Document:

Exhibit 10.1

 

SETTLEMENT AGREEMENT
AND MUTUAL RELEASE

 

This SETTLEMENT
AGREEMENT AND MUTUAL RELEASE (the “Agreement”) is entered
into by and among Aksys, Ltd., a
Delaware corporation (“Aksys”); Durus
Life Sciences Master Fund Ltd., a Cayman Islands company (the “Fund”);
Scott Sacane,  a Connecticut resident (“Sacane”); Durus Capital Management, LLC, a Delaware
limited liability company (“Durus”); Durus
Capital Management (N.A.), LLC,  a Delaware limited liability company (“Durus
N.A.”); and Artal Long Biotech Portfolio
LLC, a Delaware limited liability company (“Artal”).  Aksys, the Fund, Sacane, Durus, Durus N.A.
and Artal are collectively referred to herein as the “Parties”, and each
is individually referred to as a “Party.”  The Fund, Sacane, Durus, Durus N.A. and Artal are collectively
referred to herein as “Defendants”, and each is individually referred to
as a “Defendant.”  Unless
otherwise provided herein, capitalized terms used herein without definition
have the meanings given to them in the Rights Agreement (as defined below).

 

WHEREAS, as of the
date hereof, the Fund is the record owner and beneficial owner (as such term is
defined in Rule 13d-3 of the Securities Exchange Act of 1934, as amended
(the “Exchange Act”)) of 21,333,118 shares of Aksys common stock (which
amount includes 281,454 shares of Aksys common stock issuable upon exercise of
warrants (the “Warrants”) and is net of the Short Position referred to
(and as defined in) Section 3(e) hereof) (the “Fund Shares”) and
Artal is the beneficial owner of 498,100 shares of Aksys common stock (together
with the Fund Shares, the “Shares”);

 

WHEREAS, on
April 11, 2003, Aksys, Sacane and Durus entered into an agreement relating
to Aksys common stock held by the Fund (the “April 2003 Agreement”);

 

WHEREAS, on
August 5, 2003, Aksys filed a three-count lawsuit against Defendants (the
“Complaint”) in the United States District Court, District of
Connecticut (the “Court”), Case No. 03-CV-1349 (RNC) (the “Litigation”).  Count III of the Complaint, which sought disgorgement
of profits under Section 16(b) of the Exchange Act, was settled pursuant
to an agreement among the Parties dated January 12, 2004 and dismissed
pursuant to a Court order of that same date. 
Counts I and II of the Complaint allege, respectively, breach of
the April 2003 Agreement and violation of Section 13(d) of the Exchange
Act;

 

WHEREAS,
Aksys and the Fund entered into a Standstill Agreement dated as of
October 9, 2003 (the “October 2003 Agreement”);

 

WHEREAS,
Defendants, on the one hand, and Aksys, on the other hand, desire in this
Agreement and pursuant to the terms set forth below fully and finally to
settle, resolve and specifically release each other and certain related parties
from all claims that they may have, whether or not heretofore asserted,
relating to or arising from or otherwise involving the acquisition, ownership,
trading or disposition of shares of Aksys common stock on or before the date
hereof, the application of the Rights Agreement, dated as of October 28,
1996, between Aksys and EquiServe Trust Company, N.A., as successor Rights
Agent to First Chicago Trust

 

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Company of New York (the “Rights Agreement”), or any other
agreements or understandings, or otherwise arising between or among them,
including without limitation Counts I and II of the Complaint and any
claims relating to or arising under the April 2003 Agreement, the
October 2003 Agreement or the Rights Agreement; provided, that
nothing in this Agreement shall limit (i) the rights of the Fund or Artal
to sue Sacane, Durus, Durus N.A. and any of their past or present employees,
officers, directors, managers and members (collectively, the “Sacane Parties”)
for any and all causes of action and claims, or (ii) the rights of any one
or more of the Sacane Parties to sue the Fund or Artal and any of their
respective past or present employees, officers, directors, managers and
members;

 

NOW, THEREFORE,
in consideration of the mutual promises and covenants contained in this Agreement,
it is hereby agreed by and among the Parties as follows:

 

1.                                       DISMISSAL OF
THE COMPLAINT WITH PREJUDICE AGAINST ALL OF THE DEFENDANTS.  Aksys hereby agrees to seek, and
the Parties agree to take all reasonable steps to obtain, as promptly as
possible, Court approval of dismissal, with prejudice, of the Complaint in its
entirety by filing a Stipulation of Dismissal of the Complaint (the “Stipulation
of Dismissal”) substantially in the form annexed in Exhibit A hereto on the
latest of the dates that each Party executes this Agreement (the “Effective
Date”) or within one business day thereafter.

 

2.                                       AMENDMENT TO RIGHTS AGREEMENT.

 

(a)                                  Amendment
of Rights Agreement.  Concurrently
with the execution of this Agreement, Aksys is entering into the First Amendment
to Rights Agreement in the form annexed as Exhibit B hereto (the “Rights
Amendment”).

 

(b)                                 Future
Rights Agreements or Other Similar Actions.  Aksys shall not amend the Rights Agreement, adopt or implement
any rights agreement or any other similar plan or arrangement, or take any
other actions (outside of the Rights Agreement) having a disproportionate or
other disparate effect upon the holders of shares based on the number of shares
held by such holder, that does not provide for substantially similar exemptions,
protections and other provisions with respect to the Defendants as those
provided in this Agreement and the other Transaction Agreements (as defined
below).  Notwithstanding anything to the
contrary herein, upon expiration or termination of the Rights Agreement, Aksys
may adopt a successor rights agreement or similar arrangement, provided,
that such successor rights agreement or similar arrangement provides
substantially similar exemptions, protections and other provisions with respect
to the Defendants as those provided in this Agreement and the other Transaction
Agreements.

 

(c)                                  Dispute
Resolution Procedures.  Any dispute
or controversy arising under the Rights Amendment regarding whether any
Designated Person (as defined in the Rights Amendment) shall have materially
breached Section 5(a) or 6(a) of this Agreement for purposes of the Rights
Amendment (a “Rights Claim”) shall be settled through arbitration in
accordance with the procedures set forth in this Section 2(c).  Such procedures shall not apply to any other
claims, controversies or disputes between any of the Parties.

 

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(i)                                     Aksys or the applicable Defendant shall
submit a Rights Claim to arbitration administered by the American Arbitration
Association (“AAA”) in accordance with its then existing Commercial
Arbitration Rules for Large, Complex Commercial Disputes (the “AAA Rules”).  The arbitrators shall have no authority
other than to determine whether there has been a material breach of Section 5(a)
or 6(a) of this Agreement for purposes of the Rights Amendment.  Notwithstanding anything to the contrary in
this Agreement or any other Transaction Agreement, no Exempt Person shall lose
its status as an Exempt Person pursuant to the second proviso of clause (vii)
of the definition of Exempt Person as provided in the Rights Amendment until
the arbitrators shall have finally determined pursuant to these procedures that
such Person has materially violated Section 5(a) or 6(a) hereof, taking
into account the notice and cure provisions herein.

 

(ii)                                  After the time provided for cure in
Section 5(c) or 6(e), as applicable, has lapsed, Aksys or the
applicable Defendant (the “Initiating Party”) may commence such
arbitration by (A) submitting a Demand for Arbitration under the AAA Rules
(“Demand for Arbitration”) and (B) notifying in writing the
applicable Defendant or Aksys, as the case may be (collectively, the “Respondent”).  Such notice shall set forth in reasonable
detail the basic operative facts upon which the Initiating Party is making the
Rights Claim and reference specifically the affected clauses of this
Agreement.  After the Demand for
Arbitration, response and counterclaim, if any, and reply to counterclaim, if
any, have been submitted, the arbitrators shall permit either the Initiating
Party or the Respondent to propose additional issues for resolution in the
pending proceedings.

