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                                                     CONFIDENTIAL EXECUTION COPY



                           PURCHASE AND SALE CONTRACT


                                     BETWEEN


                               GIVEN IMAGING LTD.


                                       AND


                                  PEMSTAR, INC.


                                     FOR THE
                              PURCHASE AND SALE OF
                   M2A(TM) CAPSULE ASSEMBLY AND TESTING LINES
                                 YOQNEAM, ISRAEL


                                 AUGUST 25, 2001
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                                                                    CONFIDENTIAL


                                TABLE OF CONTENTS


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ARTICLE 1.
         DESCRIPTION OF CONTRACT...............................................2

         1.1      Entire Agreement and Modifications...........................2
         1.2      Conflicting Provisions.......................................2
         1.3      Definitions..................................................3
         1.4      Interpretation...............................................7
         1.5      Negotiation of this Sale Contract............................8
         1.6      Non-Exclusive Engagement.....................................8

ARTICLE 2.
         SCOPE OF WORK.........................................................8

         2.1      Scope of Work................................................8
         2.2      Purchase Orders..............................................8
         2.3      Seller's Responsibilities....................................9
         2.4      Buyer's Responsibilities....................................10
         2.5      Design Data.................................................11
         2.6      Design and Review of Process................................11
         2.7      Sub-Contractors and Suppliers...............................12
         2.8      Training....................................................12

ARTICLE 3.
         COMPLETION AND TRANSFER..............................................12

         3.1      Delivery Schedule...........................................13
         3.2      Testing.....................................................14
                  3.2.1    Provisional Tests..................................14
                  3.2.2    Performance Tests..................................14
         3.3      Final Acceptance............................................15
         3.4      Passing of Title; Risk of Loss..............................15

ARTICLE 4.
         COMPENSATION.........................................................16

         4.1      Purchase Price..............................................16
         4.2      Payment Terms...............................................17
         4.3      Taxes.......................................................18

ARTICLE 5.
         CONTRACT CHANGES; FORCE MAJEURE......................................18

         5.1      General.....................................................18


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         5.2      Product Changes.............................................18
         5.3      Changes at Request of Seller................................19
         5.4      Force Majeure...............................................20

ARTICLE 6.
         LIQUIDATED DAMAGES...................................................20

         6.1      Delay in Achievement of Final Acceptance....................20
         6.2      Failure to Achieve Performance Guarantees...................21

ARTICLE 7.
         WARRANTY.............................................................21

         7.1      Warranty Terms..............................................22
         7.2      Defects.....................................................22
         7.3      Intellectual Property Infringement..........................22
         7.4      Supplier Warranties.........................................23
         7.5      Express Warranties..........................................23

ARTICLE 8.
         INDEMNIFICATION......................................................23

         8.1      Indemnification.............................................23
         8.2      Procedure...................................................24

ARTICLE 9.
         TERM; CANCELLATION AND TERMINATION ..................................25

         9.1      Term........................................................25
         9.2      Termination by Buyer........................................25
         9.3      Termination by Seller.......................................26
         9.4      Right to Terminate for Force Majeure........................26
         9.5      Right to Terminate for Delay in Notice to Proceed...........27
         9.6      Measures to be Taken by Seller on Termination...............27

ARTICLE 10.
         CONFIDENTIAL AND PROPRIETARY INFORMATION; COMPETITION................27

         10.1     Title to Work Product.......................................27
         10.2     Confidential and Proprietary Information....................28
         10.3     Publicity...................................................29
         10.4     Non-Solicitation of Employees...............................30
         10.5     Non-Competition; Non-Interference...........................30
         10.6     Enforceability and Severability.............................30
         10.6     Equitable Relief............................................31

ARTICLE 11.
         GOVERNING LAW, JURISDICTION..........................................31

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         11.1     Governing Law and Submission to Jurisdiction................31
         11.2     Dispute Notification Procedure..............................31
         11.3     Adjudication................................................31
         11.4     Arbitration.................................................32
         11.5     No Special Damages..........................................33
         11.6     Duty of Continued Performance...............................33

ARTICLE 12.
         MISCELLANEOUS........................................................33

         12.1     Relationship of the Parties.................................33
         12.2     Binding Effect on Successors and Assignees..................34
         12.3     Notices.....................................................34
         12.4     Not for Benefit of Third Parties............................35
         12.5     Section Headings and Subheading.............................35
         12.6     No Waiver...................................................35
         12.7     Good Faith and Fair Dealing.................................35
         12.8     Severability................................................35
         12.9     Counterparts................................................35
         12.10    Further Assurances..........................................35
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                           PURCHASE AND SALE CONTRACT
                 FOR M2A(TM) CAPSULE ASSEMBLY AND TESTING LINES

         This Purchase and Sale Contract is dated as of August 25, 2001 between
Given Imaging Ltd., a company organized under the laws of Israel (hereinafter
referred to as "BUYER"), and PEMSTAR, Inc., a Minnesota company with principal
offices in Rochester, Minnesota (hereinafter referred to as "SELLER").

                                   WITNESSETH:

         WHEREAS, Buyer desires to purchase from Seller, and Seller agrees to
sell to Buyer, assembly and testing lines for the production of Buyer's
proprietary M2A Capsule (as hereinafter defined), which is subject to patents
and patent applications in the United States and other jurisdictions and has
been approved by the U.S. Food and Drug Administration for commercial
distribution in the United States; and

         WHEREAS, Buyer is not in the business of manufacturing such assembly
and testing lines, and Seller is one of the companies capable of manufacturing
such assembly and testing lines;

         NOW, THEREFORE, in consideration of the promises and the mutual
covenants set forth herein, Buyer and Seller, intending to be legally bound,
agree as follows:

                                   ARTICLE 1.
                             DESCRIPTION OF CONTRACT

1.1      ENTIRE AGREEMENT AND MODIFICATIONS

         This Purchase and Sale Contract between Buyer and Seller (together with
         the Schedules and Exhibits attached hereto, hereinafter referred to as
         this "SALE CONTRACT") sets forth the full and complete understanding of
         the parties as of the date hereof, and supersedes any and all
         agreements and representations, written or oral, made or dated prior
         thereto. No amendment, supplement or other modification to this Sale
         Contract shall be effective unless pursuant to a change order under
         Article 5 or otherwise in writing and signed by authorized
         representatives of both parties to this Sale Contract.

1.2      CONFLICTING PROVISIONS

         1.2.1    In the event either party becomes aware of any conflict
                  between this document and the Schedules or Exhibits attached
                  hereto or between any of such Schedules and Exhibits, it shall
                  notify the other party of such conflict in writing. Seller
                  shall proceed with all Work not subject to such conflict until
                  the parties have resolved such conflict.

         1.2.2    In the event of any conflict between this document and any
                  Schedule or Exhibit attached hereto, the terms and provisions
                  of this document shall


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                  prevail and, in the event of any conflict between this Sale
                  Contract or the Product Specifications and the Plans and
                  Specifications, this Sale Contract and the Product
                  Specifications shall prevail.

1.3      DEFINITIONS

         Unless the context otherwise requires, the following definitions shall
         apply to this Sale Contract:

         "AFFILIATE" means any person directly or indirectly controlled by or
         under common control with Seller. For purposes of this definition,
         "control" shall mean the possession, direct or indirect, of the power
         to direct or cause the direction of the management and policies of a
         person, whether through the ownership of voting securities, by contract
         or otherwise.

         "APPLICABLE LAW" means any code, law, rule, regulation, ordinance,
         decision, decree, directive, instruction or other requirement or
         restriction issued by or emanating from any government authority of the
         United States or any state thereof in which Seller's Facility is
         located, which has the force of law or with which a party is otherwise
         required to comply, including measures which apply directly or
         indirectly to any party or to any Production Line or to the rights and
         obligations of either of the parties arising under this Sale Contract,
         whether applicable at the date hereof or in the future. For the
         avoidance of doubt, Applicable Law includes the Quality System
         Regulations.

         "BUYER'S CONTACT" means Jerome Avron, Vice President Operations, or any
         other individual designated from time to time thereafter in writing by
         Buyer to Seller who shall be authorized to receive communications from
         Seller and with whom Seller may consult at all reasonable times.

         "BUYER DELAY" means any delay or failure by Buyer (i) to provide any
         data or information with respect to (A) the Product Specifications
         within two (2) working days or (B) the Plans and Specifications within
         seven (7) working days, in either case, of a reasonable written request
         from Seller for such data or information, (ii) to obtain customs
         clearance for any Production Line within five (5) working days from the
         day such Production Line arrives at Tel-Aviv International Airport and
         (iii) to comply with any of its other obligations under this Sale
         Contract to the extent that, in each case, such delay or failure
         prevents Seller from performing its obligations under this Sale
         Contract.

         "BUYER-DIRECTED PRODUCT CHANGE" is defined in Section 5.2.1.

         "BUYER'S FACILITY" means the (i) facility of Buyer located in Yoqneam,
         Israel or any other location in Israel in which the Production Lines
         (other than the Standby Production Lines) are to be installed by Seller
         or (ii) any other facility of Buyer


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         located outside Israel designated by Buyer and agreed to by Seller,
         which agreement shall not be unreasonably withheld, delayed or
         conditioned.

         "BUYER INFORMATION" is defined in Section 2.5.

         "CHANGE IN LAW" shall mean the adoption, amendment or repeal of, or
         change in the interpretation or application of, any Applicable Law
         pertaining to the design, testing, production, control or quality
         assurance of the M2A Capsule after the date of this Sale Contract.

         "CHANGE ORDER" is defined in Section 5.1.

         "CLAIMS" is defined in Section 8.1.1.

         "CONFIDENTIAL INFORMATION" is defined in Section 10.2.1.

         "DEFECT" is defined in Section 7.2.1.

         "DOLLAR" or "$" means the legal tender of the United States of America.

         "EQUIPMENT" means all apparatus, equipment, machinery and parts and
         other materials required for the assembly and operation of any
         Production Line (including all special maintenance tools).

         "EXPERT" is defined in Section 11.3.1.

         "FDA QUALITY SYSTEM REGULATIONS" means the regulations of the U.S. Food
         and Drug Administration applicable to the methods and documentation of
         the design, testing, production, control, quality assurance, labeling
         and packaging of the M2A Capsule set forth in 21 C.F.R. Part 820
         (2001).

         "FINAL ACCEPTANCE" means, for any Production Line, Buyer's written
         confirmation in accordance with Section 3.3 that each of the conditions
         set forth therein have been satisfied for such Production Line in
         accordance with this Sale Contract.

         "FORCE MAJEURE" means all circumstances beyond the control of the
         parties the consequences of which could not reasonably have been
         remedied, and which prevent, totally or partially, the performance of
         this Sale Contract. The following events, the list of which is not
         exhaustive, constitute events of Force Majeure provided that they
         comply with the foregoing conditions: (i) any physical consequence of
         such natural elements as lightning, drought, fire, earthquake, volcanic
         eruption, landslide, flood, storm, cyclone, typhoon, tornado or
         exceptionally torrential rain; (ii) explosion, fire or destruction of
         machinery, of plant and of any facilities whatsoever; (iii) acts of
         declared or undeclared war, invasion, armed conflict or acts committed
         by a foreign enemy, blockade, embargo, revolution, rioting,
         insurrection, civil commotion, terrorist acts or sabotage; and (iv)
         strikes, protest or demand actions, slow-down in work or other


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         trade union disturbances, PROVIDED, HOWEVER, that (A) the issuance by
         the United States State Department or any other governmental authority
         of any other country of any travel advisory with respect to Israel
         shall not constitute an event of Force Majeure and (B) events described
         in clause (iv) with respect to Seller's Facility shall not entitle
         Seller to claim Force Majeure and with respect to Buyer's Facility
         shall not entitle Buyer to claim Force Majeure.

