Document:

Exhibit
      10.3

     

    THE
      SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
      HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
      AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III)
      THE
      COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
      SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
      ACT
      OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

    

    SUBJECT
      TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00
      P.M. EASTERN TIME ON OCTOBER 23, 2009 (THE “EXPIRATION
      DATE”).

    

    No.
      A
      -____

     

    ARBIOS
      SYSTEMS, INC.

    

    WARRANT
      TO PURCHASE [XXXX] SHARES OF

    COMMON
      STOCK, PAR VALUE $0.001 PER SHARE

    

    For
      VALUE
      RECEIVED, [XXXXX] (“Warrantholder”),
      is
      entitled to purchase, subject to the provisions of this Warrant, from Arbios
      Systems, Inc., a Delaware corporation (“Company”),
      at
      any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as
      defined above), at an exercise price per share equal to $1.00 (the exercise
      price in effect being herein called the “Warrant
      Price”),
      [XXXX] shares (“Warrant
      Shares”)
      of the
      Company’s Common Stock, par value $0.001 per share (“Common
      Stock”).
      The
      number of Warrant Shares purchasable upon exercise of this Warrant and the
      Warrant Price shall be subject to adjustment from time to time as described
      herein.

     

    Section
      1.  Registration.
      The
      Company shall maintain books for the transfer and registration of the Warrant.
      Upon the initial issuance of this Warrant, the Company shall issue and register
      the Warrant in the name of the Warrantholder.

     

    Section
      2.  Transfers.
      As
      provided herein, this Warrant may be transferred only pursuant to a registration
      statement filed under the Securities Act of 1933, as amended (the “Securities
      Act”),
      or an
      exemption from such registration. Subject to such restrictions, the Company
      shall transfer this Warrant from time to time upon the books to be maintained
      by
      the Company for that purpose, upon surrender thereof for transfer properly
      endorsed or accompanied by appropriate instructions for transfer and such other
      documents as may be reasonably required by the Company, including, if required
      by the Company, an opinion of its counsel to the effect that such transfer
      is
      exempt from the registration requirements of the Securities Act, to establish
      that such transfer is being made in accordance with the terms hereof, and a
      new
      Warrant shall be issued to the transferee and the surrendered Warrant shall
      be
      canceled by the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      3.  Exercise
      of Warrant.
      (a)
      Subject to the provisions hereof, the Warrantholder may exercise this Warrant
      in
      whole or in part at any time prior to the Expiration Date upon surrender of
      the
      Warrant, together with delivery of the duly executed Warrant exercise form
      attached hereto as Appendix
      A
      (the
“Exercise
      Agreement”)
      and
      payment by cash, certified check or wire transfer of funds for the aggregate
      Warrant Price for that number of Warrant Shares then being purchased, to the
      Company during normal business hours on any business day at the Company’s
      principal executive offices (or such other office or agency of the Company
      as it
      may designate by notice to the Warrantholder). The Warrant Shares so purchased
      shall be deemed to be issued to the Warrantholder or the Warrantholder’s
      designee, as the record owner of such shares, as of the close of business on
      the
      date on which this Warrant shall have been surrendered (or evidence of loss,
      theft or destruction thereof and security or indemnity satisfactory to the
      Company), the Warrant Price shall have been paid and the completed Exercise
      Agreement shall have been delivered. Certificates for the Warrant Shares so
      purchased, representing the aggregate number of shares specified in the Exercise
      Agreement, shall be delivered to the Warrantholder within a reasonable time,
      not
      exceeding three (3) business days, after this Warrant shall have been so
      exercised. The certificates so delivered shall be in such denominations as
      may
      be requested by the Warrantholder and shall be registered in the name of the
      Warrantholder or such other name as shall be designated by the Warrantholder.
      If
      this Warrant shall have been exercised only in part, then, unless this Warrant
      has expired, the Company shall, at its expense, at the time of delivery of
      such
      certificates, deliver to the Warrantholder a new Warrant representing the number
      of shares with respect to which this Warrant shall not then have been exercised.
      As used herein, “business day” means a day, other than a Saturday or Sunday, on
      which banks in New York City are open for the general transaction of business.
      Each exercise hereof shall constitute the re-affirmation by the Warrantholder
      that the representations and warranties contained in Section 5 of the Purchase
      Agreement dated April 23, 2007, by and among the Company and the Investors
      named
      therein (the “Purchase
      Agreement”),
      are
      true and correct in all material respects with respect to the Warrantholder
      as
      of the time of such exercise.

     

    Section
      4.  Compliance
      with the Securities Act.
      Except
      as provided in the Purchase Agreement, the Company may cause the legend set
      forth on the first page of this Warrant to be set forth on each Warrant or
      similar legend on any security issued or issuable upon exercise of this Warrant,
      unless counsel for the Company is of the opinion as to any such security that
      such legend is unnecessary.

     

    Section
      5.  Payment
      of Taxes.
      The
      Company will pay any documentary stamp taxes attributable to the initial
      issuance of Warrant Shares issuable upon the exercise of the Warrant;
provided,
      however,
      that
      the Company shall not be required to pay any tax or taxes which may be payable
      in respect of any transfer involved in the issuance or delivery of any
      certificates for Warrant Shares in a name other than that of the Warrantholder
      in respect of which such shares are issued, and in such case, the Company shall
      not be required to issue or deliver any certificate for Warrant Shares or any
      Warrant until the person requesting the same has paid to the Company the amount
      of such tax or has established to the Company’s reasonable satisfaction that
      such tax has been paid. The Warrantholder shall be responsible for income taxes
      due under federal, state or other law, if any such tax is due.

     

    
      
        
        

      

      
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    Section
      6.  Mutilated
      or Missing Warrants.
      In case
      this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall
      issue in exchange and substitution of and upon cancellation of the mutilated
      Warrant, or in lieu of and substitution for the Warrant lost, stolen or
      destroyed, a new Warrant of like tenor and for the purchase of a like number
      of
      Warrant Shares, but only upon receipt of evidence reasonably satisfactory to
      the
      Company of such loss, theft or destruction of the Warrant, and with respect
      to a
      lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect
      thereto, if requested by the Company.

     

    Section
      7.  Reservation
      of Common Stock.
      The
      Company hereby represents and warrants that there have been reserved, and the
      Company shall at all applicable times keep reserved until issued (if necessary)
      as contemplated by this Section 7, out of the authorized and unissued shares
      of
      Common Stock, sufficient shares to provide for the exercise of the rights of
      purchase represented by this Warrant. The Company agrees that all Warrant Shares
      issued upon due exercise of the Warrant shall be, at the time of delivery of
      the
      certificates for such Warrant Shares, duly authorized, validly issued, fully
      paid and non-assessable shares of Common Stock of the Company.

     

    Section
      8.  Adjustments.
      Subject
      and pursuant to the provisions of this Section 8, the Warrant Price and number
      of Warrant Shares subject to this Warrant shall be subject to adjustment from
      time to time as set forth hereinafter.

     

    (a)  If
      the
      Company shall, at any time or from time to time while this Warrant is
      outstanding, pay a dividend or make a distribution on its Common Stock in shares
      of Common Stock, subdivide its outstanding shares of Common Stock into a greater
      number of shares or combine its outstanding shares of Common Stock into a
      smaller number of shares or issue by reclassification of its outstanding shares
      of Common Stock any shares of its capital stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing corporation), then the number of Warrant Shares
      purchasable upon exercise of the Warrant and the Warrant Price in effect
      immediately prior to the date upon which such change shall become effective,
      shall be adjusted by the Company so that the Warrantholder thereafter exercising
      the Warrant shall be entitled to receive the number of shares of Common Stock
      or
      other capital stock which the Warrantholder would have received if the Warrant
      had been exercised immediately prior to such event upon payment of a Warrant
      Price that has been adjusted to reflect a fair allocation of the economics
      of
      such event to the Warrantholder. Such adjustments shall be made successively
      whenever any event listed above shall occur.