 

(iii)                               The parties shall attempt, by agreement, to
appoint a sole arbitrator for confirmation by the AAA.  If the parties fail so to appoint a sole
arbitrator within 20 days after the commencement of the arbitration
proceedings, a board of three arbitrators shall be appointed by the parties
jointly or, if the parties cannot agree as to three arbitrators within 20 days after
the commencement of the arbitration proceeding, then one arbitrator shall be
appointed by the Initiating Party and one arbitrator shall be appointed by the
Respondent each within 35 days after the commencement of the arbitration
proceeding and the third arbitrator shall be appointed by mutual agreement of
such two arbitrators.  If such two
arbitrators shall fail to agree within 40 days after commencement of the
arbitration proceeding upon the appointment of the third arbitrator, the third
arbitrator shall be appointed by the AAA in accordance with the AAA Rules.  Notwithstanding the foregoing, if any party
shall fail to appoint an arbitrator within the specified time period, such
arbitrator and the third arbitrator shall be appointed by the AAA in accordance
with the AAA Rules.  For purposes of
this Section, the “commencement of the arbitration proceeding” shall be deemed
to be the date upon which the Demand for Arbitration has been delivered to the
Respondent in accordance with clause (ii).

 

(iv)                              After the appointment of the arbitrators, the
parties to the arbitration shall have the right to take depositions, ask
interrogatories, obtain documentation and to obtain other discovery regarding
the subject matter of the arbitration, and, to that end, to use and exercise
all the same rights, remedies, and procedures, and be subject to all of the
same duties, liabilities, and obligations in the arbitration with respect to
the subject matter thereof.  Before any
discovery is initiated, the parties shall reach agreement with the arbitrators
on a streamlined and expedited discovery program in order to save costs and
avoid unnecessary delay in completing any arbitration.

 

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(v)                                 A hearing on the Rights Claim shall commence
within 30 days following appointment and confirmation of the arbitrators.  The decision of the arbitrators shall be
rendered no later than 30 days after commencement of such hearing.

 

(vi)                              Any decision shall be rendered by a majority
of the arbitrators.  The arbitrators
shall issue to Aksys and the applicable Defendant a written explanation of the
reasons for their decision and a full statement of the facts as found and the
rules of law applied.  The arbitrators’
decision rendered in connection with an arbitration pursuant to this Section
shall be final and binding upon Aksys and the applicable Defendant.  The arbitral award shall be conclusive proof
of the validity of the determinations of the arbitrations set forth in the
award.

 

(vii)                           The place of arbitration shall be in the
State of Delaware.

 

(viii)                        In reaching their decision, the arbitrators
shall follow the substantive law of the State of Delaware.

 

(ix)                                All proceedings and all documents prepared in
connection with any arbitration conducted hereunder shall be confidential and
the subject matter thereof shall not be disclosed to any Person other than the
parties to the proceedings, their Affiliates, their counsel, witnesses and
experts, the arbitrator, and, if involved, the court and court staff; provided,
that the parties to the proceedings and their Affiliates may disclose such
proceedings and documents if required by law. 
All documents filed with the arbitrator or with a court shall be filed
under seal.  The parties shall stipulate
to all arbitration and court orders necessary to effectuate fully the
provisions of this Section concerning confidentiality.

 

3.                                       THE SELL-DOWN PERIOD.

 

(a)                                  Cooperation.  Aksys shall use its commercially reasonable
efforts to facilitate the disposition of the Shares and the Warrants by the
Fund and Artal and their respective Permitted Transferees under (and as defined
in) the Registration Rights Agreement (as defined below), and, upon any
exchange of the Note (as defined below) for New Shares (as defined below), the
New Shares, and will cooperate with the Fund’s and Artal’s reasonable requests
in that regard consistent with the terms hereof and the other Transaction
Agreements.

 

(b)                                 Permitted
Disposition.  The Fund and Artal may
dispose of the Shares and Warrants, and the New Shares, in one or more public
and/or private offerings with the decision as to the type of disposition(s) and
whether or not to use any underwriters to be made by the Fund consistent with
the terms hereof and the other Transaction Agreements.

 

(c)                                  Registration
Rights Agreement.  Concurrently with
the execution of this Agreement, Aksys, the Fund and Artal are entering into a
Registration Rights Agreement in the form annexed as Exhibit C hereto (the “Registration
Rights Agreement”) providing for, among other things, the preparation and
effectiveness of one or more registration statements covering the Shares,
Warrants and New Shares (together with the appropriate amendments and
supplements thereto, the “Registration Statement(s)”).

 

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(d)                                 Related
Agreements.  Aksys shall enter into
underwriting or distribution agreements on reasonable terms with any
underwriter(s) or broker dealer(s) selected by the Fund (subject to Aksys’
approval, which shall not be unreasonably withheld) to distribute securities
selected by the Fund, Artal and/or their Permitted Transferees.  Aksys agrees that any nationally recognized underwriter(s) and/or broker
dealer(s) that acquire Shares from any
Exempt Person as part of a distribution by such Exempt Person of the Shares
(that is, for the purpose of re-sale to investors), whether pursuant to an
underwritten offering, block trade, agented distribution or any other bona fide
distribution of the Shares, shall be deemed to be “Exempt Persons” under the
Rights Agreement.

 

(e)                                  Short
Position.  With respect to the
Fund’s existing short position of 165,000 shares of Aksys common stock (the “Short
Position”), subject to its obligations under Applicable Law (as defined
below), Aksys shall cooperate with the Fund in closing out such short position,
including, without limitation, by delivering instructions to its transfer agent
to release the “matching” shares and taking such other reasonable actions as
the Fund may request.

 

(f)                                    Stock
Certificates.  Aksys agrees that the
Fund may take possession of the certificates representing its shares of Aksys
common stock from Schulte Roth & Zabel LLP, with whom the certificates were
deposited pursuant to the October 2003 Agreement, at any time.  Aksys on the date hereof shall instruct its
transfer agent to remove immediately upon receipt of those certificates the
restrictive legends endorsed on those certificates pursuant to the
October 2003 Agreement.

 

(g)                                 Limitation
on Transfers to 10% Holders.  Each
Defendant covenants that it shall not sell, assign, convey, distribute,
transfer or otherwise dispose of any of the Shares to any Person which, at the
time of such transfer or as a result of such transfer, such Defendant knows
(based on information reasonably available to such Defendant) would
beneficially own in excess of 10% of Aksys’ then-outstanding common stock,
except to:

 

(i)                                     any
Person with the written consent of Aksys, which consent shall not be
unreasonably withheld, provided, that in no event shall a Defendant make
any transfer pursuant to this clause (i) to any Person that such Defendant
knows would beneficially own in excess of 14.99% of Aksys’ then-outstanding
common stock (based on information reasonably available to such Defendant);

 

(ii)                                  any
Permitted Transferee, unless such Defendant knows (based on information
reasonably available to such Defendant) that such Person would beneficially own
in excess of 14.99% of Aksys’ then-outstanding common stock;

 

(iii)                               any
nationally recognized underwriter(s) and/or broker dealer(s) as part of a distribution by such Defendant
of the Shares (that is, for the purpose of re-sale to investors), whether
pursuant to an underwritten offering, block trade, agented distribution or any
other bona fide distribution of the Shares;

 

(iv)                              any
Person in a distribution by such Defendant to its direct or indirect equity or
other interest holders (including any Permitted Transferee) pro rata in
accordance with

 

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such distributees’ respective pro rata shares of the Defendant’s equity
or other interests, provided, that if any such Person acquires in such
distribution beneficial ownership of shares of Aksys common stock in excess of
14.99% of Aksys’ then-outstanding common stock, then such Person shall be
subject to the provisions of Sections 5 and 6 hereof as if it were a
Defendant hereunder (and shall so confirm in writing to Aksys); and

 

(v)                                 any
holder of a proxy granted pursuant to Section 6(d) hereof.

