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EXHIBIT 10.14
[ZITEL LETTERHEAD]
March 15, 2000
Via Facsimile
Dazzle Multimedia, Inc.
45778 Northport Loop West
Fremont, CA 94538
Attention: Wasim Malik
RE: SUBLEASE BETWEEN DAZZLE MULTIMEDIA, INC. AND ZITEL CORPORATION
Gentlemen:
Pursuant to that certain Sublease between Dazzle Multimedia, Inc., as subtenant
("Subtenant"), and Zitel Corporation, as sublandlord ("Sublandlord"), dated
March 3, 2000 (the "Sublease"), Subtenant has agreed to sublease from
Sublandlord certain premises (the "Subleased Premises") within the building
located at 47211 Bayside Parkway, Fremont, California (the "Premises"),
currently leased by Sublandlord, as tenant, from Renco Investment Company, as
landlord ("Master Landlord"), pursuant to an Industrial Space Lease dated
February 16, 1995, as amended (the "Master Lease").
As a condition of Master Landlord's consent to the Sublease, Master Landlord
has required that Sublandlord and Subtenant execute a Consent to Sublease in
the form attached hereto as Exhibit A (the "Consent"), which makes Subtenant
liable for certain matters under the Master Lease for which Subtenant otherwise
has no liability under the Sublease. Accordingly, Sublandlord agrees to
indemnify, defend, protect, and hold Subtenant and Subtenant's partners,
principals, members, employees, agents and contractors harmless from and
against all actions, claims, demands, costs, liabilities, losses, reasonable
attorneys' fees, damages, penalties and expenses whatsoever which may be
brought or made by Master Landlord against Subtenant pursuant to the terms of
Section 3(b) of the Consent, but only to the extent that Subtenant is not
otherwise responsible for such actions, claims, demands, costs, liabilities,
losses, reasonable attorneys' fees, damages, penalties and expenses under the
terms of the Sublease.
This indemnity agreement shall be binding upon Sublandlord and Sublandlord's
successors and assigns and shall inure to the benefit of Subtenant and
Subtenant's successors and assigns.
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Mr. Wasim Malik
March 15, 2000
Page Two
This letter may be executed simultaneously in counterparts, each of which shall
be deemed an original, but all of which together shall constitute one and the
same instrument. Please sign this letter in the space provided below and return
it to me via facsimile and Federal Express in order to confirm the agreement of
the Subtenant to the foregoing. Thank you.
Sincerely,
ZITEL CORPORATION ACCEPTED AND AGREED:
DAZZLE MULTIMEDIA, INC.
By: /s/ ANNA M. MCANN By: /s/ WASIM MALIK
------------------------- -------------------------
Anna McCann Wasim Malik
cc: Sean Morley
Elizabeth Willes
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EXHIBIT A
CONSENT TO SUBLEASE
(ATTACHED)
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CONSENT TO SUBLEASE
This CONSENT TO SUBLEASE (Consent) is made to be effective on March 14, 2000,
(the "Effective Date") by and between ZITEL CORPORATION (as "Tenant" and/or
"Sublessor"), whose present address is 47211 Bayside Parkway, Fremont,
California, DAZZLE MULTIMEDIA, INC. (as "Sublessee") whose current address is
45778 Northport Loop West, Fremont, CA, and RENCO INVESTMENT COMPANY (as
"Landlord") whose current address is 1285 Oakmead Parkway, Sunnyvale,
California, who agree as follows:
THIS CONSENT IS MADE WITH REFERENCE TO THE FOLLOWING FACTS:
A. Landlord and Tenant entered into a lease dated as of February 16, 1995, (the
"Lease Agreement") for the following described space (the "Leased Premises"):
47211 Bayside Parkway
Fremont, California
B. Tenant and Sublessee have entered into that certain sublease dated March 3,
2000. By the terms of the Sublease, Tenant shall sublease to Sublessee and
Sublessee shall sublease from Tenant a portion of the Leased Premises, as more
particularly described in the Sublease (the "Subleased Premises").
C. Sublessee desires to sublease the Leased Premises from Tenant and to assume
all the obligations of Tenant under the existing Lease Agreement but only as
provided in the Sublease and only in so far as they relate to the Sublease
Premises as of the Effective Date first above set forth.
NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PROMISES OF THE
PARTIES HEREIN CONTAINED, THE PARTIES HERETO AGREE AS FOLLOWS:
1. Assumption Of Obligations By Tenant: Tenant and Sublessee represent and
warrant that (a) they have entered into the Sublease for the Subleased
Premises, subject to this consent being signed by the Landlord, (b) the
Sublease provides that Sublessee has assumed, for the benefit of Tenant, all
obligations of Tenant under the terms of the Lease Agreement but only as
provided in the Sublease and only in so far as they relate to the Subleased
Premises and has agreed to be liable for and to perform all obligations under
the terms of the Lease Agreement but only as provided in the Sublease and only
in so far as they relate to the Subleased Premises for the benefit of Landlord
as if Sublessee were the original tenant under the Lease Agreement. As such,
upon full execution of this Agreement, Sublessee assumes all obligations of
Tenant under the Lease Agreement but only as provided in the Sublease and only
in so far as they relate to the Subleased Premises for the benefit of Tenant.
