AGREEMENT

 

This Agreement, made as of the 12th day of July, 2005, by and between Cambrex
Bio Science Walkersville, Inc., a Delaware corporation (“CBSW”) and Ortec
International, Inc., a Delaware corporation (“Client”)(Each of CBSW and Client a
“Party” and, collectively, the “Parties”).

 

WHEREAS, by Cell Therapy Manufacturing Agreement (the “Manufacturing Agreement”)
dated October 29, 2003, the Parties have agreed that CBSW shall manufacture
Product for Client under the terms and conditions set forth therein; and

 

WHEREAS, the Parties wish to provide for certain additional manufacturing
services beyond those set forth in the Manufacturing Agreement but otherwise in
accordance with the terms and conditions of the Manufacturing Agreement.

 

NOW, THEREFORE, the Parties hereto hereby agree as follows.

 

1.         (a) Unless otherwise indicated the terms used herein shall have the
same meaning as such term is used in the Manufacturing Agreement.

 

            (b) The Manufacturing Agreement shall remain unchanged and in full
force and effect.

 

2.         CBSW shall continue to reserve for Client’s use, a Production Suite,
commencing May 1, 2005 and ending October 31, 2005, unless such term shall be
extended by written agreement of the Parties. During such term CBSW shall
produce Product in accordance with the manufacturing terms of the Manufacturing
Agreement and as provided in a Production Plan agreed to by the Parties. All
Product shall upon completed manufacture be the property of Client and shall be
delivered in accordance with Client’s written directions.

 

3.         (a) The charge for the Production Suite shall be One Hundred Twenty
Eight Thousand, Seven Hundred and Fifty Dollars ($128,750) per month. Such
amount shall be accrued by CBSW for conversion into Client’s common stock and
warrants as provided in section 4 hereof.

 

            (b) In addition to the Production Suite charge described in
subsection (a) above, Client will pay in cash all non suites fees described in
Attachment 3(b) hereto based on 30 day terms.

4.         (a) At any time after November 1, 2005 and until a date three (3)
months after (i) Client notifies CBSW that the Product has received the approval
of the United States Food and Drug Administration (FDA) for the treatment of
venous leg ulcers (VLU) or (ii) Client notifies CBSW that there has been a
change of control of Client, CBSW will by notice to Client exercise the
conversion of the

 

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aggregate Production Suite charge described in sections 2 and 3(a) into Client
common stock (“Common Stock”) at a ratio of $0.75 of suite fees per common
share. The Client shall deliver to CBSW stock certificates representing the
shares of Common Stock that CBSW is purchasing in exchange for a credit by CBSW
of the suite fees otherwise due. An example of such conversion is attached
hereto as Exhibit 4(a).

 

(b) Each share of Common Stock issued under section 4(a) above shall have
appended one and one half warrants (1½), each single warrant authorizing CBSW to
purchase an additional share of Common Stock at a price of $1.80. Each such
warrant shall become effective on the date the corresponding share of Common
Stock is issued and shall expire on a date three (3) calendar years following
such date. Such Common Stock warrant (“Warrant”) is attached hereto as
Attachment 4(b).

 

5.         As of June 30, 2005, Client had an outstanding payable to CBSW of
$285,623.59. Client shall pay such payable as follows:

 

(a) On or before July 27, 2005

$200,000.00

(b) On or before August 24, 2005

$85,623.59

 

 

6.         Client shall provide CBSW, within five working days of receipt, (a) a
copy of all interim clinical trial results concerning the product, and (b) a
copy of all correspondence to and from the FDA.

 

7.         The Client hereby represents and warrants to CBSW as of the date
hereof as follows:

(a) The Client is a corporation duly organized, validly existing under, and by
virtue of, the laws of the State of Delaware and is in good standing under such
laws. The Client has all requisite corporate power and authority to own and
operate its properties and assets, and to carry on its business as presently
conducted and as proposed to be conducted. The Client is duly qualified and
authorized to transact business and is in good standing as a foreign corporation
in each jurisdiction in which the failure so to qualify or be in good standing
would have a material adverse effect on its business, properties, or financial
condition. The Client has furnished CBSW with copies of its Articles and Bylaws,
as may have been amended.

