Exhibit
      10.4

     

    ARBIOS
      SYSTEMS, INC. 

     

    


     

    November
      13, 2007

     

    Mr.
      Walter Ogier

    433
      Main
      Street

    Winchester,
      MA 01890

    


    Dear
      Walter:

    


    The
      purpose of this letter agreement (the “Agreement”) is to set forth the terms
      regarding your separation of employment from Arbios Systems, Inc. (the
“Company”). As more fully set forth below, the Company desires to provide you
      with severance pay and benefits in exchange for certain agreements by you.
      This
      agreement shall become effective (the “Effective Date”) upon full execution and
      upon expiration of the revocation period (without revocation by you) set forth
      in paragraph 10 below. 

     

    1. Separation
      of Employment.
      You
      acknowledge that your employment with the Company terminated, or will terminate,
      effective September 21, 2007 (the “Separation Date”), which includes a
      termination from all positions and offices with the Company and as a member
      of
      the Company’s Board of Directors effective on the Separation Date. You
      acknowledge that from and after the Separation Date, you have not had and shall
      not have any authority and have not and shall not represent yourself as an
      officer director, employee or agent of the Company. 

     

    2. Acknowledgement
      of Payment.
      You
      acknowledge that you have been paid all salary, bonus and accrued vacation
      due
      to you for the period of employment through the Separation Date, except that
      the
      amount of $30,000 which may become due you as a Performance Bonus under the
      incentive compensation plan approved by the Company’s Board of Directors on July
      12, 2007. Such amount shall be earned conditioned on, and paid not later than
      thirty (30) days following, the closing by the Company of a financing
      transaction, including a transaction involving a strategic collaboration, in
      which the Company receives net proceeds of not less than $5,000,000 within
      one
      hundred eighty (180) days following the Separation Date. You also will be
      reimbursed for all expenses incurred, submitted and approved in accordance
      with
      the Company’s policies on expense reimbursement. Such payments were or, as the
      case may be, will be made without any requirement that you accept this
      agreement.

     

    3. Severance
      Compensation.
      In
      exchange for the mutual covenants set forth in this agreement, the Company
      agrees to provide you with the following:

     

    (a) Severance
      Pay.
      Payment
      of an amount equal to twelve (12) months of your gross monthly base salary
      of
      $25,000, less all applicable federal, state, local and other employment-related
      deductions, such payments to be made in approximately equal monthly installments
      beginning on the first regularly scheduled Company payday for senior executives
      which is at least ten (10) days after your acceptance of this Agreement.


     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

     

    (b) Health
      Insurance.
      In the
      event that you choose to exercise your right under Chapter 176J, Section 9
      of
      the Massachusetts General Laws to continue your participation in the Company’s
      health insurance plan (which you may do, to the extent permitted by such
      statute, regardless of whether you accept this Agreement), the Company shall
      pay
      its normal share of the costs for such coverage (the “Severance Benefits”) for a
      period of twelve (12) month(s) beginning on the Separation Date to the same
      extent that such insurance is provided to persons then currently employed by
      the
      Company, provided, however, that notwithstanding any other provision of this
      Agreement, this obligation shall cease on the date you become eligible to
      receive health insurance benefits through any other employer you subsequently
      work for. Your co-pay, if any, shall be deducted from the monthly severance
      payments described in subsection (a) above or, if no such payments remain to
      be
      paid, shall be paid by you directly to the Company within seven (7) days of
      receipt of notice such payment is due. 

     

    (c) Notice
      of Eligibility for other Health Care Insurance.
      You
      agree to provide the Company with written notice immediately upon becoming
      eligible for coverage under another employer’s health insurance plan. The notice
      described herein shall be given in the same manner as prescribed for acceptance
      of this Agreement.

     

    (d) Options.
      All
      unvested options under your Stock Option Agreement dated as of November 8,
      2005
      (Stock Option Number 61 and Stock Option Number 62 and hereinafter jointly
      the
“2005 Option”) shall become exercisable as of the Separation Date. Options for
      60,000 shares under your Stock Option Agreement dated as of July 10, 2007 (the
      “2007 Option”) shall become exercisable as of the Separation Date. Any vested
      options under both agreements shall be exercisable for ninety (90) days
      following the Separation Date in accordance with the terms of these
      agreements
      and for
      the additional twelve (12) month consulting period described in Section 5 below;
      in addition, should such twelve (12) month consulting period be extended by
      mutual agreement, the period in which you may extend the options shall be
      extended by an equal length of time.
      