If Tenant fails to timely surrender the Leased Premises to Landlord in good
condition and repair and in the condition required by the terms of the Lease
Agreement at the expiration or earlier termination of the Lease Agreement,
Tenant shall be liable to Landlord for all damages sustained by Landlord,
including, but not limited to, loss of rental income, construction and
remodeling costs, attorney's fees and court costs resulting from or in
connection with Tenant's failure to timely vacate and
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Consent To Sublease
Page 2
surrender the Leased Premises to Landlord in the condition provided for in the
Lease Agreement as of the effective expiration or termination date of the Lease
Agreement.
2. Landlord's Consent: Landlord hereby agrees to permit Tenant to sublease
the Leased Premises to Sublessee. Landlord's consent shall in no way void or
alter any of the terms of the Lease Agreement nor shall this consent alter or
diminish, in any way, Tenant's obligations to Landlord. Sublessee's occupancy
of the Leased Premises shall be subject and subordinate to the Lease Agreement.
Landlord has not reviewed the terms of the Sublease nor any other agreement
between Tenant and Sublessee, and Landlord shall not be bound by any agreement
other than the terms of the Lease Agreement between Landlord and Tenant and
this Consent. Landlord does not make any warranties or representations as to
the condition of the Leased Premises or the terms of the Lease Agreement
between Landlord and Tenant. Landlord's consent to the sublease shall in no way
obligate Landlord to any further consents or agreements with Tenant and/or
Sublessee. Landlord does not waive enforcement of any terms of the Lease
between Landlord and Tenant including but not limited to the rights of Landlord
regarding construction of improvements in the Leased Premises and this Consent
does not grant Tenant or Sublessee any right to alter the Leased Premises.
3. Landlord's Default Options. It is agreed by all parties hereto that, in
the event a default occurs under the Lease Agreement, beyond any applicable
cure period that applies to such default, then, regardless of anything to the
contrary contained in the Sublease, Landlord may at its sole option elect any
one or more of the following:
(a) pursue any right contained in the Lease Agreement or under applicable
law, including without limitation, the termination of the Lease Agreement and,
in such event, the Sublease shall automatically terminate simultaneously with
the Lease Agreement.
(b) elect that Sublessee become an assignee of all of Tenant's rights and
obligations under the Lease Agreement (whether arising before or after such
assignment), provided, however, that the Base Monthly Rent and Additional Rent
(as defined in the Lease Agreement) shall automatically become the greater of
(i) the Base Monthly Rent and Additional Rent as stated in the Lease Agreement,
or (ii) the Base Monthly Rent and Additional Rent as stated in the Sublease.
Landlord shall not, in any event, nor under any circumstance, be responsible or
liable to Sublessee for (i) the return of any security deposit paid by
Sublessee to Tenant, nor shall Sublessee be given credit for any prepaid rental
or other monetary consideration paid by Sublessee to Tenant under said
Sublease; (ii) any other claim or damage of any kind or nature whatsoever by
reason of or in connection with Landlord's election; and/or (iii) any default
of Tenant under the Sublease.
4. Assignment of Rights and Interest in Sublease: In consideration of
Landlord's consent to the Sublease, Tenant irrevocably assigns to Landlord, as
security for Tenant's obligations under the Lease Agreement, all rent and
income payable to Tenant under the Sublease. Therefore, Landlord may collect
all payments due under the Sublease and apply such payments towards Tenant's
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Consent To Sublease
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obligations under the Lease. Landlord requires that the security deposit paid
by Sublessee to Tenant in the amount of One Hundred Twenty One Thousand One
Hundred Eleven Dollars and 20/100ths ($121,111.20) be paid by Tenant to
Landlord, and Landlord shall hold such amount as an additional Security Deposit
under the terms of the Lease Agreement, but depositing such funds with Landlord
shall not relieve Tenant of its obligation to return Sublessee's Security
Deposit under the terms of the Sublease. Tenant and Sublessee agree to pay all
rent and income payable to Tenant under the Sublease to Landlord upon demand
without further consent of Tenant and Sublessee required; provided, however,
that until demand by Landlord, Tenant shall have the right to collect such
payments. Tenant hereby irrevocably authorizes and directs Sublessee, upon
receipt of a written notice from Landlord, to pay to Landlord the payments due
and to become due under the Sublease. Tenant agrees that Sublessee shall have
the right to rely on any such statement and request from Landlord, and that
Sublessee shall pay such rents to Landlord without any obligation or right to
inquire as to whether any default exists and notwithstanding any notice or
claim from Tenant to the contrary. Tenant shall have no right or claim against
Sublessee or Landlord for any such payments so paid by Sublessee to Landlord.
It is further agreed between the parties hereto that neither Tenant's assignment
of such rent and income, nor Landlord's acceptance of any payment of rental or
other sum due by Sublessee to tenant under said Sublease, whether payable
directly to Landlord or endorsed to Landlord by Tenant, shall in any way nor in
any event be construed as creating a direct contractual relationship between
Landlord and Sublessee, unless the parties expressly so agree in writing and
such acceptance shall be deemed to be an accommodation by landlord to, and for
the convenience of Tenant and Sublessee. Except as expressly set forth herein,
any direct contractual agreement between Landlord and Sublessee must be in
writing.
5. Delivery Required: This Consent to Sublease shall only be effective, and
Landlord's consent to the Sublease given, when this Consent is executed by
Landlord, Tenant, Sublessee, and all guarantors, as applicable, and returned to
Landlord.
6. Attorneys' Fees: If any party commences an action against any of the
parties arising out of or in connection with this Consent, the prevailing party
or parties shall be entitled to recover from the losing party or parties
reasonable attorneys' fees and costs of suit.
