Document:

Exhibit 10.4

 

THIRD
AMENDMENT TO LEASE

 

THIS THIRD AMENDMENT TO LEASE (this
“Amendment”), dated March l3, 2001 is intended to amend, and by this reference
be incorporated into, that certain Office Lease dated June 28, 1999 by and
between IMPERIAL PROMENADE ASSOCIATES, LLC, a Delaware limited liability
company, as “Landlord”, and MSC.SOFTWARE CORPORATION, a Delaware corporation,
as “Tenant”, as previously amended by that certain First Amendment to Lease
dated August 11, 2000 by and between Landlord and Tenant and that certain
Second Amendment to Lease dated January 19, 2001 by and between Landlord and
Tenant (collectively, the “Lease”). 

 

Where, and to the extent that, any of the
provisions contained in this Amendment are contrary to or inconsistent with any
provision contained in the Lease, the provisions contained in this Amendment
shall control. All terms not otherwise defined herein but defined in the Lease
shall have the same meaning in this Amendment as in the Lease.

 

The Lease shall be amended in the following
respects:  

 

1.                                       Amends Basic Lease Provisions Item 3

 

Description of Premises: Floors 1-9. Suites 100, 200, 300, 400, 500,
600, 700, 800 and 900

 

Rentable Area: approximately 203,511 square feet (see Exhibit “A-4”)

 

2.                                       Amends Basic Lease Provisions Item 4:

 

Tenant’s Proportionate Share of Operating
Costs:   50.0 %

 

3.                                       Amends Basic Lease Provisions Item 5:

 

Basic Annual Rent (see Paragraphs 2 and 20) shall be twelve (12) times the following
monthly amounts:

 

	
  Months During Term

  	
   

  	
  Floors 1-7

  	
   

  	
  Floors 8 & 9

  	
   

  	
  Total

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Partial
  Lease Month:

  	
   

  	
  $

  	
  7,821.31 per
  day ($1.49/rentable sq. ft./mo NNN)

  	
   

  	
  $3,414.09
  per day ($2.15/ rentable sq. ft/mo NNN for Floor 8; $2.30/rentable sq. ft./mo
  NNN for Floor 9)

  	
   

  	
  $11,235.04
  per day

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Month 1

  	
   

  	
  $

  	
  1,254.58 ($1.49/rentable sq. ft./mo NNN on balance
  of Floor 1 leased under this Amendment)
  (but see Paragraph 20(a))

  	
   

  	
  $0.00
  (unless Floors 8 & 9 Commencement Date [hereafter
  defined] occurs during such month)

  	
   

  	
  $1,254.58

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months 2-5

  	
   

  	
  $

  	
  1,254.58 ($1.49/rentable
  sq. ft./mo NNN on balance of Floor 1 leased under Second Amendment) (but see
  Paragraph 20(a))

  	
   

  	
  $102,422.55
  ($2.15/rentable sq. ft./mo
  NNN for Floor 8; $2.30/rentable sq. ft./mo NNN for Floor 9 - commencing on
  Floors 8 & 9 Commencement
  Date [hereafter defined])

  	
   

  	
  $103,677.13
  per month

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months 6-65:

  	
   

  	
  $

  	
  234,639.24 ($1.49/rentable
  sq. ft./mo NNN)

  	
   

  	
  $102,422.55 ($2.15/rentable
  sq. ft./mo NNN for Floor 8; $2.30/rentable sq. ft./mo NNN for Floor 9)

  	
   

  	
  $337,061.79
  per month

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months
  66-125:

  	
   

  	
  $

  	
   

  	
  *

  	
   

  	
   

  	
  $114,713.26 (12%
  increase over monthly rent during Months 6-65)

  	
   

  	
  *plus $114,713.26 per month

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months
  126-149:

  	
   

  	
  $

  	
   

  	
  **

  	
   

  	
   

  	
  $128,478.85 (12%
  increase over
  monthly rent during Months
  66-125)

  	
   

  	
  **plus $128,478.85 per month

  

 

1

 

*Commencing on the first day
of the sixty-sixth (66th) month of the term, Basic Annual Rent for Floors 1-7
shall be increased by the percentage increase, if any, in the Consumer Price
Index, Urban Wage Earners and Clerical Workers (Los Angeles-Anaheim-Riverside
region; “All Items”; Reference Base Year 1982-1984=100), as published by the
United States Department of Labor, Bureau of Labor Statistics or its successor
(the “Index”), as follows: The Index for the second month preceding the first
day of the sixty-sixth (66th) month of the term shall be compared with the
Index for the second month preceding the Commencement Date, and the Basic
Annual Rent for Floors 1-7 then in effect shall be increased by the lesser of
(i) the amount of the percentage increase, if any, between them, or (ii) ten
percent (10%); provided however, in no event shall the Basic Annual Rent
for Floors 1-7 be reduced by reason of such computation. If the Index ceases to
be published, is published less frequently or is altered in any material
respect, then Landlord shall adopt, at its reasonable discretion, a substitute
index or substitute procedure which reasonably reflects and monitors changes in
consumer prices.

 

**Commencing on the first
day of the one hundred twenty-sixth (126th) month of the term, Basic Annual
Rent for Floors 1-7 shall be increased by the percentage increase, if any, in
the Index, as follows: The Index for the second month preceding the first day
of the one hundred twenty-sixth (126th) month of the term shall be compared
with the Index for the second month preceding the sixty-sixth (66th) month of
the term, and the Basic Annual Rent for Floors 1-7 then in effect shall be
increased by the lesser of (i) the amount of the percentage increase, if any,
between them, or (ii) ten percent (10%); provided however, in no event
shall the Basic Annual Rent for Floors 1-7 be reduced by reason of such
computation. If the Index ceases to be published, is published less frequently
or is altered in any material respect, then Landlord shall adopt, at its
reasonable discretion, a substitute index or substitute procedure which
reasonably reflects and monitors changes in consumer prices.

 

4.                                       Supplements Basic Lease Provisions Item No.
6:

 

Initial Monthly Installment of Basic Annual
Rent Payable Upon Execution of this Amendment:
$20,437.90

 

5.             Amends
Basic Lease Provisions Item 10:

 

Target Commencement Date for Floors 1-7: March 1, 2001

 

Target Commencement Date for Floors 8 & 9 (including the
Floor 8 Remainder Space):

May 1, 2001

 

6.             Paragraph 20(d) shall be of no further force
and effect.

 

7.               In connection with the tenant improvements
for the Floor 8 Remainder Space (the “Floor 8 Remainder Space Tenant Work”),
Landlord shall provide Tenant with an allowance in the amount of up to Thirty
Dollars ($30.00) per usable square foot of the Floor 8 Remainder Space to be
used towards the cost of the design, purchase and construction of the Floor 8
Remainder Space Tenant Work, including without limitation all permits and fees,
contractors’ charges and general conditions, performance bond premiums, and
construction management fees. Tenant shall pay the excess of all costs to
complete the Floor 8 Remainder Space Tenant Work over the amount of such
allowance available to defray such costs. Prior to commencement of such Floor 8
Remainder Space Tenant Work, Landlord shall prepare and submit to Tenant a
written estimate of the costs incurred to date on such work, the estimated
remaining cost to complete such work, and any amount of such costs in excess of
the allowance. Within five (5) days after receipt of such notice, Tenant shall
deliver to Landlord the full amount of such excess. In addition, within sixty
(60) days after completion of the Floor 8 Remainder Space Tenant Work, Landlord
shall determine the actual final costs therefore and shall submit a written
statement of such amount to Tenant. If any estimate previously paid by Tenant
exceeds the amount due hereunder from Tenant

 

2

 

for
such work, such excess shall be refunded to Tenant; if any amount is still due
from Tenant for such work, then Tenant shall pay such amount in
full within ten (10) days of receipt of Landlord’s statement. All other terms
and conditions of the existing Work Letter to the Lease, where applicable,
shall apply to the Floor 8 Remainder Space Tenant Work.

 

8.             Notwithstanding the actual date of
substantial completion for the Floor 8 Remainder Space, Tenant’s obligation to
commence the payment of monthly installments of Basic Annual Rent on the Floor
8 Remainder Space shall commence on the earlier to occur of substantial completion
of the Floor 8 Remainder Space Tenant Work or May 1, 2001 (such earlier date being
hereinafter the “Floor 8 Remainder Space Commencement Date”), and if such Floor
8 Remainder Space Commencement Date occurs on a date other than the first (1st)
day of the calendar month, then Tenant shall pay rent on the Floor 8 Remainder
Space for such Partial Lease Month in the amount set forth in Item 5 of the
Basic Lease Provisions for each day of such partial month from and after the
Floor 8 Remainder Space Commencement Date. Notwithstanding the foregoing,
subject to Tenant Delays and delays outside of the reasonable control of
Landlord, commonly considered force majeure, Landlord shall use commercially
reasonable efforts to substantially complete the Floor 8 Remainder Space Tenant
Work as soon as possible.

 

9.               This Third Amendment to Lease Agreement shall
be effective only upon (1) an executed Lease Termination Agreement for the
Floor 8 Remainder Space by and between Landlord and United Advanced Lumber,
Inc., a Nevada corporation and (2) a check from Tenant in the amount of $
67,500.00 payable to Landlord as Tenant’s portion of the Termination Fee payable
by Landlord to United Advanced Lumber as an inducement to terminate their existing
lease covering the Floor 8 Remainder Space.

 

IN
WITNESS WHEREOF, the parties have executed this Amendment as of the date stated
above.

 

	
  LANDLORD

  	
   

  	
  TENANT

  
	
   

  	
   

  	
   

  
	
  IMPERIAL
  PROMENADE ASSOCIATES, LLC,

  a Delaware limited liability company

  	
   

  	
  MSC SOFTWARE CORPORATION

  a Delaware corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Curtis
  R. Olson

  	
   

  	
  By:

  	
  /s/ Frank Perna
  Jr.

