Exhibit 10.2


 


REGISTRATION RIGHTS AGREEMENT


 


This REGISTRATION RIGHTS AGREEMENT (this “Agreement”)
is made as of February 23, 2004, by and among Aksys, Ltd., a Delaware
corporation (“Aksys”), Durus Life Sciences Master Fund Ltd., a Cayman
Islands company (the “Master Fund”), and Artal Long Biotech Portfolio
LLC, a Delaware limited liability company (“Artal”), with respect to the
shares of common stock of Aksys, par value $0.01 per share (the “Common
Stock”), warrants to purchase Common Stock (the “Warrants”) and
Common Stock for which the Warrants are exercisable in each case owned by the
Stockholders (as defined below) on the date hereof (collectively, the “Shares”),
the New Shares (as defined in Section 5) and any Shares or New Shares owned by
Permitted Transferees (as defined in Section 13(e)) after the date hereof
(together with any additional shares of capital stock of Aksys issued to any
Stockholders or Permitted Transferees in respect of the Shares pursuant to any
stock splits, stock dividends, distributions, mergers, recapitalizations,
exchanges and similar transactions, the “Registrable Securities”).  Aksys, the Master Fund, and Artal are
collectively referred to herein as the “Parties,” and each is
individually referred to as a “Party.” 
The Master Fund and Artal are collectively referred to herein as the “Stockholders,”
and each is individually referred to as a “Stockholder.”


 


WHEREAS, the Parties are entering into a
Settlement Agreement and Mutual Release (the “Settlement Agreement”)
concurrently herewith pursuant to which the Parties are settling and releasing
certain claims that they may have with respect to the Stockholders’
acquisition, ownership, trading or disposition of the Shares and certain other
matters prior to the date hereof; and


 


WHEREAS, in order to induce the Stockholders
to enter into the Settlement Agreement, Aksys has agreed to provide certain
registration rights on the terms and subject to the conditions set forth
herein;


 


NOW, THEREFORE, in consideration of the
premises and of the mutual agreements contained herein, and for other good and
valuable consideration the receipt and sufficiency of which is hereby
acknowledged, and intending to be legally bound hereby, the Parties hereto
agree as follows:


 


1.               Filing of Shelf
Registration.  Aksys shall as
promptly as practicable file with the Securities and Exchange Commission (the “SEC”)
a registration statement for offerings to be made on a continuous or delayed
basis pursuant to Rule 415 promulgated under the Securities Act of 1933, as amended
(the “Securities Act”), covering all of the Registrable Securities other
than the New Shares (the “Initial Shelf Registration”) and shall use
reasonable best efforts to cause such Initial Shelf Registration to be declared
effective by the SEC under the Securities Act as promptly as practicable
thereafter.  The Initial Shelf
Registration shall be on Form S-3, if available to Aksys, or otherwise on Form
S-1 or another appropriate form permitting registration of such Registrable
Securities for sale by each Stockholder and Permitted Transferee, if any, in
the manner or manners reasonably designated by the Master Fund (including,
without limitation, one or more underwritten offerings and broker-assisted
distributions).  Aksys shall not permit


 

















 


any securities other than the
Registrable Securities to be included in any Shelf Registration (as defined
below) filed pursuant to this Agreement without the prior written consent of
the Master Fund.


 


2.               Selling
Stockholder Information.  Each
Stockholder and Permitted Transferee, if any, shall furnish to Aksys in
writing, promptly after receipt of a request therefor, such information as
Aksys, after conferring with counsel with regard to information relating to
such person that would be required by the SEC to be included in such Shelf
Registration or prospectus included therein, may reasonably request for
inclusion in the Shelf Registration or prospectus included therein.


 


3.               Effectiveness of
Shelf Registration.  Aksys shall use
reasonable best efforts to keep the Shelf Registration continuously effective
under the Securities Act until the date that is two years from the date the
Initial Shelf Registration is declared effective (such period of time as it may
be extended hereunder, the “Effectiveness Period”); provided that
the Effectiveness Period shall terminate in all circumstances when each
Stockholder and Permitted Transferee can freely resell its Registrable
Securities in accordance with the provisions set forth in Rule 144(k)
promulgated under the Securities Act.  Notwithstanding anything to the contrary
herein, the duration of the Effectiveness Period shall be extended (i) for
the number of days therein that the Initial Shelf Registration or a Subsequent
Shelf Registration, if any, is not effective prior to the termination of the
Effectiveness Period, and (ii) for 180 days, if prior to the termination of the Effectiveness Period Aksys
experiences a material adverse event related to the Food and Drug
Administration (or any other governmental entity that is concerned with the
safety, efficacy, reliability or manufacturing of the medical products sold by
Aksys or any of its subsidiaries or affiliates), including, without limitation,
a material adverse event related to any product recall, safety alert, consent
decree, revocation of any product authorization or approval, or the
commencement of any investigation, inquiry or other regulatory proceeding
concerning any of the foregoing.  Each of the Master Fund and Artal individually
agrees that it will not own in excess of 14.9% of the then-outstanding Common
Stock (other than New Shares) upon the expiration of the Effectiveness Period
(including any extensions hereunder).


