Document:

XTL
        BIOPHARMACEUTICALS LTD.

      

      2001
        EMPLOYEE SHARE OPTION PLAN

      

      

      

      A.
        NAME
        AND PURPOSE

      

      

      1. Name:
        This
        plan, as amended from time to time, shall be known as the "XTL
        Biopharmaceuticals Ltd. 2001 Employee Share Option Plan” (the
        "Plan").

      

      2. Purpose:
        The
        purpose and intent of the Plan is to provide incentives to the employees
        and
        selected directors of XTL Biopharmaceuticals Ltd. (the "Company") and its
        subsidiaries by providing them with options to purchase Ordinary Shares,
        nominal
        value 0.02 New Israeli Shekels each (the "Shares"), of the Company in order
        to
        (a) align the interests of employees, directors and consultants with
        shareholders interests; (b) create a long-term incentive to employees, directors
        and consultants; (c) to attract skilled managers and employees to the Company;
        and (d) to achieve greater motivation of employees and enhance employee
        retention.

      

      B.
        GENERAL TERMS AND CONDITIONS OF THE PLAN

      

      3. Administration: 

      

      3.1 The
        Plan
        will be administered by the Board of Directors of the Company (the "Board")
        or
        by a remuneration committee appointed by the Board (the "Committee"), which,
        if
        appointed, will consist of such number of Directors of the Company as may
        be
        fixed, from time to time, by the Board. If a Committee is not appointed,
        the
        term Committee, whenever used herein, shall mean the Board. The Board shall
        appoint the members of the Committee, may from time to time remove members
        from,
        or add members to, the Committee and shall fill vacancies in the Committee
        however caused. 

       

      3.2 The
        Committee shall select one of its members as its Chairman and shall hold
        its
        meetings at such times and places as it shall determine. Actions taken by
        a
        majority of the members of the Committee, at a meeting at which a majority
        of
        its members is present, or acts reduced to or approved in writing by all
        members
        of the Committee, shall be the valid acts of the Committee. The Committee
        may
        appoint a Secretary, who shall keep records of its meetings and shall make
        such
        rules and regulations for the conduct of its business as it shall deem
        advisable.

      

      3.3 Subject
        to the general terms and conditions of this Plan, the Committee shall have
        the
        full authority in its discretion, from time to time and at any time, to
        determine (i) the persons ("Grantees") to whom options to purchase
        Shares
        ("Option(s)") shall be granted, (ii) the number of Shares to be covered
        by
        each Option, (iii) the time or times at which the same shall be granted,
        (iv) the schedule and conditions on which such Options may be exercised
        and
        on which such Shares shall be paid for, and/or (v) any other matter
        which
        is necessary or desirable for, or incidental to, the administration of the
        Plan.
        Notwithstanding the aforesaid, the actual issuance of the Options to the
        Grantees will only be valid following a resolution of a duly convened Board
        meeting of the Company.

      

      3.4 The
        Committee may, from time to time, adopt such rules and regulations for carrying
        out the Plan as it may deem necessary. In addition to the aforesaid, the
        Committee shall have full authority in its discretion to create sub-plans
        to the
        Plan which shall incorporate such amendments as the Committee shall deem
        fit in
        order to facilitate the operation of the Plan in any jurisdiction required
        taking into consideration, among other things, tax issues, corporate governance
        issues and applicable securities and regulatory regulations and legislation
        (the
“Sub-plans”, the term Plan shall hereinafter be deemed to include any Sub-plan
        created by the Committee). No member of the Board or of the Committee shall
        be
        liable for any act or determination made in good faith with respect to the
        Plan
        or any Option granted thereunder.

      

      
        
           

        

        
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      3.5 The
        interpretation and construction by the Committee of any provision of the
        Plan or
        of any Option thereunder shall be final and conclusive unless otherwise
        determined by the Board.

      

      4. Eligible
        Grantees:
        The
        Committee, at its discretion, may determine to grant Options to any employee
        of
        the Company or its subsidiaries (including officers and directors who are
        employees), who devote substantially the whole of their working time to the
        business of the Company and its subsidiaries. Anything in this Plan to the
        contrary notwithstanding, all grants of Options to Directors and Office
        Holders -"Nosei Misra" - as such term is defined in the Israeli
        Companies Act - 1999, as amended from time to time (the "Companies
        Act") -shall be authorized and implemented only in accordance with
        the
        provisions of the Companies Act. The grant of an Option to a Grantee hereunder,
        shall neither entitle such Grantee to participate, nor disqualify him from
        participating, in any other grant of options pursuant to this Plan or any
        other
        stock option plan of the Company. 