  
	
   

  	
    Curtis R. Olson, Managing Member

  	
   

  	
   

  	
  Its:

  	
  Frank Perna,
  Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  Chairman and
  CEO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
  3/13/01

  	
   

  	
  Date: 

  	
        3/19/01

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /s/ Louis A.
  Greco

  
	
   

  	
   

  	
   

  	
   

  	
  Its:

  	
    CFO

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date: 

  	
          3-9-01

  
										

 

3Exhibit 10.5

 

LEASE

 

THIS LEASE AGREEMENT “Lease”, entered into August 5,
1999 between William C. Martin or his Assignee (hereinafter referred to as “Host”)
whose address is c/o First Martin Corporation, 115 Depot Street, Ann Arbor,
Michigan 48104 and MECHANICAL DYNAMICS, INC., a Michigan corporation
(hereinafter referred to as “Guest”) whose address is 2391 Commonwealth
Boulevard, Ann Arbor, Michigan 48105 until commencement of the term hereof and
thereafter the Premises, by which the parties agree as follows:

 

1.                                     Leased Premises.    Subject
to and upon the terms hereinafter set forth, and in consideration of the sum of
Ten Dollars ($10.00), the premises, and the mutual covenants set forth herein,
the receipt and sufficiency of which are hereby acknowledged, Host does hereby
lease to Guest certain premises (hereinafter referred to as the “Premises”) consisting
of a building (hereinafter referred to as the (“Building”) in the Traverwood Business
Center located in Ann Arbor, Michigan, on the site described in Exhibit A-1
attached hereto (hereinafter referred to as the “Site”), such leased Premises
being approximately 66,878 square feet of Gross Building Area as generally
described in Paragraph 3 hereof; the preliminary site plan for the Building is
attached hereto as Exhibit A-2.  Together
the Building and Site are sometimes referred to herein as the “Project”.  As used herein, “Gross Building Area” or “GBA”
shall refer to the total square footage of all floor area (including floor area
which is below grade) measured to the predominant outside surface of the
Building exterior walls (or in the case of floor area below grade, the inside
face of the foundation walls).

 

2.                                     Term.

 

(a)                                  Initial Term.  The term of this Lease shall commence fifteen
(15) days after the date of Substantial Completion of the improvements to be
made by Host (“Host’s Improvements”, as defined in Paragraph 3 of this Lease),
and shall continue for a period of ten (10) years from the first of the
month coincident with or next following such date of commencement (hereinafter
referred to as the “Commencement Date”).  Guest and Host mutually agree that in the
event Substantial Completion is achieved between December 1, 2000 and January 2,
2001, Guest may delay the Commencement Date of the Lease until January 15,
2001.  As used herein, “Substantial
Completion” shall mean the completion of Host’s Improvements in substantial
compliance with the plans, specifications and other contract documents for such
Improvements except for punchlist items which in the aggregate do not
materially interfere with the use and occupancy of the subject space for its
intended purposes and which can be completed without interfering with the use
of such space.  Guest acknowledges that a
certificate of occupancy cannot be secured until Guest’s cubicles are installed
and wired.  Guest shall be allowed access
to install the same as soon as reasonably possible. Should Substantial
Completion of Host’s Improvements be delayed due to either (i) Guest’s
failure to approve the plans and specifications for said Improvements

 

1

 

in a timely manner
(as set forth in Paragraph 3), or (ii) change orders initiated by Guest,
then the Commencement Date shall be that date on which Host’s Improvements would
have otherwise been substantially completed but for such delays.  Change orders shall state the delay which will
result thereby, if any, in the Substantial Completion of Host’s Improvements.  As used herein, the term “Lease Year” shall
mean a period of twelve (12) consecutive months.  The first Lease Year shall begin on the date
of commencement of the term of this Lease if such Commencement Date shall occur
on the first day of a month, or, if not, then on the first day of the following
month.

 

(b)                                 Renewal
Option.    Provided Guest is not then in default, Guest
shall have the right to renew the term of this Lease for two (2) additional
successive periods of five (5) years each (the “Option Periods”) on the
same terms and conditions with the exception that (i) Guest shall have no further
implied right to renew beyond the properly exercised Option Periods, (ii) Guest
shall not have the right to assign said rights to any sublessee of the Premises
or assignee of the Lease, nor may any such sublessee or assignee exercise such
renewal rights, and (iii) the leasehold improvements shall be provided in their
then-existing condition (on an “as is” basis) at the time the Option Periods
commence.  If Guest elects to exercise
any expansion options as provided in Paragraph 36 hereof, then the Option
Periods shall commence at the expiration of the term of the Lease as extended
pursuant to the provisions of such expansion options.  Guest shall give Host notice that it is
exercising any such right not less than eighteen (18) months prior to the expiration
date of the then current term of the Lease.

 

(c)                                  Completion
Date.    Host shall use its best efforts to obtain
Substantial Completion on or before November 1, 2000.  In the event that Substantial Completion of Host’s
Improvements has not been attained on or before May 1, 2001, Guest shall have
the right to terminate this Lease by delivery of fifteen (15) days’ prior written
notice of termination to Host, unless during such fifteen (15) day period, Host
agrees in writing to extend (i) the lease between First Properties Associates Limited
Partnership and Guest, as lessee, date July 12, 1989, covering certain premises
located at 2301 Commonwealth Boulevard, Ann Arbor, Michigan (the “Old Lease”),
and (ii) the Rent Credit as defined in an amendment to the Old Lease
described as the Third Amendment to Lease dated as of August 5, 1999, in
both cases, for a period thirty (30) days beyond the date of actual Substantial
Completion of Host’s Improvements.  Guest
agrees to act promptly in all matters requiring Guest’s approval, including but
not limited to approval of plans and specifications so as not to delay the
project commencement and completion.

 

3.                                       Improvements.

 

(a)                                  Host’s
Improvements.    Host shall cause to be constructed on the Land
a Building with a Gross Building Area of approximately 66,878 square feet
including site work, building shell, mechanical systems, and interior
partitions and finishes but

 

2

 

excluding the installation of cubicles
(including electrical wiring) and computer and communications cabling (herein sometimes
referred to as “Host’s Improvements”).  Guest
shall be responsible for the layout, design and installation of all cubicles
(including electrical wiring) and computer and communications cabling; said
design and Guest’s contractors most be approved by Host in writing in advance.

 

(b)                                 Plans and
Specifications.    Host’s Improvements shall be constructed in accordance
with plans and specifications mutually approved and agreed upon by Host and
Guest as provided hereinafter.  The
architect for Host’s improvements
shall be Jickling, Lyman and Powell.  The
maximum number of parking spaces allowed by the City of Ann Arbor shall be
provided not to exceed five spaces per 1,000 square feet of Gross Building
Area, subject to receiving site plan approval from the City of Ann Arbor for
the amount of parking.  Host shall submit
to Guest for its approval the site plan and the final plans and specifications
for Host’s Improvements; said plans and specifications shall be deemed approved
unless rejected in writing within five (5) business days of receipt.  A working set of site plans and building plans
and specifications which are approximately 75% complete will be made available for
review at least two weeks prior to submission of final plans.  Any denial of such approval shall be fair and
reasonable.

 

(c)                                  Building
Construction.    The general contractor for Host’s Improvements
shall be O’Neal Construction, Inc. (“O’Neal”).  Host and Guest shall jointly negotiate a contract
with O’Neal, which contract shall provide a guaranteed maximum price which
includes a 3% construction contingency.  Host
shall provide an allowance (the “Hard Construction Cost Allowance”) of up to
$100.00 per square foot of Gross Building Area for the direct construction
costs for Host’s Improvements; “direct construction costs” includes bonding and
permits but excludes extraordinary costs relating to poor soil conditions,
which costs shall be the sole responsibility of Host, and soft costs such as
base building architectural and design services, legal services, construction
financing, permanent financing origination, title insurance, builder’s risk
insurance, brokerage commissions, development fees, real estate taxes and other
carrying costs for the Site.  Upon Guest’s
written request received on or before the date of commencement of said Improvements,
Host shall increase said Allowance to up to $110.00 per square foot of Gross
Building Area, subject to Host securing additional financing acceptable to Host
within thirty (30) days of notice from Guest that it wishes to increase said
Allowance.  Any direct construction costs
for Host’s Improvements in excess of said Allowance shall be paid to Host by
Guest within 30 days of date of invoice.  O’Neal shall provide a warranty of one year on
all work with the exception of the roof, which shall have a ten year warranty;
said warranties shall commence as of the date of Substantial Completion of Host’s
Improvements.  The additional cost of any
change order requested by Guest shall be paid to Host within ten (10) days
of date of invoice and shall include an administrative fee of 10%.

 

3

 

4.                                       Rent.

 

(a)                                  Base Rent.    Guest
shall pay to Host as annual base rent for the Premises for the term hereof an
amount which shall be determined by multiplying the Rent Factor by the Total
Development Cost for the Project, as further defined below:

 

(i)                  “Rent Factor” is
the sum of the Rental Rate Constant and the Debt Service Constant.

 

(ii)               “Rental Rate
Constant” is 200 basis points.

 

(iii)            “Debt Service
Constant” is the percentage calculated by dividing the annual payment of
principal and interest required for the Permanent Mortgage Loan by the original
principal amount of said Loan.  The Debt
Service Constant shall not change if Host refinances the Permanent Mortgage
Loan or pays off said Loan subsequent to the Commencement Date of the Lease.

 

(iv)           “Permanent
Mortgage Loan” is the loan which is secured by Host to finance the Total
Development Cost. Said loan shall (a) have a minimum term of ten (10) years,
(b) be non-recourse to Host, (c) have a twenty-five year amortization
schedule which provides for level annual payments, and (d) be
otherwise acceptable to Host.  If said
loan has not been closed as of the Commencement Date, then the terms set forth
in the commitment for said Loan shall be used.

 

(v)              “Total
Development Cost” is the sum of:

 

•                  “Land Cost”,
which is deemed to be $1,050,000.00;

 

•                  “Hard
Construction Cost”, which is the portion of the Hard Construction Cost
Allowance which is used; and

 

•                  “Soft Cost”,
which is deemed to be One Million Five Hundred Eighty-Three Thousand Four Hundred
($1,583,400) Dollars.

 

The manner in which the annual rent is to be
calculated is illustrated using estimated costs in Exhibit B attached hereto.

 

(b)                                 Payment Schedule.    Said
annual rent shall be due and payable in equal monthly installments in advance
on the first day of each calendar month during the term hereof.  Rent for partial months shall be prorated
based on a 365 day year.  If any rent
payment due hereunder is more than six (6) days late, Guest shall pay Host
a service fee equal to two percent (2%) of said rent payment.  The payment of this late payment service fee
will not constitute a waiver by Host of any default by Guest under this Lease.  The rent to be paid by Guest hereunder shall
not be

 

4

 

diminished by the additional payments to be
made by Guest as provided in Paragraphs 5,6,7,8 and 16 or elsewhere in this
Lease.

