<PAGE>
                                                                    EXHIBIT 10.6


                        DISTRIBUTION AND SUPPLY AGREEMENT

      This Distribution and Supply Agreement (the "Agreement") is made as of
September 22, 2003 (the "Effective Date"), by and between Omrix
Biopharmaceuticals, Inc., a corporation organized under the laws of Delaware
(hereinafter referred to as "Omrix"), and Ethicon, Inc., a corporation organized
under the laws of New Jersey, acting by and through its Johnson & Johnson Wound
Management division (hereinafter referred to as "Ethicon," together with Omrix,
the "Parties" and each individually a "Party").

                                    RECITALS

      WHEREAS, Omrix has developed a biologic surgical adhesive in the form of a
frozen liquid fibrin sealant, including biological reagents and a delivery
device, known as "Quixil(TM)", and is in the process of developing a second
generation fibrin sealant product currently known as "FS2"; and

      WHEREAS, Omrix believes that one of the components of Quixil, thrombin,
can be developed as a stand-alone product with few or no process changes; and

      WHEREAS, pursuant to a development agreement dated the date hereof (the
"Development Agreement"), the Parties agree that Omrix will, with certain
testing and other contributions of Ethicon, further develop and obtain marketing
authorizations for a second generation fibrin sealant product, a thrombin
product, a product known as the "Hemostatic Pad Product" containing biologic
component(s) from Omrix and a substrate, and a kitted product containing a
medical device and thrombin known as "Flowable Hemostat"; and

      WHEREAS, this Distribution and Supply Agreement is being entered into to
set out the terms and conditions under which (A) Ethicon will act as Omrix's
exclusive distributor of Quixil and the products developed under the Development
Agreement, in each case in specific territories for hemostasis and sealing
indications for non-consumer applications only, (B) Omrix will supply and
Ethicon will purchase Quixil and the products covered by the Development
Agreement once they are developed and (C) Ethicon will provide the medical
device necessary to produce the Flowable Hemostat and may provide the substrate
necessary to produce the Hemostatic Pad.

      NOW THEREFORE, in consideration of the mutual covenants and consideration
set forth herein, and contingent upon the simultaneous execution of the
Development Agreement, the Parties hereto agree as follows:

      PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT
        TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE
                       SECURITIES AND EXCHANGE COMMISSION.


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                                    ARTICLE 1
                                   DEFINITIONS

      As used in this Agreement, the following defined terms shall have the
meanings set out in this Article 1. Capitalized terms used but not otherwise
defined herein, and which are defined in the Development Agreement, shall have
the meanings given such terms in the Development Agreement.

      1.1 "ACCESSORY" shall mean any of the devices or other articles listed on
Exhibit A, as such Exhibit may be amended from time to time by mutual agreement
of the Parties, but in no event shall mean the basic application device
accompanying a Product.

      1.2 "AFFILIATE" shall mean, in relation to either Party hereto, (a) any
entity in which the relevant Party directly or indirectly holds more than 50% of
the voting stock or power, (b) any entity ("Holding Entity") which holds
directly or indirectly more than 50% of the voting stock or power of the
relevant Party, (c) any other entity in which more than 50% of the voting stock
or power is directly or indirectly held by any Holding Entity of the relevant
Party or (d) any entity in which the relevant Party directly or indirectly holds
less than 50% of the voting stock or power but has management control of such
entity in that it has the ability to appoint and remove the majority of the
Board of Directors (or other governing body) of such Party.

      1.3 "APPLICABLE LEGAL REQUIREMENTS" shall mean: (a) any and all federal,
national, supranational, state and local laws, regulations, ordinances, orders
and requirements applicable to the activities under this Agreement; and (b) any
other specifications, guidelines, procedures and directives mutually agreed to
by the Parties, applicable to the Products, Improved Products or Ethicon
Components, as applicable, or activities under this Agreement. In the case of
the United States, Applicable Legal Requirements shall include, without
limitation, all applicable laws, regulations and guidelines of and under the
U.S. Federal Food, Drug, and Cosmetic Act and Public Health Service Act,
including all applicable current Good Manufacturing Practices ("cGMP", see,
e.g., 21 CFR 211); provided that, in the event of any conflict between such
sources of authority, U.S. federal law and regulations shall be given priority.
In the case of the European Union, Applicable Legal Requirements shall include,
without limitation, all applicable regulations and directives of the European
Union, the European Commission and guidelines of the CPMP and all applicable
national legislation; provided that, in the event of any conflict between the
foregoing sources of authority, European Union law shall be given priority.

      1.4 "AVERAGE TRANSFER PRICE" with respect to any Product during any period
shall be determined by adding up all the Quarterly Amounts (as defined in
Exhibit C) with respect to such Product and such time period and dividing the
sum by the aggregate number of units of such Product sold during such period,
provided that the Average Transfer Price shall in no event be less than the
Minimum Transfer Price nor greater than the Maximum Transfer Price then in
effect for such Product.

      1.5 "BANKRUPTCY EVENT" shall mean (a) the person or entity in question
becomes insolvent, or voluntary or involuntary proceedings by or against such
person or entity are instituted in bankruptcy or under any insolvency law, or a
receiver, trustee or custodian is appointed for such person or entity, or
proceedings are instituted by or against such person or


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entity for corporate reorganization or the dissolution of such person or entity;
provided that an involuntary bankruptcy, dissolution or reorganization
proceeding shall not be deemed a Bankruptcy Event unless and until the person or
entity consents to such proceeding or such proceeding shall is not dismissed
within 60 days after the date of filing, or (b) such person or entity makes an
assignment for the benefit of its creditors, or substantially all of the assets
of such person or entity are seized or attached and not released within 60 days
thereafter.

      1.6 "BASELINE COSTS" with respect to a Product shall mean Omrix's actual
costs for the Cost Variables for manufacturing such Product determined based on
the cost at the end of the second twelve (12) month period after the First
Commercial Sale of that Product.

      1.7 "COST VARIABLES" shall mean the variables listed on Exhibit K hereto.

      1.8 "DEVELOPMENT PRODUCTS" shall mean FS2, Thrombin, the Flowable Hemostat
and the Hemostatic Pad Product.

      1.9 "DEVELOPED TERRITORY" shall have the meaning set forth in Section
2.3(a) hereof.

      1.10 "EFFECTIVE DATE" shall have the meaning set forth in the introduction
hereto.

      1.11 "ETHICON COMPONENTS" shall have the meaning set forth in the
Development Agreement.

      1.12 "EVENT OF DEFAULT" shall have the meaning given in Section 11.3
hereof.

      1.13 "FAILURE TO SUPPLY" shall have the meaning set forth in Section 3.3
hereof.

      1.14 "FDA" shall mean the United States Food and Drug Administration.

      1.15 "FIBRIN SEALANT PRODUCTS" shall mean Quixil and FS2.

      1.16 "FIELD" shall mean Non-Consumer Applications (as defined in the
Development Agreement) using human-plasma derived products that are indicated
for (A) hemostasis (with or without other indications) or (B) sealing only;
except that, notwithstanding anything to the contrary in the foregoing, the
Field does not include dentistry applications, regardless of whether hemostasis
and/or sealing is an indication, recombinant products or any device which uses
the patient's own blood.

      1.17 "FISCAL YEAR" shall mean Ethicon's fiscal year, which varies
annually, but which is approximately the period beginning on each January 1 and
ending on the following December 31.

      1.18 "FISCAL QUARTER" shall mean each of Ethicon's fiscal quarters, which
vary annually, but which are the approximately three (3) month periods beginning
on or about January 1, April 1, July 1 and October 1, respectively.

      1.19 "FIRST COMMERCIAL SALE" with respect to any Primary Product shall
mean the date of the first sale of such Product by Ethicon or its Affiliates (or
by Omrix pursuant to an


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order solicited by Ethicon as contemplated by Section 2.5), specifically
excluding sales to an Affiliate of Ethicon unless such Affiliate is the end user
of the Product.

      1.20 "FORCE MAJEURE EVENT" or "FORCE MAJEURE NOTICE" shall have the
meaning ascribed in Section 11.6 hereof.

      1.21 "FS2" shall mean the FS2 set forth in the Development Agreement, as
such FS2 is defined in the first Regulatory Approval for such Product.

      1.22 "FS2 TERRITORY" shall have the meaning as set forth in Section 2.3(a)
hereof.

      1.23 "HEMOSTATIC PAD PRODUCT" shall mean the Hemostatic Pad Product set
forth in the Development Agreement, as such Hemostatic Pad Product is defined in
the first Regulatory Approval for such Product.

      1.24 "IMPROVED PRODUCT" shall have the meaning set forth in the
Development Agreement.

      1.25 "FLOWABLE HEMOSTAT" shall mean the Flowable Hemostat set forth in the
Development Agreement, as such Flowable Hemostat is defined in the first
Regulatory Approval for such Product.

      1.26 "LONG TERM FORECAST" shall mean the ten year non-binding forecast of
Ethicon's requirements for the Products set forth on Exhibit I hereto, as
amended and updated pursuant to Section 4.5(a).

      1.27 "MAXIMUM TRANSFER PRICE" shall mean (i) in the case of Fibrin Sealant
Products, $*** per milliliter in the United States and (Euro)*** per milliliter
in the European Union, Norway, Iceland, Liechtenstein and Switzerland and all
other portions of the Territory other than the United States and (ii) in the
case of Thrombin, $*** per 5000 IU vial (of five (5) milliliters per vial) in
the United States and (Euro)*** per 5000 IU vial (of five (5) milliliters per
vial) in the European Union, Norway, Iceland, Liechtenstein and Switzerland and
all other portions of the Territory other than the United States; provided,
however, that the Maximum Transfer Price shall be subject to increase from time
to time through the adjustments set forth in Section 4.2. Maximum Transfer
Prices for all other Products shall be agreed in writing separately by the
Parties.

      1.28 "MINIMUM TRANSFER PRICE" shall mean (i) in the case of Fibrin Sealant
Products, $*** per milliliter in the United States and (Euro)*** per milliliter
in the European Union, Norway, Iceland, Liechtenstein and Switzerland and all
other portions of the Territory other than the United States (provided that the
foregoing Minimum Transfer Price for Fibrin Sealant Products shall be reduced
by ***% after the first Fiscal Year in which *** milliliters of Fibrin Sealant
Products are sold by Ethicon in the United States) and (ii) in the case of
Thrombin, $*** per 5000 IU vial (of five (5) milliliters per vial) in the
United States and (Euro)*** per 5000 IU vial (of five (5) milliliters per vial)
in the European Union, Norway, Iceland, Liechtenstein and Switzerland and all
other portions of the Territory other than the United States (provided that the
Minimum Transfer Price for Thrombin shall become US$*** per 5000 IU vial (of
five(5)


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milliliters per vial) in the United States and (Euro)*** per 5000 IU vial (of
five (5) milliliters per vial) in the European Union, Norway, Iceland,
Liechtenstein and Switzerland and all other portions of the Territory other
than the United States after the earlier of calendar year 2010 or the first
calendar year in which *** vials of Thrombin are sold by Ethicon, subject to
adjustment as contemplated in the following proviso); provided, however, that
the Minimum Transfer Price shall be subject to proportional increase from time
to time based on the adjustments set forth in Section 4.2. Minimum Transfer
Prices for all other Products shall be agreed in writing separately by the
Parties.

      1.29 "NET SALES" with respect to any Product shall mean the amounts
actually invoiced by Ethicon or its Affiliates from the sale of such Product to
non-Affiliates, less the following amounts: (i) discounts, including cash
discounts, or rebates actually allowed and taken, (ii) credits or allowances
actually granted upon claims or returns regardless of the Party requesting the
return, (iii) freight charges paid for delivery if separately invoiced to the
buyer, and (iv) taxes or other governmental charges levied on or measured by the
invoiced amount (but not direct taxes on income) whether absorbed by the billing
or the billed Party; provided that, with respect to any Product sold by Ethicon
in a transaction in which any other product(s) are also provided, the Net Sales
for the Product or Improved Product will be calculated by multiplying the actual
Net Sales of the combination product by the fraction (A/A+B), where A is the
invoiced price of such Product or Improved Product as if sold separately by
Ethicon and B is the aggregate of the invoiced prices of each of the other
product(s) included in the combination product as if each such product was sold
separately by Ethicon; provided further that the amount deemed to be the invoice
price for a product shall be the average amount invoiced in good faith by
Ethicon for such product when sold individually over the prior twelve (12) month
period.

      1.30 "OMRIX FACILITY" shall mean each of (a) Omrix's facility in Belgium
for Products to be distributed in the European Union (as it is to be expanded in
2004, except Portugal), Norway, Iceland, Liechtenstein and Switzerland (b)
Omrix's facility in Israel for Products to be distributed in the United States,
Canada and other portions of the Territory and (c) any other facility owned or
operated by Omrix in connection with this Agreement or any of the Products.

      1.31 "PRIMARY PRODUCTS" shall mean any Products, other than Accessories
and components of Accessories.

      1.32 "PRODUCTION PLAN" shall have the meaning set forth in Section 4.6
hereof.

      1.33 "PRODUCTS" shall mean Quixil, the Development Products, the Improved
Products and Accessories.

      1.34 "PURCHASE PRICE" shall have the meaning set forth in Section 4.2
hereof.

      1.35 "QUALITY AGREEMENT" shall have the meaning set forth in Section
3.2(e) hereof.

      1.36 "QUIXIL" shall have the meaning set forth in the Development
Agreement.

      1.37 "QUIXIL QUALITY AGREEMENT" shall have the meaning set forth in
Section 3.2(e) hereof.


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      1.38 "QUIXIL TERRITORY" shall have the meaning set forth in Section 2.3(a)
hereof.

      1.39 "REGULATORY AGENCY" with respect to a given country shall mean the
regulatory agency or notified body in such country that performs the same or
equivalent function as the FDA in the United States. Any reference to a rule or
requirement of the FDA herein shall refer, if the circumstances make it
applicable, to the equivalent rule or requirement of any Regulatory Agency. For
avoidance of doubt, FDA shall be considered a Regulatory Agency for purposes of
this definition.

      1.40 "REGULATORY APPROVAL" shall mean EU Marketing Clearance or U.S.
Marketing Clearance, as applicable, each as defined in the Development
Agreement, or with respect to Products in any other country, the filing and
receipt of all other registrations, approvals, licenses and authorizations
required for the marketing and sale of the Product in such country, excluding
any dossiers or applications required for pricing or reimbursement.

      1.41 "REGULATORY CHANGES" shall mean any changes in or to a Product, its
components or its Regulatory Approval imposed by the applicable Regulatory
Agency subsequent to Regulatory Approval, except for changes to Quixil required
for Omrix to meet the milestone set forth in Section 4.1(b) hereof. For the
avoidance of doubt, changes which Omrix makes for product quality, compliance
requirements, ongoing improvement programs related to viral inactivation
processes and productivity improvements not imposed by the applicable Regulatory
Agency shall not be considered Regulatory Changes.

      1.42 "REMEDIATION PLAN" shall have the meaning set forth in Section 3.3
hereof.

      1.43 "RESTRICTED COUNTRIES" shall mean, (i) with respect to Quixil and
FS2, the United States, Canada, Japan and any country in which Omrix has,
pursuant to a written contract in existence as of the Agreement Date, appointed
a distributor for Quixil and (ii) with respect to any of the Development
Products (other than FS2), Japan; provided that, if Omrix ceases to have a
written contract with such distributor, the country excluded as a result of such
contract with such distributor shall cease to be a Restricted Country. Exhibit H
lists, by Product, all countries in which Omrix has a written contract with a
distributor with respect to such Product as of the Agreement Date.

      1.44 "SHORTFALL AMOUNT" with respect to a given Product shall mean (A) 50%
of the Average Transfer Price for such Product multiplied by (B) the excess of
the minimum quantity of such Product required to by purchased by Ethicon
hereunder over the quantity of such Product actually purchased by Ethicon for
the applicable period.

