Document:

EXHIBIT 10.7  

CANCELLATION
AGREEMENT

          Cancellation
Agreement entered into on the 18th day of June, 2007, between Ortec
International, Inc. (the “Company”) and Steven Katz (“Katz”).

RECITALS

          A.
The Company and Katz are parties to the Termination of Employment Agreement
(hereafter defined).

          B.
The Company and Katz have reached understandings for the cancellation of the
Termination of Employment Agreement.

          NOW,
THEREFORE, in consideration of the mutual covenants and agreements set forth
herein, the parties hereto agree as follows:

          1.
Definitions.
As used in this Agreement the following terms shall have the following meanings
ascribed thereto.

	
 

	
 

	
 

	
“Act”
  means the Securities Act of 1933, as amended.

	
 

	
 

	
 

	
“Common
  Stock” means the Company’s common stock par value $0.001 per
  share.

	
 

	
 

	
 

	
“Common
  Stock Equivalents” means securities which are convertible to or
  exercisable for Common Stock.

	
 

	
 

	
 

	
“Common
  Stock Equivalent Consideration” means the consideration received
  by the Company for issuing any Common Stock Equivalent, divided by the number
  of shares of Common Stock issuable upon the conversion or exercise of such
  Common Stock Equivalent, plus the additional consideration, if any, payable
  to

	
 

	
 

	
 

	
the Company
  upon the exercise of the right to convert or exercise such Common Stock
  Equivalent for one share of Common Stock.

	
 

	
 

	
 

	
“Company”
  means Ortec International, Inc., a corporation created under the laws of
  Delaware and having an office at 3960 Broadway, New York, New York 10032.

	
 

	
 

	
 

	
“Event”
  shall have the meaning ascribed thereto in Section 3.

	
 

	
 

	
 

	
“Excess
  Shares” shall have the meaning ascribed thereto in Section 4(a).

	
 

	
 

	
 

	
“Exchange
  Agreement” means the Amended and Restated Exchange Agreement dated
  in June 2007, between the Company and Paul Capital.

	
 

	
 

	
 

	
“Extended
  Financing Period” means the period beginning the date of this
  Agreement and ending 30 days after the Company’s public announcement of its
  receipt of written notice from the FDA granting the Company the right to commercialize
  and market (i.e. formal approval of the Company’s pre-market application for)
  its OrCel product for the treatment of venous leg ulcers.

	
 

	
 

	
 

	
“FDA”
  means the United States Food and Drug Administration.

	
 

	
 

	
 

	
“FDA’s 100
  Day Letter” means the letter usually sent by the FDA to a sponsor
  of a clinical trial within 100 days after the sponsor’s filing of a
  pre-market application for commercial sales of a drug or device, such letter
  from the FDA in this instance being in response to the Company’s pre-market
  application for its OrCel product for the treatment of venous leg ulcers.

	
 

	
 

	
 

	
“Financing”
  means the sales by the Company of its equity securities other than

-2-

	
 

	
 

	
 

	
 

	
(a)

	
the sale
  after the first closing of the Private Placement, but no later than July 31,
  2007, of the Company’s securities sold in the Private Placement which,
  together with the proceeds received by the Company in the first closing of
  the Private Placement (inclusive of the principal amount of the bridge notes
  issued by the Company between October 2006 and the initial closing of the
  Private Placement, which are exchanged in the private Placement for the
  Company’s securities sold in the Private Placement) does not exceed
  $12,000,000 in aggregate, and

	
 

	
 

	
 

	
 

	
(b)

	
as a result
  of the exercise by the holders thereof of the Company’s Series M Warrants,

	
 

	
 

	
 

	
and from the
  sale of its debt securities, and/or receipt of payments in entering into a
  licensing or distribution agreement, in any or all of which the Company
  receives cash proceeds.

	
 

	
 

	
 

	
“Initial
  Registration Statement” means the registration statement under the
  Act which the Company is required to file registering and qualifying for sale
  in the public securities markets shares of Common Stock issuable upon
  conversion of the Company’s Series A Convertible Preferred Stock acquired or
  to be acquired by the investors in the Private Placement.

	
 

	
 

	
 

	
“IRC”
  means the United States Internal Revenue Code.

	
 

	
 

	
 

	
“Katz”
  means Steven Katz, having an address at 655 Rutland Avenue, Teaneck, New
  Jersey 07666.

	
 

	
 

	
 

	
“Katz Option” shall
  have the meaning ascribed thereto in Section 5.

-3-

	
 

	
 

	
 

	
“Katz Option Securities” shall
  have the meaning ascribed thereto in Section 5.

	
 

	
 

	
 

	
“Katz’
  Warrants” means the Warrants to be issued to Katz pursuant to the
  provisions of Sections 3(d) and 4.

	
 

	
 

	
 

	
“New
  Funding Amount” means not less than $8,000,000 (inclusive of the
  principal amount of up to $2,800,000 in bridge notes issued by the Company
  between October 2006 and May 2007, which are exchanged in the Private
  Placement) for the Company’s Series A Convertible Preferred Stock and Series
  A Warrants sold in the Private Placement.

	
 

	
 

	
 

	
“Paul
  Capital” means Paul Royalty Fund, L.P., a limited partnership
  created under the laws of the State of Delaware and having an office at Two
  Grand Central Tower, 140 East 45th Street, 44th Floor,
  New York, New York 10017, formerly known as Paul Capital Acquisition Fund,
  L.P.

	
 

	
 

	
 

	
“Private
  Placement” means the sale of the Company’s Series A Convertible
  Preferred Stock, Series A Warrants, Series M Warrants and Series M-1
  Warrants, the first closing of which is to take place on or about the date of
  this Agreement and when the Company will receive the New Funding Amount.

	
 

	
 

	
 

	
“Registrable Option Shares”
  means all the shares of Common Stock issued or issuable upon the conversion
  of all the shares of Series A Convertible Preferred Stock, and upon exercise
  of all the Series M Warrants, which the holder of the Katz Option could
  acquire upon exercise of the Katz Option in full.

	
 

	
 

	
 

	
“Registrable
  Warrant Shares” means all of the shares of the Common Stock issued
  or issuable upon exercise of Katz’ Warrants.

-4-

	
 

	
 

	
 

	
“Revenue
  Interests” means the interest in the Company’s future revenues
  owned by Paul Capital pursuant to agreements between the Company and Paul
  Capital, and all other securities, interests and rights granted by the
  Company to Paul Capital, which, together with such revenue interest, Paul
  Capital is exchanging for the Company’s Series A-1 and Series A-2 Convertible
  Preferred Stock.

	
 

	
 

	
 

	
“Termination
  of Employment Agreement” means that agreement dated December 5,
  2002 between the Company and Katz.

	
 

	
 

	
 

	
“Warrants”
  means five-year warrants to be issued to Katz as in Sections 3(d) and 4
  provided, to purchase shares of Common Stock, exercisable at $0.55 per share,
  in the form annexed hereto which form contains the same provisions as those
  contained in the Company’s Series A Warrant to be issued to the investors in
  the Private Placement except for specific provisions applied only to Katz.
  The five-year term of each such Warrant shall commence on the date of the
  issuance thereof.

          2.
Termination
of Employment. Upon

	
 

	
 

	
 

	
 

	
(a)

	
the Company
  securing the New Funding Amount,

	
 

	
 

	
 

	
 

	
(b)

	
Paul Capital
  having exchanged its Revenue Interests for shares of the Company’s Series A-1
  and A-2 Preferred Stock, and

	
 

	
 

	
 

	
 

	
(c)

	
Katz
  receiving (i) the $40,000 cash payment referred to in clause (c) of Section 3
  below, (ii) the $25,000 cash payment referred to in Section 4 and (iii) the
  Warrant referred to in clause (d) of Section 3 below, 

	
then

	
 

	
 

	
 

	
 

	
 

	
 

	
(d)

	
Katz’
  employment by the Company shall be terminated,

-5-

	
 

	
 

	
 

	
 

	
(e)

	
Katz shall
  resign as Chairman and a member of the Company’s board of directors and all
  positions he holds as an officer, director or manager of any of the Company’s
  subsidiaries. Katz has delivered a written resignation letter to the Company
  to such effect, conditioned upon events set forth in clauses (a), (b) and (c)
  above having occurred and effective after the Company has filed its annual
  report on Form 10-KSB for the year ended December 31, 2006, with the United
  States Securities and Exchange Commission,

	
 

	
 

	
 

	
 

	
(f)

	
Katz shall
  use his best efforts to have the Company’s board of directors elect Costa
  Papastephanou as a director to fill a vacancy created by the resignation of
  Ron Lipstein and as chief executive officer of the Company, and

	
 

	
 

	
 

	
 

	
(g)

	
Katz shall
  surrender (i) all warrants and options heretofore issued to him to purchase
  shares of Common Stock or other securities of the Company, which options and
  warrants will then be cancelled and (ii) all rights he may have to acquire
  other options or warrants to purchase shares of Common Stock other than the
  Warrants he is to receive pursuant to the terms of this Agreement.

          3.
The
Company’s Obligations to Katz. Upon

	
 

	
 

	
 

	
 

	
(a)

	
the initial
  closing of the Private Placement and

	
 

	
 

	
 

	
 

	
(b)

	
Paul Capital
  having exchanged its Revenue Interests for shares of the Company’s Series A-1
  and A-2 Convertible Preferred Stock, as provided in the Exchange Agreement,

the Company,
in consideration of Katz entering into this Cancellation Agreement, shall
simultaneously with the initial closing of the Private Placement (except as
provided below)

	
 

	
 

	
 

	
 

	
(c)

	
pay $40,000
  to Katz for entering into this Cancellation Agreement,

-6-

	
 

	
 

	
 

	
 

	
(d)

	
issue to
  Katz the Warrants as provided in Section 4(a) of this Agreement, and

	
 

	
 

	
 

	
 

	
(e)

	
no later
  than 30 days after the date of the FDA’s 100 Day Letter, pay Katz an
  additional $45,000 and no later than seven months after the date of the FDA’s
  100 Day Letter, pay Katz a final payment of $75,000, both such payments being
  further consideration for entering into this Cancellation Agreement.

Provided,
however, that if at the time the Company is required to pay Katz the $45,000
referred to in clause (e) of this Section 3 the Company (i) has not received an
aggregate of at least $1,000,000 from a Financing or Financings and/or from the
exercise of the Company’s Series M Warrants and (ii) does not have $500,000 in
funds available to it, the payment of such $45,000 to Katz may be deferred
until the earliest of the times when (iii) the Company receives an aggregate of
not less than such $1,000,000 from a Financing or Financings and/or from the
exercise of the Company’s Series M Warrants, (iv) the Company has $500,000 of
funds available to it or (v) the date the $75,000 payment also referred to in
clause (e) of this Section 3 is required to be paid to Katz.

In the event
that the Company receives funds from a Financing or Financings and/or from the
exercise of the Company’s Series M Warrants, which aggregate not less than
$1,000,000, or in the event of the merger or consolidation of the Company into
or with another entity (whether or not the Company is the surviving entity in
such merger), or the sale by the Company of all or substantially all of its
assets (each an “Event”) prior to the time $45,000 referred to in clause (e) of
this Section 3 is required to be paid, the Company shall accelerate payment of
the $45,000 referred to in such clause (e) of this Section 3 to no later than
10 days after the occurrence of such Event.