7. Excess Rentals: Concurrently with the execution and delivery of a copy of
this Consent to Landlord (and prior to Landlord being required to execute this
Consent), Tenant shall deliver to Landlord itemized calculations of the
Sublease rent and the Lease Agreement rent, specifying what excess rents are to
be due to Landlord pursuant to the profit sharing provisions of the Lease
Agreement. Such document shall be executed by Tenant and Sublessee. All excess
rent due Landlord shall be due and payable on or before the first of each month.
IN WITNESS WHEREOF, Landlord, Tenant, Sublessee and Guarantors, as applicable,
have executed this Consent on the respective dates below set forth to be
effective as of the Effective Date first above set forth.
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Consent To Sublease
Page 4
AS LANDLORD: AS TENANT:
RENCO INVESTMENT COMPANY ZITEL CORPORATION
By: /s/ Richard T. Peery By: /s/ Anna M. McCann
----------------------------- -----------------------------
Title: Trustee, UTA dated 7/20/77 Title: CFO
(Richard T. Perry Separate
Property Trust)
By: /s/ William N. Neisig By: /s/ [Signature Illegible]
----------------------------- -----------------------------
Title: President, Riverside Title: CEO
Interest, Inc.
Dated: 3/16/00
AS SUBLESSEE:
DAZZLE MULTIMEDIA, INC.
By: /s/ Wasim Malik
-----------------------------
Title: Director of Operations
By: /s/ Sajid Sonail
-----------------------------
Title: CEO
Dated: 3/16/00
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SUBLEASE
THIS SUBLEASE ("Sublease"), dated March 3, 2000 for reference purposes
only, is entered into by and between ZITEL CORPORATION, a California corporation
("Sublandlord"), and DAZZLE MULTIMEDIA, INC., a California corporation
("Subtenant").
RECITALS
A. Sublandlord leases certain premises consisting of approximately
67,536 square feet in an industrial building, located at 47211 Bayside Parkway,
Fremont, California, pursuant to that certain Industrial Space Lease dated
February 16, 1995, between Renco Investment Company, as landlord (the "Master
Landlord") and Sublandlord, as tenant, together with the First Addendum thereto,
and as amended by that certain First Amendment to Lease dated September 1, 1997
(as amended or otherwise modified from time to time, the "Master Lease"), a copy
of which is attached as Exhibit A, as more particularly described therein (the
"Premises"). Capitalized terms used but not defined herein have the same
meanings as they have in the Master Lease.
B. Sublandlord desires to sublease a portion of the Premises (the
"Sublease Premises") consisting of approximately 38,448 rentable square feet
(and for purposes hereby agreed to contain said number of square feet) to
Subtenant, and Subtenant desires to sublease the Sublease Premises from
Sublandlord on the terms and provisions hereof. The Sublease Premises are more
particularly shown on the layout attached hereto as Exhibit B-1.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
contained herein, Sublandlord and Subtenant covenant and agree as follows:
AGREEMENT
1. PREMISES. On and subject to the terms and conditions below,
Sublandlord hereby leases to Subtenant, and Subtenant hereby leases from
Sublandlord, the Sublease Premises.
2. TERM. This Sublease shall commence on April 16, 2000 (the
"Commencement Date"), provided Sublandlord has theretofore obtained the consent
of Master Landlord, and shall expire March 31, 2003, unless sooner terminated
pursuant to any provision hereof.
3. POSSESSION. If for any reason Sublandlord cannot deliver possession
of the Sublease Premises to Subtenant on the Commencement Date, Sublandlord
shall not be subject to any liability therefor, nor shall such failure affect
the validity of this Sublease or the obligations of Subtenant hereunder or
extend the term hereof, provided that no rent shall be due hereunder until
possession of the Sublease Premises has been delivered to Subtenant. If the
Commencement Date shall not have occurred by June 1, 2000, Subtenant shall have
the right to terminate this Sublease upon written notice to Sublandlord.
Notwithstanding the foregoing, Subtenant may access the Sublease Premises
commencing on March 20, 2000 until April 13, 2000 ("Early Access Period"),
during the hours of 8 a.m. to 5 p.m. on weekdays only (or at any time following
Sublandlord vacating the Sublease Premises prior to the Commencement Date) for
purposes of installing furniture, fixtures and equipment and other improvements
(as set forth
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below) only, provided that Subtenant shall comply with all other provisions of
this Sublease other than the payment of Rent, including, without limitation,
the insurance requirements contained herein. During the Early Access Period,
Subtenant may install partitioning, modify the electrical circuits, and install
data and telephone cabling, provided such installations and modifications do
not interfere with or disrupt Sublandlord's operations in the Sublease
Premises. In addition, Subtenant may perform minor construction (such as
installation of doors) in the Sublease Premises during the Early Access Period,
provided such construction does not interfere with or disrupt Sublandlord's
operations in the Sublease Premises, and provided that Subtenant obtains
Sublandlord's and Master Landlord's prior written consent pursuant to the terms
of this Sublease and the Master Lease.
