Document:

EXHIBIT B

EXHIBIT 4.12

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of January 20, 2006, by and between HEPALIFE TECHNOLOGIES, INC., a Florida corporation, (the "Company"), and FUSION CAPITAL FUND II, LLC (together with it permitted assigns, the “Buyer”).  Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Common Stock Purchase Agreement by and between the parties hereto, dated as of the date hereof (as amended, restated, supplemented or otherwise modified from time to time, the "Purchase Agreement").

WHEREAS:

A.

The Company has agreed, upon the terms and subject to the conditions of the Purchase Agreement, to issue to the Buyer (i) up to Fifteen Million Dollars ($15,000,000) of the Company's common stock, par value $0.001 per share (the "Common Stock") (the "Purchase Shares"), and (ii) such number of  shares of Common Stock as is required pursuant to Section 4(f) of the Purchase Agreement (the "Commitment Shares"); and

B.

To induce the Buyer to enter into the Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "1933 Act"), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Buyer hereby agree as follows:

1.

DEFINITIONS.

As used in this Agreement, the following terms shall have the following meanings:

a.

"Investor" means the Buyer, any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

b.

"Person" means any person or entity including any corporation, a limited liability company, an association, a partnership, an organization, a business, an individual, a governmental or political subdivision thereof or a governmental agency.

c.

"Register," "registered," and "registration" refer to a registration effected by preparing and filing one or more registration statements of the Company in compliance with the 1933 Act and pursuant to Rule 415 under the 1933 Act or any successor rule providing for offering securities on a continuous basis ("Rule 415"), and the declaration or ordering of effectiveness of such registration statement(s) by the United States Securities and Exchange Commission (the "SEC").

d.

"Registrable Securities" means the Purchase Shares which have been, or which may from time to time be, issued or issuable upon purchases of the Available Amount under the Purchase Agreement (without regard to any limitation or restriction on purchases), the 20,000 Signing Shares, issued or issuable to the Investor and the Commitment Shares issued or issuable to the Investor and any shares of capital stock issued or issuable with respect to the Purchase Shares, the Signing Shares, the Commitment Shares or the Purchase Agreement as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitation on purchases under the Purchase Agreement.

e.

"Registration Statement" means the registration statement of the Company covering only the sale of the Registrable Securities.

2.

REGISTRATION.

a.

Mandatory Registration.  The Company shall within ten (10) Trading Days from the date hereof file with the SEC the Registration Statement.  The Registration Statement shall register only the Registrable Securities and no other securities of the Company.  The Investor and its counsel shall have a reasonable opportunity to review and comment upon such registration statement or amendment to such registration statement and any related prospectus prior to its filing with the SEC.  Investor shall furnish all information reasonably requested by the Company for inclusion therein.  The Company shall use its best efforts to have the Registration Statement or amendment declared effective by the SEC at the earliest possible date.  The Company shall use reasonable best efforts to keep the Registration Statement effective pursuant to Rule 415 promulgated under the 1933 Act and available for sales of all of the Registrable Securities at all times until the earlier of (i) the date as of which the Investor may sell all of the Registrable Securities without restriction pursuant to Rule 144(k) promulgated under the 1933 Act (or successor thereto) or (ii) the date on which (A) the Investor shall have sold all the Registrable Securities and no Available Amount remains under the Purchase Agreement (the "Registration Period").  The Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein, or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading.

b.

Rule 424 Prospectus.  The Company shall, as required by applicable securities regulations, from time to time file with the SEC, pursuant to Rule 424 promulgated under the 1933 Act, the prospectus and prospectus supplements, if any, to be used in connection with sales of the Registrable Securities under the Registration Statement.  The Investor and its counsel shall have a reasonable opportunity to review and comment upon such prospectus prior to its filing with the SEC. The Investor shall use its reasonable best efforts to comment upon such prospectus within one (1) Trading Day from the date the Investor receives the final version of such prospectus. 

c.

Sufficient Number of Shares Registered.  In the event the number of shares available under the Registration Statement is insufficient to cover all of the Registrable Securities, the Company shall amend the Registration Statement or file a new registration statement (a ”New Registration Statement”), so as to cover all of such Registrable Securities as soon as practicable, but in any event not later than ten (10) Trading Days after the necessity therefor arises.  The Company shall use it reasonable best efforts to cause such amendment and/or New Registration Statement to become effective as soon as practicable following the filing thereof.   

3.

RELATED OBLIGATIONS.

With respect to the Registration Statement and whenever any Registrable Securities are to be registered pursuant to Section 2(b) including on any New Registration Statement, the Company shall use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

a.

The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to any registration statement and the prospectus used in connection with such registration statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep the Registration Statement or any New Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement or any New Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such registration statement.

b.

The Company shall permit the Investor to review and comment upon the Registration Statement or any New Registration Statement and all amendments and supplements thereto at least two (2) Trading Days prior to their filing with the SEC, and not file any document in a form to which Investor reasonably objects.  The Investor shall use its reasonable best efforts to comment upon the Registration Statement or any New Registration Statement and any amendments or supplements thereto within two (2) Trading Days from the date the Investor receives the final version  thereof.  The Company shall furnish to the Investor, without charge any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to the Registration Statement or any New Registration Statement.

c.

Upon request of the Investor, the Company shall furnish to the Investor, (i) promptly after the same is prepared and filed with the SEC, at least one copy of such registration statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference and all exhibits, (ii) upon the effectiveness of any registration statement, a copy of the prospectus included in such registration statement and all amendments and supplements thereto (or such other number of copies as the Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as the Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by the Investor.

d.

The Company shall use reasonable best efforts to (i) register and qualify the Registrable Securities covered by a registration statement under such other securities or "blue sky" laws of such jurisdictions in the United States as the Investor reasonably requests, (ii) prepare and file in those jurisdictions, such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(d), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.  The Company shall promptly notify the Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

e.