          4.
The
Warrants.

	
 

	
 

	
 

	
 

	
(a)

	
The Warrants
  which the Company is to deliver to Katz pursuant to the provisions of clause
  (d) of Section 3 above shall entitle Katz to purchase 

-7-

	
 

	
 

	
 

	
 

	
 

	
2,045,979
  shares of Common Stock. Provided, however, that if the total number of shares
  of Common Stock which the Company is required to issue upon conversion of its
  Series A Convertible Preferred Stock and upon exercise of its Series A
  Warrants (both sold by the Company in the Private Placement) exceeds an
  aggregate of 27,692,278 shares of Common Stock (the “Excess Shares”), then
  the Warrants which the Company is to deliver to Katz pursuant to the
  provision of clause (d) of Section 3 shall entitle Katz to purchase so many
  shares of Common Stock as shall equal the total of 2,045,979 shares plus 31⁄2%
  of the Excess Shares.

	
 

	
 

	
 

	
 

	
(b)

	
Within 15
  days after the end of each 60-day period in which the Company’s Series M
  Warrants continue to be exercisable the Company shall issue to Katz an
  additional Warrant entitling Katz to purchase so many shares of Common Stock
  as shall equal 3-1/2% of the aggregate of

	
 

	
 

	
 

	
 

	
 

	
(i)

	
the number
  of shares of Common Stock

	
 

	
 

	
 

	
 

	
 

	
 

	
(x)

	
issued or
  required to be issued by the Company to the providers of such Financing or
  Financings, whether as a result of the exercise of the Series M Warrants (but
  not upon exercise of the Company’s Series M-1 Warrants) or otherwise,
  and

	
 

	
 

	
 

	
 

	
 

	
 

	
(y)

	
issuable by
  the Company to the providers of such Financing or Financings upon the
  conversion or exercise of Common Stock Equivalents issued or granted by the
  Company,

	
 

	
 

	
 

	
 

	
 

	
 

	
in such
  60-day period, as consideration for the first cash proceeds received by the
  Company prior to the end of the Extended Financing Period, for such Common

-8-

	
 

	
 

	
 

	
 

	
 

	
Stock or
  such Common Stock Equivalents aggregating not more than $6,300,000 (including
  proceeds received by the Company for the shares of Common Stock the Company
  issues upon exercise of the Company’s Series M Warrants), plus

	
 

	
 

	
 

	
 

	
(ii)

	
the number
  of shares of Common Stock issued by the Company during such 60-day period to
  its suppliers of goods and services and its other creditors in satisfaction
  of obligations, which exceed the number of shares of Common Stock issued by
  the Company during the Extended Financing Period in satisfaction of an
  aggregate of $3,000,000 owed by the Company to its creditors.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(c)

	
If during
  the Extended Financing Period

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(i)

	
the exercise
  price of the Series M Warrants is reduced to less than $0.50 per share of
  Common Stock and Series M Warrants are exercised at such lower exercise
  price, or

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(ii)

	
the Company
  sells Common Stock for less than $0.50 per share, or

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
(iii)

	
the Company
  sells Common Stock Equivalents for Common Stock Equivalent Consideration of
  less than $0.50 per share of Common Stock,

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
then the
  exercise price of the Warrants issued pursuant to Sections 3(d), 4(a) and
  4(b) above shall be reduced to an amount equal to $0.05 more than such lower
  exercise price of the Series M Warrants, or $0.05 more than the Company
  receives for the per share sales price of its Common Stock, or $0.05 more
  than the Company receives as the Common Stock Equivalent

-9-

	
 

	
 

	
 

	
 

	
 

	
Consideration for one share of Common Stock issuable upon exercise or
  conversion of such Common Stock Equivalent.

          5.
Satisfaction
of Deferred Compensation Obligation. 

          The
Company owes Katz deferred compensation in the amount of $366,221. In
satisfaction of such obligation and all other obligations owed by the Company
to Katz other than (x) obligations owed pursuant to the terms of this Agreement
and (y) payment of Katz’s current salary until the time his employment by the
Company is terminated, as provided in clause (d) of Section 2 of this
Agreement, the Company (a) shall pay Katz $25,000 (which is in addition to the
payments to be made to Katz as provided in Section 3 of this Agreement) and (b)
grants Katz an option (the “Katz Option”) to purchase the following preferred
shares and warrants identical to those which are being sold to investors in the
Private Placement (together the “Katz Option Securities”):

	
 

	
 

	
 

	
 

	
(i)

	
8 shares of
  the Company’s Series A Convertible Preferred Stock having a stated
  value/liquidation preference of $10,000 per share with each such preferred
  share convertible into 20,000 shares of Common Stock;

	
 

	
 

	
 

	
 

	
(ii)

	
the
  Company’s five year Series A Warrants to purchase an aggregate of 80,000
  shares of Common Stock at an exercise price of $1.00 per common share;

	
 

	
 

	
 

	
 

	
(iii)

	
the
  Company’s Series M warrants to purchase an additional 80,000 shares of Common
  Stock at an exercise price of $0.50 per common share, and

	
 

	
 

	
 

	
 

	
(iv)

	
the
  Company’s Series M-1 warrants to purchase one half of the number of shares of
  Common Stock that Katz acquires as the result of Katz’s exercise of the
  Series M Warrants which Katz acquires upon the exercise of the Katz Option.

-10-

          The
Katz Option may be exercised by Katz or by his successors or assigns at any
time up to 30 days after the Company files a report on Form 8-K with the United
States Securities and Exchange Commission announcing FDA clearance for the
commercial sale of the Company’s OrCel product for the treatment of venous
stasis ulcers, and the Katz Option shall no longer be exercisable after the end
of such 30-day period. The Katz Option may be exercised by the holder thereof,
in whole or in part, by notice of exercise to the Company in writing in the
manner for notice provided in Section 11 of this Agreement, accompanied by
payment to the Company of the exercise price which is $100 for each share of
Series A Convertible Preferred Stock, plus Series A, M and M-1 warrants to
purchase one-eighth of the number of shares of Common Stock which could be
purchased by exercise of all the warrants in that series which Katz would
acquire upon the exercise of the Katz Option.

          6.
Registration
Rights.

	
 

	
 

	
 

	
 

	
(a)

	
The
  Registrable Warrant Shares will not be included among the shares of Common
  Stock registered in the Initial Registration Statement. However, the Company
  will include the Registrable Warrant Shares in any registration statement
  filed by it under the Act after the Initial Registration Statement.

	
 

	
 

	
 

	
 

	
(b)

	
In addition
  to the piggyback registration rights set forth in Section 6(a) immediately
  above, beginning on the earlier of (i) six months after the effective date of
  the Initial Registration Statement or (ii) nine months after the date of this
  Agreement, the Company shall, except as hereafter in this Section 6 provided,
  upon Katz’s written demand file a registration statement under the Act
  registering and qualifying the Registrable Warrant Shares for sale in the
  public securities markets. The Company agrees to have the 

-11-

	
 

	
 

	
 

	
 

	
 

	
registration
  statement it files in response to Katz’s written demand declared effective no
  later than 120 days after the date of Katz’s written demand.

	
 

	
 

	
 

	
 

	
(c)

	
The Company
  shall file post-effective amendments to such registration statement which
  registers the Registrable Warrant Shares or additional registration
  statements, so that the Registrable Warrant Shares shall continue to be
  registered under the Act and therefore qualified for sale in the public
  securities markets. Provided, however, that anything in this Section 6 to the
  contrary notwithstanding the Company’s obligation to register any of the
  Registrable Warrant Shares and to continue to have such Registrable Warrant
  Shares registered so as to qualify them for sale in the public securities
  markets, shall terminate on the earlier of (x) the sale of all such
  Registrable Warrant Shares in the public securities market or (y) when all
  such Registrable Warrant Shares may be sold in the public securities markets
  by application of Rule 144-k promulgated under the Act.

	
 

	
 

	
 

	
 

	
(d)

	
Further
  provided, however, that the Company’s obligation to register the Registrable
  Warrant Shares pursuant to the provisions of paragraphs (a) or (b) of this
  Section 6 shall be deferred but only for the number of Registrable Warrant
  Shares that the registration of such Registrable Warrant Shares would prevent
  shares of the Company’s common stock owned by, or that could be acquired by
  (i) Paul Capital as a result of Paul Capital’s conversion of the Company’s
  Series A-1 Convertible Preferred Stock owned by Paul Capital, or (ii) by the
  holders of the Company’s Series A Convertible Preferred Stock as a result of
  such holders conversion of their Series A Convertible Preferred Stock, or
  (iii) by the holders of the Company’s Series M Warrants as a result of such holders
  exercise of their Series M Warrants, which the Company is required to
  register under the Act pursuant to the terms of a Registration Rights
  Agreement entered into by the Company with Paul Capital and such 

-12-

	
 

	
 

	
 

	
 

	
 

	
holders of
  the Company’s Series A Convertible Preferred Stock and the holders of such
  Series M Warrants, dated on or about the date of this Agreement, being
  registered under the Act because of the Securities and Exchange Commission’s
  application of Rule 415 under the Act. In such situation the Company’s
  obligation to register the Registrable Warrant Shares shall be deferred only
  until the time when the Company’s obligation to register shares of its common
  stock owned or that could be acquired by Paul Capital and by the holders of
  such Series A Convertible Preferred Stock and such Series M Warrants upon
  conversion or exercise of such Ortec securities, would no longer be affected
  by the registration of the Registrable Warrant Shares.

	
 

	
 

	
 

	
 

	
(e)

	
Katz’s
  Warrants shall provide that the cashless exercise provisions of Katz’s
  Warrants may be exercised by the holder of Katz’s Warrants at any time
  beginning on the date which is the earlier of (i) one year from the date of
  this Agreement or (ii) if the registration statement demanded by Katz pursuant
  to paragraph (b) of this Section 6 is not declared effective within such
  120-day period, immediately after the expiration of such 120-day period.
  Provided, however, that the right to exercise such cashless exercise
  provision will not preclude Katz from asserting and prosecuting any other
  claim he may have against the Company for the Company’s failure to have such
  registration statement declared effective in such 120-day period as required
  by such paragraph (b).

	
 

	
 

	
 

	
 

	
(f)

	
The
  Company’s obligation to register the Registrable Option Shares shall be the
  same as the Company’s obligations to register the Common Stock issuable upon
  conversion of any other shares of Series A Convertible Preferred Stock or
  upon the exercise of any other Series M Warrants pursuant to the Registration
  Rights Agreement dated on or about the date of this Agreement 

-13-

	
 

	
 

	
 

	
 

	
 

	
among the
  Company and the holders of the Company’s Series A Convertible Stock sold in
  the Private Placement. Katz shall have all the rights of, and be entitled to
  all payments payable by the Company to, the holders of the Company’s Series A
  Convertible Preferred Stock who are parties to such Registration Rights
  Agreement as if Katz was a party thereto.

