**Exhibit 10.9**

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**ContractManufacturing Agreement**

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This ContractManufacturing Agreement (the “Agreement”) is made as of February 28,2003 (the “Effective Date”) by and between Peak Industries, Inc., itsprincipal offices being located at 4300 Road 18, Longmont, CO  80504 (“Peak”) and Aksys, Ltd. , itsprincipal offices being located at Two Marriot Drive, Lincolnshire, IL 60069 (“Aksys”).

 

**AGREEMENT**

 

In consideration of the mutualcovenants, promises, and conditions set forth below, the parties, intending tobe bound, agree as follows:

 

1.               Definitions.  The following capitalized terms when used inthis Agreement shall have the respective meanings set forth below.

 

a.               “Bill of Material” shall mean anymaterials and components lists and related instructions and informationprovided by Aksys to Peak and concerning components required or preferred forthe manufacture of a Product by Peak pursuant to this Agreement.

 

b.              “Disclosing Party” shall have themeaning stated in Section 14 hereof.

 

c.               “Effective Date” shall have themeaning stated in the preamble of this Agreement.

 

d.              “Improvements” shall mean allimprovements to Aksys Patents or Know-How hereafter created or acquired duringthe term of this Agreement by Peak or jointly by one or more employees of Aksysand Peak, including without limitation advances, developments, modifications,enhancements, variations, revisions, adaptations, extensions or any elementthereof, utilizing or incorporating, or based on, the Know-How or Patents,whether able to be patented or not.

 

e.               “Intellectual Property” shallmean trade secrets, ideas, inventions, designs, developments, devices, methodsor processes (whether patented or able to be patented and whether or notreduced to practice) and all patents and patent applications related thereto;copyrightable works and mask works (whether or not registered); trademarks,service marks and trade dress; and all registrations and applications forregistration related thereto; and all other intellectual or industrial propertyrights, to the extent in or related to the Products.

 

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f.                 “Know-How” shall mean theknow-how, technical information and confidential technical data, together withall trade secrets, non-patented technical knowledge and inventions,confidential manufacturing procedures and methods, that are related to theProducts.

 

g.              “Losses” shall mean any and alldamages, liabilities, costs and expenses (including reasonable attorneys’ feesand expenses), and amounts paid in settlement.

 

h.              “MPQ”  shall mean minimum package quantities purchased to supportrequirements in forecast of Product.

 

i.                  “Patents” shall mean thosepatents and patent applications that are now or hereafter owned or acquired byAksys and relate to the Products.

 

j.                  “Peak Supplier Managed InventoryAgreement” shall mean an agreement negotiated with key suppliers to provideinventory to Peak whose title shall not transfer until such material is pulledinto Peak’s possession and supplier is notified.

 

k.               “Products” shall mean the devicesand other goods identified in Exhibit B hereto, which shall be described indetail in the Specifications.

 

l.                  “Proprietary Information”shall have the meaning stated in Section 14(b).

 

m.            “Recipient” shall have the meaningstated in Section 14(a).

 

n.              “6 Month Forecast” shall have themeaning stated in Section 6.

 

o.              “Spares”  shall mean the components and spare parts/assemblies required tosupport Products in the field.

 

p.              “Special Inventory” shall have themeaning stated in Section 7(d).

 

q.              “Specifications” shall mean all drawings,prints, instructions and similar materials provided by Aksys to Peak andrelating to a Product to be manufactured by Peak pursuant to this Agreement,including without limitation the design and specifications attached as ExhibitA for Products identified in Exhibit B.

 

2.               Supply Obligations.  During the Term of this Agreement, Peakshall manufacture for Aksys its requirements for the Products, subject to andin accordance with the terms and conditions set forth in this Agreement,including without limitation the Specifications.

 

3.               Document Control and Process.

 

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a.               Document Control*.*   All Specifications, Bills of Material andother documents provided to Peak pursuant to this Agreement, including withoutlimitation all modifications, revisions, updates, supplements and amendmentsthereto, will be entered into Peak’s document control system promptly uponreceipt thereof.

