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                                                                    Exhibit 10.3

                               SECURITY AGREEMENT

          THIS SECURITY AGREEMENT (this "Agreement"), dated as of June 23, 2006,
is made between AKSYS, LTD., a Delaware corporation ("Debtor"), and the Lenders
party (together with any Collateral Agent (as defined below) appointed
hereunder, each a "Secured Party" and, collectively, the "Secured Parties") to
the Loan Agreement referred to below.

          Debtor and Secured Parties hereby agree as follows:

          Section 1. Definitions; Interpretation.

          (a) All capitalized terms used in this Agreement and not otherwise
defined herein shall have the meanings assigned to them in the Loan Agreement.

          (b) As used in this Agreement, the following terms shall have the
following meanings:

          "Collateral" has the meaning set forth in Section 2.

          "Collateral Agent" has the meaning set forth in Section 2(e).

          "Durus" means Durus Life Sciences Master Fund Ltd., a Cayman Islands
Exempted Company.

          "Event of Default" has the meaning set forth in Section 8.

          "Loan Agreement" means the Loan Agreement, dated as the date hereof,
between Debtor and Secured Parties, as amended, amended and restated, modified,
renewed, extended or replaced from time to time.

          "Majority Secured Parties" means at any time Secured Parties holding
at least 51% of the then aggregate unpaid principal amount of the Loans plus the
unused portion of the Additional Commitment, or, if no such principal amount is
then outstanding, Secured Parties having at least 51% of the aggregate
Commitments.

          "Obligations" means the indebtedness, liabilities and other
obligations of Debtor and any Guarantor to Secured Parties or any Collateral
Agent under or in connection with the Loan Agreement, the Notes and the other
Loan Documents, including the Loans, all interest accrued thereon, all fees due
under the Loan Agreement and all other amounts payable by Debtor to Secured
Parties or any Collateral Agent thereunder or in connection therewith, whether
now or hereafter existing or arising, and whether due or to become due, absolute
or contingent, liquidated or unliquidated, determined or undetermined, and
including interest that accrues after the commencement by or against Debtor or
any Guarantor of any Insolvency Proceeding naming such Person as the debtor in
such proceeding.

          "Original Agreement" means that certain Security Agreement dated as of
March 31, 2006 entered into between Debtor and Durus.

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          "Partnership and LLC Collateral" has the meaning set forth in Section
5(r).

          "Pledged Collateral" means Debtor's (i) investment property and (ii)
Partnership and LLC Collateral, including any ownership interests in any
Subsidiaries of Debtor.

          "Pledged Collateral Agreements" means any shareholders agreement,
operating agreement, partnership agreement, voting trust, proxy agreement or
other agreement or understanding with respect to any Pledged Collateral.

          "UCC" means the Uniform Commercial Code as the same may, from time to
time, be in effect in the State of New York.

          (c) Where applicable and except as otherwise defined herein, terms
used in this Agreement shall have the meanings assigned to them in the UCC.

          (d) The rules of interpretation set forth in Section 1.02 of the Loan
Agreement shall be applicable to this Agreement and are incorporated herein by
this reference.

          Section 2. Security Interest.

          (a) As security for the payment and performance of the Obligations,
Debtor hereby grants to Secured Parties a security interest in all of Debtor's
right, title and interest in, to and under the following assets, wherever
located and whether now existing or owned or hereafter acquired or arising: all
goods, accounts, chattel paper (whether tangible or electronic), software,
commercial tort claims, deposit accounts, documents, equipment (including all
fixtures), general intangibles (including intellectual property), payment
intangibles, instruments, inventory, investment property, letter-of-credit
rights, money, records, and all other personal property and all products,
proceeds and supporting obligations of any and all of the foregoing
(collectively, the "Collateral"). Notwithstanding the foregoing, "Collateral"
shall not include any rights or interests in any lease, license, contract, or
agreement, as such, if under the terms of such lease, license, contract, or
agreement, or applicable law with respect thereto, the valid grant of a security
interest or lien therein to Secured Parties is prohibited and such prohibition
has not been or is not waived or the consent of the other party to such lease,
license, contract, or agreement has not been or is not otherwise obtained or
under applicable law such prohibition cannot be waived; provided, that the
foregoing exclusion shall in no way be (i) construed to apply if any such
prohibition would be rendered ineffective under the UCC or other applicable law
(including the Bankruptcy Code) or principles of equity, (ii) construed so as to
limit, impair or otherwise affect Secured Parties' unconditional continuing
security interests in and liens upon any rights or interests of Debtor in or to
the proceeds thereof, including monies due or to become due under any such
lease, license, contract, or agreement (including any accounts), or (iii)
construed to apply at such time as the condition causing such prohibition shall
be remedied and, to the extent severable, "Collateral" shall include any portion
of such lease, license, contract, or agreement that does not result in such
prohibition; and provided, further, that Debtor shall obtain the consents with
respect to leases, licenses, contracts and agreements as set forth in the Loan
Agreement.

          (b) Debtor hereby acknowledges and agrees for the benefit of Secured
Parties that the Original Agreement is amended and restated by this Agreement,
without novation, and

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that the Original Agreement, as amended and restated by this Agreement: (i) is
and shall continue to be in full force and effect, without offset or
counterclaim; (ii) is and shall continue to be valid and enforceable; and (c) is
not and shall not be impaired or affected in any respect by the execution and
delivery of this Agreement or by the execution and delivery of, or the
consummation of the transactions contemplated by, the Loan Documents, the
execution of which shall not be deemed a satisfaction, cancellation, or novation
of any Obligation of Debtor under the Original Agreement or any other Loan
Document (as defined in the Original Agreement). Debtor further acknowledges and
agrees that any reference to the "Security Agreement" in the other Loan
documents shall mean and be references to the Original Agreement as amended and
restated by this Agreement (and as further amended, amended and restated,
modified, renewed, extended or replaced from time to time in accordance with the
terms hereof). Debtor hereby ratifies and reaffirms the validity and
enforceability of all of the liens and security interests heretofore granted to
any Secured Party as collateral security for the Obligations and acknowledges
that all such liens and security interests and all collateral heretofore granted
as security for the Obligations under the Original Agreement continues to be and
remains collateral for the Obligations from and after the date hereof pursuant
to the Original Agreement as amended and restated by this Agreement.

          (c) Anything herein to the contrary notwithstanding, (i) Debtor shall
remain liable under any Pledged Collateral Agreements and any other contracts,
agreements and other documents included in the Collateral, to the extent set
forth therein, to perform all of its duties and obligations thereunder to the
same extent as if this Agreement had not been executed, (ii) the exercise by
Secured Parties or any Collateral Agent of any of the rights hereunder shall not
release Debtor from any of its duties or obligations under any Pledged
Collateral Agreements or other such contracts, agreements and other documents,
and (iii) neither the Secured Parties nor any Collateral Agent shall have any
obligation or liability under any Pledged Collateral Agreements or other such
contracts, agreements and other documents by reason of this Agreement, nor shall
Secured Parties or any Collateral Agent be obligated to perform any of the
obligations or duties of Debtor thereunder or to take any action to collect or
enforce any Pledged Collateral Agreements or other such contract, agreement or
other document.

          (d) This Agreement shall create a continuing security interest in the
Collateral which shall remain in effect until terminated in accordance with
Section 18 hereof.

          (e) The Majority Secured Parties may appoint a Secured Party, or an
affiliate of a Secured Party, who has proposed itself available for
consideration therefor or consented thereto upon nomination by any other Secured
Party, to perform the duties and obligations set forth in subsection (f) below
(the "Collateral Agent") at any time, and whether before, during or after the
occurrence of an Event of Default. Following the appointment of Collateral
Agent, and agreement upon any fees and other arrangements required by it,
including any indemnification agreement it may require, by the Majority Secured
Parties, Collateral Agent's duties and obligations shall commence upon the date
specified in the notice of acceptance to be submitted by Collateral Agent. Each
Secured Party hereby authorizes Collateral Agent to take such action as agent on
its behalf and to exercise such powers and perform such duties under this
Agreement and the other Loan Documents as are delegated to Collateral Agent by
the terms thereof, together with such powers as are reasonably incidental
thereto. The duties and obligations of Collateral Agent are strictly limited to
those expressly provided for herein, and any additional duties and

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obligations expressly agreed upon by Collateral Agent and the Majority Secured
Parties, and no implied covenants, functions, responsibilities, duties,
obligations or liabilities shall be read into this Agreement or otherwise exist
against Collateral Agent. Nothing in this Agreement shall, or shall be construed
to, constitute Collateral Agent a trustee or fiduciary for any Secured Party. In
performing its functions and duties hereunder, Collateral Agent shall act solely
as the agent of Secured Parties and does not assume and shall not be deemed to
have assumed any obligation towards or relationship of agency or trust with or
for Debtor. Notwithstanding anything to the contrary contained herein,
Collateral Agent shall not be required to take any action which is contrary to
this Agreement or applicable law.

          (f) The duties and obligations of Collateral Agent hereunder shall
consist of (i) exercising or refraining from exercising any rights, remedies or
powers of Secured Parties under the Loan Documents or under applicable law in
respect of the Loans or all or any portion of any Collateral, (ii) selling,
releasing, surrendering, realizing upon or otherwise dealing with, in any manner
and in any order, all or any portion of any Collateral, (iii) making any demands
or giving any notices under Loan Documents, (iv) effecting amendments to and
granting waivers under the Loan Documents, (v) distributing payments to Secured
Parties of amounts paid to it by Debtor under any Loan Documents or received by
it in connection with the Collateral, (vi) holding on behalf of Secured Parties
any instruments or other possessory Collateral, and (vii) engaging and replacing
(in consultation with Secured Parties and with the prior approval of the
Majority Secured Parties), instructing and remunerating on behalf of Secured
Parties all consultants, experts and other Persons to be engaged by Secured
Parties, including legal counsel for Secured Parties, in each case in accordance
with the instructions of the Majority Secured Parties.

          (g) Neither Collateral Agent nor any of its directors, officers,
employees or agents shall be responsible to any Secured Party for any action
taken or omitted to be taken by it or them hereunder or in connection herewith,
except for its or their own gross negligence or willful misconduct. Collateral
Agent shall use the level of care it uses with respect to its own property of a
similar nature to assure the safe custody of Collateral in its possession.
Beyond the exercise of such level of care to assure the safe custody of
Collateral in its possession as Collateral Agent, and the accounting for any
monies actually received by Collateral Agent in such capacity, Collateral Agent
shall have no duty or liability to exercise or preserve any rights, privileges
and powers pertaining to the Collateral.

          (h) Each Secured Party's interest in the Collateral shall be on a
parity with the interests of all other Secured Parties, and the interest of each
Secured Party in the Collateral shall be equal to its Pro Rata Share (except to
the extent the Secured Parties agree to any other ratable interest therein). Any
Secured Party holding any instruments, certificated investment property or other
Collateral hereunder shall do so as agent for and for the ratable benefit of all
Secured Parties.

          (i) Anything herein to the contrary notwithstanding, in no event shall
the Collateral include, and Debtor shall not be deemed to have granted a
security interest in, any of Debtor's right, title or interest in any of the
outstanding voting capital stock or other ownership interests of a Controlled
Foreign Corporation (as defined below) in excess of 65% of the voting power of
all classes of capital stock or other ownership interests of such Controlled
Foreign

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Corporation entitled to vote; provided that (A) immediately upon the amendment
of the Internal Revenue Code to allow the pledge of a greater percentage of the
voting power of capital stock or other ownership interests in a Controlled
Foreign Corporation without adverse tax consequences, the Collateral shall
include, and Debtor shall be deemed to have granted a security interest in, such
greater percentage of capital stock or other ownership interests of each
Controlled Foreign Corporation; and (B) if no adverse tax consequences to Debtor
shall arise or exist in connection with the pledge of any Controlled Foreign
Corporation, the Collateral shall include, and Debtor shall be deemed to have
granted a security interest in, such Controlled Foreign Corporation. As used
herein, "Controlled Foreign Corporation" shall mean a "controlled foreign
corporation" as defined in the Internal Revenue Code.

          (j) Secured Parties agree that, notwithstanding anything to the
contrary herein, the security interest granted herein to Secured Parties in and
to restricted account No. 1610630624 held at JPMorgan Chase Bank, NA and the
cash and cash equivalents held therein (collectively, the "Restricted Account")
shall be subject, subordinate and junior in all respects to the liens and
security interests granted to JPMorgan Chase Bank, NA in the Restricted Account
to secure Debtor's reimbursement obligation as of the date hereof with respect
to a letter of credit issued by JPMorgan Chase Bank, NA, for the benefit of Two
Lincolnshire Office Venture, LLC in connection with the Company's lease of the
premises at Two Marriott Drive, Lincolnshire, Illinois. The subordinations and
priorities specified hereinabove with respect to any such Collateral are
expressly conditioned upon the nonavoidability and perfection of the lien or
security interest of JPMorgan Chase Bank, NA and, if such lien or security
interest is not perfected or is avoidable, for any reason, then the
subordinations and relative priority agreements provided for herein shall not be
effective as to the Restricted Account. Debtor agrees that immediately upon any
event or circumstance resulting in the release of the Restricted Account by
JPMorgan Chase Bank, NA. (A) to cause such Person to take all action necessary
to evidence such release immediately upon the occurrence of such event or
circumstance, (B) to furnish to Secured Parties or any Collateral Agent at least
ten (10) days prior written notice of any anticipated event or circumstance that
would result in the release of the Restricted Account, and (iii) to cooperate
with Secured Parties and any Collateral Agent in obtaining control (as defined
in the UCC) of the Restricted Account.

          Section 3. Financing Statements and Other Action.

          (a) Debtor hereby authorizes Secured Parties or Collateral Agent to
file at any time and from time to time any financing statements describing the
Collateral, and Debtor shall execute and deliver to Secured Parties or any
Collateral Agent, and Debtor hereby authorizes Secured Parties or any Collateral
Agent to file (with or without Debtor's signature), at any time and from time to
time, all amendments to financing statements, assignments, continuation
financing statements, termination statements, security agreements relating to
intellectual property Collateral, account control agreements, collateral access
agreements, landlord waivers and other documents and instruments, in form
reasonably satisfactory to Majority Secured Parties or any Collateral Agent, and
to take such other action, in each case as any Secured Parties or Collateral
Agent may reasonably request, to perfect and continue perfection of, maintain
the priority of or provide notice of the security interest of Secured Parties in
the Collateral and to accomplish the purposes of this Agreement. Without
limiting the generality of the foregoing, Debtor ratifies and authorizes the
filing by Secured Parties or Collateral Agent of (i) any financing statements
filed

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prior to the date hereof, and (ii) any financing statements describing the
Collateral as "all assets" or "all personal property".

          (b) Debtor will cooperate with Secured Parties and any Collateral
Agent in obtaining control (as defined in the UCC) of Collateral consisting of
such deposit accounts, investment property, letter of credit rights and
electronic chatter paper as the Majority Secured Parties or any Collateral Agent
may request.

          (c) Upon request of the Majority Secured Parties or any Collateral
Agent, Debtor will join with Secured Parties or any Collateral Agent in
notifying any third party who has possession of any Collateral of Secured
Parties' security interest therein and obtaining an acknowledgment from the
third party that it is holding the Collateral for the benefit of Secured
Parties; provided, however, this Section 3(c) shall not apply with respect to
Collateral consisting of machines used by individuals for the purpose of home
healthcare treatments.

          (d) Upon request of the Majority Secured Parties or any Collateral
Agent, Debtor (i) shall cause certificates to be issued in respect of any
uncertificated Pledged Collateral, (ii) shall exchange certificated Pledged
Collateral for certificates of larger or smaller denominations, and (iii) shall
cause any securities intermediaries to show on their books that Secured Parties
or Collateral Agent are the entitlement holder with respect to any Pledged
Collateral.

          (e) Upon request of the Majority Secured Parties or any Collateral
Agent, Debtor will not create any chattel paper without placing a legend on the
chattel paper acceptable to the Majority Secured Parties or any Collateral Agent
indicating that Secured Parties and any Collateral Agent have a security
interest in the chattel paper.

          Section 4. Representations and Warranties. Debtor represents and
warrants to Secured Parties that:

          (a) This Agreement creates a security interest which is enforceable
against the Collateral in which Debtor now has rights and will create a security
interest which is enforceable against the Collateral in which Debtor hereafter
acquires rights at the time Debtor acquires any such rights; and (ii) Secured
Parties have a perfected and first priority security interest in the Collateral,
in which Debtor now has rights, and will have a perfected and first priority
security interest in the Collateral in which Debtor hereafter acquires rights at
the time Debtor acquires any such rights, in each case securing the payment and
performance of the Obligations.

          (b) Debtor's chief executive office and principal place of business
(as of the date of this Agreement) is located at the address set forth in
Schedule 1; Debtor's jurisdiction of organization and organizational ID number
is set forth in Schedule 1; Debtor's exact legal name is as set forth in the
first paragraph of this Agreement; and all other locations where Debtor conducts
business or Collateral is kept (as of the date of this Agreement) are set forth
in Schedule 1. All trade names and trade styles under which Debtor conducts its
business operations as of the date hereof are set forth in Schedule 2, and,
except as set forth in Schedule 2, Debtor has not, at any time in the past: (i)
been known as or used any other corporate, trade or fictitious name; (ii)
changed its name; (iii) been the surviving or resulting corporation in a

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merger or consolidation; or (iv) acquired through asset purchase or otherwise
any business of any Person.

