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EXHIBIT 10.8

[EQUINOX SECURITIES LOGO]

April 19, 2007

Mr. Frank Menzler 

HepaLife Technologies, Inc.

60 State Street, Suite 700

Boston, MA 02109

Dear Mr. Menzler:

I am pleased to confirm our agreement pursuant to this letter of engagement (the “Agreement”) under which Equinox Securities, Inc. (“Equinox”), a broker-dealer and Member NASD, is engaged by HepaLife Technologies, Inc.  (OTCBB:HPLF.OB) (the “Company”).

1.

Engagement. Equinox is hereby engaged as the Company’s placement agent for the purpose of finding “Investors” for potential “Transactions” with the Company.  The Company acknowledges that there is no guaranty or assurance that any Transaction will take place and that Equinox makes no representation or warranties regarding the same or any other matter.  It is agreed and understood that at all times, the Company shall have the right to approve or disapprove the terms and conditions of any Transaction and the Company shall be solely responsible for ensuring that the terms and conditions of any Transaction are suitable and appropriate for the Company.  The term “Transaction” shall mean an equity or debt financing for the Company.  The term “Investor,” or “Investors”, shall mean any individual, corporation, institution, group, organization or other entity identified by Equinox that participates in a Transaction during the term of this Agreement (or thereafter as set forth herein) by contributing value to the Company.

2.

Compensation and Expenses

A.

As compensation for the services provided by Equinox hereunder, the Company shall pay or issue to Equinox:

i.

Retainer Fee:  Equinox waives its monthly retainer fee. 

Schedule #1

			
	Amount Funded

	A. Fee

	B. Unaccountable Expenses

	$1,000,000 to $10,000,000

	10%

	0%

B.

Plus, 10% of the transaction value of the investor  warrants (non-cashless) of the Issuer on the same pricing and conditions as the Transaction or Issue warrants.

  OR

D.  In the event that Finder introduces or identifies a business or entity to Issuer and Issuer subsequently acquires all or any portion of the capital securities or assets of, or engages in a merger, joint venture or other business arrangement with, such business or entity (the “Acquisition Services”), then the Issuer will compensate Finder (based 

on the Transaction Value, as defined or the percentage defined under schedule #2 below) for such services in an amount equal to:

Schedule #2

6 % on the first $10,000,000 of the Transaction Value; 

5% on the amount from $10,000,001 to $15,000,000; 

4% on the amount from $15,000,001 to $20,000,000; 

3% on the amount from $20,000,001 to $25,000, 000, and 

2% on the amount in excess of $25,000,000.

3.

Term of Engagement. This Agreement shall expire 12 months from the date of execution of this Agreement by the Company (unless extended by mutual agreement).  Upon any termination of expiration of this agreement, Equinox will be entitled to payment of all fees and any remaining fees as additional staged funding from the Investor’s initial convertible debt  instrument proceeds over the term of the Investor’s investment proposal. 

In addition, (a) if at any time during the 12 month period commencing immediately after the termination or expiration of this Agreement, the Company consummates any Transaction or Transactions with Investors identified by Equinox, or (b) if at any time during the 12 month period commencing immediately after the termination or expiration, the Company enters into a written agreement(s) with respect to a Transaction or Transactions with Investors identified by Equinox and such Transaction or Transactions are consummated on substantially the terms contained in such written agreement(s) within 24 months after termination or expiration of this Agreement, then Equinox in addition to any expense reimbursement due, shall be entitled to payment in full of the compensation described in Section 2 of this Agreement with respect to such Transaction or Transactions.  Upon the written request of the Company, after termination or expiration of this Agreement, Equinox shall provide to the Company a list of the Investors identified by Equinox within five business days of such request.

4.

Cooperation. To the extent possible, the Company will furnish Equinox with all financial and other information and data, as Equinox believes appropriate in connection with its activities on the Company’s behalf, and shall provide Equinox access to its officers, directors, employees and professional advisors.  The Company shall use its reasonable best efforts to cooperate in Equinox’s marketing efforts, including participation of senior officers in roadshows, investor presentations and similar activity.  In addition, the Company will be solely responsible for preparing or approving any and all term sheets and materials for a Transaction, including materials describing the Company, its operations, historical performance and future prospects and any materials to be used in selling any securities of the Company (the “Offering Materials”). The Company agrees that it and its counsel will be solely responsible for ensuring that a Transaction and the Offering Materials are complete and comply in all respects with the applicable law and that the terms and conditions of a Transaction are suitable and appropriate for the Company. The Company, to the extent possible, authorizes Equinox to transmit the Offering Materials to prospective Investors of the proposed Transaction.  The Company will also cause to be furnished to Equinox and addressed to it at the closing, copies of such agreements, opinions, certificates and other documents delivered at the closing as Equinox may reasonably request. The Company will promptly notify Equinox if it learns of any material inaccuracy or misstatement in, or material omission from, any information theretofore delivered to Equinox.

The Company recognizes and confirms that Equinox, in connection with performing its services with respect to a Transaction:  (i) will not be rendering any advice to the Company or any other person regarding any aspect of a Transaction, (ii) will not be responsible for the actions of an Investor or its agents, (iii) will be relying without investigation upon information that is available from public sources or other information supplied to it by, or on behalf of, the Company, or its advisors, (iv) shall not in any respect be responsible for the accuracy or completeness of, or have any obligation to verify said information, (v) will not conduct any appraisal of any assets of the Company, and (vi) may require that the Offering Materials contain appropriate disclaimers consistent with the foregoing.  The Company further confirms and acknowledges that neither Equinox nor any of its employees or agents is acting as attorney, accountant or financial advisor to the Company and that the Company will seek its own professional advice with respect to a Transaction.

5.

Confidentiality. The Company agrees that any written communication provided by Equinox pursuant to this Agreement will be treated by the Company as confidential, will be used solely for the information of the Company in connection with its consideration of a transaction of the type referred to in Section 1 of this agreement and will not be used, circulated, quoted or otherwise referred to for any other purpose, nor will it be filed with, included in or referred to, in whole or in part, in any registration statement, proxy statement or any other communication, whether written (including, without limitation, the Offering Materials) or oral, prepared, issued or transmitted by the Company or any affiliate, director, officer, employee, agent or representative of any thereof, without, in each instance, Equinox’s prior written consent.

6.

Conflicts. The Company acknowledges that Equinox and its affiliates may have, and may continue to have, investment banking and other relationships with parties other than the Company pursuant to which Equinox may acquire information of interest to the Company.  Equinox shall have no obligation to disclose such information to the Company, or to use such information in connection with any contemplated financing.  The Company recognizes that Equinox is being engaged hereunder to provide the services described above only to the Company and is not acting as an agent or a fiduciary of, and shall have no duties or liability to, the equity holders of the Company or any third party in connection with its engagement hereunder, all of which are hereby expressly waived.  

7. 

Relationship Created. Equinox is an independent contractor and shall have control over the manner and means of performing the services under this Agreement.  During the term of the Agreement, the Company agrees that Equinox may appoint in its sole discretion or otherwise designate suitable employees, agents, or representatives to assist Equinox with performing services hereunder.

8.

Public Announcements. Neither Equinox nor the Company shall have the right to place announcements and advertisements in financial and other newspapers and journals, describing the services of Equinox in the Transaction, unless the party has first obtained the consent of the other, which consent shall not be unreasonably withheld.

9.  

Complete Agreement; Severability; Amendments; Assignment; Captions; Counterparts. This Agreement embodies the entire agreement and understanding between the parties hereto and supersedes any prior agreements and understandings relating to the subject matter hereof.  If any provision of this Agreement is determined to be invalid or unenforceable in any respect, such determination will not affect such provision in any other respect or any other provision of this Agreement, which will remain in full force and effect.  This Agreement may not be amended or otherwise modified or waived except by an instrument in writing signed by both Equinox and the Company.  This Agreement may not be assigned by either party without the prior written consent 

of the other party.  The captions in this Agreement are used for convenience only and shall not be considered in interpreting this Agreement.

This Agreement may be executed in counterparts and by facsimile transmission, all of which together should constitute a binding agreement between Equinox and the Company.

This Agreement shall be binding upon and inure to the benefit of the Company, Equinox, each Indemnified Person (as defined in Schedule I hereto) and their respective successors and assigns.

10.  

Scope of Responsibility. Neither Equinox nor any Indemnified Person (as defined in Schedule I) shall be liable to the Company, or to any other person claiming through the Company, for any claim, loss, damage, liability, cost or expense suffered by the Company, or any such other person, arising out of or relating to this engagement, except for a claim that arises primarily out of, or is based primarily upon, any action or failure to act by Equinox that constitutes willful misconduct on the part of Equinox, other than an action or failure to act undertaken at the request or with the consent of the Company.  Notwithstanding anything to the contrary contained in this Agreement, the Company agrees that (a) neither Equinox nor any Indemnified Person shall, regardless of the legal theory advanced, be liable for any consequential, indirect, incidental or special damages of any nature, and (b) in no event shall Equinox and/or any Indemnified Person be liable in the aggregate to the Company, or any person claiming through the Company, for any amount which exceeds the cash fees actually received by Equinox pursuant to this Agreement.

11.

Governing Law; Forum. Equinox and the Company agree that the obligations of each of the parties are solely corporate obligations, and that no officer, director, employee, agent, or shareholder of either party shall be subjected to any personal liability whatsoever to any person; nor will any claim for liability or suit be asserted by, or on behalf of, either Equinox or the Company. Any controversy, claim or dispute between Equinox and the Company shall be resolved by binding arbitration in accordance with the rules of the American Arbitration Association pursuant to an arbitration conducted in Los Angeles, California.  Judgment upon such arbitration may be entered in any court having jurisdiction thereof.  Each of the Company and Equinox agree that the prevailing party shall be awarded reasonable attorney fees, together with any costs and expenses. This Agreement shall be interpreted and enforced in accordance with the substantive laws of the State of California applicable to agreements made and to be performed therein, without regard to any conflict of law provisions.

12.

Notices. All notices or communications hereunder will be in writing and mailed or delivered as follows:

If to Equinox:

Mr. Stephen Oliveira

President

                                                

Equinox Securities, Inc.  

2084 E. Francis Street

                                         

Ontario, CA 91761

Phone: 909-657-6639

                                                

Fax: 909-923-2721

soliveira@equinoxsecurities.net

             

If to the Company:

Frank Menzler 

HepaLife Technologies, Inc.

60 State Street, Suite 700

Boston, MA 02109

Please confirm that the foregoing correctly sets forth our agreement by signing, dating, and returning to Equinox the enclosed copy of this Agreement by mail or fax to (909) 923-2721.

Sincerely,

Equinox Securities, Inc.

By:  /s/ Stephen Oliveira

        Stephen Oliveira, President and CEO

AGREED AND ACCEPTED:

HepaLife Technologies, Inc. 

By: /s/ Frank Menzler

       Frank Menzler, President and CEO

      

 

Date: April 24, 2007

SCHEDULE I

This Schedule I is entered into pursuant to, and is made a part of, this Agreement between Equinox and the Company.  Capitalized terms used and not defined in this Schedule I shall have the meanings assigned to them in this Agreement.

The Company and Equinox agree to indemnify and hold harmless, its affiliates, and each of their respective members, partners, directors, officers, managers, agents, consultants, employees, advisors, representatives and controlling persons (each an “Indemnified Person”) from and against any claims, losses, damages, expenses or liabilities (collectively, “Losses”), including without limitation reasonable legal fees (subject to the limitations set forth below), incurred in connection with investigating, preparing, defending, paying, settling or compromising any action, claim or proceeding (whether or not in connection with any pending or threatened litigation in which any Indemnified Person is a named party) to which any Indemnified Person may become subject and which is related to or arises out of the engagement letter or the transactions contemplated thereby.  The Company and Equinox will not, however, be responsible to an Indemnified Person due to the extent that a court of competent jurisdiction shall have determined by a final judgment that such Losses resulted primarily from actions taken or omitted by such Indemnified Person due to the Indemnified Person’s willful misconduct.

The Company and Equinox will reimburse each Indemnified Person for Losses as such Losses are incurred or paid, notwithstanding the absence of judicial determination as to the propriety or enforceability of the Company’s or Equinox’s obligation to reimburse such Indemnified Person for such Losses and the possibility that such payments might later be held by a court of competent jurisdiction to have been improper. To the extent that any such interim reimbursement is so held to have been improper, the Indemnified Person shall promptly return it to the Company and Equinox.

If the indemnification provided herein should be, for any reason whatsoever, unenforceable, unavailable or otherwise insufficient to hold each Indemnified Person harmless, the Company and Equinox shall pay to or on behalf of each Indemnified Person contributions for Losses so that the Indemnified Person ultimately bears only the portion of such losses as is appropriate (i) to reflect the relative benefits received by such Indemnified Person on the one hand and the Company and Equinox on the other hand in connection with the Agreement and the transactions contemplated thereby or (ii) if the allocation on the basis set forth in clause (i) above is not permitted by applicable law, to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Indemnified Person and the Company and Equinox as well as any other relevant equitable considerations; provided, however, that in no event shall the aggregate contribution of all Indemnified Persons to all Losses exceed the amount of cash fees actually received by Equinox or paid by Company pursuant to the engagement letter. The respective relative benefits received by all Indemnified Persons and the Company and Equinox shall be deemed to be in the same proportion as the aggregate cash fee paid to Equinox pursuant to the Agreement bears to the total consideration paid or contemplated to be paid or received by the Company and Equinox or its stockholders, as the case may be, in connection with the Transaction or any similar transaction referred to in the Agreement, whether or not such transaction is consummated. The relative fault of each Indemnified Person and the Company and Equinox shall be determined by reference to, among other things, whether the actions or omissions to act were by such Indemnified Person or the Company and Equinox, and the parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such action or omission to act. Notwithstanding the foregoing, no Indemnified Person shall have any obligation to investigate or verify the information provided to Equinox and Company in connection with the provision of its financial advisory services under the engagement letter, and the Company and Equinox shall be solely liable for any Losses related to or arising out of the use of such information that is inaccurate for any reason in connection with the services provided under the engagement letter.

The Company and Equinox agrees that no Indemnified Person shall have any liability to the Company and Equinox or its affiliates, directors, officer, managers, members, employees, agents, consultants, advisors, representatives, control persons or stockholders, directly or indirectly, related to or arising out of the Agreement or the transactions contemplated thereby, except Losses incurred by the Company and Equinox to the extent a court of competent jurisdiction shall have determined by a final judgment that such losses resulted primarily from actions taken or omitted to be taken by such Indemnified Person due to such Indemnified Person’s willful misconduct. The Company and Equinox also agrees that in no event, regardless of the legal theory advanced, shall any Indemnified Person be liable for any consequential, indirect, incidental or special damages of any nature and in no event shall the aggregate liabilities for Losses of any and all Indemnified Persons exceed the amount of cash fees actually received by Equinox pursuant to the Agreement.

In case any proceeding shall be instituted involving any Indemnified Person, such Indemnified Person shall promptly notify the Company and Equinox in writing. The failure of an Indemnified Person to provide such prompt notice shall not reduce such Indemnified Person’s right to indemnification or contribution hereunder to the extent that such failure does not materially prejudice the ability to defend such proceeding.  Upon the request of the Indemnified Person, the Company and Equinox shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Company and Equinox may designate in such proceeding and shall pay the fees and disbursements of such counsel related to such proceeding. In any proceeding, the Indemnified Person shall have the right to employ separate counsel and to participate in the defense of such action or proceeding, and the Company and Equinox shall bear the reasonable fees, costs and expenses of such separate counsel (and shall pay such fees, costs and expenses at least quarterly), if (i) the use of counsel chosen by the Company and Equinox to represent such Indemnified Person would, in the reasonable judgment of the Indemnified Person, present such counsel with a conflict of interest; (ii) the defendants in, or targets of, any such action or proceeding include both an Indemnified Person and the Company and Equinox, and such Indemnified Person shall have reasonably concluded that there may be legal defenses available to it or to other Indemnified Persons which are different from or additional to those available to the Company and Equinox (in which case the Company and Equinox shall not have the right to direct the defense of such action or proceeding on behalf of the Indemnified Person); (iii) the Company and Equinox shall not have employed counsel satisfactory to such Indemnified Person in the exercise of the Indemnified Person’s reasonable judgment to represent such Indemnified Person within a reasonable time after notice of the institution of such action or proceeding; or (iv) the Company and Equinox shall authorize such Indemnified Person to employ separate counsel at the Company’s and Equinox’s expense. In any case in which one or more Indemnified Persons are entitled to separate counsel due to such actual or potential differing interests, the Company and Equinox shall be liable for the expenses of more than one separate counsel. The Company and Equinox shall not be liable for any settlement of any proceeding affected without its written consent, which consent will not be unreasonably withheld. The Company and Equinox shall not, without the prior written consent of the Indemnified Person, effect any settlement of, or consent to the entry of judgment in connection with, any pending or threatened proceeding in respect of which such Indemnified Person is or could have been a party and indemnity or contribution could have been sought hereunder by such Indemnified Person, unless such settlement or judgment includes an unconditional release of such Indemnified Person from all liability on claims that are subject matter of the proceeding.

The obligations of the Company and Equinox referred to above shall be in addition to any rights that any Indemnified Person may otherwise have and shall inure to the benefit of and be binding upon any successors, assigns, heirs and personal representatives of any Indemnified Person or the Company and Equinox.EXHIBIT 99

EXHIBIT 10.9

HEPALIFE TECHNOLOGIES, INC.

NONSTATUTORY STOCK OPTION AGREEMENT

THIS NONSTATUTORY STOCK OPTION AGREEMENT (“Agreement”) is made and entered into as of the date set forth below, by and between HepaLife Technologies, Inc., a Florida corporation (the “Company”), and the following employee of the Company (“Optionee”):

In consideration of the covenants herein set forth, the parties hereto agree as follows:

1. 

Option Information.

(a)  

Date of Option:

January 25, 2007

(b)  

Optionee:

Frank Menzler

(c)  

Number of Shares: 

2,000,000

(d)  

Exercise Price: 

$0.52

2.  

Acknowledgements.

(a)  

Optionee is an employee of the Company.

(b)  

The Board of Directors (the “Board” which term shall include an authorized committee of the Board of Directors) and shareholders of the Company have heretofore adopted a 2001 Incentive Stock Plan (the “Plan”), pursuant to which this Option is being granted; and

(c)  

The Board has authorized the granting to Optionee of a nonstatutory stock option (“Option”) to purchase shares of common stock of the Company (“Stock”) upon the terms and conditions hereinafter stated and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “Securities Act”) provided by Rule 701 thereunder.

3.  

Shares; Price.  

Company hereby grants to Optionee the right to purchase, upon and subject to the terms and conditions herein stated, the number of shares of Stock set forth in Section 1(c) above (the “Shares”) for cash (or other consideration as is authorized under the Plan and acceptable to the Board of Directors of the Company, in their sole and absolute discretion) at the price per Share set forth in Section 1(d) above (the “Exercise Price”), such price being the average closing price during the last three days of the Shares covered by this Option.

4.

Term of Option; Continuation of Service.  This Option shall expire, and all rights hereunder to purchase the Shares shall terminate 10 years from the date hereof. This Option shall earlier terminate subject to Sections 7 hereof upon, and as of the date of, the termination of Optionee’s employment if such termination occurs prior to the end of such 10 year period. Following the termination of the Optionee’s employment, if the Optionee continues to serve as a director of the Company, this Option shall nevertheless be terminated as of the date of the termination of  the Optionee’s employment. Nothing contained herein shall confer upon Optionee the right to the continuation of his or her employment by the Company or to interfere with the right of the Company to terminate such employment or to increase or decrease the compensation of Optionee from the rate in existence at the date hereof.

5.

Vesting of Option.  Subject to the provisions of Sections 7 hereof, this Option shall vest and become exercisable during the term of Optionee’s employment as follows: 

(i) 1,500,000 options shall vest if and when HepaLife or a wholly owned subsidiary, or any one current or future medical device or other technology, approved by the Board of Directors is acquired, in whole or in part, or when either HepaLife or a subsidiary, enters into a strategic collaborative agreement for any one current or future medical device or other technology, approved by the Board of Directors, provided that the Company’s Board of Directors has approved, by written resolution, any such acquisition, sale or agreement;

(ii) 250,000 stock options shall vest upon the filing of human safety trials for HepaLife’s artificial liver device (or such other Board approved medical device or other technology) in Europe or the equivalent filing in the US; and 

(iii) 250,000 stock options shall vest upon the successful completion of human safety trials for HepaLife’s artificial liver device (or such other Board approved medical device or other technology) in Europe or the equivalent safety trial approval in the US (completion of phase 1).

The installments shall be cumulative (i.e., this option may be exercised, as to any or all shares covered by an installment, at any time or times after an installment becomes exercisable and until expiration or termination of this option).

6.

Exercise.  This Option shall be exercised by delivery to the Company of (a) written notice of exercise stating the number of Shares being purchased (in whole shares only) and such other information set forth on the form of Notice of Exercise attached hereto as Appendix A, (b) a check or cash in the amount of the Exercise Price of the Shares covered by the notice (or such other consideration as has been approved by the Board of Directors consistent with the Plan) and (c) a written investment representation as provided for in Section 12 hereof. This Option shall not be assignable or transferable, except by will or by the laws of descent and distribution, and shall be exercisable only by Optionee during his or her lifetime. 

7.

Termination of Employment.  If Optionee shall cease to be employed by the Company for any reason whatsoever, whether voluntarily or involuntarily, Optionee, this Option shall terminate as of the date of the termination of such employment and shall be null and void. No options, including those previously vested but not exercised, may be exercised after the date of Optionee’s termination of employment with or by the Company

Unless earlier terminated, all rights under this Option shall terminate in any event on the expiration date of this Option as defined in Section 4 hereof.

8.

No Rights as Shareholder.  Optionee shall have no rights as a shareholder with respect to the Shares covered by any installment of this Option until the effective date of issuance of the Shares following exercise of this Option, and no adjustment will be made for dividends or other rights for which the record date is prior to the date such stock certificate or certificates are issued except as provided in Section 9 hereof.

9.

Recapitalization.  Subject to any required action by the shareholders of the Company, the number of Shares covered by this Option, and the Exercise Price thereof, shall be proportionately adjusted for any increase or decrease in the number of issued shares resulting from a subdivision or consolidation of shares or the payment of a stock dividend, or any other increase or decrease in the number of such shares effected without receipt of consideration by the Company; provided however that the conversion of any convertible securities of the Company shall not be deemed having been “effected without receipt of consideration by the Company”.

In the event of a proposed dissolution or liquidation of the Company, a merger or consolidation in which the Company is not the surviving entity, or a sale of all or substantially all of the assets or capital stock of the Company (collectively, a “Reorganization”), unless otherwise provided by the Board, this Option shall terminate immediately prior to such date as is determined by the Board, which date shall be no later than the consummation of such Reorganization. In such event, if the entity which shall be the surviving entity does not tender to Optionee an offer, for which it has no obligation to do so, to substitute for any unexercised Option a stock option or capital stock of such surviving of such surviving entity, as applicable, which on an equitable basis shall provide the Optionee with substantially the same economic benefit as such unexercised Option, then the Board may grant to such Optionee, in its sole and absolute discretion and without obligation, the right for a period commencing thirty (30) days prior to and ending immediately prior to the date determined by the Board pursuant hereto for termination of the Option or during the remaining term of the Option, whichever is the lesser, to exercise any unexpired Option or Options without regard to the installment provisions of Section 5; provided, however, that such exercise shall be subject to the consummation of such Reorganization.

Subject to any required action by the shareholders of the Company, if the Company shall be the surviving entity in any merger or consolidation, this Option thereafter shall pertain to and apply to the securities to which a holder of Shares equal to the Shares subject to this Option would have been entitled by reason of such merger or consolidation, and the installment provisions of Section 5 shall continue to apply.

In the event of a change in the shares of the Company as presently constituted, which is limited to a change of all of its authorized Stock without par value into the same number of shares of Stock with a par value, the shares resulting from any such change shall be deemed to be the Shares within the meaning of this Option.

To the extent that the foregoing adjustments relate to shares or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. Except as hereinbefore expressly provided, Optionee shall have no rights by reason of any subdivision or consolidation of shares of Stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of stock of any class, and the number and price of Shares subject to this Option shall not be affected by, and no adjustments shall be made by reason of, any dissolution, liquidation, merger, consolidation or sale of assets or capital stock, or any issue by the Company of shares of stock of any class or securities convertible into shares of stock of any class.

The grant of this Option shall not affect in any way the right or power of the Company to make adjustments, reclassifications, reorganizations or changes in its capital or business structure or to merge, consolidate, dissolve or liquidate or to sell or transfer all or any part of its business or assets.

10.

Taxation upon Exercise of Option.  Optionee understands that, upon exercise of this Option, Optionee will recognize income, for Federal and state income tax purposes, in an amount equal to the amount by which the fair market value of the Shares, determined as of the date of exercise, exceeds the Exercise Price. The acceptance of the Shares by Optionee shall constitute an agreement by Optionee to report such income in accordance with then applicable law and to cooperate with Company in establishing the amount of such income and corresponding deduction to the Company for its income tax purposes. Withholding for federal or state income and employment tax purposes will be made, if and as required by law, from Optionee’s then current compensation, or, if such current compensation is insufficient to satisfy withholding tax liability, the Company may require Optionee to make a cash payment to cover such liability as a condition of the exercise of this Option.

11.

Modification, Extension and Renewal of Options.  The Board or Committee, as described in the Plan, may modify, extend or renew this Option or accept the surrender thereof (to the extent not theretofore exercised) and authorize the granting of a new option in substitution therefore (to the extent not theretofore exercised), subject at all times to the Plan, the Code and the corporate securities rules of Florida. Notwithstanding the foregoing provisions of this Section 11, no modification shall, without the consent of the Optionee, alter to the Optionee’s detriment or impair any rights of Optionee hereunder.

12.

Investment Intent; Restrictions on Transfer.

(a)  

Optionee represents and agrees that if Optionee exercises this Option in whole or in part, Optionee will in each case acquire the Shares upon such exercise for the purpose of investment and not with a view to, or for resale in connection with, any distribution thereof; and that upon such exercise of this Option in whole or in part, Optionee shall furnish to the Company a written statement to such effect, satisfactory to the Company in form and substance. If the Shares represented by this Option are registered under the Securities Act, either before or after the exercise of this Option in whole or in part, the Optionee shall be relieved of the foregoing investment representation and agreement and shall not be required to furnish the Company with the foregoing written statement.

(b)  

Optionee further represents that Optionee has had access to the financial statements or books and records of the Company, has had the opportunity to ask questions of the Company concerning its business, operations and financial condition, and to obtain additional information reasonably necessary to verify the accuracy of such information

(c)  

Unless and until the Shares represented by this Option are registered under the Securities Act, all certificates representing the Shares and any certificates subsequently issued in substitution therefor and any certificate for any securities issued pursuant to any stock split, share reclassification, stock dividend or other similar capital event shall bear legends in substantially the following form:

THESE SECURITIES HAVE NOT BEEN REGISTERED OR OTHERWISE QUALIFIED UNDER THE SECURITIES ACT OF 1933 (THE ‘SECURITIES ACT’) OR UNDER THE APPLICABLE OR SECURITIES LAWS OF ANY STATE. NEITHER THESE SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER THE SECURITIES ACT OR ANY APPLICABLE SECURITIES LAWS OF ANY STATE, UNLESS PURSUANT TO EXEMPTIONS THEREFROM.

THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED PURSUANT TO THAT CERTAIN NONSTATUTORY STOCK OPTION AGREEMENT DATED JANUARY 25, 2007, BETWEEN THE COMPANY AND THE ISSUEE WHICH RESTRICTS THE TRANSFER OF THESE SHARES WHICH ARE SUBJECT TO REPURCHASE BY THE COMPANY UNDER CERTAIN CONDITIONS.

and/or such other legend or legends as the Company and its counsel deem necessary or appropriate. Appropriate stop transfer instructions with respect to the Shares have been placed with the Company’s transfer agent.

13.

Stand-off Agreement.  Optionee agrees that, in connection with any registration of the Company’s securities under the Securities Act, and upon the request of the Company or any underwriter managing an underwritten offering of the Company’s securities, Optionee shall not sell, short any sale of, loan, grant an option for, or otherwise dispose of any of the Shares (other than Shares included in the offering) without the prior written consent of the Company or such managing underwriter, as applicable, for a period of at least one year following the effective date of registration of such offering.

14.

 Restriction Upon Transfer.  The Shares may not be sold, transferred or otherwise disposed of and shall not be pledged or otherwise hypothecated by the Optionee except as hereinafter provided.

(a)

Repurchase Right on Termination Other Than for Cause. For the purposes of this Section, a “Repurchase Event” shall mean an occurrence of one of (i) termination of Optionee’s employment by the Company, voluntary or involuntary and with or without cause; (ii) retirement or death of Optionee; (iii) bankruptcy of Optionee, which shall be deemed to have occurred as of the date on which a voluntary or involuntary petition in bankruptcy is filed with a court of competent jurisdiction; (iv) dissolution of the marriage of Optionee, to the extent that any of the Shares are allocated as the sole and separate property of Optionee’s spouse pursuant thereto (in which case, this Section shall only apply to the Shares so affected); or (v) any attempted transfer by the Optionee of Shares, or any interest therein, in violation of this Agreement. Upon the occurrence of a Repurchase Event, the Company shall have the right (but not an obligation) to repurchase all or any portion of the Shares of Optionee at a price equal to the fair value of the Shares as of the date of the Repurchase Event.

(b)

Repurchase Right on Termination for Cause. In the event Optionee’s employment is terminated by the Company “for cause”, then the Company shall have the right (but not an obligation) to repurchase Shares of Optionee at a price equal to the Exercise Price. Such right of the Company to repurchase Shares shall apply to 100% of the Shares for one (1) year from the date of this Agreement; and shall thereafter lapse at the rate of twenty percent (20%) of the Shares on each anniversary of the date of this Agreement. In addition, the Company shall have the right, in the sole discretion of the Board and without obligation, to repurchase upon termination for cause all or any portion of the Shares of Optionee, at a price equal to the fair value of the Shares as of the date of termination, which right is not subject to the foregoing lapsing of rights. In the event the Company elects to repurchase the Shares, the stock certificates representing the same shall forthwith be returned to the Company for cancellation.

(c)

Exercise of Repurchase Right. Any Repurchase Right under Paragraphs 14(a) or 14(b) shall be exercised by giving notice of exercise as provided herein to Optionee or the estate of Optionee, as applicable. Such right shall be exercised, and the repurchase price thereunder shall be paid, by the Company within a ninety (90) day period beginning on the date of notice to the Company of the occurrence of such Repurchase Event (except in the case of termination of employment or retirement, where such option period shall begin upon the occurrence of the Repurchase Event). Such repurchase price shall be payable only in the form of cash (including a check drafted on immediately available funds) or cancellation of purchase money indebtedness of the Optionee for the Shares. If the Company can not purchase all such Shares because it is unable to meet the financial tests set forth in the Florida corporation law, the Company shall have the right to purchase as many Shares as it is permitted to purchase under such sections. Any Shares not purchased by the Company hereunder shall no longer be subject to the provisions of this Section 14.

(d)  

Right of First Refusal. In the event Optionee desires to transfer any Shares during his or her lifetime, Optionee shall first offer to sell such Shares to the Company. Optionee shall deliver to the Company written notice of the intended sale, such notice to specify the number of Shares to be sold, the proposed purchase price and terms of payment, and grant the Company an option for a period of thirty days following receipt of such notice to purchase the offered Shares upon the same terms and conditions. To exercise such option, the Company shall give notice of that fact to Optionee within the thirty (30) day notice period and agree to pay the purchase price in the manner provided in the notice. If the Company does not purchase all of the Shares so offered during foregoing option period, Optionee shall be under no obligation to sell any of the offered Shares to the Company, but may dispose of such Shares in any lawful manner during a period of one hundred and eighty (180) days following the end of such notice period, except that Optionee shall not sell any such Shares to any other person at a lower price or upon more favorable terms than those offered to the Company.