 


4.               Subsequent Shelf Registrations. 
If the Initial Shelf Registration or any Subsequent Shelf Registration
ceases to be effective for any reason at any time during the Effectiveness
Period, Aksys shall (i) use reasonable best efforts to obtain the prompt
withdrawal of any order suspending the effectiveness thereof within 30 days of
such cessation of effectiveness (including amending such Shelf Registration in
a manner designed to obtain the prompt withdrawal of such order), and (ii) if
such order is not withdrawn within 30 days of such cessation of effectiveness,
file with the SEC an additional Shelf Registration pursuant to Rule 415
covering all of the Registrable Securities not sold under the Initial Shelf
Registration or an earlier Subsequent Shelf Registration (a “Subsequent
Shelf Registration”).  If a
Subsequent Shelf Registration is filed with the SEC, Aksys shall use reasonable
best efforts to cause the Subsequent Shelf Registration to be declared
effective by the SEC as soon as practicable after such filing and to keep such
Subsequent Shelf Registration continuously effective for the duration of the Effectiveness
Period.  As used herein the term “Shelf
Registration” means the Initial Shelf Registration, any Subsequent Shelf
Registrations and the New Share Shelf Registrations, unless the context
otherwise requires.


 


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5.               New Shares Registration. 
Notwithstanding anything to the contrary herein, as promptly as
practicable after “New Shares” (as defined in the Settlement Agreement)
are issued, Aksys shall file an additional Shelf Registration (the “Initial
New Share Shelf Registration”) covering all New Shares.  In the event the Initial New Share Shelf
Registration or any Subsequent New Share Shelf Registration ceases to be
effective for any reason at any time during the New Share Shelf Effectiveness
Period (as defined below), Aksys shall (i) use reasonable best efforts to
obtain the prompt withdrawal of any order suspending the effectiveness thereof
within 30 days of such cessation of effectiveness (including amending such New
Share Shelf Registration in a manner designed to obtain the prompt withdrawal
of such order), and (ii) if such order is not withdrawn within 30 days of such
cessation of effectiveness, file with the SEC an additional New Share Shelf
Registration pursuant to Rule 415 covering all of the Registrable Securities
not sold under the Initial New Share Shelf Registration or an earlier
Subsequent New Share Shelf Registration (a “Subsequent New Share Shelf
Registration”, and together with the Initial New Share Shelf Registration,
the “New Share Shelf Registrations”). 
If a Subsequent New Share Shelf Registration is filed with the SEC,
Aksys shall use reasonable best efforts to cause the Subsequent New Share Shelf
Registration to be declared effective by the SEC as soon as practicable after
such filing and to keep such Subsequent New Share Shelf Registration
continuously effective for the duration of the New Share Effectiveness
Period.  The terms and conditions of the
New Share Shelf Registrations shall be as set forth herein with respect to a Shelf
Registration; provided, however, that (i) New Shares (together
with any additional shares of capital stock of Aksys issued in respect of the
New Shares pursuant to any stock splits, stock dividends, distributions,
mergers, recapitalizations, exchanges and similar transactions) shall be the only Registrable
Securities to be included in the New Share Shelf Registrations, (ii) the
effectiveness period with respect to the New Share Shelf Registrations shall be
one year, subject to extensions as set forth herein (the “New Share Shelf
Effectiveness Period”), (iii) expenses with respect to the New Share Shelf
Registrations shall be paid as provided in Section 9(b); and (iv) the
limitation set forth in the second sentence of Section 13(a) shall not be
applicable to the New Share Shelf Registrations.


 


6.               Limitation on
Underwritten Offerings and Prospectus Supplements.  Notwithstanding
anything to the contrary herein, Aksys shall not be required to effect
an underwritten offering with respect to Registrable Securities unless the
aggregate number of Registrable Securities offered thereby is at least
2,000,000 (subject to appropriate adjustment in the event of any stock splits,
stock dividends, distributions, mergers, recapitalizations, exchanges and
similar transactions).


 


7.               Blackout Period.  Notwithstanding anything to the contrary
herein, upon advance written notice provided as promptly as is reasonably
practicable to the Stockholders and Permitted Transferees, if any, Aksys may
suspend the use of a Shelf Registration or the prospectus included therein for
a period of time not to exceed 75 days in any twelve month period if the
failure to do so would require the disclosure of material, non-public
information the disclosure of which at such time, in the good faith opinion of
Aksys’ Board of Directors, would be materially detrimental to Aksys.  In the event of any such blackout period,
(i) Aksys shall promptly notify the Stockholders and Permitted Transferees, if
any, in writing when such blackout period has been terminated, and (ii) the
duration of the Effectiveness Period and/or the New Share Shelf Effectiveness
Period, as applicable, shall be extended for the number of days of such
blackout period.


 


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8.               Registration Procedures. 
In connection with its obligations hereunder, Aksys shall:


 


(a)          furnish, without charge, to each Stockholder, Permitted Transferee
and underwriter, if any, such number of copies of each Shelf Registration, each
amendment and supplement thereto (in each case including all exhibits) and the
prospectus included therein (including each preliminary prospectus and
prospectus supplement thereto) in conformity with the requirements of the
Securities Act, and such other documents as any such person may reasonably
request in order to facilitate the disposition of the Registrable Securities
(Aksys hereby consenting to the use in accordance with applicable law of each
such Shelf Registration (and each amendment and supplement thereto) and each
such prospectus (and each preliminary prospectus and prospectus supplement
thereto) by such persons in connection with the offering and sale of the
Registrable Securities);


 