          7.
Cancellation
of the Termination of Employment Agreement. The Termination of
Employment Agreement shall be cancelled and neither the Company nor Katz shall
thereafter have any rights or obligations thereunder if and when the Company
(i) makes the payments required to be made by it to Katz pursuant to clause (c)
of Section 3 and clause (a) in the first paragraph of Section 5 and (ii) issues
the Warrants to Katz required to be issued to Katz on the date of the initial
closing of the Private Placement pursuant to clause (d) of Section 3 and
paragraph (a) of Section 4. Such cancellation of Katz’s Termination of
Employment Agreement shall take effect when the conditions in the preceding
sentence have been met even though the Company does not thereafter meet its
other obligations hereunder, including, without limitation, the Company’s
failure to make the payments required by clause (e) of Section 3, in which
event Katz’s remedies against the Company for such breach of this Agreement
shall be based solely on this Agreement.

          8.
Indemnification.
The Company will, to the fullest extent permitted or required by Section 145 of
the Delaware General Corporation Law, as from time to time amended and
supplemented, indemnify Katz under said section from and against any and all of
the expenses, liabilities or other matters referred to in or covered by said
section, and the indemnification provided for herein will not be deemed
exclusive of any other rights to which Katz may be entitled under any of the
Company’s bylaws, agreements, vote of the stockholders or directors or
otherwise, both as to action heretofore or hereafter taken by Katz as an
officer and/or director of the Company, and will continue after Katz has ceased
to be a director, officer, employee or agent of the Company and will inure to
the benefit of Katz’ heirs, executors and administrators.

-14-

          9.
Non-Disparagement.
For a period of three years after the termination of Katz’ employment with the
Company, none among the Company, its officers and directors will make any
comment which disparages or defames Katz or places Katz in a negative light.

          10.
Excise
Tax. (a) If pursuant to any of the provisions of this Cancellation
Agreement, if the aggregate amounts due Katz under this Cancellation Agreement
and any other plan or program of the Company constitutes a “Parachute Payment”,
as such term is defined in IRC Section 280(G), and as a result thereof there is
an excise tax imposed on Katz pursuant to IRC Section 4999 on all or part of
such “Parachute Payment” received by Katz from the Company, the Company shall
reimburse Katz for (i) such excise tax payment required to be paid by Katz plus
(ii) income taxes and additional excise taxes required to be paid by Katz
because of any reimbursement of excise and income taxes required to be paid by Katz
pursuant to clause (i) and this clause (ii) of this Section 10, all so that all
excise taxes and income taxes on the amount of the reimbursement to Katz for
such excise taxes and income taxes required to be paid by Katz on account of
such “Parachute Payment” and such reimbursements shall be borne by the Company
and not by Katz.

                    (b)
Anything in this Cancellation Agreement to the contrary notwithstanding if the
aggregate of the amounts due Katz under this Cancellation Agreement and any
other plan or program of the Company constitutes a “Parachute Payment” then, at
Katz’ option, the payments to be made to Katz under this Cancellation Agreement
and under such other plan or program of the Company, shall be reduced to an
amount which, when added to the aggregate of all other payments to Katz will
not make the total amount of such payments a “Parachute Payment”. If payments
to Katz included in determining whether Katz is receiving an IRC 280(G)
“Parachute Payment” include the value of the Warrants and other obligations of
the Company hereunder and Katz makes the election provided in this Section
11(b),then which items of payment are to be eliminated (cash, the Warrants or
the Company’s other obligations hereunder or any combination thereof) shall be
made by Katz.

-15-

          11.
Notice.
Any Notice or demand required or permitted to be given or made hereunder shall
be deemed to have been duly given or made for all purposes if (a) in writing
and sent by (i) messenger or an overnight courier service against receipt, (ii)
certified or registered mail, postage pre-paid, return receipt requested or (b)
by telegram, telecopy, telex or similar electronic means, provided that a
written copy thereof is sent on the same day by postage-paid first-class mail,
to the following addresses or such other addresses and telecopy numbers as a
party shall have notified the other party in the manner for notice in this
Section 11 provided.

	
 

	
 

	
 

	
 

	
If to the
  Company:

	
 

	
 

	
 

	
 

	
Ortec
  International, Inc.

	
 

	
 

	
3960
  Broadway

	
 

	
 

	
New York,
  New York 10032

	
 

	
 

	
Attn: Chief
  Financial Officer

	
 

	
 

	
Fax no.:
  (212) 740-2570

	
 

	
 

	
 

	
If to Katz:

	
 

	
 

	
 

	
 

	
655 Rutland
  Avenue

	
 

	
 

	
Teaneck, New
  Jersey 07666

	
 

	
 

	
Fax no.:
  (201) 692-0796

          12.
Exchange
of General Releases. Simultaneously with the execution of this
Agreement, Katz and the Company are exchanging general releases excepting from
the operation thereof the obligations arising under the terms of this Agreement
and in the case of the general release being given by Katz to the Company, also
excepting from the operation thereof all indemnifications of Katz from the
claims of third parties based on his actions as an officer, director and/or
employee of the Company and either of its subsidiaries to the extent such
indemnification is provided by the Delaware General Corporation Law, the
Company’s certificate of incorporation or its by-laws, and/or to the extent the
Company and/or Katz are insured against such claims by the Company’s officers
and directors liability policies.

          13.
Governing
Law; Dispute Resolution. This Agreement shall be governed by, and
interpreted and enforced in accordance with, the laws of the State of New York
without regard to

-16-

principles of
choice of law or conflict of laws. Each party to this Agreement (i) submits to
the jurisdiction of the courts of the State of New York, located in New York
County, New York, and, to the extent it can and does obtain jurisdiction, to
the jurisdiction of the United States District Court for the Southern District
of New York, with respect to the enforcement of any matter arising out of this
Agreement, (ii) waives any objection to venue in the County of New York, State
of New York, or such District Court, and (iii) agrees that service of any
summons, complaint, notice or other process relating to such proceeding may be
effected in the manner for notice provided by Section 11 above. In the event of
any litigation between Katz and the Company arising out of or in connection
with this Agreement, the losing party shall pay all fees and expenses,
including, without limitation, legal fees and disbursement, incurred by the
prevailing party in such litigation.

          14.
Counterparts.
This Agreement may be executed in counterparts, each of which shall be deemed
an original and which together shall constitute one and the same agreement.

          15.
Titles
and Captions. The titles and captions of the sections of this
Agreement are for convenience of reference only and do not in any way define or
interpret the intent of the parties or modify or otherwise affect any of the
provisions hereof.

          16.
No
Presumptions. Each party hereto acknowledges that it has had an
opportunity to consult with counsel and has participated in the preparation of
this Agreement. No party hereto is entitled to any presumption with respect to
the interpretation of any provision hereof or the resolution of any alleged
ambiguity herein based on any claim that another party hereto drafted or
controlled the drafting of this Agreement.

          17.
Entire
Agreement. This Agreement embodies the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
prior agreements, commitments or arrangements relating thereto.

-17-

          IN
WITNESS WHEREOF, the undersigned have duly executed this Agreement as of the
day and year first above written.

	
 

	
 

	
 

	
 

	
 

	
 

	
 

	
Ortec International, Inc.

	
 

	
 

	
 

	
 

	
By:

	
/s/

	
Alan W.
  Schoenbart

	
 

	
 

	
 

	

	
 

	
 

	
Print Name:

	
Alan W.
  Schoenbart

	
 

	
 

	
Title:

	
Chief
  Financial Officer

	
 

	
 

	
 

	
 

	
 

	
 

	
/s/

	
Steven Katz

	
 

	
 

	

	
 

	
 

	
Steven Katz

-18-EXHIBIT 10.8  

THIS WARRANT AND THE SHARES OF COMMON STOCK
ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”) OR ANY STATE SECURITIES LAWS AND MAY
NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS REGISTERED UNDER THE
SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES LAWS OR ORTEC
INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF ITS COUNSEL THAT
REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND UNDER THE
PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

WARRANT TO PURCHASE

SHARES OF COMMON STOCK

OF

ORTEC
INTERNATIONAL, INC.

	
 

	
 

	
No.: W-RL1

  Date of Issuance: June 18, 2007

	
Number of Shares: 2,105,819

          FOR
VALUE RECEIVED, subject to the provisions hereinafter set forth, the
undersigned, Ortec International, Inc., a Delaware corporation (together with
its successors and assigns, the “Issuer”), hereby certifies that Ron
Lipstein or his registered assigns is entitled to subscribe for and purchase,
during the period specified in this Warrant, up to two million one hundred five
thousand eight hundred nineteen (2,105,819) shares (subject to adjustment as
hereinafter provided) of the duly authorized, validly issued, fully paid and
non-assessable Common Stock of the Issuer, at an exercise price per share equal
to the Warrant Price then in effect, subject, however, to the provisions and
upon the terms and conditions hereinafter set forth. Capitalized terms used in
this Warrant and not otherwise defined herein shall have the respective
meanings specified in Section 9 hereof.

          1.
Term. The right to subscribe for and purchase shares of Warrant Stock
represented hereby shall commence on June 18, 2007 and shall expire at 5:00
p.m., eastern time, on June 17, 2012 (such period being the “Term”).

          2.
Method of Exercise Payment; Issuance of New Warrant; Transfer and Exchange.

          (a)
Time of Exercise. The purchase rights represented by this Warrant may be
exercised in whole or in part at any time and from time to time during the
Term.

          (b)
Method of Exercise. The Holder hereof may exercise this Warrant, in
whole or in part, by the surrender of this Warrant (with the exercise form
attached hereto duly executed) at the principal office of the Issuer, and by
the payment to the Issuer of an amount of consideration

therefor equal
to the Warrant Price in effect on the date of such exercise multiplied by the
number of shares of Warrant Stock with respect to which this Warrant is then
being exercised, payable at such Holder’s election (i) by certified or official
bank check or by wire transfer to an account designated by the Issuer, (ii) by
“cashless exercise” in accordance with the provisions of subsection (c) of this
Section 2, but only when a registration statement under the Securities Act
providing for resale of all of the Warrant Stock is not then in effect and in
any event not earlier than after the earlier date of (A) June 18, 2008 or (B)
120 days after the Holder’s written demand upon the Issuer to file a
registration statement under the Securities Act registering and qualifying the
Warrant Stock for sale in the public securities markets, which written demand
the Holder may not make until the earlier of (a) March 18, 2008 or (b) six
months after the effective date of the Initial Registration Statement, or (iii)
by a combination of the foregoing methods of payment selected by the Holder of
this Warrant.

          (c)
Cashless Exercise. Notwithstanding any provisions herein to the contrary
but only during the period provided in clause (ii) of Section 2(b) hereof, if
(i) the Per Share Market Value of one share of Common Stock is greater than the
Warrant Price (at the date of calculation as set forth below) and (ii) a
registration statement under the Securities Act providing for the resale of all
of the Warrant Stock is not then in effect, in lieu of exercising this Warrant
by payment of cash, the Holder may exercise this Warrant by a cashless exercise
and shall receive the number of shares of Common Stock equal to an amount (as
determined below) by surrender of this Warrant at the principal office of the
Issuer together with the properly endorsed Notice of Exercise in which event
the Issuer shall issue to the Holder a number of shares of Common Stock computed
using the following formula:

	
 

	
 

	
 

	
 

	
X = Y - 

	
(A)(Y)

	
 

	
 

	

	
 

	
 

	
     B

	
 

	
 

	
 

	
Where

	
X =

	
the number
  of shares of Common Stock to be issued to the Holder.

