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EXHIBIT 10.6

                                LICENSE AGREEMENT

      THIS LICENSE AGREEMENT  ("Agreement") is entered into this ___ day of June
2001,  and shall be  effective  as of the date  specified  in Section 2.7 hereof
("Effective  Date") by and between  CEDARS-SINAI  MEDICAL  CENTER,  a California
nonprofit  public  benefit  corporation  ("CSMC"),  with offices at 8700 Beverly
Boulevard, Los Angeles, California 90048-1865, and ARBIOS TECHNOLOGIES,  INC., a
Delaware  corporation  ("Licensee"),  with offices at 2331 Buckingham  Lane, Los
Angeles, California 90077-1339.

                                 R E C I T A L S

      A. CSMC owns and/or is entitled to grant  license  rights with  respect to
certain Patent Rights and Technical  Information  (as defined below) invented or
developed in the course of certain studies in the area of liver cell procurement
and   cryopreservation   for  use  in  cell-based   therapies  like   hepatocyte
transplantation and support of failing liver using  extracorporeal  liver assist
devices (the "Liver Studies  Programs") at CSMC conducted under the direction or
supervision of Achilles A. Demetriou,  M.D., Ph.D., or Jacek Rozga,  M.D., Ph.D.
(hereinafter collectively referred to as the "Inventors").

      B. CSMC desires to have the Patent  Rights and the  Technical  Information
developed,  used and  commercialized  in the Field of Use (as defined  below) by
Licensee,  and Licensee  desires to obtain an  exclusive,  worldwide  license to
conduct research in the Field of Use, and to develop,  manufacture, use and sell
Products  (as defined  below) in the Field of Use,  using the Patent  Rights and
Technical Information in accordance with the terms of this Agreement. Other than
the rights expressly granted by CSMC hereunder within the Field of Use, Licensee
acknowledges  that CSMC shall retain all other rights with respect to the Patent
Rights and the Technical Information.

      C. CSMC and Licensee  intend that the execution,  delivery and performance
of this  Agreement  by each  party,  and the  consummation  of the  transactions
contemplated hereunder,  shall not at any time threaten CSMC's tax-exempt status
under Section  501(c)(3) of the Internal  Revenue Code and Section 23701d of the
California  Revenue and Taxation  Code, or cause CSMC to be in default under any
of CSMC's issued and outstanding tax-exempt bonds.

      NOW,  THEREFORE,  in  consideration  of the mutual  covenants and premises
herein contained, the parties hereto agree as follows:

1.    DEFINITIONS

      1.1  "AFFILIATE" or  "AFFILIATES"  shall mean any  corporation,  person or
entity,  which  controls,  is controlled  by, or is under common control with, a
party to this Agreement without regard to stock or other equity  ownership.  For
purposes hereof, the terms "control" and "controls" mean the possession,  direct
or indirect, of the power to direct or cause the direction of the management and
policies of a corporation,  person or entity,  whether  through the ownership of
voting securities, by contract or otherwise.

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      1.2 "CONFIDENTIAL  INFORMATION" shall mean any confidential or proprietary
information  furnished by one party (the "Disclosing  Party") to the other party
(the "Receiving  Party") in connection with this Agreement,  including,  without
limitation, all specifications,  know-how, trade secrets, technical information,
drawings,   software,  models,  business  information  and  patent  applications
pertaining  to the  Patent  Rights  and  Technical  Information,  and as further
provided in Section 10 hereof.

      1.3 "FDA" shall mean the United  States Food and Drug  Administration,  or
any successor agency thereof.

      1.4 "FIELD OF USE" shall mean any and all  applications and uses of any of
the Licensed Patents or any of the Technical Information.

      1.5 "FUNDING  AGENCIES" shall mean any public or private granting agencies
which have provided  funding to CSMC or the Inventors for the development of any
of the Patent Rights or Technical Information prior to the Effective Date.

      1.6  "FUTURE   PATENT   RIGHTS"  shall  mean  any  patents  and/or  patent
applications  claiming  Inventions invented after the Effective Date through any
use of the Patent Rights or Technical  Information  licensed  hereunder  arising
from work conducted by or under the direction of the Inventors during the course
of their  employment  with CSMC,  and any  patents  and/or  patent  applications
(including  provisional patent applications) in any other country  corresponding
to   any   of    the    foregoing,    and    all    divisions,    continuations,
continuations-in-part,   reissues,   reexaminations,   supplementary  protection
certificates and extensions thereof, whether domestic or foreign, and any patent
that  issues  thereon.  Future  Patent  Rights  do not  include  any  Inventions
conceived  or  reduced  to  practice  solely  during  the  Inventors'  course of
employment, if any, with Licensee.

      1.7 "FUTURE TECHNICAL INFORMATION" shall mean the following information in
the Field of Use  developed  after the  Effective  Date through  practicing  the
Inventions  claimed in or otherwise  arising through any of the Patent Rights or
Technical Information licensed hereunder arising from work conducted by or under
the direction of the Inventors  during the course of their employment with CSMC:
Know-how,   trade   secrets,   unpublished   patent   applications,    software,
bioinformatics,   unpatented  technology,  technical  information,   statistical
information and analyses, biological materials,  chemical reagents,  preclinical
and  clinical  information,   and  any  and  all  confidential  and  proprietary
information  described in the Future Patent Rights or Inventions  invented after
the  Effective   Date  through  any  use  of  the  Patent  Rights  or  Technical
Information.  Future Technical Information does not include any know-how,  trade
secrets, unpublished patent applications,  software, bioinformatics,  unpatented
technology,   technical  information,   statistical  information  and  analyses,
biological materials,  chemical reagents,  pre-clinical and clinical information
conceived  or  reduced  to  practice  solely  during  the  Inventors'  course of
employment, if any, with Licensee.

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      1.8  "INVENTION"  shall  mean  all  unpatented,  patentable  and  patented
inventions,  discoveries,  designs,  apparatuses,  systems,  machines,  methods,
processes,  uses, devices, models, composition of matter, technical information,
trade secrets, know how, codes, programs or configurations of any kind which are
in the Field of Use.

      1.9  "LICENSEE  IMPROVEMENTS"  shall  mean  any and all  processes,  uses,
designs,   applications,   methods  and   compositions-of-matter,   indications,
improvements, enhancements and modifications in the Field of Use that relate to,
and are directly based upon or directly  created using, the Patent Rights and/or
Technical  Information and which were discovered or developed by or on behalf of
Licensee (exclusive of work performed by CSMC or the Inventors during the course
of their  employment  with CSMC,  but inclusive of work  performed by Licensee's
sublicensees under  circumstances where Licensee has obtained such sublicensees'
prior written consent), during the term of this Agreement.

      1.10 "PATENT  RIGHTS" shall mean the patents  and/or  patent  applications
existing  on the  Effective  Date  which are  described  on  Schedule A attached
hereto, and all patents and/or patent applications (including provisional patent
applications)   existing  as  of  the  Effective   Date  in  any  other  country
corresponding  to  any of  the  foregoing,  and  all  divisions,  continuations,
continuations-in-part,   reissues,   reexaminations,   supplementary  protection
certificates and extensions thereof, whether domestic or foreign, and any patent
that issues thereon. The Patent Rights are all owned by CSMC.

      1.11  "PRODUCT" or  "PRODUCTS"  shall mean any  products or services  that
utilize,  are  derived  from  or  made  from,  or  incorporate,  in  any  manner
whatsoever, any of the Patent Rights or Technical Information.

      1.12  "TECHNICAL  INFORMATION"  shall mean, as of the Effective  Date, any
know-how,   trade   secrets,   unpublished   patent   applications,    software,
bioinformatics,   unpatented  technology,  technical  information,   statistical
information and analyses, biological materials,  chemical reagents,  preclinical
and clinical  information,  in each case which has been  conceived or reduced to
practice  prior to the  Effective  Date,  in the  conduct  by CSMC of the  Liver
Studies  Programs  at CSMC  under the  direction  or  supervision  of any of the
Inventors. The Technical Information shall further include information described
in Schedule B hereto  which is  described  in, or useful in the practice of, the
Patent Rights and which has been  conceived or reduced to practice  prior to the
Effective Date in the conduct of any of the aforementioned  research programs at
CSMC under the direction or supervision  of any of the Inventors.  The Technical
Information is owned by CSMC.

      1.13 "TERRITORY" shall mean the World.

      1.14 "VALID CLAIM" shall mean a claim of (a) a patent application included
within the Patent  Rights,  which  patent  application  has not been pending for
longer  than ten (10)  years  after its first  filing,  or (b) an issued  patent
included within the Patent Rights, which claim has not (i) lapsed, been canceled
or  become  abandoned,   (ii)  been  declared  invalid  or  unenforceable  by  a
non-appealable  decision  or judgment  of a court or other  appropriate  body or
authority of  competent  jurisdiction,  or (iii) been  admitted to be invalid or
unenforceable through reissue, disclaimer or otherwise.

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2.    LICENSE

      2.1 GRANT OF  EXCLUSIVE  RIGHTS.  Subject to the terms of this  Agreement,
CSMC hereby  grants to Licensee,  and  Licensee  hereby  accepts from CSMC,  the
exclusive,  worldwide license,  with the right to grant sublicenses  (subject to
the terms of Section 2.2 hereof), during the term of this Agreement (as provided
in Section 6 hereof) to  conduct  research  in the Field of Use using the Patent
Rights and the  Technical  Information  and to develop,  use,  make,  have made,
practice,  import, carry out,  manufacture,  have manufactured,  offer for sale,
sell and/or have sold  Products in the Field of Use in the  Territory  using the
Patent Rights and the Technical Information.  The foregoing grant of exclusivity
is made expressly subject to the following:

            (A)  All  applicable  laws  and  regulations,   including,   without
limitation,  the  requirements  of federal law as pertains to the manufacture of
products within the United States;

            (B) All applicable rules of the Funding Agencies which have provided
funding to CSMC or to any of its employees  (including any of the Inventors) for
the development of the Patent Rights and Technical Information; and

            (C) The  following  non-exclusive  rights to the  Patent  Rights and
Technical Information, which are retained by CSMC (and which are transferable by
CSMC solely to its Affiliates for so long as they remain  Affiliates) within the
Field of Use:

                  (I) Subject to  Licensee's  right to prior review to determine
the  patentability  thereof (which shall expire after forty-five (45) days after
Licensee's receipt thereof in complete written form,  including all amendments),
the right to submit  for  publication  the  scientific  findings  from  research
conducted  by or through CSMC or its  investigators  (including  the  Inventors)
related to the Patent Rights and the Technical Information;

                  (II) Except as provided in subparagraph (d) hereof,  the right
(A) to use any tangible or intangible information contained in the Patent Rights
or the Technical  Information  (so long as CSMC shall treat such  information as
Confidential  Information  and maintain its  confidentiality  in accordance with
Section 10 hereof), for CSMC's internal teaching and other educationally-related
and  non-commercial  (except for charges to its own patients) clinical purposes,
where clinical use does not involve a third party funding grant to commercialize
or develop  such  information,  and (B) to obtain  research  funding for further
study  and   development   thereof  from   governmental   and  other   nonprofit
organizations (including grant applications); and

                  (III) Except as provided in subparagraph (d) hereof, the right
to conduct  research using the Patent Rights and Technical  Information,  and to
develop, use, make, practice, carry-out, and otherwise exploit the Patent Rights
and  Technical  Information  for CSMC's  internal  research  and  non-commercial
(except for charges to its own patients) clinical  purposes,  where clinical use
does not involve a third party  funding  grant to  commercialize  or develop any
Product.