(b)         provide each Stockholder, Permitted Transferee and underwriter, if
any, a reasonable opportunity to
review and provide comments with respect to the “Plan of Distribution” of each
Shelf Registration (and
each amendment and supplement thereto) and any information regarding such person to be included in such Shelf
Registration (and each
amendment and supplement thereto);


 


(c)          promptly as is
practicable register or qualify all Registrable Securities under such other
securities or blue sky laws of such jurisdictions as each Stockholder, Permitted Transferee or
underwriter, if any, may reasonably request and keep such registration or
qualification in effect in each such jurisdiction for the duration of the
Effectiveness Period, and do any and all other acts and things that may
reasonably be necessary or advisable to enable each Stockholder and Permitted Transferee, if any, to
consummate the disposition in such jurisdictions of the Registrable Securities;
provided, however, that Aksys shall not be required to (i)
qualify generally to do business in any jurisdiction where it would not
otherwise be required to so qualify but for this subsection, (ii) subject
itself to taxation in any such jurisdiction, or (iii) consent to general
service of process in any such jurisdiction;


 


(d)         use reasonable best
efforts to obtain all other approvals, consents, exemptions and authorizations
applicable to Aksys from such governmental and regulatory agencies and
authorities as may be required or otherwise customary in connection with the
transactions contemplated by this Agreement;


 


(e)          promptly notify each
Stockholder and Permitted
Transferee, if any, their respective counsel and each underwriter, if
any:  (i) when each Shelf
Registration, any pre-effective amendment, the prospectus or any prospectus
supplement related thereto or post-effective amendment thereto has been filed
and, with respect to the Shelf Registration or any post-effective amendment,
when the same has become effective, (ii) of any request by the SEC or any state
securities or blue sky authority for amendments or supplements to a Shelf
Registration or the prospectus related thereto or for additional information,
(iii) of the issuance by the SEC of any stop order suspending the effectiveness
of a Shelf Registration or the initiation or threat of any proceedings for that
purpose, (iv) of the receipt by Aksys of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale under
the securities or blue sky laws of any jurisdiction or the initiation of any
proceeding for such


 


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purpose, (v) of the existence of any fact or
the happening of any event of which Aksys becomes aware that results in any
Shelf Registration or the prospectus included therein containing an untrue
statement of a material fact or omitting to state a material fact required to
be stated therein or necessary to make any statements therein not misleading,
(vi) if at any time the representations and warranties made by Aksys herein or
in connection with any Shelf Registration cease to be true and correct in all
material respects, and (vii) of Aksys’ determination that a post-effective
amendment to a Shelf Registration would be appropriate or that there exist
circumstances not yet disclosed to the public that make further sales under
such Shelf Registration inadvisable pending such disclosure and post-effective
amendment.  If the notification relates
to an event described in any of the clauses (ii) through (iv) of this
subsection, Aksys shall promptly provide each Stockholder and Permitted Transferee, if any,
their respective counsel and each underwriter, if any, with a written copy
thereof and of any response thereto.  If
the notification relates to an event described in any of the clauses (ii)
through (vii) of this subsection, subject to Aksys’ blackout rights under
Section 7, Aksys shall promptly prepare and file a supplement or post-effective
amendment to such Shelf Registration or related prospectus or any document
incorporated therein by reference and any other required document so that (1)
such Shelf Registration shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (2) as thereafter
delivered to the purchasers of the Registrable Securities being sold
thereunder, such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein in the light of the circumstances under
which they were made not misleading (and shall furnish to each Stockholder, Permitted Transferee and
underwriter, if any, a reasonable number of copies of such prospectus so
supplemented or amended).  If the
notification relates to an event described in clause (iii) of this subsection,
Aksys shall use reasonable best efforts to prevent the entry of such stop
order.  The Parties understand and agree
that, except as specifically set forth herein, without the prior consent of a
Stockholder or Permitted Transferee, Aksys shall not, directly or indirectly,
provide such person with material non-public information relating to Aksys
unless the failure to include such information in a Shelf Registration would
result in such Shelf Registration containing any untrue statement of a material
fact or omitting to state a material fact required to be stated therein or
necessary to make the statements therein not misleading;


 


(f)            make available for
inspection by each Stockholder, Permitted
Transferee and underwriter,
if any, and any attorney, accountant or other agent retained by any such
person (each, an “Inspector”), all financial and other records,
pertinent corporate documents and properties of Aksys and any subsidiaries
thereof as may be in existence at such time (collectively, the “Records”)
as shall be reasonably necessary to enable such person to exercise its due
diligence responsibilities and to conduct a reasonable investigation within the
meaning of the Securities Act, and cause Aksys’ and any subsidiaries’ officers,
directors, employees and independent public accountants to supply all
information reasonably requested by any such Inspector in connection with such
Shelf Registration.  Each Stockholder
and Permitted Transferee, if any, acknowledges that, if in possession of
material non-public information with respect to Aksys, it may be restricted
from purchasing or selling securities of Aksys.  Each Stockholder and Permitted Transferee, if any, agrees that it
will, upon learning that disclosure of confidential Records is sought from it
in a court of competent jurisdiction, use reasonable best efforts to give
notice to Aksys in order to allow Aksys, at its expense, to undertake
appropriate action to prevent disclosure of such confidential Records;


 


5

















 