     

    (b)  If
      any
      capital reorganization, reclassification of the capital stock of the Company,
      consolidation or merger of the Company with another corporation in which the
      Company is not the survivor, or sale, transfer or other disposition of all
      or
      substantially all of the Company’s assets to another corporation shall be
      effected, then, as a condition of such reorganization, reclassification,
      consolidation, merger, sale, transfer or other disposition, lawful and adequate
      provision shall be made whereby each Warrantholder shall thereafter have the
      right to purchase and receive upon the basis and upon the terms and conditions
      herein specified and in lieu of the Warrant Shares immediately theretofore
      issuable upon exercise of the Warrant, such shares of stock, securities or
      assets as would have been issuable or payable with respect to or in exchange
      for
      a number of Warrant Shares equal to the number of Warrant Shares immediately
      theretofore issuable upon exercise of the Warrant, had such reorganization,
      reclassification, consolidation, merger, sale, transfer or other disposition
      not
      taken place, and in any such case appropriate provision shall be made with
      respect to the rights and interests of each Warrantholder to the end that the
      provisions hereof (including, without limitation, provision for adjustment
      of
      the Warrant Price) shall thereafter be applicable, as nearly equivalent as
      may
      be practicable in relation to any shares of stock, securities or assets
      thereafter deliverable upon the exercise hereof.

     

    
      
        
        

      

      
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    (c)  In
      case
      the Company shall fix a payment date for the making of a distribution to all
      holders of Common Stock (including any such distribution made in connection
      with
      a consolidation or merger in which the Company is the continuing corporation)
      of
      evidences of indebtedness or assets (other than cash dividends or cash
      distributions payable out of consolidated earnings or earned surplus or
      dividends or distributions referred to in Section 8(a)), or subscription rights
      or warrants, the Warrant Price to be in effect after such payment date shall
      be
      determined by multiplying the Warrant Price in effect immediately prior to
      such
      payment date by a fraction, the numerator of which shall be the total number
      of
      shares of Common Stock outstanding multiplied by the Market Price (as defined
      below) per share of Common Stock immediately prior to such payment date, less
      the fair market value (as determined by the Company’s Board of Directors in good
      faith) of said assets or evidences of indebtedness so distributed, or of such
      subscription rights or warrants, and the denominator of which shall be the
      total
      number of shares of Common Stock outstanding multiplied by such Market Price
      per
      share of Common Stock immediately prior to such payment date. “Market Price” as
      of a particular date (the “Valuation
      Date”)
      shall
      mean the following: (a) if the Common Stock is then listed on a national stock
      exchange, the closing sale price of one share of Common Stock on such exchange
      on the last trading day prior to the Valuation Date; (b) if the Common Stock
      is
      then quoted on The Nasdaq Stock Market, LLC (“Nasdaq”),
      the
      National Association of Securities Dealers, Inc. OTC Bulletin Board (the
“Bulletin
      Board”)
      or
      such similar exchange or association, the closing sale price of one share of
      Common Stock on Nasdaq, the Bulletin Board or such other exchange or association
      on the last trading day prior to the Valuation Date or, if no such closing
      sale
      price is available, the average of the high bid and the low asked price quoted
      thereon on the last trading day prior to the Valuation Date; or (c) if the
      Common Stock is not then listed on a national stock exchange or quoted on
      Nasdaq, the Bulletin Board or such other exchange or association, the fair
      market value of one share of Common Stock as of the Valuation Date, shall be
      determined in good faith by the Board of Directors of the Company. If the Common
      Stock is not then listed on a national securities exchange, the Bulletin Board
      or such other exchange or association, the Board of Directors of the Company
      shall respond promptly, in writing, to an inquiry by the Warrantholder prior
      to
      the exercise hereunder as to the fair market value of a share of Common Stock
      as
      determined by the Board of Directors of the Company.

     

    (d)  An
      adjustment to the Warrant Price shall become effective immediately after the
      payment date in the case of each dividend or distribution and immediately after
      the effective date of each other event which requires an
      adjustment.

     

    
      
        
        

      

      
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    (e)  In
      the
      event that, as a result of an adjustment made pursuant to this Section 8, the
      Warrantholder shall become entitled to receive any shares of capital stock
      of
      the Company other than shares of Common Stock, the number of such other shares
      so receivable upon exercise of this Warrant shall be subject thereafter to
      adjustment from time to time in a manner and on terms as nearly equivalent
      as
      practicable to the provisions with respect to the Warrant Shares contained
      in
      this Warrant. 

     

    (f)  Except
      as
      provided in subsection (g) hereof, if the Company shall issue or sell, or is,
      in
      accordance with any of subsections (f)(l) through (f)(7) hereof, deemed to
      have
      issued or sold, any shares of Common Stock for no consideration or for a
      consideration per share less than the Warrant Price in effect immediately prior
      to the time of such issue or sale, then and in each such case (a “Trigger
      Issuance”)
      the
      then-existing Warrant Price, shall be reduced, without a corresponding
      adjustment to the number of Warrant Shares issuabe upon exercise, as of the
      close of business on the effective date of the Trigger Issuance, to the
      consideration per share received by the Company for such issuance or deemed
      issuance of Additional Shares of Common Stock. Such adjustment pursuant to
      this
      Section 8(f) may only be made one time from the date hereof until the Expiration
      Date upon the first issuance of Additional Shares of Common Stock for
      consideration per share less that the Warrant Price hereunder.

     

    For
      purposes of this subsection (f), “Additional Shares of Common Stock” shall mean
      all shares of Common Stock issued by the Company or deemed to be issued pursuant
      to this subsection (f), other than Excluded Issuances (as defined in subsection
      (g) hereof), whether in a single transaction or series of related
      transactions, yielding aggregate proceeds to the Company of at least
      $3.0 million.

    

    For
      purposes of this subsection (f), the following subsections (f)(l) to (f)(7)
      shall also be applicable:

    

    (f)(1)
      Issuance of Rights or Options. In case at any time the Company shall in any
      manner grant (directly and not by assumption in a merger or otherwise) any
      warrants or other rights to subscribe for or to purchase, or any options for
      the
      purchase of, Common Stock or any stock or security convertible into or
      exchangeable for Common Stock (such warrants, rights or options being called
      “Options”
and
      such convertible or exchangeable stock or securities being called “Convertible
      Securities”)
      whether or not such Options or the right to convert or exchange any such
      Convertible Securities are immediately exercisable, and the price per share
      for
      which Common Stock is issuable upon the exercise of such Options or upon the
      conversion or exchange of such Convertible Securities (determined by dividing
      (i) the sum (which sum shall constitute the applicable consideration) of (x)
      the
      total amount, if any, received or receivable by the Company as consideration
      for
      the granting of such Options, plus (y) the aggregate amount of additional
      consideration payable to the Company upon the exercise of all such Options,
      plus
      (z), in the case of such Options which relate to Convertible Securities, the
      aggregate amount of additional consideration, if any, payable upon the issue
      or
      sale of such Convertible Securities and upon the conversion or exchange thereof,
      by (ii) the total maximum number of shares of Common Stock issuable upon the
      exercise of such Options or upon the conversion or exchange of all such
      Convertible Securities issuable upon the exercise of such Options) shall be
      less
      than the Warrant Price in effect immediately prior to the time of the granting
      of such Options, then the total number of shares of Common Stock issuable upon
      the exercise of such Options or upon conversion or exchange of the total amount
      of such Convertible Securities issuable upon the exercise of such Options shall
      be deemed to have been issued for such price per share as of the date of
      granting of such Options or the issuance of such Convertible Securities and
      thereafter shall be deemed to be outstanding for purposes of adjusting the
      Warrant Price. Except as otherwise provided in subsection 8(f)(3), no adjustment
      of the Warrant Price shall be made upon the actual issue of such Common Stock
      or
      of such Convertible Securities upon exercise of such Options or upon the actual
      issue of such Common Stock upon conversion or exchange of such Convertible
      Securities.

    

    
      
        
        

      

      
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    (f)(2)
      Issuance of Convertible Securities. In case the Company shall in any manner
      issue (directly and not by assumption in a merger or otherwise) or sell any
      Convertible Securities, whether or not the rights to exchange or convert any
      such Convertible Securities are immediately exercisable, and the price per
      share
      for which Common Stock is issuable upon such conversion or exchange (determined
      by dividing (i) the sum (which sum shall constitute the applicable
      consideration) of (x) the total amount received or receivable by the Company
      as
      consideration for the issue or sale of such Convertible Securities, plus (y)
      the
      aggregate amount of additional consideration, if any, payable to the Company
      upon the conversion or exchange thereof, by (ii) the total number of shares
      of
      Common Stock issuable upon the conversion or exchange of all such Convertible
      Securities) shall be less than the Warrant Price in effect immediately prior
      to
      the time of such issue or sale, then the total maximum number of shares of
      Common Stock issuable upon conversion or exchange of all such Convertible
      Securities shall be deemed to have been issued for such price per share as
      of
      the date of the issue or sale of such Convertible Securities and thereafter
      shall be deemed to be outstanding for purposes of adjusting the Warrant Price,
      provided
      that (a)
      except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant
      Price shall be made upon the actual issuance of such Common Stock upon
      conversion or exchange of such Convertible Securities and (b) no further
      adjustment of the Warrant Price shall be made by reason of the issue or sale
      of
      Convertible Securities upon exercise of any Options to purchase any such
      Convertible Securities for which adjustments of the Warrant Price have been
      made
      pursuant to the other provisions of subsection 8(f).