(b) The Client has all requisite legal and corporate power and authority to
execute and deliver this Agreement and the Warrant and to sell and issue the
shares of Common Stock and Warrants hereunder, and to carry out and perform its
obligations under the terms of this Agreement, the Warrant and the transactions
contemplated hereby and thereby.

 

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(c) The authorized and issued capital stock of the Client consists of 26,496,749
shares of Common Stock. All such issued and outstanding shares have been duly
authorized and validly issued, are fully paid and nonassessable and have been
issued in compliance with the registration or qualification provisions of the
Securities Act of 1933, as amended (the “Securities Act”) and any relevant state
securities laws or pursuant to valid exemption therefrom.

(d) The Common Stock shall have the rights, preferences, privileges and
restrictions set forth in the Articles.

(e) The Client has reserved a sufficient number of shares of its Common Stock
for issuance pursuant to this Agreement and any other stock purchase agreement
heretofore or concurrently herewith executed by the Client or pursuant to the
exercise of options to be granted under employment agreements of the Client.

(f) All corporate action on the part of the Client, its officers, directors and
stockholders necessary for the authorization, execution, delivery and
performance of this Agreement and the Warrant, the authorization, sale, issuance
(or reservation for issuance) and delivery of the Common Stock and the
performance of all of the Client’s obligations hereunder and under the Warrant
have been taken or will be taken prior to delivery of the Common Stock to CBSW.
This Agreement and the Warrant constitute valid and legally binding obligations
of the Client, enforceable in accordance with their respective terms, except (i)
as limited by applicable bankruptcy, insolvency, reorganization, moratorium and
other laws of general application affecting enforcement of creditors’ rights
generally, (ii) as limited by laws relating to the availability of specific
performance, injunctive relief, or other equitable remedies and (iii) to the
extent that any provisions contained in the Warrant may be limited by applicable
laws or principles of public policy.

(g) The Common Stock, when issued, sold and delivered in compliance with the
provisions of this Agreement, will be duly and validly issued, fully paid and
nonassessable and issued in compliance with applicable federal and state
securities laws, and will be free and clear of any liens or encumbrances;
provided, however, that the Common Stock may be subject to restrictions on
transfer under state and/or federal securities laws.

8.

CBSW represents and warrants to the Client as follows:

(a) CBSW will be acquiring the Common Stock for investment for its own account,
not as a nominee or agent, and not with the view to, or for resale in connection
with, any distribution thereof. CBSW understands that the Common Stock has not
been, and will not be when issued, registered under the Securities Act by reason
of a specific exemption from the registration provisions of the Securities Act,
the availability of which depends upon, among other things, the

 

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bona fide nature of the investment intent and the accuracy of the
representations as expressed herein.

(b) CBSW acknowledges that the Common Stock must be held indefinitely unless
subsequently registered under the Securities Act or unless an exemption from
such registration is available. CBSW is aware of the provisions of Rule 144
promulgated under the Securities Act which permit limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, which may include, among other things, the existence of a public
market for the shares, the availability of certain current public information
about the Client, the resale occurring not less than one year after a party has
purchased and paid for the security to be sold, the sale being effected through
a “broker’s transaction” or in transactions directly with a “market maker” and
the number of shares being sold during any three-month period not exceeding
specified limitations.

(c) CBSW has not incurred, and will not incur, directly or indirectly, any
liability for brokerage or finders’ fees or agents’ commissions or any similar
charges in connection with this Agreement or any transaction contemplated
hereby.

(d) It is understood that each certificate representing the Common Stock shall
bear the following legend:

“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACT, AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF SUCH ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED
(UNLESS SUCH TRANSFER IS TO AN AFFILIATE OF THE HOLDER HEREOF, IN WHICH CASE NO
SUCH OPINION SHALL BE REQUIRED).”

 

“THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS
ON TRANSFER AND TAG-ALONG RIGHTS AS SET FORTH IN AN AGREEMENT ENTERED INTO BY
THE HOLDER OF THESE SHARES AND THE COMPANY. A COPY OF SUCH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH TAG-ALONG RIGHTS ARE BINDING UPON
CERTAIN TRANSFEREES OF THESE SHARES.”