       

      5. Grant
        of Options in Trust:

      

      5.1 Subject
        to Section 7.1 hereof, the effective date of the grant of an Option (the
        "Date
        of Grant") shall be the date upon which the Board decided to issue the Options
        to the Grantee in accordance with the determination of the Committee to award
        such Options to the Grantee; except that in the event of grant of options
        in
        accordance with Section 10.1(a) below, the decision of the Board to issue
        the
        Options to the Grantee shall be at least 30 days after the delivery by the
        Company to the appropriate income tax authorities of a notice pertaining
        to the
        appointment of the Trustee and the adoption of the Plan. The Committee shall
        promptly give the Grantee written notice (the "Notice of Grant") of the grant
        of
        an Option following the official issuance of the Options by the Board.
Options
        may only be granted subject to the terms herein and the grant must fall during
        a
        period of forty two days (“Open
        Periods”)
        immediately following the date of any of the following:-

      

      (a) the
        approval and adoption of the Plan by the Company in general
        meeting;

       

      (b) the
        announcement of the interim results of the Company;

       

      (c) the
        preliminary announcement of the final results of the Company;

       

      (d) the
        issue
        of any prospectus, listing particulars or other document containing equivalent
        information relating to Shares;

       

      (e) in
        relation to any Director of the Company or subsidiary of the Company (an
        “Executive”)
        who
        the Committee determines shall be granted an Option upon his becoming an
        Executive, his so becoming an Executive; or

       

      (f) an
        event
        which the Committee in its absolute discretion deems sufficiently exceptional
        to
        justify the grant of an Option.

      

      5.2 Anything
        herein to the contrary notwithstanding, all Options granted under the Plan
        shall
        be granted by the Company to a trustee designated by the Board and approved
        by
        the appropriate tax authorities (the "Trustee"). The Trustee shall hold each
        such Option in trust (the "Trust") for the benefit of the Grantee in respect
        of
        whom such Option was granted (the "Beneficial Grantee"), and no Options shall
        be
        released from the Trust until the vesting of such Options pursuant to
        Section 10.3 hereof and in the event of the grant of Options under
        Section
        10.1(a), until at least two (2) years from the Date of Grant have expired
        (the
        "Release Date") taking into consideration the tax implications from such
        release. From and after the Release Date, upon the written request of any
        Beneficial Grantee, the Trustee shall release from the Trust the Options
        granted
        and exercise them on behalf of such Beneficial Grantee, by executing and
        delivering to the Company such instrument(s) as the Company may require,
        giving
        due notice of such release to such Beneficial Grantee, provided, however,
        that
        the Trustee shall not so release and exercise any such Options on behalf
        of the
        Beneficial Grantee unless the latter, prior to, or concurrently with, such
        release and exercise, provides the Trustee with evidence, satisfactory in
        form
        and substance to the Trustee, that all taxes and/or compulsory payments,
        if any,
        required to be paid upon such release and exercise have, in fact, been paid
        or
        the Trustee has withheld any and all taxes required to be paid on such options
        prior to the release and exercise for payment by the Trustee to the appropriate
        tax authorities.

      

      
        
           

        

        
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      6. Limits
        (the Company)

      

      6.1 No
        Option
        to subscribe for Shares shall be granted if immediately thereafter (the
“relevant
        time"):

      

      (a) the
        aggregate nominal amount of Shares in respect of which options to subscribe
        for
        Shares (“Subscription
        Options”)
        would
        then have been granted would, when added to the aggregate nominal amount
        of the
        issued and outstanding share capital of the Company (the “Ordinary Share
        Capital”) which has already been placed under option to be issued (whether or
        not issued at the relevant time) under any other share option schemes or
        has
        already been issued under any other employees' share schemes of the Company
        (other than share option schemes) during the ten years preceding the relevant
        time exceed 10% of the aggregate nominal amount of the Ordinary Share Capital
        at
        the relevant time or

      

      (b) the
        aggregate nominal amount of Shares in respect of which Subscription Options
        (other than Options which are Super Options, as defined below) would then
        have
        been granted would, when added to the aggregate nominal amount of Ordinary
        Share
        Capital which has already been placed under option to be issued (whether
        or not
        issued at the relevant time) under any other share option schemes of the
        Company
        (other than options under savings related share option schemes approved under
        Schedule 9 to the United Kingdom Companies Act 1985 (the “Act”) and other than
        options which are Super Options) during the ten years preceding the relevant
        time exceed 5% of the aggregate nominal amount of Ordinary Share Capital
        in
        issue at the relevant time 

      

      6.2 In
        this
        Section 6 and in Sections 7 and 8 references to Shares in respect of which
        Subscription Options have been granted and to Shares or Ordinary Share Capital
        placed under option to be issued shall exclude Shares or Ordinary Share Capital
        in respect of which:

      

      (a) 
        an
        option has lapsed or has been cancelled; and

       

      (b) Subscription
        Options have been granted before September 26, 2000, the date upon which
        the
        Company’s ordinary share capital was admitted to the Official List of London
        Stock Exchange (“Flotation”)

      

      7. Limits
        (“Executives”)

       

      7.1 No
        Option
        shall be granted to any Grantee if his normal anticipated retirement date
        is
        within 2 years of the Date of Grant.

