EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT dated for reference October 25, 2006

BETWEEN:

FORBES MEDI-TECH INC., a company having an office at #200 - 750 West Pender Street, Vancouver, B.C. V6C 2T8

(the "Company")

AND:

JOHN J. NESTOR, an individual residing at ***** (address omitted) (Employee)

WHEREAS:

A.

The Employee has experience in the area of broad business and scientific management with an emphasis on drug discovery;

B.

Upon the acquisition of TheraPei Pharmaceuticals, Inc., the Company wishes to employ the Employee as a Chief Scientific Officer, and the Employee wishes to provide services to the Company in such capacity;

THEREFORE in consideration of the recitals, the following representations and covenants and the payment of one dollar made by each party to the other, the receipt and sufficiency of which is acknowledged by each party, the parties agree on the following terms:

1.

EMPLOYMENT

1.1

The Company hereby confirms the employment of the Employee in the position of Chief Scientific Officer (the "Position"), residing in the San Diego area, and the Employee accepts such employment and agrees to carry out the duties and responsibilities specified herein or otherwise required for the Position to the best of his or her abilities and in accordance with the terms and conditions of this Agreement.

2.

DUTIES AND RESPONSIBILITIES

2.1

Initial Duties  The Employee shall, pursuant to this Agreement, perform all duties customarily performed by a Chief Scientific Officer, in a business similar to the Company's business.  In particular, the Employee shall fulfill the specific duties and responsibilities set forth in Schedule "A".

Page 1 of 9

2.2

Position may evolve or vary  The Employee understands and agrees that the above noted duties and responsibilities, and the Employee's Position, may evolve or vary from time to time over the course of the Employee's employment to deal with changing business conditions, corporate expansion or reorganization, and/or an evolving regulatory environment, and consents to such reasonable variations in such duties and responsibilities, and in the Position, as may reasonably be required by the Company from time to time as a result.  The Company shall not be deemed to have waived the right to require the Employee to perform any duties hereunder by assigning the Employee to any other duties or services or by assigning another individual to perform the duties of the Employee.  Employer agrees to be bound by any rules or policies of the Company generally applicable to all California employers.

2.3

Best Efforts  The Employee shall use his or her best efforts to promote the interests of the Company and will perform faithfully, honestly and efficiently and in the best interest of the Company in carrying out such responsibilities.  The Employee shall act in a fiduciary manner including but not limited to his obligations under the Confidentiality and Inventions Agreement of October 25, 2006.  

2.4

Full-Time Position  The Position is a full-time position, and accordingly the Employee shall devote his or her full business time to the business and affairs of the Company.

2.5

Reporting  The Employee shall report directly to the President & CEO, or such other persons(s) as may be directed by the President and Chief Executive Officer from time to time.

2.6

Rules and Regulations  The Employee will, subject to the terms of this Agreement, comply promptly and faithfully with the Company's reasonable instructions, directions, requests, and rules and regulations, and the Employee acknowledges and agrees that the Company may, acting reasonably, modify such rules and regulations from time to time to deal with new or changing circumstances.

3.

REMUNERATION AND BENEFITS

3.1

Annual Base Salary  The Employee shall be paid an annual base salary of $225,000 USD per annum (the "Annual Base Salary") for all hours worked, exclusive of bonuses, benefits and other compensation, payable in equal bi-monthly installments in arrears, on the fifteenth day and last days of each month or such other normal payroll dates as may be set for all California employees of the Company.  Should the fifteenth or last day of any month not be a business day, the Employee's salary otherwise due on such date shall be paid to the Employee on the immediately preceding business day.  

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