          (c) Debtor has rights in or the power to transfer the Collateral, and
Debtor is the sole and complete owner of the Collateral or has the right to use
the Collateral pursuant to a valid and enforceable license, free from any Lien
other than Permitted Liens.

          (d) All of Debtor's United States and foreign patents and patent
applications, copyrights (registered and material unregistered), applications
for copyright registrations, trademarks, service marks and trade names
(registered and material unregistered), and applications for registration of
such trademarks, service marks and trade names, are set forth in Schedule 2.

          (e) No control agreements exist with respect to any Collateral other
than control agreements in favor of Secured Parties.

          (f) Debtor does not have or hold any chattel paper, letter-of-credit
rights or commercial tort claims except as disclosed in writing to Secured
Parties.

          (g) The names and addresses of all financial institutions and other
Persons at which Debtor maintains its deposit and securities accounts, and the
account numbers and account names of such accounts, are set forth in Schedule 1.

          (h) Schedule 3 lists Debtor's ownership interests in each of its
Subsidiaries as of the date hereof.

          (i) Debtor is and will be the legal record and beneficial owner of all
Pledged Collateral, and has and will have good and marketable title thereto.

          (j) Except as disclosed in writing to Secured Parties, there are no
Pledged Collateral Agreements which affect or relate to the voting or giving of
written consents with respect to any of the Pledged Collateral. Each Pledged
Collateral Agreement contains the entire agreement between the parties thereto
with respect to the subject matter thereof, has not been amended or modified,
and is in full force and effect in accordance with its terms. To the best
knowledge of Debtor, there exists no violation or default under any Pledged
Collateral Agreement by Debtor or the other parties thereto. Debtor has not
knowingly waived or released any of its rights under or otherwise consented to a
departure from the terms and provisions of any Pledged Collateral Agreement.

          (k) Debtor is not and will not become a lessee under any real property
lease or party to any other agreement governing the location of Collateral at
the premises of another Person pursuant to which the lessor or such other Person
may obtain any rights in any of the Collateral except as disclosed in writing to
Secured Parties, and no such lease or other such agreement now prohibits,
restrains, impairs or will prohibit, restrain or impair Debtor's right to remove
any Collateral from the premises at which such Collateral is situated, except
for the usual and customary restrictions contained in such leases of real
property and in such other agreements.

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          Section 5. Covenants. So long as any of the Obligations remain
unsatisfied, or Secured Parties shall have any Commitments, Debtor agrees that:

          (a) Debtor shall appear in and defend any action, suit or proceeding
which may affect its title to, or right or interest in, any Collateral Agent's
or Secured Parties' right or interest in, the Collateral, and shall do and
perform all reasonable acts that may be necessary and appropriate to maintain,
preserve and protect the Collateral.

          (b) Debtor shall comply with all laws, regulations and ordinances, and
all policies of insurance, relating to the possession, operation, maintenance
and control of the Collateral.

          (c) Debtor shall give prompt written notice to Secured Parties (and in
any event not later than ten (10) days prior to any change described below in
this subsection) of: (i) any change in the location of Debtor's chief executive
office or principal place of business; (ii) any change in the locations set
forth in Schedule 1; (iii) any change in its name; (iv) any changes in its
identity or structure in any manner which might make any financing statement
filed hereunder incorrect or misleading; and (v) any change in its jurisdiction
of organization; provided that Debtor shall not locate any Collateral outside of
the United States nor shall Debtor change its jurisdiction of organization to a
jurisdiction outside of the United States.

          (d) Debtor shall carry and maintain in full force and effect, at its
own expense and with financially sound and reputable insurance companies (not
Affiliates of Debtor), insurance with respect to the Collateral in such amounts,
with such deductibles and covering such risks as is customarily carried in
accordance with sound business practice by companies engaged in the same or
similar businesses and owning similar properties in the localities where Debtor
operates, and in any event in amount, adequacy and scope satisfactory to the
Board of Directors of Debtor. Insurance on the Collateral shall name the Secured
Parties and any Collateral Agent as additional insured and as loss payee. Upon
the request of Majority Secured Parties or any Collateral Agent, Debtor shall
furnish Secured Parties or any Collateral Agent from time to time with full
information as to the insurance carried by it and, if so requested, copies of
all such insurance policies. Debtor shall also furnish to Secured Parties from
time to time upon the request of the Majority Secured Parties or any Collateral
Agent a certificate of Debtor's insurance broker or other insurance specialist
stating that all premiums then due on the policies relating to insurance on the
Collateral have been paid and that such policies are in full force and effect.
All insurance policies required under this subsection (d) shall provide that
they shall not be terminated or cancelled nor shall any such policy be
materially changed without at least 30 days' prior written notice (or 10 days'
prior written notice in the event of cancellation for non-payment of premium) to
Debtor and Secured Parties or any Collateral Agent. Receipt of notice of
termination or cancellation of any such insurance policies or reduction of
coverages or amounts thereunder shall entitle Secured Parties or any Collateral
Agent to renew any such policies, cause the coverages and amounts thereof to be
maintained at levels required pursuant to the first sentence of this subsection
(d) or otherwise to obtain similar insurance in place of such policies, in each
case at the expense of Debtor. If the Collateral shall be materially damaged or
destroyed, in whole or in part, by fire or other casualty, Debtor shall give
prompt notice thereof to Secured Parties or any Collateral Agent. Additionally,
Debtor shall in any event promptly give Secured Parties or any Collateral Agent
notice of all reports made to insurance companies in

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respect of any claim in excess of $100,000. No settlement on account of any loss
covered by insurance shall be made for less than insured value without the
consent of Majority Secured Parties.

          (e) Debtor shall keep accurate and complete books and records with
respect to the Collateral, disclosing Secured Parties' security interest
hereunder.

          (f) Debtor shall not surrender or lose possession of (other than to
any Collateral Agent or any of the Secured Parties), sell, lease, or otherwise
dispose of or transfer any of the Collateral or any right or interest therein,
except as expressly permitted by the Loan Documents.

          (g) Debtor shall keep the Collateral free of all Liens except
Permitted Liens.

          (h) Debtor shall pay and discharge all taxes, fees, assessments and
governmental charges or levies imposed upon it with respect to the Collateral
prior to the date on which penalties attach thereto, except to the extent such
taxes, fees, assessments or governmental charges or levies are being contested
in good faith by appropriate proceedings and are adequately reserved against in
accordance with GAAP.

          (i) Debtor shall maintain and preserve its legal existence, its rights
to transact business and all other rights, franchises and privileges necessary
or desirable in the normal course of its business and operations and the
ownership of the Collateral, except in connection with any transactions
expressly permitted by the Loan Agreement.

          (j) Upon the request of the Majority Secured Parties or any Collateral
Agent, Debtor shall (i) immediately deliver to such Secured Party or Collateral
Agent, or their designated agent, appropriately endorsed or accompanied by
appropriate instruments of transfer or assignment, all documents and
instruments, all certificated securities with respect to any Pledged Collateral,
all letters of credit and all accounts and other rights to payment at any time
evidenced by promissory notes, trade acceptances or other instruments, and (ii)
cause certificates to be issued in respect of any uncertificated Pledged
Collateral, (iii) provide such notice, obtain such acknowledgments and take all
such other action, with respect to any investment property, chattel paper,
documents and letter-of credit rights, as the Majority Secured Parties or
Collateral Agent, as the case may be, shall reasonably specify.

          (k) Debtor shall: (i) with such frequency as the Majority Secured
Parties or any Collateral Agent may require, furnish to Secured Parties or any
Collateral Agent such lists of customers and other information relating to the
accounts and other rights to payment as the Majority Secured Parties or any
Collateral Agent shall reasonably request; (ii) give only normal discounts,
allowances and credits as to accounts and other rights to payment, in the
ordinary course of business, according to normal trade practices utilized by
Debtor, and enforce all accounts and other rights to payment strictly in
accordance with their terms, except that Debtor may grant any extension of the
time for payment or enter into any agreement to make a rebate or otherwise to
reduce the amount owing on or with respect to, or compromise or settle for less
than the full amount thereof, any account or other right to payment, in the
ordinary course of business, according to normal and prudent trade practices
utilized by Debtor; and (iii) Debtor shall upon

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the request of the Majority Secured Parties or any Collateral Agent (A) at any
time, notify all or any designated portion of the account debtors and other
obligors on the accounts and other rights to payment of the security interest
hereunder, and (B) upon the occurrence and during the continuance of an Event of
Default, notify the account debtors and other obligors on the accounts and other
rights to payment or any designated portion thereof that payment shall be made
directly to Secured Parties or any Collateral Agent or to such other Persons or
locations as the Majority Secured Parties or any Collateral Agent shall specify.

          (l) Debtor shall, at such times as the Majority Secured Parties shall
reasonably request, prepare and deliver to Secured Parties a report of all
inventory, in form and substance satisfactory to the Majority Secured Parties.

          (m) Debtor shall (i) notify Secured Parties or any Collateral Agent of
any material claim made or asserted against the Collateral by any Person and of
any change in the composition of the Collateral or other event which could
materially adversely affect the value of the Collateral or Secured Parties' Lien
thereon; (ii) furnish to Secured Parties or any Collateral Agent such statements
and schedules further identifying and describing the Collateral and such other
reports and other information in connection with the Collateral as the Majority
Secured Parties or any Collateral Agent may reasonably request, all in
reasonable detail; and (iii) upon reasonable request of the Majority Secured
Parties or any Collateral Agent make such demands and requests for information
and reports as Debtor is entitled to make in respect of the Collateral.

          (n) If and when Debtor shall obtain rights to any new patents,
trademarks, service marks, trade names or registered or material unregistered
copyrights, or otherwise acquire or become entitled to the benefit of, or apply
for registration of, any of the foregoing, Debtor (i) shall promptly notify
Secured Parties or any Collateral Agent, as the case may be, thereof and (ii)
hereby authorizes Secured Parties or any Collateral Agent, as the case may be,
to modify, amend, or supplement Schedule 2 and from time to time to include any
of the foregoing and make all necessary or appropriate filings with respect
thereto. Debtor shall promptly execute and deliver appropriate documents (in
form and substance reasonably satisfactory to the Majority Secured Parties) with
respect to any such current or future registered copyrights for recording in the
U.S. Copyright Office.

          (o) Without limiting the generality of subsection (n), Debtor shall
not register with the U.S. Copyright Office any unregistered copyrights (whether
in existence on the date hereof or thereafter acquired, arising, or developed)
unless Debtor provides Secured Parties or any Collateral Agent, as the case may
be, with written notice of its intent to register such copyrights not less than
30 days prior to the date of the proposed registration.

          (p) At the request of the Majority Secured Parties or any Collateral
Agent, Debtor will obtain from each Person from whom Debtor leases any premises
at which any Collateral is at any time present such collateral access,
subordination, waiver, consent and estoppel agreements, as the Majority Secured
Parties or such Collateral Agent may require, in form and substance satisfactory
to the Majority Secured Parties or such Collateral Agent.

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          (q) Debtor shall give Secured Parties or any Collateral Agent, as the
case may be, immediate notice of the acquisition of any instruments or
securities, or the establishment of any new deposit account or any new
securities account with respect to any Pledged Collateral.

          (r) (i) Debtor shall comply with all of its obligations under any
Pledged Collateral Agreements to which it is a party and shall enforce all of
its rights thereunder. (ii) Debtor will take all actions necessary to cause each
Pledged Collateral Agreement relating to Collateral consisting of any and all
limited liability and general partnership interests and limited liability
company interests of any type or nature ("Partnership and LLC Collateral") to
provide specifically at all times that: (A) no Partnership and LLC Collateral
shall be a security governed by Article 8 of the applicable Uniform Commercial
Code; and (B) no consent of any member, manager, partner or other Person shall
be a condition to the admission as a member or partner of any transferee that
acquires ownership of the Partnership and LLC Collateral as a result of the
exercise by Secured Parties or any Collateral Agent of any remedy hereunder or
under applicable law. Additionally, Debtor agrees that no Partnership and LLC
Collateral (A) shall be dealt in or traded on any securities exchange or in any
securities market, (B) shall constitute an investment company security, or (C)
shall be held by Debtor in a securities account. (iii) Debtor shall not vote to
enable or take any other action to: (A) amend or terminate, or waive compliance
with any of the terms of, any Pledged Collateral Agreement, certificate or
articles of incorporation, bylaws or other organizational documents in any way
that changes the rights of Debtor with respect to any Partnership and LLC
Collateral or other Collateral constituting investment property in a manner
adverse to the Secured Parties or that adversely affects the validity,
perfection or priority of Secured Parties' security interest therein.

          (s) Debtor shall immediately notify Secured Parties or any Collateral
Agent if Debtor holds or acquires (i) any commercial tort claims, (ii) any
chattel paper, including any interest in any electronic chattel paper, other
than chattel paper arising in the ordinary course of Debtor's business in
connection with leases by Debtor to its customers of its inventory, or (iii) any
letter-of-credit rights.

          (t) In the event that Debtor acquires rights in any Subsidiary after
the date hereof, it shall deliver to Secured Parties and any Collateral Agent a
completed supplement to Schedule 3, reflecting such new Subsidiary and Debtor
shall comply with the Section 5.02(m) of the Loan Agreement. Notwithstanding the
foregoing, it is understood and agreed that the security interest of Secured
Parties shall attach to any such Subsidiary immediately upon Debtor's
acquisition of rights therein and shall not be affected by the failure of Debtor
to deliver any such supplement to Schedule 3 or to comply with Section 5.02(m)
of the Loan Agreement.

          Section 6. Rights of Secured Parties.

          (a) Until Secured Parties exercise their rights hereunder to collect
the accounts and other rights to payment, Debtor shall endeavor in the first
instance diligently to collect all amounts due or to become due on or with
respect to the accounts and other rights to payment. At the request of the
Majority Secured Parties or any Collateral Agent, upon the occurrence and during
the continuance of any Event of Default, all remittances received by Debtor
shall be held in trust for Secured Parties and, in accordance with the Majority
Secured Parties' or any Collateral Agent's instructions, remitted to Secured
Parties or any Collateral

                                       11

<Page>

Agent or deposited to an account of Secured Parties or any Collateral Agent in
the form received (with any necessary endorsements or instruments of assignment
or transfer).

          (b) At the request of the Majority Secured Parties or any Collateral
Agent, upon the occurrence and during the continuance of any Event of Default,
Secured Parties shall be entitled to receive all distributions and payments of
any nature with respect to any Pledged Collateral or instrument Collateral, and
all such distributions or payments received by the Debtor shall be held in trust
for Secured Parties and, in accordance with the Majority Secured Parties' or any
Collateral Agent's instructions, remitted to Secured Parties or any Collateral
Agent or deposited to an account designated by the Majority Secured Parties or
any Collateral Agent in the form received (with any necessary endorsements or
instruments of assignment or transfer). Further, upon the occurrence and during
the continuance of any Event of Default any such distributions and payments with
respect to any Pledged Collateral held in any securities account shall be held
and retained in such securities account, in each case as part of the Collateral
hereunder, and the Majority Secured Parties or any Collateral Agent shall have
the right, following prior written notice to the Debtor, to vote and to give
consents, ratifications and waivers with respect to any Pledged Collateral and
instruments, and to exercise all rights of conversion, exchange, subscription or
any other rights, privileges or options pertaining thereto, as if Secured
Parties or any Collateral Agent were the absolute owner thereof; provided that
Secured Parties or any Collateral Agent shall have no duty to exercise any of
the foregoing rights afforded to it or them and shall not be responsible to the
Debtor or any other Person for any failure to do so or delay in doing so.

          Section 7. Authorization; Collateral Agent Appointed Attorney-in-Fact.
Any Collateral Agent shall have the right to, in the name of Debtor, or in the
name of Secured Parties or Collateral Agent or otherwise, upon notice to but
without the requirement of assent by Debtor, and Debtor hereby constitutes and
appoints Collateral Agent (and any of Collateral Agent's officers, employees or
agents designated by Collateral Agent) as Debtor's true and lawful
attorney-in-fact, with full power and authority to: (i) sign and file any of the
financing statements and other documents and instruments which must be executed
or filed to perfect or continue perfected, maintain the priority of or provide
notice of Secured Parties' security interest in the Collateral (including any
notices to or agreements with any securities intermediary); (ii) assert, adjust,
sue for, compromise or release any claims under any policies of insurance; (iii)
give notices of control, default or exclusivity (or similar notices) under any
account control agreement or similar agreement with respect to exercising
control over deposit accounts or securities accounts; and (iv) execute any and
all such other documents and instruments, and do any and all acts and things for
and on behalf of Debtor, which Collateral Agent or the Majority Secured Parties
may deem reasonably necessary or advisable to maintain, protect, realize upon
and preserve the Collateral and Secured Parties' security interest therein and
to accomplish the purposes of this Agreement. The foregoing power of attorney is
coupled with an interest and irrevocable so long as the Obligations have not
been paid and performed in full. In the event that a Collateral Agent is not
appointed, each Secured Party, acting upon the direction of the Majority Secured
Parties, is hereby authorized to exercise the authority set forth in, and act as
attorney-in-fact as contemplated by, this Section 7. Collateral Agent and the
Secured Parties agree that, except upon and during the continuance of an Event
of Default, the power of attorney, or any rights granted to Collateral Agent or
any designated Secured Party, pursuant to clauses (ii), (iii) and (iv), shall
not be exercised. Debtor hereby ratifies, to the extent permitted by law, all
that

                                       12

<Page>

Collateral Agent or any such Secured Party shall lawfully and in good faith do
or cause to be done by virtue of and in compliance with this Section 7.