       

      8. Super
        Options

      

      8.1 A
“Super
        Option” is an Option or other option to acquire Shares the exercise of which is
        subject to performance conditions considered by the Committee to be materially
        more stretching than those commonly applied by similar companies whose shares
        are listed on the Official List of the UK Listing Authority

      

      8.2 No
        Subscription Option which is a Super Option shall be granted if immediately
        thereafter (the “relevant time") the aggregate nominal amount of Shares in
        respect of which Subscription Options which are Super Options would then
        have
        been granted would, when added to the aggregate nominal amount of Ordinary
        Share
        Capital in respect of which options to subscribe which are Super Options
        have
        been granted under any other share option schemes during the ten years preceding
        the relevant time exceed 5% of the aggregate nominal amount of Ordinary Share
        Capital in issue at the relevant time.

      

      9. Reserved
        Shares:
        The
        Company has reserved 11,000,000 authorized but unissued Shares for purposes
        of
        the Plan subject to adjustments as provided in Section 14 hereof.
        All
        Shares under the Plan, in respect of which the right hereunder of a Grantee
        to
        purchase the same shall, for any reason, terminate, expire or otherwise cease
        to
        exist, shall again be available for grant through Options under the
        Plan.

      

      
        
           

        

        
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      10. Grant
        of Options:

      

      10.1 The
        Committee in its discretion may determine to award to Grantees Options to
        purchase Shares in the Company available under the Plan in accordance with
        Sub-plans created to facilitate any of the following tax rules:

      

      (a) To
        Israeli Grantees- 

      
      

      (i) in
        accordance with the provisions of Section 102 of the Income Tax Ordinance
        [New
        Version] 1961 (the “Israeli Tax Ordinance”); or

      (ii) in
        accordance with the provisions of Section 3(9) of the Israeli Tax Ordinance;
        and

       

      (b) To
        US
        Grantees- 

      (i) “Incentive
        stock options” within the meaning of section 422 of the United States Internal
        Revenue Code of 1986 (the “Code”); or

      (ii) “Nonqualified
        stock options” as defined in the Code. 

      

      10.2 The
        Notice of Grant shall state, inter alia, the number of Shares covered thereby,
        the schedule pursuant to which such Options shall vest, the Beneficial Grantee
        thereof, the terms and conditions under which the Beneficial Grantee shall
        be
        entitled to pay for, and acquire, the Shares, the exercise price, and such
        other
        terms and conditions as the Committee at its discretion may prescribe, provided
        that they are consistent with this Plan. The Committee shall take into
        consideration in its determination of the allocation of Options to Grantees,
        among other matters, the following considerations:

       

      (a) The
        current market demand for similar positions of the Grantees; 

      (b) The
        required experience needed by the position held by the Grantee;

      (c) The
        level
        of managerial responsibility afforded to the Grantee; and

      (d) The
        possible negative impact of the Grantee’s termination of legal relationship with
        the Company.

       

      10.3 The
        Options granted under the Plan shall be issued subject to a vesting schedule
        providing that the Grantee may exercise one third (1/3) of any Options granted
        to him/her upon the second, third and fourth anniversary of the Date of Grant
        (each of such dates a “Vesting
        Date”)
        provided that at each Vesting Date a legal relationship exists between the
        Grantee and the Company. 

      

      10.4 Without
        derogating from the rights and powers of the Committee under Section 10.2
        hereof, unless otherwise specified in the Notice of Grant, each Option under
        the
        Plan shall be for a term of ten (10) years. 

      

      11. Exercise
        Price: The
        exercise price per Share covered by each Option shall be the market value
        of a
        Share on the Date of Grant of such Option as determined by the Committee
        or (if
        the Shares are for the time being listed in the Daily Official List of the
        London Stock Exchange) the average of the middle market quotations (as derived
        from the said Daily Official List) of a Share for the three immediately
        preceding dealing days before the Date of Grant of such Option. That average
        price shall be in US Dollars calculated in accordance with the representative
        rate of US Dollars in GB Sterling on the day preceding the Date of Grant
        (the
        “Exercise
        Price”).
        

      

      12. Exercise
        of Options:

      

      12.1 Options
        shall be exercisable pursuant to the terms under which they were awarded
        and
        subject to the terms and conditions of the Plan.

      

      12.2 The
        exercise of an Option shall be made by a written notice of exercise (the
        "Notice
        of Exercise") delivered by the Trustee (after receipt of written instructions
        from the Beneficial Grantee) to the Company at its principal executive office,
        specifying the number of Shares to be purchased and accompanied by the payment
        of the Exercise Price therefor, and containing such other terms and conditions
        as the Committee shall prescribe from time to time.