     

    (f)(3)
      Change in Option Price or Conversion Rate. Upon the happening of any of the
      following events, namely, if the purchase price provided for in any Option
      referred to in subsection 8(f)(l) hereof, the additional consideration, if
      any,
      payable upon the conversion or exchange of any Convertible Securities referred
      to in subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible
      Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into
      or
      exchangeable for Common Stock shall change at any time (including, but not
      limited to, changes under or by reason of provisions designed to protect against
      dilution), the Warrant Price in effect at the time of such event shall forthwith
      be readjusted to the Warrant Price which would have been in effect at such
      time
      had such Options or Convertible Securities still outstanding provided for such
      changed purchase price, additional consideration or conversion rate, as the
      case
      may be, at the time initially granted, issued or sold. On the termination of
      any
      Option for which any adjustment was made pursuant to this subsection 8(f) or
      any
      right to convert or exchange Convertible Securities for which any adjustment
      was
      made pursuant to this subsection 8(f) (including without limitation upon the
      redemption or purchase for consideration of such Convertible Securities by
      the
      Company), the Warrant Price then in effect hereunder shall forthwith be changed
      to the Warrant Price which would have been in effect at the time of such
      termination had such Option or Convertible Securities, to the extent outstanding
      immediately prior to such termination, never been issued.

     

    
      
        
        

      

      
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    (f)(4)
      Stock Dividends. Subject to the provisions of this Section 8(f), in case the
      Company shall declare a dividend or make any other distribution upon any stock
      of the Company (other than the Common Stock) payable in Common Stock, Options
      or
      Convertible Securities, then any Common Stock, Options or Convertible
      Securities, as the case may be, issuable in payment of such dividend or
      distribution shall be deemed to have been issued or sold without
      consideration.

    

    (f)(5)
      Consideration for Stock. In case any shares of Common Stock, Options or
      Convertible Securities shall be issued or sold for cash, the consideration
      received therefor shall be deemed to be the net amount received by the Company
      therefor, after deduction therefrom of any expenses incurred or any underwriting
      commissions or concessions paid or allowed by the Company in connection
      therewith. In case any shares of Common Stock, Options or Convertible Securities
      shall be issued or sold for a consideration other than cash, the amount of
      the
      consideration other than cash received by the Company shall be deemed to be
      the
      fair value of such consideration as determined in good faith by the Board of
      Directors of the Company, after deduction of any expenses incurred or any
      underwriting commissions or concessions paid or allowed by the Company in
      connection therewith. In case any Options shall be issued in connection with
      the
      issue and sale of other securities of the Company, together comprising one
      integral transaction in which no specific consideration is allocated to such
      Options by the parties thereto, such Options shall be deemed to have been issued
      for such consideration as determined in good faith by the Board of Directors
      of
      the Company. If Common Stock, Options or Convertible Securities shall be issued
      or sold by the Company and, in connection therewith, other Options or
      Convertible Securities (the “Additional
      Rights”)
      are
      issued, then the consideration received or deemed to be received by the Company
      shall be reduced by the fair market value of the Additional Rights (as
      determined using the Black-Scholes option pricing model or another method
      mutually agreed to by the Company and the Warrantholder). The Board of Directors
      of the Company shall respond promptly, in writing, to an inquiry by the
      Warrantholder as to the fair market value of the Additional Rights.

    

    
      
        
        

      

      
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    (f)(6)
      Record Date. In case the Company shall take a record of the holders of its
      Common Stock for the purpose of entitling them (i) to receive a dividend or
      other distribution payable in Common Stock, Options or Convertible Securities
      or
      (ii) to subscribe for or purchase Common Stock, Options or Convertible
      Securities, then such record date shall be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase, as the case
      may
      be.

    

    (f)(7)
      Treasury Shares. The number of shares of Common Stock outstanding at any given
      time shall not include shares owned or held by or for the account of the Company
      or any of its wholly-owned subsidiaries, and the disposition of any such shares
      (other than the cancellation or retirement thereof) shall be considered an
      issue
      or sale of Common Stock for the purpose of this subsection (f).

     

    (g)  Anything
      herein to the contrary notwithstanding, the Company shall not be required to
      make any adjustment of the Warrant Price in the case of the issuance of
(A)
      capital stock, Options or Convertible Securities issued to directors, officers,
      employees or consultants of the Company in connection with their service as
      directors of the Company, their employment by the Company or their retention
      as
      consultants by the Company pursuant to an equity compensation program approved
      by the Board of Directors of the Company or the compensation committee of the
      Board of Directors of the Company, (B) shares of Common Stock issued upon the
      conversion or exercise of Options or Convertible Securities issued prior to
      the
      date hereof, (C) securities issued pursuant to the Purchase Agreement and
      securities issued upon the exercise or conversion of those securities, including
      those certain warrants to purchase Common Stock issued to Musket Research
      Associates, Inc. in connection with the consummation of the transactions
      contemplated by the Purchase Agreement, (D) shares of Common Stock issued or
      issuable by reason of a dividend, stock split or other distribution on shares
      of
      Common Stock (but only to the extent that such a dividend, split or distribution
      results in an adjustment in the Warrant Price pursuant to the other provisions
      of this Warrant), (E) shares of Common Stock issued or issuable to (x) a
      strategic partner, collaborator, licensee or licensor, bank or other financial
      institution in a transaction the primary purpose of which is not the raising
      of
      capital, (y) pursuant to a bona fide firm commitment underwritten public
      offering with a nationally recognized underwriter (excluding any equity line)
      in
      an aggregate offering amount greater than $25,000,000, or (z) pursuant to the
      Company’s bona fide acquisition of another corporation, or all or a portion of
      its assets, by merger, purchase of assets or stock or other corporate
      reorganization in each case, as approved by the Company’s board of directors and
      not for the principal purpose of raising capital (collectively, “Excluded
      Issuances”).

     

    Section
      9.  Fractional
      Interest.
      The
      Company shall not be required to issue fractions of Warrant Shares upon the
      exercise of this Warrant. If any fractional share of Common Stock would, except
      for the provisions of the first sentence of this Section 9, be deliverable
      upon
      such exercise, the Company, in lieu of delivering such fractional share, shall
      pay to the exercising Warrantholder an amount in cash equal to the Market Price
      of such fractional share of Common Stock on the date of exercise.

     

    
      
        
        

      

      
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    Section
      10.  Benefits.
      Nothing
      in this Warrant shall be construed to give any person, firm or corporation
      (other than the Company and the Warrantholder) any legal or equitable right,
      remedy or claim, it being agreed that this Warrant shall be for the sole and
      exclusive benefit of the Company and the Warrantholder.

     

    Section
      11.  Notices
      to Warrantholder.
      Upon
      the happening of any event requiring an adjustment of the Warrant Price, the
      Company shall promptly give written notice thereof to the Warrantholder at
      the
      address appearing in the records of the Company, stating the adjusted Warrant
      Price and the adjusted number of Warrant Shares resulting from such event and
      setting forth in reasonable detail the method of calculation and the facts
      upon
      which such calculation is based. Failure to give such notice to the
      Warrantholder or any defect therein shall not affect the legality or validity
      of
      the subject adjustment.

     

    Section
      12.  Identity
      of Transfer Agent.
      The
      Transfer Agent for the Common Stock is The Nevada Agency and Trust Company.
      Upon
      the appointment of any subsequent transfer agent for the Common Stock or other
      shares of the Company’s capital stock issuable upon the exercise of the rights
      of purchase represented by the Warrant, the Company will mail to the
      Warrantholder a statement setting forth the name and address of such transfer
      agent.