 

(h)                                 Reasonable
Best Efforts.  Each Defendant shall
use reasonable best efforts to dispose of its Shares as promptly as
practicable; provided, that no Defendant shall be required to accept a
price or other terms for its Shares that it deems in its discretion not
acceptable.

 

4.                                       FINANCIAL
TERMS.

 

(a)                                  Approval
Payment.  Immediately following
execution of this Agreement and receipt of the Court’s order approving the
Stipulation of Dismissal (the “Order”), each of the Fund and Artal,
respectively, shall as soon as possible, and in no event later than two (2)
business days thereafter, deliver, in immediately available funds, to Aksys
(1) $17,640,000 in the case of the Fund and (2) $360,000 in the case
of Artal.

 

(b)                                 Registration
Statement Effectiveness Payment. 
Following receipt of the Order, upon the Initial Registration Statement
(as defined in the Registration Rights Agreement) being declared effective by
the Securities and Exchange Commission, each of the Fund and Artal,
respectively, shall as soon as possible, and in no event later than two (2)
business days thereafter, deliver, in immediately available funds, to Aksys an
additional (1) $9,800,000 in the case of the Fund and (2) $200,000 in
the case of Artal.

 

(c)                                  Purchase
of Subordinated Note.  Aksys shall
sell to each of the Fund and Artal, respectively, and each of the Fund and
Artal, respectively, shall purchase from Aksys, a redeemable exchangeable
subordinated note (each, a “Note,” and any shares of Aksys common stock
issuable upon exchange of a Note, the “New Shares”), for an aggregate
purchase price of (1) $15,778,000, in the case of the Fund, and
(2) $322,000, in the case of Artal, pursuant to a Note Purchase Agreement
in the form annexed as Exhibit D hereto  (the
“Note Purchase Agreement”).  The
Note Purchase Agreement is being executed concurrently with the execution and
delivery of this Agreement.  The closing
of the purchase of the Note shall be concurrent with the payments described in
Section 4(a) above.

 

5.                                       DEFENDANTS’ STANDSTILL COVENANTS.

 

(a)                                  Control Matters. 
Except for the acquisition of the Note and the New Shares, if any, each
Defendant covenants that, until such time as the combined ownership of Voting
Securities (as defined below) by (i) the Fund and, to the Fund’s knowledge
(based on information reasonably available to the Fund), its Affiliates and
Associates, (ii) such Defendant (if other than the Fund) and, to such
Defendant’s knowledge (based on information reasonably available to such
Defendant), its Affiliates and Associates, and (iii) to the knowledge of
such Defendant (based on information reasonably available to such Defendant),
all other Defendants

 

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and their respective Affiliates and Associates (with respect to each
Defendant, the Voting Securities described in clauses (i), (ii) and (iii),
collectively (but without double-counting), are referred to as such Defendant’s
“known Aggregate Ownership”) is less than 15% of the then-outstanding
Aksys common stock, it shall not, and shall not permit any of its Affiliates
controlled by it or its Associates controlled by it to:

 

(i)                                     acquire,
offer to acquire or agree to acquire, by purchase or otherwise, beneficial
ownership of any of Aksys’ securities, except pursuant to the Note or the Note
Purchase Agreement or as a result of a stock split, stock dividend,
distribution, merger, recapitalization, exchange or similar transaction or any
Exempt Event or the exercise of any rights in connection with an Exempt Event;

 

(ii)                                  make
or participate in any “solicitation” of “proxies” to vote (as such terms are
defined in Rule 14a-1 under the Exchange Act), or solicit any consent or
otherwise seek to advise or influence any individual, firm, corporation,
partnership, joint venture, association, trust, unincorporated organization or
other entity or group (as such term is used in Section 13(d)(3) of the
Exchange Act) (a “Person”) with respect to the voting of any Voting
Securities, in each case only if and to the extent such solicitation, advice or
influence is in connection with a Control Matter, or become a “participant” (as
such term is used in Schedule 14A under the Exchange Act) in any election
contest with respect to members of the Aksys Board (as defined below);

 

(iii)                               form,
or join with others in the formation of, any new “person” within the meaning of
Section 13(d)(3) of the Exchange Act with respect to any Voting Securities
in connection with a Control Matter;

 

(iv)                              deposit
any Voting Securities into a voting trust or subject any such Voting Securities
to any arrangement or agreement with respect to the voting thereof in
connection with a Control Matter (other than a proxy granted pursuant to
Section 6(d) hereof);

 

(v)                                 initiate,
propose or otherwise solicit stockholders for the approval of one or more
stockholder proposals with respect to Aksys as described in Rule 14a-8
under the Exchange Act, or induce or attempt to induce any other Person to
initiate any stockholder proposal, in each case in connection with a Control
Matter;

 

(vi)                              seek
election to or seek to place a representative on the Aksys Board or seek the
removal of any member of the Aksys Board;

 

(vii)                           call or
seek to have called any meeting of the stockholders of Aksys; or

 

(viii)                        make any
press release or public proposal with respect to any form of business
combination transaction involving Aksys, including, without limitation, a
merger, exchange offer or liquidation of Aksys’ assets, or any restructuring,
recapitalization or similar transaction with respect to Aksys.

 

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(b)                                 Other
Matters.  Each Defendant further covenants that, until such time as its
known Aggregate Ownership is less than 15% of the then-outstanding Aksys common
stock, it shall not, and shall not permit any of its Affiliates controlled by
it or its Associates controlled by it to:

 

(i)                                     make
or participate in any “solicitation” of “proxies” to vote (as such terms are
defined in Rule 14a-1 under the Exchange Act), or solicit any consent or
otherwise seek to advise or influence any Person with respect to the voting of
any Voting Securities in connection with any matter other than a Control
Matter;

 

(ii)                                  deposit
any Voting Securities into a voting trust or subject any such Voting Securities
to any arrangement or agreement with respect to the voting thereof in connection
with any matter other than a Control Matter (other than a proxy granted
pursuant to Section 6(d) hereof); or

 

(iii)                               initiate,
propose or otherwise solicit stockholders for the approval of one or more
stockholder proposals with respect to Aksys as described in Rule 14a-8
under the Exchange Act, or induce or attempt to induce any other Person to
initiate any stockholder proposal, in each case other than in connection with a
Control Matter.

 

(c)                                  Notice
And Cure.  In the event that Aksys believes that a
Defendant is in material breach of any of the covenants set forth in
Section 5(a) or (b) (without regard to the first proviso in the following
sentence) (for purposes of this Section 5(c), a “Potential Breach”),
Aksys shall provide such Defendant with written notice that specifies the
Potential Breach in reasonable detail (based on information reasonably
available to Aksys), and such Defendant shall have the opportunity to cure the
Potential Breach (including by ceasing and correcting in all material respects
the allegedly breaching conduct) as described in the following sentence.  Such Defendant shall use its reasonable best
efforts to cure such Potential Breach as soon as practicable after receipt of
such notice from Aksys, but in any event such Defendant shall complete such
cure, in order for such cure to be effective, within 30 days of receipt of such
notice; provided, that, notwithstanding anything herein to the contrary,
no breach shall be deemed to have occurred unless the breach shall not have
been cured in all material respects prior to the end of the 30th day
following the date of such notice; and provided, further, that
nothing herein shall prevent Aksys from seeking interim equitable relief during
such 30-day period.