     

    You
      acknowledge and agree that the Severance Compensation provided in this Agreement
      is not otherwise due or owing to you under any Company employment agreement
      (oral or written) or Company policy or practice, and that this Severance
      Compensation to be provided to you is not intended to, and shall not constitute,
      a severance plan, and shall confer no benefit on anyone other than the parties
      hereto. You further acknowledge that except for the specific financial
      consideration set forth in this Agreement, you are not and shall not in the
      future be entitled to any other compensation including, without limitation,
      wages, bonuses, vacation pay, holiday pay or any other form of compensation
      or
      benefit. 

     

    Notwithstanding
      any other provision of this Agreement, the Company, its officers, directors,
      employees, attorneys and agents make no guarantee of any tax consequences with
      respect to the payments or compensation set forth herein, including, without
      limitation, Section 409A of the Internal Revenue Code of 1986, as
      amended.

     

    
      
         

      

      
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    4. Unemployment
      Benefits.
      The
      Company agrees that it will not contest any claim for unemployment benefits
      by
      you with the Massachusetts Department of Employment and Training. The Company,
      of course, shall not be required to falsify any information.

     

    5. Consulting.
      In
      exchange for the consideration set forth herein, including the extension of
      the
      option exercise period for an additional twelve (12) months as described in
      Section 3(d) above, you agree to provide the Company, at reasonable times and
      places as requested by the Company, including at the Company’s premises if
      needed, consulting services for eight (8) hours per month, for twelve (12)
      consecutive months, commencing on the Effective Date. The Company in making
      such
      requests shall take into account and attempt to accommodate your other work
      and
      personal commitments. If requested by the Company, you will provide it with
      a
      written summary from time to time of the services provided and the time spent
      on
      each activity. The twelve (12) month consulting period may be extended by mutual
      agreement in exchange for a further extension of the option exercise period
      as
      described in Section 3(d) above. 

     

    6. Cooperation. You
      agree
      that both during and at any time after your employment, you shall cooperate
      fully with the Company in connection with any matter or event relating to your
      employment or events that occurred during your employment, including, without
      limitation, in the defense or prosecution of any claims or actions now in
      existence or which may be brought or threatened in the future against or on
      behalf of the Company, including any claims or actions against its affiliates
      and its and their officers and employees. Your cooperation in connection with
      such matters, actions and claims shall include, without limitation, being
      available, upon reasonable notice to meet with the Company regarding matters
      in
      which you have been involved, and any contract matters or audits; to prepare
      for, attend and participate in any proceeding (including, without limitation,
      depositions, consultation, discovery or trial); to provide affidavits; to assist
      with any audit, inspection, proceeding or other inquiry; and to act as a witness
      in connection with any litigation or other legal proceeding affecting the
      Company. You further agree that should you be contacted (directly or indirectly)
      by any person or entity (for example, by any party representing an individual
      or
      entity) adverse to the Company, you shall promptly notify the Chief Executive
      Officer or the Chairman of the Board of the Company. You shall be reimbursed
      for
      any reasonable costs and expenses incurred in connection with providing such
      cooperation under this section.

     

    7. Additional
      Covenants by You.
      You
      expressly acknowledge and agree to the following:

     

    (a) that
      you
      have returned to the Company, and have not retained, all Company files and
      documents (and any copies thereof in any form or media) and property, including
      without limitation, any cell phone, computer, keys, key cards and vehicles,
      and
      that you shall abide by any and all contractual, common law and/or statutory
      obligations relating to protection and non-disclosure of the Company’s trade
      secrets and/or confidential and proprietary documents and information; provided,
      however, that ownership of the Company laptop computer you have been using
      shall
      be
      transferred to you, and possession of it returned to you, after you have
      delivered it to the Company and permitted the Company, with verification by
      its
      Chief Financial Officer, to remove all Company information and property
      contained thereon;

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

     

    (b) that
      all
      information relating in any way to the negotiation of this Agreement, including
      the terms and amount of financial consideration provided for in this Agreement,
      shall be held confidential by you and shall not be publicized or disclosed
      to
      any person (other than an immediate family member, legal counsel or financial
      advisor, provided that any such individual to whom disclosure is made agrees
      to
      be bound by these confidentiality obligations), business entity or government
      agency (except as mandated by state or federal law); 

     

    (c) that
      you
      will not make any statements that are professionally or personally disparaging
      about, or adverse to, the interests of the Company (including its officers,
      directors and employees) including, but not limited to, any statements that
      disparage any person, product, service, finances, financial condition,
      capability or any other aspect of the business of the Company, and that you
      will
      not engage in any conduct which is intended to harm professionally or personally
      the reputation of the Company (including its officers, directors and employees).
      Nothing herein shall apply to any legal action or proceeding to enforce the
      provisions of this Agreement, to any legal proceeding between you and any person
      subject to this provision, or to any communication required or privileged by
      law; and

     

    (d) that
      the
      breach of any of the foregoing covenants by you shall constitute a material
      breach of this Agreement and shall relieve the Company of any further
      obligations hereunder and, in addition to any other legal or equitable remedy
      available to the Company, shall entitle the Company to recover any Severance
      Compensation already paid to you and/or, where applicable, the cost of same
      to
      the Company and to rescind and revoke any action taken pursuant to this
      Agreement.