     

    Section
      13.  Notices.
      Unless
      otherwise provided, any notice required or permitted under this Warrant shall
      be
      given in writing and shall be deemed effectively given as hereinafter described
      (i) if given by personal delivery, then such notice shall be deemed given upon
      such delivery, (ii) if given by telex or facsimile, then such notice shall
      be
      deemed given upon receipt of confirmation of complete transmittal, (iii) if
      given by mail, then such notice shall be deemed given upon the earlier of (A)
      receipt of such notice by the recipient or (B) three days after such notice
      is
      deposited in first class mail, postage prepaid, and (iv) if given by an
      internationally recognized overnight air courier, then such notice shall be
      deemed given one business day after delivery to such carrier. All notices shall
      be addressed as follows: if to the Warrantholder, at its address as set forth
      in
      the Company’s books and records and, if to the Company, at the address as
      follows, or at such other address as the Warrantholder or the Company may
      designate by ten days’ advance written notice to the other:

     

    If
      to the
      Company:

    

    Arbios
      Systems, Inc.

    1050
      Winter Street, Suite 1000

    Waltham,
      Massachusetts 02451

    Attention:
      President

    Fax:
      (781) 839-7294 

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    With
      a
      copy to:

    

    Mintz,
      Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

    One
      Financial Center

    Boston,
      Massachusetts 02111

    Attention:
      William Whelan, Esq.

    Fax:
      (617) 542-2241 

     

    Section
      14.  Registration
      Rights.
      The
      initial Warrantholder is entitled to the benefit of certain registration rights
      with respect to the shares of Common Stock issuable upon the exercise of this
      Warrant as provided in the Registration Rights Agreement, and any subsequent
      Warrantholder may be entitled to such rights.

     

    Section
      15.  Successors.
      All the
      covenants and provisions hereof by or for the benefit of the Warrantholder
      shall
      bind and inure to the benefit of its respective successors and assigns
      hereunder. 

     

    Section
      16.  Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Warrant shall be governed by, and construed in accordance with, the internal
      laws of the State of New York, without reference to the choice of law provisions
      thereof. The Company and, by accepting this Warrant, the Warrantholder, each
      irrevocably submits to the exclusive jurisdiction of the courts of the State
      of
      New York located in New York County and the United States District Court for
      the
      Southern District of New York for the purpose of any suit, action, proceeding
      or
      judgment relating to or arising out of this Warrant and the transactions
      contemplated hereby. Service of process in connection with any such suit, action
      or proceeding may be served on each party hereto anywhere in the world by the
      same methods as are specified for the giving of notices under this Warrant.
      The
      Company and, by accepting this Warrant, the Warrantholder, each irrevocably
      consents to the jurisdiction of any such court in any such suit, action or
      proceeding and to the laying of venue in such court. The Company and, by
      accepting this Warrant, the Warrantholder, each irrevocably waives any objection
      to the laying of venue of any such suit, action or proceeding brought in such
      courts and irrevocably waives any claim that any such suit, action or proceeding
      brought in any such court has been brought in an inconvenient forum.
EACH
      OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES
      ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
      WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
      WAIVER.

     

    Section
      17.  Call
      Provision.
      Notwithstanding any other provision contained herein to the contrary in the
      event that the closing bid price of a share of Common Stock as traded on the
      Bulletin Board (or such other exchange or stock market on which the Common
      Stock
      may then be listed or quoted) equals or exceeds 1.5 times the Exercise Price
      for
      a period of thirty (30) days of any sixty (60) consecutive days at any time
      commencing after the Registration Statement (as defined in the Registration
      Rights Agreement) is declared effective (the “Trading
      Period”),
      the
      Company, upon thirty (30) days prior written notice (the “Notice
      Period”)
      given
      to the Warrantholder within five business days immediately following the end
      of
      such Trading Period, may call this Warrant, in whole but not in part, at a
      redemption price equal to $0.001per share of Common Stock then purchasable
      pursuant to this Warrant; provided
      that (i)
      the Company simultaneously calls all Company Warrants (as defined below) on
      the
      same terms and (ii) all of the shares of Common Stock issuable hereunder either
      (A) are registered pursuant to an effective Registration Statement which has
      not
      been suspended and for which no stop order is in effect, and pursuant to which
      the Warrantholder is able to sell such shares of Common Stock at all times
      during the Notice Period or (B) no longer constitute Registrable Securities
      (as
      defined in the Registration Rights Agreement). Notwithstanding any such notice
      by the Company, the Warrantholder shall have the right to exercise this Warrant
      prior to the end of the Notice Period.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Section
      18.  No
      Rights as Stockholder.
      Prior
      to the exercise of this Warrant, the Warrantholder shall not have or exercise
      any rights as a stockholder of the Company by virtue of its ownership of this
      Warrant.

     

    Section
      19.  Amendment;
      Waiver.
      This
      Warrant is one of a series of Warrants of like tenor issued by the Company
      pursuant to the Purchase Agreement and initially covering an aggregate of up
      to
      3,739,231 shares of Common Stock (collectively, the “Company
      Warrants”).
      Any
      term of a Company Warrant may be amended or waived (including the adjustment
      provisions included in Section 8 of this Warrant) upon the written consent
      of
      the Company and the holders of Company Warrants of like tenor with respect
      to
      Warrant Price and Expiration Date representing at least 50% of the number of
      shares of Common Stock then subject to all such outstanding Company Warrants
      (with respect to such Company Warrants of like tenor, the “Majority
      Holders”);
      provided,
      that
      (x) any such amendment or waiver must apply to all sun Company Warrants of
      like
      tenor; and (y) the number of Warrant Shares subject to this Warrant, the Warrant
      Price and the Expiration Date may not be amended, and the right to exercise
      this
      Warrant may not be altered or waived, without the written consent of the
      Warrantholder.

     

    Section
      20.  Section
      Headings.
      The
      section headings in this Warrant are for the convenience of the Company and
      the
      Warrantholder and in no way alter, modify, amend, limit or restrict the
      provisions hereof.

     

    [remainder
      left intentionally blank]

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
      of
      the 23rd
      day of
      April, 2007.

    
      	 	 	 
	 	ARBIOS
              SYSTEMS,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
              Walter C. Ogier
	 	Title:
              President and Chief Executive Officer

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    ARBIOS
      SYSTEMS, INC.

    WARRANT
      EXERCISE FORM

    

    To
      Arbios
      Systems, Inc.:

    

      The
      undersigned hereby irrevocably elects to exercise the right of purchase
      represented by the within Warrant (“Warrant”)
      for,
      and to purchase thereunder by the payment of the Warrant Price and surrender
      of
      the Warrant, _______________ shares of Common Stock (“Warrant
      Shares”)
      provided for therein. The undersigned intends that payment of the Warrant Price
      shall be made as (check one):

     

    ____
      “Cash Exercise” under Section 3

     

    

    and
      requests that certificates for the Warrant Shares be issued as follows:

    

    _______________________________

    Name

    ________________________________

    Address

    ________________________________

    ________________________________

    Federal
      Tax ID or Social Security No.

    

    and
      delivered by (certified
      mail to the above address, or 

    (electronically
      (provide DWAC Instructions:___________________), or 

    (other
      (specify): __________________________________________). 

    

    and,
      if
      the number of Warrant Shares shall not be all the Warrant Shares purchasable
      upon exercise of the Warrant, that a new Warrant for the balance of the Warrant
      Shares 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    purchasable
      upon exercise of this Warrant be registered in the name of the undersigned
      Warrantholder or the undersigned’s Assignee as below indicated and delivered to
      the address stated below.

    

    Dated:
      ___________________, ____

     

      	
              Note:
                The signature must correspond with the name of the Warrantholder
                as
                written on the first page of the Warrant in every particular, without
                alteration or enlargement or any change whatever, unless the Warrant
                has
                been assigned.

            	 	 	
              Signature:

              
                

              

               

              

              Name
                (please print)

               

              
                

                

              

              Address

            
	 	 	 	 

              

              Federal
                Identification or

                Social
                  Security No.

              

            
	 	 	 	 
	 	 	 	
              Assignee:Exhibit
      10.4

    

    THE
      SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
      HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
      AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III)
      THE
      COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
      SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES
      ACT
      OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.

    

    SUBJECT
      TO THE PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00
      P.M. EASTERN TIME ON APRIL 23, 2012 (THE“EXPIRATION
      DATE”).

    

    No.
      B
      -____

     

    ARBIOS
      SYSTEMS, INC.