	
 

	
 

	
 

	
 

	
Y =

	
the number
  of shares of Common Stock purchasable upon exercise of all of the Warrant or,
  if only a portion of the Warrant is being exercised, the portion of the
  Warrant being exercised.

	
 

	
 

	
 

	
 

	
A =

	
the Warrant
  Price.

	
 

	
 

	
 

	
 

	
B =

	
the Per
  Share Market Value of one share of Common Stock.

          (d)
Issuance of Stock Certificates. In the event of any exercise of the
rights represented by this Warrant in accordance with and subject to the terms
and conditions hereof, (i) certificates for the shares of Warrant Stock so
purchased shall be dated the date of such exercise and delivered to the Holder
hereof within a reasonable time, not exceeding three (3) Trading Days after
such exercise or, at the request of the Holder, issued and delivered to the
Depository Trust Company (“DTC”) account on the Holder’s behalf via the
Deposit Withdrawal Agent Commission System (“DWAC”) within a reasonable
time, not exceeding three (3) Trading Days after such exercise, and the Holder
hereof shall be deemed for all purposes to be the Holder of

-2-

the shares of
Warrant Stock so purchased as of the date of such exercise and (ii) unless this
Warrant has expired, a new Warrant representing the number of shares of Warrant
Stock, if any, with respect to which this Warrant shall not then have been
exercised (less any amount thereof which shall have been canceled in payment or
partial payment of the Warrant Price as hereinabove provided) shall also be
issued to the Holder hereof at the Issuer’s expense within such time.

          (e)
Transferability of Warrant. Subject to Section 2(g), this Warrant may be
transferred by a Holder without the consent of the Issuer. If transferred
pursuant to this paragraph, this Warrant may be transferred on the books of the
Issuer by the Holder hereof in person or by the Holder’s duly authorized
attorney, upon surrender of this Warrant at the principal office of the Issuer,
properly endorsed (by the Holder executing an assignment in the form attached
hereto) and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. This Warrant is exchangeable at the principal
office of the Issuer for Warrants for the purchase of the same aggregate number
of shares of Warrant Stock, each new Warrant to represent the right to purchase
such number of shares of Warrant Stock as the Holder hereof shall designate at
the time of such exchange. All Warrants issued on transfers or exchanges shall
be dated the Original Issue Date and shall be identical with this Warrant
except as to the number of shares of Warrant Stock issuable pursuant hereto.

          (f)
Continuing Rights of Holder. The Issuer will, at the time of or at any
time after each exercise of this Warrant, upon the request of the Holder
hereof, acknowledge in writing the extent, if any, of its continuing obligation
to afford to such Holder all rights to which such Holder shall continue to be
entitled after such exercise in accordance with the terms of this Warrant, provided
that if any such Holder shall fail to make any such request, the failure shall
not affect the continuing obligation of the Issuer to afford such rights to such
Holder.

          (g)
Compliance with Securities Laws.

	
 

	
 

	
 

	
          (i)
  The Holder of this Warrant, by acceptance hereof, acknowledges that this
  Warrant and the shares of Warrant Stock to be issued upon exercise hereof are
  being acquired solely for the Holder’s own account and not as a nominee for
  any other party, and for investment, and that the Holder will not offer, sell
  or otherwise dispose of this Warrant or any shares of Warrant Stock to be
  issued upon exercise hereof except pursuant to an effective registration
  statement, or an exemption from registration, under the Securities Act and
  any applicable state securities laws.

	
 

	
 

	
 

	
          (ii)
  Except as provided in paragraph (iii) below, this Warrant and all
  certificates representing shares of Warrant Stock issued upon exercise hereof
  shall be stamped or imprinted with a legend in substantially the following
  form:

	
 

	
THIS WARRANT
  AND THE SHARES OF COMMON STOCK ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
  REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES
  ACT”) OR ANY STATE 

-3-

	
 

	
SECURITIES
  LAWS AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF UNLESS
  REGISTERED UNDER THE SECURITIES ACT AND UNDER APPLICABLE STATE SECURITIES
  LAWS OR ORTEC INTERNATIONAL, INC. SHALL HAVE RECEIVED AN OPINION OF ITS
  COUNSEL THAT REGISTRATION OF SUCH SECURITIES UNDER THE SECURITIES ACT AND
  UNDER THE PROVISIONS OF APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED.

	
 

	
 

	
 

	
          (iii)
  The restrictions imposed by this subsection (g) upon the transfer of this
  Warrant or the shares of Warrant Stock to be purchased upon exercise hereof
  shall terminate (A) when such securities shall have been resold pursuant to
  an effective registration statement under the Securities Act, (B) upon the
  Issuer’s receipt of an opinion of counsel, in form and substance reasonably
  satisfactory to the Issuer, addressed to the Issuer to the effect that such
  restrictions are no longer required to ensure compliance with the Securities
  Act and state securities laws or (C) upon the Issuer’s receipt of other
  evidence reasonably satisfactory to the Issuer that such registration and
  qualification under the Securities Act and state securities laws are not
  required. Whenever such restrictions shall cease and terminate as to any such
  securities, the Holder thereof shall be entitled to receive from the Issuer
  (or its transfer agent and registrar), without expense (other than applicable
  transfer taxes, if any), new Warrants (or, in the case of shares of Warrant
  Stock, new stock certificates) of like tenor not bearing the applicable
  legend required by paragraph (ii) above relating to the Securities Act and
  state securities laws.

          (h)
Buy In.

    
               In
addition to any other rights available to the Holder, if the Issuer fails to
cause its transfer agent to transmit to the Holder a certificate or
certificates representing the Warrant Stock pursuant to an exercise on or
before the Delivery Date, and if after such date the Holder is required by its
broker to purchase (in an open market transaction or otherwise) shares of
Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant
Stock which the Holder anticipated receiving upon such exercise (a “Buy-In”),
then the Issuer shall (1) pay in cash to the Holder the amount by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
shares of Common Stock so purchased exceeds (y) the amount obtained by
multiplying (A) the number of shares of Warrant Stock that the Issuer was required
to deliver to the Holder in connection with the exercise at issue times, (B)
the price at which the sell order giving rise to such purchase obligation was
executed, and (2) at the option of the Holder, either reinstate the portion of
the Warrant and equivalent number of shares of Warrant Stock for which such
exercise was not honored or deliver to the Holder the number of shares of
Common Stock that would have been issued had the Issuer timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Stock having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of shares of Common Stock with an
aggregate sale price giving rise to such purchase 

-4-

obligation of $10,000,
under clause (1) of the immediately preceding sentence the Issuer shall be
required to pay the Holder $1,000. The Holder shall provide the Issuer written
notice indicating the amounts payable to the Holder in respect of the Buy-In,
together with applicable confirmations and other evidence reasonably requested
by the Issuer. Nothing herein shall limit a Holder’s right to pursue any other
remedies available to it hereunder, at law or in equity including, without
limitation, a decree of specific performance and/or injunctive relief with
respect to the Issuer’s failure to timely deliver certificates representing
shares of Common Stock upon exercise of this Warrant as required pursuant to
the terms hereof.

          3.
Stock Fully Paid; Reservation and Listing of Shares; Covenants.

          (a)
Stock Fully Paid. The Issuer represents, warrants, covenants and agrees
that all shares of Warrant Stock which may be issued upon the exercise of this
Warrant or otherwise hereunder will, upon issuance, be duly authorized, validly
issued, fully paid and non-assessable and free from all taxes, liens and
charges created by or through Issuer. The Issuer further covenants and agrees
that during the period within which this Warrant may be exercised, the Issuer
will at all times have authorized and reserved for the purpose of the issue
upon exercise of this Warrant a number of shares of Common Stock equal to at
least 120% of the aggregate number of shares of Common Stock exercisable
hereunder to provide for the exercise of this Warrant (without regard to
limitations or exercisability set forth in Section 8).

          (b)
Reservation. If any shares of Common Stock required to be reserved for
issuance upon exercise of this Warrant or as otherwise provided hereunder
require registration or qualification with any governmental authority under any
federal or state law before such shares may be so issued, the Issuer will in
good faith use its best efforts as expeditiously as possible at its expense to
cause such shares to be duly registered or qualified. If the Issuer shall list
any shares of Common Stock on any securities exchange or market it will, at its
expense, list thereon, maintain and increase when necessary such listing, of,
all shares of Warrant Stock from time to time issued upon exercise of this
Warrant or as otherwise provided hereunder, and, to the extent permissible
under the applicable securities exchange’s rules, all unissued shares of
Warrant Stock which are at any time issuable hereunder, so long as any shares of
Common Stock shall be so listed. The Issuer will also so list on each
securities exchange or market, and will maintain such listing of, any other
securities which the Holder of this Warrant shall be entitled to receive upon
the exercise of this Warrant if at the time any securities of the same class
shall be listed on such securities exchange or market by the Issuer.

          (c)
Covenants. The Issuer shall not by any action including, without
limitation, amending the Certificate of Incorporation or the by-laws of the
Issuer, or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder hereof against dilution (to the
extent specifically provided herein) or impairment. Without limiting the
generality of the foregoing, the Issuer will (i) not permit the par value, if
any, of its Common Stock to exceed the then effective Warrant Price, (ii) not
amend or modify any

-5-

provision of
the Certificate of Incorporation or by-laws of the Issuer in any manner that
would adversely affect the rights of the Holders of the Warrants, (iii) take
all such action as may be reasonably necessary in order that the Issuer may
validly and legally issue fully paid and nonassessable shares of Common Stock,
free and clear of any liens, claims, encumbrances and restrictions (other than
as provided herein) upon the exercise of this Warrant, and (iv) use its best
efforts to obtain all such authorizations, exemptions or consents from any public
regulatory body having jurisdiction thereof as may be reasonably necessary to
enable the Issuer to perform its obligations under this Warrant.

          (d)
Loss, Theft, Destruction of Warrants. Upon receipt of evidence
satisfactory to the Issuer of the ownership of and the loss, theft, destruction
or mutilation of any Warrant and, in the case of any such loss, theft or
destruction, upon receipt of indemnity or security satisfactory to the Issuer
or, in the case of any such mutilation, upon surrender and cancellation of such
Warrant, the Issuer will make and deliver, in lieu of such lost, stolen,
destroyed or mutilated Warrant, a new Warrant of like tenor and representing
the right to purchase the same number of shares of Common Stock.

          4.
Adjustment of Warrant Price and Warrant Share Number. The number of
shares of Common Stock for which this Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of this Warrant, shall be
subject to adjustment from time to time as set forth in this Section 4. The
Issuer shall give the Holder notice of any event described below which requires
an adjustment pursuant to this Section 4 in accordance with Section 5.
Notwithstanding any adjustment hereunder, at no time shall the Warrant Price be
greater than $0.55 per share except if it is adjusted pursuant to Section 4(b).

          (a)
Recapitalization, Reorganization, Reclassification, Consolidation, Merger or
Sale.

