Document:

EXHIBIT 10.4

                           EMPLOYEE LOAN-OUT AGREEMENT

      THIS EMPLOYEE LOAN-OUT  AGREEMENT  ("Agreement") is entered into effective
as of July 1, 2001, by and between  Cedars-Sinai  Medical  Center,  a California
nonprofit  public  benefit   corporation  (the  "Medical   Center")  and  Arbios
Technologies,  Inc., a Delaware  corporation (the "Company"),  with reference to
the following facts:

                                    RECITALS

      A. The Medical Center owns and operates an acute care hospital and related
health care  facilities,  located  principally  at 8700 Beverly  Boulevard,  Los
Angeles, California 90048-1965.

      B. The Medical Center employs,  among other persons,  those persons and/or
categories of employees set forth on Exhibit "A" attached  hereto  (collectively
known as the "Medical Center Employees").

      C. Concurrently  herewith, the Medical Center and the Company are entering
into (i) a Stock Purchase Agreement (the "Stock Purchase Agreement"), and (ii) a
License Agreement (the "License Agreement"), pursuant to which this Agreement is
being  executed and delivered.  Capitalized  terms used herein but not otherwise
defined herein shall have the meanings set forth in the License Agreement.

      D. The  Company  desires  to obtain the  services  of the  Medical  Center
Employees on a part-time  basis,  and the Medical  Center  agrees to provide the
services of the Medical  Center  Employees,  subject to the terms and conditions
set forth below.

      NOW,  THEREFORE,  in  consideration of the mutual covenants and conditions
hereinafter contained, the parties hereby agree as follows:

                                    ARTICLE I

                         TERM OF AGREEMENT; TERMINATION

      1.1 Term. The term of this  Agreement  ("Term") shall commence on the date
first set forth above (the  "Commencement  Date"), and shall continue for a term
of two (2) years, unless sooner terminated as provided herein.

      1.2 Termination. This Agreement shall terminate upon the earliest to occur
of the following:

            (a) Any  termination  of either (i) the License  Agreement,  or (ii)
that certain Facilities Lease, of even date herewith, between the Medical Center
and the Company  ("Facilities  Lease"),  unless the Company,  within thirty (30)
days  following  such  termination  of  the  Facilities  Lease,   obtains  other
laboratory  space at a location  that is  reasonably  acceptable  to the Medical
Center (which  determination  by the Medical Center will be based primarily upon
an assessment as to whether the Medical  Center  Employees will continue to have
the ability to meet their obligations to the Medical Center);

<PAGE>

            (b) Upon ninety (90) days'  written  notice from the Medical  Center
if, within such ninety (90) day period, the Company shall fail to cure fully any
breach or default of any material  obligation  under this Agreement as described
in such  written  notice  detailing  the facts of such  breach  with  reasonable
specificity;  provided, however, that the Company may avoid such termination if,
before the end of such 90-day  period,  such breach or default has been cured by
the Company;

            (c) Upon  ninety  (90) days'  written  notice  from the  Company if,
within such ninety (90) day period,  the Medical Center shall fail to cure fully
any  breach or default  of any  material  obligation  under  this  Agreement  as
described  in such  written  notice  detailing  the  facts of such  breach  with
reasonable  specificity;  provided,  however,  that the Medical Center may avoid
such  termination  if,  before the end of such  90-day  period,  such  breach or
default has been cured by the Medical Center;

            (d) Upon thirty (30) days' written notice from the Company,  with or
without cause; or

            (e) Upon the mutual agreement of the Company and the Medical Center.

      1.3 Jeopardy.  This Agreement shall be deemed immediately  terminated upon
the finding or directive of any governmental  agency,  or court or arbitrator of
competent  jurisdiction,  that the  relationship  between the  parties  pursuant
hereto violates any federal, state, or local law, rule, regulation, ordinance or
order,  or otherwise  jeopardizes  the tax-exempt  status of the Medical Center;
provided, however, that, upon the reasonable request of the Company, the parties
shall use  commercially  reasonable  efforts  to  restructure  the  relationship
created  by this  Agreement  on  mutually-agreeable  terms  to  avoid  any  such
violations or other impact on the tax-exempt status of the Medical Center.

                                   ARTICLE II

                       RESPONSIBILITIES OF MEDICAL CENTER

      2.1  Provision  of Medical  Center  Employees.  The Medical  Center  shall
provide  the Medical  Center  Employees  to the  Company to render the  services
required by the Company of each such Medical Center Employee, including, without
limitation,  those duties described on Exhibit "A" attached hereto.  The Medical
Center  Employees shall be provided to the Company to work at the "Premises" (as
such term is defined in the Facilities  Lease) or any  substitute  premises that
are reasonably acceptable to the Medical Center (determinable in the same manner
set forth in Section 1.2(a)(ii) hereof),  for the period of time and pursuant to
the schedule of work hours set forth on Exhibit "B" attached hereto. The Medical
Center and the Company  may modify  Exhibit "A" and Exhibit "B" hereto from time
to time in a writing signed by both parties.

