EXHIBIT 10.5

         

        Personal Employment
Agreement

      

      
         

         

      

      
        This
Personal Employment Agreement (the “Agreement”) is entered as of
this 20th day of
April, 2006 (the “Effective
Date”), by and between

      

      
        


      

      
        MEDGENICS
MEDICAL ISRAEL LTD.,

      

      
        


      

      
        a company
organized under the laws of the State of Israel, having its principal office at
12 HaNapach St Karmiel, 21653 (the “Company”)
and

      

      
        


      

      
        Baruch
Stern

      

      
        


      

      
        of 30
Smolenskin St.

      

      
        


      

      
        Haifa,
Israel 34366

      

      
        


      

      
        (Israeli
I.D. No. 069523561)

      

      
        


      

      
        (the
“Employee”).

      

      
        


      

      
        WITNESSETH

      

      
         

         

      

      
        
          	
                  WHEREAS,

                	
                  the
      Company was established for the purpose of engaging in the research and
      development, production and sale of products and/or services in the areas
      of life sciences, biotechnology and/or medical devices;
  and

                


        

      

      
        


      

      
        
          	
                  WHEREAS,

                	
                  the
      Company desires to engage the Employee as Bioscience Director, and the
      Employee represents that he has the requisite skill and knowledge to serve
      as such; and

                


        

      

      
        


      

      
        
          	
                  WHEREAS,

                	
                  the
      parties desire to state the terms and conditions of the Employee’s
      engagement by the Company, effective as of the date of this Agreement, as
      set forth below.

                


        

      

      
        


      

      
        
          NOW THEREFORE, in
consideration of the mutual promises, covenants, conditions, representations and
warranties set forth herein, and intending to be legally bound hereby, the
parties agree as follows:

        

      

      
        


      


      
        
           


        

        
           


          
            

          

        

        
           


        

      


      
        
          	
                  1.

                	
                  Appointment; Position:
      Bioscience Director

                


        

      

      
        


      

      
        The
Company hereby appoints the Employee as Bioscience Director, and in such
capacity he will report to the CEO.

      

      
        


      

      
        
          	
                  2.

                	
                  Position

                


        

      

      
        


      

      
        During
the term of this Agreement:

      

      
        


      

      
        
          	
                	
                  2.1

                	
                  The
      Employee shall be employed on a full-time basis and shall devote his
      entire business time, attention and efforts to the performance of his
      duties and responsibilities under this Agreement and the business and
      affairs of the Company. The Employee may not be employed by nor provide
      services to any other entity, nor engage directly or indirectly in any
      other work or business, without the prior, express, written permission of
      the Company.

                


        

      

      
        


      

      
        
          	
                	
                  2.2

                	
                  The
      Employee shall be responsible for managing biological research and
      development efforts, including the bio-research facilities, outsourced
      services and consultants in bio-research and development that are
      pertinent to the bioscience work of the company. The Employee’s areas of
      activity shall include:

                


        

      

      
         

      

      
        
          	
                	
                  a)

                	
                  Scientific
      leadership of bioscience development, including preclinical
      preparations

                


        

      

      
        


      

      
        
          	
                	
                  b)

                	
                  As
      part of the senior management team, participating in company planning and
      management, creating and updating the technology development plan and
      schedule, and executing the detailed
plan.

                


        

      

      
        


      

      
        
          	
                	
                  c)

                	
                  Ensuring
      compliance with the applicable regulatory quality and safety standards
      (e.g. GLP, GCP, GMP) for development, preclinical, and clinical stages,
      including consulting with appropriate advisors and
  experts

                


        

      

      
        


      

      
        
          	
                	
                  d)

                	
                  Preparing
      for, supervising and guiding the implementation of experiments and
      interpretation of results obtained, within approved schedule and
      budget

                


        

      

      
        


      

      
        
          	
                	
                  e)

                	
                  Analysis
      of experimental results qualitatively and quantitatively, lessons learned,
      and use in ongoing
development

                


        

      

      
        


      

      
        
          	
                	
                  f)

                	
                  Keeping
      the company updated on relevant technology developments and
      opportunities

                


        

      

      
         

      


      
        
           


        

        
          2

          
            

          

        

        
           


        

      


      
        
          	
                	
                  g)

                	
                  Establishing
      and maintaining contacts with world class experts and advisors, together
      with CTO

                


        

      

      
        


      

      
        
          	
                	
                  h)

                	
                  Providing
      key scientific support for partnering,
  fundraising

                


        

      

      
        


      

      
        
          	
                	
                  i)

                	
                  Supporting
      maintenance and strengthening of intellectual property, together with
      CTO

                


        

      

      
        


      

      
        
          	
                	
                  j)

                	
                  Additional
      management duties as updated and agreed with the CEO/CTO from time to
      time.

