**Exhibit10.7(a)**

 

FIRST AMENDMENT TO LEASE

 

THISFIRST AMENDMENT TO LEASE (“First Amendment”) is made as of           November 12            ,2004, by and between TRANSWESTERN GREAT LAKES, L.P., a Delaware limitedpartnership (“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 writtenlease dated July 15, 1996 (the “Lease”) for the lease of the entirecommercial 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 theLease, 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 herebyacknowledged, Landlord and Tenant hereby agree as follows:

 

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

 

2.                                       AnnualRent.  Effective as of June 1,2005, Tenant shall pay the following amounts as Annual Rent and MonthlyInstallment 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.                                       RentAdjustment.  In addition to AnnualRent, 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 eachLease Year, as set forth in the Lease.

 

4.                                       Improvements.  Landlord has no obligation to improve, alteror remodel the Premises**;** providedhowever, that Landlord shall provide up to but not in excess of $290,500 (anamount equal to $7.00 per rentable square foot in the Premises) (“TenantAllowance”) for Tenant’s use for the purpose of redecorating, altering,furnishing and/or remodeling the Premises, provided however, in no event shallthe 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’swritten approval of such work and/or the detailed plans of such work, ifnecessary and available.  All contractorsmust be approved by Landlord in advance, which approval shall not beunreasonably withheld, and shall be licensed, bonded and/or insured to Landlord’sreasonable satisfaction.  The cost ofperforming such work shall include any and all architectural fees, fees forbuilding permits and approvals, and Landlord’s construction management fee ofthree percent (3%) of the cost of the work. Landlord shall provide Construction Management Services to Tenant forits improvements.  If the cost of suchwork exceeds the amount of the Tenant Allowance, Tenant shall be directlyresponsible for said excess amount or shall pay to Landlord said excess amountwithin fifteen (15) days of Tenant’s receipt of Landlord’s statement of suchexcess costs.  If the actual cost of the

 

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workis less than the Tenant Allowance, Tenant shall not be entitled to receive anypayment or credit for such difference. Such work must be completed by, and any request for reimbursement fromthe 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 thePremises shall be paid for by Tenant by a separate charge or charges billed bythe utility company providing electrical service and payable by Tenant directlyto such utilities company.  Landlordshall have the right at any time and from time-to-time during the Lease Term tocontract for electricity service from such providers of such services asLandlord shall elect (each being an “Electric Service Provider”).  Tenant shall cooperate with Landlord, and theapplicable Electric Service Provider, at all times and, as reasonablynecessary, shall allow Landlord and such Electric Service Provider reasonableaccess to the Building’s electric lines, feeders, risers, wiring, and any othermachinery within the Premises.  Tenant’suse of electrical services furnished by Landlord shall not exceed in voltage,rated capacity, or overall load that which is standard for the Building.

 

6.                                       SecurityDeposit / Letter of Credit.

 

A.           Landlordand Tenant hereby acknowledge that Tenant has previously deposited withLandlord an irrevocable letter of credit (“Letter of Credit”) running in favorof Landlord, in the current face amount of $600,000.00, as provided in Section 5of the Lease.  No later than June 1,2005, Tenant shall either: (i) cause the issuer of the Letter of Credit todeliver to Landlord a valid and binding amendment to the Letter of Creditpursuant 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 amountof $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 6or Section 5 of the Lease, if Tenant has not, as of the applicable dateset forth below or prior, defaulted in the performance of any of its obligationsunder the Lease beyond any applicable notice or cure period, then the Letter ofCredit may be reduced as follows:

 

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

 

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

 

(iii) at any time after January 1, 2008, Tenant may reducethe 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 thatTenant’s income from continuing operations for the immediately preceding fiscalyear is greater than $2,000,000.00 (as evidenced by Tenant’s audited financialstatements); provided however, in no event shall the face amount of the Letterof Credit be less than $150,000.00 at any time during the term of the Lease.