(g)         obtain an opinion from Aksys’ counsel and a “cold comfort” letter
from Aksys’ independent public accountants who have certified Aksys’ financial
statements included or incorporated by reference in such Shelf Registration, in
each case dated the effective date of such Shelf Registration (and if such
registration involves an underwritten offering, dated the date of the closing
under the underwriting agreement), together with any updates thereto, in
customary form and covering such matters as are customarily covered by such
opinions and “cold comfort” letters delivered to underwriters in underwritten
public offerings, which opinion and letter shall be reasonably satisfactory to
the Master Fund, Artal and each underwriter, if any, and furnish to each
Stockholder, Permitted Transferee and underwriter, if any, participating in the
offering a copy of such opinion and letter addressed to each such Stockholder
and Permitted Transferee, if any, (in the case of the opinion) and underwriter
(in the case of the opinion and the “cold comfort” letter);


 


(h)         maintain a CUSIP number
for all Registrable Securities and cause to be maintained a transfer agent and
registrar for all such Registrable Securities not later than the effectiveness
of such Shelf Registration;


 


(i)             use reasonable best
efforts to comply with all applicable rules, regulations and instructions of
the SEC and any other governmental agency or authority having jurisdiction over
the offering;


 


(j)             use reasonable best
efforts to cause all Registrable Securities to be listed on each national
securities exchange (including Nasdaq) on which the Common Stock is then
listed;


 


(k)          keep each Stockholder,
Permitted Transferee and underwriter, if any, advised as to the initiation and
progress of any registration hereunder;


 


(l)             enter into and
perform customary agreements (including, if applicable, underwriting agreements
and distribution agreements in customary form) and provide officers’
certificates and other customary closing documents;


 


(m)        cooperate, and shall cause
its management to cooperate, in good faith with each Stockholder, Permitted
Transferee and underwriter, if any, and their respective counsel in connection
with any filings required to be made with the National Association of Security
Dealers, Inc. or The Nasdaq Stock Market, Inc., and participate, and shall
cause its management to participate, in good faith in any road shows,
management presentations and similar selling efforts reasonably requested by
the Master Fund and/or its Permitted Transferees, if any, in connection with
any offerings of Registrable Securities and shall make reasonably available its
senior management and otherwise provide reasonable assistance to each
Stockholder, Permitted Transferee and underwriter, if any, in any road shows,
management presentations and other marketing efforts in connection with any
offerings of Registrable Securities; provided that the Parties agree to
cooperate in good faith with the objective of minimizing the interference with
such persons’ obligation to manage the affairs and operations of Aksys’
business caused by such selling efforts;


 


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(n)         furnish to the Master
Fund and the sole or lead managing underwriter, if any, without charge, at
least one manually signed copy of each Shelf Registration and each amendment
thereto, if any, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those deemed to
be incorporated by reference) (which copies of such documents incorporated by
reference and exhibits need not be manually signed);


 


(o)         cooperate with each
Stockholder, Permitted Transferee and underwriter, if any, to facilitate the
timely preparation and delivery of certificates not bearing any restrictive
legends representing the Registrable Securities to be sold, and cause such
Registrable Securities to be issued in such denominations and registered in
such names in accordance with an underwriting agreement prior to any sale of
Registrable Securities to the underwriters or, if not an underwritten offering,
in accordance with the instructions of (as applicable) each Stockholder and
Permitted Transferee, if any, delivered at least three business days prior to
any sale of Registrable Securities; and


 


(p)         subject to Aksys’
blackout rights under Section 7, as promptly as is reasonably practicable,
supplement or amend, as appropriate, any
Shelf Registration, including any prospectus included therein, (i) if required by the rules,
regulations or instructions applicable to the form used for such Shelf
Registration and prospectus, (ii) if required by the Securities Act, or (iii) if
requested by any Stockholder, Permitted Transferee or underwriter, if any, with respect to the information
included (or not included) therein regarding such person or the intended
method of distribution and as is appropriate in the reasonable judgment of
Aksys and its counsel, including information with respect to the number of
Registrable Securities being offered or sold, the purchase price being paid
therefor and any other terms of the offering or of the Registrable Securities
to be sold in such offering; and in connection therewith shall make all
required filings of such supplements and amendments as soon as practicable; and


 


(q)         use its reasonable best
efforts to take all other steps reasonably necessary to expedite or facilitate
the registration and disposition of the Registrable Securities contemplated
hereby.


 


9.               Registration
Expenses.  (a)                           With respect to any Shelf
Registration other than any New
Share Shelf Registrations, Aksys shall pay all registration expenses up to
$500,000, after which all registration expenses shall be paid by the
Stockholders and Permitted Transferees participating in such Shelf Registration
(pro rata among such Stockholders and Permitted Transferees based on the number
of Registrable Securities of each such person included therein); provided,
however, that (i) each Stockholder and Permitted Transferee
participating in such Shelf Registration shall be responsible for the fees and
expenses of its own counsel in connection with such Shelf Registration, (ii)
the Stockholders and Permitted Transferees participating in such Shelf
Registration shall be responsible for all underwriting discounts and
commissions in connection therewith and (iii) any underwriters, brokers,
dealers, placement agents or similar Persons participating in any offering
shall bear all customary costs, fees and expenses associated with their
involvement in the offering.


 


(b)         With respect to any New Share Shelf Registrations,
Aksys shall pay all registration expenses; provided, however,
that (i) each Stockholder and Permitted Transferee


 


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participating in such New
Share Shelf Registration shall be responsible for the fees and expenses of its
own counsel in connection with such New Share Shelf Registrations, (ii) the
Stockholders and Permitted Transferees participating in such New Share Shelf
Registrations shall be responsible for all underwriting discounts and
commissions in connection therewith and (iii) any underwriters, brokers,
dealers, placement agents or similar Persons participating in any offering
shall bear all customary costs, fees and expenses associated with their
involvement in the offering.