 

b.              Design Implementation.  Peak’s design implementation for a Productwill be in accordance with a form of Document Control Request (“DCR”) orTemporary Deviation Authorization (“TDA”) provided by Peak and reviewed,approved and signed by Aksys.

 

c.               Manufacturing.  Peak will generate customary manufacturingdocumentation, including without limitation manufacturing procedures, assemblyquality plans and checklists.  Suchdocumentation shall be controlled by Peak through its document controlsystem.  Peak shall be required toobtain Aksys’ prior approval of all significant manufacturing procedures,including without limitation manufacturing in-process, final test activitiesand assembly quality plans.

 

d.              Prototypes.  In lieu of Specifications, Peak may withAksys’ approval develop prototypes to serve as confirmation of Aksys’requirements.  Peak shall obtain Aksys’written approval of such prototypes prior to commencement of manufacturing.

 

e.               Design Changes.  Aksys shall be responsible for providingPeak with any desired modifications, updates or other changes to theSpecifications, which shall be processed by Peak in accordance with theforegoing provisions of this Section 3. Upon submission, Peak will inform Aksysin writing whether the requested change is a “standard change” for which Aksysshall pay Peak a single charge of $250 or a “non-standard change” (i.e., achange which Peak anticipates will require more than four (4) hours ofnon-recurring engineering time) which Peak will separately quote to Aksys forwritten pre-approval.

 

f.                 Design Change Process.  Peak will estimate scope and cost of DesignChanges beyond the standard charge. Peak and Aksys agree to create an exhibit with details on activities tobe performed, appropriate charges for activities and deliverables.  Aksys will deliver a purchase order forDesign Change prior to any work performed by Peak.  Any changes to scope must be pre-approved by Aksys prior to anywork performed.

 

g.              Testing and Quality.   Aksys and Peak will establish mutuallyagreed testing procedures, which Peak will incorporate its manufacturingquality system.

 

h.              Aksys Accessibility.  Aksys shall have access to the areas ofPeak’s facility where Products are being manufactured or stored or where partsand materials are being processed or stored at all times during normal businesshours for

 

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purposes ofquality inspection, verification of manufacturing procedures and otherlegitimate purposes.

 

i.                  Design Verification.  Aksys shall maintain the design history fileand shall perform all necessary design verification and validation.  Aksys shall be responsible for notifyingPeak in writing of its requirements for lot traceability of components and Peakshall implement procedures to do so.

 

j.                   Approved Supplier List.  Peak shall maintain an approved vendor list(“ASL”) for all components to be incorporated into the Products and the ASLshall serve as the only list of approved suppliers.  Such suppliers may be selected by either Peak, Aksys or jointlyas mutually agreed. (i) In cases where Aksys recommends suppliers to be addedto the ASL, Peak shall be solely responsible for the evaluation, selection, andapproval of these suppliers, including without limitation any necessarysurveys, on-site visits or similar qualifications.  (ii) In cases where new suppliers are selected through a jointprocess by Aksys and Peak, these suppliers will be treated as a Peak selectedsupplier.   Aksys agrees to reimbursePeak for activities related to qualifying suppliers recommended by Aksys andthe reimbursement for these must be approved by Aksys in advance.   In cases where Peak selects suppliers to beadded to the ASL, Peak shall be solely responsible for the evaluation,selection, and approval of these vendors, including without limitation anynecessary surveys, on-site visits or similar qualifications.  Notwithstanding the foregoing, in caseswhere Peak selects Suppliers to be added to the ASL, only suppliers that supplyfor manufacturers indicated in the Specifications or otherwise approved byAksys in writing shall be added to the ASL.

 

k.               Process Validation.  Peak will perform process validation whereresults cannot be verified by subsequent inspection or test and installation,including qualification of tooling and fixtures.  Any additional process validation will be specified by Aksys andperformed by Peak.  Aksys will providespecifications for, and will obtain any necessary regulatory approvals of,printed materials, including labels manuals, artwork and copy.

