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EXHIBIT 10.4  

 
 

TENTH AMENDMENT TO CREDIT AGREEMENT    
    

        This Amendment, dated as of June 30, 2003, is made by and among INNOVEX, INC., a Minnesota corporation (the "Borrower"), each of the banks appearing
on the signature pages hereof, together with such other banks as may from time to time become a party to the Credit Agreement (defined below) pursuant to the terms and conditions of  Article VIII of
the Credit Agreement (each, a "Bank"; collectively, the "Banks"), and WELLS FARGO BANK MINNESOTA, NATIONAL ASSOCIATION, formerly
known as Norwest Bank Minnesota, National Association, a national banking association, in its separate capacity as administrative agent for itself and all other Banks (in such capacity, the "Agent"). 

Recitals  

        A.    The
Borrower, the Banks and the Agent are parties to a Credit Agreement dated as of September 15, 1999, a First Amendment to Credit Agreement dated as of
June 29, 2000, a Second Amendment to Credit Agreement dated as of December 31, 2000, a Third Amendment to Credit Agreement dated as of March 30, 2001, a Fourth Amendment to Credit
Agreement dated as of June 30, 2001, a Fifth Amendment to Credit Agreement dated as of September 30, 2001, a Sixth Amendment to Credit Agreement dated as of February 14, 2002, a
Seventh Amendment to Credit Agreement dated as of April 29, 2002, an Eighth Amendment to Credit Agreement dated as of June 30, 2002, and a Ninth Amendment to Credit Agreement dated as of
September 30, 2002 (as so amended and as further amended or restated from time to time, the "Credit Agreement"). 

        B.    Currently,
the Borrower is in default of several provisions of the Credit Agreement, and the Borrower has requested that the Banks and the Agent waive the existing
defaults and provide certain other financial accommodations. 

        C.    The
Banks and the Agent are willing to grant the Borrower's requests subject to the terms and conditions set forth below. 

Agreement  

        ACCORDINGLY, in consideration of the premises and for other good and valuable consideration, the Borrower, the Banks and the Agent agree as follows: 

        1.    Definitions.    All capitalized terms used in this Amendment and not otherwise specifically defined in this
Amendment shall have the meanings given such terms in the Credit Agreement. In addition, Section 1.1 of the Credit Agreement is hereby amended by restating the following definitions in the
appropriate alphabetical location: 

        "'Early
Payoff Date' means August 15, 2003." 

        "'Maturity
Date' means December 31, 2003, with respect to the Term Facility." 

        "'Tenth
Amendment' means the Tenth Amendment to Credit Agreement, dated as of June 30, 2003, by and among the Borrower, the Banks and the Agent." 

        2.    Payoff of Facility.    Section 2.9 of the Credit Agreement is hereby amended to include the following
subsection 2.9(c), immediately following subsection 2.9(b): 

        "(c)    Early Payoff of Term Facility.    Notwithstanding any language in this Agreement to the contrary, the Borrower
shall pay all unpaid principal and interest with respect to the Term Facility as of the Early Payoff Date. If the Borrower fails to pay all unpaid principal and interest with respect to the Term
Facility as of the Early Payoff Date: (1) the Borrower shall pay the Agent, on the following Business Day, a non-refundable fee in the amount of $30,000 for the pro rata account of
the Banks and (2) the Borrower shall continue to pay the Term 

 

Note
as provided for in Section 2.9(b), with any and all unpaid principal, interest and applicable fees finally due and payable as of the Maturity Date." 

        3.    Covenant Waivers.    

        (a)    June 30, 2003 Covenant Computation Date.    The
requirements of Section 5.9 of the Credit Agreement regarding the Borrower's Interest Coverage Ratio, Section 5.10 of the Credit Agreement regarding the Borrower's Leverage Ratio, and
Section 5.12 of the Credit Agreement regarding the Borrower's Profitability are waived by the Banks. Such waivers are limited to the June 30, 2003 Covenant Computation Date. 

        4.    Waiver Fee.    In consideration for the waivers contained herein, on the date this Amendment is executed, the
Borrower shall pay the Agent a non-refundable fully-earned waiver fee in the amount of $30,000 for the pro rata account of the Banks. 