As promptly as practicable after becoming aware of such event or facts, the Company shall notify the Investor in writing of the happening of any event or existence of such facts as a result of which the prospectus included in any registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and promptly prepare a supplement or amendment to such registration statement to correct such untrue statement or omission, and deliver a copy of such supplement or amendment to the Investor (or such other number of copies as the Investor may reasonably request).  The Company shall also promptly notify the Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a registration statement or any post-effective amendment has become effective (notification of such effectiveness shall be delivered to the Investor by facsimile on the same day of such effectiveness and by overnight mail), (ii) of any request by the SEC for amendments or supplements to any registration statement or related prospectus or related information, and (iii) of the Company's reasonable determination that a post-effective amendment to a registration statement would be appropriate.

f.

The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of any registration statement, or the suspension of the qualification of any Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify the Investor of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

g.

The Company shall (i) cause all the Registrable Securities to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange, or (ii) secure designation and quotation of all the Registrable Securities on the Principal Market. The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section.

h.

The Company shall cooperate with the Investor to facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to any registration statement and enable such certificates to be in such denominations or amounts as the Investor may reasonably request and registered in such names as the Investor may request.

i.

The Company shall at all times provide a transfer agent and registrar with respect to its Common Stock.

j.

If reasonably requested by the Investor, the Company shall (i) immediately incorporate in a prospectus supplement or post-effective amendment such information as the Investor believes should be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities; (ii) make all required filings of such prospectus supplement or post-effective amendment as soon as notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any registration statement.

k.

The Company shall use its reasonable best efforts to cause the Registrable Securities covered by the any registration statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

l.

Within one (1) Trading Day after any registration statement which includes the Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel for the Company to deliver, to the transfer agent for such Registrable Securities (with copies to the Investor) confirmation that such registration statement has been declared effective by the SEC in the form attached hereto as Exhibit A.  Thereafter, if requested by the Buyer at any time, the Company shall require its counsel to deliver to the Buyer a written confirmation whether or not the effectiveness of such registration statement has lapsed at any time for any reason (including, without limitation, the issuance of a stop order) and whether or not the registration statement is current and available to the Buyer for sale of all of the Registrable Securities.

m.

The Company shall take all other reasonable actions necessary to expedite and facilitate disposition by the Investor of Registrable Securities pursuant to any registration statement.

4.

OBLIGATIONS OF THE INVESTOR.

a.

The Company shall notify the Investor in writing of the information the Company reasonably requires from the Investor in connection with any registration statement hereunder.  The Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

b.

The Investor agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any registration statement hereunder.

c.

The Investor agrees that, upon receipt of any notice from the Company of the happening of any event or existence of facts of the kind described in Section 3(f) or the first sentence of 3(e), the Investor will immediately discontinue disposition of Registrable Securities pursuant to any registration statement(s) covering such Registrable Securities until the Investor's receipt of the copies of the supplemented or amended prospectus contemplated by Section 3(f) or the first sentence of 3(e). Notwithstanding anything to the contrary, the Company shall cause its transfer agent to promptly deliver shares of Common Stock without any restrictive legend in accordance with the terms of the Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(f) or the first sentence of 3(e) and for which the Investor has not yet settled.

5.

EXPENSES OF REGISTRATION.

All reasonable expenses, other than sales or brokerage commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company, shall be paid by the Company.

6.

INDEMNIFICATION.

a.

To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend the Investor, each Person, if any, who controls the Investor, the members, the directors, officers, partners, employees, agents, representatives of the Investor and each Person, if any, who controls the Investor within the meaning of the 1933 Act or the Securities Exchange Act of 1934, as amended (the "1934 Act") (each, an "Indemnified Person"), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, attorneys' fees, amounts paid in settlement or expenses, joint or several, (collectively, "Claims") incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon: (i) any untrue statement or alleged untrue statement of a material fact in the Registration Statement, any New Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to the Registration Statement or any New Registration Statement  or (iv) any material violation by the Company of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, "Violations").  The Company shall reimburse each Indemnified Person promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a): (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person expressly for use in connection with the preparation of the Registration Statement, any New Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); (ii) with respect to any superceded prospectus, shall not inure to the benefit of any such person from whom the person asserting any such Claim purchased the Registrable Securities that are the subject thereof (or to the benefit of any person controlling such person) if the untrue statement or omission of material fact contained in the superceded prospectus was corrected in the revised prospectus, as then amended or supplemented, if such revised prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e), and the Indemnified Person was promptly advised in writing not to use the incorrect prospectus prior to the use giving rise to a violation and such Indemnified Person, notwithstanding such advice, used it; (iii) shall not be available to the extent such Claim is based on a failure of the Investor to deliver or to cause to be delivered the prospectus made available by the Company, if such prospectus was timely made available by the Company pursuant to Section 3(c) or Section 3(e); and (iv) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9.

b.

In connection with the Registration Statement or any New Registration Statement, the Investor agrees to indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement or any New Registration Statement, each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (collectively and together with an Indemnified Person, an "Indemnified Party"), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information about the Investor set forth on Exhibit B attached hereto and furnished to the Company by the Investor expressly for use in connection with such registration statement; and, subject to Section 6(d), the Investor will reimburse any legal or other expenses reasonably incurred by them in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Investor, which consent shall not be unreasonably withheld; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to the Investor as a result of the sale of Registrable Securities pursuant to such registration statement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investor pursuant to Section 9. 

c.

Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the indemnifying party, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding. The Indemnified Party or Indemnified Person shall cooperate fully with the indemnifying party in connection with any negotiation or defense of any such action or claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or claim.  The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such claim or litigation.  Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

d.

The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred.

e.

The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7.

CONTRIBUTION.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that: (i) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

8.

REPORTS AND DISCLOSURE UNDER THE SECURITIES ACTS.

With a view to making available to the Investor the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investor to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees, at the Company’s sole expense, to:

a.

make and keep public information available, as those terms are understood and defined in Rule 144;

b.

file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

c.

furnish to the Investor so long as the Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting and or disclosure provisions of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investor to sell such securities pursuant to Rule 144 without registration.

d.

take such additional action as is requested by the Investor to enable the Investor to sell the Registrable Securities pursuant to Rule 144, including, without limitation, delivering all such legal opinions, consents, certificates, resolutions and instructions to the Company’s Transfer Agent as may be  requested from time to time by the Investor and otherwise fully cooperate with Investor and Investor’s broker to effect such sale of securities pursuant to Rule 144.