 

(d)                                 Investor
Communications.  The Parties
acknowledge that the Fund in the ordinary course of business will communicate
with its shareholders and investors and their respective managers, members,
control persons, officers and directors, and that, notwithstanding anything in
this Agreement to the contrary, no such communications shall violate any of the
provisions of this Section 5 so long as such communications occur in the
ordinary course of business and are not made with the intent of encouraging or
initiating any Control Matter prohibited under Section 5(a) above.

 

(e)                                  Defendant
Voting.  Notwithstanding anything in
this Agreement to the contrary, none of the provisions of Section 5(a) or
(b) shall restrict the voting by any Defendant of any

 

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Shares which such Defendant is permitted to vote in its own discretion
pursuant to Section 6 hereof.

 

(f)                                    Certain
Definitions.  For purposes of this
Agreement:

 

(i)                                     “Voting
Securities” means any securities entitled to vote generally on matters submitted
for a vote of stockholders of Aksys, or any direct or indirect rights or
options to acquire any such securities or any securities convertible into or
exercisable or exchangeable for such securities.

 

(ii)                                  “Control
Matter” means any proposal or transaction concerning or involving
(A) the control of a majority of the outstanding Voting Securities,
(B) the election or removal of members of the Aksys Board, (C) a
business combination transaction involving Aksys, including, without limitation,
any merger, reorganization, recapitalization, sale of all or substantially all
assets or similar transaction with respect to Aksys, or (D) any other
matter proposed to Aksys’ shareholders, including, without limitation, changes
to Aksys’ certificate of incorporation or bylaws, that pertains to takeover
defenses or a change in control of Aksys.

 

6.                                       VOTING AGREEMENT.

 

(a)                                  2004
Annual Meeting Election of Directors. 
Each Defendant shall authorize Aksys’ chief executive officer and/or
chief financial officer as its proxy to vote at the 2004 annual meeting of
Aksys shareholders, to be held in May 2004 (the “2004 Annual Meeting”),
all Shares owned by it of record or for which it has the power to direct the
vote as of the record date for the 2004 Annual Meeting in favor of the election
of William C. Dow and Dekle W. Rountree, Jr. to the Aksys Board.

 

(b)                                 Other
Voting.  In connection with any
other vote of Aksys stockholders, including any vote to be held at the 2004
Annual Meeting, each Defendant shall authorize a third party selected by the
Fund with the consent of Aksys (such consent not to be unreasonably withheld)
or, if no such third party shall have been selected by the end of the 30th
day following the Effective Date, Aksys’ chief executive officer and/or chief
financial officer (in either case, the “Voting Designee”) as its proxy
to vote all Shares owned by it of record or for which it has the power to
direct the vote as of the record date for such vote:

 

(i)                                     at
the 2004 Annual Meeting, in the case of any stockholder proposal (as described
in Rule 14a-8 under the Exchange Act) being acted upon by the
shareholders, as directed by a majority of the independent members of the Aksys
Board (as defined under the rules of the National Association of Securities
Dealers), and

 

(ii)                                  for
all other matters, in proportion to the votes cast by all other holders of
Aksys common stock (other than other Defendants);

 

provided,
that from and after certification by the Fund to Aksys that its known Aggregate
Ownership is less than 50% of the then-outstanding Aksys common stock, the
Voting Designee shall vote as provided above only those of Defendants’ Shares
that are in excess of 14.99% of the

 

9

 

then-outstanding Aksys common
stock (with the Fund to designate which of the Defendants’ Shares are to be so
voted by the Voting Designee) and the Defendants’ remaining Shares may be voted
at each Defendant’s discretion.

 

(c)                                  Termination
of Voting.  From and after
certification by the Fund to Aksys that the Fund’s known Aggregate Ownership is
less than 15% of the then-outstanding Aksys common stock, the voting and other
rights, if any, of the Voting Designee (and, if applicable, the proxies
specified in Section 6(a) above) with respect to the Shares shall be
discontinued.

 

(d)                                 Proxies.  Each Defendant that as of the date hereof
owns of record or holds the power to direct the vote of any Shares shall
execute irrevocable proxies in the forms annexed as Exhibit E hereto.

 

(e)                                  Notice
And Cure.  In the event that Aksys believes that a
Defendant is in material breach of any of the covenants set forth in
Section 6(a) or (b) (without regard to the first proviso in the following
sentence) (for purposes of this Section 6(e), a “Potential Breach”),
Aksys shall provide such Defendant with written notice that specifies the
Potential Breach in reasonable detail (based on information reasonably
available to Aksys), and such Defendant shall have the opportunity to cure the
Potential Breach (including by ceasing and correcting in all material respects
the allegedly breaching conduct) as described in the following sentence.  Such Defendant shall use its reasonable best
efforts to cure such Potential Breach as soon as practicable after receipt of
such notice from Aksys, but in any event such Defendant shall complete such
cure, in order for such cure to be effective, within 10 days of receipt of such
notice; provided, that, notwithstanding anything herein to the contrary,
no breach shall be deemed to have occurred unless the breach shall not have
been cured in all material respects prior to the end of the 10th day
following the date of such notice; provided, further, that
nothing herein shall prevent Aksys from seeking interim equitable relief during
such 10-day period; and provided, further, that nothing herein
shall prevent Aksys from exercising any rights otherwise available to it under
its organizational documents or Applicable Laws to postpone any shareholder
meeting or action by written consent in order to facilitate a cure and
correction of such Potential Breach.

 

7.                                       ACCESS RIGHTS. 
Until such time as the Fund’s known Aggregate Ownership is
less than 15% of the then-outstanding Aksys common stock, Aksys shall provide
the Fund with reasonable access to Aksys’ senior management and members of the
Aksys Board, including, without limitation, the opportunity to meet with
members of the Aksys Board immediately prior to or after each regular meeting
of the Aksys Board (at the site of such meeting, if so desired by the Fund),
and shall cause such senior managers and members of the Aksys Board to discuss
in good faith issues raised by the Fund. 
Aksys shall give the Fund at least 5 business days’ notice of any
regular meeting of the Aksys Board and, if requested by the Fund, the agenda
items for such meetings.

 

8.                                       NO
ASSIGNMENT.  The Parties
represent and warrant that they have not assigned, transferred or conveyed to
any other Person any claim or portion thereof or interest therein relating to
any of the matters that are the subject of this Agreement.