        5.    Conditions to Effectiveness.    This Amendment, including the covenant waivers contained in paragraph 3
herein, shall not be or become effective unless the Agent receives each of the following items in form and substance acceptable to the Agent on or before July 15, 2003: 

        (a)   This
Amendment, duly executed by the Agent, the Banks and the Borrower, and duly acknowledged by the Guarantors; 

        (b)   Payment
of the fee described in paragraph 4 of this Amendment; and 

        (c)   Payment
of all legal fees incurred by the Agent through the date of the execution of this Amendment. 

        6.    Continued Effectiveness.    Except as amended by this Amendment, all of the terms and conditions of the Credit
Agreement and the other Loan Documents shall remain in all other respects in full force and effect. 

        7.    Counterparts.    This Amendment may be executed in any number of counterparts, each of which shall be deemed to
be an original and all of which counterparts taken together shall constitute but one and the same instrument. 

        8.    Release.    The Borrower and each Guarantor, by signing the Acknowledgment and Agreement set forth below, hereby
absolutely and unconditionally releases and forever discharges the Agent and each of the Banks, and any and all participants, parent corporations, subsidiary corporations, affiliated corporations,
insurers, indemnitors, successors and assigns thereof, together with all of the present and former directors, officers, agents and employees of any of the foregoing (each, a "Released Party"), from
any and all claims, demands or causes of action of any kind, nature or description, whether arising in law or equity or upon contract or tort or under any state or federal law or otherwise, which the
Borrower or such Guarantor has had, now has or has made claim to have against such Released Party for or by reason of any act, omission, matter, cause or thing whatsoever arising from the beginning of
time to and including the date of this Amendment in connection with or related to the transactions evidenced by the Loan Documents, whether such claims, demands and causes of action are mature or
unmatured or known or unknown. 

        9.    No Other Waiver.    Except as expressly set forth herein, the execution of this Amendment shall not be deemed to
be a waiver of any Event of Default under the Credit Agreement, whether or not known to the Agent and/or the Banks and whether or not existing on the date of this Amendment. 

        10.    Representations and Warranties.    The Borrower hereby represents and warrants to the Agent and the Banks as
follows: 

        (a)   The
Borrower has all requisite power and authority to execute this Amendment and to perform all of its obligations under the Credit Agreement, as amended by this
Amendment, and 

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the
Credit Agreement, as amended by this Amendment, and the other Loan Documents executed on behalf of the Borrower have been duly executed and delivered by the Borrower and constitute the legal,
valid and binding obligations of the Borrower, enforceable in accordance with their respective terms. 

        (b)   The
execution, delivery and performance by the Borrower of the Credit Agreement, as amended by this Amendment, and the other Loan Documents executed on behalf of the
Borrower have been duly authorized by all necessary corporate action and do not (i) require any authorization, consent or approval by any governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign, (ii) violate any provision of any law, rule or regulation or of any order, writ, injunction or decree presently in effect, having applicability
to the Borrower, or the Articles of Incorporation or By-laws of the Borrower, or (iii) result in a breach of or constitute a default under any indenture or loan or credit agreement
or any other agreement, lease or instrument to which the Borrower is a party or by which it or its properties may be bound or affected. 

        (c)   All
of the representations and warranties contained in Article IV of the Credit Agreement are correct on and as of the date hereof as though made on and as of
such date, except to the extent that such representations and warranties relate solely to an earlier date. 

        11.    References.    All references in the Credit Agreement to "this Agreement" shall be deemed to refer to the
Credit Agreement as amended by this Amendment; and any and all references in any of the other Loan Documents to the "Credit Agreement" shall be deemed to refer to the Credit Agreement as amended by
this Amendment. 

[Signature Page Follows]

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        IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective officers thereunto duly authorized as of the date first above written. 

	 	 	INNOVEX, INC.
	 	 	 	 	 