4. RENT.
(a) Commencing on the Commencement Date and continuing
throughout the term of this Sublease, Subtenant shall pay monthly rent,
consisting of Base Rent and Additional Rent as defined below (collectively
referred to herein as "Rent") to Sublandlord in the following amounts:
(i) Base Rent. Subtenant shall pay to Sublandlord
monthly base rent as follows ("Base Rent"):
Dates Monthly Base Rent
----- -----------------
4/16/00 - 3/31/01 $30,758.40
4/1/01 - 3/31/02 $38,448.00
4/1/02 - 3/31/03 $40,370.40
(ii) Additional Rent. In addition to Base Rent,
Subtenant shall also pay to Sublandlord, all Subtenant's Proportionate Share
(defined below) of Property Operating Expenses (as that term is defined in
Section 13.12 of the Master Lease) and all other costs payable by Sublandlord
under the Master Lease ("Additional Rent"). Additional Rent shall be payable to
Sublandlord as and when payments are due from Sublandlord pursuant to the Master
Lease, but at least five (5) business days prior to the date Sublandlord must
pay such amounts to Master Landlord. "Subtenant's Proportionate Share" shall
mean, for the first twelve (12) months of the Sublease term, 35.54% (as to all
Property Operating Expenses other than gas, electric and water which shall be
56.93% at all times), and thereafter shall mean 56.93%. Subtenant shall further
pay to Sublandlord as Additional Rent, Subtenant's Proportionate Share of any
costs and expenses for utilities or maintenance which are paid for directly by
Sublandlord.
(iii) Payment of Rent. If the Commencement Date does
not fall on the first day of a calendar month, Rent for the first month shall
be prorated on a daily basis based upon a calendar month. Rent shall be payable
to Sublandlord in lawful money of the United States, in advance, without prior
notice, demand, or offset, on or before the first day of each calendar month
during the term hereof. All Rent shall be paid to Sublandlord at the address
specified for notices to Sublandlord in Section 14, below.
(b) Subtenant recognizes that late payment of any Rent
will result in administrative expenses to Sublandlord, the extent of which
additional expenses are extremely
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difficult and economically impractical to ascertain. Subtenant therefore agrees
that if any Rent shall remain unpaid for four (4) calendar days after
Subtenant's receipt of written notice, the amount of such Rent shall be
increased by a late charge to be paid to Sublandlord by Subtenant in an amount
equal to five percent (5%) of the amount of the delinquent Rent. In addition,
if any Rent remains delinquent for a period in excess of four (4) calendar
days, then, in addition to such late charge, Tenant shall pay to Landlord
interest on any rent that is not so paid from the fifth day at the then maximum
rate of interest not prohibited or made usurious by law until paid.
(c) Upon execution of this Sublease, Subtenant shall pay to
Sublandlord the sum of Thirty Thousand Seven Hundred Fifty-Eight Dollars and
40/100 ($30,758.40), representing the first month's Base Rent. In the event the
first month of the Sublease term is less than a full month, any excess from
such amount shall be applied to the next month's Base Rent.
(d) In the event of any casualty or condemnation affecting the
Sublease Premises, Rent payable by Subtenant shall be abated hereunder, but
only to the extent that Rent under the Master Lease is abated, and Subtenant
waives any right to terminate this Sublease in connection with such casualty or
condemnation except to the extent the Master Lease is also terminated as to the
Sublease Premises or any portion thereof.
5. SECURITY DEPOSIT.
(a) Upon execution of this Sublease, Subtenant shall pay to
Sublandlord the sum of One Hundred Twenty One Thousand One Hundred Eleven
Dollars and 20/100 ($121,111.20) as a security deposit ("Security Deposit"). If
Subtenant fails to pay Rent or other charges when due under this Sublease, or
fails to perform any of its other obligations hereunder and provided all
applicable notice and cure periods provided in this Sublease or incorporated
through the Master Lease have expired. Sublandlord may use or apply all or any
portion of the Security Deposit for the payment of any Rent or other amount then
due hereunder and unpaid, for the payment of any other sum for which Sublandlord
may become obligated by reason of Subtenant's default or breach, or for any loss
or damage sustained by Sublandlord as a result of Subtenant's default or breach.
If Sublandlord so uses any portion of the Security Deposit, Subtenant shall
restore the Security Deposit to the full amount originally deposited within ten
(10) days after Sublandlord's written demand. Sublandlord shall not be required
to keep the Security Deposit separate from its general accounts, and shall have
no obligation or liability for payment of interest on the Security Deposit. The
Security Deposit, or so much thereof as had not theretofore been applied by
Sublandlord, shall be returned to Subtenant within thirty (30) days of the
expiration or earlier termination of this Sublease, provided Subtenant has
vacated the Sublease Premises.
(b) In the event the Sublease Guaranty (as defined in Section 22 of
this Sublease) is terminated pursuant to clause (c) of the last sentence of
Section 3 of the Sublease Guaranty, Subtenant shall increase the amount of the
Security Deposit by an amount equal to nine (9) months of the then applicable
Base Monthly Rent (the "Additional Security Deposit"). Failure to so increase
the Security Deposit within seven (7) days after notice from Sublandlord shall
be a default under this Sublease. The Additional Security Deposit shall be
deemed part of the Security Deposit and held by Sublandlord in accordance with
the terms hereof. If Subtenant thereafter either (1) completes an initial
public offering of shares of Tenant's stock on a
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recognized national stock market or (2) delivers to Sublandlord a sublease
guaranty in the same form attached hereto as Exhibit C executed by a guarantor
with sufficient financial strength to guaranty the Sublease obligations (as
determined by Sublandlord in its reasonable discretion), then such Additional
Security Deposit shall be returned to Subtenant within ten (10) days after
notice from Subtenant to Sublandlord of such event.
6. ASSIGNMENT AND SUBLETTING. Subtenant may not assign, sublet, transfer,
pledge, hypothecate or otherwise encumber the Sublease Premises, in whole or in
part, or permit the use or occupancy of the Sublease Premises by anyone other
than Subtenant, unless Subtenant has obtained Sublandlord's consent thereto
(which shall not be unreasonably withheld) pursuant to the terms of Article 7 of
the Master Lease (as incorporated herein) and the consent of Master Landlord,
pursuant to the terms of Article 7 of the Master Lease. Regardless of
Sublandlord's consent, no subletting or assignment shall release Subtenant of
its obligations hereunder.