9.         With a view to making available the benefits of certain rules and
regulations of the Commission that may at any time permit the sale of the
Registrable Securities to the public without registration, for so long as any
Holder owns any Registrable Securities, the Client agrees to:

 

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(a)

Make and keep adequate, current public information available, as those terms are
understood and defined in Rule 144, at all times;

(b)

File with the Commission in a timely manner all reports and other documents
required of the Client under the Exchange Act; and

(c)

So long as CBSW owns any Registrable Securities, furnish to CBSW forthwith upon
request a written statement by the Client as to its compliance with the
reporting requirements of Rule 144, a copy of the most recent annual or
quarterly report of the Client, and such other reports and documents of the
Client as CBSW may reasonably request in availing itself of any rule or
regulation of the Commission allowing CBSW to sell any such securities without
registration; provided, that the Client shall not be required to provide, under
this paragraph, any reports or documents which are publicly available on the
Commission’s EDGAR system.

10.        (a) If at any time or from time to time during the period when the
Client is required to maintain the effectiveness of a Registration Statement
there is not an effective Registration Statement covering all of the Registrable
Securities, the Client shall use its best efforts to notify CBSW in writing at
least 20 days before filing any registration statement under the Act for
purposes of effecting an underwritten public offering by the Client of
securities of the Client (excluding registration statements relating to any
employee benefit plan or a corporate merger, acquisition or reorganization) and
will afford CBSW an opportunity to include in such registration statement all or
any part of the Registrable Securities then held by CBSW. CBSW desiring to
include in any such registration statement all or any part of the Registrable
Securities held by CBSW shall, within 10 days after receipt of the
above-described notice from the Client, so notify the Client in writing, and in
such notice shall inform the Client of the number of Registrable Securities CBSW
wishes to include in such registration statement. If CBSW decides not to include
all of its Registrable Securities in any such registration statement filed by
the Client, CBSW shall nevertheless continue to have the right to include any
Registrable Securities in any subsequent registration statement or registration
statements as may be filed by the Client with respect to offerings of its
securities, all upon the terms and conditions set forth herein. CBSW’s rights to
include any Registrable Securities in any offering under this section are
subject in all events to the ability of the managing underwriter for such
offering to exclude some or all of the Registrable Securities requested to be
registered on the basis of a good faith determination that inclusion of such
securities might adversely affect the success of the offering or otherwise
adversely affect the Client; provided, however, that no Registrable Securities
shall be excluded from any such offering if any securities of the Client other
than Registrable Securities are included in such offering for resale by any
person other than the Client. Any such exclusion shall be pro rata among all
holders who have requested to sell Registrable Securities in such registration.

 

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(b) If a registration statement under which the Client gives notice under this
section is for an underwritten offering, then the Client shall so advise CBSW.
In such event, the right of CBSW’s Registrable Securities to be included in a
registration pursuant to this Section shall be conditioned upon CBSW
participation in such underwriting and the inclusion of CBSW’s Registrable
Securities in the underwriting to the extent provided herein. CBSW proposing to
distribute their Registrable Securities through such underwriting shall enter
into an underwriting agreement in customary form with the managing underwriter
or underwriters selected for such underwriting and shall furnish such
information and documents as the Client or the managing underwriter or
underwriters may reasonably request. Notwithstanding any other provision of this
Agreement, if the managing underwriter determine(s) in good faith that marketing
factors require a limitation of the number of shares to be underwritten, then
the managing underwriter(s) may exclude Registrable Securities from the
registration and the underwriting, pro rata among all Holders who have requested
to sell Registrable Securities in such registration; provided, however, that no
Registrable Securities shall be excluded from any such offering if any
securities of the Client other than Registrable Securities are included in such
offering for resale by any person other than the Client. If any Holder
disapproves of the terms of any such underwriting, such Holder may elect to
withdraw such Holder’s Registrable Securities therefrom by written notice to the
Client and the underwriter. Any Registrable Securities excluded or withdrawn
from such underwriting shall be excluded and withdrawn from the registration.

(c) From and after the date hereof, the Client shall not enter into any
agreement granting any holder or prospective holder of any securities of the
Client registration rights with respect to such securities that deny CBSW the
rights granted to CBSW herein, without the consent of CBSW.

11.        This Agreement and the exhibits hereto constitute the entire
agreement between the Client and CBSW relative to the subject matter hereof. No
party shall be bound or liable to any other party in any manner by any
warranties, representations or covenants except as specifically set forth
herein. Subject to the exceptions specifically set forth in this Agreement, the
terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective executors, administrators, heirs, successors and
assigns of the parties (including transferees of any securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided herein.