 

l.                  Regulatory Requirements.  Aksys will be responsible for compliancewith all regulatory and related matters which may require regulatory agencynotification including FDA Medical Device Report, MDD Vigilance report, andsafety agency notifications.  Peak shallprovide such assistance and cooperation as Aksys shall reasonably request,including without limitation the provision of relevant manufacturing records,provided that Aksys shall reimburse Peak for its out-of-pocket expenses inconnection therewith.  Each party shallobtain all domestic and foreign governmental licenses, permits and approvalsrequired for such party’s performance under this Agreement.  Without limiting the generality of the 

 

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foregoing: (i) Aksys shall be responsible forcomplying with all applicable foreign and U.S. federal, state and local laws,rules, regulations and orders and for obtaining all applicable U.S. FDA and othergovernmental agency product and design approvals and applicable foreign agencyapproval for sale of the Product; and (ii) Peak shall be responsible forcomplying with all U.S. FDA and applicable state and local laws, rules,regulations and orders applicable to the manufacturing processes andprocedures.

 

m.            Product Recall.  Aksys is responsible for conducting productrecalls.  Peak shall cooperate withAksys recall investigations, including providing manufacturing-related recordsas they relate to the recall. Peak and Aksys shall cooperate in jointlyassessing the root cause of a product recall. Both parties will mutually agree as to the assessment ofresponsibility.  Should Aksys bedetermined solely responsible for the recall, Aksys will reimburse Peak for allreasonable costs and expenses in cooperation of such recall.  Should Peak be determined solelyresponsible, Aksys will not reimburse Peak for expenses incurred in providingreplacement components.  Aksys will bearthe cost of all field service related activities

 

4.               Tools and Fixtures.  Aksys shall be responsible for purchasingall custom tooling and custom fixtures that are required for manufacturing ofthe Products (including any tooling and fixtures required due to a change tothe Specifications) which Peak does not otherwise own as of the EffectiveDate.  All tooling and fixturespurchased by Aksys shall be held by Peak in trust for Aksys’ exclusive use inaccordance with manufacturing and testing procedures established for theProducts.  Peak shall publish andprovide to Aksys a listing of such tooling at least once per year.  Such tooling and fixtures shall be owned byAksys and identified to Peak’s lenders, creditors, shareholders and other thirdparties as Aksys assets in the possession of Peak.  Except for normal production maintenance, which will be theresponsibility of Peak, Aksys shall be exclusively responsible for the costs torepair or replace such tooling and fixtures. Peak and Aksys shall cooperate to obtain the best available pricing forall such tooling and fixtures.  Peakagrees to execute and deliver to Aksys upon request a form UCC-1 or suchother documents as Aksys reasonably may request to protect its interest in suchassets.

 

5.               Cost Reductions.  Peak and Aksys agree to seek ways to reducethe cost of manufacturing Products by methods such as obtaining alternatesources of materials and improved assembly or test methods.  Peak shall notify Aksys in writing not lessthan thirty (30) days prior to starting any such cost reduction efforts orimplementation of any such cost reduction methods. Peak and Aksys agree to meetat least every six (6) months to identify cost reduction opportunities.  The benefits of any cost reductioninitiative proposed independently by Peak will be shared by Peak and Aksys onterms to be agreed and the benefits of any cost reduction initiative proposedindependently by Aksys will be realized 100% by Aksys.  Peak will provide updated pricing forProducts to incorporate Aksys’ share of all cost reduction initiatives.

 

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6.               Forecasts.  Aksys shall provide to Peak prior to thefirst day of each month a six (6) month rolling forecast (6 Month Forecast) ofAksys’ reasonably anticipated manufacturing requirements for each Product.  All such forecasts provided by Aksys shallbe confidential information, whether so marked or not, and shall be treated inaccordance with Section 14 hereof.