7. CONDITION OF PREMISES. Subtenant has used due diligence in inspecting
the Sublease Premises and, except as provided in this Section 7, agrees to
accept the Sublease Premises in "as-is" condition and with all faults without
any representation or warranty of any kind or nature whatsoever, or any
obligation on the part of Sublandlord to modify, improve or otherwise prepare
the Sublease Premises for Subtenant's occupancy. Prior to the Commencement
Date, Sublandlord shall (1) touch up the paint on the interior walls of the
Sublease Premises as needed (as determined by Sublandlord in its reasonable
discretion), (2) clean the carpeting and tile floors, (3) clean the entire
Sublease Premises one time using a janitorial service, (4) ensure that the HVAC
systems are in good working order, and (5) ensure that all doors within the
Sublease Premises are in good working order.
8. USE. Subtenant may use the Sublease Premises only for the purposes as
allowed in the Master Lease, and for no other purpose, subject to the terms of
Paragraph 4.2 of the Master Lease, as incorporated herein. Subtenant shall
promptly comply with the requirements set forth in Paragraph 4.7 of the Master
Lease, as incorporated herein, as to the Sublease Premises. Subtenant agrees
that, since some of the building systems located at the Sublease Premises will
not be separate, it will notify the other subtenant of the Premises three (3)
business days prior to the making of any alterations or improvements that may
interrupt building services such as, but not limited to, electrical service,
lighting, fire suppression systems. To the extent Subtenant desires access to
Building systems outside the Sublease Premises for purposes maintaining such
systems serving the Sublease Premises, Subtenant shall coordinate such access
directly with the other tenants in the Building. Notwithstanding anything to
the contrary contain herein or incorporated by reference, Subtenant shall have
no responsibility or liability for the remediation of Hazardous Materials
present on or under the Sublease Premises which Hazardous Materials existed on
the Sublease Premises as of the date the Sublease Premises are delivered to
Subtenant.
9. PARKING. Subtenant shall have use of the parking areas outlined on
Exhibit B-2 attached hereto, subject to the terms of the Master Lease.
10. SIGNAGE. Subtenant shall be entitled to signage for the Sublease
Premises in the location shown on Exhibit B-2 (and any additional signage
approved by Sublandlord and Master Landlord in accordance with the terms of
Paragraph 4.6 of the Master Lease), all of which signage shall be installed in
accordance with the terms of the Master Lease and all requirements
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and restrictions imposed by the City of Fremont and Bayside Technology Park
(including covenants, conditions and restrictions of record).
11. INCORPORATION OF SUBLEASE.
(a) All of the terms and provisions of the Master Lease, except as
provided in subsection (b) below, are incorporated into and made a part of this
Sublease and the rights and obligations of the parties under the Master Lease
are hereby imposed upon the parties hereto with respect to the Sublease
Premises, Sublandlord being substituted for the "Lessor" in the Master Lease,
and Subtenant being substituted for the "Lessee" in the Master Lease. It is
further understood that where reference is made in the Master Lease to the
"Leased Premises," the same shall mean the Sublease Premises as defined herein;
where reference is made to the "Commencement Date," the same shall mean the
Commencement Date as defined herein; and where reference is made to the
"Lease," the same shall mean this Sublease.
(b) The following are not incorporated herein: Paragraphs 1.1(A)
through (K), (N), (R), (S), Paragraphs 2.3, 2.4, 2.5, 2.6, 2.7, 3.1, 3.4, 3.7,
5.2, 8.2 and 14.2 of the Master Lease, Sections 2.6 and 4.6 of the First
Addendum to Lease, and the First Amendment to Lease dated September 15, 1997.
(c) Subtenant hereby assumes and agrees to perform for Sublandlord's
benefit, during the term of this Sublease, all of Sublandlord's obligations
with respect to the Sublease Premises under the Master Lease, except
Sublandlord's obligation to pay Base Monthly Rent under the Master Lease and
except as otherwise provided herein. Subtenant shall not commit or permit to be
committed any act or omission which violates any term or condition of the
Master Lease. Except as otherwise provided herein, this Sublease shall be
subject and subordinate to all of the terms of the Master Lease.
12. INSURANCE. Subtenant shall be responsible for compliance with the
insurance provisions of the Master Lease with respect to the Sublease Premises.
Such insurance shall insure the performance by Subtenant of its indemnification
obligations hereunder and shall name Master Landlord and Sublandlord as
additional insureds. All insurance required under this Sublease shall contain
an endorsement requiring thirty (30) days written notice from the insurance
company to Subtenant and Sublandlord before cancellation or change in the
coverage, insureds or amount of any policy. Subtenant shall provide Sublandlord
with certificates of insurance evidencing such coverage prior to Subtenant's
(or its agent's employees' or contractors') entry into the Sublease Premises
pursuant to Section 3 above or the Commencement Date, whichever is earlier.
13. DEFAULT. In Addition to defaults contained in the Master Lease,
failure of Subtenant to make any payment of Rent within three (3) days after
written notice from Sublandlord that such Rent is past due shall constitute an
event of default hereunder.
