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                                                                   Exhibit 10.12

                          SEVERANCE, CONFIDENTIALITY
                  AND POST-EMPLOYMENT RESTRICTIONS AGREEMENT


          THIS AGREEMENT is made as of October 12, 1998 by and between Aksys,
Ltd., a Delaware corporation (the "Company"), and Bruce Dobsch (the
"Executive").

          WHEREAS, the Company and the Executive desire to enter into an
agreement (i) defining the relative rights of the Company and the Executive with
respect to Intellectual Property (as defined below) owned by the Company or its
customers or clients to which the Executive may have access or may contribute as
a result of the Executive's employment with the Company, (ii) setting forth the
obligation of the Executive to refrain from competing with the Company during
his employment with the Company and for a period of time thereafter as provided
herein and (iii) the severance conditions associated with termination from the
Company.

          NOW, THEREFORE, in consideration of the mutual covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties to this Agreement hereby agree as
follows:

     1.   Restriction on Post-Termination Employment

          (a) The Executive acknowledges and agrees with the Company that the
Executive's services to the Company are unique in nature and that the Company
would be irreparably damaged if the Executive were to provide similar services
to any person or entity competing with the Company or engaged in a similar
business.  Executive accordingly covenants and agrees with the Company that if
the Executive's employment with the Company terminates (a "Termination") as a
result of the Executive's Disability (as defined below) or as a result of
Termination by the Company without Cause (as defined below), then during the
period
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commencing with the date of this Agreement and ending on the first anniversary
of the date of Termination of Executive's employment with the Company (the "Non-
Competition Period"), Executive shall not directly or indirectly, either for
himself or for any other individual, corporation, partnership, joint venture, or
other entity, provide services as an employee or consultant or participate in
any business (including, without limitation, any division, group or franchise of
a larger organization) wherein Executive's duties include the promotion,
development, sale, distribution or production of a product or products whose
primary intended use is home hemodialysis or any other business hereafter
contemplated by the Company prior to Employee's termination. For purposes of
this Agreement, the term "participate in" will include, without limitation,
having any direct or indirect interest in any corporation, partnership, joint
venture or other entity, whether as a sole proprietor, owner, stockholder,
partner, joint venturer, creditor or otherwise, or rendering any direct or
indirect service or assistance to any individual, corporation, partnership,
joint venture and other business entity (whether as a director, officer,
manager, supervisor, employee, agent, consultant or otherwise); provided that
the term "participate in" shall not include ownership of less than five percent
of the stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market. In addition, for purposes
of this Agreement, "any other business hereafter contemplated by the Company"
shall include only those businesses which have been (i) targeted or otherwise
identified by the Company's board of directors (the "Board") or management as
potential new businesses and (ii) actually pursued in any respect by the Board
or the Company's management.

          (b) If the Executive's employment with the Company terminates as a
result of the Executive's resignation or Termination by the Company for Cause,
the Noncompetition 
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Period shall continue until the second anniversary of the date of the
Termination.

          (c) "Cause" means (i) the commission of a felony or a crime involving
moral turpitude or the commission of any other act involving dishonesty,
disloyalty or fraud with respect to the Company, (ii) conduct tending to bring
the Company into substantial public disgrace or disrepute, (iii) repeated
failure (after written notice of such failure) to perform duties as reasonably
directed by the Board, (iv) gross negligence or willful misconduct with respect
to the Company or (v) any other material breach of this Agreement which is not
cured within 15 days after written notice thereof to the Executive.

          (d) "Disability" shall mean the inability, due to illness, accident,
injury, physical or mental incapacity or other disability, of the Executive to
carry out effectively his duties and obligations to the Company or to
participate effectively and actively in the management of the Company for a
period of at least 90 consecutive days or for shorter periods aggregating at
least 120 days (whether or not consecutive) during any twelve-month period, as
determined in the good faith judgment of the Board.

     2.   Severance.

          (a) If the Executive's employment with the Company terminates as a
result of the Executive's Disability or Termination by the Company without
Cause, the Company shall continue, for a period of six months, to make monthly
cash payments to the Executive in an amount equal to the Executive's monthly
base salary immediately prior to the Termination.

          (b) If the Executive's employment with the Company terminates as a
result of the Executive's resignation or termination by the Company for Cause,
the Executive shall not be entitled to any severance payments and the Company
will make no such payments.