      2.2 Supervision. The Medical Center shall designate a supervisory employee
(the "Medical Center Supervisor") who shall coordinate with a designated Company
supervisor  or staff  member  (the  "Company  Coordinator")  the  functions  and
responsibilities  to be assumed by the Medical  Center  Employees in  connection
with this Agreement.

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<PAGE>

      2.3  Evaluations;  Compensation.  The Medical  Center  Employees  shall be
supervised by and evaluated on an annual basis by the Medical Center Supervisor.
The Medical Center shall set compensation,  benefits,  raises,  and bonuses,  if
any, for the Medical Center  Employees.  The Medical Center shall be responsible
for  hiring,  firing,  reassigning  and  replacing  all  of the  Medical  Center
Employees.  Subject to Section  2.6  hereof,  the  Department  of Surgery of the
Medical  Center shall,  upon request by the Company,  replace any Medical Center
Employee,  in the event that any such Medical Center Employee quits, retires, is
terminated, or otherwise ceases employment with the Medical Center.

      2.4  Company   Rules.   The  Medical   Center  shall  support  all  rules,
regulations,  policies,  procedures and protocols of the Company  (collectively,
the "Company Rules").  To the extent reasonably  feasible,  Medical Center shall
ensure that the Medical Center Employees comply with the Company Rules; provided
that Company promptly notifies the Medical Center in writing of each instance of
a Medical Center Employee's failure to comply with such Company Rules.

      2.5   Reasonable   Cause   Termination   of  Medical   Center   Employees.
Notwithstanding  anything to the contrary set forth in this  Agreement,  Medical
Center  shall  immediately  terminate  the  participation  of any of the Medical
Center  Employees  with the Company at the  Company's  request  upon  reasonable
cause.  As used  herein,  the term  "reasonable  cause" shall  include,  without
limitation,  any material  violation by a Medical Center Employee of any Company
Rule or any rule, regulation, policy, procedure or protocol of Medical Center. A
Medical  Center  Employee who is so terminated  shall be notified by the Medical
Center,  and shall have no rights to  administrative  redress by or on behalf of
the Company.

      2.6  Withdrawal  of  Medical  Center  Employees.  The  Medical  Center may
withdraw or reduce the work schedule of any of the Medical Center Employees from
his or her assignment at the Company upon thirty (30) days' prior written notice
to the Company.  In the event of any such  withdrawal  or reduction  for reasons
other than material reductions or cuts in the Medical Center's budget(s) for the
Department(s)  for which the Medical Center Employees work at the Medical Center
("Budget Reductions"), the Department of Surgery of the Medical Center shall use
reasonable  efforts to select a  replacement  for the withdrawn  Medical  Center
Employee who is acceptable  to the Company  within sixty (60) business days from
the effective notice of withdrawal.  In the event that the Department of Surgery
of the  Medical  Center is unable to find a  suitable  replacement  within  such
period (or such longer  period as may be mutually  agreed-upon  by the parties),
the Medical Center shall be relieved of its obligation hereunder to replace such
withdrawn  Medical  Center  Employee.  In the  event  that  the  Medical  Center
withdraws  or reduces  the work  schedule of any  Medical  Center  Employee as a
result of Budget  Reductions,  the Medical  Center also shall be relieved of its
obligation  hereunder to replace such withdrawn  Medical Center  Employee for so
long as such Budget Reductions remain in effect and are not subsequently  offset
by material budget increases in the relevant Medical Center Department(s).

      2.7  Insurance;  Certain  Supplies.  The Medical  Center shall arrange and
procure or ensure that each Medical  Center  Employee has arranged and procured,
if appropriate (a) professional  liability  insurance or funded  self-insurance,
covering  each of the  Medical  Center  Employee's  activities  hereunder,  with
liability  limits  of  not  less  than  One  Million  Dollars  ($1,000,000)  per
occurrence and Three Million Dollars  ($3,000,000) annual aggregate;  (b) health
insurance  in  amounts  standard  for  Medical  Center  employees  of  the  same
classification as the Medical Center  Employees;  and (c) necessary lab coats or
uniforms  which  shall be  designated  by mutual  agreement  between the Medical
Center and the Company.

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<PAGE>

      2.8  Notifications.  The Medical  Center shall  notify the Medical  Center
Employees,  in writing, that they are responsible for (a) following the internal
rules,  regulations,  policies  and  procedures  of  the  Company;  (b)  wearing
appropriate  Company  identification  while on the Company's premises (including
any  premises  leased by the  Company  from the Medical  Center  pursuant to the
Facilities Lease);  (c) obtaining written permission from the Company,  prior to
publication, of any material based solely or in part on his or her experience at
the Company, which permission may be withheld in the Company's sole and absolute
discretion; (d) obtaining any required health examinations,  including necessary
immunizations,  tuberculin  tests,  and  chest  X-rays,  if  such  examinations,
immunizations, tests and X-rays are necessary, appropriate or otherwise required
by state law, as amended  from time to time;  and (e) if required by the Company
or applicable  law,  providing the Company with a current  certificate of health
prior to  commencement  of duties for the  Company  which may  include,  without
limitation, verification of a TB test (current within one year) proving immunity
to rubella  and a PPD test or, if  necessary,  a chest  X-ray  showing no active
tuberculosis, consistent with state regulations.