 


10.         Underwriter Selection.  Any underwriters and broker-dealers entering
into underwriting or distribution agreements in connection with any Shelf
Registration or sale, transfer or other distribution in connection therewith
may be selected only by the Master Fund (subject to approval by Aksys, which
shall not be unreasonably withheld). 
Aksys agrees that it shall enter into such underwriting or distribution
agreements, provided the terms of such agreement(s) are reasonable.


 


11.         Indemnification.


 


(a)          Indemnification by
Aksys.  Aksys shall indemnify and
hold harmless each Stockholder and Permitted Transferee, if any, each person
who controls such Stockholder or Permitted Transferee (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”)) and the officers,
directors, members and partners of each such person from and against any
losses, claims, damages, liabilities, costs (including, without limitation,
reasonable costs of preparation and reasonable attorneys’ fees) and reasonable
expenses (including, without limitation, reasonable costs and expenses incurred
in connection with investigating, preparing, pursuing or defending against any
of the foregoing) (collectively, “Losses”), insofar as such Losses arise
out of or are based upon any untrue statement or alleged untrue statement of a
material fact in any Shelf Registration, prospectus or form of prospectus, or
in any amendment or supplement thereto, or in any preliminary prospectus, or
any omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, except insofar as
such Losses result solely or primarily from information relating to (as
applicable) such Stockholder or Permitted Transferee and furnished in writing
to Aksys by (as applicable) such Stockholder or Permitted Transferee or its respective
counsel expressly for use therein. 
Aksys also shall indemnify any underwriters, selling brokers, dealer
managers and similar securities industry professionals participating in the
distribution, each person who controls such persons (within the meaning of
Section 15 of the Securities Act or Section 20(a) of the Exchange Act) and
their respective officers, directors, members, partners, agents and employees
to the same extent as provided above with respect to the indemnification of the
Stockholders and Permitted Transferees, if any.


 


(b)         Indemnification by the
Selling Stockholders.  Each selling Stockholder and
Permitted Transferee, if any, shall indemnify and hold harmless Aksys and the
directors and officers of Aksys from and against all Losses insofar as such
Losses arise out of or are based upon any untrue statement or alleged untrue
statement of a material fact in any Shelf Registration, prospectus or form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or any omission or alleged omission to state therein a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the


 


8

















 


circumstances under which
they were made, not misleading to the extent, but only to the extent, that such
Losses resulted solely or primarily from an untrue statement or alleged untrue
statement of a material fact or omission or alleged omission of a material fact
contained in or omitted from any information so furnished in writing by (as
applicable) such selling Stockholder or Permitted Transferee to Aksys expressly
for use therein.  Notwithstanding the
foregoing, in no event shall the liability of any Stockholder or Permitted
Transferee be greater in amount than the dollar amount of the proceeds (net of
payment of expenses) received by such person upon the sale of the Registrable
Securities giving rise to such indemnification obligation.


 


(c)          Conduct of Indemnification
Proceedings.  If any proceeding shall be brought or
asserted against any person entitled to indemnification hereunder (an “Indemnified
Party”), such Indemnified Party shall promptly notify the party or parties
from which such indemnification is sought (the “Indemnifying Party” or “Indemnifying
Parties,” as applicable) in writing; provided, however, that
the failure to so notify the Indemnifying Parties shall not relieve the
Indemnifying Parties from any obligation or liability except to the extent (but
only to the extent) that it shall be finally determined by a court of competent
jurisdiction (which determination is not subject to appeal) that the
Indemnifying Parties have been prejudiced materially by such failure.


 


The Indemnifying
Party shall have the right, exercisable by providing written notice to an
Indemnified Party, to assume, at its expense, the defense of any such
proceeding; provided, however, that an Indemnified Party shall
have the right to employ separate counsel in any such proceeding and to
participate in the defense thereof, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless:  (i) the Indemnifying Party has agreed to pay
such fees and expenses; (ii) the Indemnifying Party shall have failed promptly
to assume the defense of such proceeding or shall have failed to employ counsel
reasonably satisfactory to such Indemnified Party; or (iii) the named parties
to any such proceeding (including any impleaded parties) include both such
Indemnified Party and the Indemnifying Party or any of its affiliates or
controlling persons, and such Indemnified Party shall have been advised by
counsel that there may be one or more defenses available to such Indemnified
Party that are in addition to, or in conflict with, those defenses available to
the Indemnifying Party or such affiliate or controlling person (in which case,
if such Indemnified Party notifies the Indemnifying Parties in writing that it
elects to employ separate counsel at the expense of the Indemnifying Parties,
the Indemnifying Parties shall not have the right to assume the defense and the
reasonable fees and expenses of such counsel shall be at the expense of the
Indemnifying Party; it being understood, however, that, the Indemnifying Party
shall not, in connection with any one such proceeding or separate but
substantially similar or related proceedings arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more than
one separate firm of attorneys (in addition to one appropriate local counsel in
each required jurisdiction) at any time for such Indemnified Party).