	 	 	By	/s/  THOMAS PAULSON      

	 	 	 	Its	Senior Vice President and CFO

	 	 	 	 	 
	 	 	 	 	 
	 	 	WELLS FARGO BANK MINNESOTA,

    NATIONAL ASSOCIATION, formerly

    known as Norwest Bank Minnesota, National

    Association, as Bank and as Agent
	 	 	 	 	 
	 	 	By	/s/  RAJENDRA SEWAK      

	 	 	 	Its	Vice President

	 	 	 	 	 
	 	 	 	 	 
	 	 	U.S. BANK NATIONAL ASSOCIATION, as

    Bank
	 	 	 	 	 
	 	 	 	 	 
	 	 	By	/s/  C. KIRK DYCHE      

	 	 	 	Its	Vice President

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ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORS    
    

        The undersigned, each a guarantor of all debts, liabilities and other obligations of Innovex, Inc., a Minnesota corporation (the "Borrower") to the Banks
(as defined in the foregoing Amendment) and the Agent (as defined in the foregoing Amendment) under the Credit Agreement (as defined in the foregoing Amendment) and related Loan Documents (as defined
in the foregoing Amendment) pursuant to (i) a separate Guaranty from Innovex Precision Components, Inc. dated as of September 15, 1999 (the "Precision Guaranty") secured by a
separate Security Agreement from Innovex Precision Components, Inc. dated as of September 15, 1999 (the "Precision Security Agreement"), (ii) a separate Guaranty from Innovex
Southwest, Inc. dated as of September 15, 1999 (the "Southwest Guaranty") secured by a separate Security Agreement from Innovex Southwest, Inc. dated as of September 15,
1999 (the "Southwest Security Agreement"), and (iii) a separate Guaranty from ADFlex Cayman Limited dated as of December 31, 2000 (the "ADFlex Guaranty," together with the Precision
Guaranty and the Southwest Guaranty, each hereinafter called a "Guaranty") secured by a separate Stock Pledge Agreement from ADFlex Cayman Limited dated as of December 31, 2000 (the "ADFlex
Security Agreement," together with the Precision Security Agreement and the Southwest Security Agreement, each hereinafter called a "Security Agreement"), hereby (a) acknowledges receipt of the
foregoing Amendment; (b) consents to the terms of the foregoing Amendment (including, without limitation, the releases set forth in paragraph 8 of the foregoing Amendment) and execution
of the foregoing Amendment by the Borrower; (c) reaffirms its obligations to the Agent and the Banks pursuant to the terms of its Guaranty, its Security Agreement and any other Loan Documents
to which it is a party; and (d) acknowledges that the Agent and the Banks may amend, restate, extend, renew, or otherwise modify the Credit Agreement or any other Loan Document or any
indebtedness or agreement of the Borrower in favor of the Agent and/or the Banks, or enter into any agreement or extend additional or other credit accommodations to the Borrower, without notifying or
obtaining the consent of the
undersigned and without impairing the liability of the undersigned under its Guaranty, its Security Agreement and any other Loan Documents to which it is a party. 

	INNOVEX SOUTHWEST, INC.	 	INNOVEX PRECISION COMPONENTS, INC.
	 	 	 	 	 	 	 
	By	/s/  THOMAS PAULSON      
	 	By	/s/  THOMAS PAULSON      

	 	Its	Senior Vice President and CFO
	 	 	Its	Senior Vice President and CFO

	 	 	 	 	 	 	 
	ADFLEX CAYMAN LIMITED	 	 	 	 
	 	 	 	 	 	 	 
	By	/s/  THOMAS PAULSON      
	 	 	 	 
	 	Its	Senior Vice President and CFO
	 	 	 	 

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TENTH AMENDMENT TO CREDIT AGREEMENT

ACKNOWLEDGMENT AND AGREEMENT OF GUARANTORSQuickLinks
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Exhibit 4.1    
    

 
  EXHIBIT A    
    

 
  COMMON STOCK PURCHASE WARRANT    
    

To
Purchase 204,546 Shares of Common Stock of 

 
  Aksys, Ltd    
    

        THIS COMMON STOCK PURCHASE WARRANT CERTIFIES that, for value received, The Riverview Group, LLC (the "Holder"), is
entitled, upon the terms and subject to the limitations on exercise and the conditions hereinafter set forth, at any time on or after June 30, 2003 (the "Initial
Exercise Date") and on or prior to the close of business on June 29, 2008 (the "Termination Date") but not thereafter, to
subscribe for and purchase from Aksys, Ltd, a corporation incorporated in the State of Delaware (the "Company"), up to 204,546 shares (the
"Warrant Shares") of Common Stock, par value $0.01 per share, of the Company (the "Common Stock"). The
purchase price of one share of Common Stock (the "Exercise Price") under this Warrant shall be $13.75,
subject to adjustment hereunder. 