          (c) If the Executive is offered and accepts other employment during
the period 
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of severance payments from the Company, then the Executive shall immediately
notify the Board of such fact, and the Company shall make no further severance
payments to the Executive.

          (d) All of the Executive's rights to fringe benefits and bonuses (if
any) otherwise accruing with respect to any period including any period
commencing on or after the date of Termination shall terminate immediately upon
the close of business on the date of Termination.

          3.   Nonsolicitation.  During the Noncompetition Period, the Executive
shall not (i) induce or attempt to induce any employee of the Company to leave
the employ of the Company, or in any way interfere with the relationship between
the Company and any employee there, (ii) hire directly or through another entity
any person who was an employee of the Company at any time during the
Noncompetition Period, or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company to cease doing
business with the Company, or in any way interfere with the relationship between
any such customer, supplier, licensee or business relation and the Company.

     4.   Nondisclosure and Nonuse of Confidential Information.

          (a) The Executive will not disclose or use at any time, either during
his employment with the Company or thereafter, any Confidential Information (as
defined below) of which the Executive is or becomes aware, whether or not such
information is developed by him, except to the extent that such disclosure or
use is directly related to and required by the Executive's performance of duties
assigned to the Executive by the Company.  The Executive will take all
appropriate steps to safeguard Confidential Information and to protect it
against disclosure, misuse, espionage, loss and theft.

          (b) As used in this Agreement, the term "Confidential Information"
means 
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information that is not generally known to the public and that is used,
developed or obtained by the Company in connection with its business, including
but not limited to (i) products or services, (ii) fees, costs and pricing
structures, (iii) designs, (iv) analysis, (v) drawings, photographs and reports,
(vi) computer software, including operating systems, applications and program
listings, (vii) flow charts, manuals and documentation, (viii) data bases, (ix)
accounting and business methods, (x) inventions, devices, new developments,
methods and processes, whether patentable or unpatentable and whether or not
reduced to practice, (xi) customers and clients and customer or client lists,
(xiii) other copyrightable works, (xiii) all technology and trade secrets, and
(xiv) all similar and related information in whatever form. Confidential
Information will not include any information that has been published in a form
generally available to the public prior to the date the Executive proposes to
disclose or use such information. Information will not be deemed to have been
published merely because individual portions of the information have been
separately published, but only if all material features comprising such
information have been published in combination.

     5.   The Company's Ownership of Intellectual Property.

          (a) In the event that the Executive as part of his activities on
behalf of the Company generates, authors or contributes to any invention,
design, new development, device, product, method or process (whether or not
patentable or reduced to practice or comprising Confidential Information), any
copyrightable work (whether or not comprising Confidential Information) or any
other form of Confidential Information relating directly or indirectly to the
Company's business as now or hereinafter conducted (collectively, "Intellectual
Property"), the Executive acknowledges that such Intellectual Property is the
exclusive property of the Company and hereby assigns all rights, title and
interest in and to such Intellectual Property to the 
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Company. Any copyrightable work prepared in whole or in part by the Executive
will be deemed "a work made for hire" under Section 201(b) of the 1976 Copyright
Act, and the Company will own all of the rights comprised in the copyright
therein. The Executive will promptly and fully disclose all Intellectual
Property to the Company and will cooperate with the Company to protect the
Company's interests in and rights to such Intellectual Property (including,
without limitation, providing reasonable assistance in securing patent
protection and copyright registrations and executing all documents as reasonably
requested by the Company, whether such requests occur prior to or after
termination of the Executive's employment with the Company).

          (b) In accordance with Section 2872 of the Illinois Employee Patent
Act, Ill. Reve. Stat. Chap. 140, (S) 301 et seq. (1983), the Executive is hereby
advised that Section 2 of this Agreement regarding the Company's ownership of
Intellectual Property does not apply to any invention for which no equipment,
supplies, facilities or trade secret information of the Company was used and
which was developed entirely on the Executive's own time, unless (i) the
invention relates to the business of the Company or to the Company's actual or
demonstrably anticipated research or development or (ii) the invention results
from any work performed by the Executive for the Company.

     6.   Acknowledgment of Protectible Interests.  Executive agrees that the
Company has a protectible interest in the Confidential Information, Intellectual
Property, goodwill and specialized knowledge acquired by Executive during the
course of his employment with Company.