    

    WARRANT
      TO PURCHASE [XXXX] SHARES OF

    COMMON
      STOCK, PAR VALUE $0.001 PER SHARE

    

    For
      VALUE
      RECEIVED, [XXXXX] (“Warrantholder”),
      is
      entitled to purchase, subject to the provisions of this Warrant, from Arbios
      Systems, Inc., a Delaware corporation (“Company”),
      at
      any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as
      defined above), at an exercise price per share equal to $1.40 (the exercise
      price in effect being herein called the “Warrant
      Price”),
      [XXXX] shares (“Warrant
      Shares”)
      of the
      Company’s Common Stock, par value $0.001 per share (“Common
      Stock”).
      The
      number of Warrant Shares purchasable upon exercise of this Warrant and the
      Warrant Price shall be subject to adjustment from time to time as described
      herein.

     

    Section
      1.  Registration.
      The
      Company shall maintain books for the transfer and registration of the Warrant.
      Upon the initial issuance of this Warrant, the Company shall issue and register
      the Warrant in the name of the Warrantholder.

     

    Section
      2.  Transfers.
      As
      provided herein, this Warrant may be transferred only pursuant to a registration
      statement filed under the Securities Act of 1933, as amended (the “Securities
      Act”),
      or an
      exemption from such registration. Subject to such restrictions, the Company
      shall transfer this Warrant from time to time upon the books to be maintained
      by
      the Company for that purpose, upon surrender thereof for transfer properly
      endorsed or accompanied by appropriate instructions for transfer and such other
      documents as may be reasonably required by the Company, including, if required
      by the Company, an opinion of its counsel to the effect that such transfer
      is
      exempt from the registration requirements of the Securities Act, to establish
      that such transfer is being made in accordance with the terms hereof, and a
      new
      Warrant shall be issued to the transferee and the surrendered Warrant shall
      be
      canceled by the Company.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    Section
      3.  Exercise
      of Warrant.
      (a)
      Subject to the provisions hereof, the Warrantholder may exercise this Warrant
      in
      whole or in part at any time prior to the Expiration Date upon surrender of
      the
      Warrant, together with delivery of the duly executed Warrant exercise form
      attached hereto as Appendix
      A
      (the
“Exercise
      Agreement”)
      and
      payment by cash, certified check or wire transfer of funds for the aggregate
      Warrant Price for that number of Warrant Shares then being purchased, to the
      Company during normal business hours on any business day at the Company’s
      principal executive offices (or such other office or agency of the Company
      as it
      may designate by notice to the Warrantholder). The Warrant Shares so purchased
      shall be deemed to be issued to the Warrantholder or the Warrantholder’s
      designee, as the record owner of such shares, as of the close of business on
      the
      date on which this Warrant shall have been surrendered (or evidence of loss,
      theft or destruction thereof and security or indemnity satisfactory to the
      Company), the Warrant Price shall have been paid and the completed Exercise
      Agreement shall have been delivered. Certificates for the Warrant Shares so
      purchased, representing the aggregate number of shares specified in the Exercise
      Agreement, shall be delivered to the Warrantholder within a reasonable time,
      not
      exceeding three (3) business days, after this Warrant shall have been so
      exercised. The certificates so delivered shall be in such denominations as
      may
      be requested by the Warrantholder and shall be registered in the name of the
      Warrantholder or such other name as shall be designated by the Warrantholder.
      If
      this Warrant shall have been exercised only in part, then, unless this Warrant
      has expired, the Company shall, at its expense, at the time of delivery of
      such
      certificates, deliver to the Warrantholder a new Warrant representing the number
      of shares with respect to which this Warrant shall not then have been exercised.
      As used herein, “business day” means a day, other than a Saturday or Sunday, on
      which banks in New York City are open for the general transaction of business.
      Each exercise hereof shall constitute the re-affirmation by the Warrantholder
      that the representations and warranties contained in Section 5 of the Purchase
      Agreement dated April 23, 2007, by and among the Company and the Investors
      named
      therein (the “Purchase
      Agreement”),
      are
      true and correct in all material respects with respect to the Warrantholder
      as
      of the time of such exercise.

     

    Section
      4.  Compliance
      with the Securities Act.
      Except
      as provided in the Purchase Agreement, the Company may cause the legend set
      forth on the first page of this Warrant to be set forth on each Warrant or
      similar legend on any security issued or issuable upon exercise of this Warrant,
      unless counsel for the Company is of the opinion as to any such security that
      such legend is unnecessary.

     

    Section
      5.  Payment
      of Taxes.
      The
      Company will pay any documentary stamp taxes attributable to the initial
      issuance of Warrant Shares issuable upon the exercise of the Warrant;
provided,
      however,
      that
      the Company shall not be required to pay any tax or taxes which may be payable
      in respect of any transfer involved in the issuance or delivery of any
      certificates for Warrant Shares in a name other than that of the Warrantholder
      in respect of which such shares are issued, and in such case, the Company shall
      not be required to issue or deliver any certificate for Warrant Shares or any
      Warrant until the person requesting the same has paid to the Company the amount
      of such tax or has established to the Company’s reasonable satisfaction that
      such tax has been paid. The Warrantholder shall be responsible for income taxes
      due under federal, state or other law, if any such tax is due.

     

    
      
        
        

      

      
        -2-

        
          

        

      

      
        
        

      

    

     

    Section
      6.  Mutilated
      or Missing Warrants.
      In case
      this Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall
      issue in exchange and substitution of and upon cancellation of the mutilated
      Warrant, or in lieu of and substitution for the Warrant lost, stolen or
      destroyed, a new Warrant of like tenor and for the purchase of a like number
      of
      Warrant Shares, but only upon receipt of evidence reasonably satisfactory to
      the
      Company of such loss, theft or destruction of the Warrant, and with respect
      to a
      lost, stolen or destroyed Warrant, reasonable indemnity or bond with respect
      thereto, if requested by the Company.

     

    Section
      7.  Reservation
      of Common Stock.
      The
      Company hereby represents and warrants that there have been reserved, and the
      Company shall at all applicable times keep reserved until issued (if necessary)
      as contemplated by this Section 7, out of the authorized and unissued shares
      of
      Common Stock, sufficient shares to provide for the exercise of the rights of
      purchase represented by this Warrant. The Company agrees that all Warrant Shares
      issued upon due exercise of the Warrant shall be, at the time of delivery of
      the
      certificates for such Warrant Shares, duly authorized, validly issued, fully
      paid and non-assessable shares of Common Stock of the Company.

     

    Section
      8.  Adjustments.
      Subject
      and pursuant to the provisions of this Section 8, the Warrant Price and number
      of Warrant Shares subject to this Warrant shall be subject to adjustment from
      time to time as set forth hereinafter.

     

    (a)  If
      the
      Company shall, at any time or from time to time while this Warrant is
      outstanding, pay a dividend or make a distribution on its Common Stock in shares
      of Common Stock, subdivide its outstanding shares of Common Stock into a greater
      number of shares or combine its outstanding shares of Common Stock into a
      smaller number of shares or issue by reclassification of its outstanding shares
      of Common Stock any shares of its capital stock (including any such
      reclassification in connection with a consolidation or merger in which the
      Company is the continuing corporation), then the number of Warrant Shares
      purchasable upon exercise of the Warrant and the Warrant Price in effect
      immediately prior to the date upon which such change shall become effective,
      shall be adjusted by the Company so that the Warrantholder thereafter exercising
      the Warrant shall be entitled to receive the number of shares of Common Stock
      or
      other capital stock which the Warrantholder would have received if the Warrant
      had been exercised immediately prior to such event upon payment of a Warrant
      Price that has been adjusted to reflect a fair allocation of the economics
      of
      such event to the Warrantholder. Such adjustments shall be made successively
      whenever any event listed above shall occur.

     

    (b)  If
      any
      capital reorganization, reclassification of the capital stock of the Company,
      consolidation or merger of the Company with another corporation in which the
      Company is not the survivor, or sale, transfer or other disposition of all
      or
      substantially all of the Company’s assets to another corporation shall be
      effected, then, as a condition of such reorganization, reclassification,
      consolidation, merger, sale, transfer or other disposition, lawful and adequate
      provision shall be made whereby each Warrantholder shall thereafter have the
      right to purchase and receive upon the basis and upon the terms and conditions
      herein specified and in lieu of the Warrant Shares immediately theretofore
      issuable upon exercise of the Warrant, such shares of stock, securities or
      assets as would have been issuable or payable with respect to or in exchange
      for
      a number of Warrant Shares equal to the number of Warrant Shares immediately
      theretofore issuable upon exercise of the Warrant, had such reorganization,
      reclassification, consolidation, merger, sale, transfer or other disposition
      not
      taken place, and in any such case appropriate provision shall be made with
      respect to the rights and interests of each Warrantholder to the end that the
      provisions hereof (including, without limitation, provision for adjustment
      of
      the Warrant Price) shall thereafter be applicable, as nearly equivalent as
      may
      be practicable in relation to any shares of stock, securities or assets
      thereafter deliverable upon the exercise hereof.