      1.45 "SPECIFICATIONS" shall mean the specifications for the design,
composition, product safety assurance, manufacture, packaging, and/or quality
control of any Product, as set forth on Exhibit B attached hereto and made a
part hereof, as the same may hereafter be modified pursuant to the Development
Agreement or by mutual agreement in writing but prior to the first applicable
Regulatory Approval for the applicable product.

      1.46 "TERRITORY" for a Product, shall mean the territory for such product
set forth in Section 2.3.


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      1.47 "THROMBIN" shall mean the Thrombin set forth in the Development
Agreement, as such Thrombin is defined in the first Regulatory Approval for such
Product.

      1.48 "UP FRONT DIFFERENCE" shall mean *** U.S. Dollars ($***).

                                    ARTICLE 2
                  DISTRIBUTION AND SUPPLY RELATIONSHIP; ESCROW

      2.1 APPOINTMENT; PAYMENT. Subject to the terms and conditions of this
Agreement, Omrix hereby appoints Ethicon, and Ethicon hereby accepts
appointment, as Omrix's exclusive distributor of Quixil in the Quixil Territory,
FS2 in the FS2 Territory and the Development Products and Improved Products in
the Developed Territory (other than Improved Products arising from Covered
Improvements to FS2, for which Omrix appoints Ethicon solely in the FS2
Territory); provided that, Ethicon shall have no rights to market, sell or
distribute the Products outside the Field and may only market, sell and
distribute Improved Products within the Field after the Parties mutually agree
on annual minimum purchases, transfer prices and/or net sales percentages
applicable to such Improved Products; provided that the parties shall use good
faith efforts to reach agreement on such terms; and provided, further, that in
no event shall Omrix agree to sell the Improved Products to a third party on
terms that are less favorable to Omrix than those proposed by Ethicon. Omrix
understands and agrees that Ethicon may utilize its Affiliates to act as
distributors hereunder in certain geographic areas, provided that, such
Affiliates are subject to the same restrictions, limitations and requirements as
are applicable to Ethicon, and Ethicon shall at all times remain responsible for
performance of all of its and its Affiliates' obligations under this Agreement.
In consideration of the foregoing appointment and the execution by Omrix of this
Agreement, Ethicon shall pay Omrix within three (3) business days of the
Effective Date *** U.S. Dollars ($***).

      2.2 SUPPLY.

            (a) Supply of Products. Omrix shall supply the Products to Ethicon
on an exclusive basis in the Field in the Territory applicable to such Product
as set forth in Section 2.3 (the "Applicable Territory") in accordance with and
subject to the terms and conditions of this Agreement. In addition, Omrix shall
supply the Accessories to Ethicon on a non-exclusive basis in the Applicable
Territory for sale or distribution in connection with Primary Products in
accordance with and subject to the terms and conditions of this Agreement.
Ethicon shall not solicit or accept orders for any Product from any prospective
purchaser located outside of the Applicable Territory for said Product or for
use outside the Field, subject to applicable law. Ethicon shall not engage in
any advertising or promotional activities relating to the Products directed
primarily to customers located outside the Applicable Territory for such Product
or promoting the use of any Products outside the Field. Ethicon may not deliver
or tender (or cause to be delivered or tendered) any Product outside of the
Applicable Territory for such Product or outside the Field. Notwithstanding the
preceding three sentences, if Ethicon receives an unsolicited order for Products
from a prospective purchaser located outside the Applicable Territory for such
Product and such purchaser is likely to resell such Products back into the
Applicable Territory, then Ethicon may accept such order. Omrix agrees that it
will not: (i) engage in an any advertising or promotional activities relating to
any Product for use in the Field and directed primarily to customers located
inside the Applicable Territory for said Product; (ii)


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solicit or accept orders for any Product from any prospective purchaser located
in the Applicable Territory for said Product for use in the Field, or (iii)
deliver or tender (or cause to be delivered or tendered) any Product for use in
the Field in the Applicable Territory for said Product. Omrix will take all
reasonable measures to ensure that all of its distributors of the Products
comply with the exclusive rights granted by Omrix to Ethicon in the Territory
related to each particular Product under this Agreement, subject to applicable
law.

            (b) Supply of Ethicon Components. Ethicon shall supply the Ethicon
Components, if any, to Omrix within ninety (90) days of Omrix's orders therefor.
Ethicon hereby agrees to supply Omrix with sufficient amounts and quality of
Ethicon Components, if applicable, in order for Omrix to meet its supply
obligations to Ethicon with respect to the Hemostatic Pad Product and Flowable
Hemostat hereunder, and to do so in the time frame necessary for Omrix to meet
its delivery obligations to Ethicon hereunder. Ethicon further covenants that
all Ethicon Components shall be delivered to Omrix with a remaining shelf-life
equal to or greater than two (2) years.

      2.3 TERRITORY.

            (a) For purposes of this Agreement, the Territory with respect to
each Primary Product shall be as follows:

                  (i) Quixil: The European Union (including the countries
joining in 2004 but excluding Portugal), Norway, Iceland, Liechtenstein and
Switzerland (collectively, the "Quixil Territory").

                  (ii) FS2: The European Union (including the countries joining
in 2004), Norway, Iceland, Liechtenstein and Switzerland (the "FS2 Territory").

                  (iii) All other Products: The European Union (including the
countries joining in 2004), Norway, Iceland, Liechtenstein, Switzerland, the
United States of America and Canada and all their territories and possessions
(including Puerto Rico) (the "Developed Territory").

            (b) The Territory with respect to any Accessory shall be the same as
the Territory for any Primary Product with which such Accessory can be used.

      2.4 ADDITIONAL TERRITORIES. If Omrix desires to commercially exploit any
Product in any country that is not within the Territory for such Product and is
not in the Restricted Countries, it shall notify Ethicon in writing of such
intention, and thereafter Ethicon shall have three (3) months to request, by
written notice to Omrix, that such country be added to the Territory for such
Product. If Ethicon desires to commercially exploit any Product in any country
that is not within the Territory for such product and is not in the Restricted
Countries, it shall notify Omrix in writing of such intention. Upon either
event, the Parties shall then negotiate in good faith the minimum number of
sales of such Product by Ethicon in such country for the first twenty-four (24)
months following the four month anniversary of Regulatory Approval in such
country; provided that, Ethicon shall pay the necessary costs of Regulatory
Approval for such Product in such additional country. If Ethicon fails to make
such election


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within the applicable time frame, if the Parties fail to reach an agreement in
writing on the terms of adding such country to the Territory within thirty (30)
days of Ethicon's written notice to Omrix contemplated above, if Ethicon fails
to file for Regulatory Approval in such country within one-hundred twenty (120)
days of reaching agreement on terms that contemplate that Ethicon will be
responsible for filing for Regulatory Approval in such country, or if Ethicon
fails to timely pay (or reimburse Omrix) for any necessary costs of such
Regulatory Approval, Ethicon shall have no rights to such Product in such
country and Omrix shall be free to sell such Product in such country directly or
through any third party distributor.

      2.5 INTERIM SALES AGENCY AGREEMENT.

            (a) General. Notwithstanding anything else in this Agreement, with
respect to each country within the Territory in which Ethicon does not have the
regulatory and other legal authorizations, licenses, approvals and other
clearance necessary for Ethicon to distribute or sell as principal
("Distribution Clearance") any Product (each such country, an "Agency Country"
with respect to such Product), Ethicon shall be Omrix's exclusive sales
representative for such Product (an "Agency Product" with respect to such
country) in that country and Ethicon shall not distribute or sell as principal
any such Product prior to Distribution Clearance. Within any Agency Country,
Omrix shall not solicit directly or indirectly from any party any purchases of
products that are Agency Products with respect to such country. Ethicon may
solicit and transmit orders to Omrix for Agency Products, but Ethicon shall not
be authorized to bind Omrix to any proposals, orders or agreements of any kind.
At such time as Ethicon shall have received Distribution Clearance for a Product
within a country that was theretofore an Agency Country, Ethicon shall
automatically cease to serve as Omrix's sales representative and shall
simultaneously become the exclusive distributor of such Product within such
country, as contemplated by the other provisions of this Agreement.

            (b) Commissions. In consideration of Ethicon's sales efforts under
this Section 2.5, Omrix will pay Ethicon a sales commission of *** percent
(***%) of Omrix's Net Sales of the applicable Agency Product(s) in the Agency
Country. Commissions for a calendar quarter will be paid by Omrix to Ethicon
within 40 days after the end of such calendar quarter.

            (c) Reporting. Omrix will provide Ethicon with monthly quantity
reports ("Monthly Quantity Reports") of all Agency Products sold by Omrix in
each Agency Country. Omrix will provide the Monthly Quantity Reports no more
than 60 days after the end of each calendar month. The Monthly Quantity Reports
will be provided to Ethicon in electronic format and in accordance with Omrix's
standard accounting practices. The Monthly Quantity Reports will contain the
following information: a) Omrix's unique customer identification number; b) end
user customer name, address, city, state, and zip code; c) product code and
description; d) selling unit of measure; e) quantity sold in such month; and f)
indication of positive or negative transaction (credit or return, etc.). Ethicon
may hire, at its own expense, a mutually-agreed-upon independent third party to
audit the Net Sales reported by Omrix under this Section 2.5(c) no more than
once per calendar year and, if Omrix's records are insufficient for the
foregoing purposes or any such inspection discloses an underpayment of five
percent (5%) or more of the amount of payments actually due for any period,
then, in addition to any other rights and remedies available to Ethicon under
this Agreement, Omrix will pay Ethicon's reasonable cost of


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<PAGE>

such inspection after receipt of the bill or invoice for such inspection. Omrix
will provide reasonable access to applicable records and reasonably cooperate
with such third party auditor. Any adjustments to Commissions will be made
promptly following completion of the audit.

            (d) Promotional Materials. Omrix shall provide Ethicon with such
types and quantities of Omrix's standard promotional materials for the Agency
Products as Ethicon may reasonably request in order to promote and solicit
orders for such Products. No such promotional materials for any Agency Country
shall refer to Ethicon if such reference is prohibited by the Applicable Legal
Requirements in such country.

            (e) Termination of UK Employee. Ethicon may within ten (10) business
days of the Effective Date, in its sole discretion, hire Jonathan Gillespie on
terms and conditions similar to his current employment with Omrix. If Ethicon
chooses to hire Mr. Gillespie, Ethicon shall be responsible for obtaining a
waiver or for paying for costs resulting from Mr. Gillespie's contractual notice
provisions or any statutory rights solely to the extent arising from the
termination of Mr. Gillespie by Omrix, if any, up to a maximum of $50,000. Omrix
shall be responsible for all other costs arising from the termination of Mr.
Gillespie's employment. If Ethicon chooses not to hire Mr. Gillespie within ten
(10) business days of the Effective Date, Ethicon will reimburse Omrix solely
for the costs of terminating Mr. Gillespie, including without limitation any
contractual or statutory rights of Mr. Gillespie relating to his termination, up
to a maximum of $50,000. Ethicon will pay Omrix's invoice therefor within
forty-five (45) days of receipt. Omrix agrees to indemnify Ethicon for any
liabilities arising from Mr. Gillespie's employment and any costs arising from
the termination of Mr. Gillespie's employment in excess of the $50,000
reimbursed by Ethicon.

      2.6 EXCLUSIVE PURCHASE OF PRODUCT. For the period of the above
distribution rights, Ethicon agrees that Omrix will be Ethicon's and its
Affiliates' exclusive supplier of human plasma derived hemostats and sealants
for use in the Field in the Territory; provided that, Omrix agrees that its sole
and exclusive remedy for a breach of this provision shall be to terminate this
Agreement and/or seek damages against Ethicon (and not any of its Affiliates)
and Omrix shall not be entitled and hereby waives any right to seek injunctive
relief or any damages against any of Ethicon's Affiliates. For purposes of this
Section 2.6 only, "Territory" where used without reference to one or more of the
Products shall mean all the Territories set forth in Section 2.3 applicable to
one or more of the Products. For the avoidance of doubt, the foregoing
restriction restricts Ethicon and its Affiliates from internally sourcing human
plasma derived hemostats and sealants for use in the Field in the Territory. If
such exclusivity is not enforceable under applicable law and Ethicon or its
Affiliates sell or distribute human plasma derived hemostats and sealants of any
party other than Omrix in a country in the Territory, and Ethicon fails to cure
such breach or nonperformance within sixty (60) days after receiving written
notice from Omrix thereof, Omrix may make non-exclusive, upon written notice to
Ethicon made within sixty (60) days of the end of such cure period, (A) if such
country is in the European Union, all exclusivity rights of Ethicon hereunder in
the portion of the Territory that is in the European Union, (B) if such country
is the United States, all exclusivity rights of Ethicon hereunder in the United
States and (C) if such country is not in the European Union and is not the
United States, all exclusivity rights of Ethicon hereunder in such country;
provided that such termination of exclusivity shall be Omrix's sole and
exclusive remedy for any breach of this Section 2.6. The provisions of this


                                       10
<PAGE>

Section 2.6 shall not be interpreted in a manner that would require Ethicon to
violate Applicable Legal Requirements in order to maintain its exclusivity
rights hereunder. The foregoing shall not restrict Ethicon's ability to obtain
products to replace Products for which Ethicon or Omrix has exercised its rights
of termination under this Agreement. The provisions of this Section 2.6 are
subject to the provisions of Section 2.8(d) in all respects.

      2.7 DISTRIBUTION BY OMRIX. Nothing in this Agreement will limit the right
of Omrix to market, sell and distribute the Products outside the Field anywhere
in the world, under any names, trademarks, logos, and other trade dress (other
than any names, trademarks, logos and trade dress of Ethicon or Johnson &
Johnson or their Affiliates) as Omrix in its sole discretion may determine;
provided however, Omrix shall not directly or indirectly (through its
Affiliates, agents or licensees) market, sell or distribute any product under
the Quixil name or trademark anywhere in the Territory other than Products sold
to Ethicon or Agency Products. Omrix shall not have the right, however, to
distribute Products which incorporate an Ethicon Component.

      2.8 CARVE OUT AND EFFECTS THEREOF.

            (a) Carve Out. Notwithstanding anything to the contrary in this
Agreement, Ethicon shall have no rights in the United States, Canada or any of
their territories or possessions (including Puerto Rico) to FS2 or Improved
Products arising from Covered Improvements to FS2 or any Improvements to Quixil;
provided that, Omrix agrees that it and its Affiliates will not commercialize
FS2 in the Field in the United States and its territories and possessions
(including Puerto Rico) or enter into any transaction for the commercialization
(including without limitation, the supply, sale, marketing, promotion,
licensing, or distribution) of FS2 in the Field in the United States and its
territories and possessions (including Puerto Rico) without including Ethicon as
its exclusive distributor in the Field under terms and conditions that are
substantially similar to this Agreement, except as otherwise permitted by this
Section 2.8 unless the Restriction Sunset (as defined in Section 2.8(b) below)
occurs.

            (b) Expansion of the FS2 Territory. The FS2 Territory under this
Agreement may be expanded to include the United States, Canada and their
territories and possessions (including Puerto Rico) upon the mutual agreement in
writing of Omrix and Ethicon on the same terms and conditions as those set forth
herein; provided that any such agreement shall require, at the least, that (i)
Ethicon shall pay an additional fee equal to the Up Front Difference upon such
mutual written agreement, (ii) Section 5(c) of the Development Agreement shall
be amended and restated in its entirety to read: "a milestone of ***
dollars ($***) shall be paid by Ethicon upon the earlier of (A) First
Commercial Sale of FS2 in the United States or (B) forty-five (45) days after US
Marketing Clearance of FS2, less any amounts paid under this Section 5(c) prior
to the amendment which inserted this revised Section 5(c)", (iii) all purchases
of FS2 shall be counted towards Ethicon's Fibrin Sealant minimum purchase
requirements under Section 4.4 herein and (iv) references to "FS2" shall be
deleted from the first and fourth lines of Section 1.43; provided further that,
after the four (4) year period commencing on the Effective Date, if no mutual
agreement has yet occurred to so expand the FS2 Territory on the foregoing
terms, and Omrix subsequently proposes to Ethicon an agreement to so expand the
FS2 Territory on the foregoing terms, but Ethicon has not agreed in writing
within thirty (30) days of Omrix's proposed agreement to so expand the FS2
Territory on such terms, then Omrix shall be free to


                                       11
<PAGE>

grant such rights in the United States, Canada and all their territories and
possessions (including Puerto Rico) to a third party (the occurrence of such
thirtieth (30th) day, , the "Restriction Sunset").