          Section 8. Events of Default. Any of the following events which shall
occur and be continuing shall constitute an "Event of Default":

          (a) Any "Event of Default" as defined in the Loan Agreement or in any
other Loan Document shall have occurred and be continuing;

          (b) Any material impairment in the value of the Collateral or any
impairment of the priority of Secured Parties' Liens hereunder.

          (c) Any levy upon, seizure or attachment of any of the Collateral, the
aggregate value of which exceeds $100,000, which shall not have been rescinded
or withdrawn.

          (d) Any loss, theft or substantial damage to, or destruction of, any
material portion of the Collateral (unless within 10 days after the occurrence
of any such event, Debtor furnishes to Secured Parties evidence satisfactory to
the Majority Secured Parties that the amount of any such loss, theft, damage to
or destruction of the Collateral is fully insured under policies naming Secured
Parties as additional named insureds or loss payees).

          Section 9. Remedies.

          (a) Upon the occurrence and during the continuance of any Event of
Default, each Secured Party shall have, in addition to all other rights and
remedies granted to it in this Agreement, the Loan Agreement or any other Loan
Document, all rights and remedies of a secured party under the UCC and other
applicable laws. Without limiting the generality of the foregoing, (i) Secured
Parties or any Collateral Agent in each case as directed by Majority Secured
Parties may peaceably and without notice enter any premises of Debtor, take
possession of any the Collateral, remove or dispose of all or part of the
Collateral on any premises of Debtor or elsewhere, or, in the case of equipment,
render it nonfunctional, and otherwise collect, receive, appropriate and realize
upon all or any part of the Collateral, and demand, give receipt for, settle,
renew, extend, exchange, compromise, adjust, or sue for all or any part of the
Collateral, as the Majority Secured Parties may determine; (ii) Secured Parties
or any Collateral Agent in each case as directed by Majority Secured Parties may
require Debtor to assemble all or any part of the Collateral and make it
available to Secured Parties at any place and time designated by Secured
Parties, and may withdraw (or cause to be withdrawn) any and all funds and other
Collateral from any deposit accounts or securities accounts; (iii) Secured
Parties or any Collateral Agent in each case as directed by Majority Secured
Parties may use or transfer any of Debtor's rights and interests in any
intellectual property Collateral, by license, by sublicense (to the extent
permitted by an applicable license) or otherwise, on such conditions and in such
manner as the Majority Secured Parties may determine, (iv) Secured Parties or
any Collateral Agent in each case as directed by Majority Secured Parties may
secure the appointment of a receiver of the Collateral or any part thereof (to
the extent and in the manner provided by applicable law); and (v) Secured
Parties or any Collateral Agent, in each case as directed by Majority Secured
Parties, may sell, resell, lease, use, assign, license, sublicense, transfer or
otherwise dispose of any or all of the Collateral in its then condition or
following any

                                       13

<Page>

commercially reasonable preparation or processing (utilizing in connection
therewith any of Debtor's assets, without charge or liability to Secured Parties
therefor) at public or private sale, by one or more contracts, in one or more
parcels, at the same or different times, for cash or credit, or for future
delivery without assumption of any credit risk, all as Majority Secured Parties
deem advisable; provided, however, that Debtor shall be credited with the net
proceeds of sale only when such proceeds are finally collected by Secured
Parties. Debtor recognizes that Secured Parties or any Collateral Agent may be
unable to make a public sale of any or all of the Pledged Collateral, by reason
of prohibitions contained in applicable securities laws or otherwise, and
expressly agrees that a private sale to a restricted group of purchasers for
investment and not with a view to any distribution thereof shall be considered a
commercially reasonable sale. Secured Parties or any Collateral Agent shall have
the right upon any such public sale, and, to the extent permitted by law, upon
any such private sale, to purchase the whole or any part of the Collateral so
sold, free of any right or equity of redemption, which right or equity of
redemption Debtor hereby releases, to the extent permitted by law. Any Secured
Party or any Collateral Agent shall give Debtor such notice of any private or
public sales as may be required by the UCC or other applicable law.

          (b) For the purpose of enabling Secured Parties to exercise their
rights and remedies under this Section 9 or otherwise in connection with this
Agreement, effective upon the occurrence and during the continuance of an Event
of Default, Debtor hereby grants to Secured Parties and Collateral Agent, if
any, an irrevocable, non-exclusive and assignable license (exercisable without
payment or royalty or other compensation to Debtor) to use, license or
sublicense any intellectual property Collateral to the extent such grant is not
prohibited with respect to such intellectual property Collateral.

          (c) Neither Collateral Agent nor any Secured Party shall have any
obligation to clean up or otherwise prepare the Collateral for sale. Neither
Collateral Agent nor any Secured Party shall have any obligation to attempt to
satisfy the Obligations by collecting them from any other Person liable for
them, and Collateral Agent and the Majority Secured Parties may release, modify
or waive any Collateral provided by any other Person to secure any of the
Obligations, all without affecting Collateral Agent's or any Secured Party's
rights against Debtor. Debtor waives any right it may have to require Collateral
Agent or any Secured Party to pursue any third Person for any of the
Obligations. Collateral Agent and Secured Parties may comply with any applicable
state or federal law requirements in connection with a disposition of the
Collateral and compliance will not be considered adversely to affect the
commercial reasonableness of any sale of the Collateral. Collateral Agent and
Secured Parties may sell the Collateral without giving any warranties as to the
Collateral. Collateral Agent and Secured Parties may specifically disclaim any
warranties of title or the like. This procedure will not be considered adversely
to affect the commercial reasonableness of any sale of the Collateral. If
Secured Parties sell any of the Collateral upon credit, Debtor will be credited
only with payments actually made by the purchaser, received by Collateral Agent
and Secured Parties and applied to the indebtedness of the purchaser. In the
event the purchaser fails to pay for the Collateral, Collateral Agent or Secured
Parties may resell the Collateral, and Debtor shall be credited with the
proceeds of the sale.

          (d) To the extent Debtor uses the proceeds of any of the Obligations
to purchase Collateral, Debtor's repayment of the Obligations shall apply on a
"first-in, first-out"

                                       14

<Page>

basis so that the portion of the Obligations used to purchase a particular item
of Collateral shall be paid in the chronological order the Debtor purchased the
Collateral.

          (e) The cash proceeds actually received from the sale or other
disposition or collection of Collateral, and any other amounts received in
respect of the Collateral the application of which is not otherwise provided for
herein, shall be applied FIRST, to the payment of the fees, costs and expenses
of any Collateral Agent and Secured Parties in exercising or enforcing its
rights hereunder and in collecting or attempting to collect any of the
Collateral, and to the payment of all other amounts payable to Secured Parties
with respect to the Loan Documents (other than principal and interest); and
SECOND, to the payment of all other Obligations in the following order unless a
specific determination is made by the Majority Lenders with respect thereto (i)
FIRST, to any other fees, costs, expenses and other amounts (other than
principal and interest) due the Lenders under the Loan Documents; (ii) SECOND,
to accrued and unpaid interest due the Lenders; (iii) THIRD, to the outstanding
principal amount of the Five Million Closing Date Loan, the Cash Closing Date
Loan and the Additional Loans, and (iv) FOURTH, to the outstanding principal
amount of the $9.3 Million Closing Date Loan. Any surplus thereof which exists
after payment and performance in full of the Obligations shall be promptly paid
over to Debtor or otherwise disposed of in accordance with the UCC or other
applicable law. Debtor shall remain liable to Secured Parties for any deficiency
which exists after any sale or other disposition or collection of Collateral.

          Section 10. Certain Waivers. Debtor waives, to the fullest extent
permitted by law, (i) any right of redemption with respect to the Collateral,
whether before or after sale hereunder, and all rights, if any, of marshalling
of the Collateral or other collateral or security for the Obligations; (ii) any
right to require any Collateral Agent or any Secured Party (A) to proceed
against any Person, (B) to exhaust any other collateral or security for any of
the Obligations, (C) to pursue any remedy in any Secured Party's or any
Collateral Agent's power, or (D) to make or give any presentments, demands for
performance, notices of nonperformance, protests, notices of protests or notices
of dishonor in connection with any of the Collateral; and (iii) all claims,
damages, and demands against any Secured Party or any Collateral Agent arising
out of the repossession, retention, sale or application of the proceeds of any
sale of the Collateral.

          Section 11. Notices. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given:
(i) upon personal delivery to the party to be notified; (ii) when sent by
confirmed telex or facsimile if sent during normal business hours of the
recipient, if not, then on the next business day; (iii) five (5) days after
having been sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) two (2) days after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the parties hereto at their
respective addresses or facsimile numbers set forth below their names on the
signature pages hereof, or, in the case of any Collateral Agent, as specified by
Collateral Agent in writing to Debtor and Secured Parties, or, all cases, as
notified by such party from time to time at least ten (10) days prior to the
effectiveness of such notice.

          Section 12. No Waiver; Cumulative Remedies. No failure on the part of
any Secured Party or any Collateral Agent to exercise, and no delay in
exercising, any right, remedy, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial

                                       15

<Page>

exercise of any such right, remedy, power or privilege preclude any other or
further exercise thereof or the exercise of any other right, remedy, power or
privilege. The rights and remedies under this Agreement are cumulative and not
exclusive of any rights, remedies, powers and privileges that may otherwise be
available to such Secured Party or Collateral Agent.

          Section 13. Binding Effect. This Agreement shall be binding upon,
inure to the benefit of and be enforceable by Debtor, any Secured Party, any
Collateral Agent appointed hereunder and their respective successors and
assigns. Any Collateral Agent is expressly designated to be a third party
beneficiary hereof. Debtor may not assign, transfer, hypothecate or otherwise
convey its rights, benefits, obligations or duties hereunder without the prior
express written consent of the Secured Parties. Any such purported assignment,
transfer, hypothecation or other conveyance by Debtor without the prior express
written consent of the Secured Parties shall be void. Debtor acknowledges and
agrees that in connection with an assignment of, or grant of a participation in,
the Obligations, Secured Parties may assign, or grant participations in, all or
a portion of their rights and obligations hereunder. Upon any assignment of
Secured Parties' rights hereunder, such assignee or assignees shall have, to the
extent of such assignment, all rights of Secured Parties hereunder. Debtor
agrees that, upon any such assignment, such assignee may enforce directly,
without joinder of Secured Parties, the rights of Secured Parties set forth in
this Agreement. Any such assignee shall be entitled to enforce Secured Parties'
rights and remedies under this Agreement to the same extent as if it were an
original secured party named herein.

          Section 14. Governing Law; Waiver of Jury Trial; Submission to
Jurisdiction.

          (a) This Agreement shall be construed in accordance with and governed
by the internal laws of the State of New York (as permitted by Section 5-1401 of
the New York General Obligations Law (or any similar successor provision))
without giving effect to any choice of law rule that would cause the application
of the laws of any jurisdiction other than the internal laws of the State of New
York to the rights and duties of the parties, except as required by mandatory
provisions of law and to the extent the validity or perfection of the security
interests hereunder, or the remedies hereunder, in respect of any Collateral are
governed by the law of a jurisdiction other than New York.

          (b) THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY, AND
INTENTIONALLY WAIVE THE RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION
ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT AND THE OTHER LOAN
DOCUMENTS, THIS WAIVER BEING A MATERIAL INDUCEMENT FOR EACH SUCH PARTY TO ENTER
INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.

          (c) For purposes of any suit, action or other legal proceeding
relating to this Agreement or the other Loan Documents or the enforcement of any
provision of this Agreement or the Loan Documents, each party hereto hereby
expressly and irrevocably submits and consents to the exclusive jurisdiction of
the courts of the State of New York sitting in the borough of Manhattan and the
United States District Court for the Southern District of New York for the
purposes of any such suit, action or legal proceeding, including to enforce any
settlement, order or award; and agrees that such state and federal courts shall
be deemed to be a

                                       16

<Page>

convenient forum; and waives and agrees not to assert (by way of motion, as a
defense or otherwise), in any such legal proceeding commenced in such court any
claim that such party is not subject personally to the jurisdiction of such
court, that such legal proceeding has been brought in an inconvenient forum,
that the venue of such proceeding is improper or that the Loan Documents or the
subject matter thereof may not be enforced in or by such court.

          (d) Each party hereto agrees to the entry of an order to enforce any
resolution, settlement, order or award made pursuant to this Section by the
courts of the State of New York sitting in the borough of Manhattan or the
United States District Court for the Southern District of New York and in
connection therewith hereby waives, and agrees not to assert by way of motion,
as a defense, or otherwise, any claim that such resolution, settlement, order or
award is inconsistent with or violative of the laws or public policy of the laws
of the State of New York or any other jurisdiction.

          Section 15. Entire Agreement; Amendment. This Agreement and the other
Loan Documents contain the entire agreement of the parties with respect to the
subject matter hereof and supersede any prior agreements, commitments, drafts,
communication, discussions and understandings, oral or written, with respect
thereto. No amendment to this Agreement, or any waiver of any provision hereof,
shall be effective unless it is in writing and signed by the Majority Secured
Parties (or any Collateral Agent with the written consent of the Majority
Secured Parties) and (in the case of any amendment) the Debtor; provided,
however, that without the consent of all Secured Parties, no amendment, waiver
or consent shall do any of the following: (i) subject the Secured Parties to any
additional obligations; (ii) reduce any amount payable to the Secured Parties
hereunder; (iii) postpone any date fixed for any payment in respect of any
amount payable to any Secured Parties hereunder; (iv) change the definition of
"Majority Secured Parties" or any definition or provision of this Agreement
requiring the approval of the Secured Parties or some other specified amount of
Secured Parties; or (vi) amend the provisions of this Section 15; and provided,
further, that no amendment, waiver or consent shall, unless in writing and
signed by the Collateral Agent, affect the rights, duties or obligations of the
Collateral Agent under or in respect of this Agreement. Any such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given.

          Section 16. Severability. If any provision of this Agreement shall be
prohibited by or invalid under any applicable law or regulation in any
jurisdiction, it shall, as to such jurisdiction, be deemed modified to conform
to the minimum requirements of such law or regulation, or, if for any reason it
is not deemed so modified, it shall be ineffective and invalid only to the
extent of such prohibition or invalidity without affecting the remaining
provisions of this Agreement, or the validity or effectiveness of such provision
in any other jurisdiction.

          Section 17. Counterparts. This Agreement may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute but one and the same agreement.

          Section 18. Termination. Upon payment and performance in full of all
Obligations (other than inchoate indemnity obligations and any other obligations
which by their

                                       17

<Page>

terms are to survive the termination of the Loan Documents) and termination of
the Commitments, the security interest created under this Agreement shall
terminate and each Secured Party and Collateral Agent shall promptly execute and
deliver to Debtor such documents and instruments reasonably requested by Debtor
as shall be necessary to evidence termination of all security interests given by
Debtor to such Secured Party or Collateral Agent hereunder.

                                       18

<Page>

          IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement, as of the date first above written.

                                      DEBTOR:

                                      AKSYS, LTD.

                                      By /s/
                                         ---------------------------------------
                                         Name:
                                         Title:

                                      Address:

                                      Two Marriot Drive
                                      Lincolnshire, IL 60069
                                      Attn: ____________________________________
                                      Fax: 847-229-2080

                                      WITH A COPY TO:

                                      Keith S. Crow P.C.
                                      Kirkland & Ellis LLP
                                      200 East Randolph Drive
                                      Chicago, Illinois 60601
                                      Fax: 312-861-2200

                                      S-1

<Page>

                                      SECURED PARTIES:

                                      DURUS LIFE SCIENCES MASTER FUND LTD.

                                      By /s/
                                         ---------------------------------------
                                         Name:
                                         Title:

                                      Address:

                                      Durus Life Sciences Master Fund Ltd.
                                      c/o International Fund Services (Ireland)
                                      Ltd.
                                      3rd Floor, Bishops Square
                                      Redmonds Hill
                                      Dublin 2, Ireland
                                      Attention:  Susan Byrne
                                      Fax: (011) 35-31-707-5013

                                      WITH A COPY TO:

                                      Gavin Grover, Esq.
                                      Morrison & Foerster LLP
                                      425 Market Street
                                      San Francisco, California 94105
                                      Fax: 415-269-7522

                                      AND WITH A COPY TO:

                                      Paul N. Roth, Esq.
                                      Schulte, Roth & Zabel
                                      919 Third Avenue
                                      New York, New York 10022
                                      Fax: 212-593-5955

                                      S-2

<Page>

                                   SCHEDULE 1
                            to the Security Agreement

1.   Jurisdiction of Organization

2.   Organizational ID Number

3.   Chief Executive Office and Principal Place of Business

4.   Other locations where Debtor conducts business or Collateral is kept

5.   Deposit Accounts and Security Accounts

                                 Schedule 1-1.