                


        

      

      
        


      

      
        
          	
                	
                  2.3

                	
                  The
      duties, responsibilities, authority and position of the Employee and the
      organizational structures implicit in them may be changed by the Company
      from time to time, as it deems necessary, and reasonable efforts to work
      with and accommodate the Employee with such changes will be made; however,
      the Employer retains the right of sole discretion to make such
      changes.

                


        

      

      
        


      

      
        
          	
                	
                  2.4

                	
                  The
      Employee acknowledges hereby that the terms of his employment, the
      circumstances thereof, and the nature of his work require an unusual
      amount of personal trust as set out in the law governing Hours of
      Employment and Rest Law; 5711-1951, and therefore, said law shall not
      apply to his employment with the
Company.

                


        

      

      
        


      

      
        
          	
                  3.

                	
                  Place of
      Work

                


        

      

      
        


      

      
        In
connection with the Employee’s employment by the Company, the Employee shall be
based at the current principal offices of the Company in Israel, or at such
other place as is otherwise appropriate to the functions being performed by the
Company.   The Employee acknowledges that the performance of his
duties hereunder may require domestic or international
travel.

      

      
        


      

      
        
          	
                  4.

                	
                  Salary

                


        

      

      
        


      

      
        
          	
                	
                  4.1

                	
                  The
      Company shall pay the Employee as compensation for the employment services
      hereunder a monthly gross salary (“bruto”) of NIS 27,000 per month
      (payable on the ninth day of each month) through June 2007; as of July 1,
      2007 the Company shall increase the Employee monthly gross salary to NIS
      37,500 per month, during the term of the Employee’s engagement hereunder
      (the “Salary”), subject to all applicable statutory
      deductions.

                


        

      

      
        


      

      
        
          	
                	
                  4.2

                	
                  The
      Salary and additional benefits to which the Employee shall be entitled
      hereunder (including bonuses) shall be reviewed by the CEO on an annual
      basis; and, if in the

                


        

      

      
        

          
            
               


            

            
              3

              
                

              

            

            
               


            

          



      

      
        CEO’s
discretion the circumstances justify the same, the Employee’s Salary shall be
adjusted and/or additional benefits shall be granted to the Employee
hereunder.

      

      
        


      

      
        
          	
                	
                  4.3

                	
                  Potential
      Bonus Related to Achievement of Company Goals. The Employee shall
      be eligible to receive an annual cash bonus with respect to each fiscal
      year of the Company during the Term of up to $20,000 on an annualized
      basis, as determined by the Board, in its sole discretion, which shall be
      based upon corporate and personal performance criteria as established by
      the CEO and the Board (the “Goal
      Bonus”). If awarded, the Goal Bonus shall be payable within ninety
      (90) days after the end of the fiscal year to which it relates, or earlier
      if the CEO and Board so agree. The performance criteria for the Goal Bonus
      for the period through July, 2007 is set forth on Exhibit A attached
      hereto.

                


        

      

      
        


      

      
        
          	
                	
                  4.4

                	
                  Potential
      Bonus Related to Team Leadership. The Employee shall be eligible to
      receive an annual cash bonus with respect to each fiscal year of the
      Company during the Term of up to $10,000 on an annualized basis, as
      determined by the Board, in its sole discretion, which shall be based upon
      personal and team leadership performance criteria as established by the
      CEO and the Board (the “Team Leadership
      Bonus”). If awarded, the Team Leadership Bonus shall be payable
      within ninety (90) days after the end of the fiscal year to which it
      relates. The criteria for the Team Leadership Bonus for the period through
      July, 2007 is set forth on Exhibit B attached
  hereto.

                


        

      

      
        


      

      
        
          	
                  5.

                	
                  Social Insurance and
      Benefits

                


        

      

      
        


      

      
        
          	
                	
                  5.1

                	
                  The
      Company shall insure the Employee under an accepted “Manager’s Insurance
      Scheme” and/or a comprehensive financial arrangement, at the election of
      the Employee, including insurance in the event of illness or loss of
      capacity for work (hereinafter referred to as the “Managers Insurance”) as
      follows: (a) the Company shall pay an amount equal to 5% of the Employee’s
      Salary towards the Managers Insurance for the Employee’s benefit and shall
      deduct 5% from the Employee’s Salary and pay such amount towards the
      Managers Insurance for the Employee’s benefit (the various components of
      the Managers Insurance shall be fixed at the discretion of the Employee);
      (b) the Company shall pay up to 2.5% of the Employee’s Salary towards
      disability

                


        

      

      
        


      


      
        
           


        

        
          4

          
            

          

        

        
           


        

      


      
        insurance;
and (c) the Company shall pay an amount equal to 8 1/3% of the Employee’s Salary
towards a fund for severance compensation which shall be payable to the Employee
upon severance, but subject to the provisions of section 7.3.