 

(c)                                  Escalation.     The
annual base rent payable under this Lease shall be adjusted annually at the
beginning of the second Lease Year and each succeeding Lease Year during the
term of this Lease and any renewals thereof by 2.69%.  Commencing with the seventh Lease Year, in the
event the Consumer Price Index (as hereinafter defined and referred to as “CPI”)
increases more than 7.0% in the twelve month period immediately proceding the
third month prior to the month in which such adjustment is to take effect, then
the annual increase in the rent will be 80% of the percentage increase in the
CPI during such period.  Adjusted monthly
installments of rent shall be rounded to the nearest whole dollar.  As used herein, “Consumer Price Index” means
the Consumer Price Index for All Urban Consumers, U.S. City Average, All Items,
1982-84 = 100, as issued by the Bureau of Labor Statistics, United States
Department of Labor.  If at any time
during the term hereof the Bureau of Labor Statistics should modify the
methodology used in computing the CPI and should said Bureau determine that, as
a result, the CPI is likely to be different in the future than would otherwise
be the case, then in calculating rent increases hereunder the CPI shall be
adjusted as follows.  Commencing with the
first rent adjustment date after the new methodology becomes effective, the
percentage increase in the CPI during the relevant twelve month period shall be
multiplied by an adjustment factor, which shall be the quotient of a) the
increase in the CPI using the old methodology during the twelve month period
prior to the date the new methodology becomes effective, divided by the
increase in the CPI during said twelve month period using the new methodology
(as estimated by the Bureau of Labor Statistics).  If at any time during the term hereof the
United States Bureau of Labor Statistics shall discontinue the issuance of the
CPI, then the parties agree to use any other standard, nationally recognized
cost of living index then issued and available, which is published by the
United States Government, and if no governmental index is then published, then
by any generally recognized privately published index of the cost of living.

 

5.                                       Net Features.    The
rent during the term of this Lease shall be on a net-net-net basis.  That is to say, Guest, and not Host, shall be
responsible for and pay all costs connected with the Premises and the grounds
and parking facilities subject to the limitations contained in section 37
hereof appurtenant thereto, including but not limited to: real estate taxes as
hereinafter defined (or any other tax or charge imposed by any governmental
authority expressly designated and identifiable as a substitute for such
taxes), personal property taxes, special assessments, utilities, service
charges, janitorial service, maintenance (including: (i) maintenance
repair and replacement, as necessary, of all plumbing, electrical,
heating/cooling and other mechanical systems; (ii) the building doors, windows,
roof and structure; and (iii) the grounds and parking facilities), insurance
and management.  Such items shall be paid
before they become overdue or delinquent.  Failure to do so shall be a default of the
Lease.  There shall be no deduction from
the rent

 

5

 

on account of Guest’s payment of such
costs.  Latent defects in the roof,
windows, or structure discovered subsequent to the one year warranty period and prior to the seventh anniversary of
the lease Commencement Date shall be the Host’s responsibility to repair or
replace as necessary.

 

6.                                       Real Estate Taxes.    From
and after the Commencement Date, Guest shall pay all real estate taxes
connected with the Premises and one-half of real estate taxes connected with the
Site (or a greater portion should Guest exercise its expansion options as
provided in Paragraph 36 (“Expansion Options”)).  As used herein, “real estate taxes” shall
mean: (i) all real estate, ad valorem or personal property taxes levied
with respect to the Premises, the Site, any fixtures, equipment or other
property, real or personal, located on or about the Premises or the Site; (ii) any
other tax, general or special assessment or other governmental charge of any
description imposed upon or in respect to the Premises or Site, including,
without limitation, a tax upon any rent therefrom, or any occupancy or use
thereof; (ill) any water and sewer general or special assessments, charges,
excises, levies, license and permit fees, transfer taxes, and all other similar
charges, if any, which are levied, assessed, or imposed upon or become due and
payable in connection with, or liens upon, the Premises, Site or facilities
used in connection therewith, and rentals or receipts therefrom; and (iv) all
taxes of whatsoever nature that are imposed in substitution for or in lieu of
any taxes, assessments or other charges included in this definition.  Host shall obtain from the taxing authority a
separate tax parcel for the Site.  Guest’s
liability for real estate taxes hereunder shall be paid to Host in the manner
set forth in Paragraph 8 hereof.  In the
event Host is required under any mortgage covering the Building to escrow real
estate taxes, Host may, but shall not be obligated to, use the amount required
to be so escrowed as a basis for its estimate of such monthly installments.
Provided Guest is the sole occupant of the Building, Guest shall have the right
to contest the assessed value of the Premises after first consulting with Host.
 If the building becomes multi-tenant,
Host and Guest may mutually agree to contest the assessed value.  In such case, Host will negotiate or contest
the assessed value with the City of Ann Arbor.  Real estate taxes for the first and last years
of this Lease shall be prorated between Host and Guest using the due date
method.

 

7.                                      Utilities.    From
and after the Commencement Date, Guest shall be responsible for the cost of all
utilities for the Project including, but not limited to, the cost of
electricity, gas, water, sewer, stormwater discharge and power for heating,
lighting, air-conditioning and ventilating the Project.  Such costs shall be paid by Guest directly to
the providers of such utilities.

 

8.                                       Operating
Expenses; Maintenance and Repair.

 

(a)                                  Operating
Expenses Defined.  From and after the
Commencement Date, Guest shall pay Host the Operating Expenses for the Project
as additional rent.  As used herein, “Operating
Expenses’” shall include all costs of maintaining, repairing, replacing,
decorating, cleaning, operating, servicing and protecting the Project together
with a management fee equal to 5% of the sum of all other Operating

 

6

 

Expenses and the base rent as set forth in Paragraph 4 hereof.  Such costs shall include but not be limited
to:

 

(i) wages and salaries, including
taxes, insurance and benefits, of all on-site employees engaged in operations
and maintenance, as reasonably allocated by Host.

 

(ii) cost of all supplies, tools, equipment materials and
professional fees to the extent used in operations and maintenance, as
reasonably allocated by Host;

 

(iii) cost of all maintenance and
service agreements and the equipment therein, including, but not limited to,
parking lot and facility maintenance, repair and snow removal, window cleaning,
elevator maintenance, janitorial service, landscaping and irrigation
maintenance, hvac systems, roof, carpet, windows, doors, etc.;

 

(iv) cost of repairs, replacements and
general maintenance (excluding repairs, replacements, alterations and general
maintenance paid by proceeds of insurance);

 

(v) cost of any system, apparatus, device, or equipment which is
installed for the principal purpose of (a) reducing Operating Expenses, (b) promoting
safety or (c) complying with governmental requirements which become
effective after the Commencement Date;

 

(vi) the cost of all insurance, including, but not limited to, the
cost of casualty, rent loss and liability insurance, and insurance on Host’s
personal property, plus the cost of all deductible payments made by Host in
connection therewith, as more specifically provided in Paragraph 16 hereof; and

 

(vii) the cost of real estate taxes,
as such term is defined in Paragraph 6.

 

(b)                                 Method of Payment.    At the Commencement
Date and prior to the beginning of each calendar year thereafter, Host shall
have the right to estimate the Operating Expenses for such calendar year or
portion thereof and notify Guest of its liability for such Operating Expenses,
which amount shall then be due and payable in monthly installments in advance
in accordance with the provisions of Paragraph 4(b) hereof for the payment
of rent.  Host may adjust the estimated monthly installment at the end of any
calendar quarter on the basis of Host’s experience and anticipated costs.  Within ninety (90) days following the end of
such calendar year (or in the case of the last calendar year of the Lease term,
the termination date), Host shall furnish Guest with a statement covering the
calendar year just expired showing the total Operating Expenses for such
calendar year and payments made by Guest during such year.  If Guest’s liability exceeds Guest’s payments
for estimated Operating Expenses during such year, then Guest shall pay Host
the deficiency within fifteen (15) days after receipt of such statement

 

7

 

without the necessity of additional demand or notice
thereof.  If Guest’s payments exceed
Guest’s liability, Guest shall be entitled to offset such excess payments
against payments next thereafter to come due Host under this Paragraph 8;
provided, that upon the expiration or earlier termination of this Lease, Host
shall refined to Guest such excess payments so long as Guest is not in default
hereunder.

 

(c)                                 Guest Oversight.    In
as much as Guest will be reimbursing Host for Operating Expenses pursuant to
this Section 8, Host hereby agrees that Guest shall have the right to
annually review with Host all contracts which are to be let for the provision
of services included in Operating Expenses for the ensuing Lease Year to insure
that (i) the Project is maintained in good order and repair and in a first
class condition and (ii) Operating Expenses are minimized to the greatest
extent possible, consistent with such standard of maintenance and repair.  Host and Guest agree to cooperate with each
other in minimizing Operating Expenses and contracting with such service
providers as will provide good quality services at the best possible cost.

 

9.                                       Security Deposit.   As security for Guest’s faithful performance
of its obligations hereunder.  Guest
shall (a) deposit with Host upon execution hereof the amount of thirty-one
thousand, seven hundred and forty-three ($31,743) Dollars, and (b) deliver
a letter to First Properties Associates Limited Partnership (“FPALP”)
instructing FPALP to pay to Host the security deposit in the amount of
fifty-two thousand, five hundred ($52,500) Dollars currently held by FPALP
pursuant to a lease between FPALP and Guest for certain premises at 2301
Commonwealth Blvd., Ann Arbor, Michigan at the time said lease is terminated;
together such amounts are hereinafter referred to as the “deposit”.  If Guest fails to pay the rent or otherwise
defaults with respect to any provision of this Lease, Host may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default, or for the payment of any other sum to which Host may become
obligated by reason of Guest’s default or to compensate Host for any loss or
damage which Host may suffer thereby.  Said
deposit shall not be a limitation on Host’s damages or other rights under this
Lease, or a payment of liquidated damages or an advance payment of the rent.  If Host so uses or applies all or any portion
of said deposit, Guest shall, within five (5) days after written demand
thereof, deposit cash with Lessor in an amount sufficient to restore said
deposit to the full amount hereinabove stated and Guest’s failure to do so
shall be a material breach of this Lease.  Host shall not be required to keep said
deposit separate from its general accounts.  If Guest performs all of Guest’s obligations
hereunder, said deposit, or so much thereof as has not theretofore been applied
by Host, shall be returned, without payment of interest or other increment for
its use, to Guest at the expiration of the term hereof and after Guest has
vacated the Premises.  No trust
relationship is created herein between Host and Guest with respect to said
security deposit.

 

10.                                 Place and Form for
Payment of Rent.   All payments of rent shall be
delivered to Host at First Martin Corporation, 115 Depot Street, Ann Arbor,
Michigan 48104 or at such other

 

8

 

place as Host shall designate from time to time in writing.  Rent payments shall be made payable to Host.

 

11.                                 Financing.    (a) If
in connection with obtaining by Host of any financing or refinancing for the
Building, the lender shall request reasonable modifications in this Lease as a
condition to such financing or refinancing.  Guest will not unreasonably withhold, delay or
defer its consent thereto, provided that such modifications do not increase the
obligations of Guest hereunder or in a material manner adversely affect the
leasehold interest hereby created.

 

(b)  Guest
agrees that this Lease shall be subordinate to any mortgages that may hereafter
be placed or made upon the Building, provided the mortgagee named in any such
mortgages shall agree to recognize the lease of Guest in the event of
foreclosure if Guest is not in default.

