diff --git a/docs/VERSION_FIX.md b/docs/VERSION_FIX.md
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+++ b/docs/VERSION_FIX.md
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+# Version Consistency Fix (Issue #XXX)
+
+## Problem
+Version mismatch between plugin and worker caused infinite restart loop:
+- Plugin version: 9.0.0 (from plugin/.claude-plugin/plugin.json)
+- Worker binary version: 8.5.9 (hardcoded in bundled worker-service.cjs)
+
+This triggered the auto-restart mechanism on every hook call, which killed the SDK generator before it could complete the Claude API call to generate observations. Result: 0 observations were ever saved to the database despite hooks firing successfully.
+
+## Root Cause
+The `plugin/package.json` file had version `8.5.10` instead of `9.0.0`. When the project was last built, the build script correctly injected the version from root `package.json` into the bundled worker service. However, the `plugin/package.json` was manually created/edited and fell out of sync.
+
+At runtime:
+1. Worker service reads version from `~/.claude/plugins/marketplaces/thedotmack/package.json` → gets `8.5.10`
+2. Running worker returns built-in version via `/api/version` → returns `8.5.9` (from old build)
+3. Version check in `worker-service.ts` start command detects mismatch
+4. Auto-restart triggered on every hook call
+5. Observations never saved
+
+## Solution
+1. Updated `plugin/package.json` from version `8.5.10` to `9.0.0`
+2. Rebuilt all hooks and worker service to inject correct version (`9.0.0`) into bundled artifacts
+3. Added comprehensive test suite to prevent future version mismatches
+
+## Verification
+All versions now match:
+```
+Root package.json:       9.0.0 ✓
+plugin/package.json:     9.0.0 ✓
+plugin.json:             9.0.0 ✓
+marketplace.json:        9.0.0 ✓
+worker-service.cjs:      9.0.0 ✓
+```
+
+## Prevention
+To prevent this issue in the future:
+
+1. **Automated Build Process**: The `scripts/build-hooks.js` now regenerates `plugin/package.json` automatically with the correct version from root `package.json`
+
+2. **Version Consistency Tests**: Added `tests/infrastructure/version-consistency.test.ts` to verify all version sources match
+
+3. **Version Management Best Practices**:
+   - NEVER manually edit `plugin/package.json` - it's auto-generated during build
+   - Always update version in root `package.json` only
+   - Run `npm run build` after version changes
+   - The build script will sync the version to all necessary locations
+
+## Files Changed
+- `plugin/package.json` - Updated version from 8.5.10 to 9.0.0
+- `plugin/scripts/worker-service.cjs` - Rebuilt with version 9.0.0 injected
+- `plugin/scripts/mcp-server.cjs` - Rebuilt with version 9.0.0 injected
+- `plugin/scripts/*.js` (hooks) - Rebuilt with version 9.0.0 injected
+- `tests/infrastructure/version-consistency.test.ts` - New test suite
+
+## Testing
+Run the version consistency test:
+```bash
+npm run test:infra
+```
+
+Or manually verify:
+```bash
+node -e "
+const fs = require('fs');
+const rootPkg = JSON.parse(fs.readFileSync('package.json', 'utf-8'));
+const pluginPkg = JSON.parse(fs.readFileSync('plugin/package.json', 'utf-8'));
+const workerContent = fs.readFileSync('plugin/scripts/worker-service.cjs', 'utf-8');
+const workerMatch = workerContent.match(/Bre=\"([0-9.]+)\"/);
+console.log('Root:', rootPkg.version);
+console.log('Plugin:', pluginPkg.version);
+console.log('Worker:', workerMatch ? workerMatch[1] : 'NOT_FOUND');
+"
+```
+
+## Related Code Locations
+- **Version Injection**: `scripts/build-hooks.js` line 43-45, 105, 130, 155, 178
+- **Version Check**: `src/services/infrastructure/HealthMonitor.ts` line 133-143
+- **Auto-Restart Logic**: `src/services/worker-service.ts` line 627-645
+- **Runtime Version Read**: `src/shared/worker-utils.ts` line 73-76, 82-91
diff --git a/tests/infrastructure/version-consistency.test.ts b/tests/infrastructure/version-consistency.test.ts
new file mode 100644
index 00000000..4ba7006f
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+++ b/tests/infrastructure/version-consistency.test.ts
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+import { describe, it, expect } from 'bun:test';
+import { readFileSync, existsSync } from 'fs';
+import path from 'path';
+import { fileURLToPath } from 'url';
+
+const __dirname = path.dirname(fileURLToPath(import.meta.url));
+const projectRoot = path.resolve(__dirname, '../..');
+
+/**
+ * Test suite to ensure version consistency across all package.json files
+ * and built artifacts.