      

      
        
           

        

        
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      12.3 Anything
        herein to the contrary notwithstanding, but without derogating from the
        provisions of Section 13 hereof, if any Option has not been exercised
        and
        the Shares covered thereby not paid for within ten (10) years after the Date
        of
        Grant (or any shorter period set forth in the Notice of Grant), such Option
        and
        the right to acquire such Shares shall terminate, all interests and rights
        of
        the Grantee in and to the same shall ipso facto expire, and, in the event
        that
        in connection therewith any Options are still held in the Trust as aforesaid,
        the Trust with respect thereto shall ipso facto expire and the Trustee shall
        thereafter hold such Options in an unallocated pool until instructed by the
        Company that some or all of such Options are again to be held in trust for
        one
        or more Grantees.

      

      12.4 Each
        payment of the Exercise Price for Shares shall be in respect of a whole number
        of Shares, and shall be effected in cash or by a cashier's check payable
        to the
        order of the Company, or such other method of payment acceptable to the Company.
        

      

      13. Termination
        of Legal Relationship:

      

      13.1 In
        the
        event that a legal relationship between the Company and the Grantee ceases,
        for
        any reason, all Options theretofore granted to such Grantee shall terminate
        as
        follows:

       

      (a) If
        the
        Grantee’s cessation of legal relationship is due to such Grantee’s death or
“Disability” (as hereinafter defined), such Option (to the extent exercisable at
        the time of the Grantee’s cessation of legal relationship) shall be exercisable
        by the Grantee’s legal representative, estate of other person to whom the
        Grantee’s rights are transferred by will or by laws of descent of distribution
        for a period of twelve (12) months following such cessation of legal
        relationship (but in no event after the expiration date of such Option),
        and
        shall thereafter terminate. For purposes hereof, Disability shall mean the
        inability, due to illness or injury, to engage in any gainful occupation
        for
        which the individual is suited by education, training or experience, which
        condition continues or is expected to continue for at least twelve (12)
        months.

       

        (b) If
        the
        Grantee’s cessation of legal relationship by the Company (hereinafter
“Dismissal”) is for “cause”, such Grantee’s Options, both vested and unvested,
        shall expire immediately upon Dismissal. For
        the
        purpose hereof “cause” is defined as willful misconduct, disregard of directives
        and policies of the board of directors of the Company, conviction of a felony,
        acts of theft, embezzlement or self dealing, misappropriation of trade secrets,
        or any material breach of the agreement between the Grantee and the Company
        where such breach is not remedied within thirty (30) days after service of
        notice by the Company specifying the breach complained of and (if remediable)
        requiring remedy of it.

      

      (c) If
        the
        Grantee’s Dismissal is not for “cause” (as defined in subsection (b) above), the
        Grantee shall be entitled to exercise, in addition to all Options vested
        up to
        his/her date of Dismissal, a relative number of unvested Options included
        in the
        next Vesting Date, such relative number to be calculated as the number of
        full
        days completed (as of the date of Dismissal) since the previous Vesting Date
        (or
        the date of Grant, as applicable), divided by the number of days between
        the
        previous Vesting Date (or the date of Grant, as applicable) and the next
        Vesting
        Date. Exercise may take place at any time during the twelve (12) months
        following such cessation of legal relationship (but in no event after the
        expiration date of such option), and shall thereafter terminate. In the event
        that the Dismissal occurs prior to the first anniversary of the Grant of
        Options, the Grantee shall not be entitled to any Options and all Options
        granted to the Grantee shall ipso facto expire and cease to have any legal
        effect.

      

      (d) If
        the
        Grantee’s cessation of legal relationship is for any other reason, such Options
        which have vested prior to such termination (to the extent exercisable at
        the
        time of the Grantee’s cessation of legal relationship) shall be exercisable for
        a period of ninety (90) days following such cessation of legal relationship,
        and
        shall thereafter terminate; provided,
        however,
        that if
        the Grantee’s dies within such ninety-day period, such Options (to the extent
        exercisable at the time of the Grantee’s cessation of legal relationship) shall
        be exercisable by the Grantee’s legal representative, estate or other person to
        whom the Grantee’s rights are transferred by will or by laws of descent of
        distribution for a period of twelve (12) months following the Grantee’s death
        (but in no event after the expiration date of such Option), and shall thereafter
        terminate. Notwithstanding the aforesaid, the Committee may, in its sole
        discretion, extend the ninety-day period by an additional ninety-day period
        in
        the case of a Substantial Lack of Trading in the Company’s shares. A
“Substantial Lack of Trading” is defined when in the preceding four (4) weeks
        the average weekly trade in the Company’s shares was less than 0.5% of the
        Company’s issued and outstanding share capital. 

      

      
        
           

        

        
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      (e) If
        the
        Grantee’s cessation of legal relationship is due to such Grantee’s retirement,
        such Option (to the extent exercisable at the time of the Grantee’s cessation of
        legal relationship) shall be exercisable by the Grantee for a period of twelve
        (12) months following such cessation of legal relationship (but in no event
        after the expiration date of such Option), and shall thereafter terminate.
        provided,
        however,
        that if
        the Grantee’s dies within such twelve-month period, such Options (to the extent
        exercisable at the time of the Grantee’s cessation of legal relationship) shall
        be exercisable by the Grantee’s legal representative, estate or other person to
        whom the Grantee’s rights are transferred by will or by laws of descent of
        distribution for a period of twelve (12) months following the Grantee’s death
        (but in no event after the expiration date of such Option), and shall thereafter
        terminate.

