Unassociated Document


    EXHIBIT
      10.18

     

    March
      25,
      2005

    


    Shawn
      Cain

    73
      Newfield St.

    N.
      Chelmsford, MA 01863


    Dear
      Shawn:

    


    I
      am
      pleased to offer you a full time position with Arbios Systems, Inc. (the
“Company”), effective as of April 25, 2005, (the “Effective Date”) on the
      following terms:

     

    


    1.    The
      position of a full time Vice-President of Operations reporting to the company’s
      Chief Executive Officer. Your duties will consist of managing all of the
      Company's manufacturing operations related to its liver assist
      technology, including SEPET and HepatAssist-2 programs. It is understood
      that the Company operates primarily through Arbios Technologies, Inc., our
      wholly-owned subsidiary, and that, therefore, your services will be primarily
      provided to Arbios Technologies, Inc. You may be considered to be an employee
      of
      both companies.

    


    2.    Your
      employment is to be considered exclusive to the Company. While you are employed
      by the Company, you will not perform services for compensation for any third
      party.

    


    3.    Reimbursement
      for all reasonable out-of-pocket expenses incurred in connection with performing
      duties from your home office so long as a home office is necessary for you
      to
      perform your duties for the Company (such expenses to primarily consist of
      telephone, fax and internet monthly charges, copy machine, office equipment,
      computer, printer, and supplies).

    


    4.    Annual
      base salary in the amount of $160,000, before withholding of federal and state
      income taxes, Social Security, and other customary deductions, to be paid in
      equal biweekly installments during the term of your employment.

    


    5.    Incentive
      compensation in the form of a five-year incentive stock option to purchase
      30,000 shares of the Company's common stock to be granted pursuant to the
      Company's 2001 Stock Option Plan. The options will have an exercise price equal
      to the closing market price of the Company’s common stock on the effective date
      of your employment. Options will vest in monthly installments of 1,250 shares
      commencing on April 22, 2005.

    


    6.    The
      Company may grant you additional stock options, at the sole discretion of the
      Board, if and when such stock options are also granted to Company’s
      management.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    


    7.    You
      may
      enter into our Indemnification Agreement in a form substantially similar to
      that
      signed by the current members of our Board of Directors and by
      management.

    


    8.    You
      will
      be entitled to three weeks paid vacation each year and such other holidays
      as
      are customarily observed which currently include 7 paid holidays per
      year.

    


    9.    A
      401K
      plan with the Company to match at a rate of 50% of the amount you contribute
      up
      to 6% of total compensation per annum.

    


    11.    Benefits:

    


    
      	 	
              a.

            	
              From
                the period commencing on the Effective Date and ending 18 months
                thereafter (the “Transition Period,”) the Company will reimburse you for
                expenses related to maintaining your current medical coverage through
                COBRA, including medical ($1,057.42/month), dental ($110.28/month)
                and
                vision ($18/month) coverage. 

            


    

    


    
      	 	
              b.

            	
              The
                Company shall provide you with a competitive benefits program no
                later
                than 18 months from the Effective Date.  After the transition period,
                the cost to you shall not exceed a monthly rate of >200 and if the
                total out of pocket maximum for the family plan is greater than $1,500
                the
                difference will be covered in a gross up of the base
                salary.

            


    

    


    
      	 	
              c.

            	
              Short-term
                and long-term disability insurance as outlined in Exhibit A to this
                offer
                at no cost to you. 

            


    

    


    
      	 	
              d.

            	
              Term
                Life Insurance 2 x Salary up to $500,000 at no cost to you with ability
                to
                purchase more at you own expense.

            


    

    


    12.    You
      shall
      be considered for an annual discretionary cash bonus up to 15% of the base
      annual salary based on performance and the satisfaction of specified goals.
      During the initial 12-month period of your employment, your target goals shall
      include the following.

    


    
      	 	
              a.

            	
              Overseeing
                all of the Company's manufacturing operations including quality assurance
                and quality control related to its liver assist
                technology, including the SEPET and HepatAssist-2
                programs.

            


    

    


    
      	 	
              b.

            	
              Establishing
                second source for US manufacturing of SEPET cartridge and
                membrane.

            


    

    


    
      	 	
              c.

            	
              Establishing
                manufacturing of HepatAssist
                reactors.

            


    

     

     

    
      
        
        

      

      
        2

        
          

        

      

      
        
        

      

    

     

    
      	 	
              d.

            	
              Leasing
                and expanding space to breed and house organ donors (AIB, Inc., E.
                Woodstock, CT).

            


    

    


    
      	 	
              e.

            	
              Identifying
                and acquiring pig breeding stock and validating animal health status
                and
                suitability for organ/cell
                procurement.

            


    

    


    
      	 	
              f.

            	
              Establishing
                breeding of pig liver donors and implementing processes to harvest
                donor
                organs.

            


    

    


    
      	 	
              g.

            	
              Designing
                and building cGMP cell procurement facility, acquiring necessary
                capital
                equipment and hiring and training technical personnel (2 - 4
                persons).

            


    

    


    
      	 	
              h.

            	
              Establishing
                relationships with key vendors.

            


    

    


    
      	 	
              i.

            	
              Revising, adopting
                and validating SOP and QA/QC protocols related to animal breeding,
                housing and use.

            


    

    


    
      	 	
              j.

            	
              Revising, adopting
                and validating SOP and QA/QC protocols related to cell manufacturing
                and storage.

            


    

    


    
      	 	
              k.

            	
              Resuming
                manufacture of cryopreserved pig liver cells for bioartificial liver
                use in human patients (pending availability of sufficient
                funds).

            


    

    


    13.    You
      will
      be employed on an “AT WILL” basis. That is, the terms of your employment shall
      continue unless terminated by either you or the Company. Termination by the
      Company may be with or without cause, at any time. However, you will receive
      severance terms consistent with other employees of the Company holding
      comparable “grade level” positions, except that, (i) during the first year of
      employment, you will receive six month’s notice if the Company wishes to
      terminate your employment, (ii) during the second year of employment you will
      receive four month’s notice, and (iii) during the third year of employment you
      will receive three month notice. If we provide you with less than the six-,
      four- or three-month -notice, upon your termination we will pay you the salary
      equivalent of the notice of the shortened notice period.

    


    14.    You
      must
      obtain a release from your current employer or any previous employers from
      any
      existing non-compete agreements, if applicable.

     

    
      
        
        

      

      
        3

        
          

        

      

      
        
        

      

    

     

    If
      the
      terms of this offer are acceptable to you, please indicate below by signing
      and
      returning one copy of this letter to me, together with one signed copy of the
      attached Employee Invention Assignment and Confidentiality Agreement as soon
      as
      possible. Should you have any questions, do not hesitate to contact me. We
      are
      looking forward to having you join our team and hope you will find your new
      employment with us challenging and rewarding.

     

    
      	 	 	 
	 	Sincerely,
	 
 	 
 	 
 
	 	By:  	/s/ Jacek
              Rozga, M.D., Ph. D
	 	
              
Jacek
              Rozga, M.D., Ph. D
	 	President  


    

    
      	 	 	 	 
	 Accepted and agreed to this 4th day
              of
              April, 2005	 	 	 
	 	 	 	 
	 	 	 	 
	/s/ Shawn
              Cain	 	 	 
	
              
Shawn
              Cain	 	 	
            
	 	 	 	 

  

     

    
      
        
        

      

      4