The Company agrees that damages may be an inadequate remedy for any breach of the terms and provisions of this Section 8 and that Investor shall, whether or not it is pursuing any remedies at law, be entitled to equitable relief in the form of a preliminary or permanent injunctions, without having to post any bond or other security, upon any breach or threatened breach of any such terms or provisions.

9.

ASSIGNMENT OF REGISTRATION RIGHTS.

The Company shall not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investor, including by merger or consolidation.  The Investor may not assign its rights under this Agreement without the written consent of the Company, other than to an affiliate of the Investor controlled by Steven G. Martin or Joshua B. Scheinfeld.

10.

AMENDMENT OF REGISTRATION RIGHTS.

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Investor.

11.

MISCELLANEOUS.

a.

A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities.  If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

b.

Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally; (ii) upon receipt, when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one (1) Trading Day after deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:

HepaLife Technologies, Inc.

1628 W. 1st Avenue, Suite 216

Vancouver, British Columbia V6J 1G1

Telephone:

800-518-4879

Facsimile:

604-659-5029

Attention:  

Harmel S. Rayat

With a copy to:

Sierchio Greco & Greco

720 Fifth Ave, Suite 1301

New York, NY 10019

Telephone:

212-246-3030

Facsimile:

212-246-2225

Attention:

Joseph Sierchio

If to the Investor:

Fusion Capital Fund II, LLC

222 Merchandise Mart Plaza, Suite 9-112

Chicago, IL 60654

Telephone:

312-644-6644

Facsimile:

312-644-6244

Attention:

Steven G.  Martin

or at such other address and/or facsimile number and/or to the attention of such other person as the recipient party has specified by written notice given to each other party three (3) Trading Days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a nationally recognized overnight delivery service, shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

c.

Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

d.

The corporate laws of the State of Florida shall govern all issues concerning the relative rights of the Company and its stockholders.  All other questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois.   Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting the City of Chicago, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement in that jurisdiction or the validity or enforceability of any provision of this Agreement in any other jurisdiction.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

e.

This Agreement, and the Purchase  Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.  This Agreement and the Purchase Agreement supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

f.

Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

g.

The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

h.

This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

i.

Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

j.

The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

k.

This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

* * * * * *

IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement to be duly executed as of day and year first above written.

THE COMPANY:

HEPALIFE TECHNOLOGIES, INC.

By: /s/ Harmel S. Rayat

           Name: Harmel S. Rayat

Title: Chief Executive Officer

BUYER:

FUSION CAPITAL FUND II, LLC

BY: FUSION CAPITAL PARTNERS, LLC

BY: ROCKLEDGE CAPITAL CORPORATION

By: /s/ Joshua B. Scheinfeld

Name: Joshua B. Scheinfeld

Title: President

EXHIBIT A

TO REGISTRATION RIGHTS AGREEMENT

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[Date]

[TRANSFER AGENT]

___________________

___________________

RE: HEPALIFE TECHNOLOGIES, INC.

Ladies and Gentlemen:

We are counsel to HEPALIFE TECHNOLOGIES, INC., a Florida corporation (the "Company"), and have represented the Company in connection with that certain Common Stock Purchase Agreement, dated as of _________, 2006 (the "Purchase Agreement"), entered into by and between the Company and Fusion Capital Fund II, LLC (the "Buyer") pursuant to which the Company has agreed to issue to the Holder shares of the Company's Common Stock, par value $0.001 per share (the "Common Stock"), in an amount up to Fifteen Million Dollars ($15,000,000) (the "Purchase Shares"), in accordance with the terms of the Purchase Agreement.  In addition, pursuant to the Stock Purchase Agreement, the Company issued to the Buyer 1,066,351 shares of Common Stock (the "Commitment Shares").  Pursuant to the Purchase Agreement, the Company also has entered into a Registration Rights Agreement, dated as of ______, 2006, with the Buyer (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the Purchase Shares, _____ Signing Shares (as defined in the Purchase Agreement), and the Commitment Shares under the Securities Act of 1933, as amended (the "1933 Act").  In connection with the Company's obligations under the Purchase Agreement and the Registration Rights Agreement, on _______, 200_, the Company filed a Registration Statement (File No. 333-_________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the sale of the Purchase Shares, the Signing Shares and the Commitment Shares.

In connection with the foregoing, we advise you that a member of the SEC's staff has advised us by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at 5:00 P.M. on __________, 2006 and we have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Purchase Shares, the Signing Shares and the Commitment  Shares are available for sale under the 1933 Act pursuant to the Registration Statement.

The Buyer has confirmed  it shall comply with all securities laws and regulations applicable to it including applicable prospectus delivery requirements upon sale of the Purchase Shares, the Signing Shares and the Commitment  Shares.

Very truly yours,

[Company Counsel]

By:____________________

CC:

Fusion Capital Fund II, LLC

EXHIBIT B

TO REGISTRATION RIGHTS AGREEMENT

Information About The Investor Furnished To The Company By The Investor 

Expressly For Use In Connection With The Registration Statement

As of the date of the Purchase Agreement, Fusion Capital beneficially owned 1,086,351 shares of common stock of the Company.  Steven G. Martin and Joshua B. Scheinfeld, the principals of Fusion Capital, are deemed to be beneficial owners of all of the shares of common stock owned by Fusion Capital.  Messrs. Martin and Scheinfeld have shared voting and investment power over the shares being offered under the prospectus filed with the SEC in connection with the transactions contemplated under the Purchase Agreement.  Fusion Capital is not a registered broker-dealer or an affiliate of a registered broker-dealer.Exhibit 10

EXHIBIT 10.1

			
	

UNITED STATES DEPARTMENT OF AGRICULTURE

	

TYPE OF RESEARCH AGREEMENT

	

RESEARCH AGREEMENT

	Cooperative Research and Development Agreement

	

AGREEMENT NO.