            (c) Improvements to Quixil and Commercialization thereof. For the
avoidance of doubt, notwithstanding anything to the contrary herein or in the
Development Agreement, Omrix shall be free to develop Improvements (as defined
in the Development Agreement) to Quixil, but may not commercialize such
Improvements in the Field (i) in the Quixil Territory, except as provided herein
and in the Development Agreement and (ii) in the United States, Canada and all
their territories and possessions (including Puerto Rico) without including
Ethicon as its exclusive distributor in the Field for all products resulting
from such Improvements, until the date of the Restriction Sunset ; provided
that, notwithstanding anything to the contrary herein or in the Development
Agreement, Omrix shall be free to commercialize any such improvements which are
(A) modifications to the delivery device accompanying Quixil in the United
States, Canada and all their territories and possessions (including Puerto Rico)
and/or (B) any variations to Quixil required by a Regulatory Agency in the
United States, Canada and all their territories and possessions (including
Puerto Rico).

            (d) Limited Waiver of Restriction on Ethicon. Notwithstanding
anything to the contrary herein, so long as Ethicon does not have exclusive
distribution rights to FS2 in the United States, Canada and their territories
and possessions (including Puerto Rico), then Ethicon and its Affiliates shall
be permitted to source and commercialize fibrin sealant products which compete
directly with Quixil and/or FS2 in the United States, Canada and all their
territories and possessions (including Puerto Rico), whether or not in the
Field; provided that Ethicon has given sixty (60) days prior notice to Omrix of
its intent to develop such competing product and Ethicon and its Affiliates
shall not commercialize such fibrin sealant products for six (6) months after
providing such notice to Omrix. In the event Ethicon provides such notice or
commences such development or commercialization without such notice, then each
of the following shall be deemed terminated and of no further force or effect:
(A) the proviso in clause (a) of Section 2.8, (B) clause (b) of Section 2.8 and
(C) the restrictions on commercialization by Omrix in the United States, Canada
and all their territories and possessions (including Puerto Rico) set forth in
Section 2.8(c)(ii).

      2.9 NO FURTHER GRANTS OR LICENSES. Except for the rights expressly granted
by this Agreement, no further licenses are granted to Omrix or Ethicon in or
under this Agreement, either expressly or by implication.

                                    ARTICLE 3
                    LAUNCH; PROMOTION; PRODUCTION FACILITIES

      3.1 LAUNCH AND COMMERCIAL EXPLOITATION OF THE PRODUCTS.

            (a) Omrix expressly understands and acknowledges that, subject to
Section 2.6 above, Ethicon may be currently involved in, and in the future may
evaluate and/or become involved in, other business opportunities and products
for the hemostasis and sealant markets,


                                       12
<PAGE>

some of which products may compete with the Products. Subject to Section 2.6
above, Ethicon in its sole discretion may, both now and during the term of this
Agreement, alone or in other business or research arrangements with third
parties, sell such competing products and otherwise participate in these and
other markets. Omrix acknowledges that the Development Costs, milestone
payments, purchase prices, and other consideration paid or to be paid by Ethicon
hereunder and under the Development Agreement, together with Ethicon's agreement
to make minimum purchases hereunder, constitute complete and adequate
consideration for Omrix entering into this Agreement and shall constitute
complete satisfaction of any duty, whether express or implied, which could be
imposed upon Ethicon to commercially exploit its rights under this Agreement and
are accepted by Omrix in lieu of any other minimum efforts obligation on the
part of Ethicon. Omrix acknowledges, understands and agrees, that Omrix shall
not challenge in any subsequent claim or action any decision or action regarding
the commercial exploitation of the Products made or taken by any director,
officer, employee or individual acting as agent of Ethicon or its Affiliates in
what such individual subjectively believes to be the best interests of Ethicon
(or such Affiliate), and that they are not required to take into account the
interests of Omrix, unless such decision or action constitutes a material breach
by Ethicon of any of its obligations under this Agreement.

            (b) Ethicon shall have the right to use a contract sales force for
the commercial exploitation of the Products.

      3.2 REGULATORY & QUALITY OVERSIGHT.

            (a) Regulatory Approval: Omrix will use commercially reasonable
efforts to obtain and maintain the necessary Regulatory Approval to market and
sell each Product in the Territory in the Field subject to Ethicon's obligations
to pay for certain costs pursuant to Section 4.1 of the Development Agreement.
For purposes of this Agreement, Omrix shall produce the various Products under
cGMPs and Ethicon shall produce the Ethicon Components under cGMPs.

            (b) Quality Oversight. Ethicon quality and manufacturing staff will
have the right to inspect the Omrix Facilities during regular business hours
and, upon reasonable written notice, may review submissions to Regulatory
Agencies before they are submitted and any correspondence/citations from such
Regulatory Agencies, provided that Omrix has no obligation to delay the
submission or consider any input from Ethicon. Omrix shall give Ethicon copies
of any such submissions in advance of filing them and shall promptly provide
Ethicon with copies of such citations and correspondence from Regulatory
Agencies. Omrix quality and manufacturing staff will have the right to inspect
Ethicon's facilities in which Ethicon Components are manufactured and in which
the Products are held and stored, during regular business hours.

            (c) Agency Relations. Omrix may request that Ethicon cooperate with
Omrix in establishing and maintaining a positive relationship with Regulatory
Agencies concerning the applicable Product and Ethicon will then use
commercially reasonable efforts to do so.

            (d) Changes to Specifications. Omrix shall give Ethicon reasonable
advance written notice of any change, improvement or modification (i) to any
specification for an


                                       13
<PAGE>

Accessory or (ii) to the method, location or process of manufacture or
production of any Accessory or any raw material used in its manufacture, but in
the case of this clause (ii), only if such change, improvement or modification
would require the submission of any amendment, filing or other documentation
with any regulatory authority or otherwise materially adversely affect the
Accessory, the Primary Products with which it is used, or the marketability of
either. The Parties acknowledge that Specifications for Products and the Ethicon
Components are addressed separately under the Development Agreement.

            (e) Quality Agreement. Attached as Exhibit D is the quality
agreement for Quixil as agreed by the Parties (the "Quixil Quality Agreement").
The Parties may enter into a separate quality agreement on a Product-by-Product
basis or may amend the Quixil Quality Agreement to apply to such Product and the
regulations applicable thereto (each, a "Quality Agreement"), which Quality
Agreement shall supercede any contradictory provisions of this Section 3.2 with
respect to the applicable Product.

      3.3 REMEDIATION PLAN. In the event that Omrix encounters production or
other problems that are causing, or Omrix believes are significantly likely to
cause, Omrix to fail to meet its supply obligations hereunder ("Supply
Disruptions"), Omrix will provide Ethicon with written notice of a potential
supply disruption. Within sixty (60) days of such notice, Omrix will develop in
good faith a remediation plan ("Remediation Plan") to redress or avoid such
Supply Disruptions. Ethicon shall have the right to consult and comment on the
Remediation Plan and Omrix will consider its comments in good faith. Upon
completion of the Remediation Plan, Omrix will use its best efforts to
successfully implement the Remediation Plan. Nothing in this Section 3.3 shall
limit Omrix's liability for failure to supply Products in accordance with the
terms of this Agreement. Further, in the event of a Failure to Supply (as
defined below), Omrix will pay certain liquidated damages as set forth in
Section 4.7 hereof. For the purposes of this Agreement, "Failure to Supply"
shall mean, with respect to any Product, (A) the failure of Omrix to both (1)
supply at least sixty-five percent (65%) of Ethicon's binding orders for such
Product which conform to the Forecast for a consecutive three (3) month period
(the "Initial Shortage Period") and (2) supply at least eighty percent (80%) of
Ethicon's binding orders for such Product which conform to the Forecast for the
nine (9) month period that commences with the beginning of the Initial Shortage
Period (such nine month period, a "Shortage Period") or (B) the failure of Omrix
to supply at least ninety percent (90%) of Ethicon's binding orders for such
Product which conform to the Forecast during any Fiscal Year (such a Fiscal
Year, also a "Shortage Period"). Any such shortage under clauses (A) or (B)
below ninety percent (90%) of the quantities ordered by Ethicon pursuant to
binding orders which conform to the Forecast during the Shortage Period is
referred to herein as a "Failure to Supply Shortfall" for such Product (for
instance, if the Binding Orders for the Shortage Period were for 100 units of a
Product and Omrix supplied only 65 units of that Product during that period, the
Failure to Supply Shortfall would be 25 units of that Product).

      3.4 SUPPLY AGREEMENT. Omrix agrees to use commercially reasonable efforts
to enter into (and maintain during the term of this Agreement) a binding supply
agreement on or prior to December 31, 2003 for the supply human plasma with NABI
Biopharmaceuticals substantially in the form attached hereto as Exhibit M.


                                       14
<PAGE>

                                    ARTICLE 4
      MILESTONE PAYMENTS, MINIMUM REQUIREMENTS AND PAYMENT AND ORDER TERMS

      4.1 FIBRIN SEALANT MILESTONE PAYMENTS. Ethicon shall pay to Omrix the
following payments upon the following milestones:

            (a) Upon the first anniversary of the First Commercial Sale of
Quixil by Ethicon (or by Omrix pursuant to an order solicited by Ethicon as
contemplated by Section 2.5), Ethicon shall pay Omrix *** U.S. Dollars (US$***);
and

            (b) Within thirty (30) days following EU Marketing Clearance (as
defined in the Development Agreement) for Quixil to be used to support
hemostasis in general surgery as per the EU Guideline CPMP/BPWG/153/00, Ethicon
shall pay Omrix *** U.S. Dollars (US$***).

      4.2 INVOICES; PURCHASE PRICE; ADJUSTMENTS.

            (a) Invoices. Within five (5) days of the end of each calendar
month, Omrix will invoice Ethicon for the Purchase Price (as defined below) for
each Product and Accessory actually received by Ethicon in compliance with the
terms and provisions of this Agreement in such month. Ethicon shall pay each
such invoice in full within forty-five (45) days of receipt thereof. Omrix may
offer, in its sole discretion to Ethicon, on an invoice-by-invoice basis, that
invoices paid in full within ten (10) days of receipt of such invoice shall be
discounted two percent (2%) from the amount stated on such invoice. The purchase
price (the "Purchase Price") for each Product purchased from Omrix during the
Initial Term shall be as set forth on Exhibit C.

            (b) Cost Adjustments. Within forty-five (45) days of the end of the
second twelve (12) month period after the First Commercial Sale of a Product
hereunder, the Parties shall agree on the Baseline Costs for such Product or
shall appoint an independent expert to make such determination.

                  (i) On the second August 15 (or the next business day if such
date is not a business day) after the end of such second twelve (12) month
period and the August 15 (or the next business day if such date is not a
business day) of every second calendar year thereafter, if there has been a net
increase in the unit costs of Omrix's Cost Variables for a Product since the
determination of the Baseline Costs or the date of the most recent price
adjustment increase pursuant to this sentence, the Parties will use good faith
efforts to agree to an increase in the sample prices, Maximum Transfer Price and
Minimum Transfer Price for such Product for the subsequent full Fiscal Years
(commencing on or around January 1, 2006) that will preserve that portion of
Omrix's percentage gross profit margin on such Product that is solely based on
Omrix's Cost Variables for which there has been a net increase in unit costs,
and any independent expert determining the extent of such cost changes shall
consider only net changes in the unit costs of the Cost Variables (Schedule 4.2
hereto sets forth an example of such calculations).


                                       15
<PAGE>

                  (ii) In addition, if Omrix effectuates a change in
manufacturing a Product as a result of Regulatory Changes at any time, the
Parties will use good faith efforts to agree to a change in the sample price,
Maximum Transfer Price and Minimum Transfer Price for such Product to reflect
variable costs or savings actually incurred by Omrix as a result of such
Regulatory Changes (e.g., if such that additional costs or savings to Omrix of
$*** per ml would increase or decrease the sample prices, Maximum Transfer Price
and Minimum Transfer Price by $*** per ml); provided that, any equipment costs
required to effectuate such Regulatory Changes included in such calculation
shall be amortized for the remaining useful life of such equipment.

                  (iii) Further, if Omrix incurs an extraordinary increase in
raw materials and/or supply costs of more than *** percent (***%) for a Product,
the Parties will use good faith efforts to agree to an increase in the sample
price, Maximum Transfer Price and Minimum Transfer Price for such Product to
reflect such increased costs of raw materials and to preserve that portion of
Omrix's percentage gross profit margin on such Product that is solely based on
an extraordinary increase in raw materials or supply costs of more than ***
percent (***%); provided that such price change shall not be effective until at
least six (6) months after the Effective Date or the most recent adjustment for
extraordinary increases in raw materials costs pursuant to this sentence. If,
subsequent to an increase in the sample price, Maximum Transfer Price or Minimum
Transfer Price to reflect an extraordinary increase in raw materials costs,
those additional costs are subsequently reduced, the Parties will use good faith
efforts to agree to a reduction in the sample price, Maximum Transfer Price and
Minimum Transfer Price for the applicable Product to reflect such reductions in
those costs; provided that such price change shall not be effective until at
least six (6) months after the increase in prices for such extraordinary
increases in raw materials costs pursuant to the prior sentence.

If the Parties cannot agree on the amount of a change in sample price, Maximum
Transfer Price and Minimum Transfer Price for a Product contemplated above
within six (6) weeks of such price change being proposed by a Party, the Parties
shall mutually agree on an independent expert to be responsible for making a
final determination of whether and to what extent the sample price, Maximum
Transfer Price and Minimum Transfer Price will be adjusted and both Parties
agree to abide by the determination of such independent expert. In all cases,
the Parties shall equally share in the cost of such expert. In no event shall
the sample prices, Maximum Transfer Prices and Minimum Transfer Prices be
adjusted to less than the original sample prices, Maximum Transfer Prices and
Minimum Transfer Prices set forth under this Agreement. If the Parties cannot
agree on Baseline Costs, price changes or on an independent expert to determine
such matters within nine (9) weeks of the end of the period from which such
Baseline Costs would be computed or of a proposal of a price change by a Party,
the dispute shall be handled through dispute resolution pursuant to Article 13
hereof.

      4.3 SHIPPING TERMS. All shipments of Products shall be EXW (Ex Works)
(INCOTERMS 2000) Omrix's facility in Israel for all Products other than those
shipped to the European Union, for which the shipping terms shall be EXW Omrix's
facility in Belgium. Each shipment shall be accompanied by a packing slip which
describes the Products and states the purchase order number. To the extent there
is any conflict or inconsistency between this Agreement and any purchase order,
purchase order release, confirmation, acceptance or any similar document, the
terms of this Agreement shall govern.


                                       16
<PAGE>

      4.4 PURCHASES AND MINIMUMS.

            (a) Ethicon agrees to purchase the following quantities of Fibrin
Sealant Products:

                  (i) Ethicon hereby orders from Omrix *** units (1 ml
equivalent) of Quixil, for delivery on or prior to December 31, 2003 and agrees
that this clause (i) constitutes a binding "purchase order" for that amount of
Quixil; provided that Omrix shall reallocate units so ordered to the extent
necessary to supply customers pursuant to Section 2.5 hereof. For the avoidance
of doubt, sales of Quixil in Agency Countries through December 31, 2003 shall
count toward Ethicon's *** unit order for Quixil in this clause.