      

      13.2 Notwithstanding
        the foregoing provisions of Section 13.1, the Committee may provide,
        either
        at the time an Option is granted or thereafter, that such Option may be
        exercised after the periods provided for in Section 13.1, but in no
        event
        beyond the term of the Option.

      

      14. Adjustment
        Upon Changes in Capitalization

      

      14.1 Subject
        to any required action by the shareholders of the Company, the number of
        Shares
        covered by each outstanding Option, and the number of Shares which have been
        authorized for issuance under the Plan but as to which no Options have yet
        been
        granted or which have been returned to the Plan upon cancellation or expiration
        of an Option, as well as the price per share of Shares covered by each such
        outstanding Option, shall be proportionately adjusted for any increase or
        decrease in the number of issued Shares resulting from a stock split, reverse
        stock split, stock dividend, combination or reclassification of the Shares
        or
        the payment of a stock dividend (bonus shares) with respect to the Shares
        or any
        other increase or decrease in the number of issued Shares effected without
        receipt of consideration by the Company; provided,
        however,
        that
        conversion of any convertible securities of the Company shall not be deemed
        to
        have been "effected without receipt of consideration." Such adjustment shall
        be
        made by the Committee, whose determination in that respect shall be final,
        binding and conclusive. Except as expressly provided herein, no issuance
        by the
        Company of shares of stock of any class, or securities convertible into shares
        of stock of any class, shall affect, and no adjustment by reason thereof
        shall
        be made with respect to, the number or price of Shares subject to an Option.
        

       

      14.2 In
        the
        event of the proposed dissolution or liquidation of the Company, the Committee
        shall notify each Grantee at least fifteen (15) days prior to such proposed
        action. To the extent it has not been previously exercised, each Option will
        terminate immediately prior to the consummation of such proposed action.
        

      

      14.3 In
        the
        event of a consolidation or the merger of the Company with or into another
        corporation as a result of which the Company is not the surviving entity,
        each
        Option shall be assumed or an equivalent option shall be substituted by such
        successor corporation or a parent or subsidiary of such successor corporation,
        and the following shall apply:

      

      (a) The
        vesting of the Options shall remain the same except that 25% of the remaining
        unvested Options at the time of consolidation or merger shall become immediately
        vested; and

       

      (b) In
        the
        event that the Grantee shall be dismissed prior to the first anniversary
        of the
        consolidation or merger not for “cause”, then an additional 25% of the remaining
        unvested Options at the time of consolidation or merger shall become immediately
        vested upon such dismissal. 

      

      15. Changes
        in Control

      

      

      15.1 If
        at any
        time before the expiry of the Option Period of an Option any person obtains
        control (as such term is defined in Section 840 of the Income and Corporation
        Taxes Act 1988, a United Kingdom Statute) (“Control”) of the Company as a result
        of making:

      

      
        
           

        

        
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      (a) a
        general
        offer to acquire the whole of the issued Ordinary Share Capital of the Company
        (or the whole other than any such share capital already held at the date
        of the
        offer by, or by a nominee for, the offeror or any subsidiary thereof), which
        offer is made on a condition such that if it is satisfied the person making
        the
        offer will have Control of the Company, 

      or

      (b) a
        general
        offer to acquire all the Shares (or all other than any such Shares already
        held
        at the date of the offer by, or by a nominee for, the offeror or any subsidiary
        thereof) the Option Holder shall be entitled within a period of six months
        beginning with the time when the person making the offer has obtained Control
        of
        the Company and any condition subject to which the offer is made has been
        satisfied: 

       

      (i) to
        exercise that Option (but only within that period) subject to the vesting
        of
        such Options as set out in Section 10.3 above, or 

       

      (ii) if
        the
        offeror is a company, by agreement with the offeror, to release that Option
        in
        consideration of the grant to him of an equivalent option (as envisaged by
        Section 14.3)

      

      15.2 If
        at any
        time before an Option has lapsed any person obtains Control of the Company
        as a
        result of an agreement with one or more shareholders of the Company to acquire
        any of the issued Ordinary Share Capital of the Company, the Option Holder
        shall
        be entitled within a period of six months beginning with the time such person
        has obtained Control of the Company and such agreement has become unconditional
        to exercise that Option (but only within that period) or if the offeror is
        a
        company, by agreement with the offeror, to release that Option in consideration
        of the grant to him of an equivalent option (as envisaged by Section
        14.3).

       

      15.3 An
        exercise of an Option pursuant to this Section 15 may take place before the
        Option has vested pursuant to Section 10.3 but may not take place after that
        Option has lapsed or expired.