 

(c)  Guest
agrees within ten (10) days after request by Host to execute in recordable
form and deliver to Host (i) a subordination agreement as required by any such
mortgagee provided that such an agreement contains recognition/nondisturbance
provisions satisfactory to Guest, and (ii) an estoppel certificate
certifying (a) that this Lease is in full force and effect, (b) the
date of commencement of the term of this Lease, (c) that rent is paid
currently without any off-set or defense thereto, (d) the amount of rent,
if any, paid in advance, (e) that there are no uncured defaults by Host or
stating those claimed by Guest (provided that, in fact, such facts are accurate
and ascertainable), and (f) such other information pertaining to the Lease
as may be required by any such mortgagee.

 

(d)  If
proceedings are brought for the foreclosure of, or in the event of exercise of
the power of sale under, any mortgage made by Host covering the leased
Premises, Guest shall become the tenant of, and attorn to, the purchaser upon
any such foreclosure or sale and recognize such purchaser as the Host under
this Lease.  The obligation of Guest
hereunder to attorn to the purchaser shall be conditioned upon the agreement of
such purchaser to recognize the rights of Guest under this Lease.  Guest agrees within ten (10) days after
request by Host to execute in recordable form and deliver to Host an attornment
agreement evidencing the provisions of this subparagraph.

 

12.                                 Use of Premises.    (a) Guest
shall use and occupy the Premises only for office use consistent with the
zoning of the Land.

 

(b)  Guest will keep the Premises
clean and shall not create any nuisance, noises, vibrations, electrical
discharges, radiation or other disturbances that shall in any way unreasonably
impair the peace, quietness, comfort, or security of the building wherein the
Premises are situated nor do anything that will cause any extra hazard, impair
the validity of any policy of insurance now or hereafter placed on the
Building, or any of its contents, or that will increase the rate of premium on
any such policy or that will violate any prohibitions in any such policy.

 

9

 

(c)  Guest, shall, at its own
cost and expense, comply with all of the requirements of all valid laws and
regulations, municipal, state and federal, now in force, or which may hereafter
be in force, pertaining to the Premises, and the use and occupancy
thereof.

 

(d)  Guest shall not sell, rent
or keep drug paraphernalia, pornographic materials or sexually explicit
materials in or from the Premises; Guest shall not use the Premises for any
activity included in the definition of “adult entertainment business” in the
City of Ann Arbor Zoning Ordinance, regardless of whether an activity is a “principal”
activity.

 

13.                                 Acceptance of
Premises.    Except as Host and Guest may otherwise agree
in writing at such time, the taking of possession by Guest shall be conclusive
evidence that Guest has examined the Premises, has found them to be in
satisfactory condition and accepts the Premises “as-is” subject to completion
of punch list items, and that Host up to such time had performed all of its
obligations hereunder.

 

14.                                 Host’s Repairs.    (a) Subject
to the provisions of Paragraph 5, 8 and 34 hereof, Host shall maintain and
repair the Premises, the Common Areas and the structural and public areas of
the Building such as lobbies, stairs, corridors, common restrooms, roof,
elevators, and structural elements; provided, however, should Guest elect to
self-manage the Project (as provided in Paragraph 34) then Guest, and not Host,
shall be responsible for all such maintenance and repair.  Notwithstanding anything herein to the
contrary, Guest shall be solely responsible for locking and unlocking Building
entry doors, security alarms and services.

 

(b)  Except as otherwise provided
in the Paragraph hereof relating to Destruction and in the Paragraph hereof
relating to Eminent Domain, there shall be no allowance, abatement of rental,
or liability to Guest for diminution of rental value or interference with Guest’s
business and no claim by Guest for eviction from said Premises by reason of
inconvenience, annoyance or injury to Guest arising from any repairs, alterations,
replacements or improvements made to said Premises, Building, Common Areas or
any portion thereof by Host, its agents, employees or contractors, or by Host’s
mortgagee.  To the extent Host may be
responsible for repairs under this Lease, Host shall not be liable to Guest for
failure to make repairs to the Premises, Building, Common Areas or any portion
thereof, unless Host has received from Guest written notice of the need for
such repairs and has failed to commence and diligently complete such repairs
within thirty (30) days of such notice or such greater length of time as is
reasonably required by Host to make such repairs.

 

(c)  The Guest covenants and
agrees that if the demised Premises consists of only a part of a structure
owned or controlled by the Host, the Host may enter the demised Premises at
reasonable times and upon reasonable notice and install or repair pipes, wires
and other appliances or make any repairs deemed by the Host essential to the
use and occupancy of other parts of the Host’s building.

 

(d)    Guest
acknowledges that the Building cooling system is designed for a maximum

 

10

 

internally generated heat load per zone or
room of 1 person per 220 square feet and 4.5 watts of lighting and equipment
per square foot in the aggregate.  Should
the host load in the Premises exceed the aforesaid maximum, Guest shall be
responsible for the cost of any
consequent modification to the cooling system.

 

15.                                 Alterations by
Guest.    Guest shall not make any alterations, additions and improvements to
the Premises without the Host’s written consent, and all alterations, additions
and improvements made by either of the parties hereto upon the Premises, except
movable office furniture and trade fixtures put in at the expense of the Guest,
shall be the property of the Host, and shall remain upon and be surrendered
with the Premises at the termination of this Lease; provided, however, that the
Guest shall have the option of removing additions made by it if the Premises
are restored to good condition following such removal and any damages to the
Premises resulting from such removal are repaired.  Host may, at its option, require Guest to
remove, at Guest’s sole expense, improvements made for or by Guest and repair
any damage resulting therefrom, upon the expiration or earlier termination of
this Lease.  Should Guest make any
alterations to the Premises, Guest shall have the plans for the Premises
revised to reflect such alterations and shall provide Host with a set of the
revised plans.

 

16.                                 Insurance.    (a) During the term hereof Host shall
maintain insurance coverage as follows:

 

(i) Host shall keep the Building
covered by a policy of fire and extended coverage insurance equal to 100% for
the replacement cost of the Building with an “agreed amount” endorsement so as
to prevent Host from becoming a co-insurer of any loss.  Such policy of insurance shall name Host as
the loss payee.  During any
reconstruction, alteration or material remodeling of the Premises such policy
shall be in “builder’s risk” form if there would be an exclusion under Host’s
fire and extended coverage policy as a result of such construction,
reconstruction, alteration or material remodeling.

 

(ii) Host shall maintain an
owner/lessor’s policy of commercial general liability and property damage
insurance with limits which are secured for other comparable buildings owned
and/or managed by First Martin Corporation; however, in no event shall said
limit ever be less than $3 million.

 

(iii) Host shall maintain a policy of
insurance covering loss of rents resulting from the interruption of Guest’s
business due to fire or other casualty for a period of not less than twelve
(12) months.  Such policy shall name Host
as the loss payee.

 

(b)   Guest shall pay Host
the cost of the insurance to be maintained by Host hereunder as provided in
Paragraph 8.

 

(c)   Guest shall maintain,
at Guest’s expense, a policy of commercial general liability and property
damage insurance with a combined single occurrence limit of not less than $3
million insuring Host and Guest against any liability arising out of the
ownership, use,

 

11

 

occupancy or maintenance of the Premises.  Host, although named as an additional insured
party under said policy, shall nonetheless be entitled to recover under said
policy for any less sustained by it as the result of the acts or omissions of
Guest. Said single limit shall be adjusted at the beginning of the sixth Lease
year and every fifth year thereafter to the amount then typically being
required by new leases for comparable facilities in southeastern Michigan as
mutually agreed upon by Host and Guest; but in no event shall said limit ever
be less than $3 million.  Guest shall
cause the issuer of such policy of insurance to deliver to Host a copy of or
Certificate of Insurance for such policy naming Host as an additional insured
party prior to the Commencement Date hereof and with respect to the renewal or
replacement policies, not less than thirty (30) days prior to the expiration of
the policy being renewed or replaced.  No
such policy shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days’ prior written notice to Lessor.  In addition, Guest shall maintain a policy of
fire and extended coverage insurance on its personal property.

 

(d) All insurance required under this paragraph shall be written
by companies acceptable to Host, shall be reasonably satisfactory to Host in
all respects and shall provide an effective waiver by the insurer of all rights
of subrogation against any named insured and against such insured’s interest in
the Premises and any income derived therefrom.  Host and Guest and all other parties claiming
under them hereby mutually release and discharge each other from all claims and
liability to the extent covered by insurance, regardless of the cause of any
damage, loss or injury to person or property to the extent such waiver of
liability is permitted by any applicable policies of insurance maintained by
Host and/or Guest, as the case may be.  Provided
other tenants of Host waive subrogation against Guest, Guest waives any and all
rights Guest may have against said other tenants for damage to or destruction
of the demised Premises due to any casualty insurable by the customary form of
fire and extended coverage insurance, whether such damage or destruction be due
to said tenants’ negligence or otherwise.

 

17.                                 Guest’s Personal Property.  All personal property of Guest
kept on the Premises shall be at Guest’s sole risk, and Guest hereby waives all
right of recovery which it might otherwise have against Host for any loss,
theft or damage to Guest’s personal property.

 

18.                                 Destruction - Fire or Other Cause.  If the Premises shall be rendered
untenantable by fire or other casualty, then Host shall make the Premises
tenantable as speedily as possible, and the rent shall be abated in whole or in
part, according to the portion of the Premises which is rendered untenantable,
during the period of untenantability, except that there shall be no such
abatement if such fire or other casualty shall be caused by the gross
negligence of Guest or its agents, employees, invitees or licensees, and
further, there shall be no abatement for the time required for the replacement
or repair of any property of Guest, in excess of the time required to make the
Premises tenantable.  In the event that
the Premises cannot be made tenantable within ninety (90) days, then either
Host or Guest may terminate this Lease by notification to the other of such
termination within ten (10) days after Host shall have notified Guest of the
time required to make them tenantable.  Host
shall, in its sole judgment, reasonably exercised, determine the length of

 

12

 

time
required to make the Premises tenantable, and shall notify Guest of such determination
within ten (10) days after the occurrence of the fire or other casualty.  Notwithstanding the foregoing, in the event
that the Premises shall be so damaged by fire or other casualty that demolition
or substantial reconstruction is required, then Host or Guest may terminate this Lease by notifying the Guest or
Host of such termination within thirty (30) days after the date of such damage.