     

    
      
        
        

      

      
        -3-

        
          

        

      

      
        
        

      

    

     

    (c)  In
      case
      the Company shall fix a payment date for the making of a distribution to all
      holders of Common Stock (including any such distribution made in connection
      with
      a consolidation or merger in which the Company is the continuing corporation)
      of
      evidences of indebtedness or assets (other than cash dividends or cash
      distributions payable out of consolidated earnings or earned surplus or
      dividends or distributions referred to in Section 8(a)), or subscription rights
      or warrants, the Warrant Price to be in effect after such payment date shall
      be
      determined by multiplying the Warrant Price in effect immediately prior to
      such
      payment date by a fraction, the numerator of which shall be the total number
      of
      shares of Common Stock outstanding multiplied by the Market Price (as defined
      below) per share of Common Stock immediately prior to such payment date, less
      the fair market value (as determined by the Company’s Board of Directors in good
      faith) of said assets or evidences of indebtedness so distributed, or of such
      subscription rights or warrants, and the denominator of which shall be the
      total
      number of shares of Common Stock outstanding multiplied by such Market Price
      per
      share of Common Stock immediately prior to such payment date. “Market Price” as
      of a particular date (the “Valuation
      Date”)
      shall
      mean the following: (a) if the Common Stock is then listed on a national stock
      exchange, the closing sale price of one share of Common Stock on such exchange
      on the last trading day prior to the Valuation Date; (b) if the Common Stock
      is
      then quoted on The Nasdaq Stock Market, LLC (“Nasdaq”),
      the
      National Association of Securities Dealers, Inc. OTC Bulletin Board (the
“Bulletin
      Board”)
      or
      such similar exchange or association, the closing sale price of one share of
      Common Stock on Nasdaq, the Bulletin Board or such other exchange or association
      on the last trading day prior to the Valuation Date or, if no such closing
      sale
      price is available, the average of the high bid and the low asked price quoted
      thereon on the last trading day prior to the Valuation Date; or (c) if the
      Common Stock is not then listed on a national stock exchange or quoted on
      Nasdaq, the Bulletin Board or such other exchange or association, the fair
      market value of one share of Common Stock as of the Valuation Date, shall be
      determined in good faith by the Board of Directors of the Company. If the Common
      Stock is not then listed on a national securities exchange, the Bulletin Board
      or such other exchange or association, the Board of Directors of the Company
      shall respond promptly, in writing, to an inquiry by the Warrantholder prior
      to
      the exercise hereunder as to the fair market value of a share of Common Stock
      as
      determined by the Board of Directors of the Company.

     

    (d)  An
      adjustment to the Warrant Price shall become effective immediately after the
      payment date in the case of each dividend or distribution and immediately after
      the effective date of each other event which requires an
      adjustment.

     

    
      
        
        

      

      
        -4-

        
          

        

      

      
        
        

      

    

    (e)  In
      the
      event that, as a result of an adjustment made pursuant to this Section 8, the
      Warrantholder shall become entitled to receive any shares of capital stock
      of
      the Company other than shares of Common Stock, the number of such other shares
      so receivable upon exercise of this Warrant shall be subject thereafter to
      adjustment from time to time in a manner and on terms as nearly equivalent
      as
      practicable to the provisions with respect to the Warrant Shares contained
      in
      this Warrant. 

     

    (f)  Except
      as
      provided in subsection (g) hereof, if the Company shall issue or sell, or is,
      in
      accordance with any of subsections (f)(l) through (f)(7) hereof, deemed to
      have
      issued or sold, any shares of Common Stock for no consideration or for a
      consideration per share less than the Warrant Price in effect immediately prior
      to the time of such issue or sale, then and in each such case (a “Trigger
      Issuance”)
      the
      then-existing Warrant Price, shall be reduced, without a corresponding
      adjustment to the number of Warrant Shares issuabe upon exercise, as of the
      close of business on the effective date of the Trigger Issuance, to the
      consideration per share received by the Company for such issuance or deemed
      issuance of Additional Shares of Common Stock. Such adjustment pursuant to
      this
      Section 8(f) may only be made one time from the date hereof until the Expiration
      Date upon the first issuance of Additional Shares of Common Stock for
      consideration per share less that the Warrant Price hereunder.

     

    For
      purposes of this subsection (f), “Additional Shares of Common Stock” shall mean
      all shares of Common Stock issued by the Company or deemed to be issued pursuant
      to this subsection (f), other than Excluded Issuances (as defined in subsection
      (g) hereof), whether in a single transaction or series of related
      transactions, yielding aggregate proceeds to the Company of at least
      $3.0 million.

    

    For
      purposes of this subsection (f), the following subsections (f)(l) to (f)(7)
      shall also be applicable:

    

    (f)(1)
      Issuance of Rights or Options. In case at any time the Company shall in any
      manner grant (directly and not by assumption in a merger or otherwise) any
      warrants or other rights to subscribe for or to purchase, or any options for
      the
      purchase of, Common Stock or any stock or security convertible into or
      exchangeable for Common Stock (such warrants, rights or options being called
      “Options”
and
      such convertible or exchangeable stock or securities being called “Convertible
      Securities”)
      whether or not such Options or the right to convert or exchange any such
      Convertible Securities are immediately exercisable, and the price per share
      for
      which Common Stock is issuable upon the exercise of such Options or upon the
      conversion or exchange of such Convertible Securities (determined by dividing
      (i) the sum (which sum shall constitute the applicable consideration) of (x)
      the
      total amount, if any, received or receivable by the Company as consideration
      for
      the granting of such Options, plus (y) the aggregate amount of additional
      consideration payable to the Company upon the exercise of all such Options,
      plus
      (z), in the case of such Options which relate to Convertible Securities, the
      aggregate amount of additional consideration, if any, payable upon the issue
      or
      sale of such Convertible Securities and upon the conversion or exchange thereof,
      by (ii) the total maximum number of shares of Common Stock issuable upon the
      exercise of such Options or upon the conversion or exchange of all such
      Convertible Securities issuable upon the exercise of such Options) shall be
      less
      than the Warrant Price in effect immediately prior to the time of the granting
      of such Options, then the total number of shares of Common Stock issuable upon
      the exercise of such Options or upon conversion or exchange of the total amount
      of such Convertible Securities issuable upon the exercise of such Options shall
      be deemed to have been issued for such price per share as of the date of
      granting of such Options or the issuance of such Convertible Securities and
      thereafter shall be deemed to be outstanding for purposes of adjusting the
      Warrant Price. Except as otherwise provided in subsection 8(f)(3), no adjustment
      of the Warrant Price shall be made upon the actual issue of such Common Stock
      or
      of such Convertible Securities upon exercise of such Options or upon the actual
      issue of such Common Stock upon conversion or exchange of such Convertible
      Securities.

    

    
      
        
        

      

      
        -5-

        
          

        

      

      
        
        

      

    

    (f)(2)
      Issuance of Convertible Securities. In case the Company shall in any manner
      issue (directly and not by assumption in a merger or otherwise) or sell any
      Convertible Securities, whether or not the rights to exchange or convert any
      such Convertible Securities are immediately exercisable, and the price per
      share
      for which Common Stock is issuable upon such conversion or exchange (determined
      by dividing (i) the sum (which sum shall constitute the applicable
      consideration) of (x) the total amount received or receivable by the Company
      as
      consideration for the issue or sale of such Convertible Securities, plus (y)
      the
      aggregate amount of additional consideration, if any, payable to the Company
      upon the conversion or exchange thereof, by (ii) the total number of shares
      of
      Common Stock issuable upon the conversion or exchange of all such Convertible
      Securities) shall be less than the Warrant Price in effect immediately prior
      to
      the time of such issue or sale, then the total maximum number of shares of
      Common Stock issuable upon conversion or exchange of all such Convertible
      Securities shall be deemed to have been issued for such price per share as
      of
      the date of the issue or sale of such Convertible Securities and thereafter
      shall be deemed to be outstanding for purposes of adjusting the Warrant Price,
      provided
      that (a)
      except as otherwise provided in subsection 8(f)(3), no adjustment of the Warrant
      Price shall be made upon the actual issuance of such Common Stock upon
      conversion or exchange of such Convertible Securities and (b) no further
      adjustment of the Warrant Price shall be made by reason of the issue or sale
      of
      Convertible Securities upon exercise of any Options to purchase any such
      Convertible Securities for which adjustments of the Warrant Price have been
      made
      pursuant to the other provisions of subsection 8(f).