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            (D) CSMC shall not, under any  circumstances,  grant and/or transfer
any rights (i) retained by CSMC under  Section  2.1(c) to any third party (other
than to  Licensee  or,  where  required by  applicable  law,  rule,  regulation,
governmental  policy or  contract,  to any Funding  Agency or the United  States
Government) or (ii) to commercialize  Inventions or information  related thereto
derived  directly  from the Patent Rights or the  Technical  Information  in the
Field of Use as a result of CSMC's  teaching and internal  research and clinical
activities with respect to the Patent Rights and Technical Information otherwise
permitted by Sections 2.1(c)(ii) and (iii) above.

            (E)  There  are no rights to the  Patent  Rights  and the  Technical
Information  outside of the Field of Use to be retained  by CSMC.  All rights to
the Future Patent Rights and Future Technical  Information  shall be governed by
Section 2.3 hereof and, if applicable,  any license  agreement  between CSMC and
Licensee  with  respect  to such  Future  Patent  Rights  and  Future  Technical
Information.

      2.2  RIGHT  TO  SUBLICENSE.   Licensee  shall  have  the  right  to  grant
sublicenses  to any of its rights under  Section 2.1;  provided,  however,  that
Licensee  shall not  sublicense  any such  rights to any  entity  which is not a
recognized biopharmaceutical,  pharmaceutical or bio-diagnostic company which is
either (a) listed on Schedule C hereto,  as amended  from time to time by mutual
agreement of the parties, or (b) generally recognized in such industries and has
a level  of  science,  management  and  investors  of the  quality  as  shall be
acceptable to CSMC (each,  an "Acceptable  Sublicensee")  on the basis of CSMC's
prior written consent (which consent shall not be unreasonably withheld, delayed
or conditioned). In order to preserve and protect the value of the Patent Rights
and Technical  Information,  Licensee shall obtain the prior written  consent of
CSMC prior to entering  into or granting a sublicense to any party who is not an
Acceptable  Sublicensee under subclause (a) above. Licensee also shall keep CSMC
reasonably  informed with respect to the progress of any relations  entered into
with any Acceptable Sublicensees (or any other party for whom CSMC has given its
prior  written  consent)  and shall give due  consideration  to any  comments or
concerns that CSMC has with respect to same.  Any and all  sublicenses  shall be
subject to the terms of this  Agreement.  Licensee shall promptly notify CSMC of
all sublicenses and shall require all sublicensees to perform in accordance with
the  terms  of this  Agreement  (including,  but not  limited  to,  the  royalty
reporting and record  keeping  provisions,  the  indemnification  and inspection
provisions,  and the provisions  pertaining to the use of CSMC's names and marks
and Confidential  Information).  Licensee will be responsible for enforcing each
sublicensee's  obligations  under its  sublicense  and, in  particular,  royalty
payment  obligations due on such  sublicensee's  sales of Products.  If Licensee
shall conduct one or more audits of its  sublicensees  hereunder during the term
hereof,  Licensee shall provide to CSMC, on a timely basis,  copies of all audit
reports;  provided,  however,  that Licensee shall have the right to redact from
such audit  reports any and all  information  which is not related to the Patent
Rights and Technical  Information or the license  granted to Licensee under this
Agreement.  The covenants  pertaining  to the use of CSMC's name and marks,  the
indemnification  of CSMC and the use of CSMC's  Confidential  Information in any
sublicense  shall run for the benefit of CSMC, who shall be expressly  stated as
being a third-party  beneficiary thereof with respect to the covenants set forth
in this  Agreement.  Licensee  understands and agrees that none of its permitted
sublicenses  hereunder  shall  reduce in any manner any of its  obligations  set
forth in this Agreement.

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      2.3 CERTAIN FUTURE RIGHTS. The following shall pertain to Inventions which
constitute Future Patent Rights or Future Technical Information:  Subject to the
rights and applicable rules of the Funding Agencies,  Licensee shall have, for a
period of ninety  (90) days after  either (a)  receipt  by  Licensee  of written
notice from CSMC  disclosing in adequate detail any such Inventions in the Field
of Use or (b) written  notification  by any of the Inventors to each of Licensee
and CSMC  disclosing in adequate detail any such Inventions in the Field of Use,
the exclusive  first right to negotiate with CSMC to obtain one or more licenses
to the  Future  Patent  Rights  in the  Field  of Use  and/or  Future  Technical
Information  in the Field of Use,  upon such  terms and  conditions  as shall be
agreed  by  the  parties  hereto,  which  terms  and  conditions  shall  include
provisions  for  fair  market  value  consideration  for the  grant  of any such
licenses.  Subject to the rights and applicable rules of the Funding Agencies or
the  United  States  Government,  and to the  extent  it  would  not  impair  or
jeopardize  any efforts of CSMC to obtain  domestic or foreign  rights  thereto,
CSMC shall  provide  Licensee  with prompt  written  disclosure of Future Patent
Rights in the Field of Use and/or Future  Technical  Information in the Field of
Use as may be developed by CSMC or either of the Inventors. If Licensee declines
or fails to  pursue,  or if the  parties  fail to  conclude  negotiations  for a
license  to,  such  Future  Patent  Rights  in the  Field of Use  and/or  Future
Technical  Information  in the Field of Use during  the  ninety  (90) day period
specified above, then CSMC shall have the right to commence discussions with any
other party  concerning  such  Future  Patent  Rights  and/or  Future  Technical
Information.   Subject  to  the   provisions  of  this  Section  2.3,   Licensee
acknowledges  and agrees that CSMC  expressly  retains and  reserves any and all
right,  title  and  interest  in and to the  Future  Patent  Rights  and  Future
Technical Information,  whether or not in the Field of Use and, accordingly,  no
license to any Future Patent Rights or Future  Technical  Information is granted
to Licensee under this  Agreement.  CSMC shall use its reasonable and continuing
efforts during the term of this  Agreement,  in accordance with its policies and
procedures, where appropriate, to file and maintain patent applications claiming
Inventions in the Field of Use.

      2.4  LICENSE  TO USE  IMPROVEMENTS.  Licensee  hereby  grants  to CSMC the
following  license  rights to the Licensee  Improvements,  which rights shall be
nonexclusive,  royalty-free,  fully paid-up  rights and subject to the following
conditions:

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            (A) Subject to  Licensee's  right to prior review to  determine  the
patentability thereof within forty-five (45) days following receipt by Licensee,
the right and license to publish the scientific findings from research conducted
for  Licensee  by CSMC  with  respect  to  particular  and  identified  Licensee
Improvements;

            (B) Except as  provided  below in this  Section  2.4,  the right and
license to use any tangible or intangible  information contained in the Licensee
Improvements  (so long as CSMC shall  treat  such  information  as  Confidential
Information  and  maintain its  confidentiality  in  accordance  with Section 10
hereof),  for  CSMC's  internal  teaching  and other  educationally-related  and
non-commercial (except for charges to its own patients) clinical purposes, where
clinical use does not involve a third party  funding grant to  commercialize  or
develop such  information  and, with Licensee's prior written consent (not to be
unreasonably withheld, delayed or conditioned),  to obtain research funding from
governmental and other nonprofit  organizations  (including grant applications);
and

            (C) Except as  provided  below in this  Section  2.4,  the right and
license to conduct  research  using the Licensee  Improvements,  and to develop,
use, make, practice and carry out the Licensee  Improvements for CSMC's internal
teaching  and  research  and  non-commercial  (except  for  charges  to its  own
patients) clinical  purposes,  where clinical use does not involve a third party
funding grant to commercialize or develop any Product.

      CSMC shall not, under any circumstances,  grant and/or transfer any rights
(i) granted to CSMC under this  Section  2.4 to any third  party  (other than to
Licensee or, where required by applicable  law, rule,  regulation,  governmental
policy or contract,  to any Funding  Agency or the United States  Government) or
(ii) to  commercialize  or  develop  Inventions  in the  Field of Use  resulting
directly from the Licensee  Improvements as a result of CSMC's internal research
and clinical  activities  with respect to the  Licensee  Improvements  otherwise
permitted by Sections 2.4(b) and (c) above.

      2.5  MILESTONES.  Licensee  acknowledges  that (a) it is important to CSMC
that  Licensee  pursue  the  development,  commercialization  and  marketing  of
Products and otherwise exercise commercially  reasonable efforts to maximize the
value of this Agreement to CSMC and (b) the United States Government under Title
35,  Section 203 of the United  States Code,  has certain  march-in  rights with
respect to the Patent  Rights to the extent  such Patent  Rights were  developed
with funding from the United States Government. Licensee shall be deemed to have
exercised  commercially  reasonable  efforts  to  maximize  the  value  of  this
Agreement to CSMC, and the milestone  requirements  of this Section 2.5 shall be
deemed to have been met, if Licensee meets the respective requirements set forth
on Schedule D hereto,  with each such  requirement  being  deemed a separate and
independent  condition (each, a "Milestone").  Within sixty (60) days after each
anniversary of the Effective Date, Licensee shall prepare and deliver to CSMC an
annual  written  report (to be certified  by an  executive  officer of Licensee)
indicating its  compliance  with the  Milestones.  If Licensee fails to meet any
annual Milestone designated in Schedule D hereto, CSMC may, at its option and as
its sole remedy for  Licensee's  breach of this Section 2.5, upon written notice
to Licensee,  (i) convert the exclusive license granted under Section 2.1 hereof
to a non-exclusive  license or to a co-exclusive  license, or (ii) terminate the
license;  provided,  however,  that CSMC shall in good faith  review  Licensee's
efforts and shall not exercise any of such remedies if Licensee has demonstrated
that (A) it has been exercising reasonable and diligent efforts, consistent with
industry standards,  or (B) it has been subject to events commonly recognized as
"force majeure"  events (i.e.,  events or causes for delay beyond its reasonable
control).  In the event that Licensee does not develop or  commercialize  one or
more Products as a result of legitimate  patent  infringement,  interference  or
other issues relating to the Patent Rights,  all of Licensee's  obligations with
respect to such  Products,  including,  without  limitation,  royalty  and other
payment  obligations,  and milestone and diligence  obligations  related to that
particular  Product in that  jurisdiction,  shall be suspended  unless and until
such patent  infringement,  interference  or other issues are  resolved.  In the
event that any such issues are not resolved during the term of the Agreement, or
in the event that such  issues are  resolved  in a manner  that does not provide
commercially  reasonable  incentive to develop or  commercialize  such Products,
then Licensee shall have no further  obligations  hereunder with respect to such
Products.

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      2.6 PROCEDURE FOR GRANTING ACCESS TO TECHNICAL  INFORMATION.  The grant of
rights by CSMC to Licensee  pursuant to Section 2.1 hereof are expressly subject
to the following provisions:

            (A) RESPONSIBILITY  FOR MONITORING ACCESS TO TECHNICAL  INFORMATION.
During the term of this Agreement,  the  responsibility for monitoring access to
the Technical Information (and any Future Technical Information) in the Field of
Use at CSMC  shall be borne  by the  Inventors  or,  in the  event  that all the
Inventors  shall die, become disabled or otherwise cease to be employees of CSMC
for whatever reason,  the Senior Vice President for Academic Affairs of CSMC (or
his or her  functional  equivalent  at  CSMC)  (the  "Gatekeeper").  Subject  to
Sections  2.1(c),  2.4 and 3.3 hereof,  the Gatekeeper shall not grant access to
the Technical  Information or any Future  Technical  Information in the Field of
Use to any person at CSMC  except as provided in this  Section  2.6,  and CSMC's
sole  responsibility  with  respect to  requests  for the grant of access to the
Technical Information or any Future Technical Information in the Field of Use by
any person at CSMC shall be to refer all such requests to the Gatekeeper.