58-3K95-3-967

	

TYPE OF ACTION

NEW

	

AGENCY (Name and Address)

	

	

	

Agricultural Research Service

1400 Independence Avenue SW

Washington DC 20250-0302

	

PERIOD OF AGREEMENT

11/1/02 through 10/31/04

	

FEDERAL OBLIGATION

$ -0-

	

CHANGE IN FEDERAL OBLIGATION

             N/A

	

CRIS NO.

	

AUTHORITY

	

PERFORMING ORGANIZATION (Name and Address)

Zeta Corporation

1025 - 11811 N. Tatum Blvd.

Phoenix, AZ 85028-1699

	

1265-31000-087-01T

	

15 USC 3710a, et seq.

	

OBLIGATION DISTRIBUTION

	Accounting Code

	$Amount

	 

X91-1265-356

	 

$292,727.00

	

PRINCIPAL INVESTIGATOR (Name and Address)

Harmel Rayat

(Same as Above)

	

FINANCE OFFICE (Complete Mailing Address)

USDA, ARS, BA, Budget and Fiscal Office

10300 Baltimore Ave.

Bldg. 003, Rm. 206, BARC-West

Beltsville, MD  20705-2350

	

TITLE OF PROJECT

Development and Application of an In Vitro Model 

of the Pig Liver

	

AUTHORIZED DEPARTMENTAL OFFICER'S DESIGNATED REPRESENTATIVE (Name and Address)

Neil C. Talbot

USDA, ARS, BA, ANRI, GEML

10300 Baltimore Ave.

Bldg. 200, Rm. 13A, BARC-E

Beltsville, MD 20705-2350

	

LOG #22659

Incorporated into this Agreement are the following:

1.  General Provisions.

2.  Schedule 1 - Certifications.

3.  Schedule 2 - Statement of Work.

4.  Schedule 3 - Estimated Budget.

			
	

FOR THE UNITED STATES DEPARTMENT OF AGRICULTURE

	

AUTHORIZED DEPARTMENTAL OFFICER

	

TYPED NAME

	

DATE

October 22, 2002

	/s/ Richard Brenner

	RICHARD J. BRENNER

	

	

FOR THE PERFORMING ORGANIZATION

(Signature of person authorized by the governing body of the performing organization to incur contractual obligations.)

	

SIGNATURE

/s/ Harmel S. Rayat

	

TYPED NAME AND TITLE

Harmel Rayat

	

DATE

November 1, 2002

	 	 	 
	

SIGNATURE

	

TYPED NAME AND TITLE

	

DATE

	 	 	

GENERAL PROVISIONS

1.

Definitions

ARS means the United States Department of Agriculture=s Agricultural Research Service.

Zeta means Zeta Corporation

Agreement means this Cooperative Research and Development Agreement.

Confidential Information means trade secrets or commercial or financial information that is privileged or confidential, under the meaning of 5 USC 552(b)(4).

Subject Inventions means any invention or other intellectual property conceived or first reduced to practice under this Agreement which is patentable or otherwise protectable under Title 35 of the United States Code, under 7 USC 2321, et seq., or under the patent laws of a foreign country.  Specifically not included in the definition of Subject Inventions are inventions made outside The Scope of Agreement or prior to the execution of this Agreement.

Scope of Agreement means those activities set forth in Schedule 2, Statement of Work.

2.

Publications

a.

Subject to the requirements of confidentiality and preservation of rights in Subject Inventions, either party may publish the results of this Agreement, PROVIDED:

(1)

The other party is allowed to review the manuscript at least sixty (60) days prior to submission for publication.

(2)

The publication shall acknowledge this Agreement and the contributions of each party's personnel.

b.

The final decision as to the publication content rests with the party that writes the publication.

c.

Publication and/or other disclosure of the results of this Agreement shall be delayed as necessary to preserve both United States of America and foreign patent rights in a Subject Invention.

(1)

Such a delay will only be granted if requested in writing; and

(2)

The requesting party demonstrates promptness and diligence in seeking patent protection on the Subject Invention.

3.

Meetings, Reports and Records

a.

Frequent and effective communication is essential to the successful accomplishment of the objectives of this Agreement.  To this end, the scientific representatives of ARS and Zeta shall meet at least once every six (6) months to exchange results, perform critiques, and make plans and recommendations.  Written progress reports shall be supplied by each party to the other at least fifteen (15) calendar days prior to each semiannual meeting.

b.

Any such plan or recommendation that is outside the Scope of Agreement shall be reduced to writing and referred to the management of each party for appropriate action.  Any such plan or recommendation so referred shall not be binding upon either party unless incorporated into this Agreement by amendment.

c.

Each party shall keep complete records relating to this research.  All such records shall be available for inspection by either party at reasonable times.  The records, or true copies of them, shall be delivered to either party upon request.

d.

The results of this Agreement and research data which are collected, compiled, and evaluated 

under this Agreement shall be shared and mutually interchanged by Zeta and ARS. 

e.

A final report summarizing all data shall be submitted by each party to the other within sixty (60) days of the completion of this Agreement.  

4.

Confidentiality

a.

Confidential Information which is owned by one party to this Agreement and given to the other shall not be disclosed by the recipient without the written permission of the owner.

b.

Confidential Information given by one party to the other  under this Agreement shall be labeled "CONFIDENTIAL" by the submitter.

c.

To the extent either party orally submits its Confidential Information to the other party, the submitting party will prepare a document marked "CONFIDENTIAL" embodying or identifying in reasonable detail such orally submitted Confidential Information and provide the document to the other party.

d.

Any Confidential Information created under this Agreement which normally would be included in scientific publications describing the results under this Agreement may be included in such publications after an one (1) year delay after creation of the information unless Zeta waives delay.

(1)

Such publications may be delayed an additional year upon justifiable request from the non-publishing party; and

(2)

The preparation and filing of a patent application on a Subject Invention is sufficient justification.

e.