 

10

 

9.                                       RELEASE OF
THE DEFENDANTS.  On the Effective Date and subject to
Court approval of the Order, Aksys, for (i) itself and its affiliates
(other than the Fund, to the extent the Fund might otherwise be deemed to be an
affiliate of Aksys) and subsidiaries, predecessor and successor corporations or
entities, (ii) any and all of their respective past, present and future
officers, directors, employees, agents, representatives and attorneys, and
(iii) any and all other persons, firms, corporations and entities that
could or might act on its behalf, does hereby fully, finally and forever
release, remise, discharge and acquit each of the Defendants, their affiliates
and subsidiaries, predecessor and successor corporations or entities, any and
all of their respective past, present and future managers, investors, members,
partners, officers, directors, employees, agents, representatives and
attorneys, permitted assigns and transferees, and any and all other persons,
firms, corporations and entities that could or might act on its behalf,
including, without limitation, Durus Life Sciences Fund, LLC and Durus Life
Sciences International Fund Ltd., from and against any and all claims, actions,
causes of action, debts, damages, demands, offsets, payments, costs, attorneys’
fees, obligations of every kind and nature, rights, liabilities, charges,
expenses, contracts, promises and agreements (collectively, “Claims”)
arising out of conduct to date, whether direct or indirect, regardless of the
legal theory upon which they are based, whether known or unknown, now existing
or arising at any time in the future, and whether liquidated or unliquidated,
including, but not limited to, all Claims arising out of conduct to date
relating to or arising from the acquisition, ownership, trading or disposition
of shares of Aksys common stock, all Claims arising out of conduct to date
relating to or arising under the April 2003 Agreement, the
October 2003 Agreement or the Rights Agreement and all Claims arising out
of conduct to date that were asserted or that could have been asserted in the
Litigation.

 

10.                                 RELEASE OF
AKSYS.  On the Effective Date
and subject to Court approval of the Order, each Defendant, for (i) itself
and its affiliates (other than, in the case of the Fund, Aksys, to the extent
Aksys might otherwise be deemed to be an affiliate of the Fund) and
subsidiaries, predecessor and successor corporations or entities, (ii) any
and all of their respective past, present and future officers, directors,
employees, agents, representatives and attorneys, and (iii) any and all
other persons, firms, corporations and entities that could or might act on its
behalf, does hereby fully, finally and forever release, remise, discharge and
acquit Aksys, its affiliates and subsidiaries, predecessor and successor
corporations or entities, any and all of their respective past, present and
future managers, partners, officers, directors, employees, agents,
representatives and attorneys, permitted assigns and transferees, and any and
all other persons, firms, corporations and entities that could or might act on
its behalf, from and against any and all Claims arising out of conduct to date,
whether direct or indirect, regardless of the legal theory upon which they are
based, whether known or unknown, now existing or arising at any time in the
future, and whether liquidated or unliquidated, including, but not limited to,
all Claims arising out of conduct to date relating to or arising from the
acquisition, ownership, trading or disposition of the shares of Aksys common
stock, all Claims arising out of conduct to date relating to or arising under
the April 2003 Agreement, the October 2003 Agreement or the Rights
Agreement and all Claims arising out of conduct to date that were asserted or
that could have been asserted in the Litigation.

 

11

 

11.                                 REPRESENTATIONS
AND WARRANTIES.

 

(a)                                  Mutual
Representations and Warranties. 
Each Defendant, on the one hand, represents and warrants to Aksys, and
Aksys, on the other hand, represents and warrants to each Defendant, as
follows:

 

(i)                                     It
has the right, power and authority to enter into and to perform its obligations
under those of the Transaction Agreements to which it is or is contemplated to
be a party.  The execution, delivery and
performance by it of each Transaction Agreement to which it is or is
contemplated to be a party have been duly authorized by all necessary action on
its part.  Each Transaction Agreement to
which it is or is contemplated to be a party has been duly executed and
delivered and constitutes its valid and binding obligation, enforceable in
accordance with its terms.

 

(ii)                                  The
execution and delivery of each Transaction Agreement to which it is or is
contemplated to be a party, and the consummation of the transactions
contemplated thereby, by it will not, directly or indirectly (with or without
notice or lapse of time): 
(A) contravene, conflict with or result in a violation of
(1) any provisions of its certificate or articles of incorporation,
bylaws, management agreement, operating agreement, partnership agreement or
similar governing document or (2) any resolution adopted by its board of
directors or any committee thereof or shareholders, (B) contravene,
conflict with or result in a violation of, or give any governmental authority,
agency or entity of any kind whatsoever, including without limitation any
quasi-governmental agency, self-regulatory organization, arbitrator or arbitral
panel (a “Governmental Body”) the right to exercise any remedy or obtain
any relief under, any federal, state, local or foreign statute, law, ordinance,
rule, regulation, judgment, decree, order, concession, grant, franchise, permit
or other governmental authorization or approval (collectively, “Applicable
Law”), or (C) contravene, conflict with or result in a violation or
breach of, or default under, any provision of any contract to which it is a
party or may be bound.

 

(b)                                 Additional
Representations and Warranties and Covenants of Aksys.  Aksys additionally represents and warrants
to each Defendant as follows:

 

(i)                                     to
Aksys’ knowledge, no past or present Aksys shareholder has made or threatened
to make any claims with respect to the acquisition, ownership, trading or
disposition of shares of Aksys common stock by any of the Defendants, other
than as previously disclosed in writing to the Fund; and

 

(ii)                                  the
Rights Amendment has been adopted and approved by a unanimous vote of the
members of the board of directors of Aksys (the “Aksys Board”), has been
duly executed and delivered by Aksys, and will be effective, without any
further action by any Person, immediately upon the Court’s approval of the
Stipulation of Dismissal, and there has not been any Stock Acquisition Date
based on the stock ownership of any Defendant, individually or collectively,
and there has not been any Distribution Date under the Rights Agreement.

 

Aksys shall
cause the Rights Agent to duly execute and deliver a counterpart to the Rights
Amendment as soon as practicable, and in any event within 1 business day
following the Effective Date.

 

12

 

(c)                                  Additional
Representations and Warranties and Covenants of Defendants.

 

(i)                                     Each
Defendant represents and warrants to Aksys that it does not hold any Shares
with the purpose or intent of controlling Aksys or changing or influencing the
control or management of Aksys or in connection with or as a participant in any
transaction having that purpose or intent.

 

(ii)                                  Each
Defendant covenants that, until such time as such Defendant’s known Aggregate
Ownership is less than 15% of the then-outstanding Aksys common stock, it shall
not in the future hold any Shares with the purpose or intent of controlling
Aksys or changing or influencing the control or management of Aksys or in
connection with or as a participant in any transaction having that purpose or
intent.

 

(iii)                               Each
of the Fund and Artal, respectively, represents and warrants to Aksys that it
is the beneficial owner of that number of Shares indicated on Schedule I
annexed hereto.  Each other Defendant
represents and warrants to Aksys that it does not own any Shares of record or
beneficially, other than indirect interests, if any, in the Shares owned by the
Fund or Artal as represented pursuant to the preceding sentence.

 

(d)                                 Additional
Representation and Warranty of the Fund and Artal.  Each of the Fund and Artal represents and
warrants to Aksys that neither the Sacane Parties nor any Person known to the Fund
or Artal, respectively (based on information reasonably available to it), to be
an Affiliate or Associate of the Sacane Parties has the right to direct the
voting or disposition of any Shares beneficially owned by the Fund or Artal or
to trade securities on the Fund’s or Artal’s behalf or exercise any management
power with respect to the Fund or Artal.

 

12.                                 NOTICES OF
SALES.  Each Defendant, until
such time as such Defendant’s known Aggregate Ownership is less than 15% of the
then-outstanding Aksys common stock, shall notify Aksys promptly in writing of
each sale or other similar disposition by it of any Shares.

 

13.                                 PROHIBITION
AGAINST SHORT SALES.  Each
Defendant covenants that, until such time as such Defendant’s known Aggregate
Ownership is less than 10% of Aksys’ then-outstanding common stock, it will not
engage in short sales of any Aksys common stock.

 

14.                                 VOLUNTARY
AND KNOWINGLY.  The Parties
acknowledge that, before executing this Agreement, they have been advised and
given the opportunity to consult with counsel and have in fact sought and
received advice from counsel of their own choosing, and have been fully advised
of their rights under law.  The Parties
further acknowledge that they have reviewed this Agreement in its entirety,
understand it and voluntarily execute it.