     

    8. Additional
      Covenants by the Company. 

     

    (a) Nondisparagement.
      The
      Company agrees that its officers and directors shall not make, or cause to
      be
      made, any statement (whether oral or written) that disparages you and will
      not
      engage in conduct which is intended to harm your reputation. Nothing herein
      shall apply to any legal action or proceeding to enforce the provisions of
      this
      Agreement, to any legal proceeding between you and any person subject to this
      provision, or to any communication required or privileged by
      law. 

     

    (b) Reference.
      In
      response to requests for references received by officers, directors or senior
      management of the Company, the Company will respond to the effect that you
      were
      in good standing with the Company through the period of your employment.


     

    9. Release
      of Claims.
      You
      hereby agree that by signing this agreement and accepting the Severance
      Compensation, and other good and valuable consideration provided for in this
      Agreement, you are waiving and releasing your right to assert any form of legal
      claim against the Company1 
      whatsoever for any alleged action, inaction or circumstance existing or arising
      from the beginning of time through the Separation Date. Your waiver and release
      herein is intended to bar any form of legal claim, charge, complaint or any
      other form of action (jointly referred to as “Claims”) against the Company
      seeking any form of relief including, without limitation, equitable relief
      (whether declaratory, injunctive or otherwise), the recovery of any damages
      or
      any other form of monetary recovery whatsoever (including, without limitation,
      back pay, front pay, compensatory damages, emotional distress damages, punitive
      damages, attorneys fees and any other costs) against the Company, for any
      alleged action, inaction or circumstance existing or arising through the
      Separation Date.

     

    

    
      1
        For the
        purposes of this section, the parties agree that the term “Company” shall
        include Arbios Systems, Inc., its divisions, affiliates, parents and
        subsidiaries, and its and their respective officers, directors, shareholders,
        owners, employees, attorneys, agents and assigns.

    


    
      
         

      

      
        4

        
          

        

      

      
         

      

    

     

    Without
      limiting the foregoing general waiver and release, you specifically waive and
      release the Company from any Claim arising from or related to your employment
      relationship with the Company or the termination thereof, including, without
      limitation: 

     

    
      	 	
              ·

            	
              Claims
                under any state or federal discrimination, fair employment practices
                or
                other employment related statute, regulation or executive order (as
                they
                may have been amended through the Separation Date) prohibiting
                discrimination or harassment based upon any protected status including,
                without limitation, race, national origin, age, gender, marital status,
                disability, veteran status or sexual orientation. Without limitation,
                specifically included in this paragraph are any Claims arising under
                the
                federal Age Discrimination in Employment Act, the Older Workers Benefit
                Protection Act, the Civil Rights Acts of 1866 and 1871, Title VII
                of the
                Civil Rights Act of 1964, the Civil Rights Act of 1991, the Equal
                Pay Act,
                the Americans With Disabilities Act and any similar Massachusetts
                or other
                state statute.

            


    

     

    
      	 	
              ·

            	
              Claims
                under any other state or federal employment related statute, regulation
                or
                executive order (as they may have been amended through the Separation
                Date) relating to wages, hours or any other terms and conditions
                of
                employment. Without limitation, specifically included in this paragraph
                are any Claims arising under the Fair Labor Standards Act, the National
                Labor Relations Act, the Employee Retirement Income Security Act
                of 1974,
                the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA)
                and any
                similar Massachusetts or other state statute.


            


    

     

    
      	 	
              ·

            	
              Claims
                under any state or federal common law theory including, without
                limitation, wrongful discharge, breach of express or implied contract,
                promissory estoppel, unjust enrichment, breach of a covenant of good
                faith
                and fair dealing, violation of public policy, defamation, interference
                with contractual relations, intentional or negligent infliction of
                emotional distress, invasion of privacy, misrepresentation, deceit,
                fraud
                or negligence. 

            


    

     

    
      	 	
              ·

            	
              Any
                other Claim arising under local, state or federal
                law.

            


    

     

    Notwithstanding
      the foregoing, this section does not:

    


    
      	 	
              ·

            	
              release
                the Company from any obligation expressly set forth in this Agreement
                or
                from any obligation, including without limitation obligations under
                the
                Workers Compensation laws, which as a matter of law cannot be
                released;

            


    

     

    
      
         

      

      
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              ·

            	
              prohibit
                you from filing a charge with the Equal Employment Opportunity Commission
                (“EEOC”); 

            


    

     

    
      	 	
              ·

            	
              prohibit
                you from participating in an investigation or proceeding by the EEOC
                or
                any comparable state or local
                agency.

            


    

     

    Your
      waiver and release, however, are intended to be a complete bar to any recovery
      or personal benefit by or to you with respect to any claim whatsoever, including
      those raised through a charge with the EEOC, except those which, as a matter
      of
      law, cannot be released. 

     

    You
      acknowledge and agree that, but for providing this waiver and release, you
      would
      not be receiving the Severance Pay being provided to you under the terms of
      this
      Agreement.

     

    10. Waiver
      of Employment.
      You
      hereby waive and release forever any right or rights you may have to employment
      with the Company and any affiliate thereof at any time in the future and agree
      not to seek or make application for employment with the Company or any affiliate
      thereof. 

     

    11. Assignment
      on Death.
      Notwithstanding paragraph 3 above or any provision of this Agreement, should
      you
      die before all of the Severance Compensation set forth in paragraph 3 above
      is
      paid, the Company will (1) make all remaining Severance Compensation payments
      to
      your estate, and/or (2) allow the exercise of stock options by your estate
      within the period set forth in Section 2(d) above. 

     

    12. Entire
      Agreement/Modification/Waiver/Choice of Law/Enforceability/Jury
      Waiver.
      You
      acknowledge and agree that, with the exception of your November
      3, 2005 Employee
      Invention Assignment and Confidentiality Agreement and any other agreement
      relating to inventions and/or confidentiality, your November 3, 2005
      Indemnification Agreement, and the 2005 Option and the 2007 Option,
      the
      terms
      of all of which you and the Company hereby acknowledge, reaffirm and agree
      to,
this
      Agreement supersedes any and all prior or contemporaneous oral and/or written
      agreements between you and the Company, and sets forth the entire agreement
      between you and the Company. No variations or modifications hereof shall be
      deemed valid unless reduced to writing and signed by the parties hereto. The
      failure of the Company to seek enforcement of any provision of this Agreement
      in
      any instance or for any period of time shall not be construed as a waiver of
      such provision or the Company's right to seek enforcement of such provision
      in
      the future. This Agreement shall be deemed to have been made in the Commonwealth
      of Massachusetts, shall take effect as an instrument under seal within the
      Commonwealth of Massachusetts, and shall be governed by and construed in
      accordance with the laws of the Commonwealth of Massachusetts, without giving
      effect to conflict of law principles. You agree that any action, demand, claim
      or counterclaim relating to the terms and provisions of this Agreement, or
      to
      its formation or breach, shall be commenced in the Commonwealth of Massachusetts
      in a court of competent jurisdiction, and you further acknowledge that venue
      for
      such actions shall lie exclusively in the Commonwealth of Massachusetts and
      that
      material witnesses and documents would be located in the Commonwealth of
      Massachusetts. The provisions of this Agreement are severable, and if for any
      reason any part hereof shall be found to be unenforceable, the remaining
      provisions shall be enforced in full.

     

    
      
         

      

      
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    By
      executing this Agreement, you are acknowledging that you have been afforded
      sufficient time to understand the terms and effects of this agreement, that
      your
      agreements and obligations hereunder are made voluntarily, knowingly and without
      duress, and that neither the Company nor its agents or representatives have
      made
      any representations inconsistent with the provisions of this
      agreement.

     

    This
      Agreement may be signed on one or more copies, each of which when signed will
      be
      deemed to be an original, and all of which together will constitute one and
      the
      same Agreement.

     

    If
      the
      foregoing correctly sets forth our agreement, please sign, date and return
      the
      enclosed copy of this agreement to me at Arbios Systems, Inc. by hand delivery
      or by mailing by first-class mail or overnight delivery within twenty-one (21)
      days of the date of this letter. You may revoke such acceptance in the same
      manner within seven (7) days of such acceptance. 

     

    
      	 	
              Very
                truly yours,

               

            	 
	 	
              ARBIOS
                SYSTEMS, INC.

            	 
	 	 	 	 
	 	 	 	 
	 	
              By:

            	
              /s/
                Tom Tully

            	 
	 	 	 	 
	 	
              Name:

            	
              Tom
                Tully

            	 
	 	 	 	 
	 	
              Title:

            	 	 
	 	 	 	 
	 	
              Dated:

            	
              November
                13, 2007

            	 


    

     

     

    Confirmed
      and Agreed:

     

    /s/
      Walter Ogier

    Walter
      Ogier

     

    Dated: November
      13, 2007

     

    
      
         

      

      
        7