 


No Indemnifying
Party shall be liable for any settlement of any such proceeding effected
without its written consent, which shall not be unreasonably withheld, but if
settled with its written consent, or if there be a final judgment for the
plaintiff in any such proceeding, each Indemnifying Party jointly and severally
agrees, subject to the exceptions and limitations set forth above, to indemnify
and hold harmless each Indemnified Party from and against any and all Losses by
reason of such settlement or judgment. 
The Indemnifying Party


 


9

















 


shall not consent to the entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to each Indemnified Party of a release, in form and
substance reasonably satisfactory to the Indemnified Party, from all liability
in respect of such proceeding for which such Indemnified Party would be
entitled to indemnification hereunder (whether or not any Indemnified Party is
a party thereto).


 


(d)         Contribution. 
If the indemnification provided for in this Section 11 is unavailable to
an Indemnified Party or is insufficient to hold such Indemnified Party harmless
for any Losses in respect of which this Section 11 would otherwise apply by its
terms (other than by reason of exceptions provided in this Section 11), then
each applicable Indemnifying Party, in lieu of indemnifying such Indemnified
Party, shall have a joint and several obligation to contribute to the amount
paid or payable by such Indemnified Party as a result of such Losses, in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party, on the one hand, and such Indemnified Party, on the other hand, in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations.  The relative fault of such Indemnifying Party,
on the one hand, and Indemnified Party, on the other hand, shall be determined
by reference to, among other things, whether any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact relates to information supplied by such Indemnifying Party or
Indemnified Party, and the parties’ relative intent, knowledge, access to
information and opportunity to correct or prevent any such statement or
omission.  The amount paid or payable by
an Indemnified Party as a result of any Losses shall be deemed to include any
legal or other fees or expenses incurred by such party in connection with any
proceeding, to the extent such party would have been indemnified for such fees
or expenses if the indemnification provided for in Section 11(a) or 11(b) was
available to such Party.


 


The Parties hereto
agree that it would not be just and equitable if contribution pursuant to this
Section 11(d) were determined by pro rata allocation or by another method of
allocation that does not take account of the equitable considerations referred
to in the immediately preceding paragraph. 
Notwithstanding the provisions of this Section 11(d), no Stockholder or
Permitted Transferee shall be required to contribute in excess of (i) the dollar
amount of the proceeds (net of payment of expenses) received by such person
upon the sale of the Registrable Securities giving rise to such contribution
obligation over (ii) the aggregate amount of damages that such person has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission giving rise to such contribution
obligation in the action or series of related actions for which contribution is
sought.  No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation.


 


The indemnity and
contribution agreements contained in this Section 11 are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.


 


(e)          Survival of Indemnity.  The indemnification provided by this Section
11 shall be a continuing right to indemnification and shall survive the
registration and sale of any securities hereunder and the expiration or
termination of this Agreement.


 


10

















 


12.         Representations and
Warranties.  Each of the Parties
hereby represents and warrants to the others as follows:


 


(a)          The execution, delivery
and performance of this Agreement by such Party, if a legal entity, have been
duly authorized by all requisite corporate action (or equivalent company or
partnership action) and will not violate any provision of law, any order of any
court or other agency of government, the Certificate of Incorporation or Bylaws
(or equivalent organizational documents) of such Party or any provision of any
indenture, agreement or other instrument to which such Party or any of its
properties or assets are bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or
imposition of any lien, charge or encumbrance of any nature whatsoever upon any
of the properties or assets of such Party.


 


(b)         This Agreement has been
duly executed and delivered by such Party and constitutes the legal, valid and
binding obligation of such Party, enforceable in accordance with its terms,
subject to (i) applicable bankruptcy, insolvency, reorganization, fraudulent
conveyance and moratorium laws and other laws of general application affecting
enforcement of creditors’ rights generally, (ii) the availability of equitable
remedies as such remedies may be limited by equitable principles of general
applicability (regardless of whether enforcement is sought in a proceeding in
equity or at law), and (iii) any applicable law prohibiting indemnification for
securities law violations.


 


13.         General.


 


(a)          No Inconsistent
Agreements or Actions.  Aksys agrees
that it shall not hereafter enter into any agreement or take any action that
conflicts with the rights granted to the Stockholders and Permitted
Transferees, if any, in this Agreement; provided, however, that
nothing herein shall prevent or limit Aksys’ ability to effect the registration
of its capital stock relating to any employee benefit plan on Form S-8 (or any
substitute form that may be adopted by the SEC).  Notwithstanding the foregoing, Aksys shall not effect the registration of any shares of its
capital stock other than Registrable Securities at any time during the
first year of the Effectiveness Period without the prior written consent of the Master Fund, and after the
first year of the Effectiveness Period, Aksys may effect the registration of
any shares of its capital stock without such consent.  In the event of any registration by Aksys of any shares of its
capital stock other than Registrable Securities at any time during the
Effectiveness Period,
including a registration as set forth in the previous sentence, the
duration of the Effectiveness Period shall be extended for 180 days for each
such registration.


 


(b)         Lockup. 
To the extent timely requested by an underwriter or broker-dealer in an
offering pursuant to a Shelf Registration, Aksys agrees not to effect any
offer, sale or other distribution of any of its capital stock, including any
private placement, or to pledge, contract or otherwise obligate itself to do
so, during the period beginning 30 days before and ending the number of days
reasonably requested by such underwriter or broker-dealer (but not to exceed
180 days) after such offering (except as part of such offering, if permitted,
or pursuant to one or more registration statements relating to any employee
benefit plan on Form S-8 (or any substitute form that may be
adopted by the SEC).