                  (ii) A minimum quantity of *** units (1 ml equivalent) of
Fibrin Sealant Products during the period commencing on January 1, 2004 and
ending September 30, 2005. Of that *** units (1 ml equivalent) Ethicon hereby
agrees to order *** units (1 ml equivalent) of Quixil for delivery on or prior
to June 30, 2004, an additional *** units (1 ml equivalent) of Quixil for
delivery on or prior to September 30, 2004 and an additional *** units (1 ml
equivalent) of Quixil for delivery on or prior to December 31, 2004. The units
ordered pursuant to clause (i) above shall not count toward the requirements of
this clause (ii). Sales of Fibrin Sealant Products in Agency Countries
commencing on January 1, 2004 and ending September 30, 2005 shall count toward
Ethicon's *** unit purchase requirement of this clause (ii) as Fibrin Sealant
Products purchased by Ethicon. For the period from October 1, 2005 through
December 31, 2005, Ethicon will purchase a minimum quantity of Fibrin Sealant
Products equal to ***% of the quantity of units of Fibrin Sealant sold to
Ethicon in Fiscal Year 2004 (***% of the quantity of units of Fibrin Sealant
purchased by Ethicon in Fiscal Year 2004 prorated by ***%), provided that, for
the avoidance of doubt, such quantities shall include any amounts sold pursuant
to Section 2.5 hereof.

                  (iii) Commencing in Fiscal Year 2006, and every subsequent
Fiscal Year during the Term, a minimum quantity of units (1 ml equivalent) of
Fibrin Sealant Products equal to *** percent (***%) of the quantity of units of
Fibrin Sealant Products sold by Ethicon in the previous Fiscal Year.

            (b) Ethicon agrees to purchase the following quantities of Thrombin
as a stand alone product:

                  (i) A minimum quantity of *** units (each unit being a 5,000
IU vial) during the period commencing on the First Commercial Sale of Thrombin
by Ethicon and ending twenty-four (24) months thereafter.

                  (ii) Commencing in the first full Fiscal Year following such
twenty-four (24) month period in clause (i), and every subsequent Fiscal Year
during the Term, a minimum quantity of units of Thrombin equal to *** percent
(***%) of the quantity of units of Thrombin sold by Ethicon in the previous
Fiscal Year; provided that the minimum for the remainder of the Fiscal Year in
which such twenty-four (24) month period expires shall be *** percent (***%) of
the quantity of units of Thrombin sold by Ethicon in the second twelve (12)


                                       17
<PAGE>

months of such twenty-four (24) month period, prorated based on the portion of
such Fiscal Year then remaining.

            (c) If for any reason Ethicon fails to purchase the applicable
minimum requirements above for a Product during the corresponding period
described in Section 4.4 (as applicable, the "Minimum Period"), then Ethicon
shall pay the Shortfall Amount to Omrix within forty-five (45) days of the end
of the applicable Minimum Period and Omrix's sole and exclusive alternative
remedy for failure to pay such amount shall be to unilaterally terminate by
written notice to Ethicon within sixty (60) days of Ethicon's failure to pay the
Shortfall Amount within the forty-five (45) day period set forth above provided
that Ethicon has not cured such failure to pay the Shortfall Amount within such
sixty (60) day period (1) this Agreement with respect to such Product only or
(2) Ethicon's rights of exclusivity with respect to distribution of such
Product, at Omrix's sole discretion. In the event Ethicon fails to purchase the
minimum quantities of a Product for three consecutive Minimum Periods, then
Omrix's sole and exclusive remedy, other than collection of the Shortfall
Amounts as contemplated above, under this Agreement shall be the right to
terminate this Agreement by written notice to Ethicon within sixty (60) days of
the end of the third consecutive Minimum Period with respect to such Product
only. In no event shall Ethicon's failure to meet any minimum requirements of
Section 4.4 constitute a breach of this Agreement; provided that the Parties
each acknowledge that failure to pay the resulting Shortfall Amount shall
constitute a material breach of this Agreement. Omrix shall not be obligated to
deliver any Products in exchange for the Shortfall Amount.

            (d) In the event that Ethicon's annual unit sales volume of Fibrin
Sealant Products shall decrease by ***% or more, year over year, for ***
consecutive Fiscal Years, then Omrix shall have the right, but not the
obligation, by written notice to Ethicon given no later than sixty (60) days
after the end of the second such consecutive Fiscal Year to terminate this
Agreement with respect to the Fibrin Sealant Products.

            (e) In the event that Ethicon's annual unit sales volume of Thrombin
shall decrease by ***% or more, year over year, for *** consecutive Fiscal
Years, then Omrix shall have the right, but not the obligation, by written
notice to Ethicon given no later than sixty (60) days after the end of the
second such consecutive Fiscal Year to terminate this Agreement with respect to
Thrombin.

            (f) Ethicon shall not be deemed as having failed to meet any of its
purchase or sales minimums (including, but not limited to, those set forth in
Sections 4.4 (a) - (e)) for a Product to the extent such failure is a result of
(a) Omrix's failure to supply the quantities of such Product ordered in
accordance with this Agreement by Ethicon (except for such failures resulting
from Ethicon's failure to supply Ethicon Components, if applicable), (b) a
recall, field action or government initiated action with respect to such Product
that materially adversely affects Ethicon's ability to distribute such Product
in conformance with Applicable Legal Requirements, (c) infringement by a third
party of any patent of Omrix relating to such Product in the Territory which
infringement results in a competitive product that has an adverse effect on
Ethicon's sales of such Product, or (d) a Force Majeure Event.

      4.5 FORECASTS AND PURCHASE ORDERS.


                                       18
<PAGE>

            (a) Forecasts. During the term of this Agreement, Ethicon shall
provide to Omrix, no later than the first day of each calendar month, a
non-binding, good faith written estimate (the "Forecast") by month of Ethicon's
quantity requirements for each Product for the next twelve (12) months on a
country-by-country basis and with the fill sizes and delivery dates SPECIFIED;
provided, however, (1) the first five (5) months of each Forecast shall be
binding on Ethicon and Ethicon shall submit purchase orders to Omrix for the
Products included in such five (5) month period in accordance with paragraph (b)
below and (2) purchase orders submitted by Ethicon shall be for at least ***
percent (***%) of the amounts forecast for the sixth through twelfth months of
such Forecast (and shall not submit purchase orders for Product in excess of ***
percent (***%) of the amounts forecast for each of those months, unless
otherwise mutually agreed on a case-by-case basis). The binding orders set forth
in Section 4.4(a)(i) and for January 2004 and February 2004 in the initial
Forecast are exempt from the five (5) month prior notice requirement; provided
that fill sizes shall be as set forth on the Forecast attached hereto. Ethicon
agrees that there shall be a five (5) month lead time for orders of Products
with fill sizes and delivery dates, except that Ethicon need not provide the
county-by-country breakdown for the quantities in the Forecast or a binding
order until three (3) months prior to the requested delivery date. The Forecast
shall be updated on a rolling monthly basis; provided that new Forecasts cannot
change the binding five (5) month portion of the Forecast. Notwithstanding
anything to the contrary herein, the Parties agree that, with respect to the
Hemostatic Pad Product and any Improved Products, the lead-time for forecasts
may be different than five months and shall be mutually agreed by the Parties
prior to the commercial production of those products. In addition,
notwithstanding anything to the contrary herein, Omrix shall not be obligated to
supply a number of Products which exceeds the Long Term Forecast for such
products unless (i) such amount of product is within Omrix's capacity (taking
into account Omrix's obligations to supply Quixil to third parties in other
territories) or (ii) Ethicon provides Omrix with at least three (3) years prior
written notice of an increase in the Long Term Forecast. Ethicon further agrees
that, at least once each year, it will update in good faith the Long Term
Forecast for the subsequent ten (10) year period and that, as Products become
available for sale which are not set forth on the Long Term Forecast, Ethicon
shall add such Products to the Long Term Forecast. Ethicon's initial twelve (12)
month forecast is attached hereto as Exhibit E.

            (b) Purchase Orders. Except as provided in Section 4.4(a), Ethicon
shall place an initial binding purchase order for Products with Omrix for the
first five (5) month period contemplated above by written or electronic purchase
order (or by any other means agreed to by the Parties) and shall, each month
thereafter, submit a binding order for what shall then be the fifth (5th) month,
by written or electronic purchase order (or by any other means agreed to by the
Parties) to Omrix each calendar month. Each purchase order shall specify fill
sizes, product quantities and delivery dates, provided that Ethicon need not
provide the county-by-country breakdown for the quantities in the purchase order
until three (3) months prior to the requested delivery date. The delivery dates
specified in such purchase orders shall be no sooner than (60) days following
the date on which the applicable purchase order is received by Omrix. Omrix
agrees to use its best efforts to deliver Products within ten (10) days of the
delivery dates specified in each purchase order. Omrix shall be obligated to
supply no less than 90% percent of the Products that were included as a binding
portion of the Forecast for a specified month. For quantities of any Product
ordered during any calendar month that exceed 100% but does not exceed 120% of
the quantity of such Product in the most recent Forecast for such month, Omrix


                                       19
<PAGE>

shall have an additional 90 days to supply the quantity of such Product that
exceeds 100%. Omrix is under no obligation to supply quantities of a Product in
excess of ninety percent (90%) (except as otherwise provided in clause (a)
above), though Omrix will discuss in good faith with Ethicon the possibility of
provision of additional quantities of such Product upon Ethicon's request.

            (c) Inventory; Failure to Supply Components. In the process of
forecasting, ordering and filling orders under this Agreement, the Parties agree
to work together to in an attempt to optimize the balance between manufacturing
efficiencies for Omrix and inventory control efficiencies for Ethicon. Without
limiting the foregoing, Omrix agrees not to deliver Products to Ethicon more
than five days in advance of the delivery date specified in the purchase order
for such Products. Further, Ethicon hereby agrees and acknowledges that Omrix
shall not be responsible for failure to supply Products to the extent such
failure is caused by Ethicon's failure to supply Ethicon Components in the
quality and number required for Omrix to produce such Products.

      4.6 PRODUCTION PLAN. Within 60 days after delivery to Omrix of the first
Forecast for any Product, Omrix shall provide to Ethicon its five (5) month
production plan for such Product (each, a "Production Plan") for such Product
for completing implementation of procedures and facilities for producing the
Products that satisfy the first six (6) months of the Forecast. In its
manufacture and supply of each Product hereunder, Omrix agrees to use
commercially reasonable efforts to comply with the Production Plan for such
Product. Ethicon may request other changes and Omrix agrees to consider such
other changes in good faith. The Production Plan will be updated as necessary to
reflect updated Forecasts; provided that nothing herein shall reduce or restrict
Ethicon's or Omrix's respective binding commitments pursuant to Section 4.5
above. In addition, each Production Plan will include a plan and projected
timetable for the establishment of an alternate production facility in the event
Omrix's primary production facility is incapable (either by reason of force
majeure, regulatory action or otherwise) of supplying Products as contemplated
by this Agreement.

      4.7 LIQUIDATED DAMAGES. In the event a Failure to Supply occurs during a
Fiscal Year, within forty-five (45) days of the end of such Fiscal Year, Omrix
shall pay liquidated damages to Ethicon, calculated as fifty percent (50%) of
the most recently calculated Average Transfer Price multiplied by the Failure to
Supply Shortfall for the applicable Product under this Agreement during the
applicable Shortage Period; provided that (i) liquidated damages resulting from
a Failure to Supply in any Shortage Year shall not exceed one hundred percent
(100%) of the aggregate Purchase Prices paid to Omrix (for the applicable
Product only) pursuant to Section 4.2 hereof in the Fiscal Year preceding such
Shortage Year and (ii) nothing in this Section 4.7 shall limit Omrix's liability
in the event of any willful or intentional breach of its supply obligations
under this Agreement; provided further that, Ethicon shall not seek any
additional damages for a Failure to Supply Shortfall for which Ethicon has
received liquidated damages hereunder unless Ethicon has provided notice to
Omrix that it may seek an alternative remedy in lieu of liquidated damages prior
to the later of (A) forty-five (45) days of the end of such Fiscal Year and (B)
thirty (30) days after Ethicon has received payment of such liquidated damages;
provided that, Ethicon shall return with such written notice to Omrix all
liquidated damages relating to that portion of a Failure to Supply for which
Ethicon asserts an intention to


                                       20
<PAGE>

seek such an alternative remedy. For the avoidance of doubt, a breach of Omrix's
supply obligations under this Agreement resulting from Omrix's negligence or a
Force Majeure Event shall not be considered a willful or intentional breach, nor
shall a pro rata distribution of Products to all of Omrix's customers in the
event of an unintentional constraint in supply of such Products. Both Parties
agree that Ethicon's rights under this Section 4.7 are in lieu of any other
remedy for Omrix's failure to meet its supply obligations hereunder and that the
liquidated damages under this Section 4.7 shall be Ethicon's sole and exclusive
remedy in law or equity for Omrix's failure to meet its supply obligations
hereunder (other than termination of this Agreement pursuant to Section 11.3
hereof and for any willful or intentional breaches of Omrix's supply obligations
unless Ethicon has provided notice to Omrix that it may seek additional damages
as an alternative to liquidated damages prior to the later of (A) forty-five
(45) days of the end of such Fiscal Year and (B) thirty (30) days after Ethicon
has received payment of such liquidated damages).

      4.8 CURRENCY. All Quarterly Amounts for Ethicon's sales to end users in
areas of the European Union that have adopted the Euro will be paid in Euros.
For sales in Europe not included in the Euro zone, their amount would be
converted into Euros at the average exchange rate of the relevant currency
against Euros for the five (5) business days immediately prior to the end of the
Fiscal Quarter to which the Quarterly Amount relates, as published by the
European Central Bank. All Quarterly Amounts for sales in other countries shall
be invoiced in U.S. Dollars. Any sales in countries outside of Europe and the
United States shall be converted into US Dollars at the average rate published
by the Federal Reserve Bank of New York for the five (5) business days
immediately prior to the end of the Fiscal Quarter to which the Quarterly Amount
relates.

      4.9 OVERDUE INTEREST. All amounts due and owing to either Party hereunder
but not paid by the other Party on the due date thereof shall bear interest
compounded monthly at the rate of the lesser of: (i) the prime rate of interest
plus 2% per annum; and (ii) the maximum lawful interest rate permitted under
applicable law. Such interest shall accrue on the balance of unpaid amounts from
time to time outstanding from the date on which portions of such amounts become
due and owing until payment thereof in full and shall be payable in the same
currency as the overdue payment. For any day in any calendar month, the prime
rate of interest shall be deemed to be (i) for payments due in U.S. Dollars ($),
the prime rate of interest published in the Wall Street Journal on the last
business day of the immediately preceding month and (ii) for payments due in
Euros (E), the prime rate of interest for U.S. Dollars published in the Wall
Street Journal on the last business day of the immediately preceding month plus
(1) the one month LIBOR rate applicable to Euros published in the European
edition of the Wall Street Journal on the last business day of the immediately
preceding month less (2) the one month LIBOR rate applicable to U.S. Dollars
published in the New York edition of the Wall Street Journal on the last
business day of the immediately preceding month.

      4.10 PRODUCT WARRANTY.

            (a) Omrix warrants as manufacturer that each of the Products sold to
Ethicon hereunder shall, upon delivery and for a period ending on the expiry
date of such Product: (i)


                                       21
<PAGE>

comply with the Specifications, (ii) be free from defects in materials and
workmanship, and (iii) be manufactured in compliance with all Applicable Legal
Requirements.

            (b) Warranty claims shall not apply to damaged Product to the extent
such damage is caused in whole or in part by: (i) use, handling, installation,
operation, maintenance, or storage that is negligent or otherwise not in
accordance with Omrix's written instructions; (ii) repair, alteration, or
modifications performed by anyone other than Omrix or a Party authorized by
Omrix; (iii) use in any manner or procedure other than those for which it is
labeled or (iv) Ethicon Components that do not conform to Ethicon's warranties
set forth herein.