(e)

Acceptance of Restrictions. Acceptance of the Shares shall constitute the Optionee’s agreement to such restrictions and the legending of his certificates with respect thereto. Notwithstanding such restrictions, however, so long as the Optionee is the holder of the Shares, or any portion thereof, he shall be entitled to receive all dividends declared on and to vote the Shares and to all other rights of a shareholder with respect thereto.

(f)  

Permitted Transfers. Notwithstanding any provisions in this Section 14 to the contrary, the Optionee may transfer Shares subject to this Agreement to his or her parents, spouse, children, or grandchildren, or a trust for the benefit of the Optionee or any such transferee(s); provided, that such permitted transferee(s) shall hold the Shares subject to all the provisions of this Agreement (all references to the Optionee herein shall in such cases refer mutatis mutandis to the permitted transferee, except in the case of clause (iv) of Section 14(a) wherein the permitted transfer shall be deemed to be rescinded); and provided further, that notwithstanding any other provisions in this Agreement, a permitted transferee may not, in turn, make permitted transfers without the written consent of the Optionee and the Company.

(g)  

Release of Restrictions on Shares. All other restrictions under this Section 14 shall terminate five (5) years following the date of this Agreement, or when the Company’s securities are publicly traded, whichever occurs earlier.

15.  

Notices.  Any notice required to be given pursuant to this Option or the Plan shall be in writing and shall be deemed to be delivered upon receipt or, in the case of notices by the Company, five (5) days after deposit in the U.S. mail, postage prepaid, addressed to Optionee at the address last provided by Optionee for his or her employee records.

16.

Agreement Subject to Plan; Applicable Law.  This Option is made pursuant to the Plan and shall be interpreted to comply therewith. A copy of such Plan is available to Optionee, at no charge, at the principal office of the Company. Any provision of this Option inconsistent with the Plan shall be considered void and replaced with the applicable provision of the Plan. This Option has been granted, executed and delivered in the State of Florida, and the interpretation and enforcement shall be governed by the laws thereof and subject to the exclusive jurisdiction of the courts therein.

17.

 For purposes of this Option a termination of employment for "for cause" occurs if the Optionee’s employment is terminated for any of the following reasons: 

(i) theft, dishonesty, or falsification of any employment or Company records; 

(ii) improper disclosure of the Company’s confidential or proprietary information; 

(iii) any intentional act by the Optionee which has a material detrimental effect on the Company’s reputation or business; 

(v) the Optionee’s failure or inability to perform any reasonable assigned duties after written notice from the Company of, and a reasonable opportunity to cure, such failure or inability; and 

(vi) any material breach by the Optionee of an agreement, including this Option, between the Company and the Optionee,  which breach is not cured within 10 days following written notice of such breach from the Company. 

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

HepaLife Technologies, Inc.

By: /s/ Harmel S. Rayat

Harmel S. Rayat, Chief Financial Officer and 

Authorized Signatory

/s/ Frank Menzler

Frank Menzler, Optionee

(one of the following, as appropriate, shall be signed)

I certify that as of the date

By his or her signature, the

hereof I am unmarried

spouse of Optionee hereby agrees

to be bound by the provisions of

the foregoing NONSTATUTORY STOCK

OPTION AGREEMENT

____________________________

/s/ Abida Kearney-Menzler

Optionee

Spouse of Optionee

Appendix A

NOTICE OF EXERCISE

HepaLife Technologies, Inc.

60 State Street, Suite 700

Boston, MA  02109

Attention: Chief Financial Officer

Re: 

Nonstatutory Stock Option

Notice is hereby given pursuant to Section 6 of my Nonstatutory Stock Option Agreement that I elect to purchase the number of shares set forth below at the exercise price set forth in my option agreement:

Nonstatutory Stock Option Agreement dated: ____________

Number of shares being purchased: ____________

Exercise Price: $____________

A check in the amount of the aggregate price of the shares being purchased is attached.

I hereby confirm that such shares are being acquired by me for my own account for investment purposes, and not with a view to, or for resale in connection with, any distribution thereof. I will not sell or dispose of my Shares in violation of the Securities Act of 1933, as amended, or any applicable federal or state securities laws.

I understand that the certificate representing the Option Shares will bear a restrictive legend within the contemplation of the Securities Act and as required by such other state or federal law or regulation applicable to the issuance or delivery of the Option Shares.

Further, I understand that, as a result of this exercise of rights, I will recognize income in an amount equal to the amount by which the fair market value of the Shares exceeds the exercise price. I agree to report such income in accordance with then applicable law and to cooperate with Company in establishing the withholding and corresponding deduction to the Company for its income tax purposes.

I agree to provide to the Company such additional documents or information as may be required pursuant to the Company’s 2001 Incentive Stock Plan.

_______________________________

(signature)

_______________________________

(print name of Optionee)

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