 

19.                                 Eminent Domain.   In the event that all or a
substantial portion of the Premises be lawfully condemned or taken in any
manner for any public or
quasipublic use, this Lease shall terminate as of the date of actual taking.  In the event that any insubstantial part of
the Premises be so condemned or taken, Host or Guest shall have the right to
terminate this Lease as of the date of actual taking by giving Guest or Host
written notice of such termination; but should Host or Guest not so terminate
this Lease, this Lease shall cease as to the part taken and the rent adjusted
so that Guest shall pay a pro rata portion of the rent determined by the amount
of space (and rate therefor) remaining after the taking.  Host shall be entitled to receive the entire
award from any such condemnation or taking of the Premises or any part thereof,
without deduction therefrom for any estate or interest granted to Guest by this
Lease, provided, that nothing herein contained shall be deemed to prevent Guest
from claiming compensation for relocation costs or loss for interruption of
business in the event an award with respect thereto is provided for by law or is
fixed in the proceeding in which such taking shall occur.  In the event of a partial taking insufficient
in size to cause termination of the Lease, Host shall build, repair or replace
any outer walls, floor, or roof necessary to make the Premises tenantable.

 

20.                                 Assignment and Subletting.   Guest shall not assign
this Lease or sublet the Premises or any part thereof without the written
consent of Host, which consent shall not be unreasonably withheld.  Under no circumstances shall Guest have the
right to sublease the Premises to more than three (3) sublessees.  Any other provision of this Paragraph to the
contrary notwithstanding, Host shall not be required to give its consent to an
assignment or subletting of the leased Premises, or any part thereof, if the
effect of such assignment or subletting would be to create a profit for the
Guest. In such cases, any profit from the assignment or subletting shall be
paid to the Host. Guest agrees that it shall not be unreasonable for Host
to withhold its consent to a proposed assignment or subletting if: (i) Host
believes that the proposed assignee or sublessee of 35,000 square feet or more
in the premises is not as financially responsible as Guest on the date hereof; (ii) Host
believes that the proposed assignee or sublessee will not conduct on the
Premises a business of a quality equal to that conducted by Guest; or (iii)
Host believes that the business of the proposed assignee or sublessee,
conducted on the Premises, will have an impact upon the common facilities
dissimilar to that of Guest’s business or will require services of Host
dissimilar to those required by Guest. Host’s consent to one assignment or
sublease shall not waive the requirement of its consent to any subsequent
assignment or sublease.  In the event
Host consents to Guest’s subletting, Guest shall include in such sublease all
of the pertinent terms contained herein, and Guest shall furnish Host with a
certified copy of any and all subleases affecting the demised Premises prior to
such consent; and in case of default by Guest giving Host right of entry for
breach of condition

 

13

 

subsequent,
Guest, at Host’s option, shall assign all of Guest’s right, title and interest
in any subleases to Host, and Guest shall incorporate such provision in any and
all subleases made by Guest.  Host’s
consent to an assignment shall not be effective until Host has reserved a
written document in which the assignee has assumed and agreed to perform all of
Guest’s obligations in the Lease.  Host’s
consent to an assignment or sublease shall not release the Guest from the
payment and performance of its obligations in the Lease, but rather the Guest
and its assignee shall be jointly and severally primarily liable for such
payment and performance.

 

21.                                 Default, Eviction, Termination and Damages.  If
Guest shall fail to pay any rent or other charges due hereunder within ten (10) days
of the date said charges are due, or if Guest shall fail to comply with any
details, provisions, or covenants of this Lease other than the payment of rent
and shall not cure such failure within thirty (30) days after written notice
thereof, or if Guest shall be adjudged bankrupt by a court of competent
jurisdiction, or if a receiver or trustee shall be appointed for all or
substantially all of the assets of Guest, then in any such event, Guest shall
be deemed in default. When Guest is in default, Host, besides other rights or
remedies it may have, shall have the right to declare this Lease terminated and
the term ended, shall have the right to evict Guest under Summary Proceeding
law, and shall have the additional and immediate right of reentry and may
remove all persons and properly from the leased Premises and such property may
be removed and stored in a public warehouse or elsewhere at the cost of, and
for the account of Guest, without evidence of notice or resort to legal process
and without being deemed guilty of trespass, or becoming liable for any loss or
damage which may be occasioned thereby.  Should
Host elect to reenter, as herein provided, or should it take possession
pursuant to legal proceedings or pursuant to any notice provided for by law, it
may either terminate this Lease or it may from time to time, without
terminating this Lease, make such alterations and repairs as it may deem
appropriate in order to re-rent the Premises, and re-rent said Premises or any part thereof for such term or terms
(which may be for a term extending beyond the term of this Lease) and at such
rental or rentals and upon such other terms and conditions as Host in its sole
discretion may deem advisable.  If Host
has other unoccupied apace similar to the Premises, Host shall be under no duty
to attempt to re-rent these Premises (and Guest shall be entitled to no
reduction in its indebtedness to Host as a result of any such failure by Host)
until such other space has been rented.  Upon
each such re-renting, all rentals and other sums received in any month by Host
from such re-renting shall be applied, first to the payment of any indebtedness
other than rent due hereunder from Guest to Host; second, to the payments of
any costs and expenses of such re-renting, including reasonable brokerage fees
and attorneys’ fees and of costs of such alterations and repairs; third, to the
payment of rent and other charges due and unpaid hereunder, and the residue, if
any, shall be held by Host and applied in payment of future rent as the same
may become due and payable hereunder.  If
such rentals and other sums received from such re-renting during any month be
less than that to be paid during that month by Guest hereunder, Guest shall pay
such deficiency to Host. Such deficiency shall be calculated and paid monthly.  No such re-entry or taking possession of said
Premises by Host shall be construed as an election on its part to terminate
this Lease unless a written notice of such intention is given to Guest or
unless the termination

 

14

 

thereof
is decreed by a court of competent jurisdiction.  Notwithstanding any such re-renting without
termination, Host may at any time hereafter elect to terminate this Lease for
such previous default.  Should Host at
any time terminate this Lease for any default, in addition to any offer
remedies it may have, it may recover from Guest all damages it may incur by
reason of such default, including the cost of recovering the leased Premises, reasonable
attorneys’ fees, and including the worth at the time of such termination of the
excess, if any, of the amount of rent and charges equivalent to the rent
reserved in this Lease for the remainder of the stated term over the then reasonable
rental value of the leased Premises for the remainder of the stated term, all
of which amounts shall be immediately due and payable from Guest to Host.  In case suit shall be brought for recovery of
possession of the leased Premises, for the recovery of rent or any other amount
due under the provisions of this Lease, or because of the failure by Guest to
abide by any other detail, provision, or covenant herein contained, Guest shall
pay to Host all expenses incurred therefore, including reasonable attorneys’
fees.  Guest and Host hereby waive their
rights to jury trial in any litigation that may arise relating to this Lease.

 

22.                                 Surrender of
Premises.   Upon the expiration or the termination of the term
of this Lease, Guest shall quit and surrender the Premises to Host in good
order and condition, ordinary wear, damage by the elements, and damage which is
the responsibility of Host excepted; and Guest shall remove all of its property
and shall repair any damage to the Premises caused by such removal.  Any personal property of Guest or of anyone
claiming under Guest which shall remain on the Premises after the expiration or
termination of the Lease term shall be deemed to have been abandoned by Guest,
and either may be removed by Host as its property or may be disposed of in such
manner as Host may see fit, and Host shall not be responsible for the same.

 

23.                                 Access to
Premises.    Host shall have the right to enter upon the
Premises at all reasonable hours upon reasonable notice for the purpose of inspecting
the same, preventing waste, loss, or destruction, removing obstructions, making
such repairs or alterations as it is obligated to make under the terms of this
Lease, or to enforce any of Host’s rights or powers under this instrument, and
Host shall not be liable nor responsible for any loss that may accrue to Guest’s
business by reason thereof. The Host may show the Premises to prospective
tenants at any time during the last eighteen (18) months of the term of this
Lease and display a “for rent”  sign
subject to Guest’s approval of design and location.

 

24.                                 Heirs and Assigns.    The covenants,
conditions, and agreements contained in this Lease shall bind and inure to the
benefit of Host and Guest and their respective heirs, distributees, executors, administrators,
successors, and, except as otherwise provided in this Lease, their assigns.

 

25.                                 Confidentiality.    Guest shall not
disclose the terms and conditions of this Lease to third parties, except to
professional advisors of Guest and as required by securities laws affecting
Guest, without the advance written consent of Host.

 

15

 

26.                                 Quiet Enjoyment.    So long as Guest
pays the rent and performs all of its obligations in this Lease, Guest’s
possession of the Premises will not be disturbed by Host, its successors or
designs.

 

27.                                 Signs.    Other than the signage shown on the Project
plans and specifications mutually agreed upon by Host and Guest (as provided in
Paragraph 3), Guest or Host shall not fasten to or paint upon any part of the
Site or Building any sign, advertisement, notices or handbill without the prior
written consent of the Host or Guest.  Host may, without notice to Guest, remove any
such sign, advertisement, notice or handbill painted or affixed in violation of
this clause without any liability whatsoever for damages or otherwise to Guest, and Guest shall be
responsible for the cost of such removal.  Host reserves the right to place other signage
on the Site or Building in the event the Building becomes multi-tenanted.

 

28.                                 Holding Over.    In the event that
Guest shall hold over after the term of the Lease, it is agreed that thereafter
the tenancy shall be from month to month in the absence of a written agreement
to the contrary on the same terms and conditions contained herein, with the
exception that the rent shall increase to 120% of the rent in effect at the
termination of the term of the Lease for the first three months and 150%
thereafter.

 

29.                                 Parking.    Subject to the provisions of Paragraph 36 (h),
Guest shall have an exclusive license for the use of its agents, employees,
suppliers, and customers over the driveways and parking lots on the Site.  Guest shall not allow its employees, agents or
invitees to park on Traverwood Drive or in lots of other buildings in
Traverwood Business Park.

 

30.                                 Notices.    Whenever any notice is required hereunder it
shall be made in writing and served personally or by certified mail, return
receipt requested, at the following addresses (or at such other addresses as
the parties may hereafter designate in writing):

 

	
   

  	
  Host:

  	
  William
  C. Martin

  
	
   

  	
   

  	
  c/o
  First Martin Corporation

  
	
   

  	
   

  	
  115
  Depot Street

  
	
   

  	
   

  	
  Ann
  Arbor, Michigan 48104

  
	
   

  	
   

  	
   

  
	
   

  	
  Guest:

  	
  Mechanical
  Dynamics, Inc.

  
	
   

  	
   

  	
  2301
  Commonwealth Boulevard

  
	
   

  	
   

  	
  Ann
  Arbor, Michigan 48105

  

 

until
the commencement date of the Lease and thereafter the Premises.  If served personally, service shall be
conclusively deemed made at the time of such service.  If served by certified mail, service shall be
conclusively deemed made forty-eight (48) hours after the deposit thereof in
the United States Mail.

 

16

 

31.                                 Host’s Liability.    (a) Guest and
Host shall mutually indemnify, defend and hold harmless each other and their
respective officers, employees, agents and invitees from all losses, damage,
claims or liability arising out of any and
all injuries to or death of any person or damage to any property arising out of
any occurrence in or about the Premises, or arising out of any occurrence in or
about the Building arising from the act or neglect of Guest or Host or their
respective agents or invitees. Notwithstanding the foregoing, neither party
shall have any obligation to indemnify the other party against the sole
negligence of that party.