         "FULLY-AUTOMATED PRODUCTION LINE" means each fully-automated assembly
         and testing line for the manufacture of the M2A Capsule ordered by
         Buyer from Seller hereunder.

         "GUARANTEED FINAL ACCEPTANCE DATE" means, for each Production Line,
         thirty (30) days after the date specified in the Milestone Schedule for
         Final Acceptance of such Production Line, as such date may be extended
         by a Change Order pursuant to Article 5.

         "IMPORT TAXES" means any value added tax and any customs duties, import
         taxes or other like taxes or fees levied by Israel on the importation
         of any Production Line.

         "INDEMNIFIED PARTY" and "INDEMNIFYING PARTY" are defined in Article 8.

         "INTERNATIONAL QUALITY STANDARDS" means the standards and requirements
         of each of the (i) ISO 9001of the International Standards Organization,
         (ii) the Medical Devices Directive of the European Union and (iii) EN
         46001 of the European Union.

         "LCIA" is defined in Section 11.4.

         "LIEN" means any charge, lien, hypothecation, pledge, security
         interest, title retention or other preferential right of any kind
         having the effect of security, or which otherwise encumbers any
         tangible or intangible property.

         "M2A CAPSULE" means the Buyer's proprietary single-use, disposable
         color in-vivo video M2A(TM) capsule used in connection with its
         proprietary wireless imaging system, as more fully described in the
         Product Specifications.

         "MILESTONE SCHEDULE" is defined in Section 3.1.

         "PERFORMANCE GUARANTEES" means, for each Semi-Automated Production Line
         and Fully-Automated Production Line, the guarantees set forth in
         Schedule 1 for such Production Line.

         "PERFORMANCE TESTS" shall mean the tests of each Production Line to be
         carried out in accordance with the procedures set forth in Schedule 3
         to determine whether such Production Line is capable of achieving the
         Performance Guarantees.


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         "PLANS AND SPECIFICATIONS" means (i) the technical requirements for the
         design, engineering and manufacturing of the Production Lines and (ii)
         the aggregate of all designs, specifications, plans and drawings
         prepared by Seller, or obtained by Seller from any Supplier in
         connection with the procurement of any Equipment, under this Sale
         Contract.

         "PRODUCTION LINE" means any Semi-Automated Production Line or
         Fully-Automated Production Line.

         "PRODUCT SPECIFICATIONS" means the preliminary description and
         specifications for the M2A Capsule to be provided by Buyer to Seller,
         as modified or supplemented from time to time by a Change Order in
         accordance with Article 5.

         "PROVISIONAL ACCEPTANCE" means, for any Production Line, Buyer's
         written confirmation in accordance Section 3.2.1 that the Performance
         Tests have demonstrated that such Production Line is capable of
         achieving the Performance Guarantees.

         "PROVISIONAL TESTS" shall mean the preliminary tests of each Production
         Line to be carried out in accordance with the procedures set forth in
         Schedule 3 to determine whether such Production Line is capable of
         achieving the Performance Guarantees.

         "PURCHASE ORDER" means a purchase order, substantially in the form of
         Exhibit A, issued by Buyer to Seller for the purchase by Buyer from
         Seller of any Production Line under this Sale Contract.

         "PURCHASE PRICE" means, for each Production Line, the total firm fixed
         lump sum price for such Production Line set forth in Section 4.1, as
         adjusted by Change Orders pursuant to Article 5.

         "SALE CONTRACT" is defined in Section 1.1 and shall include
         modifications made pursuant to a Change Order under Article 5 or
         otherwise in writing signed by authorized representatives of each of
         parties to this Sale Contract..

         "SELLER-REQUESTED PRODUCT CHANGE" is defined in Section 5.1.

         "SELLER'S CONTACT" means Susan Johnson, Executive Director, Precision,
         Testing and Automation, or any other individual designated from time to
         time in writing by Seller to Buyer who shall be authorized to receive
         communications from Buyer and with whom Buyer may consult at all
         reasonable times.

         "SELLER'S FACILITY" means (i) the facility of Seller located in
         Rochester, Minnesota in which each Production Line is to be assembled
         and the Standby Production Lines are to be stored or (ii) such other
         facility in any other location designated by Seller and agreed to by
         Buyer in its sole discretion.


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         "SEMI-AUTOMATED PRODUCTION LINE" shall mean each semi-automated
         assembly and testing line for the manufacture of the M2A Capsule
         ordered by the Buyer from the Seller hereunder.

         "STANDBY PRODUCTION LINE" is defined in Section 2.2.3.

         "SUPPLIER" means any person who has an agreement for the performance of
         any part of the Work or procurement of all or any portion of the
         Equipment or Services, including each tier of subcontractor and
         sub-supplier.

         "TAXES" means all taxes, assessments, charges, duties, fees, levies or
         other governmental charges, including all Israeli and non-Israeli and
         U.S. and non-U.S. federal, state, local and other income, franchise,
         profits, sales, use, occupation, property, excise, severance, windfall
         profits, stamp, license, payroll and other taxes, assessments, charges,
         duties, fees, levies or other governmental charges of any kind
         whatsoever (whether payable directly or by withholding and whether or
         not requiring the filing of a tax return), all estimated taxes,
         deficiency assessments, additions to tax, penalties and interest and
         shall include any liability for such amounts as a result either of
         being a member of a combined, consolidated, unitary or affiliated group
         or of a contractual obligation to indemnify any person or other entity.

         "WARRANTIES" means the warranties specified in Article 7.

         "WARRANTY PERIOD" is defined in Section 7.1.

         "WORK" is defined in Section 2.1.

         "WORK PRODUCT" is defined in Section 10.1.1.

1.4      INTERPRETATION

         Unless the context requires otherwise, the following rules of
         interpretation shall apply to this Sale Contract:

         (a)      words singular or plural in number shall be deemed to include
                  the other and pronouns having a masculine or feminine gender
                  shall be deemed to include the other;

         (b)      any reference to this Sale Contract or any other agreement or
                  any schedule, exhibit or attachment hereto or thereto shall
                  mean this Sale Contract or such other agreement and all such
                  schedules, exhibits and attachments as amended, supplemented
                  or otherwise modified;

         (c)      any reference to any person shall include any natural person,
                  corporation, company, partnership, joint venture, trust or
                  other entity and permitted


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                  successors and assigns thereof and, in the case of any
                  government authority, any person succeeding to its functions
                  and capacities; and

         (d)      any reference to days, weeks, months or years shall mean
                  calendar days, months or years and any reference to working
                  days shall mean, in the case of any obligation of Seller, any
                  day other than a Saturday and Sunday and any other day on
                  which banks are closed for business in Rochester, Minnesota
                  and, in the case of any obligation of Buyer, any day other
                  than a Friday and Saturday and any other day on which banks
                  are closed for business in Israel.

1.5      NEGOTIATION OF THIS SALE CONTRACT

         Seller represents and warrants that the factual statements and
         information provided by Seller to Buyer in writing prior to the date
         hereof with respect to its experience and qualifications in design
         engineering, procurement and manufacturing, taken as a whole, are true
         and correct in all material respects as of the date hereof and do not
         omit any material fact necessary in order to make such factual
         statements and information, taken as a whole, not materially misleading
         as of the date hereof.

1.6      NON-EXCLUSIVE ENGAGEMENT

         Buyer is entering into this Sale Contract with Seller on a
         non-exclusive basis and reserves the right, in its sole discretion, to
         enter into contracts with any other person with respect to the design
         engineering, procurement, manufacturing, installation and testing of
         assembly and testing lines or other facilities for the manufacturing of
         its M2A Capsule.

                                   ARTICLE 2.
                                  SCOPE OF WORK

2.1      SCOPE OF WORK

         Seller shall design, engineer, manufacture, deliver, install and test
         each Production Line and procure all Equipment in connection therewith
         as required to achieve Provisional Acceptance and Final Acceptance and
         in compliance with (i) the FDA Quality System Regulations and other
         Applicable Law, (ii) the International Quality Standards and (iii) all
         licenses and permits applicable to the parties or the design,
         engineering, manufacturing or export of any Production Line under
         Applicable Law (the provision of the foregoing services, hereinafter
         referred to as the "WORK").

2.2      PURCHASE ORDERS

         Buyer may issue a Purchase Order, substantially in the form of Exhibit
         A hereto, for Production Lines under this Sale Contract as follows:


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         2.2.1    Buyer shall be deemed to have issued a Purchase Order for the
                  first Semi-Automated Production Line to be installed by Seller
                  at Buyer's Facility effective August 27, 2001.

         2.2.2    Buyer may issue a Purchase Order for the first Fully-Automated
                  Production Line to be installed by Seller at Buyer's Facility
                  at any time prior to December 31, 2004.

         2.2.3    Buyer may issue an unlimited number of Purchase Orders for
                  additional Production Lines within twelve (12) weeks prior to
                  the expiration of the term of this Sale Contract in the case
                  of any additional Semi-Automated Production Line and within
                  thirty-six (36) weeks prior to the expiration of the term of
                  this Sale Contract in the case of any additional
                  Fully-Automated Production Line. Subject to the provisions of
                  Article 5 with respect to Change Orders, the Product
                  Specifications and Plans and Specifications for any such
                  additional Production Line shall be the same as those for the
                  first, Semi-Automated Production Line or, as the case may be,
                  the first Fully-Automated Production Line. Any such Purchase
                  Order shall specify whether the Production Line being ordered
                  is to be installed by Seller at Buyer's Facility or stored by
                  Seller at Seller's Facility (any such Production Line to be
                  stored at Seller's Facility, a "STANDBY PRODUCTION LINE").

2.3      SELLER'S RESPONSIBILITIES

         2.3.1    Without limiting the other obligations of Seller under this
                  Sale Contract, Seller shall perform the following tasks:

                  (a)      prepare all technical requirements for the design,
                           engineering and manufacturing of Production Lines
                           capable of producing M2A Capsules in compliance with
                           the Product Specifications and the FDA Quality System
                           Regulations and other Applicable Law, the
                           International Quality Standards and the following
                           design criteria:

                           (i)      each Production Line must have a foreseeable
                                    life span of at least seven (7) years after
                                    Final Acceptance; and

                           (ii)     each Production Line must be capable of
                                    reliable operation under the following
                                    operating conditions with respect to Buyer's
                                    Facility: (A) freestanding 20 centimeter
                                    concrete floors; (B) a daily average
                                    temperature range of 15.5 to 26.0 degrees
                                    Celsius and (C) a daily average relative
                                    humidity range of 35% to 75%;

                  (b)      prepare all designs, specifications, plans and
                           drawings for the assembly and construction of the
                           Production Lines;


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                  (c)      engineer and manufacture each Production Line in
                           accordance with the Plans and Specifications and the
                           provisions of this Sale Contract and procure all
                           Equipment required for such purpose;

                  (d)      (i) deliver each Production Line (other than any
                           Standby Production Lines) F.O.B. to Buyer and install
                           such Production Line at Buyer's Facility, in each
                           case as provided in Section 3.2.2 and (ii) store each
                           Standby Production Line at Seller's Facility;

                  (e)      supervise the Provisional Tests and Performance
                           Tests, including arranging for any representatives of
                           Suppliers to be present during such tests as required
                           for system adjustments, and procure all components
                           necessary to manufacture M2A Capsules during such
                           tests and any testing equipment necessary to carry
                           out such tests;

                  (f)      obtain and maintain, at its sole cost and expense,
                           all licenses and permits required by Applicable Law
                           in connection with the performance of the Work and
                           comply with the requirements of such (A) licenses and
                           permits and (B) the FDA Quality System Regulations
                           and other Applicable Law;

                  (g)      provide for Buyer's review and approval the
                           deliverables required as a condition to Final
                           Acceptance of any Production Line and other
                           documentation with respect to such Production Lines
                           as is reasonably requested by Seller; and

                  (h)      provide to Buyer a bi-monthly report on the fifteenth
                           (15th) and last day of every month, detailing the
                           progress in the performance of the Work in the
                           preceding period of such month in a format reasonably
                           acceptable to Buyer.

