Exhibit
      10.1

     

    CONSULTING
      AGREEMENT 

     

    THIS
      CONSULTING AGREEMENT (this "Agreement"), made and entered into by and between
      Arbios Systems Inc., 1050 Winter St., Suite 1000, Waltham, MA 02451, USA
      (hereinafter "Company") and Shawn Cain, 73 Newfield Street, N. Chelmsford,
      MA
      01863 USA (hereinafter referred to as "Consultant") as of 
      August
      1, 2008 (the “Effective Date”), with respect to the following
      facts:

    


    RECITALS

    


    A. Consultant
      represents that it has expertise in the area of financial activities and is
      ready, willing, and able to provide consulting assistance to the Company on
      the
      terms and conditions set forth herein.

    


    B. Company
      is willing to engage Consultant as an independent Consultant, and not as an
      employee, to provide consultation services to the Company on the terms and
      conditions set forth herein for the purpose of assisting the Company in the
      areas of strategic initiatives and corporate guidance.

    


    In
      consideration of the obligations herein made and undertaken, as well as other
      good and valuable consideration, the sufficiency of which is hereby
      acknowledged, the parties, intending to be legally bound, covenant and agree
      as
      follows:

    


    AGREEMENT

    


    1. Definitions

     

    1.1. "Company"
      means Arbios Systems Inc., and its employees, officers and directors, agents,
      consultant or independent Consultants who disclose information to Consultant
      pursuant to this agreement. 

     

    1.2. "Confidential
      Information" means all information and material which is proprietary to Company,
      whether or not marked as "confidential" or "proprietary" and which is disclosed
      to or obtained by Consultant, which relates to Company's or its parent Company’s
      past, present or future research, development or business activities.
      Confidential Information is all information or materials prepared by or for
      Company and includes, without limitation, all of the following: designs,
      drawings, specifications, techniques, models, data, documentation, diagrams,
      flow charts, research, development, processes, procedures, "know-how," new
      product or new technology information, product prototypes, product copies,
      manufacturing, development or marketing techniques and materials, development
      or
      marketing timetables, strategies related to customers, suppliers or personnel,
      pricing policies and financial information, and other information of a similar
      nature, whether or not reduced to writing or other tangible form, and any other
      Trade Secrets or nonpublic business information. Confidential Information does
      not include any information which (a) was in the lawful and unrestricted
      possession of Consultant prior to its disclosure by Company, (b) is or becomes
      generally available to the public by acts other than those of Consultant after
      receiving it, or (c) has been received lawfully and in good faith by Consultant
      from a third party who did not derive it from Company.

     

    
      
        
        

      

      
        -
          1
          -

        
          

        

      

      
        
        

      

    

     

    1.3. "Trade
      Secrets" shall mean any scientific or technical data, information, design,
      process, procedure, formula, or improvement that is commercially valuable to
      the
      Company and is not generally known in the medical device industry. 

     

    2. Scope
      of Services.
      Consultant shall provide advisory and consulting services in the area of
      financial affairs and is to perform all activities as conducted as Interim
      President & CEO. Company specifically agrees that Consultant may perform
      similar services for another entity so long as such services do not violate
      the
      terms and conditions of this Agreement, or impede his ability to perform his
      duties hereunder. Direction of consulting services shall be provided by the
      Board of Directors. 

     

    3. Term
      And Termination

     

    3.1. Term.
      This
      Agreement shall commence on the Effective Date, and continue for a period
      through August 31, 2008, unless earlier terminated pursuant to the terms of
      this
      Agreement. The parties may amend this Agreement to extend it for an additional
      period of time following the term of this Agreement. 

     

    3.2. Termination
      for Breach.
      This
      Agreement may be terminated by either party upon ten (10) days' prior written
      notice, if the other party breaches any term hereof and the breaching party
      fails to cure such breach within the ten-day (10) period.

     

    3.3. Termination
      Without Cause.
      Subject
      to the terms of Section 4 below, either party may terminate this Agreement
      at
      any time upon thirty (30) days’ advance written notice to the other
      party.

     

    3.4. Survival.
      In the
      event of any termination of this Agreement, Sections 5, 6, 7 and 9 hereof shall
      survive and continue in effect. 

     

    4. Compensation/Expenses.

     

    4.1. Consulting
      Fees. In consideration for Consultant's consulting services to be rendered
      hereunder, Company agrees to pay to Consultant the sum $5,000 per month. Payment
      shall be made in arrears within thirty (30) days of receipt of the invoice
      from
      Consultant for such services, or on such terms that the parties mutually agree.
      Consultant agrees to prepare a detailed monthly invoice to evidence services
      rendered as reasonably required by Company for auditing or other business
      requirements. 