<Page>

                                   SCHEDULE 2
                            to the Security Agreement

1.   PATENTS AND PATENT APPLICATIONS.

2.   COPYRIGHTS (REGISTERED AND UNREGISTERED) AND COPYRIGHT APPLICATIONS.

3.   TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND TRADEMARK, SERVICE MARK AND
     TRADE NAME APPLICATIONS.

                                 Schedule 2-1.

<Page>

                                   SCHEDULE 3
                            to the Security Agreement

                              PLEDGED SUBSIDIARIES

          1. Pledged Collateral consisting of interests in each limited
liability company that is a subsidiary of Debtor as follows:

   SUBSIDIARY     NUMBER OF UNITS   DATE OF ISSUANCE OF UNITS

          2. Pledged Collateral consisting of interests in each general
partnership, limited partnership, limited liability partnership or other
partnership that is a subsidiary of Debtor as follows:

                         TYPE OF
                  PARTNERSHIP INTEREST                      NUMBER OF UNITS OR
                     (E.G., GENERAL,     DATE OF ISSUANCE     OTHER OWNERSHIP
   SUBSIDIARY           LIMITED)           OR FORMATION          INTERESTS

          3. Pledged Collateral consisting of capital stock of each corporate
subsidiary of Debtor being represented by stock certificates as follows:

                                                       NO. AND CLASS
   SUBSIDIARY     CERTIFICATE NO.   CERTIFICATE DATE     OF SHARES

                                 Schedule 3-1.<Page>

                                                                    Exhibit 10.4

                                   AKSYS, LTD.

                            INVESTOR RIGHTS AGREEMENT

                            DATED AS OF JUNE 23, 2006

<Page>

                                TABLE OF CONTENTS

                                                                            PAGE

1.  Definitions                                                               2

2.  Registration of New Registrable Securities                                4
    2.1  Mandatory Registration                                               4
    2.2  Legal Counsel                                                        5
    2.3  Effect of Failure to File and Obtain and Maintain
         Effectiveness of Registration Statement                              6
    2.4  Request for Acceleration                                             7

3.  Registration Obligations With Respect to All Registrable
    Securities                                                                7
    3.1  Maintain Effectiveness of Registration Statements                    7
    3.2  Review of Registration Statements                                    8
    3.3  Copies of Registration Statements                                    9
    3.4  "Blue Sky" Laws                                                      9
    3.5  Notice of Certain Events                                             9
    3.6  Stop Orders and Ineffectiveness of Registration Statement           10
    3.7  Ineligibility for Form S-3                                          10
    3.8  Sufficient Number of Shares Registered                              11
    3.9  Underwriter Status and Related Matters                              11
    3.10 Disclosure of Information Concerning Investors                      12
    3.11 Listing of Registrable Securities                                   12
    3.12 Unlegended Certificates                                             13
    3.13 Transfer of Registrable Securities                                  13
    3.14 Governmental Agencies                                               13
    3.15 Delivery of Earnings Statement                                      13
    3.16 Compliance with Laws                                                14
    3.17 Confirmation                                                        14
    3.18 Reports Under the 1934 Act                                          14
    3.19 Blackout Period                                                     14

4.  Obligations of the Investors                                             15

5.  Expenses of Registration                                                 16

6.  Assignment of Registration Rights                                        16

7.  Company Board of Directors                                               16
    7.1  Board Representation                                                16
    7.2  Executive Committee                                                 17
    7.3  Other Committees                                                    17
    7.4  Certain Officers                                                    17
    7.5  Continuation of Rights                                              17
    7.6  Vacancies                                                           18
    7.7  Costs and Expenses                                                  18
    7.8  Directors' Indemnification                                          18

                                       i

<Page>

                                                                            PAGE

    7.9  Series B Preferred Director                                         19
    7.10 Certificate of Incorporation; By-Laws                               19
    7.11 Performance                                                         19

8.  Covenants of the Company                                                 19
    8.1  Inspection                                                          19
    8.2  Delivery of Financing Statements and Other Reports                  20
    8.3  Right of First Refusal upon Sale of Company                         20
    8.4  Notice of Litigation                                                21
    8.5  Preservation of Existence, Etc                                      21
    8.6  Payment of Taxes, Etc                                               22
    8.7  Maintenance of Insurance                                            22
    8.8  Keeping of Records and Books of Account                             22
    8.9  Compliance with Requirements of Governmental Authorities            22
    8.10 Maintenance of Properties, Etc                                      22
    8.11 Licenses                                                            23
    8.12 Protection of Intellectual Property Rights                          23
    8.13 Restrictions on Certain Corporate Actions                           23
    8.14 Termination of Certain Covenants                                    24

9.  Indemnification                                                          24

10. Contribution                                                             27

11. No Inconsistent Agreements or Actions                                    27

12. Lockup                                                                   28

13. Amendment of Registration Rights                                         28

14. Entire Agreement; Termination of Existing Registration Rights
    Agreement                                                                28

15. Miscellaneous                                                            28

                                       ii

<Page>

                            INVESTOR RIGHTS AGREEMENT

     This Investor Rights Agreement (this "Agreement") is entered into as of
June 23, 2006, by and among AKSYS, LTD., a Delaware corporation (the "Company"),
DURUS LIFE SCIENCES MASTER FUND LTD., a Cayman Islands company ("Durus"), and
ARTAL LONG BIOTECH PORTFOLIO LLC, a Delaware limited liability company
("Artal"). Durus and Artal are collectively referred to herein as the "Existing
Investors," and each is individually referred to as an "Existing Investor."

     WHEREAS, in connection with the Securities Purchase Agreement by and among
the Company and Durus of even date herewith (the "Purchase Agreement"), the
Company has agreed, upon the terms and subject to the conditions set forth in
the Purchase Agreement, to issue and sell to Durus at the Initial Closing, as
defined in the Purchase Agreement, (i) 5,000 shares of the Company's Series B
Convertible Preferred Stock ("Initial Preferred Shares"), the terms of which are
set forth in the certificate of designation for such series of preferred stock
in the form attached as Exhibit A to the Purchase Agreement (the "Certificate of
Designation"), and which Initial Preferred Shares shall be convertible into
shares of the Company's common stock (the "Common Stock") pursuant to the terms
of the Certificate of Designation (such shares of Common Stock to be received
upon the conversion of the Initial Preferred Shares are referred to herein as
the "Initial Conversion Shares"), and (ii) warrants (the "Initial Warrants") to
purchase 5,000,000 shares of Common Stock at an initial exercise price of $1.10
per share (the "Initial Warrant Shares" and, together with the Initial
Conversion Shares and the Initial Warrants, the "Initial Securities");

     WHEREAS, the Purchase Agreement provides that after the Initial Closing,
Durus will have the option, in its sole discretion, to purchase up to an
additional $15,000,000 of the Company's Series B Convertible Preferred Stock
(the "Additional Preferred Shares") convertible into Common Stock (the
"Additional Conversion Shares") and warrants (the "Additional Warrants") to
purchase shares of Common Stock (the "Additional Warrant Shares" and, together
with the Additional Conversion Shares and the Additional Warrants, the
"Additional Registrable Securities") from the Company at one or more Subsequent
Closings, as defined in the Purchase Agreement;

     WHEREAS, contemporaneously with the execution and delivery of the Purchase
Agreement, Durus and the Company also are executing and delivering a loan
agreement, substantially in the form attached as Exhibit D to the Purchase
Agreement (the "Loan Agreement"), pursuant to which the Company will be issuing
certain notes to Durus (the "Notes");

     WHEREAS, Durus also currently holds 21,377,274 shares of Common Stock (the
"Durus Shares") and a warrant (the "Durus Warrant") to purchase 281,454 shares
of Common Stock at an exercise price of $3.25 per share subject to adjustment
pursuant to the terms of the Durus Warrant (the "Durus Warrant Shares" and,
together with the Durus Shares and the Durus Warrants, the "Durus Securities");

     WHEREAS, Artal currently holds 501,870 shares of Common Stock (the "Artal
Shares") and an unsecured subordinated promissory note in the principal amount
of $322,000 (the "Artal

<Page>

Note") issued by the Company to Artal pursuant to that certain Note Purchase
Agreement, dated as of February 23, 2004, by and among the Company and Artal,
and pursuant to the Artal Note the Company has the right to elect, in lieu of
repayment in cash of all or any portion of the principal due under the Artal
Note, to repay such amount of principal in Common Stock of the Company (the
"Note Shares"), subject to the terms and conditions of the Artal Note.

     WHEREAS, the Company has previously registered certain Durus Securities and
the Artal Shares on a registration statement on Form S-3, Registration No.
333-114396, filed by the Company with the Securities and Exchange Commission
(the "SEC") on May 13, 2004 (the "Existing Registration Statement"); and

     WHEREAS, in connection with the execution and delivery of the Purchase
Agreement and the other Transaction Documents (as defined in the Purchase
Agreement), the Company has agreed to provide rights to the Existing Investors
as provided herein.

     NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Existing
Investors hereby agree as follows:

1.   DEFINITIONS.

     Capitalized terms used herein and not otherwise defined herein shall have
the respective meanings set forth in the Purchase Agreement. As used in this
Agreement, the following terms shall have the following meanings:

     (A) "Additional Registrable Securities" means the (i) Additional
Registrable Securities and (ii) any shares of capital stock issued or issuable
from time to time (with any adjustments) in exchange for or otherwise with
respect to the Additional Conversion Shares or the Additional Warrant Shares,
including as a result of any share split, share dividend, recapitalization,
exchange or similar event or otherwise, without regard to any limitations on
conversions of the Additional Preferred Shares or exercise of the Additional
Warrants.

     (B) "Affiliate" means, with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries, controlling,
controlled by or under common control with such Person. For purposes of this
definition, the term "control" (and correlative terms) means the power, whether
by contract, equity ownership or otherwise, to direct the policies or management
of a Person.

     (C) "Beneficial Owner" and "Beneficially Own" mean, with respect to any
Person, any securities (i) which such Person or any of such Person's Affiliates
beneficially owns, directly or indirectly; (ii) which such Person or any of such
Person's Affiliates, directly or indirectly, has (A) the right to acquire
(whether such right is exercisable immediately or only after the passage of
time) pursuant to any agreement, arrangement or understanding (whether or not in
writing), or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise, or (B) the right to vote pursuant to any
agreement, arrangement or understanding (whether or not in writing); or (iii)
which are beneficially owned, directly or indirectly, by any other Person (or
any Affiliate thereof) with which such Person (or any of such Person's
Affiliates) has any

                                       2

<Page>

agreement, arrangement or understanding (whether or not in writing) for the
purpose of acquiring, holding, voting or disposing of any voting securities of
the same issuer.

     (D) "Business Day" means any day other than Saturday, Sunday or any other
day on which commercial banks in The City of New York are authorized or required
by law to remain closed.

     (E) "Effective Date" means the date that the Registration Statement (as
defined below) has been declared effective by the SEC.

     (F) "Effectiveness Deadline" means (i) with respect to the Registration
Statement to be filed hereunder covering the New Registrable Securities (as
defined below), the date which is 60 days after the Initial Closing, or if there
is any review of such Registration Statement by the SEC, 120 days after the
Initial Closing, (ii) with respect to the Registration Statement or Registration
Statements to be filed hereunder covering the Additional Registrable Securities,
the date which is 60 days after the Subsequent Closing relating to Additional
Registrable Securities, or if there is any review of such Registration Statement
by the SEC, 120 days after such Subsequent Closing and (iii) with respect to the
Registration Statement to be filed hereunder covering the Note Shares, the date
which is 60 days after the issuance of such Note Shares, or if there is any
review of such Registration Statement by the SEC, 120 days after the issuance of
such Note Shares.

     (G) "Existing Registrable Securities" means the Durus Securities registered
on the Existing Registration Statement and the Artal Shares and any shares of
capital stock issued or issuable from time to time (with any adjustments) in
exchange for or otherwise with respect to such Durus Shares, the Artal Shares or
the Durus Warrant Shares, including as a result of any share split, share
dividend, recapitalization, exchange or similar event or otherwise, without
regard to any limitations on conversions of the Durus Warrants.

     (H) "Filing Deadline" means (i) with respect to the Registration Statement
to be filed hereunder covering the New Registrable Securities, thirty (30)
Business Days following the Initial Closing, (ii) with respect to the
Registration Statement or Registration Statements to be filed hereunder covering
the Additional Registrable Securities, within thirty (30) Business Days
following the Subsequent Closing relating to such Additional Registrable
Securities and (iii) with respect to the Registration Statement to be filed
hereunder covering the Note Shares, thirty (30) Business Days following the
issuance of the Note Shares.

     (I) "Investors" mean the Existing Investors and any of their transferees or
assignees who receive or acquire Registrable Securities and who are entitled to
the benefit of this Agreement as provided in Section 6 hereof.

     (J) "New Registrable Securities" means (i) the Initial Securities and (ii)
any shares of capital stock issued or issuable from time to time (with any
adjustments) in exchange for or otherwise with respect to the Initial Conversion
Shares or the Initial Warrant Shares, including as a result of any share split,
share dividend, recapitalization, exchange or similar event or otherwise,
without regard to any limitations on conversions of the Initial Preferred Shares
or exercise of the Initial Warrants.

                                       3

<Page>

     (K) "1933 Act" means the Securities Act of 1933, as amended, and the rules
and regulations promulgated by the SEC thereunder.

     (L) "1934 Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated by the SEC thereunder.

     (M) "Person" means an individual, a limited liability company, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.

     (N) "register," "registered," and "registration" refer to a registration
effected by preparing and filing one or more Registration Statements (as defined
below) in compliance with the 1933 Act and pursuant to Rule 415 and the
declaration of effectiveness of such Registration Statement(s) by the SEC.

     (O) "Registrable Securities" means the New Registrable Securities, the
Additional Registrable Securities, the Existing Registrable Securities and the
Note Shares.

     (P) "Registration Statement" means a registration statement or registration
statements of the Company filed under the 1933 Act covering the Registrable
Securities.

     (Q) "Rule 415" means Rule 415 under the 1933 Act or any successor rule
providing for the offering of securities on a continuous or delayed basis.

     (R) "Warrant Shares" means the Initial Warrant Shares, the Additional
Warrant Shares and the Durus Warrant Shares.

2.   REGISTRATION OF NEW REGISTRABLE SECURITIES.

     2.1  MANDATORY REGISTRATION.

          (A) The Company shall use its best efforts to prepare, and, as soon as
practicable, but in no event later than the applicable Filing Deadline, file
with the SEC a Registration Statement on Form S-3 covering the resale of all of
the New Registrable Securities and the issuance of the Initial Warrant Shares to
be acquired upon exercise of the Initial Warrants. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration that is reasonably acceptable to Durus. The
Registration Statement prepared pursuant hereto shall register for resale
10,000,000 shares of Common Stock and all of the Initial Warrants, and shall
register the issuance of 5,000,000 shares of Common Stock upon exercise of the
Initial Warrants. The Registration Statement, to the extent allowable under the
1933 Act and the rules and regulations promulgated thereunder (including Rule
416), shall state that such Registration Statement also covers such
indeterminate number of additional shares of Common Stock as may become issuable
upon conversion of or otherwise pursuant to the Initial Preferred Shares and
exercise of the Initial Warrants to prevent dilution resulting from stock
splits, stock dividends or similar transactions. The Company shall use its
reasonable best efforts to have the Registration Statement declared effective by
the SEC as soon as practicable, but in no event later than the respective
Effectiveness Deadline.

                                       4

<Page>

          (B) In the event of any Subsequent Closings, the Company shall use its
best efforts to prepare, and, as soon as practicable thereafter, but in no event
later than the applicable Filing Deadline, file with the SEC a Registration
Statement on Form S-3 covering the resale of all the Additional Registrable
Securities relating to each such Subsequent Closing and the issuance of the
Additional Warrant Shares to be acquired upon exercise of the Additional
Warrants issued at each such Subsequent Closing. In the event that Form S-3 is
unavailable for such a registration, the Company shall use such other form as is
available for such a registration that is reasonably acceptable to Durus. The
Registration Statement, to the extent allowable under the 1933 Act and the rules
and regulations promulgated thereunder (including Rule 416), shall state that
such Registration Statement also covers such indeterminate number of additional
shares of Common Stock as may become issuable upon conversion of or otherwise
pursuant to the Additional Preferred Shares and exercise of the Additional
Warrants to prevent dilution resulting from stock splits, stock dividends or
similar transactions. The Company shall use its reasonable best efforts to have
each such Registration Statement declared effective by the SEC as soon as
practicable after each such Subsequent Closing, but in no event later than the
applicable Effectiveness Deadline.

          (C) In the event of the issuance of Note Shares, the Company shall use
its best efforts to prepare, and, as soon as practicable thereafter, but in no
event later than the applicable Filing Deadline, file with the SEC a
Registration Statement on Form S-3 covering the resale of all of the Note
Shares. In the event that Form S-3 is unavailable for such a registration, the
Company shall use such other form as is available for such a registration that
is reasonably acceptable to holders of a majority in interest of the Note
Shares. The Registration Statement prepared pursuant hereto shall register for
resale all of the Note Shares. The Company shall use its reasonable best efforts
to have such Registration Statement declared effective by the SEC as soon as
practicable after the issuance of the Note Shares, but in no event later than
the applicable Effectiveness Deadline.

