DISTRIBUTION AND SUPPLY AGREEMENT



      This Distribution and Supply Agreement (the "Agreement") is made as of

September 22, 2003 (the "Effective Date"), by and between Omrix

Biopharmaceuticals, Inc., a corporation organized under the laws of Delaware

(hereinafter referred to as "Omrix"), and Ethicon, Inc., a corporation organized

under the laws of New Jersey, acting by and through its Johnson & Johnson Wound

Management division (hereinafter referred to as "Ethicon," together with Omrix,

the "Parties" and each individually a "Party").



                                    RECITALS



      WHEREAS, Omrix has developed a biologic surgical adhesive in the form of a

frozen liquid fibrin sealant, including biological reagents and a delivery

device, known as "Quixil(TM)", and is in the process of developing a second

generation fibrin sealant product currently known as "FS2"; and



      WHEREAS, Omrix believes that one of the components of Quixil, thrombin,

can be developed as a stand-alone product with few or no process changes; and



      WHEREAS, pursuant to a development agreement dated the date hereof (the

"Development Agreement"), the Parties agree that Omrix will, with certain

testing and other contributions of Ethicon, further develop and obtain marketing

authorizations for a second generation fibrin sealant product, a thrombin

product, a product known as the "Hemostatic Pad Product" containing biologic

component(s) from Omrix and a substrate, and a kitted product containing a

medical device and thrombin known as "Flowable Hemostat"; and



      WHEREAS, this Distribution and Supply Agreement is being entered into to

set out the terms and conditions under which (A) Ethicon will act as Omrix's

exclusive distributor of Quixil and the products developed under the Development

Agreement, in each case in specific territories for hemostasis and sealing

indications for non-consumer applications only, (B) Omrix will supply and

Ethicon will purchase Quixil and the products covered by the Development

Agreement once they are developed and (C) Ethicon will provide the medical

device necessary to produce the Flowable Hemostat and may provide the substrate

necessary to produce the Hemostatic Pad.



      NOW THEREFORE, in consideration of the mutual covenants and consideration

set forth herein, and contingent upon the simultaneous execution of the

Development Agreement, the Parties hereto agree as follows:



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

        TO A REQUEST FOR CONFIDENTIAL TREATMENT FILED SEPARATELY WITH THE

                       SECURITIES AND EXCHANGE COMMISSION.





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                                    ARTICLE 1

                                   DEFINITIONS



      As used in this Agreement, the following defined terms shall have the

meanings set out in this Article 1. Capitalized terms used but not otherwise

defined herein, and which are defined in the Development Agreement, shall have

the meanings given such terms in the Development Agreement.



      1.1 "ACCESSORY" shall mean any of the devices or other articles listed on

Exhibit A, as such Exhibit may be amended from time to time by mutual agreement

of the Parties, but in no event shall mean the basic application device

accompanying a Product.



      1.2 "AFFILIATE" shall mean, in relation to either Party hereto, (a) any

entity in which the relevant Party directly or indirectly holds more than 50% of

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

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

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

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

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

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

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

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



      1.3 "APPLICABLE LEGAL REQUIREMENTS" shall mean: (a) any and all federal,

national, supranational, state and local laws, regulations, ordinances, orders

and requirements applicable to the activities under this Agreement; and (b) any

other specifications, guidelines, procedures and directives mutually agreed to

by the Parties, applicable to the Products, Improved Products or Ethicon

Components, as applicable, or activities under this Agreement. In the case of

the United States, Applicable Legal Requirements shall include, without

limitation, all applicable laws, regulations and guidelines of and under the

U.S. Federal Food, Drug, and Cosmetic Act and Public Health Service Act,

including all applicable current Good Manufacturing Practices ("cGMP", see,

e.g., 21 CFR 211); provided that, in the event of any conflict between such

sources of authority, U.S. federal law and regulations shall be given priority.

In the case of the European Union, Applicable Legal Requirements shall include,

without limitation, all applicable regulations and directives of the European

Union, the European Commission and guidelines of the CPMP and all applicable

national legislation; provided that, in the event of any conflict between the

foregoing sources of authority, European Union law shall be given priority.



      1.4 "AVERAGE TRANSFER PRICE" with respect to any Product during any period

shall be determined by adding up all the Quarterly Amounts (as defined in

Exhibit C) with respect to such Product and such time period and dividing the

sum by the aggregate number of units of such Product sold during such period,

provided that the Average Transfer Price shall in no event be less than the

Minimum Transfer Price nor greater than the Maximum Transfer Price then in

effect for such Product.