14. NOTICES. The addresses specified in the Master Lease for receipt
of notices to each of the parties are deleted and replaced with the following:
TO SUBLANDLORD AT: Zitel Corporation
46832 Lakeview Boulevard
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Fremont, California
Attn: Chief Financial Officer
TO SUBTENANT AT: the Sublease Premises
Attn: Wasim Malik
15. SUBLANDLORD'S OBLIGATIONS.
(a) To the extent that the provision of any services or the
performance of any maintenance or any other act respecting the Premises or
Building is the responsibility of Master Landlord under the Master Lease
(collectively "Master Landlord Obligations"), upon Subtenant's request,
Sublandlord shall make commercially reasonable efforts to cause Master Landlord
to perform such Master Landlord Obligations, provided, however, that in no event
shall Sublandlord be liable to Subtenant for any liability, loss or damage
whatsoever in the event that Master Landlord should fail to perform the same,
nor shall Subtenant be entitled to withhold the payment of Rent or terminate
this Sublease. It is expressly understood that the services and repairs which
are incorporated herein by reference, including but not limited to the
maintenance of exterior walls, structural portions of the roof, foundations,
walls and floors, will in fact be furnished by Master Landlord and not by
Sublandlord, except to the extent otherwise provided in the Master Lease. In
addition, Sublandlord shall not be liable for any maintenance, restoration
(following casualty or destruction) or repairs in or to the Building or Sublease
Premises, other than its obligation hereunder to use reasonable efforts to cause
Master Landlord to perform its obligations under the Master Lease.
(b) Except as otherwise expressly provided in this Sublease,
Sublandlord shall have no other obligations to Subtenant with respect to the
Sublease Premises or the performance of the Master Landlord Obligations.
Notwithstanding the foregoing, subject to Subtenant's obligation to reimburse
Sublandlord, (1) Sublandlord shall arrange for gas and electricity to the
Sublease Premises and (2) Sublandlord shall maintain the Building gas lines,
electrical system and water piping systems outside of the Sublease Premises, and
any other building systems outside of the Sublease Premises which are not
separated to serve exclusively the Sublease Premises, provided that Sublandlord
shall have no responsibility for repairing damage to such systems caused by the
negligence or willful misconduct of Subtenant. Any such damage shall be promptly
repaired by Subtenant at its sole cost and expense. Subtenant shall reimburse
Sublandlord for the cost of all services, maintenance and repair provided by
Sublandlord as Additional Rent as provided in Section 4(a)(ii) above.
(c) Except to the extent caused by Sublandlord's gross negligence or
willful misconduct, Sublandlord shall not be in default hereunder or be liable
for any damages directly or indirectly resulting from, nor shall the Rent be
abated by reason of (i) the installation, use or interruption of use of any
equipment in connection with the furnishing of any of the foregoing services,
(ii) failure to furnish or delay in furnishing any such services when such
failure or delay is caused by accident or any condition beyond the control of
Sublandlord, or (iii) the limitation, curtailment, rationing or restrictions on
use of water, electricity, gas or any other form of energy serving the
Sublease Premises or the Building.
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16. Early Termination of Sublease. If, without the fault of Sublandlord,
the Master Lease should terminate prior to the expiration of this Sublease,
Sublandlord shall have no liability to Subtenant on account of such termination.
To the extent that the Master Lease grants Sublandlord any discretionary right
to terminate the Master Lease, whether due to casualty, condemnation, or
otherwise, Sublandlord shall be entitled to exercise or not exercise such right
in its complete and absolute discretion, provided that Sublandlord shall not
negotiate an early termination of the Master Lease. Sublandlord shall not modify
the Master Lease in any manner which affects the Sublease Premises or
Subtenant's obligations hereunder, without first obtaining Subtenant's consent,
which consent shall not be unreasonably withheld.
17. Consent of Master Landlord and Sublandlord. If Subtenant desires to
take any action which requires the consent or approval of Sublandlord pursuant
to the terms of this Sublease, prior to taking such action, including, without
limitation, making any alterations, then, notwithstanding anything to the
contrary herein, (a) Sublandlord shall have the same rights of approval or
disapproval as Master Landlord has under the Master Lease, and (b) Subtenant
shall not take any such action until it obtains the consent of Sublandlord and
Master Landlord, as may be required under this Sublease or the Master Lease.
This Sublease shall not be effective unless and until any required written
consent of the Master Landlord shall have been obtained.
18. Indemnity. Subtenant shall defend with competent counsel
satisfactory to Sublandlord any claims made or legal actions filed or threatened
against Sublandlord with respect to the violation of any law, or the death,
bodily injury, personal injury, property damage, or interference with
contractual or property rights suffered by any third party occurring within the
Subleased Premises or resulting from Subtenant's use or occupancy of the
Subleased Premises, the Building or the Outside Areas, or resulting from
Subtenant's activities in or about the Sublease Premises, the Building, the
Outside Areas or the Property, and Subtenant shall indemnify and hold
Sublandlord, Sublandlord's partners, principals, members, employees, agents and
contractors harmless from any loss liability, penalties, or expense whatsoever
(including any loss attributable to vacant space which otherwise would have been
leased, but for such activities) resulting therefrom, except to the extent
proximately caused by the active negligence or willful misconduct of
Sublandlord. This indemnity agreement shall survive the expiration or sooner
termination of this Sublease.
19. Brokers. Each party hereto represents and warrants that it has dealt
with no broker in connection with this Sublease and the Transactions
contemplated herein, except Chip Sutherland and Paul Lyles of CB Richard Ellis
(on behalf of Subtenant) and Rick Bell of Cornish & Carey Commercial (on behalf
of Sublandlord) ("Broker"). Each party shall indemnify, protect, defend and hold
the other party harmless from all costs and expenses (including reasonable
attorneys' fees) arising from or relating to a breach of the foregoing
representation and warranty.