2.4      BUYER'S RESPONSIBILITIES

         2.4.1    Buyer shall, subject to the terms and conditions of this Sale
                  Contract:

                  (a)      provide to Seller within four (4) weeks of the
                           Purchase Order for the first Semi-Automated
                           Production Line, the following: (i) the software for
                           the system to capture and record the image from the
                           M2A Capsule and any algorithms necessary for
                           alignment of the image and (ii) the software for the
                           one-time programmable system for the Application
                           Specific Integrated Circuit (ASIC);

                  (b)      provide to Seller (i) within four (4) weeks of the
                           Purchase Order for the first Semi-Automated
                           Production Line, 20 kits of Component Parts for the
                           M2A Capsule, (ii) within six (6) weeks of such
                           Purchase Order, three hundred (300) such kits and
                           (iii) within


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                           fourteen (14) weeks of such Purchase Order three
                           hundred (300) such kits;

                  (c)      expeditiously review all designs, specifications,
                           plans and drawings and other proposals submitted by
                           Seller for review by Buyer in accordance with this
                           Sale Contract;

                  (d)      arrange for transportation to Buyer's Facility and
                           customs clearance in Israel for each Production Line
                           delivered by Seller to in accordance with Section
                           3.2.2(a);

                  (e)      provide 2000 square feet at Buyer's Facility for the
                           installation and testing of each Production Line to
                           be installed therein; and

                  (f)      provide for the interconnections for air pressure,
                           electrical power and water supply and any other
                           utilities as required for the operation and
                           maintenance of each Production Line to be installed
                           at Buyer's Facility.

2.5      DESIGN DATA

         In performance of its obligations hereunder, Seller shall be entitled
         to rely on the Product Specifications and other data and information
         provided by Buyer to Seller, PROVIDED that Buyer shall have no
         liability to Seller for the Product Specifications or any other data or
         information that Buyer may have provided to Seller or may hereafter
         provide to Seller in connection with any Change Order or otherwise (the
         "BUYER INFORMATION"). Seller's sole remedy in respect of any change to
         or the insufficiency of any Buyer Information shall be to a Change
         Order in respect of the Product Specifications, to which Seller shall
         be entitled as provided in Article 5.

2.6      DESIGN AND REVIEW OF PROCESS

         2.6.1    The Plans and Specifications shall be subject to inspection
                  and review by Buyer and its representatives. Seller shall
                  submit draft Plans and Specifications to Buyer and incorporate
                  changes requested by Buyer into the Plans and Specifications
                  in a manner satisfactory to Buyer.

         2.6.2    All other Work shall be subject to inspection and review by
                  Buyer or its representatives at the discretion of Buyer upon
                  reasonable prior notice to Seller. Seller shall furnish all
                  reasonable assistance required in connection with any such
                  inspection or review.

         2.6.3    No inspection or review by Buyer or its representatives prior
                  to Final Acceptance of any Production Line shall constitute
                  either (i) an approval, endorsement or confirmation of any
                  kind or (ii) an acknowledgment by


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                  Buyer that any component or part of such Production Line
                  satisfies the requirements of this Sale Contract.

2.7      SUB-CONTRACTORS AND SUPPLIERS.

         2.7.1    Seller may subcontract any portion of the Work to any
                  Supplier, PROVIDED that, (i) Seller shall remain responsible
                  for management and oversight of the Work and liable to Buyer
                  for any Work so subcontracted and (ii) all subcontracts are
                  assigned in accordance with Applicable Law to Buyer or its
                  designee on terms and conditions reasonably acceptable to
                  Buyer. Seller shall provide Buyer with such information
                  concerning Suppliers as Buyer may request from time to time.

         2.7.2    Seller shall promptly pay each of its subcontractors, vendors
                  and materialmen for all labor, materials and equipment,
                  regardless of any dispute between Seller and Buyer, and shall
                  promptly inform Buyer of any dispute that could reasonably be
                  expected to result in creation of a Lien against any
                  deliverables hereunder (including, without limitation, any
                  Equipment or Production Line or portion thereof). Seller shall
                  use commercially reasonable efforts to settle any such
                  dispute, and shall be responsible for discharging any such
                  Liens, at its sole cost and expense.

         2.7.3    Seller agrees that it shall be fully responsible to Buyer for
                  the acts and omissions of Suppliers and of persons directly or
                  indirectly employed by them, as it is for the acts or
                  omissions of persons directly or indirectly employed by
                  Seller, in connection with the performance of any part of the
                  work or the procurement of any equipment.

         2.7.4    Nothing contained herein shall create any contractual
                  relationship between any Supplier and Buyer, and Buyer shall
                  have no obligation to pay or cause payment to be made to any
                  Supplier.

2.8      TRAINING

         Seller shall be responsible for training Buyer's regular operating
         personnel at Buyer's Facility to provide all information necessary for
         efficient and proper operation of the Production Lines, including
         start-up, shutdown, operation, maintenance and repairs, and emergency
         procedures. Training will consist of classroom and on-the-job
         (hands-on) operational instruction as necessary. Seller shall design
         and submit to Buyer a training procedure and schedule for each of the
         Semi-Automated Production Lines and the Fully-Automated Production
         Lines within fifteen (15) days of Provisional Acceptance of the first
         such Production Line. Seller promptly shall incorporate Buyer's
         comments into the training procedures and schedules and shall be
         required to complete such training to Buyer's satisfaction prior to
         Final Acceptance of any Production Line.


                                       12
<Page>

                                   ARTICLE 3.
                             COMPLETION AND TRANSFER

3.1      DELIVERY SCHEDULE

         Seller shall commence the Work with respect to each Production Line
         upon issuance of a Purchase Order in respect thereof under Section
         2.2.1 and shall prosecute the Work continuously and with due diligence
         in accordance with the following schedule (the "MILESTONE SCHEDULE"),
         subject to adjustment only by a Change Order.

<Table>
<Caption>
         ----------------------------------------------------------------------------------------
                                     Milestone                           Milestone Date
                                                                       (from issuance of
                                                                         Purchase Order)
         ----------------------------------------------------------------------------------------
<S>                                                              <C>
         FIRST SEMI-AUTOMATED PRODUCTION LINE:
         ----------------------------------------------------------------------------------------
                  Final Plans and Specifications to Buyer        Eight (8) weeks
         ----------------------------------------------------------------------------------------
                  Provisional Acceptance Date                    Sixteen (16) weeks
         ----------------------------------------------------------------------------------------
                  Final Acceptance                               Twenty (20) weeks
         ----------------------------------------------------------------------------------------
         EACH ADDITIONAL SEMI-AUTOMATED PRODUCTION LINE:
         ----------------------------------------------------------------------------------------
                  Provisional Acceptance Date                    Nine (9) weeks
         ----------------------------------------------------------------------------------------
                  Final Acceptance                               Twelve (12) weeks
         ----------------------------------------------------------------------------------------
         FIRST FULLY-AUTOMATED PRODUCTION LINE:
         ----------------------------------------------------------------------------------------
                  Final Plans and Specifications to Buyer        Eight (8) weeks
         ----------------------------------------------------------------------------------------
                  Provisional Acceptance                         Thirty-five (35) weeks
         ----------------------------------------------------------------------------------------
                  Final Acceptance                               Forty (40) weeks
         ----------------------------------------------------------------------------------------
         EACH ADDITIONAL FULLY-AUTOMATED PRODUCTION LINE:
         ----------------------------------------------------------------------------------------
                  Provisional Acceptance                         Thirty (30) weeks
         ----------------------------------------------------------------------------------------
                  Final Acceptance                               Thirty-six (36) weeks
         ----------------------------------------------------------------------------------------
</Table>


         Seller shall take such steps as shall be necessary to ensure compliance
         with the Milestone Schedule, including increasing its labor force, the
         number of shifts, overtime operations or the length of the work week,
         but in any such case, Seller


                                       13
<Page>

         shall not be entitled to any additional payment or be relieved of its
         obligation to complete the Work in accordance with the Milestone
         Schedule.

3.2      TESTING.

         3.2.1    PROVISIONAL TESTS. When any Production Line has been
                  physically completed in accordance with the Plans and
                  Specifications, Seller shall carry out the Provisional Tests
                  on such Production Line at Seller's Facility in the presence
                  of Buyer at a mutually agreed time. If the Provisional Tests
                  for any Production Line demonstrate to Buyer's satisfaction
                  that such Production Line has achieved the Performance
                  Guarantees, Provisional Acceptance for such Production Line
                  shall be deemed to have occurred on the date of Buyer's
                  written confirmation thereof substantially in the form of
                  Exhibit B hereto. If the Provisional Tests demonstrate that
                  any Production Line has not achieved the Performance
                  Guarantees, Seller shall perform such Work as is necessary to
                  achieve Provisional Acceptance and the foregoing testing
                  procedure shall be repeated until Provisional Acceptance of
                  such Production Line has been achieved. The achievement of
                  Provisional Acceptance shall not relieve Seller of any of its
                  other obligations under this Sale Contract, including its
                  obligation to achieve in a timely manner Final Acceptance or
                  its obligations arising under Article 7 hereof.

         3.2.2    PERFORMANCE TESTS.

                  (a)      Upon Provisional Acceptance of any Production Line,
                           Seller shall deliver such Production Line (other than
                           any Standby Production Line) to Buyer F.O.B.
                           Minneapolis St. Paul International Airport, at the
                           loading dock of a carrier designated by Buyer. Seller
                           shall be responsible for packaging such Production
                           Line for transportation to Buyer's Facility. Buyer
                           shall be responsible for transportation of such
                           Production Line from such airport to Buyer's Facility
                           and for customs clearance and Import Taxes payable in
                           respect of such Production Line.

                  (b)      Upon delivery of any Production Line (other than any
                           Standby Production Line) to Buyer's Facility, Seller
                           shall install such Production Line in Buyer's
                           Facility, in coordination with Buyer. Seller shall
                           carry out the Performance Tests for any such
                           Production Line at Buyer's Facility in the presence
                           of Buyer at a mutually agreed time. In the case of
                           any Standby Production Line, Seller shall carry out
                           the Performance Tests at Seller's Facility in the
                           presence of Buyer at a mutually agreed time.

                           If any Production Line is not ready for the
                           Performance Tests in the opinion of Buyer, Seller
                           shall perform such Work as is necessary to


                                       14
<Page>

                           prepare such Production Line for the Performance
                           Tests until such Production Line is ready for the
                           Performance Tests, in the opinion of Buyer. If any
                           Production Line does not achieve the Performance
                           Guarantees to Buyer's satisfaction, Seller shall
                           perform such Work as is necessary to achieve the
                           Performance Guarantees and the foregoing testing
                           procedure shall be repeated until Provisional
                           Acceptance of such Production Line has been achieved
                           in accordance with this Section 3.2.1.

                  (c)      The successful completion of the Performance Tests
                           shall not relieve Seller of its obligations to
                           achieve Final Acceptance or its obligations arising
                           under Article 7 hereof.