            (B)  CONDITIONS  OF  ACCESS  TO  THE  TECHNICAL  INFORMATION.  As  a
condition  to  any  use  of  the  Technical   Information  or  Future  Technical
Information  by,  and any grant of access to the  Technical  Information  or any
Future  Technical  Information  to, any  person at CSMC  within the Field of Use
during the term of this  Agreement,  such person shall be required to (i) obtain
the prior  written  consent of the  Gatekeeper to obtain the use of or access to
the Technical  Information or Future Technical  Information  within the Field of
Use, and (ii) after obtaining the Gatekeeper's prior written consent,  execute a
material  transfer  agreement (to be obtained from the  Gatekeeper)  in the form
customarily  employed for such purpose by CSMC. Such material transfer agreement
shall  identify  Licensee's  rights in such  Technical  Information  and/or such
Future  Technical  Information  and specify the  obligations of the  transferee,
which obligations shall not be less than those of CSMC under this Agreement. The
Gatekeeper  shall then  promptly  provide  the  executed  originals  of all such
material transfer  agreements to CSMC, with an executed copy to Licensee for its
records.

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            (C) SPECIAL  SITUATIONS.  Licensee  shall  obtain the prior  written
consent of CSMC to any proposed transfer of Technical Information (or any Future
Technical  Information) or any proposed  sublicense of any Patent Rights, to any
other  person or entity  for which  special  notice  and for which  commercially
reasonable justification is previously provided by CSMC to Licensee.

      2.7  CONDITIONS  TO  EFFECTIVENESS.   As  a  condition  precedent  to  the
effectiveness of this Agreement,  all of the following documents and instruments
shall have been fully  executed and delivered by each of the parties  hereto and
thereto:  (a) this Agreement,  including applicable Schedules A, B, C and D, (b)
that certain Stock  Purchase  Agreement by and between  Licensee and CSMC in the
form of that attached hereto as Schedule E (the "Stock Purchase Agreement"), (c)
a stock  certificate  or  certificates  in the  name of CSMC for the  Shares  of
Licensee as provided in Section 4.1 hereof, (d) that certain Facilities Lease by
and between  Licensee and CSMC in the form of that attached hereto as Schedule F
(the  "Facilities  Lease"),  (e) that  certain  Equipment  Lease by and  between
Licensee  and  CSMC in the  form of that  attached  hereto  as  Schedule  G (the
"Equipment  Lease"),  and (f) that certain  Employee  Loan-Out  Agreement by and
between Licensee and CSMC in the form of that attached hereto as Schedule H (the
"Loan-Out  Agreement").  For purposes of this  Agreement,  the "Effective  Date"
shall mean, and this Agreement shall become  effective upon, the date upon which
the last of the documents or instruments described in the preceding sentence has
been fully executed and delivered by all of the parties hereto and thereto.

3.    REPRESENTATIONS AND WARRANTIES

      3.1 RIGHTS TO  TECHNOLOGY.  Except for the rights,  if any, of the Funding
Agencies  or the United  States  Government,  CSMC  represents  and  warrants to
Licensee  that,  to the best of its  current  knowledge  (without  investigation
outside of CSMC as to such  representations and warranties) (a) it has the right
to grant the licenses in this Agreement,  (b) it has not granted licenses to the
Patent Rights or Technical  Information  to any other party that would  restrict
the rights granted hereunder except as stated herein, (c) it is the owner of the
Patent Rights and Technical Information,  (d) no other party has any interest in
the  Patent  Rights  or  Technical  Information  and (e)  there  are no  claims,
judgments or  settlements  to be paid by CSMC with respect the Patent  Rights or
Technical  Information  or pending  claims or litigation  relating to the Patent
Rights or Technical  Information.  Except for any  potential or actual rights of
Funding  Agencies or the United  States  Government,  CSMC is not aware that any
additional  rights or licenses  are  necessary  for  Licensee  to  exercise  its
licensed rights granted by CSMC under this Agreement.

                                       9
<PAGE>

      3.2 LIMITED WARRANTY.  CSMC makes no representation or warranty other than
those expressly specified in this Agreement.  Licensee accepts the Patent Rights
and the  Technical  Information  on an "AS-IS"  basis.  CSMC MAKES NO EXPRESS OR
IMPLIED WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR OTHER
ATTRIBUTES OF ANY OF THE PATENT RIGHTS OR TECHNICAL INFORMATION.

      3.3 RIGHTS RETAINED BY FUNDING AGENCIES. Licensee acknowledges that to the
extent that the Patent Rights and Technical  Information  have been developed in
part under one or more funding  agreements  ("Funding  Agreements")  with one or
more  Funding  Agencies,  such  Funding  Agencies  may have  certain  statutory,
non-exclusive rights relative thereto for use for government purposes as well as
regulatory or statutory "march-in rights"  (collectively,  "Statutory  Rights").
Licensee also  acknowledges that to the extent that the Future Patent Rights and
Future Technical  Information may be developed in part under one or more Funding
Agreements  with one or more Funding  Agencies,  such Funding  Agencies may have
certain  Statutory  Rights relative  thereto.  This Agreement is explicitly made
subject to such Statutory  Rights and, to the extent of any conflict between any
such Statutory Rights and this Agreement, such Statutory Rights shall prevail.

4.    CONSIDERATION

      In  consideration of the execution and delivery by CSMC of this Agreement,
Licensee agrees as follows:

      4.1  ISSUANCE OF STOCK.  As of the  Effective  Date,  Licensee  shall have
issued  681,818 shares of the voting  "Junior  Preferred  Stock of Licensee (the
"Shares"). The Shares to be issued to CSMC shall be Junior Preferred Stock, with
the rights,  preferences,  privileges  and  restrictions  set forth in the Stock
Purchase  Agreement and/or in Licensee's  Certificate of Incorporation and other
charter documents  ("Charter  Documents").  Licensee  represents and warrants to
CSMC that,  as of the  Effective  Date,  (a) the total  Shares  issuable to CSMC
hereunder  shall equal twelve  percent  (12%),  in the  aggregate,  of the total
issued  and  outstanding  shares of  Licensee's  capital  stock,  as more  fully
described  in the  capitalization  table  attached as Schedule I, (b) the Shares
shall be  convertible  voting  preferred  stock having the rights,  preferences,
privileges and restrictions as set forth in the Stock Purchase  Agreement and/or
the Charter  Documents),  (c) shall  represent one hundred percent (100%) of the
issued and outstanding  shares of the Junior  Preferred Stock of Licensee),  and
(d) would represent, at the time of issuance, twelve percent (12%) of the issued
and  outstanding  shares  of  Licensee's  common  stock  if it were  convertible
immediately upon Licensee's issuance thereof to CSMC.

      4.2 PAYMENT OF ROYALTIES.  Licensee  shall pay to CSMC certain  royalties,
which shall be determined and paid in accordance with Schedule J hereto. As more
particularly   set  forth  in   Schedule  J  hereto,   Licensee   shall   permit
representatives  of CSMC, upon reasonable prior notice, to audit and inspect its
books and records (including such thereof as shall exist in computer systems and
computer  memories)  in order for CSMC to  determine  that  Licensee  is in full
compliance with its obligations to pay and account for the royalties required by
this Agreement.

                                       10
<PAGE>

      4.3  CONSULTING  GUIDELINES;   SEEKING  RESEARCH  GRANTS.  Notwithstanding
anything  to the  contrary  contained  in CSMC's  "Guidelines  on  Institutional
Acceptance of Equity as Part of Licensing  Transactions",  CSMC expressly agrees
that, at all times during the term of this Agreement,  and subject to compliance
with the "Full Time Faculty Consulting  Guidelines" of CSMC and the terms of any
consulting or similar agreement approved by CSMC, the Inventors (a) may hold one
or  more  management  and/or  consulting  positions  with  Licensee,  (b) may be
appointed  to, and act as members  of, the Board of  Directors  and/or  advisory
boards of  Licensee,  and (c) may be  "loaned-out"  to Licensee  pursuant to the
terms of the Loan-Out Agreement.  In addition,  Licensee  acknowledges that each
Inventor,  in his capacity as an employee of CSMC, may continue to seek research
funding   after  the  Effective   Date  from  Funding   Agencies  and  nonprofit
organizations,  as  appropriate,  in  connection  with the  conduct of the Liver
Studies  Programs and research  programs in liver biology,  pathophysiology  and
therapy,   transplantation  biology  and  minimally-invasive   surgery  at  CSMC
conducted  under the direction or  supervision of the Inventors as the principal
investigators.

      4.4 RIGHT OF FIRST  CONSIDERATION.  With respect to continued  research in
the areas of  bioartificial  liver  devices,  bioartificial  liver  systems  and
associated  technology  related to a bioartificial  human liver ("BAL Area"), if
any, Licensee shall consider CSMC as its external facility of first choice,  for
research  contracts in excess of  Twenty-Five  Thousand  Dollars  ($25,000)  for
research  in the BAL Area  (excluding  therefrom  clinical  trials in which CSMC
would be considered to be an inappropriate choice by reason of its relationships
with the  Inventors).  Licensee  shall  notify CSMC in writing in each such case
where  Licensee  intends to fund such  external  research in the BAL Area.  Such
written notice shall specify the general criteria upon which Licensee intends to
choose the appropriate facility to conduct the proposed research, and CSMC shall
promptly   provide  such  information  to  Licensee  as  shall  be  relevant  in
demonstrating  its ability to meet such criteria.  Upon the presentation of such
information,  CSMC and Licensee shall negotiate in good faith the proposed terms
of a research  agreement,  to be consummated  within  forty-five (45) days after
receipt by CSMC from Licensee of a detailed written  description of the research
to be conducted.

      CSMC  acknowledges  and  agrees  that the  Shares,  royalties,  and  other
obligations of Licensee under this  Agreement  constitute  fair market value for
the  rights  granted to  Licensee  under this  Agreement  based on  arms'-length
negotiations with Licensee and an independent  evaluation made by CSMC's outside
expert(s).

                                       11
<PAGE>

5.    PATENT RIGHTS

      5.1 PROSECUTION.  Commencing on the Effective Date, Licensee shall assume,
in coordination with CSMC, full responsibility for the application, maintenance,
reexamination,  reissue,  opposition and  prosecution of any kind  (collectively
"Prosecution")  relating to the Patent Rights in the Territory,  including,  but
not limited to, payment of all costs, fees and expenses related thereto. Subject
to the  approval of CSMC (which  approval  shall not be  unreasonably  withheld,
delayed or  conditioned),  Licensee  shall have the right to select counsel with
respect to the  responsibility  assumed by Licensee  in this  Section  5.1,  and
Licensee  shall  diligently  pursue the  Prosecution of the Patent Rights to the
benefit of CSMC. For all purposes of the patent  Prosecution,  CSMC shall be the
named "client" of such patent  counsel.  Each party shall provide the other with
copies of any and all material or  communications  with the United States Patent
and Trademark Office,  or any foreign patent office,  and CSMC shall be afforded
the opportunity of prior review and comment on such action or paper.