      

      
        


      

      
        
          	
                	
                  5.2

                	
                  The
      Company shall pay the full salary of the Employee, including insurance,
      social benefits and fringe benefits, during the period of the Employee’s
      military reserve service. National Insurance Institute transfers in
      connection with such military reserve duty shall be retained by the
      Company.

                


        

      

      
        


      

      
        
          	
                	
                  5.3

                	
                  The
      Company and the Employee shall open and maintain a Keren Hishtalmut Fund.
      The Company shall contribute to such Fund an amount equal to 7.5% of each
      monthly Salary payment, but not more than the amount for which the
      Employee is exempt from tax payment, and the Employee shall contribute to
      such Fund an amount equal to 2-1/2% of each monthly Salary payment. The
      Employee hereby instructs the Company to transfer to such Fund the amount
      of the Employee’s and the Company’s contribution from each monthly Salary
      payment.

                


        

      

      
        


      

      
        
          	
                  6.

                	
                  Additional
      Benefits

                


        

      

      
        


      

      
        
          	
                	
                  6.1

                	
                  The
      Employee shall be entitled to be reimbursed for all normal, usual and
      necessary actual business expenses arising out of travel, lodging, meals
      and entertainment whether in Israel or abroad, provided Employee provides
      proper documentation and provided further that such business expenses are
      within an expense policy approved by the CEO of the
    Company.

                


        

      

      
        


      

      
        
          	
                	
                  6.2

                	
                  The
      Employee shall be entitled, in addition to public holidays to 22
      (twenty-two) paid vacations days per year calculated on the basis of a
      five-day work-week. A maximum of one year’s entitlement to vacation days
      may be accumulated if unused beyond which any vacation days will be
      forfeited by the Employee if not utilized during the year in which they
      are allocated.

                


        

      

      
        


      

      
        
          	
                	
                  6.3

                	
                  Employee
      shall be entitled to sick leave and Recreation Pay (Dmei Havra-ah)
      according to applicable law.

                


        

      

      
        


      

      
        
          	
                	
                  6.4

                	
                  The
      Employee will be entitled at the Company’s expense to the use of a company
      car, of type Group 2, and under other conditions to be determined by the
      Company. For

                


        

      

      
        


      

      
        

          
            
               


            

            
              5

              
                

              

            

            
               


            

          



      

      
        avoidance
of doubt, all income taxes associated with such car’s “value equivalent” for tax
purposes (the value of the car usage as determined by the tax authorities) shall
be borne by the Employee and deducted from the salary. Employee shall at all
times comply with any Company rules with respect to the use of the company
vehicle. Any driving and/or parking fines incurred while the vehicle was
provided for the use of the Employee shall be the sole responsibility of the
Employee, and Employee hereby empowers the Company to sign any documents
necessary to formally assign any such fines and/or tickets to Employee’s
name.

      

      
        


      

      
        
          	
                	
                  6.5

                	
                  The
      Employee was granted options on 11.5.2006 to purchase up to 20,000 shares
      per year, at an exercise price of $1.516 per share during a vesting period
      of four (4) years, for up to a total of 80,000 shares in Medgenics Medical
      Israel’s parent company, Medgenics Inc. (the “Parent”), according to the
      vesting schedule discussed below. In addition, the Company hereby grants,
      subject to and with effect from immediately prior to Admission of the
      entire issued share capital in the Company to trading on AIM becoming
      effective prior to 31 December 2007, options to purchase 6,667 shares per
      year, up to a total of 26,667 additional shares during a vesting period of
      four (4) years, starting from the date granted, and at an exercise price
      equal to the share price upon listing. All such grants shall be subject to
      the approval of the Parent’s Compensation Committee or Board of Directors
      and pursuant to the terms and conditions of any stock option plan which
      the Company/and or the Parent adopts, and pursuant to the standard form of
      option agreement which the Company and/or Parent may
  use.

                


        

      

      
        


      

      
        
          	
                	
                  6.6

                	
                  Any
      tax liability in connection with the options, (including with respect to
      the grant, exercise, sale of the options or the shares receivable upon
      their exercise) shall be borne solely by the
  Employee.

                


        

      

      
        


      

      
        
          	
                	
                  6.7  

                	
                  These
      options will be calculated from grant date and will be under the employee
      benefit plan of the Parent.

                


        

      

      
        


      

      
        
          	
                  7.

                	
                  Term and
      Termination

                


        

      

      
        


      

      
        
          	
                	
                  7.1

                	
                  This
      Agreement shall commence as of the Effective Date and shall continue
      unless this

                


        

      

      
        


      

      
        

          
            
               


            

            
              6

              
                

              

            

            
               


            

          



      

      
        Agreement
is terminated as hereafter provided.