 

15.                                 SACANE
PARTIES.

 

(a)                                  No
Release of Sacane Parties.  Nothing
in this Agreement shall be construed as a release by the Fund or Artal of any
third party or any party other than Aksys, Aksys’ affiliates and subsidiaries,
predecessor and successor corporations and entities, any and all of their
respective past, present and future managers, partners, officers, directors,
employees, agents, representatives and attorneys, permitted assigns and
transferees, and any and all other persons,

 

13

 

firms, corporations and entities that could or might act on Aksys’
behalf.  Without limiting the generality
of the foregoing, nothing in this Agreement shall be construed as a release by
the Fund or Artal of the Sacane Parties, nor shall this Agreement impair in any
way the right of the Fund, Artal, Durus Life Sciences Fund, LLC and Durus Life
Sciences International Fund Ltd., or any of their respective investors,
managers, members and control persons, from asserting any claims at law or in
equity against any of the Sacane Parties. 
Any language to the contrary in this Agreement or any other Transaction
Agreement is superceded by this Section 15(a).

 

(b)                                 No
Release by Sacane Parties.  Nothing in this Agreement shall be construed
as a release by the Sacane Parties of any third party or any party other than
Aksys, Aksys’ affiliates and subsidiaries, predecessor and successor
corporations and entities, any and all of their respective past, present and future
managers, partners, officers, directors, employees, agents, representatives and
attorneys, permitted assigns and transferees, and any and all other persons,
firms, corporations and entities that could or might act on Aksys’ behalf.  Without limiting the generality of the
foregoing, nothing in this Agreement shall be construed as a release by the
Sacane Parties of the Fund, Artal, Durus
Life Sciences Fund, LLC and Durus Life Sciences International Fund Ltd., nor
shall this Agreement impair in any way the right of the Sacane Parties from
asserting any claims at law or in equity against any of the Fund, Artal, Durus
Life Sciences Fund, LLC and Durus Life Sciences International Fund Ltd., or any
of their respective investors.  Any
language to the contrary in this Agreement or any of the other Transaction
Agreements is superceded by this Section 15(b).

 

16.                                 SUFFICIENCY
OF CONSIDERATION.  Other than
the terms set forth in this Agreement, each Defendant, on the one hand, and
Aksys, on the other hand, acknowledges and agrees that no additional
consideration is required or owing to the other arising out of or relating to
the Complaint or other matters covered hereby, and that sufficient
consideration has passed between them by virtue of this Agreement to render this
Agreement and the Transaction Agreements, including the releases herein, valid
and enforceable.  Aksys further
acknowledges that each Defendant, and each Defendant further acknowledges that
Aksys, is relying upon the representations and warranties of such Party, among
other things, in entering into this Agreement.

 

17.                                 ENTIRE
AGREEMENT; MODIFICATION.

 

(a)                                  Entire
Agreement.  This Agreement and the
other Transaction Agreements constitute the complete, final and exclusive
embodiment of the entire agreement among the Parties with regard to the subject
matter hereof.  This Agreement is
entered into without reliance on any promise or representation, written or
oral, other than those expressly contained or referenced herein.  Without limiting the generality of the
foregoing, the April 2003 Agreement and the October 2003 Agreement
are hereby terminated.

 

(b)                                 Modification.  This Agreement may not be modified except in
a writing signed by each Party adversely affected by the proposed amendment.

 

14

 

18.                                 SEVERAL
OBLIGATIONS.  The obligations
of Aksys, the Fund, Artal and the Sacane Parties hereunder are several and not
joint; provided, that the obligations of the Sacane Parties are joint
and several.

 

19.                                 HEIRS,
SUCCESSORS
AND ASSIGNS.  This Agreement
shall bind the heirs, personal representatives, successors, assigns, executors
and administrators of each Party, and inure to the benefit of each Party, its
heirs, personal representatives, successors, assigns, executors and
administrators.

 

20.                                 GOVERNING
LAW.  This Agreement shall be
governed by and construed according to the laws of the State of Delaware
without giving effect to the conflicts or choice of law provisions thereof.

 

21.                                 SEVERABILITY.  If any provision of this Agreement or any
other Transaction Agreement is determined to be invalid, void or unenforceable,
in whole or in part, this determination will not affect any other provision of
this Agreement, and the provision in question shall be modified so as to be rendered
valid and enforceable and to give the applicable Parties the intended benefits
of the provision.

 

22.                                 ENFORCEMENT
ACCORDING TO TERMS.

 

(a)                                  Enforcement.  The Parties intend this Agreement to be
enforced according to its terms.  Each
Defendant, on the one hand, and Aksys, on the other hand, acknowledges and
agrees that Aksys or the Defendants, as the case may be, would suffer
irreparable harm if any of the provisions of this Agreement were not performed
in accordance with their specific terms or were otherwise breached.  Accordingly, each Defendant, on the one
hand, and Aksys, on the other hand, shall be entitled to an injunction or
injunctions (without the need to post any bond) to prevent breaches of this
Agreement by Aksys or the Defendants, as the case may be, and to enforce
specifically its provisions in any court of the United States or any state
having jurisdiction, this being in addition to any other remedy to which any
Party may be entitled at law or in equity.

 

(b)                                 Third
Party Beneficiaries.   The Parties
acknowledge and agree that the provisions of this Agreement and each of the
Transaction Agreements are intended to be for the benefit of, and may be
enforced by, each of the Parties. 
Nothing in this Agreement shall be construed to give any rights to any
third parties to enforce the terms of this Agreement or the Transaction
Agreements, except that third parties who are intended beneficiaries of the
release of claims against them contained in Sections 9 and 10 hereof shall
be entitled to enforce such releases.

 

(c)                                  Limitations.  In the event a third party claim (the “Third
Party Claim”) results in losses for which a Party (the “Claiming Party”)
seeks recovery against another Party (the “Representing Party”) as a
result of breach of the representation and warranty contained in
Section 11(a)(i), 11(a)(ii)(C) and 11(b) hereof:

 

(i)                                     Damages
recoverable from the Representing Party for the breach of the representation
and warranty shall not include losses arising from a general decline in the
price of all Aksys common stock as a result of the Third Party Claim or the
settlement thereof; and

 

15

 

(ii)                                  Damages
recoverable from the Representing Party in the claim for breach of the
representation and warranty shall be limited to the extent that any losses in
the Third Party Claim arose from acts of misconduct at any time by those
individuals who currently are officers or directors of the Claiming Party.

 

23.                                 CONSTRUCTION
AND CERTAIN DEFINED TERMS.

 

(a)                                  Headings.  Descriptive headings are for convenience
only and will not control or affect the meaning or construction of any
provision of this Agreement.

 

(b)                                 Transaction
Agreements.  “Transaction
Agreements” shall mean this Agreement, the Rights Agreement, as amended by
the Rights Amendment, the Registration Rights Agreement, the Note Purchase
Agreement, the Note, and all other agreements, certificates and instruments
contemplated herein or therein.

 

24.                                 WAIVER.  No term or condition of this Agreement shall
be deemed to have been waived, nor shall there be an estoppel against the
enforcement of any provision of this Agreement, except by a written instrument
signed by the Party charged with the waiver or estoppel.  No written waiver shall be deemed a
continuing waiver unless specifically stated therein, and the written waiver
shall operate only as to the specific term or condition waived, and not for the
future or as to any other act than that specifically waived.