            (c) Omrix will replace defective Product under warranty at Omrix's
own cost and expense within ninety (90) days of notice by Ethicon that the
Product is defective.

      4.11 ETHICON COMPONENT WARRANTY.

            (a) Ethicon warrants to Omrix that each of the Ethicon Components
provided to Omrix hereunder shall upon delivery and, for a period ending on the
expiry date of such Ethicon Component: (i) be free from defects in materials and
workmanship, (ii) comply with the Specifications therefor and (iii) be
manufactured in compliance with all Applicable Legal Requirements.

            (b) Warranty claims under this Section 4.11 shall not apply to
damaged Ethicon Component or Product to the extent such damage is caused in
whole or in part by: (i) use, handling, installation, operation, maintenance, or
storage that is negligent or otherwise not in accordance with Omrix's and
Ethicon's written instructions; (ii) repair, alteration, or modifications
performed by anyone other than Ethicon or a Party authorized by Ethicon; or
(iii) use in any manner or procedure other than those for which it is labeled.

            (c) Ethicon will replace defective Ethicon Components under warranty
at Ethicon's own cost and expense within ninety (90) days of notice by Omrix
that the Ethicon Components are defective.

                                    ARTICLE 5
              PACKAGING, PROMOTIONAL MATERIAL, TRADEMARKS, TRAINING

      5.1 PACKAGING; INCOMPLETE PRODUCT SHIPMENTS; CLAIMS FOR BREACH OF
Warranty.

            (a) Unless Ethicon requests otherwise, all Products ordered by
Ethicon shall be packed for shipment and storage in accordance with the
Specifications. Ethicon may notify Omrix of any special packaging requirements.
Ethicon will be responsible for any incremental costs in excess of Omrix's
standard commercial practices that result from any special packaging
requirements. The Parties agree and acknowledge that the design of the labeling
for a Product shall be performed by Ethicon, subject to the reasonable approval
of the manufacturer to the extent required by Applicable Legal Requirements.
Ethicon shall provide artwork for the printing and packaging of labels to Omrix.
Printing and packaging of labels with Products shall be performed by Omrix.


                                       22
<PAGE>

            (b) Within a reasonable period, but no more than ten (10) business
days after receipt, Ethicon shall visually inspect each shipment of the Product
received by Ethicon for quantity. All claims for incomplete shipments must be
made in writing to Omrix within ten (10) business days of Ethicon's discovery of
the non-conformity. Any such claims not made within such period shall be deemed
waived and released, except as to shortages that cannot be detected at the time
of receipt, for example, because of Product packaging.

            (c) Ethicon may submit claims for breach of warranty at any time
during the warranty period provided in Section 4.10(a). If Ethicon submits a
claim for breach of warranty, then as promptly as possible after the submission
of the claim to Omrix, Omrix shall instruct Ethicon whether to return or destroy
the Products in question and Omrix shall provide Ethicon with replacement
Products. If Omrix agrees with the claim, then Omrix shall pay for all costs of
returning or destroying the Products that are the subject of such claim. Omrix
shall bear the risk of loss for such Products, beginning at such time as they
are taken at Ethicon's premises for return delivery. If Omrix does not agree
with the claim, then the parties agree to submit the Products in question to an
independent party which has the capability of testing the Products to determine
whether or not they comply with the Specifications. In the event the parties
cannot agree upon such independent party, then such dispute shall be resolved
pursuant to Article 13. The losing party shall bear all costs and expenses
related to such testing and, if Omrix is the losing party, pay for all costs of
returning or destroying the Products and sending the replacement Products. If
Omrix fails to instruct Ethicon as to the disposition of defective Products,
Ethicon may dispose of such defective Products as it sees fit and Omrix shall
promptly (i) reimburse Ethicon for all direct, out-of-pocket costs incurred by
Ethicon in respect of such disposition, and (ii) replace such defective Product
at Omrix's own cost and expense.

            (d) The same rights and obligations set forth in this Section 5.1
shall apply to the packaging and shipment of Ethicon Components, with references
to Products meaning Ethicon Components, references to Omrix meaning Ethicon and
references to Ethicon meaning Omrix.

      5.2 PROMOTIONAL MATERIAL. Ethicon shall submit to Omrix any promotional
copy prior to using it to promote the Products and Ethicon shall implement any
changes required by Omrix to all such materials to the extent such changes are
required for Omrix to comply with Applicable Legal Requirements. Except for any
statements added by Omrix, Ethicon shall be solely liable for all statements and
representations in its promotional material regarding a Product that are beyond
Omrix's warranty obligations to Ethicon with respect to such Product.

      5.3 TRADEMARKS. Omrix hereby grants Ethicon a fully paid up,
non-transferable, exclusive license within the Territory to use the Quixil name,
trade mark and trade dress in connection with the distribution of Quixil.
Ethicon shall have the right to discontinue its use of the Quixil name, trade
mark and trade dress at any time at its sole discretion. Ethicon may use any
other name, trade mark and trade dress (to which Ethicon has rights) in
connection with distribution of the Product currently known as Quixil, subject
to Applicable Legal Requirements. All Primary Products (other than Quixil) and
all Improved Products shall be packaged and marketed under trademarks and trade
dress of Ethicon, except that Ethicon shall have the right and the obligation to
identify, on all promotional literature, trade dress and package inserts for


                                       23
<PAGE>

each Product, Omrix as the source of the biologic components of such product,
and Omrix's name shall, on each document or other materials, be printed in
compliance with Applicable Legal Requirements. Omrix hereby gives Ethicon a
fully paid up, non-exclusive, non-transferable license within the Territory to
use the Omrix name on the Products. Except as set forth above in this Section,
neither Party is authorized to use the other's name or any trademark, service
mark or tradename of the other Party in connection with any aspect of its
business.

      5.4 TRAINING. Omrix shall use all reasonable efforts provide such
assistance as Ethicon shall request in the development of training manuals and
training programs for customers and Ethicon's sales, technical support and field
repair organizations. Omrix will train the technical staff appointed by Ethicon
during one business week per year, as agreed by the Parties. All expenses for
travel, accommodation and meals incurred in connection with such training shall
be borne by Ethicon.

                                    ARTICLE 6
                             INSPECTION AND TESTING

      6.1 BY ETHICON. Ethicon shall have the right to inspect and test during
normal business hours the facilities used by Omrix to perform the production,
testing, packaging, labeling, storage and shipment of the Products, and Omrix's
operating procedures and records, for compliance with the Applicable Legal
Requirements and other requirements of this Agreement, from time to time during
the Term, but no more frequently than twice in any twelve (12) month period,
with no less than five (5) weeks advance written notice, and Omrix shall use
commercially reasonable efforts to meet the scheduled date, though Ethicon
acknowledges that the specific date of such inspection may vary by several days.
Omrix shall cooperate with Ethicon's reasonable requests in any such inspection.
At its option, Ethicon may conduct an initial inspection within ninety (90) days
after the Effective Date. Omrix shall provide Ethicon access to such facilities
and reasonable assistance, without charge, to Ethicon's representatives during
normal business hours (including any normal shifts) when requested. Omrix shall
obtain comparable inspection and testing rights specified in this Section 6.1
from any supplier of raw materials or components incorporated in any Products.
Ethicon's inspection and testing, or failure to inspect and/or test, shall not
relieve Omrix of any liability for noncompliance or defects. Prior to producing
any Products for use in clinical or preclinical trials, Omrix shall remedy any
reasonable issues raised by Ethicon during the initial inspection and any
subsequent inspections so that Omrix can become and remain in accordance with
any Quality Agreement agreed by the Parties. Omrix agrees to consider in good
faith all recommendations concerning any material deficiencies and problems
found.

      6.2 BY OMRIX. Omrix shall have the right to inspect and test during normal
business hours the facilities of Ethicon used to manufacture the Ethicon
Components supplied to Omrix, or package, store and distribute the Products, and
Ethicon's operating procedures and records, for compliance with the Applicable
Legal Requirements and other requirements of this Agreement, from time to time
during the Term, but no more frequently than twice in any twelve (12) month
period, with no less than five (5) weeks advance written notice, and Ethicon
shall use commercially reasonable efforts to meet the scheduled date, though
Omrix acknowledges that the specific date of such inspection may vary by several
days. Ethicon shall cooperate with


                                       24
<PAGE>

Omrix's reasonable requests in any such inspection. At its option, Omrix may
conduct an initial inspection within 90 days after the Effective Date. Ethicon
shall provide Omrix access to its facilities and reasonable assistance, without
charge, to Omrix's representatives during normal business hours (including any
normal shifts) when requested. Ethicon shall obtain comparable inspection and
testing rights specified in this Section 6.2 from any supplier of Ethicon
Components and any Affiliate serving on Ethicon's behalf. Omrix's inspection and
testing, or failure to inspect and/or test, shall not relieve Ethicon of any
liability for noncompliance or defects. Prior to producing any Ethicon
Components for use in the Products to be used for clinical or preclinical
trials, Ethicon shall remedy any reasonable issues raised by Omrix during the
initial inspection and any subsequent inspections. Ethicon agrees to consider in
good faith all recommendations concerning any material deficiencies and problems
found.

                                    ARTICLE 7
      RECORDS, REPORTS, ADVERSE EVENTS, GOVERNMENT INSPECTIONS AND RECALLS

      7.1 BATCH RELEASE PROTOCOL. Omrix shall notify Ethicon within five (5)
days after Regulatory Agency has approved a lot of Product for release and shall
provide Ethicon with copies of the documentation required by Applicable Legal
Requirements.

      7.2 PRODUCTION REPORTS. Omrix will provide to Ethicon on a monthly basis a
production report indicating the amount of Ethicon Components used in such
month, work-in-process balances, the pipeline of batches of Product awaiting
release by regulatory authorities and the quantities of Ethicon Components
required to be shipped by Ethicon.

      7.3 RECORDS.

            (a) General. Both Parties shall completely and accurately maintain
all documents relating to performance under this Agreement, including without
limitation records, files, reports, manuals, studies, photographs, negatives,
calibration and performance records, development and validation records, change
control documents, and records management documents (collectively, "Documents").
Each Party will make its Documents available, during normal business hours, to
the other Party or its designee and to persons and/or entities to which the
other Party is required by law or regulation to grant access to such Documents,
within three (3) business days upon request at any time during performance under
this Agreement and for a period of four (4) years after termination of this
Agreement. The other Party may request a longer retention period by written
notice to the Party maintaining such Documents, which request shall not be
unreasonably denied; provided that in lieu of maintaining Documents for a longer
period pursuant to such request, a Party may elect to turn over such Documents
to the requesting Party at its expense.

            (b) Record Retention. Omrix shall maintain all documentation
(manufacturing records, packaging records, inspection records, QA records, batch
cards/records etc.) generated during the manufacturing process for a minimum of
the life of the Product, plus two (2) years. Records of Product distribution and
storage shall be retained in accordance with Applicable Legal Requirements.


                                       25
<PAGE>

            (c) Distribution and Use.

                  (i) Omrix shall maintain records of the use of
Ethicon-supplied Ethicon Components delivered to Omrix in accordance with
Applicable Legal Requirements. Such records shall be maintained in a manner that
assures that the use of Ethicon-supplied Ethicon Components can be rapidly and
unequivocally accounted for and the Products into which such Ethicon-supplied
Ethicon Components was processed can be identified, and that such records are
made available to Ethicon upon request. Omrix shall assist Ethicon in
identifying, tracking and controlling the use of any Ethicon-supplied Ethicon
Components identified as unsuitable for processing or incorporating into
Product. Omrix shall inform Ethicon as to the disposition of any
Ethicon-supplied Ethicon Components, within fifteen business days after the
receipt of a written request for such information from Ethicon.

                  (ii) Ethicon shall maintain records of each lot of Product
delivered to Ethicon in accordance with Applicable Legal Requirements. Such
records shall be maintained in a manner that complies with Applicable Legal
Requirements. Ethicon shall inform Omrix as to the distribution of each lot of
Product based on records it maintains in accordance with Applicable Legal
Requirements, within 30 days after the receipt of a written request for such
information from Omrix.

                  (iii) Each Party shall have the right to review and audit the
other Party's maintenance of records pursuant to this Section 7.3 and recommend
reasonable changes. The audited Party shall seriously consider and use
commercially reasonable efforts to implement any such reasonable changes
recommended by the other Party. If the audited Party decides not to implement
any changes recommended by the other Party, it shall notify the other Party in
writing of the reasons for its decision not to implement such changes. If the
other Party believes any such recommended change not implemented will negatively
and materially affect the ability of the Ethicon Components and/or Product to be
rapidly and unequivocally accounted for, such Party may refer the issue for
resolution in accordance with Article 13.

            (d) Of Books and Records. Ethicon shall keep, and shall cause any of
its Affiliates appointed by Ethicon to act as sub-distributors hereunder to
keep, full, true and accurate books of account containing all particulars and
such other records, together with reasonable supporting documentation, as may be
necessary for the purpose of determining the Net Sales of the Products, the fees
and other consideration payable by Ethicon under this Agreement and Ethicon's
compliance in other respects with obligations under this Agreement. All such
books of account, records and reasonable supporting documentation shall be made
available at the principal place of business of Ethicon and shall be open for
inspection at a time mutually acceptable to the Parties, during normal business
hours no more frequently than once each six months for four years following the
end of the calendar year to which they pertain (and access shall not be denied
thereafter if reasonably available) by any independent internationally
recognized certified public accountant retained by Omrix for the purpose of
verifying Ethicon's fee reports and/or compliance in other respects with
obligations under this Agreement. Ethicon shall promptly pay to Omrix the amount
of such underpayment (together with interest, in accordance with Section 4.9,
from the date payment was originally due until the date paid) and, if such
records are insufficient for the foregoing purposes or any such inspection
discloses an


                                       26
<PAGE>

underpayment of five percent (5%) or more of the amount of payments actually due
for any annual period, then, in addition to any other rights and remedies
available to Omrix under this Agreement, Ethicon will pay Omrix's reasonable
cost of such inspection after receipt of the bill or invoice for such
inspection.

      7.4 REGULATORY AUTHORITY ACCESS TO RECORDS.

            (a) By Omrix. Omrix shall provide Ethicon and Regulatory Agencies
access to all documents relating to its performance under this Agreement to the
extent required by Applicable Legal Requirements or for Ethicon to comply with
Applicable Legal Requirements. Omrix shall allow access during normal business
hours to all such documents and to its facilities where manufacturing under this
Agreement occurs, without prior advance notice, for purposes of Regulatory
Agency inspections or other requests for access by a Regulatory Agency in
accordance with Applicable Legal Requirements. Omrix shall provide access to all
such documents in any Affiliate's possession and to any facilities of Affiliates
where services relating to this Agreement are performed.

            (b) By Ethicon. Ethicon shall provide Omrix and Regulatory Agencies
access to all documents relating to the manufacture of the Ethicon Components
relating to this Agreement to the extent required by Applicable Legal
Requirements or for Omrix to comply with Applicable Legal Requirements. Ethicon
shall allow access during normal business hours to all such documents in
Ethicon's possession and to its facilities where services relating to this
Agreement are performed, without prior advance notice, for purposes of
Regulatory Agency inspections or other requests for access by a Regulatory
Agency in connection with Products and in accordance with Applicable Legal
Requirements. Ethicon shall provide access to all such documents in any
Affiliate's possession and to any facilities of Affiliates where services
relating to this Agreement are performed.

      7.5 PHARMACOVIGILANCE. Ethicon will report all adverse events to Omrix who
will file MedWatch reports to FDA or comparable reports to other Regulatory
Agencies, to the extent required. Omrix will inform Ethicon of any adverse
reports directly sent to Omrix.