      2.9 Medical Center Employees'  Intellectual  Property Rights.  The Medical
Center shall  require,  upon the Company's  request,  each of the Medical Center
Employees to execute an Invention Agreement and Confidentiality  Agreement, in a
form  reasonably  acceptable to the parties  hereto and in  accordance  with the
division of  intellectual  property  rights  between the Medical  Center and the
Company as set forth in Section 4.3 hereof.

                                  ARTICLE III

                           RESPONSIBILITIES OF COMPANY

      3.1  Consideration.  The Company is obtaining  the services of the Medical
Center  Employees in partial  consideration  for the shares of Junior  Preferred
Stock being  issued to the Medical  Center by the Company  pursuant to the Stock
Purchase  Agreement.  However, if the Company requires any of the Medical Center
Employees to perform  services on its behalf at any location or locations  other
than the Premises,  the Company  shall  arrange and pay for all  transportation,
lodging and meal  expenses  required  for  Employee's  rendition of services (it
being understood and agreed that the Medical Center shall have no responsibility
for any such  expenses,  or for any  "per  diem" or  other  travel  expenses  or
allowances for the Medical Center Employees under such circumstances).

      3.2 Space;  Supplies.  The  Company  shall,  subject to  availability  and
absence of  interference  with the  Company's  regular  activities,  provide the
Medical Center Employees with such research and laboratory space,  equipment and
tools  reasonably  necessary for the Medical Center Employees to carry out their
duties on behalf of the Company.

      3.3 Emergency  Aid. The Company  shall,  on any day when a Medical  Center
Employee is at the Premises or any of the Company's  other  facilities,  provide
the Medical Center  Employees with necessary  emergency health care or first-aid
for  accidents  occurring  in, on or about the  Premises  or such other  Company
facilities.

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<PAGE>

                                   ARTICLE IV

               CONFIDENTIAL INFORMATION AND INTELLECTUAL PROPERTY

      4.1 Confidential Information.  The parties acknowledge that the provisions
set forth in Section 10 of the License  Agreement shall be applicable to any and
all  disclosures  of such party's  Confidential  Information  made by any of the
Medical Center  Employees to the Company or the Medical  Center,  as applicable.
Each of the parties understands and agrees that the Medical Center Employees may
not disclose or use any of the other party's  Confidential  Information for such
non-disclosing party's benefit or use. Further, each of the parties acknowledges
and agrees that it shall have no right, title, interest, or license in or to any
of the other party's  Confidential  Information,  except as otherwise  expressly
agreed to by the parties in a separate  agreement  that is duly executed by each
party's authorized  representative(s).  Each of the parties covenants and agrees
that  it  will  not  seek  to  acquire  any of the  other  party's  Confidential
Information,  or induce any of the Medical Center Employees to breach their duty
to  preserve  the  other  party's   Confidential   Information   in  a  strictly
confidential  manner.  The Medical  Center  shall  require,  upon the  Company's
request,  each of the  Medical  Center  Employees  to execute a  Confidentiality
Agreement,  in a  form  reasonably  acceptable  to  the  parties  hereto  and in
accordance with the terms of this Section 4.1.

      4.2 Name Use  Restrictions.  The  Company  agrees that the  provisions  of
Section 9 of the License  Agreement also refer to any use or reference to any of
the Medical  Center  Employees'  names,  in their  capacity as  employees of the
Medical Center.

      4.3 Intellectual Property Rights.

            (a) The Company  shall own all right,  title and  interest in and to
any and all Inventions  which are "first reduced to practice" (as that phrase is
commonly  understood  under  United  States  patent  laws) by any of the Medical
Center Employees (i) using the Company's supplies, equipment (including, without
limitation, those items leased by the Medical Center to the Company), facilities
(including,  but not limited to, the Premises) or trade secrets (as that term is
commonly  understood  under United States  intellectual  property laws), or (ii)
during the course of his or her  services  for the Company  (including,  but not
limited to, any  Inventions  first  reduced to practice by such  Medical  Center
Employees  at the  Premises).  The parties  acknowledge  and agree that any such
Inventions which constitute Licensee  Improvements shall be subject to the terms
and conditions of the License Agreement with respect thereto.

            (b) The Medical  Center  shall own all right,  title and interest in
and to any and all Inventions  which are first reduced to practice by any of the
Medical  Center  Employees (i) using the Medical  Center's  supplies,  equipment
(excluding  those items leased by the Medical  Center to the Company  during the
term of such lease),  facilities  (excluding the Premises) or trade secrets,  or
(ii) during the course of his or her services for the Medical Center (including,
but not limited to, any  Inventions  first  reduced to practice by such  Medical
Center  Employees  at any of the  Medical  Center's  facilities  (other than the
Premises)).  The parties  acknowledge and agree that any such  Inventions  which
constitute Future Patent Rights or Future Technical Information shall be subject
to the terms and conditions of the License Agreement with respect thereto.