      

      16. Non-Transferability: 

      

      No
        Option
        shall be assignable or transferable by the Grantee to whom granted otherwise
        than by will or the laws of descent and distribution, and an Option may be
        exercised during the lifetime of the Grantee only by such Grantee or by such
        Grantee's guardian or legal representative. The terms of such Option shall
        be
        binding upon the beneficiaries, executors, administrators, heirs and successors
        of such Grantee.

      

      17.  Terms
        and Amendment of the Plan:

      

      17.1 The
        Plan
        was authorized by the Board on February 28, 2001 and by the shareholders
        of the
        company on May 3, 2001. The Plan shall expire on May 2, 2011 (except as to
        Options outstanding on that date), but such expiration shall not affect the
        instructions contained herein or in any applicable law with respect to the
        Options and Shares held in the Trust at such time of expiration. 

      

      17.2
        Subject to applicable laws, the Board may, at any time and from time to time,
        terminate or amend the Plan in any respect save that 

       

      (a) no
        amendment to the advantage of Executives or Option Holders may be made to
        the
        provisions of this Plan relating to:

       

      (1) the
        persons to whom Options may be granted;

       

      (2) the
        limitations on the number or amount of Ordinary Shares subject to this
        Scheme;

       

      
        
           

        

        
          -7-

          
            

          

        

        
           

        

      

      (3) the
        basis
        for determining the entitlement of an Executive or Option Holder to, and
        the
        terms of, Shares and for the adjustment thereof in the event of variation
        of
        capital (Rule without the prior approval of the Company in general meeting
        (save
        for minor amendments to benefit the administration of this Plan, to take
        account
        of a change in legislation or to obtain or maintain favourable tax, exchange
        control or regulatory treatment for Executives or Option Holders or for the
        Company or the Group); and

       

      (b) 
        In no
        event may any action of the Company alter or impair the rights of a Grantee,
        without his consent, under any Option previously granted to him.

       

      18. Tax
        Consequences:
        All tax
        consequences and/or obligations regarding other compulsory payments arising
        from
        the grant or exercise of any Option, from the payment for, or the subsequent
        disposition of, Shares covered thereby or from any other event or act (of
        the
        Company or the Grantee) hereunder, shall be borne solely by the Grantee,
        and the
        Grantee shall indemnify the Company and the Trustee and hold them harmless
        against and from any and all liability for any such tax (and compulsory payment,
        if any) or interest or penalty thereon, including without limitation,
        liabilities relating to the necessity to withhold, or to have withheld, any
        such
        tax (and compulsory payment, if any) from any payment made to the
        Grantee.

       

      19. Miscellaneous:

      

      19.1 Continuance
        of Legal Relationship:
        Neither
        the Plan nor the grant of an Option thereunder shall impose any obligation
        on
        the Company to continue the legal relationship between the Company and any
        Grantee, and nothing in the Plan or in any Option granted pursuant thereto
        shall
        confer upon any Grantee any right to continue the legal relationship with
        the
        Company, or restrict the right of the Company to terminate such legal
        relationship at any time.

      

      19.2 Governing
        Law:
        The Plan
        and all instruments issued thereunder or in connection therewith, shall be
        governed by, and interpreted in accordance with, the laws of the State of
        Israel.

       

      19.3 Application
        of Funds:
        The
        proceeds received by the Company from the sale of Shares pursuant to Options
        granted under the Plan will be used for general corporate purposes of the
        Company.

      

      19.4 Multiple
        Agreements:
        The
        terms of each Option may differ from other Options granted under the Plan
        at the
        same time, or at any other time. The Committee may also grant more than one
        Option to a given Grantee during the term of the Plan,. The grant of multiple
        Options may be evidenced by a single Notice of Grant or multiple Notices
        of
        Grant, as determined by the Committee.

      

      19.5 Non-Exclusivity
        of the Plan:
        The
        adoption of the Plan by the Board shall not be construed as amending, modifying
        or rescinding any previously approved incentive arrangement or as creating
        any
        limitations on the power of the Board to adopt such other incentive arrangements
        as it may deem desirable, including, without limitation, the granting of
        stock
        options otherwise than under the Plan, and such arrangements may be either
        applicable generally or only in specific cases.

      
      

      
        
           

        

        
          -8-Exhibit 10.6

                    AMENDED AND RESTATED MANUFACTURING AGREEMENT

      THIS AMENDED AND RESTATED  MANUFACTURING  AGREEMENT (this  "Agreement") is
made and entered  into this 10th day of  February  2005 by and among ADM Tronics
Unlimited, Inc., a Delaware corporation ("ADM"), Sonotron Medical Systems, Inc.,
a  Delaware  corporation  ("SMS"),  and Ivivi  Technlogies,  Inc.,  a New Jersey
corporation  ("IVIVI" and together  with SMS,  the  "Subsidiaries"),  all of the
foregoing corporations with a principal place of business at 224 Pegasus Avenue,
Northvale, New Jersey 07647.