3.3      FINAL ACCEPTANCE

         3.3.1    Final Acceptance for any Production Line shall occur upon
                  Buyer's written confirmation, substantially in the form of
                  Exhibit C, that each of the following conditions has been
                  satisfied with respect to such Production Line in accordance
                  with this Sale Contract, as determined by Buyer:

                  (a)      the Performance Tests have demonstrated that such
                           Production Line has achieved the Performance
                           Guarantees;

                  (b)      All special tools necessary for the operation and
                           maintenance of the such Production Line have been
                           furnished to Buyer;

                  (c)      Buyer has received all Plans and Specifications for
                           the Production Lines and "as-built" drawings for each
                           Production Line;

                  (d)      Buyer has received operation and maintenance manuals
                           and other documentation necessary to support the
                           operation, maintenance and repair of such Production
                           Line and such documentation shall be in compliance
                           with the FDA Quality System Regulations and the
                           International Quality Standards;

                  (e)      Seller has completed the training program required by
                           Section 2.8 to the satisfaction of Buyer; and

                  (f)      Seller has performed all other terms of and delivered
                           all items required by this Sale Contract.

         3.3.2    The achievement of Final Acceptance with respect to any
                  Production Line shall not relieve Seller of any of its
                  obligations arising under Article 7.


                                       15
<Page>

3.4      PASSING OF TITLE; RISK OF LOSS

         3.4.1    All right, title and interest in, and the risk of loss or
                  damage to, each Production Line shall pass to Buyer, upon
                  delivery of such Production Line to Buyer in accordance with
                  Section 3.2.2(a). Prior to such time, Seller shall be
                  obligated to replace, repair or reconstruct such Production
                  Line, including the components and parts thereof, which is
                  lost, damaged or destroyed by any cause (other than the
                  negligence or willful misconduct of Buyer). From and after
                  such time, Buyer shall assume the risk of physical loss or
                  damage to such Production Line, except for such loss or damage
                  which is caused by Seller or its representatives or for which
                  Seller has responsibility under Articles 7 or 8 of this Sale
                  Contract, including any loss or damage which is caused by any
                  defect or deficiency in the packaging of such Production Line
                  for transportation to Buyer's Facility.

         3.4.2    Seller covenants that it shall promptly discharge, at its sole
                  cost and expense, any Liens filed or maintained against any
                  Production Line or any component or part thereof, either by
                  Seller or anyone claiming by, through or under Seller for or
                  on account of any Equipment procured or supplied by Seller.

                                   ARTICLE 4.
                                  COMPENSATION

4.1      PURCHASE PRICE

         4.1.1    Seller shall accept as full and complete payment for all of
                  each Production Line the following fixed lump sum Purchase
                  Price:

                  (a)      FIRST SEMI-AUTOMATED PRODUCTION LINE:

                           One Million Five Hundred Eighty-two Thousand Five
                           Hundred Fifty Dollars ($1,582,550);

                  (b)      EACH ADDITIONAL SEMI-AUTOMATED PRODUCTION LINE:

                           Nine Hundred Twelve Thousand Six Hundred Fifty-five
                           Dollars ($912,655);

                  (c)      FIRST FULLY-AUTOMATED PRODUCTION LINE:

                           Two Million Eight Hundred Nineteen Thousand Seven
                           Hundred Ten Dollars ($2,819,710); and

                  (d)      EACH ADDITIONAL FULLY-AUTOMATED PRODUCTION LINE:


                                       16
<Page>

                           Two Million Two Hundred Seven Thousand Seven Hundred
                           Eighty Dollars ($2,207,780).

         4.1.2    The parties acknowledge and agree that the Purchase Price for
                  each Production Line is the entire compensation payable by
                  Buyer to Seller for the completion of the Work with respect to
                  such Production Line in every detail in accordance with the
                  terms of this Sale Contract other than the storage of any
                  Standby Production Line by Seller at Seller's Facility.

         4.1.3    Buyer shall reimburse Seller on a monthly basis for the
                  reasonable costs of the storage of any Standby Production Line
                  at Seller's Facility.

4.2      PAYMENT TERMS

         4.2.1    The Purchase Price for each Production Line shall be payable
                  in installments upon the achievement of each of the milestones
                  set forth below in an amount equal to the percentage set forth
                  opposite such milestone multiplied by the Purchase Price for
                  such Production Line:

<Table>
<Caption>
                  --------------------------------------------------------------------------------
                                             Milestone                             Percentage of
                                                                                  Purchase Price
                  --------------------------------------------------------------------------------
<S>                                                                               <C>
                  Purchase Order                                                              30%
                  --------------------------------------------------------------------------------
                  Provisional Acceptance                                                      30%
                  --------------------------------------------------------------------------------
                  First Semi-Automated Production Line:
                  --------------------------------------------------------------------------------
                           o    Achievement of Performance Guarantees at 3,000                12%
                                M2A Capsules per Month
                  --------------------------------------------------------------------------------
                           o    Final Acceptance                                              28%
                  --------------------------------------------------------------------------------
                  Final Acceptance all other Production Lines                                 40%
                  --------------------------------------------------------------------------------
</Table>


         4.2.2    Buyer shall pay the initial installment of the Purchase Price
                  for each Production Line upon its issuance of the Purchase
                  Order for such Production Line.

         4.2.3    Seller shall submit an invoice for the each subsequent
                  installment of the Purchase Price upon achievement of the
                  relevant milestone set forth in Section 4.2.1 and shall submit
                  an invoice for the storage costs of any Standby Line within 10
                  working days of the end of every month. Buyer shall pay the
                  undisputed portion of any such invoice within thirty (30) days


                                       17
<Page>

                  after Buyer's receipt thereof. All payments hereunder shall be
                  made in Dollars.

         4.2.4    Any dispute with respect to any invoice which is not resolved
                  by mutual agreement shall be resolved in accordance with
                  Article 11.

4.3      TAXES

         Each party shall be responsible and liable for the timely payment of
         any and all Taxes imposed on or with respect to the properties, income
         and operations of the such party in connection with the performance of
         its obligations hereunder and the payment of any amounts hereunder.

                                   ARTICLE 5.
                         CONTRACT CHANGES; FORCE MAJEURE

5.1      GENERAL

         Buyer and Seller may at any time agree on a change in the Work or to
         the Product Specifications, the Milestone Schedule, the Purchase Price,
         the Performance Guarantees or the Warranties with respect to any
         Production Line only by a written amendment to this Sale Contract,
         executed by each of Buyer and Seller, substantially in the form of
         Exhibit D (a "CHANGE ORDER"). Seller shall not undertake a change in
         the Work other than pursuant to a Change Order.

5.2      PRODUCT CHANGES

         5.2.1    Buyer may at any time change the Product Specifications (a
                  "BUYER-DIRECTED PRODUCT CHANGE"). Buyer also shall provide
                  Seller with such additional specifications necessary to design
                  and engineer the first Semi-Automated Production Line (i) with
                  respect to the M2A Capsule, as is reasonably requested by
                  Seller in writing by September 26, 2001 and (ii) with respect
                  the deliverables described in Section 2.4.1(a), as is
                  reasonably requested by Seller in writing within fifteen (15)
                  days of Buyer's delivery of such deliverables, PROVIDED that
                  such time periods shall be extended day-for-day for any delay
                  or failure by Buyer to provide such additional specifications
                  to the extent such failure or delay constitutes Buyer Delay
                  (any such additional description or specifications, a
                  "SELLER-REQUESTED PRODUCT CHANGE" and, together with a
                  Buyer-Directed Product Change, a "PRODUCT CHANGE").

         5.2.2    Buyer and Seller shall consult (at no charge to Buyer)
                  concerning the cost and impact of implementing any such
                  Product Change promptly following notice from Buyer to Seller
                  of a Buyer-Directed Product Change or the provision by Buyer
                  to Seller of a Seller-Requested Product Change. Seller shall
                  promptly prepare (at no charge to Buyer) a detailed written
                  estimate relating to the Product Change, including (i) all
                  relevant drawings and


                                       18
<Page>

                  specifications, all in a format and level of detail sufficient
                  to allow Buyer to compare readily the existing Work and the
                  Work as it would be affected by such Product Change, (ii) the
                  cost of such Product Change and the consequent effect thereof
                  on the Purchase Price for the affected Production Lines,
                  including a bill of materials; (iii) the effect such change
                  will have on the Milestone Schedule for the affected
                  Production Lines and (iv) the effect such change will have on
                  Seller's ability to comply with any of its obligations under
                  this Sale Contract, including the Performance Guarantees and
                  Warranties.

         5.2.3    Seller agrees that any changes in the Work as a result of a
                  Product Change shall be performed on the basis of a lump sum
                  reimbursement in an amount agreed to in advance by Buyer and
                  Seller, taking into consideration any savings or costs not
                  incurred by Seller due to such change, in the form of an
                  adjustment to the Purchase Price for the affected Production
                  Lines. If the parties reach agreement on the matters listed in
                  the estimate provided by Seller pursuant to Section 5.2.2,
                  Buyer shall issue a Change Order that reflects the nature of
                  their agreement with respect to such matters, including any
                  change to the Purchase Price and, in the case of a
                  Buyer-Direct Product Change only, to the Milestone Schedule.
                  Seller shall be entitled to an adjustment to the Milestone
                  Schedule in respect of any Seller-Requested Product Change
                  only to the extent Seller is entitled to a Change Order due to
                  any Buyer Delay in respect of such Seller-Requested Product
                  Change pursuant to Section 5.3.

         5.2.4    In the event Buyer and Seller do not agree on the terms of a
                  Change Order for any Product Change within thirty (30) days of
                  notice from Buyer to Seller of a Buyer-Directed Product Change
                  or the provision by Buyer to Seller of a Seller-Requested
                  Product Change, either party may commence proceedings under
                  Section 11, PROVIDED that, notwithstanding any such
                  proceedings, Seller shall proceed with the performance of its
                  obligations under this Sale Contract and the Product
                  Specifications shall be deemed for all purposes of this Sale
                  Contract to have been modified by such Product Change.

5.3      CHANGES AT REQUEST OF SELLER.

         5.3.1    Seller also shall be entitled to request a Change Order to the
                  extent that any (i) Change in Law, (ii) event of Force
                  Majeure, (iii) Buyer Delay or (iv) relocation of Buyer's
                  Facility outside Israel (it being understood that Seller shall
                  have the obligation to mitigate the impact of such
                  circumstances to the extent reasonably possible) has a
                  material adverse effect on the ability of Seller to comply
                  with the Milestone Schedule or materially increases the cost
                  of its performance of the Work.


                                       19
<Page>

         5.3.2    In the event that Seller considers that a Change Order is
                  warranted, it shall notify Buyer in writing within twenty (20)
                  days of when the circumstances giving rise to such a claim
                  could reasonably have been known to Seller. Such notice shall
                  include Seller's proposal for any adjustment to the Milestone
                  Schedule or Purchase Price for the affected Production Lines.
                  Should Seller fail to notify Buyer of the circumstances giving
                  rise to such a claim within such period, Seller shall be
                  deemed to have waived its right to a Change Order and Buyer
                  shall be discharged from all liability in connection with any
                  such claim. Seller shall keep full records relative to any
                  such claim and shall keep Buyer informed of outstanding
                  claims, on a monthly basis.

         5.3.3    In the case of any Change in Law or relocation of Buyer's
                  Facility, the Milestone Schedule or the Purchase Price, or
                  both, with respect to the affected Purchase Lines shall be
                  adjusted equitably to take account of the additional,
                  justified direct costs and delays caused by such Change in Law
                  or relocation of Buyer's Facility. In the case of any event of
                  Force Majeure or Buyer Delay, the Milestone Schedule with
                  respect to the affected Purchase Lines shall be adjusted
                  day-for-day for the delay caused by such event of Force
                  Majeure or Buyer Delay but the Purchase Price shall not be
                  adjusted.

         5.3.4    In the event Buyer and Seller do not agree on the terms of a
                  Change Order requested by Seller under this Section 5.3,
                  either party may immediately commence proceedings under
                  Section 11, PROVIDED that Seller shall proceed with the
                  performance of this Sale Contract notwithstanding any such
                  dispute.