     

    4.2. Reimbursement
      of Expenses.
      Company
      shall reimburse Consultant for reasonable and necessary out-of-pocket expenses
      incurred by Consultant in carrying out the duties of Consultant; provided
      however, that such expenses, including travel, shall be approved in advance
      by
      Company, and Consultant shall provide receipts to the Company for such expenses
      prior to receipt of any reimbursement hereunder. 

     

    
      
        
        

      

      
        -
          2
          -

        
          

        

      

      
        
        

      

    

     

    5. Ownership
      Rights

     

    5.1. General
      Property.
      As
      between Company and Consultant, all right, title, and interest in and to the
      progress, systems, data, or materials used or produced by Consultant in the
      performance of the services called for in this Agreement shall remain or become
      the property of Company.

     

    5.2. Intellectual
      Property.
      Consultant agrees that Company shall be entitled to own and control all
      proprietary technology and all financial, operating, training ideas, data,
      processes, procedures and materials, including works of expression, all
      copyrights, all patent rights, and all trade secret rights in such works that
      are developed, written, or conceived by Consultant during the term of this
      Agreement, to the extent that they relate to the performance or the requirements
      of this Agreement. 

     

    5.3. Materials
      Furnished.
      All
      right, title, and interest in and to any Confidential Information, mechanical
      drawings, sketches, documentation, programs, systems, data, and materials
      furnished to Consultant by Company are and shall remain the property of
      Company.

     

    6. Confidentiality
      and Nondisclosure 

     

    6.1. Consultant
      will hold in complete confidence and not disclose, produce, publish, permit
      access to, or reveal Confidential Information disclosed hereunder, at any time
      prior to Company's intentional public disclosure of that information, without
      the express prior written consent of Company.

     

    6.2. Consultant
      agrees that Company's Confidential Information has been developed or obtained
      by
      the investment of significant time, effort and expense and provides Company
      with
      a significant competitive advantage in its business. 

     

    7. Consultant
      Warranties.
      Consultant warrant that Consultant's performance of the services called for
      by
      this Agreement do not and will not violate any applicable law, rule, or
      regulation; any contracts with third parties; or any third-party rights in
      any
      patent, trademark, copyright, trade secret, or similar right.

     

    8. Indemnification.
      Consultant hereby indemnifies and agrees to hold harmless Company, its
      directors, officers, employees and agents from and against any and all claims,
      demands, and actions, and any liabilities, damages, or expenses resulting
      therefrom, including court costs and reasonable attorney fees, arising out
      of or
      relating to the negligent or intentional acts or omissions by Consultant
      hereunder or any breach of the warranties made by Consultant pursuant to Section
      7 hereof. Consultant's obligations under this section shall survive the
      termination of this Agreement for any reason. Company agrees to give Consultant
      prompt notice of any such claim, demand, or action and shall, to the extent
      Company is not adversely affected, cooperate fully with Consultant in defense
      and settlement of said claim, demand, or action. Company hereby indemnifies
      and
      agrees to hold harmless Consultant, its officers, directors, employees and
      agents from and against any and all claims, demands, and actions, and any
      liabilities, damages, or expenses resulting therefrom, including court costs
      and
      reasonable attorney fees, (“Losses”) arising out of or relating to this
      Agreement, except to the extent that such Losses are caused in whole or in
      part
      by the acts or omissions of Consultant. Company’s obligations under this section
      shall survive the termination of this Agreement for any reason. Consultant
      agrees to give Company prompt notice of any such claim, demand, or action and
      shall, to the extent Consultant is not adversely affected, cooperate fully
      with
      Company in defense and settlement of said claim, demand, or action.

     

    
      
        
        

      

      
        -
          3
          -

        
          

        

      

      
        
        

      

    

     

    9. Miscellaneous.

     

    9.1. Relationship
      of the Parties.
      Consultant is and shall be an independent Consultant to Company, and nothing
      herein shall be deemed to cause this Agreement to create an agency, partnership,
      or joint venture between the parties. Nothing in this Agreement shall be
      interpreted or construed as creating or establishing the relationship of
      employer and employee between Company and either Consultant or any employee
      or
      agent of Consultant.

     

    9.2. Entire
      Agreement, Modifications.
      This
      Agreement contains the entire agreement between the parties hereto with respect
      to the transactions contemplated hereby, and contains all of the terms and
      conditions thereof and supersedes all prior agreements and understandings
      relating to the subject matter hereof. No changes or modifications of or
      additions to this Agreement shall be valid unless the same shall be in writing
      and signed by each party hereto.

     

    9.3. Severability.
      The
      provisions of this Agreement shall be deemed severable and the invalidity or
      unenforceability of any one or more of the provisions hereof shall not affect
      the validity and enforceability of the other provisions hereof.