 

7.               Orders, Changes and Cancellation.

 

a.               Purchase Orders.  Peak shall initiate manufacturing of Productupon receipt of a written purchase order (“Order”) from Aksys.  Orders shall specify a delivery date notless than thirteen (13) weeks from the date delivered to Peak, unless otherwiseagreed in writing by Peak.  Peak shall satisfyall such Orders in full; *provided however that* Peak shall be underno obligation to satisfy any Order(s) which, when combined with all otherOrders for the relevant 13 Week period, exceeds purchase order quantity.  Notwithstanding the foregoing, Peak shalluse its commercially reasonable efforts to satisfy any Order specifying adelivery date less than thirteen weeks from the date delivered to Peak and tosatisfy any portion of an Order that exceeds its obligations and in doing soshall make satisfaction of Aksys’ Order(s) a priority over other customers.

 

b.              Order Changes.  The quantity or shipment date for any Ordermay be adjusted by mutual written agreement of the parties.  Peak shall use its best efforts toaccommodate any changes requested by Aksys.

 

c.               Order Cancellation.  Aksys may cancel any Order; *providedthat* in such event, Peak shall stop any work-in-process and Aksysshall purchase from Peak all finished goods inventory, work in process and rawmaterial for which title has not passed to Aksys.

 

d.              Materials Inventory.  Peak shall be authorized to purchaseinventory and maintain levels needed to support open purchase order(s).  Such material inventory schedule shall bebased on material lead-times, reasonable inventory on-hand stocking levels,MPQ’s.  Peak may periodically requestfrom Aksys written authorization to purchase certain long lead time items to beheld in inventory, as safety stock or to meet anticipated manufacturingrequirements (Special Inventory). Authorization can be in the form of an e-mail or other writtencommunication from Aksys.  Upontermination or cancellation of this Agreement, Aksys shall purchase from Peak,at Peak’s burdened cost, any unused inventory. With respect to materialscontrolled by a Peak Supplier Managed Inventory Agreement,  Peak will not take title to inventory fasteron behalf of Aksys than it would on its own behalf.

 

e.               Carrying Charges.  Provided that Peak observes the requirementsof Section 7(d) hereof, in the event that Aksys has requested Peak to delayshipment of

 

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confirmed purchase order(s) in excess of 30days and as a result, Peak’s materials inventory has become stagnant, Aksysshall pay Peak a carrying charge of 1.5% per month calculated on the stagnantportion of such materials at Peak’s actual cost of such inventory.  Notwithstanding the foregoing, Aksys may atany time purchase from Peak, at Peak’s actual cost, or remit a deposit for theequivalent amount of, any stagnant inventory in order to avoid being chargedinventory carrying charges.

 

f.                 Obsolete Inventory.  Aksys agrees to purchase from Peak, atburdened cost, any inventory purchased by Peak in reliance on Aksys purchaseorders or authorization for Special Inventory, which inventory is renderedobsolete due to a change to the Specifications.  Peak shall, however, first use reasonable efforts to return anysuch inventory, and Aksys agrees to pay for the restocking charges, shippingand similar out-of-pocket costs to Peak as applicable.

 

8.               Packaging, Shipping and Delivery.  Peak shall ship the Products in accordancewith packaging and shipping instructions provided by Aksys.  Unless otherwise specified in writing in aparticular Order, all Product deliveries shall be shipped F.O.B. Peak’sfacilities to the destination specified by Aksys.

 

9.               Spares.  Aksys may require Peak to provide spares to support Products inthe field.  Aksys agrees to pay Peak amarkup as identified in Exhibit B based on the actual costs of such spares.

 

10.         Payment.

 

a.               Invoice.  Peak will invoice at the time of shipment ofProducts or at the time such Products are available for fulfillment pursuant toAksys’ instructions in as contemplated by Section 11 hereof.  Aksys shall pay such invoices within 30 daysof receipt.