 

25.                                 COUNTERPARTS.  This Agreement may be executed in one or
more counterparts, any of which need not contain the signatures of more than
one Party, but all signed counterparts taken together shall constitute one and
the same instrument.  A facsimile
signature shall be deemed as valid as an original signature.

 

26.                                 NOTICES.  All demands, notices, communications and
reports provided for in this Agreement shall be in writing and shall be either
sent by facsimile with confirmation to the number specified below or personally
delivered or sent by reputable overnight courier service (delivery charges
prepaid) to any party at the address specified below.

 

If to Aksys, to:

 

Aksys, Ltd.

Two Marriott Drive

Lincolnshire, Illinois  60069

Attn:                    Chief Executive Officer

Chief Financial Officer

Telecopy:  (847) 229-2235

Telephone:  (847) 229-2020

 

16

 

With a copy to:

 

Kirkland &
Ellis LLP

200 East
Randolph Drive

Chicago,
Illinois  60601

Attn:  Keith S. Crow, P.C.

Telecopy:  (312) 861-2200

Telephone:  (312) 861-2000

 

If to the Fund, to:

 

Durus Life Sciences Master Fund Ltd.

c/o International Fund Services (Ireland) Limited

3rd Floor, Bishops Square

Redmonds Hill

Dublin 2, Ireland

Attn:  Susan Byrne

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

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

 

With a copy to:

 

Schulte Roth & Zabel LLP

919 Third Avenue

New York, NY 10022

Attn:  Paul N. Roth, Esq.

Telecopy: (212) 593-5955

Telephone: (212) 756-2000

 

And an additional copy to:

 

Morrison & Foerster LLP

425 Market Street

San Francisco, CA 94105

Attn:  Gavin Grover, Esq.

Telecopy: (415) 268-7522

Telephone: (415) 268-7113

 

If to Sacane, to:

 

Scott Sacane

20 Marshall Street

Suite 320

Norwalk, Connecticut 06854

Telecopy:   (203) 899-3107

Telephone: (203) 899-3125

 

17

 

With a copy to:

 

The Dontzin Law Firm

6 East 81st Street

New York, New York 10028

Telecopy:   (212) 717-8088

Telephone: (212) 717-2900

 

If to Durus, to:

 

Durus Capital Management, LLC

20 Marshall Street

Suite 320

Norwalk, Connecticut 06854

Telecopy:   (203) 899-3107

Telephone: (203) 899-3125

 

With a copy to:

 

The Dontzin Law Firm

6 East 81st Street

New York, New York 10028

Telecopy:   (212) 717-8088

Telephone: (212) 717-2900

 

If to Durus N.A., to:

 

Durus Capital Management (N.A.), LLC

20 Marshall Street

Suite 320

Norwalk, Connecticut 06854

Telecopy:   (203) 899-3107

Telephone: (203) 899-3125

 

With a copy to:

 

The Dontzin Law Firm

6 East 81st Street

New York, New York 10028

Telecopy:   (212) 717-8088

Telephone: (212) 717-2900

 

18

 

If to Artal, to:

 

Artal Long Biotech Portfolio LLC

c/o Artal Alternative Treasury Management

19A Rue de la Croix-d’or

Geneva

Switzerland

Attn: Christian Tedeschi, Managing Director

 

With a copy to:

 

Shartsis, Friese & Ginsburg LLP

One Maritime Plaza, 18th Floor

San Francisco, CA 94111

Attn: Carolyn Gorman, Esq.

Telecopy: (415) 421-2922

Telephone: (415) 421-6500

 

Any such
demand, notice, communication or report shall be deemed to have been given
pursuant to this Agreement when delivered personally, when confirmed if by
facsimile or on the second business day after deposit with a reputable
overnight courier service, as the case may be.

 

27.                                 PUBLIC
DISCLOSURE.

 

(a)                                  Disclosures.  Until such time as the Fund’s known
Aggregate Ownership is less than 15% of the then-outstanding Aksys common
stock:

 

(i)                                     each
Party proposing to make any press release or other written public announcement
or disclosure concerning any Transaction Agreement (a “Disclosure”)
shall provide an advance copy to the other Parties and shall allow each of
Aksys, the Fund and Artal the opportunity to comment thereon, and

 

(ii)                                  no
such Disclosure shall be made by any Party in a press release without the
consent of Aksys, in the case of any Disclosure made by any Defendant, or the
consent of the Fund, in the case of any Disclosure made by any Party other than
the Fund, in each case such consent not to be unreasonably withheld.

 

(b)                                 Process.  At any and all times after the filing of the
Stipulation of Dismissal, if any Party receives a subpoena or other process
from any non-party seeking production or other disclosure of any documentation,
correspondence, or testimony related to the Litigation, the Party receiving the
process promptly shall give written notice and notice by telephone to all other
Parties of the receipt of that process, identifying the production, disclosure
or testimony sought and enclosing a copy of the process.

 

(c)                                  Governmental
Bodies.  At any and all times after
the filing of the Stipulation of Dismissal, the Parties may not disclose any
documentation, correspondence, or testimony related

 

19

 

to the Litigation except (i) as may be required by Applicable Law
or (ii) to any Governmental Body, provided, that the Party disclosing
such documentation, correspondence, or testimony requests confidential
treatment thereof to the extent permitted by law.

 

28.                                 NON-DISPARAGEMENT.

 

(a)                                  Aksys
Covenant.  Subject to
paragraph (d) below, Aksys agrees not to publicly make or publish, and to
instruct its agents and employees not to publicly make or publish, any
Disparaging (as defined below) remarks, comments or statements (orally or in
writing), or instigate, assist or participate in the making or publication of
any Disparaging remarks, comments or statements, concerning (i) any Defendant,
(ii) any Defendant’s services, affairs or operations, or (iii) the
reputation of any Person who is known by Aksys (based on information reasonably
available to Aksys) to be a member, manager, officer, director, agent, employee
or investor of any Defendant.

 

(b)                                 Defendants
Covenant.  Each Defendant agrees not
to publicly make or publish, and to instruct its agents and employees not to
publicly make or publish, any Disparaging remarks, comments or statements (orally
or in writing), or instigate, assist or participate in the making or
publication of any Disparaging remarks, comments or statements, concerning
(i) Aksys, (ii) any of Aksys’ services, affairs or operations, or
(iii) the reputation of any Person who is known by such Defendant (based
on information reasonably available to such Defendant) to be a member, manager,
officer, director, agent or employee of Aksys.

 

(c)                                  Definition
of Disparaging.  “Disparaging”
remarks, comments or statements are those that impugn the character, honesty,
integrity or morality or business acumen or abilities in connection with any
aspect of the operation of business of the Person being disparaged.

 

(d)                                 Exceptions
and Expiration.  Nothing contained
in this Section 28 shall preclude any of the Parties from:  (i) complying with its disclosure
obligations under the securities laws; (ii) providing truthful testimony
in response to a subpoena, court order, regulatory request or other legal
process believed in good faith to be valid; or (iii) making any statements
of any kind to such parties’ spouse or attorney.  The provisions of this Section 28 shall expire upon the
third anniversary of the Effective Date.

 

29.                                 NO ADMISSION
OF LIABILITY.  Neither Aksys’ nor any Defendant’s
execution of this Agreement constitutes or may be construed as an admission of
any liability.

 

30.                                 FURTHER ASSURANCES.

 

(a)                                  Reasonable Efforts.  Each
Party agrees to use reasonable effort to take reasonable actions as any other
Party may request to carry out the intent of the transactions contemplated by
this Agreement and the other Transaction Agreements and to take any other
actions required under Applicable Laws to carry out and effectuate the intent
of this Agreement and the other Transaction Agreements.  Each Party further agrees to cooperate with
the other Parties and use all reasonable efforts to take, or cause to be taken,
all action, and do, or cause to be done, all

 

20

 

things, reasonably necessary to carry out and effectuate the intent of
this Agreement and the other Transaction Agreements.