 

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

 

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

 

D.                                    Inthe event of a transfer of Landlord’s interest in the Building, Landlord shallhave the right to (i) transfer the Letter of Credit to the transferee, or (ii)to require Tenant to cause the  issuer ofthe Letter of Credit to deliver a valid and binding amendment changing thebeneficiary of the Letter of Credit to the transferee, and thereupon theLandlord shall, without any further agreement between the parties, be releasedby Tenant from all liability therefor, and it is agreed that the provisionshereof shall apply to every transfer or assignment of the Letter of Credit to anew Landlord.  Tenant shall pay uponLandlord’s demand, as additional rent, any and all costs or fees charged inconnection with the Letter of Credit that arise due to: (i) Landlord’s sale ortransfer of all or a portion of the Building; or (ii) the addition, deletion,or modification of any beneficiaries under the Letter of Credit.

 

7.                                       OptionTo Renew.

 

A.                                   Tenantshall have and is hereby granted one (1) option to renew the Lease with respectto all (but not less than all) of the Premises for five (5) years (the “RenewalTerm”) 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 thecovenants, conditions and provisions of the Lease shall be applicable to theRenewal Term, except that the Annual and Monthly Base Rent shall be adjusted tothe current “Market Rental Rate” for the Premises as of the date the RenewalTerm is to commence with appropriate increases each year thereafter.  Landlord shall advise Tenant of the new monthlyrental rate for a Renewal Term within fifteen (15) days after a requesttherefore from Tenant; provided however that Tenant’s failure to timely makesuch request shall not extend the date upon which Tenant must give notice ofits exercise of the option to renew.  Inno event shall the Annual and Monthly Base Rent be subject to determination ormodification by any person, entity, court or authority other than as expresslyset forth herein.  Tenant shall havethirty (30) days from the receipt of Landlord’s notice to either accept ordispute Landlord’s determination of the Market Rental Rate.  In the event that Tenant disputes Landlord’sdetermination, Tenant shall so notify Landlord and advise Landlord of Tenant’sdetermination of the Market Rental Rate for the Renewal Term.  If, after engaging in good faithnegotiations, Landlord and Tenant cannot agree upon the Market Rental Ratewithin thirty (30) days after Landlord’s receipt of Tenant’s notice ofobjection to Landlord’s determination of the Market Rental Rate, the “DisputeResolution Mechanism” described in subparagraph D below shall apply.

 

B.                                     Tenant’sexercise 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 byTenant the time of notification of its exercise of the renewal option or anytime prior to commencement of the Renewal Term, and (iii) that both at the timeof notification and commencement there has been no material adverse change inthe financial condition of the Tenant since the date of the Lease, asreasonably determined by Landlord.

 

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

 

D.                                    The Dispute ResolutionMechanism shall be as follows:  no laterthan fifteen (15) days after the end of the 30-day period described insubparagraph A above, Landlord and Tenant shall jointly appoint as arbitrator acommercial 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) daysthereafter, its own arbitrator who meets the qualifications describedabove.  The arbitrators shall thenjointly select, within an additional ten (10) days, an arbitrator to serve asthe arbitrator hereunder.  If eitherLandlord or Tenant fails to choose its own arbitrator within said fifteen (15)day period, then the arbitrator chosen by the other shall resolve thedispute.  Within ten (10) days afterappointment (whether mutually by

 

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theparties, by default of one party to choose an arbitrator, or by selection bythe two arbitrators), Landlord and Tenant shall each submit to thearbitrator(s) in writing its good faith estimate of the Market Rental Rate forthe Renewal Term.  Within ten (10) daysafter receipt of the last of the determinations, the arbitrator(s) shall chooseeither Landlord’s or Tenant’s determination of Market Rental Rate.  The cost of the arbitrator(s) shall be borneby the party whose determination of the Market Rental Rate was not selected bythe arbitrator.

 

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

 

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

 

9.                                       Notices.  The Lease is hereby modified to provide thatthe address for rent payments and notices to Landlord shall be addressed asfollows:

 
| 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 |

 

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

 

10.                                 Broker’sCommission.  Landlord and Tenant eachrepresent to the other that the only broker with whom either has dealt inconnection with this First Amendment are Transwestern Commercial Services asLandlord’s agent and CB Richard Ellis, Inc. at Tenant’s agent.