      1.5 "BANKRUPTCY EVENT" shall mean (a) the person or entity in question

becomes insolvent, or voluntary or involuntary proceedings by or against such

person or entity are instituted in bankruptcy or under any insolvency law, or a

receiver, trustee or custodian is appointed for such person or entity, or

proceedings are instituted by or against such person or





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entity for corporate reorganization or the dissolution of such person or entity;

provided that an involuntary bankruptcy, dissolution or reorganization

proceeding shall not be deemed a Bankruptcy Event unless and until the person or

entity consents to such proceeding or such proceeding shall is not dismissed

within 60 days after the date of filing, or (b) such person or entity makes an

assignment for the benefit of its creditors, or substantially all of the assets

of such person or entity are seized or attached and not released within 60 days

thereafter.



      1.6 "BASELINE COSTS" with respect to a Product shall mean Omrix's actual

costs for the Cost Variables for manufacturing such Product determined based on

the cost at the end of the second twelve (12) month period after the First

Commercial Sale of that Product.



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



      1.8 "DEVELOPMENT PRODUCTS" shall mean FS2, Thrombin, the Flowable Hemostat

and the Hemostatic Pad Product.



      1.9 "DEVELOPED TERRITORY" shall have the meaning set forth in Section

2.3(a) hereof.



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

hereto.



      1.11 "ETHICON COMPONENTS" shall have the meaning set forth in the

Development Agreement.



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

hereof.



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

hereof.



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



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



      1.16 "FIELD" shall mean Non-Consumer Applications (as defined in the

Development Agreement) using human-plasma derived products that are indicated

for (A) hemostasis (with or without other indications) or (B) sealing only;

except that, notwithstanding anything to the contrary in the foregoing, the

Field does not include dentistry applications, regardless of whether hemostasis

and/or sealing is an indication, recombinant products or any device which uses

the patient's own blood.



      1.17 "FISCAL YEAR" shall mean Ethicon's fiscal year, which varies

annually, but which is approximately the period beginning on each January 1 and

ending on the following December 31.



      1.18 "FISCAL QUARTER" shall mean each of Ethicon's fiscal quarters, which

vary annually, but which are the approximately three (3) month periods beginning

on or about January 1, April 1, July 1 and October 1, respectively.



      1.19 "FIRST COMMERCIAL SALE" with respect to any Primary Product shall

mean the date of the first sale of such Product by Ethicon or its Affiliates (or

by Omrix pursuant to an





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order solicited by Ethicon as contemplated by Section 2.5), specifically

excluding sales to an Affiliate of Ethicon unless such Affiliate is the end user

of the Product.



      1.20 "FORCE MAJEURE EVENT" or "FORCE MAJEURE NOTICE" shall have the

meaning ascribed in Section 11.6 hereof.



      1.21 "FS2" shall mean the FS2 set forth in the Development Agreement, as

such FS2 is defined in the first Regulatory Approval for such Product.



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

hereof.



      1.23 "HEMOSTATIC PAD PRODUCT" shall mean the Hemostatic Pad Product set

forth in the Development Agreement, as such Hemostatic Pad Product is defined in

the first Regulatory Approval for such Product.



      1.24 "IMPROVED PRODUCT" shall have the meaning set forth in the

Development Agreement.



      1.25 "FLOWABLE HEMOSTAT" shall mean the Flowable Hemostat set forth in the

Development Agreement, as such Flowable Hemostat is defined in the first

Regulatory Approval for such Product.



      1.26 "LONG TERM FORECAST" shall mean the ten year non-binding forecast of

Ethicon's requirements for the Products set forth on Exhibit I hereto, as

amended and updated pursuant to Section 4.5(a).



      1.27 "MAXIMUM TRANSFER PRICE" shall mean (i) in the case of Fibrin Sealant

Products, $*** per milliliter in the United States and (Euro)*** per milliliter

in the European Union, Norway, Iceland, Liechtenstein and Switzerland and all

other portions of the Territory other than the United States and (ii) in the

case of Thrombin, $*** per 5000 IU vial (of five (5) milliliters per vial) in

the United States and (Euro)*** per 5000 IU vial (of five (5) milliliters per

vial) in the European Union, Norway, Iceland, Liechtenstein and Switzerland and

all other portions of the Territory other than the United States; provided,

however, that the Maximum Transfer Price shall be subject to increase from time

to time through the adjustments set forth in Section 4.2. Maximum Transfer

Prices for all other Products shall be agreed in writing separately by the

Parties.



      1.28 "MINIMUM TRANSFER PRICE" shall mean (i) in the case of Fibrin Sealant

Products, $*** per milliliter in the United States and (Euro)*** per milliliter

in the European Union, Norway, Iceland, Liechtenstein and Switzerland and all

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