      

      
        


      

      
        
          	
                	
                  7.2

                	
                  The
      Company may terminate this Agreement and the employment relationship
      hereunder at its discretion and at any time by giving Employee 3 (three)
      months prior written notice. The Employee may terminate this Agreement and
      the employment relationship hereunder at his discretion and at any time by
      giving the Company 3 (three) months prior written
  notice.

                


        

      

      
        


      

      
        In the
event of termination of employment by the Company, the Company may, at its
discretion, determine that the Employee’s employment shall cease immediately or
at any time prior to expiration of the prior notice period, and in such event
the Company shall pay the Employee an amount equal to the salary which would
have been paid during the remaining prior notice period.

      

      
        


      

      
        
          	
                	
                  7.3

                	
                  Termination
      With Cause – The Company may terminate the Employee’s employment for
      cause. For purposes of this Agreement, termination for “cause” shall mean
      and include: (a) conviction of a felony involving moral turpitude or
      affecting the Company, the Parent or its subsidiaries; (b) any refusal to
      carry out a reasonable directive of his CEO or such other officer
      appointed by the CEO which involves the business of the Company, the
      Parent or its subsidiaries and was capable of being lawfully performed;
      (c) embezzlement of funds of the Company, the Parent or its subsidiaries;
      (d) any breach of the Employee’s fiduciary duties or duties of care to the
      Company (except for conduct taken in good faith); (e) any breach of this
      Agreement by the Employee; (f) any conduct (other than in good faith)
      materially detrimental to the Company, including, but not limited to,
      sexual harassment and violence. If the employment of the Employee is
      terminated for cause, then the Employee shall only be entitled to:
      severance pay in the amount required by law, if required; and that portion
      of the policy that was contributed to by the
  Employee.

                


        

      

      
        


      

      
        
          	
                	
                  7.4

                	
                  Termination Upon Death or
      Disability - The Company may terminate the Employee’s employment upon the death of the
      Employee or after having established the Employee’s disability. For purposes of this
      Agreements “disability” means a physical or
  mental

                


        

      

      
        

          
            
               


            

            
              7

              
                

              

            

            
               


            

          



      

      
        infirmity
that impairs the Employee’s ability to substantially perform his duties under
the Agreement that continues for a period of at least ninety (90) consecutive
days.

      

      
        


      

      
        
          	
                	
                  7.5

                	
                  During
      the period following notice of termination by either the Employee or the
      Company, the Employee shall cooperate with the Company and use his best
      efforts to assist in the integration into the Company’s organization the
      person or persons who will assume the Employee’s
      responsibilities.

                


        

      

      
        


      

      
        
          	
                	
                  7.6

                	
                  This
      Agreement shall remain in full force and effect during the period after
      the notice of termination has been served and there shall be no change in
      the Employee’s position with the Company or any obligations hereunder,
      unless otherwise determined by the Company in a written notice to
      Employee.

                


        

      

      
        


      

      
        
          	
                  8.

                	
                  Proprietary
      Information

                


        

      

      
        


      

      
        
          	
                	
                  8.1

                	
                  The Employee acknowledges and
      agrees that he will have access to confidential and proprietary information
      concerning the business and financial activities of the Company and information and
      technology regarding the Company’s product research and development, including
      without limitation, the Company’s banking, investments, investors, properties, employees,
      marketing plans, customers, trade secrets, and test results, processes,
      data and know-how, improvements, inventions, techniques and products (actual or planned).
      Such information, whether documentary, written, oral or computer generated, shall be
      deemed to be and is referred to as “Proprietary
      Information”.

                


        

      

      
        


      

      
        
          	
                	
                  8.2

                	
                  Proprietary
      Information shall be deemed to include any and all proprietary information
      disclosed by or on behalf of the Company and irrespective of form, but
      excluding information that (a) was known to the Employee prior to his
      association with the Company and can be so proven; (b) shall have appeared
      in any printed publication or patent or shall have become a part of the
      public knowledge except as a result of a breach of this Agreement by the
      Employee; (c) shall have been received by the Employee from a third party
      having no obligation to the
Company

                


        

      

      
        


      

      
        
          	
                	
                  8.3

                	
                  The
      Employee agrees and declares that all Proprietary Information, patents and
      other rights in connection therewith shall be the sole property of the
      Company and its assigns.

                


        

      

      
        


      

      
        

          
            
               


            

            
              8

              
                

              

            

            
               


            

          



      

      
        At all
times, both during his engagement by the Company and after its termination, the
Employee will keep in confidence and trust all Proprietary Information, and the
Employee will not use or disclose any Proprietary Information or anything
relating to it without the written consent of the Company, except as may be
necessary in the ordinary course of performing the Employee’s duties hereunder
and in the best interests of the Company.