        1.    Title to Warrant.    Prior to the Termination Date, this Warrant and all rights hereunder are transferable, in
whole or in part, at the office or agency of the Company by the Holder in person or by duly authorized attorney, upon surrender of this Warrant together with the Assignment Form annexed hereto
properly endorsed. 

        2.    Authorization of Shares.    The Company covenants that all Warrant Shares which may be issued upon the exercise
of the purchase rights represented by this Warrant will, upon exercise of the purchase rights represented by this Warrant, be duly authorized, validly issued, fully paid and nonassessable and free
from all taxes, liens and charges in respect of the issue thereof (other than taxes in respect of any transfer occurring contemporaneously with such issue). 

        3.    Exercise of Warrant.    

        (a)   Except
as provided in Section 4 herein, exercise of the purchase rights represented by this Warrant may be made at any time or times on or after the Initial
Exercise Date and on or before the Termination Date by the surrender of this Warrant and the Notice of Exercise Form annexed hereto duly executed, at the office of the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered Holder at the address of such Holder appearing on the books of the Company) and upon payment of the Exercise Price of
the shares thereby purchased by wire transfer or cashier's check drawn on a United States bank or by means of a "cashless exercise" pursuant to Section 3(c), the Holder shall be entitled to
receive a certificate for the number of Warrant Shares so purchased. Warrant Shares purchased hereunder shall be delivered to the Holder within three (3) business days after the date on which
this Warrant shall have been exercised as aforesaid. This Warrant has been registered on the Company's Registration Statement, Form S-3, File No. 333-100557 (the
"Registration Statement") and accordingly, if this Warrant is exercised at a time when the Registration Statement (or any registration statement
registering the sale of the Warrant Shares to the Holder upon exercise of this Warrant) is then effective and available for use or if this Warrant is exercised by means of a "cashless exercise"
pursuant to Section 3(c) (such condition each a "Condition"), the Company shall deliver the Warrant Shares to the Buyer, if eligible, via the
Depository Trust Company's ("DTC") Deposit Withdrawal Agent Commission ("DWAC") system via the DTC
instructions provided to the Company in the Notice of Exercise. If either Condition is met at the time of exercise, the Warrant Shares shall be, when issued, unlegended and free of any resale
restrictions. If no Conditions are met at the time of such exercise, the certificates representing the Warrant Shares shall be issued in paper form and contain a standard Securities Act legend
restricting resale 

1

 

without
registration or an exemption. This Warrant shall be deemed to have been exercised and such certificate or certificates shall be deemed to have been issued, and the Holder or any other person
so designated to be named therein shall be deemed to have become a holder of record of such shares for all purposes, as of the date the Warrant has been exercised by payment to the Company of the
Exercise Price and all taxes required to be paid by the Holder, if any, pursuant to Section 5 prior to the issuance of such shares, have been paid. If the Company fails to deliver to the Holder
a certificate or certificates representing the Warrant Shares pursuant to this Section 3(a) by the close of business on the third (3rd) business day after the date of exercise,
then the Holder will have the right to rescind such exercise. In addition to any other rights available to the Holder, if the Company fails to deliver to the Holder a certificate or certificates
representing the Warrant Shares pursuant to an exercise by the close of business on the third (3rd) business day after the date of exercise, and if after such third (3rd)
business day the Holder is required by its broker to purchase (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Shares which the Holder anticipated receiving upon such exercise (a "Buy-In"), then the Company shall (1) pay in cash to the Holder
the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order
giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such
exercise was not honored or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder.
For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. The
Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of
the Buy-In, together with applicable confirmations and other evidence reasonably requested by the Company. Nothing herein shall limit a Holder's right to pursue any other remedies
available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company's failure to timely deliver
certificates representing shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof. 

        (b)   If
this Warrant shall have been exercised in part, the Company shall, at the time of delivery of the certificate or certificates representing Warrant Shares, deliver to
Holder a new Warrant evidencing the rights of Holder to purchase the unpurchased Warrant Shares called for by this Warrant, which new Warrant shall in all other respects be identical with this
Warrant. 