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<PAGE>

            (c) Each of the parties  hereby  agrees to take all actions,  and to
execute  and  deliver  to  the  other   party  all   instruments,   conveyances,
assignments,  certificates and other documents reasonably requested by the other
party in order to effectuate the intent of the foregoing ownership provisions in
this Section 4.3.

      4.4 Remedies.  Each of the parties acknowledges and agrees that the remedy
at law for the breach (or threatened breach) of any provision of this Article IV
may be inadequate and that the other party may be entitled to injunctive  relief
or specific  performance  without  bond,  in  addition  to any other  rights and
remedies  which the  other  party  may have for any such  breach  or  threatened
breach.

      4.5 Survival. Each of the parties agrees that its obligations,  covenants,
and agreements and the rights of the other party as set forth in this Article IV
shall survive any termination or expiration of this Agreement.

                                   ARTICLE V

                 STATUS OF COMPANY AND MEDICAL CENTER EMPLOYEES

      It is  expressly  agreed  and  understood  by the  Medical  Center and the
Company that all of the Medical Center  Employees are providing the Company with
the  services  described  herein  and in Exhibit  "A",  and the  Medical  Center
Employees are not, and shall not be  considered to be,  employees of Company for
any  purpose  whatsoever,  including,  but  not  limited  to,  compensation  for
services,   employees'   welfare  and  pension  benefits,   fringe  benefits  of
employment,  or workers'  compensation  insurance.  The Medical  Center shall be
responsible for payment of all the above compensation;  provided,  however, that
the Company shall maintain workers' compensation insurance on the Medical Center
Employees as may be required by California law.

                                   ARTICLE VI

                                 INDEMNIFICATION

      6.1 By Company.  The Company hereby agrees to indemnify,  defend, and hold
the Medical Center, its Affiliates,  and their respective  directors,  officers,
trustees, members,  shareholders,  employees,  independent contractors,  agents,
attorneys and representatives (collectively, "Medical Center Parties"), from and
against any and all Losses  suffered by any of the Medical Center Parties in any
Action arising or resulting from (a) injuries to persons,  including  death,  or
damage to property arising from any act,  omission or negligence of the Company,
its  Affiliates,  any of their  respective  directors,  officers,  shareholders,
employees,  independent  contractors,  agents or representatives,  or any of the
Medical Center Employees  during such times when they are providing  services to
or for the Company;  (b) any of the  Company's  employment  practices or conduct
(including,  but not  limited  to, any  practices  or  conduct  which are or are
alleged  to be in  violation  of  any  statute,  ordinance,  common  law,  rule,
regulation,  policy, or  administrative  interpretation or guide concerning wage
and  hour  practices,  health  and  safety,  workers'  compensation,  employment
discrimination,  payroll taxes, labor relations,  wrongful  discharge,  tortious
conduct, breach of the employment relationship,  whether based on oral, written,
or implied  contract  (including,  but not limited to, breach of any  collective
bargaining  contract  to which  such  party is  bound)  or any  other  aspect of
employment  whatsoever)  (collectively,  "Employment  Practices");  and  (c) the
performance  of this  Agreement  by the  Company;  provided,  however,  that the
Company  shall have no  obligation  under this  Section 6.1 with  respect to any
Losses  in any  Action  to the  extent  such  Losses  are  caused  by the  gross
negligence or willful misconduct of the Medical Center.

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<PAGE>

      6.2 By Medical  Center.  The Medical  Center  hereby  agrees to indemnify,
defend, and hold the Company,  its Affiliates,  and their respective  directors,
officers,  shareholders,  employees,  independent contractors, agents, attorneys
and representatives (collectively,  "Company Parties"), from and against any and
all Losses  suffered  by any of the  Company  Parties  in any Action  arising or
resulting from (a) injuries to persons,  including  death, or damage to property
arising  from any  act,  omission  or  negligence  of the  Medical  Center,  its
Affiliates,  or any  of  their  respective  directors,  officers,  shareholders,
employees  (including the Medical Center  Employees  during such times when they
are  providing  services  to or for the  Medical  Center  and not the  Company),
independent  contractors,  agents  or  representatives;  (b) any of the  Medical
Center's Employment Practices;  and (c) the performance of this Agreement by the
Medical  Center;  provided,  however,  that the  Medical  Center  shall  have no
obligation  under this  Section 6.2 with  respect to any Losses in any Action to
the extent such Losses are caused by the gross negligence or willful  misconduct
of the Company.

      6.3 Notice of Claim.  If any of the Medical  Center Parties or the Company
Parties, as the case may be ("Indemnified  Party") receives notice of any Action
with  respect to which the  Company or the Medical  Center,  as  applicable,  is
obligated  to provide  indemnification  pursuant  to Section  6.1 or Section 6.2
hereof (the "Indemnifying Party"), the Indemnified Party shall promptly give the
Indemnifying Party written notice thereof, which notice shall specify, if known,
the amount or an estimate  of the amount of the Losses  arising  therefrom.  The
failure to deliver written notice to the Indemnifying  Party within a reasonable
time of the commencement of any such Action,  if prejudicial to the Indemnifying
Party's ability to defend such Action,  shall relieve the Indemnifying  Party of
any liability to the  Indemnified  Party under this Article VI to the extent the
Indemnifying Party was prejudiced by such failure.  The Indemnifying Party shall
not settle or compromise any Action for which it is entitled to  indemnification
hereunder  without the prior written consent of the Indemnifying  Party,  unless
suit  shall  have  been  instituted   against  the  Indemnified  Party  and  the
Indemnifying  Party shall not have taken control of such suit after notification
thereof as provided in Section 6.4 hereof.