      

      
        


      

      
        
          	
                	
                  8.4

                	
                  Upon
      termination of his employment with the Company, the Employee will promptly
      deliver to the Company all documents and materials of any nature
      pertaining to his work with the Company, and he will not take with him any
      documents or materials or copies thereof containing any Proprietary
      Information.

                


        

      

      
        


      

      
        
          	
                	
                  8.5

                	
                  The
      Employee recognizes that the Company received and will receive
      confidential or proprietary information from third parties subject to a
      duty on the Company’s part to maintain the confidentiality of such
      information and to use it only for certain limited purposes. At all times,
      both during his employment and after its termination, the Employee
      undertakes to keep and hold all such information in strict confidence and
      trust, and he will not use or disclose any of such information without the
      prior written consent of the Company, except as may be necessary to
      perform his duties as an employee of the Company and consistent with the
      Company’s agreement with such third party. Upon termination of his
      employment with the Company, Employee shall act with respect to such
      information as set forth in Section 8.4, mutatis
      mutandis.

                


        

      

      
        


      

      
        
          	
                	
                  8.6

                	
                  The
      Employee’s undertakings in this Section 8 shall remain in full force and
      effect after termination of this Agreement or any renewal
      thereof.

                


        

      

      
        


      

      
        
          	
                  9.

                	
                  Disclosure and
      Assignment of
Inventions

                


        

      

      
        


      

      
        
          	
                	
                  9.1

                	
                  The
      Employee understands that the Company is engaged in a continuous program
      of research, development, production and marketing in connection with its
      business and that, as an essential part of his employment with the
      Company, he is expected to make new contributions to and create inventions
      of value for the Company. Employee agrees to share with the Company all
      his knowledge and experience, provided however that Employee shall not
      disclose to the Company any information which Employee has
      prior

                


        

      

      
         

        
          
            
               


            

            
              9

              
                

              

            

            
               


            

          



      

      
        to the
date hereof or (if after) with the prior approval of the CEO undertaken to third
parties to keep confidential

      

      
        


      

      
        
          	
                	
                  9.2

                	
                  As
      of the Effective Date of this Agreement, the Employee undertakes and
      covenants that he will promptly disclose in confidence to the
      Company all inventions, improvements, designs, original works of
      authorship, formulas, concepts, techniques, methods, systems, processes,
      compositions of matter, computer software programs, databases, mask works,
      and trade secrets, related to the Company’s business or current or
      anticipated research and development, whether or not patentable,
      copyrightable or protectible as trade secrets, that are made or conceived
      or first reduced to practice or created by him, either alone or jointly
      with others, during the period of his employment, whether or not in the
      course of his employment
(“Inventions”).

                


        

      

      
        


      

      
        
          	
                	
                  9.3

                	
                  The
      Employee agrees that all Inventions that (a) are developed using
      equipment, supplies, facilities or trade secrets of the Company, (b)
      result from work performed by him for the Company, or (c) relate to the
      Company’s business or current or anticipated research and development,
      will be the sole and exclusive property of the Company (“Company
      Inventions”).

                


        

      

      
        


      

      
        
          	
                	
                  9.4

                	
                  The
      Employee hereby irrevocably transfers and assigns to the Company
      (including any future rights): (a) all worldwide patents, patent
      applications, copyrights, mask works, trade secrets and other intellectual
      property rights in any Company Invention; and (b) any and all “Moral
      Rights” (as defined below) that he may have in or with respect to any
      Company Invention. He also hereby forever waives and agrees never to
      assert any and all Moral Rights he may have in or with respect to any
      Company Invention, even after termination of his work on behalf of the
      Company. “Moral Rights” mean any rights of paternity or integrity, any
      right to claim authorship of an invention, to object to any distortion,
      mutilation or other modification of, or other derogatory action in
      relation to, any invention, whether or not such would be prejudicial to
      his honor or reputation, and any similar right, existing under judicial or
      statutory law of any country in the world, or under any treaty, regardless
      of whether or not such right is denominated or generally referred to as a
      “moral right”. The Employee will not file any patent applications for
      Company Inventions other than in the name of the Company (other than such
      patent

                


        

      

      
         

      


      
        
           


        

        
          10

          
            

          

        

        
           


        

      


      
        applications
which are required by law to be filed by such Employee but which shall
immediately thereafter be assigned for no or nominal consideration to the
Company).