20. Surrender of Premises. Upon the expiration or earlier termination of
this Sublease, Subtenant shall surrender the Sublease Premises in substantially
the same condition as they were in on the Commencement Date, except for ordinary
wear and tear. Subtenant shall also remove any alterations to the Sublease
Premises made by Subtenant during the term of the Sublease and restore the
Sublease Premises to their condition prior to the making of such alterations if
Master Landlord requires such removal and restoration. Subtenant shall have no
15
obligation to remove any alterations made to the Sublease Premises by
Sublandlord prior to the Commencement Date.
21. NO THIRD PARTY RIGHTS. The benefit of the provisions of this Sublease
is expressly limited to Sublandlord and Subtenant and their respective
permitted successors and assigns. Under no circumstances will any third party
be construed to have any rights as a third party beneficiary with respect to
any of said provisions.
22. SUBLEASE GUARANTY. Concurrently herewith, Subtenant shall cause SCM
Microsystems, Inc. ("Guarantor") to execute and deliver to Sublandlord a
sublease guaranty in the form attached hereto as Exhibit C (the "Sublease
Guaranty"). Delivery of such Sublease Guaranty fully executed by Guarantor
shall be a condition precedent to the effectiveness of this Sublease and the
parties rights and obligations hereunder.
23. COUNTERPARTS. This Sublease may be signed in two or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one agreement.
24. MUTUAL WAIVER OF SUBROGATION. The waiver of subrogation provision set
forth in Paragraph 9.3 of the Master Lease shall be deemed a three party
agreement binding among and inuring to the benefit of Sublandlord, Subtenant
and Master Landlord (by reason of its consent to hereto).
IN WITNESS WHEREOF, the parties have executed this Sublease as of the date
first written above.
SUBLANDLORD: SUBTENANT:
Zitel Corporation, a California Dazzle Multimedia, Inc., a California
corporation corporation
By: /s/ Anna M. McCann By: /s/ Wasim Malik
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Its: CFO Its: Director of Operations
------------------------------ ------------------------------
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CONSENT OF MASTER LANDLORD
RENCO INVESTMENT COMPANY, the Master Landlord under the Master Lease,
hereby consents to the Sublease attached hereto, and all of the terms and
conditions contained therein. By consenting to the Sublease, Master Landlord
agrees that the waiver of subrogation and releases set forth in Paragraph 9.3
of the Master Lease shall be deemed a three party agreement binding among and
inuring to the benefit of Sublandlord, Subtenant and Master Landlord.
RENCO INVESTMENT COMPANY
By:
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Its:
------------------------------
Date:
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17
EXHIBIT B-1
SUBLEASE PREMISES
[DIAGRAM]
SUBLEASED PREMISES
(38,448 SQ. FT.)
18
EXHIBIT B-2
PARKING AND SIGNAGE
[PARKING DIAGRAM]
19
EXHIBIT C
SUBLEASE GUARANTY
IN CONSIDERATION OF, and as an inducement to, ZITEL CORPORATION, a
California corporation ("Sublandlord"), to enter into that certain Sublease
dated of even date herewith (the "Sublease") with DAZZLE MULTIMEDIA, INC., a
California corporation ("Subtenant"), with respect to that certain building
located at 47211 Bayside Parkway, Fremont, California (the "Premises"), the
undersigned Guarantor has executed and delivered this Guaranty as of this 3rd
day of March, 2000. Guarantor acknowledges that the current Subtenant under the
Sublease is a majority-owned subsidiary of Guarantor, that Sublandlord would
not enter into the Sublease without this Guaranty, that without this Guaranty
Sublandlord could elect not to enter into the Sublease, and that entering into
the Sublease is in the best interests of Subtenant and will benefit Subtenant
and therefore that Guarantor will benefit from Sublandlord's entering into the
Sublease with Subtenant.
1. Guarantor hereby guarantees to Sublandlord, its successors and
assigns the full and prompt payment of the rent and all other sums and charges
payable by Subtenant, its successors and assigns, under the Sublease accruing
during the initial Sublease term, and further hereby guarantees the full and
timely performance of all the covenants, terms, conditions and agreements
therein provided to be performed or observed by Subtenant, its successors and
assigns during the initial Sublease term. Guarantor hereby covenants and agrees
to and with Sublandlord, its successors and assigns, that if default shall at
any time during the initial Sublease term be made by Subtenant, its successors
and assigns, in the payment of any such rent and any and all such other sums
and charges, or in the performance and observance of any of the covenants,
terms, conditions or agreements contained in the Sublease, Guarantor shall,
within four (4) business days after notice to Guarantor, forthwith pay such
rent and other sums and charges, and any arrears thereof, to Sublandlord, its
successors and assigns, and shall forthwith faithfully perform and fulfill all
of such terms, covenants, conditions and agreements, or, with respect to
non-monetary defaults only, if the cure of such defaults cannot reasonably be
accomplished within such four (4) business day period, Guarantor shall (within
such period) commence the cure and shall diligently pursue such cure to
completion. Guarantor shall also forthwith pay to Sublandlord all reasonably
attorneys' fees and disbursements payable by Subtenant under the Sublease or
incurred by Sublandlord in the enforcement of this Guaranty.