 

b.              Pricing.  Peak’s invoices shall reflect charges for the Products asspecified in Exhibit B.  Such chargesare exclusive of taxes, shipping and insurance.  Charges for taxes, shipping and insurance (to the extentapplicable) shall be separately stated on Peak’s invoice.

 

c.               Deposit.  If Aksys places a purchase order upon Peakand Aksys is unable to provide sufficient evidence in its ability to pay forsuch purchase order, Peak may require and Aksys agrees to provide a deposit oran irrevocable letter of credit to cover the material liability for any Aksyspurchase order.  Such ability to paywill be Aksys current cash and cash equivalents plus its confirmed access toequity funds in their aggregate in relation to the payment schedule requiredbased on the delivery dates of Products from said purchase orders.

 

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11.         Fulfillment.  Peak agrees provide fulfillment services to Aksys for theProducts.  The terms of Peak’s ePeakProgram Internet Commerce Agreement are attached hereto as Exhibit C andincorporated herein by reference.

 

12.         WARRANTY.

 

a.               Basic Warranty.  Peak warrants that the Products are andshall be free from defects in workmanship which exist or develop for a periodof 90 days from the date of installation or 6 months from date of shipment thereof to Aksys or Aksys’s designateddistributor, whichever occurs first, provided that such defect developed undernormal and proper use within the operating parameter described in theSpecifications.

 

b.              Specification Warranty.  Peak warrants that the Products aremanufactured to mutually agreed upon specifications for a period of 90 days fromthe date of installation or 6 months from date of shipment thereof to Aksys orAksys’s designated distributor, whichever occurs first.

 

c.               Limitation of Liability.  Aksys’s sole and exclusive remedy in theevent of a breach of the foregoing warranties shall be repair or, at Peak’ssole discretion, replacement, including related shipping costs.  Aksys will bear financial responsibility forall field service related warranty expenses.

 

d.              PEAK EXPRESSLY DISCLAIMS ALL IMPLIEDWARRANTIES, INCLUDING, WITHOUT LIMITATION, WARRANTIES OF FITNESS FOR APARTICULAR PURPOSE AND MERCHANTABILITY.

 

13.         Intellectual Property.

 

a.               Ownership.  As between Aksys and Peak, Aksys shall ownall right, title and interest in and to Products and the Know-How, Improvementsand Patents related thereto.  No impliedrights or licenses are granted by this Agreement.  Aksys shall have the right to apply, in its own name and at itsown expense, for patent, copyright or other Intellectual Property rights insuch Know-How and Improvements and, if requested, Peak shall cooperate withAksys in any reasonable manner in obtaining such protection.  Peak agrees that all such Know-How andImprovements shall be owned solely by Aksys, even though developed as a resultof this Agreement, and regardless of whether conceived, created or developed byAksys or Peak.

 

b.              License.  During the Term of this Agreement and limited to the scope andpurposes hereunder, Aksys grants to Peak a non-exclusive, royalty-free right

 

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and license under the Patents, Know-How andImprovements to make the Products solely for delivery to Aksys or Aksys’designee.

 

14.         Confidentiality.

 

a.               General Obligation.  All information provided by one party (the “DisclosingParty”) to the other party (the “Recipient”) shall be governed bythis Section 15.

 

b.              Proprietary Information.  As used in this Agreement, the term “ProprietaryInformation” shall mean all trade secrets or confidential or proprietaryinformation designated as such in writing by the Disclosing Party, whether by letteror by the

c.

use of an appropriate proprietary stamp orlegend, prior to or at the time any such trade secret or confidential orproprietary information is disclosed by the Disclosing Party to theRecipient.  Notwithstanding theforegoing, information which is orally or visually disclosed to the Recipientby the Disclosing Party, or is disclosed in writing without an appropriateletter, proprietary stamp or legend, shall constitute Proprietary Informationif the Disclosing Party, within thirty (30) days after such disclosure,delivers to the Recipient a written document or documents describing suchProprietary Information and referencing the place and date of such oral, visualor written disclosure and the names of the employees or officers of the Recipientto whom such disclosure was made.