      

      
        


      

      
        
          	
                	
                  9.5

                	
                  The
      Employee agrees to assist the Company in every proper way to obtain for
      the Company and enforce patents, copyrights, mask work rights, and other
      legal protections for the Company’s Inventions in any and all countries.
      He will execute any documents that the Company may reasonably request for
      use in obtaining or enforcing such patents, copyrights, mask work rights,
      trade secrets and other legal protections. His obligations under this
      Section 9.5 will continue beyond the termination of his employment with
      the Company, provided that the Company will compensate him at a reasonable
      rate after such termination for time or expenses actually spent by him at
      the Company’s request on such assistance. The Employee hereby irrevocably
      appoints the CEO of the Company as his attorney-in-fact to execute
      documents on his behalf for this
purpose.

                


        

      

      
        


      

      
        
          	
                  10.

                	
                  Non-Competition

                


        

      

      
        


      

      
        
          	
                	
                  10.1

                	
                  The
      Employee agrees and undertakes that he will not, so long as he is employed
      by the Company and for a period of 12 months following termination of his
      employment for whatever reason, directly or indirectly, as owner, partner,
      joint venturer, stockholder, employee, broker, agent, principal, corporate
      officer, director, licensor or in any other capacity whatever engage in,
      become financially interested in, be employed by, or have any connection
      with any business or venture that is engaged in any activities competing
      with products or services offered by the Company; provided, however, that
      the Employee may own securities of any corporation which is engaged in
      such business and is publicly owned and traded but in an amount not to
      exceed at any one time one percent of any class of stock or securities of
      such company, so long as he has no active role in the publicly owned and
      traded company as director, employee, consultant or
    otherwise.

                


        

      

      
        


      

      
        
          	
                	
                  10.2

                	
                  The
      Employee agrees and undertakes that during the period of his employment
      and for a period of 12 months following termination, he will not, directly
      or indirectly, including personally or in any business in which he is an
      officer, director or shareholder, for any purpose or in any
      place:

                


        

      

      
         

      

      
        


      


      
        
           


        

        
          11

          
            

          

        

        
           


        

      


      
        
          	
                	
                  (a)

                	
                  employ
      any person employed by the Company or retained by the Company as a
      consultant on the date of such termination or during the preceding five
      months.

                


        

      

      
        


      

      
        
          	
                	
                  (b)

                	
                  seek
      to entice away from the Company or interfere with the relationship or the
      terms of business applying between the Company and any customer, supplier,
      collaborator or licensor of any intellectual property rights to the
      Company with which the Employee dealt within six months of the Termination
      Date.

                


        

      

      
        


      

      
        
          	
                	
                  10.3

                	
                  If
      any one or more of the terms contained in this Section 10 shall for any
      reason be held to be excessively broad with regard to time, geographic
      scope or activity, the term shall be construed in a manner to enable it to
      be enforced to the extent compatible with applicable
  law.

                


        

      

      
        


      

      
        
          	
                  11.

                	
                  Rights Upon
      Termination

                


        

      

      
        


      

      
        Upon
termination of this Agreement by the Company for any reason whatsoever other
than by justifiable cause, as defined herein, the Employee shall be entitled to
the payment of his full salary, including insurance and social benefits as set
for in Sections 4-6 above, during a period of 6 months if his employment is
terminated with the first 12 months of the effective date, and an additional
month for each 12 months of employment thereafter.

      

      
        


      

      
        
          	
                  12.

                	
                  Mutual
      Representations

                


        

      

      
        


      

      
        
          	
                	
                  12.1

                	
                  The
      Employee represents and warrants to the Company that the execution and
      delivery of this Agreement and the fulfillment of the terms hereof (a)
      will not constitute a default under or conflict with any agreement or
      other instrument to which he is a party or by which he is bound, and (b)
      do not require the consent of any person or
  entity.

                


        

      

      
        


      

      
        
          	
                	
                  12.2

                	
                  The
      Company represents and warrants to the Employee that this Agreement has
      been duly authorized, executed and delivered by the Company and that the
      fulfillment of the terms hereof (a) will not constitute a default under or
      conflict with any agreement or other instrument to which it is a party or
      by which it is bound, and (b) do not require the consent of any person of
      entity.

                


        

      

      
        


      

      
        
          	
                	
                  12.3

                	
                  Each
      party hereto warrants and represents to the other that this Agreement
      constitutes the valid and  binding obligation of such party
      enforceable against such party
in

                


        

      

      
        
 

      


      
        
           


        

        
          12

          
            

          

        

        
           


        

      


      
        accordance
with its terms subject to applicable bankruptcy, insolvency, moratorium and
similar laws affecting creditors’ rights generally, and subject, as to
enforceability, to general principles of equity (regardless if enforcement is
sought in proceeding in equity or at law).

      

      
        


      

      
        
          	
                  13.

