CONFIDENTIAL



                              DEVELOPMENT AGREEMENT



      THIS DEVELOPMENT AGREEMENT (the "Agreement") is made as of September 22,

2003 (the "Agreement Date"), by and between OMRIX BIOPHARMACEUTICALS, INC., a

corporation organized under the laws of Delaware (hereinafter referred to as

"Omrix"), and ETHICON, INC., a corporation organized under the laws of New

Jersey, acting by and through its Johnson & Johnson Wound Management division

(hereinafter referred to as "Ethicon," together with Omrix, the "Parties" and

each individually a "Party").



                                    RECITALS



      WHEREAS, Omrix has developed a fibrin sealant, Quixil(TM), including the

medical device applicator and other related devices;



      WHEREAS, Omrix is in the process of developing further, biological fibrin

sealant products and devices and intellectual property related thereto, such as

thrombin and a second generation fibrin sealant;



      WHEREAS, Ethicon desires to provide medical devices, and components of

such devices, for use in connection with certain of Omrix's biological fibrin

sealants in specific products;



      WHEREAS, Ethicon and Omrix desire to further develop specific fibrin

sealant products and thrombin products, and medical devices for use in

connection with such products;



      WHEREAS, Ethicon and Omrix desire to provide a mechanism for development

of certain improvements which may arise in the course of developing the

aforementioned products; and



      WHEREAS, Ethicon and Omrix are simultaneously entering to a Distribution

and Supply Agreement (the "Supply Agreement") for Ethicon to purchase and resell

Quixil(TM) and the products developed hereunder in specified territories;



      NOW, THEREFORE, in consideration of the premises and of the mutual

promises and covenants herein contained, effective upon the Effective Date, the

Parties hereto agree as follows:



      1. Definitions. The following terms, when used with initial capital

letters, shall have the meanings set forth below.



      PORTIONS OF THIS EXHIBIT MARKED BY AN *** HAVE BEEN OMITTED PURSUANT

        TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE

                       SECURITIES AND EXCHANGE COMMISSION.







<PAGE>



            1.1 "Affiliate" shall mean, in relation to either Party hereto, (a)

any entity in which the relevant Party directly or indirectly holds more than

50% of the voting stock or power, (b) any entity ("Holding Entity") which holds

directly or indirectly more than 50% of the voting stock or power of the

relevant Party, (c) any other entity in which more than 50% of the voting stock

or power is directly or indirectly held by any Holding Entity of the relevant

Party or (d) any entity in which the relevant Party directly or indirectly holds

less than 50% of the voting stock or power but has management control of such

entity in that it has the ability to appoint and remove the majority of the

Board of Directors (or other governing body) of such Party.



            1.2 "BAC" shall mean the substance that is a component of Quixil

that is manufactured from cryoprecipitate extracted from "Human Plasma for

Fractionation" the production processes for which include various combinations

of both tranexamic acid and arginine and/or their derivatives and meets the

specifications for BAC set forth on Exhibit B hereto.



            1.3 "BAC2" shall mean a different version of BAC identified by Omrix

in its sole discretion that contains different combinations of the same

components of BAC, but that is essentially free of plasminogen activity and

tranexamic acid.



            1.4 "Covered Improvement" shall mean an Improvement to a Development

Product, made or proposed to be made during the Term of this Agreement, for

which both (i) the primary indication for use is in the Field and (ii) the

Improvement includes, or results in an improved version of a Development Product

that includes, (A) in the case of an Improvement to FS2, an improved version of

BAC2 and/or an improved version of Thrombin delivered together through a device

functionally equivalent to the device first approved for use with FS2, (B) in

the case of Thrombin, an improved sterile solution or lyophilized version of

Thrombin and (C) in the case of the Hemostatic Pad Product, an improved version

of the substrate, BAC2 and/or Thrombin used in the Hemostatic Pad Product or the

process of incorporation of BAC2 and/or Thrombin with a substrate.



            1.5 "Development Costs" shall mean all reasonable costs and expenses

incurred by Omrix in connection with the Project (including, without limitation,

all costs and expenses relating to clinical studies and regulatory filing fees

and costs of subcontractors and consultants, provided that such subcontractors

or consultants do not replace full-time, permanent Omrix personnel positions) in

a manner consistent with parameters set forth in a budget approved by the DAB,

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