     

    9.4. Assignment.
      Company
      may assign or otherwise transfer its rights or obligations hereunder to any
      affiliated entity, or any entity which shares or which is subject to common
      control. Except as set forth herein, no party to this Agreement may, voluntarily
      or by operation of law, assign or otherwise transfer any of his, her or its
      rights or obligations under this Agreement, without obtaining the prior written
      consent of the other party hereto, which may be unreasonably withheld. Any
      attempted assignment in violation of this Agreement shall be void and of no
      effect.

     

    9.5. Successors
      and Assigns.
      This
      Agreement shall be binding upon and inure to the benefit of the parties, their
      successors and assigns.

     

    9.6. Waivers.
      No
      waiver of any of the provisions of this Agreement shall be deemed to be or
      shall
      constitute a waiver of any other provision of this Agreement, whether or not
      similar, nor shall any waiver constitute a continuing waiver. No waiver of
      any
      provision of this Agreement shall be binding on the parties hereto unless it
      is
      executed in writing by the party making the waiver.

     

    9.7. Notices.
      All
      notices, requests, demands and other communications under this Agreement shall
      be in writing and shall be deemed to have been duly given on the date of
      delivery if delivered personally to the party to whom notice is to be given,
      or
      on the third (3rd) day after mailing if mailed to the party to whom notice
      is
      given, by first class mail, registered or certified, postage prepaid, and
      properly addressed as set forth below on the signature page. Either party may
      change the address to which notices to such party are to be addressed by giving
      the other party hereto written notice of such change in the manner herein set
      forth.

     

    
      
        
        

      

      
        -
          4
          -

        
          

        

      

      
        
        

      

    

     

    9.8. Governing
      Law.
      This
      Agreement is made and shall be governed by, and construed and enforced in
      accordance with the laws of the state of Massachusetts, United States of
      America.

     

    9.9. Arbitration.
      Any
      controversy, dispute or claim arising out of or in connection with this
      Agreement, or the breach, termination or validity hereof, shall be settled
      by
      final and binding arbitration to be conducted by an arbitration tribunal in
      Boston, Massachusetts, pursuant to the rules of the American Arbitration
      Association. The arbitration tribunal shall consist of three arbitrators. The
      party initiating arbitration shall nominate one arbitrator in the request for
      arbitration and the other party shall nominate a second in the answer thereto
      within thirty (30) days of receipt of the request. The two arbitrators so named
      will then jointly appoint the third arbitrator. If the answering party fails
      to
      nominate its arbitrator within the thirty (30) day period, or if the arbitrators
      named by the parties fail to agree on the third arbitrator within sixty (60)
      days, the office of the American Arbitration Association in Boston,
      Massachusetts shall make the necessary appointments of such arbitrator(s).
      The
      decision or award of the arbitration tribunal (by a majority determination,
      or
      if there is no majority, then by the determination of the third arbitrator,
      if
      any) shall be final, and judgment upon such decision or award may be entered
      in
      any competent court or application may be made to any competent court for
      judicial acceptance of such decision or award and an order of enforcement.
      In
      the event of any procedural matter not covered by the aforesaid rules, the
      procedural law of the Commonwealth of Massachusetts shall govern.

     

    9.10. Venue;
      Submission to Jurisdiction.
      Except
      as governed by the above paragraph (9.9), any legal action or proceeding with
      respect to this Agreement shall be brought in the courts of The Commonwealth
      of
      Massachusetts or of the United States of America for the First District of
      Massachusetts. By execution and delivery of this Agreement, each of the parties
      hereto accepts for itself and in respect of its property, generally and
      unconditionally, the jurisdiction of the aforesaid courts. Each of the parties
      hereto irrevocably consents to the service of process of any of the
      aforementioned courts in any such action or proceeding by the mailing of copies
      thereof by certified mail, postage prepaid, to the party at its address set
      forth below.

     

    
      
        
        

      

      
        -
          5
          -

        
          

        

      

      
        
        

      

    


    IN
      WITNESS WHEREOF, the parties have executed this Agreement as of the date set
      forth above.

     

    
      	
              COMPANY:

            
	 
	
              Arbios
                Systems, Inc. 

            
	 	 
	
              By:

            	
              /s/
                Scott Hayashi

            
	
              Name:
                

            	
              Scott
                Hayashi

            
	
              Title:

            	
              Interim
                Chief Financial Officer

            


    

    
      	
              Address:
                

            	
              1050
                Winter St, Suite 1000

            
	 	
              Waltham,
                MA 02451

            


    

     

    
      	
              CONSULTANT:

            
	
              Shawn
                P. Cain

            
	 
	
              By:
                /s/ Shawn Cain

            
	
              Shawn
                P. Cain

            


    

    
      	
              Address:
                

            	
              73
                Newfield St.

            
	 	
              North
                Chelmsford, MA 01863

            


    

     

    
      
        
        

      

      
        -
          6
          -