      5.2 ABANDONMENT, DISCLAIMERS, ETC. Licensee shall obtain the prior written
consent of CSMC (which consent shall not be  unreasonably  withheld,  delayed or
conditioned) prior to abandoning,  disclaiming,  withdrawing, seeking reissue or
allowing  to  lapse  any  material  patent,   patent   application  or  Licensee
Improvements relating to the Patent Rights;  provided,  however, that CSMC shall
not  require  Licensee  to  maintain  any  patent or patent  application  in any
jurisdiction  where such  maintenance  would not be  commercially  reasonable or
economically  feasible;  and, provided further,  that any failure by Licensee to
obtain such prior written consent shall not be deemed a breach of this Agreement
if Licensee has otherwise  complied with the following notice  requirements.  In
the event that Licensee shall elect to abandon the Prosecution or maintenance of
any patent or patent application  included in the Patent Rights,  Licensee shall
notify CSMC of such  election at least  forty-five  (45) days before a final due
date which would result in abandonment or bar of  patentability of the patent or
patent  application.  In such event,  CSMC may, at its sole option and  expense,
continue  Prosecution  or  maintenance  of the  patent  application  or  patent.
Licensee  further  agrees  that  it  shall  not  file  any  continuation-in-part
application  relating to the Patent Rights unless the  additional  disclosure or
material to be included in the continuation-in-part  application is necessary or
appropriate  to  support  the  patentability  of a  claim  recited  in a  parent
application on which the  continuation-in-part  application  is based.  Prior to
filing any continuation-in-part application, Licensee shall consult with CSMC to
discuss the need for filing such an  application.  If CSMC shall  disagree  with
Licensee's  conclusion  that such a  continuation-in-part  application is either
necessary or  appropriate  to support the  patentability  of a claim  recited or
capable of being  recited  in a patent  application,  then the  matter  shall be
submitted for resolution to independent  patent counsel  mutually agreed upon by
the parties,  who will determine whether a  continuation-in-part  application is
necessary or appropriate in accordance  with this Section 5.2. Any decision made
by such  independent  patent  counsel  shall be  conclusive  and  binding on the
parties hereto.

      5.3  EXPENSES.   Licensee  shall  pay  all  expenses  resulting  from  its
obligations  in Section 5.1 hereof.  CSMC shall exercise  reasonable  efforts to
cause the  Inventors  (to the extent they are  available  and on CSMC's staff as
employees) to cooperate  fully with  Licensee  with respect to the  Prosecution,
maintenance  and protection of the Patent  Rights,  and CSMC shall be reimbursed
for all reasonable out-of-pocket expenses as such expenses are incurred.

                                       12
<PAGE>

6.    TERM AND TERMINATION

      6.1 TERM. Unless earlier terminated as provided in Section 6.2 hereof, the
term of this Agreement shall commence on the Effective Date and shall expire, on
a  country-by-country  basis,  on the date upon  which the last to expire of the
patents covering the Patent Rights shall expire.  Upon expiration of the term of
this Agreement,  Licensee shall have a fully paid-up,  royalty-free,  perpetual,
nonexclusive license to use the Technical Information.

      6.2 TERMINATION.  Except as provided by Section 6.3 hereof, this Agreement
shall terminate upon the earliest to occur of the following:

            (A)  Automatically  if  Licensee  shall  enter  into  a  liquidating
bankruptcy, be adjudged insolvent, liquidate, dissolve and/or if the business of
Licensee  shall be placed  in the hands of a  receiver,  assignee,  or  trustee,
whether by voluntary act of Licensee or otherwise;  provided,  however,  that if
any such  action is  involuntary,  termination  shall not take place  unless the
action is not reversed within sixty (60) days. Further, Licensee shall give CSMC
at least  forty-five (45) days' prior written notice before  Licensee  initiates
any  bankruptcy  proceeding,  and CSMC  shall have the right to  terminate  this
Agreement immediately upon receipt of such notice;

            (B) Upon thirty (30) days' written  notice from CSMC if, within such
thirty (30) day  period,  Licensee  shall fail to pay fully any royalty  payment
required by Section 4.3 hereof or Schedule J hereto;

            (C) Upon ninety (90) days' written  notice from CSMC if, within such
ninety (90) day period,  Licensee 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  Licensee may avoid such  termination  if, before the end of such
90-day period, such breach or default has been cured by Licensee;

            (D) Upon ninety (90) days'  written  notice from Licensee if, within
such ninety (90) day period, CSMC 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 CSMC may avoid such termination if, before the end of such 90-day
period, such breach or default has been cured by CSMC;

            (E) Upon the mutual  written  agreement of the parties  hereto (such
termination to be effective as of the date mutually  agreed upon in such written
agreement); or

                                       13
<PAGE>

            (F) As to the entire Agreement, at Licensee's sole discretion,  upon
sixty (60) days' written notice from Licensee.

      6.3 OBLIGATIONS UPON  TERMINATION.  Upon any termination of this Agreement
pursuant to Section 6.2 hereof, nothing herein shall be construed to release any
party from any liability for any obligation  incurred through the effective date
of termination (e.g., confidentiality, reimbursement of patent expenses incurred
prior to such  date,  etc.) or for any  breach  of this  Agreement  prior to the
effective date of such  termination.  Licensee may, for a period of one (1) year
after  the  effective  date of such  termination,  sell  all  tangible  Products
customarily  classified  as  "inventory"  that  it has on  hand  at the  date of
termination, subject to payment by Licensee to CSMC of the applicable royalty or
royalties, as set forth in Schedule J.

      6.4  EFFECT  OF  TERMINATION.  In the  event  of any  termination  of this
Agreement  pursuant to Section 6.2 hereof,  where such  termination has not been
caused by any action or inaction on the part of any  sublicensee  of Licensee or
by any breach by such  sublicensee of its obligations  under its sublicense from
Licensee,  such termination of this Agreement shall be without  prejudice to the
rights of each  non-breaching  sublicensee  of Licensee  and each  non-breaching
sublicensee shall be deemed to be a licensee of CSMC thereunder,  and CSMC shall
be entitled to all rights,  but shall not be subject to any  obligations  (other
than the grant of license and  appurtenant  obligations  under this Agreement to
the extent provided for in such sublicense) of Licensee thereunder.

      6.5 RIGHT TO INSTITUTE  LEGAL ACTIONS.  Notwithstanding  the provisions of
Section 6.2 hereof, CSMC, on the one hand, and Licensee,  on the other hand, may
institute  any other legal action or pursue any other  remedy  against the other
party permitted by applicable law if the other party does not substantially cure
any breach or default of any material obligation as provided herein.

      6.6  REVERSION  OF RIGHTS.  Notwithstanding  anything to the  contrary set
forth  herein  (including,   but  not  limited  to,  Section  5  hereof),   full
responsibility for Prosecution of the Patent Rights shall, at the option of CSMC
(exercisable in its sole and absolute discretion),  and at its sole expense from
the date of reversion, revert to CSMC upon any termination of this Agreement.

                                       14

<PAGE>

7.    INFRINGEMENT BY THIRD PARTIES

      7.1  ENFORCEMENT.  Licensee  shall have the first right and the obligation
(as more  particularly  set forth in this Section  7.1) to enforce,  at its sole
expense, any Patent Rights to the extent licensed hereunder against infringement
by third  parties  and shall  notify  CSMC in  writing  in  advance  of all such
enforcement  efforts.  Licensee  shall have the  obligation  to make the initial
assessment of any actual or alleged infringement by a third party, to the extent
such actual or alleged  infringement  is known to Licensee,  and Licensee  shall
promptly inform CSMC of the results of such initial assessment.  Upon Licensee's
undertaking  to pay all  expenditures  reasonably  incurred by CSMC,  CSMC shall
reasonably cooperate in any such enforcement and, as necessary,  join as a party
therein.  Licensee shall reimburse CSMC for all expenses,  including  reasonable
attorneys' fees, incurred in connection with any such enforcement.  In the event
that  Licensee  does not file suit against or commence  and conclude  settlement
negotiations  with a  substantial  infringer of Patent Rights within ninety (90)
days of receipt of a written demand from CSMC that Licensee bring suit, then the
parties  will  consult  with one  another  in an effort to  determine  whether a
reasonably prudent licensee would institute  litigation to enforce the patent in
question in light of all relevant business and economic factors (including,  but
not limited to, the projected cost of such litigation, the likelihood of success
on the merits,  the  probable  amount of any damage  award,  the  prospects  for
satisfaction of any judgment against the alleged  infringer,  the possibility of
counterclaims  against the parties  hereto,  the impact of any possible  adverse
outcome on  Licensee  and the effect any  publicity  might have on the  parties'
respective  reputations and goodwill).  If, after such process, it is determined
that a suit  should  be  filed  and  Licensee  does not  file  suit or  commence
settlement  negotiations  forthwith against the infringer,  then CSMC shall have
the right, at its own expense,  to enforce any Patent Rights licensed  hereunder
on behalf  of  itself  and  Licensee,  and  Licensee's  failure  to pursue  such
enforcement shall not be deemed a breach of this Agreement. Any amount recovered
in any such action or suit, whether by judgment or settlement,  shall be paid to
or  retained  entirely by  whichever  party  brought  the action,  or where both
parties  participate in such action or suit, all such amounts shall be allocated
to each party in the ratio of damages incurred,  after first paying each party's
out-of-pocket expenses, including reasonable attorneys' fees.

      7.2 DEFENSE OF PATENT RIGHTS.  In the event that any Patent Rights are the
subject of a legal action seeking  declaratory relief or of any reexamination or
opposition proceeding instituted by a third party, the parties agree to promptly
consult with one another  concerning the defense of such actions or proceedings.
If the parties agree that such defense should be undertaken, then Licensee shall
bear the expenses,  including attorneys' fees,  associated with such defense and
in any recoupment of expenses. If the parties disagree,  then the party desiring
to defend the action or  proceeding  may proceed with such defense and will bear
its own expenses, and be entitled to all sums recovered.

                                       15
<PAGE>

8.    INDEMNIFICATION

      8.1 INDEMNIFICATION BY LICENSEE.  Subject to Section 8.2 hereof,  Licensee
shall  hold  harmless,  defend  and  indemnify  CSMC and  each of its  officers,
directors,  employees  (including  the  Inventors),  agents and  sponsors of the
research (except Licensee) (each, an "Indemnified Party", and collectively,  the
"Indemnified  Parties")  from and against any and all claims,  damages,  losses,
costs and expenses (including  reasonable attorneys' fees and expenses and costs
of investigation)  (collectively,  "Losses")  suffered or incurred by any of the
Indemnified  Parties in any action,  litigation,  arbitration  or dispute of any
kind  ("Action")  arising or resulting  from any  negligence  or willful acts or
omissions on the part of Licensee,  its Affiliates or permitted  sublicensees in
connection with (a) their use the Patent Rights or Technical  Information and/or
(b) the exercise of their rights  hereunder or under any sublicense,  including,
but not  limited to (i) the  preclinical  development  and  clinical  testing of
Products, and (ii) the manufacture,  sale, use, marketing,  or other disposition
of Products developed,  manufactured, sold, marketed, used or otherwise disposed
of  under  this  Agreement;  provided,  however,  that  Licensee  shall  have no
obligation  under this  Section 8.1 with  respect to any Losses in any Action to
the extent such Losses are caused by the gross negligence or willful  misconduct
of an Indemnified  Party. As part of its obligations  hereunder,  Licensee shall
defend any Action brought against any of the Indemnified Parties with counsel of
its own choosing and  reasonably  acceptable  to CSMC,  and neither CSMC nor any
other  Indemnified  Party  shall  enter into any  settlement  of any such Action
without first  obtaining  prior  approval of Licensee.  Should CSMC or any other
Indemnified  Party not afford  Licensee the right to defend any such Action,  or
should CSMC or any other  Indemnified  Party not obtain the approval of Licensee
to such  settlement,  Licensee shall have no obligation to indemnify CSMC or any
other Indemnified Party hereunder. Should Licensee fail to provide a defense for
the  Indemnified  Parties as required  hereunder,  then Licensee shall reimburse
CSMC for its out-of-pocket  expenses (including  reasonable  attorneys' fees and
expenses  and  costs of  investigation)  which are  incurred  as a result of any
investigation,   defense  or  settlement   relating  to  the  foregoing,   which
reimbursement  shall  be made to CSMC  upon  receipt  by  Licensee  of  invoices
reflecting in reasonable detail such expenses  incurred by CSMC.  Licensee shall
obtain and maintain insurance policies (including products liability and general
liability  policies at such time as is  appropriate)  which are  reasonable  and
necessary  to cover  its  activities  and to  comply  with  the  indemnification
obligations set forth above.  Such insurance  policies shall (A) name CSMC as an
additional insured party, (B) provide minimum amounts in coverage per occurrence
that are standard and customary for similarly situated companies in the industry
in which  Licensee  conducts  business,  and (C)  provide  for a thirty (30) day
notice to CSMC of any material  change in such policies.  Upon initiation of any
human  clinical  studies  using a  therapeutic  molecule  covered  by the Patent
Rights,  Licensee shall have first increased its insurance coverage to a minimum
amount in the aggregate  that is standard and  customary for similarly  situated
companies in the industry in which Licensee  conducts  business.  Licensee shall
provide  CSMC  with  Certificates  of  Insurance  upon  request,   and  annually
thereafter,  evidencing  the policies  required in accordance  with this Section
8.1.