          (D) In the event that Durus distributes or otherwise transfers any of
its Registrable Securities to its investors or members, the Company shall use
its best efforts to prepare, and, as soon as practicable, file with the SEC a
Registration Statement on Form S-3 covering the resale of all of such
Registrable Securities by such investors or members upon the written request of
Durus. In the event that Form S-3 is unavailable for such a registration, the
Company shall use such other form as is available for such a registration that
is reasonably acceptable to a majority of such investors or members. The Company
shall not be required to effect a registration pursuant to this Section 2.1(d)
if (i) the Company has previously effected two (2) registrations pursuant to
this Section 2.1(d), and such registrations have been declared or ordered
effective, or (ii) the Company receives such written request from Durus more
than five (5) years after the date hereof.

     2.2  LEGAL COUNSEL.

          (A) Subject to Section 5 hereof, Durus shall have the right to select
one legal counsel to review and oversee any registration pursuant to Sections
2.1(a) or 2.1(b), which shall be designated in writing by Durus ("Durus Legal
Counsel").

                                       5

<Page>

          (B) Subject to Section 5 hereof, holders of a majority in interest of
the Artal Shares shall have the right to select one legal counsel to review and
oversee any registration pursuant to Section 2.1(c), which shall be designated
in writing by such holders ("Artal Legal Counsel" and, together with Durus Legal
Counsel, "Legal Counsel").

          (C) The Company and Legal Counsel shall reasonably cooperate with each
other in regards to the performance of the Company's obligations under this
Agreement.

     2.3 EFFECT OF FAILURE TO FILE AND OBTAIN AND MAINTAIN EFFECTIVENESS OF
REGISTRATION STATEMENT.

     If (i) a Registration Statement covering the New Registrable Securities or
the Additional Registrable Securities required to be covered thereby and
required to be filed by the Company pursuant to this Section 2 is (A) not filed
with the SEC on or before the applicable Filing Deadline (a "Filing Failure") or
(B) filed with the SEC but not declared effective by the SEC on or before the
applicable Effectiveness Deadline (an "Effectiveness Failure") or (ii) on any
day after the Effective Date sales of all of such Registrable Securities
required to be included on such Registration Statement cannot be made (other
than during an Allowable Grace Period (as defined in Section 3.19)) pursuant to
such Registration Statement (including, without limitation, because of a failure
to keep such Registration Statement effective, to disclose such information as
is necessary for sales to be made pursuant to such Registration Statement, a
suspension or delisting of the Common Stock on its principal trading market or
exchange, or to register a sufficient number of shares of Common Stock) (a
"Maintenance Failure") then, as partial relief for the damages to any holder by
reason of any such delay in or reduction of its ability to sell the underlying
shares of Common Stock (which remedy shall not be exclusive of any other
remedies available at law or in equity), the Company shall pay to each holder of
New Registrable Securities or Additional Registrable Securities, as applicable,
relating to such Registration Statement an amount in cash equal to one percent
(1%) of the aggregate purchase price of such Investor's Initial Preferred Shares
and Initial Warrants or Additional Preferred Shares and Additional Warrants,
respectively, on each of the following dates: (i) on every thirtieth day (pro
rated for periods totaling less than thirty days) after a Filing Failure until
such Filing Failure is cured; (ii) on every thirtieth day (pro rated for periods
totaling less than thirty days) after an Effectiveness Failure until such
Effectiveness Failure is cured; and (iii) on every thirtieth day (pro rated for
periods totaling less than thirty days) after a Maintenance Failure until such
Maintenance Failure is cured; provided, that the maximum amount payable by the
Company pursuant to this Section 2.3 with respect to such Registration Statement
shall not exceed 10% of the aggregate purchase price of such Investor's
Registrable Securities included in such Registration Statement. The payments to
which a holder shall be entitled pursuant to this Section 2.3 are referred to
herein as "Registration Delay Payments." Registration Delay Payments shall be
paid on the earlier of (I) the last day of each calendar month during which such
Registration Delay Payments are incurred and (II) the third Business Day after
the event or failure giving rise to the Registration Delay Payments is cured. In
the event the Company fails to make Registration Delay Payments in a timely
manner, such Registration Delay Payments shall bear interest, from the date the
Registration Delay Payment was due until the date such Registration Delay
Payment is paid in full, at the rate of ten percent (10%) per annum.
Notwithstanding anything to the contrary herein, the Company shall not be
required to pay any Registration Delay Payments to the extent that such
registration is required to be made pursuant

                                       6

<Page>

to a Registration Statement on Form S-1 for the sole reason that Form S-3 is
unavailable to such registration.

     2.4  REQUEST FOR ACCELERATION.

     The Company shall submit to the SEC, within two (2) Business Days after the
later of the date that (i) the Company learns that no review of the Registration
Statement will be made by the staff of the SEC or that the staff has no further
comments on the Registration Statement, as the case may be, and (ii) the
approval of Legal Counsel in accordance with Section 3.2 (which approval shall
be immediately sought), a request for acceleration of effectiveness of such
Registration Statement to a time and date not later than 48 hours after the
submission of such request.

3.   REGISTRATION OBLIGATIONS WITH RESPECT TO ALL REGISTRABLE SECURITIES.

     The Company shall have the following obligations with respect to the
registration of the Registrable Securities:

     3.1  MAINTAIN EFFECTIVENESS OF REGISTRATION STATEMENTS.

          (A) The Company shall keep the Registration Statements covering the
Registrable Securities, including the Existing Registration Statement, effective
pursuant to Rule 415 at all times until the earlier of (i) the date as of which
all of the Investors may sell all of the Registrable Securities covered by all
of the Registration Statements in any period of three months pursuant to Rule
144 (or any successor thereto) promulgated under the 1933 Act and (ii) the date
on which the Investors shall have sold all of the Registrable Securities covered
by all Registration Statements (or, in the case of the Warrants, the date on
which each such Warrant shall have otherwise terminated pursuant to its terms)
(the "Registration Period"); provided, however, that the Registration Period
with respect to any Registration Statement filed pursuant to Section 2.1(d)
shall be until the earlier of (i) the date as of which all investors and members
of Durus that own Registrable Securities covered by such Registration Statement
may sell all of the Registrable Securities covered by such Registration
Statement in any period of three months pursuant to Rule 144 (or any successor
thereto) promulgated under the 1933 Act and (ii) the date on which all investors
and members of Durus that own Registrable Securities covered by such
Registration Statement shall have sold all of the Registrable Securities covered
by such Registration Statement. The Company shall ensure that each Registration
Statement (including any amendments or supplements thereto and prospectuses
contained therein) 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 (in the case of prospectuses, in the light of the
circumstances in which they were made) not misleading.

          (B) Subject to Section 3.19 of this Agreement, the Company shall
prepare and file with the SEC such amendments (including post-effective
amendments) and supplements to a Registration Statement and the prospectus used
in connection with such Registration Statement, which prospectus is to be filed
pursuant to Rule 424 promulgated under the 1933 Act, or prepare and file with
the SEC a new Registration Statement, as may be necessary to effect the
provisions of Section 3.1 and to otherwise keep such Registration Statement
effective at all times during the

                                       7

<Page>

Registration Period, and, during such period, comply with the provisions of the
1933 Act with respect to the disposition of all Registrable Securities of the
Company covered by such Registration Statement until such time as all of such
Registrable Securities shall have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof as set forth in
such Registration Statement. The Company shall use its best efforts to prepare
and file with the SEC a prospectus supplement or, if required, a post-effective
amendment to the Existing Registration Statement as soon as practicable
following the Initial Closing to effect the provisions of Section 3.1. In the
case of amendments and supplements to a Registration Statement which are
required to be filed pursuant to this Agreement (including pursuant to this
Section 3.1(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K
or any analogous report under the 1934 Act, the Company shall have incorporated
such report by reference into such Registration Statement, if applicable, or
shall file such amendments or supplements with the SEC within two Business Days
of the day on which the 1934 Act report is filed which created the requirement
for the Company to amend or supplement such Registration Statement.

     3.2  REVIEW OF REGISTRATION STATEMENTS.

          (A) To the extent applicable, the Company shall (A) permit Durus Legal
Counsel to review and comment upon (i) Registration Statements covering the New
Registrable Securities, the Additional Registrable Securities or the Existing
Registrable Securities at least five (5) Business Days prior to its filing with
the SEC (and for at least two (2) Business Days after any final, material
changes are made to any draft thereof) (provided that the Filing Deadline shall
be extended by the time taken by Durus Legal Counsel beyond such specified
periods in exercising its right to review such Registration Statements pursuant
to this Section 3) and (ii) all amendments and supplements to such Registration
Statements within a reasonable number of days prior to their filing with the
SEC, and (B) not file any such Registration Statement or amendment or supplement
thereto in a form to which such Durus Legal Counsel reasonably objects. The
Company shall not submit a request for acceleration of the effectiveness of any
such Registration Statement or any amendment or supplement thereto without the
prior approval of Durus Legal Counsel, which consent shall not be unreasonably
withheld. The Company shall furnish to Durus Legal Counsel, without charge, (i)
copies of any correspondence from the SEC or the staff of the SEC to the Company
or its representatives relating to any such Registration Statement, (ii)
promptly after the same is prepared and filed with the SEC, one copy of any such
Registration Statement and any amendment(s) thereto, including financial
statements and schedules, all documents incorporated therein by reference, if
requested by an Investor, and all exhibits and (iii) upon the effectiveness of
any such Registration Statement, one copy of the prospectus included in such
Registration Statement and all amendments and supplements thereto. The Company
shall reasonably cooperate with Durus Legal Counsel in performing the Company's
obligations pursuant to this Section 3.

          (B) To the extent applicable, the Company shall (A) permit Artal Legal
Counsel to review and comment upon (i) a Registration Statement cover the Artal
Shares at least five (5) Business Days prior to its filing with the SEC (and for
at least two (2) Business Days after any final, material changes are made to any
draft thereof) (provided that the Filing Deadline shall be extended by the time
taken by Artal Legal Counsel beyond such specified periods in exercising its
right to review such Registration Statement pursuant to this Section 3) and (ii)
all

                                       8

<Page>

amendments and supplements to such Registration Statement within a reasonable
number of days prior to their filing with the SEC, and (B) not file any such
Registration Statement or amendment or supplement thereto in a form to which
Artal Legal Counsel reasonably objects. The Company shall not submit a request
for acceleration of the effectiveness of such Registration Statement or any
amendment or supplement thereto without the prior approval of Artal Legal
Counsel, which consent shall not be unreasonably withheld. The Company shall
furnish to Artal Legal Counsel, without charge, (i) copies of any correspondence
from the SEC or the staff of the SEC to the Company or its representatives
relating to any such Registration Statement, (ii) promptly after the same is
prepared and filed with the SEC, one copy of any such Registration Statement and
any amendment(s) thereto, including financial statements and schedules, all
documents incorporated therein by reference, if requested by an Investor, and
all exhibits and (iii) upon the effectiveness of any such Registration
Statement, one copy of the prospectus included in such Registration Statement
and all amendments and supplements thereto. The Company shall reasonably
cooperate with Artal Legal Counsel in performing the Company's obligations
pursuant to this Section 3.

     3.3  COPIES OF REGISTRATION STATEMENTS.

     To the extent applicable, the Company shall furnish to each Investor whose
Registrable Securities are included in any Registration Statement, without
charge, (i) promptly after the same is prepared and filed with the SEC, at least
one copy of any Registration Statement and any amendment(s) thereto, including
financial statements and schedules, all documents incorporated therein by
reference, if requested by the Investor, all exhibits and each preliminary
prospectus, (ii) upon the effectiveness of any Registration Statement, one (1)
copy of the prospectus included in such Registration Statement and all
amendments and supplements thereto (or such other number of copies as such
Investor may reasonably request) and (iii) such other documents, including
copies of any preliminary or final prospectus, as such Investor may reasonably
request from time to time in order to facilitate the disposition of the
Registrable Securities owned by such Investor.

     3.4  "BLUE SKY" LAWS.

     The Company shall use its reasonable best efforts to (i) register and
qualify, unless an exemption from registration and qualification applies, the
resale by Investors of the Registrable Securities covered by a Registration
Statement and the issuance of the Warrant Shares upon exercise of the Warrants
under such other securities or "blue sky" laws of all applicable jurisdictions
in the United States, (ii) prepare and file in those jurisdictions, such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions, including preparing and filing new registrations and qualifications in
applicable jurisdictions, as may be necessary to maintain such registrations and
qualifications in effect at all times during the Registration Period, and (iv)
take all other actions reasonably necessary or advisable to qualify the
Registrable Securities for sale in such jurisdictions; provided, however, that
the Company shall not be required in connection therewith or as a condition
thereto to (x) qualify to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Section 3.4, (y) subject itself to
general taxation in any such jurisdiction, or (z) file a general consent to
service of process in any such jurisdiction. The

                                       9

<Page>

Company shall promptly notify each Investor who holds Registrable Securities and
the Legal Counsel for such Investor pursuant to Section 2.2 of the receipt by
the Company of any notification with respect to the suspension of the
registration or qualification of such Registrable Securities for sale under the
securities or "blue sky" laws of any jurisdiction in the United States or its
receipt of actual notice of the initiation or threatening of any proceeding for
such purpose.

     3.5  NOTICE OF CERTAIN EVENTS.

     The Company shall notify each Investor (and such Investor's Legal Counsel
pursuant to Section 2.2) in writing of the happening of any event, as promptly
as practicable after becoming aware of such event, as a result of which (i) the
prospectus included in a Registration Statement covering such Investor's
Registrable Securities includes an untrue statement of a material fact or
omission 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 (provided that in no event shall such notice contain
any material, nonpublic information), or (ii) the representations and warranties
made by the Company herein or in connection with a Registration Statement cease
to be true and correct in all material respects, and in each such case, subject
to Section 3.19, promptly prepare a supplement or amendment to such Registration
Statement to correct such untrue statement or omission and deliver one (1) copy
of such supplement or amendment to such Legal Counsel and each Investor (or such
other number of copies as such Legal Counsel or such Investor may reasonably
request). The Company shall also promptly notify such Legal Counsel and each
Investor in writing (i) when a prospectus or any prospectus supplement or
post-effective amendment has been filed, and when a Registration Statement or
any post-effective amendment has become effective (notification of such
effectiveness shall be delivered to such Legal Counsel and each Investor by
facsimile or e-mail on the same day of such effectiveness and by overnight
mail), (ii) of any request by the SEC for amendments or supplements to a
Registration Statement or related prospectus or related information, and (iii)
of the Company's reasonable determination that a post-effective amendment to a
Registration Statement would be appropriate.

     3.6  STOP ORDERS AND INEFFECTIVENESS OF REGISTRATION STATEMENT

          (A) The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
or the suspension of the qualification of any of the Registrable Securities for
sale in any jurisdiction and, if such an order or suspension is issued, to
obtain the withdrawal of such order or suspension at the earliest possible
moment and to notify each Investor who holds Registrable Securities being sold
pursuant to such Registration Statement and such Investor's Legal Counsel
pursuant to Section 2.2 of the issuance of such order and the resolution thereof
or its receipt of actual notice of the initiation or threat of any proceeding
for such purpose.

          (B) If a Registration Statement ceases to be effective for more than
30 days for any reason at any time during the Registration Period, the Company
shall file with the SEC an additional Registration Statement (the "Subsequent
Registration Statement") covering all of the Registrable Securities not sold
under the Registration Statement that has ceased to be effective (the "Initial
Registration Statement"). If a Subsequent Registration Statement is filed with
the SEC, the Company shall use reasonable best efforts to cause the Subsequent
Registration

                                       10

<Page>

Statement to be declared effective by the SEC as soon as practicable after such
filing and to keep such Subsequent Registration Statement continuously effective
for the duration of the Registration Period in accordance with the terms of this
Agreement.

     3.7  INELIGIBILITY FOR FORM S-3.

     In the event that Form S-3 is not available for the continued registration
of the resale of Registrable Securities hereunder or the issuance of the Warrant
Shares upon exercise of the Warrants, the Company shall (i) register the resale
of the Registrable Securities and the issuance of the Warrant Shares on another
appropriate form reasonably acceptable to holders of a majority in interest of
the Registrable Securities prior to the time at which such Form S-3 will no
longer be available for such continued registration or, if later, as soon as
practicable following the determination by the Company's outside legal counsel
that such Form S-3 is no longer available for such continued registration, and
(ii) undertake to register such Registrable Securities and Warrant Shares on
Form S-3 as soon as such form is available, provided that the Company shall
maintain the effectiveness of the Registration Statement then in effect until
such time as a Registration Statement on Form S-3 covering the Registrable
Securities has been declared effective by the SEC. Notwithstanding the
foregoing, the Company shall use its best efforts to take any actions reasonably
necessary to maintain its eligibility to use Form S-3 to permit the resale of
the Registrable Securities and the issuance of the Warrant Shares.