      6.4 Defense by  Indemnifying  Party.  In connection  with any Action,  the
Indemnifying  Party,  at its sole cost and expense,  shall assume the defense of
any such Action  proceeding using counsel of its choice (subject to the approval
of the  Indemnified  Party,  not to be  unreasonably  withheld,  conditioned  or
delayed).  The  Indemnified  Party  shall be entitled  to  participate  (but not
control)  the  defense  of any  such  Action,  with its  counsel  and at its own
expense;  provided,  however,  that if the Indemnified Party determines,  in its
reasonable   discretion,   that  a  conflict  of  interest  exists  between  the
Indemnifying Party (or any constituent party thereof) and the Indemnified Party,
the  Indemnified  Party  shall have the right to engage  separate  counsel,  the
reasonable costs and expenses of which shall be paid by the Indemnifying  Party,
but in no event shall the Indemnifying  Party be liable to pay for the costs and
expenses of more than one such separate counsel.  If the Indemnifying Party does
not assume the defense of any Action,  or any  litigation  resulting  therefrom,
within thirty (30) days of receipt of written notice,  the Indemnified Party may
defend against such Action or litigation, after giving notice of the same to the
Indemnifying Party, on such terms as the Indemnified Party may deem appropriate,
and the  Indemnifying  Party shall be entitled to participate  (but not control)
the defense of the  Action,  with its  counsel  and at its own  expense.  If the
Indemnifying  Party  thereafter  seeks to  question  the  manner  in  which  the
Indemnified Party defended such Action or the amount or nature of any settlement
thereof,   the  Indemnifying   Party  shall  have  the  burden  to  prove  by  a
preponderance  of the  evidence  that the  Indemnified  Party did not  defend or
settle such Action in a reasonably prudent manner.

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<PAGE>

      6.5 Survival. Each of the parties agrees that its obligations,  covenants,
and agreements and the rights of the other party as set forth in this Article VI
shall survive any termination or expiration of this Agreement.

                                  ARTICLE VII

                                    INSURANCE

      7.1 Evidence of Insurance.  Each party shall submit to the other party, as
soon  as  reasonably  practicable  after  the  Commencement  Date,  evidence  of
liability  coverage  written  by  outside  carrier(s),   self-insurance,   or  a
combination  thereof including,  without  limitation:  (a) comprehensive  public
liability coverage; (b) coverage for any acts of professional  malpractice;  and
(c) workers'  compensation  insurance all in forms and with coverage  reasonably
acceptable to the other party and standard and customary for similarly  situated
companies in the industry.

      7.2  Claims-Made  Requirements.  In the event that any insurance  required
pursuant  to  this  Agreement  is in a  "claims-made"  form,  as  opposed  to an
"occurrence" form (as such terms are used in the insurance  industry),  coverage
shall, to the extent available on commercially  reasonable  terms, be maintained
for claims  occurring  during the Term  hereof and for three (3) years after the
expiration or earlier termination of this Agreement.  In the event a claims-made
policy is canceled,  non-renewed or otherwise expires, the party who was insured
under such policy shall provide to the other party an  endorsement  stating that
coverage is afforded  for a discovery  period of three (3) years  following  the
expiration or earlier termination of this Agreement.

      7.3 Survival.  The provisions of Section 7.2 shall survive the termination
or expiration of this Agreement.

                                  ARTICLE VIII

                    AFFIRMATIVE ACTION AND NONDISCRIMINATION

      Inasmuch as the Medical Center is bound by the following  provisions  with
respect to the Medical Center Employees,  during the Term of this Agreement, the
Company agrees as follows (it being  understood that none of the following shall
be deemed to make any of the Medical Center  Employees  employees of the Company
for any purpose):

      8.1  Non-Discrimination.  The Company  will not  discriminate  against any
employee or applicant  for  employment  because of race,  color,  age (over 40),
marital status, religion, sex, actual or perceived sexual orientation,  national
origin,  ancestry,  medical  condition  (cancer-related),   physical  or  mental
handicap or  Vietnam-era  veteran  status.  Company  agrees to take  affirmative
action to ensure that  applicants  are employed,  and that employees are treated
during employment,  without regard to their race, color,  religion,  sex, sexual
orientation or national  origin.  Such action shall include,  but not be limited
to, the following: employment,  upgrading, demotion, or transfer; recruitment or
recruitment advertising;  layoff or termination;  rates of pay or other forms of
compensation;  and  selection for training,  including  apprenticeship.  Company
agrees to post in conspicuous places,  available to employees and applicants for
employment,  notices in English and Spanish setting forth the provisions of this
nondiscrimination clause.