      8.2 NOTICE OF CLAIM. CSMC shall promptly notify Licensee in writing of any
claim or Action or material threat thereof brought against any Indemnified Party
in respect of which  indemnification for Losses may be sought and, to the extent
allowed by law, shall reasonably  cooperate with and provide full information to
Licensee in defending or settling any such claim or Action. No settlement of any
claim,  Action or threat thereof  received by CSMC and for which CSMC intends to
seek  indemnification  (for itself or on behalf of any other Indemnified  Party)
for Losses  shall be made without the prior joint  written  approval of Licensee
and CSMC.

                                       16
<PAGE>

9.    USE OF NAMES

      Licensee  shall  not,  unless  as  required  by any  law  or  governmental
regulation,  use the name of CSMC, and/or any of its trademarks,  service marks,
trade names or fictitious  business names without  express prior written consent
of the Vice President for Public Relations and Marketing of CSMC. Further, prior
to any  reference  by  Licensee  to the  names or  marks of CSMC in any  manner,
Licensee shall provide CSMC with a writing  reflecting the proposed reference so
that CSMC can review the reference  within a reasonable  period of time prior to
the proposed  use thereof by  Licensee.  This  limitation  includes,  but is not
limited to, use by  Licensee in any  regulatory  filing,  advertising,  offering
circular,  prospectus,  sales  presentation,  news release or trade publication.
Subject to  compliance  by Licensee  with the  foregoing,  which shall be deemed
conditions  precedent to any use of CSMC's name or marks by  Licensee,  Licensee
shall  ensure that the name of CSMC is used as  scientifically  or  academically
appropriate  in the "byline" of any article,  abstract,  manuscript or any other
publication related to the subject matter hereof.

10.   CONFIDENTIAL INFORMATION

      10.1  NON-DISCLOSURE.  The  parties  hereto  shall  keep the terms of this
Agreement and all business and scientific  discussions  relating to the business
of the parties strictly  confidential.  All patient information to which a party
is given  access by the other  party shall be subject to the  provisions  of the
Confidentiality of Medical  Information Act (Cal. Civ. Code ss.ss.56,  et seq.).
It may,  from time to time, be necessary  for the parties,  in  connection  with
performance  under  this  Agreement,   to  disclose   Confidential   Information
(including  know-how) to each other.  The Receiving Party (as defined in Section
1.2 hereof) shall keep in strictest  confidence the Confidential  Information of
the Disclosing  Party (as defined in Section 1.2 hereof),  using the standard of
care it normally uses for information of like character,  and shall not disclose
the  Confidential  Information  to any third party or use it except as expressly
authorized by the prior written consent of the Disclosing  Party or as otherwise
permitted by this Agreement;  provided, however, that Licensee may disclose, and
will not be  required  to  maintain  as  confidential,  the  Patent  Rights  and
Technical  Information  in  connection  with the exercise of its license  rights
hereunder.  The  Receiving  Party's  obligation  hereunder  shall  not  apply to
Confidential Information that the Receiving Party can show:

            (A) Is or later becomes part of the public  domain  through no fault
or neglect of the Receiving Party;

            (B)  Is  received  in  good  faith  from a  third  party  having  no
obligations  of  confidentiality  to the  Disclosing  Party,  provided  that the
Receiving Party complies with any restrictions imposed by the third party;

            (C) Is independently developed without use of the Disclosing Party's
Confidential Information by the Receiving Party; or

            (D) Is required by law or  regulation  to be  disclosed  (including,
without  limitation,  in  connection  with FDA  filings,  filings  with  another
government  agency or as required  under the  California  Public  Records  Act),
provided that the Receiving Party uses reasonable efforts to restrict disclosure
and to obtain  confidential  treatment  and gives the  Disclosing  Party as much
advance notice as reasonably possible.

                                       17
<PAGE>

      Except as provided in Sections  2.1(c)(i),  2.1(c)(ii) and 2.6, CSMC shall
keep  confidential  and not  disclose  to third  parties  the Patent  Rights and
Technical Information.

      10.2  LIMITS  ON  PERMITTED  DISCLOSURES.   Each  party  agrees  that  any
disclosure or distribution of the other party's Confidential  Information within
its own organization shall be made only as is reasonably  necessary to carry out
the  intent of this  Agreement.  The  parties  further  agree  that all of their
respective officers, employees, agents, representatives or approved sublicensees
to whom any  Confidential  Information  is disclosed or  distributed  shall have
agreed to maintain  its  confidentiality,  upon terms no less  restrictive  than
those set forth in this  Agreement.  In such event,  the  Receiving  Party shall
identify with reasonable  particularity,  upon request by the Disclosing  Party,
each person  within the  Receiving  Party's  organization  to whom the Receiving
Party has disclosed or distributed Confidential Information.

      10.3 LEGALLY  REQUIRED  DISCLOSURES.  If a subpoena or other legal process
concerning  Confidential  Information is served upon any party hereto pertaining
to the subject  matter  hereof,  the party  served  shall notify the other party
immediately, the other party shall cooperate with the party served, at the other
party's expense, in any effort to contest the validity of such subpoena or other
legal process.  This Section 10.3 shall not be construed in any way to limit any
party's  ability to satisfy any  disclosure of its  relationship  with the other
party required by any governmental authority.

      10.4 PATENT  RIGHTS AS  CONFIDENTIAL  INFORMATION.  The Patent  Rights are
understood by Licensee to be the Confidential  Information of CSMC to the extent
"unpublished"  as such term is construed under the United States Patent Laws. As
such, Licensee's and CSMC's confidentiality  obligations hereunder automatically
extend  to  any  and  all  Technical  Information  and  to any  and  all  patent
applications  of CSMC  relating  to any Patent  Rights,  Technical  Information,
Future  Patent  Rights  and  Future  Technical  Information  and to any  and all
communications  with the United States  Patent  Office,  and any foreign  patent
office  relating to any Patent  Rights,  Technical  Information,  Future  Patent
Rights or Future Technical Information.

      10.5 RETURN OF CONFIDENTIAL  INFORMATION.  In the event of any termination
of this Agreement,  the Receiving  Party shall promptly return all  Confidential
Information  and any  copies  made  thereof  previously  made  available  to the
Receiving Party by the Disclosing Party.

      10.6  REMEDIES.  Both  parties  acknowledge  and  agree  that it  would be
difficult  to measure  damages for breach by either party of the  covenants  set
forth in this  Section  10,  and that  injury  from  any  such  breach  would be
incalculable, and that money damages would therefore be an inadequate remedy for
any such breach. Accordingly, either party shall be entitled, in addition to all
other remedies available hereunder or under law or equity, to injunctive or such
other equitable relief as a court may deem appropriate to restrain or remedy any
breach of such covenants.

                                       18
<PAGE>

11.   INFORMATION EXCHANGE

      CSMC shall  promptly  disclose  (or cause the  Inventors  to  disclose) to
Licensee the Patent Rights and Technical  Information.  In addition, the parties
shall  cooperate  to  exchange  such  non-confidential  information  as  may  be
appropriate   and   necessary   to   facilitate   Licensee's   development   and
commercialization  of  Products  incorporating  any Patent  Rights or  Technical
Information.

12.   PATENT MARKING

      In the event any  Product  is the  subject  of a patent  under the  Patent
Rights,  Licensee shall mark all products made, sold or otherwise disposed of by
or on behalf of it or any of its sublicensees with the word "Patented"  followed
by the number of the  licensed  patent.  In such case,  Licensee  shall mark any
Product  made using a process or method  covered by any such Patent  Rights with
the number of each such patent.

13.   MISCELLANEOUS

      13.1 NOTICES. Any notice, request,  instruction or other document required
by this Agreement shall be in writing and shall be deemed to have been given (a)
if mailed  with the United  States  Postal  Service  by  prepaid,  first  class,
certified mail, return receipt requested, at the time of receipt by the intended
recipient,  (b) if sent by Federal Express(R),  Airborne(R),  or other overnight
carrier,  signature of delivery required, at the time of receipt by the intended
recipient,  or (c) if sent by  facsimile  transmission,  when so sent  and  when
receipt has been  acknowledged  by appropriate  telephone or facsimile  receipt,
addressed as follows:

                  In the case of Inventors to:

                  c/o Achilles A. Demetriou, M.D., Ph.D.
                  2331 Buckingham Lane
                  Los Angeles, California  90077
                  Fax:     (310) 471-0765

                  c/o Jacek Rozga, M.D., Ph.D.
                  986 Blue Mountain Circle
                  Westlake Village, California  91362
                  Fax:     (310) 471-0765

                  or in the case of CSMC to:

                  Cedars Sinai Medical Center
                  Room 2009, North Tower
                  8700 Beverly Boulevard
                  Los Angeles, California  90048-1865

                                       19
<PAGE>

                  Attention:  Senior Vice President for Academic Affairs
                  Fax      (310) 423-0119

                  or in the case of Licensee to:

                  Arbios Technologies, Inc.
                  2331 Buckingham Lane
                  Los Angeles, California  90077
                  Attention:  Jacek Rozga, M.D., Ph.D., President
                  Fax:     (310) 471-0765

or to such other address or to such other person(s) as may be given from time to
time under the terms of this Section 13.1.

      13.2  COMPLIANCE  WITH LAWS.  Each party shall comply with all  applicable
federal,  state and local laws and regulations in connection with its activities
pursuant to this Agreement.

      13.3  GOVERNING  LAW.  This  Agreement  shall be construed and enforced in
accordance  with the laws of the United  States of  America  and of the State of
California,  irrespective of choice of laws  provisions.  The parties agree that
Los Angeles,  California shall be the situs of any legal proceeding  arising out
of or relating to this Agreement.

      13.4 WAIVER.  Failure of any party to enforce a right under this Agreement
shall not act as a waiver of that  right or the  ability  to assert  that  right
relative to the particular situation involved.

      13.5 ENFORCEABILITY.  If any provision of this Agreement shall be found by
a court of competent jurisdiction to be void, invalid or unenforceable, the same
shall  be  reformed  to  comply  with  applicable  law  or  stricken  if  not so
conformable, so as not to affect the validity or enforceability of the remainder
of this Agreement.

      13.6 MODIFICATION.  No change,  modification,  or addition or amendment to
this Agreement,  or waiver of any term or condition of this Agreement,  is valid
or enforceable unless in writing and signed and dated by the authorized officers
of the parties to this Agreement.