12.        This Agreement shall be governed by and construed in accordance with
the laws of the State of New York applicable to contracts entered into and
wholly to be performed within the State of New York by New York residents,
without regard to its conflicts of law principles.

 

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13.        This Agreement may be executed in two or more counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same instrument.

14.        The headings of the Sections of this Agreement are for convenience
and shall not by themselves determine the interpretation of this Agreement.

15.        Any notice required or permitted to be given to a party pursuant to
the provisions of this Agreement will be in writing and will be deemed to be
effective on the earliest of (i) the date of delivery by hand delivery or
facsimile, (ii) the business day after deposit with a nationally-recognized
courier or overnight service, including Express Mail, for United States
deliveries, (iii) the third business day after deposit with an internationally
recognized courier or overnight service for deliveries outside the United
States, or (iv) five (5) business days after deposit in the United States mail
by registered or certified mail for United States deliveries. All notices not
delivered personally or by facsimile will be sent with postage and other charges
prepaid and properly addressed to the party to be notified at the address set
forth below such party’s signature on this Agreement or at such other address as
such party may designate by ten (10) days advance written notice to the other
parties hereto. All notices for delivery outside the United States will be sent
by facsimile, or by nationally recognized courier or overnight service. Any
notice given hereunder to more than one person will be deemed to have been
given, for purposes of counting time periods hereunder, on the date given to the
last party required to be given such notice.

16.        Any provision of this Agreement may be amended by a written
instrument signed by the Client and by persons holding at least a majority of
the aggregate of the then outstanding shares of Common Stock which were acquired
pursuant to this Agreement and upon exercise of the Warrants issued pursuant to
Section 4(b) of this Agreement.

17.        The Client and CBSW will indemnify each other against all liabilities
incurred by the indemnifying party with respect to claims related to investment
banking or finders fees in connection with the transactions contemplated by this
Agreement, arising out of arrangements between the party asserting such claims
and the indemnifying party, and all costs and expenses (including reasonable
fees of counsel) of investigating and defending such claims.

18.        If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

19.        The representations, warranties, covenants and agreements of the
parties contained herein shall survive the consummation of the purchase and sale
of the Shares contemplated in this Agreement, and each party recognizes that the
other

 

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is relying on such other party’s representations, warranties, covenants and
agreements.

20.        Each party will pay its own fees and expenses incurred in connection
with the transactions contemplated in this Agreement.

IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase
Agreement as of the day and year first above written.

The Client:

Ortec International, Inc.,  

      By: /s/ Ron Lipstein     Name: Ron Lipstein     Title: Chief Executive
Officer       Address: 3960 Broadway
New York, NY 10032    

 

 

 

 

 

 

CBSW:

Cambrex Bio Science Walkersville, Inc.,

      By: /s/ David Eansor     Name: N. David Eansor     Title: Vice President  
    Address: 8830 Biggs Ford Road,
Walkersville, MD, 21793    

                       

 

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Attachment 3(b)
Non-Suite Fee Related Costs for Ortec

 

Below are examples of the types of costs that Ortec is still responsible for
paying CBSW; these costs are considered non-suite fee related costs:

 

•     Technology Transfer costs

•     Process Development costs

•     Direct Labor costs

•     Project Management costs

•     Regulatory and Audit Service costs

•     Validation costs

•     External Raw Material costs, including freight costs

•     Cambrex Raw Material costs, such as Media and Serum made at Cambrex

•     Testing costs, including internal testing and testing provided by outside
contractor

•     Equipment costs for the Cryomed Freezer, Pump and the QC Retain Dewer
along with any future specialized equipment that needs to be purchased

•     Travel costs

•     Storage costs

•     Handling and Shipping costs for final product

 

 

 

 

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Attachment 4(a)
Conversion of Suite Fees to Common Stock

 

       
Month
Suite Fee
1)

May '05

$
128,750
2)

June '05

$
128,750
3)

July '05

$
128,750
4)

Aug '05

$
128,750
5)

Sept '05

$
128,750
6)

Oct '05

$
128,750
          Aggregate Production Suite Charge
$
772,500
          CS Conversion Price / Share
$
0.75
          Shares of Common Stock exchanged
1,030,000
          Number of Warrants issued per Share  
1.5
          Number of Warrants to be Issued  
1,545,000

 

 

 

 

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