 

d.              Disclosure.  The Recipient shall hold in confidence, andshall not disclose to any person outside its organization, any ProprietaryInformation, regardless of the termination of the Term of this Agreement.  The Recipient shall use such ProprietaryInformation only for the purpose of developing the Product with the DisclosingParty or fulfilling its future contractual requirements with the DisclosingParty and shall not use or exploit such Proprietary Information for any otherpurpose or for its own benefit or the benefit of another without the priorwritten consent of the Disclosing Party. The Recipient shall disclose Proprietary Information received by itunder this Agreement only to persons within its organization who have a need toknow such Proprietary Information in the course of the performance of theirduties and who are bound to protect the confidentiality of such ProprietaryInformation.

 

e.               Limitation on Obligations.  The obligations of the Recipient specifiedin this Section 15 above shall not apply, and the Recipient shall have nofurther obligations, with respect to any Proprietary Information to the extentthat such Proprietary Information: (i) is generally known to the public at thetime of disclosure or becomes generally known through no wrongful act on thepart of the Recipient; (ii) is in the Recipient’s possession at the time ofdisclosure otherwise than as a result of Recipient’s breach of any legalobligation; (iii) becomes known to the Recipient through disclosure by sourcesother than the Disclosing Party having the legal right to disclose suchProprietary Information;

 

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(iv) is independently developed by theRecipient without reference to or reliance upon the Proprietary Information; or(v) is required to be disclosed by the Recipient to comply with applicable lawsor governmental regulations*, provided that* the Recipient providesprior written notice of such disclosure to the Disclosing Party and takesreasonable and lawful actions to avoid and/or minimize the extent of suchdisclosure.

 

f.                 Ownership of ProprietaryInformation.  The Recipient agreesthat the Disclosing Party is and shall remain the exclusive owner ofProprietary Information and all Intellectual Property rights embodied therein.

 

g.              Return of Documents.  The Recipient shall, upon the request of theDisclosing Party, return to the Disclosing Party all drawings, documents andother tangible manifestations of Proprietary Information received by theRecipient pursuant to this Agreement (and all copies and reproductionsthereof): provided that the Recipient may keep one archival copy of the same.

 

15.         Indemnification.

 

a.               Indemnification.  Aksys shall indemnify, defend and holdharmless Peak from and against any Losses arising out of or relating to a claimbrought by a third party against Peak only to the extent that such claim andcorresponding Losses are based upon allegations that (i) there exists a defectin the design of any Products by Aksys (including a defect in any materialsprovided to Peak by a third party), (ii) would constitute a breach of the termsof this Agreement by Aksys, or (iii) the manufacture, sale or use of anyProduct, in accordance with the Specifications and operating instructionsprovided by Aksys, infringes a patent, copyright, trade secret or otherproprietary right of a third party. Peak shall indemnify, defend and hold harmless Aksys from and againstany Losses arising out of or relating to a claim brought by a third partyagainst Aksys only to the extent that such claim and corresponding Losses arebased upon allegations that (i) there is a defect in workmanship in any Productor (ii) would constitute a breach of the terms of this Agreement by Peak, or(iii) Peak’s gross negligence or intentional misconduct was the cause of thethird party’s damages.

 

b.              Indemnification Procedure.  A party claiming indemnification under thisSection 15 (an “Indemnified Party”) shall provide prompt written noticeto the other party (the “Indemnifying Party”) of any and all notices,claims, demands, pleadings, and other facts or circumstances that may, in theIndemnified Party’s reasonable judgment, be likely to result in a claim forindemnification.  The IndemnifiedParty’s failure to provide such prompt written notice shall reduce theindemnification obligation of the Indemnifying Party to the extent that suchfailure resulted in demonstrable prejudice to the Indemnifying Party.  The Indemnified

 

 

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Party shall promptly tender defense of anylitigation or other formal dispute to the Indemnifying Party, and theIndemnifying Party shall select counsel of its choice, reasonably acceptable tothe Indemnified Party for such litigation or dispute.  The Indemnified Party shall cooperate completely with theIndemnifying Party, including without limitation providing timely responses toall discovery requests and providing expert and factual witnesses as necessaryor desirable.  The Indemnifying Partyshall have the sole authority to negotiate and settle such claims to the extentof the applicable indemnification obligation.