            (a) Notification of Adverse Events. Ethicon and Omrix shall each
give the other prompt written notice of any information either of them receives
regarding the safety of the Ethicon Components and/or the Products, including
any confirmed or unconfirmed information on adverse, serious or unexpected
events associated with the use of the Ethicon Components and/or the Products.
For serious, unexpected events, notice must be given by telephone within 72
hours after receipt of the information, followed by written notice promptly
thereafter (which written notice shall be delivered in no event more than 5
calendar days after receipt of such information. Each Party shall cooperate with
the other in connection with the investigation of any such adverse, serious or
unexpected events. Omrix shall be responsible for filing any reports and
performing any analysis required by the applicable Regulatory Agency in or
outside of the Territory. Each Party shall have the right to conduct audits
during normal business hours and make other reasonable inquiries concerning the
other Party's reporting system to ensure that such system functions properly and
is in compliance with the Applicable Legal Requirements.


                                       27
<PAGE>

            (b) Customer Notification of Adverse Reactions. In the event during
the course of a preliminary investigation related to a report of a serious
adverse reaction, preliminary evidence is obtained indicating that the use of
Products of certain lots, according to indications and dosage, may have caused
specific adverse reactions, each customer that received product from such
suspect lots shall be notified by the Party that sold or otherwise provided such
Product, itself or through its Affiliates or third parties (other than the other
Party) to such customer and cautioned that any unused containers of the suspect
lots should be withheld from use, pending the outcome of more definitive
investigations and evaluations, with a copy of such notice to the applicable
Regulatory Agency if required and to the other Party. Any and all of the
foregoing actions will be executed with Regulatory Agency concurrence to the
extent required by law.

            (c) Recalls and Withdrawals. In the event of any market recall or
withdrawal of any of the Products or the Ethicon Components, whether voluntary
or involuntary: (a) Omrix shall be responsible for all costs in connection
therewith unless such market recall or withdrawal arises out of or results from
the use, shipment or storage of such Product by or on behalf of Ethicon or any
of its Affiliates or out of the failure of the Ethicon Components supplied by
Ethicon or its Affiliates to conform to Ethicon's warranties with respect
thereto; provided however, Omrix shall be responsible for all costs in
connection therewith to the extent such market recall or withdrawal arises out
of or results from the handling or storage of the Ethicon Components by Omrix or
from the production, shipment, storage or sale of such Product by or on behalf
of Omrix or any of its Affiliates; and (b) Ethicon and Omrix shall share equally
all costs in connection therewith to the extent both Parties or neither Party is
responsible for causing the recall or withdrawal. Ethicon shall implement any
such market recall or withdrawal in the Territory. The Party implementing the
recall or withdrawal shall invoice the other Party for such Party's share of any
costs associated with the recall or withdrawal as provided in (a) and (b) above,
which invoice shall be paid by such Party promptly after the receipt thereof. In
any case, the Party to this Agreement having the Regulatory Approval shall be
responsible for managing product recalls or withdrawals, in consultation with
the other Party.

            (d) Assistance. Each Party shall provide the other Party such
information and assistance as is reasonably requested by such Party to comply
with its obligations under this Section 7.5.

      7.6 REGULATORY FINDINGS. Both Parties shall have the right to review
during the term of this Agreement and for a period of five (5) years thereafter
all audit findings or notices of a Regulatory Agency as such may bear upon any
Product or Ethicon Component, including formal notice about the initiation of
any compliance or enforcement action, investigation, inspection, review, or
inquiry by FDA or other Regulatory Agency. Each Party shall notify the other
Party of any such audit findings or notices promptly and make such audit
findings and notices available to the other Party within five (5) business days
of receipt. Any deficiencies found as a result of an inspection by a Regulatory
Agency shall be promptly remedied. Any possible deficiencies identified as a
result of either Party's inspection of the other Party's activities hereunder
shall be resolved in a mutually agreeable and timely manner.


                                       28
<PAGE>

      7.7 QUALITY AGREEMENTS. This Section 7 shall be superceded by any
contradictory terms relating to a Product agreed by the Parties in a Quality
Agreement for such Product.

                                    ARTICLE 8
                    REPRESENTATION AND WARRANTIES; COMPLIANCE

      8.1 OMRIX REPRESENTATIONS AND WARRANTIES. Omrix represents and warrants to
Ethicon that in addition to the Product warranty in Section 4.10 above:

            (a) all necessary corporate and other authorizations, consents and
approvals which are necessary or required for Omrix's execution and performance
of this Agreement have been duly obtained;

            (b) the execution and performance of this Agreement by Omrix will
not (i) violate any provision of law, statute, rule or regulation or any ruling,
writ, injunction, order, judgment or decree of any court, administrative agency
or other governmental body to which Omrix is subject, or (ii) conflict with or
result in any breach of any of the terms, conditions or provisions of, or
constitute a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties or assets of Omrix under, its
organizational documents, as amended to date, or any material note, indenture,
mortgage, lease, agreement, contract, purchase order or other instrument,
document or agreement to which Omrix is a party or by which it or any of its
properties or assets is bound or affected; and

            (c) the Products are being sold to Ethicon free and clear of all
liens, claims and encumbrances of any nature.

      8.2 ETHICON REPRESENTATIONS AND WARRANTIES. Ethicon represents and
warrants to Omrix that in addition to the Ethicon Component warranty in Section
4.11 above:

            (a) all necessary corporate and other authorizations, consents and
approvals which are necessary or required for Ethicon's execution and
performance of this Agreement have been duly obtained;

            (b) the execution and performance of this Agreement by Ethicon shall
not (i) violate any provision of law, statute, rule or regulation or any ruling,
writ, injunction, order, judgment or decree of any court, administrative agency
or other governmental body or (ii) conflict with or result in any breach of any
of the terms, conditions or provisions of, or constitute a default (or give
raise to any right of termination, cancellation or acceleration) under, or
result in the creation of any lien, security interest, charge or encumbrance
upon any of the properties or assets of Ethicon under, its organizational
documents, as amended to date, or any material note, indenture, mortgage, lease,
agreement, contract, purchase order or other instrument, document or agreement
in which Ethicon is a party or by which it or any of its properties or assets is
bound or affected; and

            (c) The Ethicon Components are being delivered to Omrix free and
clear of all liens, claims and encumbrances of any nature.


                                       29
<PAGE>

      8.3 DISCLAIMER OF WARRANTIES. EXCEPT AS EXPRESSLY SET FORTH IN THIS
AGREEMENT OR THE DEVELOPMENT AGREEMENT:

            (a) NEITHER PARTY MAKES ANY REPRESENTATION OR WARRANTY TO THE OTHER
PARTY OF ANY KIND, INCLUDING WITHOUT LIMITATION ANY IMPLIED WARRANTY OF
MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR NONINFRINGEMENT.

            (b) NEITHER PARTY MAKES ANY WARRANTIES, EXPRESS OR IMPLIED,
CONCERNING THE SUCCESS OF THE DEVELOPMENT OR THE COMMERCIAL EXPLOITATION OF THE
PRODUCTS.

      8.4 CERTAIN COMPLIANCE OBLIGATIONS. Omrix agrees to comply with the
applicable provisions of any Federal or state law and all executive orders,
rules and regulations issued thereunder, whether now or hereafter in force,
including Executive Order 11246, as amended, Chapter 60 of Title 41 of the Code
of Federal Regulations, as amended, prohibiting discrimination against any
employee or applicant for employment because of race, color, religion, sex or
national origin; Section 60-741.1 of Chapter 60 of 41 Code of Federal
Regulations, as amended, prohibiting discrimination against any employee or
applicant for employment because of physical or mental handicap; Section
60.250.4 of Chapter 60 of 41 Code of Federal Regulations, as amended, providing
for the employment of disabled veterans and veterans of the Vietnam era; Chapter
1 of Title 48 of the Code of Federal Regulations, as Amended, Federal
Acquisition Regulations; Sections 6, 7 and 12 of the Fair Labor Standards Act,
as amended, and the regulations and orders of the United States Department of
Labor promulgated in connection therewith; and any provisions, representations
or agreements required thereby to be included in this Agreement are hereby
incorporated by reference. If any Product is ordered by Ethicon under U.S.
government contracts, Omrix agrees that all applicable federal statutes and
regulations applying to Ethicon as a contractor are accepted and binding upon
Omrix insofar as Omrix may be deemed a subcontractor.

      8.5 COMPLIANCE WITH POLICY ON THE EMPLOYMENT OF YOUNG PERSONS. Omrix and
its officers have read and understand the Johnson & Johnson Policy on the
Employment of Young Persons (the "Policy") attached as Exhibit J hereto. In the
manufacture and supply of all Products hereunder, Omrix shall employ young
persons only as permitted by the Policy. Omrix shall permit representatives of
Ethicon to enter Omrix's premises at any reasonable time, and Omrix shall ensure
that representatives of Ethicon shall be permitted to enter the premises of any
subcontractor involved in the manufacture or supply of any Products (or
component thereof) at any reasonable time, in order to inspect relevant
employment, health and safety records and to observe the manufacturing process.
Omrix (and its subcontractors) shall maintain the records necessary to
demonstrate compliance with the Policy and shall provide to Ethicon a written
certification of such compliance annually during the term of this Agreement. If
Omrix shall fail to comply with this Section 8.5 and fail to cure such
noncompliance within thirty (30) days of receipt of notice from Ethicon thereof,
then Ethicon shall have the right to terminate this Agreement forthwith,
effective upon 30 days' prior written notice, and without payment of any penalty
or termination fee.


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<PAGE>

      8.6 ENVIRONMENT, SAFETY AND INDUSTRIAL HYGIENE. Omrix hereby certifies
that it is in compliance with all environmental, safety and industrial hygiene
matters related to Omrix's activities under this Agreement. With respect to all
environmental, safety and industrial hygiene matters related to Omrix's
activities under this Agreement, Omrix shall (a) comply with all applicable laws
and regulations issued by national, state and local authorities (if applicable),
(b) inform Ethicon promptly of any significant adverse event (e.g., fires,
explosions, accidental discharges), (c) inform Ethicon promptly of any
allegations or findings of violations of applicable laws or regulations, (d)
allow Ethicon to inspect Omrix's facilities, such inspections to be at
reasonable times and upon reasonable notice. If Omrix fails to meet any of these
conditions and fails to cure such noncompliance within sixty (60) days of notice
from Ethicon thereof, Ethicon may terminate this Agreement immediately.

                                    ARTICLE 9
                                 INDEMNIFICATION

      9.1 INDEMNIFICATION BY ETHICON. Ethicon shall indemnify, defend and hold
harmless Omrix and its contractors, subcontractors, subsidiaries and Affiliates
and their respective officers, directors, employees, assigns, successors, and
agents (collectively, the "Omrix Indemnified Parties") from and against any and
all losses, liabilities, suits, claims, costs, expenses (including reasonable
attorneys' fees and court costs), judgments and/or damages, assessments, amounts
paid in settlement and causes of action, but excluding indirect, consequential,
special, incidental, punitive, exemplary or similar damages ("Losses")
(including but not limited to lawsuits alleging negligence, strict liability,
breach of warranty, failure to warn, statutory violations or any other cause of
action), which the Omrix Indemnified Parties may incur, suffer, become liable
for, or which may be asserted or claimed against the Omrix Indemnified Parties,
to the extent arising from (i) the supply of Ethicon Components hereunder or
sale and manufacture of Flowable Hemostat by Ethicon or its subcontractor (other
than Omrix); or (ii) the shipment, storage, handling, promotion or marketing by
Ethicon, its Affiliates, agents, assigns, contractors, directors, employees,
officers, subcontractors, successors or distributors of Product or devices
(including the delivery of free samples) supplied by Omrix after such Product or
device has been delivered to, and accepted by, Ethicon or its designee; or (iii)
the design of any device, supplied by Omrix and used in combination with the
Product, to the extent Ethicon is involved in the design of such device; (iv)
any breach of representations, warranties or obligations hereunder by Ethicon,
or (v) any alleged infringement by Ethicon or its agents, assigns, contractors,
directors, employees, governors, invitees, officers, subcontractors, successors,
suppliers, or volunteers of any patent, trademark, copyright, or other
intellectual property, right or trade secret, protected under U.S. law, of a
third party as it relates to the Ethicon Component and/or services provided by
Ethicon pursuant to this Agreement, except in any such case (i) - (iv) to the
extent such Losses are caused by the acts or omissions of the Omrix Indemnified
Parties or by Omrix's failure to perform its duties hereunder. With respect to
part (v) above:

            (a) In the event that any Ethicon Component provided by Ethicon is
held in a suit or proceeding to infringe any intellectual property rights of a
third party (or constitute the misappropriation of a trade secret of a third
party) and the use or sale of such Ethicon Component is enjoined, or Ethicon
reasonably believes that it is likely to be found to infringe or


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<PAGE>

constitute a misappropriation, or likely to be enjoined, then Ethicon shall, at
its sole cost and expense, and at its option, either (i) procure for Omrix the
right to continue using and selling Products incorporating such Ethicon
Component, (ii) modify such Ethicon Component so that it becomes non-infringing
or no longer constitutes a misappropriation, without affecting the basic
functionality or regulatory status of such Ethicon Component or Products
incorporating such Ethicon Component; provided, however, that if (i) and (ii)
are not practicable, Ethicon shall have the right, in its sole discretion, to
terminate this Agreement with respect to Products containing such Ethicon
Component by giving Omrix thirty (30) days prior written notice, and repurchase
the Ethicon Components which Omrix purchased from Ethicon and which are
unaltered and in saleable condition at the price which Omrix paid Ethicon for
such Ethicon Components, upon delivery of such Ethicon Components to Ethicon's
designated facility, at Ethicon's expense.

            (b) Ethicon shall have no obligation for any claim of infringement
arising from: (i) any combination of the Ethicon Component provided by Ethicon
with Omrix's Products and any other products not provided by Ethicon, where such
infringement would not have occurred but for such combination; (ii) the
adaptation or modification of the Ethicon Component provided by Ethicon, where
such infringement would not have occurred but for such adaptation or
modification; (iii) the use of the Ethicon Component provided by Ethicon in an
application for which it was not designed or intended, where such infringement
would not have occurred but for such use; (iv) a claim based on intellectual
property rights owned by Omrix or any of the Omrix Indemnified Parties or (v) a
claim based on the actions or omissions of Omrix under the Development
Agreement.

            (c) This Section 9.1 states Omrix's sole remedy and Ethicon's
exclusive liability in the event that the Ethicon Components provided by Ethicon
infringe on or misappropriate the intellectual property rights of any third
party.

      9.2 INDEMNIFICATION BY OMRIX. Omrix shall defend, indemnify and hold
harmless Ethicon, all Ethicon operating units, their contractors,
subcontractors, subsidiaries and Affiliates and their respective officers,
directors, governors, employees, volunteers, assigns, successors, and agents
(collectively the "Ethicon Indemnified Parties") from and against all Losses
(including but not limited to lawsuits alleging negligence, strict liability,
breach of warranty, failure to warn, statutory violations or any other cause of
action) which the Ethicon Indemnified Parties may incur, suffer, become liable
for, or which may be asserted or claimed against the Ethicon Indemnified
Parties, to the extent arising from (i) the design or manufacture of Quixil or
the manufacture of the other Products (except to the extent indemnified by
Ethicon pursuant to Sections 9.1(i) or (ii)); (ii) Omrix's design, manufacture,
storage, handling, promotion or marketing (including the delivery of free
samples) or sale of any device supplied by Omrix and used in combination with
the Product (including but not limited to the basic application device) (except
to the extent indemnified by Ethicon pursuant to Section 9.1(ii) or (iii) and
except to the extent that design, storage, handling, promotion or marketing was
not undertaken under the Development Agreement or by Ethicon); (iii) any breach
of representations, warranties or obligations hereunder by Omrix; or (iv) any
alleged infringement by Omrix or its agents, assigns, contractors, directors,
employees, governors, invitees, officers, subcontractors, successors, suppliers,
or volunteers of any patent, trademark, copyright, or other intellectual
property, right or trade secret, protected under U.S. law, of a third party as
it relates to the Product and/or


                                       32
<PAGE>

services provided by Omrix pursuant to this Agreement, except in any such case
(i) - (iv) to the extent such Losses are caused by the acts or omissions of the
Ethicon Indemnified Parties or by Ethicon's failure to perform its duties
hereunder. With respect to part (iv) above:

            (a) In the event that any Product provided by Omrix is held in a
suit or proceeding to infringe any intellectual property rights of a third party
(or constitute the misappropriation of a trade secret of a third party) and the
use or sale of such Product is enjoined, or Omrix reasonably believes that it is
likely to be found to infringe or constitute a misappropriation, or likely to be
enjoined, then Omrix shall, at its sole cost and expense, and at its option,
either (i) procure for Ethicon the right to continue using and selling such
Product, (ii) modify such Product so that it becomes non-infringing or no longer
constitutes a misappropriation, without affecting the basic functionality of
such Product; provided, however, that if (i) and (ii) are not practicable, Omrix
shall have the right, in its sole discretion, to terminate this Agreement with
respect to such Product by giving Ethicon thirty (30) days prior written notice,
and repurchase the Products which Ethicon purchased from Omrix and which are
unaltered and in saleable condition at the price which Ethicon paid Omrix for
such Products, upon delivery of such Products to Omrix's designated facility, at
Omrix's expense.