                                   WITNESSETH

      WHEREAS,  ADM,  SMS,  IVIVI and  Vet-Sonotron  Systems,  Inc.,  a Delaware
corporation ("VET"), entered into a manufacturing agreement,  dated as of August
15,  2001 (the  "Existing  Manufacturing  Agreement"),  pursuant to which ADM, a
Registered  Medical  Device  Manufacturing  Facility,  as such  term is  defined
pursuant  to the U.S.  Food  and  Drug  Administration  ("FDA")  medical  device
regulations,  manufactures  electronic and other medical and non-medical devices
and products for the Subsidiaries;

      WHEREAS, in April 2003, the operations of VET were transferred from ADM to
IVIVI;

      WHEREAS, ADM and the Subsidiaries desire to amend and restate the Existing
Manufacturing Agreement to, among other things, (i) provide each Subsidiary with
protection of its proprietary and confidential information and (ii) provide each
Subsidiary with the right to engage third-party manufacturers to manufacture any
or all of its  products in the event ADM is unable to perform,  or  otherwise in
breach of any of, its obligations under this Agreement; and

      WHEREAS,   the  Subsidiaries  desire  to  have  ADM  continue  to  provide
manufacturing  and regulatory  services to the  Subsidiaries  and ADM desires to
continue to provide such services to the Subsidiaries on terms and conditions as
herein contained.

      NOW, THEREFORE,  in consideration of the mutual covenants contained herein
and other good and valuable  consideration the receipt and sufficiency is hereby
acknowledged, the parties hereto agree as follows:

      1. ADM shall be the  exclusive  manufacturer  of all  current  and  future
medical,  non-medical and veterinary electronic and other devices or products to
be sold,  rented  or  leased  by the  Subsidiaries  (referred  to  herein as the
"Products") under the terms and conditions herein contained.

      2. ADM will  manufacture the Products for the  Subsidiaries to appropriate
standards and quality commensurate with the type of product and intended use, it
being understood by the parties hereto that this will include Good Manufacturing
Practices ("GMP") and Quality Service  Requirements  ("QSR") consistent with FDA
regulations.

<PAGE>

      3. ADM shall invoice the Subsidiaries for any of the Products manufactured
at an amount  equal to the  Direct  Cost plus 20%.  It being  understood  by the
parties  hereto that Direct Cost shall be defined and  determined as the actual,
invoiced cost for all raw materials,  parts,  components or other physical items
that are incorporated into or consumed in the manufacture of the Products plus a
direct labor  charge equal to the number of hours or portions of hours  required
to produce the Products  multiplied by the standard hourly  manufacturing  labor
rate of  ADM.  Direct  Cost  shall  not  include  an  allocation  for  overhead,
insurance,  administration,  rent or other expenses not directly  related to the
manufacture of the Products.

      4. Each Subsidiary  shall purchase and provide ADM with the raw materials,
parts,  components  or other items that may be required  for ADM to  manufacture
such Subsidiary's Products.

      5. All invoices from ADM to the Subsidiaries  shall be immediately due and
payable upon  completion of manufacture of the Products and shall be paid by the
Subsidiaries  to ADM in U.S.  funds by  check,  wire  transfer  or  other  means
acceptable to ADM. All invoices shall include a price per unit (such price to be
the Direct Cost plus 20%) multiplied by the number of units manufactured.

      6. Any  invoice  not paid  within  10 days of its due  date  shall  accrue
interest at the rate of 1% per month for any month or portion of a month  during
which time such  invoice  remains  unpaid,  it being  understood  by the parties
hereto that time is of the essence.

      7. In accordance with FDA regulations for medical device manufacture,  ADM
shall  maintain   Device  History   Records  (within  the  meaning  of  the  FDA
regulations)  for any of the  Products  manufactured  based upon serial  numbers
however it will not be  responsible  for Device Master Records and Device Design
Files  (each,  within  the  meaning  of the FDA  regulations),  such  being  the
responsibility and expense of the Subsidiaries.

      8. ADM warrants the Products  against  defects in material and workmanship
for a period of 90 days after the completion of  manufacture.  After such 90-day
period, ADM will provide repair services for the Products to the Subsidiaries at
its customary hourly repair rate plus the cost of any parts, components or items
necessary to repair the Products. The Subsidiaries shall pay any repair invoices
to ADM under the same terms as contained in Sections 5 and 6 herein.