5.4      FORCE MAJEURE

         Neither Seller nor Buyer will be responsible for the total or partial
         non-fulfillment of its obligations under this Sale Contract where such
         non-fulfillment is caused by the occurrence of Force Majeure. Any party
         affected by a Force Majeure shall:

         (a)      notify, without delay and as soon as physically possible, the
                  other party of the occurrence and, subsequently, the
                  termination of the circumstance and, if necessary, invite it
                  to negotiate the settlement of the consequences of the Force
                  Majeure in accordance with the provisions of this Sale
                  Contract, indicating in such notice, insofar as possible, the
                  probable duration and consequences of the circumstance; and

         (b)      use its best efforts to reduce and overcome within a
                  reasonable time, the effects of the event of Force Majeure
                  which affect the performance of its obligations.


                                       20
<Page>

                                   ARTICLE 6.
                               LIQUIDATED DAMAGES

6.1      DELAY IN ACHIEVEMENT OF FINAL ACCEPTANCE

         6.1.1    If any Production Line does not achieve Final Acceptance by
                  the Guaranteed Final Acceptance Date other than as a result of
                  a default by Buyer hereunder, the parties agree that the Buyer
                  will suffer loss and damage. Since the actual damages that
                  would be suffered would be impossible to ascertain precisely,
                  the parties agree that Seller shall pay Buyer liquidated
                  damages, not as a penalty, in an amount of Two Thousand Five
                  Hundred Dollars ($2,500) for each day from the Guaranteed
                  Final Acceptance Date to the date of Final Acceptance in the
                  case of the first Semi-Automated Production Line and One
                  Thousand Dollars ($1,000) in the case of each other Production
                  Line, PROVIDED that the maximum aggregate liability of Seller
                  for liquidated damages under this Section 6.1 shall in no
                  event exceed Two Hundred Fifty Thousand Dollars ($250,000) in
                  the case of the first Semi-Automated Production Line and One
                  Hundred Thousand Dollars ($100,000) in the case of each other
                  Production Line.

         6.1.2    Payment of liquidated damages under this Section 6.1 shall be
                  the sole and exclusive liability of Seller and the sole and
                  exclusive remedy of Buyer for the failure of any Production
                  Line to achieve Final Acceptance by the Guaranteed Completion
                  Date, subject to Buyer's right to exercise its remedies under
                  Section 6.2 and to terminate this Sale Contract in accordance
                  with Article 9.

6.2      FAILURE TO ACHIEVE PERFORMANCE GUARANTEES

         6.2.1    If any Production Line does not achieve the Performance
                  Guarantees by the Guaranteed Final Acceptance Date other than
                  as a result of a default by Buyer hereunder, the parties agree
                  that the Buyer will suffer loss and damage. Since the actual
                  damages that would be suffered would be impossible to
                  ascertain precisely, the parties agree that Seller shall pay
                  Buyer, at Buyer's option, exercised in its sole discretion,
                  liquidated damages, not as a penalty, in an amount determined
                  by multiplying (i) the percentage by which the actual capacity
                  of such Production Line is less than the Performance Guarantee
                  with respect thereto set forth in Section 1(a) of Schedule 1
                  in the case of each Semi-Automated Production Line and Section
                  2(a) of Schedule 1 in the case of each Fully-Automated
                  Production Line by (ii) the Purchase Price for such Production
                  Line.

         6.2.2    If Final Acceptance has been achieved for any Production Line
                  except for the failure of such Production Line to meet the
                  Performance Guarantees by the Guaranteed Final Acceptance
                  Date, then upon payment of all


                                       21
<Page>

                  liquidated damages due under Section 6.2.1, the Performance
                  Guarantees shall be deemed to have been amended to reflect the
                  actual levels of performance of such Production Line
                  demonstrated by the Performance Tests and Seller shall have no
                  further liability with respect to such Production Line.

                                   ARTICLE 7.
                                    WARRANTY

7.1      WARRANTY TERMS

         Seller covenants and warrants that (i) all Work with respect to each
         Production Line will be accomplished in a good and workmanlike manner
         in accordance with good engineering and manufacturing practice and in
         compliance in all respects with the Technical Requirements and the
         Plans and Specifications, the International Quality Standards and all
         licenses and permits applicable to any Production Line and Applicable
         Law in effect on the date of Final Acceptance of such Production Line
         and the terms and conditions of this Sale Contract, (ii) all Equipment
         constituting all or any portion of any Production Line will be new
         (unless otherwise agreed by Buyer in writing) and of a quality required
         by the FDA Quality System Regulations and the International Quality
         Standards and (iii) the Work in respect of each Production Line shall
         in every respect be free from Defects and fit for operation in
         accordance with the FDA Quality System Regulations and the
         International Quality Standards. The warranty described in this Section
         7.1 shall be effective for each Production Line for a period of one (1)
         year from Final Acceptance of such Production Line.

7.2      DEFECTS

         7.2.1    The term "DEFECT" in this Article 7 shall mean any failure of
                  any part of the Work to comply with or conform to the
                  requirements of this Sale Contract but shall not include any
                  damage arising from Buyer's negligence or willful misconduct
                  or from the effects of normal wear and tear.

         7.2.2    If Seller or Buyer shall discover any Defect in the Work
                  during the Warranty Period, then Seller, after discovery by
                  it, or upon written notice from Buyer, shall promptly commence
                  to correct, and diligently prosecute to completion the
                  correction of, such Defect, at the cost and expense of Seller
                  and to the reasonable satisfaction of Buyer by, at Seller's
                  option, redesigning, repairing and/or replacing the defective
                  Work. Seller shall use its best efforts to cause the
                  correction of any such defect to be accomplished within sixty
                  (60) days with minimal interference with the operation or
                  maintenance of Buyer's Facility and the Production Line.


                                       22
<Page>

         7.2.3    All costs and expenses incidental to such corrective action,
                  including removal, disassembly, reinstallation,
                  reconstruction, re-testing, repair and replacement of
                  equipment or systems which may have been damaged by such
                  Defect, and re-inspection as may be necessary to correct the
                  Defect or demonstrate that the previously defective Work
                  complies with or conforms to the requirements of this Sale
                  Contract, shall be borne by Seller. Should Seller fail to
                  commence correction promptly or fail to prosecute diligently
                  to completion the necessary redesign, repair, replacement and
                  tests, Buyer may perform or cause to be performed the same at
                  Seller's expense.

7.3      INTELLECTUAL PROPERTY INFRINGEMENT

         If use of any Work Product or Licensed Product is claimed to infringe,
         misappropriate or misuse any patent, trade secret, trademark, copyright
         or other proprietary rights, Seller shall defend such claim and shall
         indemnify and hold harmless Buyer from any final award or judgement in
         respect of such claim and shall, if required, procure the necessary
         licenses to use the infringing Work Product or Licensed Product, or,
         with Buyer's prior written approval, replace the same with
         substantially equal but non-infringing Work Product or Licensed Product
         or modify the same to be non-infringing; PROVIDED, HOWEVER, that any
         such substituted or modified Work Product or Licensed Product shall
         meet all the requirements and be subject to all the provisions of this
         Sale Contract, and that such replacements or modifications shall not
         modify or relieve Seller of any of its obligations under this Sale
         Contract. Buyer shall give Seller prompt written notice of any suit and
         shall provide such information and assistance reasonably necessary for
         the defense thereof. The indemnity set forth in this Section 7.3 shall
         survive the delivery and Final Acceptance of any Production Line and
         the expiration of any Warranty Period hereunder.

7.4      SUPPLIER WARRANTIES

         In each case where Seller obtains warranties from its Suppliers that
         are more favorable than the Warranties contained in this Sale Contract,
         Seller shall assist Buyer, if necessary, in enforcing any such
         warranties for the benefit of Buyer.

7.5      EXPRESS WARRANTIES

         THE EXPRESS WARRANTIES SET FORTH IN THIS ARTICLE 7 ARE EXCLUSIVE AND NO
         OTHER WARRANTIES OF ANY KIND, WHETHER STATUTORY, ORAL, WRITTEN, EXPRESS
         OR IMPLIED, INCLUDING ANY IMPLIED WARRANTY OF MERCHANTABILITY OR
         FITNESS FOR A PARTICULAR PURPOSE, SHALL APPLY. BUYER'S EXCLUSIVE
         REMEDIES AND SELLER'S OBLIGATIONS ARISING OUT OF OR IN CONNECTION WITH
         DEFECTIVE EQUIPMENT, MATERIAL, OR WORKMANSHIP, WHETHER BASED ON
         WARRANTY, CONTRACT,


                                       23
<Page>

         TORT (INCLUDING NEGLIGENCE) OR OTHERWISE, SHALL BE THOSE STATED IN THIS
         CONTRACT.

                                   ARTICLE 8.
                                 INDEMNIFICATION

8.1      INDEMNIFICATION

         8.1.1    Seller (an "INDEMNIFYING PARTY") agrees to indemnify fully and
                  hold harmless Buyer and its Affiliates, including their
                  principals, stockholders and other direct or indirect equity
                  holders, and Buyer's and such Affiliates' respective
                  directors, officers, agents and employees ("INDEMNIFIED
                  PARTIES"), from and against any and all claims, demands,
                  suits, causes of action, proceedings, judgments, damages,
                  costs, expenses and liabilities (including reasonable
                  attorneys' fees and costs) made by third parties against such
                  Indemnified Parties (collectively "CLAIMS") (i) for bodily
                  injury, property damage or other liability to the extent such
                  Claims arise from the negligent acts or omissions of Seller,
                  its employees, officers, agents or Suppliers, (ii) on account
                  of any violation of laws, codes, ordinances or regulations to
                  be complied with by Seller, its employees, officers, agents or
                  Suppliers, or (iii) arising from any Defect or (iv) in respect
                  to any demand by Suppliers for non-payment of amounts due as a
                  result of furnishing Equipment or services to Seller.

         8.1.2    Buyer (an "INDEMNIFYING PARTY") agrees to indemnify fully and
                  hold harmless Seller and its Affiliates, including its
                  principal, its stockholders, respective directors, officers,
                  agents and employees ("INDEMNIFIED PARTIES"), from and against
                  any and all Claims (i) for bodily injury, property damage or
                  other liability to the extent such Claims arise from the
                  negligent acts or omissions of Buyer, its employees, officers,
                  agents or anyone acting on Buyer's behalf, (ii) on account of
                  any violation of laws, codes, ordinances or regulations to be
                  complied with by Buyer, its employees, officers, agents or
                  anyone acting on Buyer's behalf or (iii) with respect the
                  design and specifications (including the Product
                  Specifications) of the M2A Capsule or the use of any M2A
                  Capsule to the extent such Claim does not arise from any
                  Defect.

8.2      PROCEDURE

         Promptly after receipt by an Indemnified Party of any claim or notice
         of the commencement of any action or administrative, arbitral or legal
         proceeding or investigation as to which the indemnity provided for in
         Section 8.1 may apply, the Indemnified Party shall notify the
         Indemnifying Party of such fact. The Indemnifying Party shall have the
         right to assume the defense thereof with counsel designated by the
         Indemnifying Party and satisfactory to the Indemnified Party; PROVIDED,
         HOWEVER, that if the defendants in any such action include both the


                                       24
<Page>

         Indemnified Party and the Indemnifying Party and the Indemnified Party
         shall have reasonably concluded that there may be legal defenses
         available to it and/or other Indemnified Parties which are different
         from or additional to those available to the Indemnifying Party, the
         Indemnified Party or Parties shall, at the expense of the Indemnifying
         Party, have the right to select separate counsel to assert such legal
         defenses and to otherwise participate in the defense of such action on
         behalf of such Indemnified Party or Parties.