      13.7 ENTIRE  AGREEMENT.  This Agreement,  the Schedules  hereto (which are
incorporated  herein by this reference as if fully set forth herein),  the Stock
Purchase  Agreement,  the Facilities Lease, the Equipment Lease and the Loan-Out
Agreement constitute the entire agreements among the parties with respect to the
subject  matter  hereof and  thereof,  and replace and  supersede as of the date
hereof and thereof any and all prior agreements and understandings, whether oral
or  written,  between  the parties  with  respect to the subject  matter of such
agreements.

                                       20
<PAGE>

      13.8 SUCCESSORS. Except as otherwise expressly provided in this Agreement,
this  Agreement  shall  be  binding  upon,  inures  to the  benefit  of,  and is
enforceable by, the parties and their respective heirs,  legal  representatives,
successors and permitted assigns.

      13.9 CONSTRUCTION.  This Agreement has been prepared, examined, negotiated
and revised by each party and their  respective  attorneys,  and no  implication
shall be drawn and no  provision  shall be  construed  against any party to this
Agreement by virtue of the purported  identity of the drafter of this  Agreement
or any portion thereof.

      13.10 COUNTERPARTS.  This Agreement may be executed  simultaneously in one
or  more  counterparts,  each  of  which  shall  constitute  one  and  the  same
instrument. This Agreement may be executed by facsimile.

      13.11  ATTORNEYS'  FEES.  In the  event of any  action at law or in equity
between  the  parties  hereto  to  enforce  any of the  provisions  hereof,  the
unsuccessful  party to such  litigation  shall pay to the  successful  party all
reasonable costs and expenses,  including  reasonable  attorneys' fees, incurred
therein by such successful  party;  and if such successful party shall recover a
judgment in any such action or proceeding,  such reasonable costs,  expenses and
attorneys' fees may be included in and as part of such judgment.

      13.12 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 (a)
Licensee shall have the right to assign its rights and delegate its  obligations
hereunder to (i) an Acceptable  Sublicensee,  (ii) in connection  with a merger,
consolidation or reorganization  of Licensee,  (iii) to an Affiliate of Licensee
or (iv) to a purchaser of all or  substantially  all of  Licensee's  assets that
relate to the  subject  matter of this  Agreement;  and (b) CSMC  shall have the
right to assign its rights and delegate its obligations hereunder as part of any
reorganization or bond financing. As an express condition of any such assignment
or delegation by Licensee, the assignee shall be required to agree in writing to
be bound by all of the terms and conditions of this Agreement.

      13.13  FURTHER  ASSURANCES.  At any time and from  time to time  after the
Effective Date, each party shall do, execute, acknowledge and deliver, and cause
to be  done,  executed,  acknowledged  or  delivered,  all  such  further  acts,
transfers, conveyances,  assignments or assurances as may be reasonably required
to consummate the transactions contemplated by this Agreement.

      13.14  SURVIVAL.  The following  sections  shall survive any expiration or
earlier  termination of this  Agreement:  Section  2.1(c)  (retention of certain
non-exclusive rights by CSMC), Section 8 ("Indemnification"), Section 9 ("Use of
Name") and Section 10 ("Confidentiality").  The provisions set forth in Schedule
J also shall survive any expiration or earlier termination of this Agreement, to
the extent set forth therein.

                                       21
<PAGE>

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

                                 "LICENSEE":

                                 ARBIOS TECHNOLOGIES, INC.,
                                 A DELAWARE CORPORATION

                                 By:
                                     -----------------------------------------
                                     Kristin P. Demetriou, Secretary

                                 Date:  June __, 2001

                                 "CSMC":

                                 CEDARS SINAI MEDICAL CENTER, A CALIFORNIA
                                 NONPROFIT PUBLIC BENEFIT CORPORATION

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

                                 Date:  June __, 2001

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

                                     Date:  June __, 2001

                                       22
<PAGE>

ACKNOWLEDGED AND AGREED:

"INVENTORS":

/s/ Achilles A. Demetriou, M.D., Ph.D.
-----------------------------------------
Achilles A. Demetriou, M.D., Ph.D.

/s/ Jacek Rozga, M.D., Ph.D.
-----------------------------------------
Jacek Rozga, M.D., Ph.D.

                                       23EXHIBIT 10.7

                                LICENSE AGREEMENT

      THIS  AGREEMENT,  dated  December 26, 2001, is entered into by and between
Spectrum  Laboratories,  Inc., a Delaware corporation  ("Spectrum"),  and Arbios
Technologies, Inc., a Delaware corporation ("Arbios").

                                    RECITALS

      A.    Spectrum owns or is entitled to grant license rights with respect to
            Proprietary Rights relating to hollow fiber bioreactors (e.g.,
            single and dual hollow fiber modules, modules with
            fiber-within-a-fiber geometry, and semipermeable membranes with
            anti-thrombotic and anti-fouling surface properties).

      B.    Arbios desires to obtain an exclusive, worldwide license for use of
            Spectrum's hollow fiber-in-fiber technology, solely for applications
            in Arbios's liver assist devices; and

      C.    Arbios and Spectrum also desire to negotiate in good faith licenses
            for hollow fiber-in-fiber technology for use in cell-based
            applications in Arbios's Field of Use, on a case-by-case basis, and
            to exploit such proprietary rights of Spectrum, in accordance with
            the terms of this Agreement.

                                    AGREEMENT

      NOW, THEREFORE, the Parties agree as follows:

SECTION 1         DEFINITIONS

      All capitalized terms, unless otherwise defined herein, have the
definitions as set forth below:

      "AFFILIATE" means any corporation or other business entity which controls,
is controlled by or is under common control with a Party to this Agreement,
without regard to equity ownership. For purposes hereof, the terms "control" and
"controls" mean the possession, direct or indirect, of the power to direct or
cause the direction of the management and policies of a corporation, person or
entity, whether through the ownership of voting securities, by contract or
otherwise.

      "ARBIOS IMPROVEMENT" means any Improvement to the Spectrum Technology that
is conceived or reduced to practice by Arbios, its employees or any other Person
exercising rights through Arbios under this Agreement.

      "CONFIDENTIAL INFORMATION" means the information that is confidential or
proprietary to a Party or that the Party is otherwise obligated to keep
confidential (e.g., pursuant to a contractual or other obligation owing to a
Third Party), including, but not limited to, the Licensed Patents, the Spectrum
Technology, the Arbios Improvements and any Proprietary Rights or Documentation
related thereto. Confidential Information does not include any information that
(a) was known to the Recipient prior to receiving the same from the Discloser in
connection with this Agreement; (b) is independently developed by the Recipient;
(c) is acquired by the Recipient from another source without restriction as to
Use or Distribution; or (d) is or becomes publicly available or part of the
public domain through no fault or action of the Recipient.

                                       1
<PAGE>

      "CONFIDENTIAL MATERIAL" means any document, diskette, tape, writing,
prototype, or other tangible item (whether handwritten, printed, coded,
magnetic, electronic, or other form or media) which contains, displays,
embodies, or manifests any Confidential Information.

      "DEVELOP" means to engineer, prepare, write, invent, create, reduce to
practice, conceive, discover, formulate, design, test, or otherwise develop.

      "DISCLOSER" means a Party that discloses Confidential Information to the
other Party.

      "DISTRIBUTE" means to market, sell, have sold, offer for sale, rent,
lease, license, sublicense, assign, transfer, allow to use, import, export,
disclose, publish, provide, distribute or otherwise dispose of.

      "DOCUMENTATION" means any design, drawing, plan, schematic, specification,
notes, notebook, photograph or other documentation (whether in handwritten,
printed, coded, magnetic, electronic or other form or media).

      "EFFECTIVE DATE" means the date upon which the last of the following
documents is executed and delivered by all of the Parties hereto and thereto (a)
this Agreement; (b) the Stock Purchase Agreement; (c) the Research Agreement;
and (d) the Manufacturing Agreement.

      "FIELD OF USE" means the fields of(a) artificial blood therapy; and (b)
bioprocessing and therapeutic devices. The Field of Use shall include, but is
not limited to, liver assist systems, artificial gut, bioartificial kidney,
hemodialysis and/or hemofiltration devices, and devices producing biologically
active compounds, including, but not limited to, monoclonal antibodies,
hormones, peptides and vaccines.

      "IMPROVEMENTS" means any and all processes, uses, designs, applications,
methods and compositions of matter, indications, improvements, enhancements and
modifications.

      "LICENSE" means the license rights granted under Section 2.1.

      "LICENSED PATENTS" means the patents and/or patent applications as set
forth on the attached Exhibit A, as may be amended from time to time.

      "LICENSED PRODUCT" means any products or services that utilize, are
derived from, are made from or incorporate, in any manner whatsoever, any of the
Spectrum Rights.

                                       2
<PAGE>

      "MAKE" means manufacture, fabricate, assemble, produce, reproduce, make or
have made.

      "MANUFACTURING AGREEMENT" means the Manufacturing and Supply Agreement
between the Parties that is executed substantially contemporaneously with this
Agreement.

      "PARTY" means Spectrum and/or Arbios, as the context requires.

      "PATENT RIGHTS" means any existing and future rights of Spectrum in any
patents or patent applications, including, but not limited to the Licensed
Patents, together with any foreign counterparts, divisions, continuations,
continuations-in-part, and any patents or reissued patents thereon.

      "PERSON" means any individual, corporation, limited liability company,
partnership, trust, association, governmental authority, or other entity.

      "PROPRIETARY RIGHT" means any patent, copyright, trade secret, or other
intellectual property right (including, but not limited to, any moral right)
under the laws of any jurisdiction, whether registered, unregistered, statutory,
common law, or otherwise (including, but not limited to, any rights to sue,
recover damages or obtain other relief for any past or future infringement, and
any rights under any application, assignment, license, legal opinion, or
search); provided, however, that the term "Proprietary Right" does not include
any trademark, service mark or trade name.

      "RECIPIENT" means a Party that receives any Confidential Information from
the other Party.

      "RESEARCH AGREEMENT" means the Research and Development Agreement between
the Parties that is executed substantially contemporaneously with this
Agreement.

      "RESEARCH PROGRAM" means the research program as set forth in the Research
Agreement.

      "SPECTRUM RIGHTS" means all current and future Proprietary Rights of
Spectrum, including, but not limited to, the Patent Rights and all Proprietary
Rights in the Spectrum Technology.

      "SPECTRUM TECHNOLOGY" means any existing or future Technology owned,
licensed or otherwise possessed or known to Spectrum or any of Spectrum's
Affiliates.

      "STOCK PURCHASE AGREEMENT" means an agreement providing for the issuance
of certain shares of Arbios Common Stock to Spectrum that is executed by the
Parties substantially contemporaneously with this Agreement.

      "TECHNOLOGY" means all inventions and discoveries, whether or not
patentable, trade secrets, data, information, copyrights and know-how,
including, but not limited to, biological and chemical materials, technical and
nontechnical data, the results of tests, assays, methods, unpublished patent
applications, unpatented technology and preclinical and clinical information.

                                       3
<PAGE>

      "THIRD PARTY" means any Person that is not a Party.

      "THIRD PARTY RESTRICTION" means any restriction, limitation or other
requirement that is applicable to any Third Party Technology pursuant to any
term, condition or other provision by which such Third Party Technology was
acquired by Spectrum from a Third Party.

      "THIRD PARTY TECHNOLOGY" means any Technology that is acquired by Spectrum
from a Third Party (e.g., by license or otherwise).

      "UNAUTHORIZED USE" means any Development, Distribution, Making or Use of
the Spectrum Rights not authorized by this Agreement.