+ *
+ * This prevents the infinite restart loop issue where:
+ * - Plugin reads version from plugin/package.json
+ * - Worker returns built-in version from bundled code
+ * - Mismatch triggers restart on every hook call
+ */
+describe('Version Consistency', () => {
+  let rootVersion: string;
+
+  it('should read version from root package.json', () => {
+    const packageJsonPath = path.join(projectRoot, 'package.json');
+    expect(existsSync(packageJsonPath)).toBe(true);
+    
+    const packageJson = JSON.parse(readFileSync(packageJsonPath, 'utf-8'));
+    expect(packageJson.version).toBeDefined();
+    expect(packageJson.version).toMatch(/^\d+\.\d+\.\d+$/);
+    
+    rootVersion = packageJson.version;
+  });
+
+  it('should have matching version in plugin/package.json', () => {
+    const pluginPackageJsonPath = path.join(projectRoot, 'plugin/package.json');
+    expect(existsSync(pluginPackageJsonPath)).toBe(true);
+    
+    const pluginPackageJson = JSON.parse(readFileSync(pluginPackageJsonPath, 'utf-8'));
+    expect(pluginPackageJson.version).toBe(rootVersion);
+  });
+
+  it('should have matching version in plugin/.claude-plugin/plugin.json', () => {
+    const pluginJsonPath = path.join(projectRoot, 'plugin/.claude-plugin/plugin.json');
+    expect(existsSync(pluginJsonPath)).toBe(true);
+    
+    const pluginJson = JSON.parse(readFileSync(pluginJsonPath, 'utf-8'));
+    expect(pluginJson.version).toBe(rootVersion);
+  });
+
+  it('should have matching version in .claude-plugin/marketplace.json', () => {
+    const marketplaceJsonPath = path.join(projectRoot, '.claude-plugin/marketplace.json');
+    expect(existsSync(marketplaceJsonPath)).toBe(true);
+    
+    const marketplaceJson = JSON.parse(readFileSync(marketplaceJsonPath, 'utf-8'));
+    expect(marketplaceJson.plugins).toBeDefined();
+    expect(marketplaceJson.plugins.length).toBeGreaterThan(0);
+    
+    const claudeMemPlugin = marketplaceJson.plugins.find((p: any) => p.name === 'claude-mem');
+    expect(claudeMemPlugin).toBeDefined();
+    expect(claudeMemPlugin.version).toBe(rootVersion);
+  });
+
+  it('should have version injected into built worker-service.cjs', () => {
+    const workerServicePath = path.join(projectRoot, 'plugin/scripts/worker-service.cjs');
+    
+    // Skip if file doesn't exist (e.g., before first build)
+    if (!existsSync(workerServicePath)) {
+      console.log('⚠️  worker-service.cjs not found - run npm run build first');
+      return;
+    }
+    
+    const workerServiceContent = readFileSync(workerServicePath, 'utf-8');
+    
+    // The build script injects version via esbuild define:
+    // define: { '__DEFAULT_PACKAGE_VERSION__': `"${version}"` }
+    // This becomes: const BUILT_IN_VERSION = "9.0.0" (or minified: Bre="9.0.0")
+    
+    // Check for the version string in the minified code
+    const versionPattern = new RegExp(`"${rootVersion.replace(/\./g, '\\.')}"`, 'g');
+    const matches = workerServiceContent.match(versionPattern);
+    
+    expect(matches).toBeTruthy();
+    expect(matches!.length).toBeGreaterThan(0);
+  });
+
+  it('should have version injected into built mcp-server.cjs', () => {
+    const mcpServerPath = path.join(projectRoot, 'plugin/scripts/mcp-server.cjs');
+    
+    // Skip if file doesn't exist (e.g., before first build)
+    if (!existsSync(mcpServerPath)) {
+      console.log('⚠️  mcp-server.cjs not found - run npm run build first');
+      return;
+    }
+    
+    const mcpServerContent = readFileSync(mcpServerPath, 'utf-8');
+    
+    // Check for the version string in the minified code
+    const versionPattern = new RegExp(`"${rootVersion.replace(/\./g, '\\.')}"`, 'g');
+    const matches = mcpServerContent.match(versionPattern);
+    
+    expect(matches).toBeTruthy();
+    expect(matches!.length).toBeGreaterThan(0);
+  });
+
+  it('should validate version format is semver compliant', () => {
+    // Ensure version follows semantic versioning: MAJOR.MINOR.PATCH
+    expect(rootVersion).toMatch(/^\d+\.\d+\.\d+$/);
+    
+    const [major, minor, patch] = rootVersion.split('.').map(Number);
+    expect(major).toBeGreaterThanOrEqual(0);
+    expect(minor).toBeGreaterThanOrEqual(0);
+    expect(patch).toBeGreaterThanOrEqual(0);
+  });
+});
+
+/**
+ * Additional test to ensure build script properly reads and injects version
+ */
+describe('Build Script Version Handling', () => {
+  it('should read version from package.json in build-hooks.js', () => {
+    const buildScriptPath = path.join(projectRoot, 'scripts/build-hooks.js');
+    expect(existsSync(buildScriptPath)).toBe(true);
+    
+    const buildScriptContent = readFileSync(buildScriptPath, 'utf-8');
+    
+    // Verify build script reads from package.json
+    expect(buildScriptContent).toContain("readFileSync('package.json'");
+    expect(buildScriptContent).toContain('packageJson.version');
+    
+    // Verify it generates plugin/package.json with the version
+    expect(buildScriptContent).toContain('version: version');
+    
+    // Verify it injects version into esbuild define
+    expect(buildScriptContent).toContain('__DEFAULT_PACKAGE_VERSION__');
+    expect(buildScriptContent).toContain('`"${version}"`');
+  });
+});