 

c.               Insurance.  Each party shall maintain products andgeneral liability insurance in an amount not less than $5,000,000.  Any amounts paid under such insurancepolicies by the either party’s insurer shall reduce the indemnificationobligation of the Indemnified Party with respect to a particular claim.

 

16.         Limitation of Liability.  Neither party shall be liable to the otherparty for any consequential, incidental or punitive damages, including, but notlimited to, damage to property, for loss of use, loss of time, or loss ofprofits or income.

 

17.         Integration.  This Agreement constitutes the complete and exclusive statementof the terms of the agreement between Peak and Aksys and supersedes all priorand contemporaneous agreements including purchase orders and undertakings ofPeak and Aksys with respect to the subject matter hereof.

 

18.         Second Sourcing.  Aksys shall notify Peak in the event that itutilizes any source of contract manufacturing for the Products other than Peak.

 

19.         Term and Termination.

 

a.               Initial Term and Renewal Term.  Unless sooner terminated in accordance withSection 19(b) or (c), the initial term of this Agreement shall be two (2) yearsand thereafter this Agreement shall automatically renew for successive one yearperiods (such initial term and renewal terms collectively referred to herein asthe “Term”).

 

b.              Termination For Convenience.  Aksys may terminate this Agreement at anytime by providing written notice of not less than one-hundred eighty (180) daysto Peak.  Peak may terminate thisAgreement at any time by providing written notice of not less than one-hundredeighty (180) days to Aksys.

 

c.               Termination For Cause.  The Term of this Agreement shall terminate:(i) automatically, if one of the parties fails to perform any materialobligations hereunder, and such material obligations remain uncured sixty (60)days following the date that the other party delivers to the defaulting partywritten notice describing such performance failures; (unless breach is for nonpayment for Product in which case the cure period is 60 days plus interest at18% 

 

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annualized) (ii) immediately upon notice byeither party if the other party shall file for liquidation, bankruptcy,reorganization, compulsory composition, dissolution, or if the other party hasentered into liquidation, bankruptcy, reorganization, compulsory composition ordissolution, or if the other party is generally not paying its debts as theybecome due (unless such debts are the subject of a bona fide dispute) or (iii)immediately upon notice if Peak is unable to maintain its ISO certification orPeak’s FDA registration.

 

d.              Effect of Termination/Survival.  Upon expiration of the Term of thisAgreement or termination hereof, neither party shall have any obligations tothe other, except that the provisions set forth in Sections 1, 12 through 17,19, 23 and 25 through 28 shall survive indefinitely.

 

e.               Transition.  Upon expiration of the Term of thisAgreement or termination hereof,

 

and for a period of six (6) months thereafter, Peak shall providereasonable cooperation and assistance (including without limitation knowledgetransfer, materials sourcing, transfer of unused materials and unfinishedinventory, and removal and shipping of Aksys-owned tooling and fixtures) totransition production of the Products to a third party designated byAksys.  Peak may invoice Aksys foractual charges incurred by Peak in rendering such transition services billed onan hourly basis at Peak’s standard rates.

 

20.         Compliance with Laws.  Each party shall comply with all domesticand foreign laws, rules, regulations and orders applicable to such party’sperformance under this Agreement.

 

21.         Assignment and Delegation.  This Agreement cannot be assigned nor is theperformance of the duties delegable by either party without the written consentof the other party; *provided, however*, that this Agreement maybe assigned by either party to a purchaser of substantially all of such party’sassets relating to the Products, or to a successor in interest by merger orcorporate reorganization.