Neither party shall be bound by confidentiality if the Confidential Information received from the other party:

(1)

Already is available to the public or known to the recipient;

(2)

Becomes available to the public through no fault of the recipient; or

(3)

Is nonconfidentially received from another party legally entitled to it.

5.

Research Exclusion

a.

The results of this Agreement owned or co-owned by the US Government may be made available to others by ARS for bona fide noncommercial research purposes if:

(1)

Confidentiality is not breached; or

(2)

Patent or Plant Variety Protection Certificate rights are not compromised.

b.

Plants and animals, their genetic materials or information relating thereto, or reproducing parts thereof, covered by Plant Variety Protection Certificates, Plant Patents, or Utility Patents, owned or co-owned by ARS, may be made available by ARS to third parties for bona fide research purposes including the development of new animals or plants.

6.

Ownership of Inventions

a.

All rights, title, and interest in any Subject Invention made solely by employee(s) of ARS shall be owned by ARS.  

b.

All rights, title, and interest in any Subject Invention made jointly by at least one (1) employee of ARS and at least one (1) employee of Zeta shall be jointly owned by ARS and Zeta.  

c.

All rights, title, and interest in any Subject Invention made solely by employees of Zeta shall be 

owned by Zeta.

7.

Subject Invention Licenses

a.

Zeta is granted an option to negotiate an exclusive license in each Subject Invention owned or co-owned by ARS for one or more field(s) of use encompassed by the Scope of Agreement.  This license shall be consistent with the requirements of 35 USC 209(a), 209(b), and 209(f) and other such terms and conditions as may be reasonable under the circumstances, as agreed upon through good faith negotiations between Zeta and ARS.

b.

The option shall terminate whenever Zeta fails to:

(1)

Submit a complete application for an exclusive license within sixty (60) days of being notified by ARS of an Inventions availability for licensing; or

(2)

Submit a good faith written response to a written proposal of licensing terms within forty five (45) days of such proposal.

c.

Zeta grants ARS, on behalf of the US Government, a royalty free, nonexclusive, worldwide, irrevocable, nontransferable license for any Zeta solely owned Subject Invention.  The purpose of this license shall be to practice the Subject Invention or have it practiced, by or on behalf of the US Government, for research or other US Government purposes.  15 USC 3710a(b)(2).

8.

Subject Invention Information

a.

The Authorized Agents or designees of each party shall promptly make written disclosure to each other of each Subject Invention.  

b.

This information shall be treated in confidence by the receiving party, EXCEPT: it may be shared with those having a need to know.

c.

Each party shall provide, when requested by the other, all information in its possession, or true copies thereof, pertaining to a Subject Invention which may be necessary or useful in the preparation, filing, and prosecution of patent or Plant  Variety Protection Certificate applications covering the Subject Invention.

9.

Intellectual Property Protection Applications

a.

ARS and Zeta agree to cooperate with the other in the preparation, filing, and prosecution of Patent or Plant Variety Protection Certificate applications on Subject Inventions in the United States of America and any other country.

b.

The Authorized Agents of each party or their designees shall provide the other party with a copy of any such application on a Subject Invention within fourteen (14) calendar days after filing.

c.

ARS shall have the first option to prepare and prosecute patent or Plant Variety Protection Certificate applications on Subject Inventions that are owned or co-owned by the U.S. Government, which option may be waived in whole or in part.

10.

Copyrights

a.

Any work copyrightable under 17 USC 101, et seq., produced in whole or in part by Zeta's employees under this Agreement shall be owned by Zeta.

b.

Zeta shall mark any such works with a copyright notice showing Zeta as an owner and shall have the option to register the copyright at Zeta's expense.

c.

Zeta hereby grants in advance to the U.S. Government, as represented by ARS, a worldwide, royalty-free, and nonexclusive license to use such copyrightable work for U.S. Governmental purposes. 

d.

Examples of Governmental purposes are:

(1)

The right to reproduce the work in copies, phonograph or electronic records;

(2)

The right to perform or display the work publicly;

(3)

The right to prepare derivative works based on the work; and

(4)

The right to have others do so for U.S. Governmental purposes.

e.

Zeta will prominently mark each such copyrighted work subject to the U.S. Government purpose license with the words:

"This work was created in the performance of a Cooperative Research and Development Agreement with the U.S. Department of Agriculture.  The Government of the United States has a royalty-free government purpose license to use, duplicate or disclose the work, in whole or in part and in any manner, and to have or permit others to do so, for government purposes."

f.

Zeta shall furnish to ARS, at no cost to ARS, three (3) copies of each such work created in whole or in part by Zeta under this Agreement.

11.

Use of Name or Endorsements

Zeta shall not in any way state or imply that this Agreement or the results of this Agreement is an endorsement of its organizational units, employees, products, or services except to the extent permission is specifically granted by ARS' Authorized Agent (Authorized Departmental Officer).

12.

Regulatory Approvals

a.

Zeta is responsible for obtaining appropriate opinions, permits, or licenses from Federal or State agencies which regulate research materials orcommercial products that may arise from the research work performed within the Scope of Agreement.

b.

In carrying out its responsibilities under this clause, Zeta shall:

(1)

Consult and coordinate regulatory approval actions with ARS; and

(2)

Give ARS= Authorized Agent or designee a copy of any applications and opinions, permits, or licenses issued.

13.

Indemnity and Liability

a.

Zeta agrees to indemnify and hold harmless ARS from any liability arising from the negligent acts or omissions of an employee, agent, or officer of Zeta, EXCEPT:  to the extent aforesaid liability arises from the negligent acts or omissions of ARS, its employees, agents, or contractors and employees or agents of the contractor.

b.

ARS will hold Zeta harmless from any liability arising from the negligent act or omission of a Federal Government officer or employee acting within the scope of his or her employment, EXCEPT:  to the extent aforesaid liability arises from the negligent acts or omissions of Zeta, its employees, agents, or contractors and employees or agents of the contractor.

c.