        (c)   If,
but only if, at any time after the Initial Exercise Date the Registration Statement (or a registration statement registering the sale of the Warrant Shares to the
Holder upon exercise of this Warrant) is not then effective or unavailable for use as reasonably determined by the Company such that the Company is unable to otherwise issue the Warrant Shares
unlegended and free of any resale restrictions at such time, this Warrant may also be exercised at such time by 

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means
of a "cashless exercise" in which the Holder shall be entitled to receive a certificate for the number of Warrant Shares equal to the quotient obtained by dividing [(A-B)
(X)] by (A), where: 

	

(A) =	

the VWAP on the Trading Day preceding the date of such election;
	

(B) =	

the Exercise Price of the Warrant, as adjusted; and
	

(X) =	

the number of Warrant Shares issuable upon exercise of the Warrants in accordance with the terms of this Warrant.

"VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) the daily volume weighted average price
of the Common Stock for such date (or the nearest preceding date) on the primary market or exchange on which the Common Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based on
a Trading Day from 9:30 a.m. Eastern Time
to 4:02 p.m. Eastern Time); (b) if the Common Stock is not then listed or quoted on a market or exchange and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the
volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC
Bulletin Board and if prices for the Common Stock are then reported in the "Pink Sheets" published by the National Quotation Bureau Incorporated (or a similar organization or agency succeeding to its
functions of reporting prices), the average of the most recent bid and ask price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common
Stock as determined by a nationally recognized-independent appraiser selected in good faith by Holder. 

        Notwithstanding
the foregoing right of "cashless exercise" by the Holder, the Company shall use commercially reasonable efforts to keep the Registration Statement (or any registration
statement registering the sale of the Warrant Shares to the Holder upon exercise of this Warrant) continuously effective under the Securities Act until the Termination Date. 

        4.    No Fractional Shares or Scrip.    No fractional shares or scrip representing fractional shares shall be issued
upon the exercise of this Warrant. As to any fraction of a share which Holder would otherwise be entitled to purchase upon such exercise, the Company shall pay a cash adjustment in respect of such
final fraction in an amount equal to such fraction multiplied by the Exercise Price. 

        5.    Charges, Taxes and Expenses.    Issuance of certificates for Warrant Shares shall be made without charge to the
Holder for any issue or transfer tax or other incidental expense in respect of the issuance of such certificate, all of which taxes and expenses shall be paid by the Company, and such certificates
shall be issued in the name of the Holder or in such name or names as may be directed by the Holder; provided,  however, that in the event certificates for
Warrant Shares are to be issued in a name other than the name of the Holder, this Warrant when surrendered
for exercise shall be accompanied by the Assignment Form attached hereto duly executed by the Holder; and the Company may require, as a condition thereto, the payment of a sum sufficient to reimburse
it for any transfer tax incidental thereto. 

        6.    Closing of Books.    The Company will not close its stockholder books or records in any manner which prevents
the timely exercise of this Warrant, pursuant to the terms hereof. 

        7.    Transfer, Division and Combination.    

        (a)   This
Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant at the principal office of the Company, together with a
written assignment of this Warrant substantially in the form attached hereto duly executed by the Holder or its agent or attorney and funds sufficient to pay any transfer taxes payable upon the making
of such transfer. Upon such surrender and, if required, such payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees and in the 

3

 

denomination
or denominations specified in such instrument of assignment, and shall issue to the assignor a new Warrant evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. A Warrant, if properly assigned, may be exercised by a new holder for the purchase of Warrant Shares without having a new Warrant issued. 

        (b)   This
Warrant may be divided or combined with other Warrants upon presentation hereof at the aforesaid office of the Company, together with a written notice specifying
the names and denominations in which new Warrants are to be issued, signed by the Holder or its agent or attorney. Subject to compliance with Section 7(a), as to any transfer which may be
involved in such division or combination, the Company shall execute and deliver a new Warrant or Warrants in exchange for the Warrant or Warrants to be divided or combined in accordance with such
notice. 

        (c)   The
Company shall prepare, issue and deliver at its own expense (other than transfer taxes) the new Warrant or Warrants under this Section 7. 

        (d)   The
Company agrees to maintain, at its aforesaid office, books for the registration and the registration of transfer of the Warrants. 

        8.    No Rights as Shareholder until Exercise.    This Warrant does not entitle the Holder to any voting rights or
other rights as a shareholder of the Company prior to the exercise hereof. Upon the surrender of this Warrant and the payment of the aggregate Exercise Price (or by means of a cashless exercise), the
Warrant Shares so purchased shall be and be deemed to be issued to such Holder as the record owner of such shares as of the close of business on the later of the date of such surrender or payment. 