     3.8  SUFFICIENT NUMBER OF SHARES REGISTERED.

     In the event the number of shares available under a Registration Statement
is insufficient to cover all of the Registrable Securities required to be
covered by such Registration Statement, the Company shall amend the applicable
Registration Statement, or file a new Registration Statement (on the short form
available therefor, if applicable), or both, so as to cover all of such
Registrable Securities as of the trading day immediately preceding the date of
the filing of such amendment or new Registration Statement. Such amendment or
new Registration Statement shall be filed as soon as practicable, but in any
event not later than fifteen (15) days after the necessity therefor arises. The
Company shall use its reasonable best efforts to cause such amendment and/or new
Registration Statement to become effective as soon as practicable following the
filing thereof. The calculation set forth above in this Section 3.8 shall be
made without regard to any limitations on the conversion of the Initial
Preferred Shares or Additional Preferred Shares or the exercise of the Warrants,
and such calculation shall assume that the Initial Preferred Shares and the
Additional Preferred Shares are then convertible into shares of Common Stock at
the then prevailing conversion rate of such shares and that the Warrants are
then exercisable for shares of Common Stock at the then prevailing exercise
price therein.

     3.9  UNDERWRITER STATUS AND RELATED MATTERS.

          (A) At the reasonable request of any Existing Investor, or at the
reasonable request of any other Investor that may be required under applicable
securities laws to be described in the Registration Statement as an underwriter,
the Company shall furnish to such Investor, on the date of the effectiveness of
the Registration Statement and thereafter from time to time on such dates as an
Investor may reasonably request (i) a letter, dated such date, from the
Company's independent certified public accountants in form and substance as is
customarily

                                       11

<Page>

given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the Investor, and (ii) an opinion,
dated as of such date, of counsel representing the Company for purposes of such
Registration Statement, in customary form, scope and substance for similar
offerings, addressed to the Investors.

          (B) At the reasonable request of any Existing Investor, or at the
reasonable request of any other Investor that may be required under applicable
securities laws to be described in the Registration Statement as an underwriter,
the Company shall make available for inspection by (i) such Investor, (ii) such
Investor's Legal Counsel pursuant to Section 2.2 and (iii) one firm of
accountants or other agents retained by the Investors (collectively, the
"Inspectors"), all pertinent financial and other records, and pertinent
corporate documents and properties of the Company (collectively, the "Records"),
as shall be reasonably deemed necessary by each Inspector, and cause the
Company's officers, directors and employees to supply all information which any
Inspector may reasonably request; provided, however, that each Inspector shall
agree in writing to hold in strict confidence and not to make any disclosure
(except to such Investor) or use of any Record or other information which the
Company determines in good faith to be confidential, and of which determination
the Inspectors are so notified, unless (a) the disclosure of such Records is
necessary to avoid or correct a misstatement or omission in any Registration
Statement or is otherwise required under the 1933 Act, (b) the release of such
Records is ordered pursuant to a final, non-appealable subpoena or order from a
court or government body of competent jurisdiction, or (c) the information in
such Records has been made generally available to the public other than by
disclosure in violation of this or any other agreement of which the Inspector
has knowledge. Each Investor agrees that it shall, upon learning that disclosure
of such Records is sought in or by a court or governmental body of competent
jurisdiction or through other means, give prompt notice to the Company and allow
the Company, at its expense, to undertake appropriate action to prevent
disclosure of, or to obtain a protective order for, the Records deemed
confidential. Nothing herein (or in any other confidentiality agreement between
the Company and any Investor) shall be deemed to limit the Investors' ability to
sell Registrable Securities in a manner which is otherwise consistent with
applicable laws and regulations.

          (C) Any underwriters and broker-dealers entering into underwriting or
distribution agreements with the Existing Investors in connection with any
Registration Statement or sale, transfer or other distribution in connection
therewith may be selected only by the Existing Investors, subject to approval by
the Company, which shall not be unreasonably withheld. The Company agrees that
it shall enter into such underwriting or distribution agreement, provided the
terms of such agreement are commercially reasonable.

     3.10 DISCLOSURE OF INFORMATION CONCERNING INVESTORS.

     The Company shall hold in confidence and not make any disclosure of
information concerning an Investor provided to the Company unless (i) disclosure
of such information is necessary to comply with federal or state securities
laws, (ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is ordered pursuant to a subpoena or other final,
non-appealable order from a court or governmental body of competent
jurisdiction, or (iv) such information has been made generally available to the
public other than by disclosure in violation

                                       12

<Page>

of this Agreement or any other agreement. The Company agrees that it shall, upon
learning that disclosure of such information concerning an Investor is sought in
or by a court or governmental body of competent jurisdiction or through other
means, give prompt written notice to such Investor and allow such Investor, at
the Investor's expense, to undertake appropriate action to prevent disclosure
of, or to obtain a protective order for, such information.

     3.11 LISTING OF REGISTRABLE SECURITIES.

     The Company shall use its best efforts either to (i) cause all of the
Registrable Securities covered by a Registration Statement to be listed on each
securities exchange on which securities of the same class or series issued by
the Company are then listed, if any, if the listing of such Registrable
Securities is then permitted under the rules of such exchange, or (ii) secure
designation and quotation of all of the Registrable Securities covered by a
Registration Statement on the NASDAQ National Market or NASDAQ Capital Market,
or (iii) if, despite the Company's best efforts to satisfy the preceding clause
(i) or (ii) the Company is unsuccessful in satisfying the preceding clause (i)
or (ii), to secure the inclusion for quotation on the OTC Bulletin Board for
such Registrable Securities and, without limiting the generality of the
foregoing, to use its best efforts to arrange for at least two market makers to
register with the National Association of Securities Dealers, Inc. ("NASD") as
such with respect to such Registrable Securities. The Company shall pay all fees
and expenses in connection with satisfying its obligation under this Section
3.11.

     3.12 UNLEGENDED CERTIFICATES.

     To the extent applicable, the Company shall cooperate with the Investors
who hold Registrable Securities being offered and, to the extent applicable,
facilitate the timely preparation and delivery of certificates (not bearing any
restrictive legend) representing the Registrable Securities to be offered
pursuant to a Registration Statement and enable such certificates to be in such
denominations or amounts, as the case may be, as the Investors may reasonably
request and registered in such names as the Investors may request.

     3.13 TRANSFER OF REGISTRABLE SECURITIES.

     If requested by an Investor, the Company shall as soon as practicable after
receipt of notice from such Investor and subject to Section 3.19 hereof, (i)
incorporate in a prospectus supplement or post-effective amendment such
information as an Investor reasonably requests to be included therein relating
to the sale and distribution of Registrable Securities, including, without
limitation, 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 of the Registrable Securities to be sold in such offering;
(ii) make all required filings of such prospectus supplement or post-effective
amendment after being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment; and (iii) supplement or make
amendments to any Registration Statement if reasonably requested by an Investor
holding any Registrable Securities.

                                       13

<Page>

     3.14 GOVERNMENTAL AGENCIES.

     The Company shall use its best efforts to cause the Registrable Securities
covered by a Registration Statement to be registered with or approved by such
other governmental agencies or authorities as may be necessary to consummate the
disposition of such Registrable Securities.

     3.15 DELIVERY OF EARNINGS STATEMENT.

     The Company shall make generally available to its security holders as soon
as practical, but not later than ninety (90) days after the close of the period
covered thereby, an earnings statement (in form complying with, and in the
manner provided by, the provisions of Rule 158 under the 1933 Act) covering a
twelve-month period beginning not later than the first day of the Company's
fiscal quarter next following the effective date of the Registration Statement.

     3.16 COMPLIANCE WITH LAWS.

     The Company shall otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC in connection with any registration
hereunder.

     3.17 CONFIRMATION.

     To the extent applicable, within two (2) Business Days after a Registration
Statement which covers Registrable Securities is ordered effective by the SEC,
the Company shall deliver, and shall cause legal counsel for the Company to
deliver, to the transfer agent for such Registrable Securities (with copies to
the Investors whose Registrable Securities are included in such Registration
Statement) confirmation that such Registration Statement has been declared
effective by the SEC.

     3.18 REPORTS UNDER THE 1934 ACT.

     With a view to making available to the Investors the benefits of Rule 144
promulgated under the 1933 Act or any other similar rule or regulation of the
SEC that may at any time permit the Investors to sell securities of the Company
to the public without registration ("Rule 144"), the Company agrees to:

          (A) make and keep public information available, as those terms are
understood and defined in Rule 144;

          (B) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1933 Act and the 1934 Act so long as
the Company remains subject to such requirements (it being understood that
nothing herein shall limit the Company's obligations under Section 4.2 of the
Purchase Agreement) and the filing of such reports and other documents is
required for the applicable provisions of Rule 144; and

          (C) furnish to each Investor so long as such Investor owns Registrable
Securities, promptly upon request, (i) a written statement by the Company, if
true, that it has complied with the reporting requirements of Rule 144, the 1933
Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report
of the Company and such other reports and

                                       14

<Page>

documents so filed by the Company, and (iii) such other information as may be
reasonably requested to permit the Investors to sell such securities pursuant to
Rule 144 without registration.

     3.19 BLACKOUT PERIOD.

     Notwithstanding anything to the contrary herein, at any time after a
Registration Statement has been declared effective by the SEC, the Company may
delay the disclosure of material, non-public information concerning the Company
the disclosure of which at the time is not, in the good faith opinion of the
Board (as defined in Section 7.1), in the best interest of the Company and, in
the opinion of counsel to the Company, otherwise required (a "Grace Period");
provided, that the Company shall promptly (i) notify the Investors in writing of
the existence of material, non-public information giving rise to a Grace Period
(provided that in each notice the Company will not disclose the content of such
material, non-public information to the Investors) and the date on which the
Grace Period will begin, and (ii) notify the Investors in writing of the date on
which the Grace Period ends; and, provided further, that no Grace Period shall
exceed thirty (30) consecutive days and during any three hundred sixty five
(365) day period such Grace Periods shall not exceed an aggregate of
seventy-five (75) days and the first day of any Grace Period must be at least
five (5) trading days after the last day of any prior Grace Period (each, an
"Allowable Grace Period"). For purposes of determining the length of a Grace
Period above, the Grace Period shall begin on and include the date the Investors
receive the notice referred to in clause (i) and shall end on and include the
later of the date the Investors receive the notice referred to in clause (ii)
and the date referred to in such notice. The provisions of Section 3.6(a) hereof
shall not be applicable during the period of any Allowable Grace Period. Upon
expiration of the Grace Period, the Company shall again be bound by the first
sentence of Section 3.5 with respect to the information giving rise thereto
unless such material, non-public information is no longer applicable.

4.   OBLIGATIONS OF THE INVESTORS.

          (A) At least seven (7) Business Days prior to the first anticipated
filing date of a Registration Statement, the Company shall notify each Investor
in writing of the information the Company requires from each such Investor if
such Investor elects to have any of such Investor's Registrable Securities
included in such Registration Statement. It shall be a condition precedent to
the obligations of the Company to complete the registration pursuant to this
Agreement with respect to the Registrable Securities of a particular Investor
that such Investor shall furnish to the Company such information regarding
itself, the Registrable Securities held by it and the intended method of
disposition of the Registrable Securities held by it, as shall be reasonably
required to effect and maintain the effectiveness of the registration of such
Registrable Securities and shall execute such documents in connection with such
registration as the Company may reasonably request.

          (B) Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of any Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from such Registration Statement.

                                       15

<Page>

          (C) Each Investor agrees that, upon receipt of any notice from the
Company of the happening of any event of the kind described in Sections 3.6(a)
or 3.19 or the first sentence of Section 3.5, such Investor will immediately
discontinue disposition of Registrable Securities pursuant to any Registration
Statement(s) covering such Registrable Securities until such Investor's receipt
of the copies of the supplemented or amended prospectus contemplated by Section
3.6(a) or the first sentence of Section 3.5 or receipt of notice that no
supplement or amendment is required. Notwithstanding anything to the contrary,
the Company shall cause its transfer agent to deliver unlegended shares of
Common Stock to a transferee of an Investor in accordance with the terms of the
Purchase Agreement in connection with any sale of Registrable Securities with
respect to which an Investor has entered into a contract for sale prior to the
Investor's receipt of a notice from the Company of the happening of any event of
the kind described in Section 3.6(a) or the first sentence of Section 3.5 and
for which the Investor has not yet settled.

5.   EXPENSES OF REGISTRATION.

     All reasonable expenses, other than underwriting discounts and commissions,
incurred in connection with registrations, filings or qualifications pursuant to
Sections 2 and 3, including, without limitation, all registration, listing and
qualifications fees, printers and accounting fees, and fees and disbursements of
counsel for the Company shall be paid by the Company. The Company shall also
reimburse the Existing Investors for the fees and disbursements of Legal Counsel
in connection with registration, filing or qualification pursuant to Sections 2
and 3 of this Agreement. In addition, the Company shall pay the Existing
Investors' reasonable costs (include legal fees) incurred in connection with the
successful enforcement of the Existing Investors' rights hereunder.

6.   ASSIGNMENT OF REGISTRATION RIGHTS.

     The rights under this Agreement to cause the Company to register
Registrable Securities pursuant to Sections 1 through 4 of this Agreement shall
be automatically assignable by any Investor to any transferee of all or any
portion of such Investor's Registrable Securities if: (i) such Investor agrees
in writing with the transferee or assignee to assign such rights, and a copy of
such agreement is furnished to the Company; (ii) the Company is furnished with
written notice of (a) the name and address of such transferee or assignee, and
(b) the securities with respect to which such registration rights are being
transferred or assigned; (iii) the transferee or assignee agrees in writing with
the Company to be bound by the provisions contained herein to the same extent as
such Investor; and (iv) such transfer shall have been conducted in accordance
with all applicable federal and state securities laws.

7.   COMPANY BOARD OF DIRECTORS

     7.1  BOARD REPRESENTATION.

     The Company shall take all corporate action necessary to appoint to the
Board of Directors of the Company (the "Board"), promptly upon the Initial
Closing of the sale of the Initial Securities to Durus pursuant to the Purchase
Agreement, four individuals designated by Durus (each, an "Investor Designee"),
one of which shall also be designated to serve as the

                                       16

<Page>

Chairman of the Board. Subject to Section 7.5 hereof, from and after the Initial
Closing, Durus shall have the continuing right to designate such number of
Investor Designees as necessary to constitute a majority of the members of the
Board and to designate the Chairman of the Board. Each Investor Designee shall
serve until the annual meeting of the Company's stockholders at which the term
of the class to which such Investor Designee has been appointed expires, and
until his or her respective successor is elected and qualified or until his or
her earlier death, resignation or removal from office. Unless Durus advises the
Board in writing of one or more replacement Investor Designees for the Company's
next annual or special meeting of stockholders at which directors are elected
and the term of one or more of the Investor Designees expires, then the Investor
Designee(s) for any such meeting shall be deemed to be the incumbent Investor
Designee(s). Such written notice by Durus shall be provided to the Board at
least seven (7) days prior to the date of the filing with the SEC of the proxy
statement relating to such meeting. The Company shall provide to Durus in
writing the filing date of such proxy statement at least thirty (30) days prior
to such filing date.

     7.2  EXECUTIVE COMMITTEE.

     At the Initial Closing, an executive committee of the Board (the "Executive
Committee") comprised of three directors shall be created and the Company shall
take all actions so that three Investor Designees are appointed to serve on the
Executive Committee. The Chief Executive Officer of the Company shall serve as
an advisory member of the Executive Committee. The Executive Committee shall
have and may exercise all the powers and authority of the Board in the
management of the business and affairs of the Company when (a) the Executive
Committee reasonably determines that action on a particular matter requires
immediate attention and that a meeting of the whole Board could not be arranged
within the period of time required to fully address such matter or (b) the
Executive Committee is otherwise prescribed such power with respect to one or
more matters by resolution of the whole Board; provided, however, that the
Executive Committee shall not have any power or authority over matters which by
law need whole Board approval or approval of the Audit Committee, Compensation
Committee or Nominating Committee of the Board. The affirmative vote of a
majority of the members of the Executive Committee must approve a particular
matter for it to be the act of the Executive Committee. If the affirmative vote
of a majority of the members of the Executive Committee on a particular matter
submitted to the Executive Committee for approval cannot be obtained, such
matter shall be submitted to the whole Board for approval. Notwithstanding the
foregoing, whole Board approval shall be required to approve (i) any operating
or capital expenditure or series of related expenditures exceeding $1,000,000,
unless such expenditure or expenditures were specifically approved by the Board
as a part of the Company's annual budget, (ii) the nomination of members for
election to the Board upon the recommendation of the Nominating Committee, and
(iii) transactions between the Company, on the one hand, and Durus or any
Affiliate of Durus, on the other hand. Written or printed notice stating the
place, day and hour of any meeting of the Executive Committee and the purpose or
purposes for which the meeting is called shall be delivered to each member of
the Executive Committee so that it is received by such member not less than one
day before the date of the meeting. Any action required or permitted to be taken
at a meeting of the Executive Committee may be taken without a meeting if a
consent in writing, setting forth the action so taken, is signed by all the
members of the Executive Committee.

                                       17

<Page>

     7.3 OTHER COMMITTEES.

     At the Initial Closing, the Company shall take all necessary action so that
the Investor Designees selected by Durus are appointed to serve as members
constituting at least a majority of each other committee of the Board, including
the Audit Committee, the Compensation Committee and the Nominating Committee,
subject to applicable law and NASDAQ requirements.