                	
                  Notice;
      Addresses

                


        

      

      
        


      

      
        
          	
                	
                  13.1

                	
                  The
      addresses of the parties for purposes of this Agreement shall be the
      addresses set forth above, or any other address which shall be provided by
      due notice.

                


        

      

      
        


      

      
        
          	
                	
                  13.2

                	
                  All
      notices in connection with this Agreement shall be sent by registered mail
      or delivered by hand to the addresses set forth above, and shall be deemed
      to have been delivered to the other party at the earlier of the following
      two dates: if sent by registered mail, as aforesaid, three business days
      from the date of mailing; if delivered by hand, upon actual delivery or
      proof of delivery (in the event of a refusal to accept it) at the address
      of the addressee. Delivery by facsimile or other electronic mail shall be
      sufficient and be deemed to have occurred upon electronic confirmation of
      receipt.

                


        

      

      
        


      

      
        
          	
                  14.

                	
                  Miscellaneous

                


        

      

      
        


      

      
        
          	
                	
                  14.1

                	
                  The
      preamble to this Agreement constitutes an integral part
      hereof.

                


        

      

      
        


      

      
        
          	
                	
                  14.2

                	
                  Headings
      are included for reference purposes only and are not to be used in
      interpreting this Agreement.

                


        

      

      
        


      

      
        
          	
                	
                  14.3

                	
                  The
      provisions of this Agreement are in lieu of the provisions of any
      collective bargaining agreement, and therefore, no collective bargaining
      agreement shall apply with respect to the relationship between the parties
      hereto (subject to the applicable provisions of
  law).

                


        

      

      
        


      

      
        
          	
                	
                  14.4

                	
                  No
      failure, delay or forbearance of either party in exercising any power or
      right hereunder shall in any way restrict or diminish such party’s rights
      and powers under this Agreement, or operate as a waiver of any breach or
      nonperformance by either party of any terms or conditions
      hereof.

                


        

      

      
        
 

      


      
        
           


        

        
          13

          
            

          

        

        
           


        

      


      
        
          	
                	
                  14.5

                	
                  Any
      determination of the invalidity or unenforceability of any provision of
      the Agreement shall not affect the remaining provisions hereof unless the
      business purpose of this Agreement is substantially frustrated
      thereby.

                


        

      

      
        


      

      
        
          	
                	
                  14.6

                	
                  This
      Agreement is personal and non-assignable by the Employee. It shall inure
      to the benefit of any corporation or other entity with which the Company
      shall merge or consolidate or to which the Company shall lease or sell all
      or substantially all of its assets, and may be assigned by the Company to
      any affiliate of the Company or to any corporation or entity with which
      such affiliate shall merge or consolidate or which shall lease or acquire
      all or substantially all of the assets of such affiliate. Any assignee
      must assume all the obligations of the Company hereunder, but such
      assignment and assumption shall not serve as a release of prior
      agreements, promises, covenants, arrangements, communications, or
      representations of the
Company.

                


        

      

      
        


      

      
        
          	
                	
                  14.7

                	
                  The
      Employee is obligated to keep all the terms and covenants of this
      Agreement under strict
confidentiality.

                


        

      

      
        


      

      
        
          	
                	
                  14.8

                	
                  This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of the subject matter contained herein and supersedes all negotiations,
      undertakings, agreements, representations or warranties, whether oral or
      written, by any officer, employee or representative of the Company or any
      party thereto; and any prior agreement of the parties hereto or of the
      Employee and the Company in respect of the subject matter contained herein
      is hereby terminated and cancelled. Any modification to the Agreement can
      only be made in writing, signed by the Employee and the CEO, with the
      approval of the Board.

                


        

      

      
        


      

      
        
          	
                	
                  14.9

                	
                  It
      is hereby agreed between the parties that the laws of the State of Israel
      shall apply to this Agreement and that the sole and exclusive place of
      jurisdiction in any matter arising out of or in connection with this
      Agreement shall be the applicable Tel-Aviv
  court.

                


        

      

      
         

      

      
        


      

      
        


      

      
        


      

      
        IN WITNESS WHEREOF, the
parties have executed this Agreement as of the Effective Date
first

      

      
        

          
            
               


            

            
              14

              
                

              

            

            
               


            

          



      

      
        above
written.

      

      
        


      

      


      
        	
                
                  /s/ Andrew Pearlman        

                

              	
                
                  /s/ Baruch Stern        

                

              
	
                
                  MEDGENICS
      MEDICAL ISRAEL, LTD.

                

              	
                
                  Baruch
      Stern, PhD

                

              
	
                
                  By:
      Dr. Andrew L. Pearlman,
      CEO

                

              	 
      


      


      
        
           


        

        
          15

          
            

          

        

        
           


        

      


      
        EXHIBIT
A

      

      
        


      

      
        Goal Bonus Criteria Through
March 2008

      

      
        


      

      
        The total
Goal Bonus of $20,000 shall be allocated to the achievement of the following
through July 2008:

      

      
        


      

      
        
          	
                	
                  I.