 

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

 

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“Tenant shall not be liable to Landlord, and Landlordwaives all claims against Tenant, for any damage to any property in or aboutthe Premises or the Building by or from any cause whatsoever except to theextent caused by or arising from the gross negligence or willful misconduct ofTenant (or its agents, employees, or contractors).  Landlord shall protect, indemnify, and holdTenant 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 notlimited to death) to any person occurring in, on or about the Premises or theBuilding to the extent that such injury or damage shall be caused by or arisefrom any actual or alleged act, neglect, fault or omission by or of Landlord,its agents, servants, employees, or invitees to meet any standards imposed byany duty with respect to the injury or damage; (b) Landlord’s failure to complywith any and all governmental laws, ordinances, and regulations applicable tothe condition of the Building (other than those that are the responsibility ofTenant); or (c) any breach or default on the part of Landlord in theperformance of any covenant or agreement on its part to be performed pursuantto this Lease.

 

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

 

12.                                 Insurance.  Section 11.1 of the Lease is herebymodified to provide that during the term of the Lease Landlord shall carryproperty damage insurance for the Building at replacement cost.

 

13.                                 Servicesand Utilities.  The following ishereby added at the end of Section 13.1 of the Lease:

 

## ***“Notwithstanding anything to the contrarycontained in this Section 13.1, if: (i) Landlord ceases to furnish anyservice in the Building for a period in excess of five (5) consecutive BusinessDays 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 22shall control); (iv) the restoration of such service is reasonably within thecontrol of Landlord; and (v) as a result of such cessation, the Premises or amaterial portion thereof, is rendered untenantable and Tenant in fact ceases touse the Premises, or material portion thereof, then Tenant, as its sole remedy,shall be entitled to receive an abatement of Base Rent payable hereunder duringthe period beginning on the sixth (6th) consecutive Business Day of suchcessation and ending on the day when the service in question has beenrestored.  In the event the entirePremises has not been rendered untenantable by the cessation in service, theamount of abatement that Tenant is entitled to receive shall be prorated basedupon the percentage of the Premises so rendered untenantable and not used byTenant.”***

## *** ***

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)                                  Thebeginning of Section 19.1.1 of the Lease shall read as follows:  “Landlord may, at its election seek toterminate this Lease or seek to terminate Tenant’s right...”

 

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

 

(c)                                  Thebeginning of Section 19.1.4.2 of the Lease shall read as follows:   “Landlord shall use commerciallyreasonable to relet the Premises or any part thereof for such rent and uponsuch terms as Landlord, in its sole discretion, shall determine (including theright to relet the premises for a greater or lesser term than that remainingunder 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 anyreletting, Landlord may, but shall not be required to, make repairs,alterations and additions in or to the Premises and redecorate the same to theextent Landlord deems necessary or desirable, and Tenant shall, upon demand,pay the cost thereof, together with Landlord’s expenses of reletting,including, without

 

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limitation, any commissionincurred by Landlord.  If Landlorddecides 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 requiredto use only the same efforts Landlord then uses to lease premises in theBuilding generally....”

 

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

 

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

 

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

 

17.                                 EstoppelCertificates.  In line 7 of Section 25of 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” inline 9 of Section 25.

 

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

 

19.                                 Authority.  If a party to this First Amendment signs as acorporation each of the persons executing this Lease on behalf of such partiesrepresents and warrants that such party has been and is qualified to do businessin the state in which the Building is located, and that the corporation hasfull right and authority to enter into this First Amendment and that allpersons signing on behalf of the corporation were authorized to do so byappropriate corporate action.  Such partyagrees to furnish promptly upon request a corporate resolution, proof of dueauthorization by partners or other appropriate documentation evidencing the dueauthorization of such party to enter into this First Amendment.

 

20.                                 Termsof Lease.  Capitalized terms used butnot defined herein shall have the meanings ascribed thereto in the Lease.

 

21.                                 Incorporationof the Lease.  Except as otherwiseamended hereby, the terms and covenants of the Lease remain in full force andeffect.

 

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IN WITNESS WHEREOF, Landlord and Tenant have executedthis 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 |
|                                          |                                                                       |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |

 

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