	
 

	
 

	
 

	
          (i)
  In case the Issuer after the Original Issue Date shall do any of the
  following (each, a “Triggering Event”): (a) consolidate with or merge
  into any other Person and the Issuer shall not be the continuing or surviving
  corporation of such consolidation or merger, or (b) permit any other Person
  to consolidate with or merge into the Issuer and the Issuer shall be the
  continuing or surviving Person but, in connection with such consolidation or
  merger, any Capital Stock of the Issuer shall be changed into or exchanged
  for Securities of any other Person or cash or any other property, or (c)
  transfer all or substantially all of its properties or assets to any other
  Person, or (d) effect a capital reorganization or reclassification of its
  Capital Stock, then, and in the case of each such Triggering Event, proper provision
  shall be made so that, upon the basis and the terms and in the manner
  provided in this Warrant, the Holder of this Warrant shall be entitled upon
  the exercise hereof at any time after the consummation of such Triggering
  Event, to the extent this Warrant is not exercised prior to such Triggering
  Event, to receive at the Warrant Price in effect at the time immediately
  prior to the consummation of such Triggering Event in lieu of the Common
  Stock issuable upon such exercise of this Warrant prior to such Triggering
  Event, the Securities, cash and property to which such Holder would have been
  entitled upon the consummation of such Triggering Event if such Holder had
  exercised the rights represented by this Warrant immediately prior 

-6-

	
 

	
 

	
 

	
thereto (including
  the right to elect the type of consideration, if applicable), subject to
  adjustments (subsequent to such corporate action) as nearly equivalent as
  possible to the adjustments provided for elsewhere in this Section 4. In the
  event that the surviving entity in any such Triggering Event is not a public
  company under the Securities Exchange Act of 1934, the common equity
  securities of which are traded or quoted on a national securities exchange or
  the OTC Bulletin Board (a “Qualifying Entity”), then the Holder, at its
  option, shall be permitted to require that the Company pay to the Holder an
  amount equal to the Black-Scholes value of this Warrant.

	
 

	
 

	
 

	
          (ii)
  Notwithstanding anything contained in this Warrant to the contrary and so
  long as the surviving entity is a Qualifying Entity, the Issuer will not be
  deemed to have effected any Triggering Event if, prior to the consummation
  thereof, each Person (other than the Issuer) which may be required to deliver
  any Securities, cash or property upon the exercise of this Warrant as
  provided herein shall assume, by written instrument delivered to the Holder
  of this Warrant and reasonably satisfactory to the Holder, (A) the
  obligations of the Issuer under this Warrant (and if the Issuer shall survive
  the consummation of such Triggering Event, such assumption shall be in
  addition to, and shall not release the Issuer from, any continuing
  obligations of the Issuer under this Warrant) and (B) the obligation to
  deliver to such Holder such shares of Securities, cash or property as, in
  accordance with the foregoing provisions of this subsection (a), such Holder
  shall be entitled to receive, and such Person shall have similarly delivered
  to such Holder an opinion of counsel for such Person stating that this Warrant
  shall thereafter continue in full force and effect and the terms hereof
  (including, without limitation, all of the provisions of this subsection (a))
  shall be applicable to the Securities, cash or property which such Person may
  be required to deliver upon any exercise of this Warrant or the exercise of
  any rights pursuant hereto. 

          (b)
Stock Dividends, Subdivisions and Combinations. If at any time the
Issuer shall:

	
 

	
 

	
 

	
          (i)
  set a record date or take a record of the holders of its Common Stock for the
  purpose of entitling them to receive a dividend payable in, or other
  distribution of, Additional Shares of Common Stock, 

	
 

	
 

	
 

	
          (ii)
  subdivide its outstanding shares of Common Stock into a larger number of
  shares of Common Stock, or

	
 

	
 

	
 

	
          (iii)
  combine its outstanding shares of Common Stock into a smaller number of
  shares of Common Stock,

then (1) the
number of shares of Common Stock for which this Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock which a record holder of the same number
of shares of Common Stock for which this Warrant is exercisable immediately
prior to the occurrence of such event would own or be entitled to receive after
the happening of such event, and (2) the Warrant Price then in effect shall be
adjusted to equal (A) the Warrant Price then in effect multiplied by the number
of

-7-

shares of
Common Stock for which this Warrant is exercisable immediately prior to the
adjustment divided by (B) the number of shares of Common Stock for which this
Warrant is exercisable immediately after such adjustment.

          (c)
Certain Other Distributions. If at any time the Issuer shall set a
record date or take a record of the holders of its Common Stock for the purpose
of entitling them to receive any divi­dend or other distribution of:

	
 

	
 

	
 

	
          (i)
  cash (other than a cash dividend payable out of earnings or earned surplus
  legally available for the payment of dividends under the laws of the
  jurisdiction of incorporation of the Issuer),

	
 

	
 

	
 

	
          (ii)
  any evidences of its indebtedness, any shares of stock of any class or any
  other securities or property of any nature whatsoever (other than cash,
  Common Stock Equivalents, Additional Shares of Common Stock or Permitted
  Issuances), or

	
 

	
 

	
 

	
          (iii)
  any warrants or other rights to subscribe for or purchase any evidences of
  its indebtedness, any shares of stock of any class or any other securities or
  property of any nature whatsoever (other than cash, Common Stock Equivalents,
  Additional Shares of Common Stock or Permitted Issuances),

then (1) the
number of shares of Common Stock for which this Warrant is exercisable shall be
adjusted to equal the product of the number of shares of Common Stock for which
this Warrant is exercisable immediately prior to such adjustment multiplied by
a fraction (A) the numerator of which shall be the Per Share Market Value of
Common Stock at the date of taking such record and (B) the denominator of which
shall be such Per Share Market Value minus the amount allocable to one share of
Common Stock of any such cash so distributable and of the fair value (as
determined in good faith by the Board of Directors of the Issuer) of any and
all such evidences of indebtedness, shares of stock, other securities or
property or warrants or other subscription or purchase rights so distributable,
and (2) the Warrant Price then in effect shall be adjusted to equal (A) the
Warrant Price then in effect multiplied by the number of shares of Common Stock
for which this Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares of Common Stock for which this Warrant is
exercisable immediately after such adjustment. A reclassification of the Common
Stock (other than a change in par value, or from par value to no par value or
from no par value to par value) into shares of Common Stock and shares of any
other class of stock shall be deemed a distribution by the Issuer to the
holders of its Common Stock of such shares of such other class of stock within
the meaning of this Section 4(c) and, if the outstanding shares of Common Stock
shall be changed into a larger or smaller number of shares of Common Stock as a
part of such reclassification, such change shall be deemed a subdivision or
combination, as the case may be, of the outstanding shares of Common Stock
within the meaning of Section 4(b).

-8-

          (d)
Issuance of Additional Shares of Common Stock. 

	
 

	
 

	
 

	
          (i)
  In the event the Issuer shall at any time following the Original Issue Date
  and prior to a Release Event (as defined below) issue any Additional Shares
  of Common Stock (otherwise than as provided in the foregoing subsections (a)
  through (c) of this Section 4), at a price per share less than the Warrant
  Price then in effect or without consideration, then the Warrant Price upon
  each such issuance shall be adjusted to the price equal to the consideration
  per share paid for such Additional Shares of Common Stock. Upon and after a
  Release Event, the price shall be adjusted to the price (rounded to the
  nearest cent) determined by multiplying the Warrant Price by a fraction:

	
 

	
 

	
 

	
          (A)
  the numerator of which shall be equal to the sum of (x) the number of shares
  of Outstanding Common Stock immediately prior to the issuance of such
  Additional Shares of Common Stock plus (y) the number of shares of
  Common Stock (rounded to the nearest whole share) which the aggregate
  consideration for the total number of such Additional Shares of Common Stock
  so issued would purchase at a price per share equal to the Warrant Price then
  in effect, and

	
 

	
 

	
 

	
          (B)
  the denominator of which shall be equal to the number of shares of
  Outstanding Common Stock immediately after the issuance of such Additional
  Shares of Common Stock.

	
 

	
 

	
 

	
          (ii)
  No adjustment of the Warrant Price shall be made under paragraph (i) of
  Section 4(d) upon the issuance of any Additional Shares of Common Stock which
  are issued pursuant to the exercise or conversion of any Common Stock
  Equivalents if any such adjustment shall previously have been made upon the
  issuance of such Common Stock Equivalents, or upon the issuance of any
  warrant or other rights therefor pursuant to Sections 4(e) or 4(f), or in connection
  with any Permitted Issuances. The term “Release Event” means, with respect to
  the holder’s Warrant Stock, the date on which the Company has received U.S.
  Food and Drug Administration approval of the Company’s Pre-Market Application
  for its OrCel product for the treatment of venous leg ulcers.

          (e)
Issuance of Warrants or Other Rights. If at any time prior to a Release
Event the Issuer shall take a record of the Holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell any warrants or options, whether or not
immediately exercisable, and the Warrant Consideration (hereafter defined) per
share for which Common Stock is issuable upon the exercise of such warrant or
option shall be less than the Warrant Price in effect immediately prior to the
time of such issue or sale, then the Warrant Price then in effect immediately
prior to the time of such issue or sale, shall be adjusted to the price equal
to the Warrant Consideration per share for which Common Stock is issuable upon
the exercise of such warrant or option. Upon and after a Release Event, this
right shall cease. In the event the Issuer shall at any time following a
Release Event issue any warrants or options at a price per share less than the
Warrant Price then in effect or without consideration, the price shall

-9-

be adjusted to
the price (rounded to the nearest cent) determined by multiplying the Warrant
Price by a fraction: (1) the numerator of which shall be equal to the sum of
(A) the number of shares of Common Stock outstanding immediately prior to the
issuance or sale of such warrants or options plus (B) the number of shares
of Common Stock (rounded to the nearest whole share) which the Warrant
Consideration multiplied by the number of shares of Common Stock issuable upon
the exercise or conversion of all such warrants or options, would purchase at a
price per share equal to the Warrant Price then in effect, and (2) the
denominator of which shall be equal to the number of shares of Common Stock
that would be outstanding assuming the exercise or conversion of all such
warrants and options. No adjustments of the Warrant Price then in effect shall
be made upon the actual issue of such Common Stock or of such Common Stock
Equivalents upon exercise of such warrants or other rights or upon the actual
issue of such Common Stock upon such conversion or exchange of such Common Stock
Equivalents. No adjustments of the Warrant Price shall be made under this
Section 4(e) in connection with any Permitted Issuances.

