transfer of the Premises.

5.       LEASE SECURITY. This Guaranty shall remain in full force and effect,
and Guarantor shall remain fully responsible, without regard to any security
deposit or other collateral, for the performance of the terms and conditions of
the Lease, or the receipt, disposition, application, waiver, exchange, or
release of any security deposit or other collateral, now or hereafter held by,
or for, the Landlord.

6.       UNCONDITIONAL OBLIGATIONS. The liability of Guarantor hereunder is
direct, immediate, absolute, continuing, unconditional, and irrevocable.
Landlord shall not be required to pursue any remedies it may have against
Tenant or against any security deposit or other collateral as a condition to
enforcement of this Guaranty. A separate action or actions may be brought and
prosecuted against Guarantor to enforce this Guaranty notwithstanding whether
an action is brought against Tenant or whether Tenant be joined in any such
action or actions. Guarantor shall not be discharged or released by reason of
the discharge or release of Tenant for any reason, including a discharge in
bankruptcy, receivership, or other proceedings, a disaffirmation or rejection
of the Lease by a trustee, custodian, or other representative in bankruptcy, a
stay or other impairment or limitation of the liability of Tenant or any remedy
of Landlord. Guarantor assumes all responsibility for being and keeping
Guarantor informed of Tenant's financial condition and assets, and of all other
circumstances bearing upon the risk of nonperformance by Tenant under the
Lease. Guarantor agrees that Landlord shall have no duty to advise Guarantor of
information known to it regarding such circumstances or risks.

7.       RELEASE OF GUARANTY. Notwithstanding anything to the contrary
contained herein, this Guaranty shall be released at the same time that Tenant
has terminated the Lease pursuant to its right to terminate under Paragraph
32(b) of the Lease, if (a) Tenant has properly terminated the Lease as
described in paragraph 32 of the Lease, and (b) Tenant has left all leasehold
improvements, including, without limitation, all flooring, ceiling tiles,
lighting fixtures, plumbing, electrical, doors, and similar items in the
Premises, and Tenant has repaired, to Landlord's satisfaction, any damage
caused by such removal. This release will apply only to Tenant's obligations
that are incurred after the said termination under Paragraph 32(b) of the
Lease, but will not release Guarantor of liabilities of Tenant that are
existing and have been incurred before termination.



                                     - 2 -
<PAGE>   28
8.       SEVERABILITY. If any term, covenant or condition of this Guaranty, or
any application thereof, should be held by a court of competent jurisdiction to
be invalid, void, or unenforceable, all terms, covenants, and conditions of
this guaranty, and all applications thereof not held invalid, void, or
unenforceable shall continue in full force and effect and shall in no way be
affected, impaired, or invalidated thereby.

9.       GENDERS AND NUMBERS. In this Guaranty, whenever the context so
requires, the masculine gender includes the feminine and/or neuter, and the
singular number includes the plural.

10.      INTERPRETATION. This Guaranty shall be construed and interpreted in
accordance with its intent and without regard to any presumption or other rule
requiring construction against the party causing the same to be drafted.

11.      JOINT AND SEVERAL LIABILITY. Should Guarantor, his assigns, or
successors ever consist of more than one person or entity, then, in such event,
all such persons and entities shall be jointly and severally liable as
Guarantor hereunder, and the parties stipulate that the proper jurisdiction and
venue for any litigation involving this Guaranty shall be exclusively in the
State of New Mexico.

12.      ATTORNEYS' FEES. In the event of any litigation arising out of, or in
connection with, this Guaranty, the prevailing party shall be awarded
reasonable attorneys' fees, costs, and expenses.

13.      GOVERNING LAW. This Guaranty and the rights of the parties hereunder
shall be governed by, and interpreted in accordance with, the laws of the State
of New Mexico.

14.      BINDING EFFECT. This Guaranty is binding upon Guarantor and Guarantor's
successors, legal representatives, and assigns, and is binding upon, and shall
inure to, the benefit of Landlord, its successors, and assigns. No assignment
or delegation by Guarantor shall release the Guarantor of Guarantor's
obligations under this Guaranty. The term "Tenant" used in this Guaranty
includes also the first and any successive assignee or subtenant of Tenant.

15.      MODIFICATIONS. This Guaranty may not be modified orally, but only by a
writing, signed by both Guarantor and Landlord. Modifications include any
waiver, change, discharge, modification, or termination. No delay or failure on
Landlord's part in exercising any right, power, or privilege under this
Guaranty or any other document executed in connection herewith, shall operate
as a waiver of any such right, power, or privilege.

In witness whereof, Guarantor has fully signed this Guaranty on the date stated
above.


                                     - 3 -
<PAGE>   29
GUARANTOR:

Alfalfa's, Inc.,
a Colorado corporation

By: /s/  S. M. HASSAN
   ----------------------------------
Name:    S. M. Hassan
     --------------------------------
Title:   President
      -------------------------------


                                ACKNOWLEDGEMENT

STATE OF COLORADO   )
                    )    ss.
COUNTY OF BOULDER   )

The foregoing instrument was acknowledged before me this 17th day of June,
1994, by S. M. Hassan, as President of Alfalfa's, Inc., a Colorado corporation,
on behalf of said corporation.

                                               /s/ NANCY J. NOWELL
                                               --------------------------------
                                               Notary Public

                                               My Commission Expires:  4/15/97



                                     - 4 -
<PAGE>   30
                                   EXHIBIT A

All that certain land and real estate lying, situate, and being at the
northeast corner of the intersection of Don Diego Avenue, as extended, and
Cordova Road in the City of Santa Fe, New Mexico, more particularly described
as follows:

         Commencing at the northwest corner of this tract, a point from which
         the southwest corner of the intersection of Camino de las Marquez and
         Don Diego Avenue bears by courses and distances west 30.00 feet to a
         point; and thence N.6 degrees 38'E., 151.70 feet to said point of
         intersection of said streets. And from said place of beginning running
         thence along the easterly side of Don Diego Avenue as extended S.25
         degrees 11'W., 183.42 feet to a point; and thence S.14 degrees 44'W.,
         30.0 feet to the southwest corner of this tract at the intersection of
         the easterly side of Don Diego Avenue as extended and the northerly
         side of Cordova road; thence along the northerly side of Cordova Road
         S.75 degrees 16'E., 366.50 feet to the southeast corner of this tract;
         thence N.14 degrees 44'E., 198.08 feet to the northeast corner of this
         tract, thence N.73 degrees 08'W., 333.65 feet to the point and place
         of beginning; all as shown by plat entitled "Lands Surveyed 4-29-54
         for Santa Fe Holding Company, Ward No. 2, Santa Fe, N.M." prepared by
         Walter G. Turley, Reg. Prof. Eng. & Land Surveyor, said plat being
         designated 54-E-26-D.