        9.    Loss, Theft, Destruction or Mutilation of Warrant.    The Company covenants that upon receipt by the Company of
evidence reasonably satisfactory to it of the loss, theft, destruction or mutilation of this Warrant or any stock certificate relating to the Warrant Shares, and in case of loss, theft or destruction,
of indemnity or security reasonably satisfactory to it (which, in the case of the Warrant, shall not include the posting of any bond), and upon surrender and cancellation of such Warrant or stock
certificate, if mutilated, the Company will make and deliver a new Warrant or stock certificate of like tenor and dated as of such cancellation, in lieu of such Warrant or stock certificate. 

        10.    Saturdays, Sundays, Holidays, etc.    If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall be a Saturday, Sunday or a legal holiday, then such action may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or legal holiday. 

        11.    Adjustments of Exercise Price and Number of Warrant Shares; Stock Splits, etc.    The number and kind of
securities purchasable upon the exercise of this Warrant and the Exercise Price shall be subject to adjustment from time to time upon the happening of any of the following. In case the Company shall
(i) pay a dividend in shares of Common Stock or make a distribution in shares of Common Stock to holders of its outstanding Common Stock, (ii) subdivide its outstanding shares of Common
Stock into a greater number of shares, (iii) combine its outstanding shares of Common Stock into a smaller number of shares of Common Stock, or (iv) issue any shares of its capital stock
in a reclassification of the Common Stock, then the number of Warrant Shares purchasable upon exercise of this Warrant immediately prior thereto shall be adjusted so that the Holder shall be entitled
to receive the kind and number of Warrant Shares or other securities of the Company which it would have owned or have been entitled to receive had such Warrant been exercised in advance thereof. Upon
each such adjustment of the kind and number of Warrant Shares or other securities of the Company which are purchasable hereunder, the Holder shall thereafter be entitled to purchase the number of
Warrant Shares or other securities resulting from such adjustment at an Exercise Price per Warrant Share or other security obtained by multiplying the Exercise Price in effect immediately prior to
such adjustment by the number of Warrant Shares purchasable pursuant hereto immediately prior to such adjustment 

4

 

and
dividing by the number of Warrant Shares or other securities of the Company resulting from such adjustment. An adjustment made pursuant to this paragraph shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for such event. 

        12.    Reorganization, Reclassification, Merger, Consolidation or Disposition of Assets.    In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge with or into another corporation (where the Company is not the surviving corporation or where there is a change in or
distribution with respect to the Common Stock of the Company), or sell, transfer or otherwise dispose of all or substantially all its property, assets or business to another corporation and, pursuant
to the terms of such reorganization, reclassification, merger, consolidation or disposition of assets, shares of common stock of the successor or acquiring corporation, or any cash, shares of stock or
other securities or property of any nature whatsoever (including warrants or other subscription or purchase rights) in addition to or in lieu of common stock of the successor or acquiring corporation
("Other Property"), are to be received by or distributed to the holders of Common Stock of the Company, then the Holder shall have the right thereafter
to receive, upon exercise of this Warrant, instead of the shares of Common Stock, the number of shares of common stock and/or Other Property receivable upon or as a result of such reorganization,
reclassification, merger, consolidation or disposition of assets by a Holder of the number of shares of Common Stock for which this Warrant is exercisable immediately prior to such event. In case of
any such reorganization, reclassification, merger, consolidation or disposition of assets, the successor or acquiring corporation (if other than the Company) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition of this Warrant to be performed and observed by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be deemed appropriate (as determined in good faith
by resolution of the Board of Directors of the Company) in order to provide for adjustments of Warrant Shares for which this Warrant is exercisable which shall be as nearly equivalent as practicable
to the adjustments provided for in this Section 12. For purposes of this Section 12, "common stock" shall include stock of such corporation of any class which is not preferred as to
dividends or assets over any other class of stock of such corporation and which is not subject to redemption and shall also include any evidences of indebtedness, shares of stock or other securities
which are convertible into or exchangeable for any such stock, either immediately or upon the arrival of a specified date or the happening of a specified event and any warrants or other rights to
subscribe for or purchase any such stock. The foregoing provisions of this Section 12 shall similarly apply to successive reorganizations, reclassifications, mergers, consolidations or
disposition of assets. 