          (f)
Issuance of Common Stock Equivalents. If at any time prior to a Release
Event the Issuer shall take a record of the Holders of its Common Stock for the
purpose of entitling them to receive a distribution of, or shall in any manner
(whether directly or by assumption in a merger in which the Issuer is the
surviving corporation) issue or sell, any Common Stock Equivalents, whether or
not the rights to exchange or convert thereunder are immediately exercisable,
and the Common Stock Equivalent Consideration (hereafter defined) per share for
which Common Stock is issuable upon such conversion or exchange shall be less than
the Warrant Price in effect immediately prior to the time of such issue or
sale, or if, after any such issuance of Common Stock Equivalents, the price per
share for which Additional Shares of Common Stock may be issuable thereafter is
amended or adjusted, and such price as so amended shall be less than the
applicable Conversion Price in effect at the time of such amendment or
adjustment, then the Warrant Price then in effect immediately prior to the time
of such issue or sale, shall upon each such issuance or sale be adjusted to the
price equal to the Common Stock Equivalent Consideration per share paid for
such Common Share Equivalents. Upon and after a Release Event, this right shall
cease. In the event the Issuer shall at any time following a Release Event
issue any Common Stock Equivalents for Common Stock Equivalent Consideration
per share less than the Warrant Price then in effect or without consideration,
then the Warrant Price upon each such issuance shall be adjusted to that price
(rounded to the nearest cent) determined by multiplying the Warrant Price by a
fraction: (1) the numerator of which shall be equal to the sum of (A) the
number of shares of Common Stock outstanding immediately prior to the issuance
or sale of such Common Stock Equivalents plus (B) the number of shares
of Common Stock (rounded to the nearest whole share) which the Common Stock
Equivalent Consideration multiplied by the number of shares of Common Stock
issuable upon the exercise or conversion of all such Common Stock Equivalents,
would purchase at a price per share equal to the Warrant Price then in effect,
and (2) the denominator of which shall be equal to the number of shares of
Common Stock that would be outstanding assuming the exercise or conversion of
all such Common Stock Equivalents. No further adjustment of the Warrant Price
then in effect shall be made under this Section 4(f) upon the issuance of any
Common Stock Equivalents which are issued pursuant to the exercise of any
warrants or other
subscription or purchase rights therefor, if any such adjustment shall
previously have been made upon the issuance of such warrants or 

-10-

other rights
pursuant to Section 4(e). No further adjustments of the Warrant Price then in
effect shall be made upon the actual issue of such Common Stock upon conversion
or exchange of such Common Stock Equivalents. No adjustments of the Warrant
Price shall be made under this Section 4(f) in connection with any Permitted
Issuances.

          (g)
Superseding Adjustment. If, at any time after any adjustment of the
Warrant Price then in effect shall have been made pursuant to Section 4(e) or
Section 4(f) as the result of any issuance of warrants, other rights or Common
Stock Equivalents, and (i) such warrants or other rights, or the right of conversion
or exchange in such other Common Stock Equivalents, shall expire, and all or a
portion of such warrants or other rights, or the right of conversion or
exchange with respect to all or a portion of such other Common Stock
Equivalents, as the case may be shall not have been exercised, or (ii) the
consideration per share for which shares of Common Stock are issuable pursuant
to such Common Stock Equivalents, shall be increased solely by virtue of
provisions therein contained for an automatic increase in such consideration
per share upon the occurrence of a specified date or event, then for each
outstanding Warrant such previous adjustment shall be rescinded and annulled
and the Additional Shares of Common Stock which were deemed to have been issued
by virtue of the computation made in connection with the adjustment so
rescinded and annulled shall no longer be deemed to have been issued by virtue
of such computation. Upon the occurrence of an event set forth in this Section
4(g) above, there shall be a recomputation made of the effect of such Common
Stock Equivalents on the basis of: (i) treating the number of Additional Shares
of Common Stock or other property, if any, theretofore actually issued or
issuable pursuant to the previous exercise of any such warrants or other rights
or any such right of conversion or exchange, as having been issued on the date
or dates of any such exercise and for the consideration actually received and
receivable therefor, and (ii) treating any such Common Stock Equivalents which
then remain outstanding as having been granted or issued immediately after the
time of such increase of the consideration per share for which shares of Common
Stock or other property are issuable under such Common Stock Equivalents;
whereupon a new adjustment of the Warrant Price then in effect shall be made,
which new adjustment shall supersede the previous adjustment so rescinded and
annulled.

          (h)
Purchase of Common Stock by the Issuer. If the Issuer at any time while
this Warrant is outstanding shall, directly or indirectly through a Subsidiary
or otherwise, purchase, redeem or otherwise acquire any shares of Common Stock
at a price per share greater than the Per Share Market Value, then the Warrant
Price upon each such purchase, redemption or acquisition shall be adjusted to
that price determined by multiplying such Warrant Price by a fraction (i) the
numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to such purchase, redemption or acquisition minus the number
of shares of Common Stock which the aggregate consideration for the total
number of such shares of Common Stock so purchased, redeemed or acquired would
purchase at the Per Share Market Value; and (ii) the denominator of which shall
be the number of shares of Common Stock outstanding immediately after such
purchase, redemption or acquisition. For the purposes of this subsection (h),
the date as of which the Per Share Market Price shall be computed shall be the
earlier of (x) the date on which the Issuer shall enter into a firm contract
for the purchase, redemption or acquisition of such Common Stock, or (y) the
date of actual purchase, redemption or acquisition of such Common Stock. For
the purposes of this subsection (h), a purchase,

-11-

redemption or
acquisition of a Common Stock Equivalent shall be deemed to be a purchase of
the underlying Common Stock, and the computation herein required shall be made
on the basis of the full exercise, conversion or exchange of such Common Stock
Equivalent on the date as of which such computation is required hereby to be
made, whether or not such Common Stock Equivalent is actually exercisable,
convertible or exchangeable on such date.

          (i)
Other Provisions applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
Warrant Price then in effect provided for in this Section 4:

	
 

	
 

	
 

	
          (i)
  Computation of Consideration. To the extent that any Additional Shares
  of Common Stock or any Common Stock Equivalents (or any warrants or other
  rights therefor) shall be issued for cash consideration, the consideration
  received by the Issuer therefor shall be the amount of the cash received by
  the Issuer therefor, or, if such Additional Shares of Common Stock or Common
  Stock Equivalents are offered by the Issuer for subscription, the
  subscription price, or, if such Additional Shares of Common Stock or Common
  Stock Equivalents are sold to underwriters or dealers for public offering
  without a subscription offering, the initial public offering price (in any
  such case subtracting any amounts paid or receivable for accrued interest or
  accrued dividends and without taking into account any compensation, discounts
  or expenses paid or incurred by the Issuer for and in the underwriting of, or
  otherwise in connection with, the issuance thereof). To the extent that such
  issuance shall be for a consideration other than cash, then, except as herein
  otherwise expressly provided, the amount of such consideration shall be
  deemed to be the fair value of such consideration at the time of such
  issuance as mutually determined in good faith by the Board of Directors of
  the Issuer and the Majority Holders. The consideration for any Additional
  Shares of Common Stock issuable pursuant to any warrants or other rights to
  subscribe for or purchase the same shall be the consideration received by the
  Issuer for issuing such warrants or other rights divided by the number of
  shares of Common Stock issuable upon the exercise of such warrant or right
  plus the additional consideration payable to the Issuer upon exercise of
  such warrant or other right for one share of Common Stock (together the
  “Warrant Consideration”). The consideration for any Additional Shares of
  Common Stock issuable pursuant to the terms of any Common Stock Equivalents
  shall be the consideration received by the Issuer for issuing such Common
  Stock Equivalent, divided by the number of shares of Common Stock issuable
  upon the conversion or other exercise of such Common Stock Equivalent, plus
  the additional consideration, if any, payable to the Issuer upon the exercise
  of the right of conversion or exchange in such Common Stock Equivalent for
  one share of Common Stock (together the “Common Stock Equivalent Consideration”).
  In case of the issuance at any time of any Additional Shares of Common Stock
  or Common Stock Equivalents in payment or satisfaction of any dividends upon
  any class of stock other than Common Stock, the Issuer shall be deemed to
  have received for such Additional Shares of Common Stock or Common Stock
  Equivalents a consideration equal to the amount of such dividend so paid or
  satisfied. 

-12-

	
 

	
 

	
 

	
          (ii)
  No Adjustments of Number of Shares. No adjustment of the number of
  shares of Common Stock for which this Warrant shall be exercisable shall be
  made because of any adjustments of the Warrant Price pursuant to Sections
  (d), (e), (f), (g) and (h) of this Section 4.

	
 

	
 

	
 

	
          (iii)
  Fractional Interests. In computing adjustments under this Section 4,
  fractional interests in Common Stock shall be taken into account to the
  nearest one one-hundredth (1/100th) of a share.

	
 

	
 

	
 

	
          (iv)
  When Adjustment Not Required. If the Issuer shall take a record of the
  holders of its Common Stock for the purpose of entitling them to receive a
  dividend or distribution or subscription or purchase rights and shall,
  thereafter and before the distribution to stockholders thereof, legally
  abandon its plan to pay or deliver such dividend, distribution, subscription
  or purchase rights, then thereafter no adjustment shall be required by reason
  of the taking of such record and any such adjustment previously made in
  respect thereof shall be rescinded and annulled. 

          (j)
Form of Warrant after Adjustments. The form of this Warrant need not be
changed because of any adjustments in the Warrant Price or the number and kind
of securities purchasable upon exercise of this Warrant.

          (k)
Escrow of Property. If after any property becomes distributable pursuant
to this Section 4 by reason of the taking of any record of the holders of
Common Stock, but prior to the occurrence of the event for which such record is
taken, and the Holder exercises this Warrant, such property shall be held in
escrow for the Holder by the Issuer to be distributed to the Holder upon and to
the extent that the event actually takes place, upon payment of the then
current Warrant Price. Notwithstanding any other provision to the contrary
herein, if the event for which such record was taken fails to occur or is
rescinded, then such escrowed property shall be returned to the Issuer.

          5.
Notice of Adjustments. Whenever the Warrant Price or Warrant Share
Number shall be adjusted pursuant to Section 4 hereof (for purposes of this
Section 5, each an “adjustment”), the Issuer shall cause its Chief Financial
Officer to prepare and execute a certificate setting forth, in reasonable
detail, the event requiring the adjustment, the amount of the adjustment, the
method by which such adjustment was calculated (including a description of the
basis on which the Board made any determination hereunder), and the Warrant
Price and Warrant Share Number after giving effect to such adjustment, and
shall cause copies of such certificate to be delivered to the Holder of this
Warrant promptly after each adjustment. Any dispute between the Issuer and the
Holder of this Warrant with respect to the matters set forth in such
certificate may at the option of the Holder of this Warrant be submitted to one
of the national accounting firms currently known as the “big five” selected by
the Holder, provided that the Issuer shall have ten (10) days after
receipt of notice from such Holder of its selection of such firm to object
thereto, in which case such Holder shall select another such firm and the
Issuer shall have no such right of objection. The firm selected by the Holder
of this Warrant as provided in the preceding sentence shall be instructed to
deliver a written opinion as to such

-13-

matters to the
Issuer and such Holder within thirty (30) days after submission to it of such
dispute. Such opinion shall be final and binding on the parties hereto. 

          6.
Fractional Shares. No fractional shares of Warrant Stock will be issued
in connection with and exercise hereof, but in lieu of such fractional shares,
the Issuer shall at its option either (a) make a cash payment therefor equal in
amount to the product of the applicable fraction multiplied by the Per Share
Market Value then in effect or (b) issue one whole share in lieu of such
fractional share.