ARS' liability is limited to that available pursuant to the Federal Tort Claims Act, 28 USC 2671, et seq.

14.

Termination

a.

This Agreement, or parts thereof, is subject to termination at any time by mutual consent.

b.

Either party may unilaterally terminate this entire Agreement at any time by giving the other party written notice not less than sixty (60) calendar days prior to the desired termination date.

c.

Pledges of confidentiality shall survive such termination.

d.

If either party unilaterally terminates this Agreement pursuant to this Clause, each party shall return to the other or destroy, as shall be then agreed, any and all data and materials originated or provided by one party to the other that is still in the receiving party=s possession.

15.

Availability of Appropriations

The continuance of this Agreement is subject to the passage by the Congress of the United States of an appropriation of funds from which expenditures may legally be made to cover ARS' contributions.

16.

Disputes

a.

Any dispute arising under this Agreement which cannot be readily resolved shall be submitted jointly to the Authorized Agents, identified in Clause 17 of these General Provisions.

b.

Each party agrees to seek in good faith to resolve the issue through negotiation or other forms of nonbinding dispute resolution processes mutually acceptable to the parties.

c

A joint decision of the Authorized Agents, or their designees, shall be dispositive of such dispute.

d.

Pending the resolution of any dispute or claim pursuant to this Clause, the parties agree that performance of all obligations shall be pursued diligently.

17.

Notices and Authorized Agents

Notices between the parties and copies of correspondence among the scientific and/or technical representatives of each party that interpret or may have a bearing on the legal effect of this Agreement's terms and conditions shall be sent to the Authorized Agents.  Referencing Agreement Number 58-3K95-3-XXX thereon, send copies to: 

ARS' Authorized Agent:

Zeta's Authorized Agent

Richard J. Brenner

Harmel Rayat

USDA-ARS-OTT

Zeta Corporation

5601 Sunnyside Ave.

1025 - 11811 N. Tatum Blvd.

Beltsville MD 20705-5131

Phoenix, AZ 85028-1699

Tel.  (301) 504-6905

Tel. 604-659-5000

FAX:  (301) 504-5060

FAX: 604-659-5029

Email: crada.ott@

Email: rayat@simbra.net

nps.ars.usda.gov.

18.

Limitation on ARS' Scientific Representative's Authority

ARS' Scientific Representative, also known as the Authorized Departmental Officer's Designated Representative (AADODR@), is authorized to perform the research and development falling within the Scope of Agreement.  This individual is not authorized to change or interpret with authority the terms and conditions of this Agreement.

19.

Export Control

a.

Both ARS and Zeta understand that materials resulting from the performance of this Agreement may be subject of export control laws and regulations.

b.

Each party is separately responsible for compliance with such laws.

20.

Assignments

a.

Neither this Agreement nor any rights or obligations of the parties hereto shall be assigned or otherwise transferred by either party without the prior written consent of the other party, which consent shall not be unreasonably withheld.

b.

In no case shall Zeta assign or transfer this Agreement to a party not a citizen or resident of the United States.

c.

ARS is an agency of the U.S. Government and any rights or obligations created under this Agreement are freely transferrable within the Government and shall not be deemed an "assignment" as contemplated by this Clause.

21.

Relationship of Parties

a.

ARS and Zeta act in their independent capacities in the performance of their respective functions under this Agreement and neither party is to be considered the officer, agent, or employee of the other.

b.

Each party shall permit the other entrance and exit from each=s facilities, as needed.

c.

Each party shall separately assign personnel, equipment, supplies, transportation, and facilities, as needed and available to meet each=s it responsibilities hereunder, such resources to remain the property of the assignor.

22.

Force Majeure

a.

Neither party shall be liable for any unforeseeable event beyond its reasonable control not caused by the fault or negligence of such party:

(1)

Which causes the party to be unable to perform its obligations under this Agreement; and

(2)

Which it has been unable to overcome by the exercise of due diligence.

(3)

This includes, but is not limited to, flood, drought, earthquake, storm, fire, pestilence, lightning and other natural catastrophes, epidemic, war, riot, civil disturbance or disobedience, strikes, labor dispute, failure, or sabotage of either party's facilities or any order or injunction made by a court or public agency.

b.

In the event of the occurrence of such force majeure event, the party unable to perform shall promptly notify the other party.  It shall also:

(1)

Use its best efforts to resume performance as quickly as possible;

(2)

Suspend performance only for such period of time as is necessary as a result of the force majeure event.

23.

Amendment

a.

If either party desires a modification in this Agreement, the parties shall confer in good faith to determine the desirability of such modification.

b.

Such modification shall not be effective until a written amendment is signed by the Authorized Agents of both parties.

24.

Severability

The illegality or invalidity of any provision of this Agreement shall not impair, affect, or invalidate the other provisions of this Agreement.

25.

Headings and Titles

The headings and titles to the articles and paragraphs in this Agreement are intended solely for convenience and shall be given no effect in the construction or interpretation of this Agreement.

26.

Ambiguities

ARS and Zeta agree that each party has reviewed this Agreement and that any rule of construction to the effect that ambiguities are to be resolved against the drafting party shall not apply to the interpretation of this Agreement.

27.

Officials Not To Benefit

a.

No Delegate to or Member of the Congress of the United States of America shall have a part of or benefit from this Agreement.

b.

This requirement does not include corporations if this Agreement is entered into for the corporation's general benefit.

28.

Subcontracting Approval

a.

A party hereto desiring to obtain and use the services of a third party via contract or otherwise shall give prior notice to the other party, including details of the contract or other arrangement.

b.

This requirement is to assure that confidentiality is not breached and rights in Subject Inventions are not compromised.

29.

Governing Law

The construction, validity, performance, and effect of this entire Agreement shall be governed by the laws applicable to the Government of the United States of America as practiced in the Federal Courts located in the District of Columbia.

30.

