January 30, 2006

 

Ortec International, Inc.

3960 Broadway

New York, NY 10032

 

Gentlepersons:

 

1.         The undersigned, being the holders of 5000.1027 outstanding shares of
Ortec International, Inc.’s (the “Company”) Series D Convertible Preferred Stock
(the “Series D Preferred Stock”), hereby agree to exchange each share of Series
D Preferred Stock owned by the undersigned for one share of the Company’s new
Series D-1 Convertible Preferred Stock (the “Series D-1 Preferred Stock”). The
undersigned understands that the only differences between the Series D Preferred
Stock and the Series D-1 Preferred Stock are:

 

 

(a)

The liquidation preference for the Series D-1 Preferred Stock will, instead of
the Ten Thousand ($10,000) Dollars per share for the Series D Preferred Stock,
be the greater of

 

 

(i)

Ten ($10) Dollars per share of Series D-1 Preferred Stock, or

 

 

 

(ii)

an amount per share of Series D-1 Preferred Stock calculated by taking the total
amount available for distribution to holders of all of the Company’s outstanding
Common Stock before deduction of any preference payments for the Series D-1
Preferred Stock, divided by the Total of (x) all of the then outstanding shares
of the Company’s Common stock, plus (y) all of the shares of the Company’s
Series D-1 Preferred Stock on an as converted basis, and multiplied by 4,000.

 

 

 

(b)

The Conversion Price for the Series D-1 Preferred Stock shall be $0.0025 per
share of Series D-1 Preferred Stock instead of Two Dollars and Fifty Cents
($2.50) per share Series D Preferred Stock.

 

 

 

(c)

The number of shares of Series D-1 Preferred Stock that the Company will be
authorized to issue shall be Fifty Thousand (50,000) shares instead of Ten
Thousand (10,000) shares of Series D Preferred Stock that the Company is
authorized to issue.

 

 

2.

The undersigned each represent that:

 

 

 

(a)

it is an “accredited investor” as that term is defined in Rule 501 of Regulation
D promulgated by the Securities and Exchange Commission under the Securities Act
of 1933, as amended (the “Act) and

 

 

 

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(b)

the undersigned is acquiring such shares of Series D-1 Preferred Stock for
investment and not with a view to distribution thereof.

 

 

Yours very truly,

 

 

 

North Sound Legacy Institutional Fund, LLC

By: North Sound Capital, LLC

 

 

 

By:       /s/ Tom McAuleyPrint name: Tom McAuley

Title: 1/30/06

 

Number of Shares: 1,739.55105

 

 

North Sound Legacy International, Ltd.

By: North Sound Capital, LLC

 

 

By:       /s/ Tom McAuley 

Print name: Tom McAuley

 

Title: Chief Investment Officer

 

Date: 1/30/06

 

Number of Shares: 3,260.55165

 

 

 

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The foregoing is agreed to and accepted.

 

Ortec International, Inc.

 

 

By:       /s/ Ron LipsteinPrint name: Ron Lipstein

Title: Chief Executive Officer

Date: 1/30/06