     7.   Delivery of Materials Upon Termination of Employment.  As requested by
the Company from time to time and upon the termination of the Executive's
employment with the 
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Company for any reason, the Executive will promptly deliver to the Company all
copies and embodiments, in whatever form, of all Confidential Information or
Intellectual Property in the Executive's possession or within his control
(including, but not limited to, written records, notes, photographs, manuals,
notebooks, documentation, program listings, flow charts, magnetic media, disks,
diskettes, tapes and all other materials containing any Confidential Information
or Intellectual Property) irrespective of the location or form of such material
and, if requested by the Company, will provide the Company with written
confirmation that all such materials have been delivered to the Company.

     8.   General Provisions.

          (a) Absence of Conflicting Agreements.  The Executive hereby warrants
and covenants that his execution, delivery and performance of this Agreement do
not and will not result in a breach of the terms, conditions or provisions of
any agreement, order, judgment or decree to which the Executive is subject.

          (b) Severability.  Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, and this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.

          (c) Complete Agreement.  This Agreement, those documents expressly
referred to herein and other documents or even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, 
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agreements or representations by or among the parties, written or oral, which
may have related to the subject matter hereof in any way.

          (d) Counterparts.  This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which taken
together constitute one and the same agreement.

          (e) Successors and Assigns.  Except as otherwise provided herein, this
Agreement will bind and inure to the benefit of and be enforceable by the
Company and the Executive and their respective successors and assigns; provided
that the rights and obligations of the Executive under this Agreement will not
be assignable without the prior written consent of the Company.

          (f) Choice of Law.  All questions concerning the construction,
validity and interpretation of this Agreement will be governed by and construed
in accordance with the domestic laws of the State of Delaware, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of Delaware or any other jurisdiction) that would cause the application of
the laws of any jurisdiction other than the State of Delaware.

          (g) Remedies.  Each of the parties to this Agreement will be entitled
to enforce its rights under this Agreement specifically, to recover damages and
costs (including reasonable attorneys fees) caused by any breach of any
provision of this Agreement and to exercise all other rights existing in its
favor.  The parties hereto agree and acknowledge that the Executive's breach of
any term or provision of this Agreement will materially and irreparably harm the
Company, that money damages will accordingly not be an adequate remedy for any
breach of the provisions of this Agreement by the Executive and that the Company
in its sole discretion and in addition to any other remedies it may have at law
or in equity may apply to any 
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court of law or equity of competent jurisdiction (without posting any bond or
deposit) for specific performance and/or other injunctive relief in order to
enforce or prevent any violations of the provisions of this Agreement.

          (h) Ability to Earn Livelihood.  Executive expressly agrees and
acknowledges that the restrictions contained in this Agreement do not preclude
Executive from earning a livelihood, nor does it unreasonably impose limitations
on Executive's ability to earn a living.  In addition, the Executive agrees and
acknowledges that the potential harm to the Company of its non-enforcement
outweighs any harm to the Executive of its enforcement by injunction or
otherwise.

          (i) Reasonableness.  Executive acknowledges that he has carefully read
this Agreement and has given careful consideration to the restraints imposed
upon the Executive by this Agreement, and is in full accord as to their
necessity for the reasonable and proper protection of the Company's Confidential
Information.  The Executive expressly acknowledges and agrees that each and
every restraint imposed by this Agreement is reasonable with respect to subject
matter, time period and geographical area.

          (j) Acknowledgment of Consideration.  Executive acknowledges that the
provisions of this Article are in consideration of: (1) employment with the
Company; (2) eligibility to participate in the Employee Incentive Compensation
Program in accordance with the additional terms of that Program; and (3)
additional good and valuable consideration as set forth in this Agreement.

          (k) Amendment and Waiver.  The provisions of this Agreement may be
amended and waived only with the prior written consent of the Company and the
Executive.

                         *  *  *  *
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          IN WITNESS WHEREOF, the parties hereto have executed this Severance,
Confidentiality and Noncompetition Agreement on the date first written above.

                              Aksys, Ltd.



                              By /s/Lawrence H.N. Kinet
                                 ----------------------

                              Its  Chairman and CEO



                              /s/Bruce E. Dobsch
                              ------------------

                              Bruce Dobsch