        13.    Voluntary Adjustment by the Company.    The Company may at any time during the term of this Warrant reduce the
then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company. 

        14.    Notice of Adjustment.    Whenever the number of Warrant Shares or number or kind of securities or other
property purchasable upon the exercise of this Warrant or the Exercise Price is adjusted, as herein provided, the Company shall give notice thereof to the Holder, which notice shall state the number
of Warrant Shares (and other securities or property) purchasable upon the exercise of this Warrant and the Exercise Price of such Warrant Shares (and other securities or property) after such
adjustment, setting forth a brief statement of the facts requiring such adjustment and setting forth the computation by which such adjustment was made. 

        15.    Notice of Corporate Action.    If at any time: 

        (a)   the
Company shall take a record of the holders of its Common Stock for the purpose of entitling them to receive an extraordinary dividend or other distribution, or any
right to subscribe for or purchase any evidences of its indebtedness, any shares of stock of any class or any other securities or property, or to receive any other right, or 

5

 

        (b)   there
shall be any capital reorganization of the Common Stock, any reclassification or recapitalization of the capital stock of the Company or any consolidation or
merger of the Company with, or any sale, transfer or other disposition of all or substantially all the property, assets or business of the Company to, another corporation, or 

        (c)   there
shall be a voluntary or involuntary dissolution, liquidation or winding up of the Company, or 

        (d)   no
registration statement registering the sale of the Warrant Shares to the Holder upon exercise of this Warrant is then effective or such registration statement is not
then available for use, as reasonably determined by the Company; 

then,
in any one or more of such cases, the Company shall give to Holder (i) at least 10 days' prior written notice of the date on which a record date shall be selected for such
dividend, distribution or right or for determining rights to vote in respect of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, liquidation or winding
up, and (ii) in the case of any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition, dissolution, liquidation or winding up, at least 10 days' prior
written notice of the date when the same shall take place, and (iii) in the case of the absence of any effective registration statement registering the sale of the Warrant Shares to the Holder
upon exercise of this Warrant or unavailability thereof, promptly upon knowledge by the Company of such occurrence. Such notice in accordance with the foregoing clauses (a)-(c) also shall specify
(i) the date on which any such record is to be taken for the purpose of such dividend, distribution or right, the date on which the holders of Common Stock shall be entitled to any such
dividend, distribution or right, and the amount and character thereof, and (ii) the date on which any such reorganization, reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up is to take place and the time, if any such time is to be fixed, as of which the holders of Common Stock shall be entitled to exchange their Warrant Shares for
securities or other property deliverable upon such disposition, dissolution, liquidation or winding up. Such notice in accordance with clause (d) shall also specify the Company's good faith
believe as to when a registration statement registering such sale shall be filed or amended or available for use again. Each such written notice shall be sufficiently given if addressed to Holder at
the last address of Holder appearing on the books of the Company and delivered in accordance with Section 17(d). 

        16.    Authorized Shares.    The Company covenants that during the period the Warrant is outstanding, it will reserve
from its authorized and unissued Common Stock a sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full authority to its officers who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares upon the exercise of the purchase rights under this Warrant. The Company will take all such reasonable action as may be necessary to assure that such Warrant Shares
may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of the principal market or exchange upon which the Common Stock may be listed. 

        Except
and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate of incorporation or through
any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the
rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above
the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or 

6

 

appropriate
in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to
obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this
Warrant. 

        Before
taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof. 

        17.    Miscellaneous.    

        (a)    Jurisdiction.    This Warrant shall constitute a contract under the laws of New York, without regard to its
conflict of law, principles or rules. 

        (b)    Restrictions.    The Holder acknowledges that the Warrant Shares acquired upon the exercise of this Warrant, if
not registered, will have restrictions upon resale imposed by state and federal securities laws. 

        (c)    Nonwaiver and Expenses.    No course of dealing or any delay or failure to exercise any right hereunder on the
part of Holder shall operate as a waiver of such right or otherwise prejudice Holder's rights, powers or remedies, notwithstanding all rights hereunder terminate on the Termination Date. If the
Company willfully and knowingly fails to comply with any provision of this Warrant, which results in any material damages to the Holder, the Company shall pay to Holder such amounts as shall be
sufficient to cover any costs and expenses including, but not limited to, reasonable attorneys' fees, including those of appellate proceedings, incurred by Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies hereunder. 