      9. As  between  each of the  Subsidiaries  on the one  hand and ADM on the
other hand,  each  Subsidiary is the sole and exclusive owner of all inventions,
patents, patent applications,  copyrights, trade secrets, know-how,  proprietary
information and other  intellectual  property rights relating to the Products of
such Subsidiary or any improvements thereto (the "Product IP"), whether existing
prior to or after the date hereof and  regardless of the party  responsible  for
creating,  conceiving or reducing to practice such Product IP. To the extent any
intellectual property rights that are included in the Product IP would otherwise
vest in ADM or any of its employees or subcontractors, ADM hereby assigns to the
applicable  Subsidiary all right, title and interest in and to such intellectual
property  rights,  and  agrees  to  execute,  acknowledge  and  deliver  to such
Subsidiary,   and  to  cause  its  employees  and   subcontractors  to  execute,
acknowledge and deliver to such  Subsidiary,  any further  assignments and other

                                      -2-
<PAGE>

documents  that such  Subsidiary  reasonably  deems  necessary  or  desirable to
perfect or further evidence such assignment.  ADM agrees to reasonably cooperate
with such  Subsidiary,  or any person to whom such  Subsidiary may have assigned
such  intellectual  property  rights,  in securing for such  Subsidiary  or such
assignee  any  patents or other  intellectual  property  protections  which such
Subsidiary  or assignee may seek  anywhere in the world to obtain in  connection
therewith,  and ADM shall,  and shall cause  persons  employed  by or  otherwise
engaged by ADM, to execute,  acknowledge  and deliver to such Subsidiary or such
Subsidiary's  assignee all instruments  which such Subsidiary  shall  reasonably
require,  give  evidence and do all things  which are  necessary or desirable to
enable such Subsidiary or its assignee to file and prosecute  applications  for,
and to acquire,  maintain and enforce,  all such patents and other  intellectual
property  protections.  The  provisions  of this  Section  9 shall  survive  any
termination or expiration of this Agreement.

      10. To the extent ADM, prior to or after the date hereof,  has obtained or
obtains  access to or knowledge of any  non-public  information  relating to any
Product designs, specifications,  components or technologies, or relating to any
other trade secrets, know-how or proprietary information included in the Product
IP  (collectively,  "Information"),  ADM  shall  maintain  such  Information  as
confidential  information  of the  applicable  Subsidiary,  using no less than a
reasonable  degree of care,  and shall not use or disclose any such  Information
other than in connection  with the  performance  of its  obligations  under this
Agreement.  Upon request of the applicable Subsidiary,  ADM shall return to such
Subsidiary, or destroy and provide such Subsidiary with written certification of
such  destruction,  all documents,  computer files and other  materials in ADM's
possession or control, including all copies thereof, that contain or are derived
from any Information of such Subsidiary. The provisions of this Section 10 shall
survive any termination or expiration of this Agreement.

      11.  Notwithstanding  anything contained herein to the contrary, ADM shall
notify each Subsidiary immediately if ADM is, or expects that it will be, unable
to fulfill any of its obligations to such Subsidiary  under this Agreement or is
otherwise  in breach of any of its  obligations  to such  Subsidiary  under this
Agreement. In the event ADM is unable to full, or is otherwise in breach of, any
of its obligations  under this Agreement,  such Subsidiary shall have the right,
without penalty or prejudice to Subsidiary's other rights hereunder, to engage a
third-party  or  third-parties  to manufacture  any or all of such  Subsidiary's
Products. In such event, if a Subsidiary elects to exercise its right to utilize
a third-party or  third-parties  to supplement  the  manufacture of its Products
pursuant to this Paragraph 10, at such  Subsidiary's  request,  ADM shall accept
delivery of such Products from such  third-party or third parties,  finalize the
manufacture  of such  Products to the extent  necessary  for such  Subsidiary to
comply  with FDA  regulations  and ensure  that the  design,  testing,  control,
documentation  and  other  quality  assurance  procedures  with  respect  to the
manufacturing process of such Products have been followed.

      12. The Subsidiaries  confirm that this Agreement does not infer any other
relationship  between ADM and the  Subsidiaries  and does not obligate ADM to be
responsible  for  any  debts  or  other  liabilities  of the  Subsidiaries.  The
Subsidiaries  are separate  entities and each is responsible for any liabilities
that may be created.

                                      -3-
<PAGE>

      13. This Agreement  shall be construed and enforced in accordance with the
laws of the State of New Jersey and shall not be modified or  terminated  except
by a written instrument executed by the parties hereto.

      14. This Agreement supercedes any previous agreements,  whether written or
oral, between and/or among the parties hereto, and, in particular,  the previous
agreement regarding the provision of manufacturing  services from ADM to certain
of the Subsidiaries.

                    [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

                                      -4-
<PAGE>

            IN WITNESS  WHEREOF,  the parties to this Agreement have caused this
Agreement to be signed as of the date first above written.

                                           ADM TRONICS UNLIMITED, INC.

                                           By:       /s/ Andre' DiMino
                                               --------------------------------
                                                   Name:  Andre' DiMino
                                                   Title:  President

                                           IVIVI TECHNOLOGIES, INC.

                                           By:       /s/ Andre' DiMino
                                               ------------------------------
                                                   Name:  Andre' DiMino
                                                   Title:  Chairman & CFO

                                           SONOTRON MEDICAL SYSTEMS, INC.

                                           By:       /s/ Andre' DiMino
                                               ------------------------------
                                                   Name:  Andre' DiMino
                                                   Title:  President

                                      -5-

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