                                   ARTICLE 9.
                       TERM; CANCELLATION AND TERMINATION

9.1      TERM.

         This Sale Contract shall become effective as of the date hereof upon
         its execution and delivery by the parties hereto and, unless terminated
         earlier in accordance with this Article 9, shall remain in effect until
         December 31, 2004 or, if a Purchase Order for the first Fully-Automated
         Production Line is issued prior to December 31, 2004, three (3) years
         from the date of the Purchase Order, PROVIDED, HOWEVER, that if a
         Purchase Order for any Production Line is outstanding at the time the
         term of this Sale Contract would otherwise expire in accordance with
         this Section 9.1, the term of this sale Contract shall be automatically
         extended until such Production Line achieves Final Completion or this
         Sale Contract is terminated in accordance with this Article 9.

9.2      TERMINATION BY BUYER

         If, for any reason other than the occurrence of Force Majeure or the
         default of Buyer:

         (a)      Seller fails to commence the Work for any Production Line
                  within fifteen (15) days on receipt of a Purchase Order for
                  such Production Line;

         (b)      Seller (i) fails to show reasonable progress toward
                  achievement of Provisional Acceptance of any Production Line
                  and thereafter fails to remedy such failure within ten (10)
                  days written notice thereof by Buyer or (ii) abandons the Work
                  for twenty (20) consecutive days (by "abandon" the parties
                  mean the complete cessation of the Work, without justification
                  or, if justification exists, then without giving notice to
                  Buyer within five (5) days of such cessation);

         (c)      Seller fails to achieve Final Acceptance of any Production
                  Line within ten (10) working days of the Guaranteed Acceptance
                  Date for such Production Line;

         (d)      Seller commits any other material breach of this Sale Contract
                  and Seller thereafter (i) fails to remedy such breach within
                  ten (10) days after written notice of such breach by Buyer or
                  (ii) if such breach is capable of being


                                       25
<Page>

                  remedied but cannot be remedied within such ten (10) day
                  period by Seller acting diligently, fails to diligently pursue
                  a remedy or fails to remedy such breach within twenty (20)
                  days after such written demand by Buyer; or

         (f)      Seller becomes insolvent or bankrupt.

         then, upon the occurrence of any such event, Buyer may either (i)
         cancel any outstanding Purchase Order or (ii) terminate this Sale
         Contract, in either case, upon written notice to Seller. In the event
         of any such cancellation or termination, Buyer shall have the right to
         finish the Work with respect to any outstanding Purchase Order, itself
         or with the assistance of third parties. No amount shall be payable by
         or to Seller in connection with any such termination. In the event
         Seller disputes the basis for Buyer's cancellation of any Purchase
         Order or termination of this Contract under this Section 9.2, Seller
         shall cease to perform the Work under this Sale Contract, and Seller's
         sole remedy shall be to refer the dispute for resolution in accordance
         with Article 11. In the event that Seller prevails in any such dispute,
         Buyer's termination shall be deemed to be a termination by Seller under
         Section 9.3 and Seller shall only be entitled to the payments set forth
         in Section 9.3.

9.3      TERMINATION BY SELLER

         If, for any reason other than the occurrence of Force Majeure (in the
         case of clause (a) only) or the default of Seller:

         (a)      Buyer commits a material breach or default of its obligations
                  hereunder (other than its payment obligations) and thereafter
                  (i) fails to remedy such breach or default within thirty (30)
                  days after written demand by Seller precisely identifying the
                  breach or default or (ii) if (A) Buyer begins to pursue a
                  remedy within such thirty (30) day period or (B) such breach
                  cannot be cured within such period by Buyer acting diligently,
                  Buyer thereafter fails to diligently pursue a remedy or fails
                  to remedy such breach within sixty (60) days after such
                  written demand by Seller; or

         (b)      Buyer fails to make any payment when due to Seller pursuant to
                  this Sale Contract (other than a disputed payment) and Buyer
                  does not make such payment within thirty (30) days after
                  notice by Seller precisely identifying the outstanding
                  payment;

         then, upon the occurrence of any such event, Seller may terminate this
         Sale Contract. Should Seller so terminate this Sale Contract, it shall
         be compensated for the Work performed on the basis of the percentage of
         the Purchase Price for any Production Line equal to the percentage of
         the Work with respect thereto which has been appropriately completed in
         accordance with this Sale Contract at the time of termination, plus the
         reasonable cost of (i) Equipment which has been procured and cannot,
         using commercially reasonable efforts, be returned to the


                                       26
<Page>

         Supplier thereof, PROVIDED that all right, title and interest in any
         such Equipment shall be transferred to Buyer, free and clear of all
         Liens, (ii) demobilization of staff employed by Seller in connection
         with this Sale Contract and (iii) the reasonable cancellation costs of
         Suppliers.

9.4      RIGHT TO TERMINATE FOR FORCE MAJEURE

         Either party may terminate this Sale Contract immediately upon written
         notice to the other party if, as the result of the occurrence of an
         event of Force Majeure, the performance by either party of its
         obligations under this Sale Contract is delayed so that the Guaranteed
         Final Acceptance Date of any Production Line is postponed by more than
         three (3) months.

         In the event either party so elects to terminate this Contract for
         Force Majeure, Seller shall be compensated as provided in Section 9.3,
         PROVIDED, HOWEVER, Buyer shall have the right to adjust (i) the
         Purchase Price or (ii) the Guaranteed Final Acceptance Date for any
         Production Line, pursuant to a Change Order within thirty (30) days of
         receipt of Seller's notice to terminate. If a Change Order is executed
         by each of the parties during such thirty (30) day notice period, this
         Sale Contract shall continue in full force and effect.

9.5      RIGHT TO TERMINATE FOR DELAY IN NOTICE TO PROCEED

         In the event that Buyer has not issued the Notice to Proceed for the
         first Semi-Automated Production Line on or before January 1, 2002, then
         either party may terminate this Sale Contract by written notice to the
         other party and Seller shall not be entitled to any compensation
         hereunder.

9.6      MEASURES TO BE TAKEN BY SELLER ON TERMINATION

         Notwithstanding any other provision of this Sale Contract to the
         contrary, in the event Buyer provides written notice to Seller that it
         is suspending the Work (or any portion thereof) or terminating this
         Sale Contract for any reason, Seller shall (i) immediately suspend
         performance of the Work on the date and to the extent specified in the
         written notice, (ii) place no further orders or subcontracts except as
         may be necessary for performance of that portion of the Work that has
         not been so suspended or terminated, (iii) to the extent reasonably
         practicable and as requested in the written notice, suspend all orders
         and subcontracts to the extent that they relate to the performance of
         the portion of the Work so suspended or terminated and (iv) take such
         action as may be necessary or as Buyer may reasonably direct for
         protection of personnel and the protection and preservation of any
         Production Line and other property which is in the possession of Seller
         and in which Buyer has or may acquire an interest under this Sale
         Contract. After receiving the foregoing notice of suspension or
         termination, as the case may be, Seller shall submit to Buyer, within
         twenty (20) days after receiving such notice,


                                       27
<Page>

         an itemized list of all action taken or intended to be taken as a
         result of such suspension or termination.

                                   ARTICLE 10.
              CONFIDENTIAL AND PROPRIETARY INFORMATION; COMPETITION

10.1     TITLE TO WORK PRODUCT

         10.1.1   Notwithstanding anything to the contrary set forth herein, all
                  right, title and interest in, to and under any Production
                  Line, Equipment or other deliverables, work product,
                  documents, data, items or services or any part thereof
                  (including, without limitation, the Plans and Specifications)
                  furnished by Seller or any Supplier under this Sale Contract
                  (collectively, the "WORK PRODUCT") is and shall be the
                  exclusive property of Buyer, except for Seller's proprietary
                  building blocks and software for which Seller has obtained a
                  patent (collectively, the "LICENSED PRODUCT").

         10.1.2   Buyer shall be entitled to use all such Work Product for any
                  purpose. Seller hereby assigns all right, title and interest
                  in all Work Product to Buyer. Seller agrees to take all
                  actions necessary, at Buyer's expense, as may be requested by
                  Buyer to perfect Buyer's exclusive ownership of the Work
                  Product and to require each Supplier to execute and deliver to
                  Buyer such instruments of assignment with respect to the Work
                  Product created, developed, or otherwise acquired by such
                  Suppliers. Seller further shall, and shall require each
                  Supplier to, at Buyer's expense, take such actions and
                  cooperate with Buyer in the preparation, execution, filing and
                  prosecution of all trademark, patent and copyright
                  applications in connection with the registration or protection
                  of Buyer's ownership rights in the Work Product.

         10.1.3   Seller hereby grants to Buyer an irrevocable, perpetual,
                  royalty-free, non-exclusive, transferable, worldwide, fully
                  paid license to retain and use the Licensed Product solely in
                  connection with the design, engineering, manufacturing,
                  operation and maintenance of each Production Line during and
                  after the term of this Sale Contract. Seller shall, at Buyer's
                  expense, execute all documents and take such actions as Buyer
                  shall reasonably request to perfect the license to granted by
                  Seller to Buyer under this Section 10.1.3, and Buyer shall be
                  entitled to grant a sub-license to retain and use the Licensed
                  Product to any person or entity involved in the design,
                  engineering, manufacturing, operation or maintenance of any
                  Production Line during and after the term of this Sale
                  Contract.

10.2     CONFIDENTIAL AND PROPRIETARY INFORMATION

         10.2.1   Neither party shall disclose to third parties or use any trade
                  secrets or other proprietary information regarding the
                  business affairs, finances,


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<Page>

                  technology or processes of the other Party (including, without
                  limitation, the Buyer Information) or related to this Sale
                  Contract or the parties' relationship prior thereto
                  (collectively, "CONFIDENTIAL INFORMATION"), without the
                  express written consent of the other party. This Section
                  10.2.1 shall not apply to information that was already in the
                  possession of one party prior to receipt from the other
                  strictly for the purposes of this Agreement, that is now or
                  hereafter becomes a part of the public domain through no fault
                  of the party wishing to disclose or use such information, or
                  that corresponds in substance to information heretofore or
                  thereafter furnished by third parties without restriction on
                  disclosure. Each party receiving Confidential Information will
                  indemnify the disclosing party from any and all losses,
                  damages, costs and expenses (including, without limitation,
                  attorneys' fees) arising out of or related to the receiving
                  party's breach or threatened breach of its obligations under
                  this Section 10.2.1.

         10.2.2   Any party required by law, rule, regulation or order to
                  disclose information that is otherwise required to be
                  maintained in confidence pursuant to Section 10.2.1, or where
                  disclosure is required in connection with the assertion of any
                  claim or defense in judicial, administrative or arbitral
                  proceedings involving a party, may make disclosure
                  notwithstanding the provisions of Section 10.2.1; PROVIDED,
                  HOWEVER, that the party making the disclosure shall
                  immediately notify the other party of the requirement and the
                  terms thereof prior to the submission and shall cooperate to
                  the maximum extent practicable to minimize the disclosure of
                  the information. The party disclosing such information shall
                  cooperate with the other party in any efforts by such other
                  party to obtain proprietary or confidential treatment for such
                  information by the third party to whom the information is
                  disclosed and/or to seek protective orders limiting the
                  dissemination and use of the information. The other party
                  shall bear all costs of such efforts and any cooperation by
                  the disclosing party. This Sale Contract does not alter the
                  rights of either party to object to the rule, regulation or
                  order requiring the disclosure.

         10.2.3   Each party also may disclose Confidential Information to those
                  of its employees who need to know such Confidential
                  Information in order for the receiving party to perform its
                  obligations hereunder, PROVIDED THAT, such employees are
                  advised of the confidential nature thereof. Seller may
                  disclose Confidential Information to any Supplier only if such
                  Supplier executes and delivers to Buyer an agreement in form
                  and substance acceptable to Buyer protecting such Confidential
                  Information from unauthorized use and disclosure. Seller
                  further agrees to require those of its employees with material
                  knowledge of the Product Specifications to execute and deliver
                  to Buyer a confidentiality agreement in form and substance
                  reasonably satisfactory to Buyer.