        (d)    Notices.    Any notice, request or other document required or permitted to be given or delivered to the Holder
by the Company shall be delivered in accordance with the notice provisions of the Purchase Agreement; provided upon any permitted assignment of this Warrant, the assignee shall promptly provide the
Company with its contact information. 

        (e)    Limitation of Liability.    No provision hereof, in the absence of any affirmative action by Holder to exercise
this Warrant or purchase Warrant Shares, and no enumeration herein of the rights or privileges of Holder, shall give rise to any liability of Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or by creditors of the Company. 

        (f)    Remedies.    Holder, in addition to being entitled to exercise all rights granted by law, including recovery of
damages, will be entitled to specific performance of its rights under this Warrant. The Company agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a
breach by it of the provisions of this Warrant and hereby agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. 

        (g)    Successors and Assigns.    Subject to applicable securities laws, this Warrant and the rights and obligations
evidenced hereby shall inure to the benefit of and be binding upon the successors of the Company and the successors and permitted assigns of Holder. The provisions of this Warrant are intended to be
for the benefit of all Holders from time to time of this Warrant and shall be enforceable by any such Holder or holder of Warrant Shares. 

        (h)    Amendment.    This Warrant may be modified or amended or the provisions hereof waived with the written consent
of the Company and the Holder; provided, however, if this Warrant is subsequently transferred to other
Persons, this Warrant may be modified or amended or the 

7

 

provisions
hereof waived with the written consent of such transferees (and the original Holder if such Holder holds any part of the Warrant at such time) holding Warrant(s) exercisable into a majority
of the Warrant Shares then issuable under the Warrants derived from the initial Warrant. 

        (i)    Severability.    Wherever possible, each provision of this Warrant shall be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this Warrant shall be prohibited by or invalid under applicable law, such provision shall be ineffective to the extent of such
prohibition or invalidity, without invalidating the remainder of such provisions or the remaining provisions of this Warrant. 

        (j)    Headings.    The headings used in this Warrant are for the convenience of reference only and shall not, for any
purpose, be deemed a part of this Warrant. 

********************

8

 

        IN
WITNESS WHEREOF, the Company has caused this Warrant to be executed by its officer thereunto duly authorized. 

Dated:
June 30, 2003 

	 	 	AKSYS, LTD
	

 	
 	

By:	

/s/  LAWRENCE D. DAMRON      
 Name: Lawrence D. Damron

Title: SVP & CFO

9

 
 

NOTICE OF EXERCISE    
    

	To:
	Aksys, Ltd

        (1)   The
undersigned hereby elects to purchase            Warrant Shares of Aksys, Ltd pursuant to the terms of the attached Warrant (only if exercised in full),
and tenders herewith payment of the exercise price in full, together with all applicable transfer taxes, if any. 

        (2)   Please
issue a certificate or certificates representing said Warrant Shares in the name of the undersigned or in such other name as is specified below: 

The
Warrant Shares shall be delivered to the following DTC account: 

   

   

	 	 	[PURCHASER]
	

 	
 	

By:	

    
 Name:

Title:
	

Dated:	

    

 
 

ASSIGNMENT FORM    
    

(To
assign the foregoing warrant, execute

this form and supply required information.

Do not use this form to exercise the warrant.) 

        FOR
VALUE RECEIVED, the foregoing Warrant and all rights evidenced thereby are hereby assigned to 

___________________________________________
whose address is 

_________________________________________________________

_________________________________________________________

Dated:
_________, ____ 

Holder's
Signature:
________________________                                     
                     
 

Holder's
Address:
________________________                                     
                     

________________________                                    
                      

Signature
Guaranteed: ______________________________________ 

NOTE:
The signature to this Assignment Form must correspond with the name as it appears on the face of the Warrant, without alteration or enlargement or any change whatsoever, and must be guaranteed
by a bank or trust company. Officers of corporations and those acting in a fiduciary or other representative capacity should file proper evidence of authority to assign the foregoing Warrant. 

QuickLinks

Exhibit 4.1

EXHIBIT A

COMMON STOCK PURCHASE WARRANT

Aksys, Ltd

NOTICE OF EXERCISE

ASSIGNMENT FORM

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