          7.
Intentionally Omitted. 

          8.
Certain Exercise Restrictions. Notwithstanding anything to the contrary
set forth in this Warrant, at no time may a holder of this Warrant exercise
this Warrant if the number of shares of Common Stock to be issued pursuant to
such exercise would exceed, when aggregated with all other shares of Common
Stock owned by such holder at such time, the number of shares of Common Stock
which would result in such holder beneficially owning (as determined in
accordance with Section 13(d) of the Securities Exchange Act of 1934, as
amended, and the rules thereunder) in excess of 9.999% of all of the Common
Stock outstanding at such time; provided, however, that upon a
holder of this Warrant providing the Issuer with sixty-one (61) days notice
(pursuant to Section 13 hereof) (the “Waiver Notice”) that such holder would
like to waive this Section 8 with regard to any or all shares of Common Stock
issuable upon exercise of this Warrant, this Section 8 will be of no force or
effect with regard to all or a portion of the Warrant referenced in the Waiver
Notice; provided, further, that this provision shall be of no further force or
effect during the sixty-one (61) days immediately preceding the expiration of
the term of this Warrant.

          9.
Definitions. For the purposes of this Warrant, the following terms have
the following meanings:

	
 

	
 

	
 

	
          “Additional
  Shares of Common Stock” means all shares of Common Stock issued by the
  Issuer after the Original Issue Date, and all shares of Other Common, if any,
  issued by the Issuer after the Original Issue Date, except for Permitted
  Issuances.

	
 

	
 

	
 

	
          “Board”
  shall mean the Board of Directors of the Issuer.

	
 

	
 

	
 

	
          “Capital
  Stock” means and includes (i) any and all shares, interests,
  participations or other equivalents of or interests in (however designated)
  corporate stock, including, without limitation, shares of preferred or
  preference stock, (ii) all partnership interests (whether general or limited)
  in any Person which is a partnership, (iii) all membership interests or
  limited liability company interests in any limited liability company, and
  (iv) all equity or ownership interests in any Person of any other type.

	
 

	
 

	
 

	
          “Certificate
  of Incorporation” means the Certificate of Incorporation of the Issuer as
  in effect on the Original Issue Date, and as hereafter from time to time
  amended,

-14-

	
 

	
 

	
 

	
modified,
  supplemented or restated in accordance with the terms hereof and thereof and
  pursuant to applicable law.

	
 

	
 

	
 

	
          “Common
  Stock” means the Common Stock, par value $.001 per share, of the Issuer
  and any other Capital Stock into which such stock may hereafter be changed.

	
 

	
 

	
 

	
          “Common
  Stock Equivalent” means any Convertible Security or warrant, option or
  other right to subscribe for or purchase any Additional Shares of Common
  Stock or any Convertible Security.

	
 

	
 

	
 

	
          “Common
  Stock Equivalent Consideration” has the meaning specified in Section 4
  (i) (i) hereof.

	
 

	
 

	
 

	
          “Convertible
  Securities” means evidences of Indebtedness, shares of Capital Stock or
  other Securities which are or may be at any time convertible into or
  exchangeable for Additional Shares of Common Stock. The term “Convertible
  Security” means one of the Convertible Securities.

	
 

	
 

	
 

	
          “Governmental
  Authority” means any governmental, regulatory or self-regulatory entity,
  department, body, official, authority, commission, board, agency or instrumentality,
  whether federal, state or local, and whether domestic or foreign.

	
 

	
 

	
 

	
          “Holders”
  mean the Persons who shall from time to time own any Warrant. The term
  “Holder” means one of the Holders.

	
 

	
 

	
 

	
          “Independent
  Appraiser” means a nationally recognized or major regional investment
  banking firm or firm of independent certified public accountants of
  recognized standing (which may be the firm that regularly examines the
  financial statements of the Issuer) that is regularly engaged in the business
  of appraising the Capital Stock or assets of corporations or other entities
  as going concerns, and which is not affiliated with either the Issuer or the
  Holder of any Warrant.

	
 

	
 

	
 

	
          “Initial
  Registration Statement” means the registration statement under the
  Securities Act which the Issuer is required to file registering and
  qualifying for sale in the public securities markets shares of Common Stock
  issuable upon conversion of the Issuer’s Series A Convertible Preferred
  Stock.

	
 

	
 

	
 

	
          “Issuer”
  means Ortec International, Inc., a Delaware corporation, and its successors. 

	
 

	
 

	
 

	
          “Majority
  Holders” means at any time the Holders of the Issuer’s Series A, Series
  M-1, Series RL and Series SK Warrants exercisable for a majority of all the
  shares of the Issuer’s common stock issuable upon exercise of all such
  warrants then outstanding.

-15-

	
 

	
 

	
 

	
          “Original
  Issue Date” means June 18, 2007.

	
 

	
 

	
 

	
          “OTC
  Bulletin Board” means the over-the-counter electronic bulletin board.

	
 

	
 

	
 

	
          “Other
  Common” means any other Capital Stock of the Issuer of any class which
  shall be authorized at any time after the date of this Warrant (other than
  Common Stock) and which shall have the right to participate in the
  distribution of earnings and assets of the Issuer without limitation as to
  amount.

	
 

	
 

	
 

	
          “Outstanding
  Common Stock” means, at any given time, the aggregate amount of
  outstanding shares of Common Stock, assuming full exercise, conversion or
  exchange (as applicable) of all options, warrants and other Securities which
  are convertible into or exercisable or exchangeable for, and any right to
  subscribe for, shares of Common Stock that are outstanding at such time.

	
 

	
 

	
 

	
          “Permitted
  Issuances” means (i) the issuance of the Warrant Stock; (ii) issuances in
  connection with strategic license agreements so long as such issuances are
  not for the purpose of raising capital; (iii) when approved by the Company’s
  Board of Directors or by a committee of the Board of Directors the majority
  of whom are independent directors, the

	
 

	
 

	
 

	
 

	
(A)

	
issuances
  and/or

	
 

	
 

	
 

	
 

	
(B)

	
grant of
  stock options or warrants to purchase shares of Common Stock, whether the
  grants of such options or warrants are made under the Company’s Employee
  Stock Option Plan or its 2006 Stock Award or any stock award and incentive
  plan, as they now exist, or hereafter adopted or otherwise so long as such
  issuances in the aggregate do not exceed ten percent (10)% of the issued and
  outstanding shares of Common Stock as of the Original Issue Date, 

	
 

	
 

	
 

	
to the
Company’s officers, directors, employees and consultants and to suppliers of
goods and/or services to the Company; (vi) securities issued upon the exercise,
conversion or exchange of any Common Stock Equivalents outstanding on the
Original Issue Date at the conversion price set forth therein as of the
Original Issue Date; (vii) issuance of Series A Preferred Stock pursuant to the
Purchase Agreement, or Common Stock issued upon conversion thereof; (viii)
issuance of Series A-1 Convertible Preferred Stock at the conversion price set
forth therein as of the Original Issue Date and Series A-2 Convertible
Preferred Stock at the conversion price set forth therein as of the Original
Issue Date, as adjusted by the anti-dilution provisions in effect on the
Original Issue Date, or Common Stock issued upon the conversion of such Series
A-1 Convertible Preferred Stock and Series A-2 Convertible Preferred Stock;
(ix) any warrants issued to Burnham Hill Partners, a division of Pali Capital
Inc., or any other person or entity for services in connection with the
transactions contemplated by the Purchase Agreement at the conversion price set
forth therein as of the Original Issue Date, as adjusted by the anti-

-16-

	
 

	
 

	
 

	
dilution
provisions in effect on the Original Issue Date, and the shares of Common Stock
issued upon exercise thereof; (x) warrants issued to Ron Lipstein and Steven
Katz in connection with the agreements terminating their employment with the
Company at the price set forth therein on the Issuance Date; (xi) issuance of
Series D-2 Convertible Preferred Stock, or Common Stock issued upon the
conversion of such Series D-2 Convertible Preferred Stock; or (xii) the
exchange of warrants outstanding prior to the Original Issue Date for shares of
Common Stock or the Company’s other equity securities.

	
 

	
 

	
 

	
          “Person”
means an individual, corporation, limited liability company, partnership, joint
stock company, trust, unincorporated organization, joint venture, Governmental
Authority or other entity of whatever nature.

	
 

	
 

	
 

	
          “Per
Share Market Value” means on any particular date (a) the closing bid price
for a share of Common Stock in the over-the-counter market, as reported by the
OTC Bulletin Board or in the National Quotation Bureau Incorporated or similar
organization or agency succeeding to its functions of reporting prices) at the
close of business on such date, or (b) if the Common Stock is not then reported
by the OTC Bulletin Board or the National Quotation Bureau Incorporated (or
similar organization or agency succeeding to its functions of reporting
prices), then the average of the “Pink Sheet” quotes for the Common Stock on
such date, or (c) if the Common Stock is not then publicly traded the fair
market value of a share of Common Stock on such date as determined by the Board
in good faith; provided, however, that the Majority Holders,
after receipt of the determination by the Board, shall have the right to
select, jointly with the Issuer, an Independent Appraiser, in which case, the
fair market value shall be the determination by such Independent Appraiser; and
provided, further that all determinations of the Per Share Market
Value shall be appropriately adjusted for any stock dividends, stock splits or
other similar transactions during the period between the date as of which such
market value was required to be determined and the date it is finally
determined. The determination of fair market value shall be based upon the fair
market value of the Issuer determined on a going concern basis as between a
willing buyer and a willing seller and taking into account all relevant factors
determinative of value, and shall be final and binding on all parties. In
determining the fair market value of any shares of Common Stock, no consideration
shall be given to any restrictions on transfer of the Common Stock imposed by
agreement or by federal or state securities laws, or to the existence or
absence of, or any limitations on, voting rights.

	
 

	
 

	
 

	
          “Securities”
means any debt or equity securities of the Issuer, whether now or hereafter
authorized, any instrument convertible into or exchangeable for Securities or a
Security, and any option, warrant or other right to purchase or acquire any
Security. “Security” means one of the Securities.

	
 

	
 

	
 

	
          “Securities
Act” means the Securities Act of 1933, as amended, or any similar federal
statute then in effect.

-17-

	
 

	
 

	
 

	
          “Subsidiary”
means any corporation at least 50% of whose outstanding Voting Stock, and a
limited liability company at least 50% of whose membership interests, shall at
the time be owned directly or indirectly by the Issuer or by one or more of its
Subsidiaries.

	
 

	
 

	
 

	
          “Term”
has the meaning specified in Section 1 hereof.

	
 

	
 

	
 

	
          “Trading
Day” means (a) a day on which the Common Stock is traded on the OTC
Bulletin Board, or (b) if the Common Stock is not traded on the OTC Bulletin
Board, a day on which the Common Stock is quoted in the over-the-counter market
as reported by the National Quotation Bureau Incorporated (or any similar
organization or agency succeeding its functions of reporting prices); provided,
however, that in the event that the Common Stock is not listed or quoted
as set forth in (a) or (b) hereof, then Trading Day shall mean any day except
Saturday, Sunday and any day which shall be a legal holiday or a day on which
banking institutions in the State of New York are authorized or required by law
or other government action to close.

	
 

	
 

	
 

	
          “Voting
Stock” means, as applied to the Capital Stock of any corporation, Capital
Stock of any class or classes (however designated) having ordinary voting power
for the election of a majority of the members of the Board of Directors (or
other governing body) of such corporation, other than Capital Stock having such
power only by reason of the happening of a contingency.