      "USE" means to consume, copy, display, duplicate, disclose, employ,
incorporate, manipulate, operate, perform, practice, publish or otherwise use.

SECTION 2         LICENSE

      2.1 LICENSE TO ARBIOS

      Subject to the terms of this Agreement, Spectrum hereby grants to Arbios,
under the Spectrum Rights and solely for use in Arbios's liver assist devices
and exclusive (subject to Section 2.2), worldwide right and license to Develop,
Make, Use, and Distribute (a) Spectrum's fiber-in-fiber hollow fiber Technology
for liver assist devices; (b) any Improvements to Spectrum's fiber-in-fiber
hollow fiber Technology; and (c) Licensed Products using Spectrum's
fiber-in-fiber hollow fiber technology.

      2.2 EXCEPTION TO EXCLUSIVITY

      Spectrum  hereby  reserves under the Spectrum  Rights the  nontransferable
right to Develop,  Make, Use and Distribute the Spectrum Technology in the Field
of Use solely in connection  with the Research  Program.  No rights  outside the
Field of Use (subject to Section 2.1) are  conferred on Arbios  pursuant to this
Agreement.

      2.3 RESERVATION OF RIGHTS

      Subject to the License and the other terms of this Agreement, Spectrum
retains all of its right, title and interest to the Spectrum Rights including,
but not limited to, Proprietary Rights in the Spectrum Technology and the Patent
Rights.

      2.4 OWNERSHIP OF IMPROVEMENTS

      Arbios shall own all right, title and interest in and to all:

      (a)   Arbios Improvements and any Proprietary Rights related to such
            Arbios Improvements; and

      (b)   Improvements to the Spectrum Technology conceived or reduced to
            practice by Spectrum or its Affiliates in connection with the
            Research Program or the Manufacturing Agreement, and any Proprietary
            Rights related to such Improvements made in connection with
            fiber-in-fiber liver assist devices on behalf of Arbios and/or other
            cell based applications as negotiated by the parties on a
            case-by-case basis

                                       4
<PAGE>

      2.5 SPECTRUM LICENSE TO IMPROVEMENTS

      Arbios hereby grants to Spectrum a nonexclusive, nontransferable (except
as required by applicable law, rule, regulation, government policy or contract),
fully paid-up right to Use the Arbios Improvements solely in connection with the
Research Program or the Manufacturing Agreement.

      2.6 DISCLOSURE OF SPECTRUM TECHNOLOGY

      Within ninety (90) days after the Effective Date and at the end of each
quarter during the Term, Spectrum shall prepare and submit to Arbios a written
report setting forth in reasonable detail, to the extent not previously
disclosed or delivered to Arbios (a) a description of all applicable existing
Spectrum Technology and any applicable Improvements thereto; (b) any applicable
Proprietary Right claimed by Spectrum in any applicable Spectrum Technology; (c)
any applicable Documentation of any applicable Spectrum Technology or
Proprietary Right claimed by Spectrum in any applicable Spectrum Technology; and
(d) any applicable claim, potential claim, Third Party Restriction or other
material limitation relating to any applicable Spectrum Technology or
Proprietary Right claimed by Spectrum in any applicable Spectrum Technology.
Upon Arbios' request, Spectrum shall furnish to Arbios a copy of any applicable
Documentation relating to the foregoing and shall allow Arbios to confer, at no
charge, with the inventors and developers of the Spectrum Technology, so long as
they are employees of Spectrum, for such reasonable periods and at such times as
are mutually convenient.

      2.7 RIGHT OF FIRST REFUSAL

      Arbios shall have a right of first refusal (the "Right of First Refusal")
to obtain a license to Make, Use, Develop or Distribute Licensed Products in the
Field of Use other than in connection with liver assist devices, as follows:

      (a)   Prior to granting any proposed license to the Spectrum Technology or
            the Spectrum Rights in the Field of Use (a "Proposed License") to a
            Third Party, Spectrum shall give Arbios a written notice (the
            "Notice") stating:

            (i)   the Third Party's intention to obtain a Proposed License;

            (ii)  the name and address of the Third Party;

            (iii) the nature, scope and duration of the Proposed License; and

            (iv)  all other associated terms and conditions of the Proposed
                  License, including, without limitation, the proposed financial
                  terms of the Proposed License.

                                       5
<PAGE>

      (b)   At any time within thirty (30) days after receipt of the Notice,
            Arbios may elect, by giving written notice to Spectrum, to obtain
            the Proposed License instead of the Third Party on substantially
            comparable terms.

      (c)   If Arbios does not give notice to Spectrum of its intention to
            obtain the Proposed License, then Spectrum may grant the Proposed
            License to such Third Party; provided, that the Proposed License is
            granted within sixty (60) days after the Notice.

      (d)   If the Proposed License is not granted within such period, or if
            Spectrum materially modifies the terms and conditions associated
            with the Proposed License, a new Notice shall again be offered and
            Arbios shall again be offered the Right of First Refusal prior to
            granting such Proposed License.

SECTION 3         PATENT PROCUREMENT AND MAINTENANCE

      3.1 ACTIVITIES

      Arbios shall have the right to select patent counsel and to take such
other actions, at its expense, as are necessary or appropriate to obtain patent
protection with respect to the Licensed Patents (in Spectrum's name) and the
Arbios Improvements (in Arbios' name) in the United States and any other
country. Spectrum shall cooperate with Arbios in procuring, maintaining and
defending such patents and shall cause its employees and agents to execute such
documents and perform such acts as reasonably requested by Arbios in connection
therewith.

      3.2 CONSULTATION

      Arbios shall consult with Spectrum and its counsel concerning the
preparation and prosecution of all patent applications included in the Licensed
Patents and shall provide Spectrum with copies of all material documentation
after receipt from or prior to submission to any governmental agency with
jurisdiction to issue patents, so that Spectrum may make comments with respect
thereto which Arbios shall consider in good faith.

      3.3 ABANDONMENT

      In the event Arbios elects to abandon a patent application included in the
Licensed Patents for a particular country, it shall promptly notify Spectrum.
Thereafter, the patent application may be prosecuted at the sole discretion,
control and expense of Spectrum and shall be removed from the Licensed Patents
licensed hereunder.

SECTION 4         INFRINGEMENT

      4.1 NOTICE

      Each Party shall give the other Party prompt written notice of any
infringement, misappropriation or violation of any of the Spectrum Rights in the
Field of Use or any Proprietary Right in the Arbios Improvements by any Third
Party that may come to such Party's attention during the Term. Any notice under
this section shall include, but not be limited to, a statement of the facts
which are known by the Party giving the notice and which such Party believes
might reasonably serve as a basis for a claim of such infringement,
misappropriation or violation, supported by copies of any pertinent
Documentation within the possession or control of the Party giving the notice.

                                       6
<PAGE>

      4.2 LEGAL ACTION

      Arbios may, but shall not be obligated to, commence and prosecute any
legal action that it deems appropriate against any infringement,
misappropriation or violation of the Licensed Patents or the Arbios
Improvements. If within a reasonable time after a written request from Spectrum
with respect to any infringement, misappropriation or violation of the Licensed
Patents or the Arbios Improvements, Arbios does not commence and thereafter
diligently prosecute any legal action to stop, and recover damages and/or other
relief arising out of, such infringement, misappropriation or violation, then
Spectrum shall have the right, but shall not be obligated, to commence and
prosecute appropriate legal action against any such infringement,
misappropriation or violation. In any such legal action commenced by Arbios
under this section, the following shall apply:

      (a)   Arbios, with Spectrum's written approval (not to be unreasonably
            withheld in connection with applications related to liver assist
            systems), may use Spectrum's name as a plaintiff;

      (b)   Arbios shall give Spectrum written notice of Arbios' intent to
            commence the action a reasonable period in advance of such
            commencement;

      (c)   Spectrum may, at its option and at its expense, participate in any
            such action (e.g., as a Party to the action or otherwise);

      (d)   Arbios shall consult with Spectrum and keep Spectrum reasonably
            informed with respect to such action;

      (e)   Spectrum shall cooperate with Arbios in such legal action and shall
            cause its employees and agents to provide such documents and perform
            such acts as reasonably requested by Arbios in connection therewith;

      (f)   Arbios shall provide Spectrum such information and copies of any
            Documentation relating to the action as Spectrum may reasonably
            request;

      (g)   Arbios shall not settle, compromise or consent to any voluntary
            disposition of the action without the prior written consent of
            Spectrum, which consent shall not be unreasonably withheld; and

      (h)   any recovery in such action shall be applied first to reimbursement
            of Arbios' costs and expenses incurred in connection with such
            action, second to the reimbursement of Spectrum's costs and expenses
            incurred in connection with such action, and finally to be divided
            between the Parties in proportion to their respective damages
            suffered on account of the infringement, misappropriation or
            violation.

                                       7
<PAGE>

SECTION 5         GOVERNMENT RIGHTS

      Arbios acknowledges that the Patent Rights may be subject to the rights
and limitations of 35 U.S.C.ss.200 et seq. and applicable implementing
regulations.

SECTION 6         CONFIDENTIALITY

      6.1 CONFIDENTIAL INFORMATION

      The Recipient shall protect the Confidential Information and Confidential
Materials of the Discloser against any Unauthorized Use to the same extent that
the Recipient protects its own Confidential Information and Confidential
Materials of a similar nature against Unauthorized Use, but in any event shall
use at least a reasonable standard of care; provided, that the Confidential
Information and Confidential Materials of the Discloser are conspicuously marked
or otherwise identified as confidential or proprietary upon receipt by the
Recipient or the Recipient otherwise knows or has reason to know that the same
is Confidential Information or Confidential Materials of the Discloser. Each
Party reserves ownership of its own Confidential Information and Confidential
Materials. The Recipient shall use any Confidential Information and Confidential
Materials of the Discloser solely for the purposes for which it is provided by
the Discloser. This section shall not be interpreted or construed to prohibit:

      (a)   any Development, Making, Distribution or Use which is necessary or
            appropriate in connection with the Recipient's performance of its
            obligations or exercise of its rights under this Agreement (e.g.,
            pursuant to the License) or any other agreement between the Parties;

      (b)   any Use, Development, Making or Distribution required by applicable
            law (e.g., pursuant to applicable securities laws or legal process),
            provided that the Recipient uses reasonable efforts to give the
            Discloser reasonable advance notice thereof (e.g., so as to afford
            the Discloser an opportunity to intervene and seek an order or other
            appropriate relief for the protection of its Confidential
            Information from any Unauthorized Use or disclosure); or

      (c)   any Use or disclosure made with the consent of the Discloser.

      6.2 RETURN OF CONFIDENTIAL INFORMATION

      Upon expiration or termination of the Term, the Receiving Party shall
promptly return or certify destruction of all Confidential Information and any
copies made thereto previously made available to the Receiving Party by the
Disclosing Party under this Agreement.

SECTION 7         Section 7 Representations, Warranties and Indemnification

      7.1 SPECTRUM WARRANTY

      Spectrum represents and warrants that (a) it has the lawful right to grant
the License provided herein; (b) it is the owner of the Licensed Patents and, to
the best of its knowledge, no Third Party has any interest in the Licensed
Patents; (c) the grant of the License pursuant to and in accordance with this

                                       8
<PAGE>

Agreement does not constitute any breach, default or violation under any
articles of incorporation, bylaws, contract, agreement, lease, license,
mortgage, deed of trust, security interest, lien or other obligation to which
Spectrum is a Party or otherwise bound; (d) it has not granted and will not
grant any rights or licenses in conflict with this Agreement; and (e) it has not
received notice of any claim or potential claim that any Spectrum Rights
infringe, misappropriate or violate any Proprietary Right of any Third Party.