     7.4 CERTAIN OFFICERS.

     Subject to Section 7.5 hereof, at and after the Initial Closing, the
Company shall not, without the approval of Durus, make any nominations of
individuals for election to the offices of Chief Executive Officer and Chief
Financial Officer of the Company.

     7.5 CONTINUATION OF RIGHTS.

          (A) So long as Durus Beneficially Owns at least fifty percent (50%) or
more of the Company's outstanding shares of Common Stock (including shares owned
by Durus prior to the Initial Closing), (A) Durus shall be entitled to, in
accordance with the provisions hereof, (i) designate such number of Investor
Designees as necessary to constitute a majority of the members of the Board,
(ii) designate three Investor Designees to serve on the Executive Committee, and
(iii) designate Investor Designees to serve as members constituting a majority
of the members of each other committee of the Board, and (B) the Company shall
not, without Durus' approval, (i) appoint or designate a person to serve as the
Chairman of the Board or (ii) nominate the Chief Executive Officer and the Chief
Financial Officer.

          (B) As long as Durus is entitled to designate Investor Designees in
accordance with this Section 7, the Company agrees to continue to cause such
Investor Designees (or their respective successors designated by Durus) to be
nominated for election to the Board at each annual or special meeting of
stockholders at which directors are elected after the Initial Closing when the
term of office of any Investor Designee expires. To the extent the Company's
proxy statement for any meeting of stockholders includes a recommendation
regarding the election of any other nominees to the Board, the Company agrees to
include a recommendation that the stockholders also vote in favor of the
Investor Designee(s) that are nominated for election to the Board in accordance
with this Section 7.

     7.6 VACANCIES.

     If, following an election or appointment to the Board or committee thereof
pursuant to this Section 7, any Investor Designee shall resign or be removed or
be unable to serve for any reason prior to the expiration of his or her term as
a director of the Company, a member of the Executive Committee and any other
applicable committee, then Durus shall have the right to fill such vacancy with
a replacement Investor Designee, and the Company shall cause such replacement
Investor Designee to be appointed to the Board and the Executive Committee and
any other applicable committee to fill the unexpired term of the Investor
Designee who such new Investor Designee is replacing.

                                       18

<Page>

     7.7 COSTS AND EXPENSES.

     The Investor Designees shall be entitled to receive the same compensation
and reimbursement of expenses, and to participate in the same benefit and
incentive plans, as the Company provides members of the Board generally and, to
the extent applicable to such Investor Designee, non-employee members of the
Board generally. In addition, the Company will pay all reasonable out-of-pocket
expenses incurred by Investor Designees in connection with their participation
in meetings of the Board (and committees thereof) and the Boards of Directors
(and committees thereof) of the subsidiaries of the Company.

     7.8 DIRECTORS' INDEMNIFICATION.

          (A) The Corporation shall obtain and cause to be maintained in effect,
with financially sound insurers, a policy of directors and officers' liability
insurance in such amount and upon such terms as are reasonably acceptable to
Durus until at least six years following the date on which (i) Durus is no
longer entitled to nominate a director pursuant to Section 7.5 and (ii) no
Investor Designees serve as directors of the Company.

          (B) The Company's Restated Certificate of Incorporation ("Certificate
of Incorporation") or Amended and Restated By-Laws ("By-Laws"), or both, shall
to the fullest extent permitted by law provide for indemnification of, and
advancement of expenses to, and limitation of the personal liability of, (i)
Durus and the Investor Designees for, in each case, the actions of such
Investors Designees as directors of the Company, and (ii) the other directors of
the Company for their actions as directors of the Company, which provisions
shall not be amended, repealed or otherwise modified in any manner adverse to
the directors until at least six years following the date on which (i) Durus is
no longer entitled to nominate a director pursuant to Section 7.5 and (ii) no
Investor Designees serve as directors of the Company.

     7.9 SERIES B PREFERRED DIRECTOR.

     Notwithstanding anything herein to the contrary, the Company and the Board
shall approve of and shall take all actions as may be necessary to elect the
director that the holders of the Series B Preferred Stock of the Company are
entitled to cause the nomination and election of pursuant to Article III.5(b) of
the Certificate of Designation. In addition, for so long as Durus or its
Affiliates own at least fifty percent (50%) of the outstanding shares of Series
B Preferred Stock and the holders of Series B Preferred Stock of the Company are
entitled to elect a director pursuant to Article III.5(b) of the Certificate of
Designation, (i) one of the Investor Designees shall be the director elected by
the holders of the Series B Preferred Stock pursuant to Article III.5(b) of the
Certificate of Designation, and (ii) Durus or its Affiliates, as the case may
be, shall have the right to designate such Investor Designee elected by the
holders of the Series B Preferred Stock as a member of any or all committees of
the Board, subject to applicable law and NASDAQ requirements.

     7.10 CERTIFICATE OF INCORPORATION; BY-LAWS.

     To the fullest extent permitted by law, the Company shall ensure that the
Company's Certificate of Incorporation and By-Laws as in effect immediately
following the Initial Closing do not, at any time thereafter, conflict in any
respect with the provisions of this Agreement. In

                                       19

<Page>

addition, the Company agrees that it will not amend its By-Laws or adopt a
resolution in accordance with its By-Laws to change the size of the Board to a
size other than seven members without the approval of a majority of the Investor
Designees.

     7.11 PERFORMANCE

     Notwithstanding anything to the contrary set forth in this Section 7, the
Board shall be entitled to act in accordance with its fiduciary obligations to
the Company under applicable law, and shall be entitled to take such actions as
are necessary to comply with applicable law, with respect to the performance of
the Company's obligations under this Agreement

8. COVENANTS OF THE COMPANY

     8.1 INSPECTION.

          (A) The Company shall permit each Existing Investor holding any shares
of Registrable Securities, at such Existing Investor's expense, to visit and
inspect the Company's properties, to examine its books of account and records
and to discuss the Company's affairs, finances and accounts with its officers,
all at such reasonable times as may be reasonably requested by the Existing
Investor; provided, however, that the Company shall not be obligated pursuant to
this Section 8.1 to provide access to any information that it reasonably
considers to be a trade secret or similar confidential information, unless such
Existing Investor executes a confidentiality and nondisclosure agreement prior
to any such visit and inspection.

          (B) The Company shall provide Durus at least five (5) Business Days'
notice of any regular meeting of the Board and, if requested by Durus, the
agenda items for such meeting.

     8.2 DELIVERY OF FINANCING STATEMENTS AND OTHER REPORTS.

     The Company shall deliver to Durus the following:

          (A) Unless filed with the SEC through the EDGAR system and available
to the public through the EDGAR system, within one (1) Business Day after the
filing thereof with the SEC, a copy of its Annual Reports and Quarterly Reports
on Form 10-K, 10-KSB, 10-Q or 10-QSB, any interim reports or any consolidated
balance sheets, income statements, shareholders' equity statements and/or cash
flow statements for any period, any Current Reports on Form 8-K and any
registration statements (other than on Form S-8) or amendments filed pursuant to
the Securities Act, which Annual Reports shall be accompanied by a report and
opinion thereon of a firm of independent certified public accountants of
recognized national standing;

          (B) As soon as available and in any event not later than 30 days prior
to the end of each fiscal year of the Company, a budget approved by the Board,
prepared on a monthly and quarterly basis, such budget to be prepared in
accordance with U.S. generally accepted accounting principles, consistently
applied ("GAAP"), and on a fair and reasonable basis and in good faith, and to
be based on estimates and assumptions believed by the Company to be fair and
reasonable as of the time made and from the best information then available to
the Company in the light of the current and reasonably foreseeable business
conditions; and

                                       20

<Page>

          (C) Promptly from time to time, such other information relating to the
financial condition, business, prospects or corporate affairs of the Company as
Durus may from time to time reasonably request, or promptly after transmission
or occurrence (but in any event within 10 days) other reports, press releases
and non-routine communications with stockholders or the financial community
generally, any reports filed by the Company or its officers, directors and
representatives with any securities exchange or the SEC and notice of any event
which would have a material adverse effect on the Company's results of
operations, business, prospects or financial condition or on Durus' investment,
provided, however, that the Company shall not be obligated under this Section
8.2(c) to provide information that it deems in good faith to be a trade secret
or similar confidential information, and provided, further, that the Company may
require Durus to execute a confidentiality and nondisclosure agreement prior to
disclosure of any information.

     8.3 RIGHT OF FIRST REFUSAL UPON SALE OF COMPANY.

          (A) Before the Company proposes to sell the Company or greater than
thirty percent (30%) of the fully diluted capital stock of the Company (the
"Offered Shares") to a third party (a "Proposed Acquirer") or the Company
otherwise accepts a bona fide offer from a Proposed Acquirer to acquire the
Company or the Offered Shares, whether such sale or acquisition is by sale of
stock, merger, sale of substantially all of the Company's assets or otherwise,
the Company shall transmit such proposal or offer (the "Offer Notice") to Durus
who shall have the right, as described herein, to acquire the Company or the
Offered Shares on terms and conditions, including price, at least as favorable
to Durus as the terms and conditions applying to the Proposed Acquirer. The
Offer Notice shall disclose the identity of the Proposed Acquirer, the terms and
conditions, including price, of the proposed sale, and any other material facts
relating to the proposed sale. If the consideration is readily marketable, the
fair market value thereof shall be determined on the date of the Offer.
Otherwise, the value shall be determined by mutual agreement of the Company and
Durus, and, if no agreement is reached, then the value shall be determined by a
third party mutually agreeable to the Company and Durus. Notwithstanding the
foregoing, the rights described in this Section 8.3(a) shall not apply to any
transaction in which the Company will acquire another business entity, by merger
or otherwise, and in which the stockholders of the Company immediately prior to
the acquisition will hold a majority of the voting securities of the resulting
entity immediately after the acquisition.

          (B) If Durus elects to purchase the Offered Shares, Durus shall
communicate such election in writing ("Written Election") to the Company within
thirty (30) days of the date that Durus received the Offer Notice. The Written
Election shall, when taken in conjunction with the Offer Notice, be deemed to
constitute a valid, legally binding and enforceable agreement for the sale and
purchase of such Offered Shares. The closing of the sale of the Offered Shares
to Durus pursuant to this Section 8.3 shall be made at the offices of the
Company on the thirtieth (30th) day following receipt by the Company of the
Written Election (or if such 30th day is not a Business Day, then on the next
succeeding Business Day).

          (C) If the Company has not received a Written Election from Durus
within thirty (30) days of the date that Durus receives the Offer Notice, or if
at any time during that period Durus indicates in writing its decision not to
purchase the Offered Shares, the Company

                                       21

<Page>

may accept the offer of the Proposed Acquirer. Any such sale shall be to the
Proposed Acquirer at not less than the price, and upon other terms and
conditions, if any, not more favorable to the Proposed Acquirer than those
specified in the Offer Notice. In the event the Company has not sold the Offered
Shares within ninety (90) days of the date of the Offer Notice, the Company
shall not thereafter sell the Offered Shares without first offering such Offered
Shares to Durus in the manner provided in this Section 8.3.

     8.4 NOTICE OF LITIGATION

     The Company will provide notice to each Existing Investor upon the filing
of any material action, suit or proceeding by or against the Company.

     8.5 PRESERVATION OF EXISTENCE, ETC.

     The Company will, and will cause each of its subsidiaries to, maintain and
preserve its legal existence, its rights to transact business and all other
rights, franchises and privileges necessary or desirable in the normal course of
its business and operations and the ownership of its properties, and become or
remain, and cause each of its subsidiaries to become or remain, duly qualified
and in good standing in the jurisdiction of its formation and in each
jurisdiction in which the character of the properties owned or leased by it or
in which the transaction of its business makes such qualification necessary.

     8.6 PAYMENT OF TAXES, ETC.

     The Company will promptly pay and discharge, or cause to be paid and
discharged, when due and payable, all lawful taxes, assessments and governmental
charges or levies imposed upon the income, profits, property or business of the
Company or any subsidiary; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided,
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose to be paid
when due, or in conformance with customary trade terms or otherwise in
accordance with policies related thereto adopted by the Board.

     8.7 MAINTENANCE OF INSURANCE.

     The Company will, and will cause each of its subsidiaries to, carry and
maintain in full force and effect, at its own expense and with financially sound
and reputable insurance companies, insurance in such amounts, with such
deductibles and covering such risks as is customarily carried in accordance with
sound business practice by companies engaged in the same or similar businesses
and owning similar properties in the localities where the Company or such
subsidiary operates, and in any event in amount, adequacy and scope satisfactory
to the Board.

                                       22

<Page>

     8.8 KEEPING OF RECORDS AND BOOKS OF ACCOUNT.

     The Company will, and will cause each of its subsidiaries to, keep adequate
records and books of account, in which complete entries will be made in
accordance with GAAP reflecting all financial transactions of the Company and
its subsidiaries.

     8.9 COMPLIANCE WITH REQUIREMENTS OF GOVERNMENTAL AUTHORITIES.

     The Company will, and will cause each of its subsidiaries to, comply with
the requirements of all applicable laws, rules, regulations and orders of any
governmental agency or authority.

     8.10 MAINTENANCE OF PROPERTIES, ETC.

     The Company will, and will cause each of its subsidiaries to, maintain and
preserve all of its properties necessary or useful in the proper conduct of its
business in good working order and condition and otherwise in accordance with
the general practice of other Persons of similar character and size, ordinary
wear and tear excepted.

     8.11 LICENSES.

     The Company will, and will cause each of its subsidiaries to, obtain and
maintain, and to take all action necessary to timely renew, all licenses,
permits, authorizations, consents, filings, exemptions, registrations and other
governmental approvals of any governmental agency or authority necessary in
connection the operation and proper conduct of its business and ownership of its
properties.

     8.12 PROTECTION OF INTELLECTUAL PROPERTY RIGHTS.

     The Company will, and will cause each of its subsidiaries to, protect,
defend and maintain the validity and enforceability of its intellectual
property. The Company shall require all employees and consultants to enter into
the Company's standard form of proprietary information and inventions agreement.

     8.13 RESTRICTIONS ON CERTAIN CORPORATE ACTIONS.

     The Company shall not, and shall not permit any of its subsidiaries to,
directly or indirectly, take any of the following actions without the approval
of the Board, including a majority of the Investor Designees:

          (A) change the size of the Board to a number of directors other than
seven (7) or otherwise alter or change the Company's By-Laws;

          (B) declare or pay dividends or make other distributions on the
capital stock of the Company;

          (C) redeem, purchase or otherwise acquire (or pay into or set aside
for a sinking fund for such purpose) any share or shares of Common Stock or any
series of Preferred

                                       23

<Page>

Stock; provided, however, that this restriction does not apply to the repurchase
of shares of Common Stock from employees, officers, directors, consultants or
other persons performing services for the Company or any subsidiary pursuant to
agreements under which the Company has the option to repurchase such shares at
cost upon the occurrence of certain events, such as the termination of
employment or other provision of services to the Company;

          (D) approve any material change in the Company's principal line of
business or business plan;

          (E) approve or enter into any agreement to which any officer,
director, employee or stockholder of the Company is directly or indirectly a
party or beneficiary (other than the payment of salary or related compensation
in the ordinary course of business or any compensation approved by the
Compensation Committee of the Board), including any employee benefit, bonus or
stock plan if such will provide more benefits than are then provided to such
person;

          (F) grant any individual options in excess of 1% of the issued and
outstanding shares of Common Stock of the Company or change the Company's stock
option plan to increase the number of options thereunder to an amount greater
than 10% of the outstanding shares of Common Stock;

          (G) terminate or approve the hiring or termination of the Company's
Chief Executive Officer or the Chief Financial Officer or any other officer of
equivalent or senior status;

          (H) approve the Company's annual and periodic budgets and business
plans;

          (I) incur any indebtedness in excess of $500,000 individually or
$2,000,000 in the aggregate

          (J) enter into any agreement, contract or other financial commitment
in excess of $1,000,000 individually or in the aggregate;

          (K) permit to exist any mortgage, deed of trust, pledge, security
interest, assignment, charge, encumbrance, lien or other type of preferential
arrangement on any property of the Company with a value in excess of $1,000,000;

          (L) effect any transaction described in Section 2(b) of the Company's
Certificate of Designation, or effect any reclassification or recapitalization
of the outstanding capital stock of the Company; and

          (M) issue any press releases or marketing materials or make any other
written public announcement or disclosure concerning the Company, except where
not practicable if immediate disclosure is required under applicable law.

                                       24

<Page>

     8.14 TERMINATION OF CERTAIN COVENANTS.

     Sections 8.3 through 8.14 of this Agreement shall terminate and be of no
further force or effect at such time at which Durus Beneficially Owns less than
fifty percent (50%) or more of the Company's outstanding shares of Common Stock.

9. INDEMNIFICATION.

     In the event any Registrable Securities are included in a Registration
Statement under this Agreement:

          (A) To the fullest extent permitted by law, the Company will, and
hereby does, indemnify, hold harmless and defend each Investor, the directors,
officers, stockholders, members, partners, managers, employees, agents,
representatives of, and each Person, if any, who controls any Investor within
the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"),
against any losses, claims, damages, liabilities, judgments, fines, penalties,
charges, costs, reasonable attorneys' fees, amounts paid in settlement or
expenses, joint or several, (collectively, "Claims") incurred in investigating,
preparing or defending any action, claim, suit, inquiry, proceeding,
investigation or appeal taken from the foregoing by or before any court or
governmental, administrative or other regulatory agency, body or the SEC,
whether pending or threatened, whether or not an indemnified party is or may be
a party thereto ("Indemnified Damages"), to which any of them may become subject
insofar as such Claims (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon: (i) any untrue
statement or alleged untrue statement of a material fact in a Registration
Statement or any post-effective amendment thereto or in any filing made in
connection with the qualification of the offering under the securities or other
"blue sky" laws of any jurisdiction in which Registrable Securities are offered
("Blue Sky Filing"), or the omission or alleged omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, not misleading, (iii) any violation or alleged violation by the Company of
the 1933 Act, the 1934 Act, any other law, including, without limitation, any
state securities law, or any rule or regulation thereunder relating to the offer
or sale of the Registrable Securities pursuant to a Registration Statement or
(iv) any violation of this Agreement (the matters in the foregoing clauses (i)
through (iv) being, collectively, "Violations"). Subject to Section 9(c), the
Company shall reimburse the Indemnified Persons, promptly as such expenses are
incurred and are due and payable, for any legal fees or other reasonable
expenses incurred by them in connection with investigating or defending any such
Claim. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9(a): (i) shall not apply to
a Claim by an Indemnified Person arising out of or based upon a Violation which
occurs in reliance upon and in conformity with information furnished in writing
to the Company by such Indemnified Person for such Indemnified Person expressly
for use in connection with the preparation of the Registration Statement or any
such amendment thereof or supplement thereto;

                                       25

<Page>

(ii) shall not be available to the extent such Claim is based on a failure of
the Investor to deliver or to cause to be delivered the prospectus made
available by the Company, including a corrected prospectus, if such prospectus
or corrected prospectus was timely made available by the Company pursuant to
Section 3.3; and (iii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld or delayed. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Indemnified Person and shall survive the transfer of
the Registrable Securities by the Investors pursuant to Section 6.

          (B) In connection with any Registration Statement in which an Investor
is participating, each such Investor agrees to severally and not jointly
indemnify, hold harmless and defend, to the same extent and in the same manner
as is set forth in Section 9(a), the Company, each of its directors, each of its
officers who signs the Registration Statement and each Person, if any, who
controls the Company within the meaning of the 1933 Act or the 1934 Act (each,
an "Indemnified Party"), against any Claim or Indemnified Damages to which any
of them may become subject, under the 1933 Act, the 1934 Act or otherwise,
insofar as such Claim or Indemnified Damages arise out of or are based upon any
Violation, in each case to the extent, and only to the extent, that such
Violation occurs in reliance upon and in conformity with written information
furnished to the Company by such Investor expressly for use in connection with
such Registration Statement; and, subject to Section 9(c), such Investor will
reimburse any legal or other expenses reasonably incurred by an Indemnified
Party in connection with investigating or defending any such Claim; provided,
however, that the indemnity agreement contained in this Section 9(b) and the
agreement with respect to contribution contained in Section 10 shall not apply
to amounts paid in settlement of any Claim if such settlement is effected
without the prior written consent of such Investor, which consent shall not be
unreasonably withheld or delayed; provided further, however, that the Investor
shall be liable under this Section 9(b) for only that amount of a Claim or
Indemnified Damages as does not exceed the net proceeds to such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 6. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 9(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact contained in the
preliminary prospectus was corrected on a timely basis in the prospectus, as
then amended or supplemented.

          (C) Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 9 of notice of the commencement of any action or
proceeding (including any governmental action or proceeding) involving a Claim,
such Indemnified Person or Indemnified Party shall, if a Claim in respect
thereof is to be made against any indemnifying party under this Section 9,
deliver to the indemnifying party a written notice of the commencement thereof,
and the indemnifying party shall have the right to participate in, and, to the
extent the indemnifying party so desires, jointly with any other indemnifying
party similarly noticed, to assume control of the defense thereof with counsel
mutually satisfactory to the indemnifying party and the Indemnified Person or
the Indemnified Party, as the case may be; provided, however, that an
Indemnified Person or Indemnified Party shall have the right to retain its own
counsel with the fees and expenses of not more than one counsel for all such
Indemnified Person or Indemnified

                                       26

<Page>

Party to be paid by the indemnifying party, if (i) in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential differing interests between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or (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 Person or Indemnified Party;
provided further, that the indemnifying party shall not be responsible for the
reasonable fees and expenses of more than one (1) separate legal counsel for all
such Indemnified Persons or Indemnified Parties, respectively. In the case of an
Indemnified Person, legal counsel referred to in the immediately preceding
sentence shall be selected by the Investors holding at least a majority in
interest of the Registrable Securities included in the Registration Statement to
which the Claim relates. The Indemnified Party or Indemnified Person shall
cooperate reasonably with the indemnifying party in connection with any
negotiation or defense of any such action or Claim by the indemnifying party and
shall furnish to the indemnifying party all information reasonably available to
the Indemnified Party or Indemnified Person which relates to such action or
Claim. The indemnifying party shall keep the Indemnified Party or Indemnified
Person fully apprised at all times as to the status of the defense or any
settlement negotiations with respect thereto. No indemnifying party shall be
liable for any settlement of any action, claim or proceeding effected without
its prior written consent, provided, however, that the indemnifying party shall
not unreasonably withhold, delay or condition its consent. No indemnifying party
shall, without the prior written consent of the Indemnified Party or Indemnified
Person, consent to entry of any judgment or enter into any settlement or other
compromise which does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such Indemnified Party or Indemnified Person of a
release from all liability in respect to such Claim or litigation. Following
indemnification as provided for hereunder, the indemnifying party shall be
subrogated to all rights of the Indemnified Party or Indemnified Person with
respect to all third parties, firms or corporations relating to the matter for
which indemnification has been made. The failure to deliver written notice to
the indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 9, except to the
extent that the indemnifying party is prejudiced in its ability to defend such
action.

          (D) No Person involved in the sale of Registrable Securities who is
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) in connection with such sale shall be entitled to
indemnification from any Person involved in such sale of Registrable Securities
who is not guilty of fraudulent misrepresentation.

          (E) The indemnification required by this Section 9 shall be made by
periodic payments of the amount thereof during the course of the investigation
or defense, as and when bills are received or Indemnified Damages are incurred.

          (F) The indemnity agreements contained herein shall be in addition to
(i) any cause of action or similar right of the Indemnified Party or Indemnified
Person against the indemnifying party or others, and (ii) any liabilities the
indemnifying party may be subject to pursuant to the law.

                                       27

<Page>

10. CONTRIBUTION.

     To the extent any indemnification by an indemnifying party is prohibited or
limited by law, the indemnifying party agrees to make the maximum contribution
with respect to any amounts for which it would otherwise be liable under Section
9 to the fullest extent permitted by law; provided, however, that: (i) no
contribution shall be made under circumstances where the maker would not have
been liable for indemnification under the fault standards set forth in Section 9
of this Agreement, (ii) no Person involved in the sale of Registrable Securities
which Person is guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to
contribution from any Person involved in such sale of Registrable Securities who
was not guilty of fraudulent misrepresentation; and (iii) contribution by any
seller of Registrable Securities shall be limited in amount to the net amount of
proceeds received by such seller from the sale of such Registrable Securities
pursuant to such Registration Statement.

11. NO INCONSISTENT AGREEMENTS OR ACTIONS.

     The Company agrees that it shall not hereafter enter into any agreement or
take any action that conflicts with the rights granted to the Investors in this
Agreement, and the Company 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 Registration Period without the prior written consent of Durus.
Notwithstanding the foregoing, nothing herein shall prevent or limit the
Company's 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).

12. LOCKUP

     To the extent timely requested by an underwriter or broker-dealer in an
offering by the Existing Investors pursuant to a Registration Statement, the
Company 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
the ending of 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).

13. AMENDMENT OF REGISTRATION RIGHTS.

     Provisions of this Agreement may be amended and the observance thereof may
be waived (either generally or in a particular instance and either retroactively
or prospectively), only with the written consent of the Company, Durus and the
holders of a majority in interest of the Registrable Securities; provided,
however, that any such amendment or waiver that would have an adverse and
disproportionate effect on the holders of the Note Shares must be approved by a
majority of the holders in interest of the Note Shares. Any amendment or waiver
effected in accordance with this Section 13 shall be binding upon each Existing
Investor and the Company. No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of this Agreement unless the same consideration also is

                                       28

<Page>

offered to all of the parties to this Agreement. Notwithstanding the foregoing,
the rights specifically granted in this Agreement to Durus under Section 7 and
Section 8.3 shall not be assignable by Durus without the prior written consent
of the Company.

14. ENTIRE AGREEMENT; TERMINATION OF EXISTING REGISTRATION RIGHTS AGREEMENT.

     This Agreement, the other Transaction Documents (as defined in the Purchase
Agreement) and the instruments referenced herein and therein constitute the
entire agreement among the parties hereto with respect to the subject matter
hereof and thereof. There are no restrictions, promises, warranties or
undertakings, other than those set forth or referred to herein and therein. This
Agreement, the other Transaction Documents and the instruments referenced herein
and therein supersede and terminate all prior agreements and understandings
among the parties hereto with respect to the subject matter hereof and thereof,
including the Registration Rights Agreement dated as of February 23, 2004 by and
among Durus, Artal and the Company.

15. MISCELLANEOUS.

          (A) A Person is deemed to be a holder of Registrable Securities
whenever such Person owns or is deemed to own of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more Persons with respect to the same Registrable
Securities, the Company shall act upon the basis of instructions, notice or
election received from such record owner of such Registrable Securities.

          (B) Any notices, consents, waivers or other communications required or
permitted to be given under the terms of this Agreement must be in writing and
will be deemed to have been delivered: (i) upon receipt, when delivered
personally; (ii) upon receipt, when sent by facsimile (provided confirmation of
transmission is mechanically or electronically generated and kept on file by the
sending party); or (iii) one Business Day after deposit with a nationally
recognized overnight delivery service, in each case properly addressed to the
party to receive the same. The addresses and facsimile numbers for such
communications shall be:

                                       29

<Page>

          If to the Company:

               Aksys, Ltd.
               Two Marriott Drive
               Lincolnshire, Illinois 60069
               Attn: ______________
               Telecopy: (847) ___-____
               Telephone: (847) ___-____

          With a copy to:

               Kirkland & Ellis LLP
               200 East Randolph Drive
               Chicago, Illinois 60601
               Attn: Keith S. Crow, P.C.
               Telecopy: (312) ___-____
               Telephone: (312) ___-____

          If to Durus, 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

          With copies to:

               Morrison & Foerster, LLP
               425 Market Street
               San Francisco, CA 94105
               Attn: Gavin B. Grover
               Telecopy: (415) 268-7522
               Telephone: (415) 268-7113

               -and-

               Schulte Roth & Zabel LLP
               919 Third Avenue
               New York, NY 10022
               Attn: Paul N. Roth
               Telecopy: (212) 593-5955
               Telephone: (212) 756-2000

                                       30

<Page>

          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: _________________

          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 Investor other than Durus or Artal, to such address as may
hereafter be designated in writing by such Investor to the other parties hereto.

     Written confirmation of receipt (A) given by the recipient of such notice,
consent, waiver or other communication, (B) mechanically or electronically
generated by the sender's facsimile machine containing the time, date, recipient
facsimile number and an image of the first page of such transmission or (C)
provided by a courier or overnight courier service shall be rebuttable evidence
of personal service, receipt by facsimile or receipt from a nationally
recognized overnight delivery service in accordance with clause (i), (ii) or
(iii) above, respectively.

          (C) Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.

          (D) In order to attract and retain the most qualified individuals who
are involved in the Company's industry and who understand the Company's
business, the parties hereto agree that Durus may designate as Investor
Designees pursuant to Section 7 hereof individuals who (i) may participate or
will participate, directly or through Durus and its Affiliates, in businesses
that compete with, or are substantially the same as the business of the Company
or its subsidiaries, (ii) may have an interest in, participate with, and serve
as directors, officers or employees of other Persons engaged in businesses that
compete with, or are substantially the same as, the business of the Company or
its subsidiaries and (iii) may develop business opportunities for Durus, Durus'
Affiliates or the Investor Designees, other than in each case individuals who
are also employees of the Company or any of its subsidiaries. Although the
parties hereto do not anticipate any overlap in terms of corporate opportunities
of the businesses in which Durus or the Investor Designees are or will be
involved and the business of the Company and its subsidiaries, in order to
enable the Company to attract the most qualified individuals as members of the
Board, the Company wishes to, and hereby does, renounce any interest or
expectancy of the Company in, or in being offered an opportunity to participate
in,

                                       31

<Page>

any Excluded Opportunity. An "Excluded Opportunity" is any matter, transaction
or interest that is presented to, or acquired, created or developed by, or which
otherwise comes into the possession of, (i) an Investor Designee who is not an
employee of the Company or any of its subsidiaries, or (ii) Durus or any
partner, member, director, stockholder, employee, Affiliate or agent of Durus,
other than an individual who is an employee of the Company or any of its
subsidiaries (collectively, "Covered Persons"), unless such matter, transaction
or interest is presented to, or acquired, created or developed by, or otherwise
comes into the possession of, a Covered Person expressly and solely in such
Covered Person's capacity as a director of the Corporation.

          (E) Subject to Section 15(d), the Investor Designees, Durus and Durus'
Affiliates may engage or invest independently or with others, in any business
activity of any type or description, including without limitation those that
might be the same as or similar to the businesses of the Company or its
subsidiaries, and neither the Company, any subsidiary of the Company, nor any
other stockholder of the Company shall have any right in or to such business
activities or ventures or to receive or share in any income or proceeds derived
therefrom.

          (F) All questions concerning the construction, validity, enforcement
and interpretation of this Agreement shall be governed by the internal laws of
the State of New York, without giving effect to any choice of law or conflict of
law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any jurisdictions
other than the State of New York. Each party hereby irrevocably submits to the
exclusive jurisdiction of the state and federal courts sitting in The City of
New York, Borough of Manhattan, for the adjudication of any dispute hereunder or
in connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, that such suit, action or proceeding is brought
in an inconvenient forum or that the venue of such suit, action or proceeding is
improper. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such suit, action or proceeding by
mailing a copy thereof to such party at the address for such notices to it under
this Agreement and agrees that such service shall constitute good and sufficient
service of process and notice thereof. Nothing contained herein shall be deemed
to limit in any way any right to serve process in any manner permitted by law.
If any provision of this Agreement shall be invalid or unenforceable in any
jurisdiction, such invalidity or unenforceability shall not affect the validity
or enforceability of the remainder of this Agreement in that jurisdiction or the
validity or enforceability of any provision of this Agreement in any other
jurisdiction. EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND
AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE
HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY.

          (G) Subject to the requirements of Section 6, this Agreement shall
inure to the benefit of and be binding upon the permitted successors and assigns
of each of the parties hereto.

          (H) The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.

                                       32

<Page>

          (I) This Agreement may be executed in identical counterparts, each of
which shall be deemed an original but all of which shall constitute one and the
same agreement. This Agreement, once executed by a party, may be delivered to
the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.

          (J) Each party 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 any other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

          (K) All consents and other determinations required to be made by the
Investors pursuant to this Agreement shall be made, unless otherwise specified
in this Agreement, by the holders of a majority in interest of the Registrable
Securities; provided, however, that any consent or other determination the
result of which would have an adverse and disproportionate effect on the
Existing Investors must be consented to or determined by, as the case may be,
the Existing Investors.

          (L) The language used in this Agreement will be deemed to be the
language chosen by the parties to express their mutual intent and no rules of
strict construction will be applied against any party.

          (M) This Agreement is intended for the benefit of the parties hereto
and their respective permitted successors and assigns, and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person.

          (N) 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.

          (O) The obligations of each Investor hereunder are several and not
joint with the obligations of any other Investor, and no provision of this
Agreement is intended to confer any obligations on any Investor vis-a-vis any
other Investor. Nothing contained herein, and no action taken by any Investor
pursuant hereto, shall be deemed to constitute the Investors as a partnership,
an association, a joint venture or any other kind of entity, or create a
presumption that the Investors are in any way acting in concert or as a group
with respect to such obligations or the transactions contemplated herein.

                                       33

<Page>

     IN WITNESS WHEREOF, the Existing Investors and the Company have caused
their respective signature page to this Investor Rights Agreement to be duly
executed as of the date first written above.

                                        AKSYS, LTD.

                                        By: /s/ Larry Birch
                                            ------------------------------------
                                            Name: L. Birch
                                            Title: CFO

                                        DURUS LIFE SCIENCES MASTER FUND LTD.

                                        By: /s/ Leslie L. Lake
                                            ------------------------------------
                                            Name: Leslie L. Lake
                                            Title: Director

                                        ARTAL LONG BIOTECH PORTFOLIO LLC

                                        By: Artal Alternative Treasury
                                            Management
                                        Its: Managing Member

                                        By: /s/ Christian Tedeschi
                                            ------------------------------------
                                            Name: Christian Tedeschi
                                            Title: Managing Director

                                       34

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