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<PAGE>

      8.2 Statements.  The Company will, in all  solicitations or advertisements
for  employees  placed by or on  behalf of  Company,  state  that all  qualified
applicants  will receive  consideration  for employment  without regard to race,
color,  age (over  40),  marital  status,  religion,  sex,  sexual  orientation,
national  origin,  ancestry,  medical  condition  (cancer  related),  mental  or
physical handicap or Vietnam era veteran status.

      8.3 Notices.  The Company will send to each labor union or  representative
of workers  with which  Company has a collective  bargaining  agreement or other
contract  or  understanding,  a notice,  advising  the labor  union or  workers'
representative of Company's commitments under Section 202 of Executive Order No.
11246 of September 24, 1965 (as amended to date,  the  "Executive  Order"),  and
shall post copies of the notice in conspicuous places available to employees and
applicants for employment.

      8.4  Compliance  with Laws. The Company will comply with all provisions of
the Executive  Order,  and of the rules,  regulations,  and relevant orders (the
"Labor  Secretary  Rules") of the United  States  Secretary of Labor (the "Labor
Secretary").

      8.5 Information and Reports.  The Company will furnish all information and
reports  required by the Executive  Order,  and by the Labor Secretary Rules, or
pursuant thereto, and will permit the Medical Center and the Labor Secretary (or
their  authorized  agents)  with access to the  Company's  books,  records,  and
documents  for  purposes  of  investigation  to  ascertain  compliance  with the
Executive Order and the Labor Secretary Rules.

      8.6  Penalties.  In the  event  of the  Company's  noncompliance  with the
provisions of this Article VIII,  this Agreement may be canceled,  terminated or
suspended  in whole or in part and the Company may be  declared  ineligible  for
Government  contracts in accordance with procedures  authorized in the Executive
Order,  and such other sanctions may be imposed and remedies invoked as provided
in the Executive Order or by rule,  regulation,  or order of the Labor Secretary
of Labor, or as otherwise provided by law.

      8.7 Inclusion of  Provisions.  The Company will include the  provisions of
Sections 8.1 through 8.7 in every  subcontract or purchase order unless exempted
by the Labor Secretary Rules,  regulations,  or orders of the Labor Secretary of
Labor  issued  pursuant  to Section  204 of the  Executive  Order,  so that such
provisions will be binding upon each  subcontractor or vendor.  The Company will
take such  action  with  respect to any  subcontract  or  purchase  order as the
Medical  Center may direct as a means of enforcing  such  provisions,  including
sanctions for noncompliance;  provided,  however,  that in the event the Company
becomes involved in, or is threatened  with,  litigation with a subcontractor or
vendor as a result of such  direction  by the  Medical  Center,  the Company may
request the United States to enter into such litigation to protect the interests
of the United States.

                                       9
<PAGE>

                                   ARTICLE IX

                     MEDICARE RECORD DISCLOSURE REQUIREMENTS

      9.1  Cost   Verification.   For  the  purpose  of   implementing   Section
1861(v)(1)(I)  of the  Social  Security  Act (as  amended,  the  "Act")  and any
regulations  promulgated  pursuant  thereto,  each party hereto agrees to comply
with  the  following  statutory   requirements   governing  the  maintenance  of
documentation  to verify the cost of services  rendered  by the  Medical  Center
Employees under this Agreement:

            (a) Until the  expiration of four (4) years after the  furnishing of
any  such  services  pursuant  hereto  such  contract,  such  party  shall  make
available,  upon written  request,  to the Secretary of the Department of Health
and Human Services (the "DHHS  Secretary") or, upon request,  to the Comptroller
General  of the  United  States  ("Comptroller  General"),  or any of their duly
authorized representatives,  this Agreement and the books, documents and records
of such party that are necessary to certify the nature and extent of such costs;
and

            (b) If such party  carries  out any of the duties of this  Agreement
through a subcontract with a value or cost of Ten Thousand Dollars  ($10,000) or
more over a twelve (12) month period, with a related  organization (as that term
is  defined  with  regard  to  a  provider  in  42  C.F.R.  ss.413.17(b)),  such
subcontract  shall  contain a clause to the effect that until the  expiration of
four  (4)  years  after  the  furnishing  of  such  services  pursuant  to  such
subcontract,  the  related  organization  shall  make  available,  upon  written
request, to the DHHS Secretary or, upon request, to the Comptroller  General, or
any of their duly  authorized  representatives,  the  subcontract  and the other
books, documents and records that are necessary to certify the nature and extent
of such costs.

      9.2 Records  Access.  If either  party is  requested  to  disclose  books,
documents  or records  pursuant  to Section  1861(v)(l)(I)  of the Act and/or 42
C.F.R.  ss.420.300 et seq.,  such party shall promptly notify the other party of
the nature and scope of such  request  and the  notifying  party shall make such
books,  documents or records disclosed  reasonably available to the other party,
which other party may copy at its own cost and expense.

                                   ARTICLE X

                                   ASSIGNMENT

      This  Agreement  shall be binding  upon and shall  inure to the benefit of
each party and its respective  successors and permitted  assigns.  Neither party
may assign its rights or delegate its obligations  under this Agreement  without
the prior  written  consent of the other party,  except that the Medical  Center
shall have the right to assign its rights and to delegate its obligations  under
this  Agreement as part of any  reorganization  or bond  financing.  The Company
agrees to comply with all of the terms and conditions of this Agreement upon any
such  assignment  or  delegation  by the Medical  Center.  Without  limiting the
generality  of the  foregoing,  any desired  assignment  or  delegation  of this
Agreement by the Company shall be governed by and  construed in accordance  with
the provisions and procedures of Article XV of the Facilities Lease, as the same
has been  clarified  pursuant  to that  certain  letter  agreement  between  the
parties, also of even date herewith.

                                       10
<PAGE>

                                   ARTICLE XI

                                  MISCELLANEOUS

      11.1 Notices. All notices required or desired to be provided in connection
with this  Agreement  shall be provided in the manner and to the  addresses  set
forth in Section 13.1 of the License  Agreement,  with the Medical  Center being
classified as "CSMC" and the Company as "Licensee".

      11.2 Governing Law; Venue. The validity,  interpretation,  and performance
of this  Agreement  shall be governed by, and construed in accordance  with, the
laws of the State of California.  Any legal action or proceeding with respect to
this  Agreement  shall be brought in the state or federal  courts sitting in Los
Angeles, California, the parties hereto hereby waiving any claim or defense that
such forum is not  convenient or proper.  Each party hereby agrees that any such
court  shall  have in  personam  jurisdiction  over it,  consents  to service of
process in any manner  authorized  by  California  law,  and agrees that a final
judgment  in any  such  action  or  proceeding  shall be  conclusive  and may be
enforced in other  jurisdictions  by suit on the judgment or in any other manner
specified by law.

      11.3 Severability. In the event any provision of this Agreement is held to
be unenforceable  or void by any court or arbitrator of competent  jurisdiction,
the remaining  provisions of this Agreement  shall  nevertheless  remain in full
force and effect  except to the extent such  result  would  defeat an  essential
business purpose of this Agreement.

      11.4  Compliance  with Laws.  The parties shall comply with all applicable
federal,  state and local laws,  rules,  regulations,  ordinances  and orders in
connection  with the  performance  of their  duties and  obligations  under this
Agreement.

      11.5  Waivers.  Any waiver of any terms and  conditions  hereof must be in
writing,  and  signed by the  parties  hereto.  A waiver of any of the terms and
conditions  hereof  shall not be  construed  as a waiver of any other  terms and
conditions hereof.

      11.6  Interpretation.  Ambiguities,  if any,  in this  Agreement  shall be
reasonably  construed in accordance with all relevant  circumstances  including,
without limitation,  prevailing  practices in the industry of the parties in the
place where the contract is to be performed  and shall not be construed  against
either  party,  irrespective  of which party may be deemed to have  authored the
ambiguous provision.

      11.7 Relationship of Parties.  Medical Center and the Company  acknowledge
and agree that this  Agreement is not intended,  and shall not be construed,  to
create a relationship of agent, servant, employee,  partnership,  joint venture,
or association between the Medical Center, the Medical Center  Employee(s),  and
the  Company  or any of its  contractors.  Medical  Center and the  Company  are
independent contractors of each other.

      11.8  Entire  Agreement.  This  Agreement  contains  a full  and  complete
expression  of the rights and  obligations  of the parties  with  respect to the
subject matter hereof,  and it shall supersede all other agreements,  written or
oral,  heretofore  made by the parties.  This  Agreement may be modified only in
writing, signed by the parties hereto.

                                       11
<PAGE>

      11.9 Counterparts. This Agreement may be executed in counterparts, each of
which  shall be  deemed  an  original,  but all of which  taken  together  shall
constitute one and the same instrument.

      11.10 Recitals and Exhibits. All Recitals and Exhibits attached hereto are
incorporated herein by reference.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       12
<PAGE>

      IN WITNESS  WHEREOF,  the parties  hereto have caused this Agreement to be
executed by their duly authorized  representatives  as of the date first written
above.

                        THE "COMPANY":

                        ARBIOS TECHNOLOGIES, INC.

                        By:  /s/ Kristin P. Demetriou
                               -------------------------------------------------
                               Name:  Kristin P. Demetriou
                               Title: Secretary

                        THE "MEDICAL CENTER":

                        CEDARS-SINAI MEDICAL CENTER

                        By:  /s/ Shlomo Melmed
                               -------------------------------------------------
                               Name:  Shlomo Melmed, M.D.
                               Title: Senior Vice President for Academic Affairs

                        By:  /s/ Edward M.  Prunchunas
                               -------------------------------------------------
                               Name:  Edward M.  Prunchunas
                               Title: Senior Vice President for Finance and CFO

                                       13EXHIBIT 10.5

                                    EXHIBIT A

                 SECOND AMENDMENT TO EMPLOYEE LOAN-OUT AGREEMENT

      THIS SECOND AMENDMENT TO EMPLOYEE LOAN-OUT AGREEMENT (this "Amendment"),
dated as of May 7, 2003, is made and entered into by and between Cedars-Sinai
Medical Center, a California nonprofit public benefit corporation (the "Medical
Center"), and Arbios Technologies, Inc., a Delaware corporation (the "Company"),
with reference to the following facts:

      A. The Medical Center and the Company are parties to that certain Employee
Loan-Out Agreement, dated as of July 1, 2001, as amended by that certain First
Amendment to Employee Loan-Out Agreement, dated as of December 1, 2001 (as so
amended, the "Existing Agreement").

      B. The Company has requested that the Medical Center extend the term of
the Existing Agreement for an additional twelve (12) months, to commence on July
1, 2003 and to end on June 30, 2004. Subject to the terms and conditions set
forth herein, the Medical Center has agreed to do so.

      C. Article XI, Section 11.8 of the Existing Agreement provides that the
Existing Agreement may be modified only in writing, signed by the parties
thereto. Furthermore, Article II, Section 2.1 of the Existing Agreement provides
that the parties thereto may modify Exhibit "A" and Exhibit "B" to the Existing
Agreement from time to time in a writing signed by both parties.

      D. Pursuant to said Article XI, Section 11.8, and said Article II, Section
2.1, the Medical Center and the Company desire to amend the Existing Agreement
and Exhibit "A" and Exhibit "B" thereto, in accordance with the terms and
conditions of this Amendment.

      E. Capitalized terms used in this Amendment but not otherwise defined
herein shall have the meanings ascribed to them in the Existing Agreement.

      NOW, THEREFORE, in consideration of the foregoing recitals and the mutual
promises and covenants hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereby agree as follows:

1.  Amendments  to Existing  Agreement.  The parties  hereby  agree to amend the
Existing Agreement as follows:

            (a) Section 1.1. Section 1.1 of the Existing Agreement is hereby
amended in its entirety to read in full as follows:

                   1.1 Term. The term of this Agreement ("Term ") shall commence
on the date set forth above ("Commencement Date"), and shall continue for a term
of three (3) years, unless sooner terminated as provided herein.

<PAGE>

            (b) Exhibit "A". The entry for Yvette Middleton in Paragraph 2 of
Exhibit "A" of the Existing Agreement is hereby deleted in its entirety, and
replaced with the following:

                   2. INTENTIONALLY DELETED

            (c) Exhibit "B". Exhibit "B" to the Existing Agreement is hereby
deleted in its entirety, and replaced with Exhibit "B" attached to this
Amendment.

      2. Consideration. In consideration of the Medical Center's agreement to
amend the Existing Agreement as provided hereinabove, the Company shall,
concurrently with its execution and delivery of this Amendment deliver to the
Medical Center a corporate check in the amount of $70,262, representing
twenty-five percent (25%) of the Medical Center Employees' salaries (including
fringe benefits of 20.2% of such salaries), listed in the table for "Time Period
Number Four" in Exhibit "B" to this Amendment. Further, the Company shall
deliver a corporate check in the same amount to the Medical Center on October 1,
2003, January 1, 2004 and April 1, 2004 to cover the balance of the Medical
Center's Employees' salaries (and fringe benefits of such salaries) for said
Time Period Number Four.

      3. Effect on Existing Agreement. Except as amended by this Amendment, the
Existing Agreement shall remain in full force and effect, and is hereby
ratified, reaffirmed and confirmed in all respects by the parties. Upon the
effectiveness of this Amendment, each reference in the Existing Agreement to
"this Agreement," "hereunder," "herein," "hereof" or words of like import
referring to the Existing Agreement shall mean and be a reference to the
Existing Agreement as amended by this Amendment.

      4. No Novation. This Amendment is a revision to the Existing Agreement
only, and not a novation thereof.

      5. Governing Law. This Amendment shall be governed by and construed in
accordance with the laws of the State of California, without regard to its
conflict of laws principles.

      6. Counterparts. This Amendment may be executed in any number of
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.

      7. Further Assurances. Each party shall, from time to time when requested
by the other party, execute and deliver such further instruments, documents and
agreements, and take such further actions, as the other party may reasonably
require in order to effect fully the intent and accomplish the purposes of this
Amendment.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                       2
<PAGE>

           IN WITNESS  WHEREOF,  the parties have executed this  Amendment as of
the day and year first written above.

                                         THE "MEDICAL CENTER:"

                                         CEDARS-SINAI MEDICAL CENTER, a
                                         California nonprofit public benefit
                                         corporation

                                         By:____________________________________
                                                Shlomo Melmed, M.D.
                                                Senior Vice President for
                                                Academic Affairs

                                         By:____________________________________
                                                Edward M. Prunchunas
                                                Senior Vice President for
                                                Finance and CFO

                                         THE "COMPANY"

                                         ARBIOS TECHNOLOGIES, INC.,
                                         a Delaware corporation

                                         By:____________________________________
                                               Jacek Rozga, M.D., Ph.D.
                                               President

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