US Competitiveness

US Government policy is that the results of a Cooperative Research and Development Agreement are to be used primarily to enhance the competitiveness of US industry and commerce.  15 USC 3710a(c)(4)(B).   Accordingly, Zeta agrees to use the results of this Agreement substantially in the United States prior to use in foreign countries.

31.

Entire Agreement

This Agreement constitutes the entire agreement between Zeta and ARS and supersedes all prior agreements and understandings between them with respect to its subject matter.

a.

Any representation, promise, or condition in connection with such subject matter which is not incorporated in this Agreement shall not be binding upon either party.

b.

No modification, renewal, extension, waiver, or termination of this Agreement or any of its provisions shall be binding upon the party against whom enforcement of such modification, renewal, extension, waiver, or termination is sought, unless made in writing and signed on behalf of such party by that party=s Authorized Agent.

c.

As used herein, the word "termination" includes any and all means of bringing to an end prior to its expiration by its own terms of this Agreement, or any provision thereof, whether by release, discharge, abandonment, or otherwise.

58-3K95-3-967

Schedule 1

CERTIFICATIONS

Zeta certifies that it:

1.

 X   is,     is not, a small business concern.

2.

    is, X   is not, a minority business.

3.

operates as:

    an individual

    a partnership

 X  a corporation

__ limited liability corporation

__ public institution

__ private institution

__ educational institution;

and is incorporated in the State of Florida.

4.

has not paid or agreed to pay any company or person (other than a bona fide employee working solely for Zeta) any fee, commission, percentage, or brokerage fee, contingent upon the award of this Agreement, and if so, agrees to furnish information relating thereto, as requested, by the Authorized Departmental Officer.

5.

has not employed or retained any company or person (other than a full-time bona fide employee working solely for Zeta) to solicit or secure this Agreement.

6.

its Principal Officers are not listed on the U.S. Government's list of debarred and suspended organizations and individuals; shall notify the Authorized Departmental Officer if so listed; and shall not subcontract or otherwise award to any organization or individual so listed.

7.

agrees to comply with the provisions of the Civil Rights Act of 1964, as amended, and Executive Order 11246, addressing equal opportunity and affirmative action.

8.

agrees to comply with the provisions of Title IX of the Education Amendment of 1972, 20 USC 1681, et seq.; Section 504 of the Rehabilitation Act of 1973, as amended, 29 USC 794; Age Discrimination Act of 1975, 42 USC 6101-6107; Clean Air Act, 42 USC 7401, et seq.; and Drug-Free Workplace Act of 1988, 41 USC 701, et seq.

9.

is in a position to undertake, perform, and complete this Agreement and will diligently perform work in accordance with its provisions.

58-3K95-3-967

Schedule 2

STATEMENT OF WORK

A.

Introduction/Background

ARS has developed several in-vitro model systems to investigate various aspects of hepatic gene expression and metabolic regulation.  These systems encompass both established cell lines and primary liver cell cultures.  One stem-like cell line, derived from porcine epiblast (embryonic) tissue is the ARS PICM-19 cell line (ARS patent #5,532,156), has been partially characterized and is a non-transformed immortal cell line that possesses many characteristics similar to that of intact liver parenchymal cells.  ARS interests would be greatly enhanced by further characterization and improvements in the culture technology that would ultimately result in the cell line not requiring feeder cell support and growth in a completely serum-free defined medium. These advancements would facilitate our understanding of regulatory events in pig liver gene/proteome expression and in regulation of nutrient metabolism.  Further, it has already been demonstrated that the unique hepatic characteristics of the ARS-PICM-19 cell line would have potential application for use in the production of a rescue device for human patients in liver failure (ARS patent # 5,866,420; AArtificial Liver Device@, granted to ARS on 2/2/1999).  To date, the cellular components of artificial liver devices that are being tested by other institutions are based on freshly isolated porcine hepatocytes, human transformed tumor cells, or poorly defined stem-like cells prepared from fresh human adult liver tissue.  It is widely recognized that the greatest hindrance to the development of a completely functional artificial liver rescue device is the lack of an appropriate defined cell line that will provide the functions of an intact liver.  The primary interest of Zeta is to explore the possibility that the ARS PICM-19 cell line is indeed the most appropriate cell line to use in such a device.

B.

Objective

The overall objective of the work is to optimize the patented ARS-PICM-19 cell line as an in-vitro model of the pig liver. The first objective is to investigate and discover culture conditions for the ARS-PICM-19 cell line, or modifications of the ARS-PICM-19 cell line technology itself, that will optimize function, i.e., culture conditions or cell line modifications that will enable, as closely as possible, the reproduction of normal pig liver functions in an in-vitro environment.  Directly related to the first objective will be the second objective of adapting and applying the optimized ARS-PICM-19 cell line technology to the development of an extracorporeal liver assist device as described in patent #5,866,420. 

C.

Approach and Methodology

ARS will study experimental culture conditions for the ARS-PICM-19 cell or other pig epiblast-derived liver cell lines (as described under ARS patent #5,532,156, AHepatocyte Cell Line Derived from the Epiblast of Pig Blastocysts@) so as to optimize their hepatocyte functions for use as an in-vitro liver model and for their use in an artificial liver device.  

Specific project objectives are the following:

1.

Develop cell culture system allowing the growth and differentiation of ARS-PICM-19 cells without STO feeder cell support.

2.

Develop serum-free, defined or semi-defined medium cell culture system for growth and differentiation of ARS-PICM-19 cells.

3

Develop spheroid cultures of PICM-19 cells without STO feeder cells and testing of rotating cell culture system (RCCS) for production and maintenance of spheroids.

4.

Investigate effects of accessory cells obtained from pig liver on spheroid form and function. 

5.

Assay ARS-PICM-19 cells and spheroids for liver specific functions by measuring P450 activity, γ-glutamyltranspeptidase activity, urea production, and ammonia clearance.

6.

Assay ARS-PICM-19 liver specific protein synthesis and secretion by electrophoretic and immunochemical techniques.

7.

Assay liver specific markers in ARS-PICM-19 by immunocytochemistry.

8.

Document ARS-PICM-19 spheroid morphology by  electron microscopy.