 


11

















 


(c)          Amendments and
Waivers.  The provisions of this
Agreement may not be amended, modified, supplemented or terminated without the
written consent of Aksys, Artal and the Master Fund; provided that
Artal’s written consent is not required with respect to provisions relating to
the New Share Shelf Registration. 
Waivers or consents to departures from the provisions hereof may not be
given except by a written instrument signed by the Party charged with the
waiver or consent to departure.  No
written waiver shall be deemed a continuing waiver unless specifically stated
therein, and a written waiver shall operate only as to the specific term or
condition waived, and not for the future or as to any other act than that
specifically waived.


 


(d)         Notices.  All notices and other communications
provided for or permitted hereunder shall be made in writing by hand delivery,
telecopier, recognized courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, in each case with any
postage prepaid and addressed to the applicable Party at the address set forth
below or such other address as may hereafter be designated in writing by such
Party in accordance with the provisions of this Section:


 


If to Aksys, to:


 


Aksys, Ltd.


Two Marriott
Drive


Lincolnshire,
Illinois  60069


Attn:  General Counsel


Telecopy:  (847) 229-2235


Telephone:


 


With a copy to:


 


Kirkland &
Ellis LLP


200 East
Randolph Drive


Chicago,
Illinois  60601


Attn:  Keith S. Crow, P.C.


Telecopy:  (312) 861-2200


Telephone:


 


If to the Master Fund, to:


 


Durus Life
Sciences Master Fund Ltd.


c/o
International Fund Services (Ireland) Limited


3rd Floor,
Bishops Square


Redmonds Hill


Dublin 2,
Ireland


Attn:  Susan Byrne


Telecopy:  (011) 35-31-707-5113


Telephone:  (011) 35-31-707-5013


 


12

















 


With a copy to:


 


Schulte Roth
& Zabel LLP


919 Third
Avenue


New York, NY
10022


Attn:  Paul N. Roth


Telecopy:
(212) 593-5955


Telephone:
(212) 756-2000


 


If to Artal, to:


 


Artal Long
Biotech Portfolio LLC


c/o Artal
Alternative Treasury Management


19A Rue de la
Croix-d’or


Geneva


Switzerland


Attn: Christian
Tedeschi, Managing Director


 


With a copy to:


 


Shartsis,
Friese & Ginsburg LLP


One Maritime
Plaza, 18th Floor


San Francisco,
CA 94111


Attn: Carolyn
Gorman, Esq.


Telecopy:
(415) 421-2922


Telephone:
(415) 421-6500


 


If to any Permitted Transferee, to such address as may hereafter be
designated in writing by such Permitted Transferee to the Parties hereto.


 


All such notices and communications shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when receipt is acknowledged, if telecopied; on the next business
day, if timely delivered for overnight delivery to a recognized courier
guaranteeing overnight delivery; and five days (10 if to be delivered
internationally) after being deposited in the mail if sent first class
registered or certified mail, return receipt requested, in each case postage
prepaid and properly addressed.


 


(e)          Successors and
Assigns.  This Agreement shall inure
to the benefit of and be binding upon the Parties hereto and their respective
heirs, successors and permitted assigns (including any Permitted
Transferees).  The registration and
other rights of the Stockholders and any Permitted Transferees hereunder shall
be freely transferable by the Stockholders and any Permitted Transferees
together with the underlying Registrable Securities directly or indirectly (i)
to one or more of its investors, officers, directors, members, managers,
partners, stockholders, subsidiaries or affiliates who would not be permitted
to freely resell such shares immediately and without restriction under
applicable law, (ii) to one or more persons in a broker-assisted distribution
or one or more persons who would not be permitted to freely resell such shares
immediately and without restriction under applicable law, or (iii) to one or
more


 


13

















 


persons approved by Aksys (each such person
to whom Registrable Securities have been transferred, a “Permitted
Transferee”).  In the event of one
or more such transfers that result in the Master Fund or Artal no longer
holding any Registrable Securities, unless the context otherwise requires,
actions to be taken by such person hereunder may be taken by the holders of a majority of the
then outstanding Registrable Securities. 
Notwithstanding anything to the contrary herein, in the event of
one or more such transfers that result in the Master Fund no longer holding any
Registrable Securities, Aksys shall not be required during any calendar year to
effect more than four underwritten offerings pursuant to a Shelf
Registration.  Except as set forth above, neither this Agreement nor any right,
remedy, obligation or liability arising hereunder or by reason hereof shall be
assignable by any Party without the written consent of the other Parties hereto.  Aksys agrees that each Permitted Transferee,
if any, is an intended third party beneficiary of this Agreement and is
entitled to enforce any rights established hereunder with respect to such
Permitted Transferee.


 


(f)            Counterparts.  This Agreement may be executed in two or
more counterparts, each of which, when so executed and delivered, shall be
deemed to be an original, but all of which, taken together, shall constitute
one and the same instrument.


 


(g)         Descriptive Headings,
Etc.  The headings in this Agreement
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. 
Unless the context of this Agreement otherwise requires: (i) words of
any gender shall be deemed to include each other gender; (ii) words using the
singular or plural number shall also include the plural or singular number,
respectively; (iii) the words “hereof,” “herein,” “hereunder” and words of
similar import when used in this Agreement shall refer to this Agreement as a whole
and not to any particular provision of this Agreement, and section and
paragraph references are to the sections and paragraphs of this Agreement
unless otherwise specified; (iv) the word “including” and words of similar
import when used in this Agreement shall mean “including, without limitation,”
unless otherwise specified; (v) “or” is not exclusive; (vi) the word “person”
when used in this Agreement shall mean any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock company, limited
liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision
thereof, and shall include any successor (by merger or otherwise) of such
entity; and (vii) provisions apply to successive events and transactions.