            (b) Omrix shall have no obligation for any claim of infringement
arising from: (i) any combination of the Product or services provided by Omrix
with Ethicon Components and any other products or services not provided by
Omrix, where such infringement would not have occurred but for such combination;
(ii) the adaptation or modification of the Product provided by Omrix, where such
infringement would not have occurred but for such adaptation or modification;
(iii) the use of the Product or services provided by Omrix in an application for
which it was not designed or intended, where such infringement would not have
occurred but for such use; (iv) a claim based on intellectual property rights
owned by Ethicon or any of the Ethicon Indemnified Parties or (v) a claim based
on the actions or omissions of Ethicon under the Development Agreement.

            (c) This Section 9.2 states Ethicon's sole remedy and Omrix's
exclusive liability in the event that the Product provided by Omrix infringe on
or misappropriate the intellectual property rights of any third party.

      9.3 NON-EXCLUSIVE. The indemnification provided to the Ethicon Indemnified
Parties by Omrix, provided to the Omrix Indemnified Parties by Ethicon or
granted pursuant to the provisions of this Agreement, shall not be deemed
exclusive of any other rights to which the Ethicon Indemnified Parties or Omrix
Indemnified Parties may be entitled, except to the extent provided otherwise in
this Section 9. The Ethicon Indemnified Parties and Omrix Indemnified Parties
right to indemnification by Omrix and Ethicon, respectively, shall be
enforceable in any court of competent jurisdiction.

      9.4 INDEMNIFICATION PROCEDURE. Any Ethicon Indemnified Party or Omrix
Indemnified Party, as the case may be, shall notify Omrix or Ethicon (the
"Indemnifying Party") promptly in writing of an indemnifiable claim or cause of
action under Section 9.1 or 9.2 upon receiving notice or being informed of the
existence thereof. The Indemnifying Party shall assume, at its cost and expense,
the sole defense of such claim or cause of action through counsel selected by
the Indemnifying Party and reasonably acceptable to the Indemnified Party. The


                                       33
<PAGE>

Indemnifying Party shall maintain control of such defense, including any
decision as to settlement; provided that, in the event that the Indemnifying
Party does not maintain control of such defense on a timely basis, then, without
prejudice to any other rights and remedies available to the Indemnified Party
under this Agreement, the Indemnified Party may take over such defense with
counsel of its choosing at the Indemnifying Party's cost and expense; provided
that the Indemnified Party shall not enter into any settlement without the prior
written approval of such settlement by the Indemnifying Party. The Indemnified
Party may, at its option and expense, participate in the Indemnifying Party's
defense, and if the Indemnified Party so participates, the Parties shall
cooperate with one another in such defense. The Indemnified Party will not
settle or compromise the claim without the prior written consent of the
Indemnifying Party. The Indemnifying Party will not, without the consent of the
Indemnified Party (which consent will not be unreasonably withheld), settle or
compromise the claim in any manner which would have an adverse effect on the
Indemnified Party, unless (x) prior to such settlement or compromise the
Indemnifying Party acknowledges in writing its obligation to pay in full the
amount of the settlement or compromise and the Indemnified Party is furnished
with security reasonably satisfactory to it that the Indemnifying Party can in
fact pay such amount, (y) such settlement or compromise includes a full release
of such claim against the Indemnified Party and (z) such settlement or
compromise provides for no relief or remedy other than money damages. The
Indemnifying Party shall bear the total costs of any court award or settlement
of such claim or cause of action and all other costs, fees and expenses related
to the resolution thereof (including reasonable attorneys' fees except for
attorneys' fees for which the Indemnified Party is responsible in the event that
the Indemnified Party participates in the Indemnifying Party's defense of such
claim or cause of action).

      9.5 PARTIAL INDEMNIFICATION. In the event a claim is based partially on an
indemnified claim described in this Article 9 and partially on a non-indemnified
claim, or is based partially on a claim indemnified by one Party and partially
on a claim indemnified by the other Party pursuant to the provisions of this
Article 9, any payments and reasonable attorney fees incurred in connection with
such claims are to be apportioned between the Parties in accordance with the
degree of cause attributable to each Party.

                                   ARTICLE 10
                             LIMITATION ON LIABILITY

      10.1 ETHICON. ETHICON SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR OTHER INDIRECT DAMAGES OR FOR LOSS OF
PROFITS (EXCEPT, IN THE EVENT OF AN "INTENTIONAL BREACH" (AS DEFINED BELOW)
WHICH OCCURS DURING THE TERM OF THE AGREEMENT, IN WHICH CASE ETHICON MAY BE
OBLIGATED TO PAY LOSS OF PROFITS DAMAGES FOR SUCH CLAIM SUBJECT TO THE
LIMITATIONS SET FORTH IN SECTION 10.3) ARISING OUT OF OR RELATING TO: (a) ANY
ETHICON COMPONENTS OR ANY USE THEREOF OR (b) ETHICON'S PERFORMANCE OR FAILURE TO
PERFORM OR DELAY IN PERFORMING ITS OBLIGATIONS HEREUNDER, EVEN IF ETHICON HAS
BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.


                                       34
<PAGE>

      10.2 OMRIX. OMRIX SHALL NOT BE LIABLE FOR ANY SPECIAL, INCIDENTAL,
CONSEQUENTIAL, PUNITIVE, EXEMPLARY OR OTHER INDIRECT DAMAGES OR FOR LOSS OF
PROFITS (EXCEPT, IN THE EVENT OF AN "INTENTIONAL BREACH" (AS DEFINED BELOW)
WHICH OCCURS DURING THE TERM OF THE AGREEMENT, IN WHICH CASE OMRIX MAY BE
OBLIGATED TO PAY LOSS OF PROFITS DAMAGES FOR SUCH CLAIM SUBJECT TO THE
LIMITATIONS SET FORTH IN SECTION 10.3) ARISING OUT OF OR RELATING TO: (a) ANY
PRODUCTS DELIVERED TO ETHICON OR ANY USE OR SALE THEREOF OR (b) OMRIX'S
PERFORMANCE OR FAILURE TO PERFORM OR DELAY IN PERFORMING ITS OBLIGATIONS
HEREUNDER, EVEN IF OMRIX HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.

      10.3 CAP. NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS ARTICLE 10,
NEITHER PARTY'S LIABILITY FOR CLAIMS ARISING DURING A FISCAL YEAR SHALL EXCEED
THE SUM OF (A) Fifteen Million Dollars ($15,000,000) (EXCEPT AFTER JANUARY 1,
2010, THIS CLAUSE (A) SHALL EQUAL ZERO ($0)) AND (B) 150% OF THE PURCHASE PRICES
PAID BY ETHICON IN THE PREVIOUS FISCAL YEAR, LESS THE AMOUNT PAID BY OMRIX IN
LIQUIDATED DAMAGES IN SUCH FISCAL YEAR.

      10.4 DEFINITION OF "INTENTIONAL BREACH". In the case of breaches related
to the supply of Product, an "intentional breach" of a Party, as used in this
Article10, shall mean a material, intentional breach by such Party. In the case
of breaches unrelated to the supply of Product, an "intentional breach" of a
Party, as used in this Article 10, shall mean a material, intentional breach by
such Party in bad faith.

                                   ARTICLE 11
                              TERM AND TERMINATION

      11.1 TERM. The initial term of this Agreement shall commence on the date
hereof and shall end on the tenth anniversary of the date hereof, unless
terminated earlier as provided below (the "Initial Term"). Ethicon, at its
option, may renew this Agreement for an unlimited number of additional three
year periods, exercisable upon at least 90 days' written notice to Omrix prior
to the date of termination of the then current Term; provided that Ethicon is
not in breach of this Agreement and that the Parties agree on updated prices
(consistent with those in effect at the end of the then current Term) and on
reasonable new minimum annual quantities for each of the Products. In the event
that the Parties shall not have agreed upon updated prices and reasonable
minimums within said ninety-day notice period, all such matters not so agreed
upon shall be determined in accordance with the provisions of Article 13 below,
and pending the outcome of such determination, the then-current prices and
minimums shall continue to apply during the renewal period.

      11.2 TERMINATION AT WILL. At any time after the thirty (30) month
anniversary of this Agreement, Ethicon may terminate this Agreement by providing
six (6) months prior written notice to Omrix; provided that (i) Ethicon pay all
Development Costs and one-half of the actual, out-of-pocket Labor Costs for the
six (6) month period following such termination notice to the extent such Labor
Costs are consistent with parameters set forth in a budget approved by the


                                       35
<PAGE>

DAB, (ii) upon such termination, Ethicon deliver to Omrix any and all
Development Intellectual Property owned solely by Omrix that is in its
possession or control and (iii) Ethicon pay, on or prior to the effective date
of such termination, a sum equal to (A) *** U.S. Dollars ($***)
less (B) the following deductions: (1) any milestone payments accrued to Omrix
after the thirty (30) month anniversary date pursuant to Section 4.1 thereof and
actually paid to Omrix prior to the effective date of such termination, (2) any
milestone payments accrued to Omrix after the thirty (30) month anniversary date
pursuant to Section 5 of the Development Agreement and actually paid to Omrix
prior to the effective date of such termination and (3) thirty-three percent
(33%) of the aggregate Purchases Prices paid to Omrix after the thirty (30)
month anniversary date of this Agreement pursuant to Section 4.2(a) hereof and
prior to the effective date of such termination; provided that any Purchase
Prices paid after such termination and not accounted for in the foregoing
deductions shall be discounted by thirty-three percent (33%) of the Purchase
Price otherwise payable so long as the foregoing termination fee has been pain
in full; provided further that, such discounts shall not be given to the extent
they would result in more than an aggregate of $*** in deductions under
the foregoing clauses (1), (2) and (3).

      11.3 EVENTS OF DEFAULT. The occurrence of any one or more of the following
conditions shall constitute an "Event of Default" with respect to a Party (the
"Defaulting Party") under this Agreement:

            (a) such Party materially breaches, or materially fails to perform,
its obligations under this Agreement and fails to cure such breach or
nonperformance within sixty (60) days after receiving written notice thereof; or

            (b) such Party materially fails to comply with any Applicable Legal
Requirements with respect to its obligations hereunder and fails to cure such
failure within sixty (60) days after receiving written notice thereof; or

            (c) in the case of Omrix, a Failure to Supply occurs.

      11.4 RIGHTS UPON AN EVENT OF DEFAULT. Upon the occurrence of an Event of
Default, the non-defaulting Party in its sole discretion may terminate this
Agreement upon prior notice to the defaulting Party; provided that, if such
Event of Default only affects some but not all of the Products, then the
termination right of the non-defaulting Party may in its discretion be limited
to the affected Product(s).

      11.5 AUTOMATIC TERMINATION. In addition to the rights of termination
provided in this Article 11, on the occurrence of a Bankruptcy Event, this
Agreement shall automatically terminate unless the Party which is not the
subject of such event elects within 30 days following such event to waive
termination

      11.6 FORCE MAJEURE EVENTS. If either Party is prevented from performing
any of its obligations hereunder (other than payment obligations) due to any
cause which is beyond the non-performing Party's reasonable control, including,
without limitation, fire, explosion, flood, or other acts of God; acts,
regulations, or laws of any government; war, terrorist act or civil commotion;
strike, lock-out or labor disturbances; or failure of public utilities or common


                                       36
<PAGE>

carriers (a "Force Majeure Event"), such non-performing Party shall not be
liable for breach of this Agreement with respect to such non-performance to the
extent such non-performance is due to a Force Majeure Event. Such
non-performance will be excused for as long as such event shall be continuing,
provided that the non-performing Party gives immediate written notice to the
other Party of the Force Majeure Event. Such non-performing Party shall exercise
all reasonable efforts to eliminate the Force Majeure Event and to resume
performance of its affected obligations as soon as practicable. Should the event
of Force Majeure continue unabated for a period of 60 days or more, the Parties
shall enter into good faith discussions with a view to alleviating its affects
or to agreeing upon such alternative arrangements as may be fair and reasonable
having regard to the circumstances prevailing at that time. Further, Ethicon
shall have the right to terminate this Agreement with respect to the Product(s)
for which such Force Majeure Event continues, if a Force Majeure Event continues
for such Product(s) for more than 180 days during which Omrix is unable to meet
any of its supply obligations hereunder.

      11.7 EFFECT OF TERMINATION OR EXPIRATION. In the event of termination or
expiration of this Agreement, (a) Omrix shall wind down its activities under
this Agreement as rapidly as is commercially practical and, pursuant to
Ethicon's written instructions, deliver to Ethicon all finished and unfinished
Product to be delivered to Ethicon, and, at Ethicon's cost, deliver to Ethicon,
or to a third party specified by Ethicon, any Ethicon Components not yet
processed into Product; and (b) all payment obligations for Products requested
by Ethicon to be delivered by Omrix and actually received by Ethicon prior to
the termination or expiration of this Agreement pursuant to binding orders shall
continue to apply as well as any payment obligations for all Products delivered
to Ethicon after termination and not returned (at Ethicon's sole option) to
Omrix within fifteen (15) days after such delivery; (c) neither Party shall be
deemed to release the other Party hereto from any liability which at such time
has already accrued or which thereafter accrues from a breach or default prior
to such termination, provided that neither Party shall have any obligation to
the other Party, or to any employee of the other Party, for compensation or for
damages of any kind arising by virtue of the termination or expiration of this
Agreement, whether on account of the loss by the other Party or such employee of
present or prospective sales, investments, compensation or goodwill as a result
of such termination or expiration; (d) Ethicon shall have one hundred eighty
(180) days after the receipt of the final shipment of Product from Omrix in
which to sell its stock of any Products it possesses or has committed to
purchase under this Agreement and (e) the non-terminating Party under Section
11.4 or 11.5 or Ethicon if Ethicon terminates this Agreement pursuant to Section
11.2, shall deliver to the other Party a copy of all documentation and data in
its possession or control relating to any clinical studies or Regulatory
Approvals relating to the Products and shall use its commercially reasonable
efforts to provide the Party with all information necessary to continue any
ongoing clinical trials or studies. Each Party agrees that if such Party
provides documentation and/or data as contemplated above, the receiving Party
shall have a perpetual, unrestricted right to use such documentation and/or data
for any and all lawful purposes.