                                       29
<Page>

         10.2.4   Seller agrees that it will not undertake, authorize or
                  otherwise permit the disassembly, reverse engineering or
                  de-compiling of any Confidential Information, in whole or in
                  part.

10.3     PUBLICITY.

         Neither Buyer nor Seller shall, without the approval of the other
         party, issue any press releases or otherwise make any public statements
         with respect to the transactions contemplated by this Sale Contract,
         except as may be required Applicable Law or by obligations pursuant to
         any listing agreement with any national securities exchange so long as
         such party has used reasonable best efforts to obtain the approval of
         the other party prior to issuing such press release or making such
         public disclosure.

10.4     NON-SOLICITATION OF EMPLOYEES

         Seller shall not, and shall cause its Affiliates to not, during the
         term of this Sale Contract and for a period of five (5) years from the
         date of such termination, knowingly solicit for employment any of the
         officers or directors of Buyer whom Seller meets in the course of
         negotiating or performing the terms of this Sale Contract, PROVIDED
         THAT, this Section 10.4 shall not preclude Seller or its affiliates
         from soliciting for employment or hiring any such employee who (i)
         responds to a general solicitation through a public medium or general
         or mass mailing by or on behalf of Seller or any of its affiliates that
         is not targeted at employees of the Buyer or (ii) contacts Seller or
         its affiliates directly on such individual's own initiative.

10.5     NON-COMPETITION; NON-INTERFERENCE.

         10.5.1   In consideration of the amounts payable by Buyer to Seller
                  hereunder, Seller agrees that for a period of ten (10) years
                  from the date of this Agreement, Seller shall not, and shall
                  cause its Affiliates to not:

                  (a)      within any jurisdiction worldwide, directly or
                           indirectly own, manage, operate, control, be employed
                           by or participate in the ownership, management,
                           operation or control of, or be connected in any
                           manner with, the manufacturing of in-vivo
                           gastrointestinal swallowable devices. For these
                           purposes, ownership of securities of one percent (1%)
                           or less of any class of securities of a public
                           company shall not be considered to be competition
                           with the Seller;

                  (b)      solicit for Seller or any person other than Buyer the
                           business of manufacturing of in-vivo gastrointestinal
                           swallowable devices of any person which is a customer
                           or client of Buyer or any of its affiliates or in any
                           way interfere with the business relationship


                                       30
<Page>

                           between Buyer or any of its affiliates and any such
                           person in any way engaged in such business.

10.6     ENFORCEABILITY AND SEVERABILITY

         It is the desire and intent of the parties to this Sale Contract that
         the provisions of this Article 10 shall be enforced to the fullest
         extent permissible under the laws and public policies applied in each
         jurisdiction in which enforcement is sought. If any particular
         provisions or portion of this Article 10 shall be adjudicated to be
         invalid or unenforceable, this Article 10 shall be deemed amended to
         delete therefrom such provision or portion adjudicated to be invalid or
         unenforceable, such amendment to apply only with respect to the
         operation of such provision in the particular jurisdiction in which
         such adjudication is made.

10.7     EQUITABLE RELIEF.

         The parties agree that money damages alone would not be a sufficient
         remedy for a breach of the confidentiality obligations set forth in
         this Article 10. Accordingly, in addition to all other remedies of law
         or in equity that the disclosing party may have, such party shall be
         entitled to specific performance and injunctive or other equitable
         relief arising from any breach or threatened breach of this Article 10
         in accordance with Section 11.5.

                                   ARTICLE 11.
                           GOVERNING LAW, JURISDICTION

11.1     GOVERNING LAW AND SUBMISSION TO JURISDICTION

         This Sale Contract shall be governed by and interpreted in accordance
         with the laws of the State of New York without regard to the conflicts
         of laws provisions thereof.

11.2     DISPUTE NOTIFICATION PROCEDURE

         Subject to Section 11.5, in the event a dispute arises between Buyer
         and Seller arising out of or relating to this Sale Contract, including
         any question regarding its existence, validity or termination, the
         aggrieved party shall promptly notify the other party to this Sale
         Contract of the dispute.

11.3     ADJUDICATION

         11.3.1   In the event that the parties are unable to resolve any
                  dispute to their mutual satisfaction within ten (10) days
                  after delivery of a notice under Section 11.2, then either
                  party may give notice of its intention to refer the dispute to
                  one expert appointed by the agreement of the parties. In the
                  event that the parties are unable to agree on the appointment
                  of one person to act as expert within five (5) days of such
                  notice, either party may


                                       31
<Page>

                  request the Chairman of the Standing Committee of the Centre
                  for Expertise of the International Chamber of Commerce to
                  propose the name of an expert and the nomination so made shall
                  be final and conclusive upon the parties (the person appointed
                  to act as expert pursuant to this Section 11.3.1, the
                  "EXPERT"). The place of the expert proceedings shall be New
                  York, New York.

         11.3.2   Within ten (10) days of the appointment of the Expert, the
                  party who initially issued the notice of intention to refer
                  the matter to the Expert shall submit to the Expert and to the
                  other party the following documents in English:

                  (a)      a description of the dispute;

                  (b)      a statement of that party's position; and

                  (c)      copies of relevant documentary evidence in support.

         11.3.3   Within ten (10) days of receipt of the above documents, the
                  other party shall submit the to the Expert and the other party
                  the following documents in English:

                  (a)      a description of the dispute;

                  (b)      a statement of that party's position; and

                  (c)      copies of relevant documentary evidence in support.

         11.3.4   The Expert may call for such further documentary evidence and
                  interview such persons as he or she deems necessary in order
                  to reach a decision.

         11.3.5   The Expert shall act as an independent expert and not as an
                  arbitrator. The Expert shall reach a decision and give notice
                  to the parties of the decision within thirty (30) days of
                  receipt of the documents provided under Section 11.3.2 and
                  11.3.3. The decision of the Expert shall be binding and final
                  unless any party issues a notice, within ten (10) days of the
                  decision, of its intention to refer the matter to arbitration
                  in accordance with Section 11.4. In such case, the Expert's
                  decision shall remain binding unless revised or reversed by an
                  arbitration award.

         11.3.6   The costs of engaging the Expert shall be borne equally by
                  Seller and Buyer, PROVIDED that each party shall bear its own
                  costs of preparing the materials for and making presentations
                  to the Expert. The terms of remuneration of the person
                  appointed to act as the Expert shall be mutually agreed upon
                  by Buyer, Seller and such person. In the event of
                  disagreement, the remuneration of the Expert shall include
                  reimbursement for reasonable expenses and a daily fee in
                  accordance with the daily fee


                                       32
<Page>

                  established from time to time for arbitrators under the
                  administrative and financial regulations of the International
                  Centre for Settlement of Investment Disputes.

         11.3.7   Any person who has been appointed as an Expert may not
                  subsequently be appointed to act as an arbitrator in an
                  arbitration relating to the same or any similar dispute
                  between the parties.

11.4     ARBITRATION

         Subject to Section 11.5, any dispute in respect of which:

         (a)      an Expert has not been appointed within thirty (30) days of
                  the notice given by either party of its intention to refer the
                  dispute to an expert, or the Expert has failed to deliver a
                  decision to the parties within the period required by Section
                  11.2.5;

         (b)      any party has issued a notice under Section 11.2.5 challenging
                  the decision of the Expert; or

         (c)      any party has failed to comply with the decision of the
                  Expert;

         shall be referred to and finally resolved by arbitration under the
         Rules of the London Court of International Arbitration (the "LCIA) by
         one (1) arbitrator appointed by the LCIA. The place of the arbitration
         shall be New York, New York. The arbitrator shall be a lawyer
         qualified, as may be appropriate, in the field of intellectual property
         and shall be a national of the United States of America. The
         arbitration shall be conducted in the English language. The arbitrator
         shall have full power to open up review and revise any decision of the
         Expert. No party shall be limited in the arbitration proceedings to the
         evidence or arguments previously put before the Expert to obtain the
         decision of the Expert. The award rendered by the arbitrator shall be
         final and binding on Buyer and Seller and judgment may be entered in
         accordance with applicable law in any court having jurisdiction
         thereof.

11.5     NO SPECIAL DAMAGES

         Neither party shall be liable to the other party for any consequential,
         indirect or special damages.

11.6     DUTY OF CONTINUED PERFORMANCE

         Seller shall proceed diligently in accordance with Buyer's direction
         with performance of this Sale Contract pending final resolution of any
         claim, dispute or other matter in question arising out of, or relating
         to this Sale Contract, or the interpretation or breach thereof, and
         Buyer shall continue to make payment of all


                                       33
<Page>

         sums which are due and payable to Seller in accordance with this Sale
         Contract and which are not related to the dispute.

                                   ARTICLE 12.
                                  MISCELLANEOUS

12.1     RELATIONSHIP OF THE PARTIES

         The parties acknowledge and agree that the relationship between them
         (including, without limitation, their relationship with any Supplier)
         is solely that of independent contractors. Neither party, nor their
         respective employees, agents or representatives, have any right, power
         or authority to act or create any obligation, express or implied on
         behalf of the other party. None of Seller, any Suppliers or their
         respective agents or employees shall be deemed to be the servants,
         employees or agents of Buyer.

12.2     BINDING EFFECT ON SUCCESSORS AND ASSIGNEES

         12.2.1   This Sale Contract shall be binding upon and shall inure to
                  the benefit of the parties hereto and their respective
                  successors and permitted assigns.

         12.2.2   Neither party hereto shall assign or convey any of its right,
                  title or interest under this Sale Contract without the prior
                  written consent of the other party hereto provided, however,
                  that without any such consent, Buyer or its respective
                  successor may assign any or all of its right, title or
                  interest hereunder to (i) any person, corporation, trust
                  company, association or other business entity as security in
                  connection with obtaining or arranging financing for its
                  business or operations; or (ii) any person, corporation,
                  trust, company or other business entity in order to enforce
                  any security assignment described in (i) above.

         12.2.3   Unless otherwise agreed by the parties hereto in a separate
                  writing, no assignment permitted by Section 11.6.2 shall
                  relieve the assigning party from any of its obligations under
                  this Sale Contract.

12.3     NOTICES

         Regular communications not specifically covered by the requirements of
         this Sale Contract shall be between Seller's Contact and Buyer's
         Contact. All notices to be given under this Sale Contract shall be
         effective upon receipt and shall be in writing and delivered personally
         or by recognized courier service or given by facsimile transmission,
         with hard copy by any other method permitted by this Section 12.3 at
         the following address or such other address as may hereafter be
         designated, in writing, by any party to the other in accordance with
         this Section 12.3.


                                       34
<Page>

         If to Buyer:               Given Imaging Ltd.
                                    New Industrial Park
                                    PO Box 258, Yoqneam
                                    20692 Israel
                                    Attn:  Chief Operating Officer
                                    Fax:  + (972 4) 959 2466

         If to Seller:              PEMSTAR Inc.
                                    3535 Technology Drive
                                    Rochester, Minnesota
                                    United States of America 55901
                                    Attn:  Susan Johnson
                                    Fax:   (1-507) 280-0838

12.4     NOT FOR BENEFIT OF THIRD PARTIES

         This Sale Contract and each and every provision thereof is for the
         exclusive benefit of the parties hereto and not for the benefit of any
         other party.

12.5     SECTION HEADINGS AND SUBHEADING

         All section headings and subheadings are inserted for convenience only
         and shall not affect any construction or interpretation of this Sale
         Contract.