9.

Zeta will provide funds for the salary of one post-doctoral researcher for a  period two years and funds for the associated laboratory supplies and professional activities involved with conducting the CRADA objectives.

D.

ARS’  Responsibilities

1.

Conduct these portions of the research project or perform the following tasks:

a.

Hire one post-doctoral research associate for a 2 year period.

b.

Provide laboratory and office space for the research associate.

c.

Provide fully equipped cell culture laboratory and protein chemistry laboratory.

d.

Provide experimental animals (pigs) and slaughter facilities.

e.

Acquire specific laboratory equipment, i.e., RCCS, and  supplies to conduct the CRADA objectives.

f.

Conduct research on the optimization of the ARS-PICM-19 cell line (or related pig epiblast-derived cell lines) as an in-vitro pig liver cell model and the adaptation of the ARS-PICM-19 liver cell technology to an extracorporeal liver assist device.

g.

Prepare progress reports on project objectives.

h.

Prepare and submit technical reports for publication.

2.

a.

Provide access to 1850 square feet of laboratory space in Building 200, Room 13, 202, 204, and 212, at the Beltsville Agricultural Research Center for those Zeta personnel assigned to this project.

b.

Provide utilities, services, and general support to Zeta's personnel, as needed and available.

E.

Zeta’s Responsibilities

1.

Perform these portions of the research effort:

a.

Interact with ARS personnel on the technical details involved with pig liver cell culture development.

b.

Provide funds for post-doctoral research associate for two years.

c.

Provide funds for project related laboratory equipment, supplies, and off site research services such as electron microscopy.

d.

Provide funds for position advertisement and travel expenses for position interviews.

e.

Provide funds for professional activities of research associate such as travel to meetings and project specific training activities.

f.

Prepare and file patent applications.

g.

Review reports and implement procedures for the development of an artificial liver device utilizing the ARS-PICM-19 cell line (or related pig liver epiblast-derived cell lines).

2.

Pay $ 292,727 to ARS.

  

a.

The payment schedule is:

(1)

$91,500 within 30 days of signing this agreement;

(2)

$20,700 on or before 1/31/03;

(3)

$20,700 on or before 4/30/03;

(4)

$20,700 on or before 7/31/03;

(5)

$91,500 on or before 10/31/03;

(6)

$15,875 on or before 1/31/04;

(7)

$15,876 on or before 4/30/04; and

(8)

$15,876 on or before 8/1/04

b.

Make checks or money orders out to the "Agricultural Research Service," cite Agreement No. 58-3K95-3-XXX thereon, and send to:

USDA, ARS, BA, Budget and Fiscal Office

10300 Baltimore Ave.

Bldg. 003, Rm. 306, BARC-West

Beltsville, Maryland 20705-2350

3.

Zeta may pay the travel and per diem of ARS scientific representatives traveling pursuant to this Agreement if such payment receives the prior approval of the appropriate ARS Area Director.

4.

ZETA will not furnish any personnel and/or equipment to ARS.

F.

ARS & Zeta’s Joint or Mutual Responsibilities

1.

Perform these portions of the effort jointly:

a.

Develop strategy for design of a support system matrix to grow and maintain established ARS-PICM-19 or related pig liver epiblast-derived cell lines.

b.

Evaluate efficacy of ARS-PICM-19 or related pig liver epiblast-derived cell lines in an in-vitro pig liver model system for potential use in an extracorporeal liver assist device.

ESTIMATED BUDGET

TOTAL YEARS

ARS

  ARS

Zeta

to Receive    In-House

In-House

Funds For

A.

Salaries and Wages.......

$150,000

$ 46,440

$144,000

B.

Equipment................

$ 13,025

$100,000

$ 12,000

C.

Materials and Supplies...

$ 91,000

$ -0-

$ -0-

D.

Travel

1.  Domestic.............

$  4,000

$  4,000

$ 16,000

2.  Foreign..............

$ -0-

$ -0-

$ -0-

E.

Facilities...............

$ -0-

$112,000

$ 24,000

F.

Other Direct Costs.......

$  5,430

$ 52,488

$ -0-

G.

TOTAL DIRECT COSTS.......

$263,455

$314,928

$196,000

H.

Indirect Costs...........

$ 29,272

$  -0-

$ -0-

I.

TOTAL COSTS (G+H)........

$292,727

$314,928

$196,000

YEAR 1

A.

Salaries and Wages.......

$ 75,000

$ 23,220

$ 72,000

B.

Equipment................

$ 13,025

$ 50,000

$  6,000

C.

Materials and Supplies...

$ 45,500

$  -0-

$ -0-

D.

Travel

1.  Domestic.............

$  2,000

$  2,000

$  8,000

2.  Foreign..............

$  -0-

$  -0-

$ -0-

E.

Facilities...............

$  -0-

$ 56,000

$ 12,000

F.

Other Direct Costs.......

$  2,715

$ 26,244

$ -0-

G.

TOTAL DIRECT COSTS.......

$138,240

$157,464

$ 98,000

H.

Indirect Costs...........

$ 15,360

$  -0-

$ -0-

I.

TOTAL COSTS (G+H)........

$153,600

$157,464

$ 98,000

YEAR 2

A.

Salaries and Wages.......

$ 75,000

$ 23,220

$ 72,000

B.

Equipment................

$  -0-

$ 50,000

$  6,000

C.

Materials and Supplies...

$ 45,500

$  -0-

$ -0-

D.

Travel

1.  Domestic.............

$  2,000

$  2,000

$  8,000

2.  Foreign..............

$  -0-

$  -0-

$ -0-

E.

Facilities...............

$  -0-

$ 56,000

$ 12,000

F.

Other Direct Costs.......

$  2,715

$ 26,244

$ -0-

G.

TOTAL DIRECT COSTS.......

$125,215

$157,464

$ 98,000

H.

Indirect Costs...........

$ 13,912

$  -0-

$ -0-

I.

TOTAL COSTS (G+H)........

$139,127

$157,464

$ 98,000

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