 

(b)  The
Host shall not be responsible or liable to the Guest for any loss or damage
that may be occasioned by or through the acts or omissions of persons occupying
adjoining premises or any part of the premises adjacent to or connected with
the Premises hereby leased or any part of the Building of which the leased
Premises are a part or for any loss or damage resulting to the Guest or his
property from bursting, stoppage or leaking of water, gas, sewer or steam
pipes.

 

(c)  If
Host shall fail to perform any provision of this Lease and if as a consequence
of such default Guest shall recover a money judgement against Host, such
judgement shall be satisfied only out of the proceeds of sale received upon
execution of such judgement and levied against the interest of Host in the
Building or the consideration received by Host from the sale of Host’s
interest.

 

32.                                 Rules and Regulations.    Guest and its
employees and invitees, shall faithfully observe and comply with the Rules and
Regulations attached to this Lease, and all reasonable modifications of and
additions thereto may be from time to time put into effect by Host.  Host shall not be responsible to Guest for
the nonperformance of any of said Rules and Regulations by any other Guest
or occupant of the Building.  In the
event of a conflict between the terms and provisions of this Lease and the
referenced Rules and Regulations, this Lease shall control.  Prior to the effective date of any intended
modifications of or additions to the Rules and Regulations annexed hereto,
Host shall furnish Guest with a written copy of same.

 

33.                                 Environmental Law Compliance.     The parties
acknowledge that there are certain federal, state and local laws, regulations
and guidelines now in effect, and that additional laws, regulations and
guidelines may hereafter be enacted, concerning the impact on the environment
of land use, the maintenance and operation of structures, and the conduct of
business.  Guest will not cause, or
permit to be caused, any act or practice on or about the premises which would
adversely affect the environment or violate any of such laws, regulations, or
guidelines.  In particular, without
limiting the generality of the foregoing, Guest will not use the premises to
produce, store, process or transport any hazardous waste or hazardous
substance, as those terms are defined in the Comprehensive Environmental
Response, Compensation, and Liability Act of 1980, as amended (“CERCLA”), or in
the Resource Conservation Recovery Act of 1980, as amended (“RCRA”).  Any violation of this covenant shall be an
event of default under this Lease.  In
the event that a governmental authority deems the Premises, Building or
underlying

 

17

 

land unsafe for occupancy
due to Guest’s tenancy, or the operation of its business at the Premises, then
Guest shall be liable and shall fully compensate Host for the resulting loss
sustained by Host.  Such liability shall
extend to any and all of Guest’s officers, principals, general partners and
guarantors under the Lease.  Guest agrees
to indemnify and hold Host harmless against all losses, costs, expense and
liability whatsoever, including Host’s costs of defending against the
foregoing, which will include reasonable attorney’s fees, and against any costs
necessary in connection with the cleanup or removal of any hazardous waste or
hazardous substance from the premises, caused, or permitted to be caused, by
any act, practice or neglect of Guest with respect to the use of the premises.  Guest shall have no claim against Host by
reason of any changes which Host may be required to make to the premises
pursuant to such laws, regulations, or guidelines.  Host hereby represents to Guest that, to the
best of Host’s knowledge, no condition currently exists on the Site which
constitutes a violation of any environmental law described in this Section 33
or otherwise, and Host hereby agrees to indemnify, defend and hold harmless
Guest from any liability, claim, damage or expense arising out of any environmental
condition associated with the Site in existence prior to the Commencement Date.

 

34.                                 Management
by Guest.     Provided
Guest is the sole Lessee of the initial Building or after expansions, Guest
shall have the right to assume responsibility for the management, maintenance
and repair (including replacement, as necessary) of the Project by giving Host
written notice of its intentions to assume management of the Project on the
date specified in such notice (which date must be on the first day of a Lease
Year): (a) within six (6) months of Lease execution; or (b) six (6) months
prior to the fifth anniversary of the Commencement Date; or (c) six (6)
months prior to the tenth anniversary of the Commencement Date; or (d) six
(6) months prior to the commencement of the First Option Term hereunder,
provided Guest has properly exercised such Option; or (e) six (6) months
prior to the commencement of the Second Option Term hereunder, provided Guest
has properly exercise such Option.  Performance
of such responsibility by Quest shall be on the terms and conditions which are
as follows.  Host shall be relieved of its
obligation to maintain and repair the Project (as set forth in Paragraph 14).  Guest shall maintain the Project in good order
and repair and in a first-class condition.  Guest shall pay the Operating Expenses for
maintenance and repair set forth in Paragraph 8 directly to the providers of
maintenance and repair services.  Guest
shall enter into and keep in force maintenance contracts for the services which
are follows: (a) parking facility sweeping, snow removal and salting; (b) comprehensive
landscaping maintenance, including mowing, fertilization, pruning and the
planting of spring and summer annual flowers; (c) elevator maintenance
(full maintenance contract, inducting replacements); and (d) heating/cooling
systems preventive maintenance (4 times per year).  Guest shall police the grounds and the parking
facilities of the Project each day so that said grounds and parking facilities
are as free of litter and debris as is reasonably possible.  Should Guest fail to perform any of its
maintenance obligations hereunder within thirty (30) days of notice from Host,
Host shall have the right to enter the Premises, perform such maintenance and
bill Guest the reasonable cost thereof.  Guest shall not engage a third party to manage
such maintenance and repair without the advance written approval of

 

18

 

Host.  Upon assumption of Project management by Guest
hereunder, Host shall have all of the rights provided to Guest under Section 8
(c) hereof with respect to oversight of Project management.  In the event Host expands the Building
pursuant to the terms of Paragraph 36 (h), Guest shall cease to be
responsible for the maintenance and repair of the Project and Host shall assume
such responsibility as of the date construction of such expansion commences in
accordance with the terms of this Lease. 
Host represents to the best of its knowledge that the premises prior to and
during the construction process does not violate any such laws and indemnifies
Guest against any loss caused by a condition existing prior to lease
commencement.

 

35.                                 Michigan
House Lease.     A
default by Guest under the lease between First Properties Associates Limited
Partnership (as Assignee of Plymouth Square) and Guest dated July 12, 1989
for certain premises at 2301 Commonwealth Boulevard, Ann Arbor, Michigan shall
be a default under this Lease.

 

36.                                 Expansion
Options.     At
the option of Guest, Host shall expand the Building as hereinafter provided.

 

(a)                                  Building
Additions.     The
expansion of the Building shall be in the form of two, two-story additions
containing, in the aggregate, a Gross Building Area of approximately 60,000
square feet; the approximate overall footprint of said additions is depicted on
Exhibit C attached hereto.  The
first such addition is hereinafter referred to as the “Phase I Expansion Space”;
the second such addition, the “Phase D Expansion Space”.

 

(b)                                 Guest’s
Expansion Options.     Guest
shall have the option to lease the Phase I Expansion Space as an addition to
the Premises.  The Phase I Expansion
Space shall have a Gross Building Area between 20,000 and 30,000 square feet.
Guest shall determine the exact size of the Phase I Expansion Space; the bay
sizing shall govern the increments to the area. 
Said option shall terminate on the date (the “Option Termination Date”)
two years from the Commencement Date of this Lease.  Guest shall exercise said option by giving
Host notice thirty (30) days prior to the Option Termination Date.  Guest shall have the right to extend the Option
Termination Date by a period of two years (i.e., to that date four years from
the Commencement Date) by giving Host notice thirty (30) days prior to the then
current Option Termination Date and paying all carrying costs for the land required
for the Phase I Expansion Space for said two year period, which land is deemed
to be 25% of the Site.  As used herein, “carrying
costs” shall mean real estate taxes and assessments (prorated on a due date
basis) and interest on the value of said land at the then prime rate minus 200
basis points.  The value of said land is
deemed to be $4.00 per square foot of land area. As used herein, “prime rate”
shall mean the prime rate reported in the Wall Street Journal as such rate may
change from time to time.  Carrying costs
shall be paid in monthly installments.  If
Guest exercises its option for the Phase I Expansion Space, Guest shall have an
option to lease the Phase II Expansion Space as an addition to the

 

19

 

Premises.  The Gross Building
Area of the Phase II Expansion Space shall be approximately the difference
between 60,000 square feet and the Gross
Building Area of the Phase I Expansion Space. 
Said Phase II option shall terminate on the date (the “Phase II Option
Termination Date) two years from the date the Phase I Expansion Space becomes
part of the leased Premises.  Guest shall
exercise [ILLEGIBLE] Phase II option
by giving Host notice not later than thirty (30) days prior to the Phase II
Option Termination Date.  Guest shall
have the right to extend the Phase II Option Termination Date by a period of
one year by giving Host notice thirty (30) days prior to the then current
Termination Date and paying all carrying costs (as described above) for the
land required for the Phase II Expansion Space for said one year period, which
land is deemed to be 25% of the Site. 
Exercise by Guest of either of the aforesaid expansion options shall be
subject to Guest not having been
in default under this Lease.  Host and
Guest acknowledge that while Host shall secure site plan approval for the
entire 120,000 square foot Building forthwith, each expansion option and Host’s
ability to perform same, are subject to securing all necessary governmental
approvals.  Within thirty days of the
date Guest exercises either of the aforesaid expansion options, Host and Guest
shall execute an amendment to the Lease which adds the expansion space to the
Premises and includes the other pertinent provisions of this Paragraph 36.  Exercise of either expansion option by Guest
shall be subject to a determination by Host in its reasonable judgement that
Guest’s financial condition and financial prospects as of the date Guest gives
Host notice of such exercise are as strong as Guest’s financial condition and
financial prospects as of the date hereof. 
Host shall make such determination within fifteen (15) days of the date
such notice is given; Guest shall provide Host with such financial data and
other information as is reasonably required by Host to make such determination.

 

(c)                                  Term.  Should Guest exercise the
Phase I option, the term of this Lease shall be extended for a period of ten
years from the date of occupancy of the Phase I expansion space.  Should Guest exercise the Phase II option,
the term of the Lease will not change. 
The Phase I and Phase II Expansion Spaces shall become part of the
leased Premises (and rent shall become due) as of the date of Substantial
Completion of Host’s Expansion Improvements (as hereinafter defined) with
respect to each phase.

 

(d)                                 Improvements.  From
the date an amendment for an expansion space is executed, Host and Guest shall
diligently prosecute the completion of the Expansion Space.  Host shall cause the construction of the
expansion space, including site work, building shell, mechanical systems, and
interior partitions and finishes but excluding the installation of cubicles
(including electrical wiring) and computer and communications cabling (herein
sometimes referred to as “Host’s Expansion Improvements”).  Guest shall be responsible for the layout,
design and installation of all cubicles (including electrical wiring) and
computer and communications cabling; said design and Guest’s contractors must
be approved by Host in writing in advance. 
Host’s Expansion Improvements shall be constructed in accordance

 

20

 

with plans and
specifications mutually determined and agreed upon by Host and Guest as
provided hereinafter.  The architect for
Host’s improvements shall be Jickling, Lyman and Powell, or, at Host’s option,
another qualified architect.  The maximum
number of parking spaces allowed by the City of Ann Arbor shall be provided not
to exceed five spaces per 1,000 square feet of Gross Building Area. Host shall
submit to Guest for its approval the site plan and final plans and specifications
for Host’s Expansion Improvements; said plans and specifications shall be
deemed approved unless rejected in writing within five (5) business days
of receipt. A working set of site plans and building plans and specifications
which are approximately 75% complete will be made available for review
at least two weeks prior to submission of final plans.  Any denial of such approval shall be fair and
reasonable.  The general contractor for
Host’s Expansion Improvements shall be O’Neal Construction or, at Host’s
option, another qualified contractor selected by Host (“Contractor”).  Host and Guest shall jointly negotiate a
contract with the Contractor, which contract shall provide a guaranteed maximum
price which includes a 3% design and construction
contingency.  Host shall provide an
allowance (the “Expansion Hard Construction Cost Allowance”) negotiated by Host
and Guest for the direct construction costs for Host’s Expansion Improvements;
“direct construction costs” includes bonding and permits but excludes
extraordinary costs relating to poor soil conditions, which costs shall be the sole
responsibility of Host, and soft costs such as architectural and design
services, legal services, construction financing, permanent financing
origination, title insurance, builder’s risk insurance, brokerage commissions,
development fees, real estate taxes and other carrying costs for the Site.  Any direct construction costs for Host’s
Expansion Improvements in excess
of said improvement allowance shall be paid to Host by Guest within ten (10) days
of date of invoice.  Contractor shall
provide a warranty of one year on all work with the exception of the roof,
which shall have a ten year warranty; said warranties shall commence as of the
date of Substantial Completion of Host’s Expansion Improvements.  The additional cost of any change orders
requested by Guest shall be paid to Host within ten (10) days of invoice
and shall include an administrative fee of 10%. 
Host shall not be liable for failure to give possession of the Expansion
Space or any part thereof by reason of Governmental interference, act of God,
labor disputes, fire, unavoidable casualties or other causes
beyond Host’s control.

 

(e)                                  Rent.   Guest shall pay to Host as annual base rent for each
Expansion Space for the term hereof an amount which shall be determined by
multiplying the Rent Factor by the Expansion Total Development Cost, as further
defined below:

 

(i)    “Rent Factor” is the sum of the Rental Rate Constant and the Debt
Service Constant

 

(ii)   “Rental Rate Constant” is 200 basis points.

 

21

 

(iii)  “Debt Service Constant” is the percentage calculated by dividing the
annual payment of principal and interest required for the Expansion Permanent
Mortgage Loan by the original principal amount of said Loan.

 

(iv)  “Expansion Permanent Mortgage Loan” is the loan which is secured by
Host to finance the Expansion Total Development Cost.  Said loan shall (a) have a minimum term
of ten (10) years, (b) be non-recourse, (c) have a twenty-five
year amortization schedule which provides for level annual
payments, and (d) be otherwise acceptable to Host.  If said loan has not been closed as of the
date the Expansion Space becomes part of the leased Premises, then the terms
set forth in the commitment for said Loan shall be used.

 

(v)   “Expansion Total Development Cost” is the sum of :

 

•                                          “Expansion Land Cost” which is deemed to be
$17.50 per square foot of Gross Building Area on the first and second floors of
the Expansion plus $4.00 per square foot of additional land required in order
to provide necessary supplemental parking should Guest elect finish-off the
lower plaza level for office occupancy;

 

•                                          “Expansion Hard Construction Cost” which is
the portion of the Expansion Hard Construction Cost Allowance which is used;

 

•                                          “Expansion Soft Cost”, which shall be
negotiated by the Host and Guest and shall include but not be limited to the
cost for the Expansion of interim financing, permanent financing origination,
architectural and engineering, real estate taxes during construction, builder’s
risk, insurance, appraisals legal, accounting, and a contingency of 2%, but
shall exclude the developer’s fee and overhead; and

 

•                                          “Developer’s Fee and Overhead” which shall be
3.0% of the sum of: (a) Expansion Land Cost; (b) Expansion Hard
Construction Cost; and (c) Expansion Soft Cost.

 

(f)                                    Additional Space. 
Should Guest require additional space after exercising both Expansion
Options, Host shall use its best efforts to find additional space at similar
terms and conditions coterminous with the Lease.

 

(g)                                 Assignment.  Guest shall not have the right
to assign either Expansion Option to third parties.  Should Guest assign its interest in the
Lease, the Expansion Options shall be terminated.

 

(h)                                 Host’s Right to Expand. 
Should Guest not exercise either of the aforesaid options for Expansion
Space, Host shall have the right to construct the Expansion Space and lease
such space to third parties.  Should Host
exercise said right, upon the

 

22

 

substantial completion of
the Expansion Space, the Building entry
lobby, and elevators, hallways and stairwells which do not exclusively
serve the leased Premises shall cease to be part of the leased Premises and
shall become common area over which Guest shall have a non-exclusive easement in
common with the other tenants of the Building. 
In such an event, the rent payable to Host by Guest hereunder shall be
ratably reduced; such reduction shall be computed based on the rentable area of
the Premises (as hereinafter defined) before and after the common area conversion.  As used herein, “rentable area” shall mean
the sum of the Gross Building Area of the leased Premises (after deduction of
the Gross Building Area of the common areas) and a pro rata share of the Gross
Building Area of the common areas.  Where
the leased Premises abuts the common area, Gross Building Area shall be
determined by measuring to the midpoint of common walls.  Guest shall pay its pro rata share of the
Project Real Estate Taxes and Operating Expenses for the common areas, grounds
and parking lots of the Project.  Said
share shall be the proportion which the rentable area of the Premises after
expansion bears to the total Gross Building Area after expansion.  Guest acknowledges inconveniences may arise
during the expansion of the Building. 
Host shall not cause any unreasonable inconveniences such as limiting
Guest’s access to the Premises or curtailing the services which Host is
obligated to provide hereunder.  Should
Guest exercise its option for the Phase I Expansion Space, Guest shall, in the
design process for the Phase I Expansion Space, cooperate with Host in
incorporating into the plans for the Phase I Expansion Space possible future
means of access from the Building entry lobby and elevator(s) to the Phase II
Expansion Space.  Should Guest not
exercise its option for the Phase II Expansion Space, then, should Host
exercise its right to construct the Phase II Expansion Space, Guest shall agree
to relinquish, at Host’s option, the portion of the Premises required for such means
of egress at the time of such construction; and the rent and expenses payable
hereunder shall be ratably reduced.  If
Host should exercise its rights to expand the Building, then (i) Guest’s
right to manage the Project shall terminate as of the date Hosts commences
construction of such expansion, and (ii) Guest’s license to use the
parking lots on the Site shall be restated as follows.  Guest shall have an exclusive license for
parking for its visitors in a portion of the parking lot to the west of the
Building, and Guest shall have a non-exclusive license for parking for its
employees and agents in the parking lot to the northeast of the Building as
depicted in Exhibit D attached hereto.

 

37.                                 Parking Structure.  Host
shall have the right to construct a parking structure on the Site in
substitution, in whole or in part, for the Project parking lots and Guest shall
have a non-exclusive license for the use of said structure in common with
others.  The total number of spaces which
Guest is entitled to use in the structure and remaining parking lots shall be
the same as the number of spaces Guest was entitled to use prior to the
construction of the parking structure. 
Guest shall be responsible for its pro rata share of the cost of
maintaining and repairing such structure, which cost shall be included in
Operating Expenses but shall not be higher than the costs to maintain surface
parking.

 

23

 

38.                                 Miscellaneous.  (a) The
failure of either party to enforce any covenant or condition of this Lease
shall not be deemed a waiver thereof or of the right of either party to enforce
each and every covenant and
condition of this Lease. No provision of this Lease shall be deemed to have
been waived unless such waiver is in writing.

 

(b)                                 This Lease and the Exhibits attached hereto
and financing a part hereof, set forth the entire agreements between Host and
Guest concerning the leased Premises. 
Any amendment shall be in writing and signed by each party.

 

(c)                                  Each party represents and warrants that there
are no claims for brokerage commissions or finder’s fees in connection with the
execution of this Lease with the exception of a commission due to Guest’s
broker, GVA Strategis, and each party agrees to indemnify the other against,
and hold it harmless from, all liability arising from any such claim.  Guest shall be liable for the payment of a
commission in the amount of Two Hundred Ninety-Three Thousand Five Hundred
($293,500) Dollars to GVA Strategis; Host shall reimburse Guest the amount of
said commission within ten (10) days of the date Guest takes occupancy of
the Premises.

 

(d)                                 Guest shall not record this Lease without the
written consent of Host.   Upon the
request of either party the other party shall join in the execution of a
memorandum of this Lease for recording which shall describe the parties, the
leased Premises, the term and any special provisions.

 

(e)                                  In the event of any transfer of Host’s
interest in the Premises, the transferor shall be automatically relieved of all
obligations and liabilities on the part of Host accruing from and after the
date of such transfer.   The release of
Host from such obligations and liabilities shall be expressly conditioned upon
an assumption by any transferee of all of the unperformed terms, covenants and
conditions of this Lease arising after the date of such transfer, including the
application of Guest’s security deposit in accordance with the provisions of
Paragraph 9 hereof.

 

(f)                                    Any amount due from Guest to Host which is
not paid when due shall bear interest at the highest legal rate from the date
due until paid, unless otherwise specifically provided herein, but the payment
of such interest shall not excuse or cure any default by Guest.

 

(g)                                 No payment by Guest of a lesser amount than
the monthly rent shall be deemed to be other than on account of the earliest
rent, nor shall any endorsement or statement on any check or any letter
accompanying any payment be deemed an accord and satisfaction, and Host shall
accept such payment without prejudice to Host’s right to recover the balance of
such rent or pursue any other remedy.

 

(h)                                 Guest agrees to furnish to Host the financial
statements of Guest in a form acceptable to Host at least annually and within
thirty days after Host’s request.

 

24

 

(i)                                     This Lease shall be governed by, and
construed to accordance with, the laws of the State of Michigan.  If any
provision of this Lease shall, to any extent, be invalid or
unenforceable, the remainder of this Lease shall not be affected and each
provision shall be valid and enforceable to the fullest extent permitted by
law.

 

(j)                                     In the event that during the term of this
Lease, Host is afforded the opportunity to rent space on the roof of Phase I or
subsequent phases of the Building solely occupied by Guest for the location of
one or move antennae, Guest agrees to such rental; provided, that no such
antenna shall interfere with any antenna, satellite dish or other
communications or similar device that Guest has installed on the roof with Host’s
approval and; further provided, that Host shall negotiate any such rental
agreement and, after reimbursement of all of Host’s expenses related to such
negotiations, shall share such rental amounts, 50% to Host and 50% to Guest,
provide an accounting of expenses and rent collections to Guest and remit Guest’s
share as such rents are collected.

 

Intentional page break.

 

25

 

This agreement is hereby
signed on behalf of the parties effective as of the date first written above.

 

 

	
   

  	
  Host:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  William
  C. Martin

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ William C. Martin

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Guest:

  
	
   

  	
   

  
	
   

  	
  MECHANICAL
  DYNAMICS, INC.,

  A Michigan corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ [ILLEGIBLE]

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
  VP & CFO

  	
   

  

 

26

 

ACKNOWLEDGEMENT OF
CORPORATE GUEST

 

	
  STATE
  OF

  	
   

  
	
   

  	
  ss.

  
	
  COUNTY
  OF

  	
   

  
	
   

  
	
   

  
	
  The
  foregoing instrument was acknowledged before me this 5th day of August, 1999 by

  
	
   

  
	
   

  	
  the

  	
   

  	
  of

  
	
   

  	
  ,

  
	
   

  
	
  a

  	
  corporation,
  on behalf of the corporation.

  
					

 

	
   

  	
  /s/ Shawn L. Siddall-Benoit

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary Public,

  	
   

  	
  County

  	
   

  
	
   

  	
   

  
	
   

  	
  My commission expires:

  	
   

  	
   

  
	
   

  	
   

  	
  Shawn
  L. Siddall-BENOIT

  	
   

  
	
   

  	
   

  
	
   

  	
  Notary Public, Livingston
  County, MI

  
	
   

  	
  My Commission
  Expires May 17, 2002

  
	
   

  	
  Acting in Washtenaw
  County, MI

  
						

 

27

 

EXHIBIT A-1

 

LEGAL DESCRIPTION OF THE LAND

 

Commencing
at the South 1/4 corner of Section 15,
T2s, R&E, City of Ann Arbor, Washtenaw County, Michigan; thence

N 01°10’27” W 1000.01 feet along the North-South 1/4 of said Section 15 for
a PLACE OF BEGINNING; thence N 71°15’31” W 325.00 feet; thence N 30o29’46” W 215.77 feet; thence S 53o14’25” W 482.04 feet; thence the following
four courses along the Easterly right-of-way line of Traverwood Drive (70 feet
wide): 418.79 feet along the arc of a 672.98-foot radius nontangential circular
curve to the right, with a central angle of 35o39’18”, having a chord which bears N 05o57’27” E
412.06 feet, N 23o47’10” E 347.36 feet,
129.14 feet along the arc of a 538.00-foot radius circular curve to the right,
with a central angle of 13o45’10”, having a chord which bears N 30°39’46” E 128.83 feet, and N 37o32’08” E 307.25 feet; thence S 51°49’25” E
446.69 feet along the Southerly right-of-way line of Huron Parkway (variable
width); thence S 01°10’27” E 808.10 feet to the Place of Beginning, being a
part of the Southwest 1/4 of said Section 15, containing 13.19 acres of
land, more or less, being subject to easements and restrictions of record, if
any.

 

28

 

 

 

 

 

 

 

EXHIBIT B

 

ILLUSTRATION OF HYPOTHETICAL RENTAL PAYMENT
CALCULATION

(Using Estimated Costs)

 

	
  Hard
  costs (66,878 sq. ft. @ $100.00)

  	
   

  	
  $

  	
  6,687,800

  	
   

  
	
  Soft
  costs (60,000 sq. ft. @ $26.39)*

  	
   

  	
  1,583,400

  	
   

  
	
  Land
  Cost (60,000 sq. ft. @ $17.50)

  	
   

  	
  1,050,000

  	
   

  
	
  Est. Total Development Cost

  	
   

  	
  $

  	
  9,321,200

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  x Est. Rent Factor (Rental Rate Constant
  + Debt Service Constant) (2.00% + 8.75% = 10.75%)

  	
   

  	
  x 10.75

  	
  %

  
	
   

  	
   

  	
   

  	
   

  
	
  Estimated Annual Base Rental

  	
   

  	
  $

  	
  1,002,029

  	
   

  

 

*Note: Soft Costs are based on first two
floors only, and not the approximate 6,878 sq. ft. on the lower plaza level.

 

30

 

EXHIBIT E

 

RULES AND REGULATIONS

 

1.     The sidewalks and grounds of the Building are
not for the use of the general public, and Host shall in all cases retain the right to control and prevent
access thereto of all persons whose presence in the judgment of Host shall be
prejudicial to the safety, character, reputation and interests of the Building
and its Guests, provided that nothing herein contained shall be construed to
prevent such access to employees or other persons with whom any Guest normally
deals in the ordinary course of its business, unless such persons are engaged
in illegal activities.  No Guests and no employee,
agent or invitee of any Guest shall go upon the roof of the Building.

 

2.     No
awnings or other projection shall be attached to the outside walls of the
Building.  No curtains, blinds, shades or
screens shall be attached to or hung in, or used in connection with, any window
or door of the Premises without prior written consent of Host. All electric
ceiling fixtures hung in offices or spaces along the perimeter of the Building
must be fluorescent, of a quality, type, design and bulb color approved by Host.
 Neither the interior nor exterior of any
windows shall be coated or otherwise unscreened without the written consent of
the Host.

 

3.     No bicycles, vehicles, birds or animals of
any kind shall be brought into or kept in or about the Premises.  Any preparation of food or beverages in the
Premises shall be done only with equipment approved by Host which does not
overload the electrical wiring of the Premises. 
No Guest shall cause or permit any unusual or objectionable odors to be
produced or permeate the Premises.

 

4.     Except with the prior written consent of
Host, no Guest shall occupy or permit any portion of his Premises to be
occupied as an office for a public stenographer or typist, or for the
manufacture or sale of liquor, narcotics or tobacco in any form, or as a barber
or manicure shop, in or on the Premises. 
No Guest shall engage or pay any employees on the Premises, except those
actually working for Guest on the Premises, nor advertise for laborers giving
an address at the Premises.  The Premises
shall not be used for lodging or sleeping or for any illegal purposes.

 

5.     No Guest shall make, or permit to be made,
any unseemly or disturbing noises or disturb or interfere with occupants of
this or neighboring buildings or premises or those having business with them,
whether by the use of any musical instrument, radio, phonograph, unusual noise,
or any other way.  No Guest shall throw
anything out of door, windows or skylights or down the passageways.

 

6.     Guest shall provide Host with a key for any exterior
doors installed by Guest in the Premises. 
Each Guest must, upon the termination of its tenancy, restore to the
Host all keys of stores, offices, and toilet rooms, either furnished to, or
otherwise procured by, such Guest and in the event of the loss of any keys so
furnished, such Guest shall pay to the Host the cost of

 

33

 

replacing the same or of changing the lock or locks opened by such lost
key if Host shall deem it necessary to make such change.

 

7.     Host shall have the right to prohibit any
advertising by any Guest which, in Host’s opinion tends
to impair the reputation of the Building or its desirability as an office research
building and upon written notice from Host any Guest shall refrain from or
discontinue such advertising.

 

8.     Each guest shall see that the doors of its
Premises are closed and securely locked and must observe strict care and
caution that all water faucets, water apparatus and utilities are shut off
before employees leave the Premises, so as to prevent waste or damage, and for
any default or carelessness Guest shall make good all injuries sustained by
other tenants or occupants of the Building or Host. On multiple-tenancy floors,
all Guests shall keep all doors to the Building corridors closed at all times
except for ingress and egress.

 

9.     The requirements of Guest will be attended to
only upon application to Host. Employees and agents of Host shall not perform
any work or do anything outside of their regular duties unless under special
instruction from Host.

 

10.   Canvassing, soliciting and peddling in the
Building are prohibited and each Guest shall cooperate to prevent the same.

 

11.   Guest shall not cause any noise, odor,
vibration or light disturbing or annoying to other tenants of the Building or
to tenants of neighboring buildings.

 

12.   No air conditioning unit or other similar
apparatus shall be installed or used by any Guest without the written consent
of Host.

 

13.   No Guest shall install any radio or
television antenna, loudspeaker or other device on the roof or exterior walls
of the Building without Host’s consent which consent will not be unreasonably
withheld.

 

14.   Each Guest shall store all its trash and
garbage within its Premises.  No material
shall be placed in the trash boxes or receptacles if such materials is of such
nature that it may not be disposed of in the ordinary and customary manner of
removing and disposing of trash and garbage in the City of Ann Arbor without
being in violation of any law or ordinance governing such disposal. All garbage
and refuse disposal shall be made only through entryways provided for such
purposes and at such times as Host shall designate.  Should the amount of trash generated by Guest
exceed the amount typically generated by users of office space, Guest shall be
responsible for the cost of disposing of such excess.  All boxes shall be broken down before being
placed in the Building trash boxes or receptacles.

 

15.   Host may waive any one or more of these Rules and
Regulations for the benefit of any particular Guest or Guests, but no such
waiver by Host shall be construed as a waiver of such Rules and
Regulations in favor of any other Guest or Guests, nor prevent Host from

 

34

 

thereafter enforcing any such Rules and Regulations against any or
all of the Guests of the Building.

 

16.   These Rules and Regulations are in
addition to and shall not be construed to in any way modify, alter or amend, in
whole or in part, the terms, covenants, agreements and conditions of any lease
of premises in the Building.

 

17.   Guest shall not operate any equipment that
sends out radio frequencies or otherwise distorts electric power to the
building.

 

18.   Smoking is prohibited in the Building
restrooms, hallways, lobbies, lunchrooms and other common areas and on the
Building grounds except in those areas designated by Host. Host shall not be
obligated to designate any such areas.

 

19.   Guest shall place chair mats under all chairs
with casters with the exception of conference room chairs; if Guest does not,
Host shall have the right to provide such chair mats and Guest shall reimburse
Host for the cost of such mats.

 

20.   The moving into or out of the Building of any
safes, freight, furniture, or other bulky matter of any description may only
take place during the hours determined by Host in its absolute discretion.  The moving of such bulky matter may only be
made after notice to Host and the persons employed by any Guest for such work
must be acceptable to Host.

 

21.   Host reserves the right to make such other
and reasonable rules and regulations as in its judgment may from time to
time be needed for the safety, care and cleanliness of the Building, and for
the preservation of good order therein.

 

35

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