      11.8 SURVIVAL. All rights granted and obligations undertaken by the
Parties hereunder shall terminate immediately upon the event of any termination
or expiration of this Agreement, except for the following provisions shall
survive according to their terms: Sections 4.10. 4.11, 5.1(c), 7.3, 7.4, 7.5,
7.6, 7.7, 8.1, 8.2, 8.3, 9, 10, 11, 12, 13, 14.3, 14.4, 14.5, 14.6, 14.7, 14.8,
14.9, 14.10, 14.11, 14.12, 14.13 and 14.14. Further, after termination or
expiration of this


                                       37
<PAGE>

Agreement, Ethicon may exercise any rights and remedies hereunder arising from a
breach by Omrix of Sections 8.4, 8.5 or 8.6 occurring prior to such termination
or expiration.

                                   ARTICLE 12
                                 CONFIDENTIALITY

      12.1 CONFIDENTIALITY OBLIGATION. Each of Ethicon and Omrix (the "Receiving
Party") shall keep strictly confidential any information disclosed in writing,
orally or in any other manner by the other Party (the "Disclosing Party") or
otherwise made available to the Receiving Party concerning the Disclosing
Party's performance of this Agreement or otherwise concerning the business,
operations, trade secrets or other proprietary information of the Disclosing
Party ("Confidential Information"), using at least the same degree of care that
it uses to protect its own confidential or proprietary information but in no
event less than reasonable care. Information disclosed orally shall be
considered Confidential Information only if indicated by the Disclosing Party at
the time of disclosure to the Receiving Party that such information is
considered confidential and confirmed in writing within thirty (30) days after
such disclosure as to the confidential subject matter of the disclosure. This
Agreement shall be deemed to be Confidential Information of each Party.
"Confidential Information" shall not include information:

            (a) which is or becomes generally available to the public other than
as a result of disclosure thereof by the Receiving Party in violation of this
Article 12;

            (b) which is lawfully received by the Receiving Party on a
nonconfidential basis from a third party that the Receiving Party reasonably
believes is not itself under any obligation of confidentiality or nondisclosure
to the Disclosing Party with respect to such information;

            (c) which by written evidence can be shown by the Receiving Party to
have been independently developed by the Receiving Party; or

            (d) which by written evidence can be shown by the Receiving Party to
have been in its possession at the time of disclosure by the Disclosing Party.

      12.2 NONDISCLOSURE OF CONFIDENTIAL INFORMATION. The Receiving Party shall
use Confidential Information of the other Party solely for the purposes of this
Agreement and shall not disclose or disseminate any Confidential Information of
the other Party to any person at any time, except for disclosure to those of its
and its Affiliates' directors, officers, employees, accountants, attorneys,
advisers and agents whose duties reasonably require them to have access to such
Confidential Information, provided that such directors, officers, employees,
accountants, attorneys, advisers and agents are required to maintain the
confidentiality of such Confidential Information to the same extent as if they
were Parties hereto.

      12.3 PRESS RELEASES. No Party to this Agreement shall originate any
publicity, news release or other public announcement, written or oral, whether
relating to this Agreement or any arrangement between the Parties, without the
prior written consent of the other Party, except to the extent such publicity,
news release or other public announcement is required by law; provided that in
such event, the Party issuing same shall still be required to consult with the
other


                                       38
<PAGE>

Party or Parties named in such publicity, news release or public announcement a
reasonable time (being not less than 48 hours) prior to its release to allow the
named Party or Parties to comment on the use of its name and, after its release,
shall provide the named Party or Parties with a copy thereof. Neither Party
shall use the name of the other for advertising or promotional claims without
the prior written consent of the other Party. Subject to the other terms and
conditions of this Section 12.3, both Parties agree and acknowledge that each
Party may issue a press release announcing the commercialization of a Product
shortly after regulatory approval of such product (or shortly after the
execution of this Agreement in the case of Quixil) subject to the approval of
the press release by the other Party, which approval shall not be unreasonably
withheld.

      12.4 EXCEPTION. The foregoing confidentiality and nondisclosure
obligations shall not prohibit the disclosure of Confidential Information, to
the extent such disclosure is required by law or by regulation; provided,
however, that, in such event, the Receiving Party provides the Disclosing Party
with prompt advance notice of such disclosure so that the Disclosing Party has a
reasonable opportunity if it so desires to seek a protective order or other
appropriate remedy.

      12.5 SURVIVAL. The confidentiality and nondisclosure obligations of this
Article 12 shall survive the expiration or termination of this Agreement and
remain in effect for a period of seven years following the expiration or
termination of this Agreement.

                                   ARTICLE 13
                               DISPUTE RESOLUTION

      13.1 Any dispute arising out of or in connection with this contract,
including any question regarding its existence, validity or termination, shall
be referred to and finally resolved by arbitration under UNCITRAL Rules which
rules are deemed to be incorporated by reference into this clause. The
arbitration shall be conducted in New York, New York, in the English language by
three arbitrators, one nominated by each Party and the third appointed jointly
by the two nominated arbitrators. If the two arbitrators nominated by the
Parties cannot agree upon the third arbitrator within thirty days, the third
arbitrator shall be appointed by the New York City office of the International
Centre for Dispute Resolution. The arbitrators shall apply the substantive law
of the state of New York, except that the interpretation and enforcement of this
arbitration provision shall be governed by the Federal Arbitration Act. Prior to
commencement of arbitration, emergency relief is available from any court to
avoid irreparable harm.

      13.2 Prior to commencement of arbitration, the Parties must attempt to
mediate their dispute using a professional mediator from the American
Arbitration Association ("AAA"), the CPR Institute for Dispute Resolution, or
like organization selected by agreement or, absent agreement, through selection
procedures administered by the AAA. Within a period of forty-five (45) days
after the request for mediation, the Parties agree to convene with the mediator,
with business representatives present, for at least one session to attempt to
resolve the matter. In no event will mediation delay commencement of the
arbitration for more than forty-five (45) days absent agreement of the Parties
or interfere with the availability of emergency relief.

      13.3 All disputes arising out of or related to this Agreement, or the
breach thereof, whether based on contract, tort, statute, or other theory of
liability ("Disputes"), shall be resolved in accordance with this Article 13. It
is the intent of the Parties that all disputes relating in any


                                       39
<PAGE>

way to this Agreement should be resolved in accordance with this paragraph,
including disputes that may involve the parent companies, subsidiaries, and
affiliates under common control of any Party. Notwithstanding anything contained
in this Article 13 to the contrary, each Party has the right before or, if the
arbitrators cannot hear the matter within an acceptable period, during the
arbitration to seek and obtain from the appropriate court interim relief and
provisional remedies such as attachment, preliminary injunction, replevin, etc.,
to avoid irreparable harm, maintain the status quo or preserve the subject
matter of the arbitration. THE ARBITRATORS SHALL NOT AWARD ANY PARTY PUNITIVE,
EXEMPLARY, MULTIPLIED OR CONSEQUENTIAL DAMAGES NOR ANY DAMAGES PROSCRIBED BY
SECTION 10, AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO SEEK SUCH
DAMAGES. NO PARTY MAY SEEK ATTORNEYS' FEES OR COSTS.

                                   ARTICLE 14
                                  MISCELLANEOUS

      14.1 INSURANCE. Each Party agrees to procure and maintain in full force
and effect, during the term of this Agreement and for as long as the Products
are in the marketplace, valid and collectible insurance policies in connection
with this Agreement, which policies shall provide for the type of insurance and
amount of coverage described in Exhibit F to this Agreement. Upon a Party's
written request, the other Party shall provide to such Party a certificate of
coverage or other written evidence reasonably satisfactory to such Party of such
insurance coverage.

      14.2 QUARTERLY REVIEW. The Parties agree to establish a quarterly
operations review process pursuant to which the Parties will review (either in
person, by telephone, video conference or other mutually agreeable means)
Product quality, cycle time, manufacturing capacity, delivery and cost reduction
efforts.

      14.3 PENALTIES. If either Party terminates this Agreement in accordance
with the terms herein, the terminating Party shall owe no penalty or indemnity
except as expressly provided herein, or have any other liability, to the
terminated Party on account of such termination, including without limitation
for any loss of profits on sales or anticipated sales, for any loss of good
will, or for any loss due to expenditures, investments or commitments made in
connection with this Agreement.

      14.4 INDEPENDENT CONTRACTOR STATUS. The relationship between the Parties
established by this Agreement is that of independent contractors, and nothing
herein shall be construed to constitute the Parties as partners, joint
venturers, co-owners or otherwise as participants in a joint or common
undertaking. Neither Party shall have any authority to obligate the other in any
respect nor hold itself out as having any such authority. All personnel of Omrix
shall be solely employees of Omrix and shall not represent themselves as
employees of Ethicon, and all personnel of Ethicon shall be solely employees of
Ethicon and shall not represent themselves as employees of Omrix.

      14.5 APPLICABLE LAW. This Agreement will be governed by the laws of the
United States of America and the State of New York without regard to: (i) its
principles of conflicts of laws; (ii) the United Nations Convention on Contracts
for the International Sale of Goods; (iii)


                                       40
<PAGE>

the 1974 Convention on the Limitation Period in the International Sale of Goods
(the "1974 Convention"); and (iv) the Protocol amending the 1974 Convention,
done at Vienna April 11, 1980.

      14.6 BINDING EFFECT; BENEFITS; ASSIGNMENT.

            (a) This Agreement shall inure to the benefit of and be binding upon
the Parties hereto and their respective permitted successors and assigns.
Nothing contained herein shall give to any other person any benefit or any legal
or equitable right, remedy or claim. Anything to the contrary herein
notwithstanding, each Party agrees that the right and obligations under this
Agreement of the other Party may, from time to time, be exercised or performed,
as the case may be, in whole or in part by Affiliates of such Party; provided
that the delegating Party shall remain liable for its Affiliates' performance of
those obligations delegated to them.

            (b) This Agreement shall not be assignable by any Party without the
prior written consent of the other Party, except that either Party shall be
permitted to assign this Agreement, without the other Party's consent, to an
Affiliate or to a company acquiring all or substantially all of the assigning
Party's assets, voting stock or business to which this Agreement relates upon
written notice to the other Party. Such assignment shall be subject to the
assignee agreeing in writing to assume the benefits and obligations of this
Agreement but shall not release the assigning Party from any obligations
hereunder. Any assignment made without prior written consent (if such consent is
required by this Section 14.6) shall be wholly void and invalid, the assignee
shall acquire no rights whatsoever, and the non-assigning Party shall not
recognize, nor shall it be required to recognize, the assignment. This provision
limits both the right and the power to assign.

      14.7 ENTIRE AGREEMENT; AMENDMENTS. Before signing this Agreement the
Parties have had numerous conversations, including without limitation
preliminary discussions, formal negotiations and informal conversations at meals
and social occasions, and have generated correspondence and other writings, in
which the Parties discussed the transaction that is the subject of this
Agreement and their aspirations for success. In such conversations and writings,
individuals representing the Parties may have expressed their judgments and
beliefs concerning the intentions, capabilities and practices of the Parties,
and may have forecasted future events. The Parties recognize that such
conversations and writings often involve an effort by both sides to be positive
and optimistic about the prospects for the transactions. However, it is also
recognized that all business transactions contain an element of risk, as does
the transaction contemplated by this Agreement, and that it is normal business
practice to limit the legal obligations of contracting parties to only those
promises and representations which are essential to their transaction so as to
provide certainty as to their future rights and remedies. Accordingly, this
Agreement is intended to define the full extent of the legally enforceable
undertakings of the Parties hereto, and no promise or representation, written or
oral, which is not set forth explicitly in this Agreement is intended by either
Party to be legally binding. Each of the Parties acknowledges that in deciding
to enter into this Agreement and to consummate the transaction contemplated
hereby none of them has relied upon any statements or representations, written
or oral, other than those explicitly set forth herein. No subsequent alteration,
amendment, change


                                       41
<PAGE>

or addition to this Agreement shall be binding upon the Parties hereto unless
reduced to writing and signed by the respective authorized officers of the
Parties.

      14.8 SEVERABILITY. If, under applicable law or regulation, any provision
of this Agreement (the "Severed Clause") is invalid or unenforceable, or
otherwise directly or indirectly affects the validity of any other material
provision(s) of this Agreement, it is mutually agreed that this Agreement shall
endure except for the Severed Clause. The Parties shall consult and use
reasonable good faith efforts to agree upon a valid and enforceable provision
which shall be a reasonable substitute for such Severed Clause in light of the
intent of this Agreement.

      14.9 REMEDIES. Unless otherwise expressly provided, all remedies hereunder
are cumulative, and in addition to any other remedies provided for by law and
may, to the extent permitted by law, be exercised concurrently or separately,
and the exercise of any one remedy shall not be deemed to be an election of such
remedy or to preclude the exercise of any other remedy.

      14.10 NOTICES. Any notice, request, consent or communication (each, a
"Notice") under this Agreement shall be effective if it is in writing and (i)
personally delivered, (ii) sent by certified or registered mail, postage
prepaid, return receipt requested, (iii) sent by an internationally recognized
overnight delivery service, with delivery confirmed, or (iv) sent by facsimile,
with receipt confirmed (electronically or otherwise) and hard copy delivered by
regular mail; addressed as set forth in this Section or to such other address or
facsimile number as shall be furnished by either Party hereto to the other Party
hereto. A Notice shall be deemed to have been given as of (i) the date when
personally delivered, (ii) seven (7) business days after being deposited with
the United States Postal Service, certified or registered mail, properly
addressed, return receipt requested, postage prepaid, (iii) two business days
after being delivered to said overnight delivery service properly addressed, or
(iv) upon confirmation of receipt of the facsimile, as the case may be. All
Notices shall specifically state: (i) the provision (or provisions) of this
Agreement with respect to which such Notice is given, and (ii) the relevant time
period, if any, in which the Party receiving the Notice must respond.

                              If to OMRIX:
                              Omrix Biopharmaceuticals, Inc.
                              c/o Omrix Biopharmaceuticals S.A.
                              Chaussee de Waterloo, 200
                              1640 Rhode-st-Genese
                              Belgium
                              Telephone:  +32 2359 9123
                              Telefax:    +32 2359 9149
                              Attention:  Robert Taub

                              Copy to:

                              Susan W. Murley
                              Hale and Dorr LLP
                              60 State Street
                              Boston, Massachusetts  02109


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<PAGE>

                              Telephone:  617-526-6832
                              Telefax:    617-526-5000

                              If to ETHICON:

                              Ethicon, Inc.
                              Johnson & Johnson Wound Management Division
                              U.S. Route #22
                              Somerville, New Jersey 08876
                              Attention:  President
                              Fax:

                              with a copy to:

                              Office of General Counsel
                              Johnson & Johnson
                              One Johnson & Johnson Plaza
                              New Brunswick, New Jersey 08933
                              Attention:  Associate General Counsel,
                              Corporate Group
                              Fax: (732)-524-2788

      14.11 WAIVERS. The failure of either Party to assert a right hereunder or
to insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other Party. The observance of any
provision of this Agreement may be waived (either generally or in any particular
instance) only with the written consent of the waiving Party.

      14.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, and execution by each of the Parties of any one of such
counterparts will constitute due execution of this Agreement. Each such
counterpart hereof shall be deemed to be an original instrument, and all such
counterparts together shall constitute but one agreement.

      14.13 HEADINGS. The article and section headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.

      14.14 CONSTRUCTION. The Parties expressly agree that any rule of
construction to the effect that ambiguities are to be resolved against the
drafting Party shall not be applied in the construction or interpretation of
this Agreement.


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<PAGE>

IN WITNESS WHEREOF, Ethicon and Omrix intending legally to be bound hereby have
caused this Distribution and Supply Agreement to be duly executed as of the date
first above written.

                                    OMRIX BIOPHARMACEUTICALS, INC.

                                    By:    /s/ Robert Taub
                                       -----------------------------------------
                                    Name:  Robert Taub
                                    Title: C.E.O.



                                    ETHICON, INC.

                                    By:  Its Johnson & Johnson Wound
                                    Management Division

                                       By:    /s/ Howard Zauberman
                                          --------------------------------------
                                       Name:  Howard Zauberman
                                       Title: WW Vice Pres., Ethicon
                                              New Business Development


                                       44