     

    (f)(3)
      Change in Option Price or Conversion Rate. Upon the happening of any of the
      following events, namely, if the purchase price provided for in any Option
      referred to in subsection 8(f)(l) hereof, the additional consideration, if
      any,
      payable upon the conversion or exchange of any Convertible Securities referred
      to in subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible
      Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into
      or
      exchangeable for Common Stock shall change at any time (including, but not
      limited to, changes under or by reason of provisions designed to protect against
      dilution), the Warrant Price in effect at the time of such event shall forthwith
      be readjusted to the Warrant Price which would have been in effect at such
      time
      had such Options or Convertible Securities still outstanding provided for such
      changed purchase price, additional consideration or conversion rate, as the
      case
      may be, at the time initially granted, issued or sold. On the termination of
      any
      Option for which any adjustment was made pursuant to this subsection 8(f) or
      any
      right to convert or exchange Convertible Securities for which any adjustment
      was
      made pursuant to this subsection 8(f) (including without limitation upon the
      redemption or purchase for consideration of such Convertible Securities by
      the
      Company), the Warrant Price then in effect hereunder shall forthwith be changed
      to the Warrant Price which would have been in effect at the time of such
      termination had such Option or Convertible Securities, to the extent outstanding
      immediately prior to such termination, never been issued.

     

    
      
        
        

      

      
        -6-

        
          

        

      

      
        
        

      

    

    (f)(4)
      Stock Dividends. Subject to the provisions of this Section 8(f), in case the
      Company shall declare a dividend or make any other distribution upon any stock
      of the Company (other than the Common Stock) payable in Common Stock, Options
      or
      Convertible Securities, then any Common Stock, Options or Convertible
      Securities, as the case may be, issuable in payment of such dividend or
      distribution shall be deemed to have been issued or sold without
      consideration.

    

    (f)(5)
      Consideration for Stock. In case any shares of Common Stock, Options or
      Convertible Securities shall be issued or sold for cash, the consideration
      received therefor shall be deemed to be the net amount received by the Company
      therefor, after deduction therefrom of any expenses incurred or any underwriting
      commissions or concessions paid or allowed by the Company in connection
      therewith. In case any shares of Common Stock, Options or Convertible Securities
      shall be issued or sold for a consideration other than cash, the amount of
      the
      consideration other than cash received by the Company shall be deemed to be
      the
      fair value of such consideration as determined in good faith by the Board of
      Directors of the Company, after deduction of any expenses incurred or any
      underwriting commissions or concessions paid or allowed by the Company in
      connection therewith. In case any Options shall be issued in connection with
      the
      issue and sale of other securities of the Company, together comprising one
      integral transaction in which no specific consideration is allocated to such
      Options by the parties thereto, such Options shall be deemed to have been issued
      for such consideration as determined in good faith by the Board of Directors
      of
      the Company. If Common Stock, Options or Convertible Securities shall be issued
      or sold by the Company and, in connection therewith, other Options or
      Convertible Securities (the “Additional
      Rights”)
      are
      issued, then the consideration received or deemed to be received by the Company
      shall be reduced by the fair market value of the Additional Rights (as
      determined using the Black-Scholes option pricing model or another method
      mutually agreed to by the Company and the Warrantholder). The Board of Directors
      of the Company shall respond promptly, in writing, to an inquiry by the
      Warrantholder as to the fair market value of the Additional Rights.

    

    
      
        
        

      

      
        -7-

        
          

        

      

      
        
        

      

    

    (f)(6)
      Record Date. In case the Company shall take a record of the holders of its
      Common Stock for the purpose of entitling them (i) to receive a dividend or
      other distribution payable in Common Stock, Options or Convertible Securities
      or
      (ii) to subscribe for or purchase Common Stock, Options or Convertible
      Securities, then such record date shall be deemed to be the date of the issue
      or
      sale of the shares of Common Stock deemed to have been issued or sold upon
      the
      declaration of such dividend or the making of such other distribution or the
      date of the granting of such right of subscription or purchase, as the case
      may
      be.

    

    (f)(7)
      Treasury Shares. The number of shares of Common Stock outstanding at any given
      time shall not include shares owned or held by or for the account of the Company
      or any of its wholly-owned subsidiaries, and the disposition of any such shares
      (other than the cancellation or retirement thereof) shall be considered an
      issue
      or sale of Common Stock for the purpose of this subsection (f).

     

    (g)  Anything
      herein to the contrary notwithstanding, the Company shall not be required to
      make any adjustment of the Warrant Price in the case of the issuance of
(A)
      capital stock, Options or Convertible Securities issued to directors, officers,
      employees or consultants of the Company in connection with their service as
      directors of the Company, their employment by the Company or their retention
      as
      consultants by the Company pursuant to an equity compensation program approved
      by the Board of Directors of the Company or the compensation committee of the
      Board of Directors of the Company, (B) shares of Common Stock issued upon the
      conversion or exercise of Options or Convertible Securities issued prior to
      the
      date hereof, (C) securities issued pursuant to the Purchase Agreement and
      securities issued upon the exercise or conversion of those securities, including
      those certain warrants to purchase Common Stock issued to Musket Research
      Associates, Inc. in connection with the consummation of the transactions
      contemplated by the Purchase Agreement, (D) shares of Common Stock issued or
      issuable by reason of a dividend, stock split or other distribution on shares
      of
      Common Stock (but only to the extent that such a dividend, split or distribution
      results in an adjustment in the Warrant Price pursuant to the other provisions
      of this Warrant), (E) shares of Common Stock issued or issuable to (x) a
      strategic partner, collaborator, licensee or licensor, bank or other financial
      institution in a transaction the primary purpose of which is not the raising
      of
      capital, (y) pursuant to a bona fide firm commitment underwritten public
      offering with a nationally recognized underwriter (excluding any equity line)
      in
      an aggregate offering amount greater than $25,000,000, or (z) pursuant to the
      Company’s bona fide acquisition of another corporation, or all or a portion of
      its assets, by merger, purchase of assets or stock or other corporate
      reorganization in each case, as approved by the Company’s board of directors and
      not for the principal purpose of raising capital (collectively, “Excluded
      Issuances”).

     

    Section
      9.  Fractional
      Interest.
      The
      Company shall not be required to issue fractions of Warrant Shares upon the
      exercise of this Warrant. If any fractional share of Common Stock would, except
      for the provisions of the first sentence of this Section 9, be deliverable
      upon
      such exercise, the Company, in lieu of delivering such fractional share, shall
      pay to the exercising Warrantholder an amount in cash equal to the Market Price
      of such fractional share of Common Stock on the date of exercise.

     

    
      
        
        

      

      
        -8-

        
          

        

      

      
        
        

      

    

     

    Section
      10.  Benefits.
      Nothing
      in this Warrant shall be construed to give any person, firm or corporation
      (other than the Company and the Warrantholder) any legal or equitable right,
      remedy or claim, it being agreed that this Warrant shall be for the sole and
      exclusive benefit of the Company and the Warrantholder.

     

    Section
      11.  Notices
      to Warrantholder.
      Upon
      the happening of any event requiring an adjustment of the Warrant Price, the
      Company shall promptly give written notice thereof to the Warrantholder at
      the
      address appearing in the records of the Company, stating the adjusted Warrant
      Price and the adjusted number of Warrant Shares resulting from such event and
      setting forth in reasonable detail the method of calculation and the facts
      upon
      which such calculation is based. Failure to give such notice to the
      Warrantholder or any defect therein shall not affect the legality or validity
      of
      the subject adjustment.

     

    Section
      12.  Identity
      of Transfer Agent.
      The
      Transfer Agent for the Common Stock is The Nevada Agency and Trust Company.
      Upon
      the appointment of any subsequent transfer agent for the Common Stock or other
      shares of the Company’s capital stock issuable upon the exercise of the rights
      of purchase represented by the Warrant, the Company will mail to the
      Warrantholder a statement setting forth the name and address of such transfer
      agent.