	
 

	
 

	
 

	
          “Warrant
Consideration” has the meaning specified in Section 4(i)(i) hereof.

	
 

	
 

	
 

	
          “Warrant
Price” initially means U.S. $0.55, as such price may be adjusted from time
to time as shall result from the adjustments specified in this Warrant,
including Section 4 hereof.

	
 

	
 

	
 

	
          “Warrant
Share Number” means at any time the aggregate number of shares of Warrant
Stock which may at such time be purchased upon exercise of this Warrant, after
giving effect to all prior adjustments and increases to such number made or
required to be made under the terms hereof.

	
 

	
 

	
 

	
          “Warrant
Stock” means Common Stock issuable upon exercise of any Warrant or Warrants
or otherwise issuable pursuant to any Warrant or Warrants.

	
 

	
 

	
 

	
10. Other
  Notices. In case at any time:

	
 

	
 

	
 

	
 

	
(A)

	
the Issuer
  shall make any distributions to the holders of Common Stock; or

	
 

	
 

	
 

	
 

	
(B)

	
the Issuer
  shall authorize the granting to all holders of its Common Stock of rights to
  subscribe for or purchase any 

-18-

	
 

	
 

	
 

	
 

	
 

	
shares of
  Capital Stock of any class or of any Common Stock Equivalents or other
  rights; or

	
 

	
 

	
 

	
 

	
(C)

	
there shall
  be any reclassification of the Capital Stock of the Issuer; or

	
 

	
 

	
 

	
 

	
(D)

	
there shall
  be any capital reorganization by the Issuer; or

	
 

	
 

	
 

	
 

	
(E)

	
there shall
  be any (i) consolidation or merger involving the Issuer or (ii) sale,
  transfer or other disposition of all or substantially all of the Issuer’s
  property, assets or business (except a merger or other reorganization in
  which the Issuer shall be the surviving corporation and its shares of Capital
  Stock shall continue to be outstanding and unchanged and except a
  consolidation, merger, sale, transfer or other disposition involving a
  wholly-owned Subsidiary); or

	
 

	
 

	
 

	
 

	
(F)

	
there shall
  be a voluntary or involuntary dissolution, liquidation or winding-up of the
  Issuer or any partial liquidation of the Issuer or distribution to holders of
  Common Stock;

then, in each
of such cases, the Issuer shall give written notice to the Holder of the date
on which (i) the books of the Issuer shall close or a record shall be taken for
such dividend, distribution or subscription rights or (ii) such reorganization,
reclassification, consolidation, merger, disposition, dissolution, liquidation
or winding-up, as the case may be, shall take place. Such notice also shall
specify the date as of which the holders of Common Stock of record shall
participate in such dividend, distribution or subscription rights, or shall be
entitled to exchange their certificates for Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, disposition, dissolution, liquidation or winding-up, as
the case may be. Such notice shall be given at least twenty (20) days prior to
the action in question and not less than twenty (20) days prior to the record
date or the date on which the Issuer’s transfer books are closed in respect
thereto. The Holder shall have the right to send two (2) representatives selected
by it to each meeting, who shall be permitted to attend, but not vote at, such
meeting and any adjournments thereof. This Warrant entitles the Holder to
receive copies of all financial and other information distributed or required
to be distributed to the holders of the Common Stock.

          11.
Amendment and Waiver. Any term, covenant, agreement or condition in this
Warrant may be amended, or compliance therewith may be waived (either generally
or in a particular instance and either retroactively or prospectively), only by
a written instrument or written instruments executed by the Issuer and the
Majority Holders; provided, however, that such amendment or
waiver shall (a) not reduce the Warrant Share Number, increase the Warrant
Price, shorten the period during which this Warrant may be exercised or modify
any provision of 

-19-

this Section
11 without the consent of the Holder of this Warrant or (b) apply equally to
all of the Issuer’s Series A, Series M-1, Series RL and Series SK Warrants then
outstanding.

          12.
Governing Law. THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
PRINCIPLES OF CONFLICTS OF LAW.

          13.
Notices. Any and all notices or other communications or deliveries
required or permitted to be provided hereunder shall be in writing and shall be
deemed given and effective on the earlier of (i) the date of transmission, if
such notice or communication is delivered via facsimile at the facsimile telephone
number specified for notice prior to 5:00 p.m., eastern time, on a Trading Day,
(ii) the Trading Day after the date of transmission, if such notice or
communication is delivered via facsimile at the facsimile telephone number
specified for notice later than 5:00 p.m., eastern time, on any date and
earlier than 11:59 p.m., eastern time, on such date, (iii) the Trading Day
following the date of mailing, if sent by nationally recognized overnight
courier service or (iv) actual receipt by the party to whom such notice is
required to be given. The addresses for such communications shall be with
respect to the Holder of this Warrant or of Warrant Stock issued pursuant
hereto, addressed to such Holder at its last known address or facsimile number
appearing on the books of the Issuer maintained for such purposes, or with
respect to the Issuer, addressed to:

	
 

	
 

	
 

	
Ortec International, Inc.

	
 

	
3960
  Broadway

	
 

	
New York, NY
  10032

	
 

	
Attention:
  Chief Financial Officer

	
 

	
Tel. No.:
  (212) 740-6999

	
 

	
Fax No.:
  (212) 740-2570

	
 

	
 

	
 

	
with a copy
  to:

	
 

	
 

	
 

	
Feder
  Kaszovitz Isaacson Weber Skala Bass & Rhine, LLP

	
 

	
750
  Lexington Avenue

	
 

	
New York,
  New York 10022

	
 

	
Attention:
  Gabriel Kaszovitz, Esq. 

	
 

	
Tel. No.:
  (212) 888-8200 

	
 

	
Fax No.:
  (212) 888-7776

Any party
hereto may from time to time change its address for notices by giving at least
ten (10) days written notice of such changed address to the other party hereto.

          14.
Warrant Agent. The Issuer may, by written notice to each Holder of this
Warrant, appoint an agent having an office in New York, New York for the
purpose of issuing shares of Warrant Stock on the exercise of this Warrant
pursuant to subsection (b) of Section 2 hereof, exchanging this Warrant
pursuant to subsection (d) of Section 2 hereof or replacing this Warrant
pursuant to subsection (d) of Section 3 hereof, or any of the foregoing, and
thereafter any such 

-20-

issuance,
exchange or replacement, as the case may be, shall be made at such office by
such agent.

          15.
Remedies. The Issuer stipulates that the remedies at law of the Holder
of this Warrant in the event of any default or threatened default by the Issuer
in the performance of or compliance with any of the terms of this Warrant are
not and will not be adequate and that, to the fullest extent permitted by law,
such terms may be specifically enforced by a decree for the specific
performance of any agreement contained herein or by an injunction against a
violation of any of the terms hereof or otherwise.

          16.
Successors and Assigns. This Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors and assigns of
the Issuer, the Holder hereof and (to the extent provided herein) the Holders
of Warrant Stock issued pursuant hereto, and shall be enforceable by any such
Holder or Holder of Warrant Stock.

          17.
Modification and Severability. If, in any action before any court or
agency legally empowered to enforce any provision contained herein, any
provision hereof is found to be unenforceable, then such provision shall be
deemed modified to the extent necessary to make it enforceable by such court or
agency. If any such provision is not enforceable as set forth in the preceding
sentence, the unenforceability of such provision shall not affect the other
provisions of this Warrant, but this Warrant shall be construed as if such
unenforceable provision had never been contained herein.

          18.
Headings. The headings of the Sections of this Warrant are for
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant.

          IN
WITNESS WHEREOF, the Issuer has executed this Warrant as of the day and year
first above written.

	
 

	
 

	
 

	
 

	
 

	
ORTEC INTERNATIONAL, INC.

	
 

	
 

	
 

	
 

	
By:

	
/s/ Alan
  Schoenbart

	
 

	
 

	

	
 

	
 

	
Name: Alan
  W. Schoenbart

	
 

	
 

	
Title: Chief
  Financial Officer

-21-

WARRANT

EXERCISE FORM

ORTEC
INTERNATIONAL, INC.

The undersigned
_______________, pursuant to the provisions of the within Warrant, hereby
elects to purchase _____ shares of Common Stock of Ortec International, Inc.
covered by the within Warrant.

	
 

	
 

	
 

	
 

	
Dated:

	
Signature

	
 

	

	
 

	

	
 

	
Address

	
 

	
 

	

	
 

	
 

	

Number of shares of Common
Stock beneficially owned or deemed beneficially owned by the Holder on the date
of Exercise: _________________________

The undersigned is an
“accredited investor” as defined in Regulation D under the Securities Act of
1933, as amended.

The undersigned intends that
payment of the Warrant Price shall be made as (check one): 

	
 

	
 

	
 

	
Cash Exercise_______ 

	
 

	
 

	
 

	
Cashless Exercise_______

If the Holder has elected a
Cash Exercise, the Holder shall pay the sum of $________ by certified or
official bank check (or via wire transfer) to the Issuer in accordance with the
terms of the Warrant. 

If the Holder has elected a
Cashless Exercise, a certificate shall be issued to the Holder for the number
of shares equal to the whole number portion of the product of the calculation
set forth below, which is ___________.

	
 

	
 

	
 

	
 

	
 

	
X = Y - (A)(Y)

	
 

	
 

	

	
 

	
 

	
 

	
B

	
 

	
 

	
 

Where:

The number of shares of
Common Stock to be issued to the Holder __________________(“X”).

The number of shares of
Common Stock purchasable upon exercise of all of the Warrant or, if only a
portion of the Warrant is being exercised, the portion of the Warrant being
exercised ___________________________ (“Y”). 

The Warrant Price
______________ (“A”). 

The Per Share Market Value
of one share of Common Stock _______________________ (“B”).

ASSIGNMENT

-22-

FOR VALUE RECEIVED,
_________________ hereby sells, assigns and transfers unto __________________
the within Warrant and all rights evidenced thereby and does irrevocably
constitute and appoint _____________, attorney, to transfer the said Warrant on
the books of the within named corporation.

	
 

	
 

	
 

	
 

	
Dated:

	
Signature

	
 

	

	
 

	

	
 

	
Address

	
 

	
 

	

	
 

	
 

	

PARTIAL ASSIGNMENT

FOR VALUE RECEIVED,
_________________ hereby sells, assigns and transfers unto __________________
the right to purchase _________ shares of Warrant Stock evidenced by the within
Warrant together with all rights therein, and does irrevocably constitute and
appoint ___________________, attorney, to transfer that part of the said
Warrant on the books of the within named corporation.

	
 

	
 

	
 

	
 

	
Dated:

	
Signature

	
 

	

	
 

	

	
 

	
Address

	
 

	
 

	

	
 

	
 

	

FOR
USE BY THE ISSUER ONLY:

This Warrant No. W-___ canceled
(or transferred or exchanged) this _____ day of ___________, _____, shares of
Common Stock issued therefor in the name of _______________, Warrant No.
W-_____ issued for ____ shares of Common Stock in the name of _______________.

-23-

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00125-of-00352.parquet"}]]