12.6     NO WAIVER

         No waiver by a party of any breach or default by the other party of its
         obligations hereunder shall be deemed or construed to be a consent or
         waiver to or of any other breach of default in the performance by such
         other party of the same or any other obligations of such other party
         hereunder. The giving of a waiver by a party in any one instance shall
         not limit or waive the necessity to obtain such party's waiver in any
         future instance. No waiver of any rights under this Sale Contract shall
         be binding unless it is in writing signed by the party waiving such
         rights.

12.7     GOOD FAITH AND FAIR DEALING

         The parties agree to deal fairly and to act in good faith in the
         performance or enforcement of this Sale Contract.

12.8     SEVERABILITY

         In the event that any of the provisions of this Sale Contract, or
         portions or applications thereof, are held to be unenforceable or
         invalid by any court of competent jurisdiction, Buyer and Seller shall
         negotiate an equitable adjustment in the provisions of this Sale
         Contract with a view toward effecting the purposes of this Sale
         Contract, and the validity and enforceability of the remaining
         provisions, or portions or applications thereof, shall not be affected
         thereby.


                                       35
<Page>

12.9     COUNTERPARTS

         This Sale Contract may be executed in any number of counterparts and by
         the parties hereto on separate counterparts, each complete set of
         which, when so executed and delivered by all parties, shall be an
         original, but all such counterparts shall together constitute but one
         and the same instrument.

12.10    FURTHER ASSURANCES

         If either party reasonably determines that any further instruments or
         any things are necessary or desirable to carry out the terms of this
         Sale Contract, the other party will execute and deliver all such
         instruments and assurances and do all such things as the first party
         reasonably deems necessary or desirable to carry out the terms of this
         Sale Contract, provided that Buyer shall not be required to incur any
         material cost or expense in connection therewith.

                  [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]


                                       36
<Page>

         IN WITNESS WHEREOF, the parties hereto have entered into this Sale
Contract on the day and year first hereinabove written.



                             GIVEN IMAGING LTD.



                             By: /s/ Zvi Ben-David          /s/ Yoram Ashery
                                ------------------------------------------------
                                  Zvi Ben-David             Yoram Ashery
                                  Vice President,           Vice-President
                                  Chief Financial Officer   Business Development


                             PEMSTAR, INC.



                             By: /s/ Linda Feuss
                                ------------------------------------------------
                                  Linda Feuss, Vice-President
<Page>

                                   SCHEDULE 1

                             PERFORMANCE GUARANTEES

1.       SEMI-AUTOMATED PRODUCTION LINES: Each Semi-Automated Production Line
         shall demonstrate the following:

         a.       capacity to manufacture 10,000 M2A Capsules per month,
                  operating two shifts of eight (8) hours each per day,
                  inclusive of any downtime, five (5) days per week, PROVIDED,
                  HOWEVER, that in the case of the first Semi-Automated
                  Production Line, such Production Line shall be deemed to have
                  achieved this performance guarantee for a period not exceeding
                  30 days after all of the other conditions of Final Acceptance
                  have been satisfied to the extent such Production Line
                  demonstrates a capacity to manufacture 3,000 M2A Capsule per
                  month;

         b.       operation with a maximum of 15 direct operators; and

         c.       uptime exceeding 80%.

2.       FULL-AUTOMATED PRODUCTION LINES: Each Fully-Automated Production Line
         shall demonstrate the following:

         a.       capacity to manufacture 75,000 M2A Capsules per month,
                  operating two shifts of eight (8) hours each per day,
                  inclusive of any downtime, five (5) days per week;

         b.       operation with a maximum of 15 direct operators; and

         c.       uptime of line exceeds 80%.

3.       ALL PRODUCTION LINES: All Production Lines shall demonstrate the
         following:

         a.       construction and workmanship in compliance with the FDA
                  Quality System Regulations and other Applicable Law, the
                  International Quality Standards and the other requirements of
                  the Sale Contract;

         b.       operation in compliance with the FDA Quality System
                  Regulations and other Applicable Law, the International
                  Quality Standards and the other requirements of the Sale
                  Contract; and

         c.       production of M2A Capsules in compliance with Product
                  Specifications, the FDA Quality System Regulations and other
                  Applicable Law, the International Quality Standards and the
                  other requirements of this Sale Contract, with M2A Capsules
                  operating in

<Page>

                  "live" mode for no more than 60 seconds in total until
                  packaged for shipment.

<Page>

                                   SCHEDULE 2

                                PROVISIONAL TESTS

To demonstrate its capability to achieve the Performance Guarantees and
Provisional Acceptance, each Production Line shall demonstrate the following:

1.       Completion of all construction and workmanship in compliance with the
         FDA Quality System Regulations and other Applicable Law, the
         International Quality Standards and the other requirements of this Sale
         Contract;

2.       Operation and completion of the assembly and testing procedures for M2A
         Capsules in compliance with the FDA Quality System Regulations and
         other Applicable Law, the International Quality Standards and the other
         requirements of this Sale Contract;

3.       Repeated and reliable production of M2A Capsules in compliance with
         Product Specifications, the FDA Quality System Regulations and other
         Applicable Law, International Quality Standards and the other
         requirements of this Sale Contract, as evidenced by the production of a
         minimum of 25 consecutive M2A Capsules;

4.       Production of M2A Capsules in compliance with Product Specifications,
         the FDA Quality System Regulations and other Applicable Law, the
         International Quality Standards and the other requirements of this Sale
         Contract at a rate in a continuous one (1) hour period of operation,
         such that the capacity to manufacture the number of Capsules required
         by the Performance Guarantees can be mathematically proven; and

5.       Production of M2A Capsules in compliance with Product Specifications,
         the FDA Quality System Regulations and other Applicable Law,
         International Quality Standards and the other requirements of this Sale
         Contract during a continuous two (2) hour period of operation during
         which uptime exceeds 90%.

<Page>

                                   SCHEDULE 3

                                PERFORMANCE TESTS

To demonstrate its capability to achieve the Performance Guarantees and Final
Acceptance, each Production Line shall demonstrate the following:

1.       Completion of installation in compliance with the FDA Quality System
         Regulations and other Applicable Law, the International Quality
         Standards and the other requirements of this Sale Contract;

2.       Operation and completion of the assembly and testing procedures for M2A
         Capsules in compliance with the FDA Quality System Regulations and
         other Applicable Law, the International Quality Standards and the other
         requirements of this Sale Contract; and

3.       Production of M2A Capsules in compliance with Product Specifications,
         the FDA Quality System Regulations and other Applicable Law, the
         International Quality Standards and the other requirements of this Sale
         Contract at a rate, speed and uptime, and with a labor efficiency, in a
         continuous eight (8) hour period of operation, such that the capacity
         of such Production Line to achieve the Performance Guarantees can be
         mathematically proven.

<Page>

                                    EXHIBIT A

                             FORM OF PURCHASE ORDER

                              [Letterhead of Buyer]


                                               __________, 20__



PEMSTAR, Inc
3535 Technology Drive
Rochester, Minnesota
United States of America 55901

Attn:  Susan Johnson

RE:      BUYER'S PURCHASE ORDER NO. ___

         We refer to the Purchase and Sale Contract (the "SALE CONTRACT") dated
of August 25, 2001 between Pemstar, Inc. ("SELLER") and Given Imaging, Ltd.
("BUYER"). Capitalized terms not otherwise defined herein are defined in the
Sale Contract. Pursuant to Section 2.2.1 of the Sale Contract, Buyer hereby
orders, and authorizes and releases you to proceed with all of the Work in
respect of, one (1) [Semi-Automated Production Line] [Fully-Automated Production
Line] to be [installed by Seller at Buyer's Facility] [stored by Seller at
Seller's Facility as a Standby Production Line]. The Milestone Schedule for such
Production Line is as follows:

<Table>
<Caption>
  ---------------------------------------------------------------------------------------
                              Milestone                               Milestone Date
  ---------------------------------------------------------------------------------------
<S>                                                                   <C>
      [Final Plans and Specifications to Buyer]
  ---------------------------------------------------------------------------------------
      Provisional Acceptance Date
  ---------------------------------------------------------------------------------------
      Final Acceptance
  ---------------------------------------------------------------------------------------
</Table>



                                             GIVEN IMAGING, LTD.



                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

<Page>

                                                                    CONFIDENTIAL



                                    EXHIBIT B

                   FORM OF PROVISIONAL ACCEPTANCE CERTIFICATE

                              [Letterhead of Buyer]



                                               __________, 20__



PEMSTAR, Inc.
3535 Technology Drive
Rochester, Minnesota
United States of America 55901

Attn:  Susan Johnson

RE:      BUYER'S PURCHASE ORDER NO. ___

         We refer to the Purchase and Sale Contract (the "SALE CONTRACT") dated
as of August 25, 2001 between PEMSTAR, Inc. ("SELLER") and Given Imaging, Ltd.
("BUYER"). Capitalized terms not otherwise defined herein are defined in the
Sale Contract.

         Pursuant to Section 3.2.1 of the Sale Contract, Buyer hereby confirms
that the Production Line subject to the foregoing Purchase Order has met the
requirements for Provisional Acceptance under the Sale Contract as of
__________, 20__ .



                                             GIVEN IMAGING, LTD.



                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

<Page>

                                    EXHIBIT C

                      FORM OF FINAL ACCEPTANCE CERTIFICATE

                              [Letterhead of Buyer]



                                               __________, 20__



PEMSTAR, Inc.
3535 Technology Drive
Rochester, Minnesota
United States of America 55901

Attn:  Susan Johnson

RE:      BUYER'S PURCHASE ORDER NO. ___

         We refer to the Purchase and Sale Contract (the "SALE CONTRACT") dated
as of August 25, 2001 between PEMSTAR, Inc. ("SELLER") and Given Imaging, Ltd.
("BUYER"). Capitalized terms not otherwise defined herein are defined in the
Sale Contract.

         Pursuant to Section 3.3 of the Sale Contract, Buyer hereby confirms
that the Production Line subject to the foregoing Purchase Order has met the
requirements for Final Acceptance under the Sale Contract as of __________, 20__
 .



                                             GIVEN IMAGING, LTD.



                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:

<Page>

                                    EXHIBIT D

                              FORM OF CHANGE ORDER

                              [Letterhead of Buyer]



                                               __________, 20__



PEMSTAR, Inc.
3535 Technology Drive
Rochester, Minnesota
United States of America 55901

Attn:  Susan Johnson

RE:      BUYER'S PURCHASE ORDER NO. ___

         We refer to the Purchase and Sale Contract (the "SALE CONTRACT") dated
as of August 25, 2001 between PEMSTAR, Inc. ("SELLER") and Given Imaging, Ltd.
("BUYER"). Capitalized terms not otherwise defined herein are defined in the
Sale Contract. Pursuant to Article 5 of the Sale Contract, Buyer is issuing a
Change Order with respect to the Production Line subject to the foregoing
Purchase Order as follows:

         DESCRIPTION OF CHANGE IN WORK

         [Specify or attach]

         MILESTONE SCHEDULE FOR CHANGE ORDER

         [Specify or attach.]

         PRICE FOR CHANGE IN WORK

         [Specify or attach.]

         CHANGE IN MILESTONE SCHEDULE

         [Specify milestone] from __________ , 20 __ to _________, 20__

         CHANGE IN CONTRACT PRICE:

         From $__________ to $_________

<Page>

         Please indicate your acceptance and agreement to this Change Order as
of the date hereof by executing one original of this Change Order and returning
it to Buyer.



                                             GIVEN IMAGING, LTD.



                                             By:
                                                 -------------------------------
                                                 Name:
                                                 Title:



ACCEPTED AND AGREED TO:



PEMSTAR, INC.



By:
    -----------------------------------------
Name:
Title: