Exhibit 10.7(a)

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE (“First Amendment”) is made as of
          November 12            , 2004, by and between TRANSWESTERN GREAT
LAKES, L.P., a Delaware limited partnership (“Landlord”), as successor in
interest to Great Lakes REIT, Inc., and AKSYS, LTD., a Delaware corporation
(“Tenant”).

 

WHEREAS, Landlord and Tenant are parties (by succession or assignment) to a
written lease dated July 15, 1996 (the “Lease”) for the lease of the entire
commercial building consisting of approximately 41,500 rentable square feet, and
located at Two Marriott Drive, Lincolnshire, Illinois  60069; and

 

WHEREAS, Landlord and Tenant now desire to amend the Lease and extend the term
of the Lease, all on the terms and conditions hereinafter set forth.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions
hereinafter contained, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                       Lease Term.  The term of the Lease
shall be extended from the current expiration date of August 31, 2006, until
December 31, 2011 (the “Extension Term”).

 

2.                                       Annual Rent.  Effective as of June 1,
2005, Tenant shall pay the following amounts as Annual Rent and Monthly
Installment of Rent for the Premises for the remainder of the term of the Lease
(including the Extension Term):

 

Period

 

Annual Rent/ RSF

 

Annual Rent

 

Monthly Installment of Rent

 

6/1/05 – 12/31/05

 

$

8.50

 

$

352,750.00

 

$

29,395.83

 

1/1/06 – 12/31/06

 

$

8.80

 

$

365,200.00

 

$

30,433.33

 

1/1/07 – 12/31/07

 

$

9.10

 

$

377,650.00

 

$

31,470.83

 

1/1/08 – 12/31/08

 

$

10.50

 

$

435,750.00

 

$

36,312.50

 

1/1/09 – 12/31/09

 

$

11.25

 

$

466,875.00

 

$

38,906.25

 

1/1/10 – 12/31/10

 

$

12.50

 

$

518,750.00

 

$

43,229.17

 

1/1/11 – 12/31/11

 

$

13.25

 

$

549,875.00

 

$

45,822.92

 

 

3.                                       Rent Adjustment.  In addition to Annual
Rent, for the remainder of the term of the Lease, including the Extension Term,
Tenant shall continue to pay to Landlord Direct Expenses and Taxes for each
Lease Year, as set forth in the Lease.

 

4.                                       Improvements.  Landlord has no
obligation to improve, alter or remodel the Premises; provided however, that
Landlord shall provide up to but not in excess of $290,500 (an amount equal to
$7.00 per rentable square foot in the Premises) (“Tenant Allowance”) for
Tenant’s use for the purpose of redecorating, altering, furnishing and/or
remodeling the Premises, provided however, in no event shall the cost of
furnishing the Premises exceed $124,500.00 (an amount equal to $3.00 per
rentable square foot in the Premises).  No work may be performed prior to
Landlord’s written approval of such work and/or the detailed plans of such work,
if necessary and available.  All contractors must be approved by Landlord in
advance, which approval shall not be unreasonably withheld, and shall be
licensed, bonded and/or insured to Landlord’s reasonable satisfaction.  The cost
of performing such work shall include any and all architectural fees, fees for
building permits and approvals, and Landlord’s construction management fee of
three percent (3%) of the cost of the work.  Landlord shall provide Construction
Management Services to Tenant for its improvements.  If the cost of such work
exceeds the amount of the Tenant Allowance, Tenant shall be directly responsible
for said excess amount or shall pay to Landlord said excess amount within
fifteen (15) days of Tenant’s receipt of Landlord’s statement of such excess
costs.  If the actual cost of the

 

64

--------------------------------------------------------------------------------

 

work is less than the Tenant Allowance, Tenant shall not be entitled to receive
any payment or credit for such difference.  Such work must be completed by, and
any request for reimbursement from the Tenant Allowance must be made to Landlord
no later than, December 31, 2005.  Unless otherwise provided herein, any
installations shall remain the property of Landlord.

 

5.                                       Electricity.  All electricity used by
Tenant in the Premises shall be paid for by Tenant by a separate charge or
charges billed by the utility company providing electrical service and payable
by Tenant directly to such utilities company.  Landlord shall have the right at
any time and from time-to-time during the Lease Term to contract for electricity
service from such providers of such services as Landlord shall elect (each being
an “Electric Service Provider”).  Tenant shall cooperate with Landlord, and the
applicable Electric Service Provider, at all times and, as reasonably necessary,
shall allow Landlord and such Electric Service Provider reasonable access to the
Building’s electric lines, feeders, risers, wiring, and any other machinery
within the Premises.  Tenant’s use of electrical services furnished by Landlord
shall not exceed in voltage, rated capacity, or overall load that which is
standard for the Building.

 

6.                                       Security Deposit / Letter of Credit.

 

A.           Landlord and Tenant hereby acknowledge that Tenant has previously
deposited with Landlord an irrevocable letter of credit (“Letter of Credit”)
running in favor of Landlord, in the current face amount of $600,000.00, as
provided in Section 5 of the Lease.  No later than June 1, 2005, Tenant shall
either: (i) cause the issuer of the Letter of Credit to deliver to Landlord a
valid and binding amendment to the Letter of Credit pursuant to which the face
amount of the Letter of Credit shall be increased to $750,000.00; or (ii)
provide to Landlord a new letter of credit in the amount of $750,000.00 in a
form and from a bank reasonably acceptable to Landlord.

 

B.             Paragraphs (i) and (ii) of Section 5 of the Lease are hereby
deleted.  Notwithstanding the terms of this Paragraph 6 or Section 5 of the
Lease, if Tenant has not, as of the applicable date set forth below or prior,
defaulted in the performance of any of its obligations under the Lease beyond
any applicable notice or cure period, then the Letter of Credit may be reduced
as follows:

 

(i) at any time after January 1, 2006, Tenant may reduce the face amount of the
Letter of Credit to $600,000.00;

 

(ii) at any time after January 1, 2007, Tenant may reduce the face amount of the
Letter of Credit to $500,000.00;

 

(iii) at any time after January 1, 2008, Tenant may reduce the face amount of
the Letter of Credit to $400,000.00; and

 

(iv) at any time after January 1, 2009, and each January 1 thereafter, Tenant
may reduce the face amount of the Letter of Credit by not more than $250,000.00
per year, provided that Tenant first demonstrates to Landlord that Tenant’s
income from continuing operations for the immediately preceding fiscal year is
greater than $2,000,000.00 (as evidenced by Tenant’s audited financial
statements); provided however, in no event shall the face amount of the Letter
of Credit be less than $150,000.00 at any time during the term of the Lease.

 

C.                                     The use, application or retention of the
Letter of Credit, or any portion thereof, by Landlord shall not prevent Landlord
from exercising any other right or remedy provided by the Lease or by law (it
being intended

 

65

--------------------------------------------------------------------------------

 

that Landlord shall not first be required to proceed against the collateral) and
shall not operate as a limitation on any recovery to which Landlord may
otherwise be entitled.

 

D.                                    In the event of a transfer of Landlord’s
interest in the Building, Landlord shall have the right to (i) transfer the
Letter of Credit to the transferee, or (ii) to require Tenant to cause the 
issuer of the Letter of Credit to deliver a valid and binding amendment changing
the beneficiary of the Letter of Credit to the transferee, and thereupon the
Landlord shall, without any further agreement between the parties, be released
by Tenant from all liability therefor, and it is agreed that the provisions
hereof shall apply to every transfer or assignment of the Letter of Credit to a
new Landlord.  Tenant shall pay upon Landlord’s demand, as additional rent, any
and all costs or fees charged in connection with the Letter of Credit that arise
due to: (i) Landlord’s sale or transfer of all or a portion of the Building; or
(ii) the addition, deletion, or modification of any beneficiaries under the
Letter of Credit.

 

7.                                       Option To Renew.

 

A.                                   Tenant shall have and is hereby granted one
(1) option to renew the Lease with respect to all (but not less than all) of the
Premises for five (5) years (the “Renewal Term”) by notice in writing received
by Landlord no later than December 31, 2010, time being of the essence for the
giving of such notice.  All of the covenants, conditions and provisions of the
Lease shall be applicable to the Renewal Term, except that the Annual and
Monthly Base Rent shall be adjusted to the current “Market Rental Rate” for the
Premises as of the date the Renewal Term is to commence with appropriate
increases each year thereafter.  Landlord shall advise Tenant of the new monthly
rental rate for a Renewal Term within fifteen (15) days after a request
therefore from Tenant; provided however that Tenant’s failure to timely make
such request shall not extend the date upon which Tenant must give notice of its
exercise of the option to renew.  In no event shall the Annual and Monthly Base
Rent be subject to determination or modification by any person, entity, court or
authority other than as expressly set forth herein.  Tenant shall have thirty
(30) days from the receipt of Landlord’s notice to either accept or dispute
Landlord’s determination of the Market Rental Rate.  In the event that Tenant
disputes Landlord’s determination, Tenant shall so notify Landlord and advise
Landlord of Tenant’s determination of the Market Rental Rate for the Renewal
Term.  If, after engaging in good faith negotiations, Landlord and Tenant cannot
agree upon the Market Rental Rate within thirty (30) days after Landlord’s
receipt of Tenant’s notice of objection to Landlord’s determination of the
Market Rental Rate, the “Dispute Resolution Mechanism” described in subparagraph
D below shall apply.

 

B.                                     Tenant’s exercise of the foregoing option
to renew is subject to the conditions that (i) the Lease is in full force and
effect, (ii) there is no uncured default by Tenant the time of notification of
its exercise of the renewal option or any time prior to commencement of the
Renewal Term, and (iii) that both at the time of notification and commencement
there has been no material adverse change in the financial condition of the
Tenant since the date of the Lease, as reasonably determined by Landlord.

 

C.                                     For purposes of this Lease, “Market
Rental Rate” shall mean the rental, as of the date for which such Market Rental
Rate is being calculated, per annum per rentable square foot, for lease renewals
for comparable space of comparable size in buildings comparable to the Building
in the applicable office submarket, taking into account prevailing market
conditions, including the concessions customary for a lease renewal of the size
and term contained herein, including but not limited to free rent, tenant
improvement allowance (or cash equivalent or rental abatement in lieu of tenant
improvement allowance), and any other inducements which are customary for such a
transaction.

 

D.                                    The Dispute Resolution Mechanism shall be
as follows:  no later than fifteen (15) days after the end of the 30-day period
described in subparagraph A above, Landlord and Tenant shall jointly appoint as
arbitrator a commercial real estate broker licensed in Illinois with a minimum
of ten (10) years experience in the applicable market.  If Landlord and Tenant
cannot agree on an acceptable arbitrator, Landlord and Tenant shall each choose,
within an additional fifteen (15) days thereafter, its own arbitrator who meets
the qualifications described above.  The arbitrators shall then jointly select,
within an additional ten (10) days, an arbitrator to serve as the arbitrator
hereunder.  If either Landlord or Tenant fails to choose its own arbitrator
within said fifteen (15) day period, then the arbitrator chosen by the other
shall resolve the dispute.  Within ten (10) days after appointment (whether
mutually by

 

66

--------------------------------------------------------------------------------

 

the parties, by default of one party to choose an arbitrator, or by selection by
the two arbitrators), Landlord and Tenant shall each submit to the arbitrator(s)
in writing its good faith estimate of the Market Rental Rate for the Renewal
Term.  Within ten (10) days after receipt of the last of the determinations, the
arbitrator(s) shall choose either Landlord’s or Tenant’s determination of Market
Rental Rate.  The cost of the arbitrator(s) shall be borne by the party whose
determination of the Market Rental Rate was not selected by the arbitrator.

 

E.              Landlord shall have no obligation to make improvements,
decorations, repairs, alterations or additions to the Premises as a condition to
Tenant’s obligations to pay Rent during the Renewal Term unless otherwise agreed
to by the parties at the time the amendment set forth below is executed.  In the
event that Tenant exercises the renewal option set forth herein, Tenant agrees
to enter into an amendment to the Lease incorporating the Renewal Term and the
Annual and Monthly Base Rent applicable thereto within thirty (30) days
following the exercise of the renewal option, but in no event shall a delay in
the full execution of such amendment nullify Tenant’s exercise of the option to
renew.

 

8.                                       Superseded Provisions.  Section 29 and
Exhibit B of the Lease are hereby deleted and shall be of no further force or
effect.

 

9.                                       Notices.  The Lease is hereby modified
to provide that the address for rent payments and notices to Landlord shall be
addressed as follows:

 

LANDLORD:

TRANSWESTERN COMMERCIAL SERVICES

 

 

3000 Lakeside Drive, Suite 113S

 

 

Bannockburn, Illinois 60015

 

 

Attn: Property Manager

 

 

 

with a copy to:

 

Transwestern Investment Company

 

 

150 North Wacker Drive, Suite 800

 

 

Chicago, Illinois 60606

 

 

Attn: Owner’s Representative

 

 

 

and to:

 

Drane, Freyer and Lapins

 

 

150 North Wacker Drive, 8th Floor

 

 

Chicago, Illinois 60606

 

 

Attn: Wendy Freyer, Esq.

 

 

 

Payments of Rent shall be made payable to the order of: Transwestern Two
Marriott, at the following address:

 

 

 

 

 

Transwestern Commercial Services

 

 

3000 Lakeside Drive, Suite 113S

 

 

Bannockburn, Illinois 60015

 

 

Attn: Property Manager

 

or such other name and address as Landlord shall, from time to time, designate.

 

10.                                 Broker’s Commission.  Landlord and Tenant
each represent to the other that the only broker with whom either has dealt in
connection with this First Amendment are Transwestern Commercial Services as
Landlord’s agent and CB Richard Ellis, Inc. at Tenant’s agent.

 

11.                                 Indemnification.  The following is hereby
added at the end of Section 10 of the Lease:

 

67

--------------------------------------------------------------------------------

 

“Tenant shall not be liable to Landlord, and Landlord waives all claims against
Tenant, for any damage to any property in or about the Premises or the Building
by or from any cause whatsoever except to the extent caused by or arising from
the gross negligence or willful misconduct of Tenant (or its agents, employees,
or contractors).  Landlord shall protect, indemnify, and hold Tenant harmless
from and against any and all loss, claims, liability, or costs (including court
costs and reasonable attorneys fees) incurred by reason of (a) any damage to any
property of any third party, or any injury (including but not limited to death)
to any person occurring in, on or about the Premises or the Building to the
extent that such injury or damage shall be caused by or arise from any actual or
alleged act, neglect, fault or omission by or of Landlord, its agents, servants,
employees, or invitees to meet any standards imposed by any duty with respect to
the injury or damage; (b) Landlord’s failure to comply with any and all
governmental laws, ordinances, and regulations applicable to the condition of
the Building (other than those that are the responsibility of Tenant); or (c)
any breach or default on the part of Landlord in the performance of any covenant
or agreement on its part to be performed pursuant to this Lease.

 

The provisions of this Section shall survive the termination of this Lease with
respect to any claims or liability accruing prior to such termination.”

 

12.                                 Insurance.  Section 11.1 of the Lease is
hereby modified to provide that during the term of the Lease Landlord shall
carry property damage insurance for the Building at replacement cost.

 

13.                                 Services and Utilities.  The following is
hereby added at the end of Section 13.1 of the Lease:

 

“NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN THIS SECTION 13.1, IF:
(I) LANDLORD CEASES TO FURNISH ANY SERVICE IN THE BUILDING FOR A PERIOD IN
EXCESS OF FIVE (5) CONSECUTIVE BUSINESS DAYS AFTER TENANT NOTIFIES LANDLORD OF
SUCH CESSATION (THE “INTERRUPTION NOTICE”); (II) SUCH CESSATION DOES NOT ARISE
AS A RESULT OF AN ACT OR OMISSION OF TENANT; (III) SUCH CESSATION IS NOT CAUSED
BY A FIRE OR OTHER CASUALTY (IN WHICH CASE SECTION 22 SHALL CONTROL); (IV) THE
RESTORATION OF SUCH SERVICE IS REASONABLY WITHIN THE CONTROL OF LANDLORD; AND
(V) AS A RESULT OF SUCH CESSATION, THE PREMISES OR A MATERIAL PORTION THEREOF,
IS RENDERED UNTENANTABLE AND TENANT IN FACT CEASES TO USE THE PREMISES, OR
MATERIAL PORTION THEREOF, THEN TENANT, AS ITS SOLE REMEDY, SHALL BE ENTITLED TO
RECEIVE AN ABATEMENT OF BASE RENT PAYABLE HEREUNDER DURING THE PERIOD BEGINNING
ON THE SIXTH (6TH) CONSECUTIVE BUSINESS DAY OF SUCH CESSATION AND ENDING ON THE
DAY WHEN THE SERVICE IN QUESTION HAS BEEN RESTORED.  IN THE EVENT THE ENTIRE
PREMISES HAS NOT BEEN RENDERED UNTENANTABLE BY THE CESSATION IN SERVICE, THE
AMOUNT OF ABATEMENT THAT TENANT IS ENTITLED TO RECEIVE SHALL BE PRORATED BASED
UPON THE PERCENTAGE OF THE PREMISES SO RENDERED UNTENANTABLE AND NOT USED BY
TENANT.”

 

14.                                 Remedies.  Sections 19.1.1, 19.1.4.1,
19.1.4.2, and 19.6 of the Lease are hereby modified to read as follows:

 

(a)                                  The beginning of Section 19.1.1 of the
Lease shall read as follows:  “Landlord may, at its election seek to terminate
this Lease or seek to terminate Tenant’s right…”

 

(b)                                 The following is added to the end of
Section 19.1.4.1:  “Landlord shall at all times make commercially reasonable
efforts to mitigate its damages hereunder.”

 

(c)                                  The beginning of Section 19.1.4.2 of the
Lease shall read as follows:   “Landlord shall use commercially reasonable to
relet the Premises or any part thereof for such rent and upon such terms as
Landlord, in its sole discretion, shall determine (including the right to relet
the premises for a greater or lesser term than that remaining under this Lease,
the right to relet the Premises as a part of a larger area, and the right to
change the character or use made of the Premises).  In connection with or in
preparation for any reletting, Landlord may, but shall not be required to, make
repairs, alterations and additions in or to the Premises and redecorate the same
to the extent Landlord deems necessary or desirable, and Tenant shall, upon
demand, pay the cost thereof, together with Landlord’s expenses of reletting,
including, without

 

68

--------------------------------------------------------------------------------

 

limitation, any commission incurred by Landlord.  If Landlord decides to relet
the Premises or a duty to relet is imposed upon Landlord by law, Landlord and
Tenant agree that nevertheless Landlord shall at most be required to use only
the same efforts Landlord then uses to lease premises in the Building
generally….”

 

(d)                                 Section 19.6 of the Lease is hereby deleted,
and the following is inserted in its place:  “To secure the payment of all
rentals and other sums of money becoming due from Tenant under this Lease,
Landlord shall have and Tenant grants to Landlord a first lien upon the
leasehold interest of Tenant under this Lease, which lien may be enforced in
equity, but Landlord shall not under any circumstances have any security
interest in any of Tenant’s personal property.”

 

15.                                 Damage by Fire.  In Section 22.2 of the
Lease, the words “sixty (60) days” are hereby replaced with “thirty (30) days”.

 

16.                                 Sale by Landlord.  The beginning of
Section 24 of the Lease shall be modified to read as follows:  “In the event of
sale or conveyance by Landlord of the Building, and assumption of this Lease in
writing by the purchaser or transferee, the same shall operate to release
Landlord…”

 

17.                                 Estoppel Certificates.  In line 7 of
Section 25 of the Lease, the word “reasonably” is hereby inserted before the
word “requested”, and by deletion of the remainder of the sentence after the
word “purchaser” in line 9 of Section 25.

 

18.         Surrender of Premises.  The beginning of Section 26.1 of the Lease
is hereby modified to read as follows:  “Both Landlord and Tenant will make
commercially reasonable efforts to schedule a joint inspection of the Building
at least 30 days before the last day of the Term…”

 

19.                                 Authority.  If a party to this First
Amendment signs as a corporation each of the persons executing this Lease on
behalf of such parties represents and warrants that such party has been and is
qualified to do business in the state in which the Building is located, and that
the corporation has full right and authority to enter into this First Amendment
and that all persons signing on behalf of the corporation were authorized to do
so by appropriate corporate action.  Such party agrees to furnish promptly upon
request a corporate resolution, proof of due authorization by partners or other
appropriate documentation evidencing the due authorization of such party to
enter into this First Amendment.

 

20.                                 Terms of Lease.  Capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Lease.

 

21.                                 Incorporation of the Lease.  Except as
otherwise amended hereby, the terms and covenants of the Lease remain in full
force and effect.

 

69

--------------------------------------------------------------------------------

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment as of
the day and year first above written.

 

TENANT:

LANDLORD:

 

 

 

AKSYS, LTD., a Delaware corporation

TRANSWESTERN GREAT LAKES, L.P., a
Delaware limited partnership

 

 

By:

/s/ Lawrence D. Damron

 

By:

Transwestern Great Lakes GP, L.L.C., a

Name:

 Lawrence D. Damron

 

 

Maryland limited liability company,

Title:

 Sr. VP and Chief Financial Officer

 

 

its general partner

 

 

 

 

 

 

By:

Transwestern Investment Company,

 

 

 

L.L.C., its authorized agent

 

 

 

 

 

 

By:

/s/ Betsy J. Nelson

 

 

Name:

 Betsy J. Nelson

 

 

Title:

 Vice President

 

 

 

 

 

 

 

 

WITNESS/ATTEST

WITNESS/ATTEST

By:

/s/ Rose A. Upton

 

By:

/s/ Jennifer Del Boccio

Name:

 Rose A. Upton

 

Name:

 Jennifer Del Boccio

Title:

 Exec. Office Coordinator

 

Title:

 Administrative Assistant

 

70

--------------------------------------------------------------------------------