Unassociated Document


    CONSULTING
      AGREEMENT

    


    This
      Consulting Agreement (the “Agreement”) is made and entered into as of the First
      day of October, 2005 (the “Effective Date”) by and between Arbios Systems, Inc.,
      a Delaware corporation (the “Company”), and Marvin S. Hausman, M.D. (the
“Consultant”).

    


    WITNESSETH:

    


    WHEREAS,
      the
      Company desires to retain the Consultant and the Consultant desires to be
      retained by the Company, all pursuant to the terms and conditions hereinafter
      set forth;

    


    NOW,
      THEREFORE, in
      consideration of the foregoing and the mutual promises and covenants herein
      contained, it is agreed as follows:

    


    
      	1.      	
              Retention
                of Consultant. The
                Company agrees and does hereby retain the Consultant pursuant to
                the terms
                set forth herein. The Consultant does hereby accept such retention,
                subject to and upon the terms and conditions hereinafter set forth.
                [It is
                understood and agreed, that unless specifically otherwise authorized
                by
                the Company, all services provided by the Consultant hereunder shall
                be
                provided by Marvin S. Hausman,
                M.D.]

            


    

    


    
      	2.      	
              Duties
                of Consultant.
                The Company hereby retains the Consultant to perform the following
                consulting services for the Company: a) assistance with patient enrollment
                for the Company’s SEPET pilot clinical trial, b) assistance with
                monitoring and analysis of clinical data from the SEPET Pilot Clinical
                Trial. and c) design of future clinical protocols. Such services
                shall be
                provided in person or telephonically as requested by the Company
                and the
                Consultant will be available to devote the time necessary to meet
                the
                objectives contemplated by this
                Agreement.

            


    

    


    
      	3.      	
              Compensation.
                In
                consideration for the services to be performed by the Consultant
                as
                provided herein, the Company agrees to and shall pay the Consultant
                compensation as follow:

            


    

    


    The
      Consultant shall receive a fee of $10,000/month, payable bi-monthly in equal
      amounts of $5,000 on the 15th
      and
      30th
      of each
      month for a term of three (3) months commencing on the Effective Date. The
      term
      can be renewable upon the expiration upon the mutual agreement of both the
      Company and Consultant.

    


    The
      Consultant will also receive a five-year non-qualified stock option to purchase
      30,000 shares of the Company’s common stock, to be granted pursuant to the
      Company’s 2005 Stock Incentive Plan. The shares will be exercisable at the
      current market price on the date of grant. The vesting of the stock options
      shall be determined based on the achievement of the following milestones :
      1)
      One-half (50%) (15,000 shares) of the options shall vest on November 8, 2005
      if
      the Company has enrolled 5 patients for the SEPET pilot clinical trial by
      November 8, 2005 (“Milestone 1”); 2) if the Company has enrolled 15 patients
      before December 31, 2005 (“Milestone 2”) AND Milestone 1 was achieved,
      one-hundred percent (100%) (30,000 shares) of the options shall vest on December
      31, 2005; and 3) if the Company has achieved Milestone 2 but NOT Milestone
      1,
      then 25,000 shares will vest on December 31, 2005 (i.e the 5,000 shares
      associated with Milestone 1 shall be forfeited). If Milestones 1 and 2 are
      not
      achieved, and as long as the Consultant is still retained by the Company in
      his
      capacity as an advisor regarding the SEPET clinical trials, 25,000 unvested
      shares of the stock options shall vest on a pro-rata on a monthly basis over
      the
      period of 12 months beginning after the initial three month term of this
      Agreement.

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	    4.	
              Reimbursement
                of Expenses.
                The Company will reimburse Consultant for all reasonable out-of-pocket
                expenses incurred by Consultant in connection with the furnishing
                of
                services under this Agreement. The Consultant will abide by Company
                policies which include the completion of Travel Request Forms prior
                to the
                incurrence of expenses. All expenditures in excess of $200 individually
                must be approved by the Company prior to incurring such expenses,
                including travel and entertainment
                costs.

            


    

    


    
      	 	
              5

            	
              Status
                of Consultant as an Independent Contractor.
                The Consultant is retained only for the purposes and to the extent
                set
                forth herein, and the Consultant’s relationship to the Company during the
                term of this Agreement shall be that of an independent contractor,
                and
                nothing in this Agreement shall be construed as equating Consultant
                as an
                employee of the Company. The Consultant recognizes that no amount
                will be
                withheld from his compensation for payment of any federal, state,
                or local
                taxes, and that the Consultant has sole responsibility to pay such
                taxes,
                if any, and to file such returns as shall be require by applicable
                laws
                and regulations. Consultant is not entitled to any medical coverage,
                life
                insurance, participation in the Company’s savings plan, or other benefits
                afforded to the Company’s regular employees. Consultant has no power or
                authority to act for, represent, or bind the Company or any company
                affiliated with the Company in any manner. Further, nothing herein
                shall
                be construed as establishing a joint venture or partnership between
                the
                Consultant and the Company. The Consultant is free to utilize his
                entire
                time, energy and skill in such manner and for such purposes as he
                sees
                fit.

            


    

    


    
      	 	
              6.
                