 

22.         Governing Law.  This Agreement shall be construed to bebetween merchants and shall be governed by the laws of the State of Colorado.

 

23.         Relationship of Parties.  The relationship of Aksys and Peak is thatof Aksys and seller/manufacturer, respectively, of goods.  Nothing in this Agreement is intended to, orshall be deemed to, constitute a partnership, joint venture, agency, or a transferof any intellectual property of either party, and neither party hereto shall beauthorized to act in the name of the other or enter into any contract or otheragreement which binds the other.

 

24.         Enforceability.  If any of the provisions of this Agreement,or portions thereof, are found to be invalid by any court of competentjurisdiction the remainder of this Agreement shall 

 

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nevertheless remain in full force and effect.

 

25.         Force Majeure.  Peak shall use its commercially reasonablebest efforts to notify Aksys at least thirty (30) days in advance of anyplanned holidays or shutdowns, but neither Aksys nor Peak shall be liable forany failure to perform obligations under this Agreement if prevented so by acause beyond their control and without the fault or negligence of the defaultingparty.  Without limiting the generalityof the foregoing, such causes include acts of God, fires, floods, storms,epidemics, earthquakes, riots, civil disobedience, wars or war operations, orrestraint of government.

 

26.         Amendment.  This Agreement may not be amended except in a written amendmentsigned by each of the parties. Additional or different terms contained in purchase orders or orderacknowledgments or similar forms shall not be effective unless signed by bothparties with reference to this Agreement.

 

27.         Dispute Resolution. Consent to Arbitrationand Venue. Peak and Aksys agree that upon the written demand of eitherparty, whether made before or after the institution of any legal proceedings,but prior to the rendering of any judgment in that proceeding, all disputes,claims, and controversies between them (but excluding disputes, claims andcontroversies in which a third party is a necessary party), arising from thisAgreement, including without limitation contract disputes and tort claims,shall be arbitrated in the metropolitan area which is chosen by the defendant,pursuant to the Commercial Rules of the American Arbitration Association by apanel of three arbitrators.  Allexpenses of such arbitration shall be borne equally by the parties.  Any arbitration decision shall be final andnot subject to appeal unless the parties mutually agree otherwise in writingbefore a final decision by the panel of arbitrators.  Any arbitration order or award may be enforceable in anappropriate court as provided herein. Each party shall select one arbitrator and those two arbitrators shallselect the third arbitrator to form the panel. Each party reserves the right, notwithstanding the foregoing, to seekequitable relief in a court of competent jurisdiction in any appropriate stateor federal court.  The prevailing partyin any arbitration or court proceeding is entitled to be reimbursed for any andall reasonable attorney’s fees, expert fees, and costs of suit from the losingparty.

 

28.         Financial Disclosure:   Peak agrees to provide Aksys with annualaudited financial statements audited by a Certified Public AccountingFirm.  Unaudited financial statementscan be requested by Aksys within 30 days of official quarter-end close.

 

 

**[SIGNATURE PAGEFOLLOWS]**

 

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IN WITNESS WHEREOF, theauthorized representatives signing below have entered into this ContractManufacturing Agreement on behalf of the parties as of the Effective Date.

 

 
| **Peak Industries, Inc.** | **Aksys, Ltd.**             |
|---------------------------|-----------------------------|
|                      |                        |
|                      |                        |
| By:                       |  /s/ Scott Hendrickson |   | By: |  /s/ Thomas F. Scully |   |
|                      |                        |
| Title:                    | VP Finance                  |   | Title: | Senior VP  Manufacturing & Operations |   |
|                      |                        |
| Date:                     | March 11,  2003             |   | Date: | March 24,  2003 |   |   |
|                           |                             |  |  |  |  |  |  |  |  |  |  |  |  |

 

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***Exhibit A***

 

Design and Specifications

 

Peak is inpossession of complete design specifications, bills of materials and drawingsfor the Products to be manufactured under the Agreement. Design changes will bemanaged in compliance with Section 3, Document Control and Process.

 

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