 


(h)         Severability.  In the event that any one or more of the
provisions, paragraphs, words, clauses, phrases or sentences contained herein,
or the application thereof in any circumstances, is held invalid, illegal or
unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision, paragraph, word, clause, phrase or
sentence in every other respect and of the other remaining provisions,
paragraphs, words, clauses, phrases or sentences hereof shall not be in any way
impaired, it being intended that all rights, powers and privileges of the
Parties hereto shall be enforceable to the fullest extent permitted by law.


 


(i)             Governing
Law and Jurisdiction.  This
Agreement shall be governed by, and construed in accordance with, the laws of
the State of Delaware, without giving effect to the conflict of laws principles
thereof.  Each Party to this Agreement
hereby irrevocably and unconditionally agrees that any legal action, suit or
proceeding arising out of or relating to this


 


14

















 


Agreement or any agreements or transactions
contemplated hereby shall be brought in (i) any federal court of the Southern
District of New York or any state court located in New York County, State of
New York, (ii) any federal court of the Northern District of Illinois or any
state court in Cook County, State of Illinois, or (iii) any federal or state
court in the State of Delaware, and hereby irrevocably and unconditionally
expressly submits to the exclusive personal jurisdiction and venue of such
courts for the purposes thereof and hereby irrevocably and unconditionally
waives any claim (by way of motion, as a defense or otherwise) of improper venue,
that it is not subject personally to the jurisdiction of such courts, that such
courts are an inconvenient forum or that this Agreement or the subject matter
may not be enforced in or by such courts. 
Each Party hereby irrevocably and unconditionally consents to the
service of process of any of the aforementioned courts in any such action, suit
or proceeding by the mailing of copies thereof by registered or certified mail,
return receipt requested, postage prepaid, to the address set forth or provided
for in this Agreement, such service to become effective 10 days after such
mailing.  Nothing herein contained shall
be deemed to affect the right of any Party to serve process in any manner
permitted by law or commence legal proceedings or otherwise proceed against any
other Party in any other jurisdiction to enforce judgments obtained in any
action, suit or proceeding brought pursuant to this Section.


 


(j)             Remedies; Specific
Performance.  The Parties hereto
acknowledge that money damages would not be an adequate remedy at law if any
Party fails to perform in any material respect any of its obligations
hereunder, and accordingly agree that each Party, in addition to any other
remedy to which it may be entitled at law or in equity, shall be entitled to
specific performance of the obligations of any other Party under this
Agreement, without the posting of any bond, in accordance with the terms and
conditions of this Agreement, and if any action should be brought in equity to
enforce any of the provisions of this Agreement, none of the Parties hereto
shall raise the defense that there is an adequate remedy at law.  Except as otherwise provided by law, a delay
or omission by a Party hereto in exercising any right or remedy accruing upon
any such breach shall not impair the right or remedy or constitute a waiver of
or acquiescence in any such breach.  No
remedy shall be exclusive of any other remedy. 
All available remedies shall be cumulative.


 


(k)          Entire Agreement.  Together with the Settlement Agreement and
the Transaction Agreements (as such term is defined in the Settlement
Agreement), this Agreement is intended by the Parties hereto as a final,
complete and exclusive statement of their agreement and understanding in
respect of the subject matter contained herein and there are no restrictions,
promises, representations, warranties, covenants or undertakings relating to
such subject matter other than those set forth or referred to herein.  Together with the Settlement Agreement and
the Transaction Agreements, this Agreement supersedes all prior agreements and
understandings between the Parties hereto with respect to such subject matter.


 


(l)             Further Assurances.  Each Party hereto shall do and perform or
cause to be done and performed all such further acts and things and shall
execute and deliver all such other agreements, certificates, instruments and
documents as another Party hereto reasonably may request in order to carry out
the intent and accomplish the purposes of this Agreement and the consummation
of the actions contemplated hereby.


 


15

















 


(m)         Construction.  Each Party hereby acknowledges that it has
had the benefit of legal counsel of its own choice and has been afforded an
opportunity to review this Agreement with its legal counsel and that this
Agreement shall be construed as if jointly drafted by each of the Parties
hereto.


 


*     *     *    
*     *


 


16

















 


IN WITNESS WHEREOF, the Parties hereto have
caused this Agreement to be duly executed as of the date first written above as
follows:


 


	
  Aksys, Ltd.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ William
  C. Dow

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  William C.
  Dow

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

  	
   

  
						



 

















 


IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be duly executed as
of the date first written above as follows:


 


 


	
  Durus Life Sciences
  Master Fund Ltd.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Leslie
  L. Lake

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Leslie L.
  Lake

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

  	
   

  
						



 

















 


IN WITNESS
WHEREOF, the Parties hereto have caused this Agreement to be duly executed as
of the date first written above as follows:


 


 


	
  Artal Long Biotech
  Portfolio LLC

  
	
   

  
	
  By:

  	
  Artal
  Alternative Treasury Management

  
	
  Its:

  	
  Managing
  Member

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Christian Tedeschi

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Christian
  Tedeschi

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004