            	
              Termination
                of Agreement.
                Each of the parties hereto shall have the right to terminate this
                Agreement by giving the other party fifteen (15) days prior written
                notice. Upon termination, the Consultant will be paid a pro rata
                amount of
                the monthly compensation as per Section 3 herein. Upon termination,
                section 7. Confidentiality will remain in full force and effect for
                a
                three year period.

            


    

    


    
      	 	
              7.

            	
              Confidentiality.
                By
                acceptance hereof, the Consultant expressly acknowledges that the
                list of
                the Company’s customers, its trade secrets, know-how, data, marketing
                techniques, business plans, products, technologies, intellectual
                properties, trademark and other confidential information pertaining
                to the
                operations and business and financial affairs of the Company (the
                “Confidential Information”) are valuable, special and unique assets of the
                Company. The Consultant agrees that the Company’s Confidential Information
                will be used by the Consultant only in connection with consulting
                activities hereunder, and will not be used in any way for personal
                benefit
                or to the detriment of the Company. The Consultant agrees that it
                shall
                not disclose any Confidential Information to any person, firm,
                corporation, association or other entity, for any reason or purpose
                whatsoever and that disclosure of Confidential Information would
                cause
                irreparable injury to the Company. The Company shall have the right
                to
                obtain injunctive or other similar relief without the requirement
                of
                posting bond or other similar
                measures.

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    For
      the
      purposes of this Agreement, Confidential Information shall not include
      information that (i) is or becomes generally available to the public other
      than
      as a result of a breach of this Agreement, (ii) was known to the receiving
      party
      prior to its disclosure hereunder, (iii) becomes known or available to the
      receiving party on a non-confidential basis and not in contravention of
      applicable law from a source (other than a party hereunder) which represents
      that it is entitled to disclosure such Confidential Information, or (iv) is
      required to be disclosed by operation of law.

    


    Notwithstanding
      the foregoing, if required pursuant to judicial or administrative subpoena
      or
      process or other legal obligation to disclose any Confidential Information,
      Consultant may make such disclosure only to the extent required, in the opinion
      of counsel for Consultant, to comply with such subpoena process or other
      obligation. Consultant shall, as promptly as possible and in any event prior
      to
      the making of such disclosure, notify the Company of any such subpoena, process
      or obligation and shall cooperate with the Company in seeking a protective
      order
      or other means of protecting the confidentiality of the Confidential
      Information.

    


    
      	 	
              8. 

            	
              Notices.
                All notices and other communications which are required or permitted
                hereunder shall be in writing and shall be delivered personally or
                sent by
                air courier (e.g., Federal Express) or first class certified or registered
                mail, postage prepaid, return receipt requested to the following
                address:

            


    

    


    
      	 	
              If
                to Consultant, addressed to:

              
                Marvin
                  S. Hausman

                P.O.
                  Box 910

                Stevenson,
                  WA 98648

              

            	
              If
                to the Company, addressed to:

              Arbios Systems, Inc.

              8797 Beverly Blvd, Suite 304

              Los
                Angeles, CA 90048  

            


    

     

    Either
      party may designate any other address to which notice shall be given, by giving
      written notice to the other of such change of address in the manner herein
      provided.

    


    
      	
            	9.	
              Governing
                Law. This
                Agreement has been made in the State of California and shall be construed
                and governed in accordance with the laws
                thereof.

            


    

       

    
      	
            	10.	
              Entire
                Agreement. This
                agreement contains the entire Agreement between the parties with
                respect
                to the rendering of the services described herein and may not be
                altered
                or modified, except in writing and signed by the party to be charged
                thereby and supersedes any and all previous agreements between the
                parties
                with respect to the services.

            


    

    


    
      	
            	11.	
              Severability.
                If
                any provision of this Agreement, or part thereof, is held to be
                unenforceable, the remainder of such provision of this Agreement,
                as the
                case may be, shall nevertheless remain in full force and
                effect.

            


    

    


    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    
      	
            	12.	
              Assignment.
                This Agreement may not be assigned by either of the parties hereto
                without
                the prior written consent of the other party, provided,
                however,
                that such prior written consent will not be necessary in the instance
                where the Company is merged with and into another entity or the transfer
                occurs in connection with sale of substantially all of the Company’s
                assets.

            


    

    


    
      	
            	13.	
              Execution
                in Counterparts.
                This Agreement may be executed in two or more counterparts, each
                of which
                shall be deemed an original agreement, but all of which together
                shall
                constitute one and the same
                instrument.

            


    

    


    
      	
            	14.	
              Headings,
                Interpretation of Syntax.
                The headings contained in this Agreement are for reference purposes
                only
                and shall not affect the meaning or interpretation of this Agreement.
                All
                references made and pronouns used herein shall be construed in the
                singular or plural, and in such gender, as the sense and circumstances
                require.

            


    

     

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

    


    


    
      
        	ARBIOS SYSTEMS, INC.	 	 	CONSULTANT
	 	 	 	 
	 	 	 	 
	/s/ Amy
                Factor 	 	 	/s/ Marvin
                S. Hausman
	
                
Amy
                Factor 	 	 	
                
Marvin
                S. Hausman
	
                Chief
                  Executive Officer