      7.2 ARBIOS WARRANTY

      Arbios represents and warrants that (a) it has the right, power and
authority to enter into this Agreement and undertake the obligations herein; (b)
the grant of the License pursuant to and in accordance with this Agreement does
not constitute any breach, default or violation under any articles of
incorporation, bylaws, contract, agreement, lease, license, mortgage, deed of
trust, security interest, lien or other obligation to which Arbios is a Party or
otherwise bound; and (c) Arbios has not received notice of any claim or
potential claim that any Spectrum Rights infringe, misappropriate or violate any
Proprietary Right of any Third Party.

      7.3 INDEMNIFICATION

      Each Party shall defend, indemnify and hold harmless the other Party as
follows:

      (a)   Spectrum shall defend, indemnify and hold harmless Arbios from and
            against any and all claims arising out of or related to (i) the
            exercise of any rights granted under the License; (ii) any breach of
            Spectrum's warranties set forth in Section 7.1; or (iii) any breach
            of Spectrum's obligations under Section 6.

      (b)   Arbios shall defend, indemnify and hold harmless Spectrum from and
            against any and all claims arising out of or related to (a) any
            breach of Arbios' warranties set forth in Section 7.2; or (b) any
            breach of Arbios' obligations under Section 6.

      7.4 NOTICE AND COOPERATION

         If a Party ("Indemnified Party") seeks indemnification of any claim
under Section 7.3 above, such Indemnified Party shall (a) give the other Party
("Indemnifying Party") prompt written notice of the claim; (b) cooperate with
the Indemnifying Party in connection with the defense, settlement and
satisfaction of the claim, provided such defense, settlement or satisfaction
does not restrict the exercise of the License; and (c) not settle or compromise
the claim without the written consent of the Indemnifying Party, which consent
shall not be unreasonably withheld. Without limiting the generality of the
foregoing, the Indemnifying Party shall pay or reimburse any and all costs and
expenses (including, but not limited to, court costs, expert fees, witness fees
and attorney fees) reasonably incurred by the Indemnified Party in connection
with the defense, settlement or satisfaction of any such claim (including, but
not limited to, any damages, liabilities, penalties, settlements, awards or
judgments based upon any such claim).

SECTION 8         IDENTIFICATION OF LICENSED PRODUCTS

      8.1 USE OF TRADEMARKS

      Nothing contained in this Agreement shall be construed as conferring any
right to use in advertising, publicity or other promotional activities any
trademark or other designation of either Party hereto (including any
contraction, abbreviation or simulation of any of the foregoing) except where,
upon advice of counsel, such use is required to comply with any law or
regulation of a governing body having jurisdiction over a Party or over the
making, using or selling of any Licensed Product.

                                       9
<PAGE>

      8.2 PATENT MARKING

      In the event any Licensed Product is the subject of a patent under the
Patent Rights, Arbios shall mark all such Licensed Products made, sold or
otherwise disposed of by or on behalf of it or any of its sublicensees with the
word "Patented" followed by the number of the licensed patent.

SECTION 9         COMPENSATION

      9.1 SHARES

      In consideration for the License granted hereunder, Arbios shall issue to
Spectrum three hundred sixty-two thousand six hundred and sixty-nine (362,669)
shares of Arbios Common Stock, par value $.00001 per share (the "Shares")
pursuant to the Stock Purchase Agreement, and subject to the repurchase rights
as set forth in the Research Agreement. The Shares shall have the rights,
preferences, privileges and restrictions set forth in the Stock Purchase
Agreement, Arbios' Certificate of Incorporation and other charter documents.

      9.2 REPRESENTATION CONCERNING SHARES

      Arbios represents and warrants that as of the Effective Date the aggregate
number of Shares equals six percent (6%) of the total issued and outstanding
shares of Arbios' capital stock, as more fully described in the attached Exhibit
B.

SECTION 10        TERM AND TERMINATION

      10.1 TERM

      The term shall commence on the Effective Date and, unless sooner
terminated pursuant to Section 10.2, shall continue until the expiration of all
Patent Rights (the "Term").

      10.2 TERMINATION FOR MATERIAL BREACH OR MATERIAL DEFAULT

      If either Party commits a material breach of or material default under
this Agreement (the "Defaulting Party"), then the other Party may give such
Defaulting Party written notice of the breach or default (including, but not
necessarily limited to, a statement of the facts relating to the breach or
default, the provisions of this Agreement that are in breach or default, and the
action required, as to which the defaulting party is in, to cure the breach or
default) and that the Term shall terminate pursuant to this section if the
breach or default is not cured within a reasonable time but not to exceed sixty
(60) days after receipt of notice (or such later date as may be specified in
such notice). If the Defaulting Party fails to cure the specified breach or
default within sixty (60) days after receipt of such notice (or such later date
as may be specified in such notice), then the Term shall terminate.

                                       10
<PAGE>

      10.3 EFFECT OF TERMINATION BY SPECTRUM DEFAULT

      In the event of a termination of the Term pursuant to Sections 10.2 above
where Spectrum is the Defaulting Party, then the Parties' respective rights and
obligations under Sections 1, 2, 3, 4, 5, 6, 7, 8, 9, 10 and 11 of this
Agreement shall survive.

      10.4 EFFECT OF TERMINATION BY ARBIOS' DEFAULT

      In the event of a termination of the Term pursuant to Sections 10.2 above
where Arbios is the Defaulting Party, then: (a) the License shall terminate, (b)
Arbios may, for a period of one (1) year after the effective date of such
termination, sell all tangible Licensed Products customarily classified as
"inventory" that it has on hand at the date of termination, and (c) the Parties'
respective rights and obligations under Sections 1, 6, 7, 8 and 11 of this
Agreement shall survive.

      10.5 EFFECT OF EXPIRATION OF THE TERM

      Upon expiration of the Term, (a) Arbios shall continue to have a fully
paid-up, royalty-free, worldwide, nonexclusive license under the Spectrum Rights
in the Field of Use to Develop, Make, Use and Distribute the Spectrum
Technology, Arbios Improvements and Licensed Products; and (b) the Parties'
respective rights and obligations under Sections 1, 6, 7, 8 and 11 of this
Agreement shall survive.

SECTION 11        MISCELLANEOUS

      11.1 REMEDIES

      Both Parties acknowledge and agree that it would be difficult to measure
damages for breach by either Party of the covenants and obligations under this
Agreement, and that injury from any such breach would be incalculable, and that
money damages would therefore be an inadequate remedy for any such breach.
Accordingly, either Party shall be entitled, in addition to all other remedies
available hereunder or under law or equity, to injunctive or such other
equitable relief as a court may deem appropriate to restrain or remedy any
breach of such covenants.

      11.2 ATTORNEYS' FEES

      In the event of any action at law or in equity between the Parties hereto
to enforce any of the provisions hereof, the unsuccessful Party to such
litigation shall pay to the successful Party all reasonable costs and expenses,
including reasonable attorneys' fees, incurred therein by such successful Party;
and if such successful Party shall recover a judgment in any such action or
proceeding, such reasonable costs, expenses and attorneys' fees may be included
in and as part of such judgment.

                                       11
<PAGE>

      11.3 WAIVER

      It is agreed that no waiver by either Party hereto of any breach or
default of any of the covenants or agreements herein set forth shall be deemed a
waiver as to any subsequent or similar breach or default.

      11.4 ASSIGNMENT

      Neither Party may assign, delegate or otherwise transfer any of its rights
or obligations under this Agreement without the prior written consent of the
other Party, except that either Party may sublicense its license rights
hereunder and may assign, delegate or otherwise transfer its rights or
obligations in connection with a merger, consolidation or reorganization of such
Party or to an Affiliate or a purchaser of all or substantially all of its
assets that relate to the subject matter of this Agreement.

      11.5 NOTICES

      Any payment, notice or other communication required or permitted to be
given to either Party hereto shall be in writing and shall be deemed to have
been properly given and effective (a) on the date of delivery if delivered in
person, by professional courier or by telecopy; or (b) on the third day after
mailing if mailed by first-class certified mail, postage paid, to the respective
address given below, or to such other address as either Party shall designate by
written notice given to the other Party as follows, or to such other address or
to such other person(s) as may be given from time to time under the terms of
this Section 11.5:

         In the case of Spectrum to:

         c/o F. Jesus Martinez                   c/o Gallo & Associates
         18617 Broadwick Street                  5757 Century Blvd., 7th Floor
         Rancho Dominguez, California 90220      Los Angeles, CA 90045
         Fax:      (310) 885-3400                Fax # 310-338-1199

                                                 Att:    Ray E. Gallo

         c/o Roy T. Eddleman
         18617 Broadwick Street
         Rancho Dominguez, California 90220
         Fax:      (310) 885-3400

         or in the case of Licensee to:

         Jacek Rozga, MD, PhD
         President & CSO
         Arbios Technologies, Inc.
         Cedars-Sinai Medical Center
         Research Pavilion, Room 4089,
         110 George Burns Road,
         Los Angeles, California 90048
         Fax:      (310) 423-7434

                                       12
<PAGE>

      11.6 JURISDICTION AND VENUE

      Each Party hereby irrevocably consents to the jurisdiction and venue of
the state or federal courts located in Los Angeles County, State of California,
in connection with any action, suit, proceeding or claim to enforce the
provisions of this Agreement, to recover damages for breach of or default under
this Agreement, or otherwise arising under or by reason of this Agreement.

      11.7 GOVERNING LAW

      THIS AGREEMENT SHALL BE INTERPRETED, CONSTRUED AND ENFORCED IN ALL
RESPECTS IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, U.S.A., WITHOUT
REFERENCE TO ITS CHOICE OF LAW PRINCIPLES TO THE CONTRARY.

      11.8 COUNTERPARTS

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

      11.9 MODIFICATION

      No amendment or modification hereof shall be valid or binding upon the
Parties unless made in writing and signed by authorized representatives of the
Parties.

      11.10 ENTIRE AGREEMENT

      This Agreement, together with the Stock Purchase Agreement, the Research
Agreement and the Manufacturing Agreement, embodies the entire understanding of
the Parties and shall supersede all previous communications, representations or
understandings, either oral or written, between the Parties relating to the
subject matter hereof

      11.11 SEVERABILITY

      Should one or more of the provisions contained in this Agreement for any
reason be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality or unenforceability shall not affect any other provisions
hereof and this Agreement shall be construed as if such invalid or illegal or
unenforceable provisions had never been contained herein.

      11.12 INDEPENDENT CONTRACTORS

      Nothing in this Agreement shall constitute or be deemed to constitute a
partnership or agency between the Parties hereto.

                                       13
<PAGE>

      11.13 FURTHER ASSURANCES

      At any time and from time to time after the Effective Date, each Party
shall do, execute, acknowledge and deliver, and cause to be done, executed,
acknowledged or delivered, all such further acts, transfers, conveyances,
assignments or assurances as may be reasonably required to consummate the
transactions contemplated by this Agreement.

      11.14 HEADINGS

      The headings of this Agreement are inserted for convenience only and shall
not be used in the interpretation of this Agreement.

      IN WITNESS WHEREOF, Spectrum and Arbios have executed this Agreement as of
the date first above written.

                                                  SPECTRUM LABORATORIES, INC.

                                                  By:  F. JESUS MARTINEZ
                                                  -----------------------------
                                                  Its:  /s/ F. Jesus Martinez
                                                  -----------------------------

                                                  ARBIOS TECHNOLOGIES, INC.

                                                  By:  JACEK ROZGA, MD, PhD
                                                  -----------------------------
                                                  Its:  /s/ Jacek Rozga
                                                  -----------------------------

                                       14

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