 

(b)                                 Third
Party Claims.  Subject to
Section 15 hereof and obligations under Applicable Law, each Party agrees
that neither it nor (i) any of its affiliates and subsidiaries, predecessor
and successor corporations or entities, (ii) any of its past, present and
future officers, directors, employees, agents, representatives and attorneys,
or (iii) any other Persons that such Party controls that could or might
act on its behalf, will assist, directly or indirectly, any other Person in
investigating, preparing or asserting any Proceeding against any Person
released hereunder arising out of conduct to date or any transaction
contemplated by this Agreement or any other Transaction Agreement; provided,
that nothing contained in this Section 30 shall preclude any such Person
from providing truthful testimony in response to a subpoena, court order,
regulatory request or other legal process believed in good faith to be valid;
and provided, further, that nothing in this Section 30 shall
preclude the Fund and Artal from cooperating with and assisting each other in
connection with any actions brought by or against any of the Sacane Parties.

 

(c)                                  No
Inconsistent Positions.  Each
Defendant, on the one hand, and Aksys, on the other hand, agrees not to pursue
any claim, right or defense against Aksys or any Defendant, as the case may be,
under this Agreement and the other Transaction Agreements that is inconsistent
with the obligations of such Party under this Agreement and the other
Transaction Agreements.  Each Party
agrees that it will not make any representation or argument or take any
position inconsistent with the representations, warranties, and agreements made
by it in this Agreement or any other Transaction Agreement, whether in any
action, suit, litigation, arbitration, proceeding (including any civil,
criminal, administrative, investigative or appellate proceeding and any
informal proceeding), prosecution, contest, hearing, inquiry, inquest, audit,
examination or investigation that is, has been or may in the future be
commenced, brought, conducted or heard by or before, or that otherwise has
involved or may involve, any Governmental Body (collectively, “Proceedings”),
including in any negotiation with any Person threatening to make any claims or
commence any Proceeding, and no Party shall initiate or encourage in any way
any such Proceeding.

 

31.                                 COSTS.  Except
as otherwise specified herein or in any of the other Transaction Agreements,
each Party will bear its own costs in connection with this Agreement and the
other Transaction Agreements.

 

*       *       *       *       *

 

21

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  AKSYS, LTD.

  
	
   

  
	
   

  
	
  By:

  	
   /s/
  William C. Dow 

  	
   

  
	
   

  	
   

  
	
  Name:

  	
  William C.
  Dow

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

  	
   

  
						

 

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  DURUS LIFE SCIENCES MASTER FUND LTD.

  
	
   

  
	
   

  
	
  By:

  	
   /s/
  Leslie L. Lake

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   Leslie
  L. Lake

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   February
  23, 2004

  	
   

  
						

 

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  DURUS CAPITAL MANAGEMENT, LLC

  
	
   

  
	
   

  
	
  By:

  	
   /s/
  Scott Sacane

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   Scott
  Sacane

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Managing
  Member

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   February
  23, 2004

  	
   

  
						

 

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  DURUS CAPITAL MANAGEMENT (N.A.), LLC

  
	
   

  
	
   

  
	
  By:

  	
   /s/
  Scott Sacane

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   Scott Sacane

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Managing
  Member

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   February
  23, 2004

  	
   

  
						

 

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  SCOTT SACANE

  
	
   

  	
   

  
	
   /s/
  Scott Sacane

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   February
  23, 2004

  	
   

  

 

 

IN WITNESS WHEREOF, the Parties have duly
authorized and caused this Settlement Agreement and Mutual Release to be
executed as follows:

 

 

	
  ARTAL LONG BIOTECH PORTFOLIO LLC

  
	
   

  
	
  By:

  	
  Artal
  Alternative Treasury Management

  
	
  Its:

  	
  Managing
  Member

  
	
   

  
	
   

  
	
  By:

  	
   /s/
  Christian Tedeschi

  	
   

  
	
   

  	
   

  
	
  Name:

  	
   Christian
  Tedeschi

  	
   

  
	
   

  	
   

  
	
  Title:

  	
   Managing
  Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
   February
  23, 2004

  	
   

  
								

 

 

SCHEDULE I

 

SHARES HELD

 

(as of the Effective Date)

 

	
  Defendant

  	
   

  	
  Shares
  Held of

  Record or

  Beneficially

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  The Fund

  	
   

  	
  21,333,118

  	
   

  
	
  Artal

  	
   

  	
  498,100Exhibit 10.2

 

REGISTRATION RIGHTS AGREEMENT

 

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

 

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

 

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

 

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

 

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

 

 

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

 

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

 

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

 

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

 

2

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

11.         Indemnification.

 

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

 

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

 

8

 

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

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

13.         General.

 

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

 

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

 

11

 

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

 

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

 

If to Aksys, to:

 

Aksys, Ltd.

Two Marriott
Drive

Lincolnshire,
Illinois  60069

Attn:  General Counsel

Telecopy:  (847) 229-2235

Telephone:

 

With a copy to:

 

Kirkland &
Ellis LLP

200 East
Randolph Drive

Chicago,
Illinois  60601

Attn:  Keith S. Crow, P.C.

Telecopy:  (312) 861-2200

Telephone:

 

If to the Master Fund, to:

 

Durus Life
Sciences Master Fund Ltd.

c/o
International Fund Services (Ireland) Limited

3rd Floor,
Bishops Square

Redmonds Hill

Dublin 2,
Ireland

Attn:  Susan Byrne

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

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

 

12

 

With a copy to:

 

Schulte Roth
& Zabel LLP

919 Third
Avenue

New York, NY
10022

Attn:  Paul N. Roth

Telecopy:
(212) 593-5955

Telephone:
(212) 756-2000

 

If to Artal, to:

 

Artal Long
Biotech Portfolio LLC

c/o Artal
Alternative Treasury Management

19A Rue de la
Croix-d’or

Geneva

Switzerland

Attn: Christian
Tedeschi, Managing Director

 

With a copy to:

 

Shartsis,
Friese & Ginsburg LLP

One Maritime
Plaza, 18th Floor

San Francisco,
CA 94111

Attn: Carolyn
Gorman, Esq.

Telecopy:
(415) 421-2922

Telephone:
(415) 421-6500

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

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

 

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

 

15

 

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

 

*     *     *    
*     *

 

16

 

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

 

	
  Aksys, Ltd.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ William
  C. Dow

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  William C.
  Dow

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  President
  and Chief Executive Officer

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

  	
   

  
						

 

 

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

 

 

	
  Durus Life Sciences
  Master Fund Ltd.

  
	
   

  
	
   

  
	
  By:

  	
  /s/ Leslie
  L. Lake

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Leslie L.
  Lake

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

  	
   

  
						

 

 

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

 

 

	
  Artal Long Biotech
  Portfolio LLC

  
	
   

  
	
  By:

  	
  Artal
  Alternative Treasury Management

  
	
  Its:

  	
  Managing
  Member

  
	
   

  
	
   

  
	
  By:

  	
  /s/
  Christian Tedeschi

  	
   

  
	
   

  	
   

  	
   

  
	
  Name:

  	
  Christian
  Tedeschi

  	
   

  
	
   

  	
   

  
	
  Title:

  	
  Managing
  Director

  	
   

  
	
   

  	
   

  
	
  Date:

  	
  February 23,
  2004

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