     

    Section
      13.  Notices.
      Unless
      otherwise provided, any notice required or permitted under this Warrant shall
      be
      given in writing and shall be deemed effectively given as hereinafter described
      (i) if given by personal delivery, then such notice shall be deemed given upon
      such delivery, (ii) if given by telex or facsimile, then such notice shall
      be
      deemed given upon receipt of confirmation of complete transmittal, (iii) if
      given by mail, then such notice shall be deemed given upon the earlier of (A)
      receipt of such notice by the recipient or (B) three days after such notice
      is
      deposited in first class mail, postage prepaid, and (iv) if given by an
      internationally recognized overnight air courier, then such notice shall be
      deemed given one business day after delivery to such carrier. All notices shall
      be addressed as follows: if to the Warrantholder, at its address as set forth
      in
      the Company’s books and records and, if to the Company, at the address as
      follows, or at such other address as the Warrantholder or the Company may
      designate by ten days’ advance written notice to the other:

     

    If
      to the
      Company:

    

    Arbios
      Systems, Inc.

    1050
      Winter Street, Suite 1000

    Waltham,
      Massachusetts 02451

    Attention:
      President

    Fax:
      (781) 839-7294 

    

    
      
        
        

      

      
        -9-

        
          

        

      

      
        
        

      

    

    With
      a
      copy to:

    

    Mintz,
      Levin, Cohn, Ferris, Glovsky and Popeo, P.C.

    One
      Financial Center

    Boston,
      Massachusetts 02111

    Attention:
      William Whelan, Esq.

    Fax:
      (617) 542-2241 

     

    Section
      14.  Registration
      Rights.
      The
      initial Warrantholder is entitled to the benefit of certain registration rights
      with respect to the shares of Common Stock issuable upon the exercise of this
      Warrant as provided in the Registration Rights Agreement, and any subsequent
      Warrantholder may be entitled to such rights.

     

    Section
      15.  Successors.
      All the
      covenants and provisions hereof by or for the benefit of the Warrantholder
      shall
      bind and inure to the benefit of its respective successors and assigns
      hereunder. 

     

    Section
      16.  Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial.
      This
      Warrant shall be governed by, and construed in accordance with, the internal
      laws of the State of New York, without reference to the choice of law provisions
      thereof. The Company and, by accepting this Warrant, the Warrantholder, each
      irrevocably submits to the exclusive jurisdiction of the courts of the State
      of
      New York located in New York County and the United States District Court for
      the
      Southern District of New York for the purpose of any suit, action, proceeding
      or
      judgment relating to or arising out of this Warrant and the transactions
      contemplated hereby. Service of process in connection with any such suit, action
      or proceeding may be served on each party hereto anywhere in the world by the
      same methods as are specified for the giving of notices under this Warrant.
      The
      Company and, by accepting this Warrant, the Warrantholder, each irrevocably
      consents to the jurisdiction of any such court in any such suit, action or
      proceeding and to the laying of venue in such court. The Company and, by
      accepting this Warrant, the Warrantholder, each irrevocably waives any objection
      to the laying of venue of any such suit, action or proceeding brought in such
      courts and irrevocably waives any claim that any such suit, action or proceeding
      brought in any such court has been brought in an inconvenient forum.
EACH
      OF THE COMPANY AND, BY ITS ACCEPTANCE HEREOF, THE WARRANTHOLDER HEREBY WAIVES
      ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS
      WARRANT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS
      WAIVER.

     

    Section
      17.  Call
      Provision.
      Notwithstanding any other provision contained herein to the contrary in the
      event that the closing bid price of a share of Common Stock as traded on the
      Bulletin Board (or such other exchange or stock market on which the Common
      Stock
      may then be listed or quoted) equals or exceeds 2 times the Exercise Price
      for a
      period of thirty (30) days of any sixty (60) consecutive days at any time
      commencing after the Registration Statement (as defined in the Registration
      Rights Agreement) is declared effective (the “Trading
      Period”),
      the
      Company, upon thirty (30) days prior written notice (the “Notice
      Period”)
      given
      to the Warrantholder within five business days immediately following the end
      of
      such Trading Period, may call this Warrant, in whole but not in part, at a
      redemption price equal to $0.001per share of Common Stock then purchasable
      pursuant to this Warrant; provided
      that (i)
      the Company simultaneously calls all Company Warrants (as defined below) on
      the
      same terms and (ii) all of the shares of Common Stock issuable hereunder either
      (A) are registered pursuant to an effective Registration Statement which has
      not
      been suspended and for which no stop order is in effect, and pursuant to which
      the Warrantholder is able to sell such shares of Common Stock at all times
      during the Notice Period or (B) no longer constitute Registrable Securities
      (as
      defined in the Registration Rights Agreement). Notwithstanding any such notice
      by the Company, the Warrantholder shall have the right to exercise this Warrant
      prior to the end of the Notice Period.

     

    
      
        
        

      

      
        -10-

        
          

        

      

      
        
        

      

    

     

    Section
      18.  No
      Rights as Stockholder.
      Prior
      to the exercise of this Warrant, the Warrantholder shall not have or exercise
      any rights as a stockholder of the Company by virtue of its ownership of this
      Warrant.

     

    Section
      19.  Amendment;
      Waiver.
      This
      Warrant is one of a series of Warrants of like tenor issued by the Company
      pursuant to the Purchase Agreement and initially covering an aggregate of up
      to
      3,739,231 shares of Common Stock (collectively, the “Company
      Warrants”).
      Any
      term of a Company Warrant may be amended or waived (including the adjustment
      provisions included in Section 8 of this Warrant) upon the written consent
      of
      the Company and the holders of Company Warrants of like tenor with respect
      to
      Warrant Price and Expiration Date representing at least 50% of the number of
      shares of Common Stock then subject to all such outstanding Company Warrants
      (with respect to such Company Warrants of like tenor, the “Majority
      Holders”);
      provided,
      that
      (x) any such amendment or waiver must apply to all sun Company Warrants of
      like
      tenor; and (y) the number of Warrant Shares subject to this Warrant, the Warrant
      Price and the Expiration Date may not be amended, and the right to exercise
      this
      Warrant may not be altered or waived, without the written consent of the
      Warrantholder.

     

    Section
      20.  Section
      Headings.
      The
      section headings in this Warrant are for the convenience of the Company and
      the
      Warrantholder and in no way alter, modify, amend, limit or restrict the
      provisions hereof.

     

    [remainder
      left intentionally blank]

     

    
      
        
        

      

      
        -11-

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF, the Company has caused this Warrant to be duly executed, as
      of
      the 23rd
      day of
      April, 2007.

    
      	 	 	 
	 	ARBIOS
              SYSTEMS,
              INC.
	 
 	 
 	 
 
	 	By:  	 
	 	
              
Name:
              Walter C. Ogier
	 	Title:
              President and Chief Executive Officer

    

     

    
      
        
        

      

      
        -12-

        
          

        

      

      
        
        

      

    

    APPENDIX
      A

    ARBIOS
      SYSTEMS, INC.

    WARRANT
      EXERCISE FORM

    

    To
      Arbios
      Systems, Inc.:

    

      The
      undersigned hereby irrevocably elects to exercise the right of purchase
      represented by the within Warrant (“Warrant”)
      for,
      and to purchase thereunder by the payment of the Warrant Price and surrender
      of
      the Warrant, _______________ shares of Common Stock (“Warrant
      Shares”)
      provided for therein. The undersigned intends that payment of the Warrant Price
      shall be made as (check one):

     

    ____
      “Cash Exercise” under Section 3

    

    and
      requests that certificates for the Warrant Shares be issued as follows:

    

    _______________________________

    Name

    ________________________________

    Address

    ________________________________

    ________________________________

    Federal
      Tax ID or Social Security No.

    

    and
      delivered by (certified
      mail to the above address, or 

    (electronically
      (provide DWAC Instructions:___________________), or 

    (other
      (specify): __________________________________________). 

    

    and,
      if
      the number of Warrant Shares shall not be all the Warrant Shares purchasable
      upon exercise of the Warrant, that a new Warrant for the balance of the Warrant
      Shares 

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    purchasable
      upon exercise of this Warrant be registered in the name of the undersigned
      Warrantholder or the undersigned’s Assignee as below indicated and delivered to
      the address stated below.

     

    Dated:
      ___________________, ____

     

    
      	
              Note:
                The signature must correspond with the name of the Warrantholder
                as
                written on the first page of the Warrant in every particular, without
                alteration or enlargement or any change whatever, unless the Warrant
                has
                been assigned.

            	 	 	
              Signature:

              
                

              

               

              
                

                Name
                  (please print)

                 

                
                  

                  

                  Address

                  

                    
                      

                      Federal
                        Identification or
Social
                        Security No.

                       

                      
                        Assignee:

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