2. This Guaranty is an absolute and unconditional guaranty of
payment and of performance. The obligations of Guarantor are independent of the
obligations of Subtenant. This Guaranty shall be enforceable against Guarantor
without the necessity of any suit or proceedings on Sublandlord's part of any
kind or nature whatsoever against Subtenant, its successors and assigns, and
without the necessity of any notice of nonpayment, nonperformance or
nonobservance, except as specifically provided above or in the Sublease, or any
notice of acceptance of this Guaranty, or any other notice or demand to which
Guarantor might otherwise be entitled, all of which Guarantor hereby expressly
waives. Guarantor hereby expressly agrees that the validity of this Guaranty
and the obligations of Guarantor hereunder shall in nowise be terminated,
affected, diminished or impaired by reason of the assertion or the failure to
assert by Sublandlord against Subtenant, or against Subtenant's successors and
assigns, of any of the rights or remedies reserved to Sublandlord pursuant to
the provisions of the Sublease or by relief
20
of Subtenant from any of Subtenant's obligations under the Sublease or otherwise
by (a) the release or discharge of Subtenant's in any creditors' proceedings,
receivership, bankruptcy or other proceedings, (b) the impairment, limitation or
modification of the liability of Subtenant or the estate of Subtenant in
bankruptcy, or of any remedy for the enforcement of Subtenant's liability under
the Sublease, resulting from the operation of any present or future provision of
the United States Bankruptcy Code or other statute or from the decision in any
court, or (c) the rejection or disaffirmance of the Sublease in any such
proceedings.
3. This Guaranty shall be a continuing guaranty and the liability of
Guarantor shall in no way be affected, modified or diminished by reason of any
assignment, amendment, renewal, supplement, modification or extension of the
Sublease or by reason of any modification or waiver of or change in any of the
terms, covenants, conditions or provisions of the Sublease, or by reason of any
extension of time that may be granted by Sublandlord to Subtenant, its
successors or assigns or a changed or different use of the Premises consented to
in writing by Sublandlord, or by reason of any dealings or transactions or
matters or things occurring between Sublandlord and Subtenant, its successors or
assigns, whether or not notice thereof is given to Guarantor. Notwithstanding
the foregoing, this Guaranty shall terminate and be of no further force or
effect after the occurrence of any of the following: (a) an initial public
offering of shares of Tenant's stock on a recognized national stock market; or
(b) more than fifty percent (50%) of the stock of Subtenant is acquired by a
third party and such third party executes a sublease guaranty in the same form
as this Guaranty; or (c) Guarantor ceases to own twenty percent (20%) or more of
the issued shares of Subtenant, provided however, in the event of a termination
as set forth in the foregoing clause (c) Subtenant shall be required to increase
the Security Deposit as set forth in Section 5(b) of the Sublease.
4. Sublandlord's consent to any assignment or assignments, and successive
assignments by Subtenant and Subtenant's assigns of the Sublease, made either
with or without notice to Guarantor, shall in no manner whatsoever release
Guarantor from any liability as Guarantor.
5. The assignment by Sublandlord of the Sublease and/or the avails and
proceeds thereof made either with or without notice to Guarantor shall in no
manner whatsoever release Guarantor from any liability as Guarantor. Sublandlord
may without notice to Guarantor assign this Guaranty.
6. All of Sublandlord's rights and remedies under the Sublease or under
this Guaranty are intended to be distinct, separate and cumulative, and no such
right and remedy therein or herein mentioned is intended to be in exclusion of
or a waiver of any of the others. The obligation of Guarantor hereunder shall
not be released by Sublandlord's receipt, application or release of security
given for the performance and observance of covenants and conditions required to
be performed and observed by Subtenant under the Sublease, nor shall Guarantor
be released by the maintenance of or execution upon any lien which Sublandlord
may have or assert against Subtenant and/or Subtenant's assets.
7. Until all the covenants and conditions in the Sublease on Subtenant's
part to be performed and observed are fully performed and observed, Guarantor
(a) shall have no right of subrogation against Subtenant by reason of any
payments or acts of performance by Guarantor in
21
compliance with the obligations of Guarantor hereunder, and (b) waives any
right to enforce any remedy which Guarantor now or hereafter shall have against
Subtenant by reason for any one or more payment or acts of performance in
compliance with the obligations of Guarantor hereunder.
8. Notices to Guarantor shall be sent to address set forth below beside
Guarantor's signature. This provision does not affect any right to serve
process upon Guarantor in any other manner permitted by law.
9. Guarantor hereby agrees that this Guaranty shall be governed by the
laws of the State of California, and that, except as provided in the
immediately succeeding sentence, any and all disputes arising out of or in
connection with this Guaranty shall be litigated only in the courts of the
County of Alameda, California (and, except as provided in the immediately
succeeding sentence, no other), and Guarantor hereby consents to the
jurisdiction of the courts of such county. Notwithstanding the foregoing,
Guarantor agrees that Sublandlord may at its sole option and discretion
commence an action arising out of or in connection with this Guaranty in any
other court in the State of California, and Guarantor hereby consents to the
jurisdiction of any such other court.
10. All notices and demands which Sublandlord may in its sole discretion
elect to give to Guarantor, shall be in writing and shall comply with the
procedures set forth in the Sublease and addressed as set forth below.
22
IN WITNESS WHEREOF, the undersigned Guarantor has executed this Guaranty as
of the date set forth below.
Address for Notices and Service: GUARANTOR:
SCM MICROSYSTEMS, INC. SCM MICROSYSTEMS, INC.
160 KNOWLES DR. a
LOS GATOS, CA ________________________________
Attention:
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Facsimile No. (408) 370-4880 By: /s/ Andrew Warner
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Its: CFO
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