                	
                  Goal
      Bonus Criteria through July, 2008 - $20,000, split between two groups of
      objectives:

                


        

      

      
        


      

      
        
          	
                	
                  a.

                	
                  Company
      objectives - $10,000

                


        

      

      
        


      

      
        
          	
                	
                  i.

                	
                  Assuming
      Medgenics is admitted to AIM during October, 2007, then during QI/2008,
      commence approved EPODURE Phase I/II clinical trial run under full GMP
      compliance, implanting EPODURE biopumps in at least the first 5 patients
      before the end of Ql/08, preferably by February 28. If the AIM admission
      date is delayed past October, 2007, the target dates for the start of the
      trial will be delayed
accordingly.

                


        

      

      
        


      

      
        
          	
                	
                  ii.

                	
                  By
      3 months after treatment of the first patient, in at least 5 patients,
      demonstrate at least 6 weeks’ sustained elevation of serum EPO (by at
      least 25mU over baseline), and reticulocyte count (by at least 1% over
      baseline)

                


        

      

      
        


      

      
        
          	
                	
                  iii.

                	
                  By
      5 months after treatment of first patient, in the first 10 patients,
      demonstrate at least:

                


        

      

      
        
          	
                	
                  1.

                	
                  sustained
      elevation of serum EPO (by at least 25mU over baseline), and reticulocyte
      count (by at least 1% over baseline) for at least 2 months and
      counting...

                


        

      

      
        
          	
                	
                  2.

                	
                  elevated
      hematocrit by at least 5 points or to at least 33-36 , for at least 2
      weeks and counting...

                


        

      

      
        


      

      
        
          	
                	
                  b.

                	
                  Personal
      professional objectives/deliverables -
$10,000

                


        

      

      
        
          	 	
                  i.

                	
                  GMP
      vector - receive by December 31, 2007, GMP HDAd vector fully tested and
      meeting all our required specifications, and available for use in the
      clinical trial, and sufficient to treat at least 100
    patients

                


        

      

      
        
          	 	
                  ii.

                	
                  Preclinical
      testing - complete on agreed schedule with the required GLP results to
      support the proposed clinical
trial

                


        

      

      
        
          	
                	
                  iii.

                	
                  GMP
      cell processing facility at Hadassah: Fully set up and verify ready for
      use in the
      clinical trial, establish updated, optimized SOPs and implementation program to maximize
      number of patients that can be processed per day of planned
      use

                


        

      

      
        
          	 	
                  iv.

                	
                  Design,
      successfully move into new lab
facilities

                


        

      

      
        
          	
                	
                  v.

                	
                  Demonstrate
      AAV based biopumps producing at least 200 lU/day EPO for at least 1 month in
      vitro, and remaining at least 25% of peak for 6 months in
      vitro

                


        

      

      
        
          	 	
                  vi.

                	
                  Complete
      feasibility test of at least two nonviral vector
  approaches

                


        

      

      
         

      


      
        
           


        

        
          16

          
            

          

        

        
           


        

      


      
        EXHIBIT
B

      

      
        


      

      
        Team Leadership Bonus
Criteria for the period through March 2008

      

      
        


      

      
        The CEO
and the Board will evaluate the Employee’s performance after for the period
through July 2008 and the Team Leadership Bonus of $10,000 will be awarded based
on the overall average score (as determined by the CEO and the Board) earned by
Employee in the areas listed below.

      

      
         

      

      
         

        Leadership
Bonus Criteria through June, 2008 - $10,000

      

      
        


      

      
        
          	
                  1.

                	
                  Building
      the team and maintaining good team atmosphere within the science group and
      with the other groups of the company, and also with external entities such
      as strategic partners, regulatory agencies,
etc.

                


        

      

      
        


      

      
        
          	
                  2.

                	
                  Planning
      and managing projects so as to complete deliverables on or before the
      agreed times, including timely achievement of interim milestones, making
      effective and regular use of project management tools (MS Project, EXCEL,
      etc.)

                


        

      

      
        


      

      
        
          	
                  3.

                	
                  Problem
      solving with a sense of urgency and “can do” attitude, dealing with
      technical challenges and obstacles in a way that builds confidence in the
      company both internally and
externally

                


        

      

      
        


      

      
        
          	
                  4.

                	
                  Continuing
      to develop managerial and technical skills, and to be open to feedback on
      both managerial and technical levels. Learn the Courage Institute
      approaches and methodologies, and work actively with organizational
      advisors to apply them in your executive
role.

                


